Acquisition of Vadotech Group

4 March 2021

AB Dynamics plc

("AB Dynamics", the "Company" or the "Group")

Acquisition of Vadotech Group

AB Dynamics (AIM: ABDP), the designer, manufacturer and supplier of advanced testing systems and measurement products to the global automotive market, is pleased to announce that, after thorough due diligence, it has completed the acquisition of Vadotech Pte Ltd and Zynit Pte Ltd (collectively "Vadotech Group") for total cash consideration of up to €26.0 million (the "Acquisition").

Founded in 1997 and with 140 employees, the Vadotech Group is a leading supplier of testing services in the Asia Pacific region, headquartered in Singapore with key operations in China, Germany and Japan. Vadotech Group provides comprehensive automotive testing services including evaluations of ADAS systems, infotainment, connectivity, electric vehicle performance and charging and other associated functions. The business has long standing relationships with German automotive OEMs, providing vehicle testing services to local operations, underpinned by long term customer framework agreements. Their primary operation is based in Beijing, China where they have a 60,000ft² testing centre with a wide range of testing capabilities.

Rationale for the Acquisition

The Acquisition supports a number of the Group's stated strategic priorities including:

·      Expanding the Company's international footprint by providing a sales and technical facility in the strategically important Chinese market;

·      Establishing a new Asia Pacific divisional operating hub in Singapore to manage the territory, drive additional cross selling of Group products in the region and identify and deliver further strategically important growth initiatives;

·      Further increasing the Group's visibility of future revenue as Vadotech Group sales are supported by long term customer framework agreements;

·      Increasing the range of services provided by the Group to include full vehicle assessments including quality assurance testing and support to new vehicle R&D programmes;

·      Establishing an electric vehicle and e-mobility technology training centre in Germany; and

·      Opportunity to replicate the Vadotech Group business model in other territories such as Europe and the USA

Financial Considerations

The Acquisition has been completed on a cash free, debt free basis for an initial cash consideration of €17.0 million, funded from the Company's existing cash resources. Two further conditional cash payments of up to €3.0 million and €6.0 million are subject to certain performance criteria being achieved for the year ended 31 December 2020 and the year ending 31 December 2021, respectively. The Vadotech Group is being acquired from its two shareholders, Mr Frank Beuler and Mr Sebastian Rupprecht.  Mr Rupprecht will continue with the business as Managing Director and Mr Beuler will continue to support the business for an initial transition period.

The Vadotech Group has a strong record of profitable, and cash generative growth.  Based on unaudited accounts, in the year ended 31 December 2020 Vadotech Group generated sales revenue of €14.2 million (2019: €14.5 million), earnings before interest, tax, depreciation and amortisation ('EBITDA') of €4.0 million (2019: €4.7 million) and adjusted operating profit of €3.7 million (2019: €4.2 million).  Net assets at 31 December 2020 were €4.1 million.

The Acquisition provides a significantly larger physical presence for AB Dynamics in Asia Pacific and the Group will invest approximately £1.0 million in the integration to establish a strong regional hub for the wider business. The Board expects that the Acquisition will be modestly earnings enhancing in the current year, with a more significant contribution in the first full year and beyond.

Current trading and financial position

Trading conditions for the Group were as anticipated through the latter part of the first half, with performance for the six months ended 28 February 2021 in line with the Board's expectations. With continued recovery from the disruption to customer testing operations arising from the pandemic across the Group's major territories, the Board remains confident in the Group's prospects for the year. Cash generation has also continued to be positive, with net cash at 28 February 2021 of £33.0 million (29 February 2020: £34.2 million, 31 August 2020: £30.0 million).

Dr James Routh, Chief Executive Officer, said:

"The Acquisition of Vadotech Group supports the Group's strategic initiatives by broadening the scope of the Group's product and services offering, further expanding our reach into new strategically important territories and increasing the range of testing services, which in turn increases visibility of future revenue. 

"Vadotech Group has an outstanding reputation for providing excellence in full vehicle testing services to its German OEM customer base and we look forward to expanding this further, both within existing territories and into new attractive markets.

"We expect the Acquisition, together with the establishment of the Asia Pacific divisional operating hub, to provide us with an excellent platform for further growth and we are pleased to welcome the Vadotech Group team to AB Dynamics."

Certain information contained in this announcement would have constituted inside information (as defined by Article 7 of Regulation (EU) No 596/2014) ("MAR") prior to its release as part of this announcement and is disclosed in accordance with the Company's obligations under Article 17 of those Regulations.

The person responsible for arranging the release of this information is Felicity Jackson, Company Secretary.

Enquiries:

Appendix

Vadotech Pte Ltd is a service provider to Zynit Pte Ltd which has the relationship with the end customer. The 31 December 2020 results of the acquired sub-groups are as follows: