RNS Number:1333N
Hardide PLC
04 December 2006
Press Release 4 December 2006
Hardide plc
("Hardide" or "the Company")
Preliminary Results for the Period to 30 September 2006
Hardide plc, the provider of unique surface engineering technology, announces
its preliminary results which cover trading for the year ended on 30 September
2006.
Highlights
* Turnover increased to #1.89 million (2005*: #0.69 million)
* Gross profit increased to #1.07 million (2005*: #0.41 million)
* Loss after tax** #0.91 million (2005*: #0.48 million)
* Successful opening of Hardide's manufacturing facility in Houston, Texas,
on budget and ahead of schedule
* Strengthened Board
* Trading improving following customer inventory reduction
* Successful fundraising of #2.34 million during the year, #1.80m cash on the
balance sheet at the period end
* The figures for 2005 cover the period from the Company's formation on 27
January 2005 to 30 September 2005.
** after #0.14m R&D tax credit
Commenting on the results, Jim Murray-Smith, Chief Executive of Hardide plc,
said: "These results are in line with expectations and demonstrate Hardide's
continued strong growth. The opening of the US manufacturing facility in
Houston, which was achieved ahead of schedule and on budget, will further drive
revenues.
"We are experiencing buoyant market conditions in all of our key markets and
have the capacity to install additional furnaces in both the UK and the US to
satisfy this increased demand."
For further information:
Hardide plc
Jim Murray Smith, Chief Executive Tel: +44 (0) 1869 353 830
jmurray-smith@hardide.com www.hardide.com
Daniel Stewart & Company plc
Paul Shackleton, Corporate Finance Tel: +44 (0) 207 776 6550
paul.shackleton@danielstewart.co.uk www.danielstewart.co.uk
Media enquiries:
Abchurch
Chris Lane / Laura Riascos de Castro Tel: +44 (0) 20 7398 7700
chris.lane@abchurch-group.com www.abchurch-group.com
CHAIRMAN'S STATEMENT
These results represent another year of solid growth for Hardide. The Board
took the decision in November 2005 to exploit the interest shown in Hardide's
unique technology by US-based energy companies by setting up a manufacturing
facility in Houston, Texas, the energy capital of the world. The Company
raised combined funds of #2.34 million (before expenses) in December 2005 and
May 2006 through the issue of 18,886,494 New Ordinary Shares, in part to
accelerate Hardide's development plans in Houston, and also to employ and train
additional staff to apply the Hardide process. In nine months, the site in
Houston was transformed from a greenfield project to an operational coatings
facility with local people being trained in the technology. The plant is
ideally located in the heart of the energy community, with state-of-the-art
production facilities operated by highly-qualified staff. Although early in the
site's development, the furnace has produced validation product for an existing
US customer as well as test components for both new and current customers.
The last year has again been a significant period of development for the Group
and I would like to thank Hardide's Chief Executive, Jim Murray-Smith, for
leading the management team and staff over this time.
In March 2006, Peter Davenport was appointed to the Board of Hardide as Finance
Director and I welcome him to the role. Peter has already made a major
contribution to the Hardide management team.
The Board is confident that Hardide is well-placed to make solid and continuing
progress over the next financial year and beyond as it engages new customers and
new applications in the UK and overseas.
David Chestnutt
Chairman
1 December 2006
CHIEF EXECUTIVE'S STATEMENT
The last financial year has been extremely busy for Hardide, with significant
progress made in sales and international expansion. Sales increased to #1.89
million in the year ended 30 September 2006, from #0.69 million reported for the
Group for the previous period. This represents a 73% increase over the previous
full year sales of #1.09 million for the Group's operating subsidiary, Hardide
Coatings Limited.
Substantial increases are reported across all of the Group's key sectors of oil
and gas, valves, pumps and aerospace. This performance is attributable to new
business generation, further increases in demand for parts from existing
customers, and it reflects the high level of customer satisfaction that Hardide
is delivering.
I am delighted to report that our Houston manufacturing plant opened within
budget and a month ahead of schedule on 1 September 2006.
These results were achieved despite two short-term, customer-related issues
outside of our control which affected the Company's performance against market
forecasts. As previously announced, one of the Company's major oil and gas
customers reduced its inventory during the year, resulting in lower than
expected sales. Significantly, Hardide remains the specified supplier for this
customer and orders have returned to previous levels. Furthermore, we have
recently converted two new applications for the customer, with more in trial in
both the UK and US. The strength of the oil price also led our major energy
customers to focus their resources on maintaining high levels of production; the
effect has been a slow down in field-testing and a longer conversion time for
customers intending to purchase the Hardide coating. Crucially, field-testing
continues to produce impressive results with the majority of customers going on
to incorporate the Hardide technology.
UK FACILITY
I am pleased to report a 73% like-for-like increase in sales despite the
customer inventory reduction and slowdown in testing. The high level of repeat
orders and new parts in test are a healthy indicator of customer confidence.
Aerospace activity has progressed well with Hardide Coatings Limited receiving
formal approved supplier status with BAE Systems and orders ongoing under strict
purchasing and quality procedures.
Over the last year, we have seen customers draw increasingly on our engineering
resources whereby we work closely with the customer to add value from the design
stage through to manufacture. This turnkey service sets us apart from competing
technologies and enables us to maximise the effectiveness of the coating while
giving us greater control over timelines and quality.
To nurture and support new talent in the business, we have worked closely with
Salford University, which runs the first UK MSc/PgDip in Vacuum Engineering and
Applications. The Company has staff on the management board of the course and
we see this as a valuable potential source of trained technical specialists as
the business grows.
US FACILITY
The Houston plant has received an extremely warm welcome from our existing and
prospective US customers and we have a backlog of interest from the top tier of
Houston-based energy services companies as well as the aerospace sector. There
are a number of different US parts in test which we expect will lead to further
new customers and applications. Existing US customers are committing to
increasing their order schedule now that the new plant is open and operational.
HEALTH, SAFETY AND THE ENVIRONMENT
The Group's health and safety record remains exemplary. Operating within strict
environmental frameworks is essential to working with the market-leaders in our
target sectors. We have demonstrated our commitment to environmental
responsibility by appointing an Environmental Officer to manage our activity in
this area. Over the past year, the Group has been working towards ISO 14001 and
is on-track to secure this accreditation. Hardide is committed to an
environmental supply chain and we are currently reassessing our suppliers to
ensure that they adhere to our environmental policy.
RESEARCH AND DEVELOPMENT
Last year I noted our intention to resume R&D activity into additional Hardide
coating variants. Our strategy has proven successful as we secured the US
patent for a new tungsten carbide adhesive and protective coating for industrial
diamond crystals. The Group's R&D programme is ongoing and our development of a
new low-slip coefficient coating continues to make progress. R&D will assume
even greater significance over the next twelve months as we take one of the
original UK furnaces out of commercial service and dedicate it to the
development of the next generation of ultra-high performance coatings.
MARKETING
Notable sales leads were generated at the two largest energy exhibitions of
2006; the Offshore Technology Conference in Houston, USA and the Global
Petroleum Show in Calgary, Canada. Quality leads were also created as the Group
made its debut at the Farnborough Airshow and attended the premier worldwide
valve show in Maastricht, Holland. Each of these shows has led to a number of
the new trials in the UK and US; these trials are a fundamental pre-requisite
for sales and the majority are with blue chip industrial companies.
Hardide has enjoyed a high and positive media profile over the last year
featuring in a large cross-section of quality national, business and technical
media in the UK and US. The website (www.hardide.com) was also redeveloped,
incorporating new sections and features designed specifically for our technical,
investor and media audiences.
OUTLOOK
The Company has a robust strategy where we position ourselves in close proximity
to the markets with the highest potential. I am encouraged by the market
conditions in all our operating areas and we will continue to invest in people,
equipment and R&D. I am confident that we have the technology and talent to
continue the Hardide growth story during the course of the next year and beyond.
I would like to give my personal thanks to our employees in the UK and US for
their commitment and hard work during the last year which is so crucial to our
growing business.
Jim Murray-Smith
Chief Executive Officer
1 December 2006
FINANCIAL REVIEW
The Group result for the year was a loss after tax of #906k. The last published
results for the Group were for the period 27 January to 30 September 2005, in
which the Group made a loss after tax of #481k. The increased loss was due
primarily to the investment in our new US facility, as well as the impact of a
full year's loss in the Plc of #319k (27 January to 30 September 2005: loss of
#90k). The Group's UK operating subsidiary, Hardide Coatings Limited, reduced
its full year loss from #701k in 2005 to #162k in 2006.
Having reported at the half year turnover of #1,063k, the Group was hit by a
sudden and unexpected inventory reduction by one of our largest customers over
the summer, which reduced our turnover in the second half of the year to #828k.
While this level of turnover and consequent impact on our profitability was
disappointing, it is comforting that activity with this customer has now
returned to normal levels, and the demand for Hardide coated product from the
end user has remained strong throughout the period.
On a like for like basis, turnover at our UK operating subsidiary rose from
#1.09m in 2005 to #1.89m, an increase of 73%. This increase was evenly spread
across each of our existing sales sectors (oil & gas, pumps, valves, and
aerospace). It is testament to the effectiveness of the Hardide product that
during the year we started coating production quantities of 21 new parts from
existing customers. The Group's sales to US customers rose to #367k in 2006
from #91k reported last year, which together with the number of Hardide coated
products in field trials with some of the largest US oil & gas companies,
provides sound backing for the board's decision to open a facility in Houston,
Texas.
In spite of the increase in turnover and the expansion of the Group, we have
been effective at keeping working capital under control. Levels of stock
excluding work in progress were #76k at the year end (2005: #41k), and trade
debtors reduced to #287k from #339k in 2005. The Group had a year end cash
balance of #1,803k.
There were increases in some of our costs of sales during the year. The Hardide
process uses Tungsten Hexafluoride, the cost of which has increased by 13% since
this time last year. Now that the Group is purchasing globally significant
quantities of this gas, we are exercising our purchasing power with the aim of
achieving major price reductions. We have also started to manage the entire
supply chain for certain customers as part of our competitive offering, which
increases turnover but at a lower margin.
Group overheads were #2,160k in the year, compared with #970k reported for the
previous period. Most of the increase is due to the increased length of period
reported, with additional overheads caused by the opening of our Houston
facility. During the year the Group invested in exhibiting at four major trade
shows during the year, which have provided a rich source of sales leads.
Group expenditure on fixed assets amounted to #978k in the year, of which #627k
was for our Houston plant. Of the remaining #351k, #170k was payments for the
construction of a new furnace for our Bicester plant, which was delivered in
late November. This new furnace will both increase production capacity and
allow one of our older furnaces to be taken out of front-line production and
released for research and development purposes. The arrival of the additional
furnace and the need to accommodate the overall increase in production has led
to the Group leasing additional factory space.
Given the size of the Group and its stage of development, it is appropriate that
the board has given prominence to monitoring the financial health of the Group
over the past year. The board also monitors a range of non-financial key
performance indicators including furnace performance, delivery performance and
product conformance. The board is now in the process of developing a wider
range of non-financial key performance indicators which will form the basis of
performance review in the coming year.
Peter Davenport
Finance Director
1 December 2006
HARDIDE PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the year ended 30 September 2006
27 January -
2006 30 September 2005
Note #'000 #'000
Turnover 2 1,891 692
Cost of sales (817) (283)
Gross profit 1,074 409
Administrative expenses
Amortisation 36 40
Depreciation (325) (146)
Other administration (1,871) (864)
Total administrative expenses (2,160) (970)
Other operating income 2 68
Operating loss (1,084) (493)
Net interest 36 12
Loss on ordinary activities (1,048) (481)
before taxation
Tax on loss on ordinary 3 142 -
activities
Loss for the financial year (906) (481)
Loss per share basic and diluted 4 (0.7)p (0.4)p
All operations are continuing.
HARDIDE PLC
CONSOLIDATED BALANCE SHEET AS AT 30 SEPTEMBER 2006
30 September 30 September
2006 2005
Note #'000 #'000
Fixed assets
Intangible assets
Goodwill 71 76
Negative goodwill (81) (122)
(10) (46)
Tangible assets 1,753 1,100
1,743 1,054
Current assets
Stocks 102 63
Debtors 588 459
Cash at bank and in hand 1,803 1,107
2,493 1,629
Creditors: amounts falling due (584) (313)
within one year
Net current assets 1,909 1,316
Total assets less current 3,652 2,370
liabilities
Creditors: amounts falling due (216) (314)
after one year
Net assets 3,436 2,056
Capital and reserves
Called up share capital 1,467 1,275
Share premium account 3,345 1,262
Profit and loss account (1,376) (481)
Shareholders' funds 5 3,436 2,056
HARDIDE PLC
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 30 September 2006
27 January -
Note 2006 30 September 2005
#'000 #'000
Net cash outflow from operating activities 6 (581) (851)
Returns on investments and servicing of finance
Interest received 60 19
Finance lease interest paid (24) (7)
Net cash inflow from returns on investments and 36 12
servicing of finance
Taxation 35 -
Capital expenditure and financial investment
Purchase of tangible fixed assets (978) (245)
Net cash outflow from capital expenditure and financial (978) (245)
investment
Acquisitions and disposals
Net cash transferred with subsidiary undertakings - 456
Net cash inflow from acquisitions and disposals - 456
Financing
Issue of shares 2,375 1,750
Capital element of finance lease rentals (91) (20)
New finance lease agreements - 318
Expenses paid in connection with share issues (100) (313)
Net cash inflow from financing 2,184 1,735
Increase in cash 7 696 1,107
STATEMENT OF CONSOLIDATED TOTAL RECOGNISED GAINS AND LOSSES
For the year ended 30 September 2006
27 January -
2006 30 September 2005
#'000 #'000
Loss for the financial year (906) (481)
Currency differences on foreign 11 -
currency net investments
Total recognised loss for the (895) (481)
year
HARDIDE PLC
NOTES TO THE PRELIMINARY ANNOUNCEMENT
For the year ended 30 September 2006
1. BASIS OF PREPARATION
The preliminary announcement has been prepared in accordance with applicable
accounting standards and under the historical cost convention.
The principal accounting policies of the group have remained unchanged from the
previous year.
2. SEGMENTAL INFORMATION
Turnover by origin Turnover by destination
27 January - 27 January -
2006 30 September 2005 2006 30 September 2005
#'000 #'000 #'000 #'000
UK 1,891 692 1,509 593
USA - - 367 91
Other - - 15 8
1,891 692 1,891 692
Group loss before taxation
27 January -
2006 30 September 2005
#'000 #'000
UK (584) (481)
USA (464) -
Group loss before (1,048) (481)
taxation
Group net assets
27 January -
2006 30 September 2005
#'000 #'000
UK 2,806 2,056
USA 630 -
Group net assets 3,436 2,056
3. TAXATION ON ORDINARY ACTIVITIES
(a) Analysis of credit in the year:
27 January -
2006 30 September 2005
#'000 #'000
Current tax:
Research and development tax credit 57 -
Adjustment in respect of prior years 85 -
research and development tax credits
142 -
(b) Factors affecting current tax charge:
The tax assessed on the loss on ordinary activities for the year is lower than
the standard rate of corporation tax in the UK of 19% (2005: 19%)
27 January -
2006 30 September 2005
#'000 #'000
Loss on ordinary activities before taxation (1,048) (481)
Loss on ordinary activities by rate of tax (199) (91)
Expenses not deductible for tax purposes 4 -
Capital allowances in excess of depreciation (6) (20)
Permanent differences (4) (1)
Current tax losses carried forward 216 112
Research and development tax credit 46 -
adjustment
Adjustment in respect of prior year research 85 -
and development tax credit
Total current tax (note 3(a)) 142 -
The group has unutilised tax losses in the UK of approximately #3.4m (2005:
#3.0m).
4. LOSS PER SHARE
The calculation of basic loss per share is based on the loss attributable to
ordinary shareholders of #906,000 (2005: #481,000) divided by the weighted
average number of ordinary shares in issue during the year which was 136,376,295
(2005: 127,493,242).
The issue of additional shares on the exercise of options would decrease the
basic loss per share and there is, therefore, no dilutive effect of share
options.
5. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
27 January -
2006 30 September 2005
#'000 #'000
Loss for the financial year (906) (481)
Exchange differences 11 -
Issue of shares 2,275 2,537
Net increase in shareholders' funds 1,380 2,056
Shareholders' funds at 1 October 2005 2,056 -
Shareholders' funds at 30 September 2006 3,436 2,056
6. NET CASH OUTFLOW FROM OPERATING ACTIVITIES
27 January -
2006 30 September 2005
#'000 #'000
Operating loss (1,084) (493)
Loss on disposal of fixed assets - 4
Depreciation of tangible fixed assets 325 143
Amortisation of goodwill (36) (40)
(Increase) in stocks (39) (46)
(Increase) in debtors (22) (163)
Increase / (decrease) in creditors 275 (256)
Cash outflow from operating activities (581) (851)
7. RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS
27 January -
2006 30 September 2005
#'000 #'000
Increase in cash 696 1,107
Cash inflow / (outflow) from finance leases 91 (405)
787 702
Net funds at 1 October 2005 702 -
Net funds at 30 September 2006 1,489 702
8. PUBLICATION OF NON-STATUTORY ACCOUNTS
The financial information set out in this preliminary announcement does not
constitute statutory accounts as defined in Section 240 of the Companies Act
1985.
The consolidated balance sheet at 30 September 2006 and the consolidated profit
and loss account, consolidated cash flow statement, statement of consolidated
total recognised gains and losses and associated notes for the year then ended
have been extracted from the Group's 2006 statutory financial statements upon
which the auditors opinion is unqualified and does not include any statement
under Section 237 of the Companies Act 1985.
Those financial statements have not yet been delivered to the registrar of
companies.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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