Quadrise Plc (QED) : Interim Results and Project Updates
Interim Earnings
Quadrise (QED LN) recently reported interim results for the period ended 31 December 2023. QED reported a net loss of £1.7m which was broadly unchanged YoY. This was made up of £0.9m in product development costs and £0.7m in SG&A which is again broadly in line YoY, there was also a £0.16m non-cash charge. Net finance costs were negligible. The company raised £1.945m during the period and finished the period with cash of £1.66m. Post period end on the 19th March the company completed a placing of £1.5m at 1.25p/sh. to support the balance sheet alongside an open offer of up to £1m due to close on April 5th.
QED remains focused on commercialising its pipeline of emulsion fuel products, which are differentiated from competitors by using oil in water technology (rather than water in oil). Commercial trials are underway for MSAR and bioMSAR, with bioMSAR zero under development. QED is focusing on shipping and related industries where the regulatory backdrop is perhaps most favourably aligned to the characteristics of the product pipeline. QED’s pathway of progressive decarbonisation enables industry to meet tightening legislative requirements without intensive capital investment.
Project Updates
With the main commercial trial in Morocco completed during Q4 2023, a long-term commercial supply agreement is now being negotiated. Given the challenging conditions for raising funds, the start of operations in Utah at the Valkor project has been delayed. Management currently expects financing to be concluded by Valkor in H1 2024, which will unlock an initial US$1.5m in revenue for QED. The long-term trial with MSC is set to begin in mid-2024: this 4,000-hour (6-8 month) trial of MSAR and bioMSAR represents a significant opportunity to begin supplying one of the largest shipping companies in the world. After securing a Letter of No Objection from engine manufacturer Wartsila this enables QED to scale roll out to MSC and other shipping companies using similar engines. QED recently signed agreements with Cargill and MAC2 to support the trial.
Recommendation
We reiterate that successfully concluding a commercial agreement would likely have a transformative impact on the earnings outlook and create momentum for further agreements. With support of major groups such as Cargill this should derisk scale up. Having rallied strongly into year-end on successful conclusion of the Morocco trials, the share price has eased back, likely on the back of Valkor delays. However, we anticipate that a long term supply agreement should lead to a sustained rerating. We reiterate our Buy recommendation.
VSA Capital Limited is Authorised and Regulated by the Financial Conduct Authority and is a member of the London Stock Exchange and the Aquis Stock Exchange.
The Company is registered in England with company number 2405923 at Park House, 16-18 Finsbury Circus, London EC2M 7EB.