Interim Results

RNS Number : 1854F

Hardide PLC

16 May 2017

 

16 May 2017

Hardide plc

("Hardide" or "the Group" or "the Company")

Interim Results

for the six months ended 31 March 2017

Hardide (AIM: HDD), the developer and provider of advanced surface coating technology, today announces its results for the six-month period ended 31 March 2017.

Financial Highlights

·     Revenue of £1.51m (H1 2016: £0.95m), increase of 59% from H1 2016 and 27% from H2 2016

·     Gross profit of £0.69m (H1 2016: £0.25m)

·     Group operating loss of £0.69m (H1 2016: £0.63m loss, which included a £0.23m reversal of impairment and grant income of £0.14m). On a like-for-like basis, Group operating loss of £0.72m (H1 2016: £1.02m loss excluding reversal of impairment, release of provision and effect of grants)

·     EBITDA loss (gross profit less administrative expenses) of £0.43m (H1 2016: loss of £0.72m)

·     Cash at bank at 31 March 2017 of £1.56m

Operational Highlights

·     Demand returning from oil and gas sector

-           sales from this sector rose 115% compared with H1 2016 and 38% compared with H2 2016

-           testing completed successfully and commercial discussions underway with major oil service company in North America for onshore drilling components

·     Approved Supplier status with the Airbus Group gained

-           detailed commercial and technical discussions progressing with Airbus and other equipment manufacturers about coating specific aircraft parts

·     Increase in sales to aerospace and precision engineering

-     additional new parts approved for the BAE Systems Typhoon aircraft

-    test plan for new transmission components with Leonardo Helicopters is progressing well.  The original testing programme for other safety-critical main rotor components awaits the availability of the customer's highly-specialised test rig

·     US facility in Virginia fully operational and producing regular production parts for blue-chip North American customers

Post Period

·     Further order of $100k received from the General Electric Company Inc ("GE") for the same components as were supplied under the three-year Strategic Supply Agreement which expired at end of February 2017

·     First production order from new, major oilfield service company for coating of a family of subsea flow-control components

·     Royal Mail approval for coating of a component for letter sorting machines

Commenting on the interim results, Robert Goddard, Chairman of Hardide plc, said:

"We are pleased to see that there is significant evidence of improvement in demand for the Hardide product in a still challenging and volatile oil and gas market.  At the same time, the Group has made good progress in its diversification and growth strategy with the award of Approved Supplier status from Airbus and encouraging developments with customers in the aerospace and precision engineering sectors. Overall, with the early signs of recovery in the oil and gas market, particularly in North American onshore drilling, and the expectation of new aerospace business in the near future, the Board's outlook is positive.  The Board expects the trading performance for the full financial year to be in line with market expectations."

- Ends -

For further information:

Hardide plc Philip Kirkham, CEO Jackie Robinson, Communications Manager	Tel: [phone]
finnCap Stuart Andrews /Henrik Persson/James Thompson	Tel: [phone]
IFC Advisory Graham Herring/Heather Armstrong	Tel: [phone]

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, power generation, precision engineering and aerospace industries.

CHAIRMAN'S STATEMENT

Chairman's Statement

Introduction

The six-months to 31 March 2017 has been a period of steady progress for Hardide as we continue to operate in a market that has seen significant difficulties over the last few years. This has translated into total revenues for the period 59% ahead of the first half of 2016 and 27% ahead of the second half.

Sales to our oil and gas customers in H1 increased by 115% compared with the first half of 2016 and this supports the generally-accepted belief that the bottom of the oil and gas industry downturn has been reached.  We are very pleased to have seen this reflected in increasing levels of activity among our customers and demand for Hardide-coated downhole components. Whilst we have limited visibility as to whether this trend will continue, we are optimistic about our growth potential in this area.

The period saw the achievement of 'Approved Supplier' status to the Airbus Group and this is a significant stage in Hardide's diversification strategy. As a result, the Company is now involved in commercial and technical discussions with Airbus about coating components, predominantly used in the wing structure and landing gear for A320, A330, A380 and A400M aircraft; as well as with a number of Tier 1 equipment manufacturers and Maintenance, Repair and Overhaul (MRO) organisations.

We are seeing the use of our technology predominantly on parts critical to flight safety. This means that comprehensive proving tests are undertaken by Airbus on each component family before the coating of production parts commences. A number of such tests are well underway and the pace of progress to the production order stage may be slow in some cases but, once the part is in production, orders for it can continue for the life of the aircraft. Since securing our approved supplier status with Airbus, we have seen significant interest from several other international aerospace component manufacturers and for a diverse range of components.

Financial Results

The Group is reporting H1 2017 revenue of £1.51m, an increase of 59% compared with the same period last year (H1 2016 £0.95m) with Group gross profit of £0.69m, compared with £0.25m in H1 2016. Overheads of £1.11m (H1 2016 £0.97m) are being well controlled and include a significantly reduced credit from grant income of £36k compared with £141k in H1 2016.

There was a Group operating loss of £0.69m (H1 2016: loss of £0.63m, which included £0.26m of exceptional credits in the US and £0.14m of grant income). On a like-for-like basis, excluding grants and exceptional items, the Group operating loss of £0.72m compares with a loss of £1.02m in the same period last year.

The Group made a loss before interest, tax, depreciation and amortisation ("EBITDA") of £0.43m (H1 2016: loss £0.72m).

Operational Overview

The Group delivered increased revenue in H1 2017, with sales to oil and gas, precision engineering and aerospace customers increasing compared with both H1 2016 and H2 2016. Sales to customers in the flow control sector that are related to the oil and gas market tend to lag increases in drilling activity, and so sector sales overall were broadly in line with H1 2016. We are pleased to report an improvement in market sentiment among oil and gas customers and demand is returning for Hardide coated product both from existing customers and for development and testing of new applications. This is illustrated by the successful use in the field by a North American customer of key, high-volume components in their onshore drilling and completion tools. Commercial discussions are currently underway with this customer regarding further production orders. As this market recovers, the Company is optimistic about future volumes from this customer. Post period, and after comprehensive trials, a major global oilfield service company has certified the coating for a family of subsea flow control components and production orders for these are now being received.

Strong progress has been made in the precision engineering sector, with sales increasing by 21% from H1 2016.  Post period and following successful trials, we received approval of the coating from the Royal Mail for a new application on a letter sorting machine which will be used across sorting offices. We are also in trials with this customer for further applications.

Aerospace remains a key growth market for Hardide and tests are progressing well with several aerospace component manufacturers in the UK and Europe. BAE Systems, a long-term customer of Hardide, continues to adopt our technology and has certified additional parts that are currently being coated for the Typhoon aircraft. The Nadcap audit is planned and we hope to gain this global aerospace accreditation during H2 2017. Our relationship with Leonardo Helicopters continues to strengthen. Coated safety-critical components for a rotor mechanism are still awaiting availability of Leonardo's highly‑specialised test rig, while production trials and life-testing of new, less-critical transmission system parts are progressing well.

The US coatings facility in Virginia is regularly producing product for customers in North America and is operating smoothly and efficiently.  A number of new product applications for North American customers currently in development in our UK facility are planned to be transferred to Virginia when they are production-ready.

Summary and Outlook

While the Group continues to operate in a challenging and volatile oil and gas sector, there is strong evidence of gradual improvement in market conditions and demand for Hardide coating.  At the same time, the Group has made significant progress in its diversification and growth strategy with the award of Approved Supplier status from the Airbus Group and encouraging developments with other customers in the aerospace and precision engineering sectors.  With promising signs of recovery in the oil and gas market, particularly in the North American onshore sector where the rig count is now 116% greater than a year ago, the Board's outlook remains positive and we expect the trading performance for the full financial year to be in line with market expectations.

Robert Goddard

Chairman

16 May 2017

Consolidated Statement of Comprehensive Income

For the period ended 31 March 2017

£ 000	6 months to 31 March 2017 (unaudited)	6 months to 31 March 2016 (unaudited)	Year to 30 September 2016 (audited)
Revenue	1,511	949	2,142
Cost of Sales	(826)	(695)	(1,457)
Gross profit	685	254	685
Administrative expenses	(1,110)	(971)	(1,989)
Depreciation	(262)	(165)	(418)
Exceptional items:
Reversal of fixed asset impairment	-	232	232
Release of onerous lease provision	-	23	23
Operating (loss)/ profit	(687)	(627)	(1,467)
Finance income	3	4	6
Finance costs	(0)	(1)	(1)
Loss on ordinary activities before tax	(684)	(624)	(1,462)
Tax	-	-	121
Loss on ordinary activities after tax	(684)	(624)	(1,341)

Consolidated Statement of Changes in Equity

For the period ended 31 March 2017

£ 000	6 months to 31 March 2017 (unaudited)	6 months to 31 March 2016 (unaudited)	Year to 30 September 2016 (audited)
Total equity at start of period	4,377	3,859	3,859
Profit / (loss) for the period	(684)	(624)	(1,341)
Issue of new shares	-	-	1,571
Exchange differences on translation of foreign operation	65	88	260
Share options	27	8	28
Total equity at end of period	3,785	3,331	4,377

Consolidated Statement of Financial Position

As at 31 March 2017

£ 000	31 March 2017 (unaudited)	31 March 2016 (unaudited)	30 September 2016 (audited)
Assets
Non-current assets
Investments	-	-	-
Goodwill	69	69	69
Intangible assets	1	2	1
Property, plant & equipment	1,775	1,939	1,872
Total non-current assets	1,845	2,010	1,942
Current assets
Inventories	154	104	60
Trade and other receivables	517	422	566
Other current financial assets	162	146	270
Cash and cash equivalents	1,563	1,006	1,967
Total current assets	2,396	1,678	2,863
Total assets	4,241	3,688	4,805
Liabilities
Current liabilities
Trade and other payables	444	328	408
Financial liabilities	12	17	17
Total current liabilities	456	345	425
Net current assets	1,940	1,333	2,438
Non-current liabilities
Financial liabilities	-	12	3
Total non-current liabilities	-	12	3
Total liabilities	456	357	428
Net assets	3,785	3,331	4,377
Equity attributable to equity holders of the parent
Share capital	3,242	3,041	3,242
Share premium	10,305	8,935	10,305
Retained earnings	(9,648)	(8,247)	(8,964)
Share-based payment reserve	211	162	184
Translation reserve	(325)	(560)	(390)
Total equity	3,785	3,331	4,377

Consolidated Statement of Cash Flows

For the period ended 31 March 2017

£ 000	6 months to 31 March 2017 (unaudited)	6 months to 31 March 2016 (unaudited)	Year to 30 September 2016 (audited)
Cash flows from operating activities
Operating profit / (loss)	(687)	(627)	(1,467)
Impairment of intangibles	1	1	2
Depreciation	261	164	416
Revaluation of fixed assets	-	(232)	(232)
Share option charge	27	8	28
(Increase) / decrease in inventories	(94)	(45)	1
(Increase) / decrease in receivables	76	96	(18)
Increase / (decrease) in payables	36	(216)	(160)
Increase / (decrease) in provisions	-	(23)	(23)
Exchange rate variance	-		31
Cash generated from operations	(380)	(874)	(1,422)
Finance income	3	4	6
Finance costs	(0)	(1)	(1)
Tax received / (paid)	82	64	64
Net cash generated from operating activities	(295)	(807)	(1,353)
Cash flows from investing activities
Purchase of property, plant, equipment	(100)	(506)	(561)
Net cash used in investing activities	(100)	(506)	(561)
Cash flows from financing activities
Net proceeds from issue of ordinary share capital	-	-	1,571
Loans repaid	-	-	-
Finance lease inception	-	-	-
Finance lease repayment	(9)	(8)	(17)
Net cash used in financing activities	(9)	(8)	1,554
Net increase / (decrease) in cash and cash equivalents	(404)	(1,321)	(360)
Cash and cash equivalents at the beginning of the period	1,967	2,327	2,327
Cash and cash equivalents at the end of the period	1,563	1,006	1,967

 

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