Investor cheer as Tracsis set to outstrip market expectations

The Leeds-based group said revenue for the year will be around £25m, up from £22.4m last year, while adjusted pre-tax profit will be “comfortably” ahead of market forecasts of £5.5m for the year to July 31.

Tracsis, which produces software that can prevent train derailments and delays, had year-end cash balances of over £12m, up from £9m last year, and the business remains debt free.

Tracsis CEO John McArthur said the group is looking at a number of acquisitions and it will update the market in due course.

“We’re looking at technical and software businesses in the transport space as well as data capture and smart technology businesses that collect data in real time,” he said.

“We haven’t made an acquisition since last May so shareholders may think we are overdue one.”

WH Ireland analyst Eric Burns said: “Tracsis has issued a decent update this morning.

“Whilst no detail of the breakdown is provided at this stage, we expect that the second half outcome has largely been an extrapolation of the first half with good organic growth across the business and an expected reduction in UK rail condition monitoring (RCM) against a particularly strong outcome last year.

“The statement also makes reference to a number of investment opportunities being pursued and with a substantial £12m cash pile and more than 12 months elapsed since the last acquisition (Datasys), arguably another deal is overdue.”

Mr Burns reissued his “buy” recommendation with a slightly increased 470p price target.

Tracsis is on the hunt for acquisitions following a period of record growth when it was awarded several contracts overseas and saw further growth in its domestic market.

Mr McArthur said the group has a “lot of irons in the fire” when it comes to acquisitions.

“We have a very high bar on what interests us. It has to be niche, very profitable and the price has to be right. We are cash rich and debt free,” he said.

The group said revenues from rail and bus software are performing well as the group works with the vast majority of train operating companies.

“Rail remains a growth sector. More people are travelling and more money is being spent on infrastructure. We are in a good area,” said Mr McArthur.

The group’s technology is used by Virgin Trains, First Group, Go-Ahead, Serco, Arriva and National Express and one of its biggest customers is Network Rail.

Tracsis’ products allow transport operators to computerise their staff and rolling stock schedules, so they can run their trains more efficiently.

This year the group believes it will benefit from the award of new rail franchises and it is aligned to support bidders for both the Northern and Transpennine Express franchise bids.

CEO John McArthur said: “Typically all bidders will use our software in such shape or form. Both Northern and Transpennine Express are big prizes to win.”

A decision will be made on both franchises in the next few months.

Analyst Roger Phillips at Investec said: “The update suggests the revenue out-turn will be around five per cent ahead of our expectation, and in our view “comfortably ahead” on pre-tax profits implies a similar beat.

“No divisional split is given, but we believe the software & consulting and data capture divisions will have showed significant year-on-year growth in 2015.”