AB Dynamics in the driving seat

AB Dynamics helps car manufacturers make cars safer. It works for all the big ones - Audi, Ford, Toyota and China's FAW included - supplying driving robot systems and soft targets to test and develop cars on the track. They also use AB's £2 million Suspension Parameter Measurement Machine (SPMM) to test vehicles in the lab. Profits have grown fast, and a strong forward order book suggests a new factory due to open next year can't come soon enough.

Revenue rose 13% in the six months ended 28 February to £7.56 million, but pre-tax profit jumped by 30% to £1.51 million as both improved manufacturing efficiencies from a new robot assembly facility and greater software content beefed up margins.

AB, which featured in our joint venture with the Department for Business, Innovation and Skills (BIS), generated £2.8 million from operations, too, leaving over £7 million of cash on the balance sheet. A chunk of that money is, however, earmarked for the new factory, which should open toward the end of 2016. Up to £2.3 million from the UK Government Regional Growth Fund will help, too, and fund further research. The half-year dividend also rises by 10% to 1.1p.

Japan - 9% of group revenue - and Germany (Europe is 35% of AB's sales) are going great guns, although demand in China, which makes up 28% of the business, was flat during the six months. AB chiefs tell Interactive Investor they expect a better second half there.

Crucially, EuroNCap Standards in Europe are also driving growth for Advanced Driver Assistance Systems (ADAS) testing worldwide. That's great news for AB, which supplies in-car robotic systems for driverless cars used in conjunction with its soft targets - either pedestrians or cars - to test new technology.

"Current trading is in line with management expectations and we remain confident of meeting our financial targets this financial year," said management.

AB shares are up 36% already this year and 138% since the company floated on AIM in May 2013 at 86p. We're still waiting for Charles Stanley to update forecasts, but the shares currently trade on an historic price/earnings (P/E) ratio of less than 16.

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