REG - Autins Group PLC - Full Year Results
31/01/2023 07:00
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RNS Number : 3239O Autins Group PLC 31 January 2023
31 January 2023
Autins Group plc
(the "Company" or the "Group")
Full Year Results
Autins Group plc (AIM: 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, announces its results for
the financial year ended 30 September 2022 ("FY22").
Financial Overview
§ Revenue decreased by 19.5% to £18.9 million (FY21: £23.4 million)
§ Gross profit decreased by 33% to £4.2 million (FY21: £6.3 million)
§ Reported EBITDA decreased with a loss of £1.2 million (FY21: EBITDA
profit of £1.1 million)
§ Cash outflow from operations with a loss of £0.5 million (FY21:
£1.0 million inflow)
§ Operating loss increased to £3.0 million (FY21: loss of £0.7
million)
§ Reported loss after tax increased to £3.3 million (FY21: loss of
£1.1 million)
§ Loss per share increased to 6.34 pence (FY21: loss of 2.74 pence)
§ Adjusted net debt(1) reduced to £2.0 million (FY21: £2.7 million)
FY22 Operational Highlights
§ The revenue reduction reflected ongoing supply chain issues in the
automotive industry primarily related to global semiconductor shortages.
§ Neptune sales remained stable at £7.1 million (FY21: £7.1
million). Flooring sales were lower at £3.4 million for the year (FY21: £4.7
million), caused by the exclusion of initial launch stock sales that
benefitted FY21 and a softening of construction markets.
§ Gross margin reduced to 22.4% (FY21: 27.0%). The onset of the Ukraine
war and global economic factors affected energy, material and transport
prices. Labour rates were also impacted, albeit operational and productivity
improvements partially offset this.
§ UK EBITDA reduced in line with sales. Germany continued to generate
a positive EBITDA of £0.3 million (FY21 £0.9 million) despite seeing a
downturn in sales at £6.6 million (FY21 £7.5 million). Sweden EBITDA
remained consistent at £0.2 million.
§ Cashflow primarily reflected the trading loss, being partially
offset by R&D tax credit claims, with largely neutral working capital
movements.
§ Net Debt 1 (#_ftn1) decreased due to a placing of new shares in
December 2021 that raised £3.0 million (gross) and which offset cash
absorption during the year.
Post Period Review
§ The Group has taken and secured significant profit and cashflow
improvement actions since the reporting date. These include contractual
improvements which improve customer pricing, materials purchasing, further
headcount restructuring and other cost downs. In isolation, the cumulative
impact of these improvements would be to reduce the annualised run rate of net
losses by in excess of £2.5m (although there are other factors which may
impact on the Group's overall performance in the current year, perhaps
materially so). Nonetheless, FY23 Q1 actual performance shows an unaudited
EBITDA of £0.1m positive, being a marked improvement over FY22.
§ The Board are pleased to report that further support from both of the
Group's lenders, in the form of further payment deferments until at least July
2023, and covenant waivers until March 2024 have been confirmed.
1. Cash less bank overdrafts, invoice discounting and hire purchase finance,
excluding IFRS16 lease liabilities.
Gareth Kaminski-Cook, Chief Executive, said:
"This was a difficult year for everyone supplying the automotive industry.
Semi-conductor challenges, the war in Ukraine and cost inflation all
contributed to lower demand and a squeeze on margins. However, since year-end
we have secured price increases and cost restructuring that have returned the
business to a small EBITDA profit for Q1.
"We will continue to diversify the business by leveraging the superior
properties of Neptune and our two new 100% recyclable solutions for the EV
market, Neptune-R and Silentshell. With ongoing support from shareholders,
underlying improvements in our operating costs and innovative new products, we
look forward with confidence to capturing the benefits of a future market
recovery."
For further information please contact:
Autins Group plc
Gareth Kaminski-Cook, Chief Executive Via SEC Newgate
Kamran Munir, CFO
Singer Capital Markets Tel: 020 7496 3000
(Nominated Adviser and Broker)
Sandy Fraser / Asha Chotai
SEC Newgate Tel: 020 7653 9850
(Financial PR)
Bob Huxford
Max Richardson
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.
Chairman's Statement
Overview
FY22 has been a very challenging period which has seen the Group incur
increased operating losses. We have worked tirelessly to adjust our
operating model to provide long term sustainability and ensure that we are
well placed to benefit from a future recovery of the European automotive
market.
The trading environment for Autins in FY22 has been very difficult and
disrupted. Automotive production continued to be constrained by the global
shortage of semi-conductors. It had been anticipated that supply of
semi-conductors would improve in the second half of 2022, but supply
constraints remained, resulting in reduced production throughout the period at
our key customers. However, end-user demand has remained strong with OEMs
reporting good order books.
In H2 FY22, our markets have also been subjected to high inflationary
pressures both for raw materials and labour. We have responded by taking
significant restructuring actions in the UK and have agreed commercial
arrangements with the majority of our customers shortly after our year end,
which has positively impacted gross margins and EBITDA.
Financial performance
Group sales in the second half of the year were £9.5m, 3% down on the
equivalent prior year period (H2 21: £9.7m). Overall Group sales for FY22
were down 19.5% to £18.9m (FY21: £23.4m).
Automotive component sales in the UK continued to be negatively affected by
semi-conductor shortages reducing the output of key OEM customers. In
Germany, there was growth in automotive component sales as a result of new
business wins, but overall sales reduced to £6.6m (FY21: £7.5m) due to a
reduction in flooring sales. Sales in Sweden were broadly equivalent year on
year.
Gross margin reduced to 22.4% (FY21: 27.0%). Gross margin was impacted
partially by increased operational inefficiencies due to lower customer
volumes at short notice but mainly, in the second half of the year, by
increases in raw material and staff costs that could not immediately be
recovered by price increases. However, as mentioned above, actions concluded
after the year end have now improved gross margins.
The operating loss for the Group was £3.0m (FY 21: loss of £0.7m).
Net debt (excluding IFRS 16 debt) decreased to £2.0m (FY21: £2.7m) and cash
and cash equivalents increased to £1.8m (FY21: £1.2m). This is due to a
placing of new shares in December 2021 that raised £3.0m (gross) and which
offset cash absorption during the year.
Post year end, the Group has also negotiated waivers of its banking covenants
to March 2024 and further deferrals of capital payments until at least July
2023.
People
Our staff have yet again been fantastic. Their commitment and resilience
during this difficult trading period has been inspiring and I would like to
personally thank them all for their hard work during the year.
We are committed to remaining a competitive employer and have responded to
changing requirements in our local labour markets, particularly at the lower
pay levels, to ensure we retain talent, reward loyalty and maintain motivation
in our staff. Our senior management team continue to actively engage with
our entire workforce to ensure that we live our corporate "One Team" value.
When we have had to react to market conditions, we have tried to do so fairly
and respectfully.
There were no salary increases for the Board in the year, reflecting the
operational cost control that we have had to deliver throughout the business.
Environmental, Social and Governance
Our commitment and investment to lower the environmental impact of our
products has continued in FY22. We have developed two fully recyclable NVH
products: Silentshell® (an encapsulation solution for electric vehicles) was
launched in 2022; and, Neptune-R (a fully recyclable version of our Neptune
material which delivers substantially the same levels of acoustic benefit as
our existing Neptune product) will be launched in the new financial year.
These are major milestones for the Group and will support our customers' need
to meet their environmental objectives.
We have made great progress in reducing our carbon footprint post year end.
We have changed our energy provision for our German and UK operations to 100%
renewable sources. This is forecast to reduce our carbon footprint by more
than 80% in FY23 and beyond. This complements the environmentally friendly
energy sourcing that was already in place for our Swedish operations.
The Board remains 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 continues to operate with only two independent
non-executive directors. We consider this appropriate in the short term and
in keeping with the cost mitigation measures that have been applied to all
staffing costs in the year.
Neil MacDonald has informed the Board that he intends to step down from the
Board as soon as an appropriate successor is identified and in post. We have
initiated a process to find Neil's replacement and I would very much like to
thank Neil for his considered contributions at our Board meetings over the
past few years.
We also remain committed to increasing the number of independent non-executive
directors on the Board as soon as appropriate in the recovery cycle.
Dividend
No final dividend is proposed.
The Board will continue to monitor net earnings, gearing levels and expected
capital requirements with a view to reinstating a progressive dividend policy
at the appropriate time.
Outlook
The restructuring measures and commercial agreements implemented after the
year end have had an immediate, positive effect and stemmed the operating
losses that the Group incurred in FY22. In Q1 FY23, the Group delivered a
small unaudited EBITDA profit of £0.1m, which is a marked improvement on
FY22.
However, trading conditions continue to be difficult. Automotive sales will
remain subdued due to the continuing impact of a constrained supply of
semi-conductors globally. Demand in our non-automotive markets has slowed due
to recessionary pressures.
As a Group, we continue to invest in new product development and look forward
to the positive impact that our new recyclable products will have on our
business. Retail demand for cars remains good and we expect a positive
recovery in automotive sales once the supply issues for semi-conductors are
resolved. The Board believes that the improved operating position of the
Group provides a platform to benefit from sales growth in the medium term.
Adam Attwood
Chairman
Chief Executive Officer's Review
Our materials and solutions contribute to a quieter, safer, cleaner and more
energy-efficient world.
Autins is an industry-leading designer, manufacturer and supplier of acoustic
and thermal management solutions. We apply our expertise in material
technologies to solve complex and challenging problems to create better and
more comfortable environments in a range of industry applications including
automotive, flooring, workspace solutions and commercial vehicles. We
manufacture a range of technical materials, including our own patented
material, Neptune, in our facilities in the UK, Germany and Sweden, making us
a local European partner.
Challenging market conditions reduced demand and drove inflationary cost
pressures
The supply chain challenges and semi-conductor shortages which emanated from
the Covid crisis only worsened during this financial year. Predictions for
improved semi-conductor availability in H2 22 did not materialise and the
Ukraine war put additional pressure on supply chains into the automotive
sector and created a global energy crisis with associated significant energy
cost inflation.
As a result, Group sales reduced by 19.5% to £18.9m. Combined with higher
input cost inflation on labour, transport, materials and energy, this drove
down margins and resulted in an EBITDA loss of £1.2m compared with a £1.1m
profit the previous year.
Anticipating a difficult year, we approached shareholders during the first
quarter and successfully gained support for an equity raise of £3m (gross) to
support the business.
In addition, we have fought all year for price increases with mixed results
until shortly after our year end when most of our customer base accepted
sensible revisions. Post year end we continue to pursue additional increases
with some more success recorded.
In late summer 2022, OEMs advised that market recovery would be unlikely to
happen until the end of next year, spurring us to implement additional
overhead cost reduction actions.
The combined impact of the pricing, contract and restructuring actions
described will contribute significant improvements to performance in 2023.
Germany and our Neptune technology outperform the automotive markets
It is worth noting that our Germany auto sales growth of 13%, driven by new
wins, has outperformed the German auto market which, according to the European
Automobile Manufacturers' Association (ACEA), declined 7% this year. Neptune
sales were stable year on year and so performed relatively well as new project
wins came to fruition especially on electric platforms.
Sales from the European operations were 40% of the Group turnover of which
flooring accounted for half.
A modest number of automotive wins with new customers have been achieved
throughout the year which will contribute to revenue in 2023.
Demand for NVH solutions forecast to grow
Whilst the modest improvement in car sales next year of 7% across Europe and
8% in UK will be a very welcome reversal of sales trends, the increasing
demand for more NVH solutions in cars is most relevant to the future fortunes
of Autins. Fortune Business insights estimates, consistent with other
sources, growth in NVH demand to be in the region of a 6% CAGR until 2028.
As we see car ownership models change, the emergence of autonomous solutions
and growth of low-emission drive trains will present an even greater emphasis
on the user experience within the vehicle. Concepts show us cabins that are
becoming workspaces, areas of entertainment or even rest. To this end the user
experience will shift from an operator of a vehicle to that of a passenger or
consumer of technology. So, the focus is moving to refine the vehicle for the
consumer. At Autins, we are focused on products that will allow this
refinement from day one and ensure that as the industry moves forward, we
offer best in class solutions to meet the NVH requirements of the OEMs and in
so doing our offering is becoming ever more relevant to the future car market.
Commitment to develop 100% recyclable solutions and to reduce our carbon
footprint
Last year, I described how we "intend to be at the forefront of developing
solutions" to meet the trend to electric vehicles and environmentally friendly
products. We are now seeing a greater and more consistent desire by our
customers to have "greener" products and suppliers that take ESG seriously and
so I am delighted to advise that we have developed two 100% recyclable
solutions.
"Silentshell" is a 100% recycled encapsulation product, designed to contain
noise and heat at source for numerous application areas in electric
vehicles. It is already released and is being evaluated by European
automotive customers.
The second development is Neptune-R, a 100% recyclable version of Neptune
which offers essentially the same levels of performance and will be launched
in early 2023.
I am also pleased to confirm that at year end we have converted all energy
sourcing to renewable sources which, compared to the previous year, is
forecast to improve our daily carbon footprint of the Group by 84% in FY23.
Looking forward
The Autins team have again shown tremendous resilience and determination to
achieve price increases in the toughest circumstances, maintain all existing
contracts and customers, whilst also retaining all key staff during sensitive
restructuring actions.
We will continue to diversify the business by leveraging the superior
properties of Neptune and our new product developments, Neptune-R and
Silentshell.
With the support from shareholders, underlying improvements in our operating
costs and innovative new products, we are able to look forward with confidence
to capture the benefits of a future market recovery.
Gareth Kaminski-Cook
Chief Executive Officer
Financial Review
Rebuilding the future business platform against challenging global
fundamentals
Overview
Revenues decreased by 19.5% to £18.9m year on year as automotive sector
supply disruption worsened. EBITDA decreased in line with sales to a loss of
£1.2 million for FY22. The Ukraine war and global economic dynamics added
inflationary pressure to input costs, mainly in the areas of materials, energy
and labour. This in turn further eroded profitability and cashflow in H2 FY22,
despite Group revenues being marginally higher than H1 FY22. Furlough claims
had effectively ceased in FY22 being £0.02m, compared with FY21 at £0.65m.
The equity placing in December 2021 improved net debt to £2.0m at the year
end, which was lower than the FY21 closing value of £2.7m. There was only a
small repayment of debt during FY22 because repayment waivers were in effect
for most of the year. Group cash headroom at the end of FY22, including the
undrawn invoice finance facility, was £3.7m.
A number of restructuring and profit improvement actions were planned and
commenced during H2 FY22 and were substantively completed post year end. This
includes workforce restructuring, cost reduction, including material
improvements, and contractual improvements, including price increases. A
banked hours system has been running since October 2021 to help optimise
labour efficiency and worker pay stability despite demand volatility. This has
proven to be successful, and its use has been extended to help cover customer
shutdown periods. The combined impact of completed actions has an annualised
improvement run rate profitability in excess of £2.5m (before considering
other material factors that may impact the Group's overall performance in
FY23, perhaps materially so), and this has improved post year end trading
significantly.
Although Groupwide sales do remain narrowly behind internal forecasts, gross
profit, cost management, EBITDA and cashflow performance are in line with
forecasts reviewed with our two major lenders. FY23 Q1 EBITDA, prepared on a
consistent basis, was a small profit of £0.1m. Cash headroom reduced slightly
to £3.5m at the end of December 2022 (September 2022: £3.7m) reflecting the
near breakeven EBITDA and some minimal capital expenditure in equipment
intended to improve operating performance. The Group continues to hold
strategic buffer stocks to help guard against supply disruption and also
smooth factory production against short term demand call off volatility. Post
year end, we have obtained further banking support from both of our major
lenders, with covenant waivers extended until March 2024 and capital payment
deferments extended until at least July 2023.
Revenue
Automotive revenues remained disrupted throughout FY22, with the UK and Sweden
being the most impacted. In the UK, although month to month volatility
remained prevalent, the rolling 3 month average remained at around £1m per
month, except for the month of September 2022 where there was a sharp
unexpected shortfall in semiconductor supply at a key customer. As noted
above, there has been some revenue improvement and stability since the year
end. During the year tooling revenues also declined in line with OEM new
product activity. UK non-automotive revenues, mainly in office pods, also
began to level off despite some initial promise as customers re-thought their
home and office working patterns following the pandemic restriction changes.
Sweden revenues remained consistent at £1.1m (FY21: £1.1m), with some new
product wins offsetting some declining products. Germany continued to see
contract growth in its automotive business at £3.2m (FY21: £2.8m). Flooring
revenues in Germany reduced to £3.4m (FY21: £4.7m), albeit some of this
reflected less requirement for launch stocks.
Underlying Neptune production and revenues remained stable. UK external sales
were lower in line with general market trends, however new customer wins in
Germany meant that overall volumes slightly increased, with external sales
values at component level forming an increased proportion of total Group
revenues.
Gross margin
Automotive margins declined across the Group to 22.4% (FY21: 27.0%). This was
the net result of a combination of factors including long term competitive and
fixed pricing within automotive contracts, against a backdrop of adverse cost
inflation. Materials, inbound transport and energy costs were impacted by
prevailing global economic factors. This had knock-on consequences for labour
rates at a time when the labour market was already tight given the general
reduction in worker availability after Brexit. Volume reductions further
exacerbated this by reducing the absorption of fixed production overheads,
albeit there was very limited partial offset from continuous operational
efficiency actions, including those in Neptune manufacturing processes.
UK Automotive margins declined by an average of 6.4% in FY22 from the combined
impact of low volumes and input costs continually increasing over the
financial year. As noted above, furlough was significant in FY21 at £0.65m,
which equated to 5.8% of gross margin for the UK. Labour productivity
improvements and the use of a flexible banked hours labour management approach
did have a favourable impact and largely offset labour rate increases. Sweden
managed to successfully maintain gross margin, despite volume reductions,
through ongoing cost reduction initiatives.
German automotive sales increased 13% despite tough industry conditions,
driven by overall contract growth. However, the new contracts were predicated
on aggressive fixed pricing, which diluted margins in favour of higher total
gross profit. Increased input costs further worsened this position. Gross
margins on German flooring applications are consistent with mainstream
automotive margins. However, given that the follow-on costs are primarily
sales commissions with very few additional operational costs to serve, the net
EBITDA margins from flooring remain significantly additive.
During the year, the Group initiated a number of price and contractual
improvement actions, and post year end had made significant progress (as noted
above), with further discussions ongoing. Combined with further materials
improvements and restructuring actions this improved gross margins by c.7% in
Q1 FY23, making them closer to pre-pandemic levels. This has been pivotal in
rebuilding the trading platform for the future.
EBITDA and operating profit
FY22 EBITDA fell significantly to a loss of £1.2 million (FY21: EBITDA profit
£1.1 million). EBITDA is stated on a consistent IFRS16 basis. The reported
statutory operating loss was £3.0million (FY21: operating loss of £0.7
million), representing a worsening of £2.3 million. A detailed review of
fixed assets in the prevailing economic and lower volume trading environment
resulted in £0.2m of additional depreciation being charged against plant and
machinery.
UK EBITDA decreased to a loss of £1.7m (FY21: £0.0m). Germany EBITDA was
£0.3 million profit (FY21: £0.9 million). Sweden revenues were consistent
with the prior year and yielded a consistent EBITDA of £0.2 million profit
(FY21: £0.2 million). These stated measures exclude the impact of management
recharges into Europe and apply Group plc costs entirely against the UK
entities only, this is consistent with prior years.
As noted above there was a significant reduction in UK furlough income. There
were no other significant financial support grants during the year, except a
modest contribution of £0.02m to energy saving LED lighting (FY21: £nil).
The Board acknowledges that these are alternative measures of performance and
are not GAAP (nor are they intended to be) but are used to help illustrate
underlying business performance and are informative to users of the accounts.
Exceptional items and prior year adjustment
There were no exceptional costs charged in FY22 (FY21: £nil). To be
consistent with analysts' measure of the Group's performance, amortisation of
£0.2 million (FY21: £0.2 million) in relation to acquired intangible assets
recognised as a result of the Group's conversion to IFRS at IPO (having
previously been held as non-amortising goodwill) should be excluded to provide
an adjusted operating profit. Accordingly, the adjusted operating loss,
allowing such amortisation, would be £2.8 million (FY21: loss £0.5 million).
During the year, a detailed review of intercompany account reconciliations
stemming back several years was conducted by the company. This has led to some
of the historic balances being written off, including a prior year adjustment
as per note 5.
Joint venture
The Group's joint venture, Indica Automotive, is an acoustic foam conversion
business based in Northampton that supplies components into the Group's UK
operations (who remain the largest customer) as well as its own automotive
customer base. The joint venture continues to leverage access to lower cost
material and finished component sources provided by its other parent, Indica
Industries PV based in India.
Indica Automotive's turnover decreased by 29% to £1.7 million (FY21: £2.4
million), given an equivalent impact on them from semiconductor supply
constraints reducing their end customer demand. Further margin and overhead
cost control actions were taken by management, albeit sales overheads were
increased to expand the sales organisation for future growth; and new
contracts were won which helped offset the base contract reductions. The
EBITDA for the year was a loss of £0.04m (FY21: EBITDA profit of £0.23m).
Currency
The Group's overseas operations and certain key raw material suppliers require
the Group to trade in currencies other than Sterling, its base currency.
During the year, operational transactions were conducted in US Dollar, Swedish
Krona and Euro and the retranslation of the results of the German and Swedish
operations were affected by currency fluctuations. The key raw materials for
Neptune production are currently imported from South Korea with transactions
conducted in US Dollars. The Group has taken steps to mitigate this risk by
establishing alternative sources for non-patented product which could then
also be transacted in alternative currencies. The Group also has Euro based
purchases for materials and production, including equipment. As Euro sales
continued to proportionately increase from our German business, this allowed
us to self manage relative balances in British Pounds, Euros and US Dollars.
The Group continues to benefit from natural hedging, arising from its
structure and trading balances, which means that the Group's result in both
FY22 and FY21 has only been impacted in a limited way as a result of currency
translations.
The Group held no forward currency contracting arrangements at either
year-end. Transactions of a speculative nature are, and will continue to be,
prohibited. As Neptune grows management will continue to monitor the Group's
US Dollar exposure and its impact on the Group's results. Where the frequency
and quantum of purchases can support active currency management, we will
consider implementing a formal hedging strategy.
Net finance expense
The finance expense remained consistent at £0.5 million (FY21: £0.5
million), and under IFRS 16 includes £0.3 million of financing charges
derived primarily from property rental expenses. Bank interest at £0.2
million (FY21: £0.2 million) is derived almost entirely from the CBILS and
MEIF term loans. The Group's MEIF term loan is at a coupon rate of 7.5% and
remained fully drawn during FY22, with no capital repayments having been made
under agreed extension terms. The CBILS 6 year term loan had a balance of
£1.9 million outstanding at 30 September 2022 (FY21: £2.0 million), and was
converted to a fixed interest rate of 4.69% with effect from 8(th) October
2022 (FY21: 3.99% above base rate).
The primary UK invoice financing facility was largely undrawn during FY22. Our
strategy to optimise working capital, includes special focus on debtor
collections coupled with maintaining a timely payment cycle to trade
creditors. Inventory continued to be rationalised where possible; however, the
investment in c.£0.5 million of strategic buffer stocks continues primarily
for Far East raw materials supplies and some finished goods buffer stocks to
satisfy short cycle customer demand. Sweden periodically used its modest
overdraft facilities during FY22, ending the year with no borrowings (FY21:
£0.02 million). Our key Far East suppliers continued to extend direct open
credit to the Group throughout FY22, and so trade finance was not required.
Car and equipment finance leases further reduced in FY22, as payments were
made to term agreements with no renewals, which reduced interest costs
slightly to £0.02 million (FY21: £0.02 million).
An analysis of the net finance expense is presented in note 3.
Taxation
The effective tax rate in the year was below that expected based on current UK
corporation tax levels. Given the quantum of losses compared to expected
profitability in the next two years, the Group has not recognised the majority
of current year losses as a deferred tax asset. The balance sheet asset has
been reviewed and, although considered to be supportable based on the Group's
expected future trading, has been adjusted to £zero for prudence.
The Group's technical and R&D teams have, as in prior years, continued to
enhance materials applications, improve processes and develop new products.
The post pandemic automotive industry dynamics and ongoing semiconductor
supply chain disruption mean that significant net losses continue to remain
available. Accordingly, the Group strategy remains to utilise losses to obtain
actual R&D tax credit cash refunds to maximise liquidity. An R&D tax
credit claim will be submitted for FY22 in the usual course. R&D claims
for the years ended September 2019 and September 2020 were submitted in FY21
with initial repayment having been received on time. This latter claim was
resubmitted with an optimised loss position yielding a further £0.25m of cash
refund during FY22. The R&D tax credit claim for FY21 was also submitted
and cash refund received to the value of £0.06m. R&D activities continue
and this, together with recognition and use of available brought forward
losses when profitability increases, will mean that the effective tax rate
will remain below the UK statutory level for the short to medium term with an
unrecognised deferred tax asset of £2.12 million in the UK (FY21: £0.95
million).
The Group's German subsidiary has largely utilised its historical tax losses
during FY22, which may result in a degree of tax at a higher rate on future
profits in Germany, whilst brought forward taxable losses available in Sweden
will, in the short term, at least partially offset their expected trading
profits. The Group has a further £0.06 million (FY21: £0.03 million)
unrecognised tax asset in respect of Swedish tax losses.
Earnings per share
Loss per share was 6.34 pence (FY21: Loss per share 2.74 pence) reflecting the
increased loss in the year. The weighted average number of shares was
51,683,793 in the year (FY20: 39,600,984) allowing for the new issue of
ordinary shares in the December 2021 equity placing. Calculations of earnings
per share and the potential dilution arising from the senior management share
option scheme in future periods are presented in note 4.
Dividends
The Board are not proposing a final dividend for the current year (FY21:
£nil) and no interim dividend was paid (FY21: £nil).
Net debt and working capital
The Group ended the year with net debt of £2.0 million (FY21: £2.7 million)
excluding the IFRS16 calculated lease liabilities of £5.5 million (FY21:
£5.6m) as disclosed in the reconciliation of movements in cash and financing
liabilities below.
No additional borrowing facilities were obtained or utilised during the year.
Of the CBILS loan £0.1 million was repaid during the year with a balance of
£1.9 million outstanding at the year end. Hire Purchase liabilities were
reduced to £0.1 million (FY21: £0.2m). Accordingly, total debt was reduced
by £0.2 million.
The Group has continued to optimise working capital during the year, which has
been described above. Special focus remains on timely collection of trade
debtors and timely payment of trade creditors. Far East purchases are obtained
on open credit terms from the respective suppliers. The Group continues to
hold c.£0.5m of strategic buffer stocks.
Going concern
The Board have concluded, on the basis of current and forecast trading and
related expected cash flows and available sources of finance, that it remains
appropriate to prepare these financial statements on the basis of a going
concern.
As we reported in the prior year annual report and accounts, the Group
completed an equity placing with gross proceeds of £3.0 million (£2.8
million net) in December 2021, primarily with the participation and support of
its existing shareholders. In addition, dual lender support was obtained in
the form of loan repayment deferments until January 2023 and covenant waivers
until March 2023. These related to the outstanding UK CBILS and MEIF term
loans.
Given the challenging trading circumstances experienced in FY22, the Group has
taken a series of actions which in isolation (as noted above) have
significantly improved EBITDA (and so cashflow) in excess of £2.5m per annum.
Having held further discussions and presented updated forward forecasts,
incorporating significantly improved actual performance, the Group has
successfully obtained further banking support confirmations from its two
primary lenders. Covenant waivers are now extended until March 2024, and there
is further easement on the timing of capital repayments until at least July
2023.
As at 27 January 2023, shortly before the reporting date, the prevailing cash
headroom for the Group remained in excess of £3.5 million (January 2022:
£5.0 million, September 2022: £3.7m). This includes undrawn balances on the
UK invoice financing facility, which had in excess of £2.5 million available,
with its operational limit currently agreed at £3.5 million against relevant
trade receivables. Group net debt at the end of FY23 Q1 was £2.7m
(September 2022: £2.0m), and actual Group bank cash was £1.1m (September
2022: £1.8m). Our transactional banking and invoice financing facilities with
our primary lender have an annual review date that is currently in March of
every year. These are critical to our cash headroom position and the Board
expects the facilities to be renewed on near to similar terms.
Whilst Groupwide sales do remain narrowly behind FY23 management forecasts,
margins and costs have been favourable; accordingly EBITDA and cashflow
performance are in line with the forecasts reviewed with both major lenders.
FY23 Q1 actual EBITDA was narrowly positive at £0.1m, representing a
significant improvement over FY22.
In undertaking their assessment of the future prospects for the Group, the
Directors have prepared trading and cash flow forecasts for the period to 31
March 2024 for the purpose of assessing the going concern basis of
preparation, with further forecasts going out to 30 September 2024. These take
into consideration the current and expected future impacts from industry
conditions, reduced customer demand, semiconductor supply recovery timelines,
and also have regard to the committed business and general enquiry levels from
existing customers. The Directors have also considered the impact of current
and future demand levels for new vehicles, the migration to EVs and publicly
available forward looking market information regarding market sizes and
dynamics. These forecasts have been compared, together with considering a
range of material but plausible downside sensitivities, to the available bank
facilities and the related covenant requirements. Notwithstanding the agreed
deferments, the residual loan repayments and interest costs are expected to be
adequately covered by the combination of operating cash generation over the
forecast period and the Group's prevailing liquidity headroom derived from its
currently available facilities. These should accommodate all reasonably
foreseeable cash flow requirements, with further flexibility also available to
reduce operating costs, should the need arise, or flex other payment
structures to manage the cash position.
The most sensitive factor impacting the forecast period, and the continued
availability of the current facilities, is ensuring that liquidity remains
reliably positive for the Group, albeit the Board has set a minimum liquidity
target of £0.4 million. In the next financial year, achievement of this
minimum required UK (and group) liquidity target, without significant further
unplanned cost or efficiency improvements, is predicated on minimum UK revenue
levels (prior to price increases) of £11.0 million in FY23 and £13.4 million
in FY24. These revenue levels compare with UK revenues of £11.8m in FY22,
£14.3 million in FY21, £16.8 million in FY20 and £21.3 million in FY19. New
business continues to be won and, accordingly, the Board are confident that
the sales and liquidity targets can be met.
The Board continues to review the Group's banking and funding arrangements
with a view to ensuring that they remain appropriate for the planned growth
within mainland Europe.
Acquisitions, goodwill and intangible assets
There were no acquisitions made in the year, nor any adjustment to fair values
attributed to previous transactions.
The Board, acknowledging that this is a further year of reported losses and
that the Group's current market capitalisation is currently less than the
Group's net assets, has reviewed the carrying value of goodwill and other
intangible assets held at 30 September 2022 (both existing and generated in
the year) by reference to discounted cashflow forecasts for separately
identifiable cash generating units. These forecasts consider Board approved
budgets, and medium-term IHS industry data where appropriate considering an
assessment of likely future revenue growth.
Having considered the assumptions, headroom and a range of reasonable
sensitivities the Board are able to conclude that the carrying values remain
recoverable.
Capital expenditure
Additions to tangible fixed assets were £0.2 million (FY21: £0.4 million) in
the year with no significant single items acquired. The Group continues to
benefit from investment in equipment in recent years and therefore has
capacity to address current demand levels. Planning for additional investments
designed to improve operational performance is ongoing and the Board expects
expenditure to be incurred on an ongoing basis in FY22 in support of further
operational gains.
Research and development costs of £0.11 million (FY21: £0.03 million) have
been capitalised in the period as the Board considers they meet the Group's
stated policy for recognition of internally generated assets. The costs are
focused on a range of projects designed to further enhance the Group's current
materials and product ranges and improve production capabilities to derive
volume or cost reduction benefits.
Financial risk management
Details of our financial risk management policies are disclosed in the Annual
Report.
Kamran Munir
Chief Financial Officer
Consolidated income statement
For the year ended 30 September 2022 Note
2022 2021
£000 £000
Revenue 1 18,873 23,431
Cost of sales (14,638) (17,103)
Gross profit 4,235 6,328
Other operating income 28 649
Distribution expenses (501) (604)
Administrative expenses (6,746) (7,063)
Operating loss 2 (2,984) (690)
Finance expense 3 (542) (542)
Share of post-tax (loss)/profit of
equity accounted joint ventures (26) 53
Loss before tax (3,552) (1,179)
Tax credit 277 95
(3,275) (1,084)
Loss after tax for the year
Earnings per share for loss attributable to the owners of the parent during
the year
Basic (pence) 4 (6.34)p (2.74)p
Diluted (pence) 4 (6.34)p (2.74)p
All amounts relate to continuing operations.
Consolidated statement of comprehensive income
For the year ended 30 September 2022
2022 2021
£000 £000
Loss after tax for the year (3,275) (1,084)
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Currency translation differences (15) 2
(3,290) (1,082)
Total comprehensive expense for the year
Consolidated statement of financial position
As at 30 September 2022 2022 2021 2020
£000 £000 £000
as adjusted (note 5) as adjusted (note 5)
Non-current assets
Property, plant and equipment 8,949 9,636 10,082
Right-of-use assets 4,549 4,876 5,001
Intangible assets 2,987 3,059 3,322
Investments in equity-accounted
joint ventures 74 120 147
Deferred tax asset - 95 149
Total non-current assets 16,559 17,786 18,701
Current assets
Inventories 2,669 2,433 1,938
Trade and other receivables 3,433 3,630 4,339
Cash and cash equivalents 1,786 1,262 2,974
Total current assets 7,888 7,325 9,251
Total assets 24,447 25,111 27,952
Current liabilities
Trade and other payables 3,358 3,126 3,693
Loans and borrowings 860 719 1,027
Lease liabilities 825 842 917
Total current liabilities 5,043 4,687 5,637
Non-current liabilities
Trade and other payables 105 111 117
Loans and borrowings 2,907 3,248 3,847
Lease liabilities 4,627 4,794 4,970
Deferred tax liability 30 46 74
Total non-current liabilities 7,669 8,199 9,008
Total liabilities 12,712 12,886 14,645
Net assets 11,735 12,225 13,307
Equity attributable to equity
holders of the company
Share capital 1,092 792 792
Share premium account 18,366 15,866 15,866
Other reserves 1,886 1,886 1,886
Currency differences reserve (140) (125) (127)
Profit and loss account (9,469) (6,194) (5,110)
Total equity 11,735 12,225 13,307
Consolidated statement of changes in equity
For the year ended 30 September 2022
Share Cumulative currency
Share
Share premium Other differences Profit and loss account Total
capital account reserves reserve loss equity
£000 £000 £000 £000 £000 £000
Equi
At 30 September 2021 (as adjusted - note 5) 792 15,866 1,886 (125) (6,194) 12,225
Comprehensive income for the year
Loss for the year - - - - (3,275) (3,275)
Other comprehensive income (15) - (15)
- - -
Total comprehensive expense for the year - - - (15) (3,275) (3,290)
Contributions by owners
Shares issued in the year (net of expenses) 300 2,500 - - - 2,800
At 30 September 2022 1,092 18,366 1,886 (140) (9,469) 11,735
Share Cumulative currency
Share
Share premium Other differences Profit and loss account Total
capital account reserves reserve loss equity
£000 £000 £000 £000 £000 £000
Equi
At 30 September 2020 (as adjusted - note 5) 792 15,866 1,886 (127) (5,110) 13,307
Comprehensive income for the year
Loss for the year - - - (1,084) (1,084)
Other comprehensive income - - - 2 - 2
Total comprehensive expense for the year - - - 2 (1,084) (1,082)
At 30 September 2021 (as adjusted - note 5) 792 15,866 1,886 (125) (6,194) 12,225
Consolidated statement of cash flows
For the year ended 30 September 2022
2022 2021
£000 £000
Operating activities
Loss after tax (3,275) (1,084)
Adjustments for:
Income tax (277) (95)
Finance expense 542 542
Non-cash element of other income
Depreciation of property, plant and equipment 884 788
Depreciation of right-of-use assets 831 825
Loss on disposal of tangible fixed assets - 25
Amortisation of intangible assets 163 282
Share of post-tax profit of equity accounted joint ventures 26 (53)
(1,106) 1,230
Decrease in trade and other receivables 261 725
Increase in inventories (236) (515)
Increase/(decrease) in trade and other payables 255 (538)
280 (328)
Cash (used in)/generated from operations (826) 902
Income taxes received/(paid) 291 92
Net cash flows from operating activities (535) 994
Investing activities
Purchase of property, plant and equipment (219) (405)
Purchase of intangible assets (112) (30)
Proceeds from disposal of tangible fixed assets - 8
Dividend received from equity-accounted for joint venture 20 80
Net cash used in investing activities (311) (347)
Financing activities
Interest paid (527) (380)
Proceeds from issue of shares 3,000 -
Share issue expenses paid (200) -
Loan issue expenses paid (3) -
Bank loans repaid (108) (753)
Principal paid on lease liabilities (688) (951)
Hire purchase agreements repaid (87) (108)
Net cash generated from/(used in) financing activities 1,387 (2,192)
Net increase/(decrease) in cash and cash equivalents 541 (1,545)
Cash and cash equivalents at beginning of year 1,238 2,820
Foreign exchange movements 7 (37)
Cash and cash equivalents at end of year 1,786 1,238
2022 2021
£000 £000
Cash and cash equivalents comprise:
Cash balances 1,786 1,262
Bank overdrafts - (24)
1,786 1,238
Reconciliation of movements in net cash/financing liabilities
Year ended 30 September 2022 Opening Cash flows Non-cash movements Closing
£000 £000 £000 £000
Cash and cash equivalents
Cash balances 1,262 517 7 1,786
Bank overdrafts (24) 24 - -
1,238 541 7 1,786
Financing liabilities
Bank loans (3,714) 103 (14) (3,625)
Hire purchase liabilities (229) 87 - (142)
Lease liabilities (5,636) 987 (803) (5,452)
(9,579) 1,176 (816) (9,219)
(8,341) 1,717 (809) (7,433)
Year ended 30 September 2021 Opening Cash flows Non-cash movements Closing
£000 £000 £000 £000
Cash and cash equivalents
Cash balances 2,974 (1,675) (37) 1,262
Bank overdrafts (154) 130 - (24)
2,820 (1,545) (37) 1,238
Financing liabilities
Bank loans (4,383) 753 (84) (3,714)
Hire purchase liabilities (337) 108 - (229)
Lease liabilities (5,887) 1,221 (970) (5,636)
(10,607) 2,082 (1,054) (9,579)
(7,787) 537 (1,091) (8,341)
Material non-cash transactions
Financing liabilities include lease liabilities, primarily in respect of
property leases, following the adoption of IFRS 16 from 1 October 2019.
Additions of £534,000 net of foreign exchange movements of £30,000 are shown
in non-cash movements together with financing charges of £299,000 (2021:
£705,000 of additions net of foreign exchange movements of £5,000 together
with financing charges of £270,000).
Basis of preparation of financial statements
While the financial information included in this annual financial results
announcement has been prepared in accordance with the recognition and
measurement principles of International Accounting Standards in conformity of
the requirements of the Companies Act 2008, this announcement does not contain
sufficient information to comply therewith.
The financial information set out above does not constitute the Company's
statutory accounts for the years ended 30 September 2022 or 2021 but is
derived from those accounts. Statutory accounts for the year ended 30
September 2021 have been delivered to the Registrar of Companies and those for
the year ended 30 September 2022 will be delivered following the Company's
annual general meeting.
The auditors have reported on those accounts; their reports were unqualified
and did not include references to any matters to which the auditors drew
attention by way of emphasis without qualifying their reports.
Their reports for the year end 30 September 2022 and 30 September 2021 did not
contain statements under s498 (2) or (3) of the Companies Act 2006.
The consolidated financial statements
are drawn up in sterling, the functional currency of Autins Group
plc. The level of rounding for the financial statements is the nearest thousand
pounds.
Changes in accounting policies
These financial statements have been prepared in accordance with International
Accounting Standards in conformity with the requirements of the Companies Act
2006 for periods beginning on or after 1 October 2021 with
no new standards adopted in these financial statements.
New accounting standards applicable to future periods
There are no new standards, interpretations and amendments which are not yet
effective in these financial statements, expected to have a material effect on
the Group's future financial statements. After Brexit, the UK will continue
to apply International Accounting Standards in conformity with the
requirements of the Companies Act 2006.
1. Revenue and segmental information
Revenue analysis
2022 2021
£000 £000
Revenue, recognised at a point in time, arises from:
Sales of components 18,577 23,084
Sales of tooling 296 347
18,873 23,431
Segmental information
The Group currently has one main reportable segment in each year, namely
Automotive (NVH) which involves provision of insulation materials to reduce
noise, vibration and harshness to automotive manufacturing. Turnover and
operating profit are disclosed for other segments in aggregate, mainly
flooring and other non-automotive sales) in the prior year, as they
individually do not have a significant impact on the Group result. These
segments have no material identifiable assets or liabilities.
Factors that management used to identify the Group's reportable segments
The Group's reportable segments are strategic business units that offer
different products and services.
Measurement of operating segment profit or loss
The accounting policies of the operating segments are the same as those
described in the summary of significant accounting policies.
The Group evaluates performance on the basis of operating profit/(loss).
Automotive remained the only significant segment in the year although the
German subsidiary has developed and maintained acoustic flooring sales to
offset some of the impact of the depressed automotive market.
The Group's non-automotive revenues, mainly acoustic flooring, is included
within the others segment.
Segmental analysis for the year ended 30 September 2022
Automotive Others 2022
NVH £000 Total
£000 £000
Group's revenue per consolidated statement of comprehensive income 15,271 3,602 18,873
Depreciation 1,715
Amortisation 163
Segment operating loss (2,968) (16) (2,984)
Finance expense (542)
Share of post-tax loss of equity accounted joint ventures (26)
Group loss before tax (3,552)
Additions to non-current assets 1,036 - 1,036
Reportable segment assets 24,373 24,373
Investment in joint ventures 74
Reportable segment assets/total Group assets 24,373 24,447
Reportable segment liabilities/total Group liabilities 12,712 12,712
Segmental analysis for the year ended 30 September 2021
Automotive Others 2021
NVH £000 Total
£000 £000
Group's revenue per consolidated statement of comprehensive income 18,659 4,772 23,431
Depreciation 1,613 -
Amortisation 235 47
Segment operating (loss)/profit (971) 281 (690)
Finance expense (542)
Share of post-tax profit of equity accounted joint ventures 53
Group loss before tax (1,179)
Additions to non-current assets 1,140 - 1,140
Reportable segment 24,991 - 24,991
assets
Investment in joint ventures 120
Reportable segment assets/total Group assets 25,111
Reportable segment liabilities/total Group liabilities 12,886 12,886
Revenues from one UK customer in FY22 total £6,673,000 and £2,287,000 of
revenue arose from another European customer (FY21: one customer £9,991,000
and £2,968,000 of revenue arose from another European customer). This largest
customer purchases goods from Autins Limited in the United Kingdom and there
are no other customers which account for more than 10% of total revenue.
External revenues by location of customers
2022 2021
£000 £000
United Kingdom 10,570 13,680
Sweden 645 680
Germany 5,917 6,753
Other European 1,706 2,318
Rest of the World 35 -
18,873 23,431
The only material non-current assets in any location outside of the United
Kingdom are £788,000 (2021: £900,000) of fixed assets and £519,000 (FY21:
£540,000) of goodwill in respect of the Swedish subsidiary. £491,000 (FY21:
£233,000) of cash balances were held in Germany which has been partly
utilised to repay intercompany debt owed to a UK group company.
2. Loss from operations
The operating loss is stated after charging/(crediting):
2022 2021
£000 £000
Foreign exchange (gains)/losses (8) 105
Depreciation of property, plant and equipment 884 788
Depreciation of right-of-use assets 831 825
Amortisation of intangible assets 163 282
Cost of inventory sold 13,652 15,663
Reversal of impairment of trade receivables - (83)
Government job retention scheme income - (649)
Research and development expenditure 12 16
Other government assistance and grants (28) -
Employee benefit expenses 6,273 6,499
Lease payments (short term leases only) 123 109
Auditors' remuneration:
Fees for audit of the Group 69 90
In the current economic and trading environment, with sales volumes also being
lower than prior years, a detailed review of fixed assets has been conducted
considering remaining economic life, utilisation rates, and potential disposal
values. This has resulted in £181,000 of additional depreciation being
charged against plant and machinery, which is included in the figures above.
3. Finance expense
2022 2021
£000 £000
Bank interest 208 236
Amortisation of loan issue costs 15 14
Right-of-use asset financing charges 299 270
Interest element of hire purchase agreements 20 22
542 542
4. Earnings per share
2022 2021
£000 £000
Loss used in calculating basic and diluted EPS (3,275) (1,084)
Number of shares
Weighted average number of £0.02 shares for the purpose of basic earnings per 51,683 39,601
share ('000s)
Weighted average number of £0.02 shares for the purpose of diluted earnings 51,683 39,601
per share ('000s)
Earnings per share (pence) (6.34)p (2.74)p
Diluted earnings per share (pence) (6.34)p (2.74)p
Earnings per share have been calculated based on the share capital of Autins
Group plc and the earnings of the Group for both years. There are options in
place over 2,523,648 (FY21: 2,523,648) shares that were anti-dilutive at the
year end but which may dilute future earnings per share.
5. Prior year adjustment
The group carried out a detailed reconciliation and review of the intercompany
loan and trading balances at the year end which identified a number of
differences in treatment between the UK net debtor balances and overseas
subsidiary net liabilities to the UK group companies, as well as omissions in
the posting of intercompany transactions in earlier years. As the total
difference of £542,000 represents a material change to the 30 September 2020
and 2021 statement of financial position, a prior year adjustment has been
recorded in accordance with IAS 8 'Accounting Policies, Changes in Accounting
Estimates and Errors'.
This results in an increase in trade payable liabilities and in the
accumulated losses in reserves of £542,000 as at both 30 September 2020 and
2021. Reported net assets of £13,849,000 and £12,767,000 have reduced to
£13,307,000 and £12,225,000 respectively. There was no impact to the Income
statement results for both FY22 and FY21 from making these adjustments.
6. Annual report and accounts
The annual report and accounts will be posted to shareholders shortly and will
be available to members of the public at the Company's registered office at
Central Point One, Central Park Drive, Rugby, CV23 0WE and on the Company's
website www.autins.co.uk/investors (http://www.autins.co.uk/investors) .
7. Annual General Meeting
The Annual General Meeting of Autins Group plc will be held at the Company's
main offices at Central Point One, Central Park Drive, Rugby, Warwickshire,
CV23 0WE on Tuesday 28 March 2023 commencing at 11.00am.
(#_ftnref1) 1 Cash less bank overdrafts, invoice discounting and
hire purchase finance, excluding IFRS16 lease liabilities.
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