Autins Group (LSE:AUTG) — Full Year Results

0:00 Good morning, and welcome to the AUTINS GROUP PLC investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and could be submitted at any time via the q and a tab situated on the right hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to management team. Andy, good morning, sir. Good morning. Thank first of all, thank you very much to everybody for attending today. My name is Andy Bloomer. I'm the CEO of AUTINS GROUP PLC. With me is Des Dimitrov, the CFO, and Nick Dashwood Brown, our IR relations. First of all, I'd just like to give a quick overview of AUTINS and what we do. So AUTINS are The UK based manufacturer of our proprietary Neptune material, which is a material used for taking noise, vibration and harshness out of, vehicles.

1:01 We have manufacturing facilities in The UK based in Rugby and Tamworth and we have facilities in Germany and Sweden also. We along with our proprietary Neptune material, we also manufacture fiber based ducting and panels materials for automotive. We also have a small flooring business that goes into industrial and residential settings. So with that, we'll start the overview of our results. So really today, we are here to tell you a story, about how we've moved our business from turnaround to growth. We're very, very proud of the fact that FY twenty six was the year that we achieved our first profit since 2017.

1:49 It's the first full year under mine and Desi's leadership, within the organization. And genuinely, we the way we sort of describe it is that we spent last year learning about the business, fixing some of the issues that we found within the business. And then through FY 2026, we actually worked very hard in order to make sure that we could prove that the turnaround was possible. And now we get to the point where we believe that we're ready to enter that growth phase. And that's why we've titled it from moving from survive to thrive. We achieved record gross margins at 36.2%. We have increasing proprietary technology going increasing our value per vehicle. That's critical for us as an organization.

2:37 We can only control the amount of our material that goes on car. We cannot influence the number of cars that are made or sold. So therefore, one of the key measurables within our organization is the value per vehicle manufactured. Our Swedish and our German businesses continue to grow, and our German business moved into profitability over the last twelve months, which was a key performance for us and a key success. And we've clearly set out strategy to deliver profitable growth through FY '29, and that is reflected in the, analysts and our guidance that's been put out over the last twenty four hours. So we've talked about FY 2026 and the fact it was a year of transformation.

3:24 And really we sort of split that into three within our in the way that we describe it. So the first one is operational excellence, then we've got commercial momentum and financial strength. Operationally, we've moved and improved the efficiency of our Neptune material manufacturing process. And over the last twelve months, we've moved from what we called our Gen one Neptune material into our Gen two, which significantly improved our processing capabilities. And as of the May 1, we've also begun manufacturing what we call our Gen three Neptune material, which further enhances efficiencies across our manufacturing footprint. The German and Swedish operations are significantly more integrated into our business. And in particular, the Swedish operation is now predominantly manufacturing material that's sold by our other business units.

4:13 It's a huge accomplishment for us as typically our our businesses were siloed and not only selling the the material that they were manufactured they were manufacturing. We've got significant increase in operational flexibility and resilience. And by that, we mean that we have duplicated and replicated manufacturing processes, and we've commonized our manufacturing processes across our plants. That derisks our business in terms of if we have issues within one of our factories or one of our machines. But not only that, it also ensures that we've got consistency across the business. So we all talk the same language. We all work through the problems in the same way. And it's no secret that our largest customer had a large cyber instant cyber attack. We managed the business through that.

5:00 And whilst it would be a lie to say it wasn't a hugely stressful time for our organization, actually, I'm really proud of the way we responded to it and the way we've come out the other side. In terms of commercial momentum, we secured £15,000,000 total of new business awards, which largely works out around £4,000,000 a year of additional revenue. We've continued growth across Continental Europe. Germany, in particular, won a significant portion of that new business. And if the new business awards that were announced in previous years come on stream, that is becoming a more and more important business for us. We've created additional opportunities with our AUT DUCs and AUTRIM materials, which significantly increased the value per vehicle, for our products. And we've continued the diversification of our products and our customers. Our we're significantly more diluted in terms of exposure to our largest customer than we've ever been before.

5:53 And in terms of our product base, not only do we have the AUTINO trim materials that we've spoken about before, but we've got a strong pipeline of new products that are going to be launched into the market over the next twelve months. In terms of financial strength, I've already said it, but I'm going to keep saying it because I'm incredibly proud of the fact that we've returned to profitability. We delivered the record gross margins. More importantly, we've also strengthened the balance sheet and Des will talk about that in the next slide. And from that, we we've said that we've established a platform for that future growth. We talked about moving from survive to thrive. And really, the the survive element is creating that platform, creating that stability, making sure that we are the best, most efficient organization we can possibly be to allow that future growth, be that organic or inorganic growth that we're expecting to come over the coming years.

6:47 Thank you, Andy. As Andy pointed out, we've successfully achieved the survival stage of our strategy and for us to to thrive. We've been working very hard on ensuring that the business is a very strong financial platform. The pro the improved profitability significantly helped in the the last financial year where, as pointed out, we dealt with the significant challenges coming from the cyber attack at our major customers. So record gross margin, a number of other operational efficiencies were achieved throughout the period. We looked at we were constantly assessing our overheads and optimizing where feasible. Really proud to have the first profitable year since 2017.

7:39 And as we prepare for the for the future, we have to have a strong balance sheet with a good and well managed leverage position, which is why we were repaying the legacy borrowing. So as at the time of that that we speak, we have fully repaid our MEIF and CBILS loans. We secured a new loan for the next four years, which is on a schedule to be to be repaired by March 2030. That's restoring flexibility on our balance sheet. And as we are delivering the the growth that is coming in '28 and '29, it's gonna maintain good flexibility on our balance sheet and our cash position.

8:26 As in the previous period, strong cash generation from operations, manifestation of our solid financial model, and how to achieve good working capital position. As part of another achievement in the last twelve months, we have closed a supplier relationship that has eliminated our exposure to the US dollars, and we now have very much almost 100% natural currency hedge, which reduces all of the volatility on our profit and loss and balance sheet. Thanks, Tess. Thank you. Alright. So one of the questions we are asked most frequently is why should somebody invest in AUTINS? We're a automotive manufacturer predominantly. We're based in The UK, and across Europe.

9:22 And we recognize the if you look at the headlines in the news that AUTINS might not the the automotive might not be the most interesting area. But actually, we work in a niche that we genuinely think is interesting and has significant opportunities for growth and and share improving shareholder value over the next few years. The first one is our proprietary technology. Our Neptune material is a lightweight acoustic material. So it's used to take noise out of vehicles. One of the biggest myths is that an EV is silent and therefore you don't actually need additional, you don't need to try and take noise away. The truth of the matter is that a internal combustion engine took noise away from the vehicle because all you could hear was the engine and people quite like the noise of an engine. Actually, when you're in an electric vehicle, you hear every noise, whether that's the noise of the tires, the noise of the road, whether that's the noise of a small electric motor in your seat. And so more and more of our material is used in an EV.

10:22 Our product portfolio is expanding as we talked about the AUTGUTT, our HVAC DUTG product that provides significant technical differentiation over a traditional blow molded DUT. And we have a number of OEMs who are incredibly interested and have sourced us in terms of using that material because of the level of improvement in both noise and thermal capability. And AUTIN, we are moving to customer interface materials. By that we mean areas where that are touched by the consumer, the driver of the vehicle. And as you move into there, there is more value in the components. And so therefore, again, our value vehicle continues to increase. It's no secret that UK automotive has been struggling in terms of volume over the last few years. It's in the news, and we're not going to hide away from it. But the fact of the matter is we have German and Swedish subsidiary businesses that allow us to access the German OEMs, the German carmakers, and they are more and more continuing to choose AUTINS over significantly larger alternatives.

11:28 And the reason they do that is for the level of service that we offer and and the personal way that we work with them and the fact that we're willing to move, moderate, and change some of our materials in order to best suit their needs. And then we've got our Swedish business. Sweden was historically set up in order supply to the Swedish OEMs. But as that offering and those volumes have reduced, actually, they've diversified and they've become a manufacturer of our LIFO product, and they now supply, material across the business. And in fact, we had our first award of Swedish material being sold through our German subsidiary. It's a huge accomplishment for our group. It wouldn't have been possible two years ago. We've got an experienced management team. Whilst we would, never say that the journey is over, we genuinely believe that we've delivered the turnaround moving into the profitability for the first time this year. We do recognize we have to continue to prove it. And that's why we're also focused on profitable growth, but we know how to do it. We know how we are, what we're going to do and how we're going to drive it to get there.

12:32 We've got resilient, diversified business model. Again, we've talked about it, but the reduced reliance on the group's largest customer is absolutely critical for us and for our future survival. Not only that, we're also our product groups away from just purely NVH materials into those more differentiated areas like trim panels and DUPs as well. And we're positioned for the fire phase. We've done the hard work. We've spent the last two years making sure that we are absolutely in a position to to grow, and we believe we're there. We believe we're ready to go, and we are the the we're ready to leverage the hard work that we've done over the last last two years. It's always great talking about the past. It's always great about talking about what we've done, but I suspect most people, and particularly anyone who's a prospective investor, wants to know what's next.

13:23 So what are we gonna do? Some of these obviously are things that I think most people would expect to do, but they're really important and critical for us. We've got to continue to improve our profitability, our cash general, and our return on capital. But that's not just in terms of our in terms of the bottom line growing through top line revenue. It's also about improving and continuing to improve our efficiency, reducing our staffs and making sure that we're in the best financial shape we can possibly be. Des mentioned the strengthening of the balance sheet over the past twelve months, and we're going to continue to do that, particularly as we start to look at additional opportunities through nonorganic growth. We will need to really make sure our balance sheet is as strong as possible and make sure we can maximize our working capital. And then we talked about and we'll continue to deliver further margin improvement. We've gone a long way, but there's always further room to do. One, I'm a great believer in continuous improvement, making sure that we continue to improve our processes, whether that is office based, whether that's on the shop floor, whether that's in terms of the way that we produce and sell to our customers. It's critical that we continue to improve year on year in order to ensure that our margins continue to improve.

14:34 In terms of markets, we have released our FY 2029 forecast to markets this year this week, sorry. And our expectation is that we are going to need to deliver against those. The FY twenty seven to twenty twenty nine revenue and profit guidance is out there and we need to ensure we get there. I think in terms of one of the questions we're often asked is what's your confidence level? And what we would say is actually, we believe it's a prudent and fairly conservative estimate, particularly in the 2829 year. And therefore, we've got a strong degree of confidence, excluding obviously external factors that are outside of our control. We'll continue to increase engagement with institutional and retail investors, brought broader market awareness. That's why Nick's with us today in terms of improving our investor relations, making that a bit more formalized in terms of the way we do it and the way we want to do it.

15:29 And we'll absolutely continue to diversify our customers and market exposure. One of the reasons that Germany has been quite so successful is that they've been fairly constrained into just a couple of carmakers in the past years. They're diversifying quickly. And as they diversify, it dilutes our exposure to our main our largest group customer. In terms of business growth, it's all very well winning our winning contracts, but we have to successfully launch those projects, and we have to successfully launch them profitably. And there is no point in us winning business if we can't make money from it once it's in and in production. And we talked about increasing the content per vehicle. That's critical for our growth. That's critical for improving our margins as time goes on. And then in terms of our growth, it has to be both organic and selectively acquisitive. Now that can be both in terms of a distressed asset purchase or a prepack type opportunity.

16:31 Automotive industry is going through massive consolidation at the moment, and we want to be well placed in order to be able to do that. But also as our share price improves, as our balance sheet improves, it gives us opportunity to be more selective on the types of acquisitions that we might be looking for. We've talked about our market forecast. I won't go through the table book just to show that we've released our FY twenty nine forecast and that shows continuing revenue improvement, EBITDA improvement, PBT and then EPS. So if you look at where we are in FY 2026 today, moving from a £17,600,000 revenue, with EPS adjusted EPS of 0.3 of a penny We're absolutely within FY 2029 looking for $27,200,000 in revenue and moving the EPS out to $3,500,000,000 It's important to note that this includes no nonorganic growth. This is organic growth, and the very vast majority of this forecast is already booked business that we will introduce over the next two years.

17:40 We've talked about in terms of the £50,000,000 new business. We will continue to expand across our European customers and platforms, and there's a number of exciting wins that we've got in there that continues to do that. We've got further operational efficiencies. I've talked about the Gen three Neptune that we started producing. And then in turn, all of that drops through to significant cash generation as those volumes increase across our business. Manufacturing is a great example of being as soon when your lines are full, you make the best return on your manufacturing. We can see over the next few years needing to buy new equipment in order to increase our capacity. And again, that's the first time we've been in that position for a number of years within our organization. So a lot of people, again, when we sort of look at some of the questions and what they are and how they are, they they sort of talk about the journey and what does it mean. I've really tried to sort of pick out some some keywords that if I was to ask you to take away that these would be it. So through FY '25, obviously, recognizing that FY '25 was an eighteen month period for us as we changed our financial year, Des and I really took the time to understand the business. We diagnosed what the we saw the issues were. We built the turnaround plan. We started some of those early executions, the low hanging fruit for one of the better words in order to start bringing those through and start and see that they work.

19:03 FY twenty six, I would describe as our proven year. We managed to return to profitability. There are more customers adopting our technologies, wanting to adapt, wanting to, to use our materials, And we won significant new business, including transfer business away from some of our competitors, which was critical to our short term revenue class. So if FY twenty five was about understanding and FY twenty six is about proving, we talk about FY twenty twenty seven being about executing. This is the year we've got to prove that we can do it and we can do it again. Launching those programs profitably, making sure those operational efficiencies continue to deliver whilst offsetting against any inflationary pressures within the markets. And that means that we also still have to consider careful cost management. We work in automotive. Careful cost management is a constant within our business, but it's really worth saying that, you know, we don't expect that we're going to balloon our our overheads because we've become profitable. It's about being very careful and additive where and how and when we can.

20:02 From there, FY twenty eight will be about scaling. We can absolutely see that our European business will become bigger than The UK business within sort of that five to six year period of time. And so we've got to make sure it's ready for scaling. We've got to make sure that we've got the right people in the right roles. We've got to make sure that we are, have the right facility available at the right capacities as that continues to scale. And we've got to increase our content per vehicle, both in The UK and abroad. We've got our first products and production into some new OEMs across Europe, and now we need to make sure that we leverage those opportunities further. And then in FY 2029 is to lead. I'll make no secret in the fact that our ambition is to become the leading European supplier of benefit to acoustic and thermal materials.

20:48 We need to make sure that we do that. We need to make sure we deliver that to both our customers and to our shareholders as well as internally. And to do that and if we can manage that, then we firmly believe we'll be delivering sustainable shareholder value. And so that's sort of for you the two years that have gone in the next three years in terms of sort of where we want to do, how we want to go, and where we want to be. And finally, ambition. We get asked where we'd like to be over a period of time. And I'd love to tell you that we'll be, you know, I'd love to be a truth teller or a fortune teller and tell you exactly what the future holds. None of us can do that, but I can absolutely tell you our our our ambition is to become Europe's leading supplier of innovative acoustic and thermal materials, living sustainable growth for our customers, employees, and shareholders.

21:40 And for us, that means that we will become the customer of choice for sorry, the supplier of choice for our customers. And not only that, we will be leveraging additional opportunities both organically and inorganically across the business. And that concludes the formal part of our presentation. That's great. Thank you very much for your presentation. Ladies and gentlemen, please do continue to submit your questions just by using the q and a tab situated on the right hand corner of your screen. Just while the company take a few moments to review those questions submitted today, I'd like to remind you that a recording of this presentation along with a copy of the slides and the published q and a can be accessed via investor dashboard. As you can see, we have received a number of questions throughout today's presentation. If I please ask you to read out the questions and give responses where appropriate to do so, and I'll pick up from you at the end. Sure. So we have a first question, which is when you say more diluted quote with your largest customer, is that direct or overall?

22:36 The suggestion is much of the tier work could still end up going into them. So first of all, James, thanks for the question. Really good question. Actually, we don't measure in when we talk about the dilution, we don't measure in terms of whether we're selling to the tier or whether we're selling to the OEM. We actually measure by the overall OEM. So whether that material is going with us as a Tier one supplier going direct to the OEM or whether we're the Tier two or even sometimes a Tier three, we still measure against the OEM. Last year, over the last twelve months, we've been at about 44% in terms of our largest customer. And whilst we expect that to increase again because they won't have the cyber attack, the impact of the cyber attack in the next financial year, we expect that to remain at around or below 50%.

23:25 And over the coming years, we expect that to continue to dilute further. We've got a question from Matt. Germany is increasingly becoming a growth engine for the group. Where do you see the biggest opportunities across Mainland Europe over the next three to five years? So I think it's interesting when you say three to five years, to be really honest. If I look at the first the next three years, it's with the existing OEMs who are already there, who we've already engaged with. So that can be the VW Group, the BMW Group, and sort of everybody that's associated with that. So let's call it the existing OEM base across Europe. There are a couple of OEMs. I could use Mercedes as the example that we really don't have good penetration with today and we need some better and further penetration with.

24:13 But you'll see that that's predominantly within sort of that German premium side of it. If you look into that five year base, one of the most interesting things for us is that the Chinese manufacturers look to localize. They are going to have requirements to source some of their content from within Europe in order to get the right level of credits. And if they are doing that, then our type of material, which are effectively they're very dense and very light in sorry. They're very dense in terms of their their size. They're they're they're large, but they are they're very light. And so what that actually means is they're expensive to ship. And so therefore, you need to be close to the OEM, you need to be placed close to the place where that material is used. So actually, we think that there could be some opportunity for us as those new factories are built or as they start to take over some of those older plants. You know, it's been announced that Geely, for example, will be using the Nissan factory in Sunderland.

25:13 So actually, some of that localization content, there could be some real opportunities for us. And let's come back for round two. You mentioned opportunities for selective consolidation. What characteristics would you look for in acquisition targets? And where might shareholders expect activity in this area? Thanks, Matt. I think I'll probably ask them to split it in the the opposite direction and and do the second part first. So in terms of when might shareholders expect our activity, that's dependent on the opportunities that come. As I said, we're we're looking at both, distressed asset acquisition. We've looked at a number over the last twelve months. They regularly come across my desk. We have a number of sources to understand when, where, and how there are distressed asset within the automotive industry, whether that's from restructuring experts, whether that's from the OEMs themselves who are interested, whether we would be we would have an interest in taking over a company or whether that's from companies as they enter admin themselves.

26:18 Obviously, I can't dictate or determine exactly when they're going to do. But what I can say is we've seriously looked at several over the last twelve months and we have come very close on a couple of occasions. We are being selective because we're conscious of the fact it needs to be the right opportunity for us. So that kind of links back into the first one. So what are we looking for in terms of characteristics? And I think there's sort of two ways of looking for it. We need a organization that's going to be additive to our group. We need it to be able to contribute in a meaningful way that's both in revenue and the ability to be profitable. Now, obviously, a business that is in distress will need some restructuring in order to get us to there, but Des and I have spent an awful lot of time. We spent we've done the hard work within AUTINS and so therefore firmly believe we have the ability to do so in another organization with the support of the key customers of of those companies.

27:16 The other, thing that we would look to do is somebody who will either vertically, integrated with us, so somebody who potentially we supply our components to already or who we buy raw materials from or somebody who was within our sphere, so somebody who has similar processes within our to our organization. And the reason for that is, as I said, we recognize there is consolidation going to come across within the automotive industry. There is too much capacity. And so therefore, if we can we can look at, let's call it, some of our competitors, particularly across Europe, that may well be advantageous to us rather than going and buying more additional capacity for ourselves. Next question comes from Chris. He starts by saying congratulations on delivering the first profit since 2017.

28:08 Yeah. Yeah. What are the key operational changes that give you confidence of this marks a permanent step change rather than a one off improvement? So I think in terms of sort of operationally, we one of the things we do is we measure revenue per employee. And over the last two years, that's almost doubled in terms of the revenue per employee across our organization. And a lot of that comes from the fact that we are being more efficient and effective in our manufacture of our key Neptune material. So for those of you that don't know, we manufacture the raw material itself, into large rolls. They're about 1.8 meters wide and by about 70 meters long. And then we also convert the very vast majority of that material ourselves within our factory.

28:58 And so by changing and improving the way we manufacture that raw material, it doesn't just our result in terms of the manufacture of the raw material. It also impacts our result in terms of things like our scrap level, in terms of our processing time and our ability to be more efficient and effective across the organization. In terms of a permanent step change rather than a one off, as I've said, you know, we are absolutely responsible for the value per vehicle. We are accountable. My commercial teams are accountable for how the wins that they get in order on each platform. The things that we can't control are how many of those vehicles are made. So the target, the work thing that we measure and the things that we look at are, are we increasing our value per vehicle on the next generation of car that comes through as opposed to the current vehicle that's about to phase out of production.

29:54 In Europe, I would probably say right now we're standing still sorry, in The UK, I would say we are standing still. In Europe, we are very definitely growing that value significantly. Not only that, as we look at an AUTIN and AUTRIM component, the value of those, the selling price per component is significantly higher than a standard piece of Neptune. So that again allows us to understand and know that we're going to improve our revenues and therefore improve the margins that we drop through. Okay. Second question from Chris, it's around dividends. Although no dividend is proposed, what financial milestones would need to be achieved before the board would consider introducing shareholder distributions? It's a really good question.

30:41 The board have discussed this in terms of what we would be looking for. And within the you know? And, absolutely, there is a plan for us to start looking at this. I think as sort of CEO, and I suspect that Des would say the same thing, we need to be sustainably profitable. And to take your previous question, we need to make sure and be able to demonstrate to the market and demonstrate to to the wider environment that this isn't a one off or a two off thing, that this is actually something that's sustainable over that longer term. We need to make sure that we are comfortable that we have strengthened our balance sheet to a point where we are comfortable with moving cash out of the organization and returning profits to the shareholders.

31:28 What I will say is that it is firmly within our plans to do so, but obviously I can't give a specific timeline for it right now. There's no I don't need to Yes. I completely agree with your comments. We have discussed that, and we'd very much be looking forward to making such recommendations as soon as we have confidence in the consistency of our profitability. And, yes, I think when we see one thing I can say as a finance person is what suppose a reduced net position will make it look, obviously, more prudent for us as a a management team to recommend shareholder distribution.

32:18 Okay. That's the end of the questions. Mhmm. Well, that's great. Thank you for answering all those questions you can from investors. And, course, the company can review all questions submitted today, and we'll publish those responses on the investor meet company platform. Just before redirecting investors to provide you with their feedback, which is particularly important to the company, Andy, could I please just ask you for a few closing comments? Yeah. Firstly, to everybody who's joined us, thank you for your time. We do appreciate it. We do recognize you sort of have that choice of whether to join these calls or not, and very much appreciated your interest in our organization. Our ambition is still on the screen, and that's absolutely the way that we are driving our organization and our business to be and really hope that some of you, already are on the journey or or will would like to come on that journey with us because we genuinely believe that there's significant shareholder value to be created.

33:07 I will note and you'll see this is Slide 10 of 21. There's some additional information about in the slide decks about what we do and also some more details on our financials for those of you that would like to go and review the presentation afterwards. And absolutely, we'd be happy to take any more detailed questions should you have them. And thank you very much, everyone, for your time. That's great. Thank you for updating investors today. Now please ask investors not to close this session as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations. This may take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team, we'd like to thank you for attending today's presentation, and good afternoon to you all.