# Directors' report

_Source: `DeepSeekOCR_Ardian_pruned_1k/consumer-cyclical-auto-parts/LSE_ABDP.L_2021/LSE_ABDP.L_2021.mmd` · pages 88-94_

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Directors' report

## Index to principal Directors' report and other required governance and compliance disclosures

This section contains information which the Directors are required by law and regulation to include within the Annual Report and Accounts. Where relevant information (required to be disclosed in the Directors' report) is located in more detail elsewhere in this document, please refer to the table below:

<table><tr><td>Information</td><td>Section in Annual Report</td><td>Pages</td></tr><tr><td>Business review</td><td>Strategic report</td><td>1 to 58</td></tr><tr><td>Principal risks and uncertainties</td><td>Strategic report</td><td>56 to 58</td></tr><tr><td>Risk management and internal controls</td><td>Risk management</td><td>56 to 57</td></tr><tr><td>Disclosure of information to auditor</td><td>Directors&#x27; report</td><td>89</td></tr><tr><td>Dividend recommendation for the year</td><td>Strategic report - Chairman&#x27;s statement</td><td>7</td></tr><tr><td>Strategy and future developments of the Company</td><td>Strategic report</td><td>9 to 19</td></tr><tr><td>Directors who held office during the year</td><td>Governance - Board of Directors</td><td>60 to 61</td></tr><tr><td>Directors&#x27; and Officers&#x27; liability insurance in place</td><td>Governance - Directors&#x27; report, Statement of corporate governance</td><td>71</td></tr><tr><td>Director skills, experience and independence</td><td>Governance - Board of Directors</td><td>60 to 61</td></tr><tr><td>Rules governing the appointment of Directors</td><td>Governance</td><td>68</td></tr><tr><td>Powers of Directors</td><td>Governance</td><td>68</td></tr><tr><td>Structure of share capital, including restrictions and the transfer of securities, voting rights and significant shareholders</td><td>Directors&#x27; report</td><td>88 to 89</td></tr><tr><td>Non-financial information statement</td><td>Strategic report</td><td>1 to 58</td></tr><tr><td>Articles of Association and the rules governing changes to them</td><td>Directors&#x27; report</td><td>88</td></tr><tr><td>Company&#x27;s energy usage and greenhouse gas emissions</td><td>Strategic report - ESG strategy</td><td>37 to 39</td></tr><tr><td>Research and development</td><td>Strategic report</td><td>32</td></tr><tr><td>Director remuneration details</td><td>Remuneration Committee report</td><td>80 to 86</td></tr><tr><td>Corporate social responsibility</td><td>Strategic report - ESG strategy</td><td>40 to 41</td></tr><tr><td>Employee engagement</td><td>Strategic report - ESG strategy</td><td>4</td></tr><tr><td>Employment policies</td><td>Strategic report - ESG strategy</td><td>40 to 43</td></tr><tr><td>The Company&#x27;s S172(1) statement</td><td>Strategic report - ESG strategy</td><td>50 to 53</td></tr><tr><td>Stakeholder engagement</td><td>Strategic report - ESG strategy</td><td>50 to 51</td></tr><tr><td>Principal decisions taken by the Company arising from or influenced by stakeholder engagement</td><td>Statement of corporate governance</td><td>72 to 73</td></tr><tr><td>Accounting standards applied</td><td>Directors&#x27; report, note 1 of financial statements</td><td>99</td></tr><tr><td>Performance evaluation</td><td>Nomination Committee report</td><td>76</td></tr></table>

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## Directors' report continued

## Company information

## Articles of Association

The Company's Articles of Association may be amended by special resolution of the Company's shareholders.

## Strategic report

The Strategic report is set out on pages 1 to 58 and was approved by the Board on 24 November 2021. It is signed on behalf of the Board by James Routh, Chief Executive Officer.

## Cautionary statement

The review of the business and its future development in the Annual Report has been prepared solely to provide additional information to shareholders to allow individual shareholders to consider the Group's strategies and make their own assessment of the potential for these strategies to succeed. It should not be relied on by any other party for any other purpose. The review contains forward-looking statements which are made by the Directors in good faith based on information available to them up to the time of the approval of these reports, as such they should be treated with caution due to inherent uncertainties associated with such statements.

## Employees

The average number of persons, including Directors, employed by the Group including its overseas subsidiaries and their remuneration is set out on pages 84 to 85 and in note 6 to the financial statements. Other information about the Group's employee engagement, diversity and inclusion policies is set out in the People Potential section of ESG strategy, and Corporate Social Responsibility section starting on page 40. The Group-wide gender diversity split as at 1 September 2021 was 18% female and 82% male.

## Greenhouse gas emissions (GHG)

The Group recognises and strives to minimise its impact on the environment. This year our main environmental focus has been on clean inputs and responsible consumption. Further information including the Group's carbon emissions and energy consumption data can be found on pages 37 to 39.

## Shareholder information

## Incorporation and principal activity

AB Dynamics plc is domiciled in England and registered in England and Wales under Company Number 8393914. At the date of this report there were 22,622,344 ordinary shares of 1p each in issue, all of which are fully paid up and quoted on the London Stock Exchange's AIM market. The principal activity of the Group is the design, manufacture and supply to the global automotive and mobility sectors of advanced testing systems, simulation products and testing services. A description and review of the activities of the Group during the financial year and an indication of future developments is set out on pages 1 to 58.

## Annual General Meeting

The Annual General Meeting (AGM) will be held at 11am on Wednesday 12 January 2022 at Tulchan Communications, 2nd Floor, 85 Fleet Street London EC4Y 1AE. The Notice of the AGM, which is a separate document, will be sent to all shareholders and will be published on the AB Dynamics plc website.

## Substantial shareholdings

At 29 October 2021, the Company had been notified of the following interests amounting to 3% or more of the voting rights in its ordinary share capital:

<table><tr><td></td><td>Percentage of ordinary share capital</td></tr><tr><td>Anthony Best</td><td>19.7</td></tr><tr><td>Castlefield Investments</td><td>13.4</td></tr><tr><td>Naemi Best</td><td>6.5</td></tr><tr><td>BlackRock Investment Management</td><td>4.0</td></tr><tr><td>Charles Stanley</td><td>3.7</td></tr><tr><td>Tellworth Investments</td><td>3.2</td></tr><tr><td>Danske Bank Asset Management</td><td>3.0</td></tr><tr><td>Liontrust Asset Management</td><td>3.0</td></tr></table>

As far as the Directors are aware, there were no other interests above 3% of the issued ordinary share capital.

## Share capital

The rights attaching to the Company's ordinary shares, as well as the powers of the Company's Directors, are set out in the Company's Articles of Association, copies of which can be obtained from the Group Company Secretary and are available on the Company's website. The Company is not aware of any agreements between shareholders that may result in restrictions on the transfers of securities and/or voting rights. No person holds securities in the Company carrying special rights with regard to control of the Company.

## Employee share plans

For details of the Company Share Option Plan, under which 138,872 non-transferable options were granted to employees in October 2019, and the Group's ongoing Long-term Incentive Plan, the conditional arrangement under which contingent share awards can be made to selected senior management, including the Executive Directors, are set out in the Remuneration Committee report and in note 26 of the Accounts.

## Restrictions on transfer of shares

The Board may in its absolute discretion refuse to register a transfer of a certificated share that is not fully paid, provided that the refusal does not prevent dealings in shares in the Company from taking place on an open and proper basis. The Board may also refuse to register a transfer of a certificated share, unless the instrument of transfer is:

(i) Duly stamped or duly certified or otherwise shown to the satisfaction of the Board to be exempt from stamp duty, lodged at the Transfer Office or at such other place as the Board may appoint and (save in the case of a transfer by a person to whom no certificate was issued in respect of the shares in question) accompanied by the certificate for the shares to which it relates, and such other evidence as the Board may reasonably require to show the right of the transferor to make the transfer and, if the instrument of transfer is executed by some other person on his behalf, the authority of that person so to do

(ii) In respect of only one class of shares

(iii) In favour of not more than four persons jointly

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## Directors' report continued

## Restrictions on transfer of shares continued

There are no other restrictions on the transfer of ordinary shares in the Company except certain restrictions which may from time to time be imposed by laws and regulations (for example insider trading laws); or where a shareholder with at least a 0.25% interest in the Company's certificated shares has been served with a disclosure notice and has failed to provide the Company with information concerning interests in those shares.

## Related party disclosures (AIM Rule 19)

There is no information to be disclosed by the Company in respect of related party transactions, except for:

• Share options and long-term incentive schemes awarded to Executive Directors (see the Remuneration Committee report)

• Provision of services by controlling shareholder (see the Remuneration Committee report)

• Agreements with controlling shareholders (see related party note 25 of the financial statements)

Mr A Best, former Chairman of the Company, is a trustee and beneficiary of the Best Middleton Trust. Rental payments of  \( £44,000 \)  (2020:  \( £48,000 \) ) were made in the year to the Trust. In July 2021 the lease was terminated and therefore all agreements with a controlling shareholder have now ceased.

## Financial information

## Results and dividends

The profit for the financial year attributable to shareholders was  \( £2,985,000 \)  (2020:  \( £4,022,000 \) ). The Directors recommend a total final dividend of 3.24p per ordinary share (2020: 4.4p), to be paid, if approved, on 28 January 2022. The results are shown more fully in the consolidated financial statements on pages 95 to 98 and summarised in the Chief Financial Officer's review on pages 30 to 33.

## Independent auditor

A resolution to re-appoint Crowe LLP (Crowe) as the Group's external auditor will be proposed at the forthcoming AGM, in accordance with Section 489 of the Companies Act 2006.

## Disclosure of information to auditor

Each person who is a Director at the date of approval of this Directors' report confirms that:

• So far as that Director is aware, there is no relevant audit information of which the Company's auditor is unaware

- That Director has taken all the steps that ought to have been taken as a Director in order to be aware of any information needed by the Company's auditor in connection with preparing its report and to establish that the Company's auditor is aware of the information

This confirmation is given and should be interpreted in accordance with the provisions of Section 418 of the Companies Act 2006.

## Directors' assessment of going concern

At 31 August 2021 the Company had net current assets of  \( £25,492,000 \)  (2020:  \( £29,503,000 \) ) with the main current asset being amounts owed from its subsidiary Anthony Best Dynamics Limited, amounting to  \( £17,630,000 \)  (2020:  \( £20,477,000 \) ).

## Going concern

The Directors have assessed the principal risks discussed on pages 56 to 58, including by modelling a severe but plausible downside scenario for COVID-19, whereby the Group experiences:

• A significant reduction in demand over the next two financial years

• Supply chain disruption

• Delays in collection of cash from customers

• Increase in input costs resulting in reduction in gross margin to 40%

With £23.3m of cash at 31 August 2021 and a £15m undrawn revolving credit facility, in this severe downside scenario, the Group has sufficient headroom to be able to continue to operate for the foreseeable future. The Directors believe that the Group is well placed to manage its financing and other business risks satisfactorily and have a reasonable expectation that the Group will have adequate resources to continue in operation for at least twelve months from the signing date of this Annual Report. They therefore consider it appropriate to adopt the going concern basis of accounting in preparing the financial statements.

## Directors' insurance

The Group has in place a Directors and Officers Liability Insurance Policy which provides cover for the personal liability which the Company's Directors and officers may face. This remains in force at the date of this report.

Approved for and on behalf of the Board.

Dr James Routh
Chief Executive Officer
AB Dynamics plc
Company Number: 8393914
24 November 2021

Richard Elsy CBE
Non-Executive Chairman