EQTEC plc Announces Progress on Settlement Agreement with Logik Developments Limited and Reports Steady Revenue Growth with Strategic Shift

EQTEC plc (AIM: EQT), a global technology innovator in distributed, decarbonised new energy infrastructure, announced positive progress on its settlement agreement with Logik Developments Limited and its wholly-owned subsidiary Logik WTE Limited (collectively, "Logik").

As announced on 3 April 2024, the timing of the payment of the settlement sum is subject to and conditional on the sale of a site at Weighbridge Road in Deeside Industrial Park (the "Land"), with payment expected following completion of the sale.

EQTEC has received written confirmation from Logik that the exchange for the sale of the Land to a proposed purchaser, who is funded by a global investment company, has taken place. Completion of the purchase of the Land and receipt of funds by EQTEC remains conditional only upon the final legal execution of certain documents pertaining to the project.

The long stop date for completion has been set for 28 June 2024, with completion expected by the end of May 2024.

While certain conditions still need to be satisfied for completion, on the basis that completion does occur in accordance with the anticipated timetable, EQTEC would be due to receive £2,000,000 under the settlement agreement.

Trading Update:

In the fiscal year 2023, EQTEC reported unaudited revenues of approximately €2.5 million, meeting the company's guidance. The revenue stream remained steady in the last quarter of 2023 and the first quarter of 2024. The company anticipates revenue growth in the second half of 2024, driven by equipment sales and commissioning revenues.

EQTEC's strategic shift, initiated in late 2021, focused on generating recurring revenues from technology innovation, licensing, and targeted engineering services. This pivot aimed to reduce dependency on high-risk, large-capital projects and instead concentrate on projects with leading industrial, utility, and waste operators. The company believed this strategic change would enable it to deliver services across a larger number of projects, diversifying its revenue streams.

In 2023, EQTEC undertook actions to reduce corporate risks and liabilities by selling the Grande-Combe SAS project company to Idex, discontinuing the Billingham project, and taking legal action to recover project development loans at the Deeside project. As part of its financial review for 2023, the company is considering an impairment provision for development assets on its balance sheet.

The company achieved steady monthly revenues in the first quarter of 2024, with approximately €600,000 in revenues. Unaudited gross revenue margins for 2023 were around 15%, increasing to above 30% in Q1 2024, driven by a focus on core competencies and established clients.

In the second half of 2023, the revenue split was approximately 70% from engineering services and 30% from development services. However, for 2024, the company expects revenues to be derived mainly from engineering services (55%), equipment sales (25%), and recurring revenue from operations, maintenance services, and licensing (17%), with only 3% from development services.

EQTEC generated revenues primarily from clients in France, the USA, and Greece in late 2023 and early 2024. The company is ramping up work on its Croatia reference plant and expects to generate revenues from the plant in late 2024.

EQTEC's first reference plant, Italia MDC, faced various operational challenges in its first year of operation, which impacted continuous operations. However, the plant is now in a position to operate continuously after significant maintenance and is expected to restart in April 2024. The company is considering several improvements to reduce costs and enhance revenue potential at the plant.

In terms of financial restructuring, EQTEC restructured its finances in 2023, including refinancing existing debt and reducing operational expenditure. In February 2024, the company announced a proposed equity investment of £1.5 million by Verde Corporation, subject to shareholder approval. EQTEC expects to update in May 2024 on the progress toward completing this investment and receiving funds. Meanwhile, the company plans to draw down £245,000 (net) under its existing syndicated facility to augment short-term working capital.