Driving AB Dynamics plc Annual Report 2024 delivery Discover more at abdplc.com Strategic report 01 Highlights of 2024 02 At a glance 04 Investment case 06 Chairman’s statement 08 Our markets and strategy 12 M&A strategy 13 Acquisition of Venshure Test Services 14 Our business model 16 Chief Executive Officer’s review 20 Operational review – Testing products 22 Operational review – Testing services 24 Operational review – Simulation 26 Chief Financial Officer’s review 30 Key performance indicators 32 Sustainability 50 Task Force on Climate-related Financial Disclosures (TCFD) report 56 S172(1) statement and stakeholder engagement 58 Risk management 60 Principal risks and uncertainties 63 Non-financial and sustainability information statement Governance 64 Chairman’s introduction to corporate governance 65 Statement of corporate governance 66 Board of Directors 68 Executive Committee 70 Statement of corporate compliance 80 Nomination Committee report 82 Audit and Risk Committee report 84 ESG Committee report 85 Directors’ remuneration report 93 Directors’ report 96 Statement of Directors’ responsibilities Financial statements 97 Independent auditor’s report 102 Consolidated statement of comprehensive income 103 Consolidated statement of financial position 104 Consolidated statement of changes in equity 105 Consolidated cash flow statement 106 Notes to the consolidated financial statements 128 Company statement of financial position 128 Company statement of changes in equity 129 Notes to the Company financial statements 134 Notice of Annual General Meeting 2025 Delivering performance and a platform for sustainable growth Revenue growth and margin expansion Having invested in our Group product range, capability, leadership and new product development and along with leveraging our existing core strategy and technologies, the Group has delivered a very strong set of results. It now has a solid and scalable platform from which to capitalise on an ambitious multi-year growth opportunity, supported by strong long-term structural and regulatory growth drivers. Investment case READ MORE ABOUT OUR INVESTMENT CASE ON PAGE 4 Our markets READ MORE ABOUT OUR MARKETS ON PAGE 8 Our strategy READ MORE ABOUT OUR STRATEGY ON PAGE 11 Operational highlights Strategic highlights • Record revenue and operating profit and improvement in operating margin • New product development continues at pace and in line with the technology roadmap for testing products and simulation markets, alongside development of the core technology for ABD Solutions • Initial contract win for ABD Solutions of £2m for an automated mileage accumulation solution for delivery in FY 2025 with potential for further follow-on orders • The Group acquired Venshure Test Services (VTS), a provider of mileage accumulation, electric vehicle and environmental testing services in the US, with the integration progressing as planned • Since the year end, the Group has acquired Bolab Systems GmbH (Bolab), a niche supplier of automotive power electronics testing solutions • MSCI AAA rating achieved • Well placed to sustain growth momentum over the medium term, supported by: • Target organic growth of 10% per year across core markets, supported by regulatory tailwinds and rapid technology change, with a significantly strengthened and scalable operational and commercial platform • Further margin expansion to 20% target, through operating leverage, supply chain improvements and operational efficiencies • Strong cash generation that provides scope for further value-enhancing investment in FY 2025 and beyond • The opportunity beyond automotive markets presented by ABD Solutions, transitioning from technology development to commercialisation Strong revenue and profit growth with margin expansion Financial highlights Revenue £111.3m +10% (2023: £100.8m) Adjusted* EBITDA £24.2m +18% (2023: £20.5m) Adjusted* operating profit £20.3m +22% (2023: £16.6m) Adjusted* operating margin 18.2% +170bps (2023: 16.5%) Net cash £28.6m (2023: £32.0m) Adjusted* diluted earnings per share (EPS) 70.0p +15% (2023: 60.8p) Dividend per share 7.63p +20% (2023: 6.36p) * Adjusted to exclude amortisation of acquired intangibles, acquisition related charges and exceptional items. All profit and earnings per share figures in this Annual Report refer to adjusted business performance as defined on page 28 with a reconciliation to statutory measures. Highlights of 2024 AB Dynamics plc Annual Report and Accounts 2024 01 Strategic report Governance Financial statements At a glance A global leader AB Dynamics is a leading global provider of development, test and verification solutions to the global transport market, facilitating the development of vehicles that are safer, more efficient and more sustainable. With over 40 years of experience and a global network of partners, our solutions cover a wide range of testing and development requirements, in areas such as simulation, active safety, durability, steering, suspension and autonomous driving. We help customers to achieve their goals in testing the performance, safety or comfort of their vehicles, developing the next generation of Advanced Driver Assistance Systems (ADAS) technologies and providing driverless solutions in controlled environments. TAP TO DISCOVER MORE Global automotive clients 145 Employees 555 Germany Japan China UK Singapore USA Global revenue by region Revenue by customer category Automotive OEMs – 79% Service providers – 18% Tier 1 suppliers and technology – 3% UK/Europe Asia Pacific North America 33% 44% 23% 18% 79% 3% AB Dynamics plc Annual Report and Accounts 2024 02 Strategic report Governance Financial statements At a glance continued Our solutions Testing products Testing products are used during road vehicle development for the test and verification of ADAS, autonomous systems and vehicle dynamics. Robots and ADAS platforms are used to test the performance of prototype vehicles around the test track. Our laboratory testing equipment is used to assess vehicle dynamics including noise and vibration. We also provide driverless solutions used in adjacent markets such as mining and specialist vehicles. 62% of total revenue 15% of total revenue 23% of total revenue Revenue by sector Testing services Our test facility in California, USA, uses our products to provide ADAS and vehicle dynamics tests on behalf of customers for development or certification of new vehicles. The Group also offers on-road testing services, with operations in China and Germany, as well as laboratory compliance testing through the newly acquired VTS, based in Michigan, USA. Simulation Simulation includes simulation software and driving simulators. 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 motion platforms along with our market- leading physics based simulation software reduce new vehicle development timescales, risks and costs by allowing meaningful evaluation earlier in the development process. Testing products revenue £69.4m Testing services revenue £16.7m Simulation revenue £25.2m READ MORE ON PAGE 20 READ MORE ON PAGE 22 READ MORE ON PAGE 24 AB Dynamics plc Annual Report and Accounts 2024 03 Strategic report Governance Financial statements Investment case Market leader in growing markets Structural and regulatory growth drivers across all our markets The market for vehicle development products and services is supported by: • Road safety – the significant increase in regulation of active safety systems, in terms of complexity of requirements and across new geographies and vehicle categories, will drive growth in products and services and incremental use of simulation • New powertrains – the emergence of electric vehicles (EVs) and hybrids and new original equipment manufacturers (OEMs) drives growth in the number of vehicle models, all of which need certification across each market in which they are sold. Speed to market and cost efficiencies offered by simulation also drive adoption of our simulation range. New powertrains (e.g. hydrogen/reduced emission fuels) will result in further increases in new models READ MORE ABOUT OUR MARKETS ON PAGE 8 Highly resilient business solving customers’ sustainability challenges Our global, diversified customer base and high-quality, long-term customer relationships provide resilience. We support customers throughout the vehicle development cycle. The wider focus on road safety and reduction in accidents as well as the focus on new powertrains such as EVs are important long-term trends that will support continued growth, as the emergence of new vehicle models and technologies requires additional development work, testing and validation. READ MORE IN OUR CHIEF EXECUTIVE OFFICER’S REVIEW ON PAGE 16 1 2 TAP TO DISCOVER MORE AB Dynamics plc Annual Report and Accounts 2024 04 Strategic report Governance Financial statements Strong margins with clear strategy for expansion Highly differentiated products with continued investment in innovation underpin strong gross margins. Now the Group has a solid and scalable operating platform, operating margin expansion will be delivered through operational gearing, improvements in the supply chain and operational efficiency. READ MORE IN OUR CHIEF FINANCIAL OFFICER’S REVIEW ON PAGE 26 3 4 Highly cash generative with clear capital allocation framework Our strong cash generation enables us to fund ongoing investment in organic growth across all our markets and to fund acquisitions. Our capital allocation priorities are: investment in innovation to grow the core business; investment in ABD Solutions; bolt-on acquisitions; and our progressive dividend policy. READ MORE ABOUT OUR CAPITAL ALLOCATION FRAMEWORK ON PAGE 17 TAP TO DISCOVER MORE Investment case continued AB Dynamics plc Annual Report and Accounts 2024 05 Strategic report Governance Financial statements Driving delivery of our ambitious strategy Highlights • Continued investment in new product development in our core markets • Contract win for ABD Solutions and first production units delivered • Acquisition of VTS strengthens our services offering Overview I am very pleased to report another year of strong profitable growth for AB Dynamics, and one of strategic significance as the Group positions itself for the next stage of growth. These results are evidence of the value customers place on our offering, as the team continues to win new customers globally and strengthen relationships with existing ones. The Group continued to focus on building a sustainable and resilient business. Overall results for the year showed revenue growth of 10% to £111.3m and a 22% increase in operating profit to £20.3m, driven by increases across all three 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 by ABD Solutions which has delivered the initial units of a product for construction vehicles and won a contract with a major automotive OEM which enables expansion into a new sector in that market. 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. Chairman’s statement AB Dynamics plc Annual Report and Accounts 2024 06 Strategic report Governance Financial statements Overview continued The acquisition of VTS expands our capability in the services sector and I am pleased to report that we are already progressing a number of new opportunities through expanding our offering across our wider customer base. 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 very 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 550 employees, with around half located in the UK. The Board takes our responsibility towards employee engagement and development seriously and we were particularly pleased to launch our second Professional Development Programme for emerging talent to develop our future leaders. Investments The acquisition of VTS during the year and Bolab since the year end 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. Sustainability 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 sustainability strategy, including achievement of an MSCI AAA rating. The Board is committed to ongoing improvements in all aspects of sustainability. Further information on our approach to sustainability can be found on pages 32 to 49 and the activities of the ESG Committee are summarised on page 84. Corporate governance Strong corporate governance and risk management are essential elements of the Board’s activities and are key to ensuring the ongoing stability and growth of the Group. I am pleased to confirm that AB Dynamics plc is in compliance with the Quoted Companies Alliance Code (the 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 sustainability 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 71 to 79. Dividends The Board recognises that dividends continue to be an important component of total shareholder returns, balanced against maintaining a strong financial position, and intends to pursue a sustainable and growing dividend policy in the future having regard to the development of the Group. Based on the very strong financial performance and the Board’s confidence in continued growth and delivery in 2025, the Board is recommending a final dividend of 5.30p per share, payable on 31 January 2025 subject to shareholder approval at the AGM. The ex-dividend date will be 16 January 2025 and the record date will be 17 January 2025. The total dividend for the year will therefore be 7.63p per share, which is an increase over the prior year of 20%, continuing the Board’s progressive dividend policy. Outlook AB Dynamics operates within markets that are supported by long- term regulatory and structural growth drivers in automotive and holds an enviable market-leading 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 operational delivery and ongoing investments provide a strong platform for future growth and the Board remains confident in delivering continued progress in the forthcoming year. Richard Elsy CBE Non-Executive Chairman 26 November 2024 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 Chairman’s statement continued “The Group delivered another year of strong profitable growth and now has a solid and scalable platform from which to deliver further revenue growth and margin expansion, with a strong balance sheet to support that growth.” Richard Elsy CBE Non-Executive Chairman AB Dynamics plc Annual Report and Accounts 2024 07 Strategic report Governance Financial statements Our solutions Market drivers support growth Our market drivers The automotive sector continues to evolve and adapt to the structural and regulatory changes driving rapid unprecedented change: • The ongoing societal need for improvements in road safety is driving the development of active safety, ADAS and increasing levels of autonomous systems • The global challenge of climate change is driving strong demand for the acceleration of the implementation of EVs, hybrids and development of other alternative powertrains • New entrants into the automotive market, particularly in EVs and autonomy, have placed pressures on traditional automotive OEMs to rapidly develop new technologies which require more complex tests Consequently, whilst the automotive sector is experiencing disruption to production volumes and a slower rate of increase in EV sales than anticipated, it remains fully committed to investing in R&D in these key areas as each OEM needs to respond to these challenges. OEMs need AB Dynamics’ testing products and services for development of vehicles and certification of active safety systems across all types of powertrains. The Group’s simulation capabilities enable OEMs to accelerate the efficiency and speed of development by allowing customers to test in a virtual environment. “Our growth is supported by significant long-term structural and regulatory market drivers, such as road safety improvements, the introduction of new vehicle powertrains and development of driverless solutions, as well as our own initiatives in innovation and diversification.” Consumer ratings • Improving safety technology • Increasing number and complexity of tests • Euro NCAP standards becoming global • Standards expanded to multiple vehicle categories Our solutions: Regulation • US – NHTSA • Europe – UNECE • Japan • China Our solutions: New vehicle models • Development • Certification • Speed to market • Cost effectiveness • New sensor technology • Increasing automation Our solutions: New powertrains • EVs • Hybrid • Hydrogen • Reduced emission fuels Our solutions: Euro NCAP roadmap 2030 2026 2029 2032 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 Vulnerable Road User (VRU) protection – A-pillar and micro-mobility Post-Crash Protection M12: Next-gen updates including D-call and thermal scanning Our markets and strategy AB Dynamics plc Annual Report and Accounts 2024 08 Strategic report Governance Financial statements Testing products Testing services Simulation Safety Standard requires all light-duty passenger vehicles to have AEB by 2029. Testing of this capability is expected to closely mirror those functions tested by Euro NCAP with compliance mandated through federal regulation. Future opportunities Increasing regulation test requirements drives the development of new technology, innovation and solutions tailored to the needs of the Group’s customers to meet the growth in testing volume and complexity. CONSUMER RATINGS REGULATION 1 2 Key trend Consumer bodies such as Euro NCAP (New Car Assessment Programme), Japan NCAP and China NCAP are independent safety organisations that provide car safety ratings determined from a series of vehicle tests. These tests represent, in a simplified way, real-life accident scenarios. In order to obtain an NCAP safety rating when launching a new vehicle model, each variant of that model must be certified by an NCAP test laboratory. The development of new technology means that certification requires an increasing number of increasingly complex tests. Many of our products and services are used in the development and certification of these vehicles. Progress Our growth is driven by: • Improving safety technology as customers use our equipment in the development of new assisted driving and autonomous functions • An increasing number of tests. Over the last ten years, the number of ADAS test scenarios performed per vehicle for Euro NCAP ratings has increased from 18 to in excess of 500 and is expected to grow further • Increasing complexity of tests, for example new test scenarios designed to protect motorcyclists including collision with the rear of a motorcycle braking in queueing 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 • Standards expanding to multiple vehicle categories, such as commercial vans and trucks Key trend In addition to consumer ratings, the market for ADAS and active safety is driven by regulation from bodies such as the United Nations Economic Commission for Europe (UNECE) and the US regulator, the National Highway Traffic and Safety Administration (NHTSA). With an estimated 1.35 million road deaths per year, of which a growing number are in the US, there is growing pressure on regulators to improve standards, leading to further increases in the number of requirements and hence the number and complexity of tests required. Progress UNECE regulations came into force in 2022 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 the second phase, implemented in July 2024, extended this requirement to all new 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. This may include testing the vehicle at a variety of approach speeds, offsets and loading and lighting conditions, driving increased need for AB Dynamics’ test equipment. 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 over recent years. A new Federal Motor Vehicle • Globally, there are nine NCAPs of which Euro NCAP is currently the most stringent. It is expected that other NCAPs will move towards adoption of these stricter standards Future opportunities Euro NCAP’s 2030 roadmap confirms its commitment to drive further improvements in vehicle safety focused on four core areas: Safe Driving, Crash Avoidance, Crash Protection and Post-Crash Protection. The Group’s testing products form a key part of the testing for two of the core areas – safe driving and crash avoidance technologies. 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. The Group has responded by investing in new products such as the LaunchPad Spin, the Soft Pedestrian 360 and the Soft Motorcycle 360. It is also expected to drive growth in simulation as not all the growth in testing will be able to be met through physical tests. Our markets and strategy continued READ MORE ON PAGE 11 READ MORE ON PAGE 3 Links to strategy Links to solutions 1 2 3 4 5 READ MORE ON PAGE 11 READ MORE ON PAGE 3 Links to strategy Links to solutions 1 2 3 4 5 Euro NCAP test scenarios 2025+ Vehicle-to-vehicle communication 2023 AEB junctions 2020 Enhanced VRU tests 2018 Enhanced AEB 2016 Lane departure warning 2014 AEB car to car 700+ 591 491 277 84 18 Our market drivers continued AB Dynamics plc Annual Report and Accounts 2024 09 Strategic report Governance Financial statements Our markets and strategy continued NEW VEHICLE MODELS NEW POWERTRAINS 3 4 Key trend Increasing concerns about the environmental impact and the predicted scarcity of fossil fuel supply have made energy efficiency and reduced emissions a primary focus of OEMs and a primary selling point for new vehicles. OEMs are developing EVs and hybrid alternatives to the traditional internal combustion engines, and continued development of alternative fuel sources such as e-fuels and hydrogen, hybrid drive trains and new technology continues to drive the market for vehicle development toolchains. The emergence of new sensor technology and the added capabilities in active safety and autonomy which are a differentiating factor for vehicle sales are driving growth in the volume and complexity of testing equipment used by the OEMs during development. Each variant of each new model requires certification that it meets the regulations of each country in which it is sold. In order to obtain an NCAP safety rating, each model must also be certified by the local NCAP body. This drives growth in the amount of equipment required by the OEMs, service providers and certification providers. Future opportunities Future opportunities are driven by the continued release of new passenger and commercial vehicle models, the development of autonomous and automated driving functions, new entrants into the automotive market, the rapid adoption of environmentally sustainable automotive solutions brought on by global climate change challenges and the development of new safety features. The Group is well positioned to service the growing demand through the range of testing products, the capability and scope of testing services and its simulation hardware and software solutions. Progress While the number of production vehicles of EVs is growing more slowly than predicted, the number of new models being developed continues to grow. Over 400 OEMs are currently developing EVs as well as alternative powertrains. New technology and innovation by the Group help accelerate our customers’ R&D development activities. The Group’s vehicle development tools are powertrain agnostic and the development solutions offered extend to Software in the Loop (SiL) and Hardware in the Loop (HiL) modelling which allow assessment of vehicle performance in a simulated environment, meeting the requirements of fast, efficient and effective development methods. Future opportunities As the focus remains on the development of EV technology, OEMs are also increasingly researching and developing alternative powertrains and drivetrain systems to meet growth sustainability challenges while balancing performance needs. As R&D development of new powertrains continues, so does the use of simulation during development to reduce vehicle development timescales and costs by enabling meaningful testing earlier in the development process. Key trend The emergence of EVs and new entrants into the automotive market, as well as developments in autonomy, has led to significant increases in the number of new model launches. Over 150 new vehicle models were launched to the market during 2023. Progress This has placed additional pressures on traditional automotive OEMs to rapidly develop new technologies. The need for increased speed to market and cost effectiveness has led to acceleration in the use of simulation in automotive development. Our rFpro simulation software and Ansible Motion dynamic simulators provide solutions that allow customers to test new models in a virtual environment. READ MORE ON PAGE 11 READ MORE ON PAGE 3 Links to strategy Links to solutions 1 2 3 4 5 6 READ MORE ON PAGE 11 READ MORE ON PAGE 3 Links to strategy Links to solutions 1 2 3 4 5 6 Our market drivers continued AB Dynamics plc Annual Report and Accounts 2024 10 Strategic report Governance Financial statements Our markets and strategy continued Over the last five years, AB Dynamics has grown significantly, delivering on our strategy to build a sustainable and resilient business with strong financial and operating performance. Building on the strength of our core business, coupled with value-enhancing acquisitions, the business has been transformed from a single entity in the UK to a multi-national group with twelve facilities in six countries across Europe, North America and Asia Pacific. Key achievements During FY 2024, the Group has expanded its testing product offering, with new products such as the Soft Pedestrian 360, the LaunchPad Spin and the Soft Motorcycle 360 having been approved by Euro NCAP. Testing services have been strengthened through the acquisition of VTS, a provider of mileage accumulation, EV and environmental testing services. Simulation has benefited from a strengthened market position following the integration of Ansible Motion, which was acquired in the previous year. Recurring revenue has increased to 45% (2023: 40%). Delivering our strategy As part of our diversification initiative, the Group has continued to develop new driverless solutions for new markets. Future Following significant investment in capability and capacity, the Group now has a solid and scalable operational and commercial platform from which to capitalise on an ambitious, multi-year, organic-led growth opportunity, supported by strong long-term structural and regulatory growth drivers and supplemented with value-enhancing acquisitions. We will create value for shareholders through: • Organic revenue growth supported by our market drivers • Operating margin expansion from operational gearing, improvements in the supply chain and operational efficiency • Value-enhancing acquisitions Our ambition is to double revenue and triple operating profit over the medium term, through the compounding effect of organic revenue growth of approximately 10% per year, an improvement in the operating margin to 20% and investing cash generated into acquisitions. Strategic objectives 1 6 2 5 3 4 Product and innovation Market-led new product development with a focus on research and innovation. Diversification Diversification into new adjacent markets utilising the Group’s core technology and capability. Capability and capacity Building a platform for long-term sustainable growth. International footprint Increase the Group’s international footprint in customer-led locations to increase customer intimacy, customer support and market intelligence. Service and support Transition towards a greater proportion of software as a source of higher margins and recurring revenues to meet the market’s needs as requirements become more complex. Acquisitive growth Clear and defined acquisition criteria of value-enhancing businesses that facilitate the Group’s strategic priorities. “We accelerate our customers’ drive towards net zero emissions, improving road safety and the automation of vehicle applications.” AB Dynamics plc Annual Report and Accounts 2024 11 Strategic report Governance Financial statements M&A strategy Our approach to acquisitions Having delivered and integrated five acquisitions over the last five years, the team is experienced in successfully executing transactions. A strong financial framework delivering value-enhancing M&A • Our M&A pipeline is healthy and based on clear criteria • Our initial focus is on bolt-on acquisitions, where the target is operating in a niche area at high margins, but is individually sub-scale • Typically targets will offer new product or service capabilities that can be cross-sold through our existing sales channels and relationships • We typically target profitable, cash generative businesses capable of achieving strong returns on investment, which are EPS accretive • Strong track record of integrating businesses onto the ABD platform • Highly disciplined approach to deal execution “The Group’s strategy is to drive organic growth and compound this through the acquisition of value-enhancing companies that facilitate and accelerate the Group’s strategic priorities.” 50 Opportunities 25 Focused relationships Up to four active discussions Preferred approach: transact off-market AB Dynamics plc Annual Report and Accounts 2024 12 Strategic report Governance Financial statements Acquisition of Venshure Test Services During FY 2024, the Group acquired Venshure Test Services (VTS), a leading provider of vehicle testing services including environmental testing and range certification for EVs. Based in Michigan, USA, VTS offers a comprehensive range of testing services including: • Climatic and thermal testing: Evaluate vehicle performance in extreme temperatures using our certification compliant dynamometers, solar loading and thermal chambers • Service mileage accumulation: Simulate real-world driving conditions to assess durability, range and overall powertrain performance • Battery state-of-health testing: Validate battery charging and performance with Level II and DC fast charging infrastructure • EV development and certification: Ensure compliance with regulatory EV standards through comprehensive testing protocols The business comprises a 23,300ft² testing facility strategically located close to the Detroit area and includes dynamometers and EV testing laboratories. The vehicle testing laboratories provide standardised procedures to validate EV battery energy consumption and range testing, producing certification quality data. VTS is an official Environmental Protection Agency accredited vehicle testing facility. The acquisition supports several of the Group’s strategic priorities including: • Further alignment of the Group’s testing services operations to the structural growth drivers in the automotive sector • Expanding the Group’s capabilities and broadening the scope of services in the testing services area • Complementing the Group’s existing California-based track testing services business with laboratory based testing • Opportunity to replicate testing services capabilities across both locations AB Dynamics plc Annual Report and Accounts 2024 13 Strategic report Governance Financial statements Our business model Delivering a customer-centric approach 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. 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. 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. 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 distributors and representatives in other locations to expand our reach. Customer closeness We have high-quality, long- term customer relationships with all major OEMs and test facilities, which enable us to provide support tailored to their needs and also assist in early identification of trends. Our local sales and support offices enable us to respond quickly to customer requirements. Tailored solutions In the automotive market, our broad range of products and services are used by customers throughout the development cycle from concept design to launch of new vehicle models. We provide innovative, tailored solutions to automate vehicles in other adjacent markets. WHY OUR CUSTOMERS CHOOSE US GROWTH DRIVERS Value creation We will create value for shareholders through: • Organic revenue growth supported by our market drivers • Operating margin expansion from operational gearing, improvements in the supply chain and operational efficiency • Value-enhancing acquisitions Our market drivers READ MORE ABOUT OUR MARKETS AND STRATEGY ON PAGES 8 TO 11 CONSUMER RATINGS NEW VEHICLE MODELS REGULATION NEW POWERTRAINS 3 4 2 1 Continuous innovation The Group has specialist expertise in a number of niche areas including driverless vehicle actuation, simulation software and Driver in the Loop (DiL) simulators. Continuous investment in R&D in these areas enables us to support our customers in developing new solutions to meet emerging market requirements, improve efficiencies and meet new regulations. AB Dynamics plc Annual Report and Accounts 2024 14 Strategic report Governance Financial statements Our business model continued 1 Concept design OEM • Simulation • Human factors • SPMM benchmark Customer type What we do Teams involved 2 Sub-system design Tier 1 supplier OEM • SPMM data • Simulation 3 Sub-system testing Tier 1 supplier OEM • Testing products • Testing services 4 Prototype ADAS testing OEM Service provider Tier 1 supplier • Testing products • Testing services 5 Durability testing OEM Service provider • Testing products • Testing services 7 On-road testing OEM • Testing services 6 Type approval Ratings body/ regulator • Testing products 8 NCAP testing Ratings body • Testing products High-quality, long-term customer relationships THE VEHICLE DEVELOPMENT CYCLE AB Dynamics plc Annual Report and Accounts 2024 15 Strategic report Governance Financial statements Chief Executive Officer’s review Delivering results Overview I am pleased to report that the Group delivered a very strong set of results, continuing the trend of double-digit revenue growth and margin expansion. This was driven by improvements in our commercial and operating capabilities, underpinned by positive market dynamics in all three sectors. During FY 2024, the Group continued to deliver against its strategic priorities by launching new products and services and through an initial contract award in ABD Solutions. The acquisition of VTS also expanded our presence in the testing services market, complementing the Group’s existing offering. Over the last five years, the Group has been transformed from a single entity in the UK to a multi-national group with twelve facilities in six countries across Europe, North America and Asia. Building on the strength of the core business, coupled with value-enhancing acquisitions, the Group now has a solid and scalable platform from which to capitalise on a multi-year growth opportunity, supported by strong long-term structural and regulatory tailwinds. Financial performance The Group delivered revenue growth in the year of 10% to £111.3m (2023: £100.8m) with increases across all three sectors, continuing the Group’s track record of top-line growth due to improvements in road safety technology, new vehicle models and increased regulation. Gross margin was 59.6%, up 10bps on 2023 due to operational efficiencies. Group adjusted operating profit increased by 22% to £20.3m (2023: £16.6m). The adjusted operating margin increased to 18.2% (2023: 16.5%) as a result of operating leverage and operational efficiency. Highlights 2024 • The Group delivered growth in revenue of 10% to £111.3m and a 22% increase in operating profit to £20.3m • Strong growth in testing products and testing services • ABD Solutions contract win and initial production units delivered with continued progress on pipeline of commercial opportunities • VTS acquisition integration progressing well AB Dynamics plc Annual Report and Accounts 2024 16 Strategic report Governance Financial statements Chief Executive Officer’s review continued Financial performance continued Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) increased by 18% to £24.2m (2023: £20.5m). Adjusted EBITDA margin was 21.7% (2023: 20.4%), an increase of 130bps. The Group delivered strong adjusted operating cash flow of £27.9m (2023: £23.5m) with cash conversion of 115% (2023: 114%) and net cash at the end of the year of £28.6m (2023: £32.0m), underpinning a robust balance sheet and providing the resources to fund the post year-end acquisition of Bolab and continue the Group’s investment programme. Sector review Testing products revenue of £69.4m was up 10% against 2023 (£63.0m) with growth in ADAS platforms and driving robots offset by a reduction in laboratory testing products. Testing services saw significant revenue growth of 29% to £16.7m (2023: £12.9m) in advance of new regulatory requirements, following the removal of external impediments that adversely impacted the prior year. In the Group’s Californian operation we saw improved access to vehicles for testing and in the China based operation there was a relaxation of pandemic restrictions. Simulation revenue increased by 1% to £25.2m (2023: £24.9m). Growth in simulation software was offset by a decrease in revenue from simulator motion platforms due to the timing of order intake for these large capital items. Strategic progress The Group continues to make good progress against its organic-led growth strategy, supplemented with value-enhancing acquisitions. During FY 2024, the Group has expanded its testing product offering, with new products such as the Soft Pedestrian 360, the LaunchPad Spin and the Soft Motorcycle 360 having been approved by Euro NCAP. Testing services have been strengthened through the acquisition of VTS, a provider of mileage accumulation, EV and environmental testing services. In simulation, the integration of Ansible Motion, which was acquired in the previous year, positions the Group to benefit from a strengthened market position in this important area. The increase in the level of recurring revenue to 45% (2023: 40%) enhances the resilience of the Group’s business model. The Group has continued to develop automated solutions for new markets and during the year delivered the initial units of a product for the construction industry and won a contract to supply an automated mileage accumulation solution. Following significant investment in capability and capacity, the Group now has a solid and scalable operational and commercial platform from which to capitalise on an ambitious multi-year organic-led growth opportunity, supported by strong long-term structural and regulatory growth drivers and supplemented with value-enhancing acquisitions. We will create value for shareholders through: • Organic revenue growth supported by our market drivers • Operating margin expansion from operational gearing, improvements in the supply chain and operational efficiency • Further value-enhancing acquisitions Our ambition is to double revenue and triple operating profit over the medium term, through the compounding effect of organic revenue growth of approximately 10% per year, an improvement in the operating margin to 20% and investing cash generated into acquisitions. Acquisitions On 2 April 2024, the Group acquired VTS, a provider of vehicle testing services, including environmental testing and range certification for EVs. The initial consideration was $15.0m (£11.9m). Contingent consideration of up to $15.0m will become payable in cash subject to certain performance criteria being met for each of the two years following completion. The acquisition expands both the Group’s capability and geographic coverage in the important and growing field of EV battery and powertrain performance evaluation. It also provides the opportunity to leverage AB Dynamics’ existing sales capabilities to drive cross-selling. VTS has been integrated into the Group’s testing services sector and since acquisition has been earnings accretive, delivering £1.0m of revenue and £0.4m of adjusted operating profit during FY 2024. After the year end, on 25 September 2024, the Group acquired Bolab, a niche supplier of automotive power electronics testing solutions, based in Germany. Bolab supplies low-voltage and high-voltage equipment for testing automotive sub-systems and components for conventional, hybrid and EVs. Capital allocation Our capital allocation framework delivers sustainable compounding growth as well as growing returns to shareholders. • Continuous organic investment and innovation to protect and grow core business • Organic investment into ABD Solutions driving growth in adjacent markets by leveraging core technology • Complementary acquisitions contributing to one or more of the Group’s stated strategies • Progressive dividend policy “Our market-leading position is driven by our technical capabilities and our reputation. Our products must satisfy challenging and complex requirements meaning barriers to entry are high.” Dr James Routh Chief Executive Officer AB Dynamics plc Annual Report and Accounts 2024 17 Strategic report Governance Financial statements Chief Executive Officer’s review continued Acquisitions continued The initial consideration was €5.0m (£4.2m). Contingent consideration of up to €6.0m (£5.0m) will become payable in cash across two tranches for the two years following completion, subject to meeting certain performance criteria for each year. The acquisition supports the expansion of the Group’s capabilities in the testing products business and provides further alignment with the structural growth drivers in the sector. Acquisitions have been, and will continue to be, a significant part of the overall strategy and there is a promising pipeline of potential value- enhancing and strategically compelling acquisition opportunities. Summary The Group has delivered a very strong performance, with sustained high levels of demand across key markets, demonstrating the benefits of the investment made in recent years in the commercial and operating capability of the business. 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 innovative technologies to diversify the business through our technology accelerator, ABD Solutions. Trading in the early part of FY 2025 has been strong, supported by a solid order book, providing good visibility into the new financial year. Whilst being mindful of a potential slowdown in timing of pipeline conversion due to disruption in the automotive market and customer delivery schedules, the Board remains confident that the Group will make further financial and strategic progress this year. With strong trading momentum entering FY 2025 and benefiting from the acquisition of Bolab and improving margins, the Board expects to deliver FY 2025 adjusted operating profit slightly ahead of current expectations. Our market drivers remain strong. This backdrop, along with a strong acquisition pipeline, provides confidence of delivering continued growth in revenue and margin in FY 2025 and beyond. Dr James Routh Chief Executive Officer 26 November 2024 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 and to have provided five volunteer mentors for the Royal Academy of Engineering’s Graduate Engineering Engagement programme (GEEP). 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 fourth 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. AB Dynamics plc Annual Report and Accounts 2024 18 Strategic report Governance Financial statements Chief Executive Officer’s review continued Driving delivery Q&A WITH DR JAMES ROUTH Q What are your priorities for the year ahead? It is important that we continue to leverage the investments made in the operating platform of the business to drive continued organic revenue growth, whilst optimising the business to deliver improved operating margins. We will further invest in new product R&D and customer service offerings to maintain our strong, market-leading position. We will also work hard to increase collaboration across our sectors to deliver seamless solutions to our customers, cross-sell our products and services and increase customer penetration. During FY 2025 we will focus on the integration of Bolab following completion of the acquisition in September 2024, along with continuing to identify and progress further attractive, value-enhancing acquisition opportunities. Q What will AB Dynamics look like in the future? AB Dynamics will be a larger, broader based business through the ongoing compounding effect of top-line growth, supported by long-term market drivers and continued investment in innovative new products. Over the medium term we will expand operating margins to 20%+ through operating leverage, supply chain improvements and operating efficiency. In addition to the organic growth in the core business, ABD Solutions will further support incremental revenue growth through new products and attractive adjacent markets. The organic growth will be compounded by further acquisitive growth utilising our experience and track record to deliver further value-adding acquisitions. Our disciplined approach to capital allocation provides additional resources and optionality to fund these investments. 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 have supported this resilience and have 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 2024. We have delivered the initial units of a pedestrian detect and warn system for 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. We were also particularly pleased to have won a contract with an automotive OEM for an automated mileage accumulation solution, demonstrating that as a technology accelerator, ABD Solutions can also open adjacent sectors in our core market. Q What are your highlights of the year? I am very pleased to deliver an overall performance in line with our long-term strategic plans, delivering 10% revenue growth and over 20% organic growth in operating profit as a result of our initiatives to scale and improve operating performance. Following the investments made in recent years, we have transformed the business into a strong platform that will enable and support our next phase of growth. We have also delivered good progress on inorganic growth, with the successful acquisition and integration of VTS in the US and the acquisition of Bolab in Germany after the period end. Both businesses will be value enhancing and support the ongoing development of the Group’s product and service offering. AB Dynamics plc Annual Report and Accounts 2024 19 Strategic report Governance Financial statements Operational review – Testing products Introduction The Group’s testing products are used during road vehicle development for the test and verification of ADAS, autonomous systems, EVs and vehicle dynamics. Main product categories include driving robots and ADAS platforms used on proving grounds and test tracks and Suspension Parameter Measurement Machines (SPMM) used in laboratory testing. This sector also includes driverless solutions used in adjacent markets such as mining and specialist vehicles. Driving robots are used to control the vehicle under test to deliver a much higher level of accuracy and repeatability than human test drivers can achieve 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 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 (Guided Soft Target or GST and LaunchPads) comprise powerful, electrically driven propulsion systems contained in an extremely robust, low-profile, over- drivable chassis. The test object (a soft car or dummy pedestrian or cyclist) mounted on top is constructed from lightweight and soft materials minimising the risk of damage in the event of a collision during testing. The ADAS platforms are controlled and synchronised with the vehicle under test by our comprehensive suite of software. All of our driving robots and ADAS test platforms can be operated within a single software environment 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’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 2024 • New product development continues at pace and in line with the technology roadmap for testing products • The Group’s pedestrian dummy, the Soft Pedestrian 360, the LaunchPad Spin and the Soft Motorcycle 360 have been approved by Euro NCAP • ABD Solutions delivered the first units of a retrofit pedestrian detection system for the construction industry • Development of new sensor solution for object detection to complement Ground Traffic Control software enabling larger‑scale driverless durability testing THE MARKET DRIVERS FOR GROWTH IN THE TESTING PRODUCTS SECTOR ARE DETAILED IN OUR MARKETS AND STRATEGY SECTION ON PAGE 8 Developments in technology and regulation driving growth “The growth in testing volume and complexity continues to drive demand for ADAS platforms and driving robots.” AB Dynamics plc Annual Report and Accounts 2024 20 Strategic report Governance Financial statements Financial performance The testing products business delivered revenue of £69.4m (2023: £63.0m), a 10% increase against the prior year, with notable growth across both driving robots and ADAS platforms. Driving robot sales increased 16% to £29.2m (2023: £25.2m) and ADAS platform sales increased 11% to £33.9m (2023: £30.5m). The Group expects continued growth in this area as new regulatory requirements for evolving ADAS technologies are released, such as the recent launch of the Euro NCAP 2030 roadmap and its new Safer Trucks 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. The recent launch of a new range of soft targets including motorcycles and articulating pedestrians is expected to drive further growth. SPMM revenue, which is dependent on the timing of order and delivery, was down 14% at £6.3m (2023: £7.3m). This long-standing product which has been supplied to global customers for the past 25 years has evolved significantly over this period, culminating in the launch of the SPMM Plus. 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 testing 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 Pedestrian 360, the Soft Motorcycle 360 and the LaunchPad Spin. Principal operations The testing products sector principally operates from the AB Dynamics headquarters in Bradford on Avon, UK. Growth potential 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 Changes to regulation include: • 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 fitting of vehicle-to-vehicle AEB and pedestrian AEB systems • 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. Operational review – Testing products continued Driving robots £29.2m ADAS platforms £33.9m SPMMs £6.3m £69.4m Testing products revenue (£m) 69.4 2024 2023 2022 2021 63.0 55.6 46.0 Testing products revenue AB Dynamics plc Annual Report and Accounts 2024 21 Strategic report Governance Financial statements Operational review – Testing services Expanded portfolio of services drives growth Introduction The Group’s testing services sector provides on-road, track and laboratory testing services to the automotive market including evaluation of vehicle active safety systems, environmental testing, and testing of autonomous technologies, EV drivetrains and battery performance, vehicle durability and vehicle dynamics. The Group operates a test facility in California, USA, where testing of ADAS systems and vehicle dynamics is performed on behalf of OEMs, technology developers and government agencies using the ABD track testing product range. In Michigan, USA, the Group also operates a laboratory testing facility performing mileage accumulation testing, climatic and thermal testing, and assessment of EV powertrain and battery performance. In China, the Group provides on-road vehicle testing services for the assessment of all aspects of vehicle performance, particularly focusing on EV performance, charging capability and vehicle connectivity. Highlights 2024 • Acquisition of VTS expanding the capability of services offered by the Group • Additional regional facility for on-road testing services established in China • SPMM testing as a service introduced to the North American market based in California, USA • Investment completed in our California testing facility Image to be updated THE MARKET DRIVERS FOR GROWTH IN THE TESTING SERVICES SECTOR ARE DETAILED IN OUR MARKETS AND STRATEGY SECTION ON PAGE 8 AB Dynamics plc Annual Report and Accounts 2024 22 Strategic report Governance Financial statements Financial performance This sector saw significant revenue growth of 29% to £16.7m (2023: £12.9m) following the removal of external impediments that adversely impacted the prior year. The Group continues to invest in service capability in this sector in order to meet forthcoming regulatory and environmental requirements and to ensure it offers a full suite of vehicle development and certification testing services to our customers in an increasingly complex environment. Progress during the year The Group acquired VTS in April 2024, expanding its testing service capability. VTS is a leading provider of dynamometer based testing services to the automotive sector in the USA, particularly focused on the development and deployment of EVs for US based automotive OEMs. The Group completed the extension and renovation of its facility in California, increasing capacity, number of services and capability to service customer requirements. It also expanded its operations in China with a new facility set up in Anhui. 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 off-highway testing services business is based in Torrance and Bakersfield, California, USA. The on-road testing services business is based in Beijing and Anhui, China, with a regional headquarters in Singapore. The laboratory testing facility is based in Chelsea, Michigan, USA. Growth potential • Opportunity to replicate testing services in any location • Group testing services offer end-to-end vehicle development toolchain capabilities • Utilisation of the Group’s strong OEM customer relationships Testing services revenue £16.7m Operational review – Testing services continued Testing services revenue (£m) 16.7 2024 2023 2022 2021 12.9 14.4 10.1 AB Dynamics plc Annual Report and Accounts 2024 23 Strategic report Governance Financial statements Operational review – Simulation Introduction The Group’s simulation sector provides advanced products used to replicate the real world in a simulated environment for a wide variety of applications. 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. Highlights 2024 • Ansible Motion delivered a record number of systems in the year • rFpro developed the largest ever digital twin of 80km of Los Angeles for a major OEM, including 12,000 buildings and 13,000 additional items • Progress in the development of the T1 Sport simulator THE MARKET DRIVERS FOR GROWTH IN THE SIMULATION SECTOR ARE DETAILED IN OUR MARKETS AND STRATEGY SECTION ON PAGE 8 Broad range of solutions to meet customers’ growing needs “The use of simulation in automotive development continues to grow and we are well placed to benefit.” AB Dynamics plc Annual Report and Accounts 2024 24 Strategic report Governance Financial statements Financial performance Simulation revenue increased by 1% to £25.2m (2023: £24.9m). Growth in simulation software was offset by a decrease in revenue from simulator motion platforms due to the timing of order intake for these large capital items. Progress during the year The Group has made good progress during the year in our simulation business. The strong order book at the beginning of the financial year provided a good platform for sales of the Group’s simulator products and rFpro delivered a very strong commercial performance across both automotive and motorsport customers. Driver in the Loop (DiL) simulators were delivered to customers in the UK, the US and China for both motorsport and automotive development applications. Ansible Motion has announced partnerships with both IAAPS and MdynamiX to enhance knowledge of the benefits of using simulation amongst OEMs. IAAPS Ltd (Institute for Advanced Automotive Propulsion Systems) and Ansible Motion have entered a technical cooperation agreement to leverage the strengths of both organisations to deliver advanced simulation and testing capabilities to the automotive industry. The partnership will lead to the development of a suite of accurate automotive tools necessary to evaluate and validate complex mechanical components in virtual domains and enable vehicle manufacturers and suppliers to achieve higher levels of virtual validation across chassis, powertrain and braking, supporting shorter time to market, lower costs and lower carbon emission targets. Ansible Motion and MdynamiX, both specialists in real-time Hardware in the Loop (HIL) solutions, have formalised a long- standing relationship to enhance the development of steering, braking and ADAS. This new partnership aims to enable engineers to experience and evaluate representative vehicle systems early and often during the development process by combining real, deployable hardware and software with virtual vehicle assessment capabilities. Sales of rFpro simulation software have continued to grow in FY 2024 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. rFpro has successfully developed the largest ever digital twin of 80km of Los Angeles, including 12,000 buildings and 13,000 other items, demonstrating the continued demand for our physics based software for a multitude of applications. Principal operations Ansible Motion is based in Norwich, UK. The simulation focused business of rFpro is based in Romsey, UK. 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 provides 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 to optimise vehicle dynamics with revised mass and centre of gravity Operational review – Simulation continued Simulation revenue £25.2m Simulation revenue (£m) 25.2 2024 2023 2022 2021 24.9 13.2 9.3 AB Dynamics plc Annual Report and Accounts 2024 25 Strategic report Governance Financial statements Chief Financial Officer’s review Continuing our track record of growth, margin improvement and strong cash generation Overview Our focus in 2024 has been on driving operational execution and delivering organic growth as well as acquisition integration. The performance demonstrates how the business has been transformed over the previous five years by strengthening our business model. Investments in our sales infrastructure, geographical coverage and R&D innovation have driven revenue growth, while our focus on operational skills, capabilities, systems and processes has enabled us to improve margins. These profits have been converted into cash through disciplined working capital management and capital allocation, enabling us to fund acquisitions to build out our product and service portfolio and enhance the resilience of the business. All three sectors made strong 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 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. Testing services saw significant growth through recovery from adverse macroeconomic factors in the prior year and through the acquisition of VTS. Simulation benefited from growth in simulation software. ABD Solutions, our technology accelerator developing automated solutions for adjacent markets, remains in the pre-revenue phase, but has secured two contracts due for delivery in 2025 with potential follow-on orders to come. The Group maintained its very strong financial position, with net cash at 31 August 2024 of £28.6m (2023: £32.0m) continuing the track record of excellent cash conversion, with a three-year rolling average of 116%. Adjusted operating profit (£m) £20.3m +22% Adjusted operating cash flow (£m) £27.9m +19% 20.3 27.9 2024 2024 2023 2023 2022 2022 2021 2021 16.6 23.5 13.7 20.7 10.2 16.0 AB Dynamics plc Annual Report and Accounts 2024 26 Strategic report Governance Financial statements Chief Financial Officer’s review continued Trading performance The Group delivered revenue growth of 10%. Organic constant currency revenue growth was 12% as foreign exchange provided a minor headwind. The proportion of recurring revenue increased to 45% (2023: 40%). Gross margin remained stable at 59.6% (2023: 59.5%), with operational efficiencies in testing products, and increased utilisation in US testing services offset by a change in mix in simulation. Group adjusted operating profit increased by 22% to £20.3m (2023: £16.6m). The adjusted operating margin increased to 18.2% (2023: 16.5%), as a result of operating leverage and operational efficiency. Adjusted EBITDA increased by 18% to £24.2m (2023: £20.5m). Adjusted EBITDA margin was 21.7% (2023: 20.4%), an increase of 130bps. Adjusted net finance costs reduced to £0.3m (2023: £0.4m). Adjusted profit before tax was £20.0m (2023: £16.3m). The Group adjusted tax charge totalled £3.7m (2023: £2.2m), an adjusted effective tax rate of 18.7% (2023: 13.2%). The effective tax rate is lower than the current UK corporation tax rate due to patent box relief. The increase in the year was due to the full-year effect of the increase in the UK corporation tax rate. Adjusted diluted earnings per share was 70.0p (2023: 60.8p), an increase of 15%, reflecting the increase in operating profit offset by a higher tax charge. The order book at 31 August 2024 was £30.3m (2023: £42.9m) covering approximately 25% of FY 2025 expected revenue, reflecting the standard lead time for testing products of approximately three months. The reduction on the prior year is due to timing of order intake in simulation. Statutory operating profit was flat at £12.7m (2023: £12.6m) and after net finance costs of £0.7m (2023: £1.1m), statutory profit before tax increased by 4% from £11.5m to £12.0m. The statutory tax charge increased to £2.3m (2023: £0.5m), since the prior year benefited from a one-off non-taxable gain on the release of accrued contingent consideration on the acquisition of Ansible Motion. Statutory basic earnings per share was 42.3p (2023: 48.0p). A reconciliation of statutory to underlying non-GAAP financial measures is provided below. The adjustments to operating profit of £7.6m comprise £6.4m of amortisation of acquired intangibles, £1.0m of ERP development costs and £0.2m in relation to acquisition costs (2023: £4.0m comprising £7.2m of amortisation of acquired intangibles, £1.3m of ERP development costs and a credit of £4.5m in relation to the release of contingent consideration of Ansible Motion net of acquisition costs). The £0.4m adjustment to the interest charge relates to the unwind of the discount on the contingent consideration for acquisitions (2023: £0.8m). The tax impact of these adjustments was £1.4m (2023: £1.7m). Group financial position and cash generation The Group delivered strong adjusted operating cash flow of £27.9m (2023: £23.5m) with cash conversion of 115% (2023: 114%). The strong cash generation was used to fund the acquisition of VTS and settle the final deferred consideration in respect of the acquisition of Ansible Motion. It also funded £3.8m of investment in product development, property, plant and equipment and dividends of £1.5m. Net cash at the end of the year was £28.6m (2023: £32.0m), 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 £11.2m from £99.7m to £110.9m, mainly due to the acquisition of VTS which resulted in an increase in non-current assets of £17.5m, offset by depreciation and amortisation of £10.3m. Working capital was £3.6m (2023: £6.2m), a decrease of £2.6m in a year when revenue has grown by 10%. Working capital as a percentage of revenue has decreased from 6.2% to 3.2%. The improvement reflects our continued focus on commercial contracting, inventory levels and cash management, along with timing differences arising from long-term contracts. Since the year end, there have been no significant changes to the financial position or significant cash flow transactions with the exception of the acquisition of Bolab. 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 15.4% to 17.4% benefiting from further improvement in operating leverage alongside continued investment discipline. Acquisitions On 2 April 2024, the Group acquired VTS, a provider of vehicle testing services, including environmental testing and range certification for EVs. The initial consideration was $15.0m (£11.9m). Contingent consideration of up to $15.0m will become payable in cash subject to certain performance criteria being met for each of the two years following completion. The acquisition expands both the Group’s capability and geographic coverage in the important and growing field of EV battery and powertrain performance evaluation. It also provides the opportunity to leverage AB Dynamics’ existing sales capabilities to drive cross-selling. VTS has been integrated into the Group’s testing services sector and has been earnings accretive, delivering £1.0m of revenue and £0.4m of adjusted operating profit during FY 2024. After the year end, on 25 September 2024, the Group acquired Bolab, a niche supplier of automotive power electronics testing solutions. Bolab supplies low-voltage and high-voltage equipment for testing automotive sub-systems and components for conventional, hybrid and EVs. The initial consideration was €5.0m (£4.2m). Contingent consideration of up to €6.0m (£5.0m) will become payable in cash across two tranches for the two years following completion, subject to meeting certain performance criteria for each year. The acquisition supports the expansion of the Group’s capabilities in the testing products business and provides further alignment with the structural growth drivers in the sector. Research and development While research and development form 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 £0.2m (2023: £0.5m) 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 £0.7m (2023: £0.2m). AB Dynamics plc Annual Report and Accounts 2024 27 Strategic report Governance Financial statements Foreign currency exposure The Group faces currency exposure on its foreign currency transactions and maintains a natural hedge whenever possible to transactional exposure by matching the cash inflows and outflows in the respective currencies. With significant overseas operations, the Group also has exposure to foreign currency translation risk. On a constant currency basis, revenue would have been £2.5m higher than reported and both adjusted and statutory operating profit would have been £0.2m higher as Sterling strengthened against the US dollar, Euro and Yen. Constant currency revenue growth was 13% and growth in operating profit was 23%. 2024 2023 Year-end rate US dollar 1.32 1.27 Euro 1.19 1.16 Yen 191 186 Average rate US dollar 1.26 1.21 Euro 1.17 1.15 Yen 191 165 Dividends The Board is recommending a final dividend of 5.30p per share, giving a total dividend for the year of 7.63p 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, adjusted earnings per share and adjusted cash flow from operations. 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: 2024 2023 Statutory Adjustments Adjusted Statutory Adjustments Adjusted EBITDA (£m) 23.0 1.2 24.2 23.6 (3.1) 20.5 Operating profit (£m) 12.7 7.6 20.3 12.6 4.0 16.6 Operating margin 11.5% 18.2% 12.5% 16.5% Finance expense (£m) (0.7) 0.4 (0.3) (1.1) 0.8 (0.3) Profit before tax (£m) 12.0 8.0 20.0 11.5 4.8 16.3 Tax expense (£m) (2.3) (1.4) (3.7) (0.5) (1.7) (2.2) Profit after tax (£m) 9.7 6.6 16.3 11.0 3.1 14.1 Diluted earnings per share (pence) 41.7 70.0 47.4 60.8 Cash flow from operations (£m) 26.7 1.2 27.9 19.3 4.2 23.5 Chief Financial Officer’s review continued AB Dynamics plc Annual Report and Accounts 2024 28 Strategic report Governance Financial statements Alternative performance measures continued The adjustments comprise: 2024 2023 Profit impact £m Cash flow impact £m Profit impact £m Cash flow impact £m Amortisation of acquired intangibles 6.4 — 7.2 — Acquisition related costs/(credit) 0.2 0.2 (4.5) 2.8 ERP development costs 1.0 1.0 1.3 1.4 Adjustments to operating profit 7.6 1.2 4.0 4.2 Adjustments related to acquisition related finance costs 0.4 — 0.8 — Adjustments to profit before tax 8.0 1.2 4.8 4.2 Amortisation of acquired intangibles The amortisation relates to the acquisition of VTS and the businesses acquired in previous years: DRI, rFpro, VadoTech and Ansible Motion. Acquisition related costs/(credit) The current year cost and cash impact relate to the acquisition of VTS. The credit in the prior year relates to the £5.2m release of contingent consideration on the acquisition of Ansible Motion less acquisition costs of £0.7m. The prior year cash impact relates to acquisition costs and a bonus paid to employees of the acquired entity for pre-acquisition service. 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. Acquisition related finance costs Finance costs relate to the unwind of the discount on contingent consideration payable on the acquisition of Ansible Motion and VTS. Taxation The tax impact of these adjustments was as follows: amortisation of £1.1m (2023: £1.3m), acquisition related costs of £0.1m (2023: £0.1m) and ERP development costs of £0.2m (2023: £0.3m). Net cash The reconciliation of cash and cash equivalents to net cash is as follows: 2024 2023 £m £m Cash and cash equivalents 31.8 33.5 Lease liabilities (3.2) (1.5) 28.6 32.0 Return on capital employed (ROCE) ROCE is calculated as follows: 2024 2023 £m £m Adjusted operating profit 20.3 16.6 Shareholders’ equity 131.3 125.2 Net cash (28.6) (32.0) Deferred tax 7.5 8.7 Contingent consideration 6.2 5.9 Capital employed 116.4 107.8 Return on capital employed 17.4% 15.4% Sarah Matthews-DeMers Chief Financial Officer 26 November 2024 Chief Financial Officer’s review continued AB Dynamics plc Annual Report and Accounts 2024 29 Strategic report Governance Financial statements Key performance indicators Clear performance measures that highlight sustainable value creation FINANCIAL FIGURES 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 Sustainability section for health and safety and emissions performance. 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 testing products and services. Link to strategy 1 2 3 4 5 6 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 2 3 4 Revenue (£m) £111.3m +10% Adjusted operating profit (£m) £20.3m +22% 100.8 111.3 16.6 20.3 83.2 13.7 63.7 10.2 2024 2024 2023 2023 2022 2022 2021 2021 AB Dynamics plc Annual Report and Accounts 2024 30 Strategic report Governance Financial statements Key performance indicators continued FINANCIAL FIGURES CONTINUED 2024 2024 2024 2023 2023 2023 2022 2022 2022 2021 2021 2021 60.8 70.0 23.5 27.9 15.4 17.4 48.1 20.7 15.3 35.4 16.0 11.0 Adjusted diluted EPS (p) 70.0p +15% Adjusted operating cash flow (£m) £27.9m +19% Return on capital employed (%) 17.4% +200bps 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 15% as a result of the increase in adjusted operating profit offset by an increase in the tax charge. Link to strategy 2 4 Definition Cash flow from operating activities adjusted for acquisition costs and other adjustments for one-off non-recurring payments or receipts. 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 investing activities, interest payments, tax and dividends. Comment on results Adjusted operating cash flow increased by 19% to £27.9m as a result of the increase in operating profit and a reduction in working capital. Cash conversion was 115% (2023: 114%). Link to strategy 2 3 4 Definition Adjusted operating profit as a percentage of capital employed, defined as shareholders’ equity less net cash held plus deferred tax liabilities and contingent consideration. Reason for choice This measures efficient use of capital. Comment on results ROCE increased from 15.4% to 17.4% in the year due to operational improvements and operating leverage. Link to strategy 2 3 Links to strategy Product and innovation Capability and capacity Acquisitive growth Service and support International footprint Diversification 1 4 2 5 3 6 AB Dynamics plc Annual Report and Accounts 2024 31 Strategic report Governance Financial statements Sustainability Embedding sustainability We are committed to the goal of becoming net zero for market based Scope 1 and 2 emissions by 2040 and working to be a net zero organisation by 2050. 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, via our Health and Safety Management System, associated procedures and strict auditing. Our key achievements since our last Annual Report include: • 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 • There were no reportable incidents or lost time incidents during the year • Successful re-certification of the ISO 45001 standard for Occupational Health and Safety Management Systems and the ISO 14001 standard for our Environmental Management Systems at Anthony Best Dynamics Limited and AB Dynamics GmbH • Successful launch of a Group newsletter to all employees, which will be produced on a quarterly basis going forward • ‘Manage for excellence’ programme piloted in the UK, which covers fundamental skills for our people managers • Collection of Scope 3 emissions data expanded to include all material Scope 3 emissions for our UK locations • Continued use of green renewable energy in the UK and Germany, including the use of solar panels at two of our UK sites, which generated a total of 133,119 kWh of power in FY 2024 • Completed assessment of our climate-related risks and opportunities in alignment with the recommendations of the TCFD (see report on pages 50 to 55) • Successful Energy Savings Opportunity Scheme (ESOS) audit completed for our UK businesses with energy saving recommendations identified for implementation in future periods • MSCI ESG rating of AAA achieved Our priorities for the next twelve months are: • Continue to conduct regular Group HSE visits to each of our businesses to maintain our cycle of continuous improvement • Extension of the scope for our Occupational Health and Safety Management System and Environmental Management Systems to include additional global subsidiaries • Improve our recruitment practices through the continued implementation of our new recruitment system • Continue to enhance and develop our corporate social responsibility programmes globally, focusing on community engagement and volunteering efforts • Continue to expand our Scope 3 emissions data collection for the Group • Implement the energy saving recommendations identified for implementation in the UK ESOS audit • Encourage more 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 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 sustainability credentials, as well as to 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 in road based injuries and fatalities, is fundamentally aligned to sustainability 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. Health and safety Environment Ethics and compliance Our people Sustainable products AB Dynamics plc Annual Report and Accounts 2024 32 Strategic report Governance Financial statements Sustainability continued Embedding sustainability continued Sustainability roadmap 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 sustainability 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 sustainability performance over the course of four meetings during FY 2024. The ESG Committee has overall responsibility for translating our sustainability strategy into actionable plans, in compliance with relevant legal and regulatory requirements. The Board has received significant external input on sustainability this year, with feedback from the auditor, investors and sustainability experts. Sustainable business goals We 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 AB Dynamics alignment More information Health and safety Halve the number of global deaths and injuries from road traffic accidents • 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 Pages 34 and 35 Our people Achieve gender equality and empower all women and girls • 40% of the AB Dynamics plc Board is female in line with best practice • We aim to further increase female representation across all levels throughout the business • Sponsorship and support of women in STEM subjects Page 37 Environment Improve water quality by reducing pollution, reducing untreated waste water and minimising the release of hazardous chemicals and materials • 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 Page 46 Environment Accelerate action on modern renewable energy – especially in heating and transport • Rapid development of EVs 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 Pages 42 to 46 Sustainable products Build resilient infrastructure, promote inclusive and sustainable industrialisation and foster innovation • We support the development of EVs through on-road testing of battery technology and charging infrastructure and laboratory testing of battery range • ABD Solutions’ core mission is to accelerate the transition to autonomy by providing retrofit solutions that reuse existing vehicles to automate vehicle applications Page 47 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 Page 8 Environment Reduce waste generation by prevention, reduction, recycling and reusing • We follow a waste management hierarchy of Prevention, Reuse, Recycling, Energy Recovery and Disposal, to ensure the reduction in waste sent to landfill Page 46 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 Pages 42 to 46 AB Dynamics plc Annual Report and Accounts 2024 33 Strategic report Governance Financial statements Sustainability continued Health and safety 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 continued to improve upon its processes and procedures, with increased standardisation of reporting across its subsidiaries. This will enable us to share best practice and lessons learnt from incidents across the Group and to continue to set further Group-wide health and safety targets. 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. Regular health and safety reporting is carried out across the Group and all employees are encouraged to report any safety shortcomings and near misses. Near miss reporting is crucial if we are to understand and prevent incidents, which is why we encourage all our employees to communicate near misses so we can manage any emerging risks. This increasing focus on enhanced reporting, alongside the growth of the Group, means 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 Group Health and Safety Management System is now embedded at the Group’s largest subsidiary, Anthony Best Dynamics Limited, and at AB Dynamics GmbH. We plan to extend the implementation of the system to include additional subsidiaries in FY 2025. 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. Group oversight is provided in the form of regular site visits by the Group Health, Safety and Environmental Manager, where processes are reviewed and training is provided. 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 are included within the training and describe how workplace hazards are dealt with and how we apply control measures, including for our employees working at our customers’ sites. These risk assessments are regularly reviewed and updated where necessary. Finally, environmental topics such as recycling and energy use are discussed, with guidance given on how to reduce any potential negative impacts. In FY 2024, 48 health, safety and environmental inductions were completed at our UK subsidiaries, as well as first aid refresher training and other safety related 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. 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. AB Dynamics plc Annual Report and Accounts 2024 34 Strategic report Governance Financial statements Sustainability continued Health and safety continued Safety first continued Employee wellbeing continued Our flexible working policy allows employees to request a degree of working from home, part-time working 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 are 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 performance We have a proud track record of safety performance and in FY 2024 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. Progress has been made during FY 2024 towards standardising and harmonising our risk assessments across the Group. This year, we extended our more detailed risk assessment programme to include additional business units, with risk assessments completed for all operational and support departments of our UK businesses and DRI. These have been completed in consultation between the Group Health, Safety and Environmental 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, ensure our legal obligations are met and improve the overall health and safety performance of the Group. During the year, we recertified our accreditation to the ISO 45001 standard for Occupational Health and Safety Management Systems at Anthony Best Dynamics Limited and AB Dynamics GmbH, sending 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 2024, we are pleased to report that there were no reportable incidents or lost time incidents. The number of minor injuries, most caused by slips or falls, increased, primarily due to an increasing focus on reporting, as well as the growth in headcount of the Group. 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 increase in near miss reporting represents good progress as an organisation willing to learn and improve on a continuous basis. Employee safety 2024 2023 Average employees 512 473 Reportable incidents — 1 Lost time incidents — 2 * Near misses 51 26 Minor injury, first aid cases (FAC) 26 16 Injury rate per 100 employees 5.1 3.8 Injury rate per 100,000 hours worked 3.1 2.2 * Includes RIDDOR reportable incident. 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. The increase in minor injuries resulted in a rise in the overall injury rate per 100 employees from 3.8 to 5.1. This is mainly due to regular and enhanced reporting of minor incidents, which has been encouraged throughout the organisation to prevent recurrence. Looking forward, in FY 2025 we plan to build upon the successful implementation of the Group Health and Safety Management System in the UK and Germany by extending this to include additional subsidiaries. Specific targets in relation to the system implementation will be included in the local leadership teams’ performance objectives and incentives. In addition, the Group Health, Safety and Environmental Manager will continue to conduct regular visits to each of our businesses to maintain our cycle of continuous improvement and also to provide training to employees. AB Dynamics plc Annual Report and Accounts 2024 35 Strategic report Governance Financial statements Sustainability continued Our people Engagement 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 that development needs and career aspirations are identified. Based on local requirements, weekly, monthly or quarterly 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 employee engagement, all employees will be invited to participate in employee surveys. These will be conducted annually, beginning in November 2024 with the introduction of a mid-point pulse survey to stay connected to the sentiment of our employees. We also successfully launched a Group newsletter to all employees starting in July 2024 which will be produced on a quarterly basis. Our vision and values 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 2024, particularly in our recently acquired businesses. Values were introduced as part of our performance appraisal process in FY 2024 and managers are encouraged to discuss these with employees. Equality, 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 equality, diversity and inclusion. 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 56 and 57. AB Dynamics plc Annual Report and Accounts 2024 36 Strategic report Governance Financial statements Sustainability continued Our people continued Equality, diversity and inclusion continued As a Group, we believe training, development and progression opportunities must be available to all staff. We offer flexible working opportunities such as working remotely or part-time and flexible hours according to the requirements of the position. 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. We have continued in our efforts to address these disadvantages during FY 2024, both in our role as a Corporate Partner to the Women’s Engineering Society (WES) and via our partnership with Smallpeice Trust Arkwright Engineering Scholarship, in which we mentor 16-year-old students who are considering further education or 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 and this remains a continued area of focus, given the known under-representation of women in these roles globally. At present, women represent 17% 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 21% while the Group Board is at 40%, in line with these recommendations. Set out opposite is an analysis of the Group’s employees by gender at 31 August each year (excluding VadoTech Group due to data availability). Employees by gender 2024 2023 Male Female Prefer not to say Male Female Prefer not to say Board 60% 40% — 60% 40% — Executive Committee 83% 17% — 83% 17% — Senior management 79% 21% — 84% 16% — Other employees 82% 17% 1% 82% 16% 2% All employees 82% 17% 1% 82% 17% 1% Mighty Girls is an organisation based in Wiltshire, UK, that supports and encourages girls aged 8–18 to develop confidence and try new skills. It works with several schools across Wiltshire and Somerset and is funded by the National Lottery Community Fund. Earlier this year, Mighty Girls organised a Coding Boot Camp event at Bath University, where girls learnt coding skills and met with women working in STEM careers. AB Dynamics was pleased to sponsor the event, and I met all the girls attending. I provided an overview of AB Dynamics’ products and a view of life as a software engineer. The girls quickly showed an interest in the talk, demonstrations and videos and engaged enthusiastically with our staff. We also shared ideas with them around future roles they could aspire to. Jennie Franks, Lead Software Engineer Since the start of the year, we have been running monthly sessions for new employees at the AB Dynamics offices as part of our project to increase inclusivity. The sessions provide an informal setting for new starters to discover aspects of the Company outside their usual departments, to meet other new starters and to hear from key members of staff. The initiative, led by Jennie Franks and I, is supported by the Royal Academy of Engineering as part of a pilot scheme to improve inclusivity in the engineering profession. The sessions are proving to be popular, with feedback from our new staff indicating they are highly beneficial in settling quickly into the Company, with comments like: “they have made me feel welcomed and valued in the business”, “definitely made me feel more comfortable approaching other people within the business” and “a good way to settle in and see how the Company works between departments. Mark Radley, Senior Engineer AB Dynamics plc Annual Report and Accounts 2024 37 Strategic report Governance Financial statements Sustainability continued Our people continued 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 in FY 2022, we have gone on to successfully place four graduates. Additionally, two students completed a placement year with ABD Solutions during the year and DRI has a consistent flow of placement students assisting in its Human Factors department. Average number of employees by region UK 299 Germany 25 USA 51 China 120 Singapore 6 Japan 11 512 total employees We also continued our summer placements this year with five students completing internships across the Group. As we continue our apprenticeship scheme through FY 2024, we are pleased to share that we received the Large Apprentice Employer of the Year award in recognition of the outstanding commitment and support our business has made to our apprentices throughout the apprenticeship programme with Wiltshire College & University Centre. Talent and career development The Group remains committed to attracting and retaining key talent 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 second ABD Professional Development Programme (PDP) commenced in June 2024 for twelve employees globally. The UK launched a pilot ‘manage for excellence’ programme which covers fundamentals to set a common base for our people managers. This four module programme spans 18 months, providing in-classroom training and on-the-job time to put learnings into practice. Retention Average number of employees by region In recent years, our continued efforts to develop our talented employees and enhance staff engagement and wellbeing have resulted in consistently strong retention rates. Average length of service is currently 4.3 years, with annual employee turnover at 12% (FY 2023: 13%) across the Group (excluding VadoTech Group due to data availability). I started at ABD as a placement student in the mechanical design department. It was an interesting year, working mostly on the advanced vehicle driving simulator (aVDS) Mk2, designing parts for it and helping with some of the testing. Being able to collaborate with and bounce ideas off the other design engineers and the technicians in the workshop dramatically improved my engineering and design skills before I returned to university. Returning as a graduate student has been a fun and challenging experience. I’ve been given more responsibilities and some exciting projects; it has also allowed me to rotate to other departments. My first rotation away from design has been to the verification and validation department. It has been incredibly valuable to see projects from a completely different perspective, in particular directly seeing how decisions made in design impact other departments. Alistair Knight, Current graduate and former placement student As someone who is completely new to the automotive Human Factors industry, DRI has provided a warm welcome. I’ve been interning for the Human Factors department for four months, and the experience has been both comprehensive and exciting. Working alongside DRI’s Human Factors engineers has given me the opportunity to see what it’s like to carry out intriguing projects in industry first hand. It has been awe inspiring to be able to utilise the knowledge I’ve gained from my MS Human Factors degree in the real world in such a welcoming environment, and the Human Factors engineers have proven to be excellent mentors that I can learn from each day. Aside from the wonderful experience I’ve had with the Human Factors department, the rest of the DRI staff are just as knowledgeable, passionate and welcoming. Alan Cheam, Current placement student AB Dynamics plc Annual Report and Accounts 2024 38 Strategic report Governance Financial statements Sustainability continued Our people continued Retention continued Annual employee turnover by year 2024 * 2023 Total annual employee voluntary turnover (no.) 43 50 Total annual employee voluntary turnover (%) 12% 14% Total annual employee turnover (no.) 80 82 Total annual employee turnover (%) 12% 13% * VTS data not included as recently acquired. Building upon the improvements made to recruitment practices in prior years, through FY 2024 a new recruitment system has been piloted in the UK 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. Once fully tested, the system will be rolled out to the broader Group. The Group has continued to make a proactive effort to promote internal applications for open positions and, as a result, 14 vacancies were filled by internal candidates during the year, excluding promotions. This has been supported by the ongoing implementation of talent mapping processes. Annual performance evaluations are undertaken as part of the Group’s Performance Excellence Cycle. Where recent acquisitions have occurred, this is implemented as part of the integration plan. DRI will introduce its formal performance review process in FY 2025 and VadoTech Group and VTS in FY 2026. 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 retirement schemes, life insurance, income protection and private health cover. Created by the Royal Academy of Engineering (RAE), the Graduate Engineering Engagement Programme (GEEP) supports UK engineering students and recent graduates from under- represented backgrounds into engineering employment. The programme is a collaboration across industry with over 300 volunteers from more than 50 companies taking part since 2015. This year’s volunteer mentors from AB Dynamics were Dr James Routh (Chief Executive Officer), Giorge Koulin (Software Engineer – rFpro), Jonathan Barry (Senior Software Engineer – ABD), Mark Radley (Senior Systems Engineer – ABD) and I. In addition to the scheduled programme, AB Dynamics hosted a site visit for our GEEP mentees in July 2024. This two- day event provided participants with a comprehensive overview of AB Dynamics as an engineering organisation. Jonathan Barry and I represented AB Dynamics at the 2024 GEEP Graduation Ceremony where Jonathan took part in a panel discussion, hosted at the Institute of Directors in London, UK. Jasper Barrett, Project Manager 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. Training opportunities The Group is committed to ensuring that all employees have access to the training required to support their skills and career development. 100% of employees received training in FY 2024 (FY 2023: 100%) and courses taken during the year included: Introduction to Systems Engineering, Simulink Model Management and Architecture, INCOSE Systems Engineering certification, Level 4 Customs Practitioner Award and Prince2 Foundation. Globally, our mandatory compliance training modules include: anti-bribery and corruption, cybersecurity awareness, DSE training (Display Screen Equipment), 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 modules. Graduates and apprentices Maintaining a diverse pipeline of talent is at the core of our sustainability 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 2024, two graduates are 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 2024, 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, to help increase social mobility in the local communities in which it operates. AB Dynamics plc Annual Report and Accounts 2024 39 Strategic report Governance Financial statements Sustainability continued Our people continued Community partnerships CSR strategy In line with the Group’s expanding global presence and global subsidiary governance framework, our corporate social responsibility (CSR) policy and strategy encompass 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 values: customers, people, diversity, innovation, excellence and responsibility. Whilst our fundamental approach remains unchanged, our model takes a more holistic encompassing approach, 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 • 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 Social opportunities Industry Corporate social responsibility Environmental Community Diversity and inclusion AB Dynamics plc Annual Report and Accounts 2024 40 Strategic report Governance Financial statements Sustainability continued Our people continued In March 2024, DRI was sponsor of the FIRST Robotics Competition in California. The competition challenges high school robotics teams to design, build and operate robots that can accomplish tasks in a sports arena-like environment. The competition is the culmination of years of development by these young engineers in training. The robots are designed with very specific requirements and must be able to pick up items, aim and launch those items and climb a chain, all while having the opposing robots attack them. Several DRI staff members, including Nate Kuhl, Dante Kruise and I, volunteered at the event and were blown away by the creativity and ingenuity exhibited by the competitors. DRI plans to continue to support the FIRST Robotics Competition going forward. Jordan Silberling, General Manager, DRI Community partnerships continued AB Dynamics plc Annual Report and Accounts 2024 41 Strategic report Governance Financial statements Sustainability continued Environment * Formerly referred to as the Carbon Neutral Working Group, its name was updated to align with the Group’s net zero emissions targets during FY 2024. We are committed to environmental sustainability, both globally and in our local communities, and reducing our environmental impact. It is our mission to empower our customers to accelerate the development of vehicles that are not only safer, but also more efficient with less of an impact on the environment. We are continually looking for opportunities to improve; environmental sustainability is essential. Our commitment We are committed to the goal of becoming net zero for market based Scope 1 and 2 emissions by 2040 and working to be a net zero organisation by 2050. Our definition of net zero is to reduce greenhouse gas emissions to zero or to a residual level consistent with reaching net zero emissions at the global or sector level, and to neutralise any residual emissions by the net zero target date, and any GHG emissions released into the atmosphere thereafter with certified emission reductions. Our net zero commitments are in line with the United Nations and Science Based Targets initiative (SBTi) definition. In FY 2024, the focus of the Group has been on expanding the scope of Group-wide data collection, in particular for Scope 3 emissions, in order to identify a clear path towards our net zero objectives. Simultaneously, we have continued to identify and implement initiatives to reduce our carbon emissions, waste and water usage wherever possible, with annual reduction targets in place at a subsidiary level. We continue to develop the quality and range of Scope 3 carbon emission data that we will ultimately report on. Significant time and resources are being invested in this area to validate the data that is being collected, which will ensure that future carbon reduction planning decisions are based on robust information. The nature of this detailed validation work means that it will take time to complete, which is reflected in the commitment timeframes stated above. As a business that is growing rapidly, we know that our absolute emissions will increase unless we can decouple our growth from the adverse impacts that our operations have on the environment. In the short-term, we aim to complete the Group-wide collection and validation of all material Scope 3 emissions by the end of FY 2026. We will then use this data to produce a detailed decarbonisation roadmap, including establishing our targets in accordance with the SBTi, which we will aim to publish in the next three to five years. In this report, for the first time we include information on our climate-related risks and opportunities in alignment with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). See pages 50 to 55 for the TCFD report. Our approach We are actively seeking steps to reduce our environmental impact to achieve our net zero goal. 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. We established the Net Zero Working Group (NZWG) in FY 2023* to oversee our carbon reduction plan and implement the activities and functions required to meet our objectives. This includes the development of a comprehensive engagement programme and climate awareness groups throughout all our businesses. The NZWG is comprised of representatives from all Group subsidiaries with Environmental Champions within each subsidiary to promote awareness and best practice. The NZWG is chaired by the Group CEO and its work is overseen by the ESG Committee, which in turn provides regular progress reports to the Board. We have also partnered with Auditel, a leading carbon solutions company, to assist us in reducing our carbon emissions and related costs as, in the near term, we aim for verification with ISO 14068-1 (Climate change management – Transition to net zero – Part 1: Carbon neutrality). 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. We are focused on finding ways to reduce our impact across the whole value chain to achieve our net zero commitments. 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. Our strategy Our strategy is to reduce our global GHG emissions through improving efficiency to reduce consumption and waste. • Scope 1 associated emissions are being addressed through the adoption of green fuels and upgrading of facilities and equipment to be more efficient or to use alternative greener energy sources • Scope 2 associated emissions are being addressed by implementing energy efficient practices and upgrading facilities to aid in energy efficiency. We are also using certified renewable energy, verified with REGO certificates • Scope 3 emissions tracking continues to be developed to ensure we have a clear understanding of these emissions, so that we can plan a clear and effective route to achieve our reduction targets AB Dynamics plc Annual Report and Accounts 2024 42 Strategic report Governance Financial statements Sustainability continued Environment continued Improvements in FY 2024 In FY 2024, we continued to develop our approach towards reducing carbon across our operations. Some of the significant milestones include: • Collection of Scope 3 emissions data expanded to include all material Scope 3 emissions for our UK locations • Improvements made in the collection of standardised data across the Group and the development of the Group’s carbon reduction plans • 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 largest German subsidiary • Continued use of green renewable energy in the UK and Germany, including the use of solar panels at two of our UK sites, which generated a total of 133,119 kWh of power in FY 2024 • Completed assessment of our climate-related risks and opportunities in alignment with the recommendations of the TCFD (see report on pages 50 to 55) • Successful Energy Savings Opportunity Scheme (ESOS) audit completed for our UK businesses with energy saving recommendations identified for implementation in future periods • MSCI ESG rating of AAA achieved Managing environmental performance The Group’s activities can be summarised as largely manufacturing and assembly operations, combined with office based research, product development and vehicle testing. Therefore, the Group’s main direct impact on the environment is limited to the consumption of heating and power in its manufacturing operations, and fuel or electricity for customer vehicles while providing test services or developing and testing products. The Group does not use its own logistics or freight. We recognise the importance of monitoring, controlling and improving our environmental performance in order to meet our net zero targets. We are expanding our Scope 3 emissions coverage and during the year we undertook a comprehensive project with our external advisers to better understand our Scope 3 baseline carbon footprint, allowing us to begin to collect data for all material categories for the UK part of our business. Note that the data relating to the new categories is not yet available for the global Group and is therefore excluded from the reported GHG emissions values. The categories which are currently included in the Scope 3 emissions data for the Group disclosed below are as follows: • Category 1: Purchased goods and services – currently we collect data for water supply and treatment • Category 6: Business travel – currently we collect data on air travel, automotive hire and hotel usage We are continuing to review the following categories, which we believe will capture all emission types that are material to the Group, and have begun collecting data for our UK locations: • Category 1: Purchased goods and services • Category 2: Capital goods • Category 3: Fuel and energy-related activities • Category 4: Upstream transportation and distribution • Category 5: Waste generated in operations • Category 6: Business travel • Category 7: Employee commuting • Category 9: Downstream transportation and distribution This year, the Group has continued to build on its 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 UK subsidiaries, standardising reporting and enabling us to set further environmental targets in FY 2025. Our environmental reporting covers all entities over which the Group has financial control for the financial year ended 31 August 2024, i.e. all our subsidiaries. Data for businesses acquired during each reporting period is also included where available. We are pleased with our environmental performance for the year and can confirm that we have not received nor paid any environmental fines nor penalties either in the last twelve months or in the previous five years. AB Dynamics plc Annual Report and Accounts 2024 43 Strategic report Governance Financial statements Sustainability continued Environment continued Energy and greenhouse gas emissions for FY 2024 The Group’s emissions are broken down by Scope 1, Scope 2 and some Scope 3 emissions. Scope 2 emissions associated with the Greenhouse Gas Protocol ‘market based’ method have also been calculated, in addition to ‘location based’ Scope 2 emissions. Excluding the impact of acquisitions, in FY 2024 the Group’s total Scope 1, 2 and 3 emissions (market based) increased by 56% year on year and 43% on an intensity basis (per £m of revenue) year on year. This was driven by an increase in Scope 3 emissions from business travel, which increased by 70%. This was in part due to improvements in the completeness of reporting and availability of information, as well as being related to the growth of the business, which has driven an increase in travel requirements in areas such as business development and customer support. Our total energy consumption increased by 32% year on year on an absolute basis. This was primarily due to an increase in the Company-owned vehicle use, as our testing services sector saw increased activity levels in the year. The Group has continued to implement measures to decrease our natural gas consumption, which resulted in a 15% reduction in energy consumption from gas. 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. Across the two sites, a combined 15% reduction was achieved in FY 2024. GHG emissions Absolute emissions (including Venshure Test Services) Like-for-like emissions (excluding Venshure Test Services) 2024 2023 YoY % change in total 2024 2023 YoY % change in total Units UK Global (excl. UK) Group UK Global (excl. UK) Group UK Global (excl. UK) Group UK Global (excl. UK) Group Scope 1 total tCO2e 110 393 503 129 228 357 41% 110 349 459 129 228 357 29% Gas tCO2e 95 19 114 109 18 127 -10% 95 19 114 109 18 127 -10% Company owned vehicle use tCO2e 15 374 389 20 210 230 69% 15 330 345 20 210 230 50% Scope 2 (location based) tCO2e 154 947 1,101 184 371 555 98% 154 839 993 184 371 555 79% Scope 2 (market based) tCO2e 70 726 796 112 362 474 68% 70 618 688 112 362 474 45% Total Scope 1 and 2 (location based) tCO2e 264 1,340 1,604 313 599 912 76% 264 1,188 1,452 313 599 912 59% Total Scope 1 and 2 (market based) tCO2e 180 1,119 1,299 241 590 831 56% 180 967 1,147 241 590 831 38% Scope 3 total tCO2e 1,051 869 1,920 798 332 1,130 70% 1,051 869 1,920 798 332 1,130 70% Business travel tCO2e 1,050 868 1,918 797 331 1,128 70% 1,050 868 1,918 797 331 1,128 70% Water supply and treatment tCO2e 1 1 2 1 1 2 0% 1 1 2 1 1 2 0% Total Scope 1, 2 and 3 (location based) tCO2e 1,315 2,209 3,524 1,111 931 2,042 73% 1,315 2,057 3,372 1,111 931 2,042 65% Total Scope 1, 2 and 3 (market based) tCO2e 1,231 1,988 3,219 1,039 922 1,961 64% 1,231 1,836 3,067 1,039 922 1,961 56% AB Dynamics plc Annual Report and Accounts 2024 44 Strategic report Governance Financial statements Sustainability continued Environment continued Energy and greenhouse gas emissions for FY 2024 continued Emissions intensity Absolute emissions (including Venshure Test Services) Like-for-like emissions (excluding Venshure Test Services) 2024 2023 YoY % change in total 2024 2023 YoY % change in total Units Group Group Group Group Revenue £m 111.3 100.8 10% 110.3 100.8 9% Intensity by revenue (Scope 1 and 2 market based) tCO2e per £m revenue 11.7 8.2 43% 10.4 8.2 27% Intensity by revenue (Scope 1, 2 and 3 market based) tCO2e per £m revenue 28.9 19.5 48% 27.8 19.5 43% Energy consumption by type 2024 2023 YoY % change in total UK Global (excl. UK) Group UK Global (excl. UK) Group Total electricity kWh 874,518 1,339,584 2,214,102 1,003,808 744,540 1,748,348 27% Purchased electricity kWh 741,399 1,339,584 2,080,983 888,875 744,540 1,633,415 27% On-site generated electricity (solar) kWh 133,119 — 133,119 114,933 — 114,933 16% Gas kWh 519,867 102,386 622,253 635,716 97,049 732,765 -15% Company owned vehicle use kWh 60,734 1,558,117 1,618,851 78,372 892,995 971,367 67% Personal vehicle company use kWh 69,823 311,616 381,439 72,462 143,970 216,432 76% Total energy consumption kWh 1,524,942 3,311,703 4,836,645 1,790,358 1,878,554 3,668,912 32% Notes: 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 2024, the UK government’s GHG Conversion Factors for Company Reporting 2024 (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 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. 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. AB Dynamics plc Annual Report and Accounts 2024 45 Strategic report Governance Financial statements Sustainability continued Environment 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. The Group’s usage of water is minimal and predominantly relates to cleaning, bathrooms and staff refreshments. 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 2024 has seen an increase in reporting for water usage. Data is now being collected for our testing facilities in China, as well for VTS since its acquisition, which has led to a significant increase in the Group’s reported total freshwater withdrawal. A number of our subsidiary sites are based in shared or leased premises and water consumption is included in lease fees; therefore, water consumption data for those businesses is not available. Group water withdrawal 2024 2023 Freshwater withdrawal (m3) 7,176 1,960 Intensity ratio (m3 per £m revenue) 64.5 19.4 Waste management 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. 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 support our net zero ambition. Our Environmental Management System contains procedures for waste management and frequent reminders are made to ensure waste is recycled wherever possible. In FY 2024, 98% of all waste produced by the Group was non-hazardous, with 46% being recycled and the remainder being treated, sent to landfill or used in waste to energy programmes. Our waste management intensity ratio decreased slightly during the year to 2.4 (2023: 2.6) as a result of our continued focus on eliminating waste. 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. 2024 waste management Unit Non-hazardous waste Hazardous waste Total waste Tonnes to landfill Metric tonnes 125.9 — 125.9 Tonnes recycled Metric tonnes 121.3 — 121.3 Tonnes incinerated Metric tonnes 12.4 — 12.4 Tonnes treated Metric tonnes 0.3 5.1 5.4 Total Metric tonnes 259.9 5.1 265.0 Waste management intensity Unit Non-hazardous waste Hazardous waste Total waste Intensity ratio Tonnes per £m revenue 2.3 0.1 2.4 Waste by type Material type Unit Hazardous waste Non-hazardous waste 2024 total waste 2023 total waste Gases (in containers), paints, adhesives, oils, batteries, accumulators, etc. Metric tonnes 5.1 — 5.1 1.5 Paper/cardboard Metric tonnes — 33.9 33.9 12.7 Other mixed commercial waste Metric tonnes — 138.0 138.0 205.0 Plastic and plastic packaging Metric tonnes — 76.5 76.5 28.4 Metal Metric tonnes — 3.6 3.6 5.0 Wood Metric tonnes — 7.4 7.4 5.6 Electrical/electronic Metric tonnes — 0.5 0.5 0.2 Total 5.1 259.9 265.0 258.4 AB Dynamics plc Annual Report and Accounts 2024 46 Strategic report Governance Financial statements Sustainability continued 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 EV 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 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, reduces 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 net zero target. 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 and simulation centre of excellence, responsible for innovative products like our new generation of driving simulators. 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 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. We will continue to focus on and roll out 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. Sustainable products AB Dynamics plc Annual Report and Accounts 2024 47 Strategic report Governance Financial statements Sustainability 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 are now reviewed annually and can be located on our website. 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 for oversight of 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 dealing with 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 aims to create a working environment where honest and open communication is encouraged and employees feel comfortable raising concerns. Whilst we believe we have a robust framework in place and an embedded commitment to always doing the right thing, where these high standards have not been met, we encourage our workforce to come forward and speak up via our whistleblowing portal. The portal is accessible 24 hours a day, 365 days of the year through an internet URL and mobile phone app. Our whistleblowing policy aims to encourage openness, reports can be made anonymously and we guarantee legal protection for all whistleblowers, even if they turn out to be mistaken. All reports made through this tool are investigated in line with the Group’s whistleblowing policy and are supervised by our independent Non- Executive Directors. No new whistleblowing reports were received in FY 2024 and two cases, which had been reported in our previous financial year and remained open, were resolved without the need for further action. 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, which is reviewed annually by the Audit and Risk Committee, on anti-bribery and corruption which has been circulated to every member of staff globally through the Group’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 externally conducted 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. To further strengthen our overall security position, we have committed to submitting the Information Security Management System (ISMS) of several of our key businesses to be certified by the leading international standard TISAX®. TISAX® provides a catalogue of requirements, covering virtual, physical and social aspects of information security, specific to the automotive industry. This catalogue is referred to as the Information Security Assessment (ISA) and forms the basis of the assessment. AB Dynamics plc Annual Report and Accounts 2024 48 Strategic report Governance Financial statements Sustainability continued Ethics and compliance continued Information systems and technology continued This standard also provides the European automotive industry with a consistent, standardised approach to information security systems. It has been developed by automotive industry security experts and is based on international ISMS standard ISO/IEC 27001. To that end, the Group will be enhancing its current information security practices, technology and procedural controls to identify and protect the information assets it owns or controls to ensure an elevated level of confidentiality, integrity and availability for the benefit of our customers and suppliers. 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. The Group operates a Group-wide anti-facilitation of tax evasion policy which is reviewed annually by our Audit and Risk Committee. 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 2024 49 Strategic report Governance Financial statements Task Force on Climate-related Financial Disclosures (TCFD) report Introduction Given our global operations and customer base, we recognise the importance of understanding the current and future impacts of climate change on our business. We are committed to minimising the Group’s direct impact on the planet with goals to achieve net zero for market based Scope 1 and 2 emissions by 2040 and working to be a net zero organisation by 2050. We have used the Task Force on Climate-related Financial Disclosures (TCFD) recommendations to prepare and protect our businesses and to assess and reduce our greenhouse gas emissions. This year, we conducted a thorough analysis of our climate-related risks and opportunities, evaluating the potential financial implications of these across timeframes and climate scenarios and integrating these considerations into our strategic planning. This report outlines our oversight of climate-related issues, the Group’s incorporation of climate change into our broader risk management processes, our strategies for addressing climate- related risks and the key metrics we use to track progress toward our climate goals. The following pages meet our mandatory climate-related disclosure requirements under the Companies (Strategic Report) (Climate-related Financial Disclosure) Regulations 2022. In preparing this report, we have followed the recommendations of the TCFD as set forth in its 2017 guidelines, and the 2021 guidance from ‘Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures’. Governance Board oversight The Board of Directors is responsible for reviewing and guiding the Group’s sustainability governance and strategy and for ensuring risks, including climate-related risks and opportunities, are managed throughout the Group. The Board also oversees and monitors progress against our stated net zero goals. The development and implementation of the sustainability strategy is managed by the Group’s ESG Committee, which has overall responsibility for the delivery of the strategy and carrying out actions to mitigate risks and manage opportunities. The ESG Committee is chaired by Louise Evans, Non-Executive Director, and includes both the Chairman and CEO as members. Senior leaders from across the business, representing different Group functions, are also invited to attend ESG Committee meetings as required. The ESG Committee met four times in FY 2024. Three of the five Board members are on the ESG Committee, and the other two Board members also attend the ESG Committee meetings on an ad-hoc basis, so there is strong awareness of sustainability issues at the Board level and the Board maintains regular oversight of the sustainability strategy. The ESG Committee receives updates from the Net Zero Working Group (NZWG) as well as representatives of each of the different Group functions. The Committee monitors metrics and progress related to improving the climate-related performance of the businesses and addressing climate-related risks and opportunities, such as Scope 1, Scope 2, and select Scope 3 emissions, waste and water usage data and projects for our net zero target. External specialists Auditel have been appointed to assist the Group in reducing carbon emissions and improve efficiencies. The NZWG, with support from Auditel, is responsible for delivering the Group’s carbon reduction plan and implementing the activities and functions required to meet our net zero goals. Auditel representatives attend ESG Committee meetings and provide education and training to the Committee members to ensure they are appropriately skilled and informed to make decisions on strategy relating to climate change. The Board is also supported by the Audit and Risk Committee which oversees the risk management framework for the Group. This framework is inclusive of environmental and climate-related risks which the Committee keeps the Board informed of at each Board meeting. The Audit and Risk Committee met five times during FY 2024. The Group Remuneration Committee ensures that climate-related targets, which are reviewed on an annual basis, are integrated into executive remuneration. Management’s role The NZWG has the management level responsibility for delivering the sustainability strategy and actions to achieve the Group’s net zero goals. The NZWG is chaired by the CEO and is made up of representatives from all subsidiaries. As Chairman of the NZWG and a member of the ESG Committee, the CEO is the Board Director with overall responsibility for sustainability across the Group, which includes climate-related risks and opportunities. Representatives, or Environmental Champions, are recruited from the workforce to help improve environmental performance by raising awareness of environmental issues within their areas. Oversight is also provided by the Group Health, Safety and Environmental Manager, assisted by Auditel. Members of the senior leadership team within the Group are responsible for setting and achieving specific environmental objectives assigned to their respective business unit. This includes monitoring the specific metrics assigned to each climate-related risk and opportunity in order to track progress and working towards our net zero goal through various decarbonisation projects such as energy efficiency efforts and the transition to renewable electricity. Climate-related Financial Disclosures AB Dynamics plc Annual Report and Accounts 2024 50 Strategic report Governance Financial statements Task Force on Climate-related Financial Disclosures (TCFD) report continued Risk management Climate-related risks and opportunities are integrated into the Group’s broader business risk assessments and incorporated into the Group risk register, evaluated in the same manner as other Group risks to allow for full comparability. A comprehensive review of our risk register, including an assessment of climate-related risks and opportunities, is conducted annually. A bottom-up operational assessment of risks and potential mitigation strategies is undertaken across the Group. This bottom-up approach is complemented by a top-down review, ensuring all significant risks are identified, assessed and quantified and that risks and opportunities are considered in AB Dynamics’ own operations, its supply chain and downstream. For potential climate-related physical risks specifically, a risk assessment using geospatial natural hazard mapping software has been conducted at each site. Climate-related transition risks tend to impact the Group in a top-down manner and are assessed as part of the top-down review, which incorporates policy and legal risks as well as any changes to the business, external regulatory developments or operating conditions. These are shortlisted in collaboration with internal stakeholders and senior management. Mitigation plans are then developed to reduce risks to levels deemed as low as reasonably practicable. The Group’s Audit and Risk Committee oversees the risk management framework for the Group, inclusive of environmental and climate-related risks. The CEO is responsible for the implementation of the agreed upon actions relating to climate risks. Risks are assessed for their likelihood of occurrence and their impact on the business (consequences), were they to occur, to calculate risk scores and outcomes, which inform the current risk profile. Control procedures and actions are overlaid to provide a post-mitigation risk profile and identified risks are recorded both before and after mitigation measures to determine overall risk levels and the approach to management (e.g. further mitigation, accept or control). The Board enacts and monitors specific actions to mitigate material risks, while other risks are managed by local management. Likelihood of occurrence: 1 – Rare (<1% chance) 2 – Unlikely (1–10% chance) 3 – Moderate (10–40% chance) 4 – Likely (40–85% chance) 5 – Almost certain (>85% chance) Consequences: 1 – Insignificant (minor problem easily addressed by normal day-to-day processes) 2 – Minor (some disruption possible) 3 – Moderate (significant time/resources required) 4 – Major (severe damage) 5 – Catastrophic (business survival at risk) The two metrics above lead to a risk score (probability x consequences) and an outcome classification. Score Classification 1–4 Acceptable 5–7 Acceptable with controls 8–12 Acceptable with monitored actions >12 Unacceptable Board Committees Global and subsidiary representation AB Dynamics plc Board CEO Executive Committee Environmental Champions Auditel Audit and Risk Committee Remuneration Committee ESG Committee Senior leadership team Net Zero Working Group Governance continued Management’s role continued The organisational structure of our Group’s sustainability governance is as follows: AB Dynamics plc Annual Report and Accounts 2024 51 Strategic report Governance Financial statements Task Force on Climate-related Financial Disclosures (TCFD) report continued Strategy All risk and opportunity categories outlined in the TCFD guidance have been considered to ensure the completeness of this assessment. However, not all categories were deemed applicable or material to the business. Risks and opportunities have been assessed qualitatively and quantitatively and prioritised using the scales of our risk framework. In addition, climate scenario analysis was carried out during FY 2024 to model risks and opportunities under different climate expectations to help determine our business resilience to climate change. Our risk assessment and climate scenario analysis has shown that, in aggregate across all scenarios assessed, the overall climate risk exposure for AB Dynamics is minor and we believe we are financially resilient and strategically robust to climate change. Our current understanding of climate-related risks is that any impacts on assets is limited and risks can be accommodated within business-as-usual activity considering existing and planned mitigation strategies. Physical risks are likely to increase in severity and frequency in the long term but the projected impact on assets remains minor and current mitigation in place should withstand weather events. Climate-related matters therefore do not have a material impact on the judgements and estimates applied in the financial statements as a result. We recognise the significant climate impact of the automotive industry and the exposure of the industry to climate-related transition risks through regulation on internal combustion engines. However, due to the nature of the products and services offered by the Group, our business is well positioned to adapt to these changes and is less exposed to transitional risks compared to the wider industry. In fact, the climate transition offers opportunities to the Group through increasing demand for our simulation products and systems, which enable customers to test in a virtual environment and therefore reduce their emissions in comparison to real-world testing. In addition, the Group will continue to assist in the roll- out of EVs, with the emergence of new vehicle models requiring additional development work, testing and validation. These opportunities are likely to increase across all timeframes as OEMs adapt to stringent regulation around fossil fuels and internal combustion vehicles and move towards lower-carbon alternatives. In aggregate, the estimated impact of our potential opportunities is greater than that of our climate-related risks. As we strive to achieve net zero, climate-related risks and opportunities will play a central role in shaping the Group’s strategy and planning, reaffirming our commitment to combating climate change and fostering a sustainable future. Risks are subject to ongoing refinement and quantification over time, which enables us to build a complete picture and assists with incorporating the management of any climate-related risks into the ongoing strategy. Scenarios will be supplemented with additional sources that are specific to each risk to inform any assumptions included in projections. Our risk register is not aligned with formal time horizons; however, the following timeframes have been applied when assessing climate-related physical and transitional risks: Time horizons Short Medium Long Timeframe 2024–2026 2027–2040 2040–2050 Rationale In line with going concern assessment period. Encompassing the Group’s ambition to be net zero for Scope 1 and 2 emissions by 2040. Long enough to encompass long-term industry and policy trends, such as UK Net Zero 2050, and for climate- related risks to manifest. AB Dynamics plc Annual Report and Accounts 2024 52 Strategic report Governance Financial statements Task Force on Climate-related Financial Disclosures (TCFD) report continued Key risks Physical risks To assess current and potential future physical climate-related risks at our facilities, we used a geospatial climate risk modelling software which thoroughly evaluates exposures to natural hazards based on historical data and future projections derived from climate change models. It was deemed unnecessary to carry out a physical risk analysis on the Group’s suppliers or customers due to our well diversified supplier and customer base and given the Group does not rely overly on niche or unique resources or products. Three scenarios have been used for analysis of climate-related physical risks. These are developed by the Intergovernmental Panel on Climate Change (IPCC) and are the default scenarios in the software. • RCP 2.6/SSP11: a climate-positive pathway, likely to keep global temperature rise below 2°C by 2100. Global GHG emissions are projected to peak in the early 2020s, followed by rapid and deep GHG emission reductions • RCP 4.5/SSP2: an intermediate baseline scenario more likely than not to result in global temperature rise between 2°C and 3°C, by 2100 with a mean sea level rise 35% higher than that of RCP 2.6 • RCP 8.5/SSP5: a bad case scenario where the global response to mitigating climate change is limited and global temperatures rise between 4.1–4.8°C by 2100. This scenario is included for its extreme impacts on physical climate risks Through a combination of the likelihood of an event occurring, the material importance of the location and the potential financial impact, we have identified one climate-related physical risk that may have an impact on the Company. 1 IPCC (2014), Climate Change 2014: AR 5 Synthesis Report. Contribution of Working Groups I, II and III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change. Risk description Area Potential financial impact Mitigation/actions to manage risk Related metrics Time horizon Likelihood Consequences Scenario where risk is most severe Flood disruption and damage Three of our business locations have been identified as being currently exposed or projected to be exposed to flood risk through severe precipitation or river flood. These were our track testing services business based in California, our on-road testing services business based in China and our sales and support office in Japan. Own operations • Loss of revenue due to operational disruption and reducing productivity • Asset damage costs • Increased insurance costs • Insurance coverage • Sales offices have ability to work remotely • Number of days and revenue lost due to disruption • Cost of asset damage/ replacement • Insurance costs All time horizons Moderate Minor RCP 8.5 AB Dynamics plc Annual Report and Accounts 2024 53 Strategic report Governance Financial statements Task Force on Climate-related Financial Disclosures (TCFD) report continued Key risks continued Transition risks AB Dynamics is exposed to both risks and opportunities associated with the transition to a low-carbon economy. The speed at which this transition occurs will influence the severity and impact of these climate transition risks and opportunities. Two scenarios were used for analysis of transition risks, with a horizon of 2050. These scenarios are derived from the International Energy Agency (IEA) and are supportive in modelling positive climate outcomes. • Net Zero 2050 (NZE): an ambitious scenario which sets out a narrow but achievable pathway for the global energy sector to achieve net zero CO2 emissions by 2050. This meets the TCFD requirement of using a ‘below 2°C’ scenario • Stated Policies Scenario (STEPS): a base case scenario which represents the roll forward of already announced policy measures. This scenario outlines a combination of physical and transition risk impacts as temperatures rise by around 2.5°C by 2100 from pre-industrial levels, with a 50% probability Based on a combination of the likelihood of an event and the potential financial impact, we have identified two potentially significant climate-related transition risks and two potentially significant climate-related transition opportunities. These risks and opportunities have been assessed on a gross level, assuming no mitigating actions have been implemented. TCFD category Risk description Area Potential financial impact Mitigation/actions to manage risk Related metrics Time horizon Likelihood Consequences Scenario where risk is most severe Carbon price in own operations and value chain Current and emerging regulation Carbon pricing represents a risk of higher energy prices or direct costs related to our Scope 1 and 2 emissions. IEA forecasts an increase in carbon prices under both NZE and STEPs. Carbon pricing could also be imposed in the value chain; however, it is uncertain when this will occur and how much will be passed to AB Dynamics. Own operations and upstream • Potential carbon tax related to GHG emissions in own operations and higher costs on purchases related to Scope 3 emissions • Greater costs associated with emissions activities • Current and planned initiatives to reduce energy consumption and Scope 3 emissions and targets for decreased emissions across full footprint • Full Scope 3 carbon footprint to be completed to understand the risk fully • Engagement with suppliers • Scope 1 and 2 emissions • Scope 3 emissions (purchased goods and services and upstream transportation and distribution) • Operating costs Medium to long term Moderate Minor NZE Failure to meet/maintain expected sustainability credentials Reputation Our stakeholders expect us to demonstrate progress toward the Group’s publicly disclosed net zero goals and maintain our current credentials. Failure to meet this obligation could damage our reputation amongst investors and customers. Own operations • Shareholder concern resulting in increased cost of capital and loss of investment • Loss of customer trust, competitive advantage and potentially supplier status could lead to reduced revenue • Continuous improvement in sustainability reporting to align with external frameworks and rating agencies • Publish a full transition plan to meet net zero target • Communication with stakeholders • Scope 1, 2 and 3 emissions • ESG rating agency scores • ISO 14001 certification • Revenue • Cost of capital Short to medium term Unlikely Minor NZE AB Dynamics plc Annual Report and Accounts 2024 54 Strategic report Governance Financial statements Task Force on Climate-related Financial Disclosures (TCFD) report continued Key risks continued Transition opportunities TCFD category Opportunity description Area Potential financial impact Strategy/actions to manage opportunities Related metrics Time horizon Likelihood Consequences Scenario where opportunity is greatest Aiding the transition to a green economy Products and services, Markets We are well placed to capitalise on the continued transition to EVs, with new vehicle models driving increased demand for our products and services. Similarly, our simulation offerings and the retrofit capability offered by ABD Solutions, which will enable our customers to reuse existing vehicles to automate vehicle applications, are well positioned to grow as our customers seek to achieve their own sustainability targets. Own operations • Increased revenue from the expanding EV market • New revenue streams for retrofit solutions of autonomous systems in adjacent markets • Increased market share where our offerings assist sustainability targets • Marketing strategy to communicate our ability to meet sustainability requirements • Continue to develop ABD Solutions to meet market needs • R&D investment strategy to adapt to market and industry changes • Revenue • Market share Medium term Likely Moderate NZE Renewable energy Energy source We have the opportunity to reduce emissions, mitigating any costs of carbon pricing and potentially operating costs through transitioning to green energy. By generating our own renewable energy in the long term through on- site installations, we can also improve business resilience to the transition to a low-carbon economy. Own operations • Reduced operating costs for energy • Reduced impact of carbon pricing in own operations • Reduced energy bills through generation of own renewable energy on site • Transition of overseas subsidiaries to renewable energy where possible • Further implementation of green energy initiatives, for example the installation of additional solar panels across our sites • Scope 2 emissions • Energy consumption • Operating costs Medium to long term Likely Minor NZE Metrics and targets AB Dynamics currently reports in compliance with UK SECR regulations, providing metrics on our energy consumption, Scope 1, Scope 2 and select Scope 3 emissions, including those related to water supply and treatment, and business travel. Emissions are calculated in accordance with the GHG Protocol. We are expanding our Scope 3 emissions coverage and during the year we undertook a comprehensive project with external advisers to better understand our Scope 3 baseline carbon footprint, allowing us to begin to collect data from new categories for the UK part of our business. Note that the data relating to these new categories is not yet available for the global Group and is therefore excluded from the GHG emissions values disclosed for the Group. For full details of the Group’s GHG emissions data, see pages 44 and 45. As we improve the collection of this data across the Group, we will become increasingly better positioned to set specific carbon footprint reduction targets to assist in mitigating the risks discussed under risks one and two above. Against each of the climate-related risks and opportunities, we have identified specific metrics that will be used to track and monitor progress. Our overarching target for net zero by 2040 across Scope 1 and 2 emissions is a major contributing factor behind mitigating our risks and impacts. The Group also has a longer-term target to be a net zero organisation by 2050. In addition, Anthony Best Dynamics Limited and AB Dynamics GmbH have subsidiary level targets to reduce electricity and gas usage by 5% per annum as part of their certified ISO 14001 Environmental Management Systems. Variable remuneration for our Executive Directors is linked to the achievement of sustainability metrics. In FY 2024, executive bonuses included a 5% weighting for meeting sustainability targets/metrics. Future remuneration plans are reviewed by the Remuneration Committee. The Group currently has no plans to introduce an internal carbon pricing mechanism for capital investments but, as per the carbon pricing risks outlined above, we monitor and plan for operational carbon prices using the IEA forecasts. AB Dynamics plc Annual Report and Accounts 2024 55 Strategic report Governance Financial statements S172(1) statement and stakeholder engagement Engaging with our stakeholders AB Dynamics works with the biggest names in the automotive industry (including 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. 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 Outcomes • High level of engagement across all our customer groups 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. 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 • Membership of or engagement 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 • Increased participation at industry events including showcasing the launches of our new products 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 • Financial performance • Governance • People and culture • Sustainability 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 2024 • 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 2024 PLEASE REFER TO OUR BUSINESS MODEL ON PAGES 14 AND 15 FOR MORE INFORMATION PLEASE REFER TO THE STATEMENT OF CORPORATE GOVERNANCE ON PAGES 70 TO 79 FOR MORE INFORMATION CUSTOMERS INDUSTRY BODIES INVESTORS AB Dynamics plc Annual Report and Accounts 2024 56 Strategic report Governance Financial statements S172(1) statement and stakeholder engagement continued With over 500 employees spread across the globe, the engagement and commitment of our employees are key to the Group’s resilience and continuing success. 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. 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 Outcomes • Our staff have an average length of service of over four years (excluding VadoTech Group) 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 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. 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 Outcomes • Our subsidiaries are responsible for agreeing prompt payment terms; for more information please see page 47 • We have sought to strengthen our supplier relationships as a way to manage the risk to our supply chain, which has included engagement with some new suppliers 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 • 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 • The Group has continued to enable each employee to spend two volunteering days a year to lead engagement in projects in their communities PLEASE REFER TO OUR PEOPLE ON PAGES 36 TO 41 PLEASE REFER TO OUR PEOPLE ON PAGES 36 TO 41 EMPLOYEES SUPPLY CHAINS COMMUNITIES AB Dynamics plc Annual Report and Accounts 2024 57 Strategic report Governance Financial 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 audit 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. “Our approach to risk is intended to protect the interests of all our stakeholders. We continue to assess and prioritise the risks related to our strategic objectives and their impact on the principal risks.” AB Dynamics plc Annual Report and Accounts 2024 58 Strategic report Governance Financial statements Risk management continued 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 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 Monitor effectiveness of mitigation plans Internal audit • Monitoring of compliance with internal controls and policies of the Group • Conducts or commissions specific reviews where necessary Identify internal and external risks Assess and quantify risks Manage and mitigate risks Reporting AB Dynamics’ risk management framework AB Dynamics plc Annual Report and Accounts 2024 59 Strategic report Governance Financial statements Principal risks and uncertainties Managing our risks throughout the Group Strategic risk Downturn or instability in major geographic markets or market sectors Supply chain disruption Loss of major customers and change in customer procurement processes Failure to deliver new products Dependence on external routes to market Acquisition integration and performance 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. Description The availability of key components has led to increased supply chain risk. Increased input costs lead to pressure on margins. 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. 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 • Potential financial consequences on termination 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 • 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 Mitigation • Dual sourcing for key components 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 Mitigation • We do not have any customers 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 • A significant proportion of our revenue now relates to recurring software licences, support contracts and long-term arrangements with customers Mitigation • Process for identifying new product opportunities established • New product development process implemented 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 Mitigation • Extensive financial, commercial and legal due diligence • Appropriate warranties and indemnities from sellers • Use of earnout deal structures to ensure management incentivisation and continuity • Recruitment of senior management across all functional areas, to support acquisitions • Close management and monitoring of business performance against budget Change No change Change No change Change No change Change No change Change No change Change No change Change Increased No change Decreased AB Dynamics plc Annual Report and Accounts 2024 60 Strategic report Governance Financial statements Principal risks and uncertainties continued Operational risk Cybersecurity and business interruption Competitor actions Loss of key personnel Threat of disruptive technology Product liability Failure to manage growth 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. 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, including AI, displaces the need for Group products and services, or replicating the intellectual property of the Group. Uncontrolled use of AI may result in unintentional sharing of intellectual property. 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 • Findings from external audits have been actioned • Current TISAX accreditation 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 four 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 • Use of AI within the business is controlled and restricted to Microsoft based products 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 • Scope for further operating expansion within existing footprint. Resources available for further expansion as necessary • 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 Increased Change No change Change No change AB Dynamics plc Annual Report and Accounts 2024 61 Strategic report Governance Financial statements Principal risks and uncertainties continued Financial risk Compliance risk Environmental risk Foreign currency Counterparty risk Credit risk Tax risk Intellectual property/patents Environmental risk 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. Description The Group has exposure to counterparty risk in relation to cash deposits. The risk is enhanced by recent banking failures. The Group also operates in areas where a potential cash repatriation risk arises. 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 benefits from a lower corporation tax rate on profits attributable to certain UK patents under the Patent Box regime. It also benefits from the UK Research and Development Expenditure Credit scheme. Any changes to these tax reliefs could result in an increase in the Group’s effective rate of tax. The Group’s subsidiaries operate across a number of tax jurisdictions which exposes the Group to transfer pricing compliance risk on intercompany transactions. 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 • The 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 Mitigation • Counterparty credit ratings are monitored on a regular basis • Cash deposits are spread across a number of different counterparties • Cash exposed to repatriation risk is kept to a minimum and monitored on a regular basis Mitigation • Risk is assessed on a case-by-case basis and payment terms are established according to risk • Advance payments and letters of credit used where appropriate Mitigation • Transfer pricing risk is monitored on a regular basis and transfer pricing documentation maintained 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 are 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 sustainability policies and framework while promoting sustainable long-term growth • Continued focus on building the medium-term plan for achieving net zero targets • Current development of a Group environmental policy • Carbon footprint baseline established • Formation of the Net Zero Working Group Change Increased Change Increased Change No change Change Increased Change No change Change Increased Dr James Routh Chief Executive Officer 26 November 2024 AB Dynamics plc Annual Report and Accounts 2024 62 Strategic report Governance Financial statements Non-financial and sustainability information statement This section of the Strategic report constitutes the Group’s Non-financial and sustainability information statement and addresses the requirements of Sections 414CA and 414CB of the Companies Act 2006. The non-financial information is included within the various other sections of the Strategic report and is cross-referenced below. Reporting requirements Relevant policies which govern our approach Where to read more Page Environment matters • Environmental policy • Embedding sustainability 32 to 33 • Environment 42 to 46 • TCFD report 50 to 55 Employees • Salary planning policy • Health and safety 34 to 35 • Performance planning & review policy • Our people 36 to 41 • Health and safety policy • Ethics and compliance 48 to 49 • Mental health and wellbeing policy • Employee development programme • Whistleblowing policy • Travel policy Social and community matters • Social media policy • Embedding sustainability 32 to 33 • Volunteering policy • Our people 36 to 41 Respect for human rights • Human rights policy • Ethics and compliance 48 to 49 • Equality, diversity and inclusion policy • Modern slavery policy Anti-bribery and corruption • Anti-bribery policy • Ethics and compliance 48 to 49 • Anti-facilitation of tax evasion policy • Competition and anti-trust policy • Conflicts of interest policy Business model • Investment case 4 to 5 • Our markets and strategy 8 to 11 • M&A strategy 12 • Our business model 14 to 15 • Operational review 20 to 25 Stakeholders • S172(1) statement and stakeholder engagement 56 to 57 Risk management • Internal control manual • TCFD report 50 to 55 • Risk management 58 to 59 • Principal risks and uncertainties 60 to 62 Non-financial key performance indicators • Environmental policy • Health and safety 34 to 35 • Health and safety policy • Our people 36 to 41 • Environment 42 to 46 AB Dynamics plc Annual Report and Accounts 2024 63 Strategic report Governance Financial statements Good governance to promote long-term growth Dear shareholders, I am pleased to introduce our Corporate governance report for the year ended 31 August 2024 on behalf of the Board in which we describe our corporate governance arrangements, the activities of the Board and its Committees, and how the Board discharged its duties throughout FY 2024. This report explains how we have continued to comply with the Quoted Companies Alliance Corporate Governance Code 2018 (the QCA Code) on the basis that it is the most appropriate governance code for the Group having regard to its strategy, size, stage of development and resources. The information presented in this section reflects the Board’s assessment of the application of the QCA Code. We believe that effective corporate governance is key to delivering the Group’s strategy and ensuring our long‑term success. Role of the Board The Board is responsible to the Group’s shareholders and sets the Group’s strategy for achieving long-term success in accordance with our purpose and values. The Board is also ultimately responsible for establishing the Group’s governance structure, the effectiveness of our internal controls, risk management, and the direction of the Group to help deliver our strategy. We look to provide the framework for our Group companies to follow our strategy and provide guidance at Group level on measures to implement our objectives. Richard Elsy CBE Non-Executive Chairman Chairman’s introduction to corporate governance AB Dynamics plc Annual Report and Accounts 2024 64 Strategic report Governance Financial statements “Corporate governance supports and encourages high levels of professionalism in the Board.” Growth and scale We are investing in our business to grow organically and through acquisitions. This year, we welcomed VTS into our group of businesses which expands the Group’s capability and geographic coverage in the important and growing field of EV battery and powertrain performance evaluation. This acquisition provides us with an excellent platform for further growth. We remain committed to our stated acquisition strategy and have identified a number of opportunities that would potentially meet our strategic criteria. We will ensure our governance structures remain in place and evolve to meet the changing demands of the Group in this period of growth. Board activities and environmental policy The Board is mindful that it needs to create the right balance between considering in-year activities and looking ahead at more strategic matters. The Board’s activities during the year are set out on pages 73 and 74. One of the Board’s activities this year was to review the Group’s environmental policy and ongoing actions to decarbonise and reduce emissions. Our aim to be net zero for market based Scope 1 and 2 emissions by 2040 and to be a net zero organisation by 2050 is a key part of the Group’s strategy. If we are to continue to achieve our stated objective, it is essential that decarbonisation goals become embedded into the breadth of our activities and include stretching but attainable targets. In FY 2024, the Board reviewed and discussed the Group’s decarbonisation targets and flightpath to 2050. More information on the Group’s sustainability strategy and how we track our performance can be found on pages 32 to 49. Equality, diversity and inclusion This year, our focus turned towards nurturing an inclusive culture at AB Dynamics through our equality, diversity and inclusion (EDI) workstream. We introduced an EDI policy which outlines our commitment to EDI and sets out how we put this commitment into practice. To support and raise awareness on the importance of inclusivity in our workplace every employee is to undertake EDI training on an annual basis. We surveyed our employees to obtain our baseline data this year and we will monitor our data on an ongoing basis to assess the impact of this policy and our EDI strategy. Statement of corporate governance 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 2018 (the 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. The Board of the Group notes that the QCA Code was recently updated, with changes to take effect for financial periods commencing on or after 1 April 2024. The Group will provide disclosures for the new QCA Code in next year’s Annual Report and Accounts. 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 75. 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 2024. 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 meetings through the year ended 31 August 2024, and the Directors’ attendance at those meetings is set out on page 73. The Board is committed to the pursuit and maintenance of 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 71 Board effectiveness and evaluation The Board conducts an external Board evaluation process every three years. The most recent external Board evaluation exercise was carried out in FY 2022 and it is intended that an external Board evaluation is carried out next year in FY 2025. This year we conducted an internal Board evaluation. I am pleased to report that the overall conclusion of the internal review is that the Board and its Committees continue to be effective and function well in an environment of constructive challenge and open sharing of viewpoints. Annual General Meeting (AGM) Our 2025 AGM will be held on Thursday 16 January 2025 at 11 am. Full details including the resolutions to be proposed to shareholders are set out in the Notice of the AGM on pages 134 to 138. Outcomes of the resolutions tabled at the AGM, including poll results detailing the votes for, against and withheld, will be published on the Group’s website and the London Stock Exchange once the AGM has concluded. Richard Elsy CBE Non-Executive Chairman 26 November 2024 Chairman’s introduction to corporate governance continued AB Dynamics plc Annual Report and Accounts 2024 65 Strategic report Governance Financial statements Board of Directors A leadership team creating sustainable shareholder value RC N E E Richard (Dick) Elsy CBE Non-Executive Chairman Appointments: Joined the Board as Non-Executive Director on 1 August 2020. 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 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. Dr James Routh Chief Executive Officer Appointments: Joined the Group and was appointed to the Board as an Executive Director on 1 October 2018. 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 External appointments: James is Non-Executive Director and Senior Independent Director at Tracsis plc. Industry expert Financial expert Risk expert Collective Board skills Richard Elsy CBE Dr James Routh Sarah Matthews-DeMers Richard Hickinbotham Louise Evans Board composition Length of tenure 0–5 years 2 5+ years 3 Balance of Executive and independent Non‑Executive Directors 1 Chairman was assessed as independent on appointment. Executive 2 Non-Executive1 3 Gender diversity Male 3 Female 2 AB Dynamics plc Annual Report and Accounts 2024 66 Strategic report Governance Financial statements Board of Directors continued A RC N RC A N E Sarah Matthews-DeMers Chief Financial Officer Appointments: Joined the Group and was appointed to the Board as an Executive Director on 4 November 2019. 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 External appointments: Council Member, University of Exeter. Richard Hickinbotham Non-Executive Director (Independent) Appointments: Joined the Board as a Non-Executive Director on 9 August 2017. Chair of the Remuneration 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 External appointments: Richard is Non-Executive Chair of Directa Plus Plc. Louise Evans Non-Executive Director (Independent) Appointments: Joined the Board and appointed Chair of the Audit and Risk Committee on 6 April 2020. Chair of the ESG Committee. 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 External appointments: Louise is the Senior Independent Director and Chair of the Audit Committee of Gooch & Housego plc, Non‑Executive Director of the International Foundation for Aids to Navigation and Non-Executive Director of World Rugby. Audit and Risk Committee ESG Committee Nomination Committee Remuneration Committee Committee Chair A RC E N AB Dynamics plc Annual Report and Accounts 2024 67 Strategic report Governance Financial statements 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 through running the day-to-day operations of the business.” Sarah Matthews-DeMers Chief Financial Officer SEE PAGES 66 AND 67 FOR BIOGRAPHIES Dr James Routh Chief Executive Officer 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 Group President – Testing Products, the Managing Director – Testing Services, the Managing Director – Simulation and the Group Corporate Development Director. Other individuals may be invited to attend Excom meetings as required. Executive Committee AB Dynamics plc Annual Report and Accounts 2024 68 Strategic report Governance Financial statements Andrew Ng Group President – Testing Products 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. Dan Clark Managing Director – Simulation Appointments: Joined the Group as Managing Director of the simulation division in June 2022 which comprises the AB Dynamics subsidiaries Ansible Motion Limited and rFpro Limited. Member of the Group Executive Committee. 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 Chartered Engineer with the Institution of Mechanical Engineers. Matthew Price Group Corporate Development Director Appointments: Appointed Group Corporate Development Director on 18 September 2024 and previously acted as Managing Director – ABD Solutions. Joined the Group on 1 January 2020. Member of the Group Executive Committee. 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 USA, Europe and Australia, within the automotive, telecommunications, aerospace and defence industries, including senior roles at Ford, GKN and Airbus. Matthew is a Chartered Aerospace Engineer and Fellow of the Royal Aeronautical Society. Neil Carpenter Managing Director – Testing Services Appointments: Appointed Managing Director – Testing Services on 1 October 2024. Originally joined the Group on 1 June 2024 as Managing Director – North America. Member of the Group Executive Committee. Skills and experience: Neil has held various executive leadership roles within the automotive industry. He has been in customer- facing roles his entire career, including experience in application engineering, systems engineering, project management, sales, business development and general management. His testing experience includes component, system and vehicle level development and validation. Prior to joining AB Dynamics, Neil was the Vice President – Customer Business Unit at Motherson and Global Director of Sales at Continental. Neil received his MBA from Central Michigan University and his Bachelor of Science in Mechanical Engineering from Kettering University. Executive Committee continued AB Dynamics plc Annual Report and Accounts 2024 69 Strategic report Governance Financial statements Statement of corporate compliance Principle 1 Establish a strategy and business model which promote long-term value for shareholders. 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 63 and the Group’s detailed analysis of its compliance with the QCA Code Principle 1 available on the Group’s website. Principle 2 Seek to understand and meet shareholder needs and expectations. 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 56 and 57 and the Statement of corporate governance on pages 71 to 79. Principle 3 Take into account wider stakeholder and social responsibilities and their implications for long-term success. Social engagement and the Group’s responsibilities to the communities within which we operate is one of the pillars of our sustainability 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. Principle 4 Embed effective risk management, considering both opportunities and threats, throughout the organisation. 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 60 to 62. Principle 5 Maintain the Board as a well‑functioning, balanced team led by the Chair. 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 71 to 79. Principle 6 Ensure that between them the Directors have necessary up-to-date experience, skills and capabilities. 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 66 and 67. Principle 7 Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement. 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 71 to 79. Principle 8 Promote a corporate culture that is based on ethical values and behaviours. 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 71 to 79. For more information on the Group’s vision and values, refer to page 36. Principle 9 Maintain governance structures and processes that are fit for purpose and support good decision making by the Board. 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 71 to 79. Principle 10 Communicate how the Company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders. Engagement with our stakeholders is key to a successful business and is an ongoing part of managing our business. 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 79. 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 56 and 57. 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 SUMMARY OF COMPLIANCE WITH THE QCA CORPORATE GOVERNANCE CODE 2018 (THE QCA CODE) AB Dynamics plc Annual Report and Accounts 2024 70 Strategic report Governance Financial statements 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 Audit and Risk Committee Remuneration Committee ESG Committee • Board and Committee composition • Succession planning • Board diversity • Executive and Non‑Executive Board appointments and strategy • External audit • Financial reporting • Risk management and internal controls • Internal audit • Remuneration policy • Remuneration principles • Incentive scheme design and setting of targets • Executive and senior management remuneration • Environmental policy • Diversity and inclusion • People and talent • CSR and community engagement • Ethical, diverse and robust supply chains READ MORE ON PAGES 80 AND 81 READ MORE ON PAGES 82 AND 83 READ MORE ON PAGES 85 TO 92 READ MORE ON PAGE 84 Statement of corporate governance continued AB Dynamics plc Annual Report and Accounts 2024 71 Strategic report Governance Financial 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 Chairman 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 66 and 67. Chairman Chief Executive Officer Chief Financial Officer Independent Non-Executive Directors • 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 • Provides the day-to-day leadership of 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 Chairman 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 • 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 • 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 66 and 67) • 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 Chairman 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. AB Dynamics plc Annual Report and Accounts 2024 72 Strategic report Governance Financial statements Statement of corporate governance continued Governance framework continued Board and Committee attendance record Member Independence Board 1 AGM Strategy day Audit and Risk Remuneration Nomination ESG Executive Dr James Routh N 8/8 Yes 1/1 N/A N/A N/A 4/4 Sarah Matthews-DeMers N 8/8 Yes 1/1 N/A N/A N/A N/A Non-Executive Richard Elsy CBE Y 2 8/8 Yes 1/1 N/A 4/4 2/2 4/4 Richard Hickinbotham Y 8/8 Yes 1/1 5/5 4/4 2/2 N/A Louise Evans Y 8/8 Yes 1/1 5/5 4/4 2/2 4/4 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. 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 seven 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 Chairman and each of the independent Non-Executive Directors can devote sufficient time to the Group’s business. Matters reserved for the Board Matters reserved for the Board include, but are not limited to: • Strategy and management, including responsibility for the overall leadership of the Group, setting the Group’s values and standards, and overview of the Group’s operational management • 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 • Contracts, including approval of all major capital projects and major investments • 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 71 to 74. 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 2024 73 Strategic report Governance Financial statements Statement of corporate governance continued Governance framework continued Activities of the Board continued Key considerations Key activities In practice Strategy • Annual strategy day (March 2024) 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 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 2025 and three-year plan • ERP implementation activities • Onboarding of Crowe UK LLP as the Group’s external auditor • Integration of VTS The Board debated the risks and benefits of the current dividend policy, including the options available in light of an uncertain economic environment and continued exposure to geopolitical uncertainty. It concluded that the total dividend for the year should be 7.63p. 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 Crowe UK LLP as the Group’s external auditor. Risk and compliance • Annual review of the Group’s strategic risk register • Continuation of due diligence on third party suppliers and agents • Review of Group-wide policies • Review of Group-wide insurance coverage • Maintenance of the Group’s whistleblowing platform The Board continues to receive information to assess and mitigate risks associated with ongoing geopolitical conflicts. 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 received no new whistleblowing issues in FY 2024 and two whistleblowing cases which had been reported in our previous financial year, and remained open, were resolved without the need for further action. People and culture • Professional Development Programme • Group CSR maintained • Review of current structure of the Group • Real Living Wage accreditation The Group completed the second 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 maintained the operation of its CSR criteria, underpinned by its corporate values, to ensure that its CSR activities enhance the links to the Group’s local communities. All four UK legal trading entities within the Group achieved accreditation as a Real Living Wage employer. Governance • The Group achieved an MSCI AAA ESG rating • Stakeholder engagement • Internal Board performance review The Group achieved an MSCI AAA ESG rating, placing the Group in the top 6% of MSCI’s ACWI Index for Auto Components. Having created our Net Zero Working Group in the last financial year, the Group set targets of becoming net zero for market based Scope 1 and 2 emissions by 2040 and to be a net zero organisation by 2050. The Group has completed a milestone in this journey by finalising its UK data collection (including Scope 3 emissions) enabling the business to complete its first comprehensive assessment of the Group’s UK carbon footprint and establish its baseline. The Group continues to work with Auditel to assist with its net zero goals. 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 75 for more information. Focus for 2025 – The Board will focus on succession planning, diversification and sustainability initiatives. AB Dynamics plc Annual Report and Accounts 2024 74 Strategic report Governance Financial statements Statement of corporate governance continued Statement of corporate governance Board meetings During the period, the Board convened formally on eight 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 Chairman 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 2024, 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 66 and 67. 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) and an external Board performance review is scheduled to take place in the next financial year. 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. Actions identified in the review for the forthcoming year include Board presence at the Group’s locations internationally. 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) 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: • Setting and approval of an annual budget • 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 • 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 60 to 62 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 2024 75 Strategic report Governance Financial statements Statement of corporate governance continued Anti-corruption The Group has recently reviewed its policy on anti-bribery and corruption to ensure it meets the requirements of the Bribery Act 2010 and the US Foreign Corrupt Practices Act 1977. This policy is published on the Group’s website and is circulated to employees globally. Individuals receive online training on the core subject matter annually. To facilitate understanding and compliance, the policy and training are available in four languages (the key languages spoken across the Group). The Group continues to use the Dow Jones Risk Management tool for its due diligence on agents, distributors, customers and suppliers. The Dow Jones Risk and Compliance platform aids the Group’s diligence on these third parties in relation to: sanctions lists, state ownership, politically exposed persons, territorial/jurisdictional risks and adverse media amongst other things, which supports the Group’s anti-corruption policies and procedures. Whistleblowing The Group aims to create a working environment where honest and open communication is encouraged and employees feel comfortable raising concerns. Whilst we believe we have a robust framework in place and an embedded commitment to always doing the right thing, where these high standards have not been met, we encourage our workforce to come forward and speak up via our whistleblowing portal. The portal is accessible 24 hours a day, 365 days of the year, through an internet URL and mobile phone app. Our whistleblowing policy aims to encourage openness, reports can be made anonymously, and we guarantee legal protection for all whistleblowers, even if they turn out to be mistaken. All reports made through this tool are investigated in line with the Group’s whistleblowing policy and are supervised by our independent Non- Executive Directors. No new whistleblowing reports were received in FY 2024 and two cases which had been reported in our previous financial year, and remained open, were resolved without the need for further action. Statement of corporate governance continued 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 Sustainability section. Re-election All Directors are subject to 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 Chairman 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. AB Dynamics plc Annual Report and Accounts 2024 76 Strategic report Governance Financial statements BOARD COMMITTEES Statement of corporate governance continued Audit and Risk Committee Chaired by Louise Evans (finance and audit expert) Number of meetings in the year: 5 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 Crowe UK LLP as the new external auditor to the Group. Remuneration Committee Chaired by Richard Hickinbotham (industry and finance expert) Number of meetings in the year: 4 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. Nomination Committee Chaired by Richard Elsy CBE (industry expert) Number of meetings in the year: 2 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. ESG Committee Chaired by Louise Evans (finance and audit expert) Number of meetings in the year: 4 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 sustainability management and performance and promote and enhance the Group’s sustainability work to ensure it receives due attention and acknowledgement, enabling the Group to become a sustainability leader in our selected industries. This year, the ESG Committee continued to instruct Auditel, a leading cost, procurement and carbon solutions company, to assist with our net zero 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 96 (within the Directors’ report). AB Dynamics plc Annual Report and Accounts 2024 77 Strategic report Governance Financial statements Statement of corporate governance continued Stakeholder engagement Consideration of all our stakeholders See our report on Section 172(1) stakeholder engagement on pages 56 and 57 for details of how the Group engages with its stakeholders. Our stakeholders How the Board and Committees are kept informed Customers • The Board reviews the Group’s engagement with significant customers and regularly discusses the contractual requirements of the larger or more complex contracts Industry bodies • The ESG Committee receives information regarding industry bodies with which 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 brokers 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 2025 on pages 134 to 138 • 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 • The Chairman and Non-Executive Directors have engaged directly with employees at several levels of seniority providing an opportunity to receive direct feedback Supply chains • The Board receives reports from the businesses to update on performance of major suppliers, highlighting risks (and their proposed mitigations) Communities • 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 AB Dynamics plc Annual Report and Accounts 2024 78 Strategic report Governance Financial statements Statement of corporate governance continued 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 Stakeholders How the Board considered stakeholders during the year Annual Report sections CSR criteria review • Employees • Customers • Society 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 maintained for all employees to take up two paid volunteering days p.a. For more information on the Group’s CSR criteria, refer to page 40 of the Sustainability section Capital allocation • Shareholders • Employees • Customers • Society During the year, the Group acquired VTS. An acquisition of this type impacts on a number of our stakeholders. The strengthening of our testing services 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 VTS. Our breadth of testing services 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. Growth of a sustainability agenda led by an ESG Committee • Society • Customers • Employees • Shareholders The ESG Committee has continued to progress the Group’s sustainability 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 Net Zero Working Group is responsible for the Group’s initiative towards net zero. This year, the Group finalised its UK data collection (including Scope 3 emissions), its first comprehensive assessment of the Group’s UK carbon footprint and establishment of its baseline. The Group achieved an MSCI AAA rating in the financial year ended 31 August 2024. For more information, please refer to our Sustainability section on pages 32 to 49. See page 84 for more information regarding the activities of the ESG Committee AB Dynamics plc Annual Report and Accounts 2024 79 Strategic report Governance Financial statements Nomination Committee report Maintaining a balance of skills and experience Meetings 2 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 Dear shareholders, I am pleased to present the Nomination Committee’s report for the year ended 31 August 2024. 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 two meetings held during the year are shown on page 73. Meetings of the Committee are attended, at the invitation of the Chair, 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 • To implement, review and respond to the results of Board performance reviews 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. AB Dynamics plc Annual Report and Accounts 2024 80 Strategic report Governance Financial statements Nomination Committee report continued 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. Whilst the current structure of the Board has served the business well, it is under constant review regarding its scale and effectiveness. In light of the continued growth of the Group and our position within AIM, the Nomination Committee has agreed that it is time to broaden the skills and experience of the Non-Executive Directors to match the growing needs of the business. To this end we have retained Korn Ferry with a remit to secure two new Non-Executives over the next two years. Our focus is predominantly on quality of candidates and right cultural fit with the Board and we recognise that the right people may not be immediately available. By adopting a measured timing approach to this important recruitment, we feel that we will have an advantage in the market. The only timing pressure that we are imposing on the process is to secure a successor to Richard Hickinbotham, who will retire in August 2026 from the Board and as Chair of the Remuneration Committee. We wish to have a successor in role well in advance of this to ensure continuity of our robust remuneration process which we have worked hard to establish. We anticipate that this slower-burn recruitment process may well present us with exceptional candidates over time and we will consider a third Non-Executive hire should we have that choice. Board performance review The skills and experience of Board members are set out in their biographies on pages 66 and 67 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 in FY 2022 and the next external Board evaluation is scheduled for next year, in FY 2025. 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 internal 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. 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. “The Board has the experience and skills to deliver our ambitious strategy.” 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 26 November 2024 AB Dynamics plc Annual Report and Accounts 2024 81 Strategic report Governance Financial statements Audit and Risk Committee report Monitoring all aspects of financial reporting and risk Meetings 5 Audit and Risk Committee members • Louise Evans (Chair) • Richard Hickinbotham Key activities for the year • Approval of the 2023 Annual Report and Accounts and 2024 half- year report • Review and recommendation to the Board as to the appointment of the external auditor • Review of the Group’s risk and internal control framework 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, through monitoring the integrity of the Group’s financial reporting and internal controls and reviewing material financial reporting judgements. During the early part of the financial year, the Committee was focused on matters relating to the 2023 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 2024 half-year and full-year results, and the external and internal audit activity during 2024. 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 and Risk 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 66 and 67. Operation of the Committee Meetings of the Committee are attended, at the invitation of the Chair, by the external auditor, the Chairman 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 AB Dynamics plc Annual Report and Accounts 2024 82 Strategic report Governance Financial statements Audit and Risk Committee report continued 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 • To review the internal control environment and consider the scope and findings of the internal audit reviews • 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 • 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 and finance team 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 2024 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, DRI and Venshure Test Services 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. 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 • Review of acquisition accounting: the Committee considered the allocation of the purchase price of VTS between the acquired net assets, separately identifiable intangible assets and goodwill and was satisfied that the allocation is appropriate • Review of assets held for sale: the Committee considered the classification of the land asset that is held for sale and was satisfied that a sale is highly probable therefore the classification is appropriate 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 has substantial cash resources and a £15m undrawn revolving credit facility at year end. 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 2024 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 Following the completion of the external audit process in 2023, the Audit and Risk Committee decided to undertake a tender process for the appointment of a new external auditor. In the opinion of the Audit and Risk Committee, Grant Thornton UK LLP did not complete its work on a timely basis or provide sufficient communication on progress and following the firm’s demotion to tier two status by the FRC, it was not invited to take part in the tender process. Grant Thornton UK LLP confirmed in its resignation letter that there are no matters connected with its ceasing to hold office which it considers should be brought to the attention of the members or creditors of the Group. Three audit firms took part in the audit process and, following the completion of that process, Crowe UK LLP was appointed as external auditor by the Board in April 2024, completed the audit for the year ended 31 August 2024 and provided the Independent auditor’s report on pages 97 to 101. 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 for FY 2024 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, Crowe UK LLP 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 also requires the Committee’s prior approval of any permitted 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 design and implementation of the new ERP system as well as the publication of the internal control manual in the prior year and the monitoring programme to assess its implementation which was undertaken in the year • 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 58 to 62 • Reviewing the Group’s insurance coverage Louise Evans Audit and Risk Committee Chair 26 November 2024 AB Dynamics plc Annual Report and Accounts 2024 83 Strategic report Governance Financial statements ESG Committee report Embedding sustainability across our business 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 wthe roll-out of EVs and other lower-carbon transport technologies • Overseeing the growth of the Group’s sustainability strategy • Reviewing the Group’s policies, programmes, targets and initiatives Dear shareholders, I am delighted to present my fourth report as Chair of our ESG Committee. Sustainability 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 sustainability strategy for the Group and provide Board-level oversight of the various sustainability 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 • Oversight of the Net Zero Working Group, the global team tasked with identifying, managing and reducing the Group’s carbon emissions • Promoting the Group’s Equality, Diversity and Inclusion and Social Mobility Programme • Reviewing the Group’s management and governance policies • Ensuring Group whistleblowing policies and procedures are appropriate and effective Activities during the year The Committee met four times during the year to develop the sustainability strategy and bring together the current activities under coherent oversight. We have set our environmental goal to be net zero for market based Scope 1 and 2 emissions by 2040 and to be a net zero organisation by 2050, and are already making good progress against these objectives. We continue to engage Auditel, a leading carbon solutions company, to assist us in identifying and reducing our carbon emissions and related costs. Achieving credible, trustworthy and substantiated environmental claims is key to our aim for verification with ISO 14068-1 (Climate change management - Transition to net zero; Part 1: Carbon neutrality). Employee health, safety and wellbeing continues to be of paramount importance. The Group continues to be accredited with the ISO 45001 Occupational Health and Safety Management System certification at Anthony Best Dynamics Limited and AB Dynamics GmbH. The accreditation reinforces our Health and Safety Policy and demonstrates our commitment to employee safety. The Net Zero Working Group continues to operate after its formation last year and comprises representatives from the Group’s subsidiaries who will spearhead a comprehensive programme to achieve net zero for Scope 1 and 2 emissions throughout all the businesses in the Group by 2040. 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 last year. This year we introduced an Equality, Diversity and Inclusion Policy which outlines our commitment to equality, diversity and inclusion and sets out how we put this commitment into practice. To support this policy, all of our hiring managers undertook unconscious bias training this year and every current employee is to attend equality, diversity and inclusion training on an annual basis. This year, we surveyed our employees to obtain our baseline data and we will monitor our data on an ongoing basis to assess the impact of this policy and our EDI strategy. Looking forward In the coming year, we plan to continue with the implementation of our strategy and refine our sustainability performance delivery. Louise Evans ESG Committee Chair 26 November 2024 AB Dynamics plc Annual Report and Accounts 2024 84 Strategic report Governance Financial statements Directors’ remuneration report Annual Statement Our Remuneration Policy aligns to the interests of our shareholders Meetings 4 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 Executive Directors and senior management • The 2024 annual bonus plan outturn • Approval of the 2025 annual bonus plan financial targets and personal objectives for the Executive Directors • Vesting of the 2020 LTIP awards • Approval of 2024 LTIP awards and performance conditions • Shareholder consultation on the provisions of the FY 2025 LTIP • Review of the Directors’ remuneration report Dear shareholders, I am pleased to present the Directors’ remuneration report for the year ended 31 August 2024. 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. As such, this report is divided into three sections, being: • This Annual Statement, 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, which sets out the Group’s Remuneration Policy for the Directors • The Annual Report on Remuneration, which discloses how the Remuneration Policy was implemented in the year ended 31 August 2024 in detail Consistent with AIM best practice and noting Principle 9, application e, this Directors’ remuneration report (comprising this Annual Statement, the Remuneration Policy and the Annual Report on Remuneration) will be put to an advisory vote at the AGM in January 2025. 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 and 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 • Shareholding guidelines operate for the Executive Directors In addition, the Remuneration Committee continues 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, operating profit and cash generation, despite the headwinds of global inflation and supply chain constraints. Revenue increased by 10% to £111.3m while adjusted operating profit grew by 22% to £20.3m. Further developments against the Group’s strategic priorities included the acquisition and integration of VTS and the launch of several new products. AB Dynamics plc Annual Report and Accounts 2024 85 Strategic report Governance Financial statements Directors’ remuneration report continued Implementation of the policy for the year ended 31 August 2024 In respect of implementing the Remuneration Policy for the year ended 31 August 2024: • As detailed in last year’s Directors’ remuneration report, Executive Director base salary levels were increased in line with the general workforce from 1 January 2024 • Pension provision continued to be aligned to the Company’s 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 89.5% of the maximum for both the CEO and CFO. 20% of the bonus award will be deferred into shares for three years as per the normal deferral policy. Details of the performance against the targets are set out in the Annual Report on Remuneration • LTIP awards were granted on 8 February 2024 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 December 2020, while the EPS targets (50% of awards) were met in full, the threshold total shareholder return targets (50% of awards) were not met and, as such, 50% of the total awards vested in February 2024 and the remainder of the awards lapsed Implementation of the policy for the year ending 31 August 2025 In respect of implementing the Remuneration Policy for the year ending 31 August 2025: • Following a review of Executive Director salary levels in light of both personal and Group performance and noting the increase in the Group’s size and complexity, the Committee has agreed to increase the CEO’s and CFO’s salaries to £440,412 and £330,309 effective 1 January 2025. These salaries are considered to be appropriately aligned to AIM 100 levels, particularly considering the CEO’s and CFO’s length of service, experience and performance in their respective roles. These increases follow two years of workforce aligned increases and were awarded against the backdrop of strong Group performance (with three- year revenue and operating profit growth at circa 20% and 26% CAGR respectively) • Pension provision will continue to be aligned to the Group’s UK workforce at 10% of salary • 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 (10%), organisation/operations (5% for the CEO, 11% for the CFO), product development (10% for the CEO, 4% for the CFO) and ESG (5%) • Following a positive consultation exercise with the Group’s largest shareholders, the next LTIP awards will be set at 150% of salary for the CEO and CFO. This reflects the significant increase in the Group’s size, complexity and greater international focus. This ensures packages remain market competitive and appropriately aligned to shareholder interests. Vesting will continue to be based on sliding scale earnings per share, relative total shareholder return and three-year cash based targets. The targets for the LTIP award, currently envisaged to be granted in January 2025, will be set out in an RNS announcement 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 respect of the remuneration related votes at our forthcoming AGM “Our Remuneration Policy accords with the long-term interests of our shareholders.” AB Dynamics plc Annual Report and Accounts 2024 86 Strategic report Governance Financial statements Directors’ remuneration report continued Strategic alignment of remuneration with FY 2024 KPIs Annual bonus Long-term incentive plan Remuneration Policy and FY 2024 outturn Remuneration at a glance This section provides an overview of our Remuneration Policy and outcomes for the year. 1. Financial 70% 2. Product development 5% 3. Operational/organisational 15% 4. Strategic 5% 5. ESG 5% Total shareholder return 33.3% Earnings per share (EPS) 33.3% Cash conversion 33.4% Link to strategy 1 2 3 4 5 6 READ MORE ON PAGE 11 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%. Actual Minimum On target Maximum Fixed pay Annual bonus LTIP James Routh Actual Minimum On target Maximum £325k £181k £363k £181k £117k £320k £320k Sarah Matthews-DeMers On target assumes the annual bonus and LTIP vest at 50% of maximum for FY 2024. No share price appreciation is included. £433k £427k £427k £242k £193k £242k £427k £484k £320k £484k £427k £363k £320k AB Dynamics plc Annual Report and Accounts 2024 87 Strategic report Governance Financial statements Directors’ remuneration report continued Directors’ Remuneration Policy 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 AB Dynamic’s continued growth strategy Base salaries are normally reviewed on an annual basis with any changes normally effective 1 January each year There is no maximum salary, although salary levels are set to progressively move towards levels for companies of a 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 To provide market competitive benefits Benefits may include medical cover, income protection and death in service insurance. Other benefits may be awarded as appropriate and include relocation Benefits may vary by role and individual circumstances and are periodically reviewed Not performance related Pensions Competitive to market to reward sustained contribution by Executive Directors 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 Aligned to the pension available to AB Dynamic’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 20% of any bonus earned is normally deferred into shares for three years Bonus awards are subject to malus and clawback provisions 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 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 175% of base salary although normal awards will be set at 150% 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’s 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 Chair) Discretion The Committee has discretion to adjust the 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 • LTIP outcomes to ensure alignment of pay with performance and to ensure the outcome is a true reflection of the performance of the Company 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. AB Dynamics plc Annual Report and Accounts 2024 88 Strategic report Governance Financial statements Directors’ remuneration report continued Annual Report on Remuneration This section sets out how the Remuneration Policy was applied for the year ended 31 August 2024 (and the prior year). Single figure table for Executive Directors James Routh Sarah Matthews-DeMers 2024 2023 2024 2023 Pay element £’000 £’000 £’000 £’000 Base salary 387 366 290 275 Taxable benefits 1 1 1 1 Pensions 39 37 29 27 Annual bonus 433 403 325 302 LTIP1 193 — 117 — Gain on exercise of share options2 — 257 — — Total 1,053 1,064 762 605 Of which: Fixed remuneration 427 404 320 303 Variable remuneration 626 660 442 302 1 While the threshold total shareholder return (TSR) targets were not met, the EPS targets (50% of awards) were met in full, resulting in 50% of the December 2020 awards vesting. In respect of the prior year numbers, the LTIP awards granted in January 2020 lapsed in full in January 2023 as a result of failing to hit threshold EPS and TSR targets. 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 89.5% 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: Outcome Outcome Weighting EBIT Above maximum 40% 40% Order intake Between threshold and budget 2.5% 10% Cash conversion At maximum 10% 10% Operating margin Above maximum 10% 10% Strategic Majority of the targets met in full 4% 5% Organisation/operations Majority of the targets met in full 14% 15% Product development Majority of the targets met in full 4% 5% ESG Met in full – the Committee was pleased to see the achievement of an MSCI AAA rating 5% 5% Total (% of max) 89.5% 100% Total (% of salary) 111.9% of salary AB Dynamics plc Annual Report and Accounts 2024 89 Strategic report Governance Financial statements Annual Report on Remuneration continued Share awards granted in the year Deferred bonus awards Details of the deferred bonus shares granted to Executive Directors on 8 February 2024 in respect of 20% of the respective annual bonus awards for the year ended 31 August 2023 are as follows: Executive Director Awards granted Award basis (% of salary) Grant date Release date Performance conditions James Routh 2,406 20% of FY 2023 bonus 1 8 February 2024 8 February 2027 n/a Sarah Matthews-DeMers 1,804 20% of FY 2023 bonus 1 8 February 2024 8 February 2027 n/a 1 Based on the share price of £17.75 on 7 February 2024. LTIP awards Details of the LTIP awards granted on 8 February 2024, which were set at 125% of salary for both the CEO and CFO, are as follows: Executive Director Awards granted Award basis (% of salary) Grant date Face value of award at maximum vesting (£k) 1 Vesting date Performance conditions James Routh 27,692 125% 8 February 2024 £489 8 February 2027 See below Sarah Matthews-DeMers 20,769 125% 8 February 2024 £367 8 February 2027 See below 1 Based on the share price of £17.675 on 8 February 2024. The performance conditions determining vesting over the three years to 31 August 2026 are as follows: • One-third 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. • One-third of awards vest based on cash conversion. 0% of this part of awards vest 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 vest for cash conversion of between 100% and 110% • One-third 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 Ordinary shares of 1p each Shareholding guidelines 1 Shareholding guidelines met James Routh 33,625 150% Yes Sarah Matthews-DeMers 8,048 150% No 1 Shareholdings of 150% of salary are targeted to be built up within five years of appointment. Directors’ remuneration report continued AB Dynamics plc Annual Report and Accounts 2024 90 Strategic report Governance Financial statements Directors’ interests in long-term incentive awards Awarded Exercised Lapsed 31 August Director Award Date of grant Date of vesting Notes Exercise price 1 September 2023 during the year during the year during the year 2024 James Routh LTIP 2 December 2020 8 February 2024 2 £0 21,917 — 10,958 10,959 — LTIP 11 March 2022 3 December 2024 3 £0 51,220 — — — 51,220 LTIP 4 January 2023 4 December 2025 4 £0 28,457 — — — 28,457 LTIP 8 February 2024 8 February 2027 5 £0 — 27,692 — — 27,692 Sarah Matthews-DeMers Legacy options 5 December 2019 5 December 2021 1 £21.40 60,000 — — — 60,000 LTIP 2 December 2020 8 February 2024 2 £0 13,292 — 6,646 6,646 — LTIP 11 March 2022 3 December 2024 3 £0 38,415 — — — 38,415 LTIP 4 January 2023 4 December 2025 4 £0 21,343 — — — 21,343 LTIP 8 February 2024 8 February 2027 5 £0 — 20,769 — — 20,769 Notes: 1 Recruitment related market value options which vested on 4 December 2020 (50%) and 4 December 2021 (50%). 2 50% based on EPS growth, 50% based on relative TSR versus the AIM 100 (median to upper quartile). 3 50% based on EPS growth, 50% based on relative TSR versus the AIM 100 (median to upper quartile). The EPS targets have been met in full. The TSR targets are expected to be met in full on completion of the measurement period in December 2024. 4 One-third based on EPS growth, one-third based on cash conversion, one-third based on relative TSR versus the AIM 100 (median to upper quartile). 5 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 total remuneration over the last three years. The CEO pay ratio has increased during the year due to a reduction in the average pay per employee, which has decreased by 6% due to a change in the mix of employees. The CEO pay ratio has increased from 2022 due to the crystallisation of pay-outs under long-term incentive arrangements, including legacy share options. The Committee is satisfied that the pay ratio is consistent with the pay, reward and progression policies for our employees. Total remuneration FY James Routh Average employee Ratio 2024 £1,053,000 £66,000 16:1 2023 £1,064,000 £70,000 15:1 2022 £762,000 £69,000 11:1 Directors’ remuneration report continued AB Dynamics plc Annual Report and Accounts 2024 91 Strategic report Governance Financial statements Directors’ contracts The Executive Directors have rolling service contracts that are subject to twelve months’ notice. The Chairman and Non-Executive Directors do not have contracts of service. Single figure table for Non-Executive Directors Richard Elsy CBE Richard Hickinbotham Louise Evans Pay element 2024 £’000 2023 £’000 2024 £’000 2023 £’000 2024 £’000 2023 £’000 Fees, including Committee Chair fees 104 100 60 58 60 58 Advisers FIT Remuneration Consultants LLP continued to provide independent advice to the Committee during the year ended 31 August 2024. Its fee for the year ended 31 August 2024 was £13,900 (2023: £12,900). Payments to past Directors Anthony Best retired from the Board on 1 July 2021 and continues 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 26 November 2024 Directors’ remuneration report continued AB Dynamics plc Annual Report and Accounts 2024 92 Strategic report Governance Financial 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 Section in Annual Report Page Business review Strategic report 1 to 31 Principal risks and uncertainties Strategic report 60 to 62 Risk management and internal controls Strategic report – Risk management 58 and 59 Disclosure of information to auditor Governance – Directors’ report 95 Dividend recommendation for the year Strategic report – Chairman’s statement 7 Strategy and future developments of the Company Strategic report 8 to 15 Directors who held office during the year Governance – Board of Directors 66 and 67 Directors’ and Officers’ liability insurance in place Governance – Directors’ report 95 Director skills, experience and independence Governance – Board of Directors 66 and 67 Rules governing the appointment of Directors Governance 81 Powers of Directors Governance 75 Structure of share capital, including restrictions and the transfer of securities, voting rights and significant shareholders Governance – Directors’ report 94 and 95 Non-financial information statement Strategic report 63 Articles of Association and the rules governing changes to them Governance – Directors’ report 94 Company’s energy usage and greenhouse gas emissions Strategic report – Sustainability 42 to 46 Research and development Strategic report 27 Director remuneration details Governance – Remuneration Committee report 85 to 92 Corporate social responsibility Strategic report – Sustainability 36 to 39 Employee engagement Strategic report – Sustainability 36 Employment policies Strategic report – Sustainability 36 to 41 Company’s Section 172(1) statement Strategic report – Sustainability 56 and 57 Stakeholder engagement Strategic report – Sustainability 56 and 57 Principal decisions taken by the Company arising from or influenced by stakeholder engagement Statement of corporate governance 79 Accounting standards applied Governance – Statement of Directors’ responsibilities Financial statements – Note 1 of the financial statements 96 106 Board performance review Governance – Nomination Committee report 81 AB Dynamics plc Annual Report and Accounts 2024 93 Strategic report Governance Financial statements Directors’ report continued Company information Articles of Association The Company’s Articles of Association may be amended by special resolution of the Company’s shareholders. Strategic report The Strategic report is set out on pages 1 to 63 and was approved by the Board on 26 November 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 85 to 92 and in note 8 to the financial statements. Other information about the Group’s employee engagement, equality, diversity and inclusion policies is set out in the Our people section of the Sustainability section on pages 36 to 39, and the Corporate social responsibility section on page 40. The Group-wide gender diversity split as at 1 September 2024 was 17% female, 82% male and 1% prefer not to say (excluding VadoTech Group). Greenhouse gas (GHG) emissions 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 46. Shareholder information Incorporation and principal activity AB Dynamics plc is domiciled in England and registered in England and Wales under company number 8393914. At 25 November 2024, there were 22,954,463 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 63. Annual General Meeting The Annual General Meeting (AGM) will be held at 11 am on Thursday 16 January 2025 at Teneo, The Carter Building, 11 Pilgrim Street, London EC4V 6RN. The Notice of the AGM 2025 can be found on pages 134 to 138 and will be published on the AB Dynamics plc website. Substantial shareholdings At 25 November 2024, the Company had been notified of the following interests amounting to 3% or more of the voting rights in its ordinary share capital: Percentage of ordinary share capital Anthony Best 23.88 Octopus Investments 9.92 Investec Wealth & Investment 5.36 Sanford Deland Asset Management 4.68 Liontrust Asset Management 3.98 Canaccord Genuity Wealth Management 3.80 As far as the Directors are aware, there were no other interests above 3% of the issued ordinary share capital. Share capital The rights attaching to the Company’s ordinary shares, as well as the powers of the Company’s Directors, are set out in the Company’s Articles of Association, copies of which can be obtained from the 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 AB Dynamics plc Annual Report and Accounts 2024 94 Strategic report Governance Financial 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) • Provision of services by the controlling shareholder (see the Remuneration Committee report) Financial information Results and dividends The profit for the financial year attributable to shareholders was £9,854,000 (2023: £7,279,000). The Directors recommend a final dividend of 5.30p per ordinary share (2023: 4.42p) to be paid, if approved, on 31 January 2025. The results are shown more fully in the consolidated financial statements on pages 102 to 127 and summarised in the Chief Financial Officer’s review on pages 26 to 29. Independent auditor A resolution to appoint Crowe UK LLP (Crowe) 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 • 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 The Directors have assessed the principal risks discussed on pages 60 to 62, including by modelling a severe but plausible downside scenario over an extended assessment period to August 2026, whereby the Group experiences: • A reduction in demand of 25% over the next two financial years • A 10% increase in operating costs • An increase in cash collection cycle • An increase in input costs resulting in a reduction in gross margin by 12% At 31 August 2024, the Group had £30.8m 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 and Company 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 Richard Elsy CBE Chief Executive Officer Non-Executive Chairman AB Dynamics plc Company number: 8393914 26 November 2024 AB Dynamics plc Annual Report and Accounts 2024 95 Strategic report Governance Financial 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 • 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 and Directors’ report include 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 • The Annual Report and Accounts, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Group’s position and performance, business model and strategy This responsibility statement was approved by the Board of Directors on 26 November 2024 and is signed on its behalf by: Dr James Routh Richard Elsy CBE Chief Executive Officer Non-Executive Chairman Registered office: Middleton Drive, Bradford on Avon, Wiltshire BA15 1GB AB Dynamics plc Annual Report and Accounts 2024 96 Strategic report Governance Financial statements Independent auditor’s report To the members of AB Dynamics plc Opinion We have audited the financial statements of AB Dynamics plc (the “Parent Company”) and its subsidiaries (the “Group”) for the year ended 31 August 2024, which comprise: • the Group statement of comprehensive income for the year ended 31 August 2024; • the Group and parent company statements of financial position as at 31 August 2024; • the Group and parent company statements of changes in equity for the year then ended 31 August 2024; • the Group statement of cash flows for the year then ended 31 August 2024; and • the notes to the financial statements, including a summary of material 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 2024 and of the Group’s profit for the period 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. 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 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 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. Our evaluation of the directors assessment of the group’s and parent company’s ability to continue to adopt the going concern basis of accounting included: • Reviewing management’s financial projections for the Group and parent company for the period to August 2026. • Checking the numerical accuracy of management’s financial projections • Challenging management on the assumptions underlying those projections and sensitised them to reduce anticipated net cash inflows from future trading activities. • Obtained the latest management results post year end 31 August 2024 to review how the Group and parent company are trending toward achieving the forecast. • Performed sensitivity analysis on key inputs of the forecast by calculating the impact of various scenarios and considering the impact on the group and parent Company’s ability to continue as a going concern in the event that a downward scenario occurs. The sensitivity analysis covered the downside scenario as disclosed in note 2a. • Assessing the completeness and accuracy of the matters described in the going concern disclosure within the significant accounting policies as set out in Note 2 (a). 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 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. Overview of our audit approach Materiality In planning and performing our audit we applied the concept of materiality. An item is considered material if it could reasonably be expected to change the economic decisions of a user of the financial statements. We used the concept of materiality to both focus our testing and to evaluate the impact of misstatements identified. Based on our professional judgement, we determined overall materiality for the Group financial statements as a whole to be £965,000, based on 4.8% of adjusted Group profit before tax. Materiality for the parent company financial statements was set at £670,000 based on 0.46% of net assets. We use a different level of materiality (‘performance materiality’) to determine the extent of our testing for the audit of the financial statements. Performance materiality is set based on the audit materiality as adjusted for the judgements made as to the entity risk and our evaluation of the specific risk of each audit area having regard to the internal control environment. We determined performance materiality for the Group financial statements as a whole to be £675,500. Performance materiality for the parent company financial statements was set at £469,000. Where considered appropriate performance materiality may be reduced to a lower level, such as, for related party transactions and directors’ remuneration. We agreed with the audit and risk committee to report to it all identified errors in excess of £45,000. Errors below that threshold would also be reported to it if, in our opinion as auditor, disclosure was required on qualitative grounds. AB Dynamics plc Annual Report and Accounts 2024 97 Strategic report Governance Financial statements Independent auditor’s report continued To the members of AB Dynamics plc Overview of our audit approach continued Overview of the scope of our audit The main trading Group and its principal subsidiary are accounted for from one central location, the Group’s registered office. The Group has a number of operating locations, both across the UK and overseas. Our audit work was performed entirely in the United Kingdom with the exception of year end inventory counts. Inventory counts were performed at two locations in the United Kingdom, (AB Dynamics Ltd and Ansible Ltd) and two locations in the USA , (DRI and AB Dynamics Inc), which were performed by teams from a Crowe Global member firm with oversight from the UK engagement team. The parent company and the primary trading subsidiary, AB Dynamics Ltd, were subject to a full scope audit. Ansible Motion Ltd was designated as a significant component and was therefore audited to a component materiality, whilst the remaining group entities based in the United Kingdom, Germany, the United States of America, Spain, Singapore, China and Japan were audited to Group materiality. Testing was performed on a line by line basis in the financial statements and testing was completed to ensure that the Group balance of items left untested per line item was below performance materiality. 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 period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those which 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. This is not a complete list of all risks identified by our audit. Key audit matter How the scope of our audit addressed the key audit matter Revenue recognition and accounting for long-term contracts The Group has recognised revenues totalling £111.3m (2023: £100.8m). See notes 2(c) and 3 to the financial statements. Revenue is recognised in accordance with the accounting policy set out in the financial statements. The accounting policy contains a number of judgements, particularly in recognising when the performance obligations are satisfied. This is determined with reference to the underlying contract with the customer. For certain projects the Company recognises revenue over the period of the contract. The Group uses the percentage of completion method to determine the appropriate amount of revenue to recognise in a given period. This is measured by the proportion that contract costs incurred for work performed to date bear to the estimated total contract costs. A number of judgements are made by management in making its assessment of estimated costs and profitability. Due to the estimation uncertainty over percentage completion we have identified revenue recognition and accounting for long term contracts as a key audit matter. • We assessed that the accounting policy conformed with the requirements of IFRS15 and then tested its application to a sample of contracts. • We assessed the use of a cost based methodology and its appropriateness to the circumstances of the business. • We undertook audit procedures over the design and implementation of controls within the revenue cycle that are operational within the group. • We performed cut off testing to ensure revenue was recorded in the correct period and that any resulting work in progress and other entries are appropriate. • We tested a sample of individual revenue transactions through to cash receipts. • Our work on long-term contracts focused on validating that estimated contract costs which include staff costs, overheads and material costs are appropriate and accurately estimated. • We tested a sample of costs incurred to date to supporting documentation. • We considered the original budget for the contract and compared this to actual costs to validate how the contract has performed and enquired into cost overruns and any events which could change this assessment. AB Dynamics plc Annual Report and Accounts 2024 98 Strategic report Governance Financial statements Key audit matter How the scope of our audit addressed the key audit matter Recoverability of goodwill and acquired intangible assets The Group recognises goodwill and acquired intangible balances totalling £75.9m (2023: £69.8m) arising from a number of acquisitions. See notes 12 and 13 to the financial statements. The Group’s intangible assets comprise of goodwill arising on acquisition of businesses, customer relationships, brand and technology assets. When assessing the carrying value of goodwill and intangible assets, management makes judgements regarding the appropriate cash generating unit, strategy, future trading and profitability and the assumptions underlying these. We considered the risk that goodwill and/or other intangible assets were impaired. Due to the significant assumptions that underpin the recoverable amount of these assets, the recoverability of goodwill and acquired intangible assets has been identified as a key audit matter. • We evaluated, in comparison to the requirements set out in IAS 36, management’s assessment (using discounted cash flow models) as to whether goodwill and/or other intangible assets were impaired. We reviewed and challenged management’s assessment of the CGUs. • We undertook audit procedures over the design and implementation of group controls over the internal budgeting and impairment assessment processes and approvals. • We challenged, reviewed and considered by reference to evidence, management’s impairment and fair value models as appropriate and their key estimates, including the discount rate. We reviewed the appropriateness and consistency of the process for making such estimates. • We obtained management’s discounted cash flow models supporting the intangible asset valuation. We challenged the key assumptions into the model, including the forecast revenue and gross margin, discount rates and growth rates. • We compared cash flow forecasts used in the impairment review to historical performance, and challenged where forecasts indicated performance that deviated significantly from historical performance, in the absence of significant changes in the business or market environment. • Discount rates and terminal growth rates were benchmarked to externally derived data and our knowledge of competitor performance, to evaluate the reasonableness of these assumptions. In addition we used an internal specialist to recalculate the discount rate. • Sensitivity analysis was performed by management on the key assumptions such as growth, margin and discount rates to identify those assumptions to which that the goodwill or intangible asset valuation was highly sensitive. We have applied further sensitivity to create a worst case scenario and challenged management on the likelihood of such a scenario occurring, and on what remedial actions would be taken. Our audit procedures in relation to these matters were designed in the context of our audit opinion as a whole. They were not designed to enable us to express an opinion on these matters individually and we express no such opinion. Independent auditor’s report continued To the members of AB Dynamics plc Overview of our audit approach continued Key audit matters continued Other information The directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Opinion on other matter prescribed by the Companies Act 2006 In our opinion based on the work undertaken in the course of our audit: • the information given in the strategic report and the directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and • the strategic report and directors’ report have been prepared in accordance with applicable legal requirements. AB Dynamics plc Annual Report and Accounts 2024 99 Strategic report Governance Financial statements Independent auditor’s report continued To the members of AB Dynamics plc Matters on which we are required to report by exception In light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors’ report. We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: • adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or • the parent company financial statements are not in agreement with the accounting records and returns; or • certain disclosures of directors’ remuneration specified by law are not made; or • we have not received all the information and explanations we require for our audit. Responsibilities of the directors for the financial statements As explained more fully in the directors’ responsibilities statement set out on page 96, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the group’s and parent company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so. 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. Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below however the primary responsibility for the prevention and detection of fraud lies with management and those charged with governance of the Company. • We obtained an understanding of the legal and regulatory frameworks that are applicable to the Group and the procedures in place for ensuring compliance. The most significant identified were the Companies Act 2006 and the QCA Corporate Governance Code. Our work included direct enquiry of the Company Secretary who oversees all legal proceedings, reviewing Board and relevant committee minutes and inspection of correspondence. • As part of our audit planning process we assessed the different areas of the financial statements, including disclosures, for the risk of material misstatement. This included considering the risk of fraud where direct enquiries were made of management and those charged with governance concerning both whether they had any knowledge of actual or suspected fraud and their assessment of the susceptibility of fraud. We considered the risk was greater in areas that involve significant management estimate or judgement. Based on this assessment we designed audit procedures to focus on the key areas of estimate or judgement, this included specific testing of journal transactions, both at the year end and throughout the year. • We used data analytic techniques to identify any unusual transactions or unexpected relationships, including considering the risk of undisclosed related party transactions. Where the risk was considered to be highest, we performed audit procedures to address these: Our procedures included: • enquiry of management about the Group’s policies, procedures and related controls regarding compliance with laws and regulations and if there are any known instances of non-compliance; • examining the supporting documents for all material balances, transactions and disclosures; • review of minutes of meetings about litigations and claims; • evaluation of the selection and application of accounting policies related to subjective measurements and complex transactions, in particular those items included in the Key Audit Matters; • analytical procedures to identify an unusual or unexpected relationships; • testing the appropriateness of a selection of journal entries recorded in the general ledger and other adjustments made in the financial statements; • review of accounting estimates for biases. Owing to the inherent limitations of an audit, there is an unavoidable risk that some material misstatements of the financial statements may not be detected, even though the audit is properly planned and performed in accordance with the ISAs (UK). The potential effects of inherent limitations are particularly significant in the case of misstatement resulting from fraud because fraud may involve sophisticated and carefully organised schemes designed to conceal it, including deliberate failure to record transactions, collusion or intentional misrepresentations being made to us. 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. AB Dynamics plc Annual Report and Accounts 2024 100 Strategic report Governance Financial statements Independent auditor’s report continued To the members of AB Dynamics plc 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. Matthew Stallabrass Senior Statutory Auditor for and on behalf of Crowe U.K. LLP Statutory Auditor, London 26 November 2024 AB Dynamics plc Annual Report and Accounts 2024 101 Strategic report Governance Financial statements Consolidated statement of comprehensive income For the year ended 31 August 2024 2024 2023 Adjusted Adjustments * Statutory Adjusted Adjustments * Statutory Note £’000 £’000 £’000 £’000 £’000 £’000 Revenue 3 111,253 — 111,253 100,767 — 100,767 Cost of sales (44,972) — (44,972) (40,837) — (40,837) Gross profit 66,281 — 66,281 59,930 — 59,930 General and administrative expenses (45,982) (7,554) (53,536) (43,326) (9,229) (52,555) Fair value gain on release of contingent consideration — — — — 5,180 5,180 Operating profit 20,299 (7,554) 12,745 16,604 (4,049) 12,555 Operating profit is analysed as: Before depreciation and amortisation 24,231 (1,203) 23,028 20,517 3,140 23,657 Depreciation and amortisation (3,932) (6,351) (10,283) (3,913) (7,189) (11,102) Operating profit 20,299 (7,554) 12,745 16,604 (4,049) 12,555 Net finance expense 6 (272) (447) (719) (354) (713) (1,067) Profit before tax 7 20,027 (8,001) 12,026 16,250 (4,762) 11,488 Tax expense 9 (3,746) 1,426 (2,320) (2,146) 1,644 (502) Profit for the year 16,281 (6,575) 9,706 14,104 (3,118) 10,986 Other comprehensive expense Items that may be reclassified to consolidated income statement: Cash flow hedges — — — 124 — 124 Exchange loss on foreign currency net investments (1,767) — (1,767) (2,059) — (2,059) Total comprehensive income for the year 14,514 (6,575) 7,939 12,169 (3,118) 9,051 Earnings per share – basic (pence) 11 71.0p 42.3p 61.6p 48.0p Earnings per share – diluted (pence) 11 70.0p 41.7p 60.8p 47.4p * See note 4. AB Dynamics plc Annual Report and Accounts 2024 102 Strategic report Governance Financial statements Consolidated statement of financial position As at 31 August 2024 2024 2023 Note £’000 £’000 ASSETS Non-current assets Goodwill 12 44,568 36,939 Acquired intangible assets 13 31,293 32,831 Other intangible assets 13 2,491 2,746 Property, plant and equipment 14 29,684 25,739 Right-of-use assets 15 2,861 1,409 110,897 99,664 Current assets Inventories 16 14,412 17,954 Trade and other receivables 17 14,655 14,494 Contract assets 5 2,295 3,152 Cash and cash equivalents 18 31,803 33,486 63,165 69,086 Assets held for sale 19 1,893 1,893 LIABILITIES Current liabilities Trade and other payables 20 20,260 20,127 Contract liabilities 5 7,485 9,234 Short-term lease liabilities 15 1,031 570 Contingent consideration 28 2,770 5,943 31,546 35,874 2024 2023 Note £’000 £’000 Non-current liabilities Deferred tax liabilities 22 7,507 8,708 Long-term lease liabilities 15 2,207 906 Contingent consideration 28 3,443 — 13,157 9,614 Net assets 131,252 125,155 SHAREHOLDERS’ EQUITY Share capital 23 230 229 Share premium 23 62,859 62,781 Other reserves 24 636 2,403 Retained earnings 67,527 59,742 Total equity 131,252 125,155 The financial statements were approved by the Board of Directors and authorised for issue on 26 November 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 2024 103 Strategic report Governance Financial statements Consolidated statement of changes in equity For the year ended 31 August 2024 Share capital Share premium Other reserves Retained earnings Total equity Note £’000 £’000 £’000 £’000 £’000 At 1 September 2022 226 62,260 1,142 48,754 112,382 Total comprehensive income — — (1,935) 10,986 9,051 Share based payments — — — 1,064 1,064 Deferred tax on share based payments 9 — — — 193 193 Dividend paid 10 — — — (1,255) (1,255) Issue of shares 23, 24 3 521 3,196 — 3,720 At 31 August 2023 229 62,781 2,403 59,742 125,155 Total comprehensive income — — (1,767) 9,706 7,939 Share based payments — — — 1,175 1,175 Deferred tax on share based payments 9 — — — 219 219 Dividend paid 10 — — — (1,542) (1,542) Issue of shares 23, 24 1 78 — — 79 Purchase of own shares — — — (1,773) (1,773) At 31 August 2024 230 62,859 636 67,527 131,252 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 items included in the consolidated statement of changes in equity that relate to transactions with owners are share based payments, deferred tax on share based payments, dividends paid, issues of shares and purchases of own shares by the Employee Benefit Trust. AB Dynamics plc Annual Report and Accounts 2024 104 Strategic report Governance Financial statements Consolidated cash flow statement For the year ended 31 August 2024 2024 2023 Note £’000 £’000 Profit before tax 12,026 11,488 Depreciation and amortisation 10,283 11,102 Finance expense 719 1,067 Share based payment 25 1,421 1,263 Release of contingent consideration 28 — (5,180) Operating cash flows before changes in working capital 24,449 19,740 Decrease/(increase) in inventories 3,542 (2,612) Decrease in trade and other receivables 965 2,514 Decrease in trade and other payables (2,221) (369) Cash flows from operations 26,735 19,273 Cash flows from operations are analysed as: Adjusted cash flows from operations 27,938 23,450 Cash impact of adjusting items 4 (1,203) (4,177) Cash flows from operations 26,735 19,273 Finance costs paid (118) (291) Income tax (paid)/received (3,114) 363 Net cash flows from operating activities 23,503 19,345 Cash flows used in investing activities Acquisition of businesses net of cash acquired (16,970) (10,656) Purchase of property, plant and equipment (3,638) (2,930) Capitalised development costs and purchased software (189) (469) Net cash used in investing activities (20,797) (14,055) 2024 2023 Note £’000 £’000 Cash flows used in financing activities Drawdown of loans 3,928 6,000 Repayment of loans (3,928) (6,000) Dividends paid 10 (1,542) (1,255) (Purchase of own shares)/proceeds from issue of share capital (1,694) 457 Repayment of lease liabilities 15 (1,145) (1,124) Net cash used in financing activities (4,381) (1,922) Net (decrease)/increase in cash and cash equivalents (1,675) 3,368 Cash and cash equivalents at beginning of the year 33,486 30,141 Effects of exchange rate changes (8) (23) Cash and cash equivalents at end of the year 18 31,803 33,486 AB Dynamics plc Annual Report and Accounts 2024 105 Strategic report Governance Financial statements Notes to the consolidated financial statements For the year ended 31 August 2024 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 material 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 Group’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 2026, whereby the Group experiences: • A reduction in demand of 25% over the next two financial years • 10% increase in operating costs • Increase in cash collection cycle • Increase in input costs resulting in reduction in gross margins by 12% With £31.8m of cash at 31 August 2024 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 12 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) Critical 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, and which 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 revenue recognition for long-term revenue contracts 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 2024 106 Strategic report Governance Financial statements Notes to the consolidated financial statements continued For the year ended 31 August 2024 2. Summary of material accounting policies continued (b) Critical accounting judgements and sources of estimation uncertainty continued Accounting judgements continued Assessment of revenue recognition for long-term revenue contracts 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. The main timing difference between over time recognition and point in time recognition arises during the build phase, prior to meeting the initial performance obligation on delivery of the equipment. Consequently, the impact on the results is limited to any contracts where the build phase spans a year end. Were a different judgement to be made regarding point in time or over time recognition on these, the amount of revenue recognised in the year could increase or decrease accordingly. For the year ended 31 August 2024, £16,310,000 was recognised in relation to 13 contracts for custom-built laboratory testing and simulator equipment, with only one contract in the build phase at the year end. Assets held for sale Management judgements are required in relation to the classification of assets held for sale, specifically in relation to assessing whether a sale is highly probable. Typically, a sale is deemed to be highly probable when it is expected to qualify for recognition as a completed sale within one year from the date of classification, in addition to the other criteria stipulated in IFRS 5. However, events or circumstances may extend the period to complete the sale beyond one year. An extension of the period required to complete a sale does not preclude an asset from being classified as held for sale. Where this is the case, management judgements are required to assess whether the delay is caused by events or circumstances beyond the entity’s control and there is sufficient evidence that the entity remains committed to its plan to sell the asset, in order to continue to meet the assets held for sale criteria. For the land asset that is classified as held for sale as at 31 August 2024, the delays experienced to date with the sale process have been caused by circumstances outside of the Group’s control, including the impact of the pandemic on planning applications. An active sale process is underway at year end pending planning permission and management judges that a sale is highly probable. Key sources of estimation uncertainty Assessment of the percentage of completion for long-term revenue contracts 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. Other 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. 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, customer relationships, brand and order book have been identified by management as separate intangible assets as they are separable assets and can be reliably measured by valuation of future cash flows. Management does not believe there are any other intangible assets that have arisen on acquisition during the year which can be reliably measured. The key assumptions and estimates used to determine the valuation of intangible assets acquired are the forecast cash flows, the discount rate and/or customer/supplier attrition. 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. Separate intangibles valued on acquisitions made in the year were £5,252,000 (2023: £16,800,000), comprised of £3,406,000 (2023: £16,100,000) in relation to technology, £1,520,000 (2023: £Nil) in relation to customer relationships and £326,000 (2023: £700,000) in relation to brand. (c) Revenue and long-term contracts 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 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. AB Dynamics plc Annual Report and Accounts 2024 107 Strategic report Governance Financial statements Notes to the consolidated financial statements continued For the year ended 31 August 2024 2. Summary of material accounting policies continued (c) Revenue and long-term contracts continued 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 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 clauses 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. Contract assets (accrued revenue) and contract liabilities (amounts received in advance of performance delivery) are recognised separately. 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 as 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 over time recognition are not met, revenue is recognised at a point in time on delivery based on the Incoterms. 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 licensing 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 the 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 intercompany balances and transactions, including recognised gains arising from inter-group transactions, have been eliminated in full. Unrealised losses are eliminated in the same manner as recognised gains except to the extent that they provide evidence of impairment. (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. Costs in relation to the unwinding of discounting are recognised as a finance expense. AB Dynamics plc Annual Report and Accounts 2024 108 Strategic report Governance Financial statements Notes to the consolidated financial statements continued For the year ended 31 August 2024 2. Summary of material accounting policies continued (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 an appropriate proportion of production overheads. Net realisable value is based on the estimated useful selling price less further costs expected to be incurred to completion and subsequent disposal. 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 loans and receivables financial assets. 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. 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. The 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. (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. Plant and machinery 10% straight line Motor vehicles 20%–25% straight line Furniture and fittings 10% straight line Computer equipment 25%–33% straight line General equipment 10%–20% straight line Test equipment 10%–20% straight line Buildings 5% straight line (i) Intangible assets 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 is satisfied as to the ultimate technology 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 asset’s useful life of between three and five years. AB Dynamics plc Annual Report and Accounts 2024 109 Strategic report Governance Financial statements Notes to the consolidated financial statements continued For the year ended 31 August 2024 2. Summary of material accounting policies continued (i) Intangible assets continued (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. Economic life Customer relationships 7–10 years Brand 5–10 years Technology 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. (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 14.4% to 18.0%. The discount rates applied reflect 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% increase in the discount rate combined with a corresponding 15% decrease in the growth rate and even under these circumstances, no CGUs would require an impairment against goodwill. 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. 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). AB Dynamics plc Annual Report and Accounts 2024 110 Strategic report Governance Financial statements Notes to the consolidated financial statements continued For the year ended 31 August 2024 2. Summary of material accounting policies continued (l) Share based payments continued 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 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: (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 and accumulated in a separate component of equity in other reserves; 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. (o) Alternative performance measures Alternative performance measures are 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 within 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 exceptional 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. AB Dynamics plc Annual Report and Accounts 2024 111 Strategic report Governance Financial statements Notes to the consolidated financial statements continued For the year ended 31 August 2024 3. Segment reporting The Group derives revenue from the sale of its advanced measurement, simulation and testing products and services used in assisting the global transport market in the laboratory, on the test track and on- road. The Group has three segments. The operating segments are 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. 2024 2023 Testing products Testing services Simulation Unallocated * Total Testing products Testing services Simulation Unallocated * Total £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 Revenue 69,350 16,697 25,206 — 111,253 63,016 12,858 24,893 — 100,767 Adjusted operating profit 13,160 4,219 7,025 (4,105) 20,299 9,079 2,878 8,296 (3,649) 16,604 Adjusted operating profit is analysed as: Before depreciation and amortisation 15,414 5,351 7,539 (4,073) 24,231 11,834 3,723 8,552 (3,592) 20,517 Depreciation and amortisation (2,254) (1,132) (514) (32) (3,932) (2,755) (845) (256) (57) (3,913) Adjusted operating profit 13,160 4,219 7,025 (4,105) 20,299 9,079 2,878 8,296 (3,649) 16,604 Amortisation on acquired intangibles — (3,386) (2,965) — (6,351) — (3,055) (4,134) — (7,189) Adjusting items — — — (1,203) (1,203) — — — 3,140 3,140 Operating profit 13,160 833 4,060 (5,308) 12,745 9,079 (177) 4,162 (509) 12,555 Net finance expense (719) (1,067) Profit before tax 12,026 11,488 Tax expense (2,320) (502) Profit for the year 9,706 10,986 * Unallocated items are head office costs that cannot be allocated to a business segment. AB Dynamics plc Annual Report and Accounts 2024 112 Strategic report Governance Financial statements Notes to the consolidated financial statements continued For the year ended 31 August 2024 3. Segment reporting continued Analysis of revenue by destination: 2024 2023 £’000 £’000 Europe (including United Kingdom) 36,809 26,970 North America 25,867 25,171 Asia Pacific 48,407 46,409 Rest of the World 170 2,217 111,253 100,767 No customers individually represent more than 10% of total revenue (2023: no customers individually represent more than 10% of total revenue). Revenue recognised over time during the year was £12,690,000 (2023: £12,300,000). Assets and liabilities by segment are not reported to the Board of Directors therefore they 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: 2024 2023 £’000 £’000 Europe (including United Kingdom) 64,397 67,248 North America 30,797 15,508 Asia Pacific 15,703 16,908 110,897 99,664 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, adjusted earnings per share and adjusted cash flow from operations. 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. 2024 2023 £’000 £’000 Amortisation of acquired intangibles 6,351 7,189 Acquisition related costs/(credit) 231 (4,502) ERP development costs 972 1,362 Adjustments to operating profit 7,554 4,049 Acquisition related finance costs 447 713 Adjustments to profit before tax 8,001 4,762 Amortisation of acquired intangibles The amortisation relates to the acquisition of Venshure Test Services on 2 April 2024, Ansible Motion Limited on 20 September 2022, and the businesses acquired in previous years, DRI, rFpro and VadoTech. Acquisition related costs/(credit) The costs in the current year relate to the acquisition of Venshure Test Services. The credit in the prior year relates to the release of contingent consideration on the acquisition of Ansible Motion (£5.2m), less acquisition costs (£0.7m). 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. Acquisition related finance costs Finance costs relate to the unwind of the discount on contingent consideration payable on the acquisition of Venshure Test Services and Ansible Motion (2023: Ansible Motion). Tax The tax impact of these adjustments was as follows: amortisation £1.1m (2023: £1.3m), acquisition related costs £0.1m (2023: £0.1m) and ERP development costs £0.2m (2023: £0.3m). Cash impact The operating cash flow impact of the adjustments was an outflow of £1.2m (2023: £4.2m), being £1.0m (2023: £1.4m) in relation to the ERP development costs and £0.2m (2023: £2.8m) in relation to acquisition costs. AB Dynamics plc Annual Report and Accounts 2024 113 Strategic report Governance Financial statements Notes to the consolidated financial statements continued For the year ended 31 August 2024 5. Disclosure of revenue from contracts with customers Contract balances The Group has recognised the following revenue related contract assets and liabilities: 2024 2023 £’000 £’000 Contract assets (i) 2,295 3,152 Contract liabilities (ii) 7,485 9,234 (i) Significant changes in contract assets Contract assets have decreased by 27% during the year reflecting completion of two contracts for which work had been performed in the prior year in advance of the payment schedule. (ii) Significant changes in contract liabilities This balance consists of deferred income and payments in advance. The decrease in contract liabilities was due to the completion of a large contract during the year. At 31 August 2024 there was £4,817,000 (2023: £3,158,000) relating to support and warranties which are recognised over the period in which these obligations are performed. Of the £9,234,000 of contract liabilities at the beginning of the period, £7,789,000 was recognised as revenue during the year. Remaining performance obligations as at 31 August 2024 Outstanding performance obligations at 31 August 2024 were £30,265,000 (2023: £41,001,000). The related revenue is expected to be recognised over the next 12 months as these performance obligations are satisfied, except for performance obligations to build and deliver laboratory testing and simulator equipment, where the typical length of time 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 2024 (2023: Nil). 6. Net finance expense 2024 2023 £’000 £’000 Finance income (43) (42) Finance expense 315 396 Unwinding of discount on contingent consideration 447 713 Net finance expense 719 1,067 7. Profit before tax The profit before tax is stated after charging/(crediting): 2024 2023 £’000 £’000 Depreciation of tangible fixed assets 2,485 2,264 Depreciation of right-of-use assets 1,050 971 Amortisation of other intangible assets 397 679 Amortisation of acquired intangible assets 6,351 7,189 Realised loss on foreign exchange 646 1,050 ERP development costs 972 1,362 Remeasurement of contingent consideration — (5,180) Staff costs: – Wages and salaries 29,794 27,039 – Social security costs 2,781 2,781 – Other pension costs 1,411 1,219 Share based payments 1,421 1,263 Contractor costs 2,190 1,871 Research and development costs charged as an expense 693 247 Auditor’s remuneration 2024 2023 £’000 £’000 Fees payable to the Group’s auditor during the year for: – the audit of the Company’s financial statements 105 76 – the audit of the Company’s subsidiaries 100 447 205 523 The decrease in audit fees is due to a change in auditor from Grant Thornton UK LLP to Crowe UK LLP following significant auditor inefficiencies and overruns in the prior year audit. AB Dynamics plc Annual Report and Accounts 2024 114 Strategic report Governance Financial statements Notes to the consolidated financial statements continued For the year ended 31 August 2024 8. Employees The average monthly number of employees, including Directors, during the year was as follows: 2024 2023 No. No. Directors and commercial 21 23 Engineers and technicians 419 375 Administration 72 75 512 473 The total number of employees at the year end was 555 (2023: 471). Total remuneration of key management personnel, being the Directors of the Company and the members of the Executive Committee, is set out below: 2024 2023 £’000 £’000 Short-term employee benefits 2,583 2,634 Post-employment benefits 106 123 Social security costs 170 182 Share based payments – equity settled 1,161 852 4,020 3,791 Further details relating to the remuneration of the Directors of the Company can be found on page 89 in the Remuneration Committee report. The total remuneration paid to or receivable by the Directors of the Group in respect of qualifying services is £2,039,000 (2023: £1,885,000). Pension contributions totalling £6,000 (2023: £4,000) were made into the defined contribution scheme for two Directors in the year (2023: two). 9. Tax expense 2024 2023 £’000 £’000 Current tax: – for the financial year 3,408 1,853 – adjustments in respect of prior year (156) 8 3,252 1,861 Deferred tax (note 22): – origination and reversal of temporary differences (1,030) (1,408) – adjustments in respect of prior year 98 49 2,320 502 The statutory effective rate of tax for the year of 19.3% (2023: 4.4%) is lower than (2023: lower than) the standard rate of corporation tax in the UK of 25% (2023: 21.5%) as set out below. The effective rate of tax on the adjusted profit before tax is 18.7% (2023: 13.2%). The tax charge can be reconciled to the consolidated income statement as follows: 2024 £’000 2023 £’000 Profit before tax 12,026 11,488 Tax at the applicable statutory rate of 25% (2023: 21.5%): 3,006 2,470 Tax effects of: Non-deductible expenses/(non-taxable income) 469 (727) Research and development tax credit — (135) Adjustments in respect of prior year (58) 58 Patent box relief* (1,361) (1,133) Changes in tax rates (16) (14) Increase in tax risk provision 196 — Overseas tax rates 84 (17) Tax expense for the financial year 2,320 502 * 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: 2024 2023 £’000 £’000 Deferred tax Change in estimated excess tax deductions related to share based payments (219) (193) Total income tax recognised directly in equity (219) (193) Factors affecting the tax charge in future years The Group’s future tax charge could be affected by several factors including: tax reform in the UK, the US, 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 RDEC, any future acquisitions and availability of R&D and patent box relief. AB Dynamics plc Annual Report and Accounts 2024 115 Strategic report Governance Financial statements Notes to the consolidated financial statements continued For the year ended 31 August 2024 10. Dividends paid 2024 £’000 2023 £’000 Final 2022 dividend paid of 3.54p per share — 811 Interim 2023 dividend paid of 1.94p per share — 444 Final 2023 dividend paid of 4.42p per share 1,009 — Interim 2024 dividend paid of 2.33p per share 533 — 1,542 1,255 The Board has proposed a final dividend in respect of the year ended 31 August 2024 of 5.30p per share totalling £1,217,000. An interim dividend was paid of 2.33p per share totalling £533,000. If approved, the final dividend will be paid on 31 January 2025 to shareholders on the register on 17 January 2025. 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. 2024 2023 Weighted average number of shares Basic 22,944 22,886 Diluted 23,249 23,193 Earnings per share Profit for the year attributable to owners of the Group (£’000) 9,706 10,986 Basic earnings per share (pence) 42.3p 48.0p Diluted earnings per share (pence) 41.7p 47.4p Adjusted profit for the year attributable to owners of the Group (£’000) 16,281 14,104 Adjusted earnings per share (pence) 71.0p 61.6p Adjusted diluted earnings per share (pence) 70.0p 60.8p 12. Goodwill VadoTech Group £’000 DRI £’000 rFpro £’000 Ansible Motion £’000 Venshure Test Services £’000 Total £’000 At 1 September 2023 6,310 9,080 7,535 14,014 — 36,939 Acquisitions — — — — 8,462 8,462 Exchange differences (134) (314) — — (385) (833) At 31 August 2024 6,176 8,766 7,535 14,014 8,077 44,568 VadoTech Group £’000 DRI £’000 rFpro £’000 Ansible Motion £’000 Venshure Test Services £’000 Total £’000 At 1 September 2022 6,347 9,936 7,535 — — 23,818 Acquisitions — — — 14,014 — 14,014 Exchange differences (37) (856) — — — (893) At 31 August 2023 6,310 9,080 7,535 14,014 — 36,939 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 14.4% to 18.0%. 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 2024 116 Strategic report Governance Financial statements Notes to the consolidated financial statements continued For the year ended 31 August 2024 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 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. Following a detailed review, no impairment losses were recognised in the year ended 31 August 2024. 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 (increasing the rate to between 16.6% and 20.7%) combined with a 15.0% decrease in the growth rate. None of these scenarios resulted in any CGUs requiring impairment. 13. Acquired and other intangible assets Customer relationships £’000 Brand £’000 Technology £’000 Total acquired intangible assets £’000 Capitalised development costs £’000 Total other intangible assets £’000 Cost At 1 September 2023 24,158 2,683 26,999 53,840 3,754 3,754 Additions — — — — 189 189 Acquisitions 1,520 326 3,406 5,252 — — Disposals — — — — (173) (173) Exchange differences (471) (54) (229) (754) — — At 31 August 2024 25,207 2,955 30,176 58,338 3,770 3,770 Amortisation At 1 September 2023 9,092 947 10,970 21,009 1,008 1,008 Charge for the year 3,301 366 2,684 6,351 397 397 Disposals — — — — (126) (126) Exchange differences (234) (21) (60) (315) — — At 31 August 2024 12,159 1,292 13,594 27,045 1,279 1,279 Net book value At 31 August 2023 15,066 1,736 16,029 32,831 2,746 2,746 At 31 August 2024 13,048 1,663 16,582 31,293 2,491 2,491 Internally generated additions total £87,000 (2023: £396,000). AB Dynamics plc Annual Report and Accounts 2024 117 Strategic report Governance Financial statements Notes to the consolidated financial statements continued For the year ended 31 August 2024 13. Acquired and other intangible assets continued Customer relationships £’000 Brand £’000 Technology £’000 Total acquired intangible assets £’000 Capitalised development costs £’000 Total other intangible assets £’000 Cost At 1 September 2022 24,613 2,089 11,100 37,802 3,388 3,388 Additions — — — — 469 469 Acquisitions — 700 16,100 16,800 — — Disposals — — — — (88) (88) Exchange differences (455) (106) (201) (762) (15) (15) At 31 August 2023 24,158 2,683 26,999 53,840 3,754 3,754 Amortisation At 1 September 2022 6,150 641 7,346 14,137 417 417 Charge for the year 3,119 344 3,726 7,189 679 679 Disposals — — — — (88) (88) Exchange differences (177) (38) (102) (317) — — At 31 August 2023 9,092 947 10,970 21,009 1,008 1,008 Net book value At 31 August 2022 18,463 1,448 3,754 23,665 2,971 2,971 At 31 August 2023 15,066 1,736 16,029 32,831 2,746 2,746 Acquired intangible assets relate to items acquired through business combinations which are amortised over their useful economic life. Other intangible assets comprise acquired intellectual property and capitalised development costs. AB Dynamics plc Annual Report and Accounts 2024 118 Strategic report Governance Financial statements Notes to the consolidated financial statements continued For the year ended 31 August 2024 14. Property, plant and equipment Land and buildings £’000 Plant and equipment £’000 Test equipment £’000 Motor vehicles £’000 Total £’000 Cost At 1 September 2023 22,553 5,781 2,991 602 31,927 Additions 243 2,120 1,231 44 3,638 Acquisitions — 3,276 — — 3,276 Disposals (34) (1,442) — (36) (1,512) Exchange differences (63) (198) (72) (4) (337) At 31 August 2024 22,699 9,537 4,150 606 36,992 Accumulated depreciation At 1 September 2023 2,089 2,172 1,533 394 6,188 Charge for the year 624 1,107 664 90 2,485 Disposals (34) (1,205) — (36) (1,275) Exchange differences (26) (29) (33) (2) (90) At 31 August 2024 2,653 2,045 2,164 446 7,308 Net book value At 31 August 2023 20,464 3,609 1,458 208 25,739 At 31 August 2024 20,046 7,492 1,986 160 29,684 Land and buildings £’000 Plant and equipment £’000 Test equipment £’000 Motor vehicles £’000 Total £’000 Cost At 1 September 2022 22,569 4,731 4,349 505 32,154 Additions 128 1,906 763 133 2,930 Acquisitions — 31 — — 31 Disposals — (758) (2,000) (29) (2,787) Exchange differences (144) (129) (121) (7) (401) At 31 August 2023 22,553 5,781 2,991 602 31,927 Accumulated depreciation At 1 September 2022 1,612 1,830 2,712 292 6,446 Charge for the year 520 951 683 110 2,264 Disposals — (581) (1,822) (4) (2,407) Exchange differences (43) (28) (40) (4) (115) At 31 August 2023 2,089 2,172 1,533 394 6,188 Net book value At 31 August 2022 20,957 2,901 1,637 213 25,708 At 31 August 2023 20,464 3,609 1,458 208 25,739 Included within land and buildings are assets under construction of £2,287,000 (2023: 1,445,000). These assets are not depreciated. There were no capital commitments contracted and not yet provided for in these financial statements. AB Dynamics plc Annual Report and Accounts 2024 119 Strategic report Governance Financial statements Notes to the consolidated financial statements continued For the year ended 31 August 2024 15. Leases Right-of-use assets Land and buildings £’000 Total £’000 Cost At 1 September 2023 3,280 3,280 Additions 1,935 1,935 Acquisitions 504 504 Disposals (1,789) (1,789) Exchange differences (31) (31) At 31 August 2024 3,899 3,899 Accumulated depreciation At 1 September 2023 1,871 1,871 Charge for the year 1,050 1,050 Disposals (1,789) (1,789) Exchange differences (94) (94) At 31 August 2024 1,038 1,038 Net book value At 31 August 2023 1,409 1,409 At 31 August 2024 2,861 2,861 Land and buildings £’000 Total £’000 Cost At 1 September 2022 2,540 2,540 Additions 1,141 1,141 Acquisitions 441 441 Disposals (730) (730) Exchange differences (112) (112) At 31 August 2023 3,280 3,280 Accumulated depreciation At 1 September 2022 1,664 1,664 Charge for the year 971 971 Disposals (689) (689) Exchange differences (75) (75) At 31 August 2023 1,871 1,871 Net book value At 31 August 2022 876 876 At 31 August 2023 1,409 1,409 Lease liabilities 2024 2023 £’000 £’000 Maturity analysis – contractual undiscounted cash flows Less than one year 1,184 624 One to five years 2,470 882 More than five years — 85 Total undiscounted cash flows 3,654 1,591 Discount (416) (115) Total lease liabilities 3,238 1,476 Current 1,031 570 Non-current 2,207 906 AB Dynamics plc Annual Report and Accounts 2024 120 Strategic report Governance Financial statements Notes to the consolidated financial statements continued For the year ended 31 August 2024 15. Leases continued Amounts recognised in the consolidated statement of comprehensive income 2024 2023 £’000 £’000 Depreciation of right-of-use assets 1,050 971 Interest on lease liabilities 67 55 Amounts recognised in the consolidated cash flow statement 2024 2023 £’000 £’000 Principal lease payments 1,145 1,124 Interest payments on leases 67 55 16. Inventories 2024 2023 £’000 £’000 Raw materials 4,319 10,640 Work-in-progress 5,950 5,067 Finished goods 4,143 2,247 14,412 17,954 The value of inventories recognised as an expense during the year was £34,108,000 (2023: £29,655,000). During the year the amount of write down of inventories recognised as an expense was £196,000 (2023: £Nil). 17. Trade and other receivables 2024 2023 £’000 £’000 Trade receivables 11,843 11,356 Less: credit loss provision (802) (970) 11,041 10,386 Other receivables 2,492 2,122 Prepayments 1,122 1,986 14,655 14,494 Other receivables consist mainly of VAT, withholding taxes and deposits. The maximum exposure to credit risk for trade receivables at 31 August, by currency, was: 2024 2023 £’000 £’000 Sterling 884 4,069 Euro 4,750 4,734 US dollar 5,314 1,133 Japanese yen 93 450 11,041 10,386 Trade receivables, before credit loss provisions, are analysed as follows: 2024 2023 £’000 £’000 Not past due 9,443 7,946 Past due, no credit loss for impairment 1,598 2,440 Past due, credit loss for impairment 802 970 11,843 11,356 The ageing of trade receivables, classified as past due, but not impaired, is as follows: 2024 2023 £’000 £’000 Less than three months past due 1,598 1,118 Over three months past due — 1,322 1,598 2,440 Credit loss provision 2024 2023 £’000 £’000 At 1 September 970 508 (Credited)/charged in the year (168) 462 At 31 August 802 970 AB Dynamics plc Annual Report and Accounts 2024 121 Strategic report Governance Financial statements Notes to the consolidated financial statements continued For the year ended 31 August 2024 18. Cash and cash equivalents 2024 2023 £’000 £’000 Cash at bank: – Sterling 17,430 25,282 – Euro 6,347 3,058 – US dollar 4,436 3,916 – Japanese yen 3,151 916 – Other currencies 439 314 31,803 33,486 Net cash 2024 2023 £’000 £’000 Cash and cash equivalents 31,803 33,486 Lease liabilities (3,238) (1,476) 28,565 32,010 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. It is held at the lower of carrying amount and fair value less costs to sell of £1,893,000. The sale is expected to be completed during the first half of FY 2025. 20. Trade and other payables 2024 2023 £’000 £’000 Trade payables 5,616 4,946 Social security and other taxes 1,644 697 Other payables and accruals 13,000 14,484 20,260 20,127 Other payables and accruals comprise accrued expenses and accrued employee related costs. The maximum exposure to foreign currency risk for trade payables at 31 August, by currency, was: 2024 2023 £’000 £’000 Sterling 1,855 4,087 Euro 553 265 US dollar 3,100 518 Japanese yen 108 76 5,616 4,946 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 sterling. 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, euro and yen. The sensitivity to a 10% strengthening in sterling against each of these currencies (with other variables held constant) on the translation of the Group’s consolidated income statement is as follows: 2024 2023 £’000 £’000 Decrease in adjusted operating profit (at average rates): US dollar 326 262 Euro 531 382 Yen 174 163 AB Dynamics plc Annual Report and Accounts 2024 122 Strategic report Governance Financial statements Notes to the consolidated financial statements continued For the year ended 31 August 2024 21. Financial instruments continued (b) Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group’s exposure to interest rate risk arises mainly from interest-bearing financial assets being interest-bearing bank deposits. The Group’s policy is to obtain the most favourable interest rates available whilst ensuring that cash is deposited with a financial institution with a credit rating of ‘AA’ or better. Any surplus funds are placed with licensed financial institutions to generate interest income. 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. (c) Equity price risk The Group does not have any quoted investments and hence is not exposed to equity price risk. (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 cash equivalents), 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. Expected credit losses are estimated by management based on prior experience and the current economic environment. The Group’s major concentration of credit risk at 31 August 2024 relates to the amounts owing by 20 customers which constituted approximately 79% of its trade receivables as at the end of the reporting period. As the Group does not have collateral, the maximum exposure to credit risk is represented by the carrying amount of the financial assets at the end of the reporting period. The exposure of credit risk for trade receivables by geographical region is as follows: 2024 2023 £’000 £’000 North America 3,071 805 United Kingdom 1,731 134 Europe 3,312 3,072 Rest of the World 2,927 6,375 11,041 10,386 (e) Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The exposure to liquidity risk arises primarily from mismatches of the maturities of financial assets and liabilities. The Group maintains a level of cash and cash equivalents and bank facilities deemed adequate by management to ensure as far as possible that it will have sufficient liquidity to meet its liabilities when they fall due. 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. The Group’s undiscounted financial liabilities are as follows: 2024 2023 £’000 £’000 Trade payables 5,616 4,946 Other payables 13,000 14,484 Lease liabilities 3,654 1,591 Contingent consideration 6,715 6,228 28,985 27,249 The maturities of the undiscounted liabilities are as follows: Less than one year 22,585 26,282 One to five years 6,400 882 More than five years — 85 Total undiscounted cash flows 28,985 27,249 Discount (918) (400) Total liabilities 28,067 26,849 Current 22,417 25,943 Non-current 5,650 906 Total liabilities 28,067 26,849 AB Dynamics plc Annual Report and Accounts 2024 123 Strategic report Governance Financial statements Notes to the consolidated financial statements continued For the year ended 31 August 2024 21. Financial instruments continued (f) Capital risk management Capital is defined as the total equity of the Group. The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of 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, including lease liabilities, less cash and cash equivalents. At 31 August 2024, the Group’s cash resources exceed its total debt. The Company hence has no net debt. (g) Classification of financial instruments All financial instruments are categorised as follows: 2024 2023 £’000 £’000 Financial assets Trade receivables 11,041 10,386 Contract assets 2,295 3,152 Cash and cash equivalents 31,803 33,486 45,139 47,024 Financial liabilities held at amortised cost Trade and other payables and accruals 18,616 19,430 Lease liabilities 3,238 1,476 21,854 20,906 Financial liabilities held at fair value through profit and loss Contingent consideration 6,213 5,943 6,213 5,943 (h) Fair value hierarchy The fair values of the financial assets and liabilities are analysed into level 1 to 3 as follows: Level 1: Fair value measurements derive from quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2: Fair value measurements derive from inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly. Level 3: Fair value measurements derive from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs). The 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). 22. Deferred tax 2024 2023 £’000 £’000 At 1 September (8,708) (6,397) Acquisitions — (3,917) Recognised in profit or loss: – in respect of timing differences 932 1,291 – in respect of deferred tax on share options — 68 Recognised in equity: – in respect of deferred tax on share options 219 193 Exchange differences 50 54 At 31 August (7,507) (8,708) The deferred tax balance is analysed as follows: 2024 2023 £’000 £’000 Deferred tax liability (7,507) (8,708) (7,507) (8,708) The deferred tax liabilities are attributable to: 2024 2023 £’000 £’000 Short-term timing differences (1,039) (1,135) Acquisitions (6,468) (7,573) (7,507) (8,708) AB Dynamics plc Annual Report and Accounts 2024 124 Strategic report Governance Financial statements Notes to the consolidated financial statements continued For the year ended 31 August 2024 23. Share capital The allotted, called up and fully paid share capital is made up of 22,954,463 ordinary shares of £0.01 each. Number of shares Share capital Share premium Total Note ’000 £’000 £’000 £’000 At 1 September 2022 22,626 226 62,260 62,486 Issued during the year (i) 308 3 521 524 At 31 August 2023 22,934 229 62,781 63,010 Issued during the year (ii) 20 1 78 79 At 31 August 2024 22,954 230 62,859 63,089 (i) 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 issued to 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. (ii) During the year ended 31 August 2024, a total of 20,098 share options were exercised of £0.01 each for £3.95. 24. Other reserves Reconstruction reserve £’000 Merger relief reserve £’000 Translation reserve £’000 Hedging reserve £’000 Other reserves £’000 At 1 September 2022 (11,284) 11,390 1,160 (124) 1,142 Other comprehensive expense — — (2,059) 124 (1,935) Issue of shares — 3,196 — — 3,196 At 31 August 2023 (11,284) 14,586 (899) — 2,403 Other comprehensive expense — — (1,767) — (1,767) At 31 August 2024 (11,284) 14,586 (2,666) — 636 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. 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 prior 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 align the long-term interests of management and staff with shareholders. The schemes are administered by the Remuneration Committee. The schemes adopted by the Group are equity settled and a charge of £1,421,000 (2023: £1,263,000) has been charged to the consolidated statement of comprehensive income relating to these options. Summary of movements in share options Weighted average Number of shares exercise price (pence) Outstanding at 1 September 2023 461,019 709 Options and awards granted 98,050 — Options and awards exercised (53,071) 150 Options and awards lapsed (37,507) — Outstanding at 31 August 2024 468,491 692 Exercisable at 31 August 2024 8,447 395 Outstanding at 1 September 2022 540,233 1,445 Options and awards granted 97,756 — Options and awards exercised (45,226) 1,010 Options and awards lapsed (131,744) 833 Outstanding at 31 August 2023 461,019 709 Exercisable at 31 August 2023 28,545 395 The weighted average share price on the date of exercise was 1,759p (2023: 1,947p). The weighted average remaining contractual life of the options outstanding at the statement of financial position date is 7.5 years (2023: 7.7 years). The weighted average fair value of options granted in the year was £15.68 (2023: £14.34). AB Dynamics plc Annual Report and Accounts 2024 125 Strategic report Governance Financial statements Notes to the consolidated financial statements continued For the year ended 31 August 2024 25. Share based payments continued Summary of movements in share options continued 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 8 February 2024 4 January 2023 11 March 2022 3 December 2021 2 December 2020 Stock price: 1,768p 1,613p 1,025p 1,750p 1,768p Exercise price: nil nil nil nil nil Interest rate: 4.18% 3.43% 1.25% 0.50% 0.02% Volatility: 39% 48% 64% 62% 53% Vesting period: 3 years 3 years 3 years 3 years 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. Employee Benefit Trust At 31 August 2024 77,521 (2023: Nil) ordinary shares were held by a trust in respect of obligations under the long-term incentive plan. The market value of the shares held in the trust at 31 August 2024 was £1,593,000 (2023: £Nil). These shares are held at cost as treasury shares and deducted from shareholders’ equity. During the year the trust acquired 113,200 (2023: Nil) shares at a cost of £1,773,000 (2023: £Nil). 35,679 shares were used to satisfy awards following the vesting of shares under the long-term incentive plan and annual bonus plan. 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 2 April 2024, the Group acquired 100% of Venshure Test Services LLC for total cash consideration of up to $30,000,000 (£23,872,000). The acquisition supports a number of the Group’s strategic priorities, including expanding the Group’s capabilities, broadening the scope of services in the testing services area and complementing the Group’s existing California-based track testing services business with laboratory based testing. The acquisition has been completed for an initial cash consideration of $13,500,000 (£10,742,000), being $15,000,000 (£11,936,000) initial consideration less $1,500,000 (£1,085,000 discounted to present value) retained against potential warranties, funded from the Group’s existing cash resources and short-term utilisation of part of the Group’s revolving credit facility. Contingent consideration of up to $15,000,000 (£11,936,000) will be payable in cash across two tranches for the two years following completion, subject to meeting certain performance criteria for both years. Acquisition expenses totalled $358,000 (£285,000) and are included within general and administrative expenses in the consolidated statement of comprehensive income. The fair values set out below are provisional and will be finalised in the next financial year. Goodwill of £8,462,000 represents the amount paid for future sales growth from both new customers and new products and employee know-how. No deferred tax has been recognised in relation to the intangible assets as the related amortisation is tax deductible in the US and therefore the tax base of the assets is equal to their fair value at the date of acquisition. From the date of acquisition to 31 August 2024, the newly acquired business contributed £1,000,000 to revenue and £385,000 to adjusted operating profit. Had the acquisition been completed at the beginning of the period, Group revenue would have been £112,800,000 and adjusted operating profit would have been £20,800,000. £162,000 of the discount on the contingent consideration unwound in the period and has been included in finance expenses. The carrying amount of each class of Venshure Test Services assets before combination is set out below: Fair value IFRS 3 intangible asset adjustments Provisional fair value £’000 £’000 £’000 Intangible assets — 5,252 5,252 Property, plant and equipment 3,276 — 3,276 Right-of-use asset 504 — 504 Trade and other receivables 268 — 268 Trade and other payables (217) — (217) Lease liabilities (808) — (808) Net assets acquired 3,023 5,252 8,275 Goodwill arising on acquisition 8,462 16,737 Total purchase consideration £’000 Initial cash consideration 10,742 Contingent consideration payable 4,910 Discounted retention against warranties 1,085 Total consideration 16,737 AB Dynamics plc Annual Report and Accounts 2024 126 Strategic report Governance Financial statements Notes to the consolidated financial statements continued For the year ended 31 August 2024 28. Acquisition of businesses continued Contingent consideration £’000 Contingent consideration 4,910 Retention against warranties 1,085 At acquisition 5,995 Unwind on discount 162 Exchange differences 56 At 31 August 2024 6,213 Current 2,770 Non-current 3,443 Ansible Motion Limited 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, of which only £5,700,000 became payable in cash in January 2024. This gave rise to a fair value gain on release of contingent consideration in the income statement in the prior year of £5,180,000. At 31 August 2023 an accrual was included in the balance sheet for the net present value of the deferred contingent consideration and £528,000 of the purchase price was retained against any potential warranties. During the current year, the discount of £285,000 unwound and has been included in finance expense. A total of £6,228,000 was paid in cash during the year in respect of the final performance payment and release of the retention against warranties. Contingent consideration £’000 At 1 September 2023 5,943 Unwind on discount 285 Cash paid (6,228) At 31 August 2024 — 29. Subsidiary undertakings Details of the Group undertakings at 31 August 2024 are set out in note 3 to the Company financial statements. The Company has given a parental guarantee under Section 479A of the Companies Act 2006 to certain subsidiary undertakings. Ansible Motion Limited (company number 06944081) and rFpro Limited (company number 06427019) are exempt from the requirement to file audited accounts for the year ended 31 August 2024 by virtue of Section 479A of the Companies Act 2006. See note 3 to the Company financial statements for the registered offices of the subsidiary undertakings. 30. Post-balance sheet event On 25 September 2024, the Group acquired Bolab Systems GmbH, a niche supplier of automotive power electronics testing solutions, based in Germany. Bolab supplies low-voltage and high-voltage equipment for testing automotive sub-systems and components for conventional, hybrid and EVs. The acquisition supports the expansion of the Group’s capabilities in the testing products business and provides further alignment with the structural growth drivers in the sector. The initial consideration was €5,000,000 (£4,202,000), funded from the Group’s existing cash resources. Contingent consideration of up to €6,000,000 (£5,042,000) will become payable in cash across two tranches for the two years following completion, subject to meeting certain performance criteria for each year. The book value of the acquired assets and liabilities at the date of acquisition was approximately €1,500,000 (£1,260,000). The Group is currently in the process of determining the fair values of the assets and liabilities acquired. AB Dynamics plc Annual Report and Accounts 2024 127 Strategic report Governance Financial statements 2024 2023 Note £’000 £’000 ASSETS Non-current assets Investments 3 103,551 91,717 103,551 91,717 Current assets Other receivables 4 3,687 9,511 Cash and cash equivalents 2,187 3,163 5,874 12,674 LIABILITIES Current liabilities Trade and other payables 5 4,695 1,511 Contingent consideration — 5,943 4,695 7,454 Net current assets 1,179 5,220 Net assets 104,730 96,937 Shareholders’ equity Share capital 6 230 229 Share premium 6 62,859 62,781 Merger reserve 3,197 3,197 Retained earnings 38,444 30,730 Total equity 104,730 96,937 The Company’s profit for the financial year was £9,854,000 (2023: £7,279,000). The financial statements were approved by the Board of Directors and authorised for issue on 26 November 2024 and are signed on its behalf by: Dr James Routh Sarah Matthews-DeMers Director Director Company registration number: 08393914 Note Share capital £’000 Share premium £’000 Merger reserve £’000 Retained profits £’000 Total equity £’000 At 1 September 2022 226 62,260 — 23,642 86,128 Total comprehensive income — — — 7,279 7,279 Share based payments — — — 1,064 1,064 Dividends 7 — — — (1,255 ) (1,255 ) Issue of shares, net of share issue costs 3 521 3,197 — 3,721 At 31 August 2023 229 62,781 3,197 30,730 96,937 Total comprehensive income — — — 9,854 9,854 Share based payments — — — 1,175 1,175 Dividends 7 — — — (1,542 ) (1,542 ) Issue of shares, net of share issue costs 1 78 — — 79 Purchase of own shares — — — (1,773) (1,773) At 31 August 2024 230 62,859 3,197 38,444 104,730 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 merger reserve relates to the acquisition of 100% of the issued share capital of Ansible Motion Limited during the year ended 31 August 2023 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 Company. Company statement of financial position As at 31 August 2024 Company statement of changes in equity For the year ended 31 August 2024 AB Dynamics plc Annual Report and Accounts 2024 128 Strategic report Governance Financial statements 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, Wiltshire BA15 1GB. 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 of 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 • 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 Going concern At 31 August 2024 the Company had net current assets of £1,179,000 (2023: £5,220,000). 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. The Directors have, after careful consideration of the factors set out above, concluded that it is appropriate to adopt the going concern basis for the preparation of the financial statements and the financial statements do not include any adjustments that would result if the going concern basis was not appropriate. Investments Investments held as fixed assets are stated at cost less provision for impairment. 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 statement 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. Debtors 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. Creditors 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. Notes to the Company financial statements For the year ended 31 August 2024 AB Dynamics plc Annual Report and Accounts 2024 129 Strategic report Governance Financial statements 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 payments 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. 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 £9,854,000 (2023: £7,279,000). The Company’s profit for the financial year has been arrived at after charging auditor’s remuneration payable to Crowe UK LLP for audit services to the Company of £105,000 (2023: £96,000). 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: 2024 2023 £’000 £’000 Wages and salaries 2,988 2,939 Social security costs 175 206 Pension costs 55 79 3,218 3,224 Seven 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 financial statements. 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: 2024 2023 Number Number Directors and management 11 11 3. Investments 2024 2023 £’000 £’000 Subsidiary undertaking At 1 September 91,717 67,124 Capital contribution arising on share based payments 1,175 1,064 Ansible Motion Limited — 23,527 AB Dynamics Overseas Inc 10,658 — Exchange differences 1 2 At 31 August 103,551 91,717 The Company tests investments at least annually for impairment. Tests are conducted more frequently if there are indications that investments might be impaired. There were no impairment indicators identified during the year ended 31 August 2024. Notes to the Company financial statements continued For the year ended 31 August 2024 AB Dynamics plc Annual Report and Accounts 2024 130 Strategic report Governance Financial statements Notes to the Company financial statements continued For the year ended 31 August 2024 3. Investments continued Subsidiary undertaking Class of share held % shareholding Registered office Country of incorporation (or registration) and operation Anthony Best Dynamics Ltd Ordinary 100 Middleton Drive, Bradford on Avon, Wiltshire BA15 1GB, United Kingdom England AB Dynamics GK Ordinary 100 2-2-3 Shinyokohama, Dai-Ichi Takeo bldg. 6F 606 Kohoku-ku, Yokohama 222-0033, Japan Japan AB Dynamics Inc Ordinary 100 48325 Alpha Drive, Suite 120, Wixom, MI 48393, USA USA rFpro Ltd Ordinary 100 Middleton Drive, Bradford on Avon, Wiltshire BA15 1GB, United Kingdom England AB Dynamics UK Holdings Ltd Ordinary 100 Middleton Drive, Bradford on Avon, Wiltshire BA15 1GB, United Kingdom England AB Dynamics Overseas Holdings Ltd Ordinary 100 Middleton Drive, Bradford on Avon, Wiltshire BA15 1GB, United Kingdom England AB Dynamics Singapore Holdings Pte Ltd* Ordinary 100 77 Robinson Road, #13-00 Robinson 77, Singapore 068896 Singapore VadoTech Pte Ltd* Ordinary 100 77 Robinson Road, #13-00 Robinson 77, Singapore 068896 Singapore VadoTech Japan KK* Ordinary 100 Nichitochi Nishishinjyuku Building 8F, 6-10-1, Nishishinjyuku, Shinjyuku-ku, Tokyo Japan VadoTech Deutschland* Ordinary 100 Bismarckstraße 7, 10625 Berlin, Germany Germany VadoTech Servicios Téchnicos S.L.* Ordinary 100 Calle Madrid, n. 70, Edificio Irene II, local 1, Monachil , Granada, Spain Spain VadoTech US Inc* Ordinary 100 The Corporation Trust Center, 1209 Orange Street, City of Wilmington, County of New Castle, DE 19801, USA USA VadoTech Korea Ltd* Ordinary 100 301 ho, 10-1, Maebong-gil, Seongdong-gu, Seoul, South Korea South Korea Zynit Pte Ltd* Ordinary 100 77 Robinson Road, #13-00 Robinson 77, Singapore 068896 Singapore Zynit China Co. Ltd* Ordinary 100 No.13, Jinma Yuan 2 Street, Gaoliying Town, Shunyi, District, Beijing, China China Zynit Hefei Co. Ltd* Ordinary 100 No. 3 Workshop of Keyuan M&E, cross between Tang Kou Road and Ji Xian Road, Feixi Economy Development Area, Hefei, China China AB Dynamics Europe GmbH* Ordinary 100 Vogelsang 11, 35398 Gießen, Germany Germany Dynamic Research Inc* Ordinary 100 355 Van Ness Avenue, Suite 200, Torrance, CA 90501, USA USA DRI Advanced Test Systems Inc* Ordinary 100 355 Van Ness Avenue, Suite 200, Torrance, CA 90501, USA USA Venshure Test Services, LLC* Ordinary 100 18600 W Old Highway 12, Chelsea, MI 48118, USA USA AB Dynamics Overseas Holdings Inc Ordinary 100 3500 South DuPoint Highway, Dover, Delaware 19901, County of Kent, USA USA ABD Solutions Ltd* Ordinary 100 Middleton Drive, Bradford on Avon, Wiltshire BA15 1GB, United Kingdom England Ansible Motion Ltd Ordinary 100 Middleton Drive, Bradford on Avon, Wiltshire BA15 1GB, United Kingdom England * Denotes indirect shareholding. Ansible Motion Limited (company number 06944081) and rFpro Limited (company number 06427019) are exempt from the requirement to file audited accounts for the year ended 31 August 2024 by virtue of Section 479A of the Companies Act 2006. AB Dynamics plc Annual Report and Accounts 2024 131 Strategic report Governance Financial statements Notes to the Company financial statements continued For the year ended 31 August 2024 4. Other receivables 2024 2023 £’000 £’000 Amounts owed by Group undertakings 1,164 9,440 Prepayments 2,523 71 3,687 9,511 5. Trade and other payables 2024 2023 £’000 £’000 Amounts owed to Group undertakings 2,619 — Other payables and accruals 2,076 1,511 4,695 1,511 6. Share capital The allotted, called up and fully paid share capital is made up of 22,954,463 ordinary shares of £0.01 each. Number of shares Share capital Share premium Total Note ’000 £’000 £’000 £’000 At 1 September 2022 22,626 226 62,260 62,486 Issued during the year (i) 308 3 521 524 At 31 August 2023 22,934 229 62,781 63,010 Issued during the year (ii) 20 1 78 79 At 31 August 2024 22,954 230 62,859 63,089 (i) 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 issued to 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. (ii) During the year ended 31 August 2024, a total of 20,098 share options were exercised of £0.01 each for £3.95. 7. Dividends paid 2024 2023 £’000 £’000 Final 2022 dividend paid of 3.54p per share — 811 Interim 2023 dividend paid of 1.94p per share — 444 Final 2023 dividend paid of 4.42p per share 1,009 — Interim 2024 dividend paid of 2.33p per share 533 — 1,542 1,255 The Board has proposed a final dividend for the year ended 31 August 2024 of 5.30p per share totalling £1,217,000. An interim dividend was paid of 2.33p per share totalling £533,000. If approved, the final dividend will be paid on 31 January 2025 to shareholders on the register on 17 January 2025. 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 2024 132 Strategic report Governance Financial statements Notes to the Company financial statements continued For the year ended 31 August 2024 9. Share based payments The share based compensation schemes were established to align the long-term interests of management and staff with shareholders. The schemes are administered by the Remuneration Committee. The schemes adopted by the Company are equity settled. Summary of movements in share options Weighted average Number of shares exercise price (pence) Outstanding at 1 September 2023 461,019 709 Options and awards granted 98,050 — Options and awards exercised (53,071) 150 Options and awards lapsed (37,507) — Outstanding at 31 August 2024 468,491 692 Exercisable at 31 August 2024 8,447 395 Outstanding at 1 September 2022 540,233 1,445 Options and awards granted 97,756 — Options and awards exercised (45,226) 1,010 Options and awards lapsed (131,744) 833 Outstanding at 31 August 2023 461,019 709 Exercisable at 31 August 2023 28,545 395 The weighted average share price on the date of exercise was 1,759p (2023: 1,947p). The weighted average remaining contractual life of the options outstanding at the statement of financial position date is 7.5 years (2023: 7.7 years). The weighted average fair value of options granted in the year was £15.68 (2023: £14.34). 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 8 February 2024 4 January 2023 11 March 2022 3 December 2021 2 December 2020 Stock price 1,768p 1,613p 1,025p 1,750p 1,768p Exercise price nil nil nil nil nil Interest rate 4.18% 3.43% 1.25% 0.50% 0.02% Volatility 39% 48% 64% 62% 53% Vesting period 3 years 3 years 3 years 3 years 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. AB Dynamics plc Annual Report and Accounts 2024 133 Strategic report Governance Financial statements 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. 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. 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 Thursday 16 January 2025 at Teneo, The Carter Building, 11 Pilgrim Street, London, EC4V 6RN 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. ORDINARY RESOLUTIONS 1. To receive the annual accounts of the Company for the year ended 31 August 2024, together with the reports of the Directors and the auditor on those accounts. 2. To approve the Directors’ remuneration report (comprising the Annual Statement, Remuneration Policy and Annual Report on Remuneration), as set out on pages 85 to 92 of the Group’s Annual Report and Accounts for the financial year ended 31 August 2024. Note: this is an advisory vote only. 3. To declare a final dividend of 5.30p per share, to be paid to all shareholders on the Register of Members as at 17 January 2025. 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 appoint Crowe 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 £76,514, 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. Notice of Annual General Meeting 2025 Notice of Annual General Meeting AB Dynamics plc Annual Report and Accounts 2024 134 Strategic report Governance Financial statements SPECIAL RESOLUTION 11. That, subject to the passing of resolution 10 above, the Directors be empowered pursuant to Section 571 of 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: (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 £11,477, 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. 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 David Forbes Company Secretary 26 November 2024 Registered office: AB Dynamics plc Middleton Drive Bradford on Avon Wiltshire BA15 1GB Registered number: 08393914 Notice of Annual General Meeting 2025 continued Notice of Annual General Meeting AB Dynamics plc Annual Report and Accounts 2024 135 Strategic report Governance Financial statements 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 Chair 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) by visiting www.shareregistrars.uk.com, clicking on the ‘Proxy Vote’ button and then following the on-screen instructions; (b) 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 14 January 2025, 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. 3. 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. 4. 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 14 January 2025, 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. 5. 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. 6. 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. 7. 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. 8. 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. 9. 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. Notice of Annual General Meeting 2025 continued Notice of Annual General Meeting AB Dynamics plc Annual Report and Accounts 2024 136 Strategic report Governance Financial statements 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: (a) to do so would interfere unduly with the preparation for the meeting or involve the disclosure of confidential information; (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 25 November 2024 (being the last business day prior to the publication of this Notice), the Company’s issued ordinary share capital consisted of 22,954,463 ordinary shares of 1p each, carrying one vote each. Therefore, the total voting rights in the Company as at 25 November 2024 were 22,954,463. 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 Chair’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 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 2024 (2024 Annual Report) to shareholders at the meeting. You are voting to receive the 2024 Annual Report. Detailed information is contained within the 2024 Annual Report. Resolution 2 – Directors’ remuneration report Shareholders will have the opportunity to cast an advisory vote on the Directors’ remuneration report (comprising the Annual Statement, Remuneration Policy and Annual Report on Remuneration) for the year ended 31 August 2024. The report is set out in full on pages 85 to 92 of the 2024 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 5.30p per ordinary share. If approved, the dividend is expected to be paid to shareholders on the Register of Members as of 17 January 2025. The Company paid an interim dividend this year; therefore, the total dividend distribution for the year shall be 7.63p 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 66 and 67 of the 2024 Annual Report and at www.abdplc.com/about/board-of-directors. Notice of Annual General Meeting 2025 continued Notice of Annual General Meeting Appendix: Explanatory notes on the resolutions to be proposed at the Annual General Meeting AB Dynamics plc Annual Report and Accounts 2024 137 Strategic report Governance Financial statements Notice of Annual General Meeting 2025 continued Appendix: Explanatory notes on the resolutions to be proposed at the Annual General Meeting continued Resolution 9 – 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. Crowe UK LLP has expressed its willingness to be appointed as the auditor to the Company. This resolution proposes the appointment of Crowe 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 £76,514, representing approximately one-third of the Company’s issued ordinary share capital as at 25 November 2024 (being the last business day prior to the publication of this Notice). This authority will expire at the earlier of the conclusion of the Annual General Meeting of the Company to be held in 2026 or the date falling 15 months after the passing of the resolution. 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 earlier of the conclusion of the Annual General Meeting of the Company to be held in 2026 or the date falling 15 months after the passing of the resolution, 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 £11,477, representing approximately 5% of the Company’s issued ordinary share capital as at 25 November 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. AB Dynamics plc Annual Report and Accounts 2024 138 Strategic report Governance Financial statements AB Dynamics plc’s commitment to environmental issues is reflected in this Annual Report, which has been printed on Arena Extra White Smooth. This product is made of FSC®-certified and other controlled 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. CBP028100 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