In 2013 LGB Investments arranged for its clients to be invited to an institutional investor day prior to the IPO of AB Dynamics, as the company’s business was diversifying into remote driving systems and crash testing obstacles. The LGB Investments team recognised the potential of this strategic move to transform the business and recommended that clients take part in the listing. AB Dynamic’s move into these new areas and partnership with F1 team Williams helped accelerate its growth and generated significant investment returns for LGB clients.
Significant growth potential identified
AB Dynamics as an investment proposition met LGB Investment’s key criteria, including demonstrating strong value and holding substantial intellectual property. Its business is international and the quality of its customers validated the firm’s commercial prospects. On visiting the company ahead of the IPO with clients, the LGB investment team was driven by driverless cars around a testing track. This first-hand experience and insight into the quality of the company’s innovative technology and reinforced LGB Investment’s view of the business’ significant growth potential.
Successful transition to public company
AB Dynamics successfully made the transition from private enterprise to a PLC. Management changes needed to grow the business and increase profitability had been implemented before the IPO. A new CEO was appointed who effectively addressed the first challenge of production capacity. The original premises were expanded and a new factory was later built, which not only increased capacity but consolidated activities that had been conducted at different locations, creating production efficiencies across the business.
Secondary revenue stream strengthened business model
AB Dynamics’ diversified its business activities, particularly in the area of crash testing, and the firm commenced a collaboration with Formula 1 company, Williams, creating an opportunity of using the data gathered in driving simulators to sell onto third parties. This secondary line of income quickly started to generate recurring revenues for the firm, strengthening the business model, improving the company’s growth prospects and giving better visibility to revenue and profit forecasting.
Strong share price growth enabled investors to take profits
As a result of the initiatives implemented, the AB Dynamics share price rose strongly after the IPO and investors benefited from two significant re-ratings as the stock continued to exceed market expectations. The secondary business line was delivering substantial recurring revenues while the cost savings from the consolidated production facility and increased capacity helped to drive the bottom line. LGB Investments advised its clients to take profits as the re-ratings occurred and today most still have residual positions at about 10X the original IPO price.
£5mRaised at the IPO
£14mAB Dynamics' market capitalisation on admission to AIM
10XAfter taking profits, many clients still hold residual positions at 10x the original IPO price