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Preliminary results for the year to 30 September 2018
Hardide plc
2© 2018 All content is confidential and remains the property of Hardide plc
Developed and commercialised patented CVD coating
➢With a unique combination of properties
The coating does what others can’t:
➢Uniformly coats complex shapes, both inside and outside
Provides B2B coating service
➢From sites in Bicester, UK and Virginia, USA;
➢Both facilities accredited to AS9100/ISO9001
Customers and developments:
➢All major oil service companies, GE, Airbus, BAE Systems,
Leonardo Helicopters, EDF Energy;
Listed on LSE AIM
Currently investing for growth
Comparison with FY17:
3© 2018 All content is confidential and remains the property of Hardide plc
Financial overview FY18
Record sales: £4.61m - 47% CAGR over 3 years
Gross profit: £2.41m – 87% CAGR over 3 years
Gross margin: 52% - from 49%
EBITDA: £0.30m loss - reduced from £0.74m loss
Oversubscribed fundraise: £2.54m
Cash at bank: £3.30m (at 30/09/18)
Overheads: 59% of sales down from 72%
4© 2018 All content is confidential and remains the property of Hardide plc
0
0.5
1
1.5
2
2.5
3
H1 2016 H2 2016 H1 2017 H2 2017 H1 2018 H2 2018
£m
Sales revenue
0
0.2
0.4
0.6
0.8
1
1.2
1.4
H1 2016 H2 2016 H1 2017 H2 2017 H1 2018 H2 2018
£m
Gross Profit
0%
10%
20%
30%
40%
50%
60%
H1 2016 H2 2016 H1 2017 H2 2017 H1 2018 H2 2018
Gross Margin
Financial trends
-1.4
-1.2
-1
-0.8
-0.6
-0.4
-0.2
0
2016 2017 2018
£m
EBITDA
5© 2018 All content is confidential and remains the property of Hardide plc
UK – Head office and primary 16,000 sq ft manufacturing facility based in Oxfordshire
USA – 25,000 sq.ft coating facility in Martinsville, Virginia, opened in 2016
Russia – Research lab in Moscow. Scientists with decades in CVD research. Working on new Hardide formulations and applications
Hardide group facilities
6© 2018 All content is confidential and remains the property of Hardide plc
Key facts
Patented coating technology
Turnover c. £4.6m
Group headcount c. 45
Head office and main facility in Bicester, Oxfordshire
US coatings facility in Martinsville, Virginia opened 2016
Current major markets Oil & Gas and Flow Control: downhole components, pumps and valves
Developing markets: aerospace, power generation, precision engineering
Visibility of near term EBITDA break even
3 year sales growth: 47% CAGR
Strong balance sheet
Approved supplier to BAE and Airbus
High margins:• Variable margin: >70%• Gross margin: > 50%• High operational gearing
Leonardo Helicopters full approval in progress
Coating is crystallised atom-by-atom from gases by chemical vapour deposition (CVD)
Hardide does what other coatings can’t: uniformly coats complex shapes, both internal and external surfaces, including non-line-of-sight areas
250x greater wear resistance than steel
Protects against corrosion – acid resistant
Coated parts typically last many times longer
Hardide enables high-value manufacturers to make globally competitive products, differentiated in terms of quality, performance and life-cycle costs
7© 2018 All content is confidential and remains the property of Hardide plc
Patented coating technology
Nano-structured tungsten carbide, metallurgical coatings that significantly extends the life of criticalparts and tools. A CVD (Chemical Vapour Deposition) process creates an extremely hard, tough and thinlayer with a number of advantages over competitor processes.
8© 2018 All content is confidential and remains the property of Hardide plc
Technology
Superior wear & erosion resistance
Outperforms hard chrome by factor of 12 and cemented tungsten carbide by factor of 3
Ease of Finishing
Only polishing required compared to expensive grinding with other technologies - especially with
complex shapes
Chemical Resistance
Virtually pore-free structure provides very high protection against a range of corrosive and aggressive chemicals
Tailored Hardness
Gas phase of process allows precise control over hardness. Micro hardness of up to 4000HV can be achieved
Internal Surfaces and Complex Shapes
Gas-phase deposition process allows uniform coating to form on internal
surfaces and complex designs. This is not possible for HVOF, Plasma Spray, D-Gun
or PVD Coating technologies
Toughness and Flexibility
Follows contours of substrate and has high flexibility – substantially reducing the
risk of cracking under deformation
Coating Thinness
CVD process requires no binder, creating a less bulky structure than alternative
technologies
Type Hardness Toughness Thickness Applications
Hardide-H
“Ultra-Hard”3000 – 3500 Hv Satisfactory 5…10 μm
Self-sharpening blades
Hardide-T
“Tough”1100 – 1600 Hv Excellent
Typically 50 μm
Oil tools, pumps, valves, actuators
Hardide-A
“Aerospace”800 – 1200 Hv Excellent 50-100 μm
Hard chrome replacement
Hardide-W 400 Hv Excellent Up to 300 μm X-ray Anodes
Coating hardness/toughness/thickness can be tailored to a specific application requirements
© 2018 All content is confidential and remains the property of Hardide plc
Hardide – a family of coatings
9
Intellectual property
10© 2018 All content is confidential and remains the property of Hardide plc
Five international families of patents, including:
➢Two patents protect the compositions, structure and depositionmethods of different types of Hardide coatings for metal parts.Key claims specify the coatings chemical composition, which canbe used as a “fingerprint” of Hardide technology
➢Two patents on coating for diamonds
➢Self-sharpening blades with hard coating
Hardide trademark registered in the EU and the USA
New applications and coating improvements are reviewed for possible patentability
New patent application pending for turbine blades
11© 2018 All content is confidential and remains the property of Hardide plc
Key markets
Oil & Gas
➢Used by all the leading oil & gas service providers –downhole, well stimulation and subsea applications
Flow Control
➢Severe service pumps & valves for demanding environments
PrecisionEngineering
➢Power generation, plastics extrusion, baggage X-ray machines, silicon wafer production
Aerospace
➢BAE and Airbus approved, Leonardo approval in progress, multiple applications with other global aero players
12© 2018 All content is confidential and remains the property of Hardide plc
• Technical work completed
Airbus
• Final stages before approval of parts
Leonardo helicopters
• Work ongoing with Triumph Aerospace and others
US aerospace
• Commissioned during Nov 2018
New reactor in US
• Accredited to ISO 9001 and aerospace AS9100D
Martinsville facility
Two NATEP grants
New patent application pending
• Oil & gas sector sales up 61%
• More diversified customer base
• Two new large supply contracts producing revenue
Sales revenue increased 42%
• Now 61% of group revenue
Sales to North America up 84%
Gross margin increased by 3%
Aerospace close to first orders
Additional us-based business development manager
Operational overview
13© 2018 All content is confidential and remains the property of Hardide plc
Airbus:➢Positive progress. Multiple components at final stage before
production
Leonardo Helicopters:➢Positive progress. Final stages before part approval on
transmission system
Other Aerospace:➢New interest from US aerospace companies - trials with
Triumph Aerospace and others
Business Model Change➢Two contracts where we are now responsible for full
component manufacture as well as coating
Oil & Gas:➢Two new major supply contracts in place
➢Three new major customer applications
➢New coated diamond applications
Flow Control:➢Additional high volume components from the major
customer
Precision Engineering:➢Continuing demand for x-ray baggage screening machine
parts
North America:➢Additional business development manager appointed
➢Now 61% of Group turnover
Business development
14© 2018 All content is confidential and remains the property of Hardide plc
Outlook positive in all sectors- oil & gas demand especially strong, but carefully watching global trends
Recent developments in oil & gas applications projected to deliver high demand in coming years
Confident of aerospace revenues commencing shortly – especially from Airbus and Leonardo Helicopters
Third reactor installed in Martinsville during November 2018. New, larger pre-treatment line also currently being installed
UK site currently under review due to capacity and space restrictions
Outlook
Financials
16© 2018 All content is confidential and remains the property of Hardide plc
£m 2015/16 2016/17 2017/18
H1 H2 H1 H2 H1 H2
Sales 0.95 1.19 1.51 1.73 2.16 2.45
Variable Gross Margin %
65% 69% 73% 77% 75% 71%
Fixed costs of sales 0.36 0.39 0.42 0.43 0.46 0.51
Gross Profit % 27% 36% 45% 52% 53% 51%
Overheads 0.97 1.02 1.11 1.22 1.29 1.42
EBITDA (0.72) (0.59) (0.43) (0.31) (0.14) (0.16)
Consolidated income statement
17© 2018 All content is confidential and remains the property of Hardide plc
Balance sheet
£k 2015/16 2016/17 2017/18
H1 H2 H1 H2 H1 H2
Assets 2,156 2,212 2,007 1,802 1,868 2,392
Cash 1,006 1,967 1,563 1,212 3,233 3,302
Net working capital 198 218 227 294 342 (301)
Liabilities & provisions*
(29) (20) (12) (17) (65) (314)
Capital Employed 3,331 4,377 3,785 3,291 5,378 5,079
Equity 11,976 13,547 13,547 13,548 16,018 16,081
Losses (8,247) (8,964) (9,648) (10,060) (10,377) (10,925)
Other reserves (398) (206) (114) (197) (263) (77)
Shareholders’ funds 3,331 4,377 3,785 3,291 5,378 5,079
*Provision created of £246k for potential partial-repayment of US grants
18© 2018 All content is confidential and remains the property of Hardide plc
£k 2015/16 2016/17 2017/18
H1 H2 H1 H2 H1 H2
Net Operating Cash
(807) (546) (295) (291) (138) 530
Net Investing Cash
(506) (55) (100) (52) (360) (527)
Share Issues - 1,571 - - 2,470 63
Finance Lease (8) (9) (9) (8) (2) -
Loan Changes - - - - 51 3
Net Financing Cash
(8) 1,562 (9) (8) 2,519 66
Net Cash At Start
2,327 1,006 1,967 1,563 1,212 3,233
Net Cash At End 1,006 1,967 1,563 1,212 3,233 3,302
Cash flow
19© 2018 All content is confidential and remains the property of Hardide plc
Sales grew strongly over the past three years (47% per year) but gross profit grew nearly twice as fast (87% per year) and fixed costs (production overheads + admin costs) grew at only 16% per year.
Year on Year comparison
£m 2015/16 2016/17 2017/18 CAGR
Sales 2.14 3.24 4.61 47%
Variable Gross Margin % 67% 75% 73%
Fixed costs of sales 0.75 0.85 0.97 14%
Gross Profit 0.69 1.58 2.41 87%
Gross Profit % 32% 49% 52%
Overheads 1.99 2.33 2.71 17%
EBITDA (1.31) (0.74) (0.30)
'Fixed' costs (2.74) (3.18) (3.68) 16%
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20© 2018 All content is confidential and remains the property of Hardide plc