Tracsis flags higher first-half revenue, narrower margins
By Josh White
Date: Wednesday 26 Feb 2025
(Sharecast News) - Tracsis flagged modest first-half revenue growth on Wednesday, with revenue expected to reach £36.3m, up from £35.5m on a like-for-like basis after adjusting for discontinued operations.
The AIM-traded company said it experienced further growth in UK rail technology, although remote condition monitoring hardware revenue declined as anticipated due to the impact of Network Rail's Control Period 7 (CP7) funding cycle.
Its adjusted EBITDA margin was expected to be around 10%, down from 16% in the prior year, reflecting changes in revenue mix and lower profitability in the traffic data and events division.
The rail technology and services division maintained revenue at a similar level to the prior period despite the CP7 headwinds.
Tracsis said it made strategic progress in safety and risk management by expanding the functionality of RailHub for Network Rail, while its customer experience segment secured a major contract for the National Rail pay-as-you-go 'Tap Converter' system.
In operations and planning, Tracsis said it completed the first intercity deployment of TRACS Enterprise in the UK, and was preparing for another full deployment in the second half of the year.
It delivered a hardware and software expansion in North America for a large US transit customer, and completed the first full deployment of its Train Dispatch system with a US commuter rail provider, opening new opportunities in the market.
The data, analytics, consultancy and events division recorded modest revenue growth, excluding £1.1m of discontinued transport consultancy revenue.
A previously-announced cyber-attack affecting a major traffic data customer reduced first-half revenue by £0.5m, although activity levels had since recovered.
The company said it was currently delivering its largest-ever traffic data survey in the UK, and had a full order book of events work for the remainder of the financial year.
However, EBITDA performance in the division declined due to inflationary cost pressures in traffic data and events, which Tracsis was addressing through pricing adjustments.
Looking ahead, the company said it expected revenue and EBITDA margin to strengthen in the second half, supported by recent contract wins and the natural seasonality of the business.
The UK rail market remained a key variable, with CP7 funding constraints continuing to affect remote condition monitoring order volumes.
However, the company said it expected demand to normalise as CP7 entered its second year in April.
The UK government's ongoing rail reform consultation could also impact procurement timelines, particularly in operations and planning, although Tracsis said it did not expect its recurring software revenue from UK train operating companies to be affected.
It added that the Tap Converter contract was expected to contribute to development revenue in the second half, with additional growth anticipated from recent pay-as-you-go deployments in Wales and Scotland.
The company said it believed successful pipeline conversion in both the UK and North America would allow it to meet full-year expectations.
With a cash balance of £22.1m and strong cash generation, Tracsis said it was positioned to invest in its technology base while pursuing targeted acquisitions.
"While external factors have slowed activity in parts of the UK rail market, the industry's structural shift towards modernisation and digital adoption continues," said chief executive officer Chris Barnes.
"Tracsis remains well-positioned to lead this transformation, meeting the growing demand for data-driven, customer-focused and safety-critical solutions.
"Despite headwinds impacting RCM, our UK Rail Technology division saw growth across its other product categories."
Barnes said the company's diversification strategy was steadily building momentum, granting it access to larger strategic opportunities such as the nationwide PAYG Tap Converter contract.
"Our ability to win and deliver these complex, multi-year contracts has been enhanced by the investment we have made in technology and delivery capabilities.
"We are now seeking to repeat this in the North American Train Dispatch market, following the completion of our first full product deployment during the period.
"With a strong foundation, a clear strategy and disciplined execution, Tracsis is well-placed to deliver on its long-term strategy despite the localised short-term headwinds."
At 0943 GMT, shares in Tracsis were down 7.52% at 365.3p.
Reporting by Josh White for Sharecast.com.
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