Annual Report & Accounts 2020
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
Covid-19 review
Key Performance Indicators
Section 172 Statement
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
14
15
16
18
19
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28
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37
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41
88
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100
2 | Annual Report and Accounts 2020
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 fourteen 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, smart ticketing 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 fourteen acquisitions since coming to
market in 2007.
Financial highlights
for the year ended 31 July 2020:
Revenue: £48.0m (2019: £49.2m)
Statutory Profit before Tax: £4.1m (2019: £6.6m)
Adjusted EBITDA*: £10.5m (2019: £10.5m)
Cash balances: £17.9m (2019: £24.1m)
*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:
Developments 2019/20:
1 Organic
further sales from existing
products to UK
Further significant contract awarded for the provision of TRACS Enterprise
software product with another major UK rail operator, which includes the
renewal of some existing systems already licenced by the customer, plus
significant levels of additional functionality through the TRACS Enterprise
suite, including ATTUne
Continued strong trading at our Infrastructure businesses – Remote
Condition Monitoring and Ontrac, including securing a major order for the
provision of remote condition monitoring technology, plus associated
Centrix software and related support services
High levels of software renewals and recurring revenue
Traffic & Data Services Division impacted by Covid-19 due to the
cancellation and postponement of significant amounts of Event work and
also Traffic Surveys, which had an impact on organic revenue and
profitability
2 Overseas Markets
show promise and remain
relatively untapped
Full year contribution from Compass Informatics Limited acquisition which
was acquired in January 2019, and increases the Group’s presence in
Ireland
Existing overseas sales in Ireland, Sweden and New Zealand all continued
3
Acquisitions
Completed the acquisition of iBlocks Limited, a software company that
specialises in the provision of smart ticketing solutions, automated delay
repay and the development of mission critical back office systems that are
used by the rail industry
Further potential targets evaluated during the year
4 | Annual Report and Accounts 2020
Strategic Report
Chairman & Chief Executive Officer’s Report
Introduction
The year ended 31 July 2020 was on the whole a satisfactory year, with a strong performance from the Rail Technology &
Services Division compensating for evident challenges caused by Covid-19, primarily in respect of the Traffic & Data Services
Division. As we reflect on the previous twelve months, having completed the acquisition of iBlocks Limited, navigated the early
phases of Covid-19, generated revenues of £48m, whilst maintaining EBITDA margin, and ended the year with almost £18m of
cash, the Board is pleased with the resilient performance.
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 strands:
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;
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;
and
Transit and Ticketing solutions: the provision of Smart Ticketing software and TIS accredited Account Based
Back Office capable of performing the full cycle from tap capture through to fare generation, payment collection
and revenue settlement.
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 Technology (TLT) are also offered to improve traffic monitoring and traffic flow in
and out of major event venues.
Covid-19
The Board estimates that Covid-19 had an impact on Group revenues of around £10m when compared against the Group’s
internal budget for the year, taking account of acquisitions made in the previous year. The majority of this was felt within the
Traffic & Data Services Division within which large Events and Transport Data Collection projects were either cancelled or
postponed. The Group’s cost base in respect this part of the Group consists of a number of casual workers who it was not
necessary to utilise given the circumstances. Accordingly, some of the loss of revenue from this part of the Group was offset by
the reduced cost base.
TRACSIS PLC | 5
Chairman & Chief Executive Officer’s Report continued
The Rail Technology & Services Division was generally unaffected by the pandemic other than a reduction in delay-repay related
revenues given the significant reduction in rail passenger numbers that occurred post the implementation of the March lockdown
in the UK.
Our key priority during these unprecedented times was the health and wellbeing of our employees, our clients and their families.
As such, the vast majority of staff immediately transitioned to working at home which on the whole was deemed to be a success.
The Company also placed a number of staff on furlough but ensured that they retained their full remuneration until July 2020.
The business has also taken actions to reduce its fixed cost base which have now all been fully implemented. All our offices are
open and have been signed off as ‘Covid secure’. The majority of staff continue to work from home although small numbers of
staff have returned to the office.
Financial Summary
Group revenues of £48.0m (2019: £49.2m) were slightly less than the previous year, due to the challenges of Covid-19. This
was mitigated to some extent by a full year contribution from acquisitions made in the previous year which were not impacted
by Covid-19 (Bellvedi and Compass Informatics), and also the acquisition of iBlocks Limited in the year. Overperformance versus
budget in our Rail Technology & Services Division was an important contributor to the overall results.
The Group has also adopted IFRS 16 in the year which brought ‘Right of Use Assets’ on to the Balance Sheet and a
corresponding “Lease Liability”. At 31 July 2020 the impact of the transition was a Right of Use asset recognised of £1.4m and
a ‘Lease Liability’ of £1.7m. The impact on EBITDA was £0.8m, with a corresponding reduction in overheads and so had no
significant impact on Profit before Tax.
Adjusted EBITDA* of £10.5m (£9.6m excluding the impact of IFRS 16) was adverse compared to the previous year on a like for
like basis (2019: £10.5m) due to the impact of Covid-19 on the Traffic & Data Services Division. Adjusted Profit** was £8.6m,
less than the previous year (2019: £9.7m). Statutory Profit before Tax was £4.1m (2019: £6.6m) after taking account of large
charges in respect of amortisation, share based payment charges, and a share of results of associated undertakings. In addition,
the Group has recognised a net credit of £0.1m relating to exceptional items. This credit includes an exceptional credit
adjustment to fair value of contingent consideration payable at year end of £1.5m, offset by exceptional deal costs of £0.2m,
plus impairments against the Citi Logik investment and TCS acquisition of £1.2m in total.
At 31 July 2020, the Group’s cash balances were £17.9m (2019: £24.1m), and cash generation continues to be strong. Cash
balances are reduced compared to the previous year due to the acquisition of iBlocks Limited. All contingent consideration due
in the year has been paid. The Group has also paid all VAT, PAYE and Corporation Tax due and has not taken advantage of any
Government Support in respect of taxes, but has claimed grant money in respect of furloughed staff in the year with support to
the Income Statement of c. £0.7m.
* 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 6 for reconciliation. 2020 prepared under IFRS 16, 2019 prepared under IAS 17
** 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 6 for reconciliation. 2020 prepared under IFRS 16, 2019 prepared under IAS 17
Trading Progress and Prospects
Rail Technology & Services
Summary segment results:
Revenue
Adjusted EBITDA *
Adjusted Profit before Tax
£25.6m (2019: £21.9m)
£9.2m
£8.6m
(2019: £6.9m)
(2019: £6.7m)
After making significant investment in our products and people, overall EBITDA margin within the Rail Technology & Services
Division was an improvement on the previous year, which was pleasing.
Software
Sales of Operational Software and Infrastructure software, excluding current year acquisitions, increased to £17.7m (2019:
£15.2m) which represents strong growth. This takes account of the various revenue streams from our TRACS, ATTUne, Ontrac,
COMPASS, Retail & Operations, and Delay-Repay product suites. As always, all software products continue to benefit from high
renewal rates from existing clients.
Work continues on implementing our TRACS Enterprise product at two major TOCs which were secured in previous years and
we were delighted to have secured a third major Operator during the year where work on the implementation started in the year.
There remains a significant market opportunity for this offering, which we hope to be able to further tap into.
6 | Annual Report and Accounts 2020
Chairman & Chief Executive Officer’s Report continued
Our Bellvedi business has traded very well during the year and the ATTUne product forms an integral part of the overall TRACS
Enterprise solution. Bellvedi also secured a significant RSSB grant to develop innovative dynamic train planning software over
the next two years which was very pleasing.
Ontrac traded well in the year and secured a number of good bespoke software development contracts, and remains supported
by high levels of recurring revenue. The business also secured an important initial contract win which is expected to result in a
multi-year enterprise wide licence deployment in due course. Work on the ‘Discovery’ and ‘Design’ commenced in the year, and
remains ongoing with the target of securing a major multi year licence and support contract. Ontrac’s software product offering
focuses on driving improvements in risk management and safety for rail infrastructure operators which continues to be a high
priority area of interest across the rail industry.
Our Delay Repay business traded well prior to the start of Covid-19 but naturally suffered an adverse impact due to significantly
reduced passenger journeys. Even in spite of this, revenues were still ahead of the previous year and the business continues
to operate from a modest cost base. Tracsis as a Group processed over 70% of all industry delay repay claims during the
reporting period.
Remote Condition Monitoring (RCM)
Revenues of £4.8m compare very well against the previous year (2019: £4.9m), which was a very strong comparative period
due to the end of Network Rail’s ‘Control Period 5’ in March 2019. The Group did not expect such a strong year but naturally
was delighted to be able to support its key customer in the first year of the new ‘Control Period 6’ that runs to 31 March 2024.
During the year we received formal approval for the Busbar units, and have now begun to ship the first of these units. This
remains a key growth area for the future. MPEC’s product offering focuses on driving improvements in asset performance for
rail infrastructure owners which is a key factor in improving overall rail performance and reducing maintenance costs.
We announced a major order in May 2020 and this was largely fulfilled by the end of the financial year.
Consultancy
Consultancy and professional services revenue was £2.2m (2019: £1.8m) which was a very good performance and shows the
continued resilience in this part of the Group as it transitions away from a historical reliance on franchise bid work. We have
been pleased to secure work with various government bodies, infrastructure providers, a range of other train operating
companies (TOCs), and multi-disciplinary engineering companies.
Acquisitions: iBlocks Limited
In the three months post acquisition, iBlocks contributed revenue of £0.9m which was in line with expectations for the short
period. We are seeing good levels of interest in iBlocks’ smart ticketing product offering which in a post Covid world is well
aligned to future rail passenger requirements. Integration into the wider Tracsis Group is going well and iBlocks forms part of a
wider Customer Experience product offering.
Traffic & Data Services
Summary segment results:
Revenue
Adjusted EBITDA*
Adjusted Profit before Tax
£22.4m (2019: £27.3m)
£1.3m
£nil
(2019: £3.6m)
(2019: £2.9m)
Traffic Surveys, Transport Insights and Passenger Analytics
Revenues of £10.0m were delivered in the year (2019: £14.7m), which were adverse to the previous year due to the impact of
Covid-19 which had an immediate and severe impact with much work either being cancelled or postponed. The business was
trading well prior to the Covid-19 pandemic and had a strong order book as it entered the crisis, but this naturally did not
materialise. However, a huge amount of credit must be given to the entire team as it delivered the Spring and Summer work as
part of the major National Road Traffic Census in spite of Covid-19 which was a major achievement and a valuable source of
revenue during challenging times. Cost reduction measures have been implemented in this part of the Group to ensure that it is
well placed to weather the challenging market conditions that inevitably lie ahead. We are still waiting for postponed work to be
rescheduled which we now expect to be workable in Spring 2021.
Our Passenger Analytics team performed its traditional manual count work during the Autumn but the Spring counts did not take
place due to Covid-19 meaning that revenues were adverse to the previous year. However, the business was supported by the
software product that it had developed in previous years for automatic train loading data, which is expected to be a key
technology platform for potential future growth.
TRACSIS PLC | 7
Chairman & Chief Executive Officer’s Report continued
Location Analytics
This was the first full year contribution from Compass Informatics since its acquisition in 2019 and it has performed very well
during the year, with work also continuing regardless of Covid-19. Most of the work was derived from its existing customer base
in Ireland, across a wide range of bodies and clients, but the business also delivered some major UK based projects for a range
of utility companies. Overall revenues of £5.5m (2019: £2.4m) were pleasing.
The Group sought to launch a full UK Analytics and GIS offering though due to challenges caused by Covid-19, this has been
placed on hold given the current economic climate.
Event Transport Management
Revenues in this part of the Group were naturally significantly impacted by Covid-19 with total revenues of £6.9m (2019: £10.2m)
which was the same as the previous year given the cancellation and postponement of many of the events that were scheduled
to take place across the Spring and Summer and had already been booked in. Revenues should have been much higher given
the full year contribution from CTM that was expected in this year following its acquisition in January 2019.
Despite the pandemic, the business continued to secure some new work, and also has been supported by the work that takes
place at its fixed venue clients.
Cost reduction measures have been implemented in this part of the Group to ensure that we proactively manage the cost base
whilst maintaining sufficient operational expertise so that we can mobilise the teams to quickly respond to the post Covid return
to normal.
EBITDA margin was less than the previous year due to the impact of Covid-19.
Dividends
In February 2012, the Board implemented a progressive dividend policy. In view of the challenges and uncertainty caused by
Covid-19, the Group decided not to pay an interim dividend for the six months ended 31 January 2020 and committed to
reviewing it at the full year stage. The Board does not consider it appropriate to pay a final dividend this year. The impact on
cash of not paying the dividend is around £0.6m. The Board is committed to restoring the progressive dividend policy in the
future and will review this at the earliest appropriate opportunity.
Acquisitions
We were pleased to have completed the acquisition of iBlocks Limited (iBlocks) in the year, which is a business that we have
known for a number of years now. We believe the unique technology offering that iBlocks has developed along with long
established client relationships will open up an exciting new area of opportunity for Tracsis. The smart/account based ticketing
market in particular is an area of the rail industry that is expected to see future industry change and growth.
Established in 2000, iBlocks is a UK based software company that specialises in the provision of smart ticketing solutions,
automated delay repay and the development of mission critical back office systems that are used by the Rail Delivery Group,
the wider community of train operating companies (TOCs) and the rail supply chain. This acquisition strategically aligns with our
objective of strengthening our rail product portfolio in areas where we can offer a unique market proposition, gain access to
strategically important partnerships and leverage the cross-selling opportunities that exist across our Rail Technology division.
The Directors believe that smart/account based ticketing and automated delay repay is a sizeable and natural growth area for
the rail industry and that iBlocks is well placed to help facilitate the move towards a paperless ticketing environment. The
acquisition will enhance Tracsis Group’s overall technology and software offering and should be significantly earnings enhancing.
The acquisition consideration comprised an initial cash payment of £12.5m which was funded out of Tracsis cash reserves and
the issue of 192,926 new ordinary shares in Tracsis with a value of £1.5m. An additional payment of £3m was made on a pound
for pound basis to reflect the net current asset position of the business at completion. Additional contingent consideration of up
to £8.5m is payable subject to iBlocks achieving certain stretched profit financial targets in the three years post acquisition. An
amount of £3.3m has been included in the Balance Sheet as the best estimate of the amount payable at the year end date.
The UK’s decision to leave the European Union
The Group does not expect to be impacted by Brexit. Current sales to European Union customers represent around 12% of
overall Group sales, and there continues to be no significant reliance on a supply chain involving European Union suppliers or
workforce.
8 | Annual Report and Accounts 2020
Chairman & Chief Executive Officer’s Report continued
People
As always, the Group is thankful to the whole team for their hard work during the year, especially during the unprecedented
times which have been challenging for many members of the team. It has been pleasing to see the business come together to
support colleagues.
In September 2020 we announced that Max Cawthra would be standing down as Chief Financial Officer in 2021 and that Andy
Kelly would be joining the business. The Board would like to thank Max for the contribution he has made since joining Tracsis
in 2010, since then the Group has grown significantly, both organically and by acquisition, which Max has played a key part in
achieving. We look forward to Andy joining us, who the Board believe is a very strong replacement.
Revised Group Structure
From 1 August 2020 onwards, the Group has been reorganised into a new structure in order to align with key areas of future
transport industry growth. This will be adopted for future external reporting purposes too.
Rail Technology & Services:
Rail Operations (includes core Operational Planning Software and Bellvedi)
Customer Experience (includes iBlocks, Travel Compensation Services and Tracsis Passenger Analytics)
Rail Infrastructure (includes MPEC and Ontrac)
Data, Analytics Consultancy and Events:
Traffic Data
Events (includes SEP and CTM)
Analytics/GIS (includes Compass Informatics)
Transport Consultancy
Our GIS business Compass Informatics and Consultancy offering will be expanded to be ‘Groupwide’ offerings and will operate
across the whole of the Group but will be reported within the Data, Analytics Consultancy and Events sector.
In addition, on 1 August 2020 the Group implemented a central shared services model covering HR, IT, Quality, Health and
Safety and Risk with the objective of implementing best practice across the Group and accelerating the integration of the different
business units.
Summary and Outlook
Q1 trading has been in line with the Board’s expectations. As we look to the remainder of the financial year, we are aspiring to
achieve modest revenue growth and EBITDA margin improvement despite the ongoing challenges of Covid-19, and we expect
our cash position to remain equally as strong.
These are unprecedented times and whilst the Board believes it has successfully navigated the first phase of the Covid-19 crisis,
and is well structured for the future, it is vigilant about short term trading conditions in particular with regards to its Traffic & Data
Services Division. At the time of writing, the impact on the Rail Technology & Services Division has not been significant but the
Board continues to monitor the situation and will respond should challenges arise.
We are confident that the medium to long term growth prospects for all parts of the Group are unchanged and we therefore
remain committed to our overall strategic growth and investment plans. We will continue to proactively manage costs whilst the
Covid-19 pandemic continues to impact the Group whilst maintaining the skills and capacity required to respond post the
pandemic.
Chris Cole, Chairman
4 December 2020
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:
Coronavirus (Covid-19)
All parts of the Group
but mainly Traffic &
Data Services
Full details of the mitigating
actions are provided on page
14.
Increased given that the
risk is new and emerged
during the year.
in
business,
The
like most
businesses in the UK and wider
impacted by
World has been
Covid-19
the year. Further
details are provided on page 14,
where a full impact assessment
has been included. The impact has
been most notable within our
Events and Traffic Data collection
where no mass gatherings have
been able to take place, and
‘lockdowns’ have
impacted on
trading conditions.
Rail industry structure changes
1. Rail Technology
& Services
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.
of
and
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 (some more than
on
others)
investment.
Group
expects
industry
that
requirements for certain of its
continue,
solutions would
the structure.
regardless of
However,
certain
in
circumstances, there is little
mitigation
certain
structural changes.
against
return
The
to
review on
the
Increased due
Williams
rail
franchising, which is due to
be published, and also the
Emergency
Measures
(EMA) and
Agreements
Emergency
subsequent
Measures
Recovery
Agreements (ERMAs) for
Operating
the
Companies
by
Covid-19, and the reduction
in passenger numbers
caused
Train
All parts of the Group
Cyber Security Incident
A malicious cyber-attack, security
breach or denial of service etc-
National Cyber Security Centre
(NCSC) information and guidance
to UK businesses, indicates that
such an incident should attract a
high probability rating. This may
lead
to business continuity or
disaster recovery problems.
Increased in the year
The Group’s outsourced
IT
Services Provider manages
some elements of operational
risk. Certain subsidiaries have
Cyber Essentials Certification
which provides a security
foundation / baseline. There is
planned to be a staged move to
ISO27001 certification which
should improve the Group’s
cyber security stance and will
require maintenance of a
dedicated
IT Security Risk
Register. The Group has
appointed a Head of Quality,
Risk, Safety & Compliance.
Business unit level business
continuity plans
to capture
localised risk and mitigation.
10 | Annual Report and Accounts 2020
Risk Management continued
Description/Potential impact:
Area of Group
impacted:
Mitigation:
Change in the year:
Reduced government spending
The Group derives
revenues
directly and indirectly from the UK
and Irish governments, and would
be significantly impacted if these
public
funding streams were
reduced, for example due to a
specific spending review in view of
Covid- 19, or other general
reviews, a general
spending
election,
of
a
or
government, though this may also
lead to additional opportunities.
change
Reliance on certain key customers
1. Traffic & Data
Services
2. Rail Technology &
Services
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.
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
orders
In
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
total Group
As the Group continues to
grow both organically and by
acquisition, the exposure to
and
reliance on any one
customer will reduce, relative
to
revenue.
Although there will always be
an exposure to certain key
customers, it manages this risk
customer
by
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.
managing
Project Delivery
Companies
The Group has several significant
contracts with major UK Train
and
Operating
Infrastructure Providers which
contain a number of deadlines for
implementation,
in accordance
with the contractual requirements
and timeframes. Certain events
within the Traffic & Data Services
Division are significant and require
large
staff deployments and
delivery.
1. Rail Technology &
Services
2. Traffic & Data
Services
The Group continues to deploy
an extensive delivery team,
following a sustained major
recruitment exercise, and has
worked with
to
establish a programme and
project plan to ensure that the
deliverables can be achieved.
Event related work is subject to
significant advance planning.
the clients
the
increased
Increased in the year given
the
political
issues from the impact of
leaving
European
Union, and the introduction
of EMAs and ERMAs as
noted above for the various
Train Operating Companies
and Owning Groups.
Government spending
in
areas relevant to the Group
the Covid-19
in
currently
is
pandemic
unknown.
light of
do
The business acquired in
the year has its own key
customers to add to the
exposure,
the
as
businesses acquired in the
previous year. Due to a
reduced level of revenue
from the Traffic & Data
Services Division due to
Covid-19, the amount of
revenue from the Group’s
largest
has
increased.
customer
Total revenues from the
Group’s largest customer
were
of Group
21%
revenue (2019: 18%).
The Traffic & Data Services
Division derived £2.7m
(2019: £3.7m)
from one
particular customer.
in
to
Increased
Rail
Technology & Services in
the
the year due
additional Rail Technology
contracts
but
decreased within Traffic &
Data Services given the
reduction in the number of
major Events delivered due
to Covid-19
secured,
TRACSIS PLC | 11
Risk Management continued
Description/Potential impact:
Area of Group
impacted:
Mitigation:
Change in the year:
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.
Technological changes
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.
Unchanged in the year.
All parts of the Group.
The Group seeks
to offer
remuneration
competitive
packages, and also offers
various
incentive
share
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.
Increased
staff
engagement have taken place
the
given Covid-19
and
challenges of working
from
home.
levels of
Unchanged in the year.
1. Traffic & Data
Services
2. Rail Technology
& Services
they
from
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
the
requirements
products which helps to ensure
that
relevant.
remain
Some of the Group’s offerings
continue to be protected by
relationships,
customer
Framework
Agreements,
contractual terms and also a
barrier to entry is the significant
development costs required to
the market, which
enter
provides some protection. A
new
‘Innovation Hub’ was
launched in the year.
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.
1. Traffic & Data
Services
2. Rail Technology &
Services
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
exposure
to potential new
entrants.
Unchanged in the year.
12 | Annual Report and Accounts 2020
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
permanent
and
temporary
locations across the country, and
also travelling to and from these
locations.
1. Traffic & Data
Services
2. Rail Technology
& Services
Dedicated Group led Health &
Safety team trained to IOSH &
NEBOSH standards.
Access to and support from
external Consultancy who are
retained by contract.
Dashcams and tracker devises
installed in company vehicles
and partnership with external
provider to manage driver risk
and check licencing.
Internal assurance activity
provided by peripatetic risk-
based auditing.
Employee activity assessed for
risk and documented safe
systems of work in force
Customer pricing pressure
from customers
Price pressure
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
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.
efficiently
and
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
proposition,
the
so
customer base will continue to
adopt its products due to their
quality and business case, with
price being of lower concern.
that
due
internal
incidents,
Decreased
to
additional risk assessment
and safe systems of work,
as well as increased levels
auditing,
of
improved
information
management, investigation
safety
of
surveillance activity and
policy re-rewrites. Group
Health & Safety Manager
appointed
from August
2020. Risk partly reduced
given
in
Traffic Data and Event
related work in the year due
to the impact of Covid-19,
though partly increased on
due to the reopening of
offices following Covid-19
which required a thorough
risk assessment to ensure
staff
to a safe
working environment.
reduction
return
the
Increased in the year as the
industry emerges
from
Covid-19, and it is expected
to be more competitive in
certain parts of the Group
the prevailing
due
economic conditions.
to
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
All parts of the Group
No change in the year.
the
its Corporate
As part of
Governance,
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. Trained and
in key
qualified staff are
appointments,
is an
there
reporting
incident
internal
mechanism, and structured
risk management model.
TRACSIS PLC | 13
Risk Management continued
Description/Potential impact:
Area of Group
impacted:
Mitigation:
Change in the year:
No change in the year
All parts of the Group
Regulatory breach
There may be a Privacy event,
data breach or loss of personal
data as defined by GDPR, or
deviation
regulatory
from
compliance leading to a fine or
enforcement order imposed on the
business by a Court, Regulator or
Regulatory body - such as the
FCA, HSE, ICO etc
Impact of EU Referendum
is
Group
level
governance
Staff training on GDPR, and
Group Data Protection Officer
who
IAPP Certified
Information Privacy Manager
trained.
Effective
Corporate
mechanisms exercised.
Senior Management generate
Social
Corporate
and
Responsibility
culture.
Directors briefed on AIM rules
in conjunction with Nominated
Advisor, and regular dialogue
finnCap
maintained
throughout the year.
policy
with
and
All parts of the Group
Increased in the year as the
the
date
for
European Union
gets
closer.
leaving
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
continues
to be vigilant of
these influences.
1. Traffic & Data
Services
2. Rail Technology
& Services
A plan exists for the integration
of each of
the acquired
businesses.
No change in the year.
to
on
leave
the
The decision
European Union may have a
potential
the
impact
macroeconomic conditions in the
UK, from which the Group derives
the majority of its revenue and
profit, which may impact on the
Group’s customers, in particular
those revenues derived from the
public sector should this lead to
in government
any
spending.
has
customers in Ireland and Sweden.
The Group
reduction
Integration risk
each
integrate
The Group has made one
acquisition in the year, and made
three in the previous year. It plans
acquired
to
business to various extents. In
particular, the Group is combining
SEP and CTM into one Combined
Events Business,
has
integrated Bellvedi and iBlocks into
its existing Rail Technology &
Services Division.
and
14 | Annual Report and Accounts 2020
Strategic Report
Covid-19 review
Introduction
On 11 March 2020 the World Health Organisation declared a global pandemic after the outbreak of the Covid-19 virus
In line with many other businesses in the United Kingdom and across the wider world, the Group has been impacted
by Covid-19
Action has been taken to mitigate the impact accordingly
Impact on the Tracsis business during 2019/20
There has been a significant impact on current macroeconomic conditions in the UK and worldwide
The Rail Technology & Services Division continued to trade well and was generally not impacted by the pandemic with
the exception of significantly reduced delay-repay related revenues. Several major pieces of Software work were
delivered or secured
The Traffic & Data Services Division was badly impacted with the cancellation or postponement of several major events
and data collection projects which had an estimated impact of around £10m against our budgeted revenues, but the
business still delivered a major project despite the crisis and also secured small amounts of Covid-19 related work at
fixed venues
The Group did not suffer any significant bad debts due to its generally blue-chip nature of its customer base
The Group agreed to extend the contingent consideration periods of two previous acquisitions
Mitigating actions taken by the Group
The Group ensured the vast majority of staff worked from home in line with government guidelines
Staff welfare regularly checked, and a health & wellbeing site section set up on Intranet, and staff surveys undertaken
Many staff were placed on ‘Furlough’ and the Group received Coronavirus Job Retention Scheme grant monies
Several staff from businesses impacted were redeployed elsewhere in the Group
The Group has taken action to reduce its cost base mainly in the Traffic & Data Services Division by a number of
measures such as redundancies, salary reductions, no payment of bonuses
Full risk assessments of offices have been undertaken with small numbers of staff beginning to return to offices, prior
to the revised Government guidance for staff to work from home if possible
Expected impact on the business for 2020/21 and beyond
It is expected that there will be a significant impact around future macroeconomic conditions in the UK and worldwide
Cost reduction measures across the whole Group, but mainly within the Traffic & Data Services Division have been
implemented – mostly in the year ended 31 July 2020 and some during the year ending 2021
Reduced levels of delay-repay revenues are again expected to continue into 2021
Reduced levels of Traffic Data Collection work versus normal have been factored in to the Group’s strategy though a
return to more normal market conditions is expected at some point in the future, likely beyond 2020-21
Reduced levels of Event work versus normal are expected to take place though again a return to more normal market
conditions is expected at some point in the future, likely beyond 2020-21
Potential short term disruption to procurement of Train Operating Companies who have entered into ERMAs
TRACSIS PLC | 15
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 such as EBITDA, Profit before Tax, Earnings Per Share) versus
the annual budget, updated forecast and previous year
b. Cash balances
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
v. Sales prospects and forecasts versus budget and prior year
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
v. Sales prospects and forecasts versus budget and prior year
Revenue - £m
32.6
34.5
39.8
49.2
48.0
Adjusted EBITDA - £m (see note 31 for
reconciliation)
7.6
8.5
9.4
10.5
10.5
15
10
5
0
Revenue
Adjusted EBITDA
2016
2017
2018
2019
2020
2016
2017
2018
2019
2020
Profit Before Tax - £m
Basic Earnings Per Share - p
8.3
6.6
4.0
4.6
4.1
25.7
12.7
13.4
17.8
10.0
30.0
20.0
10.0
0.0
PBT
Basic EPS
2016
2017
2018
2019
2020
2016
2017
2018
2019
2020
Cash - £m
Note re basis of preparation and adoption of IFRS 15 and IFRS 16:
22.3
24.1
17.9
2016 to 2018 financial statements prepared under IAS 18
(‘Revenue’), 2019 and 2020 financial statements prepared under
IFRS 15 (‘Revenue from Contracts with Customers’)
15.4
11.4
2016 to 2019 financial statements prepared under IAS 17
(‘Leases’), 2020 financial statements prepared under IFRS 16
(‘Leases’). 2020 Adjusted EBITDA includes £0.8m adjustment in
respect of IFRS 16 when compared to 2019. A reconciliation is
provided in note 32
Cash
2016
2017
2018
2019
2020
60
40
20
0
10.0
8.0
6.0
4.0
2.0
0.0
30
25
20
15
10
5
0
16 | Annual Report and Accounts 2020
Strategic Report
Section 172 Statement
Broader Stakeholder Interests
Directors of the Group must consider Section 172 of the Companies Act 2006 which requires them to act in the way that would
most likely promote the success of the Group for the benefit of all its stakeholders. The Board and its committees consider who
its key stakeholders are, the potential impact of decisions made on them taking into account a wider range of factors, including
the impact on the Group’s operations and the likely consequences of decisions made in the long term. The Group's key
stakeholders, material issues and how the Board and the Group have engaged with them during the year is set out below.
The Directors promote a culture within Tracsis of treating everyone fairly and with respect and this extends to all principal
stakeholders including shareholders, employees, consultants, suppliers, customers and the communities where it is active.
Strategy
Details of the Group’s long term strategy is provided on page 3 which indicates a combination of organic growth and growth by
acquisition. A strategy review took place in September 2019 and is expected be updated again in early to mid 2021 and thereafter
become an annual exercise. The Board believes that this strategy has been successful in the past and will lead to further growth
in the future.
Employees
The CEO provides a monthly performance update to each member of the Senior Leadership Team throughout the Group which
keeps them informed of what is happening across the wider Group. Our employees were naturally impacted by Covid-19 but we
supported them throughout. Our key priority during these unprecedented times was the health and wellbeing of our employees,
our clients and their families. As such, the vast majority of staff immediately transitioned to working at home which on the whole
was deemed to be a success, and many other staff were placed on ‘furlough’ in order for the business to claim Coronavirus Job
retention Scheme (CJRS) grant monies. The Group continued to support the staff in question by topping up salaries to 100%
until July 2020. During Covid-19 ‘lockdown’, more frequent business updates were issued to the team, and these were also
shared with the wider employee base.
Prior to Covid-19, the CEO and CFO held meetings at various offices across the Group and provided the opportunity for all staff
to engage with them and ask questions in a more informal setting over a team lunch. This has not happened since Covid-19,
but instead, regular ‘lunch and learn’ sessions have been set up which offer all employees the opportunity to learn about the
Group’s various product and service offerings. The Tracsis intranet was also launched in the year and was updated during
Covid-19 to include a health and wellbeing section which provided support to employees as they worked remotely. Due to the
financial impact of Covid-19, the Group had to make several colleagues redundant, mainly within the Traffic & Data Services
Division.
Business conduct and ethics
The Group is committed to high standards of business conduct and ethics. Further details are provided in the Governance
section on pages 18 to 27.
Shareholders
Responsibility for managing shareholder relationships rests with CEO and CFO who have completed two roadshows in the year
for the final results from the previous year and interim results from the current year, and also various ad hoc meetings throughout
the year covering both UK and overseas investors. The interim roadshow was held virtually given the travel restrictions imposed
by Covid-19. These roadshows cover both existing and potential new investors. The Chairman has also had some contact with
institutional shareholders too. The Group encourages all shareholders to attend AGMs normally, though the forthcoming AGM
is likely to be held virtually given the challenge of Covid-19.
Clients
The Group has a wide range of current and prospective clients across its various Divisions and business units. Regular contact
is maintained through a variety of relationships at all levels throughout the organisation. The Group has a number of large
projects that are ongoing at any point in time which require regular dialogue and close liaison with the customer base. In the
past, the Group has held user days for various product offerings but these have not taken place in the year due to the impact of
Covid-19. Regular contact with clients is maintained through video conference facilities
TRACSIS PLC | 17
Section 172 Statement continued
Community
One of the Group’s subsidiaries, Bellvedi Limited, has been awarded the Diamond Award for payroll giving, which is the highest
of five awards that can be given, and represents that the business has over 30% of employees taking part in the scheme and
the Company pays the administration fees and matches donations. The Group has also sponsored a number of athletes and
has made several donations to the Community.
Suppliers
The majority of the Group’s costs are staff costs. In respect of external suppliers, the Group has a policy of treating all suppliers
fairly and paying in accordance with agreed payment terms which are generally within 30 days of invoice. The Group provides
details of its payment practices twice a year and the January 2020 report indicated that the average time taken to pay invoices
was 25 days, and that 76% of invoices were paid within 30 days. The July 2020 report indicated that the average time taken to
pay invoices was 21 days and that 78% of invoices were paid within 30 days.
Regulation
As a listed business, Tracsis is required to comply with all AIM rules and has done so during the year. Some of the Group’s
subsidiary companies are certified for ISO 27001, and certain ones are also certified for ISO 9001. The Group has recently
commenced an initiative to obtain ISO 27001 certification for more of its subsidiary companies and has a plan for rolling this out
over the coming year.
Health Safety and Environment
The Group’s Traffic Data Collection and Event based work are deemed to carry the highest risk from a Health & Safety
perspective, as the majority of the Group’s other operations are office based which are deemed to be low risk. The Group
employed a Divisional Health & Safety Manager during the year whose role has since been expanded into a Groupwide role
with the title of Group Health & Safety Manager. During the year, the Group had one RIDDOR which related to outside work.
Risk assessments have been completed for all of the Group’s offices as staff have returned to work, to ensure that workplaces
are deemed ‘Covid secure’.
Each of the Board members consider that they have acted together, in good faith in a way most likely to promote the success
of the Group for the benefit of its broader range of stakeholders as a whole taking into account section 172 (1) (a-f) of the
Companies Act 2006.
The strategic report has been approved by the Board of Directors and signed on their behalf.
Max Cawthra,
Director Tracsis plc
Nexus
Discovery Way
Leeds,
United Kingdom
LS2 3AA
18 | Annual Report and Accounts 2020
Governance
Board of Directors
Executive Directors
Chris Barnes (45) Chief Executive Officer
Chris was appointed as 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 (42) 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 EY in Leeds. Prior to joining Tracsis, Max spent seven years at Persimmon plc in a
variety of roles.
Non-Executive Directors
Chris Cole (74) 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 (49) Independent Non-Executive Director
Lisa is currently HR Director at Parkdean Resorts. She 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 (62) 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 Dot Digital plc which is listed on AIM, and also 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 (44) Independent Non-Executive Director
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 | 19
Governance
Directors’ Report
The directors present their report and the audited financial statements for the year ended 31 July 2020.
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 4 December 2020.
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 37 to 87.
Dividends
In February 2012, the Board implemented a progressive dividend policy. In view of Covid-19, the Group decided not to pay an
interim dividend for the six months ended 31 January 2020 and committed to reviewing it at the full year stage. The Board does
not consider it appropriate to pay a final dividend this year. The impact on cash of not paying the dividend is around £0.6m. The
Board is committed to restoring the progressive dividend policy in the future and will review this at the earliest appropriate
opportunity.
Directors
The directors who serve on the Board and on Board Committees during the year are set out on page 18.
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, Lisa Charles-Jones
and Mac Andrade 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 22 to 25.
Directors’ shareholdings
Directors’ beneficial interests in the shares of the Company, including family interests, at 31 July 2020 and 2019 were as follows:
31 July 2020
31 July 2019
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%
-
-
-
-
4,118
0.01%
-
-
-
-
-
-
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.
20 | Annual Report and Accounts 2020
Directors’ Report continued
Substantial shareholdings
At 3 December 2020, 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
2,382,920
Schroder Investment Management
2,319,000
Unicorn Asset Management
2,163,557
Tellworth Investments
1,567,655
Ennismore Fund Management
1,498,829
Charles Stanley
1,426,473
AXA Framlington Investment Managers
1,312,836
Downing
Franklin Templeton Fund Management
1,105,300
Canaccord Genuity Wealth Management 1,017,100
934,700
NFU Mutual
884,273
Rathbones
% of
issued shares
8.2%
8.0%
7.4%
5.4%
5.1%
4.9%
4.5%
3.8%
3.5%
3.2%
3.0%
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 2020 were 42 days (2019: 59 days).
Research and development
During the year the Group incurred £3,048,000 (2019: £2,166,000) of expenditure on research and development activity mainly
relating to software development, 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. In addition, the Group is committed to training courses, with a number of staff undertaking
apprenticeships and other technical training, and is also to career development and internal promotion where possible within
the Group. Further details on employee engagement is provided in the Section 172 statement on pages 16 and 17, and the
Covid-19 review section on page 14.
Environment
The Group adheres to all environmental regulations and has, where possible, utilised environmental-sustaining policies such as
recycling and waste reduction.
The Group is classed as large under the Companies Act 2006 and therefore falls under the scope of the Streamlined Energy &
Carbon Reporting requirements, applicable for the first time in this financial year. No individual UK registered company within
the Group is a large company that consumes more than 40,000 KWH of energy per year
Future business developments
Details of these are provided in the strategic report, and the Chairman & Chief Executive Officer’s report on pages 2 to 8.
TRACSIS PLC | 21
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;
Compass Informatics Limited has a range of contracts with government bodies and private sector organisations; and
iBlocks Limited has some significant contacts with Train Operating Companies and also industry association bodies
Auditor
KPMG LLP resigned as the Group’s auditor in the year, and Grant Thornton UK LLP were appointed. A resolution to reappoint
Grant Thornton UK 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.
Events after the Balance Sheet date
There were no post balance sheet events requiring disclosure.
By order of the Board
Max Cawthra
Company Secretary
4 December 2020
Nexus
Discovery Way
Leeds
United Kingdom
LS2 3AA
22 | Annual Report and Accounts 2020
Governance
Directors’ Remuneration Report
As a company listed on AIM, the Company is not required to comply with Schedule 8 of the Large and Medium-sized Companies
and Groups (Accounts and Reports) Regulations 2008 as amended in August 2013 (the “Regulations”), nor is it required to
comply with the principles relating to directors’ remuneration in the UK Corporate Governance Code 2018 (the “Code”).
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.
TRACSIS PLC | 23
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 2020 is set out below
Basic Pension
Conts
salary
£000
£’000
Bonus
£000
Benefits
in kind
£000
Total
2020
£000
Executive Directors
Chris Barnes
Max Cawthra
Non-Executive Directors
Chris Cole
Lisa Charles-Jones
Liz Richards
Mac Andrade
275
156
431
60
33
33
30
156
-
7
7
-
-
-
-
-
25
15
40
-
-
-
-
-
-
-
-
-
-
-
-
-
300
178
478
60
33
33
30
156
125
Total
2019
£000
150
229
379
50
28
28
19
Directors’ interests in share options in the Executive Share Option Schemes
At
1 August
At
Exercise
Date from
31 July
price
Which
2019 Granted Lapsed Exercised
2020
pence
Exercisable Expiry date
Executive
Directors
Chris Barnes
(note a)
21,417
38,961
Max Cawthra
40,535
Non-Executive
Directors
Chris Cole
Lisa Charles-
Jones
Liz Richards
Mac Andrade
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
60,378
0.4p
01/05/2022
01/05/2029
40,535
0.4p
Fully vested
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.
24 | Annual Report and Accounts 2020
Directors’ Remuneration Report continued
Directors’ interests in shares options in the Executive Share Option Schemes (continued)
Note a
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.
In addition, Chris participated in the 2019 LTIP as follows:
Chris Barnes granted a maximum of 38,961 options
Full award is only payable should statutory diluted EPS for the year ending 31 July 2022 be 25.92p, and TSR versus
the peer group is in the top quartile
Should statutory diluted EPS for the year ending 31 July 2022 be less than 22.92p, 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 3 December 2022 onwards, being three years from the grant date
The aggregate amount of pre-tax gains made by directors on the exercise of share options was £nil (2019: £nil). No directors
received or were due to receive any shares under long term incentive schemes other than under the share options schemes set
out above.
TRACSIS PLC | 25
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 2019 to 31 July 2020.
125
115
105
95
85
75
65
Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20
Jul-20
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
4 December 2020
26 | Annual Report and Accounts 2020
Governance
Corporate Governance
Tracsis plc was listed on AIM on 27 November 2007. The Group recognises the importance of, and is committed to, high
standards of corporate governance. Tracsis plc, as an AIM Company, adopts the Quoted Company Alliance’s Corporate
Governance Code for Small and Mid-Size Quoted Companies 2013 (updated April 2018) (the “QCA Code”) which supports the
Group’s long term success and strategy for growth. The Board believes that the Group currently complies with the provisions of
the QCA Code in all areas with the exception of the formal board evaluation. 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 page 18.
The Directors each have diverse backgrounds and a wide range of experience is available to the Group. The Board meets ten
times a year 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 22.
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. Lisa Charles-Jones and Mac Andrade 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
1/1
1/1
1/1
Meetings Committee
Meetings
-
-
-
-
-
-
(total/poss)
10/10
10/10
10/10
10/10
10/10
10/10
Audit
Committee
Meetings
-
-
1/2
2/2
2/2
1/2
Chris Barnes
Max Cawthra
Chris Cole
Lisa Charles-Jones
Liz Richards
Mac Andrade
Independence of Non-Executive Directors
The Directors consider all Non-Executive Directors to be independent.
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).
TRACSIS PLC | 27
Corporate Governance continued
Audit Committee
The Audit Committee similarly comprises Liz Richards as Chairperson, Lisa Charles-Jones, Mac Andrade and Chris Cole as
attendees. 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 Audit Committee oversaw the change of auditor from KPMG LLP to Grant Thornton
UK LLP during the year. 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, Grant Thornton UK LLP did not
provide any non audit services (2019: KPMG LLP £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 at least twelve months from
the signing of the financial statements 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 2020 the Group had net cash and cash
equivalents totalling £17.9m. 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, and also make assumptions regarding the potential impact of Covid-19 on the business.
Board evaluation process
As noted above, 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.
28 | Annual Report and Accounts 2020
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 (IFRSs) as adopted by the European Union 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 and profit or loss of the parent Company and Group for that period. Note that where the exemption
has been taken under section 408, Companies Act 2006 not to publish the parent Company’s profit and loss account, section
408(3) states that the directors must still prepare and approve the parent company’s profit and loss account even though it is
not published. In preparing each of the Group and Parent company financial statements, the directors are required to:
select suitable accounting policies and then apply them consistently;
make judgements and estimates that are reasonable, and prudent;
for the Group financial statements, state whether applicable IFRSs as adopted by the European Union have been
followed, subject to any material departures disclosed and explained in the financial statements;
for the parent Company financial statements, state whether applicable UK accounting standards have been followed,
subject to any material departures disclosed and explained in the financial statements;
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will
continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent
Company’s transactions and disclose with reasonable accuracy at any time the financial position of the parent Company and
enable them to ensure that its financial statements comply with the Companies Act 2006. They are also responsible for
safeguarding the assets of the parent Company and hence for taking reasonable steps for the prevention and detection of fraud
and other irregularities.
The directors confirm that:
so far as each director is aware, there is no relevant audit information of which the parent Company’s auditor is
unaware; and
the directors have taken all the steps that they ought to have taken as directors in order to make themselves aware of
any relevant audit information and to establish that the parent Company’s auditor is aware of that information.
The directors are responsible for the maintenance and integrity of the corporate and financial information included on the
company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may
differ from legislation in other jurisdictions.
TRACSIS PLC | 29
Independent auditor’s report to the members of Tracsis plc
Opinion
Our opinion on the financial statements is unmodified
We have audited the financial statements of Tracsis plc (the ‘parent company’) and its subsidiaries (the ‘Group’) for the
year ended 31 July 2020, which comprise the Consolidated statement of comprehensive income, the Consolidated
balance sheet, the Consolidated statement of changes in equity, the Consolidated cash flow statement, the Company
balance sheet, the Company statement of changes in equity and notes to the financial statements, including a summary
of significant accounting policies. The financial reporting framework that has been applied in the preparation of the Group
financial statements is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the
European Union. The financial reporting framework that has been applied in the preparation of the parent company
financial statements is applicable law and United Kingdom Accounting Standards, including Financial Reporting
Standard 101 ‘Reduced Disclosure Framework’ (United Kingdom Generally Accepted Accounting Practice).
In our opinion:
the financial statements give a true and fair view of the state of the Group’s and of the parent company’s affairs
as at 31 July 2020 and of the Group’s profit for the year then ended;
the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the
European Union;
the parent company financial statements have been properly prepared in accordance with United Kingdom
Generally Accepted Accounting Practice; and
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the ‘Auditor’s responsibilities for the audit of the financial
statements’ section of our report. We are independent of the Group and the parent company in accordance with the ethical
requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as
applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We
believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
The impact of macro-economic uncertainties on our audit
Our audit of the financial statements requires us to obtain an understanding of all relevant uncertainties, including those
arising as a consequence of the effects of macro-economic uncertainties such as Covid-19 and Brexit. All audits assess and
challenge the reasonableness of estimates made by the directors and the related disclosures and the appropriateness of the
going concern basis of preparation of the financial statements. All of these depend on assessments of the future economic
environment and the Group’s future prospects and performance.
Covid-19 and Brexit are amongst the most significant economic events currently faced by the UK, and at the date of
this report their effects are subject to unprecedented levels of uncertainty, with the full range of possible outcomes
and their impacts unknown. We applied a standardised firm-wide approach in response to these uncertainties when
assessing the Group’s future prospects and performance. However, no audit should be expected to predict the
unknowable factors or all possible future implications for a company associated with these particular events.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you
where:
the directors' use of the going concern basis of accounting in the preparation of the financial statements is not
appropriate; or
the directors have not disclosed in the financial statements any identified material uncertainties that may cast
significant doubt about the Group’s or the parent company's ability to continue to adopt the going concern basis of
accounting for a period of at least twelve months from the date when the financial statements are authorised for
issue.
In our evaluation of the directors' conclusions, we considered the risks associated with the Group's business, including effects
arising from macro-economic uncertainties such as Covid-19 and Brexit, and analysed how those risks might affect the
Group's financial resources or ability to continue operations over the period of at least twelve months from the date when the
financial statements are authorised for issue. In accordance with the above, we have nothing to report in these respects.
30 | Annual Report and Accounts 2020
However, as we cannot predict all future events or conditions and as subsequent events may result in outcomes that are
inconsistent with judgements that were reasonable at the time they were made, the absence of reference to a material
uncertainty in this auditor's report is not a guarantee that the Group or the parent company will continue in operation.
Overview of our audit approach
Overall materiality: £177,000, which represents 4.3% of the Group’s
profit before tax;
Key audit matters were identified as revenue recognition, business
combination accounting for intangibles arising from the acquisition of
iBlocks Limited, valuation of intangible assets, valuation of contingent
consideration and going concern; and
We performed full scope audit procedures on all subsidiaries of the
Group, with the exception of Compass Informatics Limited and iBlocks
Limited, on which specified procedures were performed. Collectively
these procedures, all of which were carried out by the Group audit
team, covered 100% of the Group’s revenues.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due
to fraud) that we identified. These matters included those that had the greatest effect on: the overall audit strategy; the
allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the
context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
Key Audit Matter – Group
How the matter was addressed in the audit – Group
Valuation of intangible assets – non-current
assets carrying value exceeds fair value
within the SEP Limited (SEP), Cash & Traffic
Management Limited (CTM), Tracsis Traffic
Data Limited (TTD) and Tracsis Travel
Compensation Services (TCS) CGUs
The Group recorded goodwill and other intangible
assets with a carrying value of £54.4m as at 31
July 2020 (2019: £38.8m). The Group has
recognised an impairment to intangible assets in
the year at a value of £0.9m.
Given the uncertainty arising from the Covid-19
pandemic this year, there is an increased risk that
the goodwill and intangibles held by the Group
are impaired as per International Accounting
Standard (‘IAS’) 36 ‘ Impairment of Assets’. We
have focussed our significant risk upon the SEP
CGU, CTM CGU, TTD CGU and the TCS CGU
as these businesses have been more heavily
impacted by the pandemic than other Group
CGUs.
Management have determined the recoverable
amount of goodwill and intangible assets for SEP,
CTM, TTD and TCS based on value-in-use
calculations using discounted cash flows. There
are significant judgements involved in these
calculations, including forecasting the operating
cash flows, long term growth rates and discount
rates.
We therefore identified the risk that non-current
assets’ carrying value exceeded their fair value
as a significant risk, and one of the most
significant assessed risks of material
misstatement.
Our audit work included, but was not restricted to:
Assessing and challenging management’s
impairment review, ensuring appropriate
costs are included or excluded, that cash
flows included in the model are appropriate
considering Covid-19, and that the
methodology used is in accordance with the
requirements of IAS 36;
Utilising valuation experts to independently
determine a WACC for the Group, to assess
whether the WACC used by management, as
determined by their expert, is appropriate;
Assessing the competence of management’s
expert through reference to their
qualifications and experience;
Performing sensitivity analysis on the
forecast cash flows, long term growth rates
and discount rates and determining their
impact on the carrying value of the intangible
assets;
Evaluating historical forecasting accuracy by
comparing results achieved in prior years to
budgets;
Evaluating whether the goodwill and
intangible assets are allocated to the cash
generating units appropriately and
challenging whether the CGUs identified are
appropriate; and
Assessing whether the impairment recorded
against the TCS CGU is appropriate.
Key Audit Matter – Group
How the matter was addressed in the audit – Group
TRACSIS PLC | 31
Business combination accounting,
specifically the valuation of acquired
intangible assets
The Group acquired iBlocks Limited in the year
resulting in additions of £20m to intangible
assets, of which £12.9m is allocated to
technology assets and customer related
intangibles, with the remainder allocated to
goodwill.
IFRS 3 ‘Business combinations’ requires assets
and liabilities in the consolidated financial
statements to be recorded at fair value. There is
significant management judgement involved in
determining the fair value of the assets and
liabilities acquired, including the calculation of the
fair value of technology and customer related
intangibles acquired, and the discount rate and
long term growth rates used in the valuation.
We therefore identified the valuation and
allocation of intangibles arising on acquisition as
a significant risk, and one of the most significant
assessed risks of material misstatement.
The Group’s accounting policy on impairment of
goodwill and intangibles is shown in note 3 and
as part of critical accounting estimates and
judgements shown in note 4 to the financial
statements and related disclosures are included
in note 15.
Key observations
From our work performed we are satisfied with
management’s judgement that the goodwill and
intangibles allocated to the SEP CGU, CTM CGU
and TTD CGU are not impaired.
Management recorded an impairment to the TCS
CGU of £0.9m. We have not identified any further
material misstatements in relation to the valuation
of intangible assets.
Our audit work included, but was not restricted to:
Utilising our valuation experts to assist in
assessing the work performed by
management’s valuation expert in relation to
the valuation of acquired intangible assets -
this included challenge of whether the
methodology used in the valuation is in line
with accepted valuation methods, and
whether inputs such as future profits, attrition
rates and discount rates used are
appropriate;
Assessing the competence of management’s
expert through reference to their
qualifications and experience;
Challenging management’s rationale and
calculations behind the fair values of any
contingent consideration, including the
assessment of range of possible outcomes
and the probability of each of these;
Testing of the acquisition balance sheet;
Performing a review of key contractual terms
including within the sale and purchase
agreement and ensuring these had been
accounted for correctly;
Reperforming the calculation of goodwill and
comparing to the figure as determined by
management to gain assurance over the
mathematical accuracy of the calculation;
Agreeing the consideration paid to bank
statement by reference to acquisition
agreements; and
Assessing the adequacy of the relevant
disclosure made in the financial statements
with respect to the acquisition to determine
whether they are complete and accurate.
The Group’s accounting policy on business
combination accounting is shown in note 3 to the
financial statements and related disclosures are
included in note 5.
Key observations
Based on our audit work performed we have not
identified any material misstatements relating to
the valuation of intangible assets arising on
acquisition.
32 | Annual Report and Accounts 2020
Key Audit Matter – Group
How the matter was addressed in the audit – Group
Going concern
As stated in ‘the impact of macro-economic
uncertainties on our audit’ section of our report,
Covid-19 is one of the most significant economic
events currently faced by the UK, and at the date
of this report its effects are subject to
unprecedented levels of uncertainty.
This event could adversely impact the future
trading performance of the Group and as such
increases the extent of judgement and estimation
uncertainty associated with management’s
decision to adopt the going concern basis of
accounting in the preparation of the financial
statements.
As such we identified going concern as a
significant risk, which was one of the most
significant assessed risks of material
misstatement.
Our audit work included, but was not restricted to:
Obtaining management’s cash flow
forecasts, including the impact of Covid-
19, covering the period from 1 August
2020 to 30 November 2021 and updated
consideration to 4 December 2021,
assessing how these cash flow forecasts
were compiled and assessing their
appropriateness by applying relevant
sensitivities to the underlying
assumptions, and challenging those
assumptions..
Evaluating the key assumptions, which
included timing of cash outflows and
inflows, and value of cash outflows and
inflows, applied in the forecast for
reasonableness and determined
whether they had been applied
appropriately. We also considered
whether the assumptions are consistent
with our understanding of the business,
with current lockdown restriction
guidance and the expected wider
economic impact of Covid-19;
Challenging mitigating actions identified
by management in the event of a
downturn, which included an
assessment of the possibility of
performing such mitigations and
corroboration of potential cost savings
through to supporting documentation;
Performing reverse stress testing on
management’s model to determine the
point at which headroom runs out, and
assessing the likelihood of such a
situation occurring;
Assessing the accuracy of
management’s past forecasting by
comparing management’s forecasts for
last year to the actual results for last
year and considering the impact on the
cash flow forecast;
Comparing post year end results
achieved to those forecasted to
determine if the business is trading in
line with forecast and
Assessing the adequacy of the going
concern disclosures included within the
Financial Statements.
The Group’s accounting policy and related
disclosures on going concern are shown in note
2f to the financial statements. Additional
information on the Group’s response to the
Covid-19 pandemic can be found in the Strategic
Report on page 14.
Key observations
We have nothing to report in addition to that
stated in the ‘Conclusions relating to going
concern’ section of our report.
TRACSIS PLC | 33
Key Audit Matter – Group and parent
How the matter was addressed in the audit – Group
and parent
Improper revenue recognition
Under ISA 240 (UK) there is a presumed risk that
revenue may be misstated due to the improper
recognition of revenue.
Our identified presumed risk relating to Group
revenue is focussed on the accuracy and
completeness of the deferred income balance at
the year end. At the year end, the Group recorded
a total of £7.8m of deferred income (2019: £8.0m).
In addition to the above, we have identified a risk
regarding the accuracy of IFRS 15 accounting
where the software contracts held by the Group
contain multiple performance obligations, in
particular the accuracy of the allocation of
transaction price to performance obligations and
the identification of performance obligations within
the contract
Our audit work included, but was not restricted to:
Testing the design and implementation of key
controls in the revenue recognition process,
including those related to the posting and
reconciliation of revenue;
Evaluating the revenue recognition policies for
consistency with IFRS 15, through
assessment of management’s IFRS 15 paper;
including, specifically, consideration of
management’s identification of performance
obligations and allocation of the transaction
prices to the performance obligations
Recalculating IFRS 15 adjustments made by
management based on the supporting
documentation of contracts and proof of
acceptance used to make these adjustments,
in order to gain assurance over the accuracy
of IFRS 15 adjustments made;
Testing a sample of revenue transactions
through to supporting documentation, ensuring
the revenue in a selected item is recognised
as per the Group’s accounting policy, and
performing a recalculation of the revenue
recognised in the year to determine the
amount of revenue that should be deferred, if
any;
Recalculating the year-end deferred revenue
balance in full based on management’s
schedules, and performing procedures on a
sample basis to ensure schedules were
complete and accurate; and
Testing a sample of manual journals posted to
revenue by agreeing to supporting
documentation, in order to gain an
understanding of the rationale for these entries
to ensure they were not indicative of
management override of controls.
The Group’s accounting policy on revenue
recognition is shown in note 3 to the financial
statements and related disclosures are included in
note 6.
Key observations
Based on our work performed we have not
identified any material misstatements with respect
to revenue recognition, specifically regarding the
completeness and accuracy of deferred income
and the accuracy of IFRS 15 accounting for
software contracts with multiple performance
obligations.
Valuation of contingent consideration
As at the year end the Group has total contingent
consideration payable of £7.3m. £3.3m of this is in
respect of the iBlocks acquisition and £3.2m
relates to the acquisition of Bellvedi in the prior
year.
The valuation of contingent consideration at fair
value involves a significant degree of management
judgement and is a material accounting estimate
with a high degree of estimation uncertainty.
As such, we identified the valuation of contingent
consideration arising on the acquisitions of iBlocks
and Bellvedi as a significant risk.
Our audit work included, but was not restricted to:
Reconciling contingent consideration per
management’s workings to the trial balance
and financial statements, and agreeing
brought forward contingent consideration to
prior year financial statements.
Ensuring mathematical accuracy of the
schedules provided to us by performing
recalculations of contingent consideration due;
Testing the movement in contingent
consideration payable year on year, through
agreeing payments made to bank records and
ensuring any changes to the fair value of
existing contingent consideration agreed to
34 | Annual Report and Accounts 2020
Key Audit Matter – Group and parent
How the matter was addressed in the audit – Group
and parent
supporting documentation, including
correspondence with the relevant individuals,
and that the assumptions behind the changes
to fair value are appropriate;
Challenging management’s rationale and
assumptions used in calculations behind the
fair values of any contingent consideration,
including the assessment of range of possible
outcomes and the probability of each of these;
This included focussed assessment of the
discounting used in measuring fair value of the
contingent consideration in relation to prior
year acquisition.
For contingent consideration arising on the
acquisition of iBlocks Limited, agreeing inputs
to the model used by management’s expert,
including those within the share purchase
agreement, and assessing management’s
challenge of the underlying assumptions of the
fair value estimate; and
Assessing the competence of management’s
expert through reference to their qualifications
and experience;
Assessing whether contingent consideration
due in more than one year has been
discounted at an appropriate rate and
performing a recalculation of the contingent
consideration due after discounting;
Assessing the adequacy of the relevant
disclosures made in the financial statements to
ensure they are complete, accurate and in line
with accounting standards.
The Group’s accounting policy on contingent
consideration is shown in note 3d to the financial
statements and related disclosures are included in
note 21.
Key observations
Based on our audit work performed we have not
identified any material misstatements relating to
the valuation of contingent consideration.
As a result of our audit challenge management
recorded an adjustment to the contingent
consideration payable. We have not identified any
further material misstatements in relation to the
valuation of contingent consideration.
Our application of materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic
decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality in determining the
nature, timing and extent of our audit work and in evaluating the results of that work.
TRACSIS PLC | 35
Materiality was determined as follows:
Materiality measure
Group
Parent company
Financial statements as a
whole
£177,000 which is 4.3% of profit before
tax. This benchmark is considered the
most appropriate because it is a key
performance indicator for the Group’s
stakeholders and is a generally accepted
benchmark for listed companies.
£131,000 which is 3% of revenues. This
benchmark is considered the most
appropriate because the business is a
trading entity, and the revenue figure is
less volatile than the loss before tax.
Performance materiality
used to drive the extent
of our testing
70% of financial statement materiality.
70% of financial statement materiality.
Communication of
misstatements to the
audit committee
£8,850 and misstatements below that
threshold that, in our view, warrant
reporting on qualitative grounds.
£6,550 and misstatements below that
threshold that, in our view, warrant
reporting on qualitative grounds.
An overview of the scope of our audit
Our audit approach was a risk-based approach founded on a thorough understanding of the Group’s business, its environment
and risk profile and in particular included:
Obtaining and documenting an understanding of the design and implementation of controls in place related to
significant risks;
An evaluation of the Group’s internal control environment, including its IT systems and controls;
Evaluation by the Group audit team of identified components to assess the significance of that component and to
determine the planned audit response based on a measure of materiality, including their relative contribution to the
Group’s revenues and profit before tax;
Full scope procedures were performed for all components to a component materiality level, with the exception of
Compass Informatics Limited which is based in Ireland, and iBlocks Limited which was acquired in the year.
Components subject to full scope audit procedures cover 87% of the consolidated revenues;
Specified audit procedures, including procedures over revenues, were performed on Compass Informatics Limited
and iBlocks Limited to a Group materiality level. This work was performed by the Group audit team and covered 13%
of Group revenues. Collectively full scope and specific audit procedures, all of which were carried out by the Group
audit team, covered 100% of the Group’s revenues; and
A full scope statutory audit has been performed on the parent company.
Other information
The directors are responsible for the other information. The other information comprises the information included in the annual
report, other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not
cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of
assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the
audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material
misstatement of the other information. If, based on the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Our opinion on other matters prescribed by the Companies Act 2006 is unmodified
In our opinion, based on the work undertaken in the course of the audit:
the information given in the strategic report and the directors’ report for the financial year for
which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors’ report have been prepared in accordance with
applicable legal requirements.
36 | Annual Report and Accounts 2020
Matters on which we are required to report under the Companies Act 2006
In the light of the knowledge and understanding of the Group and the parent company and its environment obtained in the
course of the audit, we have not identified material misstatements in the strategic report or the directors’ report.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report
to you if, in our opinion:
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not
been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
Responsibilities of directors for the financial statements
As explained more fully in the statement of directors’ responsibilities set out on page 28, the directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control
as the directors determine is necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group’s and the parent company’s ability
to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis
of accounting unless the directors either intend to liquidate the Group or the parent company or to cease operations, or have
no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or
in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these
financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting
Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies
Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are
required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work,
for this report, or for the opinions we have formed.
Mark Overfield BSc FCA
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Leeds
4 December 2020
Financial Statements
Consolidated Statement of Comprehensive Income
for the year ended 31 July 2020
2020
2019
TRACSIS PLC | 37
Group excluding in-
year acquisitions
Acquisitions in-year
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:
Impairment losses
Other
Operating profit
Finance income
Finance expense
Share of result of equity
accounted investees
Profit before tax
Taxation
Profit after tax
Notes
6
6, 31
14
31
15
9.4
8
9.3
9.3
9
10
11
16
12
Other comprehensive income/(expense)
Items that are or may be reclassified subsequently to
profit or loss
Foreign currency translation differences
Total recognised income for the year
Earnings per ordinary share
Basic
Diluted
13
13
£000
47,115
(16,669)
30,446
(26,162)
10,250
(1,819)
8,431
(3,176)
353
(1,050)
£000
883
(127)
Total
£000
Total
£000
47,998
49,219
(16,796)
(20,163)
756
31,202
29,056
(617)
(26,779)
(22,360)
213
(63)
150
(423)
23
-
10,463
(1,882)
8,581
(3,599)
376
(1,050)
10,514
(831)
9,683
(2,251)
260
(1,034)
4,558
(250)
4,308
6,658
(1,155)
881
4,284
76
(75)
(309)
3,976
(1,201)
2,775
21
2,796
-
389
139
-
(4)
-
135
(33)
102
-
102
(1,155)
1,270
4,423
76
(79)
(309)
(623)
661
6,696
58
(21)
(174)
4,111
6,559
(1,234)
(1,488)
2,877
5,071
21
2,898
9.95p
9.67p
17
5,088
17.78p
17.26p
* 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
38 | Annual Report and Accounts 2020
Financial Statements
Consolidated Balance Sheet as at 31 July 2020 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
Lease Liabilities
Contingent consideration payable
Deferred tax liabilities
Current liabilities
Lease liabilities
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
2020
£000
3,581
54,376
50
-
1,039
877
2019
£000
2,678
38,812
350
250
1,098
667
59,923
43,855
430
6,382
17,920
24,732
84,655
986
5,587
8,234
381
9,729
24,104
34,214
78,069
285
5,304
5,942
14,807
11,531
1,128
13,509
1,747
439
16,823
31,630
53,025
116
6,373
5,420
277
16,936
879
505
18,597
30,128
47,941
115
6,343
3,921
41,078
37,545
38
17
53,025
47,941
The financial statements on pages 37 to 87 were approved and authorised for issue by the Board of Directors on 4 December 2020
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 | 39
Share
Capital
£’000
Share
Premium
£’000
Merger
reserve
£’000
Retained
Earnings
£’000
Translation
reserve
£’000
Total
£’000
113
6,243
3,160
32,593
-
-
-
-
-
-
1
1
-
-
-
-
-
-
100
-
-
-
-
-
-
-
-
761
(667)
5,071
-
5,071
(486)
1,034
-
-
-
-
-
17
17
-
-
-
-
42,109
(667)
5,071
17
5,088
(486)
1,034
101
762
At 1 August 2018
Adjustment on initial
application of IFRS 15 (net of
tax)
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
115
6,343
3,921
37,545
17
47,941
At 1 August 2019
Adjustment on initial
application of IFRS 16 (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
(note 23)
Shares issued as
consideration for business
combinations
At 31 July 2020
115
6,343
3,921
-
-
-
-
-
-
-
1
-
-
-
-
-
-
30
-
-
-
-
-
-
-
-
1,499
37,545
(106)
2,877
-
2,877
(288)
1,050
-
-
17
-
-
21
21
-
-
-
-
47,941
(106)
2,877
21
2,898
(288)
1,050
30
1,500
116
6,373
5,420
41,078
38
53,025
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
40 | Annual Report and Accounts 2020
Financial Statements
Consolidated Cash Flow Statement for the year ended 31 July 2020
Operating activities
Profit for the year
Finance income
Finance expense
Depreciation
(Profit) / 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)
Payment of contingent consideration
Equity investments and loans to investments
Net cash flow used in investing activities
Financing activities
Dividends paid
Proceeds from exercise of share options
Lease liability payments
Lease receivable receipts
Net cash flow used in financing activities
Net (decrease)/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
9.1
9.3
9.4
15
16
12
8
10
11
14
5
21
30
18
2020
£000
2,877
(76)
79
1,882
(12)
(320)
(376)
3,599
21
309
1,234
1,050
10,267
(49)
5,121
(3,875)
11,464
76
(79)
(908)
10,553
(387)
66
(13,852)
(1,228)
-
(15,401)
(288)
30
(1,089)
11
(1,336)
(6,184)
24,104
17,920
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)
(2,149)
(400)
(9,872)
(486)
101
(342)
-
(727)
1,775
22,329
24,104
The accompanying notes form an integral part of these financial statements
TRACSIS PLC | 41
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 2020 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, contingent consideration and initial valuation of assets and liabilities acquired in business combinations
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 2019. 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 2019:
IFRS 16 Leases
IFRIC 23 Uncertainty over Income Tax Treatments
IAS 28 Long-term interests in Associates and Joint Ventures (Amendments to IAS 28)
Annual Improvements to IFRS 2015-2017 Cycle
These standards have not had a material impact on the Consolidated Financial Statements with the exception of the
adoption of IFRS 16.
42 | Annual Report and Accounts 2020
Notes to the Consolidated Financial Statements continued
2
Basis of preparation (continued)
(e)
Accounting developments (continued)
The Group has adopted IFRS 16 “Leases” from 1 August 2019. It has brought more leases on to the Balance Sheet
eliminating the distinction between operating leases and finance leases, and recognising a right-of-use asset and a
corresponding lease liability, except for those identified as low-value or having a remaining lease term of less than 12
months from the date of initial application. Rentals on operating leases which were previously charged to the income
statement, have been replaced by depreciation charge on the asset and interest expense on the lease liability.
The Group has adopted IFRS 16 using the modified retrospective approach with the cumulative effect of initially
adopting IFRS 16 recognised as an adjustment to retained earnings at 1 August 2019 with no restatement of
comparative information. The Group has applied the practical expedient to grandfather the definition of a lease on
transition. This means that it has applied IFRS 16 to all contracts entered into before 1 August 2019 and identified as
leases in accordance with IAS 17 and IFRIC 4.
Instead of performing an impairment review on the right-of-use assets at the date of initial application, the Group has
relied on its historical assessment as to whether leases were onerous immediately before the date of initial application
of IFRS 16.
For those leases previously classified as finance leases, the right-of-use asset and lease liability are measured at the
date of initial application at the same amounts as under IAS 17 immediately before the date of initial application.
On transition to IFRS 16 the weighted average incremental borrowing rate applied to lease liabilities recognised under
IFRS 16 was 2.6%.
Further detail on the financial statement impact of the adoption of IFRS 16 has been disclosed in note 32 to these
financial statements, including a reconciliation of reserves at 1 August 2019 and a reconciliation between the total
operating lease commitment at 31 July 2019 to the lease liabilities recognised at 1 August 2019.
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 2020. These standards are not expected to have a significant impact on adoption.
Definition of a Business (Amendments to IFRS 3)
Definition of Material (Amendments to IAS 1 and IAS 8)
Conceptual Framework for Financial Reporting
(f)
Going concern
The Group is debt free and has substantial cash resources. At 31 July 2020 the Group had net cash and cash
equivalents totalling £17.9m. 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 and have also factored in a continued reduced contribution from its Traffic &
Data Services Division which has been impacted the most by Covid-19. 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.
TRACSIS PLC | 43
Notes to the Consolidated Financial Statements continued
3
Significant accounting policies (continued)
(a)
Basis of consolidation
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.
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 applied IFRS 15 “Revenue from Contracts with Customers” for the first time in the financial statements for
the year ended 31 July 2019. IFRS 15 established a comprehensive framework for determining whether, how much
and when revenue is recognised.
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 when the performance
obligation in the contract has been performed (either at a “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. An asset is recognised in accordance with IFRS 15:95 in relation to costs
associated with incomplete performance obligations where the costs relate directly to the contract and can be
specifically identified, the costs generate or enhance resources of the Group and the costs are expected to be
recovered. 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.
44 | Annual Report and Accounts 2020
Notes to the Consolidated Financial Statements continued
3
Significant accounting policies (continued)
(b)
Revenue recognition (continued)
Rail Technology & Services
Revenue Stream
Recognition Policy
Software – perpetual and non-cancellable annual
software licenses, and support and maintenance
services associated with these licenses
The criteria under IFRS 15 have been considered to
assess whether the software licenses and support and
maintenance are distinct performance obligations. As
the support and updates do not makes changes to the
software that are so fundamental that the software
would not be able to operate without them they are
considered distinct.
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. Additionally the Group does not
undertake activities that significantly affect the license
after the point at which it was provided to the customer.
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.
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.
For renewals of hosted licenses, the revenue is
recognised over the period of the contract
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.
TRACSIS PLC | 45
Notes to the Consolidated Financial Statements continued
3
(b)
Significant accounting policies (continued)
Revenue recognition (continued)
Revenue Stream
Recognition Policy
Bespoke software development work
Hardware
Consultancy services
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. The development work does not
create an asset with an alternative use to the
Group and the Group does not have a
contractual right to payment for performance
completed to date.
to
Under IFRS 15, the Group has identified one
performance obligation in relation to the sale of
the
items, being delivery
hardware
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 however the license is considered to
be distinct from the hardware under IFRS 15
criteria as the two can be sold and used
separately from each other. The transaction
price is allocated to the components of the
contract based on an adjusted market
assessment approach.
Revenue
the condition
recognition
monitoring software license is recognised in
line with nature of the software (hosted
Software as a Service) which is detailed further
above.
Provision
customers.
returns by
is made
for any
for
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.
46 | Annual Report and Accounts 2020
Notes to the Consolidated Financial Statements continued
3
Significant accounting policies (continued)
(b)
Revenue recognition (continued)
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
revenue would be recognised over
the
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.
(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. 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 assess the fair value of net identifiable assets and liabilities in accordance with International Financial Reporting
Standards. 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”.
TRACSIS PLC | 47
Notes to the Consolidated Financial Statements continued
3
Significant accounting policies (continued)
(d)
Intangible assets (continued)
Business Combinations
From 1 August 2009 the Group has applied IFRS 3 Business Combinations (2008) in accounting for business
combinations. The change in accounting policy has been applied prospectively and has had no material impact on
earnings per share. Business combinations are accounted for using the acquisition method as at the acquisition date,
which is the date on which control is transferred to the Group. An investor controls an investee when the investor is
exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those
returns through its power over the investee.
For acquisitions on or after 1 August 2009, the Group measures goodwill at the acquisition date as:
the fair value of the consideration transferred; plus
the recognised amount of any non-controlling interests in the acquiree; plus if the business combination is
achieved in stages, the fair value of the existing equity interest in the acquiree; less
the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.
When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.
The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such
amounts are generally recognised in profit or loss.
Costs related to the acquisition, other than those associated with the issue of debt or equity securities, that the Group
incurs in connection with a business combination are expensed as incurred.
Any contingent consideration payable is recognised at fair value at the acquisition date. If the contingent consideration
is classified as equity, it is not remeasured and settlement is accounted for within equity. Subsequent changes to the
fair value of the contingent consideration are recognised in operating profit or loss as such changes are primarily as a
result of operating performance. 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
investing activities in the Statement of Cash flows. In 2019, it was 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.
48 | Annual Report and Accounts 2020
Notes to the Consolidated Financial Statements continued
3
Significant accounting policies (continued)
(f)
Research and Development Costs
Expenditure on internally developed products is capitalised as intangible assets if it can be demonstrated that:
it is technically feasible to develop the product for it to be sold;
adequate resources are available to complete the development;
there is an intention to complete and sell the product;
the Group is able to sell the product;
sale of the product will generate future economic benefits; and
expenditure on the project can be measured reliably.
Capitalised development costs would be amortised over the periods the Group expected to benefit from selling the
products developed. At present, the Group has not considered that its development expenditure meets the criteria for
capitalisation. Development expenditure not satisfying the above criteria and expenditure on the research phase of
internal projects are recognised in the income statement as incurred.
(g)
Financial instruments
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 Fair Value Through Profit and Loss (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.
ii)
Classification and subsequent measurement
Financial assets
Classification
On initial recognition, a financial asset is classified as measured at: amortised cost; Fair Value through Other
Comprehensive Income (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.
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.
TRACSIS PLC | 49
Notes to the Consolidated Financial Statements continued
3
Significant accounting policies (continued)
(g)
Financial instruments (continued)
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 and debt investments measured at FVOCI. 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.
The Group applies the IFRS 9 simplified model of recognising lifetime expected credit losses for all trade receivables
as these items do not have a significant financing component.
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
50 | Annual Report and Accounts 2020
Notes to the Consolidated Financial Statements continued
3
Significant accounting policies (continued)
(h)
Taxation (continued)
related asset is realised or liability is settled, based on tax rates and laws enacted or substantively enacted at the
balance sheet date. Where the deferred tax asset recognised in respect of share-based payments would give rise to
a credit in excess of the related accounting charge at the prevailing tax rate the excess is recognised directly in
equity. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available
against which the temporary differences can be utilised.
(i)
Dividend distribution
Dividend distribution to the Company’s shareholders is recognised as a liability in the Group’s financial statements in
the period in which the dividends are approved by the Company’s shareholders, or in the case of interim dividends,
when paid.
(j)
Leases
For any new contracts entered into on or after 1 August 2019, the Group considers whether a contract is, or contains
a lease. A lease is defined as ‘a contract, or part of a contract, that conveys the right to use an asset (the underlying
asset) for a period of time in exchange for consideration’.
To apply this definition the Group assesses whether the contract meets three key evaluations which are whether:
the contract contains an identified asset, which is either explicitly identified in the contract or implicitly specified
by being identified at the time the asset is made available to the Group
the Group has the right to obtain substantially all of the economic benefits from use of the identified asset
throughout the period of use, considering its rights within the defined scope of the contract
the Group has the right to direct the use of the identified asset throughout the period of use.
The Group assess whether it has the right to direct ‘how and for what purpose’ the asset is used throughout the
period of use.
Measurement and recognition of leases as a lessee
At lease commencement date, the Group recognises a right-of-use asset and a lease liability on the balance sheet.
The right-of-use asset is measured at cost, which is made up of the initial measurement of the lease liability, any initial
direct costs incurred by the Group, an estimate of any costs to dismantle and remove the asset at the end of the lease,
and any lease payments made in advance of the lease commencement date (net of any incentives received).
The Group depreciates the right-of-use assets on a straight-line basis from the lease commencement date to the earlier
of the end of the useful life of the right-of-use asset or the end of the lease term. The Group also assesses the right-of-
use asset for impairment when such indicators exist.
At the commencement date, the Group measures the lease liability at the present value of the lease payments unpaid
at that date, discounted using the interest rate implicit in the lease if that rate is readily available or the Group’s
incremental borrowing rate.
Lease payments included in the measurement of the lease liability are made up of fixed payments (including in
substance fixed), variable payments based on an index or rate, amounts expected to be payable under a residual value
guarantee and payments arising from options reasonably certain to be exercised.
Subsequent to initial measurement, the liability will be reduced for payments made and increased for interest. It is
remeasured to reflect any reassessment or modification, or if there are changes in in-substance fixed payments.
When the lease liability is remeasured, the corresponding adjustment is reflected in the right-of-use asset, or profit and
loss if the right-of-use asset is already reduced to zero.
The Group has elected to account for short-term leases and leases of low-value assets using the practical expedients.
Instead of recognising a right-of-use asset and lease liability, the payments in relation to these are recognised as an
expense in profit or loss on a straight-line basis over the lease term.
TRACSIS PLC | 51
Notes to the Consolidated Financial Statements continued
3
Significant accounting policies (continued)
(j)
Leases (continued)
Accounting policy applicable before 1 August 2019
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards
of ownership to the lessee. All other leases are classified as operating leases. Assets held under finance leases are
initially recognised as assets of the Group at their fair value at the inception of the lease or, if lower, at the present
value of the minimum lease payments. The corresponding liability to the lessor is included in the balance sheet as a
finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease
obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are
charged directly to profit or loss, unless they are directly attributable to qualifying assets, in which case they are
capitalised in accordance with the Group’s general policy on borrowing costs. Contingent rentals are recognised as
expenses in the periods in which they are incurred.
Operating lease payments are recognised as an expense on a straight line basis over the lease term, except where
another systematic basis is more representative of the time pattern in which economic benefits from the leased asset
are consumed. Contingent rentals arising under operating leases are recognised as an expense in the period in which
they are incurred.
In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a
liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight line basis,
except where another systematic basis is more representative of the time pattern in which economic benefits from the
leased asset are consumed.
(k)
(l)
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.
In respect of share options which are not linked to TSR, which is the vast majority of share options for staff including
EMI options and discounted LTIP, the fair value of the option 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 an equity-settled transaction is cancelled, it is treated as if it had vested on the date of the cancellation, and any
expense not yet recognised for the transaction is recognised immediately. However, if a new transaction is substituted
for the cancelled transaction, and designated as a replacement transaction on the date that it was granted, the cancelled
and new transactions are treated as if they were a modification of the original transaction as described in the previous
paragraph.
Directors LTIPs have two conditions attached – Earnings per Share (non-market condition) and Total Shareholder
Return (TSR – market condition). An assessment of the fair value is made when the options are granted and in respect
of TSR/market conditions, no further adjustment is made regardless of whether the conditions are met or not.
(m)
Retirement benefits
Contributions to defined contribution pension schemes are charged to the income statement in the year to which they
relate.
52 | Annual Report and Accounts 2020
Notes to the Consolidated Financial Statements continued
3
(n)
(o)
(p)
(q)
(r)
(s)
Significant accounting policies (continued)
Exceptional items
Items which are significant by virtue of their size or nature and/or which are considered non-recurring are classified as
exceptional operating items. Such items, which include for example costs relating to acquisitions, contingent
consideration credits, any goodwill impairments and profit/loss on disposal, are included within the appropriate
consolidated income statement category but are highlighted separately. Exceptional operating items are excluded from
the profit measures used by the board to monitor underlying performance.
Finance income
Finance income comprises interest income on funds invested. Interest income is recognised as it accrues in profit or
loss, using the effective interest method.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits. The Group considers all highly liquid
investments with original maturity dates of three months or less to be cash equivalents.
Operating segments
The Group has divided its results into two segments being ‘Rail Technology and Services’ and ‘Traffic & Data Services’.
The level of disclosure of segmental and other information is determined by such assessment. Further details of the
considerations made and the resulting disclosures are provided in note 6 to the financial statements.
Inventories
Inventories are measured at the lower of cost and net realisable value. Provision is made for slow moving and obsolete
inventories on a line by line basis.
Foreign currencies
The individual financial statements of each Group entity are presented in the currency of the primary economic
environment in which the entity operates (its functional currency). For the purpose of the consolidated financial
statements, the results and financial position of each Group entity are expressed in Pounds Sterling, which is the
functional currency of the Company and the presentation currency for the consolidated financial statements.
In preparing the financial statements of the individual entities, transactions in currencies other than the entity’s
functional currency (foreign currencies) are recorded at the rates of exchange prevailing at the dates of the transactions.
At each balance sheet date, monetary items denominated in foreign currencies are retranslated at the rates prevailing
at the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are
retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are
measured in terms of historical cost in a foreign currency are not retranslated.
Exchange differences are recognised in profit or loss in the period in which they arise except for:
exchange differences that relate to assets under construction for future productive use, which are included in
the cost of those assets when they are regarded as an adjustment to interest costs on foreign currency
borrowings; and
exchange differences on monetary items receivable from or payable to a foreign operation for which settlement
is neither planned nor likely to occur, which form part of the net investment in a foreign operation, and which
are recognised in the foreign currency translation reserve and recognised in profit or loss on disposal of the
net investment.
(t)
Translation of financial statements of foreign entities
The assets and liabilities of foreign operations are translated using exchange rates at the balance sheet date. The
components of shareholders’ equity are stated at historical value. An average exchange rate for the period is used to
translate the results and cash flows of foreign operations.
Exchange differences arising on translating the results and net assets of foreign operations are taken to the translation
reserve in equity until the disposal of the investment. The gain or loss in the income statement on the disposal of foreign
operations includes the release of the translation reserve relating to the operation that is being sold.
TRACSIS PLC | 53
Notes to the Consolidated Financial Statements continued
3
(u)
(v)
(w)
(x)
Significant accounting policies (continued)
Investments (continued)
Investments are carried at fair value. A review takes place each year to check for impairment and where a subsequent
remeasurement is required, this is recognised in the Statement of Comprehensive Income
Where it is deemed that the Group has a significant influence over the investment, then the investment will be accounted
for as an associated undertaking under the equity method.
Equity accounted investees
Associates are accounted for using the equity method (equity accounted investees) and are initially recognised at cost.
The Group’s investment includes goodwill identified on acquisition, net of any accumulated impairment losses. The
consolidated financial statements include the Group’s share of the total comprehensive income and equity movements
of equity accounted investees, from the date that significant influence commences until the date that significant
influence ceases. When the Group’s share of losses exceeds its interest in an equity accounted investee, the Group’s
carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that the Group
has incurred legal or constructive obligations or made payments on behalf of an investee.
Loans due from associated undertakings
Loans due from associated undertakings are held at fair value on inception with subsequent changes recognised in the
Statement of Comprehensive Income. Any conversion of any convertible loan notes will take place at the prevailing
external valuation agreed as part of any investment round.
Government grants
Grant income is recognised when work has been performed to be able to support making a claim under the terms of
the grant, which could be linked to performance obligations or other milestones. In relation to the Coronavirus Job
Retention Scheme grant from the UK Government, this is recognised in the period to which the employee cost relates.
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 recognises revenue in accordance with IFRS 15 Revenue recognition. 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. Total Group revenues were £48.0m for the year ended 31 July 2020.
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 £20.0m were recognised in respect of the acquisition
of iBlocks Limited completed in the year, and the net book value of all intangible assets is £54.4m 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.
54 | Annual Report and Accounts 2020
Notes to the Consolidated Financial Statements continued
4
Critical Accounting Estimates and Judgements (continued)
Contingent consideration
Within the share purchase agreements for the acquisitions of Compass Informatics Limited, Cash & Traffic Management Limited,
Bellvedi Limited, iBlocks 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
£7.3m, 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.
IFRS 16 Leases
Estimation uncertainty exists on adoption of IFRS 16 in quantifying the future costs to dismantle and remove assets at the end
of the lease and in calculating the discount rate implicit in the lease. On adoption of IFRS 16 the discount rate has been calculated
as the incremental borrowing rate available to the Group at 1 August 2019. Right of Use Assets of £1.4m and Lease Liabilities
of £1.7m have been included in the Balance Sheet relating to IFRS 16.
Judgements
Revenue Recognition
Judgements have been taken in the application of IFRS 15 Revenue recognition. 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. See revenue recognition policy in note 3(b) for further detail of
the judgements taken.
5
a)
Acquisitions and investments in the current year
Acquisition: iBlocks Limited (‘iBlocks’)
On 10 March 2020 the Group acquired iBlocks, a UK based software company that specialises in the provision of smart ticketing
solutions, automated delay repay and the development of mission critical back office systems that are used by the Rail Delivery
Group, the wider community of train operating companies (TOCs) and the rail supply chain. This acquisition strategically aligns
with our objective of strengthening our rail product portfolio in areas where we can offer a unique market proposition, gain access
to strategically important partnerships and leverage the cross-selling opportunities that exist across our Rail Technology division.
The Group believes that smart/account based ticketing and automated delay repay is a significant and natural growth area for
the rail industry and that iBlocks are uniquely placed to help facilitate the move towards a paperless ticketing environment. The
acquisition will enhance Tracsis Group's overall technology and software offering and should be significantly earnings
enhancing.
The acquisition consideration comprised an initial cash payment of £12.5m which was funded out of Tracsis cash reserves and
the issue of shares in Tracsis to a value of £1.5m. An additional payment of £3.0m 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 £8.5m is payable
subject to iBlocks achieving certain stretched profit financial targets in the three years post acquisition.
In the period to 9 March 2020, iBlocks generated revenue of £3.0m, Profit before Tax of £1.1m, and had net assets of £3.5m.
The business is highly cash generative, debt free and benefits from an excellent reputation within its retained customer base
and wider UK rail industry. Under the terms of the acquisition there is a three year earn out period during which Tracsis expects
the business to achieve growth.
TRACSIS PLC | 55
Notes to the Consolidated Financial Statements continued
5
a)
Acquisitions and investments in the current year (continued)
Acquisition: iBlocks Limited (continued)
The contingent consideration could range from £nil to £8.5m depending on the financial performance over the three years since
acquisition and the Directors concluded that £3.9m was the fair value of the contingent consideration payable at the acquisition
date and £3.3m at the year end date.
In the period to 31 July 2020 iBlocks contributed revenue of £0.9m and pre tax profit of £0.2m to the Group’s results, before
amortisation of associated intangible assets and exceptional deal costs. If the acquisition had occurred on 1 August 2019,
management estimates that the contribution to Group revenue would have been £2.7m and Group pre tax profit for the period
of £0.8m. 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 2019. The fair value
of intangible assets will be assessed throughout the measurement period up to 12 months from the date of acquisition.
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 gross contractual amounts receivable for
acquired receivables is consistent with fair value. Acquired receivables are expected to be collected in full following acquisition.
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 iBlocks.
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 £0.2m 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: Technology assets
Intangible assets: Customer related intangibles
Tangible fixed assets
Cash and cash equivalents
Trade and other receivables
Trade and other payables
Income tax receivable
Lease liabilities
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
-
-
33
1,603
1,980
(484)
185
-
202
3,519
£000
8,919
3,990
459
-
(275)
-
-
(459)
(2,453)
10,181
£000
8,919
3,990
492
1,603
1,705
(484)
185
(459)
(2,251)
13,700
7,109
20,809
15,455
1,500
3,854
20,809
56 | Annual Report and Accounts 2020
Notes to the Consolidated Financial Statements continued
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
2020
£000
25,595
22,403
47,998
2020
£000
18,840
29,158
47,998
2019
£000
21,934
27,285
49,219
2019
£000
14,839
34,380
49,219
Revenue to come from contracts entered into with performance obligations not fulfilled or only partially fulfilled amounted to
£12.5m as at 31 July 2020, of which £9.9m is expected to be recognised within one year, and £2.6m after one year (£16.1m as
at 31 July 2019, with £10.4m to be recognised within one year and £5.7m after one year).
Further information on revenue is provided below:
Recognised over time
At a point in time
Rail Technology & Services
Recognised over time
At a point in time
Traffic & Data Services
Recognised over time
At a point in time
Total revenue
2020
£000
10,544
15,051
25,595
-
22,403
22,403
10,544
37,454
47,998
Major customers
Transactions with the Group’s largest customer represent 21% of the Group’s total revenues (2019: 18%).
Geographic split of revenue
A geographical analysis of revenue is provided below:
United Kingdom
Europe
North America
Rest of the World
Total
2020
£000
41,529
6,127
57
285
47,998
2019
£000
8,403
13,531
21,934
-
27,285
27,285
8,403
40,816
49,219
2019
£000
45,511
3,437
106
165
49,219
TRACSIS PLC | 57
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’. iBlocks
Limited is included in ‘Rail Technology and 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.
2020
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 (net)
Other operating income
Share-based payment charges
Interest receivable/payable(net)
Share of result of equity accounted investees
Consolidated profit before tax
25,595
25,595
9,170
-
(648)
-
-
-
31
-
8,553
22,403
22,403
1,293
-
(1,234)
-
-
-
(34)
-
25
Total
£000
47,998
47,998
10,463
(3,599)
(1,882)
115
376
-
-
-
(3,599)
-
115
376
(1,050)
(1,050)
-
(309)
(4,467)
(3)
(309)
4,111
58 | Annual Report and Accounts 2020
Notes to the Consolidated Financial Statements continued
6
b)
Revenue and Segmental analysis (continued)
Segmental Analysis (continued)
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 (net)
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
2020
Rail
Technology
& Services
£’000
Traffic &
Data
Services
£000
Unallocated
£000
Assets
Total assets for reportable segments (exc. cash)
5,551
4,842
Intangible assets and investments
Deferred tax assets
Cash and cash equivalents
Consolidated total assets
Liabilities
-
-
11,254
16,805
-
-
4,676
9,518
Total liabilities for reportable segments
12,102
3,960
Deferred tax liabilities
Contingent consideration
Consolidated total liabilities
-
-
-
-
12,102
3,960
-
55,465
877
1,990
58,332
-
8,234
7,334
15,568
Total
£000
10,393
55,465
877
17,920
84,655
16,062
8,234
7,334
31,630
TRACSIS PLC | 59
Notes to the Consolidated Financial Statements continued
6
b)
Revenue and Segmental analysis (continued)
Segmental Analysis (continued)
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
Contingent consideration
Consolidated total liabilities
-
-
-
-
(10,568)
(7,435)
Non current assets can be split as follows:
Non-current assets
Property, plant and equipment
Intangible assets
Investments – equity
Investments in equity accounted investees
UK
£000
3,482
50,398
50
1,039
2020
Ireland
£000
99
3,978
-
-
-
40,510
667
5,421
46,598
-
(5,942)
(6,183)
(12,125)
Total
£000
3,581
54,376
50
1,039
Total
£000
12,788
40,510
667
24,104
78,069
(18,003)
(5,942)
(6,183)
(30,128)
60 | Annual Report and Accounts 2020
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
Split:
Cost of Sales
Administrative expenses
Total
Average number of permanent staff
Average number of casual staff (full time equivalents)
2020
£000
21,470
2,223
736
1,050
25,479
9,197
16,282
25,479
449
308
757
2019
£000
21,591
1,703
605
1,034
24,933
12,361
12,572
24,933
462
315
777
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 22 to 25. Total
directors’ remuneration, including bonus and pension contributions was £634,000 (2019: £812,000). The aggregate
remuneration of the highest paid director was £300,000 (2019: £312,000). 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 (2019: nil) exercised share
options during the year. One director (2019: two) currently participates in the long term incentive plan. One director (2019: two)
receives employer pension contributions into a personal pension scheme. Directors of the Company control 0.6% of the voting
shares of the company (2019: 0.6%). 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.
TRACSIS PLC | 61
Notes to the Consolidated Financial Statements continued
8
Share based payments (continued)
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.
Employees are liable for settling income tax and national insurance liabilities arising from the exercise of options.
Directors’ scheme
Directors were not entitled to take part in the 2015 to 2019 staff schemes and a revised scheme was implemented by the
Remuneration Committee. Details of this scheme are provided in the Directors Remuneration Report.
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
01/08/2014
01/08/2015
25/09/2015
01/12/2015
01/08/2016
01/08/2017
01/08/2018
16/01/2019
01/05/2019
01/08/2019
28/02/2018
Employees
Number
Performance
Exercise
entitled
of options
conditions
price (p)
Earliest
exercise
date
1
4
2
1
1
3
2
16
32
12
5
40
41
79
11
7
69
1
8,000
8,387
Time served
Time served
20,000
Time served
6,000
Time served
65,000
15,301
1,616
51,521
56,569
35,500
42,688
Time served
Time served
Time served
Time served
Time served
Time served
Time served
63.5
0.40
123.0
159.0
155.5
162.5
0.40
0.40
22/03/2012*
02/08/2013**
02/02/2013*
08/07/2013*
28/07/2013*
01/02/2014*
01/08/2014**
01/08/2015**
0.40 01/08/2016****
0.40 25/09/2016****
0.40 01/12/2016****
142,617
Time served
0.40 01/08/2017****
77,516
Time served
0.40 01/08/2018****
114,993
Time served
0.40 01/08/2019****
56,743
Time served
40,075
Time served
113,502
Time served
0.40 16/01/2020****
01/05/2023
*****
0.40 01/08/2020****
0.40
21,528
EPS and TSR
0.40
28/02/2021
Expiry
date
22/09/2021
02/08/2022
02/08/2022
08/01/2023
28/01/2023
01/08/2023
01/08/2023
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
01/08/2029
28/02/2028
Directors’ schemes******
15/12/2015
06/01/2017
01/05/2019
02/12/2019
Outstanding
1
1
1
1
18,370
EPS and TSR
22,165
EPS and TSR
21,417
Time served
38,961
EPS and TSR
978,469
0.40
0.40
0.40
0.40
15/12/2018
06/01/2020
04/02/2022
02/12/2022
15/12/2025
06/01/2027
04/02/2029
02/12/2029
62 | Annual Report and Accounts 2020
Notes to the Consolidated Financial Statements continued
8
Share based payments (continued)
* 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
******Details of EPS and TSR are disclosed in the Directors remuneration report
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
2020
Weighted
Average
2020
Exercise
2019
Number
1,035,892
155,468
(31,847)
(181,044)
978,469
608,938
Price
18.9p
0.4p
0.4p
16.4p
17.0p
27.4p
Number
1,095,090
252,928
(22,697)
(289,429)
1,035,892
559,300
2019
Weighted
Average
Exercise
Price
26.9p
0.4p
0.4p
34.6p
18.9p
35.0p
Share options were exercised at numerous points in the year, and the average share price for the year ended 31 July 2020 was
634p (2019: 643p).
The share options outstanding at the end of the year have a weighted average remaining contractual life of 6.4 years (2019: 6.9
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
22/09/
2011
63.5p
63.5p
3
02/08/
2012
123.0p
02/08/
2012
123.0p
08/01/
2013
159.0p
28/01/
2013
155.0p
01/08/
2013
162.5p
0.4p
123.0p
159.0p
155.0p
162.5p
3
3
3
3
3
01/08/
2013
162.5p
0.4p
3
50%
20%
20%
20%
20%
30%
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%
-
-
-
-
-
-
TRACSIS PLC | 63
Notes to the Consolidated Financial Statements continued
8
Share based payments (continued)
Options granted in previous years (continued)
Options granted on
Share price at date of grant
Exercise price
Vesting period (years)
Expected volatility
Option life (years)
Expected life (years)
Risk-free rate
01/08/
2014
330.0p
01/08/
2015
420.0p
25/09/
2015
452.5p
01/12/
2015
462.5p
15/12/
2015
550.0p
01/08/
2016
438.0p
06/01/
2017
502.5p
0.4p
3
30%
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
0.4p
3.5
30%
10
10
0.4p
3
30%
10
10
3.5%
3.5%
3.5%
3.5%
3.5%
3.5%
3.5%
Expected dividends expressed as a dividend yield
-
-
-
-
-
-
-
Options granted on
Share price at date of grant
Exercise price
Vesting period (years)
Expected volatility
Option life (years)
Expected life (years)
Risk-free rate
Expected dividends expressed as a dividend
yield
01/08/
2017
445.0p
28/02/
2018
500.0p
01/08/
2018
625.0p
16/01/
2019
595.0p
01/05/
2019
655.0p
0.4p
3.5
30%
10
10
0.4p
3
30%
10
10
0.4p
3.5
30%
10
10
0.4p
3.5
30%
10
10
0.4p
3.5
30%
10
10
3.5%
3.5%
3.5%
3.5%
3.5%
-
-
-
-
-
Options granted in 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/
2019
647.5p
02/12/
2019
642.0p
0.4p
3.5
30%
10
10
0.4p
3
30%
10
10
3.5%
3.5%
-
-
The expected volatility is based on the historic volatility of the Company’s share price. An assessment of the likelihood of market
conditions being achieved is made at the time that the options are granted. The fair value of the options granted in the year was
646p per share.
Charge to the income statement
Share based payment charges
2020
£000
1,050
2019
£000
1,034
64 | Annual Report and Accounts 2020
Notes to the Consolidated Financial Statements continued
9
Operating profit
9.1
Operating profit is stated after charging/(crediting):
Depreciation of property, plant and equipment - owned
Depreciation of property, plant and equipment – leased (including right of use
assets)
Total depreciation of property, plant and equipment (note 14)
Total amortisation (note 15)
(Profit)/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
Grants received:
Government grants
Coronavirus Job Retention Scheme **
2020
£000
870
1,012
1,882
3,599
(12)
40
1
41
3,048
(322)
(2,369)
2019
£000
604
227
831
2,251
12
499
61
560
2,166
(29)
-
*Operating lease rentals in 2020 relate to items for which the recognition and measurement exemptions have been taken
available within IFRS 16
** Of the total amount of £2.4m received, £1.7m was paid directly to casual labour leaving a balance of £0.7m which is deemed
to be true support to the Income Statement regarding permanent employees.
9.2
Auditor’s remuneration:
a) Grant Thornton UK LLP
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
2020
£000
65
135
-
2019
£000
-
-
-
As part of the 2020 audit, Tracsis also engaged the services of external valuation experts to assist with the purchase price
allocation of iBlocks and associated acquisition accounting. This resulted in a fee of £24,000 which was borne by Tracsis.
b) KPMG LLP
Audit of these financial statements
Amounts receivable by auditors and their associates in respect of:
- Audit of financial statements of subsidiaries pursuant to legislation
- Adjustments in respect of previous years
- Other services
2020
£000
-
-
10
-
2019
£000
30
119
-
-
An additional £10,000 was paid to KPMG LLP in respect of the 2019 year-end audit, and to assist in the handover to Grant
Thornton UK LLP.
TRACSIS PLC | 65
Notes to the Consolidated Financial Statements continued
9.3
Exceptional items:
The Group incurred a number of exceptional items in 2020 and 2019 which are analysed as follows:
Impairment losses
Non cash:
Goodwill and investment impairment
Total impairment losses
Other
Non cash:
Contingent consideration fair value adjustment
Cash:
Disposal of non core data capture operation
Legal and professional fees in respect of acquisitions
Total other
Total exceptional items
Split
Non cash
Cash
Total
2020
£000
1,155
1,155
(1,475)
-
205
(1,270)
(115)
2020
£000
(320)
205
(115)
2019
£000
623
623
(722)
(179)
240
(661)
(38)
2019
£000
(99)
61
(38)
2020
During 2020, the Group acquired iBlocks Limited and incurred £205,000 of exceptional deal related costs as a result. In addition,
the Group reviewed the carrying value of the investment in Citi Logik Limited and concluded it was impaired, and as such a loss
of £300,000 was recognised. A further impairment charge of £855,000 was also made against the remaining intangible assets
of Tracsis Travel Compensation Services Limited. Further detail including the assumptions used in the assessment of this charge
can be found in note 15 to these financial statements. During the year, an exceptional credit of £1,475,000 was recognised due
to a change in accounting estimate arising from the review of the assumptions of the fair value of the contingent consideration
relating to recent acquisitions, as at 31 July 2020. The overall level of contingent consideration payable was assessed as being
lower than in previous years due to reduced profit expectations and also using a higher discount rate, given the impact of Covid-
19. These are deemed to be exceptional items due to the size and volatility of the items which can vary significantly from year
to year. A breakdown of the remaining fair value of contingent consideration by acquisition is included in note 21 to these financial
statements. These are all deemed to be exceptional items due to the size and volatility of the items which can vary significantly
from year to year.
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 was also re-assessed, resulting in an exceptional credit to the Statement of
Comprehensive Income of £722,000.
9.4
Other operating income:
The Group does not qualify 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 £376,000 in 2020 (2019:
£260,000).
66 | Annual Report and Accounts 2020
Notes to the Consolidated Financial Statements continued
10
Finance income
Interest received on bank deposits
Interest on Lease receivable
11
Finance expense
Interest on Lease liabilities
Net foreign exchange loss
Total finance expense
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
Adjustment in respect of prior periods
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% (2019: 19.0%)
Expenses not deductible for tax purposes
Rate changes
Adjustments in respect of previous years
Overseas tax not at 19%
Other movements
Total tax expense
2020
£000
73
3
76
2020
£000
73
6
79
2020
£000
1,484
(81)
1,403
(827)
557
101
(169)
1,234
2020
£000
4,111
781
17
557
20
(82)
(59)
1,234
2020
%
100.0
19.0
0.4
13.5
0.5
(2.0)
(1.4)
30.0
2019
£000
6,559
1,246
77
-
(6)
-
171
1,488
2019
£000
58
-
58
2019
£000
21
-
21
2019
£000
1,571
(6)
1,565
(77)
-
-
(77)
1,488
2019
%
100.0
19.0
1.2
-
(0.1)
-
2.6
22.7
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 was calculated on this basis.
In the 11 March 2020 Budget it was announced that the UK tax rate will remain at the current 19% and not reduce to 17% from
1 April 2020. The deferred tax asset and liability at 31 July 2020 has been calculated at 19%.
TRACSIS PLC | 67
Notes to the Consolidated Financial Statements continued
13
Earnings per share
Basic earnings per share
The calculation of basic earnings per share at 31 July 2020 was based on the profit attributable to ordinary shareholders of
£2,877,000 (2019: £5,071,000) and a weighted average number of ordinary shares in issue of 28,919,000 (2019: 28,521,000),
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
2020
28,749
76
94
28,919
2019
28,334
54
133
28,521
Diluted earnings per share
The calculation of diluted earnings per share at 31 July 2020 was based on profit attributable to ordinary shareholders of
£2,877,000 (2019: £5,071,000) and a weighted average number of ordinary shares in issue after adjustment for the effects of
all dilutive potential ordinary shares of 29,740,000 (2019: 29,387,000):
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 (net)
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
For the purposes of calculating Dilutive earnings per share
Basic adjusted earnings per share
Diluted adjusted earnings per share
2020
£’000
2,877
3,599
1,050
(115)
(376)
7,035
28,919
821
29,740
24.33p
23.66p
2019
£’000
5,071
2,251
1,034
(38)
(260)
8,058
28,521
866
29,387
28.25p
27.42p
68 | Annual Report and Accounts 2020
Notes to the Consolidated Financial Statements continued
14
Property, plant and equipment
Cost
At 1 August 2018
Additions
Arising on acquisition
Disposals
At 31 July 2019
Arising on initial adoption of IFRS 16
Additions
Arising on acquisition
Disposals
At 31 July 2020
Depreciation
At 1 August 2018
Charge for the year
Disposals
At 31 July 2019
Charge for the year
Disposals
At 31 July 2020
Net book value
At 1 August 2018
At 31 July 2019
At 31 July 2020
Land &
Motor
Computer
Plant,
machinery,
fixtures
Buildings
Vehicles
equipment
& fittings
£000
£000
£000
£000
400
1,220
1,625
1,960
-
-
-
400
1,206
443
459
-
2,508
90
15
-
105
736
-
841
310
295
1,667
625
76
(463)
1,458
-
196
-
(195)
1,459
557
236
(308)
485
420
(143)
762
663
973
697
357
37
(66)
375
35
(64)
1,953
2,306
-
155
2
(201)
1,909
1,394
180
(57)
1,517
241
(200)
1,558
231
436
351
96
251
31
(280)
2,404
983
400
(51)
1,332
485
(279)
1,538
977
974
866
Total
£000
5,205
1,357
148
(593)
6,117
1,302
1,045
492
(676)
8,280
3,024
831
(416)
3,439
1,882
(622)
4,699
2,181
2,678
3,581
Additional information on Right of Use Assets included in the total property, plant and equipment balance is provided below.
TRACSIS PLC | 69
Notes to the Consolidated Financial Statements continued
14
Property, plant and equipment (continued)
Land &
Plant
Buildings & Machinery
£000
£000
Total
Right of Use
asset
£000
Cost
At 1 August 2019
Arising on adoption of IFRS 16
New leases
Disposals
Transfer to ownership
Arising on acquisition
At 31 July 2020
Depreciation
At 1 August 2019
Charge for the year
Disposals
Transfer to ownership
At 31 July 2020
Net book value
At 31 July 2019
At 31 July 2020
15
Intangible assets
Cost
At 1 August 2018
Arising on acquisition
At 31 July 2019
Arising on acquisition
At 31 July 2020
Amortisation and impairment
At 1 August 2018
Impairment charge
Charge for the year
At 31 July 2019
Impairment charge
Charge for the year
At 31 July 2020
Carrying amounts
At 1 August 2018
At 31 July 2019
At 31 July 2020
-
1,206
444
-
-
459
2,109
-
714
-
-
714
-
1,395
853
96
214
(17)
(92)
-
853
1,302
658
(17)
(92)
459
1,054
3,163
192
298
(9)
(53)
428
661
626
192
1,012
(9)
(53)
1,142
661
2,021
Total
£000
32,911
15,463
48,374
20,018
68,392
6,688
623
2,251
9,562
855
3,599
14,016
26,223
38,812
54,376
Customer
related
intangibles
£000
Technology
related
intangibles
£000
23,611
8,524
32,135
3,990
36,125
4,875
-
1,573
6,448
386
2,278
9,112
18,736
25,687
27,013
5,652
5,846
11,498
8,919
20,417
1,813
-
678
2,491
469
1,321
4,281
3,839
9,007
16,136
Goodwill
£000
3,648
1,093
4,741
7,109
11,850
-
623
-
623
-
-
623
3,648
4,118
11,227
70 | Annual Report and Accounts 2020
Notes to the Consolidated Financial Statements continued
15
Intangible assets (continued)
The following carrying values of intangible assets arising from the acquisitions that the Group has completed in the current
and previous years are analysed as follows:
Goodwill
2020
£000
2019
£000
Customer related
intangibles
2020
2019
Technology related
intangibles
2020
2019
£000
£000
£000
£000
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
671
43
136
269
390
359
555
602
-
32
671
43
136
269
390
359
555
602
-
32
Compass Informatics Limited
1,021
1,021
Bellvedi Limited
iBlocks Limited
40
7,109
40
-
319
166
127
691
462
2,136
749
354
185
140
755
632
2,291
966
10,346
11,021
678
1,495
1,956
4,135
3,753
1,126
1,672
2,188
4,357
-
-
-
-
56
-
629
-
746
823
-
1,001
4,148
8,733
11,227
4,118
27,013
25,687
16,136
The amortisation charge is recognised in the following line items in the income statement:
Administrative expenses
2020
£000
3,599
-
-
7
125
-
795
-
886
1,460
-
1,119
4,615
-
9,007
2019
£000
2,251
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 and other intangible assets has been determined based on value in use calculations, covering
detailed annual budgets that have been prepared on a line by line basis and as approved by the Board, and form the basis of
the extended three year forecasts, followed by an extrapolation of expected cash flows at growth rates as stated below, and as
discounted using the rates stated below. The growth rates reflect prudent long term growth rates for the services provided by
the CGU. In addition to these assumptions, an additional discount to the budgeted cash flows has been applied for the next
three years in respect of the impact of Covid-19 to cover the CGUs that have been the most impacted by Covid-19, namely
Tracsis Traffic Data Limited, Events (covering SEP Limited and Cash & Traffic Management Limited), and Tracsis Travel
Compensation Services Limited & Delay Repay Sniper Limited. In each of these instances, the additional Covid-19 discount
applied to budgeted cash flows has ranged from 25% – 75% over the next three years.
In 2020, a rate of 12% was used for both Segments. In 2019, 10% was used for impairment testing within the Rail Technology
& Services segment, and a rate of 12% was used for impairment testing within the Traffic & Data Services segment.
TRACSIS PLC | 71
Notes to the Consolidated Financial Statements continued
15
Intangible assets (continued)
Long term growth rate
Discount rate
2020
1.0%
12%
2019
1.0%
10-12%
The key assumptions relate to profitability which is derived from key assumptions about revenue, the level of additional Covid
discounts, future growth rates and also the discount rate. A discount rate of 12% was used for all CGUs for the year ended 31
July 2020 which led to an impairment of Tracsis Travel Compensation Services Limited, and from this, a more detailed review
of the assumptions took place which formed the basis of the impairment recognised.
Sensitivity analysis indicates that a decrease in the long term growth rate from 1% to 0% would lead to an additional impairment
of £0.1m in one CGU. Increasing the discount rate from 12% to 13% would lead to an additional impairment of £0.1m in one
CGU. Increasing the discount rate from 12% to 14% would lead to an additional impairment of £0.7m across two CGUs.
Increasing the discount rate from 12% to 15% would lead to an additional impairment of £1.4m across two CGUs. Having
obtained advice from an external valuations expert, a discount rate of 12% is deemed appropriate.
16
Investments
The Group has made investments in Vivacity Labs Limited, Citi Logik Limited and Nutshell Software Limited.
The total gross investments made were as follows (a combination of debt and equity)
Citi Logik Limited
Nutshell Software Limited
Vivacity Labs Limited
These were originally split as follows:
Equity investments:
Citi Logik Limited
Nutshell Software Limited
Vivacity Labs Limited
Convertible Loan notes receivable from investments:
Citi Logik Limited
Nutshell Software Limited
% held
At 31 July
14.9%
23.4%
24.3%
2020
£000
600
500
1,300
2,400
2020
£000
475
250
1,300
2,025
2020
£000
125
250
375
2019
£000
600
500
1,300
2,400
2019
£000
475
250
1,300
2,025
2019
£000
125
250
375
72 | Annual Report and Accounts 2020
Notes to the Consolidated Financial Statements continued
16
Investments (continued)
In assessing the fair value of the investment in Citi Logik at year end, the Directors made a provision of £300,000 against the
investment in view of the continued losses incurred by the business during the year.
During the year, Nutshell Software Limited secured additional funding and as part of this investment round, the Group converted
its loan notes of £250,000 into equity. During a previous period, Citi Logik Limited also repaid a loan and the Group converted
its remaining debt into equity, at the prevailing external valuation agreed as part of the investment round.
Nutshell Software Limited and Vivacity Labs Limited are both accounted for as equity accounted investees by virtue of the fact
that the Group has a shareholding in excess of 20% and is deemed to have a significant influence by virtue of a board position.
The Group’s share of the profit / (loss) of Nutshell Software Limited and Vivacity Labs Limited can be summarised as follows:
2020
£000
(144)
(165)
(309)
2019
£000
18
(192)
(174)
Prior years
£000
(157)
(121)
(278)
Total
£000
(283)
(478)
(761)
Nutshell Software Limited
Vivacity Labs Limited
The carrying value of the investments is therefore 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
2020
£000
50
50
2020
£000
-
-
2020
£000
217
822
1,039
2019
£000
350
350
2019
£000
250
250
2019
£000
111
987
1,098
Summary financial information in respect of each Company is as follows:
Name
Date of last signed
accounts
Nutshell Software Limited
30 September 2019
Vivacity Labs Limited
31 December 2019
Revenue
£000
297
1,963
Profit/(loss)
after tax
£000
(23)
(1,288)
Net assets/
(liabilities)
£000
(284)
797
TRACSIS PLC | 73
Notes to the Consolidated Financial Statements continued
17
Inventories
Raw materials & work in progress
Finished goods
2020
£000
96
334
430
2019
£000
124
257
381
The value of inventories expensed in the period in cost of sales was £1,352,000 (2019: £1,402,000). 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
Lease Liabilities
Due within one year
Due after more than one year:
Between one and two years
Between two and five years
Total due after more than one year
Total obligation
A reconciliation of the obligation is stated below.
At 1 August
Arising on adoption of IFRS 16
New contracts
Arising on acquisition
Total cash outflow
At 31 July
2020
£000
1,128
612
374
986
2,114
2020
£000
562
1,386
796
459
(1,089)
2,114
2019
£000
277
241
44
285
562
2019
£000
278
-
626
-
(342)
562
Future minimum lease payments at 31 July 2020 were as follows:
2020
2019
Lease Payments not recognised as a liability
Carrying
amount
£000
Contractual
cash flows
£000
Less than
one year
£000
One to
Two years
£000
Two to
Five years
£000
2,114
562
2,190
601
1,172
306
633
247
385
48
The Group has elected not to recognise a lease liability for short term leases (leases with an expected term of 12 months or
less) or for leases of low value assets. Payments made under such leases are expensed on a straight line basis.
The expense relating to payments not included in the measurement of the lease liability is as follows:
74 | Annual Report and Accounts 2020
Notes to the Consolidated Financial Statements continued
18
Lease Liabilities (continued)
Short-term leases
Leases of low value assets
Total
2020
£000
40
1
41
Disclosures in respect of Operating leases relating to the 2019 accounts prepared under IAS 17 are as follows:
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. Total outstanding commitments for future
minimum lease payments under non-cancellable operating leases as at 31 July 2019 were as follows:
Within one year
In the second to fifth years
19
Trade and other receivables
Trade receivables
Other receivables and prepayments
Lease receivable
Land and
buildings
£000
585
726
1,311
Plant and
machinery
£000
55
45
100
Total
£’000
640
771
1,411
2020
£000
4,387
1,868
127
6,382
2019
£000
8,884
845
-
9,729
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 (2020: 21% of revenue, 2019: 18% 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 below 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.
2020
£000
994
240
46
1,280
2019
£000
1,536
283
-
1,819
Notes to the Consolidated Financial Statements continued
TRACSIS PLC | 75
20
Trade and other payables
Trade payables
Other tax and social security
Contract liabilities
Accruals and other payables
2020
£000
883
1,681
7,809
3,136
2019
£000
1,445
3,196
7,991
4,304
13,509
16,936
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.
Revenue recognised in the reporting period that was included in the contract liability balance at beginning of the year totalled
£6,789,000 (2019: £3,306,000).
21
Contingent consideration
During the financial year, the Group acquired iBlocks Limited. Under the share purchase agreement in place for this acquisition,
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 £8.5m, and the fair value of the amount payable was assessed at £3.9m at the
acquisition date and £3.3m at the year end date.
During the previous financial year, the Group acquired Cash & Traffic Management Limited, Compass Informatics Limited and
Bellvedi Limited. Under the share purchase agreements for each of these companies, contingent consideration is payable which
is linked to the profitability of the acquired businesses over 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 £112,000 for Cash & Traffic Management Limited,
£681,000 for Compass Informatics Limited and £3,193,000 for Bellvedi Limited.
During the financial year, contingent consideration of £348,000 was paid in respect of the Tracsis Travel Compensation Services
Limited acquisition which was made in year ended 31 July 2018 (2019: £84,000), £491,000 in respect of the Cash & Traffic
Management Limited acquisition which was made in year ended 31 July 2019 (2019: £nil), £332,000 in respect of the Compass
Informatics Limited acquisition which was made in the year ended 31 July 2019 (2019: £nil), and £57,000 in respect of the
Bellvedi Limited acquisition which was made in the year ended 31 July 2019 (2019: £nil)
As detailed in note 9.3, an exceptional credit of £1,475,000 was recognised, following a review of the assumptions of the fair
value of the contingent consideration as at 31 July 2020. At the balance sheet date, the Directors assessed the fair value of the
remaining amounts payable which were deemed to be as follows.
Tracsis Travel Compensation Services Limited & Delay Repay Sniper Limited
Cash & Travel Management Limited
Compass Informatics Limited
Bellvedi Limited
iBlocks Limited
2020
£000
88
112
681
3,193
3,260
7,334
2019
£000
394
600
1,132
4,057
-
6,183
76 | Annual Report and Accounts 2020
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 which specify the specific
arrangements and calculations relating to each acquisition. This involves assumptions about future profit forecasts, which results
from assumptions about revenues and costs, and is discounted back to the present value using an appropriate discount rate
and an estimate of when it is expected to be payable. A range of outcomes is considered, and a probability/likelihood weighting
is applied to each of them in order to produce a weighted assessment of the amount payable.
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:
2020
£000
6,183
3,854
(1,228)
(1,475)
7,334
2020
£000
1,747
5,587
7,334
2019
£000
3,265
5,789
(2,149)
(722)
6,183
2019
£000
879
5,304
6,183
At the start of the year
Arising on acquisition (note 5)
Cash payment
Fair value adjustment to Statement of Comprehensive Income
At the end of the year
The ageing profile of the remaining liabilities can be summarised as follows:
Payable in less than one year
Payable in more than one year
Total
22
Deferred tax
Non-current liability/(asset)
At 31 July 2018
Arising on adoption of IFRS 15
Arising on acquisition
(Credit)/charge to statement of comprehensive
income (note 12)
At 31 July 2019
Arising on acquisition (note 5)
(Credit)/charge to statement of comprehensive
income (note 12)
At 31 July 2020
Accelerated
Intangible
capital
Share
assets
allowances options
£000
3,839
-
2,406
(386)
5,859
2,453
(112)
8,200
£000
£000
36
-
22
25
83
-
(49)
34
(602)
-
-
40
(562)
-
(72)
(634)
Other
£’000
-
(244)
(105)
244
(105)
(202)
64
(243)
Total
£000
3,273
(244)
2,323
(77)
5,275
2,251
(169)
7,357
The closing deferred tax asset and liability has been calculated at 19% as at 31 July 2020 (2019: 17%).
TRACSIS PLC | 77
Notes to the Consolidated Financial Statements continued
22
Deferred tax (continued)
This is presented on the Balance Sheet as follows within non-current assets and liabilities.
Deferred tax assets
Deferred tax liabilities
Net liability per table above
23
Share capital
Allotted, called up and fully paid:
Ordinary shares of 0.4p each
2020
£000
(877)
8,234
7,357
2019
£000
(667)
5,942
5,275
2020
2020
2019
2019
Number
£
Number
£
29,122,548
116,490
28,748,578
114,994
The following share transactions have taken place during the year ended 31 July 2020:
At start of the year
Issued as consideration for business combinations
Exercise of share options (Note 8)
At end of the year
2020
Number
2019
Number
28,748,578
28,334,086
192,926
181,044
125,063
289,429
29,122,548
28,748,578
During the year, a number of options were exercised from the schemes with exercise price varying from 0.4p to 199.5p – all
took place at either the nominal value or above the nominal value
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
78 | Annual Report and Accounts 2020
Notes to the Consolidated Financial Statements continued
26
Financial risk management
The principal financial instruments comprise cash and short term deposits. The main purpose of these financial instruments is
to provide finance for the Group’s operations. The Group has various other financial instruments, such as trade receivables and
payables that arise directly from its operations. The Group has taken advantage of the exemption to exclude short term debtors
and creditors from the disclosures given below. The fair values of the financial instruments are equal to their year end carrying
values and represent the maximum exposure.
Financial assets
2020
Fixed
Floating
Rate
£000
Rate
£000
Total
£000
2019
Fixed
Floating
Rate
£000
Rate
£000
Total
£000
Cash and short term deposits
-
17,920
17,920
3,000
21,104
24,104
The Group had no 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
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.
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, though the interest rates
being offered by the major financial institutions are generally less than 0.5% with many being much less than this. Total finance
income in the year amounted to £73,000. The Group has cash balances of £17.9m as at 31 July 2020 which is spread across
different banks as detailed below, and each attracts a different interest rate. Any sensitivity to interest rates would depend on
the following factors: Tracsis subsidiary entity making the investment, the amount invested, the length of commitment and ability
to access to the funds, and the choice of financial institution. In view of current interest rates and the current economic backdrop,
the Group does not consider that it has a major exposure to interest rates and should interest rates rise, any additional rates
would have a small impact on the amount of finance income receivable. 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 2020, the Group
had £nil in a fixed rate 30 day deposit account (2019: £3.0m).
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. The
Group did not incur any material bad debts in the financial year, and has historically not had any either, and so views the overall
credit risk to be low. As noted in note 6 and note 19, the Group derives c. 21% of its revenue from a major customer, whose
credit worthiness is unquestionably strong. The Group had a trade receivables balance of £4,387,000 at 31 July 2020, and this
related to over 100 individual customers. The largest individual receivable was £495,000 and related to a major worldwide
engineering Group in a very strong financial position. Other receivables over £100,000 were spread across 15 individual clients,
and amounted to c. £2.4m. These clients include for example large infrastructure providers, Train Operators and Owning groups,
numerous Government departments and other bodies, engineering consultants, plus shopping centre providers; all of whom are
deemed to be very credit worthy.
TRACSIS PLC | 79
Notes to the Consolidated Financial Statements continued
26
Financial risk management (continued)
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. As at 31 July 2020, of the
Group’s total cash balances of £17.9m, £16.2m was spread across four major, highly rated banking institutions with £7.6m held
at the lead bank, £5.3m held at another bank, and £1.9m and £1.4m were held with others. The remainder of the cash balances
of £1.7m was spread across other financial institutions.
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 though these are not significant and are detailed in note 6 and total revenue in the year from these countries and others
amounted to £342,000. The Group acquired Compass Informatics Limited during the previous financial 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. Total
sales to/from Ireland amounted to c. £6m in the year representing around 12% of total Group sales revenue. The closing
exchange rate used was c. 1.1 GBP to Euros, with an average throughout the year of c. 1.14 GBP to Euros. Any changes to
this exchange rate would increase the Group’s foreign currency risk, though as noted above the cast majority of sales continue
to be made in Sterling. In addition, as detailed in note 21 the Group has assessed the fair value of the contingent consideration
relating to the acquisition of Compass Informatics Limited as £0.7m, which under the terms of the Share Purchase Agreement
has to be made in Euros. Any changes to the exchange rate would impact on the foreign currency risk but as these payments
are to be made over a number of years, the impact is not expected to be significant.
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.
80 | Annual Report and Accounts 2020
Notes to the Consolidated Financial Statements continued
26
Financial risk management (continued)
Changes in liabilities from financing activities
At 1 August 2019
Adoption of IFRS 16
Revised 1 August 2019
Changes from financing cash flows
Payment of lease liabilities
Total changes from financing cash flow
Changes in fair value
Other changes
Arising on acquisition
Payment of contingent consideration
New leases
At 31 July 2020
At 1 August 2018
Changes from financing cash flows
Payment of finance lease liabilities
Total changes from financing cash flow
Changes in fair value
Other changes
Arising on acquisition
Payment of contingent consideration
New finance leases
At 31 July 2019
Contingent
Consideration
£000
6,183
-
-
-
-
(1,475)
3,854
(1,228)
-
Lease
liabilities
(under
IFRS 16)
£000
562
1,386
1,948
(1,089)
(1,089)
-
459
-
796
7,334
2,114
Contingent
Consideration
£000
3,265
-
-
(722)
5,789
(2,149)
-
6,183
Lease
Liabilities
(under
IAS 17)
£000
278
(342)
(342)
-
-
-
626
562
TRACSIS PLC | 81
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)
Citi Logik Limited (2)
Nutshell Software Limited (2)
Vivacity Labs Limited (2)
WSP UK Limited (3)
Citi Logik Limited (2)
Nutshell Software Limited (2)
Purchase of
Amounts owed to
goods and services
related parties
2020
£000
-
224
-
13
404
2019
£000
78
73
-
254
202
2020
£000
2019
£000
-
21
-
-
4
-
19
-
12
36
Sale of
Amounts owed by
goods and services
related parties
2020
£000
2,706
-
14
2019
£000
3,709
-
10
2020
£000
495
-
-
2019
£000
1,364
-
-
(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) Citi Logik Limited, Nutshell Software Limited, and Vivacity Labs Limited, are related parties by virtue of the Group’s shareholding in these
entities.
(3) 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
28
Employee benefits
2020
£’000
3,280
541
3,821
2019
£’000
3,087
440
3,527
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 £736,000 (2019: £605,000). There were outstanding
contributions at 31 July 2020 of £99,000 (2019: £101,000).
82 | Annual Report and Accounts 2020
Notes to the Consolidated Financial Statements continued
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)
Tracsis Travel Compensation Services Limited
(1)
Delay Repay Sniper Limited (1)
Cash & Traffic Management Limited (2)
Compass Informatics Limited (7)
Bellvedi Limited (1)
iBlocks Limited (1)*
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
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
Rail industry software
England and Wales
Compass Informatics UK Limited (2)
Software development
England and Wales
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)
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
Mobile Network Data Analysis
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%
23.4%
24.3%
TRACSIS PLC | 83
Notes to the Consolidated Financial Statements continued
29
Group entities (continued)
*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 2017/18 of 0.9p per share paid
Interim dividend for 2018/19 of 0.8p per share paid
Final dividend for 2018/19 of 1.0p per share paid
Total dividends paid
The dividends paid or proposed in respect of each financial year is as follows:
2020
£000
-
-
288
288
2019
£000
257
229
-
486
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 paid
2020
2019
2018
2017
2016
2015
2014
2013
2012
£000
£000
£000
£000
£000
£000
£000
£000
£000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
229
288
-
-
-
-
-
-
-
-
-
-
-
-
198
257
-
-
-
-
-
-
-
-
-
-
-
-
167
225
-
-
-
-
-
-
-
-
-
-
-
-
137
195
-
-
-
-
-
-
-
-
-
-
-
-
106
164
-
-
-
-
-
-
-
-
-
-
-
-
89
119
-
-
-
-
-
-
-
-
-
-
-
-
75
102
-
-
-
-
-
-
-
-
-
-
-
-
48
87
-
-
-
-
-
-
-
-
-
-
-
-
-
-
84 | Annual Report and Accounts 2020
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
2020
2019
Nil
1.8p
2018
1.6p
2017
1.4p
2016
1.2p
2015
1.0p
2014
0.8p
2013
0.7p
2012
0.55p
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 - net
Other operating income
Amortisation of intangible assets
Depreciation
Share of result of equity accounted investees
Adjusted EBITDA
2020
£000
4,111
3
1,050
(115)
(376)
3,599
1,882
309
2019
£000
6,559
(37)
1,034
(38)
(260)
2,251
831
174
10,463
10,514
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 - net
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
2020
£000
4,111
3
1,050
(115)
(376)
3,599
309
8,581
2020
£000
10,463
(1,882)
8,581
2019
£000
6,559
(37)
1,034
(38)
(260)
2,251
174
9,683
2019
£000
10,514
(831)
9,683
TRACSIS PLC | 85
Notes to the Consolidated Financial Statements continued
32
IFRS 16 reconciliation
The Group adopted IFRS 16 with effect from 1 August 2019, using the modified retrospective approach, 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
the rental charge from the Income Statement, replaced with Depreciation and Finance charge and the inclusion of a Right of
Use Asset and a current and non current Lease Liability on the Balance Sheet. The net impact was a charge to reserves of
£106,000 which can be summarised as follows:
As previously
IFRS 16
Under IFRS 16
reported at 31 July
Adjustment at
as at 31 July
2019 under IAS 17
31 July 2019
£’000
£’000
2,678
9,729
1,302
(58)
2019
£’000
3,980
9,671
(16,936)
36
16,900
(277)
(285)
37,545
(628)
(758)
(106)
(905)
(1,043)
37,439
Property, plant and equipment
Trade and other receivables (rent
prepaid)
Trade and other payables (rent
accrual derecognised)
Current lease liabilities
Non-Current lease liabilities
Retained earnings
The table below reconciles the Company's operating lease commitment at 31 July 2019, under IAS 17, to the lease liability now
being recognised under IFRS 16.
Operating lease commitment at 31 July 2019 as disclosed in the consolidated financial statements
Impact of discounting
Lease liabilities recognised as at 1 August 2019
£’000
1,411
(25)
1,386
86 | Annual Report and Accounts 2020
Notes to the Consolidated Financial Statements continued
32
IFRS 16 reconciliation (continued)
Impact on the consolidated income statement for the year ended 31 July 2020 – showing the impact of IFRS 16 in the current
year as if it had and had not been adopted.
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 (net)
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
Amounts without
adoption of IFRS 16
£’000
47,998
(16,796)
31,202
(26,779)
10,463
(1,882)
8,581
(3,599)
376
(1,050)
4,308
115
4,423
76
(79)
(309)
4,111
(1,234)
2,877
21
2,898
-
-
-
(46)
(822)
776
(46)
-
-
-
(46)
-
(46)
(3)
45
-
(4)
-
(4)
-
(4)
47,998
(16,796)
31,202
(26,825)
9,641
(1,106)
8,535
(3,599)
376
(1,050)
4,262
115
4,377
73
(34)
(309)
4,107
(1,234)
2,873
21
2,894
TRACSIS PLC | 87
Notes to the Consolidated Financial Statements continued
32
IFRS 16 reconciliation (continued)
Impact on the consolidated balance sheet as at 31 July 2020 – showing the impact of IFRS 16 in the current year as if it had
and had not been adopted.
Non-current assets
Property, plant and equipment
Intangible assets
Investments – equity
Investments in equity accounted investees
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total assets
Non-current liabilities
Lease liabilities
Contingent consideration payable
Deferred tax liabilities
Current liabilities
Lease liabilities
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
Amounts
without
adoption of
As reported
Adjustments
IFRS 16
£’000
£’000
£’000
3,581
54,376
50
1,039
877
(1,428)
-
-
-
-
2,153
54,376
50
1,039
877
59,923
(1,428)
58,495
430
6,382
17,920
24,732
-
(67)
-
(67)
430
6,315
17,920
24,665
84,655
(1,495)
83,160
986
5,587
8,234
14,807
1,128
13,509
1,747
439
16,823
(818)
-
-
168
5,587
8,234
(818)
13,989
(873)
94
-
-
255
13,603
1,747
439
(779)
16,044
31,630
(1,597)
30,033
53,025
102
53,127
116
6,373
5,420
41,078
38
53,025
-
-
-
102
-
102
116
6,373
5,420
41,180
38
53,127
88 | Annual Report and Accounts 2020
Financial Statements
Company Balance Sheet (prepared under FRS 101)
as at 31 July 2020
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
Lease Liabilities
Contingent consideration
Current liabilities
Trade and other payables
Lease Liabilities
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
40
36
37
39
38
37
39
41
2020
£000
636
74,186
233
75,055
2,547
2,081
4,628
2019
£000
349
54,751
208
55,308
6,987
2,385
9,372
79,683
64,680
137
5,587
5,724
16,101
179
1,747
18,027
-
5,304
5,304
14,854
-
879
15,733
23,751
21,037
55,932
43,643
116
6,373
5,420
44,023
55,932
115
6,343
3,921
33,264
43,643
The Company’s profit for the year, after dividends received was £10,018,000 (2019: £3,738,000)
The financial statements were approved and authorised for issue by the Board of Directors on 4 December 2020 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
TRACSIS PLC | 89
Financial Statements
Company Statement of Changes in Equity
At 1 August 2019
Adjustment on initial application
of IFRS 16 (net of tax)
Profit and total comprehensive
income
Dividends
Share based payment charges
Shares issued as consideration
for business combinations
Exercise of share options
Share
capital
£000
115
Share
premium
£000
6,343
Merger
reserve
£000
3,921
Retained
earnings
£000
33,264
Total
equity
£000
43,643
-
-
-
-
1
-
-
-
-
-
-
30
-
-
-
-
1,499
-
(21)
(21)
10,018
10,018
(288)
1,050
-
-
(288)
1,050
1,500
30
At 31 July 2020
116
6,373
5,420
44,023
55,932
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
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
90 | Annual Report and Accounts 2020
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. IFRS 15 has
established a comprehensive framework for determining whether, how much and when revenue is recognised.
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. An 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
Company 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.
TRACSIS PLC | 91
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
Company 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.
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 Company. 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
Company 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
92 | Annual Report and Accounts 2020
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
Fixtures and Fittings
–
–
–
4% on cost
33 1/3% on cost
10% 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 Company 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
For any new contracts entered into on or after 1 August 2019, the Company considers whether a contract is, or contains a lease.
A lease is defined as ‘a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period
of time in exchange for consideration’.
To apply this definition the Company assesses whether the contract meets three key evaluations which are whether:
the contract contains an identified asset, which is either explicitly identified in the contract or implicitly specified
by being identified at the time the asset is made available to the Group
the Group has the right to obtain substantially all of the economic benefits from use of the identified asset
throughout the period of use, considering its rights within the defined scope of the contract
the Group has the right to direct the use of the identified asset throughout the period of use.
The Group assess whether it has the right to direct ‘how and for what purpose’ the asset is used throughout the period of use.
TRACSIS PLC | 93
Notes to the Company Balance Sheet continued
33
Company accounting policies (continued)
Measurement and recognition of leases as a lessee
At lease commencement date, the Group recognises a right-of-use asset and a lease liability on the balance sheet.
The right-of-use asset is measured at cost, which is made up of the initial measurement of the lease liability, any initial direct
costs incurred by the Group, an estimate of any costs to dismantle and remove the asset at the end of the lease, and any lease
payments made in advance of the lease commencement date (net of any incentives received).
The Company depreciates the right-of-use assets on a straight-line basis from the lease commencement date to the earlier of
the end of the useful life of the right-of-use asset or the end of the lease term. The Group also assesses the right-of-use asset
for impairment when such indicators exist.
At the commencement date, the Group measures the lease liability at the present value of the lease payments unpaid at that
date, discounted using the interest rate implicit in the lease if that rate is readily available or the Group’s incremental borrowing
rate.
Lease payments included in the measurement of the lease liability are made up of fixed payments (including in substance fixed),
variable payments based on an index or rate, amounts expected to be payable under a residual value guarantee and payments
arising from options reasonably certain to be exercised.
Subsequent to initial measurement, the liability will be reduced for payments made and increased for interest. It is remeasured
to reflect any reassessment or modification, or if there are changes in in-substance fixed payments.
When the lease liability is remeasured, the corresponding adjustment is reflected in the right-of-use asset, or profit and loss if
the right-of-use asset is already reduced to zero.
The Group has elected to account for short-term leases and leases of low-value assets using the practical expedients. Instead
of recognising a right-of-use asset and lease liability, the payments in relation to these are recognised as an expense in profit
or loss on a straight-line basis over the lease term.
Accounting policy applicable before 1 August 2019
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of
ownership to the lessee. All other leases are classified as operating leases. Assets held under finance leases are initially
recognised as assets of the Group at their fair value at the inception of the lease or, if lower, at the present value of the minimum
lease payments. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation. Lease
payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of
interest on the remaining balance of the liability. Finance charges are charged directly to profit or loss, unless they are directly
attributable to qualifying assets, in which case they are capitalised in accordance with the Group’s general policy on borrowing
costs. Contingent rentals are recognised as expenses in the periods in which they are incurred.
Operating lease payments are recognised as an expense on a straight line basis over the lease term, except where another
systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred.
In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The
aggregate benefit of incentives is recognised as a reduction of rental expense on a straight line basis, except where another
systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
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 51.
Where there are charges relating to subsidiary undertakings, these are borne in full by the relevant subsidiary undertakings via
a recharge.
94 | Annual Report and Accounts 2020
Notes to the Company Balance Sheet continued
33
Company accounting policies (continued)
Profit and Loss account
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 £10,018,000 after receiving dividends from subsidiary undertakings of
£9,950,000 (2019: profit of £3,738,000 after receiving dividends from subsidiary undertakings of £4,200,000).
34
Property, plant and equipment
Cost
At 1 August 2019
Arising on initial adoption of IFRS 16
Additions
At 31 July 2020
Depreciation
At 1 August 2019
Charge for the year
At 31 July 2020
Net book value
At 31 July 2019
At 31 July 2020
*Includes land of £100,000 which is not depreciated
Land & Computer
Fixtures
Buildings* equipment And Fittings
£000
£000
£000
400
438
-
838
102
179
281
298
557
107
-
42
149
56
32
88
51
61
-
-
20
20
-
2
2
-
18
Total
£000
507
438
62
1,007
158
213
371
349
636
Included in the net carrying amount of property, plant and equipment are assets held under leases of £271,000 (2019: Net book
value of assets held under finance lease obligations pre adoption of IFRS 16 £nil).
A reconciliation of the Right of Use Asset is as follows:
Cost
At 1 August 2019
Adoption of IFRS 16
At 31 July 2020
Depreciation
At 1 August 2019
Charge for the year
At 31 July 2020
Net book value
At 31 July 2019
At 31 July 2020
Land &
Buildings
£000
-
438
438
-
167
167
-
271
Notes to the Company Balance Sheet continued
35
Investments
At 1 August 2019
Additions
Adjustments
Impairment
At 31 July 2020
TRACSIS PLC | 95
Shares in, and loans to
subsidiary
undertakings
£000
54,751
20,809
10
(1,384)
74,186
The impairment in the year relates to the investment in Citi Logik Limited which impaired by £300,000 from a previous carrying
value of £350,000 to a fair value of £50,000, in view of the company’s ongoing losses and as a result of the impairment review
undertaken at the end of the financial year. Furthermore, the investment in Tracsis Travel Compensation Services Limited was
deemed to be impaired following an impairment review using a discount rate of 12% which prompted a review of the other
assumptions and as noted in note 15, the investment was deemed to be impaired and so written down to a value of £1.5m
resulting in an impairment charge for the year totalling £1,084,000.
The companies in which Tracsis plc’s interest is more than 10% at the year end are as follows:
Name
Subsidiary undertakings:
Country of
incorporation
Class and
percentage
Principal activity
of shares held
Holding
Tracsis Rail Consultancy Limited
England and Wales
Tracsis Passenger Counts Limited
England and Wales
Rail industry consultancy
Rail industry ancillary
services
Ordinary 100%
Ordinary 100%
Safety Information Systems Limited
England and Wales
MPEC Technology Limited
England and Wales
Tracsis Traffic Data Limited
Datasys Integration Limited
England and Wales
England and Wales
Tracsis Retail & Operations Limited
England and Wales
Software and consultancy
Rail industry hardware &
datalogging
Transportation data collection
Holding Company
Rail industry software
Event planning & traffic
management
Dormant
Ordinary 100%
Ordinary 100%
Ordinary 100%
Ordinary 100%
Ordinary 100%
SEP Limited
SEP Events Limited
Ontrac Technology Limited
Ontrac Limited
Tracsis Travel Compensation
Services Limited
Delay Repay Sniper Limited
Cash & Traffic Management
Limited
Compass Informatics Limited
Bellvedi Limited
iBlocks Limited
England and Wales
England and Wales
England and Wales
England and Wales
Ordinary 100%
Direct
Ordinary 100%
Indirect
Holding Company
Ordinary 100%
Direct
Rail industry software
Ordinary 100%
Indirect
England and Wales
Rail industry software
Ordinary 100%
Indirect
England and Wales
England and Wales
Republic of Ireland
England and Wales
England and Wales
Rail industry software
Event planning & traffic
management
Software Development
Ordinary 100%
Ordinary 100%
Ordinary 100%
Rail industry software
Ordinary 100%
Rail industry software
Ordinary 100%
Direct
Direct
Direct
Direct
Direct
Compass Informatics UK Limited
England and Wales
Software development
Ordinary 100%
Indirect
S Dalby Consulting Limited
England and Wales
Sky High Data Capture Limited
England and Wales
Sky High Traffic Data Limited
England and Wales
Dormant
Ordinary 100%
Dormant
Ordinary 100%
Dormant
Ordinary 100%
Direct
Indirect
Indirect
Direct
Direct
Direct
Direct
Direct
Direct
Indirect
96 | Annual Report and Accounts 2020
Notes to the Company Balance Sheet continued
35
Investments (continued)
Country of
incorporation
Class and
percentage
Principal activity
of shares held
Holding
England and Wales
Dormant
Ordinary 100%
Indirect
England and Wales
Dormant
Ordinary 100%
Indirect
Name
The Web Factory Birmingham
Limited
Forsyth Whitehead & Associates
Limited
Sky High Technology (Scotland)
Limited
Count on Us Traffic Limited
England and Wales
England and Wales
Burra Burra Distribution Limited
England and Wales
Sky High NCS Limited
England and Wales
Halifax Computer Services Limited
England and Wales
Skyhightraffic Limited
The Traffic Survey Company
Limited
The People Counting Company
Limited
Myratech.net Limited
Footfall Verification Limited
Minority investments
Citi Logik Limited
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
Nutshell Software Limited
England and Wales
Vivacity Labs Limited
England and Wales
36
Trade and other receivables
Trade receivables
Amounts owed by Group undertakings
Other debtors
Corporation Tax
Prepayments
Dormant
Ordinary 100%
Indirect
Dormant
Ordinary 100%
Dormant
Ordinary 100%
Dormant
Ordinary 100%
Dormant
Ordinary 100%
Dormant
Ordinary 100%
Indirect
Indirect
Indirect
Indirect
Indirect
Dormant
Ordinary 100%
Indirect
Dormant
Ordinary 100%
Indirect
Dormant
Ordinary 100%
Dormant
Ordinary 100%
Indirect
Indirect
Mobile network data analysis
Mobile application
development
Machine learning technology
Ordinary 14.9%
Ordinary 23.4%
Ordinary 24.3%
Direct
Direct
Direct
2020
£000
431
671
295
629
55
2,081
2019
£000
160
920
354
874
77
2,385
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.
Notes to the Company Balance Sheet continued
37
Lease Liabilities
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
Lease liabilities recognised on adoption of IFRS 16
New contracts
Total cash outflow
At end of the year
Future minimum lease payments at 31 July 2020 were as follows:
TRACSIS PLC | 97
2020
£000
179
137
-
137
316
2020
£000
-
483
-
(167)
316
2019
£000
-
-
-
-
-
2019
£000
-
-
-
-
-
2020
2019
Carrying
amount
£000
Contractual
cash flows
£000
Less than
one year
£000
One to
Two years
£000
Two to
Five years
£000
316
-
324
-
185
-
139
-
-
-
The Company has elected not to recognise a lease liability for short term leases (leases with an expected term of 12 months or
less) or for leases of low value assets. Payments made under such leases are expensed on a straight line basis.
The expense relating to payments not included in the measurement of the lease liability is as follows:
Short-term leases
Leases of low value assets
Total
Disclosures in respect of Operating leases from 2019 as prepared under IAS 17 are as follows:.
Minimum lease payments are payable as follows:
2020
£000
-
1
1
Within one year
Between one and two years
Between two to five years
Land &
buildings
£000
180
185
123
98 | Annual Report and Accounts 2020
Notes to the Company Balance Sheet continued
38
Trade and other payables
Trade payables
Other tax and social security
Amounts owed to Group undertakings
Accruals and contract liabilities
2020
£000
148
97
14,441
1,415
16,101
2019
£000
95
73
12,237
2,449
14,854
The carrying value of trade payables approximates to the fair value. Amounts owed to Group undertakings are interest free
and repayable on demand.
39
Contingent consideration
During the financial year, the Group acquired iBlocks Limited. Under the share purchase agreement in place this acquisition,
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 £8.5m, and the fair value of the amount payable was assessed at £3.9m at the
date of acquisition and £3.3m at the year end.
During the previous financial year, the Group acquired Cash & Traffic Management Limited, Compass Informatics Limited and
Bellvedi Limited. Under the share purchase agreements for each of these companies, contingent consideration is payable which
is linked to the profitability of the acquired businesses over 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 at the year end was assessed at £112,000 for Cash & Traffic Management
Limited, £681,000 for Compass Informatics Limited and £3,193,000 for Bellvedi Limited.
During the financial year, contingent consideration of £348,000 was paid in respect of the Tracsis Travel Compensation Services
Limited acquisition which was made in year ended 31 July 2018 (2019: £84,000), £491,000 in respect of the Cash & Traffic
Management Limited acquisition which was made in year ended 31 July 2019 (2019: £nil), £332,000 in respect of the Compass
Informatics Limited acquisition which was made in the year ended 31 July 2019 (2019: £nil), and £57,000 in respect of the
Bellvedi Limited acquisition which was made in the year ended 31 July 2019 (2019: £nil)
At the balance sheet date, the Directors assessed the fair value of the remaining amounts payable which were deemed to be
as follows.
Tracsis Travel Compensation Services Limited & Delay Repay Sniper Limited
Cash & Travel Management Limited
Compass Informatics Limited
Bellvedi Limited
iBlocks 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
2020
£000
88
112
681
3,193
3,260
7,334
2020
£000
1,747
5,587
7,334
2019
£000
394
600
1,132
4,057
-
6,183
2019
£000
879
5,304
6,183
TRACSIS PLC | 99
2020
£000
(208)
(25)
(233)
2020
£000
5
(238)
(233)
2019
£000
(360)
152
(208)
2019
£000
1
(209)
(208)
Notes to the Company Balance Sheet continued
40
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
41
Share capital
Allotted, called up and fully paid:
Ordinary shares of 0.4p each
2020
2020
2019
2019
Number
£
Number
£
29,122,548
116,490
28,748,578
114,994
The following share transactions have taken place during the year ended 31 July 2020:
At start of the year
Issued as consideration for business combinations
Exercise of share options
At end of the year
42
Related Party Transactions
The following transactions took place during the year with other related parties:
2020
Number
2019
Number
28,748,578
28,334,086
192,926
181,044
125,063
289,429
29,122,548
28,748,578
Leeds Innovation Centre Limited
Nexus Leeds Limited
Purchase of
Amounts owed to
goods and services
related parties
2020
£000
-
224
2019
£000
78
73
2020
£000
-
21
2019
£000
-
19
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.
100 | Annual Report and Accounts 2020
Group information
Company Secretary and Registered
Office
Max Cawthra
Auditor
Grant Thornton UK LLP
Nominated Advisor and
Stockbroker
finnCap Limited
Nexus
Discovery Way
Leeds
LS2 3AA
No 1 Whitehall Riverside
60 New Broad Street
Leeds
LS1 4BN
London
EC2M 1JJ
The registered office of all subsidiary entities
is detailed 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
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