Hope we will have some news in early 2018 regarding ongoing commercial contract discussions, between an acquired Tracsis division and their customer.
In a recorded discussion with Paul Scott back in November 2017, John McArthur explained that there was some deferred considered on the balance sheet (circa £5m) due to the two most recently acquired companies, if they hit year 2 targets.
JM said one of them had already hit the target, and the other had until November 2018, but was currently negotiating a customer contract which would ensure this would be paid out, if achieved. He seemed to think that they were not that far away from securing it, but predicting was difficult.
The average no. of shares traded over the last 3 months is 33k. (Yahoo Finance provide this figure as part of their basics of a share. I keep an eye on this for all my shares.)
Volumes often increase heading up to results as people take a punt on which way the results will send the share, and after results there can be some large trades from directors, who have been held in a closed period before the results, or as you suggest fund managers who have changed their opinion on the basis of the results.
One thing I can confirm is that this morning's large trade was not mine!
Obviously there is increased demand since the results have been released. Tracsis has always been a bit start/stop in terms of volume purchases. The headline spread is rather ridiculous, mostly I suspect because it is averagely a low volume share, and still a very modest sized business by Stock Exchange standards.
Paul Scott of Stockopedia usually does at least an annual interview of the management following results, and they hint as they do in the results to a good start to H1, and at least one promising deal which is being negotiated. I provide the link to the interview below. As ever they are pretty sensible, cautious, and probably canny (as the Scots would say). Next couple of years could be interesting?!
I haven't done an in depth analysis of the results, but it looks like most of what might be termed the original core business has declined, but that the most recent acquisitions have contributed to enabling it to beat last years results.
Its true to say the N.American opportunity originally helped give it a racy multiple of earnings, but the business generally is starting to look more steady than racy in outlook. On the America front, they have always tended to say it would be a longer game to leverage opportunity there. They have appointed a channel partner in the US to exploit opportunity, but didn't name them. Of course that means sacrificing some margin if it eventually makes sales.
A solid cash generator I guess it could surprise to the upside if certain parts of the business do well, but maybe unexciting in terms of results for an unpredictable period yet?
"As for the overseas story, yes, of course North America counts as overseas. But they won their first contract in N America in 2013 - 4 years ago, and we keep hearing how well the projects they've won over there have been going; so 4 years later a turnover of less than 1/2 a million is a little disappointing. Would have hoped things might have opened up a bit more."
Yes and we might reasonably have expected the successful North American business to have generated more. After all ; success breeds success.
I think some of the difference in eps calcs, relates to a calculation that includes issued shares as they stand at the time of the RNS, then re-calculating earning per share to include issued options (but not necessarily exercised) to give fully diluted earnings, as if they were issued.
I suppose that tells you that Directors are improving earnings even after remunerating themselves with options
"all the figures are up on last year so whats not to like?" I agree. I hope I wasn't coming across as negative. I suppose after years of double digit percentage increases in sales, 6% is a little below par. But as they say they are bedding in the new acquisitions, so it's been a year of consolidation.
As for the overseas story, yes, of course North America counts as overseas. But they won their first contract in N America in 2013 - 4 years ago, and we keep hearing how well the projects they've won over there have been going; so 4 years later a turnover of less than 1/2 a million is a little disappointing. Would have hoped things might have opened up a bit more.
I havent examined the figures in minute detail but it seems to me that all the figures are up on last year so whats not to like? I would say that the North American contract counts as overseas business doesnt it?
Just had a very quick skip through them, and they look OK. I think they've beaten expectations (just) though it's hard to tell which profit figure to compare the brokers' forecast with. I'm also confused by the EPS figures.
"Fully diluted adjusted Earnings Per Share increased 4% to 23.29p (2016: 22.37p)"
Then in their P&L statement they quote Basic Earnings per ordinary share as 13.36p (12.71p)
and Diluted Earnings per ordinary share as 12.93p (12.26p). I could not find an explanation of the discrepancy.
But overall - sales are up, profits are up by a greater % than sales, the acquisitions are settling in well, the software boffins have won their largest contract, and they say their North American contract has been delivered successfully. (Though such statements I'd rather hear from the client.) It's a bit disappointing that the international business is not taking off, but hopefully there is plenty of time and scope for this to happen.
THere's probably scope to get the share price up towards 550 again, but that's probably being a bit optimistic.
Hi Hardboy. They were cutting costs I believe, so maybe they have trimmed some extra profit, though this is usually only achieved in the 1st year, by adjusting profits by exceptional reorganisation costs going into adjusted profit. Unfortunately getting rid of people is expensive and the time it takes also eats away any gains in a limited reporting period.
Their trading statement was a rather coy presentation of 2nd half compared to first half rather than prior year, and from memory their second half figures looked relatively flat compared to prior year.
I hope I am doing them an injustice, because its nice to see the price go up,. An important adjunct to the year end will also be current trading.
I don't think the Company are keen to draw attention to the fact that H2 was flat in terms of revenue compared to the prior year.
Given that the acquisitions of Sep and Ontrac, I believe were due to make an additional contribution in this financial year, it looks like something is underperforming, and we may not gauge what that was until the November full results.
This may relate to the longer sales cycles referred to in its Feb trading statement, and may be in to the traditional core business?
I guess its not unusual for one cylinder to misfire?
I never understand that Hardboy, I watched that 100000 volume buy and expected some shift in the share price.... do you know how this is so when there were no corresponding sells at that point in time?
Luckily the market looks forward not back . I dont think they would make an RNS for a repeat contract . This must be much larger and more comprehensive.( utilising several of their products )The planning software division only has a turnover of c £4m so I suspect that his is v material.
The estimates for ''17 have been managed downwards so I'm exprecting a flat year before a much stronger year next . Remember the contract cycle has a different timeframe from Trcs financial calendar so it is always lumpy .
I am probably becoming too cynical, but I half expected a contract announcement if it was likely the year end results would disappoint or be underwhelming. That comes straight out of the playbook for companies on AIM.
Some of this contract is a renewal of previous commitments, so I think its hard to say how much of this will benefit future periods significantly.
The lack of detail suggests either commercial confidentiality or that perhaps it looks better as headline than it does after full analysis. On the positive side its a future commitment and helps underpin general trading.
As the share price has gone up one has to be grateful, I guess pro tem.
Downgraded earnings expectations and lack of news has led to the weak price . probably priced about right at 14x ex -cash .It will be important to know how the bidding has gone on the tenders out there at the next update even if they're pushed into next year . Need to see earnings growth not stagnation for this to get moving again . I d like to think it will do as the highly cash generative business model can deploy cash into new earnings streams .
If so they're wrong . Trcs would not be affected by nationalising the railways . They will still need all the software currently being supplied. The consultancy side might suffer but passenger counting will still be needed . Whoever runs it still needs to know how many get in the trains forndemand /supply .
It could be; but if the worst did happen, it could be good for contractors. The old Nationalised industries were not known for their close attention to costs.
It could be some profit taking/general liquidating shares ahead of the election, or just markets getting jittery with the lack of news. I find markets are impatient; and do like constant attention to maintain strength.
In fairness to Tracsis they have said that they expected the fairly conservative rail market for software adoption to be a slow burn. But it would be very nice if they could show further progress, as that could pull back some of the lost momentum of shareholder interest.
I would like their core high margin rail related business in the UK to perk up for the 2nd half, as that plus Ontrac is a substantial contributor to profits when its on form.
No apology needed. Your waffle is better than most Discussion Board contributors' succinct posts.
When I originally discovered Tracsis, I bought in because of the potential of their existing businesses; so I am disappointed if they have to buy to grow. Condition based maintenance is a great market. What happened to the pilots in North America? there's been precious little said about that.
They did say at the Interim stage H2 would be significantly better than H1, so the next update should be positive.
I stand corrected. You are right. 31st July is year end. So two months to go.
The current price action is not encouraging, but on pitifully small volumes.
My general feeling, or more accurately worry, is that Tracsis is going through a bit of a wobble on trying to hit its profit targets, but that does not change its fundamental characteristics.
However, all acquisitive companies face the point where acquiring companies (or profits as I prefer to think about it), becomes more expensive as you go on. In the end you are bidding up your own market. Tracsis have tried to mitigate this e.g. in Ontrac, where they have created an earn-out basis, based on future profit potential for increasing the acquisition payment. Which is fairly sensible, but does not ultimately stop the profit progression dropping off after the earn-out period has been hit.
I think in part this is why they are trying the 'cheaper' route of investing. But that has its own dangers, and probabilities of success/failure.
Tracsis may be slightly trapped by its own sensible criteria of not wanting to materially dilute by issuing shares, but not having enough cash generation to buy seriously profitable businesses.
To get out of this requires a boost from its core businesses to show they have growth to give back momentum to cash and its share price, and I have a feeling that things are slightly flattish at the moment.
Needless to say that I would love to be proved to be completely wrong in the next two months.
I can always rely on you to give a response and add some sense to things; but I think you're a bit ahead of yourself: "they are only a month away from year end results"
Year end is the end of July, so we are 2 months away from that; the results are usually in November, so further away still.
I should really check the exact facts, which I have not done, but the impression I get is the directors and senior managers are not paid THAT much, and are generally youngish; but they do get healthy share awards, so it's inevitable that they will sell some from time to time to get a bit extra liquid cash. It's always disappointing when directors sell, but I guess I accept it in these circumstances.
I think when illiquid shares lose their upward momentum, you can be on a lose-lose bet, as the market maker can just take the price lower by extending the spread to shake out some shares, and on the buy side it does not materially go up because the market can use weak small rallies to sell into.
The Directors probably can't or shouldn't sell because they are pretty near to a close period, as they are only a month away from year end results, and could have sensitive inside financial information? If they were selling I would expect the share price to drop a lot further.
I think we are in slightly nervous mode with Tracsis. If they feel they are going to miss their yea-end numbers they would probably be close to realising that by now. Last year they issued a trading statement in August. Its anyone's guess when they will do it this year.
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