REG - Tracsis PLC - Interim Results
24/04/2024 07:00
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RNS Number : 7620L Tracsis PLC 24 April 2024
24 April 2024
Tracsis plc
('Tracsis', 'the Company' or 'the Group')
Unaudited Interim results for the six months ended 31 January 2024
H1 performance in line with expectations, with an H2 weighting for FY24 and
exciting growth of UK and US pipeline
Tracsis plc (LSE: TRCS), a leading transport technology provider, is pleased
to announce its unaudited interim results for the six months ended 31 January
2024.
Financial Results (£'m) H1 24 H1 23
Revenue 36.6 39.2 -6.7%
Adjusted EBITDA * 5.7 7.5 -24.0%
Adjusted EBITDA * % 15.5% 19.0% -350bps
Cash ** 16.8 17.0
Adjusted diluted earnings per share * 10.3p 16.1p -36.1%
Statutory Results
Operating (loss) / profit (0.3) 2.4 -112.9%
(Loss) / profit before tax (0.3) 2.3 -111.9%
Basic (loss) / earnings per share (1.6p) 5.6p -129.2%
Interim dividend per share 1.1p 1.0p +10%
Financial Highlights:
· Financial performance in line with expectations
o Rail Technology & Services recurring and repeat revenue increased by
12% to £12.1m
o Growth in Data, Analytics, Consultancy & Events Division
o Total revenue decreased by 7% driven primarily by the non-repeat of H1 23
perpetual rail technology software licences as anticipated
o FY24 revenue growth will be weighted towards H2 reflecting milestone
delivery timelines in the orderbook and SaaS transition for new contract wins
in North America
· Adjusted EBITDA* margin includes the impact of investments made
in the prior year; expected to return to historical levels over the full year
· Healthy cash generation and strong debt-free balance sheet to
invest in further growth
· Statutory results include £1.3m of non-repeating exceptional
cash costs associated with Group transformation
· Continuation of progressive dividend policy. Interim dividend of
1.1p per share (H1 2023: 1.0p)
Operational and Strategic Highlights:
· Significant pipeline growth of major software opportunities in
both UK and North American markets
o Following investment in sales teams, we estimate this has more than
doubled since 31 July 23
· Secured several new contracts that will generate revenue in H2,
including next phase of development work to expand RailHub
· Further growth in Pay As You Go ("PAYG") smart ticketing
o Deployments with Transport for Wales and Merseyrail
o First deployment of PAYG mobile app platform ('Hopsta') underway with a UK
train operator
· Entry into a large US software market segment through the launch
of a new Computer Aided Dispatch product with Northern Indiana Commuter
Transportation District ("NICTD"), a commuter rail customer, going live in May
2024
· Transformation of the Group's operating model proceeding to plan,
creating a scalable platform for accelerated growth
Current Trading and Outlook:
· Encouraging start to H2 with high activity levels across both
Divisions, and further growth in the Rail Technology pipeline post period end
· Several Rail Technology opportunities are in
the final stages of procurement, particularly in North America and these are
forecast to deliver revenue in H2. The Board therefore expects FY24
performance to be in line with market expectations
· End market drivers are strong and the Group is well positioned to
deliver future growth following a year of transformation
· Growing pipeline of M&A opportunities
Chris Barnes, Chief Executive Officer, commented:
"The programme of actions to transform the Group's operating model is
progressing to plan and we are beginning to see the benefit in the growth of
our pipeline of major software opportunities. Our financial performance for
the period reflects this period of transition, with further growth anticipated
in H2 and beyond.
We have secured important new contract wins and made good progress in growing
rail technology software licence usage and recurring revenue in the period. I
am particularly encouraged by the success we are achieving in North America,
where we are soon to go live with an important new dispatch product. Our team
has done a great job to deliver this, opening up a large new segment in this
market.
Digital transformation will continue to play a significant role in the rail
industry's transition to a data-driven, customer-focused, safety-critical
future and Tracsis' product offering aligns well with this. We are confident
in the Group's growth prospects, underpinned by recent contract wins and a
fast-growing pipeline, and we continue to see significant long-term tailwinds
in both the UK and North America.
We therefore remain committed to our strategic growth and investment plans and
will continue to pursue both organic and acquisitive growth supported by a
strong balance sheet."
* In addition to statutory reporting, Tracsis plc reports alternative
performance measures ("APMs") which are not defined or specified under the
requirements of International Financial Reporting Standards ("IFRS"). 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.
APMs are used by the Directors and management for performance analysis,
planning, reporting and incentive purposes. A summary of APMs used and their
closest equivalent statutory measures is given in note 10.
** Cash and cash equivalents, and cash held in escrow
Presentation and Overview videos
Tracsis is hosting an online presentation open to all investors on Friday 26
April 2024 at 1.00pm UK time. Anyone wishing to connect should register here:
https://bit.ly/TRCS_H124_webinar (https://bit.ly/TRCS_H124_webinar)
A video overview of the results featuring CEO Chris Barnes and CFO Andy Kelly
is available to view here: https://bit.ly/TRCS_H124
(https://eur02.safelinks.protection.outlook.com/?url=https%3A%2F%2Fbit.ly%2FTRCS_H124&data=05%7C02%7CAndrew.Kelly%40tracsis.com%7Ccc0fb179ebc14abe799608dc62b67be4%7C6b98f2667d234d0a8b8a7e4cf7fded86%7C0%7C0%7C638493783143018426%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C4000%7C%7C%7C&sdata=qxDCxqlvBHhf%2B%2F2jLmenm4Axa3x8%2BkxMx3pxev1m0xg%3D&reserved=0)
Tracsis plc +44 (0)845 125 9162
Chris Barnes, CEO
Andy Kelly, CFO
Cavendish Capital Markets Ltd (Nominated Adviser & Joint Corporate Broker) +44 (0)20 7220 0500
Jonny Franklin-Adams / Giles Balleny / Charlie Beeson (Corporate Finance)
Andrew Burdis / Sunila de Silva (Corporate Broking)
Berenberg (Joint Corporate Broker & Financial Adviser) +44 (0)20 3207 7800
Mark Whitmore / Richard Andrews / Alix Mecklenburg-Solodkoff
Alma Strategic Communications +44 (0)20 3405 0205
David Ison / Rebecca Sanders-Hewett / Joe Pederzolli
tracsis@almastrategic.com
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 made good progress in the first half of the year in executing
its strategy to create a scalable platform for accelerated growth and to
transition to a broader SaaS operating model. Actions to transform the Group's
operating model are progressing at pace and to plan. The investment made in
the prior year to enhance our commercial and senior leadership capabilities is
delivering significant growth in the pipeline of major software opportunities
in both the UK and North American markets. We have secured several new
contract wins and the Group remains well placed to deliver growth in the
second half of this financial year and beyond.
First half in review
Our activities in the first half of the year have been focused around five key
areas, as summarised below. This is followed by a table updating on progress
against our strategy and a comprehensive divisional breakdown of trading
progress and prospects:
1. New contract wins and continued progress in delivering orderbook to drive
organic growth
Further growth in recurring revenue: Recurring and repeat revenue in the Rail
Technology & Services Division for the first half increased by 12% to
£12.1m, driven by new contract wins and the deployment of contracts won in
previous years.
Continued growth in smart ticketing: The two new Pay As You Go ("PAYG")
contracts with UK train operators that were announced with the full year 2023
results have been fully deployed. The deployment with Transport for Wales
("TfW") is the first EMV (contactless bankcard) deployment of this versatile
solution on the UK's rail network outside of Transport for London. The second
deployment is a smartcard system with Merseyrail. During the period we have
been awarded a new multi-year delay repay deployment that is being contracted
and will go live later in 2024.
First pilot deployment of 'Hopsta' is underway: The first pilot deployment of
our unique PAYG mobile app platform 'Hopsta' has started with a UK train
operator. This contract was secured during the period. Under the pilot, this
technology will be in the hands of consumers during Q4 of this financial year.
We have a second contract for a pilot deployment with another UK operator, as
was announced with the full year 2023 results. This is still awaiting approval
of a contract start date.
The next phase of RailHub development has started: In the UK we have
contracted the next significant funded phase of development work to expand the
functionality of the RailHub safety and risk management platform. Work to
deliver this has started in the second half of this financial year, with
go-live expected in early 2026.
Work continues on implementing three TRACS Enterprise deployments: These are
due to go fully live starting from FY25.
Remote Condition Monitoring activity levels remain high: Revenue for the first
half of the year was close to the record levels delivered during H1 23. Post
period end we have started to receive orders funded from Network Rail's new UK
Control Period that started on 1 April 2024.
Investing in 'next generation' technology: We are investing in technology
where we see opportunities to accelerate further growth in our markets. During
H1 24 this included further development of the Hopsta smart ticketing mobile
app platform that is now in pilot deployment.
2. Significant and ongoing pipeline growth in UK and North American rail
markets
Investment to enhance our commercial teams is delivering significant pipeline
growth: During FY23 we invested to build out and upskill our commercial teams
in the UK and North American rail markets. The H1 24 EBITDA* performance
includes the cost of this investment, which is already delivering significant
growth in the pipeline of major software opportunities. We estimate that in
both markets, this pipeline has more than doubled in the six months to 31
January 2024, and has continued to grow post period end.
North American software deployment will open up a new, large market segment:
The first implementation of a new Computer Aided Dispatch system is due to go
live with Northern Indiana Commuter Transportation District ("NICTD"), a US
commuter rail customer, in May 2024. The successful delivery of this system
will open a large new product segment opportunity for Tracsis in North America
where the industry is actively looking for new participants.
Unique market position in North America: Tracsis operates as a mid-market
participant in the North American rail market with a differentiated range of
products and services supported by a track record of delivery and a strong
balance sheet. Feedback from train operators and ports/industrials owners
emphasises the need for new market entrants to challenge incumbent suppliers
and introduce innovative digital solutions for immediate efficiency and
operational benefits.
End market drivers remain strong: Digital transformation remains integral to
the rail industry's future: The delivery of a data-driven, customer-focused
and safety-critical rail industry will remain a core priority in the UK and
overseas. Tracsis' range of products and services are aligned with these end
market drivers, enabling customers to enhance efficiency, productivity,
performance and safety in mission-critical activities. As we have previously
stated, external factors including the ongoing industrial action in the UK,
delays to the implementation of Great British Railways, and potential
government changes in the UK and US may have some near-term effect on
procurement and delivery timelines, however they are not anticipated to
adversely affect future growth. We continue to see significant long-term
tailwinds in both the UK and North American rail markets.
3. High activity levels in Data, Analytics, Consultancy & Events
Record revenue in Traffic Data & Events: H1 revenue increased by 16% to
£12.9m. The strong performance reflects Events remaining in high demand,
supplemented by high activity levels in Traffic Data including survey work to
support large UK transport infrastructure projects. The Events business has
secured renewals with several of its largest customers, including the
multi-year renewal of a large fixed-venue Events management contract at an
increased value.
Launched Tracsis Geo Intelligence: Targeting the deployment of our earth
observation technology offering into the UK and North America rail markets,
which are facing increasingly complex rail infrastructure challenges from the
impact of climate change and severe weather events. In combination with the
unique data sets that Tracsis' rail technology solutions generate or process,
and our existing data analytics and GIS capabilities, we are well placed to
deliver integrated solutions that can provide additional insight and
capabilities to our customers in areas such as network performance, climate
resilience and scenario planning.
4. Further progress in transforming the Group operating model
Transformation activities are progressing to plan: As previously announced,
during FY24 the Group is delivering a programme of one-off actions to
transform its operating model and to accelerate its future growth trajectory.
These actions are progressing to plan and will be substantially completed
during FY24. During the six months to 31 January 2024 we have incurred £1.3m
of non-repeat cash costs to deliver the actions summarised below. We expect to
incur c£1m further non-repeat costs during the second half of this financial
year related to these actions.
Optimising our organisational structure: During FY23 we implemented a new
organisational structure based around common operating models. Alongside this,
we invested in expanding and upskilling both our SaaS delivery capabilities
and our UK and North American commercial teams. During FY24 we are taking a
series of actions to reduce headcount where certain roles are duplicated or no
longer required in the new organisational structure. This process is ongoing
and is expected to be completed by 31 July 2024. Cost savings from these
actions will be largely re-invested in further strengthening our core
operational, commercial and management capabilities.
Integrating the Rail Technology UK business: During the period the component
businesses of the Rail Technology UK segment have been fully integrated under
a single senior leadership team. As part of the ongoing process to further
strengthen our capabilities referenced above, this has included recruiting a
Chief Technology Officer to oversee all aspects of product development and
architecture across the rail technology portfolio.
Enhanced IT and software product operating model: We are establishing a fully
consistent group-wide approach to how we develop and deliver enterprise
software solutions based on industry best practice. This will enhance the
resilience of our operations and improve the timeliness, quality and
repeatability of delivery. Alongside this we are implementing a single
group-wide IT support service.
Upgrading operating systems and processes: The implementation of a single
group-wide IT operating environment is ongoing. This will enhance the
efficiency of our operations and deliver improved management information, as
well as facilitating collaboration across the Group. This includes
implementing a new group-wide finance system that will go live during summer
2024.
Streamlining our footprint: We have consolidated locations and closed two
operating sites during H1 as the first stage of streamlining our operating
footprint. Further locations are under review as we fully align this with the
Group's new organisational structure. During the period we have started work
to reduce our legal entity footprint.
Continued commitment to sustainability: The group-wide implementation of
ISO14001 (environmental management) was completed in the period to support the
delivery of our carbon neutral 2030 objective. Post period end a group-wide
carbon reduction plan aligned to delivering this objective has been agreed.
5. Pursuit of M&A as a core component of our growth strategy
Growing pipeline of M&A opportunities: We continue to actively pursue
M&A to supplement organic growth, with a focus on extending our software
and technology footprint and enhancing recurring revenue growth. We have a
growing pipeline of opportunities in the UK, North America and targeted
overseas markets that are being evaluated in line with our disciplined
criteria.
Progress on Delivering our Strategy
Tracsis' purpose is to empower the world to move freely, safely and
sustainably. Our business model remains focused on specialist product
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 during the
period, which leaves the Group well positioned to deliver further growth. Key
progress against the objectives for each of our four strategic priorities is
summarised in the table below:
Drive Organic Growth
Delivery of our pipeline, increasing annual recurring software revenue,
continual innovation of products and services, high quality delivery and an
excellent close working relationship with our customers
Focus for FY 24 Progress since 31 July 2023
· Delivery of orderbook of rail technology contracts · Two further deployments of Pay As You Go (PAYG) smart ticketing
technology completed with UK TOCs
· Secured next significant phase of development work to expand the
RailHub safety and risk management platform
· Work continues on three full deployments of TRACS Enterprise solution
· New multi-year delay repay deployment due to go live in second half
of 2024.
· Grow pipeline of rail technology opportunities in UK and North · Addressable pipeline of major software opportunities has more than
America doubled since 31 July 2023 across UK and North American rail technology
markets
· Leverage our unique position in North America to accelerate growth in · Large software licence deployment for a new Computer Aided Dispatch
this market product in the North American transit market goes live in May 2024
· Continue to improve the quality, timeliness, and repeatability of · Continued to enhance capabilities including recruitment of Rail
future product delivery Technology UK CTO and launch of group-wide IT support team
Expand Addressable Markets
Selling our products and services into new markets, including overseas, and
expansion into selected sectors that share problems with the industries we
currently serve
Focus for FY 24 Progress since 31 July 2023
· Continue to execute organic growth strategy in UK and North America · 12% increase in Rail Technology & Services recurring and repeat
revenue
· Completed targeted investment in sales team expansion in North
America and UK to accelerate pipeline growth
· First pilot deployment of PAYG mobile app platform ('Hopsta')
underway
· Utilise data analytics, GIS and Earth Observation capabilities to · Launched Tracsis Geo Intelligence, targeting the deployment of our
deliver additional insight to our customers across the transportation sector earth observation technology offering into the UK and North American rail
markets
· Disciplined capital allocation for investment in software and · Invested to complete Hopsta development ahead of first pilot
technology products deployment
· Growing pipeline of further R&D opportunities being evaluated
Implementing 'OneTracsis'
Enhanced integration and collaboration across the Group, increasing management
capability and bandwidth, and improving our systems and processes, as key
foundations to deliver our growth strategy
Focus for FY 24 Progress since 31 July 2023
· Transformation of the Group operating model · Transformation activities progressing to plan
· Headcount reductions where roles duplicated or no longer required
· Rail Technology UK fully integrated under a common management team
· Closed two operating locations as first stage in streamlining our
operating footprint; further rationalisation planned for H2
· Work has started to streamline legal entity footprint
· Alignment of group-wide systems and processes built around · Implemented new system to support group-wide IT support services
'OneTracsis' model
· Finance systems upgrade progressing to plan and on target for go live
during H2
· Continue to execute people strategy · Further strengthened our core capabilities with targeted recruitment
for senior technology and commercial roles
· Continued to deliver development programmes for manager and senior
leaders, with a focus on high performing teams
· Continue to execute sustainability strategy aligned with our 2030 · Group-wide ISO14001 (environmental management) implementation
carbon neutral ambition completed
· Carbon reduction plan being implemented
Enhance Growth Through Acquisition
Supplementing organic growth with value accretive acquisitions that meet our
disciplined investment criteria, supported by healthy cash generation and a
strong balance sheet
Focus for FY 24 Progress since 31 July 2023
· Active pursuit of M&A to extend technology and data analytics · Significant growth in M&A pipeline, focused on UK, North America
footprint and targeted overseas markets
· Several targets are being evaluated
Trading Progress and Prospects
Rail Technology & Services
Summary segment results:
Revenue
£16.5m (H1 2023:
£19.8m)
Adjusted EBITDA* £3.4m (H1 2023:
£5.5m)
Profit before Tax £0.1m (H1
2023: £2.5m)
Activity levels in our Rail Technology & Services Division remain high. We
have delivered further growth in rail technology software usage, have made
good progress in delivering our orderbook, and have secured new contract wins
that will deliver organic growth going forward.
First half revenue was £3.3m lower than the prior period including the
non-repeat of c£2m of perpetual licence revenue in H1 23, as we continue to
transition to an increasingly SaaS-focused model for new contract wins. In
addition there were lower levels of contract delivery revenue in North
America, reflecting the timing of milestone delivery in the orderbook.
We have continued to deliver growth in recurring and repeat revenue as a
result of new contract wins and the deployment of contracts won in previous
years. This increased by 12% to £12.1m in the first half.
Adjusted EBITDA* decreased by £2.1m to £3.4m. In addition to the lower
revenue, this includes c£0.7m of incremental investment made in the second
half of the prior year to expand and upskill our SaaS delivery capabilities
and the commercial teams in both the UK and North America. This investment has
delivered significant growth in the pipeline of major software opportunities.
We estimate this has more than doubled in both the UK and North American rail
markets during the period, and continues to grow.
Alongside an existing orderbook of rail technology contracts, this leaves the
Division well placed to return to growth.
Rail Technology UK
Total revenues from the Group's Rail Technology UK business of £14.3m were at
a similar level to the prior period (H1 23: £14.5m), with the non-repeat of
£0.8m point in time revenue from software licence deployments in H1 23 offset
by underlying growth in recurring software licence revenue across the rail
operations & planning product suite.
This was driven by new contract wins and orderbook delivery, including
expanding our TRACS Enterprise product suite to support the optimisation of
station rostering, which is a further extension of our operational performance
capabilities. Work continues on the three full deployments of the TRACS
Enterprise solution that are in the orderbook that are due to go fully live
from FY25. Delivery timelines in this sector are typically determined in
partnership with our customers based around combined resource availability. We
continue to see a good pipeline of opportunities for this product.
We have made further progress in growing usage of our Pay As You Go ("PAYG")
smart ticketing solution. This technology is well aligned with passenger
requirements and with the UK Government's strategic intent to deliver
increased PAYG, multi-modal ticketing. The two new PAYG contracts with UK
train operators that were announced with the full year 2023 results have been
fully implemented and are now live. The deployment with Transport for Wales
("TfW") is the first EMV (contactless bankcard) deployment of this versatile
solution on the UK's rail network outside of Transport for London. This will
be integrated with our delay repay product to provide an automated,
frictionless experience for the customer. TfW intends to ultimately extend
this offering to deliver a multi-modal PAYG solution including bus. The second
deployment is a smartcard system with Merseyrail that was delivered in March
2024.
We have continued to invest in the deployment of a mobile app platform
('Hopsta') that puts this smart ticketing technology directly in the hands of
the consumer and avoids the requirement for expensive gateline infrastructure
in stations. The first pilot deployment of this unique solution has started
with a UK train operator; this contract was secured during the period. Under
this pilot, this technology will be available for customer use for travel
during Q4 of this financial year. We have a second contract for a pilot
deployment with another UK operator, as was announced with the full year 2023
results. This is still awaiting approval of a contract start date. We continue
to see high levels of interest in our smart ticketing product across ITSO
smartcard, EMV and barcode solutions.
During the period we have been awarded a new multi-year delay repay
deployment. This is being contracted and will go live later in 2024.
Having completed the roll-out of the RailHub safety and risk management
platform across Network Rail and its supply chain in the prior year, we have
now been contracted to deliver the next significant funded phase of
development work to add further functionality to this platform. Work to
deliver this has started in the second half of this financial year.
Remote Condition Monitoring volumes remain high, and H1 24 revenue was close
to the record level delivered in the prior period. Performance in this product
area is linked to the investment cycle trend of its UK customer base which
consists of 5 year 'Control Periods'. There was some softening of demand
towards the end of Control Period 6 which ran to 31 March 2024. Funding for
Control Period 7 has been confirmed and we are already receiving orders funded
from this budget.
Rail Technology North America
Revenue of £2.2m was £3.0m lower than the prior period (H1 2023: £5.2m).
This is attributable to two main factors. During H1 23 we delivered a £1.2m
perpetual software licence deployment that was not repeated in the period. In
addition, in the prior year we delivered £1.8m increased revenue from
contract milestones based on delivery timelines in the orderbook. We expect
this business to return to growth in the second half of this financial year,
supported by new contract wins and a large and growing pipeline.
Our strategic focus in North America is on growing and converting the pipeline
of large software opportunities, and on increasingly transitioning from a
perpetual licence model to SaaS for new contract wins. Having invested in
enhancing our sales team in this market during the prior year, we have seen
significant growth in the opportunity pipeline during the first half. There
will likely be more volatility in the phasing of revenue growth in this market
as we procure these opportunities and transition to a SaaS model.
Operational activity in the first half was focused on delivering the full
roll-out of the new Computer Aided Dispatch product (PTC BOS 1 (#_ftn1) )
with Northern Indiana Commuter Transportation District ("NICTD"), a US
commuter rail customer. Timelines for this are determined in partnership with
the customer's operational requirements and regulatory approval, and it is
expected to be completed in May 2024. This deployment with NICTD represents
the completion of a large project that was in the orderbook when Tracsis
acquired the business in 2022. The successful delivery of this system will
result in increased recurring revenues, and will open a large new product
segment opportunity for Tracsis in North America where the industry is
actively looking for new participants. There is a large and growing pipeline
of future deployment opportunities for this product.
We continue to see strong demand for our Yard Automation product offering in
North America. Post period end we have secured a number of new contracts that
will deliver revenue in the second half of this financial year. There is a
pipeline of further opportunities that are in the final stages of procurement
that are also expected to deliver FY24 revenue.
Data, Analytics, Consultancy & Events
Summary segment results:
Revenue
£20.1m (H1 2023:
£19.5m)
Adjusted EBITDA* £2.2m (H1 2023:
£1.9m)
Profit before Tax £0.9m (H1
2023: £0.5m)
Activity levels across the Data, Analytics, Consultancy & Events Division
were high, including record revenue from the Traffic Data & Events
business. This more than offset the anticipated non-repeat of c£1.5m
Professional Services revenue, resulting in revenue growth of 3% to £20.1m.
Adjusted EBITDA* increased by £0.3m to £2.2m. Profit before Tax increased by
£0.4m to £0.9m.
During the period we launched Tracsis Geo Intelligence which is targeting the
deployment of our earth observation technology offering into the UK and North
America rail markets. In combination with the unique data sets that Tracsis'
rail technology solutions generate or process, and our existing data analytics
and GIS capabilities, we are well placed to deliver integrated solutions that
can provide additional insight and capabilities to our customers in areas such
as network performance, climate resilience and scenario planning.
The Data, Analytics, Consultancy & Events Division delivered record
revenue in FY23, including the benefit from certain revenue items that will
not repeat in FY24. This includes certain events and sporting fixtures that
are not scheduled to re-occur in the second half of the financial year. We
expect the Division overall to deliver a financial performance at a similar
level to FY23, with underlying growth elsewhere offsetting this non-repeat
revenue.
Professional Services
Total revenue across our Data Analytics/GIS and Transport Insights businesses
decreased by 14% to £7.2m (H1 2023: £8.3m). This was principally driven by
the non-repeat of certain revenue items in Data Analytics/GIS as expected.
This was offset by cost mitigations and there was no material decrease in
adjusted EBITDA* associated with this. Our Transport Insights business
delivered a similar level of revenue to the prior period. There has been some
decrease in activity as Control Period 6 has come to an end, however demand
for our travel survey services remains strong.
Traffic Data & Events
Revenue increased by 16% to £12.9m (H1 2023: £11.1m) with Events remaining
in high demand, supplemented by high activity levels in Traffic Data including
survey work to support large UK transport infrastructure projects. The Events
business has secured renewals with several of its largest customers, including
the renewal of a large multi-year fixed-venue Events management contract at an
increased value.
Financial Summary
The Group's financial performance in the period was consistent with
expectations.
Trading Performance
H1 revenue of £36.6m was £2.6m (7%) lower than the prior period (H1 2023:
£39.2m). This principally reflects the strong comparable period which
included certain non-repeat software licence deployments, as well as the
phasing of milestone delivery timelines in the orderbook of rail technology
contracts. FY24 revenue growth for the Group will therefore be H2 weighted, as
was previously announced.
These one-off revenue items were mainly in the Rail Technology and Services
Division, where total revenue was £3.3m (17%) lower than the prior period.
This was mainly in North America, where the focus of activities during the
period has been on delivering the first implementation of a new Computer Aided
Dispatch product with a US commuter rail customer. Revenue in the Rail
Technology UK business was at a similar level to the prior period despite the
non-repeat of a large software licence deployment in this market. We remain
focused on transitioning to an increasingly SaaS-focused model over time in
both markets. Recurring and repeat revenue in the Rail Technology and Services
Division increased by 12% to £12.1m.
Revenue in the Data, Analytics, Consultancy & Events Division increased by
£0.6m (3%) and includes continued high activity levels in the Traffic Data
& Events business.
Adjusted EBITDA* of £5.7m was £1.8m (24%) lower than the prior period (H1
2023: £7.5m). This principally reflects the lower level of high margin rail
technology revenue described above. H1 24 also includes c£0.8m of incremental
investment made in the second half of the prior year to enhance the Group's
senior leadership capabilities and to accelerate the growth of the Group's
pipeline of large multi-year opportunities.
Transformation Costs
As previously announced, during FY24 the Group is delivering a programme of
actions to transform its operating model. These actions will establish a
consistent and scalable approach to how the Group develops and delivers
enterprise software solutions based around industry best practice, as well as
ensuring that its operating systems, processes and footprint are aligned with
this operating model. These changes will improve the timeliness, quality and
repeatability of delivery, which will enable the Group to accelerate its
future growth trajectory. In the period to 31 January 2024 we have incurred
£1.3m of non-repeat cash costs in order to deliver this transformation. These
are primarily related to headcount reductions where roles are duplicated or no
longer required, IT transformation costs to embed industry best practice and
remediate any identified historic non-conformance, and third party costs to
support the upgrade of the Group's operating systems and processes. These
costs have been reported as exceptional items so the underlying year on year
trading performance of the Group can be more clearly understood. We expect
these actions to be completed during the FY24 financial year, with c£1m of
further non-repeat cash costs to be incurred during H2 24.
Statutory Profit
H1 overall delivered a loss before tax of £0.3m (H1 2023: £2.3m profit). In
addition to the £1.8m decrease in adjusted EBITDA* described above, this
reflects the following items:
· £1.3m non-recurring exceptional cash costs relating to the
transformation of the Group's operating model, as described above (H1 2023:
£0.5m non-cash costs relating to increases in the fair value of contingent
consideration in accordance with IFRS accounting standards);
· £1.1m depreciation charge, £2.8m amortisation of intangible
assets, and £0.7m share based payment charges, all at similar levels to the
prior period; and
· <£0.1m net finance income (H1 2023: £0.1m expense)
Cash Generation
The Group continues to have significant levels of cash and remains debt free.
Cash generation remains healthy.
At 31 January 2024 the Group's cash balances were £16.8m, which is a similar
level to the prior period (H1 2023: £17.0m including cash held in escrow)
after £9.9m of cash outflows in the twelve months since 31 January 2023 on
contingent and deferred consideration and on exceptional operating items
related to the transformation of the Group's operating model. 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 parts of the
Group.
Free cash flow(+) increased to £1.2m (H1 2023: £0.7m), despite the £1.8m
decrease in adjusted EBITDA* described above. This reflects the following
items:
· A net £0.3m increase in working capital (H1 2023: £4.7m
increase) including the unwind of the large trade receivables balance at 31
July 2023;
· Net capital expenditure increased to £0.9m (H1 2023: £0.3m)
which principally reflects investment in IT assets as part of implementing a
new group-wide IT operating environment, and the replacement cycle of our
vehicle fleet including further investment in electric vehicles;
· Net lease liability payments of £0.5m were £0.2m lower than the
prior period (H1 2023: £0.7m) including the initial benefit from
rationalising our operating footprint;
· Capitalised development costs of £0.2m (H1 2023: £nil) relate
to the Hopsta smart ticketing mobile app platform for our PAYG smart ticketing
technology and other new product development in the UK and North America;
· £1.3m cash outflows on exceptional items (H1 2023: £nil). These
costs relate to the programme of transformation activities being undertaken
during FY24, as described above. They are non-recurring in nature;
· Tax paid of £1.3m was at a similar level to the prior period (H1
2023: £1.2m) and includes payments on account based on the Group's expected
financial performance in the second half of the year; and
· Cash inflows from net interest received, proceeds from the
exercise of share options, and the profit or loss on disposal of property,
plant and equipment were not material and were overall at a similar level to
the prior period.
Free Cash Flow(+)
( )
Unaudited Unaudited Audited
Six months Six months Year
Ended Ended Ended
31 January 31 January 31 July
2024 2023 2023
£'m £'m £'m
Adjusted EBITDA * 5.7 7.5 16.0
Changes in working capital (0.3) (4.7) (2.7)
Purchase of plant and equipment (net of proceeds from disposal) (0.9) (0.3) (1.5)
Lease liability payments (net of lease receivable receipts) (0.5) (0.7) (1.5)
Capitalised development costs (0.2) - (0.3)
Cash outflows on exceptional items (1.3) - -
Tax paid (1.3) (1.2) (2.1)
Other((1)) - 0.1 0.1
Free Cash Flow(+) 1.2 0.7 8.0
(+) Net cash flow from operating activities after purchase of property, plant
and equipment, proceeds from disposal of property, plant and equipment,
proceeds from exercise of share options, lease liability payments, lease
liability receipts and capitalised development costs, and before payment of
contingent consideration
((1)) Includes net interest received or paid, profit on disposal of plant
& equipment, and proceeds from exercise of share options
All material earn-outs were completed in the previous financial year, and
there was no cash outflow in the six months to January 2024 relating to
contingent consideration on previous acquisitions (H1 2023: £1.0m). At 31
January 2024 the total balance of contingent and deferred consideration
payable was £0.46m, of which £0.3m was paid in February 2024 relating to the
final tranche of deferred consideration for the 2021 acquisition of Flash
Forward Consulting.
There was a favourable impact from foreign exchange of £0.2m (H1 2023:
£0.1m) resulting in an increase in total cash balances of £1.4m (H1 2023:
£0.2m decrease).
Dividend
The Board has declared an interim dividend of 1.1 pence per share which will
be paid on 24 May 2024 to shareholders on the register at 10 May 2024. A final
dividend of 1.2 pence per share was paid on 9 February 2024 in respect of
the year ended 31 July 2023. The Board intends to pursue a sustainable and
progressive dividend policy in the future, having regard to the development of
the Group.
Board
Ross Paterson was appointed to the Board as a Non-Executive Director on 2
April 2024. Liz Richards will step down from the Board on 30 June 2024. Ross
will succeed Liz as Chair of the Audit Committee on this date.
Summary and Outlook
Activity in the first half of the year has been focused on delivering the
orderbook, growing the pipeline of major software opportunities, and executing
the programme of actions to transform the Group's operating model. We have
made good progress in all areas and the Group is well placed to deliver growth
in the second half of this financial year and beyond.
Our end market drivers are strong. In the UK and North America we see
significant long-term tailwinds as the industry looks to modernise and adopt
digital solutions. A change of government in either geography is not expected
to impact these growth drivers. We remain confident that Tracsis is well
placed to capitalise on these changes and we have a rapidly growing pipeline
of organic and inorganic opportunities to help drive market share and expand
our footprint in these markets. Our products and services deliver digital
transformation that enables our customers to deliver mission-critical
activities with increased efficiency, enhanced performance, higher
productivity, and improved safety. In combination with the unique data sets
that Tracsis' technology solutions generate or process, and our capabilities
in data analytics, GIS and earth observation, we are uniquely positioned to
deliver increasingly integrated solutions that deliver enhanced insight and
capabilities for our customers.
The Group has a clear growth strategy and has a strong balance sheet to
support its delivery. We continue to actively pursue M&A opportunities,
with a focus on extending our software and technology footprint and enhancing
recurring revenue growth. We continue to evaluate a growing pipeline of
opportunities in line with our disciplined approach.
We have entered the second half of the year with confidence in the strength of
our financial position and in the growth opportunities for the Group. Though
external factors mean there remains some near-term uncertainty around
procurement and delivery timelines, there has been an encouraging start to Q3
trading and activity levels are high across the business. Post period end we
have secured a number of new contract wins with delivery milestones in the
second half of this financial year. There is a good pipeline of opportunities
in the final stages of procurement that are also expected to deliver revenue
in FY24, primarily in North America.
The Board's expectations for the year to 31 July 2024 remain unchanged.
Jill Easterbrook Chris Barnes
Non-Executive Chair Chief Executive Officer
24 April 2024
Tracsis plc - Condensed consolidated interim statement of comprehensive income
for the six months ended 31 January 2024
Unaudited Unaudited Audited
six months ended 31 January 2024 six months ended 31 January 2023 Year ended 31 July 2023
Notes £'000 £'000 £'000
Revenue 3 36,582 39,213 82,023
Cost of sales (14,520) (14,511) (32,072)
Gross profit 22,062 24,702 49,951
Administrative costs (22,370) (22,322) (42,696)
Adjusted EBITDA (1) 3, 10 5,674 7,464 15,952
Depreciation (1,144) (1,066) (2,110)
Amortisation of intangible assets (2,802) (2,808) (5,599)
Other operating income - - 350
Share-based payment charges (740) (666) (1,248)
Operating profit before exceptional items 988 2,924 7,345
Exceptional items 4 (1,296) (544) (90)
Operating (loss) / profit (308) 2,380 7,255
Net finance income / (expense) 5 40 (124) (119)
(Loss) / profit before tax (268) 2,256 7,136
Taxation (220) (615) (329)
(Loss) / profit after tax (488) 1,641 6,807
Other comprehensive income / (expense)
Items that are or may be reclassified subsequently to profit or loss:
Foreign currency translation differences 194 507 (205)
Total comprehensive (expense) / income for the period (294) 2,148 6,602
Earnings per ordinary share
Basic 6 (1.62p) 5.55p 22.81p
Diluted 6 (1.62p) 5.41p 22.30p
( )
(1) Earnings before net 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.
Tracsis plc - Condensed consolidated interim balance sheet as at 31 January
2024
Unaudited At 31 January 2024 Unaudited At 31 January 2023 Remeasured* Audited At 31 July 2023
Notes £'000 £'000 £'000
Non-current assets
Property, plant and equipment 5,104 4,585 4,789
Intangible assets 55,242 60,779 57,694
Deferred tax assets 666 503 650
61,012 65,867 63,133
Current assets
Inventories 1,461 1,234 1,465
Trade and other receivables 13,605 17,874 20,371
Current tax receivables 1,609 - 628
Cash held in escrow - 2,191 -
Cash and cash equivalents 16,755 14,800 15,307
33,430 36,099 37,771
Total assets 94,442 101,966 100,904
Non-current liabilities
Lease liabilities 794 1,235 953
Contingent consideration payable 11 145 790 139
Deferred consideration payable 11 - 303 -
Deferred tax liabilities 6,909 7,875 7,161
7,848 10,203 8,253
Current liabilities
Lease liabilities 1,435 1,316 1,137
Trade and other payables 16,856 18,645 23,435
Contingent consideration payable 11 - 8,150 -
Deferred consideration payable 11 314 314 308
Current tax liabilities 126 - -
18,731 28,425 24,880
Total liabilities 26,579 38,628 33,133
Net assets 67,863 63,338 67,771
Equity attributable to equity holders of the Company
Called up share capital 128 119 120
Share premium reserve 6,535 6,511 6,535
Merger reserve 6,161 6,161 6,161
Retained earnings 54,765 49,755 54,875
Translation reserve 324 842 130
Fair value reserve (50) (50) (50)
Total equity 67,863 63,338 67,771
* As described in the Group's Annual Report for the year ended 31 July 2023,
the comparative balance sheet at 31 January 2023 has been amended following
the re-measurement of deferred tax liabilities on intangible assets recognised
in the Group's March 2022 acquisition of Railcomm with a corresponding
adjustment to goodwill arising on the acquisition. This has had the effect of
reducing intangible assets and deferred tax liabilities by £2,292,000 at 31
January 2023; there was no impact on net assets.
Tracsis plc - Consolidated interim statement of changes in equity for the six
months ended 31 January 2024
Unaudited Share Capital Share Premium Merger Reserve Retained Earnings Translation Reserve Fair Value Reserve Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 August 2022 119 6,436 6,161 47,448 335 (50) 60,449
Profit for the period - - - 1,641 - - 1,641
Other comprehensive income - - - - 507 - 507
Total comprehensive income - - - 1,641 507 - 2,148
Transactions with owners:
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
At 1 February 2023 119 6,511 6,161 49,755 842 (50) 63,338
Profit for the period - - - 5,166 - - 5,166
Other comprehensive income - - - - (712) - (712)
Total comprehensive income - - - 5,166 (712) - 4,454
Transactions with owners:
Dividends - - - (628) - - (628)
Share-based payment charges - - - 582 - - 582
Exercise of share options 1 24 - - - - 25
At 31 July 2023 120 6,535 6,161 54,875 130 (50) 67,771
At 1 August 2023 120 6,535 6,161 54,875 130 (50) 67,771
Loss for the period - - - (488) - - (488)
Other comprehensive expense - - - - 194 - 194
Total comprehensive income - - - (488) 194 - (294)
Transactions with owners:
Dividends - - - (362) - - (362)
Share-based payment charges - - - 740 - - 740
Exercise of share options 8 - - - - - 8
At 31 January 2024 128 6,535 6,161 54,765 324 (50) 67,863
Tracsis plc - Condensed consolidated interim cash flow statement for the six
months ended 31 January 2024
Unaudited Unaudited Audited
six months ended 31 January 2024 six months ended 31 January 2023 Year ended 31 July 2023
Notes £'000 £'000 £'000
Operating activities
(Loss) / profit for the period (488) 1,641 6,807
Net finance (income) / expense 5 (40) 124 119
Depreciation 1,144 1,066 2,110
(Profit) / loss on disposal of property, plant and equipment (16) 11 9
Non-cash exceptional items 4 7 544 90
Payment of contingent consideration * 11 - - (1,661)
Other operating income - - (350)
Amortisation of intangible assets 2,802 2,808 5,599
Income tax charge 220 615 329
Share-based payment charges 740 666 1,248
Operating cash inflow before changes in working capital 4,369 7,475 14,300
Movement in inventories 13 (144) (416)
Movement in trade and other receivables 6,779 615 (2,085)
Movement in trade and other payables (7,042) (5,138) (213)
Cash generated from operations 4,119 2,808 11,586
Interest received 5 70 8 36
Income tax paid (1,337) (1,180) (2,065)
Net cash flow from operating activities 2,852 1,636 9,557
Investing activities
Purchase of property, plant and equipment (951) (263) (1,524)
Proceeds from disposal of property, plant and equipment 49 9 10
Capitalised development costs (204) - (300)
Payment of contingent consideration * 11 - (965) (7,591)
Cash held in escrow for payment of contingent consideration - - 2,233
Payment of deferred consideration 11 - - (315)
Net cash flow used in investing activities (1,106) (1,219) (7,487)
Financing activities
Dividends paid 8 - - (628)
Proceeds from exercise of share options 8 75 100
Lease liability payments (537) (766) (1,491)
Lease receivable receipts 16 15 32
Net cash flow used in financing activities (513) (676) (1,987)
Net increase/(decrease) in cash and cash equivalents 1,233 (259) 83
Exchange adjustments 215 89 254
Cash and cash equivalents at the beginning of the period 15,307 14,970 14,970
Cash and cash equivalents at the end of the period 16,755 14,800 15,307
*Payments of contingent consideration during the comparative period have been
included within:
- cash flow used in investing activities to the extent that they relate to the
fair value of assets acquired in the business combinations; and
- cash flow from operating activities to the extent that they relate to
conditions and events after the acquisition date which have been recognised in
profit and loss.
Notes to the consolidated interim report for the six months ended 31 January
2024
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 UK-adopted international accounting standards.
There has been no ISRE 2410 accordant review of the consolidated interim
financial information by an independent auditor. 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 2023, which has been prepared in accordance
with UK-adopted international accounting standards 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 2023, as detailed on pages 79 to 85 of the Group's Annual
Report and Financial Statements for the year ended 31 July 2023, 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 2023 has been
extracted from the 2023 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 2023.
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 2023.
There have been no new accounting standards or changes to existing accounting
standards applied for the first time from 1 August 2023 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 2024 the Group had net cash and cash
equivalents totalling £16.8m. 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 23 April 2024.
2 Principal Risks and Uncertainties
The Board considers risks on a periodic basis and has maintained that the
principal risks and uncertainties of the Group 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 48
to 53 of the Annual Report & Accounts for the year ended 31 July 2023.
3 Revenue and Segmental analysis
a) Revenue
Sales revenue is summarised below:
Six months ended 31 January 2024 Six months ended 31 January Year
2023 ended
31 July
2023
£'000 £'000 £'000
Rail Technology & Services 16,477 19,751 37,862
Data, Analytics, Consultancy & Events 20,105 19,462 44,161
Total revenue 36,582 39,213 82,023
A geographical analysis of revenue by customer location is provided below:
Six months ended 31 January 2024 Six months ended 31 January Year
2023 ended
31 July
2023
£'000 £'000 £'000
United Kingdom 29,121 27,262 61,422
Ireland 4,898 6,065 10,802
Rest of Europe 229 284 378
North America 1,907 5,441 8,643
Rest of the World 427 161 778
Total revenue 36,582 39,213 82,023
b) Segmental Analysis
The Group has divided its results into two segments being Rail Technology
& Services and Data, Analytics, Consultancy & Events consistent with
the disclosure in the 2023 financial statements.
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, event planning and traffic
management, data, 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 each reportable segment 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. Segmental profit
before tax has been further analysed to allocate amortisation and exceptional
items. Segmental assets and liabilities have been further analysed to allocate
intangibles and investments, contingent consideration and deferred
consideration to each individual segment.
Six months ended 31 January 2024
Rail Technology & Services Data, Analytics, Consultancy & Events
Unallocated
Total
£'000 £'000 £'000 £'000
Revenues
Total revenue for reportable segments 16,477 20,105 - 36,582
Consolidated revenue 16,477 20,105 - 36,582
Profit or loss
EBITDA for reportable segments 3,435 2,239 - 5,674
Amortisation of intangible assets (2,201) (601) - (2,802)
Depreciation (505) (639) - (1,144)
Exceptional items (net) (634) (71) (591) (1,296)
Share-based payment charges - - (740) (740)
Interest payable (net) 54 (14) - 40
Consolidated profit / (loss) before tax 149 914 (1,331) (268)
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)
Interest payable (net) (38) (32) (54) (124)
Consolidated profit / (loss) before tax 2,467 509 (720) 2,256
Year ended 31 July 2023
Rail Technology & Services Data, Analytics, Consultancy & Events
Unallocated
Total
£'000 £'000 £'000 £'000
Revenues
Total revenue for reportable segments 37,862 44,161 - 82,023
Consolidated revenue 37,862 44,161 - 82,023
Profit or loss
EBITDA for reportable segments 10,373 5,579 - 15,952
Amortisation of intangible assets (4,273) (1,326) - (5,599)
Depreciation (913) (1,197) - (2,110)
Exceptional items (net) - - (90) (90)
Other operating income - - 350 350
Share-based payment charges - - (1,248) (1,248)
Interest payable (net) (31) (88) - (119)
Consolidated profit / (loss) before tax 5,156 2,968 (988) 7,136
31 January 2024
Rail Technology & Services Data, Analytics, Consultancy & Events
Unallocated
Total
£'000 £'000 £'000 £'000
Assets
Total other assets for reportable segments 10,835 10,944 - 21,779
Intangible assets and investments 45,521 9,721 - 55,242
Deferred tax assets - - 666 666
Cash and cash equivalents 7,978 8,777 - 16,755
Consolidated total assets 64,334 29,442 666 94,442
Liabilities
Total other liabilities for reportable segments (14,268) (4,581) (362) (19,211)
Deferred tax liabilities - - (6,909) (6,909)
Contingent consideration - (145) - (145)
Deferred consideration - (314) - (314)
Consolidated total liabilities (14,268) (5,040) (7,271) (26,579)
31 January 2023 remeasured*
Rail Technology & Services Data, Analytics, Consultancy & Events
Unallocated
Total
£'000 £'000 £'000 £'000
Assets
Total other assets for reportable segments 13,359 10,334 - 23,693
Intangible assets and investments 49,707 11,072 - 60,779
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 72,665 28,798 503 101,966
Liabilities
Total other liabilities for reportable segments (14,918) (6,278) - (21,196)
Deferred tax liabilities - - (7,875) (7,875)
Contingent consideration (7,808) (1,132) - (8,940)
Deferred consideration - (617) - (617)
Consolidated total liabilities (22,726) (8,027) (7,875) (38,628)
31 July 2023
Rail Technology & Services Data, Analytics, Consultancy & Events
Unallocated
Total
£'000 £'000 £'000 £'000
Assets
Total other assets for reportable segments 11,196 16,057 - 27,253
Intangible assets and investments 47,362 10,332 - 57,694
Deferred tax assets - - 650 650
Cash and cash equivalents 7,959 7,348 - 15,307
Consolidated total assets 66,517 33,737 650 100,904
Liabilities
Total other liabilities for reportable segments (15,707) (9,818) - (25,525)
Deferred tax liabilities - - (7,161) (7,161)
Contingent consideration - (139) - (139)
Deferred consideration - (308) - (308)
Consolidated total liabilities (15,707) (10,265) (7,161) (33,133)
* As described in the Group's Annual Report for the year ended 31 July 2023,
the comparative balance sheet at 31 January 2023 has been amended following
the re-measurement of deferred tax liabilities on intangible assets recognised
in the Group's March 2022 acquisition of Railcomm with a corresponding
adjustment to goodwill arising on the acquisition. This has had the effect of
reducing intangible assets and deferred tax liabilities by £2,292,000 at 31
January 2023 there was no impact on net assets.
4 Exceptional items
Six months ended 31 January Six months ended 31 January Year
2024 2023 ended
31 July
2023
£'000 £'000 £'000
Non-cash:
Contingent consideration fair value adjustment - 118 (559)
Unwind of discounting of contingent consideration 7 426 649
Cash:
Transformation costs - headcount 564 - -
Transformation costs - IT 471 - -
Transformation costs - other 254 - -
Total exceptional items 1,296 544 90
Split:
Non-cash 7 544 90
Cash 1,289 - -
Total 1,296 544 90
As described in the Group's Annual Report for the year ended 31 July 2023, the
Group is undertaking a series of actions to transform its operating model.
These actions will establish a consistent and scalable approach to how the
Group develops and delivers enterprise software solutions based around
industry best practice, as well as ensuring that its operating systems,
processes and footprint are aligned with this operating model. These changes
will improve the timeliness, quality and repeatability of delivery, which will
enable the Group to accelerate its future growth trajectory.
The Group's accounting policy is to classify items which are significant by
their size or nature and/or which are considered non-recurring as exceptional
operating items. The costs associated with delivering this programme of
actions have been reported as exceptional operating items consistent with this
policy since they are material in size and nature, and are non-recurring.
Exceptional costs of £1,289,000 associated with delivering this programme of
actions have been recognised in the income statement during the period. These
costs principally relate to: headcount reductions where roles are duplicated
or no longer required; IT transformation costs to embed industry best
practices and remediate any identified historic non-conformance; and third
party costs to support the upgrade of the Group's operating systems and
processes.
5 Net finance income / (expense)
Six months ended 31 January 2024 Six months ended 31 January Year
2023 ended
31 July
2023
£'000 £'000 £'000
Interest received on bank deposits 70 8 36
Net interest on lease liabilities (50) (57) (96)
Net foreign exchange gain/(loss) 26 (64) (41)
Unwind of discount of deferred consideration (6) (11) (18)
Total net finance income / (expense) 40 (124) (119)
6 Earnings per share
Basic earnings per share
The calculation of basic earnings per share for the half year ended 31 January
2024 was based on the loss attributable to ordinary shareholders of
(£488,000) (half year to 31 January 2023: profit £1,641,000, year ended 31
July 2023: profit £6,807,000) and a weighted average number of ordinary
shares in issue of 30,062,000 (half year to 31 January 2023: 29,583,000, year
ended 31 July 2023: 29,836,000).
Diluted earnings per share
The calculation of diluted earnings per share for the half year ended 31
January 2024 was based on the loss attributable to ordinary shareholders of
(£488,000) (half year to 31 January 2023: profit £1,641,000, year ended 31
July 2023: profit £6,807,000) and the weighted average number of ordinary
shares in issue of 30,062,000 with no adjustment presented for potential
ordinary shares since such shares were antidilutive in the period (half year
to 31 January 2023: 30,336,000, year ended 31 July 2023: 30,529,000).
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. These
figures are relevant to the Group and are provided to enable a comparison to
similar businesses and are metrics used by equity analysts who cover the
Group. Amortisation and share-based payment charges are deemed to be non-cash
at the point of recognition in nature, and exceptional items by their very
nature are one-off, and therefore excluded in order to assist with the
understanding of underlying trading. A reconciliation of this figure is
provided below.
Diluted Adjusted Profit EPS has been calculated based on a weighted average
number of ordinary shares in issue plus adjustment for the effects of all
dilutive potential ordinary shares which totalled 30,636,000 (half year to 31
January 2023: 30,336,000, year ended 31 July 2023: 30,529,000).
Six months ended 31 January Six months ended 31 January Year
2024 2023 ended
31 July
2023
£'000 £'000 £'000
(Loss) / profit after tax (488) 1,641 6,807
Amortisation of intangible assets 2,802 2,808 5,599
Share-based payment charges 740 666 1,248
Exceptional items (net) 1,296 544 90
Other operating income - - (350)
Tax impact of the above adjusting items (1,191) (763) (1,638)
Adjusted profit for EPS purposes 3,159 4,896 11,756
Weighted average number of ordinary shares
In thousands of shares
For the purposes of calculating basic earnings per share 30,062 29,583 29,836
Adjustment for the effects of all dilutive potential ordinary shares - 753 693
For the purposes of calculating diluted earnings per share 30,062 30,336 30,529
For the purposes of calculating basic adjusted earnings per share 30,062 29,583 29,836
Adjustment for the effects of all dilutive potential ordinary shares 574 753 693
For the purposes of calculating diluted adjusted earnings per share 30,636 30,336 30,529
Basic adjusted earnings per share 10.51p 16.55p 39.40p
Diluted adjusted earnings per share 10.31p 16.14p 38.51p
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.
These factors mean that revenue in the Group's Data, Analytics, Consultancy
& Events Division is usually higher in the second half of the financial
year.
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. The timing of new contract wins is also
variable between reporting periods.
Customers in the North American rail technology market have historically
procured software licences under a perpetual licence model more than in the UK
market. The Group believes that this will transition to an increasingly
SaaS-focused model over time. During this period there will likely be more
volatility in the phasing of revenue growth in the North American market.
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 1.1 pence per share which will
be paid on 24 May 2024 to shareholders on the register at 10 May 2024. A final
dividend of 1.2 pence per share was paid on 9(th) February 2024 in respect of
the year ended 31 July 2023 and a corresponding liability of £362,000 has
been recognised within trade and other payables at 31 January 2024. 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 period with related parties:
Purchase of goods and services Amounts owed to related parties
Six months ended 31 January Six months ended 31 January Year At 31 January At 31 January At
2024 2023 ended 2024 2023 31 July
31 July 2023
2023
£'000 £'000 £'000 £'000 £'000 £'000
Nutshell Software Limited ((1)) - 12 10 - - 28
Vivacity Labs Limited ((1)) 265 225 356 - 137 35
Ashtead Group PLC ((2)) 18 - 1 - - 1
Sale of goods and services Amounts owed by related parties
Six months ended 31 January Six months ended 31 January Year At 31 January At 31 January At
2024 2023 ended 2024 2023 31 July
31 July 2023
2023
£'000 £'000 £'000 £'000 £'000 £'000
WSP UK Limited ((3)) 37 889 3,238 - 75 1,323
Nutshell Software Limited ((1)) 16 26 41 3 - -
Ashtead Group PLC ((2)) - - 7 - - -
(1) Nutshell Software Limited and Vivacity Labs Limited are related
parties by virtue of the Group's shareholding in these entities.
(2) Ashtead Group PLC ("Ashtead ") is a company which is connected to Jill
Easterbrook who serves as non-executive Chair of Tracsis plc and also as a
non-executive director of Ashtead. Sales to and purchases from Ashtead took
place at arm's length commercial rates and were not connected to Ms
Easterbrook's position at Ashtead.
(3) WSP UK Limited (WSP) is a company which was connected to Chris Cole
who served as non-executive Chairman of Tracsis plc until 1 September 2023 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.
Sales and amounts owed to WSP are disclosed for the period whilst it was a
related party.
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"). 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 investees, are
"non-cash" items and are separately analysed 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 on initial recognition
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
Calculated as earnings before net finance income or 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. The closest equivalent statutory measure is profit before tax.
Adjusted EBITDA can be reconciled to statutory profit before tax as set out
below:
Six months ended 31 January 2024 Six months ended 31 January 2023
Year ended 31 July 2023
£'000 £000 £000
(Loss) / profit before tax (268) 2,256 7,136
Net finance (income) / expense (40) 124 119
Share-based payment charges 740 666 1,248
Exceptional items 1,296 544 90
Other operating income - - (350)
Amortisation of intangible assets 2,802 2,808 5,599
Depreciation 1,144 1,066 2,110
Adjusted EBITDA 5,674 7,464 15,952
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
equity analysts who cover the Group to better understand the underlying
performance of the Group. See note 6: Earnings per share.
Free cash flow
Calculated as net cash flow from operating activities after purchase of
property, plant and equipment, proceeds from disposal of property, plant and
equipment, proceeds from exercise of share options, lease liability payments,
lease receivable receipts and capitalised development costs, and before
payment of contingent consideration. This measure reflects the cash generated
in the period that is available to invest in accordance with the Group's
growth strategy and capital allocation policy. Free cash flow reconciles to
net cash flow from operating activities as set out below:
Six months ended 31 January 2024 Six months ended 31 January 2023
Year ended 31 July 2023
£'000 £000 £000
Net cash flow from operating activities 2,852 1,636 9,557
Purchase of property, plant and equipment (951) (263) (1,524)
Proceeds from disposal of property, plant and equipment 49 9 10
Capitalised development costs (204) - (300)
Proceeds from exercise of share options 8 75 100
Add back: payment of contingent consideration presented within cash flow from - - 1,661
operating activities
Lease liability payments (537) (766) (1,491)
Lease receivable receipts 16 15 32
Free cash flow 1,233 706 8,045
11 Contingent and deferred Consideration
a) Contingent consideration
During the financial year ended 31 July 2023, the final contingent
consideration due on the acquisitions of Compass Informatics Limited, Bellvedi
Limited, iBlocks Limited and Railcomm, LLC and Railcomm Associates was paid.
In November 2021 the Group acquired The Icon Group Limited ("Icon"). Under the
share purchase agreement, contingent consideration is payable which is based
on the profitability of Icon in the three-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
(£1,493,000). The fair value of the amount payable was assessed at €170,000
(£145,000) at 31 January 2024.
At the balance sheet date, the Directors assessed the fair value of the
remaining amounts payable which were deemed to be as follows:
31 January 31 January 2023 31 July
2024 2023
£000 £000 £000
Compass Informatics Limited - 273 -
Bellvedi Limited - 3,218 -
iBlocks Limited - 2,410 -
The Icon Group Limited 145 858 139
Railcomm, LLC - 2,181 -
Total contingent consideration payable 145 8,940 139
The movement on contingent consideration is summarised in the table below:
Six months ended 31 January 2024 Six months ended 31 January 2023
Year ended 31 July 2023
£'000 £000 £000
At the start of the period 139 9,321 9,321
Cash payment - (965) (9,252)
Fair value adjustment to statement of comprehensive income - 118 (559)
Unwind of discounting 7 426 649
Exchange adjustment (1) 40 (20)
At the end of the period 145 8,940 139
The ageing profile of the remaining liabilities can be summarised as follows:
31 January 31 January 2023 31 July
2024 2023
£000 £000 £000
Payable in less than one year - 8,150 -
Payable in more than one year 145 790 139
Total contingent consideration payable 145 8,940 139
b) Deferred consideration
The Group acquired Flash Forward Consulting Limited on 26 February 2021. As
part of this acquisition cash consideration totalling £945,000 became payable
in three equal instalments on the first, second and third anniversary of the
acquisition date. At acquisition the present value of this deferred
consideration was assessed as £878,000 discounted using a rate of 3.75%. At
31 January 2024 the present value of this deferred consideration is £314,000.
The movement on deferred consideration can be summarised as follows:
Six months ended 31 January 2024 Six months ended 31 January 2023
Year ended 31 July 2023
£'000 £000 £000
At the start of the period 308 605 605
Cash payment - - (315)
Unwind of discounting 6 12 18
At the end of the period 314 617 308
The ageing profile of the remaining liabilities can be summarised as follows:
31 January 31 January 2023 31 July
2024 2023
£000 £000 £000
Payable in less than one year 314 314 308
Payable in more than one year - 303 -
Total contingent consideration payable 314 617 308
12 Subsequent Events
On 2 April 2024 Ross Paterson was appointed to the Board as a Non-Executive
Director.
Further information for Shareholders
Company number: 05019106
Registered office: Nexus
Discovery Way
Leeds
LS2 3AA
Directors: Jill Easterbrook (Non-Executive Chair)
Chris Barnes (Chief Executive Officer)
Andrew Kelly (Chief Financial Officer)
Ross Paterson (Non-Executive Director)
Liz Richards (Non-Executive Director)
James Routh (Non-Executive Director)
Tracy Sheedy (Non-Executive Director)
Company Secretary: Jan Mitson
1 (#_ftnref1) Positive Train Control Back Office Solution. This integrates
Tracsis' Computer Aided Dispatching ('CAD') product with the Positive Train
Control ('PTC') family of automatic train protection systems in the US.
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