Acquisition

RNS Number : 3541Z

Tracsis PLC

18 July 2008

 



Embargo for release 7.00 am 18 July 2008

TRACSIS PLC

Proposed acquisition of RWA Rail Limited

Proposed placing of 373,832 new Ordinary Shares at 53.5p per share

Re-admission of the Existing Ordinary Shares and admission of the Consideration Shares and the Placing Shares to trading on AIM

Notice of General Meeting

Tracsis plc ('Tracsis' or the 'Company'), the provider of labour resource optimisation software for the transport sector, is pleased to announce that it has entered into an agreement to acquire the entire issued share capital of RWA Rail Limited ('RWA' or 'RWA Rail'). RWA is a provider of consultancy services to the rail sector, focusing on operational and strategic planning and will enable the group to provide a wider range of projects to a more diverse client base in the rail sector. 

The Company is also pleased to announce a placing to raise £200,000 by the issue of 373,832 new Ordinary Shares at 53.5p per share to satisfy institutional demand. The net proceeds of the Placing, being £194,000, will further increase the cash resources available to the Enlarged Group for working capital and possibly further acquisitions. 

The Acquisition and Placing are conditional upon the approval of Shareholders at the GM.

ACQUISITION HIGHLIGHTS:

•     RWA is a specialist provider of consultancy services to the rail sector focusing on operational and strategic  
      planning.
•     Robert Watson, founder and Managing Director of RWA Rail, will join the board of Tracsis as Chief Operating
      Officer.

•     RWA generated revenue of £1,019,000 in the year ended 31 March 2008 resulting in EBIT of £293,000.

•     RWA will strengthen the Enlarged Group's position within the rail sector.

•     An initial cash consideration of £580,000 and the issue of 1,084,113 new    
     Ordinary  Shares, subject to an adjustment mechanism depending on the net assets of RWA on Completion. 
•     Deferred consideration of up to £145,000 in cash and up to 271,029 Deferred Consideration Shares may be
      payable, subject to satisfaction of certain performance criteria following the Acquisition. 
•     In view of the size of the Acquisition, in relation to the Company, the Acquisition constitutes a reverse
      acquisition under the AIM Rules.

•     It is expected that dealings in the shares of the Enlarged Group will become effective on 5 August 2008.

TRADING UPDATE

The board is also pleased to announce today that given the visibility of revenue under contract, the Board believes that revenue for the year to 31 July 2008 will be approximately £800,000 for the existing Tracsis business.

John McArthur, Tracsis CEO, Commented: 

'Tracsis and RWA operate within the same sector and have a similar customer profile. Our vision remains as before: to become a leading provider of operational planning software and consultancy services within the rail market, with the ultimate aim of providing these services to global transport markets. Today's announcement is a step towards this vision. I welcome Robert to the Board of Tracsis and look forward to working with him and his team.' 

Robert Watson, Commented;

'Tracsis has what I believe to be unique resource optimising software; the Enlarged Group will be better able to exploit the capabilities of this software, as well as developing further the strategic and operational planning business of RWA Rail.'

Enquiries: 

Tracsis plc    0845 125 9162

John McArthur

Haggie Financial    020 7417 8989

Nicholas Nelson

Kathy Boate

Zeus Capital    0161 831 1512

Alex Clarkson

Ross Andrews

Bobby Fletcher

INTRODUCTION 

The Company announces that it has entered into an agreement to acquire the entire issued share capital of RWA Rail Limited for an initial cash consideration of £580,000 and the issue of the Consideration Shares, subject to adjustment depending on the net assets of RWA on Completion. In addition, deferred consideration of up to £145,000 in cash and up to 271,029 Deferred Consideration Shares may be payable, subject to the satisfaction of certain performance criteria following the Acquisition. 

The Company also announces a placing to raise £200,000 by means of the issue of the Placing Shares at the Placing Price in order to satisfy institutional demand. Further details of the Placing are set out in this announcement and the Admission Document.

In view of the size of the Acquisition, in relation to the Company, the Acquisition constitutes a reverse takeover under the AIM Rules and, as such, is conditional upon the re-admission of the Existing Ordinary Shares and admission of the Consideration Shares to trading on AIM and the publication of an admission document. In addition, the Acquisition also requires the approval of Shareholders. Accordingly, a General Meeting is being convened on 4 August 2008 at which Shareholders will be asked to approve the Acquisition. If the resolution is approved by Shareholders, it is expected that Admission will take place, and that dealings on AIM will commence, on 5 August 2008. The Placing is conditional upon completion of the Acquisition.

Provided that the resolution is approved, the approval of Shareholders is not required to issue the Consideration Shares or the Placing Shares as the Company already has sufficient shareholder authorities in place to issue such shares. However, in order to give the company flexibility going forward shareholders will also be asked to grant the Directors authority to allot Ordinary Shares up to an aggregate nominal value of £25,282 being equivalent to one third of the Enlarged Issued Share Capital and to disapply statutory pre-emption rights in relation to 15 per cent. of the Enlarged Issued Share Capital.

The admission document in relation to the proposed Acquisition, Placing, Admission and General Meeting (the 'Admission Document') has been posted to shareholders today and is available on the Company's website www.tracsis.com. 

BACKGROUND TO AND REASONS FOR THE ACQUISITION 

Tracsis was incorporated in January 2004 to commercialise resource optimisation software that assists with automating the process of labour scheduling for passenger rail and bus companies in the transport sector. 

In November 2007, the Company's Ordinary Shares were admitted to trading on AIM and £2 million, before expenses, was raised by way of a placing of new Ordinary Shares. 

RWA provides consultancy services to the rail sector, focussing on operational and strategic planning. It is engaged in timetable, resource planning and performance modelling assignments for customers operating within the rail industry. 

The Board believes that the acquisition of RWA Rail is likely to result in the following synergies and growth opportunities within the Enlarged Group: 

•     the addition of new services to those currently offered by Tracsis; 
•     the provision of additional labour resource and the appointment of Robert Watson to the Board of the Company; 
•     an increase in the client base; and, 
•     the strengthening of the Enlarged Group's market position within the rail sector. 

TERMS OF THE ACQUISITION 

The Company has conditionally agreed to acquire the entire issued share capital of RWA Rail from its sole shareholder, Robert Watson. 

The initial consideration payable comprises cash consideration of £580,000 and the Consideration Shares at the Consideration Share Price. The cash amount payable will be adjusted on a pound for pound basis if the Net Asset Value at Completion exceeds or falls below £450,000, subject to a cap to the adjustment of £350,000 if the Net Asset Value is above £450,000. The full adjustment may be payable, due to a period of strong trading by RWA Rail since its 31 March 2008 year end.

Deferred consideration of up to £290,000 is payable subject to; (a) RWA achieving EBITDA of not less than £280,000 for the 12 month period following Completion; or (b) the Enlarged Group achieving EBITDA of not less than £700,000 for the year ended 31 July 2009. If either of these conditions are not met, and RWA achieves EBITDA of less than £100,000, the deferred consideration will be nil. If RWA achieves EBITDA of between £100,001 and £279,999, the deferred consideration will be equal to £16.11 for every £10.00 of EBITDA in excess of £100,000 for the 12 month period following Completion. 

The Deferred Consideration will be satisfied as to 50 per cent. in cash and 50 per cent. by the issue of the Deferred Consideration Shares at the Consideration Share Price. 

The cash will be financed out of the Company's existing cash resources. At 31 January 2008, being the date of the unaudited interim results, the Company had cash and cash equivalents of £2.268 million. 

THE PLACING

The Company proposes to raise approximately £200,000, before expenses, by the allotment and issue of 373,832 new Ordinary Shares at the Placing Price pursuant to the Placing. The Placing Shares will represent approximately 1.97 per cent. of the Enlarged Issued Share Capital of the Company immediately following Admission.

Pursuant to the Placing Agreement, Zeus Capital has conditionally agreed to place, with institutional investors, the Placing Shares at the Placing Price to satisfy demand for Ordinary Shares. The net proceeds of the Placing being, £194,000, will further increase the cash resources available to the Enlarged Group for working capital and possibly, further acquisitions.

The obligations of Zeus Capital under the Placing Agreement are conditional, inter alia, on:

    the Placing Agreement becoming or being declared unconditional in all respects and not being terminated in accordance with its terms before 8.00 a.m. on 5 August 2008 (or such later time and/or date, being not later than 8.00 a.m. on 12 August 2008, as Zeus Capital may agree); and

    Admission.

Application will be made to the London Stock Exchange for the re-admission of the Existing Ordinary Shares and the admission of the Placing Shares and the Consideration Shares to trading on AIM. It is expected that Admission will become effective, and dealings in the Enlarged Issued Share Capital will commence, on 5 August 2008.

INFORMATION ON TRACSIS

Background

Tracsis owns resource optimisation software that assists with automating and optimising the process of labour scheduling for passenger rail and bus services in the transport industry, and has contracts in place with major operators within the rail and bus industries.

Tracsis was incorporated in January 2004 to commercialise resource optimisation software developed at the University of Leeds. Its shareholders include the University of Leeds and Techtran, a company which specializes in developing the commercial potential of intellectual property developed at the University. Techtran is a wholly owned subsidiary of IP Group plc, a company listed on the main market of the London Stock Exchange. Tracsis' share capital was admitted to trading on AIM on 27 November 2007 following a fundraising of £1.58 million, net of expenses.

Historically, labour scheduling for transport operators has been a complicated process which has required a high degree of manual input. This activity requires consideration of a number of variables such as:

·          working time regulations;

·          the timetabled movements of vehicles;

·          existing resource levels;

·          route knowledge – in the rail industry, it is standard practice that drivers can only drive on pre-agreed

·          routes for which they have had training; and

·          traction knowledge – in the rail industry, drivers can only drive locomotives for which they hold valid

             certification. 

Many of these variables are subject to change through unforeseen factors such as engineering problems, breakdowns and adverse weather conditions, which further exacerbate the challenge faced by transport operators in trying to achieve an efficient allocation of labour.

The Tracsis Software is based on software developed at the University of Leeds after extensive research into labour scheduling problems within the transport industry dating back to the 1970s. The Tracsis Software has the ability to reduce the number of labour resources required to service a given transport network, reduce the level of back office planning resources and shorten planning timescales. The Tracsis Software also enables users to model a variety of contingency scenarios which can assist, for example, with franchise bidding and strategic planning. It can also be used as a negotiation tool between operating companies and labour unions.

The Tracsis Software

The Tracsis Software currently forms the basis of two distinct products; TrainTRACS and BusTRACS. Each product assists with the crew planning element of the transport scheduling process for passenger rail and bus operators respectively. A number of broad categories make up the transport scheduling process; timetable preparation; vehicle planning and allocation; crew planning; crew rostering; and management of real time operations and short term planning, taking account of accidents or other unforeseen events impacting on operations. The Tracsis Software, designed to operate on a stand alone personal computer, generates an optimised crew schedule for all on-board staff based upon certain input data such as labour rules and regulations, timetable and vehicle requirements and driver route and traction knowledge. Once the Tracsis Software has been configured, it generates a set of optimal, or near optimal, labour workforce schedules.

The Tracsis Software can be tailored for individual strategic requirements, such as maximising performance and minimising costs. It may also derive cost savings via improved performance of scheduled services, which in turn may reduce the fiscal penalties imposed by regulators (such as the Department of Transport in the case of rail operators) for delayed services.

Revenue is generated by lease licensing the software to customers. In addition to the core Tracsis Software, the Company also provides maintenance, training and consultancy services to its customers.

The Company has focussed on crew optimisation and therefore relies on the Tracsis Software to generate revenue. Whilst the Tracsis Software can be used in the rail and bus industries, the Company has, to date, predominantly focussed on the rail sector.

INFORMATION ON RWA RAIL

Background

RWA provides consultancy services to the rail sector, focussing on operational and strategic planning. The business is engaged in timetable development, performance modelling and resource planning assignments for customers operating in the rail industry and its service offering involves harnessing the skills of its employees in rail operation and strategic planning matters.

The Board believes that the services provided by RWA can lead to operational and financial benefits to its customers, including:

·                  improvements in key performance indicators (such as delay minutes);

·                  reductions in the costs associated with resource planning;

·                  assistance with infrastructure investment decisions; and,

·                  meeting franchise bid timetable requirements.

RWA is based in Loughborough and employs 18 staff.

Principal Service Offerings

Timetabling and Performance Modelling

RWA undertakes a range of modelling based activities for the rail industry, including;

·                  Timetable development - using Railsys software, timetable development involves the creation of timetables to 

                    meet specifications from customers for train services in terms of journey time, stopping pattern, and frequency;

·                  Timetable performance modelling - timetable performance modelling is the process of assessing the robustness

                   of timetables using simulation techniques, also utilising Railsys software; and,

·                  Resource planning - RWA utilises TrainTRACS software to create on board crew schedules that meet labour

                    constraints / parameters set by the customer.

Franchise Bid Support

RWA provides a range of franchise bid support services, including timetabling, rolling stock planning, train crew diagramming using TrainTRACS software, and timetable performance modelling and has been involved in seven recent TOC franchise bids. The franchise work has provided an opportunity for ongoing involvement with the relevant TOCs. Rail franchises are typically awarded on a 7-10 year basis, with break clauses for breach or poor performance. As each bid must be compiled and submitted within a limited time period and the software can be used in a variety of ways to meet the timetabling and resource planning requirements of the bid; TrainTRACS software for instance can be used to develop specific labour requirements which would be difficult to complete manually given the timescale.

Further Offerings

Further schemes include a range of projects, such as demand modelling, ‘value for money’ studies and mediation between industry parties on contractual and timetabling issues.

EXISTING MARKETS AND CUSTOMERS

Tracsis and RWA operate within the same sector and have a similar customer profile. Existing customers of the Enlarged Group can be broadly categorised in the following way:

Train Operating Companies

TOCs are responsible for running regional and national rail networks. Since the privatisation of the UK rail industry, UK passenger franchises are awarded on a tender process by the Department of Transport.

Tracsis generates the majority of its revenue from the passenger rail industry, and in particular, the TOCs. Tracsis has identified 20 major passenger TOCs and several freight rail operators within the UK as potential customers. At present, Tracsis have contractual relationships with 8 of these. A large proportion of Tracsis’ revenue is under software licensing contracts which the Directors consider to be a reliable source of visibility on future revenue. Tracsis currently utilises the Tracsis Software to support the bidding activities of transport operators when tendering for new rail franchises.

Pilot schemes are also developed for Tracsis’ potential customers on a short term, low-cost basis and have proven to be an effective method of engaging customers on a longer term contract once the benefits of the Tracsis Software have been demonstrated.

RWA services the rail industry and has maintained a number of customers since inception through franchise bid support consultancy and timetable and performance modelling. In addition, RWA’s existing customer base provides a source of general consultancy revenue, on a project by project basis.

RWA has recently expanded its activities into overseas passenger rail markets and is currently undertaking work in relation to an overseas franchise bid and is hopeful of further overseas franchise bid assignments. Consultancy work has also been performed with UK freight rail market participants. The Board believes that there is further opportunity to work with overseas customers.

In addition to targeting new customers, the Board believes there is scope to enhance revenue generated from the existing customer base by enhancing the current software offering.

Rail Industry Entities

RWA also works with the Department for Transport, Network Rail and the Association of Train Operating Companies, as well as larger rail consultancies.

Bus Companies

Tracsis works with a major UK bus company with over 9,000 buses operating across a number of locations, which utilise the Company’s BusTRACS software for crew scheduling. Although at present it is the Board’s intention to dedicate the majority of the Company’s resources towards its operations within the rail industry, the Board believes that there will be opportunities in the future to expand further into the bus market.

VISION, PRODUCT AND SERVICE DEVELOPMENT, COMPETITION AND NEW MARKETS

Vision

The Company’s current vision is to become a leading provider of operational planning software and consultancy services within the rail market, with the ultimate aim of providing these services to global transport markets.

Product Development

The Tracsis Software deals predominantly with solving the issue of efficient labour resource allocation. The Directors believe that there is a potential market for optimising the movements of vehicles and the rostering of labour resources in the transport industry, and is investing in the development of a rostering tool.

Service Development

Given the renewal process involved with transport operators tendering for new rail franchises, the Board are of the opinion that revenue from bid support work will continue to be an important part of the Enlarged Group’s business.

The Board also believes that potential exists for offering timetabling and performance modelling services to Tracsis’ customers as an extension of their current product offering, thereby generating further revenue.

Competition

The Board are of the opinion that there is little direct competition to the Company’s current product offering for the UK rail market. The Board also believes that unless a TOC is using the Tracsis Software for labour scheduling optimisation, they are generally undertaking this process manually. For other transport markets, the Directors believe that other competitive offerings exist.

In respect of RWA’s product offering, the Board believes that although competitors exist, threats from competitors are mitigated by the following barriers to entry:

·                  the expertise and contacts developed by Robert Watson during his 23 years operating within the UK rail

                   industry;

·                  the skills available to RWA via its employee base and the ability to meet client needs in the area of strategic

                    and operational planning; and,

·                  the time required to train and develop a team of experts in this field.

New Markets

The Board believes that the Tracsis Software is suited to other transport sectors such as passenger airlines and rail freight, both of which have similar dynamics and the Company is exploring a number of opportunities in these sectors. The Company currently services a limited number of UK bus companies and believe that there is further scope for expansion into this area.

RWA has recently expanded into overseas passenger rail markets and, the Board also believes that there are further opportunities in overseas markets, including overseas franchise bid assignments due to the international presence of its customer base

INTELLECTUAL PROPERTY

The Company has focused on crew optimisation and therefore relies on the Tracsis Software to generate revenue. The Tracsis Software can be used in the rail and bus industries but the Company has focused predominantly on the rail sector to date.

The Company also has a right to use BOOST, vehicle optimisation software relating to the bus industry. The Tracsis Software and BOOST were both developed at the University and the Company has a right to exploit these products commercially pursuant to the terms of a licence from University of Leeds IP Limited, ULIP, which in turn has a licence from the University. The Company was granted a licence in June 2005 to commercially exploit the Tracsis Software and BOOST. The University assigned all its rights in the Tracsis Software and BOOST to the Company when the Company was admitted to AIM in November 2007. The University at that time warranted to the Company that save in relation to the allegations made by a third party (the “Third Party Purchaser”) alleging that certain aspects of the Tracsis Software and BOOST incorporated elements of Busman (the details of which are set out below), the University has not received any claim or notification that the Tracsis Software or BOOST breaches the intellectual property rights of a third party.

As with many software products, there have been previous challenges to the IP rights in the Tracsis Software and BOOST. In 1998, an allegation was made by a third party that certain aspects of the Tracsis Software and BOOST breached the copyright of that third party in a software product known as Busman. Busman was developed with the help of the University of Leeds Innovations Limited, ULIS, and sold to the third party in 1994.

Following an exchange of correspondence and a meeting between ULIS and the third party, ULIS agreed to amend extracts from its marketing literature and web pages that incorrectly suggested a connection between the products. No further action was taken and the Company believes that Busman may have been sold to a further third party.

The Company is of the opinion that neither the Tracsis Software nor BOOST infringe any of the copyright in Busman and have obtained the opinion of Counsel confirming that, on the balance of probabilities, any claim could be successfully defended.

Further details of the intellectual property and the above claim are set in the Admission Document.

RWA utilises licences to use Railsys in order to carry out timetable and performance modeling services. It currently has seven such perpetual licences and one temporary licence.

SUMMARY FINANCIAL INFORMATION

The information set out in the table below has been extracted from the historical financial information on Tracsis plc included in the Admission Document. Shareholders should read the full report and not rely solely upon the summary below:

	Year ended 31 July 2005 £’000	Year ended 31 July 2006 £’000	6 months ended 31 January 2007 £’000	Year ended 31 July 2007 £’000	6 months ended 31 January 2008 £’000
Revenue	216	500	257	742	271
EBIT	134	254	116	407	14
PAT	111	215	96	330	19

The financial information set out in the table below has been extracted from the historical financial information on RWA, included in the Admission Document. Shareholders should read the full report and not rely solely upon the summary below:

			Year ended 31 March 2006 £’000	Year ended 31 March 2007 £’000	Year ended 31 March 2008 £’000
Revenue			744	1,257	1,019
EBIT			284	480	293
PAT			232	369	240

CURRENT TRADING AND PROSPECTS

Tracsis

On 28 April 2008, the Company announced its interim results for the six month period ended 31 January 2008.

Revenue for the six months ended 31 March 2008 was £271,000 (2007: £257,000) and the profit for the period was £19,000 (2007: £96,000) after including £89,000 of exceptional and associated costs relating to the Company’s admission to AIM in November 2007.

The Board has prepared unaudited management accounts for the 11 months to 30 June 2008, being the last practicable period for which management accounts could be prepared prior to the date of the Admission Document. Revenue for the period was £709,000.

Given the visibility of revenue under contract, the Board believes revenue for the year to 31 July 2008 will be approximately £800,000.

RWA Rail

In the year ended 31 March 2008, RWA reported revenue of £1,019,000 and a profit before tax of £240,000. Since 31 March 2008, dividends of £20,000 have been paid by RWA Rail.

Prospects for the Enlarged Group

The Directors believe, due to the complementary skills and experience of each entity, the Enlarged Group should be able to undertake a wider range of projects from a more diverse client base (both UK and overseas) and that the addition of RWA will assist with a more rapid roll-out of the TrainTRACS software to domestic (UK) rail operators. Furthermore, the Directors believe prospects for the Enlarged Group remain strong and view the future with confidence.

DIRECTORS AND THE PROPOSED DIRECTOR

Brief summaries of the biographies of the Directors are set out below:

Current Directors

John Cameron McArthur (aged 33) Chief Executive Officer

John has been the Chief Executive Officer of Tracsis since the formation of the Company in January 2004. Prior to this he worked as an investment manager with Techtran, which specialises in developing the commercial potential of intellectual property developed at the University. John also worked for several years with Axiomlab plc, a technology venture capital company, having started his career with Arthur Andersen & Co. He holds a first class degree in Management Science from the University of Strathclyde in Glasgow.

Dr. Raymond Kwan (aged 50) Chief Technical Officer

Raymond is the Chief Technical Officer of Tracsis. He has a PhD in computer science and has dedicated his career to researching complex scheduling problems within the transport industry. Prior to the incorporation of Tracsis, Raymond worked as a senior lecturer within the School of Computing at the University, where he continues his research on a part time basis. Raymond has written a number of research papers published in journals covering driver scheduling.

Jay Darren Bamforth (aged 39) Finance Director

Darren graduated from the University of Bradford with a degree in Business Studies. He qualified as a Chartered Accountant with KPMG, becoming a Senior Manager in 1998. Whilst at KPMG, Darren was responsible for managing a portfolio of audit and accountancy clients. In 2002, he left KPMG to establish his own business advisory practice which specialises in supporting early stage and growing companies. Darren is engaged on a part time basis, until such time that the size of Tracsis demands a full time Finance Director.

John Graeme Nelson (aged 61) Non-Executive Director

John is currently Chairman of First Class Partnerships; a strategic consultancy business which services the UK rail industry and is the ‘Operator of Last Resort’ for the Department for Transport. Prior to this, John was the Chief Executive of Network South East, and also headed up the Eastern Region of British Rail. John has also served as Director of Laing Rail Limited, who operate Chiltern Railways, and has served on the Board of South Eastern Trains and Hull Trains.

Charles Stephen Winward (aged 38) Non-Executive Director

Charles is an Investment Manager at IP Group plc, a company which holds shares in Tracsis through Techtran and IP Venture Fund. Charles joined IP Group in April 2007 to manage investments in Top Technology Ventures Limited, the IP Group plc’s venture capital fund management subsidiary. Previously Charles was Vice President of Technology Infrastructure at JP Morgan Chase & Co, where he worked in a variety of roles in London, New York and Brussels, and an investment manager at Axiomlab plc. Charles has an MBA from the University of California at Berkeley and a Bachelors Degree in mechanical engineering from the University of Bristol.

Rodney Desmond Jones (aged 56) Non-Executive Chairman

Rod has held a number of senior management roles in several different technology companies including: European Vice President at Cincom Systems Inc., International Director of Western Data Systems Inc. and President of NASDAQ listed Ross Systems Inc. He is currently Chief Executive Officer of Proactis plc, an AIM quoted provider of spend control software.

Proposed Director

Immediately prior to Admission, Robert Watson will join the Board, and a brief summary of his biography is outlined below:

Robert Peter Watson (aged 49) Chief Operating Officer

Robert is the founder and chief executive of RWA Rail. Before its inception in 2004, Robert previously operated as a sole trader under the name Robert Watson Associates. He began his career in the rail sector with British Rail in 1982 having gained an MPhil in Management Studies from Oxford University. After management roles within British Rail and the Boots Company, Robert moved to Railtrack (now Network Rail) in 1994 where he subsequently became the Head of Operational Planning. As part of this role he was involved in the company’s flotation on the London Stock Exchange in 1996, before going on to consult to the Strategic Rail Authority, playing a leading role in the development of UK capacity utilisation policies and route utilisation strategies. Robert is a visiting lecturer in transport at Loughborough University, and has written for a number of railway-related publications covering timetabling and scheduling.

KEY MANAGEMENT AND EMPLOYEES

Key Management of RWA

Ross Brown (aged 31) Principal Consultant

Ross has worked for RWA for over five years and is experienced in the software RWA use for timetabling and performance modelling. He is responsible for refranchising timetabling and simulation work and the project management of major assignments. Ross acts as the project manager for RWA’s major assignments.

Steve Brown (aged 30) Principal Consultant

Steve joined RWA in early 2005 from another company involved in rail consultancy where he spent four years as a project manager and consultant. He is a specialist in the use of simulation and other software tools for performance modelling, analysis of data and timetable planning. Steve gained a masters degree with distinction in Rail Systems Engineering whilst studying at the University of Sheffield prior to beginning his career in the rail industry.

Hans Kohls (aged 30) Principal Consultant

Hans is an experienced RailSys modeler and software programmer and has considerable network analysis and performance modelling experience. Hans develops tools to manipulate and reformat data, in particular to interface between different systems and to present output in an appropriate way for analysis and presentations. Hans joined the RWA Rail team on completion of his degree at Hanover University.

Employees of the Company and RWA

The Directors and the Proposed Director believe that one of the strengths of both the Company and RWA is the quality and loyalty of its staff. The Company currently has eleven employees, six of whom are directors. RWA currently has eighteen employees, one of whom is a director. These employees and Directors have a range of experience and professional qualifications. Additional employees, however, will be recruited to create the infrastructure necessary for the Enlarged Group to achieve its commercial objectives.

OPTION SCHEME

The Directors recognise the importance of ensuring that employees of the Company are well motivated and identify closely with the success of the Company. To achieve this goal, the Company has established the Option Scheme.

To date, options have been granted to certain members of the Board to acquire Ordinary Shares representing 3 per cent. of the Existing Issued Share Capital. Further details of these options are set out in paragraph 5.5 of Part VI of the Admission Document.

It is also intended that Employee Options will be granted in the future, to qualifying employees and directors, including, where appropriate, EMI Options.

The number of Ordinary Shares pursuant to Employee Options granted under the Option Scheme and under any other scheme whereby the Company shall grant options over its Shares to employees and directors shall not exceed 10 per cent. of the issued share capital from time to time. Further details of the Option Scheme are set out in paragraph 12 of Part VI of the Admission Document.

LOCK IN ARRANGEMENTS

The Restricted Shareholders agreed, in November 2007, that they would not (save in certain specific circumstances) dispose of any of the Restricted Shares for a period of 12 months following the admission of the Company to AIM on 27 November 2007, and thereafter for a further 12 months have agreed only to dispose of shares through the Company’s broker in an orderly manner. Further details of the lock in arrangements are set out in paragraph 9.1(j) of Part VI of the Admission Document.

Under the terms of the Acquisition Agreement, Robert Watson has agreed that he will not dispose of any of the Consideration Shares or Deferred Consideration Shares for a period of 12 months following their issue, and thereafter for a further 12 months has agreed only to dispose of shares through the Company’s broker in an orderly manner.

RELATED PARTY TRANSACTIONS

During the year the Company made purchases amounting to £10,313 (2005 – £28,578; 2006 – £39,865; 2007 – £20,555) from one of its shareholders, the University of Leeds. These related to staff secondment costs. In addition, £10,827 (2005 – £nil; 2006 – £14,331; 2007 – £27,100) was incurred in respect of office rent and running costs paid to a company in which the University of Leeds has an interest. The Company occupies the property known as Suite 4, Leeds Innovation Centre, 103 Clarendon Way, Leeds, West Yorkshire LS2 9DF in accordance with a lease dated 22 February 2006 between the Company and Leeds Innovation Centre Limited.

At 31 January 2008, there were balances totalling £187 (2005: £8,623; 2006 – £4,148; 2007 £2,046) due to the University of Leeds and its associated companies in respect of these transactions.

In addition, purchases amounting to £2,881 (2005 – £25,050; 2006 – £19,506; 2007 – £1,108) were made from another shareholder, Techtran Group Limited. These related to staff secondment costs and office running costs recharged. At 31 January 2008 there were no outstanding balances (2005 – £360;2006 – £360; 2007 – £360), due to Techtran Group Limited.

One of the Company’s directors, Darren Bamforth, is also a director of Atraxa Consulting Limited, a company which provides ongoing accountancy services to Tracsis on an arm’s length basis in its normal course of business. The amount charged by Atraxa to the Company for accountancy services in the 6 months ended 31 January 2008 was £22,858 excluding VAT, which includes one-off costs relating to the Company’s AIM Admission of £19,350.

The above transactions were carried out at a market value on an arm’s length basis.

GENERAL MEETING

A General Meeting is to be held at 11.00 am on 4 August 2008 at the offices of Tracsis plc, Leeds Innovation Building, 103 Clarendon Road, Leeds, West Yorkshire, LS2 9DF at which the Resolution will be proposed to approve the Acquisition for the purposes of Rule 14 of the AIM Rules.

In order to give the company flexibility shareholders will also be asked to grant the Directors further authority to allot Ordinary Shares up to an aggregate nominal value of £25,282 being equivalent to one third of the Enlarged Issued Share Capital and to disapply statutory pre-emption rights in relation to 15 per cent. of the Enlarged Issued Share Capital. However completion of the Acquisition is not conditional upon the passing of these resolutions.

Save for the issue of the Consideration Shares and the Placing Shares, the Directors have no present intention of allotting further shares.

The Directors and other shareholders who hold in aggregate 13,201,927 Ordinary Shares representing 75.42 per cent. of the issued share capital have given undertakings to vote in favour of the Resolutions.

CREST

The Directors have arranged with CRESTCo Limited for the Placing Shares to be admitted to CREST with effect from Admission. Accordingly settlement of transactions in the Placing Shares following Admission may take place within the CREST system, if the relevant shareholders so wish. CREST is a paperless settlement procedure, which allows securities to be evidenced without a certificate and transferred otherwise than by written instrument. The Articles permit the holding and transfer of ordinary shares in the capital of the Company under the CREST system.

CREST is a voluntary system and holders of Placing Shares who wish to receive and retain certificates in respect of Placing Shares will be able to do so.

 

 

DEFINITIONS AND GLOSSARY

The following words and expressions shall have the following meanings in the Announcement, unless the context otherwise requires:

“Acquisition”	the proposed acquisition by the Company of the entire issued share capital of RWA pursuant to the Acquisition Agreement;
“Acquisition Agreement”	the agreement dated 18 July 2008 between (1) Robert Peter Watson and (2) Tracsis plc under which the Company has conditionally agreed to acquire the entire issued share capital of RWA further details of which are set out in paragraph 3 of Part I and paragraph 9.1(a) of Part VI of the Admission Document;
“Act” or “Acts”	the Companies Act 1985, as amended, or as superseded by the Companies Act 2006;
“Admission”	re-admission of the Existing Ordinary Shares and admission of the Placing Shares and the Consideration Shares to trading on AIM becoming effective on the 5 August 2008;
“Admission Document”	the document dated 18 July 2008;
“AIM Rules”	the AIM Rules for Companies published by the London Stock Exchange from time to time governing the admission to and the operation of AIM;
“AIM”	the market of that name operated by the London Stock Exchange;
“Articles”	the articles of association of the Company, as at the date of the Admission Document;
“Board” or “Directors”	the directors of the Company as at the date of the Admission Document and the Proposed Director, whose names appear on page 5 of the Admission Document, and “Director” means any of the Directors;
“BOOST”	vehicle optimisation software relating to the bus industry;
“certificated” or “in certificated form”	an Ordinary Share which is not in uncertificated form;
“Company” or “Tracsis”	Tracsis plc (registered in England and Wales under number 05019106);
“Completion”	completion of the Acquisition;
“Consideration Share Price”	53.5p per Consideration Share;
“Consideration Shares”	the 1,084,113 Ordinary Shares to be issued to the Proposed Director on Completion in accordance with the terms of the Acquisition Agreement;
“CREST”	the relevant system (as defined in the CREST Regulations) for paperless settlement of share transfers and the holding of shares in uncertificated form which is administered by Euroclear UK & Ireland Limited;
“CREST Regulations”	the Uncertificated Securities Regulations 2001 (SI 2001/3755) (as amended);
“Deferred Consideration Shares”	up to 271,029 new Ordinary Shares to be issued to the Proposed Director following the first anniversary of Completion in accordance with the terms of the Acquisition Agreement;
“Deferred Cash Consideration”	up to £145,000 which may be paid, settled in cash to the Proposed Director following the first anniversary of Completion in accordance with the terms of the Acquisition Agreement;
“EBIT”	earnings before interest and tax;
“EBITDA”	earnings before interest, tax, depreciation and amortisation;
“EMI Options”	options granted or to be granted pursuant to the provisions of Schedule 5 ITEPA;
“Employee Options”	options granted by the Company to employees, directors and officers of the Company pursuant to the Option Scheme;
“Enlarged Group”	the Company together with RWA immediately following Completion;
“Enlarged Issued Share Capital”	the Existing Ordinary Shares, the Placing Shares and the Consideration Shares;
“Existing Ordinary Shares”	the 17,503,450 Ordinary Shares in issue at the date of the Admission Document;
“GM” or “General Meeting”	the general meeting of the Company to be held on 4 August 2008, notice of which is set out at the end of the Admission Document;
“GM Notice”	the notice of the GM, set out at the end of the Admission Document;
“Form of Proxy”	the form of proxy included with the Admission Document for use by Shareholders in connection with the General Meeting;
“FSA”	the Financial Services Authority;
“FSMA”	the Financial Services and Markets Act 2000 (as amended);
“ITEPA”	the Income Tax (Earnings and Pensions) Act 2003;
“London Stock Exchange”	London Stock Exchange plc;
“Net Asset Value”	the net asset value of RWA to be determined in accordance with the terms of the Acquisition Agreement;
“Official List”	the Official List of the UK Listing Authority;
“Option Scheme”	a scheme adopted by the Board on 20 November 2007 which provides for the grant of share options (including EMI Options), details of which are set out at paragraph 12 of Part VI of the Admission Document;
“Ordinary Shares”	ordinary shares of 0.4p in the capital of the Company;
“PAT”	profit on ordinary activities after taxation;
“Placees”	those persons who subscribe for the Placing Shares in the Placing at the Placing Price;
“Placing”	the conditional placing of the Placing Shares by Zeus Capital, as agent for the Company, as described in the Admission Document, pursuant to the Placing Agreement;
“Placing Agreement”	the conditional agreement dated 18 July 2008, between (1) the Company, (2) the Directors and Proposed Director and (3) Zeus Capital relating to the Placing, further details of which are set out in paragraph 9.1 (b) of Part VI of the Admission Document;
“Placing Price”	53.5 per Placing Share
“Placing Shares”	373,832 new Ordinary Shares to be issued pursuant to the Placing;
“Prohibited Territories”	USA, Australia, Canada, Japan, the Republic of South Africa and their respective territories and possessions, and any other territories where the publication of the Admission Document would be prohibited by law;
“Proposals”	the Acquisition, the Placing and Admission;
“Proposed Director”	Robert Peter Watson, who will be appointed as a director of the Company on Completion;
“Resolutions”	the resolutions referred to in the GM Notice;
“Restricted Shareholders”	John McArthur, Dr Raymond Kwan, Dr Ann Kwan, Yiyu Chen, Andrew Schwarz, Atraxa Investments Limited, Techtran Group Limited, IP2IPO Nominees Limited, IP Venture Fund and the University;
“Restricted Shares”	the 12,503,450 Ordinary Shares held by the Restricted Shareholders;
“RWA” or “RWA Rail”	RWA Rail Limited (registered in England and Wales under number 05047148);
“Shareholder Resolutions”	the resolutions, inter alia, to approve the transaction set out in the notice of GM, set out at the end of the Admission Document;
“Shareholders”	holders of Existing Ordinary Shares;
“Takeover Code”	the City Code on Takeovers and Mergers;
“Techtran”	Techtran Group Limited (registered in England and Wales under registered number 04544276);
“TOC”	train operating company;
“Tracsis Software”	the resource optimisation suite of software owned by Tracsis, known as TrainTRACS and BusTRACS and other associated modules;
“UK”	the United Kingdom of Great Britain and Northern Ireland;
“UK Listing Authority”	the Financial Services Authority acting in its capacity as a competent authority for the purposes of Part VI of the Financial Services and Markets Act 2000, including where the context so permits any committee, employee or servant of such authority to whom any function of the UK Listing Authority may from time to time be delegated;
“University”	the University of Leeds;
“USA”	the United States of America;
“VAT”	value added tax;
“Zeus Capital”	Zeus Capital Limited (registered in England and Wales under number 4417845).

 

 

 

END

 

 

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