REG - AB Dynamics PLC - Half-year Report
27/04/2022 07:00
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RNS Number : 4452J AB Dynamics PLC 27 April 2022
AB Dynamics plc
Unaudited interim results for the six months ended 28 February 2022
"Strong financial performance and strategic progress"
AB Dynamics plc (AIM: ABDP, "ABD", "the Group"), the designer, manufacturer
and supplier of advanced testing, simulation and measurement products to the
global transport market, is pleased to announce its interim results for the
six-month period to 28 February 2022 (the "period").
H1 2022 H1 2021 %
£m £m
Revenue 37.8 27.3 +39%
Gross margin 57.7% 57.7% -
Adjusted operating profit(1) 5.7 3.5 +63%
Adjusted operating margin(1) 15.1% 12.8% +230bps
Statutory operating profit 2.5 0.7(2) +264%
Adjusted cash flow from operations(1) 8.5 8.0 +6%
Net cash 27.7 33.1 -16%
Pence Pence
Adjusted diluted earnings per share(1) 19.9 13.1 +52%
Statutory diluted earnings per share 8.5 3.2(2) +166%
Interim dividend per share 1.76 1.60 +10%
(1)Before amortisation of acquired intangibles, acquisition related charges,
and exceptional items. A reconciliation to statutory measures is given in the
Half Year Review.
(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. The impact was a £0.7m decrease in statutory
operating profit.
Financial highlights
· Order intake momentum continued with strong growth, particularly
in Asia Pacific. The Group's positive book to bill ratio provides confidence
in delivery of H2 revenue expectations, a significant proportion of which is
covered by the current order book.
· Revenue increased by 39% against H1 2021 and by 21% on an organic
constant currency basis, albeit against a weak comparative period that was
impacted by COVID-19.
· Constant currency revenue was slightly up against H2 2021
reflecting increased track testing activity. Track testing revenue was 45%
higher than H1 2021, up 23% on an organic constant currency basis, and up 6%
against H2 2021.
· Laboratory testing and simulation delivered revenue growth of 17%
against H1 2021 driven by increased demand for simulation software.
· Operating margins of 15.1% improved by 230 bps as a result of the
increased levels of activity.
· Strong adjusted cash flow from operations of £8.5m (H1 2021:
£8.0m). Significant net cash balance of £27.7m at the period end (28
February 2021: £33.1m, 31 August 2021: £22.3m) providing scope for continued
support to the Group's strategic growth objectives.
· Interim dividend of 1.76p per share (H1 2021: 1.6p), growth of
10%.
Operational and strategic highlights
· Market and customer activity levels have remained positive
throughout H1, with strong activity in track testing driving significant
improvements in both orders and revenues.
· Whilst the current macroeconomic operating environment still
presents challenges in relation to supply chain disruption, operational output
has not been adversely affected to date and the Group has been successful in
mitigating inflationary cost pressures through price increases for new orders.
· Further progress made on the implementation of strategic
initiatives targeting diversification alongside the established pillars and
opening up new markets beyond automotive through the launch of ABD Solutions.
· ABD Solutions was awarded its first development contract by an
industrial equipment supplier in Japan for a driverless retrofit solution for
mining vehicles.
· Continued progress in growing the proportion of recurring and
service-based sales, to 41% up from 31%, enhanced by the strengthening of our
APAC regional footprint.
· New product development continues in line with our technology
roadmap for existing track testing and simulation markets and development of
the core technology for ABD Solutions.
· Vadotech Group has been successfully integrated into the Group
and delivered a solid performance since it was acquired in H2 2021.
Current trading and outlook
· Performance in the first half of the year was as anticipated with
good conversion of orders to sales.
· The positive order intake trend provides confidence for continued
momentum into H2.
· Whilst mindful of ongoing geopolitical uncertainty, the Board now
expects the financial results for the current year to be slightly ahead of
market expectations.
· 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 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 a strong financial and operational performance in the
first half of the year, with continued momentum in our key markets and
progress against our strategic objectives.
Against the backdrop of external challenges in relation to supply chain
disruption and inflationary pressures, the Group has, to date, successfully
mitigated these effects and continued to invest in all areas of the business,
supporting our ambitious growth plans.
Whilst mindful of ongoing geopolitical uncertainty and the risk of further
logistics disruption and inflation, given the improvement in order intake, the
Board now expects the financial results for the year to be slightly ahead of
market expectations.
Our market drivers remain strong. Against that background and based on the
recent track record of improving demand and continued strategic investment,
the Board is confident of delivering progress during the second half of 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 894 7000
Mike Bell
Ed Allsopp
Tulchan 0207 353 4200
Communications
James Macey White
Matt Low
Laura Marshall
Certain information contained in this announcement would have constituted
inside information (as defined by Article 7 of Regulation (EU) No 596/2014)
("MAR") prior to its release as part of this announcement and is disclosed in
accordance with the Company's obligations under Article 17 of those
Regulations.
The person responsible for arranging the release of this information is David
Forbes, Company Secretary.
Half Year Review
Group overview
Against a backdrop of macroeconomic conditions that remain challenging, the
Group has delivered a strong performance, whilst also continuing to invest to
ensure AB Dynamics can capitalise on the significant long-term structural and
regulatory growth drivers within its markets.
The Group has seen continued improvement in order intake through the first
half of the year, including our first collaborative development contract for
ABD Solutions with an industrial equipment supplier in Japan. The Group has
managed supply chain disruptions through accelerating procurement and flexible
production scheduling, with inflationary cost pressures managed through
implementation of price increases for new orders.
Financial performance
Revenue increased by 39% against H1 2021, or 21% on an organic constant
currency basis, albeit against a weak prior period comparative that was
impacted by the COVID-19 pandemic. Constant currency revenue was slightly
ahead of H2 2021.
Gross margins remained comparable to H1 2021 and up 90 bps on the full year at
57.7% (H1 2021: 57.7%, FY 2021: 56.8%), supported by effective pricing
management and increased recurring revenue.
Group adjusted operating profit of £5.7m increased 63% against H1 2021 or 68%
on a constant currency basis. The adjusted operating margin increased against
H1 2021 to 15.1% (H1 2021: 12.8%), as a result of the increase in sales
volumes.
Net finance costs were £0.2m (H1 2021: £nil, FY 2021: £0.4m).
Adjusted profit before tax was £5.5m (H1 2021: £3.5m). The Group adjusted
tax charge totalled £1.0m (H1 2021: £0.5m), an adjusted effective tax rate
of 18.0% (H1 2021: 14.7%).
Adjusted diluted earnings per share was 19.9p (H1 2021: 13.1p), an increase of
52%, reflecting the increase in operating profit.
Statutory operating profit increased by 264% to £2.5m and after net finance
costs of £0.2m (H1 2021: £nil), statutory profit before tax was up 238% from
£0.7m to £2.3m, giving statutory basic earnings per share of 8.6p (H1 2021:
3.2p). The statutory tax charge was £0.4m (H1 2021: £nil). A reconciliation
of statutory to underlying non-GAAP financial measures is provided below. The
adjustments of £3.2m comprise £2.7m of amortisation of acquired intangibles
and £0.5m of ERP cloud computing costs (H1 2021: £2.8m comprising £1.7m of
amortisation of acquired intangibles, £0.7m of ERP cloud computing costs and
£0.4m of acquisition costs). The tax impact of these adjustments was £0.6m.
The Group delivered strong adjusted operating cash flow of £8.5m with the net
cash position at the period end of £27.7m underpinning a robust balance sheet
and providing the resources to continue the Group's investment programme.
Russia/Ukraine
At this stage the consequences for the global economy of the tragic events in
Ukraine are uncertain. Whilst the Group has no operations in this part of the
world and no direct exposure to customers and suppliers in the region, we
continue to monitor the situation carefully and in particular any effects on
wider supply chains. The Group has also reviewed the current sanctions regime
relating to Russia and Ukraine and can confirm the Group has no exposure to
any sanctioned entities or individuals.
Sector review
Track testing
Track testing revenue of £30.4m was up 45% against H1 2021 (£20.9m) and up
6% against H2 2021 (£28.7m). On an organic constant currency basis track
testing revenue was up 23%.
Driving robot sales increased 7% against H1 2021 to £9.7m (H1 2021: £9.1m),
following the recovery of order intake during H2 2021. The Group expects
continued moderate growth in driving robots once new regulatory requirements
for new ADAS technologies are released.
ADAS platform sales increased 39% to £13.3m in H1 2021 (H1 2021: £9.6m).
Demand for these products, particularly the LaunchPad continues to build. 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. 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.
The acquisition of Vadotech in March 2021 saw revenue related to the provision
of testing services increase to £7.4m (H1 2021: £2.2m).
Order intake for track testing products has continued to improve, providing
confidence for the second half of the year.
ABD Solutions, the Group's new market-facing business unit that develops
solutions to automate vehicle applications, was awarded its first
collaborative development contract with an industrial equipment supplier in
Japan for a driverless retrofit solution for mining vehicles. The contract,
while not financially significant at £1.1m for delivery over eighteen months,
will provide the opportunity to validate the technology for this specific
application. This represents an encouraging first step in the Group's
diversification strategy to reduce dependence on the traditional passenger
vehicle automotive market.
The Group continues to invest in new product development in this sector in
order to meet forthcoming regulatory requirements and to ensure we retain our
market leadership in track testing products and technology.
Laboratory testing and simulation
The laboratory testing and simulation business delivered strong revenue growth
to £7.4m, an increase of 17% on H1 2021 (£6.4m).
Simulation sales grew significantly reflecting high customer demand for our
simulation software and aVDS simulators, with revenue of £5.4m, up 26%
compared with H1 2021 (£4.3m). During the first half of the year,
development continued on the new variant of our full motion simulator for a
major automotive OEM.
SPMM revenue of £2.0m was in line with H1 2021 (£2.1m) and the division
carries forward a solid order book, which provides good coverage for the
remainder of the financial year alongside further opportunities in the
pipeline.
Progress on our strategy
The Group continues to make good progress against its core strategic
priorities, as well as further integrating ESG as a core tenet of our strategy
and operating model.
As part of the objective to diversify into adjacent markets, the newly
established ABD Solutions aims to accelerate the automation of vehicle
applications in four new primary market sectors with an initial focus on
mining and defence.
The recruitment and build out of the ABD Solutions team is on track, with good
progress made against the technology development plan for object detection and
the technology stack. In addition to the development contract for the retrofit
solution for mining vehicles, demonstrations have been given to a number of
potential customers and partners in the defence industry.
New product development continues across our core business to enhance our
offering in these attractive markets.
Acquisitions
During the second half of 2021, the Group acquired Vadotech Group for a
maximum consideration of up to €26m including two performance payments of
€3m and €6m. The first performance targets were met and €3m was paid in
H2 2021. The second performance payment is expected to be made in H2 2022. 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 and we have a promising pipeline of potential acquisition
opportunities.
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, EBITDA,
adjusted operating margin, adjusted profit before tax and adjusted earnings
per share.
The interim report 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 period 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 interim report relate to underlying business performance (as
defined above) unless otherwise stated.
A reconciliation of adjusted measures to statutory measures is provided below:
H1 2022 H1 2021
Adjusted Adjustments Statutory Adjusted Adjustments* Statutory*
EBITDA (£m) 7.3 (0.5) 6.8 4.6 (1.1) 3.5
Operating profit (£m) 5.7 (3.2) 2.5 3.5 (2.8) 0.7
Operating margin (%) 15.1 (8.5) 6.6 12.8 (10.3) 2.5
Profit before tax (£m) 5.5 (3.2) 2.3 3.5 (2.8) 0.7
Tax expense (£m) (1.0) 0.6 (0.4) (0.5) 0.5 -
Profit after tax (£m) 4.5 (2.6) 1.9 3.0 (2.3) 0.7
Diluted earnings per share (pence) 19.9 (11.4) 8.5 13.1 (9.9) 3.2
The adjustments to operating profit comprise:
H1 2022 H1 2021*
£m £m
Amortisation of acquired intangibles 2.7 1.7
ERP cloud computing costs 0.5 0.7
Acquisition related costs - 0.4
Adjustments 3.2 2.8
* 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.
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 £0.1m (H1
2021: £0.6m) 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 to the profit and loss account as
incurred, total £0.1m (H1 2021: £0.2m).
Foreign currency exposure
The Group faces currency exposure on its foreign currency transactions and
with significant overseas operations, also has exposure to foreign currency
translation risk.
The Group maintains a natural hedge whenever possible to transactional
exposure by matching the cash inflows and outflows in the respective
currencies.
There was no material difference between the reported profit for the year and
that calculated on a constant currency basis as the impact of the
strengthening US dollar was offset by the weakening Euro.
Dividends
The Board has declared an interim dividend of 1.76p per ordinary share (H1
2021: 1.6p) which will be paid on 20 May 2022 to shareholders on the register
on 6 May 2022. A final dividend of 3.24p per share was paid in respect of
the year ended 31 August 2021. It is the Board's intention to pursue a
sustainable and growing dividend policy in the future having regard to the
development of the Group.
Summary and Outlook
The Group has delivered a strong financial and operational performance in the
first half of the year, with continued momentum in our key markets and
progress against our strategic objectives.
Against the backdrop of challenges in relation to supply chain disruption and
inflationary pressures, the Group has, to date, successfully mitigated these
effects and continued to invest in all areas of the business, supporting our
ambitious growth plans.
Whilst mindful of ongoing geopolitical uncertainty and the risk of further
logistics disruption and inflation, given the improvement in order intake, the
Board now expects the financial results for the year to be slightly ahead of
market expectations.
Our market drivers remain strong. Against that background and based on the
recent track record of improved demand and continued strategic investment, the
Board is confident of delivering progress during the second half of 2022 and
beyond.
Directors' Responsibility Statement
The Directors confirm that this condensed consolidated half year financial
information has been prepared in accordance with International Accounting
Standard 34, 'Interim Financial Reporting' as adopted by the United Kingdom,
and that the half year management report herein includes a fair review of the
information required by DTR 4.2.7 and DTR 4.2.8, namely:
· an indication of important events that have occurred during the
first six months and their impact on the condensed consolidated half year
financial information, and a description of the principal risks and
uncertainties for the remaining six months of the financial year; and
· material related party transactions in the first six months and
any material changes in the related party transactions described in the last
annual report.
By order of the Board
Dr James Routh
Chief Executive Officer
27 April 2022
AB Dynamics plc
Unaudited consolidated statement of comprehensive income
for the six months ended 28 February 2022
Unaudited 6 months ended 28 February 2022 Unaudited 6 months ended 28 February Audited Year ended 31 August
2021 2021
Adjusted Adjustments Statutory Adjusted Adjustments Statutory Adjusted Adjustments Statutory
(Restated)* (Restated)*
Note £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Revenue 2 37,826 - 37,826 27,280 - 27,280 65,380 - 65,380
Cost of sales (16,011) - (16,011) (11,552) - (11,552) (28,269) - (28,269)
Gross profit 21,815 - 21,815 15,728 - 15,728 37,111 - 37,111
General and administrative expenses (16,102) (3,214) (19,316) (12,231) (2,810) (15,041) (26,288) (6,630) (32,918)
Operating profit 5,713 (3,214) 2,499 3,497 (2,810) 687 10,823 (6,630) 4,193
Operating profit is analysed as:
Before depreciation and amortisation 7,313 (480) 6,833 4,598 (1,132) 3,466 13,500 (2,198) 11,302
Depreciation and amortisation (1,600) (2,734) (4,334) (1,101) (1,678) (2,779) (2,677) (4,432) (7,109)
Operating profit 5,713 (3,214) 2,499 3,497 (2,810) 687 10,823 (6,630) 4,193
Finance income 131 - 131 21 - 21 15 - 15
Finance expense (86) - (86) (18) - (18) (91) - (91)
Other finance expense (215) - (215) - - - (332) - (332)
Profit before tax 5,543 (3,214) 2,329 3,500 (2,810) 690 10,415 (6,630) 3,785
Tax expense (999) 606 (393) (515) 555 40 (1,895) 1,095 (800)
Profit for the period 4,544 (2,608) 1,936 2,985 (2,255) 730 8,520 (5,535) 2,985
Other comprehensive income/(loss)
Items that may be reclassified to consolidated income statement:
Cash flow hedges 30 - 30 - - - (31) - (31)
Exchange gain/(loss) on foreign currency net investments 132 - 132 (948) - (948) (614) - (614)
Total comprehensive income/(loss) for the year 4,706 (2,608) 2,098 2,037 (2,255) (218) 7,875 (5,535) 2,340
Earnings per share - basic 20.1 (11.5) 8.6 13.2 (10.0) 3.2 37.7 (24.5) 13.2
(pence) 5
Earnings per share - diluted 19.9 (11.4) 8.5 13.1 (9.9) 3.2 37.4 (24.3) 13.1
(pence) 5
* 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 (see note 3).
AB Dynamics plc
Unaudited consolidated statement of financial position
as at 28 February 2022
Unaudited Unaudited Audited
28 February 28 February 31 August
2022 2021 2021
£'000 (Restated)*
£'000 £'000
ASSETS Note
Non-current assets
Goodwill 22,269 15,821 22,221
Acquired intangible assets 25,304 15,719 28,282
Other intangible assets 1,618 1,078 1,577
Property, plant and equipment 25,210 26,845 25,815
Right-of-use assets 1,020 466 913
75,421 59,929 78,808
Current assets
Inventories 9,535 9,090 6,771
Trade and other receivables 17,641 14,466 15,500
Contract assets 3,728 1,613 4,269
Taxation 815 1,119 1,443
Cash and cash equivalents 7 28,772 34,084 23,282
60,491 60,372 51,265
Assets held for sale 1,893 - 1,893
LIABILITIES
Current liabilities
Borrowings - 485 -
Trade and other payables 10,607 10,972 10,933
Contract liabilities 8,184 3,885 3,568
Derivative financial instruments 1 - 31
Short-term lease liabilities 7 556 246 456
Deferred consideration 5,016 - 4,929
24,364 15,588 19,917
Non-current liabilities
Deferred tax liabilities 6,464 2,927 6,552
Long-term lease liabilities 7 511 237 511
6,975 3,164 7,063
Net assets 106,466 101,549 104,986
Shareholders' equity
Share capital 226 230 226
Share premium 62,210 61,785 62,210
Other reserves 8 (2,177) (2,642) (2,339)
Retained earnings 46,207 42,176 44,889
Total equity 106,466 101,549 104,986
* 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 (see note 3).
AB Dynamics plc
Unaudited consolidated statement of changes in equity
for the six months ended 28 February 2022
Share capital Share premium Other reserves Retained earnings Total equity
£'000 £'000 £'000 £'000 £'000
At 1 September 2021 226 62,210 (2,339) 44,889 104,986
- - - 570 570
Share based payments
Total comprehensive income - - 162 1,936 2,098
Deferred tax on share based payments - - - (455) (455)
Dividend paid - - - (733) (733)
At 28 February 2022 226 62,210 (2,177) 46,207 106,466
226 61,736 (1,694) 41,956* 102,224*
At 1 September 2020
- - - 570 570
Share based payments
Total comprehensive income - - (948) 730* (218)*
Deferred tax on share based payments - - - (86) (86)
Dividend paid - - - (994) (994)
Issue of shares 4 49 - - 53
At 28 February 2021 230 61,785 (2,642) 42,176* 101,549*
226 61,736 (1,694) 41,956 102,224
At 1 September 2020
- - - 1,139 1,139
Share based payments
Total comprehensive income - - (645) 2,985 2,340
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 (2,339) 44,889 104,986
* 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.
AB Dynamics plc
Unaudited consolidated cash flow statement
for the six months ended 28 February 2022
Unaudited Unaudited Audited Year
6 months 6 months ended
ended ended 31 August
28 February 28 February 2021
2022 2021
(Restated)*
£'000 £'000 £'000
Profit before tax 2,329 690 3,785
Depreciation and amortisation 4,334 2,779 7,109
Net finance expense/(income) 170 (3) 408
Acquisition costs - - 304
Share based payments 570 570 1,240
Operating cash flows before changes in working capital 7,403 4,036 12,846
(Increase)/decrease in inventories (2,764) 90 2,409
Increase in trade and other receivables (1,600) (298) (3,913)
Increase in trade and other payables 4,954 3,285 2,956
Cash flows from operations 7,993 7,113 14,298
Cash impact of adjusting items 480 868 1,663
Adjusted cash flow from operations 8,473 7,981 15,961
Interest received 131 21 15
Finance costs paid (46) (113) (154)
Income tax (paid)/received (707) 1,570 1,062
Net cash flows from operating activities 7,371 8,591 15,221
Cash flows used in investing activities
Acquisition of businesses - (560) (14,329)
Purchase of property, plant and equipment (554) (3,363) (5,536)
Capitalised development costs and purchased software
(138) (589) (1,104)
Net cash used in investing activities (692) (4,512) (20,969)
Cash flows (used in)/generated from financing activities
Movements in loans - (20) (493)
Maturity of fixed term deposits - 5,000 5,000
Dividends paid (733) (994) (1,356)
Proceeds from issue of share capital - 53 474
Repayment of lease liabilities (423) (249) (656)
Net cash flow (used in)/generated from financing activities (1,156) 3,790 2,969
Net increase/(decrease) in cash and cash equivalents 5,523 7,869 (2,779)
Cash and cash equivalents at beginning of the period
23,282 26,183 26,183
Effect of exchange rates on cash and cash equivalents (33) 32 (122)
Cash and cash equivalents at end of period 28,772 34,084 23,282
* 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.
AB Dynamics plc
Notes to the unaudited interim report
for the six months ended 28 February 2022
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 is the specialised area of design, manufacture and
supply of advanced testing, simulation and measurement products to the global
transport market.
The annual financial statements of the Group are prepared in accordance with
International Financial Reporting Standards as adopted for use by the UK in
conformity with the requirements of the Companies Act 2006. A copy of the
statutory accounts for the year ended 31 August 2021 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 in this unaudited interim financial information as those which
were applied in the preparation of the Group's annual financial statements for
the year ended 31 August 2021.
Certain new standards, amendments to standards and interpretations are not yet
effective for the year ended 31 August 2022 and have therefore not been
applied in preparing this interim financial information.
The interim accounts are unaudited and do not constitute statutory accounts as
defined in Section 434 of the Companies Act 2006.
Going concern basis of accounting
The Directors have assessed the principal risks discussed in note 9, including
by modelling a number of severe but plausible downside economic scenarios,
whereby the Group experiences:
· A reduction in demand of 25%
· A 10% increase in operating costs from supply chain disruption
· An increase in cash collection cycle
With £27.7m of net cash at 28 February 2022 and availability of a revolving
credit facility of £15m, 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 this interim
financial information. They therefore consider it appropriate to adopt the
going concern basis of accounting in preparing the interim financial
information.
The interim financial information for the six months ended 28 February 2022
was approved by the Board on 27 April 2022.
2. Segment information
Revenues attributable to individual foreign countries are as follows:
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
28 February 2022 28 February 2021 31 August 2021
£'000 £'000 £'000
United Kingdom 2,780 3,191 4,449
Rest of Europe 6,772 4,763 11,352
North America 10,105 8,963 15,884
Asia Pacific 17,501 9,668 32,717
Rest of the World 668 695 978
37,826 27,280 65,380
Revenues are disaggregated as follows:
Track testing 30,420 20,937 49,680
Laboratory testing and simulation 7,406 6,343 15,700
37,826 27,280 65,380
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, EBITDA,
adjusted operating margin, adjusted profit before tax and adjusted earnings
per share.
The interim 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 interim report relate to underlying business performance (as
defined above) unless otherwise stated.
A summary of the items which reconcile statutory to adjusted measures is
included below:
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
28 February 28 February 2021 31 August 2021
2022
(Restated)*
£'000 £'000 £'000
Amortisation of acquired intangibles 2,734 1,678 4,432
ERP development costs 480 668 1,358
Acquisition related costs - 464 840
3,214 2,810 6,630
* 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.
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.
ERP Development costs
During April 2021 the IFRS Interpretations Committee finalised its 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 expensed. The ERP
system currently being implemented is hosted on the cloud; therefore, the
capitalised expenditure for development costs has now been expensed.
Acquisition related costs
The prior year costs relate to the acquisition of the Vadotech Group as well
as staff retention payments to the employees of rFpro.
4. Tax
The statutory effective tax rate for the period is a charge of 16.9% (H1 2021:
tax credit of 6%), the difference from the prior period reflecting the
availability of additional R&D credits and an increased patent box
deduction.
The adjusted effective tax rate, adjusting both the tax charge and the profit
before taxation is 18.0% (H1 2021: 14.7%).
5. Earnings per share
The calculation of earnings per share is based on the following earnings and
number of shares:
Unaudited Unaudited Audited
6 months 6 months Year
ended ended ended
28 February 28 February 31 August
2022 2021 2021
(Restated)*
Profit after tax attributable to owners of the Company (£'000) 1,936 730 2,985
Adjusted profit after tax attributable to owners of the Company (£'000) 4,544 2,985 8,520
Weighted average number of shares ('000)
Basic 22,624 22,583 22,602
Diluted 22,834 22,781 22,782
Earnings per share (pence)
Basic 8.6 3.2 13.2
Diluted 8.5 3.2 13.1
Adjusted basic 20.1 13.2 37.7
Adjusted diluted 19.9 13.1 37.4
* 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.
6. Dividends
An interim dividend of 1.6p per ordinary share in respect of the year ended 31
August 2021 was paid on 14 May 2021 to shareholders on the register on 30
April 2021.
At the Annual General Meeting the shareholders approved a final dividend in
respect of the year ended 31 August 2021 of 3.24p per ordinary share totalling
£733,000. This was paid on 28 January 2022 to shareholders on the register on
31 December 2021.
An interim dividend of 1.76p per ordinary share has been declared in respect
of the year ending 31 August 2022 which will be paid on 20 May 2022 to
shareholders on the register on 6 May 2022.
7. Net cash
Net cash comprises cash and cash equivalents, bank overdrafts and lease
liabilities.
Unaudited Unaudited Audited
28 February 28 February 31 August
2022 2021 2021
£'000
£'000 £'000
Cash and cash equivalents 28,772 34,084 23,282
Borrowings - (485) -
Lease liabilities (1,067) (483) (967)
27,705 33,116 22,315
The Group has a £15m revolving credit facility with National Westminster Bank
plc. The facility remained undrawn at 28 February 2022.
8. Other reserves
Merger relief reserve Reconstruction reserve Translation reserve Hedging reserve Total
£'000 £'000 £'000 £'000 £'000
At 1 September 2020 11,390 (11,284) (1,800) - (1,694)
Total comprehensive income - - (948) - (948)
At 28 February 2021 11,390 (11,284) (2,748) - (2,642)
Total comprehensive income - - 334 (31) 303
At 31 August 2021 11,390 (11,284) (2,414) (31) (2,339)
Total comprehensive income - - 132 30 162
At 28 February 2022 11,390 (11,284) (2,282) (1) (2,177)
9. Principal risks
The principal risks and uncertainties impacting the Group are described on
pages 56-58 of our Annual Report 2021 and remain unchanged at 28 February
2022.
They include: COVID-19 disruption, downturn or instability in major geographic
markets or market sectors, loss of major customers and changes 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.
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