Shares in Tracsis (LON:TRCS) fell on Wednesday as the transport software specialist said first half underlying profit is expected to be slightly ahead of the previous period but warned of price competition in its traffic and data services business.
Underlying profit (EBITDA) in the six months to 31 January 2017 is anticipated to be a tad higher than the £3.2m reported in 2016, according to a trading update. Similarly, the group sees pre-tax profits a touch ahead of the prior period.
Group revenues are expected to rise to £15.5m from £13.1m.
However, Tracsis said its traffic and data services division was facing increased price competition and associated margin pressures.
“Given the group has grown rapidly to become the UK's largest transport data collection company, management has taken steps to maintain operational efficiency through an investment of technology and an improvement of internal processes which has led to an associated reduction of costs,” Tracsis said in a statement.
“These changes ensure the group is well positioned for the future.”
The traffic and data services performed well in the first half despite the challenges, Tracsis added, although the second half is likely to be “significantly stronger” due to seasonal factors.
The majority of revenue and profit from its traffic planning and management services business SEP, acquired in 2015, will be delivered in the summer months.
In the rail technology and services division, the second half is also expected to be stronger due to delayed software sales.
Tracsis said software sales are likely to take place in the second half instead of the first, reflecting longer sales cycles associated with higher value products and changes in the Department of Transport’s franchise bid timetable.
“The outcome for the full year remains subject to the timely conversion of new sales for our various software products and services, supported by the improvement in gross margin initiatives that commenced at the start of the financial year,” Tracsis said.
“Delivery of these goals will result in revenues and profits being in line with current expectations and we will provide a further update with our interim results.”
Shares fell 14.41% to 398p in morning trade.