Tracsis prepares to turn cash pile into growth by takeover

The Leeds-based group, which last week completed its fourth acquisition in four years, said it has a healthy cash pile to invest in technology which improves efficiency on the railways.

Tracsis last week sealed a deal worth up to £3.4m to buy MPEC Technology. The deal adds remote trackside data-logging technology to the AIM-listed company’s portfolio of “smart planning” products.

It also raised £1.95m through a share placing last week, bringing four new institutional investors on board.

Chief executive John McArthur said the company, spun out of the University of Leeds, is assessing up to 12 possible bid targets at any one time.

“We need to be doing these deals. There’s a couple that are more interesting than the rest. “They have similar dynamics to Tracsis: They are well run, best in breed, and we think we can benefit from being under the Tracsis umbrella.

“I’d be disappointed if we could not find a technology company that we could not marry with Tracsis over the next year.”

Mr McArthur, who has headed Tracsis since it was spun out in 2004, said the company now has a cash pile of around £3.5m, giving ample firepower for acquisitions.

“I don’t see us going back to the market any time soon,” he added.

“We found it (fundraising) easy. If you’ve a good growth story and a good proposition to the market you will always find willing investors.”

Bid targets tend to be “lifestyle business”, he said. These are companies, often built by former rail industry managers, which are small but profitable and whose owners are now looking to sell. However, the company was unable to do any acquisitions in 2010 as valuations were too high.

“The window of opportunity is over the next five to 10 years when a lot of these businesses have to be looking at succession planning,” said Mr McArthur.

Tracsis, which is trying to be an “aggregator and develop of optimisation technology that solves big problems in transport,” rarely meets competition when it buys companies.

The group’s software helps rail operators improve efficiencies and cut costs by automating staff scheduling and rotas, replacing the traditional pen and paper method. It counts Network Rail, South West Trains, Stockholm Metro and Arriva Trains among its clients.

A train operator is also currently piloting Tracsis’s vehicle scheduling tool, which will help train operating companies optimise use of their rolling stock.

Later this year the company also plans to roll out an in-cab delay reporting device, which will allow train drivers to provide real-time information on delays, using a digital device with location technology.

The MPEC deal adds “black box” technology to Tracsis’s portfolio. Its kit is used in trackside equipment ranging from level crossings to signals, and constantly records data.

This data can be remotely monitored, enabling maintenance crews to tell when a piece of equipment is failing.

“You can move from ‘fail and replace’ to a preventative maintenance strategy,” said Mr McArthur.

He said the company’s growing portfolio of products should also make it attractive to customers abroad.

Last year it started its first major rail software pilot outside the UK, and earlier this year announced a contract with New Zealand’s rail authorities to help to improve the efficiency of the country’s network in time for the Rugby World Cup later this year.

“There’s lots to choose from in UK rail; its such a big industry,” said Mr McArthur.

“But later this year we’re going to have a concerted push into New Zealand and Australia.”

It is also preparing for a surge of work around rail franchises, as the Government invites companies to bid for the right to operate train routes.

The company is backed by IP Group, which helps turn university research into business. The group, headed by chief executive Alan Aubrey, has exclusive rights to commercialise research from 10 UK universities, including York and Leeds.

Once its new shares are in issue, Tracsis will have a market capitalisation of around £12m.

The company has about 40 full time staff plus another 100 part-time employees.

spin-out floated on aim market

Tracsis was spun out of the University of Leeds’ School of Computing in 2004.

It raised £2m three years later when it launched on the Alternative Investment Market.

In August 2008 it bought Loughborough consulting firm RWA Rail.

In July 2009 Tracsis pounced on rail services company Peeping to expand its reach across the transport sector.

In December 2009 it bought Safety Information Systems (SIS), a company that provides railway chiefs with data that helps to pinpoint potential troublespots.