0 | Annual Report and Accounts 2014
Annual Report & Accounts 2014
TRACSIS PLC | 1
Contents
Strategic Report
Our Business at a Glance
Strategy and Business Model
Chairman and Chief Executive Officer’s Report
(incorporating Business Review and Future Developments)
Risk Management
Key Performance Indicators
Governance
Board of Directors
Directors’ Report
Directors’ Remuneration Report
Corporate Governance
Statement of Directors’ Responsibilities
Independent Auditor Report to the members of Tracsis plc
Financial Statements
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
2
3
4
8
11
12
13
16
19
21
22
23
24
25
26
27
56
57
62
2 | Annual Report and Accounts 2014
Strategic Report
Our Business at a Glance
Tracsis plc was founded in January 2004 to commercialise world class research and expertise
developed in the field of transport scheduling and software optimisation technologies.
In the subsequent years Tracsis has grown rapidly, diversified into other related transport
technologies, and successfully executed an aggregation strategy that has seen it make a total
of 6 acquisitions so far. Today, 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 has a blue chip client base which includes the majority of UK transport operators such
as Arriva, First, Go-Ahead, National Express, Stagecoach, and Virgin. The business also
works extensively with large transport authorities and infrastructure operators such as Network
Rail, the Department for Transport, Transport Scotland, Transport for London, numerous local
authorities and a variety of large engineering and infrastructure companies.
The Group’s products and services comprise four principal revenue streams:
• Software: Industry strength resource optimisation and rail management software that
covers a variety of asset and information classes;
• Professional Services: Consulting and technology related professional services across
the operational and strategic planning horizon;
• Remote Condition Monitoring (RCM): Technology and reporting for critical infrastructure
assets in real time, to identify problems and aid with preventative maintenance; and
• Data Capture and Analytics: Collection, collation and analytical services of traffic and
passenger/customer data within rail, traffic and pedestrian rich environments.
Tracsis has offices in the UK and Australia which service projects in Europe and Australasia.
We currently employ close to 300 staff many of whom are shareholders in the company.
The business drives growth both organically and via strategic acquisition and has made six
acquisitions since coming to marking in 2007.
Financial highlights
for the year ended 31 July 2014:
• Revenues increased 106% to £22.4m (2013: £10.8m)
• Adjusted EBITDA increased 61% to £5.4m (2013: £3.4m)
• Profit Before Tax increased 62% to £4.2m (2013: £2.6m)
• Cash balances grew to £8.9m (2013: £6.6m)
• Full year dividend increased 14% to 0.8p per share (2013: 0.7p)
TRACSIS PLC | 3
Strategic Report
Strategy and Business Model
Our vision for Tracsis is to become a leading provider of high value, niche technology solutions and services for the global
transportations markets. Our business model remains focussed on specialist offerings that have high barriers to entry, are
sold on a recurring basis under contract, and to a retained customer base that is largely blue chip in nature with limited
competitive pressures. Our vision will be achieved via a 3 pronged strategy.
1) Manageable, industry-led organic growth through continual innovation of products and services.
2) International expansion in select overseas markets.
3) Reinvesting our profits to fund further accretive acquisitions that meet with our disciplined investment criteria.
We believe our strategy will allow Tracsis to continue the growth trajectory we have achieved since IPO in 2007 and deliver
further significant value to shareholders in the short, medium and long term. Achievements made in the past year in respect
of our business strategy can be summarised as follows:
Strand of Strategy:
Achievements 2013/14:
1 Organic
further sales from existing
products to UK
2 Overseas Markets
as yet relatively untapped
3
Acquisitions
• Renewal of a major Framework Agreement with our largest UK customer
for the Group’s Remote Condition Monitoring (RCM) technology. This has
been extended until March 2018
Tracsis Data Capture and Analytics division (trading as Sky High
Technology) selected to deliver a significant piece of traffic data collection
work for the Department for Transport
•
• Consultancy division worked extensively with various transport owning
groups on the re-franchising of East Coast, Docklands Light Railway and
ScotRail
• Growth in revenues, excluding acquisitions in the current year, to £21.8m
versus £10.8m in 2012/13
• Software products continually evolving via industry led feedback
• Remote Condition Monitoring technology continue to receive research and
development investment
• North American pilot for Remote Condition Monitoring technology with
•
major Class 1 rail operator announced November 2013
This work was subsequently extended in July 2014 and now includes 11
discrete geographies across the United States
• Our Australian data capture division contributed £1.7m of revenue in the
financial year
• Significant software project won in Sweden working with a major transport
•
owning group
Increased levels of business in Ireland for our Remote Condition
Monitoring technology
• Permanent Ireland presence established and new staff in place
• Completed the purchase of Datasys Integration Limited in May 2014 – our
•
sixth acquisition since IPO
This rail technology business is highly complementary to the core Tracsis
software offering with good synergies across respective businesses
• Datasys contributed £0.5m to revenue and £0.1m to profit in the two
month period prior to year end
• Purchase price of £4.5m, less £1.3m of cash acquired
•
The Group anticipates Datasys will be highly accretive to Tracsis with high
levels of recurring revenue and profit going forward
4 | Annual Report and Accounts 2014
Strategic Report
Chairman & Chief Executive Officer’s Report
A welcome from Chris Cole, Non-Executive Chairman
I am pleased, with John, to provide this year’s combined Chairman and CEO report. I was appointed in April 2014 as the
Group’s new Non-Executive Chairman and I can confirm that my expectations regarding the Business, its people and the
Markets in which they work have been upheld.
I am excited by the opportunities available to Tracsis, indeed it was a key factor in my decision to join, and one of my jobs is to
ensure direction and support as we navigate and deliver on these opportunities whilst making sure that the Group continues to
mature as we grow. My thanks to the Directors and Management for assisting my induction into Tracsis.
Introduction
The Group has enjoyed a further year of substantial growth, with overall Group revenues exceeding £20m for the first time,
and an EBITDA in excess of £5m. Both of these are significantly ahead of the previous year and a considerable achievement
for Tracsis. This has been a year of rapid growth and success for the Group, and the Directors are very pleased with the
performance in the year and the resulting financial position.
Business overview
The Tracsis Group specialises in solving a variety of resource optimisation, rail management, data capture, and reporting
problems via the provision of a range of software, hardware, and associated high value technology led professional services.
We choose to operate in these niche areas where we believe there is clear customer pain and where existing technology
solutions are not available.
The Group’s market offering can be broadly categorised into four distinct revenue streams;
1. Software: Industrial strength resource optimisation and rail management software that covers a variety of asset
classes.
2. Remote Condition Monitoring: Hardware and embedded software for real-time reporting on critical infrastructure
assets, to identify problems, predict failure, and aid with preventative maintenance.
3. Data Capture & Analytics: Collection, collation and analytical services of traffic and pedestrian data such as
volumes, queuing times, categorisation, crowding and dwell times.
4. Professional Services: Transport consulting and related professional services across the operational and strategic
planning horizon.
The Group's mission is to solve well recognised issues within transportation. Through the provision of its products and
services, Tracsis provides its clients with better visibility and information to assist in front line decision making whilst driving
efficiency and productivity. The Directors believe that the transport industry, in particular rail which forms a key part of the
Group’s business, is well positioned for further growth and the Group should be able to capitalise on this with its product and
service offerings.
Financial summary
The Group delivered revenue of £22.4m for the year, an increase of 106% on the prior year (2013: £10.8m) which exceeded
the Board's original expectations.
Organic revenues increased to £21.8m, which represents good growth across all other parts of the Group and a full year
contribution from Sky High. Revenues from Datasys Integration Limited (acquired May 2014) contributed £0.5m to the total.
The full benefit of this latest acquisition will be experienced in the next financial year ending July 2015.
Adjusted EBITDA* rose 61% to £5.4m (2013: £3.4m) with statutory profit before tax 62% higher at £4.2m (2013: £2.6m).
TRACSIS PLC | 5
Chairman & Chief Executive Officer’s Report continued
The full year contribution of Sky High and Datasys has led to higher amortisation of intangible asset charges and higher
depreciation. It has also led to an additional share based payment charge relating to stock options that were granted to senior
management within the team in order to retain and motivate key individuals for the future.
At 31 July 2014, the Group had cash balances of £8.9m (2013: £6.6m). The Group’s strong cash generation and conversion
capabilities is illustrated by the increase of £2.3m, which was in spite of the purchase of Datasys for net cash of £2.9m.
* Earnings before finance income, tax, depreciation, amortisation, exceptional items and share-based payment charges
Trading Progress and Prospects
Software
Software sales increased to £2.8m, which includes a contribution of £0.5m from the acquisition of Datasys. Organic revenues
were ahead of the prior year at £2.3m (2013: £2.1m). This demonstrates both the high levels of recurring revenue for the suite
of products and also the high levels of renewals taking place. During the year we continued our strategy of cross selling
products to our existing customer base and achieved new sales of TRACS Roster, TRACS-RS and also converting one of the
few remaining UK TOCs to adopt TrainTRACS for operational use.
Our COMPASS team was also successful in winning a significant piece of work in Sweden with a major rail and bus operator.
This work will be delivered during the FY14/15 financial year and follows on from other successful large projects the Group
has delivered in both this territory as well as other international locations.
Professional Services
During the period, our Consultancy team worked extensively on various rail franchise bids for a number of transport owning
Groups. Our teams supported submissions for the recent East Coast and Scot Rail franchises and earlier in the year worked
on Essex Thameside, Docklands Light Railway (DLR) and Crossrail bids. This work contributed towards revenues delivered
by our consultancy team amounting to £1.8m, which was a significant increase on the £1.1m delivered in the previous year
largely due to the UK rail franchising model being back on track. Looking forward, the team expects to support bidders for the
Northern and TransPennine Express franchise bids which are due to be submitted shortly. The DfT’s revised timetable for
bidding activity outlines what is expected to be a busy period in the coming years. The Group has also taken active measures
to increase the level of non-TOC related consultancy revenue and in this vein has established new revenue streams within the
signalling consultancy field.
Remote Condition Monitoring (RCM)
Trading within this part of the Group was once again buoyant with revenues increasing significantly from £3.4m to £5.8m. In
October 2013, the Group secured the renewal of a Framework Agreement with a major UK infrastructure customer for a
further five years through to 2018 which underpins our technology footprint and trading prospects for this division going
forwards. In January 2014, the Group secured a significant initial order of £2.2m under this Framework Agreement and this
was fulfilled prior to the end of the financial year. There was significant demand for this technology out with this agreement for
substantial sales across a range of other customers.
North America roll-out
The Group secured a pilot project for its RCM technology with one of the largest class 1 railroad operators in the United
States. The first sale was announced on 14th November 2013 which comprised hardware and software to cover five discrete
geographies on the customer’s rail network. On 24th July 2014, Tracsis announced a further sale to the same customer for a
further six geographies, all of which have now been installed and are currently being monitored on a daily basis.
The Group anticipates further orders in due course as the client continues to evaluate the Group's technology and its benefits
for its wider network. Following this success, the Group is now working towards developing commercial relationships with
other large class 1 railroads. Our expansion plans within the US are a key driver of growth for this division and whilst the
specific timing of technology uptake is difficult to predict, we see a considerable market opportunity that is many times larger
than what we have achieved thus far within the UK.
6 | Annual Report and Accounts 2014
Chairman & Chief Executive Officer’s Report continued
Data capture and passenger counting
This part of the Group made a key contribution to revenues in the past year with an increase from £4.1m to £12.0m. This
takes into account a full year contribution from Sky High which was acquired in April 2013. Following a period of integration
with the wider Group, Sky High has performed extremely well and has diversified its range of data capture and analytics
offering by moving into non-transport areas and adopting new technologies such as Wi-Fi and Bluetooth sensing that can be
utilised in various ways to provide for greater project diversity. Our existing passenger counts division continued to operate
well in its niche market and these two parts of the group have now been integrated.
Sky High was also selected to deliver a significant piece of traffic data collection work through a global engineering
consultancy for a UK transport agency under a two year contract with the potential to be extended for a further period of two
years, which was an important contract win.
Our team
We were delighted to strengthen our Board during the year with two non-executive Director appointments. Chris Cole was
appointed as non-executive Chairman on 28 April 2014. As the founder, former Chief Executive, and now current Chairman of
WSP Group, Chris brings with him a wealth of experience in growing successful businesses and has made an immediate
impact.
On 1 November 2013, Sean Lippell was appointed as a non-executive Director and has also helped to strengthen the Board
with his experience. As a former managing partner of a major law firm, Sean also has significant commercial experience and
we welcome him to the Group.
Dividends
In February 2012, the Board implemented a progressive dividend policy and since then the Group has maintained this
approach of growing its dividend in line with the Group's growth. To this end, an interim dividend of 0.35p per share for
2013/14 was paid in April 2014. A final dividend of 0.45p per share in respect of 2013/14 is proposed, to take the full year
dividend to 0.80p. This represents a 14% increase on the 2012/13 total dividend paid of 0.70p per share, which in itself was a
27% increase on the 0.55p per share paid in respect of 2011/12.
The overall level of dividends continues to be 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.
Acquisitions
On 16 May 2014, the Group completed the acquisition of Datasys Integration Limited (the 100% holding company of the
trading subsidiary Datasys Limited together referred to as ‘Datasys’). The gross headline consideration was £4.5m, albeit
£0.4m of this consideration was satisfied in Tracsis shares, and £1.3m of cash was acquired to give a net cash consideration
of £2.9m. Datasys had been known to Tracsis for many years given both companies are specialist providers of software to UK
rail. Datasys is an excellent strategic fit for the Group, given it has a strong software product offering, high levels of recurring
revenue and profit, and a customer base that is highly complementary to certain parts of Tracsis. Integration of this business
is well underway and Datasys made a positive contribution to the Group’s results in the two month period from acquisition to
year end, contributing revenues in excess of £0.5m.
Overseas growth
Overseas growth is a key part of the Group’s future growth strategy and whilst this remains relatively untapped, further
progress has been made. In the year under review, the Group generated £2.1m of revenue from overseas customers (9% of
overall Group revenues). The majority of this (£1.7m) came from Sky High Australia, with the balance of £0.4m coming from
clients in Sweden, Ireland and New Zealand. A small amount of revenue came from the American pilot for the Remote
Condition Monitoring technology and this represents an exciting opportunity for the year ahead.
TRACSIS PLC | 7
Chairman & Chief Executive Officer’s Report continued
Summary and Outlook
Tracsis has performed well in the period and delivered another significant year of growth across all areas of the Group with
revenue, adjusted EBITDA and Profit before Tax being well ahead of the same period last year. Good progress has been
made in expanding the geographic footprint of our business with new customers and a technology partner within the US,
whilst within the UK, the Group's acquisition has broadened our product offering to UK rail. Tracsis continues to benefit from a
strong balance sheet with good cash generation and significant cash reserves that will allow us to realise our growth plans for
the future.
The Group’s strategy remains unchanged: to deliver shareholder value and growth both organically and by acquisition, by
creating products and services that solve well recognised transport problems that are typically poorly served by existing
technology. Our business model remains focussed on niche specialist offerings that have high barriers to entry, are sold on a
recurring basis under contract, and to a retained customer base that is largely blue chip in nature with limited competitive
pressures.
Looking ahead, the passenger transport markets both within the UK and internationally are experiencing record levels of
government spending, rising passenger numbers, and regulatory change. This environment gives rise to greater demands for
quality, safety, and the need from both passengers and operators for value for money. To this end, Tracsis is well placed to
help solve some of these challenges and sees a wide range of opportunities for further growth across the Group. In the period
ahead we intend to make further in-roads into overseas markets, most notably the US, whilst continuing to diversify our
technology portfolio through a combination of in-house development and further prudent allocation of capital to fund new
acquisitions.
As always, our thanks go to our valued customers, supportive shareholders and, most of all, our talented employees for their
ongoing support towards the Group’s growth and success.
Chris Cole, Chairman
John McArthur, Chief Executive Officer
12 November 2014
8 | Annual Report and Accounts 2014
Strategic Report
Risk Management
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:
Description/Potential impact:
Rail industry structure changes
Area of Group
impacted:
Mitigation:
Change in the year:
present
structure
The
and
organisation of the rail industry in
the UK may be changed in the
future, or by a future government,
impacting the Group. The Group
derives a significant amount of its
results from the UK rail industry.
Competition
to
The success of the Group may
lead
increased competition,
especially in Data Capture where
our products and services may be
more easily replicated. The Group
has a variety of product and
service offerings and some are
more
more
to
competition than others.
exposed
Reduced government spending
indirectly
modernise
revenues
The Group derives
directly
from
and
government commitment to invest
and
transport
infrastructure, especially in the UK
and Australia, and would be
significantly
these
public
funding streams were
reduced.
impacted
if
1. Software
2. Consultancy
3. Condition
Monitoring
4. Data Capture
1. Data Capture
2. Consultancy
3. Condition
Monitoring
4. Software
1. Data Capture
2. Condition
Monitoring
3. Consultancy
4. Software
of
Several
the Group’s
products and services will still
be in demand regardless of
the structure of the industry as
them have a
some of
value
demonstrable
proposition and
return on
investment case. The Group
for
expects
certain solutions will remain
regardless
ownership
of
structure. However, in certain
circumstances, there is very
against
little
politically driven changes or
other structural changes.
that demand
mitigation
it
to
sure
pays
subject
The Group
close
attention to pricing for areas
most
strong
competition and endeavours
is
to make
competitively priced where
appropriate. Where possible,
the Group tries to ensure its
products and services have a
clear value proposition and
return on investment such that
the products and services are
embedded within its customer
base to reduce the exposure
to new entrants.
As the Group continues to
grow and develop more
revenue streams and sources
of income, the exposure to
government spending should
in theory reduce. By ensuring
that the Group’s products and
services have a clear return
on
investment and value
proposition, then in the event
in spending
that
does take place, it is hoped
that budget and demand for
the group’s offerings will
remain strong and not subject
to reduction.
reduction
The
threat of structural
changes has existed for
some time and is always a
risk. The prospect of a
general election in 2015
may potentially bring a
change of Government
which may
potentially
result in changes to the
the
structure of
industry
with
consequential
impact on the Group.
a
For the year under review,
Data Capture,
the area
most heavily exposed to
competition, accounted for
around half of the Group’s
revenues, which increased
on the previous year due to
the timing of the acquisition
of Sky High which has a
full year of trading included
this year as opposed to
reduced levels last year, so
the overall
the
to
Group has increased.
risk
forthcoming general
The
election
potential
and
change of government may
result in reduced spending.
the UK
rail
However,
industry, one of the group’s
key markets, has continued
to experience significant
investment
the
Government and the Group
has benefited from this.
from
TRACSIS PLC | 9
Risk Management continued
Description/Potential impact:
Area of Group
impacted:
Reliance on certain key customers
Mitigation:
Change in the year:
for
derives
The Group has a number of
customers
a
but
significant amount of business
from single customer under a
Framework Agreement
its
Remote Condition Monitoring
technology with no guarantee as
to the timing or quantum of any
future
potential
orders.
Furthermore,
the Group’s Data
Capture operates under a number
of Framework Agreements and
team works
the Consultancy
extensively with bidders during
franchise bid work. Reduced
levels of trading with any key
customer may adversely impact
the Group.
Attraction and retention of key
employees
The Group has a number of key
individuals, though their individual
importance has arguably reduced
as the Group has grown and the
reliance
people
reduces. However, skills and
in our markets are
expertise
specialist and hard
find or
develop, and so further growth of
the business may be restricted.
certain
on
to
1. Condition
Monitoring
2. Data Capture
3. Consultancy
4. Software
All parts of the Group.
The Group successfully
extended
its Framework
Agreement for its Condition
Monitoring
Technology
until 2018 with a key
customer. However, there
is no guarantee of sales
this
orders
agreement
the
Framework itself provides
a barrier to entry for new
entrants. The Group also
two
announced a major
year contract with
the
potential to be extended for
a further two years, for its
Data Capture business.
under
but
The Group announced a
pilot in North America for
its Condition Monitoring
technology which remains
under review.
As the Group has grown in
the
arguably
size,
exposure
certain
to
reduces.
employees
However, as the economy
continues to grow and exit
recession, then the risk of
not being able to recruit or
individuals
retain
the
increases
competition
other
potential employers.
given
from
key
and
evolve,
the group continues
to
As
grow
the
exposure to and reliance on
any one customer will reduce.
Although
the Group will
always be exposed to certain
key customers,
it manages
this risk by engaging with the
customers
to
understand their needs and
respond to them in terms of
changes
or
service offerings to reinforce
the relationship to ensure that
its products and services are
embedded with the customer
as best as possible.
proactively
products
to
The Group is also seeking to
mitigate its exposure to one
customer in Remote Condition
expanding
by
Monitoring
overseas and
targeting
certain geographic markets.
is
The Group offers competitive
remuneration packages, and
also offers two share schemes
to staff (EMI share options,
and discounted share options)
in order to attract and retain
high calibre employees. Such
share schemes are designed
that employees are
such
rewarded in the success of the
Group, and are tied in for a
period of time. As the Group
has grown, the EMI share
scheme has been restricted to
certain staff but a number of
staff continue to hold these
options from historic times. As
the Group grows, the reliance
on and exposure to certain
individuals in terms of impact
on
is
the overall Group,
reduced.
10 | Annual Report and Accounts 2014
Risk Management continued
Area of Group
impacted:
1. Software
2. Condition
Monitoring
3. Data Capture
4. Consultancy
Description/Potential impact:
Technological changes
develop
The Group has a variety of
product and service offerings
which may be under threat should
rival
competitors
technology or should better ways
of doing
things be discovered
which make some of the Group’s
services redundant. This could
potentially lead to reduced levels
of business.
Customer pricing pressure
Price pressure
from customers
may potentially result in margins
being eroded in the fullness of
revenues are
time
achieved than those which were
achieved historically.
lower
if
1. Data Capture
2. Software
3. Consultancy
4. Condition
Monitoring
Mitigation:
Change in the year:
This
is under constant
review as a Technology
focussed business and as
the group becomes more
diverse and larger, each of
the Group’s product and
service
are
subject to different levels of
technology
at
threats
various points in time.
offerings
Data Capture now makes
up a larger part of the
overall Group following the
acquisition of Sky High,
the
this part of
and
most
business
pricing
vulnerable
pressure, and as
the
element of revenue derived
from Data Capture has
increased, the risk to the
overall
has
increased in the year.
Group
is
to
that
they
The Group continues to invest
in research and development
for its technology products to
ensure that they remain up to
date and also relevant to the
customer base, as
it also
takes feedback from its clients
about what they require from
the products. This helps to
remain
ensure
relevant. The group works
closely with its customers to
deliver the next generation of
products. For certain parts of
the Group, the business works
with technology partners who
have specific expertise and
can help
to
maximise its service offerings.
Some of the Group’s offerings
are protected by customer
Framework
relationships,
contractual
Agreements,
also
agreements
significant development costs,
which provide protection even
if new entrants may come
along.
the Group
and
most
believes
relatively
it
The Group
operates a
lean
business in order to protect
against pricing pressure, and
for
is constantly searching
ways to keep its cost base to
a minimum. When reviewing
tenders and enquiries, pricing
is submitted accordingly on
favourable
the
commercial terms. The Group
to ensuring
is committed
customer
and
offering a compelling return on
its products
for
investment
with a clear value proposition,
with
the
customer base will continue to
take its products due to their
quality and business case,
with price being of
less
concern to them.
the objective
satisfaction
that
TRACSIS PLC | 11
Strategic Report
Key Performance Indicators
The Group’s main Key Performance Indicators (KPIs) are as follows:
1. Assessed at Group Level:
a. Sales Revenue and Profit (Adjusted EBITDA and Profit before Tax) versus budget and prior year
b. Sales Pipeline prospects and forecasts versus budget and prior year
c. Cash balances, debtors and working capital requirements
2. Additional Key Performance Indicators specific to certain revenue streams
a. Software: Customer renewal rates and new customer take up / product matrix
b. Consultancy: Staff utilisation and chargeability, revenue derived from various sources
c. Data Capture & Analytics: Customer enquiries and conversion rates, working capital tie up in debtors and
work in progress
d. Remote Condition Monitoring: Delivery of major orders versus customer requirements, revenue by customer
25
20
15
10
5
0
5
4
3
2
1
0
10
8
6
4
2
0
Revenue - £m
22.4
10.8
8.7
2.6
4.1
Adjusted EBITDA - £m
5.4
3.3
3.4
1.2
0.7
6
4
2
0
Revenue
EBITDA
2010
2011
2012
2013
2014
2010
2011
2012
2013
2014
Profit Before Tax - £m
Earnings Per share (Basic) - p
4.2
3.0
2.6
1.1
0.6
12.9
9.96
8.42
4.49
2.5
15
10
5
0
Revenue
Basic EPS
2010
2011
2012
2013
2014
2010
2011
2012
2013
2014
Cash - £m
8.9
7.6
6.6
4.7
2.5
Cash
2010
2011
2012
2013
2014
12 | Annual Report and Accounts 2014
Governance
Board of Directors
Executive Directors
John McArthur (39) Chief Executive Officer
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 in developing 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.
Max Cawthra (36) 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.
Non-Executive Directors
Chris Cole (68) Non-Executive Chairman
Chris is Non-Executive Chairman of WSP Global Inc. (listed on the Toronto Stock Exchange), the successor to WSP Group
plc. He is also Non-Executive Chairman of Ashtead Group plc, having previously been a Non-Executive Director, Senior
Independent Non-Executive Director of Infinis plc, and Non-Executive Chairman of Redcentric plc.
Charles Winward (44) Non-Executive Director
Charles was an Executive Director of IP Group plc until April 2014, having joined in 2007. At IP Group, Charles successfully
invested in and served as Non-Executive Director at high potential technology companies, including Retroscreen Virology plc
and Xeros Technology plc. Previously, Charles was Vice President of Technology Infrastructure at J P Morgan Chase & Co,
where he worked in London and New York. Charles is a Chartered Financial Analyst, holds an MBA from the University of
California at Berkeley and an undergraduate engineering degree from the University of Bristol.
John Nelson (67) 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 46 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 strategic management consultancy First Class Partnerships and the country's first Open Access
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 recently granted an
award for outstanding personal contribution to the rail industry at the National Rail Awards 2013.
Sean Lippell (64) Non-Executive Director
Sean has more than 35 years' experience as a corporate lawyer and was formerly Member of Addleshaw Goddard LLP, a
post which he held for 13 years, five of which were as Managing Partner within their corporate division. Sean is currently a
director of Acceleris Marketing Communications Limited.
TRACSIS PLC | 13
Governance
Directors’ Report
The directors present their report and the audited financial statements for the year ended 31 July 2014.
Tracsis plc (‘the Company’) is a public limited company incorporated and domiciled in the United Kingdom and under the
Companies Act 2006.
The address of the Company’s registered office is Leeds Innovation Centre, 103 Clarendon Road, Leeds, LS2 9DF.
The Company is listed on AIM, part of the London Stock Exchange.
The Group financial statements were authorised for issue by the Board of Directors on 12 November 2014.
Further information on the activities of the business, the Group strategy and an indication of the outlook for the business are
presented in the Chairman and Chief Executive Officer’s Statement and the Strategy and Business Model sections of the
report.
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 23 to 55.
Dividends
The Directors have adopted a progressive dividend policy, subject to growth, profitability and cash position in the future. An
interim dividend of 0.35p per share was paid in April 2014. The Directors propose a final dividend of 0.45p per share, subject
to shareholder approval at the forthcoming Annual General Meeting. This will give a full year dividend of 0.8p per share.
Directors
The directors who serve on the Board and on Board Committees during the year are set out on page 12. Sean Lippell was
appointed as a Director on 1 November 2013. Chris Cole was appointed as a Director on 28 April 2014.
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 Max Cawthra and
Charles Winward retire by rotation and, being eligible, offer themselves for re-election. In addition, Chris Cole will seek re-
election given he was appointed since the last Annual General Meeting. 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 16 to 18.
Directors’ shareholdings
Directors’ beneficial interests in the shares of the Company, including family interests, at 31 July 2013 and 2014 were as
follows:
31 July 2014
31 July 2013
Number
of
shares
% of
issued
share
capital
Number
% of
issued
of
share
shares
capital
John McArthur
1,117,433
4.26%
968,462
3.79%
Max Cawthra
John Nelson
Charles Winward
Chris Cole
Sean Lippell
54,000
230,824
86,771
-
-
0.21%
0.88%
0.33%
-
-
4,000
0.02%
30,790
0.12%
56,500
0.22%
N/A
N/A
N/A
N/A
On 10 September 2014, Chris Cole purchased 7,000 shares, representing 0.03% of the issued share capital.
14 | Annual Report and Accounts 2014
Directors’ Report continued
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 11 November 2014, 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:
% of
issued shares
Number
of
shares
2,776,846
Techtran Group Limited
1,860,532
Unicorn Asset Management
1,590,000
The University of Leeds
Downing LLP
1,531,696
Ennismore Fund Management 1,500,000
1,440,986
BlackRock Inc
1,343,778
Liontrust Investmet Partners
1,286,166
Fidelity
1,262,500
Hargreave Hale Limited
1,131,648
Investec Asset Management
John McArthur
1,117,433
1 – Techtran Group Limited is a wholly owned subsidiary of IP Group plc.
10.5%
7.1%
6.0%
5.8%
5.7%
5.5%
5.1%
4.9%
4.8%
4.3%
4.2%
Payment of suppliers
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 2014 were 57 days (2013: 62 days).
Research and development
During the year the Group incurred £393,000 (2013: £411,000) 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 a significant Framework Agreement with a major railway
infrastructure provider, from which it has historically derived a significant amount of business.
Charitable donations
The Group made charitable donations to various charities amounting to £8,134 during the year (2013: £13,922). No political
donations were made.
TRACSIS PLC | 15
Directors’ Report continued
Auditor
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
12 November 2014
16 | Annual Report and Accounts 2014
Governance
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
Chris Cole
Sean Lippell
Date Commencement Unexpired
of contract
date
term
Notice
period
21.11.07
20.09.10
21.11.07
21.11.07
28.04.14
01.11.13
01.01.04
Indefinite
6 months
20.09.10
Indefinite
3 months
21.11.07
Indefinite
3 months
21.11.07
Indefinite
3 months
28.04.14
Indefinite
3 months
01.11.13
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.
TRACSIS PLC | 17
Directors’ Remuneration Report continued
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 previous financial year, John McArthur elected to take a reduction in basic salary in return for additional employers
pension contributions and this was continued in the financial year under review. There was no additional cost to the Group in
respect of this arrangement.
Audited information:
Directors’ remuneration
Directors’ remuneration for the year ended 31 July 2014 is set out below
Executive Directors
John McArthur
Max Cawthra
Non-Executive Directors
John Nelson
Charles Winward
Chris Cole (from 28 April 2014)
Sean Lippell (from 1 November 2013)
Basic Pension
Conts
salary
£000
£’000
117
90
207
16
16
13
12
57
30
5
35
-
-
-
-
-
Bonus
£000
75*
49*
124
-
-
-
-
-
Benefits
in kind
£000
Total
2014
£000
-
-
-
-
-
-
-
-
222
144
366
16
16
13
12
57
Total
2013
£000
188
112
300
15
15
-
-
30
* Denotes cash bonus amount determined by Remuneration Committee – all Directors (with the exception of NEDs) are
eligible to exchange any part of salary or bonus for discounted EMI Share Options under a scheme open to all staff.
Directors’ interests in shares options in the Executive Share Option Schemes
At
1 August
At
Exercise
Date from
31 July
price
Which
2013 Granted* Lapsed Exercised
2014
pence
Exercisable Expiry date
Executive
Directors
John McArthur
240,000
Max Cawthra
235,162
Non-Executive
Directors
John Nelson
225,034
Charles Winward
137,517
Chris Cole
Sean Lippell
-
-
-
-
-
-
-
50,000*
-
-
-
-
-
-
(140,000)
100,000
175p
See note 3
(75,000)
160,162
89p/0.4p
See notes 1
and 2
26 Mar
2023
20 Jun 2022
/1 Aug 2022
(200,034)
25,000
175p
See note 3
(87,517)
50,000
175p
See note 3
-
-
-
-
-
50,000
185p
See note 4
26 Mar
2023
26 Mar
2023
-
1 November
2023
* In accordance with Corporate Governance best practice, the Group will no longer be granting stock options to Non-Executive
Directors in lieu of salary. This will ensure objectivity and independence within the Board’s decision making process.
18 | Annual Report and Accounts 2014
Directors’ Remuneration Report continued
Directors’ interests in shares options in the Executive Share Option Schemes (continued)
1 – Exercisable in batches in 6 monthly intervals commencing 6 months from the date of grant (20 June 2012). All options will be fully exercisable 36 months after
the date of grant.
2 – 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, in return for 10,162 options with an exercise price of 0.4p
3 – 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.
4 – Options granted in 2013/14 are exercisable in batches in 3 monthly intervals commencing 3 months from the date of grant (1 November 2013). All options will
be fully exercisable 36 months after the date of grant.
The aggregate amount of pre-tax gains made by directors on the exercise of share options was £220,512 (2013: £296,683).
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.
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 1 August 2013 to 31 July 2014.
250
200
150
100
50
0
Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec- 13 Jan-14 Feb-14 Mar- 14 Apr-14 May-14 Jun-14 Jul-14
Tracsis - rebased
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
Sean Lippell
Chair of the Remuneration Committee
12 November 2014
TRACSIS PLC | 19
Governance
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 some of the principles as set out below.
The Board
There are currently 6 Board members, comprising 2 Executive Directors and 4 Non-Executive Directors. The role of the Non-
Executive Directors is to bring independent judgement to Board deliberations and decisions. Chris Cole was appointed as a
new Non-Executive Chairman of the Board during the year to oversee Board meetings and field all concerns regarding the
executive management of the Group and the performance of the Executive Directors. Sean Lippell was appointed as a non-
executive Director during the year too. A biography of each Director appears on page 12. 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
responsibilities to its committees as set out below.
Each of the Directors is subject to either an executive services agreement or a letter of appointment as set out on page 16.
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. Max Cawthra and Charles Winward will be retiring at the Annual General Meeting
and submitting themselves for re-election. In addition, Chris Cole will seek re-election given he was appointed since the last
Annual General Meeting.
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 Nomination Remuneration
Committee
Meetings
Meetings Committee
Meetings
(total/poss)
John McArthur
Max Cawthra
John Nelson
Charles Winward
Chris Cole
Sean Lippell
12/12
12/12
11/12
10/12
3/3
7/9
-
-
2/2
2/2
N/A
1/1
-
-
2/2
2/2
1/1
1/1
Board committees
Nomination Committee
Audit
Committee
Meetings
-
-
2/2
2/2
1/1
1/1
The Nomination Committee comprises Chris Cole as Chairman, and the Non-Executive Directors. The committee’s primary
responsibilities are to make recommendations to the Directors on all new appointments of Directors and senior management,
interviewing nominees, to take up references and to consider related matters.
Remuneration Committee
The Remuneration Committee comprises Sean Lippell as Chairman and 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 Charles Winward as Chairman and 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 auditor relating to the accounting
and internal controls.
20 | Annual Report and Accounts 2014
Corporate Governance continued
Non audit services
In accordance with its policy on non audit services provided by the Group’s auditor, the Audit Committee reviews and
approves the award of any such work. 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.
Auditor independence and conflicts of interest
The Audit Committee continues to evaluate the independence and objectivity of the external auditor and takes into
consideration all United Kingdom professional and regulatory requirements. Consideration is given to all relationships
between the Group and the audit firm (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 auditor and management,
those relationships appear to impair the auditor’s judgement or independence. The Audit Committee feels they do not.
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 management over the Group’s accounting systems. 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 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 the Group’s performance and 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, alongside the Chief Financial
officer and Chairman.
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. With effect from 23 April 2014, Mr CS Winward
resigned from his position as a Director of IP Group plc, one of the Group’s major shareholders and as such no longer has a
potential conflict of interest.
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 | 21
Governance
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 in
accordance with applicable law and 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 law (UK Generally Accepted Accounting Practice).
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.
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;
• 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;
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.
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.
22 | Annual Report and Accounts 2014
Governance
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 2014 set out on pages 23 to 61. 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 21, 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
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 2014 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;
•
•
the parent company financial statements have been
properly prepared in accordance with UK Generally
Accepted Accounting Practice
the
in
financial statements have been prepared
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 Strategic Report
and 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
Jeremy Gledhill (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
1 The Embankment
Neville Street
Leeds
LS1 4DW
12 November 2014
TRACSIS PLC | 23
Financial Statements
Consolidated Statement of Comprehensive Income
for the year ended 31 July 2014
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
2014
£000
21,843
514
22,357
2013
£000
10,831
-
10,831
(9,546)
(3,033)
12,811
7,798
(8,614)
(5,272)
5,434
(460)
(431)
(31)
(315)
4,153
75
(31)
4,197
36
(32)
4,201
(898)
3,303
3,367
(273)
(154)
(225)
(189)
2,751
-
(225)
2,526
75
(11)
2,590
(486)
2,104
Other comprehensive income/(expense):
Items that are or may be reclassified subsequently to profit or loss
Foreign currency translation differences – foreign operations
(38)
(62)
Total recognised income for the year
3,265
2,042
Earnings per ordinary share
Basic
Diluted
* Earnings before finance income, tax, depreciation, amortisation, exceptional items and share-based payment charges.
12.90p
12.44p
13
13
8.42p
8.15p
24 | Annual Report and Accounts 2014
Financial Statements
Consolidated Balance Sheet as at 31 July 2014 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
2014
£000
1,689
10,724
12,413
263
4,442
8,920
2013
£000
1,600
6,067
7,667
236
3,865
6,571
13,625
10,672
26,038
18,339
133
1,388
1,521
100
6,075
493
6,668
232
1,046
1,278
96
3,532
224
3,852
8,189
5,130
17,849
13,209
105
4,591
1,846
698
10,709
(100)
17,849
102
4,280
1,472
383
7,034
(62)
13,209
The financial statements on pages 23 to 55 were approved and authorised for issue by the Board of Directors on 12
November 2014 and were signed on its behalf by:
John McArthur – Chief Executive Officer
Max Cawthra – Chief Financial Officer
TRACSIS PLC | 25
Financial Statements
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
At 1 August 2012
99
4,113
935
194
102
4,280
1,472
383
7,034
(62) 13,209
At 1 August 2013
102
4,280
1,472
383
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
Profit for the year
Other comprehensive
income/(expense)
Total comprehensive
income
Transactions with owners:
Dividends
Share based payment
charges
Tax movements in equity
Exercise of share options
Shares issued as
consideration for business
combinations
At 31 July 2014
-
-
-
-
-
2
1
-
-
-
-
-
167
-
-
-
-
-
-
-
537
-
-
-
-
189
-
-
-
-
-
-
-
-
2
1
-
-
-
-
-
-
311
-
-
-
-
-
-
-
-
374
-
-
-
-
315
-
-
-
5,092
2,104
- 10,433
-
2,104
-
(62)
(62)
2,104
(62)
2,042
(162)
-
-
-
-
-
-
-
(162)
189
169
538
7,034
3,303
(62) 13,209
-
3,303
-
(38)
(38)
3,303
(38)
3,265
(191)
-
563
-
-
-
-
-
-
-
(191)
315
563
313
375
105
4,591
1,846
698
10,709
(100) 17,849
Details of the nature of each component of equity are set out in Notes 21 and 22.
26 | Annual Report and Accounts 2014
Financial Statements
Consolidated Cash Flow Statement
for the year ended 31 July 2014
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
Acquisition of subsidiaries
Net cash flow used in investing activities
Financing activities
Dividends paid
Proceeds from exercise of share options
Hire purchase repayments
Net cash flow from/(used in) financing activities
Net increase/(decrease) 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
2014
£000
2013
£000
3,303
2,104
10
11
14
15
12
8
10
11
14
5
28
17
(36)
32
431
460
898
315
5,403
(27)
(94)
1,080
6,362
36
(32)
(649)
5,717
(446)
(2,886)
(3,332)
(191)
313
(120)
2
2,387
(38)
6,571
8,920
(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
TRACSIS PLC | 27
Financial Statements
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 2014 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 amendments to financial reporting standards were adopted from 1 August 2013, the start of the new
financial year. None of them have had a significant impact on the Group:
• Amendment to IFRS 7: Financial Instruments Disclosures – Offsetting Financial Assets and Financial
Liabilities
IFRS 13: Fair Value Measurement
•
• Amendment to IAS 1: Presentation of Financial Statements - comparative periods
• Amendment to IAS 16: Property, Plant and Equipment - servicing equipment
• Amendment to IAS 19: Employee Benefits – post employment benefits and termination benefits projects
• Amendment to IAS 32: Financial Instruments Presentation – tax effect of equity dividends
• Amendment to IAS 34: Interim Financial reporting – interim reporting of segment assets
28 | Annual Report and Accounts 2014
Notes to the Consolidated Financial Statements continued
2
Basis of preparation (continued)
The following new amendments to standards were in issue but are not yet effective for the financial year beginning 1
August 2013 and are not currently relevant for the Group:
•
•
•
•
•
•
IFRS 10 – Consolidated Financial Statements
IFRS 11 – Joint arrangements
IFRS 12 – Disclosure of Interests in Other Entities
IFRS 15 – Revenue from contracts with customers (replacement of IAS11, IAS18, IFRIC13, IFRIC15,
IFRIC18 and SIC-31) (effective 1 January 2017, not yet endorsed by EU).
IFRS 9 Amendments – Financial Instruments (replacement of IAS39) (effective 1 January 2015, not yet
endorsed by EU).
IAS 36 Amendments – Impairment of Assets (effective 1 January 2014, endorsed by EU on 19 December
2013).
No new standards becoming effective and applied in the current year have had a material impact on the financial
statements. The impact of IFRS15 – Revenue from contracts with customers, will be considered for future periods.
The Group continues to monitor the potential impact of other new standards and interpretations which may be
endorsed by the European Union and require adoption by the Group in future reporting periods.
(f)
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, post contract customer support, sale of hardware & condition monitoring technology,
consultancy and professional services, and data capture/passenger counting services.
Revenue from software is derived from the sale of software both as a perpetual and non-cancellable annual licences,
the provision of software as a service and the support and hosting services associated with this.
TRACSIS PLC | 29
Notes to the Consolidated Financial Statements continued
3
Significant accounting policies (continued)
Revenue recognition (continued)
The Group recognises the revenue from the sale of perpetual and non-cancellable annual 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 the provision of Software as a Service under contracts with extended terms which combine software
and support services elements are recognised evenly over the period to which the services relate. Customers pay an
agreed fee covering a range of periods, for a defined contractual term, and the contracts provide the customer with
various rights during the term of the contract. This policy reflects the continuous nature of the transfer of value to the
customer.
Revenue capable of being allocated to customer support services is recognised on a straight-line basis over the term
of the support contract. Revenue not recognised in the income statement under this policy is classified as deferred
income in the balance sheet.
Revenue capable of being allocated to hosting services is recognised on a straight line basis over the term of the
hosting contract. Revenue not recognised in the income statement under this policy is classified as deferred income
in the balance sheet.
In the case where a single contract involves the combination of any or all of sale of software as a perpetual or non-
cancellable annual licence, provision of Software as a Service, support services and hosting services, the amount of
consideration is derived from an assessment of the fair value of each of the individual constituent elements of the
goods and services provided. The revenue allocated to each element is recognised as outlined above.
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.
Revenue from consultancy and professional services is recognised when the services have been performed, once
the work and value has been agreed with the customer.
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.
(c)
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
30 | Annual Report and Accounts 2014
Notes to the Consolidated Financial Statements continued
3
Significant accounting policies (continued)
(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.
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.
TRACSIS PLC | 31
Notes to the Consolidated Financial Statements continued
3
Significant accounting policies (continued)
Intangible assets (continued)
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.
(e)
(f)
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.
(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.
Trade receivables
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.
(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.
(iv)
Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.
Equity instruments
Trade payables
32 | Annual Report and Accounts 2014
Notes to the Consolidated Financial Statements continued
3
Significant accounting policies (continued)
(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.
Where the deferred tax asset recognised in respect of share-based payments would give rise to a credit in excess of
the related accounting charge at the prevailing tax rate the excess is recognised directly in equity.
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)
(j)
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.
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.
(k)
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.
TRACSIS PLC | 33
Notes to the Consolidated Financial Statements continued
3
(l)
(m)
(n)
(o)
(p)
(q)
Significant accounting policies (continued)
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.
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.
(r)
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.
34 | Annual Report and Accounts 2014
Notes to the Consolidated Financial Statements continued
3
(s)
Significant accounting policies (continued)
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.
(t)
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.
TRACSIS PLC | 35
Notes to the Consolidated Financial Statements continued
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, software provided as a service, 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.
36 | Annual Report and Accounts 2014
Notes to the Consolidated Financial Statements continued
5
Acquisition of subsidiaries
(a) Acquisition in the current year: Datasys Integration Limited
On 16 May 2014, the Group acquired 100% of the share capital of Datasys Integration Limited and its wholly owned subsidiary
Datasys Limited (Datasys). Datasys Integration Limited is a holding company whilst Datasys Limited is a trading company.
Based in Manchester, Datasys provides rail management software systems, business applications and hosting services for
the majority of the UK's train operating companies. Its client base includes all of the major transport owning groups. The
principle activity of the business is software development, sales and licensing with revenues predominantly derived from
products that assist train operators capture, report and analyse the root causes of delays and other performance critical
information. The vast majority of Datasys revenue comes from long term recurring software leases.
In the period to 31 July 2014 the company contributed revenue of £514,000 and operating profit of £75,000 to the Group’s
results, net of amortisation of associated intangible assets. If the acquisition had occurred on 1 August 2013, management
estimates that consolidated revenue would have been £2,474,000 and consolidated profit for the year would have been
£526,000. 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 2013.
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: Technology assets
Intangible assets: Customer relationships
Other intangible assets
Tangible fixed assets
Trade and other receivables
Deferred tax asset
Trade and other payables and deferred income
Income tax receivable /(payable)
Deferred tax liability
Net identified assets and liabilities
Goodwill on acquisition
Consideration paid in cash
Stamp Duty
Net cash acquired
Net cash flow
Consideration paid: fair value of shares issued
Total consideration
£000
-
-
£000
1,660
3,098
1,362
(1,362)
49
483
110
(1,463)
27
-
568
-
-
(110)
-
-
(952)
2,334
£000
1,660
3,098
-
49
483
-
(1,463)
27
(952)
2,902
359
3,261
4,150
23
(1,287)
2,886
375
3,261
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. 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.
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 £31,000 which are included within administrative expenses.
TRACSIS PLC | 37
Notes to the Consolidated Financial Statements continued
5
Acquisition of subsidiaries
(b) Acquisition in the previous year: Sky High plc (subsequently renamed Sky High Technology Limited)
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.
38 | Annual Report and Accounts 2014
Notes to the Consolidated Financial Statements continued
5
Acquisition of subsidiaries - Acquisition in the previous 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 & Analytics and passenger counting
Condition monitoring technology and embedded software & associated hardware
Total revenue
2014
£000
2,798
1,815
11,987
5,757
22,357
2013
£000
2,142
1,145
4,124
3,420
10,831
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 | 39
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
Other exceptional items (net)
Depreciation
Amortisation of intangible assets
Interest receivable/payable(net)
Consolidated profit/(loss) before tax
2014
UK
Australia
£000
£000
20,634
20,634
1,723
1,723
5,295
(315)
(31)
(339)
(460)
17
4,167
139
-
-
(92)
-
(13)
34
UK
£000
2013
Australia
£000
10,374
10,374
3,422
(189)
(225)
(129)
(273)
67
2,673
457
457
(55)
-
-
(25)
-
(3)
(83)
Total
£000
22,357
22,357
5,434
(315)
(31)
(431)
(460)
4
4,201
Total
£000
10,831
10,831
3,367
(189)
(225)
(154)
(273)
64
2,590
40 | Annual Report and Accounts 2014
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
14,686
10,724
25,410
6,428
1,388
7,816
UK
£’000
11,622
6,067
17,689
3,858
1,046
4,904
2014
Australia
£000
628
-
628
373
-
373
2013
Australia
£000
650
-
650
226
-
226
Total
£000
15,314
10,724
26,038
6,801
1,388
8,189
Total
£000
12,272
6,067
18,339
4,084
1,046
5,130
Major customers
Transactions with the Group’s largest customer represent 25% of the Group’s total revenues (2013: 31%).
Geographic split of revenue
A geographical analysis of revenue is provided below:
United Kingdom
Australia
Rest of the World
Total
2014
£000
20,252
1,723
382
22,357
2013
£000
9,951
457
423
10,831
TRACSIS PLC | 41
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
2014
£000
8,363
684
135
315
9,497
295
2013
£000
4,078
344
67
189
4,678
138
The increase in staff costs and numbers is due to the impact of having Sky High within the Group for a full year during this
financial year. Parts of the business utilise high levels of casual workers for periods of time, 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 16 to 18.
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.
42 | Annual Report and Accounts 2014
Notes to the Consolidated Financial Statements continued
8
Share based payments (continued)
Details of the schemes are given below:
Grant date
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
01/08/2013
01/08/2013
01/11/2013
01/01/2014
01/01/2014
Outstanding
Employees
Number
Performance
Exercise
entitled
of options
conditions
price (p)
143,000
Time served
62,000
12,500
90,000
Time served
Time served
Time served
267,500
Time served
25,000
Time served
150,000
Time served
72,592
72,500
Time served
Time served
100,000
Time served
55,000
Time served
52.0
51.5
49.5
50.0
63.5
57.5
89.0
0.40
123.0
133.5
159.0
Earliest
exercise
date
28/07/2009*
20/01/2011*
12/07/2011*
01/12/2011*
22/03/2012*
21/05/2012*
20/12/2012*
02/08/2013**
02/02/2013*
01/06/2013*
08/07/2013*
28/07/2013*
Expiry
date
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
4,823
Time served
0.40
28/01/2014**
70,000
Time served
175,000
Time served
155.5
175.0
26/06/2013***
26/03/2023
14,286
312,500
62,173
50,000
75,000
24,686
1,838,560
Time served
Time served
Time served
Time served
Time served
Time served
0.40
26/03/2014**
162.5
01/02/2014*
0.40
01/08/2014**
185.0 01/02/2014****
199.5
01/07/2014*
0.40
01/01/2015**
26/03/2023
01/08/2023
01/08/2023
01/11/2023
01/01/2024
01/01/2024
4
2
2
1
12
1
1
24
7
1
7
1
1
3
1
11
35
1
2
2
* 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
**** Vesting dates for these options are in equal three month instalments over a 36 month period
TRACSIS PLC | 43
Notes to the Consolidated Financial Statements continued
8
Share based payments (continued)
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
2014
Weighted
Average
2014
Exercise
Number
1,929,016
525,251
(10,674)
(605,033)
1,838,560
Price
79.1p
142.8p
111.8p
51.8p
106.0p
2013
Number
1,784,102
664,965
(141,500)
(378,551)
1,929,016
940,026
87.9p
1,031,837
2013
Weighted
Average
Exercise
Price
53.6p
133.0p
104.2p
44.7p
79.1p
56.4p
The share options outstanding at the end of the year have a weighted average remaining contractual life of 7 years (2013: 6
years).
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
-
-
-
-
44 | Annual Report and Accounts 2014
Notes to the Consolidated Financial Statements continued
8
Share based payments (continued)
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
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
-
-
-
-
-
-
-
-
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
01/08/
2013
162.5p
162.5p
01/08/
2013
162.5p
01/11/
2013
185.0p
01/01/
2014
199.5p
01/01/
2014
199.5p
0.4p
185.0p
199.5p
0.4p
3
3
3
3
3
30%
30%
30%
30%
30%
10
10
10
10
10
10
10
10
10
10
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
2014
£000
315
2013
£000
189
Notes to the Consolidated Financial Statements continued
TRACSIS PLC | 45
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
10
Finance income
Interest received on bank deposits
11
Finance expense
Interest on finance lease obligations
12
Taxation
12.1
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
2014
£000
372
59
431
210
59
269
393
2014
£000
20
33
3
18
2014
£000
36
2014
£000
32
2014
£000
901
44
945
(47)
-
(47)
898
2013
£000
129
25
154
114
22
136
411
2013
£000
43
3
3
46
2013
£000
75
2013
£000
11
2013
£000
563
1
564
(78)
-
(78)
486
46 | Annual Report and Accounts 2014
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 22.33% (2013: 23.66%)
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
2014
£000
4,201
938
18
(110)
44
-
8
2014
%
100.0
22.3
0.4
(2.5)
1.0
-
0.2
898
21.4
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
Reductions in Corporation tax rates to 21% from 1 April 2014 and 20% from 1 April 2015 were substantially enacted on 2 July
2013. This reduces the Group’s future tax charge accordingly. The Group also has some tax losses in respect of the Datasys
acquisition where no deferred tax asset has been recognised which may reduce the future charge should these be utilised.
12.2
Recognised in reserves – direct to equity
Deferred Tax
Deferred tax relating to share based payments
13
Earnings per share
2014
£000
563
2013
£000
-
Basic earnings per share
The calculation of basic earnings per share at 31 July 2014 was based on the profit attributable to ordinary shareholders of
£3,303,000 (2013: £2,104,000) and a weighted average number of ordinary shares in issue of 25,608,000 (2013: 24,982,000),
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
2014
25,526
26
56
2013
24,839
70
73
25,608
24,982
Diluted earnings per share
The calculation of diluted earnings per share at 31 July 2014 was based on profit attributable to ordinary shareholders of
£3,303,000 (2013: £2,104,000) and a weighted average number of ordinary shares in issue after adjustment for the effects of
all dilutive potential ordinary shares of 26,559,000 (2013: 25,827,000):
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
2014
£000
5,434
21.22p
Diluted adjusted EBITDA* per share
* Earnings before finance income, tax, depreciation, amortisation, exceptional items and share-based payment charges.
20.46p
2013
£000
3,367
13.48p
13.04p
TRACSIS PLC | 47
Notes to the Consolidated Financial Statements continued
14
Property, plant and equipment
Freehold
Office
Land &
Motor
Computer
fixtures
Buildings
Vehicles
equipment
& fittings
£000
£000
£000
£000
Cost
At 1 August 2012
Additions
Arising on acquisition
Exchange rate variances
At 31 July 2013
Additions
Arising on acquisition
Exchange rate variances
At 31 July 2014
Depreciation
At 1 August 2012
Charge for the year
Arising on acquisition
Exchange rate variances
At 31 July 2013
Charge for the year
Arising on acquisition
Exchange rate variances
At 31 July 2014
Net book value
At 1 August 2012
At 31 July 2013
At 31 July 2014
400
-
-
-
400
-
-
-
400
18
12
-
-
30
12
-
-
42
382
370
358
21
8
719
(18)
730
55
-
(14)
771
14
38
339
(14)
377
117
-
(14)
480
7
353
291
Total
£000
593
91
2,500
(72)
3,112
471
304
(57)
131
46
619
(40)
756
207
243
(34)
41
37
1,162
(14)
1,226
209
61
(9)
1,172
1,487
3,830
86
61
426
(36)
537
151
225
(34)
879
45
219
293
12
43
535
(22)
568
151
30
(9)
740
29
658
747
130
154
1,300
(72)
1,512
431
255
(57)
2,141
463
1,600
1,689
The net book value of assets held under finance lease obligations is £194,000 (2013: £305,000).
48 | Annual Report and Accounts 2014
Notes to the Consolidated Financial Statements continued
15
Intangible assets
Cost
At 1 August 2012
Arising on acquisition
At 31 July 2013
Arising on acquisition
At 31 July 2014
Amortisation and impairment
At 1 August 2012
Charge for the year
At 31 July 2013
Charge for the year
At 31 July 2014
Carrying amounts
At 1 August 2012
At 31 July 2013
At 31 July 2014
Customer
related
intangibles
£000
Technology
related
intangibles
£000
2,628
1,704
4,332
3,098
7,430
274
182
456
333
789
2,354
3,876
6,641
914
-
914
1,660
2,574
141
91
232
127
359
773
682
2,215
Goodwill
£000
1,119
390
1,509
359
1,868
-
-
-
-
-
1,119
1,509
1,868
Total
£000
4,661
2,094
6,755
5,117
11,872
415
273
688
460
1,148
4,246
6,067
10,724
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, Sky
High plc in April 2013, and Datasys Integration Limited in May 2014 are analysed as follows:
RWA Rail Limited
Peeping Limited
Safety Information Systems Limited
MPEC Technology Limited
Sky High Technology Limited
Datasys Integration Limited
Goodwill
2014
2013
£000
£000
671
43
136
269
390
359
671
43
136
269
390
-
1,868
1,509
Customer related
intangibles
2014
2013
£000
£000
531
277
209
1,075
1,484
3,065
6,641
567
295
222
1,139
1,653
-
3,876
Technology related
intangibles
2014
£000
-
-
123
467
-
1,625
2,215
2013
£000
-
-
146
536
-
-
682
The amortisation charge is recognised in the following line items in the income statement:
Administrative expenses
2014
£000
460
2013
£000
273
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.
TRACSIS PLC | 49
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
2014
1.0%
10%
2013
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
2014
£000
184
79
263
2013
£000
138
98
236
The value of inventories expensed in the period in cost of sales was £2,034,000 (2013: £922,000). 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
2014
£000
100
79
32
22
-
133
233
2014
£000
328
-
25
(120)
233
2013
£000
96
100
83
25
24
232
328
2013
£000
-
407
16
(95)
328
50 | Annual Report and Accounts 2014
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
233
328
255
365
114
113
84
113
57
139
Hire Purchase Obligations
2014
2013
18
Trade and other receivables
Trade receivables
Other receivables and prepayments
Amounts recoverable on contracts
2014
£000
3,165
387
890
4,442
2013
£000
3,019
220
626
3,865
2013
£000
2,889
130
3,019
A breakdown of trade receivables between the United Kingdom and Australia operations is as follows:
United Kingdom
Australia
2014
£000
2,970
195
3,165
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
2014
£000
941
282
66
1,289
2013
£000
988
131
220
1,339
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.
Notes to the Consolidated Financial Statements continued
TRACSIS PLC | 51
19
Trade and other payables
Trade payables
Other tax and social security
Deferred income
Accruals and other payables
2014
£000
760
1,391
1,731
2,193
6,075
2013
£000
521
967
785
1,259
3,532
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 hosting
obligations, 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, and revenue from Software as a Service
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 2012
Arising on acquisition
(Credit)/charge to income statement
Change in tax rates
At 31 July 2013
Arising on acquisition
(Credit)/charge to income statement
Change in tax rates
Recognised in equity
At 31 July 2014
Accelerated
Intangible
capital
Share
assets
allowances options
£000
£000
£000
Other
£000
718
358
(62)
(58)
956
952
(96)
(41)
-
24
64
(7)
(2)
79
-
27
(5)
-
1,771
101
(40)
-
47
4
11
-
(8)
-
(563)
(560)
-
-
-
-
-
-
76
-
-
76
Total
£000
702
422
(22)
(56)
1,046
952
(1)
(46)
(563)
1,388
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 20% as at 31 July 2014 (2013: 21%).
21
Share capital
Allotted, called up and fully paid:
Ordinary shares of 0.4p each
2014
2014
2013
2013
Number
£
Number
£
26,258,114
105,032
25,526,306
102,105
The following share transactions have taken place during the year ended 31 July 2014:
126,775 shares were issued in respect of the acquisition of Datasys Integration Limited.
605,033 share options, under the Group’s share options schemes were exercised at various points in the year.
52 | Annual Report and Accounts 2014
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 share options
At end of the year
22
Capital and reserves
The following describes the nature and purpose of each reserve:
2014
Number
2013
Number
25,526,306
24,839,192
126,775
605,033
308,563
378,551
26,258,114
25,526,306
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
£269,000 was recognised as an expense in the income statement in respect of operating leases (2013: £136,000).
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
2014
£’000
59
195
254
2014
£’000
24
225
249
2013
£’000
20
233
253
2013
£’000
14
247
261
TRACSIS PLC | 53
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
2014
Fixed
Floating
Rate
£000
1,500
Rate
£000
Total
£000
7,420
8,920
2013
Fixed
Floating
Rate
£000
-
Rate
£000
6,571
Total
£000
6,571
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 2014, the Group had fixed-rate deposits in place as follows:
•
•
£750,000 placed on a fixed 3 month deposit at an interest rate of 0.55%
£750,000 placed on a fixed 3 month deposit at an interest rate of 0.55%
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.
54 | Annual Report and Accounts 2014
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 previous 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 Limited 1
Purchase of
Amounts owed to
goods and services
related parties
2014
£000
71
2013
£000
80
2014
£000
6
2013
£000
6
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.
WSP Group 2
Sale of
Amounts owed by
goods and services
related parties
2014
£000
41
2013
£000
-
2014
£000
36
2013
£000
-
2 – WSP Group (WSP) is a company which is connected to Chris Cole, a Director of Tracsis plc since 28 April 2014. Chris Cole is non-
executive Chairman of Tracsis plc and is also a Director of WSP. Sales to WSP took place at arm’s length commercial rates, and were not
connected to Mr Cole’s position at WSP as the group traded with WSP prior to his appointment at Tracsis. The values disclosed above
represent amounts invoiced since 28 April 2014, the date on which Mr Cole became a Director and therefore the date from which WSP
became a related party
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.
TRACSIS PLC | 55
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
£135,000 (2013: £67,000). There were outstanding contributions at 31 July 2014 of £17,000 (2013: £10,000).
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 Technology Limited
(previously Sky High plc)
Datasys Integration Limited
(owns 100% of Datasys Limited)
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
Software
England and Wales
% ordinary
share
capital owned
100%
100%
100%
100%
100%
100%
28
Dividends
The Group introduced a progressive dividend policy during previous years. The cash cost of the dividend payments is shown
below:
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 0.40p per share paid
Interim dividend for 2013/14 of 0.35p per share paid
Total dividends paid
The dividends paid or proposed in respect of each financial year is as follows:
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 0.40p per share paid
Interim dividend for 2013/14 of 0.35p per share paid
Final dividend for 2013/14 of 0.45p per share proposed
2014
£000
-
-
102
89
191
2013
£000
-
-
75
102
-
-
2013
£000
87
75
-
-
162
2012
£000
48
87
-
-
-
-
2014
£000
-
-
-
-
89
119
The dividend will be payable on 13 February 2015 to shareholders on the Register at 30 January 2015.
56 | Annual Report and Accounts 2014
Financial Statements
Company Balance Sheet (presented under UK GAAP)
as at 31 July 2014
Company number: 05019106
Fixed assets
Tangible fixed assets
Investments
Current assets
Debtors
Cash at bank and in hand
Creditors: amounts falling due within one year
Net current (liabilities)/assets
Note
30
31
32
33
2014
£000
359
14,093
1,261
5,294
6,555
(7,226)
(671)
2013
£000
371
9,545
1,030
3,284
4,314
(5,785)
(1,471)
Total assets less current liabilities
13,781
8,445
Provisions for liabilities and charges
34
(6)
(15)
Net assets
13,775
8,430
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
105
4,591
1,846
698
6,535
13,775
102
4,280
1,472
383
2,193
8,430
The financial statements were approved and authorised for issue by the Board of Directors on 12 November 2014 and were
signed on its behalf by:
John McArthur – Chief Executive Officer
Max Cawthra
– Chief Financial Officer
TRACSIS PLC | 57
Financial Statements
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.
58 | Annual Report and Accounts 2014
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 27 to 34.
30
Tangible fixed assets
Cost
At 1 August 2013
Additions
At 31 July 2014
Depreciation
At 1 August 2013
Charge for the year
At 31 July 2014
Net book value
At 31 July 2013
At 31 July 2014
31
Investments
Cost
At 1 August 2013
Additions
At 31 July 2014
The addition in the year relates to the acquisition of Datasys Integration Limited.
Freehold
Land & Computer
Buildings
equipment
£000
£000
400
-
400
30
12
42
370
358
23
-
23
22
-
22
1
1
Total
£000
423
-
423
52
12
64
371
359
Shares in subsidiary
undertakings
£000
9,545
4,548
14,093
TRACSIS PLC | 59
Notes to the Company Balance Sheet continued
31
Investments (continued)
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
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
Ordinary 100%
Ordinary 100%
Direct
Direct
Direct
Direct
Sky High Technology
Limited (previously Sky
High plc)
Sky High Traffic Data
Australia Pty Limited
Datasys Integration
Limited
Datasys Limited
32
Debtors
England and Wales
Transportation data collection
Ordinary 100%
Direct
Australia
Transportation data collection
England and Wales
Holding Company
England and Wales
Rail industry software
Ordinary 100%
Ordinary 100%
Ordinary 100%
Indirect
Direct
Indirect
Trade debtors
Amounts owed by subsidiary undertakings
Other debtors
Corporation Tax
Prepayments
2014
£000
478
603
12
141
27
1,261
2013
£000
769
50
12
166
33
1,030
The group moved onto a Payments on Account regime for Corporation Tax in the previous 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
Trade creditors
Other tax and social security
Corporation tax
Amounts owed to subsidiary undertakings
Accruals and deferred income
2014
£000
29
586
-
5,869
742
7,226
2013
£000
14
356
-
4,679
736
5,785
60 | Annual Report and Accounts 2014
Notes to the Company Balance Sheet continued
34
Provisions for liabilities and charges – deferred tax liability
At start of the year
(Credit) / charge to profit and loss account during the year
At end of the year
2014
£000
15
(9)
6
2013
£000
(33)
48
15
35
Share capital
Allotted, called up and fully paid:
Ordinary shares of 0.4p each
2014
2014
2013
2013
Number
£
Number
£
26,258,114
105,032
25,526,306
102,105
The following share transactions have taken place during the year ended 31 July 2014:
126,775 shares were issued in respect of the acquisition of Datasys Integration Limited
605,033 share options, under the Group’s share options schemes were exercised at various points in the year.
36
Reserves
At 1 August 2013
Dividends
Issue of new shares
Profit for the period
Share based payment charges
At 31 July 2014
Share
premium
account
£000
4,280
-
311
-
-
Merger
reserve
£000
1,472
-
374
-
-
4,591
1,846
Share based
payments
reserve
Profit
and loss
account
£000
383
-
-
-
315
698
£000
2,193
(191)
-
4,533
-
6,535
Profit for the period is stated after receiving dividends from subsidiary undertakings of £4,250,000.
TRACSIS PLC | 61
Notes to the Company Balance Sheet continued
37
Operating leases
Operating lease commitments
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
2014
£’000
9
-
2014
£’000
4,533
(191)
688
315
5,345
8,430
13,775
2013
£’000
-
58
2013
£’000
173
(162)
707
189
907
7,523
8,430
62 | Annual Report and Accounts 2014
Group information
Company Secretary and Registered
Office
Max Cawthra
Leeds Innovation Centre
103 Clarendon Road
Leeds
LS2 9DF
Auditor
KPMG LLP
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
Royal Bank of Scotland
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