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

0:03 Good afternoon, ladies and gentlemen, and welcome to the TRANSENSE results presentation and update on prospects. To start with, if we could cover a couple of housekeeping items. Before we begin, we would like to submit the following poll, which you 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.

0:33 If anyone has dialed in via TRANSENSE 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 Investor Me company dashboard. Finally, we'd like to remind you that this presentation is being recorded. I'd now like to hand you over to Executive Chairman, Nigel Rogers and Chief Financial Officer, Melvin Segal. Thank you very much, Tom, and thank you everybody who's joining us today for this webinar in which we're going to be presenting the financial results for the first half of our financial year, so the six months ended 12/31/2021, and also talking about some of the things going on in the business today and the outlook and prospects going forward.

1:24 I'm just going to, first of all, put up a slide here summarizing the message that you're going to receive today, which is one I think of very positive news across all three of the business streams and income streams that the company has. I think we've got a very positive story to tell today. We've seen strong revenue growth in the business, and Melvin will give you some granular information on that.

1:47 The company has passed the point at which revenue has grown above expenses and is now profitable and forecasting to continue to grow those profits over the next two or three years and cash generative. Across all three of our income streams, we're seeing good growth in the iTrack royalty, really starting to gather some momentum now in terms of the installed base being earned from Bridgestone for the rollout of the iTrack program into their mining customers. Within TRANSLOGIES, our tire measurement pro business, again, our new product range, the TLGX range, is now very well revenues very nicely and improved margins. Again, Melvin will be talking a little bit about that business after the figures.

2:33 And I'll be talking mostly about the saw business today and the changes and improvements that have been made over the last few weeks and months. And, you know, I think some really exciting prospects in that business now to talk about. We've also today announced the launch of a share buyback program, and I'm gonna give a bit of the background as to why we've done that and what our objectives are and the mechanics towards the end of the presentation. I'm gonna be very happy to take questions at the end. Or if you wanna post them on the way through, we'll try and pick them up, but I'm, looking forward to a very lively session. With that, I'll hand over to Melvin. He'll kick off with the figures, please. Thank you, Nigel. So firstly, we're gonna start off with the financial highlights. And as you'll see from the list, all of those KPIs are positive when compared to the previous period.

3:25 The revenue year on year is up over a third. The gross margin has increased from 77.6 to 82% largely due to the fact that the royalty income forms a greater part of that margin and also due to the fact that the TLGX probe is more profitable than the old probe. The EBITDA and profit before tax, I just wanna dwell on that a second. Most of you will know I joined TRANSENSE in 2007, but the TRANSENSE I'm with now effectively started in f y twenty when we did the deal with Bridgestone. That deal resulted in us jettisoning 1,450,000 of net costs and starting the new year with a royalty at an annual run rate of 600,000.

4:20 The plan at that stage was to move from the losses in f y twenty to achieve near breakeven in f y twenty one and then into profitability in f y twenty two. And if you follow the numbers through on the EBITDA, the FY twenty ones aren't there, but I'll give you them. FY twenty EBITDA was minus 700,000. We then turn that round to plus 60,000, and then we're showing plus 200,000 at the half year stage this year. And looking at the profit before tax, it was 2,600,000 loss in f y twenty, including the discontinued business. It was a 160,000 loss in f y twenty one, and we've now turned that one around into profitability, and we're 80,000 plus.

5:11 Looking forward from those numbers, the numbers in the market at the moment are f y twenty two full year 350,000 profit before tax, f y twenty three one 200,000, and the new numbers that are now in the market show f y twenty four at 1,000,000. So a continued growth and a continued development to that plan lost to profitability. Earnings per share were at point six nine. Going forward to f y twenty four, they should be in excess of 11 p per share. Net Net cash at the end of the period was 1,070,000, so that's risen during the six months and since the last year and equivalent period last year.

5:58 As I've mentioned in the presentations before, the quarterly cash is usually at its lowest point because our royalty comes in one month after the end of each quarter. So the January cash, which is mentioned in the report, is about 1,500,000. So you can see from a cash perspective, we are positive, and it's increasing. Distributable reserve, 740,000, and corporation tax losses are at 23,000,000. So that gives us a long period, hopefully not too long, of earning profits without paying any tax. The other implication of the corporation tax losses and the profitability is that we now can recognize deferred tax in our accounts, so we've got an asset in the balance sheet and a credit in the p and l.

6:50 Turning over to the next page. This is the segmental analysis, which I'm gonna leave the top line because I'm gonna go through that in more detail. The bottom line is looking at the contribution that each segment gives towards TRANSENSE TECHNOLOGIES results. TRTROPE, a 190, growing from a 150, and SOAR, which was 260 negative, is now 460, and I'll explain that. And Nigel will obviously go through it in more detail when he discusses SOAR. One of the problems SOAR has got is it gets lumbered with the premises cost because the only need for our premises is to house the store business and, obviously, the machinery that they use.

7:40 The unallocated loss of point two six is effectively board cost and aim cost and one or two other minor costs. The next slide is effectively the bridge from h one twenty one to h one twenty two where you see a loss of 53,000 is converted into a profit of 82,000. The various different elements of that are the increase in the royalty contribution of 286,000, the increase in the pro contribution of 44, a small reduction in the saw contribution of 39,000. In the previous year, we had grant income. We haven't any grant income in this year, but it's likely that there will be in the future, and that's something Nigel will cover.

8:27 And then there's an increase in overheads of 103,000, which is mainly directed at the purse increasing our personnel side on the SOAR side of the business. Now I know there's been concerns of people worried that we would invest too much of the profit that we're making from the other segments into. But we've done this in a very controlled manner, which and has not affected the numbers that are in the market. So, basically, we've done this in a way of leaving the profitability as it is and only using what we've considered as the surplus profitability to invest in the SOAR business. And Nigel would explain why it's a very good investment that we're making. The depreciation and amortization increased by about 5,000, and then that left us with the final figure of 82,000 for the half year.

9:23 The next graph is royalty income, and it basically sets out the annualized royalty run rate both in sterling and dollars. The reason it's in both is that we get paid in dollars, but we obviously account in sterling. The annualized run rate is looking at the royalty for each month and multiplying it by 12. And you you can see also that there are two horizontal lines, one mauve line and one green line. The mauve line is the actual results for f y twenty one, and the green line is the projected results for f y twenty two. Looking at those two graphs, you'll see that the blue line crosses the mauve line somewhere between March and April, so in between months nine and ten of f y twenty one. But despite that, it's we we managed to get to that 830 level.

10:19 If you then look at the blue line going forward, it crosses the green line at a much earlier point in time. And if you then carry on with that gradient going up, we consider that we will get to the sort of level that will produce us in f y twenty at the end of this year

10:39 round about the 1,500,000 mark, and then in f y twenty three, 2,300,000, and in f y twenty four, 3,000,000. And in fact, looking at the increases, the rate looks very beneficial and should enhance as we go along. Some few other points I wanted to make on this slide is, one, the annualized rate that we had at the end of the period was 1,560,000, which is 40% up in the six months and a 144% up in the eighteen months. And truck numbers are up by about a 157. One final point to make is looking at the Bridgestone report that came out just recently, they refer to iTrack in a couple of points.

11:31 And one of the points they raised is that the mine sites in which iTrack is installed has increased from 20 to 41, and they also make reference to the OtraCo acquisition, which has 60 sites of their own. So you can see the enormous potential for iTrack. Moving on to the next slide, which is the probe business. I took over the running of the probe business with the director of probes, which is Rob Carlo, in June 2020. And when I first saw the probe business, I thought it was a business that was capable of producing something like £700,000 in turnover, and that was probably somewhere near the ceiling of that business. When I got under the bonnet of the probe business and started to understand the new range that we had created, the TLGX range, and started looking at the different opportunities, it became very clear that, actually, there was no ceiling and that achieving a turnover of 1,000,000 was very feasible and even beyond there. So looking at the narrative on the left, you can see that the first point we raised is the TLGX range is well established. At the end of June twenty twenty one, you'll recall that there were a number of the OEMs who were trialing the TLGX range.

12:56 Well, I'm pleased to say that all of the OEMs that were trialing it have now converted from the old gen one probe into the TLGX range. The revenue was up 16% at 470. There was actually a potential for it to be 500,000, which would have been obviously a run rate of 1,000,000, but there was a little bit of slippage right at the year end. The gross margin has has improved, which, as I said, is due to the difference in the mix from the old gen one to the TRGX. There are component supply challenges, which I think any company that is in using chips in their technology are facing. I mean, even some of the largest global companies are finding problems getting chips.

13:42 We have managed to deal with that challenge to date. It is a challenge that will remain, and my feeling is it's gonna be there till about the middle of next year. But as I say, so far, we have managed to deal with that challenge, and it has not affected our sales. And the final point there on the left is the development work aligns yet more closely with the global tire OEMs where we're actually getting involved with them and bespoking our pro specifically for those OEMs. What is interesting is over the period, we've now developed four types of customer. We've got the OEMs, which everyone knows about, and we deal with three of the four largest OEMs in the on the globe. We're dealing with software companies that devise tire management systems for fleets, for logistic businesses, etcetera, and we're working closely with them. And we have also started working with a hardware company that have developed a sensor that goes on the outside of the tire on the valve, and they've given us the protocol to link our probe to their sensor.

14:51 And they have two of our OEMs that we're working with. They are also working very closely with. So once again, it draws us closer to those OEMs. And finally, through one of our new additions on the board, Ryan Moore, who joined obviously as a SOAR person but has a contact list bigger probably than LinkedIn, He's introduced us to a couple of customers in the logistics world, one of whom is a household name who we started speaking to last week and discovered that they still use a very antiquated system for measuring tread depth, and their way of recording it is by using pencil and paper. We told them about our automated system. They were very impressed, and there are definitely possibilities of working with them. But what it also does is open our eyes to the fact that there may be many more companies like that that are using old systems and are not automated.

15:49 And in fact, this sis this this company we spoke to suggested that automation may become compulsory in the near future, which would obviously be very beneficial if that were the case. Just quickly looking at the graphs. On the left hand side, you can see the dominant sales were the old Gen one Pro, which was 68%. And then on the right hand side, you can see the dominant Pro is now the new TLGX Pro, which is at 63% and growing. I don't have any slides for sort because their income isn't significant for purposes of a slide. But what is significant is the quality and quantity of the opportunities that now exist on SOAR. And within my seventeen years of being with TRANSENSE, SOAR is at its most stage it has ever been. And I'll let Nigel explain to you why I believe that.

16:44 Thanks, Melvin. And, you know, I I would certainly echo that. I think we've made huge progress in the SOAR business over the last few months, and I think that's going to be particularly apparent when we talk about, the transition that the business has made from engaging with customers on a fairly theoretical basis to talk about a a technology through to now looking at some real life project opportunities. And I think for those who followed the company for a long time, you know, there was some major breakthrough moments, particularly with the GE ITEP program four or five years ago and with the joint collaboration agreements that we've signed with McLaren to move away from selling a, you know, an abstract technology towards selling something which is actually fitted and working on products.

17:32 But people will recognize that both of those are relatively specialized low volume applications, high value, particularly military helicopters, but nevertheless, relatively low volume with annual volumes that will run into tens and twenties and perhaps low numbers of hundreds. And to make breakthroughs in this business, we need to be attacking markets where the volumes are, in my view, mid range, by which I mean thousands, tens of thousands, perhaps to a 100,000 units rather than dozens and scores and hundreds. And so the evolution, since the business had what was really a complete reboot commercially eighteen months ago, initially started with engaging the SOAR cap and opening up as many discussions as we could with high quality target customers to be able to try and look at what fields those will really likely to be successful in.

18:32 People will recall six months ago, I was talking about then triaging those opportunities and trying to refine them down to those where we thought there was really genuine value and opportunities for success. Well, in the last six months, we've moved on again from that and are now engaging directly with target customers in those sectors where we've moved beyond explaining the technology and what benefits it might offer them to actually engaging in terms of how could this be fitted, how would the applications work, and starting to have meaningful commercial and technical discussions as opposed to technology transfer type discussions. And and a big catalyst in that change has been engaging Ryan.

19:19 He was previously working with us in an advisory capacity. He's now engaged on a part time business development director role, And he's really been leading this work for us. He is an acknowledged expert in power electronics and motor drives, and he has the most phenomenal network of contacts. And through his involvement, these

19:43 discussions are now getting very interesting indeed across a number of different applications, a couple in aerospace, but a a whole lot more in off road and high performance automotive. Indeed, one such discussion has actually moved beyond that and into trial stage. So we have been on a lab rig. One of our one of our shafts has been on a lab rig with a major European agri tech business. And those lab trials have gone very well, and we'll move towards field trials actually on vehicle in the first part of the summer of twenty twenty two.

20:22 So we're now beginning to see some real tangible progress in the commercialization of our sole business, and it does look very exciting. Particularly exciting to actually be able to jump on an airplane and go and see people, which, of course, you know, throughout the last eighteen months while we've been rebuilding the commercial aspects of this business, we've been denied the opportunity to visit customers. And in a couple of weeks time, some of our people will be able to go and visit GE Aviation and other customers in The US for the first time. And I think that's going to, again, be a, you know, a a very valuable tool in our future. So we are now beginning to see some real commercial opportunities for the business that you can touch and feel. And that's leading us towards a position of confidence in terms of modestly and in a controlled manner stepping up the overhead base.

21:19 You see here in the graph on the left hand side here that there has been a controlled expansion of operating expenses, but all only very modest. I mean, there's the salary costs for the business have gone from about $280 in the six months to June 2020 December 2021, I beg your pardon, through to the first half of f y twenty two being something over 300. We're looking at a pretty modest increase. But they have been very significant in terms of the quality of people that we've been able to attract to the business and the speed at which they have assimilated the challenges that the business faces and really moved us forward in terms of technical capabilities. We've appointed three engineers in the last few months, and we're delighted with each of them. And our engineering complement is now up to a head count of eight.

22:08 And that's been led by Nick Hopkins, who's also joined the board as chief operating officer, and he's, you know, personally really got to grips with the business from an operational point of view and engaged with our existing customers and working closely with Ryan on new customer appointments. You know, that that is going extremely well. We recognize that in expanding the sales base, we do need to build some capacity. It's likely looking at some of our larger projects that prototyping and pilot quantities will take place within our own facilities before a technical transfer to customers or their supply base on a licensing model in higher volume. And so we've begun to build out our manufacturing capacity at Western with a, you know, a modest expenditure. We've we've committed about a £100,000 this year to build some calibration rigs, which will allow us initially to semi automate, but hopefully to fully automate the calibration of shafts and increase our throughput and and output capacity.

23:12 We're also doing some very interesting project work to try and develop some new techniques to simplify the application of our sensors, not least so that it's possible perhaps to retrofit them to existing products rather than only being designed into being bonded on brand new shots for new products. So some some very interesting work going on in the background. I'm actually gonna just pause from the presentation for a second to say that what we would like to do is an offer an opportunity for shareholders to come and actually see that facility and see the benefits of some of the work that we're doing and meet some of our people. And that's likely to take place towards the end of June or early July. At the end of this presentation, there will be another poll, and one of the questions on that will be whether you would be interested in attending.

24:03 Obviously, we're gonna have to control numbers and do that by invitation only. But if we have a list of people who are interested in attending, then we'll certainly make sure that you're contacted and given that opportunity.

24:17 So summarizing that, I think, you know, the store business has some really exciting prospects ahead of it now. And I think, you know, each six months that goes by and we do these presentations, I think we have something more tangible to touch and feel in terms of a a bright future for SOAR.

24:36 The graph on the left hand side is a very interesting one here. This is the evolution of the company's share price over the last fifteen months or so, and and it shows, in my personal opinion, a very strong and deserved growth in the share price up to evaluation at £1.20 per share around November last year, which was shortly after the last set of financial results were published and we announced the changes that we've made in the boardroom, you know, that I I think that it was entirely right that the market began to recognize the underlying value of the company. However, a relatively small number of loose shares in the marketplace being sold over the last few weeks has taken that right back down the greasy pole more or less back to where we started, which, you know, whilst, you know, actually doesn't it actually doesn't do any harm to the company. It's not as if we're raising money, but, nevertheless, you know, people do see it as a barometer of success. So it's disappointing and frustrating to see the share price drifting down in that manner when nothing has fundamentally changed in the business to suggest that that's justified.

25:49 In the past, the directors of each individually viewed that as an opportunity to buy more shares, and we'll continue to do that from time to time, but our pockets are not endless. None of us are individually that wealthy. And so we we feel that the time is right now to actually embark on a share buyback program by the company itself. And we have the confidence and we have the financial capacity to be able to do that without it compromising investments in the business. As the business grows in size and stature and our confidence in the growth trajectory of our income streams

26:27 gets ever stronger, then balancing the need to invest in the business with the need to provide returns to our shareholders gets easier and easier. And, a modest program, 300,000 over the next six months of share buybacks, I think, will significantly help the share price to stabilize at a higher level. So, you know, we're we're not we're not asking the company to drive the price up, but we certainly think that the company ought to take up opportunities to stop it from drifting back down again from time to time if there are quieter periods, and that's the purpose of our program.

27:06 So summarizing everything that we've said, I think that the midterm outlook for the business is extremely safe and secure. And I think, you know, with a high growth trajectory and a low risk profile, I think it's a great investment at these levels. I think that there is still significant opportunities for the prospects of the business to be uplifted by breakthroughs in engaging with customers in our with our SOAR technology, and I'm confident that's going to happen. I think I'll be disappointed if over the next twelve months, we don't have one or two breakthrough events that we're able to actually, step out of the confines of nondisclosure agreements with customers and actually start talking openly about some of the projects, which I think are likely to start impacting revenue over the next two or three years.

27:55 Meanwhile, our revenue stream from iTrack is growing very nicely. You know, I I do counsel people that it's worth having a look at the Bridgestone website and their own investor relations material because iTrack is clearly a a very important technology for them in their mining business. They're a great company, and they've got really high quality people. They've got more and more boots on the ground, especially after the transaction. And I have every confidence that they'll continue to be successful with iTrack, which will be reflected in our own royalty income. Meanwhile, with the probe, you know, as as Melvin has said, I think we're actually starting to recognize an opportunity to create our own markets almost because it it is surprising how many large customers are still not aware of the technology that we have and the the ability for that technology to automate systems which are very antiquated.

28:55 I one one of our one of our board members made an interesting observation that there are some markets in Europe, Germany, for example, that tend to lead in that area. And, you know, it's fair to say that the fleet management systems of UK logistics companies are perhaps not quite as technically sophisticated as we imagined that they were. And there are perhaps some opportunities for us that we otherwise didn't see. Meanwhile, as I've said in the saw business, we've got a very busy workload of early stage engagement with lots of very interesting companies. And I think that it's highly likely that we'll be able to look in the short term at generating nonrecurring engineering charges, project charges, and grant income to be able to defray our expenditure in the short term.

29:44 But in the medium to longer term, I have every confidence that we're gonna have some some breakthroughs in which we will start to generate some substantial revenues from SOAR. So putting all of that together, I think it's a great time to be a shareholder. I'm now going to pause. I see that we have some questions on the sidebar, and I'm just gonna invite Tom, if he wouldn't mind, to just run through and try and sort those into a logical order for me, please. Indeed. Yeah. Thank you, Nigel. Thank you, Melvin. If we could turn to the questions as mentioned. First of all, we are just gonna put up this other poll in respect of the site visit. If we could, Jake, if you could just post that for us, that'd be great. We have a number of questions that were submitted ahead of the presentation. However, please do continue to submit your questions using the q and a tab situated on the top right hand corner of your screen. Additionally, your feedback is important to the company. So immediately after the presentation has ended, you will be direct redirected for the opportunity to provide feedback.

30:42 While you're submitting questions, let's first have a look at those submitted ahead of the event. Now, Nigel, there are a couple of questions here where you have partially answered the question already. So what we might do is just read those questions. And if you can answer them, great. If not, then then then that's understood. And before the event, we had a question which I think is interesting. Could you explain the benefits of measuring torque directly in electric drives? And is the company currently exploring these benefits with potential customers? What is the size of the market opportunity for TRANSENSE? Yes. I think that's a great question, actually, because in many respects, I think the time is right for our surface acoustic wave technology simply because so many industries that we would target as customer industries are actually in a state of flux and particularly in a state of moving away as rapidly as they can from the combustion engine to electric drives.

31:38 And I think that's been one of the key elements of understanding which Ryan has been able to support us as a board in in really getting to grips with. In an electric drive, typically, the output torque is monitored by the electronic control unit or the ECU by using a combination of the input current that's coming out of the electric out of the electric power and the rotary speed of the engine. And those two measurements are used to impute what the output torque is, and that would generally be adjusted for an assumption on motor losses. And those motor losses would would essentially be a lookup table which the ECU would go to, and they vary according to the condition of the engine, the temperature that the engine's running at, for example.

32:30 And so when the ECU is estimating that output torque, it would typically have to put in place a degree of safety into those measurements which would tend to underestimate. If, however, you have an actual measurement for real output torque on the output shaft, then that's far more accurate than the imputed torque that the ECU would typically work with. And so there's a less of an less of an allowance for motor losses because you don't need that that that safety element in place. And consequently, you can run the motor at higher power. You can run it at higher efficiency. And also, crucially, you can run it much more safely because you know the actual output torque as opposed to just an imputed number.

33:21 And so for that reason, we think that there are lots of opportunities to encourage people using electric drive motors for the first time to actually measure the output torque, not only because it's beneficial for the performance of the engine, but also, crucially, may well be important as far as certification and safety are concerned under ISO two six two six two for automotive, for example. Anybody who wants to Google unintended acceleration event, And we'll find out what happens if you don't control your output torque and an engine accelerates unexpectedly without the driver actually doing that on purpose. So I think that, you know, that's that's quite a technical explanation for some and possibly a little too simplistic for others that are on this call.

34:12 But I think what it does do is indicate our strength of feeling that the time is right for SOAR because so many businesses are looking at electrification for the first time. In terms of trying to put a value on that for the second part of the question, then, you know, I I it's extremely difficult to do because, you know, the opportunities are endless if you like. You know, the size of the market is almost infinite relative to the size of our company. But I'll be disappointed if we can't find individual applications where the revenue or the license income don't run to 7 figures. And, you know, I I think it's entirely realistic for us to have several projects that generate 7 figures of annual income winding the clock forward five or ten years.

35:03 It's gonna take some time for us to do that, but I think it's entirely realistic. Great. Okay. Super. Now we we do have a a series of questions on SOARs. You'd be unsurprised to hear, a number of them do refer to to orders of magnitude. And I appreciate this is sensitive, you won't be able to answer all of all of those questions. But let me just drop through them if I might. In previous comments, you stated that GE is on track towards first engine to test in the in the final quarter of twenty twenty one. Can you provide an update on this? Can you give an order of magnitude for what kind of revenue will be recognized at that time? Yes. The program was actually pulled forward a little and has got and has now consequently been pushed back a little. So it's actually more or less, you know, on track to its original timetable. I think we were hopeful that it might happen a little sooner. I think it's more likely to happen on its original timetable. So I think the initial deliveries from GE Aviation to the US Army are due in latter part of twenty twenty four, early part of twenty twenty five, and I think that'll run on time.

36:09 In terms of managing expectations, in terms of what that means for revenue for TRANSENSE, you know, anybody can find out in the public domain the number of motors that will be built is relatively small. You know, we're we're talking about dozens rising up in full production to a low number of hundreds of engines per year. And so this is a really important project for us because it proves the technology, but it it's not going to massively shift the dial in terms of revenue, and I wouldn't want to convey the impression that it is. Similarly, with McLaren, which I think is another question that you might be gonna ask next, you know, the same thing applies in in motorsport. Again, it's very important because it's a proof of technology and it's very prestigious, but there's only ever gonna be a limited number of race cars built every year.

37:01 And if that runs into a small number of hundreds or sorry, a large number of hundreds or a small number of thousands, then that's all it's going to do. And whilst that would be significant in terms of today's revenue and could potentially generate 250,000 a year, maybe a bit more, You know, that that's significant today, but I'm hopeful that it won't be significant in five years' time. Yeah. Absolutely. Yep. And you're you're correct. That was one of the questions. The the next question, which, in fact, you have touched on, but I'm not sure if you want to add anything to this how have sore trials gone with the agri tech company previously mentioned? I know you touched on this. Yeah. I think we've covered that in the in the presentation. That's been on the lab rig for a couple of weeks and gone very well.

37:48 And the next stage is to go to field trials in the summer. Yeah. Great. Okay. Two questions actually on the Bridgestone royalty. I'll tag them together if that's okay. Yeah. Please. First one from Sam. I understand that the Bridgestone royalty rate per unit falls in year five and year eight. Is that correct? What is the percentage decline? And that overlaps with with Nigel's question. I understand the rate of royalty falls off sometime before ending completely. Could you please say the date first royalty payments that will be affected by the falloff and by how much and the date of the last royalty payment that we will receive? Yes. The royalty continues at the current rate per installation until June 2025, so for five years. It it reduces by approximately 40% in year six and '7, and then it reduces again to approximately 40% of the original number in years eight, '9, and '10.

38:45 So that obviously doesn't feature in the current broken note forecast period to FY 2024. All of that's still at full rate. That gets us up to about GBP 3,000,000 a year. There's still, beyond that, another year of growth before the unit rate starts to reduce. And strategically, as the business, we're obviously conscious of that. And we'll very much be hoping and working hard and expecting that success in SOAR will step into the the the you know, replace that reduction in revenue coming out of the iTRAQ program. Yeah. Okay. Share buyback, we've got three questions on that. So I'll take those in order if I can. Why are you using Shard for the share buyback program rather than L and B?

39:34 Because it's beneficial for us to use an outside broker who is not engaged by the company on other matters. There will be times when we want Shard to have the freedom to buy shares on our behalf despite the fact that we are insiders for one reason or another, whether that's annual results or whether it's because of things going on in the business that prevent us from being able to use the company's money to buy shares because we're inside. That it would be more difficult for us to demonstrate that Allan beyond inside when clearly they're our nominated adviser. So using a third party broker gives us the freedom to give them an instruction to continue even when we're inside because they won't be. Yep. Some assured clear water. Yep. Yeah. And why why do a share buyback when the funds could be used to accelerate the SOAR program, which in your own words has great potential?

40:26 Because we believe that we have the financial capacity to do both. It's not an either or. Right. Yeah. Okay. Assuming the objective of the share buyback program is to offset the dilutive impact of share awards to directors and employees, so will the number of shares subject to buybacks each year equal the number of share options issued in that year or the number of share options exercised in that year? Neither. I mean, we're we're pretty much at the ceiling now of how many share options we would expect to grant. We have shareholder approval for 10 dilution, and we're pretty much knocking on the door of that. People will have noticed that we granted some share options to employees this morning below board level, and Melvin actually very generously agreed to waive some options to make sure that we still have some headroom for new employees coming in.

41:22 So the the the buyback program, you know, the the quantum of it will not be driven in any one year by grants or exercises. It's more likely that over a period of time, we might accumulate up to 10% of the share capital on the company's balance sheet to settle existing options. But unless something very unforeseen happens, I don't expect to be granting significant share options in the future. And if something unforeseen does happen such that we want to grant share options in the future over and above the 10%, then we would go to the shareholders for approval. Okay. Super. Melvin, one for you, I think, here on the tax on HRC. Assuming the tax credit asset is only partially utilized to offset against profits, in the next few years, can you continue to carry it into future years indefinitely, or are there HMR rules to prevent this?

42:18 Thank you. There's certainly no HMRC rules because this isn't something that particularly affects HMRC. It's not a tax deductible item or anything. What we're basically doing is looking one year forward at the projected profits, and we've got guidance on that from the numbers that are in the market, which is the ones that we use. And we are providing for deferred tax on those profits. And as the current profits come into play, we then treat that as a tax charge in the accounts. So at any one time, the cumulative number in the balance sheet will will reflect the deferred tax on the year going forward, and the charge in the p and l or the credit in the p and l will be the tax on the difference between the one coming into play and the one that we've just had.

43:09 But it as I say, it doesn't affect HMRC at all. Great. Okay. Two questions, both on SOAR. When you start to commercialize SOAR for a mass market application, do you envisage there will be a recurring revenue element to overall revenue, or will all the revenue be derived from sales of the SAW units? I would expect that when volumes grow on any individual project, it's most likely that we'll license the technology to the customer and work on a royalty basis. So it would then be recurring revenue. It's probably likely that there'd be a license fee upfront as a one off followed by royalties on a per unit basis in the same way as there is on GE. Yes. Okay. And final question you, Nigel. For the SAW division, what needs to happen for the calendar year 2022 to be considered for it to be considered successful?

44:07 I think that's a great question, actually. And and it's it's one that I saw in advance, and it to give it it it was a useful one to focus the mind. And I I think I've already answered it, actually. I will be disappointed if we don't announce at least one breakthrough transaction in 2022 that looks and feels like GE, ITEP or McLaren, but is significantly larger. Great. Okay. Look, that that's very helpful. Thank you. Could I ask investors not to close this session as you will now automatically be redirected for the opportunity to provide feedback? If anyone has further questions or would like information on TRANSENSE or even to express interest in the site visit, if you could please get in contact via TRANSENSE at Warbrook p l dot com, that would be very helpful.

44:54 Nigel, Melvin, thank you again. Very comprehensive and very useful, and we look forward to updating you all again soon. Many thanks. And thank you, everybody, for listening. Much appreciated, and glad to have your attention.