Annual Report & Accounts 2019
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
16
19
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25
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31
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2 | Annual Report and Accounts 2019
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 thirteen acquisitions and three investments. Today, the Group specialises in the provision
of software and a wide range of services for the rail, traffic data and wider transport industries.
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, a wide range of government agencies & local authorities, a variety of large engineering and
infrastructure companies, plus event organisers.
The Group’s products and services comprise two principal offerings:
• Rail Technology & Services
o Software: Industry strength optimisation, rail management, planning, timetabling safety & risk management
software 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;
o Systems development and data analytics that combine geographical information systems (GIS), location
technologies, data analytics and field computing from transportation, asset management, planning, and
environmental customers
Tracsis has multiple offices in the UK and Ireland which service our growing client base.
The business drives growth both organically and via strategic acquisition and has made thirteen acquisitions since coming to
market in 2007.
Financial highlights
for the year ended 31 July 2019:
• Revenues increased 24% to £49.2m (2018: £39.8m)
• Adjusted EBITDA* increased 12% to £10.5m (2018: £9.4m)
• Statutory Profit before Tax after exceptional items of £6.6m (2018: £8.3m)
• Cash balances of £24.1m (2018: £22.3m)
•
Full year dividend increased 13% to 1.8p per share (2018: 1.6p)
*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 Group 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 2018/9:
1 Organic
further sales from existing
products to UK
•
Five-year Framework Agreement secured with a major Train Owning Group
for our TRACS Enterprise product - Tracsis' largest software contract to
date
• Strong trading at our Infrastructure businesses – Remote Condition
•
Monitoring and Ontrac
Tracsis Travel Compensation Services secured new multi-year software
deals with UK rail clients
• High levels of software renewals and recurring revenue
•
Total organic revenue growth of 9%
2 Overseas Markets
continue to show promise
and remain relatively untapped
3
Acquisitions
• Compass
the
acquisition made by Tracsis and increases Irish presence
Informatics Limited acquisition marks
first overseas
• Sale in Australia secured for the Group’s Remote Condition Monitoring
technology, and further sales targeted in North America
• Existing overseas sales in Ireland, Sweden and New Zealand all continued
• Completion of three acquisitions in the year: Compass Informatics Limited,
Cash & Traffic Management Limited and Bellvedi Limited, with a total
revenue contribution of £5.9m
• Additional investments made into Vivacity Labs Limited and Citi Logik
Limited in the year
Further potential targets evaluated during the year
•
4 | Annual Report and Accounts 2019
Strategic Report
Chairman & Chief Executive Officer’s Report
A welcome from Chris Cole, Non-Executive Chairman
This was another good year for Tracsis. The completion of three further acquisitions combined with good levels of organic
growth, and increased levels of profitability has culminated in our 2019 results being in line with market expectations. The second
half of the year was particularly strong for the Group, reflecting seasonality in the business, strong underlying trading and the
timing of acquisitions made all of which is very pleasing.
This year was also important in that we achieved a successful transition of CEO from John McArthur to Chris Barnes which was
very smooth and is now complete, and is testament to the efforts of all involved. John continues to work for the Group in an
advisory role focused solely on acquisitions. Following his appointment, Chris Barnes, together with the senior management
team, has generated a strategic plan for the business to ensure that Tracsis maximises its future organic and acquisitive growth
opportunities.
Introduction
The year ended 31 July 2019 was another year of growth, with Group revenues of £49.2m, an overall increase of 24%, and
Group adjusted EBITDA of £10.5m an overall increase of 12%. This was achieved through a mix of good levels of organic
revenue growth, and also a good contribution from three acquisitions completed during the year. The full benefit of the new
acquisitions made will be realised in the next financial year. The Group’s financial position at year end remained strong, with
cash balances in excess of £24m and no debt, even after investing over £9m on acquisitions, investments, and paying £2.1m
of contingent consideration.
Business Overview
Tracsis specialises in providing a wide range of products and services to clients within the transport and traffic sector. The
Group’s market offering can be broadly categorised into two distinct offerings:
1. Rail Technology & Services:
• Operational Software: A suite of software products covering timetabling, resource and rolling stock planning and
optimisation, real time performance and control, service recovery, retail services, delay attribution and delay repay;
•
Infrastructure Software: A range of software products that are used to collect, manage, visualise and analyse rail
asset information. They deliver improvements in safety, productivity and communication by automating heavily
regulated business processes and reducing risk;
• Remote Condition Monitoring: Rail approved data loggers and sensors to monitor asset performance and predict
failure modes (level crossings, interlockings, switch machines, bus-bars etc.) supported by our own data
acquisition software platform; and
• Consultancy: Rail operations consultancy expertise and training covering operational planning and modelling,
franchise and concession support, data capture and evaluation and innovative bespoke software tool development.
2. Traffic & Data Services:
•
•
Traffic Surveys: Traditional and advanced transport data collection for all travel modes using ANPR, video and
mobile network data, manual survey methods, big data sources and increasingly AI technology;
Transport Insights: Provision of innovative and effective transport related advice, saving time and cost and
generating increased efficiencies through the provision of sustainable transport solutions supported by data
hosting and visualisation tools;
• Passenger Analytics: Software-delivered passenger research and statistical analysis for transport operators
using our skilled market research staff and digital data collection tools (activities include passenger counting, ticket
audits, mystery shopping and market research);
•
Location Analytics: Software, mobile app and analytical platform development combining Geographic Information
Systems (GIS), location technologies, data analytics and field computing across different industrial sectors (rail,
automotive, bus, utilities, environmental etc.); and
• Event Transport Management: covering planning, control, consultancy, signage, CSAS/PATO and car parking.
Technologies like Tracsis Live Traffic (TLT) are also offered to improve traffic monitoring and traffic flow in and out
of major event venues.
TRACSIS PLC | 5
Chairman & Chief Executive Officer’s Report continued
Financial Summary
Group revenues of £49.2m (2018: £39.8m) represent a 24% increase on the previous year which came via a combination of
organic growth of 9% (£3.5m) and by acquisition of 15% (£5.9m), which is a good mix of revenue growth. The adjustment in
respect of IFRS 15 had an impact of around £0.4m to revenues, and this was the first time that this new standard has been
adopted.
Adjusted EBITDA* of £10.5m was an increase of 12% on the previous year (2018: £9.4m), with Adjusted Profit** of £9.7m being
12% higher than the previous year (2018: £8.7m). Statutory Profit before Tax was £6.6m (2018: £8.3m), although the previous
year included 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. All of the Group’s key financial metrics show good growth on the previous year
and reflect a good mix of organic and acquired performance. A net exceptional item of £0.1m was recognised this year in respect
of the TCS acquisition made in the previous year, following a detailed review of the contingent consideration, and the carrying
value of the goodwill recognised previously in respect of this acquisition.
At 31 July 2019, the Group’s cash balances increased to £24.1m (2018: £22.3m), and cash generation continues to be strong.
Overall cash balances increased by £1.8m in the financial year, even after paying £9.6m in respect of the three companies that
were acquired during the year (£6.8m outflow net of cash acquired), investing £0.4m, and paying contingent consideration of
£2.1m in respect of the Ontrac acquisition. After taking account of these investments, the Group therefore generated £11.1m of
cash, which again demonstrates strong conversion of profits to cash. The Group continues to be debt free.
* 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:
£21.9m (2018: £19.0m)
Revenue
EBITDA *
£6.9m
Profit before Tax £6.7m
(2018: £6.8m)
(2018: £6.6m)
Software
Sales of Operational Software and Infrastructure software, excluding acquisitions, increased by 9% to £14.8m (2018: £14.1m)
which represents good growth. This takes account of the various revenue streams from our TRACS, Ontrac, COMPASS, Retail
& Operations, and Delay-Repay product suites. All software products continue to benefit from high renewal rates from existing
clients.
In January 2019, we were pleased to announce a significant five-year Framework Agreement with a major Train Owning Group
(which operates several Train Operating Company (TOC) franchises) for our TRACS Enterprise product, which will increase
operational resilience and performance, with the roll out well underway. In the fullness of time, this should lead to further revenue
and EBITDA growth for the Group, assuming roll out across the client owning Group’s other TOCs continues as planned. As part
of this offering, Tracsis also offers business change support and have launched an Alliancing model which aims to deliver a
ground breaking performance uplift to the industry.
We were also pleased to secure a significant order for data hosting services and licences with another major rail client. The
order was primarily a renewal and extension of existing arrangements over a two year period, with a value in excess of £2m.
The Ontrac business was also supported by winning a number of bespoke development projects, plus continued growth of its
core RailHub suite of desktop and mobile applications with multiple new subscriptions across the rail infrastructure sector of the
industry. Ontrac was also involved in supporting the development and implementation of exciting new platforms with its key
client, as well as developing ‘virtual reality on demand’ which enables users to virtually manage and optimise their rail
infrastructure assets.
Our Travel Compensation Services business successfully implemented its Delay Repay application into two new train operators,
and also launched its cross-TOC fraud platform Exposure, plus also its 'One Click' application to support political and consumer
demands for simplified/claim processing, for which it won an award, which was particularly pleasing.
The Group has invested heavily in its technology base and in March 2019, also relocated its Leeds headquarters to larger more
modern offices that are far better suited to accommodate our expanding software team and future growth ambitions.
6 | Annual Report and Accounts 2019
Chairman & Chief Executive Officer’s Report continued
Remote Condition Monitoring (RCM)
Revenues of £4.9m were significantly higher than the previous year (2018: £3.0m), with the growth being driven by high demand
from a key UK customer at the end of Control Period Five and this performance represents one of the strongest financial years
in this part of the Group’s history. Progress continues to be made in the North American market with paid trials with a number of
railroad and transit operators, and further sales were secured from other overseas geographies. The United States continues to
be a key target market and offers significant opportunities albeit with a longer sales cycle as we develop relationships with new
customers who require time to familiarise themselves with and system test the Group’s offering.
Consultancy
Consultancy and professional services revenue was £1.8m (2018: £1.9m) which was a good performance given the reduction
in franchise bid work compared to the previous year which demonstrates the resilience that has been built up in this part of the
Group; as we secured work with other government bodies, a variety of other train operating companies (TOCs), and several
multi-disciplinary engineering companies.
Acquisitions: Bellvedi
In the three months post acquisition, Bellvedi contributed £0.4m of revenue to the overall Group revenues and the full year
benefit will be experienced in the next financial year. In recent years, Bellvedi has grown rapidly, and its ATTUne software is a
key part of the TRACS Enterprise offering, in addition to having its own client base. The Bellvedi development team has been
increased in size to facilitate delivery to an expanding user base plus delivery on other large projects and new products, such
as ATTUne4C which brings the Bellvedi systems into the control room environment.
Overall EBITDA growth in the period in the Rail Technology and Services division was impacted by the mix of work delivered
during the period with a change in focus to the delivery of previously announced milestone based multi-year large software
development contracts for products like TRACS Enterprise at the expense of short-term bespoke development work.
Traffic & Data Services
Summary segment results:
£27.3m (2018: £20.8m)
Revenue
EBITDA *
£3.6m
Profit before Tax £2.9m
(2018: £2.6m)
(2018: £2.0m)
Traffic Surveys, Transport Insights and Passenger Analytics
Revenues of £14.7m were delivered in the year (2018: £14.5m), accompanied by an increase in profitability. Notable highlights
in the year include delivery of the largest set of National Road Traffic Census survey sites across the UK in a single financial
year, the utilisation of innovative Artificial Intelligence software (through the Group’s investment in Vivacity Labs) to deliver large
scale surveys for a major client, growth of our data analytics capabilities and delivery of innovative product solutions and
dashboards to clients.
Our Passenger Analytics team were pleased to have maintained historic levels of traditional manual count business whilst also
winning new business including a multi-year ticketless travel survey framework. The business also continues to develop its own
software product for automatic train loading data, which is expected to be a key technology platform for future growth.
Location Analytics
The majority of the revenue of £2.4m from Compass Informatics since its acquisition was derived from Ireland, though the
business has secured a number of projects/contracts with UK water companies which will continue to be delivered in financial
year 2019-20. The strategy remains to grow their business footprint in the UK, by selling its range of leading products and
services to the Group’s existing UK client base, where there are clear market opportunities. Much of the current revenue is
derived from Irish government bodies which provides stability for some of the larger more innovative projects to be undertaken.
The Compass business was successful in securing some awards for its work at the National Biodiversity Data Centre and the
BIO platform, being delivered to three UK water companies, was a finalist at the Water Industry Awards.
Event Transport Management
Our existing SEP business achieved revenues of £7.1m (2018: £6.3m) which again showed further growth. A good contribution
of £3.1m from CTM was experienced, which takes total combined revenue from this part of the Group in the year to £10.2m
which is a significant offering. Both businesses continue to work with some extremely high-profile events and organisations,
which are blue chip by nature, and in many cases secured under multi-year contracts, with one large contract in particular being
renewed in the year.
TRACSIS PLC | 7
Chairman & Chief Executive Officer’s Report continued
Integration planning for CTM is well underway, and synergy benefits are expected to be progressively realised once the two
businesses are combined into one Combined Events Business. The businesses have already started working together to exploit
each other’s strengths and ensuring that internal capabilities are maximised by taking best practice from each business.
The business successfully delivered traffic management and car parking for record numbers of people at key events, plus the
planning, delivery, monitoring and control of Transport Management Systems for other key clients, and also successfully
delivered Tracsis Live Traffic (TLT) into several major events. The Group also works with one of the largest outdoor music
festivals in the world which was again successfully delivered on a huge scale.
In general for the Traffic & Data Services Division it was pleasing to see an improvement in overall profit margins versus the
previous year, which has been a key strategic objective for some time now.
Dividends
In February 2012, the Board implemented a progressive dividend policy and the Group intends to maintain this going forwards.
An interim dividend of 0.8p per share was paid in April 2019. A final dividend of 1.0p per share in respect of 2018/19 is proposed,
to take the full year dividend to 1.8p. This represents a 13% increase on the previous year’s dividend of 1.6p per share.
The dividend remains well covered by the Group’s profitability and cash position, which supports its primary objective of growth
via acquisition and through further development of new products and services. The Board remains 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 14 February 2020 to shareholders on the register on 31 January 2020.
Acquisitions
We were pleased to have completed three acquisitions in the period, all of which will increase and enhance our overall product
and service offering. These three acquisitions contributed combined revenues of £5.9m to Group numbers in the year.
Compass Informatics
On 15 January 2019 we acquired Compass Informatics, a long-established Dublin based business which we have known for a
number of years now and is a natural fit with our Traffic & Data Services division in terms of our strategy of improving our data
analytic capabilities. This acquisition, our first overseas transaction, strengthens the product and service offerings to our client
base in the UK and also benefits those existing clients retained by Compass Informatics in Ireland, and offers potential benefit
and cross-sell potential to Tracsis' existing transport clients. Compass Informatics is a software development and data analytics
company that specialises in combining geographical information systems (GIS), location technologies, data analytics and field
computing. The business works across a variety of sectors but derives most of its revenue from transport, asset management,
planning, and environmental clients.
The acquisition consideration comprised an initial cash payment of €3.15m which was funded out of Tracsis cash reserves and
the issue of shares in Tracsis to a value of €350k. An additional payment of €0.5m was made to reflect the net current asset
position of the business, and additional contingent consideration of up to €2.0m is payable subject to Compass Informatics
achieving certain stretched financial targets in the three years post acquisition.
CTM
On 16 January 2019, we acquired CTM, a well-established provider of event traffic planning, admission control, and a range of
other event-related services to some of the UK's largest and most prestigious event clients. CTM is highly complementary to the
Tracsis Traffic & Data Services division with good cross-sell potential along with clear synergy benefits with Tracsis' existing
SEP Events business which was an excellent acquisition for Tracsis, that should lead to margin improvement in the fullness of
time.
CTM has an excellent track record of organic growth, client retention and profitability over many years. The acquisition
consideration comprised an initial cash payment of £1.3m which was funded out of Tracsis cash reserves and the issue of shares
in Tracsis to a value of £0.15m, along with an additional payment of £0.5m to reflect the net current asset position of the business.
Additional contingent consideration of up to £0.75m is payable subject to CTM achieving certain stretch financial targets in the
two years post acquisition.
Bellvedi
On 30 April 2019, we acquired Bellvedi, a software company that operates within the rail industry and specialises in timetabling
optimisation software. Bellvedi's key product, ATTUne, is a timetable planning software package and is extensively used by
Train Operating Companies, infrastructure providers, franchise bidding teams and rail consultancies for the creation, validation,
optioneering and optimisation of timetables in time pressured environments. Tracsis and Bellvedi have partnered on several
significant software projects - most notably on Tracsis' recent major contract wins - with the ATTUne software forming a key part
of the TRACS Enterprise offering. As such, the acquisition of Bellvedi is strategically important and highly complementary to
the Tracsis rail software offering and future product roadmap.
8 | Annual Report and Accounts 2019
Chairman & Chief Executive Officer’s Report continued
The acquisition consideration comprised an initial cash payment of £3.7m which was funded out of Tracsis cash reserves and
the issue of shares in Tracsis to a value of £0.3m. An additional payment of circa £0.9m was made to reflect the net current
asset position of the business at completion. Additional contingent consideration of up to £7.9m is payable subject to Bellvedi
achieving certain stretched EBITDA financial targets in the four years post acquisition.
Integration of all newly acquired businesses is well underway. Due to the timing of the acquisitions, only a partial contribution
from the acquired businesses was made in the period, with the full impact coming in the next financial year.
Furthermore, the Group exercised a £0.3m warrant in Vivacity Labs, and also participated in a fundraising for Citi Logik for
£0.1m, which rounded off a busy year of acquisitions and investments. The Group remains debt free and continues to benefit
from a strong market reputation with a good pipeline of potential acquisition opportunities.
We continue to have a strong pipeline of acquisition opportunities under consideration.
The UK’s decision to leave the European Union
There is wider economic uncertainty as a result of the UK’s decision to leave the European Union. As at the date of this report
the Directors consider that the risks specific to Tracsis are reduced, due to the fact that current sales to European Union
customers are c. 5% of overall Group sales, there is no significant reliance on a supply chain involving European Union suppliers
or workforce.
Board Changes and people
Chris Barnes joined the Group during the year, succeeding John McArthur as Chief Executive Officer on 1 May 2019, and the
transition is now complete. John continues to work with Tracsis in a part-time advisory capacity primarily supporting our M&A
activities. John Nelson stood down as a Non-Executive Director on 1 November 2018, and was replaced by Mac Andrade. On
behalf of everyone at Tracsis, we would like to thank John McArthur for his significant contribution, and achievements since
founding Tracsis. We would also like to thank John Nelson for his counsel as a Non-Executive Director over the years and also
welcome Mac Andrade to the Board.
We would also like to thank the entire Tracsis team for all of the hard work and dedication that has gone into the successful
delivery of new products and projects this year.
Summary and Outlook
2018-19 was another good year for Tracsis and an important one in terms of the evolution of the Group, with three acquisitions
being made and a change of Chief Executive, all delivered whilst achieving further growth in revenue and profitability and
maintaining our excellent health and safety record, which was a great team effort.
Tracsis continues to operate in an area where there are strong drivers for business growth. These include
• Rapid Urbanisation: driven by population growth, finite capacity for the movement of goods and people,
transformational technology changes and Mobility as a Service, all underpinned by advanced data analytic
methodologies and the growing concept of smart cities and infrastructure;
• Big Data / Connectivity: driven by huge growth in connected devices, intelligent transport solutions, condition monitoring
and data visualisation all leading to the opportunity to make more informed decisions and preventative interventions;
• Enhanced Performance: a growing requirement across the transportation industry for greater levels of operational
efficiency, performance improvement, asset optimisation and enhanced safety all with lower operational costs and real
time control.
Tracsis’ range of products and services are well suited to support all of these growth drivers, given the Group offers a wide range
of products and services covering data acquisition and smart analytics, virtualisation and digitalisation of assets, remote
condition monitoring and predictive maintenance and ‘real time’ control supported as hosted enterprise solutions.
For this reason, the directors believe that Tracsis is well placed for further growth and have confidence in the core markets that
the Group serves and operates in.
Thanks go to our colleagues, clients and other industry partners, and we look forward to continuing to share further success
with them in the future.
Chris Cole, Chairman
November 14, 2019
Chris Barnes, Chief Executive Officer
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:
Area of Group
impacted:
Mitigation:
Change in the year:
Impact of EU Referendum
All parts of the Group
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
remains vigilant of
these
influences.
leaving
Increased in the year as the
the
date
for
European Union
gets
closer. Increased risk due
of
to
Compass
Informatics
though this may also be an
opportunity.
acquisition
the
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,
and also acquired Compass
Informatics in Ireland during the
year.
The Group
reduction
Rail industry structure changes
present
structure
The
and
organisation of the UK rail industry
may be changed in the future, or by
a future government, which may
have an impact on the Group. The
Group continues
to derive a
significant proportion of its results
from the UK rail industry.
1. Rail Technology
& Services
rail
to
review on
the
Increased due
rail
Williams
increased
franchising,
talk
levels of political
around
industry
the
challenges that have been
publicised in the press. The
Labour party has indicated
to
it
renationalise
rail
industry which may lead to
risks but also opportunities.
seek
the
would
of
Several
the Group’s
products and services are
expected to be still required
regardless of any changes to
the structure of the industry as
they have a clear value
proposition (albeit some more
than others) and return on
Group
investment.
expects
industry
that
requirements for certain of its
continue,
solutions
will
regardless of
industry
structure. However, in certain
circumstances, there is very
little
against
politically driven changes or
other structural changes.
mitigation
The
the
Reduced government spending
The Group derives
revenues
directly and indirectly from the UK
and Irish governments, and would
be significantly impacted if these
funding streams were
public
for example due
reduced,
to
reviews, a general
spending
of
a
or
election,
government, though this may also
lead to additional opportunities.
change
1. Traffic & Data
Services
2. Rail Technology &
Services
increased
Increased in the year given
political
the
and
uncertainty
of
announcement
the
General
December
Election, plus also
the
uncertainty from the impact
of leaving the European
Union.
As
the Group grows and
diversifies its revenue streams,
the exposure to government
spending should reduce but
will always be a risk for parts of
the Traffic & Data Services
Division due to the nature of its
customer base, which cannot
be mitigated against. For the
Rail Technology & Services
Division, the Group seeks to
ensure that its offerings have a
clear return on investment and
value proposition, to ensure
demand remains high.
10 | Annual Report and Accounts 2019
Risk Management continued
Description/Potential impact:
Area of Group
impacted:
Reliance on certain key customers
1. Rail Technology &
Services
2. Traffic & Data
Services
from
this customer.
The Group has a large number of
customers but derives a significant
amount 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
In
orders
addition, the Group’s Traffic & Data
Services division operates under a
number of Framework Agreements
with one
from
whom a significant amount of
revenue is obtained. Across the
Group, there are a number of key
customers which contribute
to
large amounts of revenue. The
Group’s remains exposed to the
largest customer’s funding cycles
and procurement processes.
large customer
Mitigation:
Change in the year:
As the Group continues to
grow, the exposure to and
reliance on any one customer
will reduce, relative to total
Group revenue. Although there
will always be an exposure to
certain key customers,
it
manages this risk by managing
customer
requirements
proactively to understand their
needs and respond to them to
ensure that its products and
services are embedded with
the customer as much as
possible.
The acquired businesses in
the year have their own key
customers to add to the
exposure.
Total revenues from the
Group’s largest customer
of Group
18%
were
revenue (2018: 14%).
The Traffic & Data Services
Division accounted for over
half of total Group revenues
and derived £3.7m (2018:
£3.2m) from one particular
customer.
Competition
The success of the Group could
lead to increased competition, in
particular in Traffic & Data Services
where our products and services
can be more easily replicated. The
Group has a wide range of product
and service offerings and some are
more exposed to more competition
than others. When tendering for
certain major contracts within the
Group’s Rail Technology &
Services Division,
competition
from European companies seeking
to enter the UK market has been
experienced.
Attraction and retention of key
employees
The Group has a number of key
individuals, plus a wide and diverse
workforce. Skills and expertise in
the Group’s key markets are
specialist and can be difficult to find
or develop, and so growth of the
business may be impacted should
key individuals leave employment,
or if the business is unable to
attract, recruit and develop staff for
its growth plans.
1. Traffic & Data
Services
2. Rail Technology &
Services
All parts of the Group.
pays
pricing
close
The Group
attention
and
to
customer satisfaction for areas
subject to the most competition
and seeks to be competitively
priced where possible. The
Group attempts to ensure its
products and services have a
clear value proposition and
return on investment with the
objective of getting its products
and services embedded within
its customer base to reduce the
to potential new
exposure
entrants.
to offer
The Group seeks
competitive
remuneration
packages, and also offers
incentive
share
various
schemes to staff in order to
attract and retain good calibre
employees. The Group seeks
to offer career development
opportunities in order to offer
its staff with opportunities to
progress within the business.
Unchanged in the year.
Increased in the year.
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
threatened should competitors or
other new market entrants develop
rival
technology develop more
effective ways of doing things,
which potentially make some of the
Group’s services redundant and
could potentially lead to reduced
levels of business.
Customer pricing pressure
Price pressure
from customers
may potentially result in margins
being reduced over time if lower
revenues are achieved than those
which were achieved historically.
1. Traffic & Data
Services
2. Rail Technology &
Services
Project delivery
TRACSIS PLC | 11
Mitigation:
Change in the year:
No change in the year.
The Group continues to invest
in its development team for its
technology products to ensure
that they remain up to date and
also relevant to the customer
base. It also receives feedback
from its clients about
their
requirements require from the
products which helps to ensure
that
relevant.
remain
Some of the Group’s offerings
are protected by customer
relationships,
Framework
Agreements, contractual terms
and also a barrier to entry is the
significant development costs
required to enter the market,
which provides protection.
they
No change in the year.
for
tenders
The Group seeks to operates a
lean organisation structure in
to mitigate pricing
order
pressure,
constantly
and
searches for ways to ensure
that its cost base operates
effectively.
and
efficiently
Pricing
and
submitted
enquiries
is
accordingly on
the most
favourable commercial terms.
The Group is committed to
ensuring customer satisfaction
and offering a compelling
return on investment for its
products with a clear value
the
so
proposition,
customer base will continue to
adopt its products due to their
quality and business case, with
price being of lower concern.
that
1. Rail Technology &
Services
2. Traffic & Data
Services
The Group continues to deploy
an extensive delivery team,
following a major recruitment
exercise, and has worked with
the client
to establish a
programme and project plan to
ensure that the deliverables
can be achieved. Event related
work is subject to significant
advance planning.
additional
Increased in the year due to
contract
the
also
secured,
and
additional event
related
work within the Traffic &
Data Services Division
CTM
following
acquisition
the
Company
The Group has a significant
contract with a major UK Train
Operating
which
contains a number of deadlines for
implementation,
in accordance
with the contractual requirements
and timeframes. In addition, during
the current year,
the Group
secured a multi-year Framework
Agreement with a major Owning
Group, and delivery of software
has
under
commenced in the year, which also
carries
deadlines.
Certain events withinin the Traffic
& Data Services Division are
significant and require large staff
deployments and delivery.
deliverable
contract
this
12 | Annual Report and Accounts 2019
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
locations across the country.
1. Traffic & Data
Services
2. Rail Technology
& Services
Increased in the year given
the CTM acquisition and the
proportion of overall group
revenue that is now derived
from
its combined
the
events businesses.
engages
The Group has a dedicated
Health & Safety team for its
Traffic & Data Services
Division, and where necessary
elsewhere
the
services of a specialist Health
& Safety Advisor. Business
unit heads also report on
Health & safety matters to the
Board at every board meeting.
The Group has a number of
policies,
and
method statements to provide
mitigation against health &
safety related risk.
procedures
Brand reputation
Any adverse publicity concerning
the Group, or any of its subsidiary
businesses may have an impact on
if
future
the
trading prospects
Group’s
adversely
brand
affected as a result of this.
is
Integration risk
each
integrate
The Group has made
three
acquisitions in the year and plans
to
acquired
business to various extents. In
particular,
to
combine SEP and CTM into one
Combined Events Business in the
fullness of time.
the Group plans
All parts of the Group
The Board maintains regular
dialogue with Operational staff
and Heads of Department and
so is made aware of any issues
so that corrective action can be
taken if necessary.
No change in the year.
1. Traffic & Data
Services
2. Rail Technology
& Services
Divisional management have a
plan for the integration of each
of the acquired businesses.
Increased in the year given
the acquisitions that took
place.
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. Sales to key UK clients, and contracted revenue for various Software products
ii. Sales to overseas customers in target markets
iii. Staff utilisation and chargeability
iv. Delivery of major projects against customer deliverables and deadlines
b. Traffic & Data Services:
i. Customer enquiries and conversion rates,
ii. Number of events and event days, plus casual staff costs relative to revenue
iii. Cross selling of products and services to the existing customer base
iv. Synergy savings achieved from consolidating business units
60
40
20
0
10
8
6
4
2
0
30
25
20
15
10
5
0
Revenue - £m
32.6
34.5
25.4
49.2
39.8
Revenue
2015
2016
2017
2018
2019
Profit Before Tax - £m
8.3
6.6
4.5
4.0
4.6
Adjusted EBITDA - £m (see note 31 for
reconciliation)
6.5
7.6
8.5
9.4
10.5
Adjusted EBITDA
2015
2016
2017
2018
2019
Basic Earnings Per Share - p
25.7
17.8
14.1
12.7
13.4
15
10
5
0
30
20
10
0
PBT
Basic EPS
2015
2016
2017
2018
2019
2015
2016
2017
2018
2019
Cash - £m
The strategic report has been approved by the Board of
Directors and signed on their behalf.
22.3
24.1
13.3
11.4
15.4
Cash
2015
2016
2017
2018
2019
Max Cawthra,
Director Tracsis plc
Nexus
Discovery Way
Leeds,
United Kingdom
LS2 3AA
14 | Annual Report and Accounts 2019
Governance
Board of Directors
Executive Directors
Chris Barnes (44) Chief Executive Officer (appointed 1 May 2019)
Chris joined Tracsis in February 2019 as CEO designate, and became Chief Executive Officer on 1 May 2019. Prior to joining
Tracsis, Chris was Managing Director of Ricardo UK Limited’s automotive consulting division, and had previously held a number
of senior roles within Ricardo plc. Chris has a Master’s degree in Engineering, Economics and Management from the University
of Oxford and is an alumnus of Harvard Business School.
Max Cawthra (41) Chief Financial Officer
Max joined Tracsis in September 2010 as Financial Controller and was promoted to the Board in August 2011. Max is a
Chartered Accountant, having trained with Ernst & Young in Leeds. Prior to joining Tracsis, Max spent seven years at Persimmon
plc in a variety of roles.
Non-Executive Directors
Chris Cole (73) 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.
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 (48) 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 is also a Non-executive Director
of Countrywide plc and holds Directorships at a registered charity The Percy Hedley Foundation, and at the Housing Association
Bernicia Housing. Lisa brings a wide range of HR experience to the Board.
Member of Audit Committee, Remuneration Committee and Nominations Committee.
Liz Richards (61) 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, and also a
Board Governor at Leeds Trinity University. 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 (43) 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.
TRACSIS PLC | 15
Governance
Board of Directors
Other Directors serving in the year:
Executive Directors
John McArthur (44) Chief Executive Officer
John was the Chief Executive Officer of Tracsis since the formation of the company in January 2004 up until his resignation on
1 May 2019. 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.
John resigned as Chief Executive Officer on 1 May 2019 but remains working with the Group on a part time basis assisting with
the Group’s acquisitions.
Non-Executive Directors
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.
John resigned as a Non-Executive Director on 1 November 2018.
16 | Annual Report and Accounts 2019
Governance
Directors’ Report
The directors present their report and the audited financial statements for the year ended 31 July 2019.
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 Nexus, Discovery Way, Leeds, United Kingdom, LS2
3AA.
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 14 November 2019.
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 31 to 80.
Dividends
The Directors have adopted a progressive dividend policy, subject to growth, profitability and cash position in the future. An
interim dividend of 0.8p per share was paid in May 2019. The Directors propose a final dividend of 1.0p per share, subject to
shareholder approval at the forthcoming Annual General Meeting. This will give a full year dividend of 1.8p per share (2018:
1.6p).
Directors
The directors who serve on the Board and on Board Committees during the year are set out on pages 14 to 15. John McArthur
resigned as Chief Executive Officer on 1 May 2019. Chris Barnes was appointed as Chief Executive Officer on 1 May 2019.
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, Max Cawthra and
Chris Cole 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 19 to 22.
Directors’ shareholdings
Directors’ beneficial interests in the shares of the Company, including family interests, at 31 July 2019 and 2018 were as follows:
31 July 2019
31 July 2018
Number
of
shares
-
% of
issued
share
capital
-
Number
% of
issued
of
share
shares
capital
-
-
168,022
0.58%
168,022
0.59%
7,000
0.02%
7,000
0.02%
-
-
-
-
-
-
-
-
-
-
-
-
Chris Barnes
Max Cawthra
Chris Cole
Lisa Charles-Jones
Liz Richards
Mac Andrade
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.
TRACSIS PLC | 17
Directors’ Report continued
Directors’ shareholdings (continued)
John McArthur, who resigned as a director on 1 May 2019, held 957,783 shares as at 31 July 2018, representing 3.38% of the
issued share capital.
John Nelson, who resigned as a director on 1 November 2018, held 125,824 shares as at 31 July 2018, representing 0.44% of
the issued share capital.
Substantial shareholdings
At 13 November 2019, being the latest practicable date prior to the publication of this document, the Company has been advised
of the following shareholdings of 3% or more in the issued share capital of Tracsis plc:
Number
of
shares
2,289,000
1,905,616
1,873,077
1,614,601
1,458,381
1,281,492
1,252,553
945,700
920,074
% of
issued shares
7.9%
6.6%
6.5%
5.6%
5.1%
4.4%
4.3%
3.3%
3.2%
Unicorn Asset Management
Ennismore Fund Management
Schroder Investment Management
AXA Framlington Investment Manager
Tellworth Investments
Liontrust Asset Management
Downing
NFU Mutual
Franklin Templeton Fund Management
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 2019 were 59 days (2018: 46 days).
Research and development
During the year the Group incurred £2,166,000 (2018: £1,942,000) of expenditure on research activity, which has been charged
to the Income Statement in accordance with the group’s accounting policy.
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 schemes.
Environment
The Group adheres to all environmental regulations and has, where possible, utilised environmental-sustaining policies such as
recycling and waste reduction.
18 | Annual Report and Accounts 2019
Directors’ Report continued
Significant Contracts
There are a number of significant contracts in operation across the Group.
•
Tracsis plc has some large contracts with Train Operating Companies from which it derives significant amounts of
revenue;
• MPEC Technology Limited, a subsidiary company, 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, and Cash & Traffic Management Limited both have a number of significant, multi-year contracts with a
number of key clients; and
• Compass Informatics Limited has a range of contracts with government bodies and private sector organisations.
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
14 November 2019
Nexus
Discovery Way
Leeds
United Kingdom
LS2 3AA
TRACSIS PLC | 19
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
Chris Barnes
Max Cawthra
Non-Executive Directors
Chris Cole
Lisa Charles-Jones
Liz Richards
Mac Andrade
Date Commencement Unexpired
of contract
date
term
Notice
period
04.02.19
20.09.10
28.04.14
25.08.16
01.09.16
01.11.18
04.02.19
Indefinite
6 months
20.09.10
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, which is based on profit related targets and also personal objectives. 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.
20 | Annual Report and Accounts 2019
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 at a rate
of 10% of basic salary for Chris Barnes and 5% of basic salary for Max Cawthra. Chris Barnes elected to exchange employer
pension contributions for additional salary. There was no additional cost to the Group in respect of this arrangement.
Directors’ remuneration
Directors’ remuneration for the year ended 31 July 2019 is set out below
Executive Directors
Chris Barnes (from 1 May 2019)
John McArthur (to 1 May 2019)
Max Cawthra
Non-Executive Directors
John Nelson (to 1 Nov 18)
Chris Cole
Lisa Charles-Jones
Liz Richards
Mac Andrade (from 1 Nov 18)
Basic Pension
Conts
salary
£000
£’000
69
152
152
373
6
50
28
28
19
131
-
30
7
37
-
-
-
-
-
-
Bonus
£000
81
130
70*
281
-
-
-
-
-
-
Benefits
in kind
£000
Total
2019
£000
150
312
229
691
6
50
28
28
19
-
-
-
-
-
-
-
-
-
-
Total
2018
£000
-
376
245
621
23
50
28
28
-
131
129
* Max Cawthra waived his entitlement to a portion of his annual bonus, and reallocated it to other members of the finance team
to reward them for their performance in the year. Had he not done so, his bonus would have been £84,000.
Directors’ interests in share options in the Executive Share Option Schemes
At
1 August
At
Exercise
Date from
31 July
price
Which
2018
Granted
(Note b)
Lapsed
(Note a)
Exercised
2019
pence
Exercisable Expiry date
Executive
Directors
Chris Barnes
-
21,417
-
Max Cawthra
47,067
-
(6,532)
Non-Executive
Directors
Chris Cole
Lisa Charles-
Jones
Liz Richards
Mac Andrade
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
21,417
0.4p
01/05/2022
40,535
0.4p
See note a/b
01/05/2029
15 Dec
2025 / 6 Jan
2027
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
In accordance with Corporate Governance best practice, the Group no longer grants stock options to Non-Executive Directors.
This ensures objectivity and independence within the Board’s decision making process.
TRACSIS PLC | 21
Directors’ Remuneration Report continued
Directors’ interests in shares options in the Executive Share Option Schemes (continued)
Note a
Original conditions:
‘2016 LTIP’
• 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
For the year ended 31 July 2019, EPS was 16.92p (excluding the exceptional credit and charge in respect of the TCS
acquisition), which meant that part of the performance criteria that were linked to EPS were partially met, and TSR was between
the median and upper quartile meaning that a part of the performance criteria that were linked to TSR were partially met. These
items combined led to options vesting for Max Cawthra of 22,165 options, with 6,532 lapsing. The options that have vested can
be exercised from 6 January 2020 onwards, being three years from the grant date.
Note b
In connection with Chris Barnes’ appointment as a Director of the Group, the Remuneration Committee agreed a share option
award to compensate Chris for unvested incentives forfeited from his previous employer on joining Tracsis. As such, Chris was
awarded 21,417 share options in Tracsis plc with an exercise price of 0.4p, that can be exercised on or after 4 February 2022
being three years since Chris joined the Group.
John McArthur, who resigned as a director during the year, had an interest in 114,942 share options as at 31 July 2018. Since
resigning as a Director, John exercised 27,555 options, and it was agreed with the Remuneration Committee that John would
be able to retain his options whilst he continued to be an employee. In respect of the ‘2016 LTIP’, and the 43,045 options that
were granted under this scheme, 33,247 vested as the performance criteria were met, and 9,798 lapsed. John retains an interest
in the ‘2017’ LTIP of 44,342 options which remain subject to performance conditions for the year ended 31 July 2020, and as
such retains a total interest in 77,589 options.
The aggregate amount of pre-tax gains made by directors on the exercise of share options was £nil (2018: £100,000). 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.
22 | Annual Report and Accounts 2019
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 2018 to 31 July 2019.
115
105
95
85
75
Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19
Jul-19
Tracsis
AIM All-Share Index
The committee has selected the above index because it is most relevant for a company of Tracsis’s size and sector.
On behalf of the Board
Lisa Charles-Jones
Chair of the Remuneration Committee
14 November 2019
TRACSIS PLC | 23
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. Further details of the group’s compliance with the QCA code can be found
on the group’s website https://www.tracsis.com/investors/corporate-governance.
The Board
There are currently six 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 pages 14
to 15. 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 19.
Tracsis plc’s Articles of Association require directors to retire from office and submit themselves for re-election on a one third
rotation at each Annual General Meeting. Max Cawthra and Chris Cole 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
-
-
-
1/1
2/2
2/2
2/2
1/1
Meetings Committee
Meetings
-
-
-
-
1/1
1/1
1/1
1/1
(total/poss)
6/7
3/3
10/10
2/2
10/10
10/10
10/10
8/8
Audit
Committee
Meetings
-
-
-
1/1
2/2
2/2
2/2
1/1
John McArthur
Chris Barnes
Max Cawthra
John Nelson
Chris Cole
Lisa Charles-Jones
Liz Richards
Mac Andrade
Board committees
Nomination Committee
The Nomination Committee comprises Chris Cole as Chairman, Lisa Charles-Jones, Liz Richards, and Mac Andrade.
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, Liz Richards, Mac Andrade 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).
24 | Annual Report and Accounts 2019
Corporate Governance continued
Audit Committee
The Audit Committee similarly comprises Liz Richards as Chairperson, Lisa Charles-Jones, Mac Andrade 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 (2018: £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. The Group is debt free
and has substantial cash resources. At 31 July 2019 the Group had net cash and cash equivalents totalling £24.1m. The Board
has prepared cash flow forecasts for the forthcoming year based upon assumptions for trading and the requirements for cash
resources, these forecasts take into account reasonably possible changes in trading financial performance.
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.
TRACSIS PLC | 25
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.
26 | Annual Report and Accounts 2019
TRACSIS PLC | 27
28 | Annual Report and Accounts 2019
TRACSIS PLC | 29
30 | Annual Report and Accounts 2019
TRACSIS PLC | 31
Financial Statements
Consolidated Statement of Comprehensive Income
for the year ended 31 July 2019
Revenue
Cost of sales
Gross profit
Administrative costs
Adjusted EBITDA*
Depreciation
Adjusted profit **
Amortisation of intangible assets
Other operating income
Share-based payment charges
2019
2018
Continuing
operations
Acquisitions
Notes
£000
£000
Total
£000
£000
6
43,325
5,894
49,219
39,834
(17,539)
(2,624)
(20,163)
(16,623)
25,786
3,270
29,056
23,211
(19,158)
(3,202)
(22,360)
(14,727)
6, 31
14
31
15
9.4
8
9,662
(798)
8,864
852
(33)
819
10,514
(831)
9,683
9,425
(760)
8,665
(1,831)
(420)
(2,251)
(1,774)
244
(927)
16
260
214
(107)
(1,034)
(1,193)
Operating profit / (loss) before exceptional items
6,350
308
6,658
5,912
Exceptional items (net)
9.3
278
(240)
38
2,572
Operating profit / (loss)
Finance income
Finance expense
Share of result of equity accounted investees
Profit / (loss) before tax
Taxation
Profit / (loss) after tax
9
10
11
16
6,628
68
6,696
8,484
58
(21)
(174)
6,491
-
-
-
58
(21)
19
(27)
(174)
(201)
68
6,559
8,275
12
(1,337)
(151)
(1,488)
(1,029)
5,154
(83)
5,071
7,246
Other comprehensive income/(expense)
Items that are or may be reclassified subsequently to profit or loss
Foreign currency translation differences – foreign operations
Total recognised income for the year
Earnings per ordinary share
Basic
Diluted
-
5,154
17
(66)
17
-
5,088
7,246
13
13
18.07p
17.54p
(0.29p)
(0.28p)
17.78p
17.26p
25.70p
24.85p
* 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
32 | Annual Report and Accounts 2019
Financial Statements
Consolidated Balance Sheet as at 31 July 2019 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
Finance leases and hire-purchase contracts
Contingent consideration payable
Deferred tax liabilities
Current liabilities
Finance leases and 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
Translation reserve
Total equity
Note
14
15
16
16
16
22
17
19
18
21
22
18
20
21
23
24
24
24
24
2019
£000
2,678
38,812
350
250
1,098
667
43,855
381
9,729
24,104
34,214
78,069
285
5,304
5,942
11,531
277
16,936
879
505
18,597
30,128
47,941
115
6,343
3,921
37,545
17
47,941
2018
£000
2,181
26,223
250
250
972
602
30,478
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
The financial statements on pages 31 to 80 were approved and authorised for issue by the Board of Directors on 14 November 2019
and were signed on its behalf by:
Chris Barnes – 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 | 33
Share
Capital
£’000
Share
Premium
£’000
Merger
reserve
£’000
Retained
Earnings
£’000
Translation
reserve
£’000
Total
£’000
112
5,948
3,010
24,577
-
-
-
-
1
-
-
-
-
-
295
-
-
-
-
-
-
150
7,246
7,246
(423)
1,193
-
-
113
6,243
3,160
32,593
113
6,243
3,160
32,593
-
-
-
-
-
-
1
1
-
-
-
-
-
-
100
-
-
-
-
-
-
-
-
761
(667)
5,071
-
5,071
(486)
1,034
-
-
-
-
-
-
-
-
-
-
-
-
-
17
17
-
-
-
-
33,647
7,246
7,246
(423)
1,193
296
150
42,109
42,109
(667)
5,071
17
5,088
(486)
1,034
101
762
115
6,343
3,921
37,545
17
47,941
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
At 1 August 2018
Adjustment on initial
application of IFRS 15 (net of
tax) – Note 32
Profit for the year
Other comprehensive income
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 2019
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
34 | Annual Report and Accounts 2019
Financial Statements
Consolidated Cash Flow Statement for the year ended 31 July 2019
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
Effect of foreign exchange adjustments
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
Net cash flow used in investing activities
Financing activities
Dividends paid
Proceeds from exercise of share options
Hire purchase repayments
Payment of contingent consideration
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
30
18
21
2019
£000
5,071
(58)
21
831
12
(99)
(260)
2,251
17
174
1,488
1,034
10,482
(128)
(1,349)
4,877
13,882
58
(21)
(1,545)
12,374
(731)
165
(6,757)
(400)
(7,723)
(486)
101
(342)
(2,149)
(2,876)
1,775
22,329
24,104
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)
(2,870)
(423)
296
(303)
(323)
(753)
6,979
15,350
22,329
The accompanying notes form an integral part of these financial statements
TRACSIS PLC | 35
Financial Statements
Notes to the Consolidated Financial Statements
1
Reporting entity
Tracsis plc (the ‘Company’) is a public company incorporated, domiciled and registered in England in the United
Kingdom. The registered number is 05019106 and the registered address is Nexus, Discovery Way, Leeds, LS2 3AA.
The consolidated financial statements of the Company for the year ended 31 July 2019 comprise the Company and its
subsidiaries (together referred to as the ‘Group’) and equity account the Group’s interest in associates. The parent
company financial statements present information about the Company as a separate entity and not about its 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, with the exception of the valuation of
investments and contingent consideration which are included on a fair value basis.
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 2018. 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 2018:
IFRIC 22 Foreign Currency Transactions and Advance Consideration
IFRS 9 Financial Instruments
• Annual Improvements to IFRS Standards 2014-2016 Cycle
•
•
• Amendments to IFRS 2: Classification and Measurement of Share-Based Payment Transaction contracts
•
IFRS 15 Revenue from Contracts with Customers
These standards have not had a material impact on the Consolidated Financial Statements with the exception of the
adoption of IFRS 15. Further information regarding the adoption of this standard has been detailed in note 32.
36 | Annual Report and Accounts 2019
Notes to the Consolidated Financial Statements continued
2
Basis of preparation (continued)
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 2019. Apart from IFRS 16, these standards are not expected to have a significant impact on adoption.
Effective for the year ending 31 July 2020
•
•
IFRS 16 Leases (effective date 1 January 2019). Provides a single lessee accounting model, specifying how
leases are recognised measured, presented and disclosed.
IFRIC 23 Uncertainty over Income Tax Treatments (effective date 1 January 2019).
Effective date for EU adoption to be confirmed
• Amendments to References to the Conceptual Framework in IFRS Standards (effective date to be confirmed)
• Annual Improvements to IFRS Standards 2015-2017 Cycle (effective date to be confirmed).
IFRS 16 “Leases”
The Group is required to adopt IFRS 16 “Leases” from 1 August 2019. It will bring most leases on to the balance sheet,
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. Additionally, 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. The Group will adopt IFRS 16 using the modified retrospective
approach. The cumulative effect of initially adopting IFRS 16 will be recognised as an adjustment to retained earnings
at 1 August 2019 with no restatement of comparative information. The Group plans to apply the practical expedient to
grandfather the definition of a lease on transition. This means that it will apply IFRS 16 to all contracts entered into
before 1 August 2019 and identified as leases in accordance with IAS 17 and IFRIC 4. The Group has assessed the
estimated impact that initial application of IFRS 16 will have on its consolidated financial statements, as described
below. Based on currently available information, the Group estimates that it will recognise additional lease assets and
liabilities of £1.2m to £1.4m as at 1 August 2019. The impact on the Income Statement is estimated to be immaterial.
(f)
Going concern
The Group is debt free and has substantial cash resources. At 31 July 2019 the Group had net cash and cash
equivalents totalling £24.1m. The Board has prepared cash flow forecasts for the forthcoming year based upon
assumptions for trading and the requirements for cash resources, these forecasts take into account reasonably possible
changes in trading financial performance. The Group’s policies for financial risk management are detailed in note 26 to
these financial statements.
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 Group controls an entity when it is exposed to, or has rights
to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over
the entity. In assessing control, the Group takes into consideration potential voting rights. 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.
TRACSIS PLC | 37
Notes to the Consolidated Financial Statements continued
3
Significant accounting policies (continued)
(a)
Basis of consolidation (continued)
Associates are those entities in which the Group has significant influence, but not control, over the financial and
operating policies. Significant influence is presumed to exist when the Group holds between 20 and 50 percent of the
voting power of another entity. 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.
(b)
Revenue recognition
The Group has initially applied IFRS 15 “Revenue from Contracts with Customers” from 1 August 2018. Due to the
transition method chosen by the Group in applying this standard, comparative information throughout these financial
statements has not been restated to reflect the requirements of the new standard. See note 32 to the financial
statements for further detail of the changes in accounting treatment arising on transition.
IFRS 15 has established a comprehensive framework for determining whether, how much and when revenue is
recognised. It replaced IAS 18 and related interpretations for the Group.
The Group derives revenue from software licencing and bespoke development work, post contract customer support,
sale of hardware & condition monitoring technology, consultancy and professional services, traffic data collection &
capture, passenger counting, plus event planning, parking and traffic management services.
The following tables provide information about the nature and timing of the satisfaction of performance obligations in
contracts with customers, and the related revenue recognition policies. Revenue is recognised either when the
performance obligation in the contract has been performed (“point in time” or “over time” as control is transferred to the
customer). Consideration received in advance of the performance obligation being satisfied by the Group is included
as a Contract Liability on the balance sheet. A contract asset is recognised when a performance obligation has been
completed, but no consideration has yet been received. Adjustments are made to allocate discounts relative to the
stand-alone selling price of each performance obligation. The Group does not adjust the transaction price for the time
value of money as it does not expect to have any contracts where the period between the transfer of the promised
service to the client, and the payment by the client exceeds one year.
The details of the significant accounting policies under IFRS 15 are set out below for each of the two operating
segments within the Group.
Rail Technology & Services
Revenue Stream
Recognition Policy
Software – perpetual and non-cancellable annual
software licenses, and support and maintenance
services associated with these licenses
There are two separate performance obligations
associated with this revenue stream:
• Provision of the perpetual or non cancellable
annual software license
• Maintenance and support services
The Group recognises the revenue from the sale of
perpetual and non-cancellable annual software
licences at the time that the license is made available
to the customer as it is considered that control passes
at that point in time.
38 | Annual Report and Accounts 2019
Notes to the Consolidated Financial Statements continued
3
Significant accounting policies (continued)
(b)
Revenue recognition (continued)
Revenue Stream
Recognition Policy
Software – perpetual and non-cancellable annual
software licenses, and support and maintenance
services associated with these licenses (continued)
The allocation of the transaction price between the
two performance obligations included in the contract
is based on an expected cost plus margin approach
as the stand-alone selling price is not observable.
Revenue related to ongoing support and periodic
updates is recognised over the license period as the
Group is unable to predict at inception of the license
when the support and updates will be required to be
provided to the customer. As such, control is
considered to pass over time.
Software as a service, and support services associated
with these licenses
Under IFRS 15 two distinct performance obligations
have been identified for these contracts.
Bespoke software development work
Hardware
• Hosted software licenses
• Maintenance and support
Revenue from the provision of the hosted software
license is recognised evenly over the period in which
the license is hosted by the Group. This policy
reflects the continuous transfer of the service to the
customer throughout the contracted license period.
Revenue related to ongoing support and periodic
updates is recognised over the license period as the
group is unable to predict at inception of the license
when the support and updates will be required to be
provided to the customer.
Revenue in relation to bespoke development work is
recognised on completion of the work as specified in
the contract with the customer as it is considered that
control of
the work does not pass until all
development work has been completed.
Under IFRS 15, the Group has identified one
performance obligation in relation to the sale of
hardware items, being delivery to the customer,
which is considered the point in time that control
passes and revenue is recognised.
Hardware items are also sold to the customer
alongside a license for condition monitoring software.
The transaction price is allocated to the components
of the contract based on an adjusted market
assessment approach.
Revenue recognition for the condition monitoring
software license is recognised in line with nature of
the software (hosted Software as a Service) which is
detailed further above.
Notes to the Consolidated Financial Statements continued
TRACSIS PLC | 39
3
Significant accounting policies (continued)
(b)
Revenue recognition (continued)
Revenue Stream
Hardware (continued)
Consultancy services
Recognition Policy
Provision
customers.
is made
for any
returns by
Consultancy service contracts are either
contracted on a time and materials basis, or as
fixed fee contracts.
Time and materials contracts are recognised
over time as services are provided at the fee
rate agreed with the client where there is an
enforceable right to payment for performance
completed to date.
Fixed fee contracts are recognised over time
based on the actual service provided to the end
of the reporting period as a proportion of the
total services to be provided where there is an
enforceable right to payment. In contracts
where there is no enforceable right to payment
for performance completed to date, revenue is
recognised on completion of the contracted
deliverables.
Traffic & Data Services
Revenue Stream
Recognition Policy
Traffic data collection & capture and passenger
counting
there
Revenue from traffic data collection & capture
and passenger counting services deliverables
is recognised on the provision of the contract
deliverable(s) as agreed with the customer,
unless
to
payment under the contract, in which instance
the
revenue would be recognised over
completion of the project based on actual
costs compared to expected total project
costs.
is an enforceable right
Event planning, parking and traffic management
services
There is considered to be one performance
obligation in the completion of event planning,
parking and traffic management, which is the
completion of the service, and this is satisfied
upon its completion of the service, being at a
point in time.
40 | Annual Report and Accounts 2019
Notes to the Consolidated Financial Statements continued
(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.
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.
TRACSIS PLC | 41
Notes to the Consolidated Financial Statements continued
3
Significant accounting policies (continued)
(d)
Intangible assets (continued)
Any contingent consideration payable is recognised at fair value at the acquisition date. If the contingent consideration
is classified as equity, it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent
changes to the fair value of the contingent consideration are recognised in profit or loss. Contingent consideration is
treated as part of the costs of acquisition provided it is not contingent on the continuing employment of the vendors.
Settlement of contingent consideration is included within financing activities in the Statement of Cash Flows.
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.
(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
i)
Recognition and initial measurement
Trade receivables are initially recognised when they are originated. All other financial assets and financial liabilities are
initially recognised when the company becomes a party to the contractual provisions of the instrument.
A financial asset (unless it is a trade receivable without a significant financing component) or financial liability is initially
measured at fair value plus, for an item not at FVTPL, transaction costs that are directly attributable to its acquisition
or issue. A trade receivable without a significant financing component is initially measured at the transaction price.
42 | Annual Report and Accounts 2019
Notes to the Consolidated Financial Statements continued
3
Significant accounting policies (continued)
(g)
Financial instruments (continued)
ii)
Classification and subsequent measurement
Financial assets
Classification
On initial recognition, a financial asset is classified as measured at: amortised cost; FVOCI – debt investment; FVOCI
– equity investment; or FVTPL.
Financial assets are not reclassified subsequent to their initial recognition unless the Company changes its business
model for managing financial assets in which case all affected financial assets are reclassified on the first day of the
first reporting period following the change in the business model.
A financial asset is measured at amortised cost if it meets both of the following conditions:
-
-
it is held within a business model whose objective is to hold assets to collect contractual cash flows; and
its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest
on the principal amount outstanding.
All financial assets not classified as measured at amortised cost or FVOCI are measured at FVTPL. This includes all
derivative financial assets.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits.
Subsequent measurement and gains and losses
Financial assets at FVTPL - these assets (other than derivatives designated as hedging instruments) are subsequently
measured at fair value. Net gains and losses, including any interest or dividend income, are recognised in profit or loss.
Financial assets at amortised cost - These assets are subsequently measured at amortised cost using the effective
interest method. The amortised cost is reduced by impairment losses. Interest income, foreign exchange gains and
losses and impairment are recognised in profit or loss. Any gain or loss on derecognition is recognised in profit or loss.
Financial liabilities and equity
Financial instruments issued by the Group are treated as equity only to the extent that they meet the following two
conditions:
(a)
(b)
they include no contractual obligations upon the Group to deliver cash or other financial assets or to exchange
financial assets or financial liabilities with another party under conditions that are potentially unfavourable to
the company; and
where the instrument will or may be settled in the Group own equity instruments, it is either a non-derivative
that includes no obligation to deliver a variable number of the company’s own equity instruments or is a
derivative that will be settled by the company’s exchanging a fixed amount of cash or other financial assets
for a fixed number of its own equity instruments.
To the extent that this definition is not met, the proceeds of issue are classified as a financial liability. Where the
instrument so classified takes the legal form of the company’s own shares, the amounts presented in these financial
statements for called up share capital and share premium account exclude amounts in relation to those shares.
Financial liabilities are classified as measured at amortised cost or FVTPL. A financial liability is classified as at FVTPL
if it is classified as held-for-trading, it is a derivative or it is designated as such on initial recognition. Financial liabilities
at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognised in profit
or loss. Other financial liabilities are subsequently measured at amortised cost using the effective interest method.
Interest expense and foreign exchange gains and losses are recognised in profit or loss. Any gain or loss on
derecognition is also recognised in profit or loss.
iii)
Impairment
The Group recognises loss allowances for expected credit losses (ECLs) on financial assets measured at amortised
cost, debt investments measured at FVOCI and contract assets (as defined in IFRS 15). The Group measures loss
allowances at an amount equal to lifetime ECL, except for other debt securities and bank balances for which credit risk
(i.e. the risk of default occurring over the expected life of the financial instrument) has not increased significantly since
initial recognition, which are measured as 12-month ECL.
TRACSIS PLC | 43
Notes to the Consolidated Financial Statements continued
3
Significant accounting policies (continued)
(g)
Financial instruments (continued)
Loss allowances for trade receivables and contract assets are always measured at an amount equal to lifetime ECL
When determining whether the credit risk of a financial asset has increased significantly since initial recognition and
when estimating ECL, the company considers reasonable and supportable information that is relevant and available
without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the
Group’s historical experience and informed credit assessment and including forward-looking information.
Measurement of ECLs
ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash
shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash
flows that the company expects to receive). ECLs are discounted at the effective interest rate of the financial asset.
Write-offs
The gross carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no
realistic prospect of recovery.
(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.
Dividend distribution
Dividend distribution to the Company’s shareholders is recognised as a liability in the Group’s financial statements in
the period in which the dividends are approved by the Company’s shareholders, or in the case of interim dividends,
when paid.
Leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards
of ownership to the lessee. All other leases are classified as operating leases. Assets held under finance leases are
initially recognised as assets of the Group at their fair value at the inception of the lease or, if lower, at the present
value of the minimum lease payments. The corresponding liability to the lessor is included in the balance sheet as a
finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease
obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are
charged directly to profit or loss, unless they are directly attributable to qualifying assets, in which case they are
capitalised in accordance with the Group’s general policy on borrowing costs. Contingent rentals are recognised as
expenses in the periods in which they are incurred.
Operating lease payments are recognised as an expense on a straight line basis over the lease term, except where
another systematic basis is more representative of the time pattern in which economic benefits from the leased asset
are consumed. Contingent rentals arising under operating leases are recognised as an expense in the period in which
they are incurred.
(i)
(j)
44 | Annual Report and Accounts 2019
Notes to the Consolidated Financial Statements continued
3
(j)
(k)
(l)
(m)
(n)
(o)
(p)
Significant accounting policies (continued)
Leases (continued)
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.
Retirement benefits
Contributions to defined contribution pension schemes are charged to the income statement in the year to which they
relate.
Exceptional items
Items which are significant by virtue of their size or nature and/or which are considered non-recurring are classified as
exceptional operating items. Such items, which include for example costs relating to acquisitions, 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.
TRACSIS PLC | 45
Notes to the Consolidated Financial Statements continued
3
(q)
(r)
(s)
Significant accounting policies (continued)
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.
(u)
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.
(v)
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.
46 | Annual Report and Accounts 2019
Notes to the Consolidated Financial Statements continued
3
Significant accounting policies (continued)
(w)
Loans due from associated undertakings
Loans due from associated undertakings are held at fair value on inception with subsequent changes recognised in the
profit and loss account.
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
The Group has adopted IFRS 15 Revenue recognition in the current financial year. The Group’s assessment of the estimation
involved at each step of the revenue recognition process is as detailed below:
Step 1 – Identify the Contract. No estimates identified.
Step 2 – Identify performance obligations. This is an accounting judgement which has been detailed further below.
Step 3 – Determine the transaction price. There are no significant estimates required to be taken by the group in calculating the
transaction price.
Step 4 – Allocate the transaction price to the performance obligations in the contract. An estimate has been made by the group
in allocating the transaction price to the performance obligation, based on an adjusted market assessment approach, or
expected cost plus margin approach dependent on revenue stream.
Step 5 – Determine when to recognise revenue. This is an accounting judgement which has been detailed further below.
A level of estimation is required in assessing the level of potential customer returns for certain hardware products.
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. Total intangible assets of £15.5m were recognised in respect of the three
acquisitions completed in the year, and the net book value of all intangible assets is £38.8m at the end of the financial year.
Estimation uncertainty exists due to actual results varying 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. An impairment of £0.6m was recognised in respect of the
Travel Compensation Services Limited acquisition that was made in the previous financial year.
Contingent consideration
Within the share purchase agreements for the acquisitions of Compass Informatics Limited, Cash & Traffic Management Limited,
Bellvedi Limited and Tracsis Travel Compensation Services Limited & Delay Repay Sniper Limited, are various provisions
relating to the payment of contingent consideration which are linked to financial performance post acquisition. There is a degree
of estimation uncertainty in calculating the fair value of the contingent consideration as it is dependent on the future profit
performance which results from assumptions about revenues and costs of the acquired businesses, and each of which is subject
to a separate share purchase agreement and basis for calculating contingent consideration. Each Share Purchase Agreement
contains different provisions for calculating contingent consideration, timeframes over which it is calculated and payable, and
therefore sensitivities regarding the total amount to be paid. Included within the balance sheet is a total amount of £6.2m, which
is management’s best estimates of the fair value of the amount payable in respect of all of the acquisitions which have a
remaining contingent consideration liability.
TRACSIS PLC | 47
Notes to the Consolidated Financial Statements continued
4
Critical Accounting Estimates and Judgements (continued)
Judgements
Revenue Recognition
Judgements have been taken in the application of IFRS 15 Revenue recognition for the first time in these financial statements.
Performance obligations have been identified based on the contracts in place with customers in the accounting period.
Consideration has subsequently been allocated to these performance obligations. A judgement has been taken by the group as
to whether the performance obligations and subsequent revenue recognition is at a point in time or over a period of time. This
judgement has been made by the Group with reference to the specific terms of the individual sales contracts.
5
a)
Acquisitions and investments in the current year
Acquisition: Compass Informatics Limited (‘Compass’)
On 15 January 2019 the Group acquired Compass, a long-established Dublin based business which has been well known for a
number of years now and is a natural fit for the Group’s Traffic & Data Services division in terms of its strategy of improving its
data service. This acquisition, the Group’s first overseas transaction, strengthens the product and service offerings to the client
base in the UK and also benefit those existing clients retained by Compass in Ireland, and offers potential benefit and cross-sell
potential to Tracsis' existing transport clients. Compass is a software development and data analytics company that specialises
in combining geographical information systems (GIS), location technologies, data analytics and field computing. The business
works across a variety of sectors but derives most of its revenue from transport, asset management, planning, and environmental
customers.
The acquisition consideration comprised an initial cash payment of €3.15m (£2.81m) which was funded out of Tracsis cash
reserves and the issue of shares in Tracsis to a value of €350k (£0.31m). An additional payment of €0.5m (£0.49m) was also
made on a euro for euro basis to reflect the net current asset position of the business, alongside additional contingent
consideration of up to €2.0m is payable subject to Compass achieving certain stretched financial targets in the four years post
acquisition.
In the year ended 30 September 2018, Compass generated revenue of €4.8m, Profit before Tax of €0.6m, and had net assets
of €1.8m.
Under the terms of the acquisition there is a four year earn out period during which Tracsis expects the business to achieve
growth.
The contingent consideration could range from €nil to €2.0m depending on the financial performance over the four years since
acquisition and the Directors concluded that £1.1m was the fair value of the contingent consideration payable and included this
in the balance sheet.
In the period to 31 July 2019 Compass contributed revenue of £2.4m and pre tax profit of £0.3m to the Group’s results, before
amortisation of associated intangible assets and exceptional deal costs. If the acquisition had occurred on 1 August 2018,
management estimates that the contribution to Group revenue would have been £4.3m 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 2018.
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 Compass.
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 £124,000 which are included within administrative expenses.
48 | Annual Report and Accounts 2019
Notes to the Consolidated Financial Statements continued
5
a)
Acquisitions and investments in the current year (continued)
Acquisition: Compass Informatics Limited (continued)
The acquisition had the following effect on the Group’s assets and liabilities on the acquisition date:
Intangible assets: Technology assets
Intangible assets: Customer related intangibles
Tangible fixed assets
Cash and cash equivalents
Trade and other receivables
Trade and other payables
Income tax payable
Deferred tax asset/(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
Pre-acquisition
Fair value
value on
carrying amount
adjustments
acquisition
Recognised
£000
-
-
25
444
533
(273)
(53)
105
781
£000
1,183
2,313
-
-
-
-
-
(594)
2,902
£000
1,183
2,313
25
444
533
(273)
(53)
(489)
3,683
1,021
4,704
3,260
312
1,132
4,704
b)
Acquisition: Cash & Traffic Management Limited (‘CTM’)
On 16 January 2019, the Group acquired CTM, a well-established provider of event traffic planning, admission control, and a
range of other event-related services to some of the UK's largest and most prestigious event clients. CTM is highly
complementary to the Tracsis Traffic & Data Services division with good cross-sell potential along with clear synergy benefits
with Tracsis' existing SEP Events business which was an excellent acquisition for Tracsis, that should lead to margin
improvement in the fullness of time.
CTM has an excellent track record of organic growth, client retention and profitability over many years. The acquisition
consideration comprised an initial cash payment of £1.305m which was funded out of Tracsis cash reserves and the issue
shares in Tracsis to a value of £0.155m, along with an additional payment of £0.528m to reflect the net current asset position of
the business. Additional contingent consideration of up to £0.75m is payable subject to CTM achieving certain stretch financial
targets in the two years post acquisition.
In the period ended 15 January 2019, CTM generated revenue of £5.2m, Profit before Tax of £0.35m, and had net assets of
£1.1m.
Under the terms of the acquisition there is a two year earn out period during which Tracsis expects the business to achieve
growth.
The contingent consideration could range from £nil to £0.75m depending on the financial performance over the two years since
acquisition and the Directors concluded that £0.6m was the fair value of the contingent consideration payable and included this
in the balance sheet.
TRACSIS PLC | 49
Notes to the Consolidated Financial Statements continued
5
Acquisitions and investments in the current year (continued)
b)
Acquisition: Cash & Traffic Management Limited (‘CTM’) (continued)
In the period to 31 July 2019 CTM contributed revenue of £3.1m and pre tax profit of £0.4m to the Group’s results, before
amortisation of associated intangible assets and exceptional deal costs. If the acquisition had occurred on 1 August 2018,
management estimates that the contribution to Group revenue would have been £5.5m and Group pre tax profit for the period
of £0.5m. 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 2018.
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 CTM.
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 £56,000 which are included within administrative expenses.
The acquisition had the following effect on the Group’s assets and liabilities on the acquisition date:
Intangible assets: Customer related intangibles
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
Pre-acquisition
Fair value
carrying amount
adjustments
Recognised
value on
acquisition
£000
-
116
955
488
(372)
(77)
(22)
1,088
£000
1,768
-
-
-
-
-
(300)
1,468
£000
1,768
116
955
488
(372)
(77)
(322)
2,556
32
2,588
1,833
155
600
2,588
50 | Annual Report and Accounts 2019
Notes to the Consolidated Financial Statements continued
5
c)
Acquisitions and investments in the current year (continued)
Acquisition: Bellvedi Limited (‘Bellvedi’)
On 1 May 2019, the Group acquired Bellvedi Limited a UK based software company that operates within the rail industry and
specialises in timetabling optimisation software. Bellvedi's key product, ATTUne, is a timetable planning software package and
is extensively used by Train Operating Companies, infrastructure providers, franchise bidding teams and rail consultancies for
the creation, validation, optioneering and optimisation of timetables in time pressured environments.
Tracsis and Bellvedi have partnered on several significant software projects - most notably on Tracsis' recent major contract
wins - with the ATTUne software forming a key part of the TRACS Enterprise offering. As such, the acquisition of Bellvedi is
strategically important and highly complementary to the Tracsis software offering and future product roadmap.
The acquisition consideration comprised an initial cash payment of £3.7m which was funded out of Tracsis cash reserves and
the issue of shares in Tracsis to a value of £0.3m. An additional payment of £0.91m was also made on a pound for pound basis
to reflect the net current asset position of the business, alongside additional contingent consideration of up to £7.9m is payable
subject to Bellvedi achieving certain stretched financial targets in the four years post acquisition.
In the 13 month period ended 29 April 2019, Bellvedi generated revenue of £1.8m, Profit before Tax of £0.8m, and had net
assets of £0.9m.
Under the terms of the acquisition there is a four year earn out period during which Tracsis expects the business to achieve
significant growth.
The contingent consideration could range from £nil to £7.9m depending on the financial performance over the four years since
acquisition and the Directors concluded that £4.1m was the fair value of the contingent consideration payable and included this
in the balance sheet.
In the period to 31 July 2019 Bellvedi contributed revenue of £0.4m 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 2018,
management estimates that the contribution to Group revenue would have been £1.6m and Group pre tax profit for the period
of £0.7m. 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 2018.
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 Bellvedi.
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 £60,000 which are included within administrative expenses.
The acquisition had the following effect on the Group’s assets and liabilities on the acquisition date:
TRACSIS PLC | 51
Notes to the Consolidated Financial Statements continued
5
Acquisitions and investments in the current year (continued)
c)
Acquisition: Bellvedi Limited (‘Bellvedi’) (continued)
Pre-acquisition
Fair value
carrying amount
adjustments
Recognised
value on
acquisition
£000
-
-
7
1,490
239
(750)
(69)
-
917
£000
4,663
4,443
-
-
(63)
417
-
(1,512)
7,948
£000
4,663
4,443
7
1,490
176
(333)
(69)
(1,512)
8,865
40
8,905
4,553
295
4,057
8,905
Intangible assets: Technology assets
Intangible assets: Customer related intangibles
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
d)
Investment: Vivacity Labs Limited
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 totalling £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. The final tranche of
investment was completed in year ended 31 July 2019 following the exercise of a £0.3m warrant increasing the Group’s equity
stake 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, Vivacity Labs Limited completed a fund raising exercise where it raised £1.15m at a pre money valuation of
£7m. The Group did not participate in this fund raise and as a result, its shareholding reduced from 28.1% to 24.6%.
It has been accounted for as an associated undertaking in year ended 31 July 2019. Further details are provided in note 16.
52 | Annual Report and Accounts 2019
Notes to the Consolidated Financial Statements continued
5
e)
Acquisitions and investments in the current year (continued)
Investment: Citi Logik Limited
On 4 September 2015, the Group made a strategic investment to acquire up to 29.4% of Citi Logik Limited (Citi Logik). Under
the terms of the agreement, the Group agreed to invest up to £1.0m via a combination of equity and debt funding in return for
up to 29.4% of the issued share capital in Citi Logik.
Investment of £0.5m (£0.375m equity and £0.125m debt) was made immediately with a further £0.5m subject to delivery of
agreed business plan milestones. The initial investment represented 17.24% of the issued share capital of Citi Logik. In February
2016, it became apparent that the business plan milestones were not being achieved and as a result, the Group did not invest
the balance of £0.5m.
The investment is carried at fair value.
During the year, Citi Logik Limited completed a fund raising exercise where it raised £1.15m at a pre money valuation of £2.85m.
Tracsis invested £0.1m and as a result, its equity stake reduced from 17.2% to 14.9%.
6
a)
Revenue and Segmental analysis
Revenue
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
2019
£000
21,934
27,285
49,219
2019
£000
14,839
34,380
49,219
2018
£000
18,968
20,866
39,834
2018
£000
14,010
25,824
39,834
Revenue to come from contracts entered into with performance obligations not fulfilled or only partially fulfilled amounted to
£16.1m as at 31 July 2019.
Major customers
Transactions with the Group’s largest customer represent 18% of the Group’s total revenues (2018: 14%).
Geographic split of revenue
A geographical analysis of revenue is provided below:
United Kingdom
North America
Rest of the World
Total
2019
£000
45,511
106
3,602
49,219
2018
£000
38,388
260
1,186
39,834
TRACSIS PLC | 53
Notes to the Consolidated Financial Statements continued
6
b)
Revenue and Segmental analysis (continued)
Segmental Analysis
The Group has divided its results into two segments being ‘Rail Technology and Services’ and ‘Traffic & Data Services’. Bellvedi
Limited is included in “Rail Technology and Services”, and Cash & Traffic Management Limited and Compass Informatics Limited
are included in “Traffic & Data 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.
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.
2019
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
Consolidated profit before tax
21,934
21,934
6,932
-
(166)
(60)
-
-
-
-
27,285
27,285
3,582
-
(665)
(1)
-
-
-
-
6,706
2,916
Total
£000
49,219
49,219
10,514
(2,251)
(831)
38
260
-
-
-
(2,251)
-
99
260
(1,034)
(1,034)
37
(174)
(3,063)
37
(174)
6,559
54 | Annual Report and Accounts 2019
Notes to the Consolidated Financial Statements continued
6
b)
Revenue and Segmental analysis (continued)
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)
2019
Rail
Technology
& Services
£’000
Traffic &
Data
Services
£000
Unallocated
£000
Assets
Total assets for reportable segments (exc. cash)
3,257
9,531
Intangible assets and investments
Deferred tax assets
Cash and cash equivalents
Consolidated total assets
-
-
12,866
16,123
-
-
5,817
15,348
Liabilities
Total liabilities for reportable segments
(10,568)
(7,435)
Deferred tax liabilities
Contingent consideration
Consolidated total liabilities
-
-
-
-
(10,568)
(7,435)
-
40,510
667
5,421
46,598
-
(5,942)
(6,183)
(12,125)
Total
£000
39,834
39,834
9,425
(1,774)
(760)
2,572
214
(1,193)
(8)
(201)
8,275
Total
£000
12,788
40,510
667
24,104
78,069
(18,003)
(5,942)
(6,183)
(30,128)
TRACSIS PLC | 55
Notes to the Consolidated Financial Statements continued
6
b)
Revenue and Segmental analysis (continued)
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
Contingent consideration
Consolidated total liabilities
-
-
-
-
(6,489)
(4,651)
-
27,695
602
13,136
41,433
-
(3,875)
(3,265)
(7,140)
Total
£000
9,763
27,695
602
22,329
60,389
(11,140)
(3,875)
(3,265)
(18,280)
56 | Annual Report and Accounts 2019
Notes to the Consolidated Financial Statements continued
7
Employees and personnel costs
Staff costs:
Wages and salaries
Social security contributions
Contributions to defined contribution plans
Equity-settled share based payment transactions
Average number of permanent staff
Average number of casual staff (full time equivalents)
2019
£000
21,591
1,703
605
1,034
24,933
462
315
777
2018
£000
17,240
1,374
352
1,193
20,159
394
273
667
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 19 to 22. Total
directors’ remuneration, including bonus and pension contributions was £812,000 (2018: £750,000). The aggregate
remuneration of the highest paid director was £312,000 (2018: £376,000). 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. No directors (2018: one) exercised share
options during the year. Two directors (2018: two) participate in the long term incentive plan. Two directors (2018: two) receive
employer pension contributions into a personal pension scheme. Directors of the Company control 0.6% of the voting shares of
the company (2018: 4.4%). 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 to 2018 staff schemes and a revised scheme was implemented by the
Remuneration Committee. Details of this scheme are provided in the Directors Remuneration Report.
TRACSIS PLC | 57
Notes to the Consolidated Financial Statements continued
8
Share based payments (continued)
Details of the schemes are given below:
Grant date
Staff schemes
22/09/2011
02/08/2012
02/08/2012
08/01/2013
28/01/2013
01/08/2013
01/08/2013
01/01/2014
01/08/2014
01/08/2015
25/09/2015
01/12/2015
01/08/2016
01/08/2017
01/08/2018
16/01/2019
01/05/2019
Directors’ schemes
15/12/2015
06/01/2017
28/02/2018
01/05/2019
Outstanding
Employees
Number
Performance
Exercise
entitled
of options
conditions
price (p)
Earliest
exercise
date
1
5
2
1
1
3
3
1
18
47
18
5
69
45
89
17
7
1
2
1
1
8,000
Time served
10,089
20,000
Time served
Time served
6,000
Time served
70,000
19,501
2,678
7,250
52,870
91,014
52,603
53,188
193,374
79,281
132,550
57,878
40,075
Time served
Time served
Time served
Time served
Time served
Time served
Time served
Time served
Time served
Time served
Time served
Time served
Time served
18,370
55,412
44,342
21,417
EPS and TSR
EPS and TSR
EPS and TSR
Time served
1,035,892
63.5
0.40
123.0
159.0
155.5
162.5
22/03/2012*
02/08/2013**
02/02/2013*
08/07/2013*
28/07/2013*
01/02/2014*
0.40
01/08/2014**
199.5
01/07/2014*
0.40
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****
0.40 01/08/2019****
0.40 16/01/2020****
01/05/2023
*****
0.40
0.40
0.40
0.40
0.40
15/12/2018
06/01/2020
28/02/2021
04/02/2022
Expiry
date
22/09/2021
02/08/2022
02/08/2022
08/01/2023
28/01/2023
01/08/2023
01/08/2023
01/01/2024
01/08/2024
01/08/2025
25/09/2025
01/12/2025
01/08/2026
01/08/2027
01/08/2028
16/01/2029
01/05/2029
15/12/2025
06/01/2027
28/02/2028
04/02/2029
* 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
***** Vesting of these options are linked to time served and also the financial performance of Bellvedi Limited which was acquired during the
year
58 | Annual Report and Accounts 2019
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
2019
Weighted
Average
2019
Exercise
2018
Number
1,095,090
252,928
(22,697)
(289,429)
1,035,892
559,300
Price
26.9p
0.4p
0.4p
34.6p
18.9p
35.0p
Number
1,342,730
137,103
(43,012)
(341,731)
1,095,090
613,006
2018
Weighted
Average
Exercise
Price
44.0p
0.4p
0.4p
86.7p
26.9p
47.6p
Share options were exercised at numerous points in the year, and the average share price for the year ended 31 July 2019 was
643p (2018: 515p).
The share options outstanding at the end of the year have a weighted average remaining contractual life of 6.9 years (2018: 5
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
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
22/09/
2011
63.5p
63.5p
3
02/08/2
012
123.0p
02/08/2
012
123.0p
01/11/2
012
133.5p
08/01/2
013
159.0p
28/01/2
013
155.0p
01/08/2
013
162.5p
0.4p
123.0p
133.5p
159.0p
155.0p
162.5p
3
3
3
3
3
3
50%
20%
20%
20%
20%
20%
30%
10
10
3.5%
-
10
10
10
10
10
10
10
10
10
10
10
10
3.5%
3.5%
3.5%
3.5%
3.5%
3.5%
-
-
-
-
-
-
01/08/20
13
162.5p
01/01/2
014
199.5p
01/08/20
14
330.0p
01/08/201
5
420.0p
25/09/20
15
452.5p
01/12/
2015
462.5p
15/12/
2015
550.0p
0.4p
199.5p
3
3
0.4p
3
30%
30%
30%
10
10
10
10
10
10
0.4p
3.5
30%
10
10
0.4p
3.5
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
-
-
-
-
-
-
-
Notes to the Consolidated Financial Statements continued
TRACSIS PLC | 59
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
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/
2016
438.0p
06/01/
2017
502.5p
01/08/20
17
445.0p
28/02/20
18
500.0p
0.4p
3.5
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%
-
-
-
-
01/08/
2018
625.0p
16/01/
2019
595.0p
01/05/
2019
655.0p
01/05/
2019
655.0p
0.4p
3.5
30%
10
10
0.4p
3.5
30%
10
10
0.4p
3.5
30%
10
10
0.4p
3
30%
10
10
3.5%
3.5%
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.
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
Total amortisation
Loss on disposal of plant and equipment
Operating lease rentals: Land and buildings
Operating lease rentals: Plant & machinery
Total operating lease rentals
Research and development expenditure expensed as incurred
2019
£000
1,034
2019
£000
604
227
831
2,251
12
499
61
560
2,166
2018
£000
1,193
2018
£000
592
168
760
1,774
17
474
37
511
1,942
60 | Annual Report and Accounts 2019
Notes to the Consolidated Financial Statements continued
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
2019
£000
30
119
-
9.3
Exceptional items:
The Group incurred a number of exceptional items in 2019 and 2018 which are analysed as follows:
Non cash:
Goodwill impairment
Contingent consideration credit
Cash:
Disposal of non core data capture operation
Legal and professional fees in respect of acquisitions
Total exceptional items
2019
£000
623
(722)
(179)
240
(38)
2018
£000
25
75
-
2018
£000
-
(2,653)
-
81
(2,572)
2019
During 2019, the Group acquired Compass Informatics Limited, Cash & Traffic Management Limited and Bellvedi Limited, and
incurred £240,000 of exceptional deal related costs as a result. The Group also disposed of a small, non core data capture
business with a net profit on disposal of £179,000. This operation had revenue in the period prior to its disposal of £0.3m and a
profit/loss of £nil.
The Group conducted a review of the remaining intangible assets which arose on the acquisition of Travel Compensation
Services Limited (renamed Tracsis Travel Compensation Services Limited) and Delay Repay Sniper Limited. Following this
review, the Group has determined that an impairment of £623,000 existed in goodwill. The contingent consideration related to
this acquisition has also been re-assessed, resulting in an exceptional credit to the Statement of Comprehensive Income of
£722,000.
2018
During 2018, 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
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 £260,000 in 2019 (2018:
£214,000).
10
Finance income
Interest received on bank deposits
2019
£000
58
2018
£000
19
Notes to the Consolidated Financial Statements continued
TRACSIS PLC | 61
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 19.0% (2018: 19.0%)
Expenses not deductible for tax purposes
Non taxable income
Adjustments in respect of previous years
Other movements
Total tax expense
2019
£000
21
2019
£000
1,571
(6)
1,565
(77)
-
(77)
1,488
2019
£000
6,559
1,246
77
-
(6)
171
1,488
2019
%
100.0
19.0
1.2
-
(0.1)
2.6
22.7
2018
£000
8,275
1,572
26
(504)
-
(65)
1,029
2018
£000
27
2018
£000
1,515
-
1,515
(486)
-
(486)
1,029
2018
%
100.0
19.0
0.3
(6.1)
-
(0.8)
12.4
Reductions in the corporation tax rate from 19% 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, and
substantively enacted on 6 September 2016. The deferred tax asset and liability at 31 July 2019 and 31 July 2018 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.
13
Earnings per share
Basic earnings per share
The calculation of basic earnings per share at 31 July 2019 was based on the profit attributable to ordinary shareholders of
£5,071,000 (2018: £7,246,000) and a weighted average number of ordinary shares in issue of 28,521,000 (2018: 28,196,000),
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
2019
28,334
54
133
28,521
2018
27,964
14
218
28,196
62 | Annual Report and Accounts 2019
Notes to the Consolidated Financial Statements continued
13
Earnings per share (continued)
Diluted earnings per share
The calculation of diluted earnings per share at 31 July 2019 was based on profit attributable to ordinary shareholders of
£5,071,000 (2018: £7,246,000) and a weighted average number of ordinary shares in issue after adjustment for the effects of
all dilutive potential ordinary shares of 29,387,000 (2018: 29,159,000):
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. 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. The largest components of the adjusting items, being amortisation,
and share based payment charges are deemed to be ‘non cash’ in nature, and therefore excluded in order to assist with the
understanding of underlying trading. A reconciliation of this figure is provided below. The Group has also presented an ‘adjusted
Profit’ metric as detailed in note 31, with the key difference between the numbers presented below, and those disclosed in note
31 being the income tax charge.
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
2019
£’000
5,071
2,251
1,034
(38)
(260)
8,058
28,521
29,387
28.25p
27.42p
2018
£’000
7,246
1,774
1,193
(2,572)
(214)
7,427
28,196
29,159
26.34p
25.47p
TRACSIS PLC | 63
Notes to the Consolidated Financial Statements continued
14
Property, plant and equipment
Freehold
Land &
Motor
Computer
Plant,
machinery,
fixtures
Buildings
Vehicles
equipment
& fittings
£000
£000
£000
£000
Cost
At 1 August 2017
Additions
Arising on acquisition
Disposals
At 31 July 2018
Additions
Arising on acquisition
Disposals
At 31 July 2019
Depreciation
At 1 August 2017
Charge for the year
Disposals
At 31 July 2018
Charge for the year
Disposals
At 31 July 2019
Net book value
At 1 August 2017
At 31 July 2018
At 31 July 2019
400
1,376
1,619
-
-
-
400
-
-
-
400
78
12
-
90
15
-
105
322
310
295
54
-
(210)
1,220
625
76
(463)
1,458
484
224
(151)
557
236
(308)
485
892
663
973
143
10
(147)
1,625
357
37
(66)
2,199
343
-
(582)
1,960
375
35
(64)
1,953
2,306
1,384
157
(147)
1,394
180
(57)
1,517
235
231
436
1,187
367
(571)
983
400
(51)
1,332
1,012
977
974
The net book value of assets held under finance lease obligations is £882,000 (2018: £511,000).
Total
£000
5,594
540
10
(939)
5,205
1,357
148
(593)
6,117
3,133
760
(869)
3,024
831
(416)
3,439
2,461
2,181
2,678
64 | Annual Report and Accounts 2019
Notes to the Consolidated Financial Statements continued
15
Intangible assets
Cost
At 1 August 2017
Arising on acquisition
At 31 July 2018
Arising on acquisition
At 31 July 2019
Amortisation and impairment
At 1 August 2017
Charge for the year
At 31 July 2018
Impairment charge
Charge for the year
At 31 July 2019
Carrying amounts
At 1 August 2017
At 31 July 2018
At 31 July 2019
Customer
related
intangibles
£000
Technology
related
intangibles
£000
Goodwill
£000
3,025
623
3,648
1,093
4,741
-
-
-
623
-
623
3,025
3,648
4,118
22,373
1,238
23,611
8,524
32,135
3,548
1,327
4,875
-
1,573
6,448
18,825
18,736
25,687
3,974
1,678
5,652
5,846
11,498
1,366
447
1,813
-
678
2,491
2,608
3,839
9,007
Total
£000
29,372
3,539
32,911
15,463
48,374
4,914
1,774
6,688
623
2,251
9,562
24,458
26,223
38,812
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:
Customer related
intangibles
2019
2018
Technology related
intangibles
2019
2018
Tracsis Rail Consultancy Limited
Tracsis Passenger Analytics 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
Cash & Traffic Management Limited
Compass Informatics Limited
Bellvedi Limited
Goodwill
2019
£000
2018
£000
671
43
136
269
390
359
555
602
-
32
1,021
40
671
43
136
269
390
359
555
602
623
-
-
-
£000
354
185
140
755
632
2,291
966
11,021
£000
390
203
154
819
802
2,446
1,039
11,695
1,126
1,188
1,672
2,188
4,357
-
-
-
The amortisation charge is recognised in the following line items in the income statement:
4,118
3,648
25,687
18,736
Administrative expenses
£000
-
-
7
125
-
795
-
886
1,460
-
1,119
4,615
9,007
2019
£000
2,251
£000
-
-
31
193
-
961
-
1,026
1,628
-
-
-
3,839
2018
£000
1,774
TRACSIS PLC | 65
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
2019
1.0%
10-12%
2018
1.0%
10-12%
A rate of 10% is used for impairment testing within the Rail Technology & Services segment, and a rate of 12% is used for
impairment testing 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 the goodwill relating to the acquisition of Travel Compensation Services Limited and Delay Repay Sniper Limited
which has been assessed by the Group in the year and an impairment of £623,000 has been recognised in these financial
statements.
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
14.9%
37.8%
24.6%
2019
£000
600
500
1,300
2,400
2019
£000
475
250
1,300
2,025
2018
£000
500
500
1,000
2,000
2018
£000
375
250
1,000
1,625
66 | Annual Report and Accounts 2019
Notes to the Consolidated Financial Statements continued
16
Investments (continued)
Convertible Loan notes receivable from investments:
Citi Logik Limited
Nutshell Software Limited
2019
£000
125
250
375
2018
£000
125
250
375
During the previous financial 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 loss of £192,000 (2018: £121,000) was
recognised.
Nutshell Software Limited was accounted for as an associated undertaking, with a share of profit of £18,000 (2018: loss of
£80,000).
The carrying value of the investments as follows:
Investments – equity
Citi Logik Limited
Convertible Loan notes receivable from associated undertakings:
Nutshell Software Limited
Investments in equity accounted investees:
Nutshell Software Limited
Vivacity Labs Limited
2019
£000
350
350
2019
£000
250
250
2019
£000
111
987
1,098
2018
£000
250
250
2018
£000
250
250
2018
£000
93
879
972
TRACSIS PLC | 67
Notes to the Consolidated Financial Statements continued
17
Inventories
Raw materials & work in progress
Finished goods
2019
£000
124
257
381
2018
£000
180
73
253
The value of inventories expensed in the period in cost of sales was £1,402,000 (2018: £698,000). 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
Finance leases and 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 obligation
A reconciliation of the obligation is stated below.
At start of the year
New contracts
Repayments
At end of the year
2019
£000
277
241
44
285
562
2019
£000
278
626
(342)
562
2018
£000
157
114
7
121
278
2018
£000
550
31
(303)
278
Finance lease and hire purchase obligations
2019
2018
Carrying
amount
£000
Contractual
cash flows
£000
Less than
one year
£000
One to
Two years
£000
Two to
Five years
£000
562
278
601
301
306
172
247
120
48
9
68 | Annual Report and Accounts 2019
Notes to the Consolidated Financial Statements continued
19
Trade and other receivables
Trade receivables
Other receivables and prepayments
Amounts recoverable on contracts
Contract assets
2019
£000
8,884
807
-
38
9,729
2018
£000
6,573
521
235
-
7,329
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 (2019: 18% of revenue, 2018: 14% 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 fair values of trade and other receivables are the same as their book values.
The expected credit loss for group trade receivables is immaterial. 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.
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
The other classes within trade and other receivables do not contain impaired assets.
2019
£000
1,536
283
-
1,819
2018
£000
978
80
-
1,058
Notes to the Consolidated Financial Statements continued
TRACSIS PLC | 69
20
Trade and other payables
Trade payables
Other tax and social security
Contract liabilities
Accruals and other payables
2019
£000
1,445
3,196
7,991
4,304
2018
£000
1,075
2,122
3,740
3,379
16,936
10,316
The Directors consider that the carrying amounts of trade payables approximates to their fair value.
Contract liabilities relates to consideration received in advance of the completion of the associated performance obligation.
21
Contingent consideration
During the financial year, the Group acquired Cash & Traffic Management Limited, Compass Informatics Limited and Bellvedi
Limited. Under the share purchase agreements in place for each of these acquisitions, contingent consideration is payable which
is linked to the profitability of the acquired businesses for a two to four year period post acquisition. The maximum amount
payable is £750,000 for Cash & Traffic Management Limited, €2,000,000 for Compass Informatics Limited and £7,900,000 for
Bellvedi Limited. The fair value of the amount payable was assessed at £600,000 for Cash & Traffic Management Limited,
£1,132,000 for Compass Informatics Limited and £4,057,000 for Bellvedi Limited.
During the previous financial 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 at the previous
financial year end date. Contingent consideration of £84,000 has been paid in the year, and the fair value of the consideration
has been assessed as £394,000 at 31 July 2019, following an exceptional credit to the Statement of Comprehensive Income of
£722,000.
During the financial year, contingent consideration of £2,058,000 was paid in respect of the Ontrac acquisition which was made
in year ended 31 July 2016 (2018: £nil), £7,000 in respect of the SEP acquisition which was made in year ended 31 July 2016
(2018: £323,000) and £84,000 in respect of the Travel Compensation Services acquisition which was made in the year end 31
July 2018 (2018: £nil).
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
Cash & Travel Management Limited
Compass Informatics Limited
Bellvedi Limited
2019
£000
-
-
394
600
1,132
4,057
6,183
2018
£000
7
2,058
1,200
-
-
-
3,265
70 | Annual Report and Accounts 2019
Notes to the Consolidated Financial Statements continued
21
Contingent consideration (continued)
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, which results from assumptions about revenues and costs. The Group has considered multiple
profit related scenarios in estimating the fair value of contingent consideration payable in the future. In all cases, contingent
consideration payable could range from zero to the maximum amount included in the Share Purchase Agreements as detailed
in this note and also note 5. Each Share Purchase Agreement contains different provisions for calculating contingent
consideration, timeframes over which it is calculated and payable, and therefore sensitivities regarding the total amount to be
paid. 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
The ageing profile of the remaining liabilities can be summarised as follows:
2019
£000
3,265
5,789
(2,149)
(722)
6,183
2019
£000
879
5,304
6,183
2018
£000
5,041
1,200
(323)
(2,653)
3,265
2018
£000
2,165
1,100
3,265
Payable in less than one year
Payable in more than one year
Total
22
Deferred tax
Non-current liability/(asset)
Accelerated
Intangible
capital
Share
assets
allowances options
At 31 July 2017
Arising on acquisition
(Credit)/charge to statement of comprehensive
income (note 12)
At 31 July 2018
Arising on adoption of IFRS 15 (note 32)
Arising on acquisition (note 5)
(Credit)/charge to statement of comprehensive
income (note 12)
At 31 July 2019
£000
£000
3,644
496
(301)
3,839
-
2,406
(386)
5,859
74
2
(40)
36
-
22
25
83
£000
(457)
-
(145)
(602)
-
-
40
Other
£’000
-
-
-
-
(244)
(105)
244
Total
£000
3,261
498
(486)
3,273
(244)
2,323
(77)
(562)
(105)
5,275
The closing deferred tax asset and liability has been calculated at 17% as at 31 July 2019 (2018: 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
2019
£000
(667)
5,942
5,275
2018
£000
(602)
3,875
3,273
TRACSIS PLC | 71
Notes to the Consolidated Financial Statements continued
23
Share capital
Allotted, called up and fully paid:
Ordinary shares of 0.4p each
2019
2019
2018
2018
Number
£
Number
£
28,748,578
114,994
28,334,086
113,336
The following share transactions have taken place during the year ended 31 July 2019:
At start of the year
Issued as consideration for business combinations
Exercise of share options (Note 8)
At end of the year
2019
Number
2018
Number
28,334,086
27,963,784
125,063
289,429
28,571
341,731
28,748,578
28,334,086
During the year, a number of options were exercised from the schemes with exercise price varying from 0.4p to 199.5p.
24
Capital and reserves
The following describes the nature and purpose of each reserve:
Reserve
Share capital
Share premium
Merger reserve
Retained earnings
Translation reserve
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 a previous year.
Translation differences on retranslation of Irish subsidiary
72 | Annual Report and Accounts 2019
Notes to the Consolidated Financial Statements continued
25
Operating leases
The Group leases several office facilities under operating leases plus various other assets. During the year £560,000 was
recognised as an expense in the income statement in respect of operating leases (2018: £511,000).
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
2019
£’000
585
726
1,311
2019
£’000
55
45
100
2018
£’000
338
413
751
2018
£’000
46
72
118
26
Financial risk management
The principal financial instruments comprise cash and short term deposits (30 day deposit). The main purpose of these financial
instruments is to provide finance for the Group’s operations. The Group has various other financial instruments, such as trade
receivables and payables that arise directly from its operations. The Group has taken advantage of the exemption to exclude
short term debtors and creditors from the disclosures given below. The fair values of the financial instruments are equal to their
year end carrying values and represent the maximum exposure.
Financial assets
Cash and short term deposits
2019
Fixed
Floating
Rate
£000
3,000
Rate
£000
Total
£000
21,104
24,104
2018
Fixed
Floating
Rate
£000
Rate
£000
Total
£000
-
22,329
22,329
TRACSIS PLC | 73
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 (1)
cash at bank (1);
trade and other payables (1)
contingent consideration (2)
investments in equity and debt instruments (3); and
finance lease liabilities (4)
(1) Items are measured at amortised cost. There are no significant financing components and short-term in nature.
(2) Measured at fair value with changes through the Income Statement
(3) Investments in equity measured at fair value, investments in debt instruments measured at amortised cost
(4) Measured at amortised cost
The group considers that the fair value is materially consistent with amortised cost for those assets measured on this basis.
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 2019, the Group had £3.0m in a fixed rate 30 day deposit account (2018: £nil).
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.
74 | Annual Report and Accounts 2019
Notes to the Consolidated Financial Statements continued
26
Financial risk management (continued)
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 and Australian
dollar. The Group acquired Compass Informatics Limited during the year which increased its exposure to the Euro given that
Compass is based in Ireland and raises the vast majority of its sales invoices in Euros.
Changes in liabilities from financing activities
At 1 August 2018
Changes from financing cash flows
Payment of finance lease liabilities
Payment of contingent consideration
Total changes from financing cash flow
Changes in fair value
Other changes
Arising on acquisition
New finance leases
At 31 July 2019
At 1 August 2017
Changes from financing cash flows
Payment of finance lease liabilities
Payment of contingent consideration
Total changes from financing cash flow
Changes in fair value
Other changes
Arising on acquisition
New finance leases
At 31 July 2018
Contingent
Consideration
£000
Finance
leases
£000
3,265
278
-
(342)
(2,149)
(2,149)
(722)
5,789
-
6,183
-
(342)
-
-
626
562
Contingent
Consideration
£000
Finance
leases
£000
5,041
550
-
(303)
(323)
(323)
(2,653)
1,200
-
3,265
-
(303)
-
-
31
278
TRACSIS PLC | 75
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)
Nexus Leeds 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)
Nutshell Software Limited (4)
Purchase of
Amounts owed to
goods and services
related parties
2019
£000
78
73
-
6
-
254
202
2018
£000
99
-
5
28
36
107
17
2019
£000
-
19
-
-
-
12
36
2018
£000
13
-
1
5
-
9
-
Sale of
Amounts owed by
goods and services
related parties
2019
£000
3,709
-
-
10
2018
£000
3,180
1
30
-
2019
£000
1,364
-
-
-
2018
£000
883
-
36
-
(1) Leeds Innovation Centre Limited and Nexus Leeds Limited are companies which are 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 was Chairman up until 11 September
2018. 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
2019
£’000
3,087
440
3,527
2018
£’000
2,214
451
2,665
76 | Annual Report and Accounts 2019
Notes to the Consolidated Financial Statements continued
28
Employee benefits
The Group makes contributions to defined contribution pension schemes for its employees. The assets of the schemes are held
separately in independently administered funds. The pension cost charge for the year comprises contributions payable by the
Group to the schemes and other personal pension plans and amounted to £605,000 (2018: £352,000). There were outstanding
contributions at 31 July 2019 of £101,000 (2018: £62,000).
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)
Cash & Traffic Management Limited (2)**
Compass Informatics Limited (7)**
Bellvedi Limited (1)**
Compass Informatics UK Limited (2)**
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)
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
Event planning & traffic
management
Software development
England and Wales
England and Wales
Republic of Ireland
Rail industry software
England and Wales
Dormant
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
England and Wales
Mobile Network Data Analysis
England and Wales
Nutshell Software Limited (4)
Mobile application development
England and Wales
Vivacity Labs Limited (5)
Machine Learning technology
England and Wales
% 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%
100%
100%
100%
100%
14.9%
37.8%
24.6%
TRACSIS PLC | 77
Notes to the Consolidated Financial Statements continued
29
Group entities (continued)
*Entity disposed of in financial year / ** Company acquired during financial year
The registered offices of the subsidiaries are as follows:
(1)
(2)
(3)
(4)
(5)
(6)
(7)
Nexus, Discovery Way, Leeds, England, LS2 3AA
Templar House, 1 Sandbeck Court, Sandbeck Way, Wetherby, England LS22 7BA
The Platform, New Station Street, Leeds, England, LS1 4JB
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
Block 8, Blackrock Business Park, Carysfort Avenue, Blackrock, County Dublin, Ireland, A94 W209
30
Dividends
The Group introduced a progressive dividend policy during previous years. The cash cost of the dividend payments is below:
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 0.9p per share paid
Interim dividend for 2018/19 of 0.8p per share paid
Total dividends paid
2019
£000
-
-
257
229
486
2018
£000
225
198
-
-
423
The dividends paid or proposed in respect of each financial year is as follows:
2019
2018
2017
2016
2015
2014
2013
2012
£000
£000
£000
£000
£000
£000
£000
£000
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 paid
Interim dividend for 2018/19 of
0.8p per share paid
Final dividend for 2018/19 of 1.0p
per share proposed
-
-
-
-
-
-
-
-
-
-
-
-
-
-
229
287
-
-
-
-
-
-
-
-
-
-
-
-
198
257
-
-
-
-
-
-
-
-
-
-
-
-
167
225
-
-
-
-
-
-
-
-
-
-
-
-
137
195
-
-
-
-
-
-
-
-
-
-
-
-
106
164
-
-
-
-
-
-
-
-
-
-
-
-
89
119
-
-
-
-
-
-
-
-
-
-
-
-
75
102
-
-
-
-
-
-
-
-
-
-
-
-
48
87
-
-
-
-
-
-
-
-
-
-
-
-
-
-
78 | Annual Report and Accounts 2019
Notes to the Consolidated Financial Statements continued
30
Dividends (continued)
The total dividends paid or proposed in respect of each financial year ended 31 July is as follows:
Total dividends paid per share
2019
1.8p
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 14 February 2020 to shareholders on the Register at 31 January 2020.
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 as they better reflect the underlying performance of the group, and its
ability to generate cash. The largest components of the adjusting items, being depreciation, amortisation, share based payments,
and share of associates are ‘non cash’ items and so separately analysed in order to assist with the understanding of underlying
trading. 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
2019
£000
6,559
(37)
1,034
(38)
(260)
2,251
831
174
10,514
2018
£000
8,275
8
1,193
(2,572)
(214)
1,774
760
201
9,425
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
2019
£000
6,559
(37)
1,034
(38)
(260)
2,251
174
9,683
2019
£000
10,514
(831)
9,683
2018
£000
8,275
8
1,193
(2,572)
(214)
1,774
201
8,665
2018
£000
9,425
(760)
8,665
TRACSIS PLC | 79
Notes to the Consolidated Financial Statements continued
32
IFRS 15 reconciliation
The Group adopted IFRS 15 with effect from 1 August 2018, using the cumulative effect method, under which the comparative
information is not restated. The impact of adopting this is set out below, but can be summarised as the removal of certain
accrued income balances to be replaced with contract assets, and the reversal of certain revenue previously recognised on a
stage of completion basis, for which performance obligations had not been fully met at year end under IFRS 15. The net impact
was a charge to reserves of £667,000 which can be summarised as follows:
As previously
IFRS 15
Under IFRS 15
reported at 31
Adjustment at
as at 31 July
July 2018
31 July 2018
£’000
£’000
7,329
(10,316)
(3,273)
(32,593)
(146)
(765)
244
667
2018
£’000
7,183
(11,081)
(3,029)
31,926
Trade and other receivables
Trade and other payables
Deferred tax (liabilities)/asset
Retained earnings
Impact on the consolidated income statement for the year ended 31 July 2019:
Revenue
Cost of sales
Gross profit
Administrative costs
Adjusted EBITDA
Depreciation
Adjusted profit
Amortisation of intangible assets
Other operating income
Share-based payment charges
Operating profit before exceptional items
Exceptional items
Operating profit
Finance income
Finance expense
Share of result of equity accounted investees
Profit before tax
Taxation
Profit after tax
Foreign currency translation
Total recognised income for the year
As reported
£’000
Adjustments
£’000
49,219
(20,163)
29,056
(22,360)
10,514
(831)
9,683
(2,251)
260
(1,034)
6,658
38
6,696
58
(21)
(174)
6,559
(1,488)
5,071
17
5,088
395
51
446
-
446
-
446
-
-
-
446
-
446
-
-
-
446
(85)
361
-
361
Amounts without
adoption of IFRS 15
£’000
49,614
(20,112)
29,502
(22,360)
10,960
(831)
10,129
(2,251)
260
(1,034)
7,104
38
7,142
58
(21)
(174)
7,005
(1,573)
5,432
17
5,449
80 | Annual Report and Accounts 2019
Notes to the Consolidated Financial Statements continued
32
IFRS 15 reconciliation (continued)
Impact on the consolidated balance sheet as at 31 July 2019:
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
Finance leases and hire-purchase contracts
Contingent consideration payable
Deferred tax liabilities
Current liabilities
Finance leases and 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
Translation reserve
Net assets
As reported
Adjustments
£’000
£’000
2,678
38,812
350
250
1,098
667
43,855
381
9,729
24,104
34,214
78,069
285
5,304
5,942
11,531
277
16,936
879
505
-
-
-
-
-
-
-
-
67
-
67
67
-
-
244
244
-
(1,290)
-
85
Amounts
without
adoption of
IFRS 15
£’000
2,678
38,812
350
250
1,098
667
43,855
381
9,796
24,104
34,281
78,136
285
5,304
6,186
11,775
277
15,646
879
590
18,597
(1,205)
17,392
30,128
(961)
29,167
47,941
1,028
48,969
115
6,343
3,921
37,545
17
-
-
-
115
6,343
3,921
1,028
38,573
-
17
47,941
1,028
48,969
TRACSIS PLC | 81
Financial Statements
Company Balance Sheet (prepared under FRS 101)
as at 31 July 2019
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
2019
£000
349
54,751
208
55,308
6,987
2,385
9,372
2018
£000
342
38,845
360
39,547
10,152
2,608
12,760
64,680
52,307
5,304
5,304
1,100
1,100
14,854
879
15,733
10,304
2,165
12,469
21,037
13,569
43,643
38,738
115
6,343
3,921
33,264
43,643
113
6,243
3,160
29,222
38,738
The Company’s profit for the year, after dividends received was £3,738,000 (2018: £6,315,000)
The financial statements were approved and authorised for issue by the Board of Directors on 14 November 2019 and were
signed on its behalf by:
Chris Barnes
– Chief Executive Officer
Max Cawthra
– Chief Financial Officer
The accompanying notes form an integral part of these financial statements
82 | Annual Report and Accounts 2019
Financial Statements
Company Statement of Changes in Equity
At 1 August 2018
Adjustment on initial application
of IFRS 15 (net of tax)
Profit and total comprehensive
income
Dividends
Share based payment charges
Shares issued as consideration
for business combinations
Exercise of share options
At 31 July 2019
Share
capital
£000
113
-
Share
premium
£000
6,243
-
Merger
reserve
£000
3,160
-
Retained
earnings
£000
29,222
(244)
Total
equity
£000
38,738
(244)
-
-
-
1
1
115
-
-
-
-
100
6,343
-
-
-
761
-
3,738
3,738
(486)
1,034
-
-
(486)
1,034
762
101
3,921
33,264
43,643
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
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
-
-
Total
equity
£000
31,207
6,315
(423)
1,193
150
296
3,160
29,222
38,738
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 is incorporated in retained earnings in the
previous and current financial year.
The accompanying notes form an integral part of these financial statements
TRACSIS PLC | 83
Financial Statements
Notes to the Company Balance Sheet
33
Company accounting policies
Tracsis plc (“the Company”) was incorporated and is domiciled in England, in the United Kingdom. Its registered office is Nexus,
Discovery Way, Leeds, LS2 3AA, 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 Group’s financial statements.
Revenue recognition
The Company has initially applied IFRS 15 “Revenue from Contracts with Customers” from 1 August 2018. Due to the transition
method chosen by the company in applying this standard, comparative information throughout these financial statements has
not been restated to reflect the requirements of the new standard.
IFRS 15 has established a comprehensive framework for determining whether, how much and when revenue is recognised. It
replaced IAS 18 and related interpretations for the Company
The Company derives revenue from software licencing, bespoke development work and post contract customer support.
The following table provides information about the nature and timing of the satisfaction of performance obligations in contracts
with customers, and the related revenue recognition policies. Revenue is recognised either when the performance obligation in
the contract has been performed (“point in time” or “over time” as control is transferred to the customer). Consideration received
in advance of the performance obligation being satisfied by the Company is included as a Contract Liability on the balance
sheet. A contract asset is recognised when a performance obligation has been completed, but no consideration has yet been
received. Adjustments are made to allocate discounts relative to the stand-alone selling price of each performance obligation.
The Group does not adjust the transaction price for the time value of money as it does not expect to have any contracts where
the period between the transfer of the promised service to the client, and the payment by the client exceeds one year.
84 | Annual Report and Accounts 2019
Notes to the Company Balance Sheet continued
33
Company accounting policies (continued)
Revenue Stream
Recognition Policy
Software – perpetual and non-cancellable annual
software licenses, and support and maintenance
services associated with these licenses
There are two separate performance obligations
associated with this revenue stream:
• Provision of the perpetual or non cancellable
annual software license
• Maintenance and support services
The company recognises the revenue from the sale of
perpetual and non-cancellable annual software
licences at the time that the license is made available
to the customer as it is considered that control passes
at that point in time.
The allocation of the transaction price between the two
performance obligations included in the contract is
based on an expected cost plus margin approach as
the stand-alone selling price is not observable.
Revenue related to ongoing support and periodic
updates is recognised over the license period as the
Group is unable to predict at inception of the license
when the support and updates will be required to be
provided
is
considered to pass over time.
the customer. As such, control
to
Software as a service, and support services associated
with these licenses
Under IFRS 15 two distinct performance obligations
have been identified for these contracts.
• Hosted software licenses
• Maintenance and support
Revenue from the provision of the hosted software
license is recognised evenly over the period in which
the license is hosted by the Group. This policy
reflects the continuous transfer of the service to the
customer throughout the contracted license period.
Revenue related to ongoing support and periodic
updates is recognised over the license period as the
group is unable to predict at inception of the license
when the support and updates will be required to be
provided to the customer.
Revenue in relation to bespoke development work is
recognised on completion of the work as specified in
the contract with the customer as it is considered that
control of
the work does not pass until all
development work has been completed.
Bespoke software development work
TRACSIS PLC | 85
Notes to the Company Balance Sheet continued
33
Company accounting policies (continued)
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.
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 in full 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 £3,738,000 after receiving dividends from subsidiary undertakings of
£4,200,000 (2018: profit of £6,315,000 after receiving dividends from subsidiary undertakings of £3,350,000 and an exceptional
contingent consideration credit of £2,653,000).
86 | Annual Report and Accounts 2019
Notes to the Company Balance Sheet continued
34
Property, plant and equipment
Cost
At 1 August 2018
Additions
At 31 July 2019
Depreciation
At 1 August 2018
Charge for the year
At 31 July 2019
Net book value
At 31 July 2018
At 31 July 2019
*Includes land of £100,000 which is not depreciated
35
Investments
At 1 August 2018
Additions
Impairment
At 31 July 2019
Freehold
Land & Computer
Buildings*
equipment
£000
£000
400
-
400
90
12
102
310
298
68
39
107
36
20
56
32
51
Total
£000
468
39
507
126
32
158
342
349
Shares in, and loans to
subsidiary
undertakings
£000
38,845
16,597
(691)
54,751
TRACSIS PLC | 87
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
England and Wales
Rail industry software
Rail industry software
Event planning & traffic
management
Software Development
Rail industry software
Dormant
Dormant
Dormant
Dormant
Ordinary 100%
Ordinary 100%
Ordinary 100%
Ordinary 100%
Ordinary 100%
Ordinary 100%
Ordinary 100%
Ordinary 100%
Ordinary 100%
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
Indirect
Direct
Direct
Direct
Direct
Indirect
Direct
Indirect
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
Ordinary 100%
Indirect
Dormant
Dormant
Ordinary 100%
Ordinary 100%
Indirect
Indirect
Ontrac Limited
Tracsis Travel Compensation
Services Limited
Delay Repay Sniper Limited
Cash & Traffic Management
Limited
Compass Informatics Limited
Bellvedi Limited
Compass Informatics UK
Limited
S Dalby Consulting Limited
England and Wales
England and Wales
Republic of Ireland
England and Wales
England and Wales
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 14.9%
Nutshell Software Limited
England and Wales Mobile application development
Ordinary 37.8%
Vivacity Labs Limited
England and Wales
Machine learning technology
Ordinary 24.6%
Direct
Direct
Direct
88 | Annual Report and Accounts 2019
Notes to the Company Balance Sheet continued
36
Trade and other receivables
Trade receivables
Amounts owed by group undertakings
Other debtors
Corporation Tax
Prepayments
2019
£000
160
920
354
874
77
2,385
2018
£000
294
1,168
362
756
28
2,608
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 contract liabilities
2019
£000
95
73
12,237
2,449
14,854
2018
£000
125
60
8,996
1,123
10,304
The carrying value of trade payables approximates to the fair value. Amounts owed to group undertakings are interest free
and repayable on demand.
38
Contingent consideration
During the financial year, the Group acquired Cash & Traffic Management Limited, Compass Informatics Limited and Bellvedi
Limited. Under the share purchase agreements in place for each of these acquisitions, contingent consideration is payable which
is linked to the profitability of the acquired businesses for a two to four year period post acquisition. The maximum amount
payable is £750,000 for Cash & Traffic Management Limited, €2,000,000 for Compass Informatics Limited and £7,900,000 for
Bellvedi Limited. The fair value of the amount payable was assessed at £600,000 for Cash & Traffic Management Limited,
£1,132,000 for Compass Informatics Limited and £4,057,000 for Bellvedi Limited.
During the previous financial 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 at the previous
financial year end date. Contingent consideration of £84,000 has been paid in the year, and the fair value of the consideration
has been assessed as £394,000 at 31 July 2019, following an exceptional credit to the Statement of Comprehensive Income of
£722,000.
During the financial year, contingent consideration of £2,058,000 was paid in respect of the Ontrac acquisition which was made
in year ended 31 July 2016 (2018: £nil), £7,000 in respect of the SEP acquisition which was made in year ended 31 July 2016
(2018: £323,000) and £84,000 in respect of the Travel Compensation Services acquisition which was made in the year end 31
July 2018 (2018: £nil).
TRACSIS PLC | 89
Notes to the Consolidated Financial Statements continued
38
Contingent consideration (continued)
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
Cash & Travel Management Limited
Compass Informatics Limited
Bellvedi Limited
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 statement of comprehensive income 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
2019
£000
-
-
394
600
1,132
4,057
6,183
2019
£000
879
5,304
6,183
2019
£000
(360)
152
(208)
2019
£000
1
(209)
(208)
2018
£000
7
2,058
1,200
-
-
-
3,265
2018
£000
2,165
1,100
3,265
2018
£000
(369)
9
(360)
2018
£000
-
(360)
(360)
90 | Annual Report and Accounts 2019
Notes to the Consolidated Financial Statements continued
40
Share capital
Allotted, called up and fully paid:
Ordinary shares of 0.4p each
2019
2019
2018
2018
Number
£
Number
£
28,748,578
114,994
28,334,086
113,336
The following share transactions have taken place during the year ended 31 July 2019:
At start of the year
Issued as consideration for business combinations
Exercise of share options
At end of the year
41
Operating leases
Operating lease commitments.
Minimum lease payments are payable as follows:
Land and buildings:
Within one year
Between one and two years
Between two to five years
42
Related Party Transactions
2019
Number
2018
Number
28,334,086
27,963,784
125,063
289,429
28,571
341,731
28,748,578
28,334,086
2019
£’000
180
185
123
2018
£’000
26
-
-
The following transactions took place during the year with other related parties:
Leeds Innovation Centre Limited
Nexus Leeds Limited
Purchase of
Amounts owed to
goods and services
related parties
2019
£000
78
73
2018
£000
99
-
2019
£000
-
19
2018
£000
13
-
Leeds Innovation Centre Limited and Nexus Leeds Limited are companies which are connected to The University of Leeds. Tracsis plc rents
its office accommodation, along with related office services, from these companies.
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
Nexus
Discovery Way
Leeds
LS2 3AA
1 Sovereign Square
Sovereign Street
Leeds
LS1 4DA
The registered office of all subsidiary entities
is detail in note 29 to the Group Financial
statements.
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 | 91
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
Bank of Ireland
Triodos
Haynes & Boone
1 New Fetter Lane
London
EC4A 1AN