Torotrak gears up to float away from parent group

Transmission company Torotrak will have a market capitalisation of about £400m when it floats next month. The company is currently part of technology transfer organisation BTG, the former British Technology Group. Its demerger will help to raise £50m in new money to develop its infinitely variable transmission system, a gearless transmission with a potentially wide […]

Transmission company Torotrak will have a market capitalisation of about £400m when it floats next month.

The company is currently part of technology transfer organisation BTG, the former British Technology Group. Its demerger will help to raise £50m in new money to develop its infinitely variable transmission system, a gearless transmission with a potentially wide range of applications.

The main market for the IVT system is automotive, where the company claims savings of up to 20% on fuel, compared with cars fitted with conventional automatic transmissions.

The Torotrak IVT was conceived by the BTG engineering division and controlled and resourced centrally by the group.

However since 1995 it has operated increasingly independently.

Chief executive Maurice Martin said he has had discussions with ‘nine out of ten’ of the world’s major car makers with a view to exploiting the IVT system for the volume car market.

‘The transmission system is aimed primarily at the automotive market and is intended to supersede conventional automotive transmissions,’ he said.

Torotrak is not expected to make money for about five years. Martin said he wanted to use the money raised by the flotation to refine the technology and develop it for use in a 100-strong fleet of cars to evaluate its reliability and robustness.

Car manufacturers themselves will bear the brunt of the cost of producing the system, with Torotrak taking a royalty on each one incorporated into the final car sold to the customer.

However Torotrak still has to fund developing the system from its existing prototype stage to final working production model.

‘We have to prove that this system works not just as a prototype but as a product,’ Martin said.

Under the terms of the flotation plans, BTG shareholders will receive one Torotrak share for every BTG share they own. The group will retain a 5% stake in Torotrak, giving it rights to share in revenues once the IVT technology is commercialised.

The amount earned depends on the level of income received, with a ceiling of 5% of revenues.

Torotrak has seven licensees, two of whom, an Italian tractor manufacturer and a Swedish truck maker, do not wish to be named. The others include transmissions and chassis engineering specialists FFD Ricardo, Toyota, BMW’s transmissions maker Getrag and LG Cable. ‘We’ve done evaluation studies with Daimler-Benz, Rover, Peugeot, Honda and Renault,’ added Martin.

Torotrak hopes eventually to win 3% of the automatic transmissions market.

This translates into royalty revenues of about £470m a year, Martin said.