AB Dynamics H1 2026: softer top line, stronger margins, and a chunky VadoTech clean‑up
AB Dynamics has posted a mixed set of unaudited interim results for the six months to 28 February 2026. Revenue stepped back after last year’s tariff-related wobble slowed order intake, but margins held firm and cash generation stayed robust. The headline negative is a sizeable exceptional charge tied to the VadoTech testing services business in China, which flips the statutory result to a loss. The Board has still lifted the interim dividend by 10%, signalling confidence in the outlook and cash position.
Headline numbers investors should know
| Metric | H1 2026 | H1 2025 | Change |
|---|---|---|---|
| Revenue | £48.8m | £58.0m | -16% |
| Gross margin | 63.7% | 60.2% | +350 bps |
| Adjusted EBITDA | £11.3m | £12.9m | -12% |
| Adjusted operating profit | £9.1m | £10.8m | -16% |
| Adjusted operating margin | 18.6% | 18.6% | Flat |
| Statutory operating (loss)/profit | (£12.1m) | £6.7m | – |
| Adjusted diluted EPS | 31.3p | 37.0p | -15% |
| Statutory diluted EPS | (53.0)p | 21.9p | – |
| Adjusted cash flow from operations | £6.5m | £9.3m | – |
| Net cash | £39.3m | £27.2m | +£12.1m |
| Interim dividend | 3.08p | 2.80p | +10% |
| Order intake | £64m | £66m | -3% |
| Order book (period end) | £47m | £42m | +£5m |
Quick jargon check: “Adjusted” figures strip out items such as acquisition amortisation and exceptional costs to show underlying trading; “bps” means basis points (100 bps = 1%).
What drove the results: demand timing and China services pain
Management had already guided to a second-half weighted year after customers paused decisions in mid‑2025 when tariffs caused disruption. That lull shows up here: revenue fell 16%. The positive twist is margin. Gross margin rose to 63.7% and the adjusted operating margin held at 18.6% thanks to operational improvements, cost actions and a better mix.
The big swing factor is VadoTech in China. Services there became commoditised and the European OEM customer has run into tough local market conditions, so volumes under a new contract are much lower than indicated. AB Dynamics has booked £16.8m of exceptional items relating to VadoTech, mostly a non‑cash impairment of £12.3m, plus £0.4m of restructuring costs and a £4.1m onerous contract provision. A strategic review is underway.
Segment performance: Simulation resilient, US services solid, China services weak
- Testing Products: Revenue £31.0m (-17%); adjusted operating profit £6.8m (-16%). A chunky robot delivery to a North American OEM in H1 2025 did not repeat. Underlying order intake in Asia Pacific and North America was “encouraging”. Euro NCAP 2026 protocols add 1,000+ test scenarios, a clear long‑term driver.
- Testing Services: Revenue £6.5m (-29%); adjusted operating profit £1.2m (-37%). US operations grew and are higher margin, but VadoTech China dragged. Excluding VadoTech, H1 2026 Testing Services delivered £4.3m revenue and £1.6m adjusted operating profit – a useful lens on the quality of the US earnings base.
- Simulation: Revenue £11.3m (-1%); adjusted operating profit £3.1m (+11%). Software sales were higher; motion platform deliveries are expected to skew to H2, and management has assumed two more contract wins in H2 within revenue expectations. The new Delta S3 Spin simulator has landed initial and follow‑on orders.
Orders, cash and dividend: signs of confidence despite H2 bias
Order intake of £64m was close to last year’s £66m and the order book rose to £47m. Together with first‑half revenue, AB Dynamics says it has around 70% visibility for FY 2026. The Board expects adjusted operating profit for FY 2026 to be in line with current market expectations, with 55-60% of revenue falling in H2. The company cites a compiled mean analyst forecast for adjusted operating profit of £24.4m.
Cash remains a strong suit: £39.3m net cash at period end and rolling 12‑month cash conversion of 102%. There is also an undrawn £20.0m revolving credit facility running to 2029. Against that backdrop, the interim dividend increases 10% to 3.08p, payable on 15 May 2026 to shareholders on the register on 1 May 2026.
Geography and customers: diversified and powertrain‑agnostic
H1 revenue was spread across Asia Pacific £22.3m, North America £13.0m, Europe (including the UK) £12.9m and Rest of World £0.6m. Management stresses its OEM- and powertrain‑agnostic positioning – it sells into R&D and testing functions regardless of EV/ICE mix – and highlights regulatory tailwinds such as the US move to mandate Automatic Emergency Braking by 2029 and tougher Euro NCAP 2026 protocols.
Why this matters: the read‑across for the investment case
Positives I’m taking away
- Margins and cash discipline: Holding an 18.6% adjusted operating margin while revenue fell 16% is no mean feat. Cash conversion at 102% and £39.3m net cash give strategic optionality for organic investment and M&A.
- Order book and visibility: £47m on the books and circa 70% coverage of expected FY 2026 revenue support the second‑half delivery plan.
- Simulation momentum: Software mix is improving profitability and the Delta S3 Spin is winning orders – helpful as OEMs shift more validation into the virtual world.
- Dividend growth: A 10% uplift signals confidence even after absorbing a statutory loss.
And the watch‑outs
- VadoTech uncertainty: The strategic review could bring further operational changes. While most of the charge is non‑cash, the Chinese on‑road testing market looks tougher and commoditised.
- Second‑half weighting: Management guides to 55-60% of revenue in H2. Execution and timing risk are, by definition, higher when the year back‑ends.
- Assumed H2 wins: H2 Simulation revenue expectations assume two further motion platform contracts. Slippage would push revenue into FY 2027.
- Macro and geopolitics: The company flags potential impacts from the Middle East situation on trade, costs and supply chains. Pricing power helps, but it remains a risk.
Strategy check: innovation first, M&A disciplined, medium‑term targets intact
AB Dynamics is keeping its medium‑term ambitions unchanged: average organic growth of 10% per year, operating margins above 20% through efficiencies and supply chain gains, and strong cash generation to fund investment. The product roadmap aligns with the next wave of regulatory and consumer testing requirements, including >1,000 Euro NCAP 2026 scenarios and new commercial vehicle tests. Management also called out AV Elevate, an AI‑enabled tool for generating engineering‑grade synthetic training data for ADAS/AV development, and continued IP safeguards via an enterprise AI usage policy.
On deals, the group reviewed opportunities but walked away from those that did not fit its financial and strategic criteria. With £39.3m net cash and an undrawn facility, it has firepower when the right acquisition appears.
My take: a tidy reset on China services, core engines still humming
This set reads like a deliberate tidy‑up of a troublesome corner while the core engines – Testing Products and Simulation – remain fundamentally sound. The exceptional VadoTech hit is ugly in the statutory line, but it is mostly non‑cash and isolates a commoditised service in a tough local market. Meanwhile, margins, cash, and order coverage all support the guidance that FY 2026 adjusted operating profit should land in line with expectations.
The key to sentiment from here will be: execution of the H2 delivery schedule, progress on the VadoTech review, and confirmation of those assumed Simulation platform wins. If those fall into place, the path back toward >20% operating margins and the 10% organic growth ambition looks credible.
Key things to watch next
- VadoTech strategic review outcome and any further restructuring actions.
- Order momentum into Q3/Q4, especially for Testing Products as Euro NCAP 2026 prep ramps.
- Simulation order conversions – particularly the two assumed motion platform contracts.
- Cash conversion and net cash progression given the H2 revenue bias.
- Any M&A moves now that balance sheet capacity is clear.
Bottom line: operational resilience is evident, the balance sheet is strong, and the dividend is growing. The second half now needs to do the heavy lifting – but AB Dynamics has a habit of delivering when regulations and model cycles do their thing.
