Transense Technologies (LSE:TRT) — Review of Full Year results and Prospects

0:03 Good afternoon, ladies and gentlemen, and welcome to the TRANSENSE TECHNOLOGIES results presentation. To start with, if we could cover a couple of housekeeping items. Before we begin, we would like to submit the following poll, which you will see on your screens. Throughout this presentation, investors will be in listen only mode. However, questions are encouraged and can be submitted at any time via the q and a tab situated on the right hand corner of your screen or if anyone has dialed in via transcents@warbrookpr.com. Now 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.

0:51 Now I would like to hand you over to executive chairman, Nigel Rogers, and chief financial officer, Melvin Siegel. Thank you very much, Tom, and welcome everybody to the seminar. I hope that you all enjoy it and get something out of it. I think we've got a a good attendance today. I would I would assume that's a mixture of existing shareholders who know the story well and perhaps some new people who don't. So we'll start off the presentation with a a recap for some, but it it'll be an overview for others.

1:23 So I will start off by just giving an overview of the company. The company's been listed on AIM since 1991. Current market cap at the share price of a pound is about 16,000,000. It's just just about 16,000,000 shares in issue. There's a list of major shareholders there, more than three percent, the most recent of those being Dowgate Capital who've accumulated 4% over the last few weeks. The board of directors, myself as executive chairman, Melvin, who you'll hear from later as CFO. Ryan Morne was recruited as business development director, and he's, been pulling up trees, as far as the, new prospects, and and you'll see some information on that later on. You know, terrific amount of extra customer engagement over the last twelve months. The most recent addition to the board is Steve Parker, who is a very experienced, non executive director, spent most of his life in large engineering consultancies and a very talented individual and again very well connected. He joined us as a non executive director a few weeks ago.

2:27 People will see that he also started to buy some shares. He bought a few shares this morning. And the Board is completed by Rodney Westhead, who is also a non executive director. Rodney's been with the business for many years and has signaled his intention to retire from the Board over the next twelve months or so and will be recruiting an independent non executive director to replace him. The senior management team is led on-site by Andy Bullock, who joined us just over a year ago as technical director and runs the day to day operations of the SOAR business. And again, he's been an excellent addition to the team. And I think we'll be talking a bit more about management as we go through. You can see also there, the, revenue, adjusted EBITDA, and adjusted profit before tax graphs for the last three years, all showing strong progression. We'll be talking about the financial track record up to 2023 in the context of signaling, midterm financial goals for 2023 to 2028 later in the presentation.

3:26 And as you can see, the share price, being shown there relative to the AIM index has really begun to respond to some of the good news that we've had in the marketplace over the last few months.

3:39 Moving on to the business. We're going to be talking primarily about two operating businesses today. SourceSense, which is the design and supply of advanced sensor solutions for accurate noncontact measurements of torque, force, pressure, and temperature. For the uninitiated torque is the twist on a shaft in an engine connected to wheels generally and is very important in terms of being able to apply power to, convert that into speed. Our SOAR technology is very much an enabling technology. It improves control and efficiency across a whole range of measurands in several different applications, and we'll be talking about some of those in-depth today. The second business we'll be talking about is TRANSLOGIES. TRANSLOGIES is the developer and supplier of smart connected tire inspection tools, so handheld tools mostly for the collection of pressure, tread depth, RFID, in truck and bus markets. So big fleet operators, use our equipment.

4:41 There's a lot more information about both of those businesses on our website for those who would like to see them, including some very interesting video demonstrations. We deal with a lot of very big and there's just a selection here of some of the major customers that we work with. Some of those will be familiar to people who've seen these presentations before. Frustratingly, there are four. They're just a sample of four of perhaps 34 companies that are currently under NDA for whom, we're not allowed to use their names in these presentations. In fact, you know, although that might sound a little disappointing, it's actually good news because what that means is that they think that the use of our technology is giving them an edge in their marketplace, which they don't, at this stage, want to reveal to their competitors. So, actually, you know, in in many respects, it's a signal of our success if large companies don't want to publicize too early that they're working with our technology.

5:40 Working with big companies is great. You know, they have scale. They have reach. They have market access. It's also fair to say they don't always move as quickly as TRANSENSE does as a small and nimble technology supplier. And so, you know, for those reasons, most of our business takes time to win. But then once it's won, it's sticky business, it tends to stay as well.

6:07 Many who are watching will also be familiar with this slide. So this page explains drivers and the reasons why our four target markets for Source Sense emerged as being primary opportunities, aerospace, industrial machinery in which we include off highway vehicles and robotics, electric motors and drives, and the performance automotive arena, motorsport, and high performance vehicles. It's in these spaces where we see opportunities to develop applications for our SOAR technology because our SOAR technology will meet an unmet need. So in, you know, in many of these sectors, people are already measuring talk, particularly in aerospace and robotics and and obviously in performance automotive as well.

6:55 They're already measuring talk, but our own system of measurement provides significant benefits over and above the technology that they're already using, either because it offers an opportunity to save cost or improve performance, usually both. And in each of these sectors, we now have strong market engagement. We're gonna be talking about some statistics in terms of the number of customers engaged in each of these markets and the level of engagement that they're at. And we're starting to see real market pull from those customers.

7:33 The third business segment, which we'll be talking about more briefly than we have in in previous periods, is the Bridgestone iTrack transaction. So for those who aren't familiar with the company, we had another technology, iTrack, which was developed, under the TRANSLOGIES brand, but was sold in a licensing transaction to Bridgestone Corporation in June 2020. So we're now three years into that ten year license period. The license expires in 2030. And the annual license income has increased from 800,000 in the first year to 2,000,000 in the third year. So in f y twenty three, we've collected 2,000,000 of of revenue from that. There's another seven years remaining. And later on in the presentation, we're gonna be talking about what we think the prospects are in terms of the growth rate in, unit volumes during the remaining seven years set against the agreed unit rate reductions, which take place in 2025 and 2027 under the licensing contract. So we'll be talking more about that. Melvin will be talking more about that during his presentation of the figures.

8:43 Again, just to complete the overview, these three charts show some interesting segmental information. On the left hand chart there, you can see the growth in revenue, which has gone from about 1,750,000 in 2021 to 3,500,000 in 2023. Those are financial years ended June, and you can see how that segmentation works. Obviously, the single biggest contributor at the moment is still the iTrack royalty in gray there, but you can see the underlying growth in the two businesses which we run day to day, TRANSLOGIES and SOURCENCE, both making a significant and increasing con, contribution. And we'll be talking about how we see that growth rate progressing in the next five years later on in the presentation.

9:29 The center doughnut chart there shows saw revenue, split by market segments. So you can see there, saw revenue for FY '23 was largely derived from aerospace and motorsport, and although beginning to start emerging in electric motors and drives. And and this is a a doughnut chart we'll be continuing to show in future presentations to see how that evolves. And then on the right hand side, another doughnut chart there, which shows the geographical split of revenue for, SOAR and TRANSLOGIES combined. And and, again, as you know, that shows that we're a very well spread business here with, you know, lots and lots of expert exports. 75% of our revenue exported. So next, what I'd like to do, now that we've either recapped or provided an overview is to talk about the development of our strategy and the key key implementation points over the last twelve months.

10:27 I think in the last twelve months, we've made tremendous strides forward in terms of, implementing our strategy. I want to talk first of all about TRANSLOGIES. So TRANSLOGIES is the business exposed to the truck and bus market, and the logistics market has been growing very rapidly indeed. There's been all sorts of major growth drivers. You know, we all have more and more purchases delivered to our doors now and distribution of products around the world is a very high growth market. The logistics market's growing strongly. However, it's also extremely competitive and very much cost driven amongst the operators. And, in in addition to those cost pressures that they see in terms of competition, they're also seeing an increasing regulatory burden in this sector, particularly driven around road safety. I mean, anybody who drives around the motorways will still see shredded truck tires on the side of the road, and it is still the single biggest cause of death on the motorway network, tire failure.

11:30 And for that reason, it's very much in focus amongst the safety authorities increasing amounts of regulatory pressure to both measure, but then also to keep digital records of proper inspections. And it is becoming embedded into all sorts of regulatory requirements for truck and bus operators, all of which is much more efficiently done using our equipment than using traditional handheld tools and manual record keeping. Over the course of the last twelve months, we've actually spent a lot of time talking directly with fleet users. People familiar with the business will know that a high proportion of our sales in the past have been sold through the major tire producers where we have very good relationships with Bridge Stone, Goodyear, Continental and Pirelli, just to name a few majors.

12:23 But we're increasingly now engaging in conversation with fleet end users. So going through the middleman to speak to the end users to understand what the major drivers of decision making for them are. And what that's led us to believe is that actually the market is significantly bigger than we perhaps might have otherwise thought. And we're making an estimate in in this presentation, which is the basis of our strategic decision making in this business that is it is potentially a $25,000,000 market here of which we're currently making sales of around 1,000,000. We have a very strong customer base upon which to build in the tire majors, but we think that direct fleet opportunities both in The UK and overseas will help to pull significantly more volume through.

13:11 We're working closely with fleet software providers in order to be able to offer a combined package of both hardware and software and increasingly try and move that to a recurring revenue model incorporating incorporating software as a service rather than purely a hardware sale. And we think that these initiatives will move this business forward very rapidly over the next two or three years. So much so that we've recruited a dedicated business development leader. We're delighted that he will be joining us very soon. He's currently on garden leave from his current employer, but he'll be joining us very soon. And during that recruitment process, we were very pleased that, actually, his views accorded very much with those that we had formed in terms of the market potential for our products and the best routes in which to attack those markets.

14:05 And so, I think we can expect some great things from TRANSLOGIES over the next couple of years. Moving then to SOURCENCE. This is, quite a busy slide. There's a lot on it to digest, but the the three bars at the top there show the key industry drivers in the aerospace market, which we think provide opportunities for us with our SOAR technology. So firstly, conventional engines conventional jet engines generally would not use a SOAR based sensor. And, you know, there are other sensors are available, which would generally be specified in conventional jet engines. However, the pressure to decarbonize in this sector are very strong, and there is a lot of development work going into more efficient fuels and more efficient engines in order to burn less fuel.

14:55 And we believe that that will create opportunities, particularly, for example, the CFM Rise program, which we're involved with, as the development partner. We think that specifying SAW technology on open rotor engines rather than conventional jet engines will be one of the enablers to unlock their use in future. The second bar there we talk about is the move towards hybrid and hybrid electric engines. And I I think that we'll see increasingly, you know, there there are many, many development programs now to try and bring those engines into use both for urban air mobility and also for regional, jet traffic. So there are some very favorable industry drivers which are beginning to show a lot of development activity, that's creating end user pull to come and engage with us to understand and try and work out the best methods of applying SOAR technology in the aerospace industry.

15:59 Historically, our engagement has already been strong in in helicopters and particularly in military helicopters. People will be familiar with the GE t nine zero one program, which was specified in 2016. But moving forward, we see lots of other opportunities in aerospace, not only in the engine as I've talked about with hybrid generation, for example, but also in mechanical assemblies like electric actuator for force and torque monitoring of electric actuation for flight surfaces and also open rotor engine torque. And so we we are we're already working on development programs in that area in the 2023 column on this chart. And moving towards 2028, we see more opportunities again in electric propulsion and potentially in braking systems and elsewhere on the airplane.

16:51 So I'll be talking a little more about the companies that we're engaged with numerically and the level of engagement going forward in the aerospace industry in two or three slides time.

17:03 But in the meantime, on this page, you can see it's an it's an enormous market and forecast to grow very strongly over the next few years. And we estimate that by 2030, we could have as much as 5 to 10,000,000 of revenue in the aerospace market potentially coming out of the provision of engineering services and component supply.

17:27 When we move on now to, industrial machinery and particularly a subset of the industrial machinery segment where we've seen a lot of success over the last twelve months, and that's in robotics. And I'm talking specifically here about, larger manufacturing robots, the type that are increasingly going into connected factories under industry 4.0. It's a sector which is undergoing very rapid growth. Automation is a key feature of manufacturing across a whole range of industries, and there are some very big and successful companies in this marketplace to whom we're talking. The market for talk sensing in robotics is perhaps easier for us to attack than others because most robots already have a live talk measurement being used using conventional either strain gauges or displacement sensors. So we're trying to displace or replace existing technology here rather than trying to demonstrate a need to measure talk in the first place in the robotics marketplace.

18:29 And, there are some very, very significant advantages of using SOAR technology, particularly around load capacity and speed and productivity of the robots. Our technology can be used without changing the features of the shaft within the robot. Traditionally, robotics have had to use more flexible shafts in order to gain an accurate torque reading, whereas our torque sensors will work even where the shaft is very stiff. And that means that it can work more accurately with a saw based sensor. This industry is currently worth about 300,000,000 a year, potentially forecast to reach $6.50 by 2028.

19:14 So again, a very big market and one in which we're talking to two or three industry leaders. And we estimate an addressable market for our own business here of around 50,000,000, so a very significant space.

19:29 I'm gonna talk next about high performance vehicles. Specifically in motorsport, people will probably be familiar that we have a partnership with McLaren Applied, as a strategic partner to sell into motorsport, and they have been putting a lot of effort into casting their net somewhat more widely into different race series with a great deal of success over the last twelve months. We've seen good revenue growth through McLaren Applied in the last twelve months and a number of opportunities emerging now for f y twenty four. So we're feeling very positive about this as an industry space. Our technology is proven, and as many people will be familiar, motorsports is often a marketplace in which you can provide a pathway to high performance vehicles for road, use as well. So, you know, a very interesting space for us to prove our technology.

20:22 We estimate an addressable marketplace for us in motorsport exceeding $20,000,000 a year. So, again, know, although it's a niche market, it's certainly large enough to deliver plenty of growth in our business over the next few years.

20:38 Turning lastly to, electric drives. This marketplace is perhaps less developed than the others. And the reason for that is because traditionally, torque sensing has not been used to control motors. Generally speaking, motors have used torque estimation rather than accurate actual real time torque readings in their engine control units. And so, proving the use of SAW technology is a slightly longer game here. However, it's also, I think, an extremely lucrative one. And so for that reason, unlike aerospace and motor sport where we have yet to, convert a reference client, you know, obviously, we've already got torque sensors in military helicopters and in racing cars, but we haven't yet got them in a in a commercial electric drive, then, you know, we expect the lead into this marketplace to be somewhat slower.

21:32 However, the simulation work that we've been doing through a major engineering consultancy this year is demonstrating some very interesting, although quite specific benefits of SOAR technology. And, we're not in a position to talk about these in the public domain yet because they will be subject of additional patent applications, which, you know, will clearly be good news as far as the long term strategic value of the company is concerned. I think there are some very significant opportunities for us to expand the breadth and depth and longevity of our IP portfolio in this area. And we will be spending further money over the next twelve months, somewhere order of magnitude 200,000 on developing a demonstrated test rig and obtaining data to be able to back up the claims that we are going to be making in this marketplace.

22:25 Again, it's going to be a very significant marketplace for us. We think there's an addressable market of upwards of $50,000,000 by the end of the decade. So, you know, there's a there's a very big price to be won here. In the short term, there are near term revenues from several funded feasibility projects, and I'll be putting some numbers to to that shortly, which are typically in the sort of 25,000 to £100,000 range, which will be contributing to revenue in the next couple of years.

22:59 So here's the numbers I've been promising a couple of times. People may well have seen this table before in previous presentations. What this table does is records the number of customer engagements according to the number of customers who are all prequalified. So they've already been through our prequalification process. There's a there's a lot of other potential customer engagements that didn't find their way onto this chart for whatever reason. But as you can see, the number of live customer engagements has moved from 24 to 57 over the last twelve months, so very substantial growth. Out of those, the number who are actually paying for development projects, has doubled from six to 13. And, looking further down, in in the aerospace sector specifically, the number of aerospace clients has doubled from seven to 14, and there's been an increasing depth of engagement with those, Almost half of them well, half of them within the next few weeks, actually, will be paying for development work as well as being engaged in conversation with us. So some very real progress in terms of the depth of of engagement and the number of customers that are now actually paying for development work, rather than simply engaged at, at what we call stage one b.

24:21 I'm now gonna pass to Melvin, who's gonna take you through the financials for FY 2023 and talk a little bit more about iTRAQ specifically. And then I will come back and talk about prospects for the business and the midterm financial goals that we're setting for ourselves for 2023 to 2028. Thank you, Nigel. Firstly, before I go through the slides, some comments regarding our performance. We've completed our third year of trading following the completion of the licensing deal with Bridgestone. In each of those years, we've faced different external challenges, COVID, Brexit, chip component shortages, and currently, the economic issues faced both domestically and globally. Notwithstanding these challenges, this is the third consecutive year we have met or exceeded market expectations.

25:10 And during this calendar year, the share price has risen by nearly 16% before today's rise compared to the all share AIM index, which has fallen by a similar sum in the same period. What is even more important in f y twenty three is that we achieved the market numbers despite a negative variance between expected and actual royalty income. The fact that both our SourceSense and TRANSLOGIES business sectors performed far better than market expectations is a factor that will be significant looking at the future success of TRANSENSE. For the first time in my fifteen year involvement with the company, I can confidently say we now have a leadership team that can finally see us realizing the true potential of both our controlled businesses.

25:57 Ian German has again provided an excellent research note through Allenby covering the next two years, and this shows the expectations of continued strong revenue growth in all segments with pretax profitability of the company expected to double again and exceed 2,000,000 by FY 2025. Looking now particularly at the slide, you can see that revenues are up by 34%, and I'll talk more on this on the next slide. Margins have increased from 85% to 87%. Included in that is an increased improved margin with TRANSLOGIES. OpEx is up only a controlled 6%. In FY '24, the market numbers will reflect some new personnel to be added to both SourceSense and TRANSLOGIES teams to facilitate our continued growth in both segments.

26:51 Exceptional one off costs were around 220,000 and related to restructuring at managerial and directorship level to reflect the changing emphasis towards new business development. Adjusted operating margins were 31% compared to last year's 11%, and these numbers resulted in a fourfold increase adjusted profit before tax and earnings per share rising 79% before exceptional admin costs. These numbers give us a PE ratio based on the adjusted profit of profit after tax of around 10, which the board considered to be on the low side when looking at our growth prospects and certainly supported by the two share purchases that were made today.

27:37 Segmentally, let's move to the next slide.

27:43 Segmentally, again, we see improvements across the board with TRANSLOGIIC up 18% crossing that 1,000,000 threshold that I predicted last year. I've previously talked about ceilings on the potential TRANSLOGIES revenue. However, in the medium term, I see no ceiling on revenue, and Nigel will give more detail shortly. SOAR grew by a 145%, albeit from a low base. However, as Nigel has just explained, the level of real opportunities has doubled in the year, and the potential for further growth is clear to see and reflected in the research note. Finally, iTrack, despite a slow start, was up 29%. Segmental profit before tax, you'll see TRANSLOGIIC up 19%, iTrac up 30%, and another indication of the growing success in Source Sense, their adjusted loss reduced by nearly a third.

28:36 As a result, the loss, when excluding iTrack income, reduced by a significant 76%, and in some months during f y twenty three were actually profitable. Moving on to iTrack. Now this is quite a complicated graph, and some of you will be familiar with it. Others, it's a new graph. So let me just quickly run through and explain what this graph is showing. So firstly, the axis on the left is the sterling numbers, and on the right is the dollar numbers translated at $1.25 being the dollar sterling rate at the inception of the Bridgestone deal. The horizontal lines represent the market expected numbers for each year, and the red and blue lines represent the annualized monthly run rate in dollars in red and sterling in blue.

29:26 Finally, the arrows indicate the actual iTRAQ turnover for each completed year, which is at the head of the arrow.

29:34 We show both dollars and sterling as the former is the currency we are paid in, and, of course, sterling is the currency we reported. So what are the observations? Firstly, looking at the red and blue lines, you can see that in around two of the three years covered, year. Share seen a significant of

30:02 the year. It only improves the cash receipts. We Clearly, the earlier the sterling blue line crosses the horizontal line, the better chance of achieving or exceeding market expectations. So over the three years, we interestingly see a different trend each year. Focusing on the sterling, year one saw moderate growth with sterling crossing the horizontal line round about month ten And notwithstanding the steep growth towards the end of FY 2021, the arrow fell just a little shy of the market number. Conversely, FY 2022 started strongly crossing the horizontal line in month six. And despite the slowdown in H2, we exceeded our market number. Looking at FY '23, we saw a very sluggish start to the year with some substantial growth in Q4, but only crossing the horizontal line in month twelve, hence the shortfall.

30:56 The closing run rate was two 250,000. However, when converted at the current FX rate, this becomes 2,380,000, reflecting a strong dollar post year end. What has been consistent in the average in the annual average growth rate in trucks producing royalties is that each each year is just the and the only difference is really the timing diff difference rather than the actual, number of trucks we've increased by. Looking forward, the iTrak market number for FY twenty four and FY twenty five reflects the closing annualized run rate and the latest budgeted information we are privy to, which suggests this number is more conservative than the previous budgets. But, obviously, we have little control over achieving it.

31:46 The royalty at the end of FY twenty five will drop to 60% of the full rate, which should be somewhere around about the FY twenty three number. However, that will be at a time when TRANSLOGIES and SourceSense combined are expected to to more than take up the slack. To date, this deal has actually produced cumulative income of 4,400,000, and Ian German has estimated in his research note that we should receive a further 13 to 18,000,000 up to 2030. Whilst many who look at the iTrack income discounted due to its finite life, it is important to bear in mind that if Sortsense and TRANSLOGIES are as being projected profitable in their own right in, say, FY '26, then Ian's research note number is worth around a pound a share in its own right.

32:37 Finally, from me, the cash flow. Let's move this forward. This statement leaves little explanation. We have an excellent operating cash conversion rate at 75% as a result of strong credit control and regular quarterly royalty. We expended a further 404,000 on share buybacks at an average price of 88 p. The total now is 707,000 with the average price paid just under 80 p, which is 25% less than the latest mid price. Finally, the year end cash was marginally down on last year. However, the post year end royalty receipt was 585,000, which going back to the comments on hedging included a 50 k gain on FX.

33:28 I will now pass back to Nigel to talk about the future prospects. Thank you, Melvin. So first, I'm just going to talk a little about expanding on what Melvin said about cash generation. Mean, our trading outlook indicates a continuation of very strong cash generation. And as Melvin's mentioned, we have used a significant proportion of last year's cash flow on share buybacks.

34:00 We see many opportunities to invest in the business, particularly in the SOAR technology. We see opportunities to invest, as I've discussed, example, on the electric motors and drives, demonstration test rig data.

34:16 A pound spent today, we think, will offer a very good return in terms of strategic growth in that business. And so, you know, we will be making sure that we retain and generate sufficient cash to be able to meet those, investment requirements, and particularly to recruit recruit further engineering resource who will be customer facing people who can accelerate the commercial delivery and the technical development of our of our technology.

34:42 However, we still expect to continue to see sufficient cash flow to be able to return money to shareholders in the future in the way that we have in the past. And we have consulted widely amongst the shareholders over the last twelve months to tease out what the relative, benefits of buybacks and dividends are in the hands of shareholders. And we have concluded overwhelmingly that both by number and by value, shareholders see that buybacks offer much more flexibility and tax benefits and and consequently, a feeling that that is the way for us to go

35:18 as a as a means of returning funds to shareholders. We will, however, also continue to build strategic cash resources. There will be plenty of opportunities for us to invest in the business also, and that will always be the first call on our cash.

35:35 Let me turn next then to current trading. Revenue in the first couple of months of the year has continued to show growth over the prior year. Revenue for July and August were 16 ahead. In TRANSLOGIES, we've added an experienced business development leader, as I've already explained, and have some very exciting opportunities. We think that that places TRANSLOGIES in the driving seat as far as being the primary top line growth provider over the next five years. We think that it's going to be a very exciting journey and look forward to being talking about the delivery of that in the next few years. Meanwhile, in SOURCENSENSE, there's been a very rapid expansion in market awareness.

36:20 We're seeing, you know, two or three inbound inquiries per week at the moment, some of which pass our qualification criteria, some of which don't. But new qualified sales leads is at a very high number there at 57. And, also, the increasing intensity of those in terms of projecting those up our table and into paid development projects is growing all the time. That's what's driven revenue up by, 146% in the current year, and we expect to see that continuing to develop significant growth in the top line, including the numbers which are in, the L and B forecasts. We are also seeing investment opportunities to add depth to the IP portfolio as I've discussed.

37:06 So SOARSense is very much going to be a self sustaining business, and and that will happen prior to full commercial deployment of of SOAR technology, which is likely to take somewhat longer. In terms of iTrack, again, as as Melvin has explained, the prospects are very much underpinned by the deployments that went into place and strong growth in the second half of the current year for f y twenty four. And if I just, look at where that leaves us in terms of midterm goals, what this table does is essentially look at the historic twenty to twenty twenty three in the left hand column, where has our growth come from. It then in the middle column shows where we see midterm growth prospects for twenty three to twenty eight, and then longer term prospects in the right hand column. Looking first of all at TRANSENSE TECHNOLOGIES, it's delivered compound annual growth in revenue of 15% per annum over the last three years. Yes. That's good. But looking at 2328, we see significant step changes in that now.

38:11 It's coming still from a low base, and we think there's lots of opportunity to grow that revenue much more quickly and and see it become the main do the main heavy lifting in terms of company revenue growth. And longer term, it's a $25,000,000 market there to be attacked. We see lots of growth potential in the business from the base that we have now. Turning to Source Sense. Primarily, the activity over the last three years has been mostly nonrevenue generating technical and commercial evaluation work, both by our customers, but also by ourselves in deciding how to position our technology and in what sectors to attack.

38:51 Over the next few years, all of that work is going to be funded. There will be, funded development work going on across all of our key target market sectors. We think the business will be financially self sufficient and start to to eat its own kill. It'll be generating more revenue than it's costing to provide the services that we currently provide. And we'll be building a very exciting pipeline of sustainable long term business, which will be harvested in the post 2028 period. And we've we've identified across our target market sectors many opportunities to develop millions or tens of millions of revenue towards the end of the decade. Turning to iTrack, it has been the major driver of growth in the historic period.

39:40 We've seen annual step changes. We still expect to see good growth in the next couple of years in the iTrack royalty, 20% sort of high high double digits

39:50 is a sensible sort of growth target for that. But it was likely to peak in the year ended June 25 when the royalty rate per installation starts to fall. And by 2026, it's likely to revert to the 2023 level. However, as Melvin has said, the growth prospects of the rest of the business will be such that we expect to at least maintain earnings in 2026 compared with 2025, which in turn is double the level that we've reported for 2023. So, you know, we think that's an excellent return for shareholders. And going beyond 2028 and looking at life beyond 2030, then after the expiry of the iTrack royalty, we think that we're gonna be left with two very strong and growing businesses, which are well capable of taking the company through the targets that we've set.

40:45 So, you know, overall, I I hope that it's conveyed that the directors are very confident of the future for the business. I'm gonna pause now and pass over to Tom. I think, Tom, you can perhaps help us with any questions that have come in. Indeed. Yeah. Thank you, Nigel. Thank you, Melvin. We have a number of questions. However, please do continue to submit your questions using the q and a tab situated situated on the top right hand corner of your screen. Additionally, your feedback is important to the company. So immediately after the presentation has ended, you will be redirected the opportunity to provide that feedback. Now if we could start, Nigel, with you, just looking at inquiries and prospects, we've got a couple of questions which which hold together relatively well.

41:31 Andy asks, what visibility do you have on new customer projects? And if I could just maybe combine that with a question that Tim's asked, which was the company appears to have received the last number of SOAR inquiries. What are you doing to convert these inquiries into deals? So there's a bit of a life cycle across both of those. Yeah. So let me just talk about how the cycle works. So, initial inquiry would come in generally now because a customer has identified an opportunity which they believe that SOAR technology might be able to address. Often, it's a problem that needs to be solved or it's a a saving which they want to achieve. And so that inquiry would come in, and our initial vetting procedure would make sure that it was a credible inquiry, credible company, that we're able to talk with a decision maker, that they have a budget allocated, and that we want to actually dedicate resource to servicing that inquiry. And and, you know, a a number come in where we feel that there either isn't a technical fit or a commercial fit, and they are, you know, politely declined at that stage.

42:40 Those that get through into our system find their way onto the table that we've shown a summary of. The summary table there is actually an extract from our internal customer relations management or CRM package in which we track those inquiries through our systems. And, initially, there would be a two way exchange of information usually under NDA rather than, publicly available information to to address the customer's questions about our technology and determine whether they wish to actually take that forward into a feasibility project. And so out of the 57 that we're currently working with, there's sort of mid teens number that have progressed beyond that to say, actually, we are looking at a development project in which we want you to instrument, usually instrument a shaft, not always a shaft, but usually, instrument a piece of our equipment so that we can actually start to read the torque measurement or temperature measurement or whatever it's being used for and determine whether that data has use to us.

43:46 And those projects would typically be somewhere between 20,080 and would have a duration of somewhere between a month and three or four months. Here's the frustrating bit. They're all big companies. It can typically take three months to get onto their supplier program and be approved to receive a purchase order. Despite the fact that the engineer we're dealing with is desperate for the work, it can often take a couple of months for the purchase order to arrive. That's life in big companies. So, you know, can that sometimes be frustrating? Yes. Does it actually change our life in the very long term? Well, no. Of course, it doesn't. But progressing through that stage can be somewhat slow.

44:33 Our main objective at that point is to make sure that in that game of tennis, the ball is always on the other side of the net. We're extremely quick to deal with any information requests or any paperwork which is necessary in order to be able to process a purchase order. And once that project's been completed and the data is available to the customer, they'll then make a determination as to whether they think that they want to take it forward commercially or not. And assuming that they do, then that will give rise to a lot more engineering effort and then later supply chain effort to be able to provide, the support the technical support that's needed to prove the technology and to productionize the technology and also to provide a supply, you know, a reliable supply of components.

45:21 So, you know, that's going to be the work which will be chargeable over the next three to five years, which will, you know, increasingly be in hundreds of thousands rather than tens of thousands per customer, and will ultimately unlock the door to full commercial production towards the end of the decade. Great. Thank you. And and following on the theme of supply chain, Simon asked, what steps has the company taken to ensure supply chain resilience? In terms of general electronic components, we've we've had to buffer some stocks, which we've done in order to be able to, you know, keep a safety stock of long lead time components. That's particularly on the TRANSENSE TECHNOLOGIES side of the business.

46:09 And I you know, I've also been able to to obtain support from colleagues in other companies as well, you know, a nod to my colleagues at Solid State for some help that they've given us over the over the course of the last couple of years, not only ourselves, but for Bridgestone iTRAQ product as well. You know, they're they're an excellent supplier, and that sounds like a commercial. But there you go. In terms of supply chain for SOAR, then it's obviously very specialized. There's a relatively small number of potential suppliers, particularly for the AQP product, but we have very strong relationships and, you know, wherever possible, we dual source rather than single sourcing components. Again, we hold high stocks ourselves at the relatively low cost components, so it makes sense for us to hold high levels of safety stocks to be able to support development activity, you know, even over a sort of twelve, eighteen month period forward. It's quite low cost for us to but for the stocks to be able to support that. But, you know, always be mindful that we will need to provide a reliable commercial supply chain when things go volume in the future.

47:18 Great. Super. And two questions I'm gonna put together. They're both on revenues and potential licenses. James says, how do you see the mix of SOAR's revenue evolving in the medium to long term as between engineering stroke consulting revenue versus license or royalty revenue. And Brian says, you've talked about the potential revenues upfront upfront license deals. What is your thinking on that? Yeah. They've they've really insightful questions, actually, because if if you look at, for example, the t nine zero one program with GE, then we received $750,000 upfront in licensing income. And we always expected to be involved in the supply chain as well to be providing both technical support and then ultimately components also.

48:09 But it was assumed in that license that GE would be able to source components themselves independently. And, actually, they found that quite difficult to do. And and I think that that speaks to our business model, that taking up front money for licenses early is obviously quite seductive, particularly if you need the cash, which in 2016, we did. But now we don't. So, you know, it may be a smarter play for us to play a longer game rather than cashing in early on a license, which provides a customer complete freedom, where to do their shopping in the future under the license, you know, it it might actually be, strategically smarter for us to work in longer term partnerships where perhaps upfront license fees are either lower or work in a different way, such that actually customers enter into a long term engineering and supply contract rather than necessarily licensing, as a standalone.

49:09 So, you know, that's that's probably not a very crisp answer to the question, but I think it, you know, it indicates that our thinking is very flexible and that actually different customers will benefit from a different model. And, ultimately, that will be the best way to deliver shareholder value. Okay. And on on the share buybacks, we do have a number of questions actually. And if I can possibly combine a couple and you can answer those. Gareth says, and I'll price it slightly, you've purchased shares equivalent to almost 6% of of the share capital. Why have these shares not been canceled? That's his question. And Brian's question is, I understand somewhat prefer share share buybacks over dividends. But if we don't have any sellers, then how does it work in practice?

49:58 K. Well, I'll I'll answer Brian's question first, if I may. So, you know, it's an open market. There are there are always sellers, sometimes small, usually small. You know, it's a it's a pretty thin trading market in our stock because we have a lot of long term major shareholders. But, nevertheless, there is still daily trading. If you look at the share purchases by the company, it hadn't taken us very long to accumulate those shares. And and, you know, in parallel, people have been following over the last few weeks that, Dowgate Capital have been acquiring shares for one of their portfolios. You know, they made that decision, you know, only a few weeks ago and were able accumulate to 4% through very patient buying of retail, you know, stock in the retail market.

50:46 So, you know, there is always transaction volume. If there were ever any large sellers or buyers, then the company's brokers will be able to help. But in the meantime, the retail market does still offer opportunities to accumulate stock if if that's what buyers want to do. You know, if there are no sellers, then there will be upward pressure on the price. And if there's upward pressure on the price, the company is unlikely to buy shares back anyway because, you know, we'd prefer to see the market functioning effectively and the instructions to our brokers, which are standing instructions, which we can only change when we're not in closed period, I should say. You know, those standing instructions, mean that they won't bid the price up. They will simply pick up stock if the market is overweight.

51:33 I'm sorry. Can you remind me the other part of the question, Tom? The other part of the question I have to be canceled. If they don't have cancel. Yeah. The the company has issued share options to all of the current employees, including the directors, those share options represent a 10% dilution. So at least until such point as this 10% in treasury, then it makes sense to retain those shares in treasury and be able to use those to satisfy options in the future if they become exercisable. And although they have different criteria, the major criteria is the need the share price needs to pass the £1.50 threshold in in order for those options to become exercisable, which in broad terms represents a doubling of the share price since they were issued.

52:23 It's a bit bit more nuanced than that, but broadly speaking, that that was the the the performance criteria. Okay. And you may have, in part, have answered the next question from John, which is what is the point of being listed on the end market? You have undertaken share buybacks and imply going forward you have sufficient cash to fund the business. Why incur the costs of a public listing? Brutally honest answer, John, we probably wouldn't start from here. But here we are. There would certainly be an appetite amongst the management to take the business private, but I think it would be very difficult to find a price to do that, that would represent fair value for the shareholders. So I think that although we don't need to raise capital on the end market today, one would never rule out the possibility of doing that in the future if there was a major opportunity that required funding.

53:20 And I possibly have ruled it out in the past, but I think we're in a different place now, and I wouldn't necessarily rule it out in the future. But I think, you know, the the the honest answer to the question is the company is a listed company because it's a listed company, and it makes more sense to stay where we are than to move anywhere else. But, you know, in a in a if if we were a start up, we probably wouldn't start from here. Yes. Excellent. Melvin, one for you. Gareth asks, have you considered hedging your U. S. Dollar exposure in view of high proportion of revenue coming via iTrack royalties? Yes. Thanks for that question. As I mentioned in my presentation, we have actually hedged. We started hedging in f y twenty two, and we continued that through f y twenty three. Interestingly enough, you speak to lots of people getting different opinions on where the dollar, pound's going to be, taken over the eight quarters in '22 and '23.

54:18 I think the overall net position was we're up about £20,000, but it is very hard to judge, but we are we do definitely hedge. And we generally use $1.25 as our point of hedging because that was when the that was the rate when the deal was originally struck. Right. Super. Thank you very much. For my entire career that no matter where it is today, the dollar will always between 1 be $1.40 to $1.60 in the long term, but I'm actually doubting that that's true now post Brexit. I'm not sure we'll ever be worth that again, but there you go. That's a personal opinion. We'll save that for the last question, which I'm holding. But yeah. So John also says a small company, but the directors could own much larger stake larger stakes if the prospects are so good, question mark.

55:09 The directors could own much larger stakes. Well, you know, we've we've all been buyers. You know, if you if you used a a standard benchmark excuse me. Sorry. I I should say I had minor surgery this morning, not a fight. If the standard benchmark is that the directors ought to own a year's income, then I've got five years income in TRANSENSE invested in the portfolio that I've bought all in the marketplace. I have 265,000 shares. I've bought more than two thirds of those since I became executive chairman post the Bridgestone transaction. I I don't think anybody would doubt my commitment to this business. All of the directors from time to time have bought and will continue to do so when there are opportunities around and the price is right.

56:02 I should say as well, for large periods of time, we're all prevented from buying because we're often in possession of price sensitive information. So if you look at the share price low of about a year ago, it was 47 p at one time, and we were all absolutely gnashing to buy. But unfortunately, weren't afforded the opportunity because we were in negotiation with Parker Meggitt about the MOU. Yeah. Okay. And final question, and you may wrap this together with a little of your own view on macroeconomic issues as well. But Nicholas asks, lots of positives in the business right now. What do you see as the greatest risk to the execution of the strategy? Okay. Greatest risks.

56:51 Macroeconomics, I actually think isn't, although I am pretty bearish about the macroeconomic outlook. But I think that that is unlikely to materially affect the prospects for TRANSENSE. And the reason for that is the nature of the work that we're doing is such that I think product development and r and d will probably continue in the aerospace and automotive arena through a downturn. I don't think that's the area where costs would be cut. I think there's always going to be a need to innovate. And I think that our offering in TRANSENSE TECHNOLOGIES is very much a cost saving measure. So when when times are tight, people are likely to want to save money and will buy the tools to do that. ITrack, I think, again, you know, is is very well placed as a cost saving tool.

57:39 Although, you know, in the commodities if if commodities boom comes to an end, then mining volumes may decline, and that might put a bit more pressure on conversion of new business for Bridgestone. So I don't think macroeconomics is a major threat. I think that makes us actually a very attractive investment from a defensive viewpoint because I think that a lot of our income is already baked in and and, you know, fairly secure even even if growth is harder to come by than perhaps we anticipate today. So I think the biggest operational challenge in the business is the recruitment of people. And I think that's common right across the industry. You know, there there are good people available, but there's still more jobs than there are people in engineering. You know, again, I don't wanna get too political, but restricting people from coming into the country who are very highly qualified and experienced is not helping because it means that, you know, we have a much smaller pool of available talent than we would otherwise have to be able to recruit people if if free movement of people isn't available.

58:45 And that's that's just fact, not not politics. So, you know, the single biggest operational challenge today is hiring engineers in order to expand the business. Although we have what we need now, and we we also have some some good countermeasures in place in terms of being able to use subcontract or or contracting in people. Outside of that, I think, you know, there was I I forget who it was to give them credit, but I think that, you know, the resilience of the supply chain is always something that we need to keep very close to because our product, our technology is dependent upon components which are actually designed to be high volume, low cost.

59:32 And whilst we're in a low volume, high cost environment before we make large scale commercial breakthroughs, then we need to keep our supply chain engaged and interested in what we're doing in order to be able to, you know, be a robust supply chain in the future when we're out of development phase and into and and into commercial production. Right. Okay. Thank you very much indeed. Thank you, Nigel. Thank you, Melbourne. 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 Technologies, please do get in contact via transcents@warbrookpr.com. Many thanks for attending today's presentation. Thank you. Thanks, everybody.