Tracsis buys US rail technology firm RailComm

The AIM-traded firm said the Fairport, New York-based RailComm provides “mission critical” automation and control solutions to reduce costs, increase safety, and improve operational efficiency for rail passenger and freight operators, and rail-served ports and industrial customers.

Its two core products are rail yard automation and computer-aided dispatching, with the company having a “wide and diversified” client base across the North American market.

Tracsis said RailComm had “good levels” of annual recurring software revenues, in addition to large project delivery and systems integration work.

The business employs around 30 full-time staff, all of which would remain with RailComm post-acquisition.

It said the acquisition was in line with its strategy of extending its rail software footprint, and expanding the addressable markets for its products and services.

In addition to the “significant” growth opportunities that existed within RailComm's core rail markets, Tracsis said it would now have direct access to a long-established sales network into a significant number of rail clients in the North American market.

That, the board said, would enable it to progressively market its existing portfolio of rail products and services, with an initial focus on remote condition monitoring.

For the financial year ended 31 December, RailComm delivered revenue of $6m, including $2.5m of recurring software revenue, and generated an unaudited loss before tax of $0.3m.

It had a “significant” order book, and as a result the board said it expected “good levels” of revenue and profit growth going forward.

The business was being acquired on a debt-free basis.

Tracsis said the acquisition consideration comprised an initial cash payment of $11.5m, with additional contingent consideration of up to $2.7m payable subject to RailComm achieving certain financial targets in the first full year post-acquisition.

That cash would be held in escrow through the period, with the consideration being funded out of Tracsis’ cash reserves.

“This is an important strategic acquisition for Tracsis, providing a platform onto which we can start to internationally expand the Tracsis group and its rail product portfolio via direct access to the significant and growing North American rail technology market,” said chief executive officer Chris Barnes.

“We are delighted to welcome all of the RailComm team into the Tracsis group and look forward to a successful future working together.”

At 1137 GMT, shares in Tracsis were up 3.36% at 930.25p.