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Tracsis PLC (TRCS)

  Print      Mail a friend       Annual reports

Wednesday 08 November, 2017

Tracsis PLC

Audited results for the year ended 31 July 2017

RNS Number : 8298V
Tracsis PLC
08 November 2017
 

Tracsis plc

('Tracsis', 'the Company' or 'the Group')

Audited results for the year ended 31 July 2017

                                               

Tracsis plc (AIM: TRCS), a leading provider of software and services for the traffic data and transportation industry, is pleased to announce its audited results for the year ended 31 July 2017.

Financial Highlights:

·      A further period of good trading across the Group

·      Revenue increased 6% to £34.5m (2016: £32.6m)

·      Adjusted EBITDA* increased 11% to £8.5m (2016: £7.6m)

·      Statutory Pre-tax Profit increased 14% to £4.6m (2016: £4.0m)

·      Fully diluted adjusted Earnings Per Share increased 4% to 23.29p (2016: 22.37p)

·      Cash balances at 31 July of £15.4m (2016: £11.4m)

·      Final dividend of 0.8p per share proposed (2016: 0.7p).  Full year dividend increased 17% to 1.4p per share (2016: 1.2p)

·      Tracsis continues to trade well and remains highly cash generative with significant balance sheet strength. The Group remains debt free

 

Strategic and Operational Highlights:

·      Significant multi-million pound contract win secured for TRACS Enterprise Software - largest software contract secured to date

·      Recently-acquired businesses On-Trac and SEP trading well and above expectation

·      Successful delivery of a North American contract for the Group's RCM technology

·      Structural changes completed within Traffic & Data Services Division, which should be beneficial to margins

·      Strategic investment in Vivacity Labs Limited, a machine learning software business operating in the field of transport and traffic analytics

 

John McArthur, Chief Executive Officer, commented: 

"This was a further year of progress, consolidation and continued growth for Tracsis following the acquisitions of SEP and Ontrac, which have substantially increased the Group's product depth, breadth and client base.  The Group has adapted well to the needs of our customers and we have made significant progress in product innovation whilst also building our team.

Revenue and profit were both ahead of the previous year and the Group continues to benefit from a strong balance sheet as a result of excellent cash generation and sizeable reserves.

The Group continues to hold a great position within our respective markets. Our financial strength coupled with favourable market conditions and good customer momentum provides a good platform for growth in the year to come."

 

* Calculation unchanged from previous years and in line with broker forecasts and research coverage on Tracsis.  Full definition and reconciliation in Note 6.

Enquiries:

Tracsis plc


John McArthur / Max Cawthra

Tel: 0845 125 9162

Investec Bank plc


Corporate Finance: Andrew Pinder / Sebastian Lawrence

Corporate Broking: Matt Lewis

Tel: 020 7597 5970

Chairman & Chief Executive Officer's Report

 

A welcome from Chris Cole, Non-Executive Chairman

 

Tracsis has performed well over the past 12 months and delivered a good financial result set against a backdrop of substantial industry change within the rail sector and renewed impetus into 'intelligent' technology and solutions across the entire traffic and transport sector.  The Group continues to evolve, diversify and professionalise its offering and I am pleased with the significant progress that was made over the past year that will form the foundations on which Tracsis will continue to grow.  On behalf of the Board, I wish to thank everyone for their hard work and dedication and remain excited about our future prospects.

Introduction

The financial year ended 31 July 2017 was a year of further growth and Group wide consolidation given it included the first full year of trading for Ontrac and SEP (acquired 2015/16), and also excludes Tracsis Traffic Data Pty Australia (disposed of Dec '15).  The new businesses have added significant strength and depth to our market offering and have created synergies within the Group. These synergies have been realised primarily in the form of technology, process and people improvements which has put the business on an excellent footing as it enters the new financial year.  These changes also contributed to a further period of growth in revenue and profitability and Tracsis remains in excellent financial health.

Business overview

Tracsis specialises in providing software, hosting services, consultancy services and bespoke technology solutions to high value, mission critical challenges within the transport and traffic sector.  The Group's market offering can be broadly categorised into two distinct offerings:

·      Rail Technology & Services:  Application software development and licensing, remote condition monitoring technology (RCM), and associated operational and strategic consulting services.

The Group has a long pedigree in developing industrial strength application software that covers a variety of resource/asset optimisation that removes extraneous cost, increase network uptime and robustness and improves overall service delivery.  Our software offering is complemented by the Group's RCM offering (hardware and software) that allows for real-time reporting on the status of critical infrastructure assets, to identify problems and aid with preventative maintenance.  Utilizing our expertise in the sector, the Group's professional services division provides consultancy and specialist advice across the operational and strategic planning horizons and play a key role in advising owning Groups, operators and a range of regulatory bodies.

·      Traffic & Data Services:  Data capture, analysis and interpretation of traffic and pedestrian movement and demand volumes to aid with the planning, investment into, and ultimate operations of a transport environment.
 

Over a number of years, the Group has developed what is now the largest traffic and transport data capture and analytics business in the UK, and this was bolstered through the most recent acquisition of SEP Events and the investment made into Vivacity Labs.  With the acquisition of SEP this division has expanded its addressable markets from rail, roads and highways to include the pedestrian rich environments of the events industry which is a significant and growing market within the UK. 

The Group's mission is to help our clients solve complex, high value, data driven problems for which there is typically very little by way of an alternative offering.  Tracsis chooses to operate within the traffic and transport markets due to the abundance of complex problems where our expertise and software have clear and demonstrable benefits.  These markets also exhibit several attractive traits for the Group - high barriers to entry due to domain knowledge, large and disparate data sets, and well informed customers that understand the inherent value that can be released through the provision of a good solution or service.  In short, Tracsis focuses on solving problems that are well understood by its customers but for which there is poor provision from traditional technology providers due to the niche nature of these problems. 

The Directors believe that the traffic, transport and pedestrian rich environments (such as events and the built space), are particularly well positioned for further, long term, growth and the Group will capitalise on this via an expanding portfolio of products and services that have a common theme of 'smart' planning and 'intelligent' mobility.

Financial summary

The Group delivered revenues of £34.5m which was an increase of 6% on the previous year (2016: £32.6m).  This was a good performance given the level of consolidation within the Group, and as it was set against a difficult comparator in 2016 when Tracsis achieved revenue growth of 29%. 

Adjusted EBITDA* of £8.5m was an increase of 11% on the previous year (2016: £7.6m), with Adjusted Profit** of £7.7m being 12% higher than the previous year (2016: £6.9m).  The impact of acquisitions was a key contributor to the increased profit in the year and through further consolidation and integration of these business in future years Tracsis should be able to continue to leverage enhanced margins.  Statutory Profit before Tax was also higher than the previous year at £4.6m (2016: £4.0m), with an increased charge being taken in respect of amortisation of acquired intangible assets and an increased share based payment charge.

At 31 July 2017, the Group's cash balances had grown to £15.4m (2016: £11.4m), and cash generation continues to be strong. Overall cash balances increased by £4.0m in the financial year, after paying contingent consideration of £1.1m (in respect of Ontrac and SEP year one earn outs) and also making a strategic investment in Vivacity Labs of £0.4m. The business therefore generated net cash of c. £5.5m which demonstrates excellent conversion of profits to cash.  The Group continues to be debt free. Contingent consideration in respect of Ontrac and SEP year two earn outs is expected to be finalised and paid in due course, once the Group has clarity on a major sales opportunity that is being negotiated.

* Earnings before finance income, tax, depreciation, amortisation, exceptional items, other operating income, and share-based payment charges and share of result of equity accounted investees - see note 6 for reconciliation
** Earnings before finance income, tax, amortisation, exceptional items, other operating income, share-based payment charges, and share of result of equity accounted investees - see note 6 for reconciliation

Trading Progress and Prospects

Rail Technology & Services

Summary segment results:

Revenue                  £16.0m (2016: £14.1m)
EBITDA                   £6.5m   (2016: £5.3m)
Profit before Tax       £6.3m   (2016: £5.1m)

Software

Software sales, excluding Ontrac, were £6.4m (2016: £6.6m) with the vast majority of this revenue being made up by software licences, which are typically long term customer relationships and recurring in nature each year.  All aspects of the software portfolio continued to perform well, with renewal rates for the TRACS, Compass and Retail & Operations product suites remaining very high.  The Group continued its strategy of upselling and cross selling existing and new products to its customer base and was pleased to secure an additional sale of DayOne which should pave the way for broader market uptake of this new product. The lack of franchise bid work in the period under review impacted slightly on anticipated performance although a quiet year within rail franchising is often followed by a busy one.

Most significantly, in July 2017, the Group was delighted to announce a major, multiyear contract with one of the largest Train Operating Companies in the UK for its TRACS Enterprise solution. The value of this contract runs to several million pounds, and will be delivered over the next four years.  This win was highly significant for the Group as once successfully implemented, it should lead to follow-on reference sales with other operators.  We look forward to delivering this contract on time and to the satisfaction of our client and have already bolstered our software delivery team in Leeds and Manchester to accommodate the work planned in the year ahead.   Elsewhere, a good contract win for our Compass product was secured in New Zealand, which builds upon our long standing relationship with this customer.

 

Remote Condition Monitoring (RCM)

Revenues of £2.6m were higher than the previous year (2016: £2.2m), largely due to successful delivery of a major order from a North American Class 1 railroad operator that was announced previously. This marked the Group's first major contract outside of the UK and the Group continues to target further sales to this operator and the broader class 1 freight operators alongside the Transit/Metro industry within North America.  As noted previously, whilst the specific timing of new sales within a new geography will always be hard to predict, management remains confident that the US is the largest potential market for our goods and services and expect to growth our footprint in the near and medium term.  To this end, Tracsis now has an agreement in place with a trusted reseller and channel partner who, alongside promoting our RCM offering, is also tasked with marketing our full range of resource planning software to the US rail industry.

In the UK, RCM trading remained buoyant, and was comparable with the previous year.  The Group was delighted to have completed product development for busbar monitoring technology and delivered the first units as part of a pilot with its major UK customer. If successful, there is significant opportunity for this product, and our customer has indicated the viable addressable market demand would be a requirement is some 20,000 units for the UK network alone.

The Group continues to target alternative applications for its RCM technology and during the year, delivered its first revenue generating projects in respect of distributed power generation monitoring.  This market remains viable and Tracsis continue to retain dedicated resources to grow this, and other, applications outside of rail.

Consultancy and Professional Services

Due to changes made by the DfT to the timetable of rail franchise competitions, revenue in the year was lower than originally anticipated.  Consultancy and professional services revenue was £1.7m (2016: £2.1m) which was a good result given the circumstances where a high number of planning and performance related projects were successfully won and delivered to replace the revenue that would otherwise have been delivered via bid support to owning Groups. Tracsis acknowledged some time ago that it needed to be more resilient to unforeseen changes to the franchise bid timetable (which are not uncommon). This acknowledgement has created a far more robust business, not only in terms of service offering, but also in relation to staff competency and client reach. 

In 2017-18, we anticipate supporting bidders for the Southeastern and West Coast franchise competitions which should lead to a significantly better consultancy performance.

Ontrac

Ontrac, performed well in the period and contributed revenue of £5.3m (2016: £3.2m) in its first full year as part of the Tracsis Group.  Revenue was delivered from a combination of software licences, hosting services, and bespoke software development work along with related consultancy services.  The business continues to work extensively with Network Rail and a wide variety of engineering and construction companies within the railway supply chain who use Ontrac's Connect, Rail Hub and National Hazard Directory products.

Ontrac continues to work on the next iteration of its 'Rail Hub' product suite and in particular the eTrac product which allows for geospatial visualisation of railway networks and asset mapping.  There has been significant interest for this innovation from key customers and the Ontrac team have high confidence that a significant sale of eTrac will be delivered in the coming financial year.  Looking ahead, with the contractual earn-out period relating to Ontrac coming to an end in 2017, further consideration will be given to how Ontrac can be integrated more fully into the rest of the Tracsis Group and how skills and resources can be leveraged for mutual benefit.

 

 

Traffic & Data Services

Summary segment results:

Revenue                £18.5m (2016: £18.5m)
EBITDA                 £2.0m   (2016: £2.3m)
Profit before Tax     £1.4m   (2016: £1.3m)

Traffic Data and Passenger Counts

Traffic Data and Passenger Counts has historically been the fastest growing division in terms of pure organic growth.  Revenues of £12.8m were delivered in the year (2016: £14.4m), reflecting the disposal of the non-core Australian business in 2015, and also taking account of the challenging market conditions that were announced in February 2017 (2016: £13.2m excluding Australia).

In response to the trading environment and challenges posed within this part of the business, the Group undertook and completed significant restructuring from October 2016 through to February 2017, which should result in savings of c.£0.6m on an annualised basis, with the full effects being realised during the current financial year ending 31 July 2018.

The Group continues to have a strong position and enjoys a favourable market share. Tracsis is excited by the opportunity that the Vivacity technology presents in terms of the potential to improve gross margins by reducing analysis costs significantly, and looks forward to adopting this in due course.  The strategy for this part of our business remains unchanged - to transition what was historically a 'project led services business' to a 'product led technology business'. In doing so the Group believes it can achieve enhanced operational efficiencies via increased use of technology and process improvements to improve both gross and net margin.

SEP

SEP achieved revenues of £5.7m (2016: £4.1m) in its first full year as part of the enlarged Group which was a fantastic achievement and significantly ahead of any previous year as an independent entity.  Along with delivering a large number of prominent events to a retained blue chip client base, the team was successful in growing its market share and winning several new customers on a retained basis.  SEP continues to target the stadium and fixed venue event market and sees Premier League football clubs as a major opportunity.  The Group continues to work closely with one of the largest clubs in the English Premiership and looks forward to replicating our success within this market in the year ahead.

The year also saw the launch of Tracsis Live Traffic (TLT) which provides event operators with a real time insight into traffic and pedestrian dynamics that comprises ANPR technology, together with application software developed internally by the Group's technical development team.  Use of this technology means the Group can differentiate itself from the competitors, and also provide incremental, high value services as part and parcel of an engagement. Early signs for the adoption of this system have been positive, with good revenues being achieved in the year. The opportunity continues to exist to roll out to other existing and potential new clients.

Dividends

In February 2012, the Board implemented a progressive dividend policy and the Group intends to maintain this going forwards.  An interim dividend of 0.6p per share for FY 2016/17 was paid in April 2017.  A final dividend of 0.8p per share in respect of FY 2016/17 is proposed, to take the full year dividend to 1.4p.  This represents a 17% increase on the previous year's dividend of 1.2p per share. 

The dividends remain well covered by the Group's profitability and cash position, which supports its primary focus on growth via acquisition and through further development of new products and services.  The Board is committed to maintaining the progressive dividend policy as the business continues to trade profitably and in line with its expectations.

The dividend will be paid on 16 February 2018 to shareholders on the register on 2 February 2018.

Acquisitions

The Group did not make any acquisitions in the year under review, but assessed multiple opportunities in line with our stated strategy.  Although no transaction was completed in the period, Tracsis' appetite for continued aggregation in selected traffic and transport markets remains unchanged and so too does the standard by which we critique potential acquisition targets.  Looking ahead, the pipeline of opportunities remains strong and Tracsis has never been in a stronger position to make further acquisitions.

Investments

The Group was pleased to announce that it had made a strategic investment of up to £1.3m into Vivacity Labs Limited ("Vivacity"), a provider of smart, hyperlocal data for smart cities and intelligent transport systems, in return for a 28.1% equity stake.

Vivacity has developed novel Machine Learning software and sensor technology which can be applied across a wide range of traffic and transport issues, most specifically for the automatic counting and classification of pedestrian and vehicle flows in a variety of environments.  The business has secured a number of client wins and pilot projects with local governments, infrastructure owners and transport providers. In March 2017 the Group was successful in winning a significant Smart Cities grant with a value of £1.7m.

Adoption of the Vivacity technology has the potential for the Group to significantly reduce its existing costs for processing video footage within the Traffic & Data Services Division whilst also leading to improvements in operational performance such as increased accuracy of traffic counts and the reduction of turnaround times for clients.

As part of a broader investment round for Vivacity, the Group agreed to invest up to £1.0m via a tranched equity funding in return for 23.3% of the enlarged share capital of Vivacity.  The first investment of £0.4m was made in the year, with the balance of £0.6m expected to be made in the year ending 31 July 2018, subject to performance milestones being fulfilled. In addition, Tracsis holds a warrant to subscribe for a further 4.8% of the enlarged share capital for an additional £0.3m.

Tracsis is entitled to a seat on the Board of Directors of Vivacity (currently filed by John McArthur - Group CEO) to help monitor our investment and promote the Vivacity offering to the Tracsis customer base.  The investment round also included Downing Ventures EIS Fund and the London Co-Investment Fund with Tracsis being lead investor. 

Summary and Outlook

FY 2016-17 was another year of significant progress, consolidation and continued growth for Tracsis following the acquisitions of SEP and Ontrac, which substantially increased the Group's product reach and client base.  The Group has demonstrated maturity and resilience to dynamic market conditions and continues to take the initiative to innovate and evolve in new areas that should provide for significant margin improvement and competitive advantages in the years ahead.

Revenue, adjusted EBITDA and adjusted profit were once again all well ahead of the previous year and the Group continues to benefit from a strong balance sheet that benefits from the business' excellent cash generation and sizeable reserves.

The Group believes that the significant Software contract win, investment in Vivacity Labs, restructuring of its Traffic Data business and North American success all provide a good platform for growth in 2017-18.

Tracsis' growth strategy remains unchanged: to deliver shareholder value both organically and through acquisition of complementary businesses, and by developing products and services that solve well recognised, high value problems that are poorly served by existing technology.  The Group's business model continues to focus on markets that generally have high barriers to entry, with contracts that are sold on a recurring/repeat basis, and to a retained customer base that is predominantly blue chip in nature.  This strategy has worked well in the past to generate good growth and significant returns for shareholders and the Group believes it will continue to work well in the future especially given the pace of change within its target markets.

As always, our thanks go to our numerous customers and partners who support our growth plans, and most importantly our talented and dedicated staff across the whole Group.

 

Chris Cole, Chairman

John McArthur, Chief Executive Officer

8 November 2017

 


Consolidated Statement of Comprehensive Income for the year ended 31 July 2017

 



2017

2016



Continuing operations

Continuing operations

Discontinued operations

Total


Notes

£000

£000

£000

£000 

Revenue

3

34,486

31,403

1,238

32,641

Cost of sales


(15,279)

(12,559)

(715)

(13,274)

Gross profit


19,207

18,844

523

19,367

Administrative costs


(14,491)

(14,745)

(662)

(15,407)

Adjusted EBITDA*

3,6

8,494

7,444

201

7,645

Depreciation


(799)

(744)

(29)

(773)

Adjusted profit **

6

7,695

6,700

172

6,872

Amortisation of intangible assets


(1,674)

(1,378)

-

(1,378)

Exceptional items


(139)

(136)

(311)

(447)

Other operating income


134

-

-

-

Share-based payment charges


(1,300)

(1,087)

-

(1,087)

Operating profit / (loss)


4,716

4,099

(139)

3,960

Finance income


15

36

-

36

Finance expense


(38)

(37)

(4)

(41)

Share of result of equity accounted investees


(77)

-

-

-

Profit / (loss) before tax


4,616

4,098

(143)

3,955

Taxation


(901)

(372)

(50)

(422)

Profit / (loss) after tax


3,715

3,726

(193)

3,533

 

Other comprehensive income:






Items that are or may be reclassified subsequently to profit or loss






Foreign currency translation differences - foreign operations


-

-

189

189

 

Total recognised income for the year


 

3,715

 

3,726

 

(4)

 

3,722













Earnings per ordinary share






Basic

4

13.36p

13.40p

(0.69p)

12.71p

Diluted

4

12.93p

12.93p

(0.67p)

12.26p

 

* Earnings before finance income, tax, depreciation, amortisation, exceptional items, other operating income, and share-based payment charges and share of result of equity accounted investees - see note 6. 

** Earnings before finance income, tax, amortisation, exceptional items, other operating income, share-based payment charges, and share of result of equity accounted investees - see note 6.

 

 

Consolidated Balance Sheet as at 31 July 2017 

 



2017

2016



£000

£000

Non-current assets




Property, plant and equipment


2,461

2,608

Intangible assets


24,458

26,132

Investments - loan notes receivable


-

125

Investments - equity


675

375

Loans due from associated undertakings


187

125

Investments in equity accounted investees


111

125

Deferred consideration receivable


-

167

Deferred tax assets


457

573



28,349

30,230

Current assets




Inventories


239

271

Trade and other receivables


8,480

6,166

Deferred consideration receivable


-

133

Cash and cash equivalents


15,350

11,385



24,069

17,955

Total assets


52,418

48,185

Non-current liabilities




Hire-purchase contracts


230

296

Contingent & Deferred consideration payable


-

4,485

Deferred tax liabilities


3,718

4,284



3,948

9,065

Current liabilities




Hire-purchase contracts


320

368

Trade and other payables


8,842

8,354

Contingent & Deferred consideration payable


5,041

1,665

Current tax liabilities


620

67



14,823

10,454

Total liabilities


18,771

19,519

Net assets


33,647

28,666

Equity attributable to equity holders of the company




Called up share capital


112

110

Share premium reserve


5,948

5,622

Merger reserve


3,010

3,010

Retained earnings


24,577

19,924

Total equity


33,647

28,666



Consolidated Statement of Changes in Equity

 



 

 







Share Capital

£'000

Share Premium

£'000

Merger reserve

£'000

Retained Earnings

£'000

Translation reserve £'000

 

Total

£'000

 








 

At 1 August 2015

106

4,776

1,846

15,838

(189)

  22,377

 

Profit for the year

-

3,533

-

3,533

 

Other comprehensive income

-

-

-

-

22

22

 

Reclassification on disposal

-

-

-

-

167

167

 

Total comprehensive income

-

3,533

189

3,722

 

Transactions with owners:







 

Dividends

-

(301)

-

(301)

 

Share based payment charges

-

1,087 

1,087

 

Tax movements in equity

-

(233)

(233)

 

Exercise of share options

3

846

849

 

Shares issued as consideration

1

-

1,164

-

-

1,165

 

At 31 July 2016

110

5,622

3,010

19,924

-

28,666

 

 

110

5,622

3,010

19,924

-

28,666

Profit for the year

-

3,715

-

3,715

Total comprehensive income

-

3,715

-

3,715

Transactions with owners:







Dividends

-

(362)

-

(362)

Share based payment charges

-

1,300 

1,300

Exercise of share options

2

326

328

At 31 July 2017

112

5,948

3,010

24,577

-

33,647

 

 

Consolidated Cash Flow Statement

 

 



2017 

2016 


Notes

£000 

£000 

Operating activities




Profit for the year


3,715

3,533

Finance income


(15)

(36)

Finance expense


38

41

Depreciation


799

773

Loss on disposal of plant and equipment


12

2

Loss on disposal of business


-

272

Exceptional items


139

-

Other operating income


(134)

-

Amortisation of intangible assets


1,674

1,378

Share of result of equity accounted investees


77

-

Income tax charge


901

422

Share based payment charges


1,300

1,087

Operating cash inflow before changes in working capital


8,506

7,472

Movement in inventories


32

3

Movement in trade and other receivables


(2,314)

(506)

Movement in trade and other payables


488

(17)

Cash generated from operations


6,712

6,952

Finance income


15

36

Finance expense


(38)

(41)

Income tax paid


(664)

(1,081)

Net cash flow from operating activities


6,025

5,866

Investing activities




Purchase of plant and equipment


(558)

(795)

Proceeds from disposal of plant and equipment


56

83

Acquisition of subsidiaries


-

(6,761)

Proceeds from disposal of subsidiaries


-

166

Equity investments and loans to investments


(550)

(750)

Repayment of loans from investments


111

-

Receipt of deferred consideration


300

74

Payment of contingent & deferred consideration


(1,109)

(30)

Net cash flow used in investing activities


(1,750)

(8,013)

Financing activities




Dividends paid

5

(362)

(301)

Proceeds from exercise of share options


328

849

Hire purchase repayments


(276)

(369)

Net cash flow from / (used in) financing activities


(310)

179

Net increase / (decrease) in cash and cash equivalents


3,965

(1,968)

Effect of exchange fluctuations


-

12

Cash and cash equivalents at the beginning of the year


11,385

13,341

Cash and cash equivalents at the end of the year


15,350

11,385

 

 

 

Notes to the Consolidated Financial Statements

 

 

1          Financial information

 

The financial information set out above does not constitute the company's statutory accounts for the years ended 31 July 2017 or 2016 but is derived from those accounts. Statutory accounts for 2016 have been delivered to the registrar of companies, and those for 2017 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 FRS 101.  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.

(c)        Functional and presentation currency

These consolidated financial statements are presented in sterling, which is the Group and 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 on-going 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)       Accounting Developments

The Group and Company financial statements have been prepared and approved by the directors in accordance with International Financial Reporting Standards as adopted by the EU ("Adopted IFRSs"). The accounting policies have been applied consistently to all periods presented in the consolidated financial statements, unless otherwise stated.

 

Certain new standards, amendments and interpretations to existing standards have been published that are mandatory for the Group's accounting period beginning on or after 1 August 2016. The following new standards and amendments to standards are mandatory and have been adopted for the first time for the financial year beginning 1 August 2016:

 

·      Accounting for Acquisitions of Interests in Joint Operations (Amendments to IFRS 11)

·      Investment Entities: Applying the Consolidation Exception (Amendments to IFRS 10, IFRS 12 and IAS 28)

·      Clarification of Acceptable Methods of Depreciation and Amortisation (Amendments to IAS 16 and IAS 38)

·      Equity Method in Separate Financial Statements (Amendments to IAS 27)

·      Disclosure Initiative (Amendments to IAS 1)

·      Annual Improvements to IFRSs 2012-2014 Cycle - various standards

 

These standards have not had a material impact on the Consolidated Financial Statements.

 

The following new or revised standards and interpretations issued by the International Accounting Standards Board (IASB) have not been applied in preparing these accounts as their effective dates fall in periods beginning on or after 1 August 2017.

 

Effective for the year ending 31 July 2018

·      IAS 7 'Statement of cash flows' - amendments relating to the IASB's disclosure initiative intended to provide information to help investors better understand changes in a company's debt

·      IAS 12 'Income taxes' - amendments relating to the accounting for deferred tax assets for unrealised losses on debt instruments measured at fair value.

Effective for the year ending 31 July 2019

·      IFRS 2 'Share-based payment' - amendments clarifying how to account for certain types of share-based payment transactions

·      IFRS 9 'Financial instruments' - introduces new requirements for classification and measurement of financial assets and financial liabilities, impairment methodology and hedge accounting.

·      IFRS 15 'Revenue from contracts with customers' - provides a single model for measuring and recognising revenue arising from contracts with customers, unless the contracts are in the scope of other standards, such as IAS 17. It supersedes all existing revenue requirements in IFRS.

Effective for the year ending 31 July 2020

·      IFRS 16 'Leases' - provides a single lessee accounting model, specifying how leases are recognised, measured, presented and disclosed

 

(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          Segmental analysis

 

The Group has divided its results into two segments being 'Rail Technology and Services' and 'Traffic & Data Services'. 'Rail Technology and Services' includes the Group's Software, Consultancy and Remote Condition Monitoring technology and also includes Ontrac which was acquired in the previous period. Traffic & Data Services includes SEP which was acquired in the previous period.

 

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.

 

Sales revenue is summarised below


2017

2016


£000

£000

Rail Technology & Services

15,964

14,066

Traffic & Data Services - continuing

18,522

17,337

Total revenue from continuing operations

34,486

31,403

Discontinued operations

-

1,238




Total revenue

34,486

32,641

 

 

Revenue can also be analysed as follows:


2017

2016


£000

£000

Software and related services

11,711

9,817

Other

22,775

22,824

Total

34,486

32,641

 

 

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.

 

 


2017


Rail Technology & Services

 

Traffic & Data Services

 

 

Unallocated

 

 

Total


£000 

£000 

£000 

£000 

Revenues





Total revenue for reportable segments

15,964

18,522

-

34,486

Consolidated revenue

15,964

18,522

-

34,486

Profit or loss





EBITDA for reportable segments

6,451

2,043

-

8,494

   Amortisation of intangible assets

-

-

(1,674)

(1,674)

   Depreciation

(124)

(675)

-

(799)

   Exceptional items

-

-

(139)

(139)

   Other operating income



134

134

   Share-based payment charges

-

-

(1,300)

(1,300)

   Interest receivable/payable(net)

-

-

(23)

(23)

   Share of result of equity accounted investees

-

-

(77)

(77)

Consolidated profit before tax

6,327

1,368

(3,079)

4,616

 

 

 


2016


Rail Technology & Services

Traffic & Data Services

 

 

Unallocated

 

 

Total


£000 

£000 

£000 

£000 

Revenues





Total revenue for reportable segments

14,066

18,575

-

32,641

Consolidated revenue

14,066

18,575

-

32,641

Profit or loss





EBITDA for reportable segments

5,346

2,299

-

7,645

   Amortisation of intangible assets

-

-

(1,378)

(1,378)

   Depreciation

(111)

(662)

-

(773)

   Exceptional items

(79)

(368)

-

(447)

   Share-based payment charges

-

-

(1,087)

(1,087)

   Interest receivable/payable(net)

-

-

(5)

(5)

Consolidated profit before tax

5,156

1,269

(2,470)

3,955

 

 


2017


           Rail Technology & Services

Traffic & Data Services

 

 

Unallocated

 

 

Total


£'000

£000

£000

£000

Assets





Total assets for reportable segments (exc. cash)

3,581

7,599

-

11,180

Intangible assets and investments

-

-

25,431

25,431

Deferred tax assets

-

-

457

457

Cash and cash equivalents

3,784

1,844

9,722

15,350

Consolidated total assets

7,365

9,443

35,610

52,418






Liabilities





Total liabilities for reportable segments

(6,142)

(3,870)

-

(10,012)

Deferred tax

-

-

(3,718)

(3,718)

Contingent & deferred consideration

-

-

(5,041)

(5,041)

Consolidated total liabilities

(6,142)

(3,870)

(8,759)

(18,771)

 


2016


           Rail Technology & Services

Traffic & Data Services

 

 

Unallocated

 

 

Total


£'000

£000

£000

£000

Assets





Total assets for reportable segments (exc. cash)

2,401

6,944

-

9,345

Intangible assets and investments

-

-

26,882

26,882

Deferred tax assets

-

-

573

573

Cash and cash equivalents

4,365

1,507

5,513

11,385

Consolidated total assets

6,766

8,451

32,968

48,185






Liabilities





Total liabilities for reportable segments

(5,004)

(4,081)

-

(9,085)

Deferred tax

-

-

(4,284)

(4,284)

Contingent & deferred consideration

-

-

(6,150)

(6,150)

Consolidated total liabilities

(5,004)

(4,081)

(10,434)

(19,519)

 

 

Major customers

Transactions with the Group's largest customer represent 16% of the Group's total revenues (2016: 14%).

 

Geographic split of revenue

A geographical analysis of revenue is provided below:

 

2017

2016


£000

£000

United Kingdom

33,224

30,798

North America

437

32

Australia

-

1,238

Rest of the World

825

573

Total

34,486

32,641

 

4          Earnings per share

Basic earnings per share

The calculation of basic earnings per share at 31 July 2017 was based on the profit attributable to ordinary shareholders of £3,715,000 (2016: £3,533,000) and a weighted average number of ordinary shares in issue of 27,804,000 (2016: 27,807,000), calculated as follows:

 

 

Weighted average number of ordinary shares

In thousands of shares


2017

2016

Issued ordinary shares at 1 August

27,546

26,564

Effect of shares issued related to business combinations

-

360

Effect of shares issued for cash

258

883

Weighted average number of shares at 31 July

27,804

27,807

 

Diluted earnings per share

The calculation of diluted earnings per share at 31 July 2017 was based on profit attributable to ordinary shareholders of £3,715,000 (2016: £3,533,000) and a weighted average number of ordinary shares in issue after adjustment for the effects of all dilutive potential ordinary shares of 28,738,000 (2016: 28,811,000):

 

Adjusted EPS

 

In addition, Adjusted Profit EPS is shown below on the grounds that it is a common metric used by the market in monitoring similar businesses. A reconciliation of this figure is provided below:


2017

2016


£'000

£'000

Profit attributable to ordinary shareholders

3,715

3,533

Amortisation of intangible assets

1,674

1,378

Share-based payment charges

1,300

1,087

Exceptional items

139

447

Other operating income

(134)

-

Adjusted profit for EPS purposes

6,694

6,445

 

 

Weighted average number of ordinary shares

In thousands of shares

 



For the purposes of calculating Basic earnings per share

27,804

27,807

Adjustment for the effects of all dilutive potential ordinary shares

28,738

28,811




Basic adjusted earnings per share

24.08p

23.18p

Diluted adjusted earnings per share

23.29p

22.37p



5          Dividends

The Group introduced a progressive dividend policy during previous years. The cash cost of the dividend payments is shown below:

 



2017

2016



£000

£000

Final dividend for 2014/15 of 0.60p per share paid


-

164

Interim dividend for 2015/16 of 0.50p per share paid


-

137

Final dividend for 2015/16 of 0.70p per share paid


195

-

Interim dividend for 2016/17 of 0.60p per share paid


167

-

Total dividends paid


362

301

 

 

The dividends paid or proposed in respect of each financial year is as follows:

 


2017

2016

2015

2014

2013

2012


£'000

£000

£000

£000

£000

£000

Interim dividend for 2011/12 of 0.20p per share paid

-

-

-

-

-

48

Final dividend for 2011/12 of 0.35p per share paid

-

-

-

-

-

87

Interim dividend for 2012/13 of 0.30p per share paid

-

-

-

-

75

-

Final dividend for 2012/13 of 0.40p per share paid

-

-

-

-

102

-

Interim dividend for 2013/14 of 0.35p per share paid

-

-

-

89

-

-

Final dividend for 2013/14 of 0.45p per share paid

-

-

-

119

-

-

Interim dividend for 2014/15 of 0.40p per share paid

-

-

106

-

-

-

Final dividend for 2014/15 of 0.60p per share paid

-

-

164

-

-

-

Interim dividend for 2015/16 of 0.50p per share paid

-

137

-

-

-

-

Final dividend for 2015/16 of 0.70p per share proposed

-

195

-

-

-

-

Interim dividend for 2016/17 of 0.60p per share paid

167

-

-

-

-

-

Final dividend for 2016/17 of 0.80p per share proposed

222

-

-

-

-

-

 

The total dividends paid or proposed in respect of each financial year ended 31 July is as follows:

 


2017

2016

2015

2014

2013

2012

Total dividends paid per share

1.4p

1.2p

1.0p

0.8p

0.7p

0.55p

 

 

 

The dividend will be payable on 16 February 2018 to shareholders on the Register at 2 February 2018.



 

 

 

6          Reconciliation of adjusted profit metrics

 

In addition to the statutory profit measures of Operating profit and profit before tax, the Group quotes Adjusted EBITDA and Adjusted profit.

 

Adjusted EBITDA is defined as Earnings before finance income, tax, depreciation, amortisation, exceptional items, other operating income, and share-based payment charges and share of result of equity accounted investees.

 

Adjusted EBITDA can be reconciled to statutory profit before tax as set out below:

 



2017

2016



£000

£000

Profit before tax


4,616

3,955

Finance income / (expense) - net


23

5

Share-based payment charges


1,300

1,087

Exceptional items


139

447

Other operating income


(134)

-

Amortisation of intangible assets


1,674

1,378

Depreciation


799

773

Share of result of equity accounted investees


77

-

Adjusted EBITDA


8,494

7,645

 

Adjusted profit is defined as Earnings before finance income, tax, amortisation, exceptional items, other operating income, share-based payment charges, and share of result of equity accounted investees.

 

Adjusted profit can be reconciled to statutory profit before tax as set out below:



2017

2016



£000

£000

Profit before tax


4,616

3,955

Finance income / (expense) - net


23

5

Share-based payment charges


1,300

1,087

Exceptional items


139

447

Other operating income


(134)

-

Amortisation of intangible assets


1,674

1,378

Share of result of equity accounted investees


77

-

Adjusted profit


7,695

6,872

 

Adjusted EBITDA reconciles to adjusted profit as set out below:



2017

2016



£000

£000

Adjusted EBITDA


8,494

7,645

Depreciation


(799)

(773)

Adjusted profit


7,695

6,872

 

 

 

7          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 2017. A copy will also be available 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 24 January 2018 at 1pm.


This information is provided by RNS
The company news service from the London Stock Exchange
 
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