TIDMHDD
RNS Number : 1169W
Hardide PLC
09 December 2019
9 December 2019
Hardide plc
("Hardide", the "Group" or the "Company")
Preliminary results for the year ended 30 September 2019
Hardide plc (AIM: HDD), the developer and provider of advanced
surface coating technology, announces its preliminary results for
the year ended 30 September 2019.
Highlights
Financial
-- Record revenues, up 10% to GBP5.1m (FY2018: GBP4.6m)
-- Gross profit of GBP2.4m (FY2018: GBP2.4m) reflecting shifting sales
mix / customer diversification
-- Gross margin of 48% (FY2018: 52%); gross margin of 51% in H2
-- EBITDA loss before exceptional items of GBP0.6m, including GBP0.1m
costs relating to moving site (FY2018: loss before exceptional
items of GBP0.3m)
Trading
-- Broadening of customer and sector bases continuing
* Over half of the sales were from customers gained in
the last four years
* Sales to oil and gas sector down 9% overall but H2
considerably stronger at 22% up on H1
* 87% increase in sales to the flow control sector
* 40% increase in sales to the precision engineering
sector
* 14-fold increase in sales of coated industrial
diamonds
* Revenue from North American customers increased to
65% of total Group sales - Martinsville facility
delivered maiden positive EBITDA contribution
(excluding overhead marketing costs)
Strategic
-- Hardide-A coating selected as the replacement for hard chrome plating
on various Airbus aircraft components
-- Three additional coating reactors currently on order - two for the
UK (including larger capacity reactor) and one for the US
-- On track for the relocation of the UK operation to a new facility
by September 2020 - decision taken to increase investment in "future
proof" equipment
Technology
-- Innovate UK grant-funded project completed resulting in the launch
of two new low-temperature Hardide coating variants
-- Awarded grant funding towards two National Aerospace Technology
Exploitation Programme (NATEP) projects
Post-period
-- New patent granted by the UK Intellectual Property Office covering
a water droplet erosion resistant coating for turbine blades and
other components
-- Hardide-A coating selected for use on components for the new Lockheed
Martin F-35 Lightning II Joint Strike Fighter
Commenting on the results, Robert Goddard, Chairman of Hardide,
said: "Overall, this is a strong set of results. We are pleased to
announce that Hardide has delivered a second year of record sales
with a 10% increase to GBP5.1m. Sales grew across all sectors and
an 18% rise in demand from North America means the region now
accounts for 65% of Group sales. We are very pleased that the
Martinsville facility (excluding overhead marketing costs) has
achieved a positive EBITDA for the year for the first time since
opening. Demand continues to be particularly buoyant in North
America from the flow control, and oil and gas sectors. Of
particular note is the selection of the Hardide-A coating by Airbus
for a number of components on a range of aircraft.
"We are looking forward to the relocation of the UK business to
the new site in 2020 and the increase in capacity and new
opportunities that it will bring. We have made a very positive
start to the new financial year and the Board is confident of
continued growth.This is a strategic priority and we are prepared
to invest in additional R&D and marketing to achieve this and
to position the company strongly for the future."
Enquiries:
Hardide plc Tel: +44 (0) 1869
Robert Goddard, Non-Executive Chairman 353830
Philip Kirkham, CEO
Jackie Robinson, Communications Manager
IFC Advisory - Financial PR and Investor Tel: +44 (0) 20 3934
Relations 6630
Graham Herring / Tim Metcalfe / Florence
Chandler
finnCap - Nominated Adviser and Joint Broker Tel: +44 (0) 20 7220
Henrik Persson / Matthew Radley 0500
Allenby Capital - Joint Broker
Tony Quirke / Jeremy Porter / James Hornigold Tel: +44 (0)20 3328
5656
Notes to editors:
Hardide develops, manufactures and applies advanced technology
tungsten carbide/tungsten metal matrix 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, precision engineering and
aerospace industries.
www.hardide.com
chairman's and ceo's report
INTRODUCTION
The Group is pleased to report record full year sales for the
second consecutive year of GBP5.1m - a 10% increase over last year
(FY2018: GBP4.6m). Sector and customer diversification continued as
we gained new applications. Over half of the sales were from
customers gained within the last four years. The oil and gas
industry remained our largest market. However, our sales to it
suffered a 9% decline in revenue in the year. We expect this to be
reversed in the current financial year as we saw a 22% increase in
oil and gas sales in H2 compared with H1.
There were two significant corporate projects this year. The
first was the fundraising of GBP3.5m (net) announced in February
2019, which has allowed us to continue our strategy to grow the
business further by investing ahead of revenue in marketing,
capacity and production equipment.
The second event was the signing of a 15-year lease on
newly-built premises close to the existing site, to replace the
current facility in Bicester. The building has double the available
floor space and a greater roof height, which will allow the
installation of larger coating reactors. Three new reactors have
been ordered; two for the UK and one for the US. One of the UK
reactors will have a larger capacity and enable the coating of
components that are too large for the current reactors, such as
turbine blades and some aircraft parts.
We are particularly pleased to report that our Martinsville
site, opened in January 2016 with the benefits of the fundraising
announced in August 2014, made an EBITDA profit (excluding overhead
marketing costs) for the financial year for the first time.
FINANCIAL RESULTS
The Group generated record sales of GBP5.1m in the year ended 30
September 2019 (FY2018: GBP4.6m).
Direct expenses including production salaries increased by 20%
due to the higher volume and mix of sales, together with an
increase in production staff numbers ahead of the expected increase
in activity.
Group gross profit was the same as last year at GBP2.4m (FY2018:
GBP2.4m). However, H2 showed a much-improved performance over H1,
with sales revenues 15% higher and a better mix of sales. Gross
margin recovered from 45% in H1 to 51% in H2, giving an overall
gross margin for the year of 48% (FY2018: 52%). The first half
gross margin suffered from an adverse product mix, as previously
reported in the Interim results.
Overhead costs including the extra costs associated with the
lease on the new building rose by 12% (8.4% excluding these costs),
including the full year cost of an additional US Business
Development Engineer.
The Group's EBITDA loss before exceptional items was GBP0.6m
including GBP0.1m of costs relating to the new building in Bicester
(FY2018: GBP0.3m loss before exceptional items). The EBITDA loss in
H2, excluding new building costs, was a much reduced GBP0.1m
compared with a loss of GBP0.4m in H1. Grant income amounted to
GBP0.1m in the year.
On the balance sheet, net assets at 30 September 2019 were
GBP7.7m (30 September 2018: GBP5.1m). This included a cash balance
of GBP4.8m (30 September 2018: GBP3.3m). Inventories increased
substantially as we took the opportunity to purchase a considerable
amount of gas at a discounted price (also reflected in trade
payables), while the similarly substantial increase in trade
receivables resulted from particularly strong trading towards the
end of the year.
OPERATIONAL OVERVIEW
Customers and Markets
Revenue from flow control customers increased by 87% and from
precision engineering by 40%. Demand increased sharply during the
year from a global player in pumps, one of our longest standing US
customers, as they expanded their use of the Hardide coating from
their premium range to several new models. This resulted in a 93%
increase in sales to this customer compared with the previous year.
We are in discussions with the same customer about using the
Hardide coating on more products in the year ahead.
Aerospace
In the aerospace sector, Airbus selected the Hardide-A coating
as the replacement for hard chrome plating on compression flap pads
on a range of aircraft types. Qualification of other components is
also nearing completion and we are in detailed discussions with
Airbus' tier 1 suppliers about production orders, expected to
commence in 2020. Hardide-coated parts have been flying for
evaluation by a major MRO (maintenance, repair and overhaul
organisation) for over 4,000 hours on an Airbus A320. Subject to
examination at servicing, production orders are expected in the
current financial year. Other development work for European and
North American aerospace companies is continuing. In November 2019,
post year-end, we announced that Hardide-A has been selected to
replace HVOF (high velocity oxy-fuel) thermal spray coatings on
components for Lockheed Martin's new F-35 Joint Strike Fighter.
This follows an extensive test programme and is another example of
the potential of Hardide's coatings to replace the most widely used
tungsten carbide coating, HVOF, in severe service applications. The
testing of components at Leonardo Helicopters was successful and
the parts are now incorporated into a full transmission assembly
ready for the final test. Full approval is expected in 2020. We are
also in technical discussions with a number of other significant
companies in the aerospace and defence industries and early stage
trials have commenced.
Recent independent tests showed that the Hardide-A coating
increased the fatigue life of components, rather than it being
decreased, as in the case of most other hard coatings. Not
surprisingly, this has attracted the interest of many engineers. We
are very pleased with the technical performance of the coating and
confident that announcements of supply agreements will be
forthcoming in the near term. The progress in securing aerospace
production orders has been much slower than we would have liked,
although this is a common feature of the introduction of a new
product to the aerospace industry.
Oil & Gas
Activity remains generally buoyant in the oil and gas sector,
although the phasing of demand from two customers contributed to a
9% year-on-year fall in sales. One customer changed its
manufacturer of the components that we coat and this caused an
extended delay to their supply of components. This began to be
resolved in the second half and a normal rate of supply has now
resumed. In addition, the Canadian oil industry has been
experiencing restrictions on pipeline capacity and this has
resulted in a slowdown of demand from the second customer.
Demand is now returning to previous levels and we saw a 22%
increase in sales to oil and gas customers in H2 compared with H1.
We expect further growth in demand from oil and gas customers in
the year ahead. During the period, sales more than doubled to one
of the world's largest oilfield service companies, placing them
among our top three oil and gas customers. We worked with them to
develop a coating for critical components on a 'breakthrough'
directional drilling tool and this is now being deployed by
operators around the world. This tool also uses Hardide--coated
industrial diamonds. A high volume of production orders continued
to be received under our supply arrangement with a very large
global oil and gas operator. This is for components of complex
design that presented considerable technical and production
challenges. Due to its production-enhancing benefits, these
components are of high value to the customer. The technology has
been deployed in deepwater fields in the Gulf of Mexico and shortly
off the coast of West Africa. The coating of these parts is being
carried out at our US facility. As a result of this technical
success, shortly we will begin testing with a European manufacturer
of a similarly complex part which is used extensively in other
industries. Demand for the coating of industrial diamonds for oil
and gas customers rose significantly (14-fold) as the drilling
market resumed growth, and sales of these products increased
considerably. We continue to have many new and potentially
high-volume applications being developed with customers in the oil
and gas sector.
Power Generation and Precision Engineering
Significant advances were made with our long-term project to
develop a water droplet erosion resistant coating for blades and
vanes used in turbines in the power generation industry.
Post-period, a UK patent was granted that incorporates and protects
this and other applications. An application for an international
PCT (Patent Cooperation Treaty) patent is in progress to cover many
other countries. EDF Energy plans to start field testing
Hardide-coated blades in a power station turbine during 2020 and we
are at various stages of progress with several other power
engineering customers on the testing of coatings for turbine
blades. We see this as an important market for Hardide coatings in
the future and one that will continue to grow.
There was regular demand throughout the year for our coated
components for the high--speed X-ray baggage screening machine. We
expect demand to grow as this customer achieves greater market
penetration and increases their rate of manufacture.
Marketing
During the year, we exhibited at several highly-targeted
aerospace and oil and gas events, both in the UK and the US. These
have resulted in new leads and contacts and fully justify our
decision to exhibit in 2020 at the Singapore Airshow and
Farnborough International Airshow.
Raising awareness of Hardide's capabilities remains a priority.
Through conference presentations in person and via webinar,
Hardide's Technical Director has successfully extended awareness
among new audiences internationally.
The performance of our online presence is monitored continually
and so we know that our website is used extensively as a technical
resource. As a novel technology with no direct competitors, the
website is a vital source of accurate information and data about
Hardide's coatings and their applications. Next year will see a new
Hardide website. This will provide updated content and
functionality for technical and investor visitors.
Production, Technology, Research & Development and
Accreditations
A third reactor for our US site was installed in November 2018,
together with a second and larger pre-treatment line. This enabled
the transfer from the UK of complete lines of product for several
US customers and the processing of larger components. In turn, this
has increased the range of products for US customers who prefer an
'in-country' supplier. The Martinsville facility was particularly
busy in the second half and has been fully utilising all three
coating reactors. A fourth reactor was ordered for the US site, and
this is due for delivery in spring 2020.
The move to the new UK site will result in a more modern and
efficient production environment with further improved
environmental performance. Investment in equipment and technology
to reduce emissions and improved filtration systems is being made
alongside two new coating reactors and a second and larger
pre-treatment line. These will enable bigger components to be
processed, including turbine blades and some aircraft landing gear
components.
The project, partly funded by Innovate UK, to develop and
characterise a new low-temperature Hardide coating process was
completed successfully. As a result, the Group has launched two new
low temperature coating variants - Hardide-LT and Hardide-LA. These
open up new opportunities for the coating of a wide range of metals
commonly used in the aerospace, and oil and gas sectors. Production
orders for them are now being received.
Work continued on two, 18-month projects to apply the new low
temperature coating to additional substrates in the aerospace
sector and to develop new grinding and super-finishing techniques.
These have been part-funded by the National Aerospace Technology
Exploitation Programme (NATEP) and are being carried out in
collaboration with Airbus, Leonardo Helicopters and other industry
partners.
The quality management systems at the Bicester and Martinsville
sites were recertified in February 2019 to aerospace quality
management system AS9100D/ISO9001:2015, thereby confirming approval
for coating aerospace and space industry components. In July 2019,
within two years of first being accredited by NADCAP (National
Aerospace and Defense Contractors Accreditation Program), the
Bicester site was awarded NADCAP Merit Status for its superior
performance and commitment to continual improvement in aerospace
quality. The Bicester site was also recertified to environmental
standard ISO14001:2015 in September 2019. Plans are underway to
achieve NADCAP accreditation for the US site by the end of 2020 and
Airbus production approval at that site is being planned for
2021.
Brexit
The Group has evaluated the potential effects of a variety of
Brexit scenarios and is not expecting to be affected in any
material fashion due to the low level of transactions with other EU
countries.
Intellectual Property
The IP committee met quarterly to review the IP portfolio. In
October 2019, shortly after the full year end, the UK Intellectual
Property Office granted a patent on the further-enhanced Hardide
coating and its new applications, particularly in power generation.
This is an important achievement. Fundamental research continues
into the development of new coating variants and applications that
will further strengthen and widen the Group's IP portfolio.
Site relocation
The project to relocate the UK operation to a new building in
Bicester is advancing well. Contracts have been placed and, at the
time of writing, the building is now being fitted-out internally
and a larger capacity electricity supply is being installed to cope
with power requirements. As detailed planning of the move proceeds,
the decision was made to take the opportunity to "future proof" and
improve the operating capabilities of the Group by investing in
superior new equipment rather than transfer dated equipment,
notwithstanding that the costs of such are expected to be slightly
ahead of the Board's previous expectations for the relocation
project. The Board is exploring the most effective means of
financing these incremental costs and has provisionally secured a
first line of asset finance attached to a new reactor. The new
production equipment will start to be installed in March 2020. This
has to be operational before the transfer of work and equipment
from the existing facility can begin. Two new coating reactors are
on order for the site, as well as other items of key processing
plant. The project is on schedule for full operation at the new
site in September 2020.
STRATEGY
Hardide's technologically advanced surface engineering coatings
help solve complex and difficult technical problems and frequently
convey considerable commercial advantage to users. Our coatings
provide a unique combination of valuable mechanical and chemical
properties that cannot be achieved by any other type of coating. In
recognition of that, Hardide has joint application developments
underway with three major coating companies, each of which has a
strong international presence. We expect that cooperation of this
kind will develop further.
Another form of industrial cooperation that has already proved
to be highly beneficial is the relationships that have been
developed with major end-users of Hardide coatings, rather than
with customers directly. These end-users currently include Airbus,
Leonardo Helicopters, EDF Energy and major US oil and gas
companies. By cooperating with such large end-users, not only is
awareness improved greatly, but more importantly, there will be
'end-user pull' on their tier 1 suppliers. The Group is aiming to
increase the number of end-users with whom we have close
cooperation.
Over the past year, very good progress has been made in
diversifying the customer base, but we continue to strive to
diversify further. As a result, we are on the threshold of
meaningful sales to aerospace customers and there has been very
encouraging development of our coatings for the power generation
industry - potentially a very large market for Hardide. A new
patent has been granted recently for this application.
The Board retains its positive view of Hardide's potential for
growth and is investing further in expanding production capacity,
marketing, business development and R&D (note that R&D
costs are not capitalised) to help drive this. In the short term,
further spending on these activities is not profit-maximising, but
the Board is confident that spending of this kind will maximise
shareholder value. The Group does not have any material borrowings
and its asset base is attractive to providers of asset finance. The
Board is exploring this as a financing option to manage efficiently
the cash costs of expansion and investment.
We were very pleased to have been able to lease a new and
considerably larger facility nearby in Bicester. To maintain
production capacity during the transition to the new site, all
Hardide's UK activity will be moved progressively, and the Group
will be operating from the new site by September 2020. In addition
to being more efficient, the new premises will assist in enabling
the Group to improve continually its environmental performance.
Many of Hardide's employees have unique skills and so minimising
staff turnover as a result of a move is very important. A new and
much more agreeable location close to our existing one will help
retention and create a much-improved working environment.
In North America, further progress has been made in diversifying
and expanding the customer base. To meet the resulting further
growth in demand, an additional reactor will be installed there in
spring 2020.
Employees and STAKEHOLDERS
Hardide benefits hugely from its loyal, able and dedicated
staff, both in Bicester and in Martinsville. They have again worked
hard to deliver record sales and achieved many technical successes
this year. The Board thanks our staff for their commitment. We also
thank our shareholders and other stakeholders in the business for
their continued support and confidence in the future for our
business.
OUTLOOK
The start to the new financial year has been strong and the
Board is confident of continued revenue growth and business
diversification in the coming year. The Board expects gross profit
margins to remain at levels comparable to the second half of
FY2019.
The project to relocate the business to a new site is on-track
and we are looking forward to operating from the facility in autumn
2020 and to the increase in capacity this will provide. This move
will enhance efficiency and open up new business opportunities, as
well as presenting a modern facility to our blue-chip customer base
and investors. The costs of the project are being monitored closely
and are expected to be borne in the current financial year. The
Board aims to ensure that the asset base of the Group matches its
needs for the future and will invest further to deliver this.
Robert Goddard Philip Kirkham
Chairman CEO
9 December 2019 9 December 2019
CONSOLIDATED INCOME STATEMENT
for the year ended 30 September 2019
2019 2018
GBP000 GBP000
Revenue 5,052 4,613
Cost of sales (2,635) (2,201)
Gross profit 2,417 2,412
--------------------------------------- -------- --------
Administrative expenses (3,037) (2,711)
Depreciation and amortisation (481) (373)
Exceptional items
Provisions (101) (246)
Operating (loss) (1,202) (918)
--------------------------------------- -------- --------
Finance income 15 8
Finance costs (3) (3)
(Loss) on ordinary activities before
taxation (1,190) (913)
--------------------------------------- -------- --------
Taxation 54 48
(Loss) on ordinary activities after
taxation (1,136) (865)
--------------------------------------- -------- --------
(Loss) per share: Basic (2.3)p (0.1)p
(Loss) per share: Diluted (2.3)p (0.1)p
Loss per share affected by 40 : 1 share consolidation undertaken
during 2019.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
at 30 September 2019
2019 2018
GBP000 GBP000
Assets
Non-current assets
Goodwill 69 69
Intangible assets 30 25
Property, plant & equipment 2,745 2,033
---------------------------------------- --------- ---------
Total non-current assets 2,844 2,127
---------------------------------------- --------- ---------
Current assets
Inventories 691 286
Trade and other receivables 1,003 749
Other current financial assets 277 265
Cash and cash equivalents 4,809 3,302
---------------------------------------- --------- ---------
Total current assets 6,780 4,602
---------------------------------------- --------- ---------
Total assets 9,624 6,729
---------------------------------------- --------- ---------
Liabilities
Current liabilities
Trade and other payables 1,351 1,336
Financial liabilities 50 10
Provision for grant repayment 260 246
Total current liabilities 1,661 1,592
---------------------------------------- --------- ---------
Net current assets 5,119 3,010
---------------------------------------- --------- ---------
Non-current liabilities
Financial liabilities 164 58
Provision for onerous lease and 101 -
dilapidations
Total non-current liabilities 265 58
---------------------------------------- --------- ---------
Total liabilities 1,926 1,650
---------------------------------------- --------- ---------
Net assets 7,698 5,079
---------------------------------------- --------- ---------
Equity attributable to equity holders
of the parent
Share capital 3,673 3,405
Share premium 15,987 12,676
Retained earnings (11,964) (10,925)
Share-based payments reserve 274 308
Translation reserve (272) (385)
---------------------------------------- --------- ---------
Total equity 7,698 5,079
---------------------------------------- --------- ---------
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 30 September 2019
2019 2018
GBP000 GBP000
Cash flows from operating activities
Operating (loss) (1,202) (918)
Impairment of intangibles 7 2
Depreciation 474 371
Share option charge 62 73
(Increase) / Decrease in inventories (392) (124)
(Increase) / Decrease in receivables (266) (149)
Increase / (Decrease) in payables 73 793
Increase in provisions 116 246
Cash (used in) / generated from operations (1,128) 294
----------------------------------------------- -------- --------
Finance income 16 8
Finance costs (3) (3)
Tax received - 93
Net cash (used in) / generated from operating
activities (1,115) 392
----------------------------------------------- -------- --------
Cash flows from investing activities
Purchase of property, plant and equipment (1,106) (887)
Net cash used in investing activities (1,106) (887)
----------------------------------------------- -------- --------
Cash flows from financing activities
Net proceeds from issue of ordinary share
capital 3,578 2,533
Finance lease repayment - (3)
New loans raised 139 55
Loans repaid (27) -
Net cash generated from financing activities 3,690 2,585
----------------------------------------------- -------- --------
Effect of exchange rate fluctuations 38 -
Net increase in cash and cash equivalents 1,507 2,090
----------------------------------------------- -------- --------
Cash and cash equivalents at the beginning
of the year 3,302 1,212
----------------------------------------------- -------- --------
Cash and cash equivalents at the end
of the year 4,809 3,302
----------------------------------------------- -------- --------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 30 September 2019
Share Share Share-based Foreign Retained Total
Capital Premium Payments Translation Earnings Equity
---------------------- --------- --------- ------------ ------------- ---------- --------
At 1 October 2017 3,242 10,306 235 (432) (10,060) 3,291
---------------------- --------- --------- ------------ ------------- ---------- --------
Issue of new shares 163 2,370 - - - 2,533
Share options - - 73 - - 73
Exchange translation - - - 47 - 47
Loss for the year - - - - (865) (865)
---------------------- --------- --------- ------------ ------------- ---------- --------
At 30 September
2018 3,405 12,676 308 (385) (10,925) 5,079
---------------------- --------- --------- ------------ ------------- ---------- --------
At 1 October 2018 3,405 12,676 308 (385) (10,925) 5,079
---------------------- --------- --------- ------------ ------------- ---------- --------
Issue of new shares 268 3,311 - - - 3,579
Share options - - (34) - 97 63
Exchange translation - - - 113 - 113
Loss for the year - - - - (1,136) (1,136)
---------------------- --------- --------- ------------ ------------- ---------- --------
At 30 September
2019 3,673 15,987 274 (272) (11,964) 7,698
---------------------- --------- --------- ------------ ------------- ---------- --------
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR TFBPTMBBMBPL
(END) Dow Jones Newswires
December 09, 2019 02:00 ET (07:00 GMT)
Hardide (LSE:HDD)
Historical Stock Chart
Von Jun 2024 bis Jul 2024
Hardide (LSE:HDD)
Historical Stock Chart
Von Jul 2023 bis Jul 2024
