Torotrak PLC Regulatory News (TRK)

27 Nov 2007 07:01

Torotrak PLC27 November 2007 Torotrak plc Half-yearly results for the six months ended 30 September 2007 Torotrak plc, the world leader in full-toroidal traction-drive transmissiontechnology, announces its half-yearly results for the six months ended 30September 2007. Business Highlights: * Three new licensees signed in the half year, including Tata Motors Limited and a new Formula 1 licensee announced separately today * Excellent progress towards delivery of a prototype transmission for a new IVT equipped fork lift truck for an industry leading customer * New funding to be committed to the Infinitrak Joint Venture (JV) to commence the development of a second low-cost lawn tractor transmission with broad application across the outdoor power equipment (OPE) market * Memorandum of Understanding (MOU) signed with a major European truck and bus manufacturer to commence a prototype engineering programme and to support the completion of a substantial licence agreement which is expected to be concluded during the second half of this financial year Financial Highlights: * £6.7m of new net equity funds, secured from the successful Placing and Open Offer, has strengthened cash resources to support business growth * Lower first half revenues of £0.5m (2006: £1.8m) reflect the later timing of engineering programmes and licence income in this financial year * The Directors are confident of achieving continued full-year revenue growth and of delivering this year's key financial objective of strong improvement in operating cash performance Dick Elsy, Chief Executive of Torotrak plc said: "Torotrak has made good progress in the first half of this financial year. Thesigning of Tata Motors Limited as a licensee earlier in this period has providedus with an ambitious and dynamic partner to work with and gives us access to thestrongly growing emerging-market sector. Elsewhere, we have made tangibleadvances in our diversification of markets and in the commercialisation of ourtechnology. Our Joint Venture, Infinitrak, is on track for volume production andfirst sales of lawn tractor transmissions in the second half of the year. TheMemorandum of Understanding with the European truck and bus manufacturerrepresents a significant step towards commercial exploitation of a valuable newmarket for Torotrak. In line with expectations, revenues will be weightedsignificantly towards the second half of this year and we remain confident ofachieving another year of improvement in operating performance." Dick Elsy, Chief Executive Simon Hudson Jeremy Deering, Finance Director Lulu Bridges Torotrak Plc Tavistock Communications Tel: +44 1772 900938 Tel: +44 20 7920 3150 www.torotrak.com Results New Customers and Licensees In July, we reported that we were seeking to finalise a licence agreement with aleading Asian car and commercial vehicle manufacturer. We were therefore verypleased to announce on 1 October that we had entered into a formal LicenceAgreement with Tata Motors Limited, with whom we are now engaged on a technologytransfer programme which is expected to conclude with a decision by Tata MotorsLimited on their first area of application of our technology. This licenceagreement is subject to approval by the Indian Government which is progressingin accordance with our expectations and is anticipated in the second half ofthis financial year. In our new sector of motorsport, we have made more rapid progress than expectedwhen last reporting in July and, as a result, we have signed up two newlicensees to develop Torotrak technology for application in Formula 1 (F1)racing. We are delighted to be securing new business in this high profile andfast moving market. Our work with a major European truck and bus manufacturer has also progressedahead of our July expectations in terms of both engineering activity andcommercial arrangements. We are pleased to report that we have signed a MOU withthis customer which authorises the commencement of an engineering programme andoutlines the key elements of a proposed licence agreement. We expect to concludeformal agreements with this major customer in the second half of this financialyear, when further details will be released as appropriate. Revenues As a result of the timing of our licence agreements and engineering programmes,revenues will be substantially weighted towards the second half of the currentfinancial year to 31 March 2008. This profile was anticipated in our 2007Preliminary Results announcement in May and again in the Prospectus for thePlacing and Open Offer which was issued in July. We expect strong revenueperformance in the second half of the financial year and hence to deliveranother year of revenue growth. Revenues of £521k in the six months to 30 September 2007 (2006: £1,829k) reflectmainly the successful completion of the first stage of our engineering prototypeprogramme for a leading fork lift truck manufacturer, where we earned £236k inthe period, as well as licence fees relating to the two new licensees in the newfield of motorsport worth £150k in the period. We have also continued to workwith our existing automotive, off-highway and outdoor power equipment customersby providing fee-earning engineering support worth £135k in the period, as wellas undertaking substantial business and engineering development activity. Revenues in the corresponding six months to 30 September 2006 reflected a highlevel of licence revenue in relation to Infinitrak (2006: £792k) and asubstantially first half weighted engineering programme (2006 engineering fees:£1,037k). Our JV, Infinitrak, has continued to prepare for series production withpilot-build runs and extensive field trials. We reported in July that Infinitraksales volumes in the first year will depend upon both the acceptance of thefirst transmission product, the twin toroidal transmission (TTT), for the 2008mowing season as well as the marketing decisions by Infinitrak's first customerand JV partner, MTD. At the JV's November board meeting it was agreed that theprimary aim for the first year of sales, covering the 2008 mowing season, is tohave launched a distinct and thoroughly trialled product rather than push forhigh first year volumes. In addition, it was agreed to enhance that plan byprogressing the development of an additional, higher volume transmission whichwill provide greater third party sales capability. This re-balanced businessplan for Infinitrak may result in lower first year volumes than originallyenvisaged, although the net financial impact this year is likely to be slightlyfavourable due to lower production and development start up costs. Operating Loss Operating costs of £3,152k, before non-recurring items, reduced by £194kcompared to the corresponding six months to 30 September 2006, whilst ourengineering capability was maintained at the levels reported at the full year to31 March 2007. Non-recurring expenses of £164k were incurred as a result ofcosts associated with the raising of new equity funds, albeit not directlyassociated with the Placing and Open Offer. Operating losses increased by £1,165k to £2,795k, reflecting mainly the lowerlevel of revenues realised in the period. In view mainly of the higher revenueanticipated in the second half of the current financial year, we expect lossesfor the full year to reduce markedly. The proportion of our engineering resources utilised on revenue generatingactivities reduced to 46% during the period (2006: c60%), reflecting the higherlevel of activity in the first half of this year on business and engineeringdevelopment. Cash As reported on 13 August, the Open Offer element of our recent Placing and OpenOffer was nearly twice oversubscribed. We were delighted to have raised ourtarget of £7,510k gross funds, resulting in £6,741k after expenses associatedwith the issue. These funds have substantially strengthened our cash reserves,with £8,676k Group cash at 30 September 2007 (£4,307k at 31 March 2007)available to support business growth. The rate of operating cash consumption in the first half of £2,442k is £451khigher than the corresponding 6 months to 30 September 2006 due mainly to the£1,165k increase in operating losses in this period as a result of the lowerfirst half weighting of revenues, offset by an improved working capitalposition. We believe that, with the anticipated strong level of business activity in thesecond half of the financial year, this year's key measure of deliveringimprovement in year on year operating cash performance will be delivered atleast in line with expectations. Technology and Market Review Torotrak has continued to make good overall progress in line with the objectivesreported within the 19 July 2007 Prospectus. Confirmed New Licensees A further three new licensees were secured in the first half of the financialyear. We announced on 1 October that we had secured a licence agreement with TataMotors Limited. The licence is broad ranging, covering a number of fields fromlow cost entry level cars through to their large commercial vehicles and trucks.We await the final approval of the licence by the Indian Government, although inanticipation of this we have commenced the process of transferring ourtechnology into the Tata engineering team as a precursor to the planning anddevelopment of their first application. The nature of this initial applicationis not yet decided and a number of alternatives are under consideration. We arepleased to be working with this new and prestigious licensee, both in India andwith their significant European engineering operation which is based in the UK. Motorsport is a new sector for Torotrak which we have only recently begun toexplore, and yet it has already yielded important progress for the Company. Thisindustry moves quickly to embrace new technologies and new developments and iswell resourced with technical expertise. We were delighted in this period tohave signed up Xtrac Ltd as a licensee to use Torotrak's traction drivetechnology to develop a novel, highly efficient and compact continuouslyvariable transmission (CVT) for application in a new mechanical kinetic energyrecovery system (KERS) expected to be used in F1 motor racing from the 2009season onwards. The KERS system comprises a high speed mechanical flywheel and avariable drive unit using Torotrak technology. The variable drive unit has beenengineered and manufactured by Xtrac who are a leading supplier of transmissionsto the motorsport industry. The first variable drive units are currently on teston our rig facilities in Leyland. On 24 September, we confirmed that a major F1 racing team had become the firstcustomer for this mechanical KERS system. This team will be supplied throughSilverstone based Flybrid Systems, which is working in cooperation with bothXtrac and Torotrak. We can now confirm that a second F1 team has begundevelopment of the technology and has become a licensee of Torotrak. This teamhas decided to work directly with Torotrak to develop the technology forapplication for the 2009 racing season. For confidentiality reasons, neither ofthese F1 teams can be named, but they will initially be contributing licence andengineering fees in the region of £75k to £100k each per annum. We were pleased that our efforts to bring new technologies to motorsport havebeen recognised by a prestigious industry award. On 5 November Torotrak, Xtracand Flybrid systems won the 'Engine Innovation of the Year' at the WorldMotorsport Expo in Cologne, Germany. This award has significantly boostedawareness of the capability of our technology not only in motorsport but alsoamong the wider automotive community. Outdoor Power Equipment Our work with our JV partners, MTD, has continued to focus on the developmentand maturation of the production process at the Infinitrak production facilitiesat Leitchfield Kentucky and amongst the numerous suppliers of components for theTTT. Infinitrak's focus since the announcement of pilot production in March has beento ensure complete robustness of the launch of the technology and to ensure fullproduction consistency. Infinitrak has continued to build small batches oftransmissions through the pilot build process and has undertaken significant rigand vehicle validation testing, accounting for several thousand test hours. TheJV has further developed the initial TTT transmission to be capable of use in awider range of MTD lawn mowers with minimal required modifications, thusbroadening its market applicability and supporting the plans for a full year ofvolume production in our next financial year. The JV partners are agreed that this extensive process, whilst reducing firstyear volumes compared to our original expectations, has resulted in a robust andcapable product with strengthened market appeal. We believe strongly thatInfinitrak's long term prospects have benefited from this measured approach toproduction launch. We can also confirm that, following a very positive JV Board Meeting on 14November, both partners have agreed to commit new funding for a programme ofproduct development to develop a second product line of low-cost Infinitraktransmissions. We expect this new unit to have broad application within the OPEmarket which will facilitate third party sales. Our partner, MTD, remains, as we do, both committed and excited about thebusiness potential of Infinitrak's new transmission technology across the OPEmarket. Whilst confirming the intent to proceed with scaling up to volume productionduring this financial year, MTD's plans for vehicles equipped with IVT for the2008 mowing season, which will now be aimed at a more targeted, initial launch,are still to be finalised. Production volumes for the period to April 2008 aretherefore yet to be confirmed although in anticipation of production ramp up,5,000 sets of key components such as the disc, rollers and casings have beenordered and produced. It would be prudent to assume that volume production andsales will not commence until the final quarter of this year, later thanoriginally planned, with sales volumes in this year possibly lower than theminimum 5,000 units anticipated in July. The financial impact in this financialyear in terms of potentially lower sales volumes does not have any materialeffect on either Infinitrak's business plan or Torotrak's short or medium termnet earnings expectations. We will be in a position to report further onInfinitrak's first year production volumes following our fourth quarter when weannounce Torotrak's Preliminary Results. Off-Highway Our licensees in the off-highway market continue to make progress with theirdevelopment of our technology in the field of medium sized tractors. In recentmeetings with two licensees, we have been given visibility of their latestproduction plans. In both cases, they believe that IVT launch will be optimisedif timed to coincide with new vehicle launches, or significant model updates,when the beneficial features of the Torotrak transmission can be stronglymarketed. We are therefore expecting both of these licensees to align thecommencement of volume production of IVT in this manner and, as a consequence,we now expect production during the 2010 calendar year. We continue to develop our business further in this sector with a number of newand interested parties. New business development in the agricultural vehiclesector has been helped by a number of notable technical developments at Torotrakin the area of electronic control strategy which has attracted considerableinterest across the off-highway market. In addition, we have recently shipped ahydro-mechanically controlled, IVT equipped tractor overseas for an extendedprogramme of customer demonstrations to take place across two continents. Thedemonstrator vehicle is a powerful marketing tool and is opening up positive newleads for the Company. Our prototype programme with an industry leading fork lift truck company isprogressing to plan with build of the first prototype transmission andsubsequent installation into the client's truck about to commence. From the workwe have carried out for this customer, it is clear that there is strongcompetitive and commercial value in our proposition. The prototype programme isprojecting a saving in excess of 15% in fuel economy, with anticipated unitcosts below those of competitive technologies such as hydrostatic drives. Automotive In the premium automotive sector, we continue our work with Aisin AW on thedevelopment of a rear drive transmission for a premium saloon car. We stillawait confirmation of the next programme step which is expected to include workto further develop the Epicycloidal Roller Control (ERC) configuration into afully functioning transmission module. Aisin AW is, in turn, awaiting directionfrom its prime customer on this programme. Aisin has however indicated that itintends to continue with the development of this technology independently andalso to consider broader application beyond the premium car segment, includingsmall cars. Our progress in motorsport with the KERS system has not gone unnoticed withinthe mainstream automotive sector. With the automotive sector struggling todevelop a robust business case for electrical hybrids, an alternative mechanicalhybrid route looks very appealing, particularly for performance road car use.This is a potential opportunity that we will explore through our businessdevelopment activities. Truck and Bus We last reported that we had worked with a leading European truck and busmanufacturer to complete a detailed cost and engineering concept study of aproposed main-drive transmission for one of their vehicles, and that we were inthe early stages of negotiation relating to their application of our technology.The MOU that we have now signed with this customer confirms authority forTorotrak to proceed with an engineering development programme and also providesthe basis of a substantial licence agreement which we expect to conclude duringthe second half of this financial year, at which point further details will bereported as appropriate. This relationship has the potential to develop into avery significant new opportunity in a new and valuable market for Torotrak. Outlook The Group has made strong progress in the first half of the year throughsecuring new licensees and by advancing major agreements with new customers. Weexpect to conclude a new licence agreement with the European truck and busmanufacturer in the second half of this financial year, which will bring with ita major engineering programme. The timing of programmes in this financial year has meant that we are nowanticipating substantial revenue growth in the second half. The Directors expectthat this year's key financial measure of improvement in year on year operatingcash performance will be delivered at least in line with expectations. With the substantial strengthening of our cash position following the Placingand Open Offer, together with the strong engineering order book, the Company iswell placed to take advantage of the increasing range of opportunities tocommercialise Torotrak's intellectual property, with Infinitrak remaining thefirst key application of our technology. 27 November 2007 Independent review report to Torotrak plc Introduction We have been engaged by the company to review the condensed set of financialstatements in the half-yearly financial report for the six months ended 30September 2007, which comprises the consolidated income statement, consolidatedstatement of recognised income and expense, consolidated balance sheet,consolidated cash flow statement and related notes. We have read the otherinformation contained in the half-yearly financial report and considered whetherit contains any apparent misstatements or material inconsistencies with theinformation in the condensed set of financial statements. Directors' responsibilities The half-yearly financial report is the responsibility of, and has been approvedby, the Directors. The Directors are responsible for preparing the half-yearlyfinancial report in accordance with the Disclosure and Transparency Rules of theUnited Kingdom's Financial Services Authority. As disclosed in note 2, the annual financial statements of the Group areprepared in accordance with IFRSs as adopted by the European Union. Thecondensed set of financial statements included in this half-yearly financialreport has been prepared in accordance with International Accounting Standard34, "Interim Financial Reporting", as adopted by the European Union. Our responsibility Our responsibility is to express to the company a conclusion on the condensedset of financial statements in the half-yearly financial report based on ourreview. This report, including the conclusion, has been prepared for and onlyfor the company for the purpose of the Disclosure and Transparency Rules of theFinancial Services Authority and for no other purpose. We do not, in producingthis report, accept or assume responsibility for any other purpose or to anyother person to whom this report is shown or into whose hands it may come savewhere expressly agreed by our prior consent in writing. Scope of review We conducted our review in accordance with International Standard on ReviewEngagements (UK and Ireland) 2410, 'Review of Interim Financial InformationPerformed by the Independent Auditor of the Entity' issued by the AuditingPractices Board for use in the United Kingdom. A review of interim financialinformation consists of making enquiries, primarily of persons responsible forfinancial and accounting matters, and applying analytical and other reviewprocedures. A review is substantially less in scope than an audit conducted inaccordance with International Standards on Auditing (UK and Ireland) andconsequently does not enable us to obtain assurance that we would become awareof all significant matters that might be identified in an audit. Accordingly, wedo not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believethat the condensed set of financial statements in the half-yearly financialreport for the six months ended 30 September 2007 is not prepared, in allmaterial respects, in accordance with International Accounting Standard 34 asadopted by the European Union and the Disclosure and Transparency Rules of theUnited Kingdom's Financial Services Authority. PricewaterhouseCoopers LLPChartered Accountants27 November 2007Manchester Consolidated Income Statementfor six months ended 30 September 2007 Restated Unaudited unaudited six months six months to 30/09/07 to 30/09/06 Notes £000 £000--------------------------------------------------------------------------------------Revenue 5 521 1,829 Development expenses (2,283) (2,450) Administrative expenses - normal (869) (896)Administrative expenses - non-recurring 6 operating costs (164) (113) ------- --------Total administrative expenses (1,033) (1,009)--------------------------------------------------------------------------------------Operating loss (2,795) (1,630) Finance income 146 148--------------------------------------------------------------------------------------Loss before taxation (2,649) (1,482)Taxation 10 200 187--------------------------------------------------------------------------------------Loss for the period 14 (2,449) (1,295)--------------------------------------------------------------------------------------Basic and diluted loss per share (pence) 7 (1.93) (1.08) The results above derive from continuing operations. Consolidated Statement of Recognised Income and Expense Unaudited Unaudited six months six months to 30/09/07 to 30/09/06 £000 £000-------------------------------------------------------------------------------------Currency translation differences (7) --------------------------------------------------------------------------------------Net expense recognised in equity (7) - Loss for the period (2,449) (1,295)-------------------------------------------------------------------------------------Total recognised expense for the period (2,456) (1,295)------------------------------------------------------------------------------------- The notes below form an integral part of the condensed half-yearlyfinancial information. Consolidated Balance Sheetas at 30 September 2007 Restated Unaudited Audited unaudited as at as at as at 30/09/07 31/03/07 30/09/06 Notes £000 £000 £000--------------------------------------------------------------------------------------Non current assets Intangible assets 9 1,084 1,027 1,137Property, plant and equipment 9 1,044 1,087 886--------------------------------------------------------------------------------------Total non current assets 2,128 2,114 2,023-------------------------------------------------------------------------------------- Current assets Inventories 35 46 -Trade and other receivables 11 1,644 1,326 1,500Current tax 468 268 641Cash and cash equivalents 13 8,676 4,307 5,356--------------------------------------------------------------------------------------Total current assets 10,823 5,947 7,497--------------------------------------------------------------------------------------Total assets 12,951 8,061 9,520--------------------------------------------------------------------------------------Current liabilities Trade and other payables 12 (1,094) (755) (700)--------------------------------------------------------------------------------------Total current liabilities (1,094) (755) (700)--------------------------------------------------------------------------------------Net assets 11,857 7,306 8,820-------------------------------------------------------------------------------------- Capital and reserves Called up share capital 14 14,608 11,990 11,990Share premium account 14 52,766 48,298 48,298Other reserves 14 (202) (262) (397)Retained earnings 14 (55,315) (52,720) (51,071)--------------------------------------------------------------------------------------Total equity 11,857 7,306 8,820-------------------------------------------------------------------------------------- The notes below form an integral part of the condensed half-yearlyfinancial information. Consolidated Cash Flow Statementfor the six months ended 30 September 2007 Restated Unaudited unaudited six months six months to 30/09/07 to 30/09/06 Notes £000 £000---------------------------------------------------------------------------------------Loss for the period (2,449) (1,295) Adjustments for: Depreciation 9 75 85Amortisation 9 50 51Finance income receivable (146) (148)(Profit) on disposal of plant and equipment - (11)Loss on disposal of intangible assets 2 4Taxation 10 (200) (200)Decrease in inventories 11 -(Increase) in trade and other receivables (282) (544)Increase /(decrease) in trade and other payables 231 (216)Charges in relation to equity settled employee share schemes and bonuses 266 283---------------------------------------------------------------------------------------Net cash used in operating activities (2,442) (1,991) Cash flows from investing activities Acquisition of property, plant and equipment (32) (186)Proceeds from sale of plant and equipment - 11Acquisition of patents (109) (109)Finance income received 110 159---------------------------------------------------------------------------------------Net cash used in investing activities (31) (125)--------------------------------------------------------------------------------------- Cash flows from financing activities Net proceeds from the issue of share capital 6,849 ----------------------------------------------------------------------------------------Net cash generated in financing activities 6,849 ----------------------------------------------------------------------------------------Net increase/(decrease) in cash and cash equivalents 4,376 (2,116) Cash and cash equivalents at start of period 4,307 7,472 Exchange loss on currency translation (7) ----------------------------------------------------------------------------------------Cash and cash equivalents at end of period 8,676 5,356---------------------------------------------------------------------------------------Cash and cash equivalents held in the JV not under direct control of the Group 162 5--------------------------------------------------------------------------------------- Notes to the interim financial information 1 General Information The Company is a limited liability company incorporated and domiciled in the UK.The address of its registered office is 1 Aston Way, Leyland, Lancashire PR267UX. The Company is listed on the London Stock Exchange. This condensed consolidated half-yearly financial information was approved forissue on 27 November 2007. These interim financial results do not comprise statutory accounts within themeaning of Section 240 of the Companies Act 1985. Statutory accounts for theyear ended 31 March 2007 were approved by the Board of Directors on 15 May 2007and delivered to the Registrar of Companies. The report of the auditors on thoseaccounts was unqualified, did not contain an emphasis of matter paragraph anddid not contain any statement under Section 237 of the Companies Act 1985. 2 Basis of Preparation This condensed consolidated half-yearly financial information for the half-yearended 30 September 2007 has been prepared in accordance with the Disclosure andTransparency Rules of the Financial Services Authority and with IAS 34, 'Interimfinancial reporting' as adopted by the European Union. The half-yearly condensedconsolidated financial report should be read in conjunction with the annualfinancial statements for the year ended 31 March 2007, which have been preparedin accordance with IFRSs as adopted by the European Union. 3 Accounting Policies The accounting policies adopted are consistent with those of the annualfinancial statements for the year ended 31 March 2007, as described in thoseannual financial statements. The accounting policy for the consolidation of theJoint Venture was changed from equity accounting to proportionate consolidationfor the year ending 31 March 2007. Therefore, the comparatives for the half-year30 September 2006 have been restated accordingly. Further details are providedin note 8. The following new standards, amendments to standards or interpretations aremandatory for the first time for the financial year ending 31 March 2008. * IFRIC 8, 'Scope of IFRS 2', effective for annual periods beginning on or after 1 May 2006. This interpretation has not had any impact on the recognition of share-based payments in the Group. * IFRIC 9, 'Reassessment of embedded derivatives', effective for annual periods beginning on or after 1 June 2006. This interpretation has not had a significant impact on the reassessment of embedded derivatives as the Group already assessed if embedded derivative should be separated using principles consistent with IFRIC 9. * IFRIC 10, 'Interims and impairment', effective for annual periods beginning on or after 1 November 2006. This interpretation has not had any impact on the timing or recognition of impairment losses as the Group already accounted for such amounts using principles consistent with IFRIC 10. * IFRS 7, 'Financial instruments: Disclosures', effective for annual periods beginning on or after 1 January 2007. IAS 1, 'Amendments to capital disclosures', effective for annual periods beginning on or after 1 January 2007. IFRS 4, 'Insurance contracts', revised implementation guidance, effective when an entity adopts IFRS 7. As this interim report contains only condensed financial statements, and as there are no material financial instrument related transactions in the period, full IFRS 7 disclosures are not required at this stage. The full IFRS 7 disclosures, including the sensitivity analysis to market risk and capital disclosures required by the amendment of IAS 1, will be given in the annual financial statements. * IFRIC 11, 'IFRS 2. Group and treasury share transactions', effective for annual periods beginning on or after 1 March 2007. This interpretation provides clarification on how to account for share-based payment arrangements where an entity receives goods or services as consideration for its own equity instruments. IFRIC 11 also provides guidance on how to account for share-based payment arrangements in a subsidiary that has an obligation to provide its employees with parent equity instruments for the services it receives from its employees. The following new standards, amendments to standards and interpretations havebeen issued, but are not effective for the financial year ending 31 March 2008and have not been early adopted: * IFRIC 12. 'Service concession arrangements', effective for annual periods beginning on or after 1 January 2008. Management do not expect this interpretation to be relevant for the Group. * IFRS 8. 'Operating segments', effective for annual periods beginning on or after 1 January 2009, subject to EU endorsement. Management do not currently foresee any changes to the Group's business segments. 4 Segmental Analysis In the opinion of the Directors, the Group operates in one primary segment beingthe business of the design and development of traction drive Infinitely VariableTransmissions (IVT). In the opinion of the Directors, and given the early stageof commercialisation of the Group's intellectual property, the Group does notcurrently operate in markets or geographical segments that are materiallydistinguishable in terms of risks and returns. 5 Revenue The Group has eliminated unrealised profits on sales made to its Joint Ventureagainst gross revenues. Unaudited Unaudited six months six months to 30/09/07 to 30/09/06 £000 £000-----------------------------------------------------------------------------------Gross revenue 521 2,691Elimination of unrealised profit on licence sales to Joint Venture - (792)Elimination of unrealised profit on services to the Joint Venture - (70)----------------------------------------------------------------------------------- 521 1,829----------------------------------------------------------------------------------- Revenue from licence sales to the Joint Venture (JV) relates to the contributionof intellectual property to the JV in accordance with the JV agreement. Thegross revenue has been eliminated so that only the element that relates to theother Joint Venture party remains. The revenue of the Company over the six month period to 30 September 2007 is notaffected by seasonality. Group revenue comprises engineering services and other income as analysed below. Unaudited Unaudited six months six months to 30/09/07 to 30/09/06 £000 £000-----------------------------------------------------------------------------------Engineering services 371 1,037Licence, option fees and sale of IP rights 150 792-----------------------------------------------------------------------------------Total 521 1,829----------------------------------------------------------------------------------- 6 Administrative Expenses The following non-recurring operating costs have been charged to operatingprofit during the half-yearly period: Unaudited Unaudited six months six months to 30/09/07 to 30/09/06 £000 £000-----------------------------------------------------------------------------------Costs incurred in relation to the refinancing that are not directly attributable to the share placing 164Additional interim Director costs during absence of previous Finance Director due to illness - 113----------------------------------------------------------------------------------- 7 Earnings per Share Basic loss per share is based on the loss after tax of £2,449,000 (2006:£1,295,000) and 126.5 million shares (2006: 119.0 million) being the weightedaverage number of shares in issue during the year. Unaudited Unaudited six months six months to 30/09/07 to 30/09/06-----------------------------------------------------------------------------------The basic and diluted earnings per share from continuing operations attributable to the equity holders of the Company (pence) (1.93) (1.08)----------------------------------------------------------------------------------- In accordance with IAS33 'Earnings per Share' the number of shares used in thecalculation excludes the weighted average number of shares held by the EmployeeShare Trust of 324,225 (2006: 844,826). 8 Jointly Controlled Entity (Joint Venture) As reported in the Group accounts for the year ended 31 March 2007 the Groupchanged its accounting policy for the consolidation of Joint Ventures toproportionate consolidation instead of equity accounting. It is considered that proportionate consolidation better reflects the economicsubstance of the interest in Infinitrak and its impact on Group results andtherefore provides more relevant and reliable information to the readers of theaccounts. As a result of the adoption of proportionate consolidation the Group's share ofincome, expense, assets, liabilities and cash flows of the jointly controlledentity are combined with items in the results on a line-by-line basis. The impact of the change in accounting policy on the 2006 interim financialstatements is detailed below. The net impact of the change in accounting policyon reserves and net assets is £nil (2006: £nil). In the Consolidated Income Statement the share of the Joint Venture loss of£226,000 in 2006 has been reallocated to development expenses of £126,000 andadministrative expenses of £100,000. In the Consolidated Balance Sheet the share of net assets of the Joint Ventureof £503,000 in 2006 has been reallocated to property, plant and equipment of£125,000, trade and other receivables of £546,000, cash and cash equivalents of£5,000 and trade and other payables of £173,000. In the Consolidated Cash Flow the increase in the share of net assets of theJoint Venture of £497,000 in 2006 were reallocated to an acquisition ofproperty, plant and equipment of £125,000, an increase in trade and otherreceivables of £348,000 and a decrease in trade and other payables of £24,000. 9 Fixed Assets Intangible assets - Property, plant patents and equipment Total £000 £000 £000--------------------------------------------------------------------------------------Net book value at 1 April 2006 1,083 785 1,868Restated expenditure/additions 109 186 295Disposals (4) - (4)Amortisation /depreciation (51) (85) (136)--------------------------------------------------------------------------------------Restated net book value at 30 September 2006 1,137 886 2,023Expenditure/additions 111 283 394Disposals (118) (1) (119)Amortisation /depreciation (103) (81) (184)--------------------------------------------------------------------------------------Net book value at 31 March 2007 1,027 1,087 2,114Expenditure/additions 109 32 141Disposals (2) - (2)Amortisation /depreciation (50) (75) (125)--------------------------------------------------------------------------------------Net book value at 30 September 2007 1,084 1,044 2,128-------------------------------------------------------------------------------------- 10 Taxation The credit for taxation is based on the estimated effective rate for the year asa whole, adjusted for taxation losses brought forward and reflects research anddevelopment tax credits. 11 Trade and Other Receivables Restated Unaudited unaudited at 30/09/07 At 31/03/07 at 30/09/06 £000 £000 £000--------------------------------------------------------------------------------------Trade receivables 191 123 45Accrued income 969 980 599Other receivables and prepayments 484 223 856-------------------------------------------------------------------------------------- 1,644 1,326 1,500-------------------------------------------------------------------------------------- 12 Trade and Other Payables Restated Unaudited unaudited at 30/09/07 At 31/03/07 at 30/09/06 £000 £000 £000--------------------------------------------------------------------------------------Trade payables 215 132 132Overseas tax 116 116 19Accruals and deferred income 763 507 549-------------------------------------------------------------------------------------- 1,094 755 700-------------------------------------------------------------------------------------- 13 Financial Instruments, Assets and Liabilities Restated Unaudited unaudited at 30/09/07 At 31/03/07 at 30/09/06 £000 £000 £000Cash (50) 780 2,126Sterling cash deposits 8,564 3,293 3,225Cash held in the Joint Venture 162 234 5-------------------------------------------------------------------------------------- 8,676 4,307 5,356-------------------------------------------------------------------------------------- 14 Reconciliation of Share Capital and Reserves Attributable to Equity Holders of the Parent Share Share Other Accum- Total capital premium reserve ulated account loss £000 £000 £000 £000 £000-------------------------------------------------------------------------------------------At 1 April 2006 11,990 48,298 (1,567) (48,889) 9,832Loss for the period - - - (1,295) (1,295)Shares issued by trust - - 1,170 (1,170) -Employee share based payments (value of employee services) - - - 283 283-------------------------------------------------------------------------------------------At 30 September 2006 11,990 48,298 (397) (51,071) 8,820Loss for the period - - - (1,604) (1,604)Shares issued by trust - - 135 (135) -Employee share based payments (value of employee services) - - - 106 106Translation differences in JV - - - (16) (16)-------------------------------------------------------------------------------------------At 31 March 2007 11,990 48,298 (262) (52,720) 7,306Loss for the period - - - (2,449) (2,449)Shares issued by trust - - 405 (405) -Employee share based payments (value of employee services) - - - 266 266Transfer of shares to employees share trust - - (345) - (345)Issue of share capital 2,618 5,237 - - 7,855Issues costs - (769) - - (769)Translation differences in JV - - - (7) (7)-------------------------------------------------------------------------------------------At 30 September 2007 14,608 52,766 (202) (55,315) 11,857------------------------------------------------------------------------------------------- The Company raised £4.99 million (net of expenses and loan to the Employee ShareTrust) through a firm placing of 20,333,333 shares at a price of £0.30p pershare. This represents 13.9% of the enlarged share capital. The Company also raised £1.75 million by the issue of 5,848,820 new ordinaryshares through an Open Offer (representing 4.0% of the enlarged share capital)at an issue price of £0.30p per share. The Company created a loan facility of £2.1 million with the trustee of theEmployee Share Trust (EST), of which £345,000 was drawn down by the EST toenable the trustee to subscribe for 1,151,180 shares at the issue price. Thisloan is in addition to the previous loan of £113,000 set up in March 1999. Theseloans are repayable on demand and are interest free. The liability of theTrustee is limited to the lower of the amount of the loan outstanding and thevalue of the assets of the EST. Reconciliation of amounts receivable from share placing to cash received. £000-------------------------------------------------------Issue of share capital 2,618Share premium 5,237Total issue costs (769)Loan to Employee Share Trust (345)-------------------------------------------------------Net proceeds 6,741Issue costs not yet paid 108-------------------------------------------------------Cash received at 30 September 2007 6,849------------------------------------------------------- Statement of Directors' Responsibilities The Directors confirm that this condensed set of financial statements has beenprepared in accordance with IAS 34 as adopted by the European Union, and thatthe interim management report herein includes a fair review of the informationrequired by DTR 4.2.7 and DTR 4.2.8. The Directors of Torotrak plc are listed in the Torotrak plc Annual Report for31 March 2007. There has been no changes since that date. A list of currentDirectors is maintained on the Torotrak plc website: www.torotrak.com By order of the Board Dick Elsy - Chief ExecutiveJeremy Deering - Finance Director 27 November 2007 This information is provided by RNS The company news service from the London Stock Exchange