Shares of AB Dynamics slipped 6% on Tuesday after the automotive testing specialist warned that most of the temporary cost savings which helped it deliver a 20% adjusted operating margin in the year to Aug. 31 are expected to unwind in the next financial year.
Ed Haycock, the company’s Chief Financial Officer-designate, described those savings as "largely the delay of discretionary spend," and said, "We expect most of the overhead saving to reverse as we balance financial performance with investment in innovation, sales, and routes to market."
The group said it commenced the 2027 financial year with "no sign" that the geopolitical and economic disruption it cited during the prior year is easing. It also stated that headwinds in the car industry, particularly across Europe, persist, and that the timing for a return to normal market conditions is "inherently uncertain."
For the 12 months ended Aug. 31, AB Dynamics reported revenue of 1.6 million, down 12% from 04.2 million a year earlier, which the company attributed to geopolitical events, softer auto market conditions in Europe and currency effects.
Adjusted operating profit before exceptional items decreased 18% to 8.3 million from 2.3 million previously, reflecting lower sales volumes. That left adjusted operating margin at 20%, compared with 21.4% the prior year.
Adjusted diluted earnings per share declined 21% to 60.3 pence from 76 pence, which the company linked to the lower operating profit and an increased tax rate.
On a statutory basis AB Dynamics reported a net loss of 2 million, or 52.2 pence per share, following a 9 million loss from its VadoTech China testing-services unit, which the company is in the process of closing. Exceptional charges tied to VadoTech totalled 9.2 million, largely a non-cash write-down.
Adjusted operating cash flow fell to 3.6 million from 7.8 million as customer deliveries were later in the year than is typical, leaving cash conversion at 61%.
Net cash on the balance sheet was 4.5 million, down from 1.4 million a year earlier. The company spent 6.1 million on acquisitions, principally for eMpulse.
By business line, Testing Products revenue fell 21% to 8.4 million, noting that the prior year included a delivery of a robot to a North American automaker. Testing Services revenue rose 13% and Simulation revenue increased 10%.
The board approved a 10% increase in the total dividend to 10.08 pence from 9.16 pence, and said it will seek shareholder approval on Jan. 14 to commence a buyback program, citing "the current valuation of the business."
Looking ahead, the board said it expects adjusted operating profit for the 2027 financial year to be "in line with current expectations." The group's order book stood at 1 million, compared with 2 million a year earlier.
This report focuses on the company's stated financial results, cash position, segment revenue trends, and management commentary on cost reversals and market uncertainty.