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New case study posted on the Hardide website.
You have to put vox markets where the stars are
https://www.**********.co.uk/articles/traders-cafe-with-zak-mir-philip-kirkham-ceo-hardide-aedde2e/
https://www.***************************/hardide-positive-results-and-a-strong,-diverse-pipeline-video/4121064327
Please put directors talk all one word where the stars is
Hi Richie, Hope you find the following constructive. HDD was always going to be expensive to develop not just for the cost of the reactors but also by the year long lead time. Very difficult to get right. The other cost is the operators relatively high wages. This is a unique job and extensive training is needed.
However not to sure re the 3.6 mill cap raise in '17 for the new premises. There is an RNS in Oct'17 for 2.54 Mill the bulk of which was stated for 2 new US reactors. This is reiterated in the post-period of the '17 full year account and described as oversubscribed. There was a fund raise of 3.6 Mill in March '19. There is also an RNS in Aug '19 re 3 new reactors - 2 for the new UK premises and 1 for the US. I'm not saying the fund raising didn't happen but the reality is that it was done in a relatively structured way and with the need to plan some 2/3 years in advance my take is that it was done pretty much as well as could be expected without the benefit of hindsight.
I bought here in '06 for two reasons, the first was the USP which is still the case and with sufficient barriers to entry to hopefully ensure the next decade or two. The second was the operational model. It couldn't be simpler or cheaper. We have to pay premises wages power and various admin costs as does most businesses but apart from that we only have to buy and store gas. We do not have to buy store and administer any raw materials or even do the same for products. The customer supplies the part, we coat it, we attach an invoice and return it. Simples!
Once we cover our relatively low operational costs any revenue will fall to the bottom line quite easily. My hope is that what we lose on the expansion and development swings we gain on the operational roundabout. Cheers
With respect you are missing the point I am trying to make. The Hardide Board sanctioned a capital raise in 2017 for £3.6m for the move to the new factory and increasing reactor capacity from 5 to 9 including 1 large capacity reactor. The Board could simply have sanctioned the move to the new factory, installed 1 large capacity reactor, 1 additional normal sized reactor and held back on the capex for 2 additional reactors until they were confident revenue was contracted. The Board took the risk and invested very expensive shareholder equity to increase furnace capacity to £9m. 5 years later the company is only generating £5.4m of revenue on an annualised basis and aerospace is £8,400! In addition the board then sanctioned 2 further equity raises of £2.5m and £0.8m and guess what they are now intimating more capital is required. I am not opposed to funding growth, it is that trust and confidence is extremely low given the historic track record. The share price reflects this lack of confidence at 30p. I would much prefer the board 1) deliver on the operational cashflow for which they say there is line of sight 2) raise additional capital for new furnaces against the covenant strength of contracted revenue using asset backed finance. Rob R put it much more succinctly, "Hardide needs to start producing the results - we've all had enough of hearing how bright the future looks".
There are two sides to the coin here. Unfortunately when the BoD made the decision to move to the new site and order the reactors they knew not of the coming pandemic. However on the bright side revenue is increasing at it's fastest rate. There are more sales and potential sales in the offing than ever before and the testing programs are bigger than ever before as in EV's, Solar Panels and both gas and steam turbine blades in testing and production. We should see record revenues in this current year. So it would appear that we are in the best position we have ever been in? I think it is a fact that if EDF make a production order then new larger capacity reactors will be needed.
Just think - one last push and it could all be over by Christmas and into profits !!!
Agreed, Richie. They need to start producing the results - I've had enough of hearing how bright the future looks.
The Hardide board has raised £9.4million of equity since 2017 (£2.5m in Oct 17, £3.6m in Feb 2019, £2.5m in Jan 2020, £0.8m in Feb 2021). This equity was all raised after the US factory was established in 2015. There is a familiar story to all the fund raises. Hardide needs funding for all the new capacity for all the exciting growth from aerospace, oil and gas etc. The shareholders have supported £9.4million of fund raises and there are 9 new furnaces of which 1 is large capacity and a new factory. This provides plenty of capacity for R&D, ~ £9million capacity for new business and ability to coat larger objects. I support the new factory investment but struggle with installing so much new reactor capacity so far in advance of contracted revenue. For example, Shareholders have taken massive dilution more than 5 years ago and Hardide has delivered 3% of aerospace revenue £8,400! Now the board are using the pretence of capacity restrictions for the new larger capacity reactor as a pre-cursor to yet more funding to support growth. I estimate revenue from Ansaldo in 1H 2022 was £226,000 ((£2.7 x 54% = £1,458k)- (£2.7m x 54%/1.49 = £978k x 1.26 = £1,232k)) based on disclosure in the interim results. If we assume the large capacity reactor can process £1.5m of revenue annually the reactor operated at approx 30% capacity in 1H 2022. Given the board has stated there is line of sight to positive cash flow and profitability can I suggest they do not do yet another highly dilutive equity raise. If Anasaldo want their blades coated, great, but surely it is not beyond the wit of the board to request i) prepayment ii) long term contract with sufficient covenant for asset backed financing to support the investment in new reactors. If the board of Hardide had delivered on the promised revenue growth historically I would be more supportive. Problem is they have not delivered the revenue. I would take much more confidence from asset backed financed being used to support the new reactor capacity because at least this way we can be confident the financier will have checked the revenue is contracted. It is call a win win allround - Ansaldo commit to revenue and get preferential commercial terms, Hardide gets the asset backed funding for growth, the shareholders do not have to suffer further dilution, and the Chairman is more popular.
Where the stars is, it is director talks interview all one word
https://www.morningstar.co.uk/uk/news/AN_1652173697958327900/hardide-expects-to-turn-profitable%3B-chair-robert-goddard-resigns.aspx
https://www.***************************/hardide-revenue-c.50-higher-than-last-year-with-a-strong-pipeline-for-h2/4121063900
https://www.marketwatch.com/story/hardide-1h-pretax-loss-narrowed-chairman-to-resign-271652163275
The Aerospace revenue is pretty dismal considering it's taken what 14 years to get here? However the A330 is quite low production and the MRO market has some 1454 planes in service to address. Once we get on the A320 program the production figures are currently 45 per month and expected to rise to over 60 and there are some 9517 planes in service.
I've said before that in my view the MRO market will be greater than the production market and will be a constant stream of revenue as parts wear and are replaced. I've also said that the turbine blade market can be just as big but has the potential to commercialise much more quickly. The initial gas turbine order was received after some 4 years of Covid delayed testing and EDF have probably been steam testing foe a couple of years already.
So record revenues and possible break-even this year and profits in '22/'23? Good God - we'll be talking divis soon!!!
This...
"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."
...would suggest that the long term contract will not be all that we hoped, at least not from a volume-of-orders perspective.
You have a good point Richie but by its very nature HDD is slow and expensive to grow. Reactors now probably cost over a Mill and take a year to arrive. In addition to that operators need training before the arrival. It says a lot for the Board that in spite of Covid we are in a good place with the prospect of a record year and spare capacity with the exception of a new larger reactor and I've said before that for me the announcement of an order to add another will be important.
Hopefully we will be able to attract a suitable new chair to move us on to a profitable future but the fiscal drag of expansion will be a bit of a challenge. However with our new site there is a clear pathway forward - onwards and upwards is the order of the day I reckon.
Please no more equity issues at this low share price. How many times has Board used "funding for growth" as the pretence for supporting ongoing operating losses. Please deliver on the operational cash flow and profitability and use asset backed financing to buy the new larger size reactor. In the interim work 7 days a week to provide an extra 40% capacity. By way of example aerospace revenue for H1 was £8,100. How much very expensive equity has the board raised to deliver this over the past 14 years? To the Hardide board, please stop and think about your private investors before rushing off to dilute us poor shareholders yet further especially given the board has line of sight to operational cashflow and profitability.
I'm up bright and early.
The Swedish promotion event could be important but may necessarily have a long lead time but we have a good story to tell with airbus and Leonardo and the Swedish approach may be more immediate than either of them.
However the webinar on the 31st could well be far more timely and with an equally good story to tell and actually promote the Company and the SP - one can but hope!!
But hey - we're actually getting out there! Wonders will never cease!
https://hardide.com/global-business-innovation-programme-sweden-16-20-may-2022/
Many thanks for the 2 links niky - The Spanish turbine blades were apparently some 4 years in testing which was news to me. EDF has been testing, I think, for a couple of years now so we're still some way. Covid probably slowed down both of them. However as we appear to be testing for both steam with EDF and selling gas to Spain we therefore have a foot in both turbine camps and this could be a faster growth potential than aerospace! I think the revenue will be broken down in reports so the figures will be interesting. Cheers.
https://www.youtube.com/watch?v=Q6Nr5p9uDMk&list=WL&index=3&t=28s
Profile in Technology webinar hosted by Hardide Coatings June 2021
I had not seen this before
https://www.youtube.com/watch?v=kCmSs8-sor0
While Tier 1 is dragging it's feet the Spanish gas turbine blade delivery is encouraging. I don't actually recall any testing info re that. But couple this with EDF's steam turbine testing and this is a significant new business opportunity. We will need though new larger reactors and pre-production lines to exploit this. I've said in the past that new reactor orders are key for me. O & G orders should be ramping up right now and there's electric cars and solar in testing which must be quicker than aerospace surely!
The 1st Half results are due in some 5 weeks and should be good but even more interesting for me will be any comments on the 2nd half which if that lives up to previous announcements should help the SP along nicely.
I think the last 12 months (ish) might have given some clarity about the future prospects of the company. My guess is they'll gradually reach their new sales capacity over the next 3-5 years, make a couple of million annual profit and I'm hoping that tranlsates to a share price of about £1. Quite possibly in 20-30 years time they'll have a site in numerous countries, but I will have sold up by then.
Airbus seems to work like the government very slow to get their contracts out slow in their test programme , and they seem to have you on the hook, its very frustrating , even Leonardo seems to going the same way its taken years to test their equipment, even after the test is approved its taking them ages to give their order.