AB Dynamics confident in delivering second half expectations

AB Dynamics reported an improved order intake across both of its divisions in its first half on Wednesday, compared to the second half of 2020, with a positive book-to-bill ratio giving it confidence in delivering on second half revenue expectations.

The AIM-traded firm said a significant proportion of those expectations were covered by its current order book

As it had anticipated, revenue at £27.3m for the six months ended 28 February was “broadly comparable” to the second half of 2020, with the impact of Covid-19 continuing into the 2021 financial year.

Track testing revenue was 29% lower year-on-year and 6% lower than the prior six months, due to ongoing pandemic disruption to customer testing activity, although driving robot sales started to recover during the period.

Laboratory testing and simulation delivered revenue growth of 23% year-on-year and 38% on the prior period, driven by strong order intake following deferments in 2020.

Operating margins were consistent with the second half of 2020 at 12.8%, which the board said reflected reduced levels of activity and continued strategic investment in capabilities, to support long-term growth drivers.

The company’s adjusted operating profit came in at £3.5m, comparable to the £3.3m it reported in the second half of 2020, and falling from £8m year-on-year, which was before the impact of the coronavirus crisis.

Adjusted diluted earnings per share rose to 13.1p from 10.7p in the prior period, but compared to 29.2p in the first half of the 2020 financial year.

AB Dynamics reported “strong” cash flow from operations of £7.8m, as well as a “significant” net cash balance of £33.1m at period end compared to £34.2myear-on-year.

That was after capital expenditure of £4.6m in the period, which the board said were intended to provide scope to support the group's strategic growth objectives.

It noted that €20m of that cash was used to fund the acquisition of Vadotech Group.

The directors declared an interim dividend of 1.6p per share, compared to nil a year ago.

Looking at its current trading, AB Dynamics said the order intake trend gave the company confidence for continued positive momentum into the second half.

The board's expectations for the financial year remained unchanged, while the firm’s future growth prospects remained supported by long-term structural and regulatory growth drivers in active safety and autonomous systems.

“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,” said chief executive officer Dr James Routh.

“We have seen an encouraging rebuild of demand in our key markets from the severe disruption experienced in the second half of the 2020 financial year.

“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.”

Dr Routh said that, together with the risk of currency headwinds and Brexit-related logistics disruption, meant the firm remained cautious in the near term.

“However, our improved order intake provides positive trading momentum into the second half.

“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, Dr Routh said the board and management saw “significant scope” for continued progress against the group's strategy, pointing to the acquisition of Vadotech in March 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.”

At 1343 BST, shares in AB Dynamics were down 6.12% at 2,300p.