20 January 2021    

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 twelve months ended 30 September 2020.

Financial Overview

·    Revenue decreased to £21.5 million (FY 19: £26.9 million)

·    Adjusted Gross Profit¹ decreased to £6.0 million (FY 19: £7.5 million)

·    Reported EBITDA¹ increased to £1.1 million (FY 19: EBITDA £0.0 million)

·    Cash flow from Operations² increased to £1.5 million (FY19: loss of £1.0 million)

·    Operating Loss reduced to £1.3 million (FY 19: loss of £1.6 million)

·    Adjusted Operating Loss³ £0.6 million (FY 19: loss of £0.8 million)

·    Reported Loss after tax £1.7 million (FY 19: loss of £1.5 million)

·    Reported Loss per share reduced to 4.35p (FY 19: loss of 6.25p)

·    Adjusted net debt⁴ reduced to £1.9 million (FY 19: £2.3 million)

Operational Highlights

·      H2 revenues having been impacted by the pandemic were £7.8 million (H120 £13.2 million) but H2 reported EBITDA improved to £0.83 million (H120 £0.27 million) and recurring overheads were reduced by £1.0 million.

·      Gross profit¹ margins remained steady at 28.0% (FY 19: 27.9%).

·      Positive reported operating cash inflow of £1.5 million (FY19 outflow £1.0 million) of which £0.9 million resulted from improved working capital.

·      £3.3 million of new finance facilities secured, including £2.75 million under UK CBILS and €0.3 million in Germany under a similar scheme, and £0.3 million trade purchases loan facility.

·      Additional £1.5 million loan secured with Midlands Engine Investment Fund (MEIF)

·      Neptune pipeline remained strong at £35 million with £8.0 million of Neptune parts already in production and additional new orders won, but not yet in production.

·      PPE products were a feature in H2, generating £1.2 million revenues in H2.

·      Germany continued to win new business in automotive and flooring. Revenues increased to £4.6 million (FY19 £4.3 million) with EBITDA strongly ahead at £0.4 million (FY19 £0.1 million).

1: Adjusted Gross Profit excludes £0.2 million exceptional inventory impairment and a further £0.3 million of Exceptional restructuring costs are excluded from EBITDA (FY19: £0.4 million). The adoption of IFRS16 in FY20 has improved EBITDA by £1.0 million.

2: The adoption of IFRS16 has improved the reported Cash from Operations by £0.76 million.

3: Adjusted Operating Loss excludes all exceptional costs as per note 1 above, and amortisation relating to acquired intangible assets recognised as a result of the Group's conversion to IFRS at IPO of £0.2 million in both years.

4: Net debt is cash less bank overdrafts, invoice discounting, hire purchase finance and excluding IFRS16 calculated lease liabilities.

Gareth Kaminski-Cook, Chief Executive, said:

"Despite the unprecedented challenges faced this year we have still delivered on many of the performance targets we set ourselves a year ago. Although our financial performance has been impacted by these challenges, this really was a year of two halves: with H1 trending on track to meet our full year expectations in the core auto business; and H2 proving that Autins has the agility to adapt to sudden changes in the macro-economy and rapidly make significant operational and financial adjustments which included securing government support funds. 

"The strategy, therefore, does not change.  We will leverage Neptune to win market share in automotive, leverage our acoustic and thermal expertise to accelerate growth in non-auto markets and drive down our operational costs."

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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 also the sole European manufacturer of the patented Neptune material. Neptune is a lightweight, high-performance acoustic material which offers superior acoustic and thermal properties. It is suitable for a range of applications where acoustic absorption is required. This market-leading product is manufactured in the UK.

Chairman's Statement

"I am proud of the leadership and business agility that the Group has shown to navigate through the past few months. From a low point in April, when there were widespread plant shutdowns throughout our core customer base, we have seen recovering sales demand in the final quarter."

Our Key Strengths

·      Specialist market applications; 

·      Market-leading performance materials;

·      Increasing OEM & Tier approvals;

·      Established European manufacturing and technical support;

·      Proven expertise in NVH consultancy;

·      Focused NVH specialist supplier; and

·      Acoustic and thermal problem solver.

People

2020 has been unprecedented. The global Covid-19 pandemic has significantly affected all geographies of our operations in a way that was unimaginable as we began the financial year. I must begin this review with a sincere "thank you" to all Autins' staff who have collectively reacted so well to events and helped to mitigate the consequences of the pandemic on the business. Our staff have shown critical, key qualities in the past few months. I have seen decisive leadership across the Group, enhanced communication (despite workspace restrictions), a willingness to adapt to change and great resilience (especially from our many staff who had the uncertainty of being on furlough). Adversity shines a spotlight on the true calibre of an organisation. I am truly grateful to all our staff for their understanding, co-operation, support, patience and ingenuity over the past months. We have a great team at Autins and that bodes well for our future!

In January 2020, we welcomed Kamran Munir to the Group as Chief Financial Officer. Kamran has provided additional expertise at cost control and operational financial management. He has already proved to be a valuable addition to the executive team, ensuring heightened financial discipline and securing additional liquidity during the year.

In light of market conditions, the Board unanimously agreed to take a 20% reduction in salary for the second half of the year both to conserve cash and to align itself with our wider workforce. At the peak, we had over 90% of employees across the Group on furlough.

Financial performance

Group sales for the year were £21.5million, 20% down on FY19. This was the result of extended and unforeseen shutdowns at the production plants of our key OEM automotive customers from the end of March, as a consequence of the global Covid pandemic.  However, sales did start to recover in the final quarter of the year, although they remained below pre-Covid expectations.

Our German subsidiary continued to gather momentum during the period with overall sales of £4.6 million (2019: £4.3 million).  This represents a very strong performance in light of the market conditions exceeding prior year for both revenue and EBITDA.

Our focus on operational and working capital improvement continued throughout the period in difficult circumstances.  This was evidenced by our adjusted gross margin remaining consistent at 28.0% (FY19: 27.9%) despite lower volumes and a disrupted operating pattern.  This resulted in reported EBITDA of £1.1 million (2019 £nil), primarily reflecting the impact of the adoption of IFRS 16, and enabled the Group to report £1.5 million of operating cash inflow for the year.

The operating loss for the Group was £1.3 million for the year (FY19: loss £1.6 million).

The Board has continued to focus on increasing the Group's liquidity and cash balances during the year. In January, we agreed a £1.5 million Midlands Engine Investment Fund loan which has been fully drawn down. In addition, by July, the Group secured CBILS (or other territory equivalents) loans of £3.0 million. These loans have significantly improved the Group's liquidity and working capital position.

Strategy

Despite the uncertainty created from the Covid pandemic, our overall strategy remains intact. We remain committed to becoming a leading noise, vibration and harshness ('NVH') specialist to European automotive markets, focusing on the new NVH challenges arising from the move to electric and hybrid vehicles. Our proprietary Neptune, melt-blown material continues to provide opportunities to supply new customers due to its specific acoustic and thermal performance and its lighter weight. In the year, we have increased the number of Neptune material and component customers by 45% to 42, with 27 in UK, 11 in Germany and 4 in Sweden.

We also continue to focus on diversifying our NVH expertise to non-automotive markets. We were successful in the year in securing supply of our flooring products to Unilin and IVC, subsidiaries of the world's largest manufacturer, Mohawk. Our initiatives to accelerate non-automotive sales were interrupted by market conditions in the mid-part of the year, but increased in momentum towards the end of the year.

We have reviewed our Environmental, Social and Governance framework during the year and are committed to the strategic importance of continuous improvement in these areas. We have introduced further effective measurement to challenge ourselves to minimise the environmental impact of our business.

Corporate governance

The Board is 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 undertook an annual review of performance in September. This was a useful exercise to understand how the Board can further develop as a team and highlight areas of governance that can be improved to assist the Group to manage its risks and adapt to change.

Dividend

In light of the impact that the Covid pandemic has had on this year's performance, no final dividend is proposed.

The Board will continue to monitor net earnings, gearing levels and expected capital requirements with a view to reinstating its progressive dividend policy at the appropriate time.

Outlook

The Group will continue to focus on operational improvement, cash conservation, sales growth and diversification of customers and markets.  Notwithstanding the ongoing uncertainty surrounding Covid, the Group has improved its liquidity position and the Board anticipates recovery in sales volumes and profitability for the Group from FY20 levels, due to the full year effect of new customer wins and continued strategic progression and a reduced negative impact from the Covid pandemic. However, there remains a heightened level of forward-looking risk until there is more certainty of the impact of the ongoing effects of the Covid pandemic, with scope for further lockdowns, and the transitional effects of the recently announced Brexit deal.

Given the continued uncertainty relating to the impact of the ongoing COVID pandemic on the automotive sector at the current time, the Board considers that it is prudent to continue the suspension of guidance to the market.

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 wide range of industry applications including automotive, flooring, office furniture 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 truly European business.

Despite the unprecedented challenges faced this year we have still delivered on many of the performance targets we set ourselves a year ago. Although our financial performance has been impacted by these challenges, this really was a year of two halves: with H1 trending on track to meet our full year expectations in the core automotive business; and H2 proving that Autins has the agility to adapt to sudden changes in its business model and macro-economic circumstances requiring significant operational and financial adjustments, as well as securing government support funds. We continue to win new Neptune business showing it is a winning technology. This all bodes well for 2021.

First half 2020

Last year I wrote that management would focus on three areas: margin improvement, growing the customer base and leveraging our unique Neptune technology to expand the business.

In December 2019, I was pleased to announce the appointment of Kamran Munir as Group CFO. By the half year Kamran's impact was already being felt, with operational efficiency improvements consistently delivering a gross margin above 30% and management actions to further reduce overheads flowing through to the bottom line. In the half year we successfully secured contracts with new customers across a number of important target industries including automotive, commercial vehicles and office pods and our Neptune revenues increased by £1.6 million to £6.5 million on an annualised run rate, based on respective customer expectations. 

Second half year 2020

The second half of the year was dominated by the Coronavirus pandemic. The impact on the business was immediate with sales to automotive clients coming to an abrupt halt following the widespread shut down of car plants for the period from the end of March until early July.  Despite the majority of our staff, more than 90% at the high point, being furloughed throughout this period, the Covid pandemic has had a large negative financial impact caused by estimated lost revenue of approximately £7.0 million against internal forecasts.

Autins responded quickly to protect cash and pivoted the business to develop new solutions; in particular, the development and production of face masks using our Neptune melt-blown technology and the production of foam components for face visors.  Sales of the Autins' face mask grew rapidly during the summer PPE shortage, peaking in June. Autins was also selected to supply cut foam parts to a visor manufacturer as part of an NHS-contract.  We began supplying within 1 week of the enquiry and subsequently supplied over 7 million parts.

We are proud of how we rapidly leveraged Autins' skills and equipment to supply essential PPE during a global crisis and generated a new stream of cash into the business.  However, this is a highly competitive market with an entrenched existing supply chain and therefore we anticipate that PPE will only provide very limited ongoing sales opportunities for the Group.

Automotive production recovered from July onwards.  By year end, the UK and Sweden were approximately 70% of pre-Covid levels, whilst Germany was above 85%.  Following a review of staffing requirements, the Company implemented a restructuring process in August resulting in a headcount reduction of approximately 10%.

We have secured government-backed financial support in the UK, Germany and Sweden, which has given the Group the funding it needs to protect the business whilst its core markets recover.

All these actions were testament to the good leadership, agility and creativity throughout the Company and confirms the versatility of Neptune in new markets. With this in mind, we have since recruited a New Business Development Manager for the UK, who will bring focus and expertise to sustain and accelerate our growth into new markets and new industry segments.

Review of the year

During the summer, our German business won its biggest ever flooring Decibex contract, to supply into the world's largest flooring manufacturer, Mohawk Group. In Sweden, via our tier partners we were awarded work with truck manufacturer Scania - and with Volvo for their new Polestar and XC90 models. In the UK we were awarded the contract to supply Grupo Antolin with Neptune products for the Mini, part of the BMW Group, and have since started making and delivering these parts for running production.

The German business managed to surpass all its original budget targets for the year, with new contracts for Neptune, and in flooring with the Decibex product range, more than offsetting the market declines in automotive.

This year we are reporting more fully on our approach and performance regarding ESG (Environment, Social and Governance). We are an international business operating in the global community and will take our responsibility to be a good corporate citizen seriously.

In a year that has tested the agility and resilience of leadership, Autins has shown that it can adapt quickly to protect cash and find new sources of revenue. Whilst Covid continues to create uncertainty, the announcement of the Brexit deal has helped to ensure EU trading stability continues. Sales recovery will be accelerated by recent wins in both the automotive and non-automotive markets, which will drive better returns from the improved cost structure, as volumes are able to recover.

The strategy, therefore, does not change. We will leverage Neptune to win market share in automotive, leverage our acoustic and thermal expertise to accelerate growth in non-auto markets and continue to drive down our operational costs.

Gareth Kaminski-Cook
Chief Executive Officer

Financial Review

The Group's primary focus in H1 was to continue new contract growth and simultaneously improve the cost structure by more than £2 million p.a. As reported for H1, the latter was achieved through volume related improvements in materials, labour productivity, and reduction in overheads of £1.0 million including restructuring staff positions. Underlying working capital improvements in stocks and debtors of more than £1.0 million were also realised. Significant new automotive OEM contracts continued to be won in UK and Germany, and £1.5 million of long term MEIF funding was also secured. 

In H2 our diversification journey continued. Significant growth in non-automotive applications was achieved. New PPE products achieved £1.2 million of revenues and new flooring sales at a rate of £1.8 million p.a. were also secured. Critical actions were also needed to work through Covid trading conditions. Approximately £1.0 million (UK £0.7 million) of furlough, and overseas equivalent, income was received. Long term CBILS, and overseas equivalent, loans of £3.0 million were successfully obtained. Over the full year reported operating cash-flow for the Group was £1.5 million and net debt, excluding lease liabilities under IFRS16, was improved by £0.4 million.

Revenue

During H1 revenue was £13.2 million (H119: £13.6 million). New automotive contracts were secured and significant additional customer tooling was sold that will drive future growth. We had additional growth in Sweden and Germany, and growth in non-automotive markets. This was offset by a reduction in volumes from our key customer consistent with the status of the overall automotive market. There was a small initial adverse impact in March 2020, as volumes started to drop in line with Covid trading patterns from our key customers.

H2 saw significant disruption. Our key customer had substantive shutdowns and volume reduction for the majority of the April 2020 to August 2020 period. Other key OEMs followed a similar pattern that impacted production and sales in UK and Sweden.

The German business had less disruption with automotive reductions being much less than UK and Sweden. With new automotive business wins coupled with non-automotive growth in flooring products, Germany exceeded budget and was ahead of prior year revenues at £4.6 million (FY19: £4.3 million).

New PPE products were developed and sold in H2 20. This realised £1.2 million of short term revenues in the UK at positive margins. The new flooring business was secured at a rate of £1.8 million per annum. With Covid trading conditions impacting the group, H2 revenues were £7 million lower than forecast at £8.3 million (H2 20: £13.1 million).

We continued with our strategy to diversify across market sectors and reduce reliance on our key customer. Non automotive revenues in FY20 were 14.4% of Group sales at £3.1 million (FY19 7.4% and £2.0 million). In the year, we continued winning more OEM contracts and also had stronger non-automotive sales than before. This will give an improved combined position as and when OEM production volumes recover.

Gross margin

Automotive and primary business adjusted gross margins improved to 28.0% (FY19: 27.9%). This was the net result of 3.8% growth in margins to 30.9% as reported pre-Covid in H1 combined with the significant reduction in volumes in H2 as a result of the Covid pandemic. The H1 improvements were achieved through significant improvements in materials costs, and labour productivity and cost downs in production running categories. Materials costs improvements in H1 include better sourcing and utilisation of materials, but also additional use and direct sale of our own manufactured Neptune material, which improved volume overhead absorption for our Tamworth facility.

As reported in H1, in total these actions combined were showing through at an improved rate of more than £1.0 million per annum. In H2 further cost reductions continued, however, these were offset by production absorption losses in our main business segments as revenues were severely impacted as described above, by the Covid trading environment.

There was also some small erosion from certain material price increases and associated adverse sourcing and import duty impacts related to materials types also used in global PPE applications that were subject to global supply constraints. Whilst the total value of this was less than £0.1 million, this still equates to a H2 erosion of 1.2%. Margins in Germany improved from 24% to 28% year on year, albeit growth in Germany's sales are dilutive to the Group's total gross margin percentage. Gross margins in Sweden improved to be above 40%, increasing from 36% in FY19.

In H2 new PPE products were sold at positive margins. This derived primarily from our ability to further utilize our own produced Neptune material. This gave us a "speed to market" and associated flexibility advantage in our commercial proposition and further improved Neptune production absorption. NHS destined PPE component revenues were derived on a materials free issue basis utilizing existing group equipment including that from our Swedish facility which gave a significant marginal absorption advantage. Combined, the PPE revenues resulted in a 1.7% full year gross margin improvement. All of the above factors combined yielded a net gross margin of 28.0%, being a narrow improvement over FY19.

Future improvements from automation and improved site layouts are expected to deliver further savings during FY21. Projects to achieve this are already in progress. Capital investment has been budgeted and can be achieved within expected operating cash-flows.

The Group should continue to have further success in securing component contracts using Neptune materials, which will improve gross margin from volume absorption. Neptune being a melt-blown and nonwoven material was used in our PPE and non-automotive products. Our core strategy remains to grow these volumes. In addition the Group continues to optimise existing and future component and materials requirements, both with existing suppliers and newly identified ones that should help improve sourcing leverage.

EBITDA and operating profit

FY20 EBITDA was £1.1 million (FY19: £0.0 million) after adjusting for exceptional and non-recurring costs as noted below, with an adjusted operating loss of £0.6 million (FY19 loss of £0.8 million) also allowing for the amortisation and impairments relating to intangible assets described below.  The reported statutory operating loss was £1.4 million (FY19: £1.6 million).

The adjusted measures are stated after excluding items that management consider to be a result of significant one-off events, including the restructuring costs associated with the detailed review of operations, following the new CFO appointment, which included employee severance costs and the planned scrapping of inventory to enable improved floor space utilisation and so reduce premises costs.  Exceptional costs relating to restructuring were £0.3 million, and exceptional inventory impairments were £0.2 million.  Management information used in running the Group is measured with a focus on the underlying operational performance and, as such, these items are excluded.

The Board acknowledge 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.

FY20 EBITDA also benefits from £1.0 million of IFRS16 adjustments, as compared to FY19. Without the benefit of IFRS16 reporting the adjusted EBITDA would be narrowly positive at £0.04 million. £1.0 million of  employment costs were met by income from the government job retention scheme in the Covid disrupted periods, and their overseas equivalents in Sweden and Germany.

Exceptional and adjusting items

As noted above, the Group incurred an exceptional cost of sales of £0.16 million (2019: £nil) and exceptional administrative costs of £0.29 million as a result of a change of Chief Financial Officer (FY19: £0.43 million included other restructuring changes). The former Chief Financial Officer, James Larner, left on 31 December 2019, and Kamran Munir was appointed from 1 January 2020.

To be consistent with analysts measure of the Group's performance, amortisation of £0.2 million (FY19: £0.2 million) in relation to acquired intangible assets recognised as a result of the Group's conversion to IFRS at IPO (having previously being held as non amortising Goodwill) and an impairment of previously recognised development costs of £0.0 million (FY19: £0.1 million) have been excluded from adjusted operating profit. The adjusted operating loss, allowing for exceptional costs and amortisation, would be £0.65 million (FY19: £0.8 million).

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 the access to low cost material and finished component sources provided by its other parent Indica Industries PV based in India.

Indica Automotive's turnover decreased by 30% to £2.1 million (FY19: £2.9 million). H120 revenues were £1.5 million (H1 19: £1.5 million), and significant revenue reduction resulted in H2 as call offs for existing parts were reduced in the Covid trading period. Strong margin and overhead cost control actions were taken by management, and £0.05 million of UK furlough income was received, helping to generate a profit after tax of £0.2 million (FY19: £0.4 million).

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 Kronor 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 Euro. The Group also has Euro based purchases for materials and production, including equipment. As Euro sales are expected to increase from our German business, this would allow us to 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 mean that the Group's result in both years 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 may implement a formal hedging strategy.

Net finance expense

Finance expense increased to £0.5 million (FY19: £0.2 million) as a result of the adoption of IFRS 16 and the inclusion of £0.3 million of financing charges previously presented in operating lease expenses. Improvements resulted from a deliberate strategy to optimise working capital, primarily in stocks and debtors and to reduce Invoice Financing (IF) facility draw-down reliance, yet simultaneously improving the payment cycle to trade creditors. Short term overdrafts were also repaid in the UK in January 2020 with a £0.85 million reduction across the Group. The IF facility was repaid in August 2020, and was not in use as at September 2020. Negotiations with our Neptune partner IKSung also meant that our direct open credit with them was extended for all of FY20, allowing the bank trade finance facility to be fully repaid. The Group secured a 5 year MEIF £1.5 million loan, at a coupon rate of 7.5% in the year which was fully drawn down by February 2020. CBILS loan funding of £2.75 million was also received in July 2020 at a net £zero cash interest cost for the first 12 month period. The accounting for this, results in recognition of the interest waived of £0.1 million as a form of grant income with an equal expense over the year to July 2021. Car and equipment finance leases reduced in FY20 as some agreements completed during the year, with no renewal, which reduced interest costs. Accordingly, the net finance expense significantly reduced in H2 to  approximately£70,000, compared with  approximately£120,000 in H1.

An analysis of the net finance expense is presented in the Annual Report and Accounts.

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 is considered to be supportable based on the Group's expected trading.

The Group's technical R&D and applications teams have, as in prior years, continued to enhance materials, improve processes and develop new products. The Covid trading pattern and significant disruption to revenues has meant that larger net losses prevail than were previously expected. Accordingly, the Group has revised its strategy and will now utilize the additional losses to obtain actual R&D tax credit cash refunds to optimize the cash position. A revised R&D claim for the year ended September 2018 was submitted in FY20 and a repayment of £0.1 million has subsequently been received. Similarly a claim for the year ended September 2019 will be revised and submitted on this basis.   Although at a lower level than 2019, R&D has continued 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 unrecognized deferred tax asset of £0.77 million in the UK (2019: £0.30 million).

The Group's overseas subsidiaries continue to have brought forward taxable losses available which will, in the short term, offset expected trading profits in Sweden and Germany that are higher relative corporation tax territories than the UK. Having reviewed recent trading performance for the European entities, the Group has fully recognized the remaining losses in Germany as a deferred tax asset and a degree of those in Sweden. The Group has a further £0.03 million (FY19: £0.13 million) unrecognised tax asset in respect of Swedish tax losses.

Earnings per share

Loss per share was 4.35 pence (FY19: Loss per share 6.25 pence) reflecting the loss in the year. The weighted average number of shares was 39,600,984 in the year (FY19: 17,500,000).

Dividends

The Board are not proposing a final dividend for the current year (FY19: £nil) and no interim dividend (FY19: no interim dividend) was paid.

Net cash/(debt) and working capital

The Group ended the year with net debt of £1.9 million (FY19: £2.3 million) excluding the IFRS16 calculated lease liabilities of £5.8 million.

The Group secured a £1.5 million 5 year term loan from MEIF in H1. £2.75 million of UK CBILS loan funding was received into the Group in July 2020. Of this £0.75 million is a 1 year bullet loan repayable by 30^th June 2021 and a further £2 million is a 6 year term loan with no repayments until July 2021. There is no interest payable for the first 12 months on either loan. Germany secured a local equivalent Government support loan of EUR300,000 that is repayable over 10 years with an interest cost of 1.03% p.a.

The Group has £0.3 million (FY19: £0.5 million) of Hire Purchase agreements in the UK.  Long-term asset backed bank loans in Sweden were substantially repaid in FY20 (FY19: £0.1 million). There were no new hire purchase agreements in the year and £0.1 million (FY19: £0.1 million) of the new short term trade import facility was utilised for Neptune materials purchases but had been fully repaid at the year-end.

The Group has focused on working capital optimisation in the year, this has already been partially described above. Collection of trade debtors improved in the year with a reduction of overdue balances from additional focus and applied resource. Bad debt or credit note provision charge in the year was £0.0 million (FY19: £0.2 million). Some of the prior year provision has been retained against residual overdue invoices which the Group continues to resolve.

Trade creditors have reduced significantly in the year with payments being made to terms, usually on a weekly cycle. Stocks were reduced during H1, but then increased in H2 as we held additional buffer stocks to help ensure supply continuity against the Covid backdrop which disrupted smooth production flow. New PPE items resulted in additional stocks of approximately £0.2 million.

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.

The Group received financing inflows of £4.55 million in the year, of which £3.5 million are long term loans, and the short term overdraft balance was reduced by £0.85 million. Invoice discounting liabilities of £3.7million were repaid but the facility remains fully available at up to £6 million against relevant trade receivables in addition to an unutilised £0.3 million import loan facility. Despite the Covid trading backdrop, the Group reported positive operating cash flows of £1.5 million. Whilst the operating cash flows benefit from a combination of improved working capital and cost management, they are also impacted by the pandemic driven decrease in revenue and associated net investment in working capital together with the change to the treatment of operating lease costs on transition to IFRS16. In addition to the increased focus on working capital management, the Group has also already made annualised savings of some £1 million in overhead costs and improved operational efficiency, with continuing programmes in place to make additional improvements.

At the year end there was £5.6 million of available cash and facility headroom, with £1.1 million of the loans repayable within 1 year, of which £0.75 million is the UK CBILS bullet loan repayable in June 2021.

In undertaking their assessment of the future prospects for the Group, the Directors have prepared trading and cash flow forecasts for the period to 30 September 2022. These take into consideration the current and expected future impacts of the Covid 19 pandemic, diversification of the customer and product ranges and also have regard to the committed business and enquiry levels from existing customers. The Directors have also considered the impact of current and future demand levels for new vehicles, the migration to EV's 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 sensitivities, to the available bank facilities and the related covenant requirements.

The loan repayments and interest costs are expected to be adequately covered by operating cash generation over the period and the Group has significant liquidity headroom within its facilities to accommodate all reasonably foreseeable cash flow requirements in the event of changes to its demand as a result of Covid, Brexit or other economic factors, with flexibility also available to favourably manage the cost base in respect of operating costs, should the need arise.

The most sensitive factor impacting the forecast period, and the continued availability of the current facilities, is the EBITDA covenant in the UK in relation to the £2 million CBILS long term loan. Prior to the CBILS loans being secured, sensitised forecasts were reviewed with the bank and used as a basis for establishing the covenants, which apply to both of the CBILS loans. At the year-end actual UK trading results were approximately £1.4 million ahead of the base forecasts at the EBITDA level. In the next financial year, achievement of the minimum required UK EBITDA, without significant further unplanned cost or efficiency improvements, is predicated on minimum revenue levels of £19.2 million. This compares with UK revenues of £16.8 million in FY20 and £21.3 million in FY19. As commented upon elsewhere in this announcement, significant new contracts have been won since FY19 and, accordingly, the Board are confident the EBITDA target will be met, especially having regard to further additional mitigating actions which remain available to the Group.

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 and to allow for the more volatile demand pattern in the current economic environment.

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 2020 (both existing and generated in the year) by reference to discounted cashflow forecasts for separately identifiable cash generating units. These forecasts are based on Board approved budgets and an assessment of likely conversion from pipeline to revenue.

Having considered the assumptions, headroom and a range of reasonably foreseeable sensitivities indicated by these assessments the Board are able to conclude that the carrying values are fully recoverable.

Capital expenditure

Additions to tangible fixed assets were £0.2 million (FY19: £0.2 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 efficiency is ongoing and the Board expects expenditure to be incurred on an ongoing basis in FY21 in support of further operational gains.

Research and development costs of £0.13 million (FY19: £0.15 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 and Accounts.

Kamran Munir

Chief Financial Officer

Consolidated income statement

All amounts relate to continuing operations.

Consolidated statement of comprehensive income

Consolidated statement of financial position

Consolidated statement of cash flows

For the year ended 30 September 2020

Reconciliation of movements in net cash/financing liabilities

Material non cash transactions

Financing liabilities now include lease liabilities, primarily in respect of property leases, following the adoption of IFRS 16. These were previously only disclosed in operating lease commitments and the discounted liability at the transition date of 1 October 2019 of £6,422,000 is shown in non-cash movements above together with a £14,000 foreign exchange movement.