News blog
Tracsis
- BY: Andrew Hore |
- POSTED: 18/08/2011 |
Tracsis says that its figures for the year to July 2011 were ahead of expectations.
Tracsis provides resource optimisation software for the rail industry and it plans to be a consolidator in the sector, which has developed since rail privatisation.
The most recent acquisition was MPEC, which develops data logging and remote monitoring technology for Network Rail. The technology monitors signals and points. Tracsis paid an initial £1m in cash and shares and there is potential deferred consideration of up to £1m depending on performance over the next two years. Tracsis also paid for the cash in the MPEC balance sheet on completion.
The business made a profit of £266,000 in the year to March 2010 but it has been growing rapidly since then.
MPEC contributed more than £1m to revenues in the two months of the financial year that it was consolidated. Revenues were forecast to grow from £2.65m to £3.42m in the year to July 2011 and the 2011-12 revenue forecast of £5.58m should be low enough to be beaten if MPEC continues to generate revenues at its current rate.
Tracsis raised £1.95m from a share placing at 45p a share at the time of the MPEC deal. This was a way of increasing liquidity and enabling VCT manager Downing to increase its stake to 8.2%. The cash itself is not needed immediately and Tracsis should have net cash of £4m at the end of July 2011.
The group is strongly cash generative and it can generate more than enough cash to cover deferred consideration on past acquisitions. The free cash will finance further acquisitions without the need to come back to the market for more cash.
Tracsis knows the types of software that it needs to add to its range and the specific companies it wants to buy. Management is not keen to do a deal that is a reverse takeover so some larger deals may have to wait. Tracsis will probably make one acquisition a year.
At 59.5p a share, up 4p, Tracsis is valued at £14.3m. The shares are trading on around 13 times 2011-12 prospective earnings.
Download the August 2011 edition of AIM Journal at http://www.hubinvest.com/AIMPDFAugust2011_23.pdf
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