MIDAS SHARE TIPS: Rail operating software firm Tracsis could be ticket to rapid returns and it makes train travel more efficient

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Rail journeys can be long, frustrating and uncomfortable so commuters frequently bemoan the state of Britain’s railways, the trains that run on them and the cost of tickets.

Tracsis is helping to change this by making rail travel safer and more efficient. The company works with Network Rail and most of the major train operators and the shares, at 365p, should deliver rewards.

Most train firms run hugely complex operations with thousands of staff and rolling stock in numerous places at any one time. There are 28 train operators in Britain, as well as Network Rail, which owns and manages the tracks, signals, level crossings and other infrastructure.

On track: Tracsis, run by John McArthur, helps rail firms plan timetables

Several hundred thousand people are employed in the industry and the number of train drivers alone amounts to more than 40,000. Making sure trains are in the right place at the right time and that there are sufficient people to staff them can be extremely challenging. Drivers, for example, will make several journeys a day, so if one of them starts a shift late, the knock-on effects can permeate an entire network.

Tracsis provides train operators with software that helps them to create more effective timetables, allowing slack in the system where necessary and ensuring that there are extra staff at stations at busy times.

The company also provides operators with data and technical information to help them submit franchise bids. It works with several of the biggest firms and, because it provides technical information, it often helps different companies bid for the same franchise. The division is growing fast, particularly as seven franchises are up for renewal or extension next year and a further seven by 2019.

Tracsis has a long-standing relationship with Network Rail, too, providing information on signals, electrical points and level crossings. The company’s technology automatically alerts Network Rail if these vital functions are not performing as they should.

The system operates in real time and is designed to enhance safety and cut delays, enabling Network Rail to address electrical issues before they become major problems.

Last year, Tracsis began working with one of America’s biggest railway groups, which manages more track than Network Rail. The US firm is evaluating the Tracsis technology and the initial signs are promising. Chief executive John McArthur hopes to sell his early-warning system to other large railway firms in North America.

In an attempt to branch out from rail, McArthur bought data monitoring firm Sky High in April 2013. 

The business analyses people and vehicles at popular events and crowded motorways and provides advice to operators about how to minimise queues and traffic. 

The group has now been fully integrated into Tracsis and recently worked for the Commonwealth Games, using data analysis to alert drivers about the journey times to the Games’ venues. The data monitoring service is also used by local authorities to assess planning issues such as road extensions, new shopping malls and car parking spaces.

Tracsis joined AIM in 2007, when sales were less than £1 million and profits less than £250,000. 

Last week, the group delivered sales up 106 per cent to £22 million and profits up 51 per cent to £5 million for the year to July 31. Unusually for a fast-growing AIM company, Tracsis pays a dividend and this rose 14 per cent to 0.8p.

The company has made six acquisitions since floating and McArthur is seeking more, hoping to double revenues over the next few years. The group has a progressive dividend policy, too, so payouts should rise to about a penny next year and 1.2p in 2016.

Midas verdict: Tracsis has made consistent progress and the shares have done well in recent years. There is every reason to expect continued success. The company provides a service to rail firms designed to save money and provide a better experience for passengers. The data monitoring division has plenty of potential, too. Buy.

Traded on: AIM Ticker: TRCS Contact: 0845 125 9162 or tracsis.com