Tracsis plc

('Tracsis', 'the Company' or 'the Group')

Audited results for the year ended 31 July 2022

Tracsis, a leading provider of software, hardware, data analytics/GIS and services for the rail, traffic data and wider transport industries, is pleased to announce its audited final results for the year ended 31 July 2022.

Financial Highlights:

·      Strong financial performance with high levels of organic and acquisitive growth

·      Revenue increased by 37% to £68.7m (2021: £50.2m)

o  Organic revenue growth of 24%

o  63% revenue growth in Data, Analytics, Consultancy and Events Division, including post-Covid recovery and contribution from acquisitions

o  Rail Technology and Services Division revenue increased by 13% including the benefit from multi-year software contract wins that went live during the year and the RailComm acquisition

·      Adjusted EBITDA* increased by 9% to £14.2m (2021: £13.0m)

·      Profit before tax of £2.6m (2021: £4.6m) after £3.1m of exceptional items including increase in fair value of contingent consideration and transaction costs associated with acquisition of businesses

·      Total cash balances** of £17.2m with no debt (31 July 2021: £25.4m) after £13.5m net investment in acquisitions, and contingent and deferred consideration

·      Proposed final dividend of 1.1p per share, with total dividend of 2.0p per share (2021: nil) consistent with the Group's progressive dividend policy that was restored at the half-year

Operational Highlights:

·      Strong growth in rail technology software licence usage:

o  First full deployment of TRACS Enterprise went live in summer 2022. Work continues on delivering our orderbook of further deployments from previously announced contract wins

o  Roll-out of RailHub enterprise software contract won in the prior year progressing to plan and will more than double the user base to c.40,000 individuals by late 2022

o  20% growth in user base of Centrix, our cloud-base Remote Condition Monitoring data acquisition platform

·      Won several multi-year rail technology software contracts as previously announced, that will support further revenue growth

·      Acquisition of RailComm LLC ("RailComm") a US based rail technology software and services provider, giving direct access to the large and growing North American market. RailComm has performed well post acquisition

·      Strong post-Covid recovery of activities in Events and Traffic Data, made possible by actions taken to safeguard these businesses during the pandemic, and including some activities not expected to repeat in the forthcoming financial year

·      Enhanced the Group's technology capabilities with the acquisition of geoscience company Icon GEO, now fully integrated

·      Formalised our sustainability strategy, with a target of being carbon neutral by 2030 for scope 1 and scope 2 emissions from Tracsis operations

·      Further progress in implementing a more integrated operating model to support future growth, with continued investment in management capability, people development, and common processes and systems

* Earnings before net finance expense, tax, depreciation, amortisation, exceptional items, other operating income, share-based payment charges and share of result of equity accounted investees. See note 6 for reconciliation.

** Cash and cash equivalents, and cash held in escrow

Chris Barnes, Chief Executive Officer, commented:

"I am pleased with the progress the Group has made this year in executing its growth strategy.

We have delivered a financial performance aligned to our long term strategic growth plan, with high levels of organic and acquisitive growth. Our Rail Technology and Services Division has won several multi-year software contracts, and in Data, Analytics, Consultancy and Events we have seen a strong post-Covid recovery in activity levels.

We have a growing pipeline of opportunities in both Divisions, and we have expanded our addressable markets including our first direct entry into the large and growing North America rail market with the acquisition of RailComm. The post-acquisition performance of this business has been particularly pleasing, with good revenue and profit performance, new orders secured for its core products, and an encouraging level of interest in products from elsewhere in the Group that are already well established in the UK. These opportunities leave us well placed to deliver further growth.

The UK rail industry's transition to a new Great British Railways structure is ongoing and the overall objective is to create a data-driven, customer-focused, safety-critical future for the industry. Digital transformation will play a significant role in the industry's transition and our range of rail technology products and services is well placed to help the rail industry deliver operational performance improvements and efficiency savings.

We continue to invest in implementing a more integrated operating model to help us to execute our growth strategy. I was particularly pleased to see the launch of the OneTracsis leadership development programme during the year, which is an important initiative as part of our commitment to investing in developing our people and growing the next generation of leaders in our business. We are also making good progress in implementing a single groupwide IT operating model, under the direction of an experienced technology leader who has been recruited to further enhance senior management bandwidth.

Tracsis is fully committed to delivering sustainable growth that benefits the communities in which we, and our customers, operate. The Group's products and services are well aligned with this vision, and support our customers in delivering positive environmental and social outcomes. This year we have formalised our sustainability strategy and set ourselves the ambition of being carbon neutral by 2030 for scope 1 and scope 2 emissions from Tracsis operations.

Q1 trading is in line with the Board's expectations. We are confident that there are strong growth prospects for all parts of our Group and therefore remain committed to implementing our overall strategic growth and investment plans. We will continue to pursue organic and acquisitive growth supported by a strong balance sheet."

Presentation and Overview videos

Tracsis is hosting an online presentation open to all investors on Friday 11 November 2022 at 1.00pm UK time. Anyone wishing to connect should register here: https://bit.ly/TRCS_FY22_results

A video overview of the results featuring CEO Chris Barnes and CFO Andy Kelly is available to view here: https://bit.ly/TRCS_FY22_overview 

Tracsis will be presenting at the MelloLondon investor conference on Wednesday 16 November 2022. Further information is available here: MelloLondon ticket page - Mello Events

Demonstration videos of the Group's TRACS Enterprise, Remote Condition Monitoring, Smart Ticketing, and Safety and Risk Management rail technology products are available to view here: Rail Technology Product Demonstration for Investors | Tracsis

Enquiries:

Tracsis plc                                                                                                        Tel: 0845 125 9162

Chris Barnes, CEO / Andy Kelly, CFO

finnCap Ltd                                                                                                       Tel: 020 7220 0500

Christopher Raggett / Charlie Beeson, Corporate Finance

Andrew Burdis / Sunila de Silva Corporate Broking

Alma PR                                                                                                            Tel: 020 3405 0205

David Ison / Hilary Buchanan / Joe Pederzolli                                                  [email protected]

Management Overview

Introduction

The Group has performed well during the year ended 31 July 2022, delivering strong organic and acquisitive growth, winning new multi-year software contracts that will support further growth in recurring revenues, expanding its addressable rail market into North America and its technology offering into earth observation, and making further progress in implementing a more integrated operating model.

Large multi-year software contract wins and deployments support further Rail Technology and Services revenue growth

We continue to secure multi-year technology contracts in the Rail Technology and Services Division that will support further growth in annual recurring licence revenue consistent with our strategy. During the year we secured new contracts for our TRACS Enterprise, Centrix, Pay As You Go ("PAYG") smart ticketing and delay repay technologies previously announced, and we have a strong pipeline of further opportunities. We are also making good progress in implementing large contracts that were won in previous years. The first end-to-end deployment of TRACS Enterprise went live with a large Train Operating Company ("TOC") in summer 2022, replacing disparate legacy systems, and we have a pipeline of further passenger and freight implementations for this product that are due to go-live through the next two financial years. The roll-out of the large RailHub contract won in July 2021 has been progressing to plan and is on schedule to be completed before the end of 2022, which will double the user base for this product to over 40,000 individuals. Post year-end we have secured further orders for the next phase of development of the RailHub product. The conversion of our large pipeline of opportunities is delivering growth in annual recurring and routinely repeat revenue⁺. For the Rail Technology and Services Division this increased in the year by 13% to £21.1m.

⁺ Recurring software licence revenue and annually repeating hardware revenue from framework agreements.

Significant recovery completed in Events and Traffic Data

We have seen a significant recovery in activity levels in the Events and Traffic Data businesses that were most impacted by Covid-19. Both were able to respond quickly to improving market demand as a result of the actions taken to safeguard those businesses and protect jobs and skills during the pandemic. Activity levels in Events returned to pre-pandemic levels in the first half of the year and maintained this through the remainder of the year. The final quarter in particular saw very high volumes as demand for sporting and music events increased. The performance in the year included some activities that are not expected to repeat in the forthcoming financial year. The recovery in Traffic Data was slower, however in this market we also saw demand return close to pre-pandemic levels in the final quarter of the year. Activity levels in this market are more sensitive to central and local authority funding. Alongside the incremental contribution from the acquisitions of Icon GEO in November 2021 and Flash Forward Consulting in February 2021, this recovery in activity levels drove extremely strong revenue growth in the Data, Analytics, Consultancy and Events Division of 63%.

US growth strategy underway, with RailComm performing well

The acquisition of RailComm in March 2022 provides direct access to the large and growing North American rail market. There are opportunities to deliver growth both in RailComm's core markets of rail yard automation and computer aided dispatching, as well as by progressively marketing Tracsis' existing portfolio of rail products and services. An experienced Tracsis rail managing director has relocated to the US to oversee delivery of this growth strategy.

RailComm has performed well since acquisition, delivering a good revenue and profit performance and winning new contracts for its core products. Implementation work continues on a number of large projects with North American customers that will support further revenue and profit growth. We are seeing good levels of interest in our Remote Condition Monitoring, Movement Planner and Crew Calling solutions that are already well established in the UK rail market.

Continuing to build the foundations for future growth

The Group has made further good progress this year in implementing a more integrated business model and adopting common processes and systems. As part of our commitment to investing in our people we have launched a 'OneTracsis' leadership development scheme with 100 managers and senior leaders enrolled on an 18 month programme that will also promote collaboration and innovation across the Group. This is part of a comprehensive people strategy that has been developed, under a new Group People Director, with a focus on succession planning, talent acquisition, and reward & benefits. We are expanding our shared services operating model by implementing a single groupwide IT operating environment, under the direction of a Group Managing Director who was recruited in the year and is an experienced technology leader. Furthermore, we have formalised our sustainability strategy and targets, with the goal of making Tracsis carbon neutral for scope 1 and scope 2 emissions by 2030.

Progress on Delivering our Strategy

Our vision for Tracsis is to become the leading provider of high value, niche technology solutions and services that solve complex problems which maximise efficiency in regulated industries. Our business model remains focused on specialist offerings that have high barriers to entry, are sold on a recurring basis under contract, and to a retained customer base that is largely blue chip in nature. Our strategy to achieve this is focused on four areas as outlined below. We believe this strategy will allow Tracsis to continue the growth trajectory it has achieved since IPO in 2007 and to deliver further significant value to shareholders in the short, medium and longer term.

We have made good progress in executing this growth strategy this year, which leaves the Group well positioned to deliver further growth. Key progress against the objectives for each of our four strategic priorities is summarised in the table below:

Trading Progress and Prospects

Rail Technology & Services

Summary segment results:

Revenue                       £29.9m             (2021: £26.4m)             

Adjusted EBITDA*         £9.8m               (2021: £9.1m)               

Profit before Tax           £4.8m               (2021: £5.0m)               

Activity levels in our Rail Technology & Services Division remain high, which has driven further revenue growth. All parts of the Division won new contracts in the year, many of which went live with customers in the second half of the year, and we have a strong pipeline of additional multi-year software opportunities. Work has also continued on implementing contracts won in previous years, including the first go-live of the end-to-end TRACS Enterprise solution in summer 2022 and the ongoing roll-out of the large RailHub enterprise software contract that was won in the previous financial year and is due to be completed before the end of 2022.

Total revenue of £29.9m was 13% higher than prior year as a result of strong organic growth in our Rail Operations & Planning and Customer Experience businesses, as well as a good initial contribution from RailComm. Revenue in both our Remote Condition Monitoring ("RCM") business and our safety and risk management business (OnTrac) was lower than the record levels achieved in the prior year, reflecting the typical investment cycle in RCM and the timing of a large licence contribution in the prior year in OnTrac. Both businesses are well positioned to deliver growth in the coming year.

As a result of the new contract wins and the deployment of contacts won in previous years, annual recurring and routinely repeating revenue in the Rail Technology & Services Division increased by 13% to £21.1m.

Adjusted EBITDA* increased by 8% to £9.8m (2021: £9.1m).

Profit before Tax decreased by £0.2m after £0.4m of transaction costs related to the acquisition of RailComm (2021: £nil) and £0.4m increase in the amortisation of acquired intangible assets.

The industry's transition to a new Great British Railways structure, which aims to create a data-driven, customer-focused, safety-critical future for the industry, is ongoing, and we have been asked at senior client level to formally input our ideas into how the UK can achieve this vision. This demonstrates the value the industry attaches to Tracsis' expertise and range of rail technology products, which offer a compelling and, in some cases, unique value proposition. Digital transformation will play a significant role in the rail industry's transition and our range of products and services is well placed to help the industry deliver operational performance improvements and efficiency savings.

Rail Operations & Planning

Total revenues from the Group's rail operations & planning software and hosting offerings grew by 17% to £12.7m (2021: £10.9m). This includes the various revenue streams from our TRACS, ATTUne, COMPASS and Retail & Operations product suites. We continue to benefit from high renewal rates from existing customers. The strong revenue growth was mainly driven by new multi-year TRACS Enterprise contracts won in the year, which were previously announced and which we are currently implementing for our clients.

Our focus on these projects is to work closely with our customers as a partner to deliver significant value over the long-term. Delivery timelines in this sector are typically determined in partnership with our customers.

Work has also continued on implementing contracts won in previous years. The first end-to-end implementation of all TRACS Enterprise modules went live with a customer in the summer of 2022. We expect the second to be completed in 2023.

The TRACS Enterprise contract wins have also resulted in increased contribution from Bellvedi, that was acquired in 2019. As a result the fair value of contingent consideration payable in respect of this acquisition has increased.

We have a strong pipeline of new multi-year TRACS Enterprise opportunities in both the passenger and freight sectors of the industry.

Digital Railway & Infrastructure

Total revenues across the Digital Railway and Infrastructure offerings were £13.3m (2021: £13.0m). This includes revenue from RailComm following its acquisition in March 2022, as well as from Remote Condition Monitoring ("RCM") within MPEC and from our RailHub safety and risk management product suites within OnTrac. Both MPEC and OnTrac delivered record levels of revenue in the prior year. Whilst these were not repeatable in FY 21/22 as anticipated, reflecting the investment cycle of its UK customer base which consists of 5 year 'Control Periods', both businesses are well positioned for future growth and the lower revenue was more than offset by a strong post-acquisition performance from RailComm.

We saw lower RCM volumes in the first half of the year which was consistent with the historic investment cycle trend of its UK customer base. Activity levels increased in the second half of the year, and revenue over this period was at a similar level to the second half of the prior financial year. Having secured a large multi-year Centrix contract and the extension of our long-running RCM data logger framework contract as previously announced, the business is well placed to deliver growth moving forward.

OnTrac revenue was lower than the prior year which included a large, high margin RailHub licence sale. Activity was dominated by the roll-out of this product with our customer which has delivered implementation and support revenue in the year. This has been proceeding according to plan and is expected to be completed before the end of 2022, at which point the user base for our RailHub product will have more than doubled to over 40,000 individuals. There is a growing pipeline of future opportunities for the RailHub platform including additional functionality that is being developed by Tracsis and the opportunity to host third party applications on the platform. Post year end we have secured new orders for the next phase of development of the RailHub product, and work on these is underway.

RailComm has delivered a strong revenue contribution for the period under Tracsis ownership. This includes completion of some large project milestones that were in the business' order book on acquisition. Implementation work is underway on several other large rail technology projects, and since acquisition the business has also won several new contracts in the North American market that will support ongoing revenue and profit growth. RailComm also opens up direct access into North America for Tracsis' existing portfolio of rail products and services. We see RCM as the initial area of focus here, and an experienced Tracsis managing director has relocated to the US to oversee these growth opportunities.

Rail Customer Experience

There was very strong growth from our Customer Experience products, with revenue increasing by 56% to £3.9m (2021: £2.5m). This was mainly driven by the 'go-live' in H2 of the financial year of new contract wins that were previously announced - one with a UK TOC for our Pay As You Go (PAYG) smart ticketing solution, and two further delay repay contracts. This part of the Group also benefitted from increased delay repay transaction volumes across its existing customer base as rail passenger numbers recovered post Covid-19.

We are seeing increased interest in iBlocks' smart ticketing product offering that is well aligned with passenger requirements and with the UK Government's strategic intent to deliver increased PAYG, multi-modal ticketing as outlined in the Williams-Shapps plan for Rail. Through our Innovation Hub R&D incubator, iBlocks has developed a mobile app ("Hopsta") that puts this technology directly in the hands of the consumer and avoids the requirement for expensive gateline infrastructure. The first pilots of this product with train operators are expected to start during financial year 22/23.

Data, Analytics, Consultancy & Events

Summary segment results:

Revenue                       £38.8m             (2021: £23.8m)             

Adjusted EBITDA*         £4.4m               (2021: £3.9m)               

Profit before Tax           £1.8m               (2021: £1.9m)               

We have seen a significant recovery in activity levels in the Events and Traffic Data businesses that were most impacted by Covid-19. As a result of the actions taken during the pandemic to protect jobs, look after our people, and safeguard these businesses, we have been able to respond quickly to this increase in demand, and both businesses are currently operating at monthly run rates close to pre-pandemic levels. In Events we benefitted from certain activities that are not expected to repeat in the forthcoming financial year. The Division has also benefitted from the incremental contribution from the acquisitions of Flash Forward Consulting in February 2021 and Icon GEO in November 2021 and both businesses have been fully integrated into the Group. After excluding the growth from acquisition, organic revenue growth for the Division was £12.1m (51%). This also included underlying growth in both Compass Informatics and in Transport Insights.

Adjusted EBITDA increased by 12% to £4.4m (2021: £3.9m). The prior period included £0.9m of support to the Income Statement from the Coronavirus Job Retention Scheme ("CJRS"). We did not take any CJRS support in the financial year ended 31 July 2022.

Data Analytics / GIS

Revenue increased to £7.9m (2021: £5.7m) which includes the incremental contribution from Icon GEO as well as continued underlying growth in Compass Informatics. Icon GEO has been fully integrated within this business to create an Irish-based Data Analytics centre of excellence with c.130 staff specialising in providing location-related technologies, earth observation and analytics solutions to government and commercial organisations. The combined business has secured additional contracts with government agencies in Ireland based on the combined skillset and service offering it can now offer.

Transport Insights

Revenue of £5.2m was 49% higher than prior year (2021: £3.5m). After adjusting for the year-on-year benefit from the acquisition of Flash Forward Consulting in February 2021, this represents organic growth of c22% across the expanded range of consulting and specialist services this business offers in the transport space. We are seeing ongoing strong demand for our specialist timetabling and rail performance expertise.

Traffic Data

Revenue increased by 29% to £9.9m (2021: £7.7m) with activity levels steadily increasing as Covid-related restrictions were eased. The return of some restrictions linked with the Omicron variant did present some headwinds in the first half of the financial year, with work being postponed or cancelled as the prevailing traffic conditions were not representative of client needs. There has been a steady recovery of activity levels through the second half of the financial year, and the final quarter was particularly strong.  The business is now operating at close to the monthly run-rate seen pre-pandemic although some month-to-month variability in demand remains and activity levels in this market are more sensitive to central and local authority funding.

Event Transport Planning & Management

The Events business delivered a very strong performance, with record revenue of £15.7m (2021: £6.9m). Activity levels in its market returned to pre-pandemic levels very quickly, with high demand for sporting and music events particularly in the final quarter of the financial year. We were able to quickly respond to this increased in demand as a result of actions taken to protect the business during the pandemic. We continued to support Covid testing and vaccination centres which delivered c£1.4m revenue in the period and is not expected to repeat.

Financial Summary

Group revenue of £68.7m was £18.5m (37%) higher than the prior year (2021: £50.2m), reflecting strong organic and acquisitive growth. Revenue in the Data, Analytics, Consultancy and Events Division increased by £15.0m (63%) principally as a result of a strong post-Covid recovery in Events and Traffic Data. There was also strong revenue growth in both our Transport Insights and Data Analytics/GIS businesses, including the benefit from the acquisition of Icon GEO in November 2021. Revenue in the Rail Technology and Services Division was £3.5m (13%) higher than prior year, which includes strong organic growth in our Rail Operations & Planning and Customer Experience businesses as well as the benefit from the acquisition of RailComm in the year. 

Adjusted EBITDA* of £14.2m was £1.2m (9%) higher than prior year (2021: £13.0m), which included £0.9m of support to the Income Statement from the Coronavirus Job Retention Scheme ("CJRS"). No claims have been made under the CJRS in this financial year. Excluding the CJRS benefit in the prior year, adjusted EBITDA* increased by 17%. Adjusted EBITDA* margin of 20.6% was lower than the prior year as anticipated (2021: 25.8%) reflecting the increased mix of revenue from the post Covid recovery in Data, Analytics, Consultancy and Events.

Statutory profit before tax of £2.6m is £2.0m lower than prior year (2021: £4.6m) after £3.1m of exceptional items (FY21: £1.1m). These principally reflect an increase in the fair value of contingent consideration following strong underlying trading performance in Bellvedi (part of our Rail Operations & Planning business), as well as transaction costs associated with acquisitions made in the year.

In addition to the £1.2m increase in adjusted EBITDA* described above, the movement in profit before tax reflects the following items:

·      £1.8m depreciation charge at a similar level to the prior year (2021: £1.6m);

·      £5.0m amortisation of intangible assets (2021: £4.3m). The increase versus prior year includes charges relating to the acquisitions of Icon GEO in November 2021 and RailComm in March 2022, as well as a full year charge from the acquisition of Flash Forward Consulting in February 2021;

·      £1.5m share based payment charges (2021: £1.3m);

·      £3.1m exceptional items (2021: £1.1m) representing: a net £1.8m increase in the assessed fair value of contingent consideration based on the future expectations of performance from previous acquisitions (2021: £0.3m) which principally relates to the expected performance from Bellvedi in the final year of its earnout; £0.8m unwinding of previously discounted contingent consideration balances in accordance with IFRS accounting standards (2021: £0.7m); £0.6m of transaction costs associated with the acquisitions of Icon GEO (£0.2m) and RailComm (£0.4m) (2021: £0.1m relating to the acquisition of Flash Forward Consulting); and £0.1m impairment charge relating to an equity accounted investee (2021: £nil); partly offset by £0.2m credit relating to the fair value adjustment and subsequent gain on settlement of a financial liability (2021: £nil);

·      £0.1m net finance expense (2021: £0.1m); and

·      £0.6m charge (2021: £0.4m) relating to the share of the result of equity accounted investees

Adjusted diluted earnings per share increased by 4% to 32.3 pence (2021: 30.9 pence). Statutory diluted earnings per share was 5.0 pence (2021: 7.8 pence).

Cash Generation

The Group continues to have significant levels of cash and remains debt free. At 31 July 2022 the Group's cash balances, including balances held in escrow, were £17.2m (2021: £25.4m). Cash generation remains strong.

Cash generated from operations was £9.5m (2021: £10.8m) after a net £4.0m increase in working capital (2021: £2.0m increase). This reflects normal trading patterns and includes an increase in trade receivables in the final trading months of the year following the strong post-Covid recovery in Events and Traffic Data. The Group has not had any material bad debt incidences. There was £0.6m cash outflow on transaction costs for acquisitions completed in the year (2021: £0.1m). Adjusted EBITDA* includes £0.1m profit on disposal of plant and equipment (2021: <£0.1m).

Net capital expenditure increased to £1.0m (2021: £0.3m) which principally reflects the post-Covid recovery in activity levels in Events and Traffic Data, as well as investment in IT assets. Net lease liability payments of £1.4m were £0.2m higher than prior year (2021: £1.2m) which includes the effect of acquisitions. Tax paid of £1.3m was at a similar level to the prior year (2021: £1.4m),

As a result free cash flow* was £5.8m (2021: £7.8m)

Free Cash Flow*

^* Net cash flow from operating activities after purchase of plant and equipment, proceeds from disposal of plant and equipment, proceeds from exercise of share options, lease liability payments, and lease liability receipts

⁽¹⁾ Includes cash outflows on exceptional items (see note 9) and profit on disposal of plant & equipment

⁽²⁾ Includes net interest received or paid and proceeds from exercise of share options

The Group invested £9.1m in the acquisitions of Icon GEO and RailComm, net of cash acquired (2021: (£0.1m)) and there was a further outflow of £0.3m relating to deferred consideration for the prior year acquisition of Flash Forward Consulting (2021: nil). Cash payments of £4.1m (2021: £0.4m) were made in the year relating to contingent consideration on the previous acquisitions of: Bellvedi, part of Rail Operations & Planning, £3.5m; Cash & Traffic Management Limited, part of Events, £0.3m; and Compass Informatics Limited, part of Data Analytics/GIS, £0.3m. £0.4m was paid to repurchase "A" shares in Tracsis Rail Consultancy, as described below (2021: nil). Dividends paid to shareholders were £0.3m (2021: nil) and there was a £0.2m favourable impact from foreign exchange (2021: £0.1m adverse).

As a result, total cash balances decreased by £8.2m to £17.2m. £2.2m of this is held in escrow following the acquisition of RailComm and will be payable during the year ending 31 July 2023 to satisfy any contingent consideration associated with this acquisition.

Acquisitions & Other Corporate Activity

Icon GEO

On 3 November 2021 the Group acquired The Icon Group Limited ("Icon GEO"). Headquartered in Dublin, Icon GEO is an interdisciplinary geosciences business specialising in earth observation, geographical information systems, and spatial data analytics. The acquisition consideration comprised an initial cash payment of €2.2m (£1.9m) which was funded out of Tracsis cash reserves, a further cash payment to reflect the working capital position of the business (above a working capital hurdle) on completion totalling €2.2m (£1.9m) and the issue of 68,762 new ordinary shares in Tracsis plc to a value of €0.8m (£0.6m). Additional contingent consideration of up to €1.8m (£1.5m) is payable subject to Icon GEO achieving certain stretched financial targets in the three years post acquisition.

RailComm LLC & RailComm Associates Inc

The Group acquired RailComm LLC and its wholly owned subsidiary RailComm Associates Inc (together "RailComm") on 11 March 2022. Headquartered in Fairport, New York and established in 1999, RailComm provides mission critical automation and control solutions that reduce costs, increase safety, and improve operational efficiency for rail passenger/freight operators and rail served ports/industrials. The acquisition consideration comprised an initial cash payment of $11.5m (£8.8m) which was funded out of Tracsis cash reserves. Additional contingent consideration of up to $2.7m (£2.2m) is payable subject to RailComm achieving certain financial targets in the first full year post acquisition through to 31 March 2023. This cash is being held in escrow through that period.

Tracsis Rail Consultancy

In the previous financial year the Group acquired Flash Forward Consulting Limited. As part of the transaction the sellers were allotted 10,225 "A" shares in Tracsis Rail Consultancy Limited. The "A" shares have full dividend and capital distribution rights attached but do not have any voting rights attached to them. "A" shares guarantee the holder a dividend each financial year. The fair value of this liability at 31 July 2021 was assessed as £590,000. On 17 June 2022 the Group acquired all of these "A" shares in return for a cash payment of £416,000. The fair value of the "A" shares at this date was £463,000. A fair value adjustment of £127,000 and a gain on purchase of £47,000 have been recognised in exceptional items in the year.

Dividend

The Group remains committed to the progressive dividend policy that was adopted in 2012. In the financial year ended 31 July 2022, we have seen a strong recovery in activity levels in those parts of the Group most impacted by Covid-19, and we did not utilise the UK Government's CJRS scheme. In this context the Board has recommended a final divided of 1.1 pence per share. The final dividend, subject to shareholder approval at the forthcoming Annual General Meeting, will be paid on 10 February 2023 to shareholders on the register at the close of business on 27 January 2023. This will bring the total dividend for the year to 2.0 pence per share.

Board

Jill Easterbrook was appointed to the Board as a Non-Executive Director on 5 October 2022. Lisa Charles-Jones will step down from the Board on 31 December 2022 after six years with the Group. Lisa will be succeeded as Chair of the Remuneration Committee by Jill Easterbrook at this date.

Outlook

Our end market drivers are strong and Tracsis' products and services are well aligned with these drivers. We deliver positive benefit cases to our clients by enabling them to deliver mission-critical activities with increased efficiency, enhanced performance, higher productivity, and improved safety.

The Group has a clear growth strategy and has a strong balance sheet to support its delivery. We are making good progress in implementing this strategy, including winning new multi-year software contracts, and continuing to deliver on contracts won in previous years. We recognise the need to continue to integrate the Group's activities, technologies and operating model in order to provide a solid platform for ongoing scalable growth. We have made good progress in the year and will continue to invest in this area.

M&A remains a core part of our strategy and we have taken an important step in the year with our first acquisition in North America. This further increases our addressable markets and diversifies our growth opportunities. We will continue to actively pursue further M&A opportunities, with a focus on extending our software and technology footprint and enhancing recurring revenue growth.

Q1 trading has been in line with the Board's expectations and the Group remains well positioned to deliver further growth in the coming financial year and beyond.

Consolidated Statement of Comprehensive Income for the year ended 31 July 2022

*  Earnings before net finance expense, tax, depreciation, amortisation, exceptional items, other operating income, share-based payment charges and share of result of equity accounted investees - see note 6

** Earnings before net finance expense, tax, amortisation, exceptional items, other operating income, share-based payment charges and share of result of equity accounted investees - see note 6