Half Yearly Report

RNS Number : 7704I

Hardide PLC

21 June 2011

 

Press Release

21 June 2011

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 2011.

Overview

·	Turnover increased by 13% to £793,000 (H1 2010: £702,000)
·	Gross profit increased by 10% to £449,000 (H1 2010: £410,000)
·	Cash outflow reduced by 33% to £221,000 (H1 2010: £328,000)
·	Group EBITDA loss increased by 16% to £235,000 (H1 2010: £203,000) mainly because of investment in business development to accelerate growth
·	Revenue from non-oil and gas sectors increased by 96% from H1 2010
·	Bruce Robinson appointed as non-executive director.  Bruce brings extensive experience of the oil and gas industry and young technology businesses
·	UK projects manager and US business development manager recruited to accelerate diversification and growth

 

Post-Period Events

·	$3.65 million seven-year exclusivity deal announced with US blue chip manufacturer of high-pressure fluid handling equipment
·	Group EBITDA profitable in May 2011

Commenting on the interim results, Graham Hine, chief executive of Hardide plc, said: "The Group has delivered improved revenue and gross profit on H1 2010.  Over the last six months we have had success in diversifying our customer base and as a result our dependency on one major customer has reduced by almost a quarter and sales to non-oil and gas sectors have nearly doubled. 

"Through our investment in business development, we have increased penetration in our core sectors of oil and gas, and flow control and are building a stronger short term sales pipeline.  Our outlook for the remainder of the year is positive as we see upward trends across our key markets and growing sales to current and new customers.  The Group is now accelerating growth towards profitability," added Dr Hine.

- Ends -

For further information:

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

Seymour Pierce Limited
Guy Peters	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, flow control, general engineering and aerospace.

CHAIRMAN'S STATEMENT

Revenue for the six months to 31 March 2011 was £793,000, 13% higher than in the same period last year (H1 2010 £702,000).  Group gross profit was £449,000, a rise of 10% from £410,000 in H1 2010. Cost of sales increased by 18% to £344,000 reflecting a one-off increase in gas costs as the company entered a new long-term supply agreement. In spite of this, production margins remained robust.  Our investment in much needed business development staff was the main reason for a 12% rise in administrative expenses to £684,000 from £613,000 in H1 2010.  Similarly, Group EBITDA loss increased by 13% to £235,000 from £203,000 in H1 2010. 

A non-cash movement of the value of the intercompany loan between Hardide plc and Hardide Coatings Inc caused by exchange rate movements meant that the operating loss increased from £14,000 to £380,000. Similarly the loss before tax increased from £67,000 to £432,000.  Without this impact, operating loss would have been £296,000 (H1 2010 loss of £273,000) and loss before tax would have been £348,000 (H1 2010 loss of £326,000).  

A drop in demand from a major customer caused a fall back from the revenue level that was reported in H2 2010.  However, the board is confident that aggregate sales to this customer are secure for the foreseeable future, and they have already shown recovery in H2 2011.  Customer diversification remains a key strategic goal and we achieved an almost four-fold increase in sales to other oil and gas customers in H1 2011.  On the matter of revenue volatility overall, I am pleased to report that we have made significant progress in another of our strategic goals and have increased revenue from non-oil and gas sectors by 96% in the first half of the year.  This has been achieved through new customer gains and increased sales to other existing customers. 

Work continues apace with customer partners in major longer term projects including aerospace, coating for diamonds and industrial turbine blades and these projects remain an important part of building shareholder value.  Significant progress was made in our development programmes, especially in aerospace where excellent results were recorded from some particularly demanding tests, and we expect major aerospace approvals in 2012.

In February 2011, the board welcomed Bruce Robinson as a new non-executive director.  The Group has already benefited from his understanding of the oil and gas industry, where he has helped us to identify more and more accurately the areas where the Hardide coating will add the greatest value.

As we progress through the year, we are seeing some steadiness return to our main markets and opportunities within new sectors are looking favourable.  The diversification strategy is ongoing and the board is optimistic that the second half of the year will see significantly increased demand and good prospects for further improvement.  Indeed, total sales for the three months ending 31 May 2011 were nearly 60% higher than for the previous three months.

Robert Goddard

Chairman

21 June 2011

CHIEF EXECUTIVE OFFICER'S REVIEW

The Group has delivered improved revenue and gross profit on the same period last year.  Following two years of successful cost reduction, we have created a streamlined and efficient business and are now carefully investing in business development to accelerate growth towards profitability.

The investment in business development and project management personnel is opening doors for us in sectors and geographies that previously we have not had the resources to address.  It is also enabling us to hasten short term development projects from within our existing market specialisms such as oil and gas exploration and severe-service flow control.

We are successfully diversifying our customer base and over the last two years have built a strong sales pipeline intended to create significantly improved performance.  Controlled diversification into new applications for existing customers and into new markets has been a key focus for the management team.  One of our successes in H1 2011 has been the swift progress that has been made with a development for an extrusion device for abrasive polymer mixes, where sales have already been made for coating the prototype parts.  We are optimistic about future revenue from this and similar applications.

Revenue from the flow control sector has increased.  This is due to a combination of new business and increased demand from existing customers.  A renewed focus on this sector has converted an encouraging level of new valve and pump business, with several trials underway with new valve customers.

The engagement of a well-connected business development representative in the US has enabled us to build relationships with prospective blue chip customers in Houston.  As a result, we expect to see increased revenues from the US during the year. 

We reviewed, valued and re-oriented our pipeline in the first half of the year and now believe that we have a healthy mix of short and long term development projects that are aligned to the resources that we have available now and can make available as revenues grow.  All of our long term test programmes including aerospace and coating for diamonds have continued to progress and we are focusing on those projects with greater potential to generate revenue in the shorter term. 

Our outlook for the remainder of the year is positive as we see upward trends across our key markets and growing sales to current and new customers.  The Group is now accelerating growth towards profitability.

Graham Hine

Chief Executive Officer

21 June 2011

Consolidated income statement for the period ended 31 March 2011
		6 Months to		6 Months to		Year to
		31 March 2011		31 March 2010		30 Sept 2010
		(unaudited)		(unaudited)		(audited)
		£ '000		£ '000		£ '000
Revenue		793		702		1,735
Cost of Sales		(344)		(292)		(649)
Gross Profit		449		410		1,086
Administrative expenses		(684)		(613)		(1,293)
Depreciation		(61)		(70)		(136)
Exchange difference on intercompany loan		(84)		259		66
Exceptional item: Impairment of fixed assets		-		-		(126)
Operating profit / (loss)		(380)		(14)		(403)
Finance income		-		2		2
Finance costs		(52)		(55)		(106)
Loss on disposal of fixed assets		-		-		-
Profit on ordinary activities before tax		(432)		(67)		(507)
Tax		-		-		33
Profit for the period		(432)		(67)		(474)

Consolidated statement of recognised income and expense for the period ended 31 March 2011
		6 months to			6 months to				Year to
		31 March 2011 (unaudited)			31 March 2010 (unaudited)				30 Sept 2010 (audited)
		£ '000			£ '000				£ '000
Profit for the period		(432)			(67)				(474)
Exchange differences on translation of foreign operations		318			(832)				(45)
Total recognised income and expense for the year		(114)			(899)				(519)

Consolidated balance sheet at 31 March 2011
		31 March 2011 (unaudited)		31 March 2010 (unaudited)		30 Sept 2010 (audited)
		£ '000		£ '000		£ '000
Assets
Non-current assets
Investments
Goodwill		69		69		69
Intangible assets		-		1		-
Property, plant & equipment		520		747		569
Total non-current assets		589		817		638
Current assets
Inventories		24		24		26
Trade and other receivables		305		285		337
Other current financial assets		47		77		62
Cash and cash equivalents		315		604		536
Total current assets		691		990		961
Total assets		1,280		1,807		1,599
Liabilities
Current liabilities
Trade and other payables		264		292		258
Financial liabilities		26		90		55
Provisions		-		-		-
Total current liabilities		290		382		313
Net current assets		401		608		648
Non-current liabilities
Financial liabilities		851		732		801
Total non-current liabilities		851		732		801
Total liabilities		1,141		1,114		1,114
Net assets		139		693		485
Equity
Share capital		2,541		2,541		2,541
Share premium		5,259		5,259		5,259
Retained earnings		(7,069)		(6,549)		(6,955)
Share-based payments reserve		272		275		269
Translation reserve		(864)		(833)		(629)
Total equity		139		693		485

Consolidated condensed cash flow statement for the period ended 31 March 2011
			6 months to		6 months to		Year to
			31 March 2011 (unaudited)		31 March 2010 (unaudited)		30 Sept 2010 (audited)
			£ '000		£ '000		£ '000
Cash flows from operating activities
	Operating loss		(380)		(14)		(403)
	Impairment of intangibles		-		1		2
	Depreciation		61		68		134
	Impairment of fixed assets		-		-		126
	Share option charge		4		1		2
	(increase) / decrease in inventories		2		2		-
	(increase) / decrease in receivables		47		(87)		(89)
	Increase / (decrease) in payables		6		31		(1)
	Exchange rate variance		84		(259)		(66)
Cash generated from operations			(176)		(257)		(295)
	Finance income		-		2		2
	Finance costs		(3)		(8)		(10)
	Tax received / (paid)		-		-		39
Net cash generated from operating activities			(179)		(263)		(264)
Cash flows from investing activities
	Purchase of property, plant and equipment		(13)		(7)		(25)
Net cash used in investing activities			(13)		(7)		(25)
Cash flows from financing activities
	Net proceeds from issue of ordinary share capital		-		-		-
	Finance lease inception		-		-		-
	Finance lease repayment		(29)		(58)		(107)
	New loans raised		-		-		-
Net cash used in financing activities			(29)		(58)		(107)
Net increase / (decrease) in cash and cash equivalents			(221)		(328)		(396)
Cash and cash equivalents at the beginning of the period			536		932		932
Cash and cash equivalents at the end of the period			315		604		536

 

END

 

 

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