REG - AB Dynamics PLC - Final Results
24/11/2021 07:00
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RNS Number : 3336T AB Dynamics PLC 24 November 2021
24 November 2021
AB Dynamics plc
Final Results for the Year Ended 31 August 2021
"Robust performance supported by recovering demand and strategic progress"
AB Dynamics plc ("AB Dynamics", the "Company" or the "Group"), the designer,
manufacturer and supplier of advanced testing systems and measurement products
to the global automotive market, is pleased to announce its final results for
the year ended 31 August 2021.
Audited Audited
2021 2020
£m £m
Revenue 65.4 61.5 +6%
Gross margin 56.8% 58.4% (160 bps)
Adjusted operating profit(1) 10.8 11.3 (4%)
Adjusted operating margin(1) 16.6% 18.4% (180 bps)
Statutory operating profit(2) 4.2 4.8 (12%)
Adjusted cash flow from operations(1) 16.0 6.9 +131%
Net cash 22.3 30.0 (26%)
Pence Pence
Adjusted diluted earnings per share(1) 37.4 39.9 (6%)
Statutory diluted earnings per share(2) 13.1 17.8 (26%)
Total dividend per share 4.8 4.4 +10%
(1)Before amortisation of acquired intangibles, acquisition related charges
and exceptional items. A reconciliation to statutory measures is given below.
(2)The prior year comparative has been restated to reflect the write off of
previously capitalised ERP development costs on adoption of the IFRIC update
on cloud computing arrangements.
Financial highlights
· Strong second half performance, managing supply chain disruption
and currency headwinds effectively in order to meet strengthening demand
during the period
· Continued recovery in the Group's markets translated into
improved order intake with positive book to bill ratio across both divisions
· Revenue for the first half of the year was broadly comparable to
H2 2020 with COVID-19 impact continuing into the current year
· Track testing revenue decreased by 4%, impacted by COVID-19
disruption to customer testing activity, although driving robot and Advanced
Driver Assistance System (ADAS) platform revenue recovered well during the
second half
· Laboratory testing and simulation revenues increased by 62% as a
result of significant growth in SPMM and simulation revenues following the
deferments in the prior year and successful sales campaigns
· Reduction in adjusted operating margins to 16.6% driven by
product mix and continued strategic investment in capability to support
long-term growth drivers
· Significant cash generation of £16.0m (2020: £6.9m) leaving net
cash at year end of £22.3m (2020: £30.0m) after funding the acquisition of
Vadotech and investing £6.6m in capital expenditure in the period
· Proposed final dividend of 3.2p per share, with total dividend of
4.8p per share (2020: 4.4p per share) reflecting the Board's confidence in the
Group's financial position and prospects
Operational and strategic highlights
· Further progress made on implementation of strategic initiatives
to enhance commercial and operational capability and provide a platform for
sustainable long-term growth
· New product development continued as planned with successful
launches including high speed ADAS platforms and a next generation simulator
· Growth in recurring revenue to 35%, up from 28% of Group revenue
through acquired businesses and increased sales of service and support
contracts
· Solid performance from Vadotech which was acquired in the second
half of the year
· Significant work undertaken to evolve the next phase of the
Group's strategy, targeting diversification alongside the established pillars
and opening up new markets beyond automotive
· Post year end launch of ABD Solutions, a new business unit
focused on providing retrofit solutions that enable the automation of
conventional off-road vehicle fleets rapidly and cost effectively
Current trading and outlook
· Q1 trading to date in line with H2 2021 exit rate
· Customer operations remain disrupted in some locations, but
underlying demand recovery continues to strengthen with sustainable long-term
structural and regulatory growth drivers remaining intact
· Supply chain disruption expected to persist into the current
year, with further operational initiatives in train to meet demand
· Progress in development of ABD Solutions with investment required
during 2022 to generate incremental growth opportunities thereafter
· Continued innovation and capability investment generating
positive commercial momentum
· Well placed and sufficiently invested to capitalise on
opportunities
There will be a presentation for analysts this morning at 9.30am at the London
Stock Exchange. Please contact abdynamics@tulchangroup.com if you would like
to attend.
Commenting on the results, Dr James Routh, Chief Executive Officer said:
"The Group has delivered another year of strong performance, despite the
ongoing impacts of COVID-19, particularly in the first half of the year. The
second half delivered record levels of order intake, revenue and cash
generation, which provides a strong foundation for continued growth in 2022.
Against the backdrop of continued market uncertainty, the Group continued to
invest in all areas of the business, further supporting our ambitious growth
plans. During the year, we made demonstrable progress in evolving the Group's
strategic direction, both with the acquisition of Vadotech and also through
the launch of ABD Solutions, a major new growth initiative to diversify the
business. The Group also continued to strengthen the operational and
commercial platform of the business through investing in new product
development, capabilities and the senior management team.
Our market drivers remain strong. Against that background and based on the
recent track record of strong order intake and continued strategic investment,
the Board is confident of delivering progress during 2022 and beyond."
Enquiries:
AB Dynamics plc 01225 860 200
Dr James Routh, Chief Executive Officer
Sarah Matthews-DeMers, Chief Financial Officer
Peel Hunt LLP 0207 418 8900
Mike Bell
Ed Allsopp
Tulchan Communications 0207 353 4200
James Macey White
Matt Low
Laura Marshall
The person responsible for arranging the release of this information is David
Forbes, Company Secretary.
About AB Dynamics plc
AB Dynamics is a leading designer, manufacturer and provider of advanced
products for testing and verification of Advanced Driver Assistance Systems
("ADAS") technology, autonomous vehicle development and vehicle dynamics to
the global automotive research and development sector.
AB Dynamics is an international group of companies headquartered in Bradford
on Avon. AB Dynamics currently supplies all the top automotive
manufacturers, Tier 1 suppliers and service providers, who routinely use the
Group's products to test and verify vehicle safety systems and dynamics.
Group overview
The Group delivered a robust performance against continued macroeconomic
challenges due to the ongoing COVID-19 pandemic, in what has been another year
of fluctuating market conditions and change.
The performance during the year was split by two markedly differing halves. As
expected, the first half performance was characterised by ongoing market
impacts from COVID-19, followed by an exceptional second half performance with
the Group delivering record levels of order intake and revenue for a half year
period, despite certain supply chain constraints and the impact of staff
isolation in the UK.
The Group continued to deliver progress against our stated strategic
priorities, with the acquisition of Vadotech delivering both expansion of our
international footprint and increasing our service capability. We have also
expanded our strategy and put in place plans to diversify the business into
large, attractive adjacent markets through our new business unit, ABD
Solutions.
The current market conditions and strong second half order intake performance
provide a solid platform for continued growth and performance during 2022.
Financial performance
The Group results show revenue growth of 6% to £65.4m (2020: £61.5m) with
the significant majority of £38.1m delivered in the second half of the
financial year, which is the highest half-year revenue during the Group's
history. Despite the adverse impacts of UK-based staff isolations, supply
chain constraints and adverse foreign exchange impacts, the Group second half
revenue growth of 42% (H2 2020: £26.8m) was strong, driven by ADAS platforms,
laboratory testing and simulation sales and the acquisition of Vadotech and is
19% higher than the comparable period in the pre-COVID-19 financial year (H2
2019: £32.1m).
Organic revenue decreased by 3%, or 1% on a constant currency basis, with the
first half of the prior year being a particularly strong comparative, having
been concluded before the impact of COVID.
Excluding the distortive H1 comparative, organic revenue has improved,
increasing from £26.8m in H2 2020 to £32.2m in H2 2021, growth of 20%.
The Group continues to increase the proportion of recurring revenue which grew
to 35% (2020: 28%) through a higher proportion of sales relating to software
and services and further enhanced by the recent acquisition of Vadotech Group.
Gross margins reduced by 160 bps to 56.8% (2020: 58.4%), impacted by a higher
proportion of large capital equipment revenues in laboratory testing and
simulation, which are lower margin than the Group's other products and
services.
Adjusted operating profit decreased 4% to £10.8m (2020: £11.3m), a reduction
in adjusted operating margin of 180 bps to 16.6% (2020: 18.4%). The reduction
in operating margin was impacted by the dilution of the gross margin and
continued investment to further strengthen the Group's operational and
commercial platform through investment in senior management, people and
systems.
The Group delivered strong adjusted operating cash flow of £16.0m with the
net cash position at year end of £22.3m (2020: £30.0m) underpinning a robust
balance sheet, despite the acquisition of Vadotech Group for gross
consideration of £17.3m and capital investment in our new Engineering Design
Centre, an expanded test track facility in California and ongoing new product
development, totalling £6.6m.
Net finance costs were £0.4m (2020: £0.4m), with lease interest of £0.1m
and the unwinding of the discounted value of the deferred consideration on
Vadotech of £0.3m.
This left adjusted profit before tax of £10.4m (2020: £10.9m).
The Group adjusted tax charge totalled £1.9m (2020: £1.9m), an adjusted
effective tax rate of 18.2% (2020: 17.7%). The effective tax rate is lower
than the current UK corporation tax rate due to allowances for research and
development and patent box.
Adjusted diluted earnings per share were 37.4p (2020: 39.9p), a decrease of
6%.
Statutory operating profit decreased by 12% to £4.2m (2020: £4.8m) and after
net finance costs of £0.4m (2020: £0.4m), statutory profit before tax
decreased by 14% from £4.3m to £3.8m, giving statutory basic earnings per
share of 13.2p (2020: 17.9p). The statutory tax charge was £0.8m (2020:
£0.3m). A reconciliation of statutory to underlying non-GAAP financial
measures is provided below.
Sector review
The track testing sector delivered revenue of £49.7m (2020: £51.8m), a 4%
reduction on the prior year and a 2% reduction at constant currency. The first
half of the financial year showed a continued impact of COVID-19 with revenues
at £20.9m (H1 2020: £29.6m), with a strong recovery in second half revenues
to £28.8m (H2 2020: £22.2m).
The track testing performance was characterised by a reduction in sales of
driving robots, ADAS platforms and track test services at Dynamic Research Inc
(DRI), offset by the initial contribution from road-based testing at Vadotech.
Driving robot sales reduced by 20% to £16.9m (2020: £21.1m), particularly in
the second half, as lower H1 order intake impacted H2 revenues. Order intake
for driving robots recovered strongly in H2 with full- year order intake
significantly higher than 2020. The Group expects a moderate growth in driving
robots once new regulatory requirements for new ADAS technologies are
released.
Revenues in ADAS platforms reduced 6% to £22.7m (2020: £24.1m) due to the
weaker first half of the financial year with revenue recovering strongly in H2
to £13.1m (H1 2021: £9.6m). Demand for ADAS platforms, particularly the
LaunchPad family of products, continues to build, in particular the Group's
new LaunchPad 80 product used for testing higher speed objects such as
motorcycles. The Group also launched the GST 120 during the year, providing
the ability to test up to 120 kph and providing enhanced deceleration
capabilities through its anti-lock braking system.
The trend towards multi-object test scenarios will further drive demand for a
range of platforms that meet these test requirements, including platforms to
carry a range of objects (e.g. pedestrian dummies, cyclists, scooters,
motorcycles etc) that can operate at a range of speeds and can interact with a
variety of test vehicles from passenger cars to commercial vehicles.
Revenue related to the provision of testing services increased 53% to £10.1m
(2020: £6.6m) due to the impact of the acquisition of Vadotech Group in March
2021, partly offset by a weaker performance at DRI. Track testing operations
at DRI were impacted in H1 by the COVID-19 pandemic preventing physical
testing taking place and the change in the US government delayed the award of
new contracts from the government agency NHTSA.
The laboratory testing and simulation sector delivered strong overall revenue
growth of 62% to £15.7m (2020: £9.7m), through significant growth of 28% in
Suspension Parameter Measurement Machine (SPMM) sales revenue and a very
strong simulation performance, growing by 98%. Many of the H2 2020 deferred
orders for larger capital items such as SPMM and Advanced Vehicle Driving
Simulator (aVDS) were received, which supported the strong revenue
performance.
The growth in sales revenue in laboratory testing equipment (including SPMM)
of 28% to £6.4m (2020: £5.0m) was due to continued strong demand from China,
with order intake continuing through H2 to support the delivery of FY 2022
revenue. The manufacture of the first ANVH test machine to a major automotive
OEM is nearing completion, which contributed to the laboratory testing and
simulation sector performance.
The simulation sector performed very well with revenue growth of 98% to £9.3m
(2020: £4.7m) due to the delivery of several aVDS simulator systems and a
recovery in revenues at rFpro following the delays to the motorsport season in
FY 2020. The outlook for simulation is robust with a strong order book for
aVDS simulators and the market for rFpro simulation software supporting
continued growth.
Strategic progress
The Group continues to make good progress against its stated core strategic
priorities, as well as expanding the strategy to include diversification and
further integrating ESG as a core tenet.
Following a comprehensive review of the potential market for leveraging our
core technologies, the Group established ABD Solutions, a new business unit
focused on the application of robotics technology and control in attractive
adjacent markets to automate selected vehicle applications. Initial market
sectors for ABD Solutions are mining, agriculture, materials handling and
defence applications.
It is important to emphasise that this new business unit is incremental to our
existing business and our previously stated strategic plans around the core
business remain firmly in place. During the year, we continued to invest in
both R&D and capabilities to expand this attractive core market. AB
Dynamics completed the build and fit out of the new Engineering Design Centre
in the UK, housing the engineering teams of AB Dynamics, a simulation
development area and demonstration suite, laboratories and prototyping
facilities. A range of new products were launched to market, in particular,
the LaunchPad 80, Guided Soft Target 120 and aVDS Mk2. All new product
launches have gained significant market traction and provided a strong
contribution to the recent growth in order intake.
Significant ongoing investment has been made in building the bench strength
and capabilities in senior management. During the year, the Group established
a divisional management structure, with the recruitment of senior regional
leadership, and further build out of the corporate team with the appointment
of a Chief Strategy Officer. Additional investments have been made at all
levels of management to ensure solid foundations are established for our
ambitious growth plans.
Acquisitions
During the second half of the year, the Group acquired Vadotech Group for a
maximum consideration of up to €26m. Vadotech Group is a leading supplier of
testing services in the Asia Pacific region, headquartered in Singapore with
key operations in China, Japan and Germany. Vadotech Group expands the range
of services offered by the Group into full vehicle assessments, particularly
to German OEMs, under long-term customer framework agreements and has
established an electric vehicle and e-mobility training centre in Germany. The
acquisition provided a strategically important footprint in the Asia Pacific
region, allowing the introduction of our new divisional operating hub in
Singapore. Vadotech Group has performed well since acquisition and in line
with the Board's expectations.
Acquisitions have and will continue to be a significant part of our overall
strategy.
Alternative performance measures
In the analysis of the Group's financial performance and position, operating
results and cash flows, alternative performance measures are presented to
provide readers with additional information. The principal measures presented
are adjusted measures of earnings including adjusted operating profit,
adjusted operating margin, adjusted profit before tax and adjusted earnings
per share.
This financial information includes both statutory and adjusted non-GAAP
financial measures, the latter of which the Directors believe better reflect
the underlying performance of the business and provide a more meaningful
comparison of how the business is managed and measured on a day-to-day basis.
The Group's alternative performance measures and KPIs are aligned to the
Group's strategy and together are used to measure the performance of the
business and form the basis of the performance measures for remuneration.
Adjusted results exclude certain items because if included, these items could
distort the understanding of the performance for the year and the
comparability between the periods.
We provide comparatives alongside all current year figures. The term
'adjusted' is not defined under IFRS and may not be comparable with similarly
titled measures used by other companies. All profit and earnings per share
figures in this financial information relate to underlying business
performance (as defined above) unless otherwise stated.
A reconciliation of statutory measures to adjusted measures is provided below:
2021 2020
Statutory Adjustments Adjusted Statutory* Adjustments* Adjusted
Operating profit (£m) 4.2 6.6 10.8 4.7 6.6 11.3
Operating margin (%) 6.4 10.2 16.6 7.7 10.7 18.4
Profit before tax (£m) 3.8 6.6 10.4 4.3 6.6 10.9
Taxation (£m) (0.8) (1.1) (1.9) (0.3) (1.6) (1.9)
Profit after tax (£m) 3.0 5.5 8.5 4.0 5.0 9.0
Diluted earnings per share (pence) 13.1 24.3 37.4 17.8 22.1 39.9
Cash flow from operations 14.3 1.7 16.0 6.2 0.7 6.9
The adjustments comprise:
2021 2020
(Restated)*
£m £m
Amortisation of acquired intangibles 4.4 3.5
Acquisition related (credit) / costs 0.8 (1.9)
ERP development costs 1.4 0.7
Inventory impairment - 3.3
Restructuring - 1.0
Adjustments 6.6 6.6
*Comparatives have been restated following the adoption of IFRIC update on
cloud computing arrangements.
Adjustments totalled £6.6m (2020: £6.6m), of which £4.4m related to
amortisation of acquired intangible assets, £0.8m to acquisition costs and
£1.4m to ERP development costs, which, following an update to the accounting
standards in relation to cloud computing arrangements, can no longer be
capitalised.
Return on capital employed (ROCE)
Our capital-efficient business and high margins enable generation of strong
ROCE (defined as adjusted operating profit as a percentage of capital
employed). However, in the years in which we acquire businesses or new
properties, our capital base grows disproportionately with profit, therefore
the ratio will be impacted. The current year has been impacted by the
acquisition of Vadotech and commissioning the new Engineering Design Centre,
accounting for the decrease in ROCE in the year from 15.2% in 2020 to 11.5% in
2021.
Research and development
While research and development forms a significant part of the Group's
activities, a significant proportion relates to specific customer programmes
which are included in the cost of the product. Development costs of £1.2m
(2020: £0.2m) have been capitalised in relation to projects for which there
are a number of near-term sales opportunities. Other research and development
costs, all of which have been written off to the income statement as incurred,
total £0.5m (2020: £0.8m).
Foreign exchange translation has provided a minor headwind on revenue and
profit, with the US dollar, euro and yen all weakening against sterling. On a
constant currency basis, restating the current year at 2021 average rates,
revenue would have been £1.5m higher and adjusted operating profit £0.2m
higher.
Dividends
The Board is recommending a final divided of 3.24p per share giving a total
dividend for the year of 4.84p per share, which is an increase of 10% over the
prior year, resuming the Board's progressive dividend policy.
Summary and outlook
The Group has delivered another year of strong performance, despite the
ongoing impacts of COVID-19, particularly in the first half of the year. The
second half delivered record levels of order intake, revenue and cash
generation, which provides a strong foundation for continued growth in 2022.
Against the backdrop of continued market uncertainty, the Group continued to
invest in all areas of the business, further supporting our ambitious growth
plans. During the year, we made demonstrable progress in evolving the Group's
strategic direction, both with the acquisition of Vadotech and also through
the launch of ABD Solutions, a major new growth initiative to diversify the
business. The Group also continued to strengthen the operational and
commercial platform of the business through investing in new product
development, capabilities and the senior management team.
Our market drivers remain strong. Against that background, and based on the
recent track record of strong order intake and continued strategic investment,
the Board is confident of delivering progress during 2022 and beyond.
Directors' Responsibility Statement on the Annual Report and Accounts
The responsibility statement below has been prepared in connection with the
Group's full annual report and accounts for the year ended 31 August 2021.
Certain parts thereof are not included within this announcement.
The Directors are responsible for preparing the Annual Report and the
financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare such financial statements for
each financial year. Under that law, they have elected to prepare the Group
financial statements in accordance with International Financial Reporting
Standards (IFRS) adopted pursuant to Regulation (EC) No 1606/2002 as it
applies in the European Union and in accordance with international accounting
standards in conformity with the requirements of the Companies Act 2006 and
applicable law and have elected to prepare the Parent Company financial
statements in accordance with UK Accounting Standards and applicable law (UK
Generally Accepted Accounting Practice).
Under Company law, the Directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of the state of
affairs of the Group and Parent Company and of their profit or loss for that
year. In preparing each of the Group and Parent Company financial statements,
the Directors are required to:
· Select suitable accounting policies and apply them consistently;
· Make judgments and accounting estimates that are reasonable and
prudent;
· State whether applicable accounting standards have been followed,
subject to any material departures disclosed and explained in the financial
statements; and
· Prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and the Parent Company
will continue in business.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the parent company's transactions and disclose
with reasonable accuracy at any time the financial position of the parent
company and enable them to ensure that the financial statements comply with
the Companies Act 2006. They are also responsible for safeguarding the assets
of the parent company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
They are further responsible for ensuring that the Strategic report and the
Directors' report and other information included in the Annual Report and
Accounts are prepared in accordance with applicable law in the United Kingdom.
The maintenance and integrity of the AB Dynamics plc web site is the
responsibility of the Directors; the work carried out by the auditors does not
involve the consideration of these matters and, accordingly, the auditors
accept no responsibility for any changes that may have occurred in the
accounts since they were initially presented on the website.
Legislation in the United Kingdom governing the preparation and dissemination
of the accounts and the other information included in annual reports may
differ from legislation in other jurisdictions.
We confirm that to the best of our knowledge:
• the Financial Statements, prepared in accordance with the relevant
financial reporting framework, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company and the
undertakings included in the consolidation taken as a whole;
• the Strategic report includes a fair review of the development and
performance of the business and the position of the Company and the
undertakings included in the consolidation taken as a whole, together with a
description of the Principal Risks and Uncertainties that they face; and
• the Annual Report and Accounts, taken as a whole, are fair,
balanced and understandable and provide the information necessary for
shareholders to assess the Company's position and performance, business model
and strategy.
This responsibility statement was approved by the Board of Directors on 24
November 2021 and has been signed on its behalf by James Routh and Richard
Elsy CBE.
AB Dynamics plc
Consolidated statement of comprehensive income
For the year ended 31 August 2021
2021 2020
Adjusted Adjustments Statutory Adjusted Adjustments Statutory
£'000 £000 £'000 £'000 (Restated)* (Restated)*
Note £'000 £'000
Revenue 2 65,380 - 65,380 61,514 - 61,514
Cost of sales (28,269) - (28,269) (25,592) - (25,592)
Gross profit 37,111 - 37,111 35,922 - 35,922
General and administrative expenses (26,288) (6,630) (32,918) (24,591) (6,574) (31,165)
Operating profit 10,823 (6,630) 4,193 11,331 (6,574) 4,757
Operating profit is analysed as:
Before depreciation and amortisation 13,500 (2,198) 11,302 13,421 (3,025) 10,396
Depreciation and amortisation (2,677) (4,432) (7,109) (2,090) (3,549) (5,639)
Operating profit 10,823 (6,630) 4,193 11,331 (6,574) 4,757
Finance income 15 - 15 218 - 218
Finance expense (91) - (91) (30) - (30)
Other finance expense (332) - (332) (564) - (564)
Profit before tax 10,415 (6,630) 3,785 10,955 (6,574) 4,381
Tax expense (1,895) 1,095 (800) (1,939) 1,580 (359)
Profit for the year 8,520 (5,535) 2,985 9,016 (4,994) 4,022
Other comprehensive income
Items that may be reclassified to consolidated income statement:
Cash flow hedges (31) - (31) - - -
Exchange loss on foreign currency net investments (614) - (614) (1,978) - (1,978)
Total comprehensive income for the year 7,875 (5,535) 2,340 7,038 (4,994) 2,044
Earnings per share - basic (pence) 6 37.7p (24.5p) 13.2p 40.1p (22.2p) 17.9p
Earnings per share - diluted (pence) 6 37.4p (24.3p) 13.1p 39.9p (22.1p) 17.8p
*Restated following adoption of IFRIC update on cloud computing arrangements
(see note 1).
AB Dynamics plc
Consolidated statement of financial position
As at 31 August 2021
2021 2020
£'000 (Restated)*
£'000
ASSETS
Non-current assets
Goodwill 22,221 16,170
Acquired intangible assets 28,282 17,623
Other intangible assets 1,565 460
Investment 12 12
Property, plant and equipment 25,815 24,309
Right-of-use assets 913 701
78,808 59,275
Current assets
Inventories 6,771 9,180
Trade and other receivables 15,500 12,844
Contract assets 4,269 2,926
Taxation 1,443 2,962
Fixed term deposits - 5,000
Cash and cash equivalents 23,282 26,183
51,265 59,095
Assets held for sale 1,893 -
LIABILITIES
Current liabilities
Borrowings - 505
Trade and other payables 10,933 10,387
Contract liabilities 3,568 1,983
Derivative financial instruments 31 -
Short-term lease liabilities 456 473
Deferred consideration 4,929 -
19,917 13,348
Non-current liabilities
Deferred tax liabilities 6,552 2,549
Long-term lease liabilities 511 249
7,063 2,798
Net assets 104,986 102,224
Shareholders' equity
Share capital 226 226
Share premium 62,210 61,736
Reconstruction reserve (11,284) (11,284)
Merger relief reserve 11,390 11,390
Translation reserve (2,414) (1,800)
Hedging reserve (31) -
Retained earnings 44,889 41,956
Total equity 104,986 102,224
*Restated following reclassification of fixed term deposits with a maturity
date of greater than three months at inception and following adoption of IFRIC
update on cloud computing arrangements.
AB Dynamics plc
Consolidated statement of changes in equity
For the year ended 31 August 2021
Share capital Share premium Merger relief reserve Reconstruction reserve Translation reserve Hedging reserve Retained earnings Total equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 September 2019 222 60,049 11,390 (11,284) 178 - 38,252 98,807
Share based payments - - - - - - 1,282 1,282
Total comprehensive income - - - - (1,978) 4,022* 2,044*
-
Deferred tax on share based payments - - - - (974) (974)
- -
Dividend paid - - - - - - (626) (626)
Issue of shares 4 1,687 - - - - - 1,691
At 31 August 2020 226 61,736 11,390 (11,284) (1,800) - 41,956 102,224
Share based payments - - - - - - 1,139 1,139
Total comprehensive income - - - - 2,985 2,340
(614) (31)
Deferred tax on share based payments - - - - 165 165
- -
Dividend paid - - - - - - (1,356) (1,356)
Issue of shares - 474 - - - - - 474
At 31 August 2021 226 62,210 11,390 (11,284) (2,414) (31) 44,889 104,986
*Restated following adoption of IFRIC update on cloud computing arrangements.
The share premium account is a non-distributable reserve representing the
difference between the nominal value of shares in issue and the amounts
subscribed for those shares.
The reconstruction reserve and merger relief reserve have arisen as follows:
The acquisition by the Company of the entire issued share capital of Anthony
Best Dynamics Limited in 2013 was accounted for as a Group reconstruction.
Consequently, the assets and liabilities of the Group were recognised at their
previous book values as if the Company had always been the parent company of
the Group.
The share capital for the period covered by these consolidated financial
statements and the comparative periods is stated at the nominal value of the
shares issued pursuant to the above share arrangement. Any differences between
the nominal value of these shares and previously reported nominal values of
shares and applicable share premium issued by Anthony Best Dynamics Limited
were transferred to the reconstruction reserve.
Retained earnings represent the cumulative value of the profits not
distributed to shareholders but retained to finance the future capital
requirements of the Group.
The items included in the consolidated statement of changes in equity that
relate to transactions with owners are share based payments, dividends paid
and issues of shares.
AB Dynamics plc
Consolidated cash flow statement
For the year ended 31 August 2021
2020
2021 (Restated)*
£'000
£'000
Cash flows from operating activities 3,785 4,381
Profit before tax
Depreciation and amortisation 7,109 5,639
Finance expense / income 408 (188)
Share based payment 1,240 1,282
Acquisition related costs / (credit) 304 (2,548)
Operating cash flows, before changes in working capital 12,846 8,566
Decrease in inventories 2,409 1,992
Increase in trade and other receivables (3,913) (565)
Increase / (decrease) in trade and other payables 2,956 (3,737)
Cash flows from operations 14,298 6,256
Cash impact of adjusting items 1,663 654
Adjusted cash flows from operations 15,961 6,910
Interest received 15 218
Finance costs paid (154) -
Income tax received / (paid) 1,062 (2,229)
Net cash flows from operating activities 15,221 4,245
Cash flows used in investing activities
Acquisition of businesses (14,329) (2,823)
Purchase of property, plant and equipment (5,536) (7,276)
Capitalised development costs and purchased software (1,104) (232)
Net cash used in investing activities (20,969) (10,331)
Cash flows used in financing activities
Net movements in loans (493) 477
Purchase of fixed term deposits - (20,000)
Maturity of fixed term deposits 5,000 15,000
Dividends paid (1,356) (626)
Proceeds from issue of share capital 474 1,691
Repayment of lease liabilities (656) (592)
Net cash flow generated from / (used in) financing activities 2,969 (4,050)
Net decrease in cash, cash equivalents and bank overdrafts (2,779) (10,136)
Cash, cash equivalents and bank overdrafts at beginning of the year 26,183 36,225
Effects of exchange rate changes (122) 94
Cash, cash equivalents and bank overdrafts at end of the year 23,282 26,183
*Restated following reclassification of fixed term deposits with a maturity
date of greater than three months at inception and following adoption of IFRIC
update on cloud computing arrangements.
AB Dynamics plc
Notes to the consolidated financial statements
For the year ended 31 August 2021
1. Basis of preparation
The Company is a public limited company limited by shares and incorporated
under the UK Companies Act. The Company is domiciled in the United Kingdom
and the registered office and principal place of business is Middleton Drive,
Bradford on Avon, Wiltshire, BA15 1GB.
The principal activity of the Group is the design, manufacture and development
of advanced testing and measurement products and services to the global
automotive industry. The Group's products and services are used primarily for
the development of road vehicles, particularly in the areas of active safety
and autonomous systems.
The annual financial statements of the Group are prepared in accordance with
International Financial Reporting Standards ('IFRS') adopted pursuant to
Regulation (EC) No 160612002 as it applies in the European Union and in
accordance with international accounting standards in conformity with the
requirements of the Companies Act 2006 as applicable to companies reporting
under IFRS. A copy of the statutory accounts for the year ended 31 August 2020
has been delivered to the Registrar of Companies. The auditor's report on
those accounts was unqualified and did not contain any statements under
section 498(2) or (3) of the Companies Act 2006.
The same accounting policies, presentation and methods of computation have
been followed as those which were applied in the preparation of the Group's
annual statements for the year ended 31 August 2020, with the exception of
updating accounting policies to reflect changes required by the IFRIC update
on cloud computing arrangements which has given rise to a prior year
adjustment of £0.7m to reduce other intangible assets and retained earnings.
Certain new standards, amendments to standards and interpretations are not yet
effective for the year ended 31 August 2021 and have therefore not been
applied in preparing the annual financial statements.
Going concern basis of accounting
The Directors have assessed the principal risks discussed in note 8, including
by modelling a severe but plausible downside scenario for COVID-19, whereby
the Group experiences:
· A reduction in demand of 25% over the next two financial years
· 10% increase in operating costs from supply chain disruption
· Increase in cash collection cycle
· Increase in input cost resulting in reduction in gross margin to
40%
With £23.3m of cash at 31 August 2021 and a £15m undrawn revolving credit
facility, in this severe downside scenario, the Group has sufficient headroom
to be able to continue to operate for the foreseeable future. The Directors
believe that the Group is well placed to manage its financing and other
business risks satisfactorily, and have a reasonable expectation that the
Group will have adequate resources to continue in operation for at least 12
months from the signing date of the financial statements. They therefore
consider it appropriate to adopt the going concern basis of accounting in
preparing the financial statements.
2. Segment information
The Group derives revenue from the sale of its advanced measurement,
simulation and testing products derived in assisting the global automotive
industry in the laboratory and on the test track. The income streams are all
derived from the utilisation of these products which, in all aspects except
details of revenue, are reviewed and managed together within the Group and as
such are considered to be the only segment.
The operating segment is based on internal reports about components of the
Group, which are regularly reviewed and used by the Board of Directors being
the Chief Operating Decision Maker ('CODM').
Analysis of revenue by country of destination:
2021 2020
£'000 £'000
United Kingdom 4,449 2,146
Rest of Europe 11,352 14,775
North America 15,884 15,606
Asia Pacific 32,717 27,788
Rest of the World 978 1,199
65,380 61,514
No customer individually represents 10% or more of total revenue.
Assets and liabilities by segment are not reported to the Board of Directors,
therefore are not used as a key decision making tool and are not disclosed
here.
A disclosure of non-current assets by location is shown below:
2021 2020
£'000 £'000
United Kingdom 41,174 40,482
Rest of Europe 1,009 747
North America 15,522 17,940
Asia Pacific 21,103 106
78,808 59,275
Revenues are disaggregated as follows:
2021 2020
£'000 £'000
Revenue by sector
Track testing 49,680 51,760
Laboratory testing and simulation 15,700 9,754
65,380 61,514
3. Alternative Performance measures
In the analysis of the Group's financial performance and position, operating
results and cash flows, alternative performance measures are presented to
provide readers with additional information. The principal measures presented
are adjusted measures of earnings including adjusted operating profit,
adjusted operating margin, adjusted profit before tax and adjusted earnings
per share.
The financial statements include both statutory and adjusted non-GAAP
financial measures, the latter of which the Directors believe better reflect
the underlying performance of the business and provide a more meaningful
comparison of how the business is managed and measured on a day-to-day basis.
The Group's alternative performance measures and KPIs are aligned to the
Group's strategy and together are used to measure the performance of the
business and form the basis of the performance measures for remuneration.
Adjusted results exclude certain items because if included, these items could
distort the understanding of the performance for the year and the
comparability between the periods.
We provide comparatives alongside all current year figures. The term
'adjusted' is not defined under IFRS and may not be comparable with similarly
titled measures used by other companies. All profit and earnings per share
figures in this report relate to underlying business performance (as defined
above) unless otherwise stated.
2021 2020
£'000 £'000
Amortisation of acquired intangibles 4,432 3,549
Acquisition related costs / (credit) 840 (1,865)
ERP development costs 1,358 654
Inventory impairment - 3,267
Restructuring - 969
6,630 6,574
Amortisation of acquired intangibles
The amortisation relates to the acquisition of Vadotech Group on 3 March 2021
and the businesses acquired in 2019, DRI and rFpro.
Acquisition related costs / (credit)
The costs relate to the acquisition of the Vadotech Group as well as staff
retention payments to the employees of rFpro. The cash to pay this was
contributed by the previous owner of rFpro prior to acquisition, but as the
employees had to remain within the business for a period prior to receiving
payment, a charge had to be recognised in the income statement in both the
current and the prior year. The credit in the prior year relates to the
release of deferred consideration on the rFpro acquisition which, due to
COVID-19 disruption, was not payable.
ERP development costs
During April 2021 the IFRS Interpretations Committee finalised their agenda
decision regarding configuration and customisation costs in Cloud Computing
Arrangements (Software as a Service, 'SaaS') under IAS 38. The agenda decision
specifies that where ERP systems are hosted on the cloud, no intangible asset
arises and configuration and customisation costs should be written off. The
ERP system currently being implemented is hosted on the cloud; therefore the
capitalised expenditure for development costs has now been expensed.
Inventory impairment
In the prior year, following a detailed review of inventory levels and usage,
a number of items previously included in the carrying value were written off
and the system of accounting for inventory updated to better reflect the
Group's current operations.
Restructuring
The restructuring costs in 2020 relate to rebalancing the skill base of the
business and termination of agents.
Tax
The tax impact of these adjustments was as follows: amortisation £0.7m (2020:
£0.5m) acquisition related £0.1m (2020:£0.1m), ERP £0.3m (2020:£0.1m),
inventory nil (2020: £0.6m) and restructuring nil (2020: £0.3m).
4. Tax
The statutory effective rate of tax for the year is higher than (2020: lower
than) the standard rate of corporation tax in the UK of 19% (2020: 19%).
The adjusted effective tax rate, adjusting both the tax charge and the profit
before tax is 18.2% (2020: 17.7%).
5. Dividend paid
2021 2020
£'000 £'000
Final 2019 dividend paid of £0.028 per share - 626
Final 2020 dividend paid of £0.044 per share 994 -
Interim dividend paid of £0.016 per share 362 -
1,356 626
In respect of the year ended 31 August 2021, the Board has proposed a final
dividend of 3.24p per share totalling £733,000. An interim dividend was paid
of 1.6p per share totalling £362,000. If approved, the final dividend will be
paid on 28 January 2022 to shareholders on the register on 31 December 2021.
6. Earnings per share
Basic earnings per share is calculated by dividing the profit attributable to
equity holders by the weighted average number of ordinary shares in issue
during the period.
Diluted earnings per share is calculated by adjusting the weighted average
number of ordinary shares outstanding to assume conversion of all potentially
dilutive shares. The Company has one category of potentially dilutive shares,
namely share options.
The calculation of earnings per share is based on the following earnings and
number of shares:
2021 2020
£'000 £'000
Profit for the year attributable to owners of the Group 2,985 4,022
Adjusted profit after tax 8,520 9,016
Weighted average number of shares ('000)
Basic 22,602 22,482
Diluted 22,782 22,622
Earnings per share
Basic 13.2 pence 17.9 pence
Diluted 13.1 pence 17.8 pence
Adjusted basic 37.7 pence 40.1 pence
Adjusted diluted 37.4 pence 39.9 pence
7. Share capital
The allotted, called up and fully paid share capital is made up of 22,622,344
ordinary shares of £0.01 each.
Note Number of shares Share capital Share premium
000 £'000 £'000 Total
£'000
At 1 September 2019 22,220 222 60,049 60,271
27 September 2019 (i) 200 2 770 772
11 December 2019 (ii) 32 - 142 142
3 March 2020 (iii) 58 1 229 230
3 March 2020 (iv) 6 - 27 27
4 May 2020 (v) 33 - 410 410
2 June 2020 (vi) 16 - 64 64
19 August 2020 (vi) 11 1 45 46
At 31 August 2020 22,576 226 61,736 61,962
8 October 2020 (vii) 8 - 29 29
4 December 2020 (ix) 1 - 18 18
15 March 2021 (x) 33 - 412 412
17 May 2021 (xi) 4 - 15 15
At 31 August 2021 22,622 226 62,210 62,436
(i) On 27 September 2019, a total of 199,526 share options were
exercised of £0.01 each for £3.95.
(ii) On 11 December 2019, a total of 31,970 share options were
exercised of £0.01 each for £3.95.
(iii) On 3 March 2020, a total of 58,086 share options were exercised
of £0.01 each for £3.95.
(iv) On 3 March 2020, a total of 6,173 share options were exercised of
£0.01 each for £4.45.
(v) On 4 May 2020, a total of 33,333 share options were exercised of
£0.01 each for £12.30.
(vi) On 2 June 2020, a total of 16,162 share options were exercised of
£0.01 each for £3.95.
(vii) On 19 August 2020, a total of 11,321 share options were exercised
of £0.01 each for £3.95.
(viii) On 8 October 2020, a total of 7,631 share options were exercised
of £0.01 each for £3.95.
(ix) On 4 December 2020, a total of 692 shares were issued to James
Routh of £0.01 in satisfaction of 20% of his respective annual bonus payments
for the year ended 31 August 2020, and a total of 349 shares were issued to
Sarah Matthews-DeMers of £0.01 in satisfaction of 20% of her respective
annual bonus payments for the year ended 31 August 2020.
(x) On 15 March 2021, a total of 33,333 share options were exercised
of £0.01 each for £12.30.
(xi) On 17 March 2021, a total of 3,786 share options were exercised
of £0.01 each for £3.95.
8. Principal risks
The principal risks and uncertainties impacting the Group are described on
pages 56-58 of our Annual Report 2021. They include: COVID-19, downturn or
instability in major markets, loss of major customers and change in customer
procurement processes, failure to deliver new products, dependence on external
routes to market, acquisitions integration and performance, supply chain,
cybersecurity and business interruption, competitor actions, loss of key
personnel, threat of disruptive technology, product liability, failure to
manage growth, foreign currency, credit risk and intellectual
property/patents.
9. Related party transactions
Mr A Best, former Chairman of the Company, is a trustee and beneficiary of the
Best Middleton Trust. Rental payments of £44,000 (2020: £48,000) were made
in the year to the Trust. In July 2021 the lease was terminated and therefore
all agreements with a controlling shareholder have now ceased.
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