Final Results

RNS Number : 7263F

Tracsis PLC

09 November 2022

 

Tracsis plc

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

Audited results for the year ended 31 July 2022

Tracsis, a leading provider of software, hardware, data analytics/GIS and services for the rail, traffic data and wider transport industries, is pleased to announce its audited final results for the year ended 31 July 2022.

Financial Highlights:

· Strong financial performance with high levels of organic and acquisitive growth

· Revenue increased by 37% to £68.7m (2021: £50.2m)

o  Organic revenue growth of 24%

o  63% revenue growth in Data, Analytics, Consultancy and Events Division, including post-Covid recovery and contribution from acquisitions

o  Rail Technology and Services Division revenue increased by 13% including the benefit from multi-year software contract wins that went live during the year and the RailComm acquisition

· Adjusted EBITDA* increased by 9% to £14.2m (2021: £13.0m)

· Profit before tax of £2.6m (2021: £4.6m) after £3.1m of exceptional items including increase in fair value of contingent consideration and transaction costs associated with acquisition of businesses

· Total cash balances** of £17.2m with no debt (31 July 2021: £25.4m) after £13.5m net investment in acquisitions, and contingent and deferred consideration

· Proposed final dividend of 1.1p per share, with total dividend of 2.0p per share (2021: nil) consistent with the Group's progressive dividend policy that was restored at the half-year

Operational Highlights:

· Strong growth in rail technology software licence usage:

o  First full deployment of TRACS Enterprise went live in summer 2022. Work continues on delivering our orderbook of further deployments from previously announced contract wins

o  Roll-out of RailHub enterprise software contract won in the prior year progressing to plan and will more than double the user base to c.40,000 individuals by late 2022

o  20% growth in user base of Centrix, our cloud-base Remote Condition Monitoring data acquisition platform

· Won several multi-year rail technology software contracts as previously announced, that will support further revenue growth

· Acquisition of RailComm LLC ("RailComm") a US based rail technology software and services provider, giving direct access to the large and growing North American market. RailComm has performed well post acquisition

· Strong post-Covid recovery of activities in Events and Traffic Data, made possible by actions taken to safeguard these businesses during the pandemic, and including some activities not expected to repeat in the forthcoming financial year

· Enhanced the Group's technology capabilities with the acquisition of geoscience company Icon GEO, now fully integrated

· Formalised our sustainability strategy, with a target of being carbon neutral by 2030 for scope 1 and scope 2 emissions from Tracsis operations

· Further progress in implementing a more integrated operating model to support future growth, with continued investment in management capability, people development, and common processes and systems

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

** Cash and cash equivalents, and cash held in escrow

Chris Barnes, Chief Executive Officer, commented:

"I am pleased with the progress the Group has made this year in executing its growth strategy.

We have delivered a financial performance aligned to our long term strategic growth plan, with high levels of organic and acquisitive growth. Our Rail Technology and Services Division has won several multi-year software contracts, and in Data, Analytics, Consultancy and Events we have seen a strong post-Covid recovery in activity levels.

We have a growing pipeline of opportunities in both Divisions, and we have expanded our addressable markets including our first direct entry into the large and growing North America rail market with the acquisition of RailComm. The post-acquisition performance of this business has been particularly pleasing, with good revenue and profit performance, new orders secured for its core products, and an encouraging level of interest in products from elsewhere in the Group that are already well established in the UK. These opportunities leave us well placed to deliver further growth.

The UK rail industry's transition to a new Great British Railways structure is ongoing and the overall objective is to create a data-driven, customer-focused, safety-critical future for the industry. Digital transformation will play a significant role in the industry's transition and our range of rail technology products and services is well placed to help the rail industry deliver operational performance improvements and efficiency savings.

We continue to invest in implementing a more integrated operating model to help us to execute our growth strategy. I was particularly pleased to see the launch of the OneTracsis leadership development programme during the year, which is an important initiative as part of our commitment to investing in developing our people and growing the next generation of leaders in our business. We are also making good progress in implementing a single groupwide IT operating model, under the direction of an experienced technology leader who has been recruited to further enhance senior management bandwidth.

Tracsis is fully committed to delivering sustainable growth that benefits the communities in which we, and our customers, operate. The Group's products and services are well aligned with this vision, and support our customers in delivering positive environmental and social outcomes. This year we have formalised our sustainability strategy and set ourselves the ambition of being carbon neutral by 2030 for scope 1 and scope 2 emissions from Tracsis operations.

Q1 trading is in line with the Board's expectations. We are confident that there are strong growth prospects for all parts of our Group and therefore remain committed to implementing our overall strategic growth and investment plans. We will continue to pursue organic and acquisitive growth supported by a strong balance sheet."

Presentation and Overview videos

Tracsis is hosting an online presentation open to all investors on Friday 11 November 2022 at 1.00pm UK time. Anyone wishing to connect should register here: https://bit.ly/TRCS_FY22_results

A video overview of the results featuring CEO Chris Barnes and CFO Andy Kelly is available to view here: https://bit.ly/TRCS_FY22_overview  

Tracsis will be presenting at the MelloLondon investor conference on Wednesday 16 November 2022. Further information is available here: MelloLondon ticket page - Mello Events

Demonstration videos of the Group's TRACS Enterprise, Remote Condition Monitoring, Smart Ticketing, and Safety and Risk Management rail technology products are available to view here: Rail Technology Product Demonstration for Investors | Tracsis

Enquiries:

Tracsis plc  Tel: [phone]

Chris Barnes, CEO / Andy Kelly, CFO

finnCap Ltd  Tel: [phone]

Christopher Raggett / Charlie Beeson, Corporate Finance

Andrew Burdis / Sunila de Silva Corporate Broking

Alma PR  Tel: [phone]

David Ison / Hilary Buchanan / Joe Pederzolli  [e-mail]

Management Overview

Introduction

The Group has performed well during the year ended 31 July 2022, delivering strong organic and acquisitive growth, winning new multi-year software contracts that will support further growth in recurring revenues, expanding its addressable rail market into North America and its technology offering into earth observation, and making further progress in implementing a more integrated operating model.

Large multi-year software contract wins and deployments support further Rail Technology and Services revenue growth

We continue to secure multi-year technology contracts in the Rail Technology and Services Division that will support further growth in annual recurring licence revenue consistent with our strategy. During the year we secured new contracts for our TRACS Enterprise, Centrix, Pay As You Go ("PAYG") smart ticketing and delay repay technologies previously announced, and we have a strong pipeline of further opportunities. We are also making good progress in implementing large contracts that were won in previous years. The first end-to-end deployment of TRACS Enterprise went live with a large Train Operating Company ("TOC") in summer 2022, replacing disparate legacy systems, and we have a pipeline of further passenger and freight implementations for this product that are due to go-live through the next two financial years. The roll-out of the large RailHub contract won in July 2021 has been progressing to plan and is on schedule to be completed before the end of 2022, which will double the user base for this product to over 40,000 individuals. Post year-end we have secured further orders for the next phase of development of the RailHub product. The conversion of our large pipeline of opportunities is delivering growth in annual recurring and routinely repeat revenue⁺. For the Rail Technology and Services Division this increased in the year by 13% to £21.1m.

⁺ Recurring software licence revenue and annually repeating hardware revenue from framework agreements.

Significant recovery completed in Events and Traffic Data

We have seen a significant recovery in activity levels in the Events and Traffic Data businesses that were most impacted by Covid-19. Both were able to respond quickly to improving market demand as a result of the actions taken to safeguard those businesses and protect jobs and skills during the pandemic. Activity levels in Events returned to pre-pandemic levels in the first half of the year and maintained this through the remainder of the year. The final quarter in particular saw very high volumes as demand for sporting and music events increased. The performance in the year included some activities that are not expected to repeat in the forthcoming financial year. The recovery in Traffic Data was slower, however in this market we also saw demand return close to pre-pandemic levels in the final quarter of the year. Activity levels in this market are more sensitive to central and local authority funding. Alongside the incremental contribution from the acquisitions of Icon GEO in November 2021 and Flash Forward Consulting in February 2021, this recovery in activity levels drove extremely strong revenue growth in the Data, Analytics, Consultancy and Events Division of 63%.

US growth strategy underway, with RailComm performing well

The acquisition of RailComm in March 2022 provides direct access to the large and growing North American rail market. There are opportunities to deliver growth both in RailComm's core markets of rail yard automation and computer aided dispatching, as well as by progressively marketing Tracsis' existing portfolio of rail products and services. An experienced Tracsis rail managing director has relocated to the US to oversee delivery of this growth strategy.

RailComm has performed well since acquisition, delivering a good revenue and profit performance and winning new contracts for its core products. Implementation work continues on a number of large projects with North American customers that will support further revenue and profit growth. We are seeing good levels of interest in our Remote Condition Monitoring, Movement Planner and Crew Calling solutions that are already well established in the UK rail market.

Continuing to build the foundations for future growth

The Group has made further good progress this year in implementing a more integrated business model and adopting common processes and systems. As part of our commitment to investing in our people we have launched a 'OneTracsis' leadership development scheme with 100 managers and senior leaders enrolled on an 18 month programme that will also promote collaboration and innovation across the Group. This is part of a comprehensive people strategy that has been developed, under a new Group People Director, with a focus on succession planning, talent acquisition, and reward & benefits. We are expanding our shared services operating model by implementing a single groupwide IT operating environment, under the direction of a Group Managing Director who was recruited in the year and is an experienced technology leader. Furthermore, we have formalised our sustainability strategy and targets, with the goal of making Tracsis carbon neutral for scope 1 and scope 2 emissions by 2030.

Progress on Delivering our Strategy

Our vision for Tracsis is to become the leading provider of high value, niche technology solutions and services that solve complex problems which maximise efficiency in regulated industries. Our business model remains focused on specialist offerings that have high barriers to entry, are sold on a recurring basis under contract, and to a retained customer base that is largely blue chip in nature. Our strategy to achieve this is focused on four areas as outlined below. We believe this strategy will allow Tracsis to continue the growth trajectory it has achieved since IPO in 2007 and to deliver further significant value to shareholders in the short, medium and longer term.

We have made good progress in executing this growth strategy this year, which leaves the Group well positioned to deliver further growth. Key progress against the objectives for each of our four strategic priorities is summarised in the table below:

Strategic Priority	Progress in 2022	Future Focus
Drive Organic Growth Delivery of our pipeline, continual innovation of products and services, flawless high quality delivery and an excellent close working relationship with our customers	· 24% organic revenue growth for the Group · Multi-year TRACS Enterprise contract wins with two UK passenger operators, and our first contract win in the rail freight sector · New smart ticketing contract won and implemented with a large passenger Train Operating Company ("TOC"). Two new delay repay contracts also secured and implemented with UK TOCs. · Large multi-year Centrix software contract win in Remote Condition Monitoring and an extension to our long-running data logger framework contract · Roll-out of RailHub enterprise software contract won in previous financial year progressing to plan and will more than double the user base to c.40,000 individuals by late 2022 · First full deployment of TRACS Enterprise went live in summer 2022; work continues on implementing other TRACS Enterprise contracts due to go-live over the next 2 years · Large pipeline of rail technology contract opportunities · Strong post-Covid recovery of activities in Events and Traffic Data, made possible by actions taken to safeguard these businesses during the pandemic	· Complete deployments of TRACS Enterprise contracts won in previous years where development work is underway · Secure further multi-year rail technology contracts across all product lines · Leverage RailComm to cross-sell existing Tracsis products and services into North America · Continued investment in software & technology product development · Support UK Rail Industry to deliver the strategic vision outlined in the Williams-Shapps plan
Expand Addressable Markets Selling our products and services into new markets, including overseas, and expansion into selected sectors that share problems with the industries we currently serve	· RailComm acquisition provides direct access to a significant number of rail clients in the large and growing North American market · Secured new contract wins in both Icon GEO and RailComm post acquisition · Further growth from Compass Informatics	· Execute growth strategy for North America · Continued growth in data informatics/GIS · Targeted growth opportunities overseas or in adjacent markets
Enhance Growth Through Acquisition Reinvesting Group profits to fund further accretive acquisitions that meet our disciplined investment criteria	· Acquisition of RailComm providing direct access to North American market · Expanded technology addressable market into Earth Observation through Icon acquisition · Further potential targets evaluated	· Active pursuit of M&A to extend rail software and technology footprint - focus on recurring revenue growth
Integration and Capability Enhanced integration and collaboration across the Group, increasing management capability and bandwidth, and improving our systems and processes, as key foundations to deliver our growth strategy	· Developed a comprehensive people strategy to attract, retain and develop talent · Enhanced management capability and bandwidth with recruitment of Group Managing Director · Launched 'OneTracsis' leadership training programme · Started workstream to implement a single groupwide IT operating model · ESG strategy and targets agreed · Developed Hopsta PAYG smart ticketing app through Innovation Hub programme · Icon GEO acquisition fully integrated	· Execution of people strategy, including further development programmes · Complete IT transformation · Further R&D collaboration via Innovation Hub · Implement ISO 14001 (Environmental management) · Continued alignment of groupwide systems and processes

Trading Progress and Prospects

Rail Technology & Services

Summary segment results:

Revenue   £29.9m  (2021: £26.4m) 

Adjusted EBITDA*  £9.8m  (2021: £9.1m) 

Profit before Tax  £4.8m  (2021: £5.0m) 

Activity levels in our Rail Technology & Services Division remain high, which has driven further revenue growth. All parts of the Division won new contracts in the year, many of which went live with customers in the second half of the year, and we have a strong pipeline of additional multi-year software opportunities. Work has also continued on implementing contracts won in previous years, including the first go-live of the end-to-end TRACS Enterprise solution in summer 2022 and the ongoing roll-out of the large RailHub enterprise software contract that was won in the previous financial year and is due to be completed before the end of 2022.

Total revenue of £29.9m was 13% higher than prior year as a result of strong organic growth in our Rail Operations & Planning and Customer Experience businesses, as well as a good initial contribution from RailComm. Revenue in both our Remote Condition Monitoring ("RCM") business and our safety and risk management business (OnTrac) was lower than the record levels achieved in the prior year, reflecting the typical investment cycle in RCM and the timing of a large licence contribution in the prior year in OnTrac. Both businesses are well positioned to deliver growth in the coming year.

As a result of the new contract wins and the deployment of contacts won in previous years, annual recurring and routinely repeating revenue in the Rail Technology & Services Division increased by 13% to £21.1m.

Adjusted EBITDA* increased by 8% to £9.8m (2021: £9.1m).

Profit before Tax decreased by £0.2m after £0.4m of transaction costs related to the acquisition of RailComm (2021: £nil) and £0.4m increase in the amortisation of acquired intangible assets.

The industry's transition to a new Great British Railways structure, which aims to create a data-driven, customer-focused, safety-critical future for the industry, is ongoing, and we have been asked at senior client level to formally input our ideas into how the UK can achieve this vision. This demonstrates the value the industry attaches to Tracsis' expertise and range of rail technology products, which offer a compelling and, in some cases, unique value proposition. Digital transformation will play a significant role in the rail industry's transition and our range of products and services is well placed to help the industry deliver operational performance improvements and efficiency savings.

Rail Operations & Planning

Total revenues from the Group's rail operations & planning software and hosting offerings grew by 17% to £12.7m (2021: £10.9m). This includes the various revenue streams from our TRACS, ATTUne, COMPASS and Retail & Operations product suites. We continue to benefit from high renewal rates from existing customers. The strong revenue growth was mainly driven by new multi-year TRACS Enterprise contracts won in the year, which were previously announced and which we are currently implementing for our clients.

Our focus on these projects is to work closely with our customers as a partner to deliver significant value over the long-term. Delivery timelines in this sector are typically determined in partnership with our customers.

Work has also continued on implementing contracts won in previous years. The first end-to-end implementation of all TRACS Enterprise modules went live with a customer in the summer of 2022. We expect the second to be completed in 2023.

The TRACS Enterprise contract wins have also resulted in increased contribution from Bellvedi, that was acquired in 2019. As a result the fair value of contingent consideration payable in respect of this acquisition has increased.

We have a strong pipeline of new multi-year TRACS Enterprise opportunities in both the passenger and freight sectors of the industry.

Digital Railway & Infrastructure

Total revenues across the Digital Railway and Infrastructure offerings were £13.3m (2021: £13.0m). This includes revenue from RailComm following its acquisition in March 2022, as well as from Remote Condition Monitoring ("RCM") within MPEC and from our RailHub safety and risk management product suites within OnTrac. Both MPEC and OnTrac delivered record levels of revenue in the prior year. Whilst these were not repeatable in FY 21/22 as anticipated, reflecting the investment cycle of its UK customer base which consists of 5 year 'Control Periods', both businesses are well positioned for future growth and the lower revenue was more than offset by a strong post-acquisition performance from RailComm.

We saw lower RCM volumes in the first half of the year which was consistent with the historic investment cycle trend of its UK customer base. Activity levels increased in the second half of the year, and revenue over this period was at a similar level to the second half of the prior financial year. Having secured a large multi-year Centrix contract and the extension of our long-running RCM data logger framework contract as previously announced, the business is well placed to deliver growth moving forward.

OnTrac revenue was lower than the prior year which included a large, high margin RailHub licence sale. Activity was dominated by the roll-out of this product with our customer which has delivered implementation and support revenue in the year. This has been proceeding according to plan and is expected to be completed before the end of 2022, at which point the user base for our RailHub product will have more than doubled to over 40,000 individuals. There is a growing pipeline of future opportunities for the RailHub platform including additional functionality that is being developed by Tracsis and the opportunity to host third party applications on the platform. Post year end we have secured new orders for the next phase of development of the RailHub product, and work on these is underway.

RailComm has delivered a strong revenue contribution for the period under Tracsis ownership. This includes completion of some large project milestones that were in the business' order book on acquisition. Implementation work is underway on several other large rail technology projects, and since acquisition the business has also won several new contracts in the North American market that will support ongoing revenue and profit growth. RailComm also opens up direct access into North America for Tracsis' existing portfolio of rail products and services. We see RCM as the initial area of focus here, and an experienced Tracsis managing director has relocated to the US to oversee these growth opportunities.

Rail Customer Experience

There was very strong growth from our Customer Experience products, with revenue increasing by 56% to £3.9m (2021: £2.5m). This was mainly driven by the 'go-live' in H2 of the financial year of new contract wins that were previously announced - one with a UK TOC for our Pay As You Go (PAYG) smart ticketing solution, and two further delay repay contracts. This part of the Group also benefitted from increased delay repay transaction volumes across its existing customer base as rail passenger numbers recovered post Covid-19.

We are seeing increased interest in iBlocks' smart ticketing product offering that is well aligned with passenger requirements and with the UK Government's strategic intent to deliver increased PAYG, multi-modal ticketing as outlined in the Williams-Shapps plan for Rail. Through our Innovation Hub R&D incubator, iBlocks has developed a mobile app ("Hopsta") that puts this technology directly in the hands of the consumer and avoids the requirement for expensive gateline infrastructure. The first pilots of this product with train operators are expected to start during financial year 22/23.

Data, Analytics, Consultancy & Events

Summary segment results:

Revenue   £38.8m  (2021: £23.8m) 

Adjusted EBITDA*  £4.4m  (2021: £3.9m) 

Profit before Tax  £1.8m  (2021: £1.9m)   

We have seen a significant recovery in activity levels in the Events and Traffic Data businesses that were most impacted by Covid-19. As a result of the actions taken during the pandemic to protect jobs, look after our people, and safeguard these businesses, we have been able to respond quickly to this increase in demand, and both businesses are currently operating at monthly run rates close to pre-pandemic levels. In Events we benefitted from certain activities that are not expected to repeat in the forthcoming financial year. The Division has also benefitted from the incremental contribution from the acquisitions of Flash Forward Consulting in February 2021 and Icon GEO in November 2021 and both businesses have been fully integrated into the Group. After excluding the growth from acquisition, organic revenue growth for the Division was £12.1m (51%). This also included underlying growth in both Compass Informatics and in Transport Insights.

Adjusted EBITDA increased by 12% to £4.4m (2021: £3.9m). The prior period included £0.9m of support to the Income Statement from the Coronavirus Job Retention Scheme ("CJRS"). We did not take any CJRS support in the financial year ended 31 July 2022.

Data Analytics / GIS

Revenue increased to £7.9m (2021: £5.7m) which includes the incremental contribution from Icon GEO as well as continued underlying growth in Compass Informatics. Icon GEO has been fully integrated within this business to create an Irish-based Data Analytics centre of excellence with c.130 staff specialising in providing location-related technologies, earth observation and analytics solutions to government and commercial organisations. The combined business has secured additional contracts with government agencies in Ireland based on the combined skillset and service offering it can now offer.

Transport Insights

Revenue of £5.2m was 49% higher than prior year (2021: £3.5m). After adjusting for the year-on-year benefit from the acquisition of Flash Forward Consulting in February 2021, this represents organic growth of c22% across the expanded range of consulting and specialist services this business offers in the transport space. We are seeing ongoing strong demand for our specialist timetabling and rail performance expertise.

Traffic Data

Revenue increased by 29% to £9.9m (2021: £7.7m) with activity levels steadily increasing as Covid-related restrictions were eased. The return of some restrictions linked with the Omicron variant did present some headwinds in the first half of the financial year, with work being postponed or cancelled as the prevailing traffic conditions were not representative of client needs. There has been a steady recovery of activity levels through the second half of the financial year, and the final quarter was particularly strong.  The business is now operating at close to the monthly run-rate seen pre-pandemic although some month-to-month variability in demand remains and activity levels in this market are more sensitive to central and local authority funding.

Event Transport Planning & Management

The Events business delivered a very strong performance, with record revenue of £15.7m (2021: £6.9m). Activity levels in its market returned to pre-pandemic levels very quickly, with high demand for sporting and music events particularly in the final quarter of the financial year. We were able to quickly respond to this increased in demand as a result of actions taken to protect the business during the pandemic. We continued to support Covid testing and vaccination centres which delivered c£1.4m revenue in the period and is not expected to repeat.

Financial Summary

Group revenue of £68.7m was £18.5m (37%) higher than the prior year (2021: £50.2m), reflecting strong organic and acquisitive growth. Revenue in the Data, Analytics, Consultancy and Events Division increased by £15.0m (63%) principally as a result of a strong post-Covid recovery in Events and Traffic Data. There was also strong revenue growth in both our Transport Insights and Data Analytics/GIS businesses, including the benefit from the acquisition of Icon GEO in November 2021. Revenue in the Rail Technology and Services Division was £3.5m (13%) higher than prior year, which includes strong organic growth in our Rail Operations & Planning and Customer Experience businesses as well as the benefit from the acquisition of RailComm in the year. 

Adjusted EBITDA* of £14.2m was £1.2m (9%) higher than prior year (2021: £13.0m), which included £0.9m of support to the Income Statement from the Coronavirus Job Retention Scheme ("CJRS"). No claims have been made under the CJRS in this financial year. Excluding the CJRS benefit in the prior year, adjusted EBITDA* increased by 17%. Adjusted EBITDA* margin of 20.6% was lower than the prior year as anticipated (2021: 25.8%) reflecting the increased mix of revenue from the post Covid recovery in Data, Analytics, Consultancy and Events.

Statutory profit before tax of £2.6m is £2.0m lower than prior year (2021: £4.6m) after £3.1m of exceptional items (FY21: £1.1m). These principally reflect an increase in the fair value of contingent consideration following strong underlying trading performance in Bellvedi (part of our Rail Operations & Planning business), as well as transaction costs associated with acquisitions made in the year.

In addition to the £1.2m increase in adjusted EBITDA* described above, the movement in profit before tax reflects the following items:

· £1.8m depreciation charge at a similar level to the prior year (2021: £1.6m);

· £5.0m amortisation of intangible assets (2021: £4.3m). The increase versus prior year includes charges relating to the acquisitions of Icon GEO in November 2021 and RailComm in March 2022, as well as a full year charge from the acquisition of Flash Forward Consulting in February 2021;

· £1.5m share based payment charges (2021: £1.3m);

· £3.1m exceptional items (2021: £1.1m) representing: a net £1.8m increase in the assessed fair value of contingent consideration based on the future expectations of performance from previous acquisitions (2021: £0.3m) which principally relates to the expected performance from Bellvedi in the final year of its earnout; £0.8m unwinding of previously discounted contingent consideration balances in accordance with IFRS accounting standards (2021: £0.7m); £0.6m of transaction costs associated with the acquisitions of Icon GEO (£0.2m) and RailComm (£0.4m) (2021: £0.1m relating to the acquisition of Flash Forward Consulting); and £0.1m impairment charge relating to an equity accounted investee (2021: £nil); partly offset by £0.2m credit relating to the fair value adjustment and subsequent gain on settlement of a financial liability (2021: £nil);

· £0.1m net finance expense (2021: £0.1m); and

· £0.6m charge (2021: £0.4m) relating to the share of the result of equity accounted investees

Adjusted diluted earnings per share increased by 4% to 32.3 pence (2021: 30.9 pence). Statutory diluted earnings per share was 5.0 pence (2021: 7.8 pence).

Cash Generation

The Group continues to have significant levels of cash and remains debt free. At 31 July 2022 the Group's cash balances, including balances held in escrow, were £17.2m (2021: £25.4m). Cash generation remains strong.

Cash generated from operations was £9.5m (2021: £10.8m) after a net £4.0m increase in working capital (2021: £2.0m increase). This reflects normal trading patterns and includes an increase in trade receivables in the final trading months of the year following the strong post-Covid recovery in Events and Traffic Data. The Group has not had any material bad debt incidences. There was £0.6m cash outflow on transaction costs for acquisitions completed in the year (2021: £0.1m). Adjusted EBITDA* includes £0.1m profit on disposal of plant and equipment (2021: <£0.1m).

Net capital expenditure increased to £1.0m (2021: £0.3m) which principally reflects the post-Covid recovery in activity levels in Events and Traffic Data, as well as investment in IT assets. Net lease liability payments of £1.4m were £0.2m higher than prior year (2021: £1.2m) which includes the effect of acquisitions. Tax paid of £1.3m was at a similar level to the prior year (2021: £1.4m),

As a result free cash flow* was £5.8m (2021: £7.8m)

Free Cash Flow*

	Year	Year
	Ended	ended
	31 July	31 July
	2022	2021
	£'m	£'m
Adjusted EBITDA *	14.2	13.0
Changes in working capital	(4.0)	(2.0)
Other adjustments(1)	(0.7)	(0.2)
Cash generated from operations	9.5	10.8
Purchase of plant and equipment (net of proceeds from disposal)	(1.0)	(0.3)
Lease liability payments (net of lease receivable receipts)	(1.4)	(1.2)
Tax paid	(1.3)	(1.4)
Other(2)	-	(0.1)
Free Cash Flow*	5.8	7.8

^* Net cash flow from operating activities after purchase of plant and equipment, proceeds from disposal of plant and equipment, proceeds from exercise of share options, lease liability payments, and lease liability receipts

⁽¹⁾ Includes cash outflows on exceptional items (see note 9) and profit on disposal of plant & equipment

⁽²⁾ Includes net interest received or paid and proceeds from exercise of share options

The Group invested £9.1m in the acquisitions of Icon GEO and RailComm, net of cash acquired (2021: (£0.1m)) and there was a further outflow of £0.3m relating to deferred consideration for the prior year acquisition of Flash Forward Consulting (2021: nil). Cash payments of £4.1m (2021: £0.4m) were made in the year relating to contingent consideration on the previous acquisitions of: Bellvedi, part of Rail Operations & Planning, £3.5m; Cash & Traffic Management Limited, part of Events, £0.3m; and Compass Informatics Limited, part of Data Analytics/GIS, £0.3m. £0.4m was paid to repurchase "A" shares in Tracsis Rail Consultancy, as described below (2021: nil). Dividends paid to shareholders were £0.3m (2021: nil) and there was a £0.2m favourable impact from foreign exchange (2021: £0.1m adverse).

As a result, total cash balances decreased by £8.2m to £17.2m. £2.2m of this is held in escrow following the acquisition of RailComm and will be payable during the year ending 31 July 2023 to satisfy any contingent consideration associated with this acquisition.

Acquisitions & Other Corporate Activity

Icon GEO

On 3 November 2021 the Group acquired The Icon Group Limited ("Icon GEO"). Headquartered in Dublin, Icon GEO is an interdisciplinary geosciences business specialising in earth observation, geographical information systems, and spatial data analytics. The acquisition consideration comprised an initial cash payment of €2.2m (£1.9m) which was funded out of Tracsis cash reserves, a further cash payment to reflect the working capital position of the business (above a working capital hurdle) on completion totalling €2.2m (£1.9m) and the issue of 68,762 new ordinary shares in Tracsis plc to a value of €0.8m (£0.6m). Additional contingent consideration of up to €1.8m (£1.5m) is payable subject to Icon GEO achieving certain stretched financial targets in the three years post acquisition.

RailComm LLC & RailComm Associates Inc

The Group acquired RailComm LLC and its wholly owned subsidiary RailComm Associates Inc (together "RailComm") on 11 March 2022. Headquartered in Fairport, New York and established in 1999, RailComm provides mission critical automation and control solutions that reduce costs, increase safety, and improve operational efficiency for rail passenger/freight operators and rail served ports/industrials. The acquisition consideration comprised an initial cash payment of $11.5m (£8.8m) which was funded out of Tracsis cash reserves. Additional contingent consideration of up to $2.7m (£2.2m) is payable subject to RailComm achieving certain financial targets in the first full year post acquisition through to 31 March 2023. This cash is being held in escrow through that period.

Tracsis Rail Consultancy

In the previous financial year the Group acquired Flash Forward Consulting Limited. As part of the transaction the sellers were allotted 10,225 "A" shares in Tracsis Rail Consultancy Limited. The "A" shares have full dividend and capital distribution rights attached but do not have any voting rights attached to them. "A" shares guarantee the holder a dividend each financial year. The fair value of this liability at 31 July 2021 was assessed as £590,000. On 17 June 2022 the Group acquired all of these "A" shares in return for a cash payment of £416,000. The fair value of the "A" shares at this date was £463,000. A fair value adjustment of £127,000 and a gain on purchase of £47,000 have been recognised in exceptional items in the year.

Dividend

The Group remains committed to the progressive dividend policy that was adopted in 2012. In the financial year ended 31 July 2022, we have seen a strong recovery in activity levels in those parts of the Group most impacted by Covid-19, and we did not utilise the UK Government's CJRS scheme. In this context the Board has recommended a final divided of 1.1 pence per share. The final dividend, subject to shareholder approval at the forthcoming Annual General Meeting, will be paid on 10 February 2023 to shareholders on the register at the close of business on 27 January 2023. This will bring the total dividend for the year to 2.0 pence per share.

Board

Jill Easterbrook was appointed to the Board as a Non-Executive Director on 5 October 2022. Lisa Charles-Jones will step down from the Board on 31 December 2022 after six years with the Group. Lisa will be succeeded as Chair of the Remuneration Committee by Jill Easterbrook at this date.

Outlook

Our end market drivers are strong and Tracsis' products and services are well aligned with these drivers. We deliver positive benefit cases to our clients by enabling them to deliver mission-critical activities with increased efficiency, enhanced performance, higher productivity, and improved safety.

The Group has a clear growth strategy and has a strong balance sheet to support its delivery. We are making good progress in implementing this strategy, including winning new multi-year software contracts, and continuing to deliver on contracts won in previous years. We recognise the need to continue to integrate the Group's activities, technologies and operating model in order to provide a solid platform for ongoing scalable growth. We have made good progress in the year and will continue to invest in this area.

M&A remains a core part of our strategy and we have taken an important step in the year with our first acquisition in North America. This further increases our addressable markets and diversifies our growth opportunities. We will continue to actively pursue further M&A opportunities, with a focus on extending our software and technology footprint and enhancing recurring revenue growth.

Q1 trading has been in line with the Board's expectations and the Group remains well positioned to deliver further growth in the coming financial year and beyond.

Chris Cole Non-Executive Chairman	Chris Barnes Chief Executive Officer
8 November 2022

Consolidated Statement of Comprehensive Income for the year ended 31 July 2022

			2022			2021
			Group excluding in-year acquisitions	Acquisitions in-year	Total	Total
	Notes		£000	£000	£000	£000
Revenue	3		63,380	5,343	68,723	50,237
Cost of sales			(25,246)	(1,237)	(26,483)	(15,424)
Gross profit			38,134	4,106	42,240	34,813
Administrative costs			(34,649)	(4,336)	(38,985)	(29,657)
Adjusted EBITDA*	3,6		13,018	1,143	14,161	12,978
Depreciation			(1,700)	(67)	(1,767)	(1,603)
Adjusted profit **	6		11,318	1,076	12,394	11,375
Amortisation of intangible assets			(4,253)	(747)	(5,000)	(4,269)
Other operating income			426	-	426	440
Share-based payment charges			(1,502)	-	(1,502)	(1,276)
Operating profit before exceptional items			5,989	329	6,318	6,270
Exceptional items:	9
Impairment losses			(49)	-	(49)	-
Other			(2,455)	(559)	(3,014)	(1,114)
Operating profit/(loss)			3,485	(230)	3,255	5,156
Net finance expense			(132)	(9)	(141)	(87)
Share of result of equity accounted investees			(556)	-	(556)	(434)
Profit/(loss) before tax	3		2,797	(239)	2,558	4,635
Taxation			(987)	(69)	(1,056)	(2,279)
Profit/(loss) after tax			1,810	(308)	1,502	2,356
Other comprehensive (expense)/income
Items that are or may be reclassified subsequently to profit or loss
Foreign currency translation differences			423	-	423	(126)
Items not to be reclassified to profit and loss in subsequent period
Revaluation of financial assets			(50)	-	(50)	-
Total comprehensive income/(expense) for the year			2,183	(308)	1,875	2,230
Earnings per Ordinary Share
Basic		4			5.09p	8.06p
Diluted		4			4.95p	7.82p

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

** Earnings before net finance expense, 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 2022

		2022	2021
	Note	£000	£000
Non-current assets
Property, plant and equipment		4,897	3,540
Intangible assets		65,867	51,745
Investments - equity		-	50
Investments in equity accounted investees		-	605
Deferred tax assets		410	551
		71,174	56,491
Current assets
Inventories		1,090	381
Trade and other receivables		18,454	11,263
Cash held in escrow		2,217	-
Cash and cash equivalents		14,970	25,387
		36,731	37,031
Total assets		107,905	93,522
Non-current liabilities
Lease liabilities		1,476	1,131
Contingent consideration payable	8	736	3,220
Deferred consideration payable	8	297	584
Deferred tax liabilities		10,671	8,517
		13,180	13,452
Current liabilities
Lease liabilities		1,291	928
Trade and other payables		24,092	17,007
Contingent consideration payable	8	8,585	4,689
Deferred consideration payable	8	308	308
Current tax liabilities		-	473
		34,276	23,405
Total liabilities		47,456	36,857
Net assets		60,449	56,665
Equity attributable to equity holders of the company
Called up share capital		119	117
Share premium reserve		6,436	6,401
Merger reserve		6,161	5,525
Retained earnings		47,448	44,710
Translation reserve		335	(88)
Fair value reserve		(50)	-
Total equity		60,449	56,665

Consolidated Statement of Changes in Equity

	Share Capital £'000	Share Premium £'000	Merger Reserve £'000	Retained Earnings £'000	Translation Reserve £'000	Fair Value Reserve £'000	Total £'000
At 1 August 2020	116	6,373	5,420	41,078	38	-	53,025
Profit for the year	-	-	-	2,356	-	-	2,356
Other comprehensive income	-	-	-	-	(126)	-	(126)
Total comprehensive income	-	-	-	2,356	(126)	-	2,230
Transactions with owners:
Share based payment charges	-	-	-	1,276	-	-	1,276
Exercise of share options	1	28	-	-	-	-	29
Shares issued as consideration for business combinations	-	-	105	-	-	-	105
At 31 July 2021	117	6,401	5,525	44,710	(88)	-	56,665

At 1 August 2021	117	6,401	5,525	44,710	(88)	-	56,665
Profit for the year	-	-	-	1,502	-	-	1,502
Other comprehensive income	-	-	-	-	423	(50)	373
Total comprehensive income	-	-	-	1,502	423	(50)	1,875
Transactions with owners:
Dividends	-	-	-	(266)	-	-	(266)
Share based payment charges	-	-	-	1,502	-	-	1,502
Exercise of share options	2	35	-	-	-	-	37
Shares issued as consideration for business combinations	-	-	636	-	-	-	636
At 31 July 2022	119	6,436	6,161	47,448	335	(50)	60,449

Consolidated Cash Flow Statement for the year ended 31 July 2022

		2022	2021
	Notes	£000	£000
Operating activities
Profit for the year		1,502	2,356
Net finance expense		141	87
Depreciation		1,767	1,603
Profit on disposal of plant and equipment		(70)	(46)
Non cash exceptional items		2,441	985
Other operating income		(426)	(440)
Amortisation of intangible assets		5,000	4,269
Share of result of equity accounted investees		556	434
Income tax charge		1,056	2,279
Share based payment charges		1,502	1,276
Operating cash inflow before changes in working capital		13,469	12,803
Movement in inventories		(233)	49
Movement in trade and other receivables		(4,103)	(4,796)
Movement in trade and other payables		383	2,784
Cash generated from operations		9,516	10,840
Interest received		6	7
Interest paid		-	(74)
Income tax paid		(1,334)	(1,417)
Net cash flow from operating activities		8,188	9,356
Investing activities
Purchase of plant and equipment		(1,129)	(400)
Proceeds from disposal of plant and equipment		123	88
Acquisition of subsidiaries (net of cash acquired)	7	(9,097)	127
Payment of contingent consideration	8	(4,126)	(410)
Cash held in escrow for payment of contingent consideration		(2,217)	-
Payment of deferred consideration	8	(315)	-
Net cash flow used in investing activities		(16,761)	(595)
Financing activities
Dividends paid	5	(266)	-
Proceeds from exercise of share options		37	27
Settlement of financial liability		(416)	-
Lease liability payments		(1,421)	(1,260)
Lease receivable receipts		32	32
Net cash flow used in financing activities		(2,034)	(1,201)
Net (decrease)/increase in cash and cash equivalents		(10,607)	7,560
Exchange adjustments		190	(93)
Cash and cash equivalents at the beginning of the year		25,387	17,920
Cash and cash equivalents at the end of the year		14,970	25,387

Notes to the Consolidated Financial Statements

1   Financial information

The financial information set out herein does not constitute the Group's statutory accounts for the 12 months 31 July 2022 or the year ended 31 July 2021 within the meaning of sections 434 of the Companies Act 2006, but is derived from those accounts. The audited accounts for the year ended 31 July 2022 will be posted to all shareholders in due course and will be available on the Group's website. The auditors have reported on those accounts and expressed an unmodified audit opinion which did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

The financial information for the year ended 31 July 2021 is derived from the statutory accounts for that year, which have been delivered to the Registrar of Companies. The auditors have reported on those accounts and expressed an unmodified audit opinion which did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in financial position and performance of the Group.

2  Basis of preparation

(a)  Statement of compliance

The Group consolidated financial statements have been prepared in accordance with UK adopted international accounting standards ("IFRSs").

(b)  Basis of measurement

The Accounts have been prepared under the historical cost convention, with the exception of the valuation of investments, contingent consideration, financial liabilities and initial valuation of assets and liabilities acquired in business combinations which are included on a fair value basis.

(c)  Presentation currency

These consolidated financial statements are presented in sterling. All financial information presented in sterling has been rounded to the nearest thousand.

(d)  Use of estimates and judgements

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

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

(e)  Accounting developments

The Group financial statements have been prepared and approved by the directors in accordance with UK adopted international accounting standards ("IFRSs").  The accounting policies have been applied consistently to all periods presented in the consolidated financial statements, unless otherwise stated.

There are no new standards, amendments to existing standards or interpretations that are not yet effective that are expected to have a material impact on the Group.

(f)  Going concern

The Group is debt free and has substantial cash resources. At 31 July 2022 the Group had net cash and cash equivalents totalling £15.0m, with a further £2.2m held in an escrow account for settlement of contingent consideration relating to the Railcomm acquisition. The Board has prepared cash flow forecasts for the period through to December 2023 based upon assumptions for trading and the requirements for cash resources, these forecasts take into account reasonably possible changes in trading financial performance.

Further to this, management prepared a severe but plausible scenario, reducing revenues from budget and including a more pessimistic view of working capital. There was still ample headroom under this scenario. A reverse stress test was also considered. The revenue and cashflow assumptions required to eliminate any headroom under the reverse stress test are considered by the Board to be highly unlikely and particularly given trading performance to date.

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  Revenue and Segmental analysis

a)  Revenue

Sales revenue is summarised below:

	2022	2021
	£000	£000
Rail Technology & Services	29,935	26,424
Data, Analytics, Consultancy & Events	38,788	23,813
Total revenue	68,723	50,237

Revenue can also be analysed as follows:

	2022	2021
	£000	£000
Software and related services	22,088	20,980
Data, Analytics, Consultancy, and Events	38,788	23,813
Other	7,847	5,444
Total	68,723	50,237

Major customers

Transactions with the Group's largest customer represent 12% of the Group's total revenues (2021: 17%).

Geographic split of revenue

A geographical analysis of revenue is provided below:

	2022	2021
	£000	£000
United Kingdom	55,849	43,965
Ireland	8,827	5,449
Rest of Europe	280	338
North America	3,343	189
Rest of the World	424	296
Total	68,723	50,237

b)  Segmental Analysis

The Group has divided its results into two segments being 'Rail Technology & Services' and 'Data, Analytics, Consultancy & Events' consistent with disclosure in the 2021 Financial Statements.

The Group has a wide range of products and services for the rail industry, such as software, hosting services, remote condition monitoring, and these have been included within the Rail Technology & Services segment as they have similar customer bases (such as Train Operating Companies and Infrastructure Providers). Traffic data collection and event planning & traffic management, and data and analytics and consultancy offerings have similar economic characteristics and distribution methods and so have been included within the Data, Analytics, Consultancy & Events segment.

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 Executive Directors, who review internal monthly management reports, budgets and forecast information as part of this. Accordingly, the Executive 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 two operating segments, 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.

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. Presented below segmental analysis of profit before tax for 2021 has been further analysed to allocate amortisation and exceptional items, assets and liabilities for 2021 has been further analysed to allocate Intangibles & Investments, Contingent Consideration and Deferred Consideration to each individual segment.

	2022
	Rail Technology & Services	Data, Analytics, Consultancy & Events	Unallocated	Total
	£000	£000	£000	£000
Revenues
Total revenue for reportable segments	29,935	38,788	-	68,723
Consolidated revenue	29,935	38,788	-	68,723
Profit or loss
EBITDA for reportable segments	9,780	4,381	-	14,161
Amortisation of intangible assets	(3,731)	(1,269)	-	(5,000)
Depreciation	(748)	(1,019)	-	(1,767)
Exceptional items (net)	(444)	(176)	(2,443)	(3,063)
Other operating income	-	-	426	426
Share-based payment charges	-	-	(1,502)	(1,502)
Interest payable (net)	(46)	(68)	(27)	(141)
Share of result of equity accounted investees	-	-	(556)	(556)
Consolidated profit before tax	4,811	1,849	(4,102)	2,558

	2021
	Rail Technology & Services	Data, Analytics, Consultancy & Events	Unallocated	Total
	£000	£000	£000	£000
Revenues
Total revenue for reportable segments	26,424	23,813	-	50,237
Consolidated revenue	26,424	23,813	-	50,237
Profit or loss
EBITDA for reportable segments	9,059	3,919	-	12,978
Amortisation of intangible assets	(3,345)	(924)	-	(4,269)
Depreciation	(699)	(904)	-	(1,603)
Exceptional items (net)	-	(129)	(985)	(1,114)
Other operating income	-	-	440	440
Share-based payment charges	-	-	(1,276)	(1,276)
Interest payable (net)	(36)	(37)	(14)	(87)
Share of result of equity accounted investees	-	-	(434)	(434)
Consolidated profit before tax	4,979	1,925	(2,269)	4,635

	2022
	Rail Technology & Services	Data, Analytics, Consultancy & Events	Unallocated	Total
	£'000	£000	£000	£000
Assets
Total other assets for reportable segments	10,935	13,506	-	24,441
Intangible assets and investments	54,277	11,590	-	65,867
Deferred tax assets	-	-	410	410
Cash held in escrow	2,217	-	-	2,217
Cash and cash equivalents	8,918	6,052	-	14,970
Consolidated total assets	76,347	31,148	410	107,905
Liabilities
Total other liabilities for reportable segments	(17,070)	(9,789)	-	(26,859)
Deferred tax liabilities	-	-	(10,671)	(10,671)
Contingent consideration	(8,320)	(1,001)	-	(9,321)
Deferred consideration	-	(605)	-	(605)
Consolidated total liabilities	(25,390)	(11,395)	(10,671)	(47,456)

	2021
	Rail Technology & Services	Data, Analytics, Consultancy & Events	Unallocated	Total
	£'000	£000	£000	£000
Assets
Total other assets for reportable segments	6,515	8,669	-	15,184
Intangible assets and investments	42,171	9,574	655	52,400
Deferred tax assets	-	-	551	551
Cash and cash equivalents	16,862	6,483	2,042	25,387
Consolidated total assets	65,548	24,726	3,248	93,522
Liabilities
Total other liabilities for reportable segments	(11,913)	(7,036)	(590)	(19,539)
Deferred tax	-	-	(8,517)	(8,517)
Contingent consideration	(7,194)	(715)	-	(7,909)
Deferred consideration	-	(892)	-	(892)
Consolidated total liabilities	(19,107)	(8,643)	(9,107)	(36,857)

4  Earnings per share

Basic earnings per share

The calculation of basic earnings per share at 31 July 2022 was based on the profit attributable to ordinary shareholders of £1,502,000 (2021: £2,356,000) and a weighted average number of ordinary shares in issue of 29,486,000 (2021: 29,229,000), calculated as follows:

Weighted average number of ordinary shares

In thousands of shares

	2022	2021
Issued ordinary shares at 1 August	29,332	29,122
Effect of shares issued related to business combinations	51	7
Effect of shares issued for cash	103	100
Weighted average number of shares at 31 July	29,486	29,229

Diluted earnings per share

The calculation of diluted earnings per share at 31 July 2022 was based on profit attributable to ordinary shareholders of £1,502,000 (2021: £2,356,000) and a weighted average number of ordinary shares in issue after adjustment for the effects of all dilutive potential ordinary shares of 30,330,000 (2021: 30,131,000).

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. These figures are relevant to the Group and are provided to enable a comparison to similar businesses and are metrics used by Equities Analysts who cover the Group. Amortisation and share based payment charges are deemed to be 'non-cash at the point of recognition' in nature, and exceptional items by their very nature are one-off, and therefore excluded in order to assist with the understanding of underlying trading. A reconciliation of this figure is provided below. The Group has also presented an 'Adjusted Profit' metric as detailed in note 6, with the key difference between the numbers presented below, and those disclosed in note 6 being the income tax charge.

	2022	2021
	£'000	£'000
Profit after tax	1,502	2,356
Amortisation of intangible assets	5,000	4,269
Share-based payment charges	1,502	1,276
Exceptional items (net)	3,063	1,114
Other operating income	(426)	(440)
Tax impact of adjusting items	(847)	746
Adjusted profit for EPS purposes	9,794	9,321

Weighted average number of ordinary shares In thousands of shares
For the purposes of calculating Basic earnings per share	29,486	29,229
Adjustment for the effects of all dilutive potential ordinary shares	844	902
For the purposes of calculating Dilutive earnings per share	30,330	30,131
Basic adjusted earnings per share	33.22p	31.89p
Diluted adjusted earnings per share	32.29p	30.93p

5  Dividends

The Group did not pay an interim or final dividend in financial year 2019/20 or 2020/21. The Group is committed to a progressive dividend policy, and an interim dividend for financial year 2021/22 has been paid. The cash cost of the dividend payments is below:

		2022	2021
		£000	£000
Interim dividend for 2021/22		266	-
Total dividends paid		266	-

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

	2022	2021
	£000	£000
Interim dividend for 2020/21 of 0.0p per share paid	-	-
Final dividend for 2020/21 of 0.0p per share paid	-	-
Interim dividend for 2021/22 of 0.9p per share paid	266	-
Final dividend for 2021/22 of 1.1p per share proposed	327	-

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

	2022	2021	2020	2019	2018	2017	2016	2015	2014
Total dividends paid per share	2.0	Nil	Nil	1.8p	1.6p	1.4p	1.2p	1.0p	0.8p

6  Reconciliation of alternative performance measures ("APMs")

The Group uses APMs, which are not defined or specified under the requirements of International Financial Reporting Standards ("IFRS"), to improve the comparability of reporting between different periods. These metrics adjust for certain items which impact upon IFRS measures, to aid the user in understanding the activity taking place across the Group's businesses. The largest components of the adjusting items, being depreciation, amortisation, share based payments, and share of result of equity accounted investees, are 'non-cash' items and are separately analysed to assist with the understanding of underlying trading. Share based payments are adjusted to reflect the underlying performance of the group as the fair value is impacted by market volatility that does not correlate directly to trading performance. APMs are used by the Directors and management for performance analysis, planning, reporting and incentive purposes.

Adjusted EBITDA

Calculated as Earnings before net finance expense, tax, depreciation, amortisation, exceptional items, other operating income, share-based payment charges and share of result of equity accounted investees. This metric is used to show the underlying trading performance of the Group from period to period in a consistent manner and is a key management incentive metric. The closest equivalent statutory measure is profit before tax. Adjusted EBITDA can be reconciled to statutory profit before tax as set out below:

		2022	2021
		£000	£000
Profit before tax		2,558	4,635
Finance expense - net		141	87
Share-based payment charges		1,502	1,276
Exceptional items - net		3,063	1,114
Other operating income		(426)	(440)
Amortisation of intangible assets		5,000	4,269
Depreciation		1,767	1,603
Share of result of equity accounted investees		556	434
Adjusted EBITDA		14,161	12,978

Adjusted Profit

Calculated as Earnings before net finance expense, tax, amortisation, exceptional items, other operating income, share-based payment charges, and share of result of equity accounted investees. This metric is used to show the underlying business performance of the Group from period to period in a consistent manner. The closest equivalent statutory measure is profit before tax. Adjusted profit can be reconciled to statutory profit before tax as set out below:

		2022	2021
		£000	£000
Profit before tax		2,558	4,635
Finance expense - net		141	87
Share-based payment charges		1,502	1,276
Exceptional items - net		3,063	1,114
Other operating income		(426)	(440)
Amortisation of intangible assets		5,000	4,269
Share of result of equity accounted investees		556	434
Adjusted profit		12,394	11,375

Adjusted EBITDA reconciles to adjusted profit as set out below:

		2022	2021
		£000	£000
Adjusted EBITDA		14,161	12,978
Depreciation		(1,767)	(1,603)
Adjusted profit		12,394	11,375

Adjusted Basic Earnings per Share

Calculated as profit after tax before amortisation, share-based payment charges, exceptional items and other operating income divided by the weighted average number of ordinary shares in issue during the period. This is a common metric used by the market in monitoring similar businesses and is used by Equities Analysts who cover the Group to better understand the underlying performance of the Group. See note 4 "Earnings per share".

Free Cash Flow

Calculated as net cash flow from operating activities after purchase of plant and equipment, proceeds from disposal of plant and equipment, proceeds from exercise of share options, lease liability payments, and lease liability receipts. This measure reflects the cash generated in the period that is available to invest in accordance with the Group's growth strategy and capital allocation policy.

Free cash flow reconciles to net cash flow from operating activities as set out below:  

		2022	2021
		£000	£000
Net cash flow from operating activities		8,188	9,356
Purchase of plant and equipment		(1,129)	(400)
Proceeds from disposal of plant and equipment		123	88
Proceeds from exercise of share options		37	27
Lease liability payments		(1,421)	(1,260)
Lease receivable receipts		32	32
Free Cash Flow		5,830	7,843

7  Acquisitions and investments in the current year

(a)  The Icon Group Limited ("Icon")

On 3 November 2021 the Group acquired the entire issued share capital of The Icon Group Limited ("Icon"). Icon is an Ireland based interdisciplinary geoscience company specialising in Earth Observation (EO), Geographical Information System (GIS) and spatial data analytics. Icon has several long-term repeat contracts. The acquisition of Icon Group adds EO capabilities that enhance the Group's offering in this growing market. Icon has a customer base that is complementary to Tracsis'.

The acquisition consideration comprised an initial cash payment of €2.2m (£1.9m) which was funded out of Tracsis cash reserves and the issue of 68,762 new ordinary shares in Tracsis to a value of €0.8m (£0.6m). An additional payment of approximately €2.2m (£1.9m) reflects the net current asset (above a working capital hurdle) position at completion on a euro for euro basis. Additional contingent consideration of up to €1.8m (£1.5m) is payable subject to Icon Group achieving certain stretched financial targets in the three years post acquisition.

The business is cash generative and debt free. In the period from acquisition to 31 July 2022 The Icon Group Limited contributed revenue to the Group of £2.0m and pre-tax profit of £0.3m, before amortisation of associated intangible assets and exceptional deal costs (pre tax loss £0.2m including amortisation of associated intangible assets and exceptional deal costs). If the acquisition had occurred on 1 August 2021 management estimates that the contribution to Group revenue would have been £2.7m and Group pre-tax profit for the period of £0.4m (estimated pre tax loss £0.2m including amortisation of associated intangible assets and exceptional deal costs if the acquisition had occurred on 1 August 2021).

Pre-acquisition carrying amounts were determined based on applicable IFRSs, immediately prior to the acquisition. The values of assets and liabilities recognised on acquisition are the estimated fair values. The gross contractual amounts receivable for acquired receivables is consistent with fair value. Acquired receivables are expected to be collected in full following acquisition.

The goodwill that arose on acquisition can be attributed to a multitude of assets, including the skills and experience of staff within the acquired business and anticipated synergies arising from the acquisition, that cannot readily be separately identified for the purposes of fair value accounting.

The fair value adjustments arise in accordance with the requirements of IFRSs to recognise intangible assets acquired. Due to the nature of the company acquired, this often requires the recognition of additional intangible assets, specifically in relation to customer relationships. An external valuation specialist has been engaged by the Group to assist with the valuation of the intangibles. In determining the fair values of intangible assets, at the Group has used discounted cash flow forecasts. The fair value of shares issued was based on market value at the date of issue. The Group incurred acquisition related costs of £0.2m which are included within administrative expenses.

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

			Recognised	Recognised
	Pre-acquisition	Fair value	value on	Value on
	carrying amount	adjustments	acquisition	acquisition
	€000	€000	€000	£000
Intangible assets: Customer related intangibles	-	2,367	2,367	2,014
Tangible fixed assets	15	-	15	13
Cash and cash equivalents	2,069	-	2,069	1,760
Trade and other receivables	1,037	-	1,037	882
Trade and other payables	(493)	-	(493)	(419)
Deferred tax liability	-	(296)	(296)	(252)
Net identified assets and liabilities	2,628	2,071	4,699	3,998
Goodwill on acquisition			1,537	1,308
			6,236	5,306
Consideration paid in cash			4,484	3,820
Consideration paid: fair value of shares issued			750	636
Fair value of contingent consideration payable			1,002	850
Total consideration			6,236	5,306

(b)  Railcomm LLC & Railcomm Associates Inc

On 11 March 2022 the Group acquired the entire members interests of Railcomm LLC and its wholly owned subsidiary Railcomm Associates Inc (together "Railcomm"). Railcomm is a US based company providing mission critical automation and control solutions that reduce costs, increase safety, and improve operational efficiency for rail passenger/freight operators and rail served ports/industrials. Its two core products are rail yard automation and computer aided dispatching and it has a wide and diversified client base across the North American market. The acquisition is in line with Tracsis' strategy of extending its rail software footprint and expanding the addressable markets for its products and services.

The acquisition consideration comprised an initial cash payment of $11.5m (£8.8m) which was funded out of Tracsis cash reserves. Additional contingent consideration of up to $2.7m (£2.1m) is payable subject to Railcomm delivering certain financial targets in the first full year after acquisition through to 31 March 2023. A further $0.1m (£0.1m) post completion adjustment in accordance with the purchase agreement was due to the sellers following completion.

The business was acquired on a debt free basis. In the period from acquisition to 31 July 2022 Railcomm contributed revenue to the Group of £3.3m and pre-tax profit of £0.8m, before amortisation of associated intangible assets and exceptional deal costs (pre tax loss £0.1m including amortisation of associated intangible assets and exceptional deal costs). If the acquisition had occurred on 1 August 2021 management estimates that the contribution to Group revenue would have been £8.9m and Group pre-tax profit for the period of £2.0m (estimated pre-tax profit £0.7m including amortisation of associated intangible assets and exceptional deal costs if the acquisition had occurred on 1 August 2021). The fair value of intangible assets will be assessed throughout the measurement period up to 12 months from the date of acquisition.

Pre-acquisition carrying amounts were determined based on applicable IFRSs, immediately prior to the acquisition. The values of assets and liabilities recognised on acquisition are the estimated fair values. The gross contractual amounts receivable for acquired receivables is consistent with fair value. Acquired receivables are expected to be collected in full following acquisition.

The goodwill that arose on acquisition can be attributed to a multitude of assets, including the skills and experience of staff within the acquired business, and anticipated synergies arising from the acquisition, that cannot readily be separately identified for the purposes of fair value accounting.

The fair value adjustments arise in accordance with the requirements of IFRSs to recognise intangible assets acquired. Due to the nature of the companies acquired, this often requires the recognition of additional intangible assets, specifically in relation to technology, customer relationships, order backlog and marketing. An external valuation specialist has been engaged by the Group to assist with the valuation of the intangibles In determining the fair values of intangible assets, the Group has used discounted cash flow forecasts. The Group incurred acquisition related costs of £0.4m which are included within administrative expenses.

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

			Recognised	Recognised
	Pre-acquisition	Fair value	value on	value on
	carrying amount	adjustments	acquisition	acquisition
	$000	$000	$000	£000
Intangible assets: Technology intangibles	-	7,398	7,398	5,654
Intangible assets: Customer related intangibles	-	1,481	1,481	1,132
Intangible assets: Order backlog intangible	-	501	501	383
Intangible assets: Marketing related intangibles	-	1,082	1,082	827
Tangible fixed assets	345	-	345	264
Cash and cash equivalents	2,257	-	2,257	1,725
Trade and other receivables	2,687	-	2,687	2,053
Inventory	576	-	576	440
Trade and other payables	(2,837)	-	(2,837)	(2,168)
Contract liabilities	(5,302)	-	(5,302)	(4,052)
Deferred tax liability	-	(2,825)	(2,825)	(2,159)
Net identified assets and liabilities	(2,274)	7,637	5,363	4,099
Goodwill on acquisition			8,841	6,756
			14,204	10,855
Consideration paid in cash			11,610	8,873
Fair value of contingent consideration payable			2,594	1,982
Total consideration			14,204	10,855

8   Contingent and deferred consideration

a  Contingent consideration 

During this financial year the Group acquired The Icon Group Limited ("Icon") and Railcomm, LLC and Railcomm Associates Inc (together "Railcomm"). Under the share purchase agreement in place for Icon, contingent consideration is payable which is based on the profitability of Icon in the 3 year period after the acquisition, and on the successful renewal of certain key contracts. Contingent consideration is payable in Euros up to a maximum of €1,750,000 (£1,471,000), and the fair value of the amount payable was assessed as €902,000 (£757,000). Contingent consideration under the share purchase agreement for Railcomm is payable up to a maximum of $2,700,000 (£2,217,000) linked to the financial performance of the business in the year following the acquisition through to 31 March 2023. At the year- end date the fair value of the amount payable was assessed at $2,626,000 (£2,157,000). Cash held in escrow for the purpose of settlement of the contingent consideration for the Railcomm acquisition totalled £2,217,000 at the balance sheet date. The cash held in escrow is held as a financial asset not within the overall cash and cash equivalents balance, due to restrictions on access to the cash on demand. Prior approval of any transfers must be completed by both Tracsis and the seller before they can take place, and as such the cash is not considered to be available on demand. If the financial performance metrics linked to the contingent consideration are not met in full, the balance will be returned to Tracsis.

In 2020, the Group acquired iBlocks Limited. Under the share purchase agreement in place for this acquisition, contingent consideration is payable which is linked to the profitability of the acquired business for a three- year period post acquisition and the signing of certain contracts currently under negotiation. The maximum amount payable is £8.5m, and the fair value of the amount payable was assessed at £2,224,000 at the year -end date.

In 2019, the Group acquired Compass Informatics Limited and Bellvedi Limited. Under the share purchase agreements for each of these companies, contingent consideration is payable which is linked to the profitability of the acquired businesses over a two to four year period post acquisition. The maximum amount payable over the contingent consideration period is €1,500,000 (£1,261,000) for Compass Informatics Limited and £7,900,000 for Bellvedi Limited. The fair value of the amount payable was assessed at £243,000 for Compass Informatics Limited and £3,940,000 for Bellvedi Limited at the year-end date.

During the financial year, the final contingent consideration due on the 2019 acquisition of Cash & Traffic Management Limited was paid totalling £259,000 (2021: £nil). Contingent consideration of €329,000 (£281,000) was paid in respect of the Compass Informatics Limited acquisition (2021: £410,000) and £3,586,000 in respect of the Bellvedi Limited acquisition (2021: £nil).

As detailed in note 9, a net exceptional charge of £1,792,000 was recognised, following a review of the assumptions of the fair value of the contingent consideration as at 31 July 2022. At the balance sheet date, the Directors assessed the fair value of the remaining amounts payable which were deemed to be as follows.

	2022	2021
	£000	£000
Cash & Travel Management Limited	-	253
Compass Informatics Limited	243	462
Bellvedi Limited	3,940	4,357
iBlocks Limited	2,224	2,837
The Icon Group Limited	757	-
Railcomm, LLC	2,157	-
	9,321	7,909

The Group has made numerous acquisitions over the past few years and carries contingent consideration payable in respect of them, which is considered to be a 'Level 3 financial liability' as defined by IFRS 13. These are carried at fair value, which is based on the estimated amounts payable based on the provisions of the Share Purchase Agreements which specify the specific arrangements and calculations relating to each acquisition. This involves assumptions about future profit forecasts, which results from assumptions about revenues and costs, and is discounted back to the present value using an appropriate discount rate and an estimate of when it is expected to be payable. A range of outcomes is considered, and a probability/likelihood weighting is applied to each of them in order to produce a weighted assessment of the amount payable.

The Group has considered multiple profit related scenarios in estimating the fair value of contingent consideration payable in the future. In all cases, contingent consideration payable could range from zero to the maximum amount included in the Share Purchase Agreements as detailed in this note and also note 7. Each Share Purchase Agreement contains different provisions for calculating contingent consideration, timeframes over which it is calculated and payable, and therefore sensitivities regarding the total amount to be paid. In respect of Compass Informatics Limited, Bellvedi Limited, iBlocks Limited, The Icon Group, and Railcomm a change in the estimated profit of 10% would result in a change in the fair value of contingent consideration of £1.0m.

The movement on contingent consideration can be summarised as follows:

		2022	2021
		£000	£000
At the start of the year		7,909	7,334
Arising on acquisition (note 7)		2,832	-
Cash payment		(4,126)	(410)
Fair value adjustment to Statement of Comprehensive Income		1,792	327
Unwind of discounting		774	658
Exchange adjustment		140	-
At the end of the year		9,321	7,909

The ageing profile of the remaining liabilities can be summarised as follows:

		2022	2021
		£000	£000
Payable in less than one year		8,585	4,689
Payable in more than one year		736	3,220
Total		9,321	7,909

b.  Deferred consideration

The Group acquired Flash Forward Consulting Limited on 26 February 2021. As part of this acquisition cash consideration totalling £945,000 is payable in three equal instalments on the 1st, 2nd and 3rd anniversary of the acquisition date. At acquisition the present value of this deferred consideration was assessed as £878,000 discounted using a rate of 3.75%. At 31 July 2022 the present value of this deferred consideration is £605,000. The movement on deferred consideration can be summarised as follows:

		2022	2021
		£000	£000
At the start of the year		892	-
Arising on acquisition		-	878
Cash payment		(315)	-
Unwind of discounting		28	14
At the end of the year		605	892

The ageing profile of the remaining liabilities can be summarised as follows:

		2022	2021
		£000	£000
Payable in less than one year		308	308
Payable in more than one year		297	584
Total		605	892

9  Exceptional items:

The Group incurred a number of exceptional items in 2022 and 2021 which are analysed as follows:

	2022	2021
	£000	£000
Impairment losses
Non cash:
Investment in Associate	49	-
Total impairment losses	49	-
Other
Non cash:
Contingent consideration fair value adjustment	1,792	327
Unwind of discounting of contingent consideration	774	658
Fair value adjustment - Financial Liability	(127)	-
Gain on settlement of Financial liability	(47)	-
Cash:
Legal and professional fees in respect of acquisitions and other corporate activities	622	129
Total other	3,014	1,114
Total exceptional items	3,063	1,114

	2022	2021
Split	£000	£000
Non cash	2,441	985
Cash	622	129
Total	3,063	1,114

2022

An exceptional cost has been recognised to increase the fair value of the contingent consideration payable at the end of the financial year. A £1,792,000 charge to the income statement has been recorded which reflects the increased pipeline for software contract opportunities, and the impact of software contracts which have been secured in the financial year. A further charge totalling £774,000 has been recognised which reflects the unwinding of the discounting of contingent consideration. The discount rates applied vary by acquisition and are in the range of 3.25% to 14.5%. A breakdown of the remaining fair value of contingent consideration by acquisition is included in note 8. These costs are deemed to be exceptional items due to the size and volatility of the items which can vary significantly from year to year. On 17 June 2022 the Group acquired the minority shareholding of 10,225 TRC A Shares which were issued as part of the consideration on the acquisition of Flash Forward Consulting in February 2021. The fair value was determined on acquisition as £590,000 and was recognised as a financial liability in the Statement of Financial Position held at Fair Value through Profit and Loss. The fair value of these shares was assessed as £463,000 immediately prior to the re-purchase and a resulting fair value adjustment recognised of £127,000. Consideration for the shares paid was £416,000 and a resulting one-off gain has been recognised totalling £47,000.

During 2022 the Group made two acquisitions. In November 2021 the Group acquired The Icon Group Limited. Legal and professional fees related to this acquisition totalled £167,000. In March 2022 the Group acquired Railcomm LLC incurring acquisition related fees of £392,000. As part of the acquisition the Group incurred £40,000 (2021: £nil) of legal and professional costs associated with the transfer of a UK employee to oversee the integration of the acquisition.

Legal and professional fees have also been incurred in relation to one off transactions (including the re-purchase of TRC A Shares) and as they will not recur in future years, are deemed to be exceptional in nature.

An impairment loss of £49,000 has been recognised in the year in relation to the Investment in the Associate in Nutshell Software Limited. Following an assessment of the anticipated future cash flows anticipated from the investment a judgement was taken to write down the remaining carrying value to £nil.

2021

In the previous financial year, the Group acquired Flash Forward Consulting Limited and incurred exceptional deal related costs totalling £129,000 in relation to this. A net exceptional charge of £327,000 was also recognised to increase the assessed fair value of the contingent consideration based on future expectations of performance of the entities. The increase in the fair value of contingent consideration payable principally reflects an increased pipeline of software contract opportunities, partly offset by some extension of procurement cycles from certain customers. Unwind of discounting of contingent consideration totalling £0.7m was completed in the year. Contingent consideration at 31 July 2021 has been discounted at 12%.

10  Subsequent Events

On 5 October 2022 Jill Easterbrook was appointed to the Board as a non-executive director. Jill joined the Audit, Remuneration and Nomination Committees with immediate effect. On the same date it was also announced that Lisa Charles-Jones intends to resign from the Board from 31 December 2022 and Jill will assume Chair of the Remuneration Committee at this date

11  Annual Report and Annual General Meeting

The Company anticipates dispatching a copy of its annual report and accounts to all shareholders in December 2022. 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 Nexus, Discovery Way, Leeds, LS2 3AA on 18 January 2023 at 1pm.

 

END

 

 

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