Annual Report 2024

Delivering performance and a platform for sustainable growth

Revenue growth and margin expansion

Having invested in our Group product range, capability, leadership and new product development and along with leveraging our existing core strategy and technologies, the Group has delivered a very strong set of results. It now has a solid and scalable platform from which to capitalise on an ambitious multi-year growth opportunity, supported by strong long-term structural and regulatory growth drivers.

Strategic report

1. Highlights of 2024
2. At a glance

1. Investment case

1. Chairman's statement

1. Our markets and strategy

1. M&A strategy
2. Acquisition of Venshure Test Services
3. Our business model

1. Chief Executive Officer's review

1. Operational review - Testing products

1. Operational review - Testing services

1. Operational review - Simulation

1. Chief Financial Officer's review

1. Key performance indicators

1. Sustainability

50 Task Force on Climate-related Financial Disclosures (TCFD) report

56 S172(1) statement and stakeholder engagement

58 Risk management

60 Principal risks and uncertainties

63 Non-financial and sustainability information statement

Governance

1. Chairman's introduction to corporate governance
2. Statement of corporate governance
3. Board of Directors

68 Executive Committee

1. Statement of corporate compliance

1. Nomination Committee report

1. Audit and Risk Committee report

1. ESG Committee report
2. Directors' remuneration report

1. Directors' report

1. Statement of Directors' responsibilities

Financial statements

97 Independent auditor's report

1. Consolidated statement of comprehensive income
2. Consolidated statement of financial position
3. Consolidated statement of changes in equity
4. Consolidated cash flow statement
5. Notes to the consolidated financial statements

1. Company statement of financial position

1. Company statement of changes in equity
2. Notes to the Company financial statements

134 Notice of Annual General Meeting 2025

Strong revenue and profit growth with margin expansion

Financial highlights

Revenue

£111.3m +10%

(2023: £100.8m)

Adjusted* EBITDA

£24.2m +18%

(2023: £20.5m)

Adjusted* operating profit

£20.3m

• Record revenue and operating profit and improvement in operating margin
• New product development continues at pace and in line with the technology roadmap for testing products and simulation markets, alongside development of the core technology for ABD Solutions
• Initial contract win for ABD Solutions of £2m for an automated mileage accumulation solution for delivery in FY 2025 with potential for further follow-on orders
• The Group acquired Venshure Test Services (VTS), a provider of mileage accumulation, electric vehicle and environmental testing services in the US, with the integration progressing as planned
• Since the year end, the Group has acquired Bolab Systems GmbH (Bolab), a niche supplier
  of automotive power electronics testing solutions
• MSCI AAA rating achieved

• Well placed to sustain growth momentum over the medium term, supported by:
• • Target organic growth of 10% per year across core markets, supported by regulatory tailwinds and rapid technology change, with a significantly strengthened and scalable operational and commercial platform
  • Further margin expansion to 20% target, through operating leverage, supply chain improvements and operational efficiencies
  • Strong cash generation that provides scope for further value-enhancing investment in FY 2025 and beyond
  • The opportunity beyond automotive markets presented by ABD Solutions, transitioning from technology development to commercialisation

+22%

(2023: £16.6m)

Adjusted* operating margin 18.2% +170bps

(2023: 16.5%)

Net cash

£28.6m

(2023: £32.0m)

Adjusted* diluted earnings per share (EPS)

70.0p +15%

(2023: 60.8p)

Dividend per share

7.63p +20%

(2023: 6.36p)

• Adjusted to exclude amortisation of acquired intangibles, acquisition related charges and exceptional items. All profit and earnings per share figures in this Annual Report refer to adjusted business performance as defined on page 28 with a reconciliation to statutory measures.

AB Dynamics is a leading global provider of development, test and verification solutions to the global transport market, facilitating the development of vehicles that are safer, more efficient and more sustainable.

With over 40 years of experience and a global network of partners, our solutions cover a wide range of testing and development requirements, in areas such as simulation, active safety, durability, steering, suspension and autonomous driving. We help customers to achieve their goals in testing the performance, safety or comfort of their vehicles, developing the next generation of Advanced Driver Assistance Systems (ADAS) technologies and providing driverless solutions in controlled environments.

Global automotive clients

145

Employees

555

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Global revenue by region Revenue by customer category

Market leader in growing markets

1

Structural and regulatory growth drivers across all our markets

The market for vehicle development products and services is supported by:

• Road safety - the significant increase in regulation of active safety systems, in terms of complexity of requirements and across new geographies and vehicle categories, will drive growth in products and services and incremental use of simulation
• New powertrains - the emergence of electric vehicles (EVs) and hybrids and new original equipment manufacturers (OEMs) drives growth in the number of vehicle models, all of which need certification across each market in which they are sold.
  Speed to market and cost efficiencies offered by simulation also drive adoption of our simulation range. New powertrains
  (e.g. hydrogen/reduced emission fuels) will result in further increases in new models

READ MORE ABOUT OUR MARKETS ON PAGE 8

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2

Highly resilient business solving customers' sustainability challenges

Our global, diversified customer base and high-quality, long-term customer relationships provide resilience. We support customers throughout the vehicle development cycle.

The wider focus on road safety and reduction in accidents as well as the focus on new powertrains such as EVs are important long-term trends that will support continued growth, as the emergence of new vehicle models and technologies requires additional development work, testing and validation.

READ MORE IN OUR CHIEF EXECUTIVE OFFICER'S REVIEW ON PAGE 16

Investment case continued

3

Strong margins with clear strategy for expansion

Highly differentiated products with continued investment in innovation underpin strong gross margins.

Now the Group has a solid and scalable operating platform, operating margin expansion will be delivered through operational gearing, improvements in the supply chain and operational efficiency.

READ MORE IN OUR CHIEF FINANCIAL OFFICER'S REVIEW ON PAGE 26

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4

Highly cash generative with clear capital allocation framework

Our strong cash generation enables us to fund ongoing investment in organic growth across all our markets and to fund acquisitions.

Our capital allocation priorities are: investment in innovation to grow the core business; investment in ABD Solutions; bolt-on acquisitions; and our progressive dividend policy.

READ MORE ABOUT OUR CAPITAL ALLOCATION FRAMEWORK ON PAGE 17

Chairman's statement

Driving delivery of our ambitious strategy

Highlights

• Continued investment in new product development in our core markets
• Contract win for ABD Solutions and first production units delivered
• Acquisition of VTS strengthens our services offering

Overview

I am very pleased to report another year of strong profitable growth for AB Dynamics, and one of strategic significance as the Group positions itself for the next stage of growth. These results are evidence of the value customers place on our offering, as the team continues to win new customers globally and strengthen relationships with existing ones.

The Group continued to focus on building a sustainable and resilient business. Overall results for the year showed revenue growth of 10% to £111.3m and a 22% increase in operating profit to £20.3m, driven by increases across all three sectors of the business.

The Group continued to invest in the core automotive sector, which is characterised by strong regulatory and structural growth drivers. The continued increase in regulation and the requirements of consumer organisations for safety ratings covering additional classes of vehicles and increasingly sophisticated safety systems are supportive of future growth in demand for our products

and services.

At the same time, we have seen good progress by ABD Solutions which has delivered the initial units of a product for construction vehicles and won a contract with a major automotive OEM which enables expansion into a new sector in that market. ABD Solutions has successfully proved the concept of retrofitting existing technologies to enable the automation of conventional vehicle fleets and developed a pipeline of commercial opportunities.

Chairman's statement continued

Overview continued

The acquisition of VTS expands our capability in the services sector and I am pleased to report that we are already progressing a number of new opportunities through expanding our offering across our wider customer base.

Employees

I would like to take this opportunity to thank our global team of hard-working and committed employees who have all contributed to a very successful year, responding to changing demands in what remains a challenging and fast-moving market. The Group attracts talent at all levels within the business and continues to invest in training all the way through from apprentices to graduates and continuing professional development.

The Group has grown strongly in recent years and we now have over 550 employees, with around half located in the UK. The

Further information on our approach to sustainability can be found on pages 32 to 49 and the activities of the ESG Committee are summarised on page 84.

Corporate governance

Strong corporate governance and risk management are essential elements of the Board's activities and are key to ensuring the ongoing stability and growth of the Group. I am pleased to confirm that AB Dynamics plc is in compliance with the Quoted Companies Alliance Code (the QCA Code) as required under the AIM Rules. The Board takes into consideration feedback provided by various ratings agencies in setting policies and in developing our sustainability strategy as part of our continuous improvement in corporate governance. I report separately on the Group's approach to governance and its procedures in the Statement of corporate governance, which can be found on pages 71 to 79.

"The Group delivered another year of strong profitable growth and now has a solid and scalable platform from which to deliver further revenue growth and margin expansion, with a strong balance sheet to support that growth."

Richard Elsy CBE

Non-Executive Chairman

Board takes our responsibility towards employee engagement and development seriously and we were particularly pleased to launch our second Professional Development Programme for emerging talent to develop our future leaders.

Investments

The acquisition of VTS during the year and Bolab since the year end will continue to drive the Group strategy forward in order to deliver sustainable growth. Other investments included continued new product development, progress in the implementation of our ERP system and investment in ABD Solutions.

Sustainability

I am pleased to report that the hard work and determination by the members of the ESG Committee and wider staff have delivered good progress on our sustainability strategy, including achievement of an MSCI AAA rating. The Board is committed to ongoing improvements in all aspects of sustainability.

Our strategy and the detailed financial results are covered in the:

CHIEF EXECUTIVE OFFICER'S REVIEW ON PAGES 16 TO 19

CHIEF FINANCIAL OFFICER'S REVIEW ON PAGES 26 TO 29

Dividends

The Board recognises that dividends continue to be an important component of total shareholder returns, balanced against maintaining a strong financial position, and intends to pursue

a sustainable and growing dividend policy in the future having regard to the development of the Group.

Based on the very strong financial performance and the Board's confidence in continued growth and delivery in 2025, the Board is recommending a final dividend of 5.30p per share, payable on

31 January 2025 subject to shareholder approval at the AGM. The ex-dividend date will be 16 January 2025 and the record date will be 17 January 2025. The total dividend for the year will therefore be 7.63p per share, which is an increase over the prior year of 20%, continuing the Board's progressive dividend policy.

Outlook

AB Dynamics operates within markets that are supported by long- term regulatory and structural growth drivers in automotive and holds an enviable market-leading position in the sectors in which it operates. These market growth drivers, coupled with the ongoing investments in all areas of the business, provide the Board with strong confidence that the outlook remains positive.

Our continued operational delivery and ongoing investments provide a strong platform for future growth and the Board remains confident in delivering continued progress in the forthcoming year.

Richard Elsy CBE

Non-Executive Chairman

26 November 2024

Our markets and strategy

Market drivers

Our solutions Testing products Testing services Simulation

support growth

Consumer ratings

Regulation

• US - NHTSA
• Europe - UNECE
• Japan
• China

New vehicle models

• Development
• Certification
• Speed to market
• Cost effectiveness
• New sensor technology
• Increasing automation

New powertrains

• EVs
• Hybrid
• Hydrogen
• Reduced emission fuels

Our market drivers

The automotive sector continues to evolve and adapt to the structural and regulatory changes driving rapid unprecedented change:

• The ongoing societal need for improvements in road safety is driving the development of active safety, ADAS and increasing levels of autonomous systems

OEMs need AB Dynamics' testing products and services for development of vehicles and certification of active safety systems across all types of powertrains. The Group's simulation capabilities enable OEMs to accelerate the efficiency and speed of development by allowing customers to test in a virtual environment.

Euro NCAP roadmap 2030

2026 2029 2032

• The global challenge of climate change is driving strong demand for the acceleration of the implementation of
  EVs, hybrids and development of other alternative powertrains
• New entrants into the automotive market, particularly in EVs and autonomy, have placed pressures on traditional automotive OEMs to rapidly develop new technologies which require more complex tests

Consequently, whilst the automotive sector is experiencing disruption to production volumes and a slower rate of increase in EV sales than anticipated, it remains fully committed to investing in R&D in these key areas as each OEM needs to respond to these challenges.

"Our growth is supported by significant long-term structural and regulatory market drivers, such as road safety improvements, the introduction of new vehicle powertrains and development of driverless solutions, as well as our own initiatives in innovation and diversification."

Safe Driving

M1: Beyond Intelligent speed assistance

M2: Driver Awareness: impaired driving to cognitive distraction

M3: AD Grading: Domain extension and driver engagement

Crash Avoidance

M4: Improved robustness and real-world effectiveness

M5: Leveraging vehicle connectivity

M6: Pedal misapplication

Crash Protection

M7: Senior protection: low severity testing with sled

M8: Far-side and side pre-crash incentives

M9: Protection equity through modelling

M10: Whiplash protection parity

M11: Passive Vulnerable Road User (VRU) protection - A-pillar and micro-mobility

Post-Crash Protection

M12: Next-gen updates including D-call and thermal scanning