Hardide PLC Interim Results (2386A)

TIDMHDD

RNS Number : 2386A

Hardide PLC

06 June 2016

 
   6 June 2016 
 

Hardide plc

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

Interim Results

for the six months ended 31 March 2016

Key Points

Financial

-- Revenue of GBP0.95m (H1 2015: GBP1.78m) affected by downturn in oil & gas exploration as expected

   --     Gross profit of GBP0.25m (H1 2015: GBP1.21m) 

-- Group operating loss of GBP0.63m, after accounting for revaluation and provision and including US start-up costs (H1 2015: loss of GBP0.08m)

   --     EBITDA loss of GBP0.72m (H1 2015: profit GBP3,000) 
   --     Cash at bank at 31 March 2016 of GBP1.00m 

Business/Operational

   --     North America investment project completed on budget and on time 
   -     new facility in Virginia operational - customer site-approval trials ongoing 
   --     Growing sales in advanced engineering and aerospace 
   -     revenue rose by 122% from H1 2015 

- GBP300,000 order to coat components for new airport high-speed X-ray baggage screening machine announced in December 2015

   -     encouraging progress with coating for diamond trials for major OEMs 
   --     Aerospace test programmes advancing, new opportunities being developed 

- Airbus formal technical approval received and first coated aircraft components awaiting life testing by Airbus

   -     promising new applications in development from customers in USA, UK & Europe 
   --     Cost reduction plan in place to mitigate impact of oil and gas downturn 

-- Given uncertainty about timing of recovery of oil and gas activity, the Board remains cautious about near term outlook, but believes H2 revenues will be higher than those in H1. Encouraging progress continues with our diversification strategy and longer-term prospects remain good

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

"Advanced engineering and aerospace sector revenues more than doubled during the half year and Group order intake showed a 44% rise from the prior six months. However, we are in the midst of the longest and most severe global downturn in our core market of oil and gas and this has led to Group revenues falling 46% from the same period last year. In response, the Company has acted quickly and decisively to reduce its cost and expense base while retaining its ability to react quickly when demand from the oil and gas market recovers. However, for the foreseeable future the Company has to operate in these challenging market conditions and continues to grow its business outside oil and gas. With this in mind the Board is considering potential funding options for the business as a precautionary measure. Nonetheless the Board is encouraged by the progress being made in the potentially high-value advanced engineering and aerospace sectors and is confident about the longer-term outlook for the business."

- Ends -

For further information:

 
  Hardide plc 
  Philip Kirkham, CEO                Tel: [phone] 
   Jackie Robinson, Communications   830 
   Manager                           www.hardide.com 
 
   finnCap 
   Stuart Andrews / Grant             Tel: [phone] 
   Bergman                            0500 
                                      www.finncap.com 
 

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

The continuing low oil price is a significant headwind for our major oil and gas customers and our interim results for the six months to 31 March 2016 reflect the impact that this has had on the Company's business. Good progress continues in other sectors and sales to advanced engineering and aerospace customers rose 122% from H1 2015. Order intake in the half was 44% higher than H2 2015, though down 32% from H1 2015. In response to the challenging market conditions, the Company has acted swiftly to reduce its cost and expense base while retaining the ability to respond quickly when oil and gas activity returns.

Financial Results

The Group is reporting H1 2016 revenue of GBP0.95m, a decrease of GBP0.83m compared with the same period last year (H1 2015 GBP1.78m). Group gross profit was GBP0.25m, compared with GBP1.21m in H1 2015. As expected, the combination of opening of the US facility, the fixed nature of production salaries and the mix of product through the UK facility, led to a 23% or GBP0.13m increase in the cost of sales, despite the fall back in revenue. The value of plant and machinery remaining at our Houston facility, dormant since March 2009, had been written down to zero in the accounts of previous financial years; upon its installation in Virginia, it was revalued back to its net book value at March 2009. This resulted in a revaluation in the profit and loss account of GBP0.23m. With effect from 4 December 2015, the lease on the Houston facility was terminated and allowed the release of the remaining onerous lease provision of GBP0.02m. Together with the planned Virginia spend, investment in sales and marketing and UK facility improvements, this resulted in a Group operating loss of GBP0.63m (H1 2015: loss of GBP0.08m). The Group made a loss before interest, tax, depreciation and amortisation ("EBITDA") of GBP0.72m (H1 2015: profit GBP3,000). The cash balance at 31 March 2016 was GBP1.00m (31 March 2015: GBP2.33m). Capex spend in the 12 month period to 31 March 2016 was GBP1.23m in addition to US revenue costs of GBP0.27m (net of grants).

Operational Overview

The Group has made good progress in several areas in H1 2015. The first high volume aircraft components have been coated for life testing by Airbus and development work is underway on several other volume Airbus A320 parts. Opportunities are also being developed with other US, UK and European aerospace manufacturers with part-specific technical developments on-going. Coated components are with AgustaWestland for testing, which awaits the allocation of time on a highly specialised test rig. Testing of critical components in the aerospace industry is, by necessity, very stringent and time consuming and requires specialist facilities. Our work on Nadcap is substantially complete and the application for this aerospace accreditation is planned for this summer.

The new production facility in Virginia is operational and supporting a small production team that is processing parts to secure site-approval from certain US customers. Production for those customers will be transferred from the UK in phases following the completion of site-approvals. US capital expenditure and revenue costs relating to the start-up of the new site are now substantially complete, with no further significant spend planned. Also in the US, the patent for coating industrial diamonds has now been granted.

We continue to diversify our customer base and orders from advanced engineering and aerospace customers rose by 122% from H1 2015. In December 2015, the Company announced an order worth more than GBP300,000 to cover an initial eight month period to supply crucial coated components for a new type of airport high-speed X-ray baggage screening machine. We expect demand to increase further as production of the new machine ramps up.

Success in securing sales of coating for new components normally results from extensive joint development work with customers and their applications and so there tends to be a lengthy period before full commercialisation of new applications. However, several important opportunities are now close to completion and we are continuing to work with existing and potential customers on many new and exciting developments that should be the source of further growth in the medium- to long-term.

Even within the currently depressed oil and gas market, new opportunities continue to emerge in this sector for the Hardide technology. Following successful testing, the Company secured its first large production order to coat components for fracking tools during the period, with a further large order received post-period. In addition we have recently been certified by a major global player on critical subsea flow control components, and are now receiving orders. The coating has also entered development and test in a range of new applications for several oil and gas service and operating companies internationally.

Summary and Outlook

We are in the midst of the longest and most severe global downturn ever experienced in our core market of oil and gas. Timing of the recovery is uncertain and will be determined by macro-economic and political factors. However, from forward orders we already have on-hand we believe that H2 revenues will be higher than those in H1. The Board takes a cautious view of when demand is likely to return from this sector and accepts that the Company has to operate in these challenging market conditions for the immediate future. With this in mind the Board is considering potential funding options for the business as a precautionary measure. Nonetheless the Board is encouraged by the progress being made in the potentially high value advanced engineering and aerospace sectors and is confident about the longer-term outlook for the business.

Robert Goddard

Chairman

6 June 2016

Consolidated Statement of Comprehensive Income

For the period ended 31 March 2016

 
 GBP 000                          6 months       6 months        Year to 
                                     to             to 
                                  31 March       31 March      30 September 
                                     2016           2015           2015 
                                 (unaudited)    (unaudited)     (audited) 
 
 Revenue                            949           1,777           3,003 
 Cost of Sales                     (695)          (564)          (1,198) 
 
 Gross profit                       254           1,213           1,805 
-----------------------------  -------------  -------------  -------------- 
 
 Administrative expenses           (971)         (1,210)         (2,130) 
 Depreciation                      (165)           (78)           (161) 
 Exceptional items: 
 Revaluation of fixed               232             -               - 
  assets 
 Release of onerous 
  lease provision                    23             -              269 
 
 Operating (loss)/ 
  profit                           (627)           (75)           (217) 
-----------------------------  -------------  -------------  -------------- 
 
 Finance income                      4              8              12 
 Finance costs                      (1)            (1)             (2) 
 
 Loss on ordinary activities 
  before tax                       (624)           (68)           (207) 
-----------------------------  -------------  -------------  -------------- 
 
 Tax                                 -             (1)             91 
 
 Loss on ordinary activities 
  after tax                        (624)           (69)           (116) 
-----------------------------  -------------  -------------  -------------- 
 

Consolidated Statement of Changes in Equity

For the period ended 31 March 2016

 
 GBP 000                    6 months          6 months           Year to 
                               to                to 
                            31 March          31 March         30 September 
                               2016        2015 (unaudited)        2015 
                           (unaudited)                          (audited) 
 
 Total equity at start 
  of period                  3,859             3,956              3,956 
-----------------------  -------------  -------------------  -------------- 
 
 Profit / (loss) for 
  the period                 (624)              (69)              (116) 
 
 Issue of new shares           -                 -                  1 
 
 Exchange differences 
  on translation of 
  foreign operation            88               (16)               (9) 
 
 Share options                 8                 15                27 
 
 Total equity at end 
  of period                  3,331             3,886              3,859 
-----------------------  -------------  -------------------  -------------- 
 

Consolidated Statement of Financial Position

As at 31 March 2016

 
 GBP 000                          31 March       31 March     30 September 
                                    2016           2015           2015 
                                 (unaudited)    (unaudited)     (audited) 
 
 Assets 
 
 Non-current assets 
 Investments                         -              -              - 
 Goodwill                            69             69             69 
 Intangible assets                   2              4              3 
 Property, plant & 
  equipment                        1,939           684           1,262 
-----------------------------  -------------  -------------  ------------- 
 Total non-current 
  assets                           2,010           757           1,334 
-----------------------------  -------------  -------------  ------------- 
 
 Current assets 
 Inventories                        104             67             59 
 Trade and other receivables        422            588            469 
 Other current financial 
  assets                            146             98            271 
 Cash and cash equivalents         1,006          3,254          2,327 
-----------------------------  -------------  -------------  ------------- 
 Total current assets              1,678          4,007          3,126 
-----------------------------  -------------  -------------  ------------- 
 
 Total assets                      3,688          4,764          4,460 
-----------------------------  -------------  -------------  ------------- 
 
 Liabilities 
 
 Current liabilities 
 Trade and other payables           328            536            544 
 Financial liabilities               17             16             16 
 Provision for lease 
  obligation                         -             144             21 
-----------------------------  -------------  -------------  ------------- 
 Total current liabilities          345            696            581 
-----------------------------  -------------  -------------  ------------- 
 
 Net current assets                1,333          3,311          2,545 
-----------------------------  -------------  -------------  ------------- 
 
 Non-current liabilities 
 Financial liabilities               12             29             20 
 Provision for lease                 -             153             - 
  obligation 
-----------------------------  -------------  -------------  ------------- 
 Total non-current 
  liabilities                        12            182             20 
-----------------------------  -------------  -------------  ------------- 
 
 Total liabilities                  357            878            601 
-----------------------------  -------------  -------------  ------------- 
 
 Net assets                        3,331          3,886          3,859 
-----------------------------  -------------  -------------  ------------- 
 
 Equity attributable 
  to equity holders 
  of the parent 
 Share capital                     3,041          3,041          3,041 
 Share premium                     8,935          8,935          8,935 
 Retained earnings                (8,247)        (7,576)        (7,623) 
 Share-based payment 
  reserve                           162            142            154 
 Translation reserve               (560)          (656)          (648) 
-----------------------------  -------------  -------------  ------------- 
 Total equity                      3,331          3,886          3,859 
-----------------------------  -------------  -------------  ------------- 
 

Consolidated Statement of Cash Flows

For the period ended 31 March 2016

 
 GBP 000                            6 months       6 months        Year to 
                                       to             to 
                                    31 March       31 March      30 September 
                                       2016           2015           2015 
                                   (unaudited)    (unaudited)     (audited) 
 
 Cash flows from operating 
  activities 
 Operating profit / 
  (loss)                             (627)           (75)           (217) 
 Impairment of intangibles             1              1               1 
 Depreciation                         164             77             160 
 Revaluation of fixed                (232)            -               - 
  assets 
 Share option charge                   8              14             27 
 (Increase) / decrease 
  in inventories                      (45)           (17)            (9) 
 (Increase) / decrease 
  in receivables                       96             28             67 
 Increase / (decrease) 
  in payables                        (216)            73             81 
 Increase / (decrease) 
  in provisions                       (23)            -             (269) 
 
 Cash generated from 
  operations                         (874)           101            (159) 
-------------------------------  -------------  -------------  -------------- 
 
 Finance income                        4              8              12 
 Finance costs                        (1)            (1)             (2) 
 Tax received / (paid)                 64             53             53 
 
 Net cash generated 
  from operating activities          (807)           161            (96) 
-------------------------------  -------------  -------------  -------------- 
 
 Cash flows from investing 
  activities 
 Purchase of property, 
  plant, equipment                   (506)          (366)          (1,029) 
 
 Net cash used in investing 
  activities                         (506)          (366)          (1,029) 
-------------------------------  -------------  -------------  -------------- 
 
 Cash flows from financing 
  activities 
 Net proceeds from 
  issue of ordinary 
  share capital                        -              -               1 
 Loans repaid                          -              -               - 
 Finance lease inception               -              -               - 
 Finance lease repayment              (8)            (8)            (16) 
 
 Net cash used in financing 
  activities                          (8)            (8)            (15) 
-------------------------------  -------------  -------------  -------------- 
 
 Net increase / (decrease) 
  in cash and cash equivalents      (1,321)         (213)          (1,140) 
-------------------------------  -------------  -------------  -------------- 
 
 Cash and cash equivalents 
  at the beginning of 
  the period                         2,327          3,467           3,467 
-------------------------------  -------------  -------------  -------------- 
 
 Cash and cash equivalents 
  at the end of the 
  period                             1,006          3,254           2,327 
-------------------------------  -------------  -------------  -------------- 
 

IMPORTANT NOTICES

No statement in this announcement is intended to be a profit forecast or estimate and no statement in this announcement should be interpreted to mean that earnings per share of the Company for the current or future financial years would necessarily match or exceed the historical published earnings per share of the Company.

This announcement may include statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "plans", "projects", "anticipates", "expects", "intends", "may", "will", or "should" or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include matters that are not historical facts. They appear in a number of places throughout this announcement and include statements regarding the Directors' current intentions, beliefs or expectations concerning, among other things, the Company's results of operations, financial condition, liquidity, prospects, growth, strategies and the Company's markets. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. Actual results and developments could differ materially from those expressed or implied by the forward-looking statements. Forward-looking statements may and often do differ materially from actual results. Any forward-looking statements in this announcement are based on certain factors and assumptions, including the Directors' current view with respect to future events and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to the Company's operations, results of operations, growth strategy and liquidity. Whilst the Directors consider these assumptions to be reasonable based upon information currently available, they may prove to be incorrect. Save as required by law or by the AIM Rules for Companies, the Company undertakes no obligation to release publicly the results of any revisions to any forward-looking statements in this announcement that may occur due to any change in the Directors' expectations or to reflect events or circumstances after the date of this announcement.

finnCap Ltd ("finnCap") which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting for the Company and no one else in connection with the Placing and will not regard any other person (whether or not a recipient of this announcement) as a client in relation to the Placing and will not be responsible to anyone other than the Company for providing the protections afforded to its clients or for providing advice in relation to the Placing or any matters referred to in this announcement.

Apart from the responsibilities and liabilities, if any, which may be imposed on finnCap by the Financial Services and Markets Act 2000 or the regulatory regime established thereunder, finnCap does not accept any responsibility whatsoever for the contents of this announcement, and makes no representation or warranty, express or implied, for the contents of this announcement, including its accuracy, completeness or verification, or for any other statement made or purported to be made by it, or on its behalf, in connection with the Company or the Placing Shares or the Placing, and nothing in this announcement is or shall be relied upon as, a promise or representation in this respect whether as to the past or future. finnCap accordingly disclaims to the fullest extent permitted by law all and any liability whether arising in tort, contract or otherwise (save as referred to above) which it might otherwise have in respect of this announcement or any such statement.

This information is provided by RNS

The company news service from the London Stock Exchange

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June 06, 2016 02:00 ET (06:00 GMT)