Annual Report & Accounts 2018
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
Company Statement of Changes in Equity
Notes to the Company Balance Sheet
Group Information
2
3
4
9
13
14
15
18
22
24
25
29
30
31
32
33
68
69
70
77
2 | Annual Report and Accounts 2018
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 related transport technologies, and successfully executed a
strategy that has seen it make a total of ten acquisitions and three investments. 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 its customers. The Group has a blue chip client base which includes the majority of UK transport
operators and 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, local authorities and a variety of large engineering
and infrastructure companies.
The Group’s products and services comprise two principal offerings:
• Rail Technology & Services
o Software: Industry strength optimisation, rail management, planning and delay-repay software that cover a
variety of asset and information classes, plus related hosting services;
o Remote Condition Monitoring (RCM): Technology and reporting for critical infrastructure assets in real time,
to identify problems and aid with preventative maintenance;
o Professional Services: Consulting and technology related professional services across the operational and
strategic planning horizon for traffic and transport customers and network operators
•
Traffic & Data Services:
o Collection, collation and analytical services of traffic and passenger/customer data within rail, traffic and
pedestrian rich environments;
o Event planning, traffic management and parking for outdoor and sporting event markets.
Tracsis has multiple offices in the UK which service our growing client base.
The business drives growth both organically and via strategic acquisition and has made ten acquisitions since coming to market
in 2007.
Financial highlights
for the year ended 31 July 2018:
• Revenues increased 16% to £39.8m (2017: £34.5m)
• Adjusted EBITDA* increased 11% to £9.4m (2017: £8.5m)
• Statutory Profit before Tax after exceptional items of £8.3m (2017: £4.6m)
• Cash balances of £22.3m (2017: £15.4m)
•
Full year dividend increased 14% to 1.6p per share (2017: 1.4p)
*Reconciliation provided in note 31.
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. Our vision is being
achieved via the delivery of a three 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 2017/8:
1 Organic
further sales from existing
products to UK
• Ongoing delivery of a multi-million contract win for TRACS Enterprise with
a major UK Train Operating Company
• Renewal of a significant contract with a major global engineering company
• High level of Software licence renewals achieved across the whole Group
• Strong sales made to the Group’s key UK customer
• New revenue stream developed for Passenger Counts business
2 Overseas Markets
showing good promise
and remain relatively untapped
• Additional work secured from a key client in North America for the Group’s
Remote Condition Monitoring technology, and further sales targeted
Traffic Data business in Ireland continues positive trading
•
• Software sale in New Zealand delivered
3
Acquisitions
• Completion of acquisitions of Travel Compensation Services Limited and
Delay Repay Sniper Limited
• Additional investments made into Vivacity Labs Limited and Nutshell
Software Limited in the year
• Numerous potential targets appraised in the year
4 | Annual Report and Accounts 2018
Strategic Report
Chairman & Chief Executive Officer’s Report
A welcome from Chris Cole, Non-Executive Chairman
I am pleased to report that once again Tracsis has achieved another successful year of trading with good organic growth across
all areas of the Group, record levels of revenue and profitability and further progress on a range of operational and strategic
goals across both divisions of the business. Tracsis also completed two successful acquisitions of well run and profitable
enterprises (TCS and DRS) which continues the established theme of considered, accretive M&A in line with our stated growth
strategy.
The culmination of this progress has translated into strong financial performance, and a business that is well positioned to take
advantage of interesting and dynamic traffic and transport markets that are changing at a significant pace. On behalf of the
Board, my sincere thanks go to all Tracsis employees for their continued hard work and dedication and I look forward to the
coming year.
Introduction
The year ended 31 July 2018 was a further year of growth, with Group revenues close to £40m, an overall increase of 16%, with
organic revenue growth, excluding acquisitions, of some 14% which was particularly pleasing. The impact of M&A activity was
negligible given the specific timing of the Travel Compensation Services (TCS) and Delay Repay Sniper (DRS) transactions and
we expect these enterprises to make a good contribution with a full year of trading and the chance to integrate and leverage
their operations and technology across the wider Group. The Group’s financial position at year end remained strong, with cash
balances in excess of £22m and no debt.
Business overview
Tracsis specialises in providing software, hosting services, consultancy and technology solutions to high value, mission critical
challenges within the transport and traffic sector. The Group’s market offering can be broadly categorised into two distinct
offerings:
1. Rail Technology & Services: Application software development and licensing, cloud-based data hosting, remote
condition monitoring technology (RCM), and associated operational, implementation and strategic consulting services.
The Group has a long pedigree in developing industrial strength application software that facilitates a variety of
resource/asset optimisation that removes extraneous cost, increases network uptime and robustness and improves
overall service delivery. Our software offering is primarily used by transport operators but also by infrastructure
providers and maintainers. The Group also has a separate Remote Condition Monitoring (RCM) offering – hardware
and software – that allows for real-time reporting on the status and health of critical infrastructure assets that can
identify problems before they lead to failure and aid with preventative maintenance. Utilising our expertise in the sector,
the Group’s professional services division provides consultancy and specialist advice across the operational and
strategic planning horizons and play a key role in advising owning Groups, operators and a range of regulatory bodies.
The recent acquisition of TCS and DRS has expanded our technology offering and moves Tracsis into a new and
disruptive element of the passenger transport market that we believe will experience significant growth in the near term.
The current focus of the Rail Technology & Services division is one of product expansion and improvement, customer
upsell/cross-sell and the move to cloud based services. Our UK customer base continues to provide the best
opportunities for organic growth by building on existing relationships and capabilities.
2. Traffic & Data Services: Data capture, analysis, categorisation and interpretation of traffic and pedestrian movement.
Tracsis provides a means to help our clients understand demand for their services and in turn this allows for informed
decision making and capital expenditure to ultimately aid with the planning, building and eventual day-to-day operations
of a transport environment.
Over a number of years, the Group has developed what is now the largest traffic and transport data capture and
analytics business in the UK. Latterly this has been bolstered through the acquisition of SEP and the investment made
into Citi Logik and Vivacity Labs. This division has now expanded its addressable markets from roads, rail and
highways to include the pedestrian rich environments of major sporting and outdoor events and is now focusing on the
advent of urban planning and traffic management for Smart Cities.
The current focus of the Traffic & Data Services division is one of technology and process transition to undertake
broader, more complex and ultimately more valuable projects for our clients. In moving this division to a stronger
technology footing we expect to see a significant improvement in operating margin and good progress has been made
in the past year in improving this metric.
TRACSIS PLC | 5
Chairman & Chief Executive Officer’s Report continued
The Group's mission is to help our clients solve complex, high value, data driven problems for which there is typically little by
way of an alternative offering. Tracsis chooses to operate within the traffic and transport markets due to the abundance of
complex problems where our expertise and products have clear and demonstrable benefit. These markets also exhibit several
attractive traits for the Group – high barriers to entry due to domain knowledge, large and disparate data sets, well informed
customers that understand the value/costs in the problems we solve, and a large pool of interesting M&A opportunities that can
be difficult for external parties to access or understand without sector expertise.
The Directors believe that the traffic, transport and pedestrian rich environments are particularly well positioned for consistent,
long term, and sustainable growth and that the Group will capitalise on this via an expanding portfolio of products and services
that have a common theme of ‘smart’ planning and ‘intelligent’ mobility whilst delivering the savings and improvements our
customers have grown to expect.
Financial summary
The Group achieved revenues of £39.8m which was an increase of 16% on the previous year (2017: £34.5m). It is important to
note that the vast majority of this increase was organic, with limited revenue from M&A given the specific timing of the TCS and
DRS acquisitions.
Adjusted EBITDA* of £9.4m was an increase of 11% on the previous year (2017: £8.5m), with Adjusted Profit** of £8.7m being
13% higher than the previous year (2017: £7.7m). Statutory Profit before Tax was £8.3m (2017: £4.6m), although this includes
an exceptional £2.65m credit relating to contingent consideration in respect of the Ontrac acquisition which arose due to specific
target milestones not being met, though it is important to note that Ontrac performed very well all the same. Statutory Profit
before Tax net of this exceptional credit was £5.6m which shows a comparable improvement on the prior year of some 22%.
All of the financial metrics show good growth on the previous year and a solid organic performance.
At 31 July 2018, the Group’s cash balances had increased to £22.3m (2017: £15.4m), and cash generation continues to be
strong. Overall cash balances increased by £6.9m in the financial year, after the acquisition of TCS and DRS (£1.7m cash
outflow), the investments in Vivacity Labs and Nutshell amounting to £0.7m, and paying contingent consideration of £0.3m (in
respect of the SEP year two earn out). Post period end, an amount of £2.1m was paid in respect of the Ontrac year two earn
out which represented good trading and profitability. The business therefore generated net cash of c. £10m which once again
demonstrates strong conversion of profits to cash. The Group continues to be debt free.
As mentioned above, the statutory results include an exceptional credit of £2.65m in respect of the finalisation of the Ontrac
contingent consideration, as required by IFRS3. This credit came about due to the inclusion of profit related performance targets
within the deal structure for Ontrac. Whilst this business has performed very well in the past two years, the full contingent
consideration was not maximised which gave rise to the credit. Needless to say, this is a non-cash exceptional credit and should
be viewed as a non recurring item that is not part of underlying performance.
* Earnings before finance income, tax, depreciation, amortisation, exceptional items, other operating income, and share-based payment
charges and share of result of equity accounted investees – see note 31 for reconciliation
** Earnings before finance income, tax, amortisation, exceptional items, other operating income, share-based payment charges, and share of
result of equity accounted investees – see note 31 for reconciliation
Trading Progress and Prospects
Rail Technology & Services
Summary segment results:
£19.0m (2017: £16.0m) +19%
Revenue
+5%
(2017: £6.5m)
£6.8m
EBITDA *
+4%
(2017: £6.3m)
Profit before Tax £6.6m
Software
(excluding £2.65m exceptional credit)
Software sales, excluding Ontrac, were £7.7m (2017: £6.4m), which was a significant increase (20%) on the previous year,
mainly due to the Group starting work on delivering a major multiyear contract with one of the largest Train Operating Companies
in the UK for our TRACS Enterprise solution. Delivery of this programme has been challenging and rewarding, with good
progress being made, and the implementation will continue throughout the rest of current financial year. In preparation for the
delivery of larger technology engagements of this type in future, we have taken active steps to significantly expand our
development team which following a period of extensive recruitment is now close to full strength. Going forwards we will continue
to market TRACS Enterprise to the rest of the UK market and are confident of making progress in the months and years to
come. Outside this major contract, all aspects of the software portfolio once again performed well, with excellent renewal rates
for the TRACS, Compass, and Retail & Operations product suites.
6 | Annual Report and Accounts 2018
Chairman & Chief Executive Officer’s Report continued
Ontrac
Ontrac once again performed very well in the period and contributed revenue of £5.9m (2017: £5.3m), with the business
completing a number of bespoke development projects for its key client, as well as benefitting from the high levels of recurring
revenue that comes from its software licences and hosting services. The business continues to specialise in the digitisation,
visualisation and streamlining of asset information and works closely with infrastructure clients and the railway supply chain on
a number of key initiatives where shared information can result in significant improvements in data quality whilst removing
extraneous processes and costs. Ontrac’s Rail Hub and eTrac products remain highly relevant to the UK rail market and the
business continues to market these initiatives along with other innovations to their customer base.
Ontrac performed well during the two year earn out period following acquisition by Tracsis in 2015 and additional performance
related contingent consideration of £2.1m was paid to Ontrac shareholders post period end. Going forwards, Ontrac trading will
now be included within the software element of the Rail Technology & Services division although we intend to maintain the
Ontrac brand which is a well-known and reputable brand within its target market.
Remote Condition Monitoring (RCM)
Revenues of £3.0m were 15% higher than the previous year (2017: £2.6m), due to a combination of positive trading with the
Group’s main UK rail infrastructure client, additional business generated from other UK supply chain customers and further sales
made within North America. As intimated previously, we now have business development resources within the US and we have
seen a lot of activity in the past year which has led to several pilots and trial engagements. Whilst it is true to say this activity
has not yet translated into meaningful revenue, we continue to believe there is a significant latent opportunity with overseas
RCM and our plans remain unchanged for the coming year. Within the UK, our busbar pilot remains ongoing, and we continue
to work with our major client for this exciting project which has huge growth potential in the future if successful.
Consultancy and Professional Services
Consultancy and professional services revenue was £1.9m (2017: £1.7m) which was a good performance helped by high levels
of franchise bid work. Tracsis supported a bidder for the West Coast Partnership, Southeastern, and also Wales & Borders rail
operations. In addition, we picked up good work from other government bodies, a variety of other train operating companies
(TOCs), and several multi-disciplinary engineering companies.
Acquisitions: Travel Compensation Services (TCS) and Delay Repay Sniper (DRS)
In the six months post acquisition, TCS and DRS contributed £0.5m of revenue (2017: £nil). The business continues to work on
a number of significant, high profile tenders which if successful, will lead to further growth in the future. The business has come
a long way in a short space of time, and the area in which it operates is ripe for technology disruption with the solution that TCS
provides offering a compelling return on investment for operators to dramatically reduce their delay repay processing costs. The
Directors are keen to grow this part of the Group and integration has begun and is well underway. Most recently, TCS launched
its new compensation service for the corporate business travel market which we believe is a further growth area outside of TOC
and passenger engagement.
Traffic & Data Services
Summary segment results:
£20.8m (2017: £18.5m) +13%
Revenue
+28%
(2017: £2.0m)
EBITDA *
£2.6m
+46%
(2017: £1.4m)
Profit before Tax £2.0m
Traffic Data and Passenger Counts
Revenues of £14.5m were delivered in the year (2017: £12.8m), which reflect good organic growth in the year. Our traffic data
business delivered multiple large and diverse projects including a significant and challenging project for Transport for London
looking at City wide cycle assets (given rising demand and inherent safety concerns), and also renewed and expanded a major
contract with a global engineering consultancy. General trading elsewhere remained solid, and margins were improved by the
structural and technological changes that were started in the previous financial year and remain ongoing. The result of our
efforts led to significant cost reductions, a refocussed management team, and a streamlined business unit that has produced a
strong performance in the year.
With regard to passenger counting, we also developed a piece of analysis software that allows for automatic train loading data
(i.e. passenger counts) to be taken directly from trains currently in service. This information is highly relevant to TOCs when
making revenue protection and performance decisions and requires a high degree of accuracy given the vagaries of timetable
changes, delays and unit swaps which can lead to erroneous information being used. The Board is pleased to be are up and
running with this software service within a short space of time, and also with the meaningful revenue achieved in the year under
review.
TRACSIS PLC | 7
Chairman & Chief Executive Officer’s Report continued
Our traffic data offering continues to benefit from a sizeable market share within its relevant sector with a good and varied service
offering to allow significant and diverse projects to be delivered. The strategy for this part of our business is unchanged – to
transition what was historically a ‘project led, service business’ to a ‘product led, technology business’. In doing so the Group
believes it can achieve enhanced operational efficiencies via increased use of technology and process improvements to improve
both gross and net margin. Tracsis remains excited by the opportunity new technology poses and our investment into the
Vivacity Labs ‘Felicity’ platform is showing real promise in terms of increasing our data analysis ability and transitioning to a
more technology led approach.
SEP
SEP achieved revenues of £6.3m (2017: £5.7m) which was pleasing, and the business has made good progress in transitioning
from an owner managed business to a division of a public company. The delivery during the peak summer months was strong
as always, and this year also saw the continuation of clients using our Tracsis Live Traffic software, which provides event
operators with a real time insight into traffic and pedestrian dynamics that comprises ANPR technology, together with application
software developed internally by the Group’s development team The Group continues to work closely with one of the largest
clubs in the English Premier League and looks forward to replicating our success within this market in the year ahead as we
target other stadiums and fixed venue events.
Overall, it was pleasing to see margins within the T&DS Division increasing compared to the previous year, which was a key
objective set out at the start of the financial year.
Dividends
In February 2012, the Board implemented a progressive dividend policy and the Group intends to maintain this going forwards.
An interim dividend of 0.7p per share for 2016/17 was paid in April 2018. A final dividend of 0.9p per share in respect of 2017/18
is proposed, to take the full year dividend to 1.6p. This represents a 14% increase on the previous year’s dividend of 1.4p per
share.
As always, the dividends remain well covered by the Group’s profitability and cash position, which supports its primary focus on
growth via acquisition and through further development of new products and services. The Board is committed to maintaining
the progressive dividend policy as the business continues to trade profitably and in line with its expectations.
The dividend will be paid on 15 February 2019 to shareholders on the register on 1 February 2019.
Acquisitions
The Board was delighted to have completed the acquisitions of TCS and DRS during the year. Both businesses operate within
the Delay Repay (DR) space which is a passenger compensation regime that exists within multiple transport environments for
delayed or cancelled services. Within the rail sector, DR has existed for many years and is an obligation of most franchise
operations. In recent years however, a combination of rising fares, poor service performance and government policy/intervention
has raised the profile of DR which has in turn given rise to far greater volumes of passenger claims. This in turn has created
several areas where Tracsis can get involved with the main one being assisting TOCs automatically process valid DR claims
through an intelligent software engine that process claims at a far higher accuracy, with greater speed and lower cost than a
human counterpart (similar in concept to the rest of Tracsis’ software suite).
TCS and DRS were acquired with a deal structure that reflects the significant growth opportunities that exist within their markets,
and hence have a large amount of contingent consideration potentially payable should the businesses grow significantly from
their current levels. An amount, reflecting the current performance of each business was paid upfront, with the balance payable
subject to various stretch targets being achieved. In the six months post acquisition, TCS and DRS delivered revenue of £0.5m,
and a PBT of £0.1m (pre exceptional deal costs and amortisation).
Numerous other acquisition opportunities were appraised during the year and the pipeline of opportunities remains as strong as
always. The Group’s appetite for making further accretive acquisitions that meet with our stated investment criteria remains
unchanged and we expect to complete further transactions in due course.
Investments
During the previous year, the Group announced that it had made a strategic investment of up to £1.3m into Vivacity Labs Limited
("Vivacity"), a provider of smart, hyperlocal data for smart cities and intelligent transport systems, in return for a 28.1% equity
stake. To the end of July 2018, Tracsis has invested £1.0m of this total amount, in return for 23.3% of the equity, including an
investment of £0.6m that was made in the current financial year. Tracsis held a warrant to subscribe for a further 4.8% of the
enlarged share capital for an additional £0.3m which was exercised post period end.
8 | Annual Report and Accounts 2018
Chairman & Chief Executive Officer’s Report continued
The Traffic & Data Services Division also entered into an Agreement to begin to adopt the Vivacity machine learning technology,
which has the potential to significantly enhance our traffic analysis capability whilst also reducing the associated overhead costs
of video processing. This work is still at a relatively early stage but is showing significant promise and will be a key focus for the
Traffic Data team in the coming year.
The Group continues to hold an investment in Citi Logik Limited and at year-end held 17.24%. Citi Logik was successful in
securing further monies from Innovate UK during the year and has won multiple First of a Kind (FOAK) projects to demonstrate
mobile network data analytics (i.e. utilising consumer mobile phone data to model traffic and pedestrian movements in near real
time).
Summary and Outlook
In summary, 2017-18 was another good year for Tracsis on multiple fronts, with strong organic growth and financial performance
coupled with operational progress and capped off by an exciting acquisition. The Group continues to mature and evolve both
in terms of people, processes and technologies and remains well positioned for the future.
Tracsis’ growth strategy remains unchanged: to deliver shareholder value both organically and through acquisition of
complementary businesses, and by developing products and services that solve well recognised, high value problems that are
poorly served by existing technology. The Group’s business model continues to focus on markets that generally have high
barriers to entry, with contracts that are sold on a recurring/repeat basis, and to a retained customer base that is predominantly
blue chip in nature. This strategy has worked well in the past to generate consistent growth and significant returns for
shareholders and the Group believes it will continue to work well in the future.
As always our thanks go to our staff, customers and other partners, and we look forward to sharing further success with them
in the years ahead.
Chris Cole, Chairman
John McArthur, Chief Executive Officer
8th November 2018
TRACSIS PLC | 9
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
and
The
organisation of the rail industry in
the UK may be changed in the
future, or by a future government,
impacting the Group. The Group
continues to derive a significant
amount of its results from the UK
rail industry.
1. Rail Technology
& Services
of
the Group’s
Several
products and services are
expected to be still in demand
regardless of the structure of
the industry they have a clear
value
demonstrable
and
proposition
some
(though
more than others) and return
on
investment case. The
Group expects that demand for
certain solutions will remain
regardless
ownership
of
structure. However, in certain
circumstances, there is very
against
little
politically driven changes or
other structural changes.
mitigation
Competition
The success of the Group may
lead to increased competition, in
particular 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. Rail Technology &
Services
Reduced government spending
to
subject
pays
pricing
close
The Group
attention
and
to
customer satisfaction 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. The Group
restructured its Traffic & Data
Services Division
the
previous year and saw the
benefits of this during the year
under review.
that
in
The Group continues to derive
revenues directly and indirectly
from government commitment to
invest and modernise transport
infrastructure, and would be
significantly
these
funding streams were
public
reduced.
impacted
if
1. Traffic & Data
Services
2. Rail Technology &
Services
the exposure
As the Group continues to
grow and diversify its revenue
streams,
to
government spending should
reduce but will always be a risk
for the Traffic & Data Services
Division due to the nature of its
customer base. For the Rail
Technology
Services
Division, the Group attempts to
ensure that its offerings have a
clear return on investment and
value proposition, to ensure
demand will remain strong.
&
Increased given the recent
rail industry challenges that
have been well publicised in
the press and the political
headlines
rail
the
that
industry has received.
No change in the year to the
risk of overall competition
across the Group.
Increased in the year given
the increased proximity to
the
‘Brexit’
uncertainties
this may
potentially bring.
and
10 | Annual Report and Accounts 2018
Risk Management continued
Description/Potential impact:
Area of Group
impacted:
Mitigation:
Change in the year:
Reliance on certain key customers
The Group has a large number of
customers but derives a significant
amount of business from one key
customer for a large part of its Rail
Technology & Services offering.
There can be no guarantee as to
the timing or quantum of any
potential future orders from this
customer.
the
Group’s Traffic & Data Services
division operates under a number
of Framework Agreements with
one large one in particular from
whom a significant amount of
revenue is obtained.
Furthermore,
Attraction and retention of key
employees
to
The Group continues to have a
number of key individuals. Skills
and expertise in our markets are
specialist and hard
find or
develop, and so further growth of
the business may be restricted
should key individuals leave the
business or if the business is
unable to attract and recruit new
staff to deliver its growth plans.
Delays to project delivery
the previous year,
During
the
Group was successful in securing
a significant contract with a major
UK Train Operating Company
which has a number of deadlines
implementation, along with
for
certain penalties
the
programme not be implemented in
accordance with the contractual
requirements and timeframes.
should
1. Rail Technology &
Services
2. Traffic & Data
Services
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
the
offerings
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.
1. Rail Technology &
Services
The Group believes it offers
remuneration
competitive
packages, and also offers
various
incentive
share
schemes to staff in order to
attract and retain high calibre
share
employees.
schemes are designed such
that employees are rewarded
in the success of the Group,
and are tied in for a period of
time.
Such
delivery
The Group has deployed an
team,
extensive
following a major recruitment
exercise, and has worked with
the client to establish a project
plan to ensure that the project
has
the best chance of
successful delivery.
No major change in the
year.
Total revenues from the
Group’s largest customer
were
of Group
14%
revenue (2017: 16%).
Revenues in respect of the
Group’s Remote Condition
Monitoring accounted
for
around 8% (2017: 8%) of
total Group revenue.
continued
The Traffic & Data Services
Division
to
account for over half of
overall Group revenues and
derived
(2017:
£3.2m
£2.5m) from one particular
customer.
Increased in the year for
parts of the Group given
two periods of contingent
consideration ended.
Increased in the year as
delivery of this key contract
progressed.
Risk Management continued
Description/Potential impact:
Technological changes
Area of Group
impacted:
1. Traffic & Data
Services
2. Rail Technology &
Services
The Group has a variety of product
and service offerings which may be
under threat should competitors
develop rival technology or should
more effective ways of doing things
be discovered which make some of
the Group’s services redundant.
This could potentially
to
reduced levels of business.
lead
Customer pricing pressure
Price pressure
from customers
may potentially result in margins
being eroded over time if lower
revenues are achieved than those
which were achieved historically.
1. Traffic & Data
Services
2. Rail Technology &
Services
TRACSIS PLC | 11
Mitigation:
Change in the year:
No change in the year.
No change in the year.
they
The Group continues to invest
in research and development
for its technology products to
ensure that they remain up to
date and also relevant to the
customer base, as it also takes
feedback from its clients about
what they require from the
products. This helps to ensure
that
relevant.
remain
Some of the Group’s offerings
are protected by customer
Framework
relationships,
contractual
Agreements,
agreements
also
significant development costs,
which provide protection even
if new entrants may come
along. The Group made a
strategic investment in Vivacity
the
Labs Limited during
previous year
to
the risks
mitigate some of
posed by technology to the
Traffic & Data Services
Division.
to seek
and
cost
The Group believes it operates
a relatively lean structure in
order to protect against pricing
pressure, and
is constantly
searching for ways to maintain
operating
its
base
efficiently. When
reviewing
tenders and enquiries, pricing
is submitted accordingly on the
most favourable commercial
terms. The Group is committed
to
customer
satisfaction and offering a
compelling
on
investment for its products with
a clear value proposition, with
the objective that the customer
base will continue to take its
products due to their quality
and business case, with price
being of less concern to them.
ensuring
return
12 | Annual Report and Accounts 2018
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. Rail Technology
& Services
All parts of the Group
All parts of the Group
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
Impact of EU Referendum
to
on
leave
The decision
the
European Union may have a
potential
the
impact
macroeconomic conditions in the
UK, from which the Group derives
the majority of its revenue and
profit, which may impact on the
Group’s customers, in particular
those revenues derived from the
public sector should this lead to
in government
any
spending.
has
customers in Ireland and Sweden.
The Group
reduction
No change in the year.
No change in the year.
Increased in the year as the
the
date
for
European Union
gets
closer.
leaving
employs
The Group
a
dedicated Health & Safety
team for its Traffic & Data
Services division, and where
necessary elsewhere 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, procedures
to
and method statements
provide mitigation
against
health & safety risk.
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.
Tracsis continues to operate
within specific niche verticals
of the traffic data and transport
markets. The Group believes
that its market offering and the
sectors in which it operates
provides it with good resilience
to external influences although
these
remains vigilant of
influences.
TRACSIS PLC | 13
Strategic Report
Key Performance Indicators
1. The Group’s main Key Performance Indicators (KPIs) assessed at Group Level are as follows:
a. Sales Revenue and various Profit metrics versus budget, forecast 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 specific divisions:
a. Rail Technology & Services
i. Customer renewal rates for Software and new customer take up / product matrix
ii. Staff utilisation and chargeability
iii. Revenue by customer and by product type
iv. Delivery of major orders versus customer requirements
b. Traffic & Data Services:
i. Customer enquiries and conversion rates,
ii. Working capital tie up in debtors and work in progress and Capital expenditure
iii. Number of events and event days, plus casual staff costs relative to revenue
50
40
30
20
10
0
10
8
6
4
2
0
25
20
15
10
5
0
Revenue - £m
32.6
34.5
39.8
22.4
25.4
Revenue
2014
2015
2016
2017
2018
Profit Before Tax - £m
8.3
4.2
4.5
4.0
4.6
Adjusted EBITDA - £m (see note 31 for
reconciliation)
8.5
7.6
9.4
6.5
5.4
Adjusted EBITDA
2014
2015
2016
2017
2018
Basic Earnings Per Share - p
25.7
12.9
14.1
12.7
13.4
10
5
0
30
20
10
0
PBT
Basic EPS
2014
2015
2016
2017
2018
2014
2015
2016
2017
2018
Cash - £m
22.3
13.3
11.4
15.4
8.9
Cash
2014
2015
2016
2017
2018
14 | Annual Report and Accounts 2018
Governance
Board of Directors
Executive Directors
John McArthur (43) 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 (40) 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
Current:
Chris Cole (72) Independent Non-Executive Chairman
Chris is Non-Executive Chairman of WSP Global Inc. (listed on the Toronto Stock Exchange), the successor to WSP Group plc,
and Non-Executive Chairman of Redcentric plc. Up until September 2018, he was also Non-Executive Chairman of Ashtead
Group plc. Chris brings significant general business and public market experience to the Board from his current and previous
roles.
Member of Audit Committee, Remuneration Committee and Nominations Committee.
Lisa Charles-Jones (47) Independent Non-Executive Director
Lisa, is a HR professional and worked for LSL Property Services plc for 13 years, which is listed on the Main Market of the
London Stock Exchange, firstly as Head of HR and for the last ten years as Group HR Director. She is a member of the Chartered
Institute of Personnel and Development and holds an MBA from the University of Durham. Lisa brings a wide range of HR
experience to the Board.
Member of Audit Committee, Remuneration Committee and Nominations Committee.
Liz Richards (60) Independent Non-Executive Director
Liz was previously Group Finance Director of Callcredit Information Group, from 2000 to 2015. Callcredit is a consumer data
business, which grew from a start-up in 2000 to a £150m turnover business with over 1,000 employees. Following its significant
growth and success, the business was sold in 2014 for circa £500m. Liz is a Chartered Accountant, having trained with EY, and
currently is Non-executive Director and audit committee chair of LINK Scheme Ltd, the UK ATM network operator. Prior to
Callcredit, Liz worked in a variety of finance roles. Liz brings extensive Finance experience to the Board.
Member of Audit Committee, Remuneration Committee and Nominations Committee.
Mac Andrade (42) Independent Non-Executive Director (appointed 1 November 2018)
Mac was appointed to the Board on 1 November 2018. Mac has held various senior roles at FirstGroup Plc, Network Rail,
Scottish & Southern Energy and National Grid. Mac brings extensive rail industry expertise and knowledge to the Board.
Member of Audit Committee, Remuneration Committee and Nominations Committee.
Other Directors serving in the year:
John Nelson (71) Independent Non-Executive Director
John served as a Non-Executive Director during the year and until his resignation on 1 November 2018, and brought extensive
rail industry experience to the Board having been involved in the industry for 50 years. John served as a member of Audit
Committee, Remuneration Committee and Nominations Committee during the year.
TRACSIS PLC | 15
Governance
Directors’ Report
The directors present their report and the audited financial statements for the year ended 31 July 2018.
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 8 November 2018.
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 29 to 67.
Dividends
The Directors have adopted a progressive dividend policy, subject to growth, profitability and cash position in the future. An
interim dividend of 0.7p per share was paid in April 2018. The Directors propose a final dividend of 0.9p per share, subject to
shareholder approval at the forthcoming Annual General Meeting. This will give a full year dividend of 1.6p per share (2017:
1.4p).
Directors
The directors who serve on the Board and on Board Committees during the year are set out on page 14. John Nelson resigned
as a Director on 1 November 2018 and Mac Andrade was appointed as a Director on 1 November 2018.
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 Liz Richards and
Lisa Charles-Jones retire by rotation and, being eligible, offer themselves for re-election. In relation to the re-elections of each
of the directors, the Board is satisfied that each of these directors continues to be effective and to demonstrate commitment to
the Company.
Information in respect of directors’ remuneration is given in the Directors’ Remuneration Report on pages 18 to 21.
Directors’ shareholdings
Directors’ beneficial interests in the shares of the Company, including family interests, at 31 July 2018 and 2017 were as follows:
31 July 2018
31 July 2017
Number
of
shares
% of
issued
share
capital
Number
% of
issued
of
share
shares
capital
957,783
3.38% 1,062,783
3.80%
168,022
0.59%
188,022
0.67%
John McArthur
Max Cawthra
John Nelson (resigned 1 Nov 18)
125,824
0.44%
100,824
0.36%
Chris Cole
Lisa Charles-Jones
Liz Richards
Mac Andrade (appointed 1 Nov 18)
7,000
0.02%
7,000
0.02%
-
-
-
-
-
-
-
-
-
-
-
-
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.
16 | Annual Report and Accounts 2018
Directors’ Report continued
Substantial shareholdings
At 7 November 2018, 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
3,050,909
Liontrust Asset Management
2,017,035
AXA Framlington
1,975,545
Unicorn Asset Management
Ennismore Fund Management
1,905,616
Schroder Investment Management 1,573,684
1,318,304
Downing LLP
1,113,846
Investec Asset Management
1,014,526
Tellworth Investments
991,700
NFU Mutual
957,783
John McArthur
% of
issued shares
10.7%
7.1%
7.0%
6.7%
5.5%
4.6%
3.9%
3.6%
3.5%
3.4%
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 2018 were 46 days (2017: 54 days).
Research and development
During the year the Group incurred £1,942,000 (2017: £1,214,000) 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 26 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,
another subsidiary company, has a significant contract with a major worldwide engineering consultancy company from which it
has historically derived a significant amount of business. Ontrac Limited works extensively with a major railway infrastructure
provider, from which it has historically derived a significant amount of business. SEP Limited has a number of significant, multi-
year contracts with a number of key clients.
TRACSIS PLC | 17
Directors’ Report continued
Charitable donations
The Group made charitable donations to various charities amounting to £nil during the year (2017: £5,029). 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.
Third party indemnity provisions
All directors benefit from qualifying third party indemnity provisions in place during the financial year and at the date of this
report.
By order of the Board
Max Cawthra
Company Secretary
8 November 2018
Leeds Innovation Centre
103 Clarendon Road
Leeds
LS2 9DF
18 | Annual Report and Accounts 2018
Governance
Directors’ Remuneration Report
Unaudited information:
Tracsis plc, presents its remuneration 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 (resigned 1 Nov 18)
Chris Cole
Lisa Charles-Jones
Liz Richards
Mac Andrade (appointed 1 Nov 18)
Date Commencement Unexpired
of contract
date
term
Notice
period
21.11.07
20.09.10
21.11.07
28.04.14
25.08.16
01.09.16
01.11.18
01.01.04
Indefinite
6 months
20.09.10
Indefinite
3 months
21.11.07
Indefinite
3 months
28.04.14
Indefinite
3 months
25.08.16
Indefinite
3 months
01.09.16
Indefinite
3 months
01.11.18
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, plus motivating them to deliver the Group’s
strategy. 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.
TRACSIS PLC | 19
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 a 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.
Directors’ remuneration
Directors’ remuneration for the year ended 31 July 2018 is set out below
Executive Directors
John McArthur
Max Cawthra
Non-Executive Directors
John Nelson (resigned 1 Nov 18)
Chris Cole
Lisa Charles-Jones
Liz Richards
Charles Winward (resigned 17 Nov 16)
Mac Andrade (appointed 1 Nov 18)
Basic Pension
Conts
salary
£000
£’000
196
148
344
23
50
28
28
-
-
129
40
7
47
-
-
-
-
-
-
-
Bonus
£000
140
90
230
-
-
-
-
-
-
-
Benefits
in kind
£000
-
-
-
-
-
-
-
-
-
-
Total
2018
£000
376
245
621
23
50
28
28
-
-
Total
2017
£000
231
151
382
23
50
25
25
8
-
129
131
Directors’ interests in shares options in the Executive Share Option Schemes
At
1 August
At
Exercise
Date from
31 July
price
Which
2017
Granted
(Note b)
Lapsed
(Note a)
Exercised
2018
pence
Exercisable Expiry date
Executive
Directors
John McArthur
81,227
44,342
(10,627)
-
114,942
0.4p
See note a/b
Max Cawthra
54,152
-
(7,085)
-
47,067
0.4p
See note a/b
15 Dec
2025 / 6 Jan
2027 / 28
Feb 2028
15 Dec
2025 / 6 Jan
2027
Non-Executive
Directors
John Nelson
Chris Cole
Lisa Charles-
Jones
Liz Richards
Mac Andrade
25,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(25,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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.
20 | Annual Report and Accounts 2018
Directors’ Remuneration Report continued
Directors’ interests in shares options in the Executive Share Option Schemes (continued)
Note a
Original conditions:
'2015 LTIP'
• John McArthur granted maximum of 38,182 options, Max Cawthra granted a maximum of 25,455 options
• Full award is only payable should statutory diluted EPS for the year ending 31 July 2018 be 17.95p, and TSR versus
the peer group is in the top quartile
• Should statutory diluted EPS for the year ending 31 July 2018 be less than 14.95p, and TSR versus the peer group is
less than the median, no options will be awarded
• For scenarios between the above range, the options will be exercisable on a sliding scale basis in both instances
For the year ended 31 July 2018, EPS (excluding the contingent consideration credit was 15.75p, which meant that part of the
performance criteria that were linked to EPS were met, and TSR was between the median and upper quartile meaning that a
part of the performance criteria that were linked to TSR were met. These items combined led to options vesting for John McArthur
of 27,555 share options, with 10,627 lapsing, and options vesting for Max Cawthra of 18,370 options, with 7,085 lapsing. The
options that have vested can be exercised from 15 December 2018 onwards, being three years from the grant date.
Note b
‘2016 LTIP’
• John McArthur granted maximum of 43,045 options, Max Cawthra granted a maximum of 28,697 options
• Full award is only payable should statutory diluted EPS for the year ending 31 July 2019 be 17.38p, and TSR versus
the peer group is in the top quartile
• Should statutory diluted EPS for the year ending 31 July 2019 be less than 14.38p, and TSR versus the peer group is
less than the median, no options will be awarded
• For scenarios between the above range, the options will be exercisable on a sliding scale basis in both instances
• Any options vesting will be able to be exercised from 6 January 2020 onwards, being three years from the grant date
‘2017 LTIP’
• John McArthur granted maximum of 44,342 options
• Full award is only payable should statutory diluted EPS for the year ending 31 July 2020 be 16.87p, and TSR versus
the peer group is in the top quartile
• Should statutory diluted EPS for the year ending 31 July 2020 be less than 13.87p, and TSR versus the peer group is
less than the median, no options will be awarded
• For scenarios between the above range, the options will be exercisable on a sliding scale basis in both instances
• Any options vesting will be able to be exercised from 28 February 2021 being three years from the grant date
The aggregate amount of pre-tax gains made by directors on the exercise of share options was £100,000 (2017: £nil). This is
based on John Nelson’s exercise referred to above, where 25,000 options were exercised with a price of £1.75 per share and
a market value at the time of exercise of £5.75 per share. No shares were disposed of. 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.
TRACSIS PLC | 21
Directors’ Remuneration Report continued
Performance graph
The following graph shows the Company’s share price (rebased) compared with the performance of the FTSE AIM all-share
index (rebased) for the period from 1 August 2017 to 31 July 2018.
140
130
120
110
100
90
80
Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18
Jul-18
Tracsis
AIM All-Share Index
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
Lisa Charles-Jones
Chair of the Remuneration Committee
8 November 2018
22 | Annual Report and Accounts 2018
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, adopts the Quoted Company Alliance’s Corporate
Governance Code for Small and Mid-Size Quoted Companies 2013 (updated April 2018) (the “QCA Code”) which supports the
Group’s long term success and strategy for growth.
The Board
There are currently 6 Board members, comprising two Executive Directors and four 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 in 2014 to oversee Board meetings and field all concerns regarding the executive
management of the Group and the performance of the Executive Directors. A biography of each Director appears on page 14.
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 18.
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. Liz Richards and Lisa Charles-Jones will be retiring at the Annual General Meeting
and submitting themselves for re-election.
Board meetings and attendance
Board meetings were held on 10 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
-
-
2/2
2/2
2/2
2/2
Meetings Committee
Meetings
-
-
-
-
-
-
(total/poss)
10/10
10/10
10/10
10/10
9/10
10/10
Audit
Committee
Meetings
-
-
2/2
2/2
2/2
2/2
John McArthur
Max Cawthra
John Nelson
Chris Cole
Lisa Charles-Jones
Liz Richards
Board committees
Nomination Committee
The Nomination Committee comprises Chris Cole as Chairman, Mac Andrade (from 1 Nov 18), John Nelson (to 1 Nov 18), Lisa
Charles-Jones and Liz Richards. 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 Lisa Charles-Jones as Chairperson, Mac Andrade (from 1 Nov 18), John Nelson (to
1 Nov 18), Liz Richards and Chris Cole as attendee. 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).
TRACSIS PLC | 23
Corporate Governance continued
Audit Committee
The Audit Committee similarly comprises Liz Richards as Chairperson, Mac Andrade (from 1 Nov 18), John Nelson (to 1 Nov
18), Lisa Charles-Jones and Chris Cole as attendee. 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. The significant issues considered by the Audit
Committee relating to the Group’s financial statements include Revenue recognition, Intangible Assets, and Contingent
Consideration, as detailed in note 4 to the financial statements.
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. During the year, KPMG LLP did not provide any
non audit services (2017: nil).
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 evaluation process
The Board completed a formal evaluation process in a previous financial year which resulted in charges to the Board but has
not completed a formal board evaluation process during the year.
24 | Annual Report and Accounts 2018
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. Under
the AIM Rules of the London Stock Exchange they are required to prepare the Group financial statements in accordance with
International Financial Reporting Standards as adopted by the European Union (IFRSs as adopted by the EU) and applicable
law and they have elected to prepare the parent Company financial statements in accordance with UK accounting standards
and applicable law (UK Generally Accepted Accounting Practice), including FRS 101 Reduced Disclosure Framework.
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, relevant, reliable 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;
assess the Group and parent Company’s ability to continue as a going concern, disclosing, as applicable, matters
related to going concern; and
use the going concern basis of accounting unless they either intend to liquidate the Group or the parent Company or
to cease operations, or have no realistic alternative but to do so.
•
•
•
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 are responsible for such internal
control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement,
whether due to fraud or error, and 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.
Under applicable law and regulations, the directors are also responsible for preparing a Strategic Report and a Directors’ Report
that complies with that law and those regulations.
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 | 25
Independent
auditor’s report
to the members of Tracsis plc
1. Our opinion is unmodified
We have audited the financial statements of Tracsis
plc (“the Company”) for the year ended 31 July
2018 which comprise the Consolidated Statement
of Comprehensive Income, the Consolidated and
Company Balance Sheet, the Consolidated and
Company Statement of Changes in Equity, the
Consolidated Cash Flow Statement and the related
notes, including the accounting policies in note 3.
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 2018 and of the
Group’s profit for the year then ended;
— the Group financial statements have been
properly prepared in accordance with
International Financial Reporting Standards as
adopted by the European Union;
— the parent Company financial statements have
been properly prepared in accordance with UK
accounting standards, including FRS 101
Reduced Disclosure Framework; and
— the financial statements have been prepared in
accordance with the requirements of the
Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with
International Standards on Auditing (UK) (“ISAs
(UK)”) and applicable law. Our responsibilities are
described below. We have fulfilled our ethical
responsibilities under, and are independent of the
Group in accordance with, UK ethical requirements
including the FRC Ethical Standard as applied to
listed entities. We believe that the audit evidence
we have obtained is a sufficient and appropriate
basis for our opinion.
Materiality:
Group financial
statements as a
whole
Coverage
£260k (2017: £225k)
4.8% (2017: 4.9%) of Group
profit before tax and
contingent consideration
credit
94% (2017:99%) of Group
profit before tax
Risks of material misstatement vs 2017
Event driven
New: Business
combinations
accounting including
valuation of acquired
intangible assets and
contingent
consideration
Recurring risks Revenue recognition –
◄►
software contracts
26 | Annual Report and Accounts 2018
2. Key audit matters: our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the financial
statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by
us, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and
directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In
arriving at our audit opinion above, the key audit matters, in decreasing order of audit significance, were as follows including
Acquisition accounting as a new risk for 2018.
Business combinations
accounting including valuation
of acquired intangible assets
and contingent consideration
Acquired Intangible assets
£2,916k
Contingent consideration payable
£1,200k
Refer to page 36 (accounting
policy) and page 42 (financial
disclosures)
Revenue Recognition –
Software Contracts
The risk
Our response
Subjective Valuation:
Our procedures included:
The Group has acquired Delay Repay
Sniper Limited (DRS) and Travel
Compensation Services Limited (TCS).
The exercise to recognise intangible
assets acquired at fair value involves a
significant degree of judgement on the
inputs used to value the intangibles,
(such as useful economic life of assets
and discount rate) and is a material
estimate.
The valuation of contingent
consideration recognised at fair value
involves a significant degree of
judgement and is a material estimate.
— Accounting analysis: We assessed the
judgements taken around fair value
adjustments having regard to relevant
accounting standards.
— Considering the separately identified
intangible assets acquired through gaining
an understanding of the business’ acquired
and applying our professional experience
and judgement;
— Benchmarking assumptions: challenging
the basis for the key assumptions used in
the valuation such as discount rate and
growth rates applied in the valuation of
acquired intangibles having regard to
internal and external data; and
— Challenging the basis for key assumptions
used in the valuation of contingent
consideration such as forecast future
performance and probability weightings.
— Assessing transparency: considering the
adequacy of the Groups disclosures in
respect of business combinations
accounting and contingent consideration
payable.
Complex Accounting Treatment
Our procedures included:
Software contracts are a key revenue
stream for the Group.
— Accounting analysis: We critically
(Group and Parent)
assessed the Group’s accounting policies in
relation to revenue recognition with
[We continue to perform procedures over [identify key audit matter]. However, following [explain why risk is less significant this
Software revenue (Group)
reference to the accounting standards;
year], we have not assessed this as one of the most significant risks in our current year audit and, therefore, it is not separately
£14,010k, (2017: £11,711k)
identified in our report this year.]
Deferred income (Group) £3,740k
(2017: £4,086k)
These contracts often contain multiple
components resulting in complex
revenue, and ultimately profit,
recognition considerations.
Software revenue (parent
company) £3,500k (2017: £2,333k)
Deferred Income (parent
company) £423k (2017: £407k)
Given the complexity there is a risk of
error on the amount of revenue
recognised or deferred on those
contracts at year end.
Refer to page 35 (accounting
policy), page 44 and page74
(financial disclosures).
— Test of Detail: We agreed a sample of sales
to customer orders and sales invoices to
determine whether the contractual terms
such as timing and value had been taken
into account in calculating revenue.
— Expectation vs. Outcome: We performed a
recalculation over a sample of deferred
income at the year end to determine, based
on our understanding of the transaction price
and value of the deliverable if the correct
deferred income amount had been
recognised by reference to the contractual
terms.
TRACSIS PLC | 27
Group Materiality
£260k (2017: £225k)
£260k
Whole financial
statements materiality
(2017: £225k)
£214.6k
Range of materiality at 13
(2017: 11) components
£214.6k - £2.3k)
(2017: £200k – £20k)
3. Our application of materiality and an overview of the
scope of our audit
Materiality for the Group financial statements as a whole
was set at £260k (2017: £225k), determined with
reference to a benchmark of Group profit before tax
normalised to exclude this years contingent credit of
£2,653k as disclosed in note 9.3. (of which it represents
4.6% (2017: 4.9%of profit before tax).
Profit before tax and
contingent consideration
credit
£5,622k (2017 profit before tax:
£4,616k)
Materiality for the parent company financial statements
as a whole was set at £180.7k (2017: £184k), determined
with reference to a benchmark of Company profit before
tax normalised to exclude this years contingent
consideration credit of £2,653k as disclosed in note 9.3,
of which it represents 4.9% (2017: 4.7% of company
profit before tax).
We agreed to report to the Audit Committee any
corrected or uncorrected identified misstatements
exceeding £13k, in addition to other identified
misstatements that warranted reporting on qualitative
grounds.
Of the Group's 13 (2017: 11) reporting components, we
subjected 11 (2017: 9) to full scope audits for Group
purposes. For the residual 2 components, we performed
analysis at an aggregated Group level to re-examine our
assessment that there were no significant risks of
material misstatement within these.
The components within the scope of our work accounted
for the percentages illustrated opposite.
The work on all 13 (2017: 11) components was
performed by the Group team.
The Group team performed procedures on the items
excluded from normalised group profit before tax
Profit before tax
Group materiality
£13k
Misstatements reported to the
audit committee £13k (2017:
£11.3k)
Group revenue
Group profit before tax
94%
(2017: 99%)
99
94
100%
(2017:
100%)
100
100
Group total assets
100%
(2017: 99%)
99
100
Key:
Full scope for Group audit purposes 2018
Full scope for Group audit purposes 2017
Residual components
28 | Annual Report and Accounts 2018
4. We have nothing to report on going concern
7. Respective responsibilities
We are required to report to you if we have concluded that
the use of the going concern basis of accounting is
inappropriate or there is an undisclosed material uncertainty
that may cast significant doubt over the use of that basis for
a period of at least twelve months from the date of approval
of the financial statements. We have nothing to report in
these respects.
5. We have nothing to report on the other information in
the Annual Report
The directors are responsible for the other information
presented in the Annual Report together with the financial
statements. Our opinion on the financial statements does
not cover the other information and, accordingly, we do not
express an audit opinion or, except as explicitly stated
below, any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in
doing so, consider whether, based on our financial
statements audit work, the information therein is materially
misstated or inconsistent with the financial statements or
our audit knowledge. Based solely on that work we have not
identified material misstatements in the other information.
Strategic report and directors’ report
Based solely on our work on the other information:
— we have not identified material misstatements in the
strategic report and the directors’ report;
— in our opinion the information given in those reports for
the financial year is consistent with the financial
statements; and
— in our opinion those reports have been prepared in
accordance with the Companies Act 2006.
6. We have nothing to report on the other matters on
which we are required to report by exception
Under the Companies Act 2006, we are required 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 received all the information and
explanations we require for our audit.
We have nothing to report in these respects
Directors’ responsibilities
As explained more fully in their statement set out on page
24, the directors are responsible for: the preparation of the
financial statements including being satisfied that they give
a true and fair view; such internal control as they determine
is necessary to enable the preparation of financial
statements that are free from material misstatement,
whether due to fraud or error; assessing the Group and,
parent Company’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern;
and using the going concern basis of accounting unless
they either intend to liquidate the Group or the parent
Company or to cease operations, or have no realistic
alternative but to do so.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to
issue our opinion in an auditor’s report. Reasonable
assurance is a high level of assurance, but does not
guarantee that an audit conducted in accordance with ISAs
(UK) will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are
considered material if, individually or in aggregate, they
could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial
statements.
A fuller description of our responsibilities is provided on the
FRC’s website at www.frc.org.uk/auditorsresponsibilities.
8. The purpose of our audit work and to whom we owe our
responsibilities
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.
David Morritt (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
1 Sovereign Square
Sovereign Street
Leeds
LS1 4DA
8 November 2018
TRACSIS PLC | 29
Financial Statements
Consolidated Statement of Comprehensive Income
for the year ended 31 July 2018
Revenue
Cost of sales
Gross profit
Administrative costs
Adjusted EBITDA*
Depreciation
Adjusted profit **
Amortisation of intangible assets
Other operating income
Share-based payment charges
2018
2017
Continuing
operations
Acquisitions
Notes
£000
£000
Total
£000
£000
6
39,370
464
39,834
34,486
(16,623)
-
(16,623)
(15,279)
22,747
464
23,211
19,207
(14,211)
(516)
(14,727)
(14,491)
6
14
15
9.4
8
9,311
(758)
8,553
114
(2)
112
9,425
(760)
8,665
8,494
(799)
7,695
(1,674)
(100)
(1,774)
(1,674)
197
(1,193)
17
-
214
134
(1,193)
(1,300)
Operating profit / (loss) before exceptional items
5,883
29
5,912
4,855
Exceptional items
9.3
2,653
(81)
2,572
(139)
Operating profit / (loss)
Finance income
Finance expense
Share of result of equity accounted investees
Profit / (loss) before tax
Taxation
Profit / (loss) after tax and total comprehensive
income
Earnings per ordinary share
Basic
Diluted
8,536
(52)
8,484
4,716
9
10
11
16
19
(27)
(201)
8,327
12
(1,004)
7,323
-
-
-
(52)
(25)
(77)
19
(27)
(201)
15
(38)
(77)
8,275
4,616
(1,029)
(901)
7,246
3,715
13
13
25.97p
25.11p
(0.27p)
(0.26p)
25.70p
24.85p
13.36p
12.93p
* Earnings before finance income, tax, depreciation, amortisation, exceptional items, other operating income, and share-based payment
charges and share of result of equity accounted investees – see note 31.
** Earnings before finance income, tax, amortisation, exceptional items, other operating income, share-based payment charges, and share of
result of equity accounted investees – see note 31.
The accompanying notes form an integral part of these financial statements
30 | Annual Report and Accounts 2018
Financial Statements
Consolidated Balance Sheet as at 31 July 2018 Company number: 05019106
Non-current assets
Property, plant and equipment
Intangible assets
Investments – equity
Loans due from associated undertakings
Investments in equity accounted investees
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total assets
Non-current liabilities
Hire-purchase contracts
Contingent consideration payable
Deferred tax liabilities
Current liabilities
Hire-purchase contracts
Trade and other payables
Contingent consideration payable
Current tax liabilities
Total liabilities
Net assets
Equity attributable to equity holders of the company
Called up share capital
Share premium reserve
Merger reserve
Retained earnings
Total equity
Note
14
15
16
16
16
22
17
19
18
21
22
18
20
21
23
24
24
24
2018
£000
2,181
26,223
250
250
972
602
2017
£000
2,461
24,458
675
187
111
457
30,478
28,349
253
7,329
22,329
29,911
60,389
121
1,100
3,875
5,096
157
10,316
2,165
546
13,184
18,280
42,109
113
6,243
3,160
32,593
42,109
239
8,480
15,350
24,069
52,418
230
-
3,718
3,948
320
8,842
5,041
620
14,823
18,771
33,647
112
5,948
3,010
24,577
33,647
The financial statements on pages 29 to 67 were approved and authorised for issue by the Board of Directors on 8 November 2018
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
Financial Statements
Consolidated Statement of Changes in Equity
TRACSIS PLC | 31
Share
Capital
£’000
Share
Premium
£’000
Merger
reserve
£’000
Retained
Earnings
£’000
Total
£’000
110
5,622
3,010
19,924
28,666
-
-
-
-
2
-
-
-
-
326
5,948
-
-
-
-
-
3,715
3,715
(362)
1,300
-
3,715
3,715
(362)
1,300
328
3,010
24,577
33,647
At 1 August 2016
Profit for the year
Total comprehensive income
Transactions with owners:
Dividends
Share based payment
charges
Exercise of share options
At 31 July 2017
112
At 1 August 2017
Profit for the year
Total comprehensive income
Transactions with owners:
Dividends
Share based payment
charges
Exercise of share options
Shares issued as
consideration for business
combinations
At 31 July 2018
112
5,948
3,010
24,577
33,647
-
-
-
-
1
-
-
-
-
-
295
-
-
-
-
-
-
150
7,246
7,246
(423)
1,193
-
-
7,246
7,246
(423)
1,193
296
150
113
6,243
3,160
32,593
42,109
Details of the nature of each component of equity are set out in Notes 23 and 24.
The accompanying notes form an integral part of these financial statements
32 | Annual Report and Accounts 2018
Financial Statements
Consolidated Cash Flow Statement for the year ended 31 July 2018
Operating activities
Profit for the year
Finance income
Finance expense
Depreciation
Loss on disposal of plant and equipment
Non cash exceptional items
Other operating income
Amortisation of intangible assets
Share of result of equity accounted investees
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
Interest received
Interest paid
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 of cash acquired)
Equity investments and loans to investments
Repayment of loans from investments
Receipt of deferred consideration
Payment of contingent consideration
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
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
Notes
10
11
14
9.3
9.4
15
16
12
8
10
11
14
5
5
16
21
30
18
2018
£000
7,246
(19)
27
760
17
(2,653)
(214)
1,774
201
1,029
1,193
9,361
(14)
1,259
1,411
12,017
19
(27)
(1,407)
10,602
(509)
53
(1,714)
(700)
-
-
(323)
(3,193)
(423)
296
(303)
(430)
6,979
15,350
22,329
2017
£000
3,715
(15)
38
799
12
139
(134)
1,674
77
901
1,300
8,506
32
(2,314)
488
6,712
15
(38)
(664)
6,025
(558)
56
-
(550)
111
300
(1,109)
(1,750)
(362)
328
(276)
(310)
3,965
11,385
15,350
The accompanying notes form an integral part of these financial statements
TRACSIS PLC | 33
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 2018 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 as adopted by the EU (‘IFRSs’) and applicable law. The Company has elected to prepare its parent company
financial statements in accordance with FRS 101. 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.
Presentation currency
These consolidated financial statements are presented in sterling. 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 2017. 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 2017:
• Disclosure Initiative (Amendments to IAS 7)
• Recognition of Deferred Tax Assets for Unrealised Losses (Amendments to IAS 12)
• Annual Improvements to IFRSs 2014-2016 Cycle (Amendments to IFRS 12)
These standards have not had a material impact on the Consolidated Financial Statements.
The following new or revised standards and interpretations issued by the International Accounting Standards Board
(IASB) have not been applied in preparing these accounts as their effective dates fall in periods beginning on or after
1 August 2018.
34 | Annual Report and Accounts 2018
Notes to the Consolidated Financial Statements continued
2
Basis of preparation (continued)
Effective for the year ending 31 July 2019
•
•
•
IFRS 2 ‘Share-based payment’ – amendments clarifying how to account for certain types of share-based
payment transactions
IFRS 9 ‘Financial instruments’ – introduces new requirements for classification and measurement of financial
assets and financial liabilities, impairment methodology and hedge accounting.
IFRS 15 ‘Revenue from contracts with customers’ – provides a single model for measuring and recognising
revenue arising from contracts with customers, unless the contracts are in the scope of other standards, such
as IAS 17. It supersedes all existing revenue requirements in IFRS.
• Annual Improvements to IFRSs 2014-2016 Cycle (Amendments to IFRS 1 and IAS 28)
Effective for the year ending 31 July 2020
•
IFRS 16 ‘Leases’ – provides a single lessee accounting model, specifying how leases are recognised,
measured, presented and disclosed
IFRS 15 “Revenue from Contracts with Customers”
The Group is required to adopt IFRS 15 “Revenue from Contracts with Customers” from 1 August 2018. IFRS 15
establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It
replaces existing revenue recognition guidance, including IAS 18 “Revenue” and IAS 11 “Construction Contracts”.
The principles in IFRS 15 must be applied using the following five step model:
Identify the contract(s) with a customer
Identify the performance obligations in the contract
1.
2.
3. Determine the transaction price
4. Allocate the transaction price to the performance obligations in the contract
5. Recognise revenue when or as the entity satisfies its performance obligations
Revenue is recognised either when the performance obligation in the contract has been performed (so “point in time”
recognition) or “over time” as control of the performance obligation is transferred to the customer. The Group is
continuing to assess the estimated impact that the initial application of IFRS 15 will have on its consolidated financial
statements. The estimated impact of the adoption of this standard on the Group is based on initial assessments
undertaken to date and is summarised below. The actual impact of adopting the standard at 1 August 2018 may change
as whilst the Group has made an assessment of all the significant income streams, it has not finalised the assessment
of all income streams and controls over its new reporting approach. An initial assessment of the impact of IFRS 15 is
summarised as follows:
Rail Technology & Services
There are a number of revenue streams within this division. The Group has a number of different arrangements in
respect of software and other related services such as hosting, support and maintenance. The revenue recognition in
respect of perpetual licence sales, and also bespoke development work under IFRS 15 is expected to be the same as
current accounting. Software licences which involve hosting are currently generally spread over the term of the licence
on a straight line basis and this is expected to continue under IFRS 15. Software licences which do not involve hosting,
but moreover access to the Software are divided into licence fees and support, both of which have different accounting
treatments and are expected to continue under IFRS 15. Revenue in respect of contracts which involve purely hosting,
or support and maintenance is spread on a straight line basis is over the term of the Agreement, which again is expected
to continue under IFRS 15. In respect of remote condition monitoring, revenue is recognised once the units are
despatched to the Customer and under IFRS 15, this is not expected to change under IFRS 15. For consultancy
services, revenue is recognised when the services are performed and this is not expected to change under IFRS 15.
Traffic & Data Services
In respect of traffic data collection and passenger counting, the Group currently recognises revenue based on the stage
of completion, with ‘Amounts Recoverable on Contract’ (accrued income based on the stage of completion of certain
projects – as detailed in note 19) being recognised. Under IFRS 15, this will no longer be recognised but will be replaced
by a ‘Contract Asset’ representing the costs incurred in respect of the partially completed projects at the end of a
reporting period, which will have the effect of deferring any profit to be recognised on partially completed projects. In
respect of event planning, parking and traffic management, revenue is recognised when the event takes place and the
service provided, and no changes are expected to take place to this revenue recognition under IFRS 15.
TRACSIS PLC | 35
Notes to the Consolidated Financial Statements continued
2
Basis of preparation (continued)
IFRS 16 “Leases”
IFRS 16 “Leases” will first be effective for the Group during the year ending 30 July 2020. It will bring most leases on
to the balance sheet for lessees, eliminating the distinction between operating leases and finance leases. The Group
has a number of operating lease arrangements and it is considered that the broad impact of IFRS 16 will be to recognise
a right-of-use asset and a corresponding lease liability for the lease commitments which are detailed in note 25. In
addition, rentals on operating leases currently charged to the statement of comprehensive income will be replaced by
a depreciation charge on the asset and an interest expense on the lease liability. Details of operating lease rental
charges are outlined in note 9.
IFRS 9 ‘Financial Instruments’ is not expected to have a material impact on the Group’s financial statements.
(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 below.
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 29. 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, hosting services, along with data collection, capture, passenger counting and
event planning, parking and traffic management 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.
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.
36 | Annual Report and Accounts 2018
Notes to the Consolidated Financial Statements continued
3
Significant accounting policies (continued)
Revenue recognition (continued)
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 collection 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.
Revenue from event planning and traffic management services is recognised when the services have been performed,
once the work and value has been agreed with the customer.
(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
20 – 25% per annum reducing balance basis
(d)
Intangible assets
Goodwill
Goodwill arising on acquisitions comprises the excess of the fair value of the consideration for investments in subsidiary
undertakings over the fair value of the net identifiable assets acquired at the date of acquisition. Adjustments are made
to fair values to bring the accounting policies of the acquired businesses into alignment with those of the Company.
The costs of integrating and reorganising acquired businesses are charged to the post acquisition income statement.
Goodwill arising on acquisitions of subsidiaries is included in intangible assets.
Goodwill is not amortised but is tested annually for impairment and carried at cost less accumulated impairment losses.
Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
TRACSIS PLC | 37
Notes to the Consolidated Financial Statements continued
3
Significant accounting policies (continued)
Goodwill (continued)
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. Contingent consideration is
treated as part of the costs of acquisition provided it is not contingent on the continuing employment of the vendors.
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.
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.
(e)
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.
38 | Annual Report and Accounts 2018
Notes to the Consolidated Financial Statements continued
3
Significant accounting policies (continued)
(f)
Research and Development Costs
Expenditure on internally developed products is capitalised as intangible assets if it can be demonstrated that:
•
•
•
•
•
•
it is technically feasible to develop the product for it to be sold;
adequate resources are available to complete the development;
there is an intention to complete and sell the product;
the Group is able to sell the product;
sale of the product will generate future economic benefits; and
expenditure on the project can be measured reliably.
Capitalised development costs would be amortised over the periods the Group expected to benefit from selling the
products developed. At present, the Group has not considered that its development expenditure meets the criteria for
capitalisation. Development expenditure not satisfying the above criteria and expenditure on the research phase of
internal projects are recognised in the income statement as incurred.
(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
(h)
Taxation
The tax on the profit or loss for the year represents current and deferred tax.
The tax currently payable is based on taxable profit for the period. Taxable profit differs from net profit as reported in
the income statement because it excludes items of income or expense that are taxable or deductible in other years and
it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using
tax rates that have been enacted at the balance sheet date.
Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of
assets and liabilities and their carrying value in the financial statements. The principal temporary differences arise from
depreciation on plant and equipment and share options granted by the Group to employees and directors. Deferred tax
assets and liabilities are measured on an undiscounted basis at the tax rates that are expected to apply when the
related asset is realised or liability is settled, based on tax rates and laws enacted or substantively enacted at the
balance sheet date. Where the deferred tax asset recognised in respect of share-based payments would give rise to a
credit in excess of the related accounting charge at the prevailing tax rate the excess is recognised directly in equity.
Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against
which the temporary differences can be utilised.
(i)
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.
TRACSIS PLC | 39
Notes to the Consolidated Financial Statements continued
3
(j)
(k)
(l)
Significant accounting policies (continued)
Leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards
of ownership to the lessee. All other leases are classified as operating leases. Assets held under finance leases are
initially recognised as assets of the Group at their fair value at the inception of the lease or, if lower, at the present
value of the minimum lease payments. The corresponding liability to the lessor is included in the balance sheet as a
finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease
obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are
charged directly to profit or loss, unless they are directly attributable to qualifying assets, in which case they are
capitalised in accordance with the Group’s general policy on borrowing costs. Contingent rentals are recognised as
expenses in the periods in which they are incurred.
Operating lease payments are recognised as an expense on a straight line basis over the lease term, except where
another systematic basis is more representative of the time pattern in which economic benefits from the leased asset
are consumed. Contingent rentals arising under operating leases are recognised as an expense in the period in which
they are incurred.
In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a
liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight line basis,
except where another systematic basis is more representative of the time pattern in which economic benefits from the
leased asset are consumed.
Employee benefits
Wages, salaries, social security contributions, paid annual leave, bonuses and non-monetary benefits are accrued in
the year in which the associated services are rendered by the employees of the Group. Where the Group provides
long term employee benefits, the cost is accrued to match the rendering of the services by the employees concerned.
Share based payments
The Group issues equity-settled share based payments to certain employees (including directors). Equity-settled share
based payments are measured 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.
Directors LTIPs have two conditions attached – Earnings per Share (non-market condition) and Total Shareholder
Return (TSR – market condition). An assessment of the fair value is made when the options are granted and in respect
of TSR/market conditions, no further adjustment is made regardless of whether the conditions are met or not.
(m)
Retirement benefits
Contributions to defined contribution pension schemes are charged to the income statement in the year to which they
relate.
40 | Annual Report and Accounts 2018
Notes to the Consolidated Financial Statements continued
3
Significant accounting policies (continued)
(n)
(o)
(p)
(q)
(r)
(s)
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, contingent
consideration credits, any goodwill impairments and profit/loss on disposal, 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 Group considers all highly liquid
investments with original maturity dates of three months or less to be cash equivalents.
Operating segments
The Group has divided its results into two segments being ‘Rail Technology and Services’ and ‘Traffic & Data Services’.
The level of disclosure of segmental and other information is determined by such assessment. Further details of the
considerations made and the resulting disclosures are provided in note 6 to the financial statements.
Inventories
Inventories are measured at the lower of cost and net realisable value. Provision is made for slow moving and obsolete
inventories on a line by line basis.
Foreign currencies
The individual financial statements of each Group entity are presented in the currency of the primary economic
environment in which the entity operates (its functional currency). For the purpose of the consolidated financial
statements, the results and financial position of each Group entity are expressed in Pounds Sterling, which is the
functional currency of the Company and the presentation currency for the consolidated financial statements.
In preparing the financial statements of the individual entities, transactions in currencies other than the entity’s
functional currency (foreign currencies) are recorded at the rates of exchange prevailing at the dates of the transactions.
At each balance sheet date, monetary items denominated in foreign currencies are retranslated at the rates prevailing
at the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are
retranslated at the rates prevailing at the date when the fair value was determined.
Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Exchange differences are recognised in profit or loss in the period in which they arise except for:
•
•
exchange differences that relate to assets under construction for future productive use, which are included in
the cost of those assets when they are regarded as an adjustment to interest costs on foreign currency
borrowings; and
exchange differences on monetary items receivable from or payable to a foreign operation for which settlement
is neither planned nor likely to occur, which form part of the net investment in a foreign operation, and which
are recognised in the foreign currency translation reserve and recognised in profit or loss on disposal of the
net investment.
(t)
Translation of financial statements of foreign entities
The assets and liabilities of foreign operations are translated using exchange rates at the balance sheet date. The
components of shareholders’ equity are stated at historical value. An average exchange rate for the period is used to
translate the results and cash flows of foreign operations.
Exchange differences arising on translating the results and net assets of foreign operations are taken to the translation
reserve in equity until the disposal of the investment. The gain or loss in the income statement on the disposal of foreign
operations includes the release of the translation reserve relating to the operation that is being sold.
TRACSIS PLC | 41
Notes to the Consolidated Financial Statements continued
3
(u)
(v)
Significant accounting policies (continued)
Investments
Investments are carried at fair value.
Where it is deemed that the group has a significant influence over the investment, then the investment will be accounted
for as an associated undertaking under the equity method.
Equity accounted investees
Associates are accounted for using the equity method (equity accounted investees) and are initially recognised at cost.
The Group’s investment includes goodwill identified on acquisition, net of any accumulated impairment losses. The
consolidated financial statements include the Group’s share of the total comprehensive income and equity movements
of equity accounted investees, from the date that significant influence commences until the date that significant
influence ceases. When the Group’s share of losses exceeds its interest in an equity accounted investee, the Group’s
carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that the Group
has incurred legal or constructive obligations or made payments on behalf of an investee.
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:
Estimates
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 estimation 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 estimation is required when assessing the stage of completion at a period end.
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.
Contingent consideration
Within the share purchase agreements for the acquisitions of Travel Compensation Services Limited and Delay Repay Sniper
Limited, are various provisions relating to the payment of contingent consideration which are linked to financial performance
post acquisition. Included within the balance sheet is an amount of £1.2m, which is management’s best estimates of the fair
value of the amount payable.
Judgements
There were no significant judgements applied in the preparation of the consolidated financial statements.
42 | Annual Report and Accounts 2018
Notes to the Consolidated Financial Statements continued
5
a)
Acquisitions and investments in the current year
Acquisition: S Dalby Consulting Limited, Travel Compensation Services Limited and Delay Repay Sniper Limited
On 1 February 2018, the Group acquired the entire issued share capital of Travel Compensation Services Limited ('TCS'), Delay
Repay Sniper Limited ('DRS') and S Dalby Consulting Limited (the holding company of TCS). All three companies were subject
to one Share Purchase Agreement. The Directors believe that the areas in which TCS and DRS operate are likely to be
opportunities for growth in the future and believe that the Group should have a product offering to take advantage of such growth.
TCS is a software provider of enterprise delay repay solutions to the UK Rail Industry. The business has developed technology
that allows train operators to automatically process large volumes of consumer claims arising from rail delays and in doing so
lower the transactional costs involved whilst speeding up response times and helping eliminate fraud.
DRS is a consumer facing web portal (www.delayrepaysniper.com) that enables rail passengers to quickly and easily submit
valid claims under the delay repay scheme to rail operators. The business operates a subscription service model and is relevant
to regular rail travellers and commuters who are often delayed many times per month and wish to forego the time and effort
involved in submitting multiple individual claims.
In the year ended 30 September 2017, TCS and DRS generated revenue of £0.7m and a profit before tax of £0.3m. Under the
terms of the acquisition there is a three year earn out period during which Tracsis expect both businesses to achieve growth.
The acquisition consideration comprised an initial cash payment of £1.75m, the issue of 28,571 Ordinary Shares in Tracsis at a
total value of £0.15m, an additional cash payment in respect of net current assets of £0.2m; and Contingent deferred cash
consideration of up to £4.7m, payable annually based on the significant growth in performance of the acquisitions over a three
year period.
The contingent consideration could range from £nil to £4.7m depending on the financial performance over the three years since
acquisition and the Directors concluded that £1.2m was the fair value of the contingent consideration payable and included this
in the balance sheet.
In the period to 31 July 2018 TCS and DRS contributed revenue of £0.5m and pre tax profit of £0.1m to the Group’s results,
before amortisation of associated intangible assets and exceptional deal costs. If the acquisition had occurred on 1 August 2017,
management estimates that the contribution to Group revenue would have been £0.8m and Group pre tax profit for the period
of £0.1m. 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 2017.
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 and
includes the workforce of TCS and DRS.
The fair value adjustments 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 £81,000 which are included within administrative expenses.
TCS was subsequently renamed Tracsis Travel Compensation Services Limited.
The acquisition (in respect of both trading companies – which have been amalgamated) had the following effect on the Group’s
assets and liabilities on the acquisition date:
TRACSIS PLC | 43
Notes to the Consolidated Financial Statements continued
5
a)
Acquisitions and investments in the current year (continued)
Acquisition: S Dalby Consulting Limited, Travel Compensation Services Limited and Delay Repay Sniper Limited
(continued)
Pre-acquisition
Fair value
value on
carrying amount
adjustments
acquisition
Recognised
Intangible assets: Technology assets
Intangible assets: Customer relationships
Tangible fixed assets
Cash and cash equivalents
Trade and other receivables
Trade and other payables
Income tax payable
Deferred tax liability
Net identified assets and liabilities
Goodwill on acquisition
Consideration paid in cash
Consideration paid: fair value of shares issued
Fair value of contingent consideration payable
Total consideration
b)
Investment: Vivacity Labs Limited
£000
-
-
10
214
108
(63)
(32)
(2)
235
£000
1,678
1,238
-
-
-
-
-
(496)
2,420
£000
1,678
1,238
10
214
108
(63)
(32)
(498)
2,655
623
3,278
1,928
150
1,200
3,278
On 3 April 2017, the Group entered into an agreement to acquire up to 28.1% of Vivacity Labs Limited for total consideration of
£1.3m, split between equity investments to be made in three tranches of £1.0m, plus a warrant for a further £0.3m. The first
tranche of the investment took place during the year ended 31 July 2017 and comprised an investment of £0.425m in return for
11.4%. Tranches two and three were made during the year ending 31 July 2018, and comprised a further investment of £0.575m
in return for a further 11.9% to take the total investment to 23.3%, for total consideration of £1.0m. Tracsis holds a further warrant
for the remaining 4.8% to take the total potential investment to 28.1%.
Vivacity has developed novel machine learning software and sensor technology which is applied to solve a wide range of traffic
and transport issues, most specifically for the automatic counting and classification of pedestrian and vehicle flows in a variety
of environments.
During the year ended 31 July 2017, the investment was carried at cost as the investment was only 11.4%. In the year ended
31 July 2018, it was accounted for as an associated undertaking given the shareholding of 23.3%. Further details are provided
in note 16.
c)
Investment: Nutshell Software Limited
On 21 July 2016, the Group entered into an agreement to acquire up to 37.8% of Nutshell Software Limited for total consideration
of £0.5m split as £0.25m of equity and £0.25m of debt. The investment was made in three tranches and the first one made in
July 2016 comprised a total of £0.25m which was split £0.125m equity and £0.125m of debt in return for 23.3% of the shares in
the company, and the second one was made in March 2017 and comprised a total of £0.125m which was split as £0.0625m
equity and £0.0625m of debt in return for a further 8.0% of the shares in the company to take the total holding to 31.3%.
During the year ended 31 July 2018, the third investment was made, which comprised a total of £0.125m which was split as
£0.0625m equity and £0.0625m of debt in return for a further 6.5% of the shares in the company to take the total holding to
37.8%. The investment is accounted for as an Associated undertaking, and further details are provided in note 16.
44 | Annual Report and Accounts 2018
Notes to the Consolidated Financial Statements continued
6
Segmental analysis
The Group has divided its results into two segments being ‘Rail Technology and Services’ and ‘Traffic & Data Services’. Travel
Compensation Services Limited and Delay Repay Sniper Limited are reported within ‘Rail Technology & Services’.
The group has a wide range of products and services and products and services for the rail industry, such as software, hosting
services, consultancy and remote condition monitoring, and these have been included within the Rail Technology & Services
segment as they have similar customer bases (such as Train Operating Companies and Infrastructure Providers), whereas
traffic data collection and event planning & traffic management have similar economic characteristics and distribution methods
and so have been included within the Traffic & Data Services segment.
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 two operating segments, 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.
Sales revenue is summarised below
Rail Technology & Services
Traffic & Data Services
Total revenue
Revenue can also be analysed as follows:
Software and related services
Other
Total
2018
£000
18,968
20,866
39,834
2018
£000
14,010
25,824
39,834
2017
£000
15,964
18,522
34,486
2017
£000
11,711
22,775
34,486
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 | 45
Notes to the Consolidated Financial Statements continued
6
Segmental analysis (continued)
2018
Rail
Technology &
Services
£000
Traffic & Data
Services
£000
Unallocated
£000
Revenues
Total revenue for reportable segments
Consolidated revenue
Profit or loss
EBITDA for reportable segments
Amortisation of intangible assets
Depreciation
Exceptional items
Other operating income
Share-based payment charges
Interest receivable/payable(net)
Share of result of equity accounted investees
18,968
18,968
6,802
-
(135)
2,572
-
-
-
-
20,866
20,866
2,623
-
(625)
-
-
-
-
-
Consolidated profit before tax
9,239
1,998
-
-
-
(1,774)
-
-
214
(1,193)
(8)
(201)
(2,962)
2017
Rail
Technology &
Services
£000
Traffic & Data
Services
£000
Unallocated
£000
Revenues
Total revenue for reportable segments
Consolidated revenue
Profit or loss
EBITDA for reportable segments
Amortisation of intangible assets
Depreciation
Exceptional items
Other operating income
Share-based payment charges
Interest receivable/payable(net)
Share of result of equity accounted investees
15,964
15,964
6,451
-
(124)
-
-
-
-
-
18,522
18,522
2,043
-
(675)
-
-
-
-
-
-
-
-
(1,674)
-
(139)
134
(23)
(77)
Consolidated profit before tax
6,327
1,368
(3,079)
Total
£000
39,834
39,834
9,425
(1,774)
(760)
2,572
214
(1,193)
(8)
(201)
8,275
Total
£000
34,486
34,486
8,494
(1,674)
(799)
(139)
134
(23)
(77)
4,616
(1,300)
(1,300)
46 | Annual Report and Accounts 2018
Notes to the Consolidated Financial Statements continued
6
Segmental analysis (continued)
2018
Rail
Technology
& Services
£’000
Traffic &
Data
Services
£000
Unallocated
£000
Assets
Total assets for reportable segments (exc. cash)
3,142
6,621
Intangible assets and investments
Deferred tax assets
Cash and cash equivalents
Consolidated total assets
Liabilities
-
-
5,673
8,815
-
-
3,520
10,141
Total liabilities for reportable segments
(6,489)
(4,651)
Deferred tax liabilities
Contingent consideration
Consolidated total liabilities
-
-
-
-
(6,489)
(4,651)
-
27,695
602
13,136
41,433
-
(3,875)
(3,265)
(7,140)
2017
Rail
Technology &
Services
£’000
Traffic & Data
Services
£000
Unallocated
£000
Assets
Total assets for reportable segments (exc. cash)
3,581
7,599
Intangible assets and investments
Deferred tax assets
Cash and cash equivalents
Consolidated total assets
Liabilities
-
-
3,784
7,365
-
-
1,844
9,443
Total liabilities for reportable segments
(6,142)
(3,870)
Deferred tax
Contingent consideration
Consolidated total liabilities
-
-
-
-
(6,142)
(3,870)
-
25,431
457
9,722
35,610
-
(3,718)
(5,041)
(8,759)
Major customers
Transactions with the Group’s largest customer represent 14% of the Group’s total revenues (2017: 16%).
Total
£000
9,763
27,695
602
22,329
60,389
(11,140)
(3,875)
(3,265)
(18,280)
Total
£000
11,180
25,431
457
15,350
52,418
(10,012)
(3,718)
(5,041)
(18,771)
Geographic split of revenue
A geographical analysis of revenue is provided below:
United Kingdom
North America
Rest of the World
Total
2018
£000
38,388
260
1,186
39,834
2017
£000
33,224
437
825
34,486
TRACSIS PLC | 47
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
2018
£000
17,240
1,374
352
1,193
20,159
2017
£000
15,273
1,200
303
1,300
18,076
Average number of employees (including directors) in the year
667
683
The staff number calculation above takes account of the Group’s permanent members of staff, and also takes account of a
large number of casual employees that are used, and includes a ‘full time equivalent’ number in respect of them.
The directors’ remuneration and share options are detailed within the Directors’ Remuneration Report on pages 18 to 21.
Total directors’ remuneration, including bonus and pension contributions was £750,000 (2017: £513,000). The aggregate
remuneration of the highest paid director was £376,000 (2017: £231,000). The highest paid director did not exercise any share
options nor did he receive any shares under a long term incentive plan during the year. One director (2017: one) exercised
share options during the year. Two directors (2017: two) participate in the long term incentive plan. Two directors (2017: two)
receive employer pension contributions into a personal pension scheme. Directors of the Company control 4.4% of the voting
shares of the company (2017: 4.9%). Details of other key management personnel are disclosed in note 27.
8
Share based payments
The Group has various share option schemes for its employees.
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 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 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.
Unapproved Share options
In August 2015, the Group implemented a revised share option scheme, resulting in discounted unapproved 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 except for Directors.
Staff are also able to exchange an element of annual salary in return for share options too. The vesting period is three and a
half years. 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.
Directors’ scheme
Directors were not entitled to take part in the 2015, 2016 or 2017 staff schemes and a revised scheme was implemented by the
Remuneration Committee. Details of this scheme are provided in the Directors Remuneration Report.
48 | Annual Report and Accounts 2018
Notes to the Consolidated Financial Statements continued
8
Share based payments (continued)
Details of the schemes are given below:
Employees
Number
Performance
Exercise
entitled
of options
conditions
price (p)
Grant date
Staff schemes
28/01/2009
20/05/2010
22/09/2011
21/11/2011
02/08/2012
02/08/2012
08/01/2013
28/01/2013
01/08/2013
01/08/2013
01/01/2014
01/01/2014
01/08/2014
01/08/2015
25/09/2015
01/12/2015
01/08/2016
01/08/2017
Directors’ schemes
15/12/2015
06/01/2017
28/02/2018
Outstanding
Earliest
exercise
date
28/07/2009*
20/01/2011*
22/03/2012*
21/05/2012*
02/08/2013**
02/02/2013*
08/07/2013*
28/07/2013*
01/02/2014*
52.0
51.5
63.5
57.5
0.40
123.0
159.0
155.5
162.5
0.40
01/08/2014**
199.5
01/07/2014*
0.40
0.40
01/01/2015**
01/08/2015**
0.40 01/08/2016****
0.40 25/09/2016****
0.40 01/12/2016****
0.40 01/08/2017****
0.40 01/08/2018****
Expiry
date
28/01/2019
20/05/2020
22/09/2021
21/11/2021
02/08/2022
02/08/2022
08/01/2023
28/01/2023
01/08/2023
01/08/2023
01/01/2024
01/01/2024
01/08/2024
01/08/2025
25/09/2025
01/12/2025
01/08/2026
01/08/2027
15/12/2025
06/01/2027
28/02/2028
21,000
30,000
32,351
25,000
10,089
22,683
Time served
Time served
Time served
Time served
Time served
Time served
9,000
Time served
70,000
34,501
8,523
11,250
21,178
70,268
139,138
77,269
53,188
213,515
84,128
Time served
Time served
Time served
Time served
Time served
Time served
Time served
Time served
Time served
Time served
Time served
1
1
2
1
8
3
1
1
4
6
1
1
29
84
21
6
91
60
2
2
1
45,925
71,742
44,342
EPS and TSR
EPS and TSR
EPS and TSR
0.40
0.40
0.40
15/12/2018
06/01/2020
28/02/2021
1,095,090
* 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 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 3.5 year period, with various forfeit/reductions if exercise takes place
sooner
TRACSIS PLC | 49
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
Lapsed
Exercised
Outstanding at 31 July
Exercisable at 31 July
2018
Weighted
Average
2018
Exercise
Number
1,342,730
137,103
(43,012)
(341,731)
1,095,090
613,006
Price
44.0p
0.4p
0.4p
86.7p
26.9p
47.6p
2017
Number
1,556,094
324,002
(119,841)
(417,525)
1,342,730
736,801
2017
Weighted
Average
Exercise
Price
59.0p
0.4p
0.4p
78.4p
44.0p
80.0p
Share options were exercised at numerous points in the year, and the average share price for the year ended 31 July 2018 was
515p (2017: 454p).
The share options outstanding at the end of the year have a weighted average remaining contractual life of 5 years (2017: 7
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
-
-
-
-
50 | Annual Report and Accounts 2018
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 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
01/08/
2014
199.5p 330.0p
02/01/
2015
411.5p
0.4p
185.0p
199.5p
0.4p
0.4p
0.4p
3
3
3
3
3
3
3
30%
30%
30%
30%
30%
30%
30%
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%
Expected dividends expressed as a dividend yield
-
-
-
-
-
-
-
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/
2015
420.0p
25/09/
2015
452.5p
01/12/
2015
462.5p
15/12/
2015
550.0p
15/12/
2015
550.0p
01/08/
2016
06/01/
2017
438.0p 502.5p
0.4p
3.5
30%
10
10
0.4p
3.5
30%
10
10
0.4p
3.5
30%
10
10
0.4p
2
30%
10
10
0.4p
3
30%
10
10
0.4p
3.5
30%
10
10
0.4p
3
30%
10
10
3.5%
3.5%
3.5%
3.5%
3.5%
3.5%
3.5%
Expected dividends expressed as a dividend yield
-
-
-
-
-
-
-
Options granted in the current year:
Options granted on
Share price at date of grant
Exercise price
Vesting period (years)
Expected volatility
Option life (years)
Expected life (years)
Risk-free rate
Expected dividends expressed as a dividend yield
01/08/
2017
445.0p
28/02/
2018
500.0p
0.4p
3.5
30%
10
10
0.4p
3
30%
10
10
3.5%
3.5%
-
-
The expected volatility is based on the historic volatility of the Company’s share price. An assessment of the likelihood of
market conditions being achieved is made at the time that the options are granted.
Notes to the Consolidated Financial Statements continued
TRACSIS PLC | 51
8
Share based payments (continued)
Charge to the income statement
Share based payment charges
9
Operating profit
9.1
Operating profit is stated after charging:
Depreciation of property, plant and equipment - owned
Depreciation of property, plant and equipment - leased
Total depreciation
Loss on disposal of plant and equipment
Operating lease rentals: Land and buildings
Operating lease rentals: Plant & machinery
Total operating lease rentals
2018
£000
1,193
2018
£000
592
168
760
17
474
37
511
2017
£000
1,300
2017
£000
595
204
799
12
418
29
447
Research and development expenditure expensed as incurred
1,942
1,214
9.2
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
2018
£000
25
75
-
9.3
Exceptional items:
The Group incurred a number of exceptional items in 2018 and 2017 which are analysed as follows:
Non cash:
Provision against investment
Contingent consideration credit
Cash:
Legal and professional fees in respect of acquisitions
Total exceptional items
2018
£000
-
(2,653)
81
(2,572)
2017
£000
18
45
-
2017
£000
139
-
-
139
2018
During the year, the Group acquired Travel Compensation Services Limited and Delay Repay Sniper Limited, and incurred
£81,000 of exceptional deal related costs as a result. An exceptional credit on contingent consideration arose as the final
amounts in respect of the acquisition of Ontrac Limited was finalised and £2,058,000 was paid post year end against an amount
included in the Balance Sheet of £4,711,000 resulting in an exceptional credit of £2,653,000
2017
The provision against the investment relates to the Group’s interests in Citi Logik Limited. Following a review of the carrying
value in the year, the Directors concluded that the value of the investment should be partly provided against and as such, an
impairment was recognised for the carrying value.
52 | Annual Report and Accounts 2018
Notes to the Consolidated Financial Statements continued
9.4
Other operating income:
The Group no longer qualifies as a SME for R&D purposes and as such is governed by the large company ‘above the line’ credit
in respect of research and development costs for Corporation Tax purposes. This amounted to £214,000 in 2018 (2017:
£134,000).
10
Finance income
Interest received on bank deposits
11
Finance expense
Interest on finance lease obligations
12
Taxation
Recognised in the income statement
Current tax expense
Current year
Adjustment in respect of prior periods
Total current tax
Deferred tax
Current year
Origination and reversal of temporary differences
Rate changes
Total deferred tax
Total tax in income statement
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 19.00% (2017: 19.67%)
Expenses not deductible for tax purposes
Non taxable income
Effect of rate changes
Other movements
Total tax expense
2018
£000
19
2018
£000
27
2018
£000
1,515
-
1,515
(486)
-
(486)
1,029
2018
£000
8,275
1,572
26
(504)
-
(65)
1,029
2018
%
100.0
19.0
0.3
(6.1)
-
(0.8)
12.4
2017
£000
4,616
908
127
-
(189)
55
901
2017
£000
15
2017
£000
38
2017
£000
1,351
-
1,351
(261)
(189)
(450)
901
2017
%
100.0
19.7
2.7
-
(4.1)
1.2
19.5
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. Further reductions to 19% (effective from 1 April 2017) and to 18% (effective 1 April
2020) were substantively enacted on 26 October 2015, and an additional reduction to 17% (effective from 1 April 2020) was
announced in the Budget on 16 March 2016. The deferred tax asset and liability at 31 July 2018 and 31 July 2017 has been
calculated based on these rates. This will reduce the company's future current tax charge accordingly and reduce the deferred
tax asset and liability further.
TRACSIS PLC | 53
Notes to the Consolidated Financial Statements continued
13
Earnings per share
Basic earnings per share
The calculation of basic earnings per share at 31 July 2018 was based on the profit attributable to ordinary shareholders of
£7,246,000 (2017: £3,715,000) and a weighted average number of ordinary shares in issue of 28,196,000 (2017: 27,804,000),
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
2018
27,964
14
218
28,196
2017
27,546
-
258
27,804
Diluted earnings per share
The calculation of diluted earnings per share at 31 July 2018 was based on profit attributable to ordinary shareholders of
£7,246,000 (2017: £3,715,000) and a weighted average number of ordinary shares in issue after adjustment for the effects of
all dilutive potential ordinary shares of 29,159,000 (2017: 28,738,000):
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
Other operating income
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
2018
£’000
7,246
1,774
1,193
(2,572)
(214)
7,427
28,196
29,159
26.34p
25.47p
2017
£’000
3,715
1,674
1,300
139
(134)
6,694
27,804
28,738
24.08p
23.29p
54 | Annual Report and Accounts 2018
Notes to the Consolidated Financial Statements continued
14
Property, plant and equipment
Cost
At 1 August 2016
Additions
Disposals
At 31 July 2017
Additions
Arising on acquisition
Disposals
At 31 July 2018
Depreciation
At 1 August 2016
Charge for the year
Disposals
At 31 July 2017
Charge for the year
Disposals
At 31 July 2018
Net book value
At 1 August 2016
At 31 July 2017
At 31 July 2018
Freehold
Land &
Motor
Computer
Plant,
machinery,
fixtures
Buildings
Vehicles
equipment
& fittings
£000
£000
£000
£000
400
-
-
400
-
-
-
400
66
12
-
78
12
-
90
334
322
310
1,306
322
(252)
1,376
54
-
(210)
1,220
423
255
(194)
484
224
(151)
557
883
892
663
1,523
98
(2)
1,619
143
10
(147)
1,625
1,189
196
(1)
1,384
157
(147)
1,394
334
235
231
2,070
300
(171)
2,199
343
-
(582)
1,960
1,013
336
(162)
1,187
367
(571)
983
1,057
1,012
977
Total
£000
5,299
720
(425)
5,594
540
10
(939)
5,205
2,691
799
(357)
3,133
760
(869)
3,024
2,608
2,461
2,181
The net book value of assets held under finance lease obligations is £511,000 (2017: £709,000).
Notes to the Consolidated Financial Statements continued
TRACSIS PLC | 55
15
Intangible assets
Cost
At 1 August 2016 and 2017
Arising on acquisition
At 31 July 2018
Amortisation and impairment
At 1 August 2016
Charge for the year
At 31 July 2017
Charge for the year
At 31 July 2018
Carrying amounts
At 1 August 2016
At 31 July 2017
At 31 July 2018
Customer
related
intangibles
£000
Technology
related
intangibles
£000
22,373
1,238
23,611
2,272
1,276
3,548
1,327
4,875
20,101
18,825
18,736
3,974
1,678
5,652
968
398
1,366
447
1,813
3,006
2,608
3,839
Goodwill
£000
3,025
623
3,648
-
-
-
-
-
3,025
3,025
3,648
Total
£000
29,372
3,539
32,911
3,240
1,674
4,914
1,774
6,688
26,132
24,458
26,223
The following carrying values of intangible assets arising from the acquisitions that the Group has completed in the current
and previous years are analysed as follows:
Goodwill
2018
£000
2017
£000
Customer related
intangibles
2018
2017
Technology related
intangibles
2018
2017
£000
£000
£000
£000
Tracsis Rail Consultancy Limited
Tracsis Passenger Counts Limited
Safety Information Systems Limited
MPEC Technology Limited
Tracsis Traffic Data Limited
Datasys Integration Limited
SEP Limited
Ontrac Technology Limited
Tracsis Travel Compensation
Services Limited & Delay Repay
Sniper Limited
671
43
136
269
390
359
555
602
623
671
43
136
269
390
359
555
602
-
390
203
154
819
802
2,446
1,039
425
221
168
883
973
2,601
1,184
11,695
12,370
1,188
-
3,648
3,025
18,736
18,825
The amortisation charge is recognised in the following line items in the income statement:
Administrative expenses
-
-
31
193
-
961
-
1,026
1,628
3,839
2018
£000
1,774
-
-
53
262
-
1,127
-
1,166
-
2,608
2017
£000
1,674
56 | Annual Report and Accounts 2018
Notes to the Consolidated Financial Statements continued
15
Intangible assets (continued)
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.
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
2018
1.0%
10-12%
2017
1.0%
10-12%
A rate of 10% is used for acquisitions within the Rail Technology & Services segment, and a rate of 12% is used for acquisitions
within the Traffic & Data Services segment.
The directors’ key assumptions relate to profitability, revenue growth and the discount rate, however, carrying value is not
significantly sensitive to reasonably foreseeable changes in these assumptions in respect of all acquired intangible assets with
the exception of those resulting from the acquisition of Ontrac Technology Limited, where profits could fall by circa 25% versus
projected numbers before an impairment would be recognised of intangible assets and also the carrying value of the investment
within Tracsis plc. If profits were to fall by more than 25% then an impairment would be recognised. No impairment charges in
respect of goodwill arose during the year.
16
Investments
The Group has made investments in Vivacity Labs Limited, Citi Logik Limited and Nutshell Software Limited. Further details
regarding these transactions are shown in note 5 ‘Acquisitions and investments in the current year’.
The total gross investments made were as follows (a combination of debt and equity)
Citi Logik Limited
Nutshell Software Limited
Vivacity Labs Limited
These are split as follows:
Equity investments:
Citi Logik Limited
Nutshell Software Limited
Vivacity Labs Limited
% held
At 31 July
17.2%
37.8%
23.3%
2018
£000
500
500
1,000
2,000
2018
£000
375
250
1,000
1,625
2017
£000
500
375
425
1,300
2017
£000
375
188
425
988
TRACSIS PLC | 57
Notes to the Consolidated Financial Statements continued
16
Investments (continued)
Convertible Loan notes receivable from investments:
Citi Logik Limited
Nutshell Software Limited
2018
£000
125
250
375
2017
£000
125
187
312
During the previous financial year, Citi Logik Limited repaid loan notes amounting to £111,000, and a provision of £139,000 was
made against the carrying value of the investment in Citi Logik Limited comprising amounts against the equity value of £125,000
and the remaining debt of £14,000, following a conversion of the remaining debt that took place.
During the year, the Group increased its investment in Vivacity Labs Limited from 11.4% to 23.3% and as such it has been
accounted for as an equity accounted investee. A share of the results of £121,000 was recognised.
Nutshell Software Limited was accounted for as an associated undertaking, with a share of results of £80,000 being recognised
based on the Group’s holding of 31.3% for a period of time and 37.8% for part of the financial year.
Following this accounting treatment, investment, repayment and provision, the carrying value of the investments as follows:
Investments – equity
Citi Logik Limited
Vivacity Labs Limited
Convertible Loan notes receivable from associated undertakings:
Nutshell Software Limited
Investments in equity accounted investees:
Nutshell Software Limited
Vivacity Labs Limited
2018
£000
250
-
250
2018
£000
250
250
2018
£000
93
879
972
2017
£000
250
425
675
2017
£000
187
187
2017
£000
111
-
111
During the year, the Group increased its investment in Vivacity Labs Limited from 11.4% to 23.3% and as such it has been
accounted for as an equity accounted investee.
At start of the year
Reclassification of Vivacity Labs Limited investment
Additional investment made
Share of results of equity accounted investee
At end of the year
2018
£000
111
425
637
(201)
972
2017
£000
125
-
63
(77)
111
58 | Annual Report and Accounts 2018
Notes to the Consolidated Financial Statements continued
17
Inventories
Raw materials & work in progress
Finished goods
2018
£000
180
73
253
2017
£000
159
80
239
The value of inventories expensed in the period in cost of sales was £698,000 (2017: £600,000). 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.
18
Hire purchase contracts
Due within one year
Due after more than one year:
Between one and two years
Between two and three 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
Hire Purchase Obligations
2018
2017
2018
£000
157
114
7
121
278
2018
£000
550
31
(303)
278
2017
£000
320
145
85
230
550
2017
£000
664
162
(276)
550
Carrying
amount
£000
Contractual
cash flows
£000
Less than
one year
£000
One to
Two years
£000
Two to
Five years
£000
278
550
301
620
172
375
120
155
9
90
TRACSIS PLC | 59
Notes to the Consolidated Financial Statements continued
19
Trade and other receivables
Trade receivables
Other receivables and prepayments
Amounts recoverable on contracts
2018
£000
6,573
521
235
7,329
2017
£000
7,223
409
848
8,480
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 as detailed in note 6 (2018: 14% of revenue, 2017: 16% of revenue), 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 within the Traffic & Data Services division.
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
2018
£000
978
80
-
1,058
2017
£000
1,070
295
172
1,537
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 continues to evolve.
60 | Annual Report and Accounts 2018
Notes to the Consolidated Financial Statements continued
20
Trade and other payables
Trade payables
Other tax and social security
Deferred income
Accruals and other payables
2018
£000
1,075
2,122
3,740
3,379
10,316
2017
£000
1,178
1,761
4,086
1,817
8,842
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.
21
Contingent consideration
During the year, the Group acquired Travel Compensation Services Limited (renamed Tracsis Travel Compensation Services
Limited) and Delay Repay Sniper Limited. Under the share purchase agreement, contingent consideration is payable which is
linked to the profitability of the acquired businesses for a three year period post acquisition. The maximum amount payable is
£4,700,000. The fair value of the amount payable was assessed at £1,200,000.
During the year, contingent consideration of £323,000 was paid in respect of the SEP acquisition which was made in the year
ended 31 July 2016, and £nil was paid in respect of the Ontrac acquisition which was made in the year ended 31 July 2016. An
amount of £2,058,000 was paid after the Balance Sheet date in respect of the Ontrac acquisition which was agreed with the
Sellers and also £7,000 in respect of SEP Limited.
At the balance sheet date, the Directors assessed the fair value of the remaining amounts payable which were deemed to be
as follows.
SEP Limited
Ontrac Limited
Tracsis Travel Compensation Services Limited & Delay Repay Sniper Limited
2018
£000
7
2,058
1,200
3,265
2017
£000
330
4,711
-
5,041
The group has made numerous acquisitions over the past few years and carries contingent consideration payable in respect of
them, which is considered to be a ‘Level 3 financial liability’ as defined by IFRS 13. These are carried at fair value, which is
based on the estimated amounts payable based on the provisions of the Share Purchase Agreements and involves assumptions
about future profit forecasts.
The movement on contingent consideration can be summarised as follows:
At the start of the year
Arising on acquisition
Cash payment
Release to Statement of Comprehensive Income
At the end of the year
2018
£000
5,041
1,200
(323)
(2,653)
3,265
2017
£000
6,150
-
(1,109)
-
5,041
TRACSIS PLC | 61
Notes to the Consolidated Financial Statements continued
21
Contingent consideration (continued)
The ageing profile of the remaining liabilities can be summarised as follows:
Payable in less than one year
Payable in more than one year
Total
22
Deferred tax
Non-current liability/(asset)
At 31 July 2016
(Credit)/charge to income statement (note 12)
At 31 July 2017
Arising on acquisition (note 5)
(Credit)/charge to income statement (note 12)
At 31 July 2018
2018
£000
2,165
1,100
3,265
2017
£000
5,041
-
5,041
Accelerated
Intangible
capital
Share
assets
allowances options
£000
£000
£000
4,159
(515)
3,644
496
(301)
3,839
125
(51)
74
2
(40)
36
(573)
116
(457)
-
(145)
(602)
Total
£000
3,711
(450)
3,261
498
(486)
3,273
The closing deferred tax asset and liability has been calculated at 17% as at 31 July 2018 (2017: 17%).
This is presented on the Balance Sheet as follows within non-current assets and liabilities.
Deferred tax assets
Deferred tax liabilities
Net liability per table above
23
Share capital
Allotted, called up and fully paid:
Ordinary shares of 0.4p each
2018
£000
(602)
3,875
3,273
2017
£000
(457)
3,718
3,261
2018
2018
2017
2017
Number
£
Number
£
28,334,086
113,336
27,963,784
111,855
The following share transactions have taken place during the year ended 31 July 2018:
At start of the year
Issued as consideration for business combinations
Exercise of share options (Note 8)
At end of the year
2018
Number
2017
Number
27,963,784
27,546,259
28,571
341,731
-
417,525
28,334,086
27,963,784
During the year, a number of options were exercised from the schemes with exercise price varying from 0.4p to 199.5p.
62 | Annual Report and Accounts 2018
Notes to the Consolidated Financial Statements continued
24
Capital and reserves
The following describes the nature and purpose of each reserve:
Reserve
Share capital
Share premium
Merger reserve
Retained earnings
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
Cumulative net profits recognised in the income statement. The share based payment
reserve which was previously shown separately was incorporated into retained earnings
during the previous year.
25
Operating leases
The Group leases several office facilities under operating leases plus various other assets. During the year £511,000 was
recognised as an expense in the income statement in respect of operating leases (2017: £447,000).
Leases as lessee
Total outstanding commitments for future minimum lease payments under non-cancellable operating leases are set out below:
Land and buildings
Minimum lease payments are payable as follows:
Within one year
In the second to fifth years
Plant and machinery
Within one year
In the second to fifth years
2018
£’000
338
413
751
2018
£’000
46
72
118
2017
£’000
410
659
1,069
2017
£’000
20
37
57
26
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
2018
Fixed
Floating
Rate
£000
Rate
£000
Total
£000
Cash and short term deposits
-
22,329
22,329
2017
Fixed
Floating
Rate
£000
Rate
£000
Total
£000
-
15,350
15,350
TRACSIS PLC | 63
Notes to the Consolidated Financial Statements continued
26
Financial risk management (continued)
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 2018, the Group did not have any fixed-rate deposits in place.
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. The Group holds its cash balances with highly rated financial institutions
and it is also spread across numerous institutions to avoid any exposure to one individual bank.
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, 23 and 24. 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.
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 makes some overseas sales and some overseas purchases, some of which are invoiced in Sterling and others in
the local currency, so there continues to be a small exposure to foreign currency, in particular to the American dollar.
64 | Annual Report and Accounts 2018
Notes to the Consolidated Financial Statements continued
27
Related Party Transactions
The following transactions took place during the year with other related parties:
Leeds Innovation Centre Limited (1)
Ashtead Plant Hire Co Limited (2)
Flash Forward Consulting Limited (3)
Citi Logik Limited (4)
Nutshell Software Limited (4)
Vivacity Labs Limited (4)
WSP UK Limited (5)
Flash Forward Consulting Limited (3)
Citi Logik Limited (4)
Purchase of
Amounts owed to
goods and services
related parties
2018
£000
99
5
28
36
107
17
2017
£000
79
13
-
126
6
7
2018
£000
13
1
5
-
9
-
2017
£000
8
2
-
7
-
Sale of
Amounts owed by
goods and services
related parties
2018
£000
3,180
1
30
2017
£000
2,489
-
-
2018
£000
883
-
36
2017
£000
708
-
-
(1) Leeds Innovation Centre Limited is a company which is connected to The University of Leeds. Tracsis plc rents its office accommodation,
along with related office services, from this company.
(2) Ashtead Plant Hire Co Limited is a subsidiary of Ashtead Group plc (Ashtead) of which Chris Cole is Chairman. SEP Limited, one of the
Group’s subsidiaries purchased goods and services from Ashtead during the year. All transactions with Ashtead took place at arm’s length
commercial rates and were not connected to Mr Cole’s position at Ashtead. SEP Limited traded with Ashtead prior to its acquisition by Tracsis
plc.
(3) Flash Forward Consulting Limited is a related party as John Nelson served as a Non-executive Director of Tracsis plc during the year and
also Chairman of Flash Forward Consulting Limited
(4) Citi Logik Limited, Nutshell Software Limited, and Vivacity Labs Limited, are related parties by virtue of the Group’s shareholding in these
entities.
(5) WSP UK Limited (WSP) is a company which is connected to Chris Cole who serves as non-executive Chairman of Tracsis plc and also of
WSP Global Inc, WSP’s parent company. Sales to WSP took place at arm’s length commercial rates and were not connected to Mr Cole’s
position at WSP.
Terms and conditions of transactions with related parties
The purchases from related parties are made at normal market prices. Outstanding balances that relate to trading balances are
unsecured, interest free and settlement occurs in cash. There have been no guarantees provided or received for any related
party receivables or payables.
Compensation of key management personnel of the Group
The Group considers the key management personnel to be its directors and the directors of the Group’s subsidiaries. Full details
of their compensation are set out below:
Total remuneration
Share based payment charges
2018
£’000
2,214
451
2,665
2017
£’000
1,589
495
2,084
TRACSIS PLC | 65
Notes to the Consolidated Financial Statements continued
28
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 £352,000
(2017: £303,000). There were outstanding contributions at 31 July 2018 of £62,000 (2017: £36,000).
29
Group entities
Below are the subsidiary undertakings which contribute to the Group results:
Held by Tracsis plc
Principal activity Country of incorporation
Tracsis Rail Consultancy Limited (1)
Rail industry consultancy
England and Wales
Tracsis Passenger Counts Limited (1)
Rail industry consultancy
England and Wales
Safety Information Systems Limited (1)
MPEC Technology Limited (1)
Tracsis Traffic Data Limited (2)
Datasys Integration Limited (1)
Tracsis Retail & Operations Limited (1)
SEP Limited (1)
SEP Events Limited (1)
Ontrac Technology Limited (1)
Ontrac Limited (1)
S-H TrafficData Solutions Private Limited (6)
Tracsis Travel Compensation Services
Limited (1)
Delay Repay Sniper Limited (1)
S Dalby Consulting Limited (1)
Sky High Data Capture Limited (2)
Sky High Traffic Data Limited (2)
The Web Factory Birmingham Limited (2)
Forsyth Whitehead & Associates Limited (2)
Sky High Technology (Scotland) Limited (2)
Count on Us Traffic Limited (2)
Burra Burra Distribution Limited (2)
Sky High NCS Limited (2)
Halifax Computer Services Limited (2)
Skyhightraffic Limited (2)
The Traffic Survey Company Limited (2)
The People Counting Company Limited (2)
Myratech.net Limited (2)
Footfall Verification Limited (2)
Minority investments:
Citi Logik Limited (3)
Nutshell Software Limited (4)
Vivacity Labs Limited (5)
Software and consultancy
Rail industry hardware &
Datalogging
Transportation data collection
England and Wales
England and Wales
England and Wales
Holding Company
England and Wales
Rail industry software
Event planning & traffic
management
Dormant
England and Wales
England and Wales
England and Wales
Holding company
England and Wales
Rail industry software
England and Wales
Data processing
India
Rail industry software
England and Wales
Rail industry software
England and Wales
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
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
England and Wales
Mobile Network Data Analysis
Mobile application
development
Machine Learning technology
England and Wales
England and Wales
England and Wales
17.2%
37.8%
23.3%
% ordinary
share
capital
owned
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
66 | Annual Report and Accounts 2018
Notes to the Consolidated Financial Statements continued
29
Group entities (continued)
The registered offices of the subsidiaries are as follows:
(1)
(2)
(3)
(4)
(5)
(6)
Leeds Innovation Centre, 103 Clarendon Road, Leeds, England, LS2 9DF
Templar House, 1 Sandbeck Court, Sandbeck Way, Wetherby, England LS22 7BA
Albury Mill Mill Lane, Chilworth, Guildford, England, GU4 8RU
Floor 1, Baltimore House, Baltic Business Quarter, Gateshead, Tyne And Wear, England, NE8 3DF
International House 24 Holborn Viaduct, City Of London, London, England, EC1A 2BN
No.61, 2nd Main, 1st Block, Koramangala, Bangalore – 560034, India
30
Dividends
The Group introduced a progressive dividend policy during previous years. The cash cost of the dividend payments is below:
Final dividend for 2015/16 of 0.70p per share paid
Interim dividend for 2016/17 of 0.60p per share paid
Final dividend for 2016/17 of 0.80p per share paid
Interim dividend for 2017/18 of 0.70p per share paid
Total dividends paid
The dividends paid or proposed in respect of each financial year is as follows:
2018
£000
-
-
225
198
423
2017
£000
195
167
-
-
362
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 paid
Interim dividend for 2015/16 of
0.50p per share paid
Final dividend for 2015/16 of 0.70p
per share paid
Interim dividend for 2016/17 of
0.60p per share paid
Final dividend for 2016/17 of 0.80p
per share paid
Interim dividend for 2017/18 of
0.70p per share paid
Final dividend for 2017/18 of 0.90p
per share proposed
2018
£000
-
-
-
-
-
-
-
-
-
-
-
-
198
255
2017
2016
2015
2014
2013
2012
£000
£000
£000
£000
£000
£000
-
-
-
-
-
-
-
-
-
-
167
225
-
-
-
-
-
-
-
-
-
-
137
195
-
-
-
-
-
-
-
-
-
-
106
164
-
-
-
-
-
-
-
-
-
-
89
119
-
-
-
-
-
-
-
-
-
-
75
102
-
-
-
-
-
-
-
-
-
-
48
87
-
-
-
-
-
-
-
-
-
-
-
-
The total dividends paid or proposed in respect of each financial year ended 31 July is as follows:
Total dividends paid per share
2018
1.6p
2017
1.4p
2016
1.2p
2015
1.0p
2014
0.8p
2013
0.7p
2012
0.55p
The dividend will be payable on 15 February 2019 to shareholders on the Register at 1 February 2019.
TRACSIS PLC | 67
Notes to the Consolidated Financial Statements continued
31
Reconciliation of adjusted profit metrics
In addition to the statutory profit measures of Operating profit and profit before tax, the Group quotes Adjusted EBITDA and
Adjusted profit. These figures are relevant to the Group and are provided to provide a comparison to similar businesses and are
metrics used by Equities Analysts who cover the Group.
Adjusted EBITDA is defined as Earnings before finance income, tax, depreciation, amortisation, exceptional items, other
operating income, and share-based payment charges and share of result of equity accounted investees.
Adjusted EBITDA can be reconciled to statutory profit before tax as set out below:
Profit before tax
Finance income / expense – net
Share-based payment charges
Exceptional items
Other operating income
Amortisation of intangible assets
Depreciation
Share of result of equity accounted investees
Adjusted EBITDA
2018
£000
8,275
8
1,193
(2,572)
(214)
1,774
760
201
9,425
2017
£000
4,616
23
1,300
139
(134)
1,674
799
77
8,494
Adjusted profit is defined as Earnings before finance income, tax, amortisation, exceptional items, other operating income, share-
based payment charges, and share of result of equity accounted investees.
Adjusted profit can be reconciled to statutory profit before tax as set out below:
Profit before tax
Finance income / expense – net
Share-based payment charges
Exceptional items
Other operating income
Amortisation of intangible assets
Share of result of equity accounted investees
Adjusted profit
Adjusted EBITDA reconciles to adjusted profit as set out below:
Adjusted EBITDA
Depreciation
Adjusted profit
2018
£000
8,275
8
1,193
(2,572)
(214)
1,774
201
8,665
2018
£000
9,425
(760)
8,665
2017
£000
4,616
23
1,300
139
(134)
1,674
77
7,695
2017
£000
8,494
(799)
7,695
32
Events after the Balance Sheet Date
An amount of £2.1m was paid in respect of the acquisition of Ontrac Limited following the finalisation of the amounts due to the
Sellers under the terms of the Share Purchase Agreement.
68 | Annual Report and Accounts 2018
Financial Statements
Company Balance Sheet (prepared under FRS 101)
as at 31 July 2018
Company number: 05019106
Non-current assets
Property, plant and equipment
Investments
Deferred tax assets
Current assets
Cash and cash equivalents
Trade and other receivables
Total assets
Non-current liabilities
Contingent consideration
Current liabilities
Trade and other payables
Contingent consideration
Total liabilities
Net assets
Capital and reserves
Called up share capital
Share premium reserve
Merger reserve
Retained earnings
Total equity
Note
34
35
39
36
38
37
38
40
2018
£000
342
38,845
360
39,547
10,152
2,608
12,760
2017
£000
328
34,867
369
35,564
7,648
2,866
10,514
52,307
46,078
1,100
1,100
-
-
10,304
2,165
12,469
9,830
5,041
14,871
13,569
14,871
38,738
31,207
113
6,243
3,160
29,222
38,738
112
5,948
3,010
22,137
31,207
The Company’s profit for the year, after dividends received was £6,315,000 (2017: £3,855,000)
The financial statements were approved and authorised for issue by the Board of Directors on 8 November 2018 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 | 69
Total
equity
£000
31,207
6,315
(423)
1,193
150
296
Financial Statements
Company Statement of Changes in Equity
At 1 August 2017
Profit and total comprehensive
income
Dividends
Share based payment charges
Shares issued as consideration
for business combinations
Exercise of share options
At 31 July 2018
At 1 August 2016
Profit and total comprehensive
income
Dividends
Share based payment charges
Exercise of share options
At 31 July 2017
Share
capital
£000
112
Share
premium
£000
5,948
Merger
reserve
£000
3,010
Retained
earnings
£000
22,137
-
-
-
-
1
113
-
-
-
-
295
6,243
-
-
-
150
-
6,315
(423)
1,193
-
-
3,160
29,222
38,738
Share
capital
£000
110
Share
premium
£000
5,622
Merger
reserve
£000
3,010
Retained
earnings
£000
17,344
-
-
-
2
112
-
-
-
326
5,948
-
-
-
-
3,855
(362)
1,300
-
Total
equity
£000
26,086
3,855
(362)
1,300
328
3,010
22,137
31,207
The following describes the nature and purpose of each reserve:
Reserve
Share capital
Share premium
Merger reserve
Retained earnings
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
Cumulative net profits recognised in the income statement. The share based payment
reserve which was previously shown separately was incorporated into retained earnings
during the previous year.
The accompanying notes form an integral part of these financial statements
70 | Annual Report and Accounts 2018
Financial Statements
Notes to the Company Balance Sheet
33
Company accounting policies
Tracsis plc (“the Company”) was incorporated and is domiciled in the United Kingdom. Its registered office is Leeds Innovation
Centre, 103 Clarendon Road, Leeds, LS2 9DF, registered number 05019106. The principal activity of Tracsis plc is that of a
holding company and also software development and consultancy for the rail industry.
The company’s accounting reference date is 31 July.
Basis of preparation
The financial statements have been prepared in accordance with Financial Reporting Standard 101 ‘Reduced Disclosure
Framework’ (“FRS 101”) which has been applied.
The principal accounting policies adopted in the preparation of the financial statements are set out below. The policies have
been consistently applied to all the years presented, unless otherwise stated.
The financial statements have been prepared on a historical cost basis. The presentation currency used is sterling and amounts
have been presented in round thousands (“£000s”).
Disclosure exemptions adopted:
In preparing these financial statements the company has taken advantage of all disclosure exemptions conferred by FRS 101.
Therefore these financial statements do not include:
•
•
•
•
•
•
•
certain comparative information as otherwise required by EU endorsed IFRS;
certain disclosures regarding the company’s capital;
a statement of cash flows;
the effect of future accounting standards not yet adopted;
these financial statements do not include certain disclosures in respect of share based payments.
the disclosure of the remuneration of key management personnel; and
disclosure of related party transactions with other wholly owned members of the Tracsis plc group of companies.
In addition, and in accordance with FRS 101 further disclosure exemptions have been adopted because equivalent disclosures
are included in the Company’s financial statements.
TRACSIS PLC | 71
Notes to the Company Balance Sheet continued
33
Company accounting policies (continued)
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.
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.
Property, plant and equipment
Property, plant and equipment is 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
income statement in the year.
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 Company’s liability for current tax is calculated using tax rates that have been
enacted at the balance sheet date.
Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and
liabilities and their carrying value in the financial statements. The principal temporary differences arise from depreciation on
plant and equipment and share options granted by the Group to employees and directors.
Deferred tax assets and liabilities are measured on an undiscounted basis at the tax rates that are expected to apply when the
related asset is realised or liability is settled, based on tax rates and laws enacted or substantively enacted at the balance sheet
date. Where the deferred tax asset recognised in respect of share-based payments would give rise to a credit in excess of the
related accounting charge at the prevailing tax rate the excess is recognised directly in equity.
Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the
temporary differences can be utilised.
72 | Annual Report and Accounts 2018
Notes to the Company Balance Sheet continued
33
Company accounting policies (continued)
Leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of
ownership to the lessee. All other leases are classified as operating leases. 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.
Share based payments
The Company’s accounting policies followed are in all material regards the same as the Group’s policy as shown on page 39.
Where there are charges relating to subsidiary undertakings, these are borne by the relevant subsidiary undertakings via a
recharge.
The Company has not presented its own profit and loss account as permitted by Section 408 of the Companies Act 2006. The
Company’s profit after taxation for the year amounted to £6,315,000 after receiving dividends from subsidiary undertakings of
£3,350,000 and an exceptional contingent consideration credit of £2,653,000 (2017: profit of £3,855,000 after receiving
dividends of £3,550,000).
34
Property, plant and equipment
Cost
At 1 August 2017
Additions
At 31 July 2018
Depreciation
At 1 August 2017
Charge for the year
At 31 July 2018
Net book value
At 31 July 2017
At 31 July 2018
*Includes land of £100,000 which is not depreciated
35
Investments
At 1 August 2017
Additions
At 31 July 2018
Freehold
Land & Computer
Buildings*
equipment
£000
£000
400
-
400
78
12
90
322
310
34
34
68
28
8
36
6
32
Total
£000
434
34
468
106
20
126
328
342
Shares in, and loans to
subsidiary
undertakings
£000
34,867
3,978
38,845
TRACSIS PLC | 73
Notes to the Company Balance Sheet continued
35
Investments (continued)
The companies in which Tracsis plc’s interest is more than 10% at the year end are as follows:
Name
Subsidiary undertakings:
Tracsis Rail Consultancy
Limited
Tracsis Passenger Counts
Limited
Safety Information Systems
Limited
Country of
incorporation
Class and
percentage
Principal activity
of shares held
Holding
England and Wales
Rail industry consultancy
Ordinary 100%
Direct
Rail industry ancillary
services
Ordinary 100%
Direct
England and Wales
England and Wales
MPEC Technology Limited
England and Wales
Tracsis Traffic Data Limited
England and Wales
Software and consultancy
Rail industry hardware &
datalogging
Transportation data collection
Datasys Integration Limited
Tracsis Retail & Operations
Limited
England and Wales
Holding Company
England and Wales
Rail industry software
SEP Limited
England and Wales
SEP Events Limited
England and Wales
Event planning & traffic
management
Dormant
Ontrac Technology Limited
England and Wales
Holding Company
England and Wales
Rail industry software
India
Data processing
Ordinary 100%
Indirect
England and Wales
Rail industry software
England and Wales
Rail industry software
Ordinary 100%
Ordinary 100%
Ordinary 100%
Ordinary 100%
Ordinary 100%
Ordinary 100%
Ordinary 100%
Ordinary 100%
Ordinary 100%
Direct
Direct
Direct
Direct
Indirect
Direct
Indirect
Direct
Indirect
Ordinary 100%
Ordinary 100%
Ordinary 100%
Ordinary 100%
Ordinary 100%
Indirect
Direct
Direct
Indirect
Indirect
Dormant
Dormant
Dormant
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
Dormant
Ordinary 100%
Indirect
Dormant
Ordinary 100%
Indirect
Dormant
Dormant
Ordinary 100%
Ordinary 100%
Indirect
Indirect
Ontrac Limited
S-H TrafficData Solutions
Private Limited
Tracsis Travel Compensation
Services Limited
Delay Repay Sniper Limited
S Dalby Consulting Limited
England and Wales
Sky High Data Capture Limited
England and Wales
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
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
Footfall Verification Limited
England and Wales
Minority investments
Citi Logik Limited
England and Wales
Mobile network data analysis
Ordinary 17.2%
Nutshell Software Limited
England and Wales Mobile application development
Ordinary 37.8%
Vivacity Labs Limited
England and Wales
Machine learning technology
Ordinary 23.3%
Direct
Direct
Direct
74 | Annual Report and Accounts 2018
Notes to the Company Balance Sheet continued
36
Trade and other receivables
Trade receivables
Amounts owed by group undertakings
Other debtors
Corporation Tax
Prepayments
2018
£000
294
1,168
362
756
28
2,608
2017
£000
356
1,573
348
577
12
2,866
The carrying value of trade receivables approximates to the fair value. Amounts owed by group undertakings are interest free
and repayable on demand.
Corporation tax is recoverable from other Group companies as Tracsis plc acts as the lead company for the Group’s Payment
on Account regime.
37
Trade and other payables
Trade payables
Other tax and social security
Amounts owed to group undertakings
Accruals and deferred income
2018
£000
125
60
8,996
1,123
10,304
2017
£000
27
45
9,229
529
9,830
The carrying value of trade receivables approximates to the fair value. Amounts owed to group undertakings are interest free
and repayable on demand.
38
Contingent consideration
During the year, the Group acquired Travel Compensation Services Limited and Delay Repay Sniper Limited. Under the share
purchase agreement, contingent consideration is payable which is linked to the profitability of the acquired businesses for a
three year period post acquisition. The maximum amount payable is £4,700,000. The fair value of the amount payable was
assessed at £1,200,000.
During the year, deferred and contingent consideration of £323,000 was paid in respect of the SEP acquisition which was made
in the year ended 31 July 2016, and £nil was paid in respect of the Ontrac acquisition which was made in the year ended 31
July 2016. An amount of £2,058,000 was paid after the Balance Sheet date in respect of the Ontrac acquisition which was
agreed with the Sellers and also £7,000 in respect of SEP Limited.
At the balance sheet date, the Directors assessed the fair value of the remaining amounts payable which were deemed to be
as follows.
SEP Limited
Ontrac Limited
Travel Compensation Services Limited & Delay Repay Sniper Limited
2018
£000
7
2,058
1,200
3,265
2017
£000
330
4,711
-
5,041
An exceptional release to the Statement of Comprehensive Income was recognised amounting to £2,653,000
TRACSIS PLC | 75
2018
£000
2,165
1,100
3,265
2017
£000
5,041
-
5,041
2018
£000
(369)
9
(360)
2018
£000
-
(360)
(360)
2017
£000
(436)
67
(369)
2017
£000
(3)
(366)
(369)
Notes to the Company Balance Sheet continued
38
Contingent consideration (continued)
The ageing profile of the remaining liabilities can be summarised as follows:
Payable in less than one year
Payable in more than one year
Total
39
Deferred tax (asset) / liability
At start of the year
Charge to income statement during the year
At end of the year
The deferred tax asset can be split as follows:
Accelerated Capital Allowances
Share options
At end of the year
40
Share capital
Allotted, called up and fully paid:
Ordinary shares of 0.4p each
2018
2018
2017
2017
Number
£
Number
£
28,334,086
113,336
27,963,784
111,855
The following share transactions have taken place during the year ended 31 July 2018:
At start of the year
Issued as consideration for business combinations
Exercise of share options
At end of the year
2018
Number
2017
Number
27,963,784
27,546,259
28,571
341,731
-
417,525
28,334,086
27,963,784
76 | Annual Report and Accounts 2018
Notes to the Company Balance Sheet continued
41
Operating leases
Operating lease commitments.
Minimum lease payments are payable as follows:
Land and buildings:
Within one year
Between one and two years
42
Related Party Transactions
2018
£’000
26
-
2017
£’000
61
25
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
2018
£000
99
2017
£000
79
2018
£000
13
2017
£000
8
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.
Terms and conditions of transactions with related parties
The purchases from related parties are made at normal market prices. Outstanding balances that relate to trading balances are
unsecured, interest free and settlement occurs in cash. There have been no guarantees provided or received for any related
party receivables or payables.
Compensation of key management personnel of the Group
The Company considers the directors to be its key management personnel. Full details of their compensation are set out in the
Directors’ Remuneration Report.
Group information
Company Secretary and Registered
Office
Max Cawthra
Auditor
KPMG LLP
Leeds Innovation Centre
103 Clarendon Road
Leeds
LS2 9DF
1 Sovereign Square
Sovereign Street
Leeds
LS1 4DA
Telephone +44 (0) 845 125 9162
Principal bankers
Fax +44 (0) 845 125 9163
Registered number
05019106
Website
www.tracsis.com
HSBC Bank plc
33 Park Row
Leeds
LS1 1LD
TRACSIS PLC | 77
Nominated Advisor and
Stockbroker
finnCap Limited
60 New Broad Street
London
EC2M 1JJ
Registrars
Neville Registrars
18 Laurel Lane
Halesowen
West Midlands
B63 3DA
Additional bankers
Solicitors
Barclays
NatWest
Santander
Royal Bank of Scotland
Co-Operative
Rosenblatt Solicitors
9-13 St Andrew Street
London
EC4A 3AF