Hardide PLC Interim Results (1854F)

TIDMHDD

RNS Number : 1854F

Hardide PLC

16 May 2017

 
   16 May 2017 
 

Hardide plc

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

Interim Results

for the six months ended 31 March 2017

Hardide (AIM: HDD), the developer and provider of advanced surface coating technology, today announces its results for the six-month period ended 31 March 2017.

Financial Highlights

   --     Revenue of GBP1.51m (H1 2016: GBP0.95m), increase of 59% from H1 2016 and 27% from H2 2016 
   --     Gross profit of GBP0.69m (H1 2016: GBP0.25m) 

-- Group operating loss of GBP0.69m (H1 2016: GBP0.63m loss, which included a GBP0.23m reversal of impairment and grant income of GBP0.14m). On a like-for-like basis, Group operating loss of GBP0.72m (H1 2016: GBP1.02m loss excluding reversal of impairment, release of provision and effect of grants)

-- EBITDA loss (gross profit less administrative expenses) of GBP0.43m (H1 2016: loss of GBP0.72m)

   --     Cash at bank at 31 March 2017 of GBP1.56m 

Operational Highlights

   --     Demand returning from oil and gas sector 
   -           sales from this sector rose 115% compared with H1 2016 and 38% compared with H2 2016 

- testing completed successfully and commercial discussions underway with major oil service company in North America for onshore drilling components

   --     Approved Supplier status with the Airbus Group gained 

- detailed commercial and technical discussions progressing with Airbus and other equipment manufacturers about coating specific aircraft parts

   --     Increase in sales to aerospace and precision engineering 
   -     additional new parts approved for the BAE Systems Typhoon aircraft 

- test plan for new transmission components with Leonardo Helicopters is progressing well. The original testing programme for other safety-critical main rotor components awaits the availability of the customer's highly-specialised test rig

-- US facility in Virginia fully operational and producing regular production parts for blue-chip North American customers

Post Period

-- Further order of $100k received from the General Electric Company Inc ("GE") for the same components as were supplied under the three-year Strategic Supply Agreement which expired at end of February 2017

-- First production order from new, major oilfield service company for coating of a family of subsea flow-control components

   --     Royal Mail approval for coating of a component for letter sorting machines 

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

"We are pleased to see that there is significant evidence of improvement in demand for the Hardide product in a still challenging and volatile oil and gas market. At the same time, the Group has made good progress in its diversification and growth strategy with the award of Approved Supplier status from Airbus and encouraging developments with customers in the aerospace and precision engineering sectors. Overall, with the early signs of recovery in the oil and gas market, particularly in North American onshore drilling, and the expectation of new aerospace business in the near future, the Board's outlook is positive. The Board expects the trading performance for the full financial year to be in line with market expectations."

- Ends -

For further information:

 
 Hardide plc                                Tel: [phone] 
  Philip Kirkham, CEO                        353 830 
  Jackie Robinson, Communications Manager 
 finnCap 
  Stuart Andrews /Henrik Persson/James        Tel: +44 (0)20 
  Thompson                                    7220 0500 
 IFC Advisory 
  Graham Herring/Heather Armstrong            Tel: +44 (0)20 
                                              3053 8761 
 

Notes to editors:

www.hardide.com

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 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, power generation, precision engineering and aerospace industries.

CHAIRMAN'S STATEMENT

Chairman's Statement

Introduction

The six-months to 31 March 2017 has been a period of steady progress for Hardide as we continue to operate in a market that has seen significant difficulties over the last few years. This has translated into total revenues for the period 59% ahead of the first half of 2016 and 27% ahead of the second half.

Sales to our oil and gas customers in H1 increased by 115% compared with the first half of 2016 and this supports the generally-accepted belief that the bottom of the oil and gas industry downturn has been reached. We are very pleased to have seen this reflected in increasing levels of activity among our customers and demand for Hardide-coated downhole components. Whilst we have limited visibility as to whether this trend will continue, we are optimistic about our growth potential in this area.

The period saw the achievement of 'Approved Supplier' status to the Airbus Group and this is a significant stage in Hardide's diversification strategy. As a result, the Company is now involved in commercial and technical discussions with Airbus about coating components, predominantly used in the wing structure and landing gear for A320, A330, A380 and A400M aircraft; as well as with a number of Tier 1 equipment manufacturers and Maintenance, Repair and Overhaul (MRO) organisations.

We are seeing the use of our technology predominantly on parts critical to flight safety. This means that comprehensive proving tests are undertaken by Airbus on each component family before the coating of production parts commences. A number of such tests are well underway and the pace of progress to the production order stage may be slow in some cases but, once the part is in production, orders for it can continue for the life of the aircraft. Since securing our approved supplier status with Airbus, we have seen significant interest from several other international aerospace component manufacturers and for a diverse range of components.

Financial Results

The Group is reporting H1 2017 revenue of GBP1.51m, an increase of 59% compared with the same period last year (H1 2016 GBP0.95m) with Group gross profit of GBP0.69m, compared with GBP0.25m in H1 2016. Overheads of GBP1.11m (H1 2016 GBP0.97m) are being well controlled and include a significantly reduced credit from grant income of GBP36k compared with GBP141k in H1 2016.

There was a Group operating loss of GBP0.69m (H1 2016: loss of GBP0.63m, which included GBP0.26m of exceptional credits in the US and GBP0.14m of grant income). On a like-for-like basis, excluding grants and exceptional items, the Group operating loss of GBP0.72m compares with a loss of GBP1.02m in the same period last year.

The Group made a loss before interest, tax, depreciation and amortisation ("EBITDA") of GBP0.43m (H1 2016: loss GBP0.72m).

Operational Overview

The Group delivered increased revenue in H1 2017, with sales to oil and gas, precision engineering and aerospace customers increasing compared with both H1 2016 and H2 2016. Sales to customers in the flow control sector that are related to the oil and gas market tend to lag increases in drilling activity, and so sector sales overall were broadly in line with H1 2016. We are pleased to report an improvement in market sentiment among oil and gas customers and demand is returning for Hardide coated product both from existing customers and for development and testing of new applications. This is illustrated by the successful use in the field by a North American customer of key, high-volume components in their onshore drilling and completion tools. Commercial discussions are currently underway with this customer regarding further production orders. As this market recovers, the Company is optimistic about future volumes from this customer. Post period, and after comprehensive trials, a major global oilfield service company has certified the coating for a family of subsea flow control components and production orders for these are now being received.

Strong progress has been made in the precision engineering sector, with sales increasing by 21% from H1 2016. Post period and following successful trials, we received approval of the coating from the Royal Mail for a new application on a letter sorting machine which will be used across sorting offices. We are also in trials with this customer for further applications.

Aerospace remains a key growth market for Hardide and tests are progressing well with several aerospace component manufacturers in the UK and Europe. BAE Systems, a long-term customer of Hardide, continues to adopt our technology and has certified additional parts that are currently being coated for the Typhoon aircraft. The Nadcap audit is planned and we hope to gain this global aerospace accreditation during H2 2017. Our relationship with Leonardo Helicopters continues to strengthen. Coated safety-critical components for a rotor mechanism are still awaiting availability of Leonardo's highly--specialised test rig, while production trials and life-testing of new, less-critical transmission system parts are progressing well.

The US coatings facility in Virginia is regularly producing product for customers in North America and is operating smoothly and efficiently. A number of new product applications for North American customers currently in development in our UK facility are planned to be transferred to Virginia when they are production-ready.

Summary and Outlook

While the Group continues to operate in a challenging and volatile oil and gas sector, there is strong evidence of gradual improvement in market conditions and demand for Hardide coating. At the same time, the Group has made significant progress in its diversification and growth strategy with the award of Approved Supplier status from the Airbus Group and encouraging developments with other customers in the aerospace and precision engineering sectors. With promising signs of recovery in the oil and gas market, particularly in the North American onshore sector where the rig count is now 116% greater than a year ago, the Board's outlook remains positive and we expect the trading performance for the full financial year to be in line with market expectations.

Robert Goddard

Chairman

16 May 2017

Consolidated Statement of Comprehensive Income

For the period ended 31 March 2017

 
 GBP 000                          6 months       6 months        Year to 
                                     to             to 
                                  31 March       31 March      30 September 
                                     2017           2016           2016 
                                 (unaudited)    (unaudited)     (audited) 
 
 Revenue                           1,511           949            2,142 
 Cost of Sales                     (826)          (695)          (1,457) 
 
 Gross profit                       685            254             685 
-----------------------------  -------------  -------------  -------------- 
 
 Administrative expenses          (1,110)         (971)          (1,989) 
 Depreciation                      (262)          (165)           (418) 
 Exceptional items: 
 Reversal of fixed 
  asset impairment                   -             232             232 
 Release of onerous 
  lease provision                    -              23             23 
 
 Operating (loss)/ 
  profit                           (687)          (627)          (1,467) 
-----------------------------  -------------  -------------  -------------- 
 
 Finance income                      3              4               6 
 Finance costs                      (0)            (1)             (1) 
 
 Loss on ordinary activities 
  before tax                       (684)          (624)          (1,462) 
-----------------------------  -------------  -------------  -------------- 
 
 Tax                                 -              -              121 
 
 Loss on ordinary activities 
  after tax                        (684)          (624)          (1,341) 
-----------------------------  -------------  -------------  -------------- 
 

Consolidated Statement of Changes in Equity

For the period ended 31 March 2017

 
 GBP 000                    6 months          6 months           Year to 
                               to                to 
                            31 March          31 March         30 September 
                               2017        2016 (unaudited)        2016 
                           (unaudited)                          (audited) 
 
 Total equity at start 
  of period                  4,377             3,859              3,859 
-----------------------  -------------  -------------------  -------------- 
 
 Profit / (loss) for 
  the period                 (684)             (624)             (1,341) 
 
 Issue of new shares           -                 -                1,571 
 
 Exchange differences 
  on translation of 
  foreign operation            65                88                260 
 
 Share options                 27                8                 28 
 
 Total equity at end 
  of period                  3,785             3,331              4,377 
-----------------------  -------------  -------------------  -------------- 
 

Consolidated Statement of Financial Position

As at 31 March 2017

 
 GBP 000                          31 March       31 March     30 September 
                                    2017           2016           2016 
                                 (unaudited)    (unaudited)     (audited) 
 
 Assets 
 
 Non-current assets 
 Investments                         -              -              - 
 Goodwill                            69             69             69 
 Intangible assets                   1              2              1 
 Property, plant & 
  equipment                        1,775          1,939          1,872 
 
 Total non-current 
  assets                           1,845          2,010          1,942 
-----------------------------  -------------  -------------  ------------- 
 
 Current assets 
 Inventories                        154            104             60 
 Trade and other receivables        517            422            566 
 Other current financial 
  assets                            162            146            270 
 Cash and cash equivalents         1,563          1,006          1,967 
 
 Total current assets              2,396          1,678          2,863 
-----------------------------  -------------  -------------  ------------- 
 
 Total assets                      4,241          3,688          4,805 
-----------------------------  -------------  -------------  ------------- 
 
 Liabilities 
 
 Current liabilities 
 Trade and other payables           444            328            408 
 Financial liabilities               12             17             17 
 
 Total current liabilities          456            345            425 
-----------------------------  -------------  -------------  ------------- 
 
 Net current assets                1,940          1,333          2,438 
-----------------------------  -------------  -------------  ------------- 
 
 Non-current liabilities 
 Financial liabilities               -              12             3 
 
 Total non-current 
  liabilities                        -              12             3 
-----------------------------  -------------  -------------  ------------- 
 
 Total liabilities                  456            357            428 
-----------------------------  -------------  -------------  ------------- 
 
 Net assets                        3,785          3,331          4,377 
-----------------------------  -------------  -------------  ------------- 
 
 Equity attributable 
  to equity holders 
  of the parent 
 Share capital                     3,242          3,041          3,242 
 Share premium                     10,305         8,935          10,305 
 Retained earnings                (9,648)        (8,247)        (8,964) 
 Share-based payment 
  reserve                           211            162            184 
 Translation reserve               (325)          (560)          (390) 
-----------------------------  -------------  -------------  ------------- 
 Total equity                      3,785          3,331          4,377 
-----------------------------  -------------  -------------  ------------- 
 

Consolidated Statement of Cash Flows

For the period ended 31 March 2017

 
 GBP 000                            6 months       6 months        Year to 
                                       to             to 
                                    31 March       31 March      30 September 
                                       2017           2016           2016 
                                   (unaudited)    (unaudited)     (audited) 
 
 Cash flows from operating 
  activities 
 Operating profit / 
  (loss)                             (687)          (627)          (1,467) 
 Impairment of intangibles             1              1               2 
 Depreciation                         261            164             416 
 Revaluation of fixed 
  assets                               -            (232)           (232) 
 Share option charge                   27             8              28 
 (Increase) / decrease 
  in inventories                      (94)           (45)             1 
 (Increase) / decrease 
  in receivables                       76             96            (18) 
 Increase / (decrease) 
  in payables                          36           (216)           (160) 
 Increase / (decrease) 
  in provisions                        -             (23)           (23) 
 Exchange rate variance                -                             31 
 
 Cash generated from 
  operations                         (380)          (874)          (1,422) 
-------------------------------  -------------  -------------  -------------- 
 
 Finance income                        3              4               6 
 Finance costs                        (0)            (1)             (1) 
 Tax received / (paid)                 82             64             64 
 
 Net cash generated 
  from operating activities          (295)          (807)          (1,353) 
-------------------------------  -------------  -------------  -------------- 
 
 Cash flows from investing 
  activities 
 Purchase of property, 
  plant, equipment                   (100)          (506)           (561) 
 
 Net cash used in investing 
  activities                         (100)          (506)           (561) 
-------------------------------  -------------  -------------  -------------- 
 
 Cash flows from financing 
  activities 
 Net proceeds from 
  issue of ordinary 
  share capital                        -              -             1,571 
 Loans repaid                          -              -               - 
 Finance lease inception               -              -               - 
 Finance lease repayment              (9)            (8)            (17) 
 
 Net cash used in financing 
  activities                          (9)            (8)            1,554 
-------------------------------  -------------  -------------  -------------- 
 
 Net increase / (decrease) 
  in cash and cash equivalents       (404)         (1,321)          (360) 
-------------------------------  -------------  -------------  -------------- 
 
 Cash and cash equivalents 
  at the beginning of 
  the period                         1,967          2,327           2,327 

-------------------------------  -------------  -------------  -------------- 
 
 Cash and cash equivalents 
  at the end of the 
  period                             1,563          1,006           1,967 
-------------------------------  -------------  -------------  -------------- 
 

This information is provided by RNS

The company news service from the London Stock Exchange

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