Share price reaction
AB Dynamics' shares declined approximately 6% on the trading day after the company disclosed that the discretionary cost‑saving initiatives that helped sustain a 20% adjusted operating margin in FY2026 are expected to largely reverse in FY2027 as it ramps up spending on sales, product development and market routes.
Management commentary
Chief Financial Officer‑designate Ed Haycock explained that the savings were primarily the result of delayed discretionary spend and that the firm anticipates most of the overhead savings to unwind while it balances financial performance with increased investment in innovation, sales and distribution.
FY2026 financial performance
For the year ended 31 August, revenue fell 12% to £91.6 million from £104.2 million, a decline the company attributed to geopolitical events, weak car‑market conditions—especially in Europe—and adverse currency effects. Adjusted operating profit, before one‑off items, dropped 18% to £18.3 million from £22.3 million, and the adjusted operating margin slipped to 20% from 21.4% a year earlier. Adjusted diluted earnings per share decreased 21% to 60.3 pence from 76 pence, reflecting the lower operating profit and a higher effective tax rate.
Net loss and exceptional items
The group reported a net loss of £12 million, equivalent to 52.2 pence per share, after recording a £19 million loss from its VadoTech China testing‑services unit, which is being closed. Exceptional charges related to VadoTech totalled £19.2 million, the majority of which was a non‑cash write‑down.
Cash flow and balance sheet
Adjusted operating cash flow declined to £13.6 million from £27.8 million, driven by later‑than‑usual customer deliveries and a cash conversion rate of 61%. Net cash balances fell to £24.5 million from £41.4 million at the end of the prior year. The company spent £16.1 million on acquisitions during the year, the principal target being eMpulse.
Segment performance
Testing Products revenue dropped 21% to £58.4 million, a decline partly explained by the prior year’s inclusion of a robot delivery to a North American automaker. Testing Services revenue rose 13% and Simulation revenue increased 10% year‑on‑year.
Dividend and shareholder return
AB Dynamics increased its total dividend by 10% to 10.08 pence per share, up from 9.16 pence. The board will seek shareholder approval on 14 January for a share‑buyback programme, citing the current valuation of the business as a rationale.
Outlook for FY2027
The board expects adjusted operating profit for FY2027 to be in line with current expectations, despite no sign yet that geopolitical and economic disruptions are easing and while automotive industry headwinds, especially in Europe, persist. The order book stood at £31 million at year‑end, marginally down from £32 million the previous year.