REG - Tracsis PLC - Interim Results
07/04/2022 07:00
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RNS Number : 5453H Tracsis PLC 07 April 2022
7 April 2022
Tracsis plc
('Tracsis', 'the Company' or 'the Group')
Unaudited Interim results for the six months ended 31 January 2022
Tracsis, a leading provider of software, hardware, data analytics/GIS and
services for the rail, traffic data and wider transport industries, is pleased
to announce its unaudited interim results for the six months ended 31 January
2022.
Financial Highlights:
· Revenue increased by 31% to £29.2m (H1 2021: £22.2m)
o Significant revenue growth in Data, Analytics, Consultancy and Events
Division, including post-Covid recovery
o Rail Technology and Services Division revenue at a similar level to prior
year; recent multi-year Rail Technology software contract wins will drive
future revenue growth
· Adjusted EBITDA* increased by 14% to £6.2m (H1 2021: £5.4m)
o Data, Analytics, Consultancy and Events Division increased by 35%
o Rail Technology and Services Division increased by 4%
· Profit before tax increased by 16% to £1.3m (H1 2021: £1.1m)
· Cash balances of £25.1m with no debt (31 July 2021: £25.4m, 31
January 2021: £20.8m)
· Restoring the progressive dividend policy; proposed interim
dividend of 0.9p per share
Operational Highlights:
· Won several multi-year rail technology software contracts
including our first in the rail freight sector for TRACS Enterprise, as well
as additional smart ticketing and delay repay contracts
· Events and Traffic Data businesses have responded quickly to
capitalise on post-Covid increase in demand, made possible by actions taken to
safeguard these businesses during the pandemic
· Large multi-year TRACS Enterprise contracts won in previous years
now in deployment phase ahead of go-live dates in summer 2022
· Enhanced the Group's Data Analytics/GIS capabilities with the
acquisition of geoscience company Icon GEO, with the integration progressing
well
· Further progress in Group operational improvements: continued
investment in implementing a more integrated operating and shared services
model, improving our processes and systems, and people development
Post period end Highlights:
· Acquisition of RailComm LLC ("RailComm") a US based rail
technology software and services provider, giving direct access to the large
and growing North American market
· Further contract wins in the Rail Technology and Services
Division
o Two additional multi-year TRACS Enterprise contracts with passenger
operators in the UK
o Secured a large multi-year Centrix software contract and an extension to
our long-running Remote Condition Monitoring data logger framework contract
with the UK's rail infrastructure provider
· Encouraging start to Q3 trading with high activity levels across
large parts of the Group
· Well positioned to deliver further growth in H2 and beyond
* Earnings before finance income & expense, tax, depreciation,
amortisation, exceptional items, other operating income, share-based payment
charges and share of result of equity accounted investees. See note 10 for
reconciliation.
Chris Barnes, Chief Executive Officer, commented:
"I am pleased with the first half performance which was in line with our
expectations. We have seen strong revenue and adjusted EBITDA growth, and have
made some important progress in executing our strategic growth agenda and
converting our sales pipeline. We have won several multi-year recurring
revenue software contracts and have a growing pipeline of other opportunities,
which together leave us well placed to deliver further growth.
The UK rail industry's transition to a new Great British Railways structure is
ongoing and the overall objective is to create a data-driven,
customer-focused, safety-critical future for the industry. Our range of rail
technology products and services is well placed to help the rail industry
deliver its strategic goals and as a result we have been asked to actively
participate in helping to shape future decision making.
The recent acquisition of RailComm is an important strategic development for
Tracsis, providing a platform onto which we can start to internationally
expand the Group and its rail product portfolio via direct access to the
significant and growing North American rail technology market. We have
received a very positive reaction across RailComm's North American client
base.
We continue to invest in implementing a more integrated operating model to
help us to execute our growth strategy. I am particularly pleased to see the
launch of the OneTracsis leadership development programme during the period,
which is an important initiative as part of our commitment to investing in
developing our people and growing the next generation of leaders in our
business.
We are confident that there are strong growth prospects for all parts of our
Group and therefore remain committed to implementing our overall strategic
growth and investment plans. We will continue to pursue organic and
acquisitive growth supported by a strong balance sheet."
Presentation and Overview video
Tracsis is hosting an online presentation open to all investors on Friday 8
April 2022 at 1.00pm UK time. Anyone wishing to connect should register here:
https://bit.ly/TRCS_Interim_webinar_r (https://bit.ly/TRCS_Interim_webinar_r)
A video overview of the results featuring CEO Chris Barnes and CFO Andy Kelly
is available to view here: https://bit.ly/TRCS_H122_overview
(https://bit.ly/TRCS_H122_overview)
Enquiries:
Tracsis
plc
Tel: 0845 125 9162
Chris Barnes, CEO / Andy Kelly, CFO
finnCap
Ltd
Tel: 020 7220 0500
Christopher Raggett / Charlie Beeson, Corporate Finance
Andrew Burdis / Sunila de Silva Corporate Broking
Alma
PR
Tel: 020 3405 0205
Rebecca Sanders-Hewett / David Ison / Hilary Buchanan / Joe
Pederzolli tracsis@almapr.co.uk
The information communicated in this announcement is inside information for
the purposes of Article 7 of the Market Abuse Regulation (EU) No. 596/2014.
Chairman & Chief Executive Officer's Report
Introduction
The Group has reported first half performance in line with management's
expectations, with strong growth in revenue and adjusted EBITDA.
Large multi-year software contract wins will support ongoing Rail Technology
and Services revenue growth
We have secured several multi-year technology contracts in the Rail technology
and Services Division during the first half and post period end. In Rail
Operations and Planning we have won two new contracts for our TRACS Enterprise
product suite with UK passenger operators, as well as our first contract for
this product in the rail freight sector. In Digital Railway and
Infrastructure, we have secured a large multi-year Centrix software contract
win and an extension to our long-running Remote Condition Monitoring ("RCM")
data logger framework contract with the UK's rail infrastructure provider,
both of which will lead to future RCM hardware procurement. And in Rail
Customer Experience we have won two new contracts for our delay repay
solution, in addition to the smart ticketing contract win that was detailed in
our Final Results announcement. These contract wins across the Division will
deliver an increase in annual recurring licence revenue consistent with our
growth expectations.
Significant recovery in Events and Traffic Data
We have seen a significant recovery in activity levels in the Events and
Traffic Data businesses that were most impacted by Covid-19. Both were able to
quickly respond to improving market demand as a result of the actions taken to
safeguard those businesses and protect jobs and skills during the pandemic.
Activity levels in Events have returned to pre-pandemic levels. We anticipate
that a full recovery in Traffic Data will be completed through the second half
of the year, although the timing of this remains uncertain. Alongside the
incremental contribution from the acquisitions of Icon GEO in November 2021
and Flash Forward Consulting in February 2021, this drove extremely strong
revenue growth in the Data, Analytics, Consultancy and Events Division of 72%.
Acquisition gives direct access to an established sales network in North
America
Post period end the Group completed an important strategic acquisition, making
our first direct entry into the North American market with the acquisition of
RailComm. This is consistent with our strategy to extend Tracsis' rail
software footprint and to expand the addressable markets for our products and
services. In addition to the growth opportunities that exist in RailComm's
core markets of rail yard automation and computer aided dispatching, the
acquisition provides Tracsis with direct access to a long-established sales
network into a significant number of rail clients in North America. This will
enable the Group to progressively market its existing portfolio of rail
products and services, with Remote Condition Monitoring the initial area of
focus.
Building a strong foundation for future growth
The Group has made further good progress during the period in implementing a
more integrated business model and adopting common processes and systems. As
part of our commitment to investing in our people we have launched a
'OneTracsis' leadership development scheme with 100 managers and senior
leaders enrolled on an 18 month programme that will also promote collaboration
and innovation across the Group. This is part of a comprehensive people
strategy that is being developed, with a focus on succession planning, talent
acquisition, and reward & benefits. We have started to expand our shared
services operating model by working towards implementing a single groupwide IT
operating environment, and we continue to accelerate the implementation of our
ESG initiatives.
Progress on Delivering our Strategy
Our vision for Tracsis is to become the leading provider of high value, niche
technology solutions and services that solve complex problems which maximise
efficiency in regulated industries. Our business model remains focused on
specialist offerings that have high barriers to entry, are sold on a recurring
basis under contract, and to a retained customer base that is largely blue
chip in nature. Our strategy to achieve this is focused on four areas as
outlined below. We believe this strategy will allow Tracsis to continue the
growth trajectory it has achieved since IPO in 2007 and to deliver further
significant value to shareholders in the short, medium and longer term.
We have made good progress in executing this growth strategy since the end of
the previous financial year, which leaves the Group well positioned to deliver
further growth. Key progress against the objectives for each of our four
strategic priorities are summarised in the table below:
Strategic Priority Progress since 31 July 2021 Future Focus
Drive Organic Growth · Multi-year TRACS Enterprise contract wins with two UK passenger · Delivery of recent contract wins and pipeline of large multi-year
operators, and our first contract win in the rail freight sector software contracts
Delivery of our pipeline, continual innovation of products and services,
flawless high quality delivery and an excellent close working relationship · New smart ticketing contract secured with a large passenger Train · Support UK Rail Industry to deliver the strategic vision outlined in the
with our customers Operating Company ("TOC"). Williams-Shapps plan
· Two new delay repay contracts secured with UK TOCs · Continued investment in software & technology products
· Large multi-year Centrix software contract win in Remote Condition · Complete post-Covid recovery in affected business units
Monitoring and an extension to our long-running data logger framework contract
· Work continues on implementing TRACS Enterprise contracts won in previous
years; two major TOCs due to go-live in summer 2022
· Large pipeline of other rail software opportunities
· Strong post-Covid recovery ongoing in Events and Traffic Data
Expand Addressable Markets · Post period-end acquisition of RailComm provides direct access to a · Progressively market existing portfolio of Tracsis products and services
significant number of rail clients in the North American market in North America
Selling our products and services into new markets, including overseas, and
expansion into selected sectors that share problems with the industries we · Further growth in Data Analytics / GIS revenue · Continued growth in Data Analytics / GIS
currently serve
Enhance Growth Through Acquisition · Completed acquisitions of RailComm and Icon GEO · Active pursuit of M&A to extend rail software and data informatics
footprint - focus on recurring revenue growth
Reinvesting Group profits to fund further accretive acquisitions that meet our · Further potential targets evaluated
disciplined investment criteria
Integration and Capability · Developing a comprehensive people strategy to attract, retain and develop · R&D collaboration via Innovation Hub
talent
Enhanced integration and collaboration across the Group, increasing management
· Enhance management capability and bandwidth
capability and bandwidth, and improving our systems and processes, as key · Launched 'OneTracsis' leadership training programme
foundations to deliver our growth strategy
· Continued alignment of Group-wide systems and processes
· Started expanding shared services model to cover IT operations
· Focused people development
· Continuing to accelerate impact of ESG activities
· Using Innovation Hub to drive increasing levels of collaboration and
future R&D
Trading Progress and Prospects
Rail Technology & Services
Summary segment results:
Revenue
£11.7m (H1 2021:
£12.1m)
Adjusted EBITDA* £4.0m (H1 2021:
£3.8m)
Profit before Tax £3.6m (H1
2021: £3.4m)
Activity levels in our Rail Technology & Services Division remain high.
All parts of the Division have won new contracts since the end of the previous
financial year, and we have a strong pipeline of additional multi-year
software opportunities. Work has continued on implementing contracts won in
previous periods. Our focus on these projects is to work closely with our
customers as a partner to deliver significant value over the long-term.
Delivery timelines in this sector are typically determined in partnership with
our customers.
Total revenue of £11.7m was 3% lower than prior year, which principally
reflects lower revenue from Remote Condition Monitoring ("RCM"). The RCM
business delivered a record performance in the prior year, and its performance
is consistent with the historic cyclical nature of the customer investment
cycle. The lower RCM revenue was partly offset by strong growth in our Rail
Operations and Planning business. Revenue from our Customer Experience
products was at a similar level to prior year. Both businesses have secured
recent contract wins that will start to deliver revenue in H2 of the current
financial year.
Despite the small decrease in revenue, adjusted EBITDA* increased by 4% to
£4.0m (H1 2021: £3.8m) which includes the benefit from a 4% increase in
software revenues across the Division.
With a number of recent contract wins, several previously won contracts
scheduled to 'go-live' in H2, and a strong pipeline of future opportunities,
we are well positioned to deliver growth in the Rail Technology and Services
Division in H2 and beyond.
The industry's transition to a new Great British Railways structure, which
aims to create a data-driven, customer-focused, safety-critical future for the
industry, is ongoing, and we have been asked at senior client level to
formally input our ideas into how the UK can achieve this vision. This
demonstrates the value the industry attaches to Tracsis' expertise and range
of rail technology products, which offer a compelling and, in some cases,
unique value proposition to help it deliver its strategic goals.
Rail Operations & Planning
Total revenues from the Group's rail operations & planning software and
hosting offerings were £5.3m (H1 2021: £4.9m). This includes the various
revenue streams from our TRACS, ATTUne, COMPASS and Retail & Operations
product suites. Software sales continue to benefit from high renewal rates
from existing customers, and also from multi-year contract wins from previous
years which we are currently implementing for our clients. We have made good
progress on our TRACS Enterprise projects and expect the first two UK TOCs to
go-live in summer 2022 . In addition, we have won several new multi-year TRACS
Enterprise contracts. This includes two further contracts with UK passenger
operators, where work will start in the second half of the financial year. We
have also secured the first TRACS Enterprise contract in the rail freight
sector and development work is already underway. In addition, we continue to
have a strong pipeline of new multi-year TRACS Enterprise opportunities in
both the passenger and freight sectors of the industry.
Digital Railway & Infrastructure
Total revenues across the Digital Railway and Infrastructure offerings were
£5.0m (H1 2021: £5.8m). This includes the revenue from MPEC in Remote
Condition Monitoring and from our safety and risk management product suites
within OnTrac. These businesses both delivered record performance in the prior
year.
We saw lower RCM volumes in the first half of the year, following a record
performance in the prior year. Performance in this part of the Division is
consistent with the historic investment cycle trend of its UK customer base
which consists of 5 year 'Control Periods'. We have won several large
contracts with large railway systems integrators for the supply of RCM
equipment through the remaining Control Period 6 which runs to 31 March 2024.
Post period-end we have also secured both a large multi-year contract win for
the supply of our Centrix data acquisition platform and an extension to our
long-running RCM data logger framework contract, both of which will lead to
future hardware procurement.
The RailComm acquisition will also open up direct access into the North
American market for this side of the business, increasing the addressable
market for our products and helping to mitigate the cyclical demand trends in
the UK market.
OnTrac revenue for the first half of the year was broadly similar to the prior
year. Activity was dominated by the roll-out of the large RailHub contract
that was secured in July 2021 that will more than double the user base of this
product. There is a growing pipeline of future opportunities for variants of
this product as the UK rail industry continues its digitalisation agenda.
Rail Customer Experience
Revenue of £1.4m was consistent with prior year (H1 2021: £1.4m). We are
seeing increasing interest in iBlocks' smart ticketing product offering that
is well aligned with passenger requirements as Covid-19 restrictions have been
lifted and with the UK Government's strategic intent to deliver increased Pay
As You Go (PAYG), multi-modal ticketing as outlined in the Williams-Shapps
plan for Rail. We announced a new contract win with a UK TOC alongside our
full year results, which is scheduled to 'go-live' during H2 of this financial
year. We have also won two new contracts for the deployment of our delay repay
products. These contract wins leave the business well positioned to deliver
growth in H2 and beyond.
Data, Analytics, Consultancy & Events
Summary segment results:
Revenue
£17.5m (H1 2021:
£10.2m)
Adjusted EBITDA* £2.2m (H1 2021:
£1.6m)
Profit before Tax £1.8m (H1
2021: £1.2m)
We have seen a significant recovery in activity levels in the Events and
Traffic Data businesses that were most impacted by Covid-19 and we expect this
recovery will continue through the second half of the financial year. As a
result of the actions taken during the pandemic to protect jobs, look after
our people, and safeguard these businesses, we have been able to respond
quickly to this increase in demand. The Division has also benefitted from the
incremental contribution from the acquisitions of Flash Forward Consulting in
February 2021 and Icon GEO in November 2021 and both businesses have been
fully integrated into the Group. After excluding the growth from acquisition,
organic revenue growth for the Division was £5.9m or 58%. This also included
continued underlying growth in Compass Informatics.
Adjusted EBITDA increased by 35% to £2.2m (H1 2021: £1.6m). The prior period
included £0.5m of support to the Income Statement from the Coronavirus Job
Retention Scheme ("CJRS"). After adjusting for this we have seen growth in the
underlying profitability of this Division, including the benefit from
increased revenue and from retaining c£0.3m of cost reduction actions taken
in the prior year.
Data Analytics / GIS
Revenue increased to £3.7m (H1 2021: £3.0m) which includes the incremental
contribution from Icon GEO as well as continued underlying growth in Compass
Informatics. Icon GEO has been fully integrated within this business to create
an Irish-based Data Analytics centre of excellence with c.130 staff
specialising in providing location-related technologies and analytics
solutions to government and commercial organisations. As well as offering an
enhanced product offering to customers, we are also starting to utilise the
Group's data analytics capabilities to support other areas of the Group in
developing new product ideas.
Transport Insights
Revenue of £2.7m was £0.9m higher than prior year (H1 2021: £1.8m) which
includes the contribution from Flash Forward that was acquired in February
2021. Excluding Flash Forward, organic revenue growth was 5% with increases in
both our Rail Consultancy and Passenger Analytics offerings.
Traffic Data
Revenue increased by 35% to £4.3m (H1 2021: £3.2m) with activity levels
steadily increasing as Covid-related restrictions have been eased. H1
performance was impacted by Covid-19 restrictions that remained in place,
including in response to the Omicron variant, with work being postponed or
cancelled as the prevailing traffic conditions were not representative of
client needs. As such, we have not yet seen a full recovery in this side of
the business and we anticipate that this will be completed through the second
half of the year, although timing remains uncertain.
Event Transport Planning & Management
H1 performance was strong, delivering revenue of £6.8m which was £4.6m
higher than the prior year (H1 2021: £2.2m). The recovery in activity levels
we experienced at the end of the previous financial year was maintained
through the first half, with demand for sporting and cultural events returning
to normal levels. We anticipate this to continue assuming no further Covid
restrictions are implemented. We have also continued to support Covid testing
and vaccination centres which delivered £1.1m of revenue in the period.
Financial Summary
H1 revenue of £29.2m was £6.9m (31%) higher than the prior year (H1 2021:
£22.2m). Revenue in the Data, Analytics, Consultancy and Events Division grew
by £7.3m (72%) as a result of a strong post-Covid recovery in Events and
Traffic Data as well as the incremental contribution from the acquisitions of
Flash Forward and Icon GEO that were completed since H1 2021. Revenue in the
Rail Technology and Services Division was £0.4m (3%) lower than prior year.
Recent contract wins leave this Division well placed to deliver growth in the
second half of the year.
Adjusted EBITDA* of £6.2m was £0.7m (14%) higher than the prior year (H1
2021: £5.4m), which included £0.5m of support to the Income Statement from
the CJRS. No claims have been made under the CJRS in this financial year.
A summary of the Group's results is set out below:
Unaudited Unaudited Audited
Six months Six months Year
ended ended Ended
31 January 31 January 31 July
2022 2021 2021
£'000 £'000 £'000
Revenue 29,182 22,239 50,237
Adjusted EBITDA * (note 10) 6,167 5,431 12,978
Adjusted Profit ** (note 10) 5,401 4,655 11,375
Profit before tax 1,280 1,102 4,635
* Earnings before finance income & expense, tax, depreciation,
amortisation, exceptional items, other operating income, share-based payment
charges and share of result of equity accounted investees. See note 10 for
reconciliation.
** Earnings before finance income & expense, tax, amortisation,
exceptional items, other operating income, share-based payment charges and
share of result of equity accounted investees. See note 10 for reconciliation.
Statutory profit before tax of £1.3m is £0.2m higher than prior year (H1
2021: £1.1m). In addition to the £0.7m increase in adjusted EBITDA*
described above, this reflects the following items:
· £0.8m depreciation charge at a similar level to the prior year
(H1 2021: £0.8m);
· £2.2m amortisation of intangible assets (H1 2021: £2.1m), which
includes charges relating to the acquisitions of Flash Forward Consulting in
February 2021 and Icon GEO in November 2021;
· £0.8m share based payment charges (H1 2021: £0.7m);
· £0.8m exceptional items (H1 2021: £0.6m) reflecting £0.4m
unwinding of previously discounted contingent consideration balances in
accordance with IFRS accounting standards at a similar level to the prior
year; a net £0.1m increase in the assessed fair value of contingent
consideration based on the future expectations of performance from previous
acquisitions; and £0.3m of transaction costs associated with the acquisitions
of Flash Forward Consulting and RailComm;
· £0.1m net finance expense (H1 2021: <£0.1m); and
· £0.3m charge (H1 2021: £0.1m) relating to the share of the
result of equity accounted investees
The Group continues to have significant levels of cash and remains debt free.
At 31 January 2022 the Group's cash balances were £25.1m (H1 2021: £20.8m)
and cash generation remains strong. Post period end the $14.2m (£10.9m)
acquisition of RailComm was funded through cash reserves. $2.7m (£2.1m) of
this relates to contingent consideration that has been paid into Escrow and is
subject to RailComm achieving certain financial targets in the year post
acquisition.
A summary of cash flows is set out below:
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
31 January 31 January 31 July
2022 2021 2021
£'000 £'000 £'000
Net cash flow from operating activities 2,909 3,636 9,356
Net cash flow used in investing activities (2,550) (63) (595)
Net cash flow used in financing activities (617) (660) (1,201)
Movement during the period (before exchange adjustments) (258) 2,913 7,560
Acquisitions
Our strategy is to continue to supplement organic growth with M&A, with a
focus on software, technology and Data Analytics/GIS businesses that have a
good level of high quality, recurring revenue. Our M&A strategy is
supported by a strong balance sheet and good levels of cash generation, and we
continue to actively pursue acquisition opportunities.
Our approach to M&A is to identify established businesses with a well
differentiated product or service offering that is complementary to Tracsis'
existing portfolio. Importantly we look for businesses that have a culture of
entrepreneurship and customer focus that fits with our ethos of building
strong, long-term relationships with our customers that deliver compelling
value propositions. In executing acquisitions we are able to mobilise quickly
and we place a high value on acting with integrity. We take a partnership
approach to the acquisition process, preferring to retain existing management
to continue in their roles post-acquisition to deliver an agreed strategic
plan.
Icon GEO
On 3 November 2021 the Group acquired Icon Group ("Icon GEO"). Headquartered
in Dublin, Icon GEO is an interdisciplinary geosciences business who
specialise in earth observation, geographical information systems, and spatial
data analytics. Icon GEO has been integrated with Tracsis' existing Data
Analytics/GIS solutions provider Compass Informatics to create an Irish-based
Data Analytics centre of excellence specialising in providing location-related
technologies and analytics solutions and services to government and commercial
organisations.
The acquisition consideration comprised an initial cash payment of £1.9m, a
further cash payment to reflect the working capital position of the business
(above a working capital hurdle) on completion totalling £1.9m and the issue
of 68,762 new ordinary shares in Tracsis plc to a value of £0.6m. Additional
contingent consideration of up to £1.5m is payable subject to Icon GEO
achieving certain stretched financial targets over a three-year period.
RailComm LLC
Post period end the Group acquired RailComm LLC ("RailComm") on 11 March 2022.
Headquartered in Fairport, New York and established in 1999, RailComm provides
mission critical automation and control solutions that reduce costs, increase
safety, and improve operational efficiency for rail passenger/freight
operators and rail served ports/industrials. Its two core products are rail
yard automation and computer aided dispatching and it has a wide and
diversified client base across the North American market. The business has
good levels of annual recurring software revenues in addition to large project
delivery/systems integration work. It employs around 30 full-time staff who
have remained with the business post transaction.
The acquisition of RailComm is in line with Tracsis' strategy of extending its
rail software footprint and expanding the addressable markets for its products
and services. In addition to the significant growth opportunities that exist
within RailComm's core rail markets, we now have direct access to a
long-established sales network into a significant number of rail clients in
the North American market. This will enable Tracsis to progressively market
its existing portfolio of rail products and services, with Remote Condition
Monitoring the initial area of focus. One of Tracsis' senior rail managers
from the UK will be relocating to the US to oversee delivery of these growth
opportunities.
The acquisition consideration comprised an initial cash payment of $11.5m
(£8.8m). Additional contingent consideration of up to $2.7m (£2.1m) is
payable subject to RailComm achieving certain financial targets in the first
full year post acquisition, and this cash will be held in escrow through that
period. The acquisition was funded out of Tracsis cash reserves.
Dividend
The Group remains committed to the progressive dividend policy that was
adopted in 2012. In the first half of this financial year, we have seen a
strong recovery in activity levels in those parts of the Group most impacted
by Covid-19, and we have not utilised the UK Government's CJRS scheme. In this
context the Board consider it appropriate to restore the progressive dividend
policy. The Directors have declared an interim dividend of 0.9 pence per share
which will be paid on 6 May 2022 to shareholders on the register at 19 April
2022.
Board
Dr James Routh was appointed to the Board as a Non-Executive Director and
Senior Independent Director on 29 September 2021.
Summary and Outlook
The Board was pleased with the first half performance, with strong revenue
growth in the Data, Analytics, Consultancy & Events Division, and a number
of important multi-year contract wins in the Rail Technology & Services
Division that positions it well for further growth.
Our end market drivers are strong and Tracsis' products and services are well
aligned with these drivers as they enable our customers to deliver
mission-critical activities with increased efficiency, enhanced performance,
higher productivity, and improved safety.
The Group has a clear growth strategy and has a strong balance sheet to
support its delivery. Since the end of the previous financial year we have
made good progress in implementing this strategy, including winning a number
of large multi-year software contracts, continuing to deliver on contracts won
in previous years, and making further targeted investment in adapting our
operating model to support ongoing, scalable growth. M&A remains a core
part of our strategy, and post period-end we have taken a significant step
towards increasing the size of our addressable markets with our first
acquisition in North America.
We have entered the second half of the year with confidence in the strength of
our financial position and with high activity levels across the Group. There
has been an encouraging start to Q3 trading, and Board's expectations for the
year to 31 July 2022 remain unchanged.
Chris Cole Chris Barnes
Non-Executive Chairman Chief Executive Officer
7 April 2022
Tracsis plc
Condensed consolidated interim income statement for the six months ended 31
January 2022
Unaudited Unaudited
6 months ended 31 January 2022 6 months ended 31 January Audited
2021 Year ended 31 July 2021
Note
£'000 £'000 £'000
Revenue 3 29,182 22,239 50,237
Cost of sales (11,438) (6,007) (15,424)
Gross profit 17,744 16,232 34,813
Administrative costs (3) (16,109) (14,987) (29,657)
Adjusted EBITDA (1) 3, 10 6,167 5,431 12,978
Depreciation (766) (776) (1,603)
Adjusted profit (2) 10 5,401 4,655 11,375
Amortisation of intangible assets (2,179) (2,126) (4,269)
Other operating income - - 440
Share-based payment charges (804) (665) (1,276)
Operating profit before exceptional items 2,418 1,864 6,270
Exceptional items:
Other (3) 4 (783) (619) (1,114)
Operating profit 1,635 1,245 5,156
Finance income 1 6 11
Finance expense 5 (59) (45) (98)
Share of result of equity accounted investees (297) (104) (434)
Profit before tax 1,280 1,102 4,635
Taxation (487) (325) (2,279)
Profit for the period 793 777 2,356
Other comprehensive income
Foreign currency translation differences 67 (49) (126)
Total recognised income for the period 860 728 2,230
Earnings per ordinary share
Basic 6 2.70p 2.66p 8.06p
Diluted 6 2.61p 2.58p 7.82p
(1) Earnings before finance income and expense, tax, depreciation,
amortisation, exceptional items, other operating income, share-based payment
charges and share of result of equity accounted investees - see note 10
(2) Earnings before finance income and expense, tax, amortisation, exceptional
items, other operating income, share-based payment charges, and share of
result of equity accounted investees. - see note 10
(3 )The unwind of discounting of contingent consideration was reported within
finance costs in HY21. This has been reported in administrative costs within
exceptional items in these financial statements for consistency with the
audited accounts for the year ended 31 July 2021.
Tracsis plc
Condensed consolidated interim balance sheet as at 31 January 2022
Unaudited Unaudited Audited
At 31 January At 31 January At 31 July
2022 2021 2021
Note £'000 £'000 £'000
Non-current assets
Property, plant and equipment 3,767 3,312 3,540
Intangible assets 53,182 52,251 51,745
Investments - equity 99 50 50
Investments in equity accounted investees 259 935 605
Deferred tax assets 701 1,035 551
58,008 57,583 56,491
Current assets
Inventories 406 386 381
Trade and other receivables 11,786 7,335 11,263
Cash and cash equivalents 25,057 20,784 25,387
37,249 28,505 37,031
Total assets 95,257 86,088 93,522
Non-current liabilities
Lease liabilities 1,205 883 1,131
Contingent consideration payable 11 4,515 6,216 3,220
Deferred consideration payable 594 - 584
Deferred tax liabilities 8,402 7,828 8,517
14,716 14,927 13,452
Current liabilities
Lease liabilities 968 1,025 928
Trade and other payables 14,811 13,160 17,007
Contingent consideration payable 11 4,556 1,653 4,689
Deferred consideration payable 314 - 308
Current tax liabilities 912 891 473
21,561 16,729 23,405
Total liabilities 36,277 31,656 36,857
Net assets 58,980 54,432 56,665
Equity attributable to equity holders of the Company
Called up share capital 118 117 117
Share premium reserve 6,415 6,386 6,401
Merger reserve 6,161 5,420 5,525
Retained earnings 46,307 42,520 44,710
Translation reserve (21) (11) (88)
Total equity 58,980 54,432 56,665
Tracsis plc - Consolidated statement of changes in equity
For the six months ended 31 January 2022
Unaudited Share Premium Reserve
Share Capital Merger Reserve Retained Earnings Translation Reserve
Total
£'000 £'000 £'000 £'000 £'000 £'000
At 1 August 2020 116 6,373 5,420 41,078 38 53,025
Total comprehensive income for the period
Profit for the six month period ended 31 January 2021 - - - 777 - 777
Other comprehensive income for the period ended 31 January 2021 - - - - (49) (49)
Total Comprehensive income for the period - - - 777 (49) 728
Transactions with owners of the Company
Share based payment charges - - - 665 - 665
Exercise of share options 1 13 - - - 14
At 31 January 2021 117 6,386 5,420 42,520 (11) 54,432
Audited
At 1 August 2020 116 6,373 5,420 41,078 38 53,025
Profit for the year ended 31 July 2021 - - - 2,356 - 2,356
Other comprehensive income for the year ended 31 July 2021
- - - - (126) (126)
Total Comprehensive income for the period - - - 2,356 (126) 2,230
Transactions with owners of the
Company
Share based payment charges - - - 1,276 - 1,276
Exercise of share options 1 28 - - - 29
Shares issued as consideration for business combinations - - 105 - - 105
At 31 July 2021 117 6,401 5,525 44,710 (88) 56,665
Tracsis plc - Consolidated statement of changes in equity (continued)
For the six months ended 31 January 2022
Unaudited Share Premium Reserve
Share Capital Merger Reserve Retained Earnings Translation Reserve
Total
£'000 £'000 £'000 £'000 £'000 £'000
At 1 August 2021 117 6,401 5,525 44,710 (88) 56,665
Total comprehensive income for the period
Profit for the six month period ended 31 January 2022 - - - 793 - 793
Other comprehensive income for the period ended 31 January 2022 - - - - 67 67
Total Comprehensive income for the period - - - 793 67 860
Transactions with owners of the Company
Share based payment charges - - - 804 - 804
Exercise of share options 1 14 - - - 15
Shares issued as consideration for business combinations - - 636 - - 636
At 31 January 2022 118 6,415 6,161 46,307 (21) 58,980
Tracsis plc
Condensed consolidated interim statement of cash flows for the six months to
31 January 2022
Unaudited Unaudited Audited
Six months to Six months to Year ended
31 Jan 2022 31 Jan 2021 31 July 2021
Note £'000 £'000 £'000
Operating activities
Profit for the period 793 777 2,356
Finance income (1) (6) (11)
Finance expense 59 45 98
Depreciation 766 776 1,603
Profit on disposal of plant & equipment - - (46)
Non-cash exceptional items 443 535 985
Other operating income - - (440)
Amortisation of intangible assets 2,179 2,126 4,269
Share of result of equity accounted investees 297 104 434
Income tax charge 487 325 2,279
Share based payment charges 804 665 1,276
Operating cash inflow before changes in working capital 5,827 5,347 12,803
Movement in inventories (25) 44 49
Movement in trade and other receivables 275 (967) (4,796)
Movement in trade and other payables (2,603) (356) 2,784
Cash generated from operations 3,474 4,068 10,840
Interest received 1 4 7
Interest paid - - (74)
Income tax paid (566) (436) (1,417)
Net cash flow from operating activities 2,909 3,636 9,356
Investing activities
Purchase of plant and equipment (312) (63) (400)
Proceeds from disposal of plant and equipment 53 - 88
Acquisition of subsidiaries (net of cash acquired) (2,033) - 127
Payment of contingent consideration 11 (258) - (410)
Net cash flow used in investing activities (2,550) (63) (595)
Financing activities
Proceeds from the exercise of share options 16 14 27
Lease liability payments (649) (688) (1,260)
Lease liability receipts 16 14 32
Net cash flow used in financing activities (617) (660) (1,201)
Net increase/(decrease) in cash and cash equivalents (258) 2,913 7,560
Exchange adjustments (72) (49) (93)
Cash and cash equivalents at beginning of period 25,387 17,920 17,920
Cash and cash equivalents at end of period 25,057 20,784 25,387
Notes to the consolidated interim report
For the six months ended 31 January 2022
1 Basis of preparation
The unaudited consolidated interim financial information has been prepared
under the historical cost convention and in accordance with the recognition
and measurement requirements of International Accounting Standard in
conformity with Companies Act 2006 ("IFRS"). The condensed consolidated
interim financial information does not constitute financial statements within
the meaning of Section 434 of the Companies Act 2006 and does not include all
of the information and disclosures required for full annual financial
statements. It should therefore be read in conjunction with the Group's Annual
Report for the year ended 31 July 2021, which has been prepared in accordance
with IFRSs and is available on the Group's investor website.
The accounting policies used in the financial information are consistent with
those used in the Group's consolidated financial statements as at and for the
year ended 31 July 2021, as detailed on pages 59 to 67 of the Group's Annual
Report and Financial Statements for the year ended 31 July 2021, a copy of
which is available on the Group's website, https://tracsis.com/investors
(https://tracsis.com/investors) .
The comparative financial information contained in the condensed consolidated
financial information in respect of the year ended 31 July 2021 has been
extracted from the 2021 Financial Statements. Those financial statements have
been reported on by Grant Thornton UK LLP, and delivered to the Registrar of
Companies. The report was unqualified, did not include a reference to any
matters to which the auditor drew attention by way of emphasis without
qualifying their report, and did not contain a statement under Section 498(2)
or 498(3) of the Companies Act 2006.
Selected explanatory notes are included to explain events and transactions
that are significant to an understanding of the changes in financial position
and performance of the Group since the last annual consolidated financial
statements as at the year ended 31 July 2021.
The preparation of the interim financial statements requires management to
make judgements, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets and liabilities, income
and expenses. Estimates and judgements are continually evaluated and are based
on historical experience and other factors, such as expectations of future
events and are believed to be reasonable under the circumstances. Actual
results may differ from these estimates. In preparing these interim financial
statements, the significant judgements made by management in applying the
Group's accounting policies and the key sources of estimation uncertainty were
the same as those applied to the audited consolidated financial statements for
the year ended 31 July 2021.
There have been no new accounting standards or changes to existing accounting
standards applied for the first time from 1 August 2021 which have a material
effect on these interim results. The Group has chosen not to early adopt any
new standards or amendments to existing standards or interpretations.
The Directors have a reasonable expectation that the Group has adequate
resources to continue in operational existence for the foreseeable future.
Accordingly, the Directors continue to adopt the going concern basis in
preparing this interim financial information. The Group is debt free and has
substantial cash resources. At 31 January 2022 the Group had net cash and cash
equivalents totalling £25.1m. The Board has considered future cash flow
requirements taking into account reasonably possible changes in trading
financial performance.
The condensed consolidated interim financial information was approved for
issue on 7 April 2022.
2 Principal Risk and Uncertainties
The principal risks and uncertainties are consistent with the previous year.
These risks and uncertainties are expected to be unchanged for the remainder
of the financial year. Further details are provided on pages 20 to 24 of the
Annual Report & Accounts for the year ended 31 July 2021. The Board
considers risks on a periodic basis and has maintained the key risks as
follows, on a Group wide basis:
· Coronavirus (Covid-19) - disruption to the Data, Analytics,
Consultancy and Events Division
· Project Delivery
· Rail industry structure changes
· Cyber Security
· Downturn or Instability in Major Markets
· Reliance on certain key customers
· Attraction and retention of key employees
· Competition
· Technological changes
· Health & Safety
· Customer pricing pressure
· Brand reputation
· Regulatory risk
· Integration risk
3 Revenue and Segmental analysis
a) Revenue
Sales revenue is summarised below:
Six months Six months Year
ended ended Ended
31 January 31 January 31 July
2022 2021 2021
£'000 £'000 £'000
Rail Technology & Services 11,665 12,057 26,424
Data, Analytics, Consultancy & Events 17,517 10,182 23,813
Total revenue 29,182 22,239 50,237
A geographical analysis of revenue is provided below:
Six months ended 31 January 2022 Six months ended 31 January Year
2021 ended
31 July
2021
£'000 £'000 £'000
United Kingdom 24,524 18,723 43,965
Ireland 4,088 3,198 5,449
Rest of Europe 218 140 338
North America 10 21 189
Rest of the World 342 157 296
Total 29,182 22,239 50,237
b) Segmental Analysis
The Group has divided its results into two segments being 'Rail Technology
& Services' and 'Data, Analytics, Consultancy & Events'. The Group has
a wide range of products and services for the rail industry, such as software,
hosting services, and remote condition monitoring, and these have been
included within the Rail Technology & Services segment as they have
similar customer bases (such as Train Operating Companies and Infrastructure
Providers). Traffic data collection and event planning & traffic
management, and data and analytics and consultancy offerings have similar
economic characteristics and distribution methods and so have been included
within the Data, Analytics, Consultancy & Events segment.
In accordance with IFRS 8 'Operating Segments', the Group has made the
following considerations to arrive at the disclosure made in these financial
statements. IFRS 8 requires consideration of the Chief Operating Decision
Maker ("CODM") within the Group. In line with the Group's internal reporting
framework and management structure, the key strategic and operating decisions
are made by the Executive Directors, who review internal monthly management
reports, budgets and forecast information as part of this. Accordingly, the
Executive Directors are deemed to be the CODM.
Operating segments have then been identified based on the internal reporting
information and management structures within the Group. From such information
it has been noted that the CODM reviews the business as two operating
segments, receiving internal information on that basis. The management
structure and allocation of key resources, such as operational and
administrative resources, are arranged on a centralised basis.
Reconciliations of reportable segment revenues, profit or loss, assets and
liabilities and other material items
Information regarding the results of the reportable segments is included
below. Performance is measured based on segment profit before income tax, as
included in the internal management reports that are reviewed by the Board of
Directors. Segment profit is used to measure performance. There are no
material inter-segment transactions, however, when they do occur, pricing
between segments is determined on an arm's length basis. Revenues disclosed
below materially represent revenues to external customers.
Six months ended 31 January 2022
Rail Technology & Services Data, Analytics, Consultancy & Events
Unallocated
Total
£000 £000 £000 £000
Revenues
Total revenue for reportable segments 11,665 17,517 - 29,182
Consolidated revenue 11,665 17,517 - 29,182
Profit or loss
EBITDA for reportable segments 3,952 2,215 - 6,167
Amortisation of intangible assets - - (2,179) (2,179)
Depreciation (342) (424) - (766)
Exceptional Items (net) - - (783) (783)
Share-based payment charges - - (804) (804)
Share of result of equity accounted investees - - (297) (297)
Net interest payable (17) (24) (17) (58)
Consolidated profit before tax 3,593 1,767 (4,080) 1,280
Six months ended 31 January 2021
Rail Technology & Services Data, Analytics, Consultancy & Events
Unallocated
Total
£000 £000 £000 £000
Revenues
Total revenue for reportable segments 12,057 10,182 - 22,239
Consolidated revenue 12,057 10,182 - 22,239
Profit or loss
EBITDA for reportable segments 3,790 1,641 - 5,431
Amortisation of intangible assets - - (2,126) (2,126)
Depreciation (355) (421) - (776)
Exceptional Items (net) - - (619) (619)
Share-based payment charges - - (665) (665)
Share of result of equity accounted investees - - (104) (104)
Net interest payable (21) (18) - (39)
Consolidated profit before tax 3,414 1,202 (3,514) 1,102
Year ended 31 July 2021
Rail Technology & Services Data, Analytics, Consultancy & Events
Unallocated Total
£000 £000 £000 £000
Revenues
Total revenue for reportable segments 26,424 23,813 - 50,237
Consolidated revenue 26,424 23,813 - 50,237
Profit or loss
EBITDA for reportable segments 9,059 3,919 - 12,978
Amortisation of intangible assets - - (4,269) (4,269)
Depreciation (699) (904) - (1,603)
Exceptional items (net) - - (1,114) (1,114)
Other operating income - - 440 440
Share-based payment charges - - (1,276) (1,276)
Net interest payable (36) (37) (14) (87)
Share of results of equity accounted investees - - (434) (434)
Consolidated profit before tax 8,324 2,978 (6,667) 4,635
31 January 2022
Rail Technology & Services Data, Analytics, Consultancy & Events
Unallocated Total
£'000 £000 £000 £000
Assets
Total assets for reportable segments (exc. cash) 6,899 9,060 - 15,959
Intangible assets and investments - - 53,540 53,540
Deferred tax assets - - 701 701
Cash and cash equivalents 13,356 9,681 2,020 25,057
Consolidated total assets 20,255 18,741 56,261 95,257
Liabilities
Total liabilities for reportable segments (11,258) (6,638) - (17,896)
Deferred tax - - (8,402) (8,402)
Contingent consideration - - (9,071) (9,071)
Deferred Consideration - - (908) (908)
Consolidated total liabilities (11,258) (6,638) (18,381) (36,277)
31 January 2021
Rail Technology & Services Data, Analytics, Consultancy & Events
Unallocated Total
£'000 £000 £000 £000
Assets
Total assets for reportable segments (exc. cash) 5,676 5,357 - 11,033
Intangible assets and investments - - 53,236 53,236
Deferred tax assets - - 1,035 1,035
Cash and cash equivalents 12,563 6,093 2,128 20,784
Consolidated total assets 18,239 11,450 56,399 86,088
Liabilities
Total liabilities for reportable segments (11,836) (4,123) - (15,959)
Deferred tax - - (7,828) (7,828)
Contingent consideration - - (7,869) (7,869)
Consolidated total liabilities (11,836) (4,123) (15,697) (31,656)
31 July 2021
Rail Technology & Services Data, Analytics, Consultancy & Events
Unallocated Total
£'000 £000 £000 £000
Assets
Total assets for reportable segments (exc. cash) 6,515 8,669 - 15,184
Intangible assets and investments - - 52,400 52,400
Deferred tax assets - - 551 551
Cash and cash equivalents 16,862 6,483 2,042 25,387
Consolidated total assets 23,377 15,152 54,993 93,522
Liabilities
Total liabilities for reportable segments (11,913) (7,036) (590) (19,539)
Deferred tax - - (8,517) (8,517)
Contingent consideration - - (7,909) (7,909)
Deferred consideration - - (892) (892)
Consolidated total liabilities (11,913) (7,036) (17,908) (36,857)
4 Exceptional items
Six months ended 31 January 2022 Six months ended 31 January Year
2021 ended
31 July
2021
£'000 £'000 £'000
Contingent consideration fair value adjustment 47 172 327
Unwind of discounting of contingent consideration 396 363 658
Legal and professional fees in respect of acquisitions((1)) 340 84 129
Total 783 619 1,114
((1)) Legal and professional fees incurred in relation to the acquisition of
The Icon Group Limited, which completed on 3 November 2021 and costs incurred
up to 31 January 2022 in the acquisition of RailComm LLC, which completed on
11 March 2022.
5 Finance Costs
Six months ended 31 January 2022 Six months ended 31 January Year
2021 ended
31 July
2021
£'000 £'000 £'000
Interest on lease liabilities 36 38 74
Net foreign exchange loss 6 7 10
Unwind of discount of deferred consideration 17 - 14
Total 59 45 98
6 Earnings per share
Basic earnings per share
The calculation of basic earnings per share for the Half Year to 31 January
2022 was based on the profit attributable to ordinary shareholders of
£793,000 (Half Year to 31 January 2021: £777,000, Year ended 31 July 2021:
£2,356,000) and a weighted average number of ordinary shares in issue of
29,397,000 (Half Year to 31 January 2021: 29,162,000, Year ended 31 July 2021:
29,229,000), calculated as follows:
Weighted average number of ordinary shares
In thousands of shares
Six months ended 31 January Six months ended 31 January Year
2022 2021 ended
31 July
2021
Issued ordinary shares at start of period 29,332 29,122 29,122
Effect of shares issued related to business combinations 34 - 7
Effect of shares issued for cash 31 40 100
Weighted average number of shares at end of period 29,397 29,162 29,229
Diluted earnings per share
The calculation of diluted earnings per share for the Half Year to 31 January
2022 was based on the profit attributable to ordinary shareholders of
£793,000 (Half Year to 31 January 2021: £777,000, Year ended 31 July 2021:
£2,356,000) and a weighted average number of ordinary shares in issue after
adjustment for the effects of all dilutive potential ordinary shares of
30,348,000 (Half Year to 31 January 2021: 30,148,000, Year ended 31 July 2021:
30,131,000).
Adjusted EPS
In addition, Adjusted Profit EPS is shown below on the grounds that it is a
common metric used by the market in monitoring similar businesses. A
reconciliation of this figure is provided below:
Six months ended 31 January Six months ended 31 January Year
2022 2021 ended
31 July
2021
£'000 £'000 £'000
Profit attributable to ordinary shareholders 793 777 2,356
Amortisation of intangible assets 2,179 2,126 4,269
Share-based payment charges 804 665 1,276
Exceptional items (net) 783 619 1,114
Other operating income - - (440)
Tax impact of adjusting items((1)) (516) (562) 746
Adjusted profit for EPS purposes 4,043 3,625 9,321
Weighted average number of ordinary shares
In thousands of shares
For the purposes of calculating Basic earnings per share 29,397 29,162 29,229
Adjustment for the effects of all dilutive potential ordinary shares 951 986 902
For the purposes of calculating Diluted earnings per share 30,348 30,148 30,131
Basic adjusted earnings per share 13.75p 12.43p 31.89p
Diluted adjusted earnings per share 13.32p 12.02p 30.93p
((1) )Tax impact of adjusting items totalling £562,000 has been included for
H1 2021 to ensure consistency to the calculation of Adjusted profit for EPS
purposes per the audited full year accounts to 31 July 2021 and the half year
information prepared to 31 January 2022.
7 Seasonality
The Group offers a wide range of products and services within its overall
suite, meaning that revenues can fluctuate depending on the status and timing
of certain sales. Some of these are exposed to high levels of seasonality for
example:
· The Group's Data, Analytics, Consultancy & Events division
derives significant amounts of revenue from work taking place at certain times
of the year and is highly exposed to seasonality, in particular for Events
which has a very high level of seasonality based on the timing of events, but
also Traffic Data where work typically takes place when the weather conditions
are more predictable;
· Our Rail Technology and Services Division performs some
significant software development projects, the specific timing of which can
vary depending on commercial terms and customer requirements;
· Revenues from remote condition monitoring are also driven by the
size and timing of significant orders received from major customers;
· Finally, the timing of certain software licence renewals, new
sales, and also major project implementations along with consultancy offerings
can also impact on when work is performed, revenues are delivered and
therefore recognised.
As such, the overall Group continues to be exposed to a high degree of
seasonality throughout the year and reporting period.
8 Dividends
The Group remains committed to the progressive dividend policy that was
adopted in 2012. In the first half of this financial year, we have seen a
strong recovery in activity levels in those parts of the Group most impacted
by Covid-19, and we have not utilised the UK Government's Coronavirus Job
Retention Scheme. In this context the Board consider it appropriate to restore
the progressive dividend policy. The Directors have declared an interim
dividend of 0.9 pence per share which will be paid on 6 May 2022 to
shareholders on the register at 19 April 2022.
9 Related party transactions
The following transactions took place during the year with other related
parties:
Purchase of Amounts owed to
goods and services related parties
H1 2022 H1 2021 FY 2021 H1 2022 H1 2021 FY 2021
£'000 £'000 £'000 £'000 £'000 £'000
Nutshell Software Limited (1) 122 26 97 82 63 8
Vivacity Labs Limited (1) 163 174 439 14 37 -
Sale of Amounts owed by
goods and services related parties
H1 2022 H1 2021 FY 2021 H1 2022 H1 2021 FY 2021
£'000 £'000 £'000 £'000 £'000 £'000
WSP UK Limited (2) 1,013 1,368 3,112 183 - 1,045
Vivacity Labs Limited (1) - 1 6 - - 2
Nutshell Software Limited (1) 67 15 93 - 10 4
(1) Nutshell Software Limited and Vivacity Labs Limited are related parties by
virtue of the Group's shareholding in these entities.
(2) WSP UK Limited (WSP) is a company which is connected to Chris Cole who
serves as non-executive Chairman of Tracsis plc and also of WSP Global Inc,
WSP's parent company. Sales to WSP took place at arm's length commercial rates
and were not connected to Mr Cole's position at WSP.
10 Reconciliation of adjusted profit metrics
In addition to the statutory profit measures of operating profit and profit
before tax, the Group quotes Adjusted EBITDA and Adjusted profit. These
figures are relevant to the Group and are provided to provide a comparison to
similar businesses and are metrics used by Equities Analysts who cover the
Group as they better reflect the underlying performance of the Group, and its
ability to generate cash. The largest components of the adjusting items, being
depreciation, amortisation, share based payments, and share of result of
equity accounted associates, are 'non cash' items and so are separately
analysed in order to assist with the understanding of underlying trading.
Share based payments are adjusted to reflect the underlying performance of the
group as the fair value is impacted by market volatility that does not
correlate directly to trading performance. APMs are used by the Directors and
management for performance analysis, planning, reporting and incentive
purposes.
Adjusted EBITDA is defined as earnings before finance income and expense, tax,
depreciation, amortisation, exceptional items, other operating income,
share-based payment charges and share of result of equity accounted investees.
Adjusted EBITDA can be reconciled to statutory profit before tax as set out
below:
Six months ended 31 January 2022 Six months ended 31 January 2021
Year ended 31 July 2021
£'000 £000 £000
Profit before tax 1,280 1,102 4,635
Net finance expense 58 39 87
Share-based payment charges 804 665 1,276
Exceptional items - net 783 619 1,114
Other operating income - - (440)
Amortisation of intangible assets 2,179 2,126 4,269
Depreciation 766 776 1,603
Share of result of equity accounted investees 297 104 434
Adjusted EBITDA 6,167 5,431 12,978
Adjusted profit is defined as earnings before finance income and expense, tax,
amortisation, exceptional items, other operating income, share-based payment
charges, and share of result of equity accounted investees. This metric is
used to show the underlying business performance of the Group from period to
period in a consistent manner. The closest equivalent statutory measure is
profit before tax. Adjusted profit can be reconciled to statutory profit
before tax as set out below:
Six months ended 31 January 2022 Six months ended 31 January 2021
Year ended 31 July 2021
£'000 £000 £000
Profit before tax 1,280 1,102 4,635
Net finance expense 58 39 87
Share-based payment charges 804 665 1,276
Exceptional items - net 783 619 1,114
Other operating income - - (440)
Amortisation of intangible assets 2,179 2,126 4,269
Share of result of equity accounted investees 297 104 434
Adjusted profit 5,401 4,655 11,375
Adjusted EBITDA reconciles to adjusted profit as set out below:
Six months ended 31 January 2022 Six months ended 31 January 2021
Year ended 31 July 2021
£'000 £000 £000
Adjusted EBITDA 6,167 5,431 12,978
Depreciation (766) (776) (1,603)
Adjusted profit 5,401 4,655 11,375
11 Contingent Consideration
During the financial year ended 31 July 2019, the Group acquired Cash &
Traffic Management Limited, Compass Informatics Limited and Bellvedi Limited.
Under the share purchase agreements in place for each of these acquisitions,
contingent consideration is payable which is linked to the profitability of
the acquired businesses for a two to four year period post acquisition. The
maximum amount payable is £750,000 for Cash & Traffic Management Limited,
€2,000,000 for Compass Informatics Limited and £7,900,000 for Bellvedi
Limited. The period for contingent consideration in relation to the Cash &
Traffic Management Limited acquisition has ended in the half year and has been
settled in full at the period end date. The fair value at 31 January 2022 is
assessed at £560,000 for Compass Informatics Limited and £4,807,000 for
Bellvedi Limited. In the financial year ended 31 July 2020 the Group acquired
iBlocks Limited. Under the share purchase agreement in place for this
acquisition contingent consideration is payable which is linked to the
profitability of the acquired business for a three year period post
acquisition. The maximum amount payable is £8,500,000, and the fair value of
the amount payable was assessed at £2,713,000 at 31 January 2022. In November
2021 the Group acquired The Icon Group Limited. The Company has subsequently
been re-branded as Icon GEO. Under the share purchase agreement in place for
this acquisition contingent consideration is payable which is linked to the
renewal of certain key contracts and revenue generation of the business over a
3 year period. The maximum amount payable is €1,750,000. The fair value of
the amount payable was assessed at £991,000 at 31 January 2022.
The movement on contingent consideration can be summarised as follows:
31 January 31 January 2021 31 July
2022 2021
£000 £000 £000
At the start of the year 7,909 7,334 7,334
Arising on acquisition 977 - -
Cash payment (258) - (410)
Fair value adjustment to Statement of Comprehensive Income 47 172 327
Unwind of discounting 396 363 658
At the end of the period 9,071 7,869 7,909
The ageing profile of the remaining liabilities can be summarised as follows:
31 January 31 January 2021 31 July
2022 2021
£000 £000 £000
Payable in less than one year 4,556 1,653 4,689
Payable in more than one year 4,515 6,216 3,220
Total 9,071 7,869 7,909
12 Acquisition
On 3 November 2021 the Group acquired the entire issued share capital of Icon
Group Limited. Icon Group is an interdisciplinary geoscience company
specialising in Earth Observation (EO), Geographical Information System (GIS)
and spatial data analytics. Icon Group has several long-term repeat contracts.
For the year ended 31 December 2020, Icon Group generated revenue of £2.8m,
Profit before Tax of £0.8m, and had net assets of £2.9m. The business is
debt free and has a history of stable organic growth.
The acquisition consideration comprised an initial cash payment of £1.9m, a
further cash payment to reflect the net current asset position of the business
(above a working capital hurdle) on completion totalling £1.9m and the issue
of 68,762 new ordinary shares in Tracsis plc to a value of £0.6m. Additional
contingent consideration of up to £1.5m is payable, further detail is
provided in note 11.
The acquisition had the following effect on the Group's assets and liabilities
on the acquisition date:
Pre acquisition carrying amount Fair value adjustments Recognised value on acquisition Recognised value on acquisition
€000 €000 €000 £000
Tangible assets: Customer relationships - 2,367 2,367 2,007
Tangible fixed assets 15 - 15 12
Cash and cash equivalents 2,070 - 2,070 1,755
Trade and other receivables 994 - 994 843
Trade and other payables (488) - (488) (417)
Deferred tax asset/(liability) - (296) (296) (251)
Net identified assets and liabilities 2,591 2,071 4,662 3,949
Intangible assets: Goodwill - 1,686 1,686 1,452
2,591 3,757 6,348 5,401
Recognised value on acquisition Recognised value on acquisition
€000 £000
Consideration paid in cash 4,445 3,788
Consideration paid: fair value of shares 750 636
Fair value of contingent consideration payable 1,153 977
Total consideration 6,348 5,401
The fair values above were provisional and arise in accordance with the
requirements of IFRSs to recognise intangible assets acquired.
13 Events after the Balance Sheet date
On 11 March 2022 the Group acquired RailComm LLC, a North American based rail
technology software and services provider. Headquartered in Fairport, New York
and established in 1999, RailComm provides mission critical automation and
control solutions that reduce costs, increase safety, and improve operational
efficiency for rail passenger/freight operators and rail served
ports/industrials. Its two core products are rail yard automation and computer
aided dispatching and it has a wide and diversified client base across the
North American market. The business has good levels of annual recurring
software revenues in addition to large project delivery/systems integration
work.
The acquisition is in line with Tracsis' strategy of extending its rail
software footprint and expanding the addressable markets for its products and
services. In addition to the significant growth opportunities that exist
within RailComm's core rail markets, the acquisition provides the Group direct
access to a long-established sales network into a significant number of rail
clients in the North America market.
The acquisition consideration comprised an initial cash payment of $11.5m
(£8.8m). Additional contingent consideration of up to $2.7m (£2.1m) is
payable subject to RailComm achieving certain financial targets in the first
full year post acquisition. This cash will be held in escrow through that
period. A formal valuation exercise has not yet been completed due to the
timing of the acquisition.
Further information for Shareholders
Company number: 05019106
Registered office: Nexus
Discovery Way
Leeds
LS2 3AA
Directors: Chris Cole (Non-Executive Chairman)
Chris Barnes (Chief Executive Officer)
Andrew Kelly (Chief Financial Officer)
Lisa Charles-Jones (Non-Executive Director)
Liz Richards (Non-Executive Director)
James Routh (Non-Executive Director)
Company Secretary: Andrew Kelly
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