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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Tracsis Plc | LSE:TRCS | London | Ordinary Share | GB00B28HSF71 | ORD 0.4P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 850.00 | 840.00 | 860.00 | 850.00 | 850.00 | 850.00 | 26,299 | 08:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Prepackaged Software | 82.02M | 6.81M | 0.2277 | 37.33 | 254.06M |
From Apr 2019 to Apr 2024
TIDMTRCS
RNS Number : 5586G
Tracsis PLC
26 November 2020
Tracsis plc
('Tracsis', 'the Company' or 'the Group')
Unaudited final results for the year ended 31 July 2020
Tracsis, a leading provider of software, hardware and services for the rail, traffic data and wider transport industries, is pleased to announce its unaudited final results for the year ended 31 July 2020. The Group will make a further announcement when the audited Annual Report for the year ended 31 July 2020 has been published, which is expected to be sent to shareholders in early December.
Financial Highlights:
-- Revenue of GBP48.0m (2019: GBP49.2m) -- Adjusted EBITDA* of GBP10.5m (GBP9.6m excluding IFRS 16) (2019: GBP10.5m) -- Operating profit before exceptional items of GBP4.3m (2019: GBP6.7m) -- Statutory Profit before Tax of GBP4.1m (2019: GBP6.6m)
-- Cash balances of GBP17.9m (2019: GBP24.1m) with no Covid-19 deferrals due to be paid. Cash conversion rates remain high
-- Fully diluted adjusted Earnings Per Share of 23.66p (2019: 27.42p)
Strategic and Operational Highlights:
-- Strong trading from our Rail Technology & Services Division, outperforming budget expectations and generally unaffected by the pandemic
o 17% revenue growth, and 33% EBITDA growth
o Continued high levels of recurring revenue across all of our software products
o Strong trading in our rail infrastructure businesses - MPEC (Remote Condition Monitoring Hardware and Software) and Ontrac (Safety and Risk Management Software)
o Further large multi-year contract secured with a major Train Operator for our TRACS Enterprise product
-- Covid-19 impacted Traffic & Data Services Division by an estimated GBP10m of revenue versus budgeted expectations, but action taken to reduce cost base and to mitigate the impact. Some loss of revenue offset at Group level by outperformance in Rail Technology & Services Division
-- Completion of the acquisition of iBlocks Limited which offers exciting opportunities in Smart Ticketing
Post year end Highlights:
-- Q1 trading has been in line with Board's expectations -- Two major rail contracts in latter stages of negotiation
-- Renewal and extension of several large multi-year agreements for Traffic Data and Event contracts
-- All software licence renewals secured -- Implementation of Groupwide shared services model to accelerate integration
Chris Barnes, Chief Executive Officer, commented:
"After a strong H1, I am pleased that the business was able to robustly navigate itself through the H2 challenges linked to Covid-19. The team did a great job in proactively responding to these challenges whilst protecting the health and wellbeing of all our employees.
We continue to see strong demand and growth across our Rail Technology & Services division and in our data & analytics capabilities. These continue to underpin our growth strategy and improving EBITDA margins. Whilst we believe we have successfully navigated the first phase of the Covid-19 crisis, and are well positioned for the future, we continue to closely monitor short term trading conditions in our Events and Traffic Data business units within the Traffic & Data Services Division.
We are confident that the medium to long term growth prospects for all parts of the Group are unchanged and we therefore remain committed to our overall strategic growth and investment plans. We will continue to proactively manage costs for as long as Covid-19 continues to impact the Group whilst maintaining the skills and capacity required to quickly respond post the end of the pandemic."
(*) Calculation unchanged from previous years and in line with broker forecasts and research coverage on Tracsis. Full definition and reconciliation in Note 6.
Presentations and Overview video
Tracsis is hosting an investor webinar today, Thursday 26th November, at 1300 hrs GMT. If you would like to
attend please register here : http://bit.ly/Tracsis_FY20_piworld_webinar
A video overview of the results from the CEO, Chris Barnes, and CFO, Max Cawthra, is available to watch here: https://bit.ly/TRCS_FY20_overview_video
Enquiries:
Tracsis plc Tel: 0845 125 9162
Chris Barnes, CEO
Max Cawthra, CFO
finnCap Ltd Tel: 020 7220 0500
Christopher Raggett, Charlie Beeson, Corporate Finance
Andrew Burdis, Corporate Broking
Alma PR Tel: 020 3405 0205
Rebecca Sanders-Hewett/David Ison/Helena Bogle/Joe Pederzolli tracsis@almapr.co.uk
Chairman & Chief Executive Officer's Report
Introduction
The year ended 31 July 2020 was on the whole a satisfactory year, with a strong performance from the Rail Technology & Services Division compensating for evident challenges caused by Covid-19, primarily in respect of the Traffic & Data Services Division. As we reflect on the previous twelve months, having completed the acquisition of iBlocks Limited, navigated the early phases of Covid-19, generated revenues of GBP48m, whilst maintaining EBITDA margin, and ended the year with almost GBP18m of cash, the Board is pleased with the resilient performance.
Business Overview
Tracsis specialises in providing a wide range of products and services to clients within the transport and traffic sector. The Group's market offering can be broadly categorised into two distinct strands:
1. Rail Technology & Services:
-- Operational Software : A suite of software products covering timetabling, resource and rolling stock planning and optimisation, real time performance and control, service recovery, retail services, delay attribution and delay repay;
-- Infrastructure Software : A range of software products that are used to collect, manage, visualise and analyse rail asset information. They deliver improvements in safety, productivity and communication by automating heavily regulated business processes and reducing risk;
-- Remote Condition Monitoring : Rail approved data loggers and sensors to monitor asset performance and predict failure modes (level crossings, interlockings, switch machines, bus-bars etc.) supported by our own data acquisition software platform;
-- Consultancy : Rail operations consultancy expertise and training covering operational planning and modelling, franchise and concession support, data capture and evaluation and innovative bespoke software tool development; and
-- Transit and Ticketing solutions : the provision of Smart Ticketing software and TIS accredited Account Based Back Office capable of performing the full cycle from tap capture through to fare generation, payment collection and revenue settlement.
2. Traffic & Data Services:
-- Traffic Surveys : Traditional and advanced transport data collection for all travel modes using ANPR, video and mobile network data, manual survey methods, big data sources and, increasingly, AI technology;
-- Transport Insights : Provision of innovative and effective transport related advice, saving time and cost and generating increased efficiencies through the provision of sustainable transport solutions supported by data hosting and visualisation tools;
-- Passenger Analytics : Software-delivered passenger research and statistical analysis for transport operators using our skilled market research staff and digital data collection tools (activities include passenger counting, ticket audits, mystery shopping and market research);
-- Location Analytics : Software, mobile app and analytical platform development combining Geographic Information Systems (GIS), location technologies, data analytics and field computing across different industrial sectors (rail, automotive, bus, utilities, environmental etc.); and
-- Event Transport Management : covering planning, control, consultancy, signage, CSAS/PATO and car parking. Technologies like Tracsis Live Technology (TLT) are also offered to improve traffic monitoring and traffic flow in and out of major event venues.
Covid-19
The Board estimates that Covid-19 had an impact on Group revenues of around GBP10m when compared against the Group's internal budget for the year, taking account of acquisitions made in the previous year. The majority of this was felt within the Traffic & Data Services Division within which large Events and Transport Data Collection projects were either cancelled or postponed. The Group's cost base in respect this part of the Group consists of a number of casual workers who it was not necessary to utilise given the circumstances. Accordingly, some of the loss of revenue from this part of the Group was offset by the reduced cost base.
The Rail Technology & Services Division was generally unaffected by the pandemic other than a reduction in delay-repay related revenues given the significant reduction in rail passenger numbers that occurred post the implementation of the March lockdown in the UK.
Our key priority during these unprecedented times was the health and wellbeing of our employees, our clients and their families. As such, the vast majority of staff immediately transitioned to working at home which on the whole was deemed to be a success. The Company also placed a number of staff on furlough but ensured that they retained their full remuneration until July 2020.
The business has also taken actions to reduce its fixed cost base which have now all been fully implemented. All our offices are open and have been signed off as 'Covid secure'. The majority of staff continue to work from home although small numbers of staff have returned to the office.
Financial Summary
Group revenues of GBP48.0m (2019: GBP49.2m) were slightly less than the previous year, due to the challenges of Covid-19. This was mitigated to some extent by a full year contribution from acquisitions made in the previous year which were not impacted by Covid-19 (Bellvedi and Compass Informatics), and also the acquisition of iBlocks Limited in the year. Overperformance versus budget in our Rail Technology & Services Division was an important contributor to the overall results.
The Group has also adopted IFRS 16 in the year which brought 'Right of Use Assets' on to the Balance Sheet and a corresponding "Lease Liability". At 31 July 2020 the impact of the transition was a Right of Use asset recognised of GBP1.4m and a 'Lease Liability' of GBP1.7m. The impact on EBITDA was GBP0.8m, with a corresponding reduction in overheads and so had no significant impact on Profit before Tax.
Adjusted EBITDA* of GBP10.5m (GBP9.6m excluding the impact of IFRS 16) was adverse compared to the previous year on a like for like basis (2019: GBP10.5m) due to the impact of Covid-19 on the Traffic & Data Services Division. Adjusted Profit** was GBP8.6m, less than the previous year (2019: GBP9.7m). Statutory Profit before Tax was GBP4.1m (2019: GBP6.6m) after taking account of large charges in respect of amortisation, share based payment charges, and a share of results of associated undertakings. In addition, the Group has recognised a net credit of GBP0.1m relating to exceptional items. This credit includes an exceptional credit adjustment to fair value of contingent consideration payable at year end of GBP1.5m, offset by exceptional deal costs of GBP0.2m, plus impairments against the Citi Logik investment and TCS acquisition of GBP1.2m in total.
At 31 July 2020, the Group's cash balances were GBP17.9m (2019: GBP24.1m), and cash generation continues to be strong. Cash balances are reduced compared to the previous year due to the acquisition of iBlocks Limited. All contingent consideration due in the year has been paid. The Group has also paid all VAT, PAYE and Corporation Tax due and has not taken advantage of any Government Support in respect of taxes, but has claimed grant money in respect of furloughed staff in the year with support to the Income Statement of c. GBP0.7m.
* Earnings before finance income, tax, depreciation, amortisation, exceptional items, other operating income, and share-based payment charges and share of result of equity accounted investees - see note 6 for reconciliation. 2020 prepared under IFRS 16, 2019 prepared under IAS 17
** Earnings before finance income, tax, amortisation, exceptional items, other operating income, share-based payment charges, and share of result of equity accounted investees - see note 6 for reconciliation. 2020 prepared under IFRS 16, 2019 prepared under IAS 17
Trading Progress and Prospects
Rail Technology & Services
Summary segment results:
Revenue GBP25.6m (2019: GBP21.9m) Adjusted EBITDA * GBP9.2m (2019: GBP6.9m) Adjusted Profit before Tax GBP8.6m (2019: GBP6.7m)
After making significant investment in our products and people, overall EBITDA margin within the Rail Technology & Services Division was an improvement on the previous year, which was pleasing.
Software
Sales of Operational Software and Infrastructure software, excluding current year acquisitions, increased to GBP17.7m (2019: GBP15.2m) which represents strong growth. This takes account of the various revenue streams from our TRACS, ATTUne, Ontrac, COMPASS, Retail & Operations, and Delay-Repay product suites. As always, all software products continue to benefit from high renewal rates from existing clients.
Work continues on implementing our TRACS Enterprise product at two major TOCs which were secured in previous years and we were delighted to have secured a third major Operator during the year where work on the implementation started in the year. There remains a significant market opportunity for this offering, which we hope to be able to further tap into.
Our Bellvedi business has traded very well during the year and the ATTUne product forms an integral part of the overall TRACS Enterprise solution. Bellvedi also secured a significant RSSB grant to develop innovative dynamic train planning software over the next two years which was very pleasing.
Ontrac traded well in the year and secured a number of good bespoke software development contracts, and remains supported by high levels of recurring revenue. The business also secured an important initial contract win which is expected to result in a multi-year enterprise wide licence deployment in due course. Work on the 'Discovery' and 'Design' commenced in the year, and remains ongoing with the target of securing a major multi year licence and support contract. Ontrac's software product offering focuses on driving improvements in risk management and safety for rail infrastructure operators which continues to be a high priority area of interest across the rail industry.
Our Delay Repay business traded well prior to the start of Covid-19 but naturally suffered an adverse impact due to significantly reduced passenger journeys. Even in spite of this, revenues were still ahead of the previous year and the business continues to operate from a modest cost base. Tracsis as a Group processed over 70% of all industry delay repay claims during the reporting period.
Remote Condition Monitoring (RCM)
Revenues of GBP4.8m compare very well against the previous year (2019: GBP4.9m), which was a very strong comparative period due to the end of Network Rail's 'Control Period 5' in March 2019. The Group did not expect such a strong year but naturally was delighted to be able to support its key customer in the first year of the new 'Control Period 6' that runs to 31 March 2024. During the year we received formal approval for the Busbar units, and have now begun to ship the first of these units. This remains a key growth area for the future. MPEC's product offering focuses on d riving improvements in asset performance for rail infrastructure owners which is a key factor in improving overall rail performance and reducing maintenance costs.
We announced a major order in May 2020 and this was largely fulfilled by the end of the financial year.
Consultancy
Consultancy and professional services revenue was GBP2.2m (2019: GBP1.8m) which was a very good performance and shows the continued resilience in this part of the Group as it transitions away from a historical reliance on franchise bid work. We have been pleased to secure work with various government bodies, infrastructure providers, a range of other train operating companies (TOCs), and multi-disciplinary engineering companies.
Acquisitions: iBlocks Limited
In the three months post acquisition, iBlocks contributed revenue of GBP0.9m which was in line with expectations for the short period. We are seeing good levels of interest in iBlocks' smart ticketing product offering which in a post Covid world is well aligned to future rail passenger requirements. Integration into the wider Tracsis Group is going well and iBlocks forms part of a wider Customer Experience product offering.
Traffic & Data Services
Summary segment results:
Revenue GBP22.4m (2019: GBP27.3m) Adjusted EBITDA* GBP1.3m (2019: GBP3.6m) Adjusted Profit before Tax GBPnil (2019: GBP2.9m)
Traffic Surveys, Transport Insights and Passenger Analytics
Revenues of GBP10.0m were delivered in the year (2019: GBP14.7m), which were adverse to the previous year due to the impact of Covid-19 which had an immediate and severe impact with much work either being cancelled or postponed. The business was trading well prior to the Covid-19 pandemic and had a strong order book as it entered the crisis, but this naturally did not materialise. However, a huge amount of credit must be given to the entire team as it delivered the Spring and Summer work as part of the major National Road Traffic Census in spite of Covid-19 which was a major achievement and a valuable source of revenue during challenging times. Cost reduction measures have been implemented in this part of the Group to ensure that it is well placed to weather the challenging market conditions that inevitably lie ahead. We are still waiting for postponed work to be rescheduled which we now expect to be workable in Spring 2021.
Our Passenger Analytics team performed its traditional manual count work during the Autumn but the Spring counts did not take place due to Covid-19 meaning that revenues were adverse to the previous year. However, the business was supported by the software product that it had developed in previous years for automatic train loading data, which is expected to be a key technology platform for potential future growth.
Location Analytics
This was the first full year contribution from Compass Informatics since its acquisition in 2019 and it has performed very well during the year, with work also continuing regardless of Covid-19. Most of the work was derived from its existing customer base in Ireland, across a wide range of bodies and clients, but the business also delivered some major UK based projects for a range of utility companies. Overall revenues of GBP5.5m (2019: GBP2.4m) were pleasing.
The Group sought to launch a full UK Analytics and GIS offering though due to challenges caused by Covid-19, this has been placed on hold given the current economic climate.
Event Transport Management
Revenues in this part of the Group were naturally significantly impacted by Covid-19 with total revenues of GBP6.9m (2019: GBP10.2m) which was the same as the previous year given the cancellation and postponement of many of the events that were scheduled to take place across the Spring and Summer and had already been booked in. Revenues should have been much higher given the full year contribution from CTM that was expected in this year following its acquisition in January 2019.
Despite the pandemic, the business continued to secure some new work, and also has been supported by the work that takes place at its fixed venue clients.
Cost reduction measures have been implemented in this part of the Group to ensure that we proactively manage the cost base whilst maintaining sufficient operational expertise so that we can mobilise the teams to quickly respond to the post Covid return to normal.
EBITDA margin was less than the previous year due to the impact of Covid-19.
Dividends
In February 2012, the Board implemented a progressive dividend policy. In view of the challenges and uncertainty caused by Covid-19, the Group decided not to pay an interim dividend for the six months ended 31 January 2020 and committed to reviewing it at the full year stage. The Board does not consider it appropriate to pay a final dividend this year. The impact on cash of not paying the dividend is around GBP0.6m. The Board is committed to restoring the progressive dividend policy in the future and will review this at the earliest appropriate opportunity.
Acquisitions
We were pleased to have completed the acquisition of iBlocks Limited (iBlocks) in the year, which is a business that we have known for a number of years now. We believe the unique technology offering that iBlocks has developed along with long established client relationships will open up an exciting new area of opportunity for Tracsis. The smart/account based ticketing market in particular is an area of the rail industry that is expected to see future industry change and growth.
Established in 2000, iBlocks is a UK based software company that specialises in the provision of smart ticketing solutions, automated delay repay and the development of mission critical back office systems that are used by the Rail Delivery Group, the wider community of train operating companies (TOCs) and the rail supply chain. This acquisition strategically aligns with our objective of strengthening our rail product portfolio in areas where we can offer a unique market proposition, gain access to strategically important partnerships and leverage the cross-selling opportunities that exist across our Rail Technology division.
The Directors believe that smart/account based ticketing and automated delay repay is a sizeable and natural growth area for the rail industry and that iBlocks is well placed to help facilitate the move towards a paperless ticketing environment. The acquisition will enhance Tracsis Group's overall technology and software offering and should be significantly earnings enhancing.
The acquisition consideration comprised an initial cash payment of GBP12.5m which was funded out of Tracsis cash reserves and the issue of 192,926 new ordinary shares in Tracsis with a value of GBP1.5m. An additional payment of GBP3m was made on a pound for pound basis to reflect the net current asset position of the business at completion. Additional contingent consideration of up to GBP8.5m is payable subject to iBlocks achieving certain stretched profit financial targets in the three years post acquisition. An amount of GBP3.3m has been included in the Balance Sheet as the best estimate of the amount payable at the year end date.
The UK's decision to leave the European Union
The Group does not expect to be impacted by Brexit. Current sales to European Union customers represent around 12% of overall Group sales, and there continues to be no significant reliance on a supply chain involving European Union suppliers or workforce.
People
As always, the Group is thankful to the whole team for their hard work during the year, especially during the unprecedented times which have been challenging for many members of the team. It has been pleasing to see the business come together to support colleagues.
In September 2020 we announced that Max Cawthra would be standing down as Chief Financial Officer in 2021 and that Andy Kelly would be joining the business. The Board would like to thank Max for the contribution he has made since joining Tracsis in 2010, since then the Group has grown significantly, both organically and by acquisition, which Max has played a key part in achieving. We look forward to Andy joining us, who the Board believe is a very strong replacement.
Revised Group Structure
From 1 August 2020 onwards, the Group has been reorganised into a new structure in order to align with key areas of future transport industry growth. This will be adopted for future external reporting purposes too.
Rail Technology & Services:
-- Rail Operations (includes core Operational Planning Software and Bellvedi)
-- Customer Experience (includes iBlocks, Travel Compensation Services and Tracsis Passenger Analytics)
-- Rail Infrastructure (includes MPEC and Ontrac)
Data, Analytics Consultancy and Events:
-- Traffic Data -- Events (includes SEP and CTM) -- Analytics/GIS (includes Compass Informatics) -- Transport Consultancy
Our GIS business Compass Informatics and Consultancy offering will be expanded to be 'Groupwide' offerings and will operate across the whole of the Group but will be reported within the Data, Analytics Consultancy and Events sector.
In addition, on 1 August 2020 the Group implemented a central shared services model covering HR, IT, Quality, Health and Safety and Risk with the objective of implementing best practice across the Group and accelerating the integration of the different business units.
Summary and Outlook
Q1 trading has been in line with the Board's expectations. As we look to the remainder of the financial year, we are aspiring to achieve modest revenue growth and EBITDA margin improvement despite the ongoing challenges of Covid-19, and we expect our cash position to remain equally as strong.
These are unprecedented times and whilst the Board believes it has successfully navigated the first phase of the Covid-19 crisis, and is well structured for the future, it is vigilant about short term trading conditions in particular with regards to its Traffic & Data Services Division. At the time of writing, the impact on the Rail Technology & Services Division has not been significant but the Board continues to monitor the situation and will respond should challenges arise.
We are confident that the medium to long term growth prospects for all parts of the Group are unchanged and we therefore remain committed to our overall strategic growth and investment plans. We will continue to proactively manage costs whilst the Covid-19 pandemic continues to impact the Group whilst maintaining the skills and capacity required to respond post the pandemic.
Chris Cole, Chairman Chris Barnes, Chief Executive Officer
26 November 2020
Consolidated Statement of Comprehensive Income for the year ended 31 July 2020
Hot Features
Premium
2020 2019
Group excluding
in-year Acquisitions Total Total
acquisitions in-year
Note GBP000 GBP000 GBP000 GBP000
---------------------------------- ----- ---------------- --------------- --------- ---------
Revenue 3 47,115 883 47,998 49,219
Cost of sales (16,669) (127) (16,796) (20,163)
---------------------------------- ----- ---------------- --------------- --------- ---------
Gross profit 30,446 756 31,202 29,056
Administrative costs (26,162) (617) (26,779) (22,360)
---------------------------------- ----- ---------------- --------------- --------- ---------
Adjusted EBITDA* 3,6 10,250 213 10,463 10,514
Depreciation (1,819) (63) (1,882) (831)
---------------------------------- ----- ---------------- --------------- --------- ---------
Adjusted profit ** 6 8,431 150 8,581 9,683
Amortisation of intangible
assets (3,176) (423) (3,599) (2,251)
Other operating income 353 23 376 260
Share-based payment
charges (1,050) - (1,050) (1,034)
---------------------------------- ----- ---------------- --------------- --------- ---------
Operating profit before
exceptional items 4,558 (250) 4,308 6,658
Exceptional items: 9
Impairment losses (1,155) - (1,155) (623)
Other 881 389 1,270 661
---------------------------------- ----- ---------------- --------------- --------- ---------
Operating profit 4,284 139 4,423 6,696
Finance income 76 - 76 58
Finance expense (75) (4) (79) (21)
Share of result of equity accounted
investees (309) - (309) (174)
Profit before tax 3 3,976 135 4,111 6,559
Taxation (1,201) (33) (1,234) (1,488)
Profit after tax 2,775 102 2,877 5,071
---------------------------------- ----- ---------------- --------------- --------- --------- Other comprehensive income/(expense) Items that are or may be reclassified subsequently to profit or loss Foreign currency translation differences 21 - 21 17 ----------------------------------------- ---------------- --------------- --------- --------- Total recognised income for the year 2,796 102 2,898 5,088 ----------------------------------------- ---------------- --------------- --------- --------- Earnings per ordinary share Basic 4 9.95p 17.78p Diluted 4 9.67p 17.26p ---------------------------------- ----- ---------------- --------------- --------- ---------
Consolidated Balance Sheet as at 31 July 2020
2020 2019
Note GBP000 GBP000
------------------------------------------- ----- ------- -------
Non-current assets
Property, plant and equipment 3,581 2,678
Intangible assets 54,376 38,812
Investments - equity 50 350
Loans due from associated undertakings - 250
Investments in equity accounted investees 1,039 1,098
Deferred tax assets 877 667
59,923 43,855
------------------------------------------- ----- ------- -------
Current assets
Inventories 430 381
Trade and other receivables 6,382 9,729
Cash and cash equivalents 17,920 24,104
------------------------------------------- ----- ------- -------
24,732 34,214
------------------------------------------- ----- ------- -------
Total assets 84,655 78,069
------------------------------------------- ----- ------- -------
Non-current liabilities
Lease Liabilities 986 285
Contingent consideration payable 8 5,587 5,304
Deferred tax liabilities 8,234 5,942
------------------------------------------- ----- ------- -------
14,807 11,531
------------------------------------------- ----- ------- -------
Current liabilities
Lease liabilities 1,128 277
Trade and other payables 13,509 16,936
Contingent consideration payable 8 1,747 879
Current tax liabilities 439 505
------------------------------------------- ----- ------- -------
16,823 18,597
------------------------------------------- ----- ------- -------
Total liabilities 31,630 30,128
------------------------------------------- ----- ------- -------
Net assets 53,025 47,941
------------------------------------------- ----- ------- -------
Equity attributable to equity holders
of the company
Called up share capital 116 115
Share premium reserve 6,373 6,343
Merger reserve 5,420 3,921
Retained earnings 41,078 37,545
Translation reserve 38 17
------------------------------------------- ----- ------- -------
Total equity 53,025 47,941
------------------------------------------- ----- ------- -------
Consolidated Statement of Changes in Equity
Share Share Premium Merger Retained Translation Total
Capital GBP'000 reserve Earnings reserve GBP'000
GBP'000 GBP'000 GBP'000 GBP'000
At 1 August 2018 113 6,243 3,160 32,593 - 42,109
Adjustment on initial
application of IFRS
15 - - - (667) - (667)
Profit for the year - - - 5,071 - 5,071
Other comprehensive
income - - - - 17 17
Total comprehensive
income - - - 5,071 17 5,088
------------------------ ---- ------ ------ ------- --- -------
Transactions with
owners:
Dividends - - - (486) - (486)
Share based payment
charges - - - 1,034 - 1,034
Exercise of share
options 1 100 - - - 101
Shares issued as
consideration for
business combinations 1 - 761 - - 762
At 31 July 2019 115 6,343 3,921 37,545 17 47,941
------------------------ ---- ------ ------ ------- --- -------
At 1 August 2019 115 6,343 3,921 37,545 17 47,941
Adjustment on initial
application of
IFRS 16 - - - (106) - (106)
Profit for the
year - - - 2,877 - 2,877
Other comprehensive
income - - - - 21 21
------------------------ ---- ------ ------ ------- --- -------
Total comprehensive
income - - - 2,877 21 2,898
Transactions with
owners:
Dividends - - - (288) - (288)
Share based payment
charges - - - 1,050 - 1,050
Exercise of share
options - 30 - - - 30
Shares issued as
consideration for
business combinations 1 - 1,499 - - 1,500
At 31 July 2020 116 6,373 5,420 41,078 38 53,025
------------------------ ---- ------ ------ ------- --- -------
Consolidated Cash Flow Statement
2020 2019
Notes GBP000 GBP000
----------------------------------------------- ------ --------- --------
Operating activities
Profit for the year 2,877 5,071
Finance income (76) (58)
Finance expense 79 21
Depreciation 1,882 831
(Profit) / loss on disposal of plant
and equipment (12) 12
Non cash exceptional items (320) (99)
Other operating income (376) (260)
Amortisation of intangible assets 3,599 2,251
Effect of foreign exchange adjustments 21 17
Share of result of equity accounted investees 309 174
Income tax charge 1,234 1,488
Share based payment charges 1,050 1,034
----------------------------------------------- ------ --------- --------
Operating cash inflow before changes
in working capital 10,267 10,482
Movement in inventories (49) (128)
Movement in trade and other receivables 5,121 (1,349)
Movement in trade and other payables (3,875) 4,877
Cash generated from operations 11,464 13,882
Interest received 76 58
Interest paid (79) (21)
Income tax paid (908) (1,545)
----------------------------------------------- ------ --------- --------
Net cash flow from operating activities 10,553 12,374
----------------------------------------------- ------ --------- --------
Investing activities
Purchase of plant and equipment (387) (731)
Proceeds from disposal of plant and equipment 66 165
Acquisition of subsidiaries (net of cash
acquired) 7 (13,852) (6,757)
Payment of contingent consideration 8 (1,228) (2,149)
Equity investments and loans to investments - (400)
Net cash flow used in investing activities (15,401) (9,872)
----------------------------------------------- ------ --------- --------
Financing activities
Dividends paid 5 (288) (486)
Proceeds from exercise of share options 30 101
Lease liability payments (1,089) (342)
Lease receivable receipts 11 -
Net cash flow used in financing activities (1,336) (727)
----------------------------------------------- ------ --------- --------
Net (decrease)/increase in cash and cash
equivalents (6,184) 1,775 Cash and cash equivalents at the beginning of the year 24,104 22,329 Cash and cash equivalents at the end of the year 17,920 24,104 ----------------------------------------------- ------ --------- --------
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 2020 or the year ended 31 July 2019 within the meaning of sections 434 of the Companies Act 2006. The financial information set out herein has not been audited or reviewed by the auditors. The 2020 statutory accounts have not been finalised but this preliminary announcement has been prepared by the Directors based on the results and position which they expect will be reflected in the statutory accounts. The comparative information in respect of the year ended 31 July 2019 has been derived from the audited statutory accounts for the year ended on that date upon which an unmodified audit opinion was expressed and which did not contain a statement under section 498 (2) or (3) of the Companies Act 2006. The audited accounts will be posted to all shareholders in due course and will be available on the Group's website. A further announcement will be made at that time.
2 Basis of preparation (a) Statement of compliance
The consolidated financial statements have been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards ('IFRSs') as adopted by the EU and applicable law.
(b) Basis of measurement
The Accounts have been prepared under the historical cost convention, with the exception of the valuation of investments and contingent consideration which are included on a fair value basis.
(c) Functional and presentation currency
These consolidated financial statements are presented in sterling, which is the Group and Company's functional currency. All financial information presented in sterling has been rounded to the nearest thousand.
(d) Use of estimates and judgements
The preparation of financial statements in conformity with IFRSs requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision only affects that period, or in the period of the revision and future periods, if the revision affects both current and future periods.
(e) Accounting Developments
The Group and Company financial statements have been prepared and approved by the directors in accordance with International Financial Reporting Standards as adopted by the EU ("Adopted IFRSs"). The accounting policies have been applied consistently to all periods presented in the consolidated financial statements, unless otherwise stated.
Certain new standards, amendments and interpretations to existing standards have been published that are mandatory for the Group's accounting period beginning on or after 1 August 2019. The following new standards and amendments to standards are mandatory and have been adopted for the first time for the financial year beginning 1 August 2019:
-- IFRS 16 Leases -- IFRIC 23 Uncertainty over Income Tax Treatments -- IAS 28 Long-term interests in Associates and Joint Ventures (Amendments to IAS 28) -- Annual Improvements to IFRS 2015-2017 Cycle
These standards have not had a material impact on the Consolidated Financial Statements with the exception of the adoption of IFRS 16.
The Group has adopted IFRS 16 "Leases" from 1 August 2019. It has brought more leases on to the Balance Sheet eliminating the distinction between operating leases and finance leases, and recognising a right-of-use asset and a corresponding lease liability, except for those identified as low-value or having a remaining lease term of less than 12 months from the date of initial application. Rentals on operating leases which were previously charged to the income statement, have been replaced by depreciation charge on the asset and interest expense on the lease liability.
The Group has adopted IFRS 16 using the modified retrospective approach with the cumulative effect of initially adopting IFRS 16 recognised as an adjustment to retained earnings at 1 August 2019 with no restatement of comparative information. The Group has applied the practical expedient to grandfather the definition of a lease on transition. This means that it has applied IFRS 16 to all contracts entered into before 1 August 2019 and identified as leases in accordance with IAS 17 and IFRIC 4.
Instead of performing an impairment review on the right-of-use assets at the date of initial application, the Group has relied on its historical assessment as to whether leases were onerous immediately before the date of initial application of IFRS 16.
For those leases previously classified as finance leases, the right-of-use asset and lease liability are measured at the date of initial application at the same amounts as under IAS 17 immediately before the date of initial application.
The following new or revised standards and interpretations issued by the International Accounting Standards Board (IASB) have not been applied in preparing these accounts as their effective dates fall in periods beginning on or after 1 August 2020. These standards are not expected to have a significant impact on adoption.
-- Definition of a Business (Amendments to IFRS 3) -- Definition of Material (Amendments to IAS 1 and IAS 8) -- Conceptual Framework for Financial Reporting
For the year ended 31 July 2020, cash flows relating to the settlement of contingent consideration are included within investing activities in the Statement of Cash flows. For the year ended 31 July 2019, it was included within financing activities in the Statement of Cash Flows.
(f) Going concern
The Group is debt free and has substantial cash resources. At 31 July 2020 the Group had net cash and cash equivalents totalling GBP17.9m. The Board has prepared cash flow forecasts for the forthcoming year based upon assumptions for trading and the requirements for cash resources, these forecasts take into account reasonably possible changes in trading financial performance and have also factored in a continued reduced contribution from its Traffic & Data Services Division which has been impacted the most by Covid-19.
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
2020 2019
GBP000 GBP000
---------------------------- ------- -------
Rail Technology & Services 25,595 21,934
Traffic & Data Services 22,403 27,285
Total revenue 47,998 49,219
---------------------------- ------- -------
Revenue can also be analysed as follows:
2020 2019
GBP000 GBP000
------------------------------- ------- -------
Software and related services 18,840 14,839
Other 29,158 34,380
Total 47,998 49,219
------------------------------- ------- -------
Major customers
Transactions with the Group's largest customer represent 21% of the Group's total revenues (2019: 18%).
Geographic split of revenue
A geographical analysis of revenue is provided below:
2020 2019
GBP000 GBP000
------------------- ------- -------
United Kingdom 41,529 45,511
Europe 6,127 3,437
North America 57 106
Rest of the World 285 165
Total 47,998 49,219
------------------- ------- -------
b) Segmental analysis
The Group has divided its results into two segments being 'Rail Technology and Services' and 'Traffic & Data Services'. iBlocks Limited is included in 'Rail Technology and Services'.
The Group has a wide range of products and services and products and services for the rail industry, such as software, hosting services, consultancy and 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), whereas traffic data collection and event planning & traffic management have similar economic characteristics and distribution methods and so have been included within the Traffic & Data Services 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 Board of Directors, who review internal monthly management reports, budgets and forecast information as part of this. Accordingly, the Board of Directors are deemed to be the CODM.
Operating segments have then been identified based on the internal reporting information and management structures within the Group. From such information it has been noted that the CODM reviews the business as 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.
2020
Rail Technology
& Services Traffic
& Data Unallocated Total
Services
GBP000 GBP000 GBP000 GBP000
------------------------------------ ---------------- ----------- -------------- --------
Revenues
Total revenue for reportable
segments 25,595 22,403 - 47,998
Consolidated revenue 25,595 22,403 - 47,998
------------------------------------ ---------------- ----------- -------------- --------
Profit or loss
EBITDA for reportable segments 9,170 1,293 - 10,463
Amortisation of intangible
assets - - (3,599) (3,599)
Depreciation (648) (1,234) - (1,882)
Exceptional items (net) - - 115 115
Other operating income - - 376 376
Share-based payment charges - - (1,050) (1,050)
Interest receivable/payable(net) 31 (34) - (3)
Share of result of equity
accounted investees - - (309) (309)
------------------------------------ ---------------- ----------- -------------- --------
Consolidated profit before
tax 8,553 25 (4,467) 4,111
------------------------------------ ---------------- ----------- -------------- --------
2019
Rail Technology
& Services Traffic
& Data Unallocated Total
Services
GBP000 GBP000 GBP000 GBP000
------------------------------------ ---------------- ----------- -------------- --------
Revenues
Total revenue for reportable
segments 21,934 27,285 - 49,219
Consolidated revenue 21,934 27,285 - 49,219
------------------------------------ ---------------- ----------- -------------- --------
Profit or loss
EBITDA for reportable segments 6,932 3,582 - 10,514
Amortisation of intangible
assets - - (2,251) (2,251)
Depreciation (166) (665) - (831)
Exceptional items (net) (60) (1) 99 38
Other operating income - - 260 260
Share-based payment charges - - (1,034) (1,034)
Interest receivable/payable(net) - - 37 37
Share of result of equity
accounted investees - - (174) (174)
------------------------------------ ---------------- ----------- -------------- --------
Consolidated profit before
tax 6,706 2,916 (3,063) 6,559
------------------------------------ ---------------- ----------- -------------- --------
2020
Rail Technology Traffic
& Services & Data
Services Unallocated Total
GBP'000 GBP000 GBP000 GBP000
----------------------------------- -------------------------- ---------- -------------- --------
Assets
Total assets for reportable
segments (exc. cash) 5,551 4,842 - 10,393
Intangible assets and investments - - 55,465 55,465
Deferred tax assets - - 877 877
Cash and cash equivalents 11,254 4,676 1,990 17,920
Consolidated total assets 16,805 9,518 58,332 84,655
----------------------------------- -------------------------- ---------- -------------- --------
Liabilities
Total liabilities for reportable
segments 12,102 3,960 - 16,062
Deferred tax liabilities - - 8,234 8,234
Contingent consideration - - 7,334 7,334
Consolidated total liabilities 12,102 3,960 15,568 31,630
----------------------------------- -------------------------- ---------- -------------- --------
2019
Rail Technology Traffic
& Services & Data
Services Unallocated Total
GBP'000 GBP000 GBP000 GBP000
----------------------------------- -------------------------- ---------- -------------- ---------
Assets
Total assets for reportable
segments (exc. cash) 3,257 9,531 - 12,788
Intangible assets and investments - - 40,510 40,510
Deferred tax assets - - 667 667
Cash and cash equivalents 12,866 5,817 5,421 24,104
Consolidated total assets 16,123 15,348 46,598 78,069
----------------------------------- -------------------------- ---------- -------------- ---------
Liabilities
Total liabilities for reportable
segments (10,568) (7,435) - (18,003)
Deferred tax - - (5,942) (5,942)
Contingent consideration - - (6,183) (6,183)
Consolidated total liabilities (10,568) (7,435) (12,125) (30,128)
----------------------------------- -------------------------- ---------- -------------- ---------
4 Earnings per share
Basic earnings per share
The calculation of basic earnings per share at 31 July 2020 was based on the profit attributable to ordinary shareholders of GBP2,877,000 (2019: GBP5,071,000) and a weighted average number of ordinary shares in issue of 28,919,000 (2019: 28,521,000), calculated as follows:
Weighted average number of ordinary shares
In thousands of shares
2020 2019
Issued ordinary shares at 1 August 28,749 28,334
Effect of shares issued related to business
combinations 76 54
Effect of shares issued for cash 94 133
Weighted average number of shares at 31
July 28,919 28,521
--------------------------------------------- ------- -------
Diluted earnings per share
The calculation of diluted earnings per share at 31 July 2020 was based on profit attributable to ordinary shareholders of GBP2,877,000 (2019: GBP5,071,000) and a weighted average number of ordinary shares in issue after adjustment for the effects of all dilutive potential ordinary shares of 29,740,000 (2019: 29,387,000):
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 provide a comparison to similar businesses and are metrics used by Equities Analysts who cover the Group. The largest components of the adjusting items, being amortisation, and share based payment charges are deemed to be 'non cash' in nature, 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.
2020 2019
GBP'000 GBP'000
Profit attributable to ordinary shareholders 2,877 5,071
Amortisation of intangible assets 3,599 2,251
Share-based payment charges 1,050 1,034
Exceptional items (net) (115) (38)
Other operating income (376) (260)
Adjusted profit for EPS purposes 7,035 8,058
--------------------------------------------------- -------- --------
Weighted average number of ordinary shares
In thousands of shares
--------------------------------------------------- -------- --------
For the purposes of calculating Basic earnings
per share 28,919 28,521
Adjustment for the effects of all dilutive
potential ordinary shares 821 866
--------------------------------------------------- -------- --------
For the purposes of calculating Dilutive earnings
per share 29,740 29,387
--------------------------------------------------- -------- --------
Basic adjusted earnings per share 24.33p 28.25p
Diluted adjusted earnings per share 23.66p 27.42p
--------------------------------------------------- -------- --------
5 Dividends
The Group introduced a progressive dividend policy during previous years. The cash cost of the dividend payments is below:
2020 2019
GBP000 GBP000
-------------------------------------- ------- -------
Final dividend for 2017/18 of 0.9p
per share paid - 257
Interim dividend for 2018/19 of 0.8p
per share paid - 229
Final dividend for 2018/19 of 1.0p 288 -
per share paid
Total dividends paid 288 486
--------------------------------------- ------- -------
In February 2012, the Board implemented a progressive dividend policy. In view of the challenges and uncertainty caused by Covid-19, the Group decided not to pay an interim dividend for the six months ended 31 January 2020 and committed to reviewing it at the full year stage. The Board does not consider it appropriate to pay a final dividend this year. The impact on cash of not paying the dividend is around GBP0.6m. The Board is committed to restoring the progressive dividend policy in the future and will review this at the earliest appropriate opportunity.
6 Reconciliation of adjusted profit metrics
In addition to the statutory profit measures of Operating profit and profit before tax, the Group quotes Adjusted EBITDA and Adjusted profit. These figures are relevant to the Group and are provided to provide a comparison to similar businesses and are metrics used by Equities Analysts who cover the Group as they better reflect the underlying performance of the Group, and its ability to generate cash. The largest components of the adjusting items, being depreciation, amortisation, share based payments, and share of associates are 'non cash' items and so separately analysed in order to assist with the understanding of underlying trading. Adjusted EBITDA is defined as Earnings before finance income, tax, depreciation, amortisation, exceptional items, other operating income, and share-based payment charges and share of result of equity accounted investees. Adjusted EBITDA can be reconciled to statutory profit before tax as set out below:
2020 2019
GBP000 GBP000
------------------------------------- ------- -------
Profit before tax 4,111 6,559
Finance income / expense - net 3 (37)
Share-based payment charges 1,050 1,034
Exceptional items - net (115) (38)
Other operating income (376) (260)
Amortisation of intangible assets 3,599 2,251
Depreciation 1,882 831
Share of result of equity accounted
investees 309 174
Adjusted EBITDA 10,463 10,514
-------------------------------------- ------- -------
Adjusted profit is defined as Earnings before finance income, tax, amortisation, exceptional items, other operating income, share-based payment charges, and share of result of equity accounted investees. Adjusted profit can be reconciled to statutory profit before tax as set out below:
2020 2019
GBP000 GBP000
------------------------------------- ------- -------
Profit before tax 4,111 6,559
Finance income / expense - net 3 (37)
Share-based payment charges 1,050 1,034
Exceptional items - net (115) (38)
Other operating income (376) (260)
Amortisation of intangible assets 3,599 2,251
Share of result of equity accounted
investees 309 174
Adjusted profit 8,581 9,683
-------------------------------------- ------- -------
Adjusted EBITDA reconciles to adjusted profit as set out below:
2020 2019
GBP000 GBP000
----------------- -------- -------
Adjusted EBITDA 10,463 10,514
Depreciation (1,882) (831)
Adjusted profit 8,581 9,683
------------------ -------- -------
7 Acquisitions in the current year
On 10 March 2020 the Group acquired iBlocks, a UK based software company that specialises in the provision of smart ticketing solutions, automated delay repay and the development of mission critical back office systems that are used by the Rail Delivery Group, the wider community of train operating companies (TOCs) and the rail supply chain. This acquisition strategically aligns with our objective of strengthening our rail product portfolio in areas where we can offer a unique market proposition, gain access to strategically important partnerships and leverage the cross-selling opportunities that exist across our Rail Technology division. The Group believes that smart/account based ticketing and automated delay repay is a significant and natural growth area for the rail industry and that iBlocks are uniquely placed to help facilitate the move towards a paperless ticketing environment. The acquisition will enhance Tracsis Group's overall technology and software offering and should be significantly earnings enhancing.
The acquisition consideration comprised an initial cash payment of GBP12.5m which was funded out of Tracsis cash reserves and the issue of shares in Tracsis to a value of GBP1.5m. An additional payment of GBP3.0m was also made on a pound for pound basis to reflect the net current asset position of the business, alongside additional contingent consideration of up to GBP8.5m is payable subject to iBlocks achieving certain stretched profit financial targets in the three years post acquisition.
In the period to 9 March 2020, iBlocks generated revenue of GBP3.0m, Profit before Tax of GBP1.1m, and had net assets of GBP3.5m. The business is highly cash generative, debt free and benefits from an excellent reputation within its retained customer base and wider UK rail industry. Under the terms of the acquisition there is a three year earn out period during which Tracsis expects the business to achieve growth.
The contingent consideration could range from GBPnil to GBP8.5m depending on the financial performance over the three years since acquisition and the Directors concluded that GBP3.9m was the fair value of the contingent consideration payable at the acquisition date and GBP3.3m at the year end date.
In the period to 31 July 2020 iBlocks contributed revenue of GBP0.9m and pre tax profit of GBP0.2m to the Group's results, before amortisation of associated intangible assets and exceptional deal costs. If the acquisition had occurred on 1 August 2019, management estimates that the contribution to Group revenue would have been GBP2.7m and Group pre tax profit for the period of GBP0.8m. In determining these amounts, management has assumed that the fair value adjustments, determined provisionally that arose on the date of acquisition would have been the same if the acquisition had occurred on 1 August 2019. 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 that cannot readily be separately identified for the purposes of fair value accounting and includes the workforce of iBlocks.
The fair value adjustments arise in accordance with the requirements of IFRSs to recognise intangible assets acquired. In determining the fair values of intangible assets 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 GBP0.2m which are included within administrative expenses.
The acquisition had the following effect on the Group's assets and liabilities on the acquisition date:
Recognised
Pre-acquisition Fair value value on
carrying adjustments acquisition
amount
GBP000 GBP000 GBP000
---------------------------------------- ---------------- ------------ ------------
Intangible assets: Technology assets - 8,919 8,919
Intangible assets: Customer related
intangibles - 3,990 3,990
Tangible fixed assets 33 459 492
Cash and cash equivalents 1,603 - 1,603
Trade and other receivables 1,980 (275) 1,705
Trade and other payables (484) - (484)
Income tax receivable 185 - 185
Lease liabilities - (459) (459)
Deferred tax asset/(liability) 202 (2,453) (2,251)
---------------------------------------- ---------------- ------------ ------------
Net identified assets and liabilities 3,519 10,181 13,700
Goodwill on acquisition 7,109
---------------------------------------- ---------------- ------------ ------------
20,809
---------------------------------------- ---------------- ------------ ------------
Consideration paid in cash 15,455
Consideration paid: fair value of
shares issued 1,500
Fair value of contingent consideration
payable 3,854
Total consideration 20,809
---------------------------------------- ---------------- ------------ ------------
8 Contingent consideration
During the financial year, 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 businesses for a three year period post acquisition. The maximum amount payable is GBP8.5m, and the fair value of the amount payable was assessed at GBP3.9m at the acquisition date and GBP3.3m at the year end date.
During the previous financial year, the Group acquired Cash & Traffic Management Limited, 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 is GBP750,000 for Cash & Traffic Management Limited, EUR2,000,000 for Compass Informatics Limited and GBP7,900,000 for Bellvedi Limited. The fair value of the amount payable was assessed at GBP112,000 for Cash & Traffic Management Limited, GBP681,000 for Compass Informatics Limited and GBP3,193,000 for Bellvedi Limited.
During the financial year, contingent consideration of GBP348,000 was paid in respect of the Tracsis Travel Compensation Services Limited acquisition which was made in year ended 31 July 2018 (2019: GBP84,000), GBP491,000 in respect of the Cash & Traffic Management Limited acquisition which was made in year ended 31 July 2019 (2019: GBPnil), GBP332,000 in respect of the Compass Informatics Limited acquisition which was made in the year ended 31 July 2019 (2019: GBPnil), and GBP57,000 in respect of the Bellvedi Limited acquisition which was made in the year ended 31 July 2019 (2019: GBPnil)
At the balance sheet date, the Directors assessed the fair value of the remaining amounts payable which were deemed to be as follows.
2020 2019
GBP000 GBP000
---------------------------------------------- ------- -------
Tracsis Travel Compensation Services Limited
& Delay Repay Sniper Ltd 88 394
Cash & Travel Management Limited 112 600
Compass Informatics Limited 681 1,132
Bellvedi Limited 3,193 4,057
iBlocks Limited 3,260 -
7,334 6,183
---------------------------------------------- ------- -------
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. 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. The movement on contingent consideration can be summarised as follows:
2020 2019
GBP000 GBP000
---------------------------------------- ------------- --------
At the start of the year 6,183 3,265
Arising on acquisition 3,854 5,789
Cash payment (1,228) (2,149)
Fair value adjustment to Statement of
Comprehensive Income (1,475) (722)
At the end of the year 7,334 6,183
---------------------------------------- ---- -------- ----------
The ageing profile of the remaining liabilities can be summarised as follows:
2020 2019
GBP000 GBP000
------------------------------- ------- -------
Payable in less than one year 1,747 879
Payable in more than one year 5,587 5,304
Total 7,334 6,183
-------------------------------- ------- -------
9 Exceptional items
The Group incurred a number of exceptional items in 2020 and 2019 which are analysed as follows:
2020 2019
GBP000 GBP000
------------------------------------------------ -------- -------
Impairment losses
Non cash:
Goodwill and investment impairment 1,155 623
------------------------------------------------ -------- -------
Total impairment losses 1,155 623
Other
Non cash:
Contingent consideration fair value adjustment (1,475) (722)
Cash:
Disposal of non core data capture operation - (179)
Legal and professional fees in respect of
acquisitions 205 240
------------------------------------------------ -------- -------
Total other (1,270) (661)
Total exceptional items (115) (38)
------------------------------------------------ -------- -------
2020 2019
Split GBP000 GBP000
---------- ------- -------
Non cash (320) (99)
Cash 205 61
---------- ------- -------
Total (115) (38)
---------- ------- -------
2020
During 2020, the Group acquired iBlocks Limited and incurred GBP205,000 of exceptional deal related costs as a result. In addition, the Group reviewed the carrying value of the investment in Citi Logik Limited and concluded it was impaired, and as such a loss of GBP300,000 was recognised. A further impairment charge of GBP855,000 was also made against the remaining intangible assets of Tracsis Travel Compensation Services Limited. An exercise has additionally been completed to assess the fair value of contingent consideration payable at the year end date across recent acquisitions. An exceptional credit has been recognised in the year totalling GBP1,475,000 as a result of this exercise. These are all deemed to be exceptional items due to the size and volatility of the items which can vary significantly from year to year.
2019
During 2019, the Group acquired Compass Informatics Limited, Cash & Traffic Management Limited and Bellvedi Limited, and incurred GBP240,000 of exceptional deal related costs as a result. The Group also disposed of a small, non core data capture business with a net profit on disposal of GBP179,000. This operation had revenue in the period prior to its disposal of GBP0.3m and a profit/loss of GBPnil. The Group conducted a review of the remaining intangible assets which arose on the acquisition of Travel Compensation Services Limited (renamed Tracsis Travel Compensation Services Limited) and Delay Repay Sniper Limited. Following this review, the Group has determined that an impairment of GBP623,000 existed in goodwill. The contingent consideration related to this acquisition was also re-assessed, resulting in an exceptional credit to the Statement of Comprehensive Income of GBP722,000.
10 Annual Report and Annual General Meeting
The Company anticipates dispatching a copy of its annual report and accounts to all shareholders in early December 2020. 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 19 January 2021 at 1pm. In view of the current situation regarding Covid-19, it is unlikely that shareholders will be able to attend in person. Further details will be provided in due course.
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