viewHardide Plc

Long-term opportunities in aerospace and power generation underpin steady Hardide

Having now been approved by Airbus there is also scope to work with other major aerospace groups.

Protecting turbine blades can be a game-changer for Hardide

Slow-burn is an accurate way to describe Hardide Plc (LON:HDD) in recent years but the pace might be about to quicken.

For example, the coatings specialist has just started to treat aerospace components for Airbus planes after an eight-year testing period.

WATCH: Turbine protection can be a game-changer for Hardide says boss Kirkham

That might sound a long time, but Phil Kirkham, Hardide’s chief executive, says it is a quick turnaround in the aerospace coatings business with anything up to 14 years the norm.

It’s a big opportunity he adds, but an even larger one might come from using its technology to stop water droplet damage on steam turbine blades used in power stations.

Tests are set to start shortly with French giant EDF and Kirkham points out that each turbine alone has hundreds of blades.

Coming on the back of record first-half revenues, Hardide is set for a transformational period he believes.

Core to the business is a coatings technology brought into the business by a Russian scientist in 2000 that increases the working life of components it is applied to by 3-5 times.

Hardide has plenty of patent protection, but Kirkham says the real skill is knowing how to apply it.

At the thickness of human hair, it has a unique range of properties particularly the ability to coat very complex shapes and internal surfaces of components.

Complex technology

That makes it different from traditional types of coatings in this field which can only “do the bits you can see, not the bits you can’t”.

 “It's is a complicated process of many variables that would be extremely difficult for anybody else even to attempt,” he adds.

Traditionally, Hardide has treated oil and gas equipment such as downhole tools and pumps and valves and other flow control equipment

Only this week, for example, the company announced £670,000 of orders to coat components for a US oil and gas multinational.

Aerospace through Airbus, however, is set to become an increasingly important part of the mix.

In May, wing parts coated with the Hardide-A product were selected for the Airbus A380 for the first time.

They replaced hard chrome plating on wing compression flap pads, as the chrome plating process has effectively now been banned by the European Union.

“Numerous other components for the Airbus range of aircraft are currently in the final stages of evaluation prior to approval,” said the interim statement including flight tests on an Airbus A321 for a maintenance and repair company.

Hardide is now using extensively its facility in Martinsville, Virginia, and the company is planning to relocate its UK plant to new and larger premises within Bicester over the next 12 months in a major upgrade that will double its capacity.

Aerospace revenue to rise

Kirkham expects in time that aerospace revenues will at least be as important to the company as oil and gas markets.

“Aerospace repair and overhaul maintenance is a very long-term business.

“Once you are approved then you are usually tuned into the life of the component or life of the aircraft platform - so typically 20, 30 or 40 years of flying.”

Having now been approved by Airbus there is also scope to work with other major aerospace groups.

Kirkham, though, is even more animated by the turbine opportunity where he believes Hardide has a solution to the serious problem of water droplet erosion.

Enormous opportunity

This sees small water drops impinging on the turbine blade when rotating at very high-speed causing damage to the surface, affecting the aerofoil profile and reducing the efficiency of the blade and the turbine.

Kirkham says Hardide has developed a coating that protects against corrosion and absorbs the stresses of these water droplets, which stops the degradation meaning potentially far fewer replacement blades are required.

The plan is for EDF to put some coated blades into a real power station for a live test early next year.

“The opportunities for us are absolutely enormous because there are hundreds of blades per turbine that would need coating.”

And there are many, many power stations around the world.

“It could be a game-changer for the business,” he says.

Order flow

New applications and customers for its coatings will also help smooth fluctuations in the order flow that have been an ongoing issue.

In the latest half-year, for instance, revenues rose by 9% to £2.35mln but would have been even better bar delays on one oil and gas order due to changes to the product spec.

As a result, Hardide cautioned revenues for the year will be at the lower end of expectations though the company expects broadly to break even on an underlying profit basis [EBITDA] over the second six months.

That compares to a first-half underlying deficit of £440,000.

Interim losses were £657,000 (£317,000).

The shares barely moved on the news and at a share price of 51.5p, the market cap is £24.5mln.

Admittedly that value is looking a fair way forward, but given the potential in both aerospace and power, that future looks healthily underpinned.

Quick facts: Hardide Plc

Price: 62 GBX

Market: AIM
Market Cap: £30.47 m

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