# Hardide plc Record revenue for a first half-year & Hardide-A coating to be used for Airbus A380

- Link: https://www.directorstalkinterviews.com/hardide-plc-record-revenue-for-a-first-half-year-hardide-a-coating-to-be-used-for-airbus-a380/412774848
- Published: 2019-05-14T07:22:37+01:00
- Author: Giles Arbor

**Hardide plc** (LON: HDD), the developer and provider of advanced surface coating
technology, has today provided its results for the six-month period ended 31 March
2019 and also states that its Hardide-A coating has been selected as the replacement
for hard chrome plating (HCP) on Airbus A380 compression flap pads.

Hardide-A has been developed specifically to meet the needs of the aerospace industry;
it is a hard wearing, quality product, environmentally compliant with demonstrable
long-term performance qualities.

**Financial Highlights**
 · Record revenue for a first half-year – up by 9% to £
2.35m (H1 2018: £2.16m)

· Gross profit of £1.05m (H1 2018: £1.15m)

· Group operating loss of £0.66m (H1 2018: £0.32m loss)

· EBITDA loss of £0.44m (H1 2018: loss of £0.14m)

· Successful fundraising of £3.60m (before expenses) in March 2019 to fund continuing
investment and long-term growth

· Cash at bank at 31 March 2019 of £5.35m (£3.23m at 31 March 2018)

**Operational Highlights**

· Diversification of customer base continues – half of revenues in H1 attributable
to customers gained in the last three years

· Sales to customers in North America increased by 32%

· Increased sales of 52% in flow control

· Encouraging progress being made in aerospace sector:

– first Airbus A380 component selected for Hardide coating

– numerous components for Airbus in final stages of evaluation

– first coated components currently in-flight testing on an Airbus A321 with a global
MRO (maintenance, repair and overhaul) customer

– Leonardo Helicopters began process to make Hardide an approved supplier for flying
parts

· Third coating reactor and large pre-treatment line installed in Martinsville

· Order placed for the first coating reactor for the new Bicester site

· Aerospace coating (Hardide-A) produced at the US facility for the first time

· Successful completion of ‘Innovate UK’ grant-funded project to produce an ultra-
low temperature coating process

· Two National Aerospace Technology Exploitation Programme (NATEP) grant-funded 
projects started

· A new international PCT patent was submitted protecting the latest developments
and improvements in the coatings

> **Commenting on the interim results, Robert Goddard, Chairman of Hardide plc, 
> said:**
> “The Group is pleased to have achieved record sales revenue for a first half during
> this period. This was despite some short-term disruption with one customer and
> the unpredictability of larger customer projects, which have led us to now expect
> full-year revenues to be at the lower end of market expectations. More than half
> of demand in the period was from customers gained within the last three years.
> Customer and sector diversification are key strategic objectives for the Group
> and the Board is pleased with the progress being made.
> “Indications are that demand will remain strong from customers in the oil and 
> gas, flow control and precision engineering sectors and the Board is pleased with
> the advances being made towards production orders from aerospace customers in 
> the UK and US. The announcement today with regard to our Hardide-A coating being
> selected by Airbus is particularly pleasing and a testament to the quality of 
> our offering.
> “We remain highly optimistic about the longer-term outlook for the business.”

**CHAIRMAN’S STATEMENT**

**Introduction**

The Group had record sales revenue for a first half in the six months to 31 March
2019, with more than half coming from new customers gained within the last three
years. Customer and sector diversification are key strategic objectives for the 
Group and the Board is pleased with the progress being made.

Demand is strong from new and existing customers in the UK and North America. Sales
to customers in North America increased by 32% compared with the same period last
year and the US facility is operating well and producing an excellent quality of
product.

Demand from some of our newly-established customers is heavily project-based. This
means that we see large, discrete orders on unpredictable timescales, thereby limiting
visibility over when revenue will be recorded. As the overall number of clients 
grows, so diversifying our revenue stream, the individual impact of any one project
will decline. The medium- and long-term trends continue to look promising and we
are very pleased to be attracting customers of this calibre. Certain customer orders
that we expected in the first half are now likely to be in H2.

In H1, one of our significant oil and gas customers made adjustments to the design
of the product that uses the components that we coat. They also changed the manufacturer
of the parts. This has delayed the phasing of orders for these components from H1
to H2 2019. However, recently there has been a return of demand for these components
and our customer expects this to continue throughout H2.

**Financial Results**

The Group is reporting H1 2019 revenue of £2.35m, an increase of 9% compared with
the same period last year (H1 2018: £2.16m), with Group gross profit of £1.05m (
H1 2018: £1.15m). Whilst revenue is up, gross profit was affected adversely by the
impact of the product mix.

Overheads of £1.48m (H1 2018: £1.29m) increased, primarily due to a strategic investment
in a new US‑based business development engineer and the planned increase in sales
and marketing expenditure. In addition, there was a rise in operational costs at
the US site due to the newly-installed third reactor, together with the annual pay
award made to all UK and US staff.

The Group made a loss before interest, tax, depreciation and amortisation of £0.44m(
H1 2018: loss

£0.14m) and an operating loss of £0.66m (H1 2018: loss of £0.32m).

During the period, the Group raised £3.60m (before expenses) in a fundraising and
undertook a share capital consolidation such that every 40 Ordinary 0.1p Shares 
in issue were consolidated into 1 New Ordinary 4p Share. Primarily, the proceeds
will be used to fund the purchase of three more coating reactors and to move the
Company’s facilities to new premises nearby where there will be double the floor
space. An update on progress in deploying these funds is set out in the Operational
Overview below.

**Operational Overview**

The demand from oil and gas customers continued, with sales being similar to those
in H1 2018. The exception was the reduced demand from the major customer mentioned
earlier, which was offset by sales of new applications for UK and US customers, 
and by the return of demand for Hardide‑coated industrial diamonds. Sales to flow
control customers increased by 52%; a contributing factor being the specification
of the Hardide coating on new product ranges for a US pump manufacturer following
successful development work last year.

There was encouraging progress in the aerospace sector, with the first coated parts
selected for the Airbus A380. These will be replacements for hard chrome plated 
wing compression flap pads. Numerous other components for the Airbus range of aircraft
are currently in the final stages of evaluation prior to approval. A global MRO 
customer has put the first Hardide-coated components on an Airbus A321 for flight
testing prior to approval. A US aerospace customer has also indicated its selection
of Hardide for coating certain of their components. This will be the subject of 
a separate announcement once it has been formally approved by the customer.

The US facility in Martinsville is operating well and Hardide-A, the coating developed
specifically for the aerospace sector, was successfully produced there for the first
time as work continues to prepare the site for processing aerospace components following
its approval to aerospace quality management standard AS9100 RevD in 2018.

Good progress was made in the development of a coating for turbine blades and this
has been identified as a product with excellent prospects. Tests commissioned by
our customer EDF Energy indicate that the coating can extend the life of steam turbine
blades through significantly enhanced resistance to erosion by solid particles and
high-speed water droplets. In March 2019, at a joint presentation by EDF Energy 
and Hardide Coatings to a meeting of the Steam Turbine Users Group, there was considerable
interest from several turbine manufacturers. EDF Energy is now developing plans 
to begin field testing of Hardide-coated blades in a power station turbine. A new
international PCT patent incorporating this application was submitted and if granted,
will protect the latest developments and improvements in the coatings. This is a
long-term project significant potential for developments of markets and of IP.

The Innovate UK grant for the project to develop and characterise the new, low-temperature
Hardide coating process was completed successfully at the end of H1 2019. This widens
the range of metals and applications that are suitable for Hardide coating and includes
many steels used in the aerospace and oil and gas sectors. Hardide-T and Hardide-
A, the two most frequently used coatings are now available in low‑temperature variants,
Hardide-LT and Hardide-LA. A global leader in the energy industry has already ordered
the first parts for low temperature coating.

Work started on two, 18-month long projects to apply Hardide’s new low-temperature
coating in the aerospace sector and develop new finishing techniques. These have
been part-funded by the National Aerospace Technology Exploitation Programme (NATEP)
and are being carried out in collaboration with Airbus, Leonardo Helicopters and
other industry partners. Working with NATEP is already presenting new opportunities
for disseminating information about Hardide coatings to the wider aerospace sector.

Following the raising of £3.60m (gross) in March 2019, detailed plans are being 
developed for the move of the UK facility to a new, larger site nearby in Bicester.
We expect costs in this regard to be approximately £200k in the second half. Planning
is underway for a staged move, which is expected to be complete by September 2020.

An order has been placed for the first of three new coating reactors and design 
of the Group’s first larger‑capacity reactor has begun. This reactor and a new pre-
treatment facility are being designed to accommodate bigger components, including
turbine blades used in the power generation industry and various aircraft landing
gear components.

**Summary and Outlook**

Indications are that demand will remain strong from customers in the oil and gas,
flow control and precision engineering sectors and the Board is pleased with the
advances being made towards production orders from aerospace customers in the UK
and US.

Due to the project-based nature of demand from several large customers, prediction
of revenue over the short term has always been difficult. Now that we have more 
project-based customers, sales forecasting has become even more challenging. In 
future, our increasingly diversified customer base will help smooth these fluctuations.
Against this background, we expect revenue for the full year to be at the lower 
end of market expectations and for EBITDA to be broadly break-even for the second
half (before costs associated with the move of facilities as set out above), dependent
on the product mix and the phasing of costs associated with the move to new premises.

Accordingly, we remain highly optimistic about the longer-term outlook for the business.

Robert Goddard
 Chairman

14 May 2019

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