Half Yearly Report

RNS Number : 4559O

Hardide PLC

30 June 2010

 

Press Release

30 June 2010

Hardide plc

("Hardide" or "the Group")

Interim Results

Hardide plc (AIM: HDD), the provider of unique surface engineering technology, announces its interim results for the six months ended 31 March 2010.

Overview

·	Turnover decreased by 21% to £702,000 (H1 2009: £888,000)
·	Gross profit increased by 13% to £410,000 (H1 2009: £362,000)
·	Group operating loss of £14,000 (H1 2009: operating profit £26,000) after accounting for credit on the exchange difference on the intercompany loan between Hardide plc and Hardide Coatings, Inc
·	Loss before tax of £67,000 (H1 2009: loss £54,000)
·	Cash outflow reduced by 40% to £328,000 (H1 2009: £549,000)
·	UK manufacturing facility achieves AS 9100 aerospace standard certification and recognition as an aerospace manufacturing supplier
·	Largest single order from new US valve customer
·	Increase in oil and gas industry demand towards end of the period
·	Completion of strategic markets and applications review

 

Post-Period Events

·	Steady build up of demand from key customers in the UK and US
·	Recruitment underway of additional sales and technical/production personnel in UK to accelerate sales growth

Commenting on the interim results, Graham Hine, Chief Executive of Hardide plc, said: "The restructuring and cost reduction plan implemented in 2009 has enabled the Group to shoulder the effects of the continued reduction in demand that was experienced in the first half of the financial year.  We are now seeing a definite upward trend in our key oil and gas market, although it is difficult to separate the effects of re-stocking from underlying demand, and we expect our valve and pump business to strengthen in the second half of the year.  The pace and extent of recovery will be determined by the wider economic climate but we are cautiously optimistic about the second half of the year."

- Ends -

For further information:

Hardide plc
Graham Hine, Chief Executive	Tel: [phone]
Jackie Robinson, Corporate Communications	www.hardide.com

Seymour Pierce Limited
Nicola Marrin	Tel: [phone]
	www.seymourpierce.com

Notes to editors:

Hardide manufactures and applies tungsten carbide-based coatings to a wide range of engineering components.  The Group's patented technology provides a unique combination of ultra-hardness, toughness, low friction and chemical resistance in one coating.  When applied to components, the technology is proven to offer dramatic cost savings through reduced downtime and extended part life.  Customers include leading companies operating in oil and gas exploration and production, valve and pumps manufacturing, general engineering and aerospace.

CHAIRMAN'S STATEMENT

The interim results for the six months to 31 March 2010 reflect the continuing impact that the sharply reduced demand that we saw in FY 2009 had on the first half of the new financial year.  The full effect of this fall off in demand was mitigated by the restructuring and cost reduction strategy that was implemented across the Group last year.

The Group is reporting H1 2010 revenue of £702,000, a decrease of 21% compared with the same period last year (H1 2009 £888,000).  Group gross profit was £410,000, a rise of 13% from £362,000 in H1 2009. Cost of sales decreased by 44% to £292,000 reflecting the hibernation of the US manufacturing facility in March 2009 and the cost reduction strategy implemented in the UK.  The Group made an H1 2010 operating loss of £14,000, compared with an operating profit of £26,000 in H1 2009, after accounting for a credit on the exchange difference on the intercompany loan between Hardide plc and Hardide Coatings, Inc.  Removing this credit would result in an operating loss of £245,000 in H1 2010 compared with a loss of £881,000 in the same period last year.  There was a cash outflow of £328,000 in H1 2010 compared with £549,000 in H1 2009.

During the reporting period, the Group has been focused on short term sales and ensuring the immediate stability of the core business while prudently pursuing longer term development opportunities with high potential strategic and financial value.

The management team, supported by the board, completed an in-depth strategic review of markets and applications for the Hardide technology in H1 2010.  The review, guided by an independent facilitator, challenged previous assumptions of markets and applications and refreshed the thinking and approach of the management team.  The process enabled the creation of a clear new plan to create a profitable and diversified business.  The conclusions supported the former strategic plan, which remains in place, in terms of key industrial markets but still greater efforts will be made to support short term sales, and market and customer diversification.

The Group entered 2010 with a significantly re-shaped business and cost base, and while the pace of recovery remains subject to the return of sustainable growth in our customers' markets, the Board is satisfied that the Group is more stable and well-placed to benefit from an improvement in trading conditions.  Meanwhile, recognising the volatility of demand from some of our major customers, the company is keeping tight control over discretionary expenditure.

Once again, I would like to thank the staff and members of the Board for their continuing dedication and commitment over the last six months.  Their loyalty and perseverance in difficult times has been inspiring.

Robert Goddard

Chairman

30 June 2010

CHIEF EXECUTIVE OFFICER'S REVIEW

The start of the reporting period began with indications of growth returning to our key customers' markets but it was only towards the end of the half year that we began to see a slow but consistently upward trend in demand, particularly from oil and gas customers.  It is difficult, however, to separate the effects of re-stocking from an improvement in underlying demand from some major customers.  Other markets such as construction and automotive have been slower to resume demand although we are now receiving indications that trading conditions are improving.  The Group has not lost any customers during the period of recession and our blue chip customer base remains solid. It is pleasing to note that the overall financial performance for the period is a significant improvement on the six months immediately preceding.

Last year's restructuring programme and the reduction in the cost base have contributed to improved operational results relative to the drop in turnover.  The focus on cash management resulted in a 40% improvement in cash outflow from H1 2009.

Aligned to the strategic review, a full assessment of management priorities was undertaken in H1 2010 and all parts of the business are supporting short term sales as a priority.   Another output from the review has been to re-evaluate the Group's strategic development projects.  These are now concentrated on a small number of well-defined high potential value programmes running in partnership with customers.  These include coating for diamonds, aerospace and industrial gas turbines - all of which continue to make positive progress in their lengthy test processes.

The Group

All US customers have been retained over the last year and the US continues to make a valuable contribution to Group revenue.  The biggest single order from the US was won from a new valve customer during H1 2010.  The US plant remains in-situ and hibernated until the UK facility reaches capacity or US sales are sufficient to support the re-start of operations. 

In February 2010, the Group secured AS9100 Aerospace Quality Standard Certification for the UK facility and is now recognised as a certified aerospace manufacturing supplier.  Many aerospace original equipment manufacturers (OEMs) will only work with suppliers who are registered to AS9100 so it is a notable step forward in our aerospace programme.

Outlook

Our outlook for the remainder of the year is cautiously optimistic. The timing of the Group's recovery will be driven by the external economic environment as well as our ability to diversify and gain new customers.  We have begun to see recovery and growing revenues in oil and gas, one of our primary markets, and we expect our valve and pump business also to strengthen in the second half of the year.  Meanwhile, the cost controls that we have implemented are having a positive effect and we can expect to reap the full benefits of this when the markets recover as anticipated.

Graham Hine

Chief Executive Officer

30 June 2010

Consolidated income statement for the period ended 31 March 2010
		6 Months to		6 Months to		Year to
		31 March 2010		31 March 2009		30 Sept 2009
		(unaudited)		(unaudited)		(audited)
		£ '000		£ '000		£ '000
Revenue		702		888		1,209
Cost of Sales		(292)		(526)		(854)
Gross Profit		410		362		355
Administrative expenses		(613)		(1,002)		(1,854)
Depreciation		(70)		(241)		(332)
Exchange difference on intercompany loan		259		907		377
Exceptional item: Impairment of fixed assets		-		-		(364)
Operating profit / (loss)		(14)		26		(1,818)
Finance income		2		14		14
Finance costs		(55)		(90)		(13)
Loss on disposal of fixed assets		-		(3)		(7)
Profit on ordinary activities before tax		(67)		(54)		(1,824)
Tax		-		-		35
Profit for the period		(67)		(54)		(1,789)

Consolidated statement of recognised income and expense for the period ended 31 March 2010
		6 months to			6 months to				Year to
		31 March 2010 (unaudited)			31 March 2009 (unaudited)				30 Sept 2009 (audited)
		£ '000			£ '000				£ '000
Profit for the period		(67)			(54)				(1,789)
Exchange differences on translation of foreign operations		(832)			(753)				(279)
Total recognised income and expense for the year		(899)			(807)				(2,068)

Consolidated balance sheet at 31 March 2010
		31 March 2010 (unaudited)		31 March 2009 (unaudited)		30 Sept 2009 (audited)
		£ '000		£ '000		£ '000
Assets
Non-current assets
Investments
Goodwill		69		69		69
Intangible assets		1		3		2
Property, plant & equipment		747		1,301		796
Total non-current assets		817		1,373		867
Current assets
Inventories		24		32		26
Trade and other receivables		285		169		208
Other current financial assets		77		103		101
Cash and cash equivalents		604		446		932
Total current assets		990		750		1,267
Total assets		1,807		2,123		2,134
Liabilities
Current liabilities
Trade and other payables		292		305		259
Financial liabilities		90		114		118
Provisions		-		-		-
Total current liabilities		382		419		377
Net current assets		608		331		890
Non-current liabilities
Financial liabilities		732		1,154		748
Total non-current liabilities		732		1,154		748
Total liabilities		1,114		1,573		1,125
Net assets		693		550		1,009
Equity
Share capital		2,541		1,896		2,541
Share premium		5,259		4,102		5,259
Retained earnings		(6,549)		(4,755)		(6,481)
Share-based payments reserve		275		364		274
Translation reserve		832		(1,058)		(584)
Total equity		693		550		1,009

Consolidated condensed cash flow statement for the period ended 31 March 2010
			6 months to		6 months to		Year to
			31 March 2010 (unaudited)		31 March 2009 (unaudited)		30 Sept 2009 (audited)
			£ '000		£ '000		£ '000
Cash flows from operating activities
	Operating profit		(14)		26		(1,818)
	Impairment of intangibles		1		2		2
	Depreciation		68		239		330
	Impairment of fixed assets		-		-		364
	Share option charge		1		19		64
	(increase) / decrease in inventories		2		12		18
	(increase) / decrease in receivables		(87)		213		181
	Increase / (decrease) in payables		31		(52)		(97)
	Exchange rate variance		(259)		(907)		(377)
Cash generated from operations			(257)		(448)		(1,333)
	Finance income		2		14		14
	Finance costs		(8)		(31)		(75)
	Tax received / (paid)		-		-		36
Net cash generated from operating activities			(263)		(465)		(1,358)
Cash flows from investing activities
	Purchase of property, plant and equipment		(7)		(29)		(30)
Net cash used in investing activities			(7)		(29)		(30)
Cash flows from financing activities
	Net proceeds from issue of ordinary share capital		-		-		802
	Finance lease inception		-		-		-
	Finance lease repayment		(58)		(55)		(110)
	New loans raised		-		-		633
Net cash used in financing activities			(58)		(55)		1,325
Net increase / (decrease) in cash and cash equivalents			(328)		(549)		(63)
Cash and cash equivalents at the beginning of the period			932		995		995
Cash and cash equivalents at the end of the period			604		446		932

 

END

 

 

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