Penny share with a big bucks partner Industrial coatings company Hardide recently announced a significant deal with global blue-chip GE. The possibility of further sales to GE means Hardide is one to watch. After several years of disappointment, shareholders in industrial tech outfit Hardide may finally see some fast progress. Listed on AIM since 2005 and with a market capitalisation today of £25m, Hardide is a specialist chemicals business, providing coatings for metal parts. According to the company website, Hardide technology can increase the lifetime of critical metal parts operating in “abrasive, erosive, corrosive or chemically agressive environments”. The last set of results revealed that for the full year ending September 2013, Hardide made sales of £2.4m and a loss before tax of £0.9m. The company reported a cash balance of £1.0m.
marginal sales can have a significant impact on profitability Shares in the company perked up in March as it announced a “Strategic Supply Agreement” with General Electric (GE). Under the agreement, Hardide will supply coatings for one component that GE currently uses. In return, Hardide has been promised approximately $1.3m until February 2016. While this may not sound like big bucks to Hardide, it is important to note that due to the nature of its business,
marginal sales can have a significant impact on profitability. What has really excited the market is the possibility that this GE deal will lead to further sales of a similar scale. Development and testing is “well-advanced” for Hardide’s technology to be used on other GE components. Management has confirmed that such additional sales would “significantly increase the overall value of the Agreement.”
Development and testing is “well-advanced” The most recent trading statement from the company revealed how trading in the first six months of the company’s year was well ahead of the same period last year. This disappointing result for 2013 was blamed on the inventory management of one key customer in the oil and gas sector. Investors are frequently scared off companies whose trading result is dependent on a small number of external client decision makers. Hardide appears to be wise to this and has been trumpeting a significant increase in new accounts. While this is all very positive, Hardide has not been successful in recent years. In 2008, the company’s shares were suspended and trading was not restored until an emergency
fundraising was concluded. In the last five years, Hardide has reported a net profit just once and this figure was exceeded by losses in each of the other four years.
a significant increase in new accounts Hardide is a great example of how an AIM company gets to be a penny share. It developed a technology but failed to deliver returns to remotely justify its share price. Very few AIM companies have ever made it back from being such a disappointment without undergoing a significant transformation in their business. However, the net cash balance and the prospect of further sales to GE raise the exciting prospect of significant share price rises. Hardide (LON:HDD) FOR Proven technology High margin business AGAINST Business remains unproven Still reliant on few key customers Market cap Bid:offer P/E (forecast) Yield (historic) 52week low:high
£23m 2.0p:2.2p no forecast available 0 0.8p:2.5p
Published on May 30, 2014