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Hardide Plc

Hardide Placing to raise £2.5 million

Hardide (LON:HDD), the developer and provider of advanced surface coating technology, today announced that it has conditionally raised £2.5 million before expenses by way of a placing. The Placing will be satisfied through the issue of 3,968,254 new ordinary shares of 4.0 pence each in the Company at a price of 63.0 pence per share. 

The Placing follows significant demand from new and existing investors and is an opportunity to welcome new investors to the register. The Board is pleased to announce that the Placing has been significantly oversubscribed and the Placing Price of 63.0 pence represents a premium of 1.6 per cent. to the closing mid-market price on 20 January 2020.

With these new funds the Company will acquire replacement and additional modern equipment to a value of approximately £1.5 million in connection with the move to new premises in Bicester during 2020. This will enable the Company to achieve greater operational efficiency and environmental performance. Plans include upgrading the existing three coating reactors to the latest technical specifications along with new pre-treatment and component cleaning equipment and a new development reactor. In addition to the capital investment, the new funds will allow the Company to meet the additional fit-out costs of approximately £350,000 that are associated with the new site. A further £500,000 of additional capex requirement has been identified by the Company in order to enhance the technical, quality control and analytical facilities, as well as for equipment to improve health and safety and additional future proofing of the Martinsville and Bicester sites.

As set out in the Company’s annual results that were announced on 9 December 2019, the move to the new facility in Bicester remains on track, and will result in improvements to capacity, capability and environmental performance.

A major factor in the decision to buy new equipment is the need to keep the processing capability for Airbus components at the present UK site during the move to the new Longlands Road site. This is because Airbus approval is specific to equipment and its location. Accordingly, the new site will require its own audit and approval, which is now unlikely to be finalised by Airbus until early 2021. There will be minimal operating costs for the residual operations at the current Wedgwood Road site until then.

The Placing will also enable the Company to strengthen its balance sheet, thereby providing additional reassurance to large customers intending to enter into long-term supply agreements with Hardide.

The Company will continue to explore the potential for asset finance.

The Placing is taking place pursuant to existing authorities established at the Company’s last Annual General Meeting on 4 March 2019.

Further information on the Placing, including its conditionality, is set out below.

Board change

The Company also announces that Hardide’s Finance Director, Peter Davenport, has notified his intention to step down to pursue a career in education. The Board has identified a talented successor and is in the process of finalising contract terms. Peter will remain with the Company as Finance Director until his successor is appointed and for a short period thereafter to ensure a smooth handover. A more detailed announcement outlining the change will be made in due course.

Director Dealing

Yuri Zhuk, Technical Director, intends to sell 208,775 Ordinary Shares as soon as possible following this announcement, at no less than the Placing Price. Dr. Zhuk is selling these shares to fund a property purchase. A further announcement will be made in due course once the sale has occurred.

Details of the Placing

The Placing Shares, when issued, will represent approximately 7.47 per cent. of the Company’s then issued share capital. The Placing Price of 63.0 pence per Placing Share represents a premium of approximately 1.6 per cent. to the closing mid-market price of 62.0 pence per Ordinary Share on 20 January 2020.

The Placing Shares, when issued, will be fully paid and rank pari passu in all respects with the existing Ordinary Shares, including the right to receive all dividends and other distributions declared, made or paid in respect of such Ordinary Shares after the date of issue.

The Placing Shares will be issued under the Company’s existing authorities established at the Company’s last Annual General Meeting on 4 March 2019, subject to customary conditions, including admission to trading on AIM (“Admission“) of the relevant Placing Shares becoming effective. Settlement for the Placing Shares and Admission is expected to take place at 8.00 a.m. on 24 January 2020. The Company has received advance assurance from HM Revenue & Customs that the Placing Shares will rank as ‘eligible shares’ for the purposes of EIS and will be capable of being a ‘qualifying holding’ for the purposes of investment by VCTs.

The Placing is conditional, inter alia, upon:

a.   the Placing Agreement, described below, becoming unconditional in all respects (save for Admission) and not having been terminated;

b.   the Company having allotted, subject only to Admission, the Placing Shares in accordance with the Placing Agreement; and

c.   Admission of the Placing Shares becoming effective at or before 8.00 a.m. on 24 January 2020 or such later time as finnCap and Allenby Capital may agree with the Company (being not later than 8.00 a.m. on 7 February 2020).

The Placing Agreement

i.    Pursuant to the terms of a placing agreement between the Company and its joint brokers, finnCap and Allenby Capital (“Placing Agreement“), finnCap and Allenby Capital have agreed to use their respective reasonable endeavours to procure placees for the Placing Shares at the Placing Price.

ii.   The Placing Agreement contains customary warranties from the Company in favour of finnCap and Allenby Capital in relation to, inter alia, certain matters relating to the Company and its business. In addition, the Company has agreed to indemnify finnCap and Allenby Capital in customary terms in relation to certain liabilities that may be incurred in respect of the Placing.

iii.  Each of finnCap and Allenby Capital has the right to terminate the Placing Agreement in certain circumstances prior to Admission, in particular, in the event of a material  breach of the warranties given to finnCap and Allenby Capital by the Company in the Placing Agreement, the failure of the Company to comply with any of its obligations under the Placing Agreement or the occurrence of an adverse change in (amongst other things) national or international financial or political conditions (which in the opinion of finnCap and Allenby Capital will or is likely to be prejudicial to the Company or to the Placing or Admission).

Application for Admission and Total Voting Rights

Application has been made to the London Stock Exchange for the 3,968,254 Placing Shares to be admitted to trading on AIM and it is anticipated that trading in the Placing Shares will commence on AIM at 8.00 a.m. on 24 January 2020.

On Admission, the Company’s issued share capital will comprise 53,113,946 Ordinary Shares with one voting right each, with no Ordinary Shares held in treasury. Therefore, the total number of Ordinary Shares and voting rights in the Company on Admission will be 53,113,946. From Admission this figure may be used by shareholders in the Company as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, the share capital of the Company under the FCA’s Disclosure Guidance and Transparency Rules.

Related Party Transactions

Canaccord Genuity Ltd, Marlborough Nano-Cap Growth Fund and Canaccord Genuity Wealth Ltd (“Canaccord“) have agreed to subscribe for, in aggregate, 1,017,615 Placing Shares pursuant to the Placing. Canaccord is a related party of the Company for the purposes of the AIM Rules for Companies by virtue of its status as a shareholder holding 10% or more of the existing Ordinary Shares.

The directors of the Company (the “Directors“) consider, having consulted with the Company’s nominated adviser, finnCap, that the terms upon which Canaccord has participated in the Placing are fair and reasonable insofar as the Company’s shareholders are concerned.

Robert Goddard, Chairman of Hardide, commented: I am delighted that we have been supported by new and existing shareholders to provide the Company with additional capital to support our growth strategy. The new money raised will enable the Company to promote the continuing growth of Hardide and strengthen its balance sheet. The funds will mainly be employed at the new UK site which will see improvements to production capacity, capability and environmental performance to deal with the increased demand for our products.

“I would also like to take this opportunity to thank Peter Davenport for all his help and support over the years and we wish him well in his new teaching profession.

“As previously reported, the year has started well and we look forward to the year ahead with confidence.”

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Disclaimer: Statements in this article should not be considered investment advice, which is best sought directly from a qualified professional.