Member Info for Al180

With our main revenue driver currently being directional drilling sleeves relating to US shale I’ve been having a look at this market.

It seems the low hanging fruit has already been exploited with the average break even now up in the $60 plus range

Permian (Delaware) $64

Permian (Midland) $62

Eagle Ford $66

Bakken $68

Other minor plays $70

Considering how close to the average breakeven the oil price was before the Iran war you would think the shale industry will be producing as much as possible at the moment leading to high demand for coated sleeves.

With H1 revenue at approximately £4.5m and forecast for full year at £10.3m this equates to H2 revenue of £5.8m.

This works out at a yearly run rate of £11.6m at H2 levels.

Historically capacity was said to be in the £10m-£12m range. I found a post from Alex Schlich on Linkedin who also attended the AGM. He mentions a potential 20% capacity increase due to work from the engineering team to improve efficiency before any new reactors are put in place. I remember Alex being there but unfortunately didn’t get to speak to him properly as we pretty much had a director each to talk to during food and drinks.

hTtps://www.linkedin.com/posts/alexschlich_hardide-coatings-shares-have-been-on-an-impressive-activity-7442641172876996608-Wkb0

I regrettably didn’t ask if any new reactors had been ordered yet, I don’t necessarily believe this would be announced in a separate RNS as it could be paid for from FCF and would now be a smaller proportion of revenue and market cap, They have also already talked of factory upgrades and prices for new reactors should they be required in previous updates.

After food and drink we were given a guided tour of the production site, this was a nice surprise and yes they did look busy. It seems the reactors are loaded during the day and operate at night when power is cheaper. They apparently sometimes work six days a week at Martinsville and Oxford depending on workload.

Capacity is being increased with what they have currently in place through process optimisation and extra shifts, when the Martinsville plant upgrade is completed this year the site will be ready to integrate new reactors, there is room for four more reactors over the two sites. From what they said about optimisation and capacity from new reactors I think they could get to £17m-£18m capacity before they need more factory space. They didn’t give an estimate themselves as it depends how much more they can get from optimisation and whether some of the new reactors are the larger ones or not.

The US energy customer is aware of Hardie's current capacity progress and lead times on new equipment, this is being taken into consideration during framework agreement discussions.

Regarding aerospace they now have the new Airbus agreement going into production providing a second source of reliable aerospace income for many years into the future. They are still providing Leonardo with small orders but there was no hint as to when further production agreements might be signed from either OEM

I got the impression they’re laser focused on getting everything right with the US energy company, achieving this would be significant for sales to this customer and could well lead other US service providers also upgrading their fleet with Hardide coated sleeves. When asked about licensing production or working with other coating companies these options seem to be a possibility or at least weren't dismissed.

AI was wrong about the sleeves being re-coated as apparently the drillers keep going until the part is totally mullered then change it. The sleeve lasting 3-5 times as long does still give it an ESG advantage over the competition. The reduced drilling downtime is obviously the most important factor.

The BOD seemed buoyant and confident and I got the impression they were relishing the current opportunities they had. Matt came across as very competent and easy to communicate with, everyone looked happy to be there. I left feeling confident in the team and very impressed with the way they treat their shareholders.

I’ve been to about ten AGMs before but this is my first with Hardide. It was the most enjoyable AGM I’ve ever attended, the BOD were very friendly and engaging from the moment I arrived. The meeting itself consisted of around a dozen or so people sitting around a boardroom table half of which were shareholders. this felt different from other AGMs I've attended. Apart from the official business it was mostly Q&A, Matt seemed in his element talking to shareholders and the atmosphere was relaxed and friendly. All the BOD were easy to talk to and it was great to meet Dr Yuri Zhuk who was a co-founder and managed development from the early laboratory stage.

£4.5 estimated for H1 breaks down to £1.8m Q1 and £2.7m in Q2. The second Airbus agreement and supply of turbine blades also starting production in H2.

All looking really good here.

I found this in the 2025 annual report...................

"In our UK facility, we have eliminated the use of natural gas and all electricity is now supplied from a renewable REGO-certified

(Renewable Energy Guarantees of Origin) source. The only use of natural gas is at our US facility in Martinsville where it is used

for workspace heating."

I believe the facilities are mostly powered by electricity, Industrial power supplies don't get the same price protection as domestic so I will find out what deal they have in place and if GM could possibly be effected by higher power prices.

The Cavendish update following the latest £1.8m order is now available on Hardide website.

hTtps://www.hardide.com/wp-content/uploads/2026/02/Cavendish-Research-Note-26-Feb-2026.pdf

2026 FY forecast now £10.3m.

3p EPS

I think you're right Trulliquick, maybe I should have made a longer list of failings. My thoughts were more focused on the original plan for the new manufacturing facility, this was to have five small independent units resulting in a much slower expansion rate and a maximum capacity of £50m . The single production line was supposed to be a quicker ramp up also squeezing an extra 25m capacity from the facility. The bigger and better equipment they used to achieve this didn't seem to behave in the same way that the small production unit did. Module one was up and running with module two under construction when they stripped it all down and went for a completely different set up. I think Billyfish you were probably not working there five years ago when they changed direction? At the time it felt like they went from no significant issues to nothing but problems.

It seems like a very complex procedure, my understanding was there are three different lengthy heat treatment processes , I looked into the CVI process some time ago and realise how many factors are involved just there. Management obviously needed more manufacturing and personal skills

Thanks for your insight Billyfish. The original plan was to have five individual modules with £10m capacity each. The first unit was operational and seemed to be performing Ok when they changed direction. If they hadn't been seduced by the customer interest and tried to ramp up too quickly do you think things could have worked out ?

I will keep my eyes open alan80 although I doubt we will get to see too much of the operational side. As for the meeting I think it will be interesting to see who's there, with Canaccord and Maven trimming their holdings over the past month and the stock being easily absorbed maybe some of the new holders will be at the AGM.

Yes will do, this was announced on 27 October 2022

hTtps://www.lse.co.uk/rns/HDD/supplier-approval-order-for-leonardo-helicopters-zyyqmt135h0etxh.html

The A320 had parts for approval in 2019 which they tested in flight for 4000 hours before being more widely adopted by some MRO companies, this led to it being used in production four years later so the timing could be right for Leonardo to do the same.

I remember former chairman Robbert Goddard saying a production agreement for an aerospace model was probably thirty plus years of guaranteed recurring revenue. This makes sense now after seeing how long it takes to get a “safety critical part” into the aerospace supply chain.

We have the A320 family for wing flap actuators in production since mid 2023, the cargo plane contract which was due for SOP in FY25 now starting sometime this year due to supply chain issues at Airbus.

There is also the (MRO) maintenance market where replacement parts are now being used on the A380, A330, A400M. I think this could be a big market but adoption could be slow due to the huge number of maintenance outlets worldwide used by AIrbus.

I will try to get some information on the production and MRO side of the market on the 24th at the AGM

I've not been to a Hardide AGM before but have attended a few small company AGMs, none of these were recorded. They are usually quite small affairs sometimes with as many company representatives as shareholders. I have a few questions I want to ask and will report back here if there's anything of interest to say. I also want to shake their hands and say thank you for digging me out of the S**t as I went pretty much all in on Hardide after a disastrous couple of years on the stock market.

The market seems spooked by the oil price today, with shale drilling having a higher break even than normal extraction I don't see this as a negative for Hardide, directional drilling is our main income driver currently.

I'm planning to go to the AGM this month, anyone else thinking of going?

While looking into the ESG factors for Hardide regarding their coated sleeves, AI analysis suggested they could trigger significant ESG investment algorithms once a development agreement for Hydrogen production and storage is announced, they are already probably being flagged up as a transitional company.

ESG investments have shifted from being merely ‘green-looking’ to entirely data-driven. 2026 regulations now hold energy companies more responsible for their supply chain carbon footprint particularly for disposable items. AI tools scan company announcements for this specific data, and Hardide has probably already been climbing the rankings.

We already see this with the Airbus supply chain, where Hardide has begun replacing toxic hard chrome. With oil and gas Hardide is making a polluting industry cleaner by significantly extending part life. When coated sleeves are returned to Hardide, they can be sent back with a reduced carbon footprint representing the difference between re-coating and casting a new sleeve.

Hardide has been using specific ESG-aligned language and seems to have been positioning for this goal for some time. Companies that achieve ESG investment status typically trade at a much higher P/E ratio than non-ESG companies. This would also make Hardide a more valuable acquisition instantly improving the ESG credentials of the buyer.

I have been having a long chat with AI regarding Hardide, this is part of the reply when I asked it’s opinion on today's RNS

1. Revenue Velocity: The £10m Target is Now the Base Case

In just 23 days, Hardide has booked £2.6m in incremental US orders (today's £1.8m + the $1m on Feb 3).

When you add this to their existing run-rate, Hardide is effectively "doubling its FY24 revenue" ahead of schedule. The CEO (Matt Hamblin) explicitly confirmed in today’s RNS that they are leveraging much higher capacity utilization.

The "Framework" Signal: The RNS mentions they are in discussions for a "Long-term Framework Arrangement." This is the holy grail for a small-cap: it moves HDD from "transactional sales" to "guaranteed recurring revenue."

2. Valuation: Even at £26m, it’s a Bargain

The P/S Ratio: Despite the 35% jump today, the Enterprise Value is still only around 2.5x projected FY26 revenue. For a high-tech coating company with a 2026 REACH monopoly, peers trade at 4x–6x.

On initial research there seems to be new rules (2026) on companies being responsible for the carbon footprint of their suppliers, Hardide sleeves are able to be re coated where surface hardening treatments make the sleeves a disposable item. I will have a deeper look at this at some point

Hold, they are the company that keeps giving :-). Another £1.8m order from US customer, supply chain integration looks a certainty now for this customer, others will follow no doubt.