Strategic report
Performance driven
AB Dynamics plc Annual Report 2023
Governance
60
Chairman’s introduction
to corporate governance
Statement of corporate
governance
Board of Directors
Executive Committee
Statement of corporate compliance
Nomination Committee report
Audit and Risk Committee report
ESG Committee report
Remuneration Committee report
Directors’ report
Statement of Directors’
responsibilities
61
62
64
66
76
78
80
81
89
92
Financial statements
94
103
Independent auditor’s report
Consolidated statement
of comprehensive income
Consolidated statement
of financial position
Consolidated statement
of changes in equity
104
105
129
106 Consolidated cash flow statement
107
Notes to the consolidated
financial statements
Company statement
of financial position
Company statement of changes
in equity
Notes to the Company
financial statements
Notice of Annual General
Meeting 2024
130
129
135
Strategic report
01
02
04
05
06
08
12
14
16
19
20
23
Highlights of 2023
At a glance
How we have evolved
Investment case
Chairman’s statement
Our markets and strategy
ABD Solutions
Business model
Chief Executive Officer’s review
Q&A with Dr James Routh
Operational review – Track testing
Operational review – Laboratory
testing and simulation
Chief Financial Officer’s review
Key performance indicators
ESG strategy
TCFD
S172(1) statement and
stakeholder engagement
Risk management
Principal risks and uncertainties
26
30
32
50
52
54
56
Discover more at abdplc.com
Driving
performance
across all areas
of the business
A platform for growth
Having invested in our Group product range, capability,
leadership and new product development and leveraging our
existing core strategy and technologies, the Group has delivered
a strong set of results, and has built a solid foundation for growth
and long-term sustainability.
Investment case
Read more about our
investment case on page 05
Our markets
Read more about our
markets on page 08
Our strategy
Read more about our
strategy on page 11
Strategic report
Highlights of 2023
Strong financial performance
and sustainable growth
Operational highlights
• Record revenue and operating profit along
with improvement in operating margin
• Continuing progress made in the strategic initiative
to open up new markets beyond automotive
• ABD Solutions won a £1m contract for
delivery of a retrofit pedestrian detection
system for construction machines for delivery
during FY 2024, illustrating the wide range of
applications for its technology
• VadoTech has been awarded an extension of its
existing contract to provide testing services in
Beijing, as well as a new, smaller contract to provide
similar services near Shanghai
• The integration of Ansible Motion is continuing as
planned and the business has delivered a strong
performance since acquisition in September 2022
• New product development continues in line with
the technology roadmap for existing track testing
and simulation markets and development of the
core technology for ABD Solutions
• Along with the launch of the new range of
ADAS motorcycle and pedestrian dummies,
and LaunchPad Spin, the Group has also released
ray-tracing capability for its simulation software
• Well placed to sustain growth momentum into
the medium term, supported by:
• Strong organic growth across automotive
markets, supported by regulatory tailwinds
and rapid technology change, with a greatly
strengthened operational and commercial platform
• The substantial opportunity beyond automotive
markets presented by ABD Solutions, transitioning
from technology development to commercialisation
• Significantly enhanced simulation and software
capabilities enabled by the expanded product
range created through the acquisitions of rFpro
and Ansible Motion
• A strong financial position that provides scope
for further value-enhancing growth investment
in FY 2024 and beyond
Financial highlights
Revenue
£100.8m +21%
(2022: £83.2m)
Adjusted* EBITDA
£20.5m +18%
(2022: £17.3m)
Adjusted* operating profit
£16.6m +21%
(2022: £13.7m)
Adjusted* operating margin
16.5% +10 bps
(2022: 16.4%)
Net cash
£32.0m
(2022: £29.2m)
Adjusted* diluted earnings per share (EPS)
60.8p +26%
(2022: 48.1p)
Dividend per share
6.36p +20%
(2022: 5.30p)
The comparatives for the prior period have been restated to reflect a timing difference
from a different interpretation of the accounting standard regarding revenue
recognition. Revenue from contracts with two customers was previously recognised
over time and has been restated to point in time (note 29).
*
Adjusted to exclude amortisation of acquired intangibles, acquisition related charges
and exceptional items. All profit and earnings per share figures going forward refer
to adjusted business performance as defined on page 28 with a reconciliation to
statutory measures.
AB Dynamics plc Annual Report and Accounts 2023
01
Strategic reportGovernanceFinancial statements At a glance
Developing our business
Track testing
Track testing products and services
represent 68% of total Group revenue.
The products are used during road vehicle
development for the test and verification
of Advanced Driver Assistance Systems
(ADAS), autonomous systems and vehicle
dynamics. Test vehicles and ADAS platforms,
such as the Guided Soft Target (GST) and
LaunchPad, are controlled using complex
control software for accurate control and
synchronisation of multiple test objects.
This enables our customers to conduct
complex, multi-object test scenarios
with a simple-to-use software interface
to satisfy internal or external regulatory
test requirements.
The Group provides testing services including
the provision of ADAS and vehicle dynamics
tests through a comprehensive test facility
based in California, USA. The Group also
offers on-road testing services, with
operations in China and Germany.
Laboratory testing
and simulation
Laboratory testing and simulation represents
32% of total Group revenue and includes
simulation software and products relating
to simulation, noise and vibration and
the assessment of kinematics and
compliance in vehicles. These products
are used during vehicle development to
replicate the real world in a simulated
environment and to characterise vehicle
dynamics and performance across a
wide range of applications including
conventional vehicles, motorsport and
automated vehicles.
Our simulator products along with our
market-leading physics based simulation
software reduce new vehicle development
timescales, risk and costs by allowing
meaningful evaluation earlier in the
development process.
02
AB Dynamics plc Annual Report and Accounts 2023
Track testing revenue
£68.6m +6%
(2022: £64.7m)
Read more on page 20
Laboratory testing
and simulation revenue
£32.2m +74%
(2022: £18.5m)
Read more on page 23
Delivering a platform
for growth
As we expand our portfolio of products
and services, we are reducing our reliance
on specific market sectors and geographic
territories. Continued progress in our
diversification strategy through ABD
Solutions, the introduction of new testing
products to market and the successful
integration of Ansible Motion into the
Group has resulted in increased revenues
and a broader customer base.
ABD Solutions leverages the core
technologies of AB Dynamics into new
adjacent markets where the customer is
the end user of the equipment, developing
solutions to automate vehicle applications
specifically in the mining and specialist
vehicles sectors. ABD Solutions enables
vehicles and machines to benefit from
autonomy. The Group’s unique expertise lies
in vehicle actuation, with the knowledge and
skills to bring autonomy to existing fleets
quickly and cost-effectively by modernising
existing assets.
In the developing area of simulation, the
acquisition of Ansible Motion has brought
critical mass to the Group’s existing
capability across simulators and simulation
software, bringing additional opportunities
for growth.
Strategic reportGovernanceFinancial statements Strategic report
Governance
Financial statements
At a glance continued
UK
Germany
USA
China
Japan
Singapore
Global sales revenue by region
Revenue by sector
Revenue by customer category
Proportion of recurring revenue*
2%
4%
25%
27%
£32.2m
26%
£68.6m
70%
2023
2022
40%
40%
£100.8m
£83.2m
0 10 20 30 40 50 60 70 80 90 100 110
46%
UK/Europe
Asia Pacific
North America
Rest of World
Laboratory testing and simulation
Track testing
Automotive OEMs
Service providers
Tier 1 suppliers and technology
Recurring
Original equipment
*
Recurring revenue is defined as revenue from annual software licences,
service and support contracts and testing services contracts.
AB Dynamics plc Annual Report and Accounts 2023
03
How we have evolved
Responding to market drivers for
improved safety and increasing automation
Along with investing in new product development in our core and adjacent markets, we have
invested in capabilities in terms of talent and leadership and built a solid foundation as a platform
for sustainable long-term growth through engineering innovation and strategic acquisitions.
Our investment case on page 05
AB Dynamics today
Track testing products and services
A range of products used in development, testing
and certification of ADAS on automotive vehicles,
to conduct complex, multi-object vehicle test
scenarios on test tracks and proving grounds.
All share a common, easy-to-use software
interface that makes programming simple and
straightforward. Products include Driving Robots,
ADAS targets, drive-by-wire systems, path
following and synchronisation software, a full
proving ground management solution and
high-performance wireless telemetry systems
allowing reliable data transfer from
vehicle-to-vehicle and vehicle-to-base.
Laboratory testing and simulation
Simulation
The AB Dynamics simulation product family
includes workstation, desktop, static and dynamic
variants for use in automotive and motorsport
applications. All systems are controlled by
simulation software that is agnostic to both
models and visualisation solutions. The AB
Dynamics software tool chain enables the
simulators to seamlessly share scenarios with
our track test systems, thereby reducing the
time required for effective real-world validation
of virtual world results. This means timescales
are reduced and development activities are
more productive.
Vehicle development end-to-end toolchain
04
AB Dynamics plc Annual Report and Accounts 2023
Laboratory testing equipment
High-precision motion control and measurement
capabilities, used across our range of automotive
measurement and analysis products. Our
class-leading SPMM (suspension parameter
measurement machine) has been chosen around
the world for over 25 years and is complemented
by our systems for testing steering systems and
measuring suspension system noise, vibration and
harshness (NVH).
ABD Solutions
ABD Solutions accelerates the transition to
autonomy by providing retrofit solutions across
mining and specialist vehicles. Indigo Drive is an
end-to-end system providing a software and
hardware solution allowing our customers to go
driverless in off highway applications.
Read more on page 12
Strategic reportGovernanceFinancial statements Investment case
Market leader in growing markets
1
2
3
4
Highly cash generative
with clear capital
allocation framework
• Our strong cash generation
enables us to fund ongoing
investment in organic growth
across our core markets and
ABD Solutions, to strengthen
business infrastructure for the
next phase of expansion and to
fund acquisitions
• Our capital allocation priorities
are: investment in innovation
to grow core business;
investment in ABD Solutions;
bolt-on acquisitions; and our
progressive dividend policy
Structural and regulatory
growth drivers across all
our markets
Highly resilient business
solving customers’
sustainability challenges
Strong margins
with clear strategy
for expansion
• We operate in long-term growth
markets supported by favourable
regulatory environments and
global focus on active safety
and autonomous systems
development
• Growth in the number and
complexity of new vehicle ADAS
tests drives growth in product sales
• Our offering spans both physical
and simulated testing across
ADAS, autonomous vehicle R&D
and vehicle testing
• We are using our core technology
portfolio to leverage adjacent
markets including mining,
specialist vehicles and defence
• We have a global presence and
diverse geographic end markets
• We have a significant proportion
of recurring revenue with our
increased service and support
offering and software sales
• The wider focus on road safety
• Highly differentiated products
and strong, long-term
relationships with customers
underpin strong margins
• Continued investment
in innovation to deliver
differentiated products will
drive strong gross margins
• Ability to increase prices enables
maintenance of gross margins
during inflationary periods
•
Investment in people, business
systems and capacity will
deliver future efficiencies
and margin expansion
• Current investment in ABD
Solutions impacts overheads
and margins during the
pre-revenue phase. Additional
margin expansion will be
delivered once this new
business unit delivers
positive contribution
and reduction in accidents as well
as the focus on electric vehicle
and battery technology is an
important long-term trend that
will support continued growth
• The focus on electric vehicle
and battery technology
supports our growth as the
emergence of new vehicle
models requires additional
development work, testing
and validation
• We actively focus on the
wellbeing of our workforce
through a strong health and
safety culture and employee
engagement and assistance
• Our global, diversified
customer base provides
resilience. With direct sales
and support facilities in the
UK, Germany, Japan, China,
Singapore and the USA and
indirect sales channels in all
other key customer territories;
we are well placed to deliver
support where our customers
need it
Read more about our markets
on page 08
Read more in our Chief Executive
Officer’s review on page 16
Read more in our Chief Financial
Officer’s review on page 26
Read more about our capital
allocation framework on page 16
Strong revenue growth
With a track record of revenue growth
and strong margins, we deliver sustainable
value for our stakeholders through our
market-leading engineered products and
services and strategic acquisitions. Our
strong cash generation and clear capital
allocation framework enables us to invest
for future growth.
Revenue £m
100.8
83.2
65.4
61.5
58.0
25% CAGR*
2023
2022
2021
2020
2019
2018
2017
2016
2015
2014
37.1
24.6
20.5
16.5
13.8
* Compound annual growth rate (CAGR).
Great teamwork
Our teams collaborate across different
geographies and different product lines
to deliver solutions to customers.
Read more about our people on page 36
AB Dynamics plc Annual Report and Accounts 2023
05
Strategic reportGovernanceFinancial statements Chairman’s statement
Driving performance across all areas of the business
Highlights
• Continued investment in new product development and
expansion of our service offering in our core markets
• Good progress made by ABD Solutions to develop and
commercialise our offering for adjacent markets
• Acquisition of Ansible Motion strengthens our
simulation offering
Overview
I am pleased to report a year of very positive financial and
strategic performance for the Group.
The Group continued to focus on building a sustainable and
resilient business. Overall results for the year showed revenue
growth of 21% to £100.8m of which 7% was organic growth, and
a 21% increase in operating profit to £16.6m, driven by increases
across both sectors of the business.
The Group continued to invest in the core automotive sector,
which is characterised by strong regulatory and structural growth
drivers. The continued increase in regulation and the requirements
of consumer organisations for safety ratings covering additional
classes of vehicles and increasingly sophisticated safety systems
are supportive of future growth in demand for our products
and services.
At the same time, we have seen good progress in our strategy
to diversify the business and expand into adjacent markets.
ABD Solutions has successfully proved the concept of retrofitting
existing technologies to enable the automation of conventional
vehicle fleets and developed a pipeline of commercial opportunities.
The acquisition of Ansible Motion expands our capability in the key
simulation sector and I am pleased to report that the integration
has been successfully completed.
Our strategy and the detailed financial results are covered in the:
Chief Executive Officer’s review on pages 16 to 19
Chief Financial Officer’s review on pages 26 to 29
Employees
I would like to take this opportunity to thank our global team of
hard working and committed employees who have all contributed
to a successful year, responding to changing demands in what
remains a challenging and fast-moving market. The Group attracts
talent at all levels within the business and continues to invest in
training all the way through from apprentices to graduates and
continuing professional development.
The Group has grown strongly in recent years, and we now have
over 470 employees, with around half located in the UK. The
Board takes our responsibility towards employee engagement
and development seriously. A particular highlight of the year was
the culmination of our first Professional Development Programme
for emerging talent to develop our future leaders.
Investments
The acquisition of Ansible Motion will continue to drive the Group
strategy forward in order to deliver sustainable growth. Other
investments included continued new product development,
progress in the implementation of our ERP system and investment
in ABD Solutions.
ESG
I am pleased to report that the hard work and determination by
the members of the ESG Committee and wider staff have delivered
good progress on our ESG strategy. The Board is committed to
ongoing improvements in all aspects of ESG.
Further information on our approach to ESG can be found on pages 32 to
49 and the activities of the ESG Committee are summarised on page 80
“ The Group delivered excellent
financial results, demonstrated
good progress against our
strategic priorities to strengthen
our platform for growth and
has a strong balance sheet to
support that growth.”
Richard (Dick) Elsy CBE
Non-Executive Chairman
06
AB Dynamics plc Annual Report and Accounts 2023
Strategic reportGovernanceFinancial statements Chairman’s statement continued
Corporate governance
Strong corporate governance and risk management is an essential
element of the Board’s activities and is key to ensuring ongoing
stability and growth of the Group. I am pleased to confirm that
AB Dynamics plc is in compliance with the Quoted Companies
Alliance (QCA) Code as required under the AIM Rules. The Board
takes into consideration feedback provided by various ratings
agencies in setting policies and in developing our ESG strategy
as part of our continuous improvement in corporate governance.
I report separately on the Group’s approach to governance and its
procedures in the Statement of corporate governance, which can
be found on pages 67 to 75.
Outlook
AB Dynamics operates within markets that are supported by
long-term regulatory and structural growth drivers in automotive
and holds an enviable position in the sectors in which it operates.
These market growth drivers, coupled with the ongoing
investments in all areas of the business, provide the Board
with strong confidence that the outlook remains positive.
Our continued strategic clarity and ongoing investments
provide a strong platform for future growth and the Board
remains confident in delivering continued progress in the
forthcoming year.
Talent development
Dividend
Based on the strong financial performance and the Board’s
confidence in continued growth and delivery in 2024, the Board
is recommending a final dividend of 4.42p per share payable on
28 February 2024 subject to shareholder approval at the AGM. The
ex-dividend date will be 8 February 2024 and the record date will
be 9 February 2024. The total dividend for the year will therefore
be 6.36p per share, which is an increase over the prior year of 20%,
continuing the Board’s progressive dividend policy.
Richard Elsy CBE
Chairman
23 January 2024
Our first twelve-month Professional
Development Programme (PDP) was
completed in June. We held a closing event
which entailed all twelve participants presenting
to the programme’s mentors, the Group senior
leadership team and our Board of Directors.
The purpose of this programme is to identify and advance high
performing people within our organisation to develop their skills
to maximise the impact they make in their careers as well as to
promote their own personal development.
Read more on page 39
AB Dynamics plc Annual Report and Accounts 2023
07
Strategic reportGovernanceFinancial statements Our markets and strategy
Road safety
Structural drivers
The automotive sector continues to evolve and adapt to the
structural and regulatory changes driving rapid unprecedented
change. The global challenge of climate change is driving strong
demand for the acceleration of the implementation of electric
vehicles and the ongoing societal need for improvements in road
safety is driving the development of ADAS and increasing levels
of autonomous systems.
Continued emergence of new entrants into the automotive
market, particularly in electric vehicles and autonomy, has placed
additional pressures on traditional automotive OEMs to rapidly
develop new technologies. Therefore, the sector remains heavily
focused on R&D in the following key areas:
• active safety and ADAS systems;
• electric vehicle and battery technology;
• assisted driving technologies that support automated highway
driving; and
• autonomy and increasingly automated driving functions.
The growing use of simulation is accelerating the efficiency
and speed of development, allowing customers to test in a
virtual environment.
These clear market drivers align with the mission and ESG aims
of AB Dynamics to assist the sector to improve road safety and aid
the global drive towards net zero emissions. The development of
ADAS has already led to significant improvements in road safety
in Europe and Japan. As these technologies are implemented and
regulated in low and middle-income countries, this will ultimately
significantly reduce the estimated 1.35m road deaths globally per
year with pedestrians, cyclists and motorcyclists making up more
than half of all road deaths.
Link to strategy
Link to strategy
08
AB Dynamics plc Annual Report and Accounts 2023
Our mission is to accelerate our customers’ drive towards net zero emissions,
improving road safety and the automation of vehicle applications.
Regulatory drivers
The market for ADAS and active safety continues to be driven
by regulation such as EU General Safety Regulation/UNECE, in
the USA, the National Highway Traffic and Safety Administration
(NHTSA), and consumer-facing safety organisations such as
European New Car Assessment Programme (Euro NCAP).
The growth in testing volume and complexity continues to drive
demand for ADAS platforms and driving robots that are both more
capable and more versatile. To recognise the need for new test
tools, this year Euro NCAP updated its listing of equipment used
in official testing to include AB Dynamics’ latest and most capable
platforms (LaunchPad 80, Soft Motorcycle 360 and GST 120).
Consumer testing
Safety ratings from consumer organisations such as Euro NCAP,
Japan NCAP and China NCAP are often more stringent than
regulation. In order to receive an NCAP safety rating, vehicles must
pass an increasing number of tests. These tests will drive demand
for our products.
In 2014, the number of ADAS test scenarios performed for Euro
NCAP ratings was 18; this has grown to in excess of 500. In 2023
Euro NCAP updates included new tests designed to reward
vehicle systems that protect motorcyclists. These test scenarios
include collision with the rear of a motorcycle braking in queuing
traffic, detection of a motorcycle in a vehicle’s blind spot and
junction scenarios where an inattentive driver may turn in front
of an oncoming motorcycle. They also included tightened criteria
for commercial van ratings, with the expectation that by 2026
commercial vans should have the same ADAS requirements as
passenger vehicles. Euro NCAP also introduced the Safer Trucks
campaign providing a Truck Safe City and Highway rating scheme.
Euro NCAP’s 2030 roadmap confirms Euro NCAP’s commitment to
drive further improvements in vehicle safety focused on four core
areas: Safe driving, crash avoidance, crash protection and post-crash
safety. The Group’s track testing products form an essential part
of the testing for two of the core areas - safe driving and crash
avoidance technologies.
Euro NCAP test scenarios
2025+ Vehicle-to-vehicle communication
2023 AEB junctions
2020 Enhanced Vulnerable Road User tests
700+
591
491
2018 Enhanced AEB
2016 Lane departure warning
2014 AEB car to car
277
84
18
LaunchPad Spin and the Soft Pedestrian are on the candidate list
for Euro NCAP accreditation.
Regulation
In 2022, new UNECE (United Nations Economic Commission
for Europe) regulations came into force which all vehicle
manufacturers must meet to sell their vehicles in the United
Kingdom and Europe. In its first phase, Automatic Emergency
Braking (AEB) was mandated on newly introduced car and van
models, while a second phase, to be implemented in July 2024,
extends this requirement to all vehicle registrations in these
classes. The regulations also include emergency lane keeping
for cars and vans, Blind Spot Information Systems and Moving
Off Information Systems for certain vehicle classes.
The accompanying legislation also gives new powers for market
surveillance authorities to monitor real-world performance
of these systems. Importantly, the authority is not limited to
carrying out the specific tests defined by the type approval
regulations, they can test for broader requirements. This means
that vehicle manufacturers must meet the wider requirements
of the regulation and not just pass the specific tests. For ADAS
Strategic reportGovernanceFinancial statements Our markets and strategy continued
2026
2029
2032
Roadmap 2030
Safe Driving
M1: Beyond Intelligent speed assistance
M2: Driver awareness: impaired
driving to cognitive distraction
M3: AD Grading: Domain extension
and driver engagement
Crash Avoidance
M4: Improved robustness and
real-world effectiveness
M5: Leveraging vehicle connectivity
M6: Pedal misapplication
Crash Protection
M7: Senior protection: low severity
testing with sled
M8: Far-side and side pre-crash incentives
M9: Protection equity through modelling
M10: Whiplash protection parity
M11: Passive VRU protection – A-pillar
and micro-mobility
Post-Crash Protection
M12: Nest-gen updates including D-call
and thermal scanning
Regulation continued
based scenarios, this may include testing the vehicle at a variety
of approach speeds, offsets and loading and lighting conditions,
driving increased need for test equipment.
In the USA, the National Highway Traffic and Safety Administration
(NHTSA) operates a similar ratings scheme to Euro NCAP but functions
as a government regulator. The US government has committed to
improving road safety and has begun to mandate the use of ADAS
to assist in reducing injuries and fatalities, with a particular focus
on the upward trend in pedestrian injuries and fatalities in the USA
Links to strategy
Product and innovation
Acquisitive growth
Service and support
Capability and capacity
Diversification
International footprint
over recent years. NHTSA’s recent notice of intended rule making
marks its intention to mandate the use of ADAS technologies. Testing
of this capability is expected to closely mirror those functions tested
by Euro NCAP, but compliance will be mandated through federal
regulation, rather than through consumer bodies such as Euro NCAP.
Market size and growth rates
Road safety addressable market
Based on data collated in 2021, the total addressable market size
is approximately £1.4bn.
The largest single sector is track testing. The core track testing
products sector represents approximately £100m market size
with strong growth in ADAS platforms offset by a more stable
market for driving robots. AB Dynamics also operates track
testing services through its testing facility in Bakersfield, USA,
and on-road testing services through VadoTech in Asia Pacific.
The laboratory testing equipment and simulation market
continues to grow and represents approximately £190m.
Overall compound annual growth rate in the existing addressable
market is forecast to be 15% per year.
Simulation
The market for the simulation division comprises the capability
and experience to deliver complete end-to-end vehicle simulation
systems including simulator hardware, simulation software,
integration, consultancy, training and aftermarket support.
Our Driver in the Loop (DiL) driving simulators put humans in
contact with new vehicles before they have been physically
prototyped to reduce vehicle development timescales and costs
by enabling meaningful virtual testing earlier in the development
process. The broad portfolio of dynamic DiL simulators offers
high dynamic performance and large motion envelopes to provide
solutions for a wide range of applications in both the automotive
and motorsport markets. rFpro offers real-time simulation software
and digital twins used to accelerate vehicle development including
testing and validation of assistance systems, autonomy and vehicle
dynamics. The combination of our expertise in simulator hardware
and software solutions offers an unparalleled level of technical
integration for our customers.
Simulation addressable market
The total vehicle simulation industry is currently estimated to be
valued at approximately £1.6bn per annum globally with an expected
CAGR of 13%. The size of the advanced DiL simulator sub-sector is
currently estimated to be valued at approximately £120m with an
expected CAGR of 5%. The size of the real-time simulation software
sub-sector for motorsport, automotive and ADAS/autonomous
vehicles (AV) development is currently estimated to be valued
at approximately £300m with an expected CAGR of 25%.
The factors influencing this growth include:
• Product development: use of simulation to reduce vehicle
development timescales and costs by enabling meaningful
virtual testing earlier in the development process.
• Safety: introduction of ADAS systems is growing, simulation
enables virtual testing to evaluate systems in a safe environment
and to assess driver acceptance.
• Autonomous vehicles: approximately $50bn investment over
the past five years in the development of AV technology, with
70% of the investment coming from other than the automotive
industry. These AV start-ups are embracing simulation to reduce
time to market.
Road safety addressable market
£1.4bn
Track testing products £0.1bn
£0.2bn
Lab testing products
£0.3bn
Simulation
£0.8bn
Testing services
AB Dynamics plc Annual Report and Accounts 2023
09
Strategic reportGovernanceFinancial statements Our markets and strategy continued
Vehicle applications
Structural drivers
Outside of the automotive sector, other industries such as mining,
defence and specialist vehicles are increasingly seeking to automate
vehicle applications to improve operational safety and/or increase
productivity and efficiency.
Operational safety and vehicle efficiency are the market drivers
for mining applications. Transport accounts for 40% of all accidents
and 60% of all deaths in quarries. Mining has the potential to be
the fastest growing market with forecast growth of approximately
50% compound annual growth rate. Demand for solutions to
mitigate operational safety and efficiency risks is a clear market
driver for vehicle applications, whilst also aligning with the
strategic objectives of the Group.
ABD Solutions’ mission is to make the route to autonomy faster,
delivering retrofit solutions that drive safety and efficiency in
existing fleets. Vehicle applications for the key addressable markets
solve problems with labour shortages, human limitations, downtime
and managing dangerous environments.
ABD Solutions’ technology and expertise addresses the challenges
faced by our customers to enhance safety, productivity and utilisation,
while realising cost reductions and increased productivity through
fast, retrofit applications, tailored for specific environments and
customer requirements.
Vehicle applications addressable market
With the introduction of ABD Solutions, our addressable market
has increased significantly with large growth opportunities across
our key target markets of mining, specialist vehicles and defence.
Analysis of these specific markets shows a total addressable
market size of £4.8bn and a compound annual growth rate over
the next five years of 25%.
These three target markets can be sub-divided into those driven
by operational safety (mining and defence) and those driven by
productivity and efficiency (mining and specialist vehicles). The
markets can be further characterised by lower volume/higher price
point (mining and defence) and higher volume/lower price point
(specialist vehicles).
Mining has the potential to be the fastest growing market with
forecast growth of approximately 50% compound annual growth
rate (CAGR) based on assumptions around the global mining truck
equipment population and rates of adoption of automated
technologies. The global autonomous mining truck market is
forecast to be valued at $1.6bn in 2025 and is projected to reach
up to $12.5bn by 2035. Autonomous haul trucks in operation
are expected to exceed 1,800 by the end of 2025/26 (currently
700+). The current global equipment population includes 55,000
mining trucks representing the largest addressable market. The
anticipated growth is driven by the need to improve operational
safety, removing the driver of large mining trucks from hazardous
environments, and also protecting other personnel from accidents.
In addition, the mining sector has high operating costs in terms of
personnel due to the often remote and less hospitable locations.
Defence is forecast to grow at 16% CAGR over the cycle, driven
by the need to improve operational safety and, where possible,
remove armed forces personnel from certain hazardous operations
such as route clearance, counter-IED and logistics in theatres of
operation. Global events are impacting near-term opportunities
but mid-term collaboration opportunities remain.
The specialist vehicles market is diverse and covers a range of
applications including warehousing, ports, and airport baggage
handling, etc. The addressable market for automating these
applications is forecast to grow at 14% CAGR and is driven by
the need to reduce operating costs and improve efficiency.
Vehicle applications addressable market
Mining
Defence
Specialist vehicles
£0.7bn
£0.6bn
£3.5bn
£4.8bn
Combined market size and growth
Overall, the combined market size of the existing AB Dynamics
business, plus the addressable markets introduced through ABD
Solutions, provides an overall addressable market of approximately
£6.2bn, with a CAGR of 24% over the five-year cycle.
Link to strategy
10
AB Dynamics plc Annual Report and Accounts 2023
Strategic reportGovernanceFinancial statements Strategic report
Governance
Financial statements
Our markets and strategy continued
Delivering on our strategy
Progress has been made across all our strategic objectives, most notably diversification
from the launch of ABD Solutions and growth through the acquisition of Ansible Motion.
Product and innovation
Capability and capacity
Acquisitive growth
Diversification
Service and support
International footprint
Strategic objective
Market-led new product
development with a focus on
research and innovation.
Strategic objective
Building a platform for
long-term sustainable growth.
Strategic objective
Clear and defined acquisition
criteria of value-enhancing
companies that facilitate the
Group’s strategic priorities.
Strategic objective
Diversification into new
adjacent markets utilising
the Group’s core technology
and capability.
Strategic objective
Transition towards a greater
proportion of software as a
source of higher margins and
recurring revenues meet the
market’s needs as requirements
become more complex.
Strategic objective
Increase the Group’s
international footprint in
customer-led locations to
increase customer intimacy,
customer support and
market intelligence.
Achievements
•
LaunchPad Spin released to
the market
• Soft Motorcycle 360 received
full Euro NCAP accreditation,
with other new products the
LaunchPad Spin and Soft
Pedestrian on the Euro NCAP
candidate target list
• New range of Soft Targets
launched to market
Future outlook
Continued focus on capabilities
for ADAS testing requirements
as well as a continued effort
in developing leading physics
based simulation software.
Sustainable revenue growth.
Achievements
• Embedded new ERP system
and new business processes
in the UK
Achievements
• Integration of Ansible Motion
strengthens our simulation
market position
• Pipeline of strategic,
Achievements
• ABD Solutions delivering as
per plan and transitioning
from development to
commercialisation
Achievements
• Increase in software sales of
17% and stabilised recurring
revenue at 40%
• Expanded our customer
value-enhancing targets
• Digital twin developed providing
support offering
operational environment
validation and a platform for
accelerated product testing
• Autonomy partnership has
been agreed with Australian
based Jevons Robotics
Future outlook
Continued development of core
modular technologies required
for a market focus on mining
and defence.
Future outlook
Foundations to support current
and future growth.
Future outlook
Further develop pipeline of
potential acquisition targets.
Deliver further value-enhancing
acquisitions to support organic
growth strategy delivery.
Achievements
• Successfully expanded to all
major customer regions
• Strategic partnerships now
supporting the growth in the
simulation business
• ABD Solutions focused on
new geographical areas such
as Australia
Future outlook
Continue to focus on
developing solutions which
promote recurring revenue and
meet the needs of a changing
and complex market.
Future outlook
Continue to drive a direct sales
channel model and increase
customer intimacy.
AB Dynamics plc Annual Report and Accounts 2023
11
Strategic report
Governance
Financial statements
ABD Solutions
Driverless solutions
ABD Solutions enables vehicles and machines to benefit from autonomy.
The Company’s unique expertise lies in vehicle actuation, with the
knowledge and skills to bring automation to existing fleets quickly
and cost-effectively by modernising existing assets.
The business is progressing well against its strategic objectives, with continued focus on the automation
of vehicle applications in three primary market sectors, mining, specialist vehicles and defence. ABD
Solutions has been successful in developing the core modular technology Indigo Drive, its end-to-end
autonomy system of user-friendly software and vehicle-agnostic hardware allowing any land vehicle
to be automated.
Fleet management system
Vehicle Autonomy
Vehicle Management
Mining
Defence
Specialist vehicles
12
AB Dynamics plc Annual Report and Accounts 2023
Vehicle Actuation
• Mechanical
Robots
Vehicle
Communications
• Radio
• Drive by Wire
• V2X
• CAN
• J1939
• Satellite
• GPS/GNSS
• Indoor and
Outdoor
Object Detection
• LiDAR
Vehicle Diagnostics
• Telemetry
• Camera
• Infrared
• Radar
• OBD2
• CAN/J1939
• Sensors
Technology
Partners/
Integration
• Indoor
Positioning
• Electrification and
Hybrid Propulsion
• Sensors
• OEMs
• Site Ops/
Management
Systems
• Data Analytics
ABD Solutions continued
Highlights 2023
• ABD Solutions continues to deliver against the 18-month
R&D contract for a major Japanese mining partner
• Digital twin developed providing operational environment
validation in simulation and a platform for accelerated
product testing
•
Indigo Drive – market-leading, functionally safe and cyber
secure autonomy solution development on plan with final
system testing, validation and certification ongoing
• Global demonstrations on mining vehicles completed
throughout 2023
• Contract awarded of £1.0m for pedestrian detect and
warn solution for a global construction equipment provider
• An autonomy partnership has been agreed with Australia
based Jevons Robotics
• Strong pipeline established for vehicle retrofit solutions
and CAN based technology stack vehicle applications
By creating driverless fleets and enabling tasks to become
automated, Indigo Drive increases safety, efficiency
and productivity on even the most hazardous sites by
removing people from high-risk scenarios, providing
greater operational efficiency and reducing fuel
consumption and vehicle emissions. Being retrofittable,
it also maximises the investment of existing high-value
assets, significantly extending their usable life.
ABD Solutions ecosystem
Radio Network Base Station
Connecting the vehicle supervisory
system to the network – whether in
an office, site cabin or vehicle.
Radio Network
Repeater Station
Boost coverage and
redundancy across even
the largest site.
Server Room
High-availability
servers manage
vehicle fleets and
site operations.
Provided on or offsite
as preferred.
Control Room
Manage multiple vehicles at
once via a user-friendly software
interface.
Vehicle Automation System
Create safer driving operations using
our smart perception system (LiDAR,
camera, and radar) and reliable vehicle
control using robotic or Controller
Area Network (CAN) technology.
Driver Connectivity
System
In-cab driver system allows
manual and autonomous
vehicle operation.
Site Traffic
Management System
Keep personnel and the
public out of harm’s way
with automated traffic
lights, barriers and other
site safety systems.
AB Dynamics plc Annual Report and Accounts 2023
13
Strategic reportGovernanceFinancial statements
Business model
Creating value for stakeholders
Key inputs
Product and technology leadership
Our innovative product development and significant intellectual
property ensure cutting-edge products are available for every
application across the markets we serve.
Customer relationships
Long-term relationships with all major automotive OEMs and test
facilities enable us to provide support tailored to their needs and
also assist in early identification of trends.
Talented workforce
Our highly skilled employees operate in niche capability areas.
Our engineers and customer support teams work closely with
our customers, supporting their requirements.
Supplier relationships
We work closely with our suppliers and take the steps necessary
to ensure their performance meets our expectations.
Global reach
We have international routes to market, with direct sales and
support offices in key territories to facilitate growth and support
our customers. We use distribution and representatives in other
locations to expand our reach.
14
AB Dynamics plc Annual Report and Accounts 2023
How we create value
Product and
innovation
Electric
vehicles
International
footprint
Capability
and capacity
Automotive
Defence
Strategic priorities
Sustainable
growth
Addressable markets
Service and
support
Acquisitive
growth
Materials
handling
equipment
Mining
Diversification
Agriculture
Building a broader based business to drive sustainable growth
Underpinned by our values
Strategic reportGovernanceFinancial statements
Strategic report
Governance
Financial statements
Business model continued
Our business
Track testing
Track testing products and services are
used for the test and verification of ADAS,
autonomous systems and vehicle dynamics.
Vehicles and ADAS platforms, such as the
GST and LaunchPad, are controlled using
complex control software for accurate
control and synchronisation of multiple
test objects.
This enables our customers to conduct
complex, multi-object test scenarios
with a simple-to-use software interface
to satisfy internal or external regulatory
test requirements.
The Group also provides test services
including the provision of ADAS and
vehicle dynamics tests through a
comprehensive test facility based
in California, USA and on-road
testing services, with operations
in China and Germany.
Laboratory testing and simulation
Laboratory testing and simulation includes
products relating to simulation, noise
and vibration and the assessment of
kinematics and compliance in vehicles,
and simulation software. These products
are used during vehicle development to
replicate the real world in a simulated
environment and to characterise vehicle
dynamics and performance across a
wide range of applications including
conventional vehicles, motorsport and
automated vehicles.
Our simulator products along with our
market-leading physics based simulation
software reduce new vehicle development
timescales and costs by allowing
meaningful evaluation earlier in the
development process.
Our purpose
We accelerate our customers’
drive towards net zero emissions,
improving road safety and the
automation of vehicle applications
through leadership and
innovation in engineering
and technology.
The value we create
Customers
We provide innovative solutions tailored to customers’
specific needs.
Employees
We are committed to providing a safe and rewarding
working environment.
Suppliers
We work closely with our suppliers, with a reputation
for integrity and ethical behaviour.
Investors
Through the execution of our strategy we grow the value
of our shareholders’ investment over time.
Communities
We engage positively with our local communities and offer
support through charitable giving and volunteering.
Environment
We are fully committed to reducing our own environmental impact
by lowering our energy consumption, and helping our customers
drive towards net zero emissions.
Our values:
Customers
People
Diversity
Innovation
Excellence
Responsibility
AB Dynamics plc Annual Report and Accounts 2023
15
Chief Executive Officer’s review
Well placed for continued growth
Capital allocation
Our capital allocation framework delivers
sustainable compounding growth as well as
growing returns to shareholders.
1
Continuous organic investment and innovation
to protect and grow core business
2
Organic investment into ABD Solutions
driving growth in adjacent markets by
leveraging core technology
3
Complementary acquisitions contributing to
one or more of the Group’s stated strategies
4
Progressive dividend policy
Overview
I am pleased to report that the Group delivered a strong set
of results driven by recent investments in its commercial and
operating capabilities and underpinned by positive market
dynamics in both segments. The Group has evolved significantly
over the last four years, building a solid and scalable platform from
which to capitalise on a multi-year growth opportunity.
The Group delivered record levels of revenue and operating
profit, while continuing investment to support its long-term
growth objectives.
The Group continued to deliver against its strategic priorities by
launching new products, developing its service offering to drive
recurring revenues and delivering on its diversification plans
through progress in ABD Solutions. The acquisition of Ansible
Motion also expanded its presence in the simulation market,
complementing the existing product range.
The Group is well positioned, with market-leading products and
services, and remains supported by regulatory and structural
growth drivers that provide a strong position for continued
growth and performance during FY 2024.
Financial performance
The Group delivered significant revenue growth in the year of
21%, to £100.8m (2022: £83.2m). The second half of the year was
particularly strong with revenue of £51.7m (H2 2022: £42.5m),
a record half-year period. This growth was delivered despite
the ongoing impacts of inflation and supply chain constraints,
which were successfully mitigated through proactive inventory
management and price increases to the market.
The growth in revenue was delivered by a large increase in
laboratory testing and simulation revenue, up 74% due to the
contribution of Ansible Motion as well as a significant increase
in SPMM revenue driven by an increase in demand and timing of
delivery for new units. Track testing saw more modest growth of
6% overall due to reduced testing services revenue impacted by
local lock downs in China and the availability of new vehicles for
“ The Group has delivered a
strong performance in FY 2023,
demonstrating the benefits
of the investment made in
recent years in the commercial
and operating capability of
the business.”
Dr James Routh
Chief Executive Officer
16
AB Dynamics plc Annual Report and Accounts 2023
Strategic reportGovernanceFinancial statements Chief Executive Officer’s review continued
Highlights 2023
• The Group delivered significant growth in
revenue up 21% to £100.8m
• Strong growth in both simulation and laboratory
test equipment
• ABD Solutions technology and product offering
in final testing stage with a good pipeline of
commercial opportunities
• Investment into new facilities and SPMM
testing as a service at our Bakersfield,
California test facility
• Ansible Motion has been fully integrated and
performed in line with expectations
Financial performance continued
testing in H1 2023. The proportion of recurring revenue
was stable at 40% (2022: 40%). This level of recurring
revenue is expected to remain stable ahead of new market
offerings which will be released in the near future.
Group adjusted operating profit increased by 21% to
£16.6m (2022: £13.7m), an increase in adjusted operating
margin of 10bps to 16.5% (2022: 16.4%). The increase in
operating margin was due to increased levels of activity
and enhanced performance initiatives offset by the
investment in ABD Solutions to support our strategic
long-term growth plan. Excluding ABD Solutions the
operating margin increased to 18.3% (2022: 18.2%).
Overall Group gross margins improved by 290bps to
59.5% (2022: 56.6%) due to operational efficiencies
and completion of a high margin simulator contract.
Group adjusted earnings before interest, tax, depreciation
and amortisation (EBITDA) increased by 18% to £20.5m
(2022: £17.3m), an EBITDA margin of 20% (2022: 21%).
The Group delivered strong adjusted operating cash flow
of £23.5m (2022: £20.7m) with the net cash position at
year end of £32.0m (2022: £29.2m) underpinning a robust
balance sheet and providing significant funding headroom
even after settlement of the initial consideration for the
acquisition of Ansible Motion. The strong year-end cash
position was delivered despite ongoing investments
in new product development and our Group-wide
ERP system.
Sector review
The track testing business delivered revenue of £68.6m
(2022: £64.7m), a 6% increase against the prior year, with
growth in sales of driving robots and ADAS platforms
offset by a reduction in testing services revenue due to
local COVID-19 restrictions in China delaying the delivery
of services and impacting the availability of test vehicles
in the first half of the year.
Laboratory testing and simulation delivered strong growth
in revenue up 74% on 2022 to £32.2m (2022: £18.5m)
due to the contribution from Ansible Motion as well as
strong organic growth from SPMM sales, reflecting the
continued demand for laboratory testing equipment.
Strategic progress
The Group continues to make good progress against
its organic-led growth strategy, supplemented with
value-enhancing acquisitions. During the year, the focus
on building and growing the core business continued,
coupled with delivering on the Group’s diversification
plans through ABD Solutions and building critical mass in
the attractive simulation market through the acquisition
of Ansible Motion.
Investment continued in the core automotive sector,
which is characterised by strong regulatory and structural
growth drivers and rapid technology change. New product
development and the strengthened operational and
commercial platform leaves the Group well placed to
benefit from increasing regulation and the increasing
number and complexity of test scenarios required by
NCAP bodies.
Ansible Motion has been successfully integrated
into the Group’s simulation business, enhancing the
Group’s simulation capability and expanding its range
of products and services in this area which includes the
physics based simulation software, rFpro.
As part of the objective to diversify into adjacent
markets, ABD Solutions continues to make significant
progress in its mission to add automated solutions to
existing vehicles fleets faster and more cost effectively.
ABD Solutions has demonstrated its product offering
in contrasting environments for potential customers
in mining, defence and other specialist vehicles and
“ The Group
continued to
deliver against
our strategic
priorities by
launching
new products,
developing
our service
offering, and
delivering on our
diversification
plans through
ABD Solutions.”
successfully proved its concept and market solution,
Indigo Drive. A digital twin has been developed which
provides operational environment validation and a
platform for accelerated product testing.
ABD Solutions focus is transitioning from technology
development to commercialisation with negotiations
ongoing around mining related contracts. The Japanese
mining development contract is progressing as planned
and a Memorandum of Understanding has been
signed with Jevons Robotics in Australia for mining
applications. In addition, ABD Solutions has been
awarded a £1.0m contract for delivery during FY 2024 of
a retrofit pedestrian detection system for a UK customer
for construction industry applications.
Acquisitions
On 20 September 2022, the Group acquired Ansible
Motion Limited, a UK based provider of advanced
simulator solutions to the automotive market, for
an initial cash consideration of £14.4m and shares
in AB Dynamics plc to the value of £3.2m. Based on
the financial performance in FY 2023, a further cash
payment of approximately £5.7m will be made along
with retained consideration of £0.5m, bringing the total
consideration to £23.8m.
Ansible Motion designs and manufactures high-end motion
platform systems for Driver in the Loop development
of vehicle dynamics, ADAS and automated systems
and already utilises rFpro as its physics based virtual
environments. The Ansible Motion range of driving
simulators complements the existing product offering
from AB Dynamics and provides a comprehensive
range of simulators that addresses a wider range
of simulator applications.
Ansible Motion has been integrated into the Group’s
simulation sector and has been earnings accretive,
delivering £11.8m of revenue and £2.4m of adjusted
operating profit during FY 2023.
AB Dynamics plc Annual Report and Accounts 2023
17
Strategic reportGovernanceFinancial statements “ The Group has delivered a strong financial
and operational performance, with continued
momentum in our key markets and progress
against our strategic objectives.”
Chief Executive Officer’s review continued
Acquisitions continued
Acquisitions continue to form a key part of the long-term strategic
development of the Group and we operate a continuous process
to identify and execute acquisition opportunities. The current
long-term pipeline remains positive and we expect to continue
to deliver further value-enhancing acquisitions.
Summary
The Group has delivered a strong performance, demonstrating
the benefits of the investment in the commercial and operating
capability of the business. The financial results show further
strong progress, with record levels of revenue and operating profit
and an improvement in operating margin. In parallel, the Group
has further strengthened its platform for growth through both
organic investments and acquisitions.
We see significant opportunity in our core markets in automotive,
which are supported by long-term structural and regulatory
growth drivers, and are continuing to invest in new product
development and technology. In addition, we are investing
in new technologies to diversify the business into attractive
adjacent markets through ABD Solutions.
Trading in FY 2024 has been encouraging, supported by a solid
order book providing good visibility into the second half of the
year. Whilst being mindful of timing of pipeline conversion, the
Board remains confident that the Group will make further financial
and strategic progress this year and its expectations for FY 2024
are unchanged.
Our market drivers both in our core business and in ABD
Solutions remain strong. This backdrop, along with the Group’s
recent investments in capability and new products, provides
confidence of delivering continued progress in 2024 and beyond.
Dr James Routh
Chief Executive Officer
23 January 2024
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AB Dynamics plc Annual Report and Accounts 2023
Strategic reportGovernanceFinancial statements Chief Executive Officer’s review continued
Q&A with Dr James Routh
Driving forward
Early career opportunities
Our organisation is committed to promoting engineering education
and careers in a variety of ways. We are proud to sponsor the Arkwright
Engineering Scholars programme, which provides students with valuable
work experience and mentorship from two of our Group employees over
a two-year period. Our Apprenticeship programme offers students the
opportunity to join us straight from school and gain hands-on experience
in both the academic and practical aspects of engineering. Additionally,
our Graduate Scheme, now in its third year, provides graduates with
a comprehensive understanding of our business through rotations
across various departments. We also offer internships across the Group,
including year-long and summer placements. Finally, we participate in
STEM and Career events aimed at influencing students from the point
they start to consider their career choices, and we offer work experience
opportunities for a variety of secondary schools.
Q
What are your highlights of the year?
The business has growth significantly over the past
five years and I am extremely proud that the Group has
exceeded £100m of revenue for the first time in its history.
At the same time, we have improved our operating margin
by leveraging the investments made in recent years and this
now provides a strong platform for sustainable growth.
We have made good strategic progress with the acquisition
of Ansible Motion, which performed very well during its first
year with the Group, along with new product launches such
as the Launchpad Spin and significant improvements in our
operations driving improved margins and quality.
Q
What are your priorities for the
year ahead?
During FY 2024 we will further leverage our recent investments
in systems, capabilities and talent to drive strong organic
revenue growth and further margin enhancement. We have
a global commercial and technology platform that will
be used to cement our existing position as market leader,
whilst simultaneously providing diversification through
ABD Solutions.
We will continue to invest in R&D and new product development
to gain additional market share in an already growing market
and to ensure we are aligned with longer term market trends,
drivers and needs.
It is our intention to continue our programme of driving
value through further acquisitions and have a good pipeline
of potential companies that meet our clearly defined
acquisition criteria.
Q
What will AB Dynamics look like in
the future?
Our debt free, net cash position provides optionality in
terms of capital allocation to ensure that AB Dynamics
continues to deliver long-term sustainable growth.
AB Dynamics in the mid-term will be a combination of
testing products, testing services and simulation in the
core business, whilst delivering incremental growth
through the commercialisation of ABD Solutions.
This structure allows us to expand within each of these categories
either organically or through carefully selected acquisitions.
Q
How is AB Dynamics positioned to be
resilient against a backdrop of
global uncertainty?
AB Dynamics has demonstrated that our business model is
resilient against a backdrop of global macroeconomic and
geopolitical uncertainty. We have delivered revenue growth
every year during these uncertain times due to the strength
of our market position, the clear regulatory and structural
growth drivers in our markets and our differentiated
products and services.
The investments made in recent years to build a strong
commercial platform has supported this resilience and
has created a more diversified business across a range of
products, services, market sectors and geographic territories.
Q
How is ABD Solutions progressing?
ABD Solutions has made excellent progress during
FY 2023, with the Indigo Drive product essentially complete
and undergoing extensive simulation and testing. We have
been successful in winning a contract to provide pedestrian
detect and warn systems to the construction industry
and have a strong pipeline of commercial opportunities in
the mining sector to convert existing fleets of vehicles to
automated operation, particularly in Japan, Australia and
South America.
AB Dynamics plc Annual Report and Accounts 2023
19
Strategic reportGovernanceFinancial statements Operational review – Track testing
Advancement of ADAS testing solutions
and broadened portfolio drives growth
Introduction
The Group’s track testing sector provides products and services
utilised on proving grounds, test tracks and public roads to
evaluate the performance of vehicle active safety systems,
autonomous technologies, electric vehicles, vehicle durability and
vehicle dynamics. The sector is broadly split into the three primary
sub-sectors of driving robots, ADAS platforms and test objects and
testing services and all track based systems are controlled by our
comprehensive control software.
Driving robots are used in the vehicle under test to deliver a
much higher level of accuracy and repeatability than human test
drivers can achieve. The Group’s driving robot technology spans
electromechanical actuators to drive-by-wire systems, all of which
can be rapidly deployed in almost any vehicle. Test repeatability
and rapid installation means our customers achieve the highest
level of testing efficiency and reliability. The robot’s capability
to operate unmanned allows tests to be performed that would
otherwise be considered too dangerous or harmful for human
test drivers to accomplish.
ADAS test platforms are used to evaluate the performance of
driver assistance technologies, such as Automatic Emergency
Braking (AEB) and Emergency Lane Keeping Assist. The ADAS
test platform, together with a test object, is designed to mimic
the visual, radar and dynamic attributes of real road users
(e.g. pedestrians, cyclists, motorcyclists and cars). The platforms
comprise powerful electrically driven propulsion systems
contained in an extremely robust, low-profile, over-drivable
chassis. The test object mounted on top is constructed from
lightweight and soft materials minimising the risk of damage
in the event of a collision during testing. A soft car is typically
mounted to the GST ADAS test platform, while LaunchPads
are smaller and used to mount other objects such as dummy
pedestrians, cyclists or motorcycles. The ADAS platforms are
controlled and synchronised with the vehicle under test by our
comprehensive suite of software.
All of ABD’s driving robots and ADAS test platforms can be
operated within a single software environment. The environment
includes Synchro and Ground Traffic Control which can be used
to synchronise and co-ordinate multi-object and complex test
scenarios. Dedicated post-processing and reporting applications
allow for live evaluation of test results against latest NCAP and
regulatory standards.
The Group operates a test facility in Bakersfield, USA, where
testing of ADAS systems and vehicle dynamics is performed
using the ABD track testing product range for OEMs, technology
developers and government agencies. Elsewhere, the Group has
service and support centres in Germany, the USA and Japan to
assist the worldwide customer base using ABD’s track testing
product range.
In China, the Group provides on-road vehicle testing services for
the assessment of all aspects of vehicle performance, particularly
focusing on electric vehicle performance, charging capability and
vehicle connectivity.
The market drivers for growth in the track testing sector are detailed
in our markets and strategy section on page 08
“ The growth in
testing volume and
complexity continues
to drive demand for
ADAS platforms and
driving robots.”
Highlights 2023
• First vehicles rated against Euro NCAP’s new 2023 test
standards using AB Dynamics robots, ADAS platforms
and dedicated post-processing applications
• Release of LaunchPad Spin, the Group’s most
manoeuvrable and compact ADAS test platform
with turn-on-the-spot functionality
• Soft Motorcycle 360, adopted and included in Euro NCAP’s
official list of test tools and LaunchPad Spin and Soft
Pedestrian on the candidate list for accreditation
• Launch of new sensor solution for object detection to
complement Ground Traffic Control software enabling
larger-scale driverless durability testing
• Investment in our Bakersfield testing facility in the USA
20
AB Dynamics plc Annual Report and Accounts 2023
Strategic reportGovernanceFinancial statements Operational review – Track testing continued
Financial performance
The track testing business delivered revenue of £68.6m (2022: £64.7m),
a 6% increase against the prior year, with notable growth across
both driving robots and ADAS platforms, partially offset by a
reduction in testing services.
Driving robot sales increased by 22% to £25.2m (2022: £20.6m),
driven by the increase in complexity and volume of testing required
for ADAS assessment. The Group expects continued growth in driving
robots at more normalised levels, as new regulatory requirements
for evolving ADAS technologies are released, such as the launch
of the Euro NCAP 2030 roadmap and its new Truck Safe rating
scheme. It is expected that there will be over 700 Euro NCAP test
scenarios by 2025, up from 591 in 2023. New tests for commercial
vehicles offer further opportunities for market expansion.
Revenue from ADAS platforms increased by 3% to £30.5m
(2022: £29.7m). The new higher speed versions of the GST and
LaunchPad, which can operate at speeds of up to 120kph and
80kph respectively, enable customers to perform a greater range
of tests, particularly the assessment of automated lane-keeping
technology and vehicle interactions with Vulnerable Road Users
such as motorcyclists, and are continuing to gain traction. The
recent launch of a new range of soft targets including motorcycles
and articulating pedestrians and a new, more manoeuvrable
platform, the LaunchPad Spin, will drive further growth.
Testing services revenues decreased 10% to £12.9m (2022: £14.4m)
due to local COVID-19 restrictions delaying the provision of testing
services in China during the first half of the year and continued
delays in availability of test vehicles more widely due to the well
documented supply chain challenges in the automotive market.
The Group continues to invest in new product development in this
sector in order to meet forthcoming regulatory requirements and
to ensure we retain our market leadership in track testing products
and technology.
Progress during the year
The Group continues to build customer relationships, drive
improvement in revenue and gross margins and invest in new
product development to meet the growing demand from
manufacturers and test providers to keep up to date with
changes in regulations.
The growth in testing volume and complexity continues to
drive demand for ADAS platforms and driving robots that are
both more capable and more versatile. To recognise the need
for new test tools, this year Euro NCAP updated its listing of
equipment used in official testing to include AB Dynamics’ Soft
Motorcycle 360.
The Group delivered continued growth in the proportion of
recurring revenue through further success in the sales of tiered
service and support packages to the existing customer base.
Principal operations
The track testing sector principally operates from the AB Dynamics
headquarters in Bradford on Avon (UK), with sales and support
offices located in Giessen and Munich (Germany), Yokohama
(Japan) and Wixom (Michigan, USA). The track testing services
business is based in Torrance and Bakersfield (California, USA).
The on-road testing services business is based in Beijing (China)
with a regional HQ in Singapore.
Track testing revenue
£68.6m
Driving robots
ADAS platforms
Testing services
£25.2m
£30.5m
£12.9m
Inclusive leadership
AB Dynamics have been successfully selected
to participate in the pilot Inclusive Leadership
Programme created and developed by the
Royal Academy of Engineering.
New technologies
The Inclusive Leadership Programme aims to foster a diverse
and inclusive culture in the engineering industry. The course
involves inclusive leadership training, an inclusion-focused
project, and peer group workshops. Participants will also benefit
from mentorship, coaching, and networking opportunities.
“ We understand the importance of
fostering an inclusive workplace and are
committed to learning and growing to
ensure that all employees feel valued and
empowered. I am proud to be a member
of the AB Dynamics team participating in
the programme and I am looking forward
to helping to deliver real change.”
Kathryn Downie
Group Head of Talent and Performance at AB Dynamics
AB Dynamics plc Annual Report and Accounts 2023
21
Strategic reportGovernanceFinancial statements Operational review – Track testing continued
Growth potential
The launch of Euro NCAP’s new roadmap for 2025–2030 brings
the prospect of further new test requirements, including:
• demand for additional categories and variety of test targets
with increased realism;
• enhancements to vehicle safety assist functions for commercial
vehicles, safe driving and crash avoidance;
• Euro NCAP launch of Safer Trucks HGV rating system, expanding
the newly introduced commercial vehicle rating scheme;
• Euro NCAP focuses on protecting motorcyclists with new test
scenarios introduced and further test scenarios expected
as Euro NCAP enhances its rating scheme for assisted and
automated driving;
• next phase of General Safety Regulation mandating
homologated ADAS systems are fitted to every new vehicle
registered from July 2024;
• US government notice of intended rule making proposing to
mandate the fitment of vehicle-to-vehicle AEB and pedestrian
AEB systems; and
• demand for testing aimed at proving the function of assisted
driving technologies that support highway driving (adaptive cruise
control, lane keeping and Level 3+ automated driving functions).
AB Dynamics contributes to the development of the Euro NCAP
roadmap for safer vehicles through participation in industry
collaboration projects, such as Safety Enhancement through
Connected Users on the Road (SECUR), a consortium project
set up to establish test methods for evaluating connected
vehicle technology.
Track testing sales growth (£m)
2023
2022
2021
2020
2019
68.6
64.7
49.7
51.8
49.8
22
AB Dynamics plc Annual Report and Accounts 2023
“ New regulatory
requirements driving
continued growth.”
Strategic reportGovernanceFinancial statements Operational review – Laboratory testing and simulation
Strong organic and
inorganic growth
Introduction
The Group’s laboratory testing and simulation sector provides
advanced products used to characterise the dynamics of vehicles
and replicate the real world in a simulated environment for
applications such as vehicle dynamics, ADAS and autonomy.
The sector is split into two primary sub-sectors of laboratory
testing equipment such as Suspension Parameter Measurement
Machines (SPMM) and simulation.
In simulation, the Group provides both physical simulators and
advanced, physics based simulation software. Simulators are
used by both automotive manufacturers and motorsport teams
to accurately represent the real world utilising the rFpro software,
coupled with state-of-the-art, high-frequency response and low
latency motion platforms and static driving simulators. Parameters
such as vehicle dynamics, tyres, environmental conditions, material
properties, sensors and light conditions (including shadows and
reflections) can be adjusted, and the variance simulated in a highly
accurate model and used across a variety of sectors.
The Group’s SPMM products are large-scale testing rigs used to
characterise the kinematics and compliance of vehicles. These
machines are widely used by automotive OEMs and tier one
suppliers to characterise vehicle dynamics, as well as providing
vital input data to be used in simulation.
Highlights 2023
• Very strong simulation growth of 89% supported by the
contribution of Ansible Motion and a strong demand
for rFpro software
• Good growth of 38% in laboratory testing products
• Integration of AB Dynamics’ simulator business with the
newly acquired Ansible Motion
• Technology development and commercialisation of the
rFpro ray-tracing capability, for the generation of AI
training data for AV development delivered through a
new scalable and cost-effective commercial model
• Award of Innovate UK projects to support advancement
in assisted and automated driving systems
• Establishment of an SPMM testing as a service offering
in California
“ The use of simulation in automotive development continues
to grow and we are well placed to benefit.”
AB Dynamics plc Annual Report and Accounts 2023
23
Strategic reportGovernanceFinancial statements Operational review – Laboratory testing and simulation continued
rFpro has successfully concluded the development and
commercialisation of its new ray-tracing simulation technology.
This technology will significantly reduce the industry’s dependence
on real-world testing for the development of Autonomous Vehicles
(AV) and ADAS systems. The state-of-the-art ray-tracing rendering
technology delivers ultra-high fidelity and realistic simulation,
designed to feed the perception systems used in AVs and simulating
how vehicle sensors ‘see’ the world. This solution efficiently generates
synthetic training data at scale and will significantly accelerate the
advancement of AVs and sophisticated ADAS technologies.
rFpro has been awarded funding from Innovate UK for two
development projects aimed at building a UK supply chain to
support both simulation based test and validation of perception
sensors for assisted and automated driving functions, and the
creation of simulation datasets for the training and testing of
artificial intelligence systems used in assisted and automated
driving functions. This funding will enable rFpro to accelerate its
existing development plans and secure its leadership position in
the global market.
The Group was very proud to launch its updated SPMM system,
the SPMM Plus. This long-standing product which has been
supplied to global customers for the past 25 years has evolved
significantly over this period to be the leading kinematics and
compliance test machine in the market. The Group also established
an SPMM testing as a service offering in Bakersfield, California.
Principal operations
The laboratory testing and simulation sector principally operates
from the AB Dynamics headquarters in Bradford on Avon (UK),
with sales and support offices located in Giessen and Munich
(Germany), Yokohama (Japan), Wixom (Michigan, USA) and recently
Bakersfield (California, USA). The recently acquired Ansible Motion
business provides an additional R&D and manufacturing facility in
Norwich (UK). The simulation focused business of rFpro is based
in Romsey (UK).
Financial performance
The laboratory testing and simulation business delivered strong
growth, with revenue of £32.2m, an increase of 74% on 2022
(£18.5m) of which 10% was organic growth in the delivery of
Suspension Parameter Measurement Machine (SPMM) systems,
with the remainder from Ansible Motion which was acquired at the
beginning of the year.
SPMM revenue of £7.3m grew by 38% (2022: £5.3m) demonstrating
continued demand for our market leading kinematics and
compliance machines.
Organic growth in simulation revenue was broadly flat with
revenue of £13.1m (2022: £13.2m). The contribution from Ansible
Motion was £11.8m reflecting the strong order book at the time of
acquisition and delivery of sales synergies.
Progress during the year
The Group has made strong progress during the year, particularly
in the growth of our simulation business. The strong order book at
the beginning of the financial year provided a good platform for
sales of our aVDS (advanced vehicle driving simulator) and Ansible
Motion simulator products and rFpro delivered a very strong commercial
performance across both automotive and motorsport customers.
The simulation division, comprising AB Dynamics’ existing simulator
business, Ansible Motion and rFpro, has made strong progress
throughout 2023 and has the combined experience, capability and
capacity to enable further growth and profitability enhancements.
Deliveries of Driver in the Loop (DiL) simulators have continued to
grow in 2023 with systems being delivered to customers in the UK,
USA and China for both motorsport and automotive development
applications. The Group has also received a number of new orders
for DiL simulators with a notable contract in China from a research
institution to support the development of vehicle dynamics and
ADAS functionality.
Sales of rFpro simulation software have continued to grow
in 2023 partly due to increased demand in the automotive
sector for production vehicle development, but also due to the
strong foundation in the supply of digital track models for the
motorsport industry.
24
AB Dynamics plc Annual Report and Accounts 2023
“ The acquisition of Ansible
Motion enhances the Group’s
product range, capability
and customer base.”
Strategic reportGovernanceFinancial statements Operational review – Laboratory testing and simulation continued
Laboratory testing and simulation
Simulation
Laboratory testing
£24.9m
£7.3m
£32.2m
Laboratory testing and simulation sales growth (£m)
2023
2022
2021
2020
2019
18.5
15.7
9.7
8.2
32.2
“ Our continued organic and
acquisitive investment in
simulation underpins the market
need to accelerate automated
vehicle development.”
Growth potential
• Drive to utilise simulation to reduce vehicle development
timescales and costs by enabling meaningful virtual testing
earlier in the development process
• Significant scope for expansion of rFpro simulation software
capability as autonomous simulation matures, requiring more
complex analyses
• Expansion of simulator product range through the development
of new simulators and simulation software products provide
significant scope for growth in simulation sales
• Requirements for integrated tool chains between the virtual
and physical world lead to opportunities to combine simulation
with track test products
• Electrification of vehicles will drive more demand for simulation
and SPMM machines to optimise vehicle dynamics with revised
mass and centre of gravity
Formula Student
AB Dynamics UK and AB Dynamics GK
sponsored the Formula Student events held
at Silverstone, UK and ECOPA, Japan. Formula
Student (FS) is Europe’s most established
educational engineering competition and
celebrated its 25th anniversary in 2023. The
competition aims to develop innovative young
engineers and encourage more young people
to take up a career in engineering, with over
100 university teams taking part every year.
rFpro and AB Dynamics UK have sponsored Formula Student
teams from Southampton and Bath University. This involved
offering our technical expertise and guidance to the teams
allowing both teams to build and design a car that fits the
criteria to enter the formula student competition.
Our support of the programme has attracted talent into the AB
Dynamics Group to foster and develop their engineering careers
in the automotive and motorsport industry.
AB Dynamics plc Annual Report and Accounts 2023
25
Strategic reportGovernanceFinancial statements Chief Financial Officer’s review
Delivering growth,
margin improvement and
strong cash generation
Adjusted operating profit
£16.6m +21%
2023
2022
2021
2020
2019
16.6
13.7
10.2
11.3
12.9
Adjusted operating cash flow
£23.5m +14%
2023
2022
2021
2020
2019
23.5
20.7
16.0
6.9
10.5
Sarah Matthews-DeMers
Chief Financial Officer
26
AB Dynamics plc Annual Report and Accounts 2023
Overview
Our focus in 2023 has been on maintaining operational execution
and delivering organic growth as well as acquisition integration.
The performance demonstrates the results of our investment over
the previous four years in strengthening our business model. The
increase in revenue has dropped through to improved operating
margins as the Group benefitted from operating leverage.
Track testing and laboratory and simulation segments made
operational and financial progress, driven by good momentum
coming into the year and sustained through supportive market
drivers and the launch of new products and services.
Demand for track testing products has been driven by a number
of factors such as increased complexity of testing required by
regulation, automotive OEMs entering into new geographic
markets and development of technology in assisted safety. Track
testing services was adversely impacted by macroeconomic factors
as customers experienced delays in sourcing vehicles for testing
and the first half of the year was still impacted by COVID-19
lockdowns in China.
Laboratory testing and simulation benefitted from the acquisition
of Ansible Motion, which expands the Group’s offering in the
simulation area, and also from an increase in SPMM revenues driven
by timing of conversion of the strong pipeline of opportunities.
ABD Solutions, our nascent business unit developing automated
solutions for the mining, defence and specialist vehicle markets,
remains in the pre-revenue phase and continues to reduce
reported operating margins. Excluding this investment in
overheads, Group adjusted operating margin increased to
18.3% (2022: 18.2%).
The Group maintained its very strong financial position, with net
cash at 31 August 2023 of £32.0m (2022: £29.2m) underpinning a
robust balance sheet and providing the resources to continue the
Group’s investment programme.
Strategic reportGovernanceFinancial statements Chief Financial Officer’s review continued
Trading performance
The Group delivered significant revenue growth of 21%, of which
7% related to organic growth and the remainder to the acquisition
of Ansible Motion.
The proportion of recurring revenue was stable at 40%
(2022: 40%).
Gross margin was 59.5%, up 290bps on 2022, due to operational
efficiencies and mitigation of the ongoing impacts of inflation
through price increases.
Group adjusted operating profit of £16.6m (2022: £13.7m)
increased 21% against 2022. The adjusted operating margin
increased against 2022 to 16.5% (2022: 16.4%), as a result of
the increased levels of activity and the benefits of enhanced
performance initiatives, partially offset by the investment in ABD
Solutions to support the strategic long-term growth drivers.
Excluding ABD Solutions, the operating margin increased to
18.3% (2022: 18.2%).
Adjusted earnings before interest, tax, depreciation and
amortisation (EBITDA) increased by 18% to £20.5m (2022: £17.3m).
Adjusted EBITDA margin was 20.4% (2022: 20.8%), an decrease
of 40 bps.
Adjusted net finance costs were consistent at £0.4m (2022: £0.4m).
Adjusted profit before tax was £16.3m (2022: £13.3m). The Group
adjusted tax charge totalled £2.1m (2022: £2.2m), an adjusted
effective tax rate of 13.2% (2022: 17.1%). The effective tax rate is
lower than the current UK corporation tax rate due to allowances
for research and development and patent box. In future years,
the effective tax rate is expected to increase due to the full-year
effect of the increase in the UK corporation tax rate.
Adjusted diluted earnings per share was 60.8p (2022: 48.1p), an
increase of 26%, reflecting the increase in operating profit and
a lower tax rate.
Statutory operating profit increased by 103% to £12.6m (2022: £6.2m)
and after net finance costs of £1.1m (2022: £0.4m), statutory
profit before tax increased by 98% from £5.8m to £11.5m,
giving statutory basic earnings per share of 48.0p (2022: 21.0p).
The statutory tax charge was £0.5m (2022: £1.0m).
A reconciliation of statutory to underlying non-GAAP financial
measures is provided below. The adjustments to operating
profit of £4.0m comprise £7.2m of amortisation of acquired
intangibles, £1.3m of ERP cloud computing costs and a credit of
£4.5m in relation to the release of contingent consideration of
Ansible Motion net of acquisition costs (2022: £7.5m comprising
£5.5m of amortisation of acquired intangibles, £1.7m of ERP
cloud computing costs and £0.3m of acquisition related costs).
The £0.8m adjustment to the interest charge relates to the
unwind of the discount on the contingent consideration for
Ansible Motion (2022: £Nil). The tax impact of these adjustments
was £1.7m (2022: £1.2m). The statutory net finance costs were
£1.1m (2022: £0.4m).
absolute terms, all areas of inventory, trade receivables and trade
payables have increased as the business has grown. Our focus
has been on ensuring this has been executed in an managed and
balanced manner.
Since the year end there have been no significant changes to the
financial position or significant cash flow transactions with the
exception of a £1.8m initial purchase of shares by the employee
benefit trust.
Return on capital employed (ROCE)
Our capital-efficient business and high margins enable
generation of strong ROCE (defined as adjusted operating
profit as a percentage of capital employed). During the year,
ROCE has increased from 15.3% to 15.4%, benefitting from
operating leverage.
Group financial position and cash generation
The Group delivered strong adjusted operating cash flow of
£23.5m (2022: £20.7m) with cash conversion of 114% (2022: 119%).
The strong cash generation was used to fund the acquisition of
Ansible Motion, £3.4m of investment in product development,
property, plant and equipment and dividends of £1.3m.
Net cash at the end of the year was £32.0m (2022: £29.2m),
underpinning a robust balance sheet. Along with the Group’s
£15.0m revolving credit facility which extends to February 2026,
this provides significant funding headroom to continue the Group’s
investment programme.
Non-current assets increased by £22.7m from £77.0m to £99.7m
mainly due to the acquisition of Ansible which resulted in an
increase in goodwill and intangible assets of £33.8m, offset by
depreciation and amortisation of £11.1m.
Working capital was £6.2m (2022: £9.9m), a decrease of £3.7m
in a year when revenue has grown by 21%. Working capital as
a percentage of revenue has decreased from 11.9% to 6.2%.
The improvement reflects our continued focus on commercial
contracting, inventory levels and cash management, along with
timing differences arising from long-term contract accounting. In
Acquisitions
On 20 September 2022, the Group acquired 100% of the issued
share capital of Ansible Motion Limited, a leading provider of
advanced simulators to the global automotive market for an initial
consideration of £17.6m, of which £3.2m was satisfied in new
ordinary shares in AB Dynamics plc and the remainder in cash.
Contingent consideration of £5.7m out of a maximum of £12.0m has
become payable in cash based on performance for the year ended
31 August 2023. The integration of Ansible Motion is progressing
well with the product range having been incorporated into the
Group’s other simulation offerings.
Research and development
While research and development forms a significant part of the
Group’s activities, a significant and increasing proportion relates
to specific customer programmes which are included in the cost of
the product. Development costs of £0.5m (2022: £1.7m) have been
capitalised in relation to projects for which there are a number of
near-term sales opportunities. Other research and development
costs, all of which have been written off to the income statement
as incurred, totalled £0.2m (2022: £0.4m).
AB Dynamics plc Annual Report and Accounts 2023
27
Strategic reportGovernanceFinancial statements Chief Financial Officer’s review continued
Foreign currency exposure
The Group faces currency exposure on its foreign currency transactions
and translation exposure in relation to its overseas subsidiaries.
The Group maintains a natural hedge whenever possible to
transactional exposure by matching the cash inflows and outflows
in the respective currencies.
Foreign exchange translation has provided a minor tailwind on
revenue and profit, due to the weakening of sterling against the
US dollar and euro. On a constant currency basis, restating the
current year at 2022 average exchange rates, revenue would have
been £1.2m lower and both adjusted and statutory operating
profit £0.1m lower.
Year-end rate
US dollar
Euro
Yen
Average rate
US dollar
Euro
Yen
2023
2022
1.27
1.16
186
1.21
1.15
165
1.16
1.15
161
1.31
1.19
158
Dividends
The Board is recommending a final dividend of 4.42p per share,
giving a total dividend for the year of 6.36p per share, which is an
increase of 20% over the prior year.
Alternative performance measures
In the analysis of the Group’s financial performance and position, operating results and cash flows, alternative performance measures are
presented to provide readers with additional information. The principal measures presented are adjusted measures of earnings including
adjusted operating profit, adjusted operating margin, adjusted EBITDA, adjusted profit before tax and adjusted earnings per share.
The Annual Report includes both statutory and adjusted non-GAAP financial measures, the latter of which the Directors believe better
reflect the underlying performance of the business and provide a more meaningful comparison of how the business is managed and
measured on a day-to-day basis. The Group’s alternative performance measures and KPIs are aligned to the Group’s strategy and
together are used to measure the performance of the business and form the basis of the performance measures for remuneration.
Adjusted results exclude certain items because, if included, these items could distort the understanding of the performance for the year
and the comparability between the periods.
We provide comparatives alongside all current year figures. The term ‘adjusted’ is not defined under IFRS and may not be comparable
with similarly titled measures used by other companies. All profit and earnings per share figures in this Annual Report relate to
underlying business performance (as defined above) unless otherwise stated.
A reconciliation of adjusted measures to statutory measures is provided below:
EBITDA (£m)
Operating profit (£m)
Operating margin
Finance expense (£m)
Profit before tax (£m)
Tax expense (£m)
Profit after tax (£m)
Diluted earnings per share (pence)
Cash flow from operations (£m)
* Restated, see note 29.
2023
2022*
Statutory
Adjustments
Adjusted
Statutory
Adjustments
Adjusted
23.6
12.6
12.5%
(1.1)
11.5
(0.5)
11.0
47.4
19.3
(3.1)
4.0
0.8
4.8
(1.7)
3.1
13.4
4.2
20.5
16.6
16.5%
(0.3)
16.3
(2.2)
14.1
60.8
23.5
15.3
6.2
7.4%
(0.4)
5.8
(1.0)
4.7
20.7
18.7
2.0
7.5
—
7.5
(1.2)
6.3
27.4
2.0
17.3
13.7
16.4%
(0.4)
13.3
(2.2)
11.0
48.1
20.7
28
AB Dynamics plc Annual Report and Accounts 2023
Strategic reportGovernanceFinancial statements Chief Financial Officer’s review continued
Alternative performance measures continued
The adjustments comprise:
2023
2022
Profit
impact
£m
Cash flow
impact
£m
Profit
impact
£m
Cash flow
impact
£m
Amortisation of
acquired intangibles
Acquisition related
(credit)/costs
ERP development costs
Adjustments to
operating profit
Adjustments related to
acquisition related finance
costs
Adjustments to profit
before tax
7.2
(4.5)
1.3
4.0
0.8
4.8
—
2.8
1.4
4.2
—
4.2
5.5
0.3
1.7
7.5
—
7.5
—
0.3
1.7
2.0
—
2.0
Taxation
The tax impact of these adjustments was as follows: amortisation
of £1.3m (2022: £0.8m), acquisition related costs of £0.1m
(2022: £0.1m) and ERP development costs of £0.3m (2022: £0.3m).
Net cash
The reconciliation of cash and cash equivalents to net cash is
as follows:
Cash and cash equivalents
Lease liabilities
Return on capital employed (ROCE)
ROCE is calculated as follows:
Amortisation of acquired intangibles
The amortisation relates to the acquisition of Ansible Motion and
the businesses acquired in previous years: DRI, rFpro, VadoTech.
Acquisition related (credit)/costs
The credit in the current year relates to the £5.2m release of
contingent consideration on the acquisition of Ansible Motion
Limited less acquisition costs of £0.7m. The prior year also related
to Ansible Motion acquisition costs. The cash impact relates to
acquisition costs and a bonus paid to employees of the acquired
entity for pre-acquisition service.
Adjusted operating profit
Shareholders’ equity
Net cash
Deferred tax
Contingent consideration
Capital employed
Return on capital employed
ERP development costs
These costs relate to the development, configuration and
customisation of the Group’s new ERP system which is hosted
on the cloud.
Sarah Matthews-DeMers
Chief Financial Officer
23 January 2024
Acquisition related finance costs
Finance costs relate to the unwind of the discount on contingent
consideration payable on the acquisition of Ansible Motion.
2023
£m
33.5
(1.5)
32.0
2023
£m
16.6
125.2
(32.0)
8.7
5.9
107.8
15.4%
2022
£m
30.1
(0.9)
29.2
2022
£m
13.7
112.4
(29.2)
6.4
—
89.6
15.3%
AB Dynamics plc Annual Report and Accounts 2023
29
Strategic reportGovernanceFinancial statements Key performance indicators
Clear performance measures that
highlight sustainable value creation
Growth of the business, quality of earnings and
efficient use of resources are crucial target areas
for AB Dynamics and we employ a number of
performance measures to monitor them. The
KPIs used to monitor the financial performance
of the business are set out opposite.
These KPIs enable progress to be monitored on
the implementation of the Group strategy, level
of investment and business development.
For other non-financial KPIs see the ESG
strategy section for Health and Safety and
emissions performance.
Financial figures
Revenue
£100.8m +21%
2023
2022
2021
2020
2019
Adjusted operating profit
£16.6m +21%
100.8
83.2
63.7
61.5
58.0
2023
2022
2021
2020
2019
16.6
10.2
11.3
13.7
12.9
Definition
Revenue is measured as the value, net of sales taxes, of goods
sold and services provided to customers.
Reason for choice
This is a key driver for the business, enabling us to track our
progress in increasing market share by product and by region.
Comment on results
The growth was driven by an increase in demand for track test
products, simulation software, and laboratory testing products
as well as the contribution from Ansible Motion.
Definition
Earnings before interest, tax, amortisation of acquired
intangibles, acquisition costs and other adjustments for
one-off non-recurring items.
Reason for choice
Adjusted operating profit provides a consistent year-on-year
measure of the trading performance of the Group’s operations.
Comment on results
The increase in revenue dropped through to operating
profit and increased operating margin due to operational
improvements and operating leverage.
Link to strategy
Link to strategy
30
AB Dynamics plc Annual Report and Accounts 2023
Strategic reportGovernanceFinancial statements Key performance indicators continued
Links to strategy
Product and innovation
Acquisitive growth
Service and support
Capability and capacity
Diversification
International footprint
Financial figures continued
Adjusted diluted EPS
60.8p +26%
Adjusted operating cash flow
£23.5m +14%
Return on capital employed
15.4% +10bps
2023
2022
2021
2020
2019
60.8
48.1
35.4
39.9
51.4
2023
2022
2021
2020
2019
23.5
20.7
16.0
2023
2022
2021
2020
2019
6.9
10.5
15.4
15.3
15.2
11.0
19.3
Definition
Profit after tax excluding amortisation of acquired intangibles,
acquisition costs and other adjustments for one-off non-recurring
items, divided by the fully diluted weighted average number
of shares.
Reason for choice
This measure is designed to include the effective management
of interest costs and the tax charge and measure the total
return achieved for shareholders.
Comment on results
Adjusted diluted EPS increased by 26% as a result of the increase
in adjusted operating profit and reduction in the tax rate.
Definition
Cash flow for operating activities adjusted for acquisition costs
and other adjustments for one-off non-recurring payments
or receipts.
Definition
Adjusted operating profit as a percentage of capital employed,
defined as shareholders’ funds less net cash held, deferred tax
and contingent consideration.
Reason for choice
This provides a measure of the cash generated by the Group’s
trading. It represents the cash that is generated to fund capital
expenditure, interest payments, tax and dividends.
Comment on results
Adjusted operating cash flow increased by 14% to £23.5m as a
result of the increase in operating profit. Cash conversion was
114% (2022: 119%).
Reason for choice
This measures efficient use of capital.
Comment on results
ROCE increased from 15.3% to 15.4% in the year due to
operational improvements and operating leverage.
Link to strategy
Link to strategy
Link to strategy
AB Dynamics plc Annual Report and Accounts 2023
31
Strategic reportGovernanceFinancial statements Strategic report
ESG strategy
Embedding sustainability
Health
and safety
Our people
Ethics and
compliance
Environmental
leadership
Sustainable
products
Sustainability roadmap
As a Group it is our core purpose to accelerate our customers’
drive towards net zero emissions, and to improve road safety
and the automation of vehicle applications. We do this through
leadership and innovation in engineering and technology and we
are well placed to support the transition towards a more socially
and environmentally sustainable economy. It is our responsibility
to continually improve our own ESG credentials, as well as support
our customers and suppliers as they do the same. Sustainability
principles lie at the very core of our business. By enhancing the
safety of vehicles for all road users through the provision of
our products and services, we seek to deploy our technology to
improve road safety. One of our key objectives, a reduction of
road based injuries and fatalities, is fundamentally aligned to
ESG principles. More recently we have broadened our scope to
improve safety in other potentially dangerous environments like
defence and mining. Furthermore, we play a role in facilitating our
customers’ drive towards zero emissions through the automation
of vehicles and our simulation products.
32
AB Dynamics plc Annual Report and Accounts 2023
We continue to focus on our goal of becoming carbon neutral
by 2030. Carbon neutral is defined by the Group as the offset
of Scope 1, 2 and 3 emissions through reduction planning
and monitoring followed by offsetting in line with the British
Standards Institute PAS 2060:2014. This will include the further
development of initiatives to reduce our carbon emissions,
waste and water usage, using improved methods of data
collection so that more achievable targets can be set in the
future. We also give priority to ensuring the health, safety
and wellbeing of all our employees across the Group with the
introduction of a Health and Safety Management System,
associated procedures and stricter auditing.
Our key ESG achievements since our last Annual
Report include:
• We have introduced an Occupational Health and Safety
Management System for AB Dynamics Limited and AB Dynamics
Europe GmbH which has achieved ISO 45001 accreditation
• There were no health, safety or environmental fines or
breaches of legislation and we have no recorded fatalities or
life changing injuries throughout the Group during the year
• We continue to use renewable energy in a number of our locations
including the use of solar power, resulting in zero emissions
for the majority of our electrical use in the UK and Europe
• We have seen increased usage and uptake of the electric
vehicle salary sacrifice scheme resulting in a reduction of
115 tonnes of CO₂
• We have established the Carbon Neutral Working Group,
with representation from all subsidiaries and locations
• We received a successful surveillance audit of our ISO 14001
accredited Environmental Management System
• We have rolled out our corporate social responsibility
initiatives globally to all our offices and introduced two paid
volunteering days each year for all employees
• We have successfully run our first development programme
for future leaders
• We launched the Equality, Diversity & Inclusion (EDI) programme
and enhanced systems to enable the collection of equality,
diversity and inclusion data
• We have matched employee charitable donations to Macmillan
Cancer Support, the Red Cross Ukraine Appeal and the
earthquake appeal for Turkey
• We recruited a Group Head of Talent & Performance role to focus
on employee communications, culture and values, talent strategy
and corporate social responsibility for the Group
Our priorities for the next twelve months
• Continue to build on our medium-term plan of achieving carbon
neutrality by 2030 by developing and implementing a carbon
reduction plan
• Continue to determine our baseline emissions and further
enhance our Scope 3 emissions disclosure
• Encourage staff across the Group to become Environmental
Champions to help improve environmental performance by
raising awareness of environmental issues within their areas
• Transition of overseas subsidiaries to renewable energy
where possible
• Extension of the scope for our Occupational Health and Safety
Management System and Environmental Management Systems
to include our global subsidiaries
• Increased regular HSE audits globally
• Continue to enhance and develop our corporate social
responsibility programmes globally, focusing on community
engagement and volunteering efforts
• Expand our training programme for future leaders and potential
top talent
• Identify further opportunities and continue to work with
partners such as the Royal Academy of Engineering to develop
ED&I opportunities and to promote careers in STEM
• Expand our social mobility outreach in the UK to primary and
secondary schools
Strategic reportGovernanceFinancial statements ESG strategy continued
Sustainability governance
The Group has a robust structure of sustainability
oversight and risk governance in place. At the highest
level, the Board of Directors has ultimate oversight
of, and responsibility for, our ESG governance and
strategy. Our Non-Executive Director and Chair of
the ESG Committee, Louise Evans, supports the
Board in this function. The ESG Committee reviewed
the Group’s ESG performance over the course of
four meetings during FY 2023. The ESG Committee
has overall responsibility for translating our ESG
strategy into actionable plans, in compliance with
relevant legal and regulatory requirements. The
Board has received significant external input on ESG
this year, with feedback from the auditor, investors
and sustainability experts.
Sustainable business goals
We also considered our mission in relation to the
United Nations Sustainable Development Goals
(UN SDGs) and determined that our support for road
safety, our alignment with innovation in transport
and our commitment to our people support the UN
SDGs as set out in the table.
UN SDG
Topic
Sustainable Development Goal Target
Health and
safety
Halve the number of global
deaths and injuries from road
traffic accidents
Our people
Achieve gender equality and
empower all women and girls
Environmental
leadership
Accelerate action on modern
renewable energy – especially
in heating and transport
Sustainable
products
Build resilient infrastructure,
promote inclusive and
sustainable industrialisation
and foster innovation
AB Dynamics alignment
• AB Dynamics plc’s core business model and purpose are to
advance road safety through facilitating deployment of active
safety systems, Advanced Driver Assistance Systems (ADAS)
and automation
• The Group benefits from regulatory tailwinds on new vehicles
to ensure OEM adherence
More information
Page 34
• 40% of the AB Dynamics plc’s Board is female in line with
Page 36
best practice
• The proportion of women in our overall workforce is higher than
average for our industry. We aim to further increase female
representation across all levels throughout the business
• Sponsorship and support of women in STEM subjects
• Rapid development of electric vehicles and autonomy has placed
additional commercial pressures on OEMs to rapidly develop and
deploy new technologies with a continued focus on R&D
• We are committed to using renewable energy sources in our
operations wherever possible
• Our products and services support this development goal
• We support the development of EVs through on-road testing
of battery technology and charging infrastructure
• ABD Solutions’ core mission is to accelerate the transition to
autonomy by providing retrofit solutions that reuse existing
vehicles to automate vehicle applications
Transport
and safety
Increase safety of transport
network and reduce impact of
cities, in particular air quality
• The core mission of the Group is to advance road safety and
support vehicle electrification, thereby reducing emissions within
city centres
Climate change Take urgent action to combat
climate change and its impact
and integrate climate change
measures in policies, strategies
and planning
• Through aiding development of EVs we provide support to
electrify the transport network which is critical to reducing
GHG emissions
• Detailed disclosure of our Scope 1, 2 and 3 emissions provides
clear evidence of integrating climate measures including
installation of renewable energy, sourcing of energy from
renewable only sources and revised travel policies
Page 42
Page 48
Page 8
Page 44
AB Dynamics plc Annual Report and Accounts 2023
33
Strategic reportGovernanceFinancial statements ESG strategy continued
Health and safety
Working environment
Employee wellbeing
The Group places utmost importance on safeguarding the safety,
health and wellbeing of our employees whether working in our
offices, on clients’ sites or from home. We ensure that the working
environment is safe and conducive to healthy, content employees
who are able to balance work and family commitments. We believe
that a more proactive, wide-ranging approach to health and safety
helps build trust with employees and helps them stay happy,
healthy and productive. Our Mental Health and Wellbeing Policy
covers a range of flexible working policies with the key objective
being to enable employees to balance their working life with other
priorities, thereby enhancing their wellbeing.
Our Flexible Working Policy includes a degree of working from
home, part time or job sharing, depending on function and
location and in agreement with line managers. All employees are
eligible to take career breaks or sabbaticals in consultation with
their line managers. Risk assessments, which were conducted
by each of the Group’s subsidiaries, are reissued to employees
regularly throughout the year, to make sure the Group is keeping
pace with the changing environment. The Group continues to
monitor staff safety and wellbeing to ensure the workplace risks
are minimised to a level as low as reasonably practicable.
Safety first
We believe that the focus on safety is essential to delivering a
high-performing, open and constructive safety culture. The Group
is committed to continuous improvement in health and safety
performance, which is a standing item at every Board meeting.
This year the Group has built further on the processes and
procedures across its subsidiaries, standardising reporting, and
this will enable us to continue setting further Group-wide health
and safety targets in FY 2024. In this way the Group can actively
promote a strong safety culture, striving to instil the same safe
working principles in every employee wherever they are, and in
whichever Group business they work.
34
AB Dynamics plc Annual Report and Accounts 2023
Regular health and safety reporting is carried out across the
Group and all employees are encouraged to report any safety
shortcomings and near misses. With the growth of the Group
and enhanced reporting, there has been an increase in the number
of minor injuries being reported.
Health and safety governance
Our health and safety organisational framework clearly defines
those responsible and accountable for health and safety across our
businesses. The Board is committed to maintaining a strong safety
culture throughout the Group. Health and safety performance
is reviewed by the Board at each scheduled Board meeting.
The Executive Committee (Excom) has responsibility and authority
to implement ongoing improvements to safety processes and systems,
delegating responsibility to local subsidiary management where
required. The Group requires that all employees take responsibility
for their own safety and that they are mindful of the safety of
those around them, thereby creating collective responsibility to
ensure we meet our high standards for health and safety and
that we continually improve them. The introduction of the Health
and Safety Management System further reminds staff at all levels
of their specific health and safety responsibilities.
Local management teams are accountable for monitoring
the health and safety methodology set by the Group, with
each manager having received appropriate briefings on these
requirements, and ensuring compliance with local regulatory
requirements, culture and specific business needs.
All the subsidiaries within the Group must meet the key requirements
of the Group’s methodology, summarised as follows:
• Health and safety must remain an agenda item at every monthly
management meeting. This ensures that teams identify issues in
a timely manner, with a process of continuous improvement in
place that underpins our strong safety culture.
• Each subsidiary must create a Health and Safety Committee
(if they do not already have one) and must hold Health and
Safety Committee meetings quarterly. This allows for the
sharing of best practice and the efficient roll-out of specific
Group safety initiatives.
• Ensure that each Committee has at least one trained health and
safety representative who is certified to a recognised standard
in the territory in which the business operates.
• All incidents must be fully investigated with remedial actions
and preventative measures put in place to ensure the incident
does not reoccur and risks are mitigated going forward.
• All subsidiaries must report to the Chief Executive Officer
quarterly (within two weeks of each Committee meeting),
providing a report which summarises the findings of this
process and each subsidiary’s health and safety metrics.
Health and safety training
All employees receive health and safety training (which includes
accident prevention and handling of hazardous substances) as part
of their induction process. The inductions consist of a reminder
of both employer and employee legal requirements. Additionally,
they highlight the main hazards which are found throughout the
organisation and the control measures in place. This includes manual
handling, hazardous materials, display screen equipment, vehicles
and using workplace equipment. Emergencies are also covered
including the actions to follow in the event of a fire evacuation.
Risk assessments also describe how workplace hazards are dealt
with, how we apply control measures (including for our employees
at work at our customers’ sites) and are regularly reviewed. Finally,
environmental issues are discussed with regard to the impacts
we have on the environment with guidance on how to reduce the
impact such as recycling and energy use.
In FY 2023, 30 health, safety and environmental inductions were
completed at the Group’s largest subsidiary, Anthony Best Dynamics
Limited, as well as fire extinguisher training and first aid refresher
training. All UK based staff also complete mandatory annual training
which includes health and safety training, manual handling training
and display screen equipment training. Additionally, our overseas
subsidiaries completed health and safety training, high-voltage
training, first aid training, emergency evacuation training and
driver safety training during the year.
Strategic reportGovernanceFinancial statements ESG strategy continued
Health and safety continued
Safety performance
We have a proud track record of safety performance and in
FY 2023 we continued to invest in the tracking and prevention
of incidents. All subsidiaries across the Group carry out risk
assessments as part of their local health and safety programmes
but during FY 2024 we will work towards standardising and
harmonising our risk assessments across the Group. Detailed risk
assessments have been completed for all operational and support
departments of Anthony Best Dynamics Limited and AB Dynamics
GmbH. These have been completed in consultation between the
Health and Safety Manager, the relevant department head or
supervisor, and the staff. All assessments highlight the hazards
associated with a part of the operation and are duly signed off by
the team leader (who owns the risk) and all the staff concerned,
so they understand the risks involved and the associated control
measures. These risk assessments cover all identifiable risks to
personal safety and are reviewed annually, with any mitigating
actions reported.
We continue to work hard to prevent incidents across the
Group and the introduction of the Company Health and Safety
Management System reinforces our current health and safety
policy and demonstrates the Company’s commitment to employee
safety. This will further reduce workplace risks, ensure our legal
obligations are met and improve the overall health and safety
performance of the Group. The achievement of accreditation
to the ISO 45001 standard sends a positive message to our
employees and stakeholders that health and safety is, and will
continue to be, our top priority.
The table below records a summary of the Group’s health and
safety statistics for the year. In FY 2023 most were caused by slips
or falls and were recorded as minor injuries. Minor injuries were
treated by our locally trained first aiders, administering treatment
for minor cuts or abrasions. All minor incidents or ‘near misses’
are reviewed regularly and where trends are identified, further
control measures are introduced to reduce risks and prevent
recurrence. The Group reported two lost time incidents one of
which was reportable (under the UK Reporting of Injuries, Diseases
and Dangerous Occurrences Regulations 2013) to the Health and
Safety Executive. The incident was reportable due to the injury
involved and time away from work for the employee. The injury
was minor and the incident fully investigated with actions taken
to prevent recurrence. These incidents together with an increase
in minor injuries have seen a rise in the overall injury rate per 100
employees for the first time in two years.
Employee safety
Average employees
Reportable incidents
Lost time incidents
Near misses
Minor injury, first aid cases (FAC)
Injury rate per 100 employees
Injury rate per 100,000 hours worked
*
Includes RIDDOR reportable incident.
2023
473
1
2*
26
16
3.8
2.2
2022
434
—
—
26
6
1.4
0.8
2021
333
—
—
15
13
3.9
—
2020
275
—
—
9
13
4.7
—
2019
181
—
—
13
14
7.7
—
2018
128
—
—
7
9
7
—
Our data covers 100% of employees and includes contractors.
Lost time incidents are defined as an injury or illness sustained on the job by an employee that results in the loss of productive work
time resulting in them being unable to perform regular job duties, taking time off for recovery or being assigned modified duties whilst
in recovery. The minor injury rate is currently measured against first aid or medical treatment cases that did not result in a reportable
incident or lost time injury.
Injury levels have increased during FY 2023, mainly due to regular and enhanced reporting of minor incidents to the Group HSE Manager
and the increased size of the Group during the year. 95% of these injuries reported were minor in nature and required local first aid or
minor medical treatment and did not result in any lost time injury.
AB Dynamics plc Annual Report and Accounts 2023
35
Strategic reportGovernanceFinancial statements ESG strategy continued
Our people
Engagement
Employee engagement and communication
The Group recognises the importance of communicating with
all employees to help maintain trust and confidence between all
parties. This is achieved by various formal processes and ad-hoc
actions throughout the year. On a formal basis, our CEO conducts
regular all-staff briefings and meetings are held throughout the
year between employees and their line managers to ensure that
personal objectives are aligned with the Group’s strategy and
to formally identify development needs and career aspirations.
Based on local requirements, weekly and monthly management
team meetings are held to provide a forum for Group updates.
Internal announcements are issued on a regular basis and include
business updates, guidance on maintaining a safe working
environment and matters of general interest. The Group’s
website is used for the distribution of preliminary and interim
announcements and press releases.
Through workforce engagement, the views of our employees
are heard at Board level and are considered in Board discussions
and decision making. To further support staff engagement all
employees are invited to participate in staff surveys. These
will be conducted every quarter starting January 2024. We are
also launching a Group newsletter to all employees starting in
December 2023 which will be produced on a regular basis.
As the Group has undergone significant change in the past
few years, in FY 2021 an inter-disciplinary ‘Values Team’ was
established to work with staff to define our renewed vision
and values, which underpin the Group’s strategy, processes and
culture. Our vision is to ‘provide world class innovative automation
and vehicle application solutions created sustainably with passion
by our people, delivering excellent products and services to our
partners’. Our key values: customers, people, diversity, innovation,
excellence and responsibility, ensure our behaviours, culture and
personal values align with those of the business and enable us
to continue to drive the strategy forward. Embedding our values
across the Group was a continued focus for FY 2023. Values have
been introduced as part of our performance appraisal process and
managers are encouraged to discuss them with employees.
36
AB Dynamics plc Annual Report and Accounts 2023
Diversity and inclusion
We recognise that being a truly diverse and inclusive Group is
crucial to our values and to our ability as a business to grow,
innovate and attract and retain talent. Different experiences,
views and opinions allow us to consider a range of opinions when
making decisions, which we believe results in better outcomes
for the business and for our stakeholders. We operate globally
and recognise the cultural differences that may exist in the
countries in which we do business. We do not tolerate any form of
discrimination. We are committed to equality of opportunity in all
our employment practices, procedures and policies. When we hire
or promote someone, we choose the best candidate irrespective
of age, race, national origin, disability, religion, sex, gender
reassignment, sexual preference, marital status or membership/
non-membership of any trade unions. All staff are provided with a
safe, secure and healthy environment in which to work, regardless
of where in the world they are located.
We aim to create an environment where the contributions of all
staff are recognised and valued, and everyone is treated with
dignity and respect. We do not tolerate any form of bullying or
harassment within the Group. We apply the same standards when
we select business partners. The ESG Committee is responsible for
setting the Group’s approach to diversity and inclusion.
As a Group we believe training, development and progression
opportunities must be available to all staff.
All text to be supplied
Key values
1
Customers
We create valuable partnerships with our customers
through collaboration to understand and deliver
their requirements.
2
People
We empower people by supporting and challenging each
other to thrive. Integrity and respect are at the forefront
of everything we do.
3
Diversity
We recognise the importance of strengthening, improving
and enriching our culture and practices through diverse
opinions, skills and people.
4
Innovation
We inspire creativity by giving people the space to challenge
the ‘now’ and engineer for the future.
5
Excellence
We are never satisfied with the status quo. We invest in our
people, products and processes by encouraging learning
and self-enrichment to deliver world-class services and
products to our customers.
6
Responsibility
Personal ownership and commitment to ourselves, our
customers, our shareholders and the environment. We
are always looking for opportunities to improve the
sustainability of our operations.
Further details on the Group’s engagement with stakeholders,
including the material topics discussed with investors and
corporate governance bodies, are contained in the Section 172
statement on pages 52 and 53
Strategic reportGovernanceFinancial statements ESG strategy continued
Our people continued
Diversity and inclusion continued
While ability and aptitude remain the determining factors
in the selection, training, career development and promotion
of all employees, the Group is conscious that engineering
continues to have inherent disadvantages for women and other
under-represented groups. Therefore, in FY 2023 we have chosen
to continue as a Corporate Partner to the Women’s Engineering
Society (WES). Actions we take to increase our profile within WES’
membership and to facilitate opportunities include targeted job
advertisements to women and membership of WES for all female
engineers. We also participate in the Arkwright Engineering
Scholarship in the mentoring of 16 year old students who are
considering a career in engineering.
The Board recognises the importance of diversity in all
forms, including the diversity of gender identity, ethnicity,
age, disability, neurodiversity, sexual orientation, geography,
social and cultural background and belief. We recognise the
gender imbalance in the profession and have been working to
improve the Group’s gender mix. A significant proportion of the
Group’s workforce are engineers and technicians. As advised by
Engineering UK, only 12% of engineers are female on a national
basis; therefore, the Group remains above average for our industry
with women representing 18% of our overall workforce. The
Board notes the recommendations of the Hampton-Alexander
and Parker Reviews and the Financial Conduct Authority (FCA) in
relation to increasing Board and Executive Committee (and direct
reports) gender and ethnic diversity. We are proud to note that
within the senior management team, the proportion of female
representation is at 19% while the Group Board is at 40%, in line
with these recommendations.
Set out below is an analysis of the Group’s employees by gender in October each year.
Employees by gender
Board
Executive Committee
Senior management
Other employees
All employees
* Excludes VadoTech group.
2023
2022
2021
Male
67%
84%
84%
82%
Female
Prefer not
to say
33%
16%
16%
16%
0%
0%
0%
2%
82%*
17%*
1%*
Male
60%
83%
83%
82%
Female
40%
17%
17%
18%
Male
60%
100%
80%
82%
Female
40%
—
20%
18%
Employees are able to request flexible working such as working from home or part-time and flexible hours according to the requirements
of the position. The Group employs contract and temporary workers across some of its locations to fulfil local requirements. It should
be noted that in FY 2023 we have seen a slight increase in the percentage of temporary employees within our workforce, reflecting
somewhat unique conditions at some locations which have discrete projects ongoing and hence require short-term support. This is
particularly the case in our manufacturing facilities globally, to ensure we meet our customer requirements. We are pleased that many
of our temporary staff choose to become permanent employees.
Number of part-time and contract/temporary employees
Part-time employees (no.)
Part-time employees to total employees (%)
1 Excludes VadoTech group.
2023 1
42
10%
2022 1
27
7%
2021 1
21
8%
AB Dynamics plc Annual Report and Accounts 2023
37
Strategic reportGovernanceFinancial statements ESG strategy continued
Our people continued
Social
Attracting and retaining young talent
Attracting and retaining young talent within the Group is a
key strategic element of ensuring the sustained growth of the
business for the future. After introducing our graduate scheme
last year, our first graduates successfully completed the scheme
in April 2023. We have a new graduate engineer in their second
year. Of their time so far on the graduate scheme, Tarren
Clark said:
“ My time on the graduate scheme at AB Dynamics
has been a journey of growth and learning. From the
moment I joined, I was exposed to a fast-paced work
environment that challenged me to adapt, innovate,
and collaborate with talented colleagues. Throughout
the programme, I’ve worked on diverse projects, each
providing valuable insights into the Company and its
various products. I’ve built lasting connections with the
people who I have worked with during the rotations,
and they all serve as valuable points of contact
while doing my work. As I near the end of the scheme,
I have joined the Real-Time Software team, using the
knowledge I gained from working hands-on with the ABD
products to allow me to make effective improvements
straight away.”
Tarren Clark, Current graduate
38
AB Dynamics plc Annual Report and Accounts 2023
Additionally, one student completed a placement year with
AB Dynamics. DRI has a consistent flow of placement students
assisting in their Human Factors department. We also re-instated
our summer placements this year with three students joining
ABD Solutions and one student joining AB Dynamics. We also
had some of our apprentices completing their apprenticeships
this year and we will continue with the scheme and recruit for
one apprentice to join the UK team for FY 2024.
“ My time at AB Dynamics has been an amazing
experience. Throughout my electronics apprenticeship,
I have gained many new skills and experience working
within multiple departments on an array of products
that we produce from the track test robots, to the
SPMM, to the aVDS.
The support that has been offered to me from the
team leaders and other colleagues, has allowed
me to focus on continuously improving what I have
learnt so far. Being able to expand my knowledge in
electronic engineering and skills such as building PCBs,
wiring/routing electrical products and fault finding
both mechanical and electrical issues has helped me
progress both in my career and outside of it.
I would definitely recommend an apprenticeship within
AB Dynamics, as being able to work for a company
that is at the forefront of automotive testing allows
an apprentice to experience working at the highest
level and allows for a lot of developmental skills and
knowledge to be gained.”
Adam Cracknell, Current apprentice
Talent and career management
Attracting and retaining key talent are critical to driving strong
operational performance, maintaining our market position and
enabling us to deliver on our ambitious growth plans. Accordingly,
the Group is committed to developing the capabilities of the
existing workforce and hiring talented people to meet current
and future requirements.
Average number of employees by region
473
total employees
UK
Germany
USA
China
Singapore
Japan
292
22
45
94
5
15
In recent years our continued efforts to enhance staff engagement
and wellbeing have resulted in consistently strong retention
rates. Average length of service is currently 4.2 years, with annual
employee turnover at 13% (FY 2022: 17%) across the Group
(excludes VadoTech group).
Annual employee turnover by year
Total annual employee
voluntary turnover (no.)
Total annual employee
voluntary turnover (%)
Total annual employee
turnover (no.)
Total annual employee
turnover (%)
2023
2022
2021 1
50
61
36
14%
15%
13%
82
72
51
13%
17%
18%
1 2021 VadoTech group data not included due to data availability.
Strategic reportGovernanceFinancial statements ESG strategy continued
Our people continued
Talent and career management continued
Annual performance evaluations
Percentage of employees
who receive annual
performance evaluations
1 Does not include VadoTech group.
2 Does not include VadoTech group and DRI.
2023 2
2022 2
2021 1
93%
83%
99%
Building upon the improvements made to recruitment practices in
prior years, a new recruitment system has been employed this year
to further improve candidate experiences and hiring timelines.
The system has also introduced updated mechanisms to reduce
biases across the recruitment process, which is critical to curating
a workforce diverse in opinions, skills and people.
In FY 2022, the Group made a proactive effort to promote
internal applications for open positions and as a result 18% of
UK employees have been promoted or had their responsibilities
increased over the last year. This has been supported by the
ongoing implementation of talent mapping processes.
Annual performance evaluations are undertaken across the Group,
with 93% of employees having received a performance appraisal
in this year (FY 2022: 83%). VadoTech, Zynit and DRI will introduce
its formal performance review process in FY 2025. Salary reviews
are aligned with performance evaluations to ensure employees
are paid fairly and correctly for the position they perform. All
employees have the opportunity to benefit from a discretionary
performance based bonus with the exception of some employees
within recent acquisitions.
We continually review our benefits and total compensation
packages across the Group. We offer a comprehensive range of
benefits to our staff which reflect local regulations and market
practices and where appropriate include annual performance-related
bonuses, employer matching contributions into pension schemes,
life insurance, income protection and private health cover. Through
a detailed benchmarking exercise we can confirm that these
packages are above or in line with local market regulations and
the competitive environment within which we operate.
We also have other forms of workplace recognition in place.
We regularly organise social events to celebrate success and to
highlight key achievements within the Group as well as workplace
employee appreciation efforts.
Career development
The Group remains committed to retaining key staff and
supporting their ongoing career development through life-long
learning. This provides benefits for both the Group, through a
more highly skilled workforce, and the individual employee, who
gains both qualifications and experience that they can use to
further their careers whilst with the Group and in any future roles
elsewhere. The Group’s talent mapping and succession planning
processes have continued to play a key role in facilitating staff
development and enabled a significant proportion of employees to
take on wider responsibilities either through formal promotional
opportunities or growth in current roles during the year.
Targeted leadership training is also an integral part of ensuring
our workforce remains engaged and innovative, whilst enabling
the Group to grow a diverse pipeline for key roles and leadership
positions. To further demonstrate the Group’s commitment to
developing internal talent, the ABD Professional Development
Programme (PDP) was launched in May 2022 and the first session
completed successfully in 2023. The overarching aim of the PDP
is to challenge and support potential future business leaders to
set and meet their own professional goals, emphasising the role
that each individual can play in modelling cultural change using
business reality as the main arena for development. The first PDP
had twelve initial participants and consisted of a series of on-the-
job training projects which were tailored to each participant’s
existing role, in addition to senior manager mentorship workshops.
The first PDP was very well received and resulted in three internal
promotions. We aim to start the second PDP in FY 2024.
Training opportunities
The Group is committed to ensuring that all employees have access to
the training required to support their skills and career development.
The Group’s training budget for FY 2023 was £121,000
(FY 2022: £170,000).
100% of employees received training in FY 2023 (FY 2022: 100%)
and courses taken during the year included: Cranfield Management
courses, St John’s Ambulance First Aiders, Agile Foundation and
Practitioner, ISTQB Software Testing Foundation, CMI Level 3
Diploma in Principles of Management and Leadership, TIG Welding
Award L2 and Advanced Welding L3, MAKE UK Managing and
Delivering Projects, Skid-Pan Training with DriveTech, scissor
lift training, AUEC Units, mental health first aiders, dangerous
goods training, fork lift truck training, counter balance training,
Simulink Model Management and Architecture, INCOSE Systems
Engineering certification, working at height, environmental
awareness, GDPR UK essentials, Microsoft Excel Intermediate
Training and Microsoft Project Management.
During the year, we also rolled out mandatory compliance training
modules globally to all employees which included: anti-bribery and
corruption, cyber security awareness, desktop safety essentials
(DSE), manual handling, mental health awareness for employees
and managers, modern slavery, customer service, bullying and
harassment for managers, health and safety essentials and
equality, diversity and inclusion.
Training expense per employee
Total training expense per employee (£)
2023
255
2022
399
Graduates and apprentices
Maintaining a diverse pipeline of talent is at the core of our ESG
strategy and is key to fulfilling our future customer requirements.
We offer a range of opportunities and tailored programmes
to early career starters with hands-on experience and training,
equipping the new generation of employees with the right skills
and ensuring that knowledge is retained within the business. We
partner with local schools, colleges and universities, offering
interesting and rewarding apprenticeships, placement schemes
and work experience.
As of 31 August 2023, two graduates enrolled in our two-year
graduate scheme. The rotational graduate scheme is a structured
training programme aimed at equipping graduates with both
soft skills and technical development opportunities across the
business. In FY 2023 we also offered work experience in the UK
to a local school together with our Arkwright Scholars.
As the Group’s global presence grows, ensuring that high quality
early career opportunities are available to all is a key focus. The
Group aims to actively expand the reach of work experience,
apprenticeship and graduate programmes to more young people
from lower social economic backgrounds, so to help increase social
mobility in the local communities in which it operates. For FY 2024
we are extending our work experience to a local school in our
community. All work experience applicants must meet the criteria
of having a genuine interest in engineering and attend one of the
local schools with which we are partnering with. All applicants are
treated with equal consideration.
AB Dynamics plc Annual Report and Accounts 2023
39
Strategic reportGovernanceFinancial statements ESG strategy continued
Our people continued
Community
Environmental
Social
opportunities
Corporate social
responsibility
Industry
Diversity and
inclusion
Community partnerships
CSR strategy
In line with the Group’s expanding global presence and the
Group’s global subsidiary governance framework, in FY 2022
we developed a new and updated corporate social responsibility
(CSR) policy and strategy which we commenced in FY 2023. The
new strategy encompasses five key guiding criteria, of which all
CSR activities are required to meet at least two: environment,
social opportunity, community, diversity and inclusion and
industry. The model represents the Group’s growing global focus
and continued ambitions to put CSR at the heart of our business
model. These criteria are underpinned by our corporate core
values and principles: customers; people; diversity; innovation;
excellence; and responsibility.
Whilst our fundamental approach remains unchanged, our model
takes a wider approach encompassing and linking together our
five pillars:
• Community: committed to strengthening and maintaining
relations and being actively involved in the local regions where
we operate, creating mutual synergies for both our business and
our communities.
40
AB Dynamics plc Annual Report and Accounts 2023
• Social opportunities: committed to demonstrating our
understanding of social responsibility in the context of wider
systemic inequalities, we strive to improve social mobility,
supported by our belief that, irrespective of their background,
talent and drive should be the only factors influencing an
individual’s development opportunities and outcomes.
• Diversity and inclusion: committed to the promotion
of diversity within the STEM environment and within the
armed forces, acknowledging that the best results come
from a diverse workforce.
• Industry: recognising the value of partnerships with our
customers and communities to increase awareness of the Group.
• Environmental: committed to actively seeking ways to reduce
our environmental impact, through linkage with both industry
and communities. Adding environmental to our new strategy
demonstrates our aim to become an integral player within the
communities and environments in which we operate.
Science, Technology, Engineering and Mathematics (STEM)
and wider community initiatives
We have attended a number of in-person careers fairs
(for students or veterans) and work experience placements.
Throughout the year the Group has also continued to make
donations towards several charitable and fundraising activities,
primarily in support of STEM related institutions, and participate
in events. Our annual budget is correlated with headcount,
so as we have grown in size in recent years, we have seen
an increase in the number of CSR initiatives. Our largest
headcount is within the UK where we are headquartered
and this remains the most active region.
In FY 2023 we continued to place heavy emphasis on creating
opportunities for people at the start of their career, with the
Group’s early years programmes designed to attract diverse
individuals from a range of backgrounds to seek new education
and career options. Our initiatives and programmes throughout
the year were centred around acknowledging talent and
identifying opportunities, placing diversity and inclusion
at the heart of our CSR strategy and demonstrating our
understanding around breaking down barriers and inequalities
around sex, gender identity, class and ethnicity to drive both
our current and future workforce.
We want to enhance and expand on our global CSR initiative,
placing emphasis around increasing social opportunities for
both individuals and groups. Our model reflects our belief in
engaging and developing global talent from all backgrounds,
and our ability to be part of the social solution, improving
participation in society. We aspire to create an impact now
and leave an inspiring legacy in both the communities and
individuals we benefit.
Strategic reportGovernanceFinancial statements ESG strategy continued
Our people continued
“ The next generation of
engineers are a key part of the
Group’s future success. We are
continuously aiming to foster
young talent and attract those
looking to kick-start their careers
within the Group.”
Community partnerships continued
Royal Academy of Engineering (RAEng)
We are one of twelve companies taking part in the Inclusive
Leadership Programme with RAEng, a UK based 18-month
leadership programme launched by the academy in 2023
to increase inclusivity within the engineering industry. The
programme involves teams of engineers in various stages of
their career who are challenged with suggesting changes to
the workplace to increase the inclusivity of their organisation’s
culture or the products/services their organisation delivers.
Employees attend ongoing coaching sessions and workshops.
We are committed to supporting the time commitment for full
participation by our team in the programme.
Social
Manufacturing and Engineering Week
Through our partnership with the Women’s Engineering
Society (WES) a cohort of our female engineers represented
AB Dynamics at the Festival of Industrial Innovation which was
held at the NEC in Birmingham as part of Manufacturing and
Engineering Week.
On Women in Engineering Day one of our talented engineers
was nominated as a finalist in the prestigious Women in
Engineering 2023 Awards. AB Dynamics remains committed
to the advancement of women in STEM careers.
AB Dynamics plc Annual Report and Accounts 2023
41
Strategic reportGovernanceFinancial statements ESG strategy continued
Environmental leadership
We have a long history of managing our environmental impact.
It is our mission to empower our customers to accelerate the
development of vehicles that are safer, more efficient and
have less impact on the environment. Our commitment to
the environment extends to ourselves, our customers and our
shareholders. We are continually looking for opportunities to
improve: environmental sustainability is essential.
We continue with our commitment to environmental
sustainability and are actively seeking steps to reduce our
environmental impact and to achieve our goals of carbon
neutrality by 2030. We established the Carbon Neutral Working
Group to facilitate a programme to meet this target.
The aim of the Carbon Neutral Working Group will be to oversee
the programme and implementation of the activities and functions
required to meet the carbon neutral goal for the Group by 2030.
This will include the development of a comprehensive engagement
programme and climate awareness groups throughout all our
businesses. This step underlines our dedication to addressing
climate change and moving towards a sustainable future.
The Carbon Neutral Working Group is comprised of representatives
from all Group subsidiaries with Environmental Champions within
each subsidiary to promote awareness and best practice. The
Carbon Neutral Working Group will also develop and measure a
baseline of our ongoing carbon performance to enable progress
to be measured and evaluated on our journey to carbon neutrality.
We have also partnered with Auditel, a leading carbon solutions
company, to assist us in reducing our carbon emissions and related
costs as we aim for PAS 2060 verification.
The focus of our ongoing emissions reduction efforts includes
greenhouse gas emissions, energy consumption, the use of renewable
energy, water resources and the reduction and management of waste.
The Group’s commitment to transparency includes the regular public
disclosure of our emissions.
The Carbon Neutral Working Group was established following
a MSCI AA rating in 2022 for AB Dynamics and ISO 14001
certification of our Environmental Management System for
our UK and German operations.
We are focused on finding ways to reduce our impact across the
whole value chain to achieve our commitment of carbon neutrality
by 2030. That means minimising the impact we and our products
have on the environment.
The Group recognises the importance of creating environmental
awareness, protecting the environment and using natural resources
efficiently by continuously reducing the environmental impacts
of our operations and services. In turn, the Board and senior
management are committed to continually measuring, monitoring,
evaluating and improving the environmental performance of
all the Group’s operations. We will continue to deploy green
technology wherever possible and appropriate, and to make
careful and considered decisions in all our operations to reduce
our current carbon footprint. Beyond our own operations, we will
also continue to assist the global automotive sector to develop
new technologies and processes that will reduce CO2 emissions.
Reflecting these efforts, and as part of the overall government
target for the UK to be net zero by 2050, we have set ourselves
the target to be carbon neutral by 2030, which will be the focus
of our efforts.
In FY 2023, we continued to develop our approach towards
reducing carbon across our operations. Some of the significant
milestones include:
• successful re-certification of the ISO 14001 standard for our
Environmental Management System applicable to Anthony
Best Dynamics Limited, our largest subsidiary, and AB Dynamics
GmbH, our German subsidiary;
• continued to expand the scope of Group-wide data collection,
in particular for Scope 3 emissions;
• the formation of the Carbon Neutral Working Group that
will focus on a programme towards meeting the ESG goal
of becoming carbon neutral by 2030;
•
increased employee uptake of the electric vehicle scheme
in the UK;
• continued use of green renewable energy in the UK including
the use of solar panels at two of our UK sites;
• appointment and training of Environmental Champions at our
UK sites; and
• engagement of Auditel to assist us with our carbon
neutral journey.
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AB Dynamics plc Annual Report and Accounts 2023
Strategic reportGovernanceFinancial statements ESG strategy continued
Environmental leadership continued
Managing environmental performance
The Group’s activities can be summarised as largely manufacturing
and assembly operations, combined with office based research,
product development and other commercial functions, where
we receive materials and products from suppliers, assemble
them into product and dispatch to customers and some on-road
vehicle testing. Therefore, the Group’s main direct impact on the
environment is limited to the consumption of heating and power
and fuel or electricity for customer vehicles, while providing test
services and developing and testing products.
We recognise the importance of monitoring, controlling and
improving our environmental performance in order to meet
our medium-term target of carbon neutrality in 2030. Enhanced
monitoring of our environmental performance has resulted in an
increase of annual emissions for the Group. This is most evident
with our Scope 3 business travel emissions. This year we have
collated more information to include all travel by air and land
including the use of hire cars, train travel and hotel stays.
The Group remains committed to identifying and assessing
environmental risks, such as packaging waste, arising from
all operations. Waste management initiatives are encouraged
and supported by the Group and materials are recycled where
practicable. Local management teams are committed to good
environmental management practices and are responsible
for implementing the necessary initiatives to meet their
local obligations. Each facility participates in recycling paper,
plastic, cardboard and wood from pallets and continues to
focus on reducing energy consumption through the efficient
use of heating and lighting. The Group’s usage of water is
minimal and predominantly relates to cleaning, bathrooms
and staff refreshments.
This year the Group has built on the environmental reporting
processes and procedures across its subsidiaries to provide a
unified framework. The main tools used to track and monitor
our environmental impact across our sites are our Environmental
Management Systems. Both internal and external environmental
audits have been completed at Anthony Best Dynamics Limited
and AB Dynamics GmbH, resulting in a successful surveillance audit
of our ISO 14001 accredited Environmental Management System.
Over the next year we aim to implement this across all Group
subsidiaries, standardising reporting and enabling us to set further
environmental targets in FY 2024.
We have continued to build on the environmental reporting
processes across all Group subsidiaries and application of the
Environmental Management System where appropriate.
Our environmental reporting covers all entities over which the
Group has financial control for the financial year ended 31 August 2023.
Data for businesses acquired or disposed of during each reporting
period is also included where available.
Social
We are pleased with our environmental performance for the
year and can confirm that we have not received nor paid any
environmental fines or penalties either in the last twelve months
or in the previous five years.
Employee electric vehicle scheme
In March last year we introduced our new Electric Dreams Scheme
which has been made available to UK based staff. The aim of the
programme is to offer employees brand new electric vehicles
through a cost-effective and tax-efficient leasing scheme.
The programme is run through our vehicle fleet partner, Octopus
Electric Vehicles. Everything required to run the vehicle is included in
a single monthly payment, including insurance, tax, maintenance
and a home charging system. A range of vehicles is available to
suit all budgets and requirements.
This is a significant addition to the benefits available to employees
and also helps to reduce our workforce’s carbon footprint. On top
of this, the vehicles can be charged at reduced rates at one of the
twelve charging points located at the Bradford on Avon facility, with
some of the energy being produced by the facility’s solar panels.
The scheme has been very successful with many employees
joining the programme and contributing towards saving
11.5 tonnes of carbon.
AB Dynamics plc Annual Report and Accounts 2023
43
Strategic reportGovernanceFinancial statements ESG strategy continued
Environmental leadership continued
Energy and greenhouse gas emissions
Reducing global greenhouse gas emissions to combat climate
change is one of the biggest global challenges of our time. We
aim to minimise our carbon footprint as the UK and the rest of the
world transition to a low-carbon economy. As the Group does not
use its own logistics or freight, its primary direct energy usage and
related CO2 emissions arise from its facilities and vehicles. As a
business, we continue to assess our impact on the environment
and try to mitigate or reduce the Group’s energy consumption
wherever possible.
The Group has a target to achieve carbon neutrality by 2030. We
have a range of initiatives underway to support this ambition such
as solar panels on two sites in the UK, which generated a total
of 114,933 kWh of power in FY 2023, and working with suppliers
to reduce the embedded carbon across our product life cycle.
ENGIE offers 100% UK generated renewable power from certified
renewable sources and is fully certified as zero carbon emissions
by UK Renewable Energy Guarantees of Origin (REGOs), providing
complete traceability of the energy it supplies to the Group.
Anthony Best Dynamics Limited and AB Dynamics GmbH
also have subsidiary level targets to reduce electricity and gas
usage by 5% per annum as part of their certified ISO 14001
Environmental Management Systems. Targets were not met during
the year mainly due to increased productivity and testing.
As a step towards focusing our efforts on the most impactful areas
of our business, we have improved the collation of Group-wide
data so we can better understand our emissions and energy usage
and create a Group baseline.
The Group’s data can be found on the next page. This is the fourth
year the Group has reported emissions in this manner.
The Group’s emissions are broken down by Scope 1, Scope 2 and
some Scope 3 emissions. For the second time in FY 2023, Scope 2
emissions associated with the Greenhouse Gas Protocol ‘market
based’ method have also been calculated, in addition to ‘location
based’ Scope 2 emissions.
In FY 2023, the Group’s total Scope 1, 2 and 3 emissions (market based)
increased by 50% year on year on an absolute basis and 20% year
on year on an intensity basis (per £m of revenue).
Our Scope 3 emissions include emissions from business travel and
water supply and treatment. Compared with FY 2022, our FY 2023
Scope 3 emissions have increased significantly across the Group.
The 140% increase can be attributed to a significant uplift in
business travel since the relaxation of COVID-19 restrictions across
the world. Our business travel data collection has also increased in
scope since FY 2022 reporting, with data disclosure now including
hotel stays and use of other modes of transportation, such as
trains, that were not previously accounted for. In FY 2024 we will
endeavour to improve the extent of our measurement of Scope 3
emissions further, in order to obtain a better understanding of our
total emissions.
In FY 2023, our total energy consumption decreased by 1% year
on year on an absolute basis. This was due to a decrease in mileage
of vehicle testing, reported in Scope 1. There were increases in
electricity usage and personal vehicles used for business purposes.
In addition to the impact of the FY 2022 acquisitions, the increase
in energy consumption in FY 2023 is also in part as a result of
increased product manufacture and testing at our UK sites. Overall,
the trend in our energy consumption data has generally followed our
emissions data as our greenhouse gas emissions are mainly due to
the use of energy at our sites.
44
AB Dynamics plc Annual Report and Accounts 2023
Strategic reportGovernanceFinancial statements
ESG strategy continued
Environmental leadership continued
Energy and greenhouse gas emissions continued
GHG emissions
Scope 1 total
Gas
Company owned vehicle use
Scope 2 (location based)
Scope 2 (market based)
Total Scope 1 and 2
(location based)
Total Scope 1 and 2
(market based)
Scope 3 total
Business travel
Water supply and treatment
Total Scope 1, 2 and 3
(location based)
Total Scope 1, 2 and 3
(market based)
Units
tCO2e
tCO2e
tCO2e
tCO2e
tCO2e
tCO2e
tCO2e
tCO2e
tCO2e
tCO2e
tCO2e
tCO2e
Absolute emissions (including Ansible Motion)
Like-for-like emissions (excluding Ansible Motion)
2023
Global
(excl. UK)
228
18
210
371
362
599
590
332
331
1
UK
129
109
20
184
112
313
241
798
797
1
Group
357
127
230
555
474
912
831
1,130
1,128
2
1,111
931
2,042
1,039
922
1,961
2022
Global
(excl. UK)
416
14
402
298
300
715
716
147
147
N/A
YoY %
change
in total
-33%
-4%
-46%
26%
55%
Group
534
107
427
440
305
975
-7%
839
471
470
1
-1%
140%
140%
100%
862
1,446
41%
864
1,310
50%
UK
118
93
25
142
5
260
123
324
323
1
584
447
2023
Global
(excl. UK)
228
18
210
371
362
599
590
332
331
1
Group
357
127
230
535
462
892
819
994
992
2
931
1,886
922
1,813
UK
129
109
20
164
100
293
229
662
661
1
955
891
2022
Global
(excl. UK)
416
14
402
298
300
715
716
147
147
N/A
YoY %
change
in total
-33%
19%
-46%
22%
51%
Group
535
107
427
440
305
975
-9%
839
471
470
1
-2%
111%
111%
100%
862
1,446
30%
864
1,311
38%
UK
118
93
25
142
5
260
123
324
323
1
584
447
AB Dynamics plc Annual Report and Accounts 2023
45
Strategic reportGovernanceFinancial statements ESG strategy continued
Environmental leadership continued
Energy and greenhouse gas emissions continued
Emissions intensity
Revenue
Intensity by revenue (Scope 1 and 2 market based)
Intensity by revenue (Scope 1, 2 and 3 market based)
Energy consumption by type
Units
£m
tCO2e per £m revenue
tCO2e per £m revenue
Total electricity
Purchased electricity
On-site generated electricity (solar)
Gas
Company owned vehicle use
Personal vehicle company use
Total energy consumption
Notes:
Units
kWh
kWh
kWh
kWh
kWh
kWh
kWh
UK
1,003,808
888,875
114,933
635,716
78,372
72,462
Absolute emissions (including Ansible Motion)
Like-for-like emissions (excluding Ansible Motion)
2023
Group
100.8
8.00
19.45
2022
Group
83.2
10.10
15.75
2023
Global
(excl. UK)
744,540
Group
1,748,348
744,540
1,633,415
—
97,049
892,995
143,970
114,933
732,765
971,367
216,432
YoY %
change
in total
21%
-21%
23%
UK
800,097
732,983
67,114
550,030
61,716
35,651
2023
Group
89.0
9.92
21.16
2022
Group
83.2
10.08
15.76
YoY %
change
in total
7%
-2%
34%
2022
Global
(excl. UK)
529,524
Group
1,329,621
529,524
1,262,507
—
79,712
67,114
629,742
1,630,061
1,691,777
47,789
83,440
YoY % change
in total
31%
29%
71%
16%
-43%
159%
-2%
1,790,358
1,878,554
3,668,912
1,447,494
2,287,087
3,734,580
Emissions for the Group are calculated using methodologies consistent with the Greenhouse Gas (GHG) Protocol: A Corporate Accounting and Reporting Standard. Source data (meter readings) has been used wherever possible; where this is not available this has been
supplemented by billed data and an amount of estimated data.
For FY 2023, the UK government’s GHG Conversion Factors for Company Reporting 2023 (DEFRA factors) were used for fuels and UK electricity. Emissions factors provided by Carbon Footprint Ltd and US EPA were used for operations in other locations globally.
Scope 1 vehicle emissions include Group owned vehicles and those that are controlled by the Group for testing purposes.
The Scope 2 emissions associated with the Greenhouse Gas Protocol ‘market based’ method have been calculated again for FY 2023. In line with the Greenhouse Gas Protocol Guidance, this figure has been calculated using residual-mix emissions factors where available
(Germany and UK). In our other operating regions where residual-mix emissions factors were unavailable, country-specific emissions factors have been used instead (as per the location based method) in line with the Greenhouse Gas Protocol Guidance. Where sites consume
grid electricity backed by REGOs, this has been taken into consideration within the calculations.
FY 2023 business travel data is inclusive of private vehicles used for business purposes, train travel, air travel, car hire and hotel stays. Metering and monitoring improvements continue to be implemented to capture and improve the Company’s data stream.
Increase in 2022 figures due to inclusion of VadoTech data (previously not available for the 2022 Annual Report.
46
AB Dynamics plc Annual Report and Accounts 2023
Strategic reportGovernanceFinancial statements ESG strategy continued
Environmental leadership continued
Water management
Water usage data across the Group continues to be collected this
year so we are able to set a baseline and future targets to reduce
water consumption can be identified and established across the
business. Water is not widely used in the design, manufacturing or
servicing of our products, however, we acknowledge that water is
a scarce resource and careful management of water consumption
is essential to minimise our impact on water availability and quality.
As part of our improved monitoring processes, FY 2023 has seen
an increase in data reporting for water usage. A number of our
subsidiary sites are based in shared or leased premises and water
consumption is included in lease fees and water consumption data
for our businesses is not available.
Group water withdrawal
Freshwater withdrawal (m3)
Intensity ratio (m3 per £m revenue)
2023
1,960
19.44
2022
1,714
20.60
Waste management
All Company waste (both hazardous and non-hazardous) is
managed in a sustainable manner, complying with all relevant
environmental legislation and regulations as they relate to
each location and community we operate in. We follow a waste
management hierarchy of Prevention, Reuse, Recycling, Energy
Recovery and Disposal, to ensure the reduction in waste sent to
landfill and the associated reduction in GHG emissions supports
our carbon neutral ambition.
Our Environmental Management System contains procedures for
waste management and frequent reminders are made to ensure
waste is recycled wherever possible.
In FY 2023, 99% of all waste produced by the Group was non-
hazardous, with 20% being recycled and the remainder being
treated, sent to landfill or used in waste to energy programmes.
With a baseline now calculated, the Group can actively monitor
initiatives to reduce the amount of waste generated across all
operations and to divert waste from landfill.
At a subsidiary level, Anthony Best Dynamics Limited and AB Dynamics Europe GmbH have an ongoing waste reduction target of 5% per
annum and continue to recycle over 60% of waste generated as part of their certified ISO 14001 Environmental Management Systems.
2023 waste management
Tonnes to landfill
Tonnes recycled
Tonnes incinerated
Tonnes treated
Total
Waste management intensity
Intensity ratio
Waste by type
Material type
Unit
Non-hazardous
waste
Hazardous
waste
Metric tonnes
194.16
Metric tonnes
Metric tonnes
Metric tonnes
51.90
10.90
—
Metric tonnes
256.96
—
—
—
1.52
1.52
Unit
Non-hazardous
waste
Tonnes per £m revenue
2.5
Hazardous
waste
0.1
Total
waste
194.16
51.90
10.90
1.52
258.48
Total
waste
2.6
Hazardous
waste
Unit
Non-
hazardous
waste
2023
total waste
2022
total waste
Gases (in containers), paints, adhesives, oils, batteries, accumulators, etc. Metric tonnes
1.52
Paper/cardboard
Other mixed commercial waste
Plastic and plastic packaging
Glass
Metal
Agricultural (garden, horticultural, forestry, etc.)
Wood
Electrical/electronic
Total
Metric tonnes
Metric tonnes
Metric tonnes
Metric tonnes
Metric tonnes
Metric tonnes
Metric tonnes
Metric tonnes
—
—
—
—
—
—
—
—
—
12.72
205
28.45
—
4.98
—
5.60
0.22
1.52
12.72
205
28.45
—
1.74
17.90
13.50
11.90
7.12
4.98
11.18
—
5.6
0.22
7.11
13.64
7.55
1.52
256.97
258.49
91.64
AB Dynamics plc Annual Report and Accounts 2023
47
Strategic reportGovernanceFinancial statements ESG strategy continued
Sustainable products
In line with the UN SDG 9 (Sustainable innovation), our ambition
is to continue to be a pioneer of innovation and support in the
development of the electric vehicle market, through testing of
battery technology and charging infrastructure. ABD Solutions’
core mission is to accelerate the transition to autonomy by
providing retrofit solutions that reuse existing vehicles to
automate vehicle applications, helping our customers achieve
their sustainability targets.
Resource efficiency and product innovation
We integrate sustainability into our product design by considering
key factors such as energy and resource efficiency. Our suite of
products (physical track testing) does not have a high carbon
footprint, and our simulation business (which enables OEMs to
replicate the set-up of a particular vehicle and drive it around
various settings virtually) reduced emissions by taking cars off
the road. By encouraging our customers to use track testing and
simulation we significantly reduce the CO2 emissions compared
to on-road vehicle testing. Wherever possible, we minimise our
raw material use and avoid the use of conflict materials in our
manufacturing processes. We use minimal levels of hazardous
substances in our production process but continue to examine
how we can improve this. We are looking at our product life cycle
management to consider how emissions can be reduced in line
with the Group’s target to achieve carbon neutrality by 2030.
As a Group we have implemented several measures to encourage
resource efficiency across our operations. These include meeting all
energy needs in the UK from renewable sources, water conservation
initiatives, raw material efficiency, waste minimisation initiatives,
including a centralised waste and recycling facility, and resource
recovery projects like our solar panels on two UK facilities. We have
worked closely with our supply chain to review the sustainability risks
associated with procurement and to implement initiatives to reduce
life cycle carbon, through programmes to reduce packaging and
source locally where possible.
We lead through engineering innovation and technology.
Our employees are encouraged to generate new ideas relating to
new products, new processes, major improvements or technology
breakthroughs. We remain passionate about technology and aim
to lead new trends in our market through our Engineering Design
Centre, responsible for innovative products like our Advanced
Driving Simulator.
All our employees undergo rigorous training on product safety
issues and to raise their awareness of their environmental protection
responsibilities. This year we also introduced specific training
workshops on quality control, precautionary testing and product
safety which all relevant staff (approximately 29% of the workforce)
attended, to ensure the highest environmental, quality and safety
standards are maintained.
Responsible sourcing
In order to achieve our sustainability goals, it is vital that we develop,
educate and work closely with our supply chain to uphold the ethical,
human rights and environmental criteria that are at the heart of
our business. We recognise the need for a proactive and engaged
supply chain strategy that meets our own high standards and that
of our stakeholders. Our communications and relationships with
customers, suppliers and advisers are managed within each subsidiary
by senior management, and the Group expects the same high
standards of expertise and business principles to be maintained in
such dealings. Our aim is to ensure that there is consistency across
our international entities, to enable us to monitor compliance. We
have chosen to operate under a centralised, head office-controlled
framework but devolve responsibility for compliance within this
framework to operating divisional or jurisdictional management,
with the aim of global harmonisation around local requirements
and legislation.
Supplier due diligence
Our supply chain is geographically diversified. All suppliers need
to remain compliant with the legal framework in their respective
countries. Before new suppliers are selected they are subject
to a due diligence assessment which involves on-site visits and
checks to determine if they are ‘fit for purpose’. This includes an
assessment of their financial strength, environmental credentials
and quality assurance. All suppliers are required to have a quality
management system in line with ISO 9001 and, in line with these
requirements, are audited by an independent third party annually
and re-accredited every three years. We select suppliers for audit
based on our supply chain risk assessments. Throughout the course
of the year, these audits assess each supplier’s approach to anti-
bribery and corruption, human rights, data protection, modern
slavery and health, safety and environmental issues amongst other
matters. If any risks are identified, the Group works with suppliers
to address them. Suppliers are then monitored in line with our
non-conformance process, for environmental quality and safety
issues, with any corrective actions recorded and monitored.
We intend to work with our suppliers to build mutually beneficial,
long-term partnerships, to ensure measurable, long-term sustainability
improvements throughout our supply chain. In FY 2024 we will
continue to focus on and roll out our supply base using our Company
supplier assurance and management schedule. This encompasses
supplier audits to ensure our supply chain continues to meet our
performance standards and simultaneously delivers on our social
and environmental standards.
Prompt payment
We understand the importance of predictable payments when
operating a business and encourage good practice across the Group.
When entering into new agreements for the supply of goods and/or
services, our subsidiaries are responsible for agreeing appropriate
payment terms. Group companies are encouraged to abide by the
payment terms they have agreed, so long as they are satisfied that
the supplier has provided the goods or services in accordance with
the agreed terms and conditions.
48
AB Dynamics plc Annual Report and Accounts 2023
Strategic reportGovernanceFinancial statements ESG strategy continued
Ethics and compliance
We are committed to ensuring that the behaviours and practices of
our organisation, including those within our supply chains, reflect
our own high ethical standards and compliance with applicable
laws and standards. We strive to conduct business honestly, openly
and with integrity, as this approach will support our long-term
success and sustainability. We hold our leaders accountable for
ensuring their businesses operate according to the strict ethical
standards we expect. We have in place a series of Group policies
forming a global subsidiary governance framework to guide our
actions and those of our employees, suppliers and partners to
ensure good governance and ethical behaviour across our Group.
These policies include Human Rights, Anti-bribery and Corruption,
Modern Slavery, Conflicts of Interest, Competition and Anti-trust.
These policies can be located on our website.
Employees (including part time and contractors)
trained on business ethics policies in 2023
Percentage (%) of employees trained on
the Group’s business ethics policies in the
current fiscal year
1 VadoTech group data not included due to data availability.
2023
2022 1
87%
71%
Human rights and modern slavery
We are committed to respecting human rights in accordance
with international human rights principles, and these are
integral to our business operations. The Group aims to manage
and mitigate the risks associated with potential human rights
breaches and modern slavery and to ensure we have transparency
across our subsidiaries, via the implementation of standardised
policies and methodologies forming part of the Group’s global
subsidiary governance framework. The ESG Committee maintains
responsibility, oversight and compliance with the Group’s human
rights principles with the overall objective of ensuring good
governance, oversight and monitoring of our supply chain and
wider supplier relationships. Local management teams remain
accountable for observing the operational approach set by the
Group, with each manager receiving appropriate briefings on
these requirements and ensuring compliance with local regulatory
requirements, culture and specific business needs. Underpinning
this approach are robust policies and procedures, together with
appropriate training, which give our workforce and other business
partners guidance on breaches of human rights standards (such
as human trafficking and child labour) and modern slavery and the
measures we take to tackle such issues within our organisation
and supply chain. All human rights abuses will be acted upon and
appropriate action will be taken in a timely manner. We continue to
believe that our exposure to the risks of human rights abuses and
modern slavery is low within our business and supply chain, and
we are confident that the policies and procedures that we have in
relation to anti-slavery and human trafficking are in compliance
with the Modern Slavery Act 2015 and our public statement, to
this effect, is available on the Group’s website (www.abdplc.com).
Further, our internal policies in relation to Human Rights and
Modern Slavery are published in English on our website and are
available locally for our workforce in four languages.
Whistleblowing
The Group encourages an environment where honest and open
communication is expected, with employees feeling comfortable
to bring forward any concerns or violations of Group policies.
Whilst we believe we have a robust framework in place and
an embedded commitment to doing the right thing, where
these high standards have not been met, we encourage our
workforce to come forward and speak up. This is embedded
into our Whistleblowing Policy which provides legal protection
for all whistleblowers and an online whistleblowing hotline,
available 24/7 through an independent provider (EQS Group).
Our employees are encouraged to raise any concerns anonymously
via the hotline to an independent Non-Executive Director of the
Group. Our Whistleblowing Policy aims to encourage openness
and will support and safeguard staff who raise genuine concerns
in good faith, with non-retaliation provisions under this policy,
even if they turn out to be mistaken. All reports made through
this tool shall be investigated in line with the Group’s policy.
Such investigations are supervised by the independent Non-
Executive Directors. Six whistleblowing reports were received
and investigated during FY 2023 and resolved without the need
for further action. The majority of cases were dismissed or treated
as a local management matter and the reporting process enhanced
to ensure appropriateness of use going forward.
Anti-bribery and corruption
We prohibit bribery and all forms of fraud and will take legal or
disciplinary action in all cases of actual or attempted fraud across
all operations. We have a Group-wide policy on anti-bribery and
corruption which has been circulated to every member of staff
globally through the Company’s HR portals and QMS systems.
Employees receive online training on anti-bribery and corruption
to improve their understanding of the Group’s requirements and
embed compliance. The policy and training modules are available
in the four key languages spoken across the Group.
Information systems and technology
The Group believes it has robust and secure information technology
(IT) systems with security controls and procedures in place, although
we acknowledge that no IT system can be completely secure. The
Group IT Manager is responsible for the integrity and security of
the IT systems and strategy. The Group has processes in place
for penetration testing, business contingency, data back-up and
recovery, and there are various processes, software and hardware
in place to prevent data security breaches and unauthorised
access to the Group’s systems. These cybersecurity policies and
procedures are reviewed annually. The Group also holds regular
cybersecurity awareness training for staff in the majority of its
operations, to ensure that our employees remain vigilant to
cybersecurity breaches.
Tax transparency
The Group is committed to compliance with all applicable tax laws
and regulations in all areas it operates in or is required to make
filings in. All required tax filings are made accurately and on time
with the relevant authorities. We are committed to a transparent
and open approach to reporting on tax and do not engage in
aggressive tax planning or tax avoidance schemes.
AB Dynamics plc Annual Report and Accounts 2023
49
Strategic reportGovernanceFinancial statements TCFD
Task Force on Climate-related Financial Disclosures
(TCFD) statement
We are not required to comply with the
Task Force on Climate-related Financial
Disclosures (TCFD) reporting requirements
for FY 2023, however, we have commenced
preparations to report in FY 2024.
We acknowledge that the automotive industry is under
intense scrutiny for its climate impact and we support
the TCFD recommendations requiring us to act, prepare
and protect our businesses and to assess and reduce our
greenhouse gas emissions.
Climate-related risks and opportunities will be key
considerations in the strategy and planning of the
Group as we aim to achieve carbon neutrality by 2030
and net zero by 2050 underlining our commitment to
addressing climate change and contributing towards
a sustainable future.
Oversight and responsibility of climate risk:
• The CEO has responsibility for delivering the ESG
strategy of the Group. The CEO is a member of
the ESG Committee and chairs the Carbon Neutral
Working Group (CNWG) (page 42) with oversight
by the ESG Committee.
• The CNWG was set up during FY 2023 and is
driven by the ESG Committee and the Board
in the delivery of the CNWG’s objectives and
the resources required to implement the
TCFD recommendations.
• Audit and Risk Committee – oversees the
risk management framework for the Group
and this will include environmental and
climate related risks.
AB Dynamics plc Board
Board
Committees
Audit and Risk
Committee
ESG Committee
Remuneration
Committee
CEO
Executive Committee
• ESG Committee – oversees the CNWG and drives
the implementation of the ESG strategy.
Senior Leadership Team
Carbon Neutral Working
Group
The following outlines our journey to date and our scope
of planned work for FY 2024.
• Remuneration Committee – ensures that climate
related targets are integrated into remuneration.
Governance Framework
The Board is ultimately responsible and accountable
for ESG governance and strategy and ensuring risks are
managed throughout the Group.
• CNWG – reports to the Executive Committee and
the ESG Committee and recruits Environmental
Champions from all of our global subsidiaries.
• Senior Leadership Team – members of the
Executive Committee and direct reports who will
have an active role in implementing the climate
strategy within their respective areas and ensuring
progress towards carbon neutrality and net zero.
• We have also engaged Auditel to advise and
guide us in preparation for our FY 2024 disclosures.
50
AB Dynamics plc Annual Report and Accounts 2023
Global and
subsidiary
representation
Environmental Champions
Auditel
Strategic reportGovernanceFinancial statements TCFD continued
FY 2024 activities
The opportunities within the automotive industry include
moving towards electrification. The end of new petrol and
diesel car sales by 2030, and all cars be fully zero emissions
capable by 2035 as required by the UK net zero 2050 mandate.
Categories of climate related risks
and opportunities
Developing and applying
a scenario analysis
• Identify and define a range of scenarios, including a 2°C
scenario or lower that will provide a range of potential
future climate states
• Evaluate the potential resiliency of our strategy to the
range of scenarios
• Assess the resiliency of our strategy to climate change
Climate scenario analysis
1
2
3
4
5
Conduct a TCFD gap analysis
Identify the steps to comply and meet
disclosure requirements
Identify the climate risks and opportunities
This will include obtaining information from
automotive manufacturers in assessing the risks
and opportunities that exist for us and the industry
Assess the climate risks and opportunities
Score and prioritise risks and opportunities
Financial impact
Quantify the cost and potential capital impact
Integration
Apply the scenario analysis to climate related
risks and opportunities and integrate into our
climate strategy
Market &
technology
shifts
Reputation
Physical risks
Policy & legal
We will also seek to target alignment with two additional UN SDGs
(see page 33) in our climate strategy.
Clean water and sanitation
Improve water quality by reducing
pollution, reducing untreated waste water
and minimising the release of hazardous
chemicals and materials.
Ensure sustainable consumption
and production patterns
Reduce waste generation by prevention,
reduction, recycling and reusing.
We look forward to sharing our full TCFD report in 2024.
AB Dynamics plc Annual Report and Accounts 2023
51
Strategic reportGovernanceFinancial statements S172(1) statement and stakeholder engagement
Engaging with our stakeholders
1
Customers
2
Industry bodies
3
Investors
AB Dynamics works with the biggest names in the automotive
industry (including original equipment manufacturers (OEMs),
proving grounds and motorsport teams).
Understanding our customers underpins the success of our
business. Regular engagement ensures that the Group continues
to operate with a ‘customer first’ attitude. We see customer
satisfaction as an important aspect of our Group performance
overall. This enables us to identify any changes required to our
services and to deliver continuous improvements.
In the complex and fast-moving automotive area, which is driven
by innovation, data technologies, customer demand and budget
constraints, policymakers and regulators face tremendous challenges
to formulate effective, evidence based and future-proof standards
that improve safety, enhance environmental performance and
serve the public interest. Productive engagement with industry
bodies and trade associations is increasingly necessary and
enables the Group to keep abreast of changes in the industry and
lead our sector to make real improvements in both safety and
environmental performance.
The support of our investors is vital to the long-term performance
and success of the Group.
As an AIM listed company it is important to provide our shareholders
with reliable, timely and transparent information. Our shareholders
are constantly evaluating their portfolios and considering their
exposure in our stock. To maintain a loyal shareholder base, it is
important that we keep them well informed. We provide them
with information to ensure their understanding of the business is
up to date and enable them to make informed decisions.
Aims and objectives for
our stakeholders
• Delivery – on time and on budget
• Safety
• Value
• Relationships
• Quality
• Service and support
How we engage
• Regular contact through
key account managers and
support engineers
• Programme of webinars
• Attendance at industry events
• Customer surveys
Aims and objectives for
our stakeholders
• Safety in the community
• Focus research to improve safety
• Environmental performance
• Global improvement of
industry standards
• Human factors
How we engage
• Members of or engage with
over 18 industry bodies,
including research organisations,
certification and/or standards
committees in the UK, Europe,
the USA, Asia and Australia
• Chair of various committees
related to motorcycle and
passenger car safety and
human factors
• Attendance at industry events
• Speakers at industry events
Outcomes
• High level of engagement across all our customer groups
Outcomes
•
Increased participation at industry events including showcasing the
launches of our new products
Please refer to the activities of the Board on page 70 and to our
ESG report on pages 32 to 49 for more information
52
AB Dynamics plc Annual Report and Accounts 2023
Aims and objectives for
our stakeholders
• Financial performance
• Governance
• People and culture
• ESG initiatives and
environmental management
How we engage
• Annual Report and Accounts
• AGM
• Group website: www.abdplc.com
•
Investor roadshows
• Results presentations
• Stock exchange announcements
•
Investor visits and ad-hoc
meetings and correspondence
throughout the year
• Open days
•
Investor Meet platform for
retail investors
Outcomes
• Approval of all our resolutions at our AGM in 2023
• High engagement on our site visit held at our main UK site
• Positive investor feedback on engagement, accessibility and transparency
• Nominated for Best Investor Communication Award at the AIM Awards 2023
For more information please refer to the activities of the Board on page
70 and to the ESG report on pages 32 to 49
Strategic reportGovernanceFinancial statements S172(1) statement and stakeholder engagement continued
4
Employees
5
Supply chains
6
Communities
With over 400 employees spread across the globe, the
engagement and commitment of our employees are key to the
Group’s resilience and continuing success.
Our external supply chains are an integral part of our business and
effective engagement with our suppliers is an essential element
of our ability to perform.
Our strength is in the products and services we provide through
our people. Therefore, it is important to have a strong culture and
invest time and effort in building diverse, skilled, motivated and
highly trained teams.
Our suppliers provide a range of parts and services. The smooth
functioning of our business depends upon the performance
of those suppliers. Regular engagement ensures that we can
maintain good relationships, and that the business, and its
customers, are not exposed to unnecessary risks.
The Group has long-term links with many of the communities
within which it operates, most notably Bradford on Avon and
the counties of Somerset and Wiltshire (UK), where we are
headquartered and around half of our employees are based.
We see ourselves as part of the communities in which we live
and work. Our active contribution and engagement with those
communities is an important part of who we are and we are
working to improve this engagement in all our locations.
Aims and objectives for
our stakeholders
• Remuneration and reward
• Employee training
and development
• Company reputation
• Health and safety
• Diversity and inclusion
• Employees’ wellbeing
• Talent management
How we engage
• Through sector and business unit
line managers
•
Inductions
• Employee training
• HSE reviews
• Support women in engineering
• Community outreach
• The CEO’s full-year and half-year
presentations on strategy and
Group performance
Aims and objectives for
our stakeholders
• Good working relationships
• Supply chain resilience
• Prompt payment
• Quality and reliability
How we engage
• Provision of Group policies
to suppliers
• Supplier conferences
and workshops
• Supplier due diligence
• Supplier quality assurance
• Ensure prompt payment of
suppliers in accordance with
agreed terms and conditions
Aims and objectives for
our stakeholders
• Support our local communities
• Encourage participation and
diversity within STEM environment
• Encourage participation within our
industry segment
How we engage
• Sponsorship and
charitable donations
• Employee volunteering
• University partnerships
• STEM ambassadors
Outcomes
• Our staff have an average length of service of over four years
Outcomes
• Our subsidiaries are responsible for agreeing prompt payment terms;
Outcomes
• The Group has revised its CSR criteria to allow each employee two
for more information please see page 48
volunteering days a year
• We have sought to strengthen our supplier relationships as a way to
• The revised CSR criteria allow employees to lead engagement in projects
manage the risk to our supply chain, which has included engagement with
some new suppliers
in their communities
Please refer to our ESG report on pages 32 to 49 for more information
For more information please refer to our ESG report on pages 32 to 49
AB Dynamics plc Annual Report and Accounts 2023
53
Strategic reportGovernanceFinancial statements Risk management
How we manage risk
To ensure sustainable delivery of shareholder
value, the Group has implemented a risk
management framework and management
structure that ensure risks are identified,
assessed and mitigated wherever possible.
It is recognised that certain risks are beyond
the control of the Group; however, the Board is
committed to the protection and enhancement
of the assets and reputation of AB Dynamics.
Methodology
The Board has overall responsibility for the management and
maintenance of systems and processes to manage risk and ensure
delivery of our strategic priorities.
Risk management responsibility is set out in the displayed
structure. The Audit and Risk Committee has responsibility for
reviewing the effectiveness of the risk management framework
and internal controls and ensures that the Group is in full compliance
with relevant regulations and laws, supported by the Company
Secretary. Executive Directors have responsibility for overall
management and delivery of the strategy, considering the risk
environment and regular review of the risk management framework.
Senior management within the individual operating companies is
then responsible for identifying and recording risks, implementing
agreed mitigation actions, ensuring compliance with Group
internal controls and ensuring compliance with relevant local
laws and regulations.
Although the Group does not currently have a dedicated internal
auditor, the function of internal control is carried out by Group
Finance, supported by the Company Secretary. Its responsibility
is to monitor compliance and conduct or, where appropriate,
commission specific reviews.
The Board has developed the framework to identify and manage
risks, set the risk appetite of the Group and determine the overall
risk tolerance levels.
A bottom-up risk analysis is undertaken considering detailed
individual risks that fit into five main categories: strategic,
operational, financial, environmental and compliance. This is
combined with a strategic top-down review to ensure that
all appropriate risks are identified, assessed and quantified.
Mitigation plans and actions are then put in place to ensure risks
are reduced to a level that is as low as reasonably practicable.
The risks are assessed both pre- and post-mitigation to identify
the overall risk level based on a combination of probability of
occurrence and the magnitude of potential consequences. For
identified risks that are considered by the Board to be material,
the Board monitors specific actions to mitigate these risks. For
all other risks, the actions are implemented at local management
level and are reviewed regularly by Executive Directors and the
Executive Committee.
54
AB Dynamics plc Annual Report and Accounts 2023
“ Macroeconomic factors have
increased risk in relation to
inflation, foreign exchange and
counterparty risk. To address
this we have implemented
price increases, hedged foreign
exchange transactions where
possible and continue to monitor
credit ratings of counterparties.”
Strategic reportGovernanceFinancial statements Risk management continued
Reporting
Identify internal
and external risks
AB Dynamics’
risk
management
framework
Internal control
• Monitoring of compliance with internal controls and policies
of the Group
• Conducts or commissions specific reviews where necessary
Assess and
quantify risks
Board
• Overall accountability
for corporate
risk management
and strategy
• Determines overall
risk appetite
Audit and Risk Committee
• Reviews effectiveness
of risk management
framework and
internal controls
• Ensures compliance
with relevant regulations
and laws
Executive Directors
• Management of the
Group and delivery
of the strategy
• Monitoring and mitigation
of key risks
• Regular reviews of the risk
management framework
Monitor
effectiveness of
mitigation plans
Manage and
mitigate risks
Operating companies
• Identify and record risks
• Implementation of risk mitigation actions and compliance with
internal controls and policies
• Responsible for compliance with relevant laws and regulations
AB Dynamics plc Annual Report and Accounts 2023
55
Strategic reportGovernanceFinancial statements Principal risks and uncertainties
Managing our risks throughout the Group
Change
Increased
No change
Decreased
Failure to deliver
new products
Dependence on external
routes to market
Acquisition integration
and performance
Supply chain disruption
Description
The availability of key components
has led to increased supply chain
risk. Increased input costs leads
to pressure on margins.
Loss of major customers and
change in customer
procurement processes
Description
Loss of a significant customer
to competition could result in
reduced revenues.
Change in procurement processes
could lead to pricing pressure.
Description
With industry and regulatory
development, the Group needs to
ensure new product development
responds to changes in the market
with new products delivered on time
and to budget.
Mitigation
• Dual sourcing for key components
Mitigation
• We do not have any customers
Mitigation
• Process for identifying new
which represent more than 10%
of Group revenue
• Continued product development
and high levels of customer
service to retain key customers
• Long-term relationships with all
key customers
product opportunities established
• New product development
process implemented
wherever possible provides
mitigation for key suppliers or a
tooling failure
• Maintaining safety stock
levels sufficient to protect against
short-term disruption
• Flexibility in production
scheduling to mitigate
price increases
• Price increases to customers
mitigate impact of inflationary
cost pressures on margins
Description
The Group uses several agents
and resellers to address particular
geographic markets:
• risk of reduced revenues if
agreements end at short notice;
•
limited control of market pricing
with resellers; and
• potential financial consequences
on termination.
Mitigation
• Direct sales model in key
territories with offices in
Germany, the USA and Japan
• The Group will maintain agents
and resellers in other territories
as appropriate
• Risks relating to financial
consequences are understood
and all transitions managed to
minimise potential quantum of
termination payments
Description
The Group has completed several
acquisitions. There is potential
for acquisitions to not deliver the
expected performance, resulting
in a potential financial impact.
Mitigation
• Extensive financial, commercial
and legal due diligence
• Appropriate warranties
and indemnities from sellers
• Use of earnout deal structures
to ensure management
retention and incentivisation
• Recruitment of senior
management to support
acquisitions, including finance
• Close management and
monitoring of business
performance against budget
Strategic risk
Downturn or instability in
major geographic markets
or market sectors
Description
Adverse changes in macroeconomic
conditions in key territories or
specific automotive markets,
including China, or the impact of
other events such as a pandemic
or international conflicts could
potentially reduce or delay demand
for the Group’s products and
services. Inflationary cost pressures
and a recessionary environment
could result in a reduction in orders,
or delay in placement of orders.
Mitigation
• Revenue spread across a
range of geographic markets
• Active safety and autonomous
vehicle technology required
despite automotive downturn
• New strategy and action
plan implemented to enter
adjacent markets
• Constant monitoring of market
trends, drivers and needs to
ensure market leadership
Change
No change
Change
Decreased
Change
No change
Change
No change
Change
No change
Change
No change
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AB Dynamics plc Annual Report and Accounts 2023
Strategic reportGovernanceFinancial statements Principal risks and uncertainties continued
Change
Increased
No change
Decreased
Operational risk
Cybersecurity and
business interruption
Description
Risk of malicious cyber attack on
Group IT systems or significant
failure of IT infrastructure,
particularly with increased
remote working and the
general increase in risk in the
cybersecurity environment.
Competitor actions
Loss of key personnel
Threat of disruptive
technology
Product liability
Failure to manage growth
Description
Competitors may develop new
technologies and/or products
which may restrict revenue growth.
Competitors may establish physical
assets in key locations.
Description
In previous years the Group had
dependence on a small number of
key individuals which could affect
future business growth if they left
the Group.
Description
Unforeseen new and novel
technology displaces the need
for Group products and services.
Simulation potentially reduces the
volume of physical testing products.
Description
Risk that products supplied by
the Group fail in service and result
in a claim under product liability,
particularly during the introduction
of new products.
Description
Rapid growth places demand on the
Group’s management and resources.
Suitable facilities are required to
support the current and forecast
demand of the market. Failure to
ensure adequate capability and
capacity could result in reduced
revenues and/or growth.
Mitigation
• External audit underway
• Cyber Essentials certification
achieved in the UK
•
•
Implementation of a new cloud
based CRM/ERP system
Implementation of enhanced
security around remote access
Mitigation
• Constant product and
technology development
• Monitoring of competitors
and the IP/patents to ensure
no infringement of Group
intellectual property
• Monitoring of competitor product
launches and territory actions
Mitigation
• Expansion of staff headcount and
specific actions around succession
planning and talent management
• Strong staff retention rate
with average length of service
of more than five years with
over two-thirds of employees
recruited in the last three years
• Recruitment and training of
new management
• Broadening of the senior
management team
Mitigation
• Constant horizon scanning of new
technologies
• Engagement with customers
and regulators to ensure
we meet their current and
future requirements
• Established simulation capability
and invested in infrastructure,
systems and processes for growth
to ensure the Group can address
both virtual and real-world testing
Mitigation
• Robust product development
process ensuring products
are safe and fit for purpose
• Monitoring and investigation of
any issues experienced
• Established quality
system to ensure that
manufactured products
meet the design standard
• Suitably qualified and experienced
engineering and technology staff
• Product liability insurance
policy in place
Mitigation
• Strategic priority placed on
•
•
Group’s capability and capacity
Implementation of a
three-year financial model which
determines requirements for
people, facilities and equipment
Implementation of
appropriate IT infrastructure
through comprehensive
CRM/ERP system
• Overseas offices established in
the USA, Germany and Japan to
support customers and product
installed base
Change
Increased
Change
No change
Change
No change
Change
No change
Change
No change
Change
No change
AB Dynamics plc Annual Report and Accounts 2023
57
Strategic reportGovernanceFinancial statements Principal risks and uncertainties continued
Financial risk
Foreign currency
Counterparty risk
Credit risk
Compliance risk
Environmental risk
Intellectual
property/patents
Environmental risk
Dr James Routh
Chief Executive Officer
23 January 2024
Change
Increased
No change
Decreased
Description
The Group operates internationally
and is exposed to both transactional
and translational foreign exchange
risk. The main currencies to which
it is exposed are the euro and US
dollar. Exposure to the Japanese
yen is expected to grow.
The risk is enhanced by
macroeconomic factors including
geopolitical conflicts, potential
disruption in China, inflationary
cost pressures and a recessionary
environment and related currency
volatility in the overseas entities.
Mitigation
• Group finance function
monitors currency forecasts
to review the net exposure on
revenue and costs
• Majority of the Group’s revenues
are contracted in GBP
• Use of foreign currency contracts
to hedge remaining exposure
where appropriate
Description
The Group has exposure to
counterparty risk in relation to cash
deposits. The risk is enhanced by
recent banking failures.
Description
The Group has the potential to
be exposed to bad debt risk from
customers; however, there is no
history of material bad debt in
the business.
Description
The Group utilises its intellectual
property to deliver product and
service revenue. Intellectual
property theft and/or infringement
could adversely affect product sales.
Description
Failure to identify and effectively
manage climate change risks
and opportunities could result in
decreased demand for our products
and services as well as loss of
customer confidence.
Mitigation
• Counterparty credit ratings are
monitored on a regular basis
• Cash deposits are spread
across a number of
different counterparties
Mitigation
• Risk is assessed on a
case-by-case basis and
payment terms established
according to risk
• Advance payments and letters of
credit used where appropriate
Mitigation
• The Group has patented
technology where appropriate
that covers the key sales territories
• Where products are not able to be
protected through patents, design
features and/or encryption is used
to protect the core IP
• Continual review of current patent
and IP status and review of new
products/technology conducted
to ensure IP is protected
Mitigation
• ESG Committee formed in
FY 2021 with responsibility for
the creation of ESG policies and
framework while promoting
sustainable long-term growth
• Continued focus on building the
medium-term plan for achieving
carbon neutrality by 2030
• Current development of a Group
Environmental Policy
Change
Increased
Change
Increased
Change
No change
Change
No change
Change
Increased
58
AB Dynamics plc Annual Report and Accounts 2023
Strategic reportGovernanceFinancial statements Governance
All text to be supplied
Governance
In this section
60
61
62
64
66
67
76
78
80
81
89
92
Chairman’s introduction to corporate governance
Statement of corporate governance
Board of Directors
Executive Committee
Statement of corporate compliance
Statement of corporate governance
Nomination Committee report
Audit and Risk Committee report
ESG Committee report
Remuneration Committee report
Directors’ report
Statement of Directors’ responsibilities
AB Dynamics plc Annual Report and Accounts 2023
59
Strategic reportGovernanceFinancial statements Chairman’s introduction to corporate governance
Good governance – a core value of the Board
Dear shareholders,
I am pleased to introduce our Corporate governance
report for the year ended 31 August 2023.
Board effectiveness and evaluation
Good governance is underpinned by an environment of
constructive challenge and the open sharing of views at
Board level. Maintaining this culture within the Board has
been an important personal responsibility and I was pleased
to see this positively reflected again in the internal Board
performance review.
Growth and scale
It continues to be essential to scale our governance structures to
meet the increasing demands of our Group today and allow for
future growth whether organically or by acquisition. The Board
has maintained a strong focus during the year on the Group’s
short, medium and long-term strategic objectives, including the
integration of our recent acquisitions.
As we welcome the employees of Ansible Motion into our group of
businesses, we are ensuring that they understand our governance
values and best practices as they are integrated into the Group.
These are further steps in the growth of the Group into a
multinational business with 21 legal entities, all of which the Board
has oversight of.
With regulation, risk and responsibilities for directors around the
management of legal entities increasing, we understand that a
strong global subsidiary governance framework enhances our
value and prevents costly financial and reputational damage. We
operate under a centralised, head office-controlled framework
but devolve responsibility for compliance within this framework
to operating divisional management, with the aim of global
harmonisation around local legislation. This is achieved via a
robust business-wide delegation of authority.
Culture and values
The Board recognises its leading role in establishing the culture
and values of the Group and embedding these throughout our
Group. The Group benefits from a very high degree of employee
engagement, measured in our rolling programme of engagement
surveys, and our employees are supported by our HR team,
alongside a multifunctional group of colleagues who represent the
wide range of expertise from our business units and are active in
managing the communication and promotion of our culture and
values. Our core values of customers, people, diversity, innovation,
excellence and responsibility are reflected in our policies and our
business ethics framework. This year, our ESG Committee has
worked on improving our links and involvement with our local
communities, as is detailed further in the ESG Committee report
on pages 40 and 41.
Stakeholders
Consideration of the Group’s full range of stakeholders,
including our people, investors, strategic partners and suppliers,
continues to be an integral part of the Board’s discussions and
decision making. The Section 172(1) statement on pages 52
and 53 describes how the Board took its wider responsibilities
into account, including an overview of the Board’s engagement
activities with each of our key stakeholder groups.
AGM
Our AGM will take place on 28 February 2024. You can read more
about our plans for the AGM later in this report and in the Notice
of the AGM on pages 135 to 139.
Richard Elsy CBE
Non-Executive Chairman
23 January 2024
Richard Elsy CBE
Non-Executive Chairman
60
AB Dynamics plc Annual Report and Accounts 2023
AB Dynamics plc Annual Report and Accounts 2023
Strategic reportGovernanceFinancial statements Statement of corporate governance
“ Good corporate
governance
supports and
encourages
high levels of
professionalism
in the Board.”
This statement of corporate governance is
an explanation of how the Group has applied
the ten principles of the Quoted Companies
Alliance Corporate Governance Code (‘QCA
Code’) throughout the year. The QCA Code and
these standards are integrated into the Group’s
operations and compliance supports the
achievement of our strategic objectives. Whilst
day-to-day operational decisions are managed
by the Chief Executive Officer, certain strategic
decision-making powers and authorities of
the Company are reserved as matters for
the Board.
The Board recognises the value of good
corporate governance and can confirm that
it has complied with the QCA Code for the
period under review, as required by the
AIM Rules.
Board performance review and evaluation
During the year, an internal review of Board performance was
conducted. Further details of the outcome of the report can be
found on page 71.
Summary of compliance with the QCA Code
The Board has reviewed the principles and provisions of the QCA
Code. Following this review, the Board is pleased to confirm that
the Company has complied with the Code for the financial year
ended 31 August 2023.
The QCA Code can be found on the QCA’s website
(www.theqca.com) and further information on compliance
with the Code can be found below.
The Board held eight full meetings through the year ended
31 August 2023, and the Directors’ attendance at those
meetings is set out on page 69.
The Board is committed to the pursuit and maintenance of very
high standards of corporate governance by promoting ethical
and sustainable values and behaviours consistently across the
Group’s businesses. This report, along with the sections detailed
below, aims to provide clear and meaningful explanations
of how the Board and its Committees have discharged their
governance duties and explains how the Group promotes
open and transparent discussions and welcomes constructive
challenge in every aspect of its business.
Continue reading about our Statement of corporate governance
on page 67
AB Dynamics plc Annual Report and Accounts 2023
61
Strategic reportGovernanceFinancial statements Board of Directors
A leadership team creating sustainable shareholder value
Board composition
Length of tenure
Balance of Executive
and independent
Non-Executive Directors
Gender diversity
2 – 4 years
4+ years
3
2
Executive
Non-Executive1
2
3
Male
Female
3
2
1
Chairman was assessed as
independent on appointment.
Collective Board skills
Richard Elsy CBE
Dr James Routh
Sarah Matthews-DeMers
Richard Hickinbotham
Louise Evans
Financial expert
Industry expert
Risk expert
62
AB Dynamics plc Annual Report and Accounts 2023
RC
N
E
IND
RE
E
IND
RE
Richard (Dick) Elsy CBE
Non-Executive Chairman
Dr James Routh
Chief Executive Officer
Appointments:
Joined the Board as Non-Executive Director
on 1 August 2020.
Appointments:
Joined the Group and was appointed to the
Board as an Executive Director on 1 October 2018.
Non-Executive Chairman (assessed as
independent on appointment) and Chairman of
the Nomination Committee from 1 July 2021.
Skills and experience:
Dick is a career veteran from the automotive
industry, with the bulk of his time spent at
Land Rover and then Jaguar, where he was
Engineering Director. He was Chief Executive
of Torotrak plc, and was the founding CEO
of the High Value Manufacturing Catapult,
which he built into Europe’s largest advanced
manufacturing research institution.
In 2020, Dick chaired the Ventilator Challenge
UK Consortium, an extraordinary programme
to repurpose the automotive, motorsport and
aero industries to build thousands of complex
medical devices in a matter of a few weeks in
response to the pandemic crisis.
Number of Board meetings attended:
8 of 8
External appointments:
Dick is Non-Executive Director of AWE and chairs
the Faraday Advisory Board for UKRI. He is a
Fellow of the Royal Academy of Engineering and
an honorary professor at Strathclyde University.
Skills and experience:
James brings significant engineering and
management leadership experience gained
across international businesses. Prior to
joining the Group, James was Group Managing
Director at FTSE 100 listed Diploma PLC for six
years where he delivered a series of successful
international acquisitions. His previous career
involved engineering leadership positions
predominantly in the aerospace and defence
industry, including senior roles at Chemring
Group PLC and Cobham PLC. James holds a PhD
in Engineering and is a Chartered Mechanical
Engineer and Fellow of the Institution of
Mechanical Engineers.
Number of Board meetings attended:
8 of 8
External appointments:
James is Non-Executive Director and Senior
Independent Director at Tracsis plc.
Strategic reportGovernanceFinancial statements Board of Directors continued
A
Audit and Risk Committee
RC
Remuneration Committee
N
E
Nomination Committee
ESG Committee
Committee Chair
£$
Financial expert
IND
Industry expert
RE
Risk expert
£$
IND
RE
A
RC
N
£$
IND
RE
A
RC
N
E
£$
IND
RE
Sarah Matthews-DeMers
Chief Financial Officer
Richard Hickinbotham
Non-Executive Director (Independent)
Louise Evans
Non-Executive Director (Independent)
Appointments:
Joined the Group and was appointed to the
Board as an Executive Director on 4 November 2019.
Appointments:
Joined the Board as a Non-Executive Director
on 9 August 2017.
Appointments:
Joined the Board and appointed Chair of the
Audit and Risk Committee on 6 April 2020.
Skills and experience:
Sarah has extensive experience of financial
management in public company environments,
investor relations and strategic development.
Previous roles include Group Finance Director
of Carclo plc and Director of Strategy at Rotork
plc where she led a wide-reaching strategic
review. Prior to this she was Deputy Group
Finance Director at Avon Rubber plc, being
part of the senior management team during
a period of significant transformation. She
began her career at PwC, working with many
international manufacturing and technology
companies. Sarah is a Chartered Accountant and
Fellow of the ICAEW with a first-class degree in
Accountancy Studies.
Number of Board meetings attended:
8 of 8
External appointments:
Council Member, University of Exeter.
Chair of the Remuneration Committee.
Chair of the ESG Committee.
Skills and experience:
Richard holds a BSc in Mechanical Engineering
from Imperial College and is a Chartered Accountant
with over 30 years’ City experience. He was Head
of Research at Singer Capital Markets and was
previously in research management roles at
Cantor Fitzgerald Europe and Charles Stanley
Securities. He has held several senior positions
at Investec and S G Warburg & Co. (acquired
by UBS).
Number of Board meetings attended:
8 of 8
External appointments:
Richard is a Non-Executive Chair of Directa Plus Plc.
Skills and experience:
A qualified Chartered Accountant, Louise was
previously Group Finance Director of Williams
Grand Prix Holdings plc and Braemar Shipping
Services plc and Non-Executive Director of SCB
Brokers SA.
Number of Board meetings attended:
8 of 8
External appointments:
Louise is a Non-Executive Director and Chair
of the Audit Committee of Gooch & Housego plc
and Non-Executive Director of the International
Foundation for Aids to Navigation.
AB Dynamics plc Annual Report and Accounts 2023
63
Strategic reportGovernanceFinancial statements Executive Committee
A balance of skills
The Executive Committee includes the
Group CEO and CFO as well as the following
business leaders.
“ The Executive Committee
facilitates execution of the
Group’s strategy though
running the day-to-day
operations of the business.”
The Executive Committee (Excom) oversees the delivery
of the Group’s strategy, monitors the operational and
financial performance of the business, allocates resources
across the Group, manages risk and implements the Group’s
governance policies.
The members of the Committee include the Executive Directors,
the President Asia Pacific and North America, the Group Operational
Excellence Director, the Managing Director – Simulation and the
Managing Director – ABD Solutions.
Other individuals may be invited to attend Excom meetings
as required.
During the year, four Excom meetings were held.
Dr James Routh
Chief Executive Officer
Sarah Matthews-DeMers
Chief Financial Officer
See pages 62 to 63 for biographies
64
AB Dynamics plc Annual Report and Accounts 2023
Strategic reportGovernanceFinancial statements Executive Committee continued
Andrew Ng
President Asia Pacific and North America
Tom Willis
Managing Director – AB Dynamics UK
Dan Clark
Managing Director – Simulation
Matthew Price
Managing Director – ABD Solutions
Appointments:
Joined the Group on 1 October 2021 and is a
member of the Group Executive Committee.
Skills and experience:
Andrew brings senior management leadership
experience and significant global commercial
experience. Prior to joining the Group, Andrew
was Group Managing Director – APAC at FTSE
100 listed Diploma plc for four years, Managing
Director – Australia for FTSE 250 listed Fenner
plc for ten years and held International Sales and
Business Development Manager roles at NZ50
listed Skellerup for twelve years. He delivered
successful acquisitions in the APAC region and
has extensive experience in automotive, mining,
mineral processing and oil and gas. Andrew has
a BAS in Materials Science from the University
of Technology, Sydney, and an MBA from
Macquarie University, Sydney, Australia.
Appointments:
Appointed Managing Director - AB Dynamics
UK on 1 November 2023. Originally joined the
Group on 11 July 2022 as Group Operational
Excellence Director and member of the Group
Executive Committee.
Appointments:
Joined the Group as Managing Director of
the simulation division in June 2022 which
comprises the ABD subsidiaries Ansible Motion
Limited and rFpro Limited. Member of the
Group Executive Committee.
Appointments:
Appointed Managing Director - ABD Solutions
on 1 June 2021 and appointed as a member of
the Group Executive Committee in June 2023.
Originally joined AB Dynamics in January 2020
as Engineering Director.
Skills and experience:
Tom brings significant operational and
leadership experience in operations and supply
chain activities across the UK, Europe, North
America and APAC. Prior to joining the Group,
Tom was Programme Director at FTSE 250 listed
Diploma plc for two years, Global Operations
Director for Hallite Seals, a Michelin company,
for three years and Supply Chain Director for
UK and Ireland at CAC Mid 60 listed Rexel for
18 years. He delivered global transformation
projects in moving from an existing operational
state into the next stage of business evolution to
drive improved customer service, improvements
through global sourcing and implementation of
ERP systems, and in bringing to the businesses
new technologies through robotics and software
that had never been seen before.
Skills and experience:
Dan is a successful business leader with a
passion for engineering and technical disciplines.
He has gained significant experience from a
career in highly technical and commercially
demanding environments in aerospace and
defence engineering services and product
development. Dan has held roles in engineering,
technical management, project management,
operations and senior leadership. Prior to joining
AB Dynamics, Dan was the Managing Director
of Stirling Dynamics and Vice President of the
Expleo Group. Dan has a Master’s degree in
mechanical engineering from the University
of Bath and is a Charted Engineer with the
Institution of Mechanical Engineers.
Skills and experience:
Matthew brings extensive international
engineering, management leadership and
operational experience gained across a broad
range of industry sectors. Prior to joining AB
Dynamics Matthew was Head of Aerospace
Aftermarket Services for Atkins, a global
engineering consultancy, where he developed
new revenue streams and delivered a series
of successful international programmes. His
previous career roles included engineering and
programme leadership positions throughout
the UK, the US, Europe and Australia, within the
automotive, telecommunications, aerospace
and defence industries, including senior roles
at Ford, GKN and Airbus. Matthew is Chartered
Aerospace Engineer and Fellow of the Royal
Aeronautical Society.
AB Dynamics plc Annual Report and Accounts 2023
65
Strategic reportGovernanceFinancial statements Statement of corporate compliance
Summary of compliance with the QCA Corporate Governance Code (QCA Code)
Principle 1: Establish a strategy and
business model which promote long-term
value for shareholders.
Principle 2: Seek to understand and meet
shareholder needs and expectations.
Principle 3: Take into account wider
stakeholder and social responsibilities and
their implications for long-term success.
Principle 4: Embed effective risk
management, considering both
opportunities and threats, throughout
the organisation.
Principle 5: Maintain the Board as a
well-functioning, balanced team led by
the Chair.
Principle 6: Ensure that between them
the Directors have necessary up-to-date
experience, skills and capabilities.
Principle 7: Evaluate Board performance
based on clear and relevant objectives,
seeking continuous improvement.
Principle 8: Promote a corporate culture
that is based on ethical values and
behaviours.
Principle 9: Maintain governance
structures and processes that are fit
for purpose and support good decision
making by the Board.
Principle 10: Communicate how the
Company is governed and is performing by
maintaining a dialogue with shareholders
and other relevant stakeholders.
The Group has built on its existing core strategy to diversify the business and enter larger, growth-focused markets. For more details regarding this strategy, please see the Strategic report
on pages 1 to 58 and the Group’s detailed analysis of its compliance with the QCA Code Principle 1 available on the Group’s website.
The Group maintains regular contact with its major shareholders and is committed to communicating openly with shareholders through announcements made via our RNS and presentations
to institutional shareholders, private client brokers and investment analysts. Meetings and site visits are regularly held with existing and prospective investors. For further and more detailed
explanations of how the Group applies Principle 2, see our commentary on the Group’s Section 172(1) responsibilities on pages 52 and 53 and the Statement of corporate governance on
pages 67 to 75.
Social engagement and the Group’s responsibilities to the communities within which we operate is one of the pillars of our ESG strategy. Our duties to our internal and external stakeholders
remain key to our Group’s success. We summarise the Group’s community activities and general corporate social responsibilities on pages 36 to 41.
The Group has implemented a risk management framework and management structure that ensure risks are identified, assessed and mitigated wherever possible. For further and more
detailed explanations of how the Group applies Principle 4, see Principal risks and uncertainties on pages 56 to 58.
The Board is supported by its Committees – Audit and Risk, Nomination, ESG and Remuneration, each of which is chaired by an independent Non-Executive Director with relevant expertise.
The Board and Committees were well attended by all Board members during the year. The Nomination Committee is satisfied that each Director commits the time necessary to fulfil their
roles effectively. For further and more detailed explanations of how the Group applies Principle 5, see the Statement of corporate governance on pages 67 to 75.
The composition of the Board is monitored by the Nomination Committee. The Board is satisfied that the Directors have a blend of skills, experience, knowledge and independence suited to
the Group’s needs and its continuing development. Information on the Directors’ range of skills including details of their technical and/or financial experience and expertise can be found on
pages 62 and 63.
The Board and its Committees review their skills, experience, independence and knowledge to enable the discharge of their duties and responsibilities effectively. This year the Board
conducted an internal Board performance review. For further and more detailed explanations of how the Group applies Principle 7, see our Statement of corporate governance on
pages 67 to 75.
The Board is committed to the pursuit and maintenance of very high standards of corporate governance and the promotion of ethical and sustainable values and behaviours across the
Group’s businesses. For further and more detailed explanations of how the Group applies Principle 8, see our Statement of corporate governance on pages 67 to 75. For more information on
the Group’s vision and values, refer to page 36.
The Group operates under a centralised, head office-controlled framework and devolves responsibility for compliance within this framework to each operating division or jurisdictional
management, with the aim of global harmonisation around local legislation. This is achieved via a robust business-wide delegation of authority. The roles and responsibilities of the Chief
Executive and the Chairman are clearly defined. The Group’s governance framework and the structures of the Board and its Committees are fully detailed within our Statement of corporate
governance on pages 67 to 75.
Engagement with our stakeholders is key to a successful business and is an ongoing part of managing our business. We summarise why and how we engage with our key stakeholders
including our shareholders on pages 52 and 53. How the Board remains informed of this engagement and a statement summarising the effects of its consideration of stakeholder interests
and the details of the principal decisions taken by the Board during the financial year can be found on page 70. For further and more detailed explanations of how the Group maintains a
dialogue with its shareholders and other relevant stakeholders, refer to the Company’s Section 172(1) statement on pages 52 and 53.
Further information on the Group’s compliance with the QCA Code can be found on the Group’s website, www.abdplc.com, on the AIM Rule 26 page.
66
AB Dynamics plc Annual Report and Accounts 2023
Strategic reportGovernanceFinancial statements Statement of corporate governance continued
Governance framework
Board
The Board of Directors (the ‘Board’) is collectively responsible to the Group’s shareholders for the long-term success of the Group. This responsibility includes matters of strategy, performance, resources,
standards of conduct and accountability as well as having regard for our employees, customers and suppliers and the impact of our activities on both the environment and the communities in which we
operate. The Board also has ultimate responsibility for corporate governance, which it discharges either directly or through its Committees. The Board delegates certain responsibilities to the Board’s
Committees outlined below, whilst maintaining an appropriate level of oversight through regular reports from Committee Chairs. The matters reserved for the Board can be found on the Group’s website
at www.abdplc.com/about/corporate-governance.
The Board’s role is to:
• Determine the Group’s overall strategy and direction
• Ensure appropriate adherence to health and safety requirements and promote an appropriate safety culture
• Establish and maintain controls, audit processes and risk management policies to ensure they mitigate identified risks and that the Group operates efficiently
• Approve budgets and review performance relative to those budgets and approve the financial statements
• Approve material agreements and non-recurring projects
• Approve Board appointments
• Review and approve Group-wide remuneration policies and Executive remuneration
• Ensure effective communication with shareholders and other key stakeholders
• Promote a corporate culture based on sound ethical values and behaviours
Committees
Certain matters are delegated to the Board’s four Committees (Nomination, Audit and Risk, Remuneration and ESG), which will consider and manage them in accordance with their terms of reference.
Nomination Committee
• Board and Committee composition
• Succession planning
• Board diversity
Audit and Risk Committee
•
External audit
• Financial reporting
Remuneration Committee
• Remuneration policy
• Remuneration principles
ESG Committee
• Environmental policy
• Diversity and inclusion
• Risk management and internal controls
• Incentive scheme design and setting of targets
• People and talent
• Executive and Non-Executive Board
• Internal audit
• Executive and senior management remuneration
• CSR and community engagement
appointments and strategy
• Ethical, diverse and robust supply chains
Read more on pages 76 and 77
Read more on pages 78 and 79
Read more on pages 81 to 88
Read more on page 80
AB Dynamics plc Annual Report and Accounts 2023
67
Strategic reportGovernanceFinancial statements
Statement of corporate governance continued
Governance framework continued
Division of responsibilities
The Group strives for a clear division of responsibilities and the table below outlines the Directors’ roles and remits. The majority of the Board is comprised of independent Non-Executive Directors
(the Chair being assessed as independent upon appointment). Further information on the Directors’ range of skills including details of their technical and/or financial experience and expertise can be found
on pages 62 and 63.
Chair
•
Responsible for the leadership and overall
effectiveness of the Board and for ensuring
appropriate strategic focus and direction
• Provides leadership to the Board, setting the
agenda, style and tone of Board discussions
to promote constructive debate and
challenge between the Executive and
Non-Executive Directors
• Ensures that there is a good information
flow to the Board, and from the Board to
its key stakeholders
• Supports and advises the Chief Executive
Officer, particularly on the development
of strategy
• Demonstrates ethical leadership and promotes
the highest standards of integrity throughout
the business
• Ensures effective operation of the
Board’s Committees
Chief Executive Officer
• Provides the day-to-day leadership of
Chief Financial Officer
• Oversees the financial delivery and
performance of the Group and provides
insightful financial analysis that informs key
decision making
• Leads investor relations activities and
communication with investors alongside
the Chief Executive Officer
• Works with the Chief Executive Officer to
develop budgets and medium-term plans to
support the agreed strategy
• Supports the Chief Executive Officer in
developing and implementing strategy,
allocating resources across the Group and
managing risk
the Group
• Responsible for developing and defining
strategic proposals for recommendation to
the Board and the subsequent implementation
of the agreed strategy
• Accountable for business performance
• Responsible for developing an organisational
structure, and establishing processes and
systems to ensure that the Group has the
capabilities and resources required to achieve
its plans
• Maintains a dialogue with the Chair on all
important matters and strategic issues facing
the Group
• Ensures that there is an effective framework
of internal controls, including risk management,
covering all business activities
• Oversees the application of Group policies
and governance procedures
• Ensures that the Board is fully informed of all
key matters
• Develops and promotes effective
communication with shareholders and
other key stakeholders
Independent Non-Executive Directors
• Bring external perspectives and insight to the
deliberations of the Board and its Committees
• Provide a range of knowledge and business
experience from different sectors and
undertakings (see their biographies on
pages 62 and 63)
• Assist in the formulation and progression of
the Board’s agreed strategy and monitor the
performance of the Executive management in
the implementation of this strategy
• Constructively challenge management and
decisions taken at Board level
• Oversee the performance of management
in meeting agreed goals
• Support the Chair and Executive Directors
to instil an appropriate culture, values and
behaviours in the boardroom and across
the Group
• Challenge the adequacy and quality of
information received prior to Board meetings
Executive Committee
The Executive Committee comprises the Group’s senior leadership below Board level and assists the Executive Directors in facilitating the execution of the strategy.
68
AB Dynamics plc Annual Report and Accounts 2023
Strategic reportGovernanceFinancial statements Statement of corporate governance continued
Governance framework continued
Board and Committee attendance record
Independence
Board 1 AGM
Strategy
day
Matters reserved for the Board
Matters reserved for the Board include, but are not limited to:
Audit
• Strategy and management, including responsibility for the overall leadership of the Group, setting
and Risk Remuneration Nomination
ESG
the Group’s values and standards, and overview of the Group’s operational management
Member
Executive
Dr James Routh
Sarah Matthews-DeMers
Non-Executive
Richard Elsy CBE
Richard Hickinbotham
Louise Evans
N
N
Y 2
Y
Y
8/8
8/8
8/8
8/8
8/8
Yes
Yes
Yes
Yes
Yes
1/1
1/1
1/1
1/1
1/1
N/A
N/A
N/A
3/3
3/3
N/A
N/A
6/6
6/6
6/6
N/A 4/4
N/A N/A
1/1
4/4
1/1 N/A
1/1
4/4
• Structure and capital, including changes relating to the Group’s capital structure and major changes
to the Group’s corporate structure, including acquisitions and disposals, and changes to the Group’s
management and control structure
• Financial reporting, including the approval of the Annual Report and Accounts, half year report,
trading statements, preliminary announcement for the results and dividend, treasury and
accounting policies
• Internal controls, ensuring that the Group manages risk effectively by approving its risk appetite
and monitoring aggregate risk exposures
1
The table shows attendance at full Board meetings only. Sub-Committees of the Board were convened with the authorisation of
the Board throughout the course of the year for transactional activities.
• Contracts, including approval of all major capital projects and major investments
2 Richard Elsy CBE was considered independent at the time of his appointment as Chairman.
Effectiveness
For the Directors to effectively perform their responsibilities as set out in the matters reserved for
the Board below, the Board meets at least eight times each financial year. The Board and Committees
also meet on an ad-hoc basis when required by business priorities. In addition, the Board attends a
strategy day at the beginning of each calendar year to discuss in depth the Group’s strategic direction.
Details of the Directors’ attendance at scheduled meetings is shown above.
Richard Elsy CBE, Non-Executive Director, was considered independent on his appointment as
Chairman. Louise Evans and Richard Hickinbotham, as Non-Executive Directors, are independent of
the Executives and are free to exercise independence of judgement. Richard Hickinbotham has the
longest tenure of the Non-Executive Directors at just over six years. The Board does not believe any
of our Non-Executives have formed associations with management or others that may compromise
their ability to exercise independent judgement or act in the best interests of the Group. The Board is
satisfied that no conflict of interest exists for any Director.
Time commitments of the Non-Executive Directors
All Non-Executive Directors have been advised of the time required to fulfil their role and remit prior
to their appointment and this requirement is included in their letters of appointment. The Nomination
Committee reviews the time commitments of the Non-Executive Directors on an annual basis and is
satisfied that the Chair and each of the independent Non-Executive Directors can devote sufficient
time to the Group’s business.
• Ensuring satisfactory communication with the Group’s stakeholders, including its shareholders
• Board membership and other appointments, including changes to the structure, size and
composition of the Board, and succession planning for the Board and senior management
• Ensure appropriate adherence to health and safety requirements and promote an appropriate
safety culture
• Promote a corporate culture based on sound ethical values and behaviours
Activities of the Board
The Group’s governance framework is set out on pages 67 to 70. The core activities and calendar of
the Board and its Committees are planned on an annual basis and this framework forms the structure
within which the Board operates.
AB Dynamics plc Annual Report and Accounts 2023
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Strategic reportGovernanceFinancial statements Statement of corporate governance continued
Governance framework continued
Activities of the Board continued
Key considerations
Strategy
Key activities
• Annual strategy day (March 2023) to discuss the future strategic
direction of the Group
• Assessment of the Group’s performance against previously agreed
strategic objectives
• Review of the CEO’s proposals for the strategic future
of the Group
In practice
The Board considered and agreed (in principle) to the CEO’s proposals for the following:
• M&A strategy
• Sales and marketing capability, including development of channels to market
• Leadership requirements, including leadership in operational excellence supported by recruitment activity
• Organisational design and structure review
• Product and technology development
• Enhanced systems and processes to support the Group’s growth
Finance
• Approval of the Group’s budget for the financial year ending
31 August 2024 and three-year plan
• ERP system preparation and implementation activities
• Onboarding of Grant Thornton UK LLP as the Group’s
external auditor
• Integration of Ansible Motion Ltd
The Board debated the risks and benefits of the current dividend policy, including the options available in light of an
economic environment underpinned by rising inflation and interest rates and continued exposure to geo-political
uncertainty. It concluded that the total dividend for the year should be 6.36p.
The Board reviewed the strategy for capital allocation and confirmed the priorities as new products, investment in
ABD Solutions, implementing acquisitions and a progressive dividend policy.
The Board welcomed Grant Thornton UK LLP as the Group’s external auditor following shareholder approval at the
AGM on 11 January 2023.
Risk and
compliance
• Annual review of the Group’s strategic risk register
• Continuation of due diligence on third party suppliers and agents
The Board continues to receive information to assess and mitigate risks associated with ongoing geopolitical
conflicts.
• Review of Group-wide policies
• Review of Group-wide insurance coverage
• Maintenance of the Group’s whistleblowing platform
People
and culture
• Professional Development Programme
• Group CSR criteria review
• Review of current structure of the Group
Governance
• Pursued growth of the Group’s ESG agenda led by the
ESG Committee
• Stakeholder engagement
• Internal Board performance review
The Board was updated by the CEO about the Group’s progress to de-risk its supply chain and improve its
diversification of suppliers of its key components.
The Board approved the new internal control manual for use throughout the Group.
The Board received six whistleblowing issues through its whistleblowing platform. For further details please refer
to page 49.
The Group completed the first year of its career development programme including a Professional Development
Programme for emerging leaders with participants from across the Group’s business units. The Group will continue
with the Professional Development Programme with new participants within the Group.
The Group revised its CSR criteria, underpinned by its corporate values, to ensure that its CSR activities enhance the
links to the Group’s local communities.
The Group’s ESG agenda this year continued its focus on reductions in its CO2 emissions, waste and water usage and
data collection to accurately measure its use of these finite resources. The Group appointed Auditel to assist with its
carbon neutral goals. The Group maintained an MSCI AA rating.
An internal Board performance review was conducted during the year and the Board approved and is implementing
the development points highlighted. Please refer to page 71 for more information.
Focus for 2024 – The Board will focus on succession planning, diversification and ESG initiatives.
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Statement of corporate governance
Board meetings
During the period, the Board convened formally on nine occasions.
The Board retains the services of a Company Secretary and receives
its information on a secure platform, Board Intelligence. The routine
Board and Committee papers are distributed seven days in advance
of the scheduled meetings (a minority of papers may be circulated
nearer to the time of a meeting on an exceptional basis).
Any Director can challenge proposals, with decisions reached after
open discussions. Any Director can ask for a concern to be noted
in the minutes of the meeting which are circulated to all Directors.
Specific actions arising from meetings are agreed by the Board
or relevant Committee and then followed up by management.
The Board is supported by the Audit and Risk, Remuneration,
Nomination and ESG Committees, each of which has access to
information, resources and advice that it deems necessary, at the
Group’s cost, to enable each Committee to discharge its duties.
The Chair also meets separately with Non-Executive Directors,
without Executive Directors or other managers present. Debate
and discussion at Board and Committee meetings are encouraged
to be open, challenging and constructive.
Board composition
As at 31 August 2023, the Board comprised a Non-Executive
Chairman (who was deemed independent upon appointment),
two Executive Directors and two independent Non-Executive
Directors. A biography of each Director in office at the end of
the year is set out on pages 62 and 63.
The composition of the Board is monitored by the Nomination
Committee. The Board remains satisfied that each Director, whether
Executive or Non-Executive, has the necessary time to devote to
their role to effectively discharge their responsibilities and that,
between them, the Directors have a blend of skills, experience,
knowledge and independence suited to the Group’s needs and
its continuing development. The Board is also assured that it
has a suitable balance between independence and knowledge
of the Group to enable it to discharge its duties and responsibilities
effectively. All Directors are encouraged to use their independent
judgement and constructively challenge other Directors
where appropriate.
Board performance review
The Board and its Committees review their skills, experience,
independence and knowledge to enable the discharge of
their duties and responsibilities effectively. An external Board
performance review is conducted every three years in accordance
with the Financial Reporting Council’s Code of Governance
(provision 21).
An internal Board performance review was conducted during
the year, which confirmed an excellent Board culture with good
balance between governance and active support for the
Group’s objectives.
The Group meets the cost of appropriate training for Directors,
the requirement for which is kept under review by the Chairman.
Directors are continually updated on the Group’s businesses and
the matters affecting the markets in which the Group operates.
Risk management and internal controls
The Board is responsible for the Group’s system of internal
controls and for reviewing the effectiveness of that system. It
is designed to manage, rather than eliminate, the risk of failure
to achieve the Group’s strategic objectives and can only provide
reasonable but not absolute assurance against material damage,
deficiency or loss. The control framework includes:
Actions identified in the review for the forthcoming year include
Board presence at the Group’s locations internationally.
• setting and approval of an annual budget;
Powers of Directors
The powers of the Directors are set out in the Group’s Articles
of Association (the Articles). The Board may exercise all powers
conferred on it by the Articles, in accordance with the Companies
Act 2006 and other applicable legislation. The Articles are available
for inspection online at www.abdplc.com and can also be viewed
at the Group’s registered office.
Directors’ inductions, training and development
Following appointment to the Board, all new Directors receive
an induction tailored to their individual requirements. These
inductions cover some or all of the following (depending on
the individual Director’s experience and what is appropriate
for their role):
• Board and governance: including the Board’s calendar;
procedures, including meeting protocols; Committee activities
and terms of reference; and matters reserved for the Board.
• Business introduction: the nature of the Group, its business,
markets and relationships; meetings with the relevant
operational and functional senior management; and overviews
of the business via monthly reports.
• Finance: budget and forecast papers; and analyst and
investor overviews.
• Risk: the Group’s approach to risk management.
• Other: meetings with the Company’s official appointed
advisers including registrar, solicitor, auditor, broker and
nominated adviser (NOMAD).
• regular updates from all subsidiaries to the CEO and CFO;
• monthly business reviews by the CEO and CFO focused on
business performance;
• quarterly reviews by Group finance focused on the quarter-end
balance sheet;
• six-monthly confirmations from local controllers regarding
operation of internal controls, results and financial position
and compliance with bank requirements;
• automated controls and workflows built into the new ERP
system; and
• physical verification of inventory every six months.
The principal risks which the Board has identified this year are set
out in the section on Principal risks and uncertainties on pages 56
to 58 of the Strategic report.
Delegation of authority
The Group has in place defined authorisation levels for
expenditure, the placing of orders and signing authorities.
Each year on behalf of the Board, the Audit and Risk Committee
reviews the effectiveness of these systems. This is achieved
primarily by a comprehensive review of the risks within a business
risk assessment matrix that includes both financial and non-financial
issues with the potential to affect the Group, and from discussions
with the external auditor.
AB Dynamics plc Annual Report and Accounts 2023
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Statement of corporate governance
continued
Anti-corruption
The Group has a policy on anti-bribery and corruption that fully
addresses the requirements of the Bribery Act 2010 and the US
Foreign Corrupt Practices Act 1977. This policy is circulated to
every member of staff globally through the Group’s HR portals
or QMS systems and individuals receive online training on the
core subject matter. To facilitate understanding and compliance,
the policy and training are available in four languages (the key
languages spoken across the Group).
The Group has formalised its due diligence with the use of
the Dow Jones Risk Management tool. Dow Jones Risk and
Compliance is a global provider of regulatory compliance and
risk management solutions; its tool allows the Group to perform
comprehensive due diligence on customers, agents and suppliers
which supports its anti-corruption policies and procedures. This
tool was one of the means by which the Group mitigated its risks
in relation to the ongoing conflict in Ukraine (and associated
restrictions on trade with Russia during the financial year).
Whistleblowing
The Board aims to encourage openness and will support staff who
raise genuine concerns in good faith under this policy, even if they
turn out to be mistaken. The Group retains an independent and
online whistleblowing hotline operated by EQS Group. The hotline
enables employees to raise any concerns anonymously through
a third party tool (EQS) to an independent Director of the Group,
and facilitates communications in all of the core languages of the
Group. All reports made through the hotline are investigated in
line with the Group’s Whistleblowing Policy.
The Board received six whistleblowing reports during the financial
year, the majority of which were deemed to be local management
matters and were resolved without further action. Please refer to
page 49 for further information.
Diversity and equality
The Group is proud of its Board diversity with 40% female
Directors and it remains committed to strengthening its
diversity beyond gender to ethnic diversity, when appropriate
opportunities arise. Diversity across a wide range of criteria
is valued, including skills, knowledge and experience as well
as neurodiversity, religion or beliefs and membership or non-
membership of any trade unions. It is also committed to creating
equality of opportunity where people are appointed on merit, and
without any form of positive or negative discrimination. Whilst
the Nomination Committee reviews the structure, size, diversity,
balance and composition of the Board, the principal objective
of the Nomination Committee is to ensure that all candidates
are suitably qualified and experienced for the role. Additional
information on diversity can be found on pages 36 and 37 in our
ESG strategy section.
Re-election
All Directors are subject to annual re-election by shareholders at
the first Annual General Meeting following their appointment and
annually thereafter.
Liability insurance
Each Director and Officer of the Group is covered by appropriate
Directors’ and Officers’ liability insurance (‘D&O insurance’) at the
Group’s expense in line with market practice.
The D&O insurance provides coverage for the Directors
and Officers for the costs of defending themselves in legal
proceedings taken against them in their capacity as a Director and
in respect of damages that may result from those proceedings.
The insurance does not provide coverage where the Director or
Officer has committed a deliberately fraudulent or deliberately
criminal act.
Professional advice
Each Director is entitled to obtain independent professional
advice at the Company’s expense in furtherance of their duties
as a Director of AB Dynamics plc. In addition, each Committee
is authorised, through its terms of reference, to seek advice
at the Company’s expense. The Board retains the services
of a Company Secretary who is available to all Directors to
provide governance advice and acts as secretary to the Board
and its Committees.
Conflicts of interest
The Group has policies and procedures to appropriately manage
or resolve potential or actual conflicts of interest that may arise in
the business. The policies are available in four languages and apply
to the Company’s Directors and personnel.
All Directors are also subject to a statutory duty under the
Companies Act 2006 (the ‘Companies Act’) to avoid a situation
where they have, or could have, a direct or indirect interest that
conflicts, or possibly could conflict, with the Company’s interests.
Directors of public companies may authorise conflicts and
potential conflicts in accordance with the Companies Act where it
is appropriate to do so and where the Articles of Association (the
‘Articles’) contain a provision to this effect. At each Board meeting,
the Chair enquires if the Directors are aware of any potential or
actual conflicts of interest. It is the Board’s contention that all
authorisation powers are being exercised in accordance with the
Companies Act and the Company’s Articles.
Accountability
The Board is responsible for ensuring that the Annual Report and
Accounts, taken as a whole, presents a clear, fair and balanced
assessment of the Group which provides the information necessary
for shareholders to assess the Group’s performance, strategy and
business model.
The Board receives a detailed report from the Chief Financial
Officer which sets out the key matters that impact or could impact
the Group’s Annual Report and financial statements and highlights
areas of the financial statements where it has been necessary to
rely upon a significant level of subjectivity.
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Board Committees
Audit and Risk Committee
Chaired by Louise Evans
(finance and audit expert)
Nomination Committee
Chaired by Richard Elsy CBE
(industry expert)
Remuneration Committee
Chaired by Richard Hickinbotham
(industry and finance expert)
ESG Committee
Chaired by Louise Evans
(finance and audit expert)
Number of meetings in the year: 3
Number of meetings in the year: 1
Number of meetings in the year: 5
Number of meetings in the year: 4
Role of the Committee
The Audit and Risk Committee is responsible
for ensuring that the financial performance
of the Group is reported and monitored,
and for meeting the auditor and reviewing
the reports from the auditor relating to
accounts and internal control systems.
The Audit and Risk Committee meets
with the external auditor at least once a
year without any Executive Directors being
present. The Committee also confirms the
independence and effectiveness of the
external auditor. The Committee is also
responsible for the review and management
of the Group’s risk management framework.
This year the Committee welcomed
Grant Thornton LLP as the new auditor to
the Group.
Role of the Committee
The Nomination Committee is responsible
for recommendations to the Board for
the appointment of additional Directors
or replacement of current Directors. The
Committee reviews the structure, size
and composition of the Board and its
Committees and also considers succession
planning for the Board and the Executive
Committee. The Committee is also responsible
for the annual Board performance review
and makes recommendations to the Board in
respect of development areas to continuously
improve the effectiveness of the Board
and its Committees.
Role of the Committee
The Remuneration Committee reviews
the performance of the Executive
Directors and sets and reviews the scale
and structure of their remuneration and
the terms of their service agreements
with due regard to the interests of
the shareholders. In determining the
remuneration of Executive Directors, the
Remuneration Committee seeks to enable
the Group to attract and retain Executives
of high calibre. No Director is permitted
to participate in discussions or decisions
concerning his or her own remuneration.
The Remuneration Committee meets as and
when necessary. This year the Remuneration
Committee continued to be advised
by FIT Remuneration Consultants. The
Committee reviewed the Group’s Executive
Remuneration Policy, oversaw the award of
Executive bonuses (and the allocation of a
percentage of these bonuses to be awarded
as shares), and authorised the award of an
LTIP to the Executive and senior leadership
of the organisation. The Executive LTIP is
subject to malus and clawback provisions.
Role of the Committee
The aim of the Committee is to further the
sustainability of the Group, promote the
continuous improvement of the Group’s
ESG management and performance and
promote and enhance the Group’s ESG
work to ensure it receives due attention
and acknowledgement, enabling the Group
to become an ESG leader in our selected
industries. This year, the ESG Committee
appointed Auditel, a leading cost,
procurement and carbon solutions company,
to assist with our carbon neutral journey.
The Board also has access to all relevant
information and reviews other periodic
management information and RNS
announcements. The draft Annual Report
and Accounts is circulated to each member
of the Board in sufficient time to allow
challenge of the disclosures where necessary.
The Statement of Directors’ responsibilities
is set out on page 92 (within the
Directors’ report).
AB Dynamics plc Annual Report and Accounts 2023
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Stakeholder engagement
Consideration of all our stakeholders
See our report on Section 172(1) stakeholder engagement on pages 52 and 53 for details of how the Group engages with its stakeholders.
Our stakeholders
Customers
Industry bodies
How the Board and Committees are kept informed
• The Board reviews the Group’s engagement with significant customers and regularly discusses the contractual requirements of the larger or more complex contracts
• The ESG Committee receives information regarding industry bodies with whom our subsidiaries are engaged. This year, the Committee intends to formalise this review to be
able to give further direction to the business regarding with whom they should engage and at what level
Investors
• The CEO and CFO engage with major shareholders and potential investors directly and indirectly throughout the year, and provide regular and detailed feedback to the Board
after each consultation
• The Company’s Executive and Non-Executive Directors are given regular updates as to the views of institutional shareholders and changes to significant shareholdings
through research carried out quarterly by the Group’s broker and adviser
• The Company’s AGM is an opportunity for all shareholders to meet and question the Directors. Please refer to the Notice of the AGM 2024 on pages 135 to 139
• The Board receives feedback from investors after the full and half-year results announcements from the Executive team
Employees
• The ESG Committee receives updates from Human Resources regarding employee engagement
• The results from any employee engagement surveys are shared with the Board
Supply chains
Communities
• The Chairman and Non-Executive Directors have engaged directly with employees at several levels of seniority providing an opportunity to receive direct feedback
• The Board receives reports from the businesses to update on performance of major suppliers, highlighting risks (and their proposed mitigations)
•
The Company’s engagement with the communities is reviewed annually by the ESG Committee
• CSR criteria reviewed annually by the ESG Committee
• The Board receives updates on CSR initiatives
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Stakeholder engagement continued
Consideration of all our stakeholders continued
We consider all stakeholders when formulating the Group’s strategy and business model. More information on how stakeholder interests have influenced the Board’s decision making this year is
included below.
Key decisions and discussions
CSR criteria review
Capital allocation
Growth of an ESG agenda led
by an ESG Committee
Enhanced maternity and
paternity for eligible employees
Stakeholders
• Employees
• Customers
• Society
• Shareholders
• Employees
• Customers
• Society
• Society
• Customers
• Employees
• Shareholders
• Employees
How the Board considered stakeholders during the year
Led by the ESG Committee, the Group’s HR team and the emerging leaders from across the
business revised and updated the Group’s CSR criteria to strengthen and deepen the Group’s
relationships with the communities it serves. The Group Employee Volunteering Policy was
introduced for all employees to take up two paid volunteering days p.a.
During the year, the Group acquired Ansible Motion Ltd. An acquisition of this type impacts
on a number of our stakeholders. The strengthening of our simulation business is seen
as beneficial to our shareholders as we increase our market presence. We welcomed new
employees to our Group and offer our existing employees the opportunity to exchange best
practices with Ansible Motion Ltd. Our range of simulation products has expanded, which
offers our customers more choice from our Group. The Board also considered the priorities
for capital allocation and agreed that these should remain unchanged, being organic
investment in the core business, investment in ABD Solutions, acquisitions and dividends.
The ESG Committee has continued to progress the Group’s ESG agenda. The ESG Committee
has continued its focus on reductions in our CO2 emissions, waste and water usage and data
collection to accurately measure our use of resources. The newly formed Carbon Neutral
Working Group is responsible for the Group’s initiative towards carbon neutrality. The
Group maintained an MSCI AA rating in the financial year ended 31 August 2023. For more
information, please refer to our ESG report on pages 32 to 49.
The Maternity Policy and Paternity Policy were updated to provide enhanced paid leave for
employees who had been in service for over one year.
Annual Report sections
For more information on the
Group’s CSR criteria, refer to
page 40 of the ESG report
See page 80 for more
information regarding the
activities of the ESG Committee
AB Dynamics plc Annual Report and Accounts 2023
75
Strategic reportGovernanceFinancial statements Nomination Committee report
Maintaining a balance of skills and experience
Dear shareholders,
I am pleased to present the Nomination Committee’s report for
the year ended 31 August 2023.
Membership of the Committee
The Nomination Committee’s key role is to ensure that the
Board has the appropriate skills, knowledge and experience to
operate effectively and deliver the Group’s strategy. There were
no changes in the membership of the Committee during the last
twelve months and all members are considered to be independent
Non-Executive Directors. I chair the Committee but will not do so
where the Committee is dealing with my own re-appointment or
my replacement as Chairman of the Board. The Company Secretary
acts as secretary to the Committee. Details of attendance of
members of the Committee at the one meeting held during the
year are shown on page 69.
Meetings of the Committee are attended, at the invitation of the
Chairman, by the Chief Executive Officer and the Chief Financial
Officer when considered appropriate. Members of the Committee
do not participate in any discussions relating to their own
appointment or replacement.
Responsibilities
The Committee’s key responsibilities are:
• to review the size, structure, composition and independence
of the Board and its Committees;
• to make recommendations to the Board for the appointment
of new Executive and Non-Executive Directors and their
re-appointment following retirement by rotation;
• to manage the search for and selection of suitable candidates
for the appointment or replacement of Directors;
• to consider succession planning for all Group Directors taking
into account the challenges and opportunities facing the Group;
• to keep under review the time commitment of Non-Executive
Directors and external appointments of Board members; and
• to implement, review and respond to the results of Board
performance review.
The Committee remains focused on ensuring the Group benefits
from strong leadership and that the Board continues to operate
in an open and transparent manner. In considering changes to the
Board and its Committees, the Nomination Committee is focused
on the recruitment of the best available talent based on merit and
assessed against a set of objective criteria of skills, knowledge and
experience. Diversity and gender inclusiveness span the whole
Group and are important and enduring considerations in the
search for and selection of new Board members.
Meetings
1
Nomination Committee members
• Richard Elsy CBE (Chair)
• Richard Hickinbotham
• Louise Evans
Key activities for the year
• Internal Board performance review
• Succession planning was reviewed and discussed during
the year
• The composition of the Board and its Committees was
reviewed and considered appropriate
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Strategic reportGovernanceFinancial statements Nomination Committee report continued
Equality, diversity and inclusion
The Committee recognises the importance of equality, diversity
and inclusion to the effective performance of the Board, and to
our wider business operations. We are committed to promoting
diversity across the Group in all forms, including diversity of age,
sex, gender identity, gender reassignment, sexual orientation,
marital status, nationality, ethnicity, geography, social and
cultural background, disability, neurodiversity, religion or beliefs,
or membership or non-membership of any trade unions.
The Committee is cognisant of the voluntary targets set out in
the Hampton-Alexander Review that at least 33% of Board and
Executive Committee members be female. We have met this
target from a Board perspective and we continue to aspire to
further improve female representation across the broader senior
leadership team over the next few years. The Committee will also
have regard to the recommendations set out in the Parker Review
on ethnic diversity when recommending future appointments to
the Board.
Succession planning
The Committee is responsible for promoting effective succession
planning for the Board and the Executive Committee, to ensure that
the leadership of the business remains aligned to the Group’s strategy.
The Committee reviewed the succession plan for individuals in
key leadership roles at Group level. The Committee is satisfied
that an appropriate succession plan is in place for the Board and
key members of the Executive Committee, including emergency
replacements over the short term. Over the longer term, the
Committee will continue further work to ensure appropriate
appointments are made when current tenures are approaching and
as the organisation grows and evolves. These will be considered on
a case-by-case basis, including internal candidates where available
or external recruitment where deemed more appropriate.
The Directors will guard against any complacency to ensure the
Board continues to operate in an open and transparent manner
supported by high-quality debate and constructive challenge.
Richard Elsy CBE
Nomination Committee Chair
23 January 2024
Board composition
The Committee regularly reviews the composition and balance
of the Board and its Committees, and considers Non-Executive
Directors’ independence, whether the balance between Non-Executive
and Executive Directors remains appropriate, and whether the
Board has the requisite skills and experience to oversee the
delivery of the agreed strategy for the Group.
The Committee remains comfortable with the balance of two
Executive and three Non-Executive Directors but will continue
to keep this under review and will consider the appointment
of additional Directors at an appropriate time having regard
to the growing scale and complexity of the Group’s activities
and the collective skills, knowledge and experience available
to the business.
Board performance review
The skills and experience of Board members are set out in their
biographies on pages 62 and 63 of this Annual Report.
An external Board evaluation is conducted every three years
in accordance with the Financial Reporting Council’s Code of
Governance. The Board undertook an external Board evaluation
during the last financial year. During the current year, an internal
Board performance review was carried out using a questionnaire
which focused on the composition of the Board, its scope of
duties, the overall performance of the Board in discharging
these duties and Group dynamics.
The review was very positive with clear evidence of a collaborative
Board which encourages constructive challenge and provides good
support for the Executives. The improvements to Board processes
following last year’s external review have shown their benefits,
in particular the quality of management information which has
fostered excellent discussion and decision making.
In the spirit of continuous improvement, the review highlighted
the opportunity for the Board to be more visible at the Group’s
many locations including internationally. We have taken action on
this already and seen benefits of greater Board awareness and
employee engagement.
AB Dynamics plc Annual Report and Accounts 2023
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Strategic reportGovernanceFinancial statements Audit and Risk Committee report
Monitoring all aspects of financial reporting and risk
Dear shareholders,
I am pleased to present my report as Chair of the Audit and
Risk Committee.
The Audit and Risk Committee continues to play a very important
role in the governance of the Group’s financial affairs, both through
monitoring the integrity of the Group’s financial reporting and
reviewing material financial reporting judgements. During the
early part of the financial year, the Committee was focused on
matters relating to the 2022 financial statements, which were
covered in detail in last year’s report. This report therefore focuses
on the Committee’s activities in relation to the 2023 half-year
and full-year results, and the external and internal audit activity
during 2023.
Membership of the Audit and Risk Committee
The Audit and Risk Committee has been established by the Board
and is responsible for monitoring the integrity of the Group’s
financial statements and the effectiveness of the internal and
external audit process. Both members of the Committee are
independent Non-Executive Directors, and each brings a broad
range of financial and business expertise. I have previously served
as the Finance Director of public companies and currently serve
as an Audit Committee Chair on an additional listed company.
Therefore, I possess recent and relevant financial experience.
The Board considers that the Committee members possess an
appropriate level of independence and offer a depth of financial
and commercial experience across various industries. The qualifications
and experience of the members of the Committee can be found on
pages 62 and 63.
Operation of the Committee
Meetings of the Committee are attended, at the invitation of the
Chair, by the external auditor, the Chair of the Board, the Chief
Executive Officer, the Chief Financial Officer and representatives
of the Group finance function. The Committee meets with the
external auditor at least once per year without the Executive
Directors being present. The Company Secretary acts as secretary
to the Committee. A verbal report on key issues discussed by
the Committee is provided to the Board after every meeting.
The Chair of the Committee meets regularly with both the Chief
Financial Officer and the external audit lead partner outside of
scheduled meetings.
The Committee is authorised to obtain any external legal or other
professional advice it requires at the Group’s expense.
The Committee relies on regular reports from the Executive Directors,
the wider management team, and the external auditor in order
to discharge its responsibilities. The Committee is satisfied that it
received timely, sufficient and reliable information to enable it to
fulfil its obligations during the year.
Audit and Risk Committee activities
The Committee’s responsibilities are set out in its terms of
reference which are available on the Group’s website. The
Committee reviews its terms of reference annually and
recommends to the Board any changes required as a result
of its review.
The key roles and responsibilities of the Committee are as follows:
• to review the Group’s risk management framework, assist
the Board in conducting a robust assessment of the
Group’s principal risks and ensure adherence to policies and
effectiveness of mitigating actions;
• to review the published half year and annual financial reports
and advise the Board on whether such information represents
a fair, balanced and understandable assessment of the Group’s
position and prospects; monitor compliance with relevant
statutory reporting requirements; review and consider any
changes in accounting standards; and consider the suitability
of, and any changes to, accounting policies used by the Group,
including the use of estimates and judgements;
Meetings
3
Audit and Risk Committee members
• Louise Evans (Chair)
• Richard Hickinbotham
Key activities for the year
• Approval of the 2023 Annual Report and Accounts and
2023 half year report
• Onboarding Grant Thornton UK LLP as external auditor
• Review of the Group’s risk and internal control framework
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Audit and Risk Committee activities continued
• to manage the appointment of the Group’s external auditor,
agreeing the nature and scope of the external audit as well as the
terms of remuneration, and assess the effectiveness of the audit
and auditor independence, including approval of any non-audit
services undertaken together with the level of non-audit fees;
two customers to reflect revenue recognition at a point in time
rather than over time. In relation to over time recognition, the
Group has established processes in relation to estimating the
stage of completion, milestones and expected profitability of
the contracts. The Committee reviewed the judgements made
and was satisfied that they are appropriate.
• to review the internal control environment and consider the
need for an internal audit function;
• to review the adequacy of the Group’s procedures for
employees to report wrongdoing or raise concerns and review
the systems in place to detect and prevent bribery, fraud and
money laundering; and
• to monitor compliance with the UK corporate governance
guidelines contained in the QCA Code in respect of audit
and risk committees.
Review of financial statements
The Committee monitors the integrity of the Group’s financial
statements and has reviewed the presentation and content of
the Group’s interim and preliminary results announcements and
the Annual Report. It considered whether the Annual Report was
fair, balanced and understandable, as well as the appropriateness
and disclosure of accounting policies, key judgements and key
estimates. As part of this review, it considered matters raised by
the CFO together with reports presented by the external auditor
summarising the findings of its annual audit.
The significant accounting judgements considered for the year
ended 31 August 2023 were:
• Review of the valuation and recoverability of goodwill and
other intangible assets: the Committee considered the carrying
value of goodwill and intangible assets in relation to Ansible
Motion, VadoTech, rFpro and DRI against the latest forecasts
for the businesses concerned and the future strategic plan for
the Group. The Committee was satisfied that the valuation is
appropriate and that no impairment is required.
• Review of revenue recognition on long-term contracts:
judgement is required on a contract by contract basis to
determine whether revenue from contracts with customers
for large capital equipment is recognised over time, depending
on whether the Group has an enforceable right to payment
for work completed to date. Following challenge by the
Group’s new auditor, Grant Thornton and in light of evolving
interpretation of the accounting standard on revenue, a prior
year adjustment has been made in relation to contracts with
• Review of inventory provisions: the Committee considered
the level of the inventory provisions and was satisfied that the
valuation of inventory is appropriate.
• Review of the going concern assumption: the Group has
substantial cash resources and a £15m undrawn revolving credit
facility at year end. In the current environment, particular
emphasis was placed on the review of the going concern
assessment, particularly with regard to the impact of the
inflationary cost pressures and macro economic environment.
• The Committee reviewed the adequacy of the Group’s financial
resources to ensure there is sufficient headroom to enable
the Group to continue trading for the foreseeable future. The
Group’s future funding requirements were also considered.
Based on its review of the Group’s forecasts and discussions
with the external auditor, the Committee recommended to
the Board the adoption of the going concern basis for the
preparation of the interim and full year results.
The Committee reviewed the form and content of the 2023
Annual Report and confirmed to the Board that, taken as a
whole, the Annual Report is fair, balanced and understandable.
The Committee also concluded that the Annual Report provides
the information necessary to assess the Group’s position and
performance, business model and strategy.
External audit
As indicated in last year’s report, the Committee ran a tender
process during 2022 for the appointment of a new external auditor.
Grant Thornton UK LLP was appointed as external auditor at the
2023 AGM, completed the audit for the year ended 31 August 2023
and provided the Independent auditor’s report on pages 94 to 102.
The Audit and Risk Committee reviewed the audit plan including scope
and materiality thresholds. It also considered the independence and
objectivity of the external auditor, and reviewed the effectiveness
of the audit process through inviting feedback from people involved
with the external auditor’s work across the business, and additional
meetings between the Chair of the Committee and the audit partner.
The Committee received confirmation from the auditor that it had
complied with independence rules and with the Ethical Standards
for Auditors. Having reviewed the audit plan, audit findings report
and enquiries of management, the Committee concluded that
audit effectiveness was satisfactory.
The Committee also reviewed the nature, extent, impact on
objectivity and cost of non-audit services provided by the auditor.
During the year, Grant Thornton provided no non-audit services.
The Committee concluded that the external auditor was
independent during the financial year.
The auditor independence policy, which was reviewed by the
Committee during the year, prohibits the provision of certain
non-audit services by the external auditor, in line with regulatory
requirements and UK ethical guidance. It requires the Committee’s
prior approval of any individual non-audit services with a fee above
£25,000, or £50,000 in aggregate in any financial year.
Risk and internal control framework
During the year, the Committee reviewed the Group’s risk,
compliance and internal control framework.
This included:
• reviewing and updating the Group’s delegation of authority
framework, in order to ensure appropriate controls are in
place for the approval of certain matters and actions relating
to expenditure, contractual exposure and other potential
liability for the Group;
• reviewing the effectiveness of the Group’s internal control
environment and how this has been strengthened through the
publication of the new internal control manual and the design
and implementation of the new ERP system;
• reviewing the provision of internal oversight and the
development of internal audit reviews;
• reviewing the ongoing development of the Group’s risk
management framework, including assessing the Group’s
emerging and principal risks and mitigating actions, more
information on which can be found on pages 56 to 58; and
• reviewing the Group’s insurance coverage.
Louise Evans
Audit and Risk Committee Chair
23 January 2024
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Embedding sustainability across our business
Dear shareholders,
I am delighted to present my third report as Chair of our
ESG Committee.
ESG is an intrinsic part of our core purpose to accelerate our
customers’ drive towards net zero emissions and to improve
road safety and the automation of vehicle applications through
leadership and innovation in engineering and technology.
The ESG Committee has continued to set the overall ESG strategy
for the Group and provide Board-level oversight of the various ESG
activities which are embedded throughout our business.
Role and activities
The role of the Committee includes:
• promoting the Group’s contribution to road safety and the
associated reduction in road accidents and fatalities;
• promoting the Group’s sustainability objectives by assisting
in the roll-out of electric vehicles and other lower carbon
transport technologies;
• promoting the Group’s Equality, Diversity and Inclusion and
Social Mobility Programme; and
• reviewing the Group’s ESG policies, programmes, targets
and initiatives.
Employee health, safety and wellbeing continues to be of
paramount importance. The Group was accredited with the
ISO 45001 Occupational Health and Safety Management System
certification for its UK and Germany operations. This involved a
rigorous third party audit from a leading certification body and
the accreditation reinforces our health and safety policy and
demonstrates our commitment to employee safety.
The Carbon Neutral Working Group was newly formed and
comprised of representatives from the Group’s subsidiaries who
will spearhead a comprehensive programme to achieve carbon
neutrality throughout all the businesses in the Group by 2030.
The Committee recognises the significance of diversity and
inclusion and social mobility and supporting future leaders.
The Group’s Equality, Diversity and Inclusion and Social Mobility
Programme was launched during the year and activities have
included improving our systems and processes to enable
data generation, identifying and supporting apprenticeship
opportunities and participation in the Inclusive Leadership
Programme with the Royal Academy of Engineering.
Looking forward
In the coming year, we plan to continue with the implementation
of our strategy and refine our ESG performance delivery.
Activities during the year
The Committee met four times during the year to develop the ESG
strategy and bring together the current activities under coherent
policies and procedures.
Louise Evans
ESG Committee Chair
23 January 2024
We have set our environmental goal to be carbon neutral by 2030
and are already making good progress against this objective.
We appointed Auditel, a leading carbon solutions company, to assist
us in reducing our carbon emissions and our related costs. Achieving
credible, trustworthy and substantiated environmental claims is key
to our aim for verified PAS 2026 carbon neutral certification.
“ We are committed to embedding
ESG principles throughout
everything we do.”
Meetings
4
ESG Committee members
• Louise Evans (Chair)
• Richard Elsy CBE
• James Routh
Key activities for the year
•
Promoting the Group’s contribution to road safety and the
associated reduction in road accidents and fatalities
• Promoting the Group’s sustainability objectives by assisting
in the roll-out of electric vehicles and other lower carbon
transport technologies
• Overseeing the growth of the Group’s ESG strategy
• Reviewing the Group’s ESG policies, programmes,
targets and initiatives
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Strategic reportGovernanceFinancial statements Remuneration Committee report
Our remuneration policy aligns to the interests of our shareholders
Meetings
5
Remuneration Committee members
• Richard Hickinbotham (Chair)
• Richard Elsy CBE
• Louise Evans
Key activities for the year
During the year, the Committee considered:
• Salary reviews for the Executive Directors and
senior management
• The 2023 annual bonus plan outturn
• Approval of the 2024 annual bonus plan financial targets
and personal objectives for the Executive Directors
• Approval of 2023 LTIP awards and performance conditions
• Review of the Directors’ remuneration report
Dear shareholders,
Foreword
I am pleased to present the Directors’ remuneration report
for the year ended 31 August 2023. As a Group listed on the
Alternative Investment Market (AIM), we are required to comply
with AIM Rule 19 in respect of remuneration disclosures. However,
the Committee has chosen to provide additional disclosures
in line with AIM best practice to enable shareholders to better
understand and consider our remuneration arrangements.
The report is divided into three sections, being:
• my annual report, which summarises the Committee and its
work, remuneration outcomes in respect of the year just ended
and how the remuneration policy will be operated for the
forthcoming financial year;
• the Remuneration policy report, which summarises the Group’s
remuneration policy; and
• the annual report on remuneration, which discloses how the
remuneration policy was implemented in the year ended
31 August 2023 in detail.
Consistent with AIM best practice, this Remuneration Committee
report will be put to an advisory vote at the AGM in January 2024.
Remuneration policy
The Committee is conscious of the need to demonstrate good
governance. Whilst we recognise our status as an AIM-quoted
company, the Committee has adopted remuneration structures
which reflect good practice. In particular, I would highlight the following:
• the annual bonus for Executive Directors is based on delivering
against key financial and strategic performance metrics which
are aligned to our business strategy;
• 20% of any bonus earned is deferred into shares for a period
of three years;
• awards made under the long-term incentive plan (LTIP) vest
based on sliding scale, three-year performance metrics
measured over a three-year performance period with a further
two-year holding period;
• LTIP awards are subject to malus and clawback provisions; and
• shareholding guidelines operate for the Executive Directors.
In addition, the Remuneration Committee will continue to keep
abreast of corporate governance and regulatory developments to
ensure the continued application of best practice and transparency.
Performance outcomes
The Group delivered a very strong set of financial results during
the year, with record levels of revenue, operational profit and cash
generation, despite the headwinds of global inflation and supply
chain constraints. Revenue increased by 21% to £100.8m while
adjusted operating profit grew by 21% to £16.6m.
Further developments against the Group’s strategic priorities
included the acquisition and integration of Ansible Motion,
the launch of several new products, and delivering on our
diversification plans through ABD Solutions.
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Implementation of the policy for the year ended
31 August 2023
In respect of implementing the remuneration policy for the year
ended 31 August 2023:
Implementation of the policy for the year ending
31 August 2024
In respect of implementing the remuneration policy for the year
ending 31 August 2024:
• As detailed in last year’s Directors’ remuneration report,
• Executive Director base salary levels will be increased from
Executive Director base salary levels were increased in line
with the general workforce from 1 January 2023.
1 January 2024 in line with the general workforce.
• Pension provision will continue to be aligned to the Group’s UK
• Pension provision continued to be aligned to the Company’s
workforce at 10% of salary.
“ Our remuneration
policy accords
with the long-term
interests of our
shareholders.”
UK workforce at 10% of salary.
• As a result of the Company’s performance against the financial
and strategic/operational performance targets, the annual
bonus paid out at 88% of the maximum for both the CEO and
CFO. 20% of the bonus award will be deferred into shares for
three years. Details of the performance against the targets are
set out in the annual report on remuneration.
• LTIP awards were granted on 4 January 2023 over shares equal
to 125% of salary for the CEO and CFO. Details of the number of
shares awarded and the performance targets are set out in the
annual report on remuneration.
• In relation to the LTIP awards granted in January 2020, threshold
EPS and total shareholder return targets were not met and the
award lapsed in full in January 2023.
• In relation to the awards granted in December 2020, the EPS
target was met and this portion (50%) of the award will vest in
full. The remaining portion relating to relative TSR performance
will be in determined in December 2023.
• Annual bonus will continue to be capped at 125% of salary.
Performance metrics will be based on adjusted EBIT (40%),
order intake (10%), cash conversion (10%), operating margin
(10%), strategic (5%), organisation/operations (15%), product
development (5%), and ESG (5%).
• LTIP awards will be granted over shares equal to no more than
125% of salary with vesting based on sliding scale earnings
per share, relative total shareholder return and three-year
cash based targets. The targets for the next LTIP award,
currently envisaged to be granted in January 2024, will be set
out in an RNS to be announced to the market following their
consideration by the Committee.
The Committee continues to welcome feedback from shareholders
and I hope that we receive your support in future remuneration
related votes at our forthcoming AGM.
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Remuneration at a glance
This section provides an overview of our remuneration policy and outcomes for the year.
Strategic alignment of remuneration with FY 2023 KPIs
Annual bonus
Long-term
incentive plan
Remuneration policy and FY 2023 outturn
James Routh
Actual
Minimum
On target
Maximum
£404k
£404k
£404k
£404k
£403k
£229k
£229k
£458k
£458k
Sarah Matthews-DeMers
Actual
Minimum
On target
Maximum
£303k
£303k
£302k
£303k
£172k
£172k
£303k
£343k
£343k
1. Financial
2. Product development
3. Operational/organisational
4. Strategic
5. ESG
Link to strategy
Read more on page 11
65%
10%
10%
10%
5%
Total shareholder return
Earnings per share (EPS)
Cash conversion
33.3%
33.3%
33.4%
Fixed pay
Annual bonus
LTIP
Total shareholder return vests between median
and upper quartile performance.
EPS vests between 5% to 12% compound
annual growth.
Cash conversion vests between 80% to 110%.
On target assumes the annual bonus and LTIP vest at 50% of
maximum for FY 2023. No share price appreciation is included.
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Remuneration policy report
Executive Directors
Element
Purpose
Operation
Maximum opportunity
Performance metrics
Base salary
To attract and retain Executive Directors with the
required skills and experience to deliver ABD’s
continued growth strategy
Base salaries are normally reviewed on an
annual basis with any changes normally effective
1 January each year
Benefits
To provide market competitive benefits
Pensions
Competitive to market to reward sustained
contribution by Executive Directors
Benefits may include medical cover and critical life
and death in service insurance. Other benefits may
be awarded as appropriate and include relocation
Contributions to a Director’s pension as
appropriate. This may include contribution to a
money purchase scheme or payment of a cash
allowance where appropriate
There is no maximum salary, although salary levels
are set to progressively move towards median
levels for companies of similar size and operational
and geographic complexity
Base salary levels and corresponding increases are
based on individual experience, skills and Group
performance along with competitiveness against
similar companies
Benefits may vary by role and individual
circumstances and are periodically reviewed
Not performance related
Aligned to the pension available to ABD’s
UK workforce
No performance metrics applicable
Annual performance
related bonus
To reward and incentivise based on the
performance against budget and other business
related objectives
Financial and non-financial performance
targets are set and reviewed by the
Remuneration Committee
Maximum of 125% of base salary
Sliding scale financial and/or personal/
strategic targets
Long-term
incentive plan
(LTIP)
To align Executive Directors to the delivery of the
long-term strategy of the Group and provide long-
term value for shareholders
20% of any bonus earned is normally deferred into
shares for three years
Performance is assessed against rolling three-year
performance periods. Awards normally vest at the
end of the three-year performance period with
60% released after year three and 20% in each of
the following two years
LTIP awards are subject to malus and
clawback provisions
Maximum of 150% of base salary although
normal awards will be set at 125% of salary
Performance metrics will be linked to financial and/
or share price and/or strategic performance
Shareholding
guidelines
To align Executive Directors with
shareholder interests
Shareholding guidelines require a minimum
shareholding (normally within five years)
150% of salary
Not performance related
Non-Executive Directors
Chairman and
Non-Executive
Directors’ fees
To attract and retain a Chairman and independent
Non-Executive Directors with the required skills
and experience
Paid monthly in arrears and reviewed each year.
Any reasonable business related expenses can
be reimbursed
The Chairman’s and Non-Executive Directors’ fees
are determined by relevant benchmark data
Annual review by the Board (Non-Executive
Directors, Remuneration Committee Chairman)
Discretion
The Committee has discretion to adjust:
• Formulaic bonus outcomes to ensure alignment of pay with the underlying performance of the
business over the financial year and to take account of personal performance over the course
of the year
• Formulaic LTIP outcomes to ensure alignment of pay with performance and to ensure the outcome
is a true reflection of the performance of the Company
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AB Dynamics plc Annual Report and Accounts 2023
Recruitment policy
Upon recruitment of an Executive Director, the remuneration package will be in line with the
remuneration policy, subject to the Committee having discretion that buy-out awards (or any other
means in order to facilitate the recruitment of an Executive Director) are reasonably necessary.
Strategic reportGovernanceFinancial statements Remuneration Committee report continued
Annual report on remuneration
This section sets out how the remuneration policy was applied for the year ended 31 August 2023 (and the prior year).
Single figure table for Executive Directors
Pay element
Base salary
Taxable benefits
Pensions
Annual bonus
LTIP1
Gain on exercise of share options2
Total
Of which:
Fixed remuneration
Variable remuneration
James Routh
Sarah Matthews-DeMers
2023
£’000
366
1
37
403
—
257
1,064
404
660
2022
£’000
350
1
35
376
—
—
762
386
376
2023
£’000
275
1
27
302
—
—
605
303
302
2022
£’000
263
1
26
226
—
—
516
290
226
1
As a result of threshold EPS and total shareholder return targets not being met, LTIP awards granted in January 2020, lapsed in full in January 2023.
2 James Routh exercised 33,334 recruitment related market value options on 20 June 2023.
Annual bonus
As a result of the Group’s performance against the financial and strategic/operational performance targets, the annual bonus paid out at 88% of the maximum for both the CEO and CFO. 20% of the bonus
award will be deferred into shares for three years. Details of the performance against the targets are as follows:
EBIT
Order intake
Cash conversion
Gross margin
Strategic
Outcome
Above stretch
Between budget and stretch
Above stretch
Between budget and stretch
Substantially met – the Committee was encouraged to see the progress made on the acquisition and integration of Ansible Motion,
progress on the Group’s diversification strategy and successful services contract wins
Organisation/operations
Substantially met – the Committee was pleased to see operational improvements across the Group’s manufacturing facilities,
upgrades to the testing facilities in the USA and delivery of a new talent development programme
Product development
Met – the Committee noted the progress made in respect of ABD Solutions in addition to a number of other important projects that
were completed on schedule
ESG
Met – the Committee was pleased to see the achievement of a MSCI AA rating
Total (% of max)
Total (% of salary)
Outcome
Weighting
35%
5%
10%
7%
8%
8%
10%
5%
88%
35%
10%
10%
10%
10%
10%
10%
5%
100%
110% of salary
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Remuneration Committee report continued
Annual report on remuneration continued
LTIPs granted in the year
Details of the LTIP awards granted on 4 January 2023, which were set at 125% of salary for both the CEO and CFO, are as follows:
Executive Director
James Routh
Sarah Matthews-DeMers
Awards granted
28,457
21,343
Award basis
(% of salary)
125%
125%
Grant date
4 January 2023
4 January 2023
Face value of award at
maximum vesting (£) 1
Vesting date
Performance conditions
£458,869
£344,156
3 January 2026
3 January 2026
See below
See below
1 Based on the share price of £16.125 on 4 January 2023.
The performance conditions determining vesting over the three years to 3 January 2026 are as follows:
• 33.3% of awards vest based on EPS growth. 25% of this part of awards vest for EPS growth of 5% p.a., increasing on a straight-line basis to 100% of this part of awards vesting for EPS growth of 12% p.a.
• 33.4% of awards vest based on cash conversion. 0% of this part of an award vests for cash conversion of 80% increasing on a straight-line basis such that 50% of this part of awards vest for cash conversion
of 100%. A further 50% of this part of awards vests for cash conversion of between 100% and 110%
• 33.3% of awards vest based on relative TSR versus the constituents of the AIM 100 (ex-Investment Trusts). 25% of this part of awards vest for median TSR, increasing on a straight-line basis to 100% of this
part of awards vesting for upper quartile TSR
Directors’ interests in shares
Directors’ interests in the shares of the Company, including related parties, were as follows:
Directors
James Routh
Sarah Matthews-DeMers
Ordinary shares of 1p each
25,433
2,735
1 Shareholdings of 150% of salary are targeted to be built up within five years of appointment.
Shareholding
guidelines1
150%
150%
Shareholding guidelines met
No
No
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Directors’ interest in long-term incentive awards
Director
James Routh
Award
Legacy options
LTIP
LTIP
LTIP
LTIP
Sarah Matthews-DeMers
Legacy options
LTIP
LTIP
LTIP
LTIP
Date of grant
12 October 2018
17 January 2020
2 December 2020
11 March 2022
4 January 2023
5 December 2019
17 January 2020
2 December 2020
11 March 2022
4 January 2023
Notes
Exercise price
1 September 2022
Awarded
during the year
Exercised (Lapsed)
during the year
31 August
2023
1
3
4
5
6
2
3
4
5
6
£12.30
£0
£0
£0
£0
£21.40
£0
£0
£0
£0
33,334
18,278
21,917
51,220
—
60,000
11,085
13,292
38,415
—
—
—
—
—
28,457
—
—
—
—
21,343
33,334
(18,278)
—
—
—
(11,085)
—
—
—
—
—
21,917
51,220
28,457
60,000
—
13,292
38,415
21,343
1 Recruitment related grant of market value options. One-third vested on 12 October 2019 and on each subsequent anniversary.
2 Recruitment related grant of market value options. One-half vested on 4 December 2020 and the remainder vested on the second anniversary of grant.
3 50% based on EPS growth, 50% based on relative TSR versus the AIM 100 (median to upper quartile). Awards lapsed in full on threshold performance targets were not met.
4 50% based on EPS growth, 50% based on relative TSR versus the AIM 100 (median to upper quartile).
5 50% based on EPS growth, 50% based on relative TSR versus the AIM 100 (median to upper quartile).
6 See performance conditions detailed in the LTIPs granted in the year section above.
CEO pay ratio
The Group has a range of policies and practices to ensure that all employees are fairly rewarded for the work they undertake. For all employees, a total reward package is offered that includes market
competitive salaries and a bonus scheme which allows employees to share in the success of the Group. The senior management team is also eligible for awards under the long-term incentive plan which
provides closer alignment to the shareholder experience.
The table below shows the CEO’s and average employee’s total remuneration for 2021, 2022 and 2023.
The CEO pay ratio has increased during the year due to gains on exercise of legacy share options. The average pay per employee has increased by 11% due to a change in the mix of employees.
The Committee is satisfied that the pay ratio is consistent with the pay, reward and progression policies for our employees.
FY
2023
2022
2021
Total remuneration
James Routh
Average employee
£1,064,000
£762,000
£870,000
£70,000
£69,000
£64,000
Ratio
15:1
11:1
14:1
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Directors’ contracts
The Executive Directors have rolling service contracts that are subject to twelve months’ notice. The Chair and Non-Executive Directors
do not have contracts of service.
Single figure table for Non-Executive Directors
Pay element
Fees, including Committee Chair fees
Richard Elsy CBE
Richard Hickinbotham
Louise Evans
2023
£’000
100
2022
£’000
95
2023
£’000
58
2022
£’000
55
2023
£’000
58
2022
£’000
55
Advisers
FIT Remuneration Consultants LLP provided independent advice to the Committee for the year ended 31 August 2023.
Payments to past Directors
On 1 July 2021, Anthony Best retired from the Board and was appointed as a special adviser to the Group on a retainer of £12,000
per annum.
Loss of office
There were no loss of office payments made during the year.
Richard Hickinbotham
Remuneration Committee Chair
23 January 2024
88
AB Dynamics plc Annual Report and Accounts 2023
Strategic reportGovernanceFinancial statements Directors’ report
Index to principal Directors’ report and other required governance and compliance disclosures
This section contains information which the Directors are required by law and regulation to include within the Annual Report and Accounts. Where relevant information (required to be disclosed in the
Directors’ report) is located in more detail elsewhere in this document, please refer to the table below:
Information
Business review
Principal risks and uncertainties
Risk management and internal controls
Disclosure of information to auditor
Dividend recommendation for the year
Strategy and future developments of the Company
Directors who held office during the year
Directors’ and Officers’ liability insurance in place
Director skills, experience and independence
Rules governing the appointment of Directors
Powers of Directors
Section in Annual Report
Strategic report
Strategic report
Strategic report – Risk management
Governance – Directors’ report
Strategic report – Chairman’s statement
Strategic report
Governance – Board of Directors
Governance – Directors’ report,
Statement of corporate governance
Governance – Board of Directors
Governance
Governance
Structure of share capital, including restrictions and the transfer of securities, voting rights and significant shareholders
Governance – Directors’ report
Non-financial information statement
Articles of Association and the rules governing changes to them
Company’s energy usage and greenhouse gas emissions
Research and development
Director remuneration details
Corporate social responsibility
Employee engagement
Employment policies
Company’s Section 172(1) statement
Stakeholder engagement
Strategic report
Governance – Directors’ report
Strategic report – ESG strategy
Strategic report
Governance – Remuneration Committee report
Strategic report – ESG strategy
Strategic report – ESG strategy
Strategic report – ESG strategy
Strategic report – ESG strategy
Strategic report – ESG strategy
Principal decisions taken by the Company arising from or influenced by stakeholder engagement
Statement of corporate governance
Accounting standards applied
Board Performance Review
Governance – Directors’ report
Financials – Note 1 of the financial statements
Governance – Nomination Committee report
Pages
1 to 58
56 to 58
54 to 55
91
7
8 to 15
62 and 63
72
62 and 63
77
71
90 and 91
1 to 58
90
42 to 47
27
81 to 88
36 to 41
36
36 to 41
52 and 53
52 and 53
70
107
77
AB Dynamics plc Annual Report and Accounts 2023
89
Strategic reportGovernanceFinancial statements Directors’ report continued
Company information
Shareholder information
Incorporation and principal activity
AB Dynamics plc is domiciled in England and registered in England
and Wales under Company number 8393914. At 24 November 2023,
there were 22,934,365 ordinary shares of 1p each in issue, all
of which are fully paid up and quoted on the London Stock
Exchange’s AIM market. The principal activity of the Group is the
design, manufacture and supply to the global transport market
of advanced testing systems, simulation products and testing
services. A description and review of the activities of the Group
during the financial year and an indication of future developments
are set out on pages 1 to 58.
Annual General Meeting
The Annual General Meeting (AGM) will be held at 11 am on
Wednesday 28 February 2024 at 85 Fleet Street, London, EC4Y
1AE. The Notice of the AGM 2023 can be found on pages 135 to
139 and will be published on the AB Dynamics plc website.
Substantial shareholdings
At 24 November 2023, the Company had been notified of the
following interests amounting to 3% or more of the voting rights
in its ordinary share capital:
Anthony Best
Octopus Investments
Sandford DeLand Asset Management Ltd
Investec Wealth & Investment
Canaccord Genuity Wealth Management
Liontrust Asset Management
Percentage of
ordinary share
capital
24.9
8.34
5.93
5.12
4.65
4.05
As far as the Directors are aware, there were no other interests
above 3% of the issued ordinary share capital.
Articles of Association
The Company’s Articles of Association may be amended by special
resolution of the Company’s shareholders.
Strategic report
The Strategic report is set out on pages 1 to 58 and was approved
by the Board on 23 January 2024. It is signed on behalf of the
Board by James Routh, Chief Executive Officer.
Cautionary statement
The review of the business and its future development in the
Annual Report has been prepared solely to provide additional
information to shareholders to allow individual shareholders to
consider the Group’s strategies and make their own assessment
of the potential for these strategies to succeed. It should not be
relied on by any other party for any other purpose. The review
contains forward-looking statements which are made by the
Directors in good faith based on information available to them up
to the time of the approval of these reports; as such they should
be treated with caution due to inherent uncertainties associated
with such statements.
Employees
The average number of persons, including Directors, employed by
the Group including its overseas subsidiaries and their remuneration
are set out on pages 81 to 88 and in note 8 to the financial statements.
Other information about the Group’s employee engagement,
diversity and inclusion policies is set out in the Our people section
of the ESG strategy on pages 36 and 37, and the Corporate social
responsibility section starting on page 40. The Group-wide gender
diversity split as at 1 September 2023 was 18.6% female and 81.4%
male (excluding VadoTech and Zynit).
Greenhouse gas emissions (GHG)
The Group recognises and strives to minimise its impact on the
environment. This year our main environmental focus has been on
clean inputs and responsible consumption. Further information
including the Group’s carbon emissions and energy consumption
data can be found on pages 42 to 47.
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AB Dynamics plc Annual Report and Accounts 2023
Share capital
The rights attaching to the Company’s ordinary shares, as well
as the powers of the Company’s Directors, are set out in the
Company’s Articles of Association, copies of which can be obtained
from the Company Secretary and are available on the Company’s
website. The Company is not aware of any agreements between
shareholders that may result in restrictions on the transfers of
securities and/or voting rights. No person holds securities in
the Company carrying special rights with regard to control of
the Company.
Employee share plans
Details of the Company Share Option Plan, under which
138,872 non-transferable options were granted to employees
in October 2019, and the Group’s ongoing long-term incentive
plan, the conditional arrangement under which contingent
share awards can be made to selected senior management,
including the Executive Directors, are set out in the Remuneration
Committee report and in note 25 of the financial statements.
Restrictions on transfer of shares
The Board may in its absolute discretion refuse to register a
transfer of a certificated share that is not fully paid, provided that
the refusal does not prevent dealings in shares in the Company
from taking place on an open and proper basis. The Board may
also refuse to register a transfer of a certificated share, unless
the instrument of transfer is:
(i)
Duly stamped or duly certified or otherwise shown to the
satisfaction of the Board to be exempt from stamp duty,
lodged at the Transfer Office or at such other place as the
Board may appoint and (save in the case of a transfer by
a person to whom no certificate was issued in respect of
the shares in question) accompanied by the certificate for
the shares to which it relates, and such other evidence as
the Board may reasonably require to show the right of the
transferor to make the transfer and, if the instrument of
transfer is executed by some other person on his behalf,
the authority of that person so to do
(ii) In respect of only one class of shares
(iii) In favour of not more than four persons jointly
Strategic reportGovernanceFinancial statements Directors’ report continued
Shareholder information continued
Restrictions on transfer of shares continued
There are no other restrictions on the transfer of ordinary shares
in the Company except certain restrictions which may from time
to time be imposed by laws and regulations (for example insider
trading laws) or where a shareholder with at least a 0.25% interest
in the Company’s certificated shares has been served with a
disclosure notice and has failed to provide the Company with
information concerning interests in those shares.
Related party disclosures (AIM Rule 19)
There is no information to be disclosed by the Company in respect
of related party transactions, except for:
• share options and long-term incentive schemes awarded
to Executive Directors (see the Remuneration Committee
report); and
• provision of services by controlling shareholder (see the
Remuneration Committee report).
Financial information
Results and dividends
The profit for the financial year attributable to shareholders
was £10,986,000 (2022: £4,741,000). The Directors recommend
a final dividend of 4.42p per ordinary share (2022: 3.54p) to be
paid, if approved, on 6 March 2024. The results are shown more
fully in the consolidated financial statements on pages 103 to 128
and summarised in the Chief Financial Officer’s review on pages
26 to 29.
Independent auditor
A resolution to re-appoint Grant Thornton UK LLP (Grant Thornton)
as the Company’s external auditor will be proposed at the
forthcoming AGM, in accordance with Section 489 of the
Companies Act 2006.
Disclosure of information to auditor
Each person who is a Director at the date of approval of this
Directors’ report confirms that:
• so far as that Director is aware, there is no relevant audit
information of which the Company’s auditor is unaware; 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
needed by the Company’s auditor in connection with preparing
its report and to establish that the Company’s auditor is aware
of the information.
This confirmation is given and should be interpreted in accordance
with the provisions of Section 418 of the Companies Act 2006.
Directors’ assessment of going concern
At 31 August 2023, the Company had net current assets of
£5,220,000 (2022: £18,741,000) with the main current asset being
amounts owed from its subsidiary Anthony Best Dynamics Limited,
amounting to £8,677,000 (2022: £13,951,000).
Going concern
The Directors have assessed the principal risks discussed on pages
56 to 58, including by modelling a severe but plausible downside
scenario over an extended assessment period to August 2025,
whereby the Group experiences:
• a reduction in demand of 25% over the next two financial years,
with no mitigations;
• a 10% increase in operating costs from supply chain disruption;
• an increase in cash collection cycle; and
• an increase in input costs resulting in reduction in gross
margin to 40%.
At 31 August 2023, the Group had £33.5m of cash and a £15.0m
undrawn revolving credit facility. Even in this severe downside
scenario, the Group has sufficient headroom to be able to continue
to operate for the foreseeable future. The Directors believe that the
Group is well placed to manage its financing and other business
risks satisfactorily and have a reasonable expectation that the Group
will have adequate resources to continue in operation for at least
twelve months from the signing date of the financial statements.
They therefore consider it appropriate to adopt the going concern
basis of accounting in preparing the financial statements.
Directors’ insurance
The Group has in place a Directors’ and Officers’ liability insurance
policy which provides cover for the personal liability which the
Company’s Directors and Officers may face. This remains in force
at the date of this report.
Approved for and on behalf of the Board.
Dr James Routh
Chief Executive Officer
AB Dynamics plc
Company number: 8393914
23 January 2024
Richard Elsy CBE
Non-Executive Chairman
AB Dynamics plc Annual Report and Accounts 2023
91
Strategic reportGovernanceFinancial statements
Statement of Directors’ responsibilities
The Directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable law
and regulations.
Company law requires the Directors to prepare such financial
statements for each financial year. Under that law, they have
elected to prepare the Group financial statements in accordance
with UK-adopted International Accounting Standards 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 year. In preparing each of the
Group and Parent Company financial statements, the Directors
are required to:
• select suitable accounting policies and apply them consistently;
• make judgements and accounting 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 Parent Company’s
transactions and disclose with reasonable accuracy at any time
the financial position of the Parent Company and enable them to
ensure that the financial statements comply with the Companies
Act 2006. They are also responsible for safeguarding the assets of
the Parent Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
They are further responsible for ensuring that the Strategic report
and the Directors’ report and other information included in the
Annual Report and Accounts are prepared in accordance with
applicable law in the United Kingdom.
The maintenance and integrity of the AB Dynamics plc website
is the responsibility of the Directors; the work carried out by the
auditor does not involve the consideration of these matters and,
accordingly, the auditor accepts no responsibility for any changes
that may have occurred in the accounts since they were initially
presented on the website.
Legislation in the United Kingdom governing the preparation and
dissemination of the accounts and the other information included
in Annual Reports may differ from legislation in other jurisdictions.
Directors’ responsibility statement
We confirm that to the best of our knowledge:
• the financial statements, prepared in accordance with the
relevant financial reporting framework, give a true and fair view
of the assets, liabilities, financial position and profit or loss of
the Company and the undertakings included in the consolidation
taken as a whole;
• the Strategic report includes a fair review of the development
and performance of the business and the position of the
Company and the undertakings included in the consolidation
taken as a whole, together with a description of the principal
risks and uncertainties that they face; and
• the Annual Report and Accounts, taken as a whole, are fair,
balanced and understandable and provide the information
necessary for shareholders to assess the Company’s position
and performance, business model and strategy.
This responsibility statement was approved by the Board of
Directors on 23 January 2024 and is signed on its behalf by:
Dr James Routh
Chief Executive Officer
Richard Elsy CBE
Non-Executive Chairman
Registered office:
Middleton Drive, Bradford on Avon, Wiltshire BA15 1GB
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AB Dynamics plc Annual Report and Accounts 2023
Strategic reportGovernanceFinancial statements
Financial statements
Financial
statements
In this section
94
103
Independent auditor’s report
Consolidated statement of
comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
104
105
106 Consolidated cash flow statement
107
129
129
130
135 Notice of Annual General Meeting 2024
Notes to the consolidated financial statements
Company statement of financial position
Company statement of changes in equity
Notes to the Company financial statements
AB Dynamics plc Annual Report and Accounts 2023
93
Strategic reportGovernanceFinancial statements Independent auditor’s report
To the members of AB Dynamics plc
Opinion
Our opinion on the financial statements is unmodified.
We have audited the financial statements of AB Dynamics plc
(the ‘Parent Company’) and its subsidiaries (the ‘Group’) for the
year ended 31 August 2023, which comprise the Consolidated
statement of comprehensive income, the Consolidated statement
of financial position, the Consolidated statement of changes
in equity, the Consolidated cash flow statement, the notes to
the Consolidated financial statements including a summary
of significant accounting policies, the Company statement of
financial position, the Company statement of changes in equity
and notes to the Company financial statements, including a
summary of significant accounting policies. The financial reporting
framework that has been applied in the preparation of the
Group financial statements is applicable law and UK-adopted
international accounting standards. 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, including Financial Reporting
Standard 102 ‘The Financial Reporting Standard applicable in the
UK and Republic of Ireland’ (United Kingdom Generally Accepted
Accounting Practice).
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
2023 and of the Group’s profit for the year then ended;
• the Group financial statements have been properly prepared in
accordance with UK-adopted international accounting standards;
• 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.
94
AB Dynamics plc Annual Report and Accounts 2023
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the
‘Auditor’s responsibilities for the audit of the financial statements’
section of our report. We are independent of the Group and the
Parent Company in accordance with the ethical requirements
that are relevant to our audit of the financial statements in the
UK, including the FRC’s Ethical Standard as applied to listed
entities, and we have fulfilled our other ethical responsibilities in
accordance with these requirements. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide
a basis for our opinion.
Conclusions relating to going concern
We are responsible for concluding on the appropriateness of
the Directors’ use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material
uncertainty exists related to events or conditions that may cast
significant doubt on the Group’s and the Parent Company’s ability
to continue as a going concern. If we conclude that a material
uncertainty exists, we are required to draw attention in our report
to the related disclosures in the financial statements or, if such
disclosures are inadequate, to modify the auditor’s opinion. Our
conclusions are based on the audit evidence obtained up to the
date of our report. However, future events or conditions may
cause the Group or the Parent Company to cease to continue as a
going concern.
A description of our evaluation of management’s assessment
of the ability to continue to adopt the going concern basis of
accounting, and the results from that evaluation is included in the
Key Audit Matters section of our report.
In auditing the financial statements, we have concluded that the
Directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified
any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the
Group’s and the Parent Company’s ability to continue as a going
concern for a period of at least twelve months from when the
financial statements are authorised for issue.
Our responsibilities and the responsibilities of the Directors with
respect to going concern are described in the relevant sections of
this report.
Our approach to the audit
Materiality
Key Audit
Matters
Scoping
Overview of our audit approach
Overall materiality:
Group: £1,000,000, which represents approximately 1% of the
Group’s revenue.
Parent Company (statutory audit): £1,920,000, which represents
approximately 1.8% of the Parent Company’s total assets.
Key Audit Matters were identified as:
• Revenue occurrence and accuracy from custom-built laboratory
and simulator equipment contracts (same as previous year);
• Accuracy of acquired intangible assets and contingent
consideration payable arising from significant business
combinations (Ansible Motion Limited) (new this year); and
• The appropriateness of the use of the going concern assumption
(new this year).
The auditor’s report for the year ended 31 August 2022 included
two Key Audit Matters which have not been reported as Key
Audit Matters in our current year’s report. These related to the
recoverability of goodwill and acquired intangible assets and the
valuation of inventory.
Strategic reportGovernanceFinancial statements Independent auditor’s report continued
To the members of AB Dynamics plc
Our approach to the audit continued
Overview of our audit approach continued
Overall materiality: continued
The recoverability of goodwill and acquired intangible assets
has not been reported as a Key Audit Matter in the current year
to reflect our risk assessment, wherein the Group has seen
improved recent trading performance and therefore lower levels
of management judgement has been required in assessing the
recoverability of goodwill and acquired intangible assets.
The valuation of inventory has also not been reported as a Key
Audit Matter in the current year due to a change in system and
methodology used by management to determine the inventory
valuation at year-end which has also lowered the level of
management judgement required.
The Group engagement team and component auditor teams
performed an audit of financial information using component
materiality (full scope audit procedures) on four of the Group’s
components in the United Kingdom and specific-scope audit
procedures on the financial information of a further three Group
components in the United States of America, Singapore and Japan.
The components which were subject to either a full scope audit or
specific-scope audit procedures contributed 80% of the Group’s
revenue, 94% of the Group’s profit/loss before tax and 94% of the
Group’s total assets.
The Group engagement team performed analytical procedures
on the financial information of all remaining Group components
which are based in the United Kingdom, Germany, the United
States of America, Romania, Spain, Singapore, China and Japan.
Key Audit Matters
Key Audit Matters are those matters that, in our professional
judgement, were of most significance in our audit of the financial
statements of the current year and include the most significant
assessed risks of material misstatement (whether or not due to
fraud) that we identified. These matters included those that had
the greatest effect on: the overall audit strategy; the allocation of
resources in the audit; and directing the efforts of the engagement
team. These matters were addressed in the context of our
audit of the financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on
these matters.
In the graph below, we have presented the Key Audit Matters
and significant risks relevant to the audit. Due to the potential
financial statement impact, we have also identified a significant
financial statement level risk due to management override
of controls. This is not a complete list of all risks identified by
our audit.
Description
Audit response
KAM
Disclosures
Key observations
or Our results
The appropriateness of the use
of the going concern assumption
(Group and Company)
High
l
a
i
c
n
a
n
fi
l
a
i
t
n
e
t
o
P
t
c
a
p
m
i
t
n
e
m
e
t
a
t
s
Low
Low
Key Audit Matter
Other significant risk
Valuation of investments in
subsidiaries (Company)
Presumed risk of fraud in revenue
recognition, occurrence of non-contract
revenue transactions (Group)
Accuracy of Inventory (Group)
Presumed risk of fraud in revenue recognition,
occurrence and accuracy of open long-term
contracts at the year end (Group)
Accuracy of acquired intangible assets and
contingent consideration payable arising
from significant business combinations
(Ansible Motion Limited) (Group)
Valuation of goodwill and other
acquired intangible assets within
Ansible and DRI CGU’s (Group)
Extent of management judgement
High
AB Dynamics plc Annual Report and Accounts 2023
95
Strategic reportGovernanceFinancial statements
Independent auditor’s report continued
To the members of AB Dynamics plc
Our approach to the audit continued
Key Audit Matters continued
Key Audit Matter – Group
How our scope addressed the matter – Group
In responding to the Key Audit Matter, we performed the following audit procedures:
• assessed whether the accounting policies adopted are in accordance with IFRS 15,
including the identification of performance obligation. As part of testing performed
checked the policies had been applied consistently;
• selected a sample of custom-built laboratory and simulator equipment contracts and
obtained an understanding of the relevant contractual clauses and terms and conditions
to test whether the criteria for over time revenue recognition under IFRS 15 has been met.
This evaluation included consultation with internal financial reporting and legal specialists.
For those contracts within our sample where revenue is recognised over time, we;
• agreed forecast revenue to signed contracts including any variations or other
corroborative and supporting documentation;
• tested whether the estimated contract costs had been accurately recorded based
on the forecasts prepared by management. We also critically assessed the forecasts
prepared by management. We also challenged any significant assumptions made in
determining the costs to complete, specifically in respect of the current inflationary
environment and anticipated delivery date to ensure any liquidated damages had
been appropriately recorded;
• substantively tested a sample of cumulative costs incurred to the year-end date to
ensure that costs had been recorded accurately in assessing management’s stage
of completion;
• considered the accuracy of management’s judgements and estimates made in prior
years and at the year-end by comparing the amounts included to actual subsequent
costs incurred in completing the projects;
• for those contracts within our sample where revenue is recognised at a point in time, we
obtained evidence, such as proof of delivery or installation, to check the performance
obligations had been satisfied during the year; and
• assessed the completeness and accuracy of disclosures included within the financial
statements for compliance with the requirements of IFRS 15.
Revenue occurrence and accuracy from custom-built
laboratory and simulator equipment contracts
We identified the occurrence and accuracy of revenue from custom-built
laboratory and simulator equipment contracts as one of the most significant
assessed risks of material misstatement due to fraud or error.
Under ISA (UK) 240 ‘The Auditor’s Responsibilities Relating to Fraud in an
Audit of Financial Statements’, there is a presumption that there are risks of
fraud in revenue recognition.
Revenue remains the key driver of the business. Historically, management
have recognised revenue from custom-built laboratory and simulator
equipment contracts over time, with stage of completion for each contract
estimated using an input method.
Initially, based on management’s stated policy, we identified a risk of
material misstatement due to fraud in respect of the occurrence and
accuracy of long-term revenue contracts that were open at year-end, since
the determination of stage of completion was anticipated to involve a high
degree of management judgement.
Whilst conducting our audit we became increasingly aware of the level of
judgement required to be exercised by management when applying the
Group’s revenue recognition policy and its compliance with International
Financial Reporting Standard 15 ‘Revenue from Contracts with Customers’
(IFRS 15). The key judgements made by management when accounting for
revenue include:
• The number of distinct performance obligations identified;
• The point at which control of the goods transfers to the customer and
whether that occurs at a point in time or over time; and
• Where control is transferred over time, how stage of completion is measured.
As our understanding of these judgements and estimates developed,
we identified a risk of material misstatement due to fraud, or error, due
to management’s potential incorrect application of IFRS 15 to custom-
built laboratory and simulator equipment contracts and the associated
occurrence and accuracy of such revenue.
This is considered a significant risk and Key Audit Matter due to the
significant judgements involved which are subject to possible management
bias and which could materially affect the financial statements.
96
AB Dynamics plc Annual Report and Accounts 2023
Relevant disclosures in the
Annual Report 2023
• Financial statements:
Accounting policy:
Revenue and long-term
contracts (note 2c), note
5: Revenue from contracts
with customers and note
29: Restatement of prior
year balances.
Key observations
Based on work performed,
we identified errors in the
current and prior year revenue
recognition where contracts had
previously been recognised over
time despite not meeting the
criteria required under IFRS 15.
As a result of our audit challenge,
management recorded material
adjustments to revenue, cost of
sales, inventories, contract assets
and contract liabilities in the
current year. These adjustments
also resulted in adjustments to
gross profit, profit before tax,
profit after tax, net assets and
shareholders’ equity. A prior
year adjustment has also been
recorded as set out in note 29.
We have not identified any
further material misstatements
in relation to the occurrence and
accuracy of revenue from custom-
built laboratory and simulator
equipment contracts.
Strategic reportGovernanceFinancial statements Independent auditor’s report continued
To the members of AB Dynamics plc
Our approach to the audit continued
Key Audit Matters continued
Key Audit Matter – Group
How our scope addressed the matter – Group
Accuracy of acquired intangible assets and contingent
consideration payable arising from significant business
combinations (Ansible Motion Limited)
We identified the accuracy of acquired intangible assets and contingent
consideration payable arising from significant business combinations of
Ansible Motion Limited as one of the most significant assessed risks of
material misstatement due to error.
The Group made the significant share purchase acquisition of Ansible Motion
Limited (Ansible) in September 2022. Under International Financial Reporting
Standard (‘IFRS’) 3 ‘Business Combinations’, management is required to
recognise, separately from goodwill, the assets acquired and liabilities
assumed, and then to recognise goodwill on purchase.
Management makes significant judgements to identify specific fair value
adjustments, including the identification of intangible assets that are
acquired with a new business and makes significant estimates to value
these assets.
Given the nature of the entity acquired, management have recognised
an intangible asset in respect of the brand and technology acquired.
Management have utilised the support of a third-party valuation expert to
assist with the valuation of the intangible assets, based on discounted cash
flow forecasts, which require judgement concerning key assumptions such
as revenue growth, margin, discount rates, brand royalty rates, customer
attrition and long-term growth rates.
Management performed a remeasurement of the contingent consideration
payable at year-end which resulted in a material fair value remeasurement
gain of £5.4m being recognised within profit and loss during the year. Given
the quantum of the remeasurement, this was considered a significant area
of challenge. Specifically, this is in respect of management’s determination
as to whether this represented events which should have been known as at
the acquisition date which would instead decrease the consideration paid
amount with a consequent reduction in the goodwill balance.
In responding to the Key Audit Matter, we performed the following audit procedures:
• utilised our internal valuation experts to assist in assessing the work performed by
management’s valuation expert in relation to the valuation of acquired intangible assets.
This included challenging whether the methodology used in the valuation is in line with
acceptable valuation methods and whether inputs such as discount rates and long-term
growth rates used were appropriate;
• assessing and challenging the reasonableness of the key assumptions such as revenue
growth rates, margin, brand royalty rates and customer attrition used in management’s
assessment, including agreeing elements of these key assumptions to industry market
data, observable comparators and historic performance achieved by Ansible;
• obtained management’s calculation of the acquisition cost, identifiable net assets at
acquisition and residual goodwill balance arising on acquisition. When considering the
acquisition cost, we enquired of management to identify the contractual payments to be
made and whether there is an element of contingent or deferred consideration that may
in substance be a remuneration cost;
• assessed the competence, objectivity and capabilities of management’s expert through
reference to their qualifications and experience;
• assessed the acquisition balance sheet by agreeing material balances to supporting
evidence, including cash balances on acquisition;
• agreed the consideration paid, including any elements of contingent consideration
calculated by management and included in liabilities at the year-end, by reference to
acquisition agreements, results of Ansible and to bank statements; and
• challenged the nature of the events which led to the contingent consideration re-
measurement gain and agreed to corroborative evidence that these events could not
have been foreseen by management at the acquisition date, including Board minutes and
re-forecasts prepared during the year;
• assessed the adequacy of the accounting policy and relevant disclosures made in the
financial statements with respect to the acquisition to determine whether they are
complete, accurate and in accordance with IFRS 3.
Relevant disclosures in the
Annual Report 2023
• Financial statements:
Accounting policy:
Acquisitions (note 2e)
and note 28: Acquisition
of business.
Key observations
Based on our audit work, we
did not identify evidence of
material misstatement in relation
to the accuracy of acquired
intangible assets and contingent
consideration payable (including
remeasurement gain recorded
through profit and loss during
the year) arising from significant
business combinations of
Ansible Motion Limited.
AB Dynamics plc Annual Report and Accounts 2023
97
Strategic reportGovernanceFinancial statements Independent auditor’s report continued
To the members of AB Dynamics plc
Our approach to the audit continued
Key Audit Matters continued
Key Audit Matter – Group
How our scope addressed the matter – Group and Company
The appropriateness of the use of the going concern assumption
We identified the appropriateness of the use of the going concern
basis assumption as one of the most significant assessed risks of
material misstatement.
Due to recent macro-economic factors such as high inflation and current
national recessionary environment, we have assessed that there is a
significant risk to the Group and Parent Company that the going concern
assumption adopted in the preparation of the financial statements may
be impacted.
In assessing whether the financial statements should be prepared on the
going concern basis, the Directors are required to consider all available
information about the future for a period of at least 12 months from the
date of approval of the financial statements. In conducting their assessment,
the Directors have concluded that adopting the going concern basis is
appropriate for the Group and Parent Company.
The uncertainties arising from the wider macro-environment result in a
greater level of judgement in forecasting the Group future trading results
and Parent Company’s funding positions, which include key assumptions
such as revenue growth rates, margin and the impact of inflationary pressures.
Our application of materiality
In responding to the Key Audit Matter, we performed the following audit procedures:
• obtaining management’s assessment for the period to August 2025, which included a base
case forecast, sensitised case and reverse stress test,
• obtaining an understanding of how management had compiled the forecasts and tested
the mathematical accuracy of management’s assessment;
• testing the reliability of management’s forecasting by comparing the accuracy of the
actual financial performance with forecast information from the prior year;
• assessing and challenging the reasonableness of the key assumptions used in
management’s forecasts approved by the Board, including agreeing elements of these key
assumptions to industry market data and historic growth rates and margins achieved by
the Group;
• challenging the sensitivity analysis performed by management on the key assumptions
and estimates to determine the impact of reasonably possible movements and assessing
the reasonableness of mitigating actions available to management; and
• assessing the adequacy of the going concern disclosures included within the accounting
policies for compliance with the requirements of International Accounting Standard 1
‘Presentation of financial statements’ (IAS 1).
Relevant disclosures in the
Annual Report 2023
• Directors’ Report:
Directors’ assessment of
going concern and going
concern sections.
• Financial statements:
Accounting policy: Going
concern (note 2a).
Our results
We have nothing to report in
addition to that stated in the
“Conclusions relating to going
concern” section of our report.
We apply the concept of materiality both in planning and performing the audit, and in evaluating the effect of identified misstatements on the audit and of uncorrected misstatements, if any, on the financial
statements and in forming the opinion in the auditor’s report.
Materiality was determined as follows:
Materiality measure
Group
Parent Company
Materiality for financial
statements as a whole
We define materiality as the magnitude of misstatement in the financial statements that, individually or in the aggregate, could reasonably be expected to influence the
economic decisions of the users of these financial statements. We use materiality in determining the nature, timing and extent of our audit work.
Materiality threshold
£1,000,000, which represents approximately 1% of the Group’s revenue.
£1,920,000 (statutory audit), which represents approximately 1.8% of the Parent
Company’s total assets.
98
AB Dynamics plc Annual Report and Accounts 2023
Strategic reportGovernanceFinancial statements Independent auditor’s report continued
To the members of AB Dynamics plc
Our approach to the audit continued
Our application of materiality continued
Materiality measure
Group
Parent Company
Significant judgements
made by auditor in
determining materiality
In determining materiality, we made the following significant judgements:
In determining materiality, we made the following significant judgements:
• Revenue is considered to be the most appropriate benchmark for the Group
because it is one of the Group’s key performance indicators and increases
commensurately with growth and expansion of the Group. Revenue is also a more
stable benchmark and there is considerable volatility in profit before tax.
• Total assets are considered to be the most appropriate benchmark for the Parent
Company as the Parent Company’s purpose is that of holding the investments
in the subsidiary undertakings. The Parent Company does not undertake any
trading activities.
• 1% of revenue is considered to be an appropriate threshold to apply to the chosen
• 1.8% of total assets is considered to be an appropriate threshold to apply to the
benchmark having considered the expectations of the users of the financial
statements and the engagement risk.
chosen benchmark having considered the expectations of the users of the financial
statements and the engagement risk.
Materiality for the current year is higher than the level that was determined for the
year ended 31 August 2022 due to a change in the benchmark applied in determining
materiality and to reflect the increase in the size of the Group due to increased
revenues as a result of acquisitions.
Materiality for the current year is higher than the level that was determined for the
year ended 31 August 2022 to reflect a change in the benchmark applied.
The Parent Company materiality is for the purposes of the Parent Company only
statutory financial statement audit. A lower component materiality has been used in
respect of the Parent Company for the Group financial statement audit.
We set performance materiality at an amount less than materiality for the financial statements as a whole to reduce to an appropriately low level the probability that the
aggregate of uncorrected and undetected misstatements exceeds materiality for the financial statements as a whole.
£650,000, which is 65% of financial statement materiality.
£1,248,000, which is 65% of financial statement materiality.
In determining performance materiality, we made the following significant judgements:
In determining performance materiality, we made the following significant judgements:
• Our risk assessment – we considered the previously reported control deficiencies and
the potential impact on the current year’s audit when performing our risk assessment
procedures; and
• Our risk assessment – we considered the previously reported control deficiencies and
the potential impact on the current year’s audit when performing our risk assessment
procedures; and
• History of misstatements – we considered the level of misstatements identified in the
• History of misstatements – we considered the level of misstatements identified in the
previous year and the potential impact on the current year’s audit.
previous year and the potential impact on the current year’s audit.
Performance materiality
used to drive the extent
of our testing
Performance
materiality threshold
Significant judgements made
by auditor in determining
performance materiality
Specific materiality
We determine specific materiality for one or more particular classes of transactions, account balances or disclosures for which misstatements of lesser amounts than
materiality for the financial statements as a whole could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.
Specific materiality
We determined a lower level of specific materiality for the following areas:
We determined a lower level of specific materiality for the following areas:
•
•
Directors’ Remuneration; and
• Directors’ Remuneration; and
Related Party Transactions outside of the normal course of business.
• Related Party Transactions outside of the normal course of business.
We determine a threshold for reporting unadjusted differences to the audit committee.
Communication of
misstatements to the
Audit Committee
Threshold for communication
£50,000 and misstatements below that threshold that, in our view, warrant reporting
on qualitative grounds.
£96,000 and misstatements below that threshold that, in our view, warrant reporting
on qualitative grounds.
AB Dynamics plc Annual Report and Accounts 2023
99
Strategic reportGovernanceFinancial statements Independent auditor’s report continued
To the members of AB Dynamics plc
Our approach to the audit continued
Our application of materiality continued
The graph below illustrates how performance materiality interacts
with our overall materiality.
Overall materiality – Group
Revenue
£100.8m
PM,
£0.65m,
65%
FSM,
£1.0m,
1%
Overall materiality – Parent Company
Total assets
£104.4m
PM,
£1.2m,
65%
FSM,
£1.92m,
1.8%
FSM: Financial statements materiality.
PM: Performance materiality.
100
AB Dynamics plc Annual Report and Accounts 2023
An overview of the scope of our audit
We performed a risk-based audit that requires an understanding
of the Group’s and the Parent Company’s business and in particular
matters related to:
Type of work to be performed on financial information of
parent and other components (including how it addressed the
Key Audit Matters)
• In order to address the audit risks identified during our planning
Understanding the Group, its components, and their
environments, including Group-wide controls
• Our audit approach was a risk-based approach founded on a
thorough understanding of the Group’s and Parent Company’s
business, its environment and risk profile. The Group’s
accounting is primarily resourced through a central function
within the UK, with a local finance function in the United States
of America, Germany, Singapore, Japan, Romania, Spain, South
Korea and China. Each local finance function reports into the
central Group finance function based in the Group’s head office.
The Group engagement team obtained an understanding of the
Group and its environment, including Group-wide controls, and
assessed the risks of material misstatement at the Group level.
• We obtained an understanding of the business processes for all
significant classes of transactions, including significant risks, in
order to confirm our understanding of the control environment
across the Group; and
• We documented and assessed the design and implementation
of controls related to key audit matters and other significant
risks communicated in this report.
Identifying significant components
• Component significance was determined based on their relative
share of the key Group financial metrics including revenue,
absolute profit/loss before tax and total assets.
• A full-scope audit approach for all components evaluated as
significant was determined based on their relative share of the
key Group financial metrics including revenue, absolute profit/
loss before tax and total assets. For components classified
as ‘individually financially significant to the Group’ an audit
of financial information of the component using component
materiality (full-scope audit procedures) was performed. We
also considered whether any components were likely to include
significant risks of material misstatement to the Group financial
statements due to their specific nature or circumstances. No
further components were identified from this consideration.
procedures, the Group engagement team performed full-
scope audit procedures on the financial information of the
Parent Company. Component auditors performed full-scope
audit procedures on the financial information of one other
significant component in the United Kingdom and two other
non-significant components in the United Kingdom.
• Specific-scope audit procedures relating to the risks of material
misstatement of the Group financial statement were carried
out by component auditor teams in the United Kingdom on
three overseas components in the United States of America,
Singapore and China.
• The financial information of the remaining operations of
the Group were subject to analytical procedures using
Group materiality.
Performance of our audit
No. of
components
% of
total Group
revenue
% of
total Group
absolute
profit/loss
before tax
% of
Group
total assets
4
3
13
56
24
20
81
13
6
83
11
6
Audit approach
Full-scope audit
Specific-scope
audit procedures
Analytical
procedures
Communications with component auditors
• The Group engagement team communicated with one component
auditor covering three components performing full-scope audit
procedures, throughout the stages of their work, from planning,
through fieldwork and as part of the concluding procedures. The
component auditor reported to the Group engagement team in
relation to the audit procedures communicated. Members of the
Group engagement team visited the locations of all individually
financially significant components.
Strategic reportGovernanceFinancial statements Independent auditor’s report continued
To the members of AB Dynamics plc
An overview of the scope of our audit continued
Communications with component auditors continued
• Across the Group audit, the Group engagement team and all
component auditor teams carried out the majority of work in
person with the respective finance teams.
Our opinions on other matters prescribed by the
Companies Act 2006 are unmodified
In our opinion, the part of the Directors’ remuneration report to
be audited has been properly prepared in accordance with the
Companies Act 2006.
Changes in approach from previous year
•
The approach to the audit has changed since the previous year
due to the increase/decrease in size of individual components
in comparison to the size of the Group, ensuring sufficient
coverage. Three components have been removed from the
scope due to a decrease in their size, whilst one new component
has been included in the current year scope following its
acquisition during the year.
In our opinion, based on the work undertaken in the course of
the audit:
• the information given in the strategic report and the Directors’
report for the financial year for which the financial statements
are prepared is consistent with the financial statements; and
• the strategic report and the Directors’ report have been
prepared in accordance with applicable legal requirements.
Other information
The other information comprises the information included in
the annual report 2023, other than the financial statements and
our auditor’s report thereon. The Directors are responsible for
the other information contained within the annual report 2023.
Our opinion on the financial statements does not cover the
other information and, except to the extent otherwise explicitly
stated in our report, we do not express any form of assurance
conclusion thereon.
Our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in
the audit or otherwise appears to be materially misstated. If
we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a
material misstatement in the financial statements themselves. If,
based on the work we have performed, we conclude that there is a
material misstatement of this other information, we are required
to report that fact.
We have nothing to report in this regard.
Matter on which we are required to report under the
Companies Act 2006
In the light of the knowledge and understanding of the Group and
the Parent Company and their environment obtained in the
course of the audit, we have not identified material
misstatements in the strategic report or the Directors’ report.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters in
relation to which the Companies Act 2006 requires us to report to
you if, in our opinion:
• adequate accounting records have not been kept by the Parent
Company, or returns adequate for our audit have not been
received from branches not visited by us; or
• the Parent Company financial statements are not in agreement
with the accounting records and returns; or
• certain disclosures of Directors’ remuneration specified by law
are not made; or
• we have not received all the information and explanations we
require for our audit.
Responsibilities of Directors
As explained more fully in the statement of Directors’
responsibilities set out on page 92, the Directors are responsible
for the preparation of the financial statements and for being
satisfied that they give a true and fair view, and for such internal
control as the Directors determine is necessary to enable the
preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are
responsible for assessing the Group’s and the Parent Company’s
ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern
basis of accounting unless the Directors either intend to liquidate
the Group or the Parent Company or to cease operations, or have
no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the
financial statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists.
Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably
be expected to influence the economic decisions of users taken
on the basis of these financial statements.
AB Dynamics plc Annual Report and Accounts 2023
101
Strategic reportGovernanceFinancial statements Independent auditor’s report continued
To the members of AB Dynamics plc
Auditor’s responsibilities for the audit of the
financial statements continued
Irregularities, including fraud, are instances of non-compliance
with laws and regulations. The extent to which our procedures are
capable of detecting irregularities, including fraud, is detailed below:
• We obtained an understanding of the legal and regulatory
frameworks that are applicable to the Group and Parent
Company and sector in which they operate and how the
Group and Parent Company are complying with those legal
and regulatory frameworks, through our commercial and
sector experience, making enquiries of management and
those charged with governance, and inspection of the Parent
Company’s and the Group’s key external correspondence. We
corroborated our enquiries through our inspection of Board
minutes and other information obtained during the course of
the audit.
• Through the understanding that we obtained, we determined
that the most significant legal and regulatory frameworks
which are directly relevant to specific assertions in the financial
statements to be those related to the reporting frameworks,
being UK-adopted international accounting standards for
the Group, Financial Reporting Standard 102 ‘The Financial
Reporting Standard applicable in the UK and Republic of Ireland’
(United Kingdom Generally Accepted Accounting Practice)
for the Parent Company and the Companies Act 2006, the
AIM Rules for Companies and the relevant tax compliance
regulations in the jurisdictions in which the Group and Parent
Company operates.
• We enquired of management and the Board of Directors whether
they were aware of any non-compliance with laws and regulations.
• We assessed the susceptibility of the Group’s and Parent
Company’s financial statements to material misstatement,
including how fraud might occur by meeting with management
from different parts of the business to understand where
it is considered there was a susceptibility of fraud. We also
considered performance targets and their propensity to
influence efforts made by management to manage earnings.
We considered the programs and controls that the Group and
Parent Company has established to address risks identified,
or that otherwise prevent, deter and detect fraud; and how
senior management monitors those programs and controls.
102
AB Dynamics plc Annual Report and Accounts 2023
Where the risk was considered to be higher, we performed audit
procedures to address each identified fraud risk.
• Our audit procedures included:
• Gaining an understanding of the controls that management
has in place to prevent and detect fraud;
• Journal entry testing, with a focus on journals indicating large
or unusual transactions or account combinations based on our
understanding of the business;
•
Gaining an understanding of and testing significant identified
related party transactions; and
• Performing audit procedures to consider the compliance of
disclosures in the financial statements with the applicable
financial reporting requirements.
• These audit procedures were designed to provide reasonable
assurance that the financial statements were free from fraud
or error. The risk of not detecting a material misstatement due
to fraud is higher than the risk of not detecting one resulting
from error and detecting irregularities that result from fraud is
inherently more difficult than detecting those that result from
error, as fraud may involve collusion, deliberate concealment,
forgery or intentional misrepresentations. Also, the further
removed non-compliance with laws and regulations is from
events and transactions reflected in the financial statements,
the less likely we would become aware of it.
•
The engagement partner’s assessment of the appropriateness
of the collective competence and capabilities of the
engagement team included consideration of the
engagement team’s:
• understanding of, and practical experience with audit
engagements of a similar nature and complexity through
appropriate training and participation;
• knowledge of the industry in which the Group and Parent
Company operate; and
• understanding of the legal and regulatory requirements
specific to the Group and Parent Company.
• We communicated relevant laws and regulations and potential
fraud risks to all engagement team members, including internal
specialists, and remained alert to any indications of fraud or
non-compliance with laws and regulations throughout the audit.
• For components at which audit procedures were performed,
we requested component auditors to report to us instances of
non-compliance with laws and regulations that gave rise to a risk
of material misstatement of the Group financial statements.
A further description of our responsibilities for the audit of the
financial statements is located on the Financial Reporting Council’s
website at: www.frc.org.uk/auditorsresponsibilities. This description
forms part of our auditor’s report.
Use of our report
This report is made solely to the Company’s members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
Company’s members those matters we are required to state to
them in an auditor’s report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the Company and the Company’s members
as a body, for our audit work, for this report, or for the opinions
we have formed.
Paul Holland BSc BFP FCA
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Reading
23 January 2024
Strategic reportGovernanceFinancial statements Consolidated statement of comprehensive income
For the year ended 31 August 2023
Revenue
Cost of sales
Gross profit
General and administrative expenses
Fair value gain on release of contingent consideration
Operating profit
Operating profit is analysed as:
Before depreciation and amortisation
Depreciation and amortisation
Operating profit
Net finance expense
Profit before tax
Tax expense
Profit for the year
Other comprehensive (expense)/income
Items that may be reclassified to consolidated income statement:
Cash flow hedges
Exchange (loss)/gain on foreign currency net investments
Total comprehensive income for the year
Earnings per share – basic (pence)
Earnings per share – diluted (pence)
* See note 4.
** See note 29.
Adjusted
£’000
100,767
(40,837)
59,930
(43,326)
2023
Adjustments *
£’000
—
—
—
Statutory
£’000
100,767
(40,837)
59,930
(9,229)
(52,555)
—
5,180
5,180
Restated**
2022
Adjustments *
£’000
—
—
—
(7,514)
—
Adjusted
£’000
83,226
(36,085)
47,141
(33,473)
—
16,604
(4,049)
12,555
13,668
(7,514)
20,517
(3,913)
16,604
(354)
16,250
(2,146)
14,104
3,140
(7,189)
(4,049)
23,657
(11,102)
12,555
(713)
(1,067)
(4,762)
1,644
(3,118)
11,488
(502)
10,986
124
(2,059)
—
—
12,169
(3,118)
124
(2,059)
9,051
48.0p
47.4p
17,288
(3,620)
13,668
(374)
13,294
(2,274)
11,020
(1,998)
(5,516)
(7,514)
—
(7,514)
1,235
(6,279)
(93)
3,574
—
—
14,501
(6,279)
Statutory
£’000
83,226
(36,085)
47,141
(40,987)
—
6,154
15,290
(9,136)
6,154
(374)
5,780
(1,039)
4,741
(93)
3,574
8,222
21.0p
20.7p
Note
3
6
7
9
11
11
AB Dynamics plc Annual Report and Accounts 2023
103
Strategic reportGovernanceFinancial statements
Consolidated statement of financial position
As at 31 August 2023
ASSETS
Non-current assets
Goodwill
Acquired intangible assets
Other intangible assets
Property, plant and equipment
Right-of-use assets
Current assets
Inventories
Trade and other receivables
Contract assets
Taxation
Cash and cash equivalents
Assets held for sale
LIABILITIES
Current liabilities
Trade and other payables
Contract liabilities
Derivative financial instruments
Short-term lease liabilities
Contingent consideration
Note
2023
£’000
Restated *
Restated *
2022
£’000
2021
£’000
12
13
13
14
15
16
17
5
18
19
20
5
21
15
28
36,939
32,831
2,746
25,739
1,409
99,664
17,954
14,494
3,152
—
33,486
69,086
1,893
20,127
9,234
—
570
5,943
35,874
23,818
23,665
2,971
25,708
876
77,038
13,651
13,782
4,328
890
30,141
62,792
1,893
16,810
5,068
123
628
—
22,629
22,221
28,282
1,577
25,815
913
78,808
7,901
15,500
4,319
1,542
23,282
52,544
1,893
10,933
5,258
31
456
4,929
21,607
Non-current liabilities
Deferred tax liabilities
Long-term lease liabilities
Net assets
SHAREHOLDERS’ EQUITY
Share capital
Share premium
Other reserves
Retained earnings
Total equity
*
See note 29.
Note
22
15
23
23
24
Restated *
Restated *
2023
£’000
8,708
906
9,614
2022
£’000
6,397
315
6,712
2021
£’000
6,552
511
7,063
125,155
112,382
104,575
229
62,781
2,403
59,742
226
62,260
1,142
48,754
226
62,210
(2,339)
44,478
125,155
112,382
104,575
The financial statements were approved by the Board of Directors and authorised for issue on
23 January 2024 and are signed on its behalf by:
Dr James Routh
Director
Sarah Matthews-DeMers
Director
Company registration number: 08393914
104
AB Dynamics plc Annual Report and Accounts 2023
Strategic reportGovernanceFinancial statements
Consolidated statement of changes in equity
For the year ended 31 August 2023
At 1 September 2021 as previously reported
Prior period adjustment
At 1 September 2021 as restated
Share based payments
Total comprehensive income
Deferred tax on share based payments
Dividend paid
Issue of shares
At 31 August 2022 as restated
At 1 September 2022 as previously reported
Prior period adjustment
At 31 August 2022 restated
Share based payments
Total comprehensive income
Deferred tax on share based payments
Dividend paid
Issue of shares
At 31 August 2023
*
See note 24 for further details of Other reserves.
Note
29
10
23
Note
29
10
23
Share
capital
£’000
226
—
226
—
—
—
—
—
Share
premium
£’000
62,210
—
Other
reserves *
£’000
(2,339)
—
Retained
earnings
£’000
44,889
(411)
Total
equity
£’000
104,986
(411)
62,210
(2,339)
44,478
104,575
—
—
—
—
50
—
3,481
—
—
—
750
4,741
(84)
(1,131)
—
750
8,222
(84)
(1,131)
50
226
62,260
1,142
48,754
112,382
Share
capital
£’000
226
—
226
—
—
—
—
3
Share
premium
£’000
62,260
—
62,260
—
—
—
—
521
229
62,781
Other
reserves *
£’000
1,142
—
1,142
—
(1,935)
—
—
3,196
2,403
*Restated
retained
earnings
£’000
48,333
421
48,754
1,064
10,986
193
(1,255)
—
Total
equity
£’000
111,961
421
112,382
1,064
9,051
193
(1,255)
3,720
59,742
125,155
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.
Retained earnings represent the cumulative value of the profits not distributed to shareholders but retained to finance the future capital requirements of the Group.
The items included in the consolidated statement of changes in equity that relate to transactions with owners are share based payments, dividends paid and issues of shares.
AB Dynamics plc Annual Report and Accounts 2023
105
Strategic reportGovernanceFinancial statements Cash flows used in financing activities
Drawdown of loans
Repayments of loans
Dividends paid
Proceeds from issue of share capital
Repayment of lease liabilities
Net cash used in financing activities
Net increase in cash, cash equivalents
Cash and cash equivalents at beginning of the year
Effects of exchange rate changes
Note
2023
£’000
*Restated
2022
£’000
10
15
6,000
(6,000)
(1,255)
457
(1,124)
(1,922)
3,368
30,141
(23)
—
—
(1,131)
50
(964)
(2,045)
6,940
23,282
(81)
Cash and cash equivalents at end of the year
33,486
30,141
*
Restated to reflect an increase in profit of £925,000 and corresponding increase in working capital from a change in
interpretation of revenue recognition, see note 29.
Consolidated cash flow statement
For the year ended 31 August 2023
Profit before tax
Depreciation and amortisation
Finance expense
Share based payment
Release of contingent consideration
Acquisition costs
Operating cash flows before changes in working capital
Increase in inventories
Decrease in trade and other receivables
(Decrease)/increase in trade and other payables
Cash flows from operations
Cash flows from operations are analysed as:
Adjusted cash flows from operations
Cash impact of adjusting items
Cash flows from operations
Finance costs paid
Income tax received/(paid)
Net cash flows from operating activities
Cash flows used in investing activities
Acquisition of businesses net of cash
Purchase of property, plant and equipment
Capitalised development costs and purchased software
Net cash used in investing activities
Note
25
28
4
2023
£’000
11,488
11,102
1,067
1,263
(5,180)
—
19,740
(2,612)
2,514
(369)
19,273
23,450
(4,177)
19,273
(291)
363
*Restated
2022
£’000
5,780
9,136
374
795
—
290
16,375
(5,751)
1,707
6,350
18,681
20,651
(1,970)
18,681
(89)
(684)
19,345
17,908
(10,656)
(2,930)
(469)
(14,055)
(5,114)
(2,098)
(1,711)
(8,923)
106
AB Dynamics plc Annual Report and Accounts 2023
Strategic reportGovernanceFinancial statements
Notes to the consolidated financial statements
For the year ended 31 August 2023
1. General information
AB Dynamics plc is a public company limited by shares and registered in England and Wales with
company number 08393914. The Company is domiciled in the United Kingdom and the registered
office and principal place of business is Middleton Drive, Bradford on Avon, Wiltshire BA15 1GB. The
consolidated financial statements comprise the Company and its subsidiaries (together referred to as
the ‘Group’).
The principal activity of the Group is the design, manufacture and supply of advanced testing,
simulation and measurement products to the global transport market. The Group’s products and
services are used primarily for the development of road vehicles, particularly in the areas of active
safety and autonomous systems.
Basis of preparation
The consolidated financial statements are measured and presented in sterling. They have been
prepared under the historical cost convention, except for financial instruments that have been
measured at fair value through profit or loss.
The consolidated financial statements have been prepared in accordance with UK-adopted
International Accounting Standards. These statements have been prepared on the going concern
basis, which assumes that the Group will continue to be able to meet its liabilities as they fall due for
the foreseeable future.
New accounting standards and interpretations
A number of amended standards became applicable for the current reporting period. The application
of these amendments has not had any material impact on the disclosures, net assets or results of
the Group.
Standards, amendments and interpretations to published standards not yet effective
The Directors have considered those standards and interpretations, which have not been applied
in the financial statements but are relevant to the Group’s operations, that are in issue but not yet
effective and do not consider that they will have a material impact on the future results of the Group.
2. Summary of significant accounting policies
(a) Going concern
The Group’s activities and an outline of the developments taking place in relation to its products,
services and marketplace are considered in the Chief Executive’s review. The principal risks and
uncertainties and mitigations are included in the Strategic report.
Note 21 to the consolidated financial statements sets out the Company’s financial risks and the
management of capital risks.
The Directors have assessed the principal risks, including by modelling a severe but plausible downside
scenario over an extended assessment period to August 2025, whereby the Group experiences:
• a reduction in demand of 25% over the next two financial years, with no mitigation;
• 10% increase in operating costs from supply chain disruption;
•
•
increase in cash collection cycle; and
increase in input costs resulting in reduction in gross margins to 40%.
With £33.5m of cash at 31 August 2023 and a £15.0m undrawn revolving credit facility, in this severe
downside scenario, the Group has sufficient headroom to be able to continue to operate for the
foreseeable future. The Directors believe that the Group is well placed to manage its financing
and other business risks satisfactorily, and have a reasonable expectation that the Group will have
adequate resources to continue in operation for at least twelve months from the signing date of
the financial statements. They therefore consider it appropriate to adopt the going concern basis
of accounting in preparing the financial statements.
(b) Accounting judgements and sources of estimation uncertainty
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:
Accounting judgements
Assessment of the percentage of completion of construction projects (laboratory testing and simulation)
Management judgements are required on a contract-by-contract basis to determine whether revenue
from contracts with customers is recognised over time. If the criteria for recognition over time are
not met, revenue is recognised at a point in time. Specifically, management judgements are required
to determine whether the Group has an enforceable right to payment for work completed to date at
all times throughout the duration of the contract. The assessment centres on whether, in the unlikely
event of a cancellation of a contract, the customer would be required to compensate the Group for
performance completed to date, either as a result of specific terms and conditions in the contract or
by assessing the relevant common law interpretation in the relevant jurisdiction as appropriate.
AB Dynamics plc Annual Report and Accounts 2023
107
Strategic reportGovernanceFinancial statements 2. Summary of significant accounting policies continued
(b) Accounting judgements and sources of estimation uncertainty continued
Accounting judgements continued
Assessment of the percentage of completion of construction projects (laboratory testing and simulation)
continued
Where the criteria are not met, custom-built laboratory testing and simulator equipment revenue is
recognised at a point in time as performance obligations are met on delivery and on installation.
Where laboratory testing and simulator equipment revenue is recognised over time, further
management judgements are required in determining the profitability and stage of completion of
contracts. This involves regular review by management of project milestones, actual costs incurred
against budgeted costs, forecast costs to complete as well as other pertinent information.
The above estimates are made internally by the Group and any changes of these estimates will result
in a corresponding change in revenue and profit. A 10% change in the stage of completion would not
have a material impact on revenue or profit. Any potential losses on contracts are considered and
appropriately recognised immediately upon occurrence, while contract revenue which cannot be
estimated reliably is recognised only after confirmed by written agreement.
Key sources of estimation uncertainty
Acquisition accounting
When the Group makes an acquisition, it recognises the identifiable assets and liabilities, including
intangible assets, at fair value with the difference between the fair value of net assets acquired and
the fair value of consideration paid comprising goodwill. The key assumptions and estimates used to
determine the valuation of intangible assets acquired are the forecast cash flows, the discount rate and
the useful economic life or the acquired technology and/or customer/ supplier relationships. Customer
and supplier relationships are valued using a discounted cash flow model. Any changes in the discount
rate or cash flow forecast would result in a change between recognised goodwill and intangible assets.
Identification of separable identifiable intangibles on acquisition
Intangible assets are recognised when they are controlled through contractual or other legal rights, or
are separable from the rest of the business, and their fair value can be reliably measured. Technology
and brand have been identified by management as a separate intangible asset as they are separable and
can be reliably measured by valuation of future cash flows. Management do not believe there are any
other intangible assets that have arisen on acquisition during the year which can be reliably measured.
Valuation of separable intangibles on acquisition
When valuating the technology and brand acquired in a business combination, management estimate
the expected future cash flows from the asset and select a suitable discount rate in order to calculate
the present value of those cash flows. Separable intangibles valued on acquisitions made in the year
were £16.8m (2022: £Nil) in respect of technology, £16.1m and in respect of brand, £0.7m.
(c) Revenue and long-term contracts
satisfaction of the performance obligations in contracts with customers. A contract with a customer
is confirmed and exists when a sales contract has been signed by both parties where the terms and
conditions of the sale have been agreed by both parties and it is expected that the entity will be paid
by the customer upon completion of the distinct performance obligations in the contract. Goods and
services are distinct and accounted for as separate performance obligations if they are separately
identifiable in the contract and the customer can benefit from the goods and services either on
their own or together with other readily available resources available to the customer. Revenue is
recognised in the amount the entity expects to receive for the performance of its obligations to the
customer and net of sales taxes. Where contract modifications do occur and the remaining goods
and services are not distinct from those already provided then the transaction price is updated,
and where necessary a cumulative adjustment is made. This occurs infrequently where insignificant
adjustments are made to the equipment supplied or services rendered. Transaction prices are set in
the contract and are thus fixed upon agreeing to enter into a contract with a customer. The Group
does not recognise variable consideration and does not estimate any other revenue other than that
agreed upon in the contract which is not subject to estimation. Rights of return are present in some
contracts, yet these are only triggered by non-performance of the obligations under the contract and
after the Group’s right to repair lapses. There have been no instances of any right of return clause being
invoked for the Group, and correspondingly no return assets, or refund liabilities are recognised.
Where there are multiple performance obligations under a single contract, the Group allocates the
transaction price in relation to the stand-alone selling prices for the performance obligations, in the
contract. Where only one performance obligation is identified in the contract the transaction price
is allocated in full. In instances where specific elements are not separated on a contract and invoice,
such as training and initial support, these revenue elements are recognised independently with
reference to the stand-alone selling prices of these services as if they were provided independently.
Revenue is recognised as the performance obligations in the contract are satisfied and control
of the goods and services has transferred to the customer. For each performance obligation, the
Group determines if the obligation has been settled over time or at a point in time. Performance
obligations are satisfied over time if the performance obligation creates an asset with no alternative
use for the Group and there is an enforceable right to payment for performance completed to date,
or if the customer can simultaneously receive and consume the benefits provided by the Group.
When revenue is recognised over time, the Group measures progress towards satisfaction of the
performance obligations on an output measurement basis, unless input is more appropriate or
provides a reasonable proxy for measuring progress of the stage of completion of the contract.
Variations in contract work and claims are recognised to the extent that they have been agreed with
the customer. The probability of a profitable outcome of the contract is determined by regular review
by management of project milestones, actual costs against budgeted costs and any other pertinent
information. 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.
The Group principally earns revenue through the sale of manufactured test products for automotive
applications and the provision of test and consultancy services and recognises revenue based on the
Contract assets (accrued revenue) and contract liabilities (amounts received in advance of
performance delivery) are recognised separately.
108
108 AB Dynamics plc Annual Report and Accounts 2023
AB Dynamics plc Annual Report and Accounts 2023
Notes to the consolidated financial statements continuedFor the year ended 31 August 2023Strategic reportGovernanceFinancial statementsStrategic reportGovernanceFinancial statements 2. Summary of significant accounting policies continued
(c) Revenue and long-term contracts continued
Supply of manufactured products
The majority of the Group’s revenue is derived from the sale of manufactured products, which
is broken down into two categories, being standard products and bespoke products. Revenue
recognition on standard products which the Group regularly manufactures and sells is measured at
the transaction price that is expected to flow to the Group and recognised at a point in time when the
Group has transferred control to the customer in line with the Incoterms as agreed with the customer.
Revenue from custom-built laboratory and simulator equipment is recognised over time when the
Group has no alternative use for these custom-built pieces of equipment and the Group has an
enforceable right to payment, plus a reasonable profit margin throughout the life of the contract.
The Group performs an assessment on a contract by contract basis of the appropriate measure of
progress towards satisfaction of performance obligations. Where an output measurement basis is
used, surveys of work performed are used to assess the percentage of completion of the contract.
Where this is not appropriate, progress is measured using an input basis by assessing the costs
incurred over the total expected costs to satisfy the obligations in the contract as well as the costs to
complete. When criteria for overtime recognition are not met, revenue is recognised at a point in time
on delivery based on the Inco terms.
Supply of services
The Group recognises revenue from the provision of services to customers which include support,
road testing, track testing, installation and training. Services are a single performance obligation
in the contract with customers. For road testing, track testing, and training services, revenue is
recognised over time as the services are delivered on a straight-line basis over the period in which
the services are performed. For support services under a subscription contract with the customer,
revenue is recognised at the transaction price on a straight-line basis over the contractual period.
Installation service revenue is recognised when the installation is complete and the customer can
obtain the benefits of the installation.
Supply of software
The Group’s software products are sold on licencing arrangements for set contracted periods in
contracts with customers. These contracts provide the customer the right to access the product
during the licence period. A new or renewed licence is a single performance obligation and revenue is
recognised on a straight-line basis over the licence period. Where perpetual licences are sold, revenue
is recognised in full on delivery of the licence.
(d) Basis of consolidation
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. The Group controls an
investee when it is exposed, or has rights, to variable returns from its involvement with the investee
and has the ability to affect those returns through its power over the investee.
All inter-company 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.
(e) Acquisitions
Acquisitions are accounted for using the acquisition method as at the acquisition date, which is the
date on which control is transferred to the Group. Goodwill at the acquisition date represents the
cost of the business combination (excluding acquisition related costs, which are expensed as incurred)
in excess of the fair value of the identifiable tangible and intangible assets and liabilities acquired.
Any contingent consideration payable is recognised at fair value at the acquisition date and held at
fair value through profit and loss with any corresponding interest amortisation changes recognised
through the interest charge.
(f) 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
and 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. Inventory is expensed to cost of sales on consumption which includes direct labour and
direct overheads.
(g) 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 assets, 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.
(i) Financial assets
On initial recognition, financial assets are classified as either financial assets at fair value through
profit or loss or financial assets measured at amortised cost. The Group does not hold any financial
assets at fair value through other comprehensive income.
Financial assets at fair value through profit or loss
As at the end of the reporting period, there were no foreign currency forward contracts classified
under this category.
AB Dynamics plc Annual Report and Accounts 2023
AB Dynamics plc Annual Report and Accounts 2023
109
109
Notes to the consolidated financial statements continuedFor the year ended 31 August 2023Strategic reportGovernanceFinancial statementsStrategic reportGovernanceFinancial statements 2. Summary of significant accounting policies continued
(g) Financial instruments continued
(i) Financial assets continued
Financial assets at amortised cost
Trade receivables and other receivables that have fixed or determinable payments that are not quoted
in an active market are classified as financial assets held at amortised cost when the contractual
terms of the financial asset give rise on specified dates to cash flows that are solely payments of
principal and interest on the principal amount outstanding. Financial assets held at amortised cost are
recognised under an expected credit loss approach, in accordance with IFRS 9. The adoption of IFRS 9
has not had a material impact on the financial statements. Interest income is recognised by applying
the effective interest rate, except for short-term receivables when the recognition of interest would
be immaterial.
(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.
Interim dividends are recognised when paid and final dividends on ordinary shares are recognised
as liabilities when approved for appropriation.
(iv) Derivative financial instruments and hedging activities
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and
are subsequently measured at their fair value. The method of recognising any resulting gain or loss
depends on whether the derivative is designated as a hedging instrument and, if so, the nature of
the item being hedged. Changes in the fair value of any derivative instruments that do not qualify
for hedge accounting are recognised immediately in the income statement.
(h) Property, plant and equipment
Property, plant and equipment is initially recorded at cost. Once the asset is available for use,
depreciation is calculated at rates estimated to write off the cost of the relevant assets, less any
estimated residual value, on either a straight-line basis or reducing balance basis over their expected
useful lives.
110
110
AB Dynamics plc Annual Report and Accounts 2023
AB Dynamics plc Annual Report and Accounts 2023
Plant and machinery
Motor vehicles
Furniture and fittings
Computer equipment
General equipment
Test equipment
Buildings
(i) Intangible assets
10% straight line
25% reducing balance
10% straight line
25%-33% straight line
10% straight line
Between 10–20% straight line
5% straight line
All intangible assets, excluding goodwill arising on a business combination, are stated at their
amortised cost or fair value at initial recognition less any provision for impairment.
(i) Research and development costs
Research expenditure is written off as incurred. Development costs incurred on projects where
the Group retains ownership of intellectual property and the related expenditure is separately
identifiable and measurable, and management are satisfied as to the ultimate technical and
commercial viability of the project, and that the asset will generate future economic benefits, are
recognised as an intangible asset. The assets are amortised on a straight-line basis over the assets
useful life of between three and five years.
(ii) Computer software costs
Where computer software is not integral to an item of property, plant or equipment, its costs are
capitalised as other intangible assets. Amortisation is provided on a straight-line basis over its useful
economic life of between three and seven years.
(iii) Acquired intangible assets – business combinations
Intangible assets that may be acquired as a result of a business combination, include, but are not
limited to, customer lists, supplier lists, databases, technology and software and patents that can be
separately measured at fair value, on a reliable basis. They are separately recognised on acquisition at
fair value, together with the associated deferred tax liability. Amortisation is charged on a straight-
line basis to the consolidated income statement over the expected useful economic lives.
Customer relationships
Brand
Technology
Economic life
7–10 years
5–10 years
5–10 years
(iv) Goodwill – business combinations
Goodwill arising on the acquisition of a subsidiary represents the excess of the aggregate of the fair
value of the consideration over the aggregate fair value of the identifiable intangible, tangible and
current assets and net of the aggregate fair value of the liabilities (including contingent liabilities
of businesses acquired at the date of acquisition). Goodwill is initially recognised as an asset at cost
and is subsequently measured at cost less any accumulated impairment losses. Transaction costs are
expensed and are not included in the cost of acquisition.
Notes to the consolidated financial statements continuedFor the year ended 31 August 2023Strategic reportGovernanceFinancial statementsStrategic reportGovernanceFinancial statements
2. Summary of significant accounting policies continued
(j) Impairment of tangible and intangible assets
An impairment loss is recognised to the extent that the carrying amount of an asset or cash generating
unit (CGU) exceeds its recoverable amount. The recoverable amount of an asset or CGU is the higher
of: (i) its fair value less costs to sell; and (ii) its value in use. Its value in use is the present value of the
future cash flows expected to be derived from the asset or CGU, discounted using a pre-tax discount
rate that reflects current market assessments of the time value of money and the risks specific to
the asset or cash generating unit. The pre-tax discount rates are derived from the post-tax weighted
cost of capital. Assumptions used in the calculation of the Group’s weighted average cost of capital
are benchmarked to externally available data. The pre-tax discount rate applied in the value in use
calculations for the financial year ranged from 13.5% to 15%. The discount rate applied reflects
the different markets, tax rates and associated risks within those jurisdictions in which the Group
operates. Stress testing was performed on the value in use calculations to consider the impact of
reasonably possible worst case scenarios over the forecast period including a 15% relative increase
in the discount rate applied in the assessment of impairment combined with a corresponding 15%
relative decrease in the growth rate. The Ansible Motion CGU is sensitive to assumptions around
winning and delivering future contracts therefore an additional sensitivity was performed to decrease
revenues by 19% with no cost mitigations, reducing the headroom to nil. None of these scenarios
resulted in any CGUs requiring impairment.
Impairment losses are recognised immediately in the consolidated income statement.
(i) Impairment of goodwill
Goodwill acquired in a business combination is allocated to a CGU; CGUs for this purpose represent the
lowest level within the Group at which the goodwill is monitored by the Group’s Board of Directors
for internal and management purposes. CGUs to which goodwill has been allocated are tested for
impairment annually, or more frequently when there is an indication that the unit may be impaired.
If the recoverable amount of the CGU is less than the carrying amount of the unit, the impairment
loss is allocated first to reduce the goodwill attributable to the CGU. Impairment losses cannot be
subsequently reversed.
(ii) Impairment of other tangible and intangible assets
Other tangible and intangible assets are reviewed for impairment when events or changes in
circumstances indicate the carrying value may not be recoverable. Impairment losses and any
subsequent reversals are recognised in the consolidated income statement.
(k) Taxation
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 recognised in other comprehensive income or
directly in equity, respectively.
The current income tax charge is calculated based on 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 based on 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 reporting 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.
(l) 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 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 profit or loss 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 a Black Scholes
model method or Monte Carlo simulation as appropriate.
(m) Foreign currencies
(i) Reporting foreign currency transactions in functional currency
The Group’s consolidated financial statements are presented in pounds sterling. Items included in the
financial statements of each of the Group’s subsidiaries are measured using the functional currency of
the primary economic environment in which the subsidiary operates.
Transactions in currencies other than the entity’s functional currency (‘foreign currencies’) are initially
recorded at the rates of exchange prevailing on the dates of the transactions. At each subsequent
balance sheet date:
AB Dynamics plc Annual Report and Accounts 2023
AB Dynamics plc Annual Report and Accounts 2023
111
111
Notes to the consolidated financial statements continuedFor the year ended 31 August 2023Strategic reportGovernanceFinancial statementsStrategic reportGovernanceFinancial statements (o) Alternative performance measures
Alternative performance measures are adjusted to exclude items of income and expense which,
because of the nature, size and/or infrequency of the events giving rise to them, merit separate
presentation. These specific items are presented separately in the income statement to provide
greater clarity and a better understanding of the impact of these items on the Group’s financial
performance. In doing so, it also facilitates greater comparison of the Group’s underlying results
with prior periods and assessment of trends in financial performance. This split is consistent with how
underlying business performance is measured internally.
Alternative performance measures may include but are not restricted to adjustments to the fair value
of acquisition related items such as contingent consideration, acquired intangible asset amortisation
and other items due to their significance, size or nature, and the related taxation.
(p) Leases
At the lease commencement date (i.e. the date the underlying asset is available for use), the Group
recognises a right-of-use asset and a lease liability on the balance sheet. The lease liability is initially
measured at the present value of future lease payments, discounted using the Group’s incremental
borrowing rate. This is the rate that we would have to pay for a loan of a similar term, and with
similar security, to obtain an asset of similar value. The right-of-use asset is initially measured at cost,
comprising the initial value of the lease liability, any lease payments made before commencement of
the lease, any initial direct costs and any restoration costs. The asset is recorded as property, plant
and equipment, and is depreciated over the shorter of its estimated useful economic life and the
lease term on a straight-line basis. The finance cost is charged to the income statement over the
lease term to produce a constant periodic rate of interest on the lease liability. The lease payment is
allocated between repayment of the lease liability and finance cost. The Group applies the short-term
lease recognition exemption to those leases that have a lease term of twelve months or less from
the commencement date and do not contain a purchase option. It also applies the low-value assets
recognition exemption to leases of assets below £5,000. Lease payments on short-term leases and
leases of low-value assets are recognised as an expense on a straight-line basis over the lease term.
2. Summary of significant accounting policies continued
(m) Foreign currencies continued
(i) Reporting foreign currency transactions in functional currency continued
(a) Foreign currency monetary items are retranslated at the rates prevailing at the balance sheet
date. Exchange differences arising on the settlement or retranslation of monetary items are
recognised in the consolidated income statement.
(b) Non-monetary items measured at historical cost in a foreign currency are not retranslated.
(c)
Non-monetary items measured at fair value in a foreign currency are retranslated using the
exchange rates at the date the fair value was determined. Where a gain or loss on non-monetary
items is recognised directly in equity, any exchange component of that gain or loss is also
recognised directly in equity and conversely, where a gain or loss on a non-monetary item is
recognised in the consolidated income statement, any exchange component of that gain or
loss is also recognised in the consolidated income statement.
(ii) Translation from functional currency to presentational currency
When the functional currency of a Group entity is different from the Group’s presentational currency,
its results and financial position are translated into the presentational currency as follows:
(a) Assets and liabilities are translated using exchange rates prevailing at the reporting date.
(b) Income and expense items are translated at average exchange rates for the year, except where
the use of such an average rate does not approximate the exchange rate at the date of the
transaction, in which case the transaction rate is used.
(c)
All resulting exchange differences are recognised in other comprehensive income; these
cumulative exchange differences are recognised in the consolidated income statement in
the period in which the foreign operation is disposed of.
(iii) Net investment in foreign operations
Exchange differences arising on a monetary item that forms part of a reporting entity’s net
investment in a foreign operation are recognised in the consolidated income statement in the
separate financial statements of the reporting entity or the foreign operation as appropriate. In
the consolidated financial statements, such exchange differences are initially recognised in other
comprehensive income as a separate component of equity and subsequently recognised in the
consolidated income statement on disposal of the net investment.
(n) Assets held for sale
Assets held for sale are assets previously classified as non-current which are expected to be sold
rather than held for continuing use. These have principally arisen as part of a review of our physical
estate. Assets held for sale have not been sold at the balance sheet date but are being actively
marketed for sale, with a high probability of completion within twelve months.
112
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Notes to the consolidated financial statements continuedFor the year ended 31 August 2023Strategic reportGovernanceFinancial statementsStrategic reportGovernanceFinancial statements No customers individually represent more than 10% of total revenue (2022: 12.0%).
Revenue recognised over time during the year was £12.3m (2022: £6.6m).
Assets and liabilities by segment are not reported to the Board of Directors, therefore are not used as
a key decision making tool and are not disclosed here.
A disclosure of non-current assets by location is shown below:
3. Segment reporting
The Group derives revenue from the sale of its advanced measurement, simulation and testing
products used in assisting the global transport market in the laboratory, on the test track and on-road.
The Group has one segment.
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). Revenue is split into different streams in the information reviewed by the Board but all other
aspects of performance are reviewed and managed together.
Revenues are disaggregated as follows:
Revenue by sector
Track testing
Laboratory testing and simulation
Analysis of revenue by destination:
United Kingdom
Rest of Europe
North America
Asia Pacific
Rest of the World
United Kingdom
Rest of Europe
North America
Asia Pacific
2023
£’000
68,610
32,157
100,767
2023
£’000
4,875
22,095
25,171
46,409
2,217
100,767
2022
£’000
64,743
18,483
83,226
2022
£’000
7,299
13,723
20,547
40,941
716
83,226
2023
£’000
66,199
1,049
15,508
16,908
99,664
2022
£’000
39,565
1,262
17,084
19,127
77,038
AB Dynamics plc Annual Report and Accounts 2023
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113
113
Notes to the consolidated financial statements continuedFor the year ended 31 August 2023Strategic reportGovernanceFinancial statementsStrategic reportGovernanceFinancial statements 4. Alternative performance measures
In the analysis of the Group’s financial performance and position, operating results and cash flows,
alternative performance measures are presented to provide readers with additional information.
The principal measures presented are adjusted measures of earnings including adjusted operating
profit, adjusted operating margin, adjusted profit before tax, adjusted EBITDA and adjusted earnings
per share.
The financial statements include both statutory and adjusted non-GAAP financial measures, the latter
of which the Directors believe better reflect the underlying performance of the business and provide
a more meaningful comparison of how the business is managed and measured on a day-to-day basis.
The Group’s alternative performance measures and KPIs are aligned to the Group’s strategy and
together are used to measure the performance of the business and form the basis of the performance
measures for remuneration. Adjusted results exclude certain items because if included, these items
could distort the understanding of the performance for the year and the comparability between
the periods.
We provide comparatives alongside all current year figures. The term ‘adjusted’ is not defined under
IFRS and may not be comparable with similarly titled measures used by other companies. All profit and
earnings per share figures in this Annual Report relate to underlying business performance (as defined
above) unless otherwise stated.
Amortisation of acquired intangibles
The amortisation relates to the acquisition of Ansible Motion Limited on 20 September 2022,
VadoTech Group on 3 March 2021 and the businesses acquired in 2019, DRI and rFpro.
Acquisition related (credit)/costs
The credit in the current year relates to the release of contingent consideration on the acquisition
of Ansible Motion, less acquisition costs. The credit in the current year relates to the release of
contingent consideration on the acquisition of Ansible Motion (£5.2m), less acquisition costs (£0.7m).
The prior year costs also related to Ansible Motion acquisition costs.
ERP development costs
These costs relate to the development, configuration and customisation of the Group’s ERP system
which is hosted on the cloud.
Acquisition related finance costs
Finance costs relate to the unwind of the discount on contingent consideration payable on the
acquisition of Ansible Motion.
Tax
Amortisation of acquired intangibles
Acquisition related (credit)/costs
ERP development costs
Adjustments to operating profit
Acquisition related finance costs
Adjustments to profit before tax
2023
£’000
7,189
(4,502)
1,362
4,049
713
4,762
2022
£’000
5,516
328
1,670
7,514
—
7,514
The tax impact of these adjustments was as follows: amortisation of acquired intangible assets £1.3m
(2022: £0.8m), acquisition related costs £0.1m (2022: £0.1m) and ERP £0.3m (2022: £0.3m).
Cash impact
The operating cash flow impact of the adjustments was an outflow of £4.2m (2022: £2.0m) being
£1.4m (2022: £1.7m) in relation to ERP development costs and £2.8m (2022: £0.3m) in relation to
acquisition costs of which £2.1m (2022: £Nil) was in relation to a bonus paid to employees of the
acquired entity for pre-acquisition service. The cash to pay this bonus was included within the cash
acquired in the opening balance sheet, therefore the impact on the cash flow statement was a
reduction in cash flows on acquisition of businesses and a corresponding decrease in cash flows from
operations.
114
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Notes to the consolidated financial statements continuedFor the year ended 31 August 2023Strategic reportGovernanceFinancial statementsStrategic reportGovernanceFinancial statements 5. Revenue from contracts with customers
Contract balances
The Group has recognised the following revenue related contract assets and liabilities:
Contract assets (i)
Contract liabilities (ii)
2023
£’000
3,152
9,234
Restated *
2022
£’000
4,328
5,068
6. Finance expense
Finance income
Finance expense
Unwinding of discount on contingent consideration
Net finance expense
Revenue recognised in the period from:
Amounts included in contract liability at the beginning of the period:
7. Profit before tax
– Laboratory testing and simulation
1,156
5,242
* See note 29.
(i) Significant changes in contract assets
Contract assets have decreased by 27% during the year reflecting completion of three contracts
during the year.
(ii) Significant changes in contract liabilities
This balance consists of deferred income and payments in advance. This increase of contract liabilities
was due to deferred income which principally relates to the contracts in progress at Ansible Motion
Limited which was acquired during the year. Within this figure is £3,158,000 relating to support which
is recognised over the period in which these obligations are performed.
Remaining performance obligations as at 31 August 2023
Unsatisfied performance obligations
Track testing
Laboratory testing and simulation
* See note 29.
2023
£’000
22,207
18,794
Restated *
2022
£’000
12,447
13,029
The revenue on outstanding performance obligations at 31 August 2023 on the track testing systems
will be recognised on delivery of these items, alongside the associated cost of sales, in the following
financial year.
The revenue on outstanding performance obligations at 31 August 2023 on laboratory testing
and simulation systems will be recognised over time alongside the associated cost of sales, in the
following financial year. The typical length of time for these construction projects is 18–24 months.
Assets recognised from costs to obtain or fulfil customer contracts
No amounts have been recognised in relation to these categories of assets as at 31 August 2023
(2022: Nil).
The profit before tax is stated after charging/(crediting):
Depreciation of tangible fixed assets
Depreciation of right-of-use assets
Amortisation of other intangible assets
Amortisation of acquired intangible assets
Realised loss/(gain) on foreign exchange
ERP development costs
Remeasurement of contingent consideration
Staff costs:
– Wages and salaries
– Social security costs
– Other pension costs
Share based payments
Contractor costs
Research and development costs charged as an expense
*
The prior year wages and salaries have been restated to exclude £1,269,000 of costs for contractors and labour which were not
subject to an employment contract.
Auditor’s remuneration
Fees payable to the Group's auditor during the year for:
– the audit of the Company's financial statements
– the audit of the Company's subsidiaries
2023
£’000
76
447
523
2022
£’000
90
51
141
The increase in audit fees are due to a change in auditor from Crowe U.K. LLP to Grant
Thornton UK LLP.
AB Dynamics plc Annual Report and Accounts 2023
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115
115
2023
£’000
(42)
396
713
1,067
2023
£’000
2,264
971
679
7,189
1,050
1,362
(5,180)
2022
£’000
—
374
—
374
*Restated
2022
£’000
2,352
964
305
5,516
(368)
1,670
—
27,039
25,177
2,781
1,219
1,263
1,871
247
2,291
1,118
795
1,269
356
Notes to the consolidated financial statements continuedFor the year ended 31 August 2023Strategic reportGovernanceFinancial statementsStrategic reportGovernanceFinancial statements 8. Employees
The average monthly number of employees, including Directors, during the year was as follows:
The statutory effective rate of tax for the year of 4.4% (2022: 17.9%) is lower than (2022: lower than)
the standard rate of corporation tax in the UK of 21.5% (2022: 19.0%) as set out below.
The effective rate of tax on the adjusted profit before tax is 13.2% (2022: 17.1%).
The tax charge can be reconciled to the consolidated income statement as follows:
Directors and commercial
Engineers and technicians
Administration
2023
No.
23
375
75
473
2022
No.
23
351
60
434
The total number of employees at the year end was 471 (2022: 428).
Tax effects of:
Total remuneration of key management personnel, being the Directors of the Company and the
members of the Executive Committee (‘Excom’) is set out below:
Short-term employee benefits
Post-employment benefits
Social security costs
Share based payments – equity settled
2023
£’000
2,634
123
182
852
2022
£’000
2,212
104
216
691
3,791
3,223
Further details relating to the remuneration of the Directors of the Company can be found on page 85
in the Remuneration Committee report. The total remuneration paid to or receivable by the Directors
of the Group in respect of qualifying services is £1.7m (2022: £1.3m). Pension contributions totalling
£4,000 (2022: £3,000) were made into the defined contribution scheme for two Directors in the year
(2022: two).
9. Tax expense
Current tax:
– for the financial year
– adjustments in respect of prior year
Deferred tax (note 22):
– origination and reversal of temporary differences
– adjustments in respect of prior year
*
See note 29.
116
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AB Dynamics plc Annual Report and Accounts 2023
2023
£’000
1,853
8
1,861
(1,408)
49
502
Restated *
2022
£’000
811
6
817
(290)
512
1,039
Profit before tax
Tax at the applicable statutory rate of 21.5% (2022: 19%)
Non-taxable (income)/ non-deductible expenses
Research and development tax credit
Adjustments in respect of prior year
Patent box relief**
Changes in tax rates
Overseas tax rates
Tax expense for the financial year
* See note 29.
2023
£’000
11,488
2,470
(727)
(135)
58
(1,133)
(14)
(17)
502
Restated*
2022
£’000
5,780
1,098
238
(196)
175
(642)
390
(24)
1,039
** Patent box relief represents the tax effect of the reduced amount payable on profits that fall within the Patent Box regime.
In addition to the amount charged to the consolidated income statement, the following amounts
relating to tax have been recognised directly in equity:
Deferred tax
Change in estimated excess tax deductions related to share based payments
Total income tax recognised directly in equity
Factors affecting the tax charge in future years
2023
£’000
(193)
(193)
2022
£’000
84
84
The main rate of corporation tax in the UK increased from 19% to 25% on 1 April 2023. In 2024, the
effective rate will increase due to the full-year effect of this change.
The Group’s future tax charge could be affected by several factors including: tax reform in the UK,
USA, Germany, Japan, Singapore or China, including any arising from the European Commission
initiatives such as the proposed Tax and Financial Reporting Directive; changes to eligibility for the
R&D expenditure credit scheme (RDEC), any future acquisitions, and availability of R&D and Patent
box relief.
Notes to the consolidated financial statements continuedFor the year ended 31 August 2023Strategic reportGovernanceFinancial statementsStrategic reportGovernanceFinancial statements 10. Dividends paid
Final 2021 dividend paid of 3.24p per share
Interim 2022 dividend paid of 1.76p per share
Final 2022 dividend paid of 3.54p per share
Interim 2023 dividend paid of 1.94p per share
2023
£’000
—
—
811
444
2022
£’000
733
398
—
—
12. Goodwill
At 1 September 2022
Acquisitions
Exchange differences
1,255
1,131
At 31 August 2023
The Board has proposed a final dividend of 4.42p per share totalling £1,014,000. An interim
dividend was paid of 1.94p per share totalling £444,000. If approved, the final dividend will
be paid on 6 March 2024 to shareholders on the register on 9 February 2024.
11. Earnings per share
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.
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares
outstanding to assume conversion of all dilutive potential shares. The Company has one category of
potentially dilutive shares, namely share options.
The calculation of earnings per share is based on the following earnings and number of shares.
Weighted average number of shares (’000)
– Basic
– Diluted
Earnings per share
Profit for the year attributable to owners of the Group (£’000)
Basic earnings per share
Diluted earnings per share
Adjusted earning per share
2023
22,886
23,193
10,986
48.0p
47.4p
Restated *
2022
22,625
22,908
4,741
21.0p
20.7p
Adjusted profit for the year attributable to owners of the Group (£’000)
14,104
11,020
Adjusted earnings per share
Adjusted diluted earnings per share
*
See note 29.
61.6p
60.8p
48.7p
48.1p
VadoTech
Group
£’000
6,347
—
(37)
6,310
VadoTech
Group
£’000
6,298
49
6,347
DRI
£’000
9,936
—
(856)
9,080
DRI
£’000
8,388
1,548
9,936
rFpro
£’000
7,535
—
—
Ansible
Motion
£’000
—
14,014
Total
£’000
23,818
14,014
—
(893)
7,535
14,014
36,939
rFpro
£’000
7,535
—
7,535
Ansible
Motion
£’000
—
—
—
Total
£’000
22,221
1,597
23,818
At 1 September 2021
Exchange differences
At 31 August 2022
Goodwill acquired in a business combination is allocated at acquisition to the cash generating units
(CGUs) that are expected to benefit from that business combination. The carrying amount of the
goodwill has been allocated to the CGUs to which they relate.
The Group tests goodwill at least annually for impairment. Tests are conducted more frequently
if there are indications that goodwill might be impaired. The recoverable amounts of the CGUs are
determined from value in use calculations. The key assumptions for the value in use calculations have
been individually estimated for each CGU and include the discount rates and expected changes to
cash flows during the period for which management has detailed plans.
Management estimates discount rates using pre-tax rates that reflect current market assessments
of the time value of money and the risks specific to each of the CGUs. Pre-tax discount rates, derived
from the Group’s post-tax weighted average cost of capital which have been adjusted for a premium
specific to each of the CGUs to account for differences in currency risk, country risk and other factors
affecting specific CGUs, have been used to discount projected cash flows. The pre-tax discount rate
applied in the value in use calculations for the financial year ranged from 13.5% to 15%.
Expected changes to cash flows during the period for which management has detailed plans relate
to revenue forecasts and forecast operating margins in each of the operating companies. The relative
value ascribed to each varies between CGUs as the budgets are built up from the underlying operating
companies within each CGU, but the key assumption for each CGU is growth resulting from the long-term
drivers in the industry, including the increase in ADAS and autonomy and increased regulation.
AB Dynamics plc Annual Report and Accounts 2023
AB Dynamics plc Annual Report and Accounts 2023
117
117
Notes to the consolidated financial statements continuedFor the year ended 31 August 2023Strategic reportGovernanceFinancial statementsStrategic reportGovernanceFinancial statements 12. Goodwill continued
The calculations have used the Group’s forecast figures for the next three years. This is based on data derived from the three-year plan that has been approved by the Board. At the end of three years, the
calculations assume the performance of the CGUs will grow at a nominal weighted average annual rate of 2.5% in perpetuity. Growth rates are based on management’s view of industry growth forecasts.
Changes in selling prices and direct costs are based on past practices and expectations of future changes. The weighted average cost of capital is derived using beta values of a comparator group of companies
adjusted for funding structures as appropriate.
The pre-tax discount rates used for value in use calculations and the carrying value of goodwill by the principal CGU range from 13.5% to 15.0%.
Following a detailed review, no impairment losses were recognised in the year ended 31 August 2023.
Sensitivity testing was performed on the forecasts to consider the impact of reasonably possible worst case scenarios over the forecast period, including a 15% increase in the discount rate combined with a
15% decrease in the growth rate. None of these scenarios resulted in any CGUs requiring impairment.
13. Acquired and other intangible assets
Cost
At 1 September 2022
Additions
Acquisitions
Disposals
Exchange differences
At 31 August 2023
Amortisation
At 1 September 2022
Charge for the year
Disposals
Exchange differences
At 31 August 2023
Net book value
At 31 August 2022
At 31 August 2023
Internally generated additions total £395,770 (2022: £173,500).
118
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AB Dynamics plc Annual Report and Accounts 2023
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Customer
relationships
£’000
Brand
£’000
Technology
£’000
Total
acquired
intangible
assets
£’000
Capitalised
development
costs
£’000
Total other
intangible
assets
£’000
24,613
2,089
11,100
37,802
3,388
3,388
—
—
—
(455)
24,158
6,150
3,119
—
(177)
9,092
—
700
—
(106)
2,683
641
344
—
(38)
947
—
—
16,100
16,800
—
(201)
—
(762)
469
—
(88)
(15)
469
—
(88)
(15)
26,999
53,840
3,754
3,754
7,346
3,726
—
(102)
14,137
7,189
—
(317)
417
679
(88)
—
417
679
(88)
—
10,970
21,009
1,008
1,008
18,463
15,066
1,448
1,736
3,754
16,029
23,665
32,831
2,971
2,746
2,971
2,746
Notes to the consolidated financial statements continuedFor the year ended 31 August 2023Strategic reportGovernanceFinancial statementsStrategic reportGovernanceFinancial statements 13. Acquired and other intangible assets continued
Cost
At 1 September 2021
Additions
Disposals
Exchange differences
At 31 August 2022
Amortisation
At 1 September 2021
Charge for the year
Exchange differences
At 31 August 2022
Net book value
At 31 August 2021
At 31 August 2022
Customer
relationships
£’000
Brand
£’000
Technology
£’000
Total
acquired
intangible
assets
£’000
Capitalised
development
costs
£’000
Investment
£’000
Total other
intangible
assets
£’000
23,837
1,897
10,738
36,472
—
—
776
—
—
192
—
—
362
24,613
2,089
11,100
2,890
3,020
240
6,150
20,947
18,463
394
195
52
641
1,503
1,448
4,906
2,301
139
7,346
5,832
3,754
—
—
1,330
37,802
8,190
5,516
431
14,137
28,282
23,665
1,677
1,711
—
—
3,388
112
305
—
417
1,565
2,971
12
—
(12)
—
—
—
—
—
—
12
—
1,689
1,711
(12)
—
3,388
112
305
—
417
1,577
2,971
Acquired intangible assets relate to items acquired through business combinations which are amortised over their useful economic life.
Other intangible assets comprise of acquired intellectual property and capitalised development costs.
AB Dynamics plc Annual Report and Accounts 2023
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119
119
Notes to the consolidated financial statements continuedFor the year ended 31 August 2023Strategic reportGovernanceFinancial statementsStrategic reportGovernanceFinancial statements 14. Property, plant and equipment
Land and
buildings
£’000
Plant and
equipment
£’000
Test
equipment
£’000
Motor
vehicles
£’000
Total
£’000
Land and
buildings
£’000
Plant and
equipment
£’000
Test
equipment
£’000
Motor
vehicles
£’000
Cost
32,154
At 1 September 2021
22,135
Cost
At 1 September 2022
22,569
Additions
Acquisition of businesses
Disposals
Exchange differences
128
—
—
(144)
4,731
1,906
31
(758)
(129)
At 31 August 2023
22,553
5,781
Accumulated depreciation
At 1 September 2022
1,612
1,830
Charge for the year
Disposals
Exchange differences
At 31 August 2023
Net book value
At 31 August 2022
At 31 August 2023
520
—
(43)
951
(581)
(28)
2,089
2,172
20,957
20,464
2,901
3,609
4,349
763
—
(2,000)
(121)
2,991
2,712
683
(1,822)
(40)
1,533
1,637
1,458
505
133
—
(29)
(7)
602
292
110
(4)
(4)
394
213
208
2,930
Additions
31
Disposals
Exchange differences
At 31 August 2022
Accumulated depreciation
At 1 September 2021
Charge for the year
Disposals
Exchange differences
At 31 August 2022
Net book value
At 31 August 2021
At 31 August 2022
(2,787)
(401)
31,927
6,446
2,264
(2,407)
(115)
6,188
25,708
25,739
193
(18)
259
22,569
961
612
(18)
57
3,665
1,500
(579)
145
4,731
4,201
312
(239)
75
4,349
1,448
1,951
854
(575)
103
828
(100)
33
1,612
1,830
2,712
21,174
20,957
2,217
2,901
2,250
1,637
There were no capital commitments contracted and not yet provided in these financial statements.
120
120 AB Dynamics plc Annual Report and Accounts 2023
AB Dynamics plc Annual Report and Accounts 2023
Total
£’000
30,403
2,098
(836)
489
32,154
4,588
2,352
(693)
199
6,446
25,815
25,708
402
93
—
10
505
228
58
—
6
292
174
213
Notes to the consolidated financial statements continuedFor the year ended 31 August 2023Strategic reportGovernanceFinancial statementsStrategic reportGovernanceFinancial statements 15. Leases
Cost
At 1 September 2022
Additions
Acquisitions
Disposals
Exchange differences
At 31 August 2023
Accumulated depreciation
At 1 September 2022
Charge for the year
Disposals
Exchange differences
At 31 August 2023
Net book value
At 31 August 2022
At 31 August 2023
Land and
buildings
£’000
2,540
1,141
441
(730)
(112)
Total
£’000
2,540
1,141
441
(730)
(112)
Cost
At 1 September 2021
Additions
Disposals
Exchange differences
At 31 August 2022
3,280
3,280
Accumulated depreciation
1,664
971
(689)
(75)
1,871
876
1,409
At 1 September 2021
1,664
Charge for the year
971
(689)
(75)
1,871
876
1,409
Disposals
Exchange differences
At 31 August 2022
Net book value
At 31 August 2021
At 31 August 2022
Lease liabilities
Maturity analysis – contractual undiscounted cash flows
Less than one year
One to five years
More than five years
Total undiscounted cash flows
Discount
Total lease liabilities
Current
Non-current
Land and
buildings
£’000
2,052
938
(572)
122
2,540
Total
£’000
2,052
938
(572)
122
2,540
1,139
1,139
964
(572)
133
964
(572)
133
1,664
1,664
913
876
2023
£’000
624
882
85
1,591
(115)
1,476
570
906
913
876
2022
£’000
631
319
—
950
(7)
943
628
315
AB Dynamics plc Annual Report and Accounts 2023
AB Dynamics plc Annual Report and Accounts 2023
121
121
Notes to the consolidated financial statements continuedFor the year ended 31 August 2023Strategic reportGovernanceFinancial statementsStrategic reportGovernanceFinancial statements 15. Leases continued
Amounts recognised in the consolidated statement of comprehensive income
Depreciation of right-of-use assets
Interest on lease liabilities
Amounts recognised in the consolidated cash flow statement
Principal lease payments
Interest payments on leases
16. Inventories
Raw materials
Work-in-progress
Finished goods
* See note 29.
2023
£’000
971
55
2023
£’000
1,124
55
2023
£’000
10,640
5,067
2,247
17,954
2022
£’000
964
40
2022
£’000
964
40
Restated *
2022
£’000
11,042
2,145
464
13,651
The maximum exposure to credit risk for trade receivables at 31 August, by currency, was:
Sterling
Euro
US dollar
Japanese yen
Trade receivables, before credit loss provisions, are analysed as follows:
Not past due
Past due, no credit loss for impairment
Past due, credit loss for impairment
2023
£’000
4,069
4,734
1,133
450
2022
£’000
4,754
3,482
1,386
470
10,386
10,092
2023
£’000
7,946
2,440
970
2022
£’000
3,394
6,698
508
11,356
10,600
The ageing of trade receivables, classified as past due, but not impaired, is as follows:
Less than three months past due
Over three months past due
The value of inventories recognised as an expense during the year was £29,655,000 (2022: £24,755,000).
During the year, the amount of write down of inventories recognised as an expense was £Nil
(2022: £220,000).
Credit loss provision
17. Trade and other receivables
Trade receivables
Less: credit loss provision
Other receivables
Prepayments
Other receivables consist mainly of VAT, withholding taxes and deposits.
122
122 AB Dynamics plc Annual Report and Accounts 2023
AB Dynamics plc Annual Report and Accounts 2023
At 1 September
Charged in the year
At 31 August
The Group’s expected credit loss provision is £1.0m (2022: £0.5m).
2023
£’000
11,356
(970)
10,386
2,122
1,986
14,494
2022
£’000
10,600
(508)
10,092
2,394
1,296
13,782
2023
£’000
1,118
1,322
2,440
2023
£’000
508
462
970
2022
£’000
5,042
1,656
6,698
2022
£’000
592
(84)
508
Notes to the consolidated financial statements continuedFor the year ended 31 August 2023Strategic reportGovernanceFinancial statementsStrategic reportGovernanceFinancial statements 18. Cash and cash equivalents
The maximum exposure to foreign currency risk for trade payables at 31 August, by currency, was:
Cash at bank:
– Sterling
– Euro
– US dollar
– Japanese yen
– Other currencies
Net cash
Cash and cash equivalents
Lease liabilities
19. Assets held for sale
Following a review of our existing manufacturing locations, previously acquired land is surplus to
requirements and has been classified as held for sale at fair value less costs to sell of £1,893,000. The
sale is expected to be completed during the first half of FY 2024.
20. Trade and other payables
Trade payables
Social security and other taxes
Other payables and accruals
*
See note 29.
2023
£’000
4,946
697
14,484
20,127
Restated *
2022
£’000
4,956
571
11,283
16,810
Other payables and accruals comprise accrued expenses and accrued employee related costs.
2023
£’000
2022
£’000
25,282
3,058
3,916
916
314
Sterling
15,230
Euro
US dollar
Japanese yen
8,867
4,111
1,596
337
2023
£’000
4,087
265
518
76
4,946
2022
£’000
3,635
154
1,096
71
4,956
33,486
30,141
2023
£’000
33,486
(1,476)
32,010
2022
£’000
30,141
(943)
29,198
21. 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 mitigating the potential adverse effects on the Group’s financial performance.
(a) Currency risk
The Group is exposed to foreign currency risk on transactions and balances that are denominated in
currencies other than the functional currency of reporting entities. The transactional exposure arises
on trade receivables, trade payables and cash and cash equivalents and these balances are analysed by
currency in notes 17, 18 and 20. 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 the cash inflows (revenue stream) and
cash outflows used for purposes such as capital expenditure and operational expenditure in the
respective currencies. Forward exchange contracts are used to manage transactional exposure where
appropriate.
Management considers that the most significant foreign exchange risk relates to US dollar and euro.
The Group’s sensitivity to a 10% strengthening in sterling against each of these currencies (with other
variables held constant) is as follows:
Decrease in adjusted operating profit (at average rates):
US dollar
Euro
Yen
2023
£’000
262
382
163
2022
£’000
230
310
310
AB Dynamics plc Annual Report and Accounts 2023
AB Dynamics plc Annual Report and Accounts 2023
123
123
Notes to the consolidated financial statements continuedFor the year ended 31 August 2023Strategic reportGovernanceFinancial statementsStrategic reportGovernanceFinancial statements 21. Financial instruments continued
(b) Interest rate risk
(e) Liquidity 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.
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
management to ensure as far as possible that it will have sufficient liquidity to meet its liabilities when
they fall due.
A 100 basis points strengthening/weakening of the interest rate as at the end of the reporting
period would have a £200,000 impact on profit after taxation and equity. This assumes that all other
variables remain constant.
The following table details the Group’s contractual maturity for its financial liabilities. The table has
been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date
on which the Group and the Company can be required to pay.
(c) Equity price risk
The Group does not have any quoted investments and hence is not exposed to equity price risk.
The Group’s financial liabilities are as follows:
(d) 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. An analysis of the ageing and currency of trade receivables is set out
in note 17. An analysis of cash and cash equivalents is set out in note 18.
The Group establishes an allowance for impairment that represents its expected credit loss in respect
of the trade and other receivables as appropriate. In addition to expected credit losses provision, the
Group’s policy is to provide in full for specific items within trade receivables, being those outstanding
for more than 90 days beyond agreed terms and provide for balances when there is uncertainty
regarding recoverability. Impairment is estimated by management based on prior experience and the
current economic environment.
The Group’s major concentration of credit risk at 31 August 2023 relates to the amounts owing by 20
customers which constituted approximately 69% of its trade receivables as at the end of the reporting
period. 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:
USA
United Kingdom
Europe
Rest of the World
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AB Dynamics plc Annual Report and Accounts 2023
AB Dynamics plc Annual Report and Accounts 2023
2023
£’000
805
134
3,072
6,375
2022
£’000
1,326
541
2,407
5,818
Trade payables
Other payables
Lease liabilities
Contingent consideration
Derivative financial instruments
The maturities of the undiscounted liabilities are as follows
(excluding leases):
Less than one year
*
See note 29.
(f) Capital risk management
2023
£’000
4,946
14,484
1,476
5,943
—
Restated *
2022
£’000
4,956
11,284
943
—
123
26,849
17,306
19,430
16,363
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 the dividend 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.
10,386
10,092
At 31 August 2023, the Group’s cash resources exceed its total debt. The Company hence has
no net debt.
Notes to the consolidated financial statements continuedFor the year ended 31 August 2023Strategic reportGovernanceFinancial statementsStrategic reportGovernanceFinancial statements 21. Financial instruments continued
(g) Classification of financial instruments
All financial instruments are categorised as follows:
Financial assets
Trade receivables
Contract assets
Cash and bank balances
Financial liabilities held at amortised cost
Trade and accruals and other payables
Lease liabilities
Financial liabilities held at fair value through profit and loss
Contingent consideration
* See note 29.
(h) Fair value hierarchy
22. Deferred tax
At 1 September
Acquisitions
Recognised in profit or loss:
– in respect of timing differences
– in respect of deferred tax on share options
Recognised in equity:
– in respect of deferred tax on share options
Exchange differences
At 31 August
The deferred tax balance is analysed as follows:
Deferred tax liability
The deferred tax liabilities are attributable to:
2023
£’000
10,386
3,152
33,486
47,024
19,430
1,476
20,906
5,943
5,943
Restated *
2022
£’000
10,092
4,328
30,141
44,561
16,363
943
17,306
—
—
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.
Short-term timing differences
Acquisitions
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 carrying value of all financial instruments approximates their fair value (valued using level 2 or
level 3 in the case of assets held for sale).
2023
£’000
(6,397)
(3,917)
1,290
68
193
55
2022
£’000
(6,552)
—
290
(512)
84
293
(8,708)
(6,397)
2023
£’000
(8,708)
(8,708)
2023
£’000
(1,135)
(7,573)
(8,708)
2022
£’000
(6,397)
(6,397)
2022
£’000
199
(6,596)
(6,397)
AB Dynamics plc Annual Report and Accounts 2023
AB Dynamics plc Annual Report and Accounts 2023
125
125
Notes to the consolidated financial statements continuedFor the year ended 31 August 2023Strategic reportGovernanceFinancial statementsStrategic reportGovernanceFinancial statements 23. Share capital
The allotted, called up and fully paid share capital is made up of 22,934,365 ordinary shares of
£0.01 each.
At 1 September 2021
Issued during the year
At 31 August 2022
Issued during the year
At 31 August 2023
Note
(i)
(ii)
Number
of shares
’000
22,622
4
22,626
308
22,934
Share
capital
£’000
226
—
226
3
229
Share
premium
£’000
62,210
50
62,260
521
62,781
Total
£’000
62,436
50
62,486
524
63,010
(i)
During the year ended 31 August 2022, 1,654 shares were issued to satisfy exercises of share options.
A total of 1,536 shares and 932 shares were issued to James Routh and Sarah Matthews-DeMers
respectively in satisfaction of 20% of their annual bonus payments for the year ended 31 August 2021.
(ii) During the year ended 31 August 2023, 45,226 shares were issued to satisfy exercises of share
options of which 33,334 related to share options exercised by James Routh. A total of 2,424
shares and 1,454 shares were issued to James Routh and Sarah Matthews-DeMers respectively in
satisfaction of 20% of their annual bonus payments for the year ended 31 August 2022.
A further 258,795 shares were issued in partial consideration for the acquisition of Ansible Motion
Limited on 20 September 2022.
24. Other reserves
Reconstruction
reserve
£’000
Merger relief
reserve
£’000
Translation
reserve
£’000
Hedging
reserve
£’000
At 1 September 2021
(11,284)
11,390
Total comprehensive income
—
—
At 31 August 2022*
(11,284)
11,390
Total comprehensive expense
Issue of shares
—
—
—
3,196
At 31 August 2023
(11,284)
14,586
(2,414)
3,574
1,160
(2,059)
—
(899)
(31)
(93)
(124)
124
—
—
Other
reserves
£’000
(2,339)
3,481
1,142
(1,935)
3,196
2,403
* Restated per note 29.
The reconstruction reserve and merger relief reserve have arisen as follows:
The acquisition by the Company of the entire issued share capital of Anthony Best Dynamics Limited
in 2013 was accounted for as a Group reconstruction. Consequently, the assets and liabilities of the
Group were recognised at their previous book values as if the Company had always been the Parent
Company of the Group.
126
126
AB Dynamics plc Annual Report and Accounts 2023
AB Dynamics plc Annual Report and Accounts 2023
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
were transferred to the reconstruction reserve.
The current year increase in the merger relief reserve was due to the acquisition of 100% of the issued
share capital of Ansible Motion of which part of the consideration was the issue of new ordinary
shares in AB Dynamics plc. See note 28.
25. Share based payments
The share based compensation schemes were established to reward and incentivise the Executive
management team and staff for delivering share price growth. The schemes are administered by the
Remuneration Committee.
The schemes adopted by the Company are equity settled and a charge of £1,263,000 (2022: £795,000)
has been charged to the consolidated statement of comprehensive income relating to these options.
Summary of movements in share options
Outstanding at 1 September 2022
Options and awards granted
Options and awards exercised
Options and awards lapsed
Outstanding at 31 August 2023
Exercisable at 31 August 2023
Outstanding at 1 September 2021
Options and awards granted
Options and awards exercised
Options and awards lapsed
Outstanding at 31 August 2022
Exercisable at 31 August 2022
Weighted
average
exercise price
(pence)
1,445
—
1,010
833
709
395
691
1,271
395
2,140
1,445
1,358
Number
of shares
540,233
97,756
(45,226)
(131,744)
461,019
28,545
466,306
135,581
(1,654)
(60,000)
540,233
86,704
The weighted average share price on the date of exercise was 1,947p (2022: 978p). The weighted
average remaining contractual life of the options outstanding at the statement of financial position
date is 7.7 years (2022: 8.2 years).
The weighted average fair value of options granted in the year was £16.45 (2022: £12.71).
Notes to the consolidated financial statements continuedFor the year ended 31 August 2023Strategic reportGovernanceFinancial statementsStrategic reportGovernanceFinancial statements
The carrying amount of each class of Ansible Motion Limited’s assets before combination is set
out below:
3 December
2021
2 December
2020
17 January
2020
Right-of-use asset
Inventory
25. Share based payments continued
Summary of movements in share options continued
A number of the options and awards lapsed related to employees who left in previous years but
deemed as lapses in the current year.
The fair values of the share option awards granted were calculated using a Black Scholes option
pricing model. The long-term incentive plan awards have targets based on earnings per share total
growth and shareholder return and were valued using a Monte Carlo simulation. The inputs into the
model for awards granted were as follows:
Date awarded
Stock price
Exercise price
Interest rate
Volatility
Vesting period
4 January
2023
1,613p
£Nil
3.43%
48%
3 years
11 March
2022
1,025p
£Nil
1.25%
64%
3 years
1,750p
£Nil
0.50%
62%
3 years
1,768p
£Nil
0.02%
53%
3 years
2,230p
£Nil
0.39%
40%
3 years
The expected volatility was determined with reference to the published share price.
The long-term incentive plan awards vest on the third anniversary of the award date.
26. Related party disclosures
The remuneration of the key management personnel of the Group is set out in note 8.
27. Ultimate controlling party
There is no ultimate controlling party.
28. Acquisition of businesses
On 20 September 2022, the Group acquired 100% of the issued share capital of Ansible Motion
Limited, a leading provider of advanced simulators to the global automotive market.
The initial £17,600,000 consideration comprised £14,400,000 of cash and £3,200,000 of new ordinary
shares in AB Dynamics plc. A maximum additional £12,000,000 performance payment was available
subject to certain performance criteria being met for the year ended 31 August 2023. An accrual for
the contingent consideration was included in the balance sheet at fair value of £9,882,000 at the
acquisition date, which has been adjusted at the year end to £5,417,000 following completion of the
performance period. £528,000 of the total consideration has been retained against any potential
warranties. The performance payment is payable in cash in January 2024.
Intangible assets
Property, plant and equipment
Trade and other receivables
Cash
Trade and other payables
Lease liabilities
Deferred tax liabilities
Deferred tax assets
Net (liabilities)/assets acquired
Goodwill arising on acquisition
Total purchase consideration
Cash paid
New ordinary shares issued
Contingent consideration payable
Total consideration
Cash consideration
Less cash acquired
Net cash outflow
Ansible
Fair value
adjustments
£’000
16,800
Provisional
fair value
£’000
16,800
Book value
£’000
—
31
441
1,691
2,049
3,744
(6,404)
(441)
—
222
—
—
—
—
—
—
—
(4,137)
—
1,333
12,663
31
441
1,691
2,049
3,744
(6,404)
(441)
(4,137)
222
13,996
14,014
28,010
£’000
14,400
3,200
10,410
28,010
£’000
14,400
(3,744)
10,656
AB Dynamics plc Annual Report and Accounts 2023
AB Dynamics plc Annual Report and Accounts 2023
127
127
Notes to the consolidated financial statements continuedFor the year ended 31 August 2023Strategic reportGovernanceFinancial statementsStrategic reportGovernanceFinancial statements 28. Acquisition of businesses continued
Contingent consideration
Performance payment net present value at acquisition date
Retained consideration
At acquisition
Unwind on discount
Less fair value adjustment to contingent consideration
At 31 August 2023
£’000
9,882
528
10,410
713
(5,180)
5,943
The initial cash consideration was satisfied with available cash resources and a short-term
utilisation of part of the Group revolving credit facility, which has now been repaid. £528,000 of
the initial purchase price has been retained against any potential warranties and is included within
contingent consideration.
The valuation exercise to identify intangible assets acquired, as required under IFRS 3, was provisionally
applied as at the half year with some adjustments required at the year end to account for open
revenue contracts at the acquisition date balance sheet. Identifiable net assets with a total fair
value of £16,800,000 and goodwill of £13,266,000 were initially recognised, the amount of goodwill
recognised increase by £748,000 to £14,014,000 during the measurement period.
Ansible Motion Limited contributed revenue of £11,800,000, and operating profit of £2,400,000 for
the period between acquisition and the balance sheet date. Acquisition related costs amounted to
£678,000 which have been expensed when incurred. £713,000 of the discount on the contingent
consideration unwound in the period and has been included in finance expenses.
VadoTech Group
On 3 March 2021, the Group acquired 100% of VadoTech Pte Ltd and Zynit Pte Ltd (collectively
‘VadoTech Group’). In 2022, the final contingent consideration payment was made (£5,200,000) and
the remaining £215,000 discount on this amount unwound, being included in finance expense in the
prior year.
29. Restatement of prior year balances
The comparatives for the prior period have been restated to reflect a different interpretation of the
accounting standard regarding revenue recognition following challenge by the Group’s new auditor,
Grant Thornton. The restatement relates to timing differences on contracts with two customers
under which revenue was previously recognised over time as the equipment was built and has
been restated to reflect recognition at a point in time on delivery and installation. The change in
interpretation relates to judgement applied in determining how much profit the Group would be
entitled to in the unlikely event of a cancellation of the contract. None of these contracts has been
cancelled and all have concluded during FY 2023 and payment has been received in full.
The impact is detailed in the tables below and has resulted in an increase to revenue and profit for the
prior period and a corresponding decrease in opening net assets at 1 September 2021. The net impact
on the closing net assets at 31 August 2022 and hence on the profit for the year ended 31 August 2023
was £421,000.
AB Dynamics plc Annual Report and Accounts 2023
128128 AB Dynamics plc Annual Report and Accounts 2023
Balance sheet
31-Aug-22
Impact of
restatement
£’000
As reported
£’000
Restated
£’000
As reported
£’000
31-Aug-21
Impact of
restatement
£’000
Restated
£’000
Non-current assets
77,038
—
77,038
78,808
—
78,808
Current assets
Inventories
Taxation
Contract assets
Other current assets
Assets held for sale
Current liabilities
Contract liabilities
Other current liabilities
Non-current liabilities
Net assets
Retained earnings
Share capital and
other reserves
Total equity
13,611
882
3,917
43,923
62,333
1,893
5,787
16,804
22,591
6,712
111,961
48,333
63,628
111,961
40
8
411
—
459
—
(719)
757
38
—
421
421
—
421
13,651
890
4,328
43,923
62,792
1,893
5,068
17,561
22,629
6,712
6,771
1,443
4,269
38,782
51,265
1,893
3,568
16,349
19,917
7,063
112,382
104,986
48,754
44,889
1,130
99
50
—
1,279
—
1,690
—
1,690
—
(411)
(411)
7,901
1,542
4,319
38,782
52,544
1,893
5,258
16,349
21,607
7,063
104,575
44,478
63,628
60,097
—
60,097
112,382
104,986
(411)
104,575
Income statement
Revenue
Cost of sales
Gross profit
Operating profit
Profit before tax
Tax expense
Profit for the year
Earnings per share
Basic
Diluted
2022
£’000
80,305
(34,089)
46,216
5,229
4,855
(946)
3,909
Impact of
restatement
£’000
2,921
Restated
2022
£’000
83,226
(1,996)
(36,085)
925
925
925
(93)
832
47,141
6,154
5,780
(1,039)
4,741
31 August
2022
Impact of
restatement
Restated
2022
17.3p
17.1p
3.7p
3.6p
21.0p
20.7p
Notes to the consolidated financial statements continuedFor the year ended 31 August 2023Strategic reportGovernanceFinancial statementsStrategic reportGovernanceFinancial statements Company statement of financial position
As at 31 August 2023
Company statement of changes in equity
For the year ended 31 August 2023
ASSETS
Non-current assets
Right-of-use assets
Investments
Deferred tax assets
Current assets
Other receivables
Cash and cash equivalents
LIABILITIES
Current liabilities
Trade and other payables
Short-term lease liabilities
Contingent consideration
Net current assets
Net assets
Shareholders’ equity
Share capital
Share premium
Merger reserve
Retained earnings
Total equity
At 1 September 2021
Share based payments
Total comprehensive
expense
Dividends
Issue of shares, net of
share issue costs
At 31 August 2022
Share based payments
Total comprehensive
income
Dividends
Issue of shares, net of
share issue costs
At 31 August 2023
Note
7
7
Share
capital
£’000
226
—
—
—
—
226
—
—
—
3
Share
premium
£’000
62,210
—
—
—
50
62,260
—
—
—
521
229
62,781
Merger
reserve
£’000
—
—
—
—
—
—
—
—
—
Retained
profits
£’000
24,351
750
(328)
(1,131)
—
23,642
1,064
7,279
(1,255)
Total
equity
£’000
86,787
750
(328)
(1,131)
50
86,128
1,064
7,279
(1,255)
3,197
3,197
—
3,721
30,730
96,937
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 current year merger reserve was due to the acquisition of 100% of the issued share capital
of Ansible Motion of which part of the consideration was the issue of new ordinary shares in AB
Dynamics plc.
Retained profits represent the cumulative value of the profits not distributed to shareholders but
retained to finance the future capital requirements of the Group.
Note
2023
£’000
2022
£’000
3
4
5
—
91,717
—
91,717
9,511
3,163
12,674
1,511
—
5,943
7,454
5,220
96,937
229
62,781
3,197
30,730
96,937
61
67,124
202
67,387
14,782
6,131
20,913
2,110
62
—
2,172
18,741
86,128
226
62,260
—
23,642
86,128
The profit for the financial year dealt with in the financial statements of the Parent Company was
£7,279,000 (2022: loss £328,000).The financial statements were approved by the Board of Directors
and authorised for issue on 23 January 2024 and are signed on its behalf by:
Dr James Routh
Sarah Matthews-DeMers
Director
Director
Company registration number: 08393914
AB Dynamics plc Annual Report and Accounts 2023
129
Strategic reportGovernanceFinancial statements
Notes to the Company financial statements
For the year ended 31 August 2023
General information
AB Dynamics plc (the Company) is the UK holding company of a group of companies which are
engaged in the provision of advanced testing systems to the global transport industry. The Company
is registered in England and Wales (registered number 08393914). Its registered office and principal
place of business is Middleton Drive, Bradford on Avon, BA15 1GB.
Investments
Investments held as fixed assets are stated at cost less provision for impairment. The review of the
carrying value of the investment in Ansible Motion is sensitive to assumptions around winning and
delivering future contracts therefore sensitivity analysis has been performed. A decrease in revenues
by 19% with no cost mitigations reduces the headroom on this review to nil.
Basis of accounting
The financial statements have been prepared in accordance with the historical cost convention and
in accordance with FRS 102, ‘The Financial Reporting Standard’ applicable in the UK and Republic
or Ireland and the Companies Act 2006. The financial statements present information about the
Company as an individual entity and the principal accounting policies are described below. They
have all been applied consistently throughout the period.
Reduced disclosure exemptions
The Company, as a qualifying entity, has taken advantage of the disclosure exemptions in FRS 102
paragraph 1.12 as follows:
• no cash flow statement has been presented as the Company is included within the consolidated
financial statements of the Group; and
• disclosures in respect of the Company’s financial instruments have not been presented as
equivalent disclosures are included in the consolidated financial statements of the Group.
The Company has also taken advantage of the disclosure exemptions in FRS 102 paragraph 33.1A
as follows:
• related party transactions have not been disclosed with other wholly owned members of
the Group.
Tax
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.
Financial instruments
Financial assets and liabilities are recognised in the statements of financial position when the
Company has become a party to the contractual provisions of the instruments.
The Company only enters into basic financial instruments transactions that result in the recognition of
financial assets and liabilities like trade and other debtors and creditors and loans to related parties.
Going concern
At 31 August 2023, the Company had net current assets of £5,220,000 (2022: £18,741,000) with the
main current asset being amounts owed from its subsidiary Anthony Best Dynamics Ltd, amounting to
£7,987,000 (2022: £13,568,0000). The Company has assessed its ongoing costs with cash generated by
its subsidiaries to ensure that it can continue to settle its debts as they fall due.
Other receivables
Short-term debtors are measured at transaction price, less any impairment. Loans and receivables are
measured initially at fair value and are measured subsequently at amortised cost using the effective
interest method, less any impairment.
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.
Trade and other payables
Short-term trade creditors are measured at the transaction price. Other financial liabilities, including
bank loans, are measured initially at fair value and are measured subsequently at amortised cost using
the effective interest method.
130
AB Dynamics plc Annual Report and Accounts 2023
Strategic reportGovernanceFinancial statements Notes to the Company financial statements continued
For the year ended 31 August 2023
Critical accounting judgements and key sources of estimation uncertainty
In the application of the Company’s accounting policies, the Directors are required to make
judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are
not apparent from other sources. The estimates and assumptions are based on historical experience
and other factors, including expectations of future events that are believed to be reasonable under
the circumstances. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estimate is revised if the revision affects only
that period or in the period of the revision and future periods if the revision affects both current and
future periods.
The following are 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
significant adjustment to the carrying amounts of assets and liabilities in the financial statements:
Share based payment
The fair value of share based remuneration is determined at the date of grant and recognised as a
capital contribution to its subsidiary 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 option pricing
models which include assumptions and estimates in the determination of the fair value.
1. Profit for the financial year
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 profit for the financial year was £7,279,000 (2022 loss: £328,000).
The Company’s profit for the financial year has been arrived at after charging auditor’s remuneration
payable to Grant Thornton UK LLP for audit services to the Company of £96,000 (2022: £90,000).
Statutory information on remuneration for other services provided by the Company’s auditor and
its associates is given on a consolidated basis in note 7 of the consolidated financial statements.
2. Employees and Directors’ remuneration
Staff costs during the year by the Company were as follows:
Wages and salaries
Social security costs
Pension costs
2023
£’000
2,939
206
79
3,224
*Restated
2022
£’000
2,602
158
49
2,809
*
Prior year pension costs have been disclosed where these were not in the prior period. There was a £Nil impact on the results of
the Company.
7 employees have contracts of service with a subsidiary company however their services are provided
to the Company and accordingly their employment costs are reflected in the Company accounts.
All Directors’ remuneration is in respect of qualifying services to AB Dynamics plc. See note 8 of the
consolidated Annual Report.
Costs in relation to share based payments in respect of the Company’s employees are borne by its
subsidiary, Anthony Best Dynamics Limited.
The average number of employees of the Company during the year was:
Directors and management
3. Investments
Subsidiary undertaking
Brought forward
Capital contribution arising on share based payment
AB Dynamics Overseas Holdings Ltd
Ansible Motion Ltd
Exchange differences
Carried forward
2023
Number
11
2022
Number
9
2023
£’000
2022
£’000
67,124
1,064
—
23,527
2
61,295
750
5,114
—
(35)
91,717
67,124
AB Dynamics plc Annual Report and Accounts 2023
131
Strategic reportGovernanceFinancial statements Notes to the Company financial statements continued
For the year ended 31 August 2023
Class of
share held
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
%
shareholding
Registered office
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Middleton Drive, Bradford on Avon, Wiltshire BA15 1GB
2-2-3 Shinyokohama, Dai-Ichi Takeo bldg. 6F 606 Kohoku-ku, Yokohama 222-0033, Japan
48325 Alpha Drive, Suite 120, Wixom, MI 48393, USA
Middleton Drive, Bradford on Avon, Wiltshire BA15 1GB
Middleton Drive, Bradford on Avon, Wiltshire BA15 1GB
Middleton Drive, Bradford on Avon, Wiltshire BA15 1GB
77 Robinson Road, #13-00 Robinson 77, Singapore, 068896
77 Robinson Road, #13-00 Robinson 77, Singapore, 068896
Nichitochi Nishishinjyuku Building 8F, 6-10-1, Nishishinjyuku, Shinjyuku-ku, Tokyo, Japan
Bismarckstraße 7, 10625 Berlin, Germany
Calle Madrid, n. 70, Edificio Irene II, local 1, Monachil, Granada, Spain
The Corporation Trust Center, 1209 Orange Street, City of Wilmington, County of New Castle, Delaware 1980, USA
301 ho, 10-1, Maebong-gil, Seongdong-gu, Seoul, South Korea
77 Robinson Road, #13-00 Robinson 77, Singapore, 068896
No.13, Jinma Yuan 2 Street, Gaoliying Town, Shunyi District, Beijing, China
48325 Alpha Drive, Suite 120, Wixom, MI 48393, USA
Vogelsang 11, 35398 Gießen, Germany
355 Van Ness Avenue, Suite 200, Torrance, CA 90501, USA
355 Van Ness Avenue, Suite 200, Torrance, CA 90501, USA
Middleton Drive, Bradford on Avon, Wiltshire BA15 1GB
Middleton Drive, Bradford on Avon, Wiltshire BA15 1GB
3. Investments continued
Subsidiary undertaking
Anthony Best Dynamics Ltd
AB Dynamics GK
AB Dynamics Inc
rFpro Ltd
AB Dynamics UK Holdings Ltd
AB Dynamics Overseas Holdings Ltd
*AB Dynamics Singapore Holding Pte Ltd
*VadoTech Pte Ltd
*VadoTech Japan KK
*VadoTech Deutschland
*VadoTech Services SL
*VadoTech US Inc
*VadoTech Korea Ltd
*Zynit Pte Ltd
*Zynit China Co Ltd
*rFpro Inc
*AB Dynamics Europe GmbH
*Dynamic Research Inc
*DRI Advanced Test Systems Inc
*ABD Solutions Ltd
Ansible Motion Ltd
* Denotes indirect shareholding.
132
AB Dynamics plc Annual Report and Accounts 2023
Strategic reportGovernanceFinancial statements Notes to the Company financial statements continued
For the year ended 31 August 2023
4. Other receivables
Amounts owed by Group undertakings
Prepayments
2023
£’000
9,440
71
9,511
7. Dividends paid
2022
£’000
14,709
Final 2021 dividend paid of 3.24p per share
73
Interim 2022 dividend paid of 1.76p per share
14,782
Final 2022 dividend paid of 3.54p per share
Interim 2023 dividend paid of 1.94p per share
Amounts owed by Group undertakings are unsecured, interest free and repayable on demand.
5. Trade and other payables
Other payables and accruals
2023
£’000
1,511
1,511
2022
£’000
2,110
2,110
6. Share capital
The allotted, called up and fully paid share capital is made up of 22,934,365 ordinary shares
of £0.01 each.
At 1 September 2021
Issued during the year
At 31 August 2022
Issued during the year
At 31 August 2023
Note
(i)
(ii)
Number of
shares
’000
22,622
4
22,626
308
22,934
Share
capital
£’000
226
—
226
3
229
Share
premium
£’000
62,210
50
62,260
521
62,781
Total
£’000
62,436
50
62,486
524
63,010
(i)
During the year ended 31 August 2022, 1,654 shares were issued to satisfy exercises of
share options. A total of 1,536 shares and 932 shares were issued to James Routh and
Sarah Matthews-DeMers respectively in satisfaction of 20% of their annual bonus payments
for the year ended 31 August 2021.
(ii) During the year ended 31 August 2023, 45,226 shares were issued to satisfy exercises of share
options of which 33,334 related to share options exercised by James Routh. A total of 2,424
shares and 1,454 shares were issued to James Routh and Sarah Matthews-DeMers respectively
in satisfaction of 20% of their annual bonus payments for the year ended 31 August 2022.
A further 258,795 shares were issued in partial consideration for the acquisition of Ansible Motion
Limited on 20 September 2022.
2023
£’000
—
—
811
444
2022
£’000
733
398
—
—
1,255
1,131
The Board has proposed a final dividend of 4.42p per share totalling £1,014,000. An interim
dividend was paid of 1.94p per share totalling £444,000. If approved, the final dividend will be paid
on 6 March 2024 to shareholders on the register on 9 February 2024.
8. Related party disclosures
The only key management personnel of the Company are the Directors. Details of their remuneration
are contained in the Remuneration Committee report.
AB Dynamics plc Annual Report and Accounts 2023
133
Strategic reportGovernanceFinancial statements
The fair values of the share option awards granted were calculated using a Black Scholes option
pricing model. The long-term incentive plan awards have targets based on earnings per share total
growth and shareholder return and were valued using a Monte Carlo simulation. The inputs into the
model for awards granted were as follows:
Stock price
Exercise price
Interest rate
Volatility
Vesting period
4 January
2023
1,613p
£Nil
3.43%
48%
3 years
11 March
2022
1,025p
£Nil
1.25%
64%
3 years
Date awarded
3 December
2021
2 December
2020
17 January
2020
1,750p
£Nil
0.50%
62%
3 years
1,768p
£Nil
0.02%
53%
3 years
2,230p
£Nil
0.39%
40%
3 years
The expected volatility was determined with reference to the published share price.
The long-term incentive plan awards vest on the third anniversary of the award date.
Notes to the Company financial statements continued
For the year ended 31 August 2023
9. Share based payments
The share based compensation schemes were established to reward and incentivise the Executive
management team and staff for delivering share price growth. The schemes are administered by the
Remuneration Committee.
The schemes adopted by the Company are equity settled.
Summary of movements in share options
Outstanding at 1 September 2022
Options and awards granted
Options and awards exercised
Options and awards lapsed
Outstanding at 31 August 2023
Exercisable at 31 August 2023
Outstanding at 1 September 2021
Options and awards granted
Options and awards exercised
Options and awards lapsed
Outstanding at 31 August 2022
Exercisable at 31 August 2022
Weighted
average
exercise price
(pence)
1,445
—
1,010
833
709
395
691
1,271
395
2,140
1,445
1,358
Number
of shares
540,233
97,756
(45,226)
(131,744)
461,019
28,545
466,306
135,581
(1,654)
(60,000)
540,233
86,704
The weighted average share price on the date of exercise was 1,947p (2022: 978p). The weighted
average remaining contractual life of the options outstanding at the statement of financial position
date is 7.7 years (2022: 8.2 years).
134
AB Dynamics plc Annual Report and Accounts 2023
Strategic reportGovernanceFinancial statements Notice of Annual General Meeting 2024
Notice of Annual General Meeting
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION
If you are in any doubt as to the action you should take, you should consult your stockbroker,
bank manager, solicitor, accountant or other independent professional adviser immediately.
ORDINARY RESOLUTIONS
1.
To receive the annual accounts of the Company for the year ended 31 August 2023, together with
the reports of the Directors and the auditor on those accounts.
If you have sold or transferred all of your shares in AB Dynamics plc, please forward this document,
together with the accompanying report and accounts and form of proxy, to the purchaser or
transferee or to the stockbroker, bank or other agent through whom the sale or transfer was
effected for delivery to the purchaser or transferee.
2.
3.
To approve the Directors’ remuneration report, as set out on pages 81 to 88 of the Group’s Annual
Report and Accounts for the financial year ended 31 August 2023.
To declare a final dividend of 4.42p per share, to be paid to all shareholders on the Register of
Members as at 9 February 2024.
AB Dynamics plc
Notice of Annual General Meeting
NOTICE IS HEREBY GIVEN that the Annual General Meeting (AGM) of the members of AB Dynamics
plc (the Company) will be held at 11 am on Wednesday 28 February 2024 at 85 Fleet Street, London,
EC4Y 1AE for the purpose of considering and, if thought fit, passing the following resolutions of
which resolutions 1 to 10 (inclusive) will be proposed as ordinary resolutions and resolution 11 will be
proposed as a special resolution.
4. To re-appoint Richard Elsy as a Director of the Company.
5. To re-appoint Louise Evans as a Director of the Company.
6. To re-appoint Richard Hickinbotham as a Director of the Company.
7. To re-appoint Sarah Matthews-DeMers as a Director of the Company.
8. To re-appoint Dr James Routh as a Director of the Company.
9.
To re-appoint Grant Thornton UK LLP as the auditor of the Company from the conclusion of this
AGM until the conclusion of the next AGM of the Company and to authorise the Directors to
determine the auditor’s remuneration.
10. That, in substitution for any previous authority but without prejudice to any allotment of shares
or grant of rights already made, offered or agreed to be made pursuant to such authorities, the
Directors from time to time be and are hereby generally and unconditionally authorised for the
purpose of Section 551 of the Companies Act 2006 (the Act) to allot shares of the Company and/
or grant rights to subscribe for, or convert any securities into, shares of the Company up to an
aggregate nominal amount of £76,447, being approximately one-third of the current issued share
capital of the Company provided that this authority shall expire (unless previously renewed,
varied or revoked by the Company in a general meeting) at the conclusion of the next AGM of the
Company or 15 months after the passing of this resolution (if earlier), except that the Directors
may before the expiry of such period make an offer or agreement which would or might require
shares to be allotted or rights granted after the expiry of such period and the Directors may allot
shares or grant rights in pursuance of that offer or agreement as if this authority had not expired.
AB Dynamics plc Annual Report and Accounts 2023
135
Strategic reportGovernanceFinancial statements Notice of Annual General Meeting 2024 continued
Notice of Annual General Meeting
SPECIAL RESOLUTION
11. That, subject to the passing of resolution 10 above, the Directors be empowered pursuant to
Section 571 of the Companies Act 2006 (the Act) to allot equity securities (within the meaning of
Section 560 of the Act) for cash pursuant to the authority conferred by resolution 10 above as if
Section 561 of the Act did not apply to such allotment, provided that this power shall be limited
to the allotment of equity securities as follows:
Recommendation
The Board is of the opinion that these proposals are in the best interests of the Company and its
shareholders as a whole.
Accordingly, the Directors unanimously recommend all shareholders to vote in favour of the
resolutions, as they intend to do in respect of their own beneficial shareholdings.
Explanatory notes in respect of the resolutions proposed are set out in the appendix to this Notice.
By Order of the Board
Dr James Routh
Chief Executive Officer
5 February 2024
Registered office:
AB Dynamics plc
Middleton Drive
Bradford on Avon
Wiltshire BA15 1GB
Registered number: 08393914
(a)
the allotment of equity securities in connection with any offer by way of rights or an open
offer of relevant equity securities where the equity securities respectively attributed to the
interests of all holders of relevant equity securities are proportionate (as nearly as may be)
to the respective numbers of relevant equity securities held by them but subject to such
exclusions or other arrangements as the Directors may deem necessary or expedient to deal
with equity securities which represent fractional entitlements or on account of either legal
or practical problems arising in connection with the laws or requirements of any regulatory
or other authority in any jurisdiction; and
(b)
otherwise than pursuant to paragraph (a) above, up to an aggregate nominal amount of
£11,467, being approximately 5% of the current issued share capital of the Company,
provided that the powers conferred by this resolution shall expire (unless previously renewed,
varied or revoked by the Company in a general meeting) on a date which is the earlier of 15
months from the date of the passing of this resolution and the conclusion of the next AGM of the
Company (the Section 571 Period) but so that the Company may at any time prior to the expiry
of the Section 571 Period make an offer or agreement which would or might require equity
securities to be allotted pursuant to these authorities after the expiry of the Section 571 Period
and the Directors may allot equity securities in pursuance of such offer or agreement as if the
authorities hereby conferred had not expired.
Action to be taken
Each shareholder is entitled to appoint one or more proxies to attend, speak and vote instead of that
shareholder. A proxy need not be a shareholder.
Shareholders should kindly complete and return the enclosed form of proxy as soon as possible,
whether or not they expect to be able to attend the AGM. Return of a form of proxy will not prevent
a shareholder from attending, speaking and voting in person at the meeting if that shareholder so
wishes and is so entitled. If you are a CREST member you can submit your proxy electronically through
the CREST system by completing and transmitting a CREST proxy instruction as described in the notes
to this circular and in the form of proxy.
136
AB Dynamics plc Annual Report and Accounts 2023
Strategic reportGovernanceFinancial statements
Notice of Annual General Meeting 2024 continued
Notice of Annual General Meeting
Notes
Pursuant to the Company’s Articles of Association (the Articles), members are entitled to appoint a
proxy or proxies to exercise all or any of their rights to attend, speak and vote at the meeting.
A proxy need not be a shareholder of the Company.
A shareholder may appoint more than one proxy in relation to the AGM, provided that each
proxy is appointed to exercise the rights attached to a different share or shares held by that
shareholder. In addition, the Chairman of the meeting will direct that voting on all resolutions
will take place by way of a poll, rather than a show of hands, to ensure that proxy votes are
recognised in order to accurately reflect the views of shareholders.
1.
Only holders of ordinary shares are entitled to attend and vote at the AGM. A member is entitled
to appoint another person as their proxy to exercise all or any of their rights to attend, speak and
vote at the meeting. A member may appoint more than one proxy in relation to the meeting,
provided that each proxy is appointed to exercise the rights attached to a different share or
shares held by the relevant member. A proxy need not be a member of the Company.
2. You can register your vote(s) for the AGM either:
(a)
(b)
by visiting www.shareregistrars.uk.com, clicking on the ‘Proxy Vote’ button and then
following the on-screen instructions;
by post or by hand to Share Registrars Limited, 3 The Millennium Centre, Crosby Way,
Farnham, Surrey GU9 7XX using the form of proxy accompanying this Notice. Instructions
for completion are shown on the form. To appoint a proxy, the form of proxy, and any power
of attorney or other authority under which it is executed (or a duly certified copy of any such
power or authority), must be completed; or
(c)
in the case of CREST members, by utilising the CREST electronic proxy appointment service
in accordance with paragraphs 5 to 8 below.
In order for a proxy appointment to be valid the form of proxy must be received by Share Registrars
Limited by 11am on 26 February 2024, being 48 hours (ignoring any part of any day that is not a
working day) before the start of the AGM. Completion of one of the above proxy voting options
will not preclude members from attending and voting in person at the AGM, should they so wish.
In the case of joint shareholders, the signature of the senior shareholder (seniority to be
determined by the order in which the names stand in the Register of Members) shall be accepted
to the exclusion of all other joint holders. The names of all joint shareholders should be stated at
the top of the form.
In order to have the right to attend and vote at the meeting (and also for the purpose of
determining how many votes a person entitled to attend and vote may cast), a person must be
entered on the Register of Members of the Company at 11 am on 26 February 2024, being 48
hours (ignoring any part of any day that is not a working day) before the start of the AGM, or,
in the event of any adjournment, 48 hours before the start of the adjourned meeting (ignoring
any part of any day that is not a working day). Changes to entries on the Register of Members
after this time shall be disregarded in determining the rights of any person to attend or vote
at the AGM.
3.
4.
5.
6.
7.
8.
9.
CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy
appointment service may do so by using the procedures described in the CREST Manual (available
via www.euroclear.com/CREST). CREST personal members or other CREST sponsored members,
and those CREST members who have appointed a voting service provider(s), should refer to their
CREST sponsor or voting service provider(s) who will be able to take the appropriate action on
their behalf.
In order for a proxy appointment or instruction made using the CREST service to be valid, the
appropriate CREST message (a CREST Proxy Instruction) must be properly authenticated in
accordance with Euroclear UK & International Limited’s (Euroclear) specifications and must
contain the information required for such instruction, as described in the CREST Manual. The
message, regardless of whether it constitutes the appointment of a proxy or is an amendment to
the instruction given to a previously appointed proxy must, in order to be valid, be transmitted
so as to be received by the issuer’s agent (ID 7RA36) by the latest time for the receipt of proxy
appointments specified in note 2 above. For this purpose, the time of receipt will be taken to be
the time (as determined by the timestamp applied to the message by the CREST Application Host)
from which the issuer’s agent is able to retrieve the message by enquiry to CREST in the manner
prescribed by CREST. After this time any change of instructions to proxies appointed through
CREST should be communicated to the appointee through other means.
CREST members and, where applicable, their CREST sponsors, or voting service providers should
note that Euroclear does not make available special procedures in CREST for any particular
message. Normal system timings and limitations will, therefore, apply in relation to the input of
CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or,
if the CREST member is a CREST personal member, or a sponsored member, or has appointed a
voting service provider, to procure that his CREST sponsor or voting service provider(s) take(s))
such action as shall be necessary to ensure that a message is transmitted by means of the CREST
system by any particular time. In this connection, CREST members and, where applicable, their
CREST sponsors or voting service providers are referred, in particular, to those sections of the
CREST Manual concerning practical limitations of the CREST system and timings.
The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in
Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001.
Any corporation which is a member can appoint one or more corporate representatives who may
exercise on its behalf all of the powers as a member provided that no more than one corporate
representative exercises powers over the same share.
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Strategic reportGovernanceFinancial statements
Notice of Annual General Meeting 2024 continued
Notice of Annual General Meeting
Appendix: Explanatory notes on the resolutions to be proposed
at the Annual General Meeting
Notes continued
10. Any member attending the meeting has the right to ask questions. The Company must cause to
be answered any such question relating to the business dealt with at the meeting, but no such
answer need be given if:
Resolution 1 – Annual Report and Accounts
The Directors must present the annual audited accounts of the Company and the Directors’ and
Auditor’s reports for the year ended 31 August 2023 (2023 Annual Report) to shareholders at
the meeting.
(a)
to do so would interfere unduly with the preparation for the meeting or involve the
disclosure of confidential information;
You are voting to receive the 2023 Annual Report. Detailed information is contained within the 2023
Annual Report.
(b)
the answer has already been given on a website in the form of an answer to a question; or
(c)
it is not in the interests of the Company or the good order of the meeting that the question
be answered.
11. As at 2 February 2024 (being the last business day prior to the publication of this Notice), the
Company’s issued ordinary share capital consisted of 22,934,365 ordinary shares of 1p each,
carrying one vote each. Therefore, the total voting rights in the Company as at 2 February 2024
were 22,934,365.
12. A copy of this Notice, and other information required by Section 311A of the Companies Act 2006
(the Act), can be found at www.abdplc.com.
13. You may not use any electronic address (within the meaning of Section 333(4) of the Act) provided
in this Notice or in any related documents (including the Chairman’s letter and form of proxy) to
communicate with the Company for any purpose other than those expressly stated.
14. Your personal data includes all data provided by you, or on your behalf, which relates to you as
a shareholder, including your name and contact details, the votes you cast and your Reference
Number (attributed to you by the Company). The Company determines the purposes for which
and the manner in which your personal data is to be processed. The Company and any third party
to which it discloses the data (including the Company’s registrars) may process your personal data
for the purposes of compiling and updating the Company’s records, fulfilling its legal obligations
and processing the shareholder rights you exercise.
Resolution 2 – Directors’ remuneration report
Shareholders will have the opportunity to cast an advisory vote on the Directors’ remuneration report
for the year ended 31 August 2023. The report is set out in full on pages 81 to 88 of the 2023 Annual
Report. The Directors’ entitlement to remuneration is not conditional on the report being approved.
Resolution 3 – Declaration of dividend
Final dividends must be approved by shareholders but cannot exceed the amount recommended by
the Directors. The Directors propose a final dividend of 4.42p per ordinary share. If approved, the
dividend is expected to be paid to shareholders on the Register of Members as of 9 February 2024.
The Company paid an interim dividend this year; therefore, the total dividend distribution for the year
shall be 6.36p per ordinary share.
Resolutions 4 to 8 – Re-appointment of Directors
Resolutions 4 to 8 relate to the re-appointment of the Company’s Directors. Under the
Company’s Articles, one-third of the Directors are required to retire from office by rotation each
year. Notwithstanding the provisions of the Articles, the Board has determined that all of the
Directors shall retire from office at the AGM in line with the best practice recommendations of
the Financial Reporting Council’s UK Corporate Governance Code. Each of the Directors intends
to stand for re-appointment by the shareholders. Biographical details, skills and experience
for each of the Directors can be found on pages 62 and 63 of the 2023 Annual Report and at
www.abdplc.com/about/board-of-directors.
138
AB Dynamics plc Annual Report and Accounts 2023
Strategic reportGovernanceFinancial statements
Strategic report
Governance
Financial statements
Notice of Annual General Meeting 2024 continued
Appendix: Explanatory notes on the resolutions to be proposed at the Annual General Meeting continued
Resolution 9 – Re-appointment of the auditor and the auditor’s remuneration
The Company is required to appoint an auditor at each general meeting at which accounts are laid
before the Company to hold office until the end of the next such meeting. Grant Thornton UK LLP has
expressed its willingness to be re-appointed as the auditor to the Company. This resolution proposes
the re-appointment of Grant Thornton UK LLP and, in accordance with standard practice, gives
authority to the Directors to determine the remuneration to be paid to the auditor.
Resolution 10 – Directors’ authority to allot shares
Under the Act, the directors of a company may only allot unissued shares in the capital of the
company or grant rights to subscribe for, or convert any security into, shares in the company if
they are authorised to do so by the shareholders at a general meeting or by the company’s articles
of association.
This resolution gives the Directors authority to allot shares in the Company up to an aggregate
nominal amount of £76,447, representing approximately one-third of the Company’s issued ordinary
share capital as at 2 February 2024 (being the last business day prior to the publication of this Notice).
This authority will expire at the conclusion of the next Annual General Meeting to be held in 2025.
The Directors do not have any present intention of exercising this authority but consider it desirable
that they should have the flexibility to allot shares, or grant rights to subscribe for, or convert any
security into, shares if circumstances arise where it may be advantageous for the Company to do so.
Resolution 11 – Partial disapplication of pre-emption rights
This resolution will, if approved, renew the Directors’ authority to allot equity securities (as defined
in the Act) for cash otherwise than to existing shareholders pro-rata to their holdings. This authority,
which will expire at the conclusion of the Annual General Meeting of the Company to be held in 2025,
is limited to the allotment of: (a) equity securities in connection with a rights issue; and (b) equity
securities up to an aggregate nominal amount of £11,467, representing approximately 5% of the
Company’s issued ordinary share capital as at 2 February 2024 (being the last business day prior to the
publication of this Notice).
The Directors have no present intention to use this authority but consider that the proposed
disapplication of pre-emption rights is desirable to give the Company the ability to issue a limited
number of shares for cash to third parties, where to do so would be of benefit to the Company.
CBP021921
AB Dynamics plc’s commitment to environmental issues
is reflected in this Annual Report, which has been printed
on Arena Extra White Smooth, an FSC® certified material.
This document was printed by Pureprint Group using its
environmental print technology, with 99% of dry waste
diverted from landfill, minimising the impact of printing on
the environment. The printer is a CarbonNeutral® company.
Both the printer and the paper mill are registered to ISO 14001.
AB Dynamics plc Annual Report and Accounts 2023
139
AB Dynamics plc
Middleton Drive
Bradford on Avon
Wiltshire BA15 1GB
T: +44 (0)1225 860 200
F: +44 (0)1225 860 201
E: investors@abdplc.com
www.abdplc.com