AB Dynamics’ (ABD) trading update for the first six months of FY 2019E states that revenues and adjusted operating profits are expected to be ‘significantly ahead’ of the same period last year. Consequently, management expects the full year to be in line with market (and its own) expectations. Market demand for track testing products and ABD’s own operational improvements are cited as the main drivers of a continuation of the strong performance seen in FY 2018. The announcement also highlights an updated strategy, which will be presented at the time of the interim results - CEO Dr James Routh notes that the focus is on “successfully implementing the strategy which builds on our strong foundations to create long-term sustainable growth." Noting the strong first half performance and the in-line trading update, we bring our revenue estimates up from the lower end of market expectations, adding 8% and 5% for FY 2019E and FY 2020E respectively. We adjust EBITDA to reflect previous guidance on investment in growth opportunities.
In FY 2018, ABD produced strong performances across the ADAS (Advanced Driver Assistance System) and steering robot businesses and won its first simulator order. Today’s update highlights that the Group continues to benefit from positive demand for track testing products and services, which support the development of ADAS and autonomous vehicle development. As ADAS complexity is increasing, we expect to see customer demand evolve accordingly.
The RNS notes that the updated strategy (to be announced in April) ‘sets the future direction of the business’ and is focused on long term sustainable growth while building on ABD’s strong market position and long-term customer relationships.
We recall that the Group entered the current financial year with a tailwind of a healthy order book and that, given the strong business outlook, it would make further investment in supporting the significant growth opportunities. Our revised estimates continue to reflect this.
ABD’s performance in the first half of the current financial year shows that the Group continues to perform well, as it benefits from the strong market conditions and management action to improve operational efficiency and increase capacity in the business. We continue to expect current investment to realise additional revenue and margin improvement over time, and see the update as a clear and positive step in this direction.