07 March 2017

Autins Group plc

("Autins" or the "Group")

Final Results

Autins Group plc (AIM: AUTG), a leading UK designer, manufacturer and supplier of acoustic and thermal insulation solutions for the automotive sector, is pleased to announce its Final Results for the year ended 30 September 2016.

Financial Highlights

·     Revenue increased to £20.4 million (FY 2015: £19.8 million)

·     Gross profit increased to £6.5 million (FY 2015: £6.0 million)

·     Operating profit decreased to £0.3 million (FY 2015: £1.2 million)

·     Profit before tax decreased to £0.2 million (FY 2015: £0.9 million)

·     Net cash* £3.3 million (FY 2015: Net debt £5.5 million)

·     Earnings per share decreased to 2.03 pence per share (FY 2015: 5.56 pence per share)

·     Proposed second interim dividend of 0.4p

* Cash less loan notes, bank financing and hire purchase arrangements

Operational Highlights

·     Successful completion of IPO in August 2016 raising £13.1m for the Group

·     Good progress with Neptune - now approved by several automotive OEMs

·     Successful integration of Swedish and German divisions

·     Neptune facility achieved full production capability in September 2016

Post Year End

·     Secured new and improved 3-year banking facility with HSBC

·     Senior management hires include Group Sales Director and Group Quality Director

·     Autins Technical Centre secured first automotive customer

·     Neptune received a further OEM approval

·     Appointment of Michael Jennings as interim Chief Executive and resignation of Jim Griffin

·     Reduced schedule projections lowering revenue and profit expectations

Adam Attwood, Chairman, said:

"We are pleased to report Autins' first published results following the successful IPO in August 2016. These results reflect the investment and progress being made in the business to drive sustainable growth."

"For the current year ahead, the profile of our results will be significantly weighted to the second half of the year and is dependent on successful deliveries of Neptune product into the market. We expect solid growth for the full year, however, as already announced, this will fall significantly short of previously anticipated levels due to the timing and rate of growth of our automotive business not being as strong as we had expected. The Board remains confident of the importance of our diversification strategy and we are committed to realising the full potential of the Autins Group."

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About Autins

Autins specialises in the design, manufacture and supply of acoustic and thermal insulation solutions primarily in the automotive sector but with an increasing focus on other sectors, including, flooring, building and wider industrial applications.

The Group is one of the leading UK suppliers of noise and heat management products in the automotive market, producing and supplying over two million parts per month to customers including some of the world's leading vehicle manufacturers.

Chairman's and Chief Executive's statement

We are pleased to present the first full year report on the results of Autins for the year-ended 30 September 2016. It was a year of progress for Autins, with the IPO in late August representing the next stage in the development and growth of the Group.  Certain of the funds raised at IPO are being used to invest in existing capabilities and in opportunities to implement and accelerate our growth strategy.

Performance

We are pleased to report a year of continued progress for the Group with encouraging operational development and growth in the business with total revenue up by 3% to £20.4 million (FY 2015: £19.8 million). In line with our core strategy, as outlined at the time of the IPO, component manufacturing sales grew by 13% to £19.5m and gross profit increased by 8.1% to £6.5m (FY 2015: £6.0 million) driven by an improvement in component manufacturing margins (including flooring), which were up by 1.5%.

Since becoming a public company, the Group's corporate profile has increased and we have seen an increased recognition of Autins with both customers and suppliers, and a growing pipeline of opportunities across the automotive and non-automotive sectors.

During the year, the Group invested in a new drape moulding capability in Rugby, which has allowed us to offer a new product suite to our customers. Our greenfield facility, established to produce the patented Neptune material, is now operational and opens up a whole range of exciting opportunities in both automotive and non-automotive applications. Other achievements have been the successful integration and continued growth of our investments in Sweden and Germany, which became wholly-owned subsidiaries of the Group at the time of the IPO.

The Group has held initial discussions with IkSung on future Ozone strategy and will continue to explore the timing, location and supply route of equipment through the year.

Market review

The key external drivers of growth have been the trend among UK car manufacturers towards premium vehicles that have a greater need for our products in order to minimise noise. We have also benefitted from the continuing move to take weight out of vehicles.

Aside from trends within the automotive industry itself, we cannot fail to mention the potential impact on our business of the UK leaving the EU. We tend to source raw materials in Euros or Dollars, so may face inflationary pressures in relation to the depreciation of Sterling. Conversely, we are growing our international business where we generate sales in Euros. We believe the Group is well placed to meet these uncertainties and we are alert to both the risks and opportunities, and monitor the costs and sources of supply of raw materials to protect margins. We will assess our deployment of investment capital across our production facilities in the UK and Europe, as the trading impact of Brexit becomes clearer to maintain and maximise the Group's competitive advantage.

Strategy

Our strategy comprises three key strands:

·     Broaden customer and sector base by diversifying within and beyond automotive.

·     Expand geographically by building on our established footprint.

·     Improve gross margins by focusing on innovation and operational performance.

This strategy is built upon our three pillars of expertise: specialist component manufacturing, specialist material manufacturing, and innovation and research.

Our Materials division is now at the stage of beginning to sell its Neptune products into the automotive market. Neptune has been specified by a number of OEMs, so will be sold to component suppliers across the industry, as well as becoming a 'material of choice' for our own specialist manufacturing operations.

Board, senior management and employees

Since the year end, we have sadly had to accept the resignation of Jim Griffin from his role as CEO of the Group for personal reasons. The Board would like to thank Jim for his immense contribution to the Group's development over the last 27 years. 

We were delighted to appoint Michael Jennings as interim Chief Executive of the Group in February.  The Board looks forward to working with Michael to continue the strategy and growth of the Group.

In March 2016 we added strength and depth to the Board through the appointment of two non-executive directors, Ian Griffiths and Terry Garthwaite. Ian is the former Managing Director of GKN Automotive. He brings significant automotive and non-executive experience. Terry is a former Group Finance Director of Senior plc and, again, brings a wealth of financial knowledge from quoted groups, as well as extensive experience as a non-executive director.

Alongside delivering on the strategic plan, the principal focus of the Board has been investment in the senior management team to further support our growth and international ambitions. We have appointed a Group Sales Director who has already started and a Group Quality Director starting in April 2017, and will continue to strengthen and develop our organisation.

With the acquisition of the joint venture partner in our Swedish business, the minority interest in our German business and the trade and assets of a flooring company in Sweden, we now have a strong foundation upon which to grow. Now that formerly independent businesses are part of one Group, we continue to develop our 'one company' culture to enhance the sharing of our collective expertise for the benefit of the whole Group, across all aspects of the business. We wish to thank our colleagues for their continued work in driving the development of the Group.

Dividend

The Group remains in a growth phase and has many strong investment opportunities, each of which is assessed using a disciplined approach to capital allocation and risk. Taking into account the short space of time between the IPO and the year end, the Board has taken the decision to pay a second interim dividend of 0.4 pence per share that will be paid on 4 April 2017 to shareholders on the register on 17 March 2017. The Board intends to adopt a progressive dividend policy alongside continuing investment in the business.

Outlook

In the near term the profile of our results will be significantly weighted to the second half of the year and is dependent on successful deliveries of Neptune product into the market. We expect solid growth for the full year, however, as already announced, this will fall significantly short of previously anticipated levels due to the timing and rate of growth in our automotive business not being as strong as we had expected. The Board remains confident of the importance of our diversification strategy and we are committed to realising the full potential of the Autins Group.

7 March 2017

Financial Review

Revenue

The financial year progressed as expected with total revenue up 3% at £20.4 million (FY 2015: £19.8 million). Importantly, component manufacturing sales, which excludes tooling, grew by 13% to £19.5 million (FY 2015: £17.3 million) primarily through the additional volumes secured with the Group's largest customer.

The core Automotive Insulations business continued to be a major driver in terms of organic growth, with sales increasing by 7% to £18.4 million (FY 2015: £17.2 million).

Within component manufacturing, flooring revenue more than doubled in the year to £0.6 million and currently represents over 60% of the external sales within RI Rheinland Insulations. The Group has secured new customer relationships with a number of leading pan European flooring manufacturers in both the domestic and industrial markets and expects further growth in the coming year.

Revenues from non-automotive component work in the UK added £0.3m to turnover in the year and the Board expects to build substantially on this early success with an increase anticipated for 2016/7. The Board continues to be committed to diversifying Group sales by customer, region and product offering and particularly in non-automotive markets.

Sales of tooling reduced to £0.6 million (2015: £2.5 million), as forecast at the time of the IPO.  Tooling is a revenue stream for the Group that arises as a function of new programme sales and will fluctuate year on year.  The Group anticipates an increased level of tooling sales in 2017, as confirmed new contract platforms are launched.

Gross margin

The Group's component gross margin increased to 33.1% (FY 2015: 31.6%) as a result of three key factors: the investment in value-added processes introduced in 2015; higher flooring volumes which deliver better margins than the Group average; and the inclusion of the post-acquisition Scandins business, where in-house material manufacture allows for improved returns. 

The Board will continue the drive to improve margins by focusing on higher added value products and materials, generating growth in non-automotive markets and investing to improve both operational efficiency and develop new product and materials.

EBITDA and operating profit

Reported operating profit was £0.3m (2015: £1.2m) with EBITDA of £0.9m (2015: £1.8m) after charging costs of £0.9m comprising £0.2m of exceptional costs, £0.2m start-up costs, £0.3m investment in staff and facilities to support ongoing growth and £0.2m of additional costs for plc governance.

The acquisition of Scandins and DBX AB added £0.35m of recurring cost to the total Group administrative expense in the period from acquisition and will have a further £0.35m impact in the next full year.

Investing for growth

To develop growth and diversification and in support of product launches the commercial and projects teams were reinforced at a cost of £0.2m in the current year (full year 2016/7: £0.3m).

The development of an in-house specialist technical research and testing facility has increased administrative costs by £0.1m in the year (full year 2016/7: £0.35m) with additional leasehold properties and dedicated technical staff recruited.  Once the capex programme of £0.3m has been completed in 2016/7 the Group expects external income to be generated from this enterprise which will support savings from in-sourcing the Group's current testing requirements.

Exceptional items and non recurring costs

The Group had non-capitalised start-up costs for Neptune of £0.2m in the year.  New production facility premises were occupied from February 2016 with operational staff employed from July 2016. 

After recognising recharged costs of £0.47m from selling shareholders, the Group has incurred £0.18m of exceptional external fees in relation to the IPO.

Joint Ventures

The Group's share of joint venture activities represents a small pre-acquisition loss of Scandins and the profitable growth in Indica Automotive.

Indica Automotive's turnover increased 60% to £1.8m (2015: £1.1m) with a profit after tax of £0.33m (2015: £0.13m).  Investment in additional management and capital equipment has positioned the joint venture for further growth and diversification away from the Group which is the current largest customer. 

Currency 

The Group is subject to currency variation in both re-translation of overseas operations and transactional differences from trading and investment activities. 

Given the significant capital purchase made from IkSung (and ongoing material supply agreement) the currency with the greatest potential transactional impact on our results is the US Dollar.

The Group also trades in currencies outside of its base currency, Sterling, and has a level of operational transactions conducted in Swedish Kronor and Euros.

At the year-end, and during the year, the Group had no forward currency contracting arrangements.   We will use derivatives to manage our foreign currency risks in future periods arising from underlying operational business and significant capital expenditure. Transactions of a speculative nature are and will continue to be prohibited.

Net finance expense 

Net finance expense for the year was £0.56m (2015: £0.39m) which includes £0.23m of interest on loan notes issued to complete the buyout of minority shareholders in 2014. The charge includes an accelerated element of £0.12m arising from the Board's decision to commit to early repayment of these debts.

The Group's ongoing investment for growth required increased use of mezzanine, tooling finance and invoice discounting facilities causing an increase of 33% in bank interest in the year. The repayment of these facilities as a result of the IPO will materially reduce financing costs in the next financial year.

Taxation 

The effective tax rate was reduced due to a proportion of non-taxable gains arising from an acquisition, enhanced R&D claims for the current year and a revision to the prior year R&D credit arising from a further review of allowable costs.

In the short term the effective tax rate is expected to remain below the UK statutory level.  The establishment of a dedicated technical Research and Development facility will increase the Group's ability to access enhance R&D tax credits within the UK.

The Group also has taxable losses available within its overseas subsidiaries which will offset trading profits in higher corporation tax territories of Sweden and Germany in the short term.  The Group has an £0.18m (2015: £0.18m) unrecognised tax asset in respect of losses in the German subsidiary.

We continue to work with our advisors to improve compliance and disclosure standards across the Group for all aspects of corporation and social taxes.  We currently seek to group relieve losses around the UK entities, but are conducting an assessment of the risk and required documentation that arises from transfer pricing between international entities.

Earnings per share 

Reduced profitability due to the planned investment for growth, the exceptional costs of the IPO and the new costs of being a plc (as detailed above) have resulted in a decrease in our earnings per share to 2.03p per share (2015: 5.56p per share).

In calculating EPS for the coming year the Board is aware that the weighted average number of shares in issue will increase as a result of the issue of 8.33m new shares on 22 August 2016 as part of the IPO.

Dividends 

The Board is proposing a second interim dividend of 0.4p per share for the current year. Our dividend policy is to grow returns progressively whilst balancing investment into the business to support the growth strategy.  The dividend will be paid on 4 April 2017 to shareholders on the register on 17 March 2017.

Net cash/(debt) and working capital 

The Group ended the year with net cash (being the net of cash and cash equivalents and the Group's loans and borrowings) of £3.3m (2015: Net debt £5.5m) and cash and cash equivalents of £6.3m (2015: £0.5m).  Cash raised from the IPO was used to settle £5.9m of invoice finance, tooling finance and mezzanine debt products leaving the Group with £1.28m (2015: £1.46m) hire purchase loans at Automotive Insulations and £0.67m (2015: £0.0m) of long term asset backed finance at Scandins, which reflects the recent investments in facilities across the whole Group

The Group had, in support of IPO costs, secured short term extended terms from certain key suppliers that required normalising in the new year at a cash cost of £0.25m.

In anticipation of further growth, the Group has, since the year-end, sought to improve working capital monitoring and control systems to maintain working capital days and therefore limit the amount of cash consumed by increased trading activity.

Going concern

Since the year-end, the Group has refinanced with HSBC which facilitates the implementation of a central treasury function to control cash management and borrowings and oversee mitigation of financial risks.

The HSBC facilities come without formal covenants, are over a three-year term and provide trading headroom to facilitate growth. 

On the basis of these new facilities, and having reviewed the Group's budgets and forecasts and made appropriate enquiries, the Directors have formed a judgement at the time of approving the financial statements, that the Group can have a reasonable expectation that adequate resources will be available for it to continue its operations for the foreseeable future and consequently it is appropriate to adopt the going concern principle in the preparation of these financial statements.

Acquisitions, goodwill and intangible assets

Two acquisitions were made in the year and the 10% Non Controlling Interest of RI Rheinland Insulations GmbH was purchased to consolidate the Group's control. The total cost of these transactions was £0.55m with £0.5m settled by grant of share options that were exercised on the Group's admission to AIM.  There was no contingent consideration.

No amortisation has been charged in relation to intangibles acquired in the year as the Directors are satisfied that after fair valuation of assets and liabilities the remaining intangibles acquired were non separable goodwill.

The Board considered the carrying value of Goodwill and other Intangibles (both existing and acquired in the year) at 30 September 2016 and concluded that the carrying value was fully recoverable.

RI Rheinland Insulations GmbH had net liabilities at acquisition (including inter-group working capital loans and trading balances) resulting in a net charge of £0.2m to retained earnings.  The acquisition of the Scandins joint venture generated a gain of £0.3m. This gain recognises the excess fair value attributable to the Group's existing 49% shareholding of Scandins.

Capital expenditure

The Group spent £5.0m in the year, with £4.0m being the establishment of the Solar Nonwovens' Neptune operation which had not been brought into use by the year-end.  Leasehold improvements of £0.8m were made at the Group's new Tamworth based Neptune facility to both support the first Neptune production line and allow sufficient power and other building services for subsequent expansion.

The Group continued to invest in plant for core component manufacture with additional press, drape moulding and water jet capability added to meet customer demand. 

James Larner

Chief Financial Officer

7 March 2017

Consolidated income statement for the year ended 30 September 2016

All amounts relate to continuing operations.

Consolidated statement of comprehensive income for the year ended 30 September 2016

Consolidated statement of financial position as at 30 September 2016