Thursday, 27 November 2014

Torotrak: Deering, out; Hughes, in

Jeremy Deering is to step down as chief executive officer of Torotrak plc and Steve Hughes, formerly engineering director at JCB Transmissions, has joined the group as chief operating officer.

It will be interesting to see if the arrival of Hughes increases the group’s momentum and propels it in the direction of developing Torotrak’s technologies for off-highway applications. JCB has a huge range of equipment (it also makes its own engines and transmissions) that could benefit from the fuel saving technologies Torotrak has developed. This could pave the way for business with other OEMs.

Deering claims he is stepping-down in 2015 “having established and executed the first phase of the company's new strategy for future growth”. (Why not stay on to implement the second phase? Or is it a case of horses for courses? From shareholders' perspective, Torotrak's shares have continued their unremitting decline from a realtively recent peak of 60.8p in June 2011 to 14p in October 2014, only once briefly hitting 43p in March 2012. In terms of shareholders' return there has been nil. So, will it be more of the same (long-time sharesholders have seen chief executives come and go), or is the corner finally about to be turned? - Ed.)

Deering said in a statement: "Our focus during the last six months has been on delivering the plan we presented to shareholders: to bring our Flybrid commercial vehicle KERS product to market in commercial volumes in the next financial year; to put in place skills and infrastructure for in-house, lower-volume and higher-value manufacturing; and to prepare our other technologies for market introduction in conjunction with Tier 1 and OEM licensees.”

He added: "We are very excited about the progress made with our V-Charge technology. The independent confirmation of the benefits of our revolutionary variable boost system for downsized engines provides an excellent validation of the technology and we believe that the technology can become a global leader delivering significant fuel savings and CO2 emissions reductions.

"Two years ago I set out a new strategy for Torotrak - to take more control over bringing our technology to market,” said Deering. “This has resulted today in: an installed manufacturing capability; Flybrid KERS being established as a market leading product, and; a step change in engagement with OEMs and Tier 1s reflecting our greater product reach and wider capability. Torotrak's three technologies are now at the top of agendas with worldwide automotive manufacturers at a time when technology and regulatory change is sweeping through the global automotive industry.” 

                                                        The next stage

Deering’s plan to step down in the second quarter of 2015 is part of a transition to “the next stage of the group's development focusing on manufacturing.

“As the first stage of this orderly hand-over, I am delighted that Nick Barter, with his considerable automotive experience and passion for the business, will be leading the board as Torotrak's new chairman,” declared Deering.

Barter noted that Hughes “brings with him a wealth of experience in delivering engineering programmes and taking new transmission products into successful commercial production. These skills are crucial as we build the capability and prepare for commercial production of bus KERS and launch of the product into the market next year.

Meanwhile, Deering revealed in his chief executive’s report: “We have made two extensive business development visits to China which confirm the very strong opportunity in this region. China is in need of CO2 emissions reducing technology to cost-effectively address its well-known urban pollution and air quality challenges and there has been strong interest in all of our technology and product areas which is why we have chosen to open a representative office. The business model for China and issues relating to licensing and IP protection, of course requires careful consideration. However, our view is that there is a new and exciting business climate emerging, with an opportunity for Torotrak to work with some forward-looking enterprises and to take advantage of the considerable investment available in moving from second and third generation IP, to class-leading technology for the Chinese domestic economy.” (A number of transmissions companies have flirted with China and had their fingers burnt – Ed.)

He added: “Japan is also growing in importance in terms of our focus, and it is noticeable how Torotrak's technologies are now very much "on the radar", compared with this time last year. Our long-standing Tier 2 Licensee, Univance, enables us to offer our potential partners and licensees a well-established manufacturing route for key components in support of IVT and V-Charge.”

In his half-yearly report to 30 September 2014 Deering points to several milestones:

● Bus testing at Millbrook test track successfully completed in preparation for in-service trials with Arriva in December 2014.
● Fuel savings in StreetLite bus independently validated on a standard test cycle at Millbrook.
● Accelerated flywheel durability testing successfully completed, equivalent to 10 years in-service running
● JCB excavator production-intent design completed, procurement underway
● Validated fuel savings and low cost manufacture confirms Flybrid KERS operator unsubsidised payback within five years
● Flybrid bus KERS wins prestigious Society of Motor Manufacturers & Traders (SMMT) Award for Automotive Innovation 2014 (Fortuitously, this came just in time to be included in the half-yearly report – Ed)

V-Charge - powering downsized engines
● Initial results from analysis conducted by University of Bath in conjunction with global OEM and Tier 1 confirms significant potential benefits from Torotrak technology in a downsized engine for the mass market
● Next generation prototype unit already installed in demonstrator vehicle

Variable traction drive transmissions
● Success-related GBP1 million deferred license fee received from Allison in November 2014 (No mention of European Truck and Bus manufacturer – Ed.)
● Engagement with two new international Off-Highway vehicle manufacturers, following independent assessments confirming Torotrak technology advantages

Financial Highlights
● Cash balance of £10.1 million at 30 September 2014, with GBP1 million deferred license fee received post balance sheet date
● Significant self-funded, operational investment in preparation for 2015 product sales & future licensing with specific OEMs and Tier 1 manufacturers

 As to the appointment of Hughes, Deering noted: “As chief operating officer with responsibility for delivery of the Group's commercial engineering programmes, manufacturing and test operations. Hughes has extensive experience in the engineering of transmissions and drivelines and in taking programmes through into volume production in automotive and commercial vehicles. He joins from JCB where he held the post of engineering director transmissions for the last four years having previously worked for Ricardo. (Ricardo plc is known to have had an interest in both CVTs and KERS. - Ed.)


Anonymous said...

I believe Steve Hughes was at Antonov, a small AIM listed transmission designer, who I believe are no longer trading.

Anonymous said...

Steve Hughes was a project manager at the once AIM listed Antonov PLC before he was at JCB. Antonov delisted