| Tracsis is Gaining Traction by James Faulkner of WatsHot.com On specialist small cap website Watshot.com, editor James Faulkner provides two hot new recommendations each month, regular updates on his share tips, investment ideas, rumours, book reviews and his daily thoughts and insights into the markets. James will be publishing TWO hot new tips before the end of the month on two stocks he believes have significant growth potential. To access those tips and much much more... Here is an overview of AIM listed Tracsis (TRCS), one of James' previous investment ideas... Most of us are familiar with the dreaded announcement: "Ladies and gentlemen, we would like to apologise for the delay to your journey. We are awaiting our driver/we are stuck at a red signal/we are in a queue of trains – and should be on the move shortly." Resource optimisation software firm Tracsis (TRCS) believes it has the answer. Its products allow transport operators to computerise staff and rolling stock scheduling through "smart planning" - i.e. effectively using their resources much more efficiently - which could be worth £173 million in labour efficiencies alone for the rail sector over the next 7 years. Revenues have already grown from £216,000 in 2007 to more than £4 million in 2011 - and they are expected to more than double again for the year to July 2011. Tracsis has four acquisitions under its belt, and now it has more than 40 staff and another 130 part-time employees. The company's software is used by train companies including Virgin Trains, First Group, Go-Ahead, Serco, Arriva, Scot Rail and National Express; and one of its biggest customers is Network Rail, which is responsible for the UK’s train tracks and infrastructure. Tracsis products include rolling stock and crew planning and optimisation tools, information management and performance reporting software, datalogging and hardware monitoring systems and a consultancy service which covers all aspects of operational planning (from strategic to delivery) and which also includes a professional passenger counting and surveying team.
Designed to operate on a stand-alone PC, the Tracsis Software currently forms the basis of two distinct products: TrainTRACS and BusTRACS. Each product assists with the crew planning element of the transport scheduling process for passenger rail and bus operators respectively. A number of broad categories make up the transport scheduling process: timetable preparation; vehicle planning and allocation; crew planning; crew rostering; and management of real time operations and short term planning, taking account of accidents or other unforeseen events impacting on operations. The software generates an optimised crew schedule for all on-board staff which is based upon certain input data such as labour rules and regulations, timetable and vehicle requirements, and driver route and traction knowledge. The software can be tailored for individual strategic requirements, such as maximising performance and minimising costs. It may also derive cost savings via improved performance of scheduled services, which in turn may reduce the fiscal penalties imposed by regulators (such as the Department of Transport in the case of rail operators) for delayed services. Revenue is generated by lease licensing the software to customers. Tracsis also provides maintenance, training and consultancy services to its customers. Interim results for the six months to 31st January 2012 showed turnover up by 194% at £3.66 million, driven largely by last year's acquisition of MPEC, whose software allows remote monitoring of trackside equipment. Stripping out the MPEC acquisition, organic revenue growth was still an impressive 36%, driven largely by Consultancy which benefited from a busy refranchising schedule. Pre-tax profit was £1.13 million. While Software was ahead by +16%, the company noted a slowing in the decision making process by rail operators. However, the company pointed to new software sales in Sweden and a pilot project in Australia, which could be the shape of things to come given the firm's ambitious international growth plans, which envisage an eventual move into the Far East including China. A maiden dividend payment should provide investors with further confidence for the years ahead, especially as this was paid out of a (net) cash pile of just under £6 million bolstered by impressive cash generation of £1.26 million during the period. In June the firm confirmed that results for the year ending 31st July 2012 were expected to significantly exceed current market expectations, with revenues in excess of £8.5 million and adjusted EBITDA of £3 million, materially ahead of the £6.8 million and £1.9 million broker WH Ireland had forecast, leading it to upgrade its forecasts for the third time this year. The company further reported that, at this stage, "the directors are confident that the current market forecast for 2013 will be revised upwards". Even using (soon to be historic) numbers for FY2013, the shares trade on a single-digit multiple (after subtracting net cash, which remains north of £6 million (c. 24p per share) even after the early repayment of the deferred consideration for MPEC). Given that this is set to fall further in FY2013, the shares could still be a great bargain, notwithstanding the recent strong performance. JAMES WILL BE PUBLISHING HIS LATEST HOT TIPS BEFORE THE END OF THE MONTH. CLICK HERE TO JOIN WATSHOT.COM NOW
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