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.
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END
IR UBVBRARUSUAR
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