AB Dynamics trading update: FY26 revenue lowered but 20% margin held

AB Dynamics has lowered its expectations for FY26 revenue after customers took longer to approve orders amid a more difficult trading environment.

The transport testing and simulation specialist now expects revenue from continuing operations of £90-95 million for the year ending 31 August 2026. However, management still forecasts a 20% adjusted operating margin, helped by close control of operating costs and discretionary spending.

The company has also agreed to exit VadoTech, its Chinese on-road testing operation, after customer volumes remained weak. The business will be treated as a discontinued operation in FY26.

Investors can read the original company announcement or visit the dedicated AB Dynamics PLC share page for further company coverage.

AB Dynamics' key FY26 figures

Measure	Latest position
Continuing operations revenue guidance	£90-95 million
Expected adjusted operating margin	20%
Net cash at 30 June 2026	£41.7 million
Expected reported revenue reduction from VadoTech classification	Approximately £4 million
Expected completion of VadoTech exit	First half of FY27

The revenue range represents a clear reduction from the level previously expected by the board, although the earlier revenue expectation is not disclosed in this announcement.

Against re-presented FY25 continuing revenue of £104.2 million, the new range would represent a year-on-year decline of approximately 8.8% to 13.6%.

At a 20% adjusted operating margin, the revenue guidance mathematically implies adjusted operating profit of roughly £18-19 million. This is an indicative calculation rather than a separate profit forecast issued by the company.

Why AB Dynamics has lowered revenue expectations

AB Dynamics described first-half trading as resilient, but conditions became more difficult during the second half.

The company highlighted three main pressures:

• Reduced customer confidence.
• Logistics disruption arising from the Middle East conflict.
• Greater disruption to automotive development programmes, particularly among European original equipment manufacturers, or OEMs.

An OEM is a vehicle manufacturer that produces cars or other vehicles under its own brand.

AB Dynamics said its sales pipeline remains healthy and customer enquiry levels are robust. The immediate problem is the speed at which those enquiries become firm orders.

Customers are taking longer to make procurement decisions, affecting short-term order conversion and revenue generation in the Testing Products and Simulation operations. Lower order intake during the latest quarter is the main reason for the revised £90-95 million revenue range.

This distinction matters. The update does not suggest that customer interest has disappeared, but delayed decisions can still create a material financial impact when there is limited time left in the financial year.

The 20% margin forecast offers some reassurance

The most encouraging part of the update is AB Dynamics' expectation that its adjusted operating margin will remain at 20%, in line with its medium-term plan.

Operational gearing describes the way a change in revenue can have an amplified effect on profit because some operating costs are fixed. Lower sales would normally place pressure on margins if those costs remained unchanged.

AB Dynamics believes it can mitigate a significant proportion of that pressure because it has actively managed operating costs and discretionary expenditure throughout the year.

Holding the margin at 20% would suggest that management's response is offsetting much of the near-term profit impact. However, investors should distinguish sensible cost control from underlying growth. Protecting profitability is valuable, but the revenue decline still indicates that current trading momentum is weaker than hoped.

The company did not disclose which costs have been reduced or whether those actions include any restructuring measures.

VadoTech will become a discontinued operation

AB Dynamics placed VadoTech under strategic review at the half-year stage after customer volumes under a new contract failed to develop as indicated.

VadoTech conducts on-road testing in China on behalf of a European OEM. Volumes have remained weak since the interim update, leading AB Dynamics to agree with the customer to terminate the contract and exit the operation.

The process is expected to conclude during the first half of FY27.

Treating VadoTech as a discontinued operation means its results will be separated from the group's continuing activities in the financial statements. FY25 comparative figures will also be restated on the same basis, helping investors compare the remaining business more consistently.

AB Dynamics expects FY26 reported group revenue to be approximately £4 million lower purely because of this classification.

The re-presentation of FY25 is as follows:

FY25 measure	As reported	Discontinued operation	Re-presented
Revenue	£114.7 million	£10.5 million	£104.2 million
Adjusted operating profit	£23.3 million	£1.0 million	£22.3 million
Adjusted operating cash	£29.4 million	£1.6 million	£27.8 million

The exit removes a business facing persistently weak customer demand. The less positive aspect is that VadoTech previously made a contribution to group revenue, profit and cash generation, and the exit is not expected to complete until FY27.

Working capital is likely to rise

Delayed order intake means FY26 deliveries are expected to be heavily weighted towards the end of the year.

This timing is likely to leave year-end working capital higher than previously expected. Working capital is the cash tied up in day-to-day trading items such as inventory, customer receivables and supplier payments.

An end-loaded delivery schedule can create execution risk. Products must be completed, shipped and accepted within a relatively short period if revenue is to be recognised in the current financial year.

The announcement does not quantify the expected working capital increase or provide updated cash guidance. That leaves year-end cash conversion as an important figure to examine when the full-year results arrive.

A strong cash position provides flexibility

AB Dynamics reported net cash of £41.7 million at 30 June 2026, giving it a substantial cushion against the more difficult market backdrop.

That balance sheet strength allows management to continue investing in innovation and sales and marketing rather than responding to weaker trading with broad cuts that could damage longer-term opportunities.

The board also referred to optionality through proactive capital allocation, although it did not specify potential acquisitions, shareholder returns or other uses of cash.

What investors should watch next

This is a mixed update, but the near-term direction is clearly softer. Revenue is now expected to decline against the re-presented FY25 figure, customer decisions are taking longer and deliveries will be concentrated near the financial year-end.

The counterweight is financial resilience. AB Dynamics expects to preserve a 20% adjusted operating margin and had £41.7 million of net cash at the end of June. Its sales pipeline and enquiry levels also remain healthy, according to management.

The next key tests will be whether delayed orders convert into revenue, whether the group delivers its end-loaded schedule, and how much cash becomes tied up in working capital. Investors will also want to see VadoTech exited cleanly during the first half of FY27.

For now, the margin and balance sheet provide support, but order timing and automotive customer confidence remain the central uncertainties.