TRT Transense Technologies Plc

The information communicated within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 which is part of UK law by virtue of the European Union (withdrawal) Act 2018. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

23 September 2024

Transense Technologies plc

("Transense", the "Company" or the "Group")

Final results for the year ended 30 June 2024

& notice of investor presentation

Transense Technologies plc (AIM: TRT), the provider of specialist sensor systems, announces its final results for the year ended 30 June 2024.

The Board of Transense is pleased to announce continued increases in revenue and profitability, and considerable strengthening of the team in both SAWsense and Translogik. The Company has already started to achieve the strategic objectives set out last year, covering the commercial and financial goals for the medium term to 2028.

Substantial investment in people, facilities, equipment and intellectual property has been made during the year, and the Board now considers that the key elements are now in place to accelerate the conversion of strong commercial pipelines.  In recent months, two major grant funded development projects have been announced for SAWsense.  Combined with other customer funded activities, these demonstrate the potential for production applications in both aerospace and electric vehicle markets, whilst underpinning short term financial forecasts.

Financial highlights:

•        Revenue up 18% to £4.18m (FY23: £3.53m)

•            Translogik revenue up 9% to £1.12m (FY23: £1.03m)

•           SAWsense revenue reduced by 8% to £0.45m (FY23: £0.49m), with high growth in second half contributing more than 80% of full year segmental revenue

•        Bridgestone iTrack royalty income up 30% to £2.61m (FY23: £2.01m)

•        Gross margin 87% of revenue (FY23: 87%)

•            Adjusted profit before taxation up 20% to £1.31m (FY23: £1.09m)*

•            Earnings per share up 15% to 10.13 pence (FY23: 8.81 pence)

•            Cash and cash equivalents at year end of £1.28m (FY23: £0.98m)

 *Before exceptional administrative expenses 

Executive Chairman of Transense, Nigel Rogers, said:

"We are delighted with the progress made in the year across the Company's entire operations.  We have strengthened the Board and executive leadership, whilst making some key appointments in senior management and across the commercial and engineering teams to achieve a major step up in activity.

Customer engagement has developed in both depth and number, with strong commercial pipelines and improved visibility to revenue generation.   These factors, combined with the investments we are making from self-generated cash flow in infrastructure, are expected to support our ambitious growth trajectory in future."

Investor Presentation: 4pm, Monday 23 September 2024

Nigel Rogers (Executive Chairman), Ryan Maughan (Managing Director) and Melvyn Segal (Chief Financial Officer) will provide a presentation to review the Company's annual results and prospects at 4pm on Monday 23 September 2024. The presentation will be hosted through the online platform Investor Meet Company.

To attend the presentation, investors can sign up to Investor Meet Company for free and select to meet Transense Technologies plc via the following link:https://www.investormeetcompany.com/transense-technologies-plc/register-investor. Investors who have already registered and selected to meet the Company will automatically be invited to the presentation.

Questions can be submitted before the event to transense@walbrookpr.com or in real time during the presentation via the "Ask a Question" function.

For further information please visit www.transense.com or contact:

Notes to Editors:

Transense is headquartered in Oxfordshire, UK and its shares are traded on AIM, a market operated by the London Stock Exchange (AIM: TRT). The Company develops and supplies advanced sensor technology and measurement solutions used by some of the world's leading companies to improve performance, efficiency, and safety in demanding, mission critical applications. Transense currently operates through two active business segments:

·      SAWsense - designs, supplies and licences advanced sensor solutions based on proven, patent protected Surface Acoustic Wave (SAW) technology to world leading companies in aerospace, automotive, and industrial machinery (including robotics), enabling improved efficiency and performance of their products. Key customers include GE Aerospace, Parker Meggitt, McLaren Applied, Airbus and several other confidential Tier One automotive, aerospace and industrial machinery suppliers.

·      Translogik - develops smart, connected commercial vehicle tyre inspection equipment to many of the world's leading tyre suppliers, fleet operators and service centres. Enabling accurate measurement and digital capture of safety-critical tyre condition data, used to reduce operating costs, improve safety and provide audit records for regulatory compliance. Key customers include Bridgestone, Goodyear, Continental and Prometeon (Pirelli), and leading independent providers of vehicle fleet maintenance management software.

In addition, Transense earns residual royalty income from Bridgestone iTrack - a tyre monitoring system for off-highway vehicles that was developed by Translogik. The associated sales, support and development infrastructure were sold to Bridgestone Corporation, the world's largest tyre producer, in June 2020, and the intellectual property was licensed exclusively to Bridgestone under a ten-year deal expiring in 2030.

Find out more at: https://www.transense.com/

CHAIRMAN'S STATEMENT & STRATEGIC REPORT

The Company continues to deliver both revenues and profitability in line with the expected growth trajectory, whilst stepping up spending on commercial, engineering and operational capabilities to accelerate future growth in revenues.  This investment has centred on introducing talented and experienced people at all levels within the organisation, resulting in a considerable strengthening of the team during the year.

Business Strategy

The business strategy of the Company remains to develop innovative sensing solutions across a range of applications, which are commercialised either through the launch of products and services to customers or by forming strategic alliances with partner organisations. Value is realised through a combination of commercial income, royalties, licensing income and capital gains on disposals.  There are currently two active business segments: Translogik and SAWsense. 

Translogik develops and supplies smart, connected tyre inspection equipment for the commercial truck and bus market, and SAWsense designs and supplies advanced sensor solutions for accurate non-contact measurement of torque, force, pressure and temperature for aerospace, electric motors and drives (EMD), industrial machinery and high-performance automotive sectors.  In addition, the Company earns residual royalty income from Bridgestone iTrack, a system developed by the Company for monitoring mining haul tyre performance which was licenced to Bridgestone Corporation for a ten year period expiring in 2030.

Operating and Financial Review

Results for the Year

Revenues for the year increased by 18% to £4.18m (FY23: £3.53m), with SAWsense slightly reduced by 8% and Translogik up 9%.    Revenue from these two operating segments was heavily weighted towards the second half of the year as growth gathered momentum.  Royalty income from Bridgestone iTrack increased by 30%, reflecting increased conversion of new installations in the year.  The Company's gross margin was maintained to 87% of revenue (FY23: 87%) amounting to £3.65m (FY23: £3.01m).

Administrative expenses increased to £2.37m (FY23: £2.09m), before exceptional severance costs of £0.05m (FY23: £0.22m).  This increase reflects the investment in new people recruited in the second half of the year to secure and deliver new customer contracts, which will impact more visibly in revenue in the coming financial year. 

Earnings before Interest, Taxation, Depreciation and Amortisation (EBITDA) adjusted for the charge for exceptional costs and share-based payments was £1.71m (FY23: £1.40m), and the adjusted net profit before taxation (excluding exceptional costs) was £1.31m (FY23: £1.09m).

There was a credit for taxation of £0.30m (FY23: £0.53m) arising from the increase in the deferred taxation asset relating to the use of previous years' tax losses in the future, reflecting a future forecast period of three years.  Previously we looked forward two years but increased this to reflect the projected profitability through to 2030 when the losses will likely be near to being exhausted. In total, the Company has UK tax losses available to carry forward at 30 June 2024 of £20.7m, available for offset against future profits, subject to HMRC agreement, of which approximately £5.90m is currently recognised for deferred taxation purposes (FY23: £4.70m).

The resulting net total comprehensive income attributable to equity shareholders for the year was £1.57m (FY23: £1.40m) resulting in earnings per share (EPS) of 10.13 pence (FY23: 8.81 pence).

Segmental Review

Translogik

Our range of tyre inspection equipment marketed under the Translogik brand generated revenue of £1.12m; an increase of 9% over the prior year (FY23: £1.03m).  Gross margin reduced slightly to 54% (FY23: 57%) largely due to foreign exchange movements.  The segmental overhead increased from £0.17m to £0.22m and closed at an annualised rate closer to £0.30m, following the appointment of new personnel in both the commercial and operational areas.  The new talents they bring to the Company will facilitate strong growth in the business in the coming year.  The segmental operating profit for the year of £0.38m (excluding exceptional costs) reflects the increased overhead (FY23: £0.42m).

The main existing market for Translogik products is with global tyre manufacturers who use the tools in their commercial vehicle businesses to enable rapid and accurate tyre inspection data to be captured. This data is captured and analysed with the customer's own software systems and used to help manage large fleet tyre usage and deliver traceable records for legislative compliance. Significant opportunities to grow the business in the road haulage and transport sector have been identified, by providing tyre inspection tools and data management software to a wider section of the market. 

In order to deliver this, the Company has collaborated with a leading developer of tyre management software to develop a simple and more accessible entry level tyre inspection solution that can be easily integrated into existing business information systems. As vehicle operators are subject to increasing road safety regulations, including the mandatory use of tyre pressure monitoring systems (TPMS) in the EU from 2024 and the US from 2028, regulations for mandatory vehicle inspections and digital record keeping and the increasing adoption of radio frequency identification tags (RFID) for tyre inventory management there is a strong business case for the adoption of Translogik solutions.

The Company's directors ("Directors") continue to estimate an addressable market for fleet management tools exceeding US$25m per annum, and this leads us to believe that Translogik provides the capacity to accelerate segmental revenue in the next three to five years. In order to deliver on this potential, Translogik has been working to grow its operational, product engineering and business development capacity, making several new key hires in the period.  This will also facilitate the in-house production of the full product range in place of the outsourcing model in use previously, with the aim to further enhance customer service, product availability, quality and cost.

SAWsense

SAWsense revenues were down slightly at £0.45m (FY23: £0.49m) and with operating overheads slightly increased, the net loss (before exceptional costs) for the segment rose to £0.71m (FY23: £0.55m).  Revenue and overhead expenses were both weighted strongly towards the second half of the year, as the commercial momentum in the business gathered pace and additional engineering personnel were recruited to deliver new customer funded development projects.

Our market approach for SAWsense continues to focus on four sectors in which there are applications with clear differentiated benefits, and we have made further substantial progress in each during the year. There are now active customers in each key segment and ongoing development projects that have moved from small initial feasibility studies into significant funded engineering programmes to design SAW sensing technology into customers new products.

Target market sectors for SAWsense:

Aerospace

Transense continues to build a strong base in the aerospace market.  The established relationship with GE Aerospace ("GE") is growing as they scale up their T901 engine program in readiness for production and integrate SAWsense into new propulsion systems such as in their HEAT and RISE development projects. The Company is quoting for a variety of additional support activities to help GE and its supply chain deliver increasing quantities and future engine programmes.

In the second half of the year, the Company announced a new landing gear project with Airbus commencing in April 2024 (LANDOne), which is anticipated to deliver £0.5m of R&D income over its two-year duration. Towards the end of the year, the Company commenced a new aircraft engine torque sensor development programme with a new customer.  In addition to these programmes and the other ongoing business the Company has with major aerospace customers, there remains a healthy pipeline of opportunities within the aerospace market with both existing and new customers.

SAWsense technology is becoming increasingly well understood and accepted in the aerospace market and is now well proven as a solution in key applications.  As a result the Directors continue to believe there is a realistic goal for annual revenue from development, engineering services and component supply into this sector by SAWsense in the range of US$5-10m by 2030, with significant upside opportunity.

Electric Motors and Drives (EMD) 

Using SAWsense technology to measure torque and/or temperature in electric motors enables improved performance, efficiency, and functional safety, and provides opportunity to reduce material costs, particularly of rare earth materials in permanent magnet motors. 

Unlike our other key target sectors, the use of real time torque data to control electric motors and drives is not common practice, and instead controls are reliant upon traditional torque estimation methods with roots going back decades. 

During the year, the Company completed the project to simulate the benefits of incorporating SAWsense technology into electric motors and extended this work to hardware in the loop testing of a representative electric vehicle propulsion motor and controller. This work has yielded significant insights enabling the Company to better promote the technology into this sector.

SAWsense recently announced its participation in the Power-electronics Upscale for Localisation and Sustainable Electrification ("PULSE") project, a collaborative R&D project that will be part funded by the UK Government through the Advanced Propulsion Centre and will be led by In-Wheel Motor drive system manufacturer Protean Electric ("Protean").  This project follows around twelve months of work funded by Protean to carry out initial feasibility studies and concept engineering of SAWsense technology in their class leading In-Wheel Motor systems. The project aims to industrialise these systems and allow Transense to develop higher volume manufacturing techniques to prepare for Protean's production requirements, with clear benefits to other running projects.

In addition, we continue to work with Tier 1 automotive business Novares on integrating sensing technology into their electric motor componentry.  Towards the end of the year, the Company commenced a new torque sensor development project in an electric drive system with a confidential major European Tier 1 electronics customer, and has an exciting pipeline of other opportunities in this sector.

Industrial Machinery (including Off-Highway Vehicles and Robotics)

The use of SAWsense technology for torque and/or temperature measurement can improve accuracy, efficiency and power distribution in industrial machinery ranging from robotics to agricultural machinery. Enhanced sensing is also required to enable more autonomous operation of machinery. During the year, the business secured two programmes with manufacturers of robotic machinery for initial feasibility studies and prototype supply. The feasibility studies were successfully completed but delivery of prototype parts scheduled to take place in the final quarter slipped into the next financial year due to engineering and production capacity constraints. The business has a pipeline of opportunities in this space.

The global market for force and torque sensors for industrial robotics was estimated to be worth US$300m in 2022 and was forecast to grow to more than US$650m by 2028.  Engagement with a select group of leading companies in this industry indicates that SAW technology can provide an improved way to measure torque and temperature in a robotic system, increasing the speed and accuracy of the robot by reducing joint flex and motor jitter.  This in turn offers increased load capacity and productivity, and because of this we believe that this valuable differentiation results in more than US$50m per annum of the robot torque sensor market to be addressable by our technology by 2028. 

Motorsport

SAWsense continues to work closely in the premium motor sport sector with our partner, McLaren Applied Limited (MAL). Motorsport revenues were subdued by a delay with one key race series, however MAL is now supplying torque sensing systems using SAWsense technology into a broader range of motorsport series including IndyCar, Le Mans Daytona Hybrid (LMDH) and others. 

In these demanding applications SAWsense has proven to be more reliable and accurate than competitor systems, offering a lower lifecycle cost to event organisations and race teams.  Whilst motorsport is a niche sector, we estimate that the addressable market for motorsport torque measurement exceeds US$25m per annum and believe that there are unique characteristics in our technology that will enable MAL and SAWsense to develop the current opportunity pipeline into a significant market share.

Success in these motor sport applications demonstrates the performance and reliability of the technology in harsh operating conditions.

Business Development Activities

SAWsense continues to make progress raising the visibility and awareness of the business divisions in key markets, driven by developing informative and engaging video content and conference presentations, as well as an increased level of trade show attendance which the business intends to continue in the next financial year.

Enquiries are carefully qualified and those that meet our criteria for technical and commercial fit enter a standardised process through a number of stage gates.  Passage through this mechanism can take several months before reaching agreement on a funded development project to instrument a demonstration unit and carry out performance assessment.  Beyond that, there are many other factors to evaluate (including for example production methods, supply chain and associated cost) before customers are ready to commit to full scale commercial implementation.

Overall, it is realistic to expect that achieving volume production in highly regulated markets such as aerospace and automotive will take three to five years, during which period customers will have the capacity and willingness to fund further development work.  

This process has been underway for more than one year, and progress has been made both in the number of active qualified enquiries which has increased from 57 to 71, and the depth of engagement indicated by projects moving from initial enquiry, through to feasibility studies and then progressing to customer funded development projects.  The number of customers funding such projects has increased from 10 to 13, and the value of quoted work to support these more advanced programmes has also increased by an order of magnitude, as set out below:

Status of potential customers by sector as at September 2024 (September 2023)

iTrack Royalty Income

Royalty income from Bridgestone iTrack generated income of £2.61m during the year, representing an increase of 30% over the prior year (FY23: £2.01m).  Over the four completed years since the inception of the licence, it has generated more than £7m in royalty income.  

New installations ran at an improved rate during the year, reaching an annualised royalty rate of US$3.67m by 30 June 2024.  Under the terms of the licence, the unit rate of royalty income will reduce to 60% of the current rate with effect from 1 July 2025, and to 40% of the current rate on 1 July 2027, before expiry on 30 June 2030.  The Directors have prepared illustrative examples using compound annual volume growth rates of 10% and 18%, which indicate future royalty income of between £13-£16m over the remaining life of the licence.  The actual rate of volume growth is uncertain, and future royalty income may lie outside of this range.

Bridgestone Corporation, Japan has rebranded the technology as Bridgestone iTrack and has accelerated social media and direct marketing of their products after renaming the relevant subsidiary Bridgestone Mining Solutions Technology Limited (formerly ATMS Technology Limited).  Bridgestone iTrack continues to be a key strategic component of their mobility solutions business.

Corporate Governance, Board Structure and Composition

The board currently comprises the Executive Chairman, three independent non-executive directors, and two executive directors.  Ryan Maughan was appointed Managing Director in March 2024 having previously served as Business Development Director, assuming responsibility for all engineering and operational activities of the Company in addition to his commercial responsibilities.

Craig Wilson joined the board with effect from 1 July 2024 as an independent non-executive director.  Prior to his appointment, Craig was Chief Executive at Williams Advanced Engineering where he led the transformation of the business from its roots in Formula One racing to provide innovative technology across a range of industry sectors.  His experience and network are highly relevant to the opportunities now evident in the Company's business. 

Rodney Westhead has confirmed his intention to retire from the Board and he will not seek re-election at the upcoming Annual General Meeting scheduled to take place in November 2024.  The Board is satisfied that reverting to a five person Board with two independent non-executive directors represents an appropriate degree of constructive challenge to the executive team.

Distribution Policy

Since February 2022, when the Company first announced the commencement of a programme to conduct market purchases of ordinary shares of 10 pence each in the Company, a total of 1,217,856 ordinary shares have been acquired for treasury at an average price of 84 pence each. The Directors continue to monitor market activity relative to the prospects for the Company, and will execute further market purchases should suitable opportunities arise, subject to the renewal of shareholder approval for such action at the upcoming Annual General Meeting.

The board has given careful consideration to the commencement of dividend payments, however this is considered premature in view of the opportunities to continue to invest in the development of operating business segments for enhanced future returns.  Accordingly, the Directors do not recommend the payment of a dividend at the present time.

Current Trading and Outlook

Trading in the period since the financial year end has been strong, with revenues approximately 60% ahead of the corresponding period last year, profits showing good progress despite increased overhead costs, and net cash at 31 August 2024 increasing to £1.49m. The depth and scale of customer engagements across the Company's two trading segments is intensifying. 

Translogik is now positioned to convert new business for its tyre management products directly with fleet customers and has several large potential contracts under negotiation.  We are also bringing the manufacture and assembly of the full range of Translogik products in-house, facilitated by our premises reconfiguration. We are confident this change will further improve customer service, product quality, availability and cost.

Since the end of the financial year, SAWsense has announced its participation in the PULSE project in the electric vehicle technology, and has also progressed several other customer funded projects, particularly in the aerospace sector.  These chargeable activities underpin forecast growth in the short to medium term and indicate a level of commitment by our customers to pursue full scale industrialisation thereafter. 

The Board is pleased with the progress made and remains confident in the growth prospects over the remaining six year period in which royalty income will be derived from Bridgestone iTrack and into the next decade.

Nigel Rogers

Executive Chairman

23 September 2024  

Consolidated Statement of Comprehensive Income

For the year ended 30 June 2024

Consolidated Balance Sheet

At 30 June 2024

Consolidated Statement of Changes in Equity

For the year ended 30 June 2024

Consolidated Cash Flow Statement

For the year ended 30 June 2024

NOTES RELATING TO THE COMPANY FINANCIAL STATEMENTS

BASIS OF PREPARATION

The consolidated statement of comprehensive income, the consolidated balance sheet, the consolidated statement of changes in equity, the consolidated cash flow statement and the associated notes for the year ended 30 June 2024 have been extracted from the Group's financial statements upon which the auditor's opinion is unqualified and does not include any statement under section 498 of the Companies Act 2006.

Whilst the financial information included in this preliminary announcement has been computed in accordance with UK adopted international accounting standards, this announcement does not itself contain sufficient information to comply with all IFRS disclosure requirements. The Company's 2024 Annual Report and Accounts will be prepared in compliance with UK-adopted International Accounting Standards (IFRS).

1          SEGMENT INFORMATION

The Company had three reportable segments being the unique trading divisions, SAWsense and Translogik, which make use of technology developed by the Company to measure and record temperature, pressure and torque, and the iTrack royalty activity in respect of income from licensed technology.

Revenue and EBITDA are the Company's key focus and in turn is the main performance measure adopted by management.

The tables below set out the Company's revenue split and operating segments. These disclose information for continuing operations and in view of their relative size, information for discontinued operations. The disposal of iTrack operations will result in future royalty income replacing direct sales income and costs.

Revenue

iTrack Royalty                                                  2,610                2,010

Total Revenue                                                    4,180              3,529

            Segments        

During the year ended 30 June 2024 there was 1 customer (2023: 1) whose turnover accounted for more than 10% of the Company's total continuing revenue as follows:

2          TAXATION

Recognised in the statement of comprehensive income in respect of continuing operations

Reconciliation of effective tax rate

The applicable UK corporation tax rate is 25% (2023: was a blend of 19% for the first 9 months and 25% thereafter giving an average rate for the reporting period of 20.5%). The Group has tax losses, subject to agreement by HM Revenue and Customs, in the sum of £20.7m (2023: £21.9m), which are available for offset against future profits of the same trade. There is no expiry date for tax losses. An appropriate deferred tax asset is being recognised as the Group is able to demonstrate a reasonable expectation of sufficient future taxable profits arising in order to utilise the losses.

3          EARNINGS PER SHARE

Basic profit per share is calculated by dividing the profit by the weighted average number of ordinary shares in issue during the year of 15,446,993 (2023: 15,849,527). This excludes treasury shares held by the Company.

There are 1,532,500 share options and no warrants in place at 30 June 2024 (1,504,300 share options at 30 June 2023).