0 | Annual Report and Accounts 2015
& bus
Annual Report & Accounts 2015
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’s 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
12
13
14
17
20
22
23
24
25
26
27
28
58
59
65
2 | Annual Report and Accounts 2015
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 7 acquisitions and a strategic investment so far (this includes the post year end transactions
of SEP and Citi Logik). 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;
• Traffic & Data Services: Collection, collation and analytical services of traffic and
passenger/customer data within rail, traffic and pedestrian rich environments. The
acquisition of SEP Events post year end further expands this capability into the outdoor
and sporting event markets.
• Professional Services: Consulting and technology related professional services across
the operational and strategic planning horizon for traffic and transport customers; and
• Remote Condition Monitoring (RCM): Technology and reporting for critical infrastructure
assets in real time, to identify problems and aid with preventative maintenance.
Tracsis has offices in the UK and Australia which service our client base in Europe and
Australasia. At year end we employed 320 permanent staff many of whom are shareholders in
the company.
The business drives growth both organically and via strategic acquisition and has made seven
acquisitions since coming to market in 2007.
Financial highlights
for the year ended 31 July 2015:
• Revenues increased 14% to £25.4m (2014: £22.4m)
• Adjusted EBITDA increased 20% to £6.5m (2014: £5.4m)
• Profit Before Tax increased 6% to £4.5m (2014: £4.2m)
• Cash balances grew to £13.3m (2014: £8.9m)
• Full year dividend increased 25% to 1.0p per share (2014: 0.8p)
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 traffic
and 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 is being achieved via the delivery of a 3 pronged strategy.
1) Manageable, industry-led organic growth through continual innovation of products and services and an excellent close
working relationship with our customers.
2) International expansion into select overseas markets that share problems with the industries we currently serve.
3) Reinvesting company 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 2014/15:
1 Organic
further sales from existing
products to UK
• Overall Group revenues increased from £22.4m to £25.4m with no new
acquisitions in the financial year
• Strong Group wide levels of trading experienced in the year, in particular at
the Traffic & Data Services part of the Group
• Consultancy team worked extensively with various transport owning groups
on the re-franchising of Northern and Transpennine Express
• High levels of recurring revenue from Software suite of products, with very
high renewal rates due to nature of the products
• Remote Condition Monitoring technology revenues reduced versus prior
year (as anticipated) but the division performed very well in spite of this
• Several new senior hires recruited into key posts throughout the Group.
These include new Head of Software, Head of Consultancy, Group HR
Manager and International Business Development Manager
• Continuation of North American rollout for our Remote Condition Monitoring
•
technology
3 ‘Class 1’ freight operators piloting our technology with a developed
pipeline of passenger, transit and other freight rail customers
• Signed agreement with US technology partner to help service this territory
• Our Australian Traffic & Data Services division contributed £2.2m of
revenue in the financial year
• Significant further software project delivered in Sweden working with a
major transport owning group
• Continued good levels of business in Ireland for our Remote Condition
Monitoring technology
• No acquisitions completed in the financial year (to July ’15) although the
Group appraised numerous opportunities none of which met with our strict
investment criteria
• Post year end Tracsis completed a strategic investment into Citi Logik
•
Limited and also completed the acquisition of SEP Limited
The overall volume and quality of acquisition opportunities seen by Tracsis
remains high
2 Overseas Markets
showing good promise
and remain relatively untapped
3
Acquisitions
4 | Annual Report and Accounts 2015
Strategic Report
Chairman & Chief Executive Officer’s Report
A welcome from Chris Cole, Non-Executive Chairman
My expectations for the progress of our Company since joining the Board as Non-Executive Chairman continued through 2015
in terms of financial results, integration of the Group and the post-year transaction highlights.
I am confident that we are well placed to create opportunities and value in the busy Rail and Transportation sectors we serve.
My thanks to the Directors and Management of Tracsis for delivering excellent results and a sound platform to continue to build
upon.
Introduction
The Group has enjoyed a further year of growth and consolidation, with total Group revenues rising to in excess of £25m, and
EBITDA in excess of £6m. Both of these are significantly ahead of the previous year and represent a considerable achievement
for Tracsis. The business continues to benefit from significant financial strength, great products and services, and an engaged
customer base which operates within a challenging environment of public and political scrutiny.
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 there is clear customer pain, an opportunity to create significant value for
customers, and where existing technology solutions are not available. Working in this way, Tracsis can share in the upside of
the benefit we bring to our clients and generate significant value for our shareholders. This approach has worked for us since
our IPO in 2007 and we continue to deploy this strategy today.
The Group’s market offering can be broadly categorised into distinct revenue streams:
• Software and technology led consulting: Industry-strength resource optimisation and rail management software
that covers a variety of asset classes. Our technology offering is delivered alongside in-house professional services
where we have deep industry knowledge across the operational and strategic planning horizons.
• Remote Condition Monitoring: Hardware and software that allows for real-time reporting on critical infrastructure
assets. We collect, process and analyse significant amounts of data from over 12,000 installations and help our
customers identify problems that aid with preventative maintenance. In a nutshell this offering removes considerable
delay, cost and uncertainty from a transport network and leads to a safer railway; and,
•
Traffic & Data Services: Data capture, processing and analysis of traffic and pedestrian data to aid with the planning,
investment and ultimate operations of a transport environment. By revenue, this is the largest and most diverse part
of the Tracsis Group and we use a variety of technology (WiFi, ATC, ANPR, telco data) to deliver projects for a wide
range of blue chip clients.
The Group's mission from the outset has been to solve complex, data driven problems within the transportation markets.
Through the provision of its products and services, Tracsis provides its clients with better visibility and information to assist
decision making whilst driving efficiency, productivity and enhanced safety. The Directors believe that the transport industry, in
particular passenger 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 expanding portfolio of product and service offerings.
Financial summary
The Group achieved revenue of £25.4m for the year, an increase of 14% on the prior year (2014: £22.4m) which exceeded the
Board's original expectations and was the first time that Group revenues have exceeded £25m. Adjusted pre-tax profit of £5.8m
was ahead of market expectations of £5.5m and the previous year result of £5.0m.
Adjusted EBITDA* increased by 20% to £6.5m (2014: £5.4m) with statutory Profit Before Tax 6% higher at £4.5m (2014: £4.2m).
Statutory PBT was impacted by higher amortisation due to the Datasys acquisition from 2014, and higher share based payment
charges due to the high take up of the Group’s share schemes. The Group also incurred costs of c. £95K in relation to
professional fees and due diligence enquiries associated with aborted acquisitions.
At 31 July 2015, the Group had cash balances of £13.3m (2014: £8.9m), with cash conversion remaining strong. Overall cash
balances increased by £4.4m in the financial year. In spite of a healthy pipeline of opportunities, no acquisitions were completed
during the year.
* Earnings before finance income, tax, depreciation, amortisation, exceptional items and share-based payment charges
TRACSIS PLC | 5
Chairman & Chief Executive Officer’s Report continued
Trading Progress and Prospects
Software
Software sales increased significantly to £5.6m (2014: £2.8m), which reflects the full year contribution from Datasys which was
acquired in May 2014. This strong performance continues to demonstrate the high levels of recurring revenue for our software
which comes from a retained user base under contract.
We now have 10 distinct products across the TRACS, COMPASS and Datasys software range, and continue our strategy of
cross selling products to our customer base which is made up of all the major Train Operating Companies along with several
smaller transit/metro players and non-franchised rail operators. We continued to invest in new product development, with the
bulk of our time being spent developing the Bugle Day One product which won a Modern Railways Industry Innovation Award
back in June. Our software division were also successful in delivering a significant installation of COMPASS to a major rail and
bus operator in Sweden following on from other successful projects the Group has delivered in this territory. In the past year we
also created a new post of Head of Software to help the Group manage technology risk and standardise our approach to
technology development, testing and quality assurance.
Professional Services
Revenue rose 8% to £2.0m (2014: £1.8m) which was a strong performance and follows on from the achievements made last
year. Our consultancy division is broader and more diverse than it was a year ago and we have made a concerted effort to bring
in new resources to our team to broaden the service offering. Along with several new hires made during the year we also
appointed a new Head of Consultancy. These changes were partly to enable a reduction of our reliance on franchise bidding
work (which is inherently lumpy in nature) but primarily in order to build a team that was able to quickly take advantage of
opportunities in other areas of the rail supply chain which historically have been outside of the core operational planning space.
These changes are beginning to bear fruit and in the first half of the financial year, our team worked on a variety of major projects
for Network Rail outside of the franchise bidding space. In the second half of the year, we chose to get heavily involved with
two high profile franchise bids working for the transport owning Groups. Tracsis supported submissions for the recent Northern
and TransPennine Express franchise bids, and we expect to support bidders for the Greater Anglia and South Western
franchises in the coming financial year. Looking ahead, our professional services team will continue to diversify our offering
whilst remaining a key source of expertise within the franchise bidding arena.
Remote Condition Monitoring (RCM)
Revenues of £3.0m (2014: £5.8m) were adverse to the previous year although this decrease was anticipated following a very
strong performance in 2014. The trading performance and profitability of RCM in the year remained buoyant and in April 2015
we announced a large order for £1.1m from our major UK based customer. This order was substantially fulfilled by the end of
the financial year, and we remain under a Framework agreement with this customer until 2018. Within the UK, Tracsis now has
an installed base in excess of 12,000 data loggers and this population is growing steadily as the rail industry continues to invest
in smarter ways of working to deliver a most cost effective railway to the customer.
Outside of the UK, we have continued to invest time and effort to develop overseas markets and earlier in the year, we were
pleased to announce a distribution agreement with a US rail technology partner on an exclusive basis. This agreement has led
to three active pilots for the adoption of our RCM technology with major Class 1 operators in North America (i.e. those defined
by freight revenue in excess of $500M per annum). As alluded to at the half year, the specific adoption rate of Remote Condition
Monitoring technology will vary significantly from customer to customer and will be impacted by several factors which Tracsis
are not able to impact such as the adoption of Positive Train Control within North America. To this end we have yet to see
significant revenue contribution from overseas markets although we continue to believe there is a large and viable market. In
the meantime, Tracsis will continue to promote RCM technology both directly and via our partners to seed the US market and
management believes this is the best approach that will lead to success in the fullness of time.
Traffic & Data Services
Now the largest part of the Group by revenue, our rebranded T&DS (Traffics & Data Services) offering saw considerable organic
growth in the period with a sharp increase in sales from £12.0m to £14.8m. Macroeconomic conditions in the UK have remained
positive, though the increase in revenue was also attributable to management achieving most of the strategic goals that were
set out at the beginning of the year. These included further technology innovation (i.e. WiFi, Bluetooth, mobile), proactive
account management, and continued professionalisation of our tendering process that has allowed us to bid for and win several
very large traffic data capture projects. Outside of the UK, our Australia operations made a great contribution to the Group and
traded ahead expectations with revenues of £2.2m (2014: £1.7m).
Post year end, the acquisition of SEP Events and the equity investment into Citi Logik were great additions to our traffic and
data capture capabilities. SEP opens up an entirely new market to Tracsis through which obvious cross selling opportunities to
the event industry exist whilst the mobile analytics capability of Citi Logik presents an entirely new product offering which has
exciting possibilities.
6 | Annual Report and Accounts 2015
Chairman & Chief Executive Officer’s Report continued
Dividends
In February 2012, the Board implemented a progressive dividend policy and the Group maintains this approach of growing the
dividend in line with growth. To this end, an interim dividend of 0.4p per share for 2014/15 was paid in May 2015. A final dividend
of 0.6p per share in respect of 2014/15 is proposed, to take the full year dividend to 1.0p. This represents a 25% increase on
the 2014/15 total dividend paid of 0.8p per share.
The dividends remain 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 Board is committed to maintaining the progressive
dividend policy going forwards provided that the business continues to trade in line with expectation.
Acquisitions
The Group appraised a number of acquisition opportunities in the year but none passed with the Group’s strict investment and
diligence criteria in order to complete. The Group incurred costs of circa £95K in relation to our company investigations, research
and general due diligence.
Post year end, we were delighted to have completed the acquisition of SEP Limited and make a £1.0m investment into Citi Logik
Limited in exchange for a 29.41% equity stake. Both transactions are of strategic importance to Tracsis and met with the
approval of our investment committee.
SEP Limited
Based in Boroughbridge, North Yorkshire, SEP is a market leading provider of traffic planning and management services for the
events industry. The business was formed in 1989, and has a 25 year pedigree which has seen its client list expand to now
include many of the UK's largest and most prestigious outdoor entertainment and sporting fixtures.
In terms of capabilities, SEP works with event organisers and ‘blue light’ services (police, ambulance, fire brigade) to plan and
deliver traffic management services for major events. This remit includes significant amounts of preparation, planning and
delivery work and revolves around how to maximise the safe and effective mass movement of people and vehicles into and out
of a specific location. SEP provides end to end traffic management services and will be involved from the pre-planning
consultation stage right through to deliver of traffic management services (road closures and signage) and on the day delivery
(parking management, meet and greet, revenue collection).
The Directors believe that SEP is highly complementary to Tracsis' existing Traffic & Data Services division and will offer strong
cross-sell and upsell opportunities given the nature of this business offering. Both SEP and Tracsis have worked together in the
past and collaborated on major events such as Royal Ascot, T in the Park, The Grand National, and the Wings and Wheels air
show.
In the year ended 30 September 2014, SEP generated revenue of £4.0m, an adjusted EBITDA of £0.4m and Profit before Tax
of £0.3m. The business employs 30 permanent staff, all of whom will remain with the business post transaction.
The acquisition consideration comprised an initial cash payment of £1.625m and the issue of 55,005 ordinary shares of 0.4p
each in Tracsis at an issue price of 454.5p (a total value of £0.25m). Deferred consideration of £0.1m is payable over two years
with performance consideration of up to £0.6m is payable based on SEP achieving certain financial targets in the two years post
acquisition, giving a total consideration of up to £2.6m.
Citi Logik Limited
On 4th September Tracsis completed a strategic investment of up to £1.0m to acquire 29.4% of Citi Logik. Citi Logik was
established in 2011, and has developed unique technology and expertise in mobile analytics to improve the understanding of
interactions between people, transport and the built environment using large anonymised mobile phone datasets. The business
has a global framework agreement with a major FTSE 100 telecommunications business to source mobile data and works with
a range of public and private customers on projects ranging from transport analysis to consumer behaviour and travel patterns.
The Directors believe Citi Logik has a highly novel technology platform that will be complementary to the existing Tracsis Traffic
& Data Services division. Mobile analytics offers strong cross-sell and upsell opportunities to the Tracsis Group and
complements existing survey methods which will expand the market into larger projects of greater size and complexity.
Tracsis will invest up to £1.0m via a combination of equity and debt funding with £0.5m being made immediately with a further
£0.5m invested within the next 12 months subject to delivery of agreed business plan milestones. A Tracsis executive will join
the Board of Directors of Citi Logik to help grow the business and promote mobile analytics to the Tracsis customer base.
TRACSIS PLC | 7
Chairman & Chief Executive Officer’s Report continued
Overseas growth
Overseas growth continues to be a key part of the Group’s future growth strategy and whilst this still remains relatively untapped,
significant progress has been made in the past year. In the year under review, the Group generated £2.8m of revenue from
overseas customers (2014: £2.1m) which accounted for 11% of Group revenues (2014: 9%). The majority of this (£2.2m) again
came from our Australian operations, with the balance of £0.6m again coming from clients in Sweden, Ireland and New Zealand
(2014: £0.4m), with a major implementation of COMPASS being delivered in Scandinavia. A small amount of revenue was
delivered from our various North American pilots for our Remote Condition Monitoring technology which continues to be an area
of focus for the year ahead. Tracsis now employs a full time business development resource for European markets and, as
discussed above, has a signed agreement in place with a US partner. Looking ahead, we anticipate our overseas footprint to
grow in the coming year albeit at a pace that is hard for us to predict given market forces beyond our control. With that said,
management believe the Group is well positioned to take advantage of new customer opportunities as and when these present
themselves.
Summary and Outlook
Tracsis has once again performed well and delivered another year of growth with revenue, adjusted EBITDA and Profit Before
Tax being well ahead of the same period last year. The Group has consolidated and built upon the successes of 2014 and made
genuine strides forward to put in place the building blocks that allow us to scale our enterprise for the years ahead. The post
year-end investments were a welcome addition and shows management’s commitment to not only breaking into new and related
markets but also our passion for technology and innovation. 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 organically and via acquisition, by creating products and
services that solve well recognised problems that are poorly served by existing technology. Our business model remains
focussed on niche offerings that typically 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. This strategy has worked well in
the past to generate significant returns for shareholders and we believe it will continue to work well in the future especially given
the pace of change within our target markets.
Looking ahead, Tracsis remains well placed to benefit from a growing UK traffic and transport industry and will continue to
develop our overseas footprint which we believe remains a significant opportunity for the future. In the meantime we will, as
ever, continue to diversify our technology portfolio through working hand in glove with our customers and making the right
acquisitions as and when these present themselves.
As always, our thanks go to our supportive clients, shareholders and, above all, our talented team who continue to make Tracsis
the business it is.
Chris Cole, Chairman
John McArthur, Chief Executive Officer
4 November 2015
8 | Annual Report and Accounts 2015
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.
1. Software
2. Consultancy
3. Condition
Monitoring
4. Traffic & Data
Services
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
demonstrable
value
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
Competition
to
The success of the Group may
increased competition,
lead
especially
in Traffic & Data
Services where our products and
services may be more easily
replicated. The Group has a variety
of product and service offerings
and some are more exposed to
more competition than others.
1. Traffic & Data
Services
2. Consultancy
3. Condition
Monitoring
4. Software
Reduced government spending
to
pays
subject
The Group
close
attention to pricing for areas
most
strong
competition and endeavours to
make sure it is competitively
appropriate.
priced where
Where possible,
the Group
tries to ensure its products and
services have a clear value
return on
proposition and
investment such
the
products and services are
embedded within its customer
base to reduce the exposure to
new entrants.
that
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. Traffic & Data
Services
2. Condition
Monitoring
3. Consultancy
4. Software
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
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
and
The Group notes
that
Network Rail became part
of HM Treasury during 2014
which was a change from
previous years. The Group
also notes
the press
releases from Network Rail,
associated media
and
its
regarding
coverage
performance. The Group
also notes the results of the
General Election which took
place during the year. The
threat of structural changes
has existed for some time
and is always a risk.
For the year under review,
Traffic & Data Services, the
area most heavily exposed
to competition, continued to
account for around half of
the Group’s revenues, so
this
risk has
remained unchanged, but
the generic risks in respect
of competition for the whole
Group remain the same.
specific
The results of the recent UK
General Election has not
to any noticeable
led
changes
to Government
spending that has impacted
on the Group.
the UK
However,
rail
industry, one of the group’s
key markets, has continued
to experience significant
investment
the
Government and the Group
has benefited from this. It is
that Network Rail
noted
of HM
became
Treasury in the year.
from
part
TRACSIS PLC | 9
Risk Management continued
Description/Potential impact:
Area of Group
impacted:
Reliance on certain key customers
Mitigation:
Change in the year:
1. Condition
Monitoring
2. Traffic & Data
Services
3. Consultancy
4. Software
for
The Group has a number of
customers but derives a 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 potential future
orders. Furthermore, the Group’s
Traffic & Data Services division
operates under a number of
Framework Agreements with one
large one in particular, and the
Consultancy
works
extensively with bidders during
franchise bid work. Reduced levels
of trading with any key customer
may adversely impact the Group.
team
to
certain
engaging
As the Group continues to
grow and evolve, the exposure
to and reliance on any one
customer will reduce. Although
the Group will always be
exposed
key
customers, it manages this risk
the
by
customers
to
understand their needs and
respond to them in terms of
changes to products or service
offerings
the
relationship to ensure that its
products and services are
embedded with the customer
as best as possible.
proactively
reinforce
with
to
All parts of 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 on certain people reduces.
However, skills and expertise in
our markets are specialist and hard
to find or develop, and so further
growth of the business may be
restricted.
The Group continues to seek to
mitigate its exposure to one
customer in Remote Condition
Monitoring
expanding
by
overseas and is continuing to
target
geographic
markets.
certain
The Group offers competitive
remuneration packages, and
also offers share schemes to
staff including EMI options, in
order to attract and retain high
calibre employees. Such share
schemes are designed such
that employees are 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 the
overall Group, is reduced.
Revenues in respect of the
Group’s Remote Condition
Monitoring were reduced
compared to the previous
year, which was anticipated
to some extent. Revenues
from this part of the group
accounted for around 12%
of Group
revenue as
opposed to over 25% in the
previous financial year. The
Traffic & Data Services part
of the Group continued to
account for over half of
overall Group revenues and
derived £1.4m of revenue
(representing 5% of overall
Group revenues) from one
particular
Framework
Agreement.
Unchanged from previous
the economy
years. As
continues to grow then the
risk of not being able to
recruit
key
individuals increases given
the competition from other
potential employers.
retain
or
10 | Annual Report and Accounts 2015
Risk Management continued
Description/Potential impact:
Technological changes
The Group has a variety of product
and service offerings which may be
under threat should competitors
develop rival technology or should
better ways of doing things be
discovered which make some of
the Group’s services redundant.
This could potentially
to
reduced levels of business.
lead
Area of Group
impacted:
1. Software
2. Condition
Monitoring
3. Traffic & Data
Services
4. Consultancy
Customer pricing pressure
1. Traffic & Data
Price pressure
from customers
may potentially result in margins
being eroded in the fullness of time
if lower revenues are achieved
than those which were achieved
historically.
Services
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
The Group made a strategic
investment
in Citi Logik
Limited in September 2015
to attempt to mitigate the
risk posted by the use of
mobile phone data
for
transport data collection.
Traffic & Data Services
continues to make up a
larger part of the overall
Group, and this part of the
business is most vulnerable
to pricing pressure, and as
the element of revenue
derived from Traffic & Data
Services has remained at
around half of Group
revenues,
risk has
the
remained unchanged on a
Groupwide basis.
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 ensure
that they remain relevant. The
Group works closely with its
customers to deliver the next
generation of products. For
certain parts of the Group, the
with
business
technology partners who have
specific expertise and can help
the Group
its
service offerings. Some of the
Group’s offerings are protected
relationships,
by
Framework
Agreements,
contractual agreements and
also significant development
costs, which provide protection
even if new entrants may come
along. The Group made a
strategic
in Citi
investment
Logik Limited in September
2015.
to maximise
customer
works
tenders
The Group believes it operates
a relatively lean business in
order to protect against pricing
pressure, and
is constantly
searching for ways to keep its
cost base to a minimum. When
reviewing
and
enquiries, pricing is submitted
accordingly on
the most
favourable commercial terms.
The Group is committed to
ensuring customer satisfaction
and offering a compelling
return on investment for its
products with a clear value
proposition, with the objective
that the customer base will
continue to take its products
due
their quality and
business case, with price being
of less concern to them.
to
TRACSIS PLC | 11
Risk Management continued
Description/Potential impact:
Area of Group
impacted:
Mitigation:
Change in the year:
Health & Safety
The Group has a large number of
employees operating at a variety of
sites around the country.
1. Traffic & Data
Services
2. Condition
Monitoring
3. Software &
Consultancy
Unchanged from previous
years.
employs
The Group
a
dedicated Health & Safety
Manager for its Traffic & Data
Services division. The Remote
Condition Monitoring division
engages the services of a
specialist Health & Safety
Advisor. Business unit heads
report on Health & safety
matters to the Board at every
board meeting. Across
the
Group, there are a number of
policies,
and
method statements to provide
mitigation against health &
safety risk.
procedures
Brand reputation
Any adverse publicity concerning
the Group, or any of its subsidiary
businesses may have an impact on
the
trading prospects
future
if
Group’s
adversely
brand
affected as a result of this.
is
All parts of the Group
The Board maintains regular
dialogue with Operational staff
and Heads of Department and
so is made aware of any issues
so that corrective action can be
taken if necessary.
Unchanged from previous
years.
12 | Annual Report and Accounts 2015
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 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. Traffic & Data Services: Customer enquiries and conversion rates, working capital tie up in debtors and
work in progress, capital expenditure
d. Remote Condition Monitoring: Delivery of major orders versus customer requirements, revenue by customer
Revenue - £m
Adjusted EBITDA - £m
30
25
20
15
10
5
0
5
4
3
2
1
0
15
10
5
0
25.4
22.4
10.8
8.7
4.1
Revenue
2011
2012
2013
2014
2015
Profit Before Tax - £m
4.2
4.5
3
2.6
1.1
6.5
5.4
3.3
3.4
1.2
Adjusted EBITDA
2011
2012
2013
2014
2015
Basic Earnings Per Share - p
12.9
14.1
9.96
8.42
4.49
8
6
4
2
0
15
10
5
0
PBT
Basic EPS
2011
2012
2013
2014
2015
2011
2012
2013
2014
2015
Cash - £m
13.3
7.6
6.6
8.9
4.7
Cash
2011
2012
2013
2014
2015
TRACSIS PLC | 13
Governance
Board of Directors
Executive Directors
John McArthur (40) 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 (37) Chief Financial Officer
Max joined Tracsis in September 2010 as Financial Controller and was promoted to the Board in August 2011. 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 (69) 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 (45) 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 (68) 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 (65) 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.
14 | Annual Report and Accounts 2015
Governance
Directors’ Report
The directors present their report and the audited financial statements for the year ended 31 July 2015.
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 4 November 2015.
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 24 to 57.
Dividends
The Directors have adopted a progressive dividend policy, subject to growth, profitability and cash position in the future. An
interim dividend of 0.40p per share was paid in May 2015. The Directors propose a final dividend of 0.60p per share, subject to
shareholder approval at the forthcoming Annual General Meeting. This will give a full year dividend of 1.0p per share.
Directors
The directors who serve on the Board and on Board Committees during the year are set out on page 13.
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 John McArthur and
Sean Lippell retire by rotation and, being eligible, offer themselves for re-election.
Information in respect of directors’ remuneration is given in the Directors’ Remuneration Report on pages 17 to 19.
Directors’ shareholdings
Directors’ beneficial interests in the shares of the Company, including family interests, at 31 July 2015 and 2014 were as follows:
31 July 2015
31 July 2014
Number
of
shares
% of
issued
share
capital
Number
% of
issued
of
share
shares
capital
John McArthur
1,117,433
4.21% 1,117,433
4.26%
Max Cawthra
54,000
0.20%
54,000
0.21%
John Nelson
230,824
0.87%
230,824
0.88%
Charles Winward
Chris Cole
Sean Lippell
86,771
7,000
-
0.33%
0.03%
-
86,771
0.33%
-
-
-
-
TRACSIS PLC | 15
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 3 November 2015, 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:
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
1,262,500
Hargreave Hale Limited
1,183,182
Fidelity
1,131,648
Investec Asset Management
1,117,433
John McArthur
% of
issued shares
10.4%
7.0%
5.9%
5.7%
5.6%
5.4%
5.0%
4.7%
4.4%
4.2%
4.2%
1 – Techtran Group Limited is a wholly owned subsidiary of IP Group plc.
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 2015 were 55 days (2014: 57 days).
Research and development
During the year the Group incurred £437,000 (2014: £393,000) 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. Tracsis Traffic Data Limited
(previously Sky High Technology Limited), another subsidiary company, has a significant Framework Agreement with a major
worldwide engineering consultancy company from which it has historically derived a significant amount of business.
16 | Annual Report and Accounts 2015
Directors’ Report continued
Charitable donations
The Group made charitable donations to various charities amounting to £6,290 during the year (2014: £8,134). No political
donations were made.
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
4 November 2015
TRACSIS PLC | 17
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.
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.
18 | Annual Report and Accounts 2015
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 2015 is set out below
Executive Directors
John McArthur
Max Cawthra
Non-Executive Directors
John Nelson
Charles Winward
Chris Cole
Sean Lippell
Basic Pension
Conts
salary
£000
£’000
153
120
273
23
25
50
25
123
40
6
46
-
-
-
-
-
Bonus
£000
106
71
177
-
-
-
-
-
Benefits
in kind
£000
Total
2015
£000
-
-
-
-
-
-
-
-
299
197
496
23
25
50
25
123
Total
2014
£000
222
144
366
16
16
13
12
57
Directors’ interests in shares options in the Executive Share Option Schemes
At
1 August
At
Exercise
Date from
31 July
price
Which
2014 Granted* Lapsed Exercised
2015
pence
Exercisable Expiry date
Executive
Directors
John McArthur
100,000
Max Cawthra
160,162
Non-Executive
Directors
John Nelson
25,000
Charles Winward
50,000
Chris Cole
-
Sean Lippell
50,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
100,000
175p
See note 3
160,162
89p/0.4p
See notes 1
and 2
26 Mar
2023
20 Jun 2022
/1 Aug 2022
25,000
175p
See note 3
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.
TRACSIS PLC | 19
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 £Nil (2014: £220,512). 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 2014 to 31 July 2015.
140
130
120
110
100
90
80
70
60
50
Jul-14
Aug-14
Sep-14
Oct-14
Nov-14
Dec-14
Jan-15
Feb-15
Mar-15
Apr-15
May-15
Jun-15
Jul-15
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
4 November 2015
20 | Annual Report and Accounts 2015
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 current 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
Non-Executive Chairman of the Board during the previous 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 previous year too. A biography of each Director appears on page 13. 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 17.
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. John McArthur and Sean Lippell will be retiring at the Annual General Meeting
and submitting themselves for re-election.
Board meetings and attendance
Board meetings were held on 11 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
10/11
11/11
10/11
11/11
11/11
10/11
-
-
-
-
-
-
-
-
2/2
2/2
2/2
2/2
Board committees
Nomination Committee
Audit
Committee
Meetings
-
-
2/2
2/2
2/2
2/2
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.
TRACSIS PLC | 21
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.
Board review process
The Board 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. During the year, the Board commenced a more formal evaluation process, and this was ongoing at the date of this
report.
22 | Annual Report and Accounts 2015
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.
TRACSIS PLC | 23
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 2015 set out on pages 24 to 64. 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
As explained more fully in the Directors' Responsibilities
Statement set out on page 22, the directors are responsible
for the preparation of the financial statements and for being
satisfied that they give a true and fair view. Our responsibility
is to audit, and express an opinion on, the financial
statements
law and
in accordance with applicable
International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing Practices
Board's Ethical Standards for Auditors.
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 2015 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
David Morritt (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
1 Sovereign Square
Sovereign Street
Leeds
LS1 4DA
4 November 2015
24 | Annual Report and Accounts 2015
Financial Statements
Consolidated Statement of Comprehensive Income
for the year ended 31 July 2015
Revenue from continuing operations
6
25,382
22,357
Notes
2015
£000
2014
£000
Cost of sales
Gross profit
Administrative costs
Adjusted EBITDA*
Amortisation of intangible assets
Depreciation
Exceptional item: Acquisition costs
Share-based payment charges
Operating profit from continuing operations
Finance income
Finance expense
Profit before tax
Taxation
Profit after tax
(9,632)
(9,546)
15,750
12,811
(11,282)
(8,614)
15
14
8
9
10
11
12
6,529
(714)
(724)
-
(623)
4,468
31
(29)
4,470
(741)
3,729
5,434
(460)
(431)
(31)
(315)
4,197
36
(32)
4,201
(898)
3,303
Other comprehensive income/(expense):
Items that are or may be reclassified subsequently to profit or loss
Foreign currency translation differences – foreign operations
(89)
(38)
Total recognised income for the year
3,640
3,265
Earnings per ordinary share
Basic
Diluted
13
13
14.10p
13.48p
12.90p
12.44p
* Earnings before finance income, tax, depreciation, amortisation, exceptional items and share-based payment charges.
The accompanying notes form an integral part of these financial statements
TRACSIS PLC | 25
Financial Statements
Consolidated Balance Sheet as at 31 July 2015 Company number: 05019106
Non-current assets
Property, plant and equipment
Intangible assets
Deferred tax 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
20
16
18
17
20
17
19
21
22
22
22
22
22
2015
£000
1,930
10,010
882
12,822
274
4,273
13,341
17,888
2014
£000
1,689
10,724
560
12,973
263
4,442
8,920
13,625
30,710
26,598
229
1,734
1,963
171
5,697
502
6,370
133
1,948
2,081
100
6,075
493
6,668
8,333
8,749
22,377
17,849
106
4,776
1,846
1,321
14,517
(189)
22,377
105
4,591
1,846
698
10,709
(100)
17,849
The financial statements on pages 24 to 57 were approved and authorised for issue by the Board of Directors on 4 November
2015 and were signed on its behalf by:
John McArthur – Chief Executive Officer
Max Cawthra – Chief Financial Officer
The accompanying notes form an integral part of these financial statements
26 | Annual Report and Accounts 2015
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 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
Tax movements in equity
Exercise of share options
Shares issued as
consideration for business
combinations
At 31 July 2014
-
-
-
-
-
-
2
1
-
-
-
-
-
-
311
-
-
-
-
-
-
-
-
374
-
-
-
-
315
-
-
-
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
At 1 August 2014
105
4,591
1,846
698
10,709
(100) 17,849
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
-
-
-
-
-
-
1
At 31 July 2015
106
-
-
-
-
-
-
185
4,776
-
-
-
-
-
-
-
-
-
-
-
623
-
-
3,729
-
3,729
-
(89)
(89)
3,729
(89)
3,640
(225)
-
304
-
-
-
-
-
(225)
623
304
186
1,846
1,321
14,517
(189) 22,377
Details of the nature of each component of equity are set out in Notes 21 and 22.
The accompanying notes form an integral part of these financial statements
Financial Statements
Consolidated Cash Flow Statement
for the year ended 31 July 2015
Operating activities
Profit for the year
Finance income
Finance expense
Depreciation
Loss on disposal of plant and equipment
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
Proceeds from disposal 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 (used in)/from financing activities
Net increase in cash and cash equivalents
Effect of exchange fluctuations
Cash and cash equivalents at the beginning of the year
TRACSIS PLC | 27
Notes
2015
£000
2014
£000
3,729
3,303
10
11
14
15
12
8
10
11
14
5
28
17
(31)
29
724
3
714
741
623
6,532
(11)
169
(378)
6,312
31
(29)
(964)
5,350
(697)
59
-
(638)
(225)
186
(186)
(225)
4,487
(66)
8,920
(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
Cash and cash equivalents at the end of the year
13,341
The accompanying notes form an integral part of these financial statements
28 | Annual Report and Accounts 2015
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 2015 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 Group and 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)
Accounting developments
The Group and Company financial statements have been prepared and approved by the directors in accordance with
International Financial Reporting Standards as adopted by the EU (“Adopted IFRSs”). The accounting policies have
been applied consistently to all periods presented in the consolidated financial statements, unless otherwise stated.
Certain new standards, amendments and interpretations to existing standards have been published that are mandatory
for the group’s accounting period beginning on or after 1 August 2014. The following new standards and amendments
to standards are mandatory and have been adopted for the first time for the financial year beginning 1 August 2014:
•
•
IFRS 10 - “Consolidated Financial Statements” and IAS 27 – “Separate Financial Statements”. These are part
of a new suite of standards on consolidation and related standards, replacing the existing accounting for
subsidiaries and making limited amendments in relation to associates.
IFRS 12 - “Disclosure of Interest in Other Entities”. This contains the disclosure requirements for entities that
have interests in subsidiaries, joint arrangements (i.e. joint operations or joint ventures), associates and/or
unconsolidated structured entities.
• Amendments to IAS 32 - “Offsetting Financial Assets and Financial Liabilities”.
• Amendments to IAS 36 - “Recoverable Amounts Disclosures for Non-Financial Assets”.
•
IFRIC 21 - “Levies”.
These standards have not had a material impact on the Consolidated Financial Statements.
TRACSIS PLC | 29
Notes to the Consolidated Financial Statements continued
2
Basis of preparation (continued)
Certain new standards, amendments and interpretations to existing standards have been published that are mandatory
for the group’s accounting period beginning on or after 1 August 2015. The Group has elected not to adopt early these
standards which are described below:
• Annual Improvements to IFRSs 2010 - 2012 Cycle
• Annual Improvements to IFRSs 2011 - 2013 Cycle
The above are not expected to have a material impact on the group’s reported results.
IFRS 15 - “Revenue From Contracts With Customers” has been published which will be mandatory for the group’s
accounting period beginning on or after 1 August 2018. The group is still considering the impact of this standard
however it is anticipated the impact on the financial position and performance of the group will not be material. In
addition, the IASB has indicated that it will issue a new standard on accounting for leases. Under the proposals, lessees
would be required to recognise assets and liabilities arising from both operating and finance leases on the balance
sheet. The IASB also plans to issue a new standard on insurance contracts. The group will consider the financial
impacts of this new standard when finalised. There are no other IFRS or IFRIC interpretations that are not yet effective
that would be expected to have a material impact on the group.
(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.
30 | Annual Report and Accounts 2015
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
25% per annum reducing balance basis
TRACSIS PLC | 31
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. An investor controls an investee when the investor is
exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those
returns through its power over the investee.
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.
32 | Annual Report and Accounts 2015
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
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
TRACSIS PLC | 33
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.
(i)
(j)
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.
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.
34 | Annual Report and Accounts 2015
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.
TRACSIS PLC | 35
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.
36 | Annual Report and Accounts 2015
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.
TRACSIS PLC | 37
Notes to the Consolidated Financial Statements continued
5
Acquisition of subsidiaries - Acquisition in the previous 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 were included within administrative expenses.
There were no subsequent adjustments to provisional fair values
38 | Annual Report and Accounts 2015
Notes to the Consolidated Financial Statements continued
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.
Following the acquisition of SEP Limited (SEP) in September 2015, the Board will consider the segments and how it allocates
resource following the integration of SEP in the year ending 31 July 2016.
The CODM reviews a split of revenue streams on a monthly basis and, as such, this additional information has been provided
below.
Revenue
Software
Consultancy
Operations and Planning Systems
Traffic & Data Services
Remote Condition Monitoring Technology
Total revenue
2015
£000
5,593
1,956
7,549
14,858
2,975
25,382
2014
£000
2,798
1,815
4,613
11,987
5,757
22,357
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.
TRACSIS PLC | 39
Notes to the Consolidated Financial Statements continued
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
Depreciation
Amortisation of intangible assets
Interest receivable/payable(net)
Consolidated profit 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 before tax
UK &
Rest of the
World
£000
23,137
23,137
6,197
(623)
(652)
(714)
11
4,219
UK &
Rest of the
World
£000
20,634
20,634
5,295
(315)
(31)
(339)
(460)
17
4,167
2015
Australia
£000
2,245
2,245
332
-
(72)
-
(9)
251
2014
Australia
£000
1,723
1,723
139
-
-
(92)
-
(13)
34
Total
£000
25,382
25,382
6,529
(623)
(724)
(714)
2
4,470
Total
£000
22,357
22,357
5,434
(315)
(31)
(431)
(460)
4
4,201
40 | Annual Report and Accounts 2015
Notes to the Consolidated Financial Statements continued
6
Segmental analysis (continued)
Assets
Total assets for reportable segments
Unallocated assets – intangible assets
Unallocated assets - deferred tax 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
Unallocated assets - deferred tax assets
Consolidated total assets
Liabilities
Total liabilities for reportable segments
Unallocated liabilities – deferred tax
Consolidated total liabilities
UK & Rest
of the World
£’000
2015
Australia
£000
18,926
10,010
882
29,818
6,199
1,734
7,933
892
-
-
892
400
-
400
UK & Rest of
the World
£’000
2014
Australia
£000
14,686
10,724
560
25,970
6,428
1,948
8,376
628
-
-
628
373
-
373
Total
£000
19,818
10,010
882
30,710
6,599
1,734
8,333
Total
£000
15,314
10,724
560
26,598
6,801
1,948
8,749
Major customers
Transactions with the Group’s largest customer represent 11% of the Group’s total revenues (2014: 25%).
Geographic split of revenue
A geographical analysis of revenue is provided below:
United Kingdom
Australia
Rest of the World
Total
2015
£000
22,534
2,245
603
25,382
2014
£000
20,252
1,723
382
22,357
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
2015
£000
10,651
875
176
623
12,325
2014
£000
8,363
684
135
315
9,497
Average number of employees (including directors) in the year
401
295
The directors’ remuneration and share options are detailed within the Directors’ Remuneration Report on pages 17 to 19.
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 2015
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
01/08/2014
02/01/2015
Outstanding
Employees
Number
Performance
Exercise
entitled
of options
conditions
price (p)
93,000
58,000
12,500
46,000
64,500
25,000
Time served
Time served
Time served
Time served
Time served
Time served
150,000
Time served
71,296
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
308,193
60,751
50,000
75,000
24,686
201,816
856
1,733,207
Time served
Time served
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
0.40
0.40
01/01/2015**
01/08/2015**
02/01/2016**
26/03/2023
01/08/2023
01/08/2023
01/11/2023
01/01/2024
01/01/2024
01/08/2024
02/01/2025
3
2
1
1
4
1
1
23
7
1
7
1
1
3
1
11
35
1
2
2
68
1
* 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
2015
Weighted
Average
2015
Exercise
2014
Number
Price
Number
1,838,560
106.0p
1,929,016
206,763
(5,902)
(306,214)
1,733,207
1,159,321
0.4p
0.4p
60.9p
101.8p
110.1p
525,251
(10,674)
(605,033)
1,838,560
940,026
2014
Weighted
Average
Exercise
Price
79.1p
142.8p
111.8p
51.8p
106.0p
87.9p
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 2015
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 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
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
-
-
-
-
-
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
Expected dividends expressed as a dividend yield
01/08/
2014
330.0p
02/01/
2015
411.5p
0.4p
0.4p
3
3
30%
30%
10
10
10
10
3.5%
3.5%
-
-
The expected volatility is based on the historic volatility of the Company’s share price.
Charge to the income statement
Share based payment charges
2015
£000
623
2014
£000
315
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
2015
£000
640
84
724
237
68
305
437
2015
£000
16
38
3
32
2015
£000
31
2015
£000
29
2015
£000
959
14
973
(232)
-
(232)
741
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
46 | Annual Report and Accounts 2015
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 20.66% (2014: 22.33%)
Expenses not deductible for tax purposes
Research and development enhancement
Adjustment in respect of prior periods
Other movements
Total tax expense
2015
£000
4,470
924
22
(115)
14
(104)
741
2015
%
100.0
20.7
0.5
(2.6)
0.3
(2.3)
16.6
2014
£000
4,201
938
18
(110)
44
8
898
2014
%
100.0
22.3
0.4
(2.5)
1.0
0.2
21.4
Reductions in the UK corporation tax rate from 23% to 21% (effective from 1 April 2014) and 20% (effective from 1 April 2015)
were substantively enacted on 2 July 2013. In the Budget on 8 July 2015, the Chancellor announced additional planned
reductions to 18% by 2020. This will reduce the company's future current tax charge accordingly. The deferred tax liability at 31
July 2015 has been calculated based on the rate of 20% substantively enacted at the balance sheet date.
The Group also utilised some tax losses in respect of the Datasys acquisition where no deferred tax asset had previously been
recognised. These have now been fully utilised.
12.2
Recognised in reserves – direct to equity
Deferred Tax
Deferred tax relating to share based payments
13
Earnings per share
2015
£000
304
2014
£000
563
Basic earnings per share
The calculation of basic earnings per share at 31 July 2015 was based on the profit attributable to ordinary shareholders of
£3,729,000 (2014: £3,303,000) and a weighted average number of ordinary shares in issue of 26,443,000 (2014: 25,608,000),
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
2015
26,258
-
185
26,443
2014
25,526
26
56
25,608
Diluted earnings per share
The calculation of diluted earnings per share at 31 July 2015 was based on profit attributable to ordinary shareholders of
£3,729,000 (2014: £3,303,000) and a weighted average number of ordinary shares in issue after adjustment for the effects of
all dilutive potential ordinary shares of 27,656,000 (2014: 26,559,000):
TRACSIS PLC | 47
Notes to the Consolidated Financial Statements continued
13
Earnings per share (continued)
Adjusted EPS
In addition, Adjusted Profit EPS is shown below on the grounds that it is a common metric used by the market in monitoring
similar businesses. A reconciliation of this figure is provided below:
Profit attributable to ordinary shareholders
Amortisation of intangible assets
Share-based payment charges
Exceptional items: Acquisition costs
Adjusted profit for EPS purposes
Weighted average number of ordinary shares
In thousands of shares
For the purposes of calculating Basic earnings per share
Adjustment for the effects of all dilutive potential ordinary shares
Basic adjusted earnings per share
Diluted adjusted earnings per share
2015
£’000
3,729
714
623
-
5,066
26,443
27,656
19.16p
18.32p
2014
£’000
3,303
460
315
31
4,109
25,608
26,559
16.05p
15.47p
48 | Annual Report and Accounts 2015
Notes to the Consolidated Financial Statements continued
14
Property, plant and equipment
Freehold
Land &
Motor
Computer
Plant,
machinery,
fixtures
Buildings
Vehicles
equipment
& fittings
£000
£000
£000
£000
Total
£000
Cost
At 1 August 2013
Additions
Arising on acquisition
Exchange rate variances
At 31 July 2014
Additions
Disposals
Exchange rate variances
At 31 July 2015
Depreciation
At 1 August 2013
Charge for the year
Arising on acquisition
Exchange rate variances
At 31 July 2014
Charge for the year
Disposals
Exchange rate variances
At 31 July 2015
Net book value
At 1 August 2013
At 31 July 2014
At 31 July 2015
400
-
-
-
400
-
-
-
400
30
12
-
-
42
12
-
-
54
370
358
346
730
55
-
(14)
771
367
(156)
(37)
945
377
117
-
(14)
480
104
(106)
(29)
449
353
291
496
1,226
3,112
756
207
243
(34)
209
61
(9)
1,172
1,487
292
(13)
(67)
391
(70)
(17)
1,384
1,791
537
151
225
(34)
879
211
(6)
(54)
568
151
30
(9)
740
397
(65)
(15)
1,030
1,057
471
304
(57)
3,830
1,050
(239)
(121)
4,520
1,512
431
255
(57)
2,141
724
(177)
(98)
2,590
219
293
354
658
747
734
1,600
1,689
1,930
The net book value of assets held under finance lease obligations is £426,000 (2014: £194,000).
Notes to the Consolidated Financial Statements continued
TRACSIS PLC | 49
15
Intangible assets
Cost
At 1 August 2013
Arising on acquisition
At 31 July 2014
Arising on acquisition
At 31 July 2015
Amortisation and impairment
At 1 August 2013
Charge for the year
At 31 July 2014
Charge for the year
At 31 July 2015
Carrying amounts
At 1 August 2013
At 31 July 2014
At 31 July 2015
Customer
related
intangibles
£000
Technology
related
intangibles
£000
Goodwill
£000
1,509
359
1,868
-
4,332
3,098
7,430
-
1,868
7,430
-
-
-
-
-
1,509
1,868
1,868
456
333
789
456
1,245
3,876
6,641
6,185
914
1,660
2,574
-
2,574
232
127
359
258
617
682
2,215
1,957
The following carrying values of intangible assets arising from the acquisitions of Tracsis Rail Consultancy Limited (previously
RWA Rail Limited) in August 2008, Tracsis Passenger Counts Limited (previously Peeping Limited) in July 2009, Safety
Information Systems Limited in December 2009, MPEC Technology Limited in June 2011, Tracsis Traffic Data Limited
(previously Sky High Technology Limited and Sky High plc) in April 2013, and Datasys Integration Limited in May 2014 are
analysed as follows:
Goodwill
2015
2014
£000
£000
Customer related
intangibles
2015
2014
Technology related
intangibles
2015
£000
£000
£000
Tracsis Rail Consultancy Limited
(previously) RWA Rail Limited
Tracsis Passenger Counts Limited
(previously Peeping Limited)
Safety Information Systems Limited
MPEC Technology Limited
Tracsis Traffic Data Limited
(previously Sky High Technology
Limited and Sky High plc)
Datasys Integration Limited
671
43
136
269
390
359
671
43
136
269
390
359
1,868
1,868
496
258
195
531
277
209
1,011
1,075
1,314
1,484
2,911
6,185
3,065
6,641
-
-
100
398
-
1,459
1,957
The amortisation charge is recognised in the following line items in the income statement:
Administrative expenses
2015
£000
714
2014
£000
460
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.
Total
£000
6,755
5,117
11,872
-
11,872
688
460
1,148
714
1,862
6,067
10,724
10,010
2014
£000
-
-
123
467
-
1,625
2,215
50 | Annual Report and Accounts 2015
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
2015
1.0%
10-12%
2014
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
2015
£000
100
174
274
2014
£000
184
79
263
The value of inventories expensed in the period in cost of sales was £759,000 (2014: £2,034,000). 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
New hire purchase contracts
Repayments
At end of the year
2015
£000
171
135
72
7
15
229
400
2015
£000
233
353
(186)
400
2014
£000
100
79
32
22
-
133
233
2014
£000
328
25
(120)
233
TRACSIS PLC | 51
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
400
233
433
255
191
114
145
84
97
57
Hire Purchase Obligations
2015
2014
18
Trade and other receivables
Trade receivables
Other receivables and prepayments
Amounts recoverable on contracts
2015
£000
2,864
305
1,104
4,273
2014
£000
3,165
387
890
4,442
2014
£000
2,970
195
3,165
A breakdown of trade receivables between the United Kingdom and Australia operations is as follows:
United Kingdom
Australia
2015
£000
2,466
398
2,864
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
2015
£000
585
268
58
911
2014
£000
941
282
66
1,289
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.
52 | Annual Report and Accounts 2015
Notes to the Consolidated Financial Statements continued
19
Trade and other payables
Trade payables
Other tax and social security
Deferred income
Accruals and other payables
2015
£000
646
1,000
1,930
2,121
5,697
2014
£000
760
1,391
1,731
2,193
6,075
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 2013
Arising on acquisition
(Credit)/charge to income statement
Change in tax rates
Recognised in equity
At 31 July 2014
(Credit)/charge to income statement
Recognised in equity
At 31 July 2015
Accelerated
Intangible
capital
Share
assets
allowances options
£000
£000
£000
Other
£000
956
952
(96)
(41)
-
1,771
(142)
-
1,629
79
-
27
(5)
-
101
4
-
105
11
-
(8)
-
(563)
(560)
(18)
(304)
(882)
-
-
76
-
-
76
(76)
-
-
Total
£000
1,046
952
(1)
(46)
(563)
1,388
(232)
(304)
852
The closing deferred tax asset and liability has been calculated at 20% as at 31 July 2015 (2014: 20%).
This is presented on the Balance Sheet as follows within non-current assets and liabilities (2014 figures re-classified)
Deferred tax assets
Deferred tax liabilities
Net liability per table above
21
Share capital
Allotted, called up and fully paid:
Ordinary shares of 0.4p each
2015
£000
(882)
1,734
852
2014
£000
(560)
1,948
1,388
2015
2015
2014
2014
Number
£
Number
£
26,564,328
106,257
26,258,114
105,032
The following share transactions have taken place during the year ended 31 July 2015:
306,214 share options under the Group’s share options scheme were exercised at various points in the year.
TRACSIS PLC | 53
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:
2015
Number
2014
Number
26,258,114
25,526,306
-
306,214
126,775
605,033
26,564,328
26,258,114
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 £305,000
was recognised as an expense in the income statement in respect of operating leases (2014: £269,000).
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
2015
£’000
12
367
379
2015
£’000
21
130
151
2014
£’000
59
195
254
2014
£’000
24
225
249
54 | Annual Report and Accounts 2015
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
2015
Fixed
Floating
Rate
£000
1,000
Rate
£000
Total
£000
12,341
13,341
2014
Fixed
Floating
Rate
£000
1,500
Rate
£000
7,420
Total
£000
8,920
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 2015, the Group had fixed-rate deposits in place as follows:
•
•
£500,000 placed on a fixed 3 month deposit at an interest rate of 0.55%
£500,000 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.
TRACSIS PLC | 55
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.
Foreign currency risk
The Group has an Australian subsidiary which is owned by Tracsis Traffic Data Limited. 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
Purchase of
Amounts owed to
goods and services
related parties
2015
£000
75
2014
£000
71
2015
£000
7
2014
£000
6
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
Parsons Brinckerhoff
Sale of
Amounts owed by
goods and services
related parties
2015
£000
83
1,404
2014
£000
41
-
2015
£000
13
506
2014
£000
36
-
WSP Group (WSP) is a company which is connected to Chris Cole who serves as non-executive Chairman of Tracsis plc and also 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 in April 2014.
On 31 October 2014, WSP completed the acquisition of Parsons Brinckerhoff (PB) which made PB a related party of the Group from this date.
One of the Group’s subsidiary companies, Tracsis Traffic Data Limited, previously Sky High Technology Limited), traded extensively with PB
prior to its acquisition by WSP as it carried out an agreement for a significant piece of data collection work for a UK transport agency which was
entered into in May 2014. All transactions with PB took place at arm’s length commercial rates, and were not connected to Mr Cole’s position at
WSP.
Disclosures in respect of sales to WSP and Parsons Brinckerhoff as stated above have been made on the following basis:
2014: Sales to WSP from 28 April 2014 being the date Mr Cole was appointed as a Director of Tracsis and WSP therefore became a related
party to the Group
2015: Sales to WSP since 1 August 2014, as WSP was a related party from this date, and sales to PB since 1 November 2014 as this is the
date WSP acquired PB and therefore the date PB became a related party to the Group
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.
56 | Annual Report and Accounts 2015
Notes to the Consolidated Financial Statements continued
25
Related Party Transactions (continued)
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.
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 £176,000
(2014: £135,000). There were outstanding contributions at 31 July 2015 of £19,000 (2014: £17,000).
27
Group entities
Below are the subsidiary undertakings which contribute to the Group results:
Held by Tracsis plc
Tracsis Rail Consultancy Limited
(previously RWA Rail Limited)
Tracsis Passenger Counts Limited
(previously Peeping Limited)
Safety Information Systems Limited
MPEC Technology Limited
Tracsis Traffic Data Limited (previously
Sky High Technology Limited and Sky
High plc)
Datasys Integration Limited
(owns 100% of Datasys Limited)
Datasys Limited
Tracsis Traffic Data Australia Pty
Limited (previously Sky High Traffic
Data Australia Pty Limited)
S-H TrafficData Solutions Private
Limited
Sky High Data Capture Limited
Sky High Traffic Data Limited
The Web Factory Birmingham Limited
Forsyth Whitehead & Associates
Limited
Sky High Technology (Scotland)
Limited
Count on Us Traffic Limited
Burra Burra Distribution Limited
Sky High NCS Limited
Halifax Computer Services Limited
Skyhightraffic Limited
The Traffic Survey Company Limited
The People Counting Company Limited
Myratech.net Limited
Footfall Verification 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
% ordinary
share
capital owned
100%
100%
100%
100%
England and Wales
100%
Holding Company
England and Wales
Rail industry software
England and Wales
Transportation data
collection
Data processing
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Australia
India
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
TRACSIS PLC | 57
Notes to the Consolidated Financial Statements continued
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 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 paid
Interim dividend for 2014/15 of 0.40p per share paid
Total dividends paid
The dividends paid or proposed in respect of each financial year is as follows:
2015
£000
-
-
119
106
225
2014
£000
102
89
-
-
191
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 paid
Interim dividend for 2014/15 of 0.40p per share paid
Final dividend for 2014/15 of 0.60p per share proposed
2015
£000
-
-
-
-
-
-
106
159
2014
£000
-
-
-
-
89
119
-
-
2013
£000
-
-
75
102
-
-
-
-
2012
£000
48
87
-
-
-
-
-
-
The dividend will be payable on 12 February 2016 to shareholders on the Register at 29 January 2016.
29
Events after the Balance Sheet date
a) Strategic Investment in Citi Logik Limited
On 4 September 2015, the Group made a strategic investment to acquire 29.4% of Citi Logik Limited (Citi Logik). Under the
terms of the agreement, the Group will invest up to £1.0m via a combination of equity and debt funding in return for 29.4% of
the issued share capital in Citi Logik. Investment of £0.5m (£0.375m equity and £0.125m debt) was made immediately with a
further £0.5m to be invested on the same basis, within the 12 months of completion, subject to delivery of agreed business plan
milestones. A Tracsis executive will join the Board of Directors of Citi Logik to help grow the business and promote mobile
analytics to the Tracsis customer base.
b) Acquisition of SEP Limited
On 25th September 2015, the Group acquired the entire issued share capital of SEP Limited and SEP Events Limited ("SEP"),
a company which provides traffic planning and management services for the events industry. The consideration comprised an
initial cash payment of £1.625m and the issue of 55,005 ordinary shares of 0.4p at an issue price of 454.5p (total value of
£0.25m). Deferred consideration of £0.1m is payable over two years along with performance consideration of up to £0.6m,
based on SEP achieving certain financial targets in the two years post acquisition, giving a total potential maximum consideration
of up to £2.6m. At the date of signing of these accounts, the Group was in the process of completing a fair value exercise to
identify assets and liabilities acquired, with the results and impact expected to be incorporated into the Group’s interim report
for the six months ending 31 January 2016.
58 | Annual Report and Accounts 2015
Financial Statements
Company Balance Sheet (presented under UK GAAP)
as at 31 July 2015
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 assets/(liabilities)
Total assets less current liabilities
Note
2015
£000
2014
£000
31
32
33
34
349
14,093
359
14,093
882
9,182
10,064
(8,446)
1,618
1,261
5,294
6,555
(7,226)
(671)
16,060
13,781
Provisions for liabilities and charges
35
-
(6)
Net assets
16,060
13,775
Capital and reserves
Called up share capital
Share premium reserve
Merger reserve
Share based payments reserve
Retained earnings
Shareholders’ funds
36
37
37
37
37
106
4,776
1,846
1,321
8,011
16,060
105
4,591
1,846
698
6,535
13,775
The financial statements were approved and authorised for issue by the Board of Directors on 4 November 2015 and were
signed on its behalf by:
John McArthur – Chief Executive Officer
Max Cawthra
– Chief Financial Officer
The accompanying notes form an integral part of these financial statements
TRACSIS PLC | 59
Financial Statements
Notes to the Company Balance Sheet
30
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.
60 | Annual Report and Accounts 2015
Notes to the Company Balance Sheet continued
30
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 29 to 35.
31
Tangible fixed assets
Cost
At 1 August 2014
Additions
At 31 July 2015
Depreciation
At 1 August 2014
Charge for the year
At 31 July 2015
Net book value
At 31 July 2014
At 31 July 2015
32
Investments
Cost
At 1 August 2014
Additions
At 31 July 2015
Freehold
Land & Computer
Buildings
equipment
£000
£000
400
-
400
42
12
54
358
346
23
3
26
22
1
23
1
3
Total
£000
423
3
426
64
13
77
359
349
Shares in subsidiary
undertakings
£000
14,093
-
14,093
TRACSIS PLC | 61
Notes to the Company Balance Sheet continued
32
Investments (continued)
The companies in which Tracsis plc’s interest is more than 20% at the year end are as follows:
Country of
incorporation
Class and
percentage
Principal activity
of shares held
Holding
England and Wales
Rail industry consultancy
Ordinary 100%
Direct
England and Wales
Rail industry ancillary
services
Ordinary 100%
Direct
Subsidiary undertaking
Tracsis Rail Consultancy
Limited (previously)
R.W.A. Rail Limited
Tracsis Passenger Counts
Limited (previously)
Peeping Limited
Safety Information
Systems Limited
MPEC Technology Limited
England and Wales
England and Wales
Software and consultancy
Rail industry hardware &
datalogging
Ordinary 100%
Ordinary 100%
Direct
Direct
Tracsis Traffic Data
Limited (previously Sky
High Technology Limited
and Sky High plc)
Tracsis Traffic Australia
pty Limited (previously Sky
High Traffic Data Australia
Pty Limited)
Datasys Integration
Limited
Datasys Limited
S-H TrafficData Solutions
Private Limited
Sky High Data Capture
Limited
Sky High Traffic Data
Limited
The Web Factory
Birmingham Limited
Forsyth Whitehead &
Associates Limited
Sky High Technology
(Scotland) Limited
Count on Us Traffic
Limited
Burra Burra Distribution
Limited
Sky High NCS Limited
Halifax Computer Services
Limited
Skyhightraffic Limited
The Traffic Survey
Company Limited
The People Counting
Company Limited
Myratech.net Limited
Footfall Verification
Limited
England and Wales
Transportation data collection
Ordinary 100%
Direct
Australia
Transportation data collection
Ordinary 100%
Indirect
England and Wales
Holding Company
England and Wales
Rail industry software
Ordinary 100%
Ordinary 100%
Direct
Indirect
India
Data processing
Ordinary 100%
Indirect
England and Wales
Dormant
Ordinary 100%
Indirect
England and Wales
Dormant
Ordinary 100%
Indirect
England and Wales
Dormant
Ordinary 100%
Indirect
England and Wales
Dormant
Ordinary 100%
Indirect
England and Wales
Dormant
Ordinary 100%
Indirect
England and Wales
Dormant
Ordinary 100%
Indirect
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
Dormant
Ordinary 100%
Indirect
Dormant
Ordinary 100%
Indirect
Dormant
Ordinary 100%
Indirect
Dormant
Ordinary 100%
Indirect
Dormant
Ordinary 100%
Indirect
Dormant
Ordinary 100%
Indirect
Dormant
Ordinary 100%
Indirect
Dormant
Ordinary 100%
Indirect
62 | Annual Report and Accounts 2015
Notes to the Company Balance Sheet continued
33
Debtors
Trade debtors
Amounts owed by subsidiary undertakings
Other debtors
Corporation Tax
Deferred Tax asset
Prepayments
2015
£000
179
245
12
416
15
15
882
2014
£000
478
603
12
141
-
27
1,261
Corporation tax is recoverable from other Group companies as Tracsis plc acts as the lead company for the Group’s Payment
on Account regime.
34
Creditors: amounts falling due within one year
Trade creditors
Other tax and social security
Amounts owed to subsidiary undertakings
Accruals and deferred income
35
Provisions for liabilities and charges – deferred tax (asset) / liability
At start of the year
(Credit) / charge to profit and loss account during the year
At end of the year
2015
£000
32
86
7,767
561
8,446
2015
£000
6
(21)
(15)
2014
£000
29
586
5,869
742
7,226
2014
£000
15
(9)
6
36
Share capital
Allotted, called up and fully paid:
Ordinary shares of 0.4p each
2015
2015
2014
2014
Number
£
Number
£
26,564,328
106,257
26,258,114
105,032
The following share transactions have taken place during the year ended 31 July 2015:
306,214 share options under the group’s share option schemes were exercised at various points in the year.
TRACSIS PLC | 63
Notes to the Company Balance Sheet continued
37
Reserves
At 1 August 2014
Dividends
Issue of new shares
Profit for the period
Share based payment charges
At 31 July 2015
Share
premium
account
£000
4,591
-
185
-
-
Merger
reserve
£000
1,846
-
-
-
-
4,776
1,846
Share based
payments
reserve
Profit
and loss
account
£000
698
-
-
-
623
1,321
£000
6,535
(225)
-
1,701
-
8,011
Profit for the period is stated after receiving dividends from subsidiary undertakings of £1,600,000.
38
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
39
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
2015
£’000
-
60
2015
£’000
1,701
(225)
186
623
2,285
13,775
16,060
2014
£’000
9
-
2014
£’000
4,533
(191)
688
315
5,345
8,430
13,775
64 | Annual Report and Accounts 2015
Notes to the Company Balance Sheet continued
40
Events after the Balance Sheet Date
a) Strategic Investment in Citi Logik Limited
On 4 September 2015, the Group made a strategic investment to acquire 29.4% of Citi Logik Limited (Citi Logik). Under the
terms of the agreement, the Group will invest up to £1.0m via a combination of equity and debt funding in return for 29.4% of
the issued share capital in Citi Logik. Investment of £0.5m (£0.375m equity and £0.125m debt) was made immediately with a
further £0.5m to be invested on the same basis, within the 12 months of completion, subject to delivery of agreed business plan
milestones. A Tracsis executive will join the Board of Directors of Citi Logik to help grow the business and promote mobile
analytics to the Tracsis customer base.
b) Acquisition of SEP Limited
On 25th September 2015, the Group acquired the entire issued share capital of SEP Limited and SEP Events Limited ("SEP"),
a company which provides traffic planning and management services for the events industry. The consideration comprised an
initial cash payment of £1.625m and the issue of 55,005 ordinary shares of 0.4p at an issue price of 454.5p (total value of
£0.25m). Deferred consideration of £0.1m is payable over two years along with performance consideration of up to £0.6m,
based on SEP achieving certain financial targets in the two years post acquisition, giving a total potential maximum consideration
of up to £2.6m. At the date of signing of these accounts, the Group was in the process of completing a fair value exercise to
identify assets and liabilities acquired, with the results and impact expected to be incorporated into the Group’s interim report
for the six months ending 31 January 2016.
TRACSIS PLC | 65
Group information
Company Secretary and Registered
Office
Max Cawthra
Leeds Innovation Centre
103 Clarendon Road
Leeds
LS2 9DF
Auditor
KPMG LLP
1 Sovereign Square
Sovereign Street
Leeds
LS1 4DA
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
Investec Bank plc
2 Gresham Street
London
EC2V 7QP
Registrars
Neville Registrars
18 Laurel Lane
Halesowen
West Midlands
B63 3DA
Solicitors
Rosenblatt Solicitors
9-13 St Andrew Street
London
EC4A 3AF