Hardide Regulatory News (HDD)

14 May 2007 07:01

Hardide PLC14 May 2007 Press Release 14 May 2007 Hardide plc ("Hardide" or "the Company" or "the Group") Interim Results Hardide plc (AIM: HDD), the provider of unique surface engineering technology,announces its interim results for the six months ended 31 March 2007. Operational Highlights • Record turnover for Oil & Gas division in Q2 2007 with customer destocking issue now resolved • UK manufacturing plant strengthened with the introduction of a fourth furnace and x-ray fluorescence equipment • Operational management team strengthened with the appointment of Neill Ricketts as MD for UK and European Operations • AFILEX appointed as an agent for Hardide in France, Germany and the Benelux countries • Manufacturing facility in Houston, Texas is fully operational with four significant new customers converted in the period • UK subsidiary delivering positive operating cash flow totalling £210,000 in H1 2007 Financial Highlights • Turnover £1,105,000 (H1 2006: £1,063,000)• Gross profit £525,000 (H1 2006: £653,000)• Loss before tax £887,000 (H1 2006: loss £293,000) reflecting budgeted investment into Houston manufacturing facility Commenting on the results, Jim Murray-Smith, Chief Executive of Hardide plc,said: "These interim results demonstrate the Group's continued progress. Wehave addressed the customer destocking issues and are very encouraged by therecord turnover in our oil and gas division in Q2 2007. "Hardide's facility in Houston, Texas is now fully operational. The four newsignificant customers won in the period for our US facility reinforce myconfidence in our ability to deliver much increased turnover for Houston in thesecond half of the year." For further information:Hardide plcJim Murray Smith, Chief Executive Tel: +44 (0) 1869 353 830jmurray-smith@hardide.com www.hardide.com Seymour PierceSarah Wharry Tel: +44 (0) 20 7107 8000 Media enquiries:AbchurchChris Lane / Hugo Jenkins Tel: +44 (0) 20 7398 7700chris.lane@abchurch-group.com www.abchurch-group.com Chief Executive's Report These interim results reflect strong commercial growth and significantinvestment in international expansion with associated capital expenditure in thesix months to 31 March 2007. The Group has continued to pursue a vigorousstrategy to maximise key technical and early mover strengths while successfullycapitalising on new opportunities and markets. Importantly, the Group hasmaintained historic pricing levels. Progress is back on track following the customer de-stocking issue which hasaffected the Company's financial performance in the previous full calendar yearand has also impacted on Q1 2007. Sales with this customer have now surpassedprevious levels. Over the last six months, growth was achieved in each of theGroup's key sectors of oil and gas, valves, pumps and aerospace. Meanwhile, wehave continued to invest in set-up costs for the Houston facility and in capitalexpenditure on technical equipment in the UK. These factors underline theCompany's commitment to building long term shareholder value through globalmarkets where we can solve the most challenging of customer problems. The Company has achieved its strategic objectives set at the time of theflotation and surpassed many. From the outset, the Company has sought blue chipand market leading customers. This goal has been firmly met as customers nowinclude eight of the largest global oil and gas service companies.Unfortunately, non-disclosure agreements prevent us naming the majority ofcustomers, although we were able to announce the Expro Group as our first new UScustomer in February 2007. This was an application that took 18 months toengineer and test; not an untypical time-frame to convert a new application insuch a buoyant, time-poor sector. UK I am pleased to report that Hardide Coatings Limited has been cash positive inH1 2007. The fourth furnace in Bicester became operational in the last sixmonths and we invested in x-ray fluorescence equipment to ensure that we remainat the forefront of technical expertise and customer service. The operational management team was strengthened in March with the appointmentof Neill Ricketts as MD for UK and European Operations. Neill brings 18 yearsof operations, production and surface engineering experience, and has alreadyinitiated a process optimisation programme to maximise plant efficiency. InMarch, we also appointed AFILEX France as our agent in France, Germany and theBenelux countries. To ensure a continual pool of technical expertise, we established skillspipelines with two recognised centres of excellence in our field, SalfordUniversity and the University of Besacon in France. We have recruited graduatesdirectly from both universities and are active in the tailoring of coursecontent relevant to our business. US The Houston plant became fully operational and the first new commercial orderswere booked during the period. To date, four significant new customers have beengained with more anticipated from over 30 ongoing trials. Intense interest hasbeen generated from the US valve market with ten trials ongoing. The facilityis on schedule to meet budget forecast in the second half of the year. Our largest US pump customer validated the plant for transfer of production fromthe UK, and the reassignment of remaining US production across all sectors iswell underway. Skills transfers have been taking place between the US and UK with secondmentsin each direction proving successful in sharing knowledge throughout the Companyas well as motivating staff. These will continue as we ensure the best fit ofpeople as our business grows. Oil & Gas Oil and gas sector sales recovered and achieved record half year levels afterthe resolution of the primary customer inventory situation. Hardide is now aTier 1 supplier to this customer. In addition, the Hardide coating is nowspecified on five new downhole tools with more new specifications underdiscussion. The Company is now ideally positioned to grow its business in thebuoyant oil and gas exploration and production sector. Valves and Pumps The level of enquiries from the valve sector has increased significantly in thelast six months with regular customer conversions leading to five new customers.Our first US valve order has been received and trials are underway with 10Texas-based valve manufacturers. Aerospace and Other Repeat orders are being regularly processed from BAE Systems with newEurofighter Typhoon components on trial. We are also undergoing thequalification process with another major aerospace manufacturer and have anactive development programme underway with a third. Prospects are promising forthis sector as Hardide offers a better performing, environmentally safealternative to hard chrome plating, a traditional aerospace coating which isbeing phased out for environmental reasons. Outlook Our business strategy remains robust and I am confident that the second halfwill deliver significantly increased revenues from our Houston facility. TheGroup's continued growth will be ensured through new and existing customers,internationalisation, and a quality product and service. We are generatingincreasing demand for our products in all our core markets. Coupled withlocalised production in the US, I believe that the Company is well placed toaccelerate business in the second half of the year thus building long termshareholder value. Jim Murray-Smith Chief Executive Officer 11 May 2007 Financial Review Group turnover for the six months was £1,105,000, an increase over the sameperiod last year of 4%. Strong turnover growth was seen during the secondquarter which was 15% higher than the same quarter last year, and 62% ahead ofthe first quarter of this year. Start up costs of our Houston plant of £112,000, including customer trials andinitial testing, affected Group gross profit, which fell to £525,000 from£653,000. Gross profit margins at our UK subsidiary slipped slightly from 61%in the first half of last year to 58% this year, reflecting some increases inraw material costs. We are confident that process optimisation and raw materialcost savings will begin to have an impact on margins in the second half. Administrative expenses rose to £1,229,000 from £789,000 last year. £236,000 ofthe increase arose from our Houston operation, the remainder reflects investmentin key resources and activities to boost turnover and bolster productivity inthe UK. Overall Group loss before tax was £887,000, of which £512,000 was attributableto our US operation, compared with a group loss of £293,000 last year. Cashflow was impacted by the purchase of our new furnace and x-ray fluorescencemachine in Bicester, completion of the fit out of the Houston plant, and startup losses there. No further capital expenditure is envisaged at the moment foreither facility. The forward order book is currently at record levels and the outlook is for acontinuation of robust revenue growth in the second half. Peter Davenport Finance Director 11 May 2007 Hardide Plc Group Profit & Loss Account For the six months ended 31st March 2007 Six months ended Six months ended Year ended 31st March 2007 31st March 2006 30th September 2006 (unaudited) (unaudited) £'000 £'000 £'000 Turnover 1,105 1,063 1,891Cost of Sales (580) (410) (817) Gross Profit 525 653 1,074 Administrative Expenses (1,229) (789) (1,871) Earnings before interest, tax, (704) (136) (797)depreciation & amortisation Depreciation & Amortisation (195) (165) (289) Operating Profit / (Loss) (899) (301) (1,086) Other Income 2 2 Profit / (Loss) on ordinary activities (899) (299) (1,084) Interest Receivable 24 19 60Interest Payable (12) (13) (24) Profit / (Loss) on ordinary activities (887) (293) (1,048)before taxation Hardide Plc Group Consolidated Balance Sheet 31st March 2007 31st March 2006 30th September 2006 (unaudited) (unaudited) £'000 £'000 £'000Fixed Assets Tangible 1,908 1,050 1,753 Intangible (31) (50) (10) 1,877 1,000 1,743Current Assets Stock 125 51 102 Trade Debtors 360 399 287 Other Debtors 132 183 170 Prepayments 99 145 131 Cash at bank & in hand 700 1,371 1,803 1,416 2,149 2,493 Creditors: Amounts falling due within one (563) (285) (584)year Net Current Assets 2,730 1,863 1,909 Creditors: Amounts falling due after one (164) (266) (216)year Net Assets 2,566 2,598 3,436Capital & Reserves Called up Share Capital 1,467 1,341 1,467 Share Premium Reserve 3,367 1,975 3,345 Profit & Loss Account (2,268) (718) (1,376) Shareholders Funds 2,566 2,598 3,436 Hardide Plc Group Cash Flow Statement Six months ended Six months ended Year ended 31st March 2007 31st March 2006 30th September 2006 (unaudited) (unaudited) £'000 £'000 £'000Cash outflow from Operating Activities (728) (364) (581) Returns on investment and servicing of finance Interest element of finance lease rental payments (12) (13) (24) Interest Received 24 19 60 Taxation 50 - 35 Capital Expenditure and Financial Investment Payments to acquire tangible fixed assets (402) (113) (978) Acquisitions & Disposals Net Cash Inflow / (Outflow) before financing (1,068) (471) (1,488) Financing Issue of Shares 780 2,375 Capital element of finance lease rental payments (57) (44) (91) New finance lease agreements 22 Expenses paid in connection with share issues (100) Increase / (Decrease) in cash (1,103) 265 696 Reconciliation of Movement in Shareholders Funds 31st March 2007 (unaudited) £'000 Profit / (Loss) for the period (887)Other recognised gains and losses 17Increase / (Decrease) in Shareholders Funds (870) Opening Shareholders Funds 3,436Closing Shareholders Funds 2,566 This information is provided by RNS The company news service from the London Stock Exchange