Profile: John McArthur

“Ladies and gentlemen, we would like to apologise for the delay to your journey. We are awaiting our driver/we are stuck at a red signal/we are in a queue of trains – and should be on the move shortly.”

With record high fuel prices forcing increasing numbers out of their cars and on to trains, delays like this matter all the more.

For University of Leeds spin-out Tracsis, its solutions to these kinds of problems have earned it a rapidly-growing reputation.

Its ‘resource optimisation’ software is used by train companies including Virgin Trains, First Group, Go-Ahead, Serco, Arriva, Scot Rail and National Express. One of its biggest customers is Network Rail, responsible for the UK’s train tracks and infrastructure.

The Leeds-based company has seen its share price rocket 63 per cent over the past year, including a 23 per cent surge last Wednesday when Tracsis said its results will beat City expectations.

But while its recent share performance makes chief executive John McArthur “reasonably happy”, he believes Tracsis has much further to go before he can celebrate.

“It’s getting closer but if you do the fundamentals and take our cash we are still trading way below the market view for tech companies on AIM,” said McArthur. “We’re sitting on close to £6m of cash and that was a good few months ago.

“But I’m happy that good news gets a response on AIM.”

Aged 37, McArthur clearly feels Tracsis has unfinished business on the Alternative Investment Market.

Since 2005 Tracsis’s revenues have grown from £216,000 to more than £4m. It has four acquisitions under its belt, and now it has more than 40 staff and another 130 part-time employees.

The company’s products allow transport operators to computerise staff and rolling stock scheduling through ‘smart planning’, effectively using their resources much more efficiently.

Its MPEC subsidiary, bought in June, allows remote monitoring of trackside equipment, reducing cost of maintenance for operators.

“The UK rail industry and the worldwide rail industry is growing. It plays to our strengths,” said the Scot. “It’s all about solving problems for the rail industry, like removing delays and reducing delay minutes.

“There are lot of big, fat, unmet but well-recognised problems in the UK to get right. The pain is very clearly felt but we’ve got a set of customers that are well aware of the problems they face and are actively trying to solve them.”

Tracsis, which was named best sub-£10m company at the Yorkshire Post’s Excellence in Business awards in October, is also branching out abroad. It has seen increasing demand from Northern Europe, Australia and New Zealand. Sales abroad now comprise about 10-15 per cent of revenues.

“Some of the largest opportunities we’ve got are overseas,” said McArthur. “Europe is the big market for rail, and potentially Australia, New Zealand and the Far East. In due course we will go into China.” McArthur is not a railway man by training. He started out in consultancy with Arthur Andersen on leaving Strathclyde University with a degree in management science. He joined the firm’s small management consultancy, specialising in ‘change management’ and corporate recovery during the dot-com boom.

On leaving Arthur Andersen, he joined a venture capital fund, investing in early stage technology businesses with “varying degrees of success”.

“We expected about half of them to fail, a quarter of them to wash their face, and a couple of home runs. That’s exactly what we got.”

Then came a spell as investment manager at Techtran, a company founded to commercialise research from Leeds University, now owned by Tracsis’s major shareholder IP Group.

While walking the corridors of the university, he came across Dr Raymond Kwan, an expert in transport scheduling.

Together they founded Tracsis in 2004 with “website and a pack of business cards”.

They soon found Tracsis’s automation software was in demand, and in 2005 McArthur left Techtran to join Tracsis full-time.

He now splits his time between his farm in Scotland’s Grampian foothills and Leeds – but opts to fly between them instead of travel by train.

“When I spoke with transport companies it was clear that this was a really compelling proposition,” he said.

“Although I’d done management consultancy I’d never really worked for a trading business. Arthur Andersen didn’t produce things and sell things. I wanted to see if I could properly run a business from scratch.”

McArthur was just 32 when Tracsis floated, making him one of the youngest CEOs on the London Stock Exchange.

The last book he read, Outliers: The Story of Success, gives a clue as to his ambition. It dissects why high achievers, from athletes to software billionaires, make it where others fail. “I thought as soon as it floated that would be time for me to go, but then I realised that’s just the beginning,” he said

“I will be there for as long as it provides me with a challenge.”

McArthur believes some of Tracsis’s success is down to the fact that he’s not an academic, but an expert at securing invest-ment and growing businesses.

“You don’t see that many of them (academics) that are particularly successful. It tends to be a different skill set between the guy that comes up with the technology and the guy that takes it to market.

“That’s possibly where we’ve done quite well in managing to articulate what we do to industry – they want something that solves problems.” His big preoccupation is acquisitions. Future deals will be niche, adding to the company’s problem-solving abilities in transport. At any one time Tracsis is considering at least a dozen possible deals, said McArthur, with another 30 or so on its radar.

“We’ve been pulling up trees trying to find the next suitable target but the reality is we’ve had to walk away from a few that did not fit our portfolio.

“There are some great targets out there. I would like to think we will be able to give further good news on that.

“The acquisitions are a really big turn on for me; I like doing the deals. We’ve done four successful acquisitions.

“The day-to-day stuff, we’ve got better people in the business taking care of that.”

Could Tracsis itself be a takeover target? The fact that it supplies most of the major train operators appears to suggest they’d be unlikely bidders, as operators would hardly accept a rival gaining a monopoly over the technology.

McArthur warns potential buyers a takeover will not be cheap. “It would be far too premature. We’ve had some approaches but I just do not think now is the right time.”

John McArthur Factfile

Title: Chief executive, Tracsis

Date of birth: March 11, 1975

Education: Degree in management science from the University of Strathclyde in Glasgow.

First job: Cleaning the car park of a Clydesdale Bank

Favourite song: Anything by The Prodigy

Favourite film: Jaws

Last book read: Outliers: The Story of Success, Malcolm Gladwell

Car driven: Range Rover

Most proud of: My pride is relatively short-lived. I take satisfaction from creating something. We IPOd in quite a tough climate and I was one of the youngest CEOs on the London Stock Exchange