27 November 2024  

Autins Group plc

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

 

Interim Results

 

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 unaudited interim results for the six months ended 30 September 2024 and, following the change of year end to 31 March, also provides detail on the twelve month performance to 30 September 2024.

 

Financial Summary (six months ended 30 September 2024)

 

·   Revenue in H2 24 decreased by 17.3% to £9.79m (H2 23: £11.84m)

·   Gross profit in H2 24 decreased by 15.9% to £3.04m (H2 23: £3.62m)

·   Gross margins increased by 0.5% to 31.1% (H2 23: 30.6%)

·   Adjusted EBITDA¹ decreased 45.6% to £0.44m (H2 23: £0.81m)

·   Loss after tax of £0.79m (H2 23: loss of £0.01m)

·   Loss per share of 1.45p (H2 23: loss of 0.026p)

·   Operating cashflow was a £0.58m net inflow (H2 23: £1.71m net inflow)

·   Net debt² excluding IFRS16 lease liabilities decreased to £1.18m (H2 23: £1.60m)

·   Cash and cash equivalents were £1.68m at the period end (H2 23: £2.09m)

·   Group cash headroom³ was £3.47m (H2 23: £3.90m)

1: EBITDA is stated on an IFRS 16 basis and before exceptional items. 

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

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

 

Financial Summary (twelve months ended 30 September 2024)

 

·   Revenue decreased by 5.5% to £21.44m (FY23: £22.68m)

·   Gross profit unchanged at £6.68m (FY23: £6.68m)

·   Gross margins increased by 1.7% to 31.2% (FY23: 29.5%)

·   Adjusted EBITDA¹ increased 7.7% to £1.26m (FY23: £1.17m)

·   Loss after tax of £1.25m (FY23: loss of £0.91m)

·   Loss per share of 2.28p (FY23: loss of 1.67p)

·   Operating cashflow unchanged at £2.00m net inflow (FY23: £2.00m net inflow)

 

Operational Highlights

 

·   Contract wins in Germany and UK, commencing in financial year 2026 and valued at in excess of £7.5m over lifetime with peak annual sales above £1.5m per annum predominantly for our Neptune based products. These again demonstrate that Neptune is the material of choice for a number of EU based OEM's.

·   Gross margins increased as a result of continued operational efficiency and material usage improvements.  Particular improvements have been seen in our German facility.

·   Repayments continued on our CBILS loan and we were pleased to commence repayment of our MEIF loan.

·   Our flooring business showed a 17% sales improvement period on period. We believe we are seeing the start of the recovery of this business although it is unlikely to return to COVID-enhanced levels. 

·   The mid-term prospects for Autins (FY27 onwards) look very strong. However, the business is facing some short-term challenges due to current automotive demand levels.

 

Post Period End

 

·   Following the resignation of Kamran Munir as Chief Financial Officer announced on 18 November 2024, Des Dimitrov, Group Financial Controller is now attending Board meetings to report on Group financial matters.

 

Andy Bloomer, Chief Executive, said:

 

"In my first six months as CEO of Autins Group plc, I have spent time getting to know the business and the people who work here.  I have found an organisation full of talented people who work incredibly hard to deliver products which solve our customers problems.

 

I have spent significant time with the team working on our go to market strategy and our AuDuct, AuTrim and new Neptune products will provide significant differentiation and cost savings in the future. 

 

Like all automotive businesses, we are currently dealing with the uncertainty of reduced demand and delayed new vehicle introduction from OEM's.  We have continued to manage our costs through headcount, procurement and operational efficiencies.  We believe we are well placed to weather this storm."

 

Adam Attwood, Chairman said:

 

"Looking at the longer term, we believe that the automotive market is showing initial signs of improvement.  OEM's are finalising platform strategies and beginning to source for their future programmes.  With the hard work done to ensure our Neptune material is specified, there are significant opportunities for Autins to gain more market share going forward.  In particular, our key UK OEM will be introducing its new all electric platform by 2027."

 

For further information please contact:

Autins Group plc Andy Bloomer, Chief Executive	Via SEC Newgate
Singer Capital Markets (Nominated Adviser and Broker) Sandy Fraser / Asha Chotai	Tel: 020 7496 3000
SEC Newgate (Financial PR) Bob Huxford Molly Gretton	Tel: 020 7653 9850

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.

 

 

Chair's Statement

 

As we have changed our financial year end to 31 March, it is a year since our last Annual Report and Accounts, and I would like to take this opportunity to provide a full strategic update to clearly set out both the exciting opportunities that the business has, as well as the short-term challenges that we face.

 

 

The European automotive market

 

Over the past few years, the European automotive market, like many industries, has faced macro headwinds (such as Covid and high inflationary costs).  It has also suffered from industry specific pressures such as semi-conductor shortages but, most impactful, delays in new platform launches, as OEM manufacturers grapple with the generational move to electric vehicles where consumer demand has not yet caught up with Governmental enthusiasm.

 

The automotive market is a long-term business.  For suppliers, there is the opportunity to win contracts with longevity of supply (typically 6+ years), subject to actual build volumes.  However, the uncertainty created in recent years from macro and micro factors, has meant that there has been a reduced opportunity to make step changes for a business such as Autins.

 

Looking at the longer term, we believe that the automotive market is showing initial signs of improvement.  OEM's are finalising platform strategies and beginning to source for their future programmes.  With the hard work done to ensure our Neptune material is specified, there are significant opportunities for Autins to gain more market share moving forward.  In particular, our key UK OEM will be introducing its new all electric platform by 2027.

 

 

Autins journey since flotation

 

Autins floated on the AIM market in 2016, following the successful award of high value per car nominations for two new car models that were forecast to sell over 100,000 vehicles per annum for each model.  In the event, the OEM's expectations turned out to be significantly overstated, which placed the business on the backfoot, compounded by the market factors stated above.

 

This resulted in us having to deploy a more defensive strategy in recent years, with efficiency and cost control becoming key to ensure our survival.  However, despite the headwinds that we have faced, we have expanded strongly in three areas; production of our patented Neptune material, development of our European operations and expansion of our customer base.

 

Our flotation enabled us to purchase machinery to start the development and manufacture of an exclusive, patented material, Neptune, for noise, vibration and harshness (NVH) and acoustics absorption.  Having the capability to develop and manufacture our own material was thought to be, and has proven to be, a key differentiator for the business, compared to its competitors.  This is especially true in our European markets.

 

The business has successfully grown in European markets, particularly in Germany.  This organic growth strategy has resulted in our German business growing six-fold since flotation, to the €7.2m business that it is today, despite the market challenges.  Our Neptune material has been key to this growth and has now been specified by a number of well-known European OEMs as their NVH material of choice. This specification work is what will drive our European business growth in the coming years.

 

Our Swedish business also continues to trade well, growing 19% since 2020 and maintaining strong levels of profitability.

 

We have sought to diversify our customer base and now supply 75 customers across the UK and Europe.  This diversification spreads our risk and eases our reliance on any single customer.

 

Germany is also the location of our flooring business.  Whilst this part of the business has struggled with the economic downturn since the high COVID demand, we now see the business stabilising and have a number of new developments in the pipeline that will provide modest growth in the coming years.

 

These achievements mean that the Group now has a much stronger and more balanced operating platform from which to develop and grow into the future.

 

New products for Autins

 

The strategic ambition for the Group has always been to move to higher value, more complex components for the automotive industry.  Despite the financial headwinds that we have faced, we have always considered research & development (R&D) and new product development to be critical to our future and we have continued to dedicate resources to product innovation.  In recent years, we have concentrated on the development of products that either can be protected by intellectual property (IP) rights or that can widen our addressable market.  As a result of this investment, we are now introducing a number of new and exciting products to the market.

 

AuDuct

A mono material automotive ducting system used to reduce energy consumption, improve acoustic and thermal performance and significantly reduce OEM warranty costs.  We have been developing this product for over two years.  We believe that AuDuct is a patentable product, and we are currently progressing our IP rights.  We believe that AuDuct opens up a £60m+ potential addressable annual market to the business.  We are in discussions with a key OEM customer which could lead to future nominations impacting from FY27 onwards but could also lead to more immediate revenue streams.  We have also had strong interest from a Tier 1 customer to supply a similar solution to a prestige OEM.  This would also be for FY27 supply.

 

AuTrim

Currently our products are hidden from the cabin of a vehicle, as they are under bonnet / body, in-boot or in-door solutions.  We believe that there is a growing opportunity to apply our skills and materials to A surface (in-cabin) components.  AuTrim enables our customers to achieve required NVH benefits for the cabin with an integrated, in-cabin component.  We are at an early stage of introducing this product to our OEM customers, but we believe that it will open up considerable new sales opportunities on future platforms.

 

Neptune products

We have channelled considerable R&D resources into our Neptune production line over the past three years.  We are now confident of finalising two key developments by the end of this financial year.

 

Firstly, we believe that we can improve the production process of our core product to enable significant efficiency improvements.

Secondly, we have also developed a new, mono-material version of Neptune made from 100% polypropylene.  This product will be branded Neptune-R.  It will have all the performance capability of our current Neptune material but will be fully recyclable whilst containing up to 30% recycled content.  We believe this is the first material of its type and will be of particular interest to our OEM customers who are looking to increase the recyclable content of their vehicles.

 

 

Short term challenges for Autins

 

Largely as a result of the success of our R&D initiative, the mid-term prospects for Autins (FY27 onwards) look very strong based on nominations received, the new platforms that we are being invited to quote on and the new products that we are introducing.  However, the business is facing some short-term challenges. 

 

We have had to absorb a significant reduction of volumes from our major customer that has required us to continue to focus on cost reductions to meet our banking covenants.  We have already had significant success in controlling operating costs and reducing the costs of trading on AIM and we are now actively considering changes to our operating footprint which could deliver further significant savings without inhibiting our planned future growth. In particular, we are looking at ways to recover significant fixed cost overheads at our UK sites.

 

 

Board composition, plc costs and other plc matters

 

There have been two recent Board changes.  Qu Li joined the Board in September 2024 to represent the interests of our largest shareholder Braveheart Investment Group plc (Braveheart).  Her salary costs are met by Braveheart .  In November 2024, our CFO Kamran Munir left the business.  In the short term, the Board is confident that we can absorb this role within our existing finance team whilst we assess our options.  Des Dimitrov, who has acted as Group Financial Controller since 2021, will attend Board meetings to report on Group financial matters.

 

Over the past 18 months, we have actively sought to reduce Board salary costs as it became increasingly clear that the original salary structure of the Board had become inappropriate for the current circumstances of the business.  As a result of this initiative the forecast annualised run rate of Board salary costs has reduced by £150k compared to 2023 calendar year.  A reduction of over 28%. 

 

As well as Board salary costs, we have put a focus on reducing other costs directly related to our AIM-listed status.  Working with all of our advisers, we have reduced the forecast annualised run rate of plc costs by £100k compared to 2023.  This has required additional work from all members of the Board and I thank them for their on-going support and commitment. 

 

In 2020, we withdrew forecasts from the market due to the turbulence within the automotive market.  We understand that this is an unsustainable position for an AIM listed company and intend to reintroduce market guidance in tandem with an update on the outcome for the financial period ending 31 March 2025.  We hope that this step and the positive outlook from FY27 onwards will allow us to reengage with the market so that we can start using our market listing as an accelerant for further growth.

 

 

Employees

 

As ever, I must thank our work force across the Group for their commitment, resilience and willingness to embrace the changes that we have needed to introduce to adapt the business to the changing market conditions.  We are truly lucky to have such a dedicated workforce.

 

I am also grateful to our CEO, Andy Bloomer, for the energy, empathy and leadership he has shown since he assumed his role in April 2024.  Andy's in-depth knowledge of both the automotive industry and advanced materials has brought more focus and clarity to the workforce as a whole.

 

 

Merger & Acquisition opportunities and growth by acquisition

 

We believe that the automotive supply chain will undergo significant restructuring in the coming years.  As part of our business-wide reviews over the past couple of years we have considered the potential impact that this could have on Autins.  We have looked at opportunities for us to consolidate but this has proved difficult based on our current share price and the lack of liquidity in the market.

 

We very much hope that this position will change in the coming months and that with re-engagement with the market, we can find opportunities to accelerate our growth through acquisition, particularly in Europe.

 

 

Outlook

 

The Group believes that its core automotive market is stabilising and that this will provide a period of stability to bed in the new initiatives set out in this statement and to ensure that it maximises the opportunities that new platforms offer from 2027 onwards.

 

The Board is comfortable that we can meet our banking commitments as they fall due and remain covenant compliant, assuming that build volumes do not deteriorate significantly from the levels currently forecast by our OEM customers.

 

We expect our net losses to increase in the period to 31 March 2025.  Profitability is then expected to improve in H1 FY26 as new, major contracts begin and we would expect the business to return to on-going net profitability in H2 FY26.

 

In the next 6-12 months, the Group will be focussed on maximising new sales opportunities on forthcoming OEM platforms, with the additional impetus from our new AuDuct, AuTrim and Neptune-R products.  The improved forward revenue visibility associated with recent contract wins and pipeline opportunities has informed the Board's intention to reintroduce market guidance in tandem with an update on the outcome for the financial period ending 31 March 2025.

 

 

CEO review

 

Initial 6 months - Creating a strategy, making decisions

 

Since my appointment in April 2024, I have worked with the Autins leadership team and the board of directors to create our "Survive then Thrive" strategy. This strategy is about making the right choices today to ensure we are well placed for our future growth aspirations.

 

We have made a number of decisions about the day-to-day operation of the business and the strategic direction moving forward.  We have worked on refining our go to market strategy, engaging with our customers to understand their needs and wants from a company like Autins and determining the best way for us to meet these needs in the future.

 

Significant efforts have been taken in improving our current Neptune materials from both a cost and performance perspective. In addition, we have continued to refine the next generation of Neptune, a fully recyclable version with significant recycled content.  Our AuDuct and AuTrim products have continued development with several OEM's engaged in testing both products for future applications.

 

We have also spent time looking at our cost base, including people, procurement, PLC costs and current footprint.  Savings have been made in all these areas to improve profit margins even after the volume reductions seen.

 

 

 

Difficult market conditions but margins improving due to careful cost control

 

Supply and demand issues persist for the UK and EU automotive industry. During the last trading period, our largest UK customer had a significant supply chain issue.  This affected our revenues (£500k+ reduction) as the customer was unable to source key components to build its vehicles, changing builds and reducing volumes at very short notice also left it difficult for us to manage our costs.

 

As is well publicised, the automotive industry continues to struggle with the issues of low demand and technology uncertainty.  Several of our customers have announced delays to new platforms as they determine whether to move to all electric or continue producing internal combustion engine vehicles.  In the meantime, the vehicles being produced are no longer new and together with current economic uncertainty this is affecting demand for new vehicles. 

 

Autins is well placed to win on new platforms as they are sourced and the £1.5m per annum in wins since our last trading update demonstrates that we are both competitive and manufacture products our customers want to buy.

 

In the automotive industry it is rare for new business to start immediately but we have several transfer opportunities we are working on which would make an immediate impact, we expect to have further news on these at our next trading update.

 

Continuing to invest

 

Despite the current issues we are seeing, in preparation for supplying the business we have already won, we have continued to invest in our German facility with new machinery valued at £250k due for delivery in December.  

 

Our people making the difference

 

Since I have joined, I have continued to be surprised and delighted with the commitment, ingenuity and flexibility our people at Autins have shown.  All employees have made me feel very welcome, been receptive to change and contributed their own thoughts and opinions.  In my opinion, a company is made or broken by culture and I am proud to report that we have a very positive culture within Autins.

 

Financial Review

 

Revenue

Sales across the Group decreased by 17.3% to £9.79m (H2 23: £11.84m) driven by a drop in production activity in the key automotive customers in the UK and Germany. On a twelve-month basis the reduction of revenue was 5.5% to £21.44m (FY23: £22.68m).

 

Sales through the European operations accounted for 37% of Group turnover in the second six-month period of the current financial period, slightly down from 38% in the comparative period in FY23. On a twelve-month basis they decreased from 39% to 35%, primarily due to the reduction in the flooring business in Germany.

 

Automotive sales decreased by 14.1% to £9.1m (H2 2023: £10.6m). On a twelve-month basis Group automotive revenue was marginally higher than FY23 (FY24: £20.23m; FY23: £20.10m), a sign of improving stability in the industry.

 

Revenue in the UK in the second six months decreased by 16.2% to £6.2m (H2 2023: £7.4m), with component revenue continuing to dominate as tooling remains at low levels with OEMs continuing to delay new projects due to uncertain demand and electrification legislation.  On a twelve-month basis our UK business was unchanged with sales at £13.9m.

 

Within our German entity automotive sales decreased by 8.0% to £2.3m (H2 23: £2.5m), and flooring sales declined by 46.2% to £0.7m (H2 23: £1.3m). Overall sales of our German subsidiary declined by 21.1% to £3.0m (H2 23: £3.8m). On a twelve-month basis the automotive revenue of the German business remained at the same level as FY23, however the flooring revenue was down by 53% for the same period. 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 and, whilst we don't see additional reductions coming, we expect current demand to persist for the foreseeable future.

 

Sweden automotive sales were at the same level as the comparative six-month period at £0.70m (H2 23: £0.70m). On a twelve-month basis our Swedish business grew its revenue by 15.4% to £1.5m (FY23: £1.3m).

  

Sales concentration of our largest customer decreased from 34.4% last year to 31.7% in H2 24, driven primarily by the reduction in demand from that customer. For the twelve months it was an increase from 33.7% in FY23 to 34.4%.  

 

Looking forward, contract wins were secured in Germany and the UK valued in aggregate at in excess of £7.5m over lifetime with peak annual sales above £1.5m per annum predominantly for our Neptune based products. Commencing in 2026, these again demonstrate that Neptune is the material of choice for a number of European based OEM's.  We also expect to see our previously announced win (€2m per annum in Germany) with a well-known EV manufacturer starting production in March 2025.

 

Gross margin

The actions taken to improve operational efficiencies and lower material purchasing costs have continued to improve margins with an increase of 0.5 percentage points to 31.1% for H2 24 compared to the prior year period.  These actions had a more pronounced impact on a twelve-month basis with an increase of 1.7% to 31.2%.

 

Adjusted EBITDA and operating profit

The H2 24 adjusted EBITDA was 45.6% lower  at £0.44m (H2 23: adjusted EBITDA of £0.81m) and adjusted operating loss of £0.56m (H2 23: adjusted operating loss of £0.1m) are prior to exceptional costs. Exceptional costs relate to the replacement of the CEO.  On a twelve-month basis, EBITDA was 7.6% higher at £1.26m (FY23: £1.17m) and the adjusted operating loss was £0.62m (FY23 adjusted operating loss of £0.75m).

 

Net finance expense

There is a gradual reduction in the bank interest expense as we continue repaying our loans.

 

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

The Board continues to believe that during the current period of economic uncertainty a suspension in dividend payments remains appropriate.  As such, 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 £1.18m (FY23 £1.60m).  Including £6.11m (FY23 £5.17m) arising from IFRS 16 lease liabilities, the Group's net debt would be £7.29m (FY23 £6.77m).  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 £1.68m (FY23: £2.09m). 

The Group's UK HSBC facilities provided up to £3.5m (H2 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 £3.47m (H2 23 £4.1m) 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, agreed in June 2024 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 HSBC CBILS loan agreement contains financial covenants which have been adhered to since they were renegotiated in June 2024.

 

Capital expenditure

The Group invested, excluding IFRS16 additions , £0.10m (H2 23: £0.45m) 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.

 

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 this Interim Financial Information, the Board has considered current and future trading and profit and cash flow forecasts through to March 2027 and assessed existing borrowings and available sources of finance. Lender covenants and repayment profiles were renegotiated in June 2024 as noted above. The Group's liquidity remains healthy, with cash headroom being in excess of £3.1m as at 31 October, 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 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 has 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 this Interim Financial Information. The Board has therefore concluded to adopt the going concern basis in preparing this Interim Financial Information.