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

A video overview of the results featuring CEO Chris Barnes and CFO Andy Kelly is available to view here: https://bit.ly/TRCS_H124

 

 

 

Tracsis plc Chris Barnes, CEO Andy Kelly, CFO	+44 (0)845 125 9162
Cavendish Capital Markets Ltd (Nominated Adviser & Joint Corporate Broker) Jonny Franklin-Adams / Giles Balleny / Charlie Beeson (Corporate Finance) Andrew Burdis / Sunila de Silva (Corporate Broking)	+44 (0)20 7220 0500
Berenberg (Joint Corporate Broker & Financial Adviser) Mark Whitmore / Richard Andrews / Alix Mecklenburg-Solodkoff	+44 (0)20 3207 7800
Alma Strategic Communications David Ison / Rebecca Sanders-Hewett / Joe Pederzolli	+44 (0)20 3405 0205 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 America	·    Addressable pipeline of major software opportunities has more than doubled since 31 July 2023 across UK and North American rail technology markets
·    Leverage our unique position in North America to accelerate growth in this market	·    Large software licence deployment for a new Computer Aided Dispatch product in the North American transit market goes live in May 2024
·    Continue to improve the quality, timeliness, and repeatability of future product delivery	·    Continued to enhance capabilities including recruitment of Rail 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 deliver additional insight to our customers across the transportation sector	·    Launched Tracsis Geo Intelligence, targeting the deployment of our earth observation technology offering into the UK and North American rail markets
·    Disciplined capital allocation for investment in software and technology products	·    Invested to complete Hopsta development ahead of first pilot 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 'OneTracsis'	·    Implemented new system to support group-wide IT support services 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 carbon neutral ambition	·    Group-wide ISO14001 (environmental management) implementation 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 footprint	·    Significant growth in M&A pipeline, focused on UK, North America 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]) 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 Six months	Unaudited Six months	Audited 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 Non-Executive Chair	Chris Barnes Chief Executive Officer
24 April 2024

 

Tracsis plc - Condensed consolidated interim statement of comprehensive income for the six months ended 31 January 2024

 

		Unaudited six months ended 31 January 2024	Unaudited six months ended 31 January 2023	Audited 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 six months ended 31 January 2024	Unaudited six months ended 31 January 2023	Audited 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.

 

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.