Equipmake Holdings - Final Results for the year ended 31 May 2024
29/11/2024 07:00
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RNS Number : 0871O Equipmake Holdings PLC 29 November 2024
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").
29 November 2024
Equipmake Holdings PLC
("Equipmake" or the "Company" or the "Group")
Final Results for the year ended 31 May 2024
Equipmake, a market leader in engineering-driven differentiated
electrification technologies, products and solutions across the automotive,
truck, bus and speciality vehicle industries, is pleased to announce its final
audited results for the year ended 31 May 2024. The annual report containing
full details will be made available on the Company's website shortly and
posted to shareholders in the coming days.
Corporate Highlights
· During the year the Group strengthened its leadership and talent base as
it further rolls out its commercialisation and growth plans:
o Nicholas (Nick) Moelders was appointed Chief Operating Officer and a
Director of the Company in January 2024;
o Anthony (Tony) Ratcliffe was appointed Chief Financial Officer, Director
and Company Secretary in April 2024; and
o Jinsong Dai joined as VP Sales and Business Development in May 2024.
· These additions to the team have a strong pedigree of delivering
significant growth in fast moving international technology businesses and they
are already positively impacting the business;
· The Company raised £4.1 million of new funds, before expenses, from
new and existing investors in February 2024 to support future growth
initiatives; and
· The Company announced a number of significant Tier 1 new client
contract wins (including Caterpillar, Rev Group and Textron) as it continues
its growth trajectory.
Operational highlights
The year was transformational for the Group as it scaled its operations in
order to deliver greater volumes of business from a range of targeted areas.
The Group delivered attractive revenue growth and increased margins from the
manufacture and supply of electric vehicle components and full zero emission
drivetrain solutions. This is the core strategic growth area for the business
as customer traction accelerates with Original Equipment Manufacturers
("OEMs") and Tier 1 suppliers (which are direct suppliers to OEMs).
· The largest increase in revenue was from Equipmake's bus repowering
business ("Bus Repowering"). This growth was driven by strong demand and a
naturally shorter sales cycle. Although there were significant cost challenges
leading to a gross loss for this business line, Bus Repowering provided
material revenues and, most importantly, it showcases the quality, reliability
and practical usability of the Company's products and solutions, which the
Company believes has been invaluable in accelerating the interest in the
Group's components and drivetrain supply business lines with targeted OEMs and
Tier 1 suppliers;
· Equipmake was selected by Textron Ground Support Equipment Inc.
("Textron"), a leading US aircraft, defence and industrials conglomerate for
the supply and installation of a prototype electric-powered airside de-icing
vehicle in September 2023. Following a successful trial an order was placed
for the supply of drivetrain kits for two further vehicles;
· Equipmake was selected by Perkins Engine Company Limited, a
subsidiary of Caterpillar Inc (the world's leading OEM of construction and
mining equipment and off highway plant) to leverage the Group's electric
drivetrain technology and expertise to develop a motor and inverter for a new
off-highway hybrid system, in October 2023. Government grant funding totalling
£3.2 million over the 3.5-year life of this project was secured via the
Advanced Propulsion Centre;
· Equipmake won a development contract with H55, a leading Swiss
aerospace propulsion company, for the development and supply of electric
motors for use in electric aircraft, in January 2024;
· Equipmake won a contract in September 2023 with Big Bus Tours, the
world's largest bus sightseeing company, to repower ten double deck
sightseeing buses, with a further ten added in January 2024; and
· Equipmake won a £2.0 million contract with Golden Tours in February
2024 to install its zero-emission electric drivetrain solution into vehicles
in its fleet, with an additional contract awarded post year-end, in June 2024,
to supply and install zero emission electric drivetrain solutions in
additional vehicles.
Financial highlights
· Revenue for the year ended 31 May 2024 was £8.1 million compared to
£5.1 million in the prior year, a growth of approximately 60%;
· Excluding grant revenue, delivery against commercial agreements
generated revenue in the year of £7.3 million compared to £4.9 million in
the prior year, a growth of 47%;
· Revenue from the supply of components and full zero emission
drivetrain solutions was £3.0 million combined compared to £2.4 million in
the prior year, a growth of 25%;
· Revenues from Bus Repowering were £3.9 million, compared to £0.9
million in the prior year, driven by strong demand;
· Revenue from Technology, which includes engineering projects
consultancy, was £0.4 million compared to £1.3 million in the prior year,
the reduction driven by a strategic focus towards only offering engineering
services around core products associated with OEM and Tier 1 partnerships,
rather than offering bespoke general technical consulting services;
· Cash balances at 31 May 2024 totalled £2.5m (FY2023: £7.0m). The
Group had no debt, other than in relation to items held under finance leases.
Phasing of billing, which was weighted more towards the end of the financial
year, meant that receivables balances, at circa £2.5 million, were
correspondingly high at the year-end date;
· Bus Repowering operations have scaled rapidly during the year. This has
resulted in a number of additional unanticipated and under-estimated direct
costs and consequently the adjusted EBITDA(1) loss was £7.4 million compared
to an adjusted EBITDA(1) loss of £3.6 million in the prior year;
· The Group recognises the labour-intensive nature of Bus Repowering
when working at modest volumes, across various platforms and with inconsistent
quality in recipient vehicles. Whilst efficiencies continue to improve, this
business line incurred material additional staff costs, including temporary
labour, in order to ensure deliveries met key customer agreed timelines.
Post year-end highlights
· The Group announced further traction as it focuses on higher margin
Drivetrain and EV Components Supply to OEM and Tier 1 customers, with South
American bus manufacturer Agrale;
· Following a successful trial and the initial order for the supply of
drivetrain kits for two further vehicles, Equipmake signed a Manufacturing and
Supply Agreement with Textron;
· Equipmake is in advanced discussions with a major automotive supplier
in relation to it licencing the Group's functional safety technology and
systems integration capability for its commercial vehicle business. The
licence agreement has terms currently envisaged, which include a total of $6
million (equivalent to approximately £4.6 million) of milestone payments over
the two years following entry into the licence agreement as well as future
volume-based royalty revenues. However, there can be no guarantee that terms
of this potential licence agreement will be agreed or that this licence, or
any other licence currently in the pipeline, will be finalised;
· On 25 October 2024, the Company announced details of a £3 million
financing round, before expenses, which subsequently closed in early November
2024. Excluding the potential cash inflows if the licence agreement referred
to above is signed, the Group has a limited cash runway estimated to
approximately March 2025. Further details of the Group's liquidity are
detailed in the going concern statement below;
· The Group is progressing a number of cost-reduction initiatives and
manufacturing improvement programmes, including lower cost battery and
component sourcing, and substantially reducing its headcount; and
· Tony Ratcliffe resigned as Chief Financial Officer, Director and Company
Secretary with effect from 30 November 2024.
Adjusted EBITDA(1) is defined as earnings before interest, taxation,
depreciation and amortisation, and before any non-recurring costs or share
based payments charges, if applicable.
( )
**ENDS**
For further information, please contact:
Equipmake Via St Brides Partners
Ian Foley, CEO
Tony Ratcliffe, CFO
Panmure Liberum (Corporate Adviser & Joint Broker) Tel: +44 (0) 20 7886 2500
James Sinclair-Ford / Josh Moss
Mark Murphy / Sam Elder
VSA Capital Limited (Joint Broker)
Simon Barton / Alex Cabral Tel: +44 (0) 20 3005 5000
St Brides Partners (Financial PR Adviser) Tel: +44 (0) 20 7236 1177
equipmake@stbridespartners.co.uk
Susie Geliher / Paul Dulieu / Will Turner
About Equipmake
Equipmake is a UK-based industrial technology company specialising in the
engineering, development and production of electrification products to meet
the needs of the automotive and other sectors in support of the transition
from fossil-fuelled to zero-emission drivetrains.
Equipmake is a leader in high performance technologically advanced electric
motors, inverters and complete zero-emission electric drivetrains and power
electronic systems. Equipmake has developed a vertically integrated offering
providing fully bespoke solutions to its customers. The Company is focussed on
accelerating traction with OEM and Tier 1 suppliers in relation to higher
margin component and drivetrain supply under long-term growth contracts and
securing high margin licencing transactions.
Key differentiators of the Company offerings are its advanced technology and
performance, reliability and adherence to ASIL-D(2) functional safety.
Equipmake's advanced motor and inverter technology, featuring ASIL-D
compliance, are designed to customers' highest Functional Safety standards.
With decades of experience in electric drivetrain integration and a dedicated
prototype vehicle testing facility, Equipmake can significantly accelerate
product development for customers.
(2) Automotive Safety Integrity Level ("ASIL") is a risk classification scheme
defined by the ISO 26262 - Functional Safety for Road Vehicles standard and is
a critical requirement for road vehicles. Of the four ASILs identified by the
standard, ASIL-D dictates the highest integrity requirements on the product,
which require exceptional rigour in their development.
NON-EXECUTIVE CHAIRMAN'S STATEMENT
I referred in last year's Annual Report to the route to net zero being firmly
on the agenda of many stakeholders and the benefits such a transition could
bring. Over the last year we have seen the positive impact to Equipmake of
this highest-level ambition, as customers seek out innovative, reliable, safe,
and cost-effective products and solutions to achieving the electrification of
their vehicle fleets.
Equipmake's focus is as a technology leader and manufacturer of highly
engineered electric drivetrain products and solutions for commercial vehicles
and other demanding applications that require high-performance electrified
solutions.
What has become increasingly clear is that the effective integration of these
products into efficient solutions and Equipmake's functional safety offering
are distinct competitive advantages. These advantages are a testament to the
heritage and ethos of our Group and enable us to continue to engage with
global OEM and Tier 1 partners, who are looking to electrify their current and
future product ranges.
Over many years, Equipmake has undertaken many hundreds of person years of
research and development and has built up significant amounts of know-how as
well as a comprehensive patent portfolio. Its product offerings include high
quality motors and inverters, as well as full drivetrain solutions, which are
gaining solid and increasing traction in the marketplace.
Bus Repowering has generated significant early revenues for the Group and has
undoubtedly proven a very important demonstrator of our products, showing the
reliability of Equipmake's solutions in demanding real-world use. It has been
challenging to deliver an attractive margin from this offering whilst volumes
are low and there are multiple product variations..
Equipmake's engagement with global OEMs and Tier 1 suppliers has accelerated
strongly. The Group's focus is to translate these and other pipeline
opportunities into continued revenue growth with attractive gross margins from
the manufacture and supply, or licencing, of components and drivetrains
delivered against what are expected to be longer-term contracts.
Equipmake is now increasingly focussing its commercial scale-up on
opportunities in North America and Europe in particular and plans to increase
its commercial team to maximise the benefits from these opportunities.
We have been pleased with continued investor support as we have secured
additional working capital to finance the Group.
The Board continues to believe that its current make-up is appropriate to the
Group's current needs and to meet its governance commitments, however it
expects to build the Board further in due course. The Board is committed to
high standards of governance and has adopted the QCA (Quoted Companies
Alliance) Code.
I wish to thank all staff for their significant efforts in growing the
business in the year. I also wish to thank our investors for their support and
we all look forward to a very busy and productive year ahead.
Clive Scrivener
Non-Executive Chairman
CHIEF EXECUTIVE OFFICER'S STATEMENT
Introduction
The financial year ending 31 May 2024 has been another busy year for
Equipmake.
The Group delivered record breaking revenues, which totalled £8.1 million, a
growth of 60% following significant demand for its zero emission electric
motors, inverters, drivetrains and Bus repowering offerings.
Business Overview
The year was a transformational one for Equipmake. Following the Admission to
Aquis in July 2022, the Company has continued to aggressively grow its
business operations to exploit opportunities in its commercial vehicle
markets.
The Group has four principal business lines: Drivetrain Supply, EV Components,
Technology and Bus Repowering. The Group also undertakes a number of focussed
grant funded programmes, designed to build intellectual property and unlock
downstream commercial opportunities.
As noted in the Chairman's Statement, the core long-term focus of growth and
building shareholder value is in securing highly attractive commercial
transactions with OEMs and Tier 1 suppliers for the supply of EV components
and drivetrain solutions, under longer term contracts.
I am delighted to report a 25% revenue growth in the supply of components and
drivetrain solutions combined, with an increase in gross margin from 24% to
29%.
Whilst Bus Repowering has been a major contributor to revenues, itself showing
more than a four-fold increase in revenue in the year, it was disappointing
that the direct costs incurred by this business line were materially higher
than expected. The Group has since secured a more cost-effective supply of
battery and other components.
Whilst the Group experienced a number of forecasting, lead time and other
procurement challenges, it did not experience the additional supply chain
challenges that were seen in the prior year in relation to securing electrical
components at the right time and right price. Increasingly, the Group expects
to outsource manufacturing where possible and source the more commoditised
components at reduced prices, particularly as volumes increase.
Market
Equipmake is targeting the electric heavy duty and medium duty commercial
vehicle markets. This includes heavy duty trucks, medium duty trucks,
speciality vehicles such as refuse trucks and ground support equipment, buses,
for the transit, tourist and school markets, and off-road construction,
agricultural and mining vehicles. This is an addressable market that the
Company believes is growing at approximately 28% CAGR and is estimated will be
worth approximately $3.8 billion globally by 2035 for motors and inverters
alone.
Whilst widespread adoption of electric solutions in these markets is estimated
to be around five years behind that seen in the passenger vehicle markets, the
Board believes that the adoption rates are now poised to dramatically
accelerate, in a similar trend to that which started to be seen in passenger
vehicles around five years ago.
The focus for the Group is now aggressive commercialisation, which is likely
to require additional commercial headcount.
Offerings
Equipmake has invested heavily in what is now an attractive complement of
motors, inverters and drivetrain solutions.
Equipmake's key differentiators are advanced technology, high performance,
reliability, systems integration and functional safety. The high performance
and reliability have been positively demonstrated by the suite of different
vehicles now successfully operating in the field.
Adherence to ASIL-D2 functional safety is a highly prized and, in certain
markets or with certain customers, a rare attribute. Equipmake's advanced
motor and inverter technology, featuring ASIL-D compliance, is designed to
customers' highest functional safety standards. Automotive Safety Integrity
Level ("ASIL") is a risk classification scheme defined by the ISO 26262 -
Functional Safety for Road Vehicles standard and this is a critical
requirement for road vehicles. Of the four ASILs identified by the standard,
ASIL-D dictates the highest integrity requirements on the product, which
therefore require the most exceptional rigour in their development. Achieving
this functional safety is challenging, typically requiring large teams over
two or three years with multi-million-dollar project budgets, projects which
often cannot be condensed into shorter timeframes however much resource is
expended. Whilst clearly a priority in ultra-high volume passenger car
offerings, customers can find the economics to achieve this standard in-house
challenging for products with volumes of 1,000's or 10,000's of units per
annum. Equipmake has secured this compliance following its historic investment
and can offer OEMs and Tier 1 suppliers appropriate solutions that include
this functional safety. The Group is in discussion with a number of potential
customers and partners in relation to providing its solutions with functional
safety.
Business model
A brief description of Equipmake's principal business offerings and models is
summarised below:
Business line Description Business model and focus
EV Components The manufacture and supply of motors, inverters and other high value electric Direct engagement with global OEMs and Tier 1 suppliers. A very high priority,
vehicle components. with the ultimate goal of substantial high value muti-year contracts with
global partners and customers.
Drivetrain Supply The manufacture and supply of complete drivetrains, including motors, Equipmake is vertically integrated to provide a full solution. This is seen as
inverters, HVAC, power electronics, control systems and battery packs. a highly valuable opportunity, generating high margins. The customer will
themselves, or with their contractors, install Equipmake's drivetrains in new
or used vehicles.
Technology Licencing of Equipmake technology - for territories or markets where Equipmake Licencing - typically up-front fees, milestone payments then royalties based
or its partners may not want to address directly. Potential to realise value on future partner sales volumes.
by selling or licencing non-core intellectual property.
Engineering projects - consulting, contract development work undertaken by
Equipmake.
Non-recurring engineering (NRE) spend on projects - typically directly related
to particular solutions, charged on a fixed, time and materials or capped fee
arrangement.
Bus Repowering Supply of drivetrains plus the retrofit installation into customer's used A recent focus providing early revenues and product validation, but given the
vehicles. labour-intensive nature, challenging to achieve high margins.
Outlook
· As Equipmake's market position has strengthened, it intends to focus
generally on higher gross margin business lines, principally the supply of EV
components and drivetrain solutions and securing high value licence
transactions;
· Equipmake has established valuable relationships with a number of
OEMs, within its EV Components and Drivetrain Supply business lines, a key
focus for the Group as it looks ahead. These include Perkins Engine Company
Limited, a subsidiary of Caterpillar Inc.; Agrale, a leading South American
truck, bus and utility vehicle manufacturer; Textron, a leading US aircraft,
defence and industrials conglomerate; Emergency One, the largest manufacturer
of fire trucks in the UK; and Rev Group, the manufacturer of speciality
industrial vehicles, including fire trucks;
· The Group is also in discussions with a number other global OEM and
Tier 1 suppliers, in relation to the supply of motors and inverters. They are
looking to leverage Equipmake's high performance, differentiated offerings
which include functional safety (a much sought after compliance requirement
for road vehicles) and system integration expertise;
· Bus Repowering has provided meaningful revenues to date and has
already successfully demonstrated the quality, reliability and significant
benefits of the Group's solutions in real world operation on a wide variety of
platforms, helping to accelerate traction with OEMs and Tier 1 suppliers in
relation to components and drivetrain solutions supply. As the Group's market
position has strengthened and it is securing greater customer interest for its
Drivetrain Supply, EV Components and Technology licencing offerings, the Group
plans to rationalise its Bus Repowering offering towards a limited number of
platforms and vehicles, with the objective of improving overall gross margins.
The Group therefore expects the revenues from Bus Repowering to materially
reduce in the current financial year. The Group plans to actively encourage
the supply of drivetrain solutions, as opposed to offering the full Bus
Repowering, to those customers seeking to retrofit existing diesel vehicles
with an EV drivetrain;
· The Group is also progressing a number of cost-reduction initiatives
and manufacturing improvement programmes. These include switching battery
sourcing as well as other component level sourcing for inclusion in the
Group's product portfolio. Equipmake expects significant cost reduction from
batteries and overall cost reductions from a number of initiatives, including
substantially reducing its headcount, to benefit gross margins and earnings
impacting principally from the second half of the current financial year;
· Equipmake has a pipeline of Technology licencing transactions, with
one potential licence agreement with a major automotive supplier being
particularly far advanced which could, if agreed, provide $6 million (or
approximately £4.6 million) of milestone payments over the first two years.
However, there can be no guarantee that terms of this potential licence
agreement will be agreed or that this licence, or any other licence currently
in the pipeline, will be finalised;
· In due course, Equipmake intends to further strengthen its commercial
team, particularly in the US and mainland Europe, in order to accelerate
commercialisation and closely manage key relationships with existing and
potential OEM and Tier 1 partners; and
· The Board is pleased to see demand across its range of products and
solutions but recognises the need to focus aggressively on the most
strategically important and financially rewarding of markets, especially given
the limited working capital currently available.
Overall, the Group remains committed to reaching financial breakeven and
profitability as soon as possible and anticipates a very busy year ahead.
I look forward to updating shareholders of our further progress over the
coming months.
Ian Foley
Chief Executive Officer
CHIEF FINANCIAL OFFICER'S STATEMENT
Revenue
Revenue for the year was £8.1 million (FY2023: £5.1 million), an increase of
60%. Excluding grant income, the revenue totalled £7.3 million (FY2023: £4.9
million), an increase of 47%.
Revenue is summarised across the business lines as below:
For the year For the year
ended 31 May ended 31 May
2024
2023
£'000 £'000
Drivetrain Supply 2,181 850
EV Components 846 1,575
Technology 399 1,612
Bus Repowering 3,854 900
7,280 4,937
Grant income 788 116
Total revenue 8,068 5,053
The Group has four principal commercial business lines - Drivetrain Supply, EV
Components, Technology and Bus Repowering. In addition, the Group operates a
number of grant funded projects. Revenue and gross margin are typically
reviewed both before and after grant projects.
The principal long-term growth priorities are the Drivetrain Supply, EV
Components and Technology business lines. The Drivetrain Supply business
generated revenues of £2.2 million (FY2023: £0.9 million) and the EV
Components supply business line generated revenues of £0.8 million (FY2023:
£1.6 million), together a combined £3.0 million (2023: FY £2.4 million), a
growth of 25%. The Technology business line generated revenues of £0.4
million (FY2023: £1.3 million), the reduction largely being caused by the
phasing of incidental engineering project work and the inclusion of a £0.3
million licence fee in the prior year.
The Bus Repowering business line generated revenues of £3.9 million (FY2023:
£0.9 million). This increase in output, which represented the repowering and
delivery of 26 customer vehicles in the year compared to five vehicles in the
prior year, was driven by significant customer demand. The Group's premises on
the Scottow Enterprise Park, which was secured on a flexible lease, became
operational in early 2024, facilitated this increase in volume. This business
line has generated material revenues and showcased the quality, reliability
and practical usability of the Group's products and solutions, which the Board
believes has been invaluable in accelerating the interest in the Company's EV
Components, Drivetrain Supply and Technology business lines with targeted OEMs
and Tier 1 suppliers.
Grant revenues totalled £0.8 million (FY2023: £0.1 million), the increase
generated by the addition of a second grant programme.
Gross profit
The overall gross loss in the year was £2.6 million (FY 2023: gross profit
£1.2 million). Excluding grant projects, the overall gross loss in the year
was £1.9 million (FY2023: gross profit of £1.3 million).
The Drivetrain Supply business generated a gross profit of £0.6 million,
representing 29% of revenue (FY2023: £nil million, representing negative 3%
of revenue) and the EV Components business line generated a gross profit of
£0.2 million, representing 28% of revenue (FY2023: £0.6 million,
representing 39% of revenue). Together the Drivetrain Supply and EV components
businesses generated a combined gross profit of £0.9 million, representing
29% of revenue (2023: FY £0.6 million, representing 24% of revenue), an
increase of 5% gross margin.
The engineering projects within the Technology business line generated a gross
profit of £0.1 million, representing 26% of revenue (FY2023: £0.5 million,
representing 37% of revenue), the reduction caused by lower value engineering
projects in the year.
The Bus Repowering business line generated a gross loss of £2.9 million,
representing a negative 76% of revenue (FY2023: gross loss of £0.1 million,
representing a negative 13% of revenue). The increased direct costs in Bus
Repowering were caused by a number of additional unanticipated and
under-estimated direct costs incurred as the Group scaled volumes very quickly
in the second half of the year across a number of vehicle platforms and with
inconsistent quality in recipient vehicles. Whilst efficiencies have since
improved, the business line incurred material additional staff costs,
including temporary labour, in order to ensure deliveries met key customer
agreed timelines. As previously mentioned, these issues are believed to have
been addressed and indeed Bus Repowering is not expected to be a core activity
going forward.
Grant projects generated a gross loss of £1.9 million (FY2023: £1.3
million), the increase driven by a second grant programme. Grant projects rely
on their full costs being partially externally funded so, by definition,
should be expected to generate a negative gross profit.
Sales, general and administrative expenses
Total expenses (excluding cost of sales) in the year amounted to £7.0 million
(FY2023: £6.4 million), although the year included non-recurring costs of
£1.1 million (FY2023: £0.6 million) and the prior year also included £0.5
million of share-based payments. Excluding these costs, expenses in the year
totalled £5.9 million compared to £5.3 million in the prior year. The growth
like-for-like of £0.6 million was driven primarily by headcount recruitment
as the Group aggressively scaled its operations in contemplation of further
revenue growth.
Adjusted EBITDA
The Board's key measure of underlying business profitability and assessing
trends across periods is adjusted earnings before interest, tax, depreciation
and amortisation, share based payments and non-recurring costs (adjusted
EBITDA). In the year, the Company achieved an adjusted EBITDA loss of £7.4
million (FY2023: adjusted EBITDA loss of £3.6 million). This is an
Alternative Performance Measure. This translated to an adjusted EBITDA loss
percentage in the year of 92 % (FY2023: 72%). As noted above, there were share
based payments in the year of £nil (FY 2023: £0.5 million). Non-recurring
costs incurred are highlighted below. Whilst there was significant revenue
growth in the year, the additional direct costs incurred in the Bus Repowering
business line was the principal driver for the increased EBITDA loss.
Non-recurring costs
The non-recurring costs in the year of £1.1 million comprised £0.7 million
related to the impairment of previously capitalised development costs and the
reversal of originally capitalised costs in the year following the Board's
decision post the year-end date to rationalise the Bus Repowering offering
towards a limited number of platforms, £0.3 million related to onerous
contract provisions for Bus Repowering contracts underway at the year-end
date, and £0.1 million related to professional fees incurred in the Company's
share placing in February 2024. The non-recurring costs in the prior year of
£0.6 million related to professional fees incurred in the Company's Admission
to Aquis.
Tax
The tax charge in the year of £0.1 million (FY2023: tax credit of £0.2
million) related to the tax due on the Research & Development Expenditure
Credit ("RDEC") receipt. The vast majority of taxable losses were generated in
the UK, where the Group has UK trading tax losses carried forward at the
year-end date amounting to approximately £21.9 million (FY2023: £11.6
million). No deferred tax asset has been recognised (FY2023: £nil).
Earnings per share
The basic and diluted loss per share amounted to 0.95 pence per share (FY2023:
loss 0.60 pence per share).
Intangible assets
The Group had intangible assets totalling £1.2 million (FY2023: £0.8
million). The increase was caused primarily by capitalised development costs
totalling £1.0 million incurred in the year, although reduced by the
impairment charge as a result of the Board's decision post year-end to
rationalise Bus Repowering platforms.
Tangible assets
The Group had tangible assets totalling £1.6 million (FY2023: £0.8 million).
The increase was caused primarily by capital additions totalling £1.2 million
incurred in the year, incurred as the Group expanded its facilities and
manufacturing capabilities, whilst the net book value was reduced by a
depreciation charge of £0.4 million (FY2023: £0.2 million).
Stock
The Group had stocks totalling £3.6 million (FY2023: £3.0 million). The
increase was caused by general increase in business volumes and the
contemplation of further growth ahead.
Trade and other receivables
The Group had total debtors totalling £4.2 million (FY2023: £4.5 million).
Whilst trade debtors, other debtors and prepayments and accrued income were
similar year-on-year, the reduction was due to reduced tax recoverable, being
a timing difference.
Trade and other payables
The Group had total creditors totalling £4.1 million (FY2023: £2.2 million).
The increase was caused primarily by increased trade creditors of £2.0
million (FY2023 £0.5 million), partially as a result in increased pace of
growth and partly as the Group strove to optimise its cash resources and
accruals and deferred income of £1.3 million (FY2023: £1.0 million), being
timing differences.
Provisions
The Group established a provision totalling £0.4 million (FY2023: £nil) in
relation to expected future losses on two Bus Repowering contracts which were
underway at the year-end date. This provision is expected to unwind in the
year ended 31 May 2025. No warranty provision has been made as the Group does
not have a track record in order to make a reliable estimate and it expenses
any warranty related issues as they arise.
Cash and working capital
Cash balances at the year-end date were £2.5 million (FY2023: £7.0 million).
Other than finance leases / hire purchase contracts which amounted to £0.5
million (FY2023: £0.4 million), the Group had no debt drawn nor any debt
facility in place. The Group completed a share placing and subscription on 5
November 2024 which raised £3 million of new cash, before expenses.
Your attention is drawn to the Principal Notes to the Final Results below
which refer (1) to the material uncertainty which has been included within the
unqualified audit report in the audited financial statements and (2) the
Group's current going concern position.
Net assets
Net assets at the year-end date amounted to £8.6 million (FY2023: £13.8
million), the movement arising from the negative earnings in the period,
partially offset by £4.1million of financing secured in February 2024.
Tony Ratcliffe
Chief Financial Officer
CONSOLIDATED STATEMENT OF PROFIT AND LOSS AND COMPREHENSIVE INCOME
Year ended Year ended
31 May 31 May
2024 2023
Note £'000 £'000
Turnover 4 8,068 5,053
Cost of sales (10,697) (3,845)
Gross profit 4 (2,629) 1,208
Administrative expenses (6,972) (6,437)
Other operating income 5 509 281
Adjusted EBITDA (7,412) (3,644)
Depreciation (343) (187)
Amortisation (158) (27)
Share based payments (45) (475)
Non-recurring costs 6 (1,134) (615)
Operating loss (9,092) (4,948)
Interest receivable and similar income 54 17
Interest payable and similar expenses (49) (86)
Loss before taxation (9,087) (5,017)
Taxation 7 (113) 186
Loss for the financial year (9,200) (4,831)
Total other comprehensive income - -
Total comprehensive loss for the year attributable to owners of the Company (9,200) (4,831)
Loss per share
Basic and diluted loss per share, in pence 15 (0.95) (0.60)
CONSOLIDATED BALANCE SHEET
As at As at
31 May 31 May
2024 2023
Assets Note £'000 £'000
Fixed assets
Intangible assets 1,243 783
Tangible assets 1,647 773
2,890 1,556
Current assets
Stocks 8 3,555 2,958
Debtors: amounts falling due within one year 9 4,163 4,502
Cash at bank and in hand 2,480 7,000
Total current assets 10,198 14,460
Liabilities
Creditors: amounts falling due within one year 10 (3,797) (1,958)
Net current assets 6,401 12,502
Total assets less current liabilities 9,291 14,058
Creditors: amounts falling due after more than one year 11 (308) (255)
Provisions for liabilities:
Other provisions 12 (358) -
Net assets 8,625 13,803
Capital and reserves
Share capital 14 102 95
Share premium 16 23,098 19,128
Other reserves 16 5,748 5,748
Profit and loss account 16 (21,417) (12,217)
Share-based payment reserve 16 1,094 1,049
Total capital and reserves 8,625 13,803
CONSOLIDATED STATEMENT OF CHANGES OF EQUITY
Share capital Share premium Other reserves Profit and loss account Share based payment reserve Total equity
£'000 £'000 £'000 £'000 £'000 £'000
Balance at 01 June 2022 50 - 5,748 (7,386) 574 (1,014)
Comprehensive loss for the year
Loss for the year - - - (4,831) - (4,831)
- - - (4,831) - (4,831)
Transactions with owners
Loan conversion 9 3,741 - - - 3,750
Issue of shares 36 16,199 - - - 16,235
Share issue costs - (812) - - - (812)
Share-based payments charge - - - - 475 475
Total transactions with owners 45 19,128 - - 475 19,648
Balance at 31 May 2023 95 19,128 5,748 (12,217) 1,049 13,803
Comprehensive loss for the year
Loss for the year - - - (9,200) - (9,200)
- - - (9,200) - (9,200)
Transactions with owners
Issue of shares 7 4,137 - - - 4,144
Share issue costs - (167) - - - (167)
Share-based payments charge - - - - 45 45
Total transactions with owners 7 3,970 - - 45 4,022
Balance at 31 May 2024 102 23,098 5,748 (21,417) 1,094 8,625
CONSOLIDATED STATEMENT OF CASHFLOWS
Year ended
31 May Year ended
31 May
2024 2023
£'000 £'000
Cash flows from operating activities
Loss for the year (9,200) (4,831)
Adjustments for:
Amortisation of intangible assets 158 27
Depreciation of tangible assets 343 187
Loss / (profit) on disposal of tangible fixed assets 51 (15)
on disposal of tangible assets
Impairment of capitalised development costs 408 -
Interest payable 49 87
Interest receivable (54) (17)
RDEC and SME R&D tax credit (476) (430)
(Increase) in stocks (597) (2,150)
Decrease / (increase) in debtors 38 (2,138)
Increase / (decrease) in creditors 1,813 (156)
Increase / (decrease) in provisions 358 (44)
Share-based payments expense 45 475
Cash used in operations (7,064) (9,005)
RDEC and SME tax credits received 777 -
Net cash outflows used in operating activities (6,287) (9,005)
Cash flows from investing activities
Purchase of tangible fixed assets (1,241) (443)
Proceeds from sale of tangible fixed assets - 25
Intangible assets - capitalisation of internal development cost (1,053) (810)
Net cash used in investing activities (2,294) (1,228)
Cash flows from financing activities
Issue of ordinary shares 4,144 16,235
Share issue costs (167) (812)
New finance leases and hire purchase loans 255 107
Repayment of obligations under finance leases and hire purchase contracts (176) (144)
Interest paid (49) (32)
Interest received 54 3
Net cash from financing activities 4,061 15,357
Net (decrease) / increase in cash and cash equivalents (4,520) 5,124
Cash and cash equivalents at the beginning of the year 7,000 1,876
Cash and cash equivalents at the end of the year 2,480 7,000
CONSOLIDATED ANALYSIS OF NET DEBT FOR THE YEAR ENDED 31 MAY 2024
At 1 June 2023 Cash flows Payments made in year Increase in lease liability At 31 May 2024
£'000 £'000 £'000 £'000 £'000
Cash at bank and in hand 7,000 (4,520) - - 2,480
Finance leases (407) - 176 (255) (486)
Net cash 6,593 (4,520) 176 (255) 1,994
Principal Notes to the Final Results
General information
Equipmake Holdings Plc is a public company limited by shares incorporated in
England and Wales. The Company registration number is 04303233. The registered
office is Unit 7, Snetterton Business Park, Snetterton, Norfolk, NR16 2JU.
The Group consists of the parent Equipmake Holdings PLC and subsidiaries
Equipmake Limited and Equipmake Inc. All Group entities are included within
the consolidation.
Equipmake is a UK-based market leader in engineering-driven differentiated
electrification technologies, products and solutions across the automotive,
truck, bus and speciality vehicle industries.
These results are presented in sterling which is the functional and
presentational currency of the Group and are rounded to the nearest £1,000.
The financial information set out in this announcement does not constitute the
Group's statutory accounts for the year ended 31 May 2024 or 31 May 2023.
Auditors reported on the accounts for the year ended 31 May 2024 and their
report drew attention to a material uncertainty relating to going concern and
did not contain statements under section 498 (2) or (3) of the Companies Act
2006. Auditors reported on the accounts for the year ended 31 May 2023 and
their report was unqualified, did not include references to any matters to
which the auditors drew attention by way of emphasis without qualifying their
report and did not contain statements under section 498 (2) or (3) of the
Companies Act 2006.
The statutory accounts for the year ended 31 May 2024 will be presented at the
forthcoming AGM and delivered to the Registrar of Companies in due course.
1. Going concern
Company law requires the Directors to consider the appropriateness of the
going concern basis when preparing the financial statements. The Directors
have prepared detailed cashflow forecasts for a period of twelve months and to
31 May 2029, including the new £3m of gross equity funds secured and
announced in October 2024, which were received in November 2024. The forecasts
anticipate progressive revenue growth over the coming years and reflect a
material reduction in the Group's cost base, which is currently being
implemented. Some revenue for the next twelve months is already secured or
visible but, as to be expected, the financial forecast is heavily reliant on
further new business being won and delivered. These forecasts confirm that the
Group will require additional financing in order to meet its liabilities as
they fall due for the twelve month period and indeed also to reach
profitability and cash break-even.
The Group remains in advanced discussions with a global automotive supplier in
relation to a potentially material licence agreement. If ultimately signed on
the terms agreed to date, this agreement would bring cash receipts of $6
million (approximately £4.6 million) over the two years following signature,
as well as further royalty receipts based on volumes, thereafter. If this
agreement is signed in its current form over the coming weeks, and the work
and the cash receipts materialise as scheduled, the Directors are confident
that the Group will have sufficient funds to continue to meet its liabilities
as they fall due for at least 12 months from today, assuming also that other
expected new business and associated cash receipts are secured as forecasted.
However, in the event that the significant licence agreement referred to above
is not signed but other expected new business is secured, the cash runway
extends to approximately March 2025. The cash runway could be less than this
in the event that revenues and receipts around other new business generally
fall short of the Directors' expectations.
In relation to the potential risk attached to the revenue line, and associated
cash receipts, there are various mitigation levers, such as the further
reduction or deferral of discretionary expenses spend.
The Group is actively considering potential sources of additional capital for
the Group and has a positive track record of securing multiple finance rounds
to date.
The Directors have determined it is appropriate to adopt the going concern
basis in preparing the financial statements. However, because there is
uncertainty over the Group securing the potentially significant licence
agreement and in securing and delivering new business or otherwise securing
additional finance in a limited timescale, there remains material uncertainty
that may cast significant doubt on the Group's ability to continue to trade as
a going concern.
2. Summary of significant accounting policies
The principal accounting policies adopted in the preparation of these
financial statements are set out below. These policies have been applied
consistently to all the years presented, unless otherwise stated.
Basis of preparation of financial results
These financial results have been prepared in accordance with FRS 102 "The
Financial Reporting Standard applicable in the UK and Republic of Ireland"
("FRS 102") and the requirements of the Companies Act 2006.
The following principal accounting policies have been applied:
Basis of consolidation
The Group's consolidated preliminary results include the results of the
Company and all its subsidiaries ("the Group") Subsidiaries are entities over
which the Group has control. The Group controls an entity where the Group is
exposed to, or has rights to, variable returns from its involvement with the
entity and has the ability to affect those returns through its power to direct
the activities of the entity. Subsidiaries are fully consolidated from the
date on which control is transferred to the Group. They are discontinued from
the date control ceases.
Intercompany transactions, balances and unrealised gains on transactions
between Group companies are eliminated. Unrealised losses are also eliminated
unless the transaction provides evidence of an impairment of the transferred
asset. Accounting policies of subsidiaries are consistent with policies
adopted by the Group.
The consolidated preliminary results incorporate the results of business
combinations using the purchase method. In the Balance Sheet, the acquiree's
identifiable assets, liabilities and contingent liabilities are initially
recognised at their fair values at the acquisition date.
In accordance with the transitional exemption available in FRS 102, the Group
has chosen not to respectively apply the standard to business combinations
that occurred before the date of transition to FRS 102, being 1 June 2016.
Foreign currency translation
Functional and presentation currency
The Company's functional and presentational currency is British Pounds.
Transactions and balances
Foreign currency transactions are translated into the functional currency
using the spot exchange rates at the dates of the transactions.
At each year end foreign currency monetary items are translated using the
closing rate. Non-monetary items measured at historical cost are translated
using the exchange rate at the date of the transaction and non-monetary items
measured at fair value are measured using the exchange rate when fair value
was determined.
Revenue
Revenue is recognised to the extent that it is probable that the economic
benefits will flow to the Group and the revenue can be reliably measured.
Revenue is measured as the fair value of the consideration received or
receivable, excluding trade discounts, and net of VAT.
Revenue from the sale of goods is recognised when the significant risks and
rewards of ownership of the goods have passed to the buyer (under "ex works"
incoterms, this is typically when the goods are made available for transport
or collection but the transfer of rights depends on the contractual terms
agreed), the amount of revenue can be measured reliably, it is probable that
the economic benefits associated with the transaction will flow to the entity
and the costs incurred or to be incurred in respect of the transaction can be
measured reliably.
Revenue from contracts for the provision of services is recognised by
reference to the stage of completion when the stage of completion, costs
incurred and costs to complete can be estimated reliably. The stage of
completion is calculated by comparing costs incurred, mainly in relation to
contractual hourly staff rates and materials, as a proportion of total costs.
Where the outcome cannot be estimated reliably, revenue is recognised only to
the extent of the expenses recognised that it is probable will be recovered.
Revenue from licencing agreements is recognised when it is probable that the
economic benefits associated with the transaction will flow to the entity and
the amount of revenue can be measured reliably. Revenue is recognised on an
accrual basis in accordance with the substance of the relevant agreement,
including consideration of ongoing obligations, guaranteed minimum payments
and payments contingent upon future events.
Income receivable from grants (see below) is included with revenue as this
represents a core operating activity of the business.
Leases
Operating leases: the Group as a lessee
Rentals paid under operating leases are charged to profit and loss on a
straight-line basis over the lease term.
Benefits received and receivable as an incentive to sign an operating lease
are recognised on a straight-line basis over the lease term unless another
systematic basis is representative of the time pattern of the lessee's benefit
from the use of the leased asset.
Finance leases: The Group as a lessee
An asset and corresponding liability are recognised for leasing agreements
that transfer to the Group substantially all of the risks and rewards
incidental to ownership ("finance leases"). The amount capitalised is the fair
value of the leased asset or, if lower, the present value of the minimum lease
payments payable during the lease term, both determined at inception of the
lease. Lease payments are treated as consisting of capital and interest
elements. The interest is charged to statement of comprehensive income, so as
to produce a constant periodic rate of interest on the remaining balance of
the liability. Contingent rents are expensed as incurred.
Government grants
Grants are accounted under the accruals model as permitted by FRS 102. Grants
relating to expenditure on tangible fixed assets are credited to profit or
loss as other income at the same rate as the depreciation on the assets to
which the grant relates. The deferred element of grants is included in
creditors as deferred income.
Grants of a revenue nature are recognised in the Consolidated Statement of
Comprehensive Income within turnover in the same period as the related
expenditure, which is recognised in cost of sales. These grants relate to the
primary function of the business and facilitate the delivery of the Group's
primary purpose. Other grants are shown within other operating income.
Interest income
Interest income is recognised in profit or loss using the effective interest
method.
Finance costs
Finance costs are charged to profit or loss over the term of the debt using
the effective interest method so that the amount charged is at a constant rate
on the carrying amount. Issue costs are initially recognised as a reduction in
the proceeds of the associated capital instrument.
Pensions
Defined contribution pension plan
The Group operates a defined contribution plan for its employees. A defined
contribution plan is a pension plan under which the Group pays fixed
contributions into a separate entity. Once the contributions have been paid
the Group has no further payment obligations.
The contributions are recognised as an expense in profit or loss when they
fall due. Amounts not paid are shown in accruals as a liability in the Balance
Sheet. The assets of the plan are held separately from the Group in
independently administered funds.
Share based payments
Where share options are awarded to employees, the fair value of the options at
the date of grant is charged to profit or loss over the vesting period.
Non-market vesting conditions are taken into account by adjusting the number
of equity instruments expected to vest at each balance sheet date so that,
ultimately, the cumulative amount recognised over the vesting period is based
on the number of options that eventually vest. Market vesting conditions are
factored into the fair value of the options granted. The cumulative expense is
not adjusted for failure to achieve a market vesting condition. The fair value
of the award also takes into account non-vesting conditions.
These are either factors beyond the control of either party (such as a target
based on an index), or factors which are within the control of one or other of
the parties (such as the Group keeping the scheme open or the employee
maintaining any contributions required by the scheme).
Where the terms and conditions of options are modified before they vest, the
increase in the fair value of the options, measured immediately before and
after the modification, is also charged to profit or loss over the remaining
vesting period.
Where equity instruments are granted to persons other than employees, profit
or loss is charged with fair value of goods and services received.
Taxation
Tax is recognised in profit or loss except that a charge attributable to an
item of income and expense recognised as other comprehensive income or to an
item recognised directly in equity is also recognised in other comprehensive
income or directly in equity respectively.
The current income tax charge is calculated on the basis of tax rates and laws
that have been enacted or substantively enacted by the balance sheet date in
the countries where the Company and the Group operate and generate income.
Non-recurring costs
Non-recurring costs are transactions that fall within the ordinary activities
of the Group but are presented separately due to their size or incidence.
Tangible fixed assets
Tangible fixed assets under the cost model are stated at historical cost less
accumulated depreciation and any accumulated impairment losses. Historical
cost includes expenditure that is directly attributable to bringing the asset
to the location and condition necessary for it to be capable of operating in
the manner intended by management.
Depreciation is charged so as to allocate the cost of assets less their
residual value over their estimated useful lives.
Depreciation is provided on the following basis:
Leasehold improvements
20% on a
straight-line basis
Plant and machinery
20-33% on a straight-line basis
Specialist
assets
50% on a straight-line basis
The assets' residual values, useful lives and depreciation methods are
reviewed, and adjusted prospectively if appropriate, or if there is an
indication of a significant change since the last reporting date.
Gains and losses on disposals are determined by comparing the proceeds with
the carrying amount and are recognised in profit or loss.
Assets under development are recognised at their cost. No depreciation is
charged on these assets until the assets are complete and available for use.
Intangible items
Intangible assets are initially recognised at cost. After recognition, under
the cost model, intangible assets are measured at cost less any accumulated
amortisation and any accumulated impairment losses.
All intangible assets are considered to have a finite useful life. If a
reliable estimate of the useful life cannot be made, the useful life shall not
exceed ten years.
Intangible assets are reviewed for impairment each financial year.
Research and development
Internally generated intangible assets arising from development, or the
development phase of internal projects, have been recognised in the year where
the following can be demonstrated:
a) The technical feasibility of completing the intangible asset so
that it will be available for use or sale;
b) Intention to complete the intangible asset and use or sell it;
c) Ability to use or sell the intangible asset;
d) How the intangible asset will generate probable future economic
benefits (e.g., the existence of a market);
e) Availability of adequate technical, financial and other resources to
complete the development and to use or sell the intangible asset; and
f) Ability to measure reliably the expenditure attributable to the
intangible asset during its development.
Development costs are recognised as an intangible asset if it can be
demonstrated that all of the criteria for recognition have been met.
In the research phase of an internal project, it is not possible to
demonstrate that the project will generate future economic benefits and hence
all expenditure on research shall be recognised as an expense when it is
incurred. If it is not possible to distinguish between the research phase and
the development phase of an internal project, the expenditure is treated as if
it were all incurred in the research phase only.
Completed assets are being amortised for up 5 years on a straight-line basis.
Investments
Investments in subsidiaries are initially measured at cost at acquisition and
reviewed for impairment at each reporting date, with any movement in the fair
value recognised in the profit and loss. Where an investment is acquired in
stages, it may be more appropriate to recognise the fair value during initial
recognition and then assess the deemed cost for impairment at each reporting
date.
The investments are assessed for impairment at each reporting date and any
impairment losses or reversals of impairment losses are required immediately
in the profit and loss account.
Stocks and work-in-progress
Stocks are stated at the lower of cost and net realisable value, being the
estimated selling price less costs to complete and sell. Cost is based on the
cost of purchase on a weighted average basis.
Work-in-progress ("WIP'') includes an allocation of direct labour costs and
overhead appropriate to the stage of manufacture. At each balance sheet date,
stocks and WIP are assessed for impairment. If impairment has occurred, the
carrying amount is reduced to its selling price less costs to complete and
sell. The impairment loss is recognised immediately in profit or loss.
Debtors
Short-term debtors are measured at transaction price, less any impairment.
Cash and cash equivalents
Cash is represented by cash in hand and deposits with financial institutions
repayable without penalty on notice of not more than 24 hours. Cash
equivalents are highly liquid investments that mature in no more than three
months from the date of acquisition and that are readily convertible to known
amounts of cash with insignificant risk of change in value.
Creditors
Short-term creditors are measured at the transaction price. Other financial
liabilities are measured initially at fair value, net of transaction costs,
and are measured subsequently at amortised cost using the effective interest
method.
Provisions for liabilities
Provisions are made where an event has taken place that gives the Group a
legal or constructive obligation that probably requires settlement by a
transfer of economic benefit, and a reliable estimate can be made of the
amount of the obligation.
Provisions are charged as an expense to profit or loss in the year that the
Group becomes aware of the obligation and are measured at the best estimate at
the balance sheet date of the expenditure required to settle the obligation,
taking into account relevant risks and uncertainties.
When payments are eventually made, they are charged to the provision carried
in the Balance Sheet.
Financial instruments
The Group has elected to apply the provisions of Section 11 'Basic Financial
Instruments' and Section 12 'Other Financial Instruments Issues' of FRS 102 to
all of its financial instruments.
Financial assets and financial liabilities are recognised when the Group
becomes a party to the contractual provisions of the instrument and are offset
only when the Group currently has a legally enforceable right to set off the
recognised amounts and intends either to settle on a net basis, or to realise
the asset and settle the liability simultaneously.
Financial assets
Trade, Group and other debtors (including accrued income) which are receivable
within one year and which do not constitute a financing transaction are
initially measured at the transaction price and subsequently measured at
amortised cost, being the transaction price less any amounts settled and any
impairment losses.
Where the arrangement with a debtor constitutes a financing transaction, the
debtor is initially measured at the present value of future payments
discounted at a market rate of interest for a similar debt instrument and
subsequently measured at amortised cost.
A provision for impairment of trade debtors is established when there is
objective evidence that the amounts due will not be collected according to the
original terms of the contract. Impairment losses are recognised in profit
or loss for the excess of the carrying value of the trade debtor over the
present value of the future cash flows discounted using the original effective
interest rate. Subsequent reversals of an impairment loss that objectively
relate to an event occurring after the impairment loss was recognised, are
recognised immediately in profit or loss.
Financial liabilities
Financial instruments are classified as liabilities and equity instruments
according to the substance of the contractual arrangements entered into. An
equity instrument is any contract that evidences a residual interest in the
assets of the Group after deducting all of its liabilities.
Trade, group and other creditors (including accruals) payable within one year
that do not constitute a financing transaction are initially measured at the
transaction price and subsequently measured at amortised cost, being the
transaction price less any amounts settled.
Where the arrangement with a creditor constitutes a financing transaction, the
creditor is initially measured at the present value of future payments
discounted at a market rate of interest for a similar instrument and
subsequently measured at amortised cost.
Equity instruments
Financial instruments classified as equity instruments are recorded at the
fair value of the cash or other resources received or receivable, net of
direct costs of issuing the equity instruments.
Dividends
Equity dividends are recognised when they become legally payable. Interim
equity dividends are recognised when paid. Final equity dividends are
recognised when approved by shareholders at a General Meeting.
Adjusted EBITDA (Alternative Performance Measure)
The Board and Management team primarily use a measure of adjusted earnings
before interest, tax, depreciation and amortisation, share based payments and
non-recurring costs (EBITDA before share based payments and non-recurring
costs, or adjusted EBITDA) to assess the performance of the overall business.
This is an Alternative Performance Measure. The reconciliation of adjusted
EBITDA to operating profit is shown on the face of the Consolidated Profit and
Loss.
3. Judgements in applying accounting policies and key
sources of estimation uncertainty
The preparation of the financial statements requires management to make
judgments, estimates and assumptions that affect the amounts reported for
assets and liabilities as at the balance sheet date, and the amounts reported
for income and expenditure during the year. However, the nature of estimation
means that actual outcomes could materially differ from those estimates. The
key assumptions concerning the future and other key sources of estimating
uncertainty at the reporting date include:
Revenue recognition
The Company has established a clear decision matrix for each order/contract to
ensure a consistent approach for determining the basis for recognising
revenue. In some circumstances, judgements are made in respect of the amount
of revenue to be recognised at each reporting date. For example, where goods
and services supplied on the same contract cannot be split for the purposes of
revenue recognition and the work is performed over a period of months or
years, the Company would recognise revenue based on the stage of completion.
Share based payments
Some of Equipmake Limited's employees have been granted share options by the
Company. The fair value of these options on the date of grant has been
determined using the Black Scholes Model. The Directors consider this the most
suitable model for calculating the fair value of the options
The management believe that there will not be only one acceptable choice for
estimating the fair value of share- based payment arrangements. The judgements
and estimates that management apply in determination of the share- based
compensation are summarised below:
· Selection of valuation model
· Making assumptions used in determining the variables used in a
valuation model:
I. Expected life
II. Expected volatility
III. Expected dividend yield
IV. Probability of performance-based vesting conditions being met.
Options with both time-based and performance-based vesting conditions were
granted in the prior year. The vesting thresholds for the performance-linked
options were revised during the prior year in line but remain consistent with
the revenue forecasts for the years ending 31 May 2023 and 2024. As the
Directors expected that the Company would achieve its revenue targets for the
year ended 31 May 2023 and 2024, a charge has been recognised for the relevant
portion of the vesting period in the prior year.
Share options were also granted to two non-employees of the Company in the
prior year. A share-based payments charge has been recognised in the prior
year in respect of one of these individuals, for whom it has been judged that
share options were awarded as a result of past services provided to the
Company.
Development costs
Management have reviewed activity relating to both customer-related and
internal product development projects during the period and capitalised costs
where it is considered that the FRS102 criteria have been met. The judgements
and estimates that management apply when identifying costs to be capitalised
are summarised below:
· Estimated size and value of the market for the product being
developed;
· Assessment of technical, financial and other resources required
and available to complete development;
· Technical feasibility of completing the development work;
· Completion status of the development work; and
· Expected useful life of the asset once completed.
In the research phase of an internal project, it is not possible to
demonstrate that the project will generate future economic benefits and hence
all expenditure on research shall be recognised as an expense when it is
incurred. If it is not possible to distinguish between the research phase and
the development phase of an internal project, the expenditure is treated as if
it were all incurred in the research phase only.
Impairment of development costs
In assessing the future economic benefit that can be realised from capitalised
development costs, Management will consider future expected revenues and
margins that are forecast to arise from relevant projects. Such estimations,
being forward looking, are inherently uncertain and may materially differ from
actual outcomes. Capitalised development costs are assessed for indications of
impairment (which is both a judgement and estimate applied by management).
Where an impairment assessment is performed, the same estimations described
above relating to future expected financial performance are applied to
consider an appropriate recoverable value of the relevant intangible asset.
As a consequence of the Directors' decision post year-end to rationalise the
Bus Repowering offering towards a limited number of platforms, the carrying
value of certain capitalised developments were reviewed, which led to an
impairment in the year which has been recorded as non-recurring cost.
Stock
The Directors have assessed whether any inventories are impaired by comparing
the estimated selling price less costs to complete to the carrying amount at
year end. Judgements and estimates that management apply in making this
assessment include:
· Identification of defective, slow-moving or obsolete stocks;
· Estimates of absorption costing, although no amount has been
included as it is considered immaterial;
· Estimates of prices obtainable for the goods at the time that
they will be available for sale; and
· Projected costs of completion and sale.
Contingent liability
A contingent liability for the provision of warranties has been reviewed by
management. Warranties requires management's best estimate of the expenditure
that will be incurred in respect of warranty claims, which are detailed in the
terms and conditions of sale. Certain contracts contain an obligation for
Equipmake to provide a warranty on the products that it provides. The precise
terms of the warranty vary on a contract-by-contract basis but currently range
between three and eight years. Given that these products are relatively new to
the market, Equipmake is unable to reference a history of warranty claims in
order to provide a basis for estimating an accurate provision and is therefore
unable to provide a basis for estimation of a provision that complies with the
requirements of the accounting standards. Whilst no provision has been
included, costs relating to service personnel, who would deal with any
potential warranty issues, are recognised in the Profit and Loss.
4. Segmental reporting and turnover
Segmental information is presented in respect of the Group's operating
segments based on the format that the Group reports to its chief operating
decision maker, for the purpose of allocating resources and assessing
performance. The Group considers that the chief operating decision maker
("CODM") comprises the Executive Directors of the business.
Revenues and gross profits are presented for each business line but, due to
the shared nature of many expenses, expenses are not separately allocated
across the business lines. No account has been taken of transfers between
business lines.
Due to the shared nature of many assets, assets and liabilities for both 2024
and 2023 are not able to be separately allocated across the business lines but
are reported to the CODM on an aggregate basis.
For the year ended 31 May 2024:
Technology Total (excluding Grants)
Bus Repowering Drivetrain Supply EV Components Engineering Projects Technology Licencing
Grants Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Turnover 3,854 2,181 846 399 - 7,280 788 8,068
Cost of sales (6,770) (1,548) (609) (297) - (9,224) (1,473) (10,697)
Gross profit (2,916) 633 237 102 - (1,944) (685) (2,629)
For the year ended 31 May 2023:
Technology Engineering Projects Technology Licencing Total (excluding Grants)
Bus Repowering Drivetrain Supply EV Components
Grants Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Turnover 900 850 1,575 1,312 300 4,937 116 5,053
Cost of sales (1,016) (876) (956) (832) - (3,680) (165) (3,845)
Gross profit (116) (26) 619 480 300 1,257 (49) 1,208
The Group manages its business lines on a global basis. The operations are
based primarily in the UK.
5. Other operating income
For the year For the year
ended 31 May ended 31 May
2024
2023
£'000 £'000
RDEC claim 476 245
Other income 33 36
Total other operating income 509 281
6. Non-recurring costs
The Company incurred the following non-recurring costs in the year, which are
disclosed separately. This is an Alternative Performance Measure.
For the year For the year
ended 31 May ended 31 May
2024
2023
£'000 £'000
Bus Repowering - impairment of capitalised development costs 408 -
Bus Repowering - onerous contracts provision 358 -
Bus Repowering - irrecoverable development costs in the year 270 -
Professional fees relating to share placing 98 -
Professional fees relating to Admission to Aquis - 615
1,134 615
The Directors reviewed the Bus Repowering business line after the balance
sheet date and made the following adjustments, all considered non-recurring:
- The Directors have treated the impairment of certain development
costs following the decision post year-end to rationalise the Bus Repowering
offering towards a limited number of platforms, as a non-recurring cost as it
is considered a one-off event;
- The Directors have treated the reversal of the capitalisation of
certain costs incurred during the year following the decision post year-end to
rationalise the Bus Repowering offering towards a limited number of platforms,
as a non-recurring cost as it is considered a one-off event; and
- The Directors have treated the establishment of an onerous
contracts provision in relation to two Bus Repowering contracts underway as
the year-end date as non-recurring as, following the successful sourcing of
lower cost batteries and other components after the year-end date, these costs
are considered a one-off event.
7. Taxation
For the year ended 31 May
2024
For the year
Ended 31 May 2023
£'000 £'000
Corporation tax
Current tax payable on RDEC receivable 119 46
Tax credit - R&D SME scheme (29) (232)
Withholding tax 23 -
Total current tax 113 (186)
Deferred tax - -
Total deferred tax - -
Taxation on loss on ordinary activities 113 (186)
8. Stocks
2024 2023
£'000 £'000
Work in progress 792 485
Raw materials 2,763 2,473
3,555 2,958
9. Debtors
2023
2024
£'000 £'000
Trade debtors 2,500 2,463
Other debtors 238 232
Prepayments and accrued income 963 931
Tax recoverable 462 876
4,163 4,502
10. Creditors: Amounts falling due within one year
2023
2024
£'000 £'000
Trade creditors 2,003 470
Other taxation and social security 168 138
Obligations under finance lease and hire - purchase contracts 178 152
Other creditors 167 217
Accruals and deferred income 1,281 980
3,797 1,957
11. Creditors: Amounts falling due after more than one year
2024 2023
£'000 £'000
Net obligations under finance leases and hire purchase contracts 308 255
308 255
12. Provisions
Onerous contracts Warranty Total
£'000 £'000 £'000
At 1 June 2022 - 44 44
Utilisation of provision - (44) (44)
At 31 May 2023 - - -
Charge to the profit and loss 358 - 358
Unaudited at 31 May 2024 358 - 358
The provision disclosed above comprises an onerous contract provision relating
to expected future losses on two Bus Repowering contracts where the associated
direct costs over the contract period are expected to be in excess if the
revenue. The provision is expected to be utilised in the year ended 31 May
2025.
13. Hire purchase and finance leases
Minimum lease payments under hire purchase agreements fall due as follows:
2024 2023
£'000 £'000
Within one year 178 152
Between 1-5 years 308 255
486 407
14. Share capital
As at As at
31 May
31 May
2024
2023
Allotted, called up and fully paid £'000 £'000
1,020,074,569 (2023: 948,229,409) Ordinary Shares of £0.0001 each 102 95
The following movements in Share Capital occurred:
Issue of 2,775,132 Ordinary Shares of £0.0001 each - -
Issue of 69,070,028 Ordinary Shares of £0.0001 each 7 -
Issue of 88,235,294 Ordinary Shares of £0.0001 each on conversion - 9
of convertible loan
Issue of 235,294,115 Ordinary Shares of £0.0001 each - 24
Issue of 124,700,000 Ordinary Shares of £0.0001 each - 12
Total 7 45
The movements in relation to Share Capital during the year were as follows:
- On 15 November 2023, the Company issued 2,775,132 £0.0001
Ordinary Shares following the exercise of share options at an exercise price
of par value;
- On 14 February 2024, the Company issued 67,233,332 £0.0001
Ordinary Shares at an issue price of £0.06, raising a gross total of £4.0
million for the Company (before related professional expenses totalling £0.1
million); and
- On 16 February 2024, the Company issued 1,836,696 Ordinary
Shares at an issue price of £0.06, raising a gross total of £0.1 million for
the Company.
- The combined expenses attached to the 14 and 16 February 2024
share issues amounted to £265,000.
The movements in relation to Share Capital during the prior year were as
follows:
- On 28 July 2022, the Company issued 88,235,294 £0.0001 Ordinary
Shares at an issue price of £0.0425, following the conversion of a loan note;
- On 28 July 2022, the Company issued 198,823,529 £0.0001
Ordinary Shares at an issue price of £0.0425, raising a total of £8.4
million for the Company (before expenses);
- On 29 July 2022, the Company issued 36,470,586 £0.0001 Ordinary
Shares at an issue price of £0.0425, raising a total of £1.6 million for the
Company (before expenses);
- On 31 January 2023, the Company issued 23,626,996 £0.0001
Ordinary Shares at an issue price of £0.05, raising a total of £1.2 million
for the Company (before expenses); and
- On 1 February 2023, the Company issued 101,073,004 Ordinary
Shares at an issue price of £0.05, raising a total of £5.1 million for the
Company (before expenses)
15. Earnings per share
Basic loss per share of 0.95 pence (2023: 0.60 pence) is calculated based on
the following data:
2024 2023
£'000 £'000
Earnings used in calculation of total earnings per share: (9,200) (4,831)
Earnings on total losses attributable to equity holders of the parent
Weighted average number of ordinary £0.0001 shares in issue 969,972,685 811,174,508
Basic (loss) per share, in pence (0.95) p/share (0.60) p/share
Diluted earnings per share is calculated by adjusting the weighted average
number of ordinary shares outstanding to assume conversion of all dilutive
potential ordinary shares. The Group, being loss making in both this year and
the comparative year would mean that any exercise would be anti-dilutive. The
diluted earnings per share is therefore the same as the basic earnings per
share.
16. Reserves
Share premium
The share premium account represents amounts subscribed for share capital in
excess of nominal value, net of directly attributable issue costs.
Other reserves
Brought forward other reserves comprise the amount attributable to the owners
of the Company following the issue of shares in the subsidiary at a premium to
non-controlling interests in previous financial years.
Other reserves
Brought forward other reserves derived from a reduction in capital which
resulted in the cancellation of 5,000,000 £1 B ordinary shares during the
year ended 31 May 2022, when £5,000,000 was credited against the proceeds of
this issue.
Share-based payments reserve
Used to reflect the assessed fair value of the equity settled options issued
as share-based payments.
Profit and loss account
Profit and loss account represents cumulative profits and losses net of
dividends and other adjustments.
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