AB Dynamics' Pause for Breath: Order Book Recovery Masks a Strategic Pivot Away from China Testing

New CEO Sarah Matthews-DeMers steers a mid-cap through tariff turbulence with a VadoTech impairment and a renewed focus on innovation.

ABDP.L · Earnings Call · 2026-04-16

A pause, not a reversal

The first half of FY2026 for AB Dynamics was, in CEO Sarah Matthews-DeMers' words, a "softer trading performance" — revenue down 16% amid the customer activity fallout from last year's tariff disruption. But the more interesting story is what lies beneath the numbers: an order intake comeback, a decisive impairment of its Chinese testing business, and a new CEO signaling "evolution, not revolution." Revenue fell to a level consistent with the previously guided second-half bias, but order book strength suggests the tank is refilling: GBP 64 million of orders received in H1 versus GBP 44 million in the prior period, with a closing order book of GBP 47 million giving roughly 70% coverage of expected FY26 revenue. As Interim CFO Andrew Lewis put it:

Order intake in the first half strengthened, showing that the market and customer activity is returning to a more positive level after a more subdued third quarter of FY '25, which was heavily impacted by global trade tariff issues.
Andrew Lewis, Interim CFO · 2026-04-16

The real pivot is in Testing Services. The group recorded a GBP 16.8 million impairment on VadoTech, its Chinese on-road testing business, and commenced a strategic review. The culprit is not a loss of Chinese demand per se, but a single European OEM's unraveling in the face of domestic brands like Geely and BYD. “However, our business in China, VadoTech, has seen significantly weaker-than-anticipated volumes under the new contract with a European OEM awarded at the end of last year.” — Andrew Lewis, Interim CFO · 2026-04-16 Matthews-DeMers was quick to firewall the damage: “It is important to stress that this is an isolated issue with a single European OEM who is facing challenging local market conditions in China.” — Sarah Matthews-DeMers, CEO · 2026-04-16 — a line that doubles as the company's answer to whether Chinese OEMs themselves are still a growth opportunity for ABD's testing products. The VadoTech business will become a smaller part of the group, and the U.S.-based mileage accumulation and track testing operations are growing nicely, aided by new wins and work for the U.S. regulator. Indeed, the company remains emphatic that it sells into R&D functions, not production lines. Sarah Matthews-DeMers' refrain — "We don't sell anything that goes into a production vehicle" — underpins a resilience claim that, for now, is holding up. “Our business is resilient against short-term market disruption, and our market drivers support sustainable double-digit revenue growth in the medium term and beyond.” — Sarah Matthews-DeMers, CEO · 2026-04-16 Operating margin was maintained at 18.6% despite the volume drop, thanks to operational gearing offsets from cost actions, a positive revenue mix, and the full-year effect of ERP and supply chain improvements. Cash conversion on a rolling 12-month basis came in at 102%, and the interim dividend was raised 10% — a tangible vote of confidence. The capital allocation discipline is unchanged — a theme the previous CFO rehearsed a year ago: “Yes. So as we set out in our capital allocation policy, the first priority is always to invest in organic R&D because that is what gives us the best returns.” — Sarah Matthews-DeMers, CFO and incoming CEO · 2025-11-12 And the market backdrop for mid-caps remains tense, as Sarah noted in the prior update: “Unfortunately, redemptions do remain the biggest issue in mid-cap markets, which drives prices down.” — Sarah Matthews-DeMers, CFO and incoming CEO · 2025-11-12

Innovation and the China question

The new CEO's first few months have been a listening tour — 9 of 10 business units visited, ~90% of employees met, and innovation workshops that generated over 500 ideas. She is leaning on AI, both in products like AB Elevate and in back-office efficiencies, while carefully ring-fencing intellectual property. In the current environment, OEM R&D budgets are not being cut — she argues the competitive threat from new Chinese entrants prevents that. That is a reassuring counterpoint to the tariff related uncertainties that have roiled the sector. Looking ahead, the company expects a 55-60% revenue bias to H2, with two large simulator orders already assumed. Management remains mindful of Middle East developments, but absent an extended disruption, they expect FY26 adjusted operating profit in line with current expectations. The medium-term ambition — double revenue and triple operating profit from FY24 — is restated with conviction, and the balance sheet (GBP 39.3 million net cash) gives them firepower for M&A. The market may have taken a pause, but AB Dynamics is positioning for the long haul.