Sunday, 17 January 2016

Sorry - Bus out of service. Destination Nowhere.

So, there you are, sat at the Bus stop... You've checked the timetable, the automatic ETA display is updating, and every now and again when a bus does go past, the driver shouts out that your bus is going to be with you soon.
You keep checking the automatic ETA display for the bus - it says "due in 4 days", and price for a ride is 16p.

Then things start to happen. Firstly the digital ETA display goes blank. No warning. Nothing said. You get the conductor from the next bus shouting that they had been saying the next bus has been cancelled because it's empty, and that he had been saying that since November, and then you hear that the driver of the next bus has decided to get off one stop earlier because he thought he had done a good enough job of driving it for the last few years.

So, you're stood there, without a bus, and a one way ticket to ride that cost you 16p. Despite the price of a ticket having dropped by 20% in the past few days, you still sit there wondering what to do with a valid ticket but no bus to get on.
[Ed note: I originally drafted this first bit back in early 2015 but never finished it]

Then you hear that the bus has a new conductor, who once used to work on a rival bus company, but that went bust when the company ran out of money after spending all their advanced ticket sales on Gearbox design and research instead of manufacturing and selling them. Do you want to keep your ticket - or is it time to sell it on instead for whatever you can get ?

Whilst all this is happening, they tell you there's a bus going on a route in Kent. Sorry it's late, but it does accelerate very fast but the fuel efficiency isn't any different. (ahh, I hear you ask, but were the buses more punctual ? who cares - said everyone)

So we get to 2015...
In walks a new Managing Director. Genesis would have us believe Adam was the first, but it transpires that the delays to the Bus trials were too much for JD to remain with any integrity. It would seem an engineer can pull the wool over an accountants eyes, and the fallout from that was that Adam banished the KERS creator (John Hilton of Flybrid fame) from the garden of IVT with less than originally promised.

At the next AGM, JD was of course nowhere to be seen, which after the Steve Redgrave-esq request from the previous one was probably just as well, and Mr Robson set out the goals for the next 12 months.

And then, it almost happened.

The trials in Kent finished, the bus hadn't crashed, and announcements of great success and future production ensued, with confirmation of production tooling being made.

All seemed good, but lower down in the announcement it said things like "version 2" will now be on trial in early 2016. Visions of continual upgrades in technology and no actual sales rise onto the horizon again. Yet another perpetual research project I hear you say... oh not again.

And the shareprice drops. It drops to sub 4pence, and then drops some more to almost 3p. Yes that's my considerable investment reduced to 5% dust at todays rates.

But surely, if production tooling is on order, and end users and OEM's are saying they are looking forwards to further collaboration and production units in Q3 2016 this wouldn't be happening to the share price would it ?

So what is the truth and can we handle it ?

Is anyone paying for the next 20 version 2 pre-production test units for the trial buses ? well I've not seen anything that says they are.

So it's poker time. Do we have a winning hand ? Will the pre-production units prove the KERS solution, get spread to the four corners of the globe and convince them to get everything with KERS forever ? Will they be retrofitting their fleets ? and more importantly - if the pre-production version 2 units work - will the end user be paying for getting them !?!?! or is this yet another free trial give away ?

I see this time and time again in all types of business. The customer says "Can you do me a quote for designing me something and let me test it ?" and individuals and companies flock to provide the service/design/prototype for them to test. The test takes place, the potential customer (for they are not an actual paying customer yet) trials it on a proper job, makes some money, and then passes the trial unit/design/concept back to those who did all the work with a "thanks but no thanks", and either that's it (because their customer has moved on), or they take the design and give it to someone else to make - leaving the business out of pocket.

The share prices says that TRK don't have a winning hand. It also screams that there is no bankable deal (i.e. firm orders) yet to speak of, no kind of conditional offer to purchase if certain limits are met, and also that with the recent government funding for low emission bus schemes, (  and ) has not yet announced (today is mid January 2016)- did the TRK technology materialise too late without the evidence to help companies apply for their grants ?
News always leaks, and if there was good news, the pessimist in me says the shareprice would have ticked up already.
Worst case scenario is they make 20 mk2 KERS, they all go out onto free trials, and then the grants come through for other technology and they get left on the side as the grant funded technology gets put in instead. I hope I didn't just tell you so.

The optimist in me looks to the V-Charge testing at Bath University, and Ford to come charging in on their Unicorns and universally adopt the technology. We have heard positive news of new Technology - which means that parasitic losses (i.e. having the Vcharge running at idling speed when it's not needed) have been overcome by a new design that allows the unit to be clutched in and out.
Again, are we up to the Mk3 - at what point will we have a production ready version that someone wants to actually buy and doesn't want to wait for the next version ?

Meanwhile Alison Transmissions are part way through a redesign because the original version turned out to be too good and lasted too long with the size of discs in the variator. Cue Smaller Mk2 version redesign, oh yes and a load of endurance testing (which we have heard nothing about it's progress).
When is this design and test going to be completed, and if they have the main design, are they trying to integrate it into their manufacturing plans in the future.
No news yet, it's all very very quiet.

I am still sitting at the proverbial bus stop, nothing has arrived, and shareprice "out of service, destination nowhere" has been flashed up on the interactive arrivals board. The only thing missing from the information is an ETA for the end.

Meanwhile in the rest of the world, the price of oil drops below $30 per barrel, world war is slowly breaking out in the middle east, and after 16 years since I last bought one, I reluctantly accept that I can't buy a car with any sort of TRK technology in it and get something out of necessity.
And no, I'm not going to start catching the bus instead - that's not arrived either.

16 years. Think about that for a moment. Think about what has been achieved in the world in the 16 years since the millennium bug was going to hit, whole companies have grown -

As a comparison of companies - we can look to facebook that only started in 2004. Google had only just launched in 1998. (I hear you cry that they are just software companies...)

ok then - Elon Musk ( launched SpaceX in 2002

IVT technology is not rocket science, apparently, Rocket science is far easier.

I don't post that often on this blog, so don't expect anything probably from here until 2017 - unless something remarkable happens - I'll leave you to guess like everyone else what that could be, but going for 20 pre-production units without a bankable deal is the proverbial fig leaf over Adam's crown jewels. I hope he keeps it covered.

Until next time,
when that damn bus arrives....

Thursday, 19 December 2013

This is not the Bus you were thinking of - December 2013

The moments passed in silence. Against the tap tap tapping of the keyboard he watched the on line news feeds anxiously awaiting the latest updates and news from the TRK half year reports as he stood at the bustop, waiting patiently.

The reports were delayed and this wasn't a good sign, or was it ? The interactive timing sign went dead over a year ago, and hadn't really flickered since.
The indication at the AGM that Flybrid was going to be bought outright by the 20th of December but needed a Shareholder General Meeting, and administrative deadlines to be met was approaching fast. It was all drifting into the last possible minutes for a deal to be done and the Half Yearly Results to be published within the right timeframes - we have been here before, so there was no panic, just solemn waiting.

But then, at the last possible opportunity, on the 2nd of December, the Half Yearly Results were published and there was


No announcement, no material progress, no mention of ETBM, no new licensees, no new trials, and no new innovation announcements. And no sales, and no production. And nothing about Flybrid either.

The new news headlines were (in a summarised form, ignoring projects that were continuing on target in the same way as they had at the AGM)

  1. Allison paid some more license fee (£1.4m of £2.6m left) 
  2. There was 6.7 million in the bank
  3. at a cashburn of too much to last much more than a year
  4. We're delighted to be talking to lots of people about... but he never said who about what - just "I am delighted by the material step up in engagement with OEM and Tier 1 manufacturers"
  5. We are in advanced talks to acquire the last 80% of flybrid, and err, the potential customers like that.
  6. Basically Dragons Den would have given them a big "I'm out" at this point.

Shocked and stunned the social chat boards descended into dismay, the share price which had started to drop from 28pence in November pretty rapidly finished the day at 20p, and just as everyone was getting themselves used to a status-quo of "we need more time to get the deal done" with a recovery to 24pence, the prospective deal and share issue was announced at 18p and an additional 54% of the company - sending the shares back down to a low of 18.5p

As it turns out it was around November when TRK were starting to ask about for the Institutions to support this Placing of new shares, so with a Half Year report

The Acquisition of Flybrid must have started before Dick Elsey left. His confident and accurate quote that by April 2013 we would be looking at a very different company - came true after all - firstly with the 20% acquisition and this all followed in behind the systemisation and manufacturing strategy that Dick himself initiated.

So, why does it feel like this latest placement and share offer is actually Flybrid taking over Torotrak ?

Flybrid - the only game in town

It is almost as if in the months leading up to the 2012 half year reports that Flybrid with its CFT (clutch based transmission) driving the flywheel had gone onto a PR exercise of the like that TRK couldn't match. At one point it seemed that Flybrid were doing everything they could to promote their solution over and above Torotraks CVT, and were getting the high profile race cars fitted out with it.

Torotrak's only answer to maintain a semblance of a product offering had to be the rather Machiavellian purchase of Flybrid - to remove the competition of the CFT. Even in technical meetings and briefings with professional engineers - "there's nothing in it really" seems to still be the considered view.

So what else could TRK have done (in hindsight) to have allayed this position ? Getting competitive is in the background of F1 engineers, but is it in the background of technical research and IP licensing experts ?
"Just build a better wheel" - is often a teaser in business - in this case - why didn't they just build a better flywheel ?

Making high speed rotating machines with Carbon Fibre drums is nothing new - hell I was making them in the mid 1990's rotating at up to 100,000rpm in a vacuum - the expertise is out there if you know where to look, but I don't think TRK did.

Torotrak, faced with an Allison project that is still years away, yet the license deal funding has all but dried up, a EBTM that has gone even more silent, a V-charge mk2 that has been designed but is only just onto a test rig, and off highway busy trundling around farms in Italy, the Flybrid acquisition was the only game in town - nobody was going to stump up the millions needed to keep TRK afloat over the next four years (until Allison start manufacture - 2017 - my estimate), and Flybrid it seemed had all the commercial interest from the likes of Volvo and Wrightbus. The TRK CVT was becoming a sideshow to the OEMs.

Meanwhile, all the manufacturers are starting to look at the legal timetable of European emissions regulations - starting to pincer in on the car industry like the beginning credits to Dads Army. 2017, and 2020 are two years looming in the distance already and they really do need a magic bullet to solve their problems and fight it off. The electric shock treatment hasn't worked - they need something more robust.

Been here before ?
The first question is - are we going to see the drift in Euro regulations as we did in the US over CAFE regulations about 8 years ago ? The lobbyists in the US successfully managed to move the goalposts to destroy the demand for the product that TRK was targetting (SUVs) and we can be sure that the lobbyists in Europe are trying their hardest to move the deadlines and prices again.

Assuming that the men of Brussels have more administrative tightropes than those in America, we can but hope that things don't change that way - but do keep your eyes open and ready !

With the hope that the Euro legislation stays in place - then there will continue to be a need for devices that conserve momentum. (Conservation of momentum is implied by Newtons third Law of motion and it would be nice to be able to come up with a catchy brand name derived from this somehow...)

Electrical devices so far seem to be limited as they look to store energy, and simply can't pack enough of it into the spaces they have. Give it 5 years I'm sure that super-capacitors made with a highly folded Graphine surface will have massive power density capabilities and be ideal for the job - but that will miss the European emission regulations and the current tranche of vehicle platforms that are being finalised right now.

So what's the latest timetable ? I mean we could write a Gantt chart to show it all, but you can work it out from this lot:

Was: ETA for V-Charge mk2 demonstrators is Q4 2013 
Now: mk2 demonstrators on first testing.

"The Group has delivered a number of the milestones and is on track to deliver the remaining targets in the current financial year. The Group has successfully installed the V2 next generation prototype into the Renault Clio demonstrator vehicle and is engaged in V2 testing with multiple customer applications, including a partner vehicle manufacturer for a special vehicle operation."

So - Still No ETA for V-Charge production

Was: Buses ETA for first Buses on trial - Q2 2014
Now: Target 5 Trials in 2014 with Arriva (in Milton Keynes), more trial buses on 4 different companies (5 trials each)
First sold bus products scheduled for 2015 

Cars Production ETA guess Q4 2016 given the new platform schedule from Volvo - some preproduction demos before. Euro legislation deadline 2017
The watchword is still "Retrofit"

Main IVT (large vehicles)
No clear ETA for Allison, but guess at Q4 2016 
No ETA for ETBMNo news from Off Highway - although there are Carraro trials going on in the fields near them.

So, in summary:

Flybrid played a good game and got the win, is it a win-win, or a win-lose for shareholders we don't know. With a massive 54% additional shares being issued to the institutions, with directors themselves investing at the 18p price floor and Allison maintaining their ~1/8th holding in the company, there seems a lot of support.
Private shareholders were apparently given the 1 for 8 uptake offer at the behest of Torotrak, without which we would actually have had no chance to acquire any part of the placing at this very clear discount. It's better to have something than nothing, but it does indicate how tight the investment houses have played this hand.

So in the interim, people are selling a little high and buying back in with their uptake volume - this will of course drive the share price down in the short term to the 18p+trading costs price.

Is the company in a stronger place now? - yes.
Has it happened as smoothly as we would have liked ? probably not. Someone somewhere was waiting for a deal to happen and they ran out of time.
Hopefully the Flybrid entrepreneurship and flair for PR will be brought to TRK and we will start to see some more colourful and interesting newsflow and opportunities breaking through.

Am I frustrated at the dilution of my holding ? Yes and No. I would have liked a better uptake offer (nearer 54% would have been good), but have I sold my shares? nope. I still have the same amount - and until I sell them they have no tangible value. 18p represents the probable cash value of the new combined company, so the uptake offer still seems like worthwhile if you have the money as we can see the future value being brought to the business.

Basically - if you think there is a chance to market, Torotrak have decided to throw the kitchen sink at it to make sure they hit the 2017 window of legislation opportunity. The other plan was to sit back, downsize and wait for Allison to get some buses fitted with main transmissions and wait for royalties. Basically I'm pleased they have decided to go for it, and it should make for a bigger company, but I do hope they don't take their eyes off the ball and lose momentum with Vcharge2 in the meantime.

My guess is that you should brace yourselves for another round of fundraising in 2017 to fund an up-scale in production facilities - either for M-KERS or V-Charge. Fingers crossed - it will be both. Dividends - prediction is 2020 - I will have been invested for 23 years by then.

In the meantime, we say to JD as he gets on the Great Escape Flybrid bus that has just pulled up: Good Luck !
(and lets hope he doesn't get caught.)

Now, can someone please put an MKERS, IVT and a VCharge on the same vehicle and really show what they can all do together as a massive combined demo opportunity...

Thursday, 25 July 2013

Sat waiting at the Bus Stop - Pre AGM 2013

As I start to write this blog, the AGM will have been in progress for about 40 minutes. Having not seen any smoke signals prior to it, and working late last night, I made the tactical quality of life decision not to go, and reading the interim statement issued this morning before 11am confirms that being there won't have changed my investment decision, missed out on champagne, nor the strategic direction of the company which has - as you will no doubt know - taken on a more commercial intent in the past 12 months.

Investment wise, we are now all sitting at the proverbial bus-stop. Waiting. Others on the discussion boards have come along and waited, muttered something about them always being late, the queue has got longer, shorter, being late, is it electric, some have turned up asking if taxis stop here or if anyone knows when the next bus will arrive. The answer to all this is: nope, not really.
We had an exciting moment a few years ago when the grass around the bus stop got mown, but that soon moved on and out of sight to another place.
The one thing you do know at a bus stop though is that one day, one day, a bus might just turn up, and the longer you wait, the more probable you hope it becomes.

You see, this isn't one of those fancy bus stops with a digital display counting down the minutes to the next buses arrival, it doesn't really even say where it's going to go, just that there are some destinations on its route. It's one of those buses you would have caught in the 1980's where you only really knew what was happening when the driver of a different bus going in the wrong direction would shout out some information to you about it being broken down.
So far as we know it's not currently broken down, but the route in the future includes Japan, Italy, England, Sweden and the US. We know it's been to Germany once or twice too, but beyond that, we just sit and wait. The rain and wind sweeps around the sides, and every now and again someone comes and pins up a revised timetable. Fortunately nobody has come and pinned up an "no stopping here" sign yet, so let's have a more detailed look at the new timetable...

Main Drive Transmissions

Allison have paid for exclusivity and are batch paying down the last £6M. They have £2.6M left to pay before 31st march 2014. Testing is always a bottleneck so new test rigs have been made to get the production design and "production representative variator components from production suppliers" finally tested.
In terms of developing a manufacturing supply chain - proving out your suppliers components is a standard ISO9000 quality compliance process. You get a new supplier to make real world parts - not just one off samples, and then you test them to check they are ok. If they are ok, you sign off the supplier and their manufacturing process, one day place your order and then get it into pre-production when all the other parts are ready.
Then you build pre-production units (usually with the proven and tested first parts), test those and then test your entire design to check all is ok, and in the meantime you build a factory to put it all together, train people to make them, load your supply chain with parts, and then if everything is still ok, you start to build them... so in my estimate that's at least two years away if not three - because - well - it's huge and the test rigs don't need to be sorted until March 2014 - and that's 8 months away.

We have to remember that all this has to go together to fit into a bus, so the demand for the transmissions needs to fit into that product marketing as well. Oh, another potential delay.
It is however good that the critical path of testing has been addressed by Torotrak. It's also interesting that TRK have kept it in house, Allison have not decided to have test rigs installed at their site (or so I infer - perhaps I'm assuming that?)  It does seem that £2M of the remaining license fee is subject to this testing, so BAM!, now you know where the license fee has gone - test rigs. By March 2014
Speaking as an ex-engineer, you can never have enough test rigs, so it's good to have them funded rather than not funded !

So, no clear ETA for Allison, but guess at Q4 2016 (remember the legislation kicks in 2017)

No mention of the European Truck and Bus Manufacturer (ETBM) was made in the statement, so unless something comes out of the AGM, we refer to the last statement which said they were going to make a decision as they had found that even long distance trucking benefited from the transmission, which was a nice surprise apparently.
No ETA possible

MKERS / Flybrid
1. Cars
The amount of press and publicity noise around the VolvoS60 demo with the Kers unit fitted suggests this is getting serious. Companies don't put out that much marketing and PR of a prototype unless they are at the "seriously considering" stage of consumer reaction. The noise seems to have been generated by straight cut gears instead of helically cut ones -

Now that Flybrid is 20% owned by TRK and have options to go to 100% it would seem that OEMs are more interested in dealing with a single product supplier to put the whole Kers package together - so getting a T1 supplier sorted out should be more interesting times ahead.
ETA guess Q1 2016 given the new platform schedule from Volvo

2. Buses
Arriva trials remain on track for March 2014, with flybrid installed in a Wrightbus vehicle.
Flybrid are also making test rigs so they can get production going (see a common theme?)
2015 is current target for full commercial production capability with proven equipment.
ETA for first Buses on trial - Q2 2014
No ETA for Bus Production

Version 2 is on the test rig - once completed it will go into demonstrator vehicles.
ETA for V-Charge mk2 demonstrators is Q4 2013
Given the interest being shown from T1 and T2 partners, ETA Production ? guess at Q4 2016

Market forces
12 years ago I passed an academic analysis of the Market forces affecting Torotrak to the then finance director Rebecca. Even then it was clear (as it is with many products in the world) that demand for the product was going to be driven by legislation more than customer demand. If the CAFE regulations proposed in 2001 had been implemented as originally prescribed then it's likely that we would already have full IVT SUV's trucking about the USA. however they didn't and as with all things Government and legislative - it is getting there, just a bit slower.

We are now faced with the 2017 legislation deadlines in Europe and the USA that will start to drive financially based investment decisions by the OEMs

The legislation ultimately is driving the need for lower fuel economy. Bus operators quite like the idea of 20% lower fuel bills, but an OEM as long as they have the most fuel efficient vehicle in relative terms don't care how efficient it is - it just needs to be good relative to the competition.
It is only with the legislation pushing a performance value and a number onto the manufactures that the OEMs see it as a financial business decision to implement the technology. With the IVT, V-Charge and M-Kers offering the step change in performance that they need - Torotraks products and IP will become more and more interesting to them.

Mission Creep ?
I noticed a change to Torotraks mission statement the other day, slipped under the radar a bit, but of huge significance -
It now goes blah blah blah.."technologies that reduce vehicle emissions and improve transport efficiency"
This is a very very broad remit. It's so broad it's almost impossible to know where to start when asking "so what do you do?" if you met someone from Torotrak at a party

What was it before you ask ?
In 2008 the Annual report said "Torotrak is the world leader in full-toroidal traction-drive transmission technology, focused on the development of IVT (Infinitely Variable Transmission) and TCVT (Toroidal
Continuously Variable Transmission) systems which deliver outstanding levels of performance, functionality and commercial advantage in automotive, truck, bus, outdoor power equipment, agricultural and off highway

So now the new mission doesn't explicitly say anything about Toroidal transmissions, (that would put Flybrids CFT out), and nothing about IVT (that would put MKERS and V-CHarge out).
But at least we now know that they have ruled out any applications on static systems that might need a variable output (compressors, generators etc) because they refer specifically to vehicles.

So what's the updated timetable ? in possible time order

ETA for V-Charge mk2 demonstrators is Q4 2013
No ETA for V-Charge production
Buses ETA for first Buses on trial - Q2 2014
No Bus production ETA
Cars Production ETA guess Q1 2016 given the new platform schedule from Volvo - some preproduction demos before
Main IVT (large vehicles)
No clear ETA for Allison, but guess at Q4 2016 

If we're lucky, perhaps a few buses will turn up at the same time ? but don't hold your breath if they do we don't currently know their colour, speed or size. At least we know they might have a Torotrak Variator in them somewhere...

In the meantime, you and I will have to continue to sit at the bus-stop with Buzz Lightyear. to indefinite and beyond... (image removed unfortunately because it was just a jpg from a website, but the website address apparently red-flagged a few browsers)

I hope everyone enjoyed the AGM and the tech talk, and hope we haven't voted to dilute the share value down to zero quite yet.

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