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Tracsis expects stronger second half

Seasonality and the impact of acquisitions should provide a boost
April 10, 2019

At first glance, a fall in first-half profits might not inspire much joy among Tracsis’ (TRCS) investors. But this decline requires some context. For starters, the transport software group adopted new accounting rules pertaining to revenue recognition, but did not restate figures for the comparative period. Under the old system, sales for the six months to January 2019 would have come in at £19.1m, while adjusted cash profits would have landed at £4.4m – up from £4.3m a year earlier.

IC TIP: Buy at 613p

Moreover, the second half is expected to be stronger for several reasons. Within its rail technology and services business, Tracsis won a five-year framework agreement with a major train-owning company – its largest ever software contract. Sales here are expected to be realised from the second half onwards. The group also invested around £0.5m into its technology base, with the benefits of this also expected in the second half.

For traffic and data services, revenues came in at £8.9m – up from £8.8m – while pre-tax profits dipped from £0.4m to £0.2m. Tracsis explains that trading here was in line with expectations, and that the second half is typically much stronger because of the timing of traffic surveys and outdoor events, plus the impact of two acquisitions made in January.

House broker finnCap expects (unadjusted) pre-tax profits of £5.9m and EPS of 16.3p for the year to July 2019, rising to £7.3m and 20.2p in FY2020.

TRACSIS (TRCS)   
ORD PRICE:613pMARKET VALUE:£175m
TOUCH:605-620p12-MONTH HIGH:731pLOW: 522p
DIVIDEND YIELD:0.3%PE RATIO:25
NET ASSET VALUE:154p*NET CASH:£18.7m
Half-year to 31 JanTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201818.12.46.80.7
201918.82.16.00.8
% change+4-11-12+14
Ex-div:25 Apr   
Payment:03 May   
*Includes intangible assets of £31.6m or 110p a share