Announcement PDF RNS Number : 2619O Equipmake Holdings PLC 02 October 2023 This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("MAR"). 2 October 2023 Equipmake Holdings plc ("Equipmake" or the "Company") Results for the year ended 31 May 2023 Equipmake, the UK-based engineering specialist pioneering the development and production of electrification products across the automotive, aerospace, bus, and coach industries, is pleased to announce its audited results for the 12-month period ended 31 May 2023. Financial Highlights • Listed on the Aquis Stock Exchange and raised £16.2m of gross proceeds during the year. • Total Revenue of £5.1m (FY2022: £3.7m), comprising: o £0.8m from Powertrain sales (supply only) (FY2022: £0.2m); o £0.9m from Powertrain sales (including vehicle integration) (FY2022: £Nil); o £1.6m from Electric Vehicle ("EV") component sales (FY2022: £0.4m); o £1.3m of Engineering projects revenue (FY2022: £2.0m); o £0.3m of licensing / royalty revenue (FY2022: £nil); and o £0.1m of grant income (FY2022: £1.0m). • Gross margin (inclusive of grants) of £1.2m or 23.9% (FY2022: Gross loss of £2.4m). Gross margin (exclusive of grants) of £1.3m or 25.5% (FY2022: no comparative available). • Loss after tax was £4.8m (FY2022: £5.3m). • Loss per share was 0.60p (FY2022: 2.3p). • Cash at 31 May 23 was £7.0m (31 May 22: £1.9m). Operational Highlights • Delivering vehicles into service for First Bus York and Transport for London ("TfL"), and secured orders for further bus repowers from both new and existing clients. • Signed licensing agreement with Sona BLW Precision Forgings Ltd ("Sonar Comstar") in India for the application of certain products in electric cars, buses, commercial vehicles and off-road vehicles in India, Thailand and other select South Asian countries. • Secured, and successfully delivered, further orders for EV powertrains for fire trucks for both the UK and US markets. • Obtained Innovate UK / Advanced Propulsion Centre ("APC") grant funding of up to £1.6m for the Hydrogen Electric Integrated Drivetrain Initiative ("HEIDI"). • Secured a flexible lease on a 50,000 sq. ft unit to facilitate the production of the growing repowering business. Post Year End Highlights • Agreed a term sheet with H55 for the provision of an aerospace electric motor - 26 June. • Supplied cutting edge E-Drivetrain for luxury long-range electric flying boat - 10 July. • Awarded £1.47m electric bus repower contract by Newport Transport - 3 August. • Awarded £1.75m electric bus repower contract by Big Bus Tours - 29 September. Ian Foley, CEO of Equipmake said: "The Company is buoyed by the successes achieved since the IPO and is confident that it will achieve both its short-term and long-term goals. It is converting opportunities and establishing itself across multiple markets and the scaling-up of its production capability is underway, demonstrating a leading role that Equipmake has in the transition to zero-emission powertrains. Investments in areas including supply chain management, product development and improved facilities are targeted to improve margins, in the current and subsequent financial years, and whilst there are signs that recent, well documented, inflationary pressures are abating, the Company remains alive to further potential opportunities and impacts going forward. The Board's expectations for FY2024 are underpinned by a contracted orderbook* of £9.2m (excluding pending opportunities above), as of 29 September 2023 with a number of opportunities at advanced stages which are expected to be converted into contracted orders in the coming months." *The contracted orderbook is orders that have been contracted but where revenue hasn't been recognised. **ENDS** For further information, please contact: Equipmake Via St Brides Partners Ian Foley, Founder and CEO Steven McGillivray, CFO Panmure Gordon (Corporate Adviser & Joint Broker) Tel: +44 (0) 20 7886 2500 John Prior / James Sinclair-Ford / Freddie Twist Hugh Rich / Sam Elder VSA Capital Limited (Joint Broker) Simon Barton / Simba Khatai / Alex Cabral Tel: +44 (0) 20 3005 5000 St Brides Partners (Financial PR Adviser) Tel: +44 (0) 20 7236 1177 Susie Geliher / Paul Dulieu equipmake@stbridespartners.co.uk About Equipmake Equipmake is the UK-based engineering specialist pioneering the development and production of electrification products to meet the needs of the automotive, aerospace and other sectors in support of the transition from fossil-fuelled to zero-emission powertrains. Equipmake is a leader in ultra-high performance electric motors and complete EV drivetrains and ultra-fast power electronic systems. As well as developing proprietary technology - such as an ultra-compact, lightweight high performance spoke motor - it also offers industry-leading EV consultancy. Equipmake has developed a vertically integrated solution providing fully bespoke solutions. The Company has built a significant pipeline of opportunities, as demand for electric vehicles increases as part of the global decarbonisation movement. Chairman's Statement The route to net zero is firmly on the agenda for governments, businesses and individual consumers, and the stakes are high. The transition to electric vehicles is important in this journey and with the cost and efficiency of the key components including batteries, motors and inverters, their mainstream adoption is increasingly economically attractive and compelling. Electric passenger cars receive a great deal of press attention and their volume and impact is very significant. This however is just one facet of a universal EV movement, and it is thanks to the innovation and vision of the Equipmake executive team, that our company is pioneering electrification products across multiple transport sectors, helping many industries adopt their own paths to carbon reduction. Investors who joined us early in our journey as a public company will have noted our prominence in the bus and coach industries, a core pillar of our business. We are scaling up to meet increasing demand for repowering in this sector, including adding a second site, as it continues to provide significant opportunity for growth. Retrofitting buses and coaches, by replacing incumbent Diesel technology with battery solutions, enables operators to accelerate their net zero ambitions, whilst providing a sustainable approach to extending the life of their assets and reducing spend on new electric vehicles. There are approximately 6,000 non-electric buses currently operating across the UK alone that are between 6 and 10 years old, being strong candidates for such retrofitting. Government support, through various Research & Development (R&D) programmes, has been important to Equipmake's development over the past 10 years. It is pleasing however that as we begin to mature our product offering, we saw in our last financial year that 97.7% of revenue was delivered from commercial contracts, up from 72.1% in the previous period. UK government affiliated agencies, most notably Innovate UK and the Advanced Propulsion Centre, continue to strongly support the transition towards net zero and we are delighted to maintain a close relationship with them and play our role in helping meet these nationwide objectives. One demonstration of this was the grant funding of up to £1.6m, announced in April 2023, under the Hydrogen Electric Integrated Drivetrain Initiative (HEIDI). This funding is being directed to the development of an integrated Hydrogen fuel cell battery hybrid system, featuring Equipmake's motor, inverter, and related technologies for use across multiple vehicle systems including buses, goods and passenger vehicles. Our intellectual property (IP) in particularly electric motors and inverters is central to our long-term growth. During the year we saw the start of how we intend to generate incremental returns from these assets, with our licensing agreement with Sona Comstar. This agreement sees Equipmake license certain products from its range of drive motors, inverter, and electric powertrain technology to Sona Comstar for applications in electric cars, buses, commercial vehicles and off-road vehicles in India, Thailand and other select South Asian countries. These are important markets for Equipmake, and addressing them via an agreement with Sona Comstar, a leading locally based automotive industry supplier, is a key milestone for us. In India alone, the share of electric passenger vehicles is forecast to increase to 25% by 2032, up from less than 1% in 2022, and electric buses to increase to 21% by 2032, up from 5% in 2022. The importance of this agreement is that, in addition to the one-time licence fee received during the period, Equipmake will receive royalties on the licensed products manufactured and sold by Sona Comstar. This is a good example of how Equipmake's IP, which has been developed over the past 10 years, can be leveraged to access new markets at minimal cost, through contractual relations with high quality partners. We expect to use this model with other suitable original equipment manufacturers (OEMs) and tier 1 suppliers over the coming years as we look to scale revenue and address new geographies and sectors. Our strategy to diversify our sector penetration, using a common pool of core product IP, has gained momentum during the year as we have proven our product applications in selected industries. We are now working with customers in markets directly adjacent to the bus industry, including coaches, but also in natural extensions to these, with for example Emergency One, the largest fire truck manufacturer in the UK. We have also entered a technology partnership with H55 S.A. ("H55"), a leading aerospace electric propulsion company, for the intended supply of an aerospace variant of our electric motor, have supplied an ultra-high-performance motor and inverter for a rocket fuel pump with Gilmour Space and an ultra-lightweight motor and inverter for Vertical Aerospace. Post period end, in July 2023, we announced that we had supplied a variant of our e-drivetrain system for use in a world-first long-range electric flying boat, opening up further possibilities in the marine industry. Our core IP and product family is directly applicable across many multi-billion-pound sectors, and our strategy is a careful and manageable route to several of those markets over time. Whilst this nascent electrification movement feels, to many, that it is only just beginning, it is important to note that Ian Foley and the Equipmake R&D team have been at its forefront for decades, which is what sets our business apart. Indeed, the majority of our business comes to us through word of mouth, with OEMs seeking us out as experts with proven production capabilities, and a track record of innovation. It is with this in mind that I look to the future with enormous enthusiasm for how we anticipate growing our business over time, and in supporting our customers ambitions toward a lower carbon future. I would like to extend my gratitude to the whole Equipmake team and to our shareholders for their hard work, shared vision and commitment to our company's growth. Clive Scrivener Non-Executive Chairman 29th September 2023 Chief Executive's Review Introduction The financial year ending 31 May 2023 ("FY2023") has been a pivotal year for Equipmake, during which it has continued to prove itself as a true pioneer of electrification solutions that address the global demand for zeroemission products. During the past financial year, the Company reported a 36.3% year-on-year increase in revenue (inc. grants) to £5.1m, and secured £16.2m of gross investment, enabling the execution of its growth plans. Business Overview FY2023 was transformational for Equipmake. The admission to the Aquis Stock Exchange in July 2022 enabled the Company to progress its plans for growth, in particular the commercialisation of its EV powertrain solution, which culminated in the delivery of repowered buses into service for First Bus York and TfL, as well as the delivery of fire truck powertrains for both the UK and US markets. To facilitate further expansion, in March 2023, the Company secured a flexible lease on a 50,000 sq. ft unit in Norfolk, which will provide an annual capacity for vehicle repowering of 200 units per annum, and space to increase production capacity for motor and battery build. Scaling-up will be completed in phases, with the first phase to be completed by the end of FY2024. Following completion of phase one, the Company will have the capability to deliver at a monthly run rate that equates to 100 repowers per annum. The profile of Equipmake was enhanced further by the signing of the licencing agreement with Sona Comstar, securing an established manufacturing partner that enables it to address demand for certain EV products in India, Thailand and other select South Asian countries. Product development commenced during Q4 of FY2023, with production expected to commence in 2025. The Company reinforced its position as a market leader of electrification products for Aerospace by delivering motors and inverters to existing clients and by securing a new partnership with Swiss electric propulsion company, H55, to certify an Electric Propulsion System (EPS) for production. The EPS will initially be used on the Bristell B23 Energic aircraft, a two-seater electric training aircraft, with initial sales expected in 2025. The Company did experience a myriad of supply chain challenges during FY2023, particularly in respect of electrical components which impacted both availability and price, and significant one-off price spikes resulting from the Russia/Ukraine war. This ultimately impacted gross margin through the absorption of higher prices and/or the redesign of products to incorporate alternative components. The in-house engineering capability to pivot to alternative components mitigated the severity of these issues on customer deliveries and enabled the Company to report its highest annual revenue number to date. Innovation and new product development are core principles of Equipmake and in FY2023, the Company continued to invest in these areas. During the year, it capitalised £0.8m of development costs relating to its powertrain products and was successful in obtaining up to £1.6m of grant funding via Innovate UK / APC to develop a powertrain (including the battery management system and thermal management system) that integrates with a hydrogen fuel cell. The project spans 27 months and further advances the capability of Equipmake's product range. Current Trading The business is trading in line with market expectations, with a strong opening orderbook and significantly advanced discussions with new and existing clients, underpinning the revenue expectation for FY2024. This includes the delivery and trial of the repowered double deck diesel vehicle for First Bus, which is still to be completed. Since the balance sheet date, the business has been successful in securing the following opportunities: • Bus repower contracts for delivery in FY2024: o Newport Transport - eight repowers for £1.475m. • • o Big Bus Tours - nine repowers for £1.575m. Emergency One - three fire truck powertrains for £0.6m. Contract with a new OEM for the repower of an airside operational vehicle. The prototype project is for £0.6m and will be delivered in FY2024, but also provides a timeframe for the commencement of discussions regarding manufacturing and a supply agreement. Outlook The Company is buoyed by the successes achieved since the IPO and is confident that it will achieve both its short-term and long-term goals. It is converting opportunities and establishing itself across multiple markets and the scaling-up of its production capability is underway, demonstrating the leading role that Equipmake has in the transition to zero-emission powertrains. Investments in areas including supply chain management, product development and improved facilities are targeted to improve margins, in the current and subsequent financial years, and whilst there are signs that the recent price spikes are abating, the Company remains alive to further potential opportunities and impacts going forward. The Board's expectations for FY2024 are underpinned by a contracted orderbook of £9.2m (excluding pending opportunities above), as of 29th September 2023 with a number of opportunities at advanced stages which are expected to be converted into contracted orders in the coming months. The contracted orderbook is orders that have been contracted but where revenue hasn't been recognised. This report was approved by the board on 29th September 2023 and signed on its behalf. Ian Foley Chief Executive Officer Group Strategic Report Introduction The directors present their strategic report and the audited financial consolidated statements for the year ended 31 May 2023. The company acts as a holding company for Equipmake Limited, collectively referred to as Equipmake. Principal Activity Equipmake is a UK-based engineering specialist pioneering the development and production of electrification products across the automotive, aerospace, bus, coach, and fire truck industries, supporting the transition from fossil-fuelled to zero-emission powertrains. Business model Through its vertically integrated business model, Equipmake designs and manufactures a significant number of the core technologies that constitute an EV powertrain (motors, inverters, battery packs, control systems) and integrates these components into a working system. The individual components or the full powertrain can be sold to an OEM, or Equipmake can integrate the powertrain into the vehicle for the end user. It also licences its products to select partners for volume manufacture. A key differentiator for Equipmake is its ability to provide the most appropriate solution for a given application, customising its solution to match the cost and performance demands of its customers. Given the relative immaturity of the EV market, the Company looks beyond a transactional relationship and positions itself to partner its customers with their own electrification journey. This approach has helped the Company to establish a leading position in the bus and coach repowering market and secure key customers in the electric fire truck market. The above approach, coupled with Equipmake's reputation for innovation and high-performance products has led to it securing contracts to supply EV components into the aerospace market and facilitated the partnership with H55 to design prototype motors for its propulsion system, with the intention to develop a fully certified system for production. Innovation and new product development is integral to the strategic direction of Equipmake. Historically, a significant amount of development has been completed with support from Innovate UK / APC grant projects and this continues to be the case. In addition to receiving funding towards development, the Company also benefits from the wider collaboration that these projects provide. Business review Total revenue (exclusive of grant revenue) increased to £4.9m, which represents year-on-year increase of 84.8% (FY2022: £2.7m). Total revenue (inclusive of grant revenue) increased to £5.1m, an increase of 36.3% (FY2022: £3.7m). This growth is driven by the commencement of delivery of repowered vehicles to First Bus York and motors and inverters to Equipmake's aerospace customers, increases in the delivery volumes of fire truck powertrains and its ASIL-D inverter to an electric hyper car OEM. The signing of the Sona Comstar licencing agreement also contributed £0.3m of licencing revenue which was not present in the prior year. Grant revenue decreased by £0.9m due to the timing of the completion of historic projects and the commencement of new ones. Gross margin is reported both inclusive and exclusive of grants. Whilst grants have a positive impact on the Company, the partially funded nature of these projects results in a gross loss which distorts the operational performance of the Company. Gross margin (inclusive of grants) was £1.2m or 23.9% (FY2022: loss £2.4m). Total gross margin (exclusive of grants) was 25.5% (FY2022: no comparative available). Administrative costs were £5.3m (FY2022: £1.9m), reflecting the investments made in a number of areas. £2.8m of the year-on-year increase relates to staff costs, reflecting a 19% increase in the average headcount (FY2023: 82, FY2022: 69) and the reporting of development costs within overheads. Costs relating to property increased by £0.2m, due to the new property lease signed at the end of March 23 and increased electricity costs. There has also been a year-on-year increase in professional fees since the IPO of £0.2m. During the year, the Company received £16.2m in gross proceeds from the IPO and the subsequent fundraise in January/February 2023, to support the expansion plans of the business. The cash balance at the end of the year was £7.0m (FY2022: 1.9m), an increase of £5.1m. This reflects the impact of the fundraising activities during the year, less the investments made into the business, principally funding trading activities and working capital requirements. As part of the Company's strategy for mitigating supply chain issues and its plans for expansion, there has been a significant investment in stock. The closing value as at the balance sheet date was £3.0m, (FY2022: £0.8m). Total debtors have increased to £4.5m (FY2022: £1.9m) due to the non-linear phasing of revenue recognition and the overall increase in revenue. The value of creditors due within one year has decreased by £3.8m to £2m (FY2022: £5.8m) due to the inclusion of a £3.8m convertible loan note in the prior year total. This was converted into equity at the IPO. Loss after taxation was £4.8m (FY2022: £5.3m) leading to a loss per share of 0.60p (FY2022: 2.3p). Other key performance indicators The Directors monitor the business internally with several performance indicators: orderbook, cash flow, health and safety, adherence to plan and quality. The board has assessed results against these KPIs and are happy with the progress that has been made. The contracted orderbook value as at 31 May 2023 was £5.5m, increasing to £8.6m as at 27th September 23, reflecting the successful conversion of opportunities into orders since the start of the FY2024 financial year. Cash at 31st May 2023 was £7.0m (2022: £1.9m), reflecting the external funding received and the significant investment made in the business during the financial year. Principal risks and uncertainties The directors continuously review and take steps to ensure that the risks and uncertainties faced by the Company and its subsidiary are appropriately managed and mitigated against. These risks are categorised in the table below. Risk Description Mitigation Strategy Financial risks - Price risk The Group is exposed to price variations in respect of its purchases and its sales price. Contractual clauses to flex the sales price when there are unavoidable significant increases in component costs. Maintain strong relationships with customers and suppliers to facilitate lower cost alternatives. Financial risks - Liquidity risk The Group is currently loss making and therefore requires access to cash to fund development. The listing provides access to investors and transparency to investors of market value. Financial risks exchange risk foreign The Group is exposed to foreign exchange risk with a small number of overseas customers and procures certain components in foreign currency. When no natural hedge is possible and the currency exposure cannot be avoided, the Company will utilise forward contracts to hedge against foreign exchange risk. Operational risks - supply chain risk Reliance on key suppliers / single source components. Supply chain disruptions. In-house engineering of components to design products around multi-sourced commodities. - In-house Procurement expertise to identify component shortages and dynamically manage stock levels. Operational risks - execution risk The Group is introducing new products and technology to the market. In-house testing process that exceeds customer requirements coupled with operational trials. Operational risks - Dependence on key executives and personnel The Group's success depends to a significant degree upon the vision, technical and specialist skills, experience and performance of its Directors, senior management and other key personnel. Contractual terms and incentives to retain existing employees. Plans to invest in formal training and development programme to facilitate development of in-house talent together with a strategy to build the senior team through external hires. Intellectual Property (IP) risks The Group may not be able to sufficiently protect its IP and proprietary expertise. The Group reduces this risk by utilising the services of patent and trademark attorney and technology is patented where possible. It also controls access to the technology through software controls and encryptions. Directors' statement of compliance with duty to promote the success of the Group (Section 172 Statement) Section 172 of the Companies Act 2006 requires that Directors of a company must act in ways that they consider, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to: • the likely consequences of any decision in the long term; • the interests of the company's employees; • the need to foster the company's business relationships with suppliers, customers and others; • the impact of the company's operations on the community and the environment; • the desirability of the company maintaining a reputation for high standards of business conduct; and • the need to act fairly as between members of the company. The board has identified the following stakeholder groups and engages with them to foster strong relations and to act fairly between them: • Customers: Equipmake engages with customers at all stages of the project life cycle - from concept design through to the production phase and after sales service and support. This is mutually beneficial and ensures that relationships with customers are not purely transactional and are instead focused on longterm relationships. • Employees: the employees are critical to the long-term success of Equipmake. The Company has introduced a strategy which rewards and retains its staff. Staff received share options in the previous financial year, it continually reviews its overall benefits package to maximise its value to employees and is addressing development needs through in-house and external training. Post balance sheet date, it has set up an apprenticeship scheme and a formal management training programme. • Grant bodies and other government agencies: Equipmake has benefited from a number of Innovate UK Research and Development grants in recent years and maintains a good relationship with the grant issuing bodies. The Advanced Propulsion Centre (APC) has supported multiple projects and participated in press events post-completion of the grant projects. • Investors and shareholders: The Company engages with investors through its annual and interim reports, AGM and analyst and investor presentations. • Partnerships: Equipmake has established partnerships with multiple companies to facilitate the exploitation of the opportunities in the automotive, bus and aerospace markets. This report was approved by the board on 29th September 2023 and signed on its behalf. Ian Foley Chief Executive Officer Consolidated Statement of Comprehensive Income Note Turnover Cost of sales 4 Year ended Year ended 31 May 31 May 2023 2022 £'s £'s 5,053,540 3,706,785 (3,845,263) (6,087,868) Gross loss Administrative expenses 1,208,277 (2,381,083) (5,346,307) (1,919,378) Other operating income 5 280,658 565,132 Share based payment charge 29 (475,321) (574,227) Exceptional items 12 (615,064) (750,000) Operating loss 6 (4,947,757) (5,059,556) Interest receivable and similar income 10 16,908 (1,182) Interest payable and similar expenses 11 (86,505) (144,994) (5,017,354) (5,205,732) 185,979 (104,499) (4,831,375) (5,310,231) Loss before taxation Tax on loss 13 Loss for the financial year Total other comprehensive income - - (4,831,375) (5,310,231) - (692,772) (4,831,375) (4,617,459) (4,831,375) (5,310,231) £'s £'s (0.0060) (0.023) As at 31 May 2023 As at 31 May 2022 Note £'s £'s 15 16 783,037 772,681 527,139 1,555,718 527,139 2,958,325 4,501,978 6,999,686 807,973 1,920,728 1,876,083 14,459,989 4,604,784 (1,957,276) (5,794,645) 12,502,713 (1,189,861) 14,058,431 (662,722) Total comprehensive loss for the year Loss for the year attributable to: Non-controlling interests Owners of the parent Company Loss per share Basic and diluted 27 The Group's activities derive from continuing operations. The notes below form an integral part of these Financial Statements. Consolidated Balance Sheet Assets Fixed assets Intangible assets Tangible assets Current assets Stocks Debtors: amounts falling due within one year Cash at bank and in hand Total current assets 18 19 20 Liabilities Creditors: amounts falling due within one year Net current assets /(liabilities) 21 Total assets less current liabilities Creditors: amounts falling due after more than one year 22 Provisions for liabilities: Other provisions 25 Net assets /(liabilities) Capital and reserves Share capital Share premium Other reserves Profit and loss account Share-based payment reserve