REG - Tracsis PLC - Interim Results
03/04/2023 07:00
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RNS Number : 0191V Tracsis PLC 03 April 2023
3 April 2023
Tracsis plc
('Tracsis', 'the Company' or 'the Group')
Unaudited Interim results for the six months ended 31 January 2023
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
2023.
Financial Highlights:
· 34% increase in revenue to £39.2m (H1 2022: £29.2m)
o 13% organic revenue growth
o 69% revenue growth in Rail Technology and Services Division including
further growth in recurring software licence revenue and a strong performance
in North America
o 11% revenue growth in Data, Analytics, Consultancy and Events Division
· Adjusted EBITDA* increased by 21% to £7.5m (H1 2022: £6.2m)
o Continuing to invest in integrating the Group's activities, technologies
and operating model to accelerate future growth
· 76% increase in profit before tax to £2.3m (H1 2022: £1.3m)
· Total cash balances** of £17.0m with no debt (31 July 2022:
£17.2m, 31 January 2022: £25.1m)
· Interim dividend of 1.0p per share
* Earnings before net finance 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.
** Cash and cash equivalents, and cash held in escrow
Operational Highlights:
· Further growth in rail technology software licence usage and
annual recurring revenue:
o Second full deployment of TRACS Enterprise went live in January 2023. Work
continues on further passenger and freight deployments from previously
announced contract wins
o Roll-out of RailHub enterprise software contract completed in December
2022, more than doubling the user base to over 40,000 individuals
o Won two new contracts for the deployment of our Pay-As-You-Go (PAYG) smart
ticketing technology
· Record first half revenue for Remote Condition Monitoring
technology (46% increase over the same period last year)
· Strong revenue contribution from RailComm following its
acquisition in the prior year, including a large software licence deployment
for a new product serving the transit market. Growing pipeline of other
opportunities in North America
· Increased activity in Data Analytics / GIS including multi-year
Earth Observation contract win utilising enhanced capabilities following the
prior year acquisition of Icon GEO
· Post-Covid lockdown recovery complete in Events and Traffic Data
businesses, with new contract wins in both markets. These business are now
fully integrated under a single leadership team
· Accelerating actions to simplify the Group, further integrate our
operating model, and invest in new product development to position Tracsis for
scalable growth
· Have started work on ISO14001 implementation and other ESG
priorities that will enable the business to deliver its objective of being
carbon neutral by 2030
Outlook:
· Positive start to Q3 trading with high activity levels across the
Group
· Unchanged expectations for the full year
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,
underpinned by strong rail technology recurring revenue growth in both the UK
and North America and new large contract wins across Remote Condition
Monitoring and Smart Ticketing. I am also delighted to see good growth in our
Data, Analytics, Consultancy and Events division which is huge testament to
the team and all their hard work throughout the Covid pandemic to ensure that
we could respond quickly to market demand post the removal of all lockdown
restrictions.
Our future opportunity pipeline is strong and the UK rail industry's
transition to a new Great British Railways structure will continue to drive
interest in product solutions that will deliver a data-driven,
customer-focused, safety-critical future for the industry. Tracsis is well
positioned to benefit from the digital transformation of the rail industry
both in the UK and North American markets.
We continue to invest in implementing a simplified and more integrated
operating model to help us to execute our growth strategy, to improve the
speed and robustness of large SaaS programme delivery, to strengthen the
resilience of our IT infrastructure, to attract and retain talent, and to meet
our objectives of being carbon neutral by 2030.
We are confident that there are strong growth prospects for all parts of our
Group and therefore we remain committed to implementing our overall strategic
growth and investment plans. We will continue to pursue organic and
acquisitive growth, including greater investment in self-funded R&D
supported by a strong balance sheet."
Presentation and Overview videos
Tracsis is hosting an online presentation open to all investors on Wednesday 5
April 2023 at 1.00pm UK time. Anyone wishing to connect should register here:
https://bit.ly/TRCS_H1_webinar (https://bit.ly/TRCS_H1_webinar)
A video overview of the results featuring CEO Chris Barnes and CFO Andy Kelly
is available to view here: https://bit.ly/TRCS_H123_overview_video
(https://bit.ly/TRCS_H123_overview_video)
Demonstration videos of the Group's TRACS Enterprise, Remote Condition
Monitoring, Smart Ticketing and Safety and Risk Management rail technology
products are available to view here: Rail Technology Product Demonstration for
Investors | Tracsis
(https://tracsis.com/investors/investors-day/rail-technology-product-demonstration-for-investors/)
(https://tracsis.com/investors/investors-day/rail-technology-product-demonstration-for-investors/)
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
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.
Management Overview
Introduction
The Group has performed well in the first half, delivering strong organic and
acquisitive growth, making further progress in delivering software deployments
from contracts won in previous years, winning new multi-year software
contracts that will support further growth in recurring revenues, and
accelerating the progression towards a more integrated operating model.
New contract wins and implementations support ongoing Rail Technology revenue
growth
We have delivered further growth in rail technology software licence usage in
the first half, with new contract wins supplemented by completing delivery
milestones on several large deployments. Recurring and repeat revenue for the
Rail Technology and Services Division increased by 16% in the period to
£10.8m.
In Rail Operations and Planning we completed the second end-to-end deployment
of TRACS Enterprise with a Train Operating Company ("TOC") in January 2023,
replacing disparate legacy systems. There is an orderbook of three further
passenger and freight implementations for this product from previously
announced contract wins, and the next full deployment will go-live in our next
financial year. We continue to look at opportunities to modularise the product
architecture to facilitate faster SaaS deployment. In RailComm we completed
acceptance testing with a North American transit customer for a large software
licence deployment that was in the business' order book on acquisition. This
contributed to a strong total first half revenue performance from RailComm of
£5.2m.
In Digital Railway and Infrastructure, the roll-out of the large RailHub
contract won in July 2021 was completed in December 2022, which has doubled
the user base for this product to over 40,000 individuals. Work is underway on
the next phase of development of the RailHub product, and there is a good
pipeline of further opportunities. We have also seen record first half revenue
for our Remote Condition Monitoring hardware and software.
In Rail Customer Experience, we won another new contract for our PAYG smart
ticketing solution with a UK Transport Authority. This will go live later this
calendar year and is the first EMV (contactless bank card) deployment of this
versatile solution on the UK's national rail network. We have also secured the
first pilot deployment of our mobile app platform ("Hopsta") with a UK TOC. We
are seeing continued high levels of interest in this product across ITSO
smartcard, EMV and barcode solutions.
Post Covid recovery and business integration completed in Events and Traffic
Data
Activity levels in both the Events and Traffic Data businesses that were most
impacted by Covid-19 have now returned to pre-pandemic levels. Total revenue
of £11.1m in the first half was at a similar level to the prior period,
however the prior period included c£1m of revenue from supporting Covid
testing and vaccination centres that has not been repeated in the current
financial year.
During the period these businesses have been fully integrated into a single
operating unit under a common leadership team. This will support margin
optimisation from operating efficiencies, and enable a consistent and focused
approach to health and safety, as well as to reducing the carbon emissions
from our vehicle fleet as we move towards our 2030 carbon neutral target.
Location data is critical in helping many organisations deliver their ESG
commitments
Activity levels in our Data Analytics, GIS and consultancy businesses continue
to accelerate. We are seeing increasing demand from across the transport and
environmental sectors for a more detailed understanding of how they use
geographic tagging and location data to monitor and track the performance of
their assets to deliver operational performance improvements, cost savings and
ultimately meet regulatory and wider ESG requirements. The Tracsis combination
of GIS/Data Analytics, IoT, earth observation services, and custom client web
and mobile solutions is well positioned alongside our broad portfolio of
software product and modelling solutions to enable Tracsis to expand its
footprint across the transport, utilities, and environmental sectors. We see
Data-as-a-Service provision as an area of specific future interest given the
large amounts of data that Tracsis processes from across the transportation
industry each day.
Building a strong foundation for future growth
We recognise the need to continue to integrate the Group's activities,
technologies and operating model in order to provide a solid platform for
ongoing scalable growth, and have made further progress in the period. We are
continuing to invest in this area in order to accelerate future growth.
This includes restructuring our operating model in order to simplify the
business, implement a single groupwide IT operating environment, accelerate
the implementation of our ESG initiatives, and expand our management
capabilities and bandwidth in order to deliver a growing pipeline. This will
be completed in the next financial year.
We have continued to deliver our "OneTracsis" leadership programme for
managers and senior leaders across the Group. The next phase of this will
focus on high performing teams.
We are also investing in technology where we see opportunities to accelerate
further growth in our markets. In the first half of the year this has included
continuing to develop the Hopsta smart ticketing mobile app platform that is
now in pilot stage. We have a pipeline of innovative technology development
opportunities under review that leverage our existing product portfolio,
industry expertise, and customer relationships. We will review the most
appropriate investment model to realise these opportunities, which may include
self-funded development where this can deliver an attractive return on
investment.
As a result of these actions to better position the Group for the future, we
will incur one-off cash costs this financial year of approximately £1m, of
which c£0.4m were incurred in the first half.
Digital transformation remains integral to the rail industry's future
Digital transformation will play a significant role in delivering a
data-driven, customer-focused, safety-critical rail industry in both the UK
and globally, including North America. Tracsis' range of products and services
are well aligned with these end market drivers, as they enable our customers
to deliver mission-critical activities with increased efficiency, enhanced
performance, higher productivity and improved safety.
The UK Transport Secretary recently reaffirmed the Government's commitment to
a new Great British Railways (GBR) structure, which will lead the digital
transformation of the rail industry in the UK. A recent government
announcement confirmed that the new headquarters for GBR will be in Derby
where Tracsis already has a strong operational presence. New National Rail
Contracts for train operators are driving an ever-increasing focus on
operational efficiencies and cost savings aligned to clearly defined Quality
Target Measures (QTMs). The industrial action in the UK that has been ongoing
since June 2022 is creating some near-term uncertainty in procurement and
delivery timelines, as our customers focus on the operational challenges of
continually re-planning timetables and services at short notice. However, the
benefits case of our rail technology products remain closely aligned with QTMs
and with the operational challenges of running the railway safely and
sustainably.
The rail industry in North America is undergoing a similar digital
transformation in pursuit of increased efficiency and improved safety
outcomes. We are seeing a growing pipeline of opportunities in North America
for Tracsis' products. The successful deployment of a new product offering in
the period, which fully integrates our Computer Aided Dispatch system with the
Positive Train Control protection systems now deployed on the US rail network,
opens a large new product segment opportunity for Tracsis in the North
American transit market.
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 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 2022 Future Focus
Drive Organic Growth · 13% organic revenue growth for the Group; 25% organic growth in Rail · Delivery of recent contract wins and pipeline of large multi-year
Technology and Services Division software contracts
Delivery of our pipeline, continual innovation of products and services,
flawless high quality delivery and an excellent close working relationship · Second full deployment of TRACS Enterprise completed in January 2023 · Support UK Rail Industry to deliver the strategic vision outlined in the
with our customers
Williams-Shapps plan
· Two new smart ticketing contracts won, including the first EMV solution
on the UK's national rail network and the first pilot deployment of our mobile · Accelerate investment in software & technology products
app platform
· Strengthening of SaaS delivery capabilities so that we can accelerate
· Roll-out of RailHub enterprise software contract completed implementation timetables and quality, and timeliness of delivery
· Strong demand for Remote Condition Monitoring hardware and software
· Work continues on implementing TRACS Enterprise contracts won in previous
years and on improving on time delivery
· Large pipeline of other rail software opportunities
· Multi-year contract wins and renewals in Data Analytics/GIS, Traffic Data
and Events
· Post-Covid recovery completed in Events and Traffic Data
Expand Addressable Markets · Investment in developing mobile app smart ticketing platform; product now · Execute growth strategy for North America
in pilot phase
Selling our products and services into new markets, including overseas, and
· Continued growth in Data Analytics / GIS especially in the UK and in
expansion into selected sectors that share problems with the industries we · Multi-year contract win in Data Analytics/GIS using combined Compass Data-as-a-service provision
currently serve Informatics and Icon GEO capabilities
· Targeted growth opportunities overseas or in adjacent markets
· Growing pipeline of opportunities in North America
Enhance Growth Through Acquisition · Strong performance from RailComm, including a large software licence · Active pursuit of M&A to extend rail software and data informatics
deployment in a new product area footprint
Reinvesting Group profits to fund further accretive acquisitions that meet our
disciplined investment criteria · Further potential targets being evaluated · Focus on recurring revenue growth
Integration and Capability · Events and Traffic Data businesses have been integrated under a common · Complete Group restructuring and IT transformation during FY24
management team
Enhanced integration and collaboration across the Group, increasing management
· Accelerate R&D collaboration
capability and bandwidth, and improving our systems and processes, as key · Workstreams to integrate the rest of the Group into a simplified
foundations to deliver our growth strategy organisational structure are underway · Continued alignment of groupwide systems and processes
· Executing people strategy to attract, retain and develop talent · Roll out next stage of 'OneTracsis' leadership training with a focus on
high performing teams
· Rolling out a single groupwide IT operating model
· Investment in strengthening SaaS delivery capabilities
· ISO14001 (Environmental management) implementation underway
Trading Progress and Prospects
Rail Technology & Services
Summary segment results:
Revenue
£19.7m (H1 2022:
£11.7m)
Adjusted EBITDA* £5.5m (H1 2022:
£4.0m)
Profit before Tax £2.5m (H1
2022: £1.6m)
Activity levels in our Rail Technology & Services Division remain high. We
have delivered further growth in rail technology software licence usage, with
new contract wins supplemented by completing delivery milestones on several
large deployments. These included the second full deployment of TRACS
Enterprise with a passenger TOC, completing the roll-out of the large RailHub
enterprise software contract that was won in July 2021, and a large software
licence deployment for a new product in the North American transit market.
Total revenue of £19.7m was 69% higher than prior year. Organic growth of 25%
was supplemented by a strong performance from RailComm in North America which
benefitted our Rail Operations & Planning and Digital Railway &
Infrastructure product segments. There was very strong revenue growth in
Customer Experience including the benefit of new contracts for our smart
ticketing and delay repay products won in the previous financial year, as well
as new contract wins in the period and an increase in transactional delay
repay revenue. There was also strong demand for our Remote Condition
Monitoring technology in the UK, which delivered record first half revenue.
As a result of the new contract wins and the deployment of contracts won in
previous years, annual recurring and routinely repeating revenue in the Rail
Technology and Services Division increased by 16% to £10.8m.
Adjusted EBITDA* increased by 40% to £5.5m (H1 2022: £4.0m).
Rail Operations & Planning
Total revenues from the Group's rail operations & planning software and
hosting offerings increased by 43% to £7.6m (H1 2022: £5.3m). This includes
the various revenue streams from our TRACS, ATTUne, COMPASS and Retail &
Operations product suites, as well as software and project implementation for
transit operators in North America. Software sales continue to benefit from
high renewal rates from existing customers. We are continuing to implement
several multi-year contracts for our customers that were won in previous
years. The second full deployment of TRACS Enterprise went live with a UK TOC
in January 2023, and work is continuing on three further deployments. We
continue to see a strong pipeline of new opportunities for this product in
both the passenger and freight sectors of the industry. 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. The next full TRACS
Enterprise go-live is expected to be in the next financial year. We are
investing in technical and program management capabilities to support improved
delivery in this area, and are looking at opportunities to modularise the
product architecture to facilitate faster SaaS deployment of this product.
In North America we delivered a large software licence deployment milestone
for a new product (PTC BOS 1 (#_ftn1) ). This is part of a large and ongoing
project with a transit operator, and will result in increased recurring
revenues as the solution is rolled out across its operations. This first
deployment opens a large new product segment opportunity for Tracsis in the
North American transit market.
Digital Railway & Infrastructure
Total revenues across the Digital Railway and Infrastructure offerings
increased by 76% to £8.8m (H1 2022: £5.0m), with good growth in the UK from
Remote Condition Monitoring (RCM) and in our safety and risk management
product suites supplemented by RailComm's yard automation and infrastructure
offerings.
We saw high RCM volumes in the first half of the year, resulting in record
revenue. Performance in this part of the Division is linked to the investment
cycle trend of its UK customer base which consists of 5 year 'Control
Periods'. We have several large contracts with large railway systems
integrators and Network Rail for the supply of RCM equipment through the
remainder of Control Period 6 which runs to 31 March 2024. We are seeing
increased interest in RCM in North America, with ongoing orders from an
existing customer and a growing number of initial user trials underway.
In safety and risk management, the roll-out of the large RailHub enterprise
software contract that was won in July 2021 was completed in December 2022.
This has embedded RailHub as the core platform used to plan and safely deliver
upgrade and maintenance work on or near the railway line in the UK, and has
more than doubled the user base for this product to over 40,000 individuals
across Network Rail and the supply chain. There is a strong pipeline of future
opportunities for the RailHub platform including additional functionality that
is being developed by Tracsis.
There was a strong revenue contribution from RailComm in the first half, with
recurring software licence revenue supplemented by the delivery of project
milestones. Work is ongoing on several rail technology projects for delivery
in the second half of the year and into next financial year.
Rail Customer Experience
There was very strong growth from our Customer Experience products, with
revenue increasing by £1.9m to £3.3m (H1 2022: £1.4m). This includes the
benefit from smart ticketing and delay repay contact wins that went live in
the previous financial year, as well as new contracts won in the period and an
increased level of delay repay transaction volumes.
We continue to see high levels of interest in iBlocks' smart ticketing product
offering that is well aligned with passenger requirements 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
have won another new contract for the deployment of this technology with a UK
Transport Authority. This will go live later this calendar year and is the
first EMV (contactless bank card) deployment of this versatile solution on the
UK's national rail network. We have continued to invest in the development of
a mobile app platform ("Hopsta") that puts this technology directly in the
hands of the consumer and avoids the requirement for expensive gateline
infrastructure. We have secured the first pilot deployment of this with a UK
TOC, which is underway. We are seeing continued high levels of interest in our
smart ticketing product across ITSO smartcard, EMV and barcode solutions.
Data, Analytics, Consultancy & Events
Summary segment results:
Revenue
£19.5m (H1 2022:
£17.5m)
Adjusted EBITDA* £1.9m (H1 2022:
£2.2m)
Profit before Tax £0.5m (H1
2022: £1.1m)
Revenue increased by 11% to £19.5m reflecting good growth in Data Analytics /
GIS and Transport Insights, and the completion of the post Covid lockdown
recovery in Traffic Data. Activity levels across the Division have been high,
with several large contract wins in the period including a multi-year Earth
Observation contract in Data Analytics / GIS that utilises the capabilities
added to the Group through the Icon GEO acquisition in November 2021, the
renewal of a large multi-year contract in Traffic Data at an increased value,
and additional fixed venue contracts in Events.
Adjusted EBITDA* of £1.9m includes c£0.4m of non-repeat costs from actions
to restructure the Group and from the groupwide one-off cost of living
allowance paid to staff in August 2022 in recognition of the increasing cost
of food and energy.
During the first half, the Events and Traffic Data businesses have been fully
integrated into a single operating unit under a common leadership team. This
will support margin optimisation from operating efficiencies, and also enable
a consistent and focused approach to health and safety and to reducing the
carbon emissions from our vehicle fleet as we move towards our 2030 carbon
neutral target. As part of our activities to simplify and streamline the
Group, in the second half of this financial year we will integrate the Data
Analytics / GIS and Transport Insights businesses under a common leadership
team. This will better enable us to provide high value consultancy and
services to our customers by combining deep sector expertise with the full
range of Tracsis' product and data capabilities, and to grow the addressable
market for our consultancy and data analytics / GIS offering across the UK and
Ireland.
Data Analytics / GIS
Revenue increased to £5.4m (H1 2022: £3.7m). This includes the initial
benefit from a large multi-year Earth Observation contract secured in Ireland
which utilises the capabilities added to the Group through the Icon GEO
acquisition in November 2021. This contract is to develop an Area Monitoring
System (AMS) using satellite data imagery and is being delivered in
partnership with two European geospatial companies. We have also secured a
range of new contracts with Irish Government departments and Utility companies
and have a growing pipeline of future opportunities.
Transport Insights
Revenue of £2.9m was £0.2m higher than prior year (H1 2022: £2.7m). We have
seen continued strong demand for our specialist timetabling and rail
performance expertise, and have won a large travel survey contract for
delivery in the second half of the current financial year.
Traffic Data
Revenue increased by 7% to £4.6m (H1 2022: £4.3m) with activity levels
returning to the levels seen prior to the Covid pandemic. Some month to month
variability in demand remains and activity levels in this market are more
sensitive to central and local authority funding. The large, multi-year
National Road Traffic Census (NRTC) contract was renewed in the period at an
increased value, and the business has secured other contracts for delivery in
the second half of the current financial year.
Event Transport Planning & Management
The Events business delivered a strong first half performance. Revenue of
£6.6m was at a similar level to the prior period (H1 2022: £6.8m) that had
included c£1m of revenue from supporting Covid testing and vaccination
centres which was not repeated in the current financial year. Underlying
activity has therefore increased and the business has won a number of new
multi-year contracts for fixed venue work.
Financial Summary
H1 revenue of £39.2m was £10.0m (34%) higher than the prior period (H1 2022:
£29.2m), reflecting strong organic and acquisitive growth. Revenue in the
Rail Technology and Services Division increased by £8.0m (69%) including the
benefit from new contract wins in the period and in the prior year, record
demand for Remote Condition Monitoring, and a strong performance from RailComm
that was acquired in March 2022. Revenue in the Data, Analytics, Consultancy
and Events Division increased by £2.0m (11%) and includes strong growth in
Data Analytics / GIS and in Transport Insights, and completion of the post
Covid lockdown recovery in Traffic Data. New contract wins in Events largely
offset the non-repeat of prior period revenue from supporting Covid testing
and vaccination centres.
Adjusted EBITDA* of £7.5m was £1.3m (21%) higher than the prior period (H1
2022: £6.2m), and includes £0.4m of one-off costs from actions to
restructure the Group and investment in new technologies. We expect an
additional net investment of c£0.6m in H2 of costs that will better position
the Group for the future. In addition there was £0.4m one-off charge in the
period for a cost of living allowance paid to staff in August 2022 in
recognition of the increasing cost of food and energy.
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
2023 2022 2022
£'000 £'000 £'000
Revenue 39,213 29,182 68,723
Adjusted EBITDA * (note 10) 7,464 6,167 14,161
Adjusted Profit ** (note 10) 6,398 5,401 12,394
Profit before tax 2,256 1,280 2,558
* Earnings before net finance 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 net finance 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 £2.3m is £1.0m higher than the prior period
(H1 2022: £1.3m). In addition to the £1.3m increase in adjusted EBITDA*
described above, this reflects the following items:
· £1.1m depreciation charge (H1 2022: £0.8m) which includes
additional charges from prior year acquisitions and the prior year investment
in IT assets;
· £2.8m amortisation of intangible assets (H1 2022: £2.2m), which
includes charges relating to the acquisitions of Icon GEO in November 2021 and
RailComm in March 2022;
· £0.7m share based payment charges (H1 2022: £0.8m);
· £0.5m exceptional items (H1 2022: £0.8m) reflecting £0.4m
unwinding of previously discounted contingent consideration balances in
accordance with IFRS accounting standards at a similar level to the prior
period, and £0.1m increase in the assessed fair value of contingent
consideration based on the future expectations of performance from previous
acquisitions (H1 2022: £0.1m). The prior period charge also included £0.3m
of transaction costs associated with the acquisitions of Icon GEO and
RailComm;
· £0.1m net finance expense (H1 2022: £0.1m); and
· £nil charge (H1 2022: £0.3m) 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 2023 the Group's cash balances, including balances held in
escrow, were £17.0m (H1 2022: £25.1m; FY 2022: £17.2m). Cash generation
remains strong.
Cash generated from operations was £2.8m (H1 2022: £3.5m) after a net £4.7m
increase in working capital in the period. This reflects normal trading
patterns and includes a £1.2m unwind of contract liabilities in RailComm
relating to delivery of the orderbook acquired with the business. The Group is
historically more cash generative in the second half of the year, reflecting
the timing of licence renewals and the seasonality of certain business units.
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
2023 2022 2022
£'000 £'000 £'000
Net cash flow from operating activities 1,636 2,909 8,188
Net cash flow used in investing activities (1,219) (2,550) (16,761)
Net cash flow used in financing activities (676) (617) (2,034)
Movement during the period (before exchange adjustments) (259) (258) (10,607)
Dividend
The Board has declared an interim dividend of 1.0 pence per share which will
be paid on 5 May 2023 to shareholders on the register at 21 April 2023.
A final dividend of 1.1 pence per share was paid in respect of the year ended
31 July 2022. The Board intends to pursue a sustainable and progressive
dividend policy in the future, having regard to the development of the Group.
Board
Jill Easterbrook was appointed to the Board as a Non-Executive Director on 5
October 2022. Lisa Charles-Jones stepped down from the Board on 31 December
2022. Jill succeeded Lisa as Chair of the Remuneration Committee on this date.
Summary and Outlook
The Board was pleased with the first half performance, with strong revenue
growth and a number of important multi-year contract wins in both Divisions
that positions it well for further growth.
Our end market drivers are strong and are linked to the ongoing digital
transformation of the rail industry in the UK and North America, as well as
growing demand for specialist operational consultancy services and for Data
Analytics / GIS expertise across all regulated industries. Whilst there is
some near-term uncertainty in procurement and delivery timelines from the
ongoing industrial action in the UK rail industry, Tracsis' products and
services remain closely aligned with these drivers. We deliver positive
benefit cases to our clients by enabling them 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. We are making good progress in delivering this strategy,
with further new multi-year software contract wins in the period and a
pipeline of deployments on contracts won in previous years. We continue to
invest in integrating the Group's activities, technologies and operating model
to provide a solid platform for ongoing scalable growth, and are accelerating
our actions in this area alongside targeted investment in new product
development to capture a growing pipeline of opportunities.
M&A remains a core part of our strategy and we are actively pursuing
further opportunities, with a focus on extending our software and technology
footprint and enhancing recurring revenue growth.
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 the Board's expectations for
the year to 31 July 2023 remain unchanged.
Chris Cole Chris Barnes
Non-Executive Chairman Chief Executive Officer
3 April 2023
Tracsis plc
Condensed consolidated interim statement of comprehensive income for the six
months ended 31 January 2023
Unaudited Unaudited
6 months ended 31 January 2023 6 months ended 31 January Audited
2022 Year ended 31 July 2022
Note
£'000 £'000 £'000
Revenue 3 39,213 29,182 68,723
Cost of sales (14,511) (11,438) (26,483)
Gross profit 24,702 17,744 42,240
Administrative costs (22,322) (16,109) (38,985)
Adjusted EBITDA (1) 3, 10 7,464 6,167 14,161
Depreciation (1,066) (766) (1,767)
Adjusted profit (2) 10 6,398 5,401 12,394
Amortisation of intangible assets (2,808) (2,179) (5,000)
Other operating income - - 426
Share-based payment charges (666) (804) (1,502)
Operating profit before exceptional items 2,924 2,418 6,318
Exceptional items:
Impairment losses - - (49)
Other 4 (544) (783) (3,014)
Operating profit 2,380 1,635 3,255
Net finance expense 5 (124) (58) (141)
Share of result of equity accounted investees - (297) (556)
Profit before tax 2,256 1,280 2,558
Taxation (615) (487) (1,056)
Profit for the period 1,641 793 1,502
Other comprehensive income
Foreign currency translation differences 507 67 423
Revaluation of financial assets - - (50)
Total recognised income for the period 2,148 860 1,875
Earnings per ordinary share
Basic 6 5.55p 2.70p 5.09p
Diluted 6 5.41p 2.61p 4.95p
( )
(1) Earnings before net finance 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 net finance expense, tax, amortisation, exceptional items,
other operating income, share-based payment charges, and share of result of
equity accounted investees. - see note 10
Tracsis plc
Condensed consolidated interim balance sheet as at 31 January 2023
Unaudited Unaudited Audited
At 31 January At 31 January At 31 July
2023 2022 2022
Note £'000 £'000 £'000
Non-current assets
Property, plant and equipment 4,585 3,767 4,897
Intangible assets 63,071 53,182 65,867
Investments - equity - 99 -
Investments in equity accounted investees - 259 -
Deferred tax assets 503 701 410
68,159 58,008 71,174
Current assets
Inventories 1,234 406 1,090
Trade and other receivables 17,874 11,786 18,454
Cash held in escrow 2,191 - 2,217
Cash and cash equivalents 14,800 25,057 14,970
36,099 37,249 36,731
Total assets 104,258 95,257 107,905
Non-current liabilities
Lease liabilities 1,235 1,205 1,476
Contingent consideration payable 11 790 4,515 736
Deferred consideration payable 303 594 297
Deferred tax liabilities 10,167 8,402 10,671
12,495 14,716 13,180
Current liabilities
Lease liabilities 1,316 968 1,291
Trade and other payables 18,645 14,811 24,092
Contingent consideration payable 11 8,150 4,556 8,585
Deferred consideration payable 314 314 308
Current tax liabilities - 912 -
28,425 21,561 34,276
Total liabilities 40,920 36,277 47,456
Net assets 63,338 58,980 60,449
Equity attributable to equity holders of the Company
Called up share capital 119 118 119
Share premium reserve 6,511 6,415 6,436
Merger reserve 6,161 6,161 6,161
Retained earnings 49,755 46,307 47,448
Translation reserve 842 (21) 335
Fair value reserve (50) - (50)
Total equity 63,338 58,980 60,449
Tracsis plc - Consolidated statement of changes in equity
For the six months ended 31 January 2023
Unaudited Share Premium Reserve Fair value Reserve
Share Capital Merger Reserve Retained Earnings Translation Reserve
Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 August 2022 119 6,436 6,161 47,448 335 (50) 60,449
Total comprehensive income for the period
Profit for the six month period ended 31 January 2023 - - - 1,641 - - 1,641
Other comprehensive income for the period ended 31 January 2023 - - - - 507 - 507
Total Comprehensive income for the period - - - 1,641 507 - 2,148
Transactions with owners of the Company
Share based payment charges - - - 666 - - 666
Exercise of share options - 75 - - - - 75
At 31 January 2023 119 6,511 6,161 49,755 842 (50) 63,338
Unaudited Share Premium Reserve Fair value Reserve
Share Capital Merger Reserve Retained Earnings Translation Reserve
Total
£'000 £'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 2023
Unaudited Unaudited Audited
6 months to 6 months to Year ended
31 January 2023 31 January 2022 31 July 2022
Note £'000 £'000 £'000
Operating activities
Profit for the period 1,641 793 1,502
Net finance expense 124 58 141
Depreciation 1,066 766 1,767
(Profit) / Loss on disposal of plant & equipment 11 - (70)
Non-cash exceptional items 544 443 2,441
Other operating income - - (426)
Amortisation of intangible assets 2,808 2,179 5,000
Share of result of equity accounted investees - 297 556
Income tax charge 615 487 1,056
Share based payment charges 666 804 1,502
Operating cash inflow before changes in working capital 7,475 5,827 13,469
Movement in inventories (144) (25) (233)
Movement in trade and other receivables 615 275 (4,103)
Movement in trade and other payables (5,138) (2,603) 383
Cash generated from operations 2,808 3,474 9,516
Interest received 8 1 6
Income tax paid (1,180) (566) (1,334)
Net cash flow from operating activities 1,636 2,909 8,188
Investing activities
Purchase of plant and equipment (263) (312) (1,129)
Proceeds from disposal of plant and equipment 9 53 123
Acquisition of subsidiaries (net of cash acquired) - (2,033) (9,097)
Payment of contingent consideration 11 (965) (258) (4,126)
Cash held in escrow for payment of contingent consideration - - (2,217)
Payment of deferred consideration - - (315)
Net cash flow used in investing activities (1,219) (2,550) (16,761)
Financing activities
Dividends paid - - (266)
Proceeds from the exercise of share options 75 16 37
Settlement of financial liability - - (416)
Lease liability payments (766) (649) (1,421)
Lease receivable receipts 15 16 32
Net cash flow used in financing activities (676) (617) (2,034)
Net decrease in cash and cash equivalents (259) (258) (10,607)
Exchange adjustments 89 (72) 190
Cash and cash equivalents at beginning of period 14,970 25,387 25,387
Cash and cash equivalents at end of period 14,800 25,057 14,970
Notes to the consolidated interim report
For the six months ended 31 January 2023
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 Standards 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 2022, which has been prepared in accordance
with IFRS 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 2022, as detailed on pages 76 to 82 of the Group's Annual
Report and Financial Statements for the year ended 31 July 2022, 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 2022 has been
extracted from the 2022 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 2022.
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 2022.
There have been no new accounting standards or changes to existing accounting
standards applied for the first time from 1 August 2022 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 2023 the Group had net cash and cash
equivalents totalling £14.8m. 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 3 April 2023.
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 44 to 49 of the
Annual Report & Accounts for the year ended 31 July 2022. The Board
considers risks on a periodic basis and has maintained the key risks as
follows, on a Group wide basis:
· 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 breach
· Integration risk
· Climate change
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
2023 2022 2022
£'000 £'000 £'000
Rail Technology & Services 19,751 11,665 29,935
Data, Analytics, Consultancy & Events 19,462 17,517 38,788
Total revenue 39,213 29,182 68,723
A geographical analysis of revenue is provided below:
Six months ended 31 January 2023 Six months ended 31 January Year
2022 ended
31 July
2022
£'000 £'000 £'000
United Kingdom 27,262 24,524 55,849
Ireland 6,065 4,088 8,827
Rest of Europe 284 218 280
North America 5,441 10 3,343
Rest of the World 161 342 424
Total 39,213 29,182 68,723
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 2023
Rail Technology & Services Data, Analytics, Consultancy & Events
Unallocated
Total
£'000 £'000 £'000 £'000
Revenues
Total revenue for reportable segments 19,751 19,462 - 39,213
Consolidated revenue 19,751 19,462 - 39,213
Profit or loss
EBITDA for reportable segments 5,548 1,916 - 7,464
Amortisation of intangible assets (2,120) (688) - (2,808)
Depreciation (459) (607) - (1,066)
Exceptional Items (net) (464) (80) - (544)
Share-based payment charges - - (666) (666)
Net finance expense (38) (32) (54) (124)
Consolidated profit before tax 2,467 509 (720) 2,256
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 (1,645) (534) - (2,179)
Depreciation (342) (424) - (766)
Exceptional Items (net) (338) (105) (340) (783)
Share-based payment charges - - (804) (804)
Share of result of equity accounted investees - - (297) (297)
Net finance expense (17) (24) (17) (58)
Consolidated profit before tax 1,610 1,128 (1,458) 1,280
Year ended 31 July 2022
Rail Technology & Services Data, Analytics, Consultancy & Events
Unallocated
Total
£'000 £'000 £'000 £'000
Revenues
Total revenue for reportable segments 29,935 38,788 - 68,723
Consolidated revenue 29,935 38,788 - 68,723
Profit or loss
EBITDA for reportable segments 9,780 4,381 - 14,161
Amortisation of intangible assets (3,731) (1,269) - (5,000)
Depreciation (748) (1,019) - (1,767)
Exceptional Items (net) (444) (176) (2,443) (3,063)
Other operating income - - 426 426
Share-based payment charges - - (1,502) (1,502)
Share of result of equity accounted investees - - (556) (556)
Net interest payable (46) (68) (27) (141)
Consolidated profit before tax 4,811 1,849 (4,102) 2,558
31 January 2023
Rail Technology & Services Data, Analytics, Consultancy & Events
Unallocated Total
£'000 £'000 £'000 £'000
Assets
Total assets for reportable segments (exc. cash) 13,359 10,334 - 23,693
Intangible assets and investments 51,999 11,072 - 63,071
Deferred tax assets - - 503 503
Cash held in escrow 2,191 - - 2,191
Cash and cash equivalents 7,408 7,392 - 14,800
Consolidated total assets 74,957 28,798 503 104,258
Liabilities
Total liabilities for reportable segments (14,918) (6,278) - (21,196)
Deferred tax liabilities - - (10,167) (10,167)
Contingent consideration (7,808) (1,132) - (8,940)
Deferred Consideration - (617) - (617)
Consolidated total liabilities (22,726) (8,027) (10,167) (40,920)
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 40,526 12,656 358 53,540
Deferred tax assets - - 701 701
Cash and cash equivalents 13,356 9,681 2,020 25,057
Consolidated total assets 60,781 31,397 3,079 95,257
Liabilities
Total liabilities for reportable segments (11,258) (6,638) - (17,896)
Deferred tax liabilities - - (8,402) (8,402)
Contingent consideration (7,520) (1,551) - (9,071)
Deferred Consideration - (908) - (908)
Consolidated total liabilities (18,778) (9,097) (8,402) (36,277)
31 July 2022
Rail Technology & Services Data, Analytics, Consultancy & Events
Unallocated Total
£'000 £000 £000 £000
Assets
Total assets for reportable segments (exc. cash) 10,935 13,506 - 24,441
Intangible assets and investments 54,277 11,590 - 65,867
Deferred tax assets - - 410 410
Cash held in escrow 2,217 - - 2,217
Cash and cash equivalents 8,918 6,052 - 14,970
Consolidated total assets 76,347 31,148 410 107,905
Liabilities
Total liabilities for reportable segments (17,070) (9,789) - (26,859)
Deferred tax liabilities - - (10,671) (10,671)
Contingent consideration (8,320) (1,001) - (9,321)
Deferred consideration - (605) - (605)
Consolidated total liabilities (25,390) (11,395) (10,671) (47,456)
4 Exceptional items
Six months ended 31 January 2023 Six months ended 31 January Year
2022 ended
31 July
2022
£'000 £'000 £'000
Contingent consideration fair value adjustment 118 47 1,792
Unwind of discounting of contingent consideration 426 396 774
Legal and professional fees in respect of acquisitions - 340 622
Other - - (125)
Total 544 783 3,063
5 Net finance expense
Six months ended 31 January 2023 Six months ended 31 January Year
2022 ended
31 July
2022
£'000 £'000 £'000
Interest received on bank deposits 8 - 6
Net interest on lease liabilities (57) (36) (95)
Net foreign exchange loss (64) (6) (23)
Unwind of discount of deferred consideration (11) (17) (29)
Total (124) (59) (141)
6 Earnings per share
Basic earnings per share
The calculation of basic earnings per share for the Half Year to 31 January
2023 was based on the profit attributable to ordinary shareholders of
£1,641,000 (Half Year to 31 January 2022: £793,000, Year ended 31 July 2022:
£1,502,000) and a weighted average number of ordinary shares in issue of
29,583,000 (Half Year to 31 January 2022: 29,397,000, Year ended 31 July 2022:
29,486,000), calculated as follows:
Weighted average number of ordinary shares
In thousands of shares
Six months ended 31 January Six months ended 31 January Year
2023 2022 ended
31 July
2022
Issued ordinary shares at start of period 29,486 29,332 29,332
Effect of shares issued related to business combinations - 34 51
Effect of shares issued for cash 97 31 103
Weighted average number of shares at end of period 29,583 29,397 29,486
Diluted earnings per share
The calculation of diluted earnings per share for the Half Year to 31 January
2023 was based on the profit attributable to ordinary shareholders of
£1,641,000 (Half Year to 31 January 2022: £793,000, Year ended 31 July 2022:
£1,502,000) and a weighted average number of ordinary shares in issue after
adjustment for the effects of all dilutive potential ordinary shares of
30,336,000 (Half Year to 31 January 2022: 30,348,000, Year ended 31 July 2022:
30,330,000).
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
2023 2022 ended
31 July
2022
£'000 £'000 £'000
Profit attributable to ordinary shareholders 1,641 793 1,502
Amortisation of intangible assets 2,808 2,179 5,000
Share-based payment charges 666 804 1,502
Exceptional items (net) 544 783 3,063
Other operating income - - (426)
Tax impact of adjusting items (763) (516) (847)
Adjusted profit for EPS purposes 4,896 4,043 9,794
Weighted average number of ordinary shares
In thousands of shares
For the purposes of calculating Basic earnings per share 29,583 29,397 29,486
Adjustment for the effects of all dilutive potential ordinary shares 753 951 844
For the purposes of calculating Diluted earnings per share 30,336 30,348 30,330
Basic adjusted earnings per share 16.55p 13.75p 33.22p
Diluted adjusted earnings per share 16.14p 13.32p 32.29p
7 Seasonality and Phasing
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 activities.
Some of the Group's revenue streams are exposed to high levels of seasonality.
This is most material in the Group's Data, Analytics, Consultancy & Events
division, which derives significant amounts of revenue from work taking place
at certain times of the year, in particular for Events which has a very high
level of seasonality based on the timing of events, and Traffic Data where
work typically takes place when the weather conditions are more predictable.
Other revenue streams are dependent on the timing of new contract wins,
project milestones, and software licence renewals.
The Group's Rail Technology and Services Division delivers some large software
development projects, where revenue is recognised dependent on either the work
performed or project milestones delivered. The timing of these 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. The timing of certain software licence
renewals, including where revenue is recognised at a point in time, can
fluctuate over a twelve month cycle. Finally, the timing of new contract wins
is variable between reporting periods.
In the Group's Data, Analytics, Consultancy and Events division, certain
revenue streams are similarly impacted by the timing of projects and delivery
of work depending on customer requirements.
As such, the overall Group continues to be exposed to a high degree of
seasonality throughout the year and variability in revenue phasing between
reporting periods
8 Dividends
The Board has declared an interim dividend of 1.0 pence per share which will
be paid on 5 May 2023 to shareholders on the register at 21 April 2023. A
final dividend of 1.1 pence per share was paid in respect of the year ended 31
July 2022. The Board intends to pursue a sustainable and progressive dividend
policy in the future, having regard to the development of the Group.
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 2023 H1 2022 FY 2022 H1 2023 H1 2022 FY 2022
£'000 £'000 £'000 £'000 £'000 £'000
Nutshell Software Limited ((1)) 12 122 157 - 82 12
Vivacity Labs Limited ((1)) 225 163 409 137 14 24
Sale of Amounts owed by
goods and services related parties
H1 2023 H1 2022 FY 2022 H1 2023 H1 2022 FY 2022
£'000 £'000 £'000 £'000 £'000 £'000
WSP UK Limited ((2)) 889 1,013 2,738 75 183 909
Vivacity Labs Limited ((1)) - - 38 - - -
Nutshell Software Limited ((1)) 26 67 37 - - -
(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 alternative profit metrics ("APMs")
The Group uses APMs, which are not defined or specified under the requirements
of International Financial Reporting Standards ("IFRS"), to improve the
comparability of reporting between different periods. These metrics adjust for
certain items which impact upon IFRS measures, to aid the user in
understanding the activity taking place across the Group's businesses. 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
Adjusted EBITDA is defined as Earnings before net finance expense, tax,
depreciation, 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 trading performance of the Group
from period to period in a consistent manner and is a key management incentive
metric. Adjusted EBITDA can be reconciled to statutory profit before tax as
set out below:
Six months ended 31 January 2023 Six months ended 31 January 2022
Year ended 31 July 2022
£'000 £000 £000
Profit before tax 2,256 1,280 2,558
Net finance expense 124 58 141
Share-based payment charges 666 804 1,502
Exceptional items - net 544 783 3,063
Other operating income - - (426)
Amortisation of intangible assets 2,808 2,179 5,000
Depreciation 1,066 766 1,767
Share of result of equity accounted investees - 297 556
Adjusted EBITDA 7,464 6,167 14,161
Adjusted Profit
Adjusted profit is defined as Earnings before net finance 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 2023 Six months ended 31 January 2022
Year ended 31 July 2022
£'000 £000 £000
Profit before tax 2,256 1,280 2,558
Net finance expense 124 58 141
Share-based payment charges 666 804 1,502
Exceptional items - net 544 783 3,063
Other operating income - - (426)
Amortisation of intangible assets 2,808 2,179 5,000
Share of result of equity accounted investees - 297 556
Adjusted profit 6,398 5,401 12,394
Adjusted EBITDA reconciles to adjusted profit as set out below:
Six months ended 31 January 2023 Six months ended 31 January 2022
Year ended 31 July 2022
£'000 £000 £000
Adjusted EBITDA 7,464 6,167 14,161
Depreciation (1,066) (766) (1,767)
Adjusted profit 6,398 5,401 12,394
Adjusted Basic Earnings per Share
Calculated as Profit After Tax before amortisation, share-based payment
charges, exceptional items and other operating income divided by the weighted
average number of ordinary shares in issue during the period. This is a common
metric used by the market in monitoring similar businesses and is used by
equities analysts who cover the Group to better understand the underlying
performance of the Group. See note 6 "Earnings per share".
11 Contingent Consideration
During the financial year ended 31 July 2019, the Group acquired 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 over the
contingent consideration period is €1,500,000 (£1,322,000) for Compass
Informatics Limited and £7,900,000 for Bellvedi Limited. The fair value at 31
January 2023 is assessed at €311,000 (£273,000) for Compass Informatics
Limited and £3,218,000 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
£2,410,000 at 31 January 2023.
In November 2021 the Group acquired The Icon Group Limited ("Icon"). Under the
share purchase agreement in place, contingent consideration is payable which
is based on the profitability of Icon in the 3 year period after the
acquisition, and on the successful renewal of certain key contracts.
Contingent consideration is payable in Euros up to a maximum of €1,750,000
(£1,542,000). The fair value of the amount payable was assessed at €974,000
(£858,000) at 31 January 2023.
In March 2022 the Group acquired Railcomm LLC and Railcomm Associates Inc
(together "Railcomm"). Contingent consideration under the share purchase
agreement for Railcomm is payable up to a maximum of $2,700,000 (£2,191,000)
linked to the financial performance of the business in the year following the
acquisition through to 31 March 2023. At the half year the fair value of the
amount payable was assessed at $2,669,000 (£2,181,000). Cash held in escrow
for the purpose of settlement of the contingent consideration for the Railcomm
acquisition totalled £2,191,000 at the balance sheet date. The cash held in
escrow is held as a financial asset not within the overall cash and cash
equivalents balance, due to restrictions on access to the cash on demand.
Prior approval of any transfers must be completed by both Tracsis and the
seller before they can take place, and as such the cash is not considered to
be available on demand. If the financial performance metrics linked to the
contingent consideration are not met in full, the balance will be returned to
Tracsis.
The movement on contingent consideration is summarised in the table below. As
detailed in note 4, a net exceptional charge of £118,000 was recognised,
following a review of the assumptions of the fair value of contingent
consideration as at 31 January 2023. This relates to increased profit
performance in Bellvedi, iBlocks and Icon.
31 January 31 January 2022 31 July
2023 2022
£000 £000 £000
At the start of the year 9,321 7,909 7,909
Arising on acquisition - 977 2,832
Cash payment (965) (258) (4,126)
Fair value adjustment to Statement of Comprehensive Income 118 47 1,792
Unwind of discounting 426 396 774
Exchange adjustment 40 - 140
At the end of the period 8,940 9,071 9,321
The ageing profile of the remaining liabilities can be summarised as follows:
31 January 31 January 2022 31 July
2023 2022
£000 £000 £000
Payable in less than one year 8,150 4,556 8,585
Payable in more than one year 790 4,515 736
Total 8,940 9,071 9,321
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)
Jill Easterbrook (Non-Executive Director)
Liz Richards (Non-Executive Director)
James Routh (Non-Executive Director)
Company Secretary: Andrew Kelly
1 (#_ftnref1) Positive Train Control Back Office Solution. This integrates
RailComm's Computer Aided Dispatching (CAD) product with the positive Train
Control (PTC) family of automatic train protection systems in the US.
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