Hardide Regulatory News (HDD)

Hardide plc

("Hardide" or "the Company" or "the Group")

Interim Results

Hardide plc (AIM: HDD), the provider of advanced surface coating technology, announces its interim results for the six months ended 31 March 2013.

Overview

·; Turnover decreased by 18% to £1.26m (H1 2012 £1.54m), primarily as a result of a major inventory adjustment by a dominant customer

·; Gross profit decreased by 23% to £855,000 (H1 2012: £1.12m)

·; Group interim loss of £102,000 (H1 2012: £201,000 profit)

·; Group EBITDA of £11,000 (H1 2012: £308,000)

·; Revenue from aerospace and advanced engineering sectors increased by 37%

·; The number of active accounts rose by 34% to 39 from 29 in H1 2012, reflecting the focus on strengthening the pipeline

·; A Technology Strategy Board grant worth up to £250,000 was awarded in January 2013 to part‑fund a two year project to further develop, manufacture and test a new coating for superabrasive materials used in 'hardfacing' tools for downhole and other high-wear applications. Rapid technical and commercial progress was made on the project

·; All aerospace and advanced engineering strategic development projects progressed steadily and successfully with customer partners

·; An independent and comprehensive testing programme was launched to investigate further the properties and benefits of Hardide coatings for a variety of new potential applications.

·; In January 2013, a loan note holder converted its convertible loan note of £225,000 into 50,000,000 new ordinary shares of the Company at a price of 0.45p per share ("New Ordinary Shares")

·; Cash at bank at 31 March 2013 of £1.39 million

Post Period Events

·; First sales of the new coating for superabrasive materials, developed as a result of the TSB grant-funding, have been achieved ahead of expectations

·; Patent applications have been filed in the US and UK for the new coating for superabrasive materials

·; The business development team has been strengthened by the appointment of two additional managers, one each in the UK and US where they will promote applications and sales in existing and new markets

·; An agent has been appointed for the German market in order to widen the Company's geographic customer base and to capitalise upon interest already expressed by potential customers in the region, particularly in the valve and pump sectors and for cutting blades

·; The Company is negotiating commercial agreements with two world-leading blue chip companies which operate across a range of advanced engineering technologies

Commenting on the interim results, Robert Goddard, chairman of Hardide plc, said:

"Our 2013 half year results have been weakened primarily by a rapid inventory reduction exercise by one major customer. This has resulted in what is expected to be a short‑term dip in demand and projected to be resolved by the end of 2013. The Company is achieving positive developments technically and with other customers. So, while this set‑back is disappointing, the confidence of the Board remains high.

Ten new customers placing production orders were signed up during the first six months of this year, increasing the number of active accounts by 34% compared with the start of the year. Except for the single large oil & gas customer, sales to other customers remain steady. Meanwhile, the technical and commercial aspects of the business are operating effectively and we are investing heavily in sales and marketing activities to drive customer penetration and diversification."

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Notes to editors:

Hardide develops, manufactures and applies nanotechnology tungsten carbide-based coatings to a wide range of engineering components. The Group's patented technology is unique in combining a mix of abrasion, erosion and corrosion resistant properties in one coating. When applied to metal components in aggressive environments, the technology is proven to offer dramatic improvements in component life resulting in cost savings through reduced downtime and increased operational efficiency. Customers include leading companies operating in oil and gas exploration and production, valve and pump manufacturing, nuclear, advanced engineering and aerospace industries.

CHAIRMAN'S STATEMENT

The interim results for the six months to 31 March 2013 reflect the impact of a major inventory reduction by one dominant customer, the effect of which was increased by unexpected delays in well-advanced new product introductions by other customers. The Hardide coating is performing well and is not related to these customer delays. We expect the inventory reduction exercise to be short-term and resolved by the end of 2013.

The Group is reporting H1 2013 revenue of £1.26m, a decrease of 18% compared with the same period last year (H1 2012: £1.54m). Group gross profit was £855,000, a fall of 23% from £1.12m in H1 2012. Cost of sales decreased by 3% to £409,000 reflecting the fixed nature of production staff salaries. The Group made an operating loss of £102,000 (H1 2012: profit of £201,000), which included the effects of the planned investment in business development, marketing and further independent testing designed to open new markets and accelerate customers' test cycles. Group EBITDA was positive at £11,000 (H1 2012: £308,000).

While the half year results reflect the drop in demand from one customer, other sales across our main sectors of oil & gas, flow control and advanced engineering remain solid. In particular, revenue from the aerospace and advanced engineering sectors grew by 37%. The strong rise during 2012 of the number of parts in customer test bore fruit in the first half of 2013 as the number of active accounts rose by 34% from 29 to 39. These include applications for customers from sectors including motorsport, oil & gas and flow control.

Broadening the customer base remains a key strategic objective and significant investment is being made in 2013 to achieve this more quickly. To this end, two further business development managers have been appointed; one each in the UK and US, to develop sales in existing and new markets. Also post-period, an agent has been appointed to represent the Company in Germany, where we believe there is high potential for us.

In January 2013, 50,000,000 New Ordinary Shares were admitted to AIM after a loan note holder converted its £225,000 convertible loan note that was issued in June 2008. Following this transaction, the Company has one outstanding convertible loan note of £633,000, which is convertible before August 2014 at a price of 0.45p per share.

In January 2013, the Company was awarded a Technology Strategy Board grant worth up to £250,000 to part-fund a two-year project to further develop, manufacture and test a new coating for superabrasive materials used for 'hardfacing' tools in downhole and other high‑wear applications. Rapid technical and commercial progress was made to the point that first commercial sales were achieved shortly after the half-year. In April 2013, the Company signed a mutually exclusive five-year supply agreement for use of the new material in oil & gas applications with hardfacing specialists Cutting & Wear Resistant Developments Limited of Sheffield.

The Company is in the final stages of negotiating commercial agreements with two world‑leading blue chip engineering companies that operate across a wide range of advanced engineering technologies. These agreements will provide frameworks for working in partnership to develop several new applications for the oil and gas and industrial manufacturing sectors.

Our other strategic development programmes with aerospace and advanced engineering customer partners continue to advance steadily and successfully. As a result, we have ever‑increasing confidence that the extended period of product testing by our aerospace OEM (original equipment manufacturer) customers will result in specific approvals.

Overall, the Company is experiencing many positive customer and technical developments so, while it is disappointing to report this weaker set of interim financial results, the confidence of the Board remains high.

Robert Goddard

Chairman

18 June 2013