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

Interim results for the six months ended 31 January 2015

Tracsis plc (AIM: TRCS), is pleased to announce its interim results for the six months ended 31 January 2015.

Financial Highlights:

·      Revenue increased 22% to £12.0m (2014: £9.8m)

·      Adjusted Pre-tax Profit¹ increased 24% to £3.2m (2014: £2.6m)

·      Statutory Profit Before Tax increased 13% to £2.5m (2014: £2.3m)

·      Basic Earnings per share increased 19% to 8.00p (2014: 6.72p)

·      Cash balances at 31 January increased to £10.0m (31 July 2014: £8.9m, 31 January 2014 £7.6m)

·      Interim dividend of 0.4p per share proposed - an increase of 14% on last year

·      On track to deliver full year earnings in line with expectations

¹Profit before tax, plus amortisation, share based payments and exceptional items

Operational Highlights:

·      All parts of the Group performed well in the period trading at or ahead of plan

·      Strong contribution from the Group's Data Capture & Analytics offering

·      Good maiden performance from Datasys (acquired May 2014) which is trading above expectation underpinned by high levels of recurring software revenue

·      Remote Condition Monitoring activities in North America continue to plan with good progress being made:

o  Two year contract signed with US distributor on exclusive basis

o  Two additional technology pilots established with Class 1 rail operators

·      Rail & Bus Operations division trading well given UK rail franchising activity

John McArthur, Chief Executive Officer, commented: 

"We are pleased to report a further period of growth with all of our key performance indicators ahead of the same period last year.  Following a period of record growth in 2014, Tracsis has built upon this position with notable wins in overseas markets whilst achieving further growth in our domestic market. 

"We remain focused on driving organic growth and continue to appraise acquisition opportunities from a strong pipeline of qualified targets. The Board expects full year trading to be in line with expectations and remains confident about our forward growth prospects."

Enquiries:

Chairman & Chief Executive Officer's Report

A welcome from Chris Cole, Non-Executive Chairman

I am pleased to provide this joint report with John.  It is nearly a year since I was appointed Non-Executive Chairman and the ambitions and performance of the Company have aligned with my expectations.  The markets and sectors in which we work are dynamic and provide the Company with significant opportunity for growth and resilient diversification.  I enjoy working with Management and providing them with my experience and counsel to support their ambitions for the Company.

Business Summary

The Group has made a good start to the new financial year and as such, the Board is confident that our business is on track to deliver full year results in line with market expectations.  All of our key performance metrics such as revenue, profit before tax, and cash held at bank, are ahead of the same period last year demonstrating the performance of the Group in the past six months.

Rail & Bus Operations

Software

This part of the Group has performed very well in the period.  Revenues were significantly ahead of the previous year which reflects the contribution made from Datasys (acquired May 2014) in addition to good levels of organic growth.  The division is supported by high levels of recurring revenue that arise from annual software licences and we continue to work with the vast majority of Train Operating Companies (TOCs) in the UK.  Datasys made a significant contribution both on underlying revenue and profit but also in growing our technical resources in terms of manpower and expertise which will allow us to deliver larger scale, inter-Group initiatives in line with our product road map.  Elsewhere, the bulk of our organic growth was achieved from a large installation of our COMPASS product in Scandinavia which follows on from previous successful implementations in this part of Europe.  Overall software revenues of £3.04m were significantly ahead of the previous year's £1.21m which is a significant achievement for the Group given the recurring nature of this revenue.

Consultancy and services

Revenues in this part of the Group were slightly adverse to the previous year but the full year will benefit from the rail refranchising activity within the UK, where our consultancy team is currently aligned to support bidders for the Northern and Transpennine Express franchise bids.  In the first half, our team were involved with several other major projects outside of franchise bid work and more opportunities of this nature are expected in future as the Group broadens its range of consultancy activities.

Remote Condition Monitoring

This part of the Group performed extremely well in the previous financial year due to the fulfilment of a large order for a major UK based customer which Tracsis is under contract with through to 2018. We did not expect orders of comparable size for H1 of this financial year in view of the timing of spend under this Framework Agreement.  For this reason, although revenue in the period is adverse to the previous year we are pleased with the progress this division has made having successfully converted a number of smaller new customers.  Furthermore, post period end, we are pleased to report this Division received an additional UK Framework Agreement order for £1.1m which is due to be fulfilled in H2.

With regards activities in North America, Tracsis has now signed an exclusive distribution agreement with a US rail technology partner for two years subject to performance metrics.  Since signing this agreement we are pleased to announce an additional two US Class 1 pilots for the adoption of our RCM technology (hardware and software) and hope to announce further progress in due course.

The timing of adoption of RCM technology within large rail networks will vary by customer type and we are not anticipating a significant revenue contribution from the US in H2 this year. However, management believes seeding the US market with our technology at the earliest opportunity is the correct approach and that will lead to significant success in the fullness of time.  We remain bullish about our prospects in North America and other overseas territories and are pleased with the appetite shown by potential new customers to pilot our technology.

Data Capture & Passenger Counting

This part of the Group performed very well in the first half of the year and revenues of £6.95m were significantly ahead of the previous year (H1 2014: £5.4m).  Both Sky High and Tracsis Passenger Counts enjoyed buoyant starts to the new financial year reflecting revenue from a number of Framework Agreements, proactive account management across the client base, several ad hoc client wins, and also the continuation of a large data collection piece of work for a major UK Transport agency. This part of the Group has operations in Australia which traded in line with expectations.  In May of this year Sky High and Tracsis Passenger Counts will be formally rebranded as Tracsis Traffic & Data Services which underpins the integration of Sky High into the wider Tracsis Group.

Acquisitions

During the period, the Group appraised a number of acquisition opportunities against its strict investment criteria and continues to enjoy a strong pipeline of qualified opportunities.   The Board considers the Group is well placed to benefit further from such growth, thus utilising our financial strength.

Overseas

The Group continues to target overseas markets as a natural source of organic growth. Total overseas revenues amounted to £1.4m (H1 2014: £1.0m) with the majority of this coming from Sky High Australia. The business also delivered a major implementation for COMPASS in Scandinavia with a new client which followed on from successes in previous years and increased our footprint further in this territory.

Dividend

The Group is committed to following the progressive dividend policy that was adopted in previous years. The Directors propose an interim dividend of 0.40p per share, which is a 14% increase on the 0.35p paid in the corresponding period last year. The dividend will be paid on 8 May 2015 to shareholders on the register on 24 April 2015.

Income statement

A summary of the Group's results is set out below, which illustrates continued growth on the same period last year at all levels.

¹Earnings before finance income, tax, depreciation, amortisation, exceptional items and share-based payment charges 

²Profit before tax, plus amortisation, share based payments and exceptional items

Sales revenue is analysed further below:

* A high element of consultancy revenue is derived from the use of our software products.

Balance sheet

The Group continues to enjoy a very strong balance sheet, with no external borrowings and cash generation remains strong.  Cash balances have increased further by £1.1m in the period, from £8.9m at 31 July 2014 to £10.0m at 31 January 2015 with the principal elements of the movement being:

Outlook

The Group has performed well in the first half of our financial year and made good progress both with organic growth within the UK but also in terms of bedding down previous acquisitions whilst also expanding its influence in new overseas markets.  We remain on track to deliver full year results in line with market expectations and thank our team, customers and shareholders for their continued support.

Tracsis plc

Condensed consolidated interim income statement

For the six months ended 31 January 2015

*Earnings before finance income, tax, depreciation, amortisation, exceptional items and share-based payment charges 

Tracsis plc

Condensed consolidated interim balance sheet

As at 31 January 2015

Tracsis plc

Consolidated statement of changes in equity

For the six months ended 31 January 2015

Tracsis plc

Consolidated statement of changes in equity (continued)

For the six months ended 31 January 2015

Tracsis plc

Condensed consolidated interim statement of cash flows

for the six months ended 31 January 2015

Notes to the consolidated interim report

For the six months ended 31 January 2015

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 2015 comprises the Company and its subsidiaries (together referred to as the 'Group'). The principal activity of the group is solving a variety of resource optimisation, rail management, data capture, and reporting problems via the provision of a range of software, hardware, and associated high value technology led professional 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 2014, 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 2015 and 31 January 2014 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 2014 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 largely unchanged for the remainder of the financial year, and are as disclosed on pages 8 to 10 of the Annual Report & Accounts for the year ended 31 July 2014. The Board considers risks on a periodic basis and has updated the key risks as follows:

·      Rail industry structure changes

·      Competition

·      Reduced government spending

·      Reliance on certain key customers

·      Attraction and retention of key employees

·      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 2014.

The condensed consolidated interim financial information was approved for issue on 15 April 2015.

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 2014 and which will form the basis of the 2015 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 2014.

3          Changes in accounting policies

The following amendments to financial reporting standards were adopted from 1 August 2014, the start of the new financial year. None of them have had a significant impact on the Group:

·      IFRS 10: Consolidated Financial Statements

·      IFRS 11: Joint arrangements

·      IFRS 12: Disclosure of Interests in Other Entities

·      IAS 27: Separate Financial Statements

·      IAS 28: Investments in Associates and Joint Ventures

·      Annual Improvements to IFRSs - 2010-2012 cycle

·      Annual Improvements to IFRSs - 2011-2013 cycle

·      IAS 36 Amendments - Impairment of Assets

The following new amendments to standards were in issue but are not yet effective for the financial year beginning 1 August 2014 and are not currently relevant for the Group:

·      IFRS 15 - Revenue from contracts with customers (replacement of IAS11, IAS18, IFRIC13, IFRIC15, IFRIC18 and SIC-31) (effective 1 January 2017, not yet endorsed by EU).

·      IFRS 9 Amendments - Financial Instruments (replacement of IAS39) (effective 1 January 2015, not yet endorsed by EU).

4          Segmental analysis

The Group's revenue and profit was derived from its principal activity which is the solving a variety of data capture, reporting and resource optimisation problems along with the provision of a range of associated professional services.

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.  Due to the small size and low complexity of the business, profitability is not analysed in further detail beyond the operating segment level and is not divided by revenue stream.

The CODM reviews a split of revenue streams on a monthly basis and, as such, this additional information has been provided below.

A geographical analysis of revenue is provided below:

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.

5          Earnings per share

Basic earnings per share

The calculation of basic earnings per share for the Half Year to 31 January 2015 was based on the profit attributable to ordinary shareholders of £2,110,000 (Half Year to 31 January 2014: £1,715,000, Year ended 31 July 2014: £3,303,000) and a weighted average number of ordinary shares in issue of 26,370,000 (Half Year to 31 January 2014: 25,536,000, Year ended 31 July 2014: 25,608,000), calculated as follows:

Weighted average number of ordinary shares 

In thousands of shares

Diluted earnings per share

The calculation of basic earnings per share for the Half Year to 31 January 2015 was based on the profit attributable to ordinary shareholders of £2,110,000 (Half Year to 31 January 2014: £1,715,000, Year ended 31 July 2014: £3,303,000) and a weighted average number of ordinary shares in issue after adjustment for the effects of all dilutive potential ordinary shares of 27,626,000 (Half Year to 31 January 2014: 26,647,000, Year ended 31 July 2014: 26,559,000):

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:

6          Seasonality

The Group offers a 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 data capture and counting revenues are derived from work taking place at certain times of the year, and revenues from condition monitoring are also driven by the size and timing of significant orders received from major customers. Similarly, the timing of software licence renewals and new sales along with consultancy offerings can also impact on when work is performed, revenues are delivered and therefore recognised. As such, the overall Group remains exposed to a high degree of seasonality throughout the year and reporting period.

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 0.40p per share, with a total expected value of c. £106K 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:

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

8          Related party transactions

The following transactions took place during the year with other related parties:

Leeds Innovation Centre Limited is a company which is connected to The University of Leeds, a significant shareholder in Tracsis plc.  Tracsis plc rents its office accommodation, along with related office services, from this company.

WSP Group (WSP) is a company which is connected to Chris Cole who serves as non-executive Chairman of Tracsis plc and also of WSP. Sales to WSP took place at arm's length commercial rates, and were not connected to Mr Cole's position at WSP as the Group traded with WSP prior to his appointment at Tracsis in April 2014.

On 31 October 2014, WSP completed the acquisition of Parsons Brinckerhoff (PB) which made PB a related party of the Group from this date. One of the Group's subsidiary companies, (Sky High Technology Limited), traded extensively with PB prior to its acquisition by WSP as it carried out an agreement for a significant piece of data collection work for a UK transport agency which was entered into in May 2014. All transactions with PB took place at arm's length commercial rates, and were not connected to Mr Cole's position at WSP.

Disclosures in respect of sales to WSP as stated above have been made on the following basis:

H1 2014: WSP was not a related party for this period as Mr Cole was not appointed as a Director of Tracsis until 28 April 2014

FY 2014: Sales to WSP from 28 April 2014 being the date Mr Cole was appointed as a Director of Tracsis and WSP therefore became a related party to the Group

H1 2015: Sales to WSP since 1 August 2014, as WSP was a related party from this date, and sales to PB since 1 November 2014 as this is the date WSP acquired PB and therefore the date PB became a related party to the Group

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; and

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