Journeo plc

Investor presentation throughout recorded presentation investors will be in listening mode. Questions are encouraged and they can be submitted at any time by the Q&A tab situated in the right corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question received in the meeting itself. However, the company can review the questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you up to CEO Russ Singleton. Good afternoon to you, sir.

Good afternoon and thank you, Alessandro. Good afternoon to everybody. It's made time to join us on this presentation and hear about our H1 results. By means of an introduction, I'm Russ. I'm the chief exec and I'm joined by Nick Lowe, who's our chief financial officer. We've both been with the company a fair while and obviously we're delighted now to talk to you about our results. So Genio is about intelligent systems for transport networks and infrastructure, if there's any new investors or potential investors listening. And what we're about is providing sort of fully integrated solutions, sort of end-to-end in those networks. We've delivered good results for H1, very strong results, got a growing opportunity pipeline, We also have an acquisition pipeline which we've been working through over the last few years. And as some of you will have seen, we recently completed an acquisition at the beginning of this month of Crime and Fire. And we've been building the senior leadership team and our backend software systems to create an organization that's capable now of working at a much higher rate, much larger footprint in the market. And we've been investing considerably in our research and development and what that's doing for us. As we put in there, it's helping us to increase our profits, delivering an 11% operating margin and a strongly growing pipeline. Again, for anybody that's not familiar with us, We have four operating companies at the moment. Our fleet systems business, which is really about fully integrated services end to end in public transport and some selected areas of freight market. We have our passenger systems, which is really about information delivery to members of the public from transportation applications. Infotech is the market leading rail passenger displays business in the UK. And we have Genio AS in Denmark, which was formed from the acquisition of MultiQ systems in September 23. We have a growing and wonderful list of end users and customers that we work with. And that's growing both geographically and segmentally. And at the moment, we have 31,000 assets connected to our cloud platforms on a concurrent basis, generating a recurring revenue. We've got about 30% or over 30% of the UK bus network onto our cloud platform. Two million journeys a day reliant on the infotech information systems. And I won't go through all of this, but there's just over 200 in the company prior to the acquisition. I'll hand over to Nick to run through a summary of the interims.

OK, so I guess it was a very, very pleasing set of results. At the headline level, revenue decreased by 4%. As we go into the segments, we'll see why that was. But we had a 3.4 million pounds of revenue from a contract with the US MTA in H1 last year, which we didn't have in H1 this year. So if we remove the effect of that, for us a lot on a life-like basis, revenue actually up by about 10%. Gross margins were good, very good. We were up 3% across the group. As we'll see later on, we were up in every segment in the group. So overall gross profit actually increased by 3% to 9.2 million, despite the drop in revenue. We had a small uplift in overhead, just inflationary. So overall adjusted PVT state level at 2.8 million. EPS was down at 12.51p. The reason for that is the effective tax rate. We had a very, very low effective tax rate last year. We still have a low rate this year because of the benefit of R&D tax credits, but that's the reason for the movement in EPS. Cash was phenomenally strong at the end of the half. We had £18 million. Obviously, we've spent some of that since the half on the acquisition, but we still sit with just over £9 million of cash today. We spent about a million pounds in R&D in the half. We capitalised some, we expensed some, but capitalisation is matched by amortisation. So basically one million did pass through the P&L. So the PBT is after writing off a million of R&D in the half. Onto segments. So Fleet Systems had a stunning performance, up 46% for revenue. It's gone up by about two and a half times revenue as in the last three years. um gross profit was good uh 65 amount was driven by three percent uplift in margin as well so a really really strong performance from fleet um but the contribution level it delivered 1.6 million which is three times up on what it did in the same period last year uh passenger system again very good performance of 17 on revenue 6.1 million margins were two percent up um so overall gp was up by 21 percent um and that group delivered a profit or bottom line about 600 000 for the group which is about 50 up on last year infotech so this is where we had a drop in revenue so as i said earlier on we had a 3.4 million pounds of revenue from the us contract in uh h1 last year Nothing in H1 this year. But moving forward, we won $5.2 million of POs with the same customer in H1, which we will get probably up 40% of the revenue in H2 this year. So we expect, well not expect, we will have a stronger H2 in H1 for Infotech. Within that, gross margins were up to 45%, which meant that GDP didn't decrease by as much. And overall, we still had a good contribution out of Infotech at about £400,000. Journey OAS, so our Danish business, again, at the headline level, revenue was down at 1.5 million. Similar to Infotech, we'll have a stronger H2 from Journey OAS. The benefit we have with Journey OAS is the recurring revenue. Junior S makes a profit just from its recurring revenue. So because we're predominantly recurring revenue in H1, we had a gross margin of 61%. So the 1.2 million drop in revenue actually only resulted in the drop of the bottom line by £100,000. So overall, although it dropped, it was less and we'll have a stronger H2. So fleet and bus did very well. And Infotech and Junior S will deliver a stronger H2 than H1. Recurring revenue, it was 16% of the group in H1, 13% of it last year, so we're up about 15% for recurring revenue. Roughly 40% of it is SaaS, and the balance of 60% is more traditional maintenance. But SaaS is the element, as we said before, that is growing, probably from about 10%, 15% two or three years ago, up to 40% of total recurring revenue now. Contract wins. So we have an announcement threshold of a million pounds for contract wins. So anything below a million pounds, we don't announce. What we have here is, again, success across the business. So we have multiple contract wins say in a different segment so the first two Stoke and Cardiff are in passenger systems and they're principally hardware contracts but with a recurring tail of revenue for three to five years the third and the last are the 5.2 million dollars of orders from the US for infotech which is why we will have a stronger H2 from infotech So $5.2 million across the two. The fourth one is a three-year frame with the first bus. So that's the estimated value of about £10 million. There's a two-year option on it. So ultimately, we would expect £15 million plus from that contract over the five years. And the £4.2 million is from Alstom. So that's within fleet systems for rail. The £4.2 million is a hardware delivery. What we will also have after the delivery of that is a recurring income of £400,000, which isn't part of the £4.2 million. So there's additional future recurring revenue to come from it. The last is operational highlights. This is some of the, I guess, Russ has touched on mostly already, but we had our first carbon reduction plan for the group in H1. We are now integrating all the business systems from the acquired business, our own business. So we have a new CRM system across the business. We have a new software development platform. As Ross said, the senior leadership team was strengthened at the end of last year and into this year.

Okay, thanks, Nick. So really wanted just to sort of bring this back now to what it is that Genio is trying to build. What we're looking for really is to align ourselves with some of the well-known megatrends that have been discussed really from the original concepts of smarter cities, where you have these things of urbanization, climate change, shifting economic power, demographics, and also the technological breakthroughs. And journey has really started in the public transportation gathering market share, both in terms of the onboard bus, train, coach and tram, but also in the active street furniture about delivering travel information and disruption information to members of the public. And as part of that, we're seeing now obviously increased congestion that's driving all sorts of developments in terms of dynamic traffic lights, signalling and some of the highways and the ITS developments. from a climate change we've seen moves to decarbonize public transport and also commercial service vehicle propulsion from diesel to either electric or hydrogen fuel cell. And these are, if you like, inflection moments where the previous uh sort of locking that suppliers and customers have have a breaking um and some of the very large or dominant players are finding quite difficult to move in these transitions and these are opportunities for junior to come in with a potentially disruptive solution at much lower cost space and it's that kind of tactic that we've been deployed that's been driving a significant part of our growth Now inside, if you like, from the transportation point of view, what we're seeing is some very significant government backing through things like the bus service improvement plan, but also the city regional sustainable transport settlements. Phase one is 5.7 billion that was allocated in 22, which started to come through really towards the end of 23 and 24. That runs till 2027. and they're now committed to a phase two of that which is 8.8 billion and that will run from 2027 to 2032 and we are seeing lots of programs to pedestrianize inner parts of city centers and town centers create park and ride systems where they've got fully off-grid bus shelters signage lighting different sort of road surfaces and these sorts of things along with the traditional zero emission vehicles, some of which may become autonomous. So a wonderful opportunity there for a business like Journeyo. Our strategy really hasn't changed. It's all customer applied research and development. We would love to do ivory tower based speculative R&D. But when the moment we don't have time, we talk to our customers, we try to understand their needs and their wants and what their challenges are. And we apply our R&D to solving real life problems or next generation problems. And our goal 12 months ago was to take Journeo from what it was then was just under 50 million revenue to 100 million in a sort of three year timeframe. with double-digit operating margins. And the way that we're going to get there is through a mixture of organic growth and acquisition. So the organic growth, as Nick's just demonstrated, to very strong organic growth. There are opportunities for consolidation in the marketplace, which we are considering. And obviously acquisitions are something that we've been active on now for a couple of years or so. We're also focusing on the quality of our earnings through very specifically targeting recurring revenue. And that doesn't have to be pure SaaS. What Journeo is, is we're sort of like an end-to-end business where we provide literally from the consultancy right through to the managed services. And we want to be with the customer for the long journey. So we don't mind having a point of entry where we provide maybe just a slight taper of our solutions through maybe maintenance or through SaaS right through to the full consultancy. And we found out as a result of the kind of technological platform that we've built that we're able to enter adjacent markets where our core capabilities can actually lift the performance of businesses in those adjacent markets. And that's really been informing our M&A targeting. So we have about 30 businesses in our M&A pipeline at any one time, and six of them at various stages in completion. So as a result of the acquisition of Crime and Fire, we're now well on the way to the 100 million both revenue and market cap. The acquisition of Crown and Fire really does align with our strategy of taking our core capabilities into adjacent markets and it strengthens our offering and broadens our reach. So it's given us an opportunity to differentiate the acquired businesses through our R&D whilst retaining their domain expertise and their intellectual property and their unique cultures. So in due course, the group will change its reporting into these three categories. and but basically we are expecting the revenue as we hit the 100 million revenue in the next 12 to 24 months to be broadly equal so you know typically sort of 30 to 35 million in each of the three segments And our integrated services business is where what we're delivering is effectively peace of mind to the customers that the systems are monitored through remote condition monitoring and we use machine learning and AI for predictive maintenance where we are providing that service. Information systems is both the image acquisition and the modeling of data broking to be able to deliver a kind of coherent messaging, whether it's transport, it's disruption, or it's actually logistics displays in through the information services divisions. And our infrastructure protection clearly is now based on the acquisition of crime and fire. And what that's about really is protecting initially the critical national infrastructure that they have, but also those sites that Jernio has. We have nuclear power station, which is very complex park and ride systems. And we have similar park and ride systems at seven international airports and shortly to become extended into our first overseas airport in Copenhagen airport, where we signed a framework contract. Our acquisition pipeline is now firmly targeted at the intersection of this Venn diagram. So we are looking at businesses that, for example, will provide more of the solution in an infrastructure protection for the benefit also of the transportation networks market. or similar businesses that are in the information services delivery that will take us beyond transportation. And we've got examples of that at the moment in the United States where we're providing, for the first time, we will be providing platform displays, which is not a media related sale into the New York City subway. We expect to see more of this in the United States and we will shortly open up JNEO Inc based in the US. So if I talk a little bit now about crime and fire, the crime and fire defence systems, the business that we've known for 12 years, it's been in our acquisition pipeline for just over two years and it was actually number three in our list when we entered 2024. There were two acquisitions that were ahead of it and then for various reasons actually we withdrew from one of them and we lost one of them because we were unable to complete pre-budget. So Chromify moved to the top in February this year. And it's a business that we like very much indeed. It specialises in physical and cyber protection of critical national infrastructure. Predominantly that's around national grid gas and national grid electrical systems. But it's also protecting other critical national infrastructure sites where connections come into the UK. It has a full raft of certifications and it's a business that's actually been growing strongly. It's been established over 25 years. It deals with most of the large utilities and working in actually very challenging and dangerous environments where there's significant barriers to entry. Each range of capabilities span from the consultancy and design where it's working with the security services and the critical national infrastructure agencies. And it does the design. It has the capability then to project manage and install these installations, which can be quite basic, where they are civil engineering sites in remote locations. But because of the nature of them, they are highly secure. And it has some of its own products that it's developed over those 25 years, which again, differentiate them from anyone else. And these have a potential for third party resale overseas. So some of the first tasks that we're doing with this business is actually introducing the journey of design center to some of those products so that we can get the certifications and the scale of capability so they can be distributed more widely. Its customers are the ones that you would expect, some of the very large utilities. It is able to offer a turnkey solution in very demanding environments. It has lots of the clearances, security clearances that you would expect it to have. And it's just starting to enter now into doing work directly with the Ministry of Defence. And we see this as a tremendous opportunity for Genium Group because we can deploy our research and development, our developers, software coders, and some of our quite advanced networking and cyber skills to assist CFDS as it tackles more sort of critical infrastructure programmes and defence related works. OK. So that's the sort of end of the high speed sort of run through the acquisition. So I'll hand over now back to you, Alexander, to run us through the next stage, the questions.

That's great. Well, Rusnik, thank you very much for your presentation. Ladies and gentlemen, please do continue to submit your questions, and you can do so just by using the Q&A tab that's situated on the top right-hand corner of your screen. But just while the company take a few moments to review the questions that have been submitted today, I'd like to remind you that recording of this presentation, along with a copy of the slides and the published Q&A, can be accessed via your investor dashboards. As you can see, we have received a number of questions, both pre-submitted and throughout today's live presentation. And now if I could hand back to you to read out the questions that are appropriate to do so, I'll pick up from you both at the end.

Okay, thank you. Okay, do you want to tackle number one? Or should I do that? You go for that one. Okay, so number one, good question. Can you please outline how we're managing the scale up in size of the company and the challenges of minimizing complexity, bureaucracy, and cost whilst ensuring customer satisfaction. It's a fabulous question. And I wish I could say that we could do all that in one go. So the way that we've been preparing Journeo for scale-up is that over the last couple of years or so, we've been investing in the senior leadership team around Nick and I so that we can effectively hand over key areas of the business to very talented individuals. So we've recently acquired a group purchasing manager, a group sales director, a group HR manager, a group head of software. And on the 1st of October, we're bringing in director of customer delivery, which effectively is a kind of fusion of CEX role and PMO role. And what this is enabling us to do This has enabled, if you like, the company to scale up in terms of each of those disciplines. So we've got an active program to build out a unified CRM system, which our new sales director introduced basically during the course of this year. We've introduced Jira for the software development. Many of you might know this. um and we have a number of other sort of back-end platforms that we are using particularly things like peoples for hr um the next uh thing that we've been doing is we also started um an internal business called junior design center where we've been capturing all of the wish lists from the various sales channels and customers that the group is interacting with to bring them together to try and and unify things like operating systems, microprocessors, some of the AI tools, and also some of the cloud and web systems, which we use in a mixture of AWS and Azure to try and get obviously scaling economies, but also to get much deeper into the development model and also reduce costs. And that is working really well. so i will say there are challenges with growing businesses you know junior is a really exciting place to to be there's a lot of things happening at the same time and there's a lot of international potential now uh i think for our inquiries which are coming in through our scandinavian well basically our swedish and uh danish business but from the scandinavian area also into continental europe and particularly into the united states So hopefully that's answered your question. I guess one other thing is we are also conducting continuous net promoter score for customer satisfaction. Okay.

so there's a question about out front media so the question is the relative seems to be growing strongly are there opportunities to extend these commercial arrangements without front to other north american markets or is it enough to go for new york city so Yes, I guess the key thing is the two orders we have received from out front in H1 are different than the omission order. So the first order is for spares to support the first order. So it's not for new trains, although, again, we've said before, there are two potential further there are two more groups of trains that will be going into service in New York City. The second PO was, as Russ said, is totally different. This was for on-platform displays. So what we are doing is developing a very good relationship with out front media. It's a growing relationship and they do operate in other North American cities. So the relationship's good. So there is always, will always be potential there for other stuff.

Okay. You probably want to take that one about the R&D spend, you know, too.

Where are we? So R&D spend, so we talk about six million spend of R&D. Do customers also contribute to development costs? Yes, they do. I think, Russell, we don't do, sadly, we don't do development that we don't market for. We've got lots of developers that would like to. Yeah, yeah. So our development is always focused on a sale that we can not always, usually focus on sale that we can already see. So by default, the customers are often contributing to it because the sale is already there.

I'll tackle that one. This is a question from Oliver B. How viable is the US operation? Well, at the moment, we actually don't have a US operation. As I mentioned to you, we have... about five and a half thousand of our displays at the moment on the first 500 trains that they've replaced in the New York Metro. And our customer has a contract that runs to 2030 exclusive marketing rights to for the media on the subway there. And as a result of the sort of vandalization that they unfortunately have, they've been collecting the displays and returning them back to us for rework if it's possible to rework them. Obviously, in many cases, you can't rework them and they used up their replacement hot spare displays. So we had the $2.5 million order was to build another transfer displays for replacements. But we've had one of our engineers working in our customer space just outside New Jersey for 12 months. And we have two engineers now working on rotation. And that's really helped both us as the manufacturer, but also our customer triage things and get the displays back into service. And as a result of that, it's that that's really led us to the point where we think that if we form a Junio Inc, a US-based subsidiary, that we'll actually be able to supply more directly into the US. So we would be carrying out the design and microelectronics assembly in the UK, but the final products will be commissioned and made effectively in the US, which would enable us to supply more into our customer, but also into other DOTs throughout North America. But at the moment, we don't have any cost base at all. It's a profit generator. But given the length that our customer has of this contract and the number of displays that he's responsible for, it will be profitable from day one for us. Hopeless, but that's okay.

I'll pick this one up. So RW's asked for just more clarity on... where we talk about uh four-year expectations so the question is so in our pre-closed statement on the 29th of july we said revenue is expected to be approximately 52 million in line with current market expectations and then on september the second cambridge upgraded four-year expectations to 56 million and 5.6 million pbt In our statement, we said Journey is on track to deliver another record set of four year results in line with market expectations. So what Arden was asking for confirmation on is which ones are we referring to? And it is the September the second expectations, which is 56 million revenue and 5.6 million PBT.

I have a question here. Would we consider earnings diluted acquisitions? Simple answer to that is no. We do have a number of, particularly in the AI arena, where there's a number of very nice businesses that are pre-revenue. They've got some fabulous groundbreaking technology, but as you might imagine, they have very high valuations attached to them that clearly don't make any sense for us. And as I said, Journeo actually is really about the solution. We don't just want to provide part of that. We actually want to be there for the long haul with these customers and build very strong foundations with them. So there are lots of opportunities for earnings enhancing acquisitions. So we're focusing on them. So I hope that answers your question. difficult to read um have we got any what's that one about jdc have any generic product okay um this is one from patrick are we any generic products being launched from the jdc um the answer to that is no um we've got some um well in fact generic products is probably a difficult one we we we're not making anything that's really just a me too. There'd be no point in us reinventing the wheel. So if we can build the solutions that satisfy the customer with things we can buy off the shelf, we will do that. There's no point in us investing in something that's me too. The developments that we carried that are being led by the JDC are all next generation things where they outperform either in terms of brightness, performance, resolution, longevity, power consumption, or recyclable or sustainable nature. And the first sort of physical products of that are actually have been released. Some of them have actually gone to paying customers in sort of like a paid for beta trial application and some of the moments are so new that we are trialing them and just basically just going through the sort of final shakedown before they move into production there's several products actually it's not just one but we don't actually ever intend to make that genomic product that would be that would be pointless okay

So there's a question, how advanced are the companies at the top of the M&A pipeline, which I will assume is asking how far are we with our discussions with them? I think as Russ said, we've always got a number of discussions ongoing and we would like to be in a position to do one early next year. So, yeah, we are at a good stage in discussions with multiple potential acquisitions experts. Okay. Let's see if there are any other ones. Can you just scroll down? God, they're really difficult to read.

Another one here. Are the MOD opportunities magnified by the ARIA break-in this year? The answer to that is yes, definitely. This obviously would be through the crime and fire business. They have the security clearances to do that sort of thing. And discussions are actually underway, not about that specific location, but other sort of military bases, as you can imagine, but following, it was Bryce Norton, I think, following that discussion, There's a lot of work going on now to harden up, they call it PIDS, perimeter intrusion detection systems, and both from a physical point of view, but also from a cyber and drone point of view. So there's a lot of work going in here. And this is actually something that the Genio R&D team will be working on very closely indeed with the crime and fire team over the next 12, 18 months or so. Okay. I think probably got time for one, I think this question really is okay. So from James, good question. We've been doing well winning business in the US of late. How important could the US be for Genio and our reputation for opening more doors over there? It's a really, really good question, James. What we know is under the biden administration they talked about three trillion dollars spend in uh transportation infrastructure also that would include the highways um the systems in the us um in the sort of downtown areas a lot of there are a lot of metros but the sort of public transport because the geographic size of the place tends to be more sort of intercity um and track um we we believe there's a tremendous opportunity for the suite of capabilities that junior possessors and a number of the acquisition targets actually we've been working on have been businesses in north america i um mainly in the us but also in canada um we we um it is difficult moving into the us market it's very big um so you need to be very focused On the moment, the way that we're going about that is that we're doing this very, very closely with our customer who are embedded within the New York City, sorry, the MTA. But they are active in a number of other cities. It's a $2 billion media and marketing specialist business. And we are talking to them about programs in other metro areas. So we are, this is really why we're going to form the Genio Inc. shortly, so that we've actually got a US foothold in order to then start to capture some of the, it goes back to that slide about the sort of mega trends. They equally apply slightly different emphasis in different countries. um but they equify the you know in terms of the congestion maybe um at the moment the u.s has a different view on the decarbonization the climate change but nevertheless the public transport and the infrastructure uh particularly in the highways infrastructure is something that's set to grow very strongly and genio's in a good position to capture part of that you could uh not most of the

we're probably out of time actually so do you want to take any other um no there's one question and can't give an exact answer how much of the growth 200 million is organic versus acquisition um we can't put exact numbers on it it will be both i guess we've done We've already done a good chunk of the organic growth already, but there is more organic growth to come. Particularly, there's more to come back from Invertech. There's more to come back from Denmark. So it will be a mix. So, okay.

So we're well on the way. So our goal is to get to 100 million and with double-digit margins, and we're well on the way now to do that. So I think probably hand back to you then, Alessandro.

That's great. Well, thank you very much for answering those questions from investors. Of course, the company can view the questions submitted today and we will publish out the responses on the InvestorMeet company platform. Just before we do redirect investors for their feedback, that's particularly important to you both. Russ, could I just ask you for any closing comments?

um sort of really it's just a summary that at the moment where we are in our development um we still can see a lot of things that we want to do to uh to strengthen the positions that we have in our core markets and we are doing that we've created um a fully scalable cloud application that's now transcended from public transport in terms of the own vehicle now actually into the active street furniture and the information delivery systems. And we're now going to be taking that into areas within the critical national infrastructure and in due course, defence related markets. These are all applications that are not unique to the UK. So they're things that could be scaled up either directly through startups or through third party resale in other territories. And we see now some really attractive growth areas, particularly in North America and also in parts of Asia for some of the things that the group has developed. So thank you very much for making time to hear our story.

grateful to you and we've enjoyed answering your questions that's great well thank you once again for updating investors today could i please ask investors not to close the session as you now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations part of the management team of journey oplc we'd like to thank you for attending today's presentation