3 Dec 2008 11:00
3 December 2008
HYDRODEC GROUP PLC
TRADING STATEMENT
Hydrodec Group plc ("Hydrodec" or the "Company") is providing the market with an update on current activity. The Company continues to make good progress in its development as the only sustainable provider of transformer oil.
US Operations at Canton
Hydrodec's Canton plant finished construction and commissioning at a total cost of approximately US$15 million. The plant is currently producing SUPERfine transformer oil at 50% capacity and is expected to reach full capacity in 2009. The oil produced has passed required external testing and is meeting customer expectations.
The development of the US market continues to gather significant momentum, with our major customers approving SUPERfine for use and product deliveries commencing. The completion of the Canton facility has allowed the Company to pursue significant long term feedstock contracts which are expected to be finalised in the near future.
The US market for transformer oil has seen a softening of price in the last quarter in both used and new oil. However, demand remains high and the pricing remains within the Company's expectation.
Australian Operations
The Australian plant at Young has been operating at maximum capacity for the past two months with sales remaining strong. During the second half of 2008, a restructuring of the sales team at Young created a greater focus on sustainable sales as well as long term feedstock commitments. This includes securing feedstock agreements with significant Australian utility companies. Hydrodec has experienced increasing acceptance of SUPERfine in this market.
Corporate activity and funding
During the second half of 2008 the Company completed the Virotec International PLC ("Virotec") acquisition, which cost the Company £6.2 million in cash, purchased the CSIRO royalty for £2.6 million in cash and finalised the construction and commissioning of the Canton plant. Furthermore, as part of the Virotec acquisition, the Company received illiquid listed securities held by Virotec as an investment. Due to the financial crisis in the equity markets, these securities have fallen in value from approximately £3.0 million to approximately £0.9 million over the past 9 months.
When the Company raised £13.8 million via the placing of Fixed Rate Unsecured Convertible Loan Notes (the "Loan Notes") in October 2007, it stated that this was sufficient to build both the Laurel and Canton plants. Whilst the money raised was intended for these plants, cash demands from the corporate activities described above and not foreseen at the time of the Loan Note have been, in part, satisfied by the Loan Note proceeds as well as the £5 million placing proceeds raised in April 2008 in conjunction with the Virotec acquisition.
As a result, it is now the Company's intention to have the Laurel plant part funded by debt. The Company is in advanced discussions to secure a facility for these purposes which it expects to have in place by the end of January 2009. With this funding in place, Hydrodec now expects the plant to be operational in the fourth quarter of 2009 rather than the third quarter.
The Company recently raised an additional £2 million via an equity placing, in November 2008. As announced, the proceeds of the placing will be used to provide additional working capital for the Company, and to continue pursuing opportunities in the Japanese and hydraulic markets.
John Gunn, Chairman commented: "Hydrodec has had a significant year with operations commencing in the US and all royalty streams now secured. This will allow Hydrodec to exploit opportunities including those presenting themselves in the Japanese and hydraulic oils markets, whilst remaining focused upon the execution of our core business model."
For further information please contact:
Hydrodec Group plc 020 7621 5774
John Gunn, Chairman
Numis Securities Limited 020 7260 1000
Nominated Adviser: Simon Blank
Corporate Broker: David Poutney / Alex Ham
Curve PR 0208 742 1597/ 07764 197003
Emma Davis