HYR.L Share News (HYR)

(Sharecast News) - Industrial oil re-refining company Hydrodec Group updated the market on its ongoing trading on Tuesday, reporting that the current conditions were "unprecedented", and provided additional challenges to those it had already outlined in February.
The AIM-traded firm did say, however, that the decline in the headline price of oil provided additional opportunities in terms of the potential availability of feedstock and its price, given the lack of viable competing alternative uses, and the "dearth" of available storage in the United States.

At the same time, it said it has successfully treated third-party partially-processed paraffinic feedstock to produce group 2+ base oil.

That, the board said, should provide Hydrodec with the opportunity of supplying blended products in the future, or offering processing capabilities to third parties for such products.

The company said it had continued to work on a refinancing package for the Canton plant and assets, in order to replace the existing equipment lease, which was over-collateralised, with an extended facility to provide additional funds for feedstock, approved capital expenditure and growth opportunities.

It said progress was still being made with several parties, although a successful conclusion had, to date, been impacted by current global events.

In the meantime, as the firm had previously disclosed, Hydrodec was reliant on the ongoing support of its major shareholder Andrew Black, who had provided cash of around $2.4m from 30 June 2019 up to 30 April this year.

"A further announcement in respect of the loan terms, together with the extension of the existing loans, will follow once finalised," the board said in its statement.

"Key terms have been agreed, and the company is awaiting formal documentation from Black's family office.

"Such terms will constitute a related party transaction pursuant to AIM Rule 13."

Hydrodec's board said it was still committed to publishing its annual audited accounts "at the earliest opportunity", while ensuring that the work required was concluded diligently and comprehensively.

It said that, given the disruption to the year-end process caused by the impact of the Covid-19 coronavirus, further hampered by travel restrictions, it now expected to publish its annual audited accounts before the end of September.

"Accordingly, we have obtained an extension from Companies House and will seek an extension from AIM to the current reporting deadline of 30 June, in accordance with recently announced temporary measures."

Looking ahead, Hydrodec said cost cutting measures, including a reduction in headcount and employee pay, has been implemented, with efforts to obtain relief from government schemes ongoing.

However, it said its operating performance to date would reflect the challenges it was facing in terms of its working capital.

The board said it was "extremely difficult" to provide any guidance in respect of performance for 2020, with the next update on expectations to be provided once "the worst of the Covid-19 pandemic" is over, and activities start to return to "a state of normality".

Given that the company's business activity was centred on what the US authorities have deemed to be essential business, the bBoard said it believed its customers and suppliers would be among the first to benefit from the removal of current restrictions.

Following its strategic review, the board said it was still pursuing other growth initiatives that, if successful, would ultimately seek to accelerate the group's return to positive EBITDA.

"Whilst we continue to pursue our strategy targeting US utilities, we are facing the unique challenges the coronavirus has brought to operating environments," said chief executive officer and interim chairman Chris Ellis.

"In addition,working capital constraints, by necessity, have a material impact on our ability to source feedstock, which in turn drives volume, margin and overall financial performance.

"All necessary steps to mitigate the impact of the Covid-19 pandemic have been taken and as soon as the current restrictions are lifted, the plan is to continue to build on the encouraging signs of early successes with our sustainability strategy highlighted in the update provided earlier in the year."

At 1536 BST, shares in Hydrodec Group were down 17.81% at 3p.