AB Dynamics plc (LON: ABDP), the designer, manufacturer and supplier of advanced testing systems and measurement products to the global automotive industry, has today announced its final results for the year ended 31 August 2018.
Financial highlights
· Revenue increased 51% to £37.05m (FY17: £24.57m)
· Reported profit before tax increased 78% to £7.95m (FY17: £4.47m)
· Profit before tax* increased 45% to £8.61m (FY17: £5.94m)
· Cash flow from operations increased by £7.8m to £9.9m (FY17: £2.1m)
· Basic EPS increased 74% to 36.29p (FY17: 20.83p), Diluted EPS increased 70% to 35.03p (FY17: 20.56p)
· Proposed final dividend increased 10% to 2.20p per ordinary share (FY17: 2.00p)
· Strong balance sheet with net cash of £15.94m as at 31 August 2018 (31 August 2017: £9.62m)
* Adjusted to exclude non-cash charges in respect of share options of £0.659m (FY17: £1.465m)
Operational Highlights
· Dr. James Routh appointed CEO, with effect from 1 October 2018
· AB Dynamics Europe GmbH facility established and operational
· Received first order for Advanced Driving Simulator (aVDS) to be delivered in FY19
· First orders received for new LaunchPad ADAS (Advanced Driver Assistance System) platform
· Demand for track testing products continues at an all-time high
· Strong forward order book, providing visibility into Q3 FY19
Tony Best, Non-Executive Chairman of AB Dynamics plc, commented:
“I am pleased to be able to report that the Group has delivered another record year of revenue and adjusted profit. Our customers remain very active in introducing ever more complex ADAS equipment into their vehicles and in the development of semi- and fully-autonomous vehicles.
I am also particularly delighted to welcome Dr. James Routh as our new Chief Executive Officer. James joins the Group from Diploma PLC where he was responsible for the International Seals businesses outside North America. James has a track record of delivering strong growth, both organically and through carefully selected, value-enhancing acquisitions.
Despite our very strong growth, order intake has continued to run ahead of sales and this has provided the Group with a healthy order book into our new financial year and, as usual, visibility into our third quarter. Against this pleasing backdrop, our progress continues to require ever greater investment in systems and our operational capability to ensure that we are fully capable of supporting current and future growth. In the coming year, we expect to make further investment in new product development, marketing, service and support, our growing overseas footprint and, of course, our people, whose skills and energy remain so important to our future success. Inevitably this investment will provide some constraint to our operating margin, but the Board remains confident that, under the leadership of our new CEO, we are well positioned to deliver a year of solid progress.”
Chairman’s Statement
Results Overview
I am very pleased to report that the Group has delivered another record year of revenue and adjusted profit that reflects the increased demand for our advanced test and measurement equipment. The development of new Advanced Driver Assistance Systems (“ADAS”) technologies and standards and the drive towards semi- and fully-autonomous vehicles continues to provide a supportive market backdrop for the Group.
For the year ended 31 August 2018 the Group delivered revenues of £37.05m (2017: £24.57m), a growth of 50.8%. Revenue from Driving Robots was at an all-time high at £21.09m (2017: £13.95m) and similarly for our ADAS products at £11.85m (2017: £6.40m). As expected, revenue from Laboratory Test Systems was broadly unchanged at £3.75m (2017: £3.80m). Over 98% of our sales were exported to customers based outside the United Kingdom.
During the year, we increased investment in our facilities, new product development, marketing and personnel. This investment will ensure that we remain well positioned within our markets to benefit from the research and development spending of our automotive OEM customers, as they continue to develop vehicles with improved safety and driving characteristics. Vehicle complexity is increasing rapidly and there is an established need for faster and more efficient ways to develop these new vehicles. We are seeing significant interest in our advanced Vehicle Dynamic Simulator (“aVDS”) as the automotive industry continues to adopt virtual prototyping to complement physical testing with the longer-term goal of developing fully autonomous vehicles.
As a result of increased investment in new products and operational capabilities, adjusted operating margins (excluding non-cash charges in respect of share-based payments) reduced slightly to 23.1% (2017: 23.9%). Reported profit before tax increased to £7.95m (2017: £4.47m), a growth of 77.9%. On a fully diluted basis, I am pleased to report that earnings per share increased by 70% to 35.03p (2017: 20.56p), with the added benefit of a reduction in the effective corporation tax rate to 11.7% (2017: 12.7%). Further detail and discussion of our financial performance can be found in the Chief Financial Officer’s Statement in our Annual Report.
People
I would like to thank all our employees for their continued hard work and professionalism over the last year. AB Dynamics is a people business and it is the performance and dedication of our employees that underpins the strong achievements of the Group. I am pleased that we continue to attract first class engineering talent and over the last year the number of our employees has increased by ca. 25% to greater than 150.
New Facilities
Our new 3,070 m2 state of the art factory and headquarters in Bradford on Avon is now fully operational. The facility has met all our expectations and has provided an attractive environment for both our employees and customers, who regularly spend time with us. We mostly occupied the building during the first quarter of the financial year and I am pleased to report that the first Suspension Parameter Measurement Machine (“SPMM”) is now being assembled, following completion of the bespoke and complex foundations in July 2018. The increased space brings added flexibility and capacity for the manufacture of our Laboratory Test equipment.
We have an increasingly large installed base of equipment and systems across the world and the Group, in conjunction with its reseller partners, remains focused on providing the high levels of support and service that our customers expect when working with our increasingly sophisticated products. In Germany, our wholly owned subsidiary, AB Dynamics Europe GmbH, recently leased 950m2 of premises in Wetzlar, near Frankfurt, and we are in the process of optimising the space to meet our immediate needs. This is an important development for the Group and will enable us to offer improved levels of service and maintenance and assembly of our products within the German market. We expect the Group to benefit significantly from on-going investment in this market which will deepen our customer relationships and allow us to capture new business.
Despite the addition of over 4,000 m2 of new space over the last year, we have previously announced the acquisition of further land on a site adjacent to our new headquarters for an additional factory of approximately 3,000 m2 to meet our future expansion needs. This building is currently in the planning stage and it is anticipated that the factory will be completed in 2020. The Board continues to review the Group’s capacity requirements against the expected future growth and remains confident that the business has sufficient manufacturing capacity until a new facility becomes available.
New Product Development
During the year, we significantly increased the level of resources applied to new product development and in particular the next phase of development work on our advanced vehicle driving simulator. In June 2018, we were delighted to announce the first order for the aVDS, valued at over £2m. The simulator is now being assembled and will be shipped to the customer, a Chinese test house, in FY19.
We recently introduced our new LaunchPad ADAS target product to the market which has been well received by the industry and we have already received multiple orders. LaunchPad is a highly manoeuvrable, compact powered platform that has been designed to carry Vulnerable Road User (“VRU”) targets for ADAS development and autonomous vehicle testing and is fully compatible with Euro NCAP approved pedestrian, cyclist and moped dummies. We see LaunchPad as a significant addition to our comprehensive suite of track testing products where there is rapidly growing demand for complex testing scenarios with multiple moving objects. We remain the only supplier to offer a full suite of interactive track testing products managed from a sophisticated and comprehensive single software environment.
The Group continues to work on a number of innovative new products that we expect to bring to the market in the coming years and we continue to be pleased with the reaction of our customers to these exciting projects.
Corporate Governance
The Board firmly believes that robust corporate governance and risk management are essential to maintaining the stability of the Group and its financial health. During the year the Board decided to adopt the new Quoted Companies Alliance (“QCA”) Corporate Governance Code and I am pleased to confirm that the Group is in full compliance with the QCA Code as required under the AIM Rules. I report separately on the Group’s corporate governance approach and procedures in my Corporate Governance Statement which can be found in the Annual Report.
The Board
At the end of February 2018 Tim Rogers stepped down as Chief Executive Officer and left the Group. I would like to express my sincere thanks to him for his hard work over the previous five years in developing the business from a small private company into a thriving AIM quoted group.
Dr James Routh was appointed CEO with effect from 1 October 2018 and I am delighted to have him on board to lead the Group in our next phase of growth. James joins from Diploma PLC where he was responsible for the International Seals businesses outside North America. James brings extensive experience of delivering strong growth both organically and through carefully selected, value-enhancing acquisitions.
I assumed the role of interim Executive Chairman when Tim Rogers stepped down and until James’ appointment and I would like to thank Rob Hart (CFO) and Mat Hubbard (COO) for their support and commitment during this time and also all our Non-Executive Directors for their continuing counsel.
Dividend
The combination of strong results, a robust balance sheet and a positive outlook supports an increased dividend. The Board is recommending a final dividend of 2.2p per ordinary share, payable on 14 December 2018, subject to shareholder approval at the AGM. The ex-dividend date will be 22 November 2018 and the record date will be 23 November 2018. The total dividend for the year will therefore be 3.665p representing an increase of 10% over the prior year.
Outlook
Since its formation in 1982, Anthony Best Dynamics has gone through many changes to establish itself as a market leader in its targeted segments within the automotive R&D market. Our customers remain very active in introducing ever more complex ADAS equipment into their vehicles and in the development of semi- and fully-autonomous vehicles. Vehicle safety standards continue to evolve under Euro NCAP and NHTSA and their safety ratings are expected to continue to include more and more ADAS and crash avoidance systems, such as future Autonomous Emergency Braking and Autonomous Emergency Steering developments.
Despite our very strong growth, order intake has continued to run ahead of sales and this has provided the Group with a healthy order book into our new financial year and, as usual, visibility into our third quarter. Against this pleasing backdrop, our progress continues to require ever greater investment in systems and our operational capability to ensure that we are fully capable of supporting current and future growth. In the coming year we expect to make further investment in new product development, marketing, service and support, our growing overseas footprint and, of course, our people, whose skills and energy remain so important to our future success. Inevitably this investment will provide some constraint to our operating margin, but the Board remains confident that, under the leadership of our new CEO, we are positioned to deliver a year of solid progress.
Tony Best
AB Dynamics plc – Non-Executive Chairman
13 November 2018
