TIDMTRK
RNS Number : 8805V
Torotrak PLC
21 April 2016
21 April 2016
Torotrak plc
("Torotrak" or the "Company")
Trading Update
Torotrak, (LSE: TRK), a leading developer and supplier of
emissions reduction and fuel efficiency technology for vehicles and
other machines, provides a trading update prior to announcing its
preliminary results for the year to 31 March 2016 at the end of
June.
Highlights
The Group has made good progress in executing the three year
strategy to commercialise its technologies - allocating resources
to deliver near-term commercial returns to shareholders. During the
last 12 months there has been a significant increase in interest
from potential licensees and OEM customers in gaining access to the
Group's KERS technology in off-highway and V-Charge in passenger
cars. The Group is now focusing its resources to deliver the
near-term commercial opportunities in these two key areas:
-- Strong interest in our V-Charge technology from Tier 1s and
OEMs, both for passenger cars and off-highway vehicle
applications:
o On-engine V-Charge testing programme being conducted by
University of Bath on track with results due early next month
o A 'should cost' study conducted with the Tier 1 study partner
demonstrating the total system cost advantage of V-Charge
technology compared to other advanced boosting solutions
o On track to demonstrate the real-world performance of the
V-charge twin-stage boosting configuration in a Ford Focus from
late July 2016
-- KERS off-highway is gaining significant traction - the
largest near term opportunity for commercialising the KERS
technology:
o A fully funded project with one of the largest global
manufacturers of off-highway construction and mining equipment to
design, develop and demonstrate a high-power KERS system
o The Group is actively engaged with several global off-highway
OEMs and in discussions with a number of Tier 1s who have expressed
interest in KERS for applications in construction and materials
handling
-- KERS-equipped bus has so far delivered fuel savings of 11.1%
on the MLTB cycle when compared to the baseline latest Euro6 bus -
simulations show that this could be potentially increased up to
14%
-- The results of the UK Government's Ultra Low Emission Bus
('LEB') grant applications have been delayed and no announcement
has been made by the Government to confirm the new date for the
awards:
o This uncertainty, coupled with persistent low fuel prices, is
causing bus operators to postpone investment in all low emission
technologies
o Wrightbus and Torotrak have therefore agreed to delay further
investment in the production launch of bus KERS until the situation
becomes clearer - Torotrak's engineering and cash resources will be
redeployed onto the other more promising, revenue generating and
near-term commercial opportunities, in line with the Company's
stated strategy of focusing its resources on the delivery of the
key products which are most likely to secure commercial take-up and
deliver near-term commercial returns
-- Successfully achieved a 20% reduction in net cash operating expenses
-- Cash at 31 March 2016 was GBP11.3 million (which excludes
R&D tax credits of GBP0.4 million received on 1 April 2016)
-- The Group continues to work with a number of passenger car
OEMs who are investigating the benefits of installing KERS into
conventional internal combustion powered vehicles to achieve fuel
efficiency, performance improvements and/or lower CO(2)
emissions
Brian Maybin, Group Engineering Director Wrightbus, said: "We
are pleased that our Euro6 StreetLite bus equipped with the new
smaller, lighter and more efficient second generation KERS now has
the capability to achieve close to our targeted 15% fuel saving on
the reference drive cycle. However, the bus diesel price and the
operators' commercial expectations have significantly changed
recently and therefore we are consulting with Torotrak on a revised
timeline to launch this product."
Nick Barter, Non-Executive Chairman, said: "I am pleased with
the overall progress that the business has made this year, but
disappointed at the decision to delay the launch of the bus KERS.
Despite the ongoing low fuel price environment that is creating
significant challenges for hybrid technologies such as KERS, we
foresee a strong year ahead building on the progress we have made
with our Tier 1 and OEM partners to commercialise our
technologies."
Adam Robson, CEO, said: "When we set out our strategy last year,
we chose to focus on three key areas (bus KERS, off-highway KERS
and V-Charge) in order to best optimise the use of our engineering
and cash resources. With the challenges facing all low emission
technologies in the UK bus market, we have decided to focus our
resources on the two areas (off-highway KERS and V-Charge). I am
optimistic about the market and the opportunities and believe we
can deliver the necessary licences over the coming 12 months in
these two key areas."
For more information, please visit www.torotrak.com or
contact:
Torotrak plc
Adam Robson, Chief Executive / Rex Vevers, Finance
Director
Tel: +44 1772 900931
Cantor Fitzgerald Europe (Financial Adviser &
Broker)
Marc Milmo / Will Goode
Tel: +44 20 7894 7000
Tavistock (Financial PR)
Simon Hudson / Lulu Bridges / James Collins
Tel: +44 20 7920 3150
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 CO(2) 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.
Trading Update
Overview
Since reporting the half year financial results in November
2015, the Company has continued to make good progress in executing
its three year strategy to commercialise the Group's technology and
reduce net cash operating costs by approximately 20%.
We are continuing to see a high level of commercial interest
from both Tier 1 and OEM partners in our KERS and V-Charge
technologies, particularly in the off-highway and passenger car
markets. In the UK bus market, low fuel prices, challenging
operator trading conditions and ongoing delays and uncertainty over
the Government's Ultra Low Emission Bus ('LEB') grant programme is
causing bus operators to delay investment in all low emission
technologies, including our bus KERS product. Accordingly, the
Board, following discussions with Wrightbus, has decided to delay
the additional investments required for production launch of the
bus KERS product targeted for later this year until the Group has
better visibility of the likely demand for KERS-equipped vehicles
from bus operators. The Group will continue to allocate engineering
resources to support the bus development programme and KERS fuel
trials with bus operators. However, the bulk of the Group's
engineering and cash resources will be redeployed onto the other
more promising, revenue generating near-term commercial
opportunities in line with the Company's strategy of focusing
resources on its key products which are most likely to secure
commercial take-up and deliver near-term commercial returns.
V-Charge
The on-engine V-Charge testing programme, being conducted by the
University of Bath ('Bath') in collaboration with a global Tier 1
supplier of engine boosting systems and with the participation of
the Ford Motor Company, is progressing well and is on track. Our
Tier 1 partner delivered the adapted turbocharger last month and
Bath is progressing with on-engine testing of the V-Charge system
in a production-intent design, twin-stage boosting configuration.
As previously announced, the results of this testing are expected
to be available by early May 2016. All the parties in the project
expect these results to show that this new V-Charge configuration
outperforms other advanced boosting systems in real-world drive
cycles. The Company remains on track to demonstrate the real-world
performance of the V-charge twin-stage boosting configuration in a
Ford Focus from late July 2016. The S-Max demonstrator vehicle is
planned to be completed and ready for presentation to OEMs after
August 2016.
Commercial discussions with our Tier 1 partner on the Bath study
are progressing well and the test results from the study will be an
important milestone to advancing the licensing discussions to the
next stage. The 'should cost' study conducted with the Tier 1 has
demonstrated the total system cost advantage of our V-Charge
technology compared to other advanced boosting solutions. We
continue to see very strong interest in our V-Charge technology
from Tier 1s and OEMs, both for passenger cars and also for a range
of off-highway vehicle applications where emissions legislation is
driving a need to downsize engines. A recent market study conducted
by Ricardo plc on our behalf has confirmed the significant size of
the global addressable market opportunities for our V-Charge
technology.
KERS
Off-highway applications:
As reported in our half year results, the off-highway sector
appears to offer the largest near-term opportunity for
commercialising the KERS technology. The Group has been awarded,
and will be signing shortly, a contract for a fully funded project
in collaboration with one of the largest global manufacturers of
off-highway construction and mining equipment to design, develop
and demonstrate a high-power KERS for integration in the main
drivetrain of a large off-highway vehicle. The project partners
believe there are significant potential opportunities for the
Group's low-cost KERS technology in a range of on and off-highway
commercial vehicles.
(MORE TO FOLLOW) Dow Jones Newswires
April 21, 2016 02:00 ET (06:00 GMT)
We are actively engaged with several global off-highway OEMs to
install our flywheel-based energy recovery technology into a range
of vehicles and other machines. We have recently delivered the
first development flywheel system to one of these OEMs for on-rig
testing as part of a broader KERS evaluation programme. If
successful, we expect this demonstration to be followed by a funded
product development programme for KERS.
Separately, we are also in discussions with Tier 1s who have
expressed interest in KERS for applications in construction and
materials handling. The product being developed with funding from
the Advanced Propulsion Centre ('APC') and in conjunction with JCB
is ready to enter validation testing and we have a volume-capable
supply chain ready. However, with the current low fuel prices we
are in discussions to amend the programme to incorporate a
cost-down design iteration to further reduce the manufactured cost
of the KERS. The objective is to enable the KERS to deliver
operator paybacks of less than two years at today's fuel prices and
on a broader range of duty cycles, opening up a larger global
market opportunity for our low-cost KERS product across a wider
range of machines.
On-highway commercial vehicles:
Testing of the second generation KERS integrated into a new
high-efficiency Euro6 StreetLite Micro Hybrid II bus has recently
been completed at the independent vehicle testing centre at
Millbrook. Independent certification of the fuel savings confirms
that the KERS-equipped bus has so far delivered fuel savings of
11.1% on the standard MLTB (Millbrook London Transport Bus) test
cycle when compared to the baseline Euro6 bus. We are working with
Wrightbus and the engine manufacturer to further improve this fuel
saving by conducting a more complete integration of Wrightbus and
Torotrak control systems. Our simulation shows that this has the
potential to take the overall fuel economy up to 14%. The Millbrook
testing also shows that the KERS-equipped bus exceeded the
threshold required to be eligible for the maximum LEB capital grant
funding; being 75% of the KERS system cost.
On the MLTB cycle, the bus also achieved significant emissions
improvements; CO(2) is down by 11.1% and greenhouse gas emissions
are down 14.8%. In parallel, our engineering and procurement teams
have worked with our Tier 1 partner and its Tier 2 supply chain
confirming the detailed bill of materials and total KERS system
cost in line with our previous estimates. Based on these costs, we
can reach the KERS system price target that Wrightbus set us in
2015.
Following the KERS trials conducted last year, we understand
that a number of bus operators submitted applications in October
2015 for LEB grants to purchase Wrightbus StreetLite vehicles
fitted with KERS. Confirmation of the LEB awards was due to have
been announced in January 2016. However, the results of the grant
applications have been delayed and no announcement has been made by
the Government's Office for Low Emission Vehicles ('OLEV') to
confirm the new date for the LEB grant awards to be announced. We
have received positive interest from bus operators for the Group's
KERS technology. However, in the absence of any visibility of the
LEB grant awards and with the current low level of fuel prices
(which operators have locked-in with forward hedging), and
following discussions with our partner Wrightbus, the Board has
decided to delay further investment in production tooling and
product and vehicle validation for the planned production launch of
the bus KERS later this year. The duration of the delay is
uncertain, depending upon the eventual award of LEB grants for
KERS-equipped vehicles, sustained higher fuel prices (net of fuel
subsidies) and an increased investment appetite amongst bus
operators for low emission technologies.
We will update investors on the revised timeline when the LEB
grant awards have been announced and Wrightbus has received KERS
orders from bus operators. In the meantime, our engineers continue
to work on the engineering demonstrator bus which will be showcased
to OEMs and bus operators and used for ongoing fuel trials. We have
also received a significant enquiry from a Chinese Province
interested in retrofitting KERS into their substantial existing bus
fleet. We are working to progress this and other potential
opportunities for our bus KERS product.
Lastly, we are exploring with commercial partners in the UK and
USA the opportunity to install KERS in on-highway trucks and to
evaluate the fuel savings and emissions reduction benefits when
compared to alternative technologies. If successful, this could
provide the opportunity to leverage significant elements of the
current bus KERS design as well as the new off-highway vehicle
demonstration programme.
Passenger car market:
The passenger car market continues to be a key target market for
the Group in which we believe that KERS can make a significant
contribution to addressing the regulatory requirement to deliver
significant real-world emissions reductions. We are working with a
number of passenger car OEMs who are investigating the benefits of
installing KERS into conventional internal combustion powered
vehicles to achieve fuel efficiency benefits, performance
improvements and/or lower CO(2) emissions. Proposals for
feasibility studies and follow-on design/development programmes
have been submitted and we are waiting to hear how many of these
have been successful; generating engineering services revenues and
the potential to lead to commercial production programmes.
IVT
The Innovate UK funded programme to develop and validate new
low-cost manufacturing methods for the supply of core variable
drive components such as discs and rollers is on track and is
generating intellectual property that is important to our Tier 1
partners for applications including V-Charge and main drive
transmissions. We maintain contact with Allison about their
programmes but these are not materially progressing at this
time.
Other
Closing cash at 31 March 2016 was GBP11.3 million (excluding
R&D tax credits of GBP0.4 million that were received on 1 April
2016).
We have successfully achieved a 20% reduction in net cash
operating expenses, in line with the cost reduction plan announced
in June 2015.
-ends-
This information is provided by RNS
The company news service from the London Stock Exchange
END
TSTEASLFALPKEEF
(END) Dow Jones Newswires
April 21, 2016 02:00 ET (06:00 GMT)
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