REG - AB Dynamics PLC - Half-year Report
25/04/2023 07:00
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RNS Number : 2746X AB Dynamics PLC 25 April 2023
AB Dynamics plc
Unaudited interim results for the six months ended 28 February 2023
"Strong performance, strategic progress and sustainable growth"
AB Dynamics plc (AIM: ABDP, 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 interim
results for the six-month period to 28 February 2023 (the "Period").
H1 2023 H1 2022
£m £m
Revenue 49.0 37.8 +30%
Gross margin 57.1% 57.7% -60bps
Adjusted operating profit(1) 7.8 5.7 +37%
Adjusted operating margin(1) 15.9% 15.1% +80bps
Statutory operating profit 2.9 2.5 +16%
Adjusted cash flow from operations(1) 9.5 8.5 +12%
Net cash 21.3 27.7 -23%
Pence Pence
Adjusted diluted earnings per share(1) 27.5 19.9 +38%
Statutory diluted earnings per share 6.7 8.5 -21%
Interim dividend per share 1.94 1.76 +10%
(1)Before amortisation of acquired intangibles, acquisition related charges,
and exceptional items. A reconciliation to statutory measures is given in the
Alternative Performance Measures section of the Half Year Review.
Financial highlights
· Market and customer activity levels have remained positive
throughout H1, with strong activity in both track testing and laboratory
testing and simulation, particularly in Europe
· Revenue increased by 30% against H1 2022 of which 14% was organic
growth
o Track testing revenue grew by 13% reflecting increases in robots and ADAS
platforms
o Laboratory testing and simulation revenue grew by 99%, of which 20% was
organic driven by a strong performance at rFpro and delivery of SPMM systems.
The remainder related to the acquisition of Ansible Motion
· The proportion of recurring and service-based sales has been
maintained at 41% (H1 2022: 41%)
· The Group has remained effective in mitigating inflationary cost
pressures, with gross margins robust at 57.1% (H1 2022: 57.7%)
· Operating margin improved by 80bps to 15.9% 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
o Excluding ABD Solutions, the operating margin increased to 18.0% (H1 2022:
16.4%)
· Operating cash generation remained strong at £9.5m (H1 2022:
£8.5m). Significant net cash balance of £21.3m at the period end (28
February 2022: £27.7m, 31 August 2022: £29.2m) after funding the initial
consideration for the acquisition of Ansible Motion
· Interim dividend of 1.94p per share (H1 2022: 1.76p), growth of
10%
Strategic highlights
· Continuing progress made in the strategic initiative to open up
new markets beyond automotive
· ABD Solutions has 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
· The integration of Ansible Motion is continuing as planned and
the business has delivered a solid 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
· Performance in the first half of the year was strong, with good
conversion of orders to revenue together with improved operational efficiency
and effective cost management
· The Group has a solid order book, providing visibility into the
second half of the year
· Whilst mindful of ongoing economic uncertainty, as well as timing
of pipeline conversion, the Board remains confident that the Group will make
further financial and strategic progress this year, with its expectations for
FY 2023 performance 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
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 growth in the core business as well as progress
in the development of ABD Solutions and in our simulation business with the
acquisition of Ansible Motion. Against the backdrop of ongoing external
challenges in relation to supply chain disruption and wider economic
uncertainty, the Group has delivered growth in revenue, operating profit and
operating margins. We have also continued to invest in all areas of the
business, supporting improved capability as well as our ambitious growth
plans.
"We see significant opportunity in our core markets within automotive, which
are supported by long-term structural and regulatory growth drivers. We are
continuing to invest in new product development and technology whilst also
investing in innovative technologies to diversify the business into attractive
adjacent markets through ABD Solutions.
"Despite the risk of short-term volatility relating to global macroeconomic
conditions and timing of order intake, 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
in achieving the Board's expectations during the second half of 2023 and
delivering further progress in the years beyond."
There will be a presentation for analysts this morning at 9.00am at the London
Stock Exchange. Please contact abdynamics@teneo.com if you would like to
attend.
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
Teneo 0207 353 4200
James Macey White
Matt Low
Half Year Review
Group overview
Despite the challenging economic and operational backdrop, the Group has
delivered a strong performance, with record levels of revenue, supported by
recent investments in its capabilities to capitalise on the significant
long-term structural and regulatory growth drivers within its markets.
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
Group also expanded its presence in the simulation market through the
formation of AB Simulation and the acquisition of Ansible Motion.
Financial performance
Revenue increased by 30% to £49.0m against H1 2022, of which 14% related to
organic growth and the remainder to the acquisition of Ansible Motion.
Gross margin was 57.1%, down 60bps on H1 2022 due to a higher proportion of
laboratory testing and simulation revenue, offset by effective pricing
management and increased recurring revenue.
Group adjusted operating profit of £7.8m increased 37% against H1 2022. The
adjusted operating margin increased against H1 2022 to 15.9% (H1 2022: 15.1%),
as a result of the increase in sales volumes.
Adjusted net finance costs were £0.2m (H1 2022: £0.2m, FY 2022: £0.4m).
Adjusted profit before tax was £7.6m (H1 2022: £5.5m). The Group adjusted
tax charge totalled £1.3m (H1 2022: £1.0m), an adjusted effective tax rate
of 16.5% (H1 2022: 18.0%).
Adjusted diluted earnings per share was 27.5p (H1 2022: 19.9p), an increase of
38%, reflecting the increase in operating profit and a lower tax rate.
Statutory operating profit increased by 16% to £2.9m and after net finance
costs of £1.0m (H1 2022: £0.2m), statutory profit before tax was down 17%
from £2.3m to £1.9m, giving statutory basic earnings per share of 6.7p (H1
2022: 8.6p). The statutory tax charge was £0.3m (H1 2022: £0.4m). A
reconciliation of statutory to underlying non-GAAP financial measures is
provided below. The adjustments to operating profit of £4.9m comprise £3.7m
of amortisation of acquired intangibles, £0.8m of ERP cloud computing costs
and £0.4m of acquisition related costs (H1 2022: £3.2m comprising £2.7m of
amortisation of acquired intangibles and £0.5m of ERP cloud computing costs).
The £0.8m adjustment to the interest charge relates to the unwind of the
discount on the deferred contingent consideration for Ansible Motion (H1 2022:
£nil). The tax impact of these adjustments was £0.9m. The statutory net
finance costs were £1.0m (H1 2022: £0.2m).
The Group delivered strong adjusted operating cash flow of £9.5m (H1 2022:
£8.5m) with the net cash position at the period end of £21.3m (31 August
2022: £29.2m) underpinning a robust balance sheet and providing the resources
to continue the Group's investment programme.
Sector review
H1 2023 H1 2022
£m £m
Driving robots 14.2 9.7 +46%
ADAS test products 14.0 13.3 +5%
Testing services 6.1 7.4 -18%
Track testing 34.3 30.4 +13%
Laboratory testing 2.8 2.0 +40%
Simulation 11.9 5.4 +120%
Laboratory testing and simulation 14.7 7.4 +99%
Total revenue 49.0 37.8 +30%
Track testing
Track testing revenue of £34.3m was up 13% against H1 2022 (£30.4m).
Driving robot sales increased 46% against H1 2022 to £14.2m (H1 2022:
£9.7m), following strong order intake during H2 2022. The Group expects
continued growth in driving robots at more normalised levels, as new
regulatory requirements for evolving ADAS technologies are released, such as
the recent 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.
ADAS platform sales increased 5% to £14.0m in H1 2023 (H1 2022: £13.3m). 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 further drive demand.
Testing services revenues decreased 18% to £6.1m (H1 2022: £7.4m) due to
local COVID restrictions delaying the provision of testing services in China
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 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 growth, with
revenue of £14.7m, an increase of 99% on H1 2022 (£7.4m) of which 20% was
organic growth in simulation software and delivery of SPMM systems, with the
remainder from Ansible Motion which was acquired at the beginning of the
period.
SPMM revenue of £2.8m grew by 40% in H1 2023 (H1 2022: £2.0m) and the
division carries forward a solid order book, which provides good coverage for
the remainder of the financial year.
Organic growth in simulation revenue was 13% reflecting high customer demand
for our simulation software, with revenue of £6.1m (H1 2022: £5.4m). The
contribution from Ansible Motion was £5.8m reflecting the strong order book
at the time of acquisition.
Progress on our strategy
The Group continues to make good progress against its strategic priorities, as
well as further integrating ESG as a core tenet of its strategy and operating
model.
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.
AB Simulation, launched at the beginning of the period, has successfully
consolidated the simulation business, including Ansible Motion, into a
dedicated and focused market-facing business unit. AB Simulation enhances the
Group's simulation capabilities, expands its product range and achieves
critical mass in this attractive sector.
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 defence and mining 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 contract for
delivery of a retrofit pedestrian detection system for a UK customer for
construction industry applications.
Acquisitions
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 for an initial consideration of £18.1m, of which
£3.2m was satisfied in new ordinary shares in AB Dynamics plc and the
remainder in cash. Contingent consideration of up to £12.0m will become
payable in cash subject to certain performance criteria being met for the year
ending 31 August 2023. The integration of Ansible Motion is progressing well
with the product range having been incorporated into the Group's other
simulation offerings.
Acquisitions have been and will continue to be a significant part of the
overall strategy, and there is 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.
Comparatives are provided 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 2023 H1 2022
Adjusted Adjustments Statutory Adjusted Adjustments Statutory
EBITDA (£m) 9.6 (1.2) 8.4 7.3 (0.5) 6.8
Operating profit (£m) 7.8 (4.9) 2.9 5.7 (3.2) 2.5
Operating margin (%) 15.9 (10.0) 5.9 15.1 (8.5) 6.6
Finance expense (£m) (0.2) (0.8) (1.0) (0.2) - (0.2)
Profit before tax (£m) 7.6 (5.7) 1.9 5.5 (3.2) 2.3
Tax expense (£m) (1.3) 0.9 (0.4) (1.0) 0.6 (0.4)
Profit after tax (£m) 6.3 (4.8) 1.5 4.5 (2.6) 1.9
Diluted earnings per share (pence) 27.5 (20.8) 6.7 19.9 (11.4) 8.5
Cash flow from operations (£m) 9.5 (3.4) 6.1 8.5 (0.5) (8.0)
The adjustments comprise:
H1 2023 H1 2022
£m £m
Amortisation of acquired intangibles 3.7 2.7
ERP development costs 0.8 0.5
Acquisition related costs 0.4 -
Adjustments to operating profit 4.9 3.2
Acquisition related finance costs 0.8 -
Adjustments to profit before tax 5.7 3.2
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 £0.3m (H1
2022: £0.1m) 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 2022: £0.1m).
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.
On a constant currency basis, revenue would have been £0.9m lower than
reported and operating profit would have been £0.1m lower as both the US
dollar and the Euro strengthened against H1 2022. Constant currency revenue
growth was 27% and growth in operating profit was 35%.
Dividends
The Board has declared an interim dividend of 1.94p per ordinary share (H1
2022: 1.76p) which will be paid on 19 May 2023 to shareholders on the register
on 5 May 2023. The ex-dividend date will be 4 May 2023.
A final dividend of 3.54p per share was paid on 27 January 2023 in respect of
the year ended 31 August 2022 totalling £810,000. 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 growth in the core business as well as progress
in the development of ABD Solutions and in the simulation business following
the acquisition of Ansible Motion. Against the backdrop of ongoing external
challenges in relation to supply chain disruption and wider economic
uncertainty, the Group has delivered growth in revenue, operating profit and
operating margins. The Company has also continued to invest in all areas of
the business, supporting improved capability as well as the ambitious growth
plans.
There is significant opportunity in the core markets within automotive, which
are supported by long-term structural and regulatory growth drivers. There is
continued investment in new product development and technology whilst also
investing in innovative technologies to diversify the business into attractive
adjacent markets through ABD Solutions.
In 2023, revenue and profit are expected to be more evenly weighted across the
two halves of the year than in previous years. Despite the risk of short-term
volatility relating to global macroeconomic conditions and timing of order
intake, the market drivers both in the core business and in ABD Solutions
remain strong. This backdrop, along with the Group's recent investments in
capability and new products, provides confidence in achieving the Board's
expectations during the second half of 2023 and delivering further progress in
the years 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
25 April 2023
AB Dynamics plc
Unaudited condensed consolidated statement of comprehensive income
for the six months ended 28 February 2023
Unaudited 6 months ended 28 February 2023 Unaudited 6 months ended 28 February Audited Year ended 31 August
2022 2022
Adjusted Adjustments Statutory Adjusted Adjustments Statutory Adjusted Adjustments Statutory
Note £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Revenue 2 49,042 - 49,042 37,826 - 37,826 80,305 - 80,305
Cost of sales (21,039) - (21,039) (16,011) - (16,011) (34,089) - (34,089)
Gross profit 28,003 - 28,003 21,815 - 21,815 46,216 - 46,216
General and administrative expenses (20,214) (4,933) (25,147) (16,102) (3,214) (19,316) (33,473) (7,514) (40,987)
Operating profit 7,789 (4,933) 2,856 5,713 (3,214) 2,499 12,743 (7,514) 5,229
Operating profit is analysed as:
Before depreciation and amortisation 9,622 (1,222) 8,400 7,313 (480) 6,833 16,363 (1,998) 14,365
Depreciation and amortisation (1,833) (3,711) (5,544) (1,600) (2,734) (4,334) (3,620) (5,516) (9,136)
Operating profit 7,789 (4,933) 2,856 5,713 (3,214) 2,499 12,743 (7,514) 5,229
Net finance expense (206) (794) (1,000) (170) - (170) (374) - (374)
Profit before tax 7,583 (5,727) 1,856 5,543 (3,214) 2,329 12,369 (7,514) 4,855
Tax expense (1,253) 932 (321) (999) 606 (393) (2,182) 1,236 (946)
Profit for the period 6,330 (4,795) 1,535 4,544 (2,608) 1,936 10,187 (6,278) 3,909
Other comprehensive income
Items that may be reclassified to consolidated income statement:
Cash flow hedges 136 - 136 30 - 30 (93) - (93)
Exchange (loss)/ gain on foreign currency net investments (539) - (539) 132 - 132 3,574 - 3,574
Total comprehensive income for the year 5,927 (4,795) 1,132 4,706 (2,608) 2,098 13,668 (6,278) 7,390
Earnings per share - basic 27.7 (21.0) 6.7 20.1 (11.5) 8.6 45.0 (27.7) 17.3
(pence) 5
Earnings per share - diluted 27.5 (20.8) 6.7 19.9 (11.4) 8.5 44.5 (27.4) 17.1
(pence) 5
AB Dynamics plc
Unaudited condensed consolidated statement of financial position
as at 28 February 2023
Unaudited Unaudited Audited
28 February 28 February 31 August
2023 2022 2022
£'000
£'000 £'000
ASSETS Note
Non-current assets
Goodwill 36,825 22,269 23,818
Acquired intangible assets 36,769 25,304 23,665
Other intangible assets 3,080 1,618 2,971
Property, plant and equipment 25,418 25,210 25,708
Right-of-use assets 1,648 1,020 876
103,740 75,421 77,038
Current assets
Inventories 15,616 9,535 13,611
Trade and other receivables 18,910 17,641 13,782
Contract assets 2,037 3,728 3,917
Taxation 140 815 882
Cash and cash equivalents 7 28,991 28,772 30,141
65,694 60,491 62,333
Assets held for sale 1,893 1,893 1,893
LIABILITIES
Current liabilities
Borrowings 7 6,000 - -
Trade and other payables 19,995 10,607 16,053
Contract liabilities 7,229 8,184 5,787
Derivative financial instruments - 1 123
Short-term lease liabilities 7 784 556 628
Deferred consideration 11,190 5,016 -
45,198 24,364 22,591
Non-current liabilities
Deferred tax liabilities 9,236 6,464 6,397
Long-term lease liabilities 7 952 511 315
10,188 6,975 6,712
Net assets 115,941 106,466 111,961
Shareholders' equity
Share capital 229 226 226
Share premium 65,568 62,210 62,260
Other reserves 8 739 (2,177) 1,142
Retained earnings 49,405 46,207 48,333
Total equity 115,941 106,466 111,961
AB Dynamics plc
Unaudited condensed consolidated statement of changes in equity
for the six months ended 28 February 2023
Share capital Share premium Other reserves Retained earnings Total equity
£'000 £'000 £'000 £'000 £'000
At 1 September 2022 226 62,260 1,142 48,333 111,961
Total comprehensive income - - (403) 1,535 1,132
Share based payments - - - 230 230
Deferred tax on share based payments - - - 117 117
Dividend paid - - - (810) (810)
Issue of shares 3 3,308 - - 3,311
At 28 February 2023 229 65,568 739 49,405 115,941
226 62,210 (2,339) 44,889 104,986
At 1 September 2021
Total comprehensive income - - 162 1,936 2,098
Share based payments - - - 570 570
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 62,210 (2,339) 44,889 104,986
At 1 September 2021
Total comprehensive income - - 3,481 3,909 7,390
Share based payments - - - 750 750
Deferred tax on share based payments - - - (84) (84)
Dividend paid - - - (1,131) (1,131)
Issue of shares - 50 - - 50
At 31 August 2022 226 62,260 1,142 48,333 111,961
AB Dynamics plc
Unaudited condensed consolidated cash flow statement
for the six months ended 28 February 2023
Unaudited Unaudited Audited Year
6 months 6 months ended
ended ended 31 August
28 February 28 February 2022
2023 2022
£'000 £'000 £'000
Profit before tax 1,856 2,329 4,855
Depreciation and amortisation 5,544 4,334 9,136
Finance expense 1,000 170 374
Acquisition costs - - 290
Share based payment 230 570 795
Operating cash flows before changes in working capital 8,630 7,403 15,450
Increase in inventories (914) (2,764) (6,889)
Decrease/(increase) in trade and other receivables
460 (1,600) 1,981
(Decrease)/increase in trade and other payables (2,034) 4,954 8,140
Cash flows from operations 6,142 7,993 18,682
Cash flows from operations are analysed as:
Adjusted cash flows from operations 9,480 8,473 20,652
Cash impact of adjusting items (3,338) (480) (1,970)
Cash flow from operations 6,142 7,993 18,682
Finance costs (paid)/ received (12) 85 (90)
Income tax received/ (paid) 546 (707) (684)
Net cash flows from operating activities 6,676 7,371 17,908
Cash flows used in investing activities
Acquisition of businesses (11,233) - (5,114)
Purchase of property, plant and equipment (882) (554) (2,098)
Capitalised development costs and purchased software
(292) (138) (1,711)
Net cash used in investing activities (12,407) (692) (8,923)
Cash flows generated from/ (used in) financing activities
Movements in loans 6,000 - -
Dividends paid (810) (733) (1,131)
Proceeds from issue of share capital 47 - 50
Repayment of lease liabilities (602) (423) (964)
Net cash flow generated from/ (used in) financing activities 4,635 (1,156) (2,045)
Net (decrease)/ increase in cash and cash equivalents (1,096) 5,523 6,940
Cash and cash equivalents at beginning of the period
30,141 23,282 23,282
Effect of exchange rates on cash and cash equivalents (54) (33) (81)
Cash and cash equivalents at end of period
28,991 28,772 30,141
AB Dynamics plc
Notes to the unaudited interim report
for the six months ended 28 February 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 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
UK-adopted international accounting standards in conformity with the
requirements of the Companies Act 2006. 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.
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 2022.
Certain new standards, amendments to standards and interpretations are not yet
effective for the year ending 31 August 2023 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, 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
· 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
At 28 February 2023 the Group had £21.3m of net cash and £9.0m undrawn
revolving credit facility. Even 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.
The interim financial information for the six months ended 28 February 2023
was approved by the Board on 25 April 2023.
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 2023 28 February 2022 31 August 2022
£'000 £'000 £'000
United Kingdom 2,115 2,780 5,459
Rest of Europe 10,405 6,772 13,723
North America 14,158 10,105 19,466
Asia Pacific 21,065 17,501 40,941
Rest of World 1,299 668 716
49,042 37,826 80,305
Revenues are disaggregated as follows:
Track testing 34,299 30,420 64,743
Laboratory testing and simulation 14,743 7,406 15,562
49,042 37,826 80,305
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 2022 31 August 2022
2023
£'000 £'000 £'000
Amortisation of acquired intangibles 3,711 2,734 5,516
ERP development costs 786 480 1,670
Acquisition related costs 436 - 328
Acquisition related finance costs 794 - -
5,727 3,214 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.
ERP development costs
These costs relate to the development, configuration and customisation of the
Group's new ERP system which is hosted in the cloud.
Acquisition related costs
The costs relate to the acquisition of Ansible Motion Limited which completed
on 20 September 2022.
Acquisition related finance costs
Finance costs relate to the unwind of the discount on deferred contingent
consideration of £12.0m payable on the acquisition of Ansible Motion.
Tax
The tax impact of these adjustments was as follows: amortisation £0.6m (H1
2022: £0.5m), acquisition related costs £0.1m (H1 2022: £Nil), ERP £0.2m
(H1 2022: £0.1m) and acquisition related finance costs £Nil (H1 2022:
£Nil).
Cash impact
The operating cash flow impact of the adjustments was an outflow of £3.3m (H1
2022: £0.5m) being £0.8m (H1 2022: £0.5m) in relation to ERP development
costs, £0.4m (H1 2022: £Nil) in relation to acquisition costs and £2.1m (H1
2022: £Nil) 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.
4. Tax
The statutory effective tax rate for the period is a charge of 17.3% (H1 2022:
16.9%), the difference from the prior period reflecting the acquisition
related finance costs which are not deductible for tax purposes.
The adjusted effective tax rate, adjusting both the tax charge and the profit
before taxation is 16.5% (H1 2022: 18.0%). The reduction reflects the
availability of additional R&D and patent box tax credits.
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
2023 2022 2022
Profit after tax attributable to owners of the Group (£'000) 1,535 1,936 3,909
Adjusted profit after tax attributable to owners of the Group (£'000) 6,330 4,544 10,187
Weighted average number of shares ('000)
Basic 22,859 22,624 22,625
Diluted 23,036 22,834 22,908
Earnings per share (pence)
Basic 6.7 8.6 17.3
Diluted 6.7 8.5 17.1
Adjusted basic 27.7 20.1 45.0
Adjusted diluted 27.5 19.9 44.5
6. Dividends
An interim dividend of 1.76p per ordinary share in respect of the year ended
31 August 2022 was paid on 20 May 2022 to shareholders on the register on 6
May 2022 totalling £398,000.
At the Annual General Meeting the shareholders approved a final dividend in
respect of the year ended 31 August 2022 of 3.54p per ordinary share totalling
£810,000. This was paid on 27 January 2023 to shareholders on the register on
30 December 2022.
An interim dividend of 1.94p per ordinary share totalling £444,000 has been
declared in respect of the year ending 31 August 2023 which will be paid on 19
May 2023 to shareholders on the register on 5 May 2023.
7. Net cash
Net cash comprises cash and cash equivalents, bank overdrafts, borrowings and
lease liabilities.
Unaudited Unaudited Audited
28 February 28 February 31 August
2023 2022 2022
£'000
£'000 £'000
Cash and cash equivalents 28,991 28,772 30,141
Borrowings (6,000) - -
Lease liabilities (1,736) (1,067) (943)
21,255 27,705 29,198
The Group has a £15.0m revolving credit facility with National Westminster
Bank plc. On 16 September 2022 the Group drew down £6.0m to fund part of the
initial consideration for the acquisition of Ansible Motion Limited.
8. Other reserves
Merger relief reserve Reconstruction reserve Translation reserve Hedging reserve Total
£'000 £'000 £'000 £'000 £'000
At 1 September 2021 11,390 (11,284) (2,414) (31) (2,339)
Other comprehensive income - - 132 30 162
At 28 February 2022 11,390 (11,284) (2,282) (1) (2,177)
Other comprehensive income - - 3,442 (123) 3,319
At 31 August 2022 11,390 (11,284) 1,160 (124) 1,142
Other comprehensive income - - (539) 136 (403)
At 28 February 2023 11,390 (11,284) 621 12 739
9. Foreign exchange
The foreign exchange rates applied during the period were:
H1 2023 H1 2022
Period end rate
US dollar 1.206 1.342
Euro 1.137 1.196
Yen 164 154
Average rate
US dollar 1.187 1.352
Euro 1.143 1.185
Yen 164 154
10. 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 £18.1m consideration comprised £14.9m of cash and £3.2m of new
ordinary shares in AB Dynamics plc. Contingent consideration of up to £12.0m
will become payable in cash in January 2024 subject to certain performance
criteria being met for the year ending 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. £0.5m of the initial
consideration has been retained against any potential warranties.
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
Tangible assets 96 (65) 31
Right of use asset 441 - 441
Inventory 2,318 (1,218) 1,100
Trade and other receivables 2,315 1,382 3,697
Trade and other payables (6,482) (89) (6,571)
Lease Liability (441) - (441)
Deferred tax liability - (4,139) (4,139)
Deferred tax assets 168 54 222
Net (liabilities)/ assets acquired (1,585) 12,725 11,140
Goodwill arising on acquisition 13,265
24,405
Initial cash consideration 14,541
Cash acquired (3,744)
Acquisition expenses 436
Net cash paid, after acquisition expenses 11,233
New ordinary shares issued 3,200
Less: acquisition expenses (436)
Deferred consideration payable 10,408
24,405
Deferred consideration
Performance payment 9,882
Retained consideration 526
10,408
The initial cash consideration was satisfied with available cash resources and
a short-term utilisation of part of the Group revolving credit facility.
£0.5m of the initial purchase price has been retained against any potential
warranties and is included within deferred consideration.
The valuation exercise to identify intangible assets acquired, as required
under IFRS3, has been provisionally applied as at the half year. The final
valuation will be reflected in the Annual Report and Accounts for the Group
for the year ending 31 August 2023. together with the appropriate IFRS 3
disclosures. Identifiable net assets with a total fair value of £16.8m and
goodwill of £13.3m have provisionally been recognised.
Ansible Motion Limited contributed revenue of £5.8m, and operating profit
of £1.3m for the period between acquisition and the balance sheet date.
Acquisition related costs amounted to £0.4m which have been expensed when
incurred. £0.8m of the discount on the deferred contingent consideration
unwound in the period and has been included in finance expenses.
11. Principal risks
The principal risks and uncertainties impacting the Group are described on
pages 56-58 of our Annual Report 2022 and, with the exception of updated risks
below, all other risks remain unchanged at 28 February 2023.
In light of recent banking failures, counterparty risk has increased as the
Group has exposure to the risk of counterparty default and potential inability
to access cash deposits held by the counterparty. This risk is mitigated by
monitoring counterparty credit ratings on a regular basis and spreading cash
across a number of different counterparties.
The unchanged risks include: Supply chain 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, cybersecurity and business interruption, competitor actions,
loss of key personnel, threat of disruptive technology, product liability,
failure to manage growth, foreign currency, credit risk, intellectual
property/patents and environmental risk.
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