TIDMHDD
RNS Number : 3820V
Hardide PLC
11 January 2012
The following amendment has been made to the ' Preliminary
Results ' announcement released on 12 December 2011 at 7.00a.m.
under RNS No 6918T.
Dr Graham Hine, former chief executive officer, resigned in
August 2011.
All other details remain unchanged.
The full amended text is shown below.
Hardide plc
("Hardide" or "the Group")
Preliminary results for the year ended 30 September 2011
Hardide plc (AIM: HDD), the provider of unique metal surface
engineering technology, announces its preliminary results for the
twelve months ended 30 September 2011.
Financial Overview
-- Group turnover increased 12% to GBP1.95 million (2010: GBP1.74
million)
-- Gross profit increased by 11% to GBP1.21k (2010: GBP1.09k)
-- Group EBITDA loss increased to GBP225k (2010: loss GBP141k). Group
EBITDA positive in H2 2011
-- Group loss before tax GBP446k (2010: loss before tax and exceptionals
GBP381k)
-- UK operation, Hardide Coatings Limited, posts full-year pre-tax
profit of GBP409k (2010: GBP378k)
-- US sales increased 31% to GBP373k (2010: GBP284k)
-- Loss per share 0.05p (2010: loss 0.06p)
Business Overview
-- Investment in business development resources delivered increased
sales across all key sectors
-- Dependency on major customer reduced by 6% after 33% increase
in sales to other customers
-- US $3.65 million seven-year exclusivity deal announced with US
blue chip manufacturer of high-pressure fluid handling equipment
-- Airbus test programme delivers encouraging results with indications
of a wider range of aerospace applications for Hardide beyond
merely as a replacement for hard chrome
-- Houston-based business development representative appointed to
accelerate US revenue growth
-- Bruce Robinson appointed as non-executive director
-- Appointment of Robert Goddard as executive chairman and Bruce
Robinson as chief operating officer on interim basis (following
resignation of Dr Graham Hine as CEO) to accelerate sales growth
and production efficiency.
Post-Period Events
-- Successful raising of GBP750,000 gross new funds from existing
and new investors. The Group intends to use the net proceeds
to facilitate near-term sales growth and undertake modest capital
expenditure.
Commenting on the results, Robert Goddard, executive chairman of
Hardide plc, said: "Hardide has grown revenues in each of its key
sectors in the year ending 30 September 2011. The UK business,
Hardide Coatings Limited has achieved profitability for the second
consecutive year and the Group was EBITDA positive in H2 2011,
despite deliberate increases in business development expenses.
"Sales in the first few months of the current year show a
continuing improvement across all of our markets and indications
from customers are reassuring. The directors are optimistic that
growth will be sustained over the coming year."
For further information:
Hardide plc
Robert Goddard, Executive Chairman Tel: +44 (0) 1869 353 830
Jackie Robinson, Communications jrobinson@hardide.com
Manager www.hardide.com
Seymour Pierce Limited
Guy Peters Tel: +44 (0) 20 7107 8000
guypeters@seymourpierce.com
www.seymourpierce.com
Notes to editors:
Hardide manufactures and applies tungsten carbide-based coatings
to a wide range of engineering components. The Group's patented
technology provides a unique combination of ultra-hardness,
toughness, low friction and chemical resistance in one coating.
When applied to components, the technology is proven to offer
dramatic cost savings through reduced downtime and extended part
life. Customers include leading companies operating in oil and gas
exploration and production, valve and pump manufacturing, general
engineering and aerospace.
EXECUTIVE CHAIRMAN'S STATEMENT AND REVIEW
OVERVIEW
Financial
Group revenue for the year ended 30 September 2011 increased 12%
to GBP1.95 million (2010: GBP1.74 million) with the Group EBITDA
positive in the second half of the year. Severance costs combined
with planned increased expenditure in UK and US business
development account for a fall back in full year Group EBITDA to a
loss of GBP225k from GBP141k in 2010. The prior year benefited from
a GBP66k credit due to exchange rate movements. Group loss before
tax for the year fell to GBP446k from a loss of GBP381k (before
exceptionals but including the exchange rate credit) in 2010.
Cost of sales increased by 13% to GBP733k from GBP649k in 2010;
a good result in the light of a substantial 36% increase in the
cost of gas, the most heavily used raw material in the production
process. Gross margin percentage declined by one point to 62% and
gross profit rose 11% to GBP1.21 million (2010: GBP1.09
million).
Business development and severance costs largely accounted for a
12% increase in overheads to GBP1.44 million (2010: GBP1.29
million). Despite this rise, an operating profit of GBP40k was
achieved in H2 2011, after accounting for severance costs; compared
with a loss of GBP380k in H1 2011. Over the full year, the Group
posted an operating loss of GBP340k (2010: loss of GBP277k before
exceptionals).
BUSINESS REVIEW
Customers and Markets
After a slow start to the first half of the year, there was a
broad recovery in demand at the end of the period and sales rose
across all of our key sectors. Demand continued to rise in H2 2011
and this trend has continued into the start of the new financial
year. The drivers behind this year's growth have been different
from 2010 in so far as we have observed no evidence of restocking.
Looking forward, we expect our markets to continue to grow,
although we remain alert to any sudden fall back in demand.
Customer and sector diversification remain a key strategic goal
for the Group. Progress was made during the year and the proportion
of sales to our major customer was reduced by six percentage points
after a 33% increase in sales to other customers. Sales to US
customers rose 31%, comprising a healthy mix of new and repeat
business, primarily from blue chip customers in flow control, and
oil and gas. In the US, the Houston manufacturing plant remains in
hibernation with the facility partly sub-leased, but the equipment
remains moth-balled in-situ and will remain so until it is prudent
to resume manufacture there.
In May 2011, the Group signed a seven-year exclusivity agreement
with a leading US based manufacturer of high pressure, fluid
handling equipment. This is valued at US$3.65 million over the
term.
The downhole and drilling sector of the oil and gas exploration
and production (E&P) industry is currently Hardide's main
market. Activity is expected to continue to grow steadily in
complex and difficult environments such as shale, high-pressure and
sour conditions. These are operating circumstances in which the
Hardide technology excels. This sector remains a key target for
growth and increasing customer diversity within it will reduce our
vulnerability to any fall back in demand from any single
customer.
Sales in flow control have increased steadily during the year;
with a combination of new and repeat orders, particularly for
metal-seated ball valves and severe service applications. The
coating has been used by a global manufacturer of severe service
valves in several high pressure and abrasive applications in the
power generation and refining industries where other hard coatings
have failed. The response from the field has been good and the
parts have either outlasted the previous solutions or are still in
service. The coating has also been tested and approved by another
global severe service valve manufacturer as a replacement for hard
chrome, a coating which is to be phased out for environmental
reasons.
Advanced engineering has been another growth area over the year.
We are working with prospective customers to qualify Hardide for
use on parts ranging from wear rings, extrusion dies and sleeves to
telemetry housing, cone rings and spherical bearings.
Directors and Management
Hugh Smith, our longest serving non-executive director stepped
down from the board at the AGM in February 2011. He left with our
sincere thanks for his insightful counsel over the years and our
best wishes for his retirement. Bruce Robinson replaced Hugh as a
non-executive director and member of both the audit committee and
the combined remuneration and nomination committees. Bruce has
brought extensive experience of growing technology-based businesses
and of the international oil and gas industry.
Dr Graham Hine, former chief executive officer, resigned in
August 2011. His role has been filled on an interim basis by me and
Bruce Robinson working together as executive chairman and chief
operating officer respectively. A specification for a replacement
has been created and a search is about to begin. Meanwhile, Bruce
and I are focused on maximising revenue potential while
implementing production and operational efficiencies, as well as
working with the board to create a new growth strategy.
There were 12 monthly board meetings in the year, with full
attendance by directors at each. In addition there were five
meetings of the combined Remuneration and Nominations Committee,
four of the IPR Subcommittee, two of the Audit Committee and one of
the Risk Subcommittee.
UK: Hardide Coatings Limited
With its stabilised cost base, the UK operating company, Hardide
Coatings Limited achieved full year profitability, with a PBT of
GBP409k (2010: GBP378k) on revenue of GBP1.95 million (2010:
GBP1.74 million). Gas and other raw material costs rose
significantly during the year but were absorbed with only a slight
reduction in the percentage gross margin.
The UK facility continues to process all sales from the US with
no detrimental effect on lead time. We have extended the contract
with our US business development representative to manage existing
accounts as well as to pursue new business.
I am pleased to report that the Group secured accreditation of
the latest AS9100 Rev. C quality system for aerospace, while also
retaining ISO9001 during the year. AS9100 Rev C requires even more
stringent quality systems and many companies are finding it
difficult to secure the latest approval, so this is a positive
achievement. I am also pleased to report that there were no lost
time incidents recorded during the year. Credit is due to Hardide's
operations team for furthering the Group's high standards in these
vital areas.
While currently fit-for-purpose, more comprehensive human
resource systems will become necessary as Hardide grows. Further
training and better resourced personal development systems will be
implemented progressively.
Technology, Research & Development
The commercial, technical, engineering and production teams
combine to provide invaluable expertise that enables us to make
increasingly well-informed decisions on the viability of a wide
range of potential applications. Recent examples include
applications from manufacturers as diverse as those of drinks
cartons, kitchen worktops and helicopters. This doesn't include all
the more mainstream enquiries from our key sectors.
In addition, we have ongoing a number of carefully-selected
medium and long term test programmes. These are being progressed
alongside our day-to-day business and short term development
programmes. The Airbus test programme has delivered encouraging
results and indicates there could be a wider range of applications
beyond using the Hardide coating exclusively as a replacement for
hard chrome. Tests are either underway or are about to begin with
two other major aerospace manufacturers.
The coating of diamonds remains a longer term development
project and continues with our customer partners.
Other medium to long term test programmes are ongoing, with a
diverse range of applications; including steam turbine blades,
metal cutting tools, silicon production equipment, bearing ring
seals, textile machinery parts, rotors and impellers.
A review of the work of the Moscow research laboratory was
carried out during the year and the decision taken by the board to
continue the use of the facility for certain development projects
and for fundamental research into new coating variants.
Outlook
Sales in the first few months of the current year show a
continuing improvement across all of our markets and indications
from customers are reassuring, despite uncertainty in the general
economy. Nonetheless, the Group is alert to the possibility of a
sudden fall back in demand from its large customers, although we
have no indication that this is going to occur in the foreseeable
future.
The management team and directors are focused on generating
demand and diversifying the customer base while managing capacity
to meet that demand. We are confident of the increasing strength of
our pipeline, in the strategic projects that we are pursuing, and
that implementation of the Group's strategy will create and sustain
further trading improvements and growth over the coming year.
We are fortunate to enjoy the continued confidence and support
of our employees, customers and shareholders and I thank them for
their commitment.
Robert Goddard
Executive Chairman
09 December 2011
FINANCIAL REVIEW
While the first half of the year started promisingly from a
revenue point of view, the momentum was not maintained and a weak
winter period meant half-year sales of GBP793k were disappointing.
However sales picked up during the spring and remained so to the
end of the year, with revenues in the second half year of
GBP1,154k, an improvement of GBP361k / 45% over the first half.
Revenue for the full year of GBP1,947k was GBP212k / 12% ahead of
last year. This has been driven by increased revenue from all
sectors, including a 31% increase in business from North
America.
Costs of sales increased by GBP84k, up 13% from GBP649k to
GBP733k. While we were hit by some increases in the cost of raw
materials compared with 2010, we also increased our production
headcount as a result of increased throughput. However, these were
offset by economies of scale such that the cost of sales as a
percentage of sales increased by only 1%. We are now in the first
year of a three year supply agreement for our most heavily used
(and most expensive) gas, meaning further cost increases should be
more limited. Gross profit increased by GBP128k to GBP1,214k from
GBP1,086k last year.
Administrative and interest costs in Hardide Coatings Limited
rose by GBP105k to GBP805k due to deliberate investment in both UK
and US sales capability, giving a pre-tax profit for the operating
subsidiary of GBP409k (2010: GBP378k).
Hardide PLC's loss increased from GBP535k to GBP684k. Hardide
PLC includes the costs of executive and non-executive directors
(although a proportion of the former are recharged to the operating
subsidiary), all research and development costs including those of
the Group's Moscow laboratory, intellectual property costs, the
legal and professional costs associated with listing, and the
interest charges associated with the convertible loan notes. There
were additional IP costs in the year as one of our patents moved
from a European patent to being registered in individual countries,
an increase in R&D expenditure, plus costs of the resignation
of the Chief Executive Officer in August 2011, not only pay in lieu
of notice but also the additional costs of Robert Goddard and Bruce
Robinson for their interim executive roles.
The costs of the Group's hibernated US subsidiary fell to
GBP106k from GBP191k before exceptional items last year.
The Group's operating loss of GBP340k was broadly flat compared
with 2010 taking into account the exceptional item and exchange
rate credit in the prior year. However, it was a year of two very
different halves, with a much better performance in the second.
Net decrease in cash during the year amounted to GBP244k
compared with a decrease of GBP396k in 2010, but again the second
half performance (GBP23k outflow) was much stronger than the first
(GBP221k outflow). The Group has now paid off all of its finance
leases, with the last payment being in August. However, payments of
interest on loan notes have now started in their place. Creditors
at the year-end were high relative to the rest of the year for a
number of one-off reasons, principally a backlog of invoices from
our gas supplier.
Peter Davenport
Finance Director
09 December 2011
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 30 September 2011
Note 2011 2010
GBP000 GBP000
Revenue 2 1,947 1,735
Cost of sales (733) (649)
Gross profit 1,214 1,086
------------------------------------- ----- -------- --------
Administrative expenses (1,439) (1,293)
Exchange difference on intercompany
loan - 66
Impairment of intangibles - (2)
Depreciation and amortisation (115) (134)
Exceptional item: Impairment of
fixed assets - (126)
------------------------------------- ----- -------- --------
Operating loss 3 (340) (403)
------------------------------------- ----- -------- --------
Finance income 4 - 2
Finance costs 5 (106) (106)
Disposal of fixed asset - -
Loss on ordinary activities before
taxation (446) (507)
------------------------------------- ----- -------- --------
Taxation 7 65 33
Loss on ordinary activities after
taxation (381) (474)
------------------------------------- ----- -------- --------
Loss per share: Basic 8 (0.05)p (0.06)p
Loss per share: Diluted 8 (0.03)p (0.04)p
All operations are continuing.
The accompanying accounting policies and notes form an integral
part of these financial statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
at 30 September 2011
Note 2011 2010
GBP000 GBP000
Assets
Non-current assets
Goodwill 9 69 69
Intangible assets 10 - -
Property, plant & equipment 11 478 569
--------------------------------------- ----- -------- --------
Total non-current assets 547 638
--------------------------------------- ----- -------- --------
Current assets
Inventories 12 24 26
Trade and other receivables 12 406 337
Other current financial assets 12 102 62
Cash and cash equivalents 12 292 536
--------------------------------------- ----- -------- --------
Total current assets 824 961
--------------------------------------- ----- -------- --------
Total assets 1,371 1,599
--------------------------------------- ----- -------- --------
Liabilities
Current liabilities
Trade and other payables 13 370 258
Financial liabilities 13 - 55
Total current liabilities 370 313
--------------------------------------- ----- -------- --------
Net current assets 454 648
--------------------------------------- ----- -------- --------
Non-current liabilities
Financial liabilities 14 895 801
--------------------------------------- ----- -------- --------
Total non-current liabilities 895 801
--------------------------------------- ----- -------- --------
Total liabilities 1,265 1,114
--------------------------------------- ----- -------- --------
Net assets 106 485
--------------------------------------- ----- -------- --------
Equity attributable to equity holders
of the parent
Share capital 16 2,541 2,541
Share premium 17 5,259 5,259
Retained earnings 17 (7,310) (6,955)
Share-based payments reserve 17 248 269
Translation reserve 17 (632) (629)
--------------------------------------- ----- -------- --------
Total equity 106 485
--------------------------------------- ----- -------- --------
The financial statements were approved and authorised for issue
by the Board on 09 December 2011.
Robert Goddard
Director
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 30 September 2011
2011 2010
GBP000 GBP000
Cash flows from operating activities
Operating loss (340) (403)
Impairment of intangibles - 2
Depreciation 115 134
Impairment of fixed assets - 126
Share option charge 5 2
Decrease in inventories 2 -
Increase in receivables (109) (89)
Decrease in payables 112 (1)
Exchange rate variance - (66)
--------------------------------------- -------- --------
Cash generated from operations (215) (295)
--------------------------------------- -------- --------
Finance income - 2
Finance costs (10) (10)
Tax received / (paid) 48 39
Net cash generated from operating
activities (177) (264)
--------------------------------------- -------- --------
Cash flows from investing activities
Purchase of property, plant and
equipment (21) (25)
Net cash used in investing activities (21) (25)
--------------------------------------- -------- --------
Cash flows from financing activities
Net proceeds from issue of ordinary - -
share capital
Finance lease inception - -
Finance lease repayment (46) (107)
New loans raised - -
Net cash used in financing activities (46) (107)
--------------------------------------- -------- --------
Net increase / (decrease) in cash
and cash equivalents (244) (396)
--------------------------------------- -------- --------
Cash and cash equivalents at the
beginning of the year 536 932
--------------------------------------- -------- --------
Cash and cash equivalents at the
end of the year 292 536
--------------------------------------- -------- --------
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
for the year ended 30 September 2011
2011 2010
GBP000 GBP000
Cancellation of share options previously 26 -
charged to profit
Exchange differences on translation
of foreign operations (3) (45)
Net income recognised directly
in equity 23 (45)
------------------------------------------ -------- --------
Loss for the year (381) (474)
Total recognised income and expense
for the year (358) (519)
------------------------------------------ -------- --------
The financial information set out in this preliminary
announcement does not constitute statutory accounts as defined in
Section 435 of the Companies Act 2006.
The consolidated statement of financial position at 30 September
2011, and the consolidated statement of comprehensive income and
consolidated statement of cash flows for the year then ended have
been extracted from the Group's 2011 statutory financial statements
upon which the auditors have reported. The auditor's report is
unqualified and does not include any statement under Sections 498
(2) (accounting records or returns inadequate or accounts not
agreeing with records) or 498 (3) (failure to obtain necessary
information and explanations) of the Companies Act 2006. Those
financial statements have not yet been delivered to the Registrar
of Companies.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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