Car sales numbers are not crucial to the fortunes of AB Dynamics (ABDP), chief executive Dr James Routh claims. It is research and development (R&D) spend, he argues, that matters. So, despite a soft global outlook for motor sales, R&D spending in recent years from the likes of car giant BMW, in areas including autonomous vehicles and electrification, appears to bode well for the developer of testing systems for the automotive industry.
AB, too, has been busy investing. In a bid to grow its international footprint (98 per cent of sales are currently exports), the company has established a presence in Detroit, the home of US motoring. It is set to add capacity in the UK, while improvements in its operational efficiencies have lowered customer lead times. AB had thus previously guided for lower margins during the period, but aside from a modest drop – owing to a reclassification of certain costs from costs of sales into operating costs – these have not appeared yet. Dr Routh now expects these to transpire in the second half of the financial year.
There will soon be a substantial market for the company’s advanced driver assistance systems (ADAS). Draft regulation was set by the United Nations Economic Commission for Europe (UNECE) and signed by 40 countries, led by Japan and the European Union (EU) mandates for the installation of assisted emergency braking and other ADAS in all new cars from 2022 onwards. But owing to their complexity, AB is downplaying the short-term prospects of a fast and comprehensive adoption of autonomous technologies. Autonomous vehicles are “probably 15-20 years away”, Dr Routh contends.
AB’s driving simulators will help car manufacturers test autonomous vehicles. The company recently delivered its second simulator to Kempten University in Germany, following a first order to a customer in China.
Analysts at N+1 Singer forecast 2019 full-year pre-tax profits and earnings per share of £12m and 51.9p respectively, rising to £14.7m and 62.2p in 2020.
| AB DYNAMICS (ABDP) | ||||
| ORD PRICE: | 2,055p | MARKET VALUE: | £ 405m | |
| TOUCH: | 2,010-2,100p | 12-MONTH HIGH: | 2,085p | LOW: 920p |
| DIVIDEND YIELD: | 0.2% | PE RATIO: | 101 | |
| NET ASSET VALUE: | 224p | NET CASH: | £18.9m | |
| Half-year to 28 Feb | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2018 | 15.3 | 2.94 | 12.4 | 1.47 |
| 2019 | 25.8 | 6.29 | 28.4 | 1.61 |
| % change | +69 | +114 | +130 | +10 |
| Ex-div: | 02 May | |||
| Payment: | 17 May |
