Transense Technologies (LSE:TRT) — Review of 2022 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 screen or if anyone has dialed in via trans sense at warbrook p r dot com. The company may not be in a position

0:34 to answer every question it receives today. However, the company will review all questions submitted and publish responses where appropriate. These will be available via your investor me company dashboard. Finally, I 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 Siegel. Hello, everybody, and welcome to the session. Looking forward to bringing you up to speed with events that TRANSENSE with our final results presentation for the year ended June 30, and obviously, we'll cover current trading since that period as well and talk a bit about prospects for the business. And I think we've got a very good story to tell. I hope you enjoy it and look forward to your questions.

1:21 I'm just gonna start with an overview then of the presentation that we're going to make today. I mean, to to sort of orientate people, we've got a solid set of financial results here. Melvin's gonna be talking about strong revenue growth and a very robust financial position. We're then gonna move on, and, Melvin will first of all talk about the TRANSENSE TECHNOLOGIES PLC business, and then I will talk a bit about the development of the iTrack royalty stream within our business, both of which have been doing very well, building market share and lots of scope for further development of those two income streams going forward. And then I'll be talking more about our store technology and the development of the marketplace and our market sector focus in that business. And, again, I think we've got some very strong information to give you

2:11 about the development of our pipeline and the level of customer engagement in that business. And then we'll talk right at the end a little bit about investor relations and our buyback program. Mark, if I could just ask, I think, if if you could just kill the cameras, it would just enable me to read the presentation a bit more clearly on my screen, please.

2:42 Okay. I'm, I'm gonna hand over to Melvin now, if I may, just to talk through the figures, and then, we'll get on to talking about developments in the business. Thank you, Nigel. Good afternoon, everybody. First page is the financial highlights, and I think the highlight generally is that all dials are pointing in a positive direction, showing strong growth in both revenue and profitability. I won't dwell on the revenue numbers because I cover them in the next slide, but you'll see the profit before taxation has moved from a loss last year to a profit this year, and the movement is 430,000, not insubstantial. Earning per share has jumped up from point nine six to 5.36, and the cash equivalent, there's no depletion in the cash whilst we have spent 300,000 on treasury shares, are shown on the next line. And finally, we've got the distributable reserves, which continue to grow as we generate profits.

3:46 On the next slide is the results bridge, which tells you how we got from 156,000 last year profit after tax to 877,000 profit after tax this year. The total income increase, which is the three first three green bars, is £830,000, and that's made up of net royalties, which have grown nearly 90% to 725 contribution. Probe, which has grown 16% to an increase of 99,000, and the saw business, which has grown 11% to an increase, sorry, to an increase of 22,000.

4:34 In overheads, we have increased overheads by 389,000, and part of that was a planned increase in headcount. There were four more people, and that accounts for about 60% of that increase. Other expenses have marginally increased, and the tax number has increased by 296,000, which reflects the movement from incorporating deferred tax looking forward two years as opposed to one year. And the sum of that those different bars comes to 877,000, which gives us the figure for the year. Looking at the next slide, we have the strengthening financial position, which is demonstrated by the balance sheet. I'll have a look at three of those boxes. First of all, the first box, deferred tax.

5:33 I've mentioned that before. The deferred tax credit was about 640,000 out of interest. If we would have brought in a deferred tax recognizing the full losses that we have, which is about 22,000,000, that number could have been 4,200,000. The cash balance unchanged as once again I mentioned that despite investing 300,000. What is important to note is the quarter royalty to June 22, which was paid in July 22, totaled $560,000. So that effectively replenished the bank account and took it up quite substantially. Finally, on the share buyback program, as announced today, that has been restarted, and Nigel will cover that at the end of his presentation.

6:25 On slide six, we have the cash flow. And what I'll focus on here is the net profit was 880,000. The adjustment for noncash items was 260,000. That's predominantly the deferred tax, less depreciation and amortization. That gives you a cash contribution of 620,000. And as you can see quite clearly from that slide, you can see where that's spent in working capital movements and in share buybacks. Moving on to the next slide, which is the financial dashboard. Once again, this kind of reinforces what I've been saying that the growth in the various parts of that dashboard, the growth in income, which is reported by segments, the net profit before tax growth, which has moved from a loss to a profit, you can see that quite clearly, the substantial growth in earnings per share, and then the growth in cash when you add the treasury share purchase to that. What I want to add, which is not on this slide, but I think it's important, which is most of this presentation looks at historic numbers and the current opportunities. I wanna look forward now, and the way we do that is by looking at the excellent research note that Ian German has prepared, which covers two main things. One is he's

7:56 done a net present value of iTRAQ, which Nigel will cover in due course. I want to just look at the FY '23 numbers that are in his research note, which for those of you that don't have it in front of you, show check increases as follows. Turnover, 2,600,000 to 3,600,000, GP from 2,200,000 to 3,200,000, and EBITDA from 600,000 to 1,400,000. We have since what I regard as the rebirth of TRANSENSE, I. When we did the Bridgestone deal at the end of June twenty twenty, we have as a board a two from two record of achieving our numbers in the market, and we even had an upgrade in 2021.

8:46 So to achieve three from three, looking at the challenges or the headwinds, as I would refer to them as, we have the global economic climate, which everyone's aware of, and then we have the challenge of getting components. From our perspective, we've managed that component issue very well, and it hasn't affected the business. And as far as I'm concerned, the global economic climate, the the main impact that has had on TRANSENSE is on the share price. Performance wise, it hasn't affected our performance to to date. Looking at the other side of that coin, the tailwinds, there are many. Firstly, we have an extremely strong team in place where we've introduced Nick Hopkins to the board as our COO.

9:36 We've brought in Ryan Moore, who was part of our SOAR cap, and he's now our business development officer. And we've also added to the short sort sorts team Andy Bullock as our chief technical officer. So very strong team in place. We have a very high quality customer base throughout the business, not just the source side, through the probe side, and, obviously, iTrack through Bridgestone. We have a growing momentum that's been demonstrated by the graphs on this page. We have a tax free profit effectively till we soak up 22,000,000 of old tax losses, and we have a pipeline that is actually full of opportunities.

10:25 So all in all, an extremely positive picture. Now we're gonna move on to one of my favorite topics, the probe business. I could say an awful lot on that, but I don't think Nigel will be very pleased because he's got quite a lot to say on the saw business. So I'll try and keep it as concise as possible. I'm sure you'll all remember back when TRANSENSE TECHNOLOGIES were able to sell the iTrack business, and it was able to do that as the iTrack business was perceived as the best in market. Likewise, our probe has achieved that status too when it comes to measuring tread depth, tire pressure, which it does by way of either a hose through the TLGX one or two or more sophisticatedly through remotely reading a sensor, which it does through the TLGX four probe. It also reads RFID tags through the TLGX three probe, which are the tags are embedded in the tire for both audit and stock control purposes, and it shares that information by Bluetooth to a fleet management system or a simple PDA.

11:37 This has resulted in TRANSLAGIES PLC partnering with four of the global tire manufacturers. And if you look at the bottom, you'll think that he can't count. There are three there. The one that's not there is Pirelli, and they use the probe extensively as part of their fleet management system. Whilst the probe is an off the shelf product, there's an element of bespoke work aligning it to the fleet management system, and this further embeds us and embeds our business with those tire manufacturers. We also supply the probe to distributors who in turn supply the tire manufacturers in areas we do not have a direct relationship or the tire company prefers to be supplied by a local supplier. Again, this enhances our opportunities.

12:25 Moving to the software houses, not all trucking businesses use the tire company's proprietary fleet management system. So we've started working with software houses, and this is an expanding area where they have approached us to use our probe as part of their systems a lit a little bit by saying there's Intel inside. Finally, we are starting to work with hardware companies who will use our probe to measure their developed tire sensors, and this once again facilitates further expansion. I it's true to say we do not know the size of this market. Pardon me. But it's fair to say it's many, many times higher than we believed it to be a few years ago.

13:11 Before I get to the supply chain challenges, just looking

13:17 to a couple of other points, the gross margin has increased by 5.3% to 55.7%. Revenue is up by 16%. And there are two reasons for the margin to have increased. One is the changeover to the TLGX range, which I mentioned in my opening comments. And the other reason is the FX impact. And as you'll see from that little pie chart on the left, The UK, which is the gray part of that pie chart, counts for a very small slither of that pie. The bigger parts are the yellow part, which is the EU, which is mainly paid in euros, and the two blue and orange parts, which are mainly paid in dollars, and they have had quite a good impact on our gross margin. And I would expect it to increase further in FY '23 to around 60%.

14:18 Looking at the graph at the top left hand side, that graph shows the consistent growth over four years, and the x axis should need to be rebase for f y twenty three. The opportunity pipeline is currently very full, as I said. There are opportunities, the size of which one single opportunity could generate around 50% of the full year research note forecast. A very positive outlook for pro for the pro business. And on that note, I will hand you over to Nigel to deal with iTRAQ and SOAR.

15:00 Thanks, Melvin. So what we're looking at here is the graph of the development of the iTRAQ royalty receipts since the date of signature of the agreement back in June 2020. So you can see there just over two years of history. The staircase that you see here is the numbers which are in the research notes in the marketplace as being our targets to meet market expectation in each of the first three financial years, FY '21 in blue, f y twenty two in yellow, and then f y twenty three up in the top right hand corner. And as you can see, the progression of the annualized royalty run rate there has climbed the staircase at pretty much the forecast gradient. And the significance of the two lines there, the red line is the US dollar amount in which the royalties are actually denominated, and the green line is the sterling equivalent.

15:55 We started off this royalty stream at the sterling equivalent of $1.25. Sterling then strengthened up towards $1.40. So the the sterling green line started to drop below the dollar line, but, obviously, that has reversed and will continue to, I imagine, climb with the events over the last few days. So the the royalty has more or less grown in line with our expectations, and I'm I'm gonna talk a little bit about the future. But first, I'll just touch on the FX. During the current financial year, we began to take advantage of the strengthening dollar and start to sell our dollar income stream ahead of time in order to be able to secure rates. So, you know, as of a few weeks ago, we secured 80% of the f y twenty three royalty income at an FX rate of $1.20 to the pound on average, which, of course, looked like a really good deal six weeks or so ago. And in this new world of trustonomics, then perhaps there's a a touch of regret.

16:57 But on the other hand, there is also certainty over the translation rate for f y twenty three. And who knows where sterling will be against the dollar by f y twenty four. So we have been able to secure good rates at a at a more attractive rate than the outset of the royalty. Now, Melvin made reference to the Allenby Capital research notes, I'm conscious that some shareholders may not have seen that. If you go on to the TRANSENSE TECHNOLOGIES website and follow the link for investor research, then you will eventually find yourself on an l and l and b capital page from which you can obtain the research note that we're referring to here. Any difficulties with that, then feel free to email either the company or Wallbrook, and we can help you to find it.

17:45 But what you will find in that document this time is that for the first time, we've really got sufficient of a foundation now to begin to start extrapolating what's likely to happen over the ten year life of this royalty stream. And in the note, Ian German, who's the analyst at L and B Capital, has made the assumption that this staircase continues on the same gradient for the first five years of the royalty, so a further two and a half, two and three quarter years from what you can see on this map, continuing to grow at roughly the same gradient. And then between years five and seven and then between years seven and ten, In addition to the royalty rate per installation starting to reduce, he's also assuming that the growth rate in the number of installations begins to mature and plateau.

18:35 And he has, in in that note, then translated that into a future cash flow stream, which if you discount back to today's value, comes out at around £15,000,000 of future royalty income in today's money. It's about £20,000,000 gross. That equates to 93.5 p a share value today and is a clear indicator that the current share price for the entire company looks substantially undervalued compared to that one income stream.

19:09 So that's our two fully commercialized businesses, iTrack and TRANSENSE TECHNOLOGIES PLC. Let's then come on to the SOAR business, which, of course, you know, after the light long after the life of the Bridgestone income on royalty has finished, then SOAR will be the core business and the main owner of this company. And we've spent now fully two years since the Bridgestone deal evaluating the market opportunities for SOAR. Originally, using our commercial advisory panel, we were sort of opening out industry opportunities and wanting to speak to as many people in as many different sectors as we could to evaluate what opportunities are out there. But the last several months has really been much more of a case of honing down and focusing on those areas where we are seeing real value opportunities.

20:01 And what I want to discuss now is three particular market segments where this value creation cycle, which you can see on the left hand side of this page, are are really present. So I'm just gonna start by looking at what actually generates value for this technology. First of all, you know, in the top right hand corner of that circle, technology fits unmet needs. No nobody wants to buy a solution to a problem that they haven't got. And so first and foremost, we've been identifying areas within high value industries where the measurement of torque or temperature or pressure or a combination of those three things can solve a problem which is otherwise insoluble.

20:47 And leading through round that circle, having having found that we can solve that problem, can we do it at a cost which is justified? So, for example, is the client able to save money elsewhere in their system by using our technology to make a cost saving? Or, alternatively, can they charge a premium price for their system because of the extra benefits which the cost of the SAW technology adds to their system. And assuming that we're able to meet that cost justification, which in these industry segments we found strong opportunities to do so, then we have engaged with the market in a meaningful way in order to speak to as many potential customers as possible and to secure an endorsement from one or more customers within these market sectors to say this technology actually has something to offer in our space.

21:42 And that then leads to the development of applications and fully paid, fully funded development projects to look at technical feasibility for the technology and lead towards full commercialization. And, and, essentially, you know, that's the cycle which we have been engaged in. And that has led us to three very interesting market areas, each of them individually very large and with some extremely attractive customers. And I'm gonna talk about those now, aerospace, electric motors and drives, and industrial machinery. I'm also gonna touch on performance automotive where many people will know we already have existing business. So let me, first of all, talk about aerospace. I mean, firstly, in the aerospace sector, torque engine torque is already measured. There are already many large customers I beg your pardon. Many large companies in this space who are producing systems to measure engine torque in aerospace, and it's an important feature in safety and the integrity of control and reliability within the aerospace industry. So measuring torque is not new to aerospace customers.

22:51 But measuring it as accurately as you can with a surface acoustic wave sensor and doing that in a way in which is extremely rapid in terms of its feedback to the engine control loop is somewhat more differentiated within this space. Also importantly, our sensors are very compact. They're very rugged. They're small in size. They're light in weight, so they lend themselves to aerospace applications. They're also able to compensate for temperature changes, so they can measure torque in conjunction with temperature and also measure torque in an area where there is high magnetic or electromagnetic interference. So some very strong advantages for surface acoustic wave sensing within the aerospace sector.

23:40 Clearly, that's already been proven with the relationship with GE on the ITEP program, but we've now got incoming inquiries from other large aerospace end user customers with specific project needs where they have identified the need to measure torque and are finding it difficult to do so. And so that's led now to four active inquiries, four active engagements with customers, and, I'm gonna come on to the pipeline when I finish talking about industry segments, which in turn has led to applications development. We've, during the current year, extended the GE license field of use to cover development work on their hybrid engine high altitude test bed program. So this is a a development program for hybrid engines in aerospace.

24:28 But then also, very importantly and very recently, hot news, we've, entered into a memorandum of understanding with Meggitt's engine sensing team based at their operations in Switzerland to explore working jointly to present surface acoustic wave sensing technology to their client base with a view to entering into a license agreement covering fields of use within the aerospace market over the next fifteen months. So that's, a very valuable relationship to us. Obviously, from sense from TRANSENSE's perspective, Meggitt offer us market access, and they offer us a very high level of technical support. From Meggitt's perspective, then they see this unique technology to quote the customer endorsement there becoming a a great addition to their engine sense engine sensing portfolio of products. So we think a really important and enduring relationship will come out of that.

25:29 Moving on from aerospace then, I'm gonna come on to electric motors and drives where, again, there are at least two very key uses of surface acoustic wave sensing within electric motors. One of them I covered six months ago when we're talking about the interim results, and that's using real time actual torque measurement to avoid the use of estimated torque measurement within engine control units or electronic control units for electric engines. And the the current sort of state of the art is to use an estimation of the torque output in the engine control, whereas using actual real time can offer some significant benefits because it needs to have a much lower factor of error in the calculation when you have the actual torque measurement.

26:18 We've recently had a piece of research completed in the desktop, which shows that it's gonna offer some very significant advantages, and we'll be investing further in that research over the next few weeks and months, the output of which will be a white paper to actually demonstrate how much additional range or additional power that we're able to generate using surface acoustic wave on an electric drive. The second area of great interest in this field is to use surface acoustic wave sensing to accurately measure the magnet temperature within an electric motor, and we think that that will offer opportunities for clients to despecify the material content and save significant amounts of money in the electric motor build by being able to monitor the temperature of the magnet on a real time time basis during operation.

27:10 So, you know, at at least two very specific fields of use here within electric motors, which, of course, have huge utility across a very broad range of industries. That's generating, again, incoming leads. We've got 10 active customers on inquiry in this field, and the first funded project is now underway. Coming to the third target industry, which is industrial machinery and and is obviously quite a broad industry in itself. I mean, I'm including here off highway vehicles, including agriculture and construction vehicles. I'm also including heavy duty engines that would be used to drive hydraulic pumps, for example, and also including robotics. So there there are a a number of sub industries here.

27:58 But as a primary industry, again, measuring the delivered torque provides the great opportunity

28:05 to improve engine control and improve power distribution in order to optimize power usage within a piece of industrial equipment. Increasingly, this type of equipment is being used on an autonomous operation without drivers. So, again, providing that extra degree of remote control, very, very valuable. Once again, we're fielding incoming inquiries. People who followed the company for a period of time will know that we have an an active ongoing trial with a large producer of agricultural machinery at the moment. That's pretty much come to a conclusion now as far as the technical development is concerned and the client, you know, as as we understand this, is very happy with the outputs that they're receiving from these sensor technology.

28:51 So now it's a question of looking at commercial feasibility rather than technical feasibility. It works. How much can we charge for it?

28:59 So, again, lots of progress here. The fourth markets market segment then is performance automotive where we have a a core relationship with McLaren Applied, who have an exclusive arrangement in premium motorsports to sell surface acoustic wave technology. They've been extremely active over the last few months and successful in implementing, source sensing instrumented shafts, not only in IndyCar where we have a a good history, but also in a number of other race series. So we see that relationship growing very nicely, and McLaren doing very well in that space. Will it be translated into high performance road cars in higher volume?

29:40 Well, there's a deliberate question mark next to that. You know, there there are certainly cost constraints within that field, which would lead me to believe that it's of a secondary importance mark in in terms of market opportunity compared to the others, but, nevertheless, an opportunity exists.

29:58 So with those four sectors in mind, I'd I'd like to then outline where we've got to in terms of development of the pipeline. And and Melvin mentioned the the really sort of important appointment of Ryan Moore as our business development director who's been working with the company in the SOAR cap for two years, but on a part time basis as director of the business now for seven months. And that really has transformed the quality and quantity of customer engagements within our pipeline. And you can see here since last July, we've got seven active engagements as opposed to 24 I think we're on 24 now as opposed to seven fourteen months ago. I'd just like to touch on what it takes for a customer to qualify to go into one of these circles.

30:44 The blue circles are active inquiries, and that means the customer has identified a need, that we have the technical capability to meet that need, that there is an r and d budget available for the for a project to go ahead to look at technical feasibility, and that we have spoken with the budget holder and aware aware that it has support internally within our customers' organizations. So there's a lot of noise around the system that doesn't get into the blue box, and the blue box is those where that prequalification has taken place. They then transition from the blue circle to the red circle where after an exchange of information on active inquiry, then we move into a funded development project where the customer will pay an r and d fee in order to be able to instrument staff a a shaft and do some test work. And we currently have three funded NRE projects underway.

31:44 We'll be updating the market regularly on the movement on the pipeline. I mean, this pipeline is one of our key performance indicators, and we'll be looking to move as many over from blue to red as we possibly can. We then, in the green box, have those that have satisfied themselves on NRE on on funded development projects and are in active negotiations move into long term contract, and there's one such at September 22 compared to July 21. So this pipeline is really now beginning to grow not only in quantity, but also most importantly in the depth and quality of the inquiries. I would love to know what the annual aggregate revenue of those 24 companies is in the world. It'll be many, many billions. So we have some very high quality customers in there.

32:35 Of course, servicing customers of that quality also takes technical and operational resource, and we have, continued to build out the technical capabilities of the business over the last twelve months in order to be one or two steps ahead of the customer need. As those funded projects move into, our operations, then we will need to have the people both in terms of number and capabilities to be able to handle those development projects. So we have been adding

33:06 quality resource to our technical leadership team and to our operational team such that we'll be in a position to handle those inquiries over the current financial year as they emerge. You can see there we've added somewhere around about 200,000 to to overhead in the SAW business to be prepared for that. But you will see when you look at the financial forecasts and certainly as the next eighteen months unfold, that we'll be looking to add

33:33 many, many funded projects to the top of that pipe to begin to defray these expenses and turn our surface acoustic wave into a self sufficient, self financing operation. So to summarize, in the first two months of this year, our current trading is well ahead of the prior year. I think revenue is about 1919% ahead of the first two months last year. Yes. The the economic outlook's pretty tough in a lot of industries, but the customers that we're engaged with are largely looking for efficiency savings, productivity improvements. They're selling products that are OpEx, not CapEx. So that, you know, they're not necessarily vulnerable to an economic downturn.

34:20 And so we think that we've actually got an extremely resilient strategy and a and a very resilient business model to be able to cope with this downturn. Of course, we've also got a business which is 95% export, so virtually all of our revenue stream is in foreign currency, whereas virtually all of our costs are in sterling. Our iTrack royalty is high growth, low risk. There's ample opportunity to continue to grow the revenue within TRANSLOGIES through managing very, very lucrative channels into tire producers and others. The SOAR pipeline is building very nicely in terms of the quality and quantity of customers they're engaged with. We've got a long pedigree of success in partnering with big companies. It's delivered for us in the past, I'm sure through Meggitt and others, we'll continue to do in the future.

35:10 And so we think for our investors, the outlook is very positive indeed. With that in mind and to to underscore our confidence in the future, we've already carried out a share buyback program during FY '22. We've bought back 300,000 shares, which sit on our balance sheet. We were bought in an average price of 70 p. We're satisfied with that. Happy that we did it and think that that will offer very good long term value to existing holders. Consequently,

35:46 have now announced that we'd like to extend that program. We're planning to buy up to another 150,000 prior to the AGM, which is in November, early December, December 1 probably. And then beyond the AGM, assuming that we get refreshed

36:03 authority from shareholders to continue with buybacks, then we plan to buy a further up to £500,000 post the AGM over f y twenty three. You know, I would stress that's all coming out of trading cash flow. That's that's, you know, not not dipping into financial reserves. That will be done out of the excess of cash generated by the business over and above that, which needs to be reinvested in the business to continue to grow. So that was a lot of information in a relatively short time. I think we've got about twenty five minutes left. We'll be very happy to field your questions. I've seen the sidebar moving quite quickly. I confess that the size of the text on my screen means that I haven't had an opportunity to read them, but thankfully, some people is going to compare for us so I can Absolutely.

36:56 Understand. Yeah. Absolutely. That's fine. Thank you, Nigel. Thank you, Melvin. We do have a number of questions as you say, but please do continue to submit your questions

37:05 using the q and a tab situated on the right hand corner of your screen. I'd like to remind you that a recording of this presentation can be accessed via your investor meet company dashboard post the event as well if you wanna replay it or if anyone else that you know, Mick, wasn't able to attend and and would like to to catch up on the update. Your feedback is important. So immediately after the presentation has ended, you will be redirected for the opportunity to provide feedback. We've got questions that are both commercial and financial, but maybe we can start with some of the commercial ones. Tom m has said, can you expand on your recently announced collaboration with Meggitt?

37:40 Clearly, SOAR is being well received. Yes. Indeed. It is. I mean, yes, I will expand on that. Initially, we were introduced to Meggitt in The US because they're a tier one supplier to GE on the ITECH program. So that was how the original handshake was made. And, indirectly, that's led to interest from their engine sensing team who are based at Freiburg in Switzerland, and we've been engaged in discussions with them over the last several months, to help them to understand the application of SOAR technology and the opportunities that we see in the marketplace. And that's clearly attracted their interest, and they're now very keen to work with us to make that available to their clients.

38:26 So we've agreed a memorandum of understanding, which has a duration initially of fifteen months. The first few weeks of that will be to prepare materials and begin to put ourselves in a position where, we can support Meggitt in pitching that technology to their customers. And then over the course of next year, we'll essentially be gauging the scale of opportunity in the marketplace, working together to effectively produce a business plan to look at what the opportunity is. But then also in negotiation between ourselves, we'll be looking at what sort of fields of use within aerospace Meggitt might be interested in taking the license. And at at one extreme, that could be a full worldwide exclusive license covering the entire aerospace sector.

39:15 At the other extreme, it could be a much narrower field of use for one particular program or another. You know, there there are there's still quite a wide range of outcomes, but there is a a very strong meeting of minds at the outset and a lot of confidence that we're going to be able to find a really good solution that'll work very well for both companies. Great. Thank you. You mentioned GE in passing. So a quick question here on GE from Jonathan. I note that the GE license agreement was expanded to cover GE's hybrid electric program. Can you comment as to whether the hybrid electric area is exclusive to GE or is a nonexclusive license? That's an extension of the existing license to cover only the development program for hybrid electric. So it doesn't cover production.

40:07 It only covers development. So it's an r and d project, and it's nonexclusive. The the entire GE license is nonexclusive. Okay. Super. Another one from Jonathan, actually. Bridgestone has a minority investment in The US autonomous tracking company called Kodiak. Does the potential exist for the iTRAK TPMS system to be used in so called 18 wheelers? Are there any plans for Bridgestone to do so? I think it would be far too early for Bridgestone to answer that question. I'm certainly not in a position to do that. I think it would be reasonable to work on the assumption that it won't happen quickly because it would be quite a big step away from the mining sector where iTRAQ is currently focused. So I wouldn't have any short term aspirations, but whether that's something which might be knitted together later, you know, would be conjecture rather than a than an answer from a position of knowledge.

41:03 Okay. Super. I'm not familiar with the acronym, but I'm gonna read it out to to you from Jordan. Can you provide an update on the FETT? Has this been completed yet? Previous comments were that this would be likely to complete in 2022. Yes. FETT is first engine to test. So that was the first full engine build of the GE ITEP engine to go into Black Hawk and Apache helicopters. The first engine to test was completed on time in the first quarter of this year despite some of the setbacks caused by COVID, and the program stayed on time. And that was very successful. It's actually in the public domain. I think it's it's probably been on our social media channel. It's certainly been on GE's social media channel that it's been completed.

41:51 Great. Super. Quick one for Richard, and it it's it's more a statement, I think, but it says, surprise power generation is not a target sector. You comment on power more broadly, and I guess sustainability is a big a big item these days. Yes. It is. I mean, sustainability is pretty much inherent in all of the applications that we're looking at because the electrification of motors, the the opportunities in aerospace are all about getting greater range and greater power utilization for less fuel. Similarly, in industrial machinery, and I wouldn't rule out power generation, mean, within industrial machinery, is a subset of heavy duty industrial engines, which certainly would be involved in hydraulics and potentially in the energy sector as well. So there are opportunities there.

42:48 Yeah. K. There's one question here, by the way. In terms of the application of our technology, the larger and the heavier the shaft, the more technically challenging it becomes. So we have, for instance, been fitted previously on marine engines where, you know, you have an absolutely huge shaft weighing many, many tons. That's technically very challenging. It's possible, but it's technically very challenging. And that's one of the reasons why energy generation perhaps isn't top of the list. Yeah. Okay. Just one question here that I'm not gonna ask you ask ask you, but for the person who's posted it, it's to do with the tapering of the royalty, and it's quite detailed. But if I could just ask that person to contact me, then we'll put you in touch on the LME notes. I think that will detail it far more effectively than trying to to address it now.

43:36 But just turning to the to the buyback, there are two questions here, actually. One from Paul, which is why share buyback instead of dividend? And then also from Mark, why do you think share buyback is a good idea? Surely investors would be better served with you paying them a dividend. Just tackle that question. Yeah. I mean, know, clearly, that's something that we keep under review. I wouldn't rule out initiating dividends either in parallel with buybacks or as an alternative way of returning cash to shareholders. The primary reason why we focused on buybacks first, apart from the obvious undervaluation in the shares, has been the majority of shareholders. Obviously, it's hard to please all people at all times, but the majority of shareholders are focused primarily on capital growth, and many of them have shares in funds where they're enjoying that capital growth tax free.

44:32 Yeah. Okay. And Richard then asks, will you be keeping the bulk shares or in treasury or canceling them? No plans to cancel them for the time being, keeping maximum flexibility. Okay. Great. A question from Brian, which I suspect is about share ownership for by current management. Please describe the current management ownership numbers. I'm assuming that's that's equity ownership. Yes. I think out out of the board of directors, I'm probably the largest shareholder. I've brought a quarter of million pound a quarter of million shares, I beg your pardon, all bought in the market since I joined the board in 2015 whenever there's been share price weakness at the same time as I have not been in possession of price sensitive information.

45:21 I've taken the opportunity to add to that holding. It gets progressively difficult for me to buy shares when I'm not in possession of price sensitive information because increasingly I am because of the number of programs that we've got ongoing. The other board members, Mel Melvin has, I think Do you want me to quickly run through it? Yeah. Why don't you? Yeah. Thank you, Melvin. Yeah. I've 50,000 shares, which were probably acquired at a average rate compared to the current price of about £6 a share. Rodney Westhead has got just over 30,000. Ryan's got 18,000, which he's acquired recently, and Nick, 5,000, which he acquired recently. I think just to expand on that as well, all of the employees in the business, including the board, are incentivized by share options.

46:13 And the majority of the value in the share options is dependent upon a share price of the order of $1.50 to £2. So, you know, we we have an opportunity, but a responsibility to drive the value of the business before that becomes worth anything to us. So I think we're extremely well aligned with shareholders in terms of value creation. Yeah. Super. Three questions from Brian. We'll take them individually. Are you actively addressing the helicopter market where torque measurement is a critical flight control element, I. E, with Airbus, Robinson, etcetera? I'm not gonna be specific about customer names, but the answer is yes. Absolutely. It's one of the key areas within aerospace and one where there ought to be the quickest wins given that we've already got adoption on the ITEP program.

47:06 Okay. Second question. Please discuss competition risk in each segment, I. E, are there competitors actively starting to compete and with deeper pockets? I assume within each segment, he means within each of the industry sectors that we're targeting the saw rather than the three segments of our business. That's how I'll answer the question. We don't see any direct competition in terms of surface acoustic wave sensing. We are protected by patents and we have a great deal of know how. So whilst there are competing technologies, and as I've said, the torque sensing market is something like $5,000,000,000 of value a year. So it's not that other torque sensors are, you know it'd be nice to say, you know, other torque sensors aren't available, but, of course, they are.

47:55 Where where we have been working hard is to find out where our own system differentiates ourselves from others. And as I've said, that's largely to do with accuracy, rugged nature of our product, cost in certain instances. Sometimes it looks expensive, sometimes it looks inexpensive depending on what it's competing against in which sector, but then also importantly, temperature compensation and especially EMC interference. The fact that we can operate in a high magnetic interference area is really important. So other torque sensors are available, other surface acoustic wave torque sensors for the applications that we're looking at. Now we have a free run once we've got patent protection and the know how that we have.

48:45 Okay. And Brian's final question. What are your capital needs over the next three years to achieve the objectives? Is the plan to raise debt or issue more shares? You're cash generative now. But The answer is neither. We expect to generate more cash than we need to invest in the business to take it where we want it to go. Yeah. Thought that might be the answer. Okay. Super. So a couple of financial questions, and these relate to the hedging agreements that are in place. Jordan says, how long is the USD hedging agreement in place for? And I'll just combine that if I can with question from Nigel. Being wise after the event, is it appropriate to fee in future as a hedge currency while we are confident we have sufficient revenue hedging as an an unnecessary expense? Okay.

49:31 Perhaps you'd like to take the first part of that question, Melvin, and then I'll take the second part if you like. Yeah. Very kind of Yeah. That's very kind of you. You. The the hedging is purely related to the iTRAQ royalty. So and there's a lot of dollars earned on SOAR and on the probe business, and they're not hedged, And and they have benefited greatly from the FX movement. On iTrack, I basically looked at 80% of the projected income, which was projected on a fairly prudent basis. And the so, basically, it covers the whole of the FY '23, which we mentioned earlier was at an average rate of about 1.2.

50:24 Being wise after the event, yep, it it it's it is easy to now look at it and say, oh, it was obvious it was gonna get dropped further. I read quite a lot of stuff on currency. I get daily updates from HSBC who we work with investors, and it was very mixed signals. And we did the original deal at 01/25, and we were very pleased at that time have achieved I mean, we did it in two lots. One was at 01/22, one was at $1.16, hence the average. We were very pleased to achieve those rates. And, yep, hindsight tells us maybe that wasn't the best thing to do, but hindsight is very I would add to take the second part of the question. As a matter of policy, then I have I have myself always often been a critic of hedging because, you know, exactly the point that's being made by the questioner that it can be an unnecessary expense, but then insurance is an unnecessary expense as well until your factory burns down.

51:31 So in this particular case, bearing in mind that we have a very large, pretty secure and growing income stream in a foreign currency, then as a matter of policy, we did think that it was sensible to start locking in what looked like very attractive rates and giving shareholders a degree of certainty. As we sit here today with the dollar at $10.07 and having hedged at $1.20 for the next twelve months, know, have we got a little bit of seller's remorse? Yes. Of course, we have. But on the other hand, we're not collecting some of this money and exercising these transactions for another twelve months, and the dollar might be starting at $1.45 at that point, and we'll be patting ourselves on the back. Nobody knows. Nope. Nobody knew that the government was gonna change and the new government was gonna gonna do what they did on Friday, and nobody knows where the dollar will be in a year's time. But we know that it'll be $1.20 when it comes to time to cash out chips.

52:30 Indeed. And you're a technology company, not a currency speculator. So yeah. Great. Okay. Well, that's very helpful. Thank you very much. The person who was asking the question about the royalty stream has actually put it on in a shorter format, which I can read now. And I'll I'll I'll take that question because it it obviously deserves an answer. The question is, where was it publicly disclosed that the iTrack royalty rate would taper off? And, you know, the answer to that is persistently in q and a, know, when I've been asked granular detail on that to the extent that I'm permitted to answer questions according to the customer's commercial confidentiality agreement that we are bound by, then I've given answers to questions, you know, as and when they have fallen due.

53:20 We didn't disclose the full granular detail of every aspect of the agreement when it was first signed. You know, it's normal to publish a summary rather than publish a full agreement, and that's what we did. I think that summary was fairly fairly balanced in terms of upside and downside, and we've answered questions on it since when we've been able to do so. Right. Okay. Appreciate that answer. So that's the and brings us to the end of the questions. Nigel, would you just like to give the postage stamp summary of of of where TRANSENSE is today? Yeah. I I would. I think we've really found our feet now, and I and I think that it you know, it's fair to say that the prospects for the business continue to build. We've we've now produced four sets of results since the company was reborn in June 2020, each one of them at least in line with the aggressive growth forecasts that were put in place at that time.

54:18 And I'm very pleased that we've been able to climb that staircase. We can still see several steps in front of us, but we can see how to navigate our way up them. I think, you know, as a message to shareholders, for those who want to sell, if there are any, then you can be absolutely assured that there's plenty of buyers around at the moment. The company is the buyer of last resort, but plenty of other people out there who would like to take a position and can't. If you're a happy holder, then join the club. You know, I'm a happy holder too. They're in a shoebox under my bed. I don't worry about them when they go down, and I get excited when they go up. But I'm I'm a very happy holder, and I think you can afford to be too. If you're a buyer, then good luck. You know, I hope you I hope you can get the shares that you want, but I think you'll find that they're in fairly short supply, and it takes a bit of patience in the retail market to accumulate them in small quantities at the moment, if that's what you want to do.

55:14 But for those who followed the company for a long time and being patient with this, thank you very much, and I'm sure your patience will be rewarded. Great. Okay. Well, thank you, Nigel. Thank you, Melvin. 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 TECHNOLOGIES, please do get in contact via transsense@walbrookpr.com. And many thanks for attending today's presentation.