TIDMHDD
RNS Number : 0824T
Hardide PLC
10 December 2012
Press Release 10 December 2012
Hardide plc
("Hardide" or "the Group" or "the Company")
Preliminary results for the year ended 30 September 2012
Hardide plc (AIM: HDD), the provider of unique metal surface
engineering technology, announces its preliminary results for the
twelve months ended 30 September 2012.
highlights
Financial
-- Group turnover increased by 49% to GBP2.91 m (2011: GBP1.95 m)
-- Gross profit rose by 73% to GBP2.09 m (2011: GBP1.21 m)
-- Group EBITDA increased by GBP747k to GBP522k (2011: loss GBP225k)
-- Maiden operating profit at Group level: GBP378k (2011: loss
GBP340k) and Group profit before tax improved by GBP711k to GBP265k
(2011: loss before tax GBP446k)
-- UK operation, Hardide Coatings Limited, posted full-year
pre-tax profit of GBP1.06 million (2011: GBP409k), an increase of
161%
-- US sales increased 56% to GBP581k (2011: GBP373k)
-- Profit per share 0.03p (2011: loss of 0.05p)
-- Positive cash flow from operating activities of GBP449k (2011: outflow of GBP177k)
-- Successful placing of GBP750k new equity with new and existing shareholders in November 2011
-- Cash at bank at 30 September 2012 of GBP1.40 million (2011:
year end of GBP292k), markedly stronger balance sheet
Operational and corporate
-- Philip Kirkham appointed as Chief Executive Officer
-- Lower dependence on a few large customers and total number of
repeat customers increased by 45%
-- Airbus test programme continues to deliver encouraging
results with generic testing by customer expected to be complete in
2013. Indications of potential aerospace applications for Hardide
beyond hard chrome replacement
-- Andrew Boyce, representing a significant family shareholding,
appointed as Non-executive Director
Post-period events
-- New approach to strategic marketing, branding and messaging
-- A programme in place for further investment in sales and marketing
Commenting on the results, Robert Goddard, Chairman of Hardide
plc, said:
"Hardide grew revenues substantially in each of its key sectors
in the year ending 30 September 2012. This, together with the high
operating gearing and improved utilisation rates, helped gross
margin rise to 72% compared with 62% last year. This resulted in
the Group posting a maiden operating profit of GBP378k.
We increased our marketing spend and will increase it again in
the coming year. At the same time, we will further develop our
technology for use in new applications and new industries. Our
markedly stronger balance sheet enables us to do this with much
greater confidence than hitherto.
The directors are optimistic that the coming year will see
further growth in sales and that the additional development spend
will also benefit future years."
For further information:
Hardide plc www.hardide.com
Robert Goddard, Chairman Tel: +44 1869 353 830
Philip Kirkham, Chief Executive jrobinson@hardide.com
Officer
Jackie Robinson, Communications
Manager
N+1 Singer www.n1singer.com
Andrew Craig, Ben Wright Tel: +44 207 496 3000
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 provides dramatic cost
savings through reduced downtime and extended part life. Customers
include leading companies operating in oil and gas exploration and
production, valve and pump manufacturing, advanced engineering and
aerospace.
CHAIRMAN'S STATEMENT AND REVIEW
Financial OVERVIEW
It is pleasing to report Hardide's strongest financial
performance since incorporation, and by a considerable margin.
Sales revenue for the year ended 30 September 2012 rose by 49%
to GBP2.91 million (2011: GBP1.95 million) and there was a maiden
operating profit at Group level of GBP378k, and EBITDA of GBP522k
(2011: GBP225k loss). Group profit before tax increased to GBP265k;
up by GBP711k on a loss of GBP446k in FY 2011.
Costs of sales increased by only 12% to GBP820k (2011: GBP733k).
This was due to fixed production salaries and improved utilisation
of assets. This resulted in a 10% increase in gross margin to 72%
(2011: 62%), meaning that gross profit rose by over 70% to GBP2.09
million (2011: GBP1.21 million).
A well-deserved staff bonus, as well as the recruitment cost for
the new CEO and three other new staff, accounted for most of the 9%
increase in expenses to GBP1.57 million (2011: GBP1.44
million).
In November 2011, in a placing to new and existing investors,
the Group raised GBP750,000 (gross) from the issue of 125,000,000
new ordinary shares at 0.6p per share. The proceeds are being used
to bolster sales, undertake modest capital expenditure and develop
the skills and technology base within the Group.
BUSINESS REVIEW
Customers and Markets
The recovery in demand seen at the end of the previous financial
year continued and FY 2012 sales were significantly higher than in
FY 2011 across each of our market sectors. Revenue from the oil and
gas sector increased by 43%, flow control (mainly pumps and valves)
by 49% and advanced engineering, including aerospace tripled,
albeit from a fairly low base. It is also encouraging that the
number of repeat customers increased by 45% over the period.
During the year we added one of the largest global providers of
oilfield services and products to our customer list with repeat
production sales on coatings for two downhole components and a
third in test for this same customer. We are now working on new
applications for five other major oilfield services companies. New
orders were secured from two leading-edge drilling tool developers
and tests are underway with several more downhole and
drilling-related companies.
Highlights in the flow control sector included the first
production order from a new 'severe service' valve manufacturer,
regular monthly orders from a new pump manufacturer, Hardide
specified on a new high-pressure valve range and approved on a
valve application for a blue chip oilfield services company. Also
of note is our cooperation with EDF Energy by which Hardide has
been specified as a solution to a problem with a steam valve at
Hinkley Point B nuclear power plant. EDF Energy is now evaluating
the coating for other applications.
The Group has been following a range of opportunities arising
from its membership of the British Valve and Actuators Association
and the Valve Manufacturers Association of America. Awareness of
the Hardide technology in this sector is improving, but the
majority of our valve sales are still to UK customers. To address
this, the coming year will see a plan to develop our valve customer
base in Europe at the same time as expanding our pump business in
the region.
A significant growth in sales to the advanced engineering sector
was achieved in the year. This was due to some recovery in demand
from customers affected by the economic downturn and also the
successful outcome of some long-running test programmes. Commercial
success was achieved in coating titanium, with the first regular
production order on a Formula 1 motorsport application. The
directors believe that the success in coating this important but
difficult base material for an exacting customer will open up a
range of applications in other industries.
Our traditional markets and customers still accounted for the
majority of revenue. However, the improved diversity of the
pipeline, together with a re-focused business development strategy
and further increases in our business development resources gives
us confidence that we will make steady progress in widening our
customer base in the coming year and beyond.
Directors and management
In June 2012, we welcomed our long-standing shareholder Andrew
Boyce as a non-executive director. The Boyce family shareholding
amounts to 26.5% of the Group's issued share capital and the family
has had a stake in Hardide plc since 2003. Andrew is a seasoned
entrepreneur and investor, having established and operated a number
of successful businesses. He has made a valuable contribution to
the board since his appointment and we are very pleased that he has
found the time to serve the Company.
In September 2012, after a prolonged search we were pleased to
announce the appointment of Philip Kirkham as our new chief
executive officer. Since then, Bruce Robinson and I have resumed
our normal non-executive roles.
Philip brings impressive CEO and international experience with a
strong background in marketing, sales and production in the metal
processing sector. A Chartered Engineer (CEng) and a European
Engineer (Eur Ing) with a BSc in Chemical Engineering and an MSc in
Advanced Manufacturing Management, he has held senior management
and CEO positions in Rolls Royce plc, Firth Rixson Ltd and the
private equity backed Material Advantage Group Ltd.
His immediate focus is the development of the sales and
marketing side of the business. The first elements of new
strategies have been developed and these focus initially on
achieving more sales to our existing oil & gas and flow control
markets where we have good track record and proven technical
success. The plan so far sees increased investment in sales and
marketing; including additional business development staff and
raising the awareness of the Hardide coating and potential
applications among new adopters. We already appointed a second
UK-based business development manager in September 2012 to exploit
the oil and gas sector and are planning to recruit a third business
development manager in the near future.
I am pleased to report that the Group was able to reward
employees with a maximum bonus payout this year. It was very
pleasing for the board to be able to recognise in this way the
outstanding loyalty and commitment of staff in meeting the
challenges of the last few years.
UK: Hardide Coatings Limited
The UK operating company, Hardide Coatings Limited posted a
record full year profit, with a PBT of GBP1.06 million (2011:
GBP409k) on revenue of GBP2.91 million (2011: GBP1.95 million) - an
increase of 161%. Material and other costs remained stable and the
percentage gross profit margin increased by 10% during the
year.
The UK plant processed all sales to the US, which rose by 56%
compared with FY 2011. Efficient customer communications and
logistics continued to ensure no adverse effect on lead times. The
Houston manufacturing facility remains hibernated with the plant
in-situ and will remain so until demand and UK capacity are such
that it makes economic sense to re-open. The costs of hibernation
remain minimised and stable. A study was conducted during the year
to determine the conditions that would allow the re-opening of the
facility and the resources and timescales required to do so.
Accreditations under AS9100, ISO9001 and ISO14001 were
maintained during the year and the Group continues to strive for
the highest standards in these vital areas.
The excellent safety record remains in place with no lost-time
incidents recorded during the year.
Technology, Research & Development
The past year saw a number of production orders emerging from
the development pipeline, including some notable technical
achievements.
The technical, engineering and production teams successfully
adapted the Hardide process to enable the coating of the interior
of hundreds of small holes in a component for a major coatings
company. This technical achievement has resulted in regular repeat
orders and has unlocked our ability to coat extremely complex
shaped parts made of low-chromium steel. It also triggered the
successful development of a new pre-treatment technique.
We received our first production order for coating on titanium
after a successful test programme with a Formula 1 motorsport
company.
The test programme continues with Airbus to deliver encouraging
results, with generic testing expected to be complete in 2013.
Indications are that there could be a wider range of applications
beyond using the Hardide coating solely as a replacement for hard
chrome. Test programmes are also underway with four other major
aerospace manufacturers. These are long-term test programmes and
include two new opportunities that have been developed during the
year.
Other medium to long-term strategic development projects
continue in other areas, including aerospace, defence, industrial
turbine blades, oil and gas drilling and pumps.
The Hardide technology has been presented at several prestigious
conferences in the oil & gas, flow control and surface
engineering sectors in the UK and overseas throughout the year.
Outlook
We have begun the current year with steady customer demand and a
good quality pipeline, with a rise in enquiries for new
applications and the acceleration of some oilfield test programmes.
Indications from our major customers are that they are forecasting
to remain buoyant throughout the coming year, although this may be
influenced by global economic circumstances.
Our investment in technology and marketing will rise further in
the coming year; much of that increase will be in pursuit of
benefits to be realised in the years beyond in the form of new
applications and new market sectors. Our markedly stronger balance
sheet enables us to increase spending with much greater confidence
than hitherto.
We will continue to maintain a relentless focus on operational
efficiency, quality and cost control. The plan for this involves
multi-skilling of key staff, strengthening quality control and the
adoption of 'smart' manufacturing techniques.
Depending on the extent and type of forecast demand, there may
be the need to commit in the coming year to additional capital
projects to satisfy that demand.
The board has confidence that the prospects are good for the
business to move forward significantly in the coming year.
Finally, our thanks must go to our employees, customers and
shareholders for their ongoing support as we look forward to
further improvements in the year ahead.
Robert Goddard
Chairman
7th December 2012
Financial Review
Revenue for 2011/12 reached a record GBP2.91m, an increase of
GBP0.97m, or nearly 50% over the prior year. Although the second
half was slightly down on the first, this was a reflection of the
exceptionally strong revenues at the start of the year, rather than
any underlying weakness in the second half.
Encouragingly, the significant revenue increases were seen
equally across all the Group's market sectors of oil and gas, flow
control and advanced engineering, as well as geographically -
revenue from North American customers increased by 56% year on
year. Growth came from a mix of existing products with existing
customers and new products to existing and new customers. Our
pipeline delivered a number of new accounts during the year and the
number of active customer application projects also increased,
which augurs well for further conversions in 2012/13.
In spite of the 49% increase in sales, costs of sales only
increased by 12%, reflecting better utilisation of capacity and the
relatively fixed nature of production salaries. We were subject to
some increases in raw material prices, principally gases. However
we did manage to avoid other increases or in some cases reduce
costs by switching suppliers or bulk buying. As a result, the
overall gross profit margin increased from 62% to 72%.
Group administrative costs rose by 9% to GBP1.57m, principally
due to staff bonus and recruitment costs; although there was an
underlying increase in marketing spend. This will continue to
increase in the current year. The business development function was
short-staffed for some of the year, however this was rectified in
September and further investment in business development is also
planned for this year.
There was a small impairment of fixed assets in our mothballed
Houston facility. Overhead costs relating to the Houston facility
have been reduced to the bare minimum required and are stable
year-on-year at GBP106k. Corporate central costs of GBP620k were
reduced by GBP64k compared to prior year.
The overall effect of markedly increased revenues on a
relatively fixed cost base was a GBP718k upswing in Group operating
profits from a loss of GBP340k to an operating profit of GBP378k. A
great deal of that operating profit improvement also fed through to
cash, where cashflow from operating activity improved by GBP626k
from an outflow of GBP177k in 2011 to an inflow of GBP449k in the
year.
The balance sheet was reinforced by the raising of GBP714k (net)
from existing and new shareholders in November 2011. This, plus the
sustained improvement in trading, has provided the confidence to
invest further in sales and marketing, as well as the
implementation of a longer-term plan for investment in additional
plant and machinery. Further resources will also be applied to
enhance Hardide's product offering. In spite of the turnover
increase, working capital remained stable: inventories increased by
over a third but at GBP33k remained low; trade debtors increased by
41% from GBP347k to GBP490k but reduced in terms of average debtor
days; trade creditors actually fell by 22% to GBP148k. Net assets
increased by over GBP1m.
During the year we started work on an internal reorganisation to
transfer patents and other intellectual property to Hardide plc.
Not only will this mean additional security for the IP, it will
also provide a means to utilise more efficiently the Group's
brought forward tax losses. This work should be completed in the
first half of 2012/13.
Peter Davenport
Finance Director
7th December 2012
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 30 September 2012
2012 2011
GBP000 GBP000
Revenue 2,915 1,947
Cost of sales (820) (733)
Gross profit 2,095 1,214
---------------------------------------- -------- --------
Administrative expenses (1,573) (1,439)
Depreciation and amortisation (108) (115)
Exceptional item: Impairment of (36) -
fixed assets
Operating profit / (loss) 378 (340)
---------------------------------------- -------- --------
Finance income 2 -
Finance costs (115) (106)
Profit / (loss) on ordinary activities
before taxation 265 (446)
---------------------------------------- -------- --------
Taxation 42 65
Profit / (loss) on ordinary activities
after taxation 307 (381)
---------------------------------------- -------- --------
Profit / (loss) per share: Basic 0.03p (0.05)p
Profit / (loss) per share: Diluted 0.02p (0.03)p
All operations are continuing.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
at 30 September 2012
2012 2011
GBP000 GBP000
Assets
Non-current assets
Goodwill 69 69
Intangible assets - -
Property, plant & equipment 379 478
--------------------------------------- -------- --------
Total non-current assets 448 547
--------------------------------------- -------- --------
Current assets
Inventories 33 24
Trade and other receivables 549 406
Other current financial assets 98 102
Cash and cash equivalents 1,405 292
--------------------------------------- -------- --------
Total current assets 2,085 824
--------------------------------------- -------- --------
Total assets 2,533 1,371
--------------------------------------- -------- --------
Liabilities
Current liabilities
Trade and other payables 480 370
Financial liabilities 257 -
Total current liabilities 737 370
--------------------------------------- -------- --------
Net current assets 1,348 454
--------------------------------------- -------- --------
Non-current liabilities
Financial liabilities 673 895
--------------------------------------- -------- --------
Total non-current liabilities 673 895
--------------------------------------- -------- --------
Total liabilities 1,410 1,265
--------------------------------------- -------- --------
Net assets 1,123 106
--------------------------------------- -------- --------
Equity attributable to equity holders
of the parent
Share capital 2,666 2,541
Share premium 5,848 5,259
Retained earnings (6,993) (7,310)
Share-based payments reserve 240 248
Translation reserve (638) (632)
--------------------------------------- -------- --------
Total equity 1,123 106
--------------------------------------- -------- --------
The financial statements were approved and authorised for issue
by the Board on 07 December 2012.
Robert Goddard
Director
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 30 September 2012
2012 2011
GBP000 GBP000
Cash flows from operating activities
Operating profit / (loss) 378 (340)
Depreciation 108 115
Impairment of fixed assets 36 -
Share option charge 1 5
Increase in inventories (9) 2
Increase in receivables (139) (109)
Decrease in payables 110 112
Cash generated from operations 485 (215)
---------------------------------------------- -------- --------
Finance income 2 -
Finance costs (83) (10)
Tax received / (paid) 45 48
Net cash generated from operating activities 449 (177)
---------------------------------------------- -------- --------
Cash flows from investing activities
Purchase of property, plant and equipment (50) (21)
Net cash used in investing activities (50) (21)
---------------------------------------------- -------- --------
Cash flows from financing activities
Net proceeds from issue of ordinary share 714 -
capital
Finance lease repayment - (46)
Net cash generated by / (used in) financing
activities 714 (46)
---------------------------------------------- -------- --------
Net increase / (decrease) in cash and
cash equivalents 1,113 (244)
---------------------------------------------- -------- --------
Cash and cash equivalents at the beginning
of the year 292 536
---------------------------------------------- -------- --------
Cash and cash equivalents at the end
of the year 1,405 292
---------------------------------------------- -------- --------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 30 September 2012
Share Share Share-based Foreign Retained Total
Capital Premium Payments Translation Earnings Equity
---------------------- --------- --------- ------------ ------------- ---------- --------
At 1 October 2010 2,541 5,259 269 (629) (6,955) 485
---------------------- --------- --------- ------------ ------------- ---------- --------
Issue of new shares - - - - - -
Share options - - (21) - 26 5
Combined instruments - - - - - -
Exchange translation - - - (3) - (3)
Loss for the year - - - - (381) (381)
---------------------- --------- --------- ------------ ------------- ---------- --------
At 30 September
2011 2,541 5,259 248 (632) (7,310) 106
---------------------- --------- --------- ------------ ------------- ---------- --------
At 1 October 2011 2,541 5,259 248 (632) (7,310) 106
---------------------- --------- --------- ------------ ------------- ---------- --------
Issue of new shares 125 589 - - - 714
Share options - - (8) - 10 2
Combined instruments - - - - - -
Exchange translation - - - (6) - (6)
Profit for the
year - - - - 307 307
---------------------- --------- --------- ------------ ------------- ---------- --------
At 30 September
2012 2,666 5,848 240 (638) (6,993) 1,123
---------------------- --------- --------- ------------ ------------- ---------- --------
The financial information set out in this preliminary
announcement does not constitute statutory accounts as defined in
Section 435 of the Companies Act 2006.
The consolidated statement of financial position at 30 September
2012, and the consolidated statement of comprehensive income and
consolidated statement of cash flows for the year then ended have
been extracted from the Group's 2012 statutory financial statements
upon which the auditors have reported. The auditor's report is
unqualified and does not include any statement under Sections 498
(2) (accounting records or returns inadequate or accounts not
agreeing with records) or 498 (3) (failure to obtain necessary
information and explanations) of the Companies Act 2006. Those
financial statements have not yet been delivered to the Registrar
of Companies.
Accounting Policies
The preliminary announcement for the year ended 30 September
2012 has been prepared in accordance with International Financial
Reporting Standards as adopted by the European Union. The
accounting policies applied in this preliminary announcement are
consistent with those reported in the Group's annual financial
statement for the year ended 30 September 2012 with new standards
and interpretations which became mandatory for the financial
year.
Copies of the Annual Report and Financial Statements will be
posted to shareholders shortly and will be available from the
Company's registered office at 11 Wedgwood Road, Bicester OX26
4UL.
This information is provided by RNS
The company news service from the London Stock Exchange
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