Last checked at 3 Jun 2008 14:00
| Press Release | 3 June 2008 |
Hardide plc
("Hardide" or "the Company")
Restoration of trading
Placing
Strategic Review
The Board of Hardide plc (AIM:HDD) announces that the suspension of trading of its Ordinary Shares on the AIM market, that commenced on 1 April 2008, will be lifted with effect from 2 p.m. on 3 June 2008.
The suspension of trading in the Ordinary Shares of the Company was requested by the Board whilst it investigated a corporate governance issue which linked to the financial outlook of the Company. A review of the financial outlook was necessary because of slower growth in the US business and a sudden and unexpected reduction in demand from one of the Company's major customers in the UK. This was due to a customer inventory issue affecting many suppliers and not related to the Company or its technology. Although the reduction in the UK appears to be temporary and orders are now resuming, it is likely to result in the Company's full year results to 30 September 2008 being markedly short of market expectations and thus a requirement for additional capital for day-to-day operations.
During the period of suspension, the Board has been actively seeking a replacement Chief Executive Officer and is pleased to announce the appointment to that role of Dr. Graham Hine. A separate announcement covers this appointment in more detail.
The Board of Hardide has also reviewed the strategic options open to the Company and has reached agreement with a number of its shareholders to subscribe for 42,500,000 new Ordinary Shares at an issue price of 3 pence per share. In addition, one other existing shareholder has agreed to provide £225,000 in the form of a loan note with a coupon of 8 per cent. and convertible in to Ordinary Shares at a conversion price of 4.5 pence per share. The gross amount raised will be £1.5 million. The new capital will cover operating losses and the development of applications designed to lead to additional near-term and mid-term sales revenue.
Hugh Smith, an existing shareholder and non-executive director of Hardide is participating in the fundraising, subscribing £49,775.01 for 1,659,167 Ordinary Shares. Application will be made for the new Ordinary Shares to be admitted to trading on AIM in due course.
The Company also wishes to incentivise existing and prospective new management by having the ability to issue additional options over Ordinary Shares under the Company's EMI scheme and in this regard wishes to issue options to the new Chief Executive, other Directors and employees as follows:
| Graham Hine | 6,000,000 |
| Robert Goddard | 1,000,000 |
| Peter Davenport | 1,000,000 |
| Yuri Zhuk | 1,000,000 |
| Employees | 6,845,000 |
To the extent that employees agree to receive new options, their existing options will be cancelled. It is proposed that each of these grants will have an exercise price of 3 pence per share, which is the Placing Price, and which will vest in three equal tranches over 3 years (for Directors and employees in employment prior to July 2007, vesting to commence from October 2008 and for Directors and employees employed since that date, vesting to commence from October 2009) and will be exercisable after vesting at any time until the tenth anniversary of grant.
In addition to the placing of the new Ordinary Shares, the terms of the two existing £500,000 shareholder loans due originally to be retired in September 2009 will be extended by one year. The final exercise date of the associated share option agreements (originally expiring in September 2010) will also be extended by one year and the exercise price reduced to nine pence per share. The directors, having consulted with Seymour Pierce, the Company's nominated adviser, consider the revised terms to be fair and reasonable insofar as shareholders are concerned.
Hardide will hold an EGM shortly to grant authority to the Board to give effect to the above proposals.
The Company has revised its strategic plan and for the next twelve months will focus on increasing cash generation in the UK operation and commercialising the significant customer interest in the US. Capital and revenue expenditure will be minimised until a firmer upward trend of sales growth is established. Meanwhile, the Company will continue its discussions with potential partners in new international markets.
Robert Goddard, Executive Chairman of Hardide plc, said: "The sudden reduction in orders from a major UK customer and slower than expected growth in the US meant that new capital was urgently needed to sustain growth and fund ongoing losses. The Company has re-forecast its sales and its cash requirements under various scenarios and has concluded that the most robust option is to reduce discretionary revenue and capital expenditure over the coming year and concentrate on increasing cash generation in the UK operation. The new strategic plan has been thoroughly interrogated and the Board believes it to be deliverable.
"The UK operation, Hardide Coatings Limited, was profitable in the first half of the financial year and recent events do not diminish the positive results that the Hardide technology is delivering. The Board remains confident that the technology is proving its value to blue chip customers worldwide through extending the life of their parts and reducing downtime. In the US, the Company will focus on converting the substantial interest and test samples that have been generated into commercial orders. We are continually encouraged by the market response to the technology and believe there is now a sound foundation for progress."
The Company will announce its interim results on Tuesday 17 June 2008.
- Ends -
For further information:
| Hardide plc | |
| Robert Goddard, Executive Chairman Jackie Robinson, Head of Communications | Tel: +44 (0) 1869 353 830 |
| jrobinson@hardide.com | www.hardide.com |
| Seymour Pierce Limited | |
| Nicola Marrin, Corporate Finance | Tel: +44 (0) 20 7107 8000 |
| nicolamarrin@seymourpierce.com |
|
Media enquiries:
| Abchurch | |
| Henry Harrison-Topham / George Parker | Tel: +44 (0) 20 7398 7719 |
| george.parker@abchurch-group.com | www.abchurch-group.com |