AB Dynamics reports solid first-half growth

23rd Apr 2024 09:49

(Sharecast News) - Transport testing, simulation and measurement specialist AB Dynamics reported an 8% increase in first-half revenue on Tuesday, to £52.3m.

The AIM-traded firm said its gross margin improved to 58.3%, representing a 90 basis point increase.

Adjusted EBITDA rose 12% to £10.6m, while adjusted operating profit reached £8.9m, reflecting a 16% increase.

The company's adjusted operating margin expanded 110 basis points to 17%.

Statutory operating profit rocketed 96% to £5.5m, while adjusted cash flow from operations experienced a rise of 19%, reaching £11.3m.

The firm's net cash position stood at £29.1m, compared to £21.3m at the end of the first half of 2023.

AB Dynamics put the growth in revenue and operating profit down to improved operating margin, operating leverage, gross margin gains, and enhanced efficiency.

Market and customer demand remained strong across all three sectors and regions served.

Revenue growth was seen in testing products and testing services, partially offset by a reduction in simulator revenue due to the timing of significant contracts.

Testing products revenue grew 12%, driven by an increase in ADAS platforms, while testing services revenue surged by 23%, particularly in the US and Asia.

The proportion of recurring and service-based sales increased to 52% for the period.

AB Dynamics said it effectively managed inflationary cost pressures, with gross margins improving to 58.3%.

Operationally, the firm said it continued its new product development efforts in line with its technology roadmap.

Recent approvals from Euro NCAP for the Soft Pedestrian 360 and the LaunchPad Spin products were highlighted.

Additionally, the company delivered the first units of its new durability testing solution and expects initial revenues from the retrofit pedestrian detection system for the construction industry in the second half of the year.

AB Dynamics also announced the acquisition of Venshure Test Services (VTS), a provider of mileage accumulation, electric vehicle, and environmental testing services in the US.

The company said it was well-positioned to sustain growth momentum over the medium term, supported by strong organic growth across automotive markets, opportunities presented by ABD Solutions, and a robust financial position.

Looking ahead, it said it was confident in sustaining performance momentum, and expected to deliver full-year adjusted operating profit ahead of current expectations.

Future growth prospects remained promising, supported by long-term structural and regulatory growth drivers in active safety, autonomous systems, and vehicle automation.

"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," said chief executive officer Dr James Routh.

"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."

Dr Routh said the company's "solid" order book provided 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 the second half and benefiting from the acquisition of VTS and improved margins, the board expects to deliver full year operating profit ahead of its expectations."

At 0926 BST, shares in AB Dynamics were up 1.36% at 1,860p.

Reporting by Josh White for Sharecast.com.