TIDMABDP

RNS Number : 7863W

AB Dynamics PLC

28 April 2021

28 April 2021

AB Dynamics plc

Unaudited interim Results for the six months ended 28 February 2021

"Stable performance with positive trading momentum"

AB Dynamics plc (AIM: ABDP, "ABD", "the Group"), the designer, manufacturer and supplier of advanced testing systems and measurement products to the global automotive market, is pleased to announce its interim results for the six-month period to 28 February 2021 (the "period").

 
                                 H1 2021   H2 2020   H1 2020 
                                   GBPm      GBPm      GBPm 
 Revenue                          27.3      26.8      34.7 
 Gross margin                     57.7%     58.3%     58.5% 
 Adjusted operating profit(1)      3.5       3.3       8.0 
 Adjusted operating margin(1)     12.8%     12.2%     23.2% 
 Statutory operating profit        1.4       1.8       3.6 
 Cash flow from operations         7.8       3.7       3.3 
 Net cash                         33.1      30.0      34.2 
------------------------------  --------  --------  -------- 
                                  Pence     Pence     Pence 
 Adjusted diluted earnings 
  per share(1)                    13.1      10.7      29.2 
 Statutory diluted earnings 
  per share                        5.6       7.2     12.9(2) 
 Interim dividend per share        1.6        -         - 
 Final dividend per share           -        4.4        - 
------------------------------  --------  --------  -------- 
 

(1) Before amortisation on acquired intangibles, acquisition related charges, and exceptional items. A reconciliation to statutory measures is given in the Financial Review. Comparatives for H1 2020 have been restated to reflect the inclusion of share-based payments which were previously reported as an adjustment.

(2) The prior year comparative has been restated to reflect a change in the statutory tax charge following the finalisation of provisional fair value adjustments on the acquisition of Dynamic Research Inc ('DRI') included in the Annual Report for the year ended 31 August 2020.

Financial performance

-- Improved order intake against H2 2020 across both divisions with a positive book to bill ratio providing confidence in delivery of H2 revenue expectations, a significant proportion of which is covered by the current order book

-- As anticipated, revenue was broadly comparable to H2 2020 with COVID-19 impact continuing into H1 2021

-- Track testing revenue was 29% lower than H1 2020 and 6% lower than H2 2020, due to ongoing COVID-19 disruption to customer testing activity, although driving robot sales started to recover during the period

-- Laboratory testing and simulation delivered revenue growth of 23% on H1 2020 and 38% on H2 2020 driven by strong order intake following the deferments last year

-- Operating margins of 12.8% were consistent with H2 2020, reflecting reduced levels of activity and continued strategic investment in capability to support long-term growth drivers (H1 2020: 23.2%, H2 2020: 12.2%)

-- Strong cash flow from operations of GBP7.8m. Significant net cash balance of GBP33.1m at the period end (29 February 2020: GBP34.2m, 31 August 2020: GBP30.0m) after investing GBP4.6m in capital expenditure in the period, providing scope to support the Group's strategic growth objectives. During H2 2021, EUR20m of this cash was used to fund the acquisition of Vadotech Group

   --      Interim dividend of 1.6p per share (H1 2020: nil) 

Operational and strategic performance

-- Customer activity slowly returning as testing operations remain restricted with COVID-19 impact continuing into H1 2021

-- Continued progress in growing the proportion of recurring and service-based sales, which will be further enhanced by the strengthening of our APAC regional footprint

-- New product development continues as planned with successful launches including high speed ADAS platforms and a next generation simulator

-- Continued investment for growth with the completion of the new Engineering Design Centre and the ongoing build of the senior management team

-- Since the period end, Vadotech Group has been acquired, demonstrating further progress against the Group's strategic priorities. The acquisition expanded our capability into on-road testing services and established a regional hub in the strategically important APAC region

Current trading and outlook

-- As anticipated, performance in the first half of the year was broadly comparable to the second half of FY20, with continued impacts of the COVID-19 pandemic

   --      The order intake trend provides confidence for continued positive momentum into H2 
   --      The Board's expectations for the financial year are unchanged 

-- Future growth prospects remain supported by long term structural and regulatory growth drivers in active safety and autonomous systems

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 another resilient performance in the first half of the year against a backdrop of market conditions that continue to be challenging.

We have seen an encouraging rebuild of demand in our key markets from the severe disruption experienced in the second half of FY20. The Board's expectations for the financial year are unchanged, despite the continued disruption associated with further waves of infection which means that visibility remains limited and there remains short-term uncertainty as to the shape and rate of the recovery. This, together with the risk of currency headwinds and Brexit-related logistics disruption, means that we remain cautious in the near term. However, our improved order intake provides positive trading momentum into H2. Looking further ahead, we remain confident that demand will recover over the longer term and that the actions we have taken in the last 12 months position the Group very strongly to capitalise on this.

Despite the uncertain backdrop, we see significant scope for continued progress against the Group's strategy, as demonstrated by the acquisition of the Vadotech Group in March 2021 and the related growth opportunities. The market drivers are compelling and the medium-term outlook for AB Dynamics continues to be positive. The Board remains confident the Group can continue to deliver on its strategic priorities."

Enquiries:

 
 AB Dynamics plc                            01225 860 200 
 Dr James Routh, Chief Executive Officer 
 Sarah Matthews-DeMers, Chief Financial 
  Officer 
 
 
 Peel Hunt LLP                              0207 894 7000 
 Mike Bell 
  Ed Allsopp 
 
 Tulchan Communications                     0207 353 4200 
 James Macey White 
 Matt Low 
 Laura Marshall 
 

The person responsible for arranging the release of this information is Felicity Jackson, Company Secretary.

Half Year Review

Group overview

Against a backdrop of macroeconomic conditions that remain challenging, the Group has delivered another resilient performance, whilst also continuing to invest to ensure AB Dynamics can capitalise on the significant long-term structural and regulatory growth drivers within its markets.

The Group has seen gradual recovery in order intake through the first half of the year, with customer activity returning slowly, as testing operations are still impacted by COVID-19 restrictions, and likely to remain so in the short term. Pleasingly, several capital equipment orders which were deferred in the prior year have now been received, including an order for an advanced variant of our simulator for a major automotive OEM.

Our continued investments have strengthened our market position to enable the business to emerge strongly as markets recover. New product development has continued as planned with new launches including high speed ADAS (Advanced Driver Assistance Systems) platforms and the next generation simulator. The completion of the new Engineering Design Centre and continued build of the senior management team strengthen our capability and capacity.

Financial performance

Against a very strong prior year comparative period (delivered prior to the COVID-19 pandemic) in which revenues increased by 34%, the results for the first half of FY21 are significantly lower. Revenue of GBP27.3m was down 21% (H1 2020: GBP34.7m).

However, as the COVID-19 pandemic did not impact the first half of last year, a more relevant comparative is against the second half of the last financial year. Against H2 2020, current period revenue was up 2% (H2 2020: GBP26.8m).

Gross margins reduced by 80 bps to 57.7% (H1 2020: 58.5%, H2 2020 58.3%), impacted by a higher proportion of large capital equipment revenues in laboratory testing and simulation, which are lower margin than the Group's other products and services.

Group adjusted operating profit of GBP3.5m decreased 57% against H1 2020, but increased 6% against H2 2020. The adjusted operating margin decreased against H1 2020 to 12.8% (H1 2020: 23.2%), being significantly impacted by the decrease in sales volumes, 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. It was up 60 bps against the second half of last year (H2 2020: 12.2%) with similar levels of activity.

Net finance costs were GBPnil (H1 2020: net income GBP0.1m).

Adjusted profit before tax was GBP3.5m (H1 2020: GBP8.1m). The Group adjusted tax charge totalled GBP0.5m (H1 2020: GBP1.5m), an adjusted effective tax rate of 15% (H1 2020: 19%).

Adjusted diluted earnings per share was 13.1p (H1 2020: 29.2p), a decrease of 55%, reflecting the decrease in operating profit.

Statutory operating profit reduced by 62% to GBP1.4m and after net finance costs of GBPnil (H1 2020: net finance income GBP0.1m), statutory profit before tax was down 63% from GBP3.7m to GBP1.4m, giving statutory basic diluted earnings per share of 5.6p (H1 2020: 12.9p). The statutory tax charge was GBP0.1m (H1 2020: GBP0.7m). A reconciliation of statutory to underlying non-GAAP financial measures is provided below. The adjustments of GBP2.1m comprise GBP1.7m of amortisation of acquired intangibles and GBP0.4m of acquisition costs (H1 2020: GBP4.4m comprising GBP1.8m of amortisation of acquired intangibles, GBP0.6m acquisition costs, GBP0.1m restructuring costs and GBP1.9m inventory impairment).

The Group delivered strong operating cash flow of GBP7.8m with the net cash position at the period end of GBP33.1m underpinning a robust balance sheet and providing the resources to acquire the Vadotech Group after the period end for EUR20.0m initial consideration and first performance payment from existing cash balances.

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. The Group 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 has not seen any significant adverse impacts on its supply chain or manufacturing facilities, but many larger, capital equipment orders were initially deferred by our customers. More significant however was the widespread curtailment of and significant disruption to both motor sport and the vehicle track testing activities of our customers during the second half of the previous financial year. This directly and severely impacted demand for our testing services and products. Whilst activity in these areas remains below pre-COVID 19 levels in many instances, we are seeing evidence of a gradual and sustained recovery. Order intake has started to improve during the last three quarters and several of the anticipated larger capital equipment orders have now been received, giving improved order coverage for the second half of the year.

Throughout the periods of lockdown, the Group has been able to maintain key manufacturing and track testing operations, whilst approximately 70% of our global workforce worked remotely. This balance has proved to be effective, and we have been able to continue delivering for our customers whilst maintaining our investment activities, particularly in product development. The restrictions on travel are curtailing certain installation, commissioning and training activities from taking place, however our recently added international sales and support offices have been 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 remain variable and we expect this uncertainty to continue through at least the remainder of the financial year, particularly in relation to larger, capital equipment orders.

However, we are confident that the long-term structural and regulatory drivers that underpin our markets remain firmly intact. The Group is therefore continuing to invest, demonstrated by the recent acquisition of Vadotech Group, as well as further investment in new product development and business infrastructure, all of which the Board believes are critical to delivering its long-term growth and strategic development objectives.

Sector review

Track testing

Track testing revenue of GBP20.9m was down 29% against H1 2020 (GBP29.5m) and down 6% against H2 2020 (GBP22.2m).

Driving robot sales started to recover in the first half of the year to GBP9.1m (H1 2020: GBP13.7m, H2 2020 GBP7.3m), having fallen significantly in the second half of last year. Compared with pre-pandemic levels, the Group expects sales revenues in this sector to remain constrained in the short term, before growing again once new regulatory requirements for new ADAS technologies are released and customer track testing operations can resume at full capacity.

Demand for ADAS platforms was resilient during the second half of last year but reduced to GBP9.6m in H1 2021 (H1 2020: GBP12.7m, H2 2020: GBP11.4m). Demand for these products, particularly the Launchpad, is expected to continue to build as new test protocols are released from regulatory 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. We have recently launched higher speed versions of the GST and Launchpad, which can operate at speeds of up to 120kph and 60kph respectively, enabling customers to perform a greater range of tests, particularly the assessment of automated lane keeping technology.

The track testing services provided to the US market by DRI enable customers to evaluate the performance of ADAS systems, autonomous vehicles and vehicle dynamics through its extensive test facility. DRI's track testing revenue of GBP2.2m fell by GBP0.9m in the first half of the year, which is usually their quieter period, as government related contracts were delayed due to the change of administration and customers' ability to attend the track was curtailed (H1 2020: GBP3.1m, H2 2020: GBP3.5m).

Order intake for track testing products has continued to improve, giving confidence for the continued recovery into the second half of the year.

The Group continues to invest in new product development in this sector with further new product launches planned for H2.

Laboratory testing and simulation

The laboratory testing and simulation sector delivered strong revenue growth against both comparator periods; at GBP6.3m it increased 23% on H1 2020 and 38% on H2 2020 (H1 2020: GBP5.2m, H2 2020: GBP4.6m).

Simulation sales grew significantly, with the receipt of one of the deferred simulator orders early in the first half and growth from the return of motorsport series. Simulation revenue of GBP4.3m grew 39% compared with GBP3.1m in H1 2020 (H2 2020: GBP1.6m).

Following the receipt of another deferred order, SPMM revenue of GBP2.0m was broadly similar to H1 2020 (H1 2020: GBP2.1m, H2 2020: GBP3.0m) with further opportunities in the pipeline.

The Group has made solid progress during the period in laboratory testing and simulation, with a number of orders received for large systems and further opportunities in the pipeline, although timing still remains uncertain. The current order coverage for SPMM and simulators provides good confidence for delivery of expectations for the remainder of the financial year.

The Group's new Engineering Design Centre now houses a simulation research and development facility to accelerate the development of new simulator technologies, including the next generation full motion simulator.

Progress on our strategy

We are pleased with the ongoing progress made against the five-point strategy announced in April 2019.

Investment in product development has been ongoing, with the market launch of the GST 120 and Launchpad 60 and the continued development of the wider ADAS platform family, completion of the aNVH 250 and further expansion of our simulator product family and simulation capability. 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 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 completed the 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.

Since the period end, the acquisition of Vadotech Group has been completed, expanding our capability into on-road testing services and establishing our regional hub in the strategically important APAC region and the acquisition pipeline remains promising.

Acquisitions

Vadotech Group was acquired after the period end, on 3 March 2021, for total potential cash consideration of up to EUR26.0m. Vadotech is a leading supplier of testing services in the Asia Pacific region, headquartered in Singapore with key operations in China, Germany and Japan. It provides comprehensive automotive testing services including evaluations of ADAS systems, infotainment, connectivity, electric vehicle performance and charging and other associated functions. The business has long-standing relationships with German automotive OEMs, providing vehicle testing services to local operations, underpinned by long-term customer framework agreements.

The acquisition supports a number of the Group's stated strategic priorities including:

-- Expanding the Company's international footprint by providing a sales and technical facility in the strategically important Chinese market;

-- Establishing a new Asia Pacific divisional operating hub in Singapore to manage the territory, drive additional cross selling of Group products in the region and identify and deliver further strategically important growth initiatives;

-- Further increasing the Group's visibility of future revenue as Vadotech Group sales are supported by long-term customer framework agreements;

-- Increasing the range of services provided by the Group to include full vehicle assessments including quality assurance testing and support to new vehicle R&D programmes;

   --      Establishing an electric vehicle and e-mobility technology training centre in Germany; and 

-- Opportunity to replicate the Vadotech Group business model in other territories such as Europe and the USA

The acquisition was completed on a cash free, debt free basis for an initial cash consideration of EUR17.0m, funded from the Company's existing cash resources. A further cash payment of EUR3.0m has become payable based on performance for the year ended 31 December 2020, with a further conditional cash payment of EUR6.0m being subject to certain performance criteria being achieved for the year ending 31 December 2021.

The acquisition provides a significantly larger physical presence for AB Dynamics in Asia Pacific and the Group will invest approximately GBP1.0m in ongoing operational costs to establish a strong regional hub for the wider business.

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 and adjusted earnings per share.

The interim report includes both statutory and adjusted non-GAAP financial measures, the latter of which the Directors believe better reflect the underlying performance of the business and provides a more meaningful comparison of how the business is managed and measured on a day-to-day basis. The Group's alternative performance measures and KPIs are aligned to the Group's strategy and together are used to measure the performance of the business and form the basis of the performance measures for remuneration. Adjusted results exclude certain items because if included, these items could distort the understanding of the performance for the year and the comparability between the periods.

We provide comparatives alongside all current year figures. The term 'adjusted' is not defined under IFRS and may not be comparable with similarly titled measures used by other companies. All profit and earnings per share figures in this interim report relate to underlying business performance (as defined above) unless otherwise stated.

A reconciliation of adjusted measures to statutory measures is provided below:

 
                                                    H1 2021                              H1 2020 
                                       Adjusted   Adjustments   Statutory   Adjusted   Adjustments   Statutory 
 
 Operating profit (GBPm)                    3.5         (2.1)         1.4        8.0         (4.4)         3.6 
 Operating margin (%)                      12.8         (7.8)         5.0       23.2        (12.9)        10.3 
 Profit before tax (GBPm)                   3.5         (2.1)         1.4        8.1         (4.4)         3.7 
 Tax expense (GBPm)                       (0.5)           0.4       (0.1)      (1.5)           0.7       (0.8) 
 Profit after tax (GBPm)                    3.0         (1.7)         1.3        6.6         (3.7)         2.9 
 Diluted earnings per share (pence)        13.1         (7.5)         5.6       29.2        (16.3)        12.9 
 

The adjustments to operating profit comprise:

 
                                         H1 2021   H1 2020 
                                            GBPm      GBPm 
 Amortisation of acquired intangibles        1.7       1.8 
 Acquisition related costs                   0.4       0.6 
 Inventory impairment                          -       1.9 
 Restructuring                                 -       0.1 
--------------------------------------  --------  -------- 
 Adjustments                                 2.1       4.4 
--------------------------------------  --------  -------- 
 

See note 3 for further details.

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 GBP0.6m (H1 2020: GBP0.2m) 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 GBP0.2m (H1 2020: GBP0.4m).

Foreign currency exposure

The Group faces currency exposure on its foreign currency transactions and with significant overseas operations, also has exposure to foreign currency translation risk.

The Group maintains a natural hedge whenever possible to transactional exposure by matching the cash inflows and outflows in the respective currencies.

There was no material difference between the reported profit for the year and that calculated on a constant currency basis as the impact of the weakening US dollar was offset by the strengthening Euro.

Dividends

The Board has declared an interim dividend of 1.6p per ordinary share which will be paid on 14 May 2021 to shareholders on the register on 30 April 2021. In 2020, against a background of significant macroeconomic uncertainty, the Board suspended the interim dividend pending the conclusion of the financial year. A final dividend of 4.4p per share was paid in respect of the year ended 31 August 2020. 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 another resilient performance in the first half of the year against a backdrop of market conditions that continue to be challenging. We have seen an encouraging rebuild of demand in our key markets from the severe disruption experienced in the second half of FY20. The Board's expectations for the financial year are unchanged, despite the continued disruption associated with further waves of infection which means that visibility remains limited and there remains short-term uncertainty as to the shape and rate of the recovery. This, together with the risk of currency headwinds and Brexit-related logistics disruption, means that we remain cautious in the near term. However, our improved order intake provides positive trading momentum into H2. Looking further ahead, we remain confident that demand will recover over the longer term and that the actions we have taken in the last 12 months position the Group very strongly to capitalise on this.

Despite the uncertain backdrop, we see significant scope for continued progress against the Group's strategy, as demonstrated by the acquisition of the Vadotech Group in March 2021 and the related growth opportunities. The market drivers are compelling and the medium-term outlook for AB Dynamics remains positive. The Board is confident the Group can continue to deliver on its strategic priorities.

Directors' Responsibility Statement

The Directors confirm that this condensed consolidated half year financial information has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting' as adopted by the European Union, and that the half year management report herein includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:

-- an indication of important events that have occurred during the first six months and their impact on the condensed consolidated half year financial information, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

-- material related party transactions in the first six months and any material changes in the related party transactions described in the last annual report.

By order of the Board

Dr James Routh

Chief Executive

28 April 2021

AB Dynamics plc

Unaudited consolidated statement of comprehensive income

for the six months ended 28 February 2021

 
                                                Unaudited      Unaudited    Audited 
                                                 6 months       6 months      Year 
                                                 ended 28       ended 29      ended 
                                                 February       February    31 August 
                                                     2021           2020      2020 
                                                             (Restated)* 
                                                  GBP'000        GBP'000     GBP'000 
                                        Notes 
 
 Revenue                                  2        27,280         34,672       61,514 
 Cost of sales                                   (11,552)       (14,401)     (25,592) 
                                               ----------  -------------  ----------- 
 Gross profit                                      15,728         20,271       35,922 
 General and administrative 
  expenses                                       (14,372)       (16,708)     (30,511) 
                                               ----------  -------------  ----------- 
 Operating profit                                   1,356          3,563        5,411 
 Finance income                                        21            114          218 
 Finance expense                                     (18)           (15)         (30) 
 Other finance expense                                  -              -        (564) 
                                               ----------  -------------  ----------- 
 Profit before tax                                  1,359          3,662        5,035 
 Tax expense                                         (87)          (749)        (483) 
                                               ----------  -------------  ----------- 
 Profit for the period                              1,272          2,913        4,552 
                                               ----------  -------------  ----------- 
 Other comprehensive expense: 
 Items that may be reclassified to consolidated income 
  statement: 
 Exchange losses on foreign 
  currency net investments                          (948)          (755)      (1,978) 
                                               ----------  -------------  ----------- 
 Total comprehensive income 
  for the period                                      324          2,158        2,574 
                                               ----------  -------------  ----------- 
 
 Earnings per share - basic 
  (pence)                                 5          5.6p          13.0p        20.2p 
 Earnings per share - diluted 
  (pence)                                 5          5.6p          12.9p        20.1p 
                                               ----------  -------------  ----------- 
 
 
 
 Alternative performance measures 
 Operating profit                                   1,356          3,563        5,411 
 Amortisation of acquired 
  intangibles                                       1,678          1,844        3,549 
 Inventory impairment                                   -          1,865        3,267 
 Acquisition related charge/(credit)                  463            588      (1,865) 
 Restructuring                                          -            186          969 
                                               ----------  -------------  ----------- 
 Adjusted operating profit                          3,497          8,046       11,331 
 Net finance income/(expense)                           3             99        (376) 
                                               ----------  -------------  ----------- 
 Adjusted profit before tax                         3,500          8,145       10,955 
 Adjusted tax                                       (515)        (1,520)      (1,939) 
                                               ----------  -------------  ----------- 
 Adjusted profit after tax                          2,985          6,625        9,016 
                                               ----------  -------------  ----------- 
 
 Adjusted earnings per share 
  - basic (pence)                         5         13.2p          29.6p        40.1p 
 Adjusted earnings per share 
  - diluted (pence)                       5         13.1p          29.2p        39.9p 
                                               ----------  -------------  ----------- 
 

*Restated following finalisation of provisional fair value adjustments to deferred tax and goodwill on the acquisition of DRI detailed in the Annual Report for the year ended 31 August 2020.

AB Dynamics plc

Unaudited consolidated statement of financial position

as at 28 February 2021

 
                                     Unaudited      Unaudited      Audited 
                                   28 February    29 February    31 August 
                                          2021           2020         2020 
                                                  (Restated)* 
                                       GBP'000        GBP'000      GBP'000 
 ASSETS 
 Non-current assets 
 Goodwill                               15,821         16,542       16,170 
 Acquired intangible assets             15,719         19,574       17,623 
 Other intangible assets                 2,389            423        1,114 
 Investment                                 12             13           12 
 Property, plant and equipment          26,845         20,637       24,309 
 Right-of-use assets                       466            917          701 
 Deferred tax assets                         -            390            - 
                                 -------------  -------------  ----------- 
                                        61,252         58,496       59,929 
                                 -------------  -------------  ----------- 
 
 Current assets 
 Inventories                             9,090         10,560        9,180 
 Trade and other receivables            14,466         16,289       12,844 
 Contract assets                         1,613          2,002        2,926 
 Taxation                                  868          2,428        2,838 
 Fixed term deposits                         -         15,000        5,000 
 Cash and cash equivalents              34,084         20,139       26,183 
                                 -------------  -------------  ----------- 
                                        60,121         66,418       58,971 
                                 -------------  -------------  ----------- 
 
 LIABILITIES 
 Current liabilities 
 Borrowings                                485              -          505 
 Trade and other payables               14,857         17,530       12,370 
 Short-term lease liabilities              246            426          473 
                                 -------------  -------------  ----------- 
                                        15,588         17,956       13,348 
                                 -------------  -------------  ----------- 
 
 Non-current liabilities 
 Deferred tax liabilities                2,927          3,189        2,549 
 Long-term lease liabilities               237            496          249 
 Deferred consideration                      -          3,239            - 
                                 -------------  -------------  ----------- 
                                         3,164          6,924        2,798 
                                 -------------  -------------  ----------- 
 Net assets                            102,621        100,034      102,754 
                                 -------------  -------------  ----------- 
 
 Shareholders' equity 
 Share capital                             230            225          226 
 Share premium                          61,785         60,857       61,736 
 Reconstruction reserve               (11,284)       (11,284)     (11,284) 
 Merger relief reserve                  11,390         11,390       11,390 
 Translation reserve                   (2,748)          (577)      (1,800) 
 Retained earnings                      43,248         39,423       42,486 
                                 -------------  -------------  ----------- 
 Total equity                          102,621        100,034      102,754 
                                 -------------  -------------  ----------- 
 

*Restated following finalisation of provisional fair value adjustments to deferred tax and goodwill on the acquisition of DRI detailed in the Annual Report for the year ended 31 August 2020.

AB Dynamics plc

Unaudited consolidated statement of changes in equity

for the six months ended 28 February 2021

 
                           Share      Share     Merger   Recon-struction   Translation    Retained      Total 
                         capital    premium     relief           reserve       reserve    earnings     equity 
                                               reserve 
                         GBP'000    GBP'000    GBP'000           GBP'000       GBP'000     GBP'000    GBP'000 
 At 1 September 
  2020                       226     61,736     11,390          (11,284)       (1,800)      42,486    102,754 
 Share based 
  payments                     -          -          -                 -             -         570        570 
 Total comprehensive 
  income                       -          -          -                 -         (948)       1,272        324 
 Deferred tax 
  on share based 
  payments                     -          -          -                 -             -        (86)       (86) 
 Dividend paid                 -          -          -                 -             -       (994)      (994) 
 Issue of shares               4         49          -                 -             -           -         53 
                       ---------  ---------  ---------  ----------------  ------------  ----------  --------- 
 At 28 February 
  2021                       230     61,785     11,390          (11,284)       (2,748)      43,248    102,621 
                       ---------  ---------  ---------  ----------------  ------------  ----------  --------- 
 
 At 1 September 
  2019                       222     60,049     11,390          (11,284)           178      38,252     98,807 
 Share based 
  payments                     -          -          -                 -             -         540        540 
 Total comprehensive 
  income*                      -          -          -                 -         (755)       2,913      2,158 
 Deferred tax 
  on share based 
  payments                     -          -          -                 -             -     (1,656)    (1,656) 
 Dividend paid                 -          -          -                 -             -       (626)      (626) 
 Issue of shares               3        808          -                 -             -           -        811 
                       ---------  ---------  ---------  ----------------  ------------  ----------  --------- 
 At 29 February 
  2020*                      225     60,857     11,390          (11,284)         (577)      39,423    100,034 
                       ---------  ---------  ---------  ----------------  ------------  ----------  --------- 
 
 At 1 September 
  2019                       222     60,049     11,390          (11,284)           178      38,252     98,807 
 Share based 
  payments                     -          -          -                 -             -       1,282      1,282 
 Total comprehensive 
  income                       -          -          -                 -       (1,978)       4,552      2,574 
 Deferred tax 
  on share based 
  payments                     -          -          -                 -             -       (974)      (974) 
 Dividend paid                 -          -          -                 -             -       (626)      (626) 
 Issue of shares               4      1,687          -                 -             -           -      1,691 
                       ---------  ---------  ---------  ----------------  ------------  ----------  --------- 
 At 31 August 
  2020                       226     61,736     11,390          (11,284)       (1,800)      42,486    102,754 
                       ---------  ---------  ---------  ----------------  ------------  ----------  --------- 
 

*Restated following finalisation of provisional fair value adjustments to deferred tax and goodwill on the acquisition of DRI detailed in the Annual Report for the year ended 31 August 2020.

.

AB Dynamics plc

Unaudited consolidated cash flow statement

for the six months ended 28 February 2021

 
                                                Unaudited      Unaudited        Audited 
                                                                                   Year 
                                                 6 months       6 months          ended 
                                                    ended          ended      31 August 
                                              28 February    29 February           2020 
                                                     2021           2020    (Restated)* 
                                                             (Restated)* 
                                                  GBP'000        GBP'000        GBP'000 
 
 Profit before tax                                  1,359          3,662          5,035 
 Depreciation and amortisation                      2,779          2,824          5,639 
 Net finance income                                   (3)           (99)          (188) 
 Acquisition costs/(credit)                             -             39        (2,548) 
 Share based payments                                 570            540          1,282 
                                           --------------  -------------  ------------- 
 Operating cash flows before changes 
  in working capital                                4,705          6,966          9,220 
 Decrease in inventories                               90            602          1,992 
 Increase in trade and other receivables            (298)        (3,264)          (565) 
 Increase/(decrease) in trade and 
  other payables                                    3,285        (1,049)        (3,737) 
                                           --------------  -------------  ------------- 
 Cash flows from operations                         7,782          3,255          6,910 
 Interest received                                     21            114            218 
 Finance costs paid                                 (113)              -              - 
 Income tax received/(paid)                         1,570        (2,114)        (2,229) 
                                           --------------  -------------  ------------- 
 Net cash flows from operating 
  activities                                        9,260          1,255          4,899 
 Cash flows used in investing activities 
 Acquisition of businesses                          (560)              -        (2,823) 
 Purchase of property, plant and 
  equipment                                       (3,363)        (1,977)        (7,276) 
 Capitalised development costs                    (1,258)          (168)          (886) 
                                           --------------  -------------  ------------- 
 Net cash used in investing activities            (5,181)        (2,145)       (10,985) 
 Cash flows from financing activities 
 Movements in loans                                  (20)              -            477 
 Purchase of fixed term deposits                        -       (15,000)       (20,000) 
 Maturity of fixed term deposits                    5,000              -         15,000 
 Dividends paid                                     (994)          (626)          (626) 
 Proceeds from issue of share capital                  53            811          1,691 
 Repayment of lease liabilities                     (249)          (276)          (592) 
                                           --------------  -------------  ------------- 
 Net cash flow generated from/(used 
  in) financing activities                          3,790       (15,091)        (4,050) 
                                           --------------  -------------  ------------- 
 Net increase/(decrease) in cash 
  and cash equivalents                              7,869       (15,981)       (10,136) 
 Cash and cash equivalents at beginning 
  of period                                        26,183         36,225         36,225 
 Effect of exchange rates on cash 
  and cash equivalents                                 32          (105)             94 
                                           --------------  -------------  ------------- 
 Cash and cash equivalents at end 
  of period                                        34,084         20,139         26,183 
                                           --------------  -------------  ------------- 
 

*Restated following reclassification of fixed term deposits with a maturity date of greater than three months at inception.

AB Dynamics plc

Notes to the unaudited interim report

for the six months ended 28 February 2021

   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 interim financial information has been prepared in accordance with IAS 34, 'Interim Financial Reporting' as adopted by the EU.

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 2020 has been delivered to the Registrar of Companies. The auditor's report on those accounts was unqualified and did not contain any statements under section 498(2) or (3) of the Companies Act 2006.

The same accounting policies, presentation and methods of computation have been followed in this unaudited interim financial information as those which were applied in the preparation of the Group's annual financial statements for the year ended 31 August 2020.

Certain new standards, amendments to standards and interpretations are not yet effective for the year ended 31 August 2021 and have therefore not been applied in preparing this interim financial information.

The interim accounts are unaudited and do not constitute statutory accounts as defined in Section 434 of the Companies Act 2006.

Going concern basis of accounting

The Directors have assessed the principal risks discussed in note 8, including by modelling a severe but plausible downside scenario for COVID-19, whereby the Group experiences:

   --      A reduction in demand of 25% 
   --      10% increase in operating costs from supply chain disruption 
   --      Increase in cash collection cycle 

With GBP33.1m of net cash at 28 February 2021 and availability of a revolving credit facility of GBP15.0m, in this severe downside scenario, the Group has sufficient headroom to be able to continue to operate for the foreseeable future. The Directors believe that the Group is well placed to manage its financing and other business risks satisfactorily, and have a reasonable expectation that the Group will have adequate resources to continue in operation for at least 12 months from the signing date of this interim financial information. They therefore consider it appropriate to adopt the going concern basis of accounting in preparing the interim financial information.

The interim financial information for the six months ended 28 February 2021 was approved by the Board on 28 April 2021.

   2.         Segment information 

Revenues attributable to individual foreign countries are as follows:

 
 
                                          Unaudited       Unaudited         Audited 
                                           6 months        6 months            Year 
                                              ended           ended           ended 
                                        28 February     29 February       31 August 
                                               2021            2020            2020 
                                            GBP'000         GBP'000         GBP'000 
 
 
 United Kingdom                               3,191           1,145           2,146 
 European Union                               4,763           9,097          14,775 
 North America                                8,963           7,432          15,606 
 Rest of the World                           10,363          16,998          28,987 
                                     --------------  --------------  -------------- 
                                             27,280          34,672          61,514 
                                     --------------  --------------  -------------- 
 
 Revenues are disaggregated as 
  follows: 
 Track testing                               20,937          29,517          51,760 
 Laboratory testing and simulation            6,343           5,155           9,754 
                                     --------------  --------------  -------------- 
                                             27,280          34,672          61,514 
                                     --------------  --------------  -------------- 
 
 
 
 
 
 
 
 
   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 and adjusted earnings per share.

The interim financial information includes both statutory and adjusted non-GAAP financial measures, the latter of which the Directors believe better reflect the underlying performance of the business and provide a more meaningful comparison of how the business is managed and measured on a day-to-day basis. The Group's alternative performance measures and KPIs are aligned to the Group's strategy and together are used to measure the performance of the business and form the basis of the performance measures for remuneration. Adjusted results exclude certain items because if included, these items could distort the understanding of the performance for the year and the comparability between the periods.

We provide comparatives alongside all current year figures. The term 'adjusted' is not defined under IFRS and may not be comparable with similarly titled measures used by other companies. All profit and earnings per share figures in this interim report relate to underlying business performance (as defined above) unless otherwise stated.

A summary of the items which reconcile statutory to adjusted measures is included below:

 
 
                                             Unaudited       Unaudited         Audited 
                                              6 months        6 months            Year 
                                                 ended           ended           ended 
                                           28 February     29 February       31 August 
                                                  2021            2020            2020 
                                               GBP'000         GBP'000         GBP'000 
 
 Amortisation of acquired intangibles            1,678           1,844           3,549 
 Acquisition related charge/(credit)               463             588         (1,865) 
 Inventory impairment                                -           1,865           3,267 
 Restructuring                                       -             186             969 
                                        --------------  --------------  -------------- 
                                                 2,141           4,483           5,920 
                                        --------------  --------------  -------------- 
 

Amortisation of acquired intangibles

The amortisation relates to the businesses acquired in 2019, DRI and rFpro.

Acquisition related costs

The costs relate to the acquisition of the Vadotech Group after the period end as well as staff retention payments to the employees of rFpro. The cash to pay this was contributed by the previous owner of rFpro prior to acquisition, but as the employees had to remain within the business for a period prior to receiving payment, a charge had to be recognised in the income statement in both the current and the prior year. The credit in the second half of the prior year relates to the release of deferred consideration on the rFpro acquisition which, due to COVID-19 disruption was not payable.

Inventory impairment

In the prior year, following a detailed review of inventory levels and usage, a number of items previously included in the carrying value were written off and the system of accounting for inventory updated to better reflect the Group's current operations.

Restructuring

The restructuring costs in 2020 relate to rebalancing the skill base of the business and termination of agents.

   4.       Tax 

The effective tax rate for the period is a charge of 6.4% (H1 2020: 20.5%, 2020: 9.6%) reflecting availability of additional R&D credits and an increased patent box deduction.

The adjusted effective tax rate, adjusting both the tax charge and the profit before taxation is 14.7% (H1 2020: 18.7%, 2020: 17.7%).

A number of changes to the UK corporation tax system were announced in the March 2021 Budget Statement which will increase the main rate of corporation tax to 25% by 1 April 2023. These changes have not been substantively enacted at the balance sheet date therefore the increased rate has not been reflected in calculating the Group's deferred tax liabilities at 28 February 2021. Once enacted, this is expected to increase the deferred tax liabilities and hence the Group's tax charge for the current year by approximately GBP0.5m.

   5.       Earnings per share 

The calculation of earnings per share is based on the following earnings and number of shares:

 
                                           Unaudited      Unaudited      Audited 
                                            6 months       6 months         Year 
                                               ended          ended        ended 
                                         28 February    29 February    31 August 
                                                2021           2020         2020 
 
 Profit after tax attributable 
  to owners of the Company (GBP'000)           1,272          2,913        4,552 
 
 Weighted average number of shares 
  ('000) 
 Basic                                        22,583         22,416       22,482 
 Diluted                                      22,781         22,661       22,622 
 
 Earnings per share (pence) 
 Basic                                           5.6           13.0         20.2 
 Diluted                                         5.6           12.9         20.1 
 
 Adjusted basic                                 13.2           29.6         40.1 
 Adjusted diluted                               13.1           29.2         39.9 
 
   6.       Dividends 

A final dividend was paid in respect of the year ended 31 August 2019 of 2.8p per share totalling GBP626,000.

No interim dividend was paid in respect of the year ended 31 August 2020 as, given the significant macroeconomic uncertainty in April 2020, the Board took the decision to suspend the interim dividend pending the conclusion of the financial year.

At the Annual General Meeting the shareholders approved a final dividend in respect of the year ended 31 August 2020 of 4.4p per ordinary share totalling GBP994,000. This was paid on 22 January 2021 to shareholders on the register on 8 January 2021.

An interim dividend of 1.6p per ordinary share has been declared in respect of the year ending 31 August 2021 which will be paid on 14 May 2021 to shareholders on the register on 30 April 2021.

   7.       Net cash 

Net cash comprises cash and cash equivalents, bank overdrafts, fixed term deposits with a maturity on acquisition of more than three months and lease liabilities.

 
                                 Unaudited      Unaudited      Audited 
                               28 February    29 February    31 August 
                                      2021           2020         2020 
 
                                   GBP'000        GBP'000      GBP'000 
 
 Cash and cash equivalents          34,084         20,139       26,183 
 Fixed term deposits                     -         15,000        5,000 
 Borrowings                          (485)              -        (505) 
 Lease liabilities                   (483)          (922)        (722) 
                             -------------  -------------  ----------- 
                                    33,116         34,217       29,956 
                             -------------  -------------  ----------- 
 
 

During the period, the Group put in place a GBP15.0m revolving credit facility with National Westminster Bank plc. The facility remained undrawn at 28 February 2021.

   8.       Principal risks 

The principal risks and uncertainties impacting the Group are described on pages 43-47 of our Annual Report 2020 and remain unchanged at 28 February 2021.

They include: COVID-19 disruption, downturn or instability in major geographic markets or market sectors, loss of major customers and changes in customer procurement processes, failure to deliver new products, dependence on external routes to market, acquisitions integration and performance, 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 

Mr A Best, Chairman of the Company, is a trustee and beneficiary of the Best Middleton Trust. Rental payments of GBP24,000 (H1 2020: GBP24,000, 2020: GBP48,000) were made in the period to the Trust. No amounts were due to or from the Trust at any period end.

   10.     Acquisition of businesses 

On 30 August 2019 the Group acquired 100% of Dynamic Research Incorporated ('DRI') based in California, US, for initial consideration of GBP17.3m (US$21.0m), before acquisition expenses of GBP0.4m. Maximum deferred contingent consideration of GBP2.9m (US$3.5m) was payable based on the performance of DRI for the twelve months ended 31 May 2020. DRI exceeded its performance targets and the deferred contingent consideration was paid in full in July 2020. An accrual for the deferred contingent consideration was included in the balance sheet on the date of acquisition at net present value and the discount of GBP564,000 unwound and included in other finance costs during the year ended 31 August 2020.

At 31 August 2019, the provisional fair value of goodwill was recorded as GBP11.7m in relation to this acquisition. At 31 August 2020, following finalisation of the deferred tax position, both goodwill and deferred tax liabilities were reduced by GBP2.2m and goodwill was recorded at GBP9.5m. Due to the availability of an election under US tax laws, the assets acquired have benefited from a step-up in the asset base cost, resulting in increased amortisation that is tax deductible in future periods. As the tax base of the assets is equal to the acquisition date fair value of those assets, no deferred tax has been recognised at the date of acquisition. The impact of the adjustment on the comparatives for the period ended 29 February 2020 was to reduce goodwill by GBP2.1m, reduce deferred tax liabilities by GBP2.0m and increase the tax charge by GBP0.1m.

During 2019 the Group acquired 100% of rFpro Limited for initial consideration of GBP18.1m, before acquisition expenses of GBP0.3m. Maximim deferred consideration of GBP3.5m was payable based on the performance of rFpro for the 12 months ended 31 January 2021. However due to COVID-19 disruption, the performance targets were not met and no further consideration was payable. The accrual for the deferred contingent consideration was released during the year ended 31 August 2020.

Post balance sheet event

On 3 March 2021, the Group acquired 100% of Vadotech Pte Ltd and Zynit Pte Ltd (collectively 'Vadotech Group') for total cash consideration of up to EUR26.0m. The acquisition supports a number of the Group's strategic priorities, including providing a sales and technical facility in the strategically important Chinese market, establishing a new Asia Pacific divisional operating hub and further increasing the Group's visibility of future revenue as Vadotech Group sales are supported by long term customer framework agreements.

The acquisition has been completed on a cash free, debt free basis for an initial cash consideration of EUR17.0m (GBP14.8m), funded from the Group's existing cash resources. Two further conditional cash payments of up to EUR3.0m (GBP2.6m) and EUR6.0m (GBP5.2m) are subject to certain performance criteria being achieved for the year ended 31 December 2020 and the year ending 31 December 2021, respectively. The criteria in relation to the payment for the year ended 31 December 2020 have been met therefore an additional EUR3.0m has become payable.

The book value of the acquired assets and liabilities at the date of acquisition was GBP3.8m. The Group is currently in the process of determining the fair values of the assets and liabilities acquired.

Acquisition expenses totalled GBP0.4m, of which GBP0.2m was incurred in the year ended 31 August 2020 and GBP0.2m is included in administrative expenses in the consolidated statement of comprehensive income for the period ended 28 February 2021.

Had the acquisition been completed at the beginning of the period, Group revenue would have been GBP33.9m and adjusted operating profit would have been GBP4.7m.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our Privacy Policy.

END

IR UBVBRARUSUAR

(END) Dow Jones Newswires

April 28, 2021 02:00 ET (06:00 GMT)

Ab Dynamics (LSE:ABDP)
Historical Stock Chart
From Aug 2021 to Sep 2021 Click Here for more Ab Dynamics Charts.
Ab Dynamics (LSE:ABDP)
Historical Stock Chart
From Sep 2020 to Sep 2021 Click Here for more Ab Dynamics Charts.