# Chairman's statement

_Source: `DeepSeekOCR_Ardian_pruned_1k/consumer-cyclical-auto-parts/LSE_ABDP.L_2019/LSE_ABDP.L_2019.mmd` · pages 9-15_

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Chairman's statement
Continuing to deliver

![](images/9_0.jpg)

Anthony Best
Chairman

"Our confidence about the future is based on our strong track record, unique capabilities and market position."

## Overview

I am pleased to report that the Group has delivered its tenth successive year of record revenue and adjusted profit reflecting continued strong demand for our advanced testing systems and measurement equipment. During the year the Group experienced a very favourable market background and reported revenues grew 56% to £58m and adjusted operating profit grew 58% to £13.9m. The outturn also benefited from our success in reducing our lead times, which had lengthened with strong levels of demand, to more appropriate levels. We operate in markets that benefit from long-term structural and regulatory growth drivers, and against this positive backdrop our customers continue to develop ever more sophisticated Advanced Driver Assistance Systems and semi and fully autonomous vehicles that will be required in the future. The results are discussed in detail in the Chief Executive's review that follows on pages 10 to 12 and in the Financial review on pages 30 and 31.

In May 2019, the Group raised gross proceeds of £50.1m through a placing of £45.1m, followed in June 2019 by the closing of an open offer of £5m, both of which were oversubscribed. We were delighted by the response from existing and also new investors whom we were pleased to welcome to the shareholder register. At the time the Board signalled its intention to use the net proceeds from the fundraise to support the Group's strategy, updated earlier in the year. The refreshed strategy, under the leadership of our CEO, has brought added focus to our new product development, our capability and capacity requirements to meet future growth, our international footprint, service and support functions, and opportunities for acquisitive growth.

Following the capital raise, the opportunity arose to acquire two complementary and attractive businesses with whom we had previously worked very closely for a number of years. In June 2019, we were pleased to announce the acquisition of rFpro, Kangaloosh Limited, for a maximum consideration of up to £21.6m and at the end of August 2019 the purchase of Dynamic Research, Incorporated ('DRI') for a maximum consideration of up to US$24.5m. Both businesses are firmly aligned to our acquisition criteria, with rFpro adding important engineering grade simulation software and highly accurate digital replicas of public roads, test tracks and racing circuits, and DRI who are experts in testing ADAS and vehicle dynamics, alongside the manufacture of a range of products for use in ADAS testing. I have much pleasure in welcoming the staff of both organisations to AB Dynamics.

Read more on pages 10–13

## International footprint and manufacturing facilities

We continue to invest in our manufacturing capacity and international footprint, our capabilities and our people. During the year we commenced operations from new facilities in Germany and the USA and as part of our international expansion we intend to establish Group operations in other key markets, including Japan, where we are currently transitioning activities in house.

As we have previously announced the Group has now received full planning permission for a new 2,850m \( ^{2} \)  facility adjacent to our existing headquarters

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in Bradford-on-Avon that will be used as a simulation centre of excellence and for engineering research and development. Ground work has begun with completion expected in Q4 2020. In addition, the Board has approved the consolidation of activities currently located in a number of smaller locations into a single operational site. The Group has purchased a 2.5 acre site on the outskirts of Melksham, approximately 5 miles from our main operations, on which we plan to build a new production facility. Building work is expected to commence in FY2021 and will take approximately 12 months to complete.

## Board changes

Dr James Routh joined the Group on 1 October 2018 as Chief Executive Officer. James has brought strong leadership and a wealth of relevant experience to the Group and it has been a great pleasure to welcome him to AB Dynamics and the Board.

On 13 February 2019 it was announced that Robert Hart had informed the Group of his intention to step down from his role as Chief Financial Officer and from the Board after ten years with AB Dynamics. I would like to thank Rob for his contribution to the success of the Group over the years up to and since our AIM IPO in 2013. As previously announced, Sarah Matthews-DeMers has been appointed as Chief Financial Officer with effect from 4 November 2019. Sarah brings extensive experience of financial management in public companies, investor relations and strategic development and I am delighted she has joined AB Dynamics.

Bryan Smart has also informed the Board of his intention to step down from his position as Chairman of the Audit and Risk Committee and retire from the Board at the AGM in January 2020. I would like to thank Bryan for his support and contribution to the development of the Group over the years since our flotation. The Board has begun the search for a suitable replacement and has also taken the decision to look to appoint a Non-Executive Director with relevant industry experience.
I would also like to thank each of our Non-Executive Directors for their continued wise counsel and contribution to the success of the Group during the year.

## Corporate governance

The Board is united in its view that robust corporate governance and risk management are essential to maintaining the stability and growth of the Group and its financial health. I am pleased to confirm that AB Dynamics has adopted the Quoted Companies Alliance ('QCA') Code and a statement of compliance is set out on our AIM Rule 26 website. I report separately on the Group's approach to governance and its procedures in my corporate governance statement, which can be found on pages 35 to 39 of this Annual Report.

## Our employees

I would like to thank all our employees for their continued hard work and professionalism over a very busy year. At its heart AB Dynamics is a people business and it is the contribution and performance of our talented employees that underpin our undoubted achievements. As we have grown, we have welcomed a significant number of new staff to the Group and we now have 264 employees (2018: 145), including employees of rFpro and DRI. I am pleased to say that we continue to attract the talent that we require to develop the increasingly complex new products that will be demanded by both our long-standing and newly emerging customers.

## Dividend

The Board is recommending a final dividend of 2.79p per share payable on 13 February 2020 subject to shareholder approval at the AGM. The ex-dividend date will be 2 January 2020 and the record date will be 3 January 2020. The total dividend for the year will therefore be 4.40p per share, which is an increase over the prior year of 20%.

The Board expects to continue to pursue a progressive dividend policy in the future.

## Outlook

AB Dynamics operates in long-term growth markets and has established a unique position as a leading designer, manufacturer and supplier of advanced testing and simulation solutions to the automotive industry globally. We continue to invest heavily into new product development that is critical to our future success and it is particularly pleasing therefore to report that we have now received a third order for our advanced Vehicle Driving Simulator. We expect simulation to play an increasingly important and critical part in the development of semi and fully autonomous vehicles in the future, as manufacturers will need to evaluate their vehicles extensively under large numbers of complex scenarios to provide a safe environment for all road users.

As in previous years, we have a healthy order book that provides good forward visibility and will continue to invest in our capabilities and infrastructure which will tend to constrain our margins. Whilst we remain optimistic about our prospects and the Group's future, we do remain alert to the continued difficulties faced by many of our customers selling into the global automotive market.

Anthony Best
Chairman
26 November 2019