Equipmake [AQSE:EQIP], the Norfolk-based manufacturer of electrification products for EVs, published its six-month results to end-November at the end of last week (10th January).
It’s a critical time for the company. At the end of November, the firm announced that although interest in its products from OEMs (original equipment manufacturers) was strong, and despite having secured GBP3m in funding round in October, that it had a limited cash runway, that would at best only see it through to March. As a result, management concluded that: “[…] There remains material uncertainty that may cast significant doubt on the Group’s ability to continue to trade as a going concern.”
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Crucial to Equipmake is securing a significant licence agreement currently under negotiation. The EV parts manufacturer is in advanced discussions with the major automotive supplier in relation to it licencing the company’s functional safety technology and systems integration capability for its commercial vehicle business. If the licence is secured, it will bring GBP4.6m of revenue into the business over the next two-years in milestone payments, as well as further volume-based royalty revenues.
However, the company can’t count its chickens until they are hatched, and there is no guarantee that Equipmake will get the agreement over the line, and as such the management team made the decision to warn the market of its Going Concern status. The company also warned that if receipts for other businesses fall short, the cash runway might be burned up before March. At the end of November, Equipmake had GBP2m in the bank, almost half of what it had in the bank a year earlier. That said, the company had a contracted order book of GBP11m as of 9th January 2025.
Seeking strategic investor or buyer
Management is looking for alternative sources of revenue – up to and including a sale of the business – as well as undertaking significant cost-reduction initiatives, including a manufacturing improvement programme and working towards materially lower-cost battery and component sourcing. The company is also seeking potential strategic partners. Management told the press last week that it had attracted “credible interest” from several potential strategic investors, partners, and acquirers.
In its results, Equipmake announced that its half-year revenue was up by 19% to GBP2.5m and within that, half-year revenue for EV components was up 80% year-on-year to GBP253,000. Repowering, namely switching vehicles from petrol-diesel engines to EV power, is, says the company, a labour-intensive undertaking. The company said that repowering was one of the company’s first undertakings, and that it created a great ‘shop window’ for the company’s other products. However, repowering is a low volume business, and subsequently the company has scaled back on its repowering operations, which Equipmake’s management says will save the company GBP2m a year.
The company was still in loss-making territory, with operational losses widening to GBP3.95m, up from a 1H24 loss of GBP2.97m, but in line with expectations. On a commercial basis the company says it is expecting a growth in its Drivetrain and EV Components Supply business units, servicing OEMs and Tier 1 manufacturers. The company is expecting further revenue from Agrale, a South American bus manufacturer.
Drivetrain traction
Post-period, Equipmake secured a manufacturing and supply agreement with Textron NYSE:TXT, an American industrial conglomerate, after a successful trial of drivetrain kits. The company sees further traction (excuse the pun) from its drivetrain and EV components division, which are higher margin business lines. Despite this, a lot of focus is on the successful procurement of the lynchpin GBP4.6m contract – Tony Ratcliffe, the company’s CFO resigned after just eight months in the role, and has not as yet been replaced.
The company’s shares opened the week at 1.475p, down 81% over one-year. In terms of being at the right place, Equipmake is tapping into the current zeitgeist as the world makes the transition from petrol and diesel engines to EVs. However, the problem may be the timing. Although the direction of travel, seems to be inevitably towards electrification, the process is glacially slow and beset by many hurdles. Timing may be the issue for Equipmake, as its cash reserve might not stretch far enough to get the firm into the promised land.
