Tracsis plc

Good afternoon and welcome to the TRAXIS half-year results presentation. Today we are joined by CEO David Frost and CFO Andy Kelly. Questions are encouraged throughout this webinar and can be submitted via the Q&A box situated on the panel on the right-hand side of your screen. I will now hand over to David to begin the presentation.

Thank you and good afternoon to you all. Welcome to the TRAXIS interim results presentation for FY26. Thank you for taking the time to join us today. Andy and I will walk you through a review of performance through the first half before providing an update on the progress we're making against our strategic priorities and the broader direction of the business. We will then close with some key takeaways before opening up to questions. Before we get into the detail, I'd just like to remind you all of our purpose and vision. Our purpose is simple. We make transport work. We do so to drive safety, efficiency, and sustainability in our customers' operations. And we strive to lead the future of sustainable, intelligent transport. Transport networks are becoming increasingly digitized and connected. Their importance to the way we live and work continues to grow. Our ambition is to be at the center of that, creating technology and solutions that revolutionize how the world moves. We have delivered a much improved financial performance versus the first half of FY25. This reflects stronger execution and the benefits of actions taken over the past 12 months, strengthening delivery, improving profitability, and continuing to build higher quality recurring and transactional revenues. Trading through Q3 of our financial year continues to progress well, which leaves us well positioned for the remainder of the year and supports our expectation of delivering a full year performance in line with the market expectations. We outlined our strategic priorities for FY26 and the full year results back in November of last year. And we've made really good progress on all of those fronts. This includes progress on M&A with the recent acquisition of Vesputi, a digital ticketing software company serving the German public transport market, giving us our first foothold into continental Europe. Aligning the portfolio with our long-term strategy remains a priority across the group. Looking to the future, we're undertaking an operating model transformation across the group to support scalable growth. This, alongside the technology investment we're making, is the foundation for the next chapter of the business, and I will come back to that later in the presentation. So our strategic focus is unchanged. We're continuing to make progress in building a higher quality, more scalable business, capable of delivering long-term growth. With that, let me hand off to Andy. He's going to talk you through the financial performance before I come back to cover off strategic progress.

Thanks, David, and good afternoon, everyone. So touching on the financial highlights, as David mentioned, after a soft first half in the prior year, We've delivered a much improved financial performance in the first half of FY26 that's in line with our expectations. We've delivered revenue and margin growth in both divisions. And importantly, we've continued to grow higher quality revenue with recurring and transactional revenues in combination 7% higher than H1 and FY25. EBITDA increased by 31% to £5 million. with an EBITDA margin of 12.8%. And on the back of that, diluted adjusted EPS increased by 34%, 10.2 pence per share. The group's balance sheet remains strong. We continue to deliver healthy cash generation, closing the period with £25.8 billion of cash and no debt. Post-period end, we invested in debt, so up to £4.4 million of that, in the acquisition of this treaty. Our £35 million RCF remains undrawn. And this leaves us well positioned to continue to invest with discipline to further strengthen our strategic position. Finally, we've maintained our progressive dividend policy and declared an interim dividend of 1.3 pence per share. That's an increase of 8% over H1 at 5.5%. Looking at the financial performance in more detail, as usual, I'll start with the group's consolidated performance and then break out the divisional results. On a consolidated basis, organic revenue growth was 7%, with a similar level of growth in both divisions, and further improvement in the revenue mix towards recurring revenues. We delivered EBITDA growth in both divisions, and our adjusted profit metrics, as you can see on the slide, show healthy growth versus suffer each one. in the prior year. On a statutory basis, we will broadly break even to the first half. That's after £1.1 million of exceptional cash costs in the period relating to M&A activity. And in the second half of FY26, we expect to incur approximately £1 million of additional exceptional cash costs related to the expansion of our OneTrax operating model on a group-wide basis These costs are mainly related to headcount reductions, where roles are duplicated or no longer required. And David will talk more about this later in today's presentation. Turning now to divisional performance and starting with the relative energy and services division. Total revenue here was 70% higher than the prior year. And as you can see from the charts on the slide, this included continued growth in both recurring and transactional revenue. Carrying software license revenue increased by 4%, £10.4 million. And transactional revenues from our smart ticketing and delayed and paid products increased by 24% to £2.4 million. The balance of the revenue in this division is made up of remote condition monitoring hardware revenue, as well as milestone fitting projects and display development projects. In aggregate, this was £0.5 million higher in the prior year, and that includes development revenue for the TAP converter project, which is scheduled to be completed in the summer of 2026, as well as a small increase in remote condition monitoring hardware revenues in the UK, although these do remain lower than historical levels as we enter year three of Network Rail Control Period 7. Divisional EBITDA of £3.5 million was 16% higher than in the prior year, and this is starting to demonstrate the operating leverage benefit we get in this division from growth in those high quality revenue streams. On the data analytics consultancy and events side of the business, we also saw 7% organic revenue growth, This included the first revenue contributions from the new multi-year geo-intelligence contract with the UK government that we announced with the year-end results, as well as higher revenues from our event businesses. You may recall that profitability in this division was adversely impacted in the first half of the prior year by input cost pressures in our traffic data and event businesses. The actions we took in response to that delivered an improved level of profitability in the second half of FY25, and that's been maintained through the first half of FY26. That said, margins on this side of the business do remain significantly lower than in the rail technology and services division, although the seasonality of the events of traffic-based businesses in particular mean that we do typically see improved margins in the second half of the financial year. Turning lastly to cash, the group continues to deliver a healthy level of cash generation. Free cash flow for the period of £2.5 million was at a significant level to the first half of the prior year. We did see a lower level of working capital inflows in each one this time around. That reflects normal trading patterns, including the timing of hardware shipments and milestone delivery of those project revenues we talked about earlier. We also had higher tax outflows in H1 this year, that's due to the timing when instalment payments were made. Of the £1.1 million of exceptional cash cost outflow in H1, £0.6 million related to costs accrued in the prior year. And overall, we expect a further outflow of approximately £2 million in the second half of FY26 relating to exceptional items, including those one-track execution costs. that I mentioned earlier. In total, our cash balance increased by £2.4 million in H1 to close at £25.8 million. As I mentioned earlier, post-period, we invested a net circa £4.4 million of that in the acquisition of Disputi. And there is an additional maximum of £2.4 million of contingent consideration linked to the performance of that business the period through the 31st of December, 2020. The dispute acquisition is part of a disciplined approach to capital allocation and the strength of our balance sheets supported by a £35 million RCF that remains undrawn and our ongoing healthy cash generation all leads us well positioned to continue to invest in a disciplined way to drive long-term growth and to further strengthen our strategic position. So with that, I'll hand you back to David now to update you on the group's strategic progress.