Journeo plc (JNEO) Earnings Call Transcript & Summary

Good afternoon, and welcome to the Journeo plc Full Year Results Investor Presentation. [Operator Instructions] Before we begin, I would like to submit the following poll. And I would now like to hand you over to your CEO, Russ Singleton. Good afternoon to you, sir.

Good afternoon, Alex, and welcome to everybody that's joining us to hear our FY '25 results. Thank you for making time. I'm Russ. I'm an engineer, I'm the CEO of the company, and I'm joined by my colleague on the left, Nicholas Lowe, who is our Chief Financial Officer. We've both been with the company a fair while now. We're both shareholders and around the board, we've got about 4% of the company. We're really pleased with the results for FY '25. Journeo has been developing quite steadily over the years. We're now one of the leading intelligent systems providers in transport. And recently through the acquisition of Crime and Fire, we've moved into critical national infrastructure. The results for '25 were in line with the broker forecast, very strong. We've increased our revenue, our profit, cash generative. We've improved margins across the board in the group. We acquired Crime and Fire Defense in September last year. And we've got an increasing sales opportunity pipeline, and we're well positioned for further growth, both organically and through acquisition. We'll go to these details a bit more later, but revenue was up, gross profit was up, adjusted profit before tax was up and so is the cash. For those that perhaps are new to our story, we really are sort of technology-based systems integration company. We built solutions in -- basically into these sort of 5 marketplaces, which are predominantly integrating services or bundling of aggregated services. We provide information systems, and that can be on the acquisition, the filtering, the processing and the outbound delivery. And more recently, now we have an infrastructure protection business that deals with both visual, cyber and physical security threats. Our Fleet Systems business is the sort of core of the original business that Journeo has turned into. And that is a specialist provider of integrated solutions onboard buses, trains, coaches and trams. And it's really all about sort of an IoT approach linking the subsystems on the vehicle and then provide information out to the operator, whether that's the fleet operator, the local authority, or potentially things like British Transport Police and other stakeholders. Our passenger Systems business is really about the delivery of information into the streets, bus station, bus shelters and some railway stations. And there, we design and manufacture a lot of the solution ourselves. Infotec is the market-leading rail displays manufacturer. It's on about 80% of the U.K. network, about 1/3 of the underground. And more recently, it's moved into the United States and also into Denmark. Journeo A/S is our Nordics business, where we've combined Journeo Denmark, which came as a result of the acquisition of MultiQ in September '23 and also Journeo Stockholm-based business. And that is a provider of all of the solutions that Journeo Group has. And we made some recent announcements about contract wins there. And Crime and Fire is the infrastructure protection business that we acquired in September last year. We have a growing list of partners and with customers, and we're really proud to have these people on there. These are obviously some of the larger ones, but we're equally proud to be working with smaller operators or smaller physical sites, but as we sit here today, we've got about 35,000 connections concurrently to our cloud-based platforms. We're on about 30-odd percent of the U.K. bus network for our cloud-based systems. And we've got just under 300 people actually now in the company. This was at the end of the period. So what I'll do now is I'll hand over to Nick to run through the financial results.

Okay. So as Russ said, a good set of results. Revenue was up 11% year-on-year to GBP 55 million. Gross margins increased again. So we got another 2% out of gross margins, and moved them to 40%. And as you'll see later, we had an uplift across all segments of the business. So gross profit actually increased by 23% to GBP 21.8 million. Adjusted PBT was up 13% to GBP 5.7 million. And if you remove the impact of the acquisition, we increased 8% to GBP 5.4 million, which is where we expect it to be. Diluted EPS was down slightly at 23.83p. There's 2 strong reasons for that. The smaller part of it is that there were some new shares issued during the year from the acquisition of Crime and Fire and some options exercised. The largest part is that our effective tax rate in 2024 was exceptionally low as we have some brought forward tax losses and some over provisions. So the tax charge in '25 was a more normal position. So that's the key reason that EPS actually dropped slightly. Cash was good, very good, close to GBP 12 million, down GBP 2.3 million year-on-year, but that's after we spent GBP 10 million on the acquisition. So true operating movement was actually about GBP 8 million uplift in cash. We always state R&D number. So we spent about GBP 2 million in the year on R&D. Fundamentally, that all passes through the P&L. So the GBP 5.7 million adjusted PBT is actually after writing off GBP 2 million of R&D. Into the segments, Fleet was a good performance. Revenue was up 3%. Margin was up by 2%. So we actually increased gross profit by 9% to GBP 7.3 million. As a contribution from fleet, we were up 17% to GBP 3 million. So a very, very strong contribution from that business. Passenger performed phenomenally well. Revenue was up 33% to GBP 12.7 million. Strong gross margins at 49%, gross profit moved up 39% to GBP 6.2 million. The really pleasing bit from passengers is that delivered a bottom line of GBP 1.5 million, which is just almost 7x what it delivered last year. Infotec revenue was down to GBP 8 million. The reason for that, and it's exactly as we expected is that we had a contribution from the New York contract in 2024 that we didn't have in 2025. What we did do during the year was $10 million of new orders with the same customer and the vast majority of that revenue actually falls into 2026. So we expect, or we will see a significant uplift in revenue in Infotec this year. Margins were good, up to 42%, which meant the gross profit was GBP 3.4 million. And as a bottom line, it still delivered just shy of GBP 1 million. Journeo A/S, our Danish business, again, revenue was down slightly at GBP 3.6 million. This was predominantly lower-margin work. So actually, as a contribution of the business, maintained gross profit of GBP 1.9 million, and actually increased the bottom line very slightly. Again, we expect more from that business entering this year. We just announced a contract which will help that. Crime and Fire, we acquired in September. So this is 4 months trading. We had a revenue of GBP 7.4 million, gross profit of GBP 3 million and a small contribution of GBP 400,000 for the period. Recurring revenue, say, it's year-over-year, so we had another uplift, we had a 10% uplift year-on-year to GBP 7.7 million. It's 14% of the whole revenue for the group and SaaS sits at roughly 40% of the total proportion of recurring revenue. Next slide is, I think historically, we've listed all of our [indiscernible] for contract wins. We have 13 announcements during 2025. So we've summarized it here. What the slide ultimately shows is that we won business in all segments of the group. So it's not only focused in one segment. The announcements are across different segments of the business, and that helps what we've carried forward into 2026.

Okay. Thanks, Nick. So we just wanted to really share this slide with you. This is effectively why we're here. It's why we've put our own money into this business. It's what we firmly believe. There's some really strong trends occurring in various parts of the world. And what we're looking to do is to align the sort of the design of our solutions so that as these megatrends start to be impacting, both in different countries and different market segments, we've got the solutions right at the sort of cutting edge ready to go. And on the other side of that, we then look for market drivers that are going to enable these new systems to actually move into actually sort of revenue-generative reality. So if I just go through actually an extensive list of these megatrends, but we just listed these 5 out. So there's rapid urbanization. That's really people moving more sort of from rural centers into towns and cities, the mega cities emerging. That's driving up congestion. It's changing the demand for passengers, but more importantly, it's actually putting greater demands on the utilities in and around the cities. You've got the climate change, and scarcity of resources and the move towards zero emission vehicles and the use of renewables. And we see a lot of the sort of infrastructure around the towns and cities, particularly on the information delivery, needing to be off-grid and in some cases, actually generated back to the grid. You then got a shift in economic power. That is really manifesting itself now, where China are a long way ahead in electric vehicle production and the battery technology in particular. You got the demographic and social changes and also then the technological breakthroughs with some amazing developments in artificial intelligence and also in solid-state battery technology for renewables. So we have been aligning ourselves with some of these, It comes from sort of a well-known theme of the smarter cities, and these are extracts of that. And then on the other side of that, we look then for what's actually going to make the change, what will -- where is the inflection point? And what do we need to do to align ourselves with that? And so I've listed 3 here. The first one is the city regional sustainable transport settlements, a bit of a mouthful there. The government put GBP 5.7 billion in to enable the oral authorities to build future transport solutions. And that's very recently been added to by GBP 15.6 billion of funding that runs after the initial fund ends. So from the period 2027 to 2032. So in total, there's around GBP 20 billion or so. And we've seen that being applied now through the Bus Services Act towards franchising. So we believe that that's going to operate as a market driver out to 2032 and beyond. And the Bus Service Improvement Plan, which is really aimed at sort of local transport grants, GBP 2 billion or so being pledged previously to that, and we've seen sort of first phases of that coming to an end. Now there's another GBP 2.3 billion of funding. This is for non-mayoral authorities to gain access to this funding through the 2025 to 2030 period. And then through the Crime and Fire Defense business, we've seen U.K. government committing to increase core spending on defense from 2.3% of GDP out to 3.5% by 2035. So what that says to us is that by building our solutions so that we can enable some of these megatrends to be applied and aligning this with our local authority, PTO and defense or security-based customers, we can actually enable some of these funds to be drawn down and these projects to take place, and that is driving our growth. Our aim is to take Journeo to GBP 150 million revenue with at least double-digit operating margins. And we're going to continue to do that through technology-enabled growth and also through acquisition, so our business is growing strongly organically, as Nick has already demonstrated. We've seen an increase in our recurring revenue and also the SaaS component within that. We are active in an active M&A program where, obviously, we just completed the acquisition of Crime and Fire. We have a raft of other acquisitions that we're working through. Some of them are into adjacent markets such as Crime and Fire, but some of them are also consolidation opportunities. And we're also working pretty actively in adjacent markets, both in the U.K., North America and also in Continental Europe. So I really just wanted to spend a few moments introducing Crime and Fire, it's relatively new to us, and there may be people with us now that don't really know about Crime and Fire. So Crime and Fire is a well-established business working in utility protection, particularly the critical national infrastructure. We acquired it in 2025 in September, and it's got a team of about 72 permanent staff and a similar number of contracted staff works predominantly throughout the U.K. and it has all the certifications and approvals that you need to work in these very dangerous sites where high pressure means gas, super grid level electric distribution and also some of the defense-related sites. It's got sort of 4 legs to the business. It has its own products, its own intellectual property, things like the MapVault and Campost, where over the years, it's improved some of the designs to the point where now it has third-party inquiries for some of the products, which historically is only designed for itself. It does its own in-house design, which it has to because of the nature of the security. BS7858, SC and DV cleared people within the team. It has a network of installation engineers and they're working throughout the U.K. And it also has a construction department. So some of the physical security systems can be quite large if they're protecting a gas treatment site or reservoirs, and these sorts of things. It's quite a hostile environments. So the reason that we wanted Crime and Fire in our business is that we've been building Journeo essentially from what was a fleet services business, integrated services. We then introduced the passenger information systems piece. And some of the work that we've been able to secure has been at the intersection of those sort of the 2 circles on the left, where things like airports, they've actually wanted a mix of the onboard long-stay car park or SAF Busing/Car Park Technology linking into the bus shelter actually then into the airport SLA adherence. And through the airport SLA adherence, we've been asked if we could interface then with things like the perimeter intrusion detection systems and the access control of very secure places, another example of things like nuclear power stations. And so we started talking to Crime and Fire many years ago about integrating those skills into our business. And they in turn started to talk to us, could we provide remote access services so they can remotely monitor some of their visual systems, and also could we run some of our -- particularly our analytic tools in real time for their systems. So it took a long time, but we actually came to the conclusion that this would actually be the sort of third circle in the Journeo Group offering. And in September, we closed that acquisition. And that now means that this is now what Journeo Group looks like. So we have our core capabilities right at the center of this, the shared resources of -- I actually like Nick and I and the M&A and the exec team. We have HR, research and development, marketing and our group IT cybersecurity. But then we have the domain expertise, very specific focused domain expertise in the integrated services business, which is extensively anything that's moving or the IT systems, where we bundle up the hardware and the software, the installation services. And then on the information side, this is predominantly where a lot of our artificial intelligence led solutions are going, and then the infrastructure protection. The infrastructure protection is relatively new to us. So at the moment, the impact in our growth plan is yet to come. But that's actually why we wanted this inside our group, and we're pretty confident that this can take us through the GBP 150 million revenue with at least a 10% net operating margin. So what we've been doing with Journeo is we've been increasing our opportunities, funnel of opportunities. We've been increasing our capability at the same time as reducing risk. And it's all about assurance, making sure that the systems are working, whether that's through the access services from board vehicles or indeed, whether it's through remote health monitoring for displays and bus shelters in railway stations or out in the street. In 2024, the business looked like it does on the left, where we have Infotec, fleet, passenger and Denmark. In '25, we added on the Crime and Fire business and our go-to-market for 2026 now looks like this, and we're really confident that we can take this thing forward. The business now has a sales -- qualified sales opportunity pipeline north of 200 million. The actual funnel is much, much larger than that. And through this, we are starting to see now synergies. So we announced a contract last week for the Danish State Railway, which is a combination of Journeo Design Center, Journeo A/S in Denmark and Infotec providing the manufacturing for a new class of displays that are going to be installed on the outside doors of the trains for DSP. And we have inquiries from other European rail authorities for these kinds of solutions. So that's kind of an introduction to our current 3-phase business model and an explanation of our FY '25 results. So we'd now like to take some questions.

[Operator Instructions] Russ, Nick, at this point, if I may just hand back to you to take us through the Q&A session, and I'll pick up from you at the end. Thank you.

Okay, I think, I'm just going to target a couple.

Okay, I can take that one. So there's a question on the quantity of our forward order book. And the follow-up, if we can't say what it is, where do we see the strongest growth coming from? So we don't publish our order book at the moment. But in terms of colors, where we see growth this year, I guess in order of growth, so we will have 12 months of Crime and Fire this year rather than 4 months. So we had GBP 7 million revenue from that last year. And it's GBP 17 million in the year pre-acquisition. So we will see a full year and good growth in Crime and Fire. As I said, when we came to Infotec, Infotec will improve significantly this year. Biggest chunk of that will be through the New York contract, but we'll also see some movement in U.K. rail. Passenger should continue its significant improvement, and fleet will also improve. So I guess in terms of ranking of additions to revenue, I would say it would be Crime and Fire followed by Infotec, followed by passenger, followed by fleet for the growth this year. There's a question there, how does Crime and Fire fit with the I think we've explained that. So the rationale for why we're interested in Crime and Fire.

Okay. Page 39 of Page 40 of the recent annual report identify high risks of increased competition and being overtaken by new technology approaches, please elaborate. It's a really good question that. So obviously, we're scanning the horizon for things that can impact us, and there's some very obvious ones, such as cyber attacks with 35,000 connections now onto our cloud-based systems, it would indeed be quite a problem if we were hacked and could deliver because a number of organizations now are relying on this. We've got 7 airports that are connected -- well actually, their mobility systems are run by our portal and about 13,000 buses and trains. So it'd be quite serious. So we deal with that. We have a team that's working on that, and we are going through the Microsoft Sentinel approach and part of the NCSC. Other risks that we've identified are increased competition. And what we mean by that, in fact, and being overtaken by new technology, they're actually sort of one and the same. What we've seen is that the incredible performance of Agentic AI is now, we believe is going to decimate a number of kind of traditional SaaS business models that are relying really on the asymmetry of huge data or big data and a user base that's unable to actually filter that. And we do have an awful lot of data, particularly that comes from the real-time information systems on more vehicles. So there's always a possibility that there's a new sort of technology solution could come in, a bit like Agentic AI is doing right now that could actually take a lot of the, if you like, the software deliverable away. So at the moment, we have a policy inside the company that we actually don't use any of the Agentic AI tools in any safety-critical solutions. So we do use machine learning, but we're using fully traceable and predictable outcomes. So we don't have the possibility of things like hallucinations within the service delivery. So the risks are more to do with some amazing new development that could come that could actually sweep away some of the delivery. So we're minded to that, and we would rather than be fearful of it, our approach is actually to embrace it and adopt it. So -- and that's really what we're doing.

Okay. There's a question around tariff threats impacting our U.S. opportunities. So far, they've actually helped us. So the most likely source of displays outside of us is actually China. So the tariffs on us are less than on China. So the tariff has not impacted -- may have helped us. How we may move around that going forward is we are -- we could potentially final assemble the product in the U.S., which would enable us to move around the tariffs anyway. So, so far, the tariffs have not impacted us, and the U.S. customer is certainly very, very pleased with what they're taking from us.

Okay. Great. There's one here. Kevin C. So we -- as you say that you're looking for acquisitions in some overseas, have you also considered in-house start-ups overseas? Again, that's a really good question. And the answer to that is yes. We have been looking and are looking and are talking to a number of overseas potential acquisitions. Some of them we're actually unable to do at the moment because the valuations, particularly in North America and the United States are much higher than they are in other parts of the world, too. So -- but the business is actually starting to take off in the U.S. So we are at a pretty advanced stage of taking some office space, and actually opened up a Journeo inc on the East Coast of the U.S. to serve New York City, the MTA and our customer base out there. We've got a team out there now. We've had a service center actually in our customers' premises for about 18 months. So we've got Journeo engineering tech support actually in the U.S. throughout that time. So that is -- I think that answers the question. So, next one. Do you want to take that?