Hardide Regulatory News (HDD)

13 Dec 2005 07:00

Hardide PLC13 December 2005 Press Release 13 December 2005 Hardide plc ("Hardide" or "the Company") Preliminary Results for the Period to 30 September 2005 Hardide plc, the provider of unique surface engineering technology, announcesits maiden set of preliminary results which cover the trading of Hardide plcfrom its formation on 27 January 2005 to the Company's year end on 30 September2005. The pro forma results cover the trading of the operating subsidiaryHardide Coatings Limited, which was acquired by Hardide plc on 7 March 2005, forthe twelve months to 30 September 2005. Highlights • Proforma turnover of £1,088,615 (2004: £330,878)• Proforma operating loss reduced to £705,884 (2004: £1,005,202)• Proforma loss before tax reduced to £701,490 (2004: £1,016,937)• Strong order book Commenting on the results, Jim Murray-Smith, Chief Executive of Hardide plc,said: "This is an encouraging set of results with Company turnover increasingthree-fold on a proforma basis, and losses substantially reduced as expected. "Demand for Hardide's product is strong and our order book places the Company ona solid footing for 2006. The coming year will be another important period forHardide as we continue our impressive history of new customer acquisition. Ilook to forward to updating shareholders in the near future." For further information:Hardide plcJim Murray Smith, Chief Executive Tel: +44 (0) 1869 353 830jmurray-smith@hardide.com www.hardide.com Seymour PierceSarah Wharry / Jeremy Porter, Corporate Finance Tel: +44 (0) 20 7107 8000 Media enquiries:AbchurchHenry Harrison-Topham / Chris Lane Tel: +44 (0) 20 7398 7700chris.lane@abchurch-group.com www.abchurch-group.com Chairman's Statement Hardide has made sound progress in the last year, which incorporated our listingon the AIM market and has resulted in this solid set of Preliminary Results.Notable was the success achieved in establishing relationships with leadingcompanies in the forefront of the drive for technologies that improve the lifeof components and optimise performance. Market conditions in our target sectorsand a healthy order book augurs well for 2006. The coming year will also see a significant uplift in the scale and complexityof our operations. The challenge will be to build on the opportunitiespresented by the strength of the oil & gas and aerospace markets and tocapitalise on our international potential. We are well placed to exploit theseprospects and have embarked on a strategic plan geared to the realisation of ourambitions. We remain firmly focused on growing our core business through a combination ofbuilding new and existing customers, new technology, international expansion andexcellent customer service. Hardide has an exciting future and I am confidentthat 2006 will see the Company achieve ever more significant growth. The Board would like to thank the management team and staff for their hard workand commitment during this time, in particular Chief Executive Officer, JimMurray-Smith, for his vision and dedication in steering the Company through achallenging and exciting year. His leadership of the Company and employeesresulted in a smooth and successful flotation in a year that encompassed stronggrowth in all of Hardide's core markets. David ChestnuttChairman Chief Executive's Report I am delighted to report Hardide's maiden set of Preliminary Results since theCompany's flotation on AIM in April 2005, when we raised £1.4 million to enableHardide to move on to the next stage of its development. This set of preliminary results covers the period of trading from Hardide plc'sformation on 27 January 2005 to the Company's year end on 30 September 2005.For direct comparison, we have included 12 month pro forma accounts forHardide's sole operating subsidiary, Hardide Coatings Limited, for the period to30 September 2005. This proforma set of accounts clearly demonstrates Hardide'sprogress throughout the period. Turnover for Hardide Coatings' has increased three-fold in the year ended 30September 2005 to £1.09 million, with total income increasing to £1.2 million.This solid performance is attributable to the generation of additional businessfrom existing customers, new customer gains as well as international expansion.For the quarter ending 30 September 2005, Hardide's UK coatings businessachieved an EBITDA positive position and the UK manufacturing base andheadquarters at Bicester, Oxfordshire is now complete and fully operational. I am pleased to report that such progress is being achieved with existingcustomers in the UK and Europe. Its scale of advance is demonstrated by salesmore than trebling in the oil & gas, valve and pump sectors over the year. TheCompany's developing US business has also made a significant contribution withsales more than doubling. This growth in the US has been achieved in spite ofthe extended supply line to the territory. Post flotation, the Company invested £100,000 in a new pre-treatment plant atBicester. This has enabled the Company to expand the range of materials thatcan be coated with Hardide, thereby opening up new markets and customers. Thein-house pre-treatment plant further improves reliability and speeds up customercomponent turnaround time, resulting in enhanced productivity and greatercustomer satisfaction. Hardide's patented technology is used in three main areas: • Oil & Gas• Valves and Pumps• Aerospace Oil & Gas In the UK, the offshore oil & gas industry continues to be one of the mostimportant industrial sectors of the economy, both in contribution to economicactivity and capital expenditure. In 2005, oil prices surged to more than $70 abarrel and the International Energy Agency also revised its 2010 oil priceforecast from last year's US $33 a barrel to US $45 a barrel, an increase ofmore than a third. In an environment where hydrocarbons are valued highly, the operating andservice companies (Hardide's customers) are driven to optimise the managementand productivity of existing oilfields to maximise the value that can beextracted from these assets. In this battle to exploit maximum value from both mature assets and from newfound oil and gas fields, the industry is seeing increasing problems developingdue to wear and corrosion of parts. The consequential costs are significant.Components that benefit from Hardide's unique patented coating are now in use ina large number of exploration and production (E&P) fields around the world. Bycoating components with Hardide, their longevity is increased which in turnhelps to reduce downtime. This further reduces the challenges from high cost E&P that operators face, thereby offering enormous operational and financialbenefits to oil companies, service companies and license holders. Hardide exhibited at two of the world's largest energy events in 2005, namelyOffshore Technology Conference (Houston, USA) and Offshore Europe (Aberdeen,Scotland). Our presence greatly raised international awareness of Hardide andinterest has been encouraging. Introductions made at the exhibitions haveresulted in customer trials which, I am happy to report, are progressing well.These trials are the first step and a pre-requisite for sales. Valves and Pumps The Hardide coating is gaining acceptance as a proven technology in the UK andEuropean valve markets. The Company's business in this sector increased nearlyfour-fold in 2005 and continues to grow with new customers being secured on amonthly basis. The new pre-treatment plant has underpinned this growth as weare now able to offer our customers fast turnaround times at premium prices. Among the top four Houston-based valve manufacturers, annual sales are estimatedto be in excess of US $1 billion. Whilst the Company is currently indevelopment work with US-based customers, it will be extremely difficult toachieve volume and highly profitable sales without a fully operational coatingfacility in Houston that will enable us to match European turnaround times. With most of the refining capacity around the world needing to be refurbished tocope with increasing volumes of highly corrosive sour crude oil, the demand forHardide's tungsten carbide coating, which provides essential corrosion and wearresistance to valves, is likely to increase dramatically. I am happy to reportthat trials with suppliers to the refining industry are progressing well andthat we recently gained approved supplier status from a leading internationalenergy company from which we are already receiving revenue. The pump market is an important part of the worldwide engineering business andrevenues from this sector have also increased more than three-fold in 2005. Ianticipate business from European customers in this sector to growsubstantially. The Company is working with, and receiving monthly orders from,one of the world's leading pump manufacturers that is based in the US. However,I firmly believe the potential of the US market can only be fully exploited withthe development of a domestic coating facility. Aerospace Since expanding into the aerospace sector in April 2005, Hardide has madesignificant progress and has won approved supplier status from BAE Systems. Wealso successfully completed our first orders to coat components for theirEurofighter Typhoon. Other parts are under trial for BAE Systems and we are nowin discussions with other leading aircraft manufacturers, including a FTSE 100aerospace and engineering firm. Hardide can offer an unrivalled solution to improving performance and longevityof components for both commercial and military aircraft, where the prevention ofcorrosion and seizure is essential. I have been extremely encouraged by ourearly exploration of this sector and look forward to it playing a major role inour growth. New Facility In line with our strategy to invest for further growth, the Company's intentionto establish a sales and manufacturing facility in Houston, Texas was announcedin April 2005 and a sales office was established in July 2005. The productionfacility will service the US oil & gas market as well as Hardide's existingcustomers in the pump and valve sectors. Equipment supply lead times andcommissioning times are fairly extended at eight months; consequently your Boardis currently considering the timing and methodology of this next significantstep in the Company's growth. In the meantime, three key administration,technical and sales positions have been filled to ensure seamlessknowledge-transfer from the UK and to handle the current level of enquiries thatare being received. Health and Safety/Environment Hardide is committed to maintaining the highest standards of health and safetyand protection of the environment. The Company's health and safety record isexemplary. Environmental protection is fundamental to the Company's operations and we arecontinually looking for ways to eliminate the potential for any environmentalimpact. The Company will aim to achieve ISO 14001, the internationallyrecognised standard for Environmental Management Systems (EMS), accreditation inthe next year. I believe this to be a market-leading move for a smallerorganisation and one which will further enable us to work with the leadinginternational companies in our target sectors. Furthermore, the pre-treatment plant investment included the installation of a 'best practice' solvent-based component cleaning process allowing us to maximisesurface preparation efficiency while exceeding environmental and safetyregulations. Research and Development (R&D) R&D will play a vital role by ensuring that the Company remains at the forefrontof advances in surface engineering technology. As the Company focused attentionon getting the UK and European facility fully operational, R&D has taken a backseat over the last year. It is now our intention to further develop our R&Dactivity over the next twelve months primarily to investigate additional Hardidecoating variants. People At the heart of Hardide lies a technically superb and dedicated team ofindividuals who have channelled their talent to moving Hardide so far forwardthis year. In 2005, the team was strengthened by three key managementappointments in the UK and two in the US. In the UK, Peter Davenport joined asChief Financial Controller bringing ten years financial management experience;latterly with the UK subsidiary of NYSE-listed global coatings company ValsparCorporation. Additionally, two UK-based sales and management positions werecreated to spearhead our move into the international oil & gas, and aerospaceindustries. Barry Vineall has been appointed Technical Sales Manager to focuson the aerospace market and brings with him six years engineering and businessdevelopment experience from AF Aerospace. Jeff Rutland has also joined asProjects Manager from worldwide oilfield services provider Schlumberger, wherehe held engineering and management positions over a five year period. Eachbrings extensive market understanding and contacts in the Company's key growthsectors. In Houston, Brian White and Larry Reed have been appointed as Technical Managerand Sales Manager respectively. Brian has nearly 20 years coatings research anddevelopment, and production experience. He joins from international product andservice supply company, Smith International, Inc. in Houston where he spenteight years in their R&D materials and coatings operations. Larry has over 30years sales management experience, the last ten with Cooper Cameron Valves wherehe sold valves to the oil & gas, petrochemical and other industries. I believe these appointments will enable us to develop and manage the interestgenerated within each of the Company's target sectors. Outlook It is clear that significant progress has been made during the last year withmore than three-fold growth, an ever-increasing customer base and demand for newapplications from existing customers. I view the future with optimism as the Company sits poised on the edge of majorbreakthroughs in two immense global markets, oil & gas and aerospace, while atthe same time buoyant conditions prevail in our niche position within the valveand pump sectors. I believe that these encouraging conditions in the surface technology marketacross the Company's chosen sectors are set to continue and will fuel demand forHardide's technology on the back of which I am confidant of delivering growingreturns for our shareholders. Jim Murray-SmithChief Executive Officer HARDIDE PLCPROFORMA PROFIT & LOSS ACCOUNTHARDIDE COATINGS LTD Year ended Year ended 30 September 30 September 2005 2004 £ £ Turnover 1,088,615 330,878Cost of sales (458,518) (106,784)Gross profit 630,097 224,094 Other operating income 90,869 52,587 Administrative expensesAdministration 1,190,897 1,113,686Amortisation 4,956 4,954Depreciation 230,997 163,243 (1,426,850) (1,281,883) Operating loss (705,884) (1,005,202) Interest receivable and similar income 13,026 7,631Interest payable and similar charges (8,632) (19,366) Loss on ordinary activities before taxation (701,490) (1,016,937)Taxation on loss on ordinary activities - 44,246 Loss on ordinary activities after taxation (701,490) (972,691) GROUP PROFIT AND LOSS ACCOUNTFOR THE PERIOD ENDED 30 SEPTEMBER 2005 From 27 January 2005 to 30 September 2005 £'000 Turnover 692Cost of sales (283) Gross profit 409 Administrative expensesAdministration 864Amortisation (40)Depreciation 146 (970) Operating loss (561) Other income 68 Loss on ordinary activities before interest and taxation (493)Other interest receivable 19Interest payable and similar charges (7) Loss on ordinary activities before taxation (481)Taxation on loss on ordinary activities - Loss on ordinary activities after taxation (481) Loss per share: basic and diluted (pence per share) 0.4 There are no recognised gains or losses other than the loss for the period ended30 September 2005 of £481,000. All results relate to acquisitions made duringthe year. GROUP BALANCE SHEETAS AT 30 SEPTEMBER 2005 30 September 2005 £'000Fixed assetsTangible assets 1,100Intangibles (46) 1,054 Current assetsStock 63Debtors 459Cash at bank and in hand 1,107 1,629 Creditors: amounts falling due within one year (313) Net current assets 1,316 Creditors: amounts falling due after one year (314) Net assets 2,056 Capital and reservesCalled up share capital 1,275Share premium reserve 1,262Profit and loss account (481) Shareholders' funds 2,056 The financial statements were approved by the board on 12th December 2005 andsigned on behalf of the board of directors. J Murray-SmithDirector COMPANY BALANCE SHEETAT 30 SEPTEMBER 2005 30 September 2005 £'000Fixed assetsInvestment in subsidiaries 1,100 1,100Current assetsDebtors 713Cash at bank and in hand 646 1,359 Creditors: amounts falling due within one year (12) Net current assets 1,347 Net assets 2,447 Capital and reservesCalled up share capital 1,275Share premium reserve 1,262Profit and loss account (90) Shareholders' funds 2,447 The financial statements were approved by the board on 12th December 2005 andsigned on behalf of the board of directors. J Murray-SmithDirector GROUP CASH FLOW STATEMENTFOR PERIOD ENDED 30 SEPTEMBER 2005 30 September 2005 £'000 Cash outflow from operating activities (851) Returns on investment and servicing of financeInterest element of finance lease rental payments (7)Interest received 19 12 Capital expenditure and financial investmentPayments to acquire tangible fixed assets (245) Acquisitions and disposalsNet cash transferred with subsidiary undertakings 456 Net cash outflow before financing (628) FinancingIssue of shares 1,437Repayment of finance lease (20)New finance lease agreements 318 1,735 Increase in cash 1,107 Notes 1. The financial information contained in this announcement does not represent the full statutory accounts of the group. 2. Statutory accounts for the period ended 30 September 2005 have not yet been delivered to the Registrar of Companies. They will carry an unqualified audit report and no statement under section 237 (2) or (3) of the Companies Act 1985. 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