26 November 2015
Torotrak plc
(“Torotrak”, the “Company” or the “Group”)
Half Year Results for the six months ended 30 September 2015
Torotrak (LSE: TRK), a leading developer and supplier of emissions reduction and fuel efficiency technology
for vehicles, today publishes its half year financial results for the six months ended 30 September 2015.
Strategy
 The appointment of Adam Robson as CEO in April 2015 led to the adoption of a refined three year
strategic direction with the sole objective of commercialising the Group’s technologies:
o Cash operating cost base reduced by an annualised 20%+, with the full financial benefit
expected in the next financial year,
o Reorganisation and restructure of the Group to focus resources on commercialising the
Group’s technologies through three key nearer-term opportunities: Bus KERS, Off-highway
KERS and V-Charge,
o £12.4 million net raised through a subscription, firm placing, placing and open offer,
Flybrid KERS
Off-highway KERS
 APC-funded programme in collaboration with JCB progressing well and on-track,
 KERS system currently being tested on machine to optimise fuel saving capability,
 Commercial discussions well advanced to secure a supply agreement with a global Tier 1 partner to
manufacture and supply KERS systems in volume to JCB,
Bus KERS
 KERS-enabled Euro V StreetLite bus trial with Arriva completed with development lessons
embedded in second generation design,
 Second generation production-intent KERS design completed; initial calibration runs and testing
undertaken at Millbrook on a Euro VI StreetLite vehicle,
V-Charge
 Commenced V-Charge on-engine rig testing at University of Bath with initial results in line with
simulation tests,
 Ford Focus car ready for installation of V-Charge adapted engine once rig testing at Bath is
completed, S-Max vehicle undergoing benchmarking before conversion,
 Strong customer interest from OEMs and Tier 1s to review Bath study results and test drive the
cars,
Variable traction drive transmissions
 Innovate UK funded programme commenced to develop volume-capable manufacturing processes
of core components for transmissions and V-Charge,
 Revised main drive transmission layout presented to Allison to further improve packaging,
Financial
 Cash balance of £14.4 million at 30 September 2015.
1
Nick Barter, Torotrak’s Chairman said: “I am pleased with the progress we have made against our strategy
since Adam’s appointment as Chief Executive in April this year. The main bus and off-highway KERS
programmes remain on track to meet the technical and commercial targets required to achieve commercial
launch in collaboration with our Tier 1 partner. On V-Charge, the initial results from on-engine testing
conducted by the University of Bath confirm the simulated improvements in fuel efficiency and
performance. Discussions with potential Tier 1 licensees across our technology portfolio continue to move
forward. Overall we are on track to deliver our plans as laid out in the Prospectus issued in June 2015.”
Brian Maybin, Engineering Director Wrightbus said: “We remain committed to our KERS programme with
Torotrak which will help our new StreetLite Micro Hybrid bus deliver industry leading fuel economy.”
For more information, please visit www.torotrak.com or contact:
Adam Robson, Chief Executive / Rex Vevers, Finance Director
Torotrak Plc
Tel: +44 1772 900931
Marc Milmo / Will Goode / David Banks
Cantor Fitzgerald Europe
Tel: +44 20 7894 7000
Simon Hudson / Lulu Bridges / James Collins
Tavistock
Tel: +44 20 7920 3150
Notes to Editors
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.
2
Chief Executive’s Review
Introduction
Following my appointment as Chief Executive in April this year, I am pleased to report on my first six
months’ operating and financial results. The majority of this period has been spent resetting the strategic
direction of the Group to focus on commercialising our technology and restructuring and refinancing the
Group to provide a platform to realise value for shareholders.
In July 2015, the Group raised £12.4 million (net of expenses) through the issue of new ordinary shares in a
subscription, firm placing, placing and open offer. The Group also restructured the Flybrid acquisition
agreement, reducing the original acquisition price payable under the earn-out arrangement and refinancing
the vendor loan notes. The net effect of the restructuring was to settle the earn-out agreement through
the issue of approximately 71.4 million new ordinary shares (£5.0 million at the issue price) eliminating the
potential maximum £10.0 million cash consideration payable under the earn-out arrangement, converting
£1.8 million of the vendor loan notes into a new £1.8 million five year term loan and the payment of £1.0
million in cash to the Flybrid vendors in settlement of the remaining loan notes.
In addition, the Group has successfully implemented a reorganisation and cost reduction programme to
reduce the on-going cash operating costs and refocus the Group’s resources on commercialising its existing
technologies and products. The reorganisation was completed in September and I am pleased to report
that, with the support of our employees, the target 20 per cent reduction in cash operating costs has been
achieved with the full benefit of these savings being realised over the next financial year. The main cost
reductions have been achieved through a reduction in headcount, the elimination of cash bonuses and
other employment-related benefits and eliminating other cash operating costs that are not necessary to
deliver the Group’s key commercialisation priorities. Going forward, further reductions in non-essential,
non-headcount related cash operating costs will remain a key priority for the senior management team.
These savings were achieved by fully realising the synergies between Torotrak and Flybrid and more
importantly by focusing the organisation around three key projects which address what we see as the
principal nearer-term opportunities to commercialise our technology. These are Off-highway KERS, Bus
KERS and V-Charge.
Market backdrop
Recent findings by regulators in the USA and EU identifying significant discrepancies between the levels of
noxious and CO2 emissions reported by passenger car OEMs and those found during independent testing
has increased the pressure on the automotive industry and regulatory authorities to ensure that real-world
vehicle emissions meet the regulatory emissions targets. Key developments will include the new World
Harmonised Light Duty Test Procedure (‘WLTP’) due to be implemented from 2017/18 onwards and which
is now likely to be implemented without delay or further amendment.
The introduction of the WLTP will increase the challenges facing vehicle OEMs in trying to satisfy the
regulatory emissions requirements as the new test will result in higher measured real-world CO2 emissions
compared with those measured under the current test protocols. In addition, it is anticipated that
regulatory authorities will rigorously enforce the new emissions requirements reducing the likelihood that
lobbying will delay the introduction of these more challenging requirements from 2021 onwards. The need
for OEMs to implement cost-effective, practical new technologies such as the Group’s technology solutions
3
has never been greater and offers the Group a significant opportunity to secure adoption on new vehicle
platforms targeting the more onerous emissions requirements post 2021.
During the last six months, the global economic climate for off-highway commercial vehicles has
deteriorated significantly. This has been caused by a combination of low commodity prices leading to
reduced activity levels in markets such as mining and a slowdown in China, particularly in the construction
sector. In response to this slowdown, a number of off-highway vehicle OEMs have already announced
significant cost cutting and job reduction programmes. So far the impact on the Group has been the delay
and possible cancellation of one potential major vehicle demonstration programme for KERS which the
Directors had expected would commence this calendar year and the delay in an IVT evaluation programme
that was expected to take place in the current financial year. Our current active programmes have not
been affected.
KERS
On-highway commercial vehicles:
The bus trial conducted in collaboration with Arriva in Gillingham has now been completed. The Gillingham
trial has satisfied its primary purpose which was to demonstrate the usability of the system in a real
operational environment, provide the relevant data to improve performance, and prove-out the
requirements for the successful implementation of the system in the StreetLite bus on a commercial basis.
The trial generated important outputs, which have fed into the next generation production-intent design
and the KERS unit will be stripped down and analysed to collect reference data to be used as part of the
design verification and validation process. Our analysis of the data shows that the expected energy was
being captured and stored during braking events and that fuel was being saved but that the overall fuel
economy was compromised because of the nature of the calibration in this first trial. The net result was
that on average the bus accelerated harder and spent more time at top speed when the KERS was
operating. We will be able to correct this position during our next phase of calibration work.
One of the key lessons learned from the trial was the difficulty of gaining sufficient access to the vehicle
whilst in-service to be able to make modifications and advance the calibration activities. To address this,
and speed up the development cycle, we have now leased a new Euro VI StreetLite Micro Hybrid bus (‘lease
bus’) which will be fitted with the latest generation production-intent KERS unit and will be used to
complete the calibration work, including the learnings from the first trial, ahead of the planned start of
production in mid-2016.
The design of the second generation production-intent KERS unit has been completed and we are working
closely with the engineering and procurement teams of our Tier 1 partner to finalise the detailed bill of
materials costing, nominating Tier 2 suppliers and placing orders for production tooling for the long lead
time components. Initial testing of this KERS design has been conducted on three early production-intent
units (made using rapid manufacturing techniques rather than using production tools and processes) to
verify the design. This has involved the testing of the complete KERS system on rigs and on a Euro VI
StreetLite vehicle and included initial calibration runs and testing at Millbrook. Based on the work
completed to date, the target is to achieve independent certification of the fuel savings from a KERSequipped Euro VI StreetLite Micro Hybrid vehicle ahead of sales in the second half of 2016.
We understand that a number of bus operators have submitted applications under the Government Ultra
Low Carbon Bus grant programme (‘LEB’) to purchase StreetLite vehicles fitted with KERS systems,
4
supporting the start of production in mid-2016. The next stage of the programme is to fit the lease bus
with one of the pre-production KERS systems and complete the detailed calibration and integration work in
preparation for the start of production and to confirm the level of LEB grants applicable to bus operators
purchasing KERS-enabled StreetLite vehicles.
In parallel, in conjunction with our Tier 1 partner, we are working on a number of other bus opportunities
to fit KERS units in new and retrofit buses and trucks for the UK and a number of other EU countries.
Off-highway commercial vehicles:
Despite the global slowdown in the off-highway commercial vehicle market, the Board believes that this
sector represents a very significant market opportunity for KERS. The Group’s KERS technology is wellsuited to off-highway applications due to its low-cost, rugged, mechanical architecture, its ability to recycle
both kinetic and potential energy to allow engine downsizing and its ability to deliver the challenging
financial payback (often less than two years) and lifetime targets demanded by end-user operators. We are
seeing strong customer interest from Europe, North America and Asia.
The Group’s leading go-to-market programme, in collaboration with JCB, is to design and develop a
flywheel-based energy recovery system for excavators. The programme is part-funded by the Advanced
Propulsion Centre (‘APC’). During the last six months, JCB has successfully demonstrated the fuel-saving
capability and performance of the KERS system on an excavator operating typical duty-cycles. The Group
has also worked closely with JCB and a global Tier 1 manufacturer to complete the design for manufacture
and assembly, productionise the KERS design and validate the KERS bill of materials, in order to meet the
challenging cost and payback targets required by JCB.
The next phase of the project is to build a number of KERS systems ‘off tool’ and conduct on rig and onvehicle durability testing to validate that the production-intent design meets the required in-service
durability targets. The Group is in active negotiations with a global Tier 1 to finalise a license agreement to
manufacture and supply the complete KERS system to JCB. The Group will license the complete KERS
system design and manufacture and supply the high value flywheel assemblies with the final KERS system
assembly being undertaken by the Tier 1. The Group and the Tier 1 are in early stage discussions about
other market opportunities to use the KERS technology across a range of other off-highway applications.
Finally, the Group is also in early stage discussions with a global off-highway OEM about potential
alternative applications for the Group’s high speed flywheel KERS technology and has a contract to supply a
first development flywheel.
Passenger car market:
During the period, the Group has been working with two different vehicle OEMs to evaluate the potential
benefits from fitting KERS to full electric vehicles. Both of these studies are on-going with initial results
suggesting that fitting KERS to a full electric vehicle can improve the performance of the vehicle and the
performance and lifetime of the batteries, particularly where frequent high discharge events are required
without degradation of the battery performance.
The Group is also working with several other OEMs looking at the benefits of fitting KERS to conventional
internal combustion powered vehicles. These studies include a review of packaging, costs and fuel
efficiency and performance improvements.
5
As noted in the Prospectus issued in June 2015, we believe that the passenger car market represents a
significant market opportunity for the Group’s KERS technology. Given the long development lead times in
the automotive industry, the focus is to secure licensing arrangements to adopt the technology on new
vehicle platforms from 2021 onwards.
V-Charge
The Innovate UK funded programme to develop a production orientated version of V-Charge for a specific
downsized engine application for passenger cars is progressing well. The project is being conducted in
collaboration with the University of Bath (‘Bath’), a global Tier 1 supplier of engine boosting systems and
with the participation of the Ford Motor Company (‘Ford’). Bath is a world-recognised centre of excellence
in the field of pressure charging and is responsible for independently validating the potential of V-charge to
improve fuel consumption and performance compared to incumbent boosting technology.
The initial simulation phase of the project indicates the potential for V-Charge to improve the performance
of modern downsized engines while retaining fuel economy benefits. The next stage, to validate the
benefits of V-Charge by conducting on-engine rig testing using the 1.0L Ford Ecoboost engine is underway
and initial results appear to closely match the results from the simulation. It is too early to predict the
outcome of the tests, but so far the results are very encouraging.
The final phase of the project is to reconfirm the results of the simulation and rig testing in a real-world
environment by installing V-Charge equipped engines in a Ford Focus and S-Max to conduct in-vehicle
testing. The objective is to demonstrate the capability of V-Charge to enable significant engine downsizing,
delivering real-world performance improvements and fuel economy without affecting the driveability of
the vehicle. The vehicles will be used to demonstrate V-Charge to Tier 1s as part of our strategy to
stimulate licensing discussions.
We have seen increased levels of interest by Tier 1s in our V-Charge technology and anticipate commencing
licensing discussions when the validated results from the Bath study are available to be shared with
potential licensees, likely to be in Q1 2016. An initial cost study has commenced with one potential Tier 1
partner to confirm the target bill of materials. We have also seen an increased level of interest in V-Charge
for smaller off-highway vehicles. Whilst these discussions are at a very early stage, there are potential
opportunities across a broad range of vehicles.
Main drive transmissions
The main development during the last six months has been the commencement of the Innovate UK funded
programme to develop and validate new low-cost manufacturing methods for the supply of core
components such as discs and rollers. This is a multi-year programme which is intended to enable the
Group to supply or license the intellectual property to potential Tier 1 partners to supply core components
ranging from applications such as V-Charge up to main drive transmissions, all meeting the challenging
requirements of costs and durability.
The Group continues to work with its strategic partner Univance about opportunities to use our CVT
technology for off-highway commercial vehicles. However, as noted earlier, the slowdown in the global offhighway market is likely to impact these discussions and potentially delay the commencement of new
programmes.
6
During the last few months the Group has presented to Allison a revised main drive transmission layout to
further reduce overall package size. We are awaiting feedback from Allison’s engineering team as to
whether the benefits offered by the proposed new layout are sufficient for them to commence a detailed
evaluation programme.
Manufacturing
As part of the Group’s strategy to commercialise its technology and deliver value to shareholders, we have
decided to focus our manufacturing activity on the production of flywheel assemblies only and to partner
with Tier 1s and OEMs to manufacture and supply the complete KERS systems. By adopting this strategy,
the Group is able to focus its resources on manufacturing the high value, IP rich KERS components and to
limit the investment required in manufacturing equipment and production systems. This strategy will
enable the Group to drive down the cost of the flywheels through volume consolidation and investment in
continuous improvement, to secure earlier licensing revenues and to leverage the capabilities of its
partners to identify multiple applications and markets.
For global mass markets such as passenger cars, it is likely that the Group will adopt a pure licensing model
which will include the production of flywheel assemblies.
Financial review
The major events during the six months ended 30 September 2015 impacting the financial results were the
fund raise, the restructuring of the Flybrid acquisition agreement and the completion of the reorganisation
and cost reduction programme.
Fund raise and Flybrid restructure:
As part of the refinancing of the Group, agreement was reached with the vendors of Flybrid to restructure
the original Flybrid acquisition agreement. The restructure resulted in the Group issuing approximately
71.4 million new ordinary shares (£5.0 million at the issue price) to the vendors of Flybrid in settlement of
the up to £15.0 million earn-out arrangement and conversion of £1.8 million of loan notes into a five-year
term loan secured on the assets of Flybrid; the remaining £1.0 million of loan notes was paid to the vendors
in cash. The restructure has therefore eliminated up to £10 million of cash consideration under the earnout and deferred £1.8 million of cash repayments under the loan notes for five years. Under international
accounting standards, the value of the new shares issued in settlement of the earn-out agreement and £0.1
million of legal fees have been treated as exceptional items in the Income Statement.
In conjunction with the Flybrid restructure, the Group successfully raised £12.4 million (net of expenses)
through the issue of new ordinary shares from a subscription, firm placing, placing and open offer, to
finance the on-going investment in the development and commercialisation of the Group’s three
technologies. The fund raise was well supported by both existing and new institutional shareholders and
private investors participated through an open offer.
Reorganisation and cost reduction:
In September the Group completed a reorganisation and cost reduction programme including a reduction
in headcount by 20 full-time equivalent employees (‘FTEs’).
The reduction in FTEs and
elimination/reduction in other cash operating expenses has resulted in a one-off exceptional charge of
approximately £0.5 million (2014: £0.1 million) for redundancy, severance and associated expenses. The
annualised reduction in cash operating expenses which together with the eliminations of cash bonuses and
other employee cash benefits will deliver more than the target 20 per cent cost reduction communicated to
7
shareholders at the time of the fund raise. The full annual benefit of these costs savings will be realised
during the next financial year.
Financial results for the period:
Revenue in the period was £1.2 million, down from £1.6 million in the six months ended 30 September
2014, reflecting the final £1.0 million licence fee payment received from Allison last year. Engineering
services revenue increased by 74 per cent principally as a result of revenue being deferred from the
previous financial year. The gross profit reduction of £0.7 million in the period is due to the reduction in
high margin licence income in the current period.
The operating loss before intangible amortisation (know-how) and exceptional items for the period was
£3.35 million, which compares to a loss of £3.35 million in the six months ended 30 September 2014. The
key changes are the £0.7 million reduction in gross profit in the period which has been offset by a £0.7
million reduction in operating expenses, which in part arises from the cost reduction programme referred
to earlier. The operating loss (including the exceptional items and intangible amortisation) in the period
increased to £9.8 million from £3.8 million mainly due to: £5.0 million (2014: Nil) from the settlement of
the Flybrid acquisition agreement; £0.1 million (2014: Nil) legal costs relating to the restructure of the
Flybrid agreement; £0.5 million (2014: £0.1 million) of redundancy and severance costs; a £0.4 million
(2014: Nil) write down of the Group’s investment in and loan to Rotrex A/S, and; a £0.4 million amortisation
cost which was in line with the previous period.
The exceptional charge relating to Rotrex A/S reflects the uncertainty in respect of the long term value of
the Group’s investment in that company. The loss for the period was £9.4 million, an increase of £5.7
million over the previous period, of which £5.1 million arose from the restructure of the Flybrid acquisition
agreement and £0.8 million arose from the other exceptional costs described above, offset by an increase
in tax receivable.
Cash used in operations of £4.2 million (2014: £4.3 million) arose from the loss for the period of £4.0
million (excluding the non-cash exceptional costs of £5.0 million relating to the Flybrid agreement and £0.4
million in respect of the investment in Rotrex A/S), adjusted by £0.6 million (2014: £0.7 million) for noncash operating costs and a net increase in working capital of £0.8 million (2014: £1.3 million). Capital
expenditure on patents and property, plant and equipment fell to £0.3 million from £0.8 million in the prior
period, reflecting the significant investments in manufacturing and test equipment made in the previous
financial year. Net cash used in operating activities and investing activities during the period was £4.5
million (2014: £4.9 million).
The cash raised from the issue of new ordinary shares net of the restructuring of the loan notes was £11.4
million (2014: £0.1 million). Cash and cash equivalents at the end of the period was £14.4 million (2014:
£10.1 million) reflecting the net funds raised and the net cash used in operating activities and investing
activities.
Management change
As part of the restructure of the Flybrid acquisition agreement and following the approval by shareholders
in July 2015, Jon Hilton stepped down as an Executive Director responsible for sales and product
development. Jon has now taken up his new role as Non-Executive Director and Deputy Chairman of
Torotrak. In addition, Jon is supporting me in identifying potential opportunities to exploit the Group’s
technologies and products. Doug Cross remains the Chief Technology Officer of the Group.
8
In September this year, John Weston announced his intention to step down as a Non-Executive Director of
the Group by the end of the year. The search for a new Non-Executive Director is well advanced and we
hope to be able to announce a replacement shortly.
Outlook
In line with our strategic redirection, the following are the Group’s key priorities over the next six months:







Complete V-Charge on-engine testing conducted by University of Bath confirming the performance
and fuel-efficiency benefits;
Demonstrate real-world performance improvements and fuel economy from V-Charge on a
gasoline engine Ford Focus;
Commence licensing discussions with potential Tier 1 partners for V-Charge;
Secure a manufacturing and sales licence agreement with a global Tier 1 to supply KERS units to
JCB, with flywheel assemblies sourced from Torotrak;
Achieve certification of real-world performance improvements and fuel economy from KERS
equipped StreetLite Micro Hybrid;
Place order with Tier 1 manufacturing partner for first 40-off batch of pre-production second
generation design bus KERS units; and
Further advance the KERS licensing discussions that we have in hand.
I very much look forward to reporting progress on delivering these priorities in 2016.
Adam Robson
Chief Executive
25 November 2015
9
Condensed consolidated income statement
for the six months ended 30 September 2015
Unaudited
Unaudited
six months
six months
to 30/09/15
to 30/09/14
£000
£000
1,169
1,614
(535)
(275)
634
1,339
Operating loss
(9,771)
(3,827)
Operating loss before intangible asset amortisation (know-how) and
exceptional items
(3,345)
(3,352)
7
(383)
(382)
14
(6,043)
(93)
(9,771)
(3,827)
(24)
6
(9,795)
(3,821)
369
149
(9,426)
(3,672)
(2.50)
(1.34)
Notes
Revenue
5
Direct costs
Gross profit
Intangible asset amortisation (know-how)
Exceptional items
Operating loss
Net finance (cost)/ income
Loss before tax
Income tax credit
8
Loss for the period
Basic and diluted loss per share (pence)
6
The results above derive from continuing operations.
The notes below form an integral part of these condensed consolidated half-yearly financial statements.
10
Condensed consolidated balance sheet
as at 30 September 2015
Unaudited
as at
30/09/15
Audited
as at
31/03/15
Unaudited
as at
30/09/14
Notes
£000
£000
£000
Intangible assets
7
14,965
15,221
15,449
Property, plant and equipment
7
1,391
1,698
1,905
Investments
9
3
273
273
10
-
147
147
16,359
17,339
17,774
314
383
462
762
1,016
3,349
727
435
436
14,422
7,616
10,119
Total current assets
16,225
9,450
14,366
Total assets
32,584
26,789
32,140
(251)
(311)
(336)
(2,044)
(2,121)
(2,198)
(1,800)
-
-
(4,095)
(2,432)
(2,534)
(1,374)
(5,373)
(6,737)
Total current liabilities
(1,374)
(5,373)
(6,737)
Total liabilities
(5,469)
(7,805)
(9,271)
Net assets
27,115
18,984
22,869
Issued share capital
30,319
27,629
27,625
Share premium
23,851
9,140
9,157
Other reserves
(204)
(244)
(250)
Accumulated loss
(26,851)
(17,541)
Total equity attributable to equity holders of the
Parent
27,115
18,984
The notes below form an integral part of these condensed consolidated half-yearly financial statements.
(13,663)
Assets
Non-current assets
Trade and other receivables
Total non-current assets
Current assets
Inventories
Trade and other receivables
10
Tax receivable
Cash and cash equivalents
11
Liabilities
Non-current liabilities
Finance lease obligation
Deferred tax
Borrowings
12
Total non-current liabilities
Current liabilities
Trade and other payables
12
Capital and reserves
22,869
11
Condensed consolidated statement of changes in equity
for the six months ended 30 September 2015
Share
capital
Share premium
account
Other
reserve
Accumulated
loss
Total
equity
£000
£000
£000
£000
£000
27,420
9,093
(141)
(10,031)
26,341
Loss for the period
-
-
-
(3,672)
(3,672)
Total comprehensive income
-
-
-
(3,672)
(3,672)
109
-
(109)
-
-
Share-based payment charge
-
-
-
136
136
Issue of shares under LTPSP
96
-
-
(96)
-
-
64
-
-
64
205
64
(109)
40
200
27,625
9,157
(250)
(13,663)
22,869
Loss for the period
-
-
-
(4,093)
(4,093)
Total comprehensive income
-
-
-
(4,093)
(4,093)
Transfer of shares under share incentive plan
-
-
6
2
8
Share-based payment charge
-
-
-
217
217
Issue of shares under LTPSP
4
-
-
(4)
-
Adjustment to costs as a result of the Open Offer
and Firm Placing
-
(17)
-
-
(17)
Total transactions with owners
4
(17)
6
215
208
27,629
9,140
(244)
(17,541)
18,984
-
-
-
(9,426)
(9,426)
27,629
9,140
(244)
(26,967)
9,558
174
1,046
-
-
1,220
Transfer of shares under share incentive plan
-
-
40
(15)
25
Share-based payment charge
-
-
-
131
131
714
4,286
-
-
5,000
Issue of shares as a result of the 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
30,319
23,851
(204)
(26,851)
27,115
Balance at 1 April 2014
Comprehensive income
Transactions with owners
Issue of shares under share incentive plan
Adjustment to costs as a result of open offer and firm
placing
Total transactions with owners
Balance at 30 September 2014
Comprehensive income
Transactions with owners
Balance at 31 March 2015
Comprehensive income
Loss for the period
Total comprehensive income
Transactions with owners
Issue of shares to Allison Transmission Inc.
Issue of shares to Vendors of Flybrid Automotive Ltd
Balance at 30 September 2015
Note (i) Includes costs of £1,433k in relation to the fund raise.
The notes below form an integral part of these condensed consolidated half-yearly financial statements.
12
Condensed consolidated statement of cash flows
for the six months ended 30 September 2015
Unaudited
Unaudited
six months
six months
to 30/09/15
to 30/09/14
£000
£000
(9,426)
(3,672)
5,000
-
Impairment of investment in Rotrex A/S
270
-
Creation of provision against Rotrex A/S loan
147
-
Notes
Cash flows from operating activities
Loss for the period
Adjustments for:
Non-cash exceptional cost – restructure of Flybrid acquisition agreement
Depreciation
7
300
280
Amortisation
7
473
473
24
(6)
9
1
(369)
(149)
131
136
69
(257)
406
(2,606)
(Decrease)/increase in trade and other payables
(1,258)
1,540
Cash used in operations
(4,224)
(4,260)
-
241
(4,224)
(4,019)
(67)
(555)
(228)
(294)
-
6
(295)
(843)
12,401
68
(18)
-
(1,000)
-
(58)
54
11,325
122
Net increase/(decrease) in cash and cash equivalents
6,806
(4,740)
Cash and cash equivalents at start of period
7,616
14,859
Cash and cash equivalents at end of period
11
14,422
The notes below form an integral part of these condensed consolidated half-yearly financial statements.
10,119
Finance income receivable
Loss on disposal of plant and equipment
Taxation
Share based payment charge
8
Changes in working capital:
Decrease/(Increase) in inventories
Decrease/(increase) in trade and other receivables
Tax received
Net cash used in operating activities
Cash flows from investing activities
Acquisition of property, plant and equipment
Acquisition of patents
Net finance income received
Net cash used in investing activities
Cash flows from financing activities
Proceeds from the issue of share capital
Net finance income paid
Repayment of borrowings
Net hire purchase financing
Net cash generated from financing activities
13
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 half-year financial statements were
approved for issue on 25 November 2015.
The interim financial statements for the period ended 30 September 2015 do not constitute statutory accounts
within the meaning of section 434 of the Companies Act 2006.
The financial information set out in this statement relating to the year ended 31 March 2015 does not constitute
statutory accounts for that period. Full statutory accounts of the Group in respect of that financial period were
approved by the Board of Directors on 31 July 2015 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’s Review. The financial position of the Group and liquidity position are
described within the Chief Executive’s Review.
After making enquiries, the Directors have concluded that it is appropriate to prepare the condensed interim
financial statements on a going concern basis.
2. Basis of preparation
These condensed consolidated interim financial statements for the six months ended 30 September 2015, 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 2015 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 2015 are consistent with the policies applied by the Group in its
consolidated financial statements as at, and for the year to, 31 March 2015, 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 2015 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
statements, are the same as those that are described in the annual financial statements for the year ended 31
March 2015.
14
5. Operating segmental analysis
Operating segmental analysis for the six months ended 30 September 2015
Engineering
services
Income from
licence
agreements
Development
activities
Note 1
£000
Total
£000
£000
Total revenue
1,069
100
-
1,169
Direct costs
(533)
(2)
-
(535)
536
98
-
634
-
-
(2,735)
(2,735)
536
98
(2,735)
(2,101)
Gross profit
Other operating costs
Total segmental profit/(loss)
Other operating costs not allocated to
segments
(7,670)
Operating loss
(9,771)
Operating segmental analysis for the six months ended 30 September 2014
Total revenue
Direct costs
Gross profit
Other operating costs
Total segmental profit/(loss)
Engineering
services
Income from
licence
agreements
Development
activities
Note 1
Total
£000
£000
£000
£000
614
1,000
-
1,614
(255)
(20)
-
(275)
359
980
-
1,339
-
-
(3,700)
(3,700)
359
980
(3,700)
(2,361)
Other operating costs not allocated to
segments
(1,466)
Operating loss
(3,827)
Note 1: Development activities include research and the creation of intellectual property.
15
Significant customers
The following revenues are attributable to significant customers:
Unaudited
Unaudited
six months
six months
to 30/09/15
to 30/09/14
£000
£000
Allison Transmission Inc.
100
1,292
Undisclosed customer
633
-
JCB
150
-
Undisclosed customer
130
-
6. Loss per share
The basic and diluted loss per share are based on a loss after tax of £9,426,000 (2014: £3,672,000). The
weighted average number of shares was 376.8 million shares (2014: 273.1 million) and the diluted weighted
average number of shares was 390.7 million (2014: 281.3 million).
For the six months ended 30 September 2015 and 2014 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 30/09/15
to 30/09/14
The basic loss per share from continuing operations attributable to the
equity holders of the Company (pence)
(2.50)
(1.34)
The diluted loss per share from continuing operations attributable to the
equity holders of the Company (pence)
(2.50)
(1.34)
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 2,369,723 (2014: 1,638,355).
7. Property, plant and equipment and intangible assets
Property plant
and equipment
Net book value at 1 April 2014
Additions
Disposals
Intangible
assets (patents)
Intangible
assets
(goodwill and
know-how)
Total
£000
£000
£000
£000
1,742
2,047
13,672
17,461
446
203
-
649
(3)
-
-
(3)
Amortisation/depreciation
(280)
(91)
(382)
(753)
Net book value at 30 September 2014
1,905
2,159
13,290
17,354
114
253
-
367
Additions
Disposals
(12)
-
-
(12)
Amortisation/depreciation
(309)
(98)
(383)
(790)
Net book value at 31 March 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
16
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 year is based on the estimated effective tax rate of 33.35% (2014: 32.63%).
The deferred tax liability relates solely to the intangible assets recognised on the acquisition of Flybrid Automotive
Limited and is based on 20 per cent. of the intangible asset value. 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
R&D tax credit
Deferred tax
Total
Unaudited
as at 30/09/15
Audited
as at 31/03/15
as at 30/09/14
£000
£000
£000
292
472
72
77
154
77
369
626
149
9. Investments
Unaudited
Audited
Unaudited
as at 30/09/15
as at 31/03/15
as at 30/09/14
£000
£000
£000
Net investment in Rotrak joint venture
3
3
3
15% investment in Rotrex A/S
-
270
270
Total investments
3
273
273
At 30 September 2015 the Group held a gross investment of £270k in Rotrex A/S, this investment is no longer
supported by the net assets of Rotrex A/S and as such an impairment provision has been created in accordance
with the Group’s accounting policy.
10. Trade and other receivables
Unaudited
Audited
Unaudited
as at 30/09/15
as at 31/03/15
as at 30/09/14
£000
£000
£000
Loan to Rotrex A/S
-
147
147
Total non-current assets
-
147
147
Trade receivables
153
171
1,544
Other receivables and accrued income
313
362
1,377
Prepayments
296
483
428
Total current assets
762
1,016
3,349
Non-current assets
Current assets
At 30 September 2015 the Group had a loan outstanding of £147k with Rotrex A/S, a provision has been created
against the value of this loan due to the uncertainty of recoverability.
17
11. Cash and cash equivalents
Unaudited
as at 30/09/15
£000
Audited
as at 31/03/15
Unaudited
as at 30/09/14
14,033
£000
20
7,580
7,580
10,093
369
16
16
14,422
7,616
10,119
Unaudited
Audited
Unaudited
as at 30/09/15
as at 31/03/15
as at 30/09/14
£000
£000
£000
251
311
336
Deferred tax
2,044
2,121
2,198
Borrowings
1,800
-
-
Total non-current liabilities
4,095
2,432
2,534
Trade and other payables
212
227
330
Social security and income tax
164
148
121
2
29
31
Accruals
841
1,343
871
Finance lease obligations
120
118
132
Borrowings (Vendor loan)
10
2,800
2,800
Deferred income
25
708
2,452
1,374
5,373
6,737
Cash
20
Sterling cash deposits
Foreign currency cash deposits
Total
£000
10
12. Trade and other payables
Non-current liabilities
Finance lease obligations
Current liabilities
Accrued pension liabilities
Total current liabilities
At a General Meeting held on 22 July 2015, the Shareholders approved the restructure of the Flybrid acquisition
agreement, as described in note 14. As part of the restructure, £1.8 million of the £2.8 million vendor loan notes,
arising from the initial consideration for the acquisition in January 2014, have been converted into a 5 year term
loan, secured on the tangible and intangible assets of Flybrid Automotive Limited, which 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; payable in
cash, monthly in arrears (the previous vendor loan notes did not attract any interest). The remaining £1.0 million
of the £2.8 million loan notes was paid in cash on 23 July 2015.
13. Related party transactions
There was a loan outstanding of £29,000 to Rotrak Limited at 30 September 2015 (2014: £28,000).
There was a long term loan outstanding to Rotrex of £147,000 (2014: £147,000), against which a provision has
been created due to the uncertainty of recovery, as explained in notes 10 and 14.
During the year the Flybrid acquisition agreement was restructured and a settlement agreement entered into with
the vendors of Flybrid Automotive Limited, as explained in notes 12 and 14.
There was a loan amount due to Jon Hilton of £1,260,000 (2014: £1,960,000) and Doug Cross of £540,000
(2014: £840,000) as explained in note 12 in relation to the acquisition of Flybrid Automotive Limited. The 2014
amounts related to loan notes and attracted no interest.
18
In the period to 30 September 2015 there was an amount of £9,908.11 paid to Jon Hilton and an amount of
£4,246.33 paid to Doug Cross in respect of loan interest. £7,249.84 was due to Jon Hilton and £3,107.07 due to
Doug Cross in respect of loan interest; these amounts were paid on 1 October 2015.
At 30 September 2014 there was an amount due from Jeremy Deering of £33,000 for tax and national insurance
in relation to the exercise of an LTPSP award which was shown as other receivables, no amounts were due in
the period to 30 September 2015.
No other amounts were due (to)/from these personnel at 30 September 2015.
14. Exceptional items
Unaudited
Unaudited
as at 30/09/14
Audited
as at 31/03/15
as at 30/09/14
£000
£000
£000
539
431
93
5,000
-
-
Impairment of investment in Rotrex A/S
270
-
-
Provision against loan to Rotrex A/S
147
-
-
Reorganisation costs
Share issue relating to settlement of earn-out
One-off legal and other costs
Total
87
-
-
6,043
431
93
The reorganisation costs relate to redundancy, severance and associated expenses in relation to a reduction in
employees.
On 22 July 2015 the Group received Shareholder approval to restructure the acquisition agreement with the
vendors of Flybrid Automotive Limited in respect of the earn-out agreement that was entered into at the time of
the Group’s acquisition of Flybrid Automotive Limited in January 2014. Under the terms of the restructured
acquisition agreement the earn-out agreement has been cancelled and a one-off settlement has been paid to the
Vendors by way of issuing new ordinary shares in the Group to the value of £5 million. The Vendors of Flybrid
Automotive Limited, Jonathan Hilton (Non-executive Director) and Douglas Cross (Chief Technology Officer),
received shares to the value of £3.5m and £1.5m respectively as part of the settlement. The £5 million has been
treated as an exceptional item in these financial statements.
The investment in Rotrex A/S and the loan due from Rotrex A/S have been written down 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.
15. Commitments
Capital expenditure contracted for at the balance sheet date but not yet incurred was £6,000 (2014: £14,000).
16. Financial Risk Management
The Group’s activities expose it to a variety of financial risks: 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 2015. There have been no changes in any risk management policies
since the year end.
17. Seasonality
The Group’s results and activities are not affected by seasonality.
19
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 as adopted by the European Union and that the
interim management report includes a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R,
namely:
 an indication of the important events that have occurred during the first half year 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
 related party transactions that have taken place in the first half of the current financial year and that have
materially affected the financial position or performance of the entity during that period; and any material
changes in the related party transactions described in the last annual report that could do so.
The Directors of Torotrak plc are listed in the Torotrak plc Annual Report for the year ended 31 March 2015. A
list of current Directors is maintained on the Torotrak plc website: www.torotrak.com.
By order of the Board on 25 November 2015.
Adam Robson
Chief Executive
-ends-
20