Cost savings evident, revenue growth to come

The re-focusing and re-orientating of the business with a major cost-saving programme are progressing well. Commercial developments are also progressing well, and medium-term financial issues have now been addressed. The long-term risk/reward balance remains favourable. The markets, though, await clear evidence that the new management team is delivering on its revenue objectives.

• Strategic developments: A global cross-site/cross-commodity sales team (eachwith specific product/market expertise) is now in place, with low regulatedmarkets as key targets. This should enhance top-line growth. Furthermore,Haydale has just received a $0.7m order for ceramic blanks from a large UScutting tool manufacturer, providing additional growth and a commitment in principle from a Japanese cutting tool manufacturer with a value of $0.6m.
• Financial developments: 2018/19 results revealed a 55% gross margin andexcellent progress on cost-cutting initiatives. New management’s key focus has been the reduction of central costs, e.g. marketing and travel, etc. This has already led to a reduction in its annualised SG&A costs of more than £1.6m, with more expected in the coming years.
• Financial position: Net cash was £3.4m at the 2018/19 year-end. The group hadan order book at 10/09/19 of £3.55m, to be delivered over the coming years. Capital expenditure will be lower in 2019/20, and working capital management is well controlled. The group should remain in a positive cash position over the medium term.
• Investment summary: Haydale remains well positioned competitively, with aproprietary and recently-enhanced nanomaterial functionalisation plasma process. Commercial traction is good, with a healthy order book, and the group has been financially de-risked. While the risk/reward balance remains favourable on a long-term basis, the market awaits clear evidence that the new management team is delivering on its revenue objectives.