Transense Technologies (LSE:TRT) — Results for year ending 30 June 2021 and prospects

0:05 Good afternoon, ladies and gentlemen, and welcome to the TRANSENSE results presentation and update on prospects. 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'll 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 transcents at walbrook p r dot com.

0:37 The company may not be in a position to answer every question it receives during the meeting itself. However, the company will review all questions submitted today and publish responses where appropriate. These will be available via your investment 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 and Chief Financial Officer, Melvin Segal. Thank you very much, Tom, and welcome, everybody. Once again, very pleased to see how well attended this seminar is. We're looking forward to the opportunity to get plenty of questions, please, which would be great. The presentation, I'm gonna start with a brief overview, and then I'm gonna hand to Melvin.

1:22 He's gonna take you through the figures for FY '20 and outline the progress that's been made during the year on the iTrack royalty income and on the TRANSENSE PLC business. And he's gonna make mention during that presentation to the Allenby research note, which was published yesterday, which includes our financial forecasts for the next couple of years. That note is available on the TRANSENSE website to registered users, and you'll have the opportunity to register for research if you want to see that note. When Melvin's finished his presentation, we're gonna pause and take any questions on his area of the presentation first before moving on, I will then look at the saw business and cover the commercial progress made so far since the last presentation a year ago and talk about some really exciting opportunities that we have in the saw business for the future, but we'll be aiming to leave plenty of time for more questions at the end. So I'm gonna now put the presentation up so Melvin and I will disappear.

2:27 So first of all, an overview, I think in the fifteen months since the Bridgestone deal was done and essentially TRANSENSE as a company was largely reborn, we've got a really substantially derisked business model. And I think it's been a very good year for us in terms of building some solid foundations for future growth. The financials, Melvin are gonna take you through, are in line with the upgraded expectations. That upgrade took place when our interim results were published in February. And we've seen really good progress across all three of our business streams, that's iTrack and TRANSENSE TECHNOLOGIES as well as SOAR. At the end of the financial year, we left ourselves with a balance sheet in a very strong position and cost cash positive. So that gives us the potential to make controlled investments for future growth in the business, particularly in the source side of the business, which I will be talking about.

3:21 Taking all in the round, we are very positive about the prospects for the business for the future and looking forward to being able to explain why. With that, I'll hand over to Melvin, please. Thank you, Nigel. Let's move on to Slide two. Slide two is the financial highlights. Before I get onto that, I wanted to put a headline to the last two years. So going back to FY '20, I would have as a headline that was a transformational year for TRANSENSE on the basis of the Bridgestone deal that we did whereby the operating business of iTrack was transferred to Bridgestone, and we did a ten year license deal with them. Giving a headline to financial year '21, the one just completed, I would say under new management starting to deliver.

4:15 Under new management because, obviously, with the Bridgestone deal, our CEO and chairman both left and joined Bridgestone. So Nigel stepped up to the role of executive chairman. We also brought on board a new MD, Nick Hopkins, who had very valuable experience in working with SOAR and has made, some big improvements, during his period. And, also, Rodney Westhead, who's our nonexec, has been very involved in working with Nigel in establishing the SOAR cap, which has been a very important move by us and also chairing our call to be SOARCAP meetings. With regards to starting to deliver, it is just a start.

5:03 We're nowhere near the targets that we've set ourselves as a board, but it is a start. And we are on that road, and I'll now go through the financial numbers, which I think will show that we are making that improvement. So revenue up threefold from 0.6 to 1,770,000. And as Nigel mentioned, in line with upgraded numbers, the gross margin has increased to 78.3%, obviously helped by the fact that we have the royalty income in there, which has no cost of sale. EBITDA has moved from a negative figure of just under 700,000 to 60,000 positive. That's on continuing operations. The profit for the year is now a positive 160,000 compared to a 2,500,000 loss for the year in the previous year.

5:57 As a result of these, the earning per share has gone from negative 6.7 to a positive just under one p per share. The net cash at the end of the year was 1,050,000, which is a small reduction on the opening number. But as I may have mentioned in previous presentations, our cash is always at the lowest at the end of each quarter because the royalties from Bridgestone are paid one month after the end of the quarter. So in July 2021, we received £260,000 plus VAT from Bridgestone, so that replenished the bank number. The distributable reserves have moved from negative 4 5,900,000 to a positive 630,000, and that reflects the capital reorganization that we carried out in January of this year.

6:55 And finally, on this page, the corporation tax losses we have to carry forward are 23,000,000. In the past, I've spoken about the fact that these losses have a value to us, but it's never been recognized in our balance sheet because we needed some degree of certainty that going forward, we would be profitable. We have now started to recognize that asset, and only in a small way, we've brought in one year's worth of future profits, working out the value of the loss on that, which would be at 19%, which is the current rate of corporation tax, and we have brought in an asset of 47,000. Going forward, if we achieve our numbers, that asset will increase in size we use up our losses.

7:46 Turning now to the next slide, which is slide four. I'm gonna whip through this slide because I cover most of this in separate slides. You've You've got got an an analysis of the revenue on that slide. ITrack and TRANSLOGIES, I cover separately. So you can see from albeit from a low basis increased by from 90,000 to a 180 That's a 100% increase. And with regards to the profit or loss from each segment, you can see that each one of those has improved during the year. I'm now gonna jump to slide five, which is a slide showing you the bridge from f y twenty's results to f y twenty one.

8:32 What I'm gonna focus on is the opening position, which was a loss last year of 2,500,000, and the main constituents that take us from that loss of 2.5 to 156,000 post tax profit in f y twenty one are the new source of income being the net royalty of 830,000, the discontinued operations relating to the operational side of the iTrack business, which is 1 point just under 1,500,000, and the SOAR and TRANSENSE added contribution of 160,000. At this stage, obviously, in the presentation, we can't refer to specifically the research note that Ian German has done for group.

9:23 But what we can do is talk about the changes that have been made and how they impact the numbers. First of all, the actual changes that have been made in Ian's research note is that the income has been increased by 350,000 per annum, and that then leads down to a 250,000 gross profit increase, and then we've allocated 250,000 additional overheads, which is mainly going towards supporting the expansion of the source side of the business, and it's mainly on headcount. So what we've done there is effectively we've left the forecast profits as they are and simply taken what we would regard as the excess profits as a result of the upgrading and using those excess to support the SOAR business as it develops further through both Nick Hopkins' involvement and the SOAR cap.

10:31 Looking at the profits going forward, 2021 was a 150,000 in round term numbers. The forecast profits for 2022 are left unchanged at 420,000, and for '23, 1,200,000. These profits recognize a revenue going from 1,800,000 in the current year to 3,600,000 going forward to 2023. And the earnings per share, if we achieve those numbers, will be moved from one p to about seven and a half p. Moving on to the next slide. This is now a slide on the iTrack royalty income.

11:16 And what this slide depicts is the annualized rate of royalty each month throughout the year both in pound sterling, which is obviously the currency that we report in, and in US dollars, which is the currency that we receive the royalties in. The blue line is the sterling line, and the red line is the dollar line. Looking at the second period of the year, you can see that the lines go far steeper, and that was due to two large successes that Bridgestone had in North America on global accounts where they converted to iTrack.

12:02 You can see in the boxes that the rate of growth in the year of the annualized income was 97% in USD, so that's the real rate of growth, and then 76% in GBP, which reflects the movements in the forex. Since the year end, we've grown 9% in GBP terms and USD terms, 8%. I think that answers the question that Nigel has raised where he refers to whether it's from inception. It's not. It's from the beginning of the year. Looking at the first part of the year, the growth was far steadier, and the reasons for that, I think, are threefold.

12:49 One is COVID had an effect as it's had an effect on every business.

12:55 Most of the good selling that's done on the mines is done by people actually being present on the mines rather than by video conference, and, obviously, that was restricted during that period. Secondly, probably, and the most important one was the integration. Any large business acquiring a smaller business, there's a period where they need to integrate that business, get to fully understand it. What has definitely helped with the integration is having Nigel on the board of ATMS, the Bridgestone subsidiary, but it has taken a little bit of time before we get to that second period where the steep growth has taken place. The third reason I feel that the we had a lower rate of growth in that first period is the acquisition that Bridgestone made of Otraco.

13:43 Very shortly after they completed our deal, the Otraco deal started moving. That's hundreds of millions of dollars, that deal, and that has taken some time. There's been a lot of management focus on that deal. The positives of that deal are that, hopefully, it will have completed by December this year. And having worked with Otjiko ourselves, we we know them quite well. They they are distributors to mines, and we would hope that a lot of those mines where we're not involved with Otjiko that we can increase our involvement and that iTRAQ will be used in those mines. So moving on to the next slide, which is the probe slide.

14:34 On the left hand side, looking at the narrative, the new TLGX probe, which was launched in May last year, is being received very positively. It's it's been under trials with all of those, OEMs that are listed on the bottom, which is virtually all the major OEMs with the exception of Michelin. The attraction to these companies has been the fact that this probe now has a lithium battery, which gives it a much longer lasting life. It has a USB connection, which makes it much easier to connect, and it is modular, which means that there is a range of probes ranging from a very simple probe, which measures tread depth only right through to a very sophisticated probe that is able to read both the tire pressure monitoring sensor and an RFID tag.

15:29 The conversions to the TLGX probe are underway and are looking very positive, and I'll come on to that when we look at the graph on the right hand side. Our customers include both the OEMs and fleet management software houses. We are working with a number of these software houses who are integrating our probe into their system. We have received a lot of commitment from these key customers, whereas in the past, might have acquired the probes on a more ad hoc basis. Now we've actually sat down. We've agreed master sales agreements and an actual purchasing plan. So very positive from that perspective.

16:14 Moving to the right hand side, and just before I say that, when I took over the running of the probe business or took responsibility, the running is done by Rob. I I I I realized realized we had two very valuable assets. We had the probe, and we had Rob, who is now our sole probe employee. And during the period of working with him, this graph which shows you the unit sales per annum, and you can see what we've managed to achieve in 2021. Quite a big improvement from 2020. What this graph also shows is the red part, which is the element that relates to the new TLGX probe, so you can see it was gaining traction in 2021, and the blue part, which relates to the gen one probe.

17:09 In that year in value, these are obviously in unit terms. In value terms, the percentages were probably in 2021, 71 the gen 29% the new TLGX probe. Since the year end, we've now moved to 47% Gen 153% TLGX. So you can see that it's gaining enormous traction, and the companies are moving to that probe. Looking at going back to 2019, if someone said to me, what's the market size and what do you think you can achieve? And they said, do you think you can achieve a million pound in sales? I would have doubted very much that we could ever get to that sort of number. Sitting where we are at the moment and seeing the the business that we've achieved in the early months of this year, I think 1,000,000 is very achievable.

18:03 The numbers that Ian has in his notes are moving from $7.64, which we achieved in 2021, to 811 in 2022 and eight 72 in 2023. So fairly modest growth. But as I said, I feel that we are on a scale that we can lead to a million pounds worth of sales in this business, if not in 2022, in 2023. And on that positive note, I'll hand over to Nigel.

18:39 Thank you very much, and a thank you to Nigel Martin for the spot that he's raised in the q and a about a small typing mistake in our RNS, but I assure you that the numbers that Melvin's presented show the growth rates for the penetration of iTRAQ cumulatively since since inception, and those words were surplus in the RNS. Thank you, Nigel. I see also a couple of questions come up on Melbourne's presentation, which I think we'll take now. So Tim G has asked what percentage do Bridgestone currently have of the global mine truck tire market, and what percentage might they be able to achieve during the nine years left on the royalty deal? Well, Tim, Bridgestone's share of the global tire market for mining is about 40% as we understand it. So they they have about 40% of the tire market.

19:33 Of course, not every tire in the tire market has TPMS fitted. In fact, we think probably only about two in one in five does, about 20%. So as the penetration of TPMS solutions within the tire market in mining grow, then naturally, Bridgestone would be looking to take a large share of that. At the moment, iTrack share of the TPMS market is probably around about seven or 8%, and I think it's got a lot of growing to do. I see a question there from Steve f as well, but I'm gonna take that at the end if I may. So I'm gonna now move on and talk about the saw business. So we've made, I think, tremendous commercial progress over the last fifteen months with the saw business, and particularly as a result of the appointment of the commercial advisory panel, which are a series of sector leaders that we've been able to attract to give us commercial support in the SOAR business and open up their network of potential clients to us to be able to explore the uses of SOAR technology across a very wide range of industries. And you know, like like many, early stage technology businesses, there is always another application to pursue, but there's limited bandwidth in terms of the engineering capabilities of the business to do many things at once.

20:54 And so the first half of last year, we spent largely opening doors and listening to potential clients in many industry sectors and sharing with them how the technology works, what it can achieve, and whether it can solve problems for them. Conversely, over the second part of the year, we spent a lot of time refining our offer specifically for those industries where we can see a really good match. And I think we've got a couple of examples of that later in the presentation where we can see excellent fit between saw technology and problems that markets will face. Equally importantly, though, we've been able to open some doors which were subsequently closed, and and that largely relates to heavier engineering applications.

21:43 So an application we've spoken about in the past, in wind energy where, you know, we have done some work in the past, we've now determined is probably not the best fit for where our technology lies now. So it's been an important time for triaging many, many opportunities and then refining our commercial focus for the next period of development of the business. I actually think personally that it's a really exciting time for manufacturing and engineering. I think we could well be embarking on another industrial revolution. The last one was largely about extracting and burning fossil fuels, and the next one is gonna be about making the world function without extracting and burning fossil fuels.

22:28 And I think the next twenty years is gonna see some really, really exciting developments in low carbon and negative carbon applications. And with increases in connectivity and five g Internet of things and the drive for sustainable solutions in energy generation and transport, food production, I think there's gonna be some very exciting opportunities for manufacturing and and development companies generally, and I think that TRANSENSE has a part to play there, which can be very exciting also. We have a long track record of building enduring partnerships, and and I'm I'm gonna gonna talk about one or two of those as we go forward. But we are certainly receptive to continuing with that approach rather than necessarily working, you know, as a lone voice in the world and there's some some areas that we're working on.

23:17 We will, however, be looking at a controlled expansion of our own capabilities, and Melvin's intimated that there's some investment to make in the business in a controlled manner, and I'll be talking a little about that also. If I move on to the next page and talk a little bit about, excuse me, talk a little bit about commercial progress with our existing customers, then first and foremost, GE with the ITECH program. Many people who are on this webinar will will recognize that we've been working with GE for many years on this program, and I'm gonna talk a little bit about the reasons why that was attractive to why our SOAR technology was attractive to GE in in a few moments.

24:03 But during the course of FY 2020, work has been continuing working alongside GE's primary contractors, BAE and Meggitt, in assisting them with technical support on the application of SOAR technology into the engine, and that's been chargeable work and has also been a great opportunities for for us to build our commercial network with those two potential clients. So very pleased with progress on the ITECH program during the year. We've also been working closely with McLaren Applied. McLaren Applied will you'll probably recall are the partner that we work with on IndyCar where our shafts, instrumented shafts go into IndyCar for regulatory control purposes.

24:49 And we've just refreshed over the last few weeks the joint collaboration agreement working with McLaren Applied in order for them to develop that business further, and that involves giving them a degree of exclusivity over the use of saw technology and motorsport in exchange for some guaranteed minimum revenues. We've also, on this page, got reference to three other really exciting prospects. We're working with a US off road sports utility vehicle sub subcontractor who manufactures an electronic power assisted steering module, EPAS module, for sale into the sports utility vehicle market, and they've recently quoted a mid volume opportunity for one of their clients, and we're eagerly awaiting the outcome.

25:35 We've furthermore been working with a European agricultural technology business. And, again, there's a page in the presentation to come talking a little bit about a page trial that we're doing in agriculture. And as I've said, I think, decarbonizing food production is gonna be a major growth driver over the next few years generally. Finally, on this page, we're involved in a technology transfer program at the moment with a leading commercial aerospace engine manufacturer for the development of a hybrid engine. And I'm gonna talk a little bit more, again in a few pages about very exciting developments in the commercial aerospace market.

26:19 Alongside that commercial progress, we've also significantly upscaled our market presence, particularly the quality of our website information and the the extent to which it provides case studies. I think the website's dramatically improved over the last twelve months, not only for investors, but more importantly, perhaps even, potential clients. And we've become much more focused and refined on our approach to social media channels such that the content of our LinkedIn and Twitter feed is now much more relevant to the business as it is today. Some people, on the webinar may have noticed that we've added a YouTube channel and a link on the web website over the last couple of days, and we'll be covering that in social media over the next week or two in which we have launched what we are calling an explainer video.

27:10 It's a very high quality animation and explanation of saw technology, including some examples of how it fits in the electrification of vehicles and in the aerospace market. It's about five and a half minutes duration, and I highly recommend it to investors and potential investors to help to understand the technology.

27:33 I mentioned that we're working with an agri tech potential client. We've recently embarked on a paid study to do a field trial fitting and instrumenting a shaft into a combine harvester. Farming ain't what it used to be. It's, it's not a single man in a single tractor now. It's a very much connected industry. And, as I'm sure you can understand, a combine harvester has many, many rotating shafts in it, and the performance of the combine harvester is

28:06 very variable considering the different weather conditions that it needs to work in, whether it's going uphill or downhill, whether the crop is wet or dry, whether it's wheat, barley, or corn. There are a huge number of variables involved in a combine harvester functioning reliably and optimizing the output in what is a fairly narrow harvesting window. And the data that can come off live talk in order to optimize the performance, avoid breakdowns, manage driver behavior, improve machine and implement control, There are lots of very, very useful uses which can provide value for that data. So we're very interested to see the outcome of this trial, and I think it'll be an opportunity for us to penetrate not only one client, but perhaps look at com contacts elsewhere in that industry space. So interesting space for us.

29:03 Turning back to aerospace then. This is a recap, and it's obviously quite a busy slide. I'm not gonna read everything on it, but it's a it's a recap of the reasons why TRANSENSE was selected as a partner for GE on the ITECH program. And this goes back five or six years now to when the US army were tendering to various aerospace businesses their requirements for a new engine for their entire fleet of military helicopters. And they placed some very demanding requirements on that tender,

29:37 including, as it says on this slide, looking for 50% greater power output, 25% better fuel consumption, and 25% longer replacement cycle. So some very demanding, parameters were placed, and GE was successful in getting the ITEP program awarded to them with the t nine zero one engine, and that necessarily includes our SOAR technology as an enabling technology to be able to deliver those benefits.

30:06 I think that's relevant today because of the really exciting changes that are happening elsewhere in the aerospace industry. And and this, again, you know, it's a it's a busy slide, and I'm sure you'll find it interesting if you look at the slide on our website and digest it. But this slide was taken from a slide deck produced by NASA, and it shows a forty year development cycle now for hybrid electric propulsion being used in the aerospace industry. And in many respects, commercial aerospace today is in the position that automotive was in perhaps fifteen years ago, where there is now very strong pressure to reduce carbon emissions and to find alternative propulsion methods in order to achieve that. So in addition to looking at alternative fuels in the same way as automotive did, there is also pressure to look at completely different engine architecture.

31:05 And on this slide, the towards the bottom left hand corner are hybrid electric engines, are likely to be in use in the next five to ten years. And if I could draw a parallel with automotive, then they are perhaps the the Toyota Prius of the marketplace, if I may.

31:25 Whereas towards the top right hand corner on a thirty to forty year time scale, they are, you know, the real juggernauts. These are passenger aircraft taking 300 passengers and capable of transporting them across the Atlantic. So that's some longer time away. But as the industry adapts to the changes that are required in order to adopt these technologies, I think there are tremendous opportunities for TRANSENSE.

31:53 This slide shows, again from the same NASA slide deck, the engine architecture on the top of a hybrid electric engine for aerospace and on the bottom, a turbo electric engine, which would be applicable to the much larger aircraft. But focusing on the top part of the slide, this shows the architecture of an engine which has propulsion both by electric, but then also by a conventional turbine, although it'll probably be open fan turbine.

32:23 And we are engaged with a leading aerospace manufacturer now to look at this engine architecture and look at the benefits which source sensing giving real time torque and temperature data can add value to this engine configuration. And in particular, it can be used to optimize the interface in terms of selection of the propulsion from the electric engine versus propulsion from the turbine. And in this program, we're already in discussion with this client, and it's likely to be in flight demo by 2024. Interesting opportunity indeed. But turning to the smaller scale, aerospace, there are also some extremely exciting developments in advanced air mobility, and this is a fascinating space.

33:16 And, you'll see that on the left hand side of of this slide, a reference there to the advanced air mobility reality index. And if you are to Google that, you will locate an absolute mine of information about somewhere around about a hundred, hundred and fifty companies that are exploring urban air mobility. In other words, drones large enough to carry four to six passengers and their luggage, and everybody's eagerly anticipating the Uber of the skies.

33:49 And it it's a fascinating industry, and we've already been engaged with more than one player who are identified in the top 10 of that reality index as being companies that are realistically likely to be able to develop technology in this space. There's some that are already very well established businesses that are putting literally billions of dollars into development of this technology.

34:12 There are others that are new startups and being funded for this purpose, but we have some open channels of communication in in that field as indeed we have on regional air mobility, which is electrically propelled fixed wing aircraft. I mean, the engineers in the audience will recognize that the urban air mobility on the left hand side there is reliant on multirotor helicopter technology, which is actually, has many of the same demands as the military helicopters that we're we're already working on, particularly where they have multiple engines, and therefore, differential rates of torque between different engines may assist control and safety.

34:59 In terms of investing in our business, we're doing it steadily. We're doing it in a controlled way, and we're doing it in a manner which is affordable. I feel that that's the right rate of investment. So in f y twenty one, we appointed Nick Hopkins, who's doing a terrific job as the new MD of the SOAR business. We initiated the SOAR cap initiative and brought some experts on board to help us with refining our commercial model and made a key hire in engineering.

35:26 We've also been doing a lot of work to help secure the supply chain for the business in what has been a very challenging time in terms of electronic component availability. Turning to the current financial year, FY '22, we've already made two further key hires in the engineering team. It's likely that we'll see an expanded role for some of the members of the SOAR cap committee in actual client engagement rather than just in an advisory capacity,

35:52 And we will be spending some fixed capital, probably around 6 figures, $100,100,150,000 on capital equipment to streamline our test and calibration processes in order to cope with increased volumes as we see greater revenue.

36:10 As I've already mentioned, though, you know, we're not necessarily tied to working alone in this field. We are still very receptive to working with partners and in as indeed we have on a number of existing programs. So in wrapping up, looking at trading since the end of the year and the overall outlook, then turning first to iTrack, the post period royalty for the first two months of the current year is up a further 9% as as, Melvin has said. So now in dollar terms, more than doubled since inception.

36:44 We're starting to see the Bridgestone are really gathering momentum in their key marketplaces and with their key clients. And post the OtraCore deal, I think that they will have additional bandwidth to both win and service new business. So we feel very positive about the prospects for iTrack as indeed we do about the TRANSENSE TECHNOLOGIES probe. The new range has been very well received.

37:08 We have very good relationships with the global majors and opportunities to work more closely with them on customized product to meet their own web based solutions. So I think we're feeling very confident about prospects there. Turning to SOAR. The SOAR cap initiative is most certainly paying off. Some of our short term revenue growth is underpinned by relationships with existing customers, including both GE and McLaren,

37:37 but we also have some early stage engagement with some very interesting opportunities in OTR, in agriculture, both of which have relatively short time to market and, obviously, in commercial aerospace, which might be a rather slower burn but has lots of great potential. So overall, feeling very positive about prospects. Post period, our revenue is up 98% compared with the same period last year. And so as we see the business develop and start to generate increased revenue, increased profits, and increased free cash flow, that will enable us to consider returning money to shareholders in the form of share buybacks or dividends. And and I know there's been a question in that area as to how we would balance those, and I think it's probably fair to say that, our attitude changes as the share price begins to recognize the value of the business, then share backs buybacks become less attractive.

38:41 And certainly by f y twenty three, if our more mature businesses are spinning off more cash than we need to invest in SOAR, then it's likely that that would be returned to shareholders in the form of a progressive dividend rather than a buyback, presuming that the share price reflects the true value of the company.

39:00 So that ends our presentation. What I'm going to do is ask Melvin to pop his camera back on, and I'll do the same. Great. Thank you. Thank you, Nigel. Thank you, Melvin. So if we could now turn to the questions. We have a number of questions that were submitted ahead of the presentation. However, please do continue to submit your questions using the Q and A tab situated on the top right hand corner of your screen. I'd like to remind you that a recording of this presentation along with a copy of the slides and the published q and a will be able to be accessed via your investor meet company dashboard after the presentation is concluded. Additionally, your feedback is important to the company. So immediately after the presentation has ended, you'll be redirected for the opportunity to provide feedback. While you're submitting questions, let us just first have a look at those submitted ahead of the event. And we've we've got a couple.

39:50 I'm gonna group them together actually by topic area, if that's alright. Now the the first area, if if I could, Nigel, is in and around the the g relationship, and this is to do with revenues rather than the actual progression of the program project. But is the t nine one still on track for its first engine to test later this year? And if yes, would TRANSENSE therefore expect to record some royalty revenue from GE in the second half of calendar twenty one?

40:18 Does a successful t nine zero one test enhance the prospects of additional saw commercialization efforts? Yeah. I mean, that's always two questions in one and a good question. So the answer to the first part is absolutely yes. As we understand it, first engine to test is due before Christmas, and everything's on track for that to take place. And when it takes place, that will be item number one off the production line, and we get paid a royalty per item produced. I think it's fair to say that that won't be visible in our revenue stream. It'll be a small drop in the ocean when it's one when it's one engine. But, yes, that is when the royalty stream will commence, and then I think full production is due in 2023, 2024 when volumes will start to increase.

41:07 The second part of the question is what impact that might have on the sole business more generally. And I think, really, that that milestone was largely passed four or five years ago when the engine went into into design and saw was designed in because at that point, the saw sensing technology itself was very rigorously tested by GE's research center and their aviation people. So I I think that was probably a milestone in terms of its credibility for other clients that really already passed. Can it do any harm when it's in production? No. Will it do more good? Well, you know, I I think that good work's largely been done. Great. Okay. And with respect to the ITEP contract for SOAR, the revenue to come from GE is described by Allenby as a perpetual sales royalty.

42:01 Can you clarify what this means for the mechanics of TRANSENSE's royalty entitlement? Is the SOAR royalty paid all upfront, I. E. Perpetual license, or on an annual basis in perpetuity for the life of the engine? We received an upfront license fee to license the technology for use, and then we will receive a royalty for each engine that is produced. And it's likely to be in production for at least thirty years. So as those engines are produced, we will receive a royalty per per unit. Okay. Great. These both relate to saw, but I'm gonna group them together. In last year's annual report, achieving SOAR profitability was the stated near term goal. Can you please provide an updated progress against this objective?

42:50 And the second question, which relates is the SOAR division's forecast for growth in the near term remain modest Over the longer term horizon, how do the directors view its potential? I think you've touched on that already. Yeah. I think I think, again, I think that's a well framed question. So looking at the market estimates published by Allenby, they make the assumption that we will continue to make modest additional investment in overhead in SOAR, but the increases in revenue are actually, you know, very prudent. So they they they they're based on the premise that that investment will not have a two year payback. I think that's sensible premise to work from, particularly bearing in mind the length of time for adoption of new technology.

43:35 But one of the things that we have worked on very hard over the last twelve months and been successful with is actually charging nonrecurring engineering costs to clients for development work and test and trial work rather than, you know, being being in a position where we've done that work for nothing in the hope of revenue in the future. So I think as we bring development projects to the table over the next couple of years, a, I think more and more clients will be willing to fund them. B, I think that there will be more and more opportunities for us to seek assist grant grant assistance for for what work that is truly innovative and also leading to sustainable solutions. Then see, I think that there'll be opportunities for us to work in conjunction with partners rather than necessarily funding all of that work ourselves.

44:25 So we'll still be trading profitably within that two year period. I absolutely hope so. And that's that's not the way that the forecasts are currently published in the market because that gives us some breathing space. But I I would hope that we'll be generating significantly higher revenues by the end of year two from now. Great. Okay. I've got a number of questions grouped together from Nathan G, and I'm just gonna break them apart if I can. What happens to our IP at the end of the five year deal with McLaren? Do we retain it? Yes. I mean, the the deal is essentially working in partnership to sell our technology into motorsport, but it doesn't actually involve passing any of the technology or the IP and the technology to any of the clients involved.

45:16 So what happens at the end of five years is if it's successful, we extend it. If it's less successful than either we or McLaren hope, then we've got the opportunity to unwind the exclusivity and work with other clients or work in other industries ourselves instead. Great. Okay. And just another part to that question from Nathan. Can we be notified when the Atraco purchase part passes the regulatory hurdles and Bridgestone completes the deal? That will obviously be Bridgestone's news rather than ours, but I see no reason why we can't retweet it. Great. Super. Just moving on to acquisitions. The L and B report says that the company is in a strong position to consider future opportunities for acquisitive growth.

46:03 Has the company identified any possible targets? No. Simple answer. Yep. Open to ideas, but haven't been looking. We've got we've got plenty of horsepower under the bonnet developing our business organically at the moment. Yep. Okay. Great. Two that's a revenue related, and we'll we'll just link those together if we can. And what percentage of revenues is recurrent? And the second part to that is, is there consultancy income for TRANSENSE the involvement in all these leading edge projects, or is it just speculative? So first one, what percentage of revenue is recurrent? The Bridgestone royalty is largely a share of subscription income that they are earning from their clients.

46:51 So you would characterize that as all being recurrent revenue. Obviously, obviously, it's possible that the client profile might change, but I would characterize that as all being recurrent revenue. In the probe business, a lot of it is repurchased by the same customers, but you do start every month with, you know, a a forecast rather than a hard order book. And in the store business, we expect that the revenues that we build will be largely recurrent, but, again, it's it's, at the moment, mostly transactional. Remind me the second part of the question, please, Tom. The second part of the question was bear with me. Sorry. Is there consultancy income for TRANSENSE from the involvement in all the leading edge projects, or is it just speculative?

47:41 Yes. There is. We generally work on the on the assumption that clients will be willing to pay for development work. Not always at the full commercial rate. There might be a degree of risk sharing, but we generally don't work for nothing. Okay. Quick one here. Just change in approach, actually. It's worth saying. Sure. Okay. A quick one here on on going back to the probe. Do Bridgestone license the probe to operators who use tires other than Bridgestone tires? And if not, could they do so in the future? Well, the the probe is Probe isn't related to Bridgestone. It's a sale item. I mean, Bridgestone happens to be a customer for the probe. Bridgestone are a significant and important customer for the probe, but so are Goodyear and Continental and others. So they buy the probes from us, and then they either sell them or package them with web based solutions for their fleet users.

48:36 Right. Okay. We there was a little addition to it's a technical question, actually, but a little addition to the questions which related to dividend or repurchase, and and you have largely covered that off. But the additional parts of the question was, what can you what can you give an approximate estimate of what you think your weighted average cost of capital is? That's probably one for you, Melvin. Yeah. Good luck with that, Melvin. Love the answer for the next presentation. Well, I I would I would answer it like this. The cost of our equity depends on the level of dividend which we are willing and able to pay in the future. And the cost of our debt is zero because we haven't got any.

49:24 So, actually, it's it's mathematically quite difficult to come up with a weighted cost of capital when there's there's no denominator on either side. Yeah. That's true. Yep. Yep. Okay. One here which may be very difficult to answer, but but it's come in. Do you think there's a possibility that you could get involved with the Orcas submarine contract? It's not something which we have considered. Obviously, you know, work working in a defense environment is a whole another set of regulatory environment to work in, and it's not something which we're currently qualifying to do and would be pretty expensive and there's high barriers to entry. So were we to be approached by clients in that field, we can certainly consider it, but it's not something that's been on our outreach program.

50:12 Yeah. Great. Okay. And and final question, I think, here, and this relates to the LSE Greenmark. Any thoughts about seeking a green mark from the LSE to enhance your appeal to green funds, be able to access innovation, green grants, government earmark funding, etcetera. I think there's a there's a classification for that in terms of percentage of revenues, isn't there? Yeah. I I have to confess. I'm not familiar enough to answer that question technically, but I am honest enough to say that our ESG, you know, we've made some tentative first steps, but we're a very small company and have limited resources to be able to really pursue, the communication of an ESG agenda very clearly at this stage.

51:00 And, you know, consequently, it's something which certainly needs to remain on our radar screen as something for the future, but it's not something that we've spent much time on up to now. Yeah. Great. Okay. Super. Alright. Well, that that concludes the the the questions there. So many thanks. Could I ask investors not to close this session? You'll be automatically redirected for the opportunity to provide feedback. If anyone has further questions or would like additional information on TRANSENSE, please do get in contact contact via transsense@walbrookpr.com. Thank you, Nigel. Thank you, Melvin, and thank you all for attending. One second, please, Tom. I think I think Mark had a word to say. Is Mark with us? Okay. Seems not. I I think Mark had mentioned, Tom, that it would be useful for us to perhaps just have a sort of one or two minute wrap up at the end.

51:58 And the purpose of that is to be able to use it as a clip to put onto social media. So if if you and listeners will permit me the indulgence, I've just got a sort of brief summary of where I think we stand. It's fifteen months since the company was reborn in June 2020. And in the first year since then, revenues are up threefold. We've returned to profit, both of those financial targets slightly ahead of the original schedule, but we recognize that it's it's the beginning and not the end of this journey. In the next two years, our market estimates are that we'll double revenues to 3,600,000 and take our earnings from a penny to 7.5 p and generate free cash flow of a further million pounds.

52:45 That's ambitious, but it's predicated on Bridgestone iTrack and TRANSENSE TECHNOLOGIES PLC business, both well established income streams and dealing with the biggest and best companies in the global tire market. Importantly, those forecasts don't actually rely on any positive contribution from our SOAR business. In our SOAR business, we've got world leading patented technology. It's already proven in military aviation and motorsports markets, so we know the technology works and is well accepted in a harsh environment. We have development opportunities in off road sports vehicles and agricultural technology. They have the potential to contribute revenue within the forecast period that's not factored in. We're engaged with a number of leading companies in commercial aerospace right across the full range of propulsion platforms from conventional turbine through hybrid and all electric.

53:40 It's a dynamic and fast moving space, and it's open to innovative sensor technology that we can provide. Obviously, there are no guarantees of success, but we're establishing a great team. We've got really good engineering and operational and commercial capability and every chance of creating long term shareholder value. Our next update's due at the AGM in November, and we look forward to updating everybody then. Thank you very much.