Blackfriar: Be a part of Tracsis, a success story in these hard times

The company has had to upgrade profit forecasts for the third time this year and shareholders can’t get enough of the stock.

Its shares rose 12p to 103p on Tuesday and last night they were up another penny at 104p.

At a time when doom and gloom is hammering just about every other sector, Tracsis is on to a nice little earner.

The Leeds-based company is seeing strong take-up of its ‘flight recorders’”.

Like a flight recorder, they monitor exactly what is going on with a railway’s assets, allowing remote monitoring of trackside equipment and reducing the cost of maintenance.

These clever boxes can monitor in real time what’s going on at a point or level crossing.

This means Network Rail can reach points and fix them before disaster strikes.

It is a sobering thought that these boxes have the potential to prevent rail disasters such as the Grayrigg derailment five years ago where a train ran over a faulty point at 90mph killing one passenger.

The point should have been open but was closed.

Tracsis points out that its gadgets aren’t just about preventing train delays, they are about saving lives.

The company now expects to announce annual revenues of over £8.5m, up from expectations of £6.8m, and underlying earnings of more than £3m against expectations of £1.9m.

While ‘flight recorders’ make up around 40 per cent of Tracsis’ revenues the other 60 per cent comes from software and services, the part of the business that was spun out of Leeds University.

This side of the business works in conjunction with train operators, helping them plan to their resources and scheduling.

At a very simple level it helps customers such as Virgin Trains, First Group, Go-Ahead, Arriva and National Express, to reduce the number of empty trains.

While passengers love to get on a half- empty carriage, it’s bad news for the train operators.

Its software can also reduce the number of people needed to work on the railways. While this isn’t very popular with the unions, it’s attractive to train operators.

Analyst Eric Burns at WH Ireland in Leeds believes that Tracsis’ business model is simple to understand as it addresses issues that sadly most of us can relate to.

Looking to the future, Tracsis is likely to be a beneficiary of future rail industry reform brought about by the McNulty Report into value for money in UK rail.

Burns believes that last year’s McNulty report will play right into Tracsis’ hands as it places emphasis on cost reduction, performance improvement and preventative action to reduce delays.

This is driving initiatives such as Network Rail’s Intelligent Infrastructure project.

The company is also to be congratulated on turning its wizardry into hard cash.

Burns says: “Although it’s a business with roots in academia, it’s a great example of how to commercialise that IP (intellectual property).

“So many university spin-outs have great technology but don’t quite get the commercial opportunity.”

At the moment, Tracsis is focused on the rail network, but it could easily broaden its horizons.

Burns adds: “Although the emphasis has been very much on rail, there are other potential markets such as the bus where Tracsis’ expertise could be used.

“In fact, we see Tracsis more as a transportation consolidation play as evidenced by the four acquisitions it has made since joining AIM in 2007.”

The wider market is fragmented and there are plenty of opportunities to replicate the company’s acquisition success to date.

Lucky investors have seen their shares more than double over the past six months. They stood at 56p on December 28, 2011.

Blackfriar believes the shares have further to go.

Credit card insurer CPP Group must be wishing it could cut off its UK business and focus on the rest of the world where the company is going great guns.

The York-based company said yesterday that its international business is making good progress with new contract wins in Turkey, Spain and Italy, but its UK arm is being held back by an ongoing investigation by the City watchdog.

The Financial Services Authority has raised “serious concerns” about how the York company sold its identity and card protection policies.

The investigation is ongoing, but the outcome and duration are still uncertain.

This is casting a cloud over the future of the company and until it is resolved it doesn’t matter how many great new products CPP dreams up, analysts will retain their neutral stance until we get clarity.

If you have a view on this or any other City story please contact Blackfriar at [email protected]