Torotrak PLC Regulatory News (TRK)

THE INFORMATION CONTAINED WITHIN THIS ANNOUNCEMENT IS DEEMED BY TOROTRAK TO CONSTITUTE INSIDE INFORMATION AS STIPULATED UNDER THE MARKET ABUSE REGULATION (EU) NO. 596/2014. ON THE PUBLICATION OF THIS ANNOUNCEMENT, THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.

30 January 2017

Torotrak plc

("Torotrak", the "Group" or the "Company")

Strategic Update, Group Refocus

Torotrak, (LSE: TRK), a leading developer and supplier of emissions reduction and fuel efficiency technology for vehicles, announces an update on the process to license its technology and the strategic actions it proposes to take as a consequence.

As previously reported, the Company has been in commercial discussions with passenger car Tier 1s and OEMs as they seek to understand the full capability of V-Charge. They have confirmed that the V-Charge product works and delivers attractive fuel savings/emissions reduction benefits. However, during the discussions it became apparent that the priorities for new product spend for many players in the European passenger car market have profoundly changed in recent months with:

· An accelerating focus on electrification projects, in particular driven by the mass market adoption of 48V hybrid electric vehicles; and

· Increased regulatory attention on eliminating noxious emissions, including banning diesel vehicles in some major cities, looks likely to result in a substantial reduction in the demand for, and investment in, diesel engines.

Both of these industry trends look set to materially reduce the mass market opportunity for V-Charge in passenger cars, particularly in Europe. The Board believes that there will remain important opportunities for V-Charge to be adopted in segments such as commercial vehicles, performance cars and markets where consumers will not pay for the increased costs of 48V hybrid electric vehicles, or where tax incentives promote the use of small highly efficient engines. These markets can still offer significant volume potential.

The impact of this change in market opportunities is that it will take Torotrak longer to engage with potential alternative Tier 1 partners and the licence value of V-Charge is likely to be lower than previously expected. We will continue our programme to license V-Charge, building on our increased market understanding and proven product performance.

Beyond this commercial effort for V-Charge, the engineering and financial resources of the Group can now be focused exclusively on the continued development and commercialisation of the KERS technology. KERS is making good progress, particularly in the off-highway markets, with the first product, a hydraulically connected flywheel-based energy recovery system ('ERS') for excavators and wheel loading shovels, having achieved the cost reduction targets the Group set. The ERS product is on track to launch on excavators in H2 2018 and will give operators attractive fuel savings and a payback typically of 18 months or less. We continue to be well engaged with our OEM partners whom we expect to take the technology forward.

Torotrak is also in discussions with on-highway commercial vehicle OEMs about the potential to adopt the Group's KERS technology in an innovative new configuration that could materially reduce the installed cost, and improve operator payback times to less than three years.

In order to efficiently pursue these growing opportunities for KERS in off-highway and commercial vehicle markets and the licensing opportunities for V-Charge, the Board has decided upon the following actions:

· Continue the commercialisation process with current and new potential buyers for V-Charge but suspend further engineering development activity, given the successful in-vehicle demonstrations and technical validation of the product;

· Focus engineering and cash resources on generating the higher value, nearer-term opportunities for the KERS products and technology;

· Actively seek buyers/licensees for the Group's IVT/CVT intellectual property and tangible assets, with a view to realising value wherever possible;

· Consequently, to commence an employee consultation process with a proposal to consolidate engineering resources. If this proposal is implemented, any changes will happen progressively so that the ongoing commitments to customers and funding partners are respected and the value of the assets/technologies is maintained.

The Board believes there is significant potential value to be generated from the KERS technology and value in V-Charge, if the appropriate market applications can be secured. The Board is also exploring other actions that could be taken to reduce cash operating costs.

Adam Robson, Chief Executive of Torotrak said: "The clear shift towards electrification and the move away from diesel engines that has occurred across the industry over the last few months has forced mainstream passenger car Tier 1s and OEMs to refocus their investment on electrification projects. We will take the appropriate actions to prudently manage our resources. We will focus our efforts on delivering shareholder value from KERS which is addressing the off and on-highway markets in which mechanical solutions remain attractive, and we will continue to work to unlock value from V-Charge. We remain determined to realise the value from our extensive intellectual property and attractive commercial opportunities."

For further information:

About Torotrak

Torotrak is a leading developer and supplier of kinetic energy recovery systems, engine boosting and variable drive transmissions for vehicles. Our portfolio of technology solutions substantially improves fuel economy and reduces CO2 and other emissions in vehicles through capturing and recycling energy that would otherwise be lost, harnessing the power of supercharging to enable engine downsizing and managing the engine at the optimum point.

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