REG - AB Dynamics PLC - Half-year Report
23/04/2024 07:00
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RNS Number : 5828L AB Dynamics PLC 23 April 2024
23 April 2024
AB Dynamics plc
Unaudited interim results for the six months ended 29 February 2024
"Strong financial performance and clear strategic progress"
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 29 February 2024 (the "Period").
H1 2024 H1 2023(2)
£m £m
Revenue 52.3 48.6 +8%
Gross margin 58.3% 57.4% +90bps
Adjusted EBITDA(1) 10.6 9.5 +12%
Adjusted operating profit(1) 8.9 7.7 +16%
Adjusted operating margin(1) 17.0% 15.9% +110bps
Statutory operating profit 5.5 2.8 +96%
Adjusted cash flow from operations(1) 11.3 9.5 +19%
Net cash 29.1 21.3
Pence Pence
Adjusted diluted earnings per share(1) 30.9 27.1 +14%
Statutory diluted earnings per share 18.0 6.3 +186%
Interim dividend per share 2.33 1.94 +20%
(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.
(2)Restated for change in interpretation of revenue recognition, see note 10.
Financial highlights
· Strong growth in revenue and operating profit, delivered
alongside an improved operating margin which reflected operating leverage,
gross margin gains and improved efficiency
· Market and customer demand levels have remained positive
throughout H1, with strong activity across all three sectors and all regions
· Revenue increased by 8% against H1 2023, or 10% on a constant
currency basis, with good growth in testing products and testing services
offset in part by a reduction in simulator revenue, where significant
contracts are H2-weighted
o Testing products revenue grew by 12% driven by an increase in ADAS
platforms
o Testing services revenue grew by 23% led by strong performances in both
the US and Asia, albeit against a weak comparative which was impacted by
Chinese lockdowns
o Simulation revenue was down 13% as a result of the timing of revenue
recognition, with several contracts due for delivery in H2
· The strong growth in testing services has increased the
proportion of recurring and service-based sales to 52% (H1 2023: 41%) for the
Period
· The Group has remained effective in mitigating inflationary cost
pressures, with gross margins improving to 58.3% (H1 2023: 57.4%)
· Operating margin improved by 110bps to 17.0% 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 Group operating margin increased to 18.6% (H1
2023: 17.9%)
· Significant operating cash generation of £11.3m (H1 2023:
£9.5m) with cash conversion of 107% (H1 2023: 100%), resulting in net cash at
the period end of £29.1m (28 February 2023: £21.3m, 31 August 2023: £32.0m)
after funding the final performance payment of £5.7m for the acquisition of
Ansible Motion
· Interim dividend of 2.33p per share (H1 2023: 1.94p), an increase
of 20%
Operational and strategic highlights
· New product development continues at pace and in line with the
technology roadmap for testing products and simulation markets, alongside
development of the core technology for ABD Solutions
o The Group's pedestrian dummy, the Soft Pedestrian 360 and the LaunchPad
Spin have been approved by Euro NCAP
o ABD Solutions delivered the first units of the new durability testing
solution and initial revenues from the retrofit pedestrian detection system
for the construction industry expected during H2
· Since the period end, the Group has acquired Venshure Test Services
('VTS'), a provider of mileage accumulation, electric vehicle and
environmental testing services in the US.
· Well placed to sustain growth momentum over the medium term,
supported by:
o Strong organic growth across automotive markets, supported by regulatory
tailwinds and rapid technology change, with a significantly strengthened and
scalable operational and commercial platform
o The substantial opportunity beyond automotive markets presented by ABD
Solutions, transitioning from technology development to commercialisation
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 good visibility for
the second half of the year
· Whilst mindful of timing of pipeline conversion and customer
delivery schedules, the Board is confident that performance momentum in the
first half margin can be sustained and, consequently, expects the Group to
deliver full year adjusted operating profit ahead of its current 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
Commenting on the results, Dr James Routh, Chief Executive Officer said:
"The Group has delivered a strong performance in the first half of the year,
capitalising on supportive conditions across key markets and demonstrating the
benefits of the investment made in recent years in the commercial and
operating capability of the business.
"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 innovative technologies to diversify the business into
attractive adjacent markets through ABD Solutions.
"Our solid order book provides good visibility for 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 this year. With strong trading
momentum entering H2 and benefiting from the acquisition of VTS and improved
margins, the Board expects to deliver full year operating profit ahead of its
expectations."
There will be a presentation for analysts this morning at 9.00am at Teneo
offices, 11 Pilgrim St, London EC4V 6RN. Please contact abdynamics@teneo.com
if you would like to attend.
A presentation will also be provided on the Investor Meet Company platform on
24 April 2023 at 9.00am. Anyone wishing to attend should register their
interest
via https://www.investormeetcompany.com/ab-dynamics-plc/register-investor
(https://www.investormeetcompany.com/ab-dynamics-plc/register-investor) .
Certain information contained in this announcement would have constituted
inside information (as defined by Article 7 of Regulation (EU) No 596/2014),
as it forms part of domestic law by virtue of the European Union (Withdrawal)
Act 2018) ("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.
Enquiries:
AB Dynamics plc 01225 860 200
Dr James Routh, Chief Executive Officer
Sarah Matthews-DeMers, Chief Financial Officer
Peel Hunt LLP (Nominated Adviser and Joint Broker) 0207 894 7000
Mike Bell
Ed Allsopp
Stifel Nicolaus Europe Limited (Joint Broker) 0207 710 7600
Matthew Blawat
Harry Billen
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.
Half Year Review
Group overview
The Group has delivered a strong performance in the first half of the year,
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.
After the period end, the Group also expanded its presence in the testing
services market with the acquisition of Venshure Test Services.
Financial performance in the Period
The Group delivered revenue growth of 8% to £52.3m, with increases in testing
products and services offset by a reduction in simulation, which reflects the
timing of delivery of customer projects.
Gross margin was 58.3%, up 90bps on H1 2023 due to effective pricing
management and increased testing services revenue.
Group adjusted operating profit increased by 16% to £8.9m. The adjusted
operating margin increased to 17.0% (H1 2023: 15.9%), as a result of the
increase in sales volumes, the improved gross margin and operational
efficiency. Excluding ABD Solutions, the adjusted operating margin increased
to 18.6% (H1 2023: 17.9%).
Adjusted net finance costs were £0.1m (H1 2023: £0.2m).
Adjusted profit before tax was £8.8m (H1 2023: £7.5m). The Group adjusted
tax charge totalled £1.6m (H1 2023: £1.3m), an adjusted effective tax rate
of 18.4% (H1 2023: 16.7%).
Adjusted diluted earnings per share was 30.9p (H1 2023: 27.1p), an increase of
14%, reflecting the increase in operating profit offset by a higher tax rate.
Statutory operating profit increased by 96% to £5.5m and after net finance
costs of £0.4m (H1 2023: £1.0m), statutory profit before tax was up 183%
from £1.8m to £5.1m, giving statutory basic earnings per share of 18.2p (H1
2023: 6.4p). The statutory tax charge was £0.9m (H1 2023: £0.4m). A
reconciliation of statutory to underlying non-GAAP financial measures is
provided below. The adjustments to operating profit of £3.4m comprise £3.0m
of amortisation of acquired intangibles, £0.3m of ERP cloud computing costs
and £0.1m of acquisition related costs (H1 2023: £4.9m comprising £3.7m of
amortisation of acquired intangibles, £0.8m of ERP cloud computing costs and
£0.4m of acquisition costs). The £0.3m adjustment to the interest charge
relates to the unwind of the discount on the deferred contingent consideration
for Ansible Motion (H1 2023: £0.8m). The tax impact of these adjustments was
a credit of £0.7m (H1 2023: £0.9m).
The Group delivered strong adjusted operating cash flow of £11.3m (H1 2023:
£9.5m) with the net cash position at the period end of £29.1m (31 August
2023: £32.0m) underpinning a robust balance sheet and providing the resources
to fund the acquisition of VTS and continue the Group's investment programme.
Sector review
H1 2024 H1 2023(1)
£m £m
Driving robots 12.5 14.2 -12%
ADAS platforms 19.5 14.0 +39%
Laboratory testing 2.9 2.9(2) -
Testing products 34.9 31.1 +12%
Testing services 7.5 6.1 +23%
Simulation 9.9 11.4(2) -13%
Total revenue 52.3 48.6 +8%
(1)The Group previously reported two sectors, track testing and laboratory
testing and simulation. Following the growth in testing services, these are
now reported separately. Laboratory testing is now included within testing
products to better reflect the nature of the products.
(2) Restated for change in revenue recognition, see note 10.
Testing products
The Group's testing products are used on proving grounds, test tracks and in
the laboratory to evaluate the performance of vehicle active safety systems,
autonomous technologies, electric vehicles, vehicle durability and vehicle
dynamics.
Testing products revenue of £34.9m was up 12% against H1 2023 (£31.1m) with
growth in ADAS platforms offset by a reduction in driving robots.
Driving robot sales decreased 12% against H1 2023 to £12.5m (H1 2023:
£14.2m). 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 Safer Trucks 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 39% to £19.5m in H1 2024 (H1 2023: £14.0m).
The recent launch of a new range of soft targets including motorcycles and
articulating pedestrians is expected to drive further growth.
Laboratory testing revenue relates to sales of our market leading SPMM
product, large-scale testing rigs used to characterise the kinematics and
compliance of vehicles under development. Revenue was flat at £2.9m (H1 2023:
£2.9m). 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.
The Group continues to invest in new product development in the testing
products sector in order to meet forthcoming regulatory requirements and to
ensure we retain our market leadership in testing technology.
Testing services
Testing services includes revenue from the Group's test facility in
Bakersfield, USA, where testing of ADAS systems and vehicle dynamics is
performed on behalf of OEMs, technology developers and government agencies.
In China, the Group provides on-road vehicle testing services for the
assessment of all aspects of vehicle performance, particularly focusing on
electric vehicle performance, charging capability and vehicle connectivity.
This sector saw significant growth of 23% to £7.5m (H1 2023: £6.1m) in
advance of new regulatory requirements, albeit against a weak comparative
period in H1 2023 that was impacted by local COVID restrictions delaying the
provision of testing services in China and delays in availability of test
vehicles more widely.
Simulation
The Group provides both physical simulators and advanced, physics-based
simulation software. Simulators are used by both automotive manufacturers and
motorsport teams to accurately represent the real world using the rFpro
software, coupled with state-of-the-art motion platforms and static driving
simulators to assist in development of new vehicles and improve performance.
Simulation revenue decreased by 13% to £9.9m (H1 2023: £11.4m). Growth in
simulation software was offset by a decrease in revenue from simulator motion
platforms due to the timing of revenue recognition, as much of the H1 activity
will be recognised in revenue on delivery in H2.
Progress on our strategy
The Group continues to make good progress against its organic led growth
strategy, supplemented with value enhancing acquisitions. The focus on
building and growing the core business continued, coupled with delivering on
the Group's diversification plans through ABD Solutions.
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 and regulators.
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. The first
units of the Group's new durability testing solution were delivered during H1,
with initial revenues from the retrofit pedestrian detection system for the
construction industry expected during H2. Several small contracts for phase 1
feasibility studies have been awarded for delivery during H2 and FY2025, while
the medium-term pipeline consists of 10-15 opportunities ranging from £0.4m
to £10m.
Acquisitions
On 2 April 2024, the Group acquired the trade and assets of Venshure Test
Services, LLC, a provider of vehicle testing services, including environmental
testing and range certification for electric vehicles. The initial
consideration was $15.0m (£11.8m). Contingent consideration of up to $15.0m
will become payable in cash subject to certain performance criteria being met
for the 2 years ending 2 April 2026. The acquisition expands both the Group's
capability and geographic coverage in the important and growing field of EV
battery and powertrain performance evaluation. It also provides the
opportunity to leverage AB Dynamics' existing sales capabilities to drive
cross-selling.
Acquisitions have been and will continue to be a significant part of the
overall strategy, and there is a promising pipeline of potential
value-enhancing and strategically compelling 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, adjusted earnings per
share and adjusted cash flow from operations.
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 2024 H1 2023(1)
Adjusted Adjustments Statutory Adjusted Adjustments Statutory
EBITDA (£m) 10.6 (0.4) 10.2 9.5 (1.2) 8.3
Operating profit (£m) 8.9 (3.4) 5.5 7.7 (4.9) 2.8
Operating margin 17.0% (6.5%) 10.5% 15.9% (10.2%) 5.7%
Finance expense (£m) (0.1) (0.3) (0.4) (0.2) (0.8) (1.0)
Profit before tax (£m) 8.8 (3.7) 5.1 7.5 (5.7) 1.8
Tax expense (£m) (1.6) 0.7 (0.9) (1.3) 0.9 (0.4)
Profit after tax (£m) 7.2 (3.0) 4.2 6.2 (4.8) 1.4
Diluted earnings per share (pence) 30.9 (12.9) 18.0 27.1 (20.8) 6.3
Cash flow from operations (£m) 11.3 (0.3) 11.0 9.5 (3.4) 6.1
(1) Restated, see note 10.
The adjustments comprise:
H1 2024 H1 2023 Cash flow impact H1 2024 Cash flow impact H1 2023
£m £m £m £m
Amortisation of acquired intangibles 3.0 3.7 - -
ERP development costs 0.3 0.8 0.3 0.8
Acquisition related costs 0.1 0.4 - 2.6
Adjustments to operating profit 3.4 4.9 0.3 3.4
Acquisition related finance costs 0.3 0.8 - -
Adjustments to profit before tax 3.7 5.7 0.3 3.4
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 £1.2m higher than
reported and operating profit would have been £0.1m higher as the US dollar,
the Euro and Yen weakened against H1 2023. Constant currency revenue growth
was 10% and growth in operating profit was 17%.
Dividends
The Board has declared an interim dividend of 2.33p per ordinary share (H1
2023: 1.94p) which will be paid on 17 May 2024 to shareholders on the register
on 3 May 2024.
A final dividend of 4.42p per share was paid on 6 March 2024 in respect of the
year ended 31 August 2023 totalling £1,014,000. The Board recognises that
dividends continue to be an important component of total shareholder returns,
balanced against maintaining a strong financial position and intends 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 performance in the first half of the year,
capitalising on supportive conditions across key markets and demonstrating the
benefits of the investment made in recent years in the commercial and
operating capability of the business.
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 innovative technologies to diversify the business into
attractive adjacent markets through ABD Solutions.
Our solid order book provides good visibility for the second half of the year,
with organic adjusted operating profit expected to be more evenly weighted
across the two halves of the year than in previous years. 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 this year. With strong trading momentum entering H2 and benefiting
from the acquisition of VTS and improved margins, the Board expects to deliver
full year operating profit ahead of its current expectations.
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
23 April 2024
AB Dynamics plc
Unaudited condensed consolidated statement of comprehensive income
for the six months ended 29 February 2024
Unaudited 6 months ended *Restated Unaudited 6 months ended Audited Year ended 31 August
29 February 2024 28 February 2023 2023
Adjusted Adjustments Statutory Adjusted Adjustments Statutory Adjusted Adjustments Statutory
Note £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Revenue 2 52,254 - 52,254 48,610 - 48,610 100,767 - 100,767
Cost of sales (21,794) - (21,794) (20,689) - (20,689) (40,837) - (40,837)
Gross profit 30,460 - 30,460 27,921 - 27,921 59,930 - 59,930
General and administrative expenses (21,587) (3,402) (24,989) (20,214) (4,933) (25,147) (43,326) (9,229) (52,555)
Fair value gain on release of contingent consideration - - - - - - - 5,180 5,180
Operating profit 8,873 (3,402) 5,471 7,707 (4,933) 2,774 16,604 (4,049) 12,555
Operating profit is analysed as:
Before depreciation and amortisation 10,564 (354) 10,210 9,540 (1,222) 8,318 20,517 3,140 23,657
Depreciation and amortisation (1,691) (3,048) (4,739) (1,833) (3,711) (5,544) (3,913) (7,189) (11,102)
Operating profit 8,873 (3,402) 5,471 7,707 (4,933) 2,774 16,604 (4,049) 12,555
Net finance expense (84) (285) (369) (206) (794) (1,000) (354) (713) (1,067)
Profit before tax 8,789 (3,687) 5,102 7,501 (5,727) 1,774 16,250 (4,762) 11,488
Tax expense (1,620) 692 (928) (1,253) 932 (321) (2,146) 1,644 (502)
Profit for the period 7,169 (2,995) 4,174 6,248 (4,795) 1,453 14,104 (3,118) 10,986
Other comprehensive expense
Items that may be reclassified to consolidated income statement:
Cash flow hedges - - - 136 - 136 124 - 124
Exchange loss on foreign currency net investments (309) - (309) (539) - (539) (2,059) - (2,059)
Total comprehensive income for the period 6,860 (2,995) 3,865 5,845 (4,795) 1,050 12,169 (3,118) 9,051
Earnings per share - basic 31.3 (13.1) 18.2 27.3 (20.9) 6.4 61.6 (13.6) 48.0
(pence)
5
Earnings per share - diluted 30.9 (12.9) 18.0 27.1 (20.8) 6.3 60.8 (13.4) 47.4
(pence) 5
*See note 10
AB Dynamics plc
Unaudited condensed consolidated statement of financial position
as at 29 February 2024
*Restated *Restated
Unaudited Unaudited Audited Audited
29 February 28 February 31 August 31 August
2024 2023 2023 2022
£'000
£'000 £'000 £'000
ASSETS Note
Non-current assets
Goodwill 36,946 36,825 36,939 23,818
Acquired intangible assets 29,768 36,769 32,831 23,665
Other intangible assets 2,610 3,080 2,746 2,971
Property, plant and equipment 26,207 25,418 25,739 25,708
Right-of-use assets 2,701 1,648 1,409 876
98,232 103,740 99,664 77,038
Current assets
Inventories 19,475 15,966 17,954 13,651
Trade and other receivables 17,061 18,910 14,494 13,782
Contract assets 1,995 2,027 3,152 4,328
Taxation - 140 - 890
Cash and cash equivalents 7 31,875 28,991 33,486 30,141
70,406 66,034 69,086 62,792
Assets held for sale 1,893 1,893 1,893 1,893
LIABILITIES
Current liabilities
Borrowings 7 - 6,000 - -
Trade and other payables 17,109 20,006 20,127 16,810
Contract liabilities 14,545 7,219 9,234 5,068
Derivative financial instruments - - - 123
Short-term lease liabilities 7 707 784 570 628
Contingent consideration 528 11,190 5,943 -
32,889 45,199 35,874 22,629
Non-current liabilities
Deferred tax liabilities 8,589 9,236 8,708 6,397
Long-term lease liabilities 7 2,064 952 906 315
10,653 10,188 9,614 6,712
Net assets 126,989 116,280 125,155 112,382
Shareholders' equity
Share capital 229 229 229 226
Share premium 62,781 62,372 62,781 62,260
Other reserves 8 2,094 3,935 2,403 1,142
Retained earnings 61,885 49,744 59,742 48,754
Total equity 126,989 116,280 125,155 112,382
*See note 10
AB Dynamics plc
Unaudited condensed consolidated statement of changes in equity
for the six months ended 29 February 2024
Share capital Share premium Other reserves Retained earnings
Total equity
£'000 £'000 £'000 £'000 £'000
At 1 September 2023 229 62,781 2,403 59,742 125,155
Total comprehensive income - - (309) 4,174 3,865
Share based payments - - - 698 698
Deferred tax on share based payments - - - 58 58
Dividend paid - - - (1,014) (1,014)
Purchase of own shares - - - (1,773) (1,773)
At 29 February 2024 229 62,781 2,094 61,885 126,989
226 62,260 1,142 48,333 111,961
At 1 September 2022 as previously reported
Prior period adjustment - - - 421 421
At 1 September 2022 restated 226 62,260 1,142 48,754 112,382
Total comprehensive income* - - (403) 1,453 1,050
Share based payments - - - 230 230
Deferred tax on share based payments - - - 117 117
Dividend paid - - - (810) (810)
Issue of shares 3 112 3,196 - 3,311
At 28 February 2023 229 62,372 3,935 49,744 116,280
226 62,260 1,142 48,333 111,961
At 1 September 2022 as previously reported
Prior period adjustment - - - 421 421
At 1 September 2022 restated 226 62,260 1,142 48,754 112,382
Total comprehensive income - - (1,935) 10,986 9,051
Share based payments - - - 1,064 1,064
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
*See note
10
AB Dynamics plc
Unaudited condensed consolidated cash flow statement
for the six months ended 29 February 2024
Unaudited *Restated *Restated Audited Year
6 months Unaudited ended
ended 6 months 31 August
29 February ended 2023
2024 28 February
2023
£'000 £'000 £'000
Profit before tax 5,102 1,774 11,488
Depreciation and amortisation 4,739 5,544 11,102
Finance expense 369 1,000 1,067
Release of contingent consideration - - (5,180)
Share based payment 698 230 1,263
Operating cash flows before changes in working capital 10,908 8,548 19,740
Increase in inventories (1,538) (1,263) (2,612)
(Increase)/decrease in trade and other receivables (1,458) 2,514
892
Increase/(decrease) in trade and other payables 3,075 (2,035) (369)
Cash flows from operations 10,987 6,142 19,273
Cash flows from operations are analysed as:
Adjusted cash flows from operations 11,336 9,480 23,450
Cash impact of adjusting items (349) (3,338) (4,177)
Cash flows from operations 10,987 6,142 19,273
Finance costs paid (9) (12) (291)
Income tax (paid)/ received (1,946) 546 363
Net cash flows from operating activities 9,032 6,676 19,345
Cash flows used in investing activities
Acquisition of businesses net of cash (5,700) (11,233) (10,656)
Purchase of property, plant and equipment (1,602) (882) (2,930)
Capitalised development costs and purchased software (49) (469)
(292)
Net cash used in investing activities (7,351) (12,407) (14,055)
Cash flows (used in)/generated from financing activities
Drawdown of loans - 6,000 6,000
Repayment of loans - - (6,000)
Dividends paid (1,014) (810) (1,255)
(Purchase of own shares)/proceeds from issue of share capital (1,773) 47 457
Repayment of lease liabilities (485) (602) (1,124)
Net cash flow (used in)/generated from financing activities (3,272) 4,635 (1,922)
Net (decrease)/increase in cash and cash equivalents (1,591) (1,096) 3,368
Cash and cash equivalents at beginning of the period 33,486 30,141
30,141
Effect of exchange rates on cash and cash equivalents (20) (54) (23)
Cash and cash equivalents at end of period 31,875 28,991 33,486
*See note
10
AB Dynamics plc
Notes to the unaudited interim report
for the six months ended 29 February 2024
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 and applicable law. A copy of
the statutory accounts for the year ended 31 August 2023 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 2023.
Certain new standards, amendments to standards and interpretations are not yet
effective for the year ending 31 August 2024 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 29 February 2024 the Group had £29.1m of net cash and £15.0m undrawn
revolving credit facility. Even after paying initial consideration of £11.8m
after the period end for the acquisition of VTS and after modelling the above
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 this financial information. They therefore consider it
appropriate to adopt the going concern basis of accounting in preparing the
interim statements.
The interim financial information for the six months ended 29 February 2024
was approved by the Board on 23 April 2024.
2. Segment information
Revenues attributable to individual countries are as follows:
Unaudited *Restated Unaudited Audited
6 months 6 months Year
ended ended ended
29 February 2024 28 February 2023 31 August 2023
£'000 £'000 £'000
United Kingdom 4,139 1,991 4,875
Rest of Europe 14,748 10,568 22,095
North America 11,145 13,547 25,171
Asia Pacific 22,115 21,205 46,409
Rest of World 107 1,299 2,217
52,254 48,610 100,767
Revenues are disaggregated as follows:
Testing products 34,861 31,101 63,017
Testing services 7,524 6,139 12,858
Simulation 9,869 11,370 24,892
52,254 48,610 100,767
*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, EBITDA,
adjusted operating margin, adjusted profit before tax, adjusted earnings per
share and adjusted cash flow from operations.
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
29 February 28 February 2023 31 August 2023
2024
£'000 £'000 £'000
Amortisation of acquired intangibles 3,048 3,711 7,189
ERP development costs 270 786 1,362
Acquisition related costs/(credit) 84 436 (4,502)
Adjustments to operating profit 3,402 4,933 4,049
Acquisition related finance costs 285 794 713
Adjustments to profit before tax 3,687 5,727 4,762
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/(credit)
The prior year costs/(credit) relate to the costs of acquisition of Ansible
Motion Limited net of the £5.2m release of contingent consideration in the
second half of the year.
Acquisition related finance costs
Finance costs relate to the unwind of the discount on deferred contingent
consideration payable on the acquisition of Ansible Motion.
Tax
The tax impact of these adjustments was as follows: amortisation £0.6m (H1
2023: £0.5m), acquisition related costs £Nil (H1 2023: £Nil), ERP £0.1m
(H1 2023: £0.1m) and acquisition related finance costs £Nil (H1 2023:
£Nil).
Cash impact
The operating cash flow impact of the adjustments was an outflow of £0.3m (H1
2023: £3.4m) being £0.3m (H1 2023: £0.8m) in relation to ERP development
costs and £Nil (H1 2023: £2.6m) in relation to acquisition costs. The prior
year acquisition costs included a bonus paid to employees of Ansible Motion
Limited for pre-acquisition service.
4. Tax
The statutory effective tax rate for the period is a charge of 18.2% (H1 2023:
18.1%), 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 18.4% (H1 2023: 16.7%). The increase reflects the full year
effect of the increase in the rate of UK corporation tax on 1 April 2023 and
changes to the UK R&D tax credit regime.
5. Earnings per share
The calculation of earnings per share is based on the following earnings and
number of shares:
Unaudited *Restated Audited
6 months Unaudited Year
ended 6 months ended
29 February ended 31 August
2024 28 February 2023
2023
Weighted average number of shares ('000)
Basic 22,934 22,859 22,886
Diluted 23,165 23,036 23,193
Earnings per share (pence)
Profit after tax attributable to owners of the Group (£'000) 4,174 1,453 10,986
Basic 18.2 6.4 48.0
Diluted 18.0 6.3 47.4
Adjusted earnings per share (pence)
Adjusted profit after tax attributable to owners of the Group (£'000) 7,169 6,248 14,104
Adjusted basic 31.3 27.3 61.6
Adjusted diluted 30.9 27.1 60.8
*See note 10
6. Dividends
An interim dividend of 1.94p per ordinary share in respect of the year ended
31 August 2023 was paid on 19 May 2023 to shareholders on the register on 5
May 2023 totalling £445,000.
At the Annual General Meeting the shareholders approved a final dividend in
respect of the year ended 31 August 2023 of 4.42p per ordinary share totalling
£1,014,000. This was paid on 6 March 2024 to shareholders on the register on
9 February 2024.
An interim dividend of 2.33p per ordinary share totalling £534,000 has been
declared in respect of the year ending 31 August 2024 which will be paid on 17
May 2024 to shareholders on the register on 3 May 2024.
7. Net cash
Net cash comprises cash and cash equivalents, bank overdrafts, borrowings and
lease liabilities.
Unaudited Unaudited Audited
29 February 28 February 31 August
2024 2023 2023
£'000
£'000 £'000
Cash and cash equivalents 31,875 28,991 33,486
Borrowings - (6,000) -
Lease liabilities (2,771) (1,736) (1,476)
29,104 21,255 32,010
The Group has a £15.0m revolving credit facility with National Westminster
Bank plc. The facility was extended on 7 February 2023 to 4 February 2026.
8. Other reserves
Merger relief reserve Reconstruction reserve Translation reserve Hedging reserve Total other reserves
£'000 £'000 £'000 £'000 £'000
At 1 September 2022 11,390 (11,284) 1,160 (124) 1,142
Other comprehensive expense - - (539) 136 (403)
Issue of shares 3,196 - - - 3,196
At 28 February 2023 14,586 (11,284) 621 12 3,935
Other comprehensive expense - - (1,520) (12) (1,532)
At 31 August 2023 14,586 (11,284) (899) - 2,403
Other comprehensive expense - - (329) 20 (309)
At 29 February 2024 14,586 (11,284) (1,228) 20 2,094
9. Foreign exchange
The foreign exchange rates applied during the period were:
H1 2024 H1 2023
Period end rate
US dollar 1.266 1.206
Euro 1.168 1.137
Yen 191 164
Average rate
US dollar 1.237 1.187
Euro 1.155 1.143
Yen 184 164
10. Restatement of prior period balances
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 concluded during FY 2023 and payment has been received in
full.
The impact is detailed in the tables below and has resulted in a decrease in
revenue of £432,000 and profit after tax of £82,000 for the period ended 28
February 2023 and an increase in opening net assets at 1 September 2022 of
£421,000.
Consolidated statement of financial position
Unaudited 28 February 2023 31 August 2022
As reported Impact of restatement Restated As reported Impact of restatement Restated
£'000
£'000
£'000
£'000
£'000 £'000
Non-current assets 103,740 - 103,740 77,038 - 77,038
Current assets
Inventories 15,616 350 15,966 13,611 40 13,651
Taxation 140 - 140 882 8 890
Contract assets 2,037 (10) 2,027 3,917 411 4,328
Other current assets 47,901 - 47,901 43,923 - 43,923
65,694 340 66,034 62,333 459 62,792
Assets held for sale 1,893 - 1,893 1,893 - 1,893
Current liabilities
Contract liabilities 7,229 (10) 7,219 5,787 (719) 5,068
Other current liabilities 37,969 11 37,980 16,804 757 17,561
45,198 1 45,199 22,591 38 22,629
Non-current liabilities 10,188 - 10,188 6,712 - 6,712
Net assets 115,941 339 116,280 111,961 421 112,382
Retained earnings 49,405 339 49,744 48,333 421 48,754
Share capital and other reserves 66,536 - 66,536 63,628 - 63,628
Total equity 115,941 339 116,280 111,961 421 112,382
Consolidated income statement Unaudited 28 February 2023
As reported Impact of restatement Restated
£'000
£'000
£'000
Revenue 49,042 (432) 48,610
Cost of sales (21,039) 350 (20,689)
Gross profit 28,003 (82) 27,921
Operating profit 2,856 (82) 2,774
Profit before tax 1,856 (82) 1,774
Tax expense (321) - (321)
Profit for the period 1,535 (82) 1,453
11. Acquisitions
During the period, the Group paid £5.7m in relation to the final contingent
consideration for the acquisition of Ansible Motion Limited, which was
acquired on 20 September 2022.
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 contingent consideration was
included in the balance sheet at net present value of £11.2m at 28 February
2023, which was adjusted at 31 August 2023 to £5.9m following completion of
the performance period, with the gain on release of the accrual of £5.2m
recognised in the income statement. During the period £0.3m discount unwind
was recognised as an interest charge (H1 2023: £0.8m). £5.7m was paid in
cash in January 2024, with £0.5m of the total consideration retained against
any potential warranties.
12. Post balance sheet event
On 2 April 2024, the Group acquired 100% of Venshure Test Services LLC for
total cash consideration of up to $30.0m. The acquisition supports a number of
the Group's strategic priorities, including expanding the Group's capabilities
and broadening the scope of services in the Testing Services area and
complementing the Group's existing California-based track testing services
business with laboratory-based testing.
The acquisition has been completed on a cash free, debt free basis for an
initial cash consideration of $15.0m (£11.8m), funded from the Group's
existing cash resources and short-term utilisation of part of the Group's
revolving credit facility. Contingent consideration of up to $15.0m will be
payable in cash across two tranches for the 2 years following completion,
subject to meeting certain performance criteria for both years.
The book value of the acquired assets and liabilities at the date of
acquisition was approximately $5m. The Group is currently in the process of
determining the fair values of the assets and liabilities acquired.
13. Principal risks
The principal risks and uncertainties impacting the Group are described on
pages 56-58 of our Annual Report 2023 and all other risks remain unchanged at
29 February 2024.
The risks include: Downturn or instability in major geographic markets or
market sectors, supply chain disruption, 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, counterparty risk, credit risk, intellectual
property/patents and environmental risk.
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