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LONDON (Alliance News) - Surface coating technology company Hardide PLC Wednesday reported a wider loss for the first half of its financial year as its deliberate spending on business development and technical staffing pushed up administrative expenses sharply.
However, the company said it was confident about its full-year outlook thanks to a major supply contract with General Electric Co, and as it increased its number of customer contracts by almost a third from last September. It said it had won its first orders from Italy and Germany as well as from the UK subsea remotely operated vehicle market.
The company reported a loss of GBP236,000 for the six months to end-March, compared with the GBP102,000 loss it posted a year earlier, as revenue rose slightly to GBP1.3 million, but that was offset by an increase in administrative expenses to GBP1.0 million, from GBP844,000.
"The first half of the year progressed well with several notable 'firsts' resulting from the investment in business development and marketing," Chairman Robert Goddard said in a statement. "The inventory reduction by one major customer that particularly affected the second half of last year has been completed and demand is returning to more typical levels."
Hardide saw its shares jump in early March after it said it had won a major deal to supply a coating for a single component currently used by General Electric, and could win further business under the deal if development and testing work is successful. The deal provides a guaranteed revenue of about USD1.3 million over the next two years and can also be extended by up to five years, it said.
The General Electric contract didn't contribute to Hardide's first-half results, but will contribute to the second half.
Aside from this, Hardide said it had increased the number of customer accounts to 50, from 38, since September last year.
"Broadening the customer base remains a key strategic goal and with the increase in business development resources in 2013, the company is now engaged with new companies on laboratory testing and field trials for a wide range of pre-qualified applications. For example, trials are underway in Germany at a major flow control company and for plastic extrusion tooling applications," it said in its statement.
Elsewhere, it said its aerospace testing programmes with Airbus and AgustaWestland continue to progress well, while it has already secured in the second half an order for a fracking tool application from a major global oilfield services company.
"This is significant due to the stature of the customer and the potential with it for this and other applications. Also it is the first production order for a fracking tool component. More than 500 Hardide-coated components are now being deployed in a down-hole tool in one field in the USA and which may lead to further sales for the company in the future," Hardide added.
"Overall, company performance is good, our trading continues to improve and the Board is positive about the outlook for the full year," Goddard said.
FinnCap said it thinks the results show that Hardide is at a turning point. It noted that the company's shares had been outperforming, "but on the basis of lower guidance, they look up with events", the brokerage added, saying it had cut its forecasts to recognise the higher overheads in marketing and the likelihood that the aerospace programmes will take time to commercialise.
"Nevertheless, we believe the group has substantial growth opportunities," finnCap said in a note to clients.
Still, Hardide shares were down 3.2% at 2.25 pence Wednesday morning.
By Steve McGrath; stevemcgrath@alliancenews.com; @stevemcgrath1
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