Hardide plc (LON:HDD), the developer and provider of advanced surface coating technology, today provided the following update on trading and the foreseeable impact of COVID-19.
Revenue in the six months to 31 March 2020 has been more than 25 per cent ahead of the same period last year. The Group’s facilities in Bicester, Oxfordshire, UK and Martinsville, Virginia, USA are continuing to coat product as normal at present. Demand has been strong from customers in the oil and gas, flow control and precision engineering sectors throughout the first half of this financial year and the Board has not yet seen any significant reduction going into the second half.
Notwithstanding this, the Board is mindful that order intake in the second half of this financial year might well be affected as customers, especially those from the oil and gas sector, could defer investment decisions or increasing governmental restrictions may have an impact on customer production levels. The Board will continue to monitor the situation and keep an open dialogue with customers over the coming weeks.
The aircraft industry in general is being seriously affected by the current situation but this is not having an effect on the developments and discussions underway between the Company and Airbus and their Tier 1 suppliers on converting components away from hard chrome plating to our Hardide-A coating. Engineering work is currently being done by Airbus to allow for our coating on a range of components and a supply agreement with a major Tier 1 supplier is almost complete. The programme of work agreed with Airbus to gain approval for the new site in Bicester continues. Other development work with Leonardo Helicopters and other aerospace companies, both in the UK and the US, is also continuing; so far without disruption.
The internal fit-out of the new Bicester facility has been completed and the transition to the new site currently remains on plan for completion during September 2020, although the current situation with COVID-19 may cause some delay.
The Group has a robust cash position following the fundraise in January 2020 and is pleased to have entered recently into its first asset finance agreement with Hitachi Capital (guaranteed by the British Business Bank) over a sum of £0.4m secured against a new coating reactor at its facility in Bicester. Nonetheless, the Group’s management is reviewing discretionary spending and implementing cost savings where appropriate.
The Board continues to observe all new government restrictions and will adhere to all those that apply to its businesses both in the UK and the US. A core customer informs us that it meets the US Department of Homeland Security’s criteria for an Essential Critical Infrastructure Company and, as a key part of its supply chain, the Group has been asked to ensure the facilities in the UK and USA stay open for production, unless mandated by law to close.
The Board also wishes to provide further details with regard to existing incentivisation arrangements for directors and senior employees, ahead of the detailed remuneration report to be provided in its next annual report. The Company has a long-term policy of granting share options with appropriate performance and tenure conditions as a core component of the Company’s executive remuneration. The Company does not however have a formal long-term incentive plan or share option schemes. The Company most recently granted options to senior employees (including directors) in December 2019 which had a grant and an exercise price of 62 pence per share. Performance conditions attaching to the vesting of these options relate to share price appreciation in each of the two years to September 2022 (25% of the options to an increase of 21% from grant price for a 30 day consecutive period before 30 September 2021, and 25% to an increase of 33% on same basis before 30 September 2022), and 50% to achieving sales growth and gross profit margin targets over the years ended 30 September 2021 and 2022 respectively. The share options can vest in part should only certain performance targets be met and are subject to ongoing employment at the relevant vesting date. They expire if not exercised before 2029.
The Company’s annual report and accounts for the year ended 30 September 2019 is available on the Company’s website at www.hardide.com. This report includes disclosures with regard to the Company’s remuneration policies. This was posted to shareholders, together with the notice of the AGM held on 17 February 2020, on 24 January 2020.