TIDMHDD
RNS Number : 8864Y
Hardide PLC
14 May 2019
The information communicated in this announcement is inside
information for the purposes of Article 7 of Regulation
596/2014.
14 May 2019
Hardide plc
("Hardide" or "the Group" or "the Company")
Interim Results
for the six months ended 31 March 2019
Hardide (AIM: HDD), the developer and provider of advanced
surface coating technology, today announces its results for the
six-month period ended 31 March 2019.
Financial Highlights
-- Record revenue for a first half-year - up by 9% to GBP2.35m
(H1 2018:
GBP2.16m)
-- Gross profit of GBP1.05m (H1 2018:
GBP1.15m)
-- Group operating loss of GBP0.66m (H1 2018: GBP0.32m
loss)
-- EBITDA loss of GBP0.44m (H1 2018: loss of
GBP0.14m)
-- Successful fundraising of GBP3.60m (before
expenses) in March 2019 to fund continuing investment
and long-term growth
-- Cash at bank at 31 March 2019 of GBP5.35m (GBP3.23m at
31 March
2018)
Operational Highlights
-- Diversification of customer base continues - half of
revenues in H1 attributable to customers gained in the
last three years
-- Sales to customers in North America increased by 32%
-- Increased sales of 52% in flow control
-- Encouraging progress being made in aerospace sector:
- first Airbus A380 component selected for Hardide coating
- numerous components for Airbus in final stages of
evaluation
- first coated components currently in-flight testing
on an Airbus A321 with a global MRO (maintenance,
repair and overhaul) customer
- Leonardo Helicopters began process to make Hardide
an approved supplier for flying parts
-- Third coating reactor and large pre-treatment line
installed in Martinsville
-- Order placed for the first coating reactor for the new
Bicester site
-- Aerospace coating (Hardide-A) produced at the US facility
for the first time
-- Successful completion of 'Innovate UK' grant-funded project
to produce an ultra-low temperature coating process
-- Two National Aerospace Technology Exploitation Programme
(NATEP) grant-funded projects started
-- A new international PCT patent was submitted protecting
the latest developments and improvements in the coatings
Commenting on the interim results, Robert Goddard, Chairman of
Hardide plc, said:
"The Group is pleased to have achieved record sales revenue for
a first half during this period. This was despite some short-term
disruption with one customer and the unpredictability of larger
customer projects, which have led us to now expect full-year
revenues to be at the lower end of market expectations. More than
half of demand in the period was from customers gained within the
last three years. Customer and sector diversification are key
strategic objectives for the Group and the Board is pleased with
the progress being made.
"Indications are that demand will remain strong from customers
in the oil and gas, flow control and precision engineering sectors
and the Board is pleased with the advances being made towards
production orders from aerospace customers in the UK and US. The
announcement today with regard to our Hardide-A coating being
selected by Airbus is particularly pleasing and a testament to the
quality of our offering.
"We remain highly optimistic about the longer-term outlook for
the business."
Enquiries:
Hardide plc
Robert Goddard, Non-Executive Chairman Tel: +44 (0) 1869 353
Philip Kirkham, CEO 830
Jackie Robinson, Communications Manager
IFC Advisory Tel: +44 (0) 2039 346
Graham Herring / Heather Armstrong / Florence 630
Chandler
finnCap Tel: +44 (0) 2072 200
Henrik Persson / Kate Bannatyne / Matthew 500
Radley
Notes to editors:
www.hardide.com
Hardide develops, manufactures and applies advanced technology
tungsten-carbide coatings to a wide range of engineering
components. Its patented technology is unique in combining in one
material, a mix of toughness and resistance to abrasion, erosion
and corrosion; together with the ability to coat accurately
interior surfaces and complex geometries. The material is proven to
offer dramatic improvements in component life, particularly when
applied to components that operate in very aggressive environments.
This results in cost savings through reduced downtime and increased
operational efficiency. Customers include leading companies
operating in oil and gas exploration and production, valve and pump
manufacturing, precision engineering and aerospace industries.
CHAIRMAN'S STATEMENT
Introduction
The Group had record sales revenue for a first half in the six
months to 31 March 2019, with more than half coming from new
customers gained within the last three years. Customer and sector
diversification are key strategic objectives for the Group and the
Board is pleased with the progress being made.
Demand is strong from new and existing customers in the UK and
North America. Sales to customers in North America increased by 32%
compared with the same period last year and the US facility is
operating well and producing an excellent quality of product.
Demand from some of our newly-established customers is heavily
project-based. This means that we see large, discrete orders on
unpredictable timescales, thereby limiting visibility over when
revenue will be recorded. As the overall number of clients grows,
so diversifying our revenue stream, the individual impact of any
one project will decline. The medium- and long-term trends continue
to look promising and we are very pleased to be attracting
customers of this calibre. Certain customer orders that we expected
in the first half are now likely to be in H2.
In H1, one of our significant oil and gas customers made
adjustments to the design of the product that uses the components
that we coat. They also changed the manufacturer of the parts. This
has delayed the phasing of orders for these components from H1 to
H2 2019. However, recently there has been a return of demand for
these components and our customer expects this to continue
throughout H2.
Financial Results
The Group is reporting H1 2019 revenue of GBP2.35m, an increase
of 9% compared with the same period last year (H1 2018: GBP2.16m),
with Group gross profit of GBP1.05m (H1 2018: GBP1.15m). Whilst
revenue is up, gross profit was affected adversely by the impact of
the product mix.
Overheads of GBP1.48m (H1 2018: GBP1.29m) increased, primarily
due to a strategic investment in a new US--based business
development engineer and the planned increase in sales and
marketing expenditure. In addition, there was a rise in operational
costs at the US site due to the newly-installed third reactor,
together with the annual pay award made to all UK and US staff.
The Group made a loss before interest, tax, depreciation and
amortisation of GBP0.44m (H1 2018: loss
GBP0.14m) and an operating loss of GBP0.66m (H1 2018: loss of
GBP0.32m).
During the period, the Group raised GBP3.60m (before expenses)
in a fundraising and undertook a share capital consolidation such
that every 40 Ordinary 0.1p Shares in issue were consolidated into
1 New Ordinary 4p Share. Primarily, the proceeds will be used to
fund the purchase of three more coating reactors and to move the
Company's facilities to new premises nearby where there will be
double the floor space. An update on progress in deploying these
funds is set out in the Operational Overview below.
Operational Overview
The demand from oil and gas customers continued, with sales
being similar to those in H1 2018. The exception was the reduced
demand from the major customer mentioned earlier, which was offset
by sales of new applications for UK and US customers, and by the
return of demand for Hardide--coated industrial diamonds. Sales to
flow control customers increased by 52%; a contributing factor
being the specification of the Hardide coating on new product
ranges for a US pump manufacturer following successful development
work last year.
There was encouraging progress in the aerospace sector, with the
first coated parts selected for the Airbus A380. These will be
replacements for hard chrome plated wing compression flap pads.
Numerous other components for the Airbus range of aircraft are
currently in the final stages of evaluation prior to approval. A
global MRO customer has put the first Hardide-coated components on
an Airbus A321 for flight testing prior to approval. A US aerospace
customer has also indicated its selection of Hardide for coating
certain of their components. This will be the subject of a separate
announcement once it has been formally approved by the
customer.
The US facility in Martinsville is operating well and Hardide-A,
the coating developed specifically for the aerospace sector, was
successfully produced there for the first time as work continues to
prepare the site for processing aerospace components following its
approval to aerospace quality management standard AS9100 RevD in
2018.
Good progress was made in the development of a coating for
turbine blades and this has been identified as a product with
excellent prospects. Tests commissioned by our customer EDF Energy
indicate that the coating can extend the life of steam turbine
blades through significantly enhanced resistance to erosion by
solid particles and high-speed water droplets. In March 2019, at a
joint presentation by EDF Energy and Hardide Coatings to a meeting
of the Steam Turbine Users Group, there was considerable interest
from several turbine manufacturers. EDF Energy is now developing
plans to begin field testing of Hardide-coated blades in a power
station turbine. A new international PCT patent incorporating this
application was submitted and if granted, will protect the latest
developments and improvements in the coatings. This is a long-term
project significant potential for developments of markets and of
IP.
The Innovate UK grant for the project to develop and
characterise the new, low-temperature Hardide coating process was
completed successfully at the end of H1 2019. This widens the range
of metals and applications that are suitable for Hardide coating
and includes many steels used in the aerospace and oil and gas
sectors. Hardide-T and Hardide-A, the two most frequently used
coatings are now available in low--temperature variants, Hardide-LT
and Hardide-LA. A global leader in the energy industry has already
ordered the first parts for low temperature coating.
Work started on two, 18-month long projects to apply Hardide's
new low-temperature coating in the aerospace sector and develop new
finishing techniques. These have been part-funded by the National
Aerospace Technology Exploitation Programme (NATEP) and are being
carried out in collaboration with Airbus, Leonardo Helicopters and
other industry partners. Working with NATEP is already presenting
new opportunities for disseminating information about Hardide
coatings to the wider aerospace sector.
Following the raising of GBP3.60m (gross) in March 2019,
detailed plans are being developed for the move of the UK facility
to a new, larger site nearby in Bicester. We expect costs in this
regard to be approximately GBP200k in the second half. Planning is
underway for a staged move, which is expected to be complete by
September 2020.
An order has been placed for the first of three new coating
reactors and design of the Group's first larger--capacity reactor
has begun. This reactor and a new pre-treatment facility are being
designed to accommodate bigger components, including turbine blades
used in the power generation industry and various aircraft landing
gear components.
Summary and Outlook
Indications are that demand will remain strong from customers in
the oil and gas, flow control and precision engineering sectors and
the Board is pleased with the advances being made towards
production orders from aerospace customers in the UK and US.
Due to the project-based nature of demand from several large
customers, prediction of revenue over the short term has always
been difficult. Now that we have more project-based customers,
sales forecasting has become even more challenging. In future, our
increasingly diversified customer base will help smooth these
fluctuations. Against this background, we expect revenue for the
full year to be at the lower end of market expectations and for
EBITDA to be broadly break-even for the second half (before costs
associated with the move of facilities as set out above), dependent
on the product mix and the phasing of costs associated with the
move to new premises.
Accordingly, we remain highly optimistic about the longer-term
outlook for the business.
Robert Goddard
Chairman
14 May 2019
Consolidated Statement of Comprehensive Income
For the period ended 31 March 2019
GBP 000 6 months to 6 months to Year to
31 March 2019 31 March 2018 30 September
2018
(unaudited) (unaudited) (audited)
Revenue 2,346 2,158 4,613
Cost of Sales (1,300) (1,004) (2,201)
Gross profit 1,046 1,154 2,412
------------------------------- --------------- --------------- --------------
Administrative expenses (1,482) (1,294) (2,711)
Depreciation (226) (178) (373)
Provision for grant repayment - - (246)
Operating (loss)/ profit (662) (318) (918)
------------------------------- --------------- --------------- --------------
Finance income 6 3 8
Finance costs (1) (2) (3)
Loss on ordinary activities
before tax (657) (317) (913)
------------------------------- --------------- --------------- --------------
Tax - - 48
Loss on ordinary activities
after tax (657) (317) (865)
------------------------------- --------------- --------------- --------------
Consolidated Statement of Changes in Equity
For the period ended 31 March 2019
GBP 000 6 months to 6 months to Year to
31 March 2019 31 March 2018 30 September
(unaudited) 2018
(unaudited) (audited)
Total equity at start of
period 5,079 3,291 3,291
------------------------------------- --------------- --------------- --------------
Profit / (loss) for the period (657) (317) (865)
Issue of new shares 3,451 2,470 2,533
Exchange differences on translation
of foreign operation 6 (85) 47
Share options 40 19 73
Total equity at end of period 7,919 5,378 5,079
------------------------------------- --------------- --------------- --------------
Consolidated Statement of Financial Position
As at 31 March 2019
GBP 000 31 March 2019 31 March 2018 30 September
2018
(unaudited) (unaudited) (audited)
Assets
Non-current assets
Investments - - -
Goodwill 69 69 69
Intangible assets 24 1 25
Property, plant & equipment 2,122 1,610 2,033
Total non-current assets 2,215 1,680 2,127
-------------------------------- -------------- -------------- -------------
Current assets
Inventories 357 218 286
Trade and other receivables 773 665 749
Other current financial assets 198 188 265
Cash and cash equivalents 5,348 3,233 3,302
Total current assets 6,676 4,304 4,602
-------------------------------- -------------- -------------- -------------
Total assets 8,891 5,984 6,729
-------------------------------- -------------- -------------- -------------
Liabilities
Current liabilities
Trade and other payables 539 541 1,336
Financial liabilities 37 2 10
Provision for grant repayment 246 - 246
Total current liabilities 822 543 1,592
-------------------------------- -------------- -------------- -------------
Net current assets 5,854 3,761 3,010
-------------------------------- -------------- -------------- -------------
Non-current liabilities
Financial liabilities 150 63 58
Total non-current liabilities 150 63 58
-------------------------------- -------------- -------------- -------------
Total liabilities 972 606 1,650
-------------------------------- -------------- -------------- -------------
Net assets 7,919 5,378 5,079
-------------------------------- -------------- -------------- -------------
Equity attributable to equity
holders of the parent
Share capital 3,645 3,393 3,405
Share premium 15,887 12,625 12,676
Retained earnings (11,583) (10,377) (10,925)
Share-based payment reserve 348 254 308
Translation reserve (378) (517) (385)
-------------------------------- -------------- -------------- -------------
Total equity 7,919 5,378 5,079
-------------------------------- -------------- -------------- -------------
Consolidated Statement of Cash Flows
For the period ended 31 March 2019
GBP 000 6 months to 6 months to Year to
31 March 2019 31 March 2018 30 September
2018
(unaudited) (unaudited) (audited)
Cash flows from operating
activities
Operating profit / (loss) (662) (318) (918)
Impairment of intangibles 3 - 2
Depreciation 223 178 371
Share option charge 40 21 73
(Increase) / decrease in
inventories (71) (58) (124)
(Increase) / decrease in
receivables 56 2 (149)
Increase / (decrease) in
payables (797) 52 793
Exchange rate variance - (25) -
Increase in provisions - - 246
Cash generated from operations (1,208) (148) 294
----------------------------------- --------------- --------------- --------------
Finance income 6 3 8
Finance costs (1) (2) (3)
Tax received / (paid) - 9 93
Net cash generated from operating
activities (1,203) (138) 392
----------------------------------- --------------- --------------- --------------
Cash flows from investing
activities
Purchase of property, plant,
equipment (321) (360) (887)
Net cash used in investing
activities (321) (360) (887)
----------------------------------- --------------- --------------- --------------
Cash flows from financing
activities
Net proceeds from issue of
ordinary share capital 3,451 2,470 2,533
Loans raised 128 51 55
Loans repaid (9) - -
Finance lease repayment - (2) (3)
Net cash used in financing
activities 3,570 2,519 2,585
----------------------------------- --------------- --------------- --------------
Net increase / (decrease)
in cash and cash equivalents 2,046 2,021 2,090
----------------------------------- --------------- --------------- --------------
Cash and cash equivalents
at the beginning of the period 3,302 1,212 1,212
----------------------------------- --------------- --------------- --------------
Cash and cash equivalents
at the end of the period 5,348 3,233 3,302
----------------------------------- --------------- --------------- --------------
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