Journeo (LSE:JNEO) — Interim Results

0:01 Good afternoon, and welcome to the JOURNEO PLC Interim Results Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. The company may not be in a position to answer every question received during the meeting itself. Have the company review your questions submitted today and publish responses where it's appropriate to do so. Before we begin, we'd like to submit the following poll. I'd now like to hand you over to Russ Singleton, CEO. Good afternoon.

0:29 Good afternoon. Thank thank you, Paul, and good afternoon. Thank you for making time to to join us to talk about h one, our interim results. For those that haven't met us before, I'm Russ. I'm the chief exec, and my colleague is Nick Lau. He's our group finance sorry, chief financial officer. And we're both shareholders of the company. I've been here for for for quite a few years. Delighted really to introduce the the results. Again, for those people that are new to us, JNEO is a information systems and technical services business, working predominantly in The UK. But as you will see, as we go through the day, we've got some activities now in Denmark, Sweden, and also in The US.

1:18 With with our aim is really to to create sort of open systems and integrate them either on board vehicles or in and around the towns and cities. And we're seeing grown adoption of our technology really the sort of driving force that's leading to growth in our sales pipeline, and our order books in our revenues. And we're really pleased with the h one performance. So very high level. Revenue has gone up by a 146% from 8,900,000 to 21,800,000. Obviously, part of that's come through the acquisition of INFOTECH, which is a business we acquired in January this year. We've actually managed to achieve 41% organic growth underneath all that, which we're very proud of.

2:05 The number of connections to our JNEO PORTER, which is a software and services application, grew very, very strongly. Actually, last year, it went from 4,000 to 10,000 connections. In the first half of this year, it's increased by a further 2,000. So we're now up to 12,000 vehicles connected to this, all generating monthly recurring revenue. And and we've seen a a pretty substantial increase in our profit from 170,000 in the same period in 2022 through to now 1,700,000. And and as I said that as a result of the sort of the activities and the interest in our applications, our pipeline of future opportunities is growing and is actually becoming now quite substantial.

2:56 So I think at this point, I'll hand over to Nick and he can run through the sort of interim results in a bit more detail. Okay. So so as Russ mentioned, revenue was up a 146% year on year to 21,800,000. Again, as Russ said, on an organic basis, we were up 41% to 12,500,000, so it's a strong growth in the core. Gross profit was up 96% to 6,400,000. Again, looking organically, we were up just over 20% to 3,900,000. Margins were down slightly from last year, but we do see that coming back in H2 and particularly into next year as well. We flowed down very well underlying PBT and PBT, So we were 2,500,000 at underlying PBT and 1,700,000 at PBT.

3:52 Cash, very, very strong. So we closed the half with 11,300,000. Some of that is advanced payments from customers, so about 3,500,000 is advanced payments, but just shy of 8,000,000 is our own cash as at the close of the half. EPS obviously increased about four times, so we've obviously issued new shares and profit went up. So we were 8.72p. And also last week, we announced the acquisition of MultiQ. So we used our own cash for that, which was €2,100,000 on the day and this 400,000 of deferred over the next two years. In the bottom right, as we stated at start of the term, we invested 800,000 in R and D during the half and all of that is ultimately passed through the P and L. We do capitalize some, but we will so amortization is pretty much matching capitalization, so 800,000 has passed through the P and L and the PBT is obviously after the write off of the R and D.

4:58 Operationally, again, so as Russ mentioned, we completed the IG acquisition in January for $8,700,000 That's $8,200,000 in cash and $05,000,000 shares, and there's a deferred element to that as well which will be paid next year. Portal connections again, as was mentioned, we were up to 12,000. So just in the six month period, we moved from 10,000 to 12,000. Since the acquisition of Inpatec, we've invested 400,000 in a new service mount production technology, and that will benefit the group, not just Inpatec in terms of manufacturing capacity that we now have. Airports, we already have five airports and we moved to our sixth airport during the half. So we now have East Midlands Airport.

5:49 And also, we embracing the new Arctic standards for our for our technology as well. We just closed ESG. We we we've moved further forward with it, and we will have a a much further further update in the full year report next year.

6:09 This slide graphically, on the right hand side, we're showing the growth in the different segments in the business. So the core existing JOURNEO business is fleet and passenger. So within fleet, we were up 61% for revenue in in the half. Passenger was up 16%. You could take these graphs back another two years and it would show a very, very similar picture. The the bottom right, the the the blue bar shows the addition of INFOTECH. So we've gone up to 12,500,000 as a JOURNEO, and then we've added an extra 9,300,000 with INFOTECH, which is the the steep uplift you can see in the lines. Left hand side is the contracts R and D that we've announced during H1, so we had a lot of announcements.

7:01 We've upped the threshold for what is announceable now, so I guess with less announcement. But first one is Transport for Wales. That was a pure software and services contract for across the entirety of Wales. The next two are both Gates since we acquired Infotech, so they're they're hardware sales through through Infotech. The Gatwick Airport renewal, Gatwick Airport was our first airport in 2017. We're five, six years into that now, and they've just extended the contract by another five years, and that's the announcement there. Transport for us in Cardiff, 1,600,000 is displays across Cardiff that will benefit from the software that we are developing or or have sold as part of the first announcement.

7:56 Cross Country is is a renewal of pure software and services to Cross Country, so it's an existing contract and it's an extension there. Areeva is one of our framework customers. They extended their framework by another year, and that's our estimation of revenue that we we would take from it in in the next twelve months. And the final one is Northern Trains, which again was another win through Invertech post acquisition.

8:25 Okay. Great. Thanks, Nick. This next slide is a sort of snapshot of of the the the people that we're working with. There's some fabulous reference customers in here ranging from Outfront Media, which is our customer in in New York City that we're working with for the mass transit authority through Siemens and talents of the rail applications sort of through the airports and most of The UK's PTOs. And so far across the bottom is a sort of just a snapshot. We we have, in addition to 12,000 vehicles connected to our platform, We have 5,000 displays around The UK that sort of that we're managing.

9:12 And in situations, we're able to use those for sort of public service messaging or for timetable variations in the event of road closures or diversions, those sorts of things. We're up to about 30% of the buses in UK are connected to our JOURNEO PORTAL. That's growing all the time. And they've got these two metrics, really, 2,190,000, passengers every day relying on the INPATEK rail displays. And, they've got, just under 1,500 of the 2,500 stations around The UK equipped with, Inprotect displays. Not all of the two and a half thousand have any form of, active passenger information displays.

10:01 So of those that have some form of passage information systems, Inpatec is installed on 80% of them, and it's now on over a third of the underground. And this number is actually now slightly out of date because we prepared this ahead of us completing the multi queue acquisition, but we're now up to a 175 people in JNEO as we continue to to to scale up. Just really wanted to to recap on this slide, which is really about market drivers, but this is actually why we're here, why we feel this is a really interesting area, to build our solution and to generate shareholder value. And it's coming from some of the sort of megatrends that are taking place of things like urbanization and the sort of overriding arch to or need, in fact, to to decarbonize public transport along with then some of the effects of the demographic changes and how that's kind of impacting the markets that that JOURNEO is serving.

11:05 Is this leading to more congestion and the requirement for more sort of interconnection interoperability of the systems that are used either on the vehicles or in the sort of infrastructure around the towns and cities. And what what we've been doing effectively is creating the technical capabilities to link these disparate or fragmented systems together in kind of open platform way. So we're enable local authorities and fleet operators to unlock themselves from proprietary lock ins. And we've been doing that really ahead of the the catalyst or the impetus that's been coming from government. So the growth that Nick's mentioned to you has really been coming about from legacy integration ahead of the funding kicking in. From the bottom right hand side of this this deck, we perhaps should have made these characters a bit larger.

11:58 Is there some very, very substantial government fundings coming in? And if I just pick on the sort of a a couple of them, the bus service improvement plan, a number of you, I'm sure, will have heard. And then this is effectively where the government have have invited local authorities and passenger transport operators to come together to form enhanced partnerships and present plans that will lead to greater patronage of public transport, obviously. And and to do this, we need to increase the the safety and frequency of the of the of the bus service, but also the whole immunity around that. And that's now starting to happen and that we're going to see that having a number of impacts, not just in the markets that JNEO is operating in, but also in some of the traffic light priorities and, pedestrianization of inner inner cities.

12:51 And the city regional sustainability transport settlement, they grant that's actually even larger. That's 5,700,000,000, and that's going to 20 or so local authorities. And they've got very, very substantial funding. Some of them are in the hundreds and hundreds of millions. And and that's the other side of the if you have the free part of it, that's about increasing the lighting, new sort of sustainable bus shelters, cycle counting, pollution detection, a whole suite of applications, and JNEO is well positioned to to benefit from that. So just to recap, the growth that we've that we've delivered really over the last eighteen months or so has been ahead largely ahead of these market stimuli. We are now starting to see some early signs of of this now coming in in in some of the programs that I said with with some of the streetlight applications and also in the vehicle orders.

13:50 The next slide really is about where JOURNEO is in terms of its evolution. So we we we set ourselves some ambitious goals to create both a scalable technical platform on which to build our applications, which are largely built around Microsoft Azure for our cloud applications, but also build a scalable business where we've got strength in-depth in terms of our management, but also in our technical services, our development, our marketing, and our HR. And we we renamed the company JOURNEO in '20 at the end of twenty nineteen and started then in this expansion program. And we've got a few landmark events, which are quite salient actually in our development. So in 2020 was really the start of the transforming cities fund of the first 60,000,000 or so that was allocated to that.

14:45 We run 3,000,000 of it, and and that really kick started some of the uptake in our new multicolor LED and low energy displays. Moving into 2021, we then secured the contract at Stansted Airport, which was a sort of follow on to the initial contract we had in Gatwick Airport where we actually operated a systems integrator then. We built our our airport busing solution out of our own displays but bought in third party software. And what we found as we did that was that it didn't really do what was required. It satisfied the customer and, yes, we got paid and everything was good, but we realized that it was actually another layer and that was actually dealing directly with the airport authority.

15:37 So we actually completely reread the code ourselves and and then Gatwick started to evangelize that into the marketplace and showed that to a number of international and UK airports. And we're delighted, obviously, with Stansted where they actually selected that technology. And as you probably know that we're we're actually now up to seven airports. And so in addition to Gatwick, we have Stansted, Bristol, Heathrow, which is currently the largest, Dublin Airport, and East Midlands are now more to come. And in 2022, we actually started to roll out these fleet wide deployments of our edge connected software as a service platform We've started to deepen the range of applications that we can monitor across it.

16:24 And and that really has driven quite a lot of growth, and it's it's something that I'm really proud of because we've built more and more applications into the the SaaS platform. And we decided that that was the right moment for us to commence our m and a work. We've had a sort of pipeline of potential acquisitions that we've been monitoring for quite some time. But as our confidence grew in terms of achieving our the market expectations and our financial goals, we felt it was the right time to really press on. And in 2023, in January 23, we we completed the 7,300,000

17:07 placing in order to acquire Infotech. And that that completed actually on the January 18. And at the same time, our organic business has also continued to take off. We secured us this contract, which Nick has said for the whole of the the Welsh country to provide a a real time application for them and continue with the development on our SaaS applications. And we also maintain our interest in the mergers and acquisition. And immediately following the the end of June, that accelerated and culminated actually in the acquisition of MultiQ just over a week ago. We've also made some quite significant announcements on the purchase wins, largely actually in our transport infrastructure, which we we we sort of refer internally to as our passenger business.

18:03 So 4,250,000 there, but again, with a lot of interest. The next slide is really about multi queue. Why might that fit? You know, we're very keen not to diversify this business. We've got a very focused capability and they were executing our strategy very seriously. But MultiQ actually isn't a diversion. We've been working with MultiQ for five years.

18:27 They provided some of the content management display systems for our first airport at Gatwick, and we've worked with them ever since. The team in Denmark actually, which is a business that we acquired with a real time specialist within MultiQ Group. MultiQ was a larger business that also had, display applications in retail space. And, in May 2022, a Swedish company called, is a retail, digital media business, acquired MultiQ Group for its retail content management and plan to divest all hardware. And the first example of this actually was a decision to divest the MultiQ ATS, which is based in Denmark.

19:14 And we've been talking to them more or less continuously. But as we knew that the Invitec acquisition was going to complete at the turn of the year, we didn't actually want the distraction of having another acquisition too early in that cycle. We actually wanted to, you know, bet Inphatec in, get to know the team, get the integration programs underway. And we we've been working on that for about seven or eight months. And as we've passed through the half year, we felt that that we did have the capacity to absorb MultiQ into our business. So we acquired that last week, and we're now starting the the post acquisition integration, which we think will take us another sort of three to four months. So at this point in time, we're not anticipating to get another acquisition this year.

20:06 But we do have a very attractive pipeline, and we've got a number of conversations at various stages.

20:13 So it is actually something where we can see very strong organic growth in our business, but there are opportunities to, if you like, broaden our solution horizontally by dropping in bolt on bolt on acquisitions that gives a line of sight to customer for our core technology. So that that really is something that's very much on our agenda. MultiQ itself, there are 15 people, 1,200 square feet based in Argus. They've got 1,300 buses running under their integrated bus information, cloud based application, and they're a full line provider. In due course, MultiQ would be rebranded JOURNEO Europe, and it's going to be run by the managing director, Matt Hanson, who formed his own software business a number of years ago, and that got acquired by MultiQ.

21:05 And him and the whole team in Denmark are staying with the company, and we think, actually, we've got a lot to learn from them. They're certainly more advanced in terms of the way that they handle SaaS and also their interconnectivity of their vehicles. But, obviously, it's also then a route to market for all of JNEO's product, whether that's in for tech rail product or in fact, it it could be the JNEO's agnostic video management applications. Okay. Our strategy really to sort of bring all this together hasn't changed from day one. We we actually want to become really through some technology enabled growth, A market leader in segments of the intelligent transport space as that space converges from proprietary or closed systems into open platforms.

21:57 So ephemeral IoT type applications. And we're doing that from a base very strong base now where we've created a scalable technology platform and a scalable business model that's delivering strong organic growth. We do intend to bolt in additional acquisitions to consolidate the position in some markets. We've seen a greater, greater interest in our software and our services, and that's driving up our recurring revenue. And we are tracking this internally, and it's become a major focus of our KPIs internally. And next year, we will begin to expose our annual recurring revenue and our SaaS revenue. And we're we're pushing into what we call thematically linked adjacent markets where, at the moment, we're being approached by businesses looking to potentially resell our technology into their marketplaces.

22:58 And we're having some discussions about that and may well do some of that. But where it actually is something that's that we can absorb, it may be in our interest actually to acquire the company rather than increase the company's value by giving it access to our technology. And so the examples of the areas that we're interested in are hazardous goods, and that includes military applications, fuel distribution, and explosive powders, and some very specialist areas of commercial vehicles and plant type vehicles. And the the whole model is an integrated offering where, you know, we're not a pure software company and we're not a box shifting hardware company.

23:43 We're, you know, a modern advanced systems integration business that has some of its own hardware when you can't buy the alternative or comparative product, and it's the same sort of thing with our our services. So we we believe we've got a very highly scalable business model. And that's a sort of a quick introduction to where we are with our interims and what our strategy is and how we're delivering. We're really pleased with the first half. As I said, we're on track for a very strong performance for this year, and and it looks very good for 2024 and 2025.

24:23 So I'll hand you back over to Paul. That's fantastic. Ross Nick, thanks indeed for the presentation. Ladies and gentlemen, do please continue to I'd like to remind you that recording of the presentation, along with a copy of the slides and the published Q and A can be accessed via your investor dashboard. Nick Russ, as as you can see, we've had a number of questions submitted both pre submitted and during today's presentation. So if I may just ask you to click on that q and a tab, at the top, read out the question where appropriate to do so, and I'll pick up from you at the end. Okay. But but we'll take it to the show. Shall have a go with this one or do you wanna have go with it? You go. Perfect. Yep. This is one okay. I can't actually see who that's from, but so regarding the medium term revenue target of 70,000,000, which we mentioned on the call in April, could we confirm that we're still on course for this and also is there a target margin which companies are? Absolutely.

25:24 So when we're modeling the 70,000,000, that was obviously ahead of the acquisition. Actually, this is from yes, it's from Daniel. So good good question, Daniel. We were sort of looking out into the marketplace and say, well, it should if we can get this right and our technology is adopted, then we can build out our footprint. Where could we get this business to in the sort of medium term? We sort of at that point, we're thinking in a three to five year time scale. And we figured we could get it to about 70,000,000 with a sort of double digit operating margin. And the reason we felt that was that it would be through a combination of our hardware and our services with the software layer inside them. And and obviously, we've we've delivered strong organic growth as we've already shown. And the Infotech acquisition has already taken us way past the sort of half of this.

26:19 And so what we actually said in our trading update was that we were targeting revenues of about 50,000,000 in 2025. Therefore, yes, to answer your question directly, we are absolutely on track to get to the 70,000,000 in the timescale that we've indicated. And and also in terms of the margin, we we think that it's absolutely addressable as we push into some of the development markets that we're that we're in. So we believe that we can deliver that and we are determined to deliver it. Okay. I would Next one is with the problems of funding within local authorities, picking Birmingham, are we seeing any knock on impact in revenues now and in future opportunity pipelines?

27:11 Quick answer is no. We've seen no impacts from existing customers or pipeline. I think Russ mentioned many of the funding pots there. They're protected, so so a local authority that's struggling would would not wouldn't lose those funding pots as a result. So so, no, we we we've seen no knock on impact at all. Okay. Okay. So please explain the portion of revenue which is coming from hardware and software. That's probably best for you, I think, that one. Okay. So so so, yeah, please explain proportion of revenue from hardware and software. So we've not split it out as Russ said. We intend to split it out in more detail with the full year.

28:04 We are heavily weighted weighted towards hardware. In terms of recurring revenue is a little over 10 of us in the half. Historically, well, last year it was a bigger proportion, but with the turnover from Inputech, that's dropped the proportion although the real value has actually gone up. We do have some contracts kicking in shortly which actually make a significant difference to our mix towards software. So from an ARR perspective, we will have a very, very much larger number at the end of this year than we did at the start of the year. And again, that will come out in more detail in the annual report.

28:53 Okay. And next one, this is from Samuel. Are you seeing further segments of the market that you can enter organically or via acquisition, especially overseas? Yes. Yes. We are. We've so we've received an approaches from a number of people in the marketplace. They're not in the so they currently are not customers that we're addressing. So these are in what we call adjacent applications. And we have sort of conversations at a number of levels there, including providing technology to them or potentially acquiring them. We we can see opportunities there, but we actually are being very careful that we don't overtrade. What we wanted to do is is obviously since Inputech came into the business, is obviously enable Inputech to to to flex and to grow.

29:45 And we're doing the same sort of thing with multi q as we bring that into the business, and that will shortly be renamed, say, Junior Europe. Then there are a number of other other areas where we can get into organically, and we just have to be very careful because if we need to if that would place any demands on our research and development, then we probably wouldn't do it because our pipeline and our order books are really strong. So we have enough in front of us really for the next eighteen to twenty four months without doing anything particularly speculative developmentally. However, if it's if it's a resell of the technology into adjacent market by effectively reskinning a website or rebranding some of our products. And yes, we could do that and we are looking at some opportunities to do that.

30:36 So the final point actually about the overseas, that actually is something that is getting a lot of debate around the board table within JOURNEO. And that's be large because of obviously, we have a contract in The US and we have some customers in France and Sweden and, obviously, Denmark and Iceland now. So we're actually looking at what else we could do possibly through licensing our software or from white labeling. So the early early conversations, but, yes, we we we actually think there's a lot of potential there. Okay. I think the rest are similar to where we've been before. If there's anything for that. There's similar sorts of questions in the letter. Okay. So I've got that one. Nigel b.

31:23 What would it take to get into a European airport? I've got to answer this quite cautiously because Dublin actually is in Europe. But we we do have some interest actually from airports overseas, much further afield actually in Europe. The plan will be that but we'll actually work through the team in multi cube to do that because they they're both a team in Stockholm and our team in Denmark, we're all multilingual. And we actually think that it would be more appropriate for them to deal with scaling up the airport operations. The the team in Denmark actually have already done Copenhagen Airport. And, obviously, this is with a different technology journey as airport technology.

32:12 So so do wanna scroll down and see if there's any most of these seem to be the same question, don't they? Okay. Do you wanna have a go at that one? David h? Shall shall we go? Okay. Okay. Just a short day. Okay. Can we explain the Nordic expansion and how easy this pushes into Mainland Europe, generally Poland, and what sorts of opportunity do we see? We see a lot of interest actually within the Nordics. They they tend to be more advanced than The UK market in terms of public transport. It's more deeply integrated. And so that is some expertise, if you like, that we will now have access to through Mads and his team in in Denmark.

33:02 There's been some harmonization, recent harmonization of the ITXBT and the German standards, which actually also roll into Poland and the rest of Eastern Europe. So that's actually something that we do intend to be doing through our operation in Denmark, and and that will absolutely involve Germany and and potentially Southern Europe. Okay. That's that's it. That's the last one. Is that that? Yes. Okay. Yep. Can we hand back? Okay. Well, I'm back. Think that's think that's all. Fantastic. Look. Thank you very much indeed, guys. And, of course, any further questions. The company will be able to review those with published responses where appropriate to do so on the investor me company platform. And Russ, perhaps just before redirecting investors to provide you with their feedback, I know it's particularly important to you and the team. If I could ask you just for a few closing comments, please.

33:54 Okay. So closing comment, obviously, you very much for making time to listen to us. We're working very hard to to obviously create this business and get us a sustainable model that can scale both in terms of its capabilities and also its geographic reach. We're not complacent. We obviously, we we we we paid we a great deal of attention to detail to to make sure that we do deliver the quality on time, on budget. But so we're very pleased with how it's going. There's a lot more that we can do and we determined to to to to meet the sort of expectations for this year and next year as we look forward. So thank you very much for your interest in us. Fantastic, Ross Nick. Thanks indeed for updating investors today.

34:39 Please ask investors not to close the session. Should be automatically redirected to provide your feedback in order the team can better understand your views and expectations. This will only take a few moments to complete, and I'm sure it's greatly valued by the company. On behalf of the management team of JNEO PLC, we'd like to thank you for attending today's presentation. This concludes today's session and good afternoon to you all.