Investment Case
We deliver sustainable value for our stakeholders by developing innovative, technology-driven solutions that solve complex problems.
Our business model is focused 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 strong balance sheet and cash generation enable us to invest for future growth.
Our products and services enable our customers to deliver mission-critical activities with increased efficiency, enhanced performance, higher productivity and improved safety. This is well aligned with industry drivers in the short, medium and long term.
The Williams-Shapps Plan for UK Rail issued in May 2021 outlined a strategic vision for the rail industry in the UK, with a greater focus on passenger and freight customers, the delivery of an increasingly safe and reliable rail network, and greater integration across different transport modes whilst prioritising innovation in new technologies.
Tracsis is well aligned to help deliver this strategic vision. With the rail industry focused on improving safety, improving timetabling and on-time train performance, increasing pre-emptive and asset-condition maintenance, and accelerating innovation in areas like pay-as-you-go smart ticketing and delay repay, the Group is well positioned to benefit from the commitment to greater innovation and investment in a digital railway.
Our products and services offer compelling value propositions for our customers. They are well differentiated, and in several cases are unique. We have strong, long-term relationships with our customers, which support a high level of recurring and repeat revenue and provide valuable insight in developing the next generation of products. This is underpinned by sector-specific expertise that allows us to provide expert advisory support and consultancy to our customers, and to fully understand their challenges and how best to provide a solution.
Our growth strategy is focused on five core areas:
- Operational Performance Software;
- Remote Condition Monitoring Hardware and Software;
- Risk Management and Safety Software; and
- Smart Ticketing and customer experience software.
- “Big Data” (data informatics and GIS).
These multiple vectors ensure diversification of our growth opportunities across customers and industry drivers, which supports our confidence that the Group can deliver further significant value for shareholders and provides some resilience against shortterm market volatility.
The addressable market for each of these growth vectors is significant. We estimate that the addressable UK rail market for Tracsis’ current products and services is at least £100m, and is growing due to the strong market fundamentals described above. The acquisition of RailComm in the year has further expanded our addressable market by providing the Group with direct access to a long-established sales network into a significant number of rail clients in North America. In addition to the growth opportunities that exist in RailComm’s core markets of rail yard automation and computer aided dispatching, the Group will progressively market its existing portfolio of rail products and services.
The Group has net cash of £17.2m at 31 July 2022, with no debt and high levels of operating cash generation. Our strong balance sheet enables us to invest for future growth and gives the financial flexibility to support investment in innovation and the development of our business infrastructure to deliver this.
We are actively pursuing M&A opportunities to expand our addressable markets and increase our technical capabilities.
In the year to 31 July 2022 we completed two acquisitions:
Enhanced the Group’s technology capabilities with the acquisition of geoscience company Icon GEO which specialises in Earth Observation.
Acquired the US based rail technology software and services provider RailComm, giving direct access to the large and growing North American market.
Our business model is highly resilient, and is built upon long-term customer relationships, well differentiated products and services that deliver compelling value propositions, high levels of recurring and repeat revenue, and strong cash generation. Working in partnership with our customers, we deliver solutions that enable positive operational and ESG outcomes for our customers.
Our Rail Technology & Services products principally support the operational requirements of running and maintaining the railway and are therefore largely resilient against changes in passenger numbers, as demonstrated during the Covid-19 pandemic. The wider focus on investing in modernising and digitising the UK railway is an important long-term trend that will support growth.
Our Events and Traffic Data businesses did see reduced activity levels as a result of Covid-19, but since Government restrictions were eased there has a significant recovery in both markets. Activity levels in Events have returned to pre-pandemic levels, and the performance in the year included some activities that are not expected to repeat. The recovery in Traffic Data was slower but has returned to close to the monthly run-rate seen pre-pandemic. Some month-to-month variability in demand remains and activity levels in this market are more sensitive to Government and public-sector funding.