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It is a bit strange - normally HDD is pretty circumspect with news. I thought that the MRO market would be good business as there's a whole heap of planes flying compared to new builds. Aerospace just seems slow compared to the turbine boys who seem to actually get on with it.
The May 18th announcement also included the following:
“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.”
Unless I missed it, we haven’t heard anything about these either.
On 18 May 2021, Hardide announced the following with the interim results, "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." Hardide Board's words not mine. It is almost the 1 year anniversary. With the exception of the gas turbine blades there has been very little by way of announcements of new customer conversions. The lack of any tangible progress with new customers and airbus is really disappointing given all the capital investment shareholders have supported. Drilling activity is rising strongly so macro environment positive for Hardide. Would be great to see customer conversions and revenue growing strongly.
Thanks for the link niky. Hadn't seen this before - nice to think Allenby agree with me that we may break into profit next year!!!
Yes Secularist, Kirkham said in a previous presentation that the technical demands of operating the reactors reinforced the Wide Moat or Barrier to Entry. This was in relation to a concern re aging Patents. So training issues, staff recruitment and retention are also factors in looking ahead when considering expansion. So far this has been well handled but it is an important consideration.
However also important is the fact that we operate at a high margin. I've got a feeling that once we are profitable and can demonstrate that we are a forward looking well run company then indeed borrowing will be reasonably straight forward. This will help the MC to appreciate above and beyond the bottom line numbers and the increasing diversity of customers will only enhance this.
This year to September could be a record year and to year September '23 could be transformational. I've seen false dawns before such as 'lets get the airbus contract started and all will be well' but this seems different. airbus new production is in fact on an incremental path upwards and the MRO market is still to come. Leonardo does seem to be about to order. Steam turbine blades are achieving production orders. O&G is increasing and maybe not just for a few months. Other testing includes other major aerospace customers including gas turbines and also electric cars. We've never had so much diversity.
I first bought in 2006 and have felt like this was a race between profitability for HDD and the cemetery for me! I've got a feeling at long last that I might just win this one!
Bearing in mind this company has large intangible assets in terms of intellectual property, almost certainly understated in the balance sheet, and a "wide moat" relating to competitors, once they have established that there is a strong and ongoing demand for their products from established industry players, they will have a strong proposition to put to bankers for simple bank funding or the issue of bonds.
Hi Richie, thank you for an excellent post and good projections. I've posted before that I regard HDD as a 'slow burner'. It's not just the fact that we spent a dozen years or so with airbus and some eight or so with Leonardo but more to do with expansion. Each reactor takes a year and costs a Mill to arrive. The larger one possibly more. So with the new premises in Bicester and the US both able to accept say 6/7 reactors between them then it could be quite a while to reach full production capacity and a fair few quid to boot.
We will then need to find new premises in both countries to further expand and then fund all the equipment. We are going to need a lot of funding. Obviously not going to be a major problem because of the uniqueness of the product but will take time to build up to a long term expansion program. Or perhaps a takeover with a deep pocket company?
H1 revenue in 2021 was £1.8m. A 40% increase implies revenue of £2.5m for H1 2022. Broadly, Hardide requires £3.0m of revenue per half year to cashflow breakeven (EBITDA positive). With strong oil and gas prices, recovery across all sectors and new revenue from gas turbine blades and airbus, > £3.0m of revenue for 2H 2022 looks acheivable. i.e. Hardide should be cashflow positive in 2H 2022. Management were awarded options in February 2021 linked to Gross Profit in the year ended Sept 22 (40%), Sept 23 (40%) and share price >75p by Sept 24 (20%). The Gross Profit targets broadly equate to revenue > £7m in year ended Sept 2022 and >£8.4m in Sept 2023. I don't think the options for Sept 2022 will vest but fingers crossed the options for Sept 23 will vest. At £8.4m of revenue Hardide should generate £1.2-£1.5m of EBITDA per year. In terms of reactor capacity, hopefully the new site allows 7 day working, rather than 5 day working which provides an immediate 40% increase in capacity. i.e. it is possible to go from £9m of revenue to £12m of revenue for a temporary period whilst new capacity can be bought online. I hope the board of Hardide will reflect carefully about raising equity well ahead of customer demand. I.e. As soon as Hardide has long-term agreements with Airbus, Hardide uses the covenant strength of these agreements to raise asset backed finance to purchase new reactors combined with the flexibility of working 7 days a week to satisfy customer demand in the interim. Once the share price is higher, raising equity is not so painful but too many times Hardide has raised equity well ahead of demand and it is incumbent on the board to look after shareholders. The share price is very attractive given the risks/rewards. I hope the board deliver on all the potential of this great product.
Hopefully the long wait from development to approval to actual orders has been worth it. Now that the airbus orders are on their way I hope this has a snowball effect and leads to greater things. I think now is a good time to be in this stock and we can look forward to a nice steady rise in the coming months.
This to me is the first real statement that Airbus is finally a proper 'go'. After all this time in development. Can't wait for more different orders from Airbus now. Onwards and upwards I hope.
Regard
RRJ
Markets seem to like the news. Onwards and upwards. Good fortune to one and all.
It is indeed. Things picking up all across the board. I reckon a record year to September and awaiting the order of a new larger reactor to cope with more turbine blades and landing gear parts. Could we actually make a profit???
A really positive and upbeat statement ahead of the agm later today. Seems like an age since there was something to really look forward to. Now all we have to see is the words turned in to income. Seems to me it has been a long time in coming but then good things do come to those that wait. Regards to all hdd investors, those considering buying or those just watching this share. S
Traditionally if these go up so does HDD's revenue. There could be a sustained world wide exploration mini-boom coming.
Can't quite see how a one-off company that has a truly unique product with multiple applications and is still in 'start up' mode can be measured in any usual way. In any case with 6 months to go to year end we could break even or make a maiden profit.
More importantly we still have a research/development facility in ( I think ) Moscow which looks vulnerable. Could the Russian operation be developed into a competitor? Question for the AGM perhaps?
https://finance.yahoo.com/news/hardide-plcs-lon-hdd-ceo-062855483.html
Perhaps more "Contract Delivery?" on the September RNS. Can't help feeling that with only one larger reactor the revenue will be limited. Lets see how long before a new reactor is ordered.
With 5 other 'developments' this is an enormous potential. Could be as big as aerospace in time. Will help March's figures as well!!
I missed that Richie, presumably good 1st quarter figures then. Bodes well for a good 1st half.
Good news is Hardide raised some asset backed finance in January and avoided the annual fund raise.
You would of thought that if orders and revenue are in fact picking up then in view of the last couple of poor years an update on the 1st quarters figures would have been helpful. By now though it's probably to late for that - just have to hope a trading update on the 1st half is prompt.
https://hardide.com/flip-book/2021/Hardide-Annual-Report-2021.html
*sigh* the share price is getting what it deserves really. I feel like this is a case of no news is bad news; not so much about the Tier 1 supplier but the lack of anything else in the meantime.
Let us all hope that airbus's planes go faster then airbus's admin!!! But to be fair we've been reputably talking to other aircraft manufacturers for many years with what seems similar time scales, notably of course Leonardo's. However as Kirkham has said this glacial progress is in fact a barrier to entry for any competitors, lets hope he's right!