Hardide (AIM: HDD) uses technology that was invented at Moscow State University during the cold war. Its vacuum reactors treat metal components with an ultra-hard tungsten coating. Hardide acquired the technology in 1999 but commercialisation has proved elusive, with revenues struggling to get beyond the £3 million mark. However there are now a few reasons to believe we might be close to some meaningful progress.
The oil and gas industry has been an important sector and the downturn saw a drop-off in orders. CEO Philip Kirkham now says the market is definitely picking up, which will help. Of particular importance to Hardide are commercial discussions with a US manufacturer of onshore drilling components. This would be a high volume contract if it comes off and we should hear some news by the end of the year.
A three year contract with guaranteed volumes from GE expired in February. Happily a surprise $100,000 order has come through and further business is now expected. Hardide will likely fulfil these volumes from its new plant in Virginia.
Hardide has also won approved supplier status from Airbus after a lengthy trials period. Management are now in discussions with the engineering teams on various aeroplane programmes and are also talking to Airbus suppliers. Treatment of wing structure and landing gear components are high on the list and there is an added impetus from the phasing out of incumbent hard-chrome plating techniques. However given Airbus procurement timescales we shouldn’t hold our breath and initial volumes are likely to be modest. Again it’s hoped news will be forthcoming around the end of the year.
Meanwhile there will be a similar cash outflow in the second half to the first, which will leave a balance of around £1.2 million in September. The market cap of £26 million is looking a fair way forward in the context of a £4 million revenue forecast for 2018. However the business is high margin and operationally geared, so all depends on those contract announcements being able to take the company into the next phase.