Transense Technologies (LSE:TRT) — Interim Results and Prospects

0:03 Good afternoon, ladies and gentlemen, and welcome to the TRANSENSE TECHNOLOGIES results presentation. To start with, if we could cover a couple of housekeeping items before we begin, we would like to submit the following poll, which you will see on your screens. Throughout this presentation, investors will be in listen only mode. However, questions are encouraged and can be submitted at any time via the q and a tab situated on the right hand corner of your screen or if anyone has dialed in via trans sense at walbrook p r dot com. The company may not be in a position to answer all questions received during the presentation. However, the company will review all questions submitted today and publish responses where appropriate.

0:43 These will be available via your investor meet company dashboard. Finally, we would like to remind you that this presentation is being recorded. I would now like to hand you over to executive chairman, Nigel Rogers chief financial officer, Melvin Siegel business development director, Ryan Moore. Hello, everybody, and thanks for your attendance. And thank you, Tom, for the introduction. I see instantly from the statistics that it's really well attended today. So thank you very much, everybody, very much for your attention. I'm looking forward to telling you the story of what's happened to TRANSENSE over the last few months and about the outlook. So we're gonna put cameras off while we're presenting in a moment. I'm going to start the presentation just with a bit of a recap of our midterm plan and a high level review of where we've progressed since that midterm plan was last discussed six months ago. I'll then hand over to Ryan. Ryan's going to take us through business development and other activities at both TRANSLOGIES and then in our surface acoustic wave business, SourceSense.

1:48 Melvin will then give us a financial summary of the first half results and cash generation, etcetera. And then I'm gonna be talking a little bit about current trading since the end of the period and the outlook. We'll be very happy to take questions. We have had a few questions submitted in advance, which look interesting. So what we're gonna try and do is get through the presentation in about probably thirty five, forty minutes and leave plenty of time for q and a. So if I, first of all, start my section with an overview and a bit of a recap first of the midterm plan. So this was published in our final results in September of last year, and this set out in those three columns the historic objectives of the business since the sale of iTrack to Bridgestone in 2020.

2:35 So that was the twenty to twenty three plan. The midterm plan, twenty three to twenty eight is set out here. And then we've just given a taster of what we see the long term looking like beyond 2028. So first of all, for the Bridgestone royalty, this has been the main driver of our top line growth since 2020. And we'll look at the the chart of royalty development in the on the next page, which I'll come back to shortly. Meanwhile, in the midterm plan for 2023 to 2028, we expect to see compound annual growth rate of the underlying installation base on which the royalty is based, so volume of 15% per annum growth. Most people who are familiar with the company will know that the unit rate of royalty reduces in June 2025 and that the absolute royalty level in 2026, we expect to revert back to the '23 level.

3:33 Long term, we expect to see the growth rate in installations slowing, and the Bridgestone royalty expires in 2030. I'll talk a little bit more in detail about that soon. Meanwhile, in TRANSLOGIES, the business has grown from about 500,000 revenue to about 1,000,000 with compound annual growth rate of 15% over the last three years. But we expect TRANSENSE TECHNOLOGIES to generate annual step changes in revenue. It will be the main driver of company top line growth in the twenty three to twenty eight period, and we're also aiming to move that to a recurring revenue model, which, again, Ryan will cover. And we see very strong ongoing growth potential beyond '28 for this business. The addressable market, you know, in truth, every time we open a new channel, we find a new addressable market, and we are absolutely confident of some very significant market opportunities and long term growth.

4:27 Meanwhile, in Source Sense, over the last three years, that's largely been a technical and commercial evaluation process. It hasn't been generating a lot of revenue. However, we're now at the stage where it's beginning there there are some small ongoing revenues from motorsport activity, but we're now beginning to get some real traction with application development projects in a number of target market sectors. Again, we'll be covered in

4:50 a good deal of detail later on. But it's our aim for the sole business to be financially self sufficient in the '23 to period whilst building a pipeline of long term production activity to go beyond. And ultimately, SOAR SENSENSE will be the main driver of top line growth for the business beyond 2028 and become the principal source of long term strategic value. You can see in the bottom row there how that all fits together for the company as a whole.

5:22 So how have we progressed since the first publication of that plan? In FY '24 to date, firstly, the Bridgestone royalty has increased 27% over the same period last year, and the current year growth has met the midterm planned compound annual growth rate of 15%. I'll show you a chart in a moment. In TRANSENSE TECHNOLOGIES, the tire monitoring business, revenue has been stable from the existing sales channels. It was at a record level last year, and we've met the same number in the first half of this year. But meanwhile, the main activity there has been investing in sales and marketing resource in order to open up new market channels and create strong growth, but which will start to be visible probably in the second half, but certainly in f y twenty five. Meanwhile, in SourceSense, the revenue has been slightly constrained in the first half of the year. It's still a small number from which we're growing.

6:13 But market conditions have been pretty tough out there, and I'm sure many of the companies which you follow as an investors will be talking about extended decision making cycles and and generally fairly tough market conditions. We're not immune from that, but it doesn't particularly concern us over the midterm either. But it it has had some impact on revenue in the first half of this year. But meanwhile, some really exciting scale and depth change in the pipeline, especially in the aerospace sector, which we'll cover shortly. In terms of the overall financials, double digit top line growth, profits up by a 146%, comfortably more than doubled. Profits benefited from a short term compression in the operating expenditure in the first half of the year whilst the business was transitioning.

7:00 We had the benefit of some cost savings of costs which came out of the p and l last year. You'll remember there was an exceptional cost relating to some people who left the business, but we're set to increase OpEx in the second half of the year as we invest in revenue generating engineering, and sales and marketing results. Overall, again, strong cash generation and balance sheet, which Melvin will cover. So that gives you some overall orientation. I'm just gonna dip into iTRAQ first before I hand over to Ryan. So many of you, I think the majority of you would be familiar with this chart, which shows the progression of the iTrack royalty since inception at the bottom left hand corner in 07/09/2020 when the annualized run rate of the royalty was approximately 600,000.

7:48 That was the the value that was on the installations, which we handed over to Bridgestone on completion of the transaction. You can see that between then and December 23, the ongoing royalty rate has quadrupled. The installation base has risen fourfold to exceed 2,500,000 currently in in at the January 2024 level there. So overall, the trajectory of that graph is looking very good and, broadly speaking, in line with the expectations that we set in the market in June 2020, slightly lower in 2023. It was a slightly flatter curve. And you can see, right at the end of twenty twenty three, towards the top right hand corner of that chart, some very strong growth in the transition from 2023 to 2024. So in the final calendar quarter of 2023, there was a very large number of new installations.

8:41 Unfortunately, you'll see a small downturn in the graph in the period September, October, November 23. That was caused by a strike in one of the large mining clients of Bridgestone, which lasted for three months. It was a mine in Mexico called Penasquito, which, because of the strike for that three month period, they actually decommissioned the use of the iTRAQ system while the trucks were not in use, and that resulted in a cost to us of probably about £60,000 of royalty. But you will see that downturn was corrected by the end of the calendar year 2023, and the mine was fully working by Christmas twenty twenty three, and it's in the annualized run rate now. So overall, some very nice numbers coming out of iTrack.

9:26 Very happy with that. That obviously provides a great deal of funding to the company, which is deployed in developing the SOAR business and also is used to increase the cash balances of the business. I'll, I'll now pass over to you, Ryan, if you could take us through TRANSENSE TECHNOLOGIES. Thanks, Nigel. So, yeah, the TRANSENSE PLC. Is a fairly simple product. It is a tool that is used to inspect and manage tires. A really critical thing about it is that it has to integrate with someone's enterprise management software.

10:12 So we cannot sell the tool as a as a standalone product. It gets integrated into some kind of software environment, and that's either owned by our customers or, in fact, is it it's us working with, software providers. And there there are, believe it or not, specialist software providers for tire, companies, tire dealerships, commercial vehicle fleets, maintenance, etcetera, etcetera. So it's a big, interesting world there. What the tool allows people to do is to gather and digitize tire inspection data and that enables them to control the cost of their tires, which is the third biggest operating cost of their fleet. Also create a fantastic audit trail. So, you know, if they have an issue from a compliance perspective, they can show that the tires have been inspected.

11:01 It allows them to identify issues with the tires in order to be able to extend the life of the tires. And that's something that you really can't do with conventional manual inspection tools because they're just not accurate enough and you can't gather the kind of data trail. So the the tool itself I think over this last year, we've been understanding how it's used in the market and what the potential is. And actually, what we can see because of that use case is there's a very strong potential in the market for it because, customers want to know want to be able to demonstrate compliance. They want to be able to manage their costs better and also reduce emissions. And believe it or not, there is a very strong case around reducing tire consumption in a logistics fleet has a really big impact on their overall fleet emissions. Some really strong market drivers there for the product.

11:57 At the moment, we mainly sell through very large commercial vehicle tire manufacturers. And is of notes that we've got and can count today four of the world's biggest five tire manufacturers as customers in Bridgestone and Goodyear and Promethean, which is a name you might not recognize, but that's the commercial vehicle business of Pirelli and Continental. So, you know, that is an amazing platform for growth for this product and also says there's something quite special about this product that, you know, we we can we can build on here. So for us as a business, what we were trying to look at moving forward was how can we take this product, take this platform that we've got, this customer base that we've got, and and really build on it.

12:50 This last year, you know, we've we've done okay in terms of sales. We had a record year. The the prior year, the the first half of this year has been in line with the previous year's record number. So, you know, we're we're okay with that. But what we can say is there's a there's a huge potential to to drive this forwards. So what have we done? Well, we we came up with a a plan to grow the business, and this involves putting some more boots on the ground, you might say, hiring some some new people. So we we brought in a dedicated sales director who's a 100% focused on this business, and he has a huge wealth of experience from the commercial vehicle industries, previously from a telematics background and very, very well connected in the commercial vehicle space.

13:41 And and we also have significantly a new marketing exec who is working 50% on TRANSLOGIES and 50% on the SOAR side of the business. So if anyone follows us on social media if you don't follow us, I'd recommend that you do. But you will notice that since January, there's been a big uptick in terms of our activity, and we've we've had a really big plan in terms of marketing and comms for TRANSLOGIES as a as a dedicated business, getting it out to exhibitions and events and putting the tool in in front of people. What what we're trying to do, you know, not not a surprise perhaps, but we wanna build on our existing relationships. So we've got those four major global tire industry customers. They are very big businesses. They have operations across the world. And actually, something of note that the company has talked about before is just a really simple, for example, you know, we supply those companies in Mainland Europe and in The US, but, you know, we don't even supply them in The UK. So there's an opportunity, to expand the global reach with the existing

14:44 customers and working with their business divisions in North America, in South America, in Asia, and we see a tremendous, potential there to expand with those existing tire industry customers. But we're also looking really hard at how we can develop new opportunities and new routes to market. So, you know, we've got four of the top five tire manufacturers. There's another top 10, there's another six to go at. You know, we want to try and build more customer relationships with more tire manufacturers and also retread specialist providers as well. We believe there's a significant opportunity to put these tools into tire dealers and vehicle service centers, so they can be used as part of that sales process in a in a slightly different way, and we're building direct relationships there as well. One of the good ways that we can sell into a bigger number of customers that we might be able to reach directly is developing partnerships with reselling partners. The company today already has some partners who are software developers and we're looking actively for more software developers who are supplying tire dealership management software or vehicle maintenance management software.

16:06 That's a very good channel for us. And then finally, direct fleet sales. So we can see up till now, of the use of the tool has been for managing tires by tire suppliers, but a large proportion of the commercial vehicle market doesn't necessarily have managed tire contracts. They manage their own tires, so there's a big opportunity for direct sales to fleets and that that could be a commercial vehicle fleet, but it could also be a car rental fleet. For example, you know, if you've ever picked up a higher car, you'll you'll probably see on the vehicle condition report, for example, that there there is a tire inspection being carried out because obviously you wouldn't want to take your hire car out with tires that were not legal. So, you know, there's an awful lot of opportunities that we're working on here and, you know, it's fair to say we've had some really good progress, you know, so there's been a lot of preparation work gone into this over the last three months and then our new sales directors hit the ground running in January, but already we've made good progress. We have direct contact now and opportunities running with two major UK tire dealer groups, five new tire and maintenance software providers, global businesses, two major UK commercial vehicle fleets and also we found and established connections with two new tyre manufacturers, so two global companies who are tyre manufacturers.

17:31 It's fair to say that we're getting a really positive response. The more hands that we put the tool you know, people recognize the value that it can bring to their operations straight away. And we're really excited about the potential that we've got there for the future. So so, yeah, that's that's it in terms of of TRANSLOGIES. Shall we move straight into the the SOAR part of the presentation? Yes, please, Ryan. Yeah. Okay. So following on from from that, on the the SOAR side of the business, we've had some pretty significant significant hits.

18:20 We're seeing continued growth overall in the pipeline, engagement with new key customers in in our focus markets, and projects progressing through the pipeline as well as progressing out of the pipeline if they're not

18:36 opportunities that we think are able to progress for one reason or another. We are actively seeing our relationship with GE expand, increased activity on the nine zero one projects and developing new opportunities with them outside of nine zero one. That includes long term opportunities with GE, but also shorter term, nearer term opportunities to generate revenue through the provision of services componentry to support their programs. We're continuing to cooperate with Parker and work alongside Parker or though you'll have seen the notes in the interim announcement about that. So very much still working with them and we see them as a good partner for us and a route into the aerospace market,

19:24 but nothing quite there yet. We do have some new contracted business for technical feasibility projects with a small aero engine manufacturer and the robotics drive system tier one supplier. So there's some some small new business come through. And we've got continuing technical programs,

19:48 one with an automotive tier one called Nevarez, and then two other programs which have been announced already with an automotive tier one and aerospace tier one, but we're confidential where we can't disclose the names of those companies yet. So there's an awful lot of activity around SAW and obviously some other notes in the the interim

20:13 announcement as well about what we're doing there. We do see that market pull really starting to crystallize for the business. I think the the the misses being, you know, we are behind target in terms of the the year to date revenue. As explained, that's really mainly down to a a key motorsport championship where the technology has been used for a number of years. So that's been a repeating customer, but they've been upgrading their powertrain to a new

20:46 new type of powertrain. And unfortunately, they've been delayed doing that so that the order slipped there for us. And then, you know, the other contracts and things that we're working on, we're working, you know, with very large aerospace companies, defense companies. There are there are lengthy contracting processes, security clearance processes, etcetera. And I think, we we were hoping to be on contract with a couple of things by now that haven't quite got there yet, but we we do expect to have some significant announcements coming in in this respect.

21:20 We've got a lot of planned activity for h two of this year. We are really building some some good steam in terms of the the MARCOMs that we're doing, obviously shared with the TRANSLOGIES side of the business. We're pushing more opportunities through the pipeline, so, you know, getting the contracted business with, opportunities that we're talking to

21:44 and and and getting more things through to the quotation stage as well. So we're starting to see some really good momentum building there. And one of the big key things that will come in this next half is being able to do some specific work around the research that we've done on electric motors. People remember we've invested in a program to investigate what benefits SAW technology can bring in electric motor drive systems. We've made some really interesting findings. We're in the process of applying for some patents and securing IP around that. And once that is done, we'll be able to start to talk in market freely about that. I, for one, it's my background, so I'm very excited about that as it as it starts to come through.

22:36 So looking at the key areas of the business, I think the motorsport market, as people know, we work with McLaren Applied in that in that space. And despite being behind because the championship has our championship has slipped in terms of its implementation of a new powertrain, It's fair to say McLaren are busier than they've ever been. I think our pipeline with McLaren is is the largest it's ever been.

23:06 You know, a couple of years ago, the SAW technology was only really used in one motorsport championship. They now are engaged with and we have supplied units to a number of teams in a number of different championships and they are continuing to work on increasing that. It's a really big focus area for their business

23:25 and and where they they are trying to grow and and extend their revenue and and profitability in that side. So, you know, we've we've got we've got very interesting growing business in in motorsport. And despite that short term setback, that we've had, we do expect motorsport, to continue contributing and to grow overall, in the business.

23:53 The aerospace market, is is pretty interesting. So, what we're trying to show on this slide, is the progress that we have made, and and expect to make. So the table at the top here in, you know, looking at 2020, so looking back, we had one customer really in the aerospace market. As of last year, we'd extended that. So we had GE. We were dealing as well with Park and Meggitt, which was in the public domain, and we also disclosed that we'd acquired a new customer, a different tier one from from those two in the aerospace. Unfortunately, we can't share their name. And we had about seven other opportunities that we were working on with aircraft or air airframe componentry or engine suppliers in the industry.

24:45 So then looking at this year, you know, very, very good progress again,

24:52 working with GE still and we have, you know, more work and more projects with GE. Continuing relationship with Park and Meggitt, still active program with the other aerospace tier one, and that's a really significant and interesting project. And now 11 additional opportunities in the space where, you know, we're in discussion and, you know, active discussion about programs in a in a wide range of applications in the space. And we see that continuing, you know, we're very, very close to being able to announce some things in the space. What the table on the bottom shows is what we now see as the key applications in aerospace for source sensing technology.

25:39 So this has really evolved our thinking over the over the last sort of twelve to eighteen months. Know, the GE, the primary piece of business with GE is in the helicopter engine for measuring helicopter engine torque. And that's an application that we knew about and it's partly driven by legislation and partly performance. But now from the the time that we spend in industry and working with different suppliers and different manufacturers, we see lots of of other applications that are very well suited to saw torque. So engine torque in helicopters and turboprop type engines is, you know, key application area. The green ticks mean that we either have contracted business or we are in an advanced level of discussion with an aerospace tier one OEM for that kind of application.

26:28 So we've got contracted business obviously with GE that people know about. We are in discussion on the turboprop side at the moment, so we're looking at bringing that through. Another application is for helicopter, for the tail rotor, measuring gearbox torque, the demand from the tail rotor and again, that's a really interesting application on helicopters. We've also got flight surface, so flight control surface actuation torque a very interesting application on fixed wing aircraft landing gear brake torque, and landing gear brake temperature. Some really interesting applications there. Again, green ticks. The other x's here are applications that we've identified, but we're not we don't necessarily have an active discussion with someone in the space, but we are aiming to kind of fill out these boxes some more.

27:21 You'll start to see more contracted business fall into place in applications other than the helicopter engine talk application that people know about and with a broader portfolio of customers, which I think is really important.

27:37 Obviously, if you only have one customer, they catch a cold, you know, so do we. But if we have a broader portfolio that reduces business risk for us, and that's really what we're aiming for, so a broader portfolio of applications and of and of customers, I think we're we're making some really excellent progress on that front and that will start to materialize into revenue both medium term from engineering support and program support revenue and longer term from manufacturing revenue. In the electric drives space, we identified the opportunity for torque sensors to improve electric motor performance. This, you know, really because at the moment, you can't use conventional sensor technology for measuring torque and temperature in electric motors. That's something we've talked about before, so I won't go into detail on that here. SAW technology allows us to be able to do that.

28:37 So it kind of creates a new application. And in a way, this is different to in the aerospace industry where, you know, engine talking helicopters is measured today with conventional technology. So the SAW technology provides a kind of better mousetrap, you know, that it's a better way of doing something that they do with an existing technology. The difference in electric drives is it's not possible with current technology. So often, the customer isn't even really thinking about using sensor technology because I'd love to be able to measure torque in my motor. I would love to be able to measure rotor temperature in my motor, but I can't because it's not possible with existing tech. So for us, really, the, the thing that we have to do here is be able to talk more about the benefits that that can bring and then effectively educate the market in terms of look. If you made the investment in putting SAW technology into your electric drive, this is what you would get back for that in terms of an improvement in performance or efficiency, in that drive system. No one's gonna invest in terms of putting that extra cost into their system unless they can see what the benefit is and if there's a sensible economic case there.

29:51 So we've had this company Drive System Design. They are renowned experts in actually transmission design and more recently in electric drive system design and development, a fantastic company. We've had them doing some simulation activity for us where they've been exploring these benefits and helping us build that case and we've got some very good data already from that. They're now in the process of moving that to a physical test rig, getting some actual test data that we'll be able to share with customers and put into the market. We are working on these the patents that I mentioned earlier. That's going very, very well. We're not aggressively pushing this into the market because we have to secure the patents. We have to kind of get the data to be able to sort to support the business case.

30:45 But in spite of that, we are on contract today with two tier one suppliers in the automotive space for source sensing opportunities, you know, in in electric drive systems. So, you know, we do have some traction today already, and they are early stage projects. They're the things that we've been working with those customers for a while on. We also have 22 other active opportunities in e drive systems, you know, and that is, where we're talking to tier ones or OEMs in the space, you know, and they're interested in, using the technology either for torque measurement or temperature measurement in electric drive systems. And I think the the rate of conversion of those into contracted business will accelerate as soon as we can start putting the evidence and data into people's hands that really help them build the business cases internally as to why this is something that they should be investing in. So very good progress to date and, you know, real tangible market traction in terms of the the work that we're on contract with, but a but a much bigger opportunity that we've got to deliver on there in in the e drives market.

31:59 So the robotic space is is one that we've talked about before. So industrial machinery and and robotics, You know, a bit like aerospace, today, torque sensors are used in industrial robots and particularly collaborative robots, which has been a big growth area. So you'll see, you know, some some really exciting kind of market growth figures for industrial and collaborative robots. I think this one this market report here was forecasting nearly 30% CAGR over the next few years. And and it's become very, very common to deploy torque sensors into the joints of industrial robots. So we recognize this and saw that there was an opportunity to potentially improve those sensing systems using SAW technology.

32:50 So this kind of similar way to the aerospace market, we're not necessarily having to educate the market on the benefit of using a torque sensor from sort of ground zero principles, but we're just having to demonstrate why a SAW based talk sensor is better than the conventional technology that they're using in that marketplace. We've been working to get some traction and, you know, it's really good that we are able to say that we've got our first contract piece of business with a global company who are a leader in the manufacture and development of robotic drive systems. And they're starting an evaluation on SawTalk running with them. We expect that to take, you know, months.

33:36 So there'll be a lot of engineering activity with that customer before it it sort of breaks through into a kind of production system deployment type project. But we're we're on the first rung of the ladder, with a very, very credible customer in that space. We also have some other opportunities in in the space. Again, another robotics manufacturer and another robot drive system manufacturer. So expecting to to close some more business out there. There's obviously other opportunities alongside this. We we group industrial, so things like agricultural machinery and stuff together with, robotics in our pipeline. You'll you'll see in the pipeline data that there is more opportunities and activity in the industrial space that we have. But I think it's very, very significant that we're now on contract as well in robotics, that's a major milestone really for the business.

34:32 Having that market traction that we've got in aerospace and building momentum there, the work that we've done and the progress that we've made in electric drive systems in the automotive space in particular and what's starting to crystallize there. And then now being able to say that we're on contract with a robotic systems manufacturer, it's really good progress for the business. Okay. Excellent. Thanks very much, Ryan. And, Alvin, I'll we'll pass over to you for the financials. Thank you. Thank you, Nigel. I'm gonna try and make this as exciting as the previous presentations. As you can see, there is a lot happening in the business. Nigel and Ryan have made a lot of references to some of the financials already, so I'm gonna run through those quite quickly and talk more about the current trading and forecasting, which is an area quite involved in. So looking very quickly at the financial highlights, revenues are up 10%, PBT up nearly two and a half times benefiting from the reduction in overheads following last year's restructuring.

35:42 Earnings per share up nearly three quarters. Cash is very strong at 1,300,000, rising to 1,900,000 at the end of January after the q two royalties. Treasury shares are standing at 600,000 at the balance sheet date, and then they subsequently have risen to nearly 900,000 post year end, which represents about 6.6 percent of our share capital and an average acquisition price of 82 p. Distributable reserves are at 2,800,000. Let me turn to the next page. Looking at segmental performances, revenues, iTrack up 26%. TRANSLOGIES marginally down at just under 500,000. But as Ryan said, this last year was a record year, and we've done well to maintain that level.

36:30 SORE SENSENSE is the largest fall down 43%, but having heard both Nigel and Ryan's presentations, you'll see the numbers belie the true position and my take on that a bit. From a contribution perspective, iTrack contributed 1,200,000, TRANSLADIC just under 200,000, SOURCENCE was a loss of just under 400,000, but a reduction of 21% on the previous year. Central overheads reduced by Looking at cash, we see a positive inflow of cash in the period of around 330,000, leading to a closing cash balance of 1,300,000, and that rises to 1,900,000 at the end of January as I previously stated.

37:16 Also, bear in mind, we have outlaid 900,000 on share buyback. You will see we still have around 22,000,000 of tax losses, which at a 25% corporate tax rate is worth 5,500,000 as a deferred asset. Currently, we have taken a very prudent view and look forward just two years to calculate our deferred tax assets. So in the balance sheet, it is So in effect, we have a hidden asset worth over 4,000,000 that is not on our balance sheet. Looking at current trading forecasting, in h two, Source Sense costs and central overhead costs will rise, demonstrating our commitment to investment in the business and in anticipation for growth in both SourceSense and TRANSLOGIES.

38:06 The headcount has increased from 18, including a new starter in November 23 to '23, which also includes Kevin, who we've made reference to who's running TRANSLOGIES. We've also committed to increase CapEx to strengthen the facilities of the engineering team and improve the supply chain. We are currently carrying out a refurb of our premises, having committed to a further five to ten years. The offices will look far more modern and professional, which is increasingly important as customers are choosing to visit us. And when you look at the quality of our customer base, the image we portray becomes particularly important. Budgeting and forecasting. Now there's one that I really enjoy. Whilst TRANSENSE has been around for twenty five years, the reality is the new TRANSENSE was born in June 2020, as I've said before.

38:58 So that makes us effectively a three year old start up, and forecasting revenues in a start up is always a challenge. Looking at the three segments, Bridgestone, iTrack, we are fortunate as we do have guidance from Bridgestone's own budget. Although in the first three years, a couple of those years were overoptimistic. And despite a degree of prudence that I build into my figures, that segment has slightly underperformed. Going forward, they have toned down their expectations, and the numbers should be far more predictable, giving us better clarity. TRANSENSE's income has doubled in the three years, but pipeline visibility beyond a few months is not readily available. So a challenge to forecast, but underpinned by the growth in that business.

39:44 We are confident we will have better understanding of future performance following Kevin's appointment as the TRANSLOGIES sales director in January. Source sense. Whilst we are getting far better visibility as the pipeline of opportunities has grown substantially, as Ryan demonstrated. Contracted work is still in single figures and at an early stage, so this issue is one of timing, and this will improve over time as we build up more and more momentum. Looking at the full year's budget for FY '24, the numbers were very much weighted in favor of h two, and the bottom line for h one was actually fairly much in line with our expectations. The outlook for h two and the full year are set out in Ian German's latest research note, and they indicate a modest reduction in profit before tax of both f y twenty four and f y twenty five.

40:36 Having achieved or exceeded market numbers in the three years post the Bridgestone deal, maybe a degree of overoptimism creeped into our numbers, although for the main part, the reduction is due to slippage beyond our control and challenging global economic conditions, have impacted many companies, particularly in our sector. Incidentally, the revised market numbers would still represent a 50% PBT growth year on year, which in the current economic climate should not be understated. One final point to leave you with. Most of my career, despite fifteen years at TRANSENSE, was spent as a chartered accountant in practice and advising numerous successful independent SMEs. One important lesson I learned was that once the SME had achieved sustainable positive cash flow and profitability, their principal focus going forward would be generating a strong and growing pipeline of both orders and genuine opportunities.

41:37 Additionally, it was essential to build and retain a talented leadership team, develop a stronger committed workforce, and an innovative and experienced marketing team. What I have just described is, of course, where TRANSENSE are right now. Although Although as a public company, there is always going to be a focus or pressure on the p and l and balance sheet at two points in each trading year. However, it's essential to look beyond that when assessing our performance, the feedback so far suggests investors are doing just that. And in answer to one of the questions I noticed as I was reading, which is Nicholas s, that's why I remain strongly optimistic, and it's a phrase you don't generally hear from chartered accountants. So that's my take on the forward.

42:22 Back to you, Greg. Well, thank you, Melvin, and I think that was a really good summing up. Those those listeners who know Melvin well and have listened to him before will know that when Melvin is bullish, then things are really strong because he is he's the archetypal pessimist on the board who has kept us through some very difficult times in the past, but but is now, you know, very positive about the future. And I think that really shares very much the mood in the boardroom. There are a lot of exciting things going on, some on the surface, which you've heard about today, some beneath the surface. But I think that leaves us all very highly motivated. We're all enjoying life. We're all working very hard, but we're all completely committed to the bright future that we believe that the company has.

43:11 I'm now going to pause. It's sixteen forty three. We've got about fifteen minutes to take questions. Perhaps I could ask if you could put them into logical order and fire them at us, please, Tom, and I'll Yes. Yeah. Thank you. Thank you, Nigel, Melvin, Ryan. We have had a number of questions ahead of the event and and quite a few during the event as well. So maybe, Nigel, we can start with some of the presmitting questions and and maybe some of the ones which come in on on a live basis. You could tie some of those in when you see the opportunity. Additionally, your feedback is important to the company. So immediately after the presentation has ended, you will be redirected for the opportunity to provide your feedback. Nigel, if we could start with this one maybe. What is the future likely value of iTRAQ royalty income, and when does it come to an end?

44:02 Right. The royalty agreement was signed in 2020 for a ten year period, so it comes to an end in 2030. In big picture terms, up to the end of this period upon which we're reporting, we've collected £5,600,000 worth of royalty income. And if there were no additional installations from the end of the period that we've just reported until the end of the royalty period in 2030. So if the number of installations remain static, then there would be approximately £10,000,000 or more also of future revenue. If it continues to grow at a compound annual growth rate of 15% in terms of volume, then despite the two step reductions in the unit, royalty rate, that would come to 16,000,000 of further cash to collect between January 24 and the end. So the broadly speaking, you know, even if you take a re a reasonably conservative view and take the midpoint of those two numbers, then the future cash flow underpin underpins the vast majority of the company's market capitalization TECHNOLOGIES today and suggests for investors, you know, a very low cost current entry into the opportunities that and SOAR offer.

45:23 Super. Thank you. Couple of questions around TRANSENSE TECHNOLOGIES. I'm just gonna group a couple together because they they work quite well. Please, will you flesh out the specific routes to market being pursued for the TRANSENSE TECHNOLOGIES product range? And Henry Henry asked a couple in the live q and a, which was, what is the driver for the rebranding and rationalization in the TRANSENSE model range? And what proportion of the tire service market do the top four producers account for? I don't know if those all work together. No. But dealing roughly in reverse order. So if you look at the global tyre market, there's some very big players and basically the top five, top six players are Michelin, who are notable in that they are the one we don't deal with at the moment, Bridgestone, Goodyear, Continental, Sumitomo, which is a a big Japanese company that have a number of different brands, and then Pirelli.

46:24 So there's there's a few others in the top 10, but but basically, you know, Michelin and Bridgestone are kind of they trade places for the top spot and, you know, they each have something like 15 to 20% of the the tire markets. You're looking at, you know, north of 20,000,000,000 of sales for each of those companies, so they are very, very big. There's a bit of a jump down, Goodyear and Conti, sort of 12 to 15,000,000 1,000,000,000 in sales, in just in their tire businesses. Obviously, Condi is a is a much bigger business outside of tires, with its automotive, tier one activities. So that that hopefully gives you a sense. You know, these are big companies. You know, overall, the top 10, I was trying to kind of tot it up because I don't have percentage figures, but it's something like a 100,000,000,000 in sales. So, you know, there's they have a significant chunk of the the tire market.

47:23 Ryan, if I could just redirect the question slightly because I think this is a relevant piece of information. In terms of tire service provision, then, you know, if we're dealing direct through the major players, we're really talking about managed tire contracts for people who are buying their tires exclusively. Whereas entering the fleet market directly, we're able to get to people who are not working under my managed tire contracts. Have you a view on how much of the market we haven't touched yet relative to how how much is handled by the global majors from a tire service point of view. Yeah. Yeah. So that's a really important point. So what what people listening might not realize is that the big tire companies for commercial vehicle tires, they have two models.

48:14 Basically, they sell tires. So just as you and I would buy tires for our vehicles, truck fleet operators can buy tires, but they also do these pay per mile or pay per kilometer deals where effectively they're leasing tires. And that managed tire business is where our tools are mainly used today by the big tire suppliers so that the technicians that work for Bridgestone or Condie use our tools as part of that managed contract tire business. We what we've learned in the last year is actually that is depending on the country that you're in, you know, really impacts how big of a market that actually is, but it's certainly not anywhere near half of the commercial vehicle tire market. And and, you know, we've heard numbers as low as 10% and as high as half of the market, but it's just real reality is it's probably somewhere in between. So there's a huge portion of the market that isn't covered by these managed tire contracts that the tire suppliers would typically offer. That's where the fleet would either manage its own tires or an independent tire management company would manage the tires for the fleet for them and and that in itself is is quite a big market and there's some key players on that side.

49:31 We you know, looking at the market in a few different ways, so the primary focus is the commercial vehicle space. I know I mentioned higher car fleets, but really, we're looking at commercial vehicles. We're looking at truck operations and and bus operations for commercial vehicles. So managed tire contract operators, like the big tire companies is a is a big chunk of that And and that is a key route to market for us. We're building the business with the existing companies and, you know, finding some more tire manufacturers to work with in in their businesses. That's that's gonna be a, you know, big activity for us moving forwards. The other is the tire dealers, and, you know, the other the sort of non OEM, companies who are supporting commercial vehicle fleet operators.

50:19 So that's, you know, tire dealerships. It is a thing today where tire dealers will actually carry out on a kind of contract basis tire inspections for commercial vehicle fleet operators. So the Thai dealer market is is a big market and we can approach that market directly and we we've done that and we're having some success there. And indirectly, working with the companies who are supplying the specialist software systems that those businesses run on And we've had quite a lot of success there actually recently building relationships or reseller relationships with those software system providers. So that's another key channel into the market for us. And then finally, it's actually working directly with those fleet operators. So building relationships with commercial vehicle fleet operators, generating some market pull with them and and really awareness of what they could be, benefiting from with a product like the the TRANSLOGIES product going into into their market.

51:20 So that's the route to market. Do we want to I mean, the the rationalization so I mean, that's quite a simple question to answer really. Today, offer four different versions of the product. Really, most of the sales are around two different versions of the product. So from our perspective, to make inventory management and try and sort of leverage some scale opportunities in manufacturing costs and such like, we're trying to rationalize those those numbers, but really focusing around what the market actually, is buying from us, moving forward. So that's what we're trying to do, make it a bit easier for customers to understand what the products do, and and which one is the best for them, for their operation. Great. Thanks, Ryan. I'm just mindful of the time, Ryan. We've got about eight minutes left, and I want to take, certainly two more questions at least.

52:10 There were some questions around the ITEP and FARA programs. So I don't know there's two or three sort of associated questions. You might just read read the main question out, please. Yeah. Indeed. So what will the effect be on TRANSENSE from the US Army's recent announcement that they will be keeping ITEP in development than moving it into production. And and following on from that, somebody else has referred to the FARA program being the announcement that it's going to be canceled. So the second question was what impact will the cancellation of FARA be on the company? Right. Right. If if you could take that one in about four minutes, Ryan, that would be great. I'm sure you could take them in four hours as well. Yeah. No. It's a really short version because obviously we have an awful lot of contact with all the key players and increasingly so but, you know, it is it is clear in its public knowledge the US government has announced that it's discontinuing the FARA program, but actually both of the manufacturers that were developing aircraft for FARA have come out and said they're gonna they are continuing with their development because The US customer the US government, sorry, wasn't their only customer.

53:18 So yes, FARA is cancelled by the US government but the the actual helicopter manufacturers are are continuing with their developments because they have other customers for those those aircraft. FARA was not the prime application for the nine zero one engine. Really, our primary application or the primary application for nine zero one is what they call a capability upgrade program. So the Black Hawk and Apache fleets are receiving these midlife upgrades over the next few years to increase the power and performance of those existing aircraft And if you read the detail of the the the press around the FARA announcement, actually, part of, what they're saying is they're gonna put more investment into capability upgrade programs.

54:09 So that's, you know, that's that's interesting. But what we have been told and and reassured is that, actually, it does not have an impact on those capability upgrade programs. There had been some delays to the nine zero one program that were announced last year by GE. And as far as we are aware and what we've been told is that it's it's in line with those capability upgrade programs. We're expecting production to start in in '27. So, you know, far, we we don't expect it to adversely impact the the longer term revenue and we still see there's positive opportunities for short term with GE on this and and other programs. Well done. Thanks, Ryan. Kept your time beautifully.

54:56 Tom, there's two or three questions grouped together on buybacks, which I'd just like to take as well, if I may, please. Yeah. Do you wanna pick those up? Yeah. Thanks. So, I mean, first of all, a question from well, there's a couple of questions from Nicholas. That's actually isn't it wiser to spend money investing in new salespeople rather than buying back stock? And and, you know, the simple answer to that, Nicholas, is we don't see them as being mutually exclusive. I think that's really what the body of this presentation has been around. You know, we we we do not feel constrained by cash. We're not constrained by the size of our distributable reserves now from being able to fund buyback programs, and there is always first priority towards investing in the business. And when there are sensible opportunities to invest within the business to accelerate growth, then we'll do it. And that's precisely why we're putting more resource in now.

55:53 But there is a sensible rate to inject that resource. There's no point, adding cost to try and go a 100 steps ahead if there's only three or four steps visible. So we've always believed in building the infrastructure of the business to be one or two steps ahead of the opportunities rather than eight or 10 steps ahead. But yet, we've been able to generate more than enough cash to be able to fund buybacks. Also picking up on other questions, you know, we we have not, by any means, ruled out dividends in the future as being another means of returning cash to shareholders rather than buybacks. We'll continue to keep both of those routes under review and, and choose the the most appropriate one.

56:38 I think also another relevant question, why has there been so little direct to buying of late? I have to say, Nicholas, I think that's a bit below the belt, that one, because I don't know many end companies where the executive directors have consistently bought shares as frequently as we have in the market. So I'm I'm gonna take slight defense of that if you don't mind. But, you know, I I I've personally built a portfolio of 265,000 shares in this company. They've all been bought in the marketplace. I'm very happy with my investment. When the share price weakness, I've taken the opportunity to add. But I've been on the board now for seven years, seven and a half years. Three of the the the the last three have been especially exciting, but out of that, there's probably at least four or five years in total when I've been it has had some inside information or other that's prevented me from buying shares.

57:33 Frustratingly, often when the share price has been at its weakest in the past, although it's now very stable. But I remember one period when it was down as low as 40 p, and I was dying to buy some and couldn't. So, you know, be be mindful that the directors aren't always allowed to buy when they might like to. That's partly true of the buyback program as well, but to a lesser extent because the company does actually place a standing order to execute the buyback program at a time when the company is not possessing inside information, which can continue despite them coming into inside information. So there are times when the buyback program can get can be executed even though the directors can't buy. Mindful of the time, we've got two minutes left.

58:19 And the question which Melvin's already answered, but which I'm dying to answer to, you know, has there ever been a time when you have been more bullish? You know, I hope that our enthusiasm and our excitement comes across because we really do genuinely believe that the company has some very tangible opportunities to grab a hold of here. And, yes, you know, we do feel very PLC positive about the future. Having said that, it's a very uncertain and difficult world out there as we all know, and there's there's lots to be scared of. It doesn't scare me as a director of TRANSENSE as much as it does as a human being. But, you know, things are tough out there too. But, with all of that in mind, we still see lots of opportunities for this company and think it's a great investment.

59:05 Super. Alright. Well, look. Thank you, Nigel, Melvin, Ryan. There are remaining questions which we will address. So for those who haven't had their questions answered, please don't don't believe we're overlooking them. We've just run out of time, and therefore, we'll we'll answer those online and publish those on the investment company dashboard. Could I ask investors not to close this session as you will now be automatically redirected for the opportunity to provide your feedback? If anyone has further questions or would like additional information on TRANSENSE, please do get in touch via TRANSENSE at walbrook p r dot com. In the meantime, many thanks for attending today's presentation. Thank you very much, everybody. Thank you.