Interim Results

RNS Number : 7751N

Hardide PLC

21 May 2015

 

21 May 2015

Hardide plc

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

Interim Results

for the six months ended 31 March 2015

Key Points

Financial

·     Encouraging progress - supported by increased demand in H1

·     Revenue increased by 36% to £1.78m (H1 2014: £1.31m) - record six month high  

·     Gross profit increased by 38% to £1.21m (H1 2014: £0.88m)

·     Operating loss reduced to £0.08m (H1 2014: loss of £0.19m)  

·     EBITDA of £3,000 (H1 2014: EBITDA loss of £0.13m)

·     Strong balance sheet - cash at bank at 31 March 2015 of £3.25m

Operational

·     Programme to significantly expand capacity commenced:

-     additional coating reactor in UK has increased capacity by almost 50%

-     new manufacturing facility in North America under construction

·     Extension of major supply contract with General Electric Company Inc. ("GE")

-     now three year contract to 2017 and extendable up to five years

·     Diversification of the customer base continues

·     Board expects continuing progress

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

"We are pleased to report encouraging first half results, with revenues up 36% to £1.78m, a new record high for a six month period.  This reflects a rise in demand from existing customers as well as new customer wins.    

"Plans for the expansion of our coatings capacity are on track.  A third large reactor is now operational in our UK plant, increasing capacity by almost 50%, and the opening of our new US production facility is scheduled for late 2015.  We are also pleased to see the extension of our relationship with GE and continuing good progress with test programmes for new customers, including Airbus.

"We made a strong start to the second half.  Looking ahead, and as previously reported, we are cautious in the short term about the potential impact of the fall in the oil price on demand from some customers.  Nonetheless, Hardide is moving forward positively on many fronts and the Board remains confident about the longer-term prospects for the business."

- Ends -

For further information:

Hardide plc
Philip Kirkham, CEO  Jackie Robinson, Communications Manager	Tel: [phone] www.hardide.com
finnCap  Stuart Andrews / Grant Bergman	Tel: [phone]      www.finncap.com
KTZ Communications  Katie Tzouliadis	Tel: [phone] www.ktz.co.uk

Notes to editors:

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 hardness and toughness together with resistance to abrasion, erosion and corrosion; and 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, nuclear, advanced engineering and aerospace industries. 

CHAIRMAN'S STATEMENT

Introduction

First half results for the six months to 31 March 2015 were very encouraging, with sales up 36% to £1.78m, a new record high for a six month period. These results reflect increased demand from existing customers as well as new customer gains, assisted by the continuing expansion of our product offering into new applications. 

Financial Results

Revenue for the six months increased by 36% to £1.78m (2014: £1.31m).  Gross profit rose by 38% to £1.21m (H1 2014: £0.88m).  As expected, after the refurbishment of the pre-treatment line and the investment in business development and marketing resource, the Group generated an operating loss of £0.08m, which nonetheless represented a substantial improvement on the same period last year (2014: loss of £0.19m). Earnings before interest, tax, depreciation and amortisation ("EBITDA") was £3,000, which included £0.08m of costs relating to the new US production facility.  This compared with an EBITDA loss of £0.13m in the same period last year.

The balance sheet remains strong, with a cash balance of £3.25m (FY 2014: £3.47m) despite much increased capital expenditure of £0.37m (H1 2014: £0.10m). 

Operational Overview

The Group made encouraging progress over several fronts in the period.  A particularly important development has been the expansion of our coating capacity to support further sales growth in both the UK and North America.  In October 2014, we commissioned a third large reactor at our UK manufacturing facility, increasing capacity by almost 50%.  As well as enabling us to increase production volumes, this extra capacity is now available for our research and development programme, which underpins our planned expansion into new applications, as well as continuing innovation with existing technologies. In January 2015, we began construction of a new production facility in Martinsville, Virginia and this is on track for production to commence towards the end of 2015.  Two senior employees have now been recruited to manage the plant and will undergo training in the UK for several months in advance of its opening.

Alongside the expansion of capacity, we continue to diversify our customer base, both in terms of end user markets and geography.  Sales increased across the UK, Europe and North America. In North America sales rose by 139% against the same period last year, with volumes benefitting from our major supply agreement with GE. This agreement, signed in February 2014, was extended by a further year to three years in March 2015.  As previously reported, under the current terms, minimum total sales of c.$2.0million are guaranteed over its three year term to February 2017 and the contract may be extended up to five years. We continue to develop our newer territories of Germany and Italy and have invested further in sales and marketing. Customer trials there are progressing well. 

Our research and development programme is supporting our expansion into new markets, including civil aerospace, plastics processing and injection moulding.  As we have previously reported, an important objective is to build our currently-modest position in the aerospace sector and to this end we have recruited a specialised Business Development Manager.  Our progress towards the global aerospace Nadcap accreditation continues and we expect to apply for final certification under this scheme before the end of 2015.

Our coating qualification programme with Airbus is also advancing well. Document preparation, approval and signature by numerous individuals is a necessary although very time‑consuming part of this process.  However, with an Airbus Industries Process Specification (AIPS) now issued for a 'CVD-deposited tungsten carbide coating', the programme is moving at a faster pace.  Development with AgustaWestland continues, although progress has slipped due to delays in receiving test parts.  

We continue to invest in raising market awareness of our coatings technology and are implementing a comprehensive programme including industry editorial, direct e-marketing, technical presentations and selective exhibiting.

Board Appointment

At the beginning of March we were pleased to appoint Jan Ward to the Board as a non-executive director. She is the founder and chief executive of Corrotherm International, a supplier of specialist metals for critical applications in the energy and aerospace sectors and brings extensive relevant experience. Her understanding of the high-technology engineering sector and connections in our key markets further strengthens the Board. We thank William Zakroff, whom Jan replaces, for his valuable contribution to Hardide as non-executive director over many years.

Summary and Outlook

Hardide made very encouraging progress in the first half and has had a good start to the second half of the year.  While the dramatic fall in the oil price had no marked impact on demand from our major oil and gas service company customers in the first seven months of the year, the Board takes a cautious view on likely demand in the remaining months given reduced global oil and gas exploration and drilling spending and the limited forward visibility from these customers.  In all other markets and areas of the oil and gas industry, demand remains encouraging.   

The Company's balance sheet is strong with a cash balance of £3.25m. Despite the likely adverse effects on trading in H2 from the low oil price, the Board expects further good progress to be made on technical, customer and market developments during the second half of the year.

Robert Goddard

Chairman

21 May 2015

Consolidated Statement of Comprehensive Income

For the period ended 31 March 2015

£ 000	6 months to 31 March 2015 (unaudited)	6 months to 31 March 2014 (unaudited)	Year to 30 September 2014 (audited)
Revenue	1,777	1,311	3,030
Cost of Sales	(564)	(433)	(944)
Gross profit	1,213	878	2,086
Administrative expenses	(1,210)	(1,011)	(1,964)
Depreciation	(78)	(59)	(121)
Exceptional items:
Impairment of fixed assets	-	-	72
Provision for onerous lease	-	-	103
Operating (loss)/ profit	(75)	(192)	176
Finance income	8	4	9
Finance costs	(1)	(48)	(75)
Loss on ordinary activities before tax	(68)	(236)	110
Tax	(1)	-	51
Loss on ordinary activities after tax	(69)	(236)	161

Consolidated Statement of Changes in Equity

For the period ended 31 March 2015

£ 000	6 months to 31 March 2015 (unaudited)	6 months to 31 March 2014 (unaudited)	Year to 30 September 2014 (audited)
Total equity at start of period	3,956	617	617
Profit / (loss) for the period	(69)	(236)	161
Issue of new shares	-	199	3,157
Exchange differences on translation of foreign operation	(16)	8	(4)
Share options	15	13	25
Total equity at end of period	3,886	601	3,956

Consolidated Statement of Financial Position

As at 31 March 2015

£ 000	31 March 2015 (unaudited)	31 March 2014 (unaudited)	30 September 2014 (audited)
Assets
Non-current assets
Investments	-	-	-
Goodwill	69	69	69
Intangible assets	4	2	5
Property, plant & equipment	684	290	383
Total non-current assets	757	361	457
Current assets
Inventories	67	32	50
Trade and other receivables	588	474	571
Other current financial assets	98	96	199
Cash and cash equivalents	3,254	944	3,467
Total current assets	4,007	1,546	4,287
Total assets	4,764	1,907	4,744
Liabilities
Current liabilities
Trade and other payables	536	386	463
Financial liabilities	16	504	16
Provision for lease obligation	144	84	132
Total current liabilities	696	974	611
Net current assets	3,311	572	3,676
Non-current liabilities
Financial liabilities	29	50	37
Provision for lease obligation	153	282	140
Total non-current liabilities	182	332	177
Total liabilities	878	1,306	788
Net assets	3,886	601	3,956
Equity attributable to equity holders of the parent
Share capital	3,041	2,777	3,041
Share premium	8,935	6,240	8,934
Retained earnings	(7,576)	(8,077)	(7,507)
Share-based payment reserve	142	288	127
Translation reserve	(656)	(627)	(639)
Total equity	3,886	601	3,956

Consolidated Statement of Cash Flows

For the period ended 31 March 2015 

£ 000	6 months to 31 March 2015 (unaudited)	6 months to 31 March 2014 (unaudited)	Year to 30 September 2014 (audited)
Cash flows from operating activities
Operating profit / (loss)	(75)	(192)	176
Impairment of intangibles	1	0	1
Depreciation	77	59	120
Impairment of fixed assets	-	-	(72)
Share option charge	14	13	25
(Increase) / decrease in inventories	(17)	9	(9)
(Increase) / decrease in receivables	28	(28)	(175)
Increase / (decrease) in payables	73	104	180
Increase / (decrease) in provisions	-	-	(104)
Cash generated from operations	101	(35)	142
Finance income	8	4	9
Finance costs	(1)	(27)	(51)
Tax received / (paid)	53	42	42
Net cash generated from operating activities	161	(16)	142
Cash flows from investing activities
Purchase of property, plant, equipment	(366)	(104)	(189)
Net cash used in investing activities	(366)	(104)	(189)
Cash flows from financing activities
Net proceeds from issue of ordinary share capital	-	200	3,158
Loans repaid	-	(232)	(734)
Finance lease inception	-	65	65
Finance lease repayment	(8)	(6)	(12)
Net cash used in financing activities	(8)	27	2,477
Net increase / (decrease) in cash and cash equivalents	(213)	(93)	2,430
Cash and cash equivalents at the beginning of the period	3,467	1,037	1,037
Cash and cash equivalents at the end of the period	3,254	944	3,467

 

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