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Hi GE17
Interested in the Costain link to use of Vivacity analytics. Thanks for that.
Nutshell looks like an interesting app. I am not sure what advantages or limitations this has in comparison tor other app development tools etc. Getting momentum on sales is difficult for small entities. Usually, to leverage you have to either create a re-seller channel, and/or white label it for other product supplier that have access to a user base, and can offer it as an add on.
Using it in primarily transport market may be a start to develop a user base and hone its features, but you have to be careful unless this is a market of deep growth potential, that it may be labelled as a niche product.
Hi Muzzletoff,
Well spotted.
I thought it would be some time (at least 12 months) before JM sold any shares. However, JM is driven and probably itching to get back into a more meaningful role. It will be interesting to see where JM surfaces and one to follow in the future.
Nutshell is a start up who offer code free apps (no software or technical knowledge required). Nutshell work closely with Ontrac (a division of Tracsis) who produce safety apps/digital products for rail worker safety.
Vivacity Labs develop machine learning and data analytics software and are a key strategic partner for Tracsis. I think Tracsis use VL software in many products. Tracsis have launched a new product that classifies movement into different categories i.e. pedestrian, bus, cycle, HGV, etc.
https://tracsistraffic.com/video-path-tracing-launch/
The analytics software in the new launch is similar to or software provided by VL. Again, huge opportunities to market to any location with large volumes of pedestrian or vehicle movement (venues, transport providers, shopping centres, etc).
VL is the much more significant strategic partner and I suspect the investment secures access to leading analytics software. If Tracsis are using VL software in these new products then revenues and profits should improve for both groups. Nutshell is a much smaller investment related to Ontrac and has broad market appeal but has quite not taken off yet outside the rail sector.
Again, well spotted. I was not aware of their profitability or JM’s involvement.
Most tech start-ups are loss making until they get their products out into the market place. VL has been expanding and secured project funding earlier in the summer to provide analytics software across the Highways England CCTV network. This looks promising.
https://www.costain.com/news/news-releases/costain-wins-innovation-competition-to-help-highways-england-accelerate-connected-digital-roads-infrastructure/
The final accounts due in November should shed more light on both investments and their valuations.
Thanks your post raised many useful points.
I hold Tracsis shares. Do your own research, etc, etc.
Hi GE17You usually keep your eye on Tracsis's activities. Any feel for what's happening on Nutshell/Vivacity?
Looked at what Directorships John McArthur still holds, and these appear to be at Vivacity Labs and Nutshell Software. These are Tracsis investment vehicles.
I notice that Vivacity Labs have recent allotted some shares to a new investor. This was probably required because Vivacity lost £600K last year, so I would imagine that Tracsis has diluted its investment somewhat?
Nutshell Software revenues seem to be making a steady loss of around £230K.
These are fairly embryonic businesses, and may or may not survive in the long term. Maybe JM has stayed on to use his influence/contacts to help refinance these businesses, and guide them through their growth phase. He may of course prefer this embryonic growth phase as this could be a re-run of how Tracsis started.
I was always slightly surprised that Tracsis made these investments, as investing is a different discipline from acquiring and running.
I am not sure these were particularly wise investments for Tracsis, given its general cautious acquisition policy. They look interesting, and may be their growth needs a rather different structure than being partially owned by a listed company.
I wonder if Tracsis will or has quietly written down some of their investment. We will see in their full accounts later this year. If they bury it in the notes or in the detail of the EBITDA adjustments that will go against their ethos of openness.
Looks like John McArthur has sold around .5% of his shares. Guess he must have made around £800k on that share sale?
To a certain degree I would have expected some share sale having stepped down from being CEO, so not entirely surprised.
He still has 2.99% but this makes it no longer notifiable by the company if he sell shares, or to list on their website, as he is now below the 3% share threshold for notifiable holdings.
He will still be on the insiders list if he is a consultant for their M&A side of things, so will probably be a little bit constrained as to when he can sell. But he has been a consistent banker of profits in the last few years.
Never easy for Directors etc to time these matters to please the markets.
Solid results. Second half revenues restored and boosted by £7m compared to the previous year(£27.9m v £20.7m). January acquisitions lifted top line figures but margin improvements should materialise over the next 12-18 months. Huge scope for synergies and margin improvement between Sep events and CTM. The FD has a history of implementing healthy margin improvements 12 months after acquisitions join the group.
Office move, recruitment and technology investments reduced EBITDA by approx. £650K (noted in interims and probably increased for the full year) but we’ll have to wait for the annual statement to get more detailed commentary across the group.
The delayed decisions on franchise awards over the last 12 months must have impacted the Train Operating Companies investment decisions. I guess Tracsis have leaned this year towards product upgrades and creating new software products whilst still delivering against market expectations. The top line benefits of this investment should flow through over the next 18 months.
Recent franchise awards and extensions are good news but broader national policy guidance from the Williams review is urgently awaited. Policy guidance is long overdue for the TOCs.
Debt free and cash generation from this group is remarkable.
The UK customer referred to under ‘control period 5’ is Network Rail or one of their key suppliers. Could be good news concerning long standing trials with network rail.
With an impressive track record, Tracsis churn out solid results year after year and are well positioned for further growth. Solid long term hold.
I hold Tracsis shares. Do your own research etc, etc.
Thought the trading statement read well, and had lots of positive messages. However, when I looked at the EBITDA figure I was a bit disappointed. I was hoping to see a bit more oomph there. This will not of course feature all of the contribution from the recent acquisitions, but must include some I guess. An overall increase of circa of £7m turnover developed £1m+ EBITDA, which suggest an overall profit margin of 20% adjusted which is pretty good, but which shows a small reduction in margin % compared to the prior year.
They are working on efficiencies, and as these probably always lag acquisitions, perhaps I am being too picky, as most companies would give their eyeteeth for that sort of profit margin.
Cash generation looks good, and allowing for acquisition related payments looks as if it is tracking EBITDA, so a good sign of health.
Definitely a stock for the patient
So a nice trading statement,
Hi Muzzletoff,
Thanks for the update.
JM’s position is certainly unusual and we’ll have to see how things pan out over the next 6-12 months and beyond. Lots to keep him busy on the acquisitions front.
Sep events managing the traffic/parking for the F1 race at Silverstone over the weekend. One of the largest events in the calendar.
The year end trading update is due in late August.
I hold Tracsis shares. Do your own research, etc, etc
Looked at the Trainline prospectus, and it is pretty much as expected. largely focused on the expanding opportunity to increment revenue from tickets from train and bus services on its IT platform.
They don't focus. as far as I can see on rebating payments systems where there is a train delay etc. (which Tracsis have invested in), but I guess there is a potential to have this. I suspect they will just stick to their knitting at present as there is greater revenue potential from their current path of business.
Hi GE
Thanks for the info. Very interesting.
The float of Trainline got away. I suppose the only connection is the Railway and Software description. Trainline seems to operate as a platform taking a skim of all train ticket sales, so the revenue potential may be huge but the bottomline is I guess much thinner. Will have to take a look at their admission document when I have a moment.
I would be interested to hear how they paint their future upside.
However, it may add something to the sentiment of a sector which is ill defined at the software end for transport related issues? Of course that can cut both ways were Trainline to have a major hiccup.
I guess we in the run up to the final month of trading for the current financial year. Let's hope the new CEO hasn't copped for giving any bad messages, but from the last announcement it seems at least most likely to be a 'steady as she goes' statement. Of course would be delighted to hear about exceeding market expectations!
I thought JM would have residual role in acquisitions but whether that would survive the change in CEO, I have my doubts.
I wonder if he is starting to get bored with the School run?
Regards
Muzz
Hi Muzzletoff,
Glastonbury weekend. The summer outdoor events season is in full swing. The Tracsis teams very busy at Glastonbury, music festivals, country shows and race courses up and down the country. This should lead to a strong final quarter and restore key financials for the year end. IT investments and the new contract noted in the interims should also add revenues to the second half.
More work with Transport for London (bus networks and traffic analytics) which looks promising . Also, Tracsis are working with partners Vivacity to install sensors in a pilot project monitoring cyclist’s movements in Helsinki.
Continued delays at the DFT around franchise awards/renewals must have an impact on train operators and their investment plans. I hope the year end update includes some comment on how this is affecting the train operators (but I doubt there will be).
On Friday, Tracsis won a ‘Passenger experience award’(Railway Industry Innovation Awards) for their delay repay product and they recently launched new software to the train operators aimed at improving delay payments to passengers and reducing payment fraud. Tracsis has contracts with Transport for Wales and Greater Anglia so large opportunity with train operators (approx. 20). TTCS are extending their product range from individual passenger claims to software for train operators. This is an important strategic shift to securing larger contracts with high recurring revenues.
I’ll have a look at Trainline and their business model. I agree acquisitions at an attractive valuation area a challenge but Tracsis have a decent track record on this front. The Bellvedi acquisition adds significant industry software experience to the group.
Little news from compass but I’ll reserve judgement until I’ve done some more research. They are based in Irelend but have an office in the same building as Tracsis and work closely with a partner (Citi Logik).
Enjoy the weather.
I own Tracsis shares. Do your own research, etc, etc.
Hi GE17
The share price has been showing an upward trend for a little while, with the odd retrace.
I was surprised to hear that Trainline is slated to float in the not too distant, and is being touted as a British Unicorn (make of that what you will).
I wonder if that has put some institutional money out there looking at transport related stocks, of which there are few.
I know its a stretch from Trainline to Tracsis, but anything that helps a sector re-rate is OK by me!
I agree that there are a few potential negatives out there, and there is always the suspicion that a successful young entrepreneur got out when he knew something the market didn't, or couldn't know.
It maybe that the acquisition market place is proving more expensive these days, making progress more of a slog.
Regards
Hi Muzzletoff,
The modest increase in turnover looks unexciting (I didn’t see that coming) but the group should have a stronger second half and the January acquisitions should strengthen final year figures. Headline PTP was lower but includes £175k in acquisitions costs and £500k in technology improvement costs. Cash generation remains very strong. A larger than expected increase in the dividend (Is that a nudge towards institutional investors?).
The share price has shown remarkable resilience given that the hugely successful founder CEO is stepping into to a new role and the results were flattish.
However, on the other side of the ledger: the Dept. of Transport and the disruption to the franchise award timetable; no mention of the delayed opening of crossrail and its implications for the contract win announced in the summer last year.
I suspect the CEO reacted to the delay of contract wins/renewals in the first half and acted swiftly with two acquisitions in January. CTM offers synergies, immediate revenues and cash flow for the current year to July while Compass offers long term complimentary cross selling software opportunities.
The Bellvedi acquisition gives Tracsis immediate access to a team of experienced software developers with specific Rail transport sector knowledge. I suspect IT recruitment has been slower than Tracsis would have liked to meet product development demand. Bellvedi offers savings (both cost & time) in recruiting IT professionals, a very high margin business and should reduce the software development cycle on new products and upgrades.
Chris Barnes as the new CEO has sasquatch size boots to fill in delivering a new phase of expansion and unifying a diverse group of teams. I have the utmost respect for JM in building a near £200 market cap business.
I hold Tracsis shares. Do your own research, etc.
JM officially plays no role in the Direction of the Company now, having resigned from the Board. However, he will maintain some role as a consultant for acquisitions. Hope its not like the Putin approach to the Presidency!:-)
Small acquisition of software business they have worked with previously, which will contribute £0.7m profit to next fin year, if all goes well.
On that basis looks like an acquisition on around 7 x earnings, which should it proves consistent or hopefully better make the business circa £14m in accretive value given it trades on circa 21 x earnings.
The downside is that small business easily go off the boil if not managed well, and they don't really move the dial significantly for shareholders in terms of upside value. So there is a balance of risk to be struck.
It will be interesting to see the new CEO's take on the business after he's got his feet under the desk.
Last year Tracsis announced its trading update on Feb 20th.
Nothing so far. Some allowance has to be made for new CEO, but should be something out shortly
Had problems with gremlins in my PC over the last few weeks and could not post any comments.
Brief trading update due this week.
The house broker increased the EPS forecast for this year by 3% (Yes, 3%) and to 30p for next year to July 2020 due to recent acquisitions. This reinforces how conservative Tracsis handle profit upgrades. Increases in guidance from Tracsis are a collector’s item. The upgrade is reassuring but let’s see the numbers this week.
Activity on the ground across group looks positioned for solid growth. I think the cash position will also be very strong even after the recent acquisitions.
This is the first release by the new Chief Executive and full Interims due late March.
Two large institutions trimmed their holdings. This could be one of those short rallies ahead of the results/update.
I hold Tracsis shares. Do your own research, etc, etc, etc.
There seems to be a steady increase in the share price over the last week. Welcome news.
I confess, I am not sure whether this follows institutions buying or selling some of their holdings (at a guess, selling)?
Hi GE17
Interesting news. They seem to try for an approximate multiple of 7x on their purchases. Given their own multiple of circa 23 (according to Stockopedia analysis), that should (assuming no future profit warnings!) give a healthy £1m NPBT addition to the bottomline. All things being equal that would justfiy assuming no further organic growth another 50p-£1 per share for this year.
If we also get some good contract news, as you suggest, that provides a good following wind for the new CEO.
Hi Muzzletoff,
You wait ages for a bus and then...........
Compass is a long established partner of Citi Logik where Tracsis have a near 20% investment. Tracsis appear to be cementing relationships with key partners.
CTM is an excellent complimentary acquisition to the rapidly expanding SEP events. This adds a strong client list (e.g. Glastonbury, London marathon and Southampton football club), access to event day staffing resources and synergies to improve margins. The timing with CTM will have an immediate impact on this year’s numbers. Based on the previous year’s total, CTM could easily add £1-2m in revenues this financial year as business is heavily weighted towards spring/summer months.
Both acquisitions looked like great value and could still leave Tracsis with £15m on the balance sheet by the Jan 2019 half year.
Tracsis recently secured a 5 year contract with Transport for Wales rail services to offer their delay repay compensation platform.
Signs on the ground remain encouraging but the CEO’s announcement came out of the blue so research can only take us so far. The stability in the share price has been impressive and the CEO has a solid following.
I hold Tracsis shares. Do your own research, etc, etc.
Hi GE17
I agree the possibility is that JM feels he is less suited to or driven by detailed operational management. Of course that is a crucial part of managing a growing business, which becomes more onerous as its grows.
You sound very informed about some of the Tracsis opportunities, so good to hear they are in a decent starting position for some future upside.
Agreed, the CEO has been the driving force for the last 10 years. However, the transition to new CEO appears to have been managed very well.
Tracsis in 2019 now a very different beast and I wonder if John McArthur(JA) prefers working on strategic rather than operational matters. Tracsis is now a near £200 mkt cap with 4 divisions and least 12 offices. Either way, JA is a very impressive CEO and his performance has been exceptional.
JA’s comments about his future role are available on stockopedia – small cap report dated 7th Jan 2019. I think he will be actively engaged for at least 12-18 months. The £20m on the balance sheet is earning very little in the Halifax!
Re - recent contract win. At least 3 rail franchises are up for award this year. Tracsis work with at least one partner in most of the bidding teams so they have put themselves in a great position to receive new contracts or extensions whoever is successful.
Tracsis have long standing product trials with Network Rail who are now awarding contracts under CP6 (2019/24 investment programme). Hope to hear contract news by the Spring/Summer.
Tracsis are opening a new office in north London to meet the growing demands for traffic sensor and camera installations in and around London. Tracsis and their partners are extending their reach with Highways England, London councils and TFL. However, not sure how the delay on crossrail will affect their recent contract win for Ontrac.
On the ground, things appear to be going well.
I hold Tracsis shares. Do your own research, etc, etc.
Disappointing development, but I understand that John McDonald does in fact wish to spend more time with his family.
That knocks the continuity factor somewhat although he will retain a consultancy position after he stands down.
They have organised the replacement, and JM is keen to to stress that he leaves the company in good hands, and with a list of acquisitions to go for.
January is always a potential month for employees to re-evaluate their futures, but obviously it has been on the table for some time.
I will remain invested. I hope that doesn't turn out to be an unwise move.
Bet he turns up somewhere else in a part time role.
Solid results from my point of view.
The CEO reaffirmed the acquisition policy, a number of pipeline opportunities and converting the cash to purchasing profitable companies.
The CEO stated “there wasn’t much RNS newsworthy things to talk about overseas” but confirmed there were more pilots rolled out in the US. RNS statements only follow “significant” contracts wins/renewals. I’ll continue to burrow for signs of improved operational activity.
The various teams are marketing new software and looking at new markets. Pilot/trial activity remains good so I hope we hear news later in the financial year (more likely in the UK than overseas).
I remain a contented long term holder.
I hold Tracsis shares. I have no links with the company. Do you own research, etc.
Tracsis have posted their final results report today.
Look promising, but slightly flattered by a credit from an 'unearned' deferred payment being credited to the p&l.
However, organic growth looks good.
The CEO is responding to questions on Paul Scott's Stockepedia small cap page, apparently.
Market is either digesting the news, or appears relatively unmoved by the announcement and is treading water at current levels.
Thanks GE17. I was worried someone was flagging up concerns about accounting policies.It would seem from your summary that they are giving an endorsement.
It's a bit chicken and egg on the shareprice, as usually the spread on pricing can be a factor in deterring investors. I think also that being circa £6 creates a pyschological barrier, unless there is very positive growth news. Technically, there is no reason £6 should be a barrier, and it wouldn't be for institutions, but for private investors, maybe.
I came in around the £3-£4 mark, so I am happy. With the tech sector temporarily out of favour, it will be up to individual stocks to justify re-ratings. Tracsis is both steady Eddie, but with the potential capacity to surprise on the upside.