Final Results

RNS Number : 5452R

Tracsis PLC

07 November 2011

 



Tracsis plc

Final Results for the year ended 31 July 2011

7 November 2011

Tracsis plc ("Tracsis" or the "Company" and with its subsidiaries the "Group") (AIM: TRCS), a leading developer and aggregator of resource optimisation software, remote condition monitoring technology, and consultancy services to passenger transport industries, is pleased to announce its audited final results for the year ended 31 July 2011.

Highlights:

·      Record revenues - revenue increased to £4,083k (2010: £2,647k) due to a combination of 14% organic growth, and £1,068k in respect of the acquisition of MPEC Technology Limited. Overall revenue growth of 54% achieved in the year

·      Record profits - adjusted EBITDA* increased to £1,242k (2010: £701k) - an increase of 77%. Profit before tax increased to £1,115k (2010: £584k) - an increase of 91% - representing strong contributions from both the continuing business and acquired operations

·      Strong balance sheet maintained, with cash balances at 31 July 2011 of £4.7m (2010: £2.5m), representing the share placing that took place in the year, and also significant cash generation in spite of significant outflows for the acquisition. The business remains debt free

·      Acquisition of MPEC Technology Limited completed - the fourth acquisition in four years - its contribution to the enlarged Group has been immediate and significant

·      Oversubscribed Share Placing successfully completed - £1.95m raised to broaden the shareholder base and provide a platform for further growth

* Earnings before finance income, tax, depreciation, amortisation, exceptional items and share-based payment charges

John McArthur, Chief Executive Officer, commented:

"Tracsis has performed extremely well in the year, achieving record levels of organic revenues and profits, and the contribution of MPEC Technology Limited ("MPEC") has also been significant. The MPEC acquisition is Tracsis's fourth in four years and represents a slight diversification into embedded software, but I believe it still sits well underneath the Tracsis transport umbrella. The Company's balance sheet remains debt free and strong, with significant levels of cash in the bank as a result of continued growth and also a successful share placing. Looking ahead, whilst we are cautious about the challenging economic climate, we are excited by the prospects for the enlarged Group and are targeting further growth going forwards."

Enquiries:

John McArthur, Tracsis plc	Tel: [phone]
Katy Mitchell, WH Ireland Limited	Tel: [phone]

Chairman's and Chief Executive Officer's Report

Introduction

For the fourth successive year since IPO, the Group is pleased to report on a period of further sustained growth which has seen significant expansion of the business.  Tracsis has developed several new product lines (TRACS-RS, TRACS In-Cab and TRACS Studio), made several key hires into the team, and completed the successful acquisition of MPEC Technology Limited.  We believe the resulting Group now contains a good balance of consultancy, software and hardware offerings which have led to a further year of record sales and profitability and a growing footprint and reputation within our respective market.

Looking ahead, the directors believe Tracsis now has the strength and depth of services, products and people to continue its growth in the face of the continuing recession and on-going economic pressures felt within the UK and abroad.  The directors also believe the business is well positioned within the passenger transport markets given its strong balance sheet; good cash flow from blue chip clients; and that it remains debt free.  The board remain excited about Tracsis's prospects as a growing public company and has confidence the Group will continue to grow in line with expectations and report further successes in the coming year.

Business overview

Tracsis is a provider, developer and aggregator of resource optimisation software, consultancy services and hardware for companies in the passenger transport industries.  Its primary market is within the UK rail and bus market although the past 12 months have seen increasing demand and enquiries from overseas operators based in Northern Europe, Australia and New Zealand which we believe will be key markets in years to come.

Tracsis' market offering can be broadly categorised into four revenue streams;

1.   Resource optimisation software of people and vehicles (scheduling, rostering and performance management);

2.   Operational and performance planning consultancy and modelling/simulation;

3.   Passenger demand analysis and surveying; and

4.   Condition monitoring and data logging hardware for critical transport infrastructure.

These products and services have a common theme in assisting transport operators run a more efficient and productive service.  This is achieved by the optimisation of resource allocation (people and vehicles) coupled with tools that provide for a significant enhancement to strategic decision making when planning future transport services.  Given the increasing importance of passenger transport markets within the UK and abroad, the directors believe that this will remain a key growth area for its products and services.

Financial summary

The Group achieved revenue of £4.08m for the year, up 54.3% on our 2010 revenue of £2.65m and delivered an adjusted EBITDA* of £1.24m which was some 77% higher than the previous year (2010: £701,000).  We believe this is a tremendous result given the backdrop of continuing market uncertainty and recessionary pressures.

Administrative costs excluding intangible asset amortisation and exceptional items increased from £1.97m to £2.41m, due to continued investment in the Group's overhead base and in anticipation of future growth and demand for the Company market offering. After taking into account intangible asset amortisation and exceptional acquisition costs, total administrative costs amounted to £2.51m (2010: £2.07m). 

* Earnings before finance income, tax, depreciation, amortisation, exceptional items and share-based payment charges

As of 31 July 2011, the Group had cash balances of £4.69m (2010: £2.55m) and remains debt free.  The key changes in cash the Group's cash position against 2010 were generally three fold - the purchase of new office premises in Derby, the acquisition of MPEC Technology Limited, and the successful share placing in June 2011.  Throughout the past year the Group's operating cash generation has remained good with a very tight control of both costs and debtors.

Trading Progress and Prospects

Trading within the Group's core software offerings remained buoyant throughout the past year and the Group maintained all on-going software licences whilst successfully winning new long term business both in the UK and abroad.  Overall, the demand for software products remained higher than expected (as it did in 2010) and the Group continues to see significant pressure on transport operators to take action on improving efficiency whilst maintaining or improving service delivery to customers.  We believe these factors have combined in the Group's favour and look set to continue for at least the short to mid-term.

The Group's consultancy services traded slightly ahead of expectation although the passenger transport markets continue to feel the pinch of the recession at large.  Although the Group witnessed some projects stalling or being deferred, we believe there is evidence the rail industry is gearing up for a high level of re-franchising activity as announced by the Transport Minister, Phillip Hammond in August 2011.  We expect this activity to take place from December 2011 and it could continue for several years to come with some 6 rail franchises due for re-tendering in the coming 3 years.  This activity should bolster all aspects of the Tracsis offering and we anticipate further growth within the consultancy and service offerings in the coming year as a consequence, although there is no guarantee at this stage. 

Re-location to Derby

In May 2011 the Group purchased new offices in the centre of Derby and moved the entire Loughborough operation to this location.  We believe this was a strategically important step in the evolution of the group as the directors believe Derby is regarded as a 'Rail Capital', given the high concentration of rail related businesses located there.  We also believe this move has assisted with the recruitment and retention of key personnel and has raised the profile of Tracsis with its target customers and potential acquisition targets.

Share placing

Earlier in the year the Company completed a successful fundraise of £1.95m as part of a share placing of 4,333,333 shares at a price of 45p per share. 

The Company raised these funds to strengthen our balance sheet in light of the pending acquisition of MPEC Technology Limited and also to replenish cash reserves to enable Tracsis to react to new opportunities as these arise in the future.  The share placing also allowed for Tracsis to broaden the institutional shareholder base which was a key strategic goal of the Board as we continue to grow. 

The successful share placing is an endorsement of Tracsis within investor circles and the board is pleased to welcome several new institutions as shareholders.

Acquisition of MPEC Technology Limited

Towards the end of our financial year the Group announced the acquisition of MPEC Technology Limited ("MPEC").  MPEC are a specialist provider of intelligent data logging equipment that is used to monitor the condition of infrastructure assets on the railway such as level crossings, railway points and point heaters.  The technology allows for these assets to be monitored in real-time so that maintenance regimes can be more predictive and preventative rather than the historic 'fail and replace' regimes.  MPEC aims to improve efficiency through better planned maintenance programmes and improve on the overall performance of the rail network endeavouring to reduce the number of services being unnecessarily delayed due to broken or faulty equipment.

The directors believe that there are good synergies with the hardware MPEC provide and the software currently being developed and marketed by Tracsis.  One instance of this is through combining the data gathered by MPEC's in-field monitors with Tracsis's performance reporting systems to enhance these products and improve the decision making capabilities for clients.  Along with these functional benefits, the directors are confident that cross selling opportunities could be created with UK Train Operating Companies who have expressed an interest in monitoring various aspects of rolling stock vehicles in real-time.

At present MPEC work exclusively within the UK rail sector where there is a defined and growing market for the technology but the directors believe there may be large untapped opportunities overseas.  As can be seen in the accounts, MPEC have traded extremely well since acquisition and we expect this trend to continue.

Outlook

Tracsis has performed very well in the past year and achieved record sales during a period of continued economic uncertainty.  The Group has grown its core team, made several new client wins, moved offices and completed its fourth acquisition whilst at the same time managing to deliver results ahead of expectations.

Looking ahead, we believe the Group remains well placed to continue its goal of becoming a leading provider of operational planning software, hardware and consultancy services to the transport markets.  As always, our thanks go out to customers, shareholders and staff who continue to support us.

Rod Jones, Chairman

John McArthur, Chief Executive Officer

7 November 2011

Consolidated Income Statement for the year ended 31 July 2011

		2011	2010
	Note	£000	£000
Revenue
- continuing		3,015	2,647
- acquisitions		1,068	-
Total revenue	4	4,083	2,647
Cost of sales		(472)	-
Gross profit		3,611	-
Administrative costs		(2,513)	(2,074)
Adjusted EBITDA*		1,242	701
Amortisation of intangible assets		(115)	(78)
Depreciation		(20)	(6)
Exceptional item: Contingent consideration surplus		45	-
Exceptional item: Acquisition costs		(37)	(24)
Share-based payment charges		(17)	(20)
Operating profit
- continuing		741	573
- acquisitions		357	-
Total operating profit		1,098	573
Finance income		17	11
Profit before tax		1,115	584
Taxation		(208)	(98)
Profit for the year		907	486
Earnings per ordinary share
Basic	5	4.49p	2.50p
Diluted	5	4.48p	2.29p

* Earnings before finance income, tax, depreciation, amortisation, exceptional items and share-based payment charges. 

Consolidated Balance Sheet as at 31 July 2011

		2011	2010
		£000	£000
Non-current assets
Property, plant and equipment		474	11
Intangible assets		4,470	2,351
		4,944	2,362
Current assets
Inventories		134	-
Trade and other receivables		1,982	1,054
Cash and cash equivalents		4,690	2,546
		6,806	3,600
Total assets		11,750	5,962
Non-current liabilities
Deferred tax liabilities		817	362
		817	362
Current liabilities
Trade and other payables		2,737	707
Current tax liabilities		540	201
		3,277	908
Total liabilities		4,094	1,270
Net assets		7,656	4,692
Equity attributable to equity holders of the company
Called up share capital		96	78
Share premium reserve		3,762	1,839
Merger reserve		935	836
Share based payments reserve		139	122
Retained earnings		2,724	1,817
Total equity		7,656	4,692

Consolidated Statement of Changes in Equity

		Share		Share-based
	Share	Premium	Merger	Payments	Retained
	Capital	Reserve	Reserve	Reserve	Earnings	Total
	£000	£000	£000	£000	£000	£000
At 1 August 2009	77	1,839	646	102	1,331	3,995
Profit for the year	-	-	-	-	486	486
Total comprehensive income	-	-	-	-	486	486
Transactions with owners:
Share based payment charges	-	-	-	20	-	20
Shares issued as consideration for business combinations	1	-	194	-	-	195
Expenses of share issue	-	-	(4)	-	-	(4)
At 31 July 2010	78	1,839	836	122	1,817	4,692
At 1 August 2010	78	1,839	836	122	1,817	4,692
Profit for the year	-	-	-	-	907	907
Total comprehensive income	-	-	-	-	907	907
Transactions with owners:
Share based payment charges	-	-	-	17	-	17
Shares issued as consideration for business combinations	1	-	99	-	-	100
Share Placing	17	1,933	-	-	-	1,950
Expenses of share issues	-	(10)	-	-	-	(10)
At 31 July 2011	96	3,762	935	139	2,724	7,656

Consolidated Cash Flow Statement for the year ended 31 July 2011

		2011	2010
		£000	£000
Operating activities
Profit for the year		907	486
Finance income		(17)	(11)
Depreciation		20	6
Amortisation of intangible assets		115	78
Contingent consideration surplus		(45)	-
Income tax charge		208	98
Share based payment charges		17	20
Operating cash inflow before changes in working capital		1,205	677
Movement in inventories		(15)	-
Movement in trade and other receivables		(222)	(155)
Movement in trade and other payables		894	(15)
Cash generated from operations		1,862	507
Finance income		17	11
Income tax paid		(178)	(304)
Net cash flow from operating activities		1,701	214
Investing activities
Purchase of plant and equipment		(453)	(9)
Payment of deferred consideration		(122)	(152)
Acquisition of subsidiaries	3	(922)	(489)
Net cash flow used in investing activities		(1,497)	(650)
Financing activities
Expenses of share issues		(10)	(4)
Proceeds from the Placing		1,950	-
Net cash flow from/(used in) financing activities		1,940	(4)
Net increase/(decrease) in cash and cash equivalents		2,144	(440)
Cash and cash equivalents at the beginning of the year		2,546	2,986
Cash and cash equivalents at the end of the year		4,690	2,546

Notes

1          Financial information

The financial information set out above does not constitute the company's statutory accounts for the years ended 31 July 2011 or 2010 but is derived from those accounts. Statutory accounts for 2010 have been delivered to the registrar of companies, and those for 2011 will be delivered in due course. The auditors have reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

2          Basis of preparation

(a)        Statement of compliance

The Group consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ('IFRSs') as adopted by the EU and applicable law. The Company has elected to prepare its parent company financial statements in accordance with UK accounting standards and applicable law ('UK GAAP').  These parent company statements appear after the notes to the consolidated financial statements.

(b)        Basis of measurement

The Accounts have been prepared under the historical cost convention except for derivative financial instruments that are stated at their fair value.

(c)        Functional and presentation currency

These consolidated financial statements are presented in sterling, which is the Company's functional currency.  All financial information presented in sterling has been rounded to the nearest thousand.

(d)        Use of estimates and judgements

The preparation of financial statements in conformity with IFRSs requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses.  The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources.  Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis.  Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision only affects that period, or in the period of the revision and future periods, if the revision affects both current and future periods.

(e)        Changes in accounting policies

IFRS and IFRIC are issued by the International Accounting Standards Board (the IASB) and must be adopted into European Union law, referred to as endorsement, before they become mandatory under the IAS Regulation.

The following IFRSs, IFRIC interpretations and amendments have been adopted in the financial statements for the first time in this financial period:

(i)         IFRIC 19 - Extinguishing Financial Liabilities with Equity Instruments

This interpretation is effective for annual periods beginning on or after 1 July 2010. This has not had a material impact on the Group as it has not had any 'debt for equity swaps'.

(ii)         IFRS 2 'Share-based Payment'

This was amended in June 2009 and is effective for annual periods beginning on or after 1 January 2010. The Group has adopted the amendments, which impact on the subsidiary companies but not the Group and has no impact on consolidation.

(iii)        IAS 32 'Financial Instruments: Presentation'

This was amended in 2009 relating to classification of rights issues. The changes were effective for annual periods beginning on or after 1 February 2010. This did not have an impact on the Group as it has not carried out a rights issue.

(iv)        Amendments resulting from May 2010 Annual Improvements to IFRSs - the following amendments are effective from 1 July 2010, but had no significant impact on the Group:

a.   IFRS 3 'Business Combinations'

b.   IAS 27 'Consolidated and Separate Financial Statements'

(v)         Amendments resulting from April 2009 Annual Improvements to IFRSs - the following amendments are effective from 1 January 2010 but had no significant impact on the Group:

a.   IFRS 5 'Non-current Assets Held for Sale and Discontinued Operations'

b.   IFRS 8 'Operating Segments'

c.   IAS 1 'Presentation of Financial Statements'

d.   IAS 7 'Statement of Cash Flows'

e.   IAS 17 'Leases'

f.    IAS 36 'Impairment of Assets'

g.   IAS 38 'Intangible Assets'

h.   IAS 39 'Financial Instruments: recognition and Measurement'

At the date of approval of these financial statements, the following Standards and Interpretations were in issue and endorsed by the EU but not yet effective. None are expected to have a significant impact on the Group:

(i)         IAS 24 'Related Party Disclosures' (revised 2011) - effective 1 January 2011

(ii)         IAS 27 'Consolidated and Separate Financial Statements' (revised 2011) 'Separate Financial Statements' - effective 1 January 2013

(iii)        Amendments resulting from May 2010 Annual Improvements to IFRSs - the following amendments are not effective until annual periods on or after 1 January 2011

a.   IFRS 7 'Financial Instruments: Disclosures'

b.   IAS 1 'Presentation of financial Statements'

c.   IAS 34 'Interim Financial Reporting'

d.   IFRIC 13 (amendment) 'Customer Loyalty Programmes'

e.   IFRIC 14 (amendment) 'The Limit on a Defined Benefit Asset'

(f)         Going concern

The Group is debt free and has substantial cash resources.  The Board has prepared cash flow forecasts for the forthcoming year based upon assumptions for trading and the requirements for cash resources.

Based upon this analysis, the Board has concluded that the Group has adequate working capital resources and that it is appropriate to use the going concern basis for the preparation of the consolidated financial statements.

3          Acquisition of subsidiary

On 1 June 2011, the Group acquired 100% of the issued share capital of MPEC Technology Limited, for a combination of cash and share based consideration.  The Company is a niche developer and supplier of data logging and remote monitoring technology to the rail industry and the acquisition will lead to significant synergies given the respective offerings within the transport sector.

In the two month period to 31 July 2011 the company contributed revenue of £1,068,000 and operating profit of £357,000 to the Group's results.  If the acquisition had occurred on 1 August 2010, management estimates that consolidated revenue would have been £2,905,000 and consolidated profit for the year would have been £841,000.  In determining these amounts, management has assumed that the fair value adjustments, determined provisionally that arose on the date of acquisition would have been the same if the acquisition had occurred on 1 August 2010.

The acquisition had the following effect on the Group's assets and liabilities on the acquisition date:

			Recognised
	Pre-acquisition	Fair value	value on
	carrying amount	adjustments	acquisition
	£000	£000	£000
Intangible assets: Customer relationships	-	1,279	1,279
Intangible assets: Technology assets	-	684	684
Tangible fixed assets	30	-	30
Inventories	119	-	119
Trade and other receivables	706	-	706
Trade and other payables	(303)	-	(303)
Income tax payable	(267)	-	(267)
Deferred tax liability	(7)	(490)	(497)
Net identified assets and liabilities	278	1,473	1,751
Goodwill on acquisition			271
			2,022
Consideration paid in cash			1,936
Net cash acquired			(1,014)
Net cash flow			922
Consideration paid: fair value of shares issued			100
Deferred contingent consideration:
- cash			1,000
Total consideration			2,022

Pre-acquisition carrying amounts were determined based on applicable IFRSs, immediately prior to the acquisition. The values of assets and liabilities recognised on acquisition are the estimated fair values.

The fair value adjustments are provisional and arise in accordance with the requirements of IFRSs to recognise intangible assets acquired.  In determining the fair values of intangible assets the Group has used discounted cash flow forecasts.  The fair value of shares issued was based on market value at the date of issue.

The deferred contingent consideration is based on the maximum amount which could be payable under an earn out arrangement contained within the acquisition agreement.  This contingent consideration is dependent upon certain earnings targets being met and will be dependent upon the absolute level of earnings achieved in a designated period post acquisition.  The amount payable could vary between a minimum of £nil and a maximum of £1,000,000.

The Group incurred acquisition related costs of £37,000 which have been included within administrative expenses.

4          Segmental analysis

The Group's revenue and profit was derived from its principal activity which is the development, supply and aggregation of resource optimisation, data capture and reporting technologies and consultancy to companies in the passenger transport industries.

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 Board of Directors, who review internal monthly management reports, budgets and forecast information as part of this.  Accordingly, the Board of 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 a single operating segment, 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.  Due to the small size and low complexity of the business, profitability is not analysed in further detail beyond the operating segment level and is not divided by revenue stream.

The CODM reviews a split of revenue streams on a monthly basis and, as such, this additional information has been provided below.

	2011	2010
Revenue	£000	£000
Software licences	1,138	876
Post contract customer support	304	197
Consultancy services, training and other revenue	1,573	1,574
Hardware	1,068	-
Total revenue	4,083	2,647

The principal activity of the Group is based mainly in the United Kingdom hence no geographical analysis is presented.  This position will be monitored as the Group develops.

Reconciliations of reportable segment revenues, profit or loss, assets and liabilities and other material items

Information regarding the results of the 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.

	2011	2010
	£000	£000
Revenues
Total revenue for reportable segments	4,083	2,647
Consolidated revenue	4,083	2,647
Profit or loss
Total profit or loss for reportable segments	1,242	701
Unallocated amounts:
Share based payment charge	(17)	(20)
Other exceptional items (net)	8	(24)
Depreciation	(20)	(6)
Amortisation of intangible assets	(115)	(78)
Interest receivable	17	11
Consolidated profit before tax	1,115	584

	2011	2010
	£000	£000
Assets
Total assets for reportable segments	7,280	3,611
Unallocated assets - intangible assets	4,470	2,351
Consolidated total assets	11,750	5,962
Liabilities
Total liabilities for reportable segments	3,277	908
Unallocated liabilities - deferred tax	817	362
Consolidated total liabilities	4,094	1,270

5          Earnings per share

Basic earnings per share

The calculation of basic earnings per share at 31 July 2011 was based on the profit attributable to ordinary shareholders of £907,000 (2010: £486,000) and a weighted average number of ordinary shares in issue of 20,188,000 (2010: 19,459,000), calculated as follows:

Weighted average number of ordinary shares

In thousands of shares

	2011	2010
Issued ordinary shares at 1 August	19,502	19,134
Effect of shares issued related to business combinations	33	325
Effect of shares issued for cash	653	-
Weighted average number of shares at 31 July	20,188	19,459

Diluted earnings per share

The calculation of diluted earnings per share at 31 July 2011 was based on profit attributable to ordinary shareholders of £907,000 (2010: £486,000) and a weighted average number of ordinary shares in issue after adjustment for the effects of all dilutive potential ordinary shares of 20,245,000 (2010: 21,178,000):

In addition, adjusted EBITDA* is shown below on the grounds that it is a common metric used by the market in monitoring similar businesses.

	2011	2010
	£000	£000
Adjusted EBITDA*	1,242	701
Basic adjusted EBITDA* per share	6.15p	3.6p
Diluted adjusted EBITDA* per share	6.13p	3.3p

* Earnings before finance income, tax, depreciation, amortisation, exceptional items and share-based payment charges.

6          Annual Report and Annual General Meeting

The Company anticipates dispatching a copy of its annual report and accounts to all shareholders on or around 29 November 2011. A copy will also be available from that date on the Company's website www.tracsis.com.

The Annual General Meeting of the Company will be held at Leeds Innovation Centre, 103 Clarendon Road, Leeds, LS2 9DF on Wednesday 18 January 2012 at 1pm.

 

END

 

 

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