AB Dynamics shares drop 6% on weak outlook, margin pressure
AB Dynamics shares drop 6% on weak outlook, margin pressure
AB Dynamics shares fell 6% on Tuesday, after the car-safety testing group said most of the cost savings that held its 2026 margin at 20% will reverse next year as it spends more on sales and product development, with no sign yet of a recovery in demand.
Chief Financial Officer-designate Ed Haycock said the savings were "largely the delay of discretionary spend" and added, "We expect most of the overhead saving to reverse as we balance financial performance with investment in innovation, sales, and routes to market."
AB Dynamics said it entered its 2027 financial year with "no sign" of the geopolitical and economic disruption easing, and that car industry headwinds, particularly in Europe, remain.
It said the timing of market conditions returning to normal was "inherently uncertain."
For the year ended Aug 31, revenue fell 12% to £91.6 million from £104.2 million, which the company attributed to geopolitical events, weak car market conditions, particularly in Europe, and currency effects.
Adjusted operating profit, before one-off items, fell 18% to £18.3 million from £22.3 million on lower sales volumes. Adjusted operating margin was 20%, versus 21.4% a year earlier.
Adjusted diluted earnings per share fell 21% to 60.3 pence from 76 pence, which the company linked to lower operating profit and a higher tax rate.
The company reported a net loss of £12 million, or 52.2 pence a share, after a £19 million loss from its VadoTech China testing-services unit, which it is closing. Exceptional charges for VadoTech totalled £19.2 million, mostly a non-cash write-down.
Adjusted operating cash flow fell to £13.6 million from £27.8 million as customer deliveries came later in the year than usual, and cash conversion was 61%. Net cash was £24.5 million, versus £41.4 million a year earlier. The company spent £16.1 million on acquisitions, mainly eMpulse.
Testing Products revenue fell 21% to £58.4 million, as the prior year included a robot delivery to a North American automaker. Testing Services revenue rose 13% and Simulation 10%.
The company raised its total dividend 10% to 10.08 pence from 9.16 pence and will ask shareholders on Jan 14 for permission to buy back shares, citing "the current valuation of the business".
The board expects adjusted operating profit for 2027 to be "in line with current expectations". The order book stood at £31 million versus £32 million a year earlier.
