TIDMABDP
RNS Number : 6660A
AB Dynamics PLC
24 January 2024
24 January 2024
AB Dynamics plc
Final results for the year ended 31 August 2023
"Strong financial performance and clear strategic progress"
AB Dynamics plc ("AB Dynamics", the "Company" or the "Group"),
the designer, manufacturer and supplier of advanced testing,
simulation and measurement products to the global transport market,
is pleased to announce its final results for the year ended 31
August 2023.
Audited Audited
2023 2022 (2)
GBPm GBPm
Revenue 100.8 83.2 +21%
Gross margin 59.5% 56.6% +290 bps
Adjusted EBITDA(1) 20.5 17.3 +18%
Adjusted operating profit(1) 16.6 13.7 +21%
Adjusted operating margin(1) 16.5% 16.4% +10 bps
Statutory operating profit 12.6 6.2 +103%
Adjusted cash flow from
operations(1) 23.5 20.7 +14%
Net cash 32.0 29.2
------------------------------ -------- ---------- ---------
Pence Pence
Adjusted diluted earnings
per share(1) 60.8 48.1 +26%
Statutory diluted earnings
per share 47.4 20.7 +129%
Total dividend per share 6.36 5.30 +20%
------------------------------ -------- ---------- ---------
(1) Before amortisation of acquired intangibles, acquisition
related charges and exceptional items. A reconciliation to
statutory measures is given below.
(2) Restated for change in interpretation of revenue
recognition, see note 10.
Financial highlights
-- Record revenue and operating profit delivered alongside an
improved operating margin reflecting strong growth enhanced by
improved operational efficiency and effective cost management
-- Market and customer activity levels have remained positive,
with strong activity in both track testing and laboratory testing
and simulation, particularly in Europe
-- Revenue increased by 21% of which 7% was organic growth
o Track testing revenue grew by 6% reflecting increases in
robots and Advanced Driver Assistance (ADAS) platforms
o Laboratory testing and simulation organic growth of 10% driven
by a strong performance at rFpro and delivery of SPMM systems.
Total sector revenue growth of 74% includes the contribution from
the acquisition of Ansible Motion
-- The proportion of recurring and service-based sales was maintained at 40% (2022: 40%)
-- The Group has remained effective in mitigating inflationary
cost pressures, with gross margins improving to 59.5% (2022:
56.6%)
-- Operating margin improved by 10bps to 16.5% as a result of
the increased levels of activity and the benefits of enhanced
performance initiatives, partially offset by the continued
investment of GBP1.8m in ABD Solutions to support the Group's
strategic long-term growth drivers
o Excluding ABD Solutions, the operating margin increased to
18.3% (2022: 18.2%)
-- Significant operating cash generation of GBP23.5m (2022:
GBP20.7m) with cash conversion of 114% (2022: 119%), resulting in
net cash at year end of GBP32.0m (2022: GBP29.2m) after funding the
initial consideration for the acquisition of Ansible Motion
-- Proposed final dividend of 4.42p per share, bringing the
total dividend for the year to 6.36p per share (2022: 5.30p per
share), an increase of 20%, reflecting the Board's confidence in
the Group's financial position and prospects
Operational and strategic highlights
-- Continuing progress made in the strategic initiative to open
up new markets beyond automotive
o ABD Solutions won a GBP1m contract for delivery of a retrofit
pedestrian detection system for construction machines for delivery
during FY 2024, illustrating the wide range of applications for its
technology
-- VadoTech has been awarded an extension of its existing
contract to provide testing services in Beijing, as well as a new,
smaller contract to provide similar services near Shanghai
-- The integration of Ansible Motion is continuing as planned
and the business has delivered a strong performance since
acquisition in September 2022
-- New product development continues in line with the technology
roadmap for existing track testing and simulation markets and
development of the core technology for ABD Solutions
o Along with the launch of the new range of ADAS motorcycle and
pedestrian dummies, and LaunchPad Spin, the Group has also released
ray-tracing capability for its simulation software
-- Well placed to sustain growth momentum into the medium term, supported by:
o Strong organic growth across automotive markets, supported by
regulatory tailwinds and rapid technology change, with a greatly
strengthened operational and commercial platform
o The substantial opportunity beyond automotive markets
presented by ABD Solutions, transitioning from technology
development to commercialisation
o Significantly enhanced simulation and software capabilities
enabled by the expanded product range created through the
acquisitions of rFpro and Ansible Motion
o A strong financial position that provides scope for further
value-enhancing growth investment in FY 2024 and beyond
Current trading and outlook
-- Trading in FY 2024 to date has been encouraging, supported by
the solid current order book which provides good visibility into
the second half of the year
-- Whilst being mindful of timing of pipeline conversion and
customer delivery schedules, the Board remains confident that the
Group will make further financial and strategic progress with its
expectations for FY 2024 unchanged
-- Future growth prospects remain supported by long-term
structural and regulatory growth drivers in active safety,
autonomous systems and the automation of vehicle applications
There will be a presentation for analysts this morning at 9.30am
at Teneo, 85 Fleet Street, EC4Y 1AE. Please contact
abdynamics@teneo.com if you would like to attend.
Commenting on the results, Dr James Routh, Chief Executive
Officer said:
"The Group has delivered a strong performance in FY 2023,
demonstrating the benefits of the investment made in recent years
in the commercial and operating capability of the business. The
financial results show further strong progress, with record levels
of revenue and operating profit and an improvement in operating
margin. In parallel, the Group has further strengthened its
platform for growth through both organic investments and
acquisitions.
"We see significant opportunity in our core markets in
automotive, which are supported by long-term structural and
regulatory growth drivers, and are continuing to invest in new
product development and technology. In addition, we are investing
in new technologies to diversify the business into attractive
adjacent markets through ABD Solutions.
" Trading in FY 2024 has been encouraging, supported by a solid
order book providing good visibility into the second half of the
year. Whilst being mindful of timing of pipeline conversion and
customer delivery schedules, the Board remains confident that the
Group will make further financial and strategic progress and its
expectations for FY 2024 are unchanged.
"Our market drivers both in our core business and in ABD
Solutions remain strong. This backdrop, along with the Group's
recent investments in capability and new products, provides
confidence of delivering continued progress in 2024 and
beyond."
Enquiries:
AB Dynamics plc 01225 860 200
Dr James Routh, Chief Executive Officer
Sarah Matthews-DeMers, Chief Financial
Officer
Peel Hunt LLP 0207 418 8900
Mike Bell
Ed Allsopp
Teneo 0207 353 4200
James Macey White
Matt Low
The person responsible for arranging the release of this
information is Felicity Jackson, Group Legal Counsel.
About AB Dynamics plc
AB Dynamics is a leading designer, manufacturer and supplier of
advanced testing, simulation and measurement products to the global
transport market.
AB Dynamics is an international group of companies headquartered
in Bradford on Avon. AB Dynamics currently supplies all the top
automotive manufacturers, Tier 1 suppliers and service providers,
who routinely use the Group's products to test and verify vehicle
safety systems and dynamics.
Group overview
The Group delivered a strong set of results driven by recent
investments in its commercial and operating capabilities,
underpinned by positive market dynamics in both sectors. The Group
has evolved significantly over the last four years, building a
solid and scalable platform from which to capitalise on a
multi-year growth opportunity.
The Group delivered record levels of revenue and operating
profit, while continuing investment to support its long-term growth
objectives.
The Group continued to deliver against its strategic priorities
by launching new products, developing its service offering to drive
recurring revenues and delivering on its diversification plans
through progress in ABD Solutions. The acquisition of Ansible
Motion also expanded its presence in the simulation market,
complementing the existing product range.
The Group is well positioned, with market-leading products and
services, and remains supported by regulatory and structural growth
drivers that provide a strong position for continued growth and
performance during FY 2024.
Financial performance
The Group delivered significant revenue growth in the year of
21%, to GBP100.8m (2022: GBP83.2m), of which 7% related to organic
growth and the remainder to the acquisition of Ansible Motion.
Laboratory testing and simulation revenue grew by 74% due to the
contribution from Ansible Motion as well as a significant increase
in SPMM revenue driven by an increase in demand and timing of
delivery for new units. Track testing saw more modest growth of 6%
overall due to reduced testing services revenue impacted by local
lock downs in China and the availability of new vehicles for
testing in H1 2023. The proportion of recurring revenue was
consistent at 40% (2022: 40%). The level of recurring revenue is
now expected to broadly stabilise ahead of new market offerings
which will be released in the near future.
Gross margin was 59.5%, up 290bps on 2022 due to operational
efficiencies and mitigation of the ongoing impacts of inflation
through price increases to the market.
Group adjusted operating profit of GBP16.6m (2022: GBP13.7m)
increased 21% against 2022. The adjusted operating margin increased
against 2022 to 16.5% (2022: 16.4%), as a result of the increased
levels of activity and the benefits of enhanced performance
initiatives, partially offset by the investment in ABD Solutions to
support the strategic long-term growth drivers. Excluding ABD
Solutions, the adjusted operating margin increased to 18.3% (2022:
18.2%).
Adjusted earnings before interest, tax, depreciation and
amortisation ('EBITDA') increased by 18% to GBP20.5m (2022:
GBP17.3m). Adjusted EBITDA margin was 20.4% (2022: 20.8%), a
decrease of 40bps.
Adjusted net finance costs were consistent at GBP0.4m (2022:
GBP0.4m).
Adjusted profit before tax was GBP16.3m (2022: GBP13.3m). The
Group adjusted tax charge totalled GBP2.1m (2022: GBP2.3m), an
adjusted effective tax rate of 13.2% (2022: 17.1%). The effective
tax rate is lower than the current UK corporation tax rate due to
allowances for research and development and patent box. In future
years, the effective tax rate is expected to increase as a result
of the full year effect of the increase in the UK corporation tax
rate.
Adjusted diluted earnings per share was 60.8p (2022: 48.1p), an
increase of 26%, reflecting the increase in operating profit and a
lower tax rate.
The Group delivered strong adjusted operating cash flow of
GBP23.5m (2022: GBP20.7m) with cash conversion of 114% (2022:
119%). The cash generated was used to fund the acquisition of
Ansible Motion, GBP3.4m of investment in product development and
property, plant and equipment and dividends of GBP1.3m.
Net cash at the end of the year was GBP32.0m (2022: GBP29.2m),
underpinning a robust balance sheet. Along with the Group's
GBP15.0m revolving credit facility which extends to February 2026,
this provides significant funding headroom to continue the Group's
investment programme.
Statutory operating profit increased by 103% to GBP12.6m (2022:
GBP6.2m) and after net finance costs of GBP1.1m (2022: GBP0.4m),
statutory profit before tax increased by 98% from GBP5.8m to
GBP11.5m. Statutory basic earnings per share was 48.0p (2022:
21.0p). The statutory tax charge was GBP0.5m (2022: GBP1.0m). A
reconciliation of statutory to underlying non-GAAP financial
measures is provided below.
Sector review
* Restated
2023 2022
GBPm GBPm
Driving robots 25.2 20.6 +22%
ADAS test products 30.5 29.7 +3%
Testing services 12.9 14.4 -10%
------------------------- ------- ----------- -----
Track testing 68.6 64.7 +6%
Laboratory testing 7.3 5.3 +38%
Simulation 24.9 13.2 +89%
------------------------- ------- ----------- -----
Laboratory testing and
simulation 32.2 18.5 +74%
------------------------- ------- ----------- -----
Total revenue 100.8 83.2 +21%
------------------------- ------- ----------- -----
*See note 10.
Track testing
The track testing business delivered revenue of GBP68.6m (2022:
GBP64.7m), a 6% increase against the prior year, with growth in
sales of driving robots and ADAS platforms offset by a reduction in
testing services revenue due to local COVID-19 restrictions in
China delaying the delivery of services and impacting the
availability of test vehicles in the first half of the year.
Driving robot sales increased by 22% to GBP25.2m (2022:
GBP20.6m), driven by the increase in complexity and volume of
testing required for ADAS assessment. The Group expects continued
growth in driving robot sales at more normalised levels, as new
regulatory requirements for evolving ADAS technologies are
released, such as the launch of the Euro NCAP 2030 roadmap and its
new Truck Safe rating scheme. It is expected that there will be
over 700 Euro NCAP test scenarios by 2025, up from 591 in 2023. New
tests for commercial vehicles offer further opportunities for
market expansion.
Revenue from ADAS platforms increased by 3% to GBP30.5m (2022:
GBP29.7m). The new higher speed versions of the GST and LaunchPad,
which can operate at speeds of up to 120kph and 80kph respectively,
enable customers to perform a greater range of tests, particularly
the assessment of automated lane-keeping technology and vehicle
interactions with Vulnerable Road Users such as motorcyclists, and
are continuing to gain traction. The recent launch of a new range
of soft targets including motorcycles and articulating pedestrians
and a new, more manoeuvrable platform, the LaunchPad Spin, will
drive further growth.
Testing services revenue decreased 10% to GBP12.9m (2022:
GBP14.4m) due to local COVID-19 restrictions delaying the provision
of testing services in China during the first half of the year and
continued delays in availability of test vehicles more widely due
to the well documented supply chain challenges in the automotive
market.
The Group continues to build customer relationships, drive
improvement in revenue and gross margins and invest in new product
development to meet the growing demand from manufacturers and test
providers to keep up to date with changes in regulations.
The growth in testing volume and complexity continues to drive
demand for ADAS platforms and driving robots that are both more
capable and more versatile. To recognise the need for new test
tools, this year Euro NCAP updated its listing of equipment used in
official testing to include AB Dynamics' Soft Motorcycle 360.
Laboratory testing and simulation
Laboratory testing and simulation delivered strong growth in
revenue up 74% on 2022 to GBP32.2m (2022: GBP18.5m) due to the
contribution from Ansible Motion as well as strong organic growth
from both rFpro and SPMM sales, reflecting the continued demand for
laboratory testing equipment.
SPMM revenue of GBP7.3m grew by 38% (2022: GBP5.3m)
demonstrating continued demand for our market leading kinetics and
compliance machines. This long-standing product which has been
supplied to global customers for the past 25 years has evolved
significantly over this period, culminating in the recent launch of
the SPMM Plus.
Organic simulation revenue was flat with revenue at GBP13.1m
(2022: GBP13.2m). The contribution from Ansible Motion was GBP11.8m
reflecting the strong order book at the time of acquisition and
delivery of sales synergies, giving total simulation revenue of
GBP24.9m (2022: GBP13.2m).
Strategic progress
The Group continues to make good progress against its
organic-led growth strategy, supplemented with value-enhancing
acquisitions. During the year, the focus on building and growing
the core business continued, coupled with delivering on the Group's
diversification plans through ABD Solutions and building critical
mass in the attractive simulation market through the acquisition of
Ansible Motion.
Investment continued in the core automotive sector, which is
characterised by strong regulatory and structural growth drivers
and rapid technology change. New product development and the
strengthened operational and commercial platform leaves the Group
well placed to benefit from increasing regulation and the
increasing number and complexity of test scenarios required by NCAP
bodies.
Ansible Motion has been successfully integrated into the Group's
simulation business, enhancing the Group's simulation capability
and expanding its range of products and services in this area which
includes the physics-based simulation software, rFpro.
As part of the objective to diversify into adjacent markets, ABD
Solutions continues to make significant progress in its mission to
add automated solutions to existing vehicles fleets faster and more
cost effectively. ABD Solutions has demonstrated its product
offering in contrasting environments for potential customers in
mining, defence and other specialist vehicles and successfully
proved its concept and market solution, Indigo Drive. A digital
twin has been developed which provides operational environment
validation and a platform for accelerated product testing.
Its focus is transitioning from technology development to
commercialisation with negotiations ongoing around mining related
contracts. The Japanese mining development contract is progressing
as planned and a Memorandum of Understanding has been signed with
Jevons Robotics in Australia for mining applications. In addition,
ABD Solutions has been awarded a GBP1m contract for delivery during
FY 2024 of a retrofit pedestrian detection system for a UK customer
for construction industry applications.
Acquisitions
On 20 September 2022, the Group acquired Ansible Motion Limited,
a UK based provider of advanced simulator solutions to the
automotive market, for an initial cash consideration of GBP14.4m
and shares in AB Dynamics plc to the value of GBP3.2m. Based on the
financial performance in FY 2023, a further cash payment of
approximately GBP5.7m will be made, along with retained
consideration of GBP0.5m, bringing the total consideration to
GBP23.8m.
Ansible Motion designs and manufactures high-end motion platform
systems for Driver in the Loop development of vehicle dynamics,
ADAS and automated systems and already utilises rFpro as its
physics based virtual environments. The Ansible Motion range of
driving simulators complements the existing product offering from
AB Dynamics and provides a comprehensive range of simulators that
addresses a wider range of simulator applications.
Ansible Motion has been integrated into the Group's simulation
sector and has been earnings accretive, delivering GBP11.8m of
revenue and GBP2.4m of adjusted operating profit during FY
2023.
Acquisitions continue to form a key part of the long-term
strategic development of the Group and we operate a continuous
process to identify and execute acquisition opportunities. The
current long-term pipeline remains positive and we expect to
continue to deliver further value-enhancing acquisitions.
Alternative performance measures
In the analysis of the Group's financial performance and
position, operating results and cash flows, alternative performance
measures are presented to provide readers with additional
information. The principal measures presented are adjusted measures
of earnings including adjusted operating profit, adjusted operating
margin, adjusted EBITDA, adjusted profit before tax and adjusted
earnings per share.
This financial information includes both statutory and adjusted
non-GAAP financial measures, the latter of which the Directors
believe better reflect the underlying performance of the business
and provide a more meaningful comparison of how the business is
managed and measured on a day-to-day basis. The Group's alternative
performance measures and KPIs are aligned to the Group's strategy
and together are used to measure the performance of the business
and form the basis of the performance measures for remuneration.
Adjusted results exclude certain items because if included, these
items could distort the understanding of the performance for the
year and the comparability between the periods.
We provide comparatives alongside all current year figures. The
term 'adjusted' is not defined under IFRS and may not be comparable
with similarly titled measures used by other companies. All profit
and earnings per share figures in this financial information relate
to underlying business performance (as defined above) unless
otherwise stated.
A reconciliation of statutory measures to adjusted measures is
provided below:
2023 2022(1)
Adjusted Adjustments Statutory Adjusted Adjustments Statutory
EBITDA (GBPm) 20.5 3.1 23.6 17.3 (2.0) 15.3
Operating profit (GBPm) 16.6 (4.0) 12.6 13.7 (7.5) 6.2
Operating margin 16.5% 12.5% 16.4% 7.4%
Finance expense (GBPm) (0.3) (0.8) (1.1) (0.4) - (0.4)
Profit before tax (GBPm) 16.3 (4.8) 11.5 13.3 (7.5) 5.8
Taxation (GBPm) (2.2) 1.7 (0.5) (2.2) 1.2 (1.0)
Profit after tax (GBPm) 14.1 (3.1) 11.0 11.0 (6.3) 4.7
Diluted e ps (pence) 60.8 (13.4) 47.4 48.1 (27.4) 20.7
O perating cash (GBPm) 23.5 (4.2) 19.3 20.7 (2.0) 18.7
1 Restated, see note 10
The adjustments comprise:
2023 2022
Profit impact Cash flow impact Profit Cash flow impact
GBPm impact
GBPm GBPm
GBPm
Amortisation of acquired intangibles 7.2 - 5.5 -
Acquisition related (credit)/costs (4.5) 2.8 0.3 0.3
ERP development costs 1.3 1.4 1.7 1.7
--------------------------------------------- -------------- ----------------- -------- -----------------
Adjustments to operating profit / cash flow 4.0 4.2 7.5 2.0
Acquisition related finance costs 0.8 - - -
--------------------------------------------- -------------- ----------------- -------- -----------------
Adjustments to profit before tax 4.8 4.2 7.5 2.0
--------------------------------------------- -------------- ----------------- -------- -----------------
The tax impact of these adjustments was a credit of GBP1.7m
(2022: GBP1.2m).
Return on capital employed (ROCE)
Our capital-efficient business and high margins enable
generation of strong ROCE (defined as adjusted operating profit as
a percentage of capital employed, being shareholders' equity less
net cash plus deferred tax and contingent consideration). During
the year, ROCE has increased from 15.3% to 15.4% benefitting from
operating leverage.
Research and development
While research and development form a significant part of the
Group's activities, a significant and increasing proportion relates
to specific customer programmes which are included in the cost of
the product. Development costs of GBP0.5m (2022: GBP1.7m) have been
capitalised in relation to projects for which there are a number of
near-term sales opportunities. Other research and development
costs, all of which have been expensed as incurred, totalled
GBP0.2m (2022: GBP0.4m).
Foreign currency exposure
Foreign exchange translation has provided a minor tailwind on
revenue and profit, due to the weakening of Sterling against the US
dollar and Euro. On a constant currency basis, restating the
current year at 2022 average rates, revenue would have been GBP1.2m
lower and both adjusted and statutory operating profit GBP0.1m
lower.
Dividends
We recognise that dividends continue to be an important
component of total shareholder returns, balanced against
maintaining a strong financial position. The Board is recommending
a final dividend of 4.42p per share, giving a total dividend for
the year of 6.36p per share, which is an increase of 20% over the
prior year.
Summary and outlook
The Group has delivered a strong performance, demonstrating the
benefits of the investment in the commercial and operating
capability of the business. The financial results show further
strong progress, with record levels of revenue and operating profit
and an improvement in operating margin. In parallel, the Group has
further strengthened its platform for growth through both organic
investments and acquisitions.
We see significant opportunity in our core markets in
automotive, which are supported by long-term structural and
regulatory growth drivers, and are continuing to invest in new
product development and technology. In addition, we are investing
in new technologies to diversify the business into attractive
adjacent markets through ABD Solutions.
Trading in FY 2024 has been encouraging, supported by a solid
order book providing good visibility into the second half of the
year. Whilst being mindful of timing of pipeline conversion and
customer delivery schedules, the Board remains confident that the
Group will make further financial and strategic progress and its
expectations for FY 2024 are unchanged.
Our market drivers both in our core business and in ABD
Solutions remain strong. This backdrop, along with the Group's
recent investments in capability and new products, provides
confidence of delivering continued progress in FY 2024 and
beyond.
Directors' Responsibility Statement on the Annual Report and
Accounts
The responsibility statement below has been prepared in
connection with the Company's full annual report and accounts for
the year ended 31 August 2023. Certain parts thereof are not
included within this announcement.
We confirm to the best of our knowledge:
1. the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair
view of the assets, liabilities, financial position and profit
or loss of the Company and the undertakings included in the
consolidation taken as a whole; and
2. the strategic report and directors' report includes a fair
review of the development and performance of the business
and the position of the issuer and the undertakings included
in the consolidation taken as a whole, together with a description
of the principal risks and uncertainties that they face.
We consider the annual report and accounts, taken as a whole, is
fair, balanced and understandable, and provides the information
necessary for shareholders to assess the Group's position and
performance, business model and strategy.
This responsibility statement was approved by the Board of
Directors on 23 January 2024 and has been signed on its behalf by
James Routh and Richard Elsy CBE.
AB Dynamics plc
Consolidated statement of comprehensive income
For the year ended 31 August 2023
2023 **Restated 2022
Adjusted *Adjustments Statutory Adjusted *Adjustments Statutory
Note GBP'000 GBP000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 2 100,767 - 100,767 83,226 - 83,226
Cost of sales (40,837) - (40,837) (36,085) - (36,085)
Gross profit 59,930 - 59,930 47,141 - 47,141
General and administrative
expenses (43,326) (4,049) (47,375) (33,473) (7,514) (40,987)
--------- ------------- ---------- --------- ------------- ----------
Operating profit 16,604 (4,049) 12,555 13,668 (7,514) 6,154
------------------------------- ------- --------- ------------- ---------- --------- ------------- ----------
Operating profit is analysed
as:
Before depreciation and
amortisation 20,517 3,140 23,657 17,288 (1,998) 15,290
Depreciation and amortisation (3,913) (7,189) (11,102) (3,620) (5,516) (9,136)
Operating profit 16,604 (4,049) 12,555 13,668 (7,514) 6,154
------------------------------- ------- --------- ------------- ---------- --------- -------------
Net finance expense (354) (713) (1,067) (374) - (374)
Profit before tax 16,250 (4,762) 11,488 13,294 (7,514) 5,780
Tax expense 4 (2,146) 1,644 (502) (2,274) 1,235 (1,039)
--------- ------------- ---------- --------- ------------- ----------
Profit for the year 14,104 (3,118) 10,986 11,020 (6,279) 4,741
--------- ------------- ---------- --------- ------------- ----------
Other comprehensive
(expense)/income
Items that may be reclassified
to consolidated
income statement:
Cash flow hedges 124 - 124 (93) - (93)
Exchange (loss)/gain on
foreign currency
net investments (2,059) - (2,059) 3,574 - 3,574
--------- ------------- ---------- --------- ------------- ----------
Total comprehensive income for
the
year 12,169 (3,118) 9,051 14,501 (6,279) 8,222
--------- ------------- ---------- --------- ------------- ----------
* See note 3
** Restated, see note 10
2023 **Restated 2022
Earnings per share Note Adjusted Statutory Adjusted Statutory
Basic 6 61.6p 48.0p 48.7p 21.0p
Diluted 6 60.8p 47.4p 48.1p 20.7p
--------- ------------- ---------- --------- ------------- ----------
** Restated, see note 10
AB Dynamics plc
Consolidated statement of financial position
As at 31 August 2023
*Restated *Restated 2021
2023 2022 GBP'000
GBP'000 GBP'000
Note
ASSETS
Non-current assets
Goodwill 36,939 23,818 22,221
Acquired intangible assets 32,831 23,665 28,282
Other intangible assets 2,746 2,971 1,577
Property, plant and equipment 25,739 25,708 25,815
Right-of-use assets 1,409 876 913
---------
99,664 77,038 78,808
--------- ---------- ---------------
Current assets
Inventories 17,954 13,651 7,901
Trade and other receivables 14,494 13,782 15,500
Contract assets 3,152 4,328 4,319
Taxation - 890 1,542
Cash and cash equivalents 33,486 30,141 23,282
--------- ---------- ---------------
69,086 62,792 52,544
--------- ---------- ---------------
Assets held for sale 1,893 1,893 1,893
--------- ---------- ---------------
LIABILITIES
Current liabilities
Trade and other payables 20,127 16,810 10,933
Contract liabilities 9,234 5,068 5,258
Derivative financial instruments - 123 31
Short-term lease liabilities 570 628 456
Contingent consideration 5,943 - 4,929
--------- ---------- ---------------
35,874 22,629 21,607
--------- ---------- ---------------
Non-current liabilities
Deferred tax liabilities 8,708 6,397 6,552
Long-term lease liabilities 906 315 511
--------- ---------- ---------------
9,614 6,712 7,063
--------- ---------- ---------------
Net assets 125,155 112,382 104,575
--------- ---------- ---------------
SHAREHOLDERS' EQUITY
Share capital 229 226 226
Share premium 62,781 62,260 62,210
Other reserves 7 2,403 1,142 (2,339)
Retained earnings 59,742 48,754 44,478
--------- ---------- ---------------
Total equity 125,155 112,382 104,575
* See note 10
AB Dynamics plc
Consolidated statement of changes in equity
For the year ended 31 August 2023
Share Share Other Retained Total
capital premium reserves earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 September 2021 as previously
reported 226 62,210 (2,339) 44,889 104,986
Prior year adjustment (note
10) - - - (411) (411)
--------- -------- ------------- ----------- --------
At 1 September 2021 as restated 226 62,210 (2,339) 44,478 104,575
Share based payments - - - 750 750
Total comprehensive income - - 3,481 4,741 8,222
Deferred tax on share based
payments - - - (84) (84)
Dividend paid - - - (1,131) (1,131)
Issue of shares - 50 - - 50
--------- -------- ------------- ----------- --------
At 31 August 2022 as restated 226 62,260 1,142 48,754 112,382
--------- -------- ------------- ----------- --------
At 1 September 2022 as previously
reported 226 62,260 1,142 48,333 111,961
Prior year adjustment (note
10) - - - 421 421
--------- -------- ------------- ----------- --------
At 1 September 2022 restated 226 62,260 1,142 48,754 112,382
Share based payments - - - 1,064 1,064
Total comprehensive income - - (1,935) 10,986 9,051
Deferred tax on share based
payments - - - 193 193
Dividend paid - - - (1,255) (1,255)
Issue of shares 3 521 3,196 - 3,720
At 31 August 2023 229 62,781 2,403 59,742 125,155
--------- -------- ------------- ----------- --------
AB Dynamics plc
Consolidated cash flow statement
For the year ended 31 August 2023
*Restated
2023 2022
Note GBP'000 GBP'000
Cash flows from operating activities
Profit before tax 11,488 5,780
Depreciation and amortisation 11,102 9,136
Finance expense 1,067 374
Share based payment 1,263 795
Release of contingent consideration (5,180) -
Acquisition costs - 290
------------- ----------
Operating cash flows before changes in working capital 19,740 16,375
Increase in inventories (2,612) (5,751)
Decrease in trade and other receivables 2,514 1,707
(Decrease)/increase in trade and other payables (369) 6,350
------------- ----------
Cash flows from operations 19,273 18,681
----------------------------------------------------------- ------- ------------- ----------
Adjusted cash flows from operations 23,450 20,651
Cash impact of adjusting items 3 (4,177) (1,970)
----------------------------------------------------------- ------- ------------- ----------
Cash flows from operations 19,273 18,681
----------------------------------------------------------- ------- ------------- ----------
Finance costs paid (291) (89)
Income tax received/(paid) 363 (684)
Net cash flows from operating activities 19,345 17,908
------------- ----------
Cash flows used in investing activities
Acquisition of businesses net of cash 9 (10,656) (5,114)
Purchase of property, plant and equipment (2,930) (2,098)
Capitalised development costs and purchased software (469) (1,711)
Net cash used in investing activities (14,055) (8,923)
------------- ----------
Cash flows used in financing activities
Drawdown of loans 6,000 -
Repayments of loans (6,000) -
Dividends paid 5 (1,255) (1,131)
Proceeds from issue of share capital 457 50
Repayment of lease liabilities (1,124) (964)
Net cash used in financing activities (1,922) (2,045)
------------- ----------
Net increase in cash and cash equivalents 3,368 6,940
Cash and cash equivalents at beginning of the year 30,141 23,282
Effects of exchange rate changes (23) (81)
Cash and cash equivalents at end of the year 33,486 30,141
============= ==========
* See note 10
AB Dynamics plc
Notes to the consolidated financial statements
For the year ended 31 August 2023
1. Basis of preparation
The Company is a public limited company limited by shares and
incorporated under the UK Companies Act. The Company is domiciled
in the United Kingdom and the registered office and principal place
of business is Middleton Drive, Bradford on Avon, Wiltshire, BA15
1GB.
The principal activity of the Group is the design, manufacture
and supply of advanced testing, simulation and measurement products
and services to the global transport market. The Group's products
and services are used primarily for the development of road
vehicles, particularly in the areas of active safety and autonomous
systems, as well as automation of vehicles used for other
applications, such as mining and defence.
The annual financial statements of the Group are prepared in
accordance with UK-adopted international accounting standards and
applicable law.
The financial information set out above does not constitute the
Company's statutory accounts for the year ended 31 August 2023 or
31 August 2022 but is derived from those accounts. A copy of the
statutory accounts for the year ended 31 August 2022 has been
delivered to the Registrar of Companies. The auditor's report on
those accounts was unqualified and did not contain any statements
under section 498(2) or (3) of the Companies Act 2006.
Certain new standards, amendments to standards and
interpretations are not yet effective for the year ended 31 August
2023 and have therefore not been applied in preparing the annual
financial statements.
Going concern basis of accounting
The financial information has been prepared under the going
concern basis, which assumes that the Group will continue to be
able to meet its liabilities as they fall due for the foreseeable
future.
The Directors have assessed the principal risks to the going
concern assumption, including by modelling a severe but plausible
downside scenario, whereby the Group experiences:
-- A reduction in demand of 25% over the next two financial years, with no mitigation
-- A 10% increase in operating costs from supply chain disruption
-- An increase in cash collection cycle
-- An increase in input costs resulting in reduction in gross margins to 40%.
With GBP33.5m of cash at 31 August 2023 and a GBP15.0m undrawn
revolving credit facility, in this severe downside scenario, the
Group has sufficient headroom to be able to continue to operate for
the foreseeable future. The Directors believe that the Group is
well placed to manage its financing and other business risks
satisfactorily and have a reasonable expectation that the Group
will have adequate resources to continue in operation for at least
twelve months from the signing date of the financial statements.
They therefore consider it appropriate to adopt the going concern
basis of accounting in preparing the financial statements.
2. Segment information
The Group derives revenue from the sale of its advanced
measurement, simulation and testing products used in assisting the
global transport market in the laboratory, on the test track and
on-road. The income streams are all derived from the utilisation of
these products which, in all aspects except details of revenue, are
reviewed and managed together within the Group and as such are
considered to be the only segment.
The operating segment is based on internal reports about
components of the Group, which are regularly reviewed and used by
the Board of Directors being the Chief Operating Decision Maker
(CODM). Revenue is split into sectors in the information reviewed
by the Board but all other aspects of performance are reviewed and
managed together.
Analysis of revenue by destination:
* Restated
2023 2022
GBP'000 GBP'000
United Kingdom 4,875 7,299
Rest of Europe 22,095 13,723
North America 25,171 20,547
Asia Pacific 46,409 40,941
Rest of World 2,217 716
--------- -------------
100,767 83,226
--------- -------------
No customers individually represent more than 10% of total
revenue for the year ended 31 August 2023 (2022: One customer
individually represented 12% of revenue).
Assets and liabilities by segment are not reported to the Board
of Directors, therefore are not used as a key decision-making tool
and are not disclosed here.
A disclosure of non-current assets by location is shown
below:
2023 2022
GBP'000 GBP'000
United Kingdom 66,199 39,565
Rest of Europe 1,049 1,262
North America 15,508 17,084
Asia Pacific 16,908 19,127
--------- -----------
99,664 77,038
--------- -----------
Revenues are disaggregated as follows:
* Restated
2023 2022
GBP'000 GBP'000
Revenue by sector
Track testing 68,610 64,743
Laboratory testing and simulation 32,157 18,483
---------- -------------
100,767 83,226
---------- -------------
* See note 10
3. Alternative Performance measures
In the analysis of the Group's financial performance and
position, operating results and cash flows, alternative performance
measures are presented to provide readers with additional
information. The principal measures presented are adjusted measures
of earnings including adjusted operating profit, adjusted operating
margin, adjusted profit before tax, adjusted EBITDA and adjusted
earnings per share.
The financial statements include both statutory and adjusted
non-GAAP financial measures, the latter of which the Directors
believe better reflect the underlying performance of the business
and provide a more meaningful comparison of how the business is
managed and measured on a day-to-day basis. The Group's alternative
performance measures and KPIs are aligned to the Group's strategy
and together are used to measure the performance of the business
and form the basis of the performance measures for remuneration.
Adjusted results exclude certain items because if included, these
items could distort the understanding of the performance for the
year and the comparability between the periods.
We provide comparatives alongside all current year figures. The
term 'adjusted' is not defined under IFRS and may not be comparable
with similarly titled measures used by other companies. All profit
and earnings per share figures in this financial information relate
to underlying business performance (as defined above) unless
otherwise stated.
2023 2022
GBP'000 GBP'000
Amortisation of acquired intangibles 7,189 5,516
Acquisition related (credit)/costs (4,502) 328
ERP development costs 1,362 1,670
Adjustments to operating profit 4,049 7,514
Acquisition related finance costs 713 -
--------- -----------
Adjustments to profit before
tax 4,762 7,514
--------- -----------
Amortisation of acquired intangibles
The amortisation relates to the acquisition of Ansible Motion
Limited on 20 September 2022, VadoTech Group on 3 March 2021 and
the businesses acquired in 2019, DRI and rFpro.
Acquisition related (credit)/costs
The credit in the current year relates to the release of
contingent consideration on the acquisition of Ansible Motion, less
acquisition costs.
The prior year costs also related to Ansible Motion acquisition
costs.
ERP development costs
These costs relate to the development, configuration and
customisation of the Group's new ERP system which is hosted on the
cloud.
Acquisition related finance costs
Finance costs relate to the unwind of the discount on contingent
consideration payable on the acquisition of Ansible Motion.
Tax
The tax impact of these adjustments was as follows: amortisation
of acquired intangibles GBP1.3m (2022: GBP0.8m), acquisition
related costs GBP0.1m (2022: GBP0.1m) and ERP development costs
GBP0.3m (2022: GBP0.3m).
Cash impact
The operating cash flow impact of the adjustments was an outflow
of GBP4.2m (2022: GBP2.0m) being GBP1.4m (2022: GBP1.7m) in
relation to ERP development costs and GBP2.8m (2022: GBP0.3m) in
relation to acquisition costs of which GBP2.1m (2022: GBPNil) was
in relation to a bonus paid to employees of the acquired entity for
pre-acquisition service. The cash to pay this bonus was included
within the cash acquired in the opening balance sheet, therefore
the impact on the cash flow statement was a reduction in cash flows
on acquisition of businesses and a corresponding decrease in cash
flows from operations.
Net cash
The reconciliation of cash and cash equivalents to net cash is
as follows:
2023 2022
GBP'000 GBP'000
Cash and cash equivalents 33,486 30,141
Lease liabilities (1,476) (943)
32,010 29,198
--------------------------- --------- -----------
4. Tax
The statutory effective rate of tax for the year of 4.4% (2022:
17.9%) is lower than (2022: lower than) the standard rate of
corporation tax in the UK of 21.5% (2022: 19.0%) due to allowances
for research and development and patent box, and the release of the
accrual for contingent consideration in relation to Ansible Motion
which was not taxable.
The effective rate of tax on the adjusted profit before tax is
13.2% (2022: 17.1%).
5. Dividend paid
2023 2022
GBP'000 GBP'000
Final 2021 dividend paid of 3.24p
per share - 733
Interim 2022 dividend paid of
1.76p per share - 398
Final 2022 dividend paid of 3.54p 811 -
per share
Interim 2023 dividend paid of 444 -
1.94p per share
1,255 1,131
----------------------------------- --------- -----------
The Board has proposed a final dividend of 4.42p per share
totalling GBP1,014,000. An interim dividend was paid of 1.94p per
share totalling GBP444,000. If approved, the final dividend will be
paid on 6 March 2024 to shareholders on the register on 9 February
2024.
6. Earnings per share
Basic earnings per share is calculated by dividing the profit
attributable to equity holders by the weighted average number of
ordinary shares in issue during the period.
Diluted earnings per share is calculated by adjusting the
weighted average number of ordinary shares outstanding to assume
conversion of all potentially dilutive shares. The Company has one
category of potentially dilutive shares, namely share options.
The calculation of earnings per share is based on the following
earnings and number of shares:
*Restated
2023 2022
Weighted average number of shares ('000)
Basic 22,886 22,625
Diluted 23,193 22,908
Earnings per share
Profit for the year attributable to owners
of the Group (GBP'000) 10,986 4,741
Basic earnings per share 48.0p 21.0p
Diluted earnings per share 47.4p 20.7p
Adjusted earnings per share
Adjusted profit for the year attributable
to owners of the Group (GBP'000) 14,104 11,020
Adjusted basic earnings per share 61.6p 48.7p
Adjusted diluted earnings per share 60.8p 48.1p
* See note 10
7. Other reserves
Merger Reconstruction Translation Hedging Total other
relief reserve reserve reserve reserves
reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 September 2021 11,390 (11,284) (2,414) (31) (2,339)
Other comprehensive
income - - 3,574 (93) 3,481
--------- --------------- ------------ --------- ------------
At 31 August 2022 11,390 (11,284) 1,160 (124) 1,142
Other comprehensive
expense - - (2,059) 124 (1,935)
Issue of shares 3,196 - - - 3,196
--------- --------------- ------------ --------- ------------
At 31 August 2023 14,586 (11,284) (899) - 2,403
--------- --------------- ------------ --------- ------------
8. Foreign exchange
The foreign exchange rates applied during the year were:
2023 2022
----- -----
Year end rate
US dollar 1.27 1.16
Euro 1.16 1.15
Yen 186 161
----- -----
Average rate
US dollar 1.21 1.31
Euro 1.15 1.19
Yen 165 158
----- -----
9. Acquisition of subsidiary
On 20 September 2022, the Group acquired 100% of the issued
share capital of Ansible Motion Limited, a leading provider of
advanced simulators to the global automotive market.
The initial GBP17.6m consideration comprised GBP14.4m of cash
and GBP3.2m of new ordinary shares in AB Dynamics plc. A maximum
additional GBP12.0m performance payment was available subject to
certain performance criteria being met for the year ended 31 August
2023. An accrual for the deferred contingent consideration was
included in the balance sheet at net present value of GBP9.9m at
the acquisition date, which has been adjusted at the year end to
GBP5.9m following completion of the performance period. GBP0.5m of
the total consideration has been retained against any potential
warranties. The performance payment is payable in cash in January
2024.
The carrying amount of each class of Ansible Motion Limited's
assets before combination is set out below:
Book value Fair value Provisional
GBP'000 adjustments fair value
GBP'000 GBP'000
Intangible assets - 16,800 16,800
Property, plant and equipment 31 - 31
Right of use asset 441 - 441
Inventory 1,691 - 1,691
Trade and other receivables 2,049 - 2,049
Cash 3,744 - 3,744
Trade and other payables (6,404) - (6,404)
Lease liabilities (441) - (441)
Deferred tax liabilities - (4,137) (4,137)
Deferred tax assets 222 - 222
---------------------------------- ----------- ------------- ------------
Net assets acquired 1,333 12,663 13,996
Goodwill arising on acquisition 14,014
---------------------------------- ----------- ------------- ------------
28,010
---------------------------------- ----------- ------------- ------------
Cash paid 14,400
New ordinary shares issued 3,200
Contingent consideration payable 10,410
---------------------------------- ----------- ------------- ------------
Total consideration 28,010
Cash consideration 14,400
Less cash acquired (3,744)
---------------------------------- ----------- ------------- ------------
10,656
---------------------------------- ----------- ------------- ------------
Contingent consideration
Performance payment net present value at acquisition
date 9,882
Retained consideration 528
------------------------------------------------------ --------
At acquisition 10,410
Unwind of discount 713
Less adjustment to performance payment payable (5,180)
------------------------------------------------------ --------
At 31 August 2023 5,943
------------------------------------------------------ --------
The contingent consideration has been adjusted at the year end
to a fair value of GBP5.4m following completion of the performance
period (an undiscounted value of GBP5.5m). GBP0.5m of the total
consideration has been retained against any potential warranties.
After the year end, the final payment was agreed as GBP5.7m and has
become payable in cash in January 2024.
The initial cash consideration was satisfied with available cash
resources and a short-term utilisation of part of the Group
revolving credit facility which has since been repaid. GBP0.5m of
the initial purchase price has been retained against any potential
warranties and is included within deferred consideration.
Intangible assets arising on acquisition are in respect of
technology (GBP16.1m) and brand (GBP0.7m). The useful economic
lives have been determined to be ten and five years
respectively.
Ansible Motion Limited contributed revenue of GBP11.8m and
adjusted operating profit of GBP2.4m for the period between
acquisition and the balance sheet date. Acquisition related costs
amounted to GBP0.7m which have been expensed when incurred. GBP0.7m
of the discount on the deferred contingent consideration unwound in
the period and has been included in finance expenses.
10. Prior year adjustment
The comparatives for the prior period have been restated to
reflect a different interpretation of the accounting standard
regarding revenue recognition following challenge by the Group's
new auditors, Grant Thornton. The restatement relates to timing
differences on contracts with two customers under which revenue was
previously recognised over time as the equipment was built and has
been restated to reflect recognition at a point in time on delivery
and installation. The change in interpretation relates to judgement
applied in determining how much profit the Group would be entitled
to in the unlikely event of a cancellation of the contract. None of
these contracts were cancelled and all have concluded during FY
2023 and payment has been received in full.
The impact is detailed in the tables below and has resulted in
an increase to revenue of GBP2,921,000 and profit after tax of
GBP832,000 for the prior period and a decrease in opening net
assets at 1 September 2021 of GBP411,000. The net impact on the
closing net assets at 31 August 2022 and hence on the profit after
tax for the year ended 31 August 2023 was GBP421,000.
Consolidated statement of financial position
31 August 2022 31 August 2021
Impact of As reported Impact of
As reported restatement Restated GBP'000 restatement Restated
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Non-current assets 77,038 - 77,038 78,808 - 78,808
--------------------- ------------- -------------------- ---------- ------------ -------------------- ----------
Current assets
Inventories 13,611 40 13,651 6,771 1,130 7,901
Taxation 882 8 890 1,443 99 1,542
Contract assets 3,917 411 4,328 4,269 50 4,319
Other current assets 43,923 - 43,923 38,782 - 38,782
--------------------- ------------- -------------------- ---------- ------------ -------------------- ----------
62,333 459 62,792 51,265 1,279 52,544
--------------------- ------------- -------------------- ---------- ------------ -------------------- ----------
Assets held for sale 1,893 - 1,893 1,893 - 1,893
--------------------- ------------- -------------------- ---------- ------------ -------------------- ----------
Current liabilities
Contract liabilities 5,787 (719) 5,068 3,568 1,690 5,258
Other current
liabilities 16,804 757 17,561 16,349 - 16,349
--------------------- ------------- -------------------- ---------- ------------ -------------------- ----------
22,591 38 22,629 19,917 1,690 21,607
--------------------- ------------- -------------------- ---------- ------------ -------------------- ----------
Non-current
liabilities 6,712 - 6,712 7,063 - 7,063
--------------------- ------------- -------------------- ---------- ------------ -------------------- ----------
Net assets 111,961 421 112,382 104,986 (411) 104,575
--------------------- ------------- -------------------- ---------- ------------ -------------------- ----------
Retained earnings 48,333 421 48,754 44,889 (411) 44,478
Share capital and
other reserves 63,628 - 63,628 60,097 - 60,097
--------------------- ------------- -------------------- ---------- ------------ -------------------- ----------
Total equity 111,961 421 112,382 104,986 (411) 104,575
--------------------- ------------- -------------------- ---------- ------------ -------------------- ----------
Consolidated income statement 31 August 2022
As reported Impact of
GBP'000 restatement Restated
GBP'000 GBP'000
Revenue 80,305 2,921 83,226
Cost of sales (34,089) (1,996) (36,085)
--------------------- ------------- -------------------- ---------- ------------ -------------------- ----------
Gross profit 46,216 925 47,141
--------------------- ------------- -------------------- ---------- ------------ -------------------- ----------
Operating profit 5,229 925 6,154
--------------------- ------------- -------------------- ---------- ------------ -------------------- ----------
Profit before tax 4,855 925 5,780
Tax expense (946) (93) (1,039)
--------------------- ------------- -------------------- ---------- ------------ -------------------- ----------
Profit for the year 3,909 832 4,741
--------------------- ------------- -------------------- ---------- ------------ -------------------- ----------
11. Principal risks
The principal risks and uncertainties impacting the Group are
described on pages 54-58 of our Annual Report 2023. They include:
downturn or instability in major geographic markets or market
sectors (including inflation, conflicts and pandemics), supply
chain disruption, loss of major customers and change in customer
procurement processes, failure to deliver new products, dependence
on external routes to market, acquisition integration and
performance, cybersecurity and business interruption, competitor
actions, loss of key personnel, threat of disruptive technology,
product liability, failure to manage growth, foreign currency,
counterparty risk, credit risk, intellectual property/patents and
environmental risk.
12. 2023 Annual Report
The Annual Report for the year ended 31 August 2023 will be
posted on the Company's website, www.abdplc.com , on 2 February
2024 and a copy will be posted to shareholders, as required, in
advance of the Company's Annual General Meeting of 28 February
2024.
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