Last checked at 17 Jun 2008 07:00
| Press Release | 17 June 2008 |
Hardide plc
("Hardide" or "the Group")
Interim Results for the six months to 31 March 2008
Hardide plc (AIM:HDD), the provider of unique surface engineering technology, announces its interim results for the six months ended 31 March 2008.
Highlights
| Group turnover increased 14% to £1.26 million (H1 2007: £1.11 million) | |
| Group gross profit increased 28% to £670,000 (H1 2007: £525,000) | |
| Group operating loss reduced 16% to £777,000 (H1 2007: loss £921,000) | |
| Group loss before tax reduced to £891,000 (H1 2007: loss £909,000) | |
| UK operating company, Hardide Coatings Limited, achieves maiden pre tax profit of £112,000 (H1 2007: loss £52,000) | |
| UK gross margins increased by 6% | |
| Global gas supply agreement signed in December 2007 | |
| Ken Siddall appointed as US Managing Director in November 2007 | |
| Hardide Coatings, Inc. achieved ISO 9001 in November 2007 |
Post-Period Highlights
| Hardide Coatings Limited enters into a three year coatings approval test programme with Airbus, one of the world's leading aircraft manufacturers | |
| Dr. Graham Hine appointed Chief Executive Officer on 2 June 2008 |
Commenting on the interim results, Robert Goddard, Chairman of Hardide plc, said: "I am pleased to report an increase in Group turnover and gross profit together with a 16% reduction in operating loss for the first six months. Our progress is evidenced by the maiden profit achieved by Hardide Coatings Limited during the period. The number and calibre of customers with whom Hardide is now in commercial use or test, as demonstrated by the test programme with Airbus, is testament to the growing reputation and value that customers are placing on our technology
"The Board believes that the leadership of Graham Hine and subsequent implementation of the new strategic plan will unlock the potential of Hardide, and create growth in shareholder value."
For further information:
| Hardide plc | |
| Robert Goddard / Peter Davenport / Jackie Robinson | Tel: +44 (0) 1869 353 830 |
| www.hardide.com |
| Seymour Pierce Limited | |
| Nicola Marrin / Richard Feigen | Tel: +44 (0) 20 7107 8000 |
| nicolamarrin@seymourpierce.com / richardfeigen@seymourpierce.com | www.seymourpierce.com |
Media enquiries:
| Abchurch | |
| Chris Lane / George Parker | Tel: +44 (0) 20 7398 7719 |
| george.parker@abchurch-group.com | www.abchurch-group.com |
Chairman's Statement
These interim results reflect the commercial and operational progress that the Group has made in the six months to 31 March 2008. I can report a 14% increase in turnover to £1.26 million compared to H1 2007 despite the slow growth in the US business and short-term reduction in demand from a major UK customer that occurred towards the end of the half year, Group gross profit increased by 28% to £670,000 and Group operating loss narrowed to £777,000 from £921,000 in H1 2007. I am pleased to report that Hardide Coatings Limited, the UK business, made a pre tax profit of £112,000 compared with a loss of £52,000 in the same period last year.
Our focus on driving down overheads and costs as well as increasing margins has started to take effect. Despite the 14% increase in sales, cost of sales increased by only 2% to £593,000 reflecting the global gas supply agreement which was made in December 2007, and more efficient purchasing. In the UK, gross margins continued to rise, with a 6% increase to the end of March 2008. Group overheads were also stable with administration expenses lower than in the same period last year.
I believe that these results, together with the number and calibre of global customers with whom the technology is currently in commercial use or test, demonstrate the fundamentally sound proposition of the Group and its technology. Since this reporting period, the Group experienced two difficult months culminating in June 2008 with a fundraising for £1.5 million, the appointment of Dr. Graham Hine as Chief Executive Officer and a revision of its strategic plan. The new capital will cover operating losses and the development of applications designed to lead to near and mid-term sales revenue.
The revised strategic plan is focused on increasing cash generation in the UK operation over the next twelve months and commercialising the significant customer interest in the US. At the same time, discretionary capital and revenue expenditure is being minimised until a firm trend of upward sales growth is established. In addition, a group-wide Applications Development Committee, led by Dr. Yuri Zhuk, Technical Director, has been formed to select, review and prioritise new applications to ensure that resources are concentrated on those opportunities with the greatest potential to realise strategically or financially significant immediate to medium-term sales.
UK: Hardide Coatings Limited
Hardide Coatings Limited, the UK operating company, achieved profitability in the first half of the financial year despite the sudden customer de-stocking issue affecting the last month of the period. Orders are now resuming from the customer, with whom the company is in advanced discussions on two new high-potential applications. Enquiries are continually being received from existing customers to coat new parts, which demonstrates the level of customer satisfaction in the technology.
The move into the aerospace sector is also having encouraging results. I am pleased to announce today that Hardide Coatings Limited has entered into a three-year coatings approval test programme with Airbus, one of the world's leading aircraft manufacturers. Furthermore, the company has confidence tests being performed at seven key aerospace industry manufacturers, a necessary precursor to gaining customer approvals and specification. Earlier stage discussions are ongoing with several other aerospace and defence organisations. Whilst the approvals process in the aerospace sector is lengthy, the market potential for Hardide in this sector is strong.
The production teams in the UK and US have made excellent progress in increasing the part density in the furnaces. This has increased gross margins and capacity, deferring the requirement for immediate capital expenditure. In select cases, the higher part density has enabled the operating companies to secure business at lower price points. In addition, development work has begun on shortening the furnace cycle time, which will increase capacity with no additional capital outlay.
US: Hardide Coatings, Inc.
The sales cycle for the technology in the US is taking longer than expected. Record oil prices and demand for oil services have meant that our customers in this sector have been focusing attention on production, and testing programmes have not been given priority. This has delayed the progress of our customer trials, which can already take 18 months to complete. On the other hand, cross-selling between the UK and US is showing good potential in the valve market that should be realised sooner. Hardide-coated valves have been successfully run through severe duty tests and the company is in various stages of dialogue to progress to production with several US valve manufacturers.
Ken Siddall joined Hardide Coatings, Inc. in November 2007 as US Managing Director, bringing twenty years of engineering, general management and coatings technology experience. The US business is now implementing the new strategy which will focus sales resources on applications that build on proven successes, shorten customer design approval and testing time, and increase the customer conversion rate. The Houston facility achieved ISO 9001 in November 2007.
Outlook
The shortfall in sales that began at the end of the H1 2008 carried on, as expected, into the second half but there are strong indications that a recovery in orders will occur in the coming few months. As such, the Group is likely to see sales in the second half less in total than reported for the first. By the end of the second half, the monthly rate of sales is expected to surpass that experienced during the first half.
The Board of Hardide is focused on generating shareholder value and is confident that the Group has the strategic plan, structure, resources, skills and talent to turn cash-positive overall within the medium term. The strategic plan has been considered and analysed and the Board believes it to be realistic and deliverable. We will also continue to discuss opportunities with potential partners in new international markets.
The Board expects that the leadership of Graham Hine as Chief Executive Officer will provide the direction and framework for substantial growth in shareholder value. The Group is building on proven success by application and by customer, and developing new applications and markets with demonstrable commercial potential. This will further strengthen the already strong foundation for future success.
Robert Goddard
Chairman
17 June 2008
| Consolidated income statement for the period ended 31 March 2008 | ||||||
| 6 months to | 6 months to | Year to | ||||
| 31 March 2008 (unaudited) | 31 March 2007 (unaudited) | 30 September 2007 (unaudited) | ||||
| £ '000 | £ '000 | £ '000 | ||||
| Revenue | 1,263 | 1,105 | 2,470 | |||
| Cost of Sales | (593) | (581) | (1,180) | |||
| Gross Profit |
| 670 |
| 525 |
| 1,290 |
| Administrative expenses | (1,217) | (1,229) | (2,676) | |||
| Depreciation | (230) | (217) | (475) | |||
| Operating profit |
| (777) |
| (921) |
| (1,861) |
| Interest income | 21 | 24 | 31 | |||
| Finance costs | (135) | (12) | (26) | |||
| Profit on ordinary activities before tax |
| (891) |
| (909) |
| (1,855) |
| Tax |
| 24 | ||||
| Profit for the period |
| (891) |
| (909) |
| (1,831) |
| Consolidated statement of recognised income and expense for the period ended 31 March 2008 | ||||||
| 6 months to | 6 months to | Year to | ||||
| 31 March 2008 (unaudited) | 31 March 2007 (unaudited) | 30 September 2007 (unaudited) | ||||
| £ '000 | £ '000 | £ '000 | ||||
| Profit for the period | (891) | (909) | (1,831) | |||
| Exchange differences on translation of foreign operations | (47) | (6) | 21 | |||
| Total recognised income and expense for the year |
| (938) |
| (915) |
| (1,811) |
| Consolidated balance sheet at 31 March 2008 | ||||||
| 31 March 2008 (unaudited) | 31 March 2007 (unaudited) | 30 September 2007 (unaudited) | ||||
| £ '000 | £ '000 | £ '000 | ||||
| Assets | ||||||
| Non-current assets | ||||||
| Investments |
|
|
| |||
| Goodwill | 69 | 69 | 69 | |||
| Intangible assets | 6 | 8 | 7 | |||
| Property, plant & equipment | 1,533 | 1,900 | 1,661 | |||
| Total non-current assets |
| 1,608 |
| 1,977 |
| 1,737 |
| Current assets | ||||||
| Inventories | 53 | 125 | 99 | |||
| Trade and other receivables | 351 | 426 | 648 | |||
| Other current financial assets | 156 | 164 | 147 | |||
| Cash and cash equivalents | 544 | 700 | 1,135 | |||
| Total current assets |
| 1,104 |
| 1,416 |
| 2,029 |
| Total assets |
| 2,712 |
| 3,393 |
| 3,767 |
| Liabilities | ||||||
| Current liabilities | ||||||
| Trade and other payables | 377 | 449 | 512 | |||
| Financial liabilities | 120 | 114 | 145 | |||
| Provisions | - | - | - | |||
| Total current liabilities |
| 497 |
| 563 |
| 657 |
| Net current assets |
| 607 |
| 853 |
| 1,372 |
| Non-current liabilities | ||||||
| Financial liabilities | 920 | 164 | 893 | |||
| Total non-current liabilities |
| 920 |
| 164 |
| 893 |
| Total liabilities |
| 1,417 |
| 727 |
| 1,550 |
| Net assets |
| 1,295 |
| 2,666 |
| 2,217 |
| Equity | ||||||
| Share capital | 1,467 | 1,467 | 1,467 | |||
| Share premium | 3,345 | 3,345 | 3,345 | |||
| Retained earnings | (3,967) | (2,172) | (3,077) | |||
| Share-based payments reserve | 465 | 22 | 450 | |||
| Translation reserve | (16) | 4 | 31 | |||
| Total equity |
| 1,295 |
| 2,666 |
| 2,217 |
| Consolidated condensed cash flow statement for the period ended 31 March 2008 | |||||||
| 6 months to | 6 months to | Year to | |||||
| 31 March 2008 (unaudited) | 31 March 2007 (unaudited) | 30 September 2007 (unaudited) | |||||
| £ '000 | £ '000 | £ '000 | |||||
| Cash flows from operating activities | |||||||
| Operating profit | (777) | (921) | (1,825) | ||||
| Impairment of intangibles | 1 | 1 | 2 | ||||
| Depreciation | 230 | 216 | 437 | ||||
| Share option charge | 15 | 22 | 59 | ||||
| (increase) / decrease in inventories | 46 | (23) | 23 | ||||
| (increase) / decrease in receivables | 287 | 11 | (224) | ||||
| Increase / (decrease) in payables | (135) | (34) | 72 | ||||
| Finance income | 21 | 24 | 31 | ||||
| Finance costs | (53) | (12) | (25) | ||||
| Tax received / (paid) | - | 50 | 107 | ||||
| Net cash generated from operating activities |
| (366) |
| (666) |
| (1,343) | |
| Cash flows from investing activities | |||||||
| Purchase of property, plant and equipment | (98) | (402) | (439) | ||||
| Net cash used in investing activities |
| (98) |
| (402) |
| (439) | |
| Cash flows from financing activities | |||||||
| Net proceeds from issue of ordinary share capital | - | - | - | ||||
| Finance lease inception | - | 22 | 209 | ||||
| Finance lease repayment | (74) | (57) | (95) | ||||
| New loans raised | - | - | 1,000 | ||||
| Net cash used in financing activities |
| (74) |
| (35) |
| 1,114 | |
| Net increase / (decrease) in cash and cash equivalents | (537) | (1,103) | (668) | ||||
| Cash and cash equivalents at the beginning of the period | 1,135 | 1,803 | 1,803 | ||||
| Effects of foreign exchange rate changes | (56) | - | - | ||||
| Cash and cash equivalents at the end of the period | 544 | 700 | 1,135 | ||||