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Hardide plc (HDD.L) has launched a £1m fundraising and we set out the rationale below. The business is at an intriguing point in its lifecycle as it transitions from an engineering business to a commercially focused entity seeking to capitalise upon its bespoke coating technologies. These have multiple applications for industrial manufacturers across a broad range of global industries, the benefits of which have been proven via its substantial investment in R&D and testing on behalf of existing and prospective clients. HDD’s management, underpinned by recent Board appointments, plans to focus on near-term opportunities to drive sales growth, engage with end customers directly, secure collaborations and over the medium-term, progressively utilise spare capacity available within its reactors which could potentially accommodate around twice FY23 revenues. This is the catalyst to build a profitable, cash generative business capable of exploiting group IP for its shareholders’ benefit.
Hardide plc
Results are in line with expectations. The group has seen a 10% increase in revenues from a strong oil & gas sector and from an increase in aerospace demand in Q4. The £0.8m reduction in EBITDA loss to £0.1m is creditable, with an improvement in working capital in the period. Since the start of the year, Q1 has seen some customer destocking and has been below expectations. This has had an effect on cash position and the group is seeking additional equity and debt funding. As such, we place our TP under review. The new interim CEO is tasked with accelerating revenue growth, in particular in consumables work, which offers near-term upside opportunities. Despite this unfortunate market-led destocking phase, the group looks tantalisingly close to moving into cash flow generation and profitability.
Hardide plc’s (HDD.L) year-end trading update confirmed FY23e EBITDA at around breakeven. That’s in line with our forecasts, on the back of c. £5.5m revenues, 10% up on the prior year. The latter came in below forecast (ACLe: £6.1m); EBITDA benefited from a combination of a disciplined approach to costs and higher selling prices rolled out during Q2 and Q4. The FY24 outlook is supported by both the leaner expense base and an anticipated higher full year contribution from Airbus for A320/A321 components, orders from which were built during Q4. The statement also reported positive indications for receipt of delayed orders for coating gas turbine compressor blades this year.
The group has announced a reassuring year-end update that points to the group trading close to EBITDA breakeven in FY23. It has achieved this despite slightly lower revenue and some previously highlighted work in the gas turbine market being rescheduled to FY24. It gained £0.7m from profit and working capital initiatives, twice the original target. The momentum of Q4 has continued, with aerospace customer schedules showing growth and the anticipated gas turbine orders rescheduled from FY23 to FY24. We slightly reduce our FY23E EBITDA to a loss of £0.1m. Despite a lower revenue forecast, FY24 is still expected to become EPBITDA positive, benefitting from the recent price and cost initiatives.
A positive first half - revenues 9% up y-o-y, 22% ahead of H2 22 – reflects improving oil & gas sector markets, new business flows and successful recovery of input cost inflation via higher selling prices. Significantly, HDD achieved EBITDA breakeven in the period and moved closer towards positive cash generation, a key financial milestone. Revenues are well diversified by industry and client, and visibility is underpinned by contractual relationships and potential for materially higher demand from both existing and new sources, primarily aerospace and power generation. Some of the latter is already undergoing detailed testing and there is potential to build on initial orders delivered during the period. Progressive market adoption of unique patented coatings technologies should further boost sales growth in H2, and margins will continue to benefit as new orders progressively absorb spare capacity that can currently support c. £10m pa of revenues.
The group’s interim results were encouraging, reflecting improving market conditions and profit improvement actions. EBITDA breakeven was achieved in H1 earlier than our expectations. H2 is expected to see further growth and also achieve EBITDA breakeven for the year as a whole. Commercial progress was recently demonstrated with the further traction in coating Airbus wing components, with a partnership agreement with Gardner Aerospace for the A320. Demand has continued in the Energy sector, with good growth in oil & gas volumes, and powergen continues to gain traction with new customers. Cash performance was also better than anticipated, resulting in stable gross cash of £0.7m. Progress is on track with no change to expectations.
The AGM statement reiterated the ‘cautious optimism’ that underpinned the group’s recent annual report (covered in our 9 February update). HDD is experiencing growth across all of its key markets; aerospace, energy and industrial products. First half revenues to end March 2023 are expected to come in around 7% ahead y-o-y. That will be sufficient to deliver forecast EBITDA breakeven in FY23 despite deferral of a c. £0.3m order into H1 FY24. That outcome underlines the success of initiatives to keep strict control of corporate expenses.
The group’s AGM update continues to see good momentum in its key target markets of oil & gas, aerospace, and industrial products with the Board cautious optimistic in its outlook. Near term economic headwinds are causing some specific customer projects to be delayed into H1 FY24. As such, we trim our revenue expectations for FY23. With management having already taken measures to protect cash flow and improve profitability by £0.4m, existing expectations for EBITDA breakeven are maintained.
Positive FY22 results show momentum building. Hardide (HDD.L) confirmed orders for its high-performance coatings from all key industry sectors. As pandemic related issues ease progressively, demand is picking up and the underlying prospects and demand for HDD products appears broadly intact. The reactor capacity is in place to meet projected demand to the end of FY24, so revenue growth should flow quickly to margins, move HDD towards full profitability and positive cashflow. HDD also confirmed successful completion of client tests and receipt of initial contracts from new and existing Oil & Gas and Aerospace clients, including high potential sources of repeatable medium-term revenues. Group finances have been underpinned by cost control, FY22 fundraising initiatives, success in passing on input cost inflation and some £0.3m to £0.4m of savings in the first half this year. That puts the group on track for EBITDA breakeven this year, positive in FY24E, important milestones towards a defined strategy to achieve full profitability and net cash generation.
The group’s year-end update confirms that the market volatility previously flagged has resulted in some customer project orders delayed from Q4 into FY23. We therefore reduce FY22 forecasts, with a £0.3m reduction in revenue and a £0.4m wider pre-tax loss. With a strong order book, management expects to see a considerable improvement in financial performance in FY23, while cash proceeds from settling customer balances, Martinsville sale & leaseback and placing proceeds provide additional financial resource.
Following the earlier announcement of an Accelerated Book Build this morning, the group has confirmed the process has successfully raised £0.55m in cash proceeds at a placing price of 19p. This will assist the group in its short-term working capital funding, as described below. Trading forecasts are unchanged in both FY22 and FY23, with the additional shares resulting in an LPS of 2.1p, a 5% change. The group continues to have good recovery prospects as well as strong growth opportunities with new and existing customers.
The interims from Hardide plc (HDD.L), the developer and provider of advanced surface coating technology, reiterated that the anticipated post pandemic recovery is well underway. There were encouraging signs of improvement in all key markets, and interesting developments now underway are expected to extend the client base into valuable new segments, including electric vehicles and alternative energy.
The interims show a step up in activity in the period, with revenues up 50% and EBITDA losses reduced by 75%. The revenue increases reflected the recovery in energy sector activity, as well as additional customers and volume gained in the oil & gas, power generation (Ansaldo Energia) and aerospace (Airbus) sectors. This broadening of revenues should continue, with a strong pickup in revenues from new contracts anticipated through H2, in aerospace (additional Airbus components and Leonardo) and in the US EV market. We raise our FY22 revenue forecasts by £0.2m, with a £0.1m reduction in our adjusted pre-tax loss to £1.2m. We introduce FY23 forecasts based on 23% revenue growth and achieving EBITDA break-even, with several new customer orders anticipated.
In our view, Hardide is in a strong position to capitalise upon growing demand for its specialist coating services, as its markets recover post pandemic.
Headline numbers reflect the pandemic, but the underlying business appears to be intact, and clear messages underpin the outlook. The first is ‘resurgent’ demand across all group sectors and a healthy pipeline of opportunities in current and new markets. The second is that test programmes on hold or slowed by the pandemic are progressively getting back on track, and support potential to extend and build the revenue base. Finally, a confident statement is anchored by continuing growth in the order book and a strong start to FY22. The value of orders received during H2 FY21 was 52% up on H1, an upward trend which has continued into FY22. HDD consequently anticipates significant improvement in financial performance this year, and we expect margin recovery from an operationally geared business.
FY results are in line with expectations, illustrating a tough year in many end markets. However, the group is now seeing a strong recovery across the board and order intake has increased 52% on H1 FY21. With increased activity continuing into Q1 2022 and momentum building, the group is on track to achieve the current FY22 forecasts. Development programmes are now resuming, some having been placed on hold during the pandemic. We maintain our 60p price target and anticipate that the shares should start to outperform on news of new contracts and recovery.
The group has posted an encouraging year-end update, with recovery slightly slower than expected but now coming through. It has seen a strong pick up in order intake in recent months, (up 52% on H1) and now expects H2 revenue to be similar to H1, with an EBITDA loss in line with expectations due to cost discipline. There has been a promising recovery in demand across all its key markets, which bodes well for FY22. The group continues its strategy of diversification, and we anticipate the next year will see significant strides with potential new large-scale customers.
Hardide plc has reported interims for the 6m ended 31 March 2021 in line with expectations. Given the year earlier period was ‘pre-COVID’ it is of no surprise that the results were significantly weaker (revenues down 41%). However, revenues in the period were up marginally on 2H 2020 indicating the worst has probably passed. The outlook is upbeat with expectations for “an improvement in revenues in H2 and into full year 2022”. We make no changes to our 2021 revenue and underlying EBITDA forecasts.
Interim results were in line and at a stable level with H2 2020, with signs of a recovery starting in the oil & gas sector. We note a markedly more upbeat tone to the announcement, particularly with regard to progress being made in new projects. Two new projects have been identified with a leading EV OEM and a major gas turbine manufacturer. Both are progressing at a rapid pace and could significantly increase revenue expectations from FY22 onwards. We leave our forecasts and price target unchanged, which offer considerable upside.
Hardide’s all-important end market of Oil & Gas, which has historically accounted for c.60% of sales, is taking longer than anticipated to return to pre COVID levels of demand. We have therefore trimmed our forecastsfor the year to September 2021. Additionally, the Company has taken the opportunity to strengthen the balance sheet and has raised £1.0m through a £0.79m equity fundraise at 30.9p and a CBILS loan of £250k. Our forecasts now assume that Hardide will end the year to September 2021 with a cash balance of £1.35m. This strengthened position will provide reassurance to existing and potential clients thus enhancing the eventual post COVID recovery.
The group is proposing a small placing of at least £0.775m and £0.25m in CBILS to provide it with a more comfortable level of liquidity as a buffer in advance of what could be a significant recovery next year. The group has made significant strategic steps over the past year, including relocating and expanding facilities as well as significant commercial milestones achieved in the Aerospace and other sectors. While the forecast delay in Oil & Gas revenues is disappointing, it should be a near-term issue, with the shares not reflecting the significant medium-term opportunity.
Hardide has announced preliminary results for the year ended September 2020 in line with prior guidance. Despite the headwinds of COVID-19 the Company has delivered resilient results with revenues down just 6% in the year. Furthermore, during 2020 Hardide completed a relocation to a new larger, more modern facility in the UK and expanded its reactor capacity from six to nine (two new reactors added in the UK and one new reactor added in the US). Of Hardide’s end markets Oil & Gas has been impacted most by COVID-19 but other end markets such as Aerospace, flow control and precision engineering have remained relatively resilient. Uncertainty remains around end market demand until we move to a post COVID-19 world and this is represented in our cautious forecasts. However, the Company has a strong balance sheet (net cash of £2.2m at period end) which places it in a position of strength should we face continued COVID-19 induced weakness through 2021.
Full-year results were in line with expectations, with a small reduction in revenue reflecting the weaker oil & gas revenues partly offset by growth in aerospace, flow control and precision engineering. The programme to expand capacity and relocate its UK operations was successfully completed on time and on budget and now offers significant capacity ahead of the anticipated orders from Airbus. With weaker oil & gas conditions continuing into H1, we adjust our forecasts, with a stronger H2 expected as aerospace production starts to increase.
The company’s trading update highlights that having seen resilient trading in its first half, Q3 has started to experience softening demand from oil & gas customers. We have reduced our forecasts for 2020 in light of the update, with a 22% forecast revenue reduction and the EBITDA loss widening from £0.3m to £0.5m. Our 2021 forecasts are conservatively flat. Good progress continues to be made in the aerospace sector, while the relocation and expansion of the Bicester facilities is on track and now operational.
Against a backdrop of generally negative company announcements, Hardide bucked the trend by releasing solid interim results for the 6 months ended March 2020, noting limited impact to date from COVID-19 and a positive trading outlook. Furthermore, the allimportant move to new facilities and corresponding capacity expansion is both on track and on budget. Several of Hardide’s end markets will clearly be feeling the impact of COVID-19. However, we feel the importance of Hardide’s technology to its customers by extending the useful life of components and its diversity of end markets across multiple sectors including oil & gas, aerospace, flow control, power generation and precision engineering is enabling it to weather the storm. We leave our forecasts unchanged and see potential for an upgrade should end markets maintain strength and H2 margins match those of H1.
Hardide (HDD): Corp | Ideagen (IDEA): Corp | Quixant (QXT): Corp
HDD IDEA NXQ
Interim results were in line with the period end trading update, posting a record half-year sales. Both UK and US sites are operating normally. Crucially, H2 has started well, with no significant reduction in demand resulting from COVID-19. Ongoing close dialogue with customers remains encouraging, with management alert to the potential for order book disruption. The company remains cautiously optimistic and, as such, forecasts remain unchanged. Having raised £2.5m in January and £0.4m of asset finance with Hitachi Capital, the group looks to have sufficient cash to complete its current expansion and relocation programme, which remains on track. Encouraging progress continues with Airbus and a supply agreement reached with a major Tier 1 supplier, while today it has announced its first low volume production order from Airbus for the A380.
The company has announced a small-scale placing, raising £2.5m as it makes good progress with its substantial expansion, upgrade and relocation project for its UK facilities. The commercial progress being made across a number of sectors, but highlighting the huge potential of new aerospace customers, supports stepping up the pace of the investment programme and also future-proofing the business through investment in modern, efficient, new equipment.
Full-year results were in line with expectations, with a significantly better H2 benefitting from better order flow from oil & gas customers and growth in other market sectors. The relocation of UK facilities is on track and there have been significant steps forwards in Aerospace, with both Airbus and Lockheed Martin awarding approval. We are reducing forecasts to reflect some additional costs ahead of anticipated increases in production.
Hardide’s patented technology enables metal components used within a wide range of high-end manufacturing processes to be coated with a thin layer of Tungsten Carbide. This coating significantly strengthens and enhances the operating performance of the component and hence, reduces operational downtime and extends the useful life. Recent significant capital investment in both Hardide’s UK and USA facilities is expanding its number of reactors from the current six to nine by the end of 2020. This capacity expansion combined with a diversifying and growing end customer base has positioned the Company for significant revenue growth and operational gearing.
The company has published a significant RNS reach today announcing that it has gained a further important award with Airbus. The announcement states that its Hardide-A coating has been specified as the replacement for the use of the hard chrome plating (HCP) process on the Airbus A330 compression flap pads. This follows an earlier announcement by Hardide on 14 May 2019 that it had been specified for use on the Airbus A380, again for its compression flap pads. Today’s announcement is important and adds weight to the view that Airbus will roll out the Hardide coating across its different aircraft platforms, with anticipated additional contract awards offering further scope for outperformance.
Significant progress continues to be made, especially in Aerospace, where today it has announced Airbus approval for use on the A380. Overall, the trading environment has been positive, although gross profit in H1 fell short due to a shift in the sales mix. A significant Oil & Gas customer temporarily changed its ordering patterns in Q2 (albeit demand from this customer has now started to recover). There was strong sales growth from other O&G customers and the flow control sector. The outlook statement points to FY revenue and EBITDA at the lower end of expectations, also including some H2 move-related costs. We peg back sales by £0.4m, which results in an adjusted PBT loss rising by £0.6m to £1.2m. Maintaining forecasts thereafter, we keep our 88p price target, recognising the exciting prospects for new customers and expansion over the next two years.
Hardide (HDD): Corp Interim results | Ideagen (IDEA): Corp Strong and consistent – full-year trading update | Shield Therapeutics (STX): Corp Europe underpins current valuation; await US approval | Tekcapital (TEK): Corp Launch of new eyewear line
HDD IDEA STX TEK
The company is at the cusp of an important inflexion point in its development and has successfully raised £3.6m to fund the investment in three additional coating reactors and the move of its UK operations to new, larger facilities. The reactors have long lead times, with expansion necessary as the UK is close to full capacity, while the first orders from Airbus are potentially expected to start within a year. Short-term additional costs defer profitability, but the investment scales up the longer-term potential. We retain our 2.2p price target, with the company expecting to become profitable and cash flow positive in 2021.
FY results saw a strong increase in revenue to a new record level and ahead of our expectations, with adjusted PBT slightly better than forecast. The continued recovery in the oil & gas sector plus strong demand from the two new supply agreements has propelled revenue. Progress in aerospace is occurring with all technical details agreed. Commercial terms are next prior to the pre-production phase, while the US facility gained aerospace accreditation. The shares’ underperformance is at odds with the strong increase in trading and the process of scaling up facilities in advance of the likelihood of the company’s first aerospace orders this year.
The group has announced a short trading update, prior to its September year end, which points to revenues for the year to be in excess of £4.4m. A positive underlying oil & gas market has boosted revenues, but specifically two major supply agreements have exceeded original expectations. We therefore raise our revenue forecasts by 10%, with higher operating costs incurred resulting in EBITDA unchanged. We raise our price target from 2.0p to 2.2p, recognising the progress and recovery in its underlying markets.
Hardide announced strong 1H18 interim results today with the continuation of positive trends experienced in 2H17. Oil &Gas, Flow Control and Precision engineering all delivered between 22-54% y/y sales growth. Progress in Aerospace continues with trials and commercial discussions with Airbus and Leonardo ongoing. The Group has delivered an improved 1H18/1H17 performance across all financial metrics with a confident outlook for 2H18. We believe our FY18E are firmly underpinned by the 1H18 interim results and take a conservative stance leaving estimates unchanged.
Interim results show strong progress in the oil & gas sector and flow control sectors from both new customers as well as underlying volume growth from existing customers, reflecting stronger conditions in the oil & gas market. Aerospace trials continue to make good progress, albeit at a slow pace. The facility in Martinsville, Virginia, is operating well, with more production being transferred there and further new capacity expected to come on-stream by the end of the year. Market conditions remain favourable, and growth from new customers is expected. As such, the group is on track to achieve existing forecasts and is now getting close to EBITDA breakeven.
Hardide published its 1H18 trading update today, indicating a very encouraging start to the year with sales firmly ahead of both 1H17 and 2H17. The positive start to the year was driven by continued momentum from customers in the Oil & Gas sector, as well as higher sales from both flow control and precision engineering versus the previous year. Management expects results for the FY to be in line with market expectations and we retain our forecasts. The Group will publish 1H18 interim results on 14 May 2018.
On 13 February Hardide updated the market that it has received advanced assurances from Her Majesty’s Revenue and Customs that the Deferred Subscription of £0.82m, as announced on 27 October, is eligible for EIS relief. Following the announcement, Hardide will have successfully raised net proceeds of £2.43m from the fundraising it undertook in October 2017. Admission and trading of the new shares is expected to take place on 19 February. We update estimates to reflect this.
Hardide released its preliminary full year results today, in-line with market expectations and showing considerable year on year momentum both financially and operationally. The Group reiterated its positive outlook and is expecting the progress made in 2017 to continue into 2018 and beyond, supported by a strong balance sheet and growth in its key markets.
Results were in line with the group’s pre-close trading update, with a significant pick-up in revenues. Operational progress continues to gain momentum gaining new customers while market conditions in the oil & gas sector have also provided a recovery in existing customer business. The group’s recent £2.5m placing has provided additional funds to scale up its US facility, which is is projected to reach full capacity in FY 2018, with two additional reactors that will provide additional capacity in advance of potential aerospace and further oil & gas contracts. The encouraging news today is that one supplier programme previously at an advanced stage, has now been confirmed as an agreement.
On 27 October, Hardide announced an oversubscribed fundraising of £2.54m, in two tranches, at 1.7p per share to fund additional capacity in anticipation of future demand, creating a solid platform for growth. The group also provided a trading update within the announcement highlighting that FY 2018E has started positively, with Hardide signing a framework supply agreement with a major international O&G (Oil & Gas) operator and is in the process of finalising a second with a different O&G customer, suggesting a positive outlook ahead. We make changes to estimates to reflect the placing, the anticipated increase in capex and more positive margin assumptions. The result is an increase to Adj EBITDA in FY2019E and FY 2020E together with higher cash balances.
The group announced it has raised £2.5m via a placing in order to expand capacity at its US facility, introduce process enhancements ahead of expected aerospace orders and continue with its marketing programme. Overall, trading is in line with expectations. The group is seeing a pick up in activity from its oil & gas customers as well as new business gains in the precision engineering and oil & gas sectors. The US facility is operating well and is expected to reach the capacity of its two existing reactors during FY 2018. With long lead times the first of the two planned new reactors is expected to be operational in autumn 2018 and EPS enhancing by FY 2019.
Over the last 6 months Hardide plc has been benefitting from an improving outlook in its largest key market (Oil & Gas), receipt of Airbus supplier approval and NADCAP accreditation, patent approval for its ground-breaking coating technology for diamond applications and order momentum within its precision engineering segment. Its revenue prospects look to have reached an inflection point resulting from this positive traction.
The group has announced that it has received an order from GE worth $0.77m over the course of the next year. The contract value is incremental to the management’s previous expectations and results in a small upgrade to our forecast for the current year and helps underpin existing expectations in 2018. This announcement follows hot on the heels of the recent Graco contract announcement and also the significant announcement that it has gained approved supplier status for Airbus.
Interim results for the six months to March put the company on track to achieve full-year expectations. Significant improvements have been seen in the level of demand from the oil & gas sector, currently its largest market. The group has gained pivotal approved supplier status with Airbus, but production contracts may take some time to come through. The group is well positioned ready for the uplift in hydrocarbon sector activity and in advance of expected aerospace contracts. As such the shares also remain extremely attractive as two major positives occur almost simultaneously.
Full-year results are in line with our expectations and offer grounds for some increased optimism as the oil & gas sector (its largest end-customer) shows some signs that it has bottomed out. Progress continues with Airbus component trials and commercial discussions, and the group’s coatings facility in the US is now operational in advance of anticipated growth in North American demand. We make no changes to our 2017 forecasts, with new 2018 forecasts moving closer to breakeven. We retain our existing 2.1p price target, which offers significant upside on oil sector recovery and positive news flow on aerospace and other developments.
The group’s half-year results illustrate the continuing difficult market conditions in oil & gas – its largest end-market. Significant progress with new customer programmes has been seen in the precision engineering and aerospace sectors. Airbus has received its first delivery of coated components for life testing, with several other aerospace components in development or testing. The new US facility is now operational and currently undergoing customer approval. We make no changes to our forecasts, but it is clear that difficult market conditions will continue to suppress trading for at least the next 18 months. Due to new orders recently received, management expect revenues to increase in H2.
Full-year results were broadly in line with our forecasts, which we consider to be a good result in the increasingly challenging environment of the oil & gas sector, the company’s largest end market. Progress in diversifying the customer base continues, with strong growth seen from flow control sector customers. The US facility is on track to start operations by the end of December. Weaker demand in the oil & gas sector increases this year’s loss, with EBITDA breakeven expected in 2017. Final documentation has been submitted for approval by Airbus, which is expected soon and could have a substantial longer-term impact on profits and provide impetus for a rerating valuation.
Hardide*: Full-year results (CORP) | Independent Oil & Gas*: Skipper update (CORP)
Hardide plc IOG PLC
Results for the first half appear strong, with a good YoY increase in sales and improved plant loading. New customer contracts are helping diversify the sales base, the aerospace trials continue to progress, and the new US facility is on track. However, a recent trading update flagged management’s expectation of a weaker 2H, as weaker demand from one large customer in the oil services sector works its way to them. We maintain our recently reduced expectations. The shares may well remain in the doldrums affected by negative oil sector sentiment; however, a positive step-change may occur on any customer announcement.
Ithaca Energy: Extended debt facilities (BUY) | Hardide*: Trading update (CORP)
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