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Tracsis a cure for railway strikes

The railway software company will improve operational efficiency for stumbling railway services.
November 9, 2022
  • Events division recovers strongly from Covid-19
  • Exceptional items hit profitability

Tracsis (TRCS) is a railway-focused software company, but it also has an events and consultancy business. The events team help with organising parking and travel, so was badly impacted during Covid-19. A bounce back in events plus the addition of two acquisitions has helped growth in the last year.

Group revenue increased by 37 per cent to £68.7mn. Part of this was driven by the acquisition of RailComm, a US based rail technology company which helps rail yard automation and dispatching. Management is hoping to cross-sell existing Tracsis products to newly acquired US customers.

Removing RailComm, organic growth was up 24 per cent. The fastest growing division was Analytics, Consultancy and Events, which grew by 63 per cent to £38.8mn after a strong post Covid-19 recovery. However, this did hit margins because consultancy and events are lower margin businesses than the software-driven Rail Technology and Services division. The company's adjusted cash profit (Ebitda) margin fell 5.2 percentage points to 20.6 per cent.

The Rail Technology and Services division may have grown more slowly than consultancy, but it still saw total revenue rise by 13 per cent to £29.9mn. Meanwhile, its annual recurring revenue increased by 13 per cent to £21.1mn. Payment for Bellvedi – a group acquired in 2019 – is contingent on profitability and it's overperforming. This contributed to the £3.1mn in exceptional payments, which pushed down profit for the year. Not a bad problem to have.

FactSet broker consensus expects EPS to rise to 47p in 2024, up from 37p this year. This gives a 2024 PE ratio of 23. It’s not that cheap but railways will receive more investment as governments try to transition to net zero. Labour shortages will also accelerate the need to automate. Tailwinds are there. Buy.

Last IC View: Buy, 1,002p, 7 April 2022

TRACSIS (TRCS)   
ORD PRICE:925pMARKET VALUE:£ 275mn
TOUCH:924p - 950p12-MONTH HIGH:1,100pLOW: 800p
DIVIDEND YIELD:0.2%PE RATIO:182
NET ASSET VALUE:203p*NET CASH:£12.2mn
Year to 31 JulyTurnover (£mn)Pre-tax profit (£mn)Earnings per share (p)Dividend per share (p)
201839.88.3025.71.6
201949.26.6017.81.8
202048.04.1110.0nil
202150.24.638.06nil
202268.72.565.092.0
% change+37-45-37-
Ex-div:26 Jan   
Payment:10 Feb   
*Includes intangible assets of £65.9mn, or 222p a share.