29th May 2012 07:00
29 May 2012
Torotrak PLC (LSE: TRK)
("Torotrak" or "the Company" or "the Group")
Preliminary results announcement for the year ended 31 March 2012
Financial and Operational Highlights
2012 £m |
2011 £m | |
Revenue | 4.3 | 5.1 |
Operating cash generated/ (outflow) | 2.5 | (4.8) |
Year-end net cash | 10.5 | 8.3 |
Operating loss before restructuring charges | (1.9) | (2.9) |
Loss after tax | (1.6) | (3.1) |
Financial highlights
·; £6.8 million licence payments received during the year
·; £2.5m net operating cash flow generated
·; Cash balance increased by £2.2m to £10.5m
·; Operating costs reduced by £1.1m and by £1.8m annualised
·; Third party collaboration & investment contributing materially to Torotrak's operating efficiency
Operational highlights
·; 20% fuel economy for Commercial Vehicle ("CV") transmissions in targeted segments confirmed through ongoing programme testing and simulation
·; Major CV licensee, Allison Transmission Inc, progressing well on its production intent programme
·; Variable pressure-charging solution, "V-Charge", gaining excellent feedback from prototype demonstrations to vehicle manufacturers and presents a valuable market opportunity
·; Torotrak and Optare to collaborate on fleet trial programme for mechanical hybrid "M-KERS" for city buses, to obtain a "quick to market" validation and production route
·; New licensing arrangements with component supplier Univance, and with Tata Motors, which has extended its licence to M-KERS and V-Charge
John Weston, Chairman, said:
"In the current climate where legislation worldwide is setting tough environmental targets, Torotrak's technology, with its demonstrable durability, fuel economy and manufacturability, offers a forceful set of options for Vehicle Manufacturers.
We have advanced our position considerably, and are working more closely than ever with substantial Vehicle and Component Manufacturers which have global reach, to bring our technology to market.
Meanwhile, our positive operating cash flow and increased cash position from substantial licence fee payments, provides us with options to take more control of the routes to market and to help drive down lead times to manufacture.
For further information, please visit www.torotrak.com or contact:
| |
Dick Elsy, Chief Executive | Simon Hudson |
Jeremy Deering, Finance and Commercial Director | Lulu Bridges |
Torotrak Plc | Tavistock Communications |
Tel: +44 1772 900938 or +44 20 7920 3150 | Tel: +44 20 7920 3150 |
Marc Milmo
Karri Vuori
Carl Holmes
Charles Stanley Securities
Financial Adviser & Broker
Tel: +44 20 7149 6000
Chairman's Review
Introduction
One year has passed since I joined Torotrak as Chairman, taking over from John Grant, who guided this Company expertly during his six years as Chairman. The Board expresses its gratitude for his stewardship, and for his commitment during his thirteen years with Torotrak overall.
A new pair of eyes as Chairman brings a fresh evaluation of how things are done and where strategy is leading. There is no doubt that Torotrak has technology that meets the needs of legislation, operators and consumers for more fuel-efficient vehicles. Replacing an incumbent technology is a demanding and difficult process and I appreciate that for the longer-standing shareholders the time taken to get the technology into production has been frustrating. We are now making steady progress towards our goal, and the last year has been a successful one for the Company.
Part of our current thinking is about how we can gain greater control over the time to market, or how we can encourage third party investment that will increase the pace. I am pleased to say that we enter the new financial year with much clearer routes to market and more options for creating shareholder value in our target applications and market segments.
This is an exciting time for Torotrak, and I am gratified to say that the opportunity and potential that drew me to the Company is supported by first rate technology, people and partners.
Results
Revenue of £4.3 million (2011: £5.1 million) reflects £2.9 million of licence income (2011: £2.7 million) and engineering fees of £1.4 million (2011: £2.4 million), which decreased this year as we moved out of our transmission prototype build phase in commercial vehicles that dominated last year. Most importantly, positive net operating cash flow of £2.5 million (2011: £4.8 million outflow) has been generated. Cash of £10.5 million at year-end (2011: £8.3 million) puts us in a very strong position to fund our business plan.
During the year, we put in place a leaner operating structure, starting as it should do at the top, with the reduction of our Board from six to four. However, whilst operating costs (pre-exceptional items) were reduced by 17 per cent in the year to £5.6 million, our capability is not diminished, and activity levels with our technology partners and investment from our licensees have both increased. Whilst a four person board falls short of ideal Corporate Governance standards, it is strong with experienced Executive and Non-Executive members, and I have found it to be active, expert and committed to maintaining high governance standards.
A fresh look at our business direction
Challenge is healthy and I am pleased to see it is engrained in Torotrak's culture. We are dealing with different stages of maturity in both our technology and our markets, and the Board is currently reviewing how we can generate the best value for our shareholders in each of the potential lines of business we are pursuing. We foresee a wider role for the Company as a systems integrator of complete applications, as well as developers and guardians of our own patented technology.
Market focus and progress
Having reviewed strategy upon joining as Chairman, I am in full agreement with the current focus on specific areas of the market where our technology delivers the most substantial benefits, at an accessible price. Torotrak's core benefits of improved fuel efficiency and reduced CO2 emissions meet the demands of tightening worldwide environmental legislation, as well as operators' need to fight rising fuel costs.
Commercial vehicles (on-highway)
We are concentrating in this market on city buses and delivery trucks with high levels of "stop start" in their usage patterns, as this is where Torotrak's technology delivers the greatest benefits. Our technological focus is on fuel-saving main drive transmissions and mechanical kinetic energy recovery devices ("M-KERS"). M-KERS offers a more compact and affordable form of fuel-saving hybrid than current battery-electric technologies.
During the year, we have:
In main drive transmissions
·; Proven the design and capability of the main drive transmissions for commercial vehicles
·; Confirmed durability of our core technology
·; Confirmed fuel economy benefits with our customers
·; Introduced new sources of component and fluid supply; an important step towards a production unit
·; Secured two licence payments totalling £6.8 million from our major licensee Allison Transmission Inc.
In M-KERS
·; Confirmed intention to move to fleet trials with bus operators
·; Secured new collaboration arrangements with component suppliers, manufacturers and technology partners, helped by our "Flybus" programme
·; Created new and valuable intellectual property in M-KERS drive systems
Passenger Cars
The technological focus in passenger cars is on variable supercharging devices and M-KERS. We now refer to our unique boosting solution in this market as "V-Charge", differentiating it from typical superchargers. V-Charge allows the industry to develop fuel-saving downsized engines without compromising performance. For the M-KERS systems, we are initially targeting premium market segments, but this will widen as costs fall.
During the year, we have:
In V-Charge
·; Confirmed the benefits of the technology
·; Evaluated and confirmed that there is a valuable market opportunity at our target price point
·; Commenced vehicle manufacturer drive events with our demonstration vehicle
·; Secured important new collaboration arrangements with component and vehicle manufacturers
In M-KERS
·; Supported Volvo's prototype trial programmes, with promising initial feedback
·; Secured £0.6 million additional licence income from Tata Motors, with a licence extension that now includes M-KERS and V-Charge
Commercial vehicles (off-highway)
In this market, we are targeting main drive transmissions for mid-range agricultural tractors and certain construction vehicles, responding to the need for strong fuel economy coupled with a high level of vehicle control.
During the year, we have:
·; Supported our licensee Carraro with their production intent programme
·; Strengthened the supply chain for validated, high quality components
·; Identified new market segments in construction equipment where our technology is highly competitive, with promising business development in this area
Technology and market development
Opportunities remain outside of these core areas. We see valuable potential for our main drive transmissions in passenger cars, and believe this will be addressable following earlier success in the commercial vehicle markets and the inevitable cost reduction arising from commercialisation. We also see opportunities for V-Charge in commercial vehicles as legislation tightens further, which could open up valuable potential markets.
Technology
Market realities drive our approach and our timetable. The best technologies can "fail" commercially and history is littered with second best engineering solutions made successful by determined entrepreneurs. Our tactic is matching purpose-driven technology design with dynamic commercial relationships, and we strive always to be several steps ahead in anticipating challenges and having the right answers ready. We aim to do things right first time, through extensive modelling and testing up front, with clearly defined and considered requirements.
Our technology is driven by our people and by their determination to succeed. I was delighted to see a changing culture at Torotrak in response to the imperatives of taking new technology into the market. This is an ambitious Company, and a challenging place to work. To maintain this momentum, we have empowered staff at all levels and ensured a high degree of transparency in all that we do.
We invest continuously in high calibre staff and state of the art equipment, in order to cultivate our prime asset, our expertise. This year, we enhanced our modelling and test resources, and implemented a formal graduate scheme to train new generations of engineers.
Modelling and simulation work is crucial; it builds confidence early on in the development process, for both our customers and us. It is also an important product in its own right, allowing us to engage with vehicle manufacturers in the early design stages, leading to better product development.
2012 has also seen a focus on Torotrak's "engine room", the test and build facilities. This has been humming with activity and is becoming a great showcase for the Company. We expect to see these capabilities enhanced further in the coming financial year.
Outlook
We have a busy year ahead with our commercial vehicle main drive transmission programmes and progressing with further prototypes and new commercial engagements in other product areas. We expect to end this year with strengthened market prospects and a broadened scope of activities. Torotrak is responding to the market and legislative demands for fuel economy, and we have excellent technology to meet them.
CEO's Review
Focus on strong growth market segments
The last year has seen significant progress in our strategy to capitalise on the growing demand for CO2 reduction technologies. Our strategy is to:
·; Prioritise commercial vehicle markets, on-road and off-road, for initial commercialisation of main drive transmissions featuring our variable drive technology
·; Focus development of new technology on new fuel saving markets including hybridisation and engine downsizing, to provide pragmatic and affordable reductions in CO2 emissions ahead of tightening legislation
These areas have a capacity for strong growth as the cost versus benefits equation is competitive compared to alternative fuel reduction technologies, such as electric hybridisation.
Whilst Torotrak earns its income predominantly through licensing, and we do not control the manufacturing route to market, our strategy has evolved to seek new ways to take greater control of outcomes through partnering and shared investment. We expect during the coming financial year to develop increased capability to support higher levels of prototyping and limited volume production.
Licensing and collaboration progress
During the year, the Company has secured important new licence and collaboration arrangements. Key highlights, which provide good momentum for Torotrak, include:
£6.8 million licence payments by Allison Transmission Inc ("Allison")
On 8 April 2011, Allison made a £3.5 million licence payment and on 14 March 2012 a further £3.3 million licence payment, which secure its rights to exclusivity until March 2013 and rights in relation to the above 14,000 kg gross vehicle weight commercial vehicle market.
This brings cumulative licence fees paid by Allison to £15.2 million since signing the licence and exclusivity agreement on 16 March 2009. It is an important sign of Allison's commitment to commercialise IVT transmissions for the commercial vehicle market, and its valuation of the opportunities that lie therein.
New licensee in component and sub-system supply
On 18 May 2012, we signed a co-operation and licence agreement with Univance Corporation, a leading manufacturer of passenger and industrial vehicle transmission units and other automotive parts headquartered in Japan. We have been working with Univance on a shared cost basis over the last two years to develop production processes for manufacturing discs and rollers; the core elements of Torotrak's traction drive technology. Univance has developed its processes over several iterations and Torotrak has been testing the components produced on its dedicated rigs at Leyland. It is telling that Univance has reached full conformity within 12 months, which reflects its determination and commitment to invest.
The new non-exclusive licence agreement allows Univance to develop, manufacture and supply core variator components and variator assemblies and systems to Torotrak licensees. Univance has committed substantial investment to support the development and initial industrialisation of core component manufacture. The agreement also supports a joint marketing programme and provides for the supply of Torotrak-branded components and systems.
This agreement is a "first" for Torotrak commercially, in that we have waived initial licence fees and instead agreed a form of revenue share on Univance-supplied Torotrak parts.
During the year, we specified, built, commissioned and supplied bespoke variator test facilities, along with the necessary technical knowledge transfer. This enables Univance to conduct its own internal research and development programs looking at cost-reduced disc and roller manufacturing processes.
Extension of Tata Motors Limited ("Tata") license and £0.6 million licence fee payment
We secured £0.6 million additional licence fees from Tata Motors, which has extended its non-exclusive licence to encompass M-KERS and V-Charge. .
Co-operation with leading automotive component manufacturers
Whilst we have focused on self-standing investment in the V-Charge system for its first vehicle trials, we have benefitted from collaboration with automotive component manufacturers, which have provided market data, independent vehicle testing, and informed production cost data.
Torotrak has also been working with a global automotive component manufacturer to develop the traction drive components for the V-Charge system, to meet our cost targets needed to make the V-Charge device competitive.
At this stage, our licensing position is reserved with these automotive component manufacturers, whilst we continue with joint, and independent, development.
Joint venture collaboration on V-Charge - Rotrak
We continue to benefit from the joint venture with supercharger specialist Rotrex A/S ("Rotrex"), a company in which we also hold a 15 per cent equity interest. Technical collaboration between our two teams continues to be highly productive. Licensing arrangements have been adjusted, allowing Torotrak and Rotrex to work separately as required with other potential parties, where this is more appropriate than undertaking business as the joint venture. This has facilitated Torotrak's separate licensing arrangements with Tata for V-Charge, as well as permitting separate development programmes with Tier 1 and Tier 2 manufacturers in cases where Rotrex prefers to reserve its own licensing position.
Progress in technology development and core programmes
Commercial vehicles main drive transmissions
Addressable market
The global truck market has recovered well, with sales increasing from 1.8 million units in 2009 to 2.6 million forecast this year. This growth trend is expected to continue and to reach 3.8 million by 2020.
We also expect to see a trend moving away from manual transmissions across all regions, driven by the requirement for greater fuel efficiency. In a typical distribution truck, fuel costs account for more than one third of the total operating costs of the vehicle.
Market opportunity
Over the last year, test results have shown that Torotrak's technology is at its most effective in the distribution truck and bus market, where measured results have validated model predictions of fuel economy gains of around 20 per cent. At this level of fuel economy, our technology is capable of displacing a considerable market share from incumbent automatic transmission technology, competing strongly with automated manual transmissions and entering the growing addressable market for automated transmissions worldwide, and especially in BRICs markets (Brazil, Russia, India and China).
Progress made
ETBM
The Torotrak prototype transmissions are now fully installed on the customer's target truck and bus vehicles. Ongoing work has involved considerable rig and vehicle testing and further development and calibration of the European Truck and Bus Manufacturer's ("ETBM") city bus vehicle.
Our assessment is that ETBM has progressed cautiously, and that they are evaluating where Torotrak's "sweet spot" sits in relation to their current spread of vehicles, which are at the heavy end of the market and often have long haul rather than "stop start" cycles. We continue to see an opportunity for licensed sales with ETBM, in line with our initial view, but it is not clear at this stage what their development path might be. It could be that external supply would be a better option than "in-house" manufacture, avoiding a production intent development programme and its resultant costs. However, as an experienced developer of the technology, ETBM is in a strong first-to-market position.
Allison Transmission Inc ("Allison")
The programme to develop a production representative transmission with Allison commenced at the start of the financial year is running to plan.
During the year, we undertook a rigorous long-term fatigue test programme, comprising 25,272 hours of testing. This finalised the engineering design rules for the variator in commercial vehicle applications and provided hard evidence of its exceptional lifespan.
The Torotrak IVT's fuel economy benefits, as well as its capability and robustness, have been confirmed through the continuing programme of work.
Allison is making strong progress, commensurate with the likely future take-up of its final licence exclusivity rights in March 2013.
V-Charge
Addressable market
Last year we were assuming an addressable market of 26 million pressure charged engines globally per annum by 2015. Recent forecasts for 2017 estimate that over 40 million pressure chargers may be produced, indicating a strong move towards downsizing and the impact of tightening legislation on CO2 reduction.
More complex pressure charging systems featuring two devices (twin turbo, turbo plus supercharger, electrically driven turbo - the so-called "E-Boost") are being developed to overcome the driveability issue that these smaller engines face. Our V-Charge is an attractive option as a single pressure charging device for small cars, which represents the largest segment within the market. Two-stage systems will remain appropriate for some segments, particularly in bigger, high-performance engines being considered for premium cars, which is also an addressable market for V-Charge.
Premium vehicle manufacturers are looking at E-Boost devices, but these demand costly in-vehicle high voltage electrical systems to function. These may make economic sense in vehicles that already have the built-in costs of high voltage systems, but on conventional 12-volt systems, V-Charge can deliver the required performance at significantly lower cost. Current single-stage devices compromise performance, presenting a large market opportunity for our V-Charge system, which overcomes these compromises.
The V-Charge system is not simply a supercharger substitute. Its use of variable drive and a centrifugal compressor gives it much greater affinity with the high volume turbocharging market, whilst uniquely addressing one of the key shortfalls of that market: turbo lag.
Market opportunity
The feedback from showing V-Charge to vehicle manufacturers and suppliers makes us confident that the technology hits this market at the optimum point of performance yield versus cost.
The driving experience is exceptional; the supercharger combined with a Torotrak variable drive delivers smooth acceleration, emulating the power of a substantially larger engine. We set out to achieve the driven feel of a 1.6 litre car from one with a 1.1 litre engine, and have witnessed excellent results, with our V-Charge providing torque from almost idle speed. This resolves the key issue of poor low-speed performance with a single device, in a way that only complex twin systems or additive electrical boosting systems could achieve. This has been achieved with current market engine technology. With one of the very latest downsized engines, just released to the market, we could achieve even more.
There is a clear demand for single and two stage variable charging systems, and with careful engineering, we believe it may be possible to satisfy these two markets with the same variable drive unit, reducing development time and cost.
Progress made
Our commercial strategy, to work with major industry partners whilst maintaining a level of independence, has worked well. The technical collaboration with Rotrex has been very positive. As systems integrator, we have so far led the investment in creating demonstrable hardware. We have demonstrated and measured system response times that cannot be achieved with current non-variable boosting systems. Specifically, we can move from zero to 95 per cent of target torque in 400 milliseconds. It is this rapid response to throttle input that gives the vehicle such good driveability. Our engineers have worked through vehicle interfacing problems, and have developed a mature and refined engine control strategy that belies the prototype system on which it is based.
We have benefitted from our co-operation with the leading Tier 2 component manufacturer to provide a production route for cost-effective discs and rollers for V-Charge. This has been complemented by our work on the overall system with other component manufacturers, where we have been able to explore specific configurations against vehicle manufacturer requirements, providing important additional verification of V-Charge's value.
Torotrak has led a programme of vehicle manufacturer drive events, based at this stage on concept hardware, from which we have been receiving excellent feedback and confirmation of interest. The next stage of prototype will incorporate this feedback, together with improvements in design, including the key variator assembly, impeller design and traction drive, and will integrate all three into a simpler configuration. We have already completed the key design elements and are currently undertaking confirmatory rig testing, supported by the leading Tier 2 manufacturer, an expert in this area.
At this point, the indications are that the timing of this product definition will be compatible with vehicle manufacturer programme plans for the introduction of engine downsizing technologies.
M-KERS
Addressable market
The global hybrid market is set to grow from the current 1 million, to around 7 million units per annum by 2020, which presents us with a valuable base addressable market.
In commercial vehicles, there is a move towards hybridisation with energy recovery systems, which recover the energy that is otherwise lost when a vehicle brakes. In this new market, the strongest immediate demand is for city buses, where the high level of "stop start" during driving enables hybridisation to demonstrate its benefits to full potential. Vehicle and equipment manufacturers are confirming the strong potential for a retrofit market opportunity that would address the current global vehicles in service.
Market forecasts show that around 3 per cent of medium and heavy-duty delivery trucks, and 10 per cent of buses, will be hybridised by 2020. This assumes the use of known available technologies and is likely to be a conservative estimate when taking into account the opportunities for newer, cost effective technologies such as M-KERS.
Market opportunity
Current electric hybrid technologies are expensive and invasive to the vehicle's structure in space and weight terms. The transaction price of a bus roughly doubles with electrical systems and makes it difficult to justify the investment, considering the fuel actually saved, without support from Government grants or strategically or politically driven decisions at the municipal fleet level. Our target is around 20 per cent of current electric hybrid system costs, which we consider capable of decreasing further with increasing industrialisation. This allows M-KERS to compete without subsidies.
In addition, the weight of these systems has a significant impact on vehicle payload, restricting it by around 800 kg overall, which equates to the loss of 8-10 passenger spaces.
We have received consistent feedback from end-users (the bus operators) about the need for a commercially viable hybrid system, as fuel consumption and total cost of ownership remain key factors for a fleet operator.
Progress made
Commercial vehicles
Torotrak and Optare have agreed the principal terms of a co-operative programme to rapidly progress the M-KERS technology through to end-user fleet trials in the UK. Torotrak will lead this programme as the M-KERS system integrator. This system includes Torotrak's CVT, combined with a third-party's flywheel. Both companies see great potential in the technology and there is a strong appetite amongst fleet operators to co-operate in this programme. This is a substantial opportunity to move the technology from concept to reality, and to engage with interested suppliers and manufacturers around tangible product requirements. We will report further on the details of this new arrangement when the agreement is finalised. The extension of Tata Motors' licence also presents opportunities, given Tata's position in this market.
Alongside Optare, we have collaborated with flywheel technology provider, Ricardo, and transmission supplier, Allison, in the Technology Strategy Board-sponsored "Flybus" project to install and test an M-KERS device in a bus. We have learnt a lot from this work and it has been a useful showcase for the technology. The programme has taken longer than envisaged, with delays on technology elements not under Torotrak's control. However, the Flybus vehicle is currently undergoing development and fuel economy tests at the Millbrook test track, and is set to deliver the initial fuel economy results within the next few months.
Simulation predictions that add known design improvements to current hardware, constrained by being concept orientated, show that between 15 and 20 per cent fuel economy is achievable, depending on operating conditions. These levels are possible without engine "stop-start" technology. Using an "engine cut" strategy could in future yield further fuel economy gains.
Cars/automotive
In April 2011, Volvo Car Corporation, Volvo Powertrain and SKF committed to a flywheel development programme with funding from FFI (the Swedish Energy Agency). The programme brought together Flybrid Systems' flywheel technology and Torotrak's CVT technology to demonstrate the flywheel system for a volume passenger car application.
The development with Volvo cars has progressed to vehicle test stage, with Flybrid Systems leading the prototype system integration. Torotrak is supporting this with technology, design tools, simulation and technical support.
With substantially lower costs than an electric hybrid solution, but with higher relative costs than other pure fuel saving options (for example, engine downsizing or milder hybrid solutions), we envisage the initial opportunity being in premium car market segments. Subsequent cost reduction would allow broader markets to be addressed. This cost reduction is a realistic assumption given the mechanical componentry and economies of scale that would come with industrialisation; cost reduction for electric solutions is not so straightforward. Sponsorship by companies such as Volvo creates the potential for strong technology leadership and momentum.
Other Markets
Addressable markets
Other active markets for Torotrak include commercial off-highway vehicles, principally transmissions for medium duty tractors and construction vehicles. The majority of vehicle manufacturers in this market produce their own transmissions, with a much lower level of independent supply by Tier 1 manufacturers.
Market Opportunity
Torotrak focuses on segments where our technology can be transformational in specific applications. Our technology generally displays strong benefits in productivity; Torotrak field trials against current technology have shown a 10 per cent improvement. This, combined with high levels of control and ease of shuttling, make it an attractive proposition, as it is less costly than the main variable drive alternatives, which tend to be hydrostatic drive transmissions.
During the year, we confirmed the potential for a valuable new addressable market in wheeled and back-hoe loaders, where our technology in place of a torque convertor power shift transmission can yield fuel economy improvements in excess of 20 per cent.
Progress made
This year, we have supported Carraro's progress towards industrialisation. The introduction of Univance as a component supplier provides a valuable option for the supply of discs and rollers for their anticipated volumes. We do not have any confirmation of launch dates from Carraro, and of course this will be impacted by their own product cycles and investment decisions, to which we are not privy.
We have carried out simulation and modelling activity with a major off-highway vehicle manufacturer to explore the high-yield benefits possible in wheeled loaders. We will focus further business development activity on this sector over the coming financial year.
Core variator technology
Progress
We continue to develop and refine our cornerstone technology; the core elements of the full toroidal variator. We have committed considerable resources to mapping disc-roller contact performance, particularly under transient abuse events, in order to satisfy the stringent production "gateway" requirements of Tier-1 manufacturers and vehicle manufacturers. The results feed directly into traction fluid models that assist with variator design for all our applications.
In the past year, we have developed a number of low cost variator solutions that will benefit the competitiveness of M-KERS and V-Charge products. As an example, we have redesigned the high power density variator originally developed for Formula 1 partners in 2008/2009 with an estimated 50 per cent reduction in parts count and 30 per cent overall cost saving, but with no compromise to function. Our manufacturing and technology partners have confirmed that the new design is fit for production, and is more easily fitted into vehicles due to its enhanced capabilities as an overall package.
Extensive work in durability testing over the year has further developed and validated our mathematical models used to scale the variator to a given usage cycle, and has demonstrated the unit's excellent fatigue life and robustness.
Patents
During the year, we filed three new patents that all related to developments in low-cost and reduced parts count systems, which service our V-Charge and M-KERS markets. A further four patents are due for filing in the first half of this financial year. This demonstrates Torotrak's continued capacity to invent and secure valuable intellectual property in its pursuit of new market opportunities.
Wider market trends
Cars and Electrification
There has been a strong governmental push towards electrification. The UK Government has set aside £400 million to support the uptake of ultra-low emission vehicle technologies, encompassing electric, plug-in hybrid and hydrogen fuelled vehicles.
In spite of this push, significant obstacles remain to achieving a vision of an electric vehicle future. This is due to the technical issues inhibiting the breadth of technological application, as well as the cost and environmental damage arising from battery manufacture, disposal, and unquantified replacement cycles. In addition, there is a growing focus on "cradle to grave" emissions, rather than just "tailpipe" emissions.
Senior automotive industry executives are planning for the internal combustion engine to continue to dominate the industry for at least the next twenty years. This creates a significant and enduring market for technologies that improve the efficiency and reduce the emissions of these engines. This is precisely the market and the opportunity that Torotrak technology aims to address.
The automotive industry has proven its readiness to embrace developments in new technology and respond to new legislative requirements. It is already working to deliver the required emissions reductions, investing substantial amounts of engineering time and money into developing new solutions to meet these requirements.
Commercial vehicles
Whilst the commercial vehicles industry remains conservative towards new technologies, there is evidence of the growing need to adopt fuel economy measures.
Industry volumes have increased from around 1.8 million in 2009 to around 2.6 million by 2012. This is forecast to reach to 3.8 million by 2020, with China predicted to remain the largest global market with 1.6 million sales by 2020, up from 1.3 million in 2010.
This is highlighted in a recent industry analysis which shows the increasing demand for automation in commercial vehicle gearboxes. This is driven principally by economic concerns with lowering fuel costs, as well as pending European and United States legislation. Currently, much of this demand is being met through organic growth in planetary automatic gearboxes and automated manual gearboxes, which are the in-house choice of the major European vehicle makers.
However, the study shows that a 20 per cent fuel economy gain from an automated gearbox such as ours could lead to a paradigm shift in industry terms.
A similar picture emerges with M-KERS. Current penetration forecasts for hybrids are based upon known and expensive electrical hybrid systems. The emergence of M-KERS has the potential to change the economics of hybridisation in the commercial vehicles industry. Feedback from end-users, who want affordable hybrids with a conventional 2-3 year payback, confirms this.
Market penetration of Torotrak technology
Current market conditions provide unprecedented pull for Torotrak technology. We expect to see emissions reduction legislation tighten further, while rising fuel prices demand more fuel efficient technology. This provides us with two levels of opportunity. Firstly, our business plan targets specific segments within markets where we are confident that our technology delivers a strong fuel economy to cost ratio relative to competitive and incumbent technologies. This creates competitive opportunities in our target addressable markets, where a "normal" level of penetration would yield valuable returns. Torotrak's approach of working in synergy with Tier 1 and Tier 2 vehicle component manufacturers is a critical part of allowing increasing competitiveness through progressive cost reduction.
However, there are "tipping points" where the level of competitiveness compared to other technologies, if supported by industrialisation partners of sufficient market reach, could lead to high market penetration of our technology. Some of the fuel economy results we are achieving, combined with the level of cost reduction available through the technology developments described above, provide the basis for this opportunity.
Financial Review
Summary
The financial condition of the Company has strengthened during this financial year. We have:
·; Continued to secure high levels of licence income, meeting a most important strategic objective of maintaining strong cash balances (£10.5 million at year end) and self-funding development expenditure
·; Reduced our operating costs, pre-exceptional items, by £1.1 million, putting us on track for lower annualised costs (before discretionary investment), of below £5 million on a cash basis. At the same time, we have increased the level of flexibility in our cost base and in our relationships with development partners, which allows us to respond to increased operational investment when needed
·; Improved our operational effectiveness through "flatter" and more accountable responsive staff structures, with disciplined project teams focused on customer delivery
·; Invested in advanced engineering systems and processes to provide first class support to the commercialisation programmes on which we are focusing, as well as underpinning innovative technical development
·; Expanded our business development opportunities, which we hope to see rewarded with deal closure in the coming financial year
·; Increased the certainty of outcome regarding future royalty income
Funding and pricing/structuring of agreements
In the stages prior to production, licensing income is a critically important factor in Torotrak's financial sustainability. It is therefore vital that we ensure the correct balance of fee-earning versus non-fee earning activity very early on, and negotiate the right terms to deliver income contributions at the required points in time. Included in this year's cash flow are licence fees of £6.8 million.
In some arrangements, however, we are prepared to forgo up front licence fees in place of a defined financial commitment from the partner company to support us in technology development. This has the impact of helping reduce Torotrak's required operating cost base, and help advance our commercialisation objectives. A good example is the recently-signed agreement with Univance.
Either way, part of Torotrak's core expertise is in formulating, pricing and negotiating licensing agreements that maximise our opportunity and encourages partner commitment, whilst ensuring robust protection of our intellectual property rights at all times.
People, processes and utilisation
"Utilisation" in the context of human beings can sound cold-hearted. However, with payroll and contractor costs representing 59 per cent of our operating costs, it is common sense to focus on getting the best from our people.
It has been a tough year in terms of ensuring that very high priority external targets are met, whilst putting in place different processes and IT to support more dynamic work practices, with a reduced team. It has been "tough" because we wanted the results to be thoroughly "bought in to" by everyone involved; it has taken long hours and significant effort up front, but the long-term rewards will be substantial, with processes built from the bottom up, rather than imposed from "above".
During the year, we have invested £0.2 million in business process change during the year to help strengthen our project management disciplines. A successful commercial or engineering programme requires clear definition of market and technical objectives, and a constant weather eye on changes that may take place in the environment surrounding a project. We are determined to achieve "best in class" project management, which is critical to secure customer confidence as it is to ensure we keep focused on navigating successfully through to the only objective that really matters - getting our technology into production in each of our core strategic markets.
This year, we increased the proportion of time spent on core technology invention and development to 30 per cent of all engineering time, from 11 per cent last year, leading to some important new patent filings.
A good indication of increased activity with partners and licensees is the amount of time that our physical assets, mainly test rigs, are in use. We monitor this carefully. We have seen a significant increase in activity in the year, with all test rigs being on some occasions nearly 100 per cent utilised. We have spent £0.1 million spent on upgrading and improving our test hardware with more budgeted for the coming year.
Revenue and licensing
Revenue of £4.3 million (2011: £5.1 million) reflects £1.4 million of engineering fees from our support activities to licensees and others (2011: £2.4 million) and £2.9 million of licence fees (2011: £2.7 million).
Licensing
Licensing revenues include £2.3 million from Allison (2011: £2.5 million), and £0.6m from Tata Motors (2011: £nil). Allison's licence fees related to exclusivity rights from March 2012 to March 2013. Exclusivity in this sense means that we will not license new parties in the commercial vehicle main drive transmission field (hence our licensees in this area are Allison, Tata Motors and ETBM only).
On a cash basis, we received two licence payments from Allison during the year totalling £6.8 million, of which £4.1 million has been cumulatively accounted for as recognised in revenue. The £2.7 million of the cash received that will be reflected in income in the future is deferred until the rights can be used by Allison in May 2012 in relation to the above 14,000kg gross vehicle weight commercial vehicle market. Exclusivity in this field had been granted to ETBM up to this point in time following their £4.2 million licence agreement, signed on 23 November 2007.
This year we also recognised £0.6 million licence income from Tata Motors, under its existing licence agreement, and we have extended this licence for Tata branded vehicles into specific fields of M-KERS for commercial vehicles and V-Charge for passenger cars. The licence extension is on the proviso that both parties work constructively to exploit the opportunities that we both see in these areas.
Engineering fees and technology development
The higher level of gross engineering fees last year was due to higher prototype build activity in the ETBM contract and therefore a higher level of material costs being invoiced. After direct costs are taken into account, engineering activities this year contributed £0.9 million (2011: £1.1 million) in gross profit. The £0.2 million reduction in gross profit reflects a higher level of activity in technology development, representing 30 per cent of available engineering time (2011: 11 per cent). This is essential to support our customers' commercialisation plans, as well as to invent and register our own new patent cases.
Operating costs
We reported last year that restructuring would achieve expected annualised savings before inflation of around £1.8 million in our operating cost base, with approximately 75 per cent of that realised in the current financial year. Annualised cost savings remain on target, but we took the decision during the year to spend £0.2 million to improve engineering processes and modelling and simulation development. As a result, we experienced an operating cost reduction of £1.1 million during the year (61 per cent of annualised savings). £0.1 million exceptional costs (2011: £0.7 million) were incurred in relation to this restructuring.
Employee numbers have fallen from an average of 53 last year to 40 this year. As discussed in previous reports, employee numbers are not an accurate measure of development activity and investment in Torotrak technology. The true indicator of underlying investment in Torotrak technology includes the considerable levels of engagement and development activity carried out by our technology licensees and partners, which is growing materially year on year.
Cash
We ended the year with an increase in net cash balances of £2.2 million and a cash total of £10.5 million on the balance sheet. Our objective prior to the point at which we earn recurring royalties or other production related earnings has been simple and consistent: to preserve cash balances and to offset operating costs with licence income and engineering fees.
Given the timing of licence fees that could straddle a financial year-end, there can be major swings in annually reported cash flow statistics. Hence, there is a need to look at performance on a more averaged basis.
Five year financial performance
We have consistently reported on our objective of achieving broad cash neutrality in the period whilst the Company is effectively in a development phase and awaiting production related royalties/ other income. On a 5 year basis, operating cash has been negative by £1.8 million, albeit that includes exceptional items. This statistic is worthy of a little more analysis:
1. £25.8 million of gross licensing and engineering fees (an average of £5.2 million per annum) have been generated at a pre-production stage, which is a sign of well-matched investment and commitment by our licensees and partners. Of course, on top of this, our partners and licensees have incurred further development costs progressing the Torotrak technology programmes.
2. Following the full impact of our restructuring, administration and development operating costs should on a cash basis fall below £5 million (before inflation) annualised, before discretionary operating investment. With further development bearing fruit in highly attractive new product areas, our capacity to secure early stage licence income and engineering support fees is being replenished. The lower operating cost base gives us greater resilience, meeting our objective to maintain cash neutrality pending recurring cash flows from royalties and other operating income
3. Finally, the lead times for this Company in the wait for recurring operating cash flow have been long. Whilst this has been frustrating, it means that we have invested considerably in development and it puts Torotrak, in a period of unprecedented global cutbacks, in a very strong position with multiple committed programmes and highly.
Financial Information 2012
Consolidated Income Statement
For the year ended 31 March | Notes | Group 2012 £000 | Group 2011 £000 |
Revenue | 4 | 4,294 | 5,066 |
Direct costs | 4 | (586) |
(1,270) |
Development expenses | 3,708
(3,699) | 3,796
(4,861) | |
Administrative expenses | |||
Excluding exceptional item | (1,874) | (1,861) | |
Exceptional item | 6 | (129) | (659) |
Administrative expenses including exceptional item | (2,003) | (2,520) | |
Operating loss | 4, 5 | (1,994) | (3,585) |
Finance income | 75 | 85 | |
Loss before income tax | (1,919) | (3,500) | |
Income tax credit (Research and Development related) | 286 | 188 | |
Loss for the year attributable to continuing operations | (1,633) | (3,312) | |
Discontinued operations | 7 | - | 215 |
Loss for the year attributable to the shareholders of the Parent Company | (1,633) |
(3,097) | |
Basic loss per share (pence) | (1.00) | (1.91) | |
Diluted loss per share (pence) | (1.00) | (1.91) | |
Basic loss per share (pence) from continuing operations | (1.00) | (2.05) | |
Diluted loss per share (pence) from continuing operations | (1.00) | (2.05) |
Consolidated Statement of Comprehensive Income
For the year ended 31 March | Group 2012 £000 | Group 2011 £000 |
Loss for the year - continuing operations |
(1,633) |
(3,312) |
Profit for the year - discontinued operations |
- |
215 |
Currency translation differences |
- |
(13) |
Total comprehensive loss for the year |
(1,633) |
(3,110) |
Balance Sheet
As at 31 March |
Notes |
Group |
Group |
2012 | 2011 | ||
£000 | £000 | ||
Assets | |||
Non-current assets | |||
Intangible assets | 1,389 | 1,322 | |
Property, plant and equipment | 811 | 700 | |
Investments | 253 | 253 | |
Trade and other receivables | 8 | 196 | 192 |
Total non-current assets | 2,649 | 2,467 | |
Current assets | |||
Inventories | 61 | 120 | |
Trade and other receivables | 8 | 1,279 | 2,265 |
Tax receivable | - | 1 | |
Cash and cash equivalents | 10,504 | 8,271 | |
Total current assets | 11,844 | 10,657 | |
Total assets | 14,493 | 13,124 | |
Liabilities | |||
Non-current liabilities | |||
Joint venture loan | (49) | (45) | |
Current liabilities | |||
Trade and other payables | 9 | (4,175) | (1,846) |
Tax payable | (109) | - | |
Total current liabilities | (4,284) | (1,846) | |
Total liabilities | (4,333) | (1,891) | |
Net assets | (10,160) | (11,233) | |
Capital and reserves | |||
Issued share capital | 10 | 16,493 | 16,254 |
Share premium | 53,726 | 53,646 | |
Other reserves | (82) | (79) | |
(Accumulated loss)/retained earnings | (59,977) | (58,588) | |
Total equity attributable to equity holders of the Parent Company | 10,160 |
11,233 |
Consolidated Statement of Changes in Equity
Group share capital £000 | Group share premium account £000 | Group other reserves £000 | Group accumulated loss £000 | Total equity £000 | |
Balance at 1 April 2010 | 16,173 | 53,646 | (31) | (55,882) | 13,906 |
Comprehensive income | |||||
Loss for the period | - | - | - | (3,097) | (3,097) |
Other comprehensive income | |||||
JV currency translation difference | - | - | - | (13) | (13) |
Total other comprehensive income | - | - | - | (13) | (13) |
Total comprehensive income | - | - | - | (3,110) | (3,110) |
Transactions with owners | |||||
Closure of trust | - | - | 12 | (4) | 8 |
Shares awarded at cost price | - | - | 19 | (19) | - |
Issue of shares under shareincentive plan |
79 |
- |
(79) |
- |
- |
Share based payment charge | - | - | - | 429 | 429 |
Issue of shares from exercise ofLTPSP |
2 |
- |
- |
(2) |
- |
Total transactions with owners | 81 | - | (48) | 404 | 437 |
Balance at 1 April 2011 | 16,254 | 53,646 | (79) | (58,588) | 11,233 |
Comprehensive income | |||||
Loss for the period | - | - | - | (1,633) | (1,633) |
Total comprehensive expense | - | - | - | (1,633) | (1,633) |
Transactions with owners | |||||
Closure of trust | - | - | 1 | - | 1 |
Transfer of shares under shareincentive plan | - | - | 28 | (10) | 18 |
Issue of shares under shareoption schemes | 50 | 53 | - | - | 103 |
Share based payment charge | - | - | - | 390 | 390 |
Issue of shares under shareincentive plan | 32 | - | (32) | - | - |
Issue of shares from exercise ofLTPSP | 136 | - | - | (136) | - |
Issue of shares under SAYE scheme | 21 | 27 | - | - | 48 |
Total transactions with owners | 239 | 80 | (3) | 244 | 560 |
Balance at 31 March 2012 | 16,493 | 53,726 | (82) | (59,977) | 10,160 |
Statement of Cash Flows
Group | Group | |
2012 | 2011 | |
£000 | £000 | |
Cash flows from operating activities | ||
Loss for the year | (1,633) | (3,097) |
Adjustments for: | ||
Depreciation | 278 | 255 |
Amortisation | 132 | 132 |
Finance income receivable | (75) | (85) |
(Profit)/loss on disposal of joint venture | - | (411) |
(Profit)/loss on disposal of plant and equipment | (9) | (30) |
Loss on disposal of intangible assets | 39 | 211 |
Taxation | (286) | (188) |
Decrease in inventories | 59 | 264 |
Decrease/(increase) in trade and other receivables | 874 | (1,444) |
Increase/(decrease) in trade and other payables | 2,378 | (1,239) |
Charge for equity-settled employee share schemes and bonuses | 390 | 429 |
Cash generated by/(used in) operations | 2,147 | (5,203) |
Income tax received | 396 | 449 |
Net cash generated by/(used in) operating activities
| 2,543 | (4,754) |
Cash flows from investing activities | ||
Acquisition of property, plant and equipment | (360) | (345) |
Acquisition of patents | (208) | (279) |
Acquisition of investment | - | (253) |
Loan to Rotrex A/S | - | (147) |
Loan to Rotrak Ltd | - | - |
Proceeds from sale of plant and equipment | 11 | 34 |
Proceeds from closure of joint venture | - | 943 |
Finance income received | 77 | 87 |
Net cash (used in)/generated by investing activities
| (480) | 40 |
Cash flows from financing activities | ||
Proceeds from the issue of share capital | 170 | - |
Net cash generated in financing activities
| 170 | - |
Net increase/(decrease) in cash and cash equivalents | 2,233 | (4,714) |
Cash and cash equivalents at start of year | 8,271 | 13,092 |
Cash disposed of as a result of withdrawal from joint venture | - | (94) |
Exchange gain on currency translation | - | (13) |
Cash and cash equivalents at end of year
| 10,504 | 8,271 |
Share of cash and cash equivalents held in joint venture (included above) | 101 | 100 |
Notes to the Financial Information
1. General Information
Torotrak plc (the Company) is a publicly traded 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.
The Annual Report and Financial Statements for the year ended 31 March 2011 have been delivered to the Registrar of Companies and are available on Torotrak's website www.torotrak.com and the Annual Report and Financial Statements for the year ended 31 March 2012 will be posted to shareholders and made available on Torotrak's website in June 2012.
The auditors have reported under section 495 of the Companies Act 2006 on the Group's statutory accounts for the years ended 31 March 2012 and 31 March 2011 and the auditors' reports were unqualified and did not contain any emphasis of matter paragraphs or statements under Section 498 of the Companies Act 2006.
2. Basis of Preparation
This preliminary announcement does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. The financial information for the year ended 31 March 2012 has been prepared under the historical cost convention and in accordance with EU Endorsed International Financial Reporting Standards (IFRS), IFRIC interpretations and the Companies Act 2006 applicable to companies reporting under IFRS. The accounting policies used are the same as those disclosed in the audited Financial Statements for the year ended 31 March 2011.
3. New standards, amendments to standards or interpretations
There are no new IFRSs or IFRIC interpretations that are effective for the first time for the financial year beginning on or after 1 April 2011 that would be expected to have a material impact on the Group.
The following standards have been published and are mandatory for accounting periods beginning on or after 1st January 2013 but have not been early adopted by the Group:
·; IFRS 9, "Financial Instruments"'. This standard is the first step in the process to replace IAS 39, 'Financial Instruments: recognition and measurement'. IFRS9 introduces new requirements for classifying and measuring financial assets. The standard is not applicable until 1st January 2015 but is available for early adoption. This standard has yet to be endorsed by the EU. It is not expected to have a material impact on the Company or Group financial statements.
·; IFRS 10, "Consolidated Financial Statements". The objective of IFRS 10 is to establish principles for the presentation and preparation of consolidated financial statements when an entity controls one or more other entities to present consolidated financial statements. This standard is not expected to have a material impact on the Group.
·; IFRS 11, "Joint Arrangements". IFRS 11 relates to joint arrangements by focusing on the rights and obligations of the arrangement rather than the legal form. This standard is not applicable until accounting periods starting on or after 1 January 2013, but is available for early adoption. IFRS 11 eliminates the accounting policy choice of proportional consolidation for joint ventures, in favour of the equity accounting method. As the Group has a joint venture that is currently accounted for under the proportional consolidation method this standard will have an impact on the Group, but is unlikely to be of material impact in relation to current joint venture transactions and balances.
·; IFRS12, "Disclosures of interests in other entities". IFRS 12 includes the disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles and other off balance sheet vehicles. As the Group has a joint venture this standard will have an impact although this is not expected to be significant.
·; IFRS 13, "Fair Value Measurement". IFRS 13 aims to provide consistency and reduce the complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRSs. This standard is not expected to have a material impact on the Company or Group.
There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Group.
4. Segmental analysis
Year ended 31 March 2012
Engineering services £000 | Income from licence agreements £000 |
Development activities £000 |
Total £000 | |
Revenue (by market) | ||||
Commercial vehicles/on & off highway | 1,139 | 2,600 | - | 3,739 |
Automotive and other | 255 | 300 | - | 555 |
1,394 | 2,900 | - | 4,294 | |
Direct costs | (474) | (112) | - | (586) |
Gross profit | 920 | 2,788 | - | 3,708 |
Other operating costs | - | - | (3,699) | (3,699) |
Segmental contribution/(loss) | 920 | 2,788 | (3,699) | 9 |
Other operating costs not allocated to segments |
(2,003) | |||
Continuing operating loss |
(1,994) |
Note: Development activities include research and the creation of intellectual property. Some market information has been combined where the values are deemed immaterial.
Year ended 31 March 2011
Engineering services £000 | Income from Licence Agreements £000 |
Development activities £000 |
Total £000 | |
Revenue (by market) | ||||
Commercial vehicles/on & off highway | 2,146 | 2,719 | - | 4,865 |
Automotive and other | 201 | - | - | 201 |
2,347 | 2,719 | - | 5,066 | |
Direct costs |
(1,235) |
(35) |
- |
(1,270) |
Gross profit |
1,112 |
2,684 |
- |
3,796 |
Other operating costs |
- |
- |
(4,861) |
(4,861) |
Segmental contribution/(loss) |
1,112 |
2,684 |
(4,861) |
(1,065) |
Other operating costs not allocated to segments |
|
|
|
(2,520) |
Continuing operating loss |
(3,585) |
Note: Development activities include research and the creation of intellectual property. Some market information has been combined where the values are deemed immaterial.
Significant customers
The following revenues are attributable to significant customers:
Group 31 March 2012 £000 | Group 31 March 2011 £000 | |
European Truck and Bus Manufacturer
| 232 | 1,301 |
Allison Transmission, Inc
| 3,199 | 3,118 |
Tata Motors
| 600 | - |
Business segment Balance Sheet
As at 31 March 2012
Torotrak excluding Joint Venture £000 |
Rotrak Joint Venture £000 |
Group £000 | |
Non-current assets | |||
Intangible assets | 1,389 | - | 1,389 |
Property, plant and equipment | 811 | - | 811 |
Investments | 253 | - | 253 |
Trade and other receivables | 147 | 49 | 196 |
Total non-current assets | 2,600 | 49 | 2,649 |
Current assets | 11,743 | 101 | 11,844 |
Total assets | 14,343 | 150 | 14,493 |
Total liabilities | (4,284) | (49) | (4,333) |
Net assets | 10,059 | 101 | 10,160 |
Business segment Balance Sheet
As at 31 March 2011
Torotrak excluding Joint Venture £000 |
Rotrak Joint Venture £000 |
Group £000 | |
Non-current assets | |||
Intangible assets |
1,322 |
- |
1,322 |
Property, plant and equipment |
700 |
- |
700 |
Investments | 253 | - | 253 |
Trade and other receivables |
147 |
45 |
192 |
Total non-current assets |
2,422 |
45 |
2,467 |
Current assets |
10,557 |
100 |
10,657 |
Total assets |
12,979 |
145 |
13,124 |
Total liabilities |
(1,846) |
(45) |
(1,891) |
Net assets |
11,133 |
100 |
11,233 |
5. Continuing operating loss
Continuing operating loss is stated after charging/(crediting) the following: |
Group 2012 £000 |
Group 2011 £000 | |
Administrative costs | |||
Amortisation of intangible assets - patents | 132 | 123 | |
Abandonment and impairment of patents | 39 | 211 | |
Profit on disposal of plant and equipment | (9) | (30) | |
Depreciation | 278 | 255 | |
Operating lease payments | - land and buildings | 280 | 280 |
- office equipment | 21 | 31 | |
Operating lease income | - land and buildings | (105) | (105) |
Auditors' remuneration: | |||
Fees payable to the Company's auditor for the audit of the Company's subsidiaries pursuant to legislation | 12 | 15 | |
Fees payable to the Company's auditor for the audit of the Parent Company and consolidated financial statements | 24 | 27 | |
Non-audit services | - tax services | 4 | - |
Expenses by nature
Group 2012 £000 |
Group 2011 £000 | ||
Employee costs
| 3,064 | 3,994 | |
Depreciation and amortisation
| 410 | 378 | |
Operating lease payments
| 301 | 311 | |
Other development costs
| 468 | 637 | |
Other administrative expenses
| 1,459 | 2,061 | |
Total of development and administrative expenses
| 5,702 | 7,381 |
6. Exceptional item
Group 2012 £000 | Group 2011 £000 | |
Reorganisation costs | 129 | 659 |
The re-organisation costs relate to redundancy severance and associated expenses in relation to a reduction in employees undertaken as part of a restructuring process.
7. Discontinued operations
The result for discontinued operations in 2011 comprises all transactions relating to Infinitrak LLC including revenue and expenses to the date of disposal of the Group's interest in the joint venture and the gain on disposal of shares in Infinitrak. The joint venture arrangements were replaced with a licensing agreement.
Group 2012 | Group 2011 | |
£000 | £000 | |
Revenue | - | 1 |
Expenses |
- |
(197) |
- |
(196) | |
Gain on disposal of discontinued operations | ||
Net proceeds after legal fees | - | 943 |
Balance sheet movement | - | - |
Intangible asset | - | 32 |
Property, plant and equipment | - | (407) |
Current assets | - | (168) |
Total liabilities | - | 11 |
Net gain | - | 411 |
Total result for discontinued operations | - | 215 |
8. Trade and other receivables
Group 31 March 2012 £000 | Group 31 March 2011 £000 | |
Non-current assets | ||
Loan to the Joint Venture | 49 | 45 |
Loan to Rotrex A/S | 147 | 147 |
Amounts owed by subsidiary undertakings | - | - |
Total non-current assets | 196 | 192 |
Current assets | ||
Trade receivables | 795 | 71 |
Accrued income | 125 | 1,877 |
Other receivables | 55 | 138 |
Prepayments | 304 | 179 |
Total current assets | 1,279 | 2,265 |
There is no provision for impairment of receivables at 31 March 2012 (2011: £nil). No trade receivables were overdue.
9. Trade and other payables
Group 31 March 2012 £000 | Group 31 March 2011 £000 | |
Non-current liabilities | ||
Share of loan to the Joint Venture | 49 | 45 |
Current liabilities | ||
Trade payables | 268 | 82 |
Accruals | 792 | 982 |
Social security and income tax | 228 | - |
Deferred income | 2,788 | 187 |
Restructuring provision | 99 | 595 |
Total current liabilities | 4,175 | 1,846 |
Amounts owed to the Joint Venture are payable on demand but are expected to be paid after more than one year. Interest is charged on this payable.
10. Issued share capital
Group |
Number | 31 March 2012 £000 |
Number | 31 March 2011 £000 | |
Authorised |
| ||||
Ordinary shares of 10 pence each | 250,000,000 | 25,000 | 250,000,000 | 25,000 |
|
Allotted and fully paid |
| ||||
Ordinary shares of 10 pence each | 164,932,780 | 16,493 | 162,538,846 | 16,254 |
|
Group |
Number |
31 March 2012 £000 |
Number |
31 March 2011 £000 |
Ordinary shares of 10 pence each | ||||
At beginning of year | 162,538,846 | 16,254 | 161,734,912 | 16,173 |
Shares issued as free/partnership/matchingshares | 320,570 | 32 | 787,494 | 79 |
Shares issued as a result of LTPSP vesting | 1,358,245 | 136 | 16,440 | 2 |
Shares issued under the SAYE scheme | 213,340 | 21 | - | - |
Shares issued under the 2008 share option scheme | 501,779 | 50 | - | - |
At end of year | 164,932,780 | 16,493 | 162,538,846 | 16,254 |
11. Financial record
For the years ended 31 March
2012 £000 | 2011 £000 | 2010 £000 | 2009 £000 | 2008 £000 | |
Revenue | 4,294 | 5,066 | 7,641 | 4,617 | 3,685 |
(Loss)/profit on ordinary activities beforetaxation | (1,919) | (3,285) | 197 | (1,987) | (2,397) |
(Loss)/profit on ordinary activities aftertaxation for the financial year | (1,633) | (3,097) | 387 | (1,788) | (2,130) |
Basic (loss)/earnings per share | (1.00p) | (1.91p) | 0.24p | (1.22p) | (1.57p) |
Diluted (loss)/earnings per share | (1.00p) | (1.91p) | 0.23p | (1.22p) | (1.57p) |
Cash and cash equivalents at year end | 10,504 | 8,271 | 13,092 | 14,975 | 11,549 |
Net cash inflow/(outflow) from operatingactivities | 2,543 | (4,754) | (1,121) | 1,011 | 526 |
Related Shares:
Torotrak PLC