Transense Technologies plc (TRT.L) Earnings Call Transcript & Summary

Good afternoon, and welcome to the Transense Technologies plc Final 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 our 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 Melvyn Segal, 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. Melvyn will take you through the financials and Ryan will take you through both SAWsense and TransLogik 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 start, a very quick refresher of the businesses that we're going to be talking about today. So we have 2 operating businesses within the company. SAWsense, 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 TransLogik, 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 have a lot more details of those 2 businesses to come. I'm just going to cover the overview of the financial year FY '25. So at 7:00 this morning, we announced the published results, the audited results for the year ended 30th of June. And they included financial highlights, which showed the trading was in line with a pretty aggressive growth plan and that we are investing in the business for future. The revenue was up by 1/3, 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 store, but also in Translogik for future growth. Within SAWsense, 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 2 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. 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. Melvyn 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 SAWsense, 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 Translogik, we've built some very firm foundations for revenue growth and are seeing an improvement in visibility of future sales. Translogik historically has been quite a transactional business, and we're at the stage now we're able to build a pipeline, particularly with the 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 Melvyn and Ryan can tell between them. 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 FY '26 in which we also expect to see some new product launches. So I think an exciting program today, and I shall now pass you on to Melvyn 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 SAW and Translogik revenues. The overall gross profit for the year has improved, as you will see, to just under 90%, reflecting an underlying increase in Translogik 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 FY '26, 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 FY '24 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% 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 expectations, and this is despite the challenging market conditions. We are, as I mentioned, achieving improved margins and investing for the future. And finally, we still have GBP 19 million of tax losses, which effectively saved us in the current year a tax charge of about GBP 350,000. 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 U.K. subsidiary, the income is actually derived from all the large mining territories being Australasia, Africa and North and South America. The U.K. income in orange is mainly derived from work with McLaren Applied now called Motion Applied, and this suggests that there is still a large U.K. market to attack in both SAW and particularly Translogik. Looking at the chart on the right, this demonstrates the consistent growth achieved in the past 5 years and the breakdown into half year snippet 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 U.K. market exposure, but large potential in the U.K. market and revenue sustaining a positive momentum over 5 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 with SAW at 149% and Translogik and iTrack 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 5 years since the Bridgestone deal. SAW revenues have gone from less than GBP 100,000 to over GBP 1.1 million, Translogik revenues from GBP 0.5 million to GBP 1.3 million and iTrack royalties have increased from an initial run rate of GBP 600,000 to a closing run rate in 2025 of over GBP 3 million. Whatever the annual numbers have been each year since 2020, the numbers in the market, our 5-year numbers, we've certainly exceeded our expectations that we would have had in June 2020. The changes in EBT year-on-year for each segment show improvements in all segments and the increase in central overheads 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 GBP 5 million revenues for each of SAW and Translogik, which is our short to medium-term goal. So looking at the next graph, what has changed from FY '24 to FY '25. This graph demonstrates the bridge with commencing with an EBT of GBP 1.26 million through to GBP 1.4 million, with the main changes being SAW's improved contribution of over GBP 0.25 million and the added GBP 0.5 million from iTrack set against the additional central costs of GBP 650,000. 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 GBP 2 million. I want to highlight the CapEx of just over GBP 2 million, which is part of the strategy that I mentioned earlier. It commenced in FY '24 and is expected to be completed mostly in FY '26, which is the year we are currently in. And I would expect a further spend of about GBP 1 million. The net movement in the year is a small reduction in cash of GBP 140,000, but we are still maintaining cash balances in excess of GBP 1 million. We have also secured but not yet used asset financing of GBP 1 million to fund the tangible element of CapEx, which is around GBP 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 to 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 GBP 1.47 million, which at the current corporation tax recognizes losses of around GBP 6 million. As I mentioned, we currently have losses of around GBP 19 million, so we have a further GBP 13 million of unrecognized losses, which represents an additional deferred tax asset of GBP 3.25 million, which is not on the balance sheet. Net assets have increased by GBP 1.5 million with distributable reserves standing at GBP 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 FY '26, as I've mentioned, to complete projects in progress, and we have a strong balance sheet. Finally, moving on to the iTrack chart, which is a chart that should be familiar to most people as you've seen it before. The light green shading on the chart represents the actual receipts which ended the year over GBP 3 million for FY '25 and in total in the first 5 years is now worth GBP 10 million. As you may recall, royalties are earned based on the number of trucks using iTrack technology and the 2 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 5 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 6 to 10, we could produce a further GBP 10 million worth of income from the iTrack deal, broadly averaging at about GBP 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.

Thanks, Melvyn. So starting off with the SAW business. SAW is the surface acoustic wave technology. It's a patented sensor technology and it's used in performance and safety critical applications, normally for measuring torque or temperature, but also forces and pressures and things like that as well. It's a very novel sensing principle. It's Transense's is -- well, it's the only company in the world that does it for torque measurement and one of the very small number of companies that uses SAW for a sensor of any kind. The business has changed the business model in the last couple of years in order to make SAW more accessible to new customers and help them derisk adoption because it's a novel technology, there's a lot of risks or perceived risks from a large company in bringing this into a product, and we've been working very hard to derisk that. That's really delivered for us, increasing customer engagement, revenue growth, as Melvyn explained, and long-term business value, creating a very credible business and platform for growth for the future. This slide shows the current torque sensor market segmented into our different industries that we're operating in. So you can see from this slide that the market today for known torque sensor applications is very, very large. So this market research has a $9.6 billion per year revenue. Some of the applications that we're working on wouldn't be included in this market because there are things that you can't currently do with the torque sensor such as in the e-drive's market. But even without that, it's a huge market, and we're a very small part of this today. So there's a very big upside for us to find the applications where SAW has a clear differentiator in the market. I'll talk a bit more about the specific markets on the next few slides. What you can see here, the automotive, obviously, is the biggest market here, and it's got very big forecast growth. The applications are things like in electric power steering systems, which use torque sensors today. The e-drive application that we've been working on for SAW wouldn't be included here because it's not something that people do today. The aerospace market where GE are, this is torque sensors for helicopter engines like our program with GE, but also turboprop engines and actuation systems and other things on aircraft. The humanoid robotics market is a market that's really quite interesting and forecast to grow very sharply over the next few years. And essentially, humanoid robots rely on force and torque sensors to be able to operate. That's what allows them to stand up and to walk and to have the dexterity and movement they have. In addition to human robots in conventional robotics, force and torque sensors are used today, particularly in type of robot called cobots. They're becoming more and more common and deployed more frequently in robots. So where a few years ago, you might have had one sensor in a robot. We're starting to see multiples of sensors coming through. So that market is also showing some very interesting growth. And then the motorsport market, which we talked about a lot before, we have good growth in the motorsport market, but I think there's an awful lot more that we could be going for. So we're operating in a very large marketplace, and we've got some key differentiators that we can bring. So in the robotics market, that is a place where we're seeing some very good growing traction with some really key global technology leaders. So we have in the robotics market, 3 projects running today, 2 are with very large global companies and one is with a specialist business of a much smaller company. But the 2 larger projects are with very big kind of globally renowned technology companies. One is more towards the industrial robotics end of things and the other is a higher volume lighter application, both really interesting programs. We've got a number of discussions ongoing with other robotics businesses and expect to see this sector grow for us very strongly over the next few months and years. The aerospace market, our cornerstone client there has been GE Aerospace for a number of years. That's given us a good presence in the market. But we have added in the last year or 2, a number of very strong new names in this space. So some very good Tier 1s and aircraft makers that unfortunately, we're not allowed to share the names of. The one project that is in the public domain is with Airbus, which I think gives a sense of the quality of some of the other companies that we're working with in the aerospace market. Obviously, the production projects for aerospace are much, much longer term than they are in robotics. We're earning money from NRE and engineering income, just starting to get towards component sales now with GE and the projects that they're on as new engines go into production. But it's a very good market for us with very long-term growth prospects. The eDrives market is a little bit different to the other 2. So in eDrives, as I mentioned before, we're developing new applications where today you can't currently have sensors. So that's in typically inside an electric motor, either in an e-bike drive system or in an electric or hybrid vehicle drive system. We've got some good programs running with some leading OEMs, Tier 1s. We've got some new programs coming through that we should be starting in this sector. So it's a really interesting market for us and very good, strong and longer-term growth prospects in this market. Motorsport market, we've got an excellent route into that market with Motion Applied. They are, I think, without doubt, the leader for control electronics in the motorsports. They supply engine ECUs to many championships, every F1 team, IndyCar, NASCAR, et cetera, et cetera. A very, very successful business in the motorsport industry. We've gone from having one race series that was using SAW sensors on their cars a couple of years ago to now having multiple vehicles in multiple different championships running the SAW technology and a really strong pipeline for growth. So motorsport is never going to be as big as robotics or e-drives or aerospace, but it can be a very significant contributor in the near term for us and unlocking some more applications for SAW in the motor industry is really key to our growth on that side. So just a slide giving some analysis of where the revenue has come from in the last couple of years. So the chart on the left, we've got production. So production is low volume production inside Transense, where we're making shafts for motorsport and some other applications, but predominantly motorsports. So you can see that's grown very significantly from '24 to '25 and is really a significant part of our business. Component sales, so that is where a customer has designed our system into their products, their vehicle, their system. That didn't exist as a revenue line in '24. It's come in, in '25, and we actually have a very strong pipeline and order book there for this new financial year. So some good growth there. The NRE is nonrecurring engineering revenue. So that's where we're working with a customer to design SAW into their application and we'll look at the phases of that on the later slide. Very good growth there for us. But one thing to sort of bear in mind is that this column to the right, the grant income, we -- the grant income all relates to additional NRE projects with 2 key customers, Protium Electric and Airbus, where they are leveraging government grants to support their ongoing product development. So these grant programs, if you're looking at this, really would be included in the NRE, the NRE programs developing our technology into customers' products for the future. So looking across at the chart on the right, revenue by sector, you can see the growth in aerospace side of things. So that's been incredibly significant and really gone -- made that a very significant part of our revenue. Motorsports growing strongly as well, eDrive systems, very strong growth as a sector there. And robotics, we're just getting started in robotics. We're just getting started with engagement, but pretty much nonexistent in '24, very significant percentage growth, but still a small proportion of our revenue. This should grow very significantly. We've got now some quite large PO coverage for delivery of next phases of projects with some key customers in the robotics market. So we're expecting that to grow in '26. So the business is all about scale up at the moment. And talking about pipeline, we're developing those engagements with customers and developing the markets that we operate in. We've got a very strong pipeline. We've got very strong customer engagement, and we continue to work on that and increase our presence within our key markets. The past development that we've been doing refers to our investment in the fundamental core technology. So the SAW sensor systems consist of 3, 4 key components. And we've been investing in getting those ready for scaled up production, making sure that we've got the right suppliers that we can deliver them at the right scales and quality and cost. So that's a really key part of our business. And it's generating an asset on the balance sheet, investing in those next-generation designs of these components as well as actually just working in a normal way with the suppliers and the supply chain. We're also investing in the processes. So I mentioned earlier that a key part of SAW technology, the actual process by which you apply SAW sensors onto the part that you want to measure is unusual and an obstacle to growth in the past or an obstacle to customers even engaging with Transense in the past, there's a lack of an ability to demonstrate a high-volume, capable, repeatable process that could be used. We've made the investment in the machinery that Melvyn referred to, so buying the pilot line assets, so working with key equipment suppliers. That equipment is nearly all installed. We're waiting for one key machine, which should be with us very soon to get that pilot line finished and then our process development will continue from there. But really key building block in making the technology accessible for production at scale in the future. And those 3 areas of focus have really been underpinned by developing the people within the business and the team. So the team has grown very significantly. We've made a number of key hires in the management side of the business and the delivery side of the business, so growing the engineering team as well, the operational team and the key leaders within the business. So very -- we really have been preparing the business for growth and making those investments across the board and getting the business ready for substantial scale up in the coming years. Just to look at the pipeline. So we've shown this in various different ways in the last update. This shows us the column on the left-hand side of customers, potential customers that we're talking to about programs, but where we're not yet on contracts, it's pre-contract discussion. So typically, that's us looking at an application, coming up with a proposal, working out time line, costings, et cetera, of how we would embed the technology into the customers' particular application and then negotiating a project. So customers do move from that precontract discussion into being on contract on a regular basis and then would start to progress through the pipeline where we're working with the customer and then it goes from a feasibility study where we're doing an initial investigation to see if the technology will work in application to then more advanced prototype development, actual product development and then into preproduction and production. So the success rate, we get to the point of quoting a customer success rate is pretty high in terms of quotes turning into actual projects. We're estimating somewhere about 75%. And then the progress through some customers do drop out along the way. But in general, again, the success rate of projects progressing through the pipeline is pretty strong as well. And it's at least 75%, if not more. So the pipeline is developing really nicely, and we're continuing to move projects through to the right-hand side. So I touched on this on the earlier slides, but the SAW technology we've got a typical system, it consists of a couple of key components. So up here is our AQP. So that's the sensing element. That's a unique Transense surface acoustic wave sensing element that's made to our design in the supply chain. So that's one of our key components. That would typically be installed on the customer's part. So in this case, this is a shaft for motorsport. It's a gearbox input shaft. It's a very special process needed to install the sense element on the shaft, and that's what we're developing the pilot production line for. The other component on the shaft is we call a rotary coupler, an RF rotary coupler. That's basically a small antenna. It's a fairly simple part, but again, it's Transense design. And then off the moving part, we've got another RF coupler. And this part will be stationary, so that bolts into the gearbox in the front of the transmission. And it has an RF connection to some electronics. The key part on the electronics is our ASIC. So that is Transense's own design. We run our first generation of ASIC still. We started the development of next generation of ASICs to make sure we've got a part that's going to continue to support us into the future. But that's the other key part of the system. So it fundamentally -- there's a lot of technicalities and complexity in these parts. But overall, it's a relatively simple system. And we've been working very hard to make these components available. And our typical projects that we do with customers, we look at how these are designed into the customer system, working with a common component set. The actual process for installing the sensing elements can kind of set out here with the pilot AQP installation line. So we've been making the investment. A lot of these pictures are actually taken in on our site now of equipment that's been installed. So we've got the preparation of shafts coming into the business. And this is installed equipment now on site. The machine we're still waiting for is a die bond. So that will pick and place the AQPs into precision dispensed adhesives. And the RF coupler installation and assembly is a more manual process. And then we've got wire bonding and then finally, calibration. So you can see from the ticks on the bottom of this slide, a good chunk of this equipment is available already within the business. Once we've got the pilot line fully installed, we'll then be able to start using it in [indiscernible], partly from a process development point of view. So I think one of the questions that came in has been to do with the payback on this line. Just to be clear, really the main justification for investing in the pilot line is all about demonstrating high-volume capable processes as opposed to using it for production in and of itself. We will use this line for our low-volume production, but that's -- it's not specifically why we bought it. We bought it to be able to show higher volume customers that there is a capable process available that you can use and put in a production plant to make these things in high volumes. So moving on now to Translogik. So the Translogik part of the business, we make tire inspection equipment -- so the handheld inspection tool that you see there. And the tool is part of an ecosystem. So we can't sell tools to customers that don't have the apps and mobile devices and cloud management software. So it's really a key part of that overall ecosystem. And the customers use our tools to reduce operating costs, to collect better data from vehicle inspections to help them improve road safety from their fleet. So it's a really important tool to the customers that use it as part of that overall ecosystem. We've had a growth plan running now for some time within Translogik based on these 5 key steps that we've been making very good progress with. Building our relationship with existing tire industry customers, so expanding sales within that industry. Over the last year or so, we have added at least one new tire manufacturer that we're now supplying. We're talking to some other new tire manufacturers as well. And we have kept up the business on that side of things within tire manufacturers. Typically, that's where tire -- premium tire suppliers are using the tools as part of their managed tire business. So where they're supplying to large fleets on a pay per mile or pay per kilometer basis, tires. So that's been the historic main route to market for Translogik. But obviously, there's risks to that, not every truck fleet does pay per mile or pay per kilometer. So we recognize in order to grow the business, we were going to need to move beyond that. So we've been working to establish new partnerships with tire companies and suppliers and particularly with fleet management software developers. So with companies developing software specifically for tires on commercial vehicles or on passenger cars, and we've had some good success on that front. We've also been developing a new direct sales route. So in order to do that, we made the deal with Tiretask to be able to resell their software into the commercial vehicle market. And we announced the first deal at the beginning of this year. We've been working with the customer to get that to the point where they can deploy it into their technician group, and we're pretty much there with that now. So we expect that to start going -- being able to be invoiced in the coming weeks. That's going to really open up a new market for us with the direct to sales and with the bundled software and solutions. So very excited about how that's going to develop this year. Fourth on the list is new distribution partnerships. So again, we announced at the beginning of this calendar year, a new partnership with Haltec, a distributor in the U.S.A. We've made a couple of other announcements to do with distributors in other territories. Those are starting to really come into effect now. And we are also working on some other new distribution partnerships as well. So there's coming through on that side. And finally, the Translogik business has really been a one product business until now. So we have the TLGX inspection tool, there's 4 versions of it. We've been working to develop new complementary products that we can bring into the market and develop our products. So we recently made an announcement about a reduction in cost of the higher spec versions of the tool. That's a result of the fantastic work the team have done looking at cost down opportunities and new componentry to reduce the cost of the TLGX3 and 4, and that's a great upsell for us in the future to make those tools more accessible. In addition to that, we've also been looking at other products. We've got a product launch coming, which is really exciting. Obviously, we're now putting the software out into the market as well. So all these extra revenue lines coming where we've got -- we do have a good route into market already where we can sell effectively more things to the same customers that we already have as well as working to try and find new customers for those existing products. So the growth plan is really working well. When you look at how the revenue splits down between types of customer, you'll see -- so the first column there is tire majors. So we actually increased sales slightly from '24 to '25 to tire majors -- and that's really as a result of growth with new tire majors and the existing. One of our tire majors has had a pretty tough year restructuring their business. And actually, they reduced significantly what they were buying from us. We do expect that to come back in the future. We haven't lost them as a customer, just they've been restructuring as a result of headwinds in their overall business. But we still managed to actually maintain and increase slightly sales to tire majors because of the work that we've done elsewhere with other customers. The next column is the fleets and service providers. You can see that was a tiny part of our business in '24. It's increased a bit in '25. We expect this to increase a lot more in '26. Where you can see some impressive growth already is with software partners. So this is where we are supplying hardware to third-party software companies. We've almost doubled that from '24 to '25. So we've been very successful there with a few really key new key accounts in that space. And actually, one in particular, that's opened up a completely new market in the passenger car sector for us with a really smart AI tire inspection tool that they've developed. So really strong progress there. New distributors are just starting to take effect, and they'll start to contribute a lot more. So really tangible results and a lot more to come for this part of the business. So back to Nigel now just to summarize.

Thank you very much, Ryan, and that's prompted plenty of questions, which is good. Thanks, everybody. So to wrap up for FY '25, I'll actually look at the start of FY '26, where in current trading in the first 2 months, revenue from the 2 operating businesses was up a total of 23% on the prior year. So it started off in the right direction with some good growth, iTrack revenues in the first 2 months of the year were 30% down on the prior year, which bearing in mind there was a 40% unit rate reduction in the royalty suggests some strong volume increase, which was indeed the case despite a bit of FX headwind compared to the prior year also. So the year started well. The SAWsense order book has doubled again since the beginning of the year. So during FY '25, the open order book for SAW doubled from GBP 0.1 million to GBP 0.2 million. It's doubled to GBP 0.5 million again since the 1st of July '25. So really starting to convert that pipeline into tangible purchase orders now. Similarly, Translogik has entered the year actually for the first time with an order book from subscription. So as I said, this is a business which has previously been very transactional, purchase orders fulfilled very quickly and little visibility. Our business model is now changing, and we're starting to see tangible order book coming into FY '26. So overall, current trading is satisfactory. This financial year, it's all about maintaining that momentum in gathering sales opportunities across the business and turning them into revenue. Between SAWsense and Translogik together, there was something like GBP 1 million added in revenue FY '25 over FY '24. And in order to maintain the momentum in profitability for the business, looking at the FY '26 forecast market expectation in [indiscernible] latest note, then that would suggest that we need to add at least another GBP 1 million this year in order to keep momentum going and we see plenty of opportunities for that to be done. We are always cautious with our forecasting narrative in that we are still a business which has 2 operating divisions that are in scale-up phase, and we don't have full granularity and the ability that the mature business might have to forecast with confidence over the short term. However, we have a very healthy pipeline. We have a great level of incoming inquiries and a good order book to go out. So we're approaching this year with confidence despite the fact that we recognize it's challenging. We are also, as always, managing our cash headroom very carefully. We're investing for success in building strategic value in these businesses, but we're doing that by eating our own kill. We're not resourcing to the market for additional money. And that means that we have to manage our cash resources carefully, which we do. And we've also given ourselves additional headroom by looking at the possibility of financing the purchase of tangible assets rather than paying for them directly out of cash flow. So we have a facility of GBP 1 million in place to be able to do that for tangible fixed assets. So putting that all together, we think that the company is actually in a really good place. We are where we expect it to be at this point and very much looking forward to the future. I'm now going to suggest if we could bring cameras back up and take away the present, please. Thank you.

We're going to open up for any further questions. We've got a good of questions here. And I'm going to try and just share these and group them together a bit. So I'm going to first of all, turn to you, if I could, Ryan. And I'm going to try and group together the questions which are related to sales within SAW first. So I'm looking at, first of all, question 5. On May 20, you updated the market on the licensing and supply agreement with ISI with closing statement expecting to generate substantial new revenue streams. What's the progress and what revenue can we expect? And I'm going to group that together with question 13. You stated that you've established a deeper engagement with GE. You expect significant revenue contribution from this sector in the financial year. Can you specify this expectation on the basis for it.

Yes. So the 2 things are linked, as Nigel has alluded to there. So ISI is a semiconductor packaging house. We put in place a contracted arrangement with them to do final packaging of our ASICs for the aerospace market in North America earlier in the year. Obviously, we have a key customer in the North American aerospace market in GE. So supply of finished ASICs into GE is a key part of what would be doing, although not limited just to that one customer. The work with ISI has progressed very, very well. We are now -- we have contracted business that we're delivering against in conjunction with them. Actually, I'm missing a call with them right now, and the team are taking on that winning program. And also that relates directly back with GE and that we've got now contracted business with them to deliver significant level of technical support and component supply, et cetera, relating to their engine programs. And we've also got pipeline of opportunities sitting with them as well where we've got quotes sitting with them that we've not yet got on to contracts as well. So we've gone from having sort of no invoice business basically at all from GE since the original license signed in this financial year will be a significant chunk of our revenue will be with the related businesses to the GE programs.

Thanks, Ryan. I'm going to jump to question 10, which is an interesting one. Would you consider entering into exclusivity agreements for particular applications in SAW? Or is it the intention to be open to any party?

The overarching intention to be open to any party, but I think exclusivity things would depend on if the customer wanted enough. We're certainly not looking to do that. But if someone wanted to do that, we would have to consider it depending on what we felt the business for shareholders in the longer term.

I'm going to now cut across to the operational side of SAW. So we have question 8. I think this was mostly answered during the presentation, but you might want to expand on it a bit. In the cash flow statement, there's a large figure for purchase of intangibles, please describe what was purchased and what is the expected CapEx spend for this year? And I'm just going to tie that together with question 17 from -- what was the 1.25 increase in intangible assets represented by.

Apologies, Melvyn, you were just muted there, sorry sir. Please continue.

Okay. Would you like me to answer the initial part of that with regards to spend, most of that initial spend probably around about GBP 1 million is with respect to the new ASIC that we are developing. There's also some spend on the new AQP, which is just under a couple of hundred thousand pounds. And there is also some spend on developing the new Translogik tool and various other tools for Translogik. So that basically makes up the GBP 1.25 million. Looking forward, there's probably another GBP 1 million or so spend to be done with regards to completing the new ASIC and the AQP. And yes, that's the early bits in intangibles. There is a little bit more on tangible assets to be spent, although a big chunk of that has already been spent.

Thank you. And I'm just going to stream back to sales because another question come in, if I could, please, Ryan. Can you give an update on SAWsense involving with the LANDOne project? For example, how long would it take scale of the potential revenue is successful, et cetera?

So LANDOne is our project with Airbus, where we are developing a new application for SAW in the landing gear, hence the project name. The project is running really well. We're making good progress on the technical delivery side of it, good working relationship with Airbus and very good opportunity to work with them because the nature of the project. It's a long-term deal. We -- it's a long-term development project in the first place, which would get us to fairly low TRL, technology regimes level in terms of Airbus's view. So that getting the technology like that through production will take several years from here on in, but progress so far is really good.

Thank you. I have a couple of questions from[ Boyan ]. It's kind of a mixture of a bit of Melvyn and a bit of Ryan, and I'm happy to take them myself also, but we'll see if we can tease out answers between us. And what would the like operating margin be for SAW now that we've moved away from licensing and into a full service solution? And as a follow-up question, what level of revenue do we expect in the next 2 or 3 years in SAW? Clearly, that's not a question that we can answer with too much precision bearing in mind. We don't want to put a forecast into the market that we will be bound by outside of what's already there. But the follow-up question, would it be in the GBP 2 million to GBP million range or the GBP 10 million to GBP 20 million range.

I think in well, the first question is sort of -- the operating margin is what it is now. So we've moved away from the licensing model already. So all of the new revenues that we've got coming in are the new model. So it is what it is now. You can say if some high-volume programs convert into production business then, the margin on those will come down in terms of like the nature of what we'll be doing, if we move from doing engineering, designing with a customer to supplying them components in really high volumes. We'll be taking a margin on the components, which are made outside. So we're supplying ASIC and sensing elements to a customer, we don't have tied up capital in that because it's made in a supply chain to our design. So other than the intangible asset in the design of that part. So the margins will be released from what they are now. But we are in the operating mode of the new business now. I mean, you can go from in terms of the levels of revenue. I think what I said before, if you look at the different markets that we're operating in, in the robotics market, there's some really interesting opportunities where they're talking about very significant hundreds of thousands, millions of units a year production requirements and some of the other markets that we're in are similar. Aerospace is not. Aerospace is low volume but high engineering revenues and motorsport, there's a lot more potential in motorsport than I think I realized certainly a couple of years ago and a lot how motorsport is changing, but also the potential for SAW within that industry, I think, is bigger than it was before. So the motorsport market could be into the millions for us as well. So yes I probably should leave it at that.

I think it's a good answer to the question. I think that our current overhead base is set to take the business into the next level, which is GBP 2 million to GBP 5 million turnover, that is a range that we would have within our sites now. And we have a pipeline of NRE business and development business that will propel us into and through that level. The business today is around breakeven. It's covering that cost base from a level of revenue of GBP 1.1 million in FY '25. So the operating margin impact of taking that through GBP 2 million to GBP 5 million to certainly take the operating margin in the 10% to 15% range. And I personally think that is sustainable through GBP 10 million to GBP 20 million of revenue. I think 12% to 15% operating margin target is certainly doable for the SAW business.

Perhaps we should pivot into Translogik and take a couple of questions. As I suspect we might run out of time before we run out of questions. So I'm going to pivot to questions 3 and 4 from [ David B ]. Again, I think probably you've probably dealt with this actually. Has the pause in Translogik sales to the major tire manufacturer passed. Have the resumed? And do you expect to -- have they been lost or you expect a degree of catch up?

So it's not -- that customer is still with us. So they haven't gone away. They are still there. We regular contact with them. There's been a lot of change going on in their business. So they're not lost as a customer. Whether the sales are lost or the catch-up, it's not really how their business works. So like I said before, with the major tire manufacturers, they're using it as part of their managed tire services business. So they're taking tools either themselves or their service providers to the service providers, and they're using them to deliver PPM, PPK contracts. So when they win new contracts and add new technicians, they buy more tools. When they they're not, then they buy more tools. So it's not whether the business is lost or not. They just -- when they're running in a normal mode, they would have a certain amount of uptake of having replacement tools as well as tools get to the end of their useful serviceable life that comes into play. So they're still with us, good relationship with them as a customer. I think some interest from them in some of the new products that we're bringing online. But yes, definitely been a bump in the road in the sort of running business and an element of restructuring that's gone on.

Thank you. I got question 12, again from David. Could you outline how you expect customers to respond to the price reductions on the TLGX3 and 4 tools?

Well, so we immediately saw an uptick in demand for TLGX3 and 4 tools. So it delivered on expectations. Basically, we've had the 4 versions of the TLGX for a long time, 1, 2, 3 and 4. And the way that it works is it's modular. So you get the 3 -- the TLGX3s got all the features of the 1 and the 2, but then plus an extra and the 4 has got all the features of the 3 plus an extra. There's a really big jump in cost from 2 to 3. And then actually, the difference in price between a 3 and 4 was fairly small, but it was really big, like double the price basically. And that was driven by some key components that we were using in our approach in the electronics. As part of our product development program, we're able to get that out and really narrow the gap. So RFID tags are very common now in tires in Europe. basically every premium tire has got an RFID tag in it for commercial vehicles and an awful lot for passenger vehicles. Being able to read the RFID tags makes it a lot easier for technicians who are doing the inspections on trucks because rather than having to try and read what it says on the side of the tire and type it into a tablet, they just go up and scan the tire. So there's a really good use case for it. But the problem with where we were, the price differential was just too big. So customer was buying 100 tools or 50 tools, it was a really big difference in the investment for 2s as it was to 3s and 4s. So we were able to get the cost down. And really the plan is that customers who would have bought -- who really wanted a 3 but couldn't quite make the business case for it. So we're buying 2s. We'll now start to buy 3s or 4s. So our revenue should increase per unit sale as a result.

I'm going to switch now to the corporate big picture. I've got a couple of questions. Sorry, I'm trying to find a question -- the share price year-to-date performance is minus 37% despite your constant positive updates. Why is the market still skeptical of your performance? And would share purchases not provide a higher internal rate of return than spending on CapEx for SAW. And associated with that, I have Mike's question, which I'll find in a second. Thank you, Mike. But then he goes on to say, I'm not a finance person. I wonder why the stock market hasn't liked your results and presentation. So people have probably heard me say this before, but the stock market in the short term is a voting machine, not a weighing machine. In the long term, it weighs how big the bag of gold is. But in the short term, it's a voting machine. And markets have been very, very difficult for all listed companies. The index has struggled and most listed businesses have struggled over the last 12 years to maintain positive momentum on the share price. The share price reflects the marginal supply and demand of a very small number of shares sold on any given day. And there are times when it can be quite demotivating for management to see that the hard work that they're putting in, and I'm particularly looking at Ryan and Melvyn here, the hard work that they and their teams are putting into the not always rewarded by short-term results in the share price. However, we're in this business to build long-term strategic value and regardless of short-term imperfections in the market, eventually value finds its way out, and we're absolutely confident that that's what's going to happen here. So we try not to be demotivated by the share price. I'm mindful that investors from time to time must get very frustrated as well. And I'm sorry for that, but I think it's outside our control. We just have to keep doing the right things, keep calm and carry on. I think we're just about out of time. I'm mindful that there are some questions that haven't been answered, but we will circle back and answer those in documentary form, which should be available within the next 24 to 48 hours. So I'll wrap up by saying thank you very much again for your attention, and thank you to Ryan and Melvyn for a great contribution and enjoy the weekend when it comes. Bye.

Fantastic, Nigel, Melvyn, Ryan. Thank you once again for updating investors today. Could I please ask investors not to close this session as you will now be automatically redirected to provide your feedback in order that the Board can better understand your views and expectations. This will only take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team of Transense Technologies plc, we would like to thank you for attending today's presentation, and good afternoon to you.