Good afternoon, ladies and gentlemen, and welcome to the Journeo plc results presentation. Throughout today's recorded meeting, attendees will be in listen-only mode. Questions are encouraged. Please submit them using the Q&A tab just situated on the right-hand corner of your screen. Before we begin, we would like to submit the following poll. I am sure the company will be most grateful for your participation. I would now like to hand over to the management team. Good afternoon to you both.
Good afternoon. Welcome to everybody that is joining us on the platform. My name is Russ. I am the Chief Exec and Design Engineer. Been with the company since 2013. My colleague on my left is Nick Lowe. He is our Chief Financial Officer, very experienced FCA. Joined the company back in May 2017 as our CFO. We are here today to talk about our first half results, which are very good. If there is anybody on the platform that does not know much about Journeo, we are an intelligent systems provider working in transport, transit, networks, and critical national infrastructure. There is a common theme of technology, cyber protection, and safety and security. Our first half results are good. Revenue is up significantly. Rough profit is up. We are cash generative.
We have got an increasingly sizable sales opportunity pipeline. In the first six months, we have been strengthening the management team to prepare ourselves for further growth.
We also have an active M&A program. The way that our business has been organized historically has been in the individual brand silo base. As we have got larger, we actually wanted to provide a clear line of sight through our organization for the benefit of our customers. So we organize ourselves internally along these three nodes. In integrated systems, where we design and deliver and support safety-critical onboard systems for bus, coach, and rail applications. We have the information systems teams, which are about design, manufacture, installation, and management of passenger information systems and digital out-of-home systems. That includes the software that acquires the information, processes it, and then ultimately displays it, and that is for bus, tram, transit, and rail.
More recently, since the acquisition in September last year, we have the infrastructure protection, where that really is an end-to-end infrastructure and protection systems business for nationally significant infrastructure projects and sites of critical national infrastructure. Our intention as we go forward is that we grow the business through these. So future acquisitions will sit within these nodes or actually at the intersections on the diagram, and they will share common areas of HR, finance, treasury, marketing, and research and development, but they will retain their very sharp domain expertise. This slide really is just a snapshot of the people that we work with, and we are equally happy to work with very large airports or fleet operators. But equally, we are very pleased to work with small operators with one or two coaches, that sort of thing.
We have a span of customers ranging from U.S.-based OUTFRONT Media companies, Scania Traffic in Sweden, and airports at Heathrow, Dublin, Gatwick, Stansted, et cetera. In terms of KPIs, we have 35,000 assets now connected to our platform on a concurrent basis. We currently handle about 2 million passenger systems a day, passenger journeys a day. That will rise to 3 million shortly following the award for the Boston, Massachusetts Bay Transportation Authority systems, where they have about 880,000 passengers a day. There are currently around 300 people employed directly in Journeo. I will hand over to Nick to run through the financial results for the first half.
Okay. As Russ said, it was a very good half for the group. Revenue was up 53% year-on-year to GBP 37.6 million. Pure organic basis revenue was up by 13%, organically very strong as well. Group gross margins were up by 1%, so that meant the overall gross profit was up 57% to GBP 14.5 million. We had some overhead investment in the half, so in terms of flowing down to the bottom, adjusted profit before tax, still strong, was up 10% to GBP 3 million, and we followed that into EPS as well, where we were up at GBP 0.136 per share. Russ mentioned cash. We are very operationally cash generative. Taking a straight year-on-year comparison, cash was down by GBP 5.4 million, but we did invest GBP 10.7 million in the Crime and Fire acquisition.
Our true cash from moving that actually increased by GBP 5.3 million from a year ago. We invest heavily in R&D. We spent over GBP 1 million in the half. Vast majority passes through the P&L, so our adjusted PBT of GBP 3 million is fundamentally after writing off the majority of the R&D spend. Segmentally, if we start with infrastructure protection, this is the new segment following the acquisition of Crime and Fire in September last year. It delivered GBP 10.6 million of revenue, which is 27% total group revenue. Gross margins were very good, 45%, which delivered GBP 4.8 million gross profit. Overheads in this segment are a little heavier, and actually account for the vast majority of the overhead increase in the group on a year-to-year comparison. Overall, the result was a contribution of 6%, which is just over GBP 600,000.
As we move forward with this segment, against the margins we have across the rest of the group, we expect a double digit bottom line margin from this as we move forward. Information systems, a phenomenally strong half for revenue. We were up 40% year-on-year to GBP 13.9 million, which is now 36% of the group revenue. Gross profit didn't increase by as much. We were up 12% to GBP 5.3 million as margins dropped. Margins were down 10% from last year. Several factors behind it. The key ones are the mix of product we delivered. We had a number of new product releases which ultimately have a lower margin on the initial production run of them, and there was some supply chain. Margins will come back in H2.
They won't come back to 48% in H2, but they'll be much better than H1, and we see margins back to a normalized 48% for next year. But as a contribution has delivered GBP 1.2 million to the group, so very good contribution. Integrated services. It was a little behind last year at revenue, 2%, and that flow to gross profit, which was also 2% lower. Margins held at 31%. The year-on-year decrease is purely in year timing. It's not a movement from years. It's an in year timing. We'll have a H2 weighting for revenue, which will also then flow to the profit this delivers for us in H2. Contribution was good. We had GBP 1.25 million from the sector in the half, so again, really good delivery. Recurring revenue. We've been stating this for three or four years now.
We were up 6% from last year. Less than the overall revenue increase, but currently Crime and Fire doesn't have recurring revenue, hence the increase is less than the group. But it formed 11% of group revenue, which is a very good addition to the group. SaaS is around 40% of the total that we're now delivering. Cash flow. We are operation cash generative. I think in the last 13 months we've generated GBP 17.5 million of inflow against a profit of around GBP 11 million. So we've had GBP 6.5 million gain over profit in the 13 month period. H1's the first half for a while where we've actually had a lower inflow than profit.
This was fundamentally a movement into working capital, which actually gives us confidence for delivery in H2 because the investment's gone in ready for what we know we're delivering at the moment. This slide is an overview of the RNSs we've had in the half. This is any contracts or purchase orders that we have announced. We have an announcement threshold of GBP 1 million, so we have a lot of orders we receive that don't hit the announcement threshold. Overall, what we're showing on this slide is we have won work across all segments in the business during the half, which just adds to the confidence of our stronger H2 to come.
Great. Thank you, Nick. Journeo is growing strongly, as you can see, and we have ambitions to take the current model through to about GBP 150 million revenue, and do that by producing double digit operating margins. To try and explain how we see that being as a realistic medium term objective, we've been building up our own models for what the total addressable market is and what the serviceable component to that is. We do that in terms of the market verticals. This is a rather complicated slide, but this is based on company data. It's not from bought in market research. It's bottom up. Across the bus and coach fleet technology market, we think the installed base in the addressable territories, which are U.K., Ireland, Scandinavia and the United States, where we're currently active. It's larger than this if you include worldwide.
But just in those territories, we think the total installed base is between GBP 750 million and GBP 1.25 billion. Not all of that would be addressable from the product software and solutions which Journeo has. So we've distilled from the total addressable market what we think actually is an addressable market. This is not an annual figure. This is what we believe the installed base of that technology is. To work out what that would be worth on an annual basis, then you need to look at the life cycle of the existing technology, what the refresh periods are, and also whether the market is growing and shrinking. So we'll come onto that next. In terms of the roadside passenger information, using the same analysis, there's roughly 400,000 NaPTAN locations, which are theoretical bus stops in the U.K.
We're using about 13% number to estimate what the total population for electronically enabled bus stops and bus interchanges are. We've done the same then in Denmark, Sweden, Finland, Iceland and Norway, and also in the United States. That gives you GBP 602 billion total addressable value. Using then the same calculation on a five to eight year renewal gives you an addressable market between GBP 150 million and GBP 250 million in the territories where we're active. The same exercise in the airports and airside operations, where they have ground-based or wheel-based interterminal transfers and long stay, and crew transportation to the airports, describes about GBP 400 million -GBP 800 million. Again, in the territories that we're active in, we believe that's a GBP 75 million- GBP 150 million opportunity.
Then in rail passenger information, same exercise produce between GBP 300 million and GBP 500 million, and we think between GBP 150 million of that is addressable directly with Journeo's offering. Finally, with the utilities and defense, this is based actually on some built-in market research plus bottom-up data. Because we've only actually had Crime and Fire within our group for 12 months, so this is partly empirical but also partly objective through the report. We've identified between GBP 4 billion and GBP 5 billion of potential business, and that is predominantly in the U.K. The addressable part of that, we believe, is between GBP 400 million and GBP 600 million. We believe that that is realistic over a five-year time horizon. So this is the big picture that we see when we look out, where the opportunities are.
There's different challenges with capturing the elements of the service addressable market, and it's not the same in each segment. Some we will need to invest organically to capture. Others, it would be sensible for us to acquire that capability so we can get a faster route to market. There are some very important market drivers providing tailwinds to make this possible. We've listed just three of them here. There are many others, but the first one is the Transport for City Regions fund. That's GBP 15.6 billion that's been applied through to 2032, and that's really driving the growth in roadside passenger information systems and the urbanization and decarbonization of public transport in the U.K. There's then GBP 2.3 billion going through the local transport grants, which has a similar impact. It's trying to get people to move out of personal use vehicles into clean energy public transport.
Then through the recent acquisition of Crime and Fire, we are now introducing the RIIO-3, which is the five-year funding program from 2026 to 2031. There is a baseline value of just over GBP 28 billion, with potential of that to rise very, very significantly indeed. The intention with this slide is not just to present there is a big number and it has actually been relatively intractable. What we are saying, there is a big potential here. If we distill that down to something that is actually addressable by Journeo Group, that still is a large number. The key then is to say, within that service addressable market, what market share can we actually capture? At the moment, the best example that we can give actually is the bus and coach fleet technology market.
We believe that there is roughly GBP 25 million -GBP 28 million, that sort of revenue coming out of that for Journeo at the moment. So at the lowest level, maybe 10% penetrated. We believe that there is a GBP 40 million -GBP 50 million per annum business for us globally if we can bring some of the new solutions that we are working on, particularly the AI assisted solutions into market, because that would be a software product sale that could be sold globally. At the moment, we are only assuming that that is sold into the territories that we are active in. But similarly, we go through the exercise, and we believe that we can take market share or capture it as it grows to generate the GBP 150 million.
The way that we are intending for Journeo to move forward now, basically, the guidance at the moment is for Journeo to generate about GBP 80 million in 2027. We think through mixture of continued organic growth, very specifically targeted acquisition and some consolidation, driving up the recurring revenue, introducing that maintenance software and services into the other components within the group, and embedding in them the SaaS applications and also in due course, the AI applications. Finally, bolting in acquisitions in adjacent markets, we think will comfortably take us past the GBP 150 million revenue mark, generating good double-digit operating margins. That is our plan. Journeo is well on track to do this. We have got the capabilities, firepower to do it. We have the bench strength within the management team around Nick and I to do this.
It is really attractive an exciting time to be doing this. That is a complete overview of the results, and I will hand it back.
That's great. Russ, Nick, thank you very much indeed for updating investors. Ladies and gentlemen, please do continue to submit your questions just using the Q&A tab situated on the right-hand corner of the screen. Just while the guys take a couple of moments to review the questions submitted already, I would just like to remind you, a recording of this presentation, along with a copy of the slides and the published Q&A, will be accessed via your Investor Meet Company platform. Russ, Nick, as you can see, you have had a number of questions from investors. Thank you to everybody for your engagement this afternoon. If I may, guys, just hand back to you to take us through the Q&A, and then I will pick up from you at the end.
Excellent.
Okay. I can take the first three on the list, I think. First one, congratulations on an excellent half. I notice sales order intake seems to have slowed compared to the same period last year. I assume that's come from the number of RNS announcements and the value of them. That's just purely down to the number that are over GBP 1 million. Later on, we have a lot of orders that are below GBP 1 million, and we do not announce them. It's just the pure mix. In terms of if that's where it's come from, order intake is not down year-on-year. We are certainly in a good place for order intake. Next one is a reference to inter-segment sales. Interim results highlight increase in inter-segment sales. Which divisions are involved?
The largest segments are between information systems and integrated services, and this is principally our rail strength within Infotec, which enables us to produce product for our rail customers who sit within integrated services. We have a good level of rail work within integrated services, and we can take advantage of the skills and the accreditations within information systems to provide the product we need and increase sales from that. Next one is an H1, H2 waiting question. The question is that Cavendish's forecast requires a large EBIT in H2 and H1. Absolutely. On why are we confident. I think the two key areas why we are confident is information systems margin will come back in H2. We expect revenue to stay strong there, so a few extra points on the margin will flow straight to the bottom.
Integrated services, the timing of revenue between H1 and H2. We will increase revenue in H2, which will flow to profit as well. Those two factors give us absolute confidence of why H2 outperforms H1.
Okay, folks. I'll take the next one. This is a question from someone called Andrew. What is the plan for dividends going forward? The dividend question comes up pretty regularly around the board table within Journeo Group. Our view has been that we've got a better use for growing the business, either investing in some of the organic things we're doing, particularly in North America recently. But also using that to fund our ambitious acquisition program. As Nick explained, we are profitable and significantly cash generative. It's something that will remain on the agenda. But at the moment, the plan is to deploy the cash in areas that can grow the business significantly. The next question is, what skills do we think are the most important in our industry? That's a really good question.
We're obviously looking for people with high energy and common sense, and people that actually can help us grow the business. At the moment, we're not a monolithic structure where we manage all of the processes. What we're looking for is for flair and dedication, commitment from our people to make decisions quickly at the edge to satisfy the customers. So it's a mixture. Obviously, we are looking for technical people, for customer relations people. The overlying thing is integrity, honesty, and common sense, of course. So a really good question.
Can I take that one?
Yes, okay. Yeah.
Okay. So there's a question around, are we looking at leverage and debt to fund expansion? Yes, we don't have any debt at the moment. We are now considerably more attractive for debt funding from providers now we've had several years of consistent performance. It is now a good option for us to use if we needed to. As I say, we don't have any yet, so if we choose to use it will certainly help.
And this one here, what areas are you focusing on for M&A? I guess what that means is, well, if it's areas, the areas that we're looking at are continental Europe and North America. If you mean what sectors or segments, I can elaborate a little bit on that. We're looking for businesses that are a bit like us, that like to do the job well, that have a good track record of keeping their promises. And there's obviously a reason for them actually being potentially up for sale. But crucially, what we're looking for is a route to market for what we already have. So, with Crime and Fire, that was a nice example. It's what we would describe as an adjacent market opportunity. They have expertise that Journeo Group didn't have.
Journeo Group did have financial horsepower, research and development software capabilities, which Crime and Fire didn't have. So by bringing them together, Journeo Group is able to offer Crime and Fire's customers additional capabilities, and Crime and Fire is able to bring the safety, security, and defense accreditations into the group to complement the ones that we already have, for example, in rail and at nuclear power stations and airports. So, obviously, I can't mention any of the names, but the businesses that we're looking at are predominantly in continental Europe and the United States.
Yeah. So there's a question of when do we expect a similar profit margin for infrastructure protection? We will move towards a similar group margin next year. So we are investing and spending time with the business at the moment. H2 should be similar to H1 in terms of margin. But next year, as we get the combined power of the group and increase at the top, then we will move towards a double-digit margin within infrastructure protection.
Shall I take the next, number three?
Yeah.
The question here is, where do we see the biggest potential for international expansion? We actually see a lot of potential actually in a number of territories. But at the moment, the territories that we're not active in. At the moment, we see the biggest potential actually in North America. We will shortly be incorporating Journeo in the U.S., and taking a small number of employees in the U.S. citizens. That will happen during this year. Our intention is to basically build on the work that we've been doing in New York for the Metropolitan Transportation Authority with our partner, OUTFRONT Media, to do something similar following the recent contract award for Boston, Massachusetts Bay Transportation Authority.
We want to provide a closer service to the MTAs and other transit authorities, and bring in all of what Journeo has to offer essentially into the U.S. and then North American market from building on that from 2027 to 2028. I think there was one question, was it the fourth question, in what timeframe do we expect to reach our long-term targets? At the moment, we're aiming on a sort of three-year timeframe. Shall I just continue the question?
Some of them are duplications, aren't they?
Yeah. What is that one? About the ARR growth? I will take that one. I suppose, again, it is partly covered by what we said before. Do you want to pick that one up?
Yeah. All right. Could see the ARR growth. Can you explain how sticky your services are to the customer? Is it a case of once you have implemented it, they are forced to stay with Journeo?
We do not like that as a tactic.
No. They are not forced. We have certainly been sticky. We are growing the number of connections we have to our SaaS platform consistently.
Yeah.
As we do more hardware installs, it drops to the SaaS install base. We are certainly continuing to move that forward.
Yeah. Our strategy, just to elaborate on that, is we actually right at the heart of the business, we see ourselves as an agnostic systems integrator. We see our job is actually to unlock customers from proprietary lock-in. We see this actually across the piece. This actually, I think, is one of the reasons customers come to us. Because when some new application or technology comes into the market, it can be quite difficult to integrate it or assimilate it into the existing estate because of the lock-in nature of the legacy systems. So we adopt an open standards approach. We are very flexible and agile in our development. The way that we tend to look at the ARR is we actually want customers to want to stay with us, not to make it difficult for them to leave us.
I understand the question, but our tactic is to try and give a really good user experience, great value for money, so that customers actually want to come to us. That certainly is driving a lot of our growth at the moment.
There's a new question from down at the bottom.
Yeah.
Just so the question, as a rule, do we report every new contract when over the value of GBP 1 million in all segments? Yes, we do. We increased the threshold three years ago, so our threshold used to be GBP 500,000 , and we were making a lot of announcements. Hence we moved the threshold to a million, and we did. Every win over a million is announced.
A good question here. Most of our solutions appear to target the land-based transport sector. Have we considered seawater-based markets such as ferries and water buses? The answer is yes. Yes, we have. Actually, through a number of channels, actually. So we've looked at the real-time information systems between the ferries and the ferry terminals, because they don't seem to work in the same way that real-time transport systems work on land. It's not the same in each country. The U.S. is different to continental Europe, which actually is different within continental Europe, and it's different again in the U.K. We did some formative work, it actually didn't turn into a contract with CalMac Ferries up in Scotland, where they were looking to put real-time or equivalent real-time systems on the ports, the ferry terminals on the islands to give a predicted arrival time.
If there's any of you that follows the ferry situation in Scotland, that became protracted, but we do hope that that might resurrect itself. Now with the sort of improvements in satellite communication, and also the weather tracking systems, it will be possible to give a, it wouldn't be accurate to the minute or second, but it would be able to give an indication of arrival time on the islands, and that would obviously extend to the Indonesian and the Greek islands. So it's something that's actually, it is on our radar. Also, I should mention that Crime and Fire have been approached about improving security on shipping. I can't say any more than that, but that also is a potential area for them to get into. Didn't we have, didn't we've, they all now these.
I think a number of their guys are duplicates of whatever you've carried on, but for every question you receive, another one seems to just drop into the box. But look, thank you for all your questions this afternoon. Great engagement. Russ, perhaps before I redirect to those on the call to give you their feedback, I could just come back to you for a few closing comments.
Okay. Well, first I'd like to thank everybody that's joined us and taken time out of the day to listen to us. We are grateful to you. Journeo is actually on a journey. We're not the finished article by any means. We are growing very strongly. We actually are trying to make a difference in the areas that we operate through apprenticeships and training. We try to put something back into society, and our aims are to become the sort of de facto provider of the solutions in the markets where we operate. We're really serious about it. We like what we do, and we would like to do more of it. Thank you very much for your time.
That's great, Russ. Thank you very much. And to you, Nick, for updating investors. If I could please ask investors not to close this session, as we'll now redirect you for your feedback. On behalf of the management team of Journeo plc, thank you for your time, and have a good rest of your day. Thank you.