REG-Hardide PLC Interim results
Released: 30/06/2009
Released 07:00 30-Jun-2009
Number 7212U07
RNS Number : 7212U
Hardide PLC
30 June 2009
Press Release 30 June 2009
Hardide plc
("Hardide" or "the Group")
Interim Results
Hardide plc (AIM: HDD), the provider of unique surface engineering
technology, announces its interim results for the six months ended 31
March 2009.
Highlights
- Turnover decreased by 30% to £888,000 (H1 2008: £1.26 million)
- Gross profit reduced by 46% to £362,000 (H1 2008: £670,000)
- Group operating profit of £26,000 (H1 2008: loss £777,000) after
accounting for credit on the exchange difference on the intercompany
loan between Hardide plc and Hardide Coatings, Inc.
- Loss before tax reduced to £54,000 (H1 2008: loss £891,000)
- Houston facility hibernated and UK redundancy programme effected in
March 2009. US Business Development Manager retained to continue US
sales and sampling function
- Cost reduction plan resulted in H1 2009 savings of over £300,000
- Hardide successfully develops a new coating for titanium
- Management team strengthened with the appointment of Nick King as
Business Development Manager in UK and Europe
Post-Period Events
- Hardide secures approval and orders from FMC Technologies(NYSE:FTI),
a leading global energy services provider
- Bridging finance of £50,000 secured from two existing shareholders to
provide short term working capital while longer term fundraising is
concluded.
Commenting on the interim results, Graham Hine, Chief Executive of
Hardide plc, said: "There is no doubting the severity of the global
recession. We have faced and tackled complex challenges, but I believe
that Hardide has the structure, strategy and people in place to
re-establish an upward sales trend which will set the direction for
sustainable growth in future shareholder value. I am confident in the
recovery and growth of demand for Hardide's technology."
- Ends -
For further information:
Hardide plc
Graham Hine, Chief Executive Tel: +44 (0) 1869 353 830
Jackie Robinson, Corporate Communications http://www.hardide.com/
Seymour Pierce Limited
Nicola Marrin Tel: +44 (0) 20 7107 8000
http://www.seymourpierce.com/
Media enquiries:
Abchurch
Chris Lane / George Parker Tel: +44 (0) 20 7398 7708
chris.lane@abchurch-group.com http://www.abchurch-group.com/
Notes to editors:
Hardide manufactures and applies tungsten carbide-based coatings to a
wide range of engineering components. The Group's patented technology
provides a unique combination of ultra-hardness, toughness, low
friction and chemical resistance in one coating. When applied to
components, the technology is proven to offer dramatic cost savings
through reduced downtime and extended part life. Customers include
leading companies operating in oil and gas exploration and production,
valve and pumps manufacturing, general engineering and aerospace.
CHAIRMAN'S STATEMENT
The interim results for the six months to 31 March 2009 reflect the
impact that the global economic downturn has had on the Group's
business. This is in line with many other small manufacturers and in
our case was aggravated by the sharp fall in sales which began in the
second quarter, a result of aggressive de-stocking by our major
customer.
The Group is reporting H1 2009 revenue of £888,000, a decrease of 30%
compared with the same period last year (H1 2008 £1.26 million). Group
gross profit was £362,000, a fall of 46% from £670,000 in H1 2008. Cost
of sales decreased by a disproportionate 11% or £67,000 reflecting the
relatively fixed production salaries which account for 59% of the cost
of sales for H1 2009. The Group made an H1 2009 operating profit of
£26,000, compared with a loss of £777,000 in H1 2008, after accounting
for a credit on the exchange difference on the intercompany loan
between Hardide plc and Hardide Coatings, Inc. Removing the effect of
this charge would result in a similar operating result to H1 2008, but
with much lower revenue. Similarly, the Group pre tax loss narrowed to
£54,000 compared to a loss before tax of £891,000 in the same period
last year.
During the course of the reporting period, the Board was required to
make some difficult decisions to protect the future of the business. In
March 2009, the manufacturing facility in Houston was hibernated and a
redundancy programme was implemented in the UK. These decisions were
not made lightly but were absolutely necessary to provide a more stable
platform from which the business can grow as conditions improve. At the
same time, the plan to reduce significantly the cost and expense base
has resulted in H1 2009 savings of over £300,000 compared with the same
period last year. This does not take into account savings to be made on
the hibernation of the Houston plant and post-period steps to further
reduce the cost of sales.
It has however been a time of advancement as well as frustration.
Crucially, the unique Hardide technology continues to win new and
strategically significant customers and there has been no loss of sales
due to product failure or under-performance. The coating is continually
being proven as an enabling technology with the power to offer
unprecedented commercial and technical value to customers. The
opportunities for increasing penetration into existing markets, for
converting the strong development pipeline and for exploiting the new
titanium and diamond coating markets are high. The Board is confident
that Hardide remains a business with significant potential.
All staff and members of the Board have made substantial contributions
during this difficult period and I would like to thank them for that
and for their loyalty and commitment.
Robert Goddard
Chairman
30 June 2009
CHIEF EXECUTIVE OFFICER'S REVIEW
The last year has been one of extreme turbulence and uncertainty in the
global economy, fuelling a downturn which has impacted businesses in
most industrial sectors worldwide. The oil sector has been subject to
extreme volatility which saw the oil price fluctuating by over US$100
per barrel during the year, falling to less than US$40 in December
2008. In the final part of the period to 31 March 2009, the Group
experienced the impact of this global situation as our key customers in
the oil and gas, construction and automotive sectors dramatically
reduced their production output and expressed uncertainty over their
future demand for the Hardide technology. It should be noted that no
customers have reduced orders due to dissatisfaction with the product.
The Board took swift and decisive action in March 2009 to protect the
future of the business as soon as the extent of the decrease in
customer orders was identified. A Group cost reduction plan was
implemented which saw the US manufacturing plant hibernated until sales
are sufficient to re-start operations. The plant was safely shut down
and production was seamlessly transferred to the UK. No customers were
lost as a result of this move.
In the UK, a redundancy programme unfortunately resulted in the loss of
five positions. It is extremely disappointing that this was necessary
as the Group has been making notable progress in commercialising a
coating for titanium, in testing for the coating of diamonds and
diamond grit with customer partners, and in converting blue chip
customers after more than 18 months of stringent testing. However, the
re-structured organisation and a reduced and streamlined cost base
means that the business is well placed for macro-economic recovery and
the return to previous sales levels from existing customers.
The rigorous application of cost reduction initiatives has enabled the
Group to drive further operating and cost efficiencies by more than
£300,000 or 24% when compared to H1 2008. Gross margin reduced to 41%
from 53% in H1 2008 but variable-only margin remained at 76% compared
with 77% in the same period last year.
UK: Hardide Coatings Limited
Hardide Coatings Limited, the UK operating company, was hit by the
softening of the oil and gas market in particular. A combination of
redundancies, robust cost controls, regular forecasting and a sharply
reduced cost and expenses base offset the impact.
In February 2009, the sales resource was enhanced with the appointment
of Nick King as Business Development Manager. A senior and highly
experienced business development professional, Nick joined from Praxair
Surface Technologies Ltd. He brings more than 30 years experience of
the surface treatment market and an extensive network of contacts. Nick
is a strong addition to the management team and has already made a
valuable contribution to our more focused product and market strategy.
The Applications Development Committee led by Technical Director, Dr.
Yuri Zhuk has been making good progress on a number of strategically
and financially significant new applications. In March 2009, the Group
was pleased to announce that it had successfully developed a process to
enable the Hardide coating of titanium. This is a significant
breakthrough for the coating of a high-performance metal commonly used
in the aerospace, defence and motorsport industries. Furthermore, the
Group has been making encouraging progress in the development of a new
variant coating for diamond which is in test with three customer
partners. Sampling is underway for a number of other pre-qualified and
prioritised new general industrial and aerospace applications.
Hardide's strategy is clear and recognises the importance of short-term
cash generation. In order to turn the significant prospects for Hardide
into performance, the Group is working with customer partners to
develop priority markets and is accelerating applications that
diversify its customer base and end-user markets. By leveraging the
Group's unique technology to deliver unparalleled component performance
and cost-benefits to customers, Hardide can fulfil a niche that is open
to no other provider.
Meanwhile, safety and environmental issues continue to receive high
priority from the Board and management, and performance levels remain
high and in-line with all statutory requirements.
US: Hardide Coatings, Inc.
It has previously been acknowledged that the sales cycle for the
technology in the US was taking longer than expected. When compounded
by the effects of the depressed economy, this situation meant that the
Group could not sustain the operation of the Houston plant without
jeopardising the prospects of the entire business. This led to the
hibernation of the facility at the end of March 2009. All production
was transferred to the UK site, and no customers were lost in the
process. Dan Wilson, US-based Business Development Manager, was
retained as an employee and together with the UK operations and
engineering teams, he played a key role in the smooth transition of
customers, samples and production parts. The intention is for the US
plant to re-open when the UK reaches capacity and/or when US sales are
sufficient to support the re-start of operations.
The US continues to generate a healthy pipeline of qualified parts in
test, and has secured two significant post-period conversions,
including FMC Technologies, which have taken more than 18 months of
engineering and testing to realise.
Outlook
In the three months since this reporting period, the Group has
continued to experience difficult trading conditions and uncertainty
from customers, culminating in a fundraising which is pending
conclusion at the time of announcing these results.
There is no doubting the severity of the global recession. We have
faced and tackled complex challenges, but I believe that Hardide has
the structure, strategy and people in place to re-establish an upward
sales trend which will set the direction for sustainable growth in
future shareholder value. I am confident in the recovery and growth of
demand for Hardide's technology.
Graham Hine
Chief Executive Officer
30 June 2009
Consolidated income statement for the
period ended 31 March 2009
6 months to 6 months to Year to
30
September
31 March 2009 31 March 2008 2008
(unaudited) (unaudited) (audited)
£ '000 £ '000 £ '000
Revenue 888 1,263 2,123
Cost of Sales (526) (593) (1,132)
Gross Profit 362 671 991
Administrative
expenses (1,002) (1,273) (2,499)
Depreciation (241) (231) (500)
Exchange
difference on
intercompany
loan 907 56 418
Operating
profit 26 (777) (1,590)
Interest income 14 21 37
Finance costs (90) (135) (187)
Loss on
disposal of
fixed assets (3) - -
Profit on
ordinary
activities
before tax (54) (891) (1,740)
Tax 37
Profit for the
period (54) (891) (1,703)
Consolidated statement of recognised
income and expense for the period
ended 31 March 2009
6 months to 6 months to Year to
31 March 2009 31 March 2008 30 September
(unaudited) (unaudited) 2008 (audited)
£ '000 £ '000 £ '000
Profit for the
period (54) (891) (1,703)
Exchange
differences on
translation of
foreign
operations (753) (47) (335)
Total recognised
income and
expense for the
year (807) (938) (2,038)
Consolidated balance sheet at 31 March 2009
30
31 March September
31 March 2009 2008 2008
(unaudited) (unaudited) (audited)
£ '000 £ '000 £ '000
Assets
Non-current assets
Investments
Goodwill 69 69 69
Intangible assets 3 6 4
Property, plant &
equipment 1,301 1,533 1,366
Total non-current
assets 1,373 1,608 1,439
Current assets
Inventories 32 53 44
Trade and other
receivables 169 351 325
Other current
financial assets 103 156 160
Cash and cash
equivalents 446 544 995
Total current assets 750 1,104 1,524
Total assets 2,123 2,712 2,963
Liabilities
Current liabilities
Trade and other
payables 305 377 356
Financial
liabilities 114 120 110
Provisions - -
Total current
liabilities 419 497 466
Net current assets 331 607 1,058
Non-current
liabilities
Financial
liabilities 1,154 920 1,162
Total non-current
liabilities 1,154 920 1,162
Total liabilities 1,573 1,417 1,628
Net assets 550 1,295 1,335
Equity
Share capital 1,896 1,467 1,896
Share premium 4,102 3,345 4,102
Retained earnings (4,755) (3,967) (4,705)
Share-based payments
reserve 364 465 347
Translation reserve (1,058) (16) (305)
Total equity 550 1,295 1,335
Production at the group's US operation in Houston ceased at the end of
March 2009. All plant and machinery is remaining in situ, as our
current intention is that the plant will be reopened in due course. A
full assessment of the impact of the hibernation on the carrying value
of the fixed assets, and of the intercompany loan from Hardide plc,
will be made in the full year audited accounts. As at the date of these
financial statements, the value of US fixed assets in the group balance
sheet was £661,000 and the value of the intercompany loan was
£5,062,000.
Consolidated condensed cash flow statement
for the period ended 31 March 2009
6 months to 6 months to Year to
30
31 March September
31 March 2009 2008 2008
(unaudited) (unaudited) (audited)
£ '000 £ '000 £ '000
Cash flows from operating
activities
Operating profit 26 (777) (1,590)
Impairment of
intangibles 2 1 3
Depreciation 239 230 497
Share option charge 19 15 50
(increase) /
decrease in
inventories 12 46 55
(increase) /
decrease in
receivables 213 287 310
Increase /
(decrease) in
payables (52) (135) (155)
Exchange rate
variance (907) (56) (391)
Cash generated from
operations (448) (389) (1,221)
Finance income 14 21 37
Finance costs (31) (53) (108)
Tax received /
(paid) - - 26
Net cash generated from
operating activities (465) (421) (1,266)
Cash flows from investing
activities
Purchase of
property, plant and
equipment (29) (98) (127)
Net cash used in investing
activities (29) (98) (127)
Cash flows from financing
activities
Net proceeds from
issue of ordinary
share capital - - 1,173
Finance lease
inception - - -
Finance lease
repayment (55) (74) (145)
New loans raised - - 225
Net cash used in financing
activities (55) (74) 1,253
Net increase / (decrease) in
cash and cash equivalents (549) (593) (140)
Cash and cash equivalents at
the beginning of the period 995 1,135 1,135
Cash and cash equivalents at
the end of the period 446 544 995
This information is provided by RNS
The company news service from the London Stock Exchange
END