Tracsis Regulatory News (TRCS)

Tracsis plc

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

Interim results for the six months ended 31 January 2014

A further period of strong growth in revenue, EBITDA and profit before tax

Tracsis plc (AIM: TRCS), is pleased to announce its interim results for the six months ended 31 January 2014.

Financial Highlights:

· Revenue increased 109% to £9.8m (2013: £4.7m)

· Adjusted EBITDA* increased 49% to £2.8m (2013: £1.9m)

· Profit before Tax increased 33% to £2.3m (2013: £1.7m)

· Cash balances now stand at £7.6m (31 July 2013: £6.6m, 31 January 2013 £8.5m)

· Interim dividend of 0.35p per share proposed - an increase of 17% on last year

· Full year results expected to exceed current market forecasts

Operational Highlights:

· Five year extension of Framework Agreement for Remote Condition Monitoring ('RCM') technology, resulting in initial order of £2.2m

· Trading in RCM remains very strong outside of the Framework Agreement

· US pilot underway with major Class 1 railroad for RCM technology

· Integration of Sky High Technology (previously Sky High plc) completed and the business is performing well

· Consultancy and software trading buoyed by a return to UK rail re-franchising activity.

John McArthur, Chief Executive Officer, commented:

"We are very pleased to be reporting another period of strong growth with both revenues and profit significantly ahead of the same period last year. Our technology and services remain as relevant as ever, with the past six months seeing a marked increase in demand across all areas of our business. Our sales pipeline remains strong with promising opportunities, including a North American pilot for our RCM technology and further UK and overseas opportunities.

"The enlarged Group now includes Sky High Technology, which was acquired in April 2013 and we have since realised key synergies and the business has performed well. The Group also remains committed to a strategy of careful acquisitive growth and has continued to evaluate a number of opportunities in the period.

"I am pleased to report that the Board is confident of exceeding current market expectations for the full year and looks forward to continuing to drive growth and value for shareholders."

Enquiries:

Chief Executive Officer's Report

Business Summary

The enlarged Group has continued to make good progress in the first half of the new financial year, with all areas of the business making good contributions with the full year outturn expected to exceed current market expectations.

Software

The majority of renewals take place in the second half of the financial year and of those annual renewals scheduled to take place thus far, all have successfully renewed. The Group was also successful in cross-selling the TRACS Roster product into its existing client base and achieving further sales to franchise bidders.

Consultancy and services

The Group's consultancy team has worked extensively on franchise bid work, including work with transport owning groups on bids such as Essex Thameside, Thameslink, Crossrail and DLR. This intensive work requires a mix of consultancy and software expertise which has buoyed trading across both of these areas of business. Post period end we have been engaged on the re-franchising work with the ScotRail and East Coast which are scheduled to complete in the second half of this financial year. We recognise the importance of having a balanced portfolio of consultancy projects to mitigate against delays or volatility and have sought to maximise the opportunities offered by franchise bid work whilst simultaneously pursuing other business development opportunities.

Data capture and passenger counting

This division has made a significant contribution to Group revenues in the year, largely due to the impact of trading via the newly acquired Sky High Technology ('Sky High') which completed in April 2013. The existing Tracsis Passenger Counts business performed well compared to last year, whilst Sky High's contribution to the Group was £4.8m. Since the delisting of this business, management has focused on leveraging the Group's balance sheet and a network of transport related clients to maximise revenue and profits.

Business integration is now complete and Sky High continues to work closely with the existing Tracsis Passenger Counts division to share staff resources, technology and post survey processing capabilities. In the fullness of time this should lead to further economies of scale, margin improvement, and an enhanced service offering for our clients both here in the UK and abroad.

Condition monitoring technology

The Group is pleased with the progress of this division, which secured an extension to a major Framework Agreement for a further five years, providing a solid platform for growth. As previously announced, a significant initial order was received under this Framework Agreement for £2.2m. Demand for the divisions products outside the Framework Agreement has been encouraging, with a steady flow of orders and new sales in Ireland.

As anticipated, revenues from this part of the Group were slightly adverse to last year due to the timing of orders received and Framework Agreement renegotiations with the Group's largest customer, however, the Board remains confident that the second half of the year will be comparably stronger. The Group won a new pilot trial in North America with a Class 1 railroad i.e. typically a railroad with carrier revenue of at least $500m and this is currently underway. Over the coming months the Group's installed technology will be monitored and a further announcement will be made in due course pending completion of the trial and an understanding of next steps.

Acquisitions and deal flow

The Group continues to actively source and appraise new opportunities that meet with the investment criteria of the Board. During the past six months multiple opportunities were assessed and the Directors believe the opportunity for further accretive growth via acquisition remains as positive as ever.

Overseas

Sky High's overseas business made a good contribution to revenues in the period albeit within Australia's challenging economic environment. We now have new staff on the ground that are tasked with expanding our product and service offering to include consultancy, software and RCM within this geography. The Group believes Australia represents a good opportunity for further organic and acquisitive growth and hopes to announce further progress in the coming year.

Dividend

The Group is committed to following the progressive dividend policy that was adopted two years ago. The Directors propose an interim dividend of 0.35p per share, which is an increase on the 0.30p (+17%) paid for the corresponding period last year. The dividend will be paid on 11 April 2014 to shareholders on the register on 28 March 2014.

Board changes

Sean Lippell was appointed to the Board on 1 November 2013. A former Managing Partner within the corporate division of law firm Addleshaw Goddard, Sean brings a wealth of commercial and legal experience to Tracsis and we are pleased to have him on board. The Group continues its extensive search for a new Non-Executive Chairman. Over the past months Management has been in discussions with several high calibre candidates and hope to be able to announce completion of this appointment in the coming months ahead of year end

Income statement

A summary of the Group's results is set out below, which illustrates continued growth on the same period last year at all levels.

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

Sales revenue is analysed further below:

* A high element of consultancy revenue is derived from the use of our software products.

Balance sheet

The Group continues to enjoy a very strong balance sheet, with no external borrowings. Cash generation remains strong, although the requirements of the enlarged Group for working capital and funding growth have increased. Cash balances have increased further by £1,040,000 in the period, from £6,571,000 at 31 July 2013 to £7,611,000 at 31 January 2014 with the principal elements of the movement being:

Outlook

The second half has started well and the full year outturn is now expected to exceed current market expectations. The Directors are confident of achieving further progress in the second half of the year, given future work flow scheduling and the strength of the sales pipeline. A number of exciting opportunities are being evaluated and 2014 looks set to be a great year for Tracsis as its overseas strategy is accelerated. As always, we are grateful to the support of our team, our customers, suppliers and shareholders in helping us achieve our objectives and position ourselves for further growth in the months ahead.

Tracsis plc

Condensed consolidated interim income statement

For the six months ended 31 January 2014

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

Tracsis plc

Condensed consolidated interim balance sheet

As at 31 January 2014

Tracsis plc

Consolidated statement of changes in equity

For the six months ended 31 January 2014

Tracsis plc

Condensed consolidated interim statement of cash flows

for the six months ended 31 January 2014

Notes to the consolidated interim report

For the six months ended 31 January 2014

1 Basis of preparation

Tracsis plc (the 'Company') is a company domiciled in England. The condensed consolidated interim financial report of the Company as at and for the six months ended 31 January 2014 comprises the Company and its subsidiaries (together referred to as the 'Group'). The principal activity of the group is solving a variety of data capture, reporting and resource optimisation problems along with the provision of a range of associated professional services for passenger transport industries (see note 4).

The condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended 31 July 2013, which have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union.

The interim financial information for each of the six month periods ended 31 January 2014 and 31 January 2013 has not been audited and does not constitute statutory accounts within the meaning of section 435 of the Companies Act 2006. The information for the year ended 31 July 2013 does not constitute statutory accounts within the meaning of section 435 of the Companies Act 2006, but is based on the statutory accounts for that year, on which the Group's auditors issued an unqualified report and which have been filed with the Registrar of Companies.

The principal risks and uncertainties are unchanged for the remainder of the financial year, and are as disclosed on page 7 of the Annual Report & Accounts for the year ended 31 July 2013.

In summary, they are as follows:

· Government spending;

· Loss of key customers;

· Competition;

· Industry ownership, structure and franchise bidding process;

· Attraction and retention of key employees;

· History of intellectual property and associated risks;

· Market acceptances and customer contracts; and

· Product obsolescence

Further detail on each risk is provided in the Annual Report & Accounts for the year ended 31 July 2013.

The condensed consolidated interim financial information was approved for issue on 17 March 2014.

2 Accounting Policies

The accounting policies applied by the Group in these interim financial statements are the same as those applied by the Group in its audited consolidated financial statements for the year ended 31 July 2013 and which will form the basis of the 2014 Annual Report except as described below. The basis of consolidation is set out in the Group's accounting policies in those financial statements.

The preparation of the interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Estimates and judgements are continually evaluated and are based on historical experience and other factors, such as expectations of future events and are believed to be reasonable under the circumstances. Actual results may differ from these estimates. In preparing these interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those applied to the audited consolidated financial statements for the year ended 31 July 2013.

3 Changes in accounting policies

The following amendments to financial reporting standards were adopted from 1 August 2013, the start of the new financial year. None of them have had a significant impact on the Group:

· Amendment to IFRS 7: Financial Instruments Disclosures - Offsetting Financial Assets and Financial Liabilities

· IFRS 10: Consolidated Financial Statements

· IFRS 11: Joint arrangements

· IFRS 12: Disclosure of Interests in Other Entities

· IFRS 13: Fair Value Measurement

· Amendment to IAS 1: Presentation of Financial Statements - comparative periods

· Amendment to IAS 16: Property, Plant and Equipment - servicing equipment

· Amendment to IAS 19: Employee Benefits - post employment benefits and termination benefits projects

· IAS 27: Separate Financial Statements

· IAS 28: Investments in Associates and Joint Ventures

· Amendment to IAS 32: Financial Instruments Presentation - tax effect of equity dividends

· Amendment to IAS 34: Interim Financial reporting - interim reporting of segment assets

4 Segmental analysis

The Group's revenue and profit was derived from its principal activity which is the solving a variety of data capture, reporting and resource optimisation problems along with the provision of a range of associated professional services.

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.

Following the acquisition of Sky High plc in the previous year, the Group has represented the way revenues are presented. Some of the revenue in respect of the Group's existing passenger counting operations prior to the Sky High acquisition have been reclassified in the January 2013 comparatives.

A geographical analysis of revenue is provided below:

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.

5 Earnings per share

Basic earnings per share

The calculation of basic earnings per share for the Half Year to 31 January 2014 was based on the profit attributable to ordinary shareholders of £1,715,000 (Half Year to 31 January 2013: £1,312,000, Year ended 31 July 2013: £2,104,000) and a weighted average number of ordinary shares in issue of 25,536,000 (Half Year to 31 January 2013: 24,847,000, Year ended 31 July 2013: 24,982,000), calculated as follows:

Weighted average number of ordinary shares 

In thousands of shares

Diluted earnings per share

The calculation of basic earnings per share for the Half Year to 31 January 2014 was based on the profit attributable to ordinary shareholders of £1,715,000 (Half Year to 31 January 2013: £1,312,000, Year ended 31 July 2013: £2,104,000) and a weighted average number of ordinary shares in issue after adjustment for the effects of all dilutive potential ordinary shares of 26,647,000 (Half Year to 31 January 2013 25,911,000, Year ended 31 July 2013: 25,827,000):

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

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

6 Seasonality

The Group offers a range of products and services within its overall suite, meaning that revenues can fluctuate depending on the status and timing of certain sales. Some of these are exposed to high levels of seasonality: for example the data capture and counting revenues are derived from work taking place at certain times of the year, and revenues from condition monitoring are also driven by the size and timing of significant orders received from major customers. Similarly, the timing of software licence renewals and new sales along with consultancy offerings can also impact on when work is performed, revenues are delivered and therefore recognised. As such, the overall Group remains exposed to a high degree of seasonality throughout the year and reporting period.

7 Dividends

As part of the Group's commitment to a progressive dividend policy adopted in 2012, the Directors recommend an interim dividend payment of 0.35p per share, with a total value of £89,378 based on the number of shares in issue at the date of this interim report.

The cash cost of the dividend payments made is shown below:

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

8 Related party transactions

The following transactions took place during the year with other related parties:

Group

Leeds Innovation Centre Limited is a company which is connected to The University of Leeds. Tracsis plc rents its office accommodation, along with related office services, from this company.

Statement of Directors' Responsibilities

The Directors confirm to the best of their knowledge that:

i) The condensed consolidated interim financial information has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the European Union; and

ii) The interim management report includes a fair review of the information required by the FSA's Disclosure and Transparency Rules (4.2.7 R and 4.2.8 R).

Financial statements are published on the Group's website in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Group's website is the responsibility of the Directors. The Directors' responsibility also extends to the ongoing integrity of the financial statements contained therein.

The Directors of Tracsis plc and their functions are listed below.

Further information for Shareholders