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Torotrak – you couldn’t make it up, value destruction so bad that now a General Meeting is required!

By Steve Moore | Thursday 4 May 2017

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.

An announcement from Torotrak (TRK) entitled “Section 656 of the Companies Act 2006”. Hmmm, given the record here, I guessed this wasn’t good news… It ain’t…

The announcement includes that the company expects its year ended 31st March 2017 results to show “£5.1 million of cash, in line with expectations”, but also “the net assets of the company will fall below half of the value of the called-up share capital”. The latter such value destruction requires, under Section 656 of the Companies Act, that upon becoming aware of it the directors call a General Meeting within 28 days to consider future steps. The announcement also includes;

“On 30 January 2017, the board announced a strategic refocus of the group, which included taking steps to consolidate the group's engineering resources and reduce the ongoing cash operating costs. Following a period of employee consultation, the board has decided to close the Leyland site and make all staff working at that site redundant. The board continues to focus on realising value from Torotrak's technology portfolio and other assets… The board does not consider that any steps are required to be taken beyond those already in hand and accordingly, no resolutions will be put to shareholders at the General Meeting.”

Hmmm. This doesn’t include that the “strategic refocus” was due to a swift shift from “significant increase in interest” to ‘materially reduced’ opportunity – and I questioned how long until cash crunch ahoy AGAIN?

The mess here is summed up by that a value destruction-enforced, “no resolutions”, General Meeting is being held on 31st May – before results for the company’s year ended 31st March 2017 are set to be available. You couldn’t make it up! Hopefully our warnings have been heeded here. B-A-R-G-E-P-O-L-E.

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