T42 Iot Track. Regulatory News (TRAC)

23 May 2008 15:00



23 May 2008

Traction Technology Plc

(AIM: TRAC)

Trading Statement

Traction Technology Plc ('Traction' or the 'Company'), a designer and deliverer of environmentally friendly, low emission series diesel electric hybrid engine systems, provides the following update on current trading and funding position.

On 19 November 2007 Traction announced that it had entered into a Memorandum of Understanding ('MOU') with the Optare Group ('Optare') to jointly develop a range of single deck series hybrid vehicles for the UK bus market. At that time it was planned that a prototype vehicle, based on an Optare Versa with Traction's super capacitor power pack would be completed by Spring 2008. The terms of the MOU also provided that, subject to the satisfaction of certain fuel economy and emissions targets, Optare would then have an option to build a minimum of 10 vehicles using the Traction hybrid system during 2008 for sale to various operators in the UK.

While Traction and Optare are actively working towards the development of the prototype, it is now expected that the vehicle will not be completed before the end of June 2008. In light of the new timetable for the completion of the prototype vehicle, Traction now considers it unlikely that it will be requested to supply its hybrid power pack system to those 10 vehicles for Optare in 2008.

Traction continues to work with other key customers and in particular remains on schedule to supply four hybrid power pack systems for Optare Solo buses to Merseytravel during the second half of 2008 subject to continued funding.

While a number of other potential orders and business opportunities are being pursued, these are unlikely to lead to significant revenues in 2008. In response to the reduction in forecast trading activities, the Company has implemented a range of measures to reduce costs while retaining its core skills.

Based on current trading and the delayed timetable for the trial of hybrid buses recently announced by Transport for London, the Board of Traction considers that the Company is unlikely to generate positive cash flow from its present activities for the foreseeable future. 

The Company currently has cash resources which, based on the current cash burn rate and management forecasts, provides sufficient working capital for approximately two months of operations. Consequently, the Board is currently considering a range of options to address the funding requirement which could include the raising of further funds, moving the business model to a licensing operation, the reduction or cessation of current activities or a sale of the business to a third party. 

Chairman, Nick Brayshaw, commented:

"It is disappointing that the challenging market is developing at a slower rate than we had anticipated, including the delay in the Transport for London trials. We continue to believe that the Company has class leading technology and we are delighted with the development of the Generation 3 TRIBRID Power Pack which is currently on trial in the test facility, the trial is performing ahead of expectations. I would like to assure shareholders that we are working to address the situation and will investigate a range of options to maximize shareholder value."

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