Torotrak PLC Regulatory News (TRK)

20 April 2015

Torotrak plc

("Torotrak" or the "Group")

Trading Update

Torotrak (LSE: TRK), a leading developer and supplier of emissions reduction and fuel efficiency technology for vehicles, is pleased to today announce a trading update in respect of the 12 months ended 31 March 2015 ahead of its preliminary results announcement in early June 2015.

Management Changes

On 30 March 2015, the Group announced the appointment of Adam Robson as Chief Executive (effective 13 April 2015), who took over from Jeremy Deering, who had previously stated his intention to stand down in November last year. Adam's track record in commercialising technology and experience in the automotive sector, will prove invaluable to Torotrak as it furthers discussions and negotiations with customers and partners directed at bringing products to market based on its world class technologies. 

Trading and Financial Update

In the half year results published in November last year, we set out the key objectives for the Group for the following six months. The Group has made significant progress against all of these objectives, both in terms of technical development and heightened commercial engagement with Tier 1 and OEM partners, and 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; the Vendor Loan Notes of £2.8m remain outstanding. 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 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.

Progress against Objectives

The following is a summary of the progress made under each key objective.

Completion of bus KERS trial

We announced that 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. The trial is anticipated to continue for at least 3 months during which time operational performance of the KERS system 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.

Announce bus KERS manufacturing strategy

The Group 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.

Commence design verification of industrialised bus KERS

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 our Tier 1 partner and the Group's development team will continue to focus on optimising the design for manufacture, reliability and cost.

Build a pipeline of KERS commercial opportunities

The commercial team is working closely with our bus OEM partner, Wrightbus, and a number of bus operators to secure initial sales orders for the bus KERS system during the next 6 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. We expect to be able to provide a further update on the bus trials at the time of the Group's preliminary results announcement. The recent announcement by the UK Government's Office for Low Emission Vehicles of a £30 million fund for Ultra Low Carbon Bus procurement is a welcome initiative to encourage bus operators to procure new low carbon vehicles. We will be working with our partner Wrightbus to ensure that the Flybrid KERS equipped StreetLite is eligible for grant funding under this scheme.

Commence testing of JCB flywheel system

The on-going product development programme with JCB to design, develop and commercialise Flybrid flywheel systems for excavators, is also 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.

Supply next generation V-Charge unit

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 boosting solutions in a premium two stage application.

Develop KERS Tier 1 licensing opportunities

The Group is 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.

Additionally, we have today made an announcement concerning the progress achieved on the Innovate UK (previously Technology Strategy Board) backed Smart Project to develop a production orientated version of V-Charge and confirming the participation of Ford Motor Company to evaluate the potential benefits of V-Charge technology in engine downsizing.

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.

Flybrid

One year on from the acquisition of Flybrid, the Board 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. The technology 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. The 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 operated by Arriva and we are confident that this will not only demonstrate the technologies in-use capabilities but also 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.

Summary

The Group has made, and continues to make, significant progress in commercialising all of its technologies, particularly in respect of KERS and V-Charge and, in addition, is engaged in commercial discussions with a number of parties about potential new applications for its technology and new commercial development programmes. The Board is reviewing the key objectives for the 2015/16 financial year, including funding, organisation, resources and other requirements in order to optimise plans to commercialise its technologies, and these will be set out in the Group's Preliminary Results Announcement due in early June 2015.

Adam Robson, Torotrak's Chief Executive 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."

For more information, please visit www.torotrak.com or contact:

Notes to editors

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

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