# To the members of AB Dynamics plc

_Source: `DeepSeekOCR_Ardian_pruned_1k/consumer-cyclical-auto-parts/LSE_ABDP.L_2019/LSE_ABDP.L_2019.mmd` · pages 53-59_

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To the members of AB Dynamics plc

## Other information

The directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

## Opinion on other matter prescribed by the Companies Act 2006

In our opinion based on the work undertaken in the course of our audit

> the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and

> the strategic report and directors' report have been prepared in accordance with applicable legal requirements.

## Matters on which we are required to report by exception

In light of the knowledge and understanding of the Group and the Parent Company and their environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

> adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from branches not visited by us; or

> the Parent Company financial statements are not in agreement with the accounting records and returns; or

> certain disclosures of directors' remuneration specified by law are not made; or

> we have not received all the information and explanations we require for our audit.

## Responsibilities of the directors for the financial statements

As explained more fully in the directors' responsibilities statement set out on page 49, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the Group's and Parent Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but to do so.

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## Auditor's responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.

Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

## Use of our report

This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.

## John Glasby

Senior Statutory Auditor
for and on behalf of
Crowe U.K. LLP
Statutory Auditor
St Bride's House,
10 Salisbury Square
London
EC4Y 8EH
26 November 2019

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## Consolidated statement of comprehensive income
For the year ended 31 August 2019

<table><tr><td></td><td>Note</td><td>2019£&#x27;000</td><td>Restated*2018£&#x27;000</td></tr><tr><td>Revenue</td><td>3</td><td>57,957</td><td>37,051</td></tr><tr><td>Cost of sales</td><td></td><td>(30,039)</td><td>(24,497)</td></tr><tr><td>Gross profit</td><td></td><td>27,918</td><td>12,554</td></tr><tr><td>Administrative expenses</td><td></td><td>(16,505)</td><td>(4,011)</td></tr><tr><td>Operating profit before share based payment costs</td><td></td><td>11,413</td><td>8,543</td></tr><tr><td>Share based payment costs</td><td>24</td><td>(586)</td><td>(660)</td></tr><tr><td>Operating profit</td><td></td><td>10,827</td><td>7,883</td></tr><tr><td>Finance income</td><td>4</td><td>171</td><td>64</td></tr><tr><td>Profit before tax</td><td>5</td><td>10,998</td><td>7,947</td></tr><tr><td>Tax expense</td><td>6</td><td>(2,340)</td><td>(932)</td></tr><tr><td>Profit for the year</td><td></td><td>8,658</td><td>7,015</td></tr><tr><td>Other comprehensive income:</td><td></td><td></td><td></td></tr><tr><td>Items that may be reclassified to consolidated income statement:</td><td></td><td></td><td></td></tr><tr><td>Exchange gains on foreign currency net investments</td><td></td><td>178</td><td>—</td></tr><tr><td>Total comprehensive income for the year</td><td></td><td>8,836</td><td>7,015</td></tr><tr><td>Earnings per share - basic (pence)</td><td>8</td><td>42.9p</td><td>36.3p</td></tr><tr><td>Earnings per share - diluted (pence)</td><td>8</td><td>42.1p</td><td>35.0p</td></tr></table>

* The prior year comparative numbers have been restated to reclassify certain overheads from cost of sales to administrative expenses.

## Alternative performance measures

<table><tr><td></td><td>Note</td><td>2019£&#x27;000</td><td>2018£&#x27;000</td></tr><tr><td>Operating profit</td><td></td><td>10,827</td><td>7,883</td></tr><tr><td>Add: Acquisition related charges</td><td>10</td><td>1,551</td><td>—</td></tr><tr><td>Add: Fee to terminate agents</td><td></td><td>550</td><td>—</td></tr><tr><td>Add: Share based payment costs</td><td>24</td><td>586</td><td>660</td></tr><tr><td>Adjusted operating profit</td><td></td><td>13,514</td><td>8,543</td></tr><tr><td>Finance income</td><td>4</td><td>171</td><td>64</td></tr><tr><td>Adjusted profit before tax</td><td>5</td><td>13,685</td><td>8,607</td></tr><tr><td>Adjusted earnings per share</td><td>8</td><td>56.4p</td><td>38.2p</td></tr><tr><td>Adjusted diluted earnings per share</td><td>8</td><td>55.4p</td><td>36.9p</td></tr></table>

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## Consolidated statement of financial position
As at 31 August 2019

<table><tr><td></td><td>Note</td><td>2019
£&#x27;000</td><td>2018
£&#x27;000</td></tr><tr><td>Non-current assets</td><td></td><td></td><td></td></tr><tr><td>Goodwill</td><td>9</td><td>19,244</td><td>—</td></tr><tr><td>Acquired intangible assets</td><td>10</td><td>21,803</td><td>—</td></tr><tr><td>Other intangible assets</td><td>10</td><td>268</td><td>—</td></tr><tr><td>Investment</td><td>11</td><td>14</td><td>—</td></tr><tr><td>Property, plant and equipment</td><td>12</td><td>17,922</td><td>13,679</td></tr><tr><td>Deferred tax assets</td><td>18</td><td>1,952</td><td>1,289</td></tr><tr><td></td><td></td><td>61,203</td><td>14,968</td></tr><tr><td>Current assets</td><td></td><td></td><td></td></tr><tr><td>Inventories</td><td>13</td><td>11,149</td><td>6,903</td></tr><tr><td>Trade and other receivables</td><td>14</td><td>12,986</td><td>8,470</td></tr><tr><td>Contract assets</td><td>15</td><td>1,885</td><td>2,189</td></tr><tr><td>Taxation</td><td></td><td>939</td><td>56</td></tr><tr><td>Cash and cash equivalents</td><td>16</td><td>36,225</td><td>15,942</td></tr><tr><td></td><td></td><td>63,184</td><td>33,560</td></tr><tr><td>Total assets</td><td></td><td>124,387</td><td>48,528</td></tr><tr><td>Equity and liabilities</td><td></td><td></td><td></td></tr><tr><td>Share capital</td><td>17</td><td>222</td><td>195</td></tr><tr><td>Share premium</td><td>17</td><td>60,049</td><td>10,258</td></tr><tr><td>Reconstruction reserve</td><td></td><td>(11,284)</td><td>(11,284)</td></tr><tr><td>Merger relief reserve</td><td></td><td>11,390</td><td>11,390</td></tr><tr><td>Translation reserve</td><td></td><td>178</td><td>—</td></tr><tr><td>Retained profits</td><td></td><td>38,252</td><td>27,484</td></tr><tr><td>Total equity</td><td></td><td>98,807</td><td>38,043</td></tr><tr><td>Non-current liabilities</td><td></td><td></td><td></td></tr><tr><td>Deferred tax liabilities</td><td>18</td><td>5,421</td><td>339</td></tr><tr><td>Deferred consideration</td><td>21</td><td>3,239</td><td>—</td></tr><tr><td></td><td></td><td>8,660</td><td>339</td></tr><tr><td>Current liabilities</td><td></td><td></td><td></td></tr><tr><td>Trade and other payables</td><td>19</td><td>16,920</td><td>10,146</td></tr><tr><td>Total liabilities</td><td></td><td>25,580</td><td>10,485</td></tr><tr><td>Total equity and liabilities</td><td></td><td>124,387</td><td>48,528</td></tr></table>

The financial statements were approved by the Board of Directors and authorised for issue on 26 November 2019 and are signed on its behalf by:

Anthony Best
Director

Dr James Routh
Director

Company registration number: 08393914

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## Consolidated statement of changes in equity
For the year ended 31 August 2019

<table><tr><td></td><td>Note</td><td>Share capital €&#x27;000</td><td>Share premium €&#x27;000</td><td>Reconstruction reserve €&#x27;000</td><td>Merger relief reserve €&#x27;000</td><td>Translation reserve €&#x27;000</td><td>Retained profits €&#x27;000</td><td>Total equity €&#x27;000</td></tr><tr><td>At 1 September 2017</td><td></td><td>191</td><td>8,579</td><td>(11,284)</td><td>11,390</td><td>—</td><td>19,370</td><td>28,246</td></tr><tr><td>Share based payments</td><td></td><td>—</td><td>—</td><td>—</td><td>—</td><td>—</td><td>660</td><td>660</td></tr><tr><td>Total comprehensive income</td><td></td><td>—</td><td>—</td><td>—</td><td>—</td><td>—</td><td>7,015</td><td>7,015</td></tr><tr><td>Tax on options</td><td></td><td>—</td><td>—</td><td>—</td><td>—</td><td>—</td><td>1,107</td><td>1,107</td></tr><tr><td>Dividends</td><td>7</td><td>—</td><td>—</td><td>—</td><td>—</td><td>—</td><td>(668)</td><td>(668)</td></tr><tr><td>Issue of shares, net of share issue costs</td><td>17</td><td>4</td><td>1,679</td><td>—</td><td>—</td><td>—</td><td>—</td><td>1,683</td></tr><tr><td>At 31 August 2018</td><td></td><td>195</td><td>10,258</td><td>(11,284)</td><td>11,390</td><td>—</td><td>27,484</td><td>38,043</td></tr><tr><td>Share based payments</td><td></td><td>—</td><td>—</td><td>—</td><td>—</td><td>—</td><td>586</td><td>586</td></tr><tr><td>Total comprehensive income</td><td></td><td>—</td><td>—</td><td>—</td><td>—</td><td>178</td><td>8,658</td><td>8,836</td></tr><tr><td>Tax on options</td><td></td><td>—</td><td>—</td><td>—</td><td>—</td><td>—</td><td>2,271</td><td>2,271</td></tr><tr><td>Dividends</td><td>7</td><td>—</td><td>—</td><td>—</td><td>—</td><td>—</td><td>(747)</td><td>(747)</td></tr><tr><td>Issue of shares, net of share issue costs</td><td>17</td><td>27</td><td>49,791</td><td>—</td><td>—</td><td>—</td><td>—</td><td>49,818</td></tr><tr><td>At 31 August 2019</td><td></td><td>222</td><td>60,049</td><td>(11,284)</td><td>11,390</td><td>178</td><td>38,252</td><td>98,807</td></tr></table>

The share premium account is a non-distributable reserve representing the difference between the nominal value of shares in issue and the amounts subscribed for those shares.

The reconstruction reserve and merger relief reserve have arisen as follows:

The acquisition by the Company of the entire issued share capital of Anthony Best Dynamics Ltd in 2013 was accounted for a Group reconstruction. Consequently, the assets and liabilities of the Group were recognised at their previous book values as if the Company had always been the Parent Company of the Group.

The share capital for the period covered by these consolidated financial statements and the comparative periods is stated at the nominal value of the shares issued pursuant to the above share arrangement. Any differences between the nominal value of these shares and previously reported nominal values of shares and applicable share premium issued by Anthony Best Dynamics Ltd were transferred to the reconstruction reserve.

Retained profits represent the cumulative value of the profits not distributed to shareholders but retained to finance the future capital requirements of the Group.

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## Consolidated cash flow statement
For the year ended 31 August 2019

<table><tr><td></td><td>2019
£&#x27;000</td><td>2018
£&#x27;000</td></tr><tr><td>Profit before tax</td><td>10,998</td><td>7,947</td></tr><tr><td>Depreciation and amortisation</td><td>1,324</td><td>463</td></tr><tr><td>Loss on sale of tangible assets</td><td>—</td><td>15</td></tr><tr><td>Interest income</td><td>(171)</td><td>(64)</td></tr><tr><td>Acquisition expenses</td><td>768</td><td>—</td></tr><tr><td>Share based payment</td><td>586</td><td>660</td></tr><tr><td>Operating cash flow before changes in working capital</td><td>13,505</td><td>9,021</td></tr><tr><td>(Increase) in inventories</td><td>(3,447)</td><td>(1,944)</td></tr><tr><td>(Increase) in trade and other receivables</td><td>(1,667)</td><td>(333)</td></tr><tr><td>Increase in trade and other payables and accruals</td><td>1,554</td><td>3,194</td></tr><tr><td>Cash flow from operating activities</td><td>9,945</td><td>9,938</td></tr><tr><td>Interest received</td><td>171</td><td>64</td></tr><tr><td>Income tax paid</td><td>(1,350)</td><td>(1,002)</td></tr><tr><td>Net cash flow from operating activities</td><td>8,766</td><td>9,000</td></tr><tr><td>Cash flow from investing activities</td><td></td><td></td></tr><tr><td>Acquisition of businesses (including expenses, net of cash acquired)</td><td>(32,792)</td><td>—</td></tr><tr><td>Purchase of property, plant and equipment</td><td>(4,706)</td><td>(3,698)</td></tr><tr><td>Purchase of other intangibles</td><td>(228)</td><td>—</td></tr><tr><td>Sale of property, plant and equipment</td><td>—</td><td>6</td></tr><tr><td>Cash flow used in investing activities</td><td>(37,726)</td><td>(3,692)</td></tr><tr><td>Cash flow from financing activities</td><td></td><td></td></tr><tr><td>Dividends paid</td><td>(747)</td><td>(668)</td></tr><tr><td>Proceeds from issue of share capital, net of share issue costs</td><td>49,818</td><td>1,683</td></tr><tr><td>Net cash flow generated from financing activities</td><td>49,071</td><td>1,015</td></tr><tr><td>Net increase in cash and cash equivalents</td><td>20,111</td><td>6,323</td></tr><tr><td>Cash and cash equivalents at beginning of the financial year</td><td>15,942</td><td>9,619</td></tr><tr><td>Effect of exchange rates on cash and cash equivalents</td><td>172</td><td>—</td></tr><tr><td>Cash and cash equivalents at end of the financial year</td><td>36,225</td><td>15,942</td></tr></table>

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# Notes to the consolidated financial statements
For the year ended 31 August 2019

## 1. General information

AB Dynamics plc is a public company limited by shares and registered in England and Wales with company number 08393914. The Company is domiciled in the United Kingdom and the registered office and principal place of business is Middleton Drive, Bradford-on-Avon, Wiltshire, BA15 1GB. The consolidated financial statements comprise the Company and its subsidiaries (together referred to as the 'Group').

The principal activity of the Group is the design, manufacture and development of advanced testing and measurement products and services to the global automotive industry. The Group's products and services are used primarily for the development of road vehicles, particularly in the areas of active safety and autonomous systems.

## Basis of preparation

The consolidated financial statements are measured and presented in Sterling which is the currency of the primary economic environment in which the Group operates. They have been prepared under the historical cost convention, except for financial instruments that have been measured at fair value through profit or loss.

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted by the EU including related interpretations issued by the International Financial Reporting Interpretations Committee ('IFRIC'), and in accordance with the Companies Act 2006 as applicable to companies reporting under IFRS. These statements have been prepared on the going concern basis, which assumes that the Group will continue to be able to meet its liabilities as they fall due for the foreseeable future.

## Standards, amendments and interpretations to published standards not yet effective

IFRS 9 'Financial Instruments' has been adopted during the year but has had no material impact on the financial statements.

The Directors have considered those Standards and Interpretations, which have not been applied in the financial statements but are relevant to the Group's operations, that are in issue but not yet effective and do not consider that they will have a material impact on the future results of the Group.

The Directors are in the process of considering the potential changes that may occur to the financial statements under IFRS 16 'Leases'. This will apply to the Group's accounting period beginning on 1 September 2019. It is not expected that the application of IFRS 16 will have a material impact on the Group's results.

## 2. Summary of significant accounting policies

## (a) Going concern

The Group's activities and an outline of the developments taking place in relation to its products, services and marketplace are considered in the Chief Executive's review. The principal risks and uncertainties and mitigations are included in the strategic report.

Note 20 to the consolidated financial statements sets out the Company's financial risks and the management of capital risks.

Accordingly, after careful enquiry and review of available financial information, including projections of profitability and cash flows, the Directors believe that the Company has adequate resources to continue to operate for the foreseeable future and that it is therefore appropriate to continue to adopt the going concern basis of accounting in the preparation of the consolidated and Company financial statements.

## (b) Critical accounting estimates and judgements

Estimates and judgements are continually evaluated by the Directors and management and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The key assumptions concerning the future and other key sources of estimation uncertainty at the statement of financial position date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial period are as stated below:

## Assessment of the percentage of completion of construction projects (laboratory testing and simulation)

The probability of a profitable outcome and stage of completion of the contract is determined by regular review by management of project milestones, actual costs against budgeted costs, forecast costs to complete and any other pertinent information.