Autins Group plc (LON:AUTG), the UK and European manufacturer of the patented Neptune melt-blown material and specialist in the design, manufacture and supply of acoustic and thermal insulation solutions, has announced its results for the twelve months ended 30 September 2020.
· Revenue decreased to £21.5 million (FY 19: £26.9 million)
· Adjusted Gross Profit1 decreased to £6.0 million (FY 19: £7.5 million)
· Reported EBITDA1 increased to £1.1 million (FY 19: EBITDA £0.0 million)
· Cash flow from Operations2 increased to £1.5 million (FY19: loss of £1.0 million)
· Operating Loss reduced to £1.3 million (FY 19: loss of £1.6 million)
· Adjusted Operating Loss3 £0.6 million (FY 19: loss of £0.8 million)
· Reported Loss after tax £1.7 million (FY 19: loss of £1.5 million)
· Reported Loss per share reduced to 4.35p (FY 19: loss of 6.25p)
· Adjusted net debt4 reduced to £1.9 million (FY 19: £2.3 million)
· H2 revenues having been impacted by the pandemic were £7.8 million (H120 £13.2 million) but H2 reported EBITDA improved to £0.83 million (H120 £0.27 million) and recurring overheads were reduced by £1.0 million.
· Gross profit1 margins remained steady at 28.0% (FY 19: 27.9%).
· Positive reported operating cash inflow of £1.5 million (FY19 outflow £1.0 million) of which £0.9 million resulted from improved working capital.
· £3.3 million of new finance facilities secured, including £2.75 million under UK CBILS and €0.3 million in Germany under a similar scheme, and £0.3 million trade purchases loan facility.
· Additional £1.5 million loan secured with Midlands Engine Investment Fund (MEIF)
· Neptune pipeline remained strong at £35 million with £8.0 million of Neptune parts already in production and additional new orders won, but not yet in production.
· PPE products were a feature in H2, generating £1.2 million revenues in H2.
· Germany continued to win new business in automotive and flooring. Revenues increased to £4.6 million (FY19 £4.3 million) with EBITDA strongly ahead at £0.4 million (FY19 £0.1 million).
1: Adjusted Gross Profit excludes £0.2 million exceptional inventory impairment and a further £0.3 million of Exceptional restructuring costs are excluded from EBITDA (FY19: £0.4 million). The adoption of IFRS16 in FY20 has improved EBITDA by £1.0 million.
2: The adoption of IFRS16 has improved the reported Cash from Operations by £0.76 million.
3: Adjusted Operating Loss excludes all exceptional costs as per note 1 above, and amortisation relating to acquired intangible assets recognised as a result of the Group’s conversion to IFRS at IPO of £0.2 million in both years.
4: Net debt is cash less bank overdrafts, invoice discounting, hire purchase finance and excluding IFRS16 calculated lease liabilities.
Gareth Kaminski-Cook, Autins Group Chief Executive, said:
“Despite the unprecedented challenges faced this year we have still delivered on many of the performance targets we set ourselves a year ago. Although our financial performance has been impacted by these challenges, this really was a year of two halves: with H1 trending on track to meet our full year expectations in the core auto business; and H2 proving that Autins has the agility to adapt to sudden changes in the macro-economy and rapidly make significant operational and financial adjustments which included securing government support funds.
“The strategy, therefore, does not change. We will leverage Neptune to win market share in automotive, leverage our acoustic and thermal expertise to accelerate growth in non-auto markets and drive down our operational costs.”
“I am proud of the leadership and business agility that the Group has shown to navigate through the past few months. From a low point in April, when there were widespread plant shutdowns throughout our core customer base, we have seen recovering sales demand in the final quarter.”
Our Key Strengths
· Specialist market applications;
· Market-leading performance materials;
· Increasing OEM & Tier approvals;
· Established European manufacturing and technical support;
· Proven expertise in NVH consultancy;
· Focused NVH specialist supplier; and
· Acoustic and thermal problem solver.
2020 has been unprecedented. The global Covid-19 pandemic has significantly affected all geographies of our operations in a way that was unimaginable as we began the financial year. I must begin this review with a sincere “thank you” to all Autins’ staff who have collectively reacted so well to events and helped to mitigate the consequences of the pandemic on the business. Our staff have shown critical, key qualities in the past few months. I have seen decisive leadership across the Group, enhanced communication (despite workspace restrictions), a willingness to adapt to change and great resilience (especially from our many staff who had the uncertainty of being on furlough). Adversity shines a spotlight on the true calibre of an organisation. I am truly grateful to all our staff for their understanding, co-operation, support, patience and ingenuity over the past months. We have a great team at Autins and that bodes well for our future!
In January 2020, we welcomed Kamran Munir to the Group as Chief Financial Officer. Kamran has provided additional expertise at cost control and operational financial management. He has already proved to be a valuable addition to the executive team, ensuring heightened financial discipline and securing additional liquidity during the year.
In light of market conditions, the Board unanimously agreed to take a 20% reduction in salary for the second half of the year both to conserve cash and to align itself with our wider workforce. At the peak, we had over 90% of employees across the Group on furlough.
Group sales for the year were £21.5million, 20% down on FY19. This was the result of extended and unforeseen shutdowns at the production plants of our key OEM automotive customers from the end of March, as a consequence of the global Covid pandemic. However, sales did start to recover in the final quarter of the year, although they remained below pre-Covid expectations.
Our German subsidiary continued to gather momentum during the period with overall sales of £4.6 million (2019: £4.3 million). This represents a very strong performance in light of the market conditions exceeding prior year for both revenue and EBITDA.
Our focus on operational and working capital improvement continued throughout the period in difficult circumstances. This was evidenced by our adjusted gross margin remaining consistent at 28.0% (FY19: 27.9%) despite lower volumes and a disrupted operating pattern. This resulted in reported EBITDA of £1.1 million (2019 £nil), primarily reflecting the impact of the adoption of IFRS 16, and enabled the Group to report £1.5 million of operating cash inflow for the year.
The operating loss for the Group was £1.3 million for the year (FY19: loss £1.6 million).
The Board has continued to focus on increasing the Group’s liquidity and cash balances during the year. In January, we agreed a £1.5 million Midlands Engine Investment Fund loan which has been fully drawn down. In addition, by July, the Group secured CBILS (or other territory equivalents) loans of £3.0 million. These loans have significantly improved the Group’s liquidity and working capital position.
Despite the uncertainty created from the Covid pandemic, our overall strategy remains intact. We remain committed to becoming a leading noise, vibration and harshness (‘NVH’) specialist to European automotive markets, focusing on the new NVH challenges arising from the move to electric and hybrid vehicles. Our proprietary Neptune, melt-blown material continues to provide opportunities to supply new customers due to its specific acoustic and thermal performance and its lighter weight. In the year, we have increased the number of Neptune material and component customers by 45% to 42, with 27 in UK, 11 in Germany and 4 in Sweden.
We also continue to focus on diversifying our NVH expertise to non-automotive markets. We were successful in the year in securing supply of our flooring products to Unilin and IVC, subsidiaries of the world’s largest manufacturer, Mohawk. Our initiatives to accelerate non-automotive sales were interrupted by market conditions in the mid-part of the year, but increased in momentum towards the end of the year.
We have reviewed our Environmental, Social and Governance framework during the year and are committed to the strategic importance of continuous improvement in these areas. We have introduced further effective measurement to challenge ourselves to minimise the environmental impact of our business.
The Board is committed to robust corporate governance and risk management to ensure the delivery of our strategic ambitions and the financial health of the Group. We apply the Quoted Companies Alliance Corporate Governance Code (the ‘QCA Code’).
The Board undertook an annual review of performance in September. This was a useful exercise to understand how the Board can further develop as a team and highlight areas of governance that can be improved to assist the Group to manage its risks and adapt to change.
In light of the impact that the Covid pandemic has had on this year’s performance, no final dividend is proposed.
The Board will continue to monitor net earnings, gearing levels and expected capital requirements with a view to reinstating its progressive dividend policy at the appropriate time.
The Group will continue to focus on operational improvement, cash conservation, sales growth and diversification of customers and markets. Notwithstanding the ongoing uncertainty surrounding Covid, the Group has improved its liquidity position and the Board anticipates recovery in sales volumes and profitability for the Group from FY20 levels, due to the full year effect of new customer wins and continued strategic progression and a reduced negative impact from the Covid pandemic. However, there remains a heightened level of forward-looking risk until there is more certainty of the impact of the ongoing effects of the Covid pandemic, with scope for further lockdowns, and the transitional effects of the recently announced Brexit deal.
Given the continued uncertainty relating to the impact of the ongoing COVID pandemic on the automotive sector at the current time, the Board considers that it is prudent to continue the suspension of guidance to the market.