Annual report 2007 - Torotrak

Chairman’s ReviewBusiness Highlights■■Start of production of IVT transmissions atInfinitrak, with pilot builds commenced inMarch 2007Memorandum Of Understanding signed forlicence with major Asian car andcommercial vehicle manufacturer■ Prototype programme confirmed withleading forklift truck manufacturer –bringing new customer and sectorIntroductionI am pleased to report on a year of significant progress inthe commercialisation of Torotrak’s technology, withadvances in each of our key markets. Our strategy, tosecure new customers across a range of markets and toapply a wider business model that extends beyond asimple royalty arrangement, is delivering increases inrevenue and valuable opportunities for future growth.In March 2007, we achieved a major milestone in thestart-up of the production facilities of our Infinitrak jointventure (JV) in the USA. Infinitrak was formed with ourpartner MTD to establish Torotrak technology in the highvolume outdoor power equipment (OPE) market, a newmarket for Torotrak. The start of pilot production wasdelivered within 18 months from the formation ofInfinitrak. This demonstrates the substantial progressthat Torotrak has made in its drive to commercialise itsfull-toroidal traction drive technology.ResultsRevenues of £2.7m represent a 31% increase over 2006.It is particularly encouraging that we closed the year witha strong order book of programme work, which continuesto build as the benefits of our technology becomeincreasingly apparent to our growing list of customers.Our customers are some of the leading, global tier-1transmission manufacturers and vehicle makers in ourtarget markets; their engagement is evidence of thestrong technical and commercial foundations thatTorotrak has put in place to underpin our plans for futuregrowth.The increase in revenue, together with the delivery of ourpreviously committed £1.1m of recurring cost savings,demonstrates continued progress towards achieving ourtarget of operating cash flow turning positive during thefinancial year ending 31 March 2009.Market ProgressOur revenues have been generated from activities in all ofour four established markets of:• OPE• Off-highway• Automotive• Truck and Bus.Across all of these markets, we have established anearnings cycle that starts with engineering anddevelopment fees, then moves to licence sales leading toproduction related income in the form of manufacturingroyalties or joint venture income.Engineering consultancy work has focused on theapplication of our full-toroidal technology in customers’products covering all markets. In addition to our existingcustomers and licensees, we have secured newcustomers and confirmed new projects to add to ourorder book for the year ahead. This engineeringconsultancy activity is important not just in terms ofimmediate revenue, but because it is instrumental inhelping our customers to progress through prototypeprogrammes into licence agreements and futuremanufacturing arrangements, where the real future valueto Torotrak lies.2Annual Report and Financial Statement 2007