23 April 2024
AB
Dynamics plc
Unaudited interim results for the six months ended 29
February 2024
"Strong financial performance and clear strategic
progress"
AB Dynamics plc (AIM: ABDP, the
"Company", or the "Group"), the designer, manufacturer and supplier
of advanced testing, simulation and measurement products to the
global transport market, is pleased to announce its interim results
for the six-month period to 29 February 2024 (the
"Period").
|
|
H1 2024
£m
|
H1
20232
£m
|
|
|
Revenue
|
52.3
|
48.6
|
+8%
|
|
Gross margin
|
58.3%
|
57.4%
|
+90bps
|
|
Adjusted
EBITDA1
|
10.6
|
9.5
|
+12%
|
|
Adjusted operating
profit1
|
8.9
|
7.7
|
+16%
|
|
Adjusted operating
margin1
|
17.0%
|
15.9%
|
+110bps
|
|
Statutory operating
profit
|
5.5
|
2.8
|
+96%
|
|
Adjusted cash flow from
operations1
|
11.3
|
9.5
|
+19%
|
|
Net cash
|
29.1
|
21.3
|
|
|
|
Pence
|
Pence
|
|
|
Adjusted diluted earnings per
share1
|
30.9
|
27.1
|
+14%
|
|
Statutory diluted earnings per
share
|
18.0
|
6.3
|
+186%
|
|
Interim dividend per
share
|
2.33
|
1.94
|
+20%
|
1Before amortisation of acquired intangibles, acquisition
related charges, and exceptional items. A reconciliation to
statutory measures is given in the Alternative Performance Measures
section of the Half Year Review.
2Restated for change in interpretation of revenue recognition,
see note 10.
Financial highlights
· Strong growth in revenue and operating profit, delivered
alongside an improved operating margin which reflected operating
leverage, gross margin gains and improved
efficiency
· Market and customer demand levels have remained positive
throughout H1, with strong activity across all three sectors and
all regions
· Revenue increased by 8% against H1 2023, or 10% on a constant
currency basis, with good growth in testing products and testing
services offset in part by a reduction in simulator revenue, where
significant contracts are H2-weighted
o Testing products revenue grew by 12% driven by an increase in
ADAS platforms
o Testing services revenue grew by 23% led by strong
performances in both the US and Asia, albeit against a weak
comparative which was impacted by Chinese lockdowns
o Simulation revenue was down 13% as a result of the timing of
revenue recognition, with several contracts due for delivery in
H2
· The
strong growth in testing services has increased the proportion of
recurring and service-based sales to 52%
(H1 2023: 41%) for the Period
· The
Group has remained effective in mitigating
inflationary cost pressures, with gross margins improving to 58.3%
(H1 2023: 57.4%)
· Operating margin improved by 110bps to 17.0% as a result of
the increased levels of activity and the benefits of enhanced
performance initiatives, partially offset by the investment in ABD
Solutions to support the strategic long-term growth
drivers
o Excluding ABD Solutions, the Group operating margin increased
to 18.6% (H1 2023: 17.9%)
· Significant operating cash generation of £11.3m (H1 2023:
£9.5m) with cash conversion of 107% (H1 2023: 100%), resulting in
net cash at the period end of £29.1m (28 February 2023: £21.3m, 31
August 2023: £32.0m) after funding the final performance payment of
£5.7m for the acquisition of Ansible Motion
· Interim dividend of 2.33p per share (H1 2023: 1.94p), an
increase of 20%
Operational and strategic highlights
· New
product development continues at pace and in line with the
technology roadmap for testing products and simulation markets,
alongside development of the core technology for ABD
Solutions
o The Group's pedestrian dummy, the Soft Pedestrian 360 and the
LaunchPad Spin have been approved by Euro NCAP
o ABD Solutions delivered the first units of the
new durability testing solution and initial
revenues from the retrofit pedestrian detection system for the
construction industry expected during H2
·
Since the period end, the Group has acquired
Venshure Test Services ('VTS'), a provider of mileage accumulation,
electric vehicle and environmental testing services in the
US.
· Well
placed to sustain growth momentum over the medium term, supported
by:
o Strong organic growth across automotive markets, supported by
regulatory tailwinds and rapid technology change, with a
significantly strengthened and scalable operational and commercial
platform
o The substantial opportunity beyond automotive markets
presented by ABD Solutions, transitioning from technology
development to commercialisation
o A
strong financial position that provides scope for further
value-enhancing growth investment in FY 2024 and beyond
Current trading and outlook
· Performance in the first half of the year was strong, with
good conversion of orders to revenue together with improved
operational efficiency and effective cost management
· The
Group has a solid order book, providing good visibility for the
second half of the year
· Whilst mindful of timing of pipeline conversion and customer
delivery schedules, the Board is confident that performance
momentum in the first half margin can be sustained and,
consequently, expects the Group to deliver full year adjusted
operating profit ahead of its current expectations
· Future growth prospects remain supported by long-term
structural and regulatory growth drivers in active safety,
autonomous systems and the automation of vehicle
applications
Commenting on the results, Dr James Routh, Chief Executive
Officer said:
"The Group has delivered a strong performance in the first
half of the year, capitalising on supportive conditions across key
markets and demonstrating the benefits of the investment made in
recent years in the commercial and operating capability of the
business.
"We see significant opportunity in our core markets in
automotive, which are supported by long-term structural and
regulatory growth drivers, and are continuing to invest in new
product development and technology. In addition, we are investing
in innovative technologies to diversify the business into
attractive adjacent markets through ABD
Solutions.
"Our solid order book provides good visibility for the second
half of the year. Whilst being mindful of timing of pipeline
conversion and customer delivery schedules, the Board remains
confident that the Group will make further financial and strategic
progress this year. With strong trading momentum entering H2 and
benefiting from the acquisition of VTS and improved margins, the
Board expects to deliver full year operating profit ahead of its
expectations."
There will be a presentation for
analysts this morning at 9.00am at Teneo
offices, 11 Pilgrim St, London EC4V 6RN. Please
contact abdynamics@teneo.com if you would like to
attend.
A presentation will also be
provided on the Investor Meet Company platform on 24 April 2023 at
9.00am. Anyone wishing to attend should register their interest
via https://www.investormeetcompany.com/ab-dynamics-plc/register-investor.
Certain information contained in this announcement would have
constituted inside information (as defined by Article 7 of
Regulation (EU) No 596/2014), as it forms part of domestic law by
virtue of the European Union (Withdrawal) Act 2018) ("MAR") prior
to its release as part of this announcement and is disclosed in
accordance with the Company's obligations under Article 17 of those
Regulations.
Enquiries:
|
AB
Dynamics plc
|
01225 860 200
|
|
Dr James Routh, Chief Executive
Officer
|
|
Sarah Matthews-DeMers, Chief
Financial Officer
|
|
|
|
|
|
|
Peel Hunt LLP (Nominated Adviser and Joint
Broker)
|
0207 894 7000
|
|
Mike Bell
Ed Allsopp
|
|
Stifel Nicolaus Europe Limited (Joint
Broker)
|
0207 710 7600
|
|
Matthew Blawat
Harry Billen
|
|
|
|
|
|
|
|
|
Teneo
|
0207 353 4200
|
|
James Macey White
|
|
Matt Low
|
|
|
|
|
The person responsible for
arranging the release of this information is Felicity Jackson,
Group Legal Counsel.
About AB Dynamics plc
AB Dynamics is a leading designer,
manufacturer and supplier of advanced testing, simulation and
measurement products to the global transport
market.
AB Dynamics is an international
group of companies headquartered in Bradford on Avon. AB Dynamics
currently supplies all the top automotive manufacturers, Tier 1
suppliers and service providers, who routinely use the Group's
products to test and verify vehicle safety systems and
dynamics.
Half Year Review
Group overview
The Group has delivered a strong
performance in the first half of the year, supported by recent
investments in its capabilities to capitalise on the significant
long-term structural and regulatory growth drivers within its
markets.
The Group continued to deliver
against its strategic priorities by launching new products,
developing its service offering to drive recurring revenues and
delivering on its diversification plans through progress in ABD
Solutions. After the period end, the Group also expanded its
presence in the testing services market with the acquisition of
Venshure Test Services.
Financial performance in the Period
The Group delivered revenue growth
of 8% to £52.3m, with increases in testing products and services
offset by a reduction in simulation, which reflects the timing of
delivery of customer projects.
Gross margin was 58.3%, up 90bps
on H1 2023 due to effective pricing management and increased
testing services revenue.
Group adjusted operating profit
increased by 16% to £8.9m. The adjusted operating margin increased
to 17.0% (H1 2023: 15.9%), as a result of the increase in sales
volumes, the improved gross margin and operational efficiency.
Excluding ABD Solutions, the adjusted operating margin increased to
18.6% (H1 2023: 17.9%).
Adjusted net finance costs were
£0.1m (H1 2023: £0.2m).
Adjusted profit before tax was
£8.8m (H1 2023: £7.5m). The Group adjusted tax charge totalled
£1.6m (H1 2023: £1.3m), an adjusted effective tax rate of 18.4% (H1
2023: 16.7%).
Adjusted diluted earnings per
share was 30.9p (H1 2023: 27.1p), an increase of 14%, reflecting
the increase in operating profit offset by a higher tax
rate.
Statutory operating profit
increased by 96% to £5.5m and after net finance costs of £0.4m (H1
2023: £1.0m), statutory profit before tax was up 183% from £1.8m to
£5.1m, giving statutory basic earnings per share of 18.2p (H1 2023:
6.4p). The statutory tax charge was £0.9m (H1 2023: £0.4m). A
reconciliation of statutory to underlying non-GAAP financial
measures is provided below. The adjustments to operating profit of
£3.4m comprise £3.0m of amortisation of acquired intangibles, £0.3m
of ERP cloud computing costs and £0.1m of acquisition related costs
(H1 2023: £4.9m comprising £3.7m of amortisation of acquired
intangibles, £0.8m of ERP cloud computing costs and £0.4m of
acquisition costs). The £0.3m adjustment to the interest charge
relates to the unwind of the discount on the deferred contingent
consideration for Ansible Motion (H1 2023: £0.8m). The tax impact
of these adjustments was a credit of £0.7m (H1 2023:
£0.9m).
The Group delivered strong
adjusted operating cash flow of £11.3m (H1 2023: £9.5m) with the
net cash position at the period end of £29.1m (31 August 2023:
£32.0m) underpinning a robust balance sheet and providing the
resources to fund the acquisition of VTS and continue the Group's
investment programme.
Sector review
|
|
|
H1 2024
£m
|
H1
20231
£m
|
|
|
Driving robots
|
|
12.5
|
14.2
|
-12%
|
|
ADAS platforms
|
|
19.5
|
14.0
|
+39%
|
|
Laboratory testing
|
|
2.9
|
2.92
|
-
|
|
Testing products
|
|
34.9
|
31.1
|
+12%
|
|
Testing services
|
|
7.5
|
6.1
|
+23%
|
|
Simulation
|
|
9.9
|
11.42
|
-13%
|
|
Total revenue
|
|
52.3
|
48.6
|
+8%
|
1The Group previously reported two sectors, track testing and
laboratory testing and simulation. Following the growth in testing
services, these are now reported separately. Laboratory testing is
now included within testing products to better reflect the nature
of the products.
2 Restated for change in revenue recognition, see note
10.
Testing products
The Group's testing products are
used on proving grounds, test tracks and in the laboratory to
evaluate the performance of vehicle active safety systems,
autonomous technologies, electric vehicles, vehicle durability and
vehicle dynamics.
Testing products revenue of £34.9m
was up 12% against H1 2023 (£31.1m) with growth in ADAS platforms
offset by a reduction in driving robots.
Driving robot sales decreased 12%
against H1 2023 to £12.5m (H1 2023: £14.2m). The Group expects
continued growth in driving robots at more normalised levels, as
new regulatory requirements for evolving ADAS technologies are
released, such as the recent launch of the Euro NCAP 2030 roadmap
and its new Safer Trucks rating scheme. It is expected that there
will be over 700 Euro NCAP test scenarios by 2025, up from 591 in
2023. New tests for commercial vehicles offer further opportunities
for market expansion.
ADAS platform sales increased 39%
to £19.5m in H1 2024 (H1 2023: £14.0m). The recent launch of a new
range of soft targets including motorcycles and articulating
pedestrians is expected to drive further growth.
Laboratory testing revenue relates
to sales of our market leading SPMM product, large-scale testing
rigs used to characterise the kinematics and compliance of vehicles
under development. Revenue was flat at £2.9m (H1 2023: £2.9m). This
long-standing product which has been supplied to global customers
for the past 25 years has evolved significantly over this period,
culminating in the recent launch of the SPMM Plus.
The Group continues to invest in
new product development in the testing products sector in order to
meet forthcoming regulatory requirements and to ensure we retain
our market leadership in testing technology.
Testing services
Testing services includes revenue
from the Group's test facility in Bakersfield, USA, where testing
of ADAS systems and vehicle dynamics is performed on behalf of
OEMs, technology developers and government agencies.
In China, the Group provides
on-road vehicle testing services for the assessment of all aspects
of vehicle performance, particularly focusing on electric vehicle
performance, charging capability and vehicle
connectivity.
This sector saw significant growth
of 23% to £7.5m (H1 2023: £6.1m) in advance of new regulatory
requirements, albeit against a weak comparative period in H1 2023
that was impacted by local COVID restrictions delaying the
provision of testing services in China and delays in availability
of test vehicles more widely.
Simulation
The Group provides both physical
simulators and advanced, physics-based simulation software.
Simulators are used by both automotive manufacturers and motorsport
teams to accurately represent the real world using the rFpro
software, coupled with state-of-the-art motion platforms and static
driving simulators to assist in development of new vehicles and
improve performance.
Simulation revenue decreased by
13% to £9.9m (H1 2023: £11.4m). Growth in simulation software was
offset by a decrease in revenue from simulator motion platforms due
to the timing of revenue recognition, as much of the H1 activity
will be recognised in revenue on delivery in H2.
Progress on our strategy
The Group continues to make good
progress against its organic led growth strategy, supplemented with
value enhancing acquisitions. The focus on building and growing the
core business continued, coupled with delivering on the Group's
diversification plans through ABD Solutions.
Investment continued in the core
automotive sector, which is characterised by strong regulatory and
structural growth drivers and rapid technology change. New product
development and the strengthened operational and commercial
platform leaves the Group well placed to benefit from increasing
regulation and the increasing number and complexity of test
scenarios required by NCAP bodies and
regulators.
As part of the objective to
diversify into adjacent markets, ABD Solutions continues to make
significant progress in its mission to add automated solutions to
existing vehicles fleets faster and more cost effectively. ABD
Solutions has demonstrated its product offering in contrasting
environments for potential customers in mining, defence and other
specialist vehicles and successfully proved its concept and market
solution, Indigo Drive. The first units of the Group's new
durability testing solution were delivered during H1, with initial
revenues from the retrofit pedestrian detection system for the
construction industry expected during H2. Several small contracts
for phase 1 feasibility studies have been awarded for delivery
during H2 and FY2025, while the medium-term pipeline consists of
10-15 opportunities ranging from £0.4m to £10m.
Acquisitions
On 2 April 2024, the Group
acquired the trade and assets of Venshure Test Services, LLC, a
provider of vehicle testing services, including environmental
testing and range certification for electric vehicles. The initial
consideration was $15.0m (£11.8m). Contingent consideration of up
to $15.0m will become payable in cash subject to certain
performance criteria being met for the 2 years ending 2 April 2026.
The acquisition expands both the Group's capability and geographic
coverage in the important and growing field of EV battery and
powertrain performance evaluation. It also provides the opportunity
to leverage AB Dynamics' existing sales capabilities to drive
cross-selling.
Acquisitions have been and will
continue to be a significant part of the overall strategy, and
there is a promising pipeline of potential value-enhancing and
strategically compelling acquisition opportunities.
Alternative performance measures
In the analysis of the Group's
financial performance and position, operating results and cash
flows, alternative performance measures are presented to provide
readers with additional information. The principal measures
presented are adjusted measures of earnings including adjusted
operating profit, EBITDA, adjusted operating margin, adjusted
profit before tax, adjusted earnings per share and adjusted cash
flow from operations.
The interim report includes both
statutory and adjusted non-GAAP financial measures, the latter of
which the Directors believe better reflect the underlying
performance of the business and provide a more meaningful
comparison of how the business is managed and measured on a
day-to-day basis. The Group's alternative performance measures and
KPIs are aligned to the Group's strategy and together are used to
measure the performance of the business and form the basis of the
performance measures for remuneration. Adjusted results exclude
certain items because if included, these items could distort the
understanding of the performance for the year and the comparability
between the periods.
Comparatives are provided
alongside all current period figures. The term 'adjusted' is not
defined under IFRS and may not be comparable with similarly titled
measures used by other companies. All profit and earnings per share
figures in this interim report relate to underlying business
performance (as defined above) unless otherwise stated.
A reconciliation of adjusted
measures to statutory measures is provided below:
|
|
H1 2024
|
H1
20231
|
|
|
Adjusted
|
Adjustments
|
Statutory
|
Adjusted
|
Adjustments
|
Statutory
|
|
|
|
|
|
|
|
|
|
EBITDA (£m)
|
10.6
|
(0.4)
|
10.2
|
9.5
|
(1.2)
|
8.3
|
|
Operating profit (£m)
|
8.9
|
(3.4)
|
5.5
|
7.7
|
(4.9)
|
2.8
|
|
Operating margin
|
17.0%
|
(6.5%)
|
10.5%
|
15.9%
|
(10.2%)
|
5.7%
|
|
Finance expense (£m)
|
(0.1)
|
(0.3)
|
(0.4)
|
(0.2)
|
(0.8)
|
(1.0)
|
|
Profit before tax (£m)
|
8.8
|
(3.7)
|
5.1
|
7.5
|
(5.7)
|
1.8
|
|
Tax expense (£m)
|
(1.6)
|
0.7
|
(0.9)
|
(1.3)
|
0.9
|
(0.4)
|
|
Profit after tax (£m)
|
7.2
|
(3.0)
|
4.2
|
6.2
|
(4.8)
|
1.4
|
|
Diluted earnings per share
(pence)
|
30.9
|
(12.9)
|
18.0
|
27.1
|
(20.8)
|
6.3
|
|
Cash flow from operations
(£m)
|
11.3
|
(0.3)
|
11.0
|
9.5
|
(3.4)
|
6.1
|
1 Restated, see note 10.
The adjustments comprise:
|
|
H1 2024
|
H1
2023
|
Cash flow impact H1
2024
|
Cash flow
impact H1 2023
|
|
|
£m
|
£m
|
£m
|
£m
|
|
Amortisation of acquired
intangibles
|
3.0
|
3.7
|
-
|
-
|
|
ERP development costs
|
0.3
|
0.8
|
0.3
|
0.8
|
|
Acquisition related
costs
|
0.1
|
0.4
|
-
|
2.6
|
|
Adjustments to operating
profit
|
3.4
|
4.9
|
0.3
|
3.4
|
|
Acquisition related finance
costs
|
0.3
|
0.8
|
-
|
-
|
|
Adjustments to profit before
tax
|
3.7
|
5.7
|
0.3
|
3.4
|
Foreign currency exposure
The Group faces currency exposure
on its foreign currency transactions and with significant overseas
operations, also has exposure to foreign currency translation risk.
The Group maintains a natural hedge whenever possible to
transactional exposure by matching the cash inflows and outflows in
the respective currencies.
On a constant currency basis,
revenue would have been £1.2m higher than reported and operating
profit would have been £0.1m higher as the US dollar, the Euro and
Yen weakened against H1 2023. Constant currency revenue growth was
10% and growth in operating profit was 17%.
Dividends
The Board has declared an interim
dividend of 2.33p per ordinary share (H1 2023: 1.94p) which will be
paid on 17 May 2024 to shareholders on the register on 3 May
2024.
A final dividend of 4.42p per
share was paid on 6 March 2024 in respect of the year ended 31
August 2023 totalling £1,014,000. The Board recognises that dividends continue to be an important
component of total shareholder returns, balanced against
maintaining a strong financial position and intends to
pursue a sustainable and growing dividend policy in the future
having regard to the development of the Group.
Summary and Outlook
The Group has delivered a strong
performance in the first half of the year, capitalising on
supportive conditions across key markets and demonstrating the
benefits of the investment made in recent years in the commercial
and operating capability of the business.
We see significant opportunity in
our core markets in automotive, which are supported by long-term
structural and regulatory growth drivers, and are continuing to
invest in new product development and technology. In addition, we
are investing in innovative technologies to diversify the business
into attractive adjacent markets through ABD Solutions.
Our solid order book provides good
visibility for the second half of the year, with
organic adjusted operating profit expected
to be more evenly weighted across the two halves of the year than
in previous years. Whilst being mindful of timing
of pipeline conversion and customer delivery schedules, the Board
remains confident that the Group will make further financial and
strategic progress this year. With strong trading momentum entering
H2 and benefiting from the acquisition of VTS and improved margins,
the Board expects to deliver full year operating profit ahead of
its current expectations.
Directors' Responsibility Statement
The Directors confirm that this
condensed consolidated half year financial information has been
prepared in accordance with International Accounting Standard 34,
'Interim Financial Reporting' as adopted by the United Kingdom, and
that the half year management report herein includes a fair review
of the information required by DTR 4.2.7 and DTR 4.2.8,
namely:
· an
indication of important events that have occurred during the first
six months and their impact on the condensed consolidated half year
financial information, and a description of the principal risks and
uncertainties for the remaining six months of the financial year;
and
· material related party transactions in the first six months
and any material changes in the related party transactions
described in the last annual report.
By order of the Board
Dr James Routh
Chief Executive Officer
23 April 2024
AB
Dynamics plc
Unaudited condensed consolidated cash flow
statement
for the six months ended 29 February
2024
|
|
Unaudited
6 months
ended
29
February
2024
|
*Restated
Unaudited
6
months
ended
28
February
2023
|
*Restated Audited Year
ended
31
August
2023
|
|
|
£'000
|
£'000
|
£'000
|
|
Profit before tax
|
5,102
|
1,774
|
11,488
|
|
Depreciation and
amortisation
|
4,739
|
5,544
|
11,102
|
|
Finance expense
|
369
|
1,000
|
1,067
|
|
Release of contingent
consideration
|
-
|
-
|
(5,180)
|
|
Share based payment
|
698
|
230
|
1,263
|
|
Operating cash flows before changes in working
capital
|
10,908
|
8,548
|
19,740
|
|
Increase in inventories
|
(1,538)
|
(1,263)
|
(2,612)
|
|
(Increase)/decrease in trade and
other receivables
|
(1,458)
|
892
|
2,514
|
|
Increase/(decrease) in trade and
other payables
|
3,075
|
(2,035)
|
(369)
|
|
Cash
flows from operations
|
10,987
|
6,142
|
19,273
|
|
Cash flows from operations are
analysed as:
|
|
|
|
|
Adjusted cash flows from
operations
|
11,336
|
9,480
|
23,450
|
|
Cash impact of adjusting
items
|
(349)
|
(3,338)
|
(4,177)
|
|
Cash flows from
operations
|
10,987
|
6,142
|
19,273
|
|
Finance costs paid
|
(9)
|
(12)
|
(291)
|
|
Income tax (paid)/
received
|
(1,946)
|
546
|
363
|
|
Net
cash flows from operating activities
|
9,032
|
6,676
|
19,345
|
|
Cash flows used in investing activities
|
|
|
|
|
Acquisition of businesses net of
cash
|
(5,700)
|
(11,233)
|
(10,656)
|
|
Purchase of property, plant and
equipment
|
(1,602)
|
(882)
|
(2,930)
|
|
Capitalised development costs and
purchased software
|
(49)
|
(292)
|
(469)
|
|
Net
cash used in investing activities
|
(7,351)
|
(12,407)
|
(14,055)
|
|
Cash
flows (used in)/generated from financing
activities
|
|
|
|
|
Drawdown of loans
|
-
|
6,000
|
6,000
|
|
Repayment of loans
|
-
|
-
|
(6,000)
|
|
Dividends paid
|
(1,014)
|
(810)
|
(1,255)
|
|
(Purchase of own shares)/proceeds
from issue of share capital
|
(1,773)
|
47
|
457
|
|
Repayment of lease
liabilities
|
(485)
|
(602)
|
(1,124)
|
|
Net
cash flow (used in)/generated from financing
activities
|
(3,272)
|
4,635
|
(1,922)
|
|
Net
(decrease)/increase in cash and cash equivalents
|
(1,591)
|
(1,096)
|
3,368
|
|
Cash and cash equivalents at
beginning of the period
|
33,486
|
30,141
|
30,141
|
|
Effect of exchange rates on cash
and cash equivalents
|
(20)
|
(54)
|
(23)
|
|
Cash and cash equivalents at end of period
|
31,875
|
28,991
|
33,486
|
*See note
10
AB Dynamics plc
Notes to the unaudited interim report
for the six months ended 29 February
2024
1. Basis of
preparation
The Company is a public limited
company limited by shares and incorporated under the UK Companies
Act. The Company is domiciled in the United Kingdom and the
registered office and principal place of business is Middleton
Drive, Bradford on Avon, Wiltshire, BA15 1GB.
The principal activity is the
specialised area of design, manufacture and supply of
advanced testing, simulation and measurement
products to the global transport market.
The annual financial statements of
the Group are prepared in accordance with UK-adopted international
accounting standards and applicable law. A copy of the statutory
accounts for the year ended 31 August 2023 has been delivered to
the Registrar of Companies. The auditor's report on those accounts
was unqualified and did not contain any statements under section
498(2) or (3) of the Companies Act 2006.
The same accounting policies,
presentation and methods of computation have been followed in this
unaudited interim financial information as those which were applied
in the preparation of the Group's annual financial statements for
the year ended 31 August 2023.
Certain new standards, amendments
to standards and interpretations are not yet effective for the year
ending 31 August 2024 and have therefore not been applied in
preparing this interim financial information.
The interim accounts are unaudited
and do not constitute statutory accounts as defined in Section 434
of the Companies Act 2006.
Going concern basis of
accounting
The Directors have assessed the
principal risks, including by modelling a severe but plausible
downside scenario, whereby the Group experiences:
· A
reduction in demand of 25% over the next two financial
years
· A
10% increase in operating costs from supply chain
disruption
· An
increase in cash collection cycle
· An
increase in input costs resulting in reduction in gross
margins
At 29 February 2024 the Group had
£29.1m of net cash and £15.0m undrawn revolving credit facility.
Even after paying initial consideration of £11.8m after the period
end for the acquisition of VTS and after modelling the above severe
downside scenario, the Group has sufficient headroom to be able to
continue to operate for the foreseeable future. The Directors
believe that the Group is well placed to manage its financing and
other business risks satisfactorily and have a reasonable
expectation that the Group will have adequate resources to continue
in operation for at least twelve months from the signing date of
this financial information. They therefore consider it appropriate
to adopt the going concern basis of accounting in preparing the
interim statements.
The interim financial information
for the six months ended 29 February 2024 was approved by the Board
on 23 April 2024.
2.
Segment information
Revenues
attributable to individual countries are as follows:
|
|
Unaudited
6
months
ended
29
February 2024
|
*Restated
Unaudited
6
months
ended
28
February 2023
|
Audited
Year
ended
31 August
2023
|
|
|
£'000
|
£'000
|
£'000
|
|
|
|
|
|
|
United
Kingdom
|
4,139
|
1,991
|
4,875
|
|
Rest of
Europe
|
14,748
|
10,568
|
22,095
|
|
North
America
|
11,145
|
13,547
|
25,171
|
|
Asia
Pacific
|
22,115
|
21,205
|
46,409
|
|
Rest of World
|
107
|
1,299
|
2,217
|
|
|
52,254
|
48,610
|
100,767
|
|
|
|
|
|
|
Revenues
are disaggregated as follows:
|
|
|
|
|
Testing
products
|
34,861
|
31,101
|
63,017
|
|
Testing
services
|
7,524
|
6,139
|
12,858
|
|
Simulation
|
9,869
|
11,370
|
24,892
|
|
|
52,254
|
48,610
|
100,767
|
|
|
|
|
|
*See note 10
3. Alternative Performance
measures
In the analysis of the Group's
financial performance and position, operating results and cash
flows, alternative performance measures are presented to provide
readers with additional information. The principal measures
presented are adjusted measures of earnings including adjusted
operating profit, EBITDA, adjusted operating margin, adjusted
profit before tax, adjusted earnings per share and adjusted cash
flow from operations.
The interim financial information
includes both statutory and adjusted non-GAAP financial measures,
the latter of which the Directors believe better reflect the
underlying performance of the business and provide a more
meaningful comparison of how the business is managed and measured
on a day-to-day basis. The Group's alternative performance measures
and KPIs are aligned to the Group's strategy and together are used
to measure the performance of the business and form the basis of
the performance measures for remuneration. Adjusted results exclude
certain items because if included, these items could distort the
understanding of the performance for the year and the comparability
between the periods.
We provide comparatives alongside
all current year figures. The term 'adjusted' is not defined under
IFRS and may not be comparable with similarly titled measures used
by other companies. All profit and earnings per share figures in
this interim report relate to underlying business performance (as
defined above) unless otherwise stated.
A summary of the items which
reconcile statutory to adjusted measures is included
below:
|
|
Unaudited
6
months
ended
29
February
2024
|
Unaudited
6
months
ended
28
February 2023
|
Audited
Year
ended
31
August 2023
|
|
|
£'000
|
£'000
|
£'000
|
|
|
|
|
|
|
Amortisation of acquired intangibles
|
3,048
|
3,711
|
7,189
|
|
ERP
development costs
|
270
|
786
|
1,362
|
|
Acquisition related costs/(credit)
|
84
|
436
|
(4,502)
|
|
Adjustments to operating profit
|
3,402
|
4,933
|
4,049
|
|
Acquisition related finance costs
|
285
|
794
|
713
|
|
Adjustments to profit before
tax
|
3,687
|
5,727
|
4,762
|
Amortisation of acquired
intangibles
The amortisation relates to the
acquisition of Ansible Motion Limited on 20 September 2022,
Vadotech Group on 3 March 2021 and the businesses acquired in 2019,
DRI and rFpro.
ERP development costs
These costs relate to the
development, configuration and customisation of the Group's new ERP
system which is hosted in the cloud.
Acquisition related
costs/(credit)
The prior year costs/(credit)
relate to the costs of acquisition of Ansible Motion Limited net of
the £5.2m release of contingent consideration in the second half of
the year.
Acquisition related finance
costs
Finance costs relate to the unwind
of the discount on deferred contingent consideration payable on the
acquisition of Ansible Motion.
Tax
The tax impact of these
adjustments was as follows: amortisation £0.6m (H1 2023: £0.5m),
acquisition related costs £Nil (H1 2023: £Nil), ERP £0.1m (H1 2023:
£0.1m) and acquisition related finance costs £Nil (H1 2023:
£Nil).
Cash impact
The operating cash flow impact of
the adjustments was an outflow of £0.3m (H1 2023: £3.4m) being
£0.3m (H1 2023: £0.8m) in relation to ERP development costs and
£Nil (H1 2023: £2.6m) in relation to acquisition costs. The prior
year acquisition costs included a bonus paid to employees of
Ansible Motion Limited for pre-acquisition service.
4. Tax
The statutory effective tax rate
for the period is a charge of 18.2% (H1 2023: 18.1%), the
difference from the prior period reflecting the acquisition related
finance costs which are not deductible for tax purposes.
The adjusted effective tax rate,
adjusting both the tax charge and the profit before taxation is
18.4% (H1 2023: 16.7%). The increase reflects the full year effect
of the increase in the rate of UK corporation tax on 1 April 2023
and changes to the UK R&D tax credit regime.
5. Earnings per
share
The calculation of earnings per
share is based on the following earnings and number of
shares:
|
|
Unaudited
6 months
ended
29 February
2024
|
*Restated
Unaudited
6
months
ended
28
February
2023
|
Audited
Year
ended
31
August
2023
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of
shares ('000)
|
|
|
|
|
Basic
|
22,934
|
22,859
|
22,886
|
|
Diluted
|
23,165
|
23,036
|
23,193
|
|
|
|
|
|
|
Earnings per share
(pence)
|
|
|
|
|
Profit after tax attributable to
owners of the Group (£'000)
|
4,174
|
1,453
|
10,986
|
|
Basic
|
18.2
|
6.4
|
48.0
|
|
Diluted
|
18.0
|
6.3
|
47.4
|
|
|
|
|
|
|
Adjusted earnings per share
(pence)
|
|
|
|
|
Adjusted profit after tax
attributable to owners of the Group (£'000)
|
7,169
|
6,248
|
14,104
|
|
Adjusted basic
|
31.3
|
27.3
|
61.6
|
|
Adjusted diluted
|
30.9
|
27.1
|
60.8
|
*See note 10
6.
Dividends
An interim dividend of 1.94p per
ordinary share in respect of the year ended 31 August 2023 was paid
on 19 May 2023 to shareholders on the register on 5 May 2023
totalling £445,000.
At the Annual General Meeting the
shareholders approved a final dividend in respect of the year ended
31 August 2023 of 4.42p per ordinary share totalling £1,014,000.
This was paid on 6 March 2024 to shareholders on the register on 9
February 2024.
An interim dividend of 2.33p per
ordinary share totalling £534,000 has been declared in respect of
the year ending 31 August 2024 which will be paid on 17 May 2024 to
shareholders on the register on 3 May 2024.
7. Net
cash
Net cash comprises cash and cash
equivalents, bank overdrafts, borrowings and lease
liabilities.
|
|
Unaudited
29
February
2024
£'000
|
Unaudited
28
February
2023
£'000
|
Audited
31
August
2023
£'000
|
|
|
|
|
|
|
Cash and cash equivalents
|
31,875
|
28,991
|
33,486
|
|
Borrowings
|
-
|
(6,000)
|
-
|
|
Lease liabilities
|
(2,771)
|
(1,736)
|
(1,476)
|
|
|
29,104
|
21,255
|
32,010
|
|
|
|
|
|
The Group has a £15.0m revolving
credit facility with National Westminster Bank plc. The facility
was extended on 7 February 2023 to 4 February 2026.
8. Other
reserves
|
|
Merger
relief reserve
|
Reconstruction reserve
|
Translation reserve
|
Hedging reserve
|
Total other reserves
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
|
|
|
|
|
|
|
|
At 1 September 2022
|
11,390
|
(11,284)
|
1,160
|
(124)
|
1,142
|
|
Other comprehensive
expense
|
-
|
-
|
(539)
|
136
|
(403)
|
|
Issue of shares
|
3,196
|
-
|
-
|
-
|
3,196
|
|
At 28 February 2023
|
14,586
|
(11,284)
|
621
|
12
|
3,935
|
|
Other comprehensive
expense
|
-
|
-
|
(1,520)
|
(12)
|
(1,532)
|
|
At 31 August 2023
|
14,586
|
(11,284)
|
(899)
|
-
|
2,403
|
|
Other comprehensive
expense
|
-
|
-
|
(329)
|
20
|
(309)
|
|
At
29 February 2024
|
14,586
|
(11,284)
|
(1,228)
|
20
|
2,094
|
|
|
|
|
|
|
|
9. Foreign
exchange
The foreign exchange rates applied
during the period were:
|
|
|
H1 2024
|
H1
2023
|
|
Period end rate
|
|
|
|
|
US dollar
|
|
1.266
|
1.206
|
|
Euro
|
|
1.168
|
1.137
|
|
Yen
|
|
191
|
164
|
|
Average rate
|
|
|
|
|
US dollar
|
|
1.237
|
1.187
|
|
Euro
|
|
1.155
|
1.143
|
|
Yen
|
|
184
|
164
|
10. Restatement of prior period
balances
The comparatives for the prior
period have been restated to reflect a different interpretation of
the accounting standard regarding revenue recognition following
challenge by the Group's new auditors, Grant Thornton. The
restatement relates to timing differences on contracts with two
customers under which revenue was previously recognised over time
as the equipment was built and has been restated to reflect
recognition at a point in time on delivery and installation. The
change in interpretation relates to judgement applied in
determining how much profit the Group would be entitled to in the
unlikely event of a cancellation of the contract. None of these
contracts were cancelled and all concluded during FY 2023 and
payment has been received in full.
The impact is detailed in the
tables below and has resulted in a decrease in revenue of £432,000
and profit after tax of £82,000 for the period ended 28 February
2023 and an increase in opening net assets at 1 September 2022 of
£421,000.
Consolidated statement of financial
position
|
|
Unaudited 28 February 2023
|
31
August 2022
|
|
|
As reported
£'000
|
Impact of
restatement
£'000
|
Restated
£'000
|
As
reported
£'000
|
Impact of
restatement
£'000
|
Restated
£'000
|
|
|
|
|
|
|
|
|
|
Non-current assets
|
103,740
|
-
|
103,740
|
77,038
|
-
|
77,038
|
|
Current assets
|
|
|
|
|
|
|
|
Inventories
|
15,616
|
350
|
15,966
|
13,611
|
40
|
13,651
|
|
Taxation
|
140
|
-
|
140
|
882
|
8
|
890
|
|
Contract assets
|
2,037
|
(10)
|
2,027
|
3,917
|
411
|
4,328
|
|
Other current assets
|
47,901
|
-
|
47,901
|
43,923
|
-
|
43,923
|
|
|
65,694
|
340
|
66,034
|
62,333
|
459
|
62,792
|
|
Assets held for sale
|
1,893
|
-
|
1,893
|
1,893
|
-
|
1,893
|
|
Current liabilities
|
|
|
|
|
|
|
|
Contract liabilities
|
7,229
|
(10)
|
7,219
|
5,787
|
(719)
|
5,068
|
|
Other current
liabilities
|
37,969
|
11
|
37,980
|
16,804
|
757
|
17,561
|
|
|
45,198
|
1
|
45,199
|
22,591
|
38
|
22,629
|
|
Non-current liabilities
|
10,188
|
-
|
10,188
|
6,712
|
-
|
6,712
|
|
Net assets
|
115,941
|
339
|
116,280
|
111,961
|
421
|
112,382
|
|
|
|
|
|
|
|
|
|
Retained earnings
|
49,405
|
339
|
49,744
|
48,333
|
421
|
48,754
|
|
Share capital and other
reserves
|
66,536
|
-
|
66,536
|
63,628
|
-
|
63,628
|
|
Total equity
|
115,941
|
339
|
116,280
|
111,961
|
421
|
112,382
|
|
|
|
|
|
|
|
|
|
Consolidated income statement
|
|
Unaudited 28 February 2023
|
|
|
|
|
|
As
reported
£'000
|
Impact of
restatement
£'000
|
Restated
£'000
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
49,042
|
(432)
|
48,610
|
|
|
Cost of sales
|
|
|
|
(21,039)
|
350
|
(20,689)
|
|
|
Gross profit
|
|
|
|
28,003
|
(82)
|
27,921
|
|
|
Operating profit
|
|
|
|
2,856
|
(82)
|
2,774
|
|
|
Profit before tax
|
|
|
|
1,856
|
(82)
|
1,774
|
|
|
Tax expense
|
|
|
|
(321)
|
-
|
(321)
|
|
|
Profit for the period
|
|
|
|
1,535
|
(82)
|
1,453
|
|
11. Acquisitions
During the period, the Group paid
£5.7m in relation to the final contingent consideration for the
acquisition of Ansible Motion Limited, which was acquired on 20
September 2022.
The initial £17.6m consideration
comprised £14.4m of cash and £3.2m of new ordinary shares in AB
Dynamics plc. A maximum additional £12.0m performance payment was
available subject to certain performance criteria being met for the
year ended 31 August 2023. An accrual for the contingent
consideration was included in the balance sheet at net present
value of £11.2m at 28 February 2023, which was adjusted at 31
August 2023 to £5.9m following completion of the performance
period, with the gain on release of the accrual of £5.2m recognised
in the income statement. During the period £0.3m discount unwind
was recognised as an interest charge (H1 2023: £0.8m). £5.7m was
paid in cash in January 2024, with £0.5m of the total consideration
retained against any potential warranties.
12. Post balance sheet event
On 2 April 2024, the Group
acquired 100% of Venshure Test Services LLC for total cash
consideration of up to $30.0m. The acquisition supports a number of
the Group's strategic priorities, including expanding the Group's capabilities and broadening the scope of
services in the Testing Services area and complementing the Group's
existing California-based track testing services business with
laboratory-based testing.
The acquisition has been completed
on a cash free, debt free basis for an initial cash consideration
of $15.0m (£11.8m), funded from the Group's existing cash resources
and short-term utilisation of part of the Group's revolving credit
facility. Contingent consideration of up to $15.0m will be payable
in cash across two tranches for the 2
years following completion, subject to meeting certain performance
criteria for both years.
The book value of the acquired
assets and liabilities at the date of acquisition was approximately
$5m. The Group is currently in the process of determining the fair
values of the assets and liabilities acquired.
13. Principal risks
The principal risks and
uncertainties impacting the Group are described on pages 56-58 of
our Annual Report 2023 and all other risks remain unchanged at 29
February 2024.
The risks include: Downturn or
instability in major geographic markets or market sectors, supply
chain disruption, loss of major customers and changes in customer
procurement processes, failure to deliver new products, dependence
on external routes to market, acquisitions integration and
performance, cybersecurity and business interruption,
competitor actions, loss of key personnel, threat of disruptive
technology, product liability, failure to manage growth, foreign
currency, counterparty risk, credit risk, intellectual
property/patents and environmental risk.
