December 2024. Please note all participants are currently in listen-only mode, and today's webinar will feature a presentation from our Trajan CEO and Managing Director, Mr. Stephen Tomisich, and Chief Financial Officer, Mr. Alister Hodges. That will be followed by a Q&A session. If you do wish to ask any questions, you can type them at any time into the Q&A panel at the bottom of your screen. Investors were also invited to submit questions ahead of time after registering for the webinar, and we will be including those later as well. Please note we will hold all questions until the conclusion of the presentation. I would like to now hand over to Mr. Stephen Tomisich, CEO and Managing Director of Trajan.
Thank you, Marie, and good morning, everyone. Thank you for joining the call. We're really pleased to share with you today a solid set of results for the first half of fiscal 2025. You'll see across the board many of the deliverables that we spoke about earlier in the year are there to be seen in terms of demand growth, revenue growth, improvement in the balance sheet, addressing improvements in profitability, and so on. We will get into some of the detail of those results in this presentation. I'm hoping that you'll indulge with me just for a moment while I revisit a couple of slides talking about who Trajan is and what it is that we do.
One of the reasons that I want to do this is that from time to time we're seeing commentary in various venues, in various forums, talking about our business in ways that really isn't correct. I've heard expressions like an industrial glass manufacturer. We are not that. I've heard commentary such as we make commodity laboratory products like beakers and test tubes. We certainly do not do that. Therefore, on these couple of slides, I just want to refresh and clarify again who Trajan is and what it is that we do. We play an integral role in this global analytical science industry. We do that because we're quite a unique designer and manufacturer of precision componentry and laboratory robotics that underpins the quality of analytical data in areas that impact human health. Those areas are things like pharmaceutical applications, clinical applications, environmental, and food applications.
When you look at Trajan's customer set, these are multinational blue chip customers, whether they're large pharma, large food, or indeed some of the captains of the industry in which we participate. If you then look at Trajan's own footprint, we have global operations that are highly integrated with those customers in the U.S., in Australia, in Southeast Asia, in Europe, and so forth. Our business now is really clearly defined by the segments upon which we report, being capital equipment and then also the components and consumables. If I just spend a moment and share with you some of the areas where Trajan made a difference in the world in this first half, we are a purpose-driven business that has a strong focus on how do we deliver impact, how do we make a difference in the world.
Here are a few examples from this first half report out. A couple of our products, our beloved microsampling products, went into space. Now, I'm not saying that space is a huge total addressable market, but it's something that we're pretty proud of, that our devices, our technologies were used on a recent SpaceX mission to start to understand what happens to therapeutic drug treatment when you're in a zero gravity environment. Perhaps even more excitingly, we're seeing some rapid adoption in an investigation use-only mode of our microbiopsy device. This is a device that allows people to take a micro tissue sample and send it back to a laboratory for an analysis. Over the last few years, we've seen the demand double each year. This year, there will be around 50,000 of those devices that will go out around the world for all sorts of applications.
That device is heading rapidly towards a medical device registration in the U.S. in the coming months. We expect to complete that in this second half of fiscal 2025. The next image down there with the little index finger and what you can see, like a few specs hanging around that finger, I just want to highlight this is an example of where our strategic focus on how do we become world's best practice for precision tubing is playing out. Those little specs you see, they're actually PEEK tubing. Each tube is accurately between the length of 2 mm or 4 mm, where the internal ID, the internal diameter of that tube, is controlled down to the micron level. What we are seeing now is because of the control we have over these dimensional tolerances, this technology is starting to be adopted in all sorts of new areas.
The ones we're showing here are now installed in a cell sorting device. We've seen technology being adopted in other areas like cell cytometry as well. You know, it's part of the strategy playing out. The bottom thing there on the left-hand side, when problems happen in the world, like recently where we saw the contamination of the food supply chain in China with petrochemical materials, you need to have sensitive analytical instrumentation to be able to detect that contamination and then, in an ongoing way, be able to confirm that it's no longer present. With this recent example in China, we did ship systems there to help them to manage this problem and to provide the ongoing measurement capability. On the right-hand side, just to touch on a few of the areas that continue to evolve.
First of all, in automated HDX, this is in structural biology, our tool that is proving to be a world leader in understanding the behavior of proteins is continuing to advance. PFAS, or Forever Chemicals, that no doubt many of you have read and heard about in the media in recent times. We sold a few automated systems in the first half. We have the next generation automated system coming to market in this half. Indeed, we have some clinical systems on trial for the determination of PFAS in blood. Whether it is about blood, soil, or water, we have technology that is enabling those measurements to happen. The next bullet point there around our miniaturized device, Hummingbird, or what we are now referring to as Versity, is also making progress towards commerciality.
Thank you for allowing me to present these couple of slides to really just try and remind the world about who we are and the importance of our role in this global industry where we are seen as an indispensable participant. If I move on now to talk, give you an overview of the results for this first half, the chart here on the left-hand side describes our group revenue by half over the last few years. On the right-hand side, our EBITDA over the same time period, also by halves. What you can see in this first half is compared to the same period in the prior year, revenue was up by about 6%. Now, there's a story behind that, which is even more exciting.
If we look at our components and consumables business, one of the things that we highlighted back at the AGM in October last year was that there was a loss of revenue from one product line, a biotech syringe that we were selling to an OEM customer where they actually lost their customer. That gave us about AUD 2.4 million headwind going into this first half. When we back out that one product line, the remainder, the entire remainder of the components and consumables segment for us in the first half was up by about 11%. If we look at our capital equipment segment, it was up over 8%. If we look at the next level of detail, the actual level of orders that came in for our capital equipment segment in this first half exceeded the revenue by another AUD 2.4 million.
Indeed, you'll see one of the other slides that I have here that the demand that we received just in this first half for our capital equipment exceeds the revenue of both of the businesses that make up that segment when we acquired them. I want to make that point because sometimes people think about acquisition as being Trajan's only growth strategy. That clearly isn't true in that we are seeing significant organic growth from these businesses that we've been putting together and as we start to realize the synergies across those businesses. When we look at EBITDA, nearly double where we were in the same period in the prior year. Indeed, when we look at heading towards our full year guidance, you can see the trajectory that we've got there.
Now, a strong contributor to that was that we made the statement earlier in the year that we were going to address the run rate of headwinds that we had from our disruptive technologies in terms of their impact on our EBITDA. Indeed, we have actually done that. At the bottom of the slide here, a few of the other key parameters, and we'll talk a bit more about those when we get into the financials. Just now moving on to the next slide and highlighting some of these key points. I've mentioned the first couple here already.
On the third point in the disruptive technologies, we're pleased to see that we've been able to really have a solid impact there in terms of its impact on the overall profitability. Overall, we can see the global market trends operating in a way that is more in line with our historical experience and able to navigate that now, I think, quite effectively. Indeed, when we look at where we're heading for this financial year overall, you'll see today that we're confirming the guidance that we had provided earlier in the year. I'm going to swap over now to Alister, who will step us through the performance by segment. Over to you, Alister.
Thanks, Stephen. The largest operating segment, components and consumables, is reporting positive trends for the half. Net revenue increased to AUD 48.9 million, or 4.9% up over the AUD 46.6 million in the prior comparative period. Most core product lines increased by 15%-20% over the prior comparative period. The strengthening of revenue performance of this segment was partially offset, as Stephen has already spoken about, by the lower demand resulting from a single biotech syringe product line, and we expect this factor to diminish in the second half. Pro forma gross profit margin increased to 41.2%, or 1.6 percentage points, over 39.6% in the prior comparative period. Normalized EBITDA also improved to AUD 16.3 million, up 10.7%, or AUD 1.6 million over the AUD 14.7 million in the prior comparative period. This was driven by higher gross margins resulting from higher net revenue.
If we move to the capital equipment segment, we can see that net revenue at AUD 29.9 million is up 8.1% on the prior comparative period of AUD 27.6 million. The food segment revenue growth was 31% over the prior comparative period, offset by lower pharma segment growth reflective of short-term pharmaceutical market conditions. Stephen's already highlighted the total order book grew by AUD 2.4 million during the half to more than AUD 11.4 million. Pro forma gross margin was 36.2%, a decrease of 3.6% over the prior comparative period of 39.8%.
That is due to mix with a greater proportion of the food segment revenues generated at a lower margin. Normalized EBITDA at AUD 5.6 million is also up 10.2% on the prior comparative period of AUD 5.1 million. If we move now to the disruptive technology segment, we can see that revenue remains stable at AUD 2 million for the half. Within the disruptive technologies, sales of microsampling tools generated a pro forma gross profit margin of 61%. That's offset by lower margins on other early-stage technology commercialization activities, including Hapira.
The forecast full year normalized EBITDA for this segment is a loss of AUD 1 million, inclusive of continuing investment in Versity and microsampling activities to be normalized EBITDA positive in the second half. If we move to cash flow, we can see that within working capital, capital equipment inventory increased by AUD 1.4 million during the half, and that's to support the growing order book revenue conversion in the second half. The cash conversion ratio remained consistent period to period at 1.1x . Within capital expenditure, circa AUD 0.5 million relates to the acquisition of Mass Spec Studio software. If we look at the balance sheet, net debt reduced by AUD 2.3 million during the half to AUD 30.6 million.
In December 2024, Trajan entered into an agreement with HSBC providing a revolving loan and term facilities of AUD 36 million and AUD 4 million respectively. As a revolving loan facility does not have a defined term, the facility has been classified as a current liability in the December 2024 financial statements. The arrangement offers flexibility in the current environment to support Trajan's future growth. Thanks, Stephen.
Thanks, Alister. Just a couple of comments on margin. You can imagine that we're also not overwhelmed by seeing the margin relatively stable compared to the prior reporting period. Again, if we peel back and look at the detail, there was margin improvement in the components and consumables segment. Project Neptune and some of the automation for Project Neptune as depicted here on this particular slide is making a difference. It was focused on how do we reduce the investment in direct resources either through automation or through relocation of some of our activities into our Malaysian operation. That is progressing well, but it's still not at the stage that we wanted it to be at at this point in time. There's still more to be gained there in that particular initiative.
The key factor playing out in the margins in this first half was the lower margins in the capital equipment side. We spoke a little bit to this in the October timeframe as well, that with the change in the mix, in other words, when we've seen the contribution from the food application side step up and the pharma side being a bit soft in this first half, that's played out in terms of the gross margins being achieved. One of the things that I want to clarify here, that is not because the food applications necessarily is a lower margin business, but it's more a result of the practices, if you like, of the business that we acquired in Germany, Axel Semrau, and some of the pricing and also some of the legacy distribution networks that exist on that side of the business.
Now, those things we are addressing over time. We want to do that in a way that does not damage the business, but we would intend and we expect to see continued improvement in those margins over time as we truly integrate this capital equipment business. I felt it was important to state at the bottom of this slide, we are not shying away from the goal that we have stated quite often in terms of we see no reason why this business cannot be heading towards a consolidated margin in the 50% realm and delivering EBITDA margins of around a 20% level. Of course, the magical question is, by when? Certainly, it is not in the short- term, but we would still say in the medium to longer- term, we would expect to see our margin trajectory heading in that direction.
If I now look at the overall picture, the chart there, I think it's important. It again shows the history of this business over a period of a decade or more. The far right-hand side in terms of the 2025 forecast, what we've shown there is where the revenue would be if we fell in the middle of the guidance range for revenue. What we are seeing in the business is very much a return to the historical growth rates, growth rates where Trajan enjoys above the overall market growth rates, particularly in components and consumables. There's a range of factors that allow us to achieve that sort of growth trajectory. We spoke many times in recent meetings about the whole stocking and destocking cycle that the industry went through.
I think we can say today with quite some confidence that is now significantly in the rear-vision mirror. We're not seeing any further impacts from that cycle that we went through. We've also spoken about the softness in the pharma sector, but what we can see now is certainly the green shoots. If I look at the opportunity pipeline, in fact, even if I look at the order book, the expanding order book for the capital equipment, the contribution from the pharma side has improved. When I look at our components and consumables business and look at some of those particular product families that are related to the pharma sector, I can see some of those now picking up in their trajectory as well.
Looking at the business, looking at where we're heading, thinking about the stage that we've been through, we're going into this second half and the outlook beyond then very much looking forward to getting back onto our longer-term growth trajectory. The last slide here really is again emphasizing some of the key characteristics of this business. I mentioned just the return to the growth profile that we've been accustomed to over a decade, that if we look at the sectors that we compete in, despite everything else that we might hear about what's going on in the world, these are defensive end markets that we address. They have structural growth drivers. I mean, if you go anywhere in the world and enjoy a glass of clean drinking water, Trajan's played a role in making that possible.
If you're enjoying, say, food anywhere in the world, chances are Trajan's played a role with that as well. Those drivers do not go away. We're pretty disciplined about the way that we address the business and the way that we execute. If we look at our customer set, again, it's a customer set that we highly value, and it's a very close relationship we have at high levels with those customers around the world. The next bullet there, and perhaps this comes back to some of my opening comments, it's not easy to do what we do. There are significant barriers to entry, not only in terms of the magic sauce that goes into some of our technology, and a lot of the technology that we have that is unique to us is not necessarily patented.
It is about know-how that we keep close to ourselves in our various facilities around the world. Our uniqueness is not just about some of that product technology. It is also in our manufacturing know-how, particularly as we have started to roll out some of our robotic and automated fabrication processes. In many of the areas that we compete, we are a world leader in that regard in terms of removing the variation that can happen when you are manually fabricating or manually forming some of these products, as many of our competitors still do. There is another element of Trajan's uniqueness in this global sector, and that is how we are embedded, how we are interlinked every day with our global customer set and supplying this industry worldwide.
When we look at the nature of our business, whether it's by customer, by geography, by segment, by product portfolio, we are far from being a one-trick pony. The diversification of our business is what underpins our robustness and gives us the confidence as we continue to grow and develop across all of these different areas. A focus on shareholder value. No doubt there's going to be some questions there about how do we actually realize shareholder value. I think the first thing that, as one of the shareholders, in fact, as the major shareholders that I take comfort from, is that the intrinsic value of the business hasn't gone away. The value of the Trajan operation continues to grow. I think one of the key questions is, well, how do we make sure that that value becomes realized?
We have a track record of acquisitive activity as well and successful integration of those acquisitions. There was a period there where we spoke about a little bit of a pause. We wanted to see our net debt reduced. As you've seen today, net debt there is now back down to around AUD 30 million. We are well below now a leverage ratio of 2, which we said was our target as well. The last point there, the team at Trajan has come out of the industry from many different areas, many different organizations, and it is an experienced global team that's running and operating this business, a team that I have tremendous confidence in.
It is not just the management, but also the other 600 people that exist in this business around the world and are dedicated to what they do every single day as we pursue our vision. That wraps up that part of the presentation this morning, Marie, and I will go back to you to see if there are any questions that we need to address.
Thank you, Stephen and Alister. As Stephen said, that now opens us up for questions. I'd like to remind everybody that if you do have any questions, you can type it into the Q&A panel at the bottom of your screen, and we'll be able to ask them. Moving on to our first question today, Stephen, I have one here. It states that a comparison to the valuation metrics to Trajan's peers in the U.S., for example, EV over EBITDA, suggests Trajan is significantly undervalued. Can you explain why that is and what the company is doing about it?
Okay. Thank you for that question. I can see where that question is coming from. Indeed, if you look at our current share price of around AUD 0.83, which suggests an enterprise value of AUD 150 million or so, that suggests the current valuation is somewhere around eight times. If we look at our peers in the U.S. in particular, they are typically valued at 20-25x EBITDA. In other words, compared to our peers right now, for some reason, we're being valued at half or a third of that value. We are the only company in our sector in Australia. Maybe that's part of the issue in that if you want to look for comparables, you need to go offshore and look at the other industry participants.
I mean, even if I look at it from an IPO perspective, if we look at where the share price is today, half of where it was at IPO, and yet if we look at the business, by every measure, the business is more than double where we were at IPO. It makes you wonder, what did it have to be in order to see some underpinning of the share price there? I have multiple hats here. With my CEO and Managing Director hat, what I can assure you of is to continue to drive this business successfully in terms of pursuing our vision with discipline and at the same time, continue to drive the fundamental financial metrics of the business in the right direction.
As a majority shareholder, I can assure you that one way or another, this business will realize its true value because it certainly has that value embedded in the performance that it delivers every year.
Okay. Thank you. Our second question is around cost reductions in the disruptive segment, and will these stifle the growth potential?
Right. People will be familiar that last year, the disruptive area posted an AUD 4.9 million EBITDA loss. The commitment that we made was that in one year, we will reduce that to circa an AUD 1 million loss. In other words, an AUD 3.9 million improvement. We have executed the cost reductions required to deliver that outcome. You can see in the first half, we are sitting at around about the AUD 1 million already, but the microsampling business now is running at a break-even level, and we expect it to continue to do that in the second half. One of the things that we noticed was that many of the competitors in this microsampling space had very significant capital behind them and were investing that capital in a range of market development, business development type activities.
Even though those deep pockets were driving those sorts of activities, they were not moving the needle as far as we could see in terms of driving market adoption. Indeed, when we look at our microsampling business, it is very clear from many measures that we are a leader. No one comes close to the number of global peer-reviewed papers that we have produced on our microsampling technology. At this point in time, no one comes close to the number of units that we have shipped and sold around the world in microsampling. When we did the cost reduction exercise, we focused on those resources and activities that were also about that development or that business development side, but we kept the core.
Our mode of operation now is to continue to underpin growth with the core resources that we've retained because we too believe changing the market dynamic from the inside out is really difficult. We still have confidence in the long- term that it will move. We're ready to put back in place, as required, the resources to underpin that growth when we see that opportunity emerge.
Thank you, Stephen. The third question today is, with such a large proportion of revenue being derived from the U.S., what risks do you see with the new administration? What countermeasures has the company prepared?
Okay. Thank you. That's a question no doubt being asked in many business meetings today, I imagine. One of the things that we've adopted at Trajan when we've perceived potential high-level risks is we form a small team, and that team becomes focused on what are the risks that could emerge and what our countermeasures be. We did this during the pandemic, and it was very effective in terms of trying to forecast what those risks might be and then how we dealt with them. With the volatility, the uncertainties that are emerging with the change of the U.S. administration, there's three key areas that we are looking at. First of all, understanding tariffs and depending on what happens, to what extent could tariffs impact on our business.
We're pretty comfortable at the moment, given Trajan's global diversity and what we're seeing in the early behaviors around the targeted tariffs, that that doesn't present the first risk. The second area that we're looking at is regulatory and to what extent could that have an upside or a downside on our business. At the moment, it appears to be relatively neutral. We're not overly concerned with that area at this point in time. The third area is the funding of government agencies that relate to our sector. These are the funding of agencies such as the NIH, the CDC, the FDA, the EPA, and so forth. Now, that's an area where we do see some exposure.
One of the things that we've done is we've looked at our current opportunity list and our current prospect list in terms of capital equipment because that's where it would be affected the most. We suspect there's going to be an impact on revenue, a negative impact on revenue in the second half of circa around AUD 1 million or so. In reiterating guidance, we've taken that into account. We'll continue to monitor and look at how we respond and react to any developments, but we certainly won't be participating in any knee-jerk reactions. I think it's very wise to watch and see which sorts of changes are likely to stick for the longer- term.
What gives me confidence here, though, is that, again, when we look at the diversity of Trajan's operations around the world and the agility that we demonstrated during the pandemic in terms of being able to relocate operations from one site to another, if we look at the diversity of our product portfolio, that gives us confidence in being able to react or respond to some of those threats as they might emerge.
Thank you. Our next question also touches again on share price, which you've already addressed. The second part of the question is, it seems that the policy of growing the company by not paying dividends may be a factor in the share price dropping. What is Trajan's dividend position?
You would be aware that the current position is that we do not have a dividend scheme as such. I appreciate the question. Certainly, one of the strengths of Trajan's business is its predictability of cash flow or cash generation. You would say maybe that is a characteristic that is an avenue by which shareholders could realize more value. If that was to happen, that clearly would have to go through a process, be adopted by the board, and so forth. Today, there is not a dividend scheme as such, but I think the question has merit.
Thank you. The next one again touches on the international and political environment, but it's how do you frame guidance versus what you were seeing out of international peers, for example, weakness on pharma and amidst an uncertain political or funding environment?
Yeah. We also experienced that weakness in pharma. We've seen the recent report out by our peers and our major customers. What I can observe in our order book, in our prospect list, and indeed, we have a unique insight into some of the componentry that goes into pharma-type analytical platforms, that the demand has picked up. It's not back to the levels that we experienced, let's say, a couple of years or so ago, but it has certainly improved from where we saw it previously. If I look at some of the projects that we have that ultimately are servicing pharma-type applications, they still have legs. They still have life and are continuing to move on. Yes, I think there is ongoing some softness. We've taken that observation into the confirmation of our guidance as well.
Overall, we're feeling more confident now than what we were, say, six months ago.
The next question's in two parts. Looking at Project Neptune, are there any additional investments that you need to make to help drive the margin improvement to 50%? The second part, is there anticipated CapEx uplift in the next 12 months?
With Project Neptune, one of the key things that we're working on right now is how to lift the productivity in our Malaysian operation. In Malaysia, we have an operation that we built up from a greenfield site. Getting to the same levels of productivity that we would have enjoyed in the Australian operation previously is probably taking a little bit longer than what we thought and using a bit more resource than what we thought. We're continuing to invest in bringing that up to speed. That has had the compound effect of retaining a level of cost structure here in Australia that is also a little bit more than what we had anticipated at this point in time.
When we project forward into the next year, I don't see anything extraordinary on the cards in terms of CapEx, but we certainly have an opportunity to roll out, if you like, the next stage of these margin improvement programs. The scope for that is broader. In other words, instead of it just being primarily about the Australian and the Malaysian operations, to now start to expand those efficiency gains and the productivity targets across the global footprint that we've consolidated.
Thank you. That has brought us to the end of the questions that we've had so far. I'll give one final call out to see if we've got any further questions. If we don't have any in the next few moments, I'd like to say thank you, Stephen, for the presentation today. That brings us to the conclusion of our Q&A session and to Trajan's half-year results investor webinar for H1 2025, the period ending 2024. There are no further questions coming in, so I'd like to say thank you all for joining us for the meeting today. I will end the webinar now.
Thank you everyone.