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Torotrak – “Trading Statement” announcement is actually ‘commercialisation delay’

By Steve Moore | Thursday 21 April 2016

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

Emissions reduction and fuel efficiency technology company Torotrak (TRK) has released a “Trading Statement” commencing that “the group has made good progress in executing the three year strategy to commercialise its technologies… During the last 12 months there has been a significant increase in interest from potential licensees and OEM customers in gaining access to the group's KERS technology in off-highway and V-Charge in passenger cars”. The shares are though currently more than 6.5% lower, at 5p, in response. Hmmm.

CEO Adam Robson notes “when we set out our strategy last year, we chose to focus on three key areas (bus KERS, off-highway KERS and V-Charge) in order to best optimise the use of our engineering and cash resources”. Off-highway KERS and V-Charge were mentioned in the opening, but what of bus KERS then?

And further down the announcement there it is;

“The results of the UK Government's Ultra Low Emission Bus grant applications have been delayed and no announcement has been made by the Government to confirm the new date for the awards. This uncertainty, coupled with persistent low fuel prices, is causing bus operators to postpone investment in all low emission technologies. Wrightbus and Torotrak have therefore agreed to delay further investment in the production launch of bus KERS until the situation becomes clearer - Torotrak's engineering and cash resources will be redeployed onto the other more promising, revenue generating and near-term commercial opportunities.”

Torotrak added it ended its year to 31st March 2016 with cash of £11.3 million and that “we foresee a strong year ahead building on the progress we have made with our Tier 1 and OEM partners to commercialise our technologies”.

Hmmm – the cash compares to £14.4 million at the half year stage (with then also other current assets of £1.8 million comparing to liabilities of £5.5 million) and it is explicitly admitted that “the ongoing low fuel price environment… is creating significant challenges for hybrid technologies such as KERS”.

I’m not sure how this tallies with “a strong year ahead”, but am that now-a-year-into-the-role CEO Robson has significant challenges ahead here and that, at this stage, the shares represent a speculation rather than an investment. With a still more than £27 million market cap, my current view is sell or if you are not in: bargepole.

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  1. alcira16247

    Another good call, Steve!

    Torotrak promises are worth Sweet Fanny Adams, successful commercialisation of its much self vaunted KERS systems, despite years of attempts have all manifestly failed and this ‘new’ three year strategy looks to have been felled at the first fence……. so no change there! . In its whole miserable existence the company has only one achievement, of note………. that of diluting its poor suffering shareholders into oblivion!

    Incredibly back in September 2000 these were trading at over £5.30 …………

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