Transense Technologies (LSE:TRT) — Final Results

0:01 Good afternoon, and welcome to the TRANSENSE TECHNOLOGIES PLC Final Results Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged, and they can be submitted at any time using the Q and A tab situated at the right hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question received during the meeting itself. However, the company can review your questions submitted today and publish your sponsors, which is appropriate to do so. Before we begin, I would like to submit the following poll. And I would now like to hand you over to

0:32 Executive Chairman, Nigel Rogers. Good afternoon to you. Thank you very much, Alex, and welcome, everybody. Those who have seen these presentations before will know I'm Nigel Rogers, the Executive Chairman of the company. And alongside me, I have Ryan Morne, who's the Managing Director and Melvin Siegel, who's the Chief Financial Officer. We're going to be splitting the presentation between us. I'll do a bit of an introduction, then Melvin will run through the financial highlights, and then Ryan will do a more in-depth look at both TRANSLOGIES and Source Sense, our two operating businesses. Alex, if you'd like to thank you. Just take the cameras off and we'll go into presentation mode. There'll be plenty of time at the end for Q and A, and we'll have cameras back on so you can see the whites of our eyes when the questions come in. So first of all, if I could start with a brief overview, a recap for some, perhaps an introduction for others.

1:27 Firstly, the ownership of the business was listed on AIM since 1991. Current market capitalization is around GBP 27,000,000. And we have a number of major shareholders above the 3% threshold. Listed there on the slide, you can see the largest two, Cricer and Dowgate, have approximately 10% of the company each. And the Board of Directors, perhaps slightly unusually for an enlisted business, have 3% stake as well, all of which has been bought in the market. Our board of directors comprises the three of us that you see on the presentation today, but we've also made some changes to the board over the last few months to plan for the retirement of Rodney Westhead, who's been an independent nonexecutive director of the business for many years. And we have brought on board two new independent nonexecutive directors, Steve Parker and Craig Wilson. I won't run through their CVs live on this presentation, but you'll see them on announcements relating to their appointment and in the RNS announcement an annual report. And I'm sure you'll find that their credentials to do the role that they're fulfilling for us mean that they're very productive and helpful as independent nonexecutive directors.

2:34 We've got a solid financial track record behind us now, and many will have followed the share price since the last time we presented and seen that there has been something of a breakout on the upside with some 50% growth in the share price over the last few months. All very pleasing, I'm sure. Just as a recap, the two operating businesses that we'll be talking about today are Source Sense and TRANSLOGIES, quite distinct in character and different market segments, but both very interesting and with high growth potential. Our SourceSense business is the supplier of advanced sensor solutions, which are applicable to a number of high growth markets, and we'll do a bit of a delve into the three particular growth markets that we're most focused on right now in subsequent slides.

3:19 And TRANSLOGIES, a product based business with a range of smart connected handheld tyre inspection tools, which cater for mostly the truck and bus market, although you're you're going to hear later today that there are some new market opportunities for that business also outside of truck and bus.

3:38 The third leg to our business is the residual income, which comes from the license agreement signed in June 2020 with Bridgestone over the technology previously sold by TRANSENSE under the moniker iTRAQ. And the iTRAQ business in the Bridgestone's ownership has grown very nicely. You'll see on the left hand side of this slide, the first four boxes here show the growth in royalty revenue since that transaction in June 2020. And that's grown at a compound annual growth rate of more than 40%, and we've collected now some GBP 7,000,000 of royalty income, including 30% growth in FY 2024 that we're just reporting on now. So a very nice solid set of growth numbers there in that business and well set to grow again in FY twenty twenty five.

4:28 On the right hand side of the graph, in the slightly darker shade of green, you'll see some illustrative numbers, and I stress their illustrations and not forecasts, as to what the future might hold in the remaining six year period of the Bridgestone royalty. And you can see there that although the unit royalty rate drops in f y twenty six and then again in f y twenty eight, In fact, we're still expecting to see growth in the volume of number of installations, which iTrack operates on, continue to give us a healthy revenue stream from this activity for the remaining life of the of the royalty agreement. In fact, at at a at a example rate of 10% compound growth in royalty volumes over the next six years, we'd collect some 13,000,000 more of revenue. At 18% growth, some £16,000,000 of revenue. So although the actual numbers may well fall outside of that range, you can see that, that range is still a very interesting number for us in terms of cash generation and ability to invest in the business and reward our shareholders.

5:39 Turning to the operating businesses themselves. I just wanted to say a little bit about the environment in which we're operating in and the reasons why we see major growth potential for each of those businesses. First and foremost, we're in dynamic marketplaces. We're approaching the aerospace market, the logistics market, automotive, electrification, industrial machinery. These are all markets which are very high growth and are characterized by very large companies. And in fact, most of our customers and potential customers are household names with multinational operations and billions of dollars of turnover. So we're operating in an environment where our customers potentially are capable of running very large programs, and that is obviously of exciting potential for us.

6:28 We also, though, are in an environment in which we're, you know, we're perhaps seeing the next technological revolution. As the world starts to wean itself off

6:39 carbon fuels, then moving towards electrification, especially as an alternative, but other alternatives also mean that industries which are by nature cautious and conservative are also embracing for the first time new technologies. And indeed, as you'll hear, the UK government are supporting that transition through grant opportunities for companies like ourselves to work in collaboration with large companies. So there is a real call for new technology, which perhaps has not been seen over the last ten or twenty years as there is a drive for sustainability. And because our technologies are new, they're innovative, and they offer opportunities to improve power usage, to lengthen the longevity or the useful life of products, to put predictive maintenance in place to be able to improve the sustainability of products, then we find ourselves in a very healthy place.

7:36 And a healthy place where we're able to focus on value because we're in markets which are both high growth, but also typically high margin, where our technology carries a premium value which customers recognize because they can offer benefits to their customers or find cost savings elsewhere in their products that justify the margins that we seek to earn in our own business. Doing that in an environment where we've built a very strong team of people, which is at the core of everything that we do, but also with the financial stability of being able to invest in our business, we feel that this cycle is putting us in a very favorable position. So then focusing on FY 'twenty four and look at the highlights of the year in terms of activities since this time last year. Then firstly, the financials. We've seen double digit revenue growth. We've seen profits up percent, in line with the expected growth trajectory that we had for the business in FY 2024.

8:40 And very good cash conversion, more than 100% of operating profit turned into cash. Especially, and Melvin will, cover this in his part of the presentation, that growth has really been focused around the second half of the year. In the first half of the year, we were mostly investing for growth and then beginning to reap that in revenue terms in the second half. So we exited the financial year at a very strong revenue rate, more consistent with the rate that we're looking for in FY 2025 rather than 2024. Within TRANSLOGIES, we've put in place new business development capabilities and are opening up new customers and also new channels to market, which Ryan will tell you more about. And we're scaling up the opportunity to bring production of our TRANSENSE TECHNOLOGIES products in house, which will enable us to increase capacity, but but also will give us cost advantage in the marketplace.

9:31 And finally, within TRANSLOGIES, we have opportunities now to broaden the product range and also to make incremental improvements to our existing products, which will be of great interest to our customers as we go through f y twenty five, but also to bundle our products in a way which gives new service options and new ways to pay for customers, which, again, we'll talk about in the presentation. Turning to SourceSense, then the pipeline conversion, know, many people who've watched this presentation over the last few cycles will have seen a very strong increase in the number of customers with which we're engaged and who are interested in the technology. We're now well underway in converting that into revenue generating opt opportunities.

10:16 Again, Ryan will expand on that. But in each of our target market sectors now, we have at least one cornerstone customer with a funded program who is undertaking work to prepare for potential future production. That has caused us to have the confidence during FY twenty four to invest more heavily in our saw business. We've spent nearly GBP 1,000,000 on investments in people, in building out the engineering team, in reconfiguring our facilities to cope with increased volume in production equipment and also in intellectual property to do it to extend the reach of our patent portfolio. Again, more of that to come. And then finally, we've allocated resource within the business to be able to continue to invest in SOAR over the next year or two in both the scale up of our own production facilities in order to be able to provide a pilot production line for customers to come and see and look at and touch, and also in the supply chain for componentry to be able to offer more choice, greater cost advantage, and a more robust supply chain going forward.

11:25 So lots of exciting things to hear, and I will pass now to Melvin to take you through the financial highlights, and then we'll hear them from Ryan.

11:34 Melvin, I'm gonna hand over control of the slides to you. Okay. Thanks, Nigel. TRANSENSE has again achieved good growth with results in line with expectations, and all of this despite the challenging economic environment we've been in. Revenues are up 18% year on year at just short of 4,200,000. Profit before tax up 20% at over 1,300,000, and the impact of increased profitability is that the earnings per share has risen year on year by 15% to over 10 p for the first time. Cash despite some large capital expenditure, which I'll come on to later, ended the year at just under 1,300,000 compared to 1,000,000 last year, and cash rose further in August to around 1,500,000.

12:21 And the next royalty from Bridgestone in respect to the first quarter of the current financial year is due end of October and should be at least 700,000. Treasury shares purchased in the year totaled 320,000, and finally, distributable reserves now stand at 3,440,000. I shall move on to the next slide. Looking at the revenue breakdown year on year, iTrack has risen by 30%, which is actually a slightly better increase than we saw between f y twenty two and f y twenty three. TRANSLOGIES is up nine percent while Source Sense fell back 8%. My focus is more on actually the next table showing the half yearly split of income as it reveals the building up of revenue momentum.

13:10 Overall revenues grew by over 30% from h one to h two. With regards to iTrack, we would expect growth as the track numbers generating royalties accumulative. The actual growth was from 1,230,000 to 1,380,000. Pleasingly, Bridgestone started exceeding their budget numbers in the second half of FY twenty four, and this has continued into the first two months of the current year. The rebranding of iTrack to Bridgestone iTrack, I'm sure, has helped with improved sales. More significant, however, are the increases in TRANSLOGIES and SourceSense. TRANSLOGIES increased by nearly 30% moving from just under 500,000 to 630,000.

13:55 The increase in h two also coincides with the introduction of Kevin Henley as the new sales director in January 24. SourceSense grew from grew the sorry. Source Sense grew the most from h one to h two, nearly a fivefold increase, but still at relatively low levels. However, what this demonstrates is that the business segment gained a lot of momentum in h two. Before I move to my final slide, a few words on the latest research note issued by Ian German, who's part of the Allenby research team. If you haven't seen it yet, I strongly recommend that you look at it. It's a very good note. The projected profit before tax of 1,600,000 for f y twenty five, which is in fact 26% up on f y twenty four, is broadly unchanged from the research note issued at the beginning of 2024.

14:48 However, the mix of income and overhead have changed reflecting our new strategy. Firstly, iTRAQ, I mentioned the improved performance of iTRAQ and the revenues for FY twenty five in the research note are now projected to be around 2,950,000, previously projected to be 2.9. This represents a 13% increase year on year. The year end run rate was just under 2,850,000, although the strengthening of the pound we've seen recently has reduced that to around 2,800,000. Encouragingly, the start of f y twenty five has seen positive incremental TRT numbers for both July and August 2024. I should also note when talking about iTrack that in f y twenty six, the royalty rate changes to 60% of the original rate.

15:39 And as we have previously indicated in presentations, the income should be somewhere around the level of the f y twenty three royalties. With regards to TRANSLOGIES, Kevin's experience and knowledge of The UK market, a largely untapped market for TRANSLOGIES, should present many new opportunities in f y twenty five as will the new tie ups we are developing, which Ryan will speak about with fleet and garage software providers. The new business coupled with further development of the business with major tire manufacturers should support the current market number projection of 1,500,000, which is an increase year on year of 34%. Incidentally, trading in July and August, traditionally slow months for TRANSENSE TECHNOLOGIES, indicate revenues substantially ahead of the previous year.

16:29 Finally, SourceSense has built real momentum in h two f y twenty four and currently has a strong pipeline of business, including the recently announced grant based awards with both Airbus and Protium. The research note reflecting this growth in momentum shows SourceSense revenue is increasing by a 120% to 1,000,000. Previously, the research note said 1 750,000. Finally, on this matter, to support growing revenues and the pipeline of opportunities, we have increased overheads, the main increases being in headcount, travel and marketing spend, and depreciation and amortization. Moving on to my final slide,

17:13 which covers cash flow. This shows we generated 1,560,000 from operations, which nets down to cash retained of 300,000. The post year end cash number demonstrates that trading continues to be cash generative. On the investment side, the share buybacks totaled 320,000 in the year, the last buyback being in April 2024. The overall average price paid for buybacks was 84 p a share, and the current market value is around 1,000,000 in excess of what was paid, which certainly in my mind confirms Nigel's assertion at the time that the shares were undervalued and a buyback policy would be appropriate. The other major financial investment has been in r and d, plant and equipment, and office refurb totaling nearly £900,000.

18:06 To explain this step change in investment, one needs to understand that the SORE SENT management historically ran the business on the basis that our unique patented technology could simply be licensed to interested customers and TRANSENSE enjoy future royalties with very little further interaction. This space has clearly enabled us to operate with minimal investment in plant and machinery and r and d. However, it failed to produce the expected revenues. Ryan's introduction has been instrumental in transforming the Source Sense business, whereby we now have a far greater involvement through engineering support and production for customers, hence the need to invest, and this benefits us twofold. Firstly, we charge for that support work, which is already starting to produce its own regular revenue stream.

18:58 And secondly, our involvement using our know how substantially increases the chances of the technology moving to the next stages. Following the renewal of our lease, we carried out a major refurb, and you can see from the pictures both here and on later slides that this is near completion. The main driver was the move from operating from small rooms to open plan, which in turn drives more collaborative working. Finally, two final points. The tax losses currently stand at 21,000,000 and are available for carry forward against future profits, so it still gives us a number of years free of paying corporation tax at 25%. And I referenced the f y twenty five numbers that are in the market. However, the f y twenty six research note numbers are likely to be introduced early in the 2025 calendar year when the board feel we will have a clearer picture of all the new developments.

19:55 And with that, I will hand over to Ryan.

20:02 Thanks, Melvin, and good afternoon, everyone. So we'll start with the TRANSENSE TECHNOLOGIES business and a recap. So TRANSLOGIES manufactures and supplies tire inspection tools. These are handheld devices.

20:21 We think we're currently the market leader in this in this space. Our tools interface through Bluetooth with either a tablet or a smartphone, like an iPhone, etcetera, and then upload data through that interface into cloud computing software, which is obviously very much becoming the thing and and very widely deployed now. We've got a great customer base that we deal with in this sector. For for many years, our business in TRANSLOGIES has been anchored around four main, tire manufacturers listed out there, Bridgestone, Promethean, Goodyear, and Continental. And in fact, Bridgestone and Goodyear representing more than 50% of the the turnover kind of regularly trading places between who is the, the the most important, customer or not. So an excellent base to to build from, with the business and really a good time to to be doing it. You know, there's a more and more focus on reducing costs in the logistics sector and a huge focus on improving safety, combined with cloud computing and these sort of mobile device applications becoming more and more widespread and just a part of routine everyday business for people where even five years ago, sort of tools that, technicians are using now in the fields couldn't have even be, dreamt

21:52 of. So fantastic time to be in the market with this product. We set out with the mission this last year to really try and grow the business based on a three point plan. Building our business with our existing customers was a priority, really getting to know them better, understand what they what they did, and how they use the product, and and we've really done that very, very well. The four customers that's, most important to us, you know, they they are very much in the top 10 global tire manufacturers, and, we know there's a lot more that we can do with them and and for them and, just helping them use the products better and provide better products and services to them. So that has has been a big part of the the focus of of what we've been doing.

22:44 The the next key activity was to, effectively find more of the same. So, you know, we currently deal with four of the top 10 tire manufacturers. Why not five, six, seven, and eight? So making a concerted effort to network and engage with the wider industry and find, more tire manufacturers. And we can say now that we're, we are dealing with one extra, tire manufacturer, and they're starting to use our tool in their business, which is Hankook. So an extra green tick on our little chart there. That's why it's a different green tick. And we're also in discussion with two more

23:22 of the tire manufacturers that are listed on that on that chart. So we've made some excellent progress in the last year expanding the business within the existing tire business. The other thing that we were really wanting to do though was expand beyond the the tire industry. So our products tend to be used in that pay per mile or pay per kilometer managed tire business of the large tire manufacturers. And we know that there's a lot of opportunities outside of that for the product

23:53 either supplying it directly to commercial vehicle fleet operators or other tire distributors and service centers and things like that to help them improve how they manage the tires and and their tire costs. And, again, we've made some really significant progress on that front in terms of finding new customers and deploying the tools in those places. What we also realized was, you know, we we really needed to add to our offer to make the the technology easy to adopt in those those kinds of applications. So, you know, the big tire manufacturers have got their own IT systems and their own information systems and software to manage the tire data.

24:32 Other companies don't. So we need to provide a solution of the bundled hardware and software into the market. And that's gonna involve working with new software providers and also launching our own software that we've been working on with a leader in the development of software in that field. So that is going very well and, again, can be shown in the numbers in that one of the reasons that we

24:58 delivered the growth that we did last year was a relationship with a new software company, which is a French business called Cerule. They have a brilliant AI driven software package which basically enables non tire businesses to sell tires. So what do I mean by that? Well, you take your car in for a service and it the the several software enables the the guys doing the regular service work to correctly specify and identify tires and then access inventories and and sell your tires and and makes it easier for them to do without having to have expert knowledge in tires.

25:38 They use our tool to help them carry out inspections, it's opened up a whole new market for our products. So very much passenger car focused, passenger car retail focused as well. And they've been doing very, very well finding new sites for that, and and they're growing in the market with that. So, you know, finding new applications in that and and working with new software companies is very effective. And finally,

26:02 big focus on trying to get new distribution partnerships in place both in the conventional sense, so new territory distributors in place, and we will be doing more of that. And we've got some news coming on that front and as well as working with more software companies. So trying to find more people like Cerule filling different niches where our tools could be could be useful to them.

26:26 So we set out the year with some key business objectives. I I think we've really delivered on those. You know, we we strengthen the team significantly. Melvin's already mentioned Kevin name checked him, but bringing Kevin online and there's a number of other team members alongside Kevin who've really helped to strengthen the team and making a very strong contribution. So big thanks to to all of them.

26:53 We have delivered growth with the existing customer base and certainly built on the those relationships, and we've got to know those existing customers much better. We've onboarded several new key accounts, which is very significant because actually the the business had had been stuck, if you like, with those four key accounts for many years. But we've we've now got extra key accounts starting to come online. So that's very, very significant for us, and we'll have better growth and better visibility through that,

27:22 including more tire companies and and distribution in Asia. We've been working to increase our production capacity. And to do that, we brought our production of the tools in house, successfully piloted that. The team at Western have done a great job in in getting that all set up, which gives us much better flexibility, should better control of quality and also margins on the product. So that should should really help us as well. We've got a really clear plan moving forward. So some, you know, very clear next steps, launching our new software partnership and enabling us to offer a simple bundled solution to customers who don't have those complex information systems, makes our product more accessible, but should also add to our revenue potential as well in the business.

28:11 Expanding that global distribution network, making sure we've got distributors in all key territories who are actively working with us and helping us sell more product, both hardware and software solutions. We are gonna be working to scale up that in house production capacity to to meet increasing needs and also working on a product road map. You know, the the business has had really one key product with four variants for couple of years now, but we can see through that high level of engagement with the customer, there's opportunities to do special products and variations on the products and software that we're offering to allow us to really put some meat on the bones of this business and and expand the offer significantly, obviously, bringing with it increased commercial opportunity for the business. So very positive period for TRANSLOGIES, a very positive period looking forward as well, and an exciting time to be taking this business onwards.

29:11 It's a fantastic opportunity and it does really feel like this is the right product at the right time in the market as we stand.

29:20 So next, we're gonna talk about SawSense and just run through where we're at with that. So SawSense, as a recap, is a sensor technology business and essentially, it enables the measurement of strain and temperature where you can't with other sensors.

29:39 And our sensor technology is it's always used to improve performance, efficiency, and safety in our customer applications. So we've got some great customers and actually, I mean, this slide has changed hugely in the last couple of years. We've added some some fantastic names to that list. Obviously, there's customers we can talk about publicly here on here and customers that we can't talk about publicly, which are also an impressive, impressive list as well. The SOAR business is focused on four key markets, aerospace, motors and drives, industrial machinery, robotics, and the, motorsport market. You can see from the graph in the middle that revenues today are coming from motorsport with smaller revenues from other sectors.

30:31 But we're already seeing that change quite significantly in terms of our progress in those markets and and with those customers. So, for example, in aerospace, we've had this customer GE for a long time. GE picked TRANSENSE and signed a license agreement several years ago, significantly before my time. But as a customer, the account hasn't really generated significant revenues beyond the initial license agreement.

31:02 We're now at a point with GE where we are very actively supporting them, providing them with engineering services, and and actually proposals for significant additional activity, component supply, etcetera, which will see that account transform into a significant revenue generating account in the near term. So the the license revenues that are attached to that GE business are still several years out before they start to turn on insignificant volumes. They're just starting to build engines now. But, you know, it's another couple of years till those engines are in volume build. But we've got a lot of opportunities in the near term to support them and and provide more to more to them to help them go through their their journey and also where they've engineered the the technology into other applications.

31:51 So they've got two more applications on top of the engine that we've been working with them for for some time. We're able to announce earlier in the year, I'll tie up with Airbus, and we're on the Airbus land one project. I'll talk about that in more detail on a on a later slide, so I won't go into that now. But, obviously, Airbus is a great business to be to be working with. And we also now have two more confidential customers in the aerospace sector. So for about a year now, we've been saying we had a a confidential program with an aerospace tier one. That is continuing, and we're working with them and actually continuing to do more work, building on that, program with them. So that that's a really exciting opportunity. But recently, in the the trading update at the year end, we announced that we'd signed and started to do work for another global engine manufacturer.

32:46 So that's very significant for us as a business. We now you know, to now have two major engine manufacturers that we're working with, very, very significant. And it shows, I think, the strength of the technology and the use case in aerospace being very, very clear. In electric motors and drives, this is really the market that got me interested in TRANSENSE in the first place, but it's it's a bit different to aerospace. In electric motors and drives, you know, predominantly for automotive, currently torque sensors and temperature sensors in the in the motor's rotor are not used in production systems because it's not possible to do that with current technology. So when you're designing a new electric drive system, you're not normally thinking about putting a torque sensor into the drive system for production because it's it's can't be done.

33:37 What we've demonstrated with SAW technology is you can do this. So this last twelve months, we've been working with an external consultancy called drive system design to validate the benefits and the use case of applying the torque and temperature sensing into the electric drive system. We've generated some really interesting results through simulation. We then took the decision to progress that into rig testing. DSD set this up on a dynamometer in their facilities and they've been running physical tests to characterize, what you can do. That's given us a huge amount of data that the company never had before and allowed us to go out with with an educated point of view and and communicate with the market the benefits that torque sensing can bring in these electric drive applications.

34:25 That's starting to really help us close programs and and get into development with customers in this space. So, again, at the the trading update, we announced we'd secured a project with a very high volume customer on a confidential basis. So that's continuing. Very good program. We also, last week, announced the program with Proteon, so in in wheel motors, and there's a number of other programs in the pipeline and actually engage with some other customers. So that sector is coming through quite strongly for us as the market begins to understand how they can use the technology to make drive systems better. And to be honest, as we become more educated in helping them reach that understanding.

35:13 Robotics and industrial machinery is our third key market. We are seeing a good level of engagement there. It's a bit behind the other two. So we just really got our first two commercial opportunities with robotic systems manufacturers. The robotics industry uses talk sensors today, So selling our technology into that industry has been a matter of, sort of showing the benefits compared to the current technology. So they're they're already familiar with why they need to use torque sensors in their systems. We've really just been having to show why our technology is better than the current technology in that space. We've just been able to deliver some prototypes to our customers in that sector. To be honest, we we have been a bit delayed with that because of capacity constraints in the business, but we just were able to get them out in September there. So again, good progress in that market, getting the parts into the customer's hands for them to start doing their testing is a is a big step forwards for us. And finally, motorsport.

36:14 So motorsport's a, you know, really interesting space. It's it's niche. The volumes are are never gonna be massive, but it is a revenue contributor to us now. And it's a great reference point for other industries, you know, some of the the places where our sensors are being used in motorsport really do help to give the customers confidence that the technology will work in their application. We work with McLaren Applied Limited in motorsport, so they sell to different race teams and championships around the world, actually. At the moment, we're doing about a 100 shaft systems a year with them, but we do see the potential to grow this to around 500. So quite significant opportunity for growth, albeit at a fairly limited volume. So the two programs that we've touched on already, Airbus, the land one, is is really interesting program. It's a two year project working with Airbus.

37:10 Airbus had already structured this project before TRANSENSE joined. So if you sort of look it up, you'll see that their projects, they've been working on land one for a little while now. They're developing a novel new landing gear for the next generation fixed wing aircraft. So that's quite significant for us in that so not only is it a program with a new potential customer in Airbus, but it's also a program in fixed wing aircraft. So traditionally in aerospace, we've been strong with helicopter and helicopter engine and helicopter applications. Helicopter market is small. The fixed wing aircraft market is much larger, so it's good venture into that market. The project is part funded by the UK government through the Aerospace Technology Institute which is it's great to be working with them, and that gives us extra exposure through the project.

38:00 It is a research project. It does have some technical risk, so we really we are trying to extend the operational envelope of the technology. If successful, though, it could lead to deployment in new landing gear systems with Airbus. There is a very big opportunity there with this in in the long run. And, crucially, even if the technology didn't deliver in that particular application, it does build a relationship with Airbus and within their business. You know, they they obviously manufacture fixed wing aircraft. They manufacture helicopters. There's a lot of opportunities to use SOURCENSE in their products in a more conventional way, which this project provides a great springboard for into the Airbus business. So it's it's really, really good to be working with Airbus on that project.

38:46 Second project that we just announced last week, is with Proteon. It's called project Pulse. So this is a thirty month project applying SAW into Proteon's in wheel motor system. So Proteon might not be a company you've heard of before. They've been the market leader in in wheel motor technology for a number of years now. In wheel motor technology has been around for a while but hasn't really found commercial success yet, but it feels like its time has come. Proteon have a number of projects with large vehicle manufacturers that nominated where they're going into production later in the decade, and this project allows Proteon to prepare for that.

39:32 It is part funded again by the UK government through an advanced propulsion center, it is albeit it's not a simple shaft, but it is a fairly conventional program. And we've been doing work with Protein for the last year. So we we announced we're working with Protein, but it was on a confidential basis several months ago. And now after that feasibility work and initial study work, that's now progressed into this full program, which we we do also see that with other customers as well. So it's good that the the the project's progressed in that way. And it also, you know, having already been on it for some time, it takes some of the risk out of it. The other really key element to this project is, it not only is allowing us to develop the technology in Proteins application, but it's also allowing us to scale up the business and, develop production processes that would be capable, and demonstrable in the in the market.

40:31 So through the program, we'd be working on putting the the, research that we've done over the last couple of years on improved production processes into a pilot line, and working to develop our supply chain in order to be ready for Prodium's requirements, but also for other high volume program requirements that we currently see in front of us. And doing it in this way, it's really good for the business. It allows us to de risk it. It also allows us to put facilities in place that help us de risk it for our other customers, Prodene included. So it's very, very good for us as a business. So we've we've been making some significant investments into the business which have been mentioned already.

41:19 But just in summary, you know, we significantly expanded the team. We name checked a few people in the presentation already, but there are several others. So we've been growing the TRANSLOGIES team and SourceSense team, you know, adding engineering, operational, and and commercial capacity to the business. So that's, you know, really helping us move forwards. We've significantly reconfigured the facility. We spent a long time trying to work out if we should just move or, you know, what we needed to do for the facility. We decided it was better to stay where we were and effectively renovate the place. TRANSENSE have been in there a long time and it was quite, say, unusual configuration. We've implemented open plan offices which have significantly increased our capacity for staff.

42:07 We've also opened a small office up in Newcastle which can hold, you know, sort of four or five members of staff up up in Newcastle. Some people will know that that's also where I live. So quite good for me. But it does give us some more flexibility in terms of where we hire people. So opening up our access to a much wider skill pool up here. In the Weston facility, the downstairs has been completely revamped. To anyone who's been there before, you absolutely would not recognize it now. Removed a lot of walls, made the spaces open, more than doubled the capacity down there, and really set a benchmark in terms of how the building should look. You know, it's now of a level where we can take a global business into the building and, you know, it's clear. They can they can see the flow through the building and and it really helps to sort of show them how the technology would work and how it would be implemented in their own facility.

43:04 Whereas before, when it was all a little bit small rooms and kind of difficult to see the flow through, it was quite hard to to communicate that to people. We do have some new equipment coming. We developed a specialized fully automated calibration system which we've been working on for some time with a a special supplier. That's due to be delivered in October, and that's really exciting. That's also first big step on more automated process equipment for the saw side of the business. And we have been doing a lot of work as well to kind of plan out what we need for the SAW sensing elements in terms of improving the installation process and coming up with a more automated process for that.

43:51 Concluded that work, starting to do trials and testing now with equipment suppliers to kind of prove out, and then that will help us, have a fully costed CapEx plan moving forwards. We have been applying for new patents, which again was quite a change. The business has been pretty follow on patents. I think someone said to me it's been ten years since they filed for a new patent. We've got a new patent in. We've got a couple more in progress, and we've got quite a few more to come because of the nature of the work that we're doing. So the the really, the big future planned investments are in that pilot production line. So there will be some key bits of CapEx that we bring in, allow us to set up a pilot production line in the building to demonstrate to customers, but also to fulfill our own needs internally.

44:38 We do have work to do in supply chain. We need to do a redesign on the ASIC and transfer that to a new production process and then all the sort of testing and things associated with that. And we're looking at the AQP, so the sensing element, how we can develop that and, and reduce its costs as well moving forwards. All of that is is giving us lots of opportunity for new IP and you'll see, you know, continued filing of patents and and new IP protection as the the business moves moves forward. So, hopefully, you can see from from that huge amount of activity inside, both the TRANSLOGIES and the Source Sense business. We're investing carefully in them and really have transformed the business. Okay.

45:26 So now back to Nigel. Thank you. I'm going to sum up and I'm going to sum up reasonably quickly because I do want to allow some time for Q and A. So summing up our current trading statement, which you'll have seen at the foot of the RES the RNS, identifies that revenues have increased by more than 60% ahead of the same period in the prior year. You'll recognize that the first half of last year was relatively slower. But nevertheless, we're seeing very strong growth in the revenue first half of this year so far. And that's driven primarily by both TRANSLOGIES and Source Sense being significantly ahead of the level of activity a year ago. And the profit of the company overall in the first couple of years is also well ahead despite the fact that we're digesting the increased cost base that we've just described.

46:15 Cash generation continues to be good. August net cash increased once again to 1,500,000. So current trading is very much on the level that we're expecting to see in the FY 2025 forecasts. Within the current financial year, our primary focus will be on converting what is a very healthy pipeline across all three business units. You know, I I have access to Bridgestone's forecast information by virtue of being a director of the subsidiary that iTrack is operated by. And then, obviously, we are getting much increased visibility of revenue within both of our own businesses because of the increased breadth and size of the customer base. So overall, confident on the top line, and projects are well underway to strengthen the supply chain and reduce costs on the bottom line by to find new component supplies and by bringing production in house for TRANSLOGIES.

47:09 So overall, know, a very good workload this financial year, but against the backdrop of high confidence in being able to deliver the numbers. Looking at the outlook longer term, you know, we are really now building two very valuable businesses in my opinion. We're at a stage where both TRANSLOGIES and SOURCENCE are coming of age and starting to demonstrate some real strategic value going forward. And that makes us very confident of the long term growth trajectory for the company as a whole despite, you know, the planned decreases in the Bridgestone iTrack royalty over the balance of this decade and then coming to its end in 2030. So, you know, overall, very happy with progress. I'm just doing a quick time check. That gives us twelve minutes for questions.

47:56 I'm sorry if you're disappointed and your question doesn't get answered online, but, you know, I would urge you to come back and circle around to the presentation online sometime tomorrow. The balance of any questions which weren't answered online will be answered in writing. But I've I've been looking down the sidebar of questions as Ryan's been speaking, and there's some very good questions, actually. I'm gonna start answering one myself on iTrack, and then I'm going to pass the questions on, so to Ryan. So I have, curated those in preparation. But I have a question from Matthew on iTrack, which is, could you give an idea of the options when the iTrack license expires in 2030? Is an extension possible? Well, the answer to that one, Matthew, is, a a frank no. I'm afraid not.

48:45 The iTrack deal, which was done in 2020, was largely reward for the investment that we had already made in the business, and it was an exit from that business. So, you know, you you could almost view that royalty as deferred consideration for sale of the business. Bearing in mind, you know, this was a business that was still cash negative. It was trading at a loss of about £1,000,000 per annum at the time of that transaction because it was still building a very from a very small market share. I think, you know, the the numbers on slide four showing an exit value of somewhere in the 20 to £25,000,000 range. You know, that that was a good deal. I think we're pretty happy with it the way that it is. I'm now going to just ask Ryan to comment on a couple of questions. I'm I'm pulling these together from the from the the ones on source. So, Ryan, what level of capital investment might investors expect with regard to the supply chain readiness associated with SOAR production capabilities in the near future?

49:46 So in this last year, we've invested about 800 k. I think, you know, people could expect this a similar level moving forwards. There'll be various different options in terms of how we, go about doing that, but you can see from the presentation, we're pretty clear in terms of key bits of equipment that we need to invest in over the time. So we are doing it carefully, but it will be of that sort of order of magnitude. Thank you. That obviously has an interaction with the APC grant as well to a degree. Melvin, the question for you, please. The APC Pulse project has a total project investment of GBP 11,000,000, including a government grant of GBP 5,500,000, half of that. How much will TRANSENSE be investing in the project? And how much grant will be received?

50:35 Yes. Thank you for that question. Our share of both of the grants actually are just in excess of 500,000 each than our net share from both grants. The level of investment, most of the cost that that will be paying for is salary cost, which we'd be incurring anyway. It will support some of the CapEx, which Ryan was talking about. So once again, cost that we would incur, probably 20 to 30% might be relating to outside subcontractors assisting us with the various work. Thank you. And again, allied to the Pulse project with Protean, Ryan, does the current partnership with Proteon Electric prevent TRANSENSE entering similar proof of concepts with competitors in The UK?

51:25 What about abroad or other segments of the market? Yes, absolutely not. So we are free to operate and actually, you know, crucially, people should bear in mind that we do have other programs running in the electric drive space but with confidential customers where we haven't been able to announce the programs and projects. So we're very active in that space with other companies. I'd like you to just comment on the relationship with Parker Meggitt, if you could, please. We have a question from Leon. The status from potential customers in Stage three Aerospace reduced from two to one. Is this related to Parker Meggitt? Or are they still a potential customer?

52:14 The answer is both. Yeah. So originally, we signed an MOU with Meggitt who were then acquired by Parker, so we're now talking about Parker Meggitt. Fair to say there's a little bit of indigestion within their organization after that deal. The intent, I think originally, was envisaged that they were gonna take on a license and kinda do their own thing. I think they realized that they couldn't do that and they needed support from us on an ongoing basis. So where we are at now with them is we are very actively in discussions with them on a number of projects. We've, you know, we're quoting them, got a couple of proposals sitting with them at the moment for for programs where we would be delivering an engineering program for them which then they they would be participating in as well and delivering on to an end customer in the aerospace market.

53:09 So the nature has changed and and that's reflected in the the pipeline in that effectively, they've gone from someone where we're in negotiation for that final license to now it's we are putting proposals in for engineering programs. So you could say it's a step forward. You could say it's a step back. Thank you. And then just pivoting to TRANSENSE TECHNOLOGIES, a question from Brian. I'm sorry, Boyan, I beg your pardon. Where is the production of TRANSENSE TECHNOLOGIES taking place? What sort of margin increase would we expect versus the current outsourced model? So we've brought the production in house into the facility in West Lone Green, part of the refurb, created the the floor space to enable us to do that. So we've set up a small production cell there.

54:00 The, you know, the capacity didn't we've we've got sufficient capacity there to deal with all of the current production needs. You know, the the contract manufacturing partner that we're using there is taking a fairly typical margin. So, you know, should be without getting into the the complete specifics of it, you know, they they had decent margin, 40% that they were applying. So we do see expect to see some margin enhancement. Some of that will be used to incentivize global distribution. So in the past, one of the things we always struggled with was we couldn't create sufficient incentives for distributors for the products, and we couldn't actually differentiate enough in our pricing structure for someone buying one unit against someone buying a thousand units. So there'll be some of, some of that as well.

54:52 Thank you. I'm gonna just take a couple of questions myself more at a corporate level. So I have, again from Boyan. When is the dilution of the $1.50 p LTIP reflected in the new share count? Is this captured in the reporting period? I also have pre submitted questions. Now that a large portion of the options are vested at 150, is it likely that management would maintain their holdings in the medium term? And a further question, is there an expectation that another LTIP would be put in place? If so, what would the targets be? And what level of shares are as a percentage of issuance? So I'll take those sort of generically. There is a a share option plan in place, which almost all of the employees, apart from the the newest joiners, participate in.

55:38 And the primary target of that has been to reach a share price between £1.50 and £2. So clearly, with the breakout, that is now coming within reach. Obviously, you know, each employee, including the senior directors, are in a position to make their own personal financial decisions as to when to exercise those options and what to do with the shares. I think that actions speak louder than words. Know, you'll note that they've hit one fifty and no options have been exercised. You'll also note that, certainly, the, the three people in the room now, have all been buyers of shares rather than sellers of re of of late. So, you know, whilst that's only a guide as to the future and nobody's gonna make any promises that they're not contractually bound by, you know, we have skin in this game.

56:28 None of us are wealthy. All of us are very highly motivated. And I think that, yeah, action speak louder than words. We have been big big holders and consistent buyers of stock. In terms of the expectations that we and other employees might have, we did most recently grant some options in July, at which time we signaled that there may be an increase in the headroom appropriate to be able to incentivize newer employees. Previously, we'd agreed a headroom of 10% of that maximum dilution. We're now looking at a potential increase to a maximum of 15%. And we said that we put that to an indicative vote of shareholders at the AGM in November, which we shall, although we have already gauged, as you would expect, the support of all of our major shareholders in advance of making that decision.

57:21 In terms of when that's reflected in dilution, well, it'll be reflected, you know, if and when those options are exercised. Although one of the big motivations behind the buyback program was to bring sufficient shares into treasury to mitigate the costs of that dilution for the company at a time when the shares were clearly undervalued. I hope that deals with that question. I have one very short question for you, Ryan, and one very long question. So looking at the time, I'm going for the short one. What was the justification for having two offices at opposite ends of the country with only 25 employees? Why was the office required? So some people already know, but, I live near Newcastle in the Northeast Of England and the company's headquarters is in Western On The Green.

58:11 Nigel lives near Sunderland across in the other side of the Northeast and, you know, we we don't let their regional rivalries get in the way of talking to each other. So, you know, a big chunk of your management team is based up in the Northeast Of England. We were actually trying to recruit a position at the Western On The Green facility, and I rather flippantly said, well, if we were advertising for this job up in Newcastle, I'd have filled the role in a week and my colleagues challenged me to that. So it was partial function of we are both located up here, but also mostly because we were trying to recruit some support roles down in Western on the Green and had been struggling, you know, several months trying to recruit for jobs which we knew would be I'm gonna have to cut across you for the time, Ryan, because we're done. But I just want to add, you know, that they're more in the nature of hot desks than an office. We're not talking about a large know, come and see us sometime, and we can give you a cup of coffee in a very small room. Yeah. We're we're not talking about plush headquarters.

59:17 It's better than the company. Yeah. Just what impact will AI have on your business? I, you know, I invite Ryan to talk about that in another full one hour session on another occasion. I'm sorry we can't take that question now. But, you know, what I would say is positively in our view, you know, AI requires accurate measurements in order to be able to apply those intelligently. So, you know, we would view AI, and many of our customers will already be using AI, you know, as generally a positive rather than a threat to our business. And I'm afraid that runs us out of time, although I'm delighted to say, also, we have run out of questions. That's great, Nigel, Melvin, Ryan. Thank you for addressing those questions from investors today. And of course, the company can review all questions submitted today, and we'll publish those responses on the investment company platform.

1:00:07 But before we direct the investors to provide you with their feedback, which one is particularly important to the company? Nigel, could I please ask you for a few closing comments? Yes, of course. People who followed this story for a period of time, I think we'll see a lot of really positive developments over the course of this presentation. We really have some depth and some substance now to what were very ambitious plans. They now look far more achievable because of the work that's been done and because of the pipeline that's been built. So, you know, for those who are invested, thank you very much for your patience, and I'm delighted to see that you've been rewarded over the last few weeks, and I'm sure we can maintain that success. For those of us look for those of you who might be looking to invest, then, you know, please keep in contact with the company, and feel free to reach out to us if you have more questions. Fantastic.

1:00:53 Nigel, Melvin, Ryan, thank you once again for updating investors today. Could I please ask investors not to close this session as you will now be automatically redirected to provide a feedback in order that the board can better understand your and expectations. This will only take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team of TRANSENSE TECHNOLOGIES PLC, we'd like to thank you for attending today's presentation, and good afternoon to you all.