Saturday, 27 November 2010

2010 Half year results and New Brokers

Since the last post on this blog there has been considerable progress in the business partners projects with Torotrak.

Firstly I suggest you go and have a read of the Torotrak Half Year report here:

There are several bits of good news contained in the report, some strategic, some to do with progress and others to do with publicity. You might also want to read the new broker report from new brokers Charles Stanley. They have put an initial share value target of 40p up as their first shot.

Firstly the long awaited MTD license curtailment is now underway and their rights to use the Infinitrak IP being restricted. Sources inside MTD have long said they can't manufacture the TTT or STT (or would that be some of the employees don't want to create competition for their incumbent hydraulic solution ?) - and we have known for over 6 months about the problems. After the missed design freeze in June it was never going to hit production this autumn. Strategically this now frees Torotrak to persue other customers for the STT and it's unique capabilities - which presents a great opportunity for new business development. It's almost a reverse Toyota situation, the customer couldn't get the design to work but this time TRK pulled the plug, not the customer. This alone indicates an improved confidence in the designs by Torotrak.

There is a huge list of partners getting nearer the point of convincing themselves that there can be no turning back to fixed gear ratios. It is truly getting to an exciting part in Torotraks history with large well respected companies investing significant amounts of their own time and money to make IVT technology become a reality.

Again I will remind you to read the half year report - I'm not going to replicate it here, as a long time follower I can see that slowly the technology is being fitted into the practical capabilities it has.

A long time ago I wrote a strategic assignment for a postgraduate degree - using Torotrak as a case study. The conclusion of it was twofold. 1. The need for IVT technology will be driven by legislation - and finally now the Euro Emmission regulations are looming on the horizons and the fines looking more like a reality - the vehicle manufacturers are getting their acts together rapidly. 2. Non-powertrain solutions have been found to get round the "not invented here" and incumbent technology investment (i.e. 6AT gearboxes in saloon cars).

The long term strategy has to be "surround the enemy" (in the words of Sun-Tsu) to develop so many solutions being used so widely that it becomes a no-brainer for passenger cars to adopt the technology. Passenger cars being the volume business that would deliver true TRK value.

This Strategic solution is finally being realised with several derivations of IVT technology making it into reality across different sizes, applications and concepts.

1. Main transmissions

  1. European Bus and Truck - three regime IVT powertrain installed
  2. Allison - Technology transfer complete for full IVT powertrain production ready design
  3. Carraro continue to exhibit and accellerate their IVT family of VARY-T transmissions

2. KERS (Flywheel)

  1. Flybus - Retrofit KERS (kinetic energy recovery solution) using an auxilliary power take off on the normal transmission. Cheaper than electric hybrid and more efficient. And more environmental !
  2. Flybrid - new install - Test transmission installed in Jaguar saloon car for on road testing

3. Engine speed de-coupling devices.

  1. Rotrak - Variable drive supercharging. This allows the effectiveness of the boost to be felt properly at all engine revs, not just at a certain rev-range. This means smaller engines can have a much higher power output and better driveability. Along with the obvious emmissions reduction.

The exciting market prospect of  being able to retrofit a KERS unit into a commercial vehicle is mouthwatering. Instead of the delay of awaiting for the new vehicle production programme to come to fruition (three to 5 years at least just to get to market launch), once a viable economic solution has been developed - it can be installed. Will it be installed ? - in the hard economics of the haulage industry anything with a 1 year payback will be snapped up. If you have an Allison transmission with a PTO languishing about - here's your chance to save some money and be more competitive.

Taking the retrofit route as a faster one to market penetration, one has to look at the possibilities of retrofit not just for KERS units but for Main Transmissions and Rotrak Superchargers. My personal conclusion is that Rotrak may have some possibilities,, main transmissions almost none, but a Retrofit KERS unit into a passenger car remains a much larger goal to be targetting.

Outlook for 2011
With prototype work starting to bear tangible real world results (not just mathematical model results), and a real ride experience that can be felt, the decision makers at Torotrak Licensee companies will soon be putting down hard money for real new vehicle production projects. With their experiences of TRK technology I fully expect that those projects will have a view to the inclusion of TRK technology. I just hope that TRK are ensuring that the decision makers are going to get that experience and make them advocates of the technology.

2011 is going to be the year that critical decisions will be made by the large licensee companies. Until those decisions are made, Torotrak is just another UK technology company. After those decisions are made Torotrak and IVT technology could be one of the most disruptive technologies we have seen since the invention of the car gearbox in the 20th century.

If you invest in Torotrak for dividends, you have about 4-5 more years at least to wait (if not longer depending on the future R&D investments), but if you are investing because of perceived future value - then you'll probably want to be in before those big decisions are made. We watch and wait with patience.

(p.s. all of this report is conjecture and has no value or robustness associated with it in any way and may not be taken as advice. Always do your own research and responsibility for your own financial matters)

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