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By Steve Moore | Friday 28 July 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.
Last writing on Torotrak (TRK) at the end of May, I concluded hopefully the warnings here have been heeded. This stock remains firmly on the bargepole list. The shares are now slumping further on the back of results for its year ended 31st March.
These open with that “two years ago we set out to definitively realise the value of the group's three technologies within a three year period”. So, how’s it doing?
Well it notes a “lack of progress from our IVT/CVT licensees” and remains in “the process to realise cash from the IVT/CVT technology”. Meanwhile, “in V-Charge, we successfully completed the product development to the point of being ready for licensing and productionisation by a Tier 1 partner”... However, it did so at a time when electrification has become the priority – and “unfortunately the Tier 1s and OEMs concluded that it did not fit with their new priority”! This has seen;
“The inevitable but painful decision that we must cease all further investment in the traditional Torotrak variable transmission-related technologies. As a result, we started a consultation process in January 2017 to close the Leyland site which was the home of this technology and this process is substantially completed with the site to be vacated by the end of 2017. We expect over the coming months to complete the sale and/or licensing of the technology and associated IP portfolio and sell the remaining physical assets such as test rigs and demonstrator vehicles. The proceeds from this are being used to off-set the closure costs.”
This leaves ‘Flybrid’, where it now has a product, offering a family of flywheel energy recovery and storage modules, for manufacture in conjunction with partners. However, it notes “severe resource constraints” in the sector, that it “will require significant further investment to realise this strategy” and that it is “pursuing options to fund the development and realise value”.
This is with it also stated that “the company must now generate additional cash inflows during the current financial year to fund the operating costs”. This follows the results showing a more than £6 million decline in cash to £5.1 million (£3.3 million net), with net current assets £7.7 million lower to £3.5 million and there also £1.9 million of non-current liabilities (-£1.9 million).
Not to worry though as “the board remains determined to realise the value from our extensive IP portfolio and attractive commercial opportunities”!?! I just hope our warnings were heeded!
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