TIDMHDD
RNS Number : 9002Y
Hardide PLC
18 May 2021
18 May 2021
Hardide plc
("Hardide", "the Group" or "the Company")
Interim Results
for the six months ended 31 March 2021
Hardide plc (AIM: HDD), the developer and provider of advanced
surface coating technology, today announces its results for the
six-month period ended 31 March 2021 ("H1 2021").
Highlights
Financial
-- Revenue of GBP1.8m (H1 2020: GBP3.0m), in line with H2
2020 and the Board's expectations
-- Gross profit of GBP0.7m (H1 2020:
GBP1.7m)
-- Gross margin of 37% (H1 2020: 55%)
-- EBITDA loss of GBP0.9m (H1 2020: breakeven)
-- Cash at bank at 31 March 2021 of GBP2.3m (GBP4.9m at 31
March 2020)
Operational
-- Airbus final approval of the Longlands Road site due July
2021
-- Encouraging progress with aerospace customers:
* Airbus approvals gained for various A320, A330, A380
and A400M components
* Regular Airbus orders for A300 'Beluga' door
components
* Orders for BAE Eurofighter Typhoon canopy locking
components five times higher than the same period
last year
* New pipeline projects for aircraft landing gear,
helicopter and business jet applications
-- Exciting development underway with a very large, US-based
manufacturer of electric vehicles
-- New UK site at Longlands Road functioning as planned and
now certified to aerospace quality management system AS9100D
and environmental system ISO14001
-- Gas turbine blade developments well advanced with a major
European manufacturer
Post-period
-- Positive signs of recovery in demand starting to be seen
across all key markets
-- Long term agreement with a major German Tier 1 supplier
to Airbus is in final stages of preparation for the coating
of multiple Airbus A320 and A330 components
-- Second CBILS loan of GBP0.25m received in April 2021
Commenting on the interim results, Robert Goddard, Chairman of
Hardide plc, said:
"Whilst the Group has had a challenging first half and the
ongoing effects of COVID-19 remain unclear, there are signs of
improvement across all of our key markets. Revenue from energy,
flow control and aerospace customers all increased in the first
half compared with H2 2020 with sales to aerospace customers
increasing by 26% and to energy and flow control by 4% each.
Predictably, the recovery in demand from oil and gas customers is
slow. The overall rate of recovery will depend largely on the speed
of roll-out of the vaccination programme, and the associated
recovery of air travel and industrial energy consumption, both of
which are already being seen across the Far East and North America.
The Board believes that a number of factors, including
diversification of our customer base, product differentiation,
increased awareness of the benefits of the coatings and strong
customer relationships position us well for medium- and long-term
growth.
"Meanwhile, the Board and management has made excellent progress
in developing further the Group's strategy to build its position in
the transition to alternative energy sources, and are pursuing new
growth opportunities in various fields. Several applications have
been identified already, just one being the exciting development
with a large, US-based manufacturer of electric vehicles. Testing
is progressing well and at a swift pace.
"Looking ahead, the Board remains confident of an improvement in
revenues in H2 and into full year 2022. The Group's cash position
remains sufficient to meet the Company's working capital
requirements for the foreseeable future."
Enquiries:
Hardide plc Tel: +44 (0) 1869 353
Robert Goddard, Non-Executive Chairman 830
Philip Kirkham, CEO
Jackie Robinson, Communications Manager
IFC Advisory Tel: +44 (0) 20 3934
Graham Herring / Tim Metcalfe / Florence 6630
Chandler
finnCap - Nominated Adviser and Joint Broker Tel: +44 (0) 2072 200
Henrik Persson 500
Richard Chambers (ECM)
Allenby Capital - Joint Broker Tel: +44 (0) 20 3328
Tony Quirke - Sales and Corporate Broking 5656
Jeremy Porter - Corporate Finance
Notes to editors:
www.hardide.com
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 the energy sectors, valve
and pump manufacturing, precision engineering and aerospace
industries.
CHAIRMAN'S STATEMENT
Introduction
Trading remained largely stable and in line with our
expectations during the period, with sales of GBP1.8m (H1 2020:
GBP3m), very marginally ahead of the level seen in H2 2020 when the
effects of the COVID-19 pandemic first hit our key market sectors.
Having undertaken all sensible preventive measures, the UK and US
sites have operated normally throughout the pandemic, with no
disruption experienced.
Following a very extensive testing and verification process, I
am delighted to report that Airbus plan to fully approve all
production processes at the new Longlands Road site in July 2021.
At the end of June the last remaining reactor will be transferred
from Wedgwood Road and final site clearance will commence. The
lease on the Wedgwood Road site terminates in October 2021.
Provisions have been made for dilapidations.
Financial Results
The Group is reporting first half revenue of GBP1.8m. Whilst
this was expected, it does represent a decrease of GBP1.2m compared
with the same period last year (H1 2020: GBP3.0m). Group gross
profit was GBP0.7m, and compares with a gross profit of GBP0.7m in
H2 2020 (H1 2020: GBP1.7m) with a gross margin of 37% (H1 2020:
55%; H2 2020: 38%). Overheads of GBP1.5m (H1 2020: GBP1.6m) are
also being well-controlled, and once the one-off beneficial impacts
of the first US Paycheck Protection Program (GBP0.2m) and NATEP
grant receipts of GBP0.1m are taken into account, are at the same
level as H2 2020. The Group made an EBITDA loss of GBP0.9m (H1
2020: breakeven) which was also similar to H2 2020 after taking
into account the one-off benefits described above. The cash balance
at 31 March 2021 of GBP2.3m (GBP4.9m at 31 March 2020) was
strengthened by GBP1.3m, primarily from an equity fundraising of
GBP0.8m (before costs) and CBILS loan of GBP0.25m. Following the
period-end, another CBILS loan of GBP0.25m was also secured.
Operational Overview
Due to the dramatic effects of the pandemic on global demand for
fossil fuels, sales to our energy customers were significantly
reduced from the record levels achieved in H1 2020. Sales to flow
control customers, mainly in the industrial pump sector were also
affected by COVID-19 when compared with H1 2020; although the
reduction was due in part to sales in H1 2020 being particularly
strong as our major industrial pump customer was building stock in
advance of demand. I am pleased to report that order levels from
this customer are now strong again, primarily due to a large
increase in US house building activity. We are also seeing the
beginnings of an upturn in overall demand: in H1 2021 energy and
flow control sales each increased by 4% from H2 2020 and revenue
from aerospace increased by 26%.
In July 2021, Airbus will have completed all process approvals
and audits at Longlands Road and the last remaining reactor at
Wedgwood Road will be transferred and final site clearance will
commence. The lease terminates in October 2021. Longlands Road has
already gained accreditation to aerospace quality management
standard AS9100D and environmental standard ISO14001. Accreditation
to Nadcap at the site has been delayed due to COVID-19 travel
restrictions and is now expected later this year.
Owing to excellent co-operation from staff and the hygiene and
distancing measures introduced at our UK and US sites, both have
been fully operational throughout the pandemic. Revenue from North
American customers increased by 70% compared to H2 2020 with rising
demand from both energy and flow control sectors. First half sales
from the Martinsville facility were nearly double those in H2 2020.
In Bicester, the government's 'flexible furlough' scheme has been
used as appropriate to the fluctuating order load.
The Hardide-A coating is now approved by Airbus for multiple
A320, A330, A380 and A440M wing components. Low volume ordering is
ongoing for Airbus A380 compression pads and regular small orders
are being received for door components for the Airbus A300 Beluga
Super Transporter aircraft. Orders for the BAE Eurofighter
Typhoon's canopy locking components were five times higher in the
first half than the same period last year. The Group has been
building the aerospace pipeline with new projects underway with
customers in the UK, Europe and USA for landing gear, helicopter
and business jet applications, and hard chrome replacement projects
for cargo door and flight control actuation applications. Due to
the previous unavailability of their test rig, Leonardo Helicopters
has now resumed testing of a new transmission system containing
Hardide-coated parts. Test results and final approval are now
expected in August 2021.
A long-term supply agreement ("LTA") is in the final stages of
preparation prior to signing with a major German Tier 1 supplier to
Airbus. This LTA will include the initial packages of work for A330
and A320 wing components and further items will be added as and
when they are approved by Airbus. 'First Article' parts for final
quality approval are due shortly for coating, with production
orders expected to commence towards the end of 2021. This is just
one of a number of supply arrangements currently being finalised
with other UK and European Tier 1 suppliers to Airbus for
components where Hardide-A has been approved already as a superior
replacement for hard chrome plating.
Our long-term project for the development of a coating to extend
the life and operating efficiency of steam turbine blades with EDF
Energy has been delayed during the pandemic as the customer's staff
have been unable to access the laboratories to advance the testing.
A large European manufacturer of steam and gas turbines has now
developed a technical specification for Hardide-A coating of its
gas turbine blades and is starting the process of full validation.
Their expectation is for an introduction of these blades into the
first new-build gas turbine early in 2022, with more to follow
later in 2022.
Two large orders for filtration screens were completed for a
very large global oil and gas operating company as part of a
previously announced high-volume supply agreement. The customer
expects more orders will be placed later in 2021. A similar
application with a new customer in Singapore is now in test with
them. Hardide has a unique ability to coat components that are
critical to optimising the performance of particular types of
filtration screens. This application has exciting further
potential, both in oil and gas and industrial applications.
Recognising the strategic changes taking place in the global
energy industry around the drive to 'net zero', the Board has
accelerated its strategy to build its position in the alternative
energy sector. Several applications have been identified already.
For example, development is progressing well and at a swift pace
for the use of Hardide-T coating on components used in the
production process of lithium-ion (Li-ion) rechargeable batteries.
These are commonly used in electric vehicles, as well as in
military and aerospace applications. Applications in battery
recycling, geothermal, nuclear and biomass energy generation are
also being explored. The coating is already embedded into the
production process of a European solar energy company, which has
major plans for expansion.
Summary and Outlook
The Board has seen encouraging signs of improvement across all
our markets. This is despite the ongoing impacts of COVID-19
remaining uncertain in many respects. The speed of recovery will
depend largely on the speed of the vaccine roll-out programme and
the re-commencement of air travel and industrial energy
consumption, and we are already seeing positive signs of that in
the UK, Far East and North America. The Board believes that the
Group's progress in diversifying the customer base, product
differentiation, increased awareness and strong customer
relationships, position it well for medium- and long-term
growth.
The Board believes its cash resources to be sufficient to meet
the Group's working capital requirements for the foreseeable future
following the February equity fundraise and receipt of two CBILS
loans, and with our cautious approach to costs. Looking ahead, the
Board remains confident that revenues will start to recover in H2
2021 and improve yet further as we go into 2022.
Robert Goddard
Chairman
18 May 2021
Consolidated Statement of Comprehensive Income
For the period ended 31 March 2021
GBP 000 6 months to 6 months to Year to
31 March 2021 31 March 2020 30 September
2020
(unaudited) (unaudited) (audited)
Revenue 1,777 3,022 4,756
Cost of Sales (1,124) (1,366) (2,436)
Gross profit 653 1,656 2,320
----------------------------- --------------- --------------- --------------
Administrative expenses (1,518) (1,627) (2,861)
Depreciation - owned assets (417) (235) (477)
Depreciation - right of use
assets (134) (142) (288)
Provisions - 42 42
Operating (loss)/ profit (1,416) (306) (1,264)
----------------------------- --------------- --------------- --------------
Finance income 2 7 11
Finance costs (9) (2) (12)
Finance costs on right of
use assets (42) (46) (91)
Loss on ordinary activities
before tax (1,465) (347) (1,356)
----------------------------- --------------- --------------- --------------
Tax 38 - 65
Loss on ordinary activities
after tax (1,427) (347) (1,291)
----------------------------- --------------- --------------- --------------
Consolidated Statement of Changes in Equity
For the period ended 31 March 2021
GBP 000 6 months to 6 months to Year to
31 March 2021 31 March 2020 30 September
2020
(unaudited) (unaudited) (audited)
Total equity at start of
period 8,837 7,698 7,698
------------------------------------- --------------- --------------- --------------
Loss for the period (1,427) (347) (1,291)
Issue of new shares 764 2,347 2,372
Exchange differences on translation
of foreign operation (144) 17 (73)
Share options - 25 86
IFRS adjustment - - 45
Total equity at end of period 8,030 9,740 8,837
------------------------------------- --------------- --------------- --------------
Consolidated Statement of Financial Position
As at 31 March 2021
GBP 000 31 March 2021 31 March 2020 30 September
2020
(unaudited) (unaudited) (audited)
Assets
Non-current assets
Goodwill 69 69 69
Intangible assets 41 31 50
Property, plant & equipment 5,953 5,857 6,337
Right of Use Assets 1,961 2,275 2,130
------------------------------------ -------------- -------------- -------------
Total non-current assets 8,024 8,232 8,586
------------------------------------ -------------- -------------- -------------
Current assets
Inventories 528 568 565
Trade and other receivables 769 874 486
Other current financial assets 247 419 395
Cash and cash equivalents 2,331 4,881 2,715
Total current assets 3,875 6,742 4,161
------------------------------------ -------------- -------------- -------------
Total assets 11,899 14,974 12,747
------------------------------------ -------------- -------------- -------------
Liabilities
Current liabilities
Trade and other payables 705 2,037 906
Financial liabilities - borrowings 91 102 91
Financial liabilities - leases 223 226 193
Provision for onerous lease
and dilapidations 99 - 45
Provision for grant repayment 54 121 116
Total current liabilities 1,172 2,486 1,351
------------------------------------ -------------- -------------- -------------
Net current assets 2,703 4,256 2,810
------------------------------------ -------------- -------------- -------------
Non-current liabilities
Financial liabilities - borrowings 714 494 407
Financial liabilities - leases 1,933 2,152 2,046
Provision for onerous lease
and dilapidations 50 102 106
Total non-current liabilities 2,697 2,748 2,559
------------------------------------ -------------- -------------- -------------
Total liabilities 3,869 5,234 3,910
------------------------------------ -------------- -------------- -------------
Net assets 8,030 9,740 8,837
------------------------------------ -------------- -------------- -------------
Equity attributable to equity
holders of the parent
Share capital 3,938 3,831 3,836
Share premium 18,858 18,176 18,196
Retained earnings (14,457) (12,311) (13,210)
Share-based payment reserve 360 299 360
Translation reserve (669) (255) (345)
------------------------------------ -------------- -------------- -------------
Total equity 8,030 9,740 8,837
------------------------------------ -------------- -------------- -------------
Consolidated Statement of Cash Flows
For the period ended 31 March 2021
GBP 000 6 months to 6 months to Year to
31 March 2021 31 March 2020 30 September
2020
(unaudited) (unaudited) (audited)
Cash flows from operating
activities
Operating profit / (loss) (1,416) (306) (1,264)
Impairment of intangibles 9 5 13
Amortisation of deferred (12) - -
grant
Depreciation - owned assets 408 230 464
Depreciation - right of use
assets 134 142 288
Share option charge - 25 86
Decrease in inventories 37 123 126
(Increase) / decrease in
receivables (173) (89) 388
(Decrease) / increase in
payables (201) 685 (445)
(Decrease) in provisions (9) (42) (50)
Cash generated from operations (1,223) 773 (394)
-------------------------------------- --------------- --------------- --------------
Finance income 2 7 11
Finance costs (9) (2) (12)
Interest on right of use
assets (42) (9) (91)
Tax received 38 76 76
Net cash generated from operating
activities (1,234) 845 (410)
-------------------------------------- --------------- --------------- --------------
Cash flows from investing
activities
Purchase of property, plant,
equipment (145) (3,336) (4,166)
Net cash used in investing
activities (145) (3,336) (4,166)
-------------------------------------- --------------- --------------- --------------
Cash flows from financing
activities
Net proceeds from issue of
ordinary share capital 764 2,347 2,372
Loans raised 358 - -
Loans repaid (39) (19) (75)
Grants repaid (54) (94) (94)
Finance lease inception - 402 402
Lease principal repayments (83) (73) (221)
-------------------------------------- --------------- --------------- --------------
Net cash used in financing
activities 946 2,563 2,384
-------------------------------------- --------------- --------------- --------------
Effect of exchange rate fluctuations 49 - 98
-------------------------------------- --------------- --------------- --------------
Net (decrease) / increase
in cash and cash equivalents (384) 72 (2,094)
-------------------------------------- --------------- --------------- --------------
Cash and cash equivalents
at the beginning of the period 2,715 4,809 4,809
-------------------------------------- --------------- --------------- --------------
Cash and cash equivalents
at the end of the period 2,331 4,881 2,715
-------------------------------------- --------------- --------------- --------------
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