Transense Technologies (LSE:TRT) — Interim Results

0:00 Good afternoon, and welcome to the TRANSENSE TECHNOLOGIES PLC Interim 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 on the right hand corner of your screen. Just simply type in your questions and press send. Before we begin, I would like to submit the following poll. And I would now like to hand you over to Executive Chairman, Nigel Rogers. Good afternoon to you, sir. Good afternoon, and thank you for hosting again today, and welcome to everybody on the cast. I hope everybody gets what they're looking for out of this presentation, which is an update with our interim results for FY '26, six months ended, so it's 12/01/2025. I'm I'm I'm sure the vast majority of people will have had a chance to look up the RNS this morning and will have also read with a bit of disappointment the trading update a few days ago. And so, you know, I'd like to start by saying that we will approach this with a bit of humility.

0:58 You know, we've hit some bumps in the road, but we're convinced that we're on the right road and, and going at the fast fastest speed that's possible. So, you know, with that in mind, I think we've got a lot of really good news stories today in terms of positive things that are happening in the business, and we look forward to sharing that with you in the presentation. I'm supported today, as usual, by Ryan Moore, the managing director, and by Melvin Siegel, the CFO. We're gonna probably drop cameras while we're presenting so that you can see the slides more clearly, and then we'll bring cameras back on for the q and a session at the end. Thank you. So I'm gonna start with a bit of an overview, and then I'm gonna pass over to Ryan who'll talk through developments within SourceSense and within TRANSENSE TECHNOLOGIES. And then Melvin will take up the rear with the figures, and he'll also talk a little bit about the iTrack royalty rates both for this year and also the forecast to the end of that royalty agreement in 2030.

2:01 So first of all, just to set the scene, you know, we have got in both of the business that we're going to be talking about today, revenue growth this year, although the full year revenue growth was slightly downgraded downgraded in the trading update on the January 30. And The reasons for that were essentially threefold. Firstly, within the Bridgestrone iTRAQ royalty income, the volume growth rate was slightly lower than we had anticipated a year ago. The historic growth rate is about 30% per annum and we'd expected about 15% this year. And in the event, the volume growth rate was a little lower than that, 10%, and there were some FX headwinds. Melvin will talk a little bit about that towards the end. Within TRANSLOGIES, although our new business ramp up in new areas has been strong and we'll talk about the new channels to market and the successes that we've had, the global tire majors have been a little down. And so consequently, TRANSLOGIES sales growth was somewhat more muted than we'd originally expected.

3:00 And within SourceSense, you know, while we've got a lot of onboarding going on with a a lot of customers at the moment, but that process is quite protracted. There's a lot of technical work required to onboard customers and also a lot of commercial work. And so Ryan will talk a lot about the pipeline. We've actually put some information about the scale and size of the pipeline and the timing for conversion of development projects into production, which Ryan will talk about at some length, and I'm sure you'll find that interesting. So overall, in the first half of the year, we've generated cash. We've delivered a small profit, but there is clear customer demand and meaningful commercial process progress across both businesses, and I'm sure you'll find that interesting to hear.

3:47 For our part, the focus is on disciplined execution. You know, we spend as much time as we possibly can on the day job, but we're happy to spend some time on investor relations every now and then, including today. So just a refresher of the company's strategy. We have in SOULCENSENSE and in TRANSLOGIES two businesses which we think are capable of very high growth for a sustained period of time, and we're developing both of those businesses towards having high value recurring revenue streams by the end of the decade. We'll talk a little bit about the mechanics of how we're achieving that later on in the presentation, But then that is all underpinned by the royalty income from the Bridgestone iTRAQ product, which is just over halfway through its ten year period.

4:37 Financial highlights for this year. Revenue excluding the iTrack royalty income was up about 39% on the first half of last year, so good growth. In total, revenue was down by about 8%. And Melvin will go into the granular detail of that by segment in his presentation. Gross margin was maintained at 90%, profitable, cash generative, and we've been working on a broad strategy of retaining at least a million pounds of cash headroom, and that was 1,300,000 at the end of the period under review. So if that sets the scene, I'll pass over now, if I may, to Ryan, please. And, Ryan, you could talk through Source Sense first, please. Thanks, Nigel, and, good afternoon to everyone. So the first chart that we have here shows, the revenue distribution for SOAR.

5:27 So on the left hand side there, just looking at the four segments that we're active in robotics, e drives, most important aerospace, and comparing the first half, of this financial year to the first half last period to period analysis. So you can see, you know, aerospace is is our biggest market. It's it's growing strongly. There's a combination of things there, some new customers, but, also a lot of activity on the with GE on the the programs with them. Motorsport business has also grown strongly and still working very closely with Motion Applied, formerly known as McLaren Applied, who are the leading electronic supplier into the motorsports market, who are a partner for distributing the source technology there.

6:14 Very, very good growth and and an awful lot in the pipeline with them. The the next largest segment for us was e drives. So that hasn't didn't grow quite strongly, but it did still grow. We're working now with automotive tier one suppliers and OEs on the integration of SAW into electric drive lines for vehicles of various kinds. And then lastly, the robotics, which we'll we'll talk more about later, grew very strongly as a percentage, from a low base. Expect to have much more growth there, in the the coming months. So re really very exciting space that I'll talk about later. Looking at the graph on the the right hand side of of this page, you can see where the income is coming from.

7:05 So, basically, on here, we've got the NRE and the grant income. So I I tend to roll those together. We we show them separately for obvious reasons, but the grand programs that we have are are working with key customers where the customer has secured government grant funding to help them, pay for a development program with us. So the customers are investing in those programs, and and they're leveraging grants available from the the the APC, which is the advanced propulsion center. So that's aimed at automotive, and that's the the program we have with Proteon or aerospace with the Aerospace Technology Institute. And that's the program that we have with Airbus. So two two fantastic programs. So we were developing new, technology for for those customers to integrate into their their systems.

7:57 NRE is is much the same, but, obviously, not supported with the grants. That's fully commercial work where the customers are paying for applications engineering, typically developing, the application for SAW into their product or system. And then on the the right hand side of that graph, you see components and production. So the the difference between those two and in the past, we've had some questions. I think people have have not sort of realized that they are two distinct different things. So what we mean in production is that is, where we are manufacturing a a instrumented system inside TRANSENSE. So, typically, most of that is motorsport business, and you see actually the the bars align pretty well with motorsport. There's there's a couple of things that fall outside of motorsport at the moment, but where we're assembling shaft systems in low volume, that's, under production.

8:47 And then the component supply is where we are supplying the components that go into a sensor system to an end customer for them to integrate in, to their systems. So examples of that would be, you know, supplying ASICs and sensing elements to to people like GE, that then they're then taking into their production to build into engines and and systems. So you can see that component income grew very strongly, for us compared to, before, which is an indicator of, the the direction of, a number of the programs that we've got. So So the next, four slides, I'm just gonna talk a little bit more about each market segment. So first of all, the the aerospace market. So for people not familiar with it, we are supplying torque sensors and temperature sensors into the aerospace market using the SAW technology.

9:39 It's a great market for us. There's a lot of sensors on on aircraft, and it's only increasing in numbers. Aircraft become smarter with more automated control systems, more preventative maintenance systems, and so on. The sensor content on on all types of aircraft is increasing. Electrified aircraft as well are a thing, and that's impacting us with some of the projects where, again, they need the sort of sensors we can provide. Our sensors allow the customer to reduce the size of of the the component that we're installed into. We're a smaller solution than conventional sensor technology, and we're typically more accurate and and offer them some lifetime reliability benefits compared to more traditional sensors. So there's a really strong commercial case, a strategic rationale for our technology in aerospace.

10:34 It is a it is a low volume market, but we are really working with some of the leading companies in the space. So with GE, we've we've got three programs now with them. We have the Airbus program. So initially, that was the one grant funded project. But since then, we've got two commercial projects running with Airbus, and and we have a lot of activity with them. So, you know, really the leading fixed wing aircraft manufacturer and, think, the leading engine manufacturer at the moment. We do have some other running projects in aerospace. So we're working with another engine OEM. We've a couple of programs there. And with a big actuator supplier, we've got a really interesting program. So we've got some great customer coverage. We do have a a bit of a pipeline of new programs with some new customers, so there's there's more to go out in the aerospace market.

11:23 And, really, the the plan for us is to continue to deliver and expand those relationships with those existing customers and build a little bit outside of those relationships with some more customers in that market and try and just continue to to grow the revenue through the engineering, application support, and then, obviously, the component production supply. I think everyone knows the the aerospace market, it's it's a long cycle time to go from development into production, but there there isn't, like, a big hockey stick like you would see in some industries. You know, the development the investment in the development of a system is very significant. The production supplies are, you know, over a very long period of time. So it's it's a good market for us to be in, but it's it does have that characteristic in terms of the pace that it moves at. So we're doing a lot in aerospace, today, and and we see a potential to grow this in the near term.

12:20 So the next key market for us is is motorsport. I said before, we work with Motion Applied, that that was part of McLaren Group, now a standalone business. They they are the leading electronics supplier in motorsport. You'll you'll find their electronics, engine controllers and and other solutions in pretty much, every major motorsport series in the world, and they're very, very strong partner for us to be working with. We've got some some really good reference cases now with them where the the technology is being used in different motorsport championships like IndyCar. WACC, you'll see there, that's World Endurance Championship. So basically, the Le Mans type cars, which is a huge part of global motorsport.

13:05 And we have a number of other championships that we're working on with, with motion applied in terms of getting our technology into those. The the technology's been used in motorsport for torque sensing, and typically being used for performance management within the championships. So in in IndyCar, they use our sensors to make sure the engine manufacturers aren't cheating, basically, to help control the cost caps in the in the formula. The the benefit of our technology, there are there are other torque sensors available in motorsport. Effectively, we give improved reliability, improved accuracy, and a better lifetime cost, so better total cost of ownership compared to other sensor technology that's in that market. And for that reason, we're getting, increasing commercial commercial traction, more programs, a and a good pipeline here.

13:53 So, you know, motorsport's a great market for us today. Will be the next couple of years, you know, with potential to double probably double again the size of of the market in motorsport. There is a cap to it. So I think in, you know, those sort of presentation of of the markets that we're in, you know, obviously, motorsport is not a high volume market. It's relatively high value per system, but it's is limited in terms of the overall, number of units that we're able to supply in that market. But still, you know, several millions of potential revenue there for us. So next e drives. So so what we're talking about here are electric propulsion units for vehicles. So, you know, electric cars and hybrid cars have an electric drive system with electric motors and gearboxes, and we're talking about putting our sensors into that application.

14:42 And this this market is a bit of a unique space for us in that, we are really opening up a market. So in the difference in aerospace and motorsports, there are alternative sensor technologies that we're competing against and, you know, the markets know they need torque sensors and so on. We provide an alternative. This market, you can't put conventional sensors inside electric motors. So we're creating an opportunity to put sensors where you can't normally, put them. That's got us some good engagement with some automotive companies. So working with a number of, companies in this space where, you know, these these projects are at development phase now. The companies are testing, and we're looking to get in in the production on some vehicle platforms. The volumes are much higher than the other two markets that we've we've looked at so far.

15:30 It is cost sensitive, so this is where our our pilot production line, starting to to come into force in terms of being able to demonstrate to the customers in the space that we can achieve the cost targets for the programs and the quality and the reliability targets for the programs that they need at hundreds of thousands of units a year, which is the typical volumes that we're we're looking at here. So very significant potential for us, you know, and and a good a good pipeline and the the programs that are running are running well. So finally so by the industrial robotics market, we've we've started to get some really good progress here. So over the last year or so, got some good engagement with a a number of companies.

16:20 The the robotics market is is set for some pretty explosive growth over the next few years because of a a combination of a number of things to do with, you know, AI and, and processing power and then some capability of mobile robots. So there's some very exciting things happening in the robotics market. And I think we'll start we'll start to see robotics solutions come into our daily lives much more, you know, from a robotic vacuum cleaner or lawn mower to, you know, cleaning equipment for hospitals, as as well as the sort of factory robots and that sort robe systems that we don't normally see. All of these, robots present an opportunity for us for sensors that help the robots get better performance, get better accuracy, and and and move around better. We are competing against other sensor technologies.

17:09 So we're getting sort of good feature of robots is that they, you know, the manufacturers understand that they they need sensors in the robots, and and we're presenting an alternative to the current sensors that's helping them get an edge in the market. So we've we've got some really strong engagement here. So, know, we're working with a very big US company, a big Japanese tier one, and a a of some more niche suppliers. But we also have a very strong pipeline, who haven't started working yet with, but are in discussions with some of the biggest robot and robot drive system manufacturers in the world. And and I think that, you know, there's a there's a huge potential in the robotics market for us. Faster moving than than the other markets we've looked at as well. So much shorter time into production than, you know, certainly than aerospace, but much shorter time in the production than automotive as well in terms of the the cycle times that we're starting to see here. So that that should be great in terms of helping us to develop some volume for the the saw business in the the medium term.

18:17 So just looking, a slightly different view across the four key markets. So what this slide is showing is the number of projects that we've currently got on. So on the the left hand side, they're the pre contract engagement. So that that is where we are talking to companies, but we don't have a commercial contract in place with them yet. So each line there represents a different company, where we have an ongoing discussion, and they're showing an interest in adopting the technology. So that's, you know, it's it's a strong pipeline for for future engagement. Then the the other side of that dark green line there, prototypes, development, preproduction, production, etcetera, those are companies where we are commercially, contractually engaged. So we are on contract with them, working on a development program or in the production side in the motorsport.

19:11 And you can see, you know, we've got a a number of programs there, and and we've indicated, I think, the first time, some potential value that we see or value range that we see those those programs being in. So, you know, what that is telling us in aerospace, we've got eight projects that are currently on contract, and each of those we see as having a mature value of somewhere between 1 and 5,000,000 a year. So, you know, the aerospace business for us is is gonna grow into a significant, you know, several millions of revenue over over the next few years. Motorsport as well, some stuff that's in production and bedded down now, but then we do have a number of series we're working on. And and lower value, but it's still still quite significant. So there are four different, things we're working on there with a value from 200,000 to 500,000 per year per per program. So again, potential for a couple million pound of revenue in most board. But then the the e drives and the robotics are really where the the very high values come in because of the higher volumes in in those markets. So, you know, seven programs in e drives, four at the moment in in robotics, a very strong pipeline behind that. So you can see the picture building in terms of you know, we've always said not all of these programs are gonna get into production, but also, you know, not all of them are not gonna get into production.

20:35 So we've got very, very good customers here, some world leading companies. They are investing their own money in applying SOAR technology in into their systems, you know, we have improving visibility all the time of what the the production side of that will look like and the time scales for us to get into volumes and and production and and a and a steady pipeline of new work coming towards us and new programs coming and building towards us. I think it's also, you know, you you can take it as a as a a good verdict on the business that that we've got customers, like I mentioned, where with Airbus where it started as as one project. If you've now got three projects running with them, you know, so there is we're getting kind of repeat business from customers as well for the for the technologies, I think I think that's speaks volumes about the the technology, but also about the team and the the work that we're doing with with customers on that.

21:32 Okay. So moving on to TRANSENSE TECHNOLOGIES. So TRANSENSE TECHNOLOGIES is our tire inspection and and management tools business. It's a very different business. I think, you know, what we're looking at here is is a very strong opportunity for us to be a market leader in this space for smart connected tire inspection management tools. You know, our existing tools are used by five out of ten, six out of 10 of the biggest tire manufacturers in the world. So we've, you know, increased that presence in that market, but it's it's a very strong endorsement of the product that's, you know, the biggest tire companies in the world.

22:20 And the, you know, it's five out of five now of the the top five are using our tools within their businesses in some way, shape, or form. A very strong endorsement of the product and and what it can do in that market. We're building, our offer, so adding complementary products, and and we're looking at how we can extend our offerings to the market. And it, you know, it is a growing market. It is a global market. So we actually still do very relatively little in The UK, mostly all export sales. We have got some nice legislative tailwinds coming, which are gonna start to help us in this market, which is something that we've been sort of hearing more and more about recently and learning more and more about, which has to do with basically digital product passport regulations for tire life cycle management that the EU is introducing, but also a number of other countries are following suit and introducing very similar legislation.

23:19 So, you know, it's been in the news in the last couple of days about another one of these tire dumps that that have appeared out of nowhere where people illegally dumping tires, and governments around the world are are trying to do something about that by introducing laws that will require tires to be fully traceable. And they're doing that by means of RFID tags embedded in the tires, which will then be used to track the tire. Tire inspections are mandatory Well, will be mandatory as part of these regulations. So tools like ours will become essential and and go from being something that's optional, kind of good business practice to being essential for for regulatory compliance. So that's quite an exciting move that's happening in this space. And, obviously, there's a lot happening with cloud computing and AI services as well that's also helping improve this market and add capability to the the tools that we're offering to customers all the time. So we've been working here to to build our business, quite successfully.

24:24 We've got this sort of key five point plan, that that has been working. But I think if I just jump to the next slide, you can see so just looking at where our revenues come from, so tire majors, you can see actually the revenue is down. So we we have added a a new tire major to to the business, but even despite that, the the revenue was down compared to the prior period. In every other place, we've expanded. So we're actually growing the business much more strongly in our other routes to markets. So distribution, direct to fleets, software, partnerships, much more strongly than the the traditional business with the tire majors. And that has been a bit of a drag on us in this first half.

25:17 You know, if if even if we'd held the tire major accounts steady, that that would have done, you know, significantly better for us as a business overall because of the growth that we've we've had elsewhere. I do think that the turbulence in the tire industry is is coming to an end. The the number of factors been driving that. And, you know, quite well documented some of these bigger tire companies have having a very difficult time over the last twelve or eighteen months. So, you know, we we are expecting that to recover, and and we are seeing really healthy growth from our other routes to market here, and and a lot of potential to expand and, and grow further within this business. Part of that is gonna come through adding new products.

26:04 So we announced, last year, we in November, we launched new products with TLGI, which is a smart inflator. It's a complementary product to sit sit alongside our inspection tools. We're starting to ship the first units to customers in the in the next couple of months. So the the launch went well. We've had a lot of early interest, and then, obviously, we got to get the the supply chains and the production set up to to start shipping units, and that's gonna start to happen in in the next couple of months. So that should that should start to have an impact on us. We do have some other complementary product launches planned as well. So we've got some exciting new products that are on the way, which will extend our offer, should enhance revenue. And we've got some more software partnerships that we're trying to bring through. So we did a a deal with a software company called TRTAS to resell their software. We've been working on another deal that's a different for a different part of the market, but a complimentary product that we're looking to bring through as well. So there's a lot coming, on the TRANSENSE TECHNOLOGIES side of the business, a lot lot of potential.

27:05 You know, it it it is a growing business. We've got some I think probably for the first time ever, we've got, you know, a good number of really strategically important, sort of partnerships and, and, cooperation activities under discussion. So that potentially huge for us in terms of getting some of those through and, you know, expecting a a much improved new business pipeline and, you know, some new subscription deals starting to come through in the next few months. So very, I'm very optimistic for the on the outlook for this part of the business. But, obviously, from a growth point of view, this was the area where the first half wasn't wasn't quite strong. Hopefully, you can see, see the reasons for that.

27:51 Okay. Thanks Ryan. The reduction in the iTRAQ royalty rate by 40% at the commencement of this financial year was always going to make f y twenty six our most challenging year post the Bridgestone deal. Evaluating that royalty change produces an annual reduction in excess of 1,000,000, which as Nigel mentioned has been increased further as a result of the stronger pound. The expectation for FY twenty six based on the levels of activity at the time the market numbers were released was that both SOAR and TRANSLOGIES revenues combined would be able to generate a challenging but achievable year on year increase of 72% to compensate for this reduction. So how what have we achieved in h one?

28:43 The financial highlights show the increase in store revenues from 380,000 to 660,000 and TRANSLOGIES from 520,000 to 590,000, representing a combined growth year on year in revenue of nearly 40%. Although SOAR on its own enjoyed a strong growth of 74% year on year. In any normal year without the royalty rate reduction, those growth rate numbers would regard would be regarded as strong, particularly in the current economic climate. They also meant that the impact in total revenues of the royalty income falling by 550,000 was reduced to 200,000 as a result of the 350,000 increase in saw and TRANSLOGIES revenues.

29:32 Gross margins have been maintained at 90% helped by improved TRANSLOGIES margins. The royalty reduction and increased operating costs have, of course, impacted profit before tax. However, we did remain profitable just. We continue to be cash generative, and the period end cash balance was a healthy 1,330,000, reflecting the drawdown in December of 400,000 against our 1,000,000 asset finance loan facility. The balance will likely be drawn down in the first quarter of the current calendar year as the tangible CapEx investment reaches the 1,000,000 mark. Looking now at the revenue growth of our two active segments, I e, SOAR and TRANSLOGIES, the chart shows a consistent year on year growth in both h one and h two, and the level of growth from h one to h two has historically been very healthy being around 70% in f y twenty five and an even higher expectation in the current year. Just pausing for a second, I noticed that someone actually raised a question, regarding why h two seems to exceed h one by so much. I I think the answers probably are one the obvious answer, which is we are a growing business, so you'd expect it. But I think maybe the lesser obvious answer, and I'm sure Nigel and Ryan might wanna comment on this, is to do with

31:03 budgets. I know that there were one or two transactions that could have gone ahead at the end of December, but because there were no budget available, they were halted or delayed and will go through hopefully in this current second half year. So looking again at the chart, you'll see the growth that we've achieved and this remains very positive even though we didn't hit the levels of the original research note. The next two slides show the bridge from f y twenty five h one to f y twenty six h one in terms of revenue and adjusted earnings before tax. Reinforcing my comments, you see across the board increases in revenues with rises of 231,000 in SOAR alone and 48,069 thousand in grants and TRANSENSE TECHNOLOGIES respectively.

31:59 The fall in royalties of over 500,000 resulting in final revenue numbers of nearly 2,300,000 with SOAR and TRANSLOGIES, as I mentioned, mitigating that fall in royalties. Looking at the adjusted earnings before tax bridge analysis, saw margins have increased by 266,000, partially offset by an increase in costs of 188,000, giving a positive year on year increase year on year increase of 78,000. TRANSLOGIES numbers show a 115,000 increased margins helped by improved gross margins achieved as a result of moving production in house with gross profit rates moving up from 55% last year to 68 in the current period.

32:50 TRANSLOGIES costs only increased marginally as a proportion of employee time has been capitalized reflecting the engagement on development work on the next generation TRANSLOGIES TLGX and also the new tire inflator tool, both of which Ryan referred to. The latter was launched last month. Finally, you can see the reduction in royalties and an increase in central costs, the latter mainly relating to costs for a larger headcount, which currently stands at 35, including 19 in the sortie. A few words on the cash flow statement, which sees positive cash flow in the period of 190,000 with a closing cash balance of 1,300,000 rising to 1,700,000 in January following the quarterly royalty receipt.

33:42 The 2024 plan CapEx spend of 2,800,000 on SOAR is summarized in the smaller table showing a spend to date of 1,700,000 partly funded by the asset finance loan of 400,000 and a future spend of 1,100,000 where the balance of the asset finance facility will be used. The tangible part of the spend being in respect of new plant and equipment to both modernize existing equipment and create a new production line that Brian referred to. On intangibles, it represents the development of the next generation key saw components being a the ASIC and AQP. Careful cash management has seen us manage the CapEx spend and maintain cash headroom above the 1,000,000 mark.

34:32 My final chart looks at iTRAQ, and you will be familiar with this chart looking at historical income and an illustration of future income based on two different levels of compound annual growth being 812%, reflecting growth in TRT numbers where we have already enjoyed a mere six fold increase in TRT numbers since inception of the deal and a compound annual growth in excess of 30%. And in the current year, this is running at 10%. The chart reflects the 40% royalty rate deduction that commenced in July 2025 and the further reduction of one third of the new rate in July 2028. Looking at the chart, the current year should end up being aligned with f y twenty three revenues with the growth in royalty producing trucks offsetting the royalty rate And the illustration closes in f y twenty sorry, in f y thirty with an annual royalty of between 1.8 and 2,000,000 based on the illustrative growth rates.

35:38 The word on FX is the royalty receipts are received in US dollars. The opening rate when we did the deal was completed was 1.25 US dollars to a pound. During the first five and a half years, the average rate has seen a stronger pound in all but one of the financial years, thereby reducing our reported revenues. To give some context, had the rate remained static throughout the five and a half years, we would have received around 300,000 more in that period, 200,000 of that coming in f y twenty five and f y twenty six alone. We have hedged the US dollar to mitigate the FX movements, and this has clawed back about 20% of that sum.

36:24 However, the hedging impacts cash receipts and not the reported revenue numbers. The overall value of the royalties due over the final four and a half years of the contract should be around £9,000,000. And 9,000,000 is a familiar number as it also represents the current market cap of TRANSENSE following the recent fall in the share price. What this is saying, therefore, is that the market is effectively recognizing very little value of both the TRANSLOGIES and SOAR SENCE segments. Whilst pondering that thought, consider that in October 2015, we sold Intellisor, company with a very narrow usage of saw technology for $5,000,000.

37:10 In July 2016, we granted a license to GE for a very specific and non exclusive use of saw technology for $750,000 plus anticipated future annual royalties. And, of course, the transaction in June 2020 with Bridgestone selling iTrak for its less assets value and a ten year royalty that has already generated $14,000,000 and could generate in total some in excess of $25,000,000 in royalties. The conclusion being our leading technology and the strong market recognition in both segments clearly does have a value. If I can now pass over to Nigel to look at the outlook.

37:57 Thank you, Melvin. And I'm just looking at the time. We're going to have about twenty minutes left for questions. We've got some really good questions come in, so thank you for that and we'll answer as many as we can. But I think just to close on the presentation, I think we've actually started today to disclose some pipeline information in terms of the scale and quality of the inquiries when they reach full production that we're handling within Source Sense. And I think that that gives a clear indication to investors of the reasons why we're investing today in order to reap those rewards tomorrow. And, you know, that is based on our genuine feeling of clear buying signals coming from customers and prospective customers that we have the right products at the right price to be able to fulfill their requirements going forwards.

38:46 So as a team, we are confident in our strategic plan. You know, we are we we also, as I said at the outset, carry some humility with us because we're not on the trajectory that we said we would be. But with that in mind, we continue to focus on disciplined execution of the plan and we remain very confident of the direction of travel and the size of the price at the other end of this process. I'm just going to now put on the screen there where you can obtain further information and start to answer your questions. I'm going to try and group the questions together a little bit and I'm going to kick off, if I may, just directing some of them at you, Ryan. First of all, on SOAR.

39:36 I'm going to put three questions together here because they are all connected. First of all, from Martin H. What is the patent position and is anyone else looking to compete against you with similar SAW sensors? From Paris T, what can go wrong in the e drive market given the lack of competition? And, again, from Paris T, could the Chinese bypass or copy our tech in robotics? So I think they're, you know, three questions connected with the level of patent protection and then the level of competitive threat that we see within this whole business. Could you perhaps just say a few words about that, please? Okay. So in terms of the patent coverage, you know, we do have an aging patent portfolio.

40:24 So some of the patents are are older now, and, you know, some have already some have expired of the original sort of patents. We've been working to put new patents in place. So last year, we put a couple of new patent applications filed. We've got some more planned. So we are in putting new patents in place to to do with typically the application engineering side or the scaled up production techniques and technology side of of what we're doing. So so there there is there's an awareness of patents. We are are working to continue to extend the patent coverage. I think the the other thing that's really important is the know how that surrounds the product as well. Like, actually, a lot of the reason for where we've ended up with the business model is because SOAR is a very different technology.

41:15 In the past, customers had a lot of problems applying it without assistance. TRANSENSE has developed a lot of know how. We're continuing to improve that know how base all the time of the application of it, the sort of high volume production technology, etcetera, etcetera. So there's a huge amount of know how within the business that's is very valuable to us. I think that it kinda covers the Chinese point. We don't have any active business in China at the moment. We do have a supplier in Taiwan for one of our key components. We'll be very careful about the Chinese market. Obviously, there could be an opportunity there for us, but it's not one that we've actively tried to seek out. We're not aware of, you know, companies trying to copy sort technology, but, obviously, you don't know what you don't know about that. I I think, though, we we are pretty well protected in terms of the the efforts that we would have to go to to replicate that deep know how and expertise and and the IP that we've got would be very, very difficult for them to do.

42:21 And I'm say this very flippantly, but it would be easier for someone just to come and buy us than than try and replicate it. So, you know, that's the patents in China. On e drives, I think really the the key risk there, because it's a market that doesn't use talk sensors today, our positioning in that market is all about proving that there's a good return on investment for the customer of applying SourceSense technology. So they if they're spending money on our part, you know, the automotive industry is is pretty heavy on cost savings and taking cost out of products rather than adding cost. So they have it has to be clear what cost they can save in the system. So being able to demonstrate good savings in in other areas, and typically, that's from reducing rare earth magnet content for a given performance of motor and some functional safety benefits as well. But getting that business case really clear for the customer and then taking the risk out of it. Automotive companies are massively risk averse.

43:25 You know, we all expect our cars to be super reliable and and not have any problems. You know, they put a lot of effort into making sure that happens and making sure that SOR can demonstrate the reliability, repeatability, and that it meets all of the requirements for that market. Keith, know, they're the really, the two key areas to achieving success in e drive space is show the benefits and take the risk out of it. Thank you, Ryan. I'm gonna also group together another couple of questions, which I think, you could take together. From Brian, can you explain customer onboarding used in the trading update, please? And from Nicholas, are delays to contract wins just down to market forces, or is there something you could have done differently? So can you just talk a little bit about the, you know, the customer onboarding process and how that works through through the early stages of development?

44:25 Yep. And what the reasons why getting them over the line into the starting blocks can sometimes be more time consuming than one might imagine. Yeah. Sure. I mean so if you look at actually both sides of the business, I mean, they're obviously very different businesses, but there are some similarities here. You know, we're we're selling specialized technical products and technology. So the the thing that we're selling, it's it's not straightforward, typically. There's always a a value proposition, and there's a lot of work to to do with the customer. We're typically dealing with I mean, we talked, you know, TRANSENSE TECHNOLOGIES. We've got, you know, some huge tire companies and and the other companies we deal with are typically very big. So we're dealing with large organizations that have got extensive contractual requirements and, you know, you're often negotiating points in a, you know, 100 page long contract about something.

45:20 So they're they're quite complicated organizations to deal with normally because they're very big. You imagine on SOAR, we're dealing with automotive OEMs, aircraft OEMs. You know, these are these are huge, huge companies. They, you know, spend a lot of money, have huge contracting departments and teams. So that process of getting set up as a supplier even on their systems is is quite onerous and and takes a lot of time, to do. Then, particularly with SOAR, the the the the process of understanding the customer requirements and looking at their application and then actually developing a project plan and a proposal to be able to to quote work back to the customer. That is significant in itself quite often negotiation on that in terms of, you know, the scope of work and the costs and so on and so on. And it can be quite a lot of backwards and forwards on that. You know, we we we have had with customers where we've been, you know, sometimes it can take three or four months even to negotiate around the actual work to put to come up with a plan in the first place and then negotiate around the work that we're gonna do with them. So when we say onboarding, it's it's that process of that we would go through of getting set up with a customer so we can exchange information and then getting set up as a supplier, getting in a position where we can can provide a proposal and and that, you know, that's quite involved. And then and then getting on contract because then, you know, that itself

46:51 is is another lengthy activity typically, especially on the source side with some other the larger organizations that we're dealing with there. It can take it can take almost as long to for the customer to raise a purchase order for something because, you know, it takes us to deliver the actual technical project, which, you know, if you've never dealt with a large business before, it can can be a surprise. So that once you're up and running though, once you're set up as set up with a company, once you're on their systems, you're a registered supplier, the next time around, it all becomes a lot easier. But I think it is a characteristic, and we've talked about this internally that, you know, the last year or so, you know, we've been doing a lot of new stuff. So we've been dealing with a lot of new customers and onboarding a lot of new customers and going through this process time and time again with new people.

47:41 It it it'll start to sort of settle off a bit as that that ratio of dealing with customers that we already know increases to the number of new customers that we're we're starting to to engage with. I think on the the the second point, the delays, I think that's I mean, there's a there's a there's all sorts of reasons behind that. I think principally, if you look at what's happened across the two divisions, we've had some some larger projects on the TRANSLOGIES side that have taken longer than anticipated. Some of that, you know, tire OEMs taking longer than than we'd expected to come back and do, you know, significant orders and rollouts.

48:28 But other, you know, other things taking time as companies are being cautious with their investments, you know. TRANSENSE TECHNOLOGIES is a spend to save type activity. So there's a good investment case, with, you know, people are investing money in that equipment and and the software technology to help their business. And at the moment, I mean, globally, it's not not a UK phenomenon. You know, people generally are being quite careful with with those investments and taking longer to make decisions. On the on the source side of things, I think, you know, we we, in general, I think progressing pretty well other than, you know, some of the larger companies that we've been dealing with. We have had issues where just just a process thing. It's taken longer. You know, they've wanted us to do something.

49:14 We sort of agreed in principle we would start on this date, and then just the internal mechanism of getting a purchase order and getting on contract has taken, you know, plus two months, three months to to to come through. So There's even occasions when we've been asked by the team that we're dealing with to do the work at risk without a purchase order simply because they know of the frustrations of their own internal processes. Yeah. We and we have we have done that a couple of times in in the last twelve months, especially for the aerospace side of things where we've started work at risk because the customer is in a hurry to get it done and we've finished the work before they've actually managed to get the purchase order raised. Yeah. Okay. I think perhaps we might pivot and just look a little bit about the questions more sort of at a corporate level on the cash position and outlook.

50:11 And then I'm going to answer a couple of questions on the shareholder base as well. So if we first of all could look at the questions on cash and you might take these please, Melvin. Have given the reduced cash inflows expected until June 26, is the company still going ahead with its CapEx program? If yes, does this mean the existing plus ex expected cash flows will suffice? Ah, I'm unmuted now. I tend to do cash forecast eighteen to twenty four months forward. So I'm regularly looking at the cash position. I also obviously sensitize those cash flows. And taking into account the current planned CapEx, we maintain the £1,000,000 headroom throughout throughout that period. And that was part of the reason why I went for the asset loan finance to maintain that headroom as well.

51:11 And as I mentioned in the presentation, far, I've drawn down 400,000 of that and should draw down the balance of that in the first quarter of this calendar year. Thank you. Allied to that question 10, do you believe you'll be able to maintain your million pound cash buffer level over the next year and meet your longer term growth ambitions without needing to raise? And I think we can answer that as a team. We have set out a strategy which is intended to deliver the benefits that we've outlined today without needing to raise growth capital to lengthen the runway. You know, we're we're on a runway. We're ready for takeoff, and we don't believe at this stage that we would need to raise cash in order to lengthen that runway.

52:02 You know, of course, it would be a fool who said never because we don't know what what's gonna happen next year in the world. But, you know, it's our strong belief that we can build a plan and as Melvin has said, that plan includes an eighteen month forward looking cash forecast to enable the company to live within its means. I I think that ties in with another question, you know, is the opex slash recruitment done? And the answer is, you know, yes, we have what we need. We don't have what we'd like, but we have what we need. And, you know, it will always be our plan to work within the constraints of the cash flow that we have available to us until and unless the business is ready to move on to a completely different level.

52:49 And and I think that brings us then to what that level might look like. I'm gonna perhaps invite Ryan and Melvin to comment on these three questions. So, again, I'm gonna combine three questions together. Cavendish of 2030 forecasts of 12,500,000 of revenue and 4.3 of EBIT, that's in Max's valuation model at the back of the broker research. With what you're currently saying in source entrance and TRANSENSE TECHNOLOGIES, do you think these targets are realistic? So that's 12.5 of revenue with 4,000,000 of EBIT by 2030. Are they realistic? But I'm gonna tie that together with another question which reads, the release today expect outlines large expected store revenues by 2030, several tens of millions. How does that reconcile to the previous guidance of 5 to 10,000,000 by 2030 or Cavendish 12,500,000 by 2030?

53:48 Then finally, what operating margin do you expect for SOAR if the revenue is 10,000,000 plus? So I think those three questions connect together quite nicely. And really, what they're looking for is a view of what this business looks like in three to five years' time. Is 12,500,000 of revenue and 4,000,000 of profit a sensible target? Is it pessimistic? Is it optimistic? Does it sit in a range? What sort of operating margin would we generate at that level of revenue to be able to hit the bottom line? I'm happy to comment on that myself, but perhaps I'll let at least one of you do so first. Do you wanna kick off, Ryan, or do you want me to? I'll let you go first, Melvin.

54:34 Yeah. So so far as the margin is concerned, I think you'll see as it develops and when we move towards production, we're we're gonna be looking at margins between 5090%. So on average, it probably will be operating at a margin of 70% on SOAR. And, actually, that's probably where between sixty five and seventy on TRANSLOGIES. With regards to the numbers in 2030, it you can only you can only be guessed where. I mean, we we have an idea of the various projects we're working on that are moving towards production. And if they do move it towards production, we have an idea of what volumes might be. Some of them are in the thousands.

55:20 Some of them would be in the hundreds of thousands. You take all of that information into account and extrapolate it, and the numbers that you you've seen given are numbers that are achievable. I'd like to personally think they're at the lower end, but I'll get Ryan's view on that. Yeah. I'd I'd I'd I'd be inclined to agree. I mean, I I would segregate it into I think in all sense, we've got the sort of lower volume business in aerospace and motorsport where we can see a business developing, you know, that's several millions of revenue. And it's pretty it's low risk in terms of we we don't have to demonstrate high volume production. We don't have to demonstrate low, you know, low cost components fire or any of those things. Like, it's it's we can get there with what we've got around us today.

56:14 You then add into that on SOAR. We've got the the two higher volume areas where we seem to have a good technology fit for the market, but we do need to be able to demonstrate high volume production capability, low cost component supply capability in order to achieve success in those markets. So, obviously, that introduces a bit of extra risk. But those markets are absolutely enormous, you know, and it it would have the the potential for for significant upside, over the those those numbers if if we manage to achieve a breakthrough in the high volume side of things, but but there is a risk level attached to that. And so on TRANSENSE TECHNOLOGIES, I think, you know, again, we're we're doing pretty well growing the TRANSENSE TECHNOLOGIES business. There's a lot of potential there to grow that a lot further.

57:00 So, you know, the TRANSENSE TECHNOLOGIES will be able to, you know, grow significantly over the next four or five years, doubling doubling again. And there's there's a lot of potential in the market for for that. So, you know, overall combined, I I think, like Melvin said, I'd like to believe those numbers are achievable and there's some upside potential on that. And, you know, every every week that goes by, we're getting better clarity and, reduces, you know, some of the risk elements and learning more about where we can, take the business to. Great. Thank you very much. I'm gonna close with a couple of questions on the share price reaction and the shareholder base. So been asked by three different people whether DaoGIES have disclosed to us their reason for selling and whether they're stopped now.

57:54 You know, obviously, you know, I can reassure you that after the trading update, I have contact with all of the major shareholders. And we've got, you know, cause and opportunity to do that again face to face over the next few days. So we will get, you know, a comp a complete picture. We already have strong indications, but we'll get a complete picture of where they stand. Nobody would expect me to comment and and share that information publicly, obviously. But we have very good and close dialogue with all of our major shareholders, and, you know, we we expect to and try to spread that to all of our shareholders, not just the larger ones. Allied to that, two or three people asking whether the directors are cleared to buy.

58:41 And, you know, obviously, up to yeah, this morning, the answer to that was no. After this morning, then, you know, I'm not in a position to comment, but all I would say is that you've seen how much is happening in the business. And from time to time and often for extended periods of time, the directors are in possession of price sensitive information because of commercial activities as well. So I think anybody who wants to try and extrapolate whether or not directors are buying as to whether or not we think the share price is an opportunity or a or a risk, you know, you you can't always you can't always buy when you want to, and you can't ever sell whether you want to or not. So don't don't interpret our activity as necessarily being one of pure sentiment.

59:31 But having said that, also recognize, you know, we are all well invested in this business. You know, we we have skin in the game. We share your pain when things go wrong with the share price, and we share your excitement when they go right. But we also recognize that they're only money when you buy them and sell them, not when you hold them. Mindful now of the time. I think we're wrapping up. I'm also mindful that there's a few questions we haven't answered, but we will do so on the q and a tab. If you want to look at that, we'll try and get them done over the next twenty four or forty eight hours. So I'll now wrap up. I hope you've enjoyed the session and got out of it what you want. And I look forward to speaking to you next time. Thank you very much, everybody, and for your help, Melvin and Ryan.

1:00:18 That's great. Nigel, Melvin and Ryan, thank you very much indeed for updating investors today. Could I please ask investors not to close this session as you will now be automatically redirected to provide your feedback, which will help the company better understand your views and expectations. On behalf of the management team, we would like to thank you for attending today's presentation, and good afternoon to you all.