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Hardide (LON:HDD), the provider of advanced surface coating technology, said demand is returning to more typical levels after destocking by a major customer.
Revenue in the six months to 31 March rose 4% to £1.31mln from £1.26mln in the corresponding period of the previous financial year.
The reported loss before tax widened to £236,000 from a loss of £102,000 the year before, after the group took a strategic decision to increase expenditure on business development and technical staffing.
The group highlighted the fact that results in the first half of the previous financial year benefited from strong sales to a major oil and gas customer, and that this customer significantly reduced inventory levels in the second half of the financial year.
The rapid and unexpected destocking by this customer meant last November’s full-year results came as an unpleasant surprise to the market, sending the share price down from 1.122p to 0.90p, but the share price has recovered strongly since then, helped by a return to more normal level of orders from a major customer and a major supply agreement with General Electric (GE).
To drive home the point that it is back on a strong growth path, the company noted that revenue in the first of the current financial year is up 20% from, revenue in the second half of the previous financial year, while gross profit of £0.88mln was up from £0.69mln in the six months to the end of September 2013.
The number of customer accounts has increased by 32% from 38 to 50 since September 2013, the company revealed.
“Further diversification of the customer base is pleasing, with the number of accounts rising by 32% and the first orders secured from Italy and Germany, and in the UK subsea ROV [remotely operated vehicle] market,” declared Robert Goddard, Hardide’s chairman.
The company ended the reporting period with cash in the bank of £0.94mln.
“We are greatly encouraged by the progress of strategic developments, including the supply agreement with GE and the continued technical testing by Airbus and AgustaWestland. Our trading continues to improve and we are confident about a healthy outlook for the year," Goddard said.
City stockbroker finnCap has initiated coverage of the stock, saying the interim results show good progress and that the company “is at a turning point”.
“The resumption of more typical purchasing patterns at its largest customer in oil and gas should have a material impact this year. The two-year contract (with an option to extend up to five years) with GE also has the potential to be extended to other parts. First sales of a new superabrasive coating to the oil and gas sector were achieved. Thereafter, the most significant opportunities rest with the programmes with AugustaWestland and Airbus gaining customer approval and converting them into orders, the scale of which could be game changing. Further out we expect that further customer orders are likely to be gained across a number of end-user industries,” finnCap’s David Buxton said.
The broker has lowered its full-year forecasts to recognise higher overheads in marketing and the likelihood that the aerospace programmes will take time to commercialise.
The house broker trimming its forecasts might have something to do with the shares taking a step back, falling 5.8% to 2.19p after initially opening firmer, though finnCap points out that the shares shave had a good run recently (+137% in the year-to-date) so there might also have been some profit taking.