Saturday, 18 June 2011

Company Focus - Torotrak - 'Gearless Wonder' or 'Toothless Wonder'?

The early phase plausibility of the divergent fiscal policies between UK and US administrations will be tested in 6 to 12 months time. The real economy of both countries - not simply the 'paper-based' capital markets variety of the City & Wall St - would expect to see green, albeit small, stable economic shoots.

But for the moment the here and now still sits in the realms of Monetarist versus Keynesian theory.

The UK's decision has been to pull-back hard on the reins of national bite the bullet of harsh but necessary economic expectantly deliver a fundamental restructuring of national production & service provision (the reform of NHS & Education most prevalent)...and to avoid Europe's heavy regulatory demands. It is a formula that has worked before under Conservative rule, previous cabinets successively championing the economic growth power of a lassez-faire attitude towards capital and labour markets flexibility.

Similarly the US also holds its breath in this period, but its expansionist view under-pinning its fiscal planning has created a very different situation for itself, and as such is now beyond the cusp of a truly new era. The interconnection of a deepened national budget deficit and the provision of 'free money' (via QE & QE2 prime-pumping exercises) has expectantly buoyed Wall St and so corporate America. That should then support a productivity-push that builds employment and so drives consumer spending. Yet that 'free money' has also contributed to creating a global commodities boom which has stoked input-cost inflation and consequentially reduced already restricted consumer-power.

The run-out of the second of QE exercise is imminent, but Wall St has predictably reacted negatively over recent weeks and given that stock bourses are the de facto economic indicators, by virtue US (and more widespread) economic health has been called into question. This of course noted by Congress and Ben Bernanke alike, no doubt predicted by both. And so this issue has become the prime Washington backdrop, discussion regards the pro's and con's of an extension of the national debt ceiling creating major cracks between ideological left and right. Unsurprisingly, Republican's feel that a metaphorical gun has been put to their heads, whilst Democrats maintain an almost evangelical belief in the ever-extended Keynesian solution. That stance now hardened by the rhetoric of a 'future lost decade' by Larry Summers, whilst Ben Bernanke counters by airing the possibility of QE3, (real or not) intended to muster a new rally in trader sentiment and so avoid an equities slip or even plunge.

These 2 massively divergent pictures then convey the 'slow but steady' UK attitude to new growth versus the more optimistic (naïve yet bombastic) 'Atlantic City' attitude of the US. It is a schism that many UK based yet export orientated medium sized enterprises must factor into their strategic planning. Having to decide the timescale & expansion rates of these two regions relative to their own sector, an increasingly important consideration given the contraction of growth prospects in the well established EM regions.

Torotrak plc is such a company: operating in the arena of mechanical power transmission, it is an IPR innovator, developer and partner-producer of alternative' gearbox systems directed at a range of customers spanning: VMs & Tier 1s of the automotive sector, Off-Highway vehicles such as the construction & agricultural fields, and specialist vehicle applications, such as leisure and functional small vehicles, including off-road buggies, ATVs and ride-on lawn-mowers.

The company's primary UK - US link is evident within its shareholder register, and includes a large US Tier 1 'traditional' gearbox manufacturer, a large UK bank and a number of Nominee companies which legally represent (though some say ''mask') other unknown interests.

It stands in what could be described as the unconventional, notionally 'advanced' realms of mechanical engineering, though base principles offered were developed in the former half of the 20th century - though little deployed given the dominance of standardised principles and systems and parts that came to pass, this primarily driven by the cost-benefit rationality of vehicle planners and the close tie that formed between VMs and their Tier 1s. These 'alternative' gearboxes have been widely used in specialist vehicles from tanks to snowmobiles, had relative success with HGVs, and perhaps had its most memorable car application by DAF (1960s/70s) thereafter used by Volvo on its 360 small car. They have been periodically used by major vehicle manufacturers, though historically done so to either increase in-house learning and experience of CVTs, or to create intentional competitive threat to incumbent suppliers, so as to both gain pricing reductions on standard technologies, to progress their own nominated supplier's R&D, aswell as to demonstrate eco-tech efforts to governments so as to attract financial contribution toward plant build or obtain easement of financial burden.

Torotrak was effectively born in 1988 as a spin-off from the British Technology Group (BTG), a body created to create the conditions for commercial leverage of those patents and IPR that was inside stagnant or declining UK firms - in this case Leyland Trucks

Torotrak describes itself as "the world’s foremost developer of full-toroidal traction drive technology. The company conducts research and develops applications in the field of variable drive transmissions. Torotrak’s continuously variable transmissions (CVT), infinitely variable transmissions (IVT) and variable ratio drive units reduce energy consumption and harmful emissions, whilst also delivering outstanding levels of control, functionality and performance".

Thus, it was established to align intellectual capabilities with the ever necessary VM corporate need for fuel-efficient, CO2 reducing solutions, able to benefit from the eco-engineering challenge that the late 20th and early 21st century posed. An era of corporate-fleet CAFE measurement and reduction in personal carbon footprints, and of notional expensive 'peak-oil' and 'oil-spikes'.

[NB Though the former belief counters the formation of EM's national oil companies, the untapped reserves of Arctic beds and other regions, and the latter typically driven by short-run speculation].

However, nonetheless there is no doubt that 'on-paper' its eco-technological focus, re-emphasising and developing fringe technologies, places Torotrak in a favourable position, to both help save the world and by virtue to offer investor confidence and returns.

To initially create an investor-friendly high profile and so interest, Torotrak was publicly listed in 1998 with an initial capital of £50m. Considering its size it appears as a sardine amongst the whales in its elected sector within the FT's FTSE pink pages, sat as it is amongst leviathans such as VW, Ford, Toyota and GKN Yet it sits most intendedly within 'Autos & Parts', when it could have listed (or swapped) under 'Industrial Engineering', 'Industrial General' or indeed under 'Technology Hardware' had it wanted to experience/play either 'defensiveness' or 'risk-on' sentiment. 'Auto & Parts' avoids these market-shifting vagaries and allows it to stand-out in 'preferred company' – no doubt seeking to gain from the perception of an operational parallel to GKN and its 'ownership' of power-transmitting CV joints, and providing a ranked name-place designed to intentionally reside between GKN & Toyota, the Torotrak name with obvious visual & phonetic similarities to the Japanese corporate name .

As is self-evident, the rational of the initial listing was to inject a core valuation which reflecting the potential of an IPR/Developer -centric company, trying to evoke similar investor attitude as was the case at the time toward Silicon Valley's IT sector.

Undoubtedly, the listing initiative was to trace a valuation growth path so as to become a desirable target. Its final sale valuation to have ideally reflected a combine of both basic company value (assets, IPR value, order book, inventory etc) and gain of an additional price premium effectively auctioned from the competing VM giants, each with historically sizable acquisition pots.

At 'worst', without a trade sale, the company to be sold to Private Equity, and to be used as a bolt-on for broader automotive sector ambitions, or possibly to use it as a 'centrifugal hub' around which could be build (with other bolt-ons) a compelling IPR-leading industrial conglomerate.

However, the commercial reality which underpins an ultimate enterprise value and the investment theory which its accords unfortunately rarely mesh seamlessly; as is seen so often in the eco-tech sphere, given the real-world variables that impact upon investors' final analysis.

In 2000 Toyota retracted from a licensing agreement, GM doing likewise 2 years later. By 2003, the initial business strategy of targeting premium car and SUV sectors had flailed. A new management team was installed, including Dick Elsy (ex original FreeLander Project Director at Land Rover and later at Jaguar Cars)as CEO.

So from this appointment it seems the original and supposedly ended ambition was still secretly on the table, executives and management still hoping for a breakthrough high value contract, whilst presenting itself as broadening the client appeal of its systems by targeting other vehicle segments and sectors.

This necessitating a form of 'reverse-engineering' to try and achieve large design and production cost savings which would be necessary to befit a BOM (Bill of Materials) budget suited to smaller vehicles (at piece cost) and to demonstrate cost effectiveness for use on smaller volume niche vehicles such as in the AG-CON sector and elsewhere.

In 2005 a licence was agreed with Carraro SpA in Italy for application in tractor transmissions. Later that year an agreement was formed with MTD Holding Inc. in Ohio, manufacturers of powered equipment for lawns and gardens, the agreement to form a JV company named Infinitrak LLC for the technologies use on a specific power band of products.

With these wins under its belt Torotrak went back to the capital markets in 2007 to obtain £6.7m via a new equity placement, used to buoy the balance sheet and illustrate the company's sound financial standing to prospective clients. Late 2007 saw a broad, non-exclusive licence agreement formed with India's TATA Motor, the technology notionally ascribed to 4 segments: passenger cars, light goods vehicles, medium & heavy commercial vehicles and construction equipment.

But without a direct vehicle application, or worked into a model development programme, investment-auto-motives considered the apparent 'deal' at the time as little more than a mutually beneficial 'good news' PR story. One that helped to give both companies apparent long-term 'investment legs' at a critical time of liquidity squeeze just before the financial crisis hit. The fact that the CVT-IVT technology has only been notionally ascribed to the 2011 (Nano-like) Pixel concept car (seen at Geneva in March) appears to support the assumption that the TATA relationship has been used as a carrot for investors. Thus it appears that no real-world TATA product using the system has been marketed to date since the 2007 agreement.

In March 2009 an £8.44m licensing agreement was struck with the US company Allison Transmission Inc, simultaneously taking a prime 10% (approx) sharehold at £2.4m (valuing Torotrak at approximately £24m at the time) to develop applications for small & medium-size trucks & buses and taking a non-exclusive arrangement for future large truck applications. Torotrak to receive the monies split over the 2009 & 2010 FY accounting periods. Importantly the deal gave Allison an option to secure worldwide exclusivity across the commercial vehicle arena, excluding previously agreed licences (ie TATA).

Given the TATA and Allison agreements, the outcome appears to be that effective application ownership is realistically split between TATA in India & SE Asia and Allison across the US and RoW. This allows Allison to then able to operationally block any threat from TATA regards the US truck market using the tech as its USP, and provides a counter to Daimler's eco-tech efforts integrated into its own broad European market and its filtration into its American truck brand portfolio. This of assistance to boosting its own IPO hopes reported in late February.

There will of course be payment terms included in the agreements, presumably based on the norm of either an annual royalty or number of CVT-IVT units produced. Given that licensee's typically decline a fixed royalty agreement given the inflexibility of such a fixed cost, although undisclosed outside the company, it is expected that production-linked agreements were formed.

If as expected, this then means that Torotrack is dependent upon TATA and Allison deploying the technology if it is to see an income boost and provide annually income stability.

Herein is the rub.

TATA and Allison have build massive production and sales empires based upon conventional technology gearboxes, each effectively a 'sun' empire around which thousands of privately owned small, medium and large 'satellite' businesses operate in the sphere of gearbox service, repair and re-conditioning. Whilst Europe and Japan consumers and fleet operators have more open views about transmission technologies (given typical dealership attachment - though still largely conservative), the USA and India are effectively entrenched in the 'old world' by virtue of greater distances traveled, and conditions met by cars and trucks and so a need for a broad continental network of relatively local, capable and low-priced repairers knowledgeable of conventional gearbox technology.

On the surface CVT-IVT would be best suited to 'self-contained' and in-house serviced truck fleets and bus fleets, better able to relate and cater to the 'alternative gearbox', but of course such fleets are eventually replaced and sold-off, and residual prices of the vehicles attained are critical to typically cash-strapped fleet managers, and their accountants, the booked heavy depreciation rates usually of little importance to their type of business models.

Thus investment-auto-motives must highlight the real-world potential for mainstream adoption of truck and car CVT-IVT, and thus has a concern about the ultimate value such production-linked payments will bring to Torotrak's investors.

Torotrak has had undeniable success targeting its system at the vehicle fringe, specifically the Outdoor Power Equipment (OPE) market for ride-on lawn mowers via the JV 'piggy-backing' with America's MTD Products. But whilst the created LLC's US location was necessary its physical and managerial remoteness was always a concern, giving the locational advantage to MTD and an ability to make greater visible and invisible operational demands.

That came to pass with a disagreement raised about the level of profit margin. As apparent small investor blogger and Torotrak shareholder Micheal Walters comments “Given that MTD was selling complete ride-on mowers, the actual cost of the transmission could be a relatively small part of the whole package. Torotrak needed to make a decent margin on transmissions, whereas MTD could make profits at other stages in mower production”. This would appear theoretically true, but a notional cost-breakdown of a ride-on mower highlights the relatively high cost of the powertrain units, this only increased from using a new system. Thus the financial crisis's hit on the DIY garden products and professional maintenance services sectors was hard, given that it is a leisure pursuit, thus circumstances demanding cost-down requirement and leading to possible pricing games played by MTD with its suppliers.

In January it was reported that Torotrak & MTD have agreed to restructure their arrangements to include royalty payments instead of direct margin receipts, with the UK partner taking back £1.6m in cash. Beyond partnering with MTD Torotrak is now free to court other competitor manufacturers in the field, including Toro which itself outsources the manufacture of its lower range of products to MTD group. Thus the near namesake Torotrak should, if successful, be able to capture greater ultimate reward from Toro and others.

[NB Both Torotrak and Toro well recognise their brand-powers as having etymological relation to the Latin/Spanish/Portugese for Bull with its referance to 'the land', and no doubt see the growth of Latin America's middle class and its future demand for US style homes and gardens. The 'lifestyle' aspect including the additional accompanying growth of both 'amateurised' & 'professionalised' lawn leisure and sports (inc golf, soccer, baseball, tennis, etc) needing course and field maintenance, and the expected growth of municipal parks: - trends that under-pin their OPE ambitions beyond the USA and Canada].

But of real practical value and USP advantage in this sector is Torotrak's ability to provide a transmission solution that allows a lawn-mowing tractor vehicle to undertake a near 180 degree about turn between 'strip-runs'. A clever trick that was seen on the TATA Pixel concept movie, but of greater practical application for large lawn gardeners.

Back to the here and now, and Torotrak is exploring other avenues closer to its spiritual automotive home.

These include:

- a flywheel-based mechanical-hybrid KERS powertrain system with Volvo Cars.
- a supercharger development programme as part of an alliance with Rotrex

Whilst these 2 projects look impressive as a bridge to the eco-tech future, the immediate concern for investors is conversion to income.

The KERS (Kenetic Energy Recovery System) project is a self-developed marriage of CVT & KERS, its basic premis attractive to Volvo Cars for exploration as part of its 'DRIVe toward Zero' (emissions) strategy. Yet a majority, if not all, of the project's funding comes not from Volvo but from the Swedish Energy Agency, which provided SKr 6.57m (Swedish Kroner). The system reportedly uses a 20cm carbon-fibre flywheel housed in a vacuum and uses electro-magnetic forces (between stator and housing) as the 'gear'- transfer device. The system no doubt works in laboratory/workshop conditions, in similar clean environments, or via a 'controlled condition' demonstrator vehicle, but investment-auto-motives believes that the sophistication and sensitivity of the device is unsuited to the life-span durability and longevity of the average car.

The programme thus being used by Torotrak to earn intermediate income so as to off-set overhead costs and used by Volvo management as an R&D promoter to its Chinese masters at Geely, themselves ideally seeking an alternative affordable technology to Japan's very successful electro-hybrid technology.

As for practical, applicable outcome and a consequential long-lived income stream for Torotrak, it appears doubtful, unless the Chinese can be persuaded to take over the mid and long-term funding of such an 'elastic' R&D programme.

A 50-50 JV alliance was formed with Denmark's Rotrex in May 2010. Called 'Rotrak' it aims to combine the core competences of the 2 firms, marrying a variable speed traction drive to supercharging technology in a bid to find a viable solution for adding power to downsized vehicle engines. To re-quote a portion of the official announcement:

“A conventional turbocharger struggles at low speed, particularly in these smaller engines. Better low-speed boost can be achieved but it is complex and costly, the firms note. Supercharging is the main alternative, but the fixed ratio between engine and supercharger speeds means that if boost is optimized for low-end response, then energy is wasted at higher engine revs”. And to re-quote Dick Elsy's words: “Adding Torotrak’s scalable variable speed traction drive to Rotrex’s technology will overcome many of the compromises that affect current pressure-charging systems.”.

In contrast to other previous unconvincing efforts, this project has the fundamentals of creating a much needed new leap forward for the stabalisation and constant & proportional air-feed dynamics for the internal combustion engine. The fundamentals appear sound, so the question investors must ask is about the deliverability of the project to meet VM and Tier 1 demands, specifically that of cost and life-span durability, a reduced parts count for the item made in high-tolerance yet affordable manufacturing conditions undoubtedly key.

The official project announcement stated that “independent analysts estimate that the market for pressure-charged gasoline engines will grow from the current global level of 2.5 million units per year (in 2009) to 12 million by 2016. The more established market for diesel pressure-charging is predicted to grow from 10.5 million to 16.1 million units in the same period”.

These figures are probably over-egged, with a level of 8 million petrol engines and 14m diesel engines more likely given the recent global economic contraction. So the project's business model assumptions should include conservative cautiousness when forecasting not only segment demand rates, but also the pricing elasticity and NPV & IRR rates deemed tenable to attract and keep targeted clients that have prime interest in such an elegant solution. Ideally they would be able to create a brand-relative technology story around the supercharger to enable their own pricing premium and thus maintain the Rotrak commercial connection for the long term.

This project then bodes well as an important 'bread and butter' income provider, the details of the arrangement obviously critical, but the 15% stake taken in Rotrex provides a base of mutual confidence.

This small note of optimism relative to an incremental step in engine technology must however be balanced by the reality of pragmatism that pervades throughout the auto-industry. That is the reticence to replace the tried and tested principles and components with 'revolutionary' replacement solutions. And this appears the case for gearboxes, as exemplified by VMs preference to use ever increasing gear ratios: the once standard 3 replaced by 4 replaced by 5, then 6 and even 7 enabled by similarly evolutionary clutch technology – Audi's DSG gearbox a good indicator.

The innate truth that has emerged is that (unsurprisingly) the large western VMs prefer to develop in-house or as a direct JV project with a Tier 1 supplier, so as to maintain direct control of IPR and are not 'put under the heel' of dependence on a single supplier, typically strategically combining IPR ownership with the agreed contract for manufacture. Such 'self-destiny' has been seen with past CVT efforts of Fuji-Subaru, Ford-FIAT, Nissan, Honda, VW-Audi and BMW, even though some of those names have willingly undertaken projects with Torotrak.

[NB. the BMW Mini CVT has attracted heavy criticism in N. America from customer complaints and a National Sales Company that has little/no direct ability to solve the problem].

[NB. In contrast to these CVT offerings, Toyota's 'Synergy Drive' system used on its Hybrid models is not defined as CVT since it transmits 2 power inputs – engine & electric motor – to drive-shaft outputs].

[NB. Ford displayed the Torotrak CVT-based 'B-Max' concept at Geneva in March, but as with TATA's Pixel, the technology may well be being used as part of Ford's
desire to demonstrate a future-forward attitude, FMC also seperately stating it is reviewing CVT for 'secondary-power' uses].

Like western VMs and Tier 1's, a similar 'self-reliant' attitude prevails within China, here though its domestic manufacturers typically utilise proven and cheap previous generation technologies that have been adopted and adapted from joint venture partnerships with western VMs. This enables them to effectively buy and control dated but still usable and critically scalable 'technology platforms'. This attitude directly aimed at power-train and electronics, but less so toward the local abilities in chassis systems (though not necessarily advanced control) and in exterior and interior trim & hardware which affect the customer 'look & feel'.

Though Geely may well hope for a positive outcome from Volvo's 'Flybrid' R&D work, it will no doubt focus its primary work and technology stratgey on replicating the incremental improvements that have been seen in the US and Europe in the past, more attendant at exploiting these phased-in and cost-reduced advances for domestic brand applications.

Thus for the present, if one were to plot a 'probability versus impact' chart for Torotrak's mid-term ventures, a greater chance of success lays with maintaining a strong continued focus on the OPE sector having already had a direct impact and grown its profile therein, and the potential of engine ancillary systems – though by no means assured given the potential for VM's or Tier 1s to develop their own supercharge induction control systems, whether mechanically or electronically controlled.

The TATA Pixel concept (as shown including smart-phone operated doors and its Torotrak-enabled pivot-turn park & drive feature) also bodes potential, especially since the FIAT 'twin-air' 500 has set a precedent for downsized city car engines, and the fact that FIAT & TATA collaborate closely at Board level, thus projecting the possibility of FIAT & TATA variants of a future small car platform mating the 'twin-air' engine and a CVT-IVT gearbox. Torotrak must then maintain close contact with both firms to promote the progression of such a project, giving a truly credible European market 'A' segment vehicle, spun-off from the basic Nano architecture.

In the meantime, Torotrak should identify mid-ground possibilities that are positioned between the reality of the OPE market of ride-on lawn-tractors and the conceptual reach of city-cars. In terms of GVW (ie passenger capacity + added load + full fuel) and product complexity & business model detail, that appears to point back into the varying forms of ATV in both leisure and military guises – the latter of course adding greater commercial credibility, and offering the necessary budget flexibility for proof of performance.

This is something the BoD surely know to be the only feasible path forward, the requirement of course – as has been the bugbear for so long – is delivery of the strategy.

In the 13 years since market listing the company's valuation has ridden the general cyclical highs and lows of the Auto & Parts sector. In recent years the sector was of course heavily depressed by the consumer consequences of the financial crisis, then boosted by western & Chinese governments' small car purchase incentive schemes. Torotrak's share price however is more volatile than the large American, German and Japanese VMs or indeed GKN, since it is less frequently traded at lower volumes, heavily affected by both sentiment of the general market, but perhaps more so by the influence of director's dealings, short-term profit maximisers and indeed the inducement of both these combined factors (as noted in general shareholder discussion boards).

A need for a renewed confidence in Torotrak's operation was recognised as long over-due, hence the internal 'top-down' shake-up that has slimmed the BoD numbers to reduce overhead costs, seen Directors take a 10% pay cut, seen the appointment of the well connected John Weston as Chairman (as of 1st June) and no doubt recognises a need to re-assess its methods regards client prospecting and capture.

Yet the company is still effectively strategically led by the 'Two Muscateers' of Dick Elsy and Nick Barter - highly knowledgeable and well respected veterans of Ford, Rover Group & JLR. This though indicates that Torotrak is still hunting for the 'Big Game' catches available from high-volume premium cars and SUVs. This no doubt subtly done in quiet corners whilst it more publicly hunts out the lesser prey in the meantime.

Hence we come full circle to the experiences of 1998 and 2003, with the idea that the CVT-IVT application for automatic large cars is inevitable. History has proven that assumption, with Nissan specifically develop a produced and proven CVT for it Japan's old model Gloria, USA Murano, Altima (ie 3.5L+ engines), and Toyota creating high-torque/high-power 'partial CVT' for its Lexus models GS 450h and LS600h.

This then obviously sets a premis that Nissan could additionally deploy this CVT on its Infiniti range, and potentially licence it to others including Jaguar. Thus setting (in this case) Torotrak & Nissan as potential opponents or collaborators.

Elsy and Barter no doubt holds a similar broad view to investment-auto-motives, in that Japanese & German technology re-appropriation will continue to be fundamental to the UK auto sector, so replaying in a more arms length, commercialised manner, the sort of technology trickle-down that came to pass when BMW bought Rolls Royce and VW bought Bentley. But whereas their architectures are set in Germany, it is TATA that acts as the parent and technology strategy intermediary on behalf of Jaguar & Land Rover, and as long as they do so Torotrak no doubt suspects it has a chance of 'Bagging the Jaguar'.

Jaguar's powertrain R&D over recent years has benefited from from a two-pronged perspective, with monies made available from the government's Technology Strategy Board (upon which Nick Barter sits). The most publicised have been those which had greatest political clout pertaining to EV and Range-Extended EV engineering related 'LimoGreen' project and its successor the REEVolution project. However, JLR was also able to investigate a more pragmatic ICE-based solution, Torotrak and others working as a consortium, using CVT to couple the cars' rear differential with 'Flybrid' (flywheel) technology.

This then theoretically allows Torotrak to integrate its CVT-IVT systems into the heart of UK premium vehicle manufacturing, but evaluation prototypes even if prove of theory on the test-bed, typically have a far harder time clearing the commercial hurdle that sees additional cost undoubtedly added to a full vehicle programme and to the unit cost (in components and labour-time) added to the factory vehicle.

A number of production vehicles could indeed be built as part of limited series for broader evaluation of the system's pros and cons, but that does not mean that 'Flybrid' will automatically become a standard-fit technology

The BoD has proven to have incredible patience and indeed staying power given that it took until 2009-10 to post a maiden profit of only £200,000. This appeared then a new phase of profitability.

But the Q1 2011 pre-tax loss result of £2.9m on revenues of £4.7m appeared expected, the share-price dipping to a new low of 20p by the end of February. This low attracted 'growth' stock-pickers and the price gained traction, a steady up-trend created by the Volvo 'Flybrid' story, sending the stock to 60.25p (reaching a 5 year high) by the Friday LSE close.

So investors are indeed re-energised with Torotrak. From here they must make a choice as to whether to ride the positive sentiment, or peer behind the eco-tech curtain to critically assess strategy, operations and corporate accounts.

The historic lacklustre performance of the company has only really rewarded those close stock watchers who have bought and sold their interests on the basis of expected volatility, and by nature in turn creating that volatility.

Torotrak must prove itself to be far more than than a trading-play for the cynical short-termist investor. For a company that initially listed 13 years ago at 300p, to now reach the 'heady heights' of 60p today is an unfortunate state of affairs, both for the company itself and the credibility of UK automotive eco-tech.

Its future fortunes – good, indifferent or poor - appears to be largely in the hands of Allison Transmission and those large 'invisible' investors who are very probably PE players looking to create industrial links for technology deployment, as seen with OPE. TATA has a role to play in shaping its fortunes but would be brave indeed to use effectively sector unproven technology as its launch pad into the Euro small car sector.

The 'Gearless Wonder' need not stay the 'Toothless Wonder' but there are heavy headwinds which continue to vie against its displaying itself as a hub of deployable British innovation and so obtaining meaningful value creation.

A dose or two of old fashioned British pragmatism – as opposed to Americanesque 'Atlantic City' optimism – would provide a powerful outlook from this renewed startpoint now that the MarketCap sits at this unprecedented level.