TRACSIS PLC | 1
Annual Report & Accounts 2013
Contents
Group Profile
Board of Directors
Chief Executive Officer’s Report
Chief Financial Officer’s Report
Directors’ Report
Directors’ Remuneration Report
Corporate Governance
Statement of Directors’ Responsibilities
Independent Auditor Report to the members of Tracsis plc
Consolidated Statement of Comprehensive Income
Consolidated Balance Sheet
Consolidated Statement of Changes in Equity
Consolidated Cash Flow Statement
Notes to the Consolidated Financial Statements
Company Balance Sheet
Notes to the Company Balance Sheet
Group Information
1
2
3
6
8
10
13
15
16
17
18
19
20
21
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TRACSIS PLC | 1
Group Profile
Tracsis plc was founded in January 2004 to commercialise world class research and expertise
developed in the field of transport scheduling and optimisation technologies.
In the subsequent years Tracsis has grown rapidly and the Group specialises in solving a
variety of data capture, reporting and resource optimisation problems along with the provision
of a range of associated professional services. Tracsis’ products and services are used to
increase efficiency, reduce cost and improve the operational performance and decision making
capabilities for clients and customers.
The Group’s products and services comprise four principal revenue streams:
• Data Capture: Collation and analytical services within traffic and pedestrian rich
environments;
• Software: Industry strength resource optimisation software that covers a variety of asset
classes;
• Remote Condition Monitoring: Technology and reporting for critical infrastructure assets
in real time, to identify problems and aid with preventative maintenance; and
• Professional Services: Consulting and related professional services across the
operational and strategic planning horizon.
The Group has a blue chip client base which includes the majority of UK transport operators
such as Arriva, First, Stagecoach, Go-Ahead, National Express and Virgin. The business also
works extensively with Network Rail, the Department for Transport, multiple local authorities,
and a variety of large engineering/infrastructure companies.
Tracsis has offices in the UK and Australia which service projects in Europe and Australasia.
The business drives growth both organically and through acquisition and has made five
acquisitions since 2008.
2 | Annual Report and Accounts 2013
Board of Directors
Executive Directors
Non-Executive Directors
John McArthur (38)
Chief Executive Officer
Charles Winward (43)
Non-Executive Director
John has been the Chief Executive Officer of Tracsis since
the formation of the company in January 2004. Prior to
this he worked as an investment manager with Techtran
Group Limited which specialises
the
commercial potential of intellectual property developed at
the University of Leeds. John also worked for several
years with Axiomlab Group plc, a technology venture
capital company, having started his career with Arthur
Andersen & Co. He holds a first class degree in
Management Science from the University of Strathclyde in
Glasgow.
in developing
Max Cawthra (35)
Chief Financial Officer
Max joined Tracsis in September 2010 as Financial
Controller and was promoted to the Board in August 2011,
as a replacement for Darren Bamforth who had acted as
Finance Director on a part time basis. Max is a Chartered
Accountant, having trained with Ernst & Young in Leeds.
Prior to joining Tracsis, Max spent seven years at
Persimmon plc in a variety of roles.
Charles is a Director at IP Group plc, a company which
holds shares in Tracsis through IP Group’s subsidiary
Techtran Group Limited. Charles joined IP Group in April
2007 to manage investments in Top Technology Ventures
Limited, IP Group plc’s venture capital fund management
subsidiary. Top Technology Ventures Limited manages
the IP Venture Fund which has also invested in Tracsis.
Previously Charles was Vice President of Technology
Infrastructure at JP Morgan Chase & Co, where he worked
in a variety of roles in London, New York and Brussels,
and an investment manager at Axiomlab Group plc.
Charles has an MBA from the University of California at
in mechanical
Berkeley and a Bachelors Degree
engineering from the University of Bristol.
John Nelson (66)
Non-Executive Director
John Nelson has worked at the top of the rail industry for
over thirty years and has been in the sector for 45 in total.
Before privatisation he was Managing Director of British
Rail's biggest business, Network South East, and prior to
that was General Manager of the Eastern Region, then a
quarter of the rail network in the UK. Since privatisation he
has established 7 new businesses including leading
First Class
strategic management
Partnerships and
first Open Access
the country's
company, Hull Trains. At one time or another he has
chaired the Boards of 13 train operating companies and
sat on the Boards of 4 others as a Non Executive Director.
He continues to promote new rail ventures and was
for outstanding personal
recently granted an award
contribution to the rail industry at the National Rail Awards
2013
consultancy
TRACSIS PLC | 3
These products and services of Tracsis have a common
theme running through them - they are all aimed at
customers within the transport industry, and are designed
to help provide a more efficient and productive operation
based on better information to assist in front line decision
making.
importance of passenger
transport markets within both the UK and abroad is widely
acknowledged, and the Directors believe these to be
growth markets for now and in years to come which will
lead to further demand for the Group’s various product
and service offerings.
increasing
The
Financial summary
The Group delivered revenue of £10.8m for the year,
which is an increase of 25% on our 2012 revenue of
£8.7m and exceeded the current market forecast of
£10.4m.
Adjusted EBITDA* rose 3% to £3.4m (2012: £3.3m). This
is the second year in succession that the Group has
reported an EBITDA* in excess of £3m. Given the
continued
and
competitive environment, the Directors believe that this
continues to be a strong performance and are pleased
with level of profitability generated in the period.
challenging
conditions
economic
Statutory profit before tax was £2.6m (2012: £3.0m). This
takes into account higher share based payment charges in
respect of the LTIP (Long Term Incentive Plan) scheme
that nearly all Tracsis staff have elected to participate in,
increased depreciation due to the nature of the Sky High
business, and also one-off exceptional professional fees in
respect of the Sky High acquisition which amounted to
£0.2m.
At 31 July 2013, the Group had cash balances of £6.6m
(2012: £7.6m). This was in spite of the purchase of Sky
High, which absorbed cash of £2.8m. The Group’s cash
position continues to be strengthened due to strong
working capital management and a high conversion of
operating profit to cash. The Group paid dividends in the
year amounting to £0.2m.
The Group has diversified revenue streams and as such is
well positioned to absorb short term revenue fluctuations
and movement in the timing of orders. The strength of
both the business model and the Group’s organic and
acquisitive growth strategy has been illustrated this year
with the delays in the retendering for the Group’s condition
monitoring technology, along with well documented delays
in the franchise bidding process which impacted on
demand for our consultancy offerings.
* Earnings before finance income, tax, depreciation, amortisation,
exceptional items and share-based payment charges
Chief Executive Officer’s Report
Introduction
Once again, the Group has enjoyed a further successful
year of growth and has continued to evolve and diversify
into a larger, well rounded business that now provides a
range of niche technology and service offerings to the
transportation industry.
The year’s highlights included Group revenue exceeding
£10m for the first time (£10.8m being reported against a
forecast of £10.4m), the launch and first sales of our
TRACS-RS and FreightTRACS software products, new
overseas sales being delivered in New Zealand, and
perhaps most notably our fifth successful acquisition: Sky
High Plc which whilst complementing our existing
business, also extends our geographical presence outside
of the UK.
Since the period end, the Group was selected to continue
its remote
with a major Framework Agreement
condition monitoring technology, and the agreement with
major infrastructure player will be extended for 5 years.
for
Elsewhere, it was pleasing to see a return to stability
within the UK rail franchising environment following a
period of economic and political uncertainty, which should
be of significant benefit to Tracsis in the coming years.
Business overview
The Group specialises in solving a variety of resource
optimisation, data capture, and reporting problems via the
provision of a range of software, hardware and associated
high value professional services. Historically the Group
has predominantly operated in the UK but is continuing to
deliver on its strategy of expanding our horizons to
overseas markets; the Sky High acquisition brings a
significant presence in Australia which we hope
to
capitalise on in due course for the Group’s other offerings.
Tracsis’ market offering can be broadly categorised into
four distinct revenue streams;
1. Software:
Industrial
resource
optimisation software that covers a variety of
asset classes.
strength
2. Remote Condition Monitoring: Hardware and
embedded software for real-time reporting on
identify
critical
problems, predict
failure, and aid with
preventative maintenance.
infrastructure
assets,
to
3. Data Capture: Collation and analytical services
within traffic and pedestrian rich environments.
4. Professional Services: Consulting and related
high value professional services across the
operational and strategic planning horizon.
4 | Annual Report and Accounts 2013
Chief Executive Officer’s Report continued
Trading Progress and Prospects
Software
Sales of the Group’s core software offerings remained
resilient throughout the year and the Group continues to
benefit from a high level of recurring software licence
revenue (c. £1.8m) whilst also winning several new
customers as part of upsells to the existing customer
base. New sales of our staff rostering optimisation tool
TRACSRoster were made to several new clients, and our
new rolling stock tool TRACS-RS was adopted by several
TOC clients following a successful formal launch earlier in
the year.
We are also pleased to have secured the first sale of our
FreightTRACS solution, which was developed
in
conjunction with one of the UK’s major freight operators.
Further growth will come from continued cross-sell/upsell
opportunities.
New product sales with major transportation clients were a
key achievement during the year. This demonstrates that
Tracsis is developing software that is both relevant to our
target customers and priced appropriately for them to
procure in spite of continued economic pressure.
Furthermore, the Group was successful in winning and
completing a major system delivery of its COMPASS
software product in New Zealand. The customer feedback
has been exceptionally positive and will lead to recurring
revenue for the Group in the future.
Consultancy and Professional Services
the period, our Consultancy
During
team worked
extensively on the Great Western and Essex Thameside
franchise bids, and had been anticipating high volumes of
workload with other bids in line with the original timetable
proposed by the DfT. The well documented ‘pausing’ of
the franchise renewal process in 2012 was a setback for
the division in the current year, however the Group
mitigated a proportion of this through its ability to transition
resources onto other projects. This led to several new
projects being won and successfully delivered. We are
pleased that the DfT has now published a revised
timetable for future franchise bids, and we look forward to
the opportunity for increased levels of consultancy work
along with the stability that a long term franchise timetable
can bring. This should also assist with forecasting and
staff resourcing.
Remote Condition Monitoring
The Group’s condition monitoring and data logging arm
continued to see high levels of demand for its products in
the past year. As previously announced, the balance of a
major order was delivered and completed in the financial
year under review, and in addition, there was continued
demand amongst other customers for our condition
monitoring technology. This part of the business works
with a range of customers and has delivered several major
projects in the year. Due to the timing of renegotiating a
contract within a current Framework Agreement, revenues
in this division were behind the previous year, however
since period end, we were extremely pleased to be able
announce
this
agreement for a further five years.
that we were selected
to continue
We believe that the concept of Intelligent Infrastructure is
firmly here to stay and that the technology and products
delivered by our remote condition monitoring division are
at the forefront of this paradigm shift from reactive ‘fail and
replace’ maintenance to a predictive ‘plan and prevent’
environment. Given the UK is leading the charge with
adoption of this technology, we believe that this change
will inevitably take hold in other geographies in the fullness
of time and to this end the Group is in the process of
aligning our resources with how to access and exploit
these markets. As with other change process, progress
from old methods to new is anticipated to be a slow
process but we are pleased to see our overseas partners
being responsive to discussions and keen to explore pilot
projects.
Data capture and passenger counting
Traditionally, our passenger counting operations have
been
reported within Consultancy. We have now
reclassified them, and included within our ‘data capture’
revenue stream. Demand for this service has continued to
be strong, and further sales opportunities have been
identified post the Sky High acquisition. Sky High itself has
made an excellent start of life under Tracsis ownership,
and has made a significant contribution during the first few
months of trading. This is the peak selling season due to
the seasonality of this part of the business, and so should
not be representative of the level of activity that is
expected on an annual basis, but nonetheless, their
contribution in both the UK and Australia is significant. We
believe Sky High has already proved to be a good
acquisition for the Group, and we look forward to growing
this part of the enlarged group in the future.
Our team
Raymond Kwan resigned as Director on 31 January 2013
and Rodney Jones stood down as Chairman on 30 June
2013. Ray continues to work with Tracsis in the same part
time capacity as he did previously and remains an
important part of our technical team.
TRACSIS PLC | 5
Chief Executive Officer’s Report continued
Both Ray and Rod played an important role in the Group’s
growth and evolution, and were instrumental in our
successes during our formative years. Now that Tracsis is
a well-established company with people and processes
both Ray and Rod felt that it an appropriate time to step
down from the Board to make room for new faces who can
lead the company in the next phase of growth. On behalf
of the Board, I thank them both for their significant
contribution to Tracsis over the years and wish them all
the best for the future.
The Board is currently in the process of carrying out a
search for a new Non-executive Director/Chairman and is
hopeful of making a further announcement in due course.
will make an increased contribution in 2013/14 when a full
year of trading will be included.
In addition to the acquisition of Sky High, several other
opportunities were appraised during the period although
none were able to be progressed to completion due to
failing to meet the Group’s strict investment criteria. As
ever, the Group continues to evaluate new opportunities
on a regular basis and has a strong pipeline of potential
prospects. The Directors remain committed to a strategy
of growth by acquisition as part of the overall growth
strategy for the Group and feel confident that further
earnings enhancing acquisitions will complete in the
fullness of time.
Dividends
Overseas growth
During 2012, the Board implemented the Group’s maiden
dividend. The progressive dividend policy began with an
interim dividend of 0.2p per share being paid at the interim
stage in 2011/12, and was followed up with a final
dividend of 0.35p, bringing the total payment for 2011/12
to 0.55p per share.
The Group has historically been largely based in the UK
with only a small amount of revenue derived from
overseas customers. Given the significant presence that
Sky High already has in Australia, and coupled with this
being a key target market of Tracsis, we anticipate a
higher proportion of overseas work in the coming year.
In the current year, an interim dividend of 0.3p per share
was declared and paid, and the Directors propose a final
dividend of 0.4p per share, subject
to shareholder
approval. This gives a total payment of 0.7p per share for
the financial year 2012/13, and this represents an increase
of c. 27% on the 2011/12 figure. The overall level of
dividends continues to be very well covered by the
Group’s profitability and cash position, which supports the
Group’s primary focus on growth via acquisition and
development of new products and services. The
progressive dividend policy will be continued going
forwards provided that the business continues to trade in
line with expectation. The dividend will be payable on 31
January 2014 to shareholders on the Register at 17
January 2014.
Acquisitions
The Group completed the acquisition of Sky High Plc in
April of this year. This was an important deal for Tracsis
for several reasons: firstly, it increases the scale of the
Group significantly; secondly, it increases the Group’s
breadth of product and service offering; and thirdly, Sky
High has a significant Australian presence which will allow
Tracsis access into a new overseas geography that had
already been identified as a target growth market.
The consideration paid for Sky High was £3.3m which was
satisfied largely by way of a cash offer although it is
important to note that incumbent management swapped a
large portion of their stock in Sky High for stock in Tracsis.
This not only shows faith in the Tracsis growth model, but
aligns the motivations of their senior team with ours and
indeed with Tracsis shareholders. Sky High was included
in the Group’s results with effect from 17 April 2013 and
The Group recognises the importance and potential for
growth in overseas markets as part of its overall growth
strategy and geographic diversification, and as such will
continuing to exploit other overseas opportunities. In line
with this strategy, during the period, the Group carried out
a major software implementation in New Zealand, and
continued to make further sales to our customers in
Sweden and Ireland. Further sales opportunities are
currently being explored, with potential leads in mainland
Europe and further afield being considered and appraised.
Summary and Outlook
Tracsis has continued to perform very well over the past
year, as illustrated by further revenue growth, further
enhancements
in underlying EBITDA and a strong
Balance Sheet even after taking into consideration the
acquisition of Sky High Plc.
The Group continues to explore opportunities to grow by
acquisition as well as organically, and has the Balance
Sheet strength to support this future growth. The potential
for overseas opportunities is exciting, as is the prospect of
further acquisitions. The return to stability within the rail
industry and associated
renewal process
provides the Group with a foundation for further growth in
the coming year and we look forward with confidence to
the opportunities this will bring.
franchise
Our thanks must be given to our loyal customers,
supportive shareholders and, above all, our valued
employees who continue to support us and contribute
towards our growth and success.
John McArthur, Chief Executive Officer
23 October 2013
6 | Annual Report and Accounts 2013
Chief Financial Officer’s Report
Results for the year
The Group reported further growth, with revenues increasing to £10.8m (2012: £8.7m). This takes into account a strong
contribution from Sky High plc which was acquired during the year, which offset organic revenue shortfalls. These arose due
to a combination of reasons – slippage of major contract awarding/tendering for the Group’s condition monitoring offering, and
also well documented delays to the franchise bid process which impacted on revenues derived from Consultancy.
Nonetheless, underlying profitability was maintained at satisfactory levels, due to tight cost control and margin enhancements.
Adjusted EBITDA (earnings before finance income, tax, depreciation, amortisation, exceptional items and share-based
payment charges) was £3.4m (2012: £3.3m). The statutory profit before tax was £2.6m (2012: £3.0m).
Acquisitions
The Group completed the acquisition of Sky High plc in the year, for an overall consideration of £3.3m. This was funded
mainly from existing cash reserves (£2.8m), and certain Sky high management took shares in Tracsis which amounted to
£0.5m. After performing a fair value review, goodwill and other intangible assets of £2.1m have been recognised in respect of
this acquisition. Exceptional fees of £0.2m were incurred in respect of this transaction, which take into account the fact that it
was a listed entity and so carried a higher level of complexity than for a private company transaction.
Sky High contributed £3.2m revenue and £0.2m profit before tax for the period since 17 April; being the date that the
transaction was declared unconditional.
The Group continues to appraise other potential acquisition opportunities but has strict criteria for proceeding and no other
opportunities in the year met those criteria.
Cash flow
Cash balances closed the year at £6.6m. This was a reduction on the £7.6m closing cash for 2012, which takes into account
the purchase of Sky High in the year which absorbed cash. Dividends of £0.2m were paid in the year. The group moved onto
a quarterly payments on account regime during the year, meaning that Corporation tax had to be paid quarterly. This resulted
in an additional cash outflow of £0.4m, to bring total Corporation tax paid in the year to £1.1m. Cash generation from the
business continues to be strong.
Following the acquisition of Sky High plc, the enlarged Group has a significantly expanded Balance Sheet, taking into account
reduced cash balances after they were utilised to fund the acquisition, and an enlarged receivable and payable base, that
takes account of the acquired balances and the enlarged Group trading position. Nonetheless, the Group continues to have
significant cash resources available, and remains in a very strong position.
Treasury management
The Group continues to manage its cash resources to maximise interest income whilst at the same time minimising any risk to
these funds. A balance of working capital cash, and short to medium term deposits are maintained. The Group places
deposits with a variety of banking institutions and recalled its fixed term deposits to fund the purchase of Sky High plc. Since
the acquisition, a balanced portfolio of treasury arrangements has been maintained. Following the downgrade of the Co-
Operative Bank, the group recalled the majority of its funds placed with them, and placed with alternative institutions.
Earnings per share
Basic earnings per share was 8.42p (2012: 9.96p). Diluted earnings per share (which takes into account the dilutive effect of
share options not yet exercised was 8.15p (2012: 9.83p).
Dividends
During the previous year, the Group adopted a progressive dividend policy subject to future profits and cash flows. During the
financial year under review, an interim dividend of 0.3p per share was paid at the interim stage, and the Directors recommend
a final dividend of 0.4p per share, which will be subject to shareholder approval at the forthcoming Annual General Meeting.
This total dividend of 0.7p per share is well covered by retained profits for the year, and represents an increase of circa 27%
on the 2012 total of 0.55p per share.
TRACSIS PLC | 7
Chief Financial Officer’s Report continued
Key risks
The board carefully considers the risks facing the Group
and endeavour to minimise the impact of those risks. The
key risks are as follows:
• Government spending: One of
the Group’s
subsidiaries works extensively with local government
or transport consultants who are ultimately working for
local government. As such, a large part of the Group
could be vulnerable to a change in the budgets of local
government, or to a significant change in the transport
or planning policies or procedures. This would affect
trading in both the UK and Australia.
• Loss of key customers: One of
the Group’s
subsidiaries has previously operated under a
significant contract / Framework Agreement with a
major customer, which it has been selected to continue
with. Loss of this contract or customer in general would
result in significant amounts of lost revenue for this
particular subsidiary and also the Group.
• Competition: Although the Directors believe there to
be very little direct competition within the market for
certain of its products, there may be products and
competitors that they are currently unaware of which
could have a detrimental effect on the Group’s trading
performance. Furthermore, certain of the Group’s
wider portfolio of other services and products are sold
in a much more competitive environment. The Group
therefore has a balanced exposure to competition, with
some offerings facing little competition, but other
revenue streams have significantly more competition.
•
Industry ownership, structure and
franchise
bidding process: The rail industry, from which the
Group derives a significant level of business, is
currently separated
into private and national
ownership. The private elements of this industry could
be renationalised which may have an adverse effect on
the Group. Any other changes to the structure of the
industry may also present a risk, but also an
opportunity as buying patterns may change. Any
delays to the previously published franchise bidding
proposed timetable or process may potentially have an
adverse impact on the Group.
• Attraction and retention of key employees: The
Group depends on the Directors and certain other key
employees spread across its various subsidiaries, and
whilst it has entered into contractual arrangements with
these individuals with the aim of securing the services
of each of them, retention of these specialist services
cannot be guaranteed. Equally, the ability to attract
new employees and in particular senior executives for
the business with the appropriate specialist expertise
and skills cannot be guaranteed
• History of intellectual property and associated risk
factors: Some of the Group’s software is based on
software which was developed at the University of
Leeds along with other research projects. Whilst the
University has assigned all its rights in respect of the
this piece of software to Tracsis, there could be claims
over certain copyright aspects of the software or other
disputes with third parties regarding the intellectual
property inherent within the Group’s software. In
common with other software products, the Group’s
software could be superseded by software developed
by third parties and the possibility of disputes over
intellectual property with
third parties cannot be
discounted. A large part of the Group’s future also
depends upon its intellectual property. If intellectual
property is inadequately protected or challenged, the
Group’s future success could be adversely affected.
• Market acceptances and customer contracts: The
Group currently has contracts in place with a number
of Train Operating Companies and other clients and it
cannot be guaranteed these contracts will continue or
that new contracts will be won by the Group. As with
many large corporations, they are unlikely to vary their
standard terms and conditions. The Group, may, in
such circumstances, enter into contracts on less
favourable terms than it would normally be able to
negotiate.
• Product obsolescence: The Group has a variety of
Technology based products, and invests in Research
& Development to ensure that they constantly evolve
and are kept up to date. Failure to keep up with
technical developments may mean that the Group’s
products run the risk of being overtaken technically
should other companies develop products at a faster
pace.
Key performance indicators (KPIs)
The Group’s main KPIs are:
• Monthly review of sales revenue pipeline, sales under
negotiation and prospects;
• Customer enquiries and conversion of these into sales
orders for certain revenue streams;
• Monthly review of EBITDA, operating margins and
profitability;
• Monthly review of actual results in the month and Year
to date against budget and the prior year;
• Monitoring of cash balances and associated working
capital requirements.
Max Cawthra
Chief Financial Officer
23 October 2013
8 | Annual Report and Accounts 2013
Directors’ Report
The directors present their report and the audited financial
statements for the year ended 31 July 2013.
Principal activity
The principal activity of the group is solving a variety of data
capture, reporting and resource optimisation problems along
with the provision of a range of associated professional
services
Business review and future developments
A review of the Group’s operations and future developments
is covered in the Chief Executive Officer’s Report and the
Chief Financial Officer’s Report. This includes a summary
of the Group’s strategy and the markets in which it operates.
The Chief Financial Officer’s Report considers the key risks
facing the Group and the key performance indicators which
are used to monitor the business.
Financial results
Details of the Group’s financial results are set out in the
Consolidated Statement of Comprehensive Income, other
primary statements and in the Notes to the Consolidated
Financial Statements on pages 17 to 46.
Dividends
The Directors have adopted a progressive dividend policy,
subject to growth, profitability and cash position in the
future. An interim dividend of 0.3p per share was paid in
March 2013. The Directors propose a final dividend of 0.4p
per share, subject
the
forthcoming Annual General Meeting.
to shareholder approval at
Directors
The directors who serve on the Board and on Board
Committees during the year are set out on page 2. In
addition, Raymond Kwan resigned as a Director on 31
January 2013, and Rod Jones resigned as a Director on 30
June 2013. The Group is currently searching for a new Non-
Executive Chairman and other Non-executive Directors.
Under the Articles of Association of the Company, one third
of the directors are subject to retirement by rotation at the
forthcoming Annual General Meeting, notice of which
accompanies this Report and Accounts. Accordingly Mr J
Nelson retires by rotation and, being eligible, offer himself
for re-election. In relation to the re-elections of each of the
directors, the Board is satisfied that each of these directors
continues to be effective and to demonstrate commitment to
the Company.
Information in respect of directors’ remuneration is given in
the Directors’ Remuneration Report on pages 10 to 12.
Directors’ shareholdings
Directors’ beneficial interests in the shares of the Company,
including family interests, at 31 July 2012 and 2013 were as
follows:
31 July 2013
31 July 2012
Number
of
shares
% of
issued
share
capital
Number
% of
issued
of
share
shares
capital
N/A
N/A
23,000
0.09%
968,462
3.79%
957,475
3.85%
N/A
4,000
30,790
56,500
N/A 2,183,850
8.80%
0.02%
0.12%
0.22%
4,000
0.02%
15,503
0.06%
56,500
0.23%
Rod Jones2
John McArthur
Raymond Kwan1
Max Cawthra
John Nelson
Charles Winward
1 - Raymond Kwan resigned as a Director on 31 January 2013.
2 - Rod Jones resigned as a Director on 30 June 2013.
There were no Directors’ share transactions between 31
July 2013 and the date of this report.
None of the Directors had any interests in the share capital
of subsidiaries. Further details of share options held by the
directors are set out in the Directors’ Remuneration Report.
Substantial shareholdings
At 23 October 2013, being the latest practicable date prior to
the publication of this document, the Company has been
advised of the following shareholdings of 3% or more in the
issued share capital of Tracsis plc:
Techtran Group Limited, IP Venture
Fund1
The University of Leeds
Investec Asset Management
Unicorn Asset Management
Ennismore Fund Management
Downing LLP
Fidelity
Hargreave Hale Limited
John McArthur
Parkwalk Advisors
Number
of
shares
3,437,285
3,090,000
2,000,000
1,874,632
1,500,000
1,529,517
1,286,166
1,262,500
968,462
777,778
% of
issued
shares
13.5%
12.1%
7.8%
7.3%
5.9%
6.0%
5.0%
4.9%
3.8%
3.0%
1 – Techtran Group Limited is a wholly owned subsidiaries of IP Group plc.
IP Group plc is a limited partner in IP Venture Fund, which is managed by an
IP Group plc company.
TRACSIS PLC | 9
Directors’ Report continued
Payment of suppliers
Auditor
KPMG Audit Plc has notified the Company that they will not
be seeking re-appointment. A resolution to appoint KPMG
LLP will be proposed at the Annual General Meeting.
Provision of information to auditor
All of the current Directors have taken all steps that they
ought to have taken to make themselves aware of any
information needed by the Company’s auditor for the
purposes of their audit and to establish that the auditor is
aware of that information. The Directors are not aware of
any relevant audit information of which the auditor is
unaware.
By order of the Board
Max Cawthra
Company Secretary
23 October 2013
It is the Group’s policy to pay suppliers in accordance with
the terms and conditions agreed in advance, providing all
trading terms and conditions have been met. All payments
are made in the ordinary course of business and the Group
expects to pay all supplier debts as they become due.
Trade payable days for the Group at 31 July 2013 were 62
days (2012: 23 days).
Research and development
During the year the Group incurred £411,000 (2012:
£403,000) of expenditure on research activity, which has
been charged to the Income Statement.
Financial instruments
Details of the Group’s exposure to financial risks are set out
in Note 24 to the financial statements.
Employment policy
It is the policy of the Group to operate a fair employment
policy. No employee or job applicant is less favourably
treated than another on the grounds of their sex, sexual
orientation, age, marital status, religion, race, nationality,
ethnic or national origin, colour or disability and all
appointments and promotions are determined solely on
merit. The Directors encourage employees to be aware of
all issues affecting the Group and place considerable
emphasis on employees sharing in its success through its
employee share option scheme.
Environment
The Group adheres to all environmental regulations and
has, where possible, utilised environmental-sustaining
policies such as recycling and waste reduction.
Significant Contracts
One of the Group’s subsidiaries, MPEC Technology Limited,
has previously operated a significant Framework Agreement
with a major railway infrastructure provider, from which it
has historically derived a significant amount of business,
and it has been informed that it has been selected to
continue with this.
Charitable donations
The Group made charitable donations to various charities
amounting to £13,922 during the year (2012: £6,140). No
political donations were made.
10 | Annual Report and Accounts 2013
Directors’ Remuneration Report
Unaudited information:
Tracsis plc, as an AIM company, is not required to present a Directors Remuneration Report in accordance with the Combined
Code. As part of the Company’s commitment to Corporate Governance, we present a voluntary report below.
Remuneration committee
The Remuneration Committee is described in the Report on Corporate Governance. The remuneration for each Executive
Director is determined by the Remuneration Committee, which comprises the Non-Executive Directors. None of the
committee members has any personal financial interest, other than as shareholders, in the matters to be decided.
Service contracts
It is the Group’s policy to enter into service contracts or letters of appointment with all Directors. Specific terms are:
Executive Directors
John McArthur
Max Cawthra
Non-Executive Directors
John Nelson
Charles Winward
Date Commencement Unexpired
of contract
date
term
Notice
period
21.11.07
20.09.10
21.11.07
21.11.07
01.01.04
Indefinite
6 months
20.09.10
Indefinite
3 months
21.11.07
Indefinite
3 months
21.11.07
Indefinite
3 months
None of the service contracts or letters of appointment provide for any termination payments.
Remuneration policy
The remuneration packages for Directors and senior management have been structured so as to fairly compensate them for
their contribution to the Group and to encourage them to remain within the Group. The basic components of these packages
include:
Basic salary and bonus arrangements
Each Director receives an annual salary or Directors’ fee for his/her services. These salaries are reviewed annually by the
Remuneration Committee and take into account the financial performance of the Group and market conditions. The Group
operates a bonus scheme. The Remuneration Committee is entitled to decide whether any bonuses are payable, and if so,
what amounts should be granted to Executive Directors. Directors, in line with all members of staff are entitled to exchange an
element of any cash bonus awarded for discounted share options under the Group’s Long Term Incentive Plan.
External appointments
The committee recognises that its directors may be invited to become executive or non-executive directors of other companies
or to become involved in charitable or public service organisations. As the Committee believes that this can broaden the
knowledge and experience of the directors to the benefit of the Group, it is the Group’s policy to approve such appointments
provided that there is no conflict of interest and the commitment is not excessive. The director concerned can retain the fees
relating to any such appointment.
Pensions and benefits in kind
All staff, Executive Directors and senior management are entitled to participate in the stakeholder pension plan established by
the Group. Benefits are provided to certain Executive Directors, including private health cover. The Group does not provide
any company cars to any of its Directors. The Group makes employer pension contributions to the pension schemes of J
McArthur and M Cawthra at a standard 5% of basic salary, in line with the level of contributions for other members of staff.
During the year, John McArthur elected to take a reduction in basic salary in return for additional pension contributions. There
was no additional cost to the Group in respect of this arrangement.
TRACSIS PLC | 11
Directors’ Remuneration Report continued
Audited information:
Directors’ remuneration
Directors’ remuneration for the year ended 31 July 2013 is set out below
Executive Directors
John McArthur
Dr Raymond Kwan – to 31 January 2013
Max Cawthra
Non-Executive Directors
Rodney Jones – to 30 June 2013
John Nelson
Charles Winward
Basic Pension
Conts
salary
£000
£’000
Bonus
£000
Benefits
in kind
£000
Total
2013
£000
132
19
80
231
17
15
15
47
11
1
4
16
-
-
-
-
45*
-
28*
73*
-
-
-
-
-
1
-
1
-
-
-
-
188
21
112
321
17
15
15
47
Total
2012
£000
166
42
85
293
17
14
14
45
* Denotes cash bonus amount determined by Remuneration Committee – all Directors are eligible to exchange any part of this
for discounted EMI Share Options under a scheme open to all staff but at the date of this report had not done so due to the
Group being in a close period until the Annual Report is published.
John McArthur elected to take a reduced salary in return for additional employers’ pension contributions with effect from June
2013.
Directors’ interests in shares options in the Executive Share Option Schemes
At
1 August
At
Exercise
Date from
31 July
price
Which
2012 Granted Lapsed Exercised
2013
pence
Exercisable Expiry date
Executive
Directors
John McArthur
140,000
100,000
Max Cawthra
225,000
10,162
-
-
-
-
240,000
52p/175p
235,162
50p/89p
See note 1 and
4 below
See note 2 and
3 below
28 Jan 2019
26 Mar
2023
12 Jan 2021
20 Jun 2022
Non-Executive
Directors
Rodney Jones
262,551
50,000
(50,000)
(262,551)
-
John Nelson
175,034
50,000
Charles Winward
87,517
50,000
-
-
-
225,034
40p/175p
-
137,517
40p/175p
21 Nov 2008
and note 4
below
21 Nov 2008
and note 4
below
21 Nov
2017
26 Mar
2023
21 Nov
2017
26 Mar
2023
1 –- Exercisable in batches in 6 monthly intervals commencing 6 months from the date of grant (28 January 2009). All options will be fully exercisable 36 months
after the date of grant.
2 – Exercisable in batches in 6 monthly intervals commencing 6 months from the date of grant (12 January 2011 and 20 June 2012). All options will be fully
exercisable 36 months after the date of grant.
3 – Options granted in 2012/13 relate to the Company’s LTIP scheme where Max Cawthra exchanged an element of his 2011/12 cash bonus for discounted share
options as part of a scheme available to all staff
4 – Options granted in 2012/13 are exercisable in batches in 3 monthly intervals commencing 3 months from the date of grant (26 March 2013). All options will be
fully exercisable 24 months after the date of grant.
The aggregate amount of pre-tax gains made by directors on the exercise of share options was £296,683 (2012: £10,030 –
Directors’ spouses). No directors received or were due to receive any shares under long term incentive schemes other than
under the share options schemes set out above.
12 | Annual Report and Accounts 2013
Directors’ Remuneration Report continued
Performance graph
The following graph shows the Company’s share price (rebased) compared with the performance of the FTSE AIM all-share
index (rebased) for the period from admission to AIM to 31 July 2013.
500
450
400
350
300
250
200
150
100
50
0
7
0
-
v
o
N
8
0
-
b
e
F
8
0
-
y
a
M
8
0
-
g
u
A
8
0
-
v
o
N
9
0
-
b
e
F
9
0
-
y
a
M
9
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u
A
9
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-
v
o
N
0
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-
b
e
F
0
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-
y
a
M
0
1
-
g
u
A
0
1
-
v
o
N
1
1
-
b
e
F
1
1
-
y
a
M
1
1
-
g
u
A
1
1
-
v
o
N
2
1
-
b
e
F
2
1
-
y
a
M
2
1
-
g
u
A
2
1
-
v
o
N
3
1
-
b
e
F
3
1
-
y
a
M
Tracsis - rebas ed
AIM All Share - rebased
The committee has selected the above indices because they are most relevant for a company of Tracsis’s size and sector.
On behalf of the Board
Charles Winward
Interim Chair of the Remuneration Committee
23 October 2013
Corporate Governance
Tracsis plc was listed on AIM on 27 November 2007. The
Group recognises the importance of, and is committed to,
high standards of corporate governance. Tracsis plc, as an
AIM Company, is not required to comply with the June 2010
UK Corporate Governance Code, although it has adopted
the principles as set out below.
The Board
There are currently 4 Board members, comprising 2
Executive Directors and 2 Non-Executive Directors. The role
of the Non-Executive Directors is to bring independent
judgement to Board deliberations and decisions. Following
the departure of Rodney Jones, the Group is currently
seeking a new Non-Executive Chairman of the Board to
oversee Board meetings and field all concerns regarding the
executive management of the Group and the performance
of the Executive Directors. This person will be responsible
for the Group’s corporate governance once appointed. A
biography of each Director appears on page 2. The
Directors each have diverse backgrounds and a wide range
of experience is available to the Group. The Board meets on
a monthly basis to review the Group’s performance and to
review and determine strategies for future growth. The
Board has delegated specific
to its
committees as set out below.
responsibilities
Each of the Directors is subject to either an executive
services agreement or a letter of appointment as set out on
page 10. Tracsis plc’s Articles of Association require
directors to retire from office and submit themselves for re-
election on a one third rotation at each Annual General
Meeting. Mr J Nelson will be retiring at the Annual General
Meeting and submitting himself for re-election.
Board meetings and attendance
Board meetings were held on 12 occasions during the year.
The table below shows attendance at the meetings whether
in person or by telephone. The Company Secretary records
attendance at all board meetings
including where
attendance is by telephone conference.
Board
Meetings
(total/poss)
10/11
11/12
12/12
5/6
11/12
11/12
Rodney Jones
John McArthur
Max Cawthra
Dr Raymond Kwan
John Nelson
Charles Winward
TRACSIS PLC | 13
Meeting attendance (continued)
Nomination Remuneration
Committee
Committee
Meetings
Meetings
Audit
Committee
Meetings
Rodney Jones
John McArthur
Max Cawthra
Dr Raymond Kwan
John Nelson
Charles Winward
Board committees
N/A
-
-
-
N/A
N/A
2/2
-
-
-
2/2
2/2
1/1
-
-
-
2/2
2/2
The Group is currently searching for a new Non-Executive
Chairman who will Chair the committees referred to below.
Until this recruitment takes place, the current Non-Executive
Directors fulfil these duties between them when necessary.
Nomination Committee
The Nomination Committee comprises the Non-Executive
Directors. The committee’s primary responsibilities are to
make recommendations
the Directors on all new
appointments of Directors and senior management,
interviewing nominees, to take up references and to
consider related matters.
to
Remuneration Committee
The Remuneration Committee comprises the Non-Executive
Directors. The committee’s primary responsibilities are to
review the performance of the Executive Directors and to
determine the terms and conditions of service of senior
management and any Executive Director appointed to the
Board (including the remuneration of and grant of options to
any such person under any share scheme adopted by the
Group).
Audit Committee
The Audit Committee similarly comprises the Non-Executive
Directors. The audit committee’s primary responsibilities
are to monitor the financial affairs of the Group, to ensure
that the financial performance of the Group is properly
measured and reported on, and to review reports from the
Group’s auditors relating to the accounting and internal
controls.
Non audit services
In accordance with its policy on non audit services provided
by the Group’s auditors, the Audit Committee reviews and
approves
The Audit
Committee refers to the Board for approval of any work
comprising non audit services where the fees for such work
represent more than 25% of the annual audit fee.
the award of any such work.
14 | Annual Report and Accounts 2013
Corporate Governance continued
Auditor independence and conflicts of interest
continues
to evaluate
the
The Audit Committee
independence and objectivity of the external auditors and
takes into consideration all United Kingdom professional
and regulatory requirements. Consideration is given to all
firm
relationships between
(including in respect of the provision of non audit services).
The Audit Committee considers whether, taken as a whole,
and having regard to the views, as appropriate, of the
external auditors and management, those relationships
appear to impair the auditors’ judgement or independence.
The Audit Committee feels they do not.
the Group and
the audit
Internal audit
The Audit Committee agrees that there should be no
internal audit function of the Group at this time considering
the size of the Group and the close involvement of senior
the Group’s accounting systems.
management over
However, the Committee will keep this matter under review
in the event that circumstances warrant an internal function
for the Group in the future.
Control procedures
The Board approves the annual budget each year. This
process allows the Board to identify key performance
targets and risks expected during the upcoming year. The
Board also considers the agreed budget when reviewing
trading updates and considering expenditures throughout
the year. Progress against budget is monitored via monthly
reporting of actual financial performance against budget and
prior year actual results.
The Group has clear authority limits deriving from the list of
matters reserved for decision by the Board including capital
expenditure approval procedures.
Relations with shareholders
the Group’s performance and
The Board recognises and understands that it has a
fiduciary responsibility to the shareholders. The Chairman’s
Statement and Chief Executive’s Statement include detailed
analysis of
future
expectations. The Group’s website
(www.tracsis.com)
allows shareholders access to information, including contact
details and the current share price. The Chief Executive is
responsible for on-going dialogue and relationships with
shareholders.
The Annual General Meeting will be a platform for the Board
to communicate with shareholders and the Board welcomes
the attendance and participation of all shareholders.
Going concern
The Directors have a reasonable expectation that the Group
has adequate resources to continue for the foreseeable
future in operational existence and have therefore adopted
the going concern basis in preparing the accounts.
Independence of Non-Executive Directors
The Directors consider all Non-Executive Directors to be
independent. Mr CS Winward is a Director of IP Group plc,
one of the Group’s major shareholders. Mr Winward
declares any potential conflicts of interest, if any, at each
Board Meeting, and ensures that he is removed from the
decision making process if relevant. The Board benefits
from Mr Winward’s vast experience and wise counsel, and
as such, considers him to be a suitable non-executive
to be
Director. The Board considers Mr JG Nelson
independent.
Board review process
The Board does not formally appraise its performance each
year, but considers the performance of Board members on
an informal basis, to ensure that each director has the skills
and experience required to perform their duties. The Board
is satisfied that all Directors have the appropriate level of
skills and experience.
TRACSIS PLC | 15
Statement of Directors’ Responsibilities in respect of the
Annual Report and the Financial Statements
The directors are responsible for preparing the Annual
Report and the group and parent company financial
statements
law and
in accordance with applicable
regulations.
Company law requires the directors to prepare group and
parent company financial statements for each financial
year. As required by the AIM Rules of the London Stock
Exchange they are required to prepare the group financial
statements in accordance with IFRSs as adopted by the
EU and applicable law and have elected to prepare the
parent company financial statements in accordance with
UK Accounting Standards and applicable
(UK
Generally Accepted Accounting Practice).
law
Under company law the directors must not approve the
financial statements unless they are satisfied that they
give a true and fair view of the state of affairs of the group
and parent company and of their profit or loss for that
period.
•
•
for the parent company financial statements, state
whether applicable UK Accounting Standards have
been followed, subject to any material departures
disclosed and explained in the financial statements;
prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the
group and the parent company will continue in
business.
The directors are responsible
for keeping adequate
accounting records that are sufficient to show and explain
the parent company's transactions and disclose with
reasonable accuracy at any time the financial position of
the parent company and enable them to ensure that its
financial statements comply with the Companies Act 2006.
They have general responsibility for taking such steps as
are reasonably open to them to safeguard the assets of
the group and to prevent and detect fraud and other
irregularities.
In preparing each of the Group and Parent Company
financial statements, the Directors are required to:
•
select suitable accounting policies and then apply
them consistently;
The directors are responsible for the maintenance and
integrity of the corporate and financial information included
on the company's website. Legislation in the UK governing
the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
• make judgements and estimates that are reasonable
and prudent;
•
for the group financial statements, state whether they
have been prepared in accordance with IFRSs as
adopted by the EU;
16 | Annual Report and Accounts 2013
Independent Auditor’s Report to the Members
of Tracsis plc
We have audited the financial statements of Tracsis plc for
the year ended 31 July 2013 set out on pages 17 to 51. The
financial reporting framework that has been applied in the
preparation of the group financial statements is applicable
law and International Financial Reporting Standards (IFRSs)
as adopted by the EU. The financial reporting framework
that has been applied in the preparation of the parent
company financial statements is applicable law and UK
Accounting Standards (UK Generally Accepted Accounting
Practice).
This report is made solely to the company's members, as a
body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken
so that we might state to the company's members those
matters we are required to state to them in an auditor's
report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility
to anyone other than the company and the company's
members, as a body, for our audit work, for this report, or for
the opinions we have formed.
Respective responsibilities of directors and auditor
that
they give a
As explained more fully in the Directors' Responsibilities
Statement set out on page 15, the directors are responsible
for the preparation of the financial statements and for being
satisfied
fair view. Our
responsibility is to audit, and express an opinion on, the
financial statements in accordance with applicable law and
International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing Practices
Board's Ethical Standards for Auditors.
true and
•
•
the parent company financial statements have been
properly prepared in accordance with UK Generally
Accepted Accounting Practice
in
financial statements have been prepared
the
accordance with the requirements of the Companies
Act 2006.
Opinion on other matters prescribed by the Companies Act
2006
In our opinion the information given in the Directors' Report
for the financial year for which the financial statements are
prepared is consistent with the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters
where the Companies Act 2006 requires us to report to you
if, in our opinion:
•
•
•
adequate accounting records have not been kept by the
parent company, or returns adequate for our audit have
not been received from branches not visited by us; or
the parent company financial statements are not in
agreement with the accounting records and returns; or
certain disclosures of directors' remuneration specified
by law are not made; or
• we have not
the
explanations we require for our audit.
received all
information and
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements
is provided on the Financial Reporting Council’s website at:
www.frc.org.uk/auditscopeukprivate..
Opinion on financial statements
In our opinion:
•
•
the financial statements give a true and fair view of the
state of the group's and of the parent company's affairs
as at 31 July 2013 and of the group's profit for the year
then ended;
the group financial statements have been properly
prepared in accordance with IFRSs as adopted by the
EU;
David Hutchinson (Senior Statutory Auditor)
for and on behalf of KPMG Audit PLC, Statutory Auditor
Chartered Accountants
1 The Embankment
Neville Street
Leeds
LS1 4DW
23 October 2013
Consolidated Statement of Comprehensive Income
for the year ended 31 July 2013
TRACSIS PLC | 17
Revenue
- continuing
- acquisitions
Total revenue
Cost of sales
Gross profit
Administrative costs
Adjusted EBITDA*
Amortisation of intangible assets
Depreciation
Exceptional item: Acquisition costs
Share-based payment charges
Operating profit
- continuing
- acquisitions
- exceptional acquisition costs
Total operating profit
Finance income
Finance expense
Profit before tax
Taxation
Profit after tax
Notes
6
15
14
8
9
10
11
12
2013
£000
7,641
3,190
10,831
2012
£000
8,668
-
8,668
(3,033)
(1,880)
7,798
6,788
(5,272)
(3,835)
3,367
(273)
(154)
(225)
(189)
2,534
217
(225)
2,526
75
(11)
2,590
(486)
2,104
3,279
(222)
(49)
-
(55)
2,953
-
-
2,953
61
-
3,014
(598)
2,416
Other comprehensive income/(expense):
Items that are or may be reclassified subsequently to profit or loss
Foreign currency translation differences – foreign operations
(62)
-
Total recognised income for the year
2,042
2,416
Earnings per ordinary share
Basic
Diluted
* Earnings before finance income, tax, depreciation, amortisation, exceptional items and share-based payment charges.
8.42p
8.15p
13
13
9.96p
9.83p
18 | Annual Report and Accounts 2013
Consolidated Balance Sheet
as at 31 July 2013
Company number: 05019106
Non-current assets
Property, plant and equipment
Intangible assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total assets
Non-current liabilities
Hire-purchase contracts
Deferred tax liabilities
Current liabilities
Hire-purchase contracts
Trade and other payables
Current tax liabilities
Total liabilities
Net assets
Equity attributable to equity holders of the company
Called up share capital
Share premium reserve
Merger reserve
Share based payments reserve
Retained earnings
Translation reserve
Total equity
Note
14
15
16
18
17
20
17
19
21
22
22
22
22
22
2013
£000
1,600
6,067
7,667
236
3,865
6,571
10,672
2012
£000
463
4,246
4,709
236
1,282
7,568
9,086
18,339
13,795
232
1,046
1,278
96
3,532
224
3,852
-
702
702
-
1,928
732
2,660
5,130
3,362
13,209
10,433
102
4,280
1,472
383
7,034
(62)
13,209
99
4,113
935
194
5,092
-
10,433
The financial statements on pages 17 to 51 were approved and authorised for issue by the Board of Directors on 23 October
2013 and were signed on its behalf by:
John McArthur – Chief Executive Officer
Max Cawthra – Chief Financial Officer
TRACSIS PLC | 19
Consolidated Statement of Changes in Equity
Share
Share Premium
Merger
Capital Reserve
Reserve
Share-
based
Payments Retained Translation
Reserve
Reserve Earnings
£000
£000
£000
£000
£000
£000
Total
£000
7,656
2,416
2,416
(48)
55
144
-
-
-
-
-
-
-
210
- 10,433
- 10,433
-
2,104
At 1 August 2011
96
3,762
935
139
Profit for the year
Total comprehensive
income
Transactions with owners:
Dividends
Share based payment
charges
Exercise of share options
Exercise of warrants
-
-
-
-
1
2
-
-
-
-
143
208
-
-
-
-
-
-
-
-
-
55
-
-
2,724
2,416
2,416
(48)
-
-
-
At 31 July 2012
99
4,113
935
194
5,092
At 1 August 2012
99
4,113
935
194
Profit for the year
Other comprehensive
income/(expense)
Total comprehensive
income
Transactions with owners:
Dividends
Share based payment
charges
Exercise of share options
Shares issued as
consideration for business
combinations
At 31 July 2013
-
-
-
-
-
2
1
-
-
-
-
-
167
-
-
-
-
-
-
-
537
-
-
-
-
189
-
-
5,092
2,104
-
(62)
(62)
2,104
(62)
2,042
(162)
-
-
-
-
-
-
-
(162)
189
169
538
102
4,280
1,472
383
7,034
(62) 13,209
Details of the nature of each component of equity are set out in Notes 21 and 22.
20 | Annual Report and Accounts 2013
Consolidated Cash Flow Statement
for the year ended 31 July 2013
Operating activities
Profit for the year
Finance income
Finance expense
Depreciation
Amortisation of intangible assets
Income tax charge
Share based payment charges
Operating cash inflow before changes in working capital
Movement in inventories
Movement in trade and other receivables
Movement in trade and other payables
Cash generated from operations
Finance income
Finance expense
Income tax paid
Net cash flow from operating activities
Investing activities
Purchase of plant and equipment
Payment of deferred consideration
Acquisition of subsidiaries
Net cash flow used in investing activities
Financing activities
Dividends paid
Proceeds from exercise of warrants
Proceeds from exercise of share options
Hire purchase repayments
Net cash flow from financing activities
Net (decrease)/increase in cash and cash equivalents
Effect of exchange fluctuations
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
Notes
2013
£000
2012
£000
2,104
2,416
10
11
14
15
12
8
10
11
14
5
28
17
(75)
11
154
273
486
189
3,142
-
(539)
116
2,719
75
(11)
(1,093)
1,690
(75)
-
(2,462)
(2,537)
(162)
-
169
(95)
(88)
(935)
(62)
7,568
6,571
(61)
-
49
222
598
55
3,279
(102)
700
191
4,068
61
-
(521)
3,608
(38)
(1,000)
2
(1,036)
(48)
210
144
-
306
2,878
-
4,690
7,568
TRACSIS PLC | 21
Notes to the Consolidated Financial Statements
1
Reporting entity
Tracsis plc (the ‘Company’) is a company incorporated in the United Kingdom. The consolidated financial statements of the
Company for the year ended 31 July 2013 comprise the Company and its subsidiaries (together referred to as the ‘Group’).
2
Basis of preparation
(a)
(b)
(c)
(d)
Statement of compliance
The Group consolidated financial statements have been prepared in accordance with International Financial
Reporting Standards (‘IFRSs’) as adopted by the EU and applicable law. The Company has elected to prepare its
parent company financial statements in accordance with UK accounting standards and applicable law (‘UK GAAP’).
These parent company statements appear after the notes to the consolidated financial statements.
Basis of measurement
The Accounts have been prepared under the historical cost convention.
Functional and presentation currency
These consolidated financial statements are presented in sterling, which is the Company’s functional currency. All
financial information presented in sterling has been rounded to the nearest thousand.
Use of estimates and judgements
The preparation of financial statements in conformity with IFRSs requires management to make judgements,
estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities,
income and expenses. The estimates and associated assumptions are based on historical experience and various
other factors that are believed to be reasonable under the circumstances, the results of which form the basis of
making the judgements about carrying values of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised if the revision only affects that period, or in the period of the
revision and future periods, if the revision affects both current and future periods.
Judgements made by management in the application of IFRSs that have a significant effect on the Group financial
statements and estimates with a significant risk of material adjustment in future years are disclosed in Note 4.
(e)
Changes in accounting policies
IFRS and IFRIC are issued by the International Accounting Standards Board (the IASB) and must be adopted into
European Union law, referred to as endorsement, before they become mandatory under the IAS Regulation.
The following new standards and amendments to standards have become effective for the current financial year and
hence are reflected in these financial statements: These standards have not had a material impact on the financial
statements.
• Amendment to IAS 1 ‘Presentation of financial statements’ – Presentation of items in other comprehensive
income
• Amendments to IAS 12 ‘Income Taxes’ – Recovery of underlying assets
At the date of approval of these financial statements the following Standards and Interpretations were in issue and
endorsed by the EU but not yet effective. It is not expected that the implementation of these standards will have a
material effect on the financial statements:
IFRS 9: Financial instruments and subsequent amendments
IFRS 10: Consolidated Financial Statements
IFRS 11: Joint arrangements
IFRS 12: Disclosure of Interests in Other Entities
IFRS 13: Fair Value Measurement
• Amendment to IFRS 7: Disclosures – Offsetting Financial Assets and Financial Liabilities
•
•
•
•
•
• Amendment to IAS 19: Employee Benefits
•
IAS 27: Separate Financial Statements
•
IAS 28: Investments in Associates and Joint Ventures
22 | Annual Report and Accounts 2013
Notes to the Consolidated Financial Statements continued
2
(f)
Basis of preparation (continued)
Going concern
The Group is debt free and has substantial cash resources. The Board has prepared cash flow forecasts for the
forthcoming year based upon assumptions for trading and the requirements for cash resources.
Based upon this analysis, the Board has concluded that the Group has adequate working capital resources and that it
is appropriate to use the going concern basis for the preparation of the consolidated financial statements.
3
Significant accounting policies
The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial
statements and have been applied consistently by Group entities, except as stated in note 2(e), which addresses changes in
accounting policies.
(a)
Basis of consolidation
The Group’s accounting policy with respect to business combinations is set out above.
Subsidiaries are entities controlled by the Company. The financial statements of subsidiaries are included in the
consolidated financial statements from the date that control commences until the date control ceases. The
accounting policies of subsidiary companies have been changed where necessary to align them with the policies
adopted by the Group.
The Group entities included in these consolidated financial statements are those listed in note 27.
All intra-group balance and transactions, including unrealised profits arising from intra-group transactions, are
eliminated fully on consolidation.
(b)
Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable (excluding value added tax and
discounts given) derived from the provision of goods and services to customers during the period. The Group derives
revenue from software licences, post contract customer support, sale of hardware & condition monitoring technology,
consultancy and professional services, and data capture/passenger counting services.
The Group recognises the revenue from the sale of software licences and specified upgrades upon shipment of the
software product or upgrade, when there are no significant vendor obligations remaining, when the fee is fixed and
determinable and when collectability is considered probable. Where appropriate the Group provides a reserve for
estimated returns under the standard acceptance terms at the time the revenue is recognised. Payment terms are
agreed separately with each customer.
Revenue from post contract customer support and consultancy services is recognised on a straight-line basis over
the term of the contract. Revenue received and not recognised in the income statement under this policy is classified
as deferred income in the balance sheet.
Revenue from hardware sales and condition monitoring technology is recognised as the products are shipped to
customers. Provision is made for any returns to customers, or credit notes to be issued.
In respect of data capture and counting services, revenue is recognised on services not yet billed at the fair value of
consideration expected to be receivable to the extent that the work has already been carried out at the year end.
Where the outcome of a contract can be estimated reliably, revenue and costs are recognised by reference to the
stage of completion of the contract activity at the end of the reporting period, measured based on work performed
and if its receipt is considered probable. Where the outcome of a contract cannot be estimated reliably, contract
revenue is only recognised to the extent of contract costs incurred that it is probable will be recoverable. Contract
costs are recognised as expenses in the period in which they are incurred. When it is probable that total contract
costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.
TRACSIS PLC | 23
Notes to the Consolidated Financial Statements continued
3
(c)
Significant accounting policies (continued)
Property, plant and equipment
Items of property, plant and equipment are initially recognised at cost. As well as the purchase price, cost includes
directly attributable costs. The corresponding liability is recognised within provisions. Items of property, plant and
equipment are carried at depreciated cost.
Depreciation is provided on all items of property, plant and equipment so as to write off the carrying value of items
over their expected useful economic lives. It is applied at the following rates:
Freehold buildings (excluding land)
Computer equipment
Office fixtures and fittings
Motor vehicles
–
–
–
–
4% on cost
33 1/3% on cost
10% - 20% on cost, or 15% reducing balance
25% per annum reducing balance basis
(d)
Intangible assets
Goodwill
Goodwill arising on acquisitions comprises the excess of the fair value of the consideration for investments in
subsidiary undertakings over the fair value of the net identifiable assets acquired at the date of acquisition.
Adjustments are made to fair values to bring the accounting policies of the acquired businesses into alignment with
those of the Company. The costs of integrating and reorganising acquired businesses are charged to the post
acquisition income statement. Goodwill arising on acquisitions of subsidiaries is included in intangible assets.
Goodwill is not amortised but is tested annually for impairment and carried at cost less accumulated impairment
losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity
sold.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. Each of those cash-generating
units represents the lowest level within the group at which the associated level of goodwill is monitored for
management purposes and are not larger than the operating segments determined in accordance with IFRS 8
“Operating Segments”.
Business Combinations
From 1 August 2009 the Group has applied IFRS 3 Business Combinations (2008) in accounting for business
combinations. The change in accounting policy has been applied prospectively and has had no material impact on
earnings per share. Business combinations are accounted for using the acquisition method as at the acquisition date,
which is the date on which control is transferred to the Group. Control is the power to govern the financial and
operating policies of an entity so as to obtain benefits from its activities. In assessing control, the Group takes into
consideration potential voting rights that currently are exercisable.
For acquisitions on or after 1 August 2009, the Group measures goodwill at the acquisition date as:
•
•
•
the fair value of the consideration transferred; plus
the recognised amount of any non-controlling interests in the acquiree; plus if the business combination is
achieved in stages, the fair value of the existing equity interest in the acquiree; less
the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.
When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.
The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such
amounts are generally recognised in profit or loss.
Costs related to the acquisition, other than those associated with the issue of debt or equity securities, that the Group
incurs in connection with a business combination are expensed as incurred.
24 | Annual Report and Accounts 2013
Notes to the Consolidated Financial Statements continued
3
Significant accounting policies (continued)
Business Combinations (continued)
Any contingent consideration payable is recognised at fair value at the acquisition date. If the contingent
consideration is classified as equity, it is not remeasured and settlement is accounted for within equity. Otherwise,
subsequent changes to the fair value of the contingent consideration are recognised in profit or loss.
For acquisitions prior to 1 August 2009, goodwill represents the excess of the cost of the acquisition over the Group’s
interest in the recognised amounts (generally fair value) of the identifiable assets, liabilities and contingent liabilities
of the acquiree.
Transaction costs, other than those associated with the issue of debt or equity securities, that the Group incurred in
connection with business combinations were capitalised as part of the cost of acquisition.
Other intangible assets
An intangible asset, which is an identifiable non-monetary asset without physical substance, is recognised to the
extent that it is probable that the expected future economic benefits attributable to the asset will flow to the group and
that its cost can be measured reliably. The asset is deemed to be identifiable when it is separable or when it arises
from contractual or other legal rights.
Intangible assets, primarily customer relationships and technology related assets, acquired as part of a business
combination are capitalised separately from goodwill and are carried at cost less accumulated amortisation and
accumulated impairment losses. Amortisation is calculated using a straight line method over the estimated useful life
of the assets of 10 to 20 years for customer related assets and 10 years for technology related assets.
Impairment of non-current assets
Where an indication of impairment is identified, the recoverable amount of the asset is estimated in order to
determine the extent of the impairment loss (if any). If the recoverable amount (higher of fair value less cost to sell
and value in use of an asset) is estimated to be less than its carrying amount, the carrying amount of the asset is
reduced to its recoverable amount.
Research and Development Costs
Expenditure on internally developed products is capitalised as intangible assets if it can be demonstrated that:
•
•
•
•
•
•
it is technically feasible to develop the product for it to be sold;
adequate resources are available to complete the development;
there is an intention to complete and sell the product;
the Group is able to sell the product;
sale of the product will generate future economic benefits; and
expenditure on the project can be measured reliably.
Capitalised development costs would be amortised over the periods the Group expected to benefit from selling the
products developed. At present, the Group has not considered that its development expenditure meets the criteria for
capitalisation.
Development expenditure not satisfying the above criteria and expenditure on the research phase of internal projects
are recognised in the income statement as incurred.
(e)
(f)
TRACSIS PLC | 25
Notes to the Consolidated Financial Statements continued
3
Significant accounting policies (continued)
(g)
Financial instruments
The Group classifies its financial instruments, or their component parts, on initial recognition as a financial asset, a
financial liability or an equity instrument in accordance with the substance of the contractual arrangement.
Financial instruments are recognised on the balance sheet when the Group becomes a party to the contractual
provisions of the instrument.
Financial instruments issued by the Group are treated as equity only to the extent that they do not meet the definition
of a financial liability. The Group’s ordinary shares are classified as equity instruments, net of issue costs.
Cash and cash equivalents
(i)
Cash and cash equivalents in the balance sheet are included at cost and comprise cash at bank, cash in hand and
short term deposits with an original maturity of three months or less.
Trade receivables
(ii)
Trade receivables do not carry interest and are stated at their nominal value as reduced by appropriate allowances
for estimated irrecoverable amounts.
(iii)
Trade payables are not interest bearing and are stated at their nominal value.
Trade payables
(iv)
Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.
Equity instruments
(h)
Taxation
The tax on the profit or loss for the year represents current and deferred tax.
The tax currently payable is based on taxable profit for the period. Taxable profit differs from net profit as reported in
the income statement because it excludes items of income or expense that are taxable or deductible in other years
and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated
using tax rates that have been enacted at the balance sheet date.
Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of
assets and liabilities and their carrying value in the financial statements.
The principal temporary differences arise from depreciation on plant and equipment and share options granted by the
Group to employees and directors.
Deferred tax assets and liabilities are measured on an undiscounted basis at the tax rates that are expected to apply
when the related asset is realised or liability is settled, based on tax rates and laws enacted or substantively enacted
at the balance sheet date.
Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against
which the temporary differences can be utilised.
(i)
Dividend distribution
Dividend distribution to the Company’s shareholders is recognised as a liability in the Group’s financial statements in
the period in which the dividends are approved by the Company’s shareholders, or in the case of interim dividends,
when paid.
26 | Annual Report and Accounts 2013
Notes to the Consolidated Financial Statements continued
3
(j)
(k)
(l)
Significant accounting policies (continued)
Leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and
rewards of ownership to the lessee. All other leases are classified as operating leases. Assets held under finance
leases are initially recognised as assets of the Group at their fair value at the inception of the lease or, if lower, at the
present value of the minimum lease payments. The corresponding liability to the lessor is included in the balance
sheet as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the
lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges
are charged directly to profit or loss, unless they are directly attributable to qualifying assets, in which case they are
capitalised in accordance with the Group’s general policy on borrowing costs. Contingent rentals are recognised as
expenses in the periods in which they are incurred.
Operating lease payments are recognised as an expense on a straight line basis over the lease term, except where
another systematic basis is more representative of the time pattern in which economic benefits from the leased asset
are consumed. Contingent rentals arising under operating leases are recognised as an expense in the period in
which they are incurred.
In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a
liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight line basis,
except where another systematic basis is more representative of the time pattern in which economic benefits from the
leased asset are consumed.
Employee benefits
Wages, salaries, social security contributions, paid annual leave, bonuses and non-monetary benefits are accrued in
the year in which the associated services are rendered by the employees of the Group. Where the Group provides
long term employee benefits, the cost is accrued to match the rendering of the services by the employees concerned.
Share based payments
The Group issues equity-settled share based payments to certain employees (including directors). Equity-settled
share based payments are measure at fair value at the date of grant. The fair value determined at the grant date of
the equity-settled share based payments is expensed on a straight line basis over the vesting period, together with a
corresponding increase in equity, based upon the Group’s estimate of the shares that will eventually vest.
Fair value is measured using the Black-Scholes option pricing model. The expected life used in the model has been
adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and
behavioural considerations.
Where the terms and conditions of options are modified, as a minimum an expense is recognised as if the terms had
not been modified. In addition, an expense is recognised for any increase in the value of the transaction as a result
of the modification, as measured at the date of modification.
Where an equity-settled transaction is cancelled, it is treated as if it had vested on the date of the cancellation, and
any expense not yet recognised for the transaction is recognised immediately. However, if a new transaction is
substituted for the cancelled transaction, and designated as a replacement transaction on the date that it was
granted, the cancelled and new transactions are treated as if they were a modification of the original transaction as
described in the previous paragraph.
TRACSIS PLC | 27
Notes to the Consolidated Financial Statements continued
3
Significant accounting policies (continued)
(m)
(n)
(o)
(p)
(q)
(r)
(s)
Retirement benefits
Contributions to defined contribution pension schemes are charged to the income statement in the year to which they
relate.
Exceptional items
Items which are significant by virtue of their size or nature and/or which are considered non-recurring are classified
as exceptional operating items. Such items, which include for example costs relating to acquisitions, amortisation of
intangible assets and share based payment charges, are included within the appropriate consolidated income
statement category but are highlighted separately. Exceptional operating items are excluded from the profit
measures used by the board to monitor underlying performance.
Finance income
Finance income comprises interest income on funds invested. Interest income is recognised as it accrues in profit or
loss, using the effective interest method.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits. The Company considers all highly liquid
investments with original maturity dates of three months or less to be cash equivalents.
Operating segments
The Group has determined that, based on its internal reporting framework and management structure, that it has only
one reportable segment on a business basis, but has two reportable segments on a geographical basis – UK and
Australia. Such determination is necessarily judgemental in its nature and has been determined by management in
preparing the financial statements. The level of disclosure of segmental and other information is determined by such
assessment. Further details of the considerations made and the resulting disclosures are provided in note 6 to the
financial statements.
Inventories
Inventories are measured at the lower of cost and net realisable value. Provision is made for slow moving and
obsolete inventories on a line by line basis.
Foreign currencies
The individual financial statements of each Group entity are presented in the currency of the primary economic
environment in which the entity operates (its functional currency). For the purpose of the consolidated financial
statements, the results and financial position of each Group entity are expressed in Pounds Sterling, which is the
functional currency of the Company and the presentation currency for the consolidated financial statements.
In preparing the financial statements of the individual entities, transactions in currencies other than the entity’s
functional currency (foreign currencies) are recorded at the rates of exchange prevailing at the dates of the
transactions. At each balance sheet date, monetary items denominated in foreign currencies are retranslated at the
rates prevailing at the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign
currencies are retranslated at the rates prevailing at the date when the fair value was determined.
Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Exchange differences are recognised in profit or loss in the period in which they arise except for:
•
•
exchange differences that relate to assets under construction for future productive use, which are included
in the cost of those assets when they are regarded as an adjustment to interest costs on foreign currency
borrowings; and
exchange differences on monetary items receivable from or payable to a foreign operation for which
settlement is neither planned nor likely to occur, which form part of the net investment in a foreign operation,
and which are recognised in the foreign currency translation reserve and recognised in profit or loss on
disposal of the net investment.
28 | Annual Report and Accounts 2013
Notes to the Consolidated Financial Statements continued
3
(t)
Significant accounting policies (continued)
Translation of financial statements of foreign entities
The assets and liabilities of foreign operations are translated using exchange rates at the balance sheet date. The
components of shareholders’ equity are stated at historical value. An average exchange rate for the period is used to
translate the results and cash flows of foreign operations.
Exchange differences arising on translating the results and net assets of foreign operations are taken to the
translation reserve in equity until the disposal of the investment. The gain or loss in the income statement on the
disposal of foreign operations includes the release of the translation reserve relating to the operation that is being
sold.
4
Critical Accounting Estimates and Judgements
The Group’s accounting policies are set out in Note 3.
The Directors consider that the key judgements and estimates made in the preparation of the consolidated financial
statements are:
Intangible fixed assets
On acquisition, the Company calculates the fair value of the net assets acquired. Due to the nature of the companies acquired,
this often requires the recognition of additional intangible assets, specifically in relation to technology or customer
relationships. The assessment of intangible assets acquired is necessarily judgemental and has been performed using a
discounted cash flow model. Significant judgement has been applied in assessing the future revenues to be achieved from
that acquisition, the growth rate of that revenue, the associated costs and the discount factor to be applied. In addition,
management make estimates as to the useful economic life of the resulting intangible assets, based on their industry
expertise. These estimates affect the amount of amortisation recognised in each financial year.
Actual results may vary significantly from expectations in future years. Annual reviews of the Group’s intangible fixed assets
are carried out, using commercial judgements to determine whether there is any evidence that the useful economic life is no
longer appropriate, or whether there are impairment indicators relating to specific intangible assets due to changes in
circumstance during the financial year in question.
Revenue recognition
Certain of the Group’s contracts for software licences, maintenance services and other consultancy projects have a term of
more than one year. The Directors assess the fair value of the entire contract attributable to each of the different services and
the timing of when revenues should be recognised and this assessment can differ from the legally contracted values. A level
of judgement and estimate is required in assessing the level of potential customer returns for certain hardware products.
Some of the Group’s revenue is derived from data capture/counting services, in which projects can last for an extended period
of time. As such, an element of judgement is required when assessing the stage of completion at a period end.
Share-based payments
The Group has equity settled share-based remuneration schemes for employees. The fair value of share options is estimated
by using the Black-Scholes valuation model, on the date of grant based on certain assumptions. These assumptions include,
among others, expected volatility, expected life of the options and number of options expected to vest.
TRACSIS PLC | 29
Notes to the Consolidated Financial Statements continued
5
Acquisition of subsidiaries - Acquisition in the current year: Sky High plc
On 26 March 2013, the Group published a recommended cash offer to acquire the entire issued share capital of Sky High plc,
for a combination of cash and share based consideration, with the share based consideration being dealt with via a
Management Agreement and Prowse Trust Agreement. On 17 April 2013, the offer was declared unconditional in all respects
as the Group had received valid acceptances of over 90% of the Offer Shares. Following this announcement, the Group
exercised its rights under Sections 979 and 980 of Companies Act 2006 to compulsory transfer the remaining shares to
Tracsis by applying the ‘squeeze out’ provisions of the Act. Sky High was delisted from AIM on 16 May 2013.
Sky High is a traffic data collection, aggregation and analysis company that provides primary information to a variety of clients
that include government bodies, private companies well known within the market place and public sector groups. Its primary
markets are the transport and people moving sectors ranging from highway agencies, stations and railways, to festival and
conference organisers.
The acquisition took place as the Directors believe that Sky High operates in a similar market, cross selling opportunities exist,
there is some overlap of customer base, and Sky High has a sizeable Australian presence which the Group may seek to
capitalise on in the future. By removing duplicate PLC costs and achieving other synergies, there is also an opportunity to
increase profitability, and Sky High management will be able to devote more time to the running of the business as opposed to
being distracted by PLC related matters.
In the period to 31 July 2013 the company contributed revenue of £3,190,000 and operating profit of £217,000 to the Group’s
results. If the acquisition had occurred on 1 August 2012, management estimates that consolidated revenue would have been
£9,594,000 and consolidated profit for the year would have been £349,000. In determining these amounts, management has
assumed that the fair value adjustments, determined provisionally that arose on the date of acquisition would have been the
same if the acquisition had occurred on 1 August 2012.
The acquisition had the following effect on the Group’s assets and liabilities on the acquisition date:
Pre-acquisition
Fair value
value on
carrying amount
adjustments
acquisition
Recognised
Intangible assets: Customer relationships
Other intangible assets
Tangible fixed assets
Trade and other receivables
Hire purchase contract obligations
Trade and other payables
Income tax payable
Deferred tax liability
Net identified assets and liabilities
Goodwill on acquisition
Consideration paid in cash
Net cash acquired
Net cash flow
Consideration paid: fair value of shares issued
Total consideration
£000
-
861
1,200
2,294
(407)
(1,488)
(21)
(64)
2,375
£000
1,704
(861)
-
(250)
-
-
-
(358)
235
£000
1,704
-
1,200
2,044
(407)
(1,488)
(21)
(422)
2,610
390
3,000
2,759
(297)
2,462
538
3,000
Pre-acquisition carrying amounts were determined based on applicable IFRSs, immediately prior to the acquisition. The
values of assets and liabilities recognised on acquisition are the estimated fair values.
30 | Annual Report and Accounts 2013
Notes to the Consolidated Financial Statements continued
5
Acquisition of subsidiaries - Acquisition in the current year: Sky High plc (continued)
The goodwill that arose on acquisition can be attributed to a multitude of assets that cannot readily be separately identified for
the purposes of fair value accounting. These include an Australian presence which may be used to facilitate Tracsis overseas
growth, cross selling opportunities, operating synergies, staff skills and capabilities, and a brand/reputation.
The fair value adjustments were provisional and arise in accordance with the requirements of IFRSs to recognise intangible
assets acquired. In determining the fair values of intangible assets the Group has used discounted cash flow forecasts. The
fair value of shares issued was based on market value at the date of issue.
The Group incurred acquisition related costs of £225,000 which are included within administrative expenses.
6
Segmental analysis
The Group’s revenue and profit was derived from its principal activity which is the solving a variety of data capture, reporting
and resource optimisation problems along with the provision of a range of associated professional services.
In accordance with IFRS 8 ‘Operating Segments’, the Group has made the following considerations to arrive at the disclosure
made in these financial statements.
IFRS 8 requires consideration of the Chief Operating Decision Maker (“CODM”) within the Group. In line with the Group’s
internal reporting framework and management structure, the key strategic and operating decisions are made by the Board of
Directors, who review internal monthly management reports, budgets and forecast information as part of this. Accordingly, the
Board of Directors are deemed to be the CODM.
Operating segments have then been identified based on the internal reporting information and management structures within
the Group. From such information it has been noted that the CODM reviews the business as a single operating segment,
receiving internal information on that basis. The management structure and allocation of key resources, such as operational
and administrative resources, are arranged on a centralised basis. Due to the small size and low complexity of the business,
profitability is not analysed in further detail beyond the operating segment level and is not divided by revenue stream.
The CODM reviews a split of revenue streams on a monthly basis and, as such, this additional information has been provided
below.
Revenue
Software licences and post contract customer support
Rail Consultancy and professional services
Data capture and passenger counting
Condition monitoring technology and embedded software & associated hardware
Total revenue
2013
£000
2,142
1,145
4,124
3,420
10,831
Re-analysed
2012
£000
1,992
1,401
807
4,468
8,668
Following the acquisition of Sky High plc in the year, the Group has represented the way revenues are presented. Some of the
revenue in respect of the Group’s existing passenger counting operations prior to the Sky High acquisition have been
reclassified in the 2012 comparatives.
Reconciliations of reportable segment revenues, profit or loss, assets and liabilities and other material items
Information regarding the results of the reportable segment is included below. Performance is measured based on segment
profit before income tax, as included in the internal management reports that are reviewed by the Board of Directors.
Segment profit is used to measure performance. There are no material inter-segment transactions, however, when they do
occur, pricing between segments is determined on an arm’s length basis. Revenues disclosed below materially represent
revenues to external customers.
Notes to the Consolidated Financial Statements continued
TRACSIS PLC | 31
6
Segmental analysis (continued)
Revenues
Total revenue for reportable segments
Consolidated revenue
Profit or loss
Total profit or loss for reportable segments
Unallocated amounts:
Share based payment charge
Other exceptional items (net)
Depreciation
Amortisation of intangible assets
Interest receivable/payable(net)
Consolidated profit/(loss) before tax
Revenues
Total revenue for reportable segments
Consolidated revenue
Profit or loss
Total profit or loss for reportable segments
Unallocated amounts:
Share based payment charge
Depreciation
Amortisation of intangible assets
Interest receivable
Consolidated profit before tax
2013
UK
Australia
£000
£000
10,374
10,374
3,422
(189)
(225)
(129)
(273)
67
2,673
UK
£000
8,668
8,668
3,279
(55)
(49)
(222)
61
3,014
457
457
(55)
-
-
(25)
-
(3)
(83)
2012
Australia
£000
-
-
-
-
-
-
-
-
Total
£000
10,831
10,831
3,367
(189)
(225)
(154)
(273)
64
2,590
Total
£000
8,668
8,668
3,279
(55)
(49)
(222)
61
3,014
32 | Annual Report and Accounts 2013
Notes to the Consolidated Financial Statements continued
6
Segmental analysis (continued)
Assets
Total assets for reportable segments
Unallocated assets – intangible assets
Consolidated total assets
Liabilities
Total liabilities for reportable segments
Unallocated liabilities – deferred tax
Consolidated total liabilities
Assets
Total assets for reportable segments
Unallocated assets – intangible assets
Consolidated total assets
Liabilities
Total liabilities for reportable segments
Unallocated liabilities – deferred tax
Consolidated total liabilities
UK
£’000
11,622
6,067
17,689
3,858
1,046
4,904
UK
£’000
9,549
4,246
13,795
2,660
702
3,362
2013
Australia
£000
650
-
650
226
-
226
2012
Australia
£000
-
-
-
-
-
-
Total
£000
12,272
6,067
18,339
4,084
1,046
5,130
Total
£000
9,549
4,246
13,795
2,660
702
3,362
Major customers
Transactions with the Group’s largest customer represent 31% of the Group’s total revenues (2012: 50%).
Geographic split of revenue
A geographical analysis of revenue is provided below:
United Kingdom
Australia
Rest of the World
Total
2013
£000
9,951
457
423
10,831
2012
£000
8,376
-
292
8,668
TRACSIS PLC | 33
Notes to the Consolidated Financial Statements continued
7
Employees and personnel costs
Staff costs:
Wages and salaries
Social security contributions
Contributions to defined contribution plans
Equity-settled share based payment transactions
Average number of employees (including directors) in the year
2013
£000
4,078
344
67
189
4,678
138
2012
£000
2,258
226
53
55
2,592
65
The increase in staff costs and numbers is due to the acquisition of Sky High plc during the year. Parts of the business utilise
high levels of casual workers, and as such, full time equivalent figures have been derived.
The directors’ remuneration and share options are detailed within the Directors’ Remuneration Report on pages 10 to 12.
8
Share based payments
The Group has two share option schemes for all employees (including directors).
EMI Share options
Options are exercisable at a price agreed at the date of grant. The vesting period is usually between one and five years. The
exercise of options is dependent upon eligible employees meeting performance criteria. The options may not be exercised
before the occurrence of a takeover, sale or admission. The options are settled in equity once exercised. If the options
remain unexercised after a period of 10 years from the date of grant, the options expire. Options are forfeited if the employee
leaves the Group before the options vest.
Discounted EMI Share options
In August 2012, the Group implemented a new EMI share option scheme, resulting in discounted EMI share options being
issued to staff instead of cash bonuses, provided certain predetermined performance criteria were met for both the overall
group, and the part of the business the employee directly works in. This scheme was made available to all staff. Staff are also
able to exchange an element of annual salary in return for share options too. The vesting period is three years. The exercise
of options is dependent upon eligible employees meeting performance criteria. The options may not be exercised before the
occurrence of a takeover, sale or admission. The options are settled in equity once exercised. If the options remain
unexercised after a period of 10 years from the date of grant, the options expire. Options are forfeited if the employee leaves
the Group before the options vest.
34 | Annual Report and Accounts 2013
Notes to the Consolidated Financial Statements continued
8
Share based payments (continued)
Details of the schemes are given below:
Employees
Number
Performance
Exercise
entitled
of options
conditions
price (p)
262,551
None
353,000
Time served
71,000
87,500
Time served
Time served
100,000
Time served
275,000
Time served
25,000
Time served
150,000
Time served
78,356
72,500
Time served
Time served
Earliest
exercise
date
26/11/2008
28/07/2009*
20/01/2011*
12/07/2011*
01/12/2011*
22/03/2012*
21/05/2012*
20/12/2012*
40.0
52.0
51.5
49.5
50.0
63.5
57.5
89.0
0.40 02/08/2013**
123.0
02/02/2013*
Grant date
26/11/2007
28/01/2009
20/05/2010
12/01/2011
01/06/2011
22/09/2011
21/11/2011
20/06/2012
02/08/2012
02/08/2012
01/11/2012
08/01/2013
28/01/2013
28/01/2013
26/03/2013
26/03/2013
2
6
2
2
1
12
1
1
26
7
1
7
1
1
3
1
100,000
Time served
133.5
01/06/2013*
65,000
Time served
159.0
08/07/2013*
4,823
Time served
0.40 28/01/2014**
70,000
Time served
155.5
28/07/2013*
200,000
Time served
175.0
26/06/2013***
26/03/2023
14,286
Time served
0.40 26/03/2014**
26/03/2023
Expiry
date
26/11/2017
28/01/2019
20/05/2020
12/01/2021
01/06/2021
22/09/2021
21/11/2021
20/06/2022
02/08/2022
02/08/2022
01/11/2022
08/01/2023
28/01/2023
28/01/2023
Outstanding
1,929,016
* Vesting dates for these options are: 10% vest six months after grant date, 15% vest 12 months after grant date, 15% vest 18 months after
grant date, 15% vest 24 months after grant date, 20% vest 30 months after grant date, 25% vest 36 months after grant date.
** Vesting dates for these options are linked to time served, and were awarded based on certain performance conditions being met, and in
exchange for an annual cash bonus. The full vesting is achieved over a 3 year period, with various forfeit/reductions if exercise takes place
sooner
*** Vesting dates for these options are in equal three month instalments over a 24 month period
The number and weighted average exercise price of share options are as follows:
Outstanding at 1 August
Granted
Forfeited
Exercised
Outstanding at 31 July
Exercisable at 31 July
2013
Weighted
Average
2013
Exercise
Number
1,784,102
664,965
(141,500)
(378,551)
1,929,016
1,031,837
Price
53.6p
133.0p
104.2p
44.7p
79.1p
56.4p
2012
Number
1,637,602
540,000
(115,000)
(278,500)
1,784,102
1,085,477
2012
Weighted
Average
Exercise
Price
47.8p
70.1p
52.0p
52.0p
53.6p
46.3p
The share options outstanding at the end of the year have a weighted average remaining contractual life of 6 years (2012: 7
years).
TRACSIS PLC | 35
Notes to the Consolidated Financial Statements continued
8
Share based payments (continued)
Fair value assumptions of share based payment charges
The estimate of the fair value of share based awards is calculated using the Black-Scholes option pricing model. The
following assumptions were used:
Options granted in previous years:
Options granted on
Share price at date of grant
Exercise price
Vesting period (years)
Expected volatility
Option life (years)
Expected life (years)
Risk-free rate
01/06/
2011
50.0p
50.0p
3
12/01/
2011
49.5p
49.5p
3
01/08/
2010
50.5p
50.5p
3
20/05/
2010
51.5p
51.5p
3
17/03/
2010
50.5p
50.5p
3
15%
15%
15%
15%
15%
10
10
10
10
10
10
10
10
10
10
28/01/
2009
52p
26/11/
2007
40p
52p
3
15%
10
10
40p
1
40%
10
10
3.5%
0.5%
0.5%
0.5%
0.5%
0.5%
4.75%
Expected dividends expressed as a dividend yield
-
-
-
-
-
-
-
Options granted in previous years (continued):
Options granted on
Share price at date of grant
Exercise price
Vesting period (years)
Expected volatility
Option life (years)
Expected life (years)
Risk-free rate
22/09/
2011
63.5p
63.5p
3
21/11/
2011
57.5p
57.5p
3
01/02/
2012
62.0p
62.0p
3
20/06/
2012
89.0p
89.0p
3
50%
50%
50%
50%
10
10
10
10
10
10
10
10
3.5%
3.5%
3.5%
3.5%
Expected dividends expressed as a dividend yield
-
-
-
-
Options granted in the current year:
Options granted on
Share price at date of grant
Exercise price
Vesting period (years)
Expected volatility
Option life (years)
Expected life (years)
Risk-free rate
02/08/
2012
123.0p
02/08/
2012
123.0p
01/11/
2012
133.5p
08/01/
2013
159.0p
28/01/
2013
155.5p
28/01/
2013
155.0p
26/03/
2013
175.0p
26/03/
2013
175.0p
0.4p
123.0p
133.5p
159.0p
0.4p
155.0p
175.0p
0.4p
3
3
3
3
3
3
2
3
20%
20%
20%
20%
20%
20%
20%
20%
10
10
10
10
10
10
10
10
10
10
10
10
10
10
10
10
3.5%
3.5%
3.5%
3.5%
3.5%
3.5%
3.5%
3.5%
Expected dividends expressed as a dividend yield
-
-
-
-
-
-
-
-
The expected volatility is based on the historic volatility of the Company’s share price.
Charge to the income statement
Share based payment charges
2013
£000
189
2012
£000
55
36 | Annual Report and Accounts 2013
Notes to the Consolidated Financial Statements continued
9
Operating profit
Operating profit is stated after charging:
Depreciation of property, plant and equipment - owned
Depreciation of property, plant and equipment - leased
Total depreciation
Operating lease rentals: Land and buildings
Operating lease rentals: Plant & machinery
Total operating lease rentals
Research and development expenditure expensed as incurred
Auditor’s remuneration:
Audit of these financial statements
Amounts receivable by auditors and their associates in respect of:
- Audit of financial statements of subsidiaries pursuant to legislation
- Other services relating to taxation
- Other services
2013
£000
129
25
154
114
22
136
411
2013
£000
43
3
3
46
2012
£000
49
-
49
51
-
51
403
2012
£000
17
3
5
6
Fees in respect of other services relate to professional advice in respect of the acquisition of Sky High plc during the year.
10
Finance income
Interest received on bank deposits
11
Finance expense
Interest on finance lease obligations
12
Taxation
Recognised in the income statement
Current tax expense
Current year
Adjustment in respect of prior periods
Total current year
Deferred tax
Current year
Adjustment in respect of prior periods
Total deferred tax
Total tax in income statement
2013
£000
75
2013
£000
11
2013
£000
563
1
564
(78)
-
(78)
486
2012
£000
61
2012
£000
-
2012
£000
716
(3)
713
(127)
12
(115)
598
TRACSIS PLC | 37
Notes to the Consolidated Financial Statements continued
12
Taxation (continued)
Reconciliation of the effective tax rate
Profit before tax for the period
Expected tax charge based on the standard rate of
corporation tax in the UK of 23.66% (2012: 25.33%)
Expenses not deductible for tax purposes
Research and development enhancement
Adjustment in respect of prior periods
Marginal relief / effect of small company tax rates
Other movements
Total tax expense
2013
£000
2,590
613
51
(121)
1
(3)
(55)
486
2013
%
100.0
23.7
2.0
(4.7)
-
(0.1)
(2.1)
18.8
2012
£000
3,014
763
4
(112)
9
(4)
(62)
598
2012
%
100.0
25.3
0.1
(3.7)
0.2
(0.1)
(2.0)
19.8
The 2012 Budget announced that the UK corporation tax rate would reduce from 24% to 22% by 1 April 2014. It was
subsequently announced in the 2012 Autumn Statement that the rate would drop instead to 21% by 1 April 2014, and in the
2013 Budget on 20 March 2013, that the rate would drop a further 1% to 20% from 1 April 2015. The reduction in the UK
corporation tax rate from 24% to 23% was enacted in July 2012 and was effective from 1 April 2013. This reduces the
company’s future current tax charge accordingly.
13
Earnings per share
Basic earnings per share
The calculation of basic earnings per share at 31 July 2013 was based on the profit attributable to ordinary shareholders of
£2,104,000 (2012: £2,416,000) and a weighted average number of ordinary shares in issue of 24,982,000 (2012: 24,260,000),
calculated as follows:
Weighted average number of ordinary shares
In thousands of shares
Issued ordinary shares at 1 August
Effect of shares issued related to business combinations
Effect of shares issued for cash
Weighted average number of shares at 31 July
2013
24,839
70
73
24,982
2012
24,036
-
224
24,260
Diluted earnings per share
The calculation of diluted earnings per share at 31 July 2013 was based on profit attributable to ordinary shareholders of
£2,104,000 (2012: £2,416,000) and a weighted average number of ordinary shares in issue after adjustment for the effects of
all dilutive potential ordinary shares of 25,827,000 (2012: 24,582,000):
In addition, adjusted EBITDA* is shown below on the grounds that it is a common metric used by the market in monitoring
similar businesses.
Adjusted EBITDA*
Basic adjusted EBITDA* per share
2013
£000
3,367
13.48p
Diluted adjusted EBITDA* per share
* Earnings before finance income, tax, depreciation, amortisation, exceptional items and share-based payment charges.
13.04p
2012
£000
3,279
13.52p
13.34p
38 | Annual Report and Accounts 2013
Notes to the Consolidated Financial Statements continued
14
Property, plant and equipment
Cost
At 1 August 2011
Additions
At 31 July 2012
Additions
Arising on acquisition
Exchange rate variances
At 31 July 2013
Depreciation
At 1 August 2011
Charge for the year
At 31 July 2012
Charge for the year
Arising on acquisition
Exchange rate variances
At 31 July 2013
Net book value
At 1 August 2011
At 31 July 2012
At 31 July 2013
Freehold
Office
Land &
Motor
Computer
fixtures
Buildings
Vehicles
equipment
& fittings
£000
£000
£000
£000
400
-
400
-
-
-
400
6
12
18
12
-
-
30
394
382
370
21
-
21
8
719
(18)
730
7
7
14
38
339
(14)
377
14
7
353
94
37
131
46
619
(40)
756
62
24
86
61
426
(36)
537
32
45
219
40
1
41
37
1,162
(14)
1,226
6
6
12
43
535
(22)
568
34
29
658
Total
£000
555
38
593
91
2,500
(72)
3,112
81
49
130
154
1,300
(72)
1,512
474
463
1,600
The net book value of assets held under finance lease obligations is £305,000 (2012: £nil).
Notes to the Consolidated Financial Statements continued
TRACSIS PLC | 39
15
Intangible assets
Cost
At 1 August 2011
Adjustments
At 31 July 2012
Arising on acquisition
At 31 July 2013
Amortisation and impairment
At 1 August 2011
Charge for the year
At 31 July 2012
Charge for the year
At 31 July 2013
Carrying amounts
At 1 August 2011
At 31 July 2012
At 31 July 2013
Customer
related
intangibles
£000
Technology
related
intangibles
£000
2,628
-
2,628
1,704
4,332
143
131
274
182
456
2,485
2,354
3,876
914
-
914
-
914
50
91
141
91
232
864
773
682
Goodwill
£000
1,121
(2)
1,119
390
1,509
-
-
-
-
-
1,121
1,119
1,509
Total
£000
4,663
(2)
4,661
2,094
6,755
193
222
415
273
688
4,470
4,246
6,067
The following carrying values of intangible assets arising from the acquisitions of RWA Rail Limited in August 2008, Peeping
Limited in July 2009, Safety Information Systems Limited in December 2009, MPEC Technology Limited in June 2011, and
Sky High plc in April 2013 are analysed as follows:
RWA Rail Limited
Peeping Limited
Safety Information Systems Limited
MPEC Technology Limited
Sky High plc
Goodwill
2013
2012
£000
£000
671
43
136
269
390
671
43
136
269
-
1,509
1,119
Customer related
intangibles
2013
2012
Technology related
intangibles
2013
£000
£000
£000
567
295
222
1,139
1,653
3,876
602
314
236
1,202
-
2,354
-
-
146
536
-
682
2012
£000
-
-
169
604
-
773
The amortisation charge is recognised in the following line items in the income statement:
Administrative expenses
2013
£000
273
2012
£000
222
Customer related intangibles and technology related intangibles are amortised over their useful life, which is the period during
which they are expected to generate revenue.
40 | Annual Report and Accounts 2013
Notes to the Consolidated Financial Statements continued
15
Intangible assets (continued)
Goodwill acquired in a business combination is allocated to cash generating units (CGUs) and is tested for impairment on an
annual basis, or more frequently if there are indications that the carrying value might be impaired, by comparing the carrying
amount against the discounted cash flow projections of the CGU. CGUs are not larger than the operating segments of the
Group.
The carrying value of the goodwill has been determined based on value in use calculations, covering detailed budgets and
three year forecasts, followed by an extrapolation of expected cash flows at growth rates given below. The growth rates
reflect prudent long term growth rates for the services provided by the CGU. Gross and operating margins have been
assumed to remain constant based on budget and past experience.
Long term growth rate
Discount rate
2013
1.0%
10%
2012
1.0%
10%
The directors’ key assumptions relate to revenue growth and the discount rate, however, carrying value is not significantly
sensitive to reasonably foreseeable changes in either assumption. No impairment charges in respect of goodwill arose during
the year.
16
Inventories
Raw materials & work in progress
Finished goods
2013
£000
138
98
236
2012
£000
197
39
236
The value of inventories expensed in the period in cost of sales was £922,000 (2012: £1,880,000). The fair values of
inventories are the same as their book values. Provision is made for slow moving and obsolete stock on a line by line basis.
The value of any write downs/reversals in the current and previous period was not material.
17
Hire purchase contracts
Due within one year
Due after more than one year:
Between one and two years
Between two and three years
Between three and four years
Between four and five years
Total due after more than one year
Total hire purchase contract obligation
A reconciliation of the obligation is stated below.
At start of the year
Arising on acquisition
New hire purchase contracts
Repayments
At end of the year
2013
£000
96
100
83
25
24
232
328
2013
£000
-
407
16
(95)
328
2012
£000
-
-
-
-
-
-
-
2012
£000
-
-
-
-
-
TRACSIS PLC | 41
Notes to the Consolidated Financial Statements continued
17
Hire purchase contracts (continued)
Carrying
amount
£000
Contractual
cash flows
£000
Less than
one year
£000
One to
Two years
£000
Two to
Five years
£000
Hire Purchase Obligations
2013
2012
18
Trade and other receivables
Trade receivables
Other receivables and prepayments
Amounts recoverable on contracts
328
-
365
-
113
-
113
-
2013
£000
3,019
220
626
3,865
A breakdown of trade receivables between the United Kingdom and Australia operations is as follows:
United Kingdom
Australia
2013
£000
2,889
130
3,019
-
139
-
2012
£000
1,217
56
9
1,282
2012
£000
1,217
-
1,217
Although the Group has a large number of customers, there is a concentration of risk in that the Group derives a large amount
of revenue from one major customer, though the credit worthiness of this customer is unquestionably strong. In other cases,
where one customer represents a significant proportion of overall revenue, the relationship consists of a large number of small
contracts which are not considered to be interdependent. The directors do not consider that any of the amounts from the sale
of goods to be irrecoverable, hence no provision has been made for bad or doubtful debts in either the current or preceding
year.
The fair values of trade and other receivables are the same as their book values.
Amounts recoverable on contracts relate to part completed projects related to the Group’s transportation data collection
operations.
Trade receivables that are past due are considered individually for impairment. The Group uses a monthly ageing profile as
an indicator when considering impairment. The summarised ageing analysis of trade receivables past due but considered to
be not impaired is as follows:
Under 30 days overdue
Between 30 and 60 days overdue
Over 60 days overdue
2013
£000
988
131
220
1,339
2012
£000
224
21
5
250
The other classes within trade and other receivables do not contain impaired assets. The Group did not incur any material
impairment losses on trade receivables in the period. The ageing profile above takes account of the enlarged Group, and the
fact that the payment terms/collection period for an enlarged Group with a wide variety of customers has evolved.
42 | Annual Report and Accounts 2013
Notes to the Consolidated Financial Statements continued
19
Trade and other payables
Trade payables
Other tax and social security
Deferred income
Accruals and other payables
2013
£000
521
967
785
1,259
3,532
2012
£000
393
305
583
647
1,928
The Directors consider that the carrying amounts of trade payables approximates to their fair value.
Deferred income relates to sales invoiced in advance of the completion of post contract customer support, and also instances
where the Group has raised sales invoices in advance of installation and acceptance of certain software sales, and also for
software licences covering several accounting periods. Support will be recognised in the income statement over the remaining
period of the contract, with other deferred income being recognised when the successful installation takes place, or over the
period of time for which multiyear deals relate to.
20
Deferred tax
Non-current liability/(asset)
At 31 July 2011
Credit to income statement
Adjustments in respect of previous years
Change in tax rates
At 31 July 2012
Arising on acquisition
Credit to income statement
Change in tax rates
At 31 July 2013
Accelerated
Intangible
capital
Share
assets
allowances
options
£000
837
(56)
-
(63)
718
358
(62)
(58)
956
£000
£000
15
(1)
12
(2)
24
64
(7)
(2)
79
(35)
(8)
-
3
(40)
-
47
4
11
Total
£000
817
(65)
12
(62)
702
422
(22)
(56)
1,046
Deferred tax is disclosed as a non-current liability in the Consolidated Balance Sheet.
The closing deferred tax asset and liability has been calculated at 21% as at 31 July 2013 (2012: 23%).
21
Share capital
Allotted, called up and fully paid:
Ordinary shares of 0.4p each
2013
2013
2012
2012
Number
£
Number
£
25,526,306
102,105
24,839,192
99,357
The following share transactions have taken place during the year ended 31 July 2013:
308,563 shares were issued in respect of the acquisition of Sky High plc.
378,551 share options, under the Group’s share options schemes were exercised at various points in the year.
TRACSIS PLC | 43
Notes to the Consolidated Financial Statements continued
21
Share capital (continued)
The movement in share capital in the year summarised as follows:
At start of the year
Issued as consideration for business combinations
Exercise of warrants
Exercise of share options
At end of the year
22
Capital and reserves
The following describes the nature and purpose of each reserve:
2013
Number
24,839,192
308,563
-
378,551
2012
Number
24,035,588
-
525,104
278,500
25,526,306
24,839,192
Description and purpose
Amount subscribed for share capital at nominal value
Amount subscribed for share capital in excess of nominal value
Amounts arising from the premium of the fair value of shares issued over their
nominal value, in respect of certain business combinations
Amounts arising from the requirement to expense the fair value of share options
in accordance with IFRS2 Share-based Payments
Cumulative net profits recognised in the income statement
Translation differences on retranslation of Australian subsidiary
Reserve
Share capital
Share premium
Merger reserve
Share based payments reserve
Retained earnings
Translation reserve
23
Operating leases
Leases as lessee
Total outstanding commitments for future minimum lease payments under non-cancellable operating leases are set out below:
Land and buildings
The Group leases several office facilities in the United Kingdom and Australia under operating leases. During the year
£136,000 was recognised as an expense in the income statement in respect of operating leases (2012: £51,000).
Expiring within one year
Expiring in the second to fifth years
Plant and machinery
Expiring within one year
Expiring in the second to fifth years
2013
£’000
20
233
253
2013
£’000
14
247
261
2012
£’000
6
55
61
2012
£’000
-
-
-
44 | Annual Report and Accounts 2013
Notes to the Consolidated Financial Statements continued
24
Financial risk management
The principal financial instruments comprise cash and short term deposits. The main purpose of these financial instruments is
to provide finance for the Group’s operations. The Group has various other financial instruments, such as trade receivables
and payables that arise directly from its operations. The Group has taken advantage of the exemption to exclude short term
debtors and creditors from the disclosures given below. The fair values of the financial instruments are equal to their year end
carrying values and represent the maximum exposure.
Financial assets
Cash and short term deposits
2013
Fixed
Floating
Rate
£000
-
Rate
£000
Total
£000
6,571
6,571
2012
Fixed
Floating
Rate
£000
2,864
Rate
£000
4,704
Total
£000
7,568
The Group had no financial liabilities or derivative contracts in either the current or previous year. It is policy that no trading in
financial instruments should be undertaken. The surplus cash balances have been invested in deposit accounts.
The principal financial instruments used by the Group, from which financial instrument risk arises, are as follows:
•
•
•
trade receivables;
cash at bank;
trade and other payables.
The main risks arising from the financial instruments are interest rate risk and liquidity risk. The Board reviews and agrees
policies for managing each of these risks and they are summarised below.
Fair value or cash flow interest rate risk
Currently the Group has surplus cash balances so does not have a borrowing requirement. Surplus cash is put on short term
deposit with high credit worthy banking institutions where appropriate at either fixed or floating rates. The Board monitors the
financial markets and the Group’s future cash requirements to ensure that this policy is exercised in the Group’s best interests.
At 31 July 2013 the Group did not have any fixed-rate deposits in place. Those fixed deposits in place at 31 July 2012 were
recalled to finance the purchase of Sky High plc. Instead of fixed rate deposits, the Group had various deposits spread across
various institutions – for example, a 95 day access account, several higher interest instant access accounts paying bonus
rates of interest if the balances are not withdrawn, and several lower interest, day-to-day bank accounts used for working
capital and day-to-day cash requirements.
Credit risk
The Group monitors credit risk closely and considers that its current policies of credit checks meet its objectives of managing
exposure to risk. The Group has no significant concentration of credit risk. Amounts shown in the balance sheet best
represent the maximum credit risk exposure in the event that other parties fail to perform their obligations under financial
instruments.
Liquidity risk
Liquidity risk is managed on a day to day basis. Facilities are agreed at appropriate levels having regard to the Group’s
forecast operating cash flows and future capital expenditures.
Capital disclosures
The Group’s objectives when maintaining capital are:
-
to safeguard the entity’s ability to continue as a going concern, so that it can continue to provide returns for
shareholders and benefits for other stakeholders, and;
to provide an adequate return to shareholders by pricing products and services commensurately with the level of risk.
-
The capital structure of the Group consists of cash and cash equivalents, and equity attributable to shareholders of the parent,
comprising issued share capital, reserves and retained earnings as disclosed in the Consolidated Statement of Changes in
Equity and Notes 13, 21 and 22. The Group sets the amount of capital it requires in proportion to risk. The Group manages
its capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of
the underlying assets. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid
to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
TRACSIS PLC | 45
Notes to the Consolidated Financial Statements continued
24
Financial risk management (continued)
Sensitivity analysis
In managing interest rates the Group aims to reduce the impact of short term fluctuations on the Group’s earnings. Over the
long term, permanent changes in interest rates would have an impact on consolidated earnings. The Directors consider that a
change of 100 basis points in interest rates at any period end would not have a material impact on cash flows.
Market risks
The Directors consider that the Group has no significant exposure to market risks with respect to its financial instruments. The
Group had some deposits and access accounts with Co-Operative Bank, but following their downgrade in the year, the
majority of these were subsequently withdrawn and funds placed with alternative financial institutions who were deemed more
creditworthy.
Foreign currency risk
The Group has an Australian subsidiary which is owned by Sky High plc. Balances and transactions in Australian dollars are
converted into Sterling and hence the group is exposed to an element of currency risk/fluctuation.
25
Related Party Transactions
The following transactions took place during the year with other related parties:
Leeds Innovation Centre Limited1
First Class Partnerships Limited2
Hull Trains Company Limited3
Purchase of
Amounts owed to
goods and services
related parties
2013
£000
80
-
2012
£000
46
75
2013
£000
6
-
2012
£000
4
-
Sale of
Amounts owed by
goods and services
related parties
2013
£000
-
2012
£000
12
2013
£000
-
2012
£000
-
1 – Leeds Innovation Centre Limited is a company which is connected to The University of Leeds. Tracsis plc rents its office accommodation,
along with related office services, from this company.
2 – First Class Partnerships Limited is a company of which John Nelson, a Non-executive Director of the Group was Chairman and
shareholder in previous years. During the year ended 31 July 2012, the Group utilised the services of a First Class Partnerships Limited
consultant, who was involved in chargeable work to a customer of the Group, and was charged on to the relevant customer. There were no
transactions in the year ended 31 July 2013.
3 – Hull Trains Company Limited is a company of which John Nelson, a Non-executive Director of the Group is a Director and shareholder.
The Group performed various consultancy services in the period to Hull Trains in the year ended 31 July 2012. There were no transactions in
the year ended 31 July 2013.
Terms and conditions of transactions with related parties
The purchases from related parties are made at normal market prices. Outstanding balances that relate to trading balances
are unsecured, interest free and settlement occurs in cash. There have been no guarantees provided or received for any
related party receivables or payables.
Compensation of key management personnel of the Group
The Group considers the directors to be its key management personnel. Full details of their compensation are set out in the
Directors’ Remuneration Report.
46 | Annual Report and Accounts 2013
Notes to the Consolidated Financial Statements continued
26
Employee benefits
The Group makes contributions to defined contribution pension schemes for its employees. The pension cost charge for the
year comprises contributions payable by the Group to the schemes and other personal pension plans and amounted to
£67,000 (2012: £53,000). There were outstanding contributions at 31 July 2013 of £10,000 (2012: £12,000).
27
Group entities
Below are the principal subsidiary undertakings which contribute to the Group results:
Held by Tracsis plc
R.W.A. Rail Limited
Peeping Limited
Safety Information Systems Limited
MPEC Technology Limited
Sky High plc
Principal activity Country of incorporation
Rail industry consultancy
England and Wales
Rail industry consultancy
England and Wales
Software and consultancy
Rail industry hardware &
Datalogging
Transportation data
collection
England and Wales
England and Wales
England and Wales
% ordinary
share
capital owned
100%
100%
100%
100%
100%
The legal process to re-register Sky High plc as a private company and subsequently change its name was ongoing at the
date of signing of these accounts.
28
Dividends
The Group introduced a progressive dividend policy during the previous year. The cash cost of the dividend payments is
shown below:
Interim dividend for 2011/12 of 0.20p per share paid
Final dividend for 2011/12 of 0.35p per share paid
Interim dividend for 2012/13 of 0.30p per share paid
Final dividend for 2012/13 of 0.4p per share proposed
2013
£000
-
-
75
102
2012
£000
48
87
-
-
The dividend will be payable on 31 January 2014 to shareholders on the Register at 17 January 2014.
TRACSIS PLC | 47
Company Balance Sheet (presented under UK GAAP)
as at 31 July 2013
Company number: 05019106
Fixed assets
Tangible fixed assets
Investments
Current assets
Deferred tax
Debtors
Cash at bank and in hand
Creditors: amounts falling due within one year
Net current (liabilities)/assets
Note
2013
£000
30
31
371
9,545
32
33
-
1,030
3,284
4,314
(5,785)
(1,471)
2012
£000
384
6,248
33
545
5,621
6,199
(5,308)
891
Total assets less current liabilities
8,445
7,523
Provisions for liabilities and charges
34
(15)
-
Net assets
8,430
7,523
Capital and reserves
Called up share capital
Share premium reserve
Merger reserve
Share based payments reserve
Retained earnings
Shareholders’ funds
35
36
36
36
36
102
4,280
1,472
383
2,193
8,430
99
4,113
935
194
2,182
7,523
The financial statements were approved and authorised for issue by the Board of Directors on 23 October 2013 and were
signed on its behalf by:
John McArthur – Chief Executive Officer
Max Cawthra
– Chief Financial Officer
48 | Annual Report and Accounts 2013
Notes to the Company Balance Sheet
29
Company accounting policies (UK GAAP)
Basis of preparation
As used in the financial statements and related notes, the term ‘Company’ refers to Tracsis plc. The separate financial
statements of the Company are presented as required by the Companies Act 2006. As permitted by the Act, the separate
financial statements have been prepared in accordance with UK Generally Accepted Accounting Principles (‘UK GAAP’).
These accounts have been prepared in accordance with applicable accounting standards and under the historical cost
convention.
A separate profit and loss account dealing with the results of the company only has not been presented, as permitted by
section 408 of the Companies Act 2006.
Under FRS 1 the Company is exempt from the requirement to present its own cash flow statement.
Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable (excluding value added tax and discounts
given) derived from the provision of goods and services to customers during the period. The Company derives revenue from
software licences, post contract customer support and consultancy services.
The Company recognises the revenue from the sale of software licences and specified upgrades upon shipment of the
software product or upgrade, when there are no significant vendor obligations remaining, when the fee is fixed and
determinable and when collectability is considered probable. Where appropriate the Company provides a reserve for
estimated returns under the standard acceptance terms at the time the revenue is recognised. Payment terms are agreed
separately with each customer.
Revenue from post contract customer support and consultancy services is recognised on a straight-line basis over the term of
the contract. Revenue received and not recognised in the profit and loss account under this policy is classified as deferred
income in the balance sheet.
Revenue from other products and services is recognised as the products are shipped or services provided.
Tangible fixed assets
Tangible fixed assets are initially recognised at cost. As well as the purchase price, cost includes directly attributable costs.
Depreciation is provided on all items so as to write off the carrying value of items over their expected useful economic lives. It
is applied at the following rates:
Freehold buildings (excluding land)
Computer equipment
–
–
4% on cost
33 1/3% on cost
Investments
Fixed asset investments are stated at cost less provision for impairment where appropriate. The directors consider annually
whether a provision against the value of investments on an individual basis is required. Such provisions are charged in the
profit and loss account in the year.
Taxation
The charge for taxation is based on the result for the year and takes into account taxation deferred because of timing
differences between the treatment of certain items for taxation and accounting purposes. Deferred taxation is recognised,
without discounting, in respect of all timing differences which have arisen but not reversed by the balance sheet date, except
as otherwise required by FRS19.
Leases
Rentals applicable where substantially all of the benefits and risks of ownership remain with the lessor are classified as
operating leases and payments are charged to the profit and loss account on a straight line basis over the period of the lease.
TRACSIS PLC | 49
Notes to the Company Balance Sheet continued
29
Company accounting policies (UK GAAP) (continued)
FRS20 share based payments
The Company has adopted FRS20 and the accounting policies followed are in all material regards the same as the Group’s
policy under IFRS2 ‘Share based payments’. The policy is shown in the Group’s accounting policies on pages 22 to 28.
30
Tangible fixed assets
Cost
At 1 August 2012
Additions
At 31 July 2013
Depreciation
At 1 August 2012
Charge for the year
At 31 July 2013
Net book value
At 31 July 2012
At 31 July 2013
31
Investments
Cost
At 1 August 2012
Additions
At 31 July 2013
Freehold
Land & Computer
Buildings
equipment
£000
£000
400
-
400
18
12
30
382
370
23
-
23
21
1
22
2
1
Total
£000
423
-
423
39
13
52
384
371
Shares in subsidiary
undertakings
£000
6,248
3,297
9,545
The addition in the year relates to the acquisition of Sky High plc.
The companies in which Tracsis plc’s interest is more than 20% at the year end are as follows:
Subsidiary undertaking
Country of
incorporation
R.W.A. Rail Limited
England and Wales
Peeping Limited
England and Wales
Safety Information
Systems Limited
England and Wales
MPEC Technology Limited
England and Wales
England and Wales
Sky High plc
Sky High Traffic Data
Australia Pty Limited
Class and
percentage
Principal activity
of shares held
Holding
Rail industry consultancy
Rail industry ancillary
services
Ordinary 100%
Ordinary 100%
Software and consultancy
Rail industry hardware &
datalogging
Transportation data collection
Ordinary 100%
Ordinary 100%
Ordinary 100%
Direct
Direct
Direct
Direct
Direct
Australia
Transportation data collection
Ordinary 100%
Indirect
50 | Annual Report and Accounts 2013
Notes to the Company Balance Sheet continued
32
Debtors
Trade debtors
Amounts owed by subsidiary undertakings
Other debtors
Corporation Tax
Prepayments
2013
£000
769
50
12
166
33
1,030
2012
£000
513
-
8
-
24
545
The group moved onto a Payments on Account regime for Corporation Tax in the year, and Tracsis plc made various
payments as the lead Company. Upon finalisation of the tax computations, the Corporation Tax payments made will be
reallocated between other Group Companies and the debtor balance cleared down accordingly.
33
Creditors: amounts falling due within one year
2013
£000
14
356
-
4,679
736
5,785
2013
£000
(33)
48
15
2012
£000
23
162
150
4,317
656
5,308
2012
£000
(34)
1
(33)
Trade creditors
Other tax and social security
Corporation tax
Amounts owed to subsidiary undertakings
Accruals and deferred income
34
Provisions for liabilities and charges – deferred tax / (asset)
At start of the year
Charge to profit and loss account during the year
At end of the year
35
Share capital
Allotted, called up and fully paid:
Ordinary shares of 0.4p each
2013
2013
2012
2012
Number
£
Number
£
25,526,306
102,105
24,839,192
99,357
The following share transactions have taken place during the year ended 31 July 2013:
308,563 shares were issued in respect of the acquisition of Sky High plc.
378,551 share options, under the Group’s share options schemes were exercised at various points in the year.
Notes to the Company Balance Sheet continued
TRACSIS PLC | 51
36
Reserves
At 1 August 2012
Dividends
Issue of new shares
Profit for the period
Share based payment charges
At 31 July 2013
37
Operating leases
Operating lease commitments
Share
premium
account
£000
4,113
-
167
-
-
Merger
reserve
£000
935
-
537
-
-
4,280
1,472
Share based
payments
reserve
Profit
and loss
account
£000
194
-
-
-
189
383
£000
2,182
(162)
-
173
-
2,193
The minimum annual lease payments to which the Company is committed under non-cancellable operating leases for the
coming year are as follows:
Land and buildings:
On leases expiring:
Within one year
Expiring between one and two years
38
Reconciliation of movement in shareholders’ funds
Profit attributable to ordinary shareholders
Dividends paid
Other recognised gains:
- Issue of new shares
- Share based payments
Opening shareholders’ funds
Closing shareholders’ funds
2013
£’000
-
58
2013
£’000
173
(162)
707
189
907
7,523
8,430
2012
£’000
6
-
2012
£’000
574
(48)
354
55
935
6,588
7,523
52 | Annual Report and Accounts 2013
Group information
Company Secretary and Registered
Office
Max Cawthra
Leeds Innovation Centre
103 Clarendon Road
Leeds
LS2 9DF
Auditor
KPMG Audit Plc
1 The Embankment
Neville Street
Leeds
LS1 4DW
Telephone +44 (0) 845 125 9162
Fax +44 (0) 845 125 9163
Registered number
05019106
Website
www.tracsis.com
Principal bankers
HSBC Bank plc
33 Park Row
Leeds
LS1 1LD
Additional bankers
Natwest
Santander
Co-Operative
Lloyds
Nominated Advisor and
Stockbroker
WH Ireland Limited
11 St. James’s Square
Manchester
M2 6WH
Registrars
Neville Registrars
18 Laurel Lane
Halesowen
West Midlands
B63 3DA
Solicitors
Rosenblatt Solicitors
9-13 St Andrew Street
London
EC4A 3AF