HYR.L Regulatory News (HYR)

19 January 2015

Hydrodec Group plc

("Hydrodec" or the "Company")

Trading Update

Hydrodec Group plc (AIM: HYR), the cleantech industrial oil re-refining group, announces a trading update for the financial year ended 31 December 2014:

Trading performance

· Group revenues for 2014 expected to increase by 35% to US$54 million (2013: US$40.1 million), the tenth consecutive year of growth; revenues in the US represent business interruption income and oil trading.

· Total oil sales for 2014 expected to increase by 26% to 48.6 million litres (2013: 38.3 million litres); 2014 includes a full year of trading by OSS and oil sales in the US.

· Gross margin expected to be higher than 2013 despite lower product sales prices and challenging market conditions in both the UK and Australia, and after accounting for business interruption income. 

· Group EBITDA in 2014 expected to improve over 2013.

Key milestones

· Settled insurance claim arising from the incident in Canton in December 2013 for a gross value of US$20 million (US$18.75 million net of deductibles), and resulting in a profit on disposal of US$ 1.4 million on the written off assets. 

· Entered into US$ 10 million, seven year term, asset financing facility and increased working capital line for Hydrodec of North America LLC, to fund appropriately the North American business following rebuild and expansion of the Canton re-refinery. 

· Submitted provisional patent applications to protect operating and design innovations in our unique transformer oil re-refining technology and upgrade technology innovations that will enhance the re-refining of lubricant oils.

· Signed exclusive licence agreement with California-based Chemical Engineering Partners (CEP) to develop the CEP wiped-film evaporation and hydrogenation technology in the UK as well as the basic engineering for an initial 75 million litre per annum capacity base oil re-refinery.

Outlook

· UK (UK Re-refinery): Hydrodec continues to make good progress towards the independent development of a base oil re-refinery. Indeed, it is worth noting that base oil prices have held up well relative to the prevailing oil price. A suitable location has been identified on the Wirral in North West England; the pre-planning and permitting process is on-going and Hydrodec has recently appointed a contractor to develop the front end engineering design (FEED). Full project sanction is anticipated by the end of Q2 2015. 

· United States: Progress on the Canton plant rebuild and expansion project continues and remains on target to start commissioning and operations by the end of Q1 2015. The capacity of the new plant at Canton will be more than 50% greater than before the incident, safer and easier to maintain, with significant unit efficiencies and only a marginal increase in headcount. 

· UK (OSS): The used oil market in the UK has been significantly impacted by lower oil prices; volumes have declined as a consequence of changing industry practices. OSS has responded by reducing headcount and costs by more than £0.5 million, and restructuring to 'realign' to the customer. 

· Australia: The relocation of operations to the Southern Oil re-refinery remains on track to take place during Q1 2015, which should deliver significant operational efficiencies.

Ian Smale, Chief Executive Officer of Hydrodec commented:

'Despite volatile market conditions in general and the more specific challenges posed by the rebuild of our Canton facility, Hydrodec has continued to develop its technical and operating platform, whilst improving its financial base. As a result of the actions taken during the year, Hydrodec will emerge stronger from the 'overhang' of the Canton insurance claim in 2014, with a more robust balance sheet and a clear sense of direction centred on our three core business streams. Whilst market conditions do remain challenging, we are focused on delivering our operational plans and also primed to take advantage of the opportunities the current market may yet present to grow the business.'

Date for Preliminary Results

The Company expects to issue its preliminary results for the year ended 31 December 2014 on Monday, 23 March 2015.

For further information please contact:

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. Hydrodec's plants are located at Canton, Ohio, US and Young, New South Wales, Australia. The plants have 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. In 2013 Hydrodec acquired the business and assets of OSS Group, the UK's largest collector, consolidator and processor of used lubricant oil and seller of processed fuel oil, with a national network of oil storage and transfer stations, currently serviced by a fleet of more than 90 trucks which collect used oil and other garage workshop waste from over 30,000 customers. Used oil is converted into processed fuel oil at OSS's plant at Stourport and principally sold on to the UK quarry and power industry.

Hydrodec's shares are listed on the AIM Market of the London Stock Exchange.

For further information, please visit www.hydrodec.com.