Hardide Regulatory News (HDD)

THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN IS RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, THE REPUBLIC OF SOUTH AFRICA, THE REPUBLIC OF IRELAND OR ANY OTHER JURISDICTION IN WHICH SUCH RELEASE, PUBLICATION OR DISTRIBUTION WOULD BE UNLAWFUL.

FURTHER, THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY AND SHALL NOT CONSTITUTE AN OFFER TO SELL OR ISSUE OR THE SOLICITATION OF AN OFFER TO BUY, SUBSCRIBE FOR OR OTHERWISE ACQUIRE ANY NEW ORDINARY SHARES OF HARDIDE PLC IN ANY JURISDICTION IN WHICH ANY SUCH OFFER, ISSUE OR SOLICITATION WOULD BE UNLAWFUL.

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

27 October 2017

Hardide plc

("Hardide" or the "Company")

Fundraising to raise £2.54 million

Hardide plc (AIM: HDD), the provider of advanced surface coating technology, is pleased to announce that the Company has conditionally raised a total of £2.54 million (before expenses) via an oversubscribed fundraising (the "Fundraising") at a price of 1.7 pence per new ordinary shares of 0.1p each ("Ordinary Shares").

The Fundraising will enable the Company to make a number of capital investments in order to create capacity to take advantage of the demand expected by management.

The Fundraising is taking place pursuant to existing authorities established at the Company's last Annual General Meeting on 20 February 2017 and comprises two tranches, being (i) the "Initial Fundraising" of the Placing and the Initial Subscription (each as defined below) to raise a total of £1.72 million subject to customary conditions including admission to trading on AIM of the relevant new Ordinary Shares becoming effective, and (ii) the "Deferred Fundraising" to raise £0.82 million, subject principally to the Company having, within a period of five months, received advance assurance from HM Revenue & Customs ("HMRC") that this additional sum will be eligible for EIS and/or VCT tax relief (the "Tax Clearance") as well as other customary conditions.

Further information on the Fundraising, including its conditionality, is set out below.

Highlights

· The Fundraising comprises the Initial Fundraising to raise £1.72 million and the Deferred Fundraising to raise £0.82 million, all at a price of 1.7 pence per new Ordinary Share;

· Net proceeds of the Fundraising of approximately £2.45 million will be used primarily to:

o fund two additional reactors at the Company's US facility;

o enhance existing equipment at UK and US sites;

o increase sales and marketing resource; and

o strengthen the Company's balance sheet.

· Management's expectation of future new business in US justifies additional capacity;

· Benefits from first additional reactor expected in FY19;

· Framework supply agreement signed with a major North American international operator in the oil and gas sector;

· Indications received from Martinsville-Henry County Economic Development Corporation ("MCEDC") that it intends to advance a US$240,000 loan in support of Hardide's expansion plans for its Martinsville facility;

· Financial results for the year ended 30 September 2017 expected to be in line with the Board's expectations and with a cash balance of £1.21m as at that date; and

· Hardide expects to release its results for the year ended 30 September 2017 on 11 December 2017.

Philip Kirkham, Chief Executive Officer of the Company, commented:

"We are delighted to have received such strong support from investors for this Fundraising. The new funding will principally allow us to invest in up to two new reactors in the US which will, when deployed, create the capacity required at the Company's existing facilities to accommodate projected new business. We are very mindful of ensuring that funds are deployed in a prudent manner to match our expectations of forthcoming demand. The loan we expect from MCEDC will further evidence support for the Company's growth plans for the Martinsville facility and we thank them for the support Hardide has received since opening the facility in 2016.

"We are excited by the recent progress made regarding two new commercial agreements, one being a signed framework agreement with a major international operator in the oil and gas sector. The Company is also in the final stages of discussion with a well-known manufacturer of drilling and production tools. These agreements underpin existing market forecasts and the Board's belief in the Company's further growth."

FURTHER INFORMATION

Background to the Fundraising, current trading and financial prospects

The Company expects to report preliminary year-end results in line with current market expectations, having benefited from a nascent recovery in the oil and gas market and from new business, both in oil and gas and precision engineering. As announced in the Company's interim results, the positive trends in underlying market conditions seen in the first half of the financial year have continued through into the full year.

Following approval by Airbus and Nadcap accreditation, the prospects for additional aerospace business are encouraging. Well under way are the development and trialling of safety‑critical parts for aerospace customers and this augurs well for future sales.

Since the year-end, a three-year agreement has been signed with a North American based, major international operator in the oil and gas sector which sets out a framework for future orders for the coating of downhole components. Technical work with this client with a view to beginning production is progressing well. A further agreement is being finalised with a manufacturer of land-based drilling and production tools.

The first orders under these agreements are expected to be received in early 2018 and combined, initial sales are expected to be worth up to £1 million per annum with good potential for this to grow. These two agreements underpin the management's expectations for revenue growth in the financial years to September 2019 and 2020.

The US coatings facility in Virginia is performing well. Management expects that the facility would, based on expected orders and its existing reactors, likely require additional capacity in the second half of the 2018 financial year.

The Company expects to release its preliminary results for the year ended 30 September 2017 on 11 December 2017.

Use of proceeds

The Company intends to apply the net proceeds of the Initial Fundraising, being approximately £1.63 million, to acquire a new coating reactor to add to the existing two reactors at its US facility in Martinsville at an expected cost of approximately £0.6 million. This reactor will be ordered shortly following completion of the Initial Fundraising, and is expected to be operational by August 2018.

The Company subsequently intends to place an order for a second reactor at a cost of approximately £0.85 million during the course of 2018, aiming for that to be operational in the course of 2019, in line with the directors' anticipation of a continued increase in demand. It is intended that this reactor will have significantly greater volume than the Company's existing reactors, enabling the coating of larger parts, as well as increasing efficiency. At the same time the Company will expand the size of its pre-treatment facility in order to accommodate these larger parts at a cost of approximately £0.25 million. The Company is excited by the new commercial opportunities that this will open up.

The Company also intends to upgrade at least one more of its current reactors in the UK to aerospace standards and to seek to obtain aerospace accreditation for the US facility. This is in preparation for and to create usable capacity to satisfy future potential orders from aerospace companies in Europe and North America.

In addition, the directors have identified certain other capital projects intended to improve further the Company's operations. These include investments in additional analytical equipment and the upgrading of pre-treatment processes in the UK.

The remaining net proceeds of the Fundraising will be deployed and used to invest further in the business development, general working capital and the strengthening of the Company's balance sheet.

MCEDC loan

The Company's US subsidiary has received a written indication from MCEDC that it intends, subject to contract, to advance a US$240,000 loan in support of the Company's expansion plans for its Martinsville facility (the "Loan"). If made, the Loan will be secured over assets and guaranteed by the Company and carry a coupon of 2 per cent. per annum. The Loan and all interest due thereon will be repayable in full on a monthly or quarterly basis on or before the fifth anniversary of drawdown.

Details of the Placing, Subscription and the Placing Agreement

The Company has received advance assurance from HMRC that the new Ordinary Shares to be issued pursuant to the Initial Fundraising will rank as 'eligible shares' for the purposes of EIS and will be capable of being a 'qualifying holding' for the purposes of investment by VCTs. The Company has committed to taking all steps necessary to seek further advance assurance from HMRC with respect to the new Ordinary Shares to be issued pursuant to the Deferred Fundraising as soon as possible. Accordingly, the Fundraising has been split between the Initial Fundraising, for which such advance assurance has already been received, and the Deferred Fundraising.

Investors should note that whilst the Company has no reason to consider that the Tax Clearance will not be received for the Deferred Fundraising, there can be no assurance in that regard at this time and therefore the Company cannot guarantee that the Deferred Fundraising will proceed.

The Placing

Under the terms of the Placing, 86,235,294 new Ordinary Shares (the "Placing Shares") have been conditionally placed by finnCap on behalf of the Company.

The Placing is conditional, inter alia, upon:

i. admission ("Admission") of the new Ordinary Shares relating to the Initial Fundraising to trading on AIM becoming effective by not later than 8:00 am on 1 November 2017 (or such later time and date as the Company and finnCap may agree, not being later than 8.00 a.m. on 30 November 2017);

ii. the Initial Fundraising proceeding; and

iii. the Placing Agreement, described below, becoming unconditional in all respects (save for Admission) and not having been terminated.

When issued and fully paid, the Placing Shares will rank in full for any dividend or other distribution declared, made or paid after Admission and otherwise equally in all respects with the existing Ordinary Shares.

The Placing Agreement

i. Pursuant to the terms of a placing agreement between the Company and finnCap (the "Placing Agreement") finnCap, as agent for the Company, has agreed to use its reasonable endeavours to procure placees for the Placing Shares at the Placing Price.

ii. The Placing Agreement contains warranties from the Company in favour of finnCap in relation to, inter alia, the accuracy of the information contained in the documents relating to the Placing and certain other matters relating to the Company and its business. In addition, the Company has agreed to indemnify finnCap in relation to certain customary liabilities that it may incur in respect of the Placing.

The obligations of finnCap under the Placing Agreement in respect of the Placing are conditional upon, amongst other things, Admission becoming effective on or before 8.00 a.m. on 1 November 2017 (or such later date as the Company and finnCap may agree, but not later than 8.00 a.m. on 30 November 2017), and there being prior to Admission no material breach of the warranties given to finnCap.

finnCap may terminate the Placing Agreement in specified circumstances (including for breach of warranty at any time prior to Admission, if such breach is reasonably considered by finnCap to be material in the context of the Placing) and on the occurrence of a force majeure event at any time prior to Admission. If the conditions to the Placing Agreement which apply to the Placing as a whole are not fulfilled on or before the relevant date in the Placing Agreement, subscription monies will be returned to placees without interest as soon as possible thereafter.

In consideration for the services to be provided to the Company by finnCap in connection with Admission and the Placing, the Company has agreed to pay finnCap a corporate broking fee and certain other costs and expenses incidental to Admission and/or the Placing.

The Subscription

The Company has also raised up to a further £1.07 million before expenses by way of a subscription for 62,999,998 new Ordinary Shares (the "Subscription Shares") at the Placing Price by various individuals, including Robert Goddard, Andrew Boyce, Jan Ward and Philip Kirkham, each being directors of the Company (the "Subscribers"). Of this amount, receipt of a total of £0.82 million (being the Deferred Subscription and in respect of the issue of 48,294,117 new Ordinary Shares) is subject to the Company receiving the Tax Clearance. Accordingly, the issue of 14,705,881 new Ordinary Shares will make up the Initial Subscription.

The Company has committed to seeking the Tax Clearance as soon as possible and within 5 months of the date of the Initial Fundraising. If the Tax Clearance is not received by such date (or such longer period as the Company may agree with any subscriber in relation to his/her subscription) the Deferred Fundraising will not proceed.

Each of the Subscribers has agreed with the Company to subscribe for that number of Subscription Shares set out in his or her subscription letter (each a "Subscription Letter"). None of the Subscription Letters is conditional on any other Subscription Letter.

When issued and fully paid the Subscription Shares will rank in full for any dividend or other distribution declared, made or paid after Admission and otherwise equally in all respects with the existing Ordinary Shares.

Application for Admission and Total Voting Rights

Application has been made to the London Stock Exchange for the 100,941,175 new Ordinary Shares relating to the Initial Fundraising to be admitted to trading on AIM and it is anticipated that trading in these new Ordinary Shares will commence on AIM at 8.00 a.m. on 1 November 2017.

In accordance with the UK Financial Conduct Authority's Disclosure and Transparency Rule 5.6.1, immediately following completion of the Initial Fundraising, the issued share capital of the Company will be 1,635,899,479 Ordinary Shares ("Initial Enlarged Share Capital").

The total number of voting rights in the Company will therefore be 1,635,899,479 which may be used by shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, the Company under the FCA's Disclosure and Transparency Rules.

A separate application for admission to trading on AIM of the new Ordinary Shares relating to the Deferred Fundraising will be made in due course and the Company will make a notification of the resultant total voting rights at that time.

Related Party Transactions

Hargreave Hale Ltd ("Hargreave Hale") has agreed to subscribe for 12,444,445 Placing Shares as part of the Placing and 13,588,235 Subscription Shares as part of the Deferred Fundraising. Hargreave Hale is a related party of the Company for the purposes of the AIM Rules by virtue of its status as a substantial shareholder of the Company.

The directors consider having consulted with the Company's nominated adviser, finnCap, that the terms upon which Hargreave Hale has participated in the Placing are fair and reasonable insofar as the Company's shareholders are concerned.

Robert Goddard, Andrew Boyce, Jan Ward and Philip Kirkham have each agreed to subscribe for 588,235 new Ordinary Shares respectively as part of the Initial Fundraising. Each of them is also a related party of the Company for the purposes of the AIM Rules by virtue of their status as directors of the Company. The consequent holdings of these directors is set out below:

Peter Davenport and Yuri Zhuk, being independent directors of the Company for this purpose, consider, having consulted with the Company's nominated adviser, finnCap, that the terms upon which those directors have participated in the Fundraising are fair and reasonable insofar as the Company's shareholders are concerned.

Notification and public disclosure of transactions by persons discharging managerial responsibilities and persons closely associated with them