AB Dynamics plc
2013 Annual Report & Accounts
For the period ended 31 August 2013
Company Registration No. 08393914
AB Dynamics plc
Annual report and financial statements
For the period ended 31 August 2013
Table of contents
Officers and professional advisers
Chairman's statement
Managing Director’s statement
Directors' report
Corporate governance statement
Independent auditor's report
Consolidated statement of comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements
Accounting policies for the consolidated financial statements
Company balance sheet
Notes to the company financial statements
Page
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46
AB Dynamics plc
Annual report and financial statements
For the period ended 31 August 2013
Officers and professional advisers
DIRECTORS
Anthony Best, Executive Chairman
Timothy John Rogers, Managing Director
Robert Andrew Leonard Hart, Finance Director
Graham Dudley Eves, Non-Executive Director
Frederick Bryan Smart, Non-Executive Director
SECRETARY
Robert Andrew Leonard Hart
REGISTERED OFFICE
AB Dynamics Plc
Holt Road
Bradford on Avon
Wiltshire
BA15 1AJ
Registered number: 08393914 (England and Wales)
AUDITOR
Crowe Clark Whitehill LLP
St Bride's House
10 Salisbury Square
London
EC4Y 8EH
NOMINATED ADVISER
Cairn Financial Advisers LLP
61 Cheapside
London
EC2V 6AX
BROKER
Charles Stanley Securities Ltd
131 Finsbury Pavement
London
EC2A 1NT
BANKERS
Bank of Scotland
Phase 2
2nd Floor
North East
Canons House
Canons Way
Bristol
BS99 7LB
LEGAL ADVISER
Pinsent Masons LLP
30 Crown Place
Earl Street
London
EC2A 4ES
REGISTRARS
Share Registrars Ltd
Suite E, First Floor
9 Lion & Lamb Yard
Farnham
GU9 7LL
PUBLIC RELATIONS ADVISER
Newgate Threadneedle
5th Floor
33 King William Street
London
EC4R 9AS
Page 1
AB Dynamics plc
Annual report and financial statements
For the period ended 31 August 2013
Chairman’s Statement
I am delighted to be able to report on a very successful year for AB Dynamics, one which I believe will
prove significant in the Group’s development. Continued strong performance resulted in revenues of £12.2
million, an increase of 37% over the prior year’s £8.9 million, fuelled by strong demand for all of our
products from a range of customers worldwide.
The year under review was notable for a number of initiatives put in place to ensure the long term
prosperity of the Group. In October 2012, Tim Rogers joined as Managing Director of the Group and was
instrumental in the process of gaining admission to the AIM market of the London Stock Exchange (“AIM”)
in May. In eight months, he had both to familiarise himself with every aspect of our business and assist the
rest of the Board with the IPO. It has been a pleasure to welcome him to the Group and I look forward to
continuing to work alongside him. The IPO raised £2.33 million net of share issue costs. A further £315k of
non-recurring AIM transaction costs were incurred leaving net proceeds of £2.0 million for the Group. We
were delighted with the take up by investors, with 19 institutions joining the share register and I would like
to thank them all for their support.
As set out in our Admission Document, the funds raised leave us well placed to effect the Group’s growth.
Some of the funds raised will be used to fund expansion into a new manufacturing facility in order to satisfy
the Group’s growing order book. We continue to make our case to the local planning authorities to obtain
planning permission and are hopeful but cannot be certain that this may be granted in Quarter 4 2013
and, if this is the case, we continue to believe that we will be able to complete the move in the second half
of 2015. In the meantime, as announced on 12 August 2013, we were pleased to complete a new annex at
our existing plant.
Since I founded the business in 1982, AB Dynamics has built a reputation for providing excellent advanced
testing and measurement products to the global automotive research and development sector, and it is
encouraging to see that so many of our early customers remain clients today. This was evidenced in July
when we announced that MIRA had placed an order for a new Suspension Parameter Measurement
Machine (“SPMM”), MIRA having also been the first customer to buy one of these machines in 1996. This
latest order is one of three SPMM orders which provide us with good revenue visibility in the next financial
year and beyond.
The Company has been able to build this reputation by attracting and retaining some of the very best talent
in UK engineering and several of my colleagues have been with the Company for more than 20 years. I
would like to thank all of the team for their continued hard work and dedication. With strong links to both
Bath and Cambridge universities, I feel confident that we can continue to provide both a creative and a
rewarding environment for young engineers.
On the assumption that our expectations are realised, we would hope to recommend the payment of a
dividend in the year ending 31 August 2014.
Anthony Best
Chairman
6 November 2013
Page 2
AB Dynamics plc
Annual report and financial statements
For the period ended 31 August 2013
Managing Director’s Statement
I am very pleased to provide my first annual review having joined the Group as Managing Director on 1
October 2012.
Results
The Group has delivered strong financial results with record revenues driven by a strong demand for all of
our products from a range of customers across different geographies. Notably, we have seen a continued
return to growth from our traditional markets in Europe and Japan combined with new interest from China.
Operating profit also saw a strong improvement to £2.2 million (2012: £1.8 million), up 22%. After including
the one off, non-recurring charge of £315k relating to the Company’s listing on AIM, the profit before tax
was similar to last year’s performance at £1.9 million (2012: £1.9 million).
Business model
The Group continues to operate in the niche automotive research sector which has, for the past 4 years,
experienced steady year on year growth. Management seeks to consolidate the company’s base to create
a sound platform for the company’s expansion by investing in product development, facilities and retaining
and recruiting high quality personnel. Measurements of the company’s performance are provided in the
Key Performance Indicators section on page 5.
Listing on AIM
One of the key developments of the year was the Company’s highly successful admission to trading on
AIM in May 2013. Demand was very encouraging and we were very pleased to welcome the new
institutions to the shareholder register. At the time of the listing, we stated that the funds would be used to
provide a new facility to provide additional capacity and also to assist with our presence in the rapidly
growing Asian markets. I am pleased to report that we have made progress on both fronts. The new facility
remains on track with the company seeking to relocate in the second half of 2015, subject to final planning
permission. In the meantime, we have recently concluded the building of a new annex on our existing site
at Bradford on Avon and have leased additional manufacturing space nearby. Whilst not a permanent
solution, these options provide a combined 30% increase in manufacturing capacity which will help us to
meet the current strong order book. To meet demand, we have relocated a UK ABD engineer to our
distributor in Tokyo to support our Japanese and Korean customers.
Product developments
This year, we launched two new track testing products. The Soft Pedestrian Target and the new Guided
Soft Crash Test Vehicle (“GSTV”) both represent a new approach to vehicle safety testing allowing car
manufacturers and test houses to evaluate (in a non-destructive way) vehicles fitted with the latest
Advanced Driver Assistance Systems (“ADAS”). By having the test vehicles interacting in a precise and
repeatable way with our moving pedestrian or vehicle soft targets, customers can safely calibrate their
systems to meet real world needs. The company received its first orders for both products from European
research laboratories and we fully expect more orders to follow as the future Euro NCAP standards require
the implementation of ADAS in vehicles.
Current trading
The new financial year has started well and we enter the year with good revenue visibility and a strong
order book. The Group has received three orders for Suspension Parameter Measurement Machines
(“SPMM”), with revenues from all of them expected to be recognised in the current financial year. The
contract value for each SPMM varies depending upon the options purchased, but they typically are in
excess of £1.5 million. Demand for our track testing equipment, which includes the Soft Targets mentioned
earlier, remains high with orders taking our production well into the third quarter of the current financial
year.
Page 3
AB Dynamics plc
Annual report and financial statements
For the period ended 31 August 2013
Outlook
With a promising pipeline of orders, the team now expanded to 51 employees and the infrastructure that
we have in place, I look forward to the future with great confidence.
The start to current financial year is in line with management’s expectations with significant visibility for the
remainder of the year provided by our existing order book.
Tim Rogers
Managing Director
6 November 2013
Page 4
AB Dynamics plc
Annual report and financial statements
For the period ended 31 August 2013
Directors’ report
The directors present their report and the audited financial statements of AB Dynamics plc for the
period ended 31 August 2013. The Company was incorporated on 7 February 2013 as AB Dynamics 2013
Limited. On 9 May 2013, the Company re-registered as a public limited company and changed its name to
AB Dynamics plc.
Principal activities
The principal activity of the Company during the period was that of a holding company.
Following the acquisition in May 2013 of Anthony Best Dynamics Limited, the principal activity of the
Group is the design, manufacture and supply to the global automotive industry of advanced testing and
measurement products for vehicle suspension, brakes and steering both in the laboratory and on the test
track. This transaction has been accounted for as a reverse acquisition as disclosed in note 1 to the
consolidated financial statements and therefore represents the continuation of the financial information of
Anthony Best Dynamics Limited.
Review of business and future developments
Details of the Company's progress during the year and its future prospects are provided in the
Chairman's and Managing Directors statements on page 2 and 3.
Key performance indicators
1. Maintain sustainable growth in revenue and operating profit
The Directors aim to achieve steady sustainable growth in turnover and operating profit. Strong cash
management is fundamental to delivering sustainable profit growth and the consistent delivery of
cash-backed profit remains a key performance indicator for the Group. In 2013, the Group
generated a net cash inflow from operations of £2.1 million (2012: inflow £0.5 million).
Aside from maintaining its focus on its current product lines, the Directors are ensuring that new
product offerings are developed in order to meet customer requirements and demands.
2. Retain, develop and ensure the safety of our people
The recruitment, development, retention and health and safety of our people and everyone who
works with us or is affected by our operations is paramount. We have the objective of ensuring that
safe working practices are consistently adopted and supported by rigorous reviews and training. In
2013, no issue arose. Furthermore, during the year, the Group retained the same level of expertise
and staff whilst recruiting four new graduate engineers and three skilled machinists.
3. Facilities
The Group needs to expand its factory space over time in order to maintain and grow the current
trading activities. During the year, the Group has opened an annex to the factory and taken on two
additional industrial units nearby, which has increased factory space by more than 30%. The
Directors remain focused on increasing the facilities further, as explained further in the Chairman’s
statement.
These matters remain key areas of focus for the forthcoming financial year.
Page 5
AB Dynamics plc
Annual report and financial statements
For the period ended 31 August 2013
Principal risks and uncertainties
Set out below are certain risk factors which could have an impact on the Group's long term performance.
The factors discussed below should not be regarded as a complete and comprehensive statement of all
potential risks and uncertainties facing the Company.
1. Risks relating to the business and operations of the group
The Group is reliant on key executives and personnel
The Group’s business, development and prospects are dependent upon the continued services and
performance of its Directors and other key personnel. The experience and commercial relationships
of the Group’s personnel help provide the Group with a competitive advantage. The Directors believe
that the loss of services of any existing key executives, for any reason, or failure to attract and retain
necessary additional personnel, could adversely impact on the business, development, financial
condition, results of operations and prospects of the Group. However, several members of staff have
worked for the Group for over 20 years and the Group continues to recruit and develop intelligent
and motivated individuals. In addition, key man insurance exists for all key personnel in the Group,
save for Anthony Best.
The Group may not successfully manage its growth
Expansion of the business of the Group may place additional demands on the Group’s management,
administrative and technological resources and marketing capabilities, and may require additional
capital expenditure. If the Group is unable to manage any such expansion effectively, then this may
adversely impact the business, development, financial condition, results of operations, prospects,
profits, cash flow and reputation of the Group.
The Group’s growth and future success will be dependent to some extent on the successful
completion of such expansion strategies proposed to be undertaken by the Group and the
sufficiency of demand for the Group’s products. The execution of the Group’s expansion strategies
may also place a strain on its managerial, operational and financial reserves. Should the Group fail
to implement such expansion strategies or should there be insufficient demand for the Group’s
products and services, the Group’s business operations, financial performance and prospects may
be adversely affected.
Potential requirement for further investment
The Group may require additional capital in the future for expansion, its activities and/or business
development, whether from equity or debt sources. There can be no guarantee that the necessary
funds will be available on a timely basis, on favourable terms, or at all, or that such funds if raised,
would be sufficient. If additional funds are raised by issuing equity securities, material dilution to the
existing shareholdings may result. The level and timing of future expenditure will depend on a
number of factors, many of which are outside of the Group’s control. If the Group is not able to obtain
additional capital on acceptable terms, or at all, it may be forced to curtail or abandon such
expansion, activities and/or business development which could adversely impact upon the Group, its
business, development, financial condition, operating results or prospects.
Litigation
Legal proceedings, with or without merit, may arise from time to time in the course of the Group’s
business, including in connection with intellectual property rights. The Directors cannot preclude
litigation being brought against the Group and any litigation brought against the Group could have a
material adverse effect on the financial condition, results or operations of the Company. The Group’s
business may be materially adversely affected if the Group and/or its employees or agents are found
not to have met the appropriate standard of care or exercised their discretion or authority in a
prudent or appropriate manner in accordance with accepted standards.
Page 6
AB Dynamics plc
Annual report and financial statements
For the period ended 31 August 2013
Internal controls
Future growth and prospects for the Company will depend on its management’s ability to manage
the business of the Group and to continue to expand and improve operational, financial and
management information and quality control systems on a timely basis, whilst at the same time
maintaining effective cost controls. Any failure to expand and improve operational, financial and
management information and quality control systems in line with the Group’s growth could have a
material adverse effect on the Group’s business, financial condition and results of operations.
New facility
Plans for the Group’s new facility are still in the development and planning stage. No formal
documentation has yet been entered into and, although the Company has established estimated
total costs, there can be no guarantee that the project will proceed or that it will proceed as planned.
It is possible that costs will increase or other unforeseen issues will mean that the current
development project does not proceed. If the facility is not constructed, this may have an adverse
impact on the Company’s future growth.
The Group is reliant on overseas sales representatives, agents and distributors
The Group has appointed a number of sales representatives, agents and distributors for certain of its
products in overseas jurisdictions, including the US, Canada, India, Japan, Malaysia, Mexico,
Germany, China and Taiwan. However, for the majority of these individuals, there are no formal
written terms of engagement. Terms concerning, inter alia, notice and termination are therefore
uncertain, meaning that there are potential issues regarding the Group’s ability to sell and distribute
in certain jurisdictions should such sales representatives, agents and distributors cease to work with
the Group at short notice. In addition, provisions as to termination payments and/or compensation
are also uncertain, meaning the Company is at risk of being liable to pay uncapped compensation to
these individuals, either under the Commercial Agents (Council Directive) Regulations 1993 or local
law equivalent, as well as possible common law damages if statutory minimum notice periods are
not complied with.
Uninsured liabilities
The Group may be subject to substantial liability claims due to the technical nature of its business
and products or for acts or omissions of its sales representatives, agents or distributors. The Group
can give no assurance that the proceeds of insurance applicable to covered risks will be adequate to
cover expenses relating to losses or liabilities. Accordingly, the Group may suffer material losses
from uninsurable or uninsured risks or insufficient insurance coverage.
Competitors
While the Directors are unaware of any single competitor that provides the range of products and
services offered by the Group, there are a number of competitors for each of the Group’s product
categories. The acquisition of market share by any of these competitors may have a material
adverse impact on the Group’s revenues and profitability.
Limited IP protection
The Group does not have a formal policy on intellectual property. While the Directors believe that the
barriers to entry in its market are high, the ability of a competitor to develop similar products to those
manufactured by the Group may have a material adverse impact on the Group’s revenues and
profitability.
Page 7
AB Dynamics plc
Annual report and financial statements
For the period ended 31 August 2013
2. Risks relating to the market in which the group operates
Research & development budgets of global automotive corporations can get squeezed or
significantly reduced
The global automotive market is highly competitive and continues its recovery from the significant
downturn in 2008. Competition is expected to intensify further in light of continuing globalisation in
the industry, possibly resulting in industry reorganisation. Factors affecting competition include
product quality and features, safety, reliability, fuel economy, the amount of time required for
innovation and development, pricing, customer service and financing terms. Increased competition
may lead to lower vehicle unit sales, which may result in downward pressure on research and
development budgets. Furthermore, adverse issues arising in the automotive industry or in the global
economy may significantly reduce the level of these research and development budgets.
The Group’s ability to respond adequately to changes in the automotive industry and to maintain its
position as a leading technology supplier will be fundamental to its future success in existing and
new markets and to maintain its market share. There can be no assurance that the Group will be
able to compete successfully in the future.
Key suppliers
Over the past 30 years, the Group has built up a reliable supplier base for its externally sourced
components. At present, a significant proportion of these components are supplied by certain key
suppliers. While the Group uses its design capabilities to dual source components, there remains a
risk of material impact in the short term if one of its key suppliers were to fail.
In certain instances, the Group has taken out an insurance policy to protect its profits should a key
supplier be unable to supply for whatever reason.
Exposure to exchange rate fluctuations
The Group is exposed to exchange rate fluctuations, principally the GBP, the US$, the Euro and, to
a lesser extent, the Japanese Yen. Changes in foreign currency exchange rates may affect the
Group’s pricing of products sold and materials purchased in foreign currencies.
The Directors believe that its use of certain derivative financial instruments, including foreign
currency forward contracts used to hedge sale commitments denominated in foreign currencies,
reduces the Group’s exposure to this risk.
Exposure to economic cycle
Market conditions may affect the value of the Company’s share price regardless of operating
performance. The Group could be affected by unforeseen events outside of its control including
economic and political events and trends, inflation and deflation, terrorist attacks or currency
exchange fluctuation. The combined effect of these factors is difficult to predict and an investment in
the Company could be affected adversely by changes in economic, political, administrative, taxation
or other regulatory factors in any jurisdiction in which the Group may operate. Deterioration in the
economic climate could result in a delay or cancellation of clients’ projects.
Force majeure events
There is a risk that the markets in which the Group currently operates could be affected by events
such as war, civil war, riot or armed conflict, acts of terrorism, floods, explosions or other
catastrophes, epidemics or quarantine restrictions, which are outside of the Directors’ control and
generally not covered by insurance. Such events could have a variety of materially adverse
consequences for the Group, including risks and costs related to decline in revenues or reputational
damage, and injury or loss of life, as well as litigation related thereto.
Page 8
AB Dynamics plc
Annual report and financial statements
For the period ended 31 August 2013
Laws and regulations
The Group is subject to the laws of the United Kingdom. Existing and future legislation and
regulation could cause additional expense, capital expenditure and restrictions and delays in the
activities of the Company, the extent of which cannot be predicted. No assurance can be given that
new laws, rules and regulations will not be enacted or existing laws, rules and regulations will not be
applied in a manner which could limit or curtail certain of the Group’s activities or services. In
addition, the Group may have to defend itself against legal proceedings which could have an
adverse effect on trading performance and, in turn, future profits. The Group also exports its
products overseas and therefore its exports may be subject to existing and future overseas
legislation and regulation and similar risks therefore also applying in relation to such overseas
existing and future legislation and regulation.
Results and dividends
The results for the year are set out on page 16.
The Directors do not recommend the payment of a final dividend for the period.
Directors
The following directors have held office during the period:-
Anthony Best (appointed 7 February 2013)
Timothy John Rogers (appointed 7 February 2013)
Robert Andrew Leonard Hart (appointed 20 March 2013)
Graham Dudley Eves (appointed 17 April 2013)
Frederick Bryan Smart (appointed 17 April 2013)
Conflicts of interest
Under the articles of association of the company and in accordance with the provisions of the
Companies Act 2006, a director must avoid a situation where he has, or can have, a direct or
indirect interest that conflicts, or possibly may conflict with the company's interests. However, the
directors may authorise conflicts and potential conflicts, as they deem appropriate. As a
safeguard, only directors who have no interest in the matter being considered will be able to take
the relevant decision, and the directors will be able to impose limits or conditions when giving
authorisation if they think this is appropriate. During the financial period ended 31 August 2013, the
directors have authorised no such conflicts or potential conflicts.
Page 9
AB Dynamics plc
Annual report and financial statements
For the period ended 31 August 2013
Directors’ interests in shares
Directors' interests in the shares of the Company, including family interests, were as follows:-
Anthony Best
Timothy John Rogers
Robert Andrew Leonard Hart
Ordinary shares of 1p each
7,196,280
5,974
11,389
During the period, the directors were issued with the following share options which are outstanding
as at 31 August 2013:
Timothy John Rogers
12.52 pence per share
Robert Andrew Leonard Hart
12.52 pence per share
558,300
15,400
Exercise price
No. of options awarded
There have been no changes in the Directors' shareholdings since the year end.
Directors’ remuneration and service contracts
The remuneration paid to the directors during 2013 is shown below:
Anthony Best
Timothy John Rogers
Robert Andrew Leonard Hart
Graham Dudley Eves
Frederick Bryan Smart
Short
term
benefits
£
84,471
150,390
97,185
10,000
10,000
Post
employment
benefits
-
-
3,188
-
-
2013
Total
£
84,471
150,390
100,373
10,000
10,000
2012
Total
£
100,292
-
76,619
-
-
352,046
3,188
355,234
176,911
Other substantial shareholdings
As at 4th November 2013, being the latest practicable date before the issue of these financial
statements, the company had been notified of the following shareholdings which constitute 3% or
more of the total issued shares of the company.
Anthony Best
Anne Middleton
Naemi Best
UK Multicap Income
The Diverse Income Trust Plc
Amati Global Investors
Stephen Neads
Ordinary
shares
No.
5,597,107
2,000,000
1,599,173
1,088,539
920,877
721,960
720,000
Shareholding
%
34.3
12.3
9.8
6.7
5.6
4.4
4.4
Page 10
AB Dynamics plc
Annual report and financial statements
For the period ended 31 August 2013
Financial instruments
The Company's principal financial instruments comprise cash at bank, bank facilities, and various
items within current assets and current liabilities that arise directly from its operations. The
Group’s financial risk management objectives and policies are set out in note 19 to the financial
statements.
Policy on payment of creditors
Although the Company does not follow a formal code, the policy is to abide by the payment terms
agreed with suppliers whenever it is satisfied that the supplier has provided the goods and services
in accordance with the agreed terms and conditions. The total value of trade creditors at 31 August
2013 amounted to £795,229 (2012: £625,078). The average period taken to pay creditors during the
year was 32 days (2012: 35 days).
Statement of Directors’ responsibilities
The Directors are responsible for preparing the annual report and the group and parent company
financial statements in accordance with applicable law and regulations. Company law requires the
Directors to prepare group and parent company financial statements for each financial year. Under
that law, they are required to prepare the group financial statements in accordance with
International Reporting Standards (IFRSs) as adopted by the European Union (EU) and applicable
law and have elected to prepare the parent company financial statements in accordance with UK
Accounting Standards and applicable law (UK Generally Accepted Accounting Practice).
Under Company law, the Directors must not approve the financial statements unless they are
satisfied that they give a true and fair view of the state of affairs of the group and parent company
and of their profit or loss for that period. In preparing each of the group and parent company
financial statements, the Directors are required to:
select suitable accounting policies and then apply them consistently;
make judgments and estimates that are reasonable and prudent;
state whether applicable accounting standards have been followed, subject to any material
departures disclosed and explained in the financial statements; and
prepare the financial statements on the going concern basis unless it is inappropriate to
presume that the group and the parent company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show
and explain the group and the parent company’s transactions and disclose with reasonable
accuracy at any time the financial position of the group and the parent company and enable them to
ensure that the financial statements comply with the Companies Act. They are also responsible for
safeguarding the assets of the group and the parent company and hence for taking reasonable
steps for the prevention and detection of fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for preparing a Directors’
report that complies with that law and those regulations.
The Directors are responsible for the maintenance and integrity of the website. Legislation in the
United Kingdom concerning the preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
Provision of information to auditors
Each of the persons who are directors at the time when this Directors’ Report is approved has
confirmed that:
so far as that director is aware, there is no relevant audit information of which the Company’s
auditors are unaware; and
that director has taken all the steps that ought to have been taken as a director in order to be
aware of any information need by the Company’s auditors in connection with preparing their
report and to establish that the Company’s auditors are aware of the information.
Page 11
AB Dynamics plc
Annual report and financial statements
For the period ended 31 August 2013
Auditor
The auditors, Crowe Clark Whitehill LLP, will be proposed for re-appointment in accordance with
Section 489 of the Companies Act 2006.
This report was approved by the board and signed on its behalf.
Anthony Best
Director
6 November 2013
Page 12
AB Dynamics plc
Annual report and financial statements
For the period ended 31 August 2013
Corporate governance statement
The Board of AB Dynamics plc appreciate the value of good corporate governance and intend to
respect the requirements of the UK Corporate Governance Code (the “Code”) on corporate
governance, as far as applicable to the Company given its current size and stage of development.
The Board is responsible for the direction and overall performance of the Group with emphasis on
policy and strategy, financial results and major operational issues.
The Code recommends that at least one-third of Board members should be non-executive Directors.
Board structure
The Board consists of five directors of which three are executive and two non-executive.
The Board meets as and when required and is satisfied that it is provided with information in an
appropriate form and quality to enable it to discharge its duties. All directors are required to retire
by rotation with one third of the board seeking re-election each year, with the exception of the first
year
The board has undertaken a formal assessment of the auditor's independence and will continue to
do so at least annually. This assessment includes:
•
•
•
a review of non-audit services provided to the company and the related fees;
a review of the auditor's own procedures for ensuring the independence of the audit firm and
parties and staff involved in the audit; and
obtaining confirmation from the auditor that, in their professional judgement, they are
independent.
Internal controls
The Board is responsible for the Company's system of internal controls and for reviewing their
effectiveness. The internal controls are designed to ensure the reliability of financial information for
both internal and external purposes. The Directors are satisfied that the current controls are effective
with regard to the size of the Company. Any internal control system can only provide reasonable,
but not absolute assurance against material mis-statement or loss.
Given the size of the Company, there is currently no need for an internal audit function.
Page 13
AB Dynamics plc
Annual report and financial statements
For the period ended 31 August 2013
We have audited the financial statements of AB Dynamics plc for the period ended 31 August 2013 which
comprise of the Consolidated Statement of Comprehensive Income, the Consolidated Statement of
Financial Position, the Consolidated Statement of Changes in Equity, the Consolidated Statement of Cash
Flows, the Parent Company Balance Sheet and the related notes.
The financial reporting framework that has been applied in the preparation of the group financial
statements is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the
European Union. The financial reporting framework that has been applied in the preparation of the Parent
Company financial statements is applicable law and United Kingdom Accounting Standards (United
Kingdom Generally Accepted Accounting Practice).
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.
Respective responsibilities of directors and auditors
As explained more fully in the Statement of Directors' Responsibilities, the directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view. Our
responsibility is to audit and express an opinion on the financial statements in accordance with applicable
law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with
the Auditing Practices Board's Ethical Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements
sufficient to give reasonable assurance that the financial statements are free from material misstatement,
whether caused by fraud or error. This includes an assessment of: whether the accounting policies are
appropriate to the company's circumstances and have been consistently applied and adequately disclosed;
the reasonableness of significant accounting estimates made by the directors; and the overall presentation
of the financial statements.
We read all the financial and non-financial information in the Chairman’s Statement, Directors’ Report and
Corporate Governance Statement and any other surround information to identify material inconsistencies
with the audited financial statements. If we become aware of any apparent material misstatements or
inconsistencies we consider the implications for our report
Opinion on financial statements
In our opinion:
•
•
•
•
the financial statements give a true and fair view of the state of the group’s and of the parent
company's affairs as at 31 August 2013 and of the group’s profit for the year then ended;
the group financial statements have been properly prepared in accordance with IFRSs as adopted
by the European Union;
the parent company financial statements have been properly prepared in accordance with United
Kingdom Generally Accepted Accounting Practice; and
the financial statements have been prepared in accordance with the requirements of the
Companies Act 2006.
Page 14
AB Dynamics plc
Annual report and financial statements
For the period ended 31 August 2013
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Directors' Report for the financial year for which the financial
statements are prepared is consistent with the financial statements.
Matters on which we are required to report by exception
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 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
Leo Malkin
Senior Statutory Auditor
for and on behalf of
Crowe Clark Whitehill LLP, Statutory Auditor
London
6 November 2013
Page 15
AB Dynamics plc
Annual report and financial statements
For the period ended 31 August 2013
Consolidated financial statements
Consolidated statement of comprehensive income
Continuing operations
Revenue
Cost of sales
Gross profit
Year ended
31 August
2013
£
Note
Proforma
Year ended
31 August
2012
£
12,171,473
8,910,839
(9,048,895)
(6,445,056)
3,122,578
2,465,783
Administrative expenses
(914,344)
(666,616)
Operating profit before AIM transaction
costs
AIM transaction costs
Operating profit
Net finance income and (costs)
Profit before taxation
Corporation tax expense
Profit after taxation
Other comprehensive income
Total comprehensive income for the period
attributed to equity holders
Earnings per share - Basic (pence)
Earnings per share - Diluted (pence)
Adjusted EPS (before AIM transaction costs):
Adjusted earnings per share - Basic (pence)
Adjusted earnings per share - Diluted (pence)
4
5
6
8
8
8
8
2,208,234
1,799,167
(315,305)
-
1,892,929
1,799,167
(27,698)
1,865,231
84,236
1,883,403
(441,974)
(451,044)
1,423,257
1,432,359
-
-
1,423,257
1,432,359
10.01p
9.48p
12.23p
11.58p
10.69p
10.69p
10.69p
10.69p
Page 16
AB Dynamics plc
Annual report and financial statements
For the period ended 31 August 2013
Consolidated financial statements
Consolidated statement of financial position
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment
CURRENT ASSETS
Inventories
Trade receivables
Other receivables, deposits and prepayments
Amount owing by contract customers
Financial instruments
Cash and cash equivalents
TOTAL ASSETS
EQUITY AND LIABILITIES
Share capital
Share premium
Reconstruction reserve
Merger relief reserve
Retained profits
Total equity attributable to owners of the Company and
total equity
NON-CURRENT LIABILITIES
Deferred tax liabilities
CURRENT LIABILITIES
Trade and other payables and accruals
Provision for taxation
Note
2013
£
Proforma
2012
£
9
10
11
12
13
14
15
16
17
18
1,012,109
1,012,109
428,838
428,838
1,486,390
1,132,625
266,950
1,736,598
-
5,990,176
10,612,739
1,475,105
1,353,301
184,372
986,990
44,821
2,481,476
6,526,065
11,624,848
6,954,903
163,070
2,302,528
(11,284,500)
11,390,000
5,650,416
134,000
43,000
62,500
-
4,443,046
8,221,514
4,682,546
41,923
71,136
3,163,093
198,318
3,361,411
1,771,221
430,000
2,201,221
TOTAL LIABILITIES
3,403,334
2,272,357
TOTAL EQUITY AND LIABILITIES
11,624,848
6,954,903
The financial statements were approved by the Board of Directors and authorised for issue on 6 November
2013 and are signed on its behalf by:
Anthony Best
Director
Robert Hart
Director
COMPANY REGISTRATION NUMBER: 08393914
Page 17
AB Dynamics plc
Annual report and financial statements
For the period ended 31 August 2013
Consolidated financial statements
Consolidated statement of changes in equity
Proforma
Share
capital
Share
premium
Merger relief
reserve
Reconstruction
reserve
Retained
profits
Total
equity
Note
£
£
£
£
£
£
Balance at 31 August 2011
134,000
43,000
Profit after taxation and total
comprehensive
income for the financial year
Dividend paid prior to group
reconstruction
7
-
-
-
-
Balance at 31 August 2012
134,000
43,000
Balance at 1 September 2012
134,000
43,000
-
-
-
-
-
62,500
3,211,687
3,451,187
-
1,432,359
1,432,359
-
(201,000)
(201,000)
62,500
4,443,046
4,682,546
62,500
4,443,046
4,682,546
(43,000)
11,390,000
(11,347,000)
-
-
Group reconstruction
Share based payment
reserve
Profit after taxation and
total comprehensive
income for the financial
year
Dividend paid prior to group
reconstruction
7
Issue of shares, net of share
issue costs
Balance at 31 August 2013
-
-
-
-
-
-
-
29,070
2,302,528
-
-
-
-
-
18,613
18,613
-
1,423,257
1,423,257
-
-
(234,500)
(234,500)
-
2,331,598
163,070
2,302,528
11,390,000
(11,284,500)
5,650,416
8,221,514
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 has arisen as follows:
The acquisition by the Company of the entire issued share capital of Anthony Best Dynamics Limited has
been accounted for as a reverse acquisition under IFRS3 (revised). Consequently, the previously
recognised book values and assets and liabilities have been retained and the consolidated financial
information for the period to 31 August 2013 has been presented as if the Company had always been the
parent company of the Group and includes a capital redemption reserve arising in the subsidiary
amounting to £62,500.
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 Limited have been 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.
Costs related directly to the new issue of shares have been deducted from the share premium account.
Attributable IPO costs are allocated between the share premium account and profit and loss account in
proportion to the number of primary and secondary shares traded on Admission.
Page 18
AB Dynamics plc
Annual report and financial statements
For the period ended 31 August 2013
Consolidated financial statements
Consolidated statement of cash flows
2013
£
Proforma
2012
£
Cash flow from operating activities
Profit before taxation
1,865,231
1,883,403
Adjustments for:-
Depreciation of property, plant and equipment
Loss/(profit) on sale of property, plant and equipment
Finance income and costs
Interest income
Share based payment
92,127
2,753
44,821
(17,123)
18,613
78,445
(679)
(68,696)
(15,540)
-
Operating profit before working capital changes
2,006,422
1,876,933
Increase in inventories
Increase in trade and other receivables
Increase in other payables
Cash flow from operations
Interest received
Income tax paid
Net cash flow from operating activities
Cash flow from investing activities
Purchase of property, plant and equipment
Sale of property, plant and equipment
Cash flow used in investing activities
Cash flow from financing activities
Dividends paid prior to group reconstruction
Proceeds from issue of share capital, net of share issue costs
(11,285)
(611,510)
1,391,872
(690,763)
(1,021,240)
525,752
2,775,499
17,123
(702,869)
690,682
15,540
(190,000)
2,089,753
516,222
(678,461)
310
(205,341)
2,545
(678,151)
(202,796)
(234,500)
2,331,598
(201,000)
-
Net cash flow from/(used in) financing activities
2,097,098
(201,000)
Net increase in cash and cash equivalents
3,508,700
112,426
Cash and cash equivalents at beginning of the financial year
2,481,476
2,369,050
Cash and cash equivalents at end of the financial year
5,990,176
2,481,476
Page 19
AB Dynamics plc
Annual report and financial statements
For the period ended 31 August 2013
Consolidated financial statements
Notes to the consolidated financial statements
1.
General information
The Company is a public company limited by shares and incorporated under the UK Companies Act.
The Company is domiciled in the United Kingdom and the registered office and principal place of
business is Holt Road, Bradford on Avon, Wiltshire, BA15 1AJ.
The principal activity is the specialised area of design and manufacture of test equipment for vehicle
suspension, steering, noise and vibration. The company also offers a range of services which
include analysis, design, prototype manufacture, testing and development.
Basis of preparation
The Company was incorporated on 7 February 2013 and on 8 May 2013 acquired the entire share
capital of Anthony Best Dynamics Limited. As a result of this transaction, the ultimate shareholders
in Anthony Best Dynamics Limited received shares in the Company in direct proportion to their
original shareholdings in Anthony Best Dynamics Limited.
Under IFRS 3 (revised) “Business Combinations”, the acquisition of Anthony Best Dynamics Limited
by the Company has been accounted for as a reverse acquisition and the consolidated IFRS
financial information of the Company is therefore a continuation of the financial information of
Anthony Best Dynamics Limited.
As a result any financial information after 8 May 2013 represents consolidated financial information
of the Group. Prior to this date, the historical financial information represents the financial information
of the Company’s only operating subsidiary, Anthony Best Dynamics Limited (see Note 3 of the
Company financial statements). On this basis, the comparative information is proforma.
The financial statements are measured and presented in sterling (£), unless otherwise stated, which
is the currency or the primary economic environment in which the entities operate. They have been
prepared under the historical cost convention, except for financial instruments that have been
measured at fair value through profit and loss.
The financial 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.
The financial information has been prepared in accordance with International Financial Reporting
Standards as adopted by the EU (“IFRS”) issued by the International Accounting Standards Board
(“IASB”),
International Financial Reporting
Interpretations Committee (“IFRIC”).
including related
interpretations
issued by
the
Page 20
AB Dynamics plc
Annual report and financial statements
For the period ended 31 August 2013
Consolidated financial statements
Standards, amendments and interpretations to published standards not yet effective
As at the date of approval of these financial statements, the following standards and interpretations
were in issue but not yet effective:
Issued and EU adopted:
●
●
●
●
●
●
●
●
●
●
●
●
IFRS 1 – Amendments – Government loans
IFRS 10 – Consolidated financial statements
IFRS 11 – Joint arrangements
IFRS 12 – Disclosure of interests in other entities
IFRS 13 – Fair value measurement
IAS 1 – (amended) – Presentation of items of other comprehensive income
IAS 12 – (amended) – Deferred tax: recovery of underlying assets
IAS 19 – (amended) – Employee benefits
IAS 27 – Separate financial statements
IAS 28 – Investments in associates and joint ventures
IFRS 7 and IAS 32 – Offsetting financial assets and financial liabilities
IFRIC 20 – Stripping costs in the production phase of a surface mine
Issued but not yet EU adopted:
IFRS 9 – (amended) – Financial instruments
Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27)
IFRIC 21 Levies
IAS 36 Amendments Recoverable Amount Disclosures for non-Financial Assets
●
●
●
●
● Novation of Derivatives and Continuation of Hedge Accounting (Amendments to IAS 39)
The Directors do not anticipate that the adoption of these standards and interpretations in future
reporting periods will have a material impact on the Group’s results.
The Group financial statements are presented in sterling and all values are rounded to the nearest
thousand pounds except where otherwise indicated.
Page 21
AB Dynamics plc
Annual report and financial statements
For the period ended 31 August 2013
Consolidated financial statements
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 Chairman’s Statement on page 2.
Note 19 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 judgments
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
Where the outcome of a construction contract can be estimated reliably, the Group recognises
revenue and costs by reference to the stage of completion of the contract activity at the statement
of financial position, based on the proportion of contract costs incurred for work performed to date
relative to the estimated total contract costs. Variations in contract work, rectification claims and
incentive payments are included to the extent that they have been agreed with the customer.
Where the outcome of a construction contract cannot be estimated reliably, contract revenue is
recognised to the extent it is probable that contract costs incurred will be recoverable. Contract
costs are recognised as expenses in the period in which they are incurred.
When it is probable that total contract costs will exceed total contract revenue, the expected loss
is recognised as an expense immediately.
The above estimates are made internally by the Group and any changes of these estimates will
result in a corresponding change on revenue and profit. The Group’s accounting approach
reflects a sound judgement as potential losses on contract are being considered and reflected
with its probability immediately upon occurrence, while contract revenue which cannot be
estimated reliably is realised only after confirmed by written agreement.
Page 22
AB Dynamics plc
Annual report and financial statements
For the period ended 31 August 2013
Consolidated financial statements
2.
Summary of significant accounting policies (continued)
(c) Basis of consolidation
The consolidated financial statements include the financial statements of all subsidiaries. The
financial year ends of all entities in the Group are coterminous.
The financial statements of subsidiaries are included in the consolidated financial statements from
the date on which control over the operating and financial decisions is obtained and cease to be
consolidated from the date on which control is transferred out of the Group. Control exists when
the Company has the power, directly, or indirectly, to govern the financial and operating policies of
an entity so as to obtain economic benefits from its activities.
On 8 May 2013, the Group, previously made of Anthony Best Dynamics Limited, underwent a re-
organisation by virtue of which Anthony Best Dynamics Limited’s shareholders in their entirety
exchanged their shares for shares in AB Dynamics plc, a newly formed company, which then
became the ultimate parent company of the Group. Notwithstanding the change in the legal
parent of the Group, this transaction has been accounted for as a reverse acquisition and the
consolidated financial statements are prepared on the basis of the new legal parent having been
acquired by the existing Group.
All intercompany balances and transactions, including recognised gains arising from inter-group
transactions, have been eliminated in full.
Unrealised losses are eliminated in the same manner as recognised gains except to the extent
that they provide evidence of impairment.
(d) Work in progress
Contract revenue and contract costs are recognised over the period of the contract, respectively,
as revenue and expenses. The Group uses the percentage of completion method to determine
the appropriate amount of revenue and costs to recognise in a given period. This is normally
measured by the proportion that contract costs incurred for work performed to date bear to the
estimated total contract costs, except where this would not be representative of the stage of
completion. Variations in contract work, claims and incentive payments are included to the extent
that they have been agreed with the customer. When it is probable that total contract costs will
exceed total contract revenue, the expected loss is recognised as an expense immediately.
The aggregate of the cost incurred and the profit/loss recognised on each contract is compared
against the progress billings up to the year end.
Where costs incurred and recognised profits (less recognised losses) exceed progress billings,
the balance is shown as amount owing from contract customers. Where the progress billings
exceed costs incurred plus recognised profits (less recognised losses), the balance is shown as
payments in advance, under trade and other payables and accruals.
(e)
Inventories
Inventories are valued on a first in, first out basis at the lower of cost and net realisable value.
Cost includes all expenditure incurred during the normal course of business in bringing in
inventories to their present location and condition, including in the case of work-in-progress and
finished goods an appropriate proportion of production overheads. Net realisable value is based
on the estimated useful selling price less further costs expected to be incurred to completion and
subsequent disposal.
Page 23
AB Dynamics plc
Annual report and financial statements
For the period ended 31 August 2013
Consolidated financial statements
2.
Summary of significant accounting policies (continued)
(f)
Financial instruments
Financial instruments are recognised in the statements of financial position when the
Company has become a party to the contractual provisions of the instruments.
Financial instruments are classified as liabilities or equity in accordance with the substance of
the contractual arrangement. Interest, dividends, gains and losses relating to a financial
instrument classified as a liability, are reported as an expense or income. Distributions to
holders of financial instruments classified as equity are charged directly to equity.
Financial instruments are offset when the Group has a legally enforceable right to offset and
intends to settle either on a net basis or to realise the asset and settle the liability simultaneously.
A financial instrument is recognised initially, at its fair value plus, in the case of a financial
instrument not at fair value through profit or loss, transaction costs that are directly attributable
to the acquisition or issue of the financial instrument. Financial instruments recognised in the
statements of financial position are disclosed in the individual policy statement associated with
each item.
Page 24
AB Dynamics plc
Annual report and financial statements
For the period ended 31 August 2013
Consolidated financial statements
2.
Summary of significant accounting policies (continued)
(f)
Financial instruments
(i)
Financial assets
On initial recognition, financial assets are classified as either financial assets at fair
value through profit or loss, held-to-maturity investments, loans and receivables financial
assets, or available-for-sale financial assets, as appropriate.
Financial assets at fair value through profit or loss
As at the end of the reporting period, there were no financial assets classified under
this category.
Held-to-maturity investments
As at the end of the reporting period, there were no financial assets classified under
this category.
Loans and receivables financial assets
Trade receivables and other receivables that have fixed or determinable payments
that are not quoted in an active market are classified as loans and receivables
financial assets. Loans and receivables financial assets are measured at amortised
cost using the effective interest method, less any impairment loss. Interest income is
recognised by applying the effective interest rate, except for short-term receivables
when the recognition of interest would be immaterial.
Available-for-sale financial assets
As at the end of the reporting period, there were no financial assets classified under
this category.
(ii)
Financial liabilities
All financial liabilities are initially recorded at fair value plus directly attributable
transaction costs and subsequently measured at amortised cost using the effective
interest method other than those categorised as fair value through profit or loss.
Fair value through profit or loss category comprises financial liabilities that are either
held for trading or are designated to eliminate or significantly reduce a measurement
or recognition inconsistency that would otherwise arise. Derivatives are also classified
as held for trading unless they are designated as hedges.
(iii) Equity instruments
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue
of new shares or options are shown in equity as a deduction, net of tax, from proceeds.
Dividends on ordinary shares are recognised as liabilities when approved for appropriation.
Page 25
AB Dynamics plc
Annual report and financial statements
For the period ended 31 August 2013
Consolidated financial statements
2.
Summary of significant accounting policies (continued)
(g) Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and impairment
losses, if any.
Depreciation is calculated under the straight-line method to write off the depreciable amount of
the assets over their estimated useful lives. Depreciation of an asset does not cease when the
asset becomes idle or is retired from active use unless the asset is fully depreciated. The
principal annual rates used for this purpose are:-
Plant and machinery
Motor vehicles
Fixtures and fittings
Computer equipment
General equipment
Proprietorial equipment
Test equipment
10% straight line
25% reducing balance
10% straight line
25% straight line
10% straight line
20% straight line
10-20% straight line
The depreciation method, useful lives and residual values are reviewed, and adjusted if
appropriate, at the end of each reporting period to ensure that the amounts, method and periods
of depreciation are consistent with previous estimates and the expected pattern of consumption of
the future economic benefits embodied in the items of the property, plant and equipment.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset,
as appropriate, only when the cost is incurred and it is probable that the future economic benefits
associated with the asset will flow to the Group and the cost of the asset can be measured
reliably. The carrying amount of parts that are replaced is derecognised. The costs of the day-to-
day servicing of property, plant and equipment are recognised in profit or loss as incurred. Cost
also comprises the initial estimate of dismantling and removing the asset and restoring the site on
which it is located for which the Group is obligated to incur when the asset is acquired, if
applicable.
An item of property and equipment is derecognised upon disposal or when no future economic
benefits are expected from its use. Any gain or loss arising from derecognition of the asset is
recognised in profit or loss. The revaluation reserve included in equity is transferred directly to
retained profits on retirement or disposal of the asset.
(h)
Impairment
(i)
Impairment of non-financial assets
The carrying values of assets, other than those to which IAS 36 - Impairment of Assets
does not apply, are reviewed at the end of each reporting period for impairment when
there is an indication that the assets might be impaired. Impairment is measured by
comparing the carrying values of the assets with their recoverable amounts. The
recoverable amount of the assets is the higher of the assets' fair value less costs to sell
and their value-in-use, which is measured by reference to discounted future cash flow.
Page 26
AB Dynamics plc
Annual report and financial statements
For the period ended 31 August 2013
Consolidated financial statements
2.
Summary of significant accounting policies (continued)
(h)
Impairment (continued)
(i)
Impairment of non-financial assets (continued)
An impairment loss is recognised in profit or loss immediately.
When there is a change in the estimates used to determine the recoverable amount, a
subsequent increase in the recoverable amount of an asset is treated as a reversal of
the previous impairment loss and is recognised to the extent of the carrying amount of
the asset that would have been determined (net of amortisation and depreciation) had
no impairment loss been recognised. The reversal is recognised in profit or loss
immediately.
(i)
Income taxes
The income tax expense for the period comprises current and deferred tax. Tax is
recognised in the income statement, except to the extent that it relates to items
recognised in other comprehensive income or directly in equity. In this case, the tax is
also recognised in other comprehensive income or directly in equity, respectively.
The current income tax charge is calculated on the basis of the tax laws enacted or
substantively enacted at the balance sheet date in the countries where the company and
its subsidiaries operate and generate taxable income. Management periodically
evaluates positions taken in tax returns with respect to situations in which applicable tax
regulation is subject to interpretation. It establishes provisions where appropriate on the
basis of amounts expected to be paid to the tax authorities.
Deferred income tax is recognised, using the liability method, on temporary differences
arising between the tax bases of assets and liabilities and their carrying amounts in the
consolidated financial statements.
Deferred income tax is determined using tax rates (and laws) that have been enacted or
substantively enacted by the balance sheet date and are expected to apply when the
related deferred income tax asset is realised or the deferred income tax liability is
settled.
Deferred income tax assets are recognised only to the extent that it is probable that
future taxable profit will be available against which the temporary differences can be
utilised.
2.
Summary of significant accounting policies (continued)
(j)
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand, bank balances, deposits with financial
institutions and short-term, highly liquid investments that are readily convertible to known amounts
of cash and which are subject to an insignificant risk of changes in value.
(k) Employee benefits
(i)
Short-term benefits
Wages, salaries, paid annual leave and sick leave, bonuses and non-monetary benefits are
accrued in the period in which the associated services are rendered by employees of the
Group.
(ii) Defined contribution plans
Page 27
AB Dynamics plc
Annual report and financial statements
For the period ended 31 August 2013
Consolidated financial statements
The Group’s contributions to defined contribution plans are recognised in profit or loss in
the period to which they relate. Once the contributions have been paid, the Group has
no further liability in respect of the defined contribution plans.
(l)
Provisions, contingent liabilities and contingent assets
Provisions are recognised when the Group has a present or constructive obligation as a result of
past events, when it is probable that an outflow of resources embodying economic benefits will be
required to settle the obligation, and when a reliable estimate of the amount can be made.
Provisions are reviewed at the end of each financial reporting period and adjusted to reflect the
current best estimate. Where effect of the time value of money is material, the provision is the
present value of the estimated expenditure required to settle the obligation.
A contingent liability is a possible obligation that arises from past events and whose existence will
only be confirmed by the occurrence of one or more uncertain future events not wholly within the
control of the Group. It can also be a present obligation arising from past events that is not
recognised because it is not probable that outflow of economic resources will be required or the
amount of obligation cannot be measured reliably.
A contingent liability is not recognised but is disclosed in the notes to the financial statements.
When a change in the probability of an outflow occurs so that the outflow is probable, it will then be
recognised as a provision.
A contingent asset is a probable asset that arises from past events and whose existence will be
confirmed only by the occurrence or non-occurrence of one or more uncertain events not wholly
within the control of the Group. Contingent assets are not recognised by the Group but are
disclosed where inflows of economic benefits are probable, but not virtually certain.
(m) Revenue and other income
Revenue represents the value, net of sales taxes, of goods sold and services provided to
customers.
Revenues on long-term contracts are recognised according to the percentage of completion
method. Revenue is recognised on a pro-rata basis according to the work performed and the
degree of completion of the contract. Where the value of the work performed on a contract
exceeds the aggregate of payments received on account from customers, the resulting balance is
included in trade and other receivables. Where the aggregate of payments received on account
from customers exceeds the value of work performed on a contract, the resulting balance is
included in current liabilities.
Interest income is recognised as other income on an accruals basis based on the effective yield
on the investment.
(n) Share-based payments
Employees (including Directors and Senior Executives) of the Group receive remuneration in the
form of share-based payment transactions, whereby these individuals render services as
consideration for equity instruments (“equity-settled transactions”). These individuals are granted
share option rights approved by the Board which can only be settled in shares of the respective
companies that award the equity-settled transactions. Share options rights are also granted to
these individuals by majority shareholders over their shares held. No cash settled awards have
been made or are planned.
The cost of equity-settled transactions is recognised, together with a corresponding increase in
equity, over the period in which the performance and/or service conditions are fulfilled, ending on
the date on which the relevant individuals become fully entitled to the award (“vesting point”). The
cumulative expense recognised for equity-settled transactions at each reporting date until the
Page 28
AB Dynamics plc
Annual report and financial statements
For the period ended 31 August 2013
Consolidated financial statements
vesting date reflects the extent to which the vesting period has expired and the Group’s best
estimate of the number of equity instruments and value that will ultimately vest. The statement of
comprehensive income charge for the year represents the movement in the cumulative expense
recognised as at the beginning and end of that period.
The fair value of share-based remuneration is determined at the date of grant and recognised as
an expense in the statement of comprehensive income on a straight line basis over the vesting
period, taking account of the estimated number of shares that will vest. The fair value is
determined by use of Black Scholes model method.
(o) Comparative information
In certain cases, the directors have reanalysed corresponding amounts to make their disclosure
more meaningful.
Page 29
AB Dynamics plc
Annual report and financial statements
For the period ended 31 August 2013
Consolidated financial statements
3.
Segment reporting
The Group derives revenue from the sale of its advanced measurement and testing products derived in
assisting the global automotive industry in the laboratory and on the test track. These income streams
are all derived from the utilisation of these products which the Group believes is its only segment.
Per IFRS 8, the operating segment is based on internal reports about components of the group, which
are regularly reviewed and used by the board of directors being the Chief Operating Decision Maker
(“CODM”).
All of the Group’s non-current assets are held in the UK.
Material revenues attributable to individual foreign countries are as follows:
United Kingdom
Rest of the European Union
North America
Rest of the World
2013
£
2,206,917
3,364,214
973,702
5,626,640
12,171,473
Proforma
2012
£
690,907
2,802,019
788,587
4,629,326
8,910,839
Revenues derived from major customers, which individually represent 10% or more of total revenue are
as follows:
Customer A
Customer B
Customer C
Customer D
Other customers
2013
£
653,976
70,966
40,566
1,743,998
9,661,967
12,171,473
Proforma
2012
£
1,035,906
963,199
917,702
449,767
5,544,265
8,910,839
There were no material non-current assets located outside the United Kingdom.
Revenues are derived from the following:
Revenue from sale of goods
Revenue from construction contracts
4.
Finance income and (costs)
Interest received
Fair value gains (losses) on financial instruments:
- Foreign currency forward contracts
7,346,430
4,825,043
12,171,473
5,393,268
3,517,571
8,910,839
2013
£
17,123
(44,821)
(27,698)
Proforma
2012
£
15,540
68,696
84,236
Page 30
AB Dynamics plc
Annual report and financial statements
For the period ended 31 August 2013
Consolidated financial statements
5.
Profit before taxation
The profit before taxation is arrived at after charging/(crediting):-
Fees payable to the Company’s auditors for the audit of
the Company’s financial statements
Fees payable to the Company’s auditors for other
services:
The audit of the company’s subsidiary subject to
legislation
Fees payable to the Company’s auditors for tax
compliance services
Fees payable to the Company’s auditors for corporate
finance services *
Total
Depreciation
Loss/(profit) on sale of assets
Realised gain on foreign exchange:
Staff costs:
- salaries, allowances and bonuses
Social security costs
Defined contribution pension scheme costs
Rental of property
Rental of equipment
Research
2013
£
15,000
15,000
7,300
76,122
113,422
92,127
2,753
(80,823)
2,527,714
269,431
87,070
41,458
-
210,997
Proforma
2012
£
-
15,000
4,179
-
19,179
78,445
(679)
(41,056)
1,915,262
190,988
85,355
38,000
364
99,151
* The Corporate finance services were in respect of the Group’s listing on AIM.
The average monthly number of employees, including the directors, during the year was as follows:
2012
No.
2013
No.
Directors & Commercial
Engineers & Technicians
Administration
7
35
5
47
6
29
4
39
Total remuneration of key management personnel, being the directors of the company and its
subsidiary, is set out below in aggregate for each of the categories specified in IAS24, related party
disclosures:
Short term employee benefits
Post employment benefits
Social security costs
2013
£
591,340
16,280
66,220
673,840
Proforma
2012
£
397,468
9,700
38,404
445,572
Further details relating to the remuneration of each member of key management can be found in the
Directors report on page 10.
Page 31
AB Dynamics plc
Annual report and financial statements
For the period ended 31 August 2013
Consolidated financial statements
6.
Income tax expense
Current tax expense:
- for the financial year
- overprovision in the
previous financial year
Deferred tax liabilities: (Note 17):
2013
£
471,200
(13)
471,187
- origination and reversal of temporary differences
(29,213)
441,974
Proforma
2012
£
430,000
-
430,000
21,044
451,044
A reconciliation of income tax expense applicable to the profit before taxation at the effective tax rate
to the income tax expense at the effective tax rate of the Group are as follows: -
Profit before taxation
Tax at the applicable statutory tax rate of
23.58% (2012 – 25.17%)
Tax effects of:-
Non-deductible expenses
Capital allowance in excess of depreciation
Adjustment in research and development tax credit
Over provision in the previous financial year
Non-taxable foreign currency forward contracts
Other differences including change in rate of deferred
tax provision
Income tax expense for the financial year
7.
Dividends paid prior to group reconstruction
Final dividends paid prior to group reconstruction
8.
Earnings per share
2013
£
Proforma
2012
£
1,865,231
1,883,403
439,821
474,053
89,981
(6,970)
(62,201)
(13)
10,569
(29,213)
441,974
2013
£
234,500
9,630
(8,836)
(27,556)
-
(17,291)
21,044
451,044
Proforma
2012
£
201,000
Basic earnings per share is calculated by dividing the profit attributable to equity holders by the
weighted average number of ordinary shares in issue during the period, adjusted to reflect the
conversion of the ordinary shares from Anthony Best Dynamics Limited to AB Dynamics plc on a 1:1
basis on 8 May 2013 and the subsequent subdivision of shares of each issued ordinary share of £1
each into 100 ordinary shares of £0.01 each.
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary
shares outstanding to assume conversion of all dilutive potential shares, adjusted to reflect the
conversion and subsequent subdivision of the ordinary shares as mentioned above. The Company
has two categories of potentially dilutive shares, namely share options and warrants.
Page 32
AB Dynamics plc
Annual report and financial statements
For the period ended 31 August 2013
Consolidated financial statements
8.
Earnings per share (continued)
The calculation of earnings per share is based on the following earnings and number of shares.
Profit after tax attributable to owners of
the Group (£)
Weighted average number of shares:
Basic
Diluted
Earnings per share (pence)
Basic
Diluted
Years ended 31 August
2012
2013
£1,423,257
£1,432,359
14,212,360
15,010,940
13,400,000
13,400,000
10.01p
9.48p
10.69p
10.69p
Profit for the period attributable to owners of the Group (£)
Adjustments for:
AIM transaction costs
Profit for the period attributable to owners of the Group
before AIM transaction costs (£)
£1,423,257
£1,432,359
£315,305
-
£1,738,562
£1,432,359
Adjusted earnings per share before AIM transaction costs (pence)
Basic
Diluted
12.23p
11.58p
10.69p
10.69p
9.
Property, plant and equipment
Test
Equipment
£
Furniture
and
fittings
£
Motor
Vehicles
£
Plant and
machinery
£
Other fixed
assets
£
Land &
Buildings
£
Total
£
559,877
439,515
45,605
218,709
565,354
36,864
1,865,924
18,433
-
69,146
(11,095)
20,502
-
1,580
-
16,344
-
552,456
-
678,461
(11,095)
Cost
At 31 August 2012
Additions
Disposals
At 31 August 2013
578,310
497,566
66,107
220,289
581,698
589,320
2,533,290
Accumulated depreciation
At 31 August 2012
Charge for the year
Disposals
441,113
20,150
-
304,890
38,122
(8,032)
15,168
9,032
-
129,733
17,601
-
546,182
7,222
-
At 31 August 2013
461,263
334,980
24,200
147,334
553,404
-
-
-
-
1,437,086
92,127
(8,032)
1,521,181
net book value
At 31 August 2012
118,764
134,625
30,437
88,976
19,172
36,864
428,838
At 31 August 2013
117,047
162,586
41,907
72,955
28,294
589,320
1,012,109
Page 33
AB Dynamics plc
Annual report and financial statements
For the period ended 31 August 2013
Consolidated financial statements
9.
Property, plant and equipment (continued)
Test
Equipment
£
Furniture
and
fittings
£
Motor
Vehicles
£
Plant and
machinery
£
Other fixed
assets
£
Land &
Buildings
£
Total
£
549,911
462,113
25,253
189,661
555,654
-
1,782,592
20,011
(10,045)
75,606
(98,204)
34,112
(13,760)
29,048
-
9,700
-
36,864
-
205,341
(122,009)
Cost
At 31 August 2011
Additions
Disposals
At 31 August 2012
559,877
439,515
45,605
218,709
565,354
36,864
1,865,924
Accumulated depreciation
At 31 August 2011
Charge for the year
Disposals
At 31 August 2012
net book value
432,211
18,947
(10,045)
372,791
30,303
(98,204)
19,606
7,456
(11,894)
113,739
15,994
-
540,437
5,745
-
441,113
304,890
15,168
129,733
546,182
At 31 August 2011
117,700
89,322
5,647
75,922
15,217
-
-
-
-
-
1,478,784
78,445
(120,143)
1,437,086
303,808
At 31 August 2012
118,764
134,625
30,437
88,976
19,172
36,864
428,838
The building was brought into use on the last working day of the period and therefore no depreciation
has been charged. The directors are in the process of considering the depreciation policy which will be
introduced for the period starting 1 September 2013.
10.
Inventories
Work in progress
Raw materials
2013
£
288,782
1,197,608
1,486,390
Proforma
2012
£
618,748
856,357
1,475,105
The value of inventories (being materials used and consumables) recognised as an expense was
£3,272,446 (2012 proforma: £2,154,391).
The amount of write down of inventories recognised as an expense was £28,504 (2012 proforma: nil).
11. Trade receivables
2013
£
Proforma
2012
£
Trade receivables
1,132,625
1,353,301
No provision is considered necessary in respect of trade receivables.
The Group’s normal trade credit term is 30 to 60 days. Other credit terms are assessed and approved
on a case by case basis.
Page 34
AB Dynamics plc
Annual report and financial statements
For the period ended 31 August 2013
Consolidated financial statements
12. Other receivables and prepayments
Other receivables
Prepayments
13. Amount owing by contract customers
Cost incurred to date
Attributable profits
Progress billings
Represented by:
Amounts received in advance
Amount owing by contract customers
Amount of contract revenue recognised
to date
No retentions were held by customers for contract work.
14. Derivative financial instruments
Derivative financial instrument balances comprise:
Forward foreign exchange contracts
2013
£
164,988
101,962
266,950
Proforma
2012
£
143,681
40,691
184,372
2013
£
Proforma
2012
£
6,013,485
2,157,660
8,171,145
(6,921,827)
1,249,318
4,363,517
1,655,636
6,019,153
(5,151,195)
867,958
(487,280)
1,736,598
(119,032)
986,990
4,825,043
3,517,571
2013
£
-
-
Proforma
2012
£
44,821
44,821
Further analysis of financial instruments is given in note 19.
15. Cash and cash equivalents
For the purpose of the statement of cash flows, cash and cash equivalents comprise the following:-
Cash and bank balances
5,990,176
2,481,476
2013
£
Proforma
2012
£
Page 35
AB Dynamics plc
Annual report and financial statements
For the period ended 31 August 2013
Consolidated financial statements
16. Share capital
The allotted, called up and fully paid share capital is made up of 16,306,976 ordinary shares of
£0.01 each.
a)
Share issues during the period
Note
Number of
shares
On incorporation
On 8 May 2013
Sub-division of shares
On 22 May 2013
Less share issue costs
At 31 August 2013
(i)
(ii)
(iii)
1
133,999
13,266,000
2,906,976
-
16,306,976
Share
Capital
£
1
133,999
-
29,070
-
163,070
Share
premium
£
-
-
-
2,470,930
(168,402)
2,302,528
Total
£
1
133,999
-
2,500,000
(168,402)
2,465,598
(i)
(ii)
(iii)
(iv)
On incorporation, one ordinary share of £1.00 was subscribed by and issued to Mr.
A. Best.
On 8 May 2013, the Company issued 133,999 ordinary shares of £1.00 each to the
shareholders of Anthony Best Dynamics Ltd in consideration for the transfer of the
entire issued share capital of Anthony Best Dynamics Ltd to the Company.
By a resolution dated 8 May 2013, each of the issued ordinary shares of £1.00 was
subdivided into 100 ordinary shares of £0.01.
On 22 May 2013, the Company issued 2,906,976 ordinary shares of £0.01 each for
£0.86.
17. Deferred tax liabilities
At 1 September
Recognised in profit or loss
2013
£
71,136
(29,213)
Proforma
2012
£
50,092
21,044
At 31 August
41,923
71,136
The deferred tax liabilities are attributable to.
Accelerated tax depreciation
Derivative financial instruments
2013
£
41,923
-
41,923
Proforma
2012
£
60,386
10,750
71,136
Page 36
AB Dynamics plc
Annual report and financial statements
For the period ended 31 August 2013
Consolidated financial statements
18. Trade and other payables and accruals
Trade payables
Payments in advance
Social security and other taxes
Other payables and accruals
2013
£
795,229
1,139,292
66,436
1,162,136
3,163,093
Proforma
2012
£
625,078
420,486
50,342
675,315
1,771,221
Payments in advance relate to contractual revenue billed in advance and the income to be
recognised upon delivery of goods and completion of services.
19. Financial instruments
The Group’s activities are exposed to a variety of market risk (including foreign currency risk, interest
rate risk and equity price risk), credit risk and liquidity risk. The overall financial risk management
policy focuses on the potential adverse effects on the Group’s financial performance, through the
use of such instruments as hedging foreign exchange exposure at appropriate points during the
year.
(a) Financial risk management policies
The Group’s policies in respect of the major areas of treasury activity are as follows:
(i) Market risk
(i) Foreign currency risk
The Group is exposed to foreign currency risk on transactions and balances that are
denominated in currencies other than the Great Britain Pound. The currencies giving
rise to this risk are primarily the Euro and United States Dollar. Foreign currency risk
is monitored closely on an ongoing basis to ensure that the net exposure is at an
acceptable level.
The Group maintains a natural hedge whenever possible, by matching the cash
inflows (revenue stream) and cash outflows used for purposes such as capital
expenditure, operational expenditure and debt service requirements
the
respective currencies.
in
Where appropriate the Group has also utilised derivative financial instruments in the
form of forward contracts to sell currency in respect of sales denominated in
currencies other than Great Britain Pound.
Page 37
AB Dynamics plc
Annual report and financial statements
For the period ended 31 August 2013
Consolidated financial statements
19. Financial instruments (continued)
(a) Financial risk management policies (continued)
(i) Market risk (continued)
(ii) Foreign currency risk (continued)
The Group’s exposure to foreign currency is as follows:-
2013
Financial assets
Trade receivables
Construction contract
receivables
Other receivables
Cash and bank balances
Financial liabilities
Trade payables
Other payables and
accruals
Construction contract
payments on account
Net financial assets
Less: Net financial
assets denominated
in the functional
currency
Currency exposure
Great
Britain
Pound
£
United
States
Dollar
£
Japan
Yen
£
Euro
£
892,523
129,921
110,181
1,657,894
164,988
5,572,609
78,704
-
191,637
-
-
225,848
8,288,014
400,262
336,029
-
-
-
82
82
Total
£
1,132,625
1,736,598
164,988
5,990,176
9,024,387
536,608
745,816
988,931
2,271,355
166
580
36,152
36,898
11,821
246,634
795,229
11,065
114,209
-
-
757,461
1,139,292
137,095
246,634
2,691,982
6,332,405
6,016,659
315,746
Although there is no formal hedge the Group seeks to offset foreign currency risk
exposure by way of forward exchange contracts. At 31 August 2013 the Group had
no forward contracts in place.
Page 38
AB Dynamics plc
Annual report and financial statements
For the period ended 31 August 2013
Consolidated financial statements
19. Financial instruments (continued)
(a) Financial risk management policies (continued)
(i) Market risk (continued)
(i) Foreign currency risk (continued)
The Group’s exposure to foreign currency is as follows:-
Great
Britain
Pound
£
Euro
£
United
States
Dollar
£
Japan
Yen
£
Total
£
976,434
148,928
227,939
224,048
143,681
74,536
-
688,406
-
-
-
-
1,353,301
986,990
143,681
2,185,695
27,748
261,278
6,755
2,481,476
3,529,858
251,212
1,177,623
6,755
4,965,448
599,042
474,647
218
308
25,818
5,499
230,975
39,142
150,369
1,304,664
39,668
181,686
-
-
-
-
625,078
480,454
420,486
1,526,018
3,439,430
2,225,194
1,214,236
2012
Financial assets
Trade receivables
Construction contract
receivables
Other receivables
Cash and bank
balances
Financial liabilities
Trade payables
Other payables and
accruals
Construction contract
payments on account
Net financial assets
Less: Net financial
assets denominated
in the functional
currency
Currency exposure
Although there is no formal hedge the Group seeks to offset foreign currency risk
exposure by way of forward exchange contracts to sell US dollars and Euro. At 31
August 2012 the Group had sold forward $2,600,000 and €300,000. A 10%
strengthening/weakening of the foreign exchange rate as at the end of the reporting
period would have had an £176,700/(£110,344) impact on profit after taxation and
equity for that period end. This assumes that all other variables remain constant.
Page 39
AB Dynamics plc
Annual report and financial statements
For the period ended 31 August 2013
Consolidated financial statements
19. Financial instruments (continued)
(a) Financial risk management policies (continued)
(i) Market risk (continued)
(ii)
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial
instrument will fluctuate because of changes in market interest rates. The
Group’s exposure to interest rate risk arises mainly from interest-bearing
financial assets being interest bearing bank deposits. The Group’s policy is to
obtain the most favourable interest rates available whilst ensuring that cash is
deposited with a financial institution with a credit rating of “AA” or better. Any
surplus funds are placed with licensed financial institutions to generate interest
income.
Interest rate risk sensitivity analysis
A 100 basis points strengthening/weakening of the interest rate as at the end of
the reporting period would have immaterial impact on profit after taxation and
equity. This assumes that all other variables remain constant.
(iii) Equity price risk
The Group does not have any quoted investments and hence is not exposed to
equity price risk.
(ii) Credit risk
The Group’s exposure to credit risk, or the risk of counterparties defaulting, arises
mainly from trade and other receivables. The Group manages its exposure to credit
risk by the application of credit approvals, credit limits and monitoring procedures on
an ongoing basis. For other financial assets (including cash and bank balances), the
Group seeks to minimise credit risk by dealing exclusively with high credit rating
counterparties.
The Group establishes an allowance for impairment that represents its estimate of
incurred losses in respect of the trade and other receivables as appropriate. The main
components of this allowance are a specific loss component that relates to individually
significant exposures. Impairment is estimated by management based on prior
experience and the current economic environment.
Credit risk concentration profile
The Group’s major concentration of credit risk at 31 August 2013 relates to the
amounts owing by three customers which constituted approximately 35% of its trade
receivables as at the end of the reporting period.
Page 40
AB Dynamics plc
Annual report and financial statements
For the period ended 31 August 2013
Consolidated financial statements
19. Financial instruments (continued)
(a) Financial risk management policies (continued)
(ii) Credit risk (continued)
Exposure to credit risk
As the Group does not hold any collateral, the maximum exposure to credit risk is
represented by the carrying amount of the financial assets as at the end of the
reporting period.
The exposure of credit risk for trade receivables by geographical region is as follows:
United States
United Kingdom
Europe
Ageing analysis
2013
£
110,181
892,523
129,921
1,132,625
2012
£
227,939
976,434
148,928
1,353,301
The ageing analysis of the Group’s trade receivables as at each of the two years
ended 31 August 2013 is as follows:
Gross
amount
£
Individual
impairment
£
Carrying
value
£
2013
Not past due
Past due:
- less than 3 months
- 3 to 6 months
2012
Not past due
Past due:
- less than 3 months
- 3 to 6 months
492,011
575,149
65,465
1,132,625
778,947
556,230
18,124
1,353,301
-
-
-
-
-
-
-
-
492,011
575,149
65,465
1,132,625
778,947
556,230
18,124
1,353,301
At the end of the reporting period, trade receivables that are individually impaired were
those in significant financial difficulties and have defaulted on payments. These
receivables are not secured by any collateral or credit enhancement.
Trade receivables that are past due but not impaired
The Group believes that no impairment allowance is necessary in respect of these trade
receivables. They are substantially companies with good collection track record and no
recent history of default.
Page 41
AB Dynamics plc
Annual report and financial statements
For the period ended 31 August 2013
Consolidated financial statements
19. Financial instruments (continued)
(a)
Financial risk management policies (continued)
(iii) Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as
they fall due. The exposure to liquidity risk arises primarily from mismatches of the
maturities of financial assets and liabilities.
The Group maintains a level of cash and cash equivalents and bank facilities deemed
adequate by the management to ensure as far as possible, that it will have sufficient
liquidity to meet its liabilities when they fall due.
(b) Capital risk management
Capital is defined as the total equity of the Group. The Group’s objectives when managing
capital are to safeguard the Group’s ability to continue as a going concern in order to provide
returns for shareholders and benefits for other stakeholders and to maintain an optimal capital
structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the
Group may adjust the amount of dividends paid to shareholders, return capital to shareholders,
issue new shares or sell assets to reduce debt.
The Group manages its capital based on debt-to-equity ratio. The strategies adopted were
unchanged during the period under review and from those adopted in the previous financial
year. The debt-to-equity ratio is calculated as net debt divided by total equity. Net debt is
calculated as borrowings plus trade and other payables less cash and cash equivalents.
At 31 August 2013, the Group’s cash resources exceed its total debt. The Company hence has
no net debt.
(c) Classification of financial instruments
Apart from derivative financial instruments held for hedging purposes, all financial
instruments are categorised as receivables and loans.
2013
£
1,132,625
1,736,598
164,988
-
5,990,176
9,024,387
1,552,690
-
1,139,292
2,691,982
Proforma
2012
£
1,353,301
986,990
143,681
44,821
2,481,476
5,010,269
1,105,532
-
420,486
1,526,018
Financial assets
Trade receivables
Construction contract receivables
Other receivables
Derivative financial instruments
Cash and bank balances
Financial liabilities
Trade and accruals and
other payables
Derivative financial instruments
Construction contract payments on account
Page 42
AB Dynamics plc
Annual report and financial statements
For the period ended 31 August 2013
Consolidated financial statements
19. Financial instruments (continued)
(d) Fair value hierarchy
The fair values of the financial assets and liabilities are analysed into level 1 to 3 as follows:-
Level 1:
Fair value measurements derive from quoted prices (unadjusted) in active markets
for identical assets or liabilities.
Level 2:
Fair value measurements derive from inputs other than quoted prices included
within level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3:
Fair value measurements derive from valuation techniques that include inputs for
the asset or liability that are not based on observable market data (unobservable
inputs).
The only financial instruments carried at fair values were derivative financial instruments falling
within Level 2 and these were held only at 31 August 2012.
20. Lease commitments
The Group had total commitments at the end of each financial year in respect of non-cancellable
operating leases of:
Property leases
Payable within one year
Payable within 2-5 years
21. Related party disclosures
2013
£
38,000
72,833
2012
£
34,833
-
Mr. A. Best, a director of the company, is a trustee and beneficiary of the Best Middleton Trust. Rental
payments of £38,000 (2012 - £38,000) were made in the year. No amounts were due to or from the
trust at any year end.
22. Share options
The share option scheme, which was adopted by the company during the year, was established to
reward and incentivise the executive management team and staff for delivering share price growth.
The share option scheme is administered by the Remuneration Committee.
Following the acquisition of Anthony Best Dynamics Ltd the share options issued on 1 February 2013
were converted into share options for AB Dynamics plc. During the year the company granted
1,302,600 share options to Directors and employees with an exercise price of 12.52p each. The
weighted fair value of the options granted was 12.52p share. A charge of £18,613 (2012: £nil) has
been charged to the statement of comprehensive income for the year relating to these options.
These fair values were calculated using the Black Scholes option pricing model. The inputs into the
model were as follows:
Stock price
Exercise price
Interest rate
Volatility
Time to maturity
12.52p
12.52p
1%
30%
10 years
The expected volatility was determined with reference to similar entities trading on AIM.
Page 43
AB Dynamics plc
Annual report and financial statements
For the period ended 31 August 2013
Consolidated financial statements
22. Share options (continued)
Details of the share options outstanding at the year end are as follows:
Number
31 August
2013
-
1,302,600
-
-
1,302,600
-
WAEP
(pence)
31 August 2013
Number
31 August
2012
WAEP
(pence)
31 August
2012
-
12.52
-
-
12.52
-
-
-
-
-
-
-
-
-
-
-
-
-
Outstanding as at 1
September
Granted during the year
Expired during the year
Exercised during the year
Options outstanding at 31
August
Exercisable at 31 August
The weighted average remaining contractual life of the options outstanding at the statement of
financial position date is 9.5 years.
23. Ultimate controlling party
There is no ultimate controlling party.
Page 44
AB Dynamics Plc
Annual report and financial statements
For the period ended 31 August 2013
Company financial statements
Company balance sheet
Fixed assets
Investments
Current assets
Other debtors
Creditors: amounts falling due within one year
Net current assets
Net assets
Capital and reserves
Called up share capital
Share premium account
Profit and loss account
Equity – attributable to the owners of the parent
Note
3
4
5
6
7
8
9
2013
£
152,613
1,958,566
1,958,566
5,000
1,953,566
2,106,179
163,070
2,302,528
(359,419)
2,106,179
The financial statements were approved by the Board of Directors and authorised for issue on 6
November 2013 and are signed on its behalf by:
Anthony Best
Director
Robert Hart
Director
COMPANY REGISTRATION NUMBER: 08393914
Page 45
AB Dynamics Plc
Annual report and financial statements
For the period ended 31 August 2013
Company financial statements
Notes to the Company financial statements
BASIS OF ACCOUNTING
The financial statements have been prepared in accordance with the historical cost convention and
in accordance with applicable United Kingdom law and United Kingdom accounting standards. The
principal accounting policies are described below. They have all been applied consistently throughout
the period.
No company cash flow statement has been prepared as no cash is held in the company.
GOING CONCERN
At 31 August 2013, the Company had net current assets of £1,953,566 with the main current asset are
being amounts owed from its subsidiary Anthony Best Dynamics Ltd, amounting to £1,952,827. The
Company has assessed its ongoing costs with cash generated by its subsidiary to ensure that it can
continue to settle its debts as they fall due.
The Directors have, after careful consideration of the factors set out above, concluded that it is
appropriate to adopt the going concern basis for the preparation of the financial statements and the
financial statements do not include any adjustments that would result if the going concern basis was not
appropriate.
INVESTMENTS
Investments held as fixed assets are stated at cost less provision for impairment.
TAXATION
Current tax, including UK corporation tax and foreign tax, is provided at amounts expected to be paid (or
recovered) using the tax rates and laws that have been enacted or substantively enacted by the balance
sheet date.
Deferred tax is recognised in respect of all timing differences that have originated but not reversed at
the balance sheet date where transactions or events that result in an obligation to pay more tax in the
future or a right to pay less tax in the future have occurred at the balance sheet date. Timing
differences are differences between the company's taxable profits and its results as stated in the
financial statements that arise from the inclusion of gains and losses in tax assessments in periods
different from those in which they are recognised in the financial statements.
A net deferred tax asset is regarded as recoverable and therefore recognised only when, on the basis of
all available evidence, it can be regarded as more likely than not that there will be suitable taxable
profits from which the future reversal of the underlying timing differences can be deducted.
Deferred tax is not recognised when fixed assets are revalued unless by the balance sheet date
there is a binding agreement to sell the revalued assets and the gain or loss expected to arise on
sale has been recognised in the financial statements. Neither is deferred tax recognised when fixed
assets are sold and it is more likely than not that the taxable gain will be rolled over, being charged to
tax only if and when the replacement assets are sold.
Taxation arising on disposal of a revalued asset is split between the profit and loss account and the
statement of total recognised gains and losses on the basis of the tax attributable to the gain or loss
recognised in each statement.
Page 46
AB Dynamics Plc
Annual report and financial statements
For the period ended 31 August 2013
Company financial statements
1
LOSS FOR THE FINANCIAL PERIOD
The company has taken advantage of section 408 of the Companies Act 2006 and, consequently, a
profit and loss account for the company alone has not been presented.
The company's loss for the financial period was £378,032.
The company's loss for the financial year has been arrived at after charging auditor's
remuneration payable to Crowe Clark Whitehill LLP for audit services to the company of £15,000.
2
EMPLOYEES AND DIRECTORS' REMUNERATION
Staff costs during the period by the Company were as follows:
Non-executive directors fees
2013
£
22,375
22,375
The executive management team is remunerated by the operating subsidiary Anthony Best
Dynamics Limited.
The average number of employees of the company during the period was:
Directors and management
3
INVESTMENTS
On incorporation
Addition
At 31 August 2013
2013
Number
5
Subsidiary
undertaking
£
-
152,613
152,613
The company owns more than 20% of the following undertakings which are incorporated in the
United Kingdom:
Subsidiary undertaking:
Anthony Best Dynamics Limited
Ordinary
100
Class of
share held
%
shareholding
On 8 May 2013, the Group, previously headed by Anthony Best Dynamics Limited, underwent a
reorganisation by virtue of which Anthony Best Dynamics Limited’s shareholders in their entirety
exchanged their shares for shares in AB Dynamics plc, a newly formed company, which then
became the ultimate parent company of the Group. Notwithstanding the change in the legal parent
of the Group, this transaction has been accounted for as a reverse acquisition under IFRS 3
(revised) “Business Combinations” and the consolidated financial statements are prepared on the
basis of the new legal parent having been acquired by the existing Group.
Page 47
AB Dynamics Plc
Annual report and financial statements
For the period ended 31 August 2013
Company financial statements
4
OTHER DEBTORS
Amounts owed by group undertakings
Prepayment
5
CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
Accruals and deferred income
All amounts fall due within 30 days of the period end.
6
SHARE CAPITAL
2013
£
1,952,827
5,739
1,958,566
2013
£
5,000
5,000
The allotted, called up and full paid share capital is made up of 16,306,976 ordinary shares of
£0.01 each.
Share issues during the period
Note
Number of
shares
On incorporation
On 8 May 2013
Sub-division of shares
On 22 May 2013
Less share issue costs
At 31 August 2013
(i)
(ii)
(iii)
1
133,999
13,266,000
2,906,976
-
16,306,976
Share
Capital
£
1
133,999
Share
premium
£
-
-
Total
£
1
133,999
29,070
-
163,070
2,470,930
(168,402)
2,302,528
2,500,000
(168,402)
2,465,598
(i) On incorporation, one ordinary share of £1.00 was subscribed by and issued to Mr. A. Best.
(ii) On 8 May 2013, the Company issued 133,999 ordinary shares of £1.00 each to the
shareholders of Anthony Best Dynamics Ltd in consideration for the transfer of the entire
issued share capital of Anthony Best Dynamics Ltd to the Company.
(iii) By a resolution dated 8 May 2013, each of the issued ordinary shares of £1.00 was
subdivided into 100 ordinary shares of £0.01.
(iv) On 22 May 2013, the Company issued 2,906,976 ordinary shares of £0.01 each for £0.86.
Share options:
The Company had a total of 1,465,669 options and warrants outstanding over ordinary shares,
which includes 163,069 warrants granted to Cairn Financial Advisers LLP.
Page 48
AB Dynamics Plc
Annual report and financial statements
For the period ended 31 August 2013
Company financial statements
7
SHARE PREMIUM ACCOUNT
Balance brought forward
Premium on issue of new shares
Share issue costs
Balance carried forward
8
PROFIT AND LOSS ACCOUNT
Balance brought forward
Share based payments
Loss for the financial period
Balance carried forward
9
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS’ FUNDS
Loss for the financial period
Net decrease in shareholders' funds
Issue of new shares
Share issue costs
Share based payments
Opening shareholders' funds
Closing shareholders' funds
2013
£
-
2,470,930
(168,402)
2,302,528
2013
£
-
18,613
(378,032)
(359,419)
2013
£
(378,032)
(378,032)
2,634,000
(168,402)
18,613
-
2,106,179
Page 49
AB Dynamics Plc
Annual report and financial statements
For the period ended 31 August 2013
Company financial statements
AB Dynamics plc
Holt Road
Bradford on Avon
Wiltshire BA15 1AJ
T: +44 (0)1225 860 200
F: +44 (0)1225 860 201
E: info@abd.uk.com
www.abd.uk.com
Page 50
Stock code: ABDP