Tracsis plc ($TRCS)

Good afternoon, and welcome to the Tracsis Half Year Results Presentation. Today, we are joined by CEO, David Frost; and CFO, Andy Kelly. [Operator Instructions] I will now hand over to David to begin the presentation.

Ellie, thank you, and good afternoon to you all. Welcome to the Tracsis Interim Results Presentation for FY '26. Thank you for taking the time to join us today. Andy and I will walk you through a review of the 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 FY '25. 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 FY '26 at 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 FY '26 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 FY '25. EBITDA increased by 31% to GBP 5 million with an EBITDA margin of 12.8%. And on the back of that, diluted adjusted EPS increased by 34% to 10.2p per share. The group's balance sheet remains strong. We continue to deliver healthy cash generation, closing the period with GBP 25.8 million of cash and no debt. Post period end, we invested a net circa GBP 4.4 million of that in the acquisition of Vesputi. Our GBP 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 have declared an interim dividend of 1.3p per share. That's an increase of 8% over H1 FY '25. Looking at the financial performance in more detail. As usual, I'll start with the group 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 the softer H1 in the prior year. On a statutory basis, we were broadly breakeven for the first half. That's after GBP 1.1 million of exceptional cash costs in the period relating to M&A activity. And in the second half of FY '26, we expect to incur approximately GBP 1 million of additional exceptional cash costs related to the expansion of our One Tracsis 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 Rail Technology & Services division. Total revenue here was 7% 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 revenues. Recurring software license revenue increased by 4% to GBP 10.4 million and transactional revenues from our smart ticketing and delay repay products increased by 24% to GBP 2.4 million. The balance of the revenue in this division is made up of remote condition monitoring hardware revenue as well as milestone-driven projects and bespoke development work. In aggregate, this was GBP 0.5 million higher than 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 U.K., although these do remain lower than historical levels as we enter year 3 of Network Rail Control Period 7. Divisional EBITDA of GBP 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 contribution from the new multiyear GeoIntelligence contract with the U.K. government that we announced with the year-end results as well as higher revenues from our Events business. 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 Events businesses. The actions we took in response to that delivered an improved level of profitability in the second half of FY '25, and that's been maintained through the first half of FY '26. That said, margins on this side of the business do remain significantly lower than in the Rail Technology & Services division, although the seasonality of the Events and Traffic Data 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 GBP 2.5 million was at a similar level to the first half of the prior year. We did see a lower level of working capital inflows in H1 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 of when installment payments are made. Of the GBP 1.1 million of exceptional cash cost outflow in H1, GBP 0.6 million related to costs accrued in the prior year. And overall, we expect a further outflow of approximately GBP 2 million in the second half of FY '26 relating to exceptional items, including those One Tracsis execution costs that I mentioned earlier. In total, our cash balance increased by GBP 2.4 million in H1 to close at GBP 25.8 million. As I mentioned earlier, post period end, we invested a net circa GBP 4.4 million of that in the acquisition of Vesputi. And there is an additional maximum of GBP 2.4 million of contingent consideration linked to the performance of that business in the period through 31st December, 2027. The Vesputi acquisition is part of a disciplined approach to capital allocation. The strength of our balance sheet, supported by a GBP 35 million RCF that remains undrawn and our ongoing healthy cash generation, all leaves 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.

Thanks, Andy. We're really pleased with the progress we are making against our strategic priorities as we start to execute the growth transformation strategy that we laid out at the FY '25 results. But before I spend more time talking to that, I'd firstly like to set the scene by touching on our key end markets. Here in the U.K., we have a really well-established position, supported by a large installed base delivering recurring revenues and a growing position in digital ticketing. Whilst we continue to see some friction in the near term, the CP7 funding remains constrained and the government continues to renationalize the train operating companies, our view remains that the structural opportunity for Tracsis in the U.K. is positive. The U.K. government's strategic plans for U.K. rail are becoming clearer following the publication of the railways bill in November 2025; and more recently, the strategy for integrated transport was published in April of this year. The priorities outlined in these documents, such as increased efficiency of operations, the integration of track and train, improved safety outcomes and a better customer experience are all closely aligned with Tracsis' products and services. We believe the combination of our mission-critical technology, our deep domain knowledge and our commitment to investing behind innovation positions us well to benefit from the supportive U.K. rail market. That said, continuing to diversify internationally is a core component of our growth transformation strategy. We continue to believe that North America offers a significant long-term opportunity. I was there again recently meeting with customers, railroad CEOs, particularly. And the evidence is now showing we have a high-quality, well-differentiated product offering in North America with our PTC-enabled train dispatch software, supported by the new logo win that we announced back in February of this year. We continue to build a healthy pipeline of opportunity across both commuter rail and freight rail operators and the industry is actively looking for a credible new technology provider. We do need to remain patient as procurement timelines are lengthy, but I firmly believe North America is a key organic growth opportunity for us. Turning to Europe. We talked at the full year results about certain European markets being of interest to us. And the recent Vesputi acquisition provides us with a measured first foothold into the German public transit market, and I'll talk more about that opportunity shortly. More broadly, the digital ticketing landscape in Europe is relatively nascent and fragmented, and we believe there is an attractive longer-term opportunity for both organic and inorganic growth in this area. Alongside this, we're continuing to develop our go-to-market model to support additional target international growth, particularly in parts of Europe. Whilst there are differences between the pace and maturity of each of the geographic markets that we serve, the underlying drivers of growth are consistent and Tracsis is well positioned to benefit from those. We set out our strategic priorities for FY '26 at the full year results, and we're pleased to report that we've made progress in all of those areas. Our #1 priority for FY '26 was core market delivery, and we're on track. Andy has taken you through the H1 numbers, which show revenue and margin growth in both of our divisions. We're continuing to deliver the key strategic contracts that will drive future growth. These include Tap Converter with the Rail Delivery Group, which will underpin a nationwide rollout of Pay-As-You-Go digital ticketing on the U.K. railway. We expect our work on this to be completed in the summer of 2026, which will then commence with a rollout starting shortly after. Work is also underway on the new train dispatch contract within North America with full deployment expected in FY '27, after which we'll start to receive the recurring support and maintenance revenues. This win provides further validation of the competitiveness of our train dispatch offering in North America. Alongside operational delivery, we've made continued progress on the quality of our revenue mix, recurring software license up 4% and consumer-driven transactional revenues up 24%, both areas that are a key strategic focus for us and a driver of long-term shareholder value. Our ambition is to become a scalable software technology product business, serving the transport and use cases globally. This is a journey that the group is on. It will take some time, but we're making tangible progress towards that. The acquisition of Vesputi is a deliberate step forward, giving us our first foothold in the German public transit market through a true SaaS product. Aligning the portfolio with our long-term strategy remains an ongoing area of focus, and we continue to evaluate further disciplined M&A opportunities in line with our criteria to strengthen our strategic position. Alongside all of this, we are implementing a new group-wide organizational structure with a single functional leadership. We're continuing to invest in the technology that will underpin the next generation of Tracsis products with the initial focus on our operations and planning platform to reinforce U.K. market leadership and support targeted international expansion over the longer term. We have made good progress so far this year. Firstly, we are delighted to have Vesputi to join the portfolio, given the group its first foothold in Germany, as I referenced earlier. The Vesputi team has created a niche in this market with its Mobilitybox product, which connects public transport operators with consumers via third-party apps websites. This is a true SaaS software product offering, and the acquisition provides Tracsis with a low-risk first step into a strategically adjacent market, consistent with our objective of growing higher-quality revenue streams. The business has delivered impressive growth since Mobilitybox was launched in 2022. The product is now transacting over EUR 70 million of ticket transactions annually in Germany, and this is growing each month. It delivered around EUR 2 million of revenue in the 12 months to December 2025 and is immediately earnings enhancing for Tracsis with good prospects for continued organic growth. The deal has been structured with EUR 2.4 million of contingent consideration that incentivizes ambitious growth targets through to December of 2027. Andy and I have been particularly impressed with the quality of the Vesputi team. They are high-quality operators with deep domain knowledge in the German and wider European ticketing market, and they share our vision of increasing the adoption of digital ticketing in public transportation. The team were in the U.K. shortly after the acquisition to start the integration work streams, and I'll be traveling to Germany once the interim roadshow is completed to meet with customers. Secondly, we're now taking the opportunity to embed a single functional leadership model across the whole of the Tracsis Group. This will remove any remaining duplication, accelerate decision-making and create clearer strategic focus around market-led product lines and their associated product road maps. It builds on the integration and transformation of the Rail Technology & Services division over the last couple of years and extends the One Tracsis model across the rest of the group. What this means in practice is that for the first time, all commercial activities will be coordinated in a single team; and similarly, all technology activities will be brought together under common leadership. The 2 key senior hires, Chief Commercial Officer and Chief Technology Officer, have now been appointed and are in the business today, and we are now implementing the new organizational model before the end of the current financial year. As Andy mentioned, there is a one-off cost associated circa GBP 1 million to execute on this. This relates mainly to headcount reduction. We expect to achieve a net headcount reduction of around 25 heads, supporting margin growth and providing the flexibility to invest behind driving our organic growth transformation strategy. Overall, pleased with the progress we've made on both of these fronts. These are actions that sharpen our strategic focus and strengthen the foundation for scalable software-led growth. So our journey continues. Our focus areas for the remainder of FY '26 are really clear. Top priority remains operational delivery. We still have some work to do through Q4, but are on track and our expectations for FY '26 financial performance are unchanged. Secondly, we expect to complete the implementation of the One Tracsis organizational model before the end of this financial year. This is going to position us well to deliver future growth and will help to streamline the integration of future acquisitions, not just Vesputi, but also those beyond. Thirdly, we're focused on progressing the drivers of organic growth transformation, building the pipeline for future growth, investing in SaaS-native products and pursuing disciplined penetration of international markets. We are developing our go-to-market model by using channel partners to support targeted international expansion. This is not going to be achieved quickly, but the new organizational model allows us to coordinate go-to-market activity on a group-wide basis under the direction of our Chief Commercial Officer. And finally, portfolio alignment and disciplined M&A remain at the heart of our strategy, supplementing organic growth and further strengthening our strategic position. Our longer-term ambition for the business is unchanged. The future presents the opportunity for a growth transformation chapter, an opportunity for us to scale our business internationally, expand into attractive transport adjacencies and invest in SaaS-native product road maps that address global market requirements. So in closing, Andy and I would like to leave you with the key takeaways from today: Firstly, Tracsis is executing with purpose, clarity and discipline, balancing delivery in the near term with continued progress against our long-term strategy. Secondly, we expect to deliver FY '26 in line with market expectations and the commercial progress we have made to-date positions us well to deliver continued growth going forward. Thirdly, we have made meaningful progress so far this year in building a more focused, scalable business, strengthening revenue quality and further simplifying the group. And finally, we remain confident in the long-term opportunity in all of our end markets, supported by strong enduring structural drivers that align well with Tracsis' technology and capabilities. So thanks for listening. With that, we will now open to questions.

[Operator Instructions] The first question is, what proportion of your annual income is recurring income?

So we -- as you've heard through the presentation, we kind of think of this in 2 categories of recurring software license revenue and then also consumer-driven transactional revenues, which are similar in nature in the sense that as the installed customer base grows, that level of revenue is highly likely to repeat year-on-year. Right now for the group in combination, together, they're approximately 1/3 of our overall revenue and growing. And for the Rail Technology & Services division, they are approximately 70% of the division's revenue. So a nice core for us, a nice resilient foundation for the business, but as David has talked about in the presentation.

Please, could you provide further color on the size of the North America team and the expectations for this geography for the year ahead?

Yes. The team in North America, headcount-wise, is around about 25. Remember, this is an acquisition that we did actually just over 4 years ago, a business called RailComm, that was already a fully-fledged stand-alone business serving the U.S. market. Under our ownership, we've brought it more tightly into the broader Rail Technology division, which we did about a year ago so that they can get the full support from the wider Tracsis team, not just in the U.S. but also here in the U.K. Under the recent changes in the organizational design that I touched on, as we become more of a functional-led business through a series of product lines, that team will further more tightly integrate to the way that we are working. And what that will effectively do is provide a lot more strength and capability to that team, but also enable the commercial team in the U.S. on the ground to focus on driving the future pipeline of opportunity for further dispatch software projects. That pipeline has some real help to it. We look at the opportunities through what we call a total contract value, which can be multiyear -- but we've got a pipeline that's close to $100 million of total contract value. So we're really focusing that team on continuing to penetrate an established market in the U.S. that has been now demonstrated through our 2 recent wins on dispatch software that gives us real confidence that we've got a competitive offering in a market that is unhappy with its incumbents; and therefore, looking for a credible alternative provider, which we are now demonstrating that we are. So we're -- this is a pretty slow burn in the U.S. given the length of the procurement cycles for such a complex piece of software. But we, Andy and I remain very confident that we will continue to see the organic growth coming from that part of the world, and that's what we've got the team focused on.

[Indiscernible] in public ownership beginning to sign new software contracts. Is there a risk that GBR decides to develop its own products?

Yes. The situation with GBR is obviously continuing to progress. Many of the train operating companies have now -- are now back in public ownership, although -- so a little bit of time still to go. GBR themselves have yet to fully form. They cannot do that until the railways bill has been passed in parliament and that's due to happen here during the summertime. So the leadership team of GBR is yet to be formally in the seats. How the train operating companies will actually operate in that future state is still relatively unknown. But despite that, we continue to feel like we're well positioned as Tracsis to continue to support that market, going forward. It's just a little unclear still as to exactly what that's going to look like as GBR does start to form. Having said that, we're leaning in more now because things are starting to happen so that we ensure that everybody is aware of who we are, what we do, so we can support them in what they're trying to achieve under GBR. If you do read the railways bill, the government is very clear that they're striving for increased productivity and efficiency in the railway, increased safety, coming together of track and train as well as improving the customer experience. And all of those are areas that our types of products and services really talk to. So we feel -- we remain confident in what the future holds for us. Will GBR develop their own products? Highly unlikely, I would say to that, given the complexity of the industry, given the intrinsic nature of what we provide to the train operating companies, we're so intrinsic to how they run their operations on a daily basis. I think it would be, yes, highly unlikely that we would see GBR go and invest in developing that for themselves.

How much of your growth is organic versus coming from acquisitions?

So all of the growth that you've seen in these numbers is organic. The Vesputi acquisition was completed about a month ago. So it doesn't appear in our H1 numbers. And the previous acquisition prior to that was the North American business almost 4 years ago. So all of the growth that you've seen in our numbers recently has been through organic growth.

Margins have improved. How sustainable is that? Or is this a one-off benefit?

It's not a one-off benefit. There's 2 things I'd say to that. I think, firstly, focusing on the H1 numbers in particular, as we highlighted in the presentation, we did have a particularly soft first half in FY '25. So that improvement in margin that you see in our H1 '26 numbers is absolutely sustainable. Zooming out a little bit in terms of what we're trying to achieve strategically with this business, there's a clear focus on sustainable margin growth and accretion as we move through. And that's really what underpins everything we're doing in terms of focusing on quality of revenue growth, focusing on organization transformation and it underpins how we think about capital allocation as well. So it's a clear strategic objective for us to deliver sustainable margin growth as well as revenue growth in this business over the strategic window.

You have mentioned that you are prioritizing higher-margin software and recurring revenues. How far along that transition are you? And what proportion of revenue is now recurring versus project-based?

As we discussed at the start of the Q&A, we've got about 1/3 of the group's revenue is now recurring. And hopefully, you saw on the Rail Technology & Services slide, how that is progressing. So I would say we're pleased with progress, but we still see ourselves at an early stage in that journey. And coming back to what I was just talking about in terms of margin growth, that focus on revenue quality also underpins everything we're doing in terms of tactical and strategic decisions for growing business.

What's the biggest risk investors are probably underestimating?

Yes. A good question, good questions. I want to scratch the head over a little bit. Look, I think there's -- we operate in a series of end markets that aren't cyclical. So the long-term trajectory of investment in critical infrastructure, I think, is a good place to be from that point of view. We also -- in terms of what we provide into that and the intrinsic nature of how we help our customers run their operations, we're very sticky in terms of being a critical part of how we help them run their operations. So once you are -- it can be challenging to penetrate into a new customer. But once you are there, you are relatively well protected given the importance and the criticality of what we do. So I think that's all good. And although some of the things outside of our control, whether that's what's going on in the geopolitical environment, change of governments, priorities within governments for where they deploy capital sometimes can be frustrating to us or not as predictable as we would like. These industries also tend to move relatively slow when it comes to adoption of new technologies. So that can be also a little frustrating to us. We would often like people to move at a faster pace, but it's kind of the nature of the end markets that we're serving. So I don't think there's anything of any sort of existential threat that people aren't seeing. It's more the dynamics of the world in which we operate, in which we live in, sometimes don't move at the pace that we would like them to move at. So being able to demonstrate growth on the back of that can be pretty challenging at times. And hence, the importance for us to kind of be less reliant on U.K. rail, if you like. It's a critical core market of ours and clearly one that we continue to be very focused upon and make sure that we position ourselves accordingly for what GBR brings. But then the importance of diversifying the portfolio so that we've kind of got our -- Andy and I talked to it as having more shots on goal so that we can be less exposed or reliant on a particular part of our portfolio. So that's the way I think we think about it. There's clearly a lot of talk at the moment about the impact of AI and the threat that, that presents to certain businesses, particularly software businesses. But we're very clear that given the fact that we are working within critical infrastructure end markets that we are so deeply entrenched in the way we help our customers run their operations, the deep domain expertise that we have as a business to enable all of that is a -- they call it a defensive moat, but we are well protected from that point of view. And therefore, look to embrace AI. I think this is one of the questions maybe coming later. We look to embrace AI in all of what we do to drive efficiency within our own business as well as deploy AI tools within our product set to help our customers be more productive and more efficient in their ways of working.

If U.K. rail spending slows further, how resilient is the business?

The business is very resilient in that scenario. I think coming back to the quantum of recurring revenue that we've got as a foundation. As David just touched on, most of what we offer is mission-critical software solutions that are well embedded with our customers. We've got a strong balance sheet. And let's not forget that we've got the Data, Analytics, Consultancy and Events division, which contributes over half of our revenue currently that isn't exposed to U.K. rail spending. So if spending slows further, it may well cause us a bit of a heartburn in terms of not being able to deliver the growth rate that we're ambitious to do, but the resilience of the business as a whole is pretty strong in that scenario.

How is Tracsis as a business affected by the conflict in the Middle East?

Yes. Look, I think I'd say to that, that we're not directly impacted in terms of our day-to-day operations as a business. We don't trade in that part of the world. We don't rely on the supplies coming from that part of the world necessarily. We are, of course, impacted like everybody in terms of pressure it puts on -- inflationary pressure it puts on our daily lives, the energy situation that we're all facing. Of course, we're caught up in that like anybody else is. But there isn't anything specific that causes Andy and I to be overly concerned by what's going on in that part of the world right now from the business standpoint, at least.

How are you using AI within the business?

Yes, I sort of touched on it earlier. Apologies, I had sight of this question coming. So I shared with you some thoughts on how we think about AI and the impact that, that can have on many, many businesses, but there are certain concerns around software businesses right now and how we feel well protected by the nature of what we do. And therefore, AI for us is something that we embrace and embrace to strengthen the competitive position that we have in our markets, whether that's through driving internal efficiencies in the way that we work, whether it's in our support functions or indeed, whether it's how we deploy AI into how we code software. So all of that is happening today. As well as then how we think about building what they call Agentic AI into some of the product offerings that we present into the market that really then helps the users of our software suite to be more efficient in their day-to-day operations. So very much embracing. We, as I mentioned, recently hired a new CTO into the business about a month ago. And that individual brings a wealth of experience in deployment of AI tools right across the spectrum that I've described. So we're pretty excited about AI being a real accelerator for us both in terms of efficiency, but also in terms of how we embed within our product suite going forward.

Are customers signing longer-term contracts now or still short cycle?

Yes, I wouldn't describe the contract situation as short cycle. I think we are seeing customers signing longer-term contracts. If I think about recent contract wins, the GeoIntelligence contract with the U.K. government is a 10-year contract. The train dispatch contract in North America is a multiyear contract. The Tap Converter contract that we're deploying in summer is a multiyear contract. So the majority of what we are signing up to are multiyear agreements. And that really reflects, again, what we've touched on already today is the criticality of the software solutions that we provide for our customers to run their operations. And in the U.K. track environment, that's where this question was kind of pointed towards, we are still seeing an appetite with our customers to lock in for longer-term deals to have that security of supply and certainty of being able to run their operations. So it is a slightly mixed bag across our revenue piece. We do have some annual renewals, but with a high level of renewal. But we're definitely not facing into a kind of restricted contract term. environment with our customers right now.

How much PAYG transactional revenue are you expecting once the system is running nationwide?

It's a great question, and it's very difficult to answer right now. And the reason I say that is that the model there, the revenue model is where you essentially get paid on a per click basis for every fair calculation that we do on platform. So ultimately, the revenue opportunity will be driven by the number of transactions that we're processing. We are providing that technology solution on a B2B basis and the rollout of the Pay-As-You-Go technology to consumers will be controlled through transport authorities, train operators and other bodies on a B2C basis that we're not in direct control of. So rather than sort of make predictions of uptick and growth rates there that we simply can't be informed about at this stage. Our guidance, if you like, our policy is to price into our forecast 12-month run rate that we're seeing at the moment with the anticipation that there is some asymmetric upside opportunity against that as technology gets rolled out and as adoption increases, but without trying to be disingenuously scientific about predicting the shape that curve is going to take.

Our next question is GBP 1 million of M&A costs, are these some costs? Or has this created an active pipeline of opportunities? Secondly, I have noted the increased facility in addition to the GBP 25 million net cash on the balance sheet. Does this open you the possibility of transformation M&A?

Yes. Let me touch on the M&A costs so far. So that does include investment in our pipeline. We have got an active pipeline of opportunities that we're working at the moment. Hopefully, you'll understand given the nature of that, but there's only so much we can say in a session like this. But we are working through a number of opportunities in a disciplined way. And that discipline does include if opportunities as they progress do not meet our strict criteria and our investment criteria, then we will move on and look at other opportunities. So you should think about the [indiscernible] M&A perspective and size-wise, we were pretty clear that having not done a deal for 4 years, we were going to walk before we ran. And therefore, an acquisition like Vesputi is a kind of a bolt-on, a strategic addition to our current capabilities, albeit in a new geography, giving us some revenue diversification, bringing some new talent into the organization that fits really nicely into the model of what we're looking for and absolutely interested in doing deals like that. The facility is there to give us the flexibility to pick up the pace with M&A. So to continue to contemplate moving at pace with opportunities like that and to give us the flexibility if something larger came along that fitted our strategic criteria to also potentially have the opportunity to progress that. So it's really about the flexibility and the optionality it gives us to do all of the above.

Can you say something about the geospatial intelligence side of the business? Can expertise here lead to further opportunities?

Yes, we think it can. The history of that business really brought up in Ireland serving public markets, particularly around transportation, agriculture and forestry and the team there are deploying their skills in the deployment of GIS and earth observation technologies into various application cases within that market space. And they procure that under -- typically under framework. So we've got a well-established business there in Ireland doing exactly that. We -- if you recall earlier this year, we announced the first contract win with U.K. government with [indiscernible] to now develop an actual software product that enables DEFRA to understand land use across the farming industry here in the U.K. And the technology can actually -- actually, the definition of the technology can define exactly what farmers are using land for and what particular crops have been growing in that -- on that land when it comes to things like subsidies. And prior to this, they would actually send people out to physically inspect what was going on, on that territory. So the way we're thinking about the technology going forward is looking at ways in which we bring together all of that capability alongside some of the other software suite that we have to further enhance the understanding of what's going on in particular application cases. So I'll give you, for instance, if you think about we have Remote Condition Monitoring deployed on the U.K. rail network, which is a data logger capturing data points, feeding up into an IoT platform. And then we're thinking about how we develop analytics to provide insight back to network rail to what's happening with that infrastructure. There is an opportunity here for us to bring together GIS and earth observation into that so that you can start to understand changes in the land, the movement in the land, how much water there is -- there's been recent incidents of land slips happening on the network. And this is a sort of technology that can help predict what's happening. So we like the idea of bringing land together with rail and the technologies that we have together to give our customers more insight as to what's going on in those particular cases. So yes, a really good question, and we do feel there's a lot more opportunity to more tightly integrate that tech into the other software suite areas that we've got.

The next question is for David. Your predecessor was talking about One Tracsis for several years. It seems to be going on, and it's not clear to shareholders what the benefits of this will be. Can we assume much improved margins and returns as a result of all these changes and exceptional costs?

Yes. Look, I think as I joined the business, moves have been made towards more tightly integrating the acquired companies from the first sort of early days of Tracsis back into the 2004 to 2019 period, where Chris Barnes, my predecessor, his predecessor, John McArthur, was buying these businesses. Chris started to bringing them together with Andy to integrate them more tightly, which was the right thing to do. And really, what we're doing here is continuing to build on that and taking it to another level whereby we are a One Tracsis single business operating under a functional structure, led through a series of product lines, which is really important so that we become market-led and invest in a product road map that serves the market requirements. That's the key thread of our strategy here. And the way that we're now organizing the teams is that we're removing a lot of duplication in the overhead structure that we have in the business. And that's enabled us to leverage from a margin standpoint. But more importantly, it's enabled us to redeploy that cost in the business into the commercial roles that will drive the organic growth transformation strategy that we have. So I think that's the key takeaway for shareholders that this isn't seen as Groundhog Day of yet another change. It's important that you see the connection with putting the foundation and the right structure into our organization that releases some of the overhead costs to then reinvest back in the roles, the commercial roles that are truly going to drive the growth and growth will lead to shareholder value if we make good decisions and deploy that appropriately.

What is the competition in the German market? Is it an open market?

The way to think about this is Mobilitybox is the software technology that enables the consumer to buy a digital ticket from one of the train operating companies. The consumer end of that is not what we are doing. So there are train operators themselves as well as many other apps and websites that allow you to go and now purchase a digital ticket. That could be -- it could be a hotel chain, for instance, -- it could be Uber. So there's many, many -- what we consider that as the open market, and there are many players within that. And that's not something that we're going to participate within. Our focus is on the back-end software that really connects the consumer wanting to buy a digital ticket with the appropriate train operating company. And what Vesputi have got is found themselves this niche in the middle whereby they are connecting all of that together and they're doing it through a SaaS product that is truly a product. There is only one code set here. And because of that, it allows them to deploy the technology incredibly quickly, you can get up and running within 3 or 4 weeks, and that's part of their kind of secret sauce, if you like, is the pace at which they can move to enable either a third-party provider talking to the consumer and/or a train operating company to start to be able to sell digital tickets.

The next question is, under GBR, will all the contracts have to be renegotiated?

There's no sight of that at the moment. So our contracts with train operators are covered by kind of umbrella agreements already that ensure continuity of provision of service in the event of change of ownership. So even as the train operators are nationalized and that process is pretty well progressed and ongoing due to be completed at the end of October 2027. But even within that, you've got a bunch of train operators that have their own operating processes, their own ways of working, different union agreements in places. So a huge amount of difference across the piece. So there's no umbrella requirement to renegotiate every contract on the way in. And exactly what the landscape looks like as GBR comes into focus. As we said before, that's not legislated yet. So their ability to appoint leadership and really set the structure up is still taking shape. That environment that we'll be facing into when that comes into play is still taking shape. As David talked about earlier, we are focused on making sure that Tracsis stays really well positioned in that space. People understand our unique capabilities, our breadth of capability. And going back to the railways bill and what the U.K. government set out as its strategic ambition of railway, we do feel that through the medium and longer term, Tracsis business is really well positioned to help to deliver that future and be a really trusted partner to all of the operators go through that process.

We are now moving on to our final question for today. If you have any further questions, please e-mail the team who will respond to any questions that weren't covered this afternoon. Does the Data, Analytics, Consultancy and Events offer enough bang for the buck?

I think we touched on some of this before. I think our vision and our strategic ambition for the group is pretty clear. And there are capabilities and technologies in that side of the business that we think are really interesting as part of our future. And certainly, as we've gone through a period of transition on the rail side of the business, it's given us a nice counterweight, a nice bit of balance in the portfolio. But we continue to look at the future of the group through that strategic lens of purpose and vision that we talked about at the start of the presentation. Right now, when you reflect on the market valuation of the business and the sum of the parts, it doesn't feel like that side of the business is fully valued. That's not something that we're in full control of. Our focus is on continuing to run a quality business, continuing to make the business stronger. And hopefully, the market valuation side of things will take care of itself. So we continue to [indiscernible] closer to what we're doing from an organizational design perspective, from a product development perspective and continue to look at all parts of the portfolio through that strategic lens of purpose and vision.

Thank you. We currently have no further questions. So I'll hand back over to David for any closing remarks.

Yes. Thanks, Ellie. Look, hopefully, guys, you found that interesting today to get an update on where we're at. We're certainly executing here with purpose, clarity and discipline, getting the right balance between the near term and continuing to progress against our long-term strategy. We're encouraged to see that our financial performance continues to be in line with the expectations. We're making good progress in the U.S. with our latest logo win. We're back on the M&A trail, first foray into a new geography with the team at Vesputi and continuing to bring further sharpness into the portfolio as we think about the direction we're looking to take. So we're very pleased with the progress that we've made so far in the first half of the year. Look forward to speaking to you again in 6 months' time when we hope to be able to continue to share further progress along that direction as we outlined here today. So thanks for listening. Appreciate your questions. Look forward to speaking to you next time.

Thank you to David and Andy for joining us today. That concludes the Tracsis half year results presentation. And please take a moment to complete a short survey following this event. And the recording of this presentation will be made available on Engage Investor. I hope you enjoyed today's webinar.