Tracsis’ ‘flight recorders’ see profits upgrade

The Leeds-based company is seeing strong take-up of its ‘flight recorders’ by Network Rail and strong demand for its software and consultancy services from train operators.

Tracsis expects to announce annual revenues of over £8.5m, up from expectations of £6.8m, and underlying earnings of more than £3m against expectations of £1.9m.

The group’s shares rose 13p to 104p yesterday.

The biggest contributor has been the acquisition of MPEC last June.

MPEC provides ‘flight recorders’ of the railway’s assets, allowing remote monitoring of trackside equipment and reducing the cost of maintenance.

Tracsis chief executive John McArthur said: “MPEC has proved a diamond of a company with tripled revenues. It provides ‘flight recorders’ of railway assets which monitor in real time what’s going on at a point or level crossing.

“They allow Network Rail to manage maintenance and fix stuff before it breaks,” he added.

The boxes have antennae that can beam back the status of the motor that moves the track from open to closed, which can tell head office if the motor is working.

“You can build up a database of what a healthy unit looks like so you can predict failure,” said Mr McArthur.

“There are 40,000 guys doing maintenance now on a fail and replace basis. Operators want to work on a plan and prevent basis.”

These boxes have the potential to prevent rail disasters such as the Grayrigg derailment in 2007 where a train ran over a faulty point at 90mph killing one passenger.

The point should have been open but was closed.

“We sell these boxes to Network Rail and they install them so that the assets start speaking to head office. This equipment isn’t just about preventing train delays, it’s about saving lives,” said Mr McArthur.

He added that 80 per cent of rail delays are caused by the knock-on effect of the original incident, for example trains getting stuck behind the train that’s been affected.

“If you can solve one broken point, you see an 80 per cent uplift in delay minutes,” he said.

Tracsis said its equipment can also reduce costs.

“UK rail is seen as 40 per cent more expensive than other European countries. We can knock a lot of costs out,” said Mr McArthur.

“If you know what needs to be fixed you don’t need so many people on standby.”

While the MPEC ‘flight recorders’ make up around 40 per cent of Tracsis’s revenues the other 60 per cent comes from software and services, the part of the business that was spun out of Leeds University.

“We work in conjunction with train operators. We help them plan their resources, scheduling and provide software that optimises the movement of rolling stock,” said Mr McArthur.

This helps customers such as Virgin Trains, First Group, Go-Ahead, Arriva and National Express, to reduce the number of empty trains.

Mr McArthur said Tracsis has seen strong growth across the board.

“It’s a really buoyant period of trading. It’s linked to the Government’s push into intelligent infrastructure,” he said.

“Network Rail is becoming more clever in how it utilises its assets such as overhead lines and level crossings.”

He added that part of the switch to Tracsis’s products is recession-led.

“People spend money with us to save money. Our software has back-office implications. People work more efficient days. It’s not the flavour of the month with the unions, but it’s reducing costs,” he said.

Analyst Eric Burns, at WH Ireland in Leeds, said Tracsis is likely to be a beneficiary of future rail industry reform.

“One of Tracsis’ key attractions to us is its exposure to likely industry reform brought about by the McNulty Report into value for money in UK rail,” he said.

Mr Burns upgraded his 2012 forecasts to revenues of £8.6m and adjusted pre-tax profits of £3.2m.

Yesterday, Tracsis issued 130,000 ordinary shares, increasing the number of ordinary shares in issue to almost 25 million.

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