28th Apr 2015 10:15
LONDON (Alliance News) - AB Dynamics saw its shares rise to a new all-time high Tuesday morning after it reported strong growth in pretax profit in the first half of its financial year, driven by a 13% rise in revenue and as its new robot assembly facility increased efficiency and helped push up margins.
The maker of testing and measurement products for vehicle suspension, brakes and steering that are used in automotive research and development also said its order book is strong and it raised its interim dividend to 1.1 pence, from 1.0p a year earlier as its balance sheet strengthened. It said current trading is meeting its expectations.
AB Dynamics reported a pretax profit of GBP1.5 million for the six months to February 28, up from GBP1.2 million a year earlier, as revenue rose to GBP7.6 million from GBP6.7 million.
The profit rise also came as its margins were lifted by the new robot assembly line that came into production last year as well as the introduction of its higher-margin new Track Testing products. It also benefited from the recent establishment of a Japanese entity that's supporting all of its products in the region through a single entity.
Management was also positive about the outlook, saying it expects the global automotive industry to invest more money in research and development as manufacturers seek to develop cars that meet new regulations and also due to the stiff competition between the car makers.
The company is headquartered in Bradford on Avon and currently supplies all the world's top twenty auto makers, including Honda, Toyota, Ford and Volkswagen.
"The European and Japanese car makers continue to invest heavily in the field of Advanced Driver Assistance Systems, where our package of Driverless Robots synchronising with our latest Soft Targets, assist the automotive industry in meeting the latest vehicle passenger and pedestrian safety standards, such as Euro NCAP," the company said.
AB Dynamics had net cash at the end of the half of GBP7.0 million, up from GBP4.6 million a year earlier, but it is staying cautious on its future dividend payouts given that it is about to start building a new factory to meet the growing demand for its products and plans more ambitious product development work.
Chief Executive Tim Rogers told Alliance News that he was in agreement with the Charles Stanley dividend forecasts. The brokers is forecasting a total dividend of 2.80 pence for the current financial year and 3.10p next year, according to data on Morningstar.
The company remains on track to open its new factory, which will be over twice the size of the existing factory on a site not far away, in the fourth quarter of 2016. It could also keep hold of the existing plant if product demand requires that need, according to Rogers.
AB Dynamics got a boost in February when it was awarded a grant of up to GBP2.3 million from the UK government-backed Regional Growth Fund, some of which could be put towards the new plant. The rest of the money will come from the strengthening balance sheet, Chief Financial Officer Robert Hart said.
About a third of AB Dynamics' revenue comes from sales of high specification Suspension Parameter Measurement Machines, and it got a boost in the first half when it won an order worth more than GBP1.7 million from a customer in South America for a machine, it's first such order in the region. It said at the time that about half the contract value is expected to be recognized in the current financial year.
Overall, its order book remains strong, and it is now taking orders for its next financial year, CEO Rogers told Alliance News.
Demand for its Track Testing products is also moving quite quickly, Rogers said, driven by the need to meet the NCAP European safety standards.
Regionally, the company is getting strong demand from Japan and Germany, but demand is flattening in China as the Chinese car manufacturers, who were getting a lot of support from the Chinese government, now have to fund testing equipment from their own budgets. However, Rogers said the company had seen a level of order interest from China in the last couple of weeks.
AB Dynamics shares were up 3.1% at 200.08 pence Tuesday morning, having been in an upward trend for the whole of 2015. The stock is up 36.6% in the year to date.
By Steve McGrath; [email protected]; @stevemcgrath1
Copyright 2015 Alliance News Limited. All Rights Reserved.
Related Shares:
AB Dynamics