Commercial traction is improving, medium-term financial issues have now been addressed, and the refocusing and re-orientating of the business with a major cost-saving programme is progressing well. The long-term risk/reward balance remains favourable, we believe. The markets, though, await clear evidence that the new management team is delivering on its revenue objectives.
- Strategic developments: The core operational objective remains the focus on SiC and the related cutting tools, functionalised inks and graphene composites. A global cross-site/cross-commodity sales team, each with specific product/market expertise, is now in place, with low regulated markets as key targets.
- Financial developments: 2018/19 interims revealed a 62% gross margin and excellent progress on cost-cutting initiatives. New management’s key focus has been the reduction of central costs, e.g. marketing and travel, etc, and this is clearly visible. Management expects a reduced operating loss on a full-year basis.
- Financial position: Haydale’s cash position was £2.7m at December 2019. Working capital management is well controlled, despite the rise in US inventory levels. Group management is assessing future debt funding options, but the group should remain in a positive cash position over the medium term.
- Investment summary: Haydale remains well positioned competitively, with a proprietary nanomaterial functionalisation plasma process. Commercial traction has now recovered, and the group has been financially de-risked. While the risk/reward balance remains favourable on a long-term basis, in our view, the market awaits clear evidence that the new management team is fully delivering on its revenue objectives.
