REG - Hardide PLC - Interim Results
10/05/2022 07:00
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RNS Number : 8445K Hardide PLC 10 May 2022
10 May 2022
Hardide plc
("Hardide", "the Group" or "the Company")
Interim Results
for the six months ended 31 March 2022
Hardide plc (AIM: HDD), the developer and provider of advanced surface coating
technology, announces its results for the six-month period ended 31 March 2022
("H1 2022").
Highlights
Financial
· Revenue of £2.7m, c.50% higher than same period last year (H1 2021: £1.8m)
with a strong pipeline for H2
· Gross profit of £1.1m (H1 2021: £0.7m)
· Gross margin of 41% (H1 2021: 37%)
· EBITDA loss of £0.2m, including a £0.2m US Employee Retention Credit (H1
2021 loss: £0.9m)
· Gross cash at 31 March 2022 of £0.9m (30 September 2021: £1.5m). Asset
finance and Government backed CBILS loans of £1.2m (30 September 2021:
£0.9m)
Operational
· Two major orders received from Ansaldo Energia S.p.A ("Ansaldo") for coating
compressor blades for power generation gas turbines with further orders
expected in H2 and on an ongoing basis
· Growing demand from the oil and gas sector as global consumption and
production increases
· Regular orders commenced for coating Airbus A320 wing components, with orders
for Airbus A330 and A380 components to start in H2
· Leonardo Helicopters finalising approval documentation with orders expected in
H2
· Continued development trials with the US-based manufacturer of EVs
Post period
· US Employee Retention Credit cash received of $233k (c. £177k)
· Orders for Airbus A330 and A380 components now received
Commenting on the interim results, Robert Goddard, Chairman of Hardide plc,
said:
"I am very pleased to report on a very positive first half with improvement
across our key markets. Revenue increased by approximately 50% in the first
half compared with both H1 and H2 2021, especially from energy, industrial and
power generation customers.
"The Board is extremely pleased with the first, and recently received second
order, for coating compressor blades for Ansaldo's gas turbines and looks
forward to a long-term relationship with the customer. Regular orders started
to materialise in H1 for the Airbus A320 series aircraft and orders for Airbus
A330 and A380 components have been received in H2. In the alternative energy
sector, we also have a number of developments underway.
"Looking ahead, the Board has increased confidence in the Group's revenue
prospects for H2 and into the next financial year underpinned by a very
healthy pipeline of identified customer projects. We continue to monitor our
working capital resources carefully but have line of sight to profitability
and cash generation.
"With the Company now being on this firmer footing for the future, I have the
confidence to step aside as Chairman, as announced separately today."
Enquiries:
Hardide plc
Robert Goddard, Non-Executive Chairman Tel: +44 (0) 1869 353 830
Philip Kirkham, CEO
Jackie Robinson, Communications Manager
IFC Advisory Tel: +44 (0) 20 3934 6630
Graham Herring
Tim Metcalfe
Florence Chandler
finnCap - Nominated Adviser and Joint Broker Tel: +44 (0) 2072 200 500
Henrik Persson/ Abigail Kelly (Corporate finance)
Richard Chambers (ECM)
Allenby Capital - Joint Broker Tel: +44 (0) 20 3328 5656
Tony Quirke - Sales and Corporate Broking
Jeremy Porter - Corporate Finance
Notes to editors:
www.hardide.com (http://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
engineering and aerospace industries.
CHAIRMAN'S STATEMENT
Introduction
Market conditions and the number of new applications have improved
considerably across all sectors, resulting in H1 revenues being approximately
50% higher than in each of H1 2021 and H2 2021.
This improving trend is expected to continue in H2 2022, with a continued
recovery anticipated across our markets together with further orders from
Ansaldo. We now have visibility of work that could, subject to typical
commercial concerns and the timing of delivery, take our performance to the
top of or beyond previous market expectations for the financial year. It is
pleasing, given the conditions in our target markets over recent years, that
our capacity to deliver further growth from the processing of large components
is now subject to addressing our own capacity constraints.
The improvements in the Group's operating environment are pleasing together
with improving market conditions. Looking forward, these show a clear
trajectory towards profitability and cash generation. In the meanwhile, the
Board continue to monitor the Group's working capital resources very closely
and is mindful that the Group's cash resources are below the level that the
Board has historically stated that it would like to maintain as a strategic
buffer. The recovery across the Group's target markets has not been even, and
certain higher-margin sectors (particularly energy), whilst improving, remain
behind previous expectations. This is compounded by the Group's upfront
product development and raw material working capital requirements,
inflationary pressures on input costs and investment requirements across the
business to support continued growth.
Financial Results
The Group is reporting first half revenue of £2.7m, an increase of c. 50%
compared with the same period last year (H1 2021: £1.8m) for reasons further
explained below. Gross profit of £1.1m (H1 2021: £0.7m) increased in line
with higher revenue, with margins improved at 41% (H1 2021: 37%). The Group is
focused on sustaining and improving margins for the full financial year, but
is experiencing already the impact of increasing costs of energy, process gas
and other chemicals.
Overheads of £1.3m (H1 2021: £1.5m) are also being well-controlled leading
to a considerably reduced EBITDA loss of £0.2m (H1 2021: £0.9m loss).
The gross cash balance at 31 March 2022 was £0.9m (30 September 2021:
£1.5m), with total asset finance and CBILS loans of £1.2m (30 September
2021: £0.9m). Gross cash balance has risen to £1.1m as at 30 April 2022
following the receipt of a $0.23m (£0.17m) cash refund in respect of the US
Employee Retention Credit scheme and £0.15m of a £0.25m debt overdue at the
period end. The balance is due to be received in May.
In January 2022, the US business secured $0.44m (£0.33m) of asset financing
on very attractive terms against one of its coating reactors. The Group will
continue to explore other financing opportunities for supporting the Group's
requirements for capital investment and working capital.
Operational Overview
In H1 2022, market segmentation of revenue was:
o Energy (including oil & gas and power generation): 54%
o Industrial: 43%
o Aerospace: 3%
Compared with the same period last year, Energy sales increased by 49% (oil
& gas by 26%) and Industrial sales by 62%. Aerospace sales showed a slight
decrease due to the phasing of orders.
Energy
As the world recovers from the COVID-19 pandemic, global demand for energy is
rising. The disruption of supplies of oil & gas from Russia, as a result
of western sanctions following the invasion of Ukraine, is adding to the
increase in oil and gas production globally. This is evident by demand
increasing from our oil & gas customers as well as new, potentially
high-volume applications currently under test in this sector.
The most significant development in the period was the first order from
Ansaldo in Italy for the coating of sets of compressor blades for one of their
new, high efficiency advanced gas turbines used in electricity generation.
These turbines cut CO(2) emissions and operational costs. The size of some of
these blades is such that it would not have been possible to take on this
business without the new large coating reactor and pre-treatment line which
were installed when the Company relocated to its new site in 2020. A second
order for a further set of blades was received in March 2022 for coating and
delivery during H2. Further orders for blade sets are projected to be received
throughout 2022 and beyond. Testing and development work continues with three
other companies in this sector.
Capacity utilisation of the large coating reactor will be high as a result of
these orders. Future demand of these and of other developments currently
underway for large components will be monitored closely to ensure coating
capacity is available to take on additional business in the future. The Board
is mindful that additional large reactor capacity would be required to
facilitate further developments and to continue to deliver further revenue
growth.
Revenue from a European solar energy customer is expected to grow during H2
and into 2023 as they embark on an expansion of their production capacity to
cope with increasing demand for silicon wafers used in solar cells.
The Group continues to advance its strategy to develop new applications in
alternative energy. Development trials are still underway with the US-based
manufacturer of EVs for the use of the Hardide-T coating on components used in
the manufacture of lithium-ion (Li-ion) rechargeable batteries. In addition to
progressing developments in the solar and EV sectors, we started the early
stage testing of the coating in three hydrogen production applications.
Hardide coatings, due to their non-porous structure, are believed to be an
excellent barrier preventing hydrogen under high pressure from penetrating the
underlying metal substrate, as hydrogen permeating into metals can cause
severe embrittlement and component failure. Tests are underway with a major
European company in the hydrogen production and distribution sector, as well
as other projects ongoing with an innovative US cleantech company working on
technology to decarbonise natural gas and a leading UK university
investigating hydrogen production by electrolysis.
Industrial
Demand from our major North American industrial pump customer was more than
double that seen in H1 2021 and 25% higher than in H2 2021, with high levels
of orders continuing into H2. Sales to the airport security scanner
manufacturer dipped during the pandemic as their customers cut back on
expenditure. This demand is now starting to return to previous levels.
Aerospace
Regular orders from a European Tier 1 supplier to Airbus are now being
received to coat wing components for the Airbus A320 range. Orders from a
UK-based Tier 1 for the coating of wing components for the Airbus A330 have
started in H2 2022, as have orders for parts for the Airbus A380 as
maintenance activity on the fleet increases and the existing hard chromed
plated parts are replaced by Hardide-coated ones. Production levels for the
A320 and A330 are increasing as airline activity resumes its previous growth.
Despite Airbus and their European Tier 1 supplier having still not finalised
their own contractual arrangements, this is not preventing orders being placed
by them. This agreement will cover only certain components for Airbus. Orders
from other Tier 1 suppliers are subject to separate arrangements and are
currently being received.
As mentioned previously, Leonardo Helicopters successfully completed their
testing of Hardide-coated components as part of a modified gearbox
transmission system. Currently, they are in the process of finalising the
approval documentation so that production orders can commence.
Summary and Outlook
The Board is much encouraged by the improving demand from our traditional
markets and the first, and recently received second order, for coating
compressor blades for Ansaldo's power generation gas turbines. The Company
looks forward to a long-term relationship with this first customer in a new
sector for Hardide in which we see considerable commercial opportunities.
Regular orders have started to materialise for the Airbus A320 series of
aircraft with further orders for Airbus A330 and A380 parts already received
in H2. A number of developments are also underway in the Alternative Energy
sector.
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.
Looking ahead, the Board remains confident that the growth in revenue will
continue in H2 2022 and is set to improve yet further as we go into 2023.
Robert Goddard
Chairman
10 May 2022
Consolidated Statement of Comprehensive Income
For the period ended 31 March 2022
£ 000 6 months to 6 months to Year to
31 March 2022 31 March 2021 30 September 2021
(unaudited) (unaudited) (audited)
Revenue 2,658 1,777 3,597
Cost of Sales (1,556) (1,124) (2,286)
Gross profit 1,102 653 1,311
Administrative expenses (1,323) (1,518) (2,795)
Depreciation - owned assets (433) (417) (854)
Depreciation - right of use assets (64) (134) (280)
Exceptional items:
Share based payments - - (202)
Provisions - - (6)
Operating loss (718) (1,416) (2,826)
Finance income 1 2 3
Finance costs (14) (9) (17)
Finance costs on right of use assets (40) (42) (87)
Loss on ordinary activities before tax (771) (1,465) (2,927)
Tax 15 38 125
Loss on ordinary activities after tax (756) (1,427) (2,802)
Consolidated Statement of Changes in Equity
For the period ended 31 March 2022
£ 000 6 months to 6 months to Year to
31 March 2022 31 March 2021 30 September 2021
(unaudited) (unaudited) (audited)
Total equity at start of period 6,914 8,837 8,837
Loss for the period (756) (1,427) (2,802)
Issue of new shares - 764 764
Exchange differences on translation of foreign operation 38 (144) (87)
Share options - - 202
Total equity at end of period 6,196 8,030 6,914
Consolidated Statement of Financial Position
As at 31 March 2022
£ 000 31 March 2022 31 March 2021 30 September 2021
(unaudited) (unaudited) (audited)
Assets
Non-current assets
Goodwill 69 69 69
Intangible assets 27 41 36
Property, plant & equipment 5,490 5,953 5,700
Right of Use Assets 1,821 1,961 1,881
Total non-current assets 7,407 8,024 7,686
Current assets
Inventories 362 528 504
Trade and other receivables 1,146 769 583
Other current financial assets 357 247 442
Cash and cash equivalents 864 2,331 1,543
Total current assets 2,729 3,875 3,072
Total assets 10,136 11,899 10,758
Liabilities
Current liabilities
Trade and other payables 665 705 702
Financial liabilities - borrowings 258 91 208
Financial liabilities - leases 199 223 201
Provision for onerous lease and dilapidations 12 99 34
Provision for grant repayment - 54 -
Total current liabilities 1,134 1,172 1,145
Net current assets 1,595 2,703 1,927
Non-current liabilities
Financial liabilities - borrowings 941 714 738
Financial liabilities - leases 1,815 1,933 1,911
Provision for onerous lease and dilapidations 50 50 50
Total non-current liabilities 2,806 2,697 2,699
Total liabilities 3,940 3,869 3,844
Net assets 6,196 8,030 6,914
Equity attributable to equity holders of the parent
Share capital 3,942 3,942 3,942
Share premium 18,854 18,854 18,854
Retained earnings (16,766) (14,457) (16,012)
Share-based payment reserve 562 360 562
Translation reserve (396) (669) (432)
Total equity 6,196 8,030 6,914
Consolidated Statement of Cash Flows
For the period ended 31 March 2022
£ 000 6 months to 6 months to Year to
31 March 2022 31 March 2021 30 September 2021
(unaudited) (unaudited) (audited)
Cash flows from operating activities
Operating (loss) (718) (1,416) (2,826)
Impairment of intangibles 9 9 18
Amortisation of deferred grant (5) (12) -
Depreciation - owned assets 424 408 836
Depreciation - right of use assets 64 134 280
Share option charge - - 202
Decrease in inventories 142 37 61
(Increase) in receivables (544) (173) (115)
(Decrease) in payables (37) (201) (204)
(Decrease) in provisions (22) (9) (183)
Cash generated from operations (687) (1,223) (1,931)
Finance income 1 2 3
Finance costs (14) (9) (17)
Interest on right of use assets (40) (42) (87)
Tax received 80 38 96
Net cash generated from operating activities (660) (1,234) (1,936)
Cash flows from investing activities
Proceeds from sales of property, plant, equipment - - 18
Purchase on intangibles
Purchase of property, plant, equipment - - (4)
(185) (145) (313)
Net cash used in investing activities (185) (145) (299)
Cash flows from financing activities
Net proceeds from issue of ordinary share capital - 764 764
Loans raised 333 358 553
Loans repaid (75) (39) (101)
Grants repaid - (54) -
Lease principal repayments (98) (83) (273)
Net cash used in financing activities 160 946 943
Effect of exchange rate fluctuations 6 49 120
Net decrease in cash and cash equivalents (679) (384) (1,172)
Cash and cash equivalents at the beginning of the period 1,543 2,715 2,715
Cash and cash equivalents at the end of the period 864 2,331 1,543
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