The company reported a 14pc increase in revenue, to £25.4m, and adjusted pre-tax profits up 16pc, to £5.8m, for the 12 months to the end of July.

The software division doubled revenues to £5.8m, and this largely came following the acquisition of Datasys last year. New technology that tracks the performance of bus drivers was also installed for a client in Sweden.

Tracsis has a five-year deal with Network Rail, which runs until 2018, to monitor points on tracks – called remote condition monitoring – to try to prevent them failing. The revenue can be lumpy, and last year it fell to £3m, from £5.8m the previous year. However, John McArthur, chief executive, is confident its financial performance should smooth out.

The points technology is being trialled by a number of US rail operators. However, any final decision on an order looks some way off.

The traffic and data analysis division delivered another strong performance during the year, with revenue rising to £14.8m, from £12m. The unit already has contracts with most of the main UK rail operators, including Virgin, Go-Ahead, Arriva and National Express.

The traffic analysis business was expanded through the £2.6m purchase of North-Yorkshire based SEP Events at the end of September.

The long-term nature of the software contracts makes Tracsis very cash generative, and cash levels increased to £13.3m at the end of July, from £8.9m a year earlier.

The shares are highly valued, trading on 19 times forecast earnings per share of 22.8p, as reported pre-tax profits are expected to increase more than 20pc to £6.1m. Buy.