Hardide plc
AIM : HDD

Hardide plc

December 04, 2006 02:04 ET

Hardide plc Preliminary Results for the Period to 30 September 2006

LONDON, UNITED KINGDOM--(CCNMatthews - Dec. 4, 2006) - Hardide plc (AIM:HDD), the provider of unique surface engineering technology, announces its preliminary results which cover trading for the year ended on 30 September 2006.

Highlights

- Turnover increased to Pounds Sterling 1.89 million (2005(i): Pounds Sterling 0.69 million)

- Gross profit increased to Pounds Sterling 1.07 million (2005(i): Pounds Sterling 0.41 million)

- Loss after tax (ii) Pounds Sterling 0.91 million (2005(i): Pounds Sterling 0.48 million)

- Successful opening of Hardide's manufacturing facility in Houston, Texas, on budget and ahead of schedule

- Strengthened Board

- Trading improving following customer inventory reduction

- Successful fundraising of Pounds Sterling 2.34 million during the year, Pounds Sterling 1.80m cash on the balance sheet at the period end

(i) The figures for 2005 cover the period from the Company's formation on 27 January 2005 to 30 September 2005.

(ii) after Pounds Sterling 0.14m R&D tax credit

Commenting on the results, Jim Murray-Smith, Chief Executive of Hardide plc, said: "These results are in line with expectations and demonstrate Hardide's continued strong growth. The opening of the US manufacturing facility in Houston, which was achieved ahead of schedule and on budget, will further drive revenues.

"We are experiencing buoyant market conditions in all of our key markets and have the capacity to install additional furnaces in both the UK and the US to satisfy this increased demand."



For further information:
Hardide plc
Jim Murray Smith, Chief Executive Tel: +44 (0) 1869 353 830
jmurray-smith@hardide.com www.hardide.com

Daniel Stewart & Company plc
Paul Shackleton, Corporate Finance Tel: +44 (0) 207 776 6550
paul.shackleton@danielstewart.co.uk www.danielstewart.co.uk

Media enquiries:
Abchurch
Chris Lane / Laura Riascos de Castro Tel: +44 (0) 20 7398 7700
chris.lane@abchurch-group.com www.abchurch-group.com


CHAIRMAN'S STATEMENT

These results represent another year of solid growth for Hardide. The Board took the decision in November 2005 to exploit the interest shown in Hardide's unique technology by US-based energy companies by setting up a manufacturing facility in Houston, Texas, the energy capital of the world. The Company raised combined funds of Pounds Sterling 2.34 million (before expenses) in December 2005 and May 2006 through the issue of 18,886,494 New Ordinary Shares, in part to accelerate Hardide's development plans in Houston, and also to employ and train additional staff to apply the Hardide process. In nine months, the site in Houston was transformed from a greenfield project to an operational coatings facility with local people being trained in the technology. The plant is ideally located in the heart of the energy community, with state-of-the-art production facilities operated by highly-qualified staff. Although early in the site's development, the furnace has produced validation product for an existing US customer as well as test components for both new and current customers.

The last year has again been a significant period of development for the Group and I would like to thank Hardide's Chief Executive, Jim Murray-Smith, for leading the management team and staff over this time.

In March 2006, Peter Davenport was appointed to the Board of Hardide as Finance Director and I welcome him to the role. Peter has already made a major contribution to the Hardide management team.

The Board is confident that Hardide is well-placed to make solid and continuing progress over the next financial year and beyond as it engages new customers and new applications in the UK and overseas.

David Chestnutt, Chairman

1 December 2006

CHIEF EXECUTIVE'S STATEMENT

The last financial year has been extremely busy for Hardide, with significant progress made in sales and international expansion. Sales increased to Pounds Sterling 1.89 million in the year ended 30 September 2006, from Pounds Sterling 0.69 million reported for the Group for the previous period. This represents a 73% increase over the previous full year sales of Pounds Sterling 1.09 million for the Group's operating subsidiary, Hardide Coatings Limited.

Substantial increases are reported across all of the Group's key sectors of oil and gas, valves, pumps and aerospace. This performance is attributable to new business generation, further increases in demand for parts from existing customers, and it reflects the high level of customer satisfaction that Hardide is delivering.

I am delighted to report that our Houston manufacturing plant opened within budget and a month ahead of schedule on 1 September 2006.

These results were achieved despite two short-term, customer-related issues outside of our control which affected the Company's performance against market forecasts. As previously announced, one of the Company's major oil and gas customers reduced its inventory during the year, resulting in lower than expected sales. Significantly, Hardide remains the specified supplier for this customer and orders have returned to previous levels. Furthermore, we have recently converted two new applications for the customer, with more in trial in both the UK and US. The strength of the oil price also led our major energy customers to focus their resources on maintaining high levels of production; the effect has been a slow down in field-testing and a longer conversion time for customers intending to purchase the Hardide coating. Crucially, field-testing continues to produce impressive results with the majority of customers going on to incorporate the Hardide technology.

UK FACILITY

I am pleased to report a 73% like-for-like increase in sales despite the customer inventory reduction and slowdown in testing. The high level of repeat orders and new parts in test are a healthy indicator of customer confidence.

Aerospace activity has progressed well with Hardide Coatings Limited receiving formal approved supplier status with BAE Systems and orders ongoing under strict purchasing and quality procedures.

Over the last year, we have seen customers draw increasingly on our engineering resources whereby we work closely with the customer to add value from the design stage through to manufacture. This turnkey service sets us apart from competing technologies and enables us to maximise the effectiveness of the coating while giving us greater control over timelines and quality.

To nurture and support new talent in the business, we have worked closely with Salford University, which runs the first UK MSc/PgDip in Vacuum Engineering and Applications. The Company has staff on the management board of the course and we see this as a valuable potential source of trained technical specialists as the business grows.

US FACILITY

The Houston plant has received an extremely warm welcome from our existing and prospective US customers and we have a backlog of interest from the top tier of Houston-based energy services companies as well as the aerospace sector. There are a number of different US parts in test which we expect will lead to further new customers and applications. Existing US customers are committing to increasing their order schedule now that the new plant is open and operational.

HEALTH, SAFETY AND THE ENVIRONMENT

The Group's health and safety record remains exemplary. Operating within strict environmental frameworks is essential to working with the market-leaders in our target sectors. We have demonstrated our commitment to environmental responsibility by appointing an Environmental Officer to manage our activity in this area. Over the past year, the Group has been working towards ISO 14001 and is on-track to secure this accreditation. Hardide is committed to an environmental supply chain and we are currently reassessing our suppliers to ensure that they adhere to our environmental policy.

RESEARCH AND DEVELOPMENT

Last year I noted our intention to resume R&D activity into additional Hardide coating variants. Our strategy has proven successful as we secured the US patent for a new tungsten carbide adhesive and protective coating for industrial diamond crystals. The Group's R&D programme is ongoing and our development of a new low-slip coefficient coating continues to make progress. R&D will assume even greater significance over the next twelve months as we take one of the original UK furnaces out of commercial service and dedicate it to the development of the next generation of ultra-high performance coatings.

MARKETING

Notable sales leads were generated at the two largest energy exhibitions of 2006; the Offshore Technology Conference in Houston, USA and the Global Petroleum Show in Calgary, Canada. Quality leads were also created as the Group made its debut at the Farnborough Airshow and attended the premier worldwide valve show in Maastricht, Holland. Each of these shows has led to a number of the new trials in the UK and US; these trials are a fundamental pre-requisite for sales and the majority are with blue chip industrial companies.

Hardide has enjoyed a high and positive media profile over the last year featuring in a large cross-section of quality national, business and technical media in the UK and US. The website (www.hardide.com) was also redeveloped, incorporating new sections and features designed specifically for our technical, investor and media audiences.

OUTLOOK

The Company has a robust strategy where we position ourselves in close proximity to the markets with the highest potential. I am encouraged by the market conditions in all our operating areas and we will continue to invest in people, equipment and R&D. I am confident that we have the technology and talent to continue the Hardide growth story during the course of the next year and beyond.

I would like to give my personal thanks to our employees in the UK and US for their commitment and hard work during the last year which is so crucial to our growing business.

Jim Murray-Smith, Chief Executive Officer

1 December 2006

FINANCIAL REVIEW

The Group result for the year was a loss after tax of Pounds Sterling 906k. The last published results for the Group were for the period 27 January to 30 September 2005, in which the Group made a loss after tax of Pounds Sterling 481k. The increased loss was due primarily to the investment in our new US facility, as well as the impact of a full year's loss in the Plc of Pounds Sterling 319k (27 January to 30 September 2005: loss of Pounds Sterling 90k). The Group's UK operating subsidiary, Hardide Coatings Limited, reduced its full year loss from Pounds Sterling 701k in 2005 to Pounds Sterling 162k in 2006.

Having reported at the half year turnover of Pounds Sterling 1,063k, the Group was hit by a sudden and unexpected inventory reduction by one of our largest customers over the summer, which reduced our turnover in the second half of the year to Pounds Sterling 828k. While this level of turnover and consequent impact on our profitability was disappointing, it is comforting that activity with this customer has now returned to normal levels, and the demand for Hardide coated product from the end user has remained strong throughout the period.

On a like for like basis, turnover at our UK operating subsidiary rose from Pounds Sterling 1.09m in 2005 to Pounds Sterling 1.89m, an increase of 73%. This increase was evenly spread across each of our existing sales sectors (oil & gas, pumps, valves, and aerospace). It is testament to the effectiveness of the Hardide product that during the year we started coating production quantities of 21 new parts from existing customers. The Group's sales to US customers rose to Pounds Sterling 367k in 2006 from Pounds Sterling 91k reported last year, which together with the number of Hardide coated products in field trials with some of the largest US oil & gas companies, provides sound backing for the board's decision to open a facility in Houston, Texas.

In spite of the increase in turnover and the expansion of the Group, we have been effective at keeping working capital under control. Levels of stock excluding work in progress were Pounds Sterling 76k at the year end (2005: Pounds Sterling 41k), and trade debtors reduced to Pounds Sterling 287k from Pounds Sterling 339k in 2005. The Group had a year end cash balance of Pounds Sterling 1,803k.

There were increases in some of our costs of sales during the year. The Hardide process uses Tungsten Hexafluoride, the cost of which has increased by 13% since this time last year. Now that the Group is purchasing globally significant quantities of this gas, we are exercising our purchasing power with the aim of achieving major price reductions. We have also started to manage the entire supply chain for certain customers as part of our competitive offering, which increases turnover but at a lower margin.

Group overheads were Pounds Sterling 2,160k in the year, compared with Pounds Sterling 970k reported for the previous period. Most of the increase is due to the increased length of period reported, with additional overheads caused by the opening of our Houston facility. During the year the Group invested in exhibiting at four major trade shows during the year, which have provided a rich source of sales leads.

Group expenditure on fixed assets amounted to Pounds Sterling 978k in the year, of which Pounds Sterling 627k was for our Houston plant. Of the remaining Pounds Sterling 351k, Pounds Sterling 170k was payments for the construction of a new furnace for our Bicester plant, which was delivered in late November. This new furnace will both increase production capacity and allow one of our older furnaces to be taken out of front-line production and released for research and development purposes. The arrival of the additional furnace and the need to accommodate the overall increase in production has led to the Group leasing additional factory space.

Given the size of the Group and its stage of development, it is appropriate that the board has given prominence to monitoring the financial health of the Group over the past year. The board also monitors a range of non-financial key performance indicators including furnace performance, delivery performance and product conformance. The board is now in the process of developing a wider range of non-financial key performance indicators which will form the basis of performance review in the coming year.

Peter Davenport, Finance Director

1 December 2006



HARDIDE PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT

For the year ended 30 September 2006

27 January -
2006 30 September 2005
Pounds Pounds
Sterling Sterling
Note '000 '000
Turnover 2 1,891 692
Cost of sales (817) (283)
Gross profit 1,074 409

Administrative expenses
-----------------------------------------------------------------------
Amortisation 36 40
Depreciation (325) (146)
Other administration (1,871) (864)
-----------------------------------------------------------------------
Total administrative
expenses (2,160) (970)

Other operating income 2 68
Operating loss (1,084) (493)
Net interest 36 12
Loss on ordinary activities
before taxation (1,048) (481)
Tax on loss on ordinary
activities 3 142 -
Loss for the financial year (906) (481)

Loss per share basic and
diluted 4 (0.7)p (0.4)p
All operations are continuing.


HARDIDE PLC
CONSOLIDATED BALANCE SHEET AS AT 30 SEPTEMBER 2006

30 September 30 September
2006 2005
Pounds Pounds
Sterling Sterling
Note '000 '000
Fixed assets
Intangible assets
Goodwill 71 76
Negative goodwill (81) (122)
---------------------------------
(10) (46)
Tangible assets 1,753 1,100
---------------------------------
1,743 1,054

Current assets
Stocks 102 63
Debtors 588 459
Cash at bank and in hand 1,803 1,107
---------------------------------
2,493 1,629

Creditors: amounts falling
due within one year (584) (313)
---------------------------------
Net current assets 1,909 1,316
Total assets less current
liabilities 3,652 2,370
---------------------------------
Creditors: amounts falling
due after one year (216) (314)
---------------------------------
Net assets 3,436 2,056

Capital and reserves
Called up share capital 1,467 1,275
Share premium account 3,345 1,262
Profit and loss account (1,376) (481)
---------------------------------
Shareholders' funds 5 3,436 2,056


HARDIDE PLC
CONSOLIDATED CASH FLOW STATEMENT

For the year ended 30 September 2006

27 January -
2006 30 September 2005
Pounds Pounds
Sterling Sterling
Note '000 '000
Net cash outflow from
operating activities 6 (581) (851)

Returns on investments and
servicing of finance

Interest received 60 19
Finance lease interest paid (24) (7)
------------------------------
Net cash inflow from returns
on investments
and servicing of finance 36 12

Taxation 35 -

Capital expenditure and
financial investment
Purchase of tangible fixed
assets (978) (245)
------------------------------
Net cash outflow from capital
expenditure and
financial investment (978) (245)

Acquisitions and disposals
Net cash transferred with
subsidiary undertakings - 456
------------------------------
Net cash inflow from
acquisitions and
disposals - 456

Financing
Issue of shares 2,375 1,750
Capital element of finance
lease rentals (91) (20)
New finance lease agreements - 318
Expenses paid in connection
with share issues (100) (313)
------------------------------
Net cash inflow from financing 2,184 1,735

Increase in cash 7 696 1,107


STATEMENT OF CONSOLIDATED TOTAL RECOGNISED GAINS AND LOSSES

For the year ended 30 September 2006
27 January -
2006 30 September 2005
Pounds Pounds
Sterling Sterling
'000 '000

Loss for the financial year (906) (481)

Currency differences on
foreign currency net
investments 11 -
----------------------------------
Total recognised loss for
the year (895) (481)


HARDIDE PLC

NOTES TO THE PRELIMINARY ANNOUNCEMENT

For the year ended 30 September 2006

1. BASIS OF PREPARATION

The preliminary announcement has been prepared in accordance with applicable accounting standards and under the historical cost convention.

The principal accounting policies of the group have remained unchanged from the previous year.



2. SEGMENTAL INFORMATION

Turnover by origin Turnover by destination

27 January - 27 January -
30 September 30 September
2006 2005 2006 2005
Pounds Pounds Pounds Pounds
Sterling Sterling Sterling Sterling
'000 '000 '000 '000

UK 1,891 692 1,509 593
USA - - 367 91
Other - - 15 8
------------------------------------------------------------
1,891 692 1,891 692


Group loss before taxation

27 January -
30 September
2006 2005
Pounds Pounds
Sterling Sterling
'000 '000

UK (584) (481)
USA (464) -
-----------------------------
Group loss
before
taxation (1,048) (481)

Group net assets

27 January -
30 September
2006 2005
Pounds Pounds
Sterling Sterling
'000 '000

UK 2,806 2,056
USA 630 -
-----------------------------
Group net
assets 3,436 2,056


3. TAXATION ON ORDINARY ACTIVITIES
(a) Analysis of credit in the year:
27 January -
30 September
2006 2005
Pounds Pounds
Sterling Sterling
'000 '000
Current tax:
Research and development tax
credit 57 -
Adjustment in respect of prior
years research and development tax
credits 85 -
----------------------------------
142 -

(b) Factors affecting current
tax charge:

The tax assessed on the loss on ordinary activities for the year
is lower than the standard rate of corporation tax in the UK of
19% (2005: 19%)

27 January -
30 September
2006 2005
Pounds Pounds
Sterling Sterling
'000 '000

Loss on ordinary activities (1,048) (481)
before taxation
----------------------------------
Loss on ordinary activities by
rate of tax (199) (91)
Expenses not deductible for
tax purposes 4 -
Capital allowances in excess
of depreciation (6) (20)


Permanent differences (4) (1)
Current tax losses carried
forward 216 112
Research and development tax 46 -
credit adjustment

Adjustment in respect of prior 85 -
year research and development tax
credit
----------------------------------
Total current tax (note 3(a)) 142 -


The group has unutilised tax losses in the UK of approximately Pounds Sterling 3.4m (2005: Pounds Sterling 3.0m).

4. LOSS PER SHARE

The calculation of basic loss per share is based on the loss attributable to ordinary shareholders of Pounds Sterling 906,000 (2005: Pounds Sterling 481,000) divided by the weighted average number of ordinary shares in issue during the year which was 136,376,295 (2005: 127,493,242).

The issue of additional shares on the exercise of options would decrease the basic loss per share and there is, therefore, no dilutive effect of share options.



5. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS

27 January -
30 September
2006 2005
Pounds Pounds
Sterling Sterling
'000 '000

Loss for the financial year (906) (481)
Exchange differences 11 -
Issue of shares 2,275 2,537
Net increase in shareholders'
funds 1,380 2,056

Shareholders' funds at 1 2,056 -
October 2005
Shareholders' funds at 30 3,436 2,056
September 2006

6. NET CASH OUTFLOW FROM OPERATING ACTIVITIES
27 January -
30 September
2006 2005
Pounds Pounds
Sterling Sterling
'000 '000
Operating loss (1,084) (493)
Loss on disposal of fixed
assets - 4
Depreciation of tangible fixed
assets 325 143
Amortisation of goodwill (36) (40)
(Increase) in stocks (39) (46)
(Increase) in debtors (22) (163)
Increase / (decrease) in
creditors 275 (256)
--------------------------------------
Cash outflow from operating
activities (581) (851)

7. RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS

27 January -
30 September
2006 2005
Pounds Pounds
Sterling Sterling
'000 '000
Increase in cash 696 1,107
Cash inflow / (outflow) from
finance leases 91 (405)
--------------------------------------
787 702
Net funds at 1 October 2005 702 -
Net funds at 30 September 2006 1,489 702


8. PUBLICATION OF NON-STATUTORY ACCOUNTS

The financial information set out in this preliminary announcement does not constitute statutory accounts as defined in Section 240 of the Companies Act 1985.

The consolidated balance sheet at 30 September 2006 and the consolidated profit and loss account, consolidated cash flow statement, statement of consolidated total recognised gains and losses and associated notes for the year then ended have been extracted from the Group's 2006 statutory financial statements upon which the auditors opinion is unqualified and does not include any statement under Section 237 of the Companies Act 1985.

Those financial statements have not yet been delivered to the registrar of companies.

Contact Information