TIDMHDD
RNS Number : 5846U
Hardide PLC
06 December 2021
6 December 2021
Hardide plc
("Hardide", "the Group" or "the Company")
Preliminary results for the year ended 30 September 2021
Positive outlook across all target sectors
Hardide plc (AIM: HDD), the developer and provider of advanced
surface coating technology, announces its preliminary results for
the year ended 30 September 2021.
Highlights
Financial
-- Revenue of GBP3.6m (FY20: GBP4.8m)
-- Gross profit of GBP1.3m (FY20: GBP2.3m)
-- Gross margin of 36% (FY20: 49%), lower due to the fixed production
cost element within cost of sales. Variable margin was 72% (FY20:
73%)
-- EBITDA loss of GBP1.5m before exceptional items (FY20: GBP0.5m
loss)
-- Fundraising of approximately GBP0.8m together with a CBILS loan
of GBP0.25m in February 2021 to increase cash reserves. Second
CBILS loan of GBP0.25m received in April 2021
-- Cash at bank at 30 September 2021 of GBP1.5m (FY20: GBP2.7m)
Trading
-- The value of orders received during H2 FY21 of GBP2.5m was
52% higher than in H1 FY21 as demand from customers recovers.
Compared with FY20:
* 46% increase in sales to the aerospace sector, from a
low base
* 38% increase in sales to the precision engineering
sector, including power generation customers
* 46% reduction in sales to the oil & gas sector
* 12% reduction in sales to the flow control sector
Strategic
-- Full approval of the new Bicester site for coating flying
components received from Airbus. First production order
received for Airbus A320 aircraft wing components. We are
still waiting for Airbus and their Tier 1 supplier to agree
final arrangements before a supply agreement between Hardide
and the Tier 1 can be signed
-- First large production order received for the coating of
gas turbine blades for a major European turbine manufacturer
-- Leonardo Helicopters successfully completed testing of a
new transmission system design that includes Hardide-coated
components. Production orders are now expected to begin
in FY22
-- A testing and development programme is underway with a large
US-based manufacturer of electric vehicles (EVs)
-- Development of the ESG agenda, including the metrics on
which to base our energy usage and CO 2 emissions
Technology
-- Equivalent registration of the most recently-secured UK
patent is underway in 10 leading industrial countries. The
patent covers further-enhancement of the Hardide coating
and new applications, including turbine blades and vanes
-- Fundamental research continues into the development of new
coating variants with additional properties conveying significant
new and beneficial advantages
Post-Period
-- Former Bicester site fully vacated just before lease termination
on 26 October 2021. Environmental benefits will result from
the relocation, as well as saving approximately GBP100k
in dual site running costs
-- Stronger trading in the first quarter of the new financial
year gives the Board confidence in the Group's prospects
for FY22
Commenting on the results, Robert Goddard, Chairman of Hardide,
said: "Demand is now resurgent across all our sectors and we have a
healthy pipeline of exciting opportunities in both current and new
markets. Many test programmes that were on hold or slowed by the
pandemic are once again gathering pace.
"Opportunities for the Hardide coating have never been more
relevant as the world looks to industry to initiate and support
measures to limit climate change, waste and pollution. Use of the
Hardide coating increases the life and performance of metal parts
in high-wear and high-value applications, thereby reducing waste,
energy consumption and end-of-life pollution. Our coatings provide
solutions to problems that previously would have required a
hazardous and environmentally damaging coating process that is now
restricted under EU, UK and US health, safety and environmental
regulations.
"Looking forward, the much improved sales performance in the
first months of the current financial year and the considerable
pipeline of opportunities augur well for further growth in sales.
This provides us with confidence in the Group's prospects for 2022
and onwards."
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 / Abigail Kelly 500
Richard Chambers (ECM)
Allenby Capital - Joint Broker Tel: +44 (0) 20 3328
Jeremy Porter - Corporate Finance 5656
Tony Quirke - Sales and Corporate Broking
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, industrial gas turbine, precision
engineering and aerospace industries.
chairman's and ceo's report
We are pleased to report on our annual results for the 2021
financial year. Market recovery is demonstrated by the value of
orders received during the second half of the year, which are a
healthy 52% higher than in the first half. This improvement in
order intake has been continuing from all sectors in the first
months of FY22.
During the period, the Group raised net new financing of
approximately GBP1.25m to increase cash reserves by way of an
equity fundraising and CBILS loans.
The move to the new UK production site at Longlands Road in
Bicester was concluded during the year and the final coating
reactor was relocated following Airbus' approval of the new
facility. The new site provides the opportunity to benchmark our
environmental performance and identify areas for further
improvement.
COVID-19
The Group has continued to operate throughout the pandemic and
to take precautions to protect our employees, contractors and
visitors at our UK and US sites. In the UK, where it was
operationally appropriate to do so, the Group utilised the
Government's Coronavirus Job Retention Schemes to match our
workforce to demand and protect employment. In the US, we received
funds from the US Small Business Association's 'Paycheck Protection
Programs'.
FINANCIAL RESULTS
The Group generated sales of GBP3.6m in the year ended 30
September 2021 (FY20: GBP4.8m).
The value of orders received during H2 FY21 was 52% higher than
in H1 FY21, with the upward trend continuing into FY22.
Direct costs decreased by 6%, primarily due to the reduction in
the amount of process gases used, as a consequence of the lower
sales volume.
Group gross profit was GBP1.3m (FY20: GBP2.3m). Gross margin was
36% (FY20: 49%), the reduction being due to the fixed cost of sales
(which mainly comprise production salaries) not decreasing in line
with sales revenue.
Overhead costs, which comprise predominantly staffing costs,
increased by 1% in FY21 on the previous year. Both years have
benefitted to varying degrees from US government and UK COVID-19
government support programmes. Excluding the impact of these,
overheads were in line with the previous year.
Before exceptional items, the Group's EBITDA loss was GBP1.5m
(FY20: GBP0.5m loss) reflecting the reduced revenue.
Borrowings increased from GBP0.5m in FY20 to GBP0.8m in FY21,
due predominantly to the receipt of two CBILS loans in February and
April 2021, each for GBP250,000. The cash balance at the end of the
financial year was GBP1.5m (FY20: GBP2.7m).
Net assets at 30 September 2021 were GBP6.9m (FY20:
GBP8.8m).
OPERATIONAL OVERVIEW
Customers and Markets
Aerospace
Aerospace sales increased by 46%. Largely, this was due to
demand from BAE Systems for the coating of parts for the
Eurofighter Typhoon, together with small production orders from
Airbus. The coating has been approved by Airbus for use on parts
for the A320, A330, A380 and A400M aircraft and we expect to see
orders for coating components for these aircraft during FY22.
The Group is now experiencing further and increased demand.
Development projects are underway with a wide range of aerospace
customers, including manufacturers of landing gear and from MRO
(Maintenance, Repair and Overhaul) companies. During FY21, the
Group experienced a marked slowdown of test programmes and
commercial discussions, and in some cases their cessation. Many of
these have now restarted and are gathering pace.
We are still waiting for Airbus and their Tier 1 supplier to
agree final arrangements that will allow a supply agreement to be
signed between Hardide and the Tier 1. The timing of this is
outside of our control, but indications are that it should be soon.
Other components for Airbus from other Tier 1 suppliers are not
affected.
Leonardo Helicopters completed successfully the extended test
programme of the transmission assembly incorporating Hardide-coated
parts. This is the culmination of a long-standing project to
develop a number of coating techniques for parts used in the
transmission and rotor head systems to reduce 'in-service' costs
and extend component life. Production orders are expected to begin
in FY22.
The Group attended many virtual and some face-to-face
aerospace-related conferences and exhibitions throughout FY21,
thereby making new connections and identifying new applications
with OEMs and Tier 1 suppliers. The Group intends to exhibit at the
Singapore Airshow in February 2022 and at the Farnborough Airshow
in July 2022.
Energy
Demand is returning in the energy sector as market fundamentals
improve. Energy consumption is increasing and our major oilfield
services customers are reporting growth in their own businesses. As
the global economy recovers, the Board is confident that demand for
Hardide-coated products in this sector will return to previous
levels, if not beyond.
Recent remarks from the CEO of Schlumberger (October 2021) were
very positive about the outlook for the oil & gas sector:
'...the strengthening industry fundamentals, combined with the
actions of OPEC+ and continued capital discipline in North America,
have firmly established the prospects of an exceptional multiyear
growth cycle ahead' and '...our confidence in the onset of an
exceptional growth cycle is reinforced.'
Also, in October 2021 the CEO of Halliburton stated:
'...I see a multi-year upcycle unfolding.'
Alternative Energy
The Group is committed to increasing the proportion of revenue
generated from the alternative energy market. Sales to a
manufacturer of product for the solar cell industry are expected to
increase as this company expands considerably its production
facilities in response to increasing demand. Sales and marketing
resources have been allocated to identify technologies and
components that would benefit from Hardide coatings. Sectors of
interest include solar, hydrogen, geothermal, nuclear, gas and wind
turbines.
Power Generation and Precision Engineering
Currently, the Group is working on projects with five power
generation companies in the UK and EU. These will be based on our
recently-patented coating for blades and vanes used in
turbines.
In the first months of FY22, blades are already being coated for
a major European manufacturer of steam and gas turbines. These are
for installation in early 2022 into a high efficiency, low emission
gas turbine. Coating these blades and other applications currently
in development, can only be undertaken because of the recent
installation of Hardide's new, larger-capacity coating reactor and
the larger pre--treatment line in the UK.
The power station field trials of coated steam turbine blades
that were scheduled by EDF Energy for 2022, but have been delayed
by the pandemic. Meanwhile, the customer is conducting further
performance tests.
Demand for our coated components for high--speed X-ray baggage
scanners remained stable throughout the year.
Production, Technology, Research & Development and
Accreditations
In August 2021, the last remaining coating reactor in our former
site was relocated to the new facility, and this has enabled the
Group to reduce its emissions and environmental footprint. New
equipment and methods of waste treatment were established in the
new facility, thereby reducing significantly the environmental
impact of our manufacturing processes. The use of natural gas has
been eliminated at the new site and all electricity there is
supplied from a REGO-certified (Renewable Energy Guarantees Origin)
source. Four electric vehicle (EV) charging points were installed
for staff use.
The new UK site and the US facility are both accredited to the
aerospace quality management system AS9100D/ISO9001. The new
Bicester facility is also accredited to Nadcap's 'Merit Status',
and to the environmental standard ISO14001.
Fundamental research continues into the development of new
coating variants with potentially revolutionary properties that
would open up new markets for Hardide.
Intellectual Property
Registration of our most recent patent is underway in 10 leading
industrial countries. This new patent covers the
further-enhancement of the Hardide coating and new applications,
including turbine blades and vanes.
EMPLOYEES AND STAKEHOLDERS
The last 18 months have been extremely challenging for our
employees. They have had to navigate the uncertainty and change
brought about by the pandemic, at home and in the workplace. The
Board would like to thank our people for their hard work,
flexibility and positive attitude in such difficult circumstances.
We are pleased that we were able to utilise the support packages
available in the UK and US to ensure that we did not have to reduce
the number of our employees.
The Board also thanks shareholders and other stakeholders for
their continued loyalty and encouragement.
OUTLOOK
Demand is now resurgent across all our sectors, and we have a
healthy pipeline of exciting opportunities in current and new
markets. Test programmes that have been on hold or slowed by the
pandemic are once again gathering pace.
Rising global demand for energy, and the increasing oil price,
provide favourable conditions for the return of strong revenues
from our oil & gas customers. Recovery in the aerospace market
is forecast to strengthen in 2022 and beyond, and the Board expects
revenues from the coating of multiple aerospace parts and turbine
components. Also, we look forward to successful developments in the
EV market.
The continuing growth in our order book and the strong first
quarter of FY22 give the Board confidence that revenues will
strengthen markedly, and therefore the Group's financial
performance will improve significantly in FY22. The Board continues
to monitor carefully the Group's projected cash position and
believes that its reserves will be sufficient for the foreseeable
future.
Robert Goddard Philip Kirkham
Chairman CEO
6 December 2021
CONSOLIDATED INCOME STATEMENT
for the year ended 30 September 2021
2020
2021 as restated
GBP000 GBP000
Revenue 3,597 4,756
Cost of sales (2,286) (2,436)
Gross profit 1,311 2,320
--------------------------------------------- -------- -------------
Administrative expenses (2,795) (2,775)
Depreciation and amortisation of
owned assets (854) (477)
Depreciation of right of use assets (280) (288)
Exceptional items
Share based payments (202) (86)
Provisions (6) 42
Operating (loss) (2,826) (1,264)
--------------------------------------------- -------- -------------
Finance income 3 11
Finance costs (17) (12)
Finance costs on right of use assets (87) (91)
(Loss) on ordinary activities before
taxation (2,927) (1,356)
--------------------------------------------- -------- -------------
Taxation 125 65
(Loss) on ordinary activities after
taxation (2,802) (1,291)
--------------------------------------------- -------- -------------
(Loss) per share: Basic (5.2)p (2.5)p
(Loss) per share: Diluted (5.2)p (2.5)p
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
at 30 September 2021
2021 2020
GBP000 GBP000
Assets
Non-current assets
Goodwill 69 69
Intangible assets 37 50
Property, plant & equipment 5,699 6,337
Right of use assets 1,881 2,130
--------------------------------------------- --------- ---------
Total non-current assets 7,686 8,586
--------------------------------------------- --------- ---------
Current assets
Inventories 504 565
Trade and other receivables 583 486
Other current financial assets 442 395
Cash and cash equivalents 1,543 2,715
--------------------------------------------- --------- ---------
Total current assets 3,072 4,161
--------------------------------------------- --------- ---------
Total assets 10,758 12,747
--------------------------------------------- --------- ---------
Liabilities
Current liabilities
Trade and other payables 702 906
Financial liabilities 208 91
Right of use lease liability 201 193
Provision for grant repayment - 116
Provision for onerous lease and
dilapidations 34 45
Total current liabilities 1,145 1,351
--------------------------------------------- --------- ---------
Net current assets 1,927 2,810
--------------------------------------------- --------- ---------
Non-current liabilities
Financial liabilities 738 407
Right of use lease liability 1,911 2,046
Provision for onerous lease and
dilapidations 50 106
Total non-current liabilities 2,699 2,559
--------------------------------------------- --------- ---------
Total liabilities 3,844 3,910
--------------------------------------------- --------- ---------
Net assets 6,914 8,837
--------------------------------------------- --------- ---------
Equity attributable to equity holders
of the parent
Share capital 3,942 3,836
Share premium 18,854 18,196
Retained earnings (16,012) (13,210)
Share-based payments reserve 562 360
Translation reserve (432) (345)
--------------------------------------------- --------- ---------
Total equity 6,914 8,837
--------------------------------------------- --------- ---------
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 30 September 2021
2021 2020
GBP000 GBP000
Cash flows from operating activities
Operating (loss) (2,826) (1,264)
Impairment of intangibles 18 13
Depreciation on owned assets 836 464
Depreciation on right of use assets 280 288
Share option charge 202 86
Decrease in inventories 61 126
(Increase) / decrease in receivables (115) 388
(Decrease) in payables (204) (445)
(Decrease) in provisions (183) (144)
Cash used in operations (1,931) (488)
---------------------------------------------- -------- --------
Finance income 3 11
Finance costs (17) (12)
Right of use asset interest (87) (91)
Tax received 96 76
Net cash used in operating activities (1,936) (504)
---------------------------------------------- -------- --------
Cash flows from investing activities
Proceeds from sales of property, plant 18 -
and equipment
Purchase of intangibles (4) (33)
Purchase of property, plant and equipment (313) (4,133)
Net cash used in investing activities (299) (4,166)
---------------------------------------------- -------- --------
Cash flows from financing activities
Net proceeds from issue of ordinary share
capital 764 2,372
New loans raised 553 402
Loans repaid (101) (75)
Repayment of leases (273) (221)
Net cash generated from financing activities 943 2,478
---------------------------------------------- -------- --------
Effect of exchange rate fluctuations 120 98
Net (decrease) in cash and cash equivalents (1,172) (2,094)
---------------------------------------------- -------- --------
Cash and cash equivalents at the beginning
of the year 2,715 4,809
---------------------------------------------- -------- --------
Cash and cash equivalents at the end
of the year 1,543 2,715
---------------------------------------------- -------- --------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 30 September 2021
Share Share Share-based Translation Retained Total
Capital Premium Payments Reserve Earnings Equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
---------------------- --------- --------- ------------ ------------ ---------- --------
At 1 October 2019 3,673 15,987 274 (272) (11,964) 7,698
---------------------- --------- --------- ------------ ------------ ---------- --------
Issue of new shares 163 2,209 - - - 2,372
Share options - - 86 - - 86
Exchange translation - - - (73) - (73)
IFRS 16 adjustment 45 45
Loss for the year - - - - (1,291) (1,291)
---------------------- --------- --------- ------------ ------------ ---------- --------
At 30 September
2020 3,836 18,196 360 (345) (13,210) 8,837
---------------------- --------- --------- ------------ ------------ ---------- --------
At 1 October 2020 3,836 18,196 360 (345) (13,210) 8,837
---------------------- --------- --------- ------------ ------------ ---------- --------
Issue of new shares 106 658 - - - 764
Share options - - 202 - - 202
Exchange translation - - - (87) - (87)
Loss for the year - - - - (2,802) (2,802)
---------------------- --------- --------- ------------ ------------ ---------- --------
At 30 September
2021 3,942 18,854 562 (432) (16,012) 6,914
---------------------- --------- --------- ------------ ------------ ---------- --------
Annual report and accounts
The full annual report and accounts for the year ended 30
September 2021, including the basis for preparation and other
explanatory notes, will be posted to shareholders in mid-February
2022 and will be available immediately thereafter on the Company's
website ( www.hardide.com ). The announcement of the full report
and accounts will be notified. Notice of the Company's annual
general meeting will be sent to shareholders at the same time.
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