Company Announcements

Tracsis plc

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

 

Audited results for the year ended 31 July 2024

 

Significant operational transformation, with continued growth in annual recurring revenues

 

Tracsis (LSE: TRCS), a leading transport technology provider, is pleased to announce its audited final results for the year ended 31 July 2024.

 

Financial Results (£'m)	2024	2023
Revenue	81.0	82.0	-1%
Adjusted EBITDA *	12.8	16.0	-20%
Adjusted EBITDA* %	15.7%	19.4%	-370bps
Cash	19.8	15.3
Adjusted diluted earnings per share *	25.1p	38.5p	-35%
Statutory Results
Operating profit	1.0	7.3	-87%
Profit before tax	1.0	7.1	-86%
Basic earnings per share	1.6p	22.8p	-93%
Final dividend per share	1.3p	1.2p	+8%
Total dividend per share	2.4p	2.2p	+9%

 

Financial Highlights:

·      Financial performance in line with revised guidance provided in the 13 June 2024 trading update**

·      Rail Technology & Services annual recurring and repeat revenue increased by 10% to £25.5m

·      Healthy cash generation and strong balance sheet to invest in further growth

·      £3.0m of exceptional costs related to Group transformation

·      Continuation of progressive dividend policy

 

Operational and Strategic Highlights:

·      New UK rail technology contracts awarded across smart ticketing & delay repay, safety & risk management, and operations & planning solutions

·      Pipeline of software opportunities increased by 200% across UK and North American markets

·      Completed deployment of new Train Dispatch product with a US commuter rail provider, opening up a large new product segment opportunity in North America

·      First intercity deployment of TRACS Enterprise now live with a large UK train operator

·      Transformed the Group's operating model, creating a scalable platform for accelerated growth and focusing the Group's products and services portfolio on higher-margin, growth activities

 

Current Trading and Outlook:

·      Activity levels increasing following the UK General Election, though some near-term variability in customer activity in the UK through H1

·      Network Rail Control Period 7 funding pressures impacting UK Remote Condition Monitoring hardware activity

·      Increases in UK national insurance and minimum wage will add cost from April 2025 and beyond; expected to impact FY25 EBITDA directly by c.£0.5m

·      Several large multi-year software opportunities in the latter stages of their procurement processes, which are expected to be awarded during FY25

·      Tracsis's products and services are well aligned with the new UK government's strategic plan for rail

·      Actions taken to transform the Group's operating model and accelerate pipeline growth leave it well positioned to deliver long-term growth

·      Evaluating M&A opportunities in line with disciplined criteria

 

 

Chris Barnes, Chief Executive Officer, commented:

 

"Despite our financial results for FY24 being impacted by the timing of the UK General Election and lower yard automation conversion in North America, we have made significant progress over the past 12 months in transforming our operating model and laying the foundations for our future growth.

 

We have delivered further growth in rail technology licence usage and annual recurring revenues, and have a large pipeline of new software opportunities in both the UK and North America, where long-term market drivers remain strong.

 

The UK Rail Industry remains in a period of transition as the new government prepares to provide further detail on its strategic vision for the railway. Tracsis' products and services are well placed to support this and we look forward to the legislation relating to Great British Railways that is expected in the coming months.

 

Some short-term headwinds remain across the UK Rail supply chain related to Control Period 7 funding restrictions from Network Rail, which is impacting our Remote Condition Monitoring hardware activity. The changes to national insurance and minimum wage legislation announced in the October Budget will bring additional cost into our business. We are working hard to mitigate these and are continuing to focus on converting our large opportunity pipeline and diversifying our client base both in the UK and internationally.

 

We are well positioned to deliver sustainable growth in FY25 and beyond. We have invested in upskilling our commercial, technical and delivery capabilities, and post year-end have delivered the successful go-live of a new Train Dispatch product in North America as well as the latest deployment of our TRACS Enterprise solution in the UK. We remain focused on delivering long-term value through the continued pursuit of both organic and acquisitive growth, supported by a strong balance sheet and healthy cash generation, and look to the future with confidence."

 

  

* In addition to statutory reporting, Tracsis plc reports alternative performance measures ("APMs") which are not defined or specified under the requirements of International Financial Reporting Standards ("IFRS"). These metrics adjust for certain items which impact upon IFRS measures, to aid the user in understanding the activity taking place across the Group's businesses. APMs are used by the Directors and management for performance analysis, planning, reporting and incentive purposes. A summary of APMs used and their closest equivalent statutory measures is given in note 9.

** 13 June 2024 trading update noted FY24 revenue range of between £80.0m and £82.0m and FY24 adjusted EBITDA* margin slightly higher than the 15.5% delivered in H1 24

 

Presentation and Overview videos

 

Tracsis is hosting an online presentation open to all investors on Friday 22 November 2024 at 1.00pm UK time. Anyone wishing to connect should register here: https://bit.ly/TRCS_FY24_results_webinar

 

A video overview of the results featuring CEO Chris Barnes and CFO Andy Kelly is available to view here: https://bit.ly/TRCS_FY24_overview

 

 

Enquiries
Tracsis plc	+44 (0)845 125 9162
Chris Barnes (CEO)
Andy Kelly (CFO)
Berenberg (Nominated Adviser, Corporate Broker & Financial Adviser)	+44 (0)20 3207 7800
Mark Whitmore / Richard Andrews / Mollie D'Arcy Rice James Thompson (QE)
Alma Strategic Communications	+44 (0)20 3405 0205
David Ison / Rebecca Sanders-Hewett / Joe Pederzolli / Sarah Peters	tracsis@almastrategic.com

 

Management Overview

Introduction

The Group has made good progress this year in executing its strategy to create a scalable platform for accelerated long-term growth.

As previously announced, our financial performance in the final quarter of FY24 was impacted by the timing of UK pre-General Election restrictions, as well as by lower than anticipated conversion of our Yard Automation opportunity pipeline in North America. As a result, full-year revenue and EBITDA were lower than we achieved in the prior year. This was a disappointing overall result, however the progress we have made against our key strategic focus areas positions the Group well to deliver growth in the next financial year and beyond.

Actions to transform the Group's operating model have been delivered to plan. Cost savings from these actions have been substantially re-invested in upskilling our commercial, technical and delivery capabilities, creating the foundations for future growth.

Year in review

Our activities this year have been focused in four key areas, as summarised below.

1. New contract wins, product deployments and continued growth in recurring and repeat revenue

Recurring and repeat revenue in the Rail Technology & Services Division increased by 10% to £25.5m, driven by strong growth in the UK from new contract wins and the deployment of contracts won in previous years.

Continued growth in smart ticketing: with the two new Pay As You Go ("PAYG") contracts with UK train operators announced with the FY23 results now successfully live, including the first EMV (contactless bankcard) deployment outside of Transport for London with Transport for Wales. The multi-year delay repay contract that was announced with the H1 2024 results has also now been fully deployed, and the pilot deployment of our unique PAYG mobile app ('Hopsta') is nearing completion.

Next funded phase of RailHub development has started: to expand the functionality of the safety and risk management platform in the UK, with go-live expected in early 2026.

First intercity deployment of TRACS Enterprise went live in November 2024 with a UK Train Operator. The next full deployment with another UK passenger operator is expected during H2 of the current financial year.

New wins secured post year end: including an expansion of our Remote Condition Monitoring hardware and software solution with a large US transit operator and, in the UK, new work across our Operations & Planning, Safety & Risk Management, and Customer Experience solutions that will start to deliver revenue in FY25.

2. Significant pipeline growth in UK and North American Rail Markets

Rail technology pipeline increased by 200% since 31 July 2023 following investment to enhance our commercial teams in the UK and North America. FY24 EBITDA includes the cost of this investment.

Deployment of new Train Dispatch system in North America completed with a US commuter rail customer in the first quarter of FY25. This opens up a large new product segment opportunity in North America where the industry is actively looking for new participants.

Digital transformation remains integral to the rail industry: as an enabler of a data-driven, customer-focused and safety-critical service and net zero future. We continue to see significant and enduring tailwinds in both the UK and North American markets and do not expect recent government changes to impact the long-term opportunity in either territory.

3. Transformation of the Group's operating model delivered to plan

Optimised our operating model: with a particular focus on enhancing our technology development and delivery capabilities to improve timeliness, quality, and repeatability. The Rail Technology UK business now operates under a single senior leadership team, and we are establishing a consistent groupwide approach to how we develop and deliver application software based on industry best practice. As part of this, we recruited a Chief Technology Officer to oversee all aspects of product development and architecture across the rail technology portfolio and have invested in our project delivery team.

Refocused the portfolio: on fast-growing, higher margin activities. As previously reported, the Group will no longer pursue new contracts for certain non-software related activities which are not aligned with these objectives. These activities are principally within the Transport Consultancy business in the UK and within part of the Rail Technology North America portfolio. This will enable the Group to deliver accelerated growth and long-term margin improvement.

Streamlining our footprint: with the closure of five operating locations to align with the Group's new organisational structure. Work to reduce our legal entity footprint will continue in FY25.

Upgraded operating systems and processes: including a single IT operating environment across our UK rail technology businesses to enhance the efficiency of our operations, better enable collaboration across the Group, and improve operational resilience. We have also implemented a new finance system that will deliver improved management information.

4. Focus on M&A as a core component of our growth strategy

Pursuit of acquisitions to supplement organic growth, with a focus on extending our software and technology footprint and enhancing recurring revenue growth. We have a pipeline of opportunities in the UK, North America and targeted overseas markets that are being evaluated in line with our disciplined criteria.

 

 

Progress against our strategic priorities

Tracsis' purpose is to 'make transport work'. Our business model remains focused on specialist product offerings that have high barriers to entry, are sold on a recurring basis under contract, and to a retained customer base that is largely blue chip in nature. Our strategy to achieve this is focused on four areas as outlined below.

 

Maximise Existing Product Footprint Expand our product footprint and increase annual recurring software revenue through the continual innovation and deployment of products and services, complemented by high quality delivery and an excellent close working relationship with our customers
Focus for FY 24	Progress since HY 24
·    Delivery of orderbook of rail technology contracts	·    Multi-year delay repay deployment now completed with UK TOC ·    First intercity deployment of TRACS Enterprise completed with UK TOC ·    One further full deployment of TRACS Enterprise due to go live during the current financial year
·    Grow pipeline of rail technology opportunities in UK and North America	·    Further growth in the pipeline of software opportunities. This has now increased by 200% since 31 July 2023 across UK and North American rail technology markets
·    Accelerate growth in North American market	·    Lower revenue than prior year due to lower revenue from contract milestones ·    Large software licence deployment for a new Train Dispatch product in the North American transit market completed. This is driving pipeline growth from both passenger and freight operators ·   Delivered the next phase of the ongoing expansion of our Remote Condition Monitoring hardware and software solution with a large US transit operator during Q1 of FY25
·    Continue to improve the quality, timeliness, and repeatability of future product delivery	·    Continued to enhance capabilities including recruitment of rail technology UK head of platforms, head of QA & test, head of software development, and head of project delivery

 

Expand Into New Markets Selling our products and services into new markets, including overseas, and expansion into selected sectors that share problems with the industries we currently serve
Focus for FY 24	Progress since HY 24
·    Continue to execute organic growth strategy	·    10% increase in Rail Technology & Services recurring and repeat revenue (FY24 vs prior year) ·    10% organic revenue growth in UK rail technology market (FY24 vs prior year) ·   Restructured Transport Consultancy business to focus on higher margin activities
·    Utilise data analytics, GIS and Earth Observation capabilities to deliver additional insight to our customers across the transportation sector	·    Area Monitoring System (AMS) developed by the Data Analytics/GIS business in collaboration with two European geospatial companies won the award for 'Data Innovation of the Year' at the 2024 Public Sector Digital Transformation Awards held in Dublin
·    Disciplined capital allocation for investment in software and technology products	·    First pilot deployment of Hopsta app nearing completion ·    Invested in Digital Track Warrant, which is a unique addition to our Train Dispatch product offering in North America ·    Pipeline of 'next generation' R&D opportunities being evaluated
Operate as 'OneTracsis' Enhanced integration and collaboration across the Group, increasing management capability and bandwidth, and improving our systems and processes, as key foundations to deliver our growth strategy
Focus for FY 24	Progress since HY 24
·    Transformation of the Group operating model	·    Transformation activities delivered to plan ·    Further headcount reductions actioned where roles were duplicated or no longer required ·    Closed three further operating locations as part of streamlining our operating footprint (five now closed in total) ·    Streamlining of legal entity footprint is ongoing
·    Alignment of group-wide systems and processes built around 'One Tracsis'	·    Finance and HR systems upgrade completed, to deliver improved management information
·    Continue to execute people strategy	·    Recruitment of Chief People Officer to support implementing a global delivery model
·    Continue to execute sustainability strategy aligned with our 2030 carbon neutral ambition	·    First external audit of groupwide ISO14001 (environmental management) certification completed with zero non-conformances ·    Carbon reduction plan completed. This will be published in early 2025
Enhance Growth Through Acquisition Supplementing organic growth with value accretive acquisitions that meet our disciplined investment criteria, supported by healthy cash generation and a strong balance sheet
Focus for FY 24	Progress since HY 24
·    Active pursuit of M&A to extend technology and data analytics footprint	·    Growth in M&A pipeline, focused on UK, North American and targeted overseas markets ·    Senior leadership role dedicated to M&A created as part of Group transformation ·    Several targets are being evaluated against our disciplined criteria

 

 

Financial Summary

Tracsis delivered Group revenue of £81.0m which was £1.0m (1%) lower than the prior year (2023: £82.0m).

As previously announced, the Group's trading performance for the year to 31 July 2024 includes the effect of the timing of the UK General Election that took place on 4 July 2024. This was preceded by a period of pre-election activity restrictions that impacted the Group's trading in the final two months of the financial year, principally across the UK Rail Technology, Transport Consultancy and Traffic Data businesses. We estimate that the total adverse impact of the UK General Election on FY24 Group revenue was c£2m. In addition, the prior year included c£4m of revenue that, as anticipated, did not repeat. £2m of this was perpetual licence revenue in the Rail Technology & Services Division as we continue to transition to an increasingly recurring revenue-focused model for new contract wins. The other c£2m was in the Data, Analytics, Consultancy & Events Division and related to Data Analytics/GIS contracts that did not repeat.

Divisional performance is explained in more detail in the 'Divisional Trading Progress and Prospects' section below.

Adjusted EBITDA* of £12.8m was £3.2m (20%) lower than prior year (2023: £16.0m). In addition to the lower overall revenue, this reflects the anticipated non-repeat of high margin perpetual licence revenue in the prior year, investment to enhance the Group's capabilities and to accelerate the growth of the Group's pipeline of large multi-year opportunities, and a significant margin decrease in the Transport Consultancy business that has now been restructured.

The Group has executed a programme of actions during the year to transform its operating model, better positioning it to deliver long-term scalable growth, increased annual recurring software revenue, and improved profitability. In the year to 31 July 2024, we have incurred £3.0m of costs in order to deliver this transformation. These are primarily related to headcount reductions where roles are duplicated or no longer required, IT transformation costs to embed industry best practice, enhancements to our cyber security provision and remediation of identified historic non-conformance, third party costs to support the upgrade of the Group's operating systems and processes, and costs associated with streamlining the Group's operating site footprint and legal entity structure. These costs have been reported as exceptional items so the underlying year on year trading performance of the Group can be more clearly understood. These actions have been substantially completed during the FY24 financial year. Actions to complete the streamlining of the Group's legal entity structure will continue through FY25. £2.7m of these transformation costs were cash items, of which £2.3m were outflows in the year to 31 July 2024. We expect the remaining cash outflow of c£0.4m during FY25.

Cost savings resulting from these actions have been substantially re-invested in upskilling our commercial, technical and delivery capabilities. This will better position the Group to convert and deliver a growing pipeline of multi-year software opportunities.

Statutory profit before tax of £1.0m is £6.1m lower than prior year (2023: £7.1m). This is principally driven by the £3.2m decrease in adjusted EBITDA*, and the £3.0m of exceptional costs relating to the transformation of the Group's operating model, both described above. The balance of the movement in profit before tax reflects the following items:

•     £nil of other exceptional costs (2023: £0.1m) representing the unwinding of previously discounted contingent consideration balances in accordance with IFRS accounting standards (2023: £0.7m). The prior year also included a net £0.6m decrease in the assessed value of contingent consideration based on the future expectations from previous acquisitions, that was not repeated this year;

•     £2.4m depreciation charge which is higher than the prior year following further investment to upgrade our IT infrastructure (2023: £2.1m);

•     £5.5m amortisation of intangible assets at a similar level to the prior year (2023: £5.6m);

•     £0.9m share based payment charges (2023: £1.2m);

•     <£0.1m other operating income (2024: £0.4m) being a lower level of R&D corporation tax credits in the UK, reflecting the fact that the Group substantially completed development work on its UK product portfolio during FY23; and

•     <£0.1m net finance income (2023: £0.1m expense)

Adjusted earnings per share decreased by 35% to 25.5 pence (2023: 39.4 pence). Statutory earnings per share decreased to 1.6 pence (2023: 22.8 pence) including the effect of the exceptional transformation costs recognised in the year.

Cash Generation

The Group continues to have significant levels of cash and has no debt. At 31 July 2024, the Group's cash balances were £19.8m (2023: £15.3m). Cash generation remains healthy.

Free cash flow* decreased to £5.4m (2023: £8.0m) after £2.3m of cash outflows relating to exceptional transformation costs (2023: £nil). Excluding these, free cash flow* was at a similar level to the prior year despite the lower level of adjusted EBITDA*. This reflects the following items:

•     A net £0.5m increase in working capital (2023: £2.7m increase) reflecting trading patterns including the impact of the UK General Election in the final two months of the year;

•     Net capital expenditure of £1.2m (2023: £1.5m) which principally relates to investment in upgrading our IT infrastructure, and the purchase of equipment to support high activity levels in Traffic Data & Events;

•     Net lease liability payments of £1.4m were slightly lower than the prior year (2023: £1.5m) as we start to rationalise our operating footprint;

•     Capitalised development costs of £0.5m (2023: £0.3m) including the Hopsta smart ticketing mobile app platform for our PAYG smart ticketing technology and the Digital Track Warrant in North America;

•     Tax paid of £1.7m was £0.4m lower than the prior year (2023: £2.1m); and

•     £0.2m net cash inflows from net interest received, proceeds from the exercise of share options, and the profit or loss on disposal of property, plant and equipment, at a similar level to the prior year (2023: £0.1m inflow).

Free Cash Flow*

	Year ended	Year ended
	31 July	31 July
	2024	2023
	£'m	£'m
Adjusted EBITDA *	12.8	16.0
Changes in working capital	(0.5)	(2.7)
Purchase of plant and equipment (net of proceeds from disposal)	(1.2)	(1.5)
Lease liability payments (net of lease receivable receipts)	(1.4)	(1.5)
Capitalised development costs	(0.5)	(0.3)
Tax paid	(1.7)	(2.1)
Other(1)	0.2	0.1
Free Cash Flow* before exceptional items	7.7	8.0
Cash outflows on exceptional items	(2.3)	-
Free Cash Flow*	5.4	8.0

 

⁽¹⁾ Includes net interest received or paid, profit on disposal of plant & equipment, and proceeds from exercise of share options

All material earn-outs were completed in the previous financial year, and there was no cash outflow in the year relating to contingent consideration on previous acquisitions (2023: £9.3m outflow). The final £0.3m tranche of deferred consideration for the 2021 acquisition of Flash Forward Consulting was paid in February 2024 (2023: £0.3m).

Dividends paid to shareholders were £0.7m (2023: £0.6m) and there was a £0.1m favourable impact from foreign exchange (2023: £0.3m favourable).

As a result, total cash balances increased by £4.5m to £19.8m.

* In addition to statutory reporting, Tracsis plc reports alternative performance measures ("APMs") which are not defined or specified under the requirements of International Financial Reporting Standards ("IFRS"). These metrics adjust for certain items which impact upon IFRS measures, to aid the user in understanding the activity taking place across the Group's businesses. APMs are used by the Directors and management for performance analysis, planning, reporting and incentive purposes. A summary of APMs used and their closest equivalent statutory measures is given in note 9.

 

Divisional Trading Progress and Prospects

 

Rail Technology & Services

Summary segment results:

Revenue                       £37.6m             (2023: £37.9m)             

Adjusted EBITDA*         £9.8m               (2023: £10.4m)             

Profit before Tax           £2.7m               (2023: £5.2m)               

 

The Rail Technology & Services Division delivered FY24 revenue 1% lower than prior year. This included the non-repeat of c£2m perpetual licence revenue in the prior year, as we continue to transition to an increasingly recurring revenue-focused model for new contract wins. In addition, there were lower levels of contract delivery revenue in North America, reflecting the timing of milestone delivery in the orderbook and lower than anticipated conversion of our Yard Automation opportunity pipeline.

There was strong organic growth in the UK, where revenue increased by 10% despite the effect of pre-election activity restrictions in the final two months of the year. Growth in this market included the benefit from new contract wins in the year and in the prior year. This, in turn, resulted in further strong growth in annual recurring and routinely repeating rail technology revenue for the Division as a whole, which increased by 10% to £25.5m.

Adjusted EBITDA* decreased by £0.6m to £9.8m (2023: £10.4m). In addition to the non-repeat of high margin perpetual licence revenue, this reflects targeted investment in enhancing the business's capabilities. This includes enhancing our commercial teams in both the UK and North America, and investing to expand and upskill our SaaS delivery capabilities. This investment has delivered significant growth in the pipeline of major software opportunities, and ensures that we have the operational capability to deliver these once secured. We estimate the opportunity pipeline across the UK and North American rail markets has increased by 200% since 31 July 2023.

Profit before tax decreased by £2.5m to £2.7m (2023: £5.2m) and includes £1.8m of exceptional transformation costs.

Rail Technology UK

Total revenues from the Group's Rail Technology UK business increased by 10% to £31.9m (2023: £29.0m). The non-repeat of £0.8m point in time revenue from software licence deployments in the prior year was more than offset by underlying growth driven primarily by our Rail Operations & Planning and Customer Experience product suites.

Growth in Rail Operations & Planning was driven by new contract wins across our suite of products, and orderbook delivery. Work has continued on delivering the orderbook of full TRACS Enterprise solutions. The first intercity deployment with a UK passenger operator was completed in November 2024. A further deployment with a UK passenger operator is scheduled to go live during FY25. Delivery timelines in this sector are typically determined in partnership with our customers based around combined resource availability. We continue to see a good pipeline of opportunities for this product with several UK train operators actively looking for new software solutions in this area.

Growth in Customer Experience revenue included the benefit from increased usage of our Pay As You Go ("PAYG") smart ticketing and delay repay solutions. This technology is well aligned with passenger requirements and with the UK Government's strategic intent to deliver increased PAYG, multi-modal ticketing. The two new PAYG contracts with UK train operators that were announced with the full year 2023 results have been fully delivered. The deployment with Transport for Wales ("TfW") is the first EMV (contactless bank card) deployment of this versatile solution on the UK's rail network outside of Transport for London. This will be integrated with our delay repay product to deliver an automated, frictionless experience for the customer. TfW intends to ultimately extend this offering to deliver a multi-modal PAYG solution including bus. The second deployment was a smartcard system with Merseyrail. Work has started on expanding this solution to include EMV deployment. We have also fully deployed the new multi-year delay repay contract that was announced with the H1 2024 results.

We have continued to invest in the deployment of a mobile app platform ('Hopsta') that puts this smart ticketing technology directly into the hands of the consumer and uses geofencing technology to avoid the requirement for expensive gateline infrastructure in stations. The first pilot deployment of this unique solution is nearing completion.

Having completed the roll-out of the RailHub safety and risk management platform across Network Rail and its supply chain in the prior year, we have now been contracted to deliver the next significant funded phase of development work to add further functionality to this platform. Work to deliver this started in the second half of the financial year.

Remote Condition Monitoring ("RCM") revenue was lower than the record achieved in the prior year. Performance in this product area is linked to the investment funding cycle within Network Rail which consists of 5 year 'Control Periods'. There was some softening of demand towards the end of Control Period 6 which ran to 31 March 2024. This has continued through the initial months of Control Period 7, where a tightening of financial management at Network Rail is impacting most of the UK rail supply chain⁽¹⁾. We are monitoring this closely and expect this will continue into 2025. Our order visibility in this product category is lower, and we now anticipate a lower overall level of RCM activity during FY25 based on current run rates.

Post year end, we secured and delivered a contract for the ongoing expansion of our RCM hardware and software solution with a large US transit operator. This is the third phase of a program of work that has been ongoing over the last three years with the objective to significantly improve asset performance and asset availability across their network.

Rail Technology North America

Revenue of £5.7m in Rail Technology North America was £3.2m lower than prior year (2023: £8.9m). This is attributable to two main factors. In the prior year we delivered a c£1.2m perpetual software licence deployment that was not repeated as anticipated. In addition, in the prior year we delivered £1.6m increased revenue from contract milestones based on delivery timelines in the orderbook.

Operational activity during the year was focused on delivering the full roll-out of the new Train Dispatch (PTC BOS⁽²⁾) with a US commuter rail customer. The full deployment of this solution was completed during the first quarter of FY25. The successful delivery of this large project that was in the orderbook when Tracsis acquired the business in 2022 will open a large new product segment opportunity for Tracsis in North America where the industry is actively looking for new participants. We continue to see strong pipeline growth for our Train Dispatch software from both passenger and freight operators.   

We have an installed base of customers for our Yard Automation product offering, where we continue to deliver upgrade and maintenance work. This product solution has a significant hardware component, sourced from third party manufacturers, and is therefore lower margin than the Train Dispatch software solutions. During FY24 the conversion of new Yard Automation opportunities was lower than we expected. Our focus in this market is on continuing to support our installed customer base, and post year end we have secured new orders with these customers.

Our strategic focus in North America is on growing and converting the pipeline of large software opportunities. Having invested in enhancing our sales team in this market, we have seen significant growth in the opportunity pipeline this year. There are some large opportunities currently in the latter stages of their procurement process that are expected to deliver revenue during H2 of the current financial year. Procurement and delivery timelines in this market are often determined by customers' operational requirements. There will likely be more volatility in the phasing of revenue growth in this market as we procure these opportunities and transition to a recurring revenue model.

⁽¹⁾ Source: Network Rail Board minutes (May 2024, published 30 August 2024) and Rail Industry Association Annual Conference (November 2024).

⁽²⁾ Positive Train Control Back Office Solution. This integrates Tracsis' Train Dispatching product with the Positive Train Control (PTC) family of automatic train protection systems in the US.

 

Data, Analytics, Consultancy & Events

 

Summary segment results:

 

Revenue                                   £43.4m             (2023: £44.1m)             

Adjusted EBITDA*                     £2.9m               (2023: £5.6m)               

(Loss) / Profit before Tax           (£0.8m)             (2023: £3.0m)               

The Data, Analytics, Consultancy & Events Division delivered revenue 2% lower than the prior year, which included the impact of the pre-General Election activity restrictions on the Transport Consultancy and Traffic Data businesses in the last two months of the year, and the anticipated non-repeat of c£2.0m Professional Services revenue.

Adjusted EBITDA* decreased to £2.9m (2023: £5.6m). In addition to the impact of lower overall revenue, this also reflects a significant margin decrease from the Transport Consultancy business in the UK. We have taken actions to restructure our Transport Consultancy business, including no longer pursuing certain activities that were not delivering an appropriate return. We expect this will see a short-term reduction in revenue for this Division, but having also adjusted our cost base we expect to deliver an improved margin performance for FY25 financial year.

The Division reported a loss before tax of (£0.8m) (2023: £3.0m profit) including £1.2m of exceptional transformation costs.

Traffic Data & Events

Revenue from the combined Traffic Data & Events business increased by 5% to £30.3m (2023: £28.8m). Activity levels in Events remained high and it delivered record revenue, with new wins more than offsetting the effect of other events and sporting fixtures that did not repeat in FY24. There was a short-term adverse impact on Traffic Data activity levels in the last two months of the year due to the timing of the UK General Election. Activity levels are returning to normal following the election, and we expect this to continue through the FY25 financial year. One of the Group's largest Traffic Data customers experienced a cyber-attack during Q1 of FY25 that may have a short-term impact on activity levels with this customer during H1 of FY25.

The business has secured large contract renewals with both Events and Traffic Data customers post year end, for FY25 revenue delivery.

Professional Services

Total revenue across our Data Analytics/GIS and Transport Consultancy businesses decreased by 14% to £13.1m (2023: £15.4m). In addition to the c£2.0m anticipated non-repeat of certain revenue items in Data Analytics/GIS, this included lower activity levels in Transport Consultancy. This business was impacted by the timing of the UK General Election and has also experienced an underlying decrease in activity levels as customer budgets and funding availability have contracted. This resulted in a significant decrease in profitability in FY24. As described above, we have taken actions to restructure this business as a result.

The Area Monitoring System (AMS) developed by the Data Analytics/GIS business in collaboration with two European geospatial companies won the award for 'Data Innovation Project of the Year' at the 2024 Public Sector Digital Transformation Awards held in Dublin.

Our strategic focus in this part of the Group is on improving profitability and on expanding our Geo Intelligence capabilities into the UK and North American rail markets.

Dividend

The Group remains committed to the progressive dividend policy that was adopted in 2012. The Board has recommended a final dividend of 1.3 pence per share. The final dividend, subject to shareholder approval at the forthcoming Annual General Meeting, will be paid on 7 February 2025 to shareholders on the register at the close of business on 24 January 2025. This will bring the total dividend for the year to 2.4 pence per share.

Board

Jill Easterbrook succeeded Chris Cole as Non-Executive Chair of the Board on 1 September 2023. Chris stepped down from the Board on the same date. This was part of the Board succession planning following the completion of Chris's third three-year term. Tracy Sheedy was appointed to the Board as a Non-Executive Director on 1 September 2023, and succeeded Jill Easterbrook as Chair of the Remuneration Committee from that date. Ross Paterson was appointed to the Board as a Non-Executive Director on 2 April 2024. Liz Richards stepped down from the Board on 30 June 2024. Ross succeeded Liz as Chair of the Audit & Risk Committee on that date.

Outlook

Activity levels increasing but with short term headwinds in the UK

Activity levels are increasing following the UK General Election. This is expected to continue through FY25 although some near-term industry wide variability in customer activity in the UK has persisted through Q1 and we anticipate this will continue through H1. We continue to monitor developments around: (i) a tightening of financial management within Network Rail that is impacting Control Period 7 funding across the UK rail supply chain; (ii) the implementation of the UK government's strategic plan for rail; (iii) and the short-term impact from a large Traffic Data customer where a significant recent cyber-attack has impacted its procurement activity. We are also working to mitigate the recently announced Budget changes in UK national insurance and minimum wage legislation that will take effect from April 2025.

We have secured FY25 contract renewals in both Divisions, have some key product deployment milestones for delivery in the coming months, and have several multi-year rail technology software opportunities that will be announced in FY25 and are in the latter stages of their procurement processes.

Well positioned to deliver long-term scalable growth

Tracsis' strategy to deliver organic and acquisitive growth, supported by a strong balance sheet and long-term structural tailwinds in its core markets, remains unchanged.

Our end market drivers are strong. In the UK and North America, we see significant long-term tailwinds as the industry looks to modernise and adopt digital solutions. We deliver positive benefit cases to our clients via digital transformation that enables them to deliver mission-critical activities with increased efficiency, enhanced performance, higher productivity, and improved safety. We therefore believe that we are well positioned to capitalise on these changes and have a large pipeline of opportunities to help drive market share and expand our footprint in these markets. 

The new Government has outlined its strategic plans for the future of UK Rail and we expect legislative details to be confirmed in the coming months. This will include the creation of Great British Railways, the re-nationalisation of train operating companies, and a focus on improving service efficiency, reliability, safety, and customer experience including PAYG smart ticketing, best value fare guarantees, and automated delay repay. Tracsis' products and services are well aligned with these objectives.

In North America, the recent go-live of our new Train Dispatch system was a significant milestone for the Group. The successful delivery of this system opens up a large new product segment opportunity for Tracsis where the market is looking for new participants. We have a growing pipeline of opportunities, some of which are in the latter stages of their procurement cycle. Procurement and delivery timelines in this market are often determined by customers' operational requirements. There will likely be more volatility in the phasing of revenue growth in this market as we procure these opportunities and transition to a recurring revenue model. The outcome of the US election is not expected to impact our long-term growth opportunity in North America.

We have significantly transformed the Group's operating model in order to accelerate its future growth trajectory. This has been particularly focused around enhancing our technology development and delivery capabilities to improve the timeliness, quality and repeatability of delivery. This will better enable the Group to achieve margin accretion from future multi-year software contracts, and to invest in developing the next generation of its products. We have also re-focused the Group's product and services portfolio on fast-growing, higher margin activities and will no longer pursue certain non-software related activities which are not aligned with these objectives. We are confident that these actions will enable to Group to better deliver improved profitability and long-term scalable growth.

We are actively pursuing our pipeline of M&A opportunities, with a focus on extending our software and technology footprint and enhancing recurring revenue growth. We continue to evaluate this growing pipeline of opportunities in line with our disciplined approach.

The Group remains well positioned to deliver growth in the coming financial year and beyond.

Jill Easterbrook Non-Executive Chair	Chris Barnes Chief Executive Officer
19 November 2024