AB Dynamics Q2 2026 Earnings Call | Order Intake Jumps 45% as Global Safety Testing Recovers

AB Dynamics 2026 Half Year Results Presentation

Introduction and Overview

• Sara Matthews Demers, CEO, introduces the presentation alongside interim CFO Andrew Lewis, outlining the agenda which includes highlights, financial performance details, initial observations from her tenure as CEO, and an update on growth strategy.

Medium-Term Growth Strategy

• The company remains committed to its medium-term growth ambitions set in November 2024 despite a softer revenue performance in the first half due to order intake delays caused by tariff disruptions.

• Order intake improved with £64 million received in H1 FY26; this recovery positions the company well for the second half of the year with a closing order book of £47 million providing approximately 70% coverage of expected full-year revenue.

Financial Performance Highlights

• Operating margin maintained at 18.6%, supported by operational improvements and effective management of discretionary spending despite lower volumes.

• Continuous improvement programs are underway to achieve sustainable margins above 20%, aided by a strong net cash balance of £39.3 million for investments.

Detailed Financial Insights

• Andrew Lewis discusses that revenue and profit align with expectations for a second-half bias in FY26; trading performance is anticipated to be weighted towards H2.

• Revenue decreased by 16% due to delayed orders and weaker volumes from Chinese testing services business VardaTech; operating profit also fell by 16%.

Cash Management and Dividends

• A proposed interim dividend increase of 10% reflects confidence in financial stability; cash conversion rates remain strong at 102%.

Segment Performance Analysis

Testing Products Segment

• Revenue down by 17% due to lack of recurring deliveries from North American OEM; however, underlying demand remains strong particularly in Asia Pacific and North America.

Testing Services Segment

• Revenue decreased by 29%, primarily affected by weak performance from VardaTech amidst challenging local market conditions in China leading to reduced on-road testing activity.

Simulation Software Segment

• Slight decrease in revenue attributed to lower motion platform sales but buoyant customer activity noted with significant contract wins indicating future potential.

Strategic Focus Areas

Innovation and R&D Investment

• Emphasis on organic R&D investment as priority followed by M&A opportunities; disciplined approach ensures alignment with long-term growth plans.

Market Drivers

• Long-term structural drivers include new vehicle models, powertrains, consumer ratings, and regulatory requirements supporting sustainable double-digit revenue growth.

Conclusion: Outlook for FY26

• Despite geopolitical uncertainties impacting trade dynamics, AB Dynamics maintains resilience through diversified offerings across automotive R&D functions. The outlook remains positive with good visibility into H2 based on current order book status.

Utilizing AI in Product Development

AI Applications in Business Operations

• The company is leveraging AI for software code debugging and reducing engineering lead times.

• In back-office operations, AI enhances customer support efficiency, prepares training materials, and assists with meeting minutes.

Concerns Regarding Intellectual Property (IP)

Safeguarding IP in the Age of AI

• There are significant concerns about the risk of IP leakage when using AI tools.

• The company is cautious about selecting tools that prioritize safeguarding their intellectual property.

OEM R&D Budgets Amid Market Challenges

Current State of OEM R&D Budgets

• OEM R&D budgets are under pressure due to falling production volumes but cannot be significantly cut.

• Competition from new Chinese entrants necessitates maintaining robust R&D investments to keep pace with market demands.

Collaboration with Chinese OEMs

Engaging with Domestic Chinese Manufacturers

• The company collaborates with domestic Chinese OEMs by selling testing products and simulators.

• They also supply testing providers used by approximately 400 startup OEMs in China lacking their own testing facilities.

Future Growth Opportunities

Long-Term Business Ambitions

• The medium-term growth ambition includes doubling revenue and tripling operating profit within five to ten years.

• Structural drivers indicate a compounding effect on growth potential over the next decade.

Conclusion and Future Engagement

Closing Remarks

• The session concludes with an invitation for future discussions, indicating ongoing engagement opportunities.