Interim Results

RNS Number : 2337H

Hardide PLC

18 June 2013

 



Press Release

18 June 2013

Hardide plc

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

Interim Results

Hardide plc (AIM: HDD), the provider of advanced surface coating technology, announces its interim results for the six months ended 31 March 2013.

Overview

·   Turnover decreased by 18% to £1.26m (H1 2012 £1.54m), primarily as a result of a major inventory adjustment by a dominant customer

·   Gross profit decreased by 23% to £855,000 (H1 2012: £1.12m)

·   Group interim loss of £102,000 (H1 2012: £201,000 profit)

·   Group EBITDA of £11,000 (H1 2012: £308,000)  

·   Revenue from aerospace and advanced engineering sectors increased by 37%

·   The number of active accounts rose by 34% to 39 from 29 in H1 2012, reflecting the focus on strengthening the pipeline

·   A Technology Strategy Board grant worth up to £250,000 was awarded in January 2013 to part‑fund a two year project to further develop, manufacture and test a new coating for superabrasive materials used in 'hardfacing' tools for downhole and other high-wear applications. Rapid technical and commercial progress was made on the project

·   All aerospace and advanced engineering strategic development projects progressed steadily and successfully with customer partners

·   An independent and comprehensive testing programme was launched to investigate further the properties and benefits of Hardide coatings for a variety of new potential applications.

·   In January 2013, a loan note holder converted its convertible loan note of £225,000 into 50,000,000 new ordinary shares of the Company at a price of 0.45p per share ("New Ordinary Shares")

·   Cash at bank at 31 March 2013 of £1.39 million

Post Period Events

·   First sales of the new  coating for superabrasive materials, developed as a result of the TSB grant-funding, have been achieved ahead of expectations

·   Patent applications have been filed in the US and UK for the new  coating for superabrasive materials

·   The business development team has been strengthened by the appointment of two additional managers, one each in the UK and US where they will promote applications and sales in existing and new markets

·   An agent has been appointed for the German market in order to widen the Company's geographic customer base and to capitalise upon interest already expressed by potential customers in the region, particularly in the valve and pump sectors and for cutting blades

·   The Company is negotiating commercial agreements with two world-leading blue chip companies which operate across a range of advanced engineering technologies

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

"Our 2013 half year results have been weakened primarily by a rapid inventory reduction exercise by one major customer.  This has resulted in what is expected to be a short‑term dip in demand and projected to be resolved by the end of 2013.  The Company is achieving positive developments technically and with other customers.  So, while this set‑back is disappointing, the confidence of the Board remains high.  

Ten new customers placing production orders were signed up during the first six months of this year, increasing the number of active accounts by 34% compared with the start of the year.  Except for the single large oil & gas customer, sales to other customers remain steady. Meanwhile, the technical and commercial aspects of the business are operating effectively and we are investing heavily in sales and marketing activities to drive customer penetration and diversification."

- Ends -

For further information:

Hardide plc
Robert Goddard, Chairman	Tel: [phone]
Philip Kirkham, CEO Jackie Robinson, Communications Manager	[e-mail] www.hardide.com
Andrew Craig/Ben Wright	Tel: [phone] www.n1singer.com

Notes to editors:

Hardide develops, manufactures and applies nanotechnology tungsten carbide-based coatings to a wide range of engineering components.  The Group's patented technology is unique in combining a mix of abrasion, erosion and corrosion resistant properties in one coating.  When applied to metal components in aggressive environments, the technology is proven to offer dramatic improvements in component life resulting 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, nuclear, advanced engineering and aerospace industries.  

CHAIRMAN'S STATEMENT

The interim results for the six months to 31 March 2013 reflect the impact of a major inventory reduction by one dominant customer, the effect of which was increased by unexpected delays in well-advanced new product introductions by other customers. The Hardide coating is performing well and is not related to these customer delays.  We expect the inventory reduction exercise to be short-term and resolved by the end of 2013. 

The Group is reporting H1 2013 revenue of £1.26m, a decrease of 18% compared with the same period last year (H1 2012: £1.54m).  Group gross profit was £855,000, a fall of 23% from £1.12m in H1 2012.  Cost of sales decreased by 3% to £409,000 reflecting the fixed nature of production staff salaries.  The Group made an operating loss of £102,000 (H1 2012: profit of £201,000), which included the effects of the planned investment in business development, marketing and further independent testing designed to open new markets and accelerate customers' test cycles. Group EBITDA was positive at £11,000 (H1 2012: £308,000).

While the half year results reflect the drop in demand from one customer, other sales across our main sectors of oil & gas, flow control and advanced engineering remain solid. In particular, revenue from the aerospace and advanced engineering sectors grew by 37%.  The strong rise during 2012 of the number of parts in customer test bore fruit in the first half of 2013 as the number of active accounts rose by 34% from 29 to 39.  These include applications for customers from sectors including motorsport, oil & gas and flow control.

Broadening the customer base remains a key strategic objective and significant investment is being made in 2013 to achieve this more quickly.  To this end, two further business development managers have been appointed; one each in the UK and US, to develop sales in existing and new markets.  Also post-period, an agent has been appointed to represent the Company in Germany, where we believe there is high potential for us.

In January 2013, 50,000,000 New Ordinary Shares were admitted to AIM after a loan note holder converted its £225,000 convertible loan note that was issued in June 2008.  Following this transaction, the Company has one outstanding convertible loan note of £633,000, which is convertible before August 2014 at a price of 0.45p per share.

In January 2013, the Company was awarded a Technology Strategy Board grant worth up to £250,000 to part-fund a two-year project to further develop, manufacture and test a new coating for superabrasive materials used for 'hardfacing' tools in downhole and other high‑wear applications. Rapid technical and commercial progress was made to the point that first commercial sales were achieved shortly after the half-year.  In April 2013, the Company signed a mutually exclusive five-year supply agreement for use of the new material in oil & gas applications with hardfacing specialists Cutting & Wear Resistant Developments Limited of Sheffield.

The Company is in the final stages of negotiating commercial agreements with two world‑leading blue chip engineering companies that operate across a wide range of advanced engineering technologies.  These agreements will provide frameworks for working in partnership to develop several new applications for the oil and gas and industrial manufacturing sectors.

Our other strategic development programmes with aerospace and advanced engineering customer partners continue to advance steadily and successfully. As a result, we have ever‑increasing confidence that the extended period of product testing by our aerospace OEM (original equipment manufacturer) customers will result in specific approvals.

Overall, the Company is experiencing many positive customer and technical developments so, while it is disappointing to report this weaker set of interim financial results, the confidence of the Board remains high.

Robert Goddard

Chairman

18 June 2013

Consolidated income statement for the period ended 31 March 2013
		6 Months to		6 Months to		Year to
		31 March 2013		31 March 2012		30 Sept 2012
		(unaudited)		(unaudited)		(audited)
		£ '000		£ '000		£ '000
Revenue		1,264		1,539		2,915
Cost of Sales		(409)		(422)		(820)
Gross Profit		855		1,117		2,095
Administrative expenses		(844)		(809)		(1,573)
Depreciation		(57)		(51)		(108)
Exceptional item: Impairment of fixed assets		-		-		(36)
Operating profit / (loss)		(46)		257		378
Finance income		1		1		2
Finance costs		(57)		(57)		(115)
Loss on disposal of fixed assets		-		-
Profit / (loss) on ordinary activities before tax		(102)		201		265
Tax		-		-		42
Profit / (loss) for the period		(102)		201		307

Consolidated statement of changes in equity for the period ended 31 March 2013
		6 months to			6 months to				Year to
		31 March 2013 (unaudited)			31 March 2012 (unaudited)				30 Sept 2012 (audited)
		£ '000			£ '000				£ '000
Total equity at start of period		1,123			106				106
Profit / (loss) for the period		(102)			201				307
Issue of new shares		304			714				714
Exchange differences on translation of foreign operations		10			(9)				(6)
Share options		20			-				2
Total Equity at end of period		1,355			1,012				1,123

Consolidated balance sheet at 31 March 2013
		31 March 2013 (unaudited)		31 March 2012 (unaudited)		30 Sept 2012 (audited)
		£ '000		£ '000		£ '000
Assets
Non-current assets
Investments		-		-		-
Goodwill		69		69		69
Intangible assets		2		-		-
Property, plant & equipment		374		459		379
Total non-current assets		445		528		448
Current assets
Inventories		35		25		33
Trade and other receivables		363		606		549
Other current financial assets		89		80		98
Cash and cash equivalents		1,389		1,072		1,405
Total current assets		1,876		1,783		2,085
Total assets		2,321		2,311		2,533
Liabilities
Current liabilities
Trade and other payables		276		387		480
Financial liabilities		-		-		257
Provisions		-		-		-
Total current liabilities		276		387		737
Net current assets		1,600		1,396		1,348
Non-current liabilities
Financial liabilities		690		912		673
Total non-current liabilities		690		912		673
Total liabilities		966		1,299		1,410
Net assets		1,355		1,012		1,123
Equity
Share capital		2,733		2,666		2,666
Share premium		6,085		5,848		5,848
Retained earnings		(7,095)		(7,109)		(6,993)
Share-based payments reserve		260		248		240
Translation reserve		(628)		(641)		(638)
Total equity		1,355		1,012		1,123

Consolidated condensed cash flow statement for the period ended 31 March 2013
			6 months to		6 months to			Year to
			31 March 2013 (unaudited)		31 March 2012 (unaudited)			30 Sept 2012 (audited)
			£ '000		£ '000			£ '000
Cash flows from operating activities
	Operating profit / (loss)		(46)		258			378
	Impairment of intangibles		0		-			-
	Depreciation		57		51			108
	Impairment of fixed assets		-		-			36
	Share option charge		20		0			1
	(increase) / decrease in inventories		(2)		(1)			(9)
	(increase) / decrease in receivables		195		(178)			(139)
	Increase / (decrease) in payables		(204)		16			110
Cash generated from operations			20		146			485
	Finance income		1		1			2
	Finance costs		(31)		(43)			(83)
	Tax received / (paid)		-		-			45
Net cash generated from operating activities			(10)		104			449
Cash flows from investing activities
	Purchase of property, plant and equipment		(48)		(38)			(50)
Net cash used in investing activities			(48)		(38)			(50)
Cash flows from financing activities
	Net proceeds from issue of ordinary share capital		304		714			714
	Loans repaid		(262)		-			-
Net cash used in financing activities			42		714			714
Net increase / (decrease) in cash and cash equivalents			(16)		780			1,113
Cash and cash equivalents at the beginning of the period			1,405		292			292
Cash and cash equivalents at the end of the period			1,389		1,072			1,405

 

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