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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% | 845.00 | 830.00 | 860.00 | 0.00 | 07:44:24 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Prepackaged Software | 82.02M | 6.81M | 0.2277 | 37.11 | 252.56M |
From Apr 2019 to Apr 2024
TIDMTRCS
RNS Number : 6837V
Tracsis PLC
10 April 2019
Tracsis plc
('Tracsis', 'the Company' or 'the Group')
Interim results for the six months ended 31 January 2019
Tracsis plc (AIM: TRCS), a leading provider of software and services for the rail, traffic data and wider transportation industries, is pleased to announce its interim results for the six months ended 31 January 2019.
Financial Highlights:
-- The Group continues to trade well, with a further period of profitable growth
-- Key financial metrics now reported under IFRS 15 and compared to last year are summarised as follows:
Hot Features
Premium
2019 under 2019 under 2018 actual Variance Variance
IFRS 15 IAS 18 IAS 18 under under IFRS
As reported IAS 18 15
Revenue GBP18.8m GBP19.1m GBP18.1m GBP1.0m GBP0.7m
EBITDA * GBP4.2m GBP4.4m GBP4.3m GBP0.1m (GBP0.1m)
Profit before GBP2.1m GBP2.3m GBP2.4m (GBP0.1m) (GBP0.3m)
Tax
-----------
-- Cash balances at 31 January 2019 of GBP18.7m (31 July 2018: GBP22.3m, 31 January 2018: GBP18.5m)
-- The business remains debt free with strong cash flow and cash conversion -- Proposed interim dividend increased by 14% to 0.8p per share (2018: 0.7p)
Operational Highlights:
-- Five-year Framework Agreement secured with a major Train Owning Group for our TRACS Enterprise product - Tracsis' largest software contract to date
-- Acquisitions of Compass Informatics Limited ("Compass") and Cash & Traffic Management Limited ("CTM") completed in the period (January 2019) - full impact will be felt in H2
-- Significant investment made in rail technology software development -- Remote Condition Monitoring business has traded well
-- Ontrac and Travel Compensation Services secured new multi-year software deals with UK rail clients
-- Traffic & Data Services division margin improvement strategy continues, and the division traded in line with expectations.
-- Chris Barnes joined the Group on 4 February as CEO Designate and will succeed John McArthur on 1 May as Group CEO
John McArthur, Chief Executive Officer, commented:
"This was another busy period for the Group and we have made good progress in delivering to our strategy of organic and acquisitive growth. We were pleased to have completed two acquisitions in the period which will benefit the second half of the financial year, and also secured a significant software contract which is strategically important for Tracsis and the wider rail industry. The Directors are pleased with the results for the period and the business is well placed to deliver full year results in line with market expectations, with the second half of the year expected to be stronger given the seasonality in the business and the contribution from the newly acquired businesses."
(*) Calculation unchanged from previous years and in line with broker forecasts and research coverage on Tracsis. Full definition and reconciliation in Note 9.
Enquiries:
Tracsis plc Tel: 0845 125 9162
John McArthur, CEO
Chris Barnes, CEO Designate
Max Cawthra, CFO
finnCap Ltd Tel: 020 7220 0500
Christopher Raggett/Scott Mathieson, Corporate Finance
Andrew Burdis, Corporate Broking
The information communicated in this announcement is inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No. 596/2014.
Chairman & Chief Executive Officer's Report
Introduction
The Group has again reported a further period of growth, with a good performance across both divisions which is in line with management expectations.
The Group adopted IFRS 15 for the first time this period, and the impact of this is summarised below:
2019 under 2019 under 2018 actual Variance Variance
IFRS 15 IAS 18 IAS 18 under under IFRS
As reported IAS 18 15
Revenue GBP18.8m GBP19.1m GBP18.1m GBP1.0m GBP0.7m
EBITDA GBP4.2m GBP4.4m GBP4.3m GBP0.1m (GBP0.1m)
Profit before GBP2.1m GBP2.3m GBP2.4m (GBP0.1m) (GBP0.3m)
Tax
Cash GBP18.7m GBP18.7m GBP18.5m GBP0.2m GBP0.2m
-----------
Trading Progress and Prospects
A summary of performance in the period is as follows:
Rail Technology & Services
Summary segment results:
Revenue GBP9.9m (H1 2018: GBP9.2m) EBITDA GBP3.5m (H1 2018: GBP3.5m) Profit before Tax GBP3.5m (H1 2018: GBP3.4m)
Software & Consultancy (including Ontrac)
Total revenues from the Group's rail software, hosting and consulting offerings were GBP7.9m (2018: GBP7.7m) taking account of all of the various revenue streams across our TRACS, Ontrac, COMPASS, Retail & Operations product suites and consultancy. Software sales once again benefited from high renewal rates for existing products. In January 2019, we were pleased to announce a significant five-year Framework Agreement with a major Train Owning Group (which operates several Train Operating Company (TOC) franchises) for our TRACS Enterprise product. This roll out is well underway and revenues from this contract are expected to be realised in the second half of the financial year and beyond, assuming roll out across the client owning Group's other TOCs continues as planned.
We were also pleased to secure a significant order for data hosting services and software licences with another major rail client. The order was predominantly a renewal and extension of existing arrangements over a two year period, with a value in excess of GBP2m.
The Group has invested heavily in its technology base with incremental development costs of c. GBP0.5m in the period, all of which have been expensed, and the benefits will be experienced in the second half of the financial year and beyond. In March 2019, post period end, the Group also relocated its Leeds headquarters to larger more modern offices that are far better suited to accommodate our expanding team and future growth ambitions.
Remote Condition Monitoring
Revenues of GBP2.0m were significantly ahead of the previous year (2018: GBP1.5m), which represents very solid trading in the core UK market. This was partly due to the end of Network Rail's Control Period 5 (CP5) which saw an increase in activity in this part of the Group. A small contribution was achieved from overseas sales in the United States which continues to be a target market and offers significant opportunities albeit with a longer sales cycle as we develop relationships with new customers who require time to familiarise themselves with the Group's offering.
Traffic & Data Services (T&DS)
Summary segment results:
Revenue GBP8.9m (H1 2018: GBP8.8m) EBITDA GBP0.7m (H1 2018: GBP0.8m) Profit before Tax GBP0.2m (H1 2018: GBP0.4m)
Overall trading was in line with expectations in the first half of the year, with the business typically performing much stronger in the second half of the financial year due to the timing of traffic surveys and outdoor events taking place. Given the acquisitions of Compass and CTM the seasonality in this part of the Group will continue to be biased to the second half of the year which is expected to be strong.
Given the timing of acquisitions made in January, the divisional results only include a small contribution in respect of the Compass and CTM with revenue of GBP0.25m and a small loss which was fully anticipated.
Tracsis Traffic Data secured a major contract in London, which was a collaboration with Vivacity Labs (a Tracsis investee company), to deliver a compelling solution to the end client. Further roll out of the Vivacity Machine Learning software is expected in the second half of the financial year. In addition, the addition of Compass analytics to the product and service portfolio will enhance the overall data offering, and the strategy is to sell Compass products and services to existing Tracsis based customers in the UK whilst continuing to expand within its domestic Irish market.
Tracsis Passenger Counts again performed well, and its development of analysis software that allows for automatic train load data (i.e. passenger counting) to be taken directly from trains currently in service has continued to generate good sales. SEP Events has continued to trade well, though as always the majority of revenue and profit from this business will be delivered over the summer months. The integration of CTM remains ongoing, and the Directors are confident that synergy benefits will be realised in the fullness of time.
Overseas
The Group's acquisition of Compass Informatics, which is discussed in more detail below, increases our Ireland presence significantly and is the first overseas acquisition that the Group has made. Progress in North America, which remains the Group's principal focus outside of the UK, remains ongoing with further sales generated from a key client and a growing pipeline of client interest.
Dividend
The Group is committed to the progressive dividend policy that it adopted in 2012. The Directors propose an interim dividend of 0.8p per share, a 14% increase on the 0.7p paid in the interim period last year and will mark the 15th successive period of this policy. The dividend will be paid on 3 May 2019 to shareholders on the register on 26 April 2019.
Acquisitions
We were pleased to have completed two acquisitions in the period, both of which will enhance the offering for our Traffic & Data Services division.
On 15 January 2019 we acquired Compass, a long-established Dublin based business which we have known for a number of years now and is a natural fit for our Traffic & Data Services division in terms of our strategy of improving our data service. This acquisition, our first overseas transaction, strengthens the product and service offerings to our client base in the UK and also benefit those existing clients retained by Compass in Ireland, and offers potential benefit and cross-sell potential to Tracsis' existing transport clients. Compass is a software development and data analytics company that specialises in combining geographical information systems (GIS), location technologies, data analytics and field computing. The business works across a variety of sectors but derives most of its revenue from transport, asset management, planning, and environmental customers.
The acquisition consideration comprised an initial cash payment of EUR3.15m which was funded out of Tracsis cash reserves and the issue of shares in Tracsis to a value of EUR350k. An additional payment of circa EUR0.6m will be made on a euro for euro basis to reflect the net current asset position of the business, alongside additional contingent consideration of up to EUR2.0m is payable subject to Compass achieving certain stretched financial targets in the three years post acquisition.
On 16 January 2019, we acquired CTM, a well-established provider of event traffic planning, admission control, and a range of other event-related services to some of the UK's largest and most prestigious event clients. CTM is highly complementary to the Tracsis Traffic & Data Services division with good cross-sell potential along with clear synergy benefits with Tracsis' existing SEP Events business which was an excellent acquisition for Tracsis, that should lead to margin improvement in the fullness of time.
CTM has an excellent track record of organic growth, client retention and profitability over many years. The acquisition consideration comprised an initial cash payment of GBP1.3m which will be funded out of Tracsis cash reserves and the issue shares in Tracsis to a value of GBP0.15m, along with an additional payment of circa GBP0.45m to reflect the net current asset position of the business. Additional contingent consideration of up to GBP0.75m is payable subject to CTM achieving certain stretch financial targets in the two years post acquisition.
Integration of both newly acquired businesses is well underway. Due to the timing of the acquisitions, only a small contribution from the acquired businesses was made in the period, with the full six month impact coming in the second half of the financial year.
Furthermore, the Group exercised a GBP0.3m warrant in Vivacity Labs increasing the Group's equity stake to 28% and also participated in a fundraising for Citi Logik for GBP0.1m, which rounded off a busy period of acquisitions and investments. The Group remains debt free and continues to benefit from a strong market reputation with a good pipeline of potential acquisition opportunities.
Income statement
A summary of the Group's results is set out below.
Unaudited Unaudited Unaudited Audited
Six months Six months Six months Year
ended ended ended ended
31 January 31 January 31 January 31 July
2019 2019 2018 2018
IFRS 15 IAS 18 IAS 18 IAS 18
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- ----------- ----------- ----------- --------
Revenue 18,750 19,055 18,077 39,834
Adjusted EBITDA (note 9) 4,239 4,407 4,306 9,425
Adjusted Pre-Tax Profit (note
9) 3,873 4,041 3,917 8,665
Profit before tax 2,121 2,289 2,382 8,275
------------------------------- ----------- ----------- ----------- --------
Sales revenue is analysed further below:
Unaudited Unaudited Unaudited Audited
Six months Six months Six months Year
ended ended Ended Ended
31 January 31 January 31 January 31 July
2019 2019 2018 2018
IFRS 15 IAS 18 IAS 18 IAS 18
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- ----------- ----------- ----------- --------
Rail Technology & Services 9,895 10,053 9,249 18,968
Traffic & Data Services 8,855 9,002 8,828 20,866
Total revenue 18,750 19,055 18,077 39,834
---------------------------- ----------- ----------- ----------- --------
Balance sheet
The Group continues to have significant levels of cash and remains debt free. Cash balances at 31 January were GBP18.7m (31 January 2018: GBP18.5m, 31 July 2018: GBP22.3m), and cash conversion levels continue to be good.
During the period, GBP3.1m was paid in respect of the Compass and CTM acquisitions (net of cash acquired), and also contingent consideration in respect of the Ontrac acquisition of GBP2.1m was paid.
A summary of cash flows is set out below:
Six months Six months Year
ended ended ended
31 January 31 January 31 July
2019 2018 2018
GBP'000 GBP'000 GBP'000
----------------------------------------- ----------- ----------- --------
Net cash flow from operating activities 2,400 4,303 10,602
Net cash used in investing activities (6,002) (1,215) (3,193)
Net cash (used in) / from financing
activities (24) 52 (430)
Movement during the period (3,626) 3,140 6,979
----------------------------------------- ----------- ----------- --------
Board changes
As announced previously, Chris Barnes, CEO Designate, joined Tracsis on 4 February 2019 and the transitioning process from John McArthur is well underway and proceeding to plan. Chris will succeed John and Group CEO on 1 May. John will continue to work with Tracsis in a part-time advisory capacity with a remit of advising and assisting on further M&A which continues to be an integral part of the Tracsis growth strategy.
Outlook
The first half of the financial year was busy on a number of fronts in delivering the Group's growth strategy of both organic and acquisition. The Directors are pleased with the performance which included good progress such as the completion of two acquisitions, securing and commencing delivery of a major software contract, and good trading across the Group. The management team is focussed on delivering a second half performance in line with market expectations, and the second half of the year is expected to be stronger given the seasonality in the business and also due to the second half including a contribution from the newly acquired businesses.
Chris Cole John McArthur Non-Executive Chairman Chief Executive Officer 10 April 2019
Tracsis plc
Condensed consolidated interim income statement for the six months ended 31 January 2019
Unaudited Unaudited Audited
6 months ended 31 January 6 months Year ended
2019 ended 31 31 July
January 2018
2018
Note Continuing Acquisitions Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 4 18,499 251 18,750 18,077 39,834
Cost of sales (7,011) (96) (7,107) (7,489) (16,623)
------------------------------------- ----- ----------- ------------- -------- ---------- ------------
Gross profit 11,488 155 11,643 10,588 23,211
Administrative costs (9,005) (406) (9,411) (8,120) (14,727)
Adjusted EBITDA * 4 4,265 (26) 4,239 4,306 9,425
Depreciation (363) (3) (366) (389) (760)
------------------------------------- ----- ----------- ------------- -------- ---------- ------------
Adjusted profit ** 3,902 (29) 3,873 3,917 8,665
Amortisation of intangible
assets (952) (38) (990) (837) (1,774)
Other operating income - - - - 214
Share-based payment charges (467) (7) (474) (612) (1,193) ------------------------------------- ----- ----------- ------------- -------- ---------- ------------ Operating profit before exceptional items 2,483 (74) 2,409 2,468 5,912 Exceptional items - (177) (177) - 2,572 ------------------------------------- ----- ----------- ------------- -------- ---------- ------------ Operating profit 2,483 (251) 2,232 2,468 8,484 Finance income 29 - 29 9 19 Finance expense (9) - (9) (29) (27) Share of result of equity accounted investees (131) - (131) (66) (201) Profit before tax 2,372 (251) 2,121 2,382 8,275 Taxation (424) - (424) (482) (1,029) ------------------------------------- ----- ----------- ------------- -------- ---------- ------------ Profit for the period 1,948 (251) 1,697 1,900 7,246 ------------------------------------- ----- ----------- ------------- -------- ---------- ------------ Other comprehensive income - - - - - Total recognised income for the period 1,948 (251) 1,697 1,900 7,246 ------------------------------------- ----- ----------- ------------- -------- ---------- ------------ Earnings per ordinary share Basic 5 6.86p (0.89p) 5.97p 6.76p 25.70p Diluted 5 6.64p (0.86p) 5.78p 6.55p 24.85p
* 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 9
** 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 9
Tracsis plc
Condensed consolidated interim balance sheet as at 31 January 2019
Unaudited Unaudited Audited
At 31 January At 31 January At 31 July
2019 2018 2018
Note GBP'000 GBP'000 GBP'000
------------------------------------------- ----- -------------- -------------- -------------
Non-current assets
Property, plant and equipment 2,476 2,264 2,181
Intangible assets 31,550 23,621 26,223
Investments - equity 350 250 250
Loans due from associated undertakings 250 250 250
Investments in equity accounted investees 1,141 1,107 972
Deferred tax assets 634 573 602
------------------------------------------- ----- -------------- --------------
36,401 28,065 30,478
------------------------------------------- ----- -------------- -------------- -----------
Current assets
Inventories 357 137 253
Trade and other receivables 8,330 7,583 7,329
Cash and cash equivalents 18,703 18,490 22,329
------------------------------------------- ----- -------------- -------------- -----------
27,390 26,210 29,911
------------------------------------------- ----- -------------- -------------- -----------
Total assets 63,791 54,275 60,389
------------------------------------------- ----- -------------- -------------- -----------
Non-current liabilities
Hire-purchase contracts 138 111 121
Contingent consideration payable 10 2,700 - 1,100
Deferred tax liabilities 4,520 3,576 3,875
7,358 3,687 5,096
------------------------------------------- ----- -------------- -------------- -----------
Current liabilities
Hire-purchase contracts 119 306 157
Trade and other payables 10,879 8,473 10,316
Contingent consideration payable 10 834 4,718 2,165
Current tax liabilities 495 747 546
------------------------------------------- ----- -------------- -------------- -----------
12,327 14,244 13,184
------------------------------------------- ----- -------------- -------------- -----------
Total liabilities 19,685 17,931 18,280
------------------------------------------- ----- -------------- -------------- -----------
Net assets 44,106 36,344 42,109
------------------------------------------- ----- -------------- -------------- -----------
Equity attributable to equity holders of the Company
Called up share capital 114 113 113
Share premium reserve 6,314 6,132 6,243
Merger reserve 3,627 3,010 3,160
Retained earnings 34,051 27,089 32,593
------------------------------------------- ----- -------------- -------------- -----------
Net assets 44,106 36,344 42,109
------------------------------------------- ----- -------------- -------------- -----------
Tracsis plc - Consolidated statement of changes in equity
For the six months ended 31 January 2019
Share
Share Premium Merger Retained
Capital Reserve Reserve Earnings Total
Unaudited GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- ---------- ---------- ---------- ----------- --------
At 1 August 2017 112 5,948 3,010 24,577 33,647
Profit for the six month
period ended 31 January
2018 and total comprehensive
income - - - 1,900 1,900
Transactions with owners:
Share based payment
charges - - - 612 612
Exercise of share options 1 184 - - 185
At 31 January 2018 113 6,132 3,010 27,089 36,344
------------------------------- ---------- ---------- ---------- ----------- --------
Audited
-------------------------------- ---- ------ ------ --------
At 1 August 2017 112 5,948 3,010 24,577 33,647
Profit for the year
ended 31 July 2018 and
total comprehensive
income - - - 7,246 7,246
Transactions with owners:
Dividends - - - (423) (423)
Share based payment
charges - - - 1,193 1,193
Exercise of share options 1 295 - - 296
Shares issued as consideration
for business combinations - - 150 - 150
At 31 July 2018 113 6,243 3,160 32,593 42,109
-------------------------------- -------- ------ ------ -------- --------
Unaudited
At 1 August 2018 113 6,243 3,160 32,593 42,109
Adjustment on initial
application of IFRS
15 (net of tax) - Note
3 - - - (713) (713)
Profit for the six month
period ended 31 January
2019 and total comprehensive
income - - - 1,697 1,697
Transactions with owners:
Share based payment
charges - - - 474 474
Exercise of share options 1 71 - - 72
Shares issued as consideration
for business combinations - - 467 - 467
At 31 January 2019 114 6,314 3,627 34,051 44,106
-------------------------------- -------- ------ ------ -------- --------
Tracsis plc
Condensed consolidated interim statement of cash flows for the six months to 31 January 2019
Unaudited Unaudited
Six months Six months Audited
to to Year ended
31 July
31 Jan 2019 31 Jan 2018 2018
Note GBP'000 GBP'000 GBP'000
--------------------------------------------- ----- ------------ ------------ ------------
Operating activities
Profit for the period 1,697 1,900 7,246
Finance income (29) (9) (19)
Finance expense 9 29 27
Depreciation 366 389 760
Loss on disposal of plant & equipment - - 17
Non-cash exceptional items - - (2,653)
Other operating income - - (214)
Amortisation of intangible assets 990 837 1,774
Share of result of equity accounted
investees 131 66 201
Income tax charge 424 482 1,029
Share based payment charges 474 612 1,193
--------------------------------------------- ----- ------------ ------------ ------------
Operating cash inflow before changes
in working capital 4,062 4,306 9,361
Movement in inventories (104) 102 (14)
Movement in trade and other receivables (126) 897 1,259
Movement in trade and other payables (847) (369) 1,411
--------------------------------------------- ----- ------------ ------------ ------------
Cash generated from operations 2,985 4,936 12,017
Interest received 29 9 19
Interest paid (9) (29) (27)
Income tax paid (605) (613) (1,407)
--------------------------------------------- ----- ------------ ------------ ------------
Net cash flow from operating activities 2,400 4,303 10,602
--------------------------------------------- ----- ------------ ------------ ------------
Investing activities
Purchase of plant and equipment (445) (229) (509)
Proceeds from disposal of plant and
equipment - 37 53
Acquisition of subsidiaries (net of
cash acquired) 11 (3,092) - (1,714)
Equity investments and loans to investments (400) (700) (700)
Payment of contingent consideration 10 (2,065) (323) (323)
--------------------------------------------- ----- ------------ ------------ ------------
Net cash flow used in investing activities (6,002) (1,215) (3,193)
--------------------------------------------- ----- ------------ ------------ ------------
Financing activities
Dividends paid - - (423)
Proceeds from the exercise of share
options 72 185 296
Hire purchase repayments (96) (133) (303)
--------------------------------------------- ----- ------------ ------------ ------------
Net cash flow from / (used in) financing
activities (24) 52 (430)
--------------------------------------------- ----- ------------ ------------ ------------
Net increase in cash and cash equivalents (3,626) 3,140 6,979
Cash and cash equivalents at beginning
of period 22,329 15,350 15,350
Cash and cash equivalents at end of
period 18,703 18,490 22,329
--------------------------------------------- ----- ------------ ------------ ------------
Notes to the consolidated interim report
For the six months ended 31 January 2019
1 Basis of preparation
Tracsis plc (the 'Company') is a company domiciled in England. The condensed consolidated interim financial report of the Company as at and for the six months ended 31 January 2019 comprises the Company and its subsidiaries (together referred to as the 'Group'). The principal activities of the Group are the provision of software, services and technology for the rail industry ('Rail Technology & Services'), along with traffic surveys, event planning and traffic management, and data analytics including software development ('Traffic Data & Services') (see note 4).
The condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended 31 July 2018, which have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union.
The interim financial information for each of the six month periods ended 31 January 2019 and 31 January 2018 has not been audited and does not constitute statutory accounts within the meaning of section 435 of the Companies Act 2006. The information for the year ended 31 July 2018 does not constitute statutory accounts within the meaning of section 435 of the Companies Act 2006, but is based on the statutory accounts for that year, on which the Group's auditors issued an unqualified report and which have been filed with the Registrar of Companies.
The principal risks and uncertainties are unchanged from the previous year end, are expected to be largely unchanged for the remainder of the financial year, and are as disclosed on pages 9 to 12 of the Annual Report & Accounts for the year ended 31 July 2018. The Board considers risks on a periodic basis and has maintained the key risks as follows, on a Group wide basis:
-- Changes to the structure of the UK rail industry -- Competition -- Reduced government spending -- Reliance on certain key customers -- Impact of Brexit negotiations and resulting UK trading position -- Attraction and retention of key employees -- Delays to project delivery -- Technological changes -- Customer pricing pressure -- Health & Safety -- Brand reputation
Further detail on risks is provided in the Annual Report & Accounts for the year ended 31 July 2018.
The condensed consolidated interim financial information was approved for issue on 10 April 2019.
2 Accounting Policies
The accounting policies applied by the Group in these interim financial statements are the same as those applied by the Group in its audited consolidated financial statements for the year ended 31 July 2018 and which will form the basis of the 2019 Annual Report except as described below. The basis of consolidation is set out in the Group's accounting policies in those financial statements.
The preparation of the interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Estimates and judgements are continually evaluated and are based on historical experience and other factors, such as expectations of future events and are believed to be reasonable under the circumstances. Actual results may differ from these estimates. In preparing these interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those applied to the audited consolidated financial statements for the year ended 31 July 2018.
3 Changes in accounting policies
The following amendments to financial reporting standards were adopted from 1 August 2018, the start of the new financial year. None of them have had a significant impact on the Group other than IFRS 15 whish is detailed in further detail below:
-- IFRS 2 'Share-based payment' - amendments clarifying how to account for certain types of share-based payment transactions
-- IFRS 9 'Financial instruments' - introduces new requirements for classification and measurement of financial assets and financial liabilities, impairment methodology and hedge accounting.
-- IFRS 15 'Revenue from contracts with customers' - provides a single model for measuring and recognising
-- revenue arising from contracts with customers, unless the contracts are in the scope of other standards, such as IAS 17. It supersedes all existing revenue requirements in IFRS.
-- Annual Improvements to IFRSs 2014-2016 Cycle (Amendments to IFRS 1 and IAS 28)
The following new amendments to standards were in issue but are not yet effective for the financial year beginning 1 August 2018:
-- IFRS 16 'Leases' - provides a single lessee accounting model, specifying how leases are recognised, measured, presented and disclosed
IFRS 15
The Group adopted IFRS 15 with effect from 1 August 2018, using the cumulative effect method, under which the comparative information is not restated. The impact of adopting this is set out below, but can be summarised as the removal of certain accrued income balances to be replaced with contract assets, and also the reversal of work in progress assessed under the stage of completion method regarding certain major software project implementations. The net impact was a charge to reserves of GBP713,000 which can be summarised as follows:
As previously IFRS 15 Adjustment Under IFRS
reported at 31 July 15 as at
at 31 July 2018 31 July 2018
2018 GBP'000 GBP'000
GBP'000
Trade and other receivables 7,329 (146) 7,183
Trade and other payables (10,316) (765) (11,081)
Current tax liabilities (546) 198 348
-------------------
Retained earnings (32,593) 713 31,880
-------------------
Impact on the condensed consolidated interim income statement for the six months ended 31 January 2019
Amounts without
adoption
of IFRS 15
As reported Adjustments
GBP'000 GBP'000 GBP'000
Revenue 18,750 305 19,055
Cost of sales (7,107) (137) (7,244)
-------------------------------------- -------------- -------------- ----------------
Gross profit 11,643 168 11,811
Administrative costs (9,411) - (9,411)
-------------------------------------- -------------- -------------- ----------------
Adjusted EBITDA 4,239 168 4,407
Depreciation (366) - (366)
-------------------------------------- -------------- -------------- ----------------
Adjusted profit 3,873 168 4,041
Amortisation of intangible assets (990) - (990)
Share-based payment charges (474) - (474)
-------------------------------------- -------------- -------------- ----------------
Operating profit before exceptional
items 2,409 168 2,577
Exceptional items (177) - (177)
-------------------------------------- -------------- -------------- ----------------
Operating profit 2,232 168 2,400
Finance income 29 - 29
Finance expense (9) - (9)
Share of result of equity accounted
investees (131) - (131)
Profit before tax 2,121 168 2,289
Taxation (424) (32) (456)
-------------------------------------- -------------- -------------- ----------------
Profit for the period and total
recognised income for the period 1,697 136 1,833
-------------------------------------- -------------- -------------- ----------------
Impact on the condensed consolidated interim balance sheet as at 31 January 2019:
Amounts
without
adoption
As reported Adjustments of IFRS
15
GBP'000 GBP'000 GBP'000
------------------------------------------- -------------- -------------- ----------
Non-current assets
Property, plant and equipment 2,476 - 2,476
Intangible assets 31,550 - 31,550
Investments - equity 350 - 350
Loans due from associated undertakings 250 - 250
Investments in equity accounted investees 1,141 - 1,141
Deferred tax assets 634 - 634
------------------------------------------- -------------- --------------
36,401 - 36,401
------------------------------------------- -------------- -------------- ----------
Current assets
Inventories 357 - 357
Trade and other receivables 8,330 156 8,486
Cash and cash equivalents 18,703 - 18,703
------------------------------------------- -------------- -------------- ----------
27,390 156 27,546
------------------------------------------- -------------- -------------- ----------
Total assets 63,791 156 63,947
------------------------------------------- -------------- -------------- ----------
Non-current liabilities
Hire-purchase contracts 138 - 138
Contingent consideration payable 2,700 - 2,700
Deferred tax liabilities 4,520 - 4,520
7,358 - 7,358
------------------------------------------- -------------- -------------- ----------
Current liabilities
Hire-purchase contracts 119 - 119
Trade and other payables 10,879 (923) 9,956
Contingent consideration payable 834 - 834
Current tax liabilities 495 230 725
------------------------------------------- -------------- -------------- ----------
12,327 (693) 11,634
------------------------------------------- -------------- -------------- ----------
Total liabilities 19,685 (693) 18,992
------------------------------------------- -------------- -------------- ----------
Net assets 44,106 849 44,955
------------------------------------------- -------------- -------------- ----------
Equity attributable to equity holders of the
Company
Called up share capital 114 - 114
Share premium reserve 6,314 - 6,314
Merger reserve 3,627 - 3,627
Retained earnings 34,051 849 34,900
------------------------------------------- -------------- -------------- ----------
Net assets 44,106 849 44,955
------------------------------------------- -------------- -------------- ----------
4 Segmental analysis
The Group has divided its results into two segments being 'Rail Technology and Services' and 'Traffic & Data Services'. The companies acquired during the period, Compass Informatics Limited, and Cash & Traffic Management Limited are reported within the 'Traffic & Data Services' division.
In accordance with IFRS 8 'Operating Segments', the Group has made the following considerations to arrive at the disclosure made in these financial statements.
IFRS 8 requires consideration of the Chief Operating Decision Maker ("CODM") within the Group. In line with the Group's internal reporting framework and management structure, the key strategic and operating decisions are made by the Board of Directors, who review internal monthly management reports, budgets and forecast information as part of this. Accordingly, the Board of Directors are deemed to be the CODM.
Operating segments have then been identified based on the internal reporting information and management structures within the Group. From such information it has been noted that the CODM reviews the business as a single operating segment, receiving internal information on that basis. The management structure and allocation of key resources, such as operational and administrative resources, are arranged on a centralised basis.
Sales revenue is summarised below:
Six months Six months Year
ended ended Ended
31 January 31 January 31 July
2019 2018 2018
GBP'000 GBP'000 GBP'000
---------------------------- ----------- ----------- --------
Rail Technology & Services 9,895 9,249 18,968
Traffic & Data Services 8,855 8,828 20,866
Total revenue 18,750 18,077 39,834
---------------------------- ----------- ----------- --------
A geographical analysis of revenue is provided below:
Six months Six months Year
ended 31 ended 31 ended
January January 31 July
2019 2018 2018
GBP'000 GBP'000 GBP'000
------------------- ----------- ----------- ---------
United Kingdom 17,834 17,282 38,388
North America 101 194 260
Rest of the World 815 601 1,186
Total 18,750 18,077 39,834
------------------- ----------- ----------- ---------
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.
Six months ended 31 January 2019
Rail Technology Traffic
& Services & Data Unallocated
Services Total
GBP000 GBP000 GBP000 GBP000
--------------------------------------- ---------------- ---------- -------------- --------
Revenues
Total revenue for reportable
segments 9,895 8,855 - 18,750
Consolidated revenue 9,895 8,855 - 18,750
--------------------------------------- ---------------- ---------- -------------- --------
Profit or loss
EBITDA for reportable segments 3,562 677 - 4,239
Amortisation of intangible
assets - - (990) (990)
Depreciation (69) (297) - (366)
Exceptional items - (177) - (177)
Share-based payment charges - - (474) (474)
Share of result of equity accounted
investees - - (131) (131)
Interest receivable/payable(net) - - 20 20
--------------------------------------- ---------------- ---------- -------------- --------
Consolidated profit before tax 3,493 203 (1,575) 2,121
--------------------------------------- ---------------- ---------- -------------- --------
Six months ended 31 January 2018
Rail Technology Traffic
& Services & Data Unallocated
Services Total
GBP000 GBP000 GBP000 GBP000
--------------------------------------- ---------------- ---------- -------------- --------
Revenues
Total revenue for reportable
segments 9,249 8,828 - 18,077
Consolidated revenue 9,249 8,828 - 18,077
--------------------------------------- ---------------- ---------- -------------- --------
Profit or loss
EBITDA for reportable segments 3,536 770 - 4,306
Amortisation of intangible
assets - - (837) (837)
Depreciation (67) (322) - (389)
Share-based payment charges - - (612) (612)
Share of result of equity accounted
investees - - (66) (66)
Interest receivable/payable(net) - - (20) (20)
--------------------------------------- ---------------- ---------- -------------- --------
Consolidated profit before tax 3,469 448 (1,535) 2,382
--------------------------------------- ---------------- ---------- -------------- --------
Year ended 31 July 2018
Rail Technology Traffic
& Services & Data
Services Unallocated Total
GBP000 GBP000 GBP000 GBP000
------------------------------------ -------------------------- ---------- -------------- ---------
Revenues
Total revenue for reportable
segments 18,968 20,866 - 39,834
Consolidated revenue 18,968 20,866 - 39,834
------------------------------------ -------------------------- ---------- -------------- ---------
Profit or loss
EBITDA for reportable segments 6,802 2,623 - 9,425
Amortisation of intangible
assets - - (1,774) (1,774)
Depreciation (135) (625) - (760)
Exceptional items 2,572 - - 2,572
Other operating income - - 214 214
Share-based payment charges - - (1,193) (1,193)
Interest receivable/payable(net) - - (8) (8)
Share of results of equity
accounted investees - - (201) (201)
Consolidated profit before tax 9,239 1,998 (2,962) 8,275
------------------------------------ -------------------------- ---------- -------------- ---------
31 January 2019
Rail Technology Traffic
& Services & Data
Services Unallocated Total
GBP'000 GBP000 GBP000 GBP000
------------------------------------ -------------------------- ---------- -------------- -----------
Assets
Total assets for reportable
segments (exc. cash) 5,330 5,833 - 11,163
Intangible assets and investments - - 33,291 33,291
Deferred tax assets - - 634 634
Cash and cash equivalents 8,335 3,710 6,658 18,703
Consolidated total assets 13,665 9,543 40,583 63,791
------------------------------------ -------------------------- ---------- -------------- -----------
Liabilities
Total liabilities for reportable
segments (7,933) (3,698) - (11,631)
Deferred tax - - (4,520) (4,520)
Contingent consideration - - (3,534) (3,534)
Consolidated total liabilities (7,933) (3,698) (8,054) (19,685)
------------------------------------ -------------------------- ---------- -------------- -----------
31 January 2018
Rail Technology Traffic
& Services & Data
Services Unallocated Total
GBP'000 GBP000 GBP000 GBP000
----------------------------------- -------------------------- ---------- -------------- ---------
Assets
Total assets for reportable
segments (exc. cash) 4,699 5,285 - 9,984
Intangible assets and investments - - 25,228 25,228
Deferred tax assets - - 573 573
Cash and cash equivalents 8,189 1,919 8,382 18,490
Consolidated total assets 12,888 7,204 34,183 54,275
----------------------------------- -------------------------- ---------- -------------- ---------
Liabilities
Total liabilities for reportable
segments (7,126) (2,511) - (9,637)
Deferred tax - - (3,576) (3,576)
Contingent consideration - - (4,718) (4,718)
Consolidated total liabilities (7,126) (2,511) (8,294) (17,931)
----------------------------------- -------------------------- ---------- -------------- ---------
31 July 2018
Rail Technology Traffic
& Services & Data
Services Unallocated Total
GBP'000 GBP000 GBP000 GBP000
----------------------------------- -------------------------- ---------- -------------- ---------
Assets
Total assets for reportable
segments (exc. cash) 3,142 6,621 - 9,763
Intangible assets and investments - - 27,695 27,695
Deferred tax assets - - 602 602
Cash and cash equivalents 5,673 3,520 13,136 22,329
Consolidated total assets 8,815 10,141 41,433 60,389
----------------------------------- -------------------------- ---------- -------------- ---------
Liabilities
Total liabilities for reportable
segments (6,489) (4,651) - (11,140)
Deferred tax - - (3,875) (3,875)
Contingent consideration - - (3,265) (3,265)
Consolidated total liabilities (6,489) (4,651) (7,140) (18,280)
----------------------------------- -------------------------- ---------- -------------- ---------
5 Earnings per share
Basic earnings per share
The calculation of basic earnings per share for the Half Year to 31 January 2019 was based on the profit attributable to ordinary shareholders of GBP1,697,000 (Half Year to 31 January 2018: GBP1,900,000, Year ended 31 July 2018: GBP7,246,000) and a weighted average number of ordinary shares in issue of 28,406,000 (Half Year to 31 January 2018: 28,121,000, Year ended 31 July 2018: 28,196,000), calculated as follows:
Weighted average number of ordinary shares
In thousands of shares
Six months Six months Year
ended 31 ended 31 ended
January January 31 July
2019 2018 2018
Issued ordinary shares at start of period 28,334 27,964 27,964
Effect of shares issued related to business
combinations 7 - 14
Effect of shares issued for cash 65 157 218
Weighted average number of shares at end
of period 28,406 28,121 28,196
--------------------------------------------- ----------- ----------- ---------
Diluted earnings per share
The calculation of basic earnings per share for the Half Year to 31 January 2019 was based on the profit attributable to ordinary shareholders of GBP1,697,000 (Half Year to 31 January 2018: GBP1,900,000, Year ended 31 July 2018: GBP7,246,000) and a weighted average number of ordinary shares in issue after adjustment for the effects of all dilutive potential ordinary shares of 29,359,000 (Half Year to 31 January 2018: 29,010,000, Year ended 31 July 2018: 29,159,000).
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. A reconciliation of this figure is provided below:
Six months Six months Year
ended 31 ended 31 ended
January January 31 July
2019 2018 2018
GBP'000 GBP'000 GBP'000
Profit attributable to ordinary shareholders 1,697 1,900 7,246
Amortisation of intangible assets 990 837 1,774
Share-based payment charges 474 612 1,193
Exceptional items 177 - (2,572)
Other operating income - - (214)
---------------------------------------------- ----------- ----------- ---------
Adjusted profit for EPS purposes 3,338 3,349 7,427
---------------------------------------------- ----------- ----------- ---------
Weighted average number of ordinary shares
In thousands of shares
---------------------------------------------- ----------- ----------- ---------
For the purposes of calculating Basic
earnings per share 28,406 28,121 28,196
Adjustment for the effects of all dilutive
potential ordinary shares 29,359 29,010 29,159
---------------------------------------------- ----------- ----------- ---------
Basic adjusted earnings per share 11.75p 11.91p 26.34p
Diluted adjusted earnings per share 11.37p 11.54p 25.47p
---------------------------------------------- ----------- ----------- ---------
6 Seasonality
The Group has completed two acquisitions towards the end of the first half of the financial year and so only a small contribution from these businesses has been experienced, with the full impact to be realised in the second half of the year which will impact on the specific H1-H2 split.
The Group offers a wide range of products and services within its overall suite, meaning that revenues can fluctuate depending on the status and timing of certain sales. Some of these are exposed to high levels of seasonality for example:
-- The Group's Traffic & Data Services division derives significant amounts of revenue from work taking place at certain times of the year and is highly exposed to seasonality, in particular for SEP and CTM which has a very high level of seasonality based on the timing of events, but also Traffic Data where work typically takes place when the weather conditions;
-- Ontrac performs some significant software development projects and the specific timing of these can vary depending on the commercial terms;
-- Revenues from remote condition monitoring are also driven by the size and timing of significant orders received from major customers;
-- Finally, the timing of certain software licence renewals, new sales, and also major project implementations along with consultancy offerings can also impact on when work is performed, revenues are delivered and therefore recognised.
As such, the overall Group continues to be exposed to a high degree of seasonality throughout the year and reporting period, with the current year expected to be even more pronounced due to the timing and nature of the acquisitions made in the first half.
7 Dividends
As part of the Group's commitment to a progressive dividend policy adopted in 2012, the Directors recommend an interim dividend payment of 0.8p per share, with a total expected value of c. GBP228k based on the number of shares in issue at the date of this interim report.
The cash cost of the dividend payments made is shown below:
Six months Six months Year
ended 31 ended 31 ended
January January 31 July
2019 2018 2018
GBP000 GBP000 GBP000
--------------------------------------- ------------ ------------ ---------
Final dividend for 2016/17 of 0.80p
per share paid - - 225
Interim dividend for 2017/18 of 0.70p
per share paid - - 198
Total dividends paid - - 423
--------------------------------------- ------------ ------------ ---------
The dividends paid or proposed in respect of each financial year ended 31 July is as follows:
2019 2018 2017 2016 2015 2014 2013 2012
GBP'000 GBP'000 GBP'000 GBP'000 GBP000 GBP000 GBP000 GBP000
----------------------------- ---------- ---------- ---------- ---------- --------- --------- -------- -------
Interim dividend for 2011/12
of 0.20p per share paid - - - - - - - 48
Final dividend for 2011/12
of 0.35p per share paid - - - - - - - 87
Interim dividend for 2012/13 - - - - - - 75 -
of 0.30p per share paid
Final dividend for 2012/13 - - - - - - 102 -
of 0.40p per share paid
Interim dividend for 2013/14 - - - - - 89 - -
of 0.35p per share paid
Final dividend for 2013/14 - - - - - 119 - -
of 0.45p per share paid
Interim dividend for 2014/15 - - - - 106 - - -
of 0.40p per share paid
Final dividend for 2014/15 - - - - 164 - - -
of 0.60p per share paid
Interim dividend for 2015/16 - - - 137 - - - -
of 0.50p per share paid
Final dividend for 2015/16 - - - 195 - - - -
of 0.70p per share paid
Interim dividend for 2016/17 - - 167 - - - - -
of 0.60p per share paid
Final dividend for 2016/17 - - 225 - - - - -
of 0.80p per share paid
Interim dividend for 2017/18 - 198 - - - - - -
of 0.70p per share paid
Final dividend for 2017/18 - 255 - - - - - -
of 0.90p per share paid
Interim dividend for 2018/19 228 - - - - - - -
of 0.80p per share proposed
----------------------------- ---------- ---------- ---------- ---------- --------- --------- -------- -------
The total dividends paid or proposed in respect of each financial year ended 31 July is as follows:
2019 2018 2017 2016 2015 2014 2013 2012
Total dividends paid per
share n/a 1.6p 1.4p 1.2p 1.0p 0.8p 0.7p 0.55p
-------------------------- ------- ------ ------ ------ ------ ------ ----- ------
8 Related party transactions
The following transactions took place during the year with other related parties:
Purchase of Amounts owed to
goods and services related parties
H1 2019 H1 2018 FY 2018 H1 2019 H1 2018 FY 2018
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- -------- -------- -------- -------- -------- --------
Leeds Innovation Centre Limited
(1) 67 50 99 13 9 13
Ashtead Plant Hire Co Limited
(2) - 1 5 - - 1
Flash Forward Consulting Limited
(3) - - 28 - - 5
Citi Logik Limited (4) - 18 36 - - -
Nutshell Software Limited
(4) 107 44 107 - - 9
Vivacity Labs Limited (4) 101 31 17 69 36 -
Sale of Amounts owed by
goods and services related parties
H1 2019 H1 2018 FY 2018 H1 2019 H1 2018 FY 2018
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- -------- -------- -------- -------- -------- --------
WSP UK Limited (5) 1,337 1,202 3,180 38 49 883
Flash Forward Consulting Limited - - 1 - - -
(3)
Citi Logik Limited (4) - - 30 - - 36
(1) Leeds Innovation Centre Limited is a company which is connected to The University of Leeds. Tracsis plc rented its office accommodation, along with related office services, from this company. All transactions took place at arm's length commercial rates.
(2) Ashtead Plant Hire Co Limited is a subsidiary of Ashtead Group plc (Ashtead) of which Chris Cole was Chairman until he resigned from Ashtead on 11 September 2018. SEP Limited, one of the Group's subsidiaries purchased goods and services from Ashtead during the year. All transactions with Ashtead took place at arm's length commercial rates and were not connected to Mr Cole's position at Ashtead. SEP Limited traded with Ashtead prior to its acquisition by Tracsis plc.
(3) Flash Forward Consulting Limited was a related party as John Nelson served as a Non-executive Director of Tracsis plc until 1 November 2018 and was also Chairman of Flash Forward Consulting Limited.
(4) Citi Logik Limited, Nutshell Software Limited and Vivacity Labs Limited are related parties by virtue of the Group's shareholding in these entities.
(5) WSP UK Limited (WSP) is a company which is connected to Chris Cole who serves as non-executive Chairman of Tracsis plc and also of WSP Global Inc, WSP's parent company. Sales to WSP took place at arm's length commercial rates and were not connected to Mr Cole's position at WSP.
9 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.
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:
Six months Six months
ended 31 ended 31 Year ended
January 2019 January 2018 31 July
2018
GBP'000 GBP000 GBP000
------------------------------------- -------------- -------------- -------------
Profit before tax 2,121 2,382 8,275
Finance income / expense - net (20) 20 8
Share-based payment charges 474 612 1,193
Exceptional items 177 - (2,572)
Other operating income - - (214)
Amortisation of intangible assets 990 837 1,774
Depreciation 366 389 760
Share of result of equity accounted
investees 131 66 201
Adjusted EBITDA 4,239 4,306 9,425
-------------------------------------- -------------- -------------- -------------
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:
Six months Six months
ended 31 ended 31 Year ended
January 2019 January 2018 31 July
2018
GBP'000 GBP000 GBP000
----------------------------- -------------- -------------- -------------
Profit before tax 2,121 2,382 8,275
Finance income / expense -
net (20) 20 8
Share-based payment charges 474 612 1,193
Exceptional items 177 - (2,572)
Other operating income - - (214)
Amortisation of intangible
assets 990 837 1,774
Share of result of equity
accounted investees 131 66 201
Adjusted profit 3,873 3,917 8,665
------------------------------ -------------- -------------- -------------
Adjusted EBITDA reconciles to adjusted profit as set out below:
Six months Six months
ended 31 ended 31 Year ended
January 2019 January 2018 31 July
2018
GBP'000 GBP000 GBP000
----------------- -------------- -------------- -------------
Adjusted EBITDA 4,239 4,306 9,425
Depreciation (366) (389) (760)
Adjusted profit 3,873 3,917 8,665
------------------ -------------- -------------- -------------
10 Contingent Consideration
During the period, the Group acquired Compass Informatics Limited and Cash & Traffic Management Limited. Under the share purchase agreements, contingent consideration is payable which is linked to the profitability of the acquired businesses for a period post acquisition. The maximum amount payable is EUR2,000,000 in respect of Compass acquisition, over a three year period, and GBP750,000 in respect of the CTM acquisition over a two year period. The fair value of the amount payable was assessed at GBP600,000 for CTM plus a further GBP153,000 in respect of the balance of the completion accounts, and GBP1,000,000 in respect of Compass, and GBP581,000 in respect of the completion accounts.
During the period, contingent consideration of GBP7,000 was paid in respect of the SEP acquisition which was made in the year ended 31 July 2016, and GBP2,058,000 was paid in respect of the Ontrac acquisition which was made in the year ended 31 July 2016.
At the balance sheet date, the Directors assessed the fair value of the remaining amounts payable which were deemed to be as follows.
31 January 31 January 31 July
2019 2018 2018
GBP000 GBP000 GBP000
---------------------------------------------- ----------- ----------- --------
SEP Limited - 7 7
Ontrac Limited - 4,711 2,058
Tracsis Travel Compensation Services Limited
& Delay Repay Sniper Limited 1,200 - 1,200
Compass Informatics Limited 1,581 - -
Cash & Traffic Management Limited 753 - -
---------------------------------------------- ----------- ----------- --------
3,534 4,718 3,265
---------------------------------------------- ----------- ----------- --------
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 and involves assumptions about future profit forecasts.
The movement on contingent consideration can be summarised as follows:
31 January 31 January 31 July
2019 2018 2018
GBP000 GBP000 GBP000
--------------------------------------- ----------- ----------- --------
At the start of the year 3,265 5,041 5,041
Arising on acquisition 2,334 - 1,200
Cash payment (2,065) (323) (323)
Release to Statement of Comprehensive
Income - - (2,653)
At the end of the year 3,534 4,718 3,265
--------------------------------------- ----------- ----------- --------
The ageing profile of the remaining liabilities can be summarised as follows:
31 January 31 January 31 July
2019 2018 2018
GBP000 GBP000 GBP000
------------------------------- ----------- ----------- --------
Payable in less than one year 834 4,718 2,165
Payable in more than one year 2,700 - 1,100
Total 3,534 4,718 3,265
------------------------------- ----------- ----------- --------
11 Acquisitions in the period
a) Compass Informatics Limited & Compass Informatics UK Limited
On 15 January 2019, the Group acquired the entire issued share capital of Compass Informatics Limited (Ireland) and Compass Informatics UK Limited (collectively "Compass"). Compass is a systems development and data analytics company that specialises in combining geographical information systems (GIS), location technologies, data analytics and field computing. The business works across a variety of sectors but derives most of its revenue from transportation, asset management, planning, and environmental customers. The acquisition of Compass is the first overseas acquisition made by Tracsis and the Directors believe the business is highly complementary to the Traffic & Data Services division whilst also bringing potential benefit and cross-sell potential to Tracsis' existing transport clients.
In the year ended 30 September 2018, Compass generated revenue of EUR4.8m, Profit before Tax of EUR0.6m, and had net assets of EUR1.8m. The acquisition consideration comprises an initial cash payment of EUR3.15m and the issue of 53,204 new ordinary shares in Tracsis (issued at a price of 587p) to a value of EUR350k. An additional payment of circa EUR0.5m will be made on a euro for euro basis to reflect the net current asset position of the business (above a working capital hurdle) at completion and will be finalised in due course.
Additional contingent consideration of up to EUR2.0m is payable subject to Compass achieving certain stretched financial targets in the three years post acquisition.
The contingent consideration could range from EURnil to EUR 2.0m depending on the financial performance over the three years post acquisition and the Directors concluded that GBP1.0m was the fair value of the contingent consideration payable and included this in the balance sheet, along with GBP0.58m in respect of the completion accounts working capital.
The Group incurred acquisition related costs of GBP121,000 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 - 1,183 1,183
Intangible assets: Customer relationships - 2,313 2,313
Tangible fixed assets 25 - 25
Cash and cash equivalents 444 - 444
Trade and other receivables 533 - 533
Trade and other payables (273) - (273)
Income tax payable (53) - (53)
Deferred tax asset/(liability) 105 (594) (489)
------------------------------------------- ---------------- ------------ ------------
Net identified assets and liabilities 781 2,902 3,683
Goodwill on acquisition 1,021
------------------------------------------- ---------------- ------------ ------------
4,704
------------------------------------------- ---------------- ------------ ------------
Consideration paid in cash 2,811 Consideration paid: fair value of shares issued 312 Fair value of contingent consideration payable 1,581 Total consideration 4,704 ------------------------------------------- ---------------- ------------ ------------
The fair values above were provisional and arise in accordance with the requirements of IFRSs to recognise intangible assets acquired.
b) Cash & Traffic Management Limited
On 16 January 2019, the Group acquired the entire issued share capital of Cash & Traffic Management Limited ('CTM'). The Directors believe that the areas in which CTM operates are highly complementary to the Tracsis Traffic & Data Services Division with good cross-sell potential along with clear synergy benefits with Tracsis' existing SEP business that should lead to margin improvement in the fullness of time.
CTM is a provider of event traffic planning, admission control, and a range of other event-related services to some of the UK's largest and most prestigious event clients. The business employs 20 permanent staff, all of whom will remain with the business post transaction, and has an excellent track record of organic growth, client retention and profitability over many years. In the year ended 28 February 2018, CTM generated revenue of GBP5.5m, normalised Profit before Tax of GBP0.35m, and had net assets of GBP0.8m.
The acquisition consideration comprised an initial cash payment of GBP1.305m and the issue of 26,334 new ordinary shares in Tracsis (issued at a price of 589p) to a value of GBP0.155m, along with an additional payment of circa GBP0.5m to reflect the net current asset position of the business. Additional contingent consideration of up to GBP0.75m is payable subject to CTM achieving certain stretch financial targets in the two years post acquisition.
The contingent consideration could range from GBPnil to GBP0.75m depending on the financial performance over the two years post acquisition and the Directors concluded that GBP0.6m was the fair value of the contingent consideration payable and included this in the balance sheet, along with the balance of GBP0.15m in respect of the completion accounts working capital.
The Group incurred acquisition related costs of GBP56,000 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: Customer relationships - 1,768 1,768
Tangible fixed assets 116 - 116
Cash and cash equivalents 955 - 955
Trade and other receivables 488 - 488
Trade and other payables (372) - (372)
Income tax payable (75) - (75)
Deferred tax liability (24) (300) (324)
------------------------------------------- ---------------- ------------ ------------
Net identified assets and liabilities 1,088 1,468 2,556
Goodwill on acquisition 32
------------------------------------------- ---------------- ------------ ------------
2,588
------------------------------------------- ---------------- ------------ ------------
Consideration paid in cash 1,680
Consideration paid: fair value of
shares issued 155
Fair value of contingent consideration
payable 753
Total consideration 2,588
------------------------------------------- ---------------- ------------ ------------
The fair values above were provisional and arise in accordance with the requirements of IFRSs to recognise intangible assets acquired.
Statement of Directors' Responsibilities
The Directors confirm to the best of their knowledge that:
i) The condensed consolidated interim financial information has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the European Union;
ii) The interim management report includes a fair review of the information required by the FSA's Disclosure and Transparency Rules (4.2.7 R and 4.2.8 R).
Financial statements are published on the Group's website in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Group's website is the responsibility of the Directors. The Directors' responsibility also extends to the ongoing integrity of the financial statements contained therein.
The Directors of Tracsis plc and their functions are listed below.
Further information for Shareholders
Company number: 05019106
Registered office: Leeds Innovation Centre
103 Clarendon Road
Leeds
LS2 9DF
Directors: Chris Cole (Non-Executive Chairman)
John McArthur (Chief Executive Officer)
Max Cawthra (Group Finance Director)
Lisa Charles-Jones (Non-Executive Director)
Liz Richards (Non-Executive Director)
Mac Andrade (Non-Executive Director)
Company Secretary: Max Cawthra
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
IR BRGDSXBGBGCC
(END) Dow Jones Newswires
April 10, 2019 02:00 ET (06:00 GMT)
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