Monday, 20 April 2015

Torotrak needs more money

Torotrak, in announcing its trading update to 31 March 2015, has stated “additional funding from partners, licensees or new and existing shareholders is likely to be required during the 2015/16 financial year”. 

Torotrak, a leading developer and supplier of emissions-reduction and fuel efficiency-technology for vehicles, recently announced a new chief executive officer, Adam Robson.

Torotrak claims it has made “significant progress” against its objectives, both in terms of technical development and heightened commercial engagement with Tier 1 and OEM partners. It says the board remains encouraged with the prospects and significant opportunities for commercialising the Group's technologies.

The Group expects to close the financial year ended 31 March 2015 with at least £7.5m in cash; but Vendor Loan Notes of £2.8m remain outstanding. 

However, as mentioned above, based on the Group's working capital requirements to fund existing projects and to optimise the realisation of the value of its product development and commercialisation programmes that are underway, additional funding from partners, licensees or new and existing shareholders is likely to be required during the 2015/16 financial year. 

The board says it continues to “actively review” the Group's priorities and “optimise its cost base” to ensure it is “focused on the key strategic priorities” and near-term commercial opportunities. In other words, not swerve off-course.
                                Flybrid KERS for buses

Torotrak is putting much effort into KERS (kinetic energy recovery system) for buses as well as off-highway vehicles, passenger cars and light commercials.

Robson will no doubt be interested in the on-going product development programme with JCB to design, develop and commercialise Flybrid flywheel systems for excavators, is said to be progressing to plan. Testing of flywheel systems in machines and on rig is “encouraging”. The combined engineering and procurement teams are already engaged with supply chain partners working on cost reduction activities for a system which has wide potential applications in this sector.

A Flybrid KERS-equipped Wrightbus StreetLite vehicle entered service last month operated by Arriva on a public bus route in Gillingham, Kent.  This followed a period of extensive functional and flywheel safety tests and in-vehicle roadworthiness testing.

Initial feedback from passengers and drivers in terms of drivability and performance has been extremely positive, according to Torotrak.

The trial is anticipated to continue for at least three months during which time operational performance of the KERS unit will be monitored through the collection and analysis of in-service data that will be used to confirm the in-service performance of the unit.

Torotrak says it has been working in close collaboration with a major global Tier 1 manufacturing and assembly partner that is a technology leader in commercial vehicle and light vehicle driveline systems. The collaboration is focused on delivering, in the volumes required by bus operators, the new productionised bus KERS system, leveraging the knowledge, experience and supply chain relationships of the Tier 1.

Based on the work completed, the Group remains extremely confident that it can achieve the target product cost underpinning the bus KERS business case and meeting the payback target for bus operators with a commercial launch in Q2 2016.

The production-ready design for the low-cost industrialised bus KERS system has been completed and the first units are currently being assembled at the Group's facility in Leyland.

These initial units will be used as part of a comprehensive design verification test programme to validate the functional performance, reliability and improved fuel efficiency of the KERS system. In parallel, the combined engineering teams of the Tier 1 partner and the Group's development team will continue to focus on optimising the design for manufacture, reliability and cost.

The commercial team is working closely with OEM partner, Wrightbus, and a number of bus operators to secure initial sales orders for the bus KERS system during the next six months. The results from the current in-service trial with Arriva, demonstrating the performance of the KERS system, are an important validation for these on-going discussions. 

Torotrak says it will be working with partner Wrightbus to ensure that the Flybrid KERS equipped StreetLite is eligible for grant funding under this scheme.

                                   Next generation V-Charge

The next generation V-Charge hardware has been built and supplied to our OEM partner, in preparation for engine testing. The OEM is planning to evaluate V-Charge comparing the technology with incumbent engine boosting solutions in a premium two stage application.

Torotrak says it remains engaged in discussions with several Tier 1 and several OEM partners about the opportunities to license KERS and V-Charge in applications including passenger cars. These discussions are on-going.

Using Innovate UK (previously Technology Strategy Board) backed Smart Project to develop a production orientated version of V-Charge, Torotrak has confirmed the participation of Ford Motor Company to evaluate the potential benefits of V-Charge technology in engine downsizing.

This is not the first time Ford and Torotrak have worked together. When CVTs (continuously variable transmissions) and IVTs (much the same thing) were seen as having a role to play in passenger cars (Perbury Transmission) and Ford became a Torotrak licensee (as did General Motors and others) to push applications in Mondeo and sports utility vehicles and the like. But, in a nutshell, the project went nowhere. Transmissions moved on to DCTs and 10-speed gearboxes.

Many years later, IVTs still have to find their place on the road – or even off-road. 

Meanwhile, work is on-going with Allison to evaluate the opportunities arising from the improved IVT durability demonstrated last year and the significance of this for in-vehicle applications. However, judging by the space given to this (and the European Truck and Bus Programme) in the company’s statement, IVT work appears to be less high-profile than work with KERS.

                              The future is………

It is now one year on since the acquisition of Flybrid. Torotrak claims it is “very pleased” with the capability and potential of its high-speed flywheel KERS technology and the significant opportunities both in on and off-highway commercial vehicles and passenger cars. And clearly this has become the ‘new focus’ of the company.

The technology, according to Torotrak, has demonstrated that it is “robust, reliable and has the potential to deliver significant fuel efficiency and emissions reductions benefits” to vehicle manufactures and operators at the lowest cost.

However, application engineering to install KERS into a Wrightbus StreetLite bus has taken longer than expected but the bus is now in-service on a public bus route.

Torotrak claims it is “confident” that this will not only demonstrate the technologies in-use capabilities but re-confirm that the technology can deliver the required payback to bus operators. The inherently robust and low-cost mechanical design offers significant through life benefits over alternative electric battery-based solutions.

Robson said: "I have joined Torotrak at a very opportune moment.  A great deal of good work has been done to advance our technologies towards production and our engagement with commercial partners reflects the increasing interest in our low cost technology solutions.   Now we are organising ourselves into dedicated teams each focussed on delivering against our priority objectives to deliver value from the technology, commercialise our portfolio of products and deliver long term shareholder value."

There will be groans from some shareholder quarters following Robson’s mention of the words “long-term shareholder value”. They are not new words to shareholders’ ears! Those who have been with Torotrak since its float will begin to wonder, how long is long-term? Robson obviously does not see a quick return. As to the London Stock Exchange, following the update brokers marked the company's share price to its lowest since 25 October 2010. Hardly a good testement to departing chief executive officer Jeremy Deering.

Businesses which develop new technology often have other revenue-earning aspects of the business to generate cash and working capital. Torotrak is a technology developing company, fair and square; and this does have its drawbacks for shareholders.

No comments: