TIDMABDP
RNS Number : 3880G
AB Dynamics PLC
25 November 2020
25 November 2020
AB Dynamics plc
Final Results for the Year Ended 31 August 2020
"A resilient performance and continued delivery of our strategy
for sustainable growth"
AB Dynamics plc ("AB Dynamics", the "Company" or the "Group"),
the designer, manufacturer and supplier of advanced testing systems
and measurement products to the global automotive market, is
pleased to announce its final results for the year ended 31 August
2020.
Audited Audited
2020 2019
GBPm GBPm
Revenue 61.5 58.0 +6%
Adjusted operating profit(1) 11.3 12.9 (12%)
Adjusted operating margin 18.4% 22.3% (390 bps)
Adjusted profit before
tax(1) 10.9 13.1 (16%)
Statutory operating profit 5.4 10.8 (50%)
Statutory profit before
tax 5.0 11.0 (54%)
Statutory profit after
tax 4.6 8.7 (47%)
Cash flow from operations 6.9 9.9 (31%)
Cash 31.2 36.2 (14%)
------------------------------ -------- -------- ----------
Pence Pence
Adjusted diluted earnings
per share(1) 39.9 51.4 (22%)
Statutory basic earnings
per share 20.2 42.9 (53%)
Statutory diluted earnings
per share 20.1 42.1 (52%)
Total dividend per share 4.4 4.4 -
------------------------------ -------- -------- ----------
(1) Before amortisation of acquired intangibles, inventory
impairment, acquisition related charges and restructuring costs. A
reconciliation to statutory measures is given below. Prior year
comparatives have been restated to reflect the inclusion of share
based payments which were previously reported as an adjustment.
Financial highlights
-- Strong first half performance, offset by challenging trading
conditions in the second half due to the COVID-19 pandemic
-- Track testing revenue increased by 4% reflecting a
combination of strong growth in ADAS platforms and testing, offset
by a reduction in sales of driving robots and a suspension of
testing operations as a result of the pandemic
-- Laboratory testing and simulation revenues increased by 18%
as a result of significant growth in SPMM and simulation revenues,
despite experiencing deferments of orders in the second half
-- Reduction in adjusted operating margins to 18.4% driven by
continued strategic investment in capability to support long term
growth drivers
-- Significant cash balance of GBP31.2m (2019: GBP36.2m) after
investing GBP8.2m in capital expenditure in the period, which
continues to provide resources to support the Group's investment
requirements
-- Reinstatement of dividends, with a proposed final dividend of
4.4p per share, equal to the total dividend for 2019 and reflecting
the Board's confidence in the Group's financial position and
prospects
Operational and strategic highlights
-- Strong geographic growth in the USA and Japan following the
successful establishment of new sales and support offices
-- Successful launch of new products including Halo driving
robot, aNVH, Guided Soft Target 120 and Radar Cart
-- Further development of the simulation sector with new
products including Static Simulator, Data Farming, Linux OS version
and highly accurate digital twins
-- Growth in recurring revenue to 28%, up from 10% of Group
revenue through acquired businesses and increased sales of service
and support contracts
-- Continued investment in management capability, processes and
systems, including progress towards implementation of a Group-wide
ERP system
-- Construction of the new Engineering Design Centre nearing completion
-- Solid performance from companies acquired during 2019,
including significant growth of track testing services in the
USA
Current trading and outlook
-- Q1 trading to date in line with Q4 FY20 exit rate
-- Progress in laboratory testing and simulation, with a number
of the deferred 2020 orders secured either side of the financial
year end
-- Second wave impacts of the pandemic make order intake
patterns difficult to predict into 2021, particularly for
laboratory testing and simulation
-- Long-term, sustainable structural and regulatory growth drivers remain intact
-- Continued innovation and capability investment generating positive commercial momentum
-- Well placed and sufficiently invested to capitalise on
opportunities when levels of demand return
-- The Group has resumed its acquisition strategy and is
actively exploring a number of opportunities
There will be a presentation for analysts this morning at 9.30am
via conference call. Please contact abdynamics@tulchangroup.com if
you would like to attend.
Commenting on the results, Dr James Routh, Chief Executive
Officer said:
"The Group has delivered a robust and resilient performance in
2020 against a backdrop of challenging market conditions due to
COVID-19. After a very strong first half of the financial year, the
Group took rapid and effective actions to mitigate the risks of the
pandemic. Whilst the backdrop has been uncertain, the Group's
strong financial position has enabled us to remain focussed on
maintaining our strategic momentum. The Group continued to invest
in its capabilities, systems and business infrastructure which,
despite a softening in operating margins over the near term,
ensures the Group remains well placed to capitalise on the
long-term regulatory and structural growth drivers, which remain
intact.
"Demand in the first quarter of the current year has been
consistent with the Q4 FY20 exit rate. The disruption associated
with further waves of infection means that visibility is limited
and there remains short-term uncertainty as to the shape and rate
of this recovery. Looking further ahead, we remain confident that
demand will recover to pre-crisis growth patterns over the medium
term.
"Despite the uncertain backdrop, we see significant scope to
deliver on the Group's strategic priorities, such as further
product development and executing on our pipeline of potential
acquisition opportunities. We are very encouraged by the initial
progress already evident from our key strategic investment
initiatives. The market drivers are compelling, the medium-term
outlook for AB Dynamics remains positive and the Board is confident
the Group can continue to deliver on its strategic priorities"
Enquiries:
AB Dynamics plc 01225 860 200
Tony Best, Chairman
Dr James Routh, Chief Executive Officer
Sarah Matthews-DeMers, Chief Financial
Officer
Peel Hunt LLP 0207 418 8900
Mike Bell
Ed Allsopp
Tulchan Communications 0207 353 4200
James Macey White
Matt Low
Deborah Roney
Certain information contained in this announcement would have
constituted inside information (as defined by Article 7 of
Regulation (EU) No 596/2014) ("MAR") prior to its release as part
of this announcement and is disclosed in accordance with the
Company's obligations under Article 17 of those Regulations.
The person responsible for arranging the release of this
information is Felicity Jackson, Company Secretary.
About AB Dynamics plc
AB Dynamics is a leading designer, manufacturer and provider of
advanced products for testing and verification of Advanced Driver
Assistance Systems ("ADAS") technology, autonomous vehicle
development and vehicle dynamics to the global automotive research
and development sector.
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
Against a backdrop of very challenging macroeconomic conditions
due to the COVID-19 pandemic, the Group delivered a resilient
performance in 2020, whilst continuing to invest to ensure the
Group can capitalise on the significant long-term structural and
regulatory growth drivers underlying its markets. This year's
performance demonstrates the strength of the Group's sustainable
business model and was supported by recent investments to diversify
the business and strengthen systems, processes and infrastructure.
During this challenging period, our employees around the world have
shown their skills, professionalism and commitment to continue to
deliver class-leading products to our valued customers.
During the second half of the year the Group saw a significant
slow down in customer activity as customers attempted to conserve
cash. This impacted Group order intake, particularly for larger,
capital equipment orders. There was a gradual recovery through Q4
as customer activity and order intake improved, although timing
remains uncertain going into H1 2021. Our continued investments in
the second half strengthened the Group's market position to enable
the business to emerge strongly as markets slowly recover. However,
the long term structural and regulatory growth drivers that
underpin our markets remain firmly intact.
Financial performance
The Group delivered revenue growth of 6% to GBP61.5m (2019:
GBP58.0m), reflecting the resilience of the business model and the
Group's strong market positions. The increase was driven by growth
of 19% from the acquisitions made in the previous year, offset by
an organic revenue decline of 13% as a result of COVID-19 specific
disruption to our international customers. At the half year the
Group had delivered significant revenue growth of 34%, of which 11%
was organic, however the second half was impacted by COVID-19 and
revenues declined 18% against a very strong prior year comparator.
In spite of the backdrop, the proportion of recurring revenue
increased substantially to 28% of sales (2019: 10%) due to the
impact of the businesses acquired in 2019, in addition to an
increase in longer-term service and support contracts.
Group adjusted operating profit decreased 12% to GBP11.3m (2019:
GBP12.9m) resulting in a decrease in adjusted operating margin of
390 bps to 18.4% (2019: 22.3%). The margin has been impacted by our
continued investment in our strategy for growth and building out
the senior management team, partly offset by mitigating actions to
reduce discretionary spending.
Gross margins increased by 1,020 bps to 58.4% as a result of
relative product mix between the Group's two sectors, coupled with
the relatively higher margin contributions from both rFpro and DRI
acquired towards the end of the last financial year. Our direct
sales model in key territories also contributed to the improved
gross margin as the Group utilises fewer third-party sales agents
and resellers.
Net finance costs were GBP0.4m (2019: net income GBP0.2m), with
interest income of GBP0.2m offset by lease interest of GBP0.1m and
the unwinding of the discounted value of the deferred consideration
on DRI and rFpro.
This left adjusted profit before tax of GBP10.9m (2019:
GBP13.1m).
The Group adjusted tax charge totalled GBP1.9m (2019: GBP2.5m),
an adjusted effective tax rate of 17.7% (2019: 19.3%). 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 remain
stable with UK allowances offsetting higher tax rates in overseas
territories.
Adjusted diluted earnings per share were 39.9p (2019: 51.4p), a
decrease of 22%. The drop through was higher than the decrease in
adjusted operating profit due to the increased number of shares
after the prior year equity issue.
Statutory operating profit reduced by 50% to GBP5.4m and after
net finance costs of GBP0.4m (2019: interest income GBP0.2m),
statutory profit before tax was down 54% from GBP11.0m to GBP5.0m,
giving statutory basic earnings per share of 20.2p (2019: 42.9p).
The statutory tax charge was GBP0.4m (2019: GBP2.3m). A
reconciliation of statutory to underlying non-GAAP financial
measures is provided below.
The Group delivered operating cash flow of GBP6.9m with the cash
position at year end of GBP31.2m underpinning a robust balance
sheet. During 2020 we invested in the Group's new Engineering
Design Centre, R&D, payment of deferred consideration for the
acquisition of Dynamic Research Inc and working capital to support
the growth in the business.
COVID-19
The emergence of the COVID-19 pandemic in early 2020 saw
unprecedented impacts on global economies, with the automotive
sector impacted particularly significantly. As reported at the end
of the Group's first half, we took rapid steps to limit
discretionary spend and conserve cash whilst we gained clarity on
the overall short-term impact on the business.
The Group did not see any significant adverse impacts on its
supply chain or manufacturing facilities, but many larger, capital
equipment orders were initially deferred by our customers. Through
the second half of the year, the Group saw orders increase,
particularly in the fourth quarter, albeit these were still below
pre-pandemic levels at the year end. At the end of the financial
year, one of the anticipated larger capital equipment orders was
received and the pipeline for further orders is strong, although we
remain mindful of uncertainty relating to timing.
Throughout the period of lockdown, the Group was able to
maintain key manufacturing and track testing operations, whilst
approximately 70% of our global workforce worked remotely. This
balance proved to be effective and we were able to continue
delivering for our customers whilst maintaining our investment
activities, particularly in product development. The restrictions
on travel prevented certain installation, commissioning and
training activities from taking place, however our recently added
international sales and support offices were able to continue to
support customers where required.
Looking forward there remains uncertainty around the ongoing
impact of COVID-19 and the Board continues to be cautious and alert
to conditions in the wider automotive market. Timing of order
intake is likely to be variable and we expect this uncertainty to
continue through at least the first half of the new financial year,
particularly in relation to capital equipment.
However, we are confident that the long-term structural and
regulatory drivers that underpin our markets remain firmly intact
and the Group is therefore continuing to invest in new product
development as well as business infrastructure, which the Board
believes are critical to delivering its long-term growth and
strategic development objectives for the business.
Furthermore, after a brief pause in the early stages of the
pandemic, we have now resumed our acquisition strategy and the
Group is actively exploring a number of opportunities. We see good
opportunity to put our strong balance sheet to work with strategic
acquisitions that will enhance earnings, broaden our product
offering and extend our geographic footprint in key markets.
Sector review
Track testing
The track testing sector delivered overall revenue growth of 4%
to GBP51.8m (2019: GBP49.8m) through a combination of strong growth
in ADAS platforms and testing services, offset by a reduction in
sales of driving robots.
Driving robot sales reduced by 30% to GBP21.1m (2019: GBP30.1m)
as demand slowed, particularly in the second half, albeit against a
very strong prior year comparator. In the previous two financial
years, strong growth was delivered through the Chinese market as
new entrant vehicle OEMs established their testing capability. Once
established, the demand for driving robots slowed and the Group
expects sales revenues in this sector to slow in the short term,
before growing again once new regulatory requirements for new ADAS
technologies are released.
The strong growth in ADAS platforms continued despite the impact
of COVID-19 in the second half of the year, delivering 22% revenue
growth to GBP24.1m (2019: GBP19.7m). Demand for ADAS platforms,
particularly the Launchpad, continues to build as new test
protocols are released from regulatory bodies and consumer bodies
such as Euro-NCAP. The trend towards multi-object test scenarios
will further drive demand for a range of platforms that meet these
test requirements, including platforms to carry a range of objects
(e.g. pedestrian dummies, cyclists, scooters, motorcycles, etc.)
that can operate at a range of speeds and can interact with a
variety of test vehicles from passenger cars to commercial
vehicles.
Through the acquisition of Dynamic Research Inc (DRI) in August
2019, the Group is able to provide track testing services to the US
market. DRI provides testing services to evaluate the performance
of ADAS systems, autonomous vehicles and vehicle dynamics through
its extensive test facility. DRI delivered revenue of GBP6.6m
(2019: GBPNil) associated with track testing services through a
significant series of test programmes for NHTSA, the US regulatory
body, and by supporting US OEMs and technology companies.
As part of the Group objective to increase recurring revenue, AB
Dynamics launched tiered service and support packages to the
existing customer base. These multi-tiered contracts proved
successful with many high profile customers entering into long-term
support contracts which increase the Group's overall proportion of
recurring revenue.
The establishment of the Group's overseas sales and support
offices in Japan, Germany and the USA has delivered improved sales
revenue, gross margin enhancement and closer relationships with key
customers. These investments have yielded significant sales revenue
growth, particularly in Japan and the USA.
The Group continues to invest in new product development in this
sector with a number of new product launches expected in 2021
including enhancements and new variants of ADAS platforms, new
driving robot technologies and a significant new release of the
Ground Traffic Control software.
Laboratory testing and simulation
The laboratory testing and simulation sector delivered strong
overall revenue growth of 18% to GBP9.7m (2019: GBP8.2m), through
significant growth of 15% in SPMM revenue, a small contribution
from revenue recognised during the build of our first aNVH and
growth of 24% in simulation.
The growth in SPMM sales revenue of 15% to GBP4.6m (2019:
GBP4.1m) was due to construction of machines for customers in Japan
and China, however this growth was constrained in the second half
of the financial year as customers deferred their decision making
to conserve cash in the face of the COVID-19 pandemic. Order intake
activity recovered towards the end of the financial year and the
current pipeline of opportunities is promising.
During the first half of the year the Group received its first
order for the aNVH machine from a major automotive OEM. The
contract commenced during the second half of FY20 with delivery
expected during FY21, therefore only a small element of the total
contract revenue was recognised during the financial year.
The Group delivered a further simulator system to the Alfa Romeo
Formula 1 team during the year and the technical partnership is
generating significant opportunities in other areas of motorsport.
Similar to the SPMM orders, many highly probable simulator orders
were deferred due to COVID-19 and the pipeline of opportunity is
encouraging.
Overall simulation sales grew by 24% to GBP4.7m (2019: GBP3.8m)
driven predominantly by a strong performance from rFpro in the
first half of the financial year. However, a significant proportion
of rFpro revenue relates to motorsport series, particularly Formula
1, Formula E and the US motorsport series such as Nascar and
Indycar. Most motorsport was postponed due to the COVID-19 pandemic
which impacted rFpro revenues in the second half. Towards the end
of the financial year, motorsport restarted which provided some
initial recovery in revenues.
The Group has made solid progress during the year in laboratory
testing and simulation, delivering strong sales growth against
difficult market conditions. During the period impacted by the
COVID-19 pandemic, the Group invested in new technologies and
launched a number of new products during the financial year
including the aNVH test machine, the static simulator expanding the
family of simulator products and the launch of new capabilities in
rFpro such as Data Farming and Linux development.
The Group's new Engineering Design Centre will house a
simulation research and development facility to accelerate the
development of new simulator technologies. A number of significant
simulation R&D projects are currently in progress and will be
launched during 2021.
Progress on our strategy
We are pleased with the ongoing progress made against the
five-point strategy announced in April 2019. Investments in
geographic diversification, direct routes to market and our service
and support offering provide direct sales channels and improved
customer intimacy, whilst enhancing margins and recurring revenue.
These investments have been complemented by the commencement of
important initiatives to improve our systems, processes and
structure. Together with continued investment in infrastructure,
people and new product development, this will result in a
resilient, sustainable business able to effectively take advantage
of the significant structural and regulatory changes in our end
markets.
Investment in product development continued with new products
including the aNVH, Halo driving robot, GST 120, Launchpad 60,
Static Simulator and Data Farming capabilities within the rFpro
simulation software. These new products address future regulatory
requirements for testing of ADAS systems and the market need to
rapidly accelerate autonomous system verification. Significant
investment in product development continues and we expect to
announce further product launches in 2021, which supports our model
of sustainable revenue growth.
To deliver the required capability and capacity to drive our
future growth, the Group has further invested in strengthening and
developing the senior management team and the continued build of
our new Engineering Design Centre. Investment in building our
business infrastructure continues with the ERP implementation
project due to go live during 2021. This is a significant change
project that will transform the business processes across the Group
and provide strong foundations to support current and future
growth.
Acquisitions
The Group has been pleased with the integration of the two
acquisitions completed during 2019. DRI has performed beyond
expectations and was able to deliver outstanding results despite
the impact of COVID-19 in the USA. Due to this strong performance,
the Group paid the maximum of $3.5m in deferred consideration to
the previous owners of DRI. rFpro has integrated well and had a
very strong first half of the year but was adversely affected by
the COVID-19 impact on motorsport in the second half. The pipeline
for acquisitions remains promising and the Group continues to
identify value enhancing acquisition opportunities that facilitate
our stated strategic priorities.
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.
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:
2020 2019
Statutory Adjustments Adjusted Statutory Adjustments * Adjusted *
Operating profit (GBPm) 5.4 5.9 11.3 10.8 2.1 12.9
Operating margin (%) 8.8 9.6 18.4 18.7 3.6 22.3
Profit before tax (GBPm) 5.0 5.9 10.9 11.0 2.1 13.1
Taxation (GBPm) (0.4) (1.5) (1.9) (2.3) (0.2) (2.5)
Profit after tax (GBPm) 4.6 4.4 9.0 8.7 1.9 10.6
Diluted earnings per share (pence) 20.1 19.8 39.9 42.1 9.3 51.4
*Comparatives have been restated to include share based payments
within underlying figures
The adjustments comprise:
2020 2019
GBPm GBPm
Amortisation of acquired intangibles 3.5 0.3
Inventory impairment 3.3 -
Acquisition related (credit) / costs (1.9) 1.3
Restructuring 1.0 0.5
-------------------------------------- ------ -----
Adjustments 5.9 2.1
-------------------------------------- ------ -----
Adjustments totalled GBP5.9m (2019: GBP2.1m), of which GBP3.5m
related to amortisation of acquired intangible assets, GBP1.9m to a
credit in relation to acquisitions and GBP1.0m to restructuring
costs. A further GBP3.3m related to a write down of inventory.
Following a detailed review of stock levels and usage, a number of
items previously included in the carrying value have been written
off and the system of accounting for inventory has been updated to
better reflect the Group's current operations. Further details of
the adjustments are provided in note 3.
The Group has previously reported the share based payment charge
as an adjustment to operating profit. However as this is expected
to be an ongoing expense for the Group, for the year ended 31
August 2020 onwards, the charge will be included within adjusted
reporting measures. Prior year comparatives have been restated to
reflect this change. Adjusted operating profit includes a charge of
GBP1.3m (2019: GBP0.6m).
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). However, in the years in which
we acquire businesses or new properties, our capital base grows
disproportionately with profit, therefore the ratio will be
impacted. The current year has been impacted by the investment in
building the new Engineering Design Centre, accounting for the
decrease in ROCE in the year from 19.3% in 2019 to 15.2% in
2020.
Research and development
While research and development forms a significant part of the
Group's activities, a significant proportion relates to specific
customer programmes which are included in the cost of the product.
Development costs of GBP0.2m (2019: GBPNil) 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 written off to the profit and loss account as
incurred, total GBP0.8m (2019: GBP0.8m).
Foreign currency exposure
The Group faces currency exposure on its foreign currency
transactions and, with the acquisition of DRI and international
expansion of our sales offices, exposure to both foreign currency
translation and transaction risk has increased.
The Group maintains a natural hedge whenever possible to
transactional exposure by matching the cash inflows and outflows in
the respective currencies.
There was no material difference between the reported profit for
the year and that calculated on a constant currency basis as the
exchange rates were broadly similar to the comparative period.
Leases
IFRS 16 'Leases' has been adopted in the period. This new
standard introduces the principle that all leased assets should be
reported on the balance sheet of the lessee, recognising an asset
for the right to use the leased item and a liability for the
present value of its future lease payments. This resulted in the
recognition of a right-of-use asset of GBP1.3m and a corresponding
lease liability being recognised on 1 September 2019.
It has also resulted in an increase in depreciation and interest
costs of GBP0.6m with a similar decrease in operating lease rental
costs.
Dividends
Against a background of significant macroeconomic uncertainty,
the Board took the decision in April 2020 to suspend the interim
dividend pending the conclusion of the financial year. The Board
has reviewed the position in light of our results for the year and
is recommending a final dividend of 4.4p per share, resulting in an
unchanged total dividend for the year. It is the Board's intention
to pursue a sustainable and growing dividend policy in the future
having regard to the development of the Group.
Summary and Outlook
The Group has delivered a robust and resilient performance in
2020 against a backdrop of challenging market conditions due to
COVID-19. After a very strong first half of the financial year, the
Group took rapid and effective actions to mitigate the risks of the
pandemic. Whilst the backdrop has been uncertain, the Group's
strong financial position has enabled us to remain focussed on
maintainting our strategic momentum. The Group continued to invest
in its capabilities, systems and business infrastructure which,
despite a softening in operating margins over the near term,
ensures the Group remains well placed to capitalise on the
long-term regulatory and structural growth drivers which remain
intact.
Demand in the first quarter of the current year has been
consistent with the Q4 FY20 exit rate. The disruption associated
with further waves of infection means that visibility is limited
and there remains short-term uncertainty as to the shape and rate
of this recovery. Looking further ahead, we remain confident that
demand will recover to pre-crisis growth patterns.
Despite the uncertain backdrop, we see significant scope to
deliver on the Group's strategic priorities, such as further
product development and executing on our pipeline of potential
acquisition opportunities. We are very encouraged by the initial
progress already evident from our key strategic investment
initiatives. The market drivers are compelling, the medium-term
outlook for AB Dynamics remains positive and the Board is confident
the Group can continue to deliver on its strategic priorities.
Directors' Responsibility Statement on the Annual Report and
Accounts
The responsibility statement below has been prepared in
connection with the Group's full annual report and accounts for the
year ended 31 August 2020. Certain parts thereof are not included
within this announcement.
The Directors are responsible for preparing the Strategic
Report, Directors' Report, any other surrounding information and
the Group and Parent Company financial statements in accordance
with applicable law and regulations. Company law requires the
Directors to prepare group and parent company financial statements
for each financial year. Under that law, they have elected to
prepare the Group financial statements in accordance with
International Financial Reporting Standards (IFRS) as adopted by
the European Union (EU) and applicable law and have elected to
prepare the parent company financial statements in accordance with
UK Accounting Standards and applicable law (UK Generally Accepted
Accounting Practice).
Under Company law, the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and Parent Company and of
their profit or loss for that year. In preparing each of the Group
and Parent Company financial statements, the Directors are required
to:
-- Select suitable accounting policies and apply them consistently;
-- Make judgments and accounting estimates that are reasonable and prudent;
-- State whether applicable accounting standards have been
followed, subject to any material departures disclosed and
explained in the financial statements; and
-- Prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and the Parent
Company will continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the parent
company's transactions and disclose with reasonable accuracy at any
time the financial position of the parent company and enable them
to ensure that the financial statements comply with the Companies
Act 2006. They are also responsible for safeguarding the assets of
the parent company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
They are further responsible for ensuring that the Strategic
Report and the Report of the Directors and other information
included in the Annual Report and Financial Statements is prepared
in accordance with applicable law in the United Kingdom.
The maintenance and integrity of the AB Dynamics plc web site is
the responsibility of the Directors; the work carried out by the
auditors does not involve the consideration of these matters and,
accordingly, the auditors accept no responsibility for any changes
that may have occurred in the accounts since they were initially
presented on the website.
Legislation in the United Kingdom governing the preparation and
dissemination of the accounts and the other information included in
annual reports may differ from legislation in other
jurisdictions.
This responsibility statement was approved by the Board of
Directors on 25 November 2020 and has been signed on its behalf by
James Routh and Anthony Best.
AB Dynamics plc
Consolidated statement of comprehensive income
For the year ended 31 August 2020
2020 2019
Note GBP'000 GBP'000
Revenue 2 61,514 57,957
Cost of sales (25,592) (30,039)
---------- ----------
Gross profit 35,922 27,918
Administrative expenses (29,229) (16,505)
Share based payment costs (1,282) (586)
Operating Profit 5,411 10,827
Finance income 218 171
Finance expense (594) -
---------- ----------
Profit before tax 5,035 10,998
Tax expense (483) (2,340)
Profit for the year 4,552 8,658
---------- ----------
Other comprehensive income:
Items that may be reclassified to consolidated
income statement:
Exchange (losses) / gains on foreign currency
net investments (1,978) 178
Total comprehensive income for the period 2,574 8,836
---------- ----------
Earnings per share - basic (pence) 6 20.2p 42.9p
Earnings per share - diluted (pence) 6 20.1p 42.1p
Alternative performance measures
2020 2019
Note GBP'000 GBP'000
Operating profit 5,411 10,827
Amortisation of acquired intangibles 3,549 279
Inventory impairment 3,267 -
Acquisition related (credit) / charge (1,865) 1,272
Restructuring 969 550
Adjusted operating profit 11,331 12,928
Net finance (expenses) / income (376) 171
Adjusted profit before tax 10,955 13,099
---------- ----------
Adjusted tax charge (1,939) (2,524)
Adjusted profit after tax 9,016 10,575
---------- ----------
Adjusted earnings per share - basic (pence) 6 40.1p 52.4p
Adjusted earnings per share - diluted
(pence) 6 39.9p 51.4p
------------------------------------------------ ------- ---------- ----------
AB Dynamics plc
Consolidated statement of financial position
As at 31 August 2020
2020 2019
GBP'000 (restated)*
GBP'000
ASSETS
NON-CURRENT ASSETS
Goodwill 16,170 17,029
Acquired intangible assets 17,623 21,803
Intangible assets 1,114 268
Investment 12 14
Property, plant and equipment 24,309 17,922
Right-of-use assets 701 -
Deferred tax assets - 1,952
--------- -------------
59,929 58,988
CURRENT ASSETS
Inventories 9,180 11,149
Trade and other receivables 12,844 12,986
Contract assets 2,926 1,885
Taxation 2,838 939
Cash and cash equivalents 31,183 36,225
--------- -------------
58,971 63,184
TOTAL ASSETS 118,900 122,172
--------- -------------
LIABILITIES
CURRENT LIABILITIES
Borrowings 505 -
Trade and other payables 12,370 16,920
Short-term lease liabilities 473 -
13,348 16,920
NON-CURRENT LIABILITIES
Deferred tax liabilities 2,549 3,206
Long-term lease liabilities 249 -
Deferred consideration - 3,239
--------- -------------
2,798 6,445
NET ASSETS 102,754 98,807
--------- -------------
EQUITY
Share capital 226 222
Share premium 61,736 60,049
Reconstruction reserve (11,284) (11,284)
Merger relief reserve 11,390 11,390
Translation reserve (1,800) 178
Retained earnings 42,486 38,252
--------- -------------
TOTAL EQUITY 102,754 98,807
--------- -------------
*Restated following finalisation of provisional fair value
adjustments on the acquisition of DRI
AB Dynamics plc
Consolidated statement of changes in equity
For the year ended 31 August 2020
Share Share Merger Reconstruction Translation Retained Total
capital premium relief reserve reserve profits equity
reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 September
2018 195 10,258 11,390 (11,284) - 27,484 38,043
Share based
payment expense - - - - - 586 586
Profit after
taxation and
total comprehensive
income for the
financial year - - - - 178 8,658 8,836
Tax impact of
exercised share
options - - - - - 2,271 2,271
Dividend paid - - - - - (747) (747)
Issue of shares,
net of share
issue costs 27 49,791 - - - - 49,818
At 31 August
2019 222 60,049 11,390 (11,284) 178 38,252 98,807
--------- --------- --------- --------------- ------------ --------- --------
Share based
payment expense - - - - - 1,282 1,282
Profit after
taxation and
total comprehensive
income for the
financial year - - - - (1,978) 4,552 2,574
Tax impact of
exercised share
options - - - - - (974) (974)
Dividend paid - - - - - (626) (626)
Issue of shares,
net of share
issue costs 4 1,687 - - - - 1,691
At 31 August
2020 226 61,736 11,390 (11,284) (1,800) 42,486 102,754
--------- --------- --------- --------------- ------------ --------- --------
The share premium account is a non-distributable reserve
representing the difference between the nominal value of shares in
issue and the amounts subscribed for those shares.
The reconstruction reserve and merger relief reserve have arisen
as follows:
The acquisition by the Company of the entire issued share
capital of Anthony Best Dynamics Ltd in 2013 was accounted for as a
Group reconstruction. Consequently, the assets and liabilities of
the Group were recognised at their previous book values as if the
Company had always been the parent company of the Group.
The share capital for the period covered by these consolidated
financial statements and the comparative periods is stated at the
nominal value of the shares issued pursuant to the above share
arrangement. Any differences between the nominal value of these
shares and previously reported nominal values of shares and
applicable share premium issued by Anthony Best Dynamics Ltd were
transferred to the reconstruction reserve.
Retained profits represent the cumulative value of the profits
not distributed to shareholders but retained to finance the future
capital requirements of the Group.
AB Dynamics plc
Consolidated cash flow statement
For the year ended 31 August 2020
2020 2019
GBP'000 GBP'000
Cash flow from operating activities
Profit before tax 5,035 10,998
Adjustments for: -
Depreciation and amortisation 5,639 1,324
Interest income (188) (171)
Acquisition related (credit) / charge (2,548) 768
Share based payment 1,282 586
--------------- ---------
Operating cash flows, before working capital
changes 9,220 13,505
Decrease / (increase) in inventories 1,992 (3,447)
Increase in trade and other receivables (565) (1,667)
(Decrease) / increase in other payables (3,737) 1,554
--------------- ---------
Cash flow from operations 6,910 9,945
Interest received 218 171
Income tax paid (2,229) (1,350)
Net cash flow from operating activities 4,899 8,766
--------------- ---------
Cash flow used in investing activities
Acquisition of businesses (2,823) (32,792)
Purchase of property, plant and equipment (7,276) (4,706)
Capitalised development costs (886) (228)
Net cash flow used in investing activities (10,985) (37,726)
--------------- ---------
Cash flow from financing activities
Movement in loans 477 -
Dividends paid (626) (747)
Proceeds from issue of share capital, net of
share issue costs 1,691 49,818
Repayment of lease liabilities (592) -
Net cash flow generated from financing activities 950 49,071
--------------- ---------
Net (decrease) / increase in cash and cash
equivalents (5,136) 20,111
Cash and cash equivalents at beginning of period 36,225 15,942
Effect of exchange rates on cash and cash equivalents 94 172
Cash and cash equivalents at end of period 31,183 36,225
--------------- ---------
AB Dynamics plc
Notes to the consolidated financial statements
For the year ended 31 August 2020
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 and
manufacture of test equipment for vehicle suspension, steering,
noise and vibration. The company also offers a range of services
which include analysis, design, prototype manufacture, testing and
development.
The annual financial statements of the Group are prepared in
accordance with International Financial Reporting Standards as
adopted for use by the European Union. A copy of the statutory
accounts for the year ended 31 August 2019 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 as those which were applied in the
preparation of the Group's annual statements for the year ended 31
August 2019, with the exception of updating accounting policies to
reflect changes required by the adoption of IFRS 16 and to reflect
inclusion of the share based payment charge within adjusted
operating profit. This charge was previously reported as an
adjustment.
Certain new standards, amendments to standards and
interpretations are not yet effective for the year ended 31 August
2020 and have therefore not been applied in preparing the annual
financial statements.
Going concern basis of accounting
The Directors have assessed the principal risks discussed in
note 8, including by modelling a severe but plausible downside
scenario for COVID-19, whereby the Group experiences:
-- A reduction in demand of 25% over the next two financial years
-- 10% increase in operating costs from supply chain disruption
-- Increase in cash collection cycle
With GBP31.2m of cash at 31 August 2020, in this severe downside
scenario, the Group has sufficient headroom to be able to continue
to operate for the foreseeable future. The Directors believe that
the Group is well placed to manage its financing and other business
risks satisfactorily, and have a reasonable expectation that the
Group will have adequate resources to continue in operation for at
least 12 months from the signing date of this interim financial
information. They therefore consider it appropriate to adopt the
going concern basis of accounting in preparing the financial
statements.
2. Segment information
The Group derives revenue from the sale of its advanced
measurement, simulation and testing products derived in assisting
the global automotive industry in the laboratory and on the test
track. 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').
Analysis of revenue by country of destination:
2020 2019
GBP'000 GBP'000
United Kingdom 2,146 2,028
Rest of Europe 14,775 15,741
North America 15,606 9,499
Asia Pacific 27,788 28,949
Rest of the World 1,199 1,740
--------- -----------
61,514 57,957
--------- -----------
No customer individually represents 10% or more of total
revenue.
Assets and liabilities by segment are not reported to the Board
of Directors on a monthly basis, 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:
2020 2019
GBP'000 (R estated
)
GBP'000
United Kingdom 41,135 41,083
Rest of Europe 747 347
Asia Pacific 107 -
North America 17,940 17,558
--------- --------------
59,929 58,988
--------- --------------
Revenues are disaggregated as follows:
2020 2019
GBP'000 GBP'000
Revenue by sector
Track testing 51,760 49,796
Laboratory testing and simulation 9,754 8,161
--------- -----------
61,514 57,957
--------- -----------
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 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 report relate to underlying
business performance (as defined above) unless otherwise
stated.
2020 2019
GBP'000 GBP'000
Amortisation of acquired intangibles 3,549 279
Inventory impairment 3,267 -
Acquisition related (credit)
/ charge (1,865) 1,272
Restructuring 969 550
--------- -----------
5,920 2,101
-------------------------------------- --------- -----------
Amortisation of acquired intangibles
The amortisation relates to the businesses acquired in the
previous year, DRI and rFpro.
Inventory impairment
Following a detailed review of stock levels and usage, a number
of items previously included in the carrying value have been
written off and the system of accounting for inventory has been
updated to better reflect the Group's current operations.
Acquisition related (credit) / charge
The credit relates to the release of deferred consideration on
the rFpro acquisition which, due to COVID-19 disruption is unlikely
to become payable. This is offset by costs, mainly in relation to
staff retention payments to the employees of rFpro. The cash to pay
this was contributed by the previous owners of the business prior
to acquisition, but as the employees have to remain within the
business for a period prior to receiving payment, a charge has to
be recognised in the income statement.
Restructuring
The restructuring costs relate to rebalancing the skill base of
the business and termination of agents.
Tax
The tax impact of these adjustments was as follows: amortisation
of acquired intangibles GBP0.5m, inventory GBP0.6m, acquisition
GBP0.1m and restructuring GBP0.3m.
4. Tax
The statutory effective rate of tax for the year is lower than
(2019: higher than) the standard rate of corporation tax in the UK
of 19% (2019: 19%).
The adjusted effective tax rate, adjusting both the tax charge
and the profit before taxation is 17.7% (2019: 19.3%).
5. Dividend paid
2020 2019
GBP'000 GBP'000
Final 2018 dividend paid of GBP0.022
per share - 430
Interim 2019 dividend paid of
GBP0.016 per share - 317
Final 2019 dividend paid of GBP0.028 626 -
per share
626 747
-------------------------------------- --------- -----------
In respect of the year ended 31 August 2020, the Board has
proposed a final dividend of 4.4p per share totalling GBP993,000.
No interim dividend was paid in respect of 2020. If approved, the
final dividend will be paid on 22 January 2021 to shareholders on
the register on 8 January 2021.
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:
2020 2019
GBP'000 GBP'000
Profit after tax attributable
to owners of the Company 4,552 8,658
Adjusted profit after tax 9,016 10,575
Weighted average number of shares
('000)
Basic 22,482 20,201
Diluted 22,622 20,585
Earnings per share
Basic 20.2 pence 42.9 pence
Diluted 20.1 pence 42.1 pence
Adjusted basic 40.1 pence 52.4 pence
Adjusted diluted 39.9 pence 51.4 pence
7. Share capital
The allotted, called up and fully paid share capital is made up
of 22,576,553 ordinary shares of GBP0.01 each.
Note Number Share Share premium
of shares capital GBP'000 Total
000 GBP'000 GBP'000
At 1 September
2018 19,537 195 10,258 10,453
6 December 2018 (i) 143 1 564 565
-------- ----------- --------- -------------- ----------
7 June 2019 (ii) 2,277 23 48,195 48,218
-------- ----------- --------- -------------- ----------
22 July 2019 (iii) 263 3 1,032 1,035
-------- ----------- --------- -------------- ----------
At 31 August 2019 22,220 222 60,049 60,271
----------- --------- -------------- ----------
27 September 2019 (iv) 200 2 770 772
-------- ----------- --------- -------------- ----------
11 December 2019 (v) 32 - 142 142
-------- ----------- --------- -------------- ----------
3 March 2020 (vi) 64 1 256 257
-------- ----------- --------- -------------- ----------
4 May 2020 (vii) 33 - 410 410
-------- ----------- --------- -------------- ----------
2 June 2020 (viii) 16 - 64 64
-------- ----------- --------- -------------- ----------
19 August 2020 (ix) 11 1 45 46
-------- ----------- --------- -------------- ----------
At 31 August 2020 22,576 226 61,736 61,962
=========== ========= ============== ==========
(i) On 6 December 2018, a total of 142,702 share options were
exercised of GBP0.01 each for GBP3.95.
(ii) On 7 June 2019, a total of 2,050,000 new ordinary shares
were placed of GBP0.01 each for GBP22.00 and a total of 227,500 new
ordinary shares of GBP0.01 were admitted to trading on AIM
following the issue of Open Offer Shares.
(iii) On 22 July 2019, a total of 263,246 share options were
exercised of GBP0.01 each for GBP3.95.
(iv) On 27 September 2019, a total of 199,526 share options were
exercised of GBP0.01 each for GBP3.95.
(v) On 11 December 2019, a total of 31,970 share options were
exercised of GBP0.01 each for GBP3.95.
(vi) On 3 March 2020, a total of 58,086 share options were
exercised of GBP0.01 each for GBP3.95 and a total of 6,173 share
options were exercised of GBP0.01 each for GBP4.45.
(vii) On 4 May 2020, a total of 33,333 share options were
exercised of GBP0.01 each for GBP12.30.
(viii) On 2 June 2020, a total of 16,162 share options were
exercised of GBP0.01 each for GBP3.95.
(ix) On 19 August 2020, a total of 11,321 share options were
exercised of GBP0.01 each for GBP3.95.
8. Principal risks
The principal risks and uncertainties impacting the Group are
described on pages 43-47 of our Annual Report 2020.
They include: COVID-19, downturn or instability in major
markets, loss of major customers and change in customer procurement
processes, failure to deliver new products, dependence on external
routes to market, acquisitions integration and performance,
cybersecurity and business interruption, competitor actions, loss
of key personnel, threat of disruptive technology, product
liability, failure to manage growth, foreign currency, credit risk
and intellectual property/patents.
9. Related party transactions
Anthony Best, Chairman of the Company, is a trustee and
beneficiary of the Best Middleton Trust. Rental payments of
GBP48,000 (2019: GBP48,000) were made to the Trust in the year. No
amounts were due to or from the trust at the end of the period
(2019: GBPnil).
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END
FR PPGRCGUPUGMC
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November 25, 2020 02:00 ET (07:00 GMT)
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