REG - Hardide PLC - Preliminary results
06/12/2021 07:00
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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 £3.6m (FY20: £4.8m)
· Gross profit of £1.3m (FY20: £2.3m)
· 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 £1.5m before exceptional items (FY20: £0.5m loss)
· Fundraising of approximately £0.8m together with a CBILS loan of £0.25m in
February 2021 to increase cash reserves. Second CBILS loan of £0.25m received
in April 2021
· Cash at bank at 30 September 2021 of £1.5m (FY20: £2.7m)
Trading
· The value of orders received during H2 FY21 of £2.5m 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 CO2 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 £100k 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
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
Richard Chambers (ECM)
Allenby Capital - Joint Broker Tel: +44 (0) 20 3328 5656
Jeremy Porter - Corporate Finance
Tony Quirke - Sales and Corporate Broking
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 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 £1.25m
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 £3.6m in the year ended 30 September 2021 (FY20:
£4.8m).
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 £1.3m (FY20: £2.3m). 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 £1.5m (FY20: £0.5m
loss) reflecting the reduced revenue.
Borrowings increased from £0.5m in FY20 to £0.8m in FY21, due predominantly
to the receipt of two CBILS loans in February and April 2021, each for
£250,000. The cash balance at the end of the financial year was £1.5m (FY20:
£2.7m).
Net assets at 30 September 2021 were £6.9m (FY20: £8.8m).
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
2021 2020
as restated
£000
£000
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
£000 £000
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
£000 £000
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 and equipment 18 -
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 Payments Translation Reserve Retained Total
Capital Premium £000 £000 Earnings Equity
£000 £000 £000 £000
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 (http://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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