Hardide Plc (LON:HDD) Chief Executive Officer Philip Kirkham caught up with DirectorsTalk for an exclusive interview to discuss the fundraise and what the proceeds will be used for, share capital consolidation and the outlook for the company.
Q1: Today Hardide announced a fundraising of approximately £3.6 million, can you please explain how the proceeds will be used?
A1: First of all, I’d just like to say how very pleased and encouraged we are with the support we’ve had from existing and new investors and shareholders in this fundraise, it’s been very encouraging indeed.
Our plans are basically to relocate from our current site because it’s physically too small for any expansion of capacity. So, the plan is to create a brand new facility in the UK which is about 20,000 square foot floor area, which is about double what we have currently, which will replace our existing Bicester over the next 18 months.
We’re also investing in new coating reactors to increase our capacity, one of these new reactors will be a larger size to enable us to cope with much bigger components than we can at the moment.
So, the premises themselves are located on a brand new industrial estate that has just been built very close to our present location in Bicester. As a new building, it’s got considerably larger floor area, space for further expansion, and it also has this much greater roof height which can accommodate the larger coating reactors we want to install. Also being a new building, it enable us to plan the layout to get much better operational efficiencies than we have currently, and this will also maximise output and increase efficiencies.
Additionally, I think this is also important, it presents a much more professional quality image when people visit the site, particularly to potential aerospace, power generation, other high-tech customers who come to see us, the premises look very very professional indeed.
So, we intend to install three new coating reactors in this plant as well as migrating our current three reactors from our existing site over there. As I say, one of these will be a larger size reactor to accommodate components such as various aircraft components and also particularly turbine blades using the power generation industry which we’ve identified as a potential and very promising growth market for us. Another of the new reactors will also be used largely for technical research and development work to develop the group’s product range.
There’s a lead time of approximately 12 months from order to installation of a new reactor so this will be a phased move with the whole migration to the new site expected to be complete by September 2020.
Q2: You also announced that you propose a share capital consolidation where every 40 Ordinary Shares in issue will be consolidated into 1 new Ordinary Share. Why is the company proposing this exercise?
A2: The company currently, before the fundraising, has more than $1.6 billion Ordinary Shares in issue and obviously, they’ll be more as a result of this fundraising. One consequence of having such a large number of shares in issue, with a very low market share price, is that very small trades in shares can result in a very large percentage movement in share price which results in considerable share price volatility.
We consider it’s in really the best interests of the company’s long-term development as a public company to have a much more manageable number of shares in issue and to have a higher absolute share price. We think that a higher share price, again, improves our image with customers which is very important as well, we believe.
Q3: What can you tell us about the outlook for Hardide?
A3: I think what we’ve said before is the company has really reached an inflection point in its history and its growth, achieving record sales across all geographies last financial year which resulted in a 42% year-on-year increase to £4.61 million.
Oil and gas revenues grew considerably over the period, benefiting from the recovery we’ve seen in that sector, with strong sales to new customers as well as existing customers.
As a Board, we’re also very encouraged by the potential for the growth in sales in civil aerospace, having successfully completed technical testing, and detailed final discussions are currently underway with Airbus and its tier 1 partners regarding the supply of production parts. Parts for other US and UK aerospace manufacturers are also in various stages of the development including final stages of live testing on transmission parts for Leonardo helicopters.
So, overall, we’re very pleased with the group’s performance and the positive trading outlook which supports our strategy to invest ahead of revenue as we drive towards profitability.