27 June 2024  

Autins Group plc

("Autins" the "Company" or the "Group")

Interim Results

Change to Accounting Reference Date

Autins Group plc (AIM: AUTG), the UK and European based manufacturer of the patented Neptune melt-blown material and specialist in the design, manufacture, and supply of acoustic and thermal insulation solutions, announces its results for the six months ended 31 March 2024.

Financial Summary

·   Revenue increased by 7.5% to £11.65m (H1 23: £10.84m)

·   Gross profit increased by 19% to £3.64m (H1 23: £3.06m)

·   Gross margins increased to 31.2% (H1 23: 28.2%)

·   Adjusted EBITDA¹ was £0.81m (H1 23: £0.36m)

·   Loss after tax of £0.46m (H1 23: loss of £0.90m)

·   Loss per share of 0.84p (H1 23: loss of 1.65p)

·   Operating cashflow was a £1.4m net inflow (H1 23: £0.30m net inflow)

·   Net debt² excluding IFRS16 lease liabilities decreased to £0.93m (H1 23: £2.42m)

·   Cash and cash equivalents were £2.47m at the period end (H1 23 £1.27m)

·   Group cash headroom³ of £4.2m (H1 23: £3.5m)

1. EBITDA is adjusted for exceptional costs.

2. Net debt is cash less bank overdrafts, loans, invoice financing, hire purchase finance and excludes right of use lease liabilities.

3. Sum of net cash at bank and residual invoice financing capacity.

Operational Highlights

·    Automotive revenue in all three regions grew as automotive OEMs expanded production and demand increased

·   Flooring revenues declined owing to a softening of the German construction industry, a move away from click laminate flooring and one of our customers currently not placing orders

·   Gross margins increased as a result of continued improvements in operational efficiency and materials and logistics improvement projects.

·    Operating cash generation improved due to actions on working capital coupled with a stabilised trading performance.

Post Period End

·    Andy Bloomer joined as CEO in April 2024 bringing considerable experience in sales and marketing within the European automotive manufacturing sector.

·    A key UK OEM has reprioritised some of their model production due to customer demand.  Autins has a higher per vehicle revenue on the deprioritised models which is expected to affect the Group's revenues in H2 2024 and H1 2025

·    Two new significant Neptune based projects were secured during March and May by our German entity worth in excess of £13m over lifetime, (£2m+ per annum) commencing from 2025 and 2026 respectively.  These projects are sourced with new OEMs to Autins, including one of the world's largest EV manufacturers.  These are the first of a number of projected wins in the European market for our Neptune products, continuing our customer diversification strategy.

·    The Group is in advanced stages regarding its first nomination for our new unique Au-duct product with a prestige UK OEM, valued at £1.75m over lifetime, this is a significant step on our product development journey.  A formal launch of Au-duct will follow in H2 24 as well as launching several other products to market.

·    Business wins in UK valued at £350k per annum (£1.75m lifetime) for immediate production to start assisting several OEMs with urgent volume needs.

·    The Group has a robust new business pipeline both with our existing customer base and with potential new customers.  The Board sees its Neptune product gaining momentum particularly with European OEMs

·    The Group has agreed (subject to documentation) revised repayment profiles and covenants with its lenders, with both lenders remaining supportive of the Company.

Andy Bloomer, Chief Executive, said:

"In my first interim results announcement as CEO, I am pleased to report the team delivered a strong first half for FY24, with significant improvements in margins and EBITDA."  

"We have been successful in winning several large contracts for our Neptune products, which are set to generate substantial annual revenues from 2025/2026, we are also close to securing a first nomination for our Au-duct product which will be a key driver for growth in coming years. Although we face some near-term challenges in the markets we operate in, we have a robust new business pipeline providing good visibility for future years and we remain confident in our future success." 

Change to Accounting Reference Date

The Group announces its intention to change its accounting reference date from 30 September to 31 March with immediate effect, to align its financial year end with the year ends of its key customers. As a consequence, the Group's next three financial reporting events will be as follows:

-      Publication of unaudited interim accounts for the 12 months to 30 September 2024, by 31 December 2024

-      Publication of audited annual accounts for the 18 months to 31 March 2025 by 31 July 2025

-      Publication of unaudited interim accounts for the 6 months to 30 September 2025 by 31 December 2025

From then, annual and interim reports will be published each year for the 12 months to 31 March and 6 months to 30 September, respectively.

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About Autins

Autins is a UK and continental Europe based industrial materials technology business that specialises in the design, manufacture, and supply of acoustic and thermal products. Its key markets are automotive, flooring, office furniture and commercial vehicles where it supplies products and services to more than 160 customer locations across Europe.

Autins is the UK and European manufacturer of the patented Neptune melt-blown material and specialises in the design, manufacture, and supply of acoustic and thermal insulation solutions.

Overview

The year on year first half financial performance was stronger than H1 FY23, consistent with H2 FY23, with revenue up by £0.81m to £11.65m (H1 23: £10.84m), which led to an adjusted EBITDA of £0.81m (H1 23: adjusted EBITDA of £0.36m).  EBITDA is adjusted for the exceptional costs incurred in H1 FY24.

Automotive revenue in all three regions grew as the automotive OEMs increased their production and demand grew. Flooring revenues declined owing to a softening of the German construction industry, a move away from click laminate flooring and one of our customers currently not placing orders.

Having taken major restructuring steps in the previous financial year, in the current year we continued to explore operational efficiencies and cost optimisation which led to an improvement in the gross margin of 3 percentage points to 31.2% compared to 28.2% in the same period in the previous year.

Revenue

Sales across the Group increased by 7.5% to £11.65m (H1 23: £10.84m) driven by improved automotive volumes in all territories and especially in the UK (H1 24: £7.7m; H1 23: £6.5m). The increases have outweighed the decline of the German flooring revenue stream.

Sales through the European operations account for 34% of Group turnover, down from 40% for the first half of FY23 due to lower flooring sales in Germany.

Group automotive sales increased by 17% to £11.1m (H1 23: £9.5m), driven by stronger demand from our existing customers. Non-auto sales now account for 5% of Group turnover, down from 12% a year ago.

Revenue in the UK increased by 18% to £7.7m (H1 23: £6.5m), with component revenue continuing to represent most of this as tooling remains at low levels with OEMs focused less on releasing new projects and more on cost cutting. 

Within our German entity automotive sales increased by 8% to £2.6m (H1 23: £2.4m), and flooring sales declining by 54% to £0.6m (H1 23: £1.3m). Overall sales of our German subsidiary declined by 14% to £3.2m (H1 23: £3.7m). The reduction in flooring sales is driven by a drop in flooring demand which was partly due to the volatility of the construction sector in Europe. Monthly sales demand for flooring is now running at much less than the run rate of the prior year, which we expect to persist for the remainder of the financial year.

Sweden sales grew by 33% to £0.8m (H1 23: £0.6m) due to stronger demand from our core customers.

Sales concentration of our largest customer increased from 32.9% last year to 36.7% in H1 24, driven primarily by the increased demand from that customer. 

Despite the positive H1 performance, we expect H2 24 sales will be negatively impacted by approximately £1m. The business is facing reduced sales in the UK, principally from a change of model mix from a key customer.  We are also experiencing reduced sales in Europe due to a halt in production of a European EV manufacturer and reduced demand for non-automotive flooring products in Germany.

Looking further ahead, however, we secured significant new contracts worth in excess of £13 million over their lifetime.  Revenue from these contracts will begin in 2025/2026, generating over £2m per annum in revenues once they are fully underway. We remain committed to increasing our revenue per vehicle on key customer vehicle platforms as they are renewed over the coming years.

Gross margin

The actions taken to improve operational efficiencies and lower material purchasing costs have continued to improve margins with an increase of 3 percentage points to 31.2% compared to the prior year period. 

EBITDA and operating profit

The H1 24 Adjusted EBITDA of £0.81m (H1 23: EBITDA of £0.36m) and adjusted operating loss of £0.01m (H1 23: loss of £0.65m) reflect exceptional costs associated with the change of the Chief Executive Officer.

Net finance expense

Net finance expense for the period was consistent at £0.23m (H1 23: £0.25m) including IFRS 16 charges of £0.13m (H1 23 £0.13m).  The interest element of hire purchase agreements is £0.01m (H1 23: £0.01m) with interest charged on bank borrowings of £0.09m (H1 23: £0.11m). 

Taxation

Given the continuing economic conditions, none of the losses carried forward are recognised in deferred tax balances, consistent with the judgement made in September 2023.

Dividends

No interim dividend is proposed.

Net debt and financing

The Group ended the period with net debt (being the net of cash and cash equivalents and the Group's loans and borrowings, excluding right of use lease liabilities) of £0.93m (H1 23 £2.42m).  Including £4.72m (H1 23 £5.04m) arising from IFRS 16 lease liabilities, the Group's net debt would be £5.65m (H1 23 £7.46m).  Net debt has reduced as a result of the trading inflows including a significant reduction in working capital balances. Cash and cash equivalents at the period end were £2.47m (H1 23: £1.27m). 

The Group's UK HSBC facilities provide up to £3.5m (H1 23: £3.5m) of invoice financing facility (subject to available accounts receivable balances). Group cash headroom, being the sum of net cash at bank and residual invoice financing capacity, was £4.2m (H1 23 £3.5m) at the period end. The HSBC CBILS loan is being repaid quarterly, in accordance with its agreed terms and is due to be fully repaid by July 2026. Maven Capital Partners, providers of the MEIF loan, have agreed to a revised repayment profile, being £0.25m in each of July 2024, December 2024 and July 2025 with the remaining £0.75m being deferred until January 2026. The Group has also renegotiated its covenants with HSBC, subject to final legal documentation, to reflect these changes and the expected lower sales profile for H2 FY24 and H1 FY25. Both lenders remain supportive of the Group.

Capital expenditure

The Group invested £0.1m (H1 23: £0.1m) in its operating facilities during the period. The Group has planned further investment for replacement of ageing equipment, as and where required, and production performance enhancement. Over the coming twelve months, this is expected to be up to £0.5m across the Group as we increase our production capabilities for new volumes and new products.

Board

Andy Bloomer, as announced on 4 March 2024, was appointed to the board as Chief Executive Officer on 22 April 2024, bringing with him extensive experience of the European automotive manufacturing industry, particularly electric vehicles and specialist fibre applications. His most recent role was Sales and Marketing Director EMEA - Thermal Ceramics at Main Market listed Morgan Advanced Materials, where he had commercial responsibility for a £150m division.

At the same time, Gareth Kaminski-Cook stepped down from the board and his role as Chief Executive Officer.  Andrew Burn ceased to be a non-executive Director on 28 March 2024.

Employees

In the UK, we continue working with a banked hours scheme to align surety of workers' pay against volatile customer demand patterns.

Production pay rates have been improved by more than 7.5% (linked to UK minimum wage increases) and overtime rates have also been strengthened to improve net take home pay, with pay banding and related multi-skilling also being improved.

Productivity and teamwork have improved, which has had a positive impact on quality, customer service, and net cost in the factories.  This has been critically important during a period where the availability of labour has become a key challenge for manufacturers.

In Germany and Sweden, we have also worked hard to ensure excellent stable and committed teams.

Going Concern

In approving these Interim Financial Statements, the Board have considered current and future trading and profit and cash flow forecasts for FY24, FY25 and FY26 and assessed existing borrowings and available sources of finance. Lender covenants and repayment profiles have been renegotiated in June 2024 as noted above. The Group's liquidity remains healthy, with cash headroom being in excess of £3.5m as at 21 June, shortly prior to the reporting date.

The trading forecasts take into consideration:

·      the current and expected demand schedules from the Group's key automotive customers, changes in expected demand for flooring products in Germany and the levels of enquiries for new business;

·      the impact of current and future expected demand levels for new vehicles, the migration to EVs and publicly available forward looking market information on market sizes and dynamics;

·      the current cost structure of the Group and an allowance for known increases, for example in relation to additional investment and resources required to fulfil new product and customer sales, and various projects to improve efficiency in the operational and procurement processes; and

·      the latest agreed lender repayment profiles that have been described in more detail above, together with a consideration of the latest covenant requirements.

The key sensitivities in the trading forecasts are automotive revenue levels, end market vehicle sales mix and the timing of orders placed by customers. These sensitivities have been factored into the forecasts, and reasonable contingency has also been modelled.

Having due regard to all the matters described above, the Board have a reasonable expectation that the Group will continue to have adequate resources to remain in operation for at least 12 months after the release of these Interim Financial Statements. The Board has therefore concluded to adopt the going concern basis in preparing these Interim Financial Statements.

Outlook

The business has secured significant work for future years, as well as having a strong sales pipeline.  The appointment of Andy Bloomer as CEO has brought a stronger focus on its commercial operations which the Board believes will improve pipeline conversion into sales.

As a result of its continuing new product development investment, the Group has secured its first nomination with a prestige OEM for an exciting new product Au-duct which will be formally launched during H2 24. We also continue to support our customers' ESG journey with our range of recycled and recyclable Neptune products.

The business has won a number of small contracts with immediate sales impact, but these opportunities tend to be limited to where there is a need for a change on an existing automotive platform.  The more meaningful opportunity for sales growth comes from securing volumes on new automotive platforms and further diversifying the Group's customer base.  The Group has made good progress in the period under review and can already see the impact of this on our future sales in 2025/2026 onwards.

For the remainder of the current financial year, the business is facing reduced sales in the UK, principally from a change of model mix from a key customer.  We are also experiencing reduced sales in Europe due to the publicised halt in production of a European EV manufacturer and reduced demand for non-automotive flooring products in Germany.

Group sales for FY24 are therefore expected to be similar to FY23, with adjusted EBITDA reduced year on year.  Automotive sales in all regions are expected to show modest growth but this will likely be offset by a decline in German flooring sales.

The Group has agreed (subject to final legal documentation) revised repayment profiles and covenants with its lenders. This provides the Group the opportunity to focus, in the short-term, on continuing delivery of operational efficiencies and improving its commercial focus to win additional sales.

The Group will focus on commercial delivery of its pipeline, together with rigorous cost control to try to accelerate an improvement in EBITDA and to increase the longer-term order book.  The mid-term prospects for the business remain strong and will benefit from the operational efficiency improvements that will continue to be implemented.