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EQTEC CEO and operations director on H1 revenue surge and new operational strategy

EQTEC PLC (AIM:EQT) CEO David Palumbo and recently-appointed operations director Murli Bhamidipati take Proactive's Stephen Gunnion through the company's remarkable turnaround in the first half of 2024, which saw a 10x increase in revenue and stronger profit margins compared to H1 2023.

Palumbo highlighted strategic shifts, focusing on high-margin services like design, engineering, and operational services. By moving away from capital-intensive development, EQTEC has established recurring revenue streams and improved cost efficiency. He noted that, "This has laid a solid foundation for recurring income," with further growth expected as more projects come online.

Bhamidipati discussed the importance of aligning operations with strategic goals, highlighting efforts to ensure the company has the resources to meet its project pipeline demands. He emphasised that EQTEC’s innovation with 60 different waste possibilities and a strong engineering team positions the company to scale efficiently.

Together, they emphasised EQTEC’s strong pipeline and focus on operational efficiency, with future growth centred around waste-to-liquid fuel solutions and public funding projects.

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Broadcast on:: 03 Oct 2024
Audio Format:: other

Hello, you're watching Proact. I'm joined by Equitec CEO David Palumbo and Murly Bami DePati, the company's new operations director. Murly, David, very good to speak with you. David, I'll start with you because you're up with your interim results and the first half of 2024 shows a significant improvement compared to H1 2023 with a 10 times increase in revenue, strong rise in gross profit as well. What were the key factors that drove this turnaround? Hi, Stephen. Thank you very much for your question. We talked about this before. This is a strategic shift that we're making to high margin services, to create a regular and predictable revenues from the service side and that we do. The focus has made in high market IP-rich services over what we're doing before that we have a very capital-intensive development activities, so this improved revenue of a profit margin. We are fully out now of capital-intensive development that also does have delay revenues. Now we have predictable monthly revenues from design, proprietary engineering and services to project before they go into construction, and then some of them translate into technology sales. Also, we focus a lot in operational efficiency and cost control, so we have a significant reduction in cost and bring business efficiency with more they can come and talk more about that. One of the key reasons to relocate the operation director to Barcelona was to bring these efficiencies to bear. Delivery execution also play a crucial role in financial performance. We are a lot more nimble in how we deploy engineering services to all our customers and we're also looking to cross-sell more projects to existing customers. As I mentioned before, this creates consistent and reliable revenue streams, so we now have a diversified mix of revenue stream that goes from design engineering, equipment sales and also operational maintenance services to build plans. This has laid a solid foundation for recurring income, and the licensing fees we start seeing then coming into some projects as a one-off and some projects as a recurrent yearly income. We are not building the daily income yet, we don't have enough plans built to generate this, but very quickly we're moving to the direction of that. In essence, I think it's very important to note that before we were waiting to get revenue at the sale of a project that we have some equity in it, now we are paid from the beginning. So in essence, all the feasibility and the design engineering we do is in a way like a paid off business development. Murray, well, the first half of 2024 shows a strong turnaround. You mentioned that a lot of work remains to be done. What are the main challenges and opportunities acoustic faces as it continues as transformation? Thanks very much, Stephen. We need to align our operations with the strategic goals. As David clearly mentioned, what our strategic goals are, and my job and me coming on board and based in Barcelona is to make sure that the operations have the capacity and capability to deliver on these. We are probably one of the largest engineering teams around in this particular space, so my job is to make sure that the team has the right resources and these resources well enough to make sure that these goals are met. That's one of my main focus and obviously the company is generating with 60 different types of ways, possibilities. There's a lot of innovation in the company, so my idea is to make sure that business development, business as usual, and innovation go hand in hand. That's one of my main goals and obviously once we get a critical mass and there seems to be critical mass developing with the project pipeline that we have, make sure that we do not run out of resources. So the scale goes at the same pace as our pipeline and that's something I'm focusing on. Obviously there is a business development and operation interface, which is what I would be responsible for to make sure that all these critical elements that we just spoke about are being delivered in a timely fashion and obviously focusing hugely on revenues and profitability. Merlin, as the new operations director based in Spain, as you said, how do you see your role contributing to the transformation and operational efficiency of ecutex business? First of all, it's really looking at carrying on what has been done in the past. A lot of work has been done, as David mentioned, cleaning up of all lumpy projects. The team has reduced its costs and so on. But also we are reaching that point particularly where the idea is to make sure there are two different types of revenue streams. One is to make sure that we have recurrent regular engineering and design type of revenues on one side and then what I call the lumpier ones, the big, big shots, bigger projects that are coming online. So my job basically is to make sure that the business reaches operational breakeven and operational profitability within the shortest period of time. We do have a fairly good pipeline in the past. Probably the business had a different focus, but now the focus is crystal clear. For me, it's crystal clear to make sure that on an operational delivery perspective, from an operational delivery perspective, we are in a close position to deliver on these priorities, which is operational breakeven and profitability. And then whenever we have bigger lumpier projects, which are the big profitable, let's say, I hate to use word moonshots, but some close by shots to make sure that we fulfill those. David, you also recently appointed a new non-executive director, Brian Cole. He seems to have extensive experience in project development and energy technology. What unique value do you believe he'll bring to EQTech's board at this stage of the company's growth? Yeah, great. We're very, very excited about having Brian Cole join us on the board. He is the first that is very sector specific expertise bring to the board a whole different dimension that we didn't have there before. I mean, he has vast industry expertise across the project development lifecycle. So he's very good. He has a long track record of energy project development. And he provides that holistic strategic view of the decision-making of which project as well. We gave both and which project are going to be, again, excited as Moody was mentioned, some of them not to call it a moonshot project. But while we're focusing on the delivery of the bread and butter that they project, there's a lot of interesting flagship projects there that are funded by governments that he has a lot of experience in. He has also a good focus on how to commercialize and scale new technologies. So he has been able to in the past assess commercial technologies and how to bring them to scale and rapid adoption. And he also have a great global network and very good marketing size. So I think with his network and he can support the non-equetex expansion in all the markets, but also strategic partnership in the sector that have been very valuable for us. And ultimately, I think something that we have been in the past probably shy or not directed from the board expertise. We now have, I mean, he's been very adamant of we start exploring more access to public funding for large-scale breakthrough projects where similar the first time that we did that was in the project in in Garden in France, where we get the grant for the government to, you know, do a feasibility of this old coal plant. And then much many more projects like that. So he has experienced, he has been a precious track record on EU funding. I mean, he was directly engaged with the securing 500 plus million of EU funding for the development of the Celtic interconnector between Ireland and France. So we're very excited with his expertise and the strategic point of view that he brings to the board. David, the recent successful tests with steam oxygen and gasification technology seems to be a major step forward. Can you elaborate on how these results validate Equitex proprietary technology and its potential applications? Yeah, absolutely. I mean, first of all, the validation of the, of the, the continuum validation of this test, you know, it makes, you know, they are shared by industry people, you know, they continue to reinforce the accurate of our technology for producing a very specific tailor made high-quality singers for chemical application, which is where we see more demand now. And the this specific test was for support the biofuel applications, you know, to produce liquid fuels in the world that we do, we compact GTL. But this is the same type of gasification steam oxygen required for all the high-value commodities, like hydrogen, methane, and as mentioned through synchrood synthetic fuels like SAV and biodiesel. So this really diversified potential market opportunities that we have. And the other thing is like we, you know, at the heart of all of this is the, the, these tests always are a way to try in the real world the precision of the computational kinetic model that we have, which is, you know, one of our unique selling points. So every time we do a real-life test, we compare again with the simulation and we have, you know, it re-enforce the precision of the simulation and obviously the data is very useful for us to continue to develop that model. Having given the promising test results, what are the next steps for acute tech in terms of scaling up and bringing these ways to liquid fuel solutions to market, David? Yeah, excellent. I mean, the joint venture with CompaGTL is progressing rapidly. And the, at the moment we are doing the pilot plan development to connect downstream from the Lermab University, so Lermab Institute and the University of Lorraine. And the idea is to, once we have that downstream model, we can produce Lermab from the waste, all the way to a sink route that can be then certified for use as a refinery for all these different applications. We believe that that joint venture has a potential to be a massive stand-alone business. We would be probably, by producing the small pilot plan, we'll be able to be the first one to produce a fully integrated solution from the waste, all the way to the liquid fuel, which at the moment, you know, we'd probably be first to market doing this one because we can do a scalable way instead of requiring a very large infrastructure and a very large investment on that. The other thing that now open engagement with new infrastructure investors, so we're moving away only from power and heat and utilities, but, you know, they have discussion now for the reference plan, mainly with, you know, oil and gas companies and other chemical companies that, you know, have deep pockets and have a significant budget to invest in technologies even before they become commercially viable, like the doing carbon capture and some of the things like that. So I think that's going to open as well the audience of the type of infrastructure investor that we can attract. And the test result will no doubt attract clients and, you know, showcase the autonomous capabilities and drive fiber commercial project also, not necessarily in the sector, but just showing that if we are good enough to do that level of complexity, you know, it continues to value the type of project that we already doing. Well, I hope you're keeping us posted on any progress with that, David, thank you very much for speaking to us today. Very good to meet you too, Murley. Thank you very much, Stephen. Thank you, Stephen. Thank you very much. That's CEO, David Palumbo, Murley Bambadi Pati, the company's new operations director.