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With yet another set of fantastic results AB Dynamics has become a poster child for AIM and small cap investing in general

AB Dynamics (LON:ABDP), the manufacturer of advanced testing systems to the global automotive sector, has issued yet another set of fantastic interim results.

Our earlier Blog from April 2016 commented how this terrific little business had delivered consistent excellence since arriving on AIM in 2013, highlighting the potential to uncover some brilliant businesses on the junior market if one undertakes the desired research and is prepared to display a bit of patience.

Founded in 1982 as a vehicle engineering consultancy, AB Dynamics is now engaged in the design, manufacture and supply to the global automotive industry of advanced testing and measurement products for vehicle suspension, brakes and steering, both in the laboratory and on the test track. The Group’s customers include the research and development divisions of some of the world’s leading vehicle manufacturers and it is a prime beneficiary of the automotive sector’s evolution to hybrid, electric, Advanced Driver Assistance Systems (“ADAS”) and autonomous vehicle technologies.

The Group arrived on AIM on 22nd May 2013 at a share price of 86p and market capitalisation of only £14m. Since then the share price has since climbed over 2000% with the current market capitalisation touching £400m.

Fundamental started acquiring shares for its AIM for IHT portfolios not long after listing, having visited AB Dynamic’s headquarters in Bradford-on-Avon in 2014.

While the Group has raised some additional capital to support the construction of a new facility, growth otherwise has been entirely organic.

The latest interim results for the six months to 28 February 2019 saw sales climb 69% to £25.8m (98% exports) and profit before tax rise 95% to £6.4m.

AB Dynamics delivered its 1,000th driving robot system in the period and a new product for testing ADAS systems with vulnerable road users continues to gain market traction with additional orders.

A second order was received for a newer advanced Vehicle Driving Simulator (“aVDS”) from Germany following successful delivery of a first aVDS to a customer in China. aVDS is a versatile and innovative driving simulator, capable of accurately representing the smallest changes to a vehicle’s configuration. The potential here looks considerable as the motor industry explores the best route to autonomous driving.

AB Dynamic’s valuation may look rich (current year PER 40x) but it is growing strongly and has a fantastic position in a booming market going through huge change. With planning permission having been received for another new facility due to be completed by 2020, the future looks bright for this delightful business.


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Results season offers plenty of encouragement for our AIM portfolios

Results and trading updates over the past few weeks from our AIM universe of companies have been generally encouraging, with growing profits and cash generation supporting investment in the business and raised dividends. Here is a brief summary of the highlights from some.

Tristel (LON: TSTL), the manufacturer of infection prevention and contamination control products, announced the regulatory approval of its Duo High-Level disinfectant product in China. Duo is a hand-held dispenser which applies Tristel’s powerful chlorine dioxide chemistry as a foam to the surface of medical devices.

Frustrated by the length of time it is taking to gain regulatory approvals in the United States, Tristel is placing greater emphasis on China where it proposes to sell Duo through its own sales force. Our associates Investor’s Champion provide in-depth coverage of Tristel here.

Remaining in the medical sector, AIM portfolio company EMIS Group (LON:EMIS) announced decent results for the year ended 31 December 2018, growing revenues across all key segments and raising its dividend 10%. Having had a good look at the business we sense that new Chief Exec Andy Thorburn is looking to make more of the group’s fantastic position in the market and deploy the excellent cash flow to greater effect. Post results it announced the sale of its non-core Specialist & Care segment for £14.0m.

Adept Technology Group (LON: ADT), formerly Adept Telecom, has grown into of the UK’s leading providers of managed IT services. The trading update for the year ending 31 March 2019 confirmed a 13% rise in revenues and underlying EBITDA, in line with expectations. The full year dividend was lifted 12% to 9.80p. We like the recurring revenue attributes of this business from its sticky customer base, which results in lots of delightful cash being generated.

The share price of Smart Metering Systems (LON: SMS), the leading installer and manager of electric and gas meters, has been on a bit of a roller-coaster ride over the past few months. The UK government’s mandated smart meter programme requires all UK households and small businesses to be offered a smart meter by the end of 2020 and SMS will be a prime beneficiary of this huge change. Needles  to say this substantial government initiative has had a few problems.

There are approximately 53 million gas and electricity meters in the UK and, as of the end of December 2018, there were 14.9 million smart and advanced meters installed in homes and businesses across the country. SMS now has agreements with twelve of the independent energy suppliers, equivalent to a potential 8 million meter points highlighting the potential for its business.

While the domestic smart meter exchange may be extended into 2023, SMS will still be a long-term winner, thereafter generating reliable, index-linked returns from its vast portfolio of meter assets. The financial statements and high level of debt taken on to support the acquisition of meter assets take some understanding, however, the operating cash flow hints at the future potential.

Anexo Group (LON: ANX), which only arrived on AIM in June 2018, issued a promising set of results for the year ended 31 December 2018. Anexo is a specialist integrated credit hire and legal services business targeting the impecunious not at fault motorist, who does not have the financial means or access to a replacement vehicle, notably motorbike riders and motorbike couriers. Anexo provides customers with an end-to-end service including the provision of Credit Hire vehicles, assistance with repair and recovery, and claims management services.

This could be a fascinating business to follow as it endeavours to settle the large number of outstanding cases on its books and increase the cash recoveries. With a growing number of in-house litigators it’s looking promising, if little understood by the investment community. You can read an in-depth commentary on Anexo Group here from our associates Investor’s Champion here.

Away from AIM and returning to the main UK market, general portfolio holding Games Workshop (LON:GAW), the creator of fantasy miniatures, including Warhammer, confirmed that sales and profits have continued to climb, with pre-tax profit for the year ending 2 June 2019 rising 7% to £80m. Shareholders are rewarded with both a rising share price and lifted dividend – what more can one ask for!

As usual, there is plenty of variety from the stock market and some great companies to invest in. Please contact Chris or Stephen to find out more about our specialist investment services, including the high performing AIM for Inheritance Tax planning service, which has now been running for more than 15 years.