HYR.L Regulatory News (HYR)

30 January 2017

Hydrodec Group plc

("Hydrodec", the "Company" or the "Group")

Pre-close Trading Update

Hydrodec Group plc (AIM: HYR), the cleantech industrial oil re-refining group, is pleased to provide a trading update for the financial year ended 31 December 2016.

Unuadited highlights for year ended 31 December 2016

· Revenues from continuing core re-refining business expected to increase by approximately 100% to US$16.4 million (2015: US$8.2 million), reflecting the full recommissioning of the Canton plant at the end of 2015

· Increased Group sales volumes of premium quality SUPERFINE transformer oil and base oil for the year of 33.3 million litres (2015: 14.4 million litres), up 130%

· Continued improvement of plant operability, with an average utilisation rate of 73% achieved for the year, further validated by significantly lower number of production hours lost through unscheduled stoppages

· Gross unit margins higher than 2015, despite lower product sales prices and challenging market conditions

· Improved sales mix between higher margin transformer oil and lower margin base oil, with transformer oil sales representing 57% of total Group oil sales in 2016, up from 7% in 2015

· Significant reduction in corporate costs already realised with benefits from more recently implemented initiatives continuing to filter through into 2017

· Group EBITDA loss from continuing operations significantly reduced in the year and expected to be marginally above market expectations. Group EBITDA expected to be positive for Q4 2016, despite the usual seasonal trends, providing the Company with confidence that this trend towards positive EBITDA at Group level will continue in 2017

· Carbon credit approval enabling Hydrodec's product to be sold with a carbon offset and creating a future incremental revenue stream

· SUPERFINE transformer oil in the US achieved "500 hour" quality status

· Additional investment by G&S Technologies Group in Hydrodec of North America in October 2016

· Disposal of loss-making UK recycling operations in March 2016

Outlook

This update confirms significant progress in the turnaround of the Company over the past twelve months. Whilst the general operating environment for oil related businesses has improved recently, positively impacting the Group's pricing and margins, challenges still remain. 2017 has begun strongly in terms of sales orders in the US and Australia. Whilst the Australian feedstock position remains robust, the feedstock position in the US is tighter. Higher margin transformer oil sales currently represent c. 60% of total Group oil sales, with scope for further improvement through the year.

In 2017, the Group remains focused on continued progress from its positive Q4 2016 performance, which will be driven by strengthening margins as the Group continues to grow market share and deliver further cost reductions and efficiencies where appropriate. This should enable Hydrodec to deliver positive Group EBITDA for 2017 as a whole.

Chris Ellis, Chief Executive Officer of Hydrodec, commented: "I am pleased to report a move into positive Group EBITDA in the last quarter of 2016, as much of our recent hard work begins to pay dividends in terms of Canton's strong operational performance, our increasing penetration of the transformer oil market, and the impact of cost cutting measures over central corporate expenditure. Despite continuing challenges in a still volatile market, I am confident that 2017 will see a move for the Group towards full year positive EBITDA and look forward to reporting further progress."

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Notes to Editors:

Hydrodec's technology is a proven, highly efficient, oil re-refining and chemical process initially targeted at the multi-billion US$ market for transformer oil used by the world's electricity industry. MarketsandMarkets forecasts that the global transformer oil market is expected to grow from US$1.98 billion in 2015 to US$2.79 billion by 2020 at a CAGR of 7.14% from 2015 to 2020. Spent oil is currently processed at two commercial plants with distinct competitive advantage delivered through very high recoveries (near 100%), producing 'as new' high quality oils at competitive cost and without environmentally harmful emissions. The process also completely eliminates PCBs, a toxic additive banned under international regulations. Hydrodec's plants are located at Canton, Ohio, US and Bomen, New South Wales, Australia. 

Hydrodec's shares are listed on the AIM Market of the London Stock Exchange. For further information, please visit www.hydrodec.com.

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014.