REG - AB Dynamics PLC - Final Results
24/01/2024 07:00
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RNS Number : 6660A AB Dynamics PLC 24 January 2024
24 January 2024
AB Dynamics plc
Final results for the year ended 31 August 2023
"Strong financial performance and clear strategic progress"
AB Dynamics plc ("AB Dynamics", the "Company" or the "Group"), the designer,
manufacturer and supplier of advanced testing, simulation and measurement
products to the global transport market, is pleased to announce its final
results for the year ended 31 August 2023.
Audited Audited
2023 2022(2)
£m £m
Revenue 100.8 83.2 +21%
Gross margin 59.5% 56.6% +290 bps
Adjusted EBITDA(1) 20.5 17.3 +18%
Adjusted operating profit(1) 16.6 13.7 +21%
Adjusted operating margin(1) 16.5% 16.4% +10 bps
Statutory operating profit 12.6 6.2 +103%
Adjusted cash flow from operations(1) 23.5 20.7 +14%
Net cash 32.0 29.2
Pence Pence
Adjusted diluted earnings per share(1) 60.8 48.1 +26%
Statutory diluted earnings per share 47.4 20.7 +129%
Total dividend per share 6.36 5.30 +20%
(1)Before amortisation of acquired intangibles, acquisition related charges
and exceptional items. A reconciliation to statutory measures is given below.
(2)Restated for change in interpretation of revenue recognition, see note 10.
Financial highlights
· Record revenue and operating profit delivered alongside an improved
operating margin reflecting strong growth enhanced by improved operational
efficiency and effective cost management
· Market and customer activity levels have remained positive, with
strong activity in both track testing and laboratory testing and simulation,
particularly in Europe
· Revenue increased by 21% of which 7% was organic growth
o Track testing revenue grew by 6% reflecting increases in robots and
Advanced Driver Assistance (ADAS) platforms
o Laboratory testing and simulation organic growth of 10% driven by a strong
performance at rFpro and delivery of SPMM systems. Total sector revenue growth
of 74% includes the contribution from the acquisition of Ansible Motion
· The proportion of recurring and service-based sales was
maintained at 40% (2022: 40%)
· The Group has remained effective in mitigating inflationary cost
pressures, with gross margins improving to 59.5% (2022: 56.6%)
· Operating margin improved by 10bps to 16.5% as a result of the
increased levels of activity and the benefits of enhanced performance
initiatives, partially offset by the continued investment of £1.8m in ABD
Solutions to support the Group's strategic long-term growth drivers
o Excluding ABD Solutions, the operating margin increased to 18.3% (2022:
18.2%)
· Significant operating cash generation of £23.5m (2022: £20.7m)
with cash conversion of 114% (2022: 119%), resulting in net cash at year end
of £32.0m (2022: £29.2m) after funding the initial consideration for the
acquisition of Ansible Motion
· Proposed final dividend of 4.42p per share, bringing the total
dividend for the year to 6.36p per share (2022: 5.30p per share), an increase
of 20%, reflecting the Board's confidence in the Group's financial position
and prospects
Operational and strategic highlights
· Continuing progress made in the strategic initiative to open up
new markets beyond automotive
o ABD Solutions won a £1m contract for delivery of a retrofit pedestrian
detection system for construction machines for delivery during FY 2024,
illustrating the wide range of applications for its technology
· VadoTech has been awarded an extension of its existing contract
to provide testing services in Beijing, as well as a new, smaller contract to
provide similar services near Shanghai
· The integration of Ansible Motion is continuing as planned and
the business has delivered a strong performance since acquisition in September
2022
· New product development continues in line with the technology
roadmap for existing track testing and simulation markets and development of
the core technology for ABD Solutions
o Along with the launch of the new range of ADAS motorcycle and pedestrian
dummies, and LaunchPad Spin, the Group has also released ray-tracing
capability for its simulation software
· Well placed to sustain growth momentum into the medium term,
supported by:
o Strong organic growth across automotive markets, supported by regulatory
tailwinds and rapid technology change, with a greatly strengthened operational
and commercial platform
o The substantial opportunity beyond automotive markets presented by ABD
Solutions, transitioning from technology development to commercialisation
o Significantly enhanced simulation and software capabilities enabled by the
expanded product range created through the acquisitions of rFpro and Ansible
Motion
o A strong financial position that provides scope for further
value-enhancing growth investment in FY 2024 and beyond
Current trading and outlook
· Trading in FY 2024 to date has been encouraging, supported by the
solid current order book which provides good visibility into the second half
of the year
· Whilst being mindful of timing of pipeline conversion and
customer delivery schedules, the Board remains confident that the Group will
make further financial and strategic progress with its expectations for FY
2024 unchanged
· Future growth prospects remain supported by long-term structural
and regulatory growth drivers in active safety, autonomous systems and the
automation of vehicle applications
There will be a presentation for analysts this morning at 9.30am at Teneo, 85
Fleet Street, EC4Y 1AE. Please contact abdynamics@teneo.com if you would
like to attend.
Commenting on the results, Dr James Routh, Chief Executive Officer said:
"The Group has delivered a strong performance in FY 2023, demonstrating the
benefits of the investment made in recent years in the commercial and
operating capability of the business. The financial results show further
strong progress, with record levels of revenue and operating profit and an
improvement in operating margin. In parallel, the Group has further
strengthened its platform for growth through both organic investments and
acquisitions.
"We see significant opportunity in our core markets in automotive, which are
supported by long-term structural and regulatory growth drivers, and are
continuing to invest in new product development and technology. In addition,
we are investing in new technologies to diversify the business into attractive
adjacent markets through ABD Solutions.
"Trading in FY 2024 has been encouraging, supported by a solid order book
providing good visibility into the second half of the year. Whilst being
mindful of timing of pipeline conversion and customer delivery schedules, the
Board remains confident that the Group will make further financial and
strategic progress and its expectations for FY 2024 are unchanged.
"Our market drivers both in our core business and in ABD Solutions remain
strong. This backdrop, along with the Group's recent investments in capability
and new products, provides confidence of delivering continued progress in 2024
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
Teneo 0207 353 4200
James Macey White
Matt Low
The person responsible for arranging the release of this information is
Felicity Jackson, Group Legal Counsel.
About AB Dynamics plc
AB Dynamics is a leading designer, manufacturer and supplier of advanced
testing, simulation and measurement products to the global transport market.
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 strong set of results driven by recent investments in
its commercial and operating capabilities, underpinned by positive market
dynamics in both sectors. The Group has evolved significantly over the last
four years, building a solid and scalable platform from which to capitalise on
a multi-year growth opportunity.
The Group delivered record levels of revenue and operating profit, while
continuing investment to support its long-term growth objectives.
The Group continued to deliver against its strategic priorities by launching
new products, developing its service offering to drive recurring revenues and
delivering on its diversification plans through progress in ABD Solutions. The
acquisition of Ansible Motion also expanded its presence in the simulation
market, complementing the existing product range.
The Group is well positioned, with market-leading products and services, and
remains supported by regulatory and structural growth drivers that provide a
strong position for continued growth and performance during FY 2024.
Financial performance
The Group delivered significant revenue growth in the year of 21%, to £100.8m
(2022: £83.2m), of which 7% related to organic growth and the remainder to
the acquisition of Ansible Motion.
Laboratory testing and simulation revenue grew by 74% due to the contribution
from Ansible Motion as well as a significant increase in SPMM revenue driven
by an increase in demand and timing of delivery for new units. Track testing
saw more modest growth of 6% overall due to reduced testing services revenue
impacted by local lock downs in China and the availability of new vehicles for
testing in H1 2023. The proportion of recurring revenue was consistent at 40%
(2022: 40%). The level of recurring revenue is now expected to broadly
stabilise ahead of new market offerings which will be released in the near
future.
Gross margin was 59.5%, up 290bps on 2022 due to operational efficiencies and
mitigation of the ongoing impacts of inflation through price increases to the
market.
Group adjusted operating profit of £16.6m (2022: £13.7m) increased 21%
against 2022. The adjusted operating margin increased against 2022 to 16.5%
(2022: 16.4%), as a result of the increased levels of activity and the
benefits of enhanced performance initiatives, partially offset by the
investment in ABD Solutions to support the strategic long-term growth drivers.
Excluding ABD Solutions, the adjusted operating margin increased to 18.3%
(2022: 18.2%).
Adjusted earnings before interest, tax, depreciation and amortisation
('EBITDA') increased by 18% to £20.5m (2022: £17.3m). Adjusted EBITDA margin
was 20.4% (2022: 20.8%), a decrease of 40bps.
Adjusted net finance costs were consistent at £0.4m (2022: £0.4m).
Adjusted profit before tax was £16.3m (2022: £13.3m). The Group adjusted tax
charge totalled £2.1m (2022: £2.3m), an adjusted effective tax rate of 13.2%
(2022: 17.1%). The effective tax rate is lower than the current UK corporation
tax rate due to allowances for research and development and patent box. In
future years, the effective tax rate is expected to increase as a result of
the full year effect of the increase in the UK corporation tax rate.
Adjusted diluted earnings per share was 60.8p (2022: 48.1p), an increase of
26%, reflecting the increase in operating profit and a lower tax rate.
The Group delivered strong adjusted operating cash flow of £23.5m (2022:
£20.7m) with cash conversion of 114% (2022: 119%). The cash generated was
used to fund the acquisition of Ansible Motion, £3.4m of investment in
product development and property, plant and equipment and dividends of £1.3m.
Net cash at the end of the year was £32.0m (2022: £29.2m), underpinning a
robust balance sheet. Along with the Group's £15.0m revolving credit facility
which extends to February 2026, this provides significant funding headroom to
continue the Group's investment programme.
Statutory operating profit increased by 103% to £12.6m (2022: £6.2m) and
after net finance costs of £1.1m (2022: £0.4m), statutory profit before tax
increased by 98% from £5.8m to £11.5m. Statutory basic earnings per share
was 48.0p (2022: 21.0p). The statutory tax charge was £0.5m (2022: £1.0m). A
reconciliation of statutory to underlying non-GAAP financial measures is
provided below.
Sector review
*Restated
2023 2022
£m £m
Driving robots 25.2 20.6 +22%
ADAS test products 30.5 29.7 +3%
Testing services 12.9 14.4 -10%
Track testing 68.6 64.7 +6%
Laboratory testing 7.3 5.3 +38%
Simulation 24.9 13.2 +89%
Laboratory testing and simulation 32.2 18.5 +74%
Total revenue 100.8 83.2 +21%
*See note 10.
Track testing
The track testing business delivered revenue of £68.6m (2022: £64.7m), a 6%
increase against the prior year, with growth in sales of driving robots and
ADAS platforms offset by a reduction in testing services revenue due to local
COVID-19 restrictions in China delaying the delivery of services and impacting
the availability of test vehicles in the first half of the year.
Driving robot sales increased by 22% to £25.2m (2022: £20.6m), driven by the
increase in complexity and volume of testing required for ADAS assessment. The
Group expects continued growth in driving robot sales at more normalised
levels, as new regulatory requirements for evolving ADAS technologies are
released, such as the launch of the Euro NCAP 2030 roadmap and its new Truck
Safe rating scheme. It is expected that there will be over 700 Euro NCAP test
scenarios by 2025, up from 591 in 2023. New tests for commercial vehicles
offer further opportunities for market expansion.
Revenue from ADAS platforms increased by 3% to £30.5m (2022: £29.7m). The
new higher speed versions of the GST and LaunchPad, which can operate at
speeds of up to 120kph and 80kph respectively, enable customers to perform a
greater range of tests, particularly the assessment of automated lane-keeping
technology and vehicle interactions with Vulnerable Road Users such as
motorcyclists, and are continuing to gain traction. The recent launch of a new
range of soft targets including motorcycles and articulating pedestrians and a
new, more manoeuvrable platform, the LaunchPad Spin, will drive further
growth.
Testing services revenue decreased 10% to £12.9m (2022: £14.4m) due to local
COVID-19 restrictions delaying the provision of testing services in China
during the first half of the year and continued delays in availability of test
vehicles more widely due to the well documented supply chain challenges in the
automotive market.
The Group continues to build customer relationships, drive improvement in
revenue and gross margins and invest in new product development to meet the
growing demand from manufacturers and test providers to keep up to date with
changes in regulations.
The growth in testing volume and complexity continues to drive demand for ADAS
platforms and driving robots that are both more capable and more versatile. To
recognise the need for new test tools, this year Euro NCAP updated its listing
of equipment used in official testing to include AB Dynamics' Soft Motorcycle
360.
Laboratory testing and simulation
Laboratory testing and simulation delivered strong growth in revenue up 74% on
2022 to £32.2m (2022: £18.5m) due to the contribution from Ansible Motion as
well as strong organic growth from both rFpro and SPMM sales, reflecting the
continued demand for laboratory testing equipment.
SPMM revenue of £7.3m grew by 38% (2022: £5.3m) demonstrating continued
demand for our market leading kinetics and compliance machines. This
long-standing product which has been supplied to global customers for the past
25 years has evolved significantly over this period, culminating in the recent
launch of the SPMM Plus.
Organic simulation revenue was flat with revenue at £13.1m (2022: £13.2m).
The contribution from Ansible Motion was £11.8m reflecting the strong order
book at the time of acquisition and delivery of sales synergies, giving total
simulation revenue of £24.9m (2022: £13.2m).
Strategic progress
The Group continues to make good progress against its organic-led growth
strategy, supplemented with value-enhancing acquisitions. During the year,
the focus on building and growing the core business continued, coupled with
delivering on the Group's diversification plans through ABD Solutions and
building critical mass in the attractive simulation market through the
acquisition of Ansible Motion.
Investment continued in the core automotive sector, which is characterised by
strong regulatory and structural growth drivers and rapid technology change.
New product development and the strengthened operational and commercial
platform leaves the Group well placed to benefit from increasing regulation
and the increasing number and complexity of test scenarios required by NCAP
bodies.
Ansible Motion has been successfully integrated into the Group's simulation
business, enhancing the Group's simulation capability and expanding its range
of products and services in this area which includes the physics-based
simulation software, rFpro.
As part of the objective to diversify into adjacent markets, ABD Solutions
continues to make significant progress in its mission to add automated
solutions to existing vehicles fleets faster and more cost effectively. ABD
Solutions has demonstrated its product offering in contrasting environments
for potential customers in mining, defence and other specialist vehicles and
successfully proved its concept and market solution, Indigo Drive. A digital
twin has been developed which provides operational environment validation and
a platform for accelerated product testing.
Its focus is transitioning from technology development to commercialisation
with negotiations ongoing around mining related contracts. The Japanese mining
development contract is progressing as planned and a Memorandum of
Understanding has been signed with Jevons Robotics in Australia for mining
applications. In addition, ABD Solutions has been awarded a £1m contract for
delivery during FY 2024 of a retrofit pedestrian detection system for a UK
customer for construction industry applications.
Acquisitions
On 20 September 2022, the Group acquired Ansible Motion Limited, a UK based
provider of advanced simulator solutions to the automotive market, for an
initial cash consideration of £14.4m and shares in AB Dynamics plc to the
value of £3.2m. Based on the financial performance in FY 2023, a further cash
payment of approximately £5.7m will be made, along with retained
consideration of £0.5m, bringing the total consideration to £23.8m.
Ansible Motion designs and manufactures high-end motion platform systems for
Driver in the Loop development of vehicle dynamics, ADAS and automated systems
and already utilises rFpro as its physics based virtual environments. The
Ansible Motion range of driving simulators complements the existing product
offering from AB Dynamics and provides a comprehensive range of simulators
that addresses a wider range of simulator applications.
Ansible Motion has been integrated into the Group's simulation sector and has
been earnings accretive, delivering £11.8m of revenue and £2.4m of adjusted
operating profit during FY 2023.
Acquisitions continue to form a key part of the long-term strategic
development of the Group and we operate a continuous process to identify and
execute acquisition opportunities. The current long-term pipeline remains
positive and we expect to continue to deliver further value-enhancing
acquisitions.
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 EBITDA, 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:
2023 2022(1)
Adjusted Adjustments Statutory Adjusted Adjustments Statutory
EBITDA (£m) 20.5 3.1 23.6 17.3 (2.0) 15.3
Operating profit (£m) 16.6 (4.0) 12.6 13.7 (7.5) 6.2
Operating margin 16.5% 12.5% 16.4% 7.4%
Finance expense (£m) (0.3) (0.8) (1.1) (0.4) - (0.4)
Profit before tax (£m) 16.3 (4.8) 11.5 13.3 (7.5) 5.8
Taxation (£m) (2.2) 1.7 (0.5) (2.2) 1.2 (1.0)
Profit after tax (£m) 14.1 (3.1) 11.0 11.0 (6.3) 4.7
Diluted eps (pence) 60.8 (13.4) 47.4 48.1 (27.4) 20.7
Operating cash (£m) 23.5 (4.2) 19.3 20.7 (2.0) 18.7
1 Restated, see note 10
The adjustments comprise:
2023 2022
Profit impact Cash flow impact Profit Cash flow impact
£m £m impact £m
£m
Amortisation of acquired intangibles 7.2 - 5.5 -
Acquisition related (credit)/costs (4.5) 2.8 0.3 0.3
ERP development costs 1.3 1.4 1.7 1.7
Adjustments to operating profit / cash flow 4.0 4.2 7.5 2.0
Acquisition related finance costs 0.8 - - -
Adjustments to profit before tax 4.8 4.2 7.5 2.0
The tax impact of these adjustments was a credit of £1.7m (2022: £1.2m).
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, being shareholders' equity less net cash plus deferred tax and
contingent consideration). During the year, ROCE has increased from 15.3% to
15.4% benefitting from operating leverage.
Research and development
While research and development form a significant part of the Group's
activities, a significant and increasing proportion relates to specific
customer programmes which are included in the cost of the product. Development
costs of £0.5m (2022: £1.7m) 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 expensed as incurred, totalled
£0.2m (2022: £0.4m).
Foreign currency exposure
Foreign exchange translation has provided a minor tailwind on revenue and
profit, due to the weakening of Sterling against the US dollar and Euro. On a
constant currency basis, restating the current year at 2022 average rates,
revenue would have been £1.2m lower and both adjusted and statutory operating
profit £0.1m lower.
Dividends
We recognise that dividends continue to be an important component of total
shareholder returns, balanced against maintaining a strong financial position.
The Board is recommending a final dividend of 4.42p per share, giving a total
dividend for the year of 6.36p per share, which is an increase of 20% over the
prior year.
Summary and outlook
The Group has delivered a strong performance, demonstrating the benefits of
the investment in the commercial and operating capability of the business. The
financial results show further strong progress, with record levels of revenue
and operating profit and an improvement in operating margin. In parallel, the
Group has further strengthened its platform for growth through both organic
investments and acquisitions.
We see significant opportunity in our core markets in automotive, which are
supported by long-term structural and regulatory growth drivers, and are
continuing to invest in new product development and technology. In addition,
we are investing in new technologies to diversify the business into attractive
adjacent markets through ABD Solutions.
Trading in FY 2024 has been encouraging, supported by a solid order book
providing good visibility into the second half of the year. Whilst being
mindful of timing of pipeline conversion and customer delivery schedules, the
Board remains confident that the Group will make further financial and
strategic progress and its expectations for FY 2024 are unchanged.
Our market drivers both in our core business and in ABD Solutions remain
strong. This backdrop, along with the Group's recent investments in capability
and new products, provides confidence of delivering continued progress in FY
2024 and beyond.
Directors' Responsibility Statement on the Annual Report and Accounts
The responsibility statement below has been prepared in connection with the
Company's full annual report and accounts for the year ended 31 August 2023.
Certain parts thereof are not included within this announcement.
We confirm to the best of our knowledge:
1. the financial statements, prepared in accordance with the applicable set of
accounting standards, 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; and
2. the strategic report and directors' report includes a fair review of the
development and performance of the business and the position of the issuer and
the undertakings included in the consolidation taken as a whole, together with
a description of the principal risks and uncertainties that they face.
We consider the annual report and accounts, taken as a whole, is fair,
balanced and understandable, and provides the information necessary for
shareholders to assess the Group's position and performance, business model
and strategy.
This responsibility statement was approved by the Board of Directors on 23
January 2024 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 2023
2023 **Restated 2022
Adjusted *Adjustments Statutory Adjusted *Adjustments Statutory
Note £'000 £000 £'000 £'000 £'000 £'000
Revenue 2 100,767 - 100,767 83,226 - 83,226
Cost of sales (40,837) - (40,837) (36,085) - (36,085)
Gross profit 59,930 - 59,930 47,141 - 47,141
General and administrative expenses (43,326) (4,049) (47,375) (33,473) (7,514) (40,987)
Operating profit 16,604 (4,049) 12,555 13,668 (7,514) 6,154
Operating profit is analysed as:
Before depreciation and amortisation 20,517 3,140 23,657 17,288 (1,998) 15,290
Depreciation and amortisation (3,913) (7,189) (11,102) (3,620) (5,516) (9,136)
Operating profit 16,604 (4,049) 12,555 13,668 (7,514) 6,154
Net finance expense (354) (713) (1,067) (374) - (374)
Profit before tax 16,250 (4,762) 11,488 13,294 (7,514) 5,780
Tax expense 4 (2,146) 1,644 (502) (2,274) 1,235 (1,039)
Profit for the year 14,104 (3,118) 10,986 11,020 (6,279) 4,741
Other comprehensive (expense)/income
Items that may be reclassified to consolidated income statement:
Cash flow hedges 124 - 124 (93) - (93)
Exchange (loss)/gain on foreign currency net investments (2,059) - (2,059) 3,574 - 3,574
Total comprehensive income for the year 12,169 (3,118) 9,051 14,501 (6,279) 8,222
* See note 3
** Restated, see note 10
2023 **Restated 2022
Earnings per share Note Adjusted Statutory Adjusted Statutory
Basic 6 61.6p 48.0p 48.7p 21.0p
Diluted 6 60.8p 47.4p 48.1p 20.7p
** Restated, see note 10
AB Dynamics plc
Consolidated statement of financial position
As at 31 August 2023
Note 2023 *Restated *Restated 2021
£'000 2022 £'000
£'000
ASSETS
Non-current assets
Goodwill 36,939 23,818 22,221
Acquired intangible assets 32,831 23,665 28,282
Other intangible assets 2,746 2,971 1,577
Property, plant and equipment 25,739 25,708 25,815
Right-of-use assets 1,409 876 913
99,664 77,038 78,808
Current assets
Inventories 17,954 13,651 7,901
Trade and other receivables 14,494 13,782 15,500
Contract assets 3,152 4,328 4,319
Taxation - 890 1,542
Cash and cash equivalents 33,486 30,141 23,282
69,086 62,792 52,544
Assets held for sale 1,893 1,893 1,893
LIABILITIES
Current liabilities
Trade and other payables 20,127 16,810 10,933
Contract liabilities 9,234 5,068 5,258
Derivative financial instruments - 123 31
Short-term lease liabilities 570 628 456
Contingent consideration 5,943 - 4,929
35,874 22,629 21,607
Non-current liabilities
Deferred tax liabilities 8,708 6,397 6,552
Long-term lease liabilities 906 315 511
9,614 6,712 7,063
Net assets 125,155 112,382 104,575
SHAREHOLDERS' EQUITY
Share capital 229 226 226
Share premium 62,781 62,260 62,210
Other reserves 7 2,403 1,142 (2,339)
Retained earnings 59,742 48,754 44,478
Total equity 125,155 112,382 104,575
* See note 10
AB Dynamics plc
Consolidated statement of changes in equity
For the year ended 31 August 2023
Share capital Share premium Other reserves Retained earnings Total equity
£'000 £'000 £'000 £'000 £'000
At 1 September 2021 as previously reported 226 62,210 (2,339) 44,889 104,986
Prior year adjustment (note 10) - - - (411) (411)
At 1 September 2021 as restated 226 62,210 (2,339) 44,478 104,575
Share based payments - - - 750 750
Total comprehensive income - - 3,481 4,741 8,222
Deferred tax on share based payments - - - (84) (84)
Dividend paid - - - (1,131) (1,131)
Issue of shares - 50 - - 50
At 31 August 2022 as restated 226 62,260 1,142 48,754 112,382
At 1 September 2022 as previously 226 62,260 1,142 48,333 111,961
reported
Prior year adjustment (note 10) - - - 421 421
At 1 September 2022 restated 226 62,260 1,142 48,754 112,382
Share based payments - - - 1,064 1,064
Total comprehensive income - - (1,935) 10,986 9,051
Deferred tax on share based payments - - - 193 193
Dividend paid - - - (1,255) (1,255)
Issue of shares 3 521 3,196 - 3,720
At 31 August 2023 229 62,781 2,403 59,742 125,155
AB Dynamics plc
Consolidated cash flow statement
For the year ended 31 August 2023
*Restated
Note 2023 2022
£'000
£'000
Cash flows from operating activities 11,488 5,780
Profit before tax
Depreciation and amortisation 11,102 9,136
Finance expense 1,067 374
Share based payment 1,263 795
Release of contingent consideration (5,180) -
Acquisition costs - 290
Operating cash flows before changes in working capital 19,740 16,375
Increase in inventories (2,612) (5,751)
Decrease in trade and other receivables 2,514 1,707
(Decrease)/increase in trade and other payables (369) 6,350
Cash flows from operations 19,273 18,681
Adjusted cash flows from operations 23,450 20,651
Cash impact of adjusting items 3 (4,177) (1,970)
Cash flows from operations 19,273 18,681
Finance costs paid (291) (89)
Income tax received/(paid) 363 (684)
Net cash flows from operating activities 19,345 17,908
Cash flows used in investing activities
Acquisition of businesses net of cash 9 (10,656) (5,114)
Purchase of property, plant and equipment (2,930) (2,098)
Capitalised development costs and purchased software (469) (1,711)
Net cash used in investing activities (14,055) (8,923)
Cash flows used in financing activities
Drawdown of loans 6,000 -
Repayments of loans (6,000) -
Dividends paid 5 (1,255) (1,131)
Proceeds from issue of share capital 457 50
Repayment of lease liabilities (1,124) (964)
Net cash used in financing activities (1,922) (2,045)
Net increase in cash and cash equivalents 3,368 6,940
Cash and cash equivalents at beginning of the year 30,141 23,282
Effects of exchange rate changes (23) (81)
Cash and cash equivalents at end of the year 33,486 30,141
* See note 10
AB Dynamics plc
Notes to the consolidated financial statements
For the year ended 31 August 2023
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 supply of
advanced testing, simulation and measurement products and services to the
global transport market. 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, as well as automation of vehicles used for
other applications, such as mining and defence.
The annual financial statements of the Group are prepared in accordance with
UK-adopted international accounting standards and applicable law.
The financial information set out above does not constitute the Company's
statutory accounts for the year ended 31 August 2023 or 31 August 2022 but is
derived from those accounts. A copy of the statutory accounts for the year
ended 31 August 2022 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.
Certain new standards, amendments to standards and interpretations are not yet
effective for the year ended 31 August 2023 and have therefore not been
applied in preparing the annual financial statements.
Going concern basis of accounting
The financial information has been prepared under the going concern basis,
which assumes that the Group will continue to be able to meet its liabilities
as they fall due for the foreseeable future.
The Directors have assessed the principal risks to the going concern
assumption, including by modelling a severe but plausible downside scenario,
whereby the Group experiences:
· A reduction in demand of 25% over the next two financial years,
with no mitigation
· A 10% increase in operating costs from supply chain disruption
· An increase in cash collection cycle
· An increase in input costs resulting in reduction in gross
margins to 40%.
With £33.5m of cash at 31 August 2023 and a £15.0m 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 twelve
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 used in assisting the global transport market
in the laboratory, on the test track and on-road. 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). Revenue is split into sectors in
the information reviewed by the Board but all other aspects of performance are
reviewed and managed together.
Analysis of revenue by destination:
2023 *Restated
£'000 2022
£'000
United Kingdom 4,875 7,299
Rest of Europe 22,095 13,723
North America 25,171 20,547
Asia Pacific 46,409 40,941
Rest of World 2,217 716
100,767 83,226
No customers individually represent more than 10% of total revenue for the
year ended 31 August 2023 (2022: One customer individually represented 12% of
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:
2023 2022
£'000 £'000
United Kingdom 66,199 39,565
Rest of Europe 1,049 1,262
North America 15,508 17,084
Asia Pacific 16,908 19,127
99,664 77,038
Revenues are disaggregated as follows:
*Restated
2023 2022
£'000 £'000
Revenue by sector
Track testing 68,610 64,743
Laboratory testing and simulation 32,157 18,483
100,767 83,226
* See note 10
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, adjusted EBITDA 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 financial information relate to underlying business
performance (as defined above) unless otherwise stated.
2023 2022
£'000 £'000
Amortisation of acquired intangibles 7,189 5,516
Acquisition related (credit)/costs (4,502) 328
ERP development costs 1,362 1,670
Adjustments to operating profit 4,049 7,514
Acquisition related finance costs 713 -
Adjustments to profit before tax 4,762 7,514
Amortisation of acquired intangibles
The amortisation relates to the acquisition of Ansible Motion Limited on 20
September 2022, VadoTech Group on 3 March 2021 and the businesses acquired in
2019, DRI and rFpro.
Acquisition related (credit)/costs
The credit in the current year relates to the release of contingent
consideration on the acquisition of Ansible Motion, less acquisition costs.
The prior year costs also related to Ansible Motion acquisition costs.
ERP development costs
These costs relate to the development, configuration and customisation of the
Group's new ERP system which is hosted on the cloud.
Acquisition related finance costs
Finance costs relate to the unwind of the discount on contingent consideration
payable on the acquisition of Ansible Motion.
Tax
The tax impact of these adjustments was as follows: amortisation of acquired
intangibles £1.3m (2022: £0.8m), acquisition related costs £0.1m (2022:
£0.1m) and ERP development costs £0.3m (2022: £0.3m).
Cash impact
The operating cash flow impact of the adjustments was an outflow of £4.2m
(2022: £2.0m) being £1.4m (2022: £1.7m) in relation to ERP development
costs and £2.8m (2022: £0.3m) in relation to acquisition costs of which
£2.1m (2022: £Nil) was in relation to a bonus paid to employees of the
acquired entity for pre-acquisition service. The cash to pay this bonus was
included within the cash acquired in the opening balance sheet, therefore the
impact on the cash flow statement was a reduction in cash flows on acquisition
of businesses and a corresponding decrease in cash flows from operations.
Net cash
The reconciliation of cash and cash equivalents to net cash is as follows:
2023 2022
£'000 £'000
Cash and cash equivalents 33,486 30,141
Lease liabilities (1,476) (943)
32,010 29,198
4. Tax
The statutory effective rate of tax for the year of 4.4% (2022: 17.9%) is
lower than (2022: lower than) the standard rate of corporation tax in the UK
of 21.5% (2022: 19.0%) due to allowances for research and development and
patent box, and the release of the accrual for contingent consideration in
relation to Ansible Motion which was not taxable.
The effective rate of tax on the adjusted profit before tax is 13.2% (2022:
17.1%).
5. Dividend paid
2023 2022
£'000 £'000
Final 2021 dividend paid of 3.24p per share - 733
Interim 2022 dividend paid of 1.76p per share - 398
Final 2022 dividend paid of 3.54p per share 811 -
Interim 2023 dividend paid of 1.94p per share 444 -
1,255 1,131
The Board has proposed a final dividend of 4.42p per share totalling
£1,014,000. An interim dividend was paid of 1.94p per share totalling
£444,000. If approved, the final dividend will be paid on 6 March 2024 to
shareholders on the register on 9 February 2024.
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:
*Restated
2023 2022
Weighted average number of shares ('000)
Basic 22,886 22,625
Diluted 23,193 22,908
Earnings per share
Profit for the year attributable to owners of the Group (£'000) 10,986 4,741
Basic earnings per share 48.0p 21.0p
Diluted earnings per share 47.4p 20.7p
Adjusted earnings per share
Adjusted profit for the year attributable to owners of the Group (£'000) 14,104 11,020
Adjusted basic earnings per share 61.6p 48.7p
Adjusted diluted earnings per share 60.8p 48.1p
* See note 10
7. Other reserves
Merger relief reserve Reconstruction reserve Translation reserve Hedging reserve Total other reserves
£'000
£'000 £'000 £'000 £'000
At 1 September 2021 11,390 (11,284) (2,414) (31) (2,339)
Other comprehensive income - - 3,574 (93) 3,481
At 31 August 2022 11,390 (11,284) 1,160 (124) 1,142
Other comprehensive expense - - (2,059) 124 (1,935)
Issue of shares 3,196 - - - 3,196
At 31 August 2023 14,586 (11,284) (899) - 2,403
8. Foreign exchange
The foreign exchange rates applied during the year were:
2023 2022
Year end rate
US dollar 1.27 1.16
Euro 1.16 1.15
Yen 186 161
Average rate
US dollar 1.21 1.31
Euro 1.15 1.19
Yen 165 158
9. Acquisition of subsidiary
On 20 September 2022, the Group acquired 100% of the issued share capital of
Ansible Motion Limited, a leading provider of advanced simulators to the
global automotive market.
The initial £17.6m consideration comprised £14.4m of cash and £3.2m of new
ordinary shares in AB Dynamics plc. A maximum additional £12.0m performance
payment was available subject to certain performance criteria being met for
the year ended 31 August 2023. An accrual for the deferred contingent
consideration was included in the balance sheet at net present value of £9.9m
at the acquisition date, which has been adjusted at the year end to £5.9m
following completion of the performance period. £0.5m of the total
consideration has been retained against any potential warranties. The
performance payment is payable in cash in January 2024.
The carrying amount of each class of Ansible Motion Limited's assets before
combination is set out below:
Book value Fair value adjustments £'000 Provisional fair value £'000
£'000
Intangible assets - 16,800 16,800
Property, plant and equipment 31 - 31
Right of use asset 441 - 441
Inventory 1,691 - 1,691
Trade and other receivables 2,049 - 2,049
Cash 3,744 - 3,744
Trade and other payables (6,404) - (6,404)
Lease liabilities (441) - (441)
Deferred tax liabilities - (4,137) (4,137)
Deferred tax assets 222 - 222
Net assets acquired 1,333 12,663 13,996
Goodwill arising on acquisition 14,014
28,010
Cash paid 14,400
New ordinary shares issued 3,200
Contingent consideration payable 10,410
Total consideration 28,010
Cash consideration 14,400
Less cash acquired (3,744)
10,656
Contingent consideration
Performance payment net present value at acquisition date 9,882
Retained consideration 528
At acquisition 10,410
Unwind of discount 713
Less adjustment to performance payment payable (5,180)
At 31 August 2023 5,943
The contingent consideration has been adjusted at the year end to a fair value
of £5.4m following completion of the performance period (an undiscounted
value of £5.5m). £0.5m of the total consideration has been retained against
any potential warranties. After the year end, the final payment was agreed as
£5.7m and has become payable in cash in January 2024.
The initial cash consideration was satisfied with available cash resources and
a short-term utilisation of part of the Group revolving credit facility which
has since been repaid. £0.5m of the initial purchase price has been retained
against any potential warranties and is included within deferred
consideration.
Intangible assets arising on acquisition are in respect of technology
(£16.1m) and brand (£0.7m). The useful economic lives have been determined
to be ten and five years respectively.
Ansible Motion Limited contributed revenue of £11.8m and adjusted operating
profit of £2.4m for the period between acquisition and the balance sheet
date. Acquisition related costs amounted to £0.7m which have been expensed
when incurred. £0.7m of the discount on the deferred contingent consideration
unwound in the period and has been included in finance expenses.
10. Prior year adjustment
The comparatives for the prior period have been restated to reflect a
different interpretation of the accounting standard regarding revenue
recognition following challenge by the Group's new auditors, Grant Thornton.
The restatement relates to timing differences on contracts with two customers
under which revenue was previously recognised over time as the equipment was
built and has been restated to reflect recognition at a point in time on
delivery and installation. The change in interpretation relates to judgement
applied in determining how much profit the Group would be entitled to in the
unlikely event of a cancellation of the contract. None of these contracts were
cancelled and all have concluded during FY 2023 and payment has been received
in full.
The impact is detailed in the tables below and has resulted in an increase to
revenue of £2,921,000 and profit after tax of £832,000 for the prior period
and a decrease in opening net assets at 1 September 2021 of £411,000. The net
impact on the closing net assets at 31 August 2022 and hence on the profit
after tax for the year ended 31 August 2023 was £421,000.
Consolidated statement of financial position
31 August 2022 31 August 2021
As reported Impact of restatement Restated As reported Impact of restatement Restated
£'000
£'000
£'000
£'000
£'000 £'000
Non-current assets 77,038 - 77,038 78,808 - 78,808
Current assets
Inventories 13,611 40 13,651 6,771 1,130 7,901
Taxation 882 8 890 1,443 99 1,542
Contract assets 3,917 411 4,328 4,269 50 4,319
Other current assets 43,923 - 43,923 38,782 - 38,782
62,333 459 62,792 51,265 1,279 52,544
Assets held for sale 1,893 - 1,893 1,893 - 1,893
Current liabilities
Contract liabilities 5,787 (719) 5,068 3,568 1,690 5,258
Other current liabilities 16,804 757 17,561 16,349 - 16,349
22,591 38 22,629 19,917 1,690 21,607
Non-current liabilities 6,712 - 6,712 7,063 - 7,063
Net assets 111,961 421 112,382 104,986 (411) 104,575
Retained earnings 48,333 421 48,754 44,889 (411) 44,478
Share capital and other reserves 63,628 - 63,628
60,097 - 60,097
Total equity 111,961 421 112,382 104,986 (411) 104,575
Consolidated income statement 31 August 2022
As reported Impact of restatement Restated
£'000
£'000
£'000
Revenue 80,305 2,921 83,226
Cost of sales (34,089) (1,996) (36,085)
Gross profit 46,216 925 47,141
Operating profit 5,229 925 6,154
Profit before tax 4,855 925 5,780
Tax expense (946) (93) (1,039)
Profit for the year 3,909 832 4,741
11. Principal risks
The principal risks and uncertainties impacting the Group are described on
pages 54-58 of our Annual Report 2023. They include: downturn or instability
in major geographic markets or market sectors (including inflation, conflicts
and pandemics), supply chain disruption, loss of major customers and change in
customer procurement processes, failure to deliver new products, dependence on
external routes to market, acquisition integration and performance,
cybersecurity and business interruption, competitor actions, loss of key
personnel, threat of disruptive technology, product liability, failure to
manage growth, foreign currency, counterparty risk, credit risk, intellectual
property/patents and environmental risk.
12. 2023 Annual Report
The Annual Report for the year ended 31 August 2023 will be posted on the
Company's website, www.abdplc.com (http://www.abdplc.com) , on 2 February 2024
and a copy will be posted to shareholders, as required, in advance of the
Company's Annual General Meeting of 28 February 2024.
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