29 November 2016 Torotrak plc Half Year Results for the ... · Half Year Results for the six months...
Transcript of 29 November 2016 Torotrak plc Half Year Results for the ... · Half Year Results for the six months...
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29 November 2016
Torotrak plc
(‘Torotrak’, the ‘Company’ or the ‘Group’)
Half Year Results for the six months ended 30 September 2016 (unaudited)
Torotrak (LSE: TRK), a leading developer and supplier of emissions reduction and fuel efficiency technology
for internal combustion engine, hybrid and all electric powered vehicles, today publishes its half year
results for the six months ended 30 September 2016.
Strategy
The Group’s focus and strategic objective is the commercialisation and monetisation of its technology for
the benefit of shareholders. Given the progress made in these areas over the last 12 months, the near term
focus is on licensing V-Charge for passenger cars and Flybrid KERS for off-highway markets.
V-Charge – delivering lower fuel consumption and lower emissions engines
Technology has exceeded expectations in on-engine performance and responsiveness.
Ford Focus demonstrator test drives with 12 OEMs and 6 Tier 1s successfully completed, generating
strong interest in V-Charge.
On track to complete second demonstrator vehicle, Ford S-MAX (with V-Charge enabled 1.0L 3 cylinder
engine replacing a 1.5L 4 cylinder engine).
Significant interest being shown by multiple global OEMs and Tier 1s in V-Charge technology.
Flybrid KERS – launch in off-highway machines
Secured APC funded wheel loader programme in collaboration with Caterpillar Inc.
On track to license KERS into the global off-highway market.
High level of interest shown by multiple OEMs in hydraulically-connected energy recovery systems
(‘ERS’) for excavators, wheel loaders and other off-highway machines.
Financial
26 per cent improvement in equity free cash outflow compared to previous period.
Cash balance of £7.9 million in line with management’s expectations for the half year.
Key Financial Results:
£000’s
Six months ended 30 September 2016 (unaudited)
Six months ended 30 September 2015 (unaudited)
Revenue 935 1,169
Operating loss (3,696) (9,771)
Equity free cash outflow1 (3,390) (4,595)
Cash and cash equivalents 7,915 14,422
1Net decrease in cash and cash equivalents excluding proceeds from the issue of share capital and the repayment of borrowings.
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Nick Barter, Chairman, commented: “I am pleased with the real progress we are making towards delivering
on our strategic objectives in terms of commercial progress, cash management and organisational
performance.”
Adam Robson, Chief Executive, commented: “I believe we are on track to deliver the demonstrable
monetisation of our technologies that we committed to in 2015. We are seeing real progress in the off-
highway sector for KERS and the hydraulically-connected ERS product and V-Charge is exceeding our
expectations in terms of in-vehicle performance, OEM interest and Tier 1 engagement.”
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 internal combustion engine, hybrid and electric powered 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 improve engine performance, emissions and responsiveness.
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CEO’s Review
Introduction
As I set out in our 2016 Annual Report, the key focus of the Group is on licensing our V-Charge and Flybrid
KERS technologies. During the last six months we have continued to engage extensively with commercial
partners and potential licensees and we have developed meaningful commercial interest and market pull
for both technology solutions. We have made good progress towards our goal of licensing KERS in the off-
highway market and securing a global licence for V-Charge in passenger cars as well as growing our
engineering services order book. In parallel, and in support of our licensing discussions, we have made
progress with the in-house development of our low cost flywheel assembly manufacturing capability and
new low cost manufacturing processes for the discs and rollers at the heart of V-Charge.
I am pleased with the progress we have made over the last six months which has created a strong platform
for our licensing discussions. I report below in detail on the specific activities and the key technical and
other achievements as well as on our progress in improving our cash performance.
Market backdrop and key trends
Passenger cars:
The automotive industry is focused on developing technologies that can help meet the upcoming
regulatory fleet average emissions targets from 2020 onwards, as measured using the new World
Harmonised Light Vehicles Test Procedure (‘WLTP’) and the new real-world driving emissions test (‘RDE’).
The combination of lower emissions targets and more representative ‘real-world’ test procedures, together
with an increasing regulatory focus at national and city levels on air quality and hence reducing emissions
of NOx and particulates, represents a significant challenge for the automotive industry.
The impact of these changes has been an accelerating trend towards increased electrification of vehicle
powertrains which is leading to some significant changes in the focus of technology development by OEMs
and Tier 1s. There is a growing consensus that in the long term electric vehicles (of some form) will
eventually come to dominate the industry but that in the medium term hybrid vehicles will form the largest
group. A report by the International Energy Agency in 2016 indicates that by 2050 nearly 60 per cent. of
the global light duty vehicle stock will be non-electric vehicles. Consequently, there remains a strong
requirement for OEMs to continue to make significant improvements in the efficiency of internal
combustion engines. Indeed, a recent report published by BHP Billiton Limited forecasts that by 2030 the
average light duty vehicle will become one third more efficient, through advances such as improved ICE
thermal efficiency, engine downsizing / rightsizing, more transmission speeds and vehicle light-weighting; a
number of which can be achieved with the Group’s technologies.
OEMs require technologies that can meet the new real-world emissions regulations at the lowest possible
cost, whilst preserving vehicle performance and driveability and importantly remaining affordable for the
end customer. The Group’s V-Charge technology offers OEMs the potential to re-size engines across the
broadest possible range of vehicle platforms - pure ICE and hybrid - reducing fuel consumption and
emissions at a highly attractive cost per gram of CO2 saved. Similarly, our KERS technology can offer OEMs
a lower cost way to hybridise their vehicles when compared to other options, such as further vehicle
electrification. Our traction drive and KERS technologies can also help improve performance, including
acceleration and gradeability of full battery electric vehicles and fuel cell vehicles. In response to the trend
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towards further vehicle electrification, Torotrak is working with OEMs and Tier 1s to explore opportunities
to use the Group’s technologies cost-effectively across their BEV and PHEV platforms.
Commercial vehicles:
The bus and smaller commercial vehicle sector is influenced by many of the same trends as the passenger
car sector, in particular with respect to urban pollution. But in the off-highway commercial vehicle sector
the principal drivers remains reduced operator costs and payback times. With the continued low oil price
and difficult global market conditions in the mining and resources sector, the uptake of new technologies
remains challenging, but Torotrak’s technologies remain highly relevant because of their cost
competitiveness, controllability and robustness. The Group continues to focus its efforts on reducing the
cost of its technology products and improving fuel efficiency to be able to offer end customers a rapid
payback on the investment in new products. Both KERS and V-Charge offer the potential to downsize
engines without compromising performance-critical factors such as low end torque and rapid transient
response.
V-Charge
The Group has made very good progress during the last six months. We have delivered and exceeded the
technical milestones in the independent study conducted by the University of Bath and we are now
developing OEM / Tier 1 market pull and creating the platform to license the technology into the global
passenger car market.
Technology validation:
During the period the Group announced the successful results of the on-engine V-Charge testing
programme conducted by the University of Bath in collaboration with a global Tier 1 supplier of engine
boosting systems and with the participation of the Ford Motor Company (the ‘Bath Study’). The results of
the independent testing programme confirm that the key performance targets were successfully achieved
or exceeded and that V-Charge outperforms other advanced boosting solutions. The following key targets
were achieved using V-Charge in conjunction with a re-matched turbocharger on a 1.0L 3 cylinder Ford
EcoBoost engine:
Torque of >145Nm at 1,000rpm,
Torque of 240Nm from 1,400rpm upwards,
Torque increase of >40% compared to the base engine with a single turbocharger,
31 Bar BMEP,
Time to 90% of target torque (216Nm) ~1.0s at 1,400 rpm.
Importantly, the on-engine test results confirm that a V-Charge enabled 3 cylinder 1.0L EcoBoost engine
matches the torque output of a 4 cylinder 1.5L EcoBoost engine. The Group has successfully demonstrated
the increased performance of the V-Charge enabled 1.0L engine in a Ford Focus demonstrator vehicle and
is on track to demonstrate the increased performance and driveability of a Ford S-MAX using the V-Charge
enabled 3 cylinder 1.0L EcoBoost in place of the turbocharged 1.5L EcoBoost engine that is normally fitted
to the S-MAX.
Re-sizing engines:
Engine rightsizing and engine downsizing are important strategies to help OEMs meet the upcoming
regulatory emissions targets whilst simultaneously delivering lower emissions of NOx and particulates at an
affordable cost. Both require improvements in engine air boosting, in particular by supercharging. V-
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Charge is a variable speed mechanical supercharger using the Group’s unique traction drive technology. By
supplying variable air on-demand, V-Charge delivers sustained high power and high torque at any engine
speed with rapid response, avoiding the ‘lag’ of other boosting solutions. Other boosting technologies
including turbochargers and other mechanical superchargers are unable to deliver exactly the required
amount of air on-demand, thereby limiting the opportunity to reduce emissions through smaller engines
(downsizing) or larger engines operating at optimum efficiency (rightsizing). Further, electric superchargers
(“eboosters”), unlike V-Charge, are unable to sustain continuous boost, due to the lack of sufficient
electrical storage on-board, which is a fundamental constraint on their applicability and adoption.
Engine downsizing using existing boosting solutions often results in worse fuel economy in real-world
driving and higher emissions at full load. Current boosting solutions are unable to deliver sustained high
torque at low engine speeds. In an attempt to remedy this problem a smaller turbocharger may be used to
provide quicker response and enhanced low speed torque, however this increases exhaust back pressure
reducing the combustion efficiency of the engine, as well as increasing NOx output due to increased
combustion temperatures. As a consequence of high specific powers and enriched fuelling, downsized
turbocharged gasoline engines require expensive gas particulate filters, whilst downsized turbocharged
diesel engines require expensive de-NOx after treatment systems to mitigate the emissions from smaller
engines operating at high loads. In contrast, V-Charge delivers instant and sustained torque at lower engine
speeds allowing the turbocharger to be sized so that the engine operates more efficiently at higher engine
speeds, reducing the need for expensive after treatment systems. V-Charge offers OEMs the opportunity
to continue to use engine downsizing to reduce emissions and remain fuel efficient in real-world driving.
OEMs are increasing the use of alternative combustion cycles such as Miller to increase engine efficiency.
However, these alternative combustion cycles cannot generate the same engine power, requiring the
engine to be ‘rightsized’, resulting in increased emissions due to greater friction, compared to smaller
engines. V-Charge addresses this problem enabling more extensive use of the Miller combustion cycle even
at high torque and low engine speed, further reducing the emissions penalty of rightsized larger engines.
By delivering sustained high torque and enabling high power, V-Charge offers OEMs the opportunity to fully
exploit the combination of engine downsizing and, where appropriate, engine rightsizing to maximise the
improvements in fuel economy and lower emissions.
Diesel engines:
With an increased focus on improving air quality, there is a growing requirement to eliminate the problems
of soot, NOx and particulates on all engines. This is a particular problem with diesel engines which require
expensive after treatment systems to reduce the noxious emissions.
V-Charge can help reduce NOx and particulates emissions produced by diesel engines, particularly during
transient events, thereby reducing the need for expensive after treatment systems. This is an important
benefit, enabling OEMs to continue to maintain diesel engine powered vehicles as a significant part of their
fleet, thereby avoiding the additional CO2 emissions penalty that would result from moving to more
gasoline engine powered vehicles.
Global market opportunity:
The Group has recently completed an in-depth market study identifying the potential sales opportunities
for V-Charge. Using detailed engine data supplied by IHS Markit Ltd, and following discussions with a range
of OEMs and Tier 1 suppliers, we believe that V-Charge is applicable to a substantial proportion of both
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single-stage and twin-stage boosted engines, offering fuel economy and emissions benefits which other
boosting technologies such as variable geometry turbochargers and eboosters cannot deliver. The results
of the study, which have been shared with our potential OEM / Tier 1 partners, show that there is a market
opportunity in 2020 of around 25m engines per annum that could be addressed with V-Charge, rising to
around 45m engines per annum in 2025.
Demonstrator vehicle test drives:
The Group has recently completed an extended pan-European tour visiting the main global automotive
OEMS and Tier 1s (including those headquartered outside Europe). The visits included test drives of the V-
Charge enabled Ford Focus demonstrator car, sharing of the results of the Group’s market study and a
detailed presentation of V-Charge, including the technical results from the independent Bath Study. The
meetings and the test drives have generated a significant level of interest in V-Charge and the feedback to
date has been extremely positive, with all participants commenting on the impressive torque response at
low engine speeds delivered by V-Charge in the demonstrator vehicle. We are currently involved in follow-
on meetings with a number of interested parties who have expressed an interest in understanding the full
capability of V-Charge and conducting further technical and commercial evaluation.
In parallel with following up on the interest generated from the pan-European Focus car test drive
programme, as noted above, the engineering team is completing the installation of the V-Charge enabled
1.0L 3 cylinder Ford EcoBoost engine in the S-MAX, replacing the incumbent 1.5L 4 cylinder engine. This
larger vehicle will be used to demonstrate the performance, driveability and improved fuel economy and
emissions of the downsized engine when installed in a vehicle usually equipped with a 1.5L engine as the
smallest displacement engine. The programme is on track to be completed next month.
The focus in the coming months is to build on the significant interest shown in V-Charge and to convert this
interest into market pull from OEM and Tier 1 parties.
KERS
Off-highway:
In April 2016, the Group was awarded a fully-funded programme to design, develop and demonstrate a
high-power KERS for integration in the main drivetrain of a large mining truck. The programme is being
conducted in collaboration with one of the largest global manufacturers of off-highway construction and
mining equipment and within the Energy Technologies Institute’s (‘ETI’) Heavy Duty Vehicle Efficiency
programme. The programme is progressing well. The detailed design work is largely complete with
procurement of long lead time components underway. In parallel, we are in discussions with the ETI about
opportunities to demonstrate the KERS design in an on-highway commercial vehicle application such as an
articulated truck. The programme is on track and we are confident that all the technical requirements of
this demanding application will be delivered by the KERS design, demonstrating the scalability and high
power density of the low cost KERS technology.
The Group recently announced it had been awarded an Advanced Propulsion Centre (‘APC’) funded project
in collaboration with Turner Powertrain Systems (a wholly-owned subsidiary of Caterpillar Inc.). The
purpose of the project is to design and develop a low cost production-intent energy storage and recovery
system using the Group’s core flywheel technology for installation in a range of Caterpillar off-highway
machines. The initial target application is wheel loaders where the KERS technology will be integrated with
Caterpillar’s leading edge hydrostatic continuously variable transmission, delivering significant reductions in
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fuel consumption and CO2 emissions and enabling engine downsizing. Work on the 42 month project is due
to commence shortly.
The engineering team has recently completed the cost-down design iteration of the hydraulically-
connected flywheel-based energy recovery system (‘ERS’) developed in collaboration with JCB, and funded
by the APC. The improved design has been released to the Group’s supply chain partners who are
conducting a detailed costing exercise, validating the target production-intent system cost. The next stage
in the programme is investment by the Group and its supply chain partners in production tooling to enable
production-intent ERS units and sub-systems to commence full validation testing from mid-2017, in
preparation for market launch in mid-2018. The Group has recently completed a detailed market study
which confirms the significant market opportunity for ERS, offering operator paybacks of less than two
years in a range of off-highway machines including excavators, wheel loaders and materials handling
equipment. In parallel, discussions have been held with the main global Tier 1s and OEMs about trialling the
production-intent ERS product on a range of machines starting in the second half of calendar year 2017.
These discussions are ongoing, with a number of OEMs interested in the ERS product.
We are continuing discussions to licence our KERS technology into the global off-highway sector.
On-highway:
We continue to explore opportunities for the Bus KERS product in on-highway bus and truck applications
outside the UK. Discussions with potential customers and partners are at an early stage and we will update
shareholders with any significant progress in these applications.
Passenger cars:
The passenger car market remains an important target for the Group’s KERS technology. The key driver for
adoption onto vehicle platforms from 2020 onwards is a competitive cost per gram of CO2 saved compared
to alternative hybridisation options, such as electric solutions. The Group is conducting initial feasibility
studies with several OEMs looking at KERS on both hybrid and full battery electric vehicles, where the KERS
technology offers superior cost per gram of CO2 saved.
We are discussing the Group’s participation in an EU-funded consortium including vehicle OEMs and Tier 1s
about the use of our KERS technology in conjunction with an electric motor offering an alternative electro-
mechanical hybridisation solution for hybrid electric vehicles. The project would leverage the Group’s low
cost KERS technology and would be evaluated in a demonstrator vehicle against other hybrid solutions.
IVT/CVT
Our main focus in the last six months has been to build on the progress made earlier in the year in the
development and validation of new low cost mass manufacturing methods for discs and rollers for use in V-
Charge and other applications. The work, being conducted in collaboration with the Advanced Forming
Research Centre and the Manufacturing Technology Centre, underpins the Group’s confidence in achieving
the target, and highly competitive, bill of materials cost for V-Charge.
We have received a number of enquiries from automotive Tier 1s and OEMs about the potential
opportunity to use the Group’s core variator technology in the drivetrain for battery electric vehicles
(‘BEV’). Whilst these enquiries are at an early stage, it appears that drivetrains using our core CVT
technology have the potential to offer BEVs a cost effective improvement in performance, including
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acceleration and gradeability, whilst maintaining the feel of ‘liquid power’. A number of auxiliary power
applications using the core CVT technology are also in the early stages of evaluation.
The Group continues to support its strategic partner Univance in looking at opportunities for the Group’s
CVT technology in off-highway applications. Univance offers licensees of Torotrak’s variator technology the
opportunity to source low cost discs, rollers and complete variators from an established volume Tier 2
supplier of transmissions and transmission components for lower volume passenger cars and off-highway
applications.
Flywheel assembly manufacturing
During the last six months, the Group has been working to validate the design for lower cost flywheels in
conjunction with the Group’s strategic supply chain partners. Flywheels manufactured using a low cost
forging process have successfully completed the full life durability testing programme, exceeding the target
life requirements for the off-highway market. The next step in the development programme is to validate
further cost-down opportunities using lower cost materials and further improvements to the current
design. This work is important to delivering the step-change reduction in the cost of the hydraulically-
connected ERS product and meeting the challenging cost targets in passenger car applications.
We have completed the set-up of the Group’s low-volume flywheel assembly manufacturing cell facility in
Leyland. This facility includes some initial automation with processes managed to automotive quality
controlled standards. This is a significant step forward in building the in-house capability to assemble
complete flywheels in volumes of up to 10,000 units p.a.
Financial
Revenue in the period was £0.9 million (2015: £1.2 million) reflecting the focus on business development
activities related to licensing V-Charge and KERS and customer funded development programmes
commencing part way through the period. The reduction in gross profit of £0.2 million in the period is due
to lower engineering services revenues and a lack of licensing revenues in the period (2015: £0.1m licence
revenue). Revenue is targeted to increase in the second half of the year.
The operating loss before intangible asset amortisation (know-how) and exceptional items for the period
was £3.3 million, in line with the same period last year. The reduction in gross profit of £0.2 million and
higher non-cash expenses, being depreciation and share-based payments, of £0.2 million were offset by an
11 per cent. reduction in net cash operating expenses of £0.4 million. The loss for the period was £3.5
million, a reduction of £5.9 million over the previous period due to the exceptional costs in the previous
period of £6.0 million relating to the restructure of the Flybrid acquisition agreement, write down of the
Group’s investment in, and loan to, Rotrex A/S and other restructuring costs.
During the period the equity free cash outflow (EFCF1) was £3.4 million (2015: £4.6 million); an
improvement of 26 per cent. This has largely been achieved through the successful reduction in net cash
operating costs as previously reported, a £0.4 million receipt of research and development tax credits and
is despite a £0.1 million increase in capital expenditure, mainly as a result of the investment in the flywheel
assembly facility. 1Net decrease in cash and cash equivalents, excluding proceeds from the issue of share capital and the repayment of borrowings.
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The closing cash balance of £7.9 million (2015: £14.4 million) is in line with management’s expectations.
Our focus during the period has been on business development to secure licence revenues and to deliver
increased engineering services revenue in the second half of the current financial year and beyond.
Accordingly we expect our cash usage to further improve during the second half of this financial year.
Outlook
The first six months of the year have seen an increase in the level of engagement from potential parties
interested in the Group’s technologies. With a focus on our strategic objective of commercialising and
monetising our technologies, the Group’s immediate priorities for the next 6 months are:
Completing demonstrations of the Ford S-MAX,
Licensing V-Charge into the global passenger car market,
Licensing KERS into the global off-highway market,
Developing commercial interest in the Group’s hydraulically-connected ERS product underpinning
the commercial uptake in excavators and/or wheel loaders from 2018 onwards,
Commencing the production of low cost flywheel assemblies for use in the ERS validation
programme.
I look forward to reporting progress on our delivery against these key priorities.
Adam Robson
Chief Executive Officer
29 November 2016
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Condensed consolidated income statement
for the six months ended 30 September 2016
Unaudited Unaudited
six months six months
to 30/09/16 to 30/09/15
Notes £000 £000
Revenue 5 935 1,169
Direct costs (528) (535)
Gross profit 407 634
Operating loss 5 (3,696) (9,771)
Operating loss before intangible asset amortisation (know-how) and
exceptional items (3,313) (3,345)
Intangible asset amortisation (know-how) 6 (383) (383)
Exceptional items 7 - (6,043)
Operating loss (3,696) (9,771)
Net finance costs (89) (24)
Loss before tax (3,785) (9,795)
Income tax credit 8 276 369
Loss for the period attributable to the owners of the Parent Company (3,509) (9,426)
Basic and diluted loss per share (pence) 9 (0.65) (2.50)
The results above derive from continuing operations.
The notes on pages 14 to 20 form an integral part of these condensed consolidated half yearly financial statements.
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Condensed consolidated balance sheet
as at 30 September 2016
Unaudited Audited Unaudited
as at
30/09/16
as at
31/03/16
as at
30/09/15
Notes £000 £000 £000
Assets
Non-current assets
Intangible assets 6 14,265 14,576 14,965
Property, plant and equipment 6 1,375 1,379 1,391
Investments 10 3 3 3
Total non-current assets 15,643 15,958 16,359
Current assets
Inventories 176 221 314
Trade and other receivables 11 1,102 964 762
Tax receivable 592 779 727
Cash and cash equivalents 12 7,915 11,305 14,422
Total current assets 9,785 13,269 16,225
Total assets 25,428 29,227 32,584
Liabilities
Non-current liabilities
Finance lease obligations (130) (190) (251)
Deferred tax (1,733) (1,809) (2,044)
Borrowings (1,800) (1,811) (1,800)
Total non-current liabilities 13 (3,663) (3,810) (4,095)
Current liabilities
Finance lease obligations (121) (122) (120)
Trade and other payables (1,505) (1,993) (1,254)
Total current liabilities 13 (1,626) (2,115) (1,374)
Total liabilities (5,289) (5,925) (5,469)
Net assets
20,139 23,302 27,115
Capital and reserves
Issued share capital 14 30,355 30,319 30,319
Share premium 23,851 23,851 23,851
Other reserves (230) (194) (204)
Accumulated loss (33,837) (30,674) (26,851)
Total equity attributable to equity holders of the
Parent 20,139 23,302 27,115
The notes on pages 14 to 20 form an integral part of these condensed consolidated half yearly financial statements.
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Condensed consolidated statement of changes in equity
for the six months ended 30 September 2016
Issued
Share
capital Share premium
Other
reserve
Accumulated
loss
Total
equity
£000 £000 £000 £000 £000
Balance at 1 April 2015 27,629 9,140 (244) (17,541) 18,984
Loss for the period - - - (9,426) (9,426)
Total comprehensive expense - - - (9,426) (9,426)
Issue of shares to Allison Transmission Inc. 174 1,046 - - 1,220
Transfer of shares under share incentive plan - - 40 (15) 25
Share-based payment charge - - - 131 131
Issue of shares to vendors of Flybrid Automotive Ltd 714 4,286 - - 5,000
Issue of shares as a result of the Placing and Open
Offer and Firm Placing (net of costs) (i) 1,802 9,379 - - 11,181
Total transactions with owners 2,690 14,711 40 116 17,557
Balance at 30 September 2015 30,319 23,851 (204) (26,851) 27,115
Loss for the period - - - (4,072) (4,072)
Total comprehensive expense - - - (4,072) (4,072)
Transfer of shares under share incentive plan - - 10 (4) 6
Share-based payment charge - - - 253 253
Total transactions with owners - - 10 249 259
Balance at 31 March 2016 30,319 23,851 (194) (30,674) 23,302
Loss for the period - - - (3,509) (3,509)
Total comprehensive expense - - - (3,509) (3,509)
Issue of shares under share incentive plan 36 - (36) - -
Share-based payment charge - - - 346 346
Total transactions with owners 36 - (36) 346 346
Balance at 30 September 2016 30,355 23,851 (230) (33,837) 20,139
Note (i) The amount shown in share premium includes costs of £1,433k in relation to the fund raise in July 2015.
The notes on pages 14 to 20 form an integral part of these condensed consolidated half yearly financial statements.
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Condensed consolidated statement of cash flows
for the six months ended 30 September 2016
Unaudited Unaudited
six months six months
to 30/09/16 to 30/09/15
Notes
£000 £000
Cash flows from operating activities
Loss for the period (3,509) (9,426)
Adjustments for:
Non-cash exceptional cost in relation to the restructure of the Flybrid
acquisition agreement - 5,000
Impairment of investment in Rotrex A/S - 270
Creation of provision against Rotrex A/S loan - 147
Depreciation 6 214 300
Amortisation 6 482 473
Net finance costs 89 24
Loss on disposal of plant and equipment - 9
Taxation 8 (276) (369)
Charge for equity-settled employee share schemes and bonuses 346 131
Decrease in inventories 45 69
(Increase)/decrease in trade and other receivables (140) 406
Decrease in trade and other payables (464) (1,258)
Cash used in operations (3,213) (4,224)
Tax received 386 -
Net cash used in operating activities (2,827) (4,224)
Cash flows from investing activities
Acquisition of property, plant and equipment (286) (67)
Acquisition of intangible assets (patents) (128) (228)
Net cash used in investing activities (414) (295)
Cash flows from financing activities
Proceeds from the issue of share capital (net of costs) - 12,401
Net finance costs (88) (18)
Repayment of borrowings - (1,000)
Net hire purchase finance (61) (58)
Net cash (used in)/generated from financing activities (149) 11,325
Net (decrease)/increase in cash and cash equivalents (3,390) 6,806
Cash and cash equivalents at start of period 11,305 7,616
Cash and cash equivalents at end of period 12 7,915 14,422
The notes on pages 14 to 20 form an integral part of these condensed consolidated half yearly financial statements.
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Notes to the half year financial information
1. General information
Torotrak plc (the Company) is a public limited company incorporated and domiciled in the UK. The address of its
registered office is 1 Aston Way, Leyland, Lancashire PR26 7UX. The Company is listed on the London Stock
Exchange under the trading symbol TRK. These condensed consolidated interim financial statements were
approved for issue on 28 November 2016.
The Group’s activities focus on the design, development and commercialisation of a range of technologies that
enable vehicle manufacturers to meet new regulations as well as improving fuel-efficiency, reducing emissions and
enhancing performance.
The interim financial statements for the period ended 30 September 2016 do not constitute statutory accounts
within the meaning of section 434 of the Companies Act 2006.
The financial information set out in this interim statement relating to the year ended 31 March 2016 does not
constitute statutory accounts for that period. Full statutory accounts of the Group in respect of that financial year
were approved by the Board of Directors on 26 July 2016 and have been delivered to the Registrar of Companies.
The report of the Auditors on these accounts was unqualified, did not contain an emphasis of matter paragraph and
did not contain a statement under section 498 of the Companies Act 2006.
1.1 Going concern basis
The Group’s business activities, together with the factors likely to affect its future development, performance and
position are set out in the Chief Executive Officer’s Review (‘CEO’s Review’). The financial position of the Group
and liquidity position are described within the CEO’s Review.
After making all necessary enquiries, the Directors have a reasonable expectation that the Group has adequate
resources to continue in operational existence for a period of at least twelve months from the date that these
interim Financial Statements were approved, given the cash resources available to the Group and the future cash
flow forecast. Accordingly, the Directors believe that it is appropriate for the Financial Statements to continue to be
prepared on the going concern basis.
2. Basis of preparation
These condensed consolidated interim financial statements for the six months ended 30 September 2016, have
neither been reviewed or audited, have been prepared in accordance with the Disclosure and Transparency Rules
(DTR) of the Financial Conduct Authority and in accordance with IAS 34, ‘Interim financial reporting’ as adopted by
the European Union (EU). The condensed consolidated interim financial statements should be read in conjunction
with the annual financial statements for the year ended 31 March 2016 which have been prepared in accordance
with International Financial Reporting Standards (IFRSs) as adopted by the EU.
3. Accounting policies
The accounting policies adopted in preparation of the condensed consolidated interim financial statements as at,
and for the six months to, 30 September 2016 are consistent with the policies applied by the Group in its
consolidated financial statements as at, and for the year to, 31 March 2016, except as described below:
- Taxes on income in the interim periods are accrued using the effective tax rate that would be
applicable to expected total annual profit or loss.
There are no new standards or amendments to standards that are mandatory for the first time in the financial year
beginning 1 April 2016 that have an impact on the Group financial statements.
4. Critical accounting estimates and assumptions
In applying the accounting policies, appropriate estimates have been made in many areas. The key areas of
estimation uncertainty, where assumptions and estimates are significant in terms of impact upon the financial
15
statements, are the same as those that are described in the annual financial statements for the year ended 31
March 2016.
5. Operating segments
Operating segmental analysis for the six months ended 30 September 2016
Engineering
services
Income from
licence
agreements
Development
activities
(i)
Total
£000 £000 £000 £000
Revenue (by technology)
IVT 50 - - 50
Flybrid ERS 854 - - 854
V-Charge and other 31 - - 31
Total revenue 935 - - 935
Direct costs (528) - - (528)
Gross profit 407 - - 407
Other operating costs - - (2,416) (2,416)
Total segmental profit/(loss) 407 - (2,416) (2,009)
Other operating costs not allocated to
segments (1,687)
Operating loss (3,696)
Operating segmental analysis for the six months ended 30 September 2015
Engineering
services
Income from
licence
agreements
Development
activities
(i)
Total
£000 £000 £000 £000
Revenue (by technology)
IVT 66 100 - 166
Flybrid ERS 999 - - 999
V-Charge and other 4 - - 4
Total revenue 1,069 100 - 1,169
Direct costs (533) (2) - (535)
Gross profit 536 98 - 634
Other operating costs - - (2,735) (2,735)
Total segmental profit/(loss) 536 98 (2,735) (2,101)
Other operating costs not allocated to
segments (7,670)
Operating loss (9,771)
Note (i) Development activities include research and the creation of intellectual property.
16
Significant customers
The following revenues are attributable to significant customers:
Unaudited Unaudited
six months six months
to 30/09/16 to 30/09/15
£000 £000
Allison Transmission Inc. - 100
Undisclosed customer - 633
Undisclosed customer - 150
Undisclosed customer 762 130
6. Property, plant and equipment and intangible assets
Property plant
and equipment
Intangible assets
(patents)
Intangible
assets
(goodwill and
know-how) Total
£000 £000 £000 £000
Net book value at 1 April 2015 1,698 2,314 12,907 16,919
Additions 7 217 - 224
Disposals (14) - - (14)
Amortisation/depreciation (300) (90) (383) (773)
Net book value at 30 September 2015 1,391 2,441 12,524 16,356
Additions 250 158 - 408
Disposals - (30) - (30)
Amortisation/depreciation (262) (93) (384) (739)
Impairment provision - (40) - (40)
Net book value at 31 March 2016 1,379 2,436 12,140 15,955
Additions 210 171 - 381
Amortisation/depreciation (214) (99) (383) (696)
Net book value at 30 September 2016 1,375 2,508 11,757 15,640
7. Exceptional items
Unaudited Unaudited
as at 30/09/16 as at 30/09/15
£000 £000
Restructuring costs – severance related - 539
Share issue in relation to the restructure of the Flybrid acquisition
agreement - 5,000
Impairment of investment in Rotrex A/S - 270
Provision against the loan to Rotrex A/S - 147
Restructuring costs - one-off legal and other costs - 87
Total - 6,043
The severance related restructuring costs relate to redundancy, severance and associated expenses in relation to
a reduction in employees.
In the financial year ended 31 March 2016 the Group received Shareholder approval to restructure the acquisition
agreement with the vendors of Flybrid Automotive Limited and as such a one-off settlement was agreed with the
vendors by way of issuing new ordinary shares in the Group to the value of £5m. The vendors of Flybrid
Automotive Limited, Jon Hilton (Non-Executive Director) and Doug Cross (Chief Technology Officer), received
17
shares to the value of £3.5m and £1.5m respectively as part of the settlement. The £5m was treated as an
exceptional item.
The investment in Rotrex A/S and the loan due from Rotrex A/S were written down in the financial year ended 31
March 2016 due to the uncertainty of the value of the net assets of Rotrex A/S and also the recoverability of the
loan.
The one-off legal and other costs relate to the restructuring of the Flybrid acquisition agreement.
8. Taxation
The Finance Act 2000 introduced the research and development tax credit, which allows companies with qualifying
expenditure to surrender their tax losses for cash. The credit for research and development tax credits for the
period is based on the estimated effective tax rate of 33.35% (2015: 33.35%).
Changes to the UK corporation tax rates were announced on 8 July 2015. These changes were substantively
enacted as part of the Finance Bill 2015 on 26 October 2015 and include reductions to the main rate to 19% from 1
April 2017 and to 18% from 1 April 2020. On 16 March 2016 further changes to the UK corporation tax rate were
announced including a further reduction in the UK corporation tax rate to 17% from 2020, which supersedes the
change enacted on 26 October 2015, and which was substantively enacted as part of the Finance Bill 2016 on 15
September 2016.
The deferred tax liability relates solely to the intangible assets recognised on the acquisition of Flybrid Automotive
Limited. The deferred tax liability will be amortised through the Income Statement to match the amortisation of the
underlying intangible asset, being over 15 years.
Unaudited Unaudited
as at 30/09/16 as at 30/09/15
£000 £000
R&D tax credit 199 292
Deferred tax 77 77
Total 276 369
9. Loss per share
The basic and diluted loss per share are based on a loss after tax of £3,509,000 (2015: £9,426,000). The weighted
average number of shares was 543.4 million shares (2015: 376.8 million) and the diluted weighted average number
of shares was 621.3 million (2015: 390.7 million).
For the six months ended 30 September 2016 and 2015 potential share options are antidilutive, as their inclusion in
the diluted loss per share calculation would reduce the loss per share, and hence have been excluded.
Unaudited Unaudited
six months six months
to 30/09/16 to 30/09/15
The basic loss per share from continuing operations attributable to the
equity holders of the Company (pence) (0.65) (2.50)
The diluted loss per share from continuing operations attributable to the
equity holders of the Company (pence) (0.65) (2.50)
In accordance with IAS33 ‘Earnings per Share’ the number of shares used in the calculation excludes the weighted
average number of shares held by the Employee Benefits Trust of 4,925,535 (2015: 2,369,723).
18
10. Investments
Unaudited Audited Unaudited
as at 30/09/16 as at 31/03/16 as at 30/09/15
£000 £000 £000
Net investment in Rotrak joint venture 3 3 3
The Group also holds an investment in Rotrex A/S. This investment is no longer supported by the net assets of
Rotrex A/S and as such an impairment provision was created in the financial year ended 31 March 2016 in
accordance with the Group’s accounting policy. This investment has a net book value of £nil (2015: £nil).
11. Trade and other receivables
Unaudited Audited Unaudited
as at 30/09/16 as at 31/03/16 as at 30/09/15
£000 £000 £000
Current assets
Net trade receivables 357 66 153
Other receivables and accrued income 379 367 313
Prepayments 366 531 296
Total trade and other receivables 1,102 964 762
At 30 September 2016 the Group had a loan outstanding of £147k with Rotrex A/S. In the financial year ended 31
March 2016 a provision was created against the value of this loan due to the uncertainty of recoverability. This
loan has a net book value of £nil (2015: £nil).
The net trade receivables includes a provision for impairment of £51k in relation to a potentially unrecoverable debt
in accordance with the Group’s accounting policy.
12. Cash and cash equivalents
Unaudited Audited Unaudited
as at 30/09/16 as at 31/03/16 as at 30/09/15
£000 £000 £000
Cash 17 17 20
Sterling short term cash deposits 7,039 10,481 14,033
Foreign currency and cash deposits 859 807 369
Total cash and cash equivalents 7,915 11,305 14,422
19
13. Trade and other payables
Unaudited Audited Unaudited
as at 30/09/16 as at 31/03/16 as at 30/09/15
£000 £000 £000
Non-current liabilities
Finance lease obligations 130 190 251
Deferred tax 1,733 1,809 2,044
Borrowings (i) 1,800 1,811 1,800
Total non-current liabilities 3,663 3,810 4,095
Current liabilities
Trade payables 462 862 212
Social security and income tax 134 119 164
Accrued pension contributions 34 36 2
Accruals 781 618 841
Finance lease obligations 121 122 120
Interest on borrowings 10 - 10
Deferred income 84 358 25
Total current liabilities 1,626 2,115 1,374
(i) The borrowings represent a five year term loan from the vendors of Flybrid Automotive Limited as detailed in
note 15. The loan is secured on the tangible and intangible assets of Flybrid Automotive Limited and can be repaid
by the Company at any time during the five years. The loan carries a fixed annual interest rate of 7 per cent.
14. Issued Share Capital
Unaudited Audited Unaudited
as at 30/09/16 as at 31/03/16 as at 30/09/15
£000 £000 £000
Allotted and fully paid
Ordinary shares of 1 pence each 5,489 5,453 5,453
Deferred shares of 9 pence each 24,866 24,866 24,866
Total Share Capital 30,355 30,319 30,319
Unaudited Audited Unaudited
as at 30/09/16 as at 31/03/16 as at 30/09/15
Number of shares Number of shares Number of shares
Allotted and fully paid
Ordinary shares of 1 pence each 548,909,251 545,357,557 545,357,557
Deferred shares of 9 pence each 276,286,047 276,286,047 276,286,047
15. Related party transactions
There was a loan outstanding of £30,000 to Rotrak Limited at 30 September 2016 (2015: £29,000).
There was a long term loan outstanding to Rotrex A/S of £147,000 (2015: £147,000), against which a provision has
been created due to the uncertainty of recovery, as explained in note 11.
There was a loan amount due to Jon Hilton of £1,260,000 (2015: £1,260,000) and Doug Cross of £540,000 (2015:
£540,000) as explained in note 13 in relation to the acquisition of Flybrid Automotive Limited.
20
In the period to 30 September 2016 there was an amount of £44,466 paid to Jon Hilton and an amount of £19,057
paid to Doug Cross in respect of loan interest. £7,250 was due to Jon Hilton and £3,107 due to Doug Cross in
respect of loan interest at 30 September 2016; these amounts were paid on 1 October 2016.
Jon Hilton is a Director of Celeratis Limited. In the period to 30 September 2016 there was an amount of £40,165
paid to Celeratis Limited for consultancy services. There was an amount due to Celeratis Limited of £2,478 at 30
September 2016.
16. Commitments
Capital expenditure contracted for at the balance sheet date but not yet incurred was £nil (2015: £6,000).
17. Financial Risk Management
The Group’s activities expose it to a variety of financial risks including currency risk, credit risk, liquidity risk and
interest rate risk.
The condensed consolidated interim financial statements do not include all financial risk management information
and disclosures required in the annual financial statements; they should be read in conjunction with the Group’s
annual financial statements as at 31 March 2016. There have been no changes in any risk management policies
or financial risks since the year end.
18. Seasonality
The Group’s results and activities are not affected by seasonality.
21
Statement of Directors’ responsibilities
The Directors confirm that, to the best of their knowledge, these condensed consolidated interim financial
statements have been prepared in accordance with IAS 34 ‘interim financial reporting’ as adopted by the European
Union and that the interim management report includes a fair review of the information required by DTR 4.2.7 and
DTR 4.2.8, namely:
an indication of the important events that have occurred during the first six months and their impact on the condensed consolidated interim financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and
material related-party transactions in the first six months and any material changes in the related-party transactions described in the last annual report.
The Directors of Torotrak plc are listed in the Torotrak plc Annual Report for the year ended 31 March 2016. A list
of current Directors is maintained on the Torotrak plc website: www.torotrak.com.
By order of the Board on 28 November 2016
Adam Robson
Chief Executive
-ends-