Transense Technologies plc

Good afternoon and welcome to the TransSense Technologies plc final results investor presentation. Throughout this recorded presentation investors will be in listen only mode. Questions are encouraged and they can be submitted at any time using the Q&A tab situated on the right hand 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 during the meeting itself however the company can review your questions submitted today and publish responses where it is appropriate to do so. Before we begin, I would like to submit the following poll and I would now like to hand you over to Executive Chairman Nigel Rogers. Good afternoon to you.

Hello and hello to everybody who's listening. Thank you for joining us today. I think we've got quite a full crowd in, so that's great. You will see alongside me, Ryan Maughan, Managing Director and Melvin Siegel, the CFO, and they will be supporting the presentation today. The order of the presentation, I'm just going to sort of top and tail it. Melvin will take you through the financials and Ryan will take you through both SourceSense and Translogic with an update on trading during the year and prospects and pipeline. I think we've got plenty of content for you. So we'll take it fairly briefly. We've got one pre submitted question, but we certainly welcome them as we go along. And we'll hopefully leave plenty of time for Q&A at the end. So if I might start a very quick refresher of the businesses that we're going to be talking about today. So we have two operating businesses within the company SourceSense which is a designer and supplier of advanced sensor solutions primarily measuring torque and temperature so particularly applicable to rotating shaft applications across a number of very high growth industries and then we have Translogic the supplier of smart connected tire inspection and data collection tools which are used primarily in the truck and bus market and again we'll I'm just going to cover the overview of the financial year FY25 so at seven o'clock this morning we announced the published results and the audited results for the year ended 30th of June and they included financial highlights which showed that trading was in line with a pretty aggressive growth plan and that we're investing in the business for future. The revenue was up by a third, profits were up as well, cash conversion was particularly high, the conversion of operating profit into cash was very good, generated a couple of million pounds worth of free cash flow which was invested in the business primarily in SOAR but also in Translogic for future growth. Within SourceSense, there's a real sense of traction within the business now, and the scale up is well underway. Revenues grew by 149% during the year, largely from the depth of relationships with two existing customers that are already progressing towards production relationships, but also with the increased onboarding of a number of new customers through the development phase. And we've got quite a lot to talk about on that today. and to support that scale up we're now investing in a production line at Weston on the Green and on the sourcing of next generation electronic components and those programs are quite capital intensive Melvin will take you through the figures but they are on schedule and on budget which is obviously pleasing And we've been able to take the opportunity to also deepen our resources within source sense. In fact, within both businesses in both engineering and business development. So we have a lot more depth and resilience and bench strength within the management team than we had a year ago. Within Translogic we've built some very firm foundations for revenue growth and are seeing an improvement in visibility of future sales. Translogic historically has been quite a transactional business and we're at the stage now we're able to build a pipeline particularly with a switch of the business towards a subscription model where we're improving the visibility of earnings. Revenues in the year were up 18% but there's a story to tell there which Elvin and Ryan can tell between them. and the tire majors were up overall despite some weakness with one particular customer which we'll talk about and we added some new territory distributors and software partners in order to open up new routes to market the sales organization was revamped towards the end of the year and that improved further the pipeline visibility for fy26 in which we also expect to do some new product launches so i think an exciting program today and i shall now pass you on to melvin to take you through the figures

Thank you, Nigel. And as Nigel mentioned, we have achieved a 33% increase in revenues. However, if you exclude iTrack revenues, we've actually experienced a year-on-year growth of 55%, which affirms our goal for steep growth in both SOAR and Translogic revenues. The overall gross profit for the year has improved as you will see to just under 90% reflecting an underlying increase in Translogic GP from 54% to 62% and this follows our decision to bring production in-house last September. This move not only increased efficiencies in production it has also enabled us to achieve much improved component costs. in FY26 we will have a full year of in-house productions and margins may increase further depending on how large the subscription element of our income becomes operating expenses have risen reflecting the increased headcount with last year's average headcount of 21 rising to 31 this year we currently have a headcount of 35 including the board other costs have risen as you would expect from the higher headcount and following the commitment made in fy24 to increase capital expenditure which includes a new pilot line and the design of next generation components the charge for depreciation and amortization has risen in the year finally you will see at the bottom of the page ebt is up 12 percent despite the substantial increase in running costs so in summary whilst each year we strive to beat market expectations we have now consistently produced results in line with expectation and this despite the challenging market conditions we are as i mentioned achieving improved margins and investing for the future and finally we still have 19 million pounds of tax losses which effectively saved us in the current year a tax charge of about 350 000 pounds looking to the next page this is our revenues graphically if we look on the left we can see from the chart the global nature of our business reducing risk of reliance on any one territory iTrack as you'll see from the green shade has made up 58% of our revenues and whilst it is paid from a Bridgestone UK subsidiary the income is actually derived from all the large mining territories being Australasia Africa and North and South America the UK income in orange is mainly derived from work with McLaren applied now called Motion Applied and this suggests that there is still a large UK market to attack in both SOAR and particularly TransLogic. Looking at the chart on the right this demonstrates the consistent growth achieved in the past five years and the breakdown into half year snippets shows the growth enjoyed each year from H1 to H2 with that increase rising yearly to 30% in recent years. So in summary, we have a truly global business. We have limited UK market exposure, but large potential in the UK market and revenue sustaining a positive momentum over five years. Moving on to the next slide which is the segmental results. Looking at these results you can see the growth achieved in revenues in each segment which saw at 149% and Translogic and iTRAC at 18 and 19% respectively. This is actually an appropriate point to pause and actually look back at what we've achieved in the last five years since the Bridgestone deal. saw revenues have gone from less than 100,000 to over 1.1 million. Translogic revenues from half a million to 1.3 million and iTrack royalties have increased from an initial run rate of 600,000 to a closing run rate in 2025 of over 3 million. Whatever the annual numbers have been each year since 2020, the numbers in the market, our five-year numbers, we've certainly exceeded our expectations that we would have had in June 2020. The changes in EVT year-on-year for each segment show improvements in all segments and the increase in central overhead reflects the higher charges relating to increased headcount and depreciation and amortization. in summary we are enjoying high growth in our operating businesses and importantly we now have in place an overhead base which can support a much larger business potentially 5 million revenues for each of saw and trans logic which is our short to medium term goal so looking at the next graph what has changed from fy24 to fy25 this graph demonstrates the bridge with commencing with an EBT of 1.26 million through to 1.4 million with the main changes being saws improved contribution of over quarter of a million pounds and the added half a million from I track set against the additional central cost of 650,000 pounds. So in summary volumes and margins up and investment in people in place to deliver future growth. looking at the cash flow statement operating cash flow has improved by over 30 at 2 million pounds and i want to highlight the capex of just over 2 million which is part of the strategy that i mentioned earlier it commenced in fy24 and is expected to be completed mostly in fy26 which is the year we are currently in uh and i would expect a further spend of over about 1 million The net movement in the year is a small reduction in cash of 140,000, but we are still maintaining cash balances in excess of 1 million. We have also secured, but not yet used, asset financing of 1 million to fund the tangible element of CapEx, which is around 500,000 already expended. Looking at the balance sheet, This remains strong with net assets up at 47p a share and as I've already covered the fixed assets the only points I want to pick up on with regards the balance sheet are trade debtors as it's worth mentioning that the quality of our customer base has meant we don't face any issues recovering debt where we might have in the past. Deferred tax as you will see remains unchanged at 1.47 million which at the current corporation tax recognizes losses of around 6 million. As I mentioned we currently have losses of around 19 million so we have a further 13 million of unrecognized losses which represents an additional deferred tax asset of 3.25 million which is not on the balance sheet. net assets have increased by 1.5 million with distributable reserves standing at 4.8 million treasury shares not shown on this table are static at 1.03 million as no investment was made in the year summarizing we anticipate similar level of capex in fy26 as i've mentioned to complete projects in progress and we have a strong balance sheet finally Moving on to the ITRAC chart which is a chart that should be familiar to most people if you've seen it before. The light green shading on the chart represents the actual receipts which ended the year over 3 million for FY25 and in total in the first five years is now worth 10 million pounds. as you may recall royalties are earned based on the number of trucks using itrack technology and the two darker shades of green illustrate the level of royalties that would be earned by applying the average incremental increase in truck numbers experienced in the first five years the lighter green being a prudent 50 of the average rate and the darker green using the average rate so as you'll see from this in years six to ten we could produce a further 10 million pounds worth of income from the itrac deal broadly averaging at about 2 million per year even taking into account the royalty rate changes and producing an income not too dissimilar from that we enjoyed in fy 23 and fy 24. i will now hand over to ryan