Hardide remains ‘confident’ of revenue recovery in H2 and FY22 

(HDD ) said it is witnessing “signs of improvement” across all of its key markets after revenue from its energy, flow control and aerospace customers rose during 1H21, solidifying the group’s confidence that it will continue to see improvement into H2 and 2022. 

The Group, which develops and provides advanced surface coating technology, said in its results for the six-month period ended 31 March 2021 that revenues of £1.8m had come in line with 2H20 and the Board's expectations despite being lower than in 1H20 (£3.0m). 

Gross profit (£0.7m) and gross margin (37%) for 1H21 came in below that reported in 1H20 (£1.7m and 55%, respectively) but remained in line with figures reported in 2H20 when the effects of the ongoing COVID-19 pandemic first hit the company’s key market sectors. 

During 1H21, the Group made an EBITDA loss of £0.9m while cash balance at 31 March 2021 of £2.3m, strengthened by £1.3m, primarily from an equity fundraising of £0.8m and CBILS loan of £0.25m. Post period-end, another CBILS loan of £0.25m was also secured. 

Having undertaken all sensible preventive measures, the Company stated that both UK and US sites have operated normally throughout the pandemic, with no disruption experienced. 

However, due to the effects of the pandemic on global demand for fossil fuels, sales to its energy customers were significantly reduced from the record levels achieved in 1H20.  

Sales to flow control customers, mainly in the industrial pump sector were also affected by COVID-19 when compared with 1H20. The reduction was due in part to 1H20 sales being strong as its major industrial pump customer was building stock in advance of demand. 

The Company stated that order levels from this customer are now strong again, primarily due to a large increase in US house building activity while the company said it is also seeing the beginnings of an upturn in overall demand: in 1H21, energy and flow control sales each increased by 4% compared to in 2H20 and revenue from aerospace increased by 26%. 

Shares in Hardide have increased by nearly 20% in value since the beginning of 2021. The stock was trading 3.85% lower this morning at 37.5p following the announcement. 

In particular, Hardide noted that Airbus, the European multinational aerospace corporation, plans to fully approve all production processes at the new Longlands Road site in July 2021. 

The Hardide-A coating is now approved by Airbus for multiple A320, A330, A380 and A440M wing components, while a long-term supply agreement ("LTA") also remains in the final stages of preparation prior to signing with a major German Tier 1 supplier to Airbus.  

Its long-term project for the development of a coating to extend the life and operating efficiency of steam turbine blades with EDF Energy has been delayed during the pandemic as the customer's staff have been unable to access the laboratories to advance the testing. 

Despite this, the Group said that a large unnamed European manufacturer of steam and gas turbines has now developed a technical specification for Hardide-A coating of its gas turbine blades and is starting the process of full validation. It said they expect to introduce these blades into the first new-build gas turbine early in 2022, with more to follow later that year. 

In addition, two large orders for filtration screens were completed for a very large global oil and gas operating company as part of a previously announced high-volume supply agreement with the customer expecting more orders to be placed later in 2021. 

Looking ahead, the Board said it is seeing ‘encouraging signs of improvement’ across all its markets despite the ongoing impacts of COVID-19 remaining uncertain in many respects. 

While the speed of recovery will depend largely on the speed of the vaccine roll-out programme and the re-commencement of air travel and industrial energy consumption, the Group said it is already seeing positive signs of that in the UK, Far East and North America. 

The Board believes its cash resources to be sufficient to meet its working capital requirements for the foreseeable future following the February equity fundraise and receipt of two CBILS loans, and with its cautious approach to costs. The Board said it remains confident that revenues will start to recover in 2H21 and improve further in 2022. 

Chairman, Robert Goddard said, “The Board and management has made excellent progress in developing further the Group's strategy to build its position in the transition to alternative energy sources and are pursuing new growth opportunities in various fields. 

Several applications have been identified already, just one being the exciting development with a large, US-based manufacturer of electric vehicles. Testing is progressing well and at a swift pace.” 

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