Autins Group Q&A: Substantial additional new revenue for the business (LON:AUTG)

Autins Group plc (LON:AUTG) Chief Executive Officer Gareth Kaminski-Cook caught up with DirectorsTalk for an exclusive interview to discuss interim results, operational and financial performance, activities since period end and pipeline going forward.

Q1: Autins Group recently published interim results for the six month period ended 31st of March. Gareth, can you talk us through the financial summary?

A1: I think overall,  the summary is that we’ve just continued the trend of the previous three half-year results that we had, so that’s from a quite poor set of results a couple of years ago we’ve continued to improve every single half.

In this half, we finished with around 29% gross margin and a plus £700,000 EBITDA and if you look at the two quarters in Q1, we generated around plus £90,000 on the EBIT and in the second quarter, it was £500,000 better than that as we were seeing consistent margins for January, February, and March well above 30%.

Q2: How did the company perform operationally?

A2: If I answer that maybe under two headings so financially and commercially.

So, commercially, it was going very well through till the end of March when, as you know, obviously COVID hit, we’d landed 9 new orders, most of those across automotive. We very happily won our first orders into an Audi group with another supply of our unique Neptune material and technology into an electric vehicle which is a real consistent trend where we’re winning a lot of electric vehicles, which is the future for vehicles. We also won our first major project into the Mini, into the BMW group, Mini in UK, which has been worked on for a number of years so we’re delighted with that.

In addition, we won our first contract supplying Neptune into a commercial vehicle company and also into another office pod manufacturer where they want acoustic efficient walls in the office pods and that’s part of our diversification of our customer and market base.

So that’s been very well in terms of the commercial side and the winds and and our pipeline is currently about £40 million and our conversion rate of the projects that do get awarded is well over 50% so that really bodes well for the future growth of the business. Of course, off the improved your margin, gross margin in the business, and the improved cost base and overhead of the business, then that bodes very well for the future.

Financially, there was no significant increment because we had a target to improve the overheads this year by £2 million and at the end of March, we were about 85% achieved on that and that’s coming from a number of areas. About 35% of that’s from head count reduction, mostly across factory and operations and that’s just operational efficiency on the lines, about 20% of that coming from purchasing of materials usage and then 14% from general operational expenses with another 17% from general overheads. So, the improved margin is then flowing through to the bottom line because you’ve got a much better overhead cost space as well.

So, commercially, and financially, it was actually a really good half for us, it’s just a shame that we then entered COVID and we had different challenges to deal with.

Q3: Since the period end, is there anything else that we should note?

A3: Well actually, quite a lot. The first thing we did of course, like any other manufacturers supplying primarily into automotive, we had to shut down the factories so it was all about cash control. I think the main thing on the minds of all stakeholders in our business, particularly shareholders was what was the financial strength and how quickly where we going to burn cash.

So, we’ve done very well in the period because we accessed all furlough schemes in all countries were in; UK, Germany and Sweden, deferred payments and building rents and all of that very, very quickly and that gave us an extended runway. As of yesterday, we have announced to the city that we have secured £3.05 million of CBILS and financing support, which was supported by HSBC.

So, financially there was an awful lot to do to make sure that we secured the future of the business, and we have done and so when we’re well set for at least 18 months if the market returns, which it obviously will.

Commercially in the business, automotive in half-year has done recover, in UK that’s 30% and it’s moving to 50% this month, it’s been 30% last month and 50% this month with Sweden similar. Germany, which released the lockdown four weeks earlier is already at 80% so we’d expect that we won’t be at pre-COVID level before the end of the financial year, but we do expect to be about at above 80% by September on the core market. The better cost base that we’ve got, that does mean that we’d expect to be generating cash as we get into the last calendar quarter of this year.

We have won some business, post-March. So, in the flooring business in Germany, we secured a multi-year contract of €1.8 million to the world’s largest flooring manufacturer, which will double the flooring business we have and helps diversification. It also will also circa double the profit that we generate out of the German business as well so that’s really transformational we’re delighted with that.

But we shut the factories down, we’ve got designers, we’ve got engineers, we’ve got a lot of equipment and we’ve got pretty strong entrepreneurial spirit in the business and at the end of March, we said, what are we going to do to use all the capability we’ve got in front of this terrible crisis that the UK and the world is facing.

Within a period of four weeks, we had designed, developed and launched a range of PPE facemasks and parts for face visors and in the last eight weeks, we’ve generated close to £500,000 of turnover in that line of business, which clearly helps the UK during the crisis, and also is substantial additional new revenue for the business as well, which we expect to continue growing, um, and will become an important part of our business in the future as part of the UK onshore PPE supply.

So, it’s been a really difficult period but actually it may be part of transforming our business as we go into the future.

Q4: Just looking at the pipeline, is there anything else that we should be looking out for news-wise over the coming months from Autins Group?

A4: There are an awful lot of projects that were delayed in terms of being awarded by companies, particularly in the automotive, that have been postponed that we expected to be awarded from January. So as confidence comes back, we would expect those projects to be awarded and and we hope to have our fair share in those.

So, the base business that we’ve got, we’ve never actually lost business that we’ve won so everything we win is additive, it’s just the market has clearly declined in automotive over the last 18 months. As it starts to recover all the new wins that we have got will contribute to accelerated growth and that will be easier for us to then recover higher profits and profitability off that turnover.

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