Autins : Interim Results to 31 March 2023

27 June 2023

Autins Group plc

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

Interim Results

Autins Group plc (AIM: AUTG), the UK and European based manufacturer of the patented Neptune melt- blown material and specialist in the design, manufacture, and supply of acoustic and thermal insulation solutions, announces its results for the six months ended 31 March 2023.

Financial Summary

• Revenue increased by 15.4% to £10.84m (H1 22: £9.39m)
• Gross profit increased by 30.2% to £3.06m (H1 22: £2.35m)
• Gross margins increased by 3.1%pts to 28.2% (H1 22: 25.1%)
• EBITDA1 was a profit of £0.34m (H1 22: £0.35m loss)
• Loss after tax of £0.90m (H1 22: loss of £1.38m)
• Loss per share of 1.65p (H1 22: loss of 2.83p)
• Operating cashflow was a £0.36m net inflow (H1 22: £0.36m net outflow)
• Net debt2 excluding IFRS16 lease liabilities increased to £2.42m (H1 22: £1.03m)
• Cash and cash equivalents were £1.27m at the period end (H1 22 £2.78m)
• Group cash headroom3 was £3.50m (H1 22: £5.15m)

1: EBITDA is stated on an IFRS 16 basis.

1. Net debt is cash less bank overdrafts, loans, invoice discounting, hire purchase finance and excludes right of use lease liabilities.
2. Sum of net cash at bank and residual invoice financing capacity.

Operational Highlights

• Significant financial benefits from price, material and cost improvements, adjustments to commercial contracts, and restructuring actions.
• The supply chain to the UK automotive market is more stable, although sales volumes were c.5% lower than the prior year.
• Automotive sales in Germany are up 65% year on year including 2022 EV platform wins.
• Flooring product sales were down 26% to £1.3m due to a slowdown in European construction activity.
• Neptune retail sales continue to increase and are up 34% on H1 22 to £4.4m.
• Gross profit increased primarily as a result of price, material and improved labour productivity which more than offset input cost pressures, leading to higher Group gross margins.
• Overheads were largely consistent year on year, despite Germany adding a stock storage facility to assist growth.
• EBITDA improved by £0.7m, which was mirrored by an equivalent improvement in operating cashflow year on year.

Gareth Kaminski-Cook, Chief Executive, said:

"I am pleased to report that we have seen a significant improvement in margins and a return to EBITDA profitability, during the first half of 2023.

We have worked closely with our customers over the past 18 months to recover the impact of increased input costs. Changes to our commercial contracts in all regions during the first six months of the year are now flowing to the bottom line. On top of this, actions taken in the period on headcount reductions, improved operational efficiencies and smarter material sourcing are all positively impacting performance. Whilst H2 2023 will see the full benefits of these actions they will be partially offset by recent workforce

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salary increases.

We were delighted to see our German automotive sales grow by 65% as project wins, primarily with Neptune for EVs, began production. The flooring market however has suffered as European construction activity weakened against a tougher economic background.

Whilst margins have improved, it is clear that the business now needs more volume. Although the automotive supply chains have stabilised somewhat, market recovery is expected to remain modest into the medium term. This is partly due to the economic backdrop, but also because of the limited number of new vehicle models being launched by our major customers at this time. The focus within the management team will continue to be on winning new business and managing costs and margins."

For further information please contact:
Autins Group plc
Gareth Kaminski-Cook, Chief Executive	Via SEC Newgate
Kamran Munir, CFO
Singer Capital Markets	Tel: [phone]
(Nominated Adviser and Broker)
James Moat / Asha Chotai
SEC Newgate	Tel: [phone]
(Financial PR)
Bob Huxford
Molly Gretton

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, 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.

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Overview

Group revenue in the period increased by £1.45m to £10.84m (H1 22: £9.39m), which, combined with

other actions, led to an EBITDA improvement of £0.69m to £0.34m (H1 22: EBITDA loss of £0.35m).

Revenue in our automotive division improved in all three regions as supply chains appeared to stabilise, albeit UK automotive volumes reduced slightly. Germany benefited from new project starts, whilst the flooring business was negatively impacted by slower European construction activity.

Protracted efforts with all our customers to recover the increased input costs of the previous 12 months finally bore fruit with adjustments to almost all customer contractual arrangements. The business also undertook further restructuring actions and improved resourcing for key materials which cumulatively have contributed to improve the gross margin by 3.1%pts to 28.2% since the end of the last financial year.

Revenue

Revenue across the Group increased by 15.4% to £10.84m (H1 22: £9.39m) driven primarily by price and contract improvements and automotive recovery in Germany. Excluding some new contract wins, sales volumes declined from our key automotive customers in the UK and German flooring customers.

Sales through the European operations made up 40% of Group turnover, slightly up from H1 2022 at 37%, on the back of stronger performance in Germany.

Group automotive sales increased by 25% to £9.5m (H1 2022: £7.6m), driven primarily by price increases and strong growth in Germany.

Automotive revenue in the UK increased by 11% to £6.5m (H1 2022: £5.9m), with component revenue increasing by 11% and tooling remaining consistently low, as the OEMs continue to release very few new projects.

German automotive sales benefited from the start of new projects that were won in the previous years and more than compensated for the lower flooring sales that reflect the weak European construction market. As a result, German sales increased 25% to £3.7m (H1 22: £3.0m), with automotive sales up by 85% to £2.4m (H1 22: £1.3m), and flooring sales declining by 22% to £ 1.3m (H1 22: £1.7m). Sweden automotive sales increased by 20% to £0.6m (H1 22: £0.5m).

Non-automotive sales were lower by 24% in H1 23at £1.4m (H1 22: £1.8m), driven by the drop in flooring demand described above. As a result, non-automotive sales now account for 13% of Group turnover, down from 19% in H1 22.

Sales concentration of our largest customer was 32.9% in H1 23, reducing from 38.3% last year, driven primarily by new projects in Germany. In the short to medium term, management would expect this concentration will revert back towards c.50% as UK automotive sales recover. Over the longer term, the sales concentration is expected to reduce as we develop demand from a larger customer base.

Gross margin

The collective actions taken to secure customer price increases, improve operational efficiencies and lower material purchasing costs have improved margins progressively since the end of the last financial year. Within this, labour productivity and restructuring actions have also added significantly to gross margin improvement. These actions have largely offset the significant input cost challenges from the previous year and restored margins.

We are now in a situation where the largest impact on our gross profit is the residual impact of low customer volumes flowing through the business that reduce the absorption of fixed production overhead costs.

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EBITDA profit and operating loss

The reported H1 23 EBITDA profit of £0.34m improved by £0.7m year over year, (H1 22: EBITDA loss of

£0.35m) and the reported operating loss was £0.65m (H1 22: loss of £1.1m). For both years the EBITDA and operating loss do not include any exceptional costs.

Joint venture

The Group's share of joint venture activities relates solely to Indica Automotive, a UK based foam conversion business.

Turnover at Indica Automotive decreased marginally to £0.91m (H1 22: £0.92m), with a loss after tax of

£0.01m (H1 22: profit of £0.01m). The Group remains the largest customer of the joint venture, and the ratio of sales to the Group as a percentage of total sales has reduced from 73% to 52%.

Net finance expense

Net Finance expense for the period was consistent at £0.25m (H1 22: £0.26m) including IFRS 16 charges

of £0.13m (H1 22 £0.14m). The interest element of hire purchase agreements is £0.01m (H1 22: £0.01m)

with interest charged on bank borrowings of £0.11m (H1 22: £0.12m).

Taxation

Given the continuing economic conditions, none of the losses carried forward are recognised in deferred tax balances, consistent with the judgement made in September 2022. A tax credit of £0.01m (H1 22: £0.01m) has been recognised.

Dividends

The Board continues to believe that a suspension in dividend payments remains appropriate. As such, no interim dividend is proposed.

Net debt and financing

The Group ended the period with net debt (being the net of cash and cash equivalents and the Group's loans and borrowings, excluding right of use lease liabilities) of £2.42m (H1 22 £1.03m). Including £5.04m (H1 22 £5.25m) arising from IFRS 16 lease liabilities, the Group's net debt would be £7.46m (H1 22 £6.28m). Net debt has increased as a result of trading outflows. Cash and cash equivalents at the period end were £1.3m (H1 22: £2.8m).

In January 2023, the Company secured a further deferment of UK loan repayments until July 2023 from its primary lender and until the end of March 2024 from its secondary lender. At 31 March 2023, the Group's UK HSBC facilities provided up to £3.5m (H1 22: £3.5m) of invoice financing facility (subject to available accounts receivable balances). In addition, £0.5m (H1 22: £0.5m) of asset finance facilities are available, subject to covenant compliance. At the end of the period, none of the invoice financing facility had been utilised (H1 22: £nil) with £0.1m used from the asset finance facility (H1 2022: £0.4m). Group cash headroom, being the sum of net cash at bank and residual invoice financing capacity, was £3.5m (H1 22 £5.1m). Currently, the HSBC term loan will re-commence quarterly payments of £146k in July 2023.

Capital expenditure

The Group invested £0.1m (H1 22: £0.1m) in its operating facilities during the period. The Group will commission new equipment in Germany during H2 with a value of c.£300k, which will replace old equipment and improve efficiency and capacity to meet growing demand.

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Employees

In the UK, we have continued to focus on maximising employee engagement and retention. We continue to maintain a high visibility of senior management with staff through a combination of regular weekly cross functional planning meetings coupled with informal feedback "coffee" sessions. The banked hours scheme continues to be successful by providing surety of workers' income whilst customer demand patterns continue to be variable. We have continued to convert the majority of temporary staff positions to permanent roles to aid core team strength. Production pay rates have been increased by more than 8% and continue to exceed the national living wage. Overtime rates continue with strong premiums to improve net take home pay, with pay bandings related to multi-skilling and personal performance also being improved. Staff retention, excluding redundancies, has been in excess of 93% during the period.

Teamwork has improved over the last 18 months positively impacting productivity, quality, customer service and the net cost in the factories. This has been critically important during a period where availability of labour continues to be a key challenge for manufacturers, and it is pleasing to see that some former colleagues have chosen to return to Autins. Latterly we have introduced a bonus scheme for all UK operators to recognise when teams or individuals have directly and positively impacted margins.

The German and Swedish businesses both have very strong team cultures which benefit from strong leadership and stable, highly committed people.

Board

In May 2023, we announced that Andrew Burn had joined the Board as a Non-Executive Director.

Neil MacDonald will resign from the Board of Directors at the end of June 2023. We would like to thank him for his excellent service and wish him well for the future.

Going Concern

In approving these Interim Financial Statements, the Board has considered current trading, profit and cash flow forecasts and assessed existing borrowings and available sources of finance.

At the time of releasing our full year financial statements, forward looking profit, and cash flow projections for FY23, and FY24 were prepared and considered. As reported in January, our major UK lenders extended covenant waivers until the end of March 2024 and capital payment deferments were extended until July 2023 with our primary lender, and until at least April 2024 with our secondary lender.

Financial forecasts and related sensitivities, compared with the prevailing key customer demand schedules and forecasts, were assessed in detail in January 2023. These assessments were documented in detail in our FY22 audited financial statements.

UK sales volumes in H1 23 remained marginally below these forecasts, although EBITDA and cash performance remained above the targets presented to the UK lenders. The Board has assumed a slight improvement in revenues for H2 23, with further improvement and new wins expected in FY24. However, there remains uncertainty on the exact timing and sales improvement for the automotive market against the current backdrop of global supply chain considerations and continuously evolving vehicle platforms for which the technical specifications and likely production quantities are still to be reliably communicated.

Actions taken to protect gross margins against increases in energy, materials, and labour costs have been successful in restoring gross margins.

The Company will continue further covenant compliance and capital repayment review discussions with its two major lenders over the coming months for the period beyond March 2024. Reaching an appropriate

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