Formula 1: Alfa Romeo supplier AB Dynamics races ahead after £24m acquisition
Formula one testing firm AB Dynamics has received a thumbs up from analysts after announcing a £24m deal to acquire a US company.
The firm, which manufacturers robots and simulators for Alfa Romeo’s F1 team, said it had completed a deal for Venshure Test Services (VTS), a Michigan-based provider of testing services for the US automotive sector.
It expects the acquisition will be earnings enhancing this year, with revenue and adjusted operating profit for the five month period forecast to reach £1.4m and £0.5m respectively.
Shares rose 1.5 per cent by early afternoon.
Dr James Routh, chief executive officer, said: “The acquisition expands both our capability and geographic coverage in the important and growing field of EV battery and powertrain performance evaluation.
“Customer focus on electric vehicle and battery technology is a long-term trend that will support continued growth at AB Dynamics as competition increases and new vehicle models require additional development work, testing and validation.”
Acquisitions have been a key pillar of the firm’s strategy and it said in January the “long-term pipeline” remained positive. The group snapped up Norwich-based Ansible Motion, a driving simulator company, for £14.4m in September 2022.
VTS is a leading provider of so-called dynamometer-based testing services and has a particular focus on the development and deployment of electric vehicles (EV) for US based automotive groups.
The business has a good track record of profitable growth. It generated earnings before interest, tax, depreciation and amortisation (EBITDA) of £1.5m in the 12 months to December, up from around just under £1m the year prior. Revenue also rose from £1.9m to £2.8m last year.
In a note, analysts at Shore Capital said: “The acquisition is in line with management’s strategy, with the statement highlighting VTS expands and broadens its testing services capabilities, supported by structural growth drivers, and complements its existing offering in California with VTS’s Detroit testing facility. We also note the management will remain with the business to ensure growth expectation s are delivered.”