Welcome to the AB Dynamics 2025 half-year results presentation. I'm James Routh, the CEO, and I'm joined today by our CFO, Sarah Matthews-DeMers. I'm going to be taking you through some highlights before Sarah takes you through the detailed financial performance. Following this, I'll provide an update on progress against our medium-term growth strategy before wrapping up with a summary of FY25 to date and an outlook for the remainder of the year. During the period, we made a strong start to delivering our medium-term growth plan, with 11% growth in revenue and 21% growth in operating profit. Market and customer activity levels remained positive throughout the period, despite the headwinds faced by the automotive market, with strong growth across all three of our sectors.
New product development continues at pace and in line with the technology roadmap for our testing products and simulation markets, and I'm very pleased to announce the initial delivery of an automated mileage accumulation contract to an automotive OEM enabled by ABD Solutions technology, demonstrating the value of our investment in this technology accelerator. We completed the acquisition of Bolab, a German supplier of testing products, continuing our track record of successful inorganic growth, with the integration progressing as planned. Our significant net cash balance of GBP 27.2 million supports further organic and inorganic investment, and we've declared a 20% increase in the interim dividend, reflecting the board's confidence in the group's financial position and prospects. I'll now hand over to Sarah to take you through our financial performance.
Thanks, James. I'm delighted to be able to present results showing our strong financial performance. We've continued our track record of delivering consistent revenue and profit growth, backed up by cash conversion. Revenue increased by 11%, with strong growth across all three sectors. Operating profit increased by 21% to GBP 10.8 million. We've delivered operating margin expansion up 160 basis points to 18.6% as a result of the full-year effect of operational improvements, operating leverage, and revenue mix. Despite an increase in the tax rate to 20% due to a change in the geographic mix of profits, EPS has increased by 20% to GBP 0.37. We're increasing the dividend by 20%, reflecting our confidence in the business. Cash conversion of 98% and our rolling three-year average cash conversion of 109% demonstrates that we are consistently able to turn these growing profits into cash.
The order book at the period end was GBP 42.1 million, of which GBP 31.4 million is for delivery in half two. This, combined with orders received since the period end and additional sources of recurring revenue, such as renewal of licenses, gives good visibility into the second half of FY 2025. Revenue increased across all three sectors. Testing products, the group's largest sector, increased by GBP 3.2 million, with growth in robots and the contribution of Bolab offset by lower SPMM sales. Testing services saw a significant increase, with revenue up GBP 1.9 million in advance of new regulatory requirements in the U.S., with cross-selling opportunities facilitated by strong customer relationships. Simulation revenue increased by GBP 1.5 million, with growth in simulator motion platforms as the prior year revenue was weighted towards the second half of the year. Currency provided a small headwind but had no material impact.
Turning to profit, the volume increase dropped through to a GBP 3.5 million increase in gross profit, along with a positive mix effect of GBP 1.1 million. This led to an increase in gross margin of 190 basis points. The overhead increase reflects the impact of inflation and the acquisitions. Delivery of GBP 10.8 million of profit represents a step forward in operating margin to 18.6%, demonstrating continued margin progression. Our rolling 12-month cash conversion of 98% demonstrates a continuation of our track record of turning profits into cash, despite cash conversion during the period being impacted by the timing of shipments to China, which were delivered towards the end of the period due to Chinese New Year, resulting in a higher trade receivables balance that was converted into cash after the period end. The acquisition of Bolab was funded through in-year cash generation.
After returning cash to shareholders in the form of dividends, we had a significant net cash balance at the period end of GBP 27.2 million available to support strategic priorities. Moving on to the performance of each segment and starting with testing products. This segment includes driving robots and ADAS platforms and the large SPMM machines. The revenue growth was driven by the increased regulation and the increased complexity of testing, with strong growth in driving robots without the benefit of any SPMM revenues. High-value SPMM sales are individually material, and therefore revenue recognition in any individual reporting period can impact the segmental margin. The increase in margin was delivered through this mix effect together with operational improvements in production layout and capacity planning. Testing services include our proving ground in California, on-road testing in China, and powertrain and environmental testing in Michigan.
US activity levels benefited from new regulatory requirements from the US regulator NHTSA, which, after a two-month delay for review by the incoming administration, have now been confirmed with an implementation date of 2029. Margin improvement was driven by the increase in volume. Strong customer relationships facilitated cross-selling of VTS's services to a major OEM to whom they were previously not able to gain access. Our current contracts for testing services in China extend to the end of FY 2025. Tenders have been submitted for the renewal of these contracts for delivery in FY2026 and beyond, with the outcome expected during the second half. Simulation includes our simulation software, rFpro, and driving simulator motion platforms. Revenue growth was driven by simulator motion platform sales.
Towards the end of the period, our simulation software offering was expanded with the launch of AV Elevate, a fully integrated simulation solution for ADAS and AV development, allowing users to set up and execute test scenarios in simulation. Margins were impacted by the mix of lower software and higher equipment sales in the period. High-value simulator sales are individually material, and two further contract wins are assumed in half two revenue expectations.
Our key financial enablers are unchanged and include our capital allocation policy. Our first priority is to invest in organic R&D and CapEx and in ABD Solutions, then M&A, and finally dividends. We aim to continue our cash conversion record at 100% through the cycle. Our strong balance sheet gives us flexibility. With GBP 30 million of cash and having renewed and extended our RCF facility, we now have a GBP 20 million committed facility to February 2028.
While we prefer to remain debt-free, our debt capacity at two times EBITDA is now approximately GBP 50 million, which, for the right acquisition, we could use for a short period, then pay down from cash generation. All this is underpinned by our great people, with over 200 qualified engineers and technicians supported by an experienced team of professionals across sales, operations, and finance. I'll now hand over to James to recap on progress against our growth strategy.
Having presented our value creation roadmap for the medium term at our last results presentation in November, I'm pleased to say that in the first six-month period, we've delivered in line with the plan. The graph demonstrates the compounding effect of delivering 10% organic revenue growth each year, expanding operating margins to 20% plus, and investment in acquisitions continues our disciplined approach against well-defined acquisition criteria. This will deliver our medium-term aspiration of doubling revenue and tripling operating profit. In H1 2025, we've delivered an 11% increase in revenue, expanding our operating margin to 18.6%, and completed the acquisition of Bolab. I'll give further detail on each of these elements in turn on the next slides. Our growth is supported by very long-term structural and regulatory growth drivers in four main areas: consumer ratings, regulation, new vehicle models, and new powertrains.
I set out the impact of these drivers in our November results presentation, so I won't repeat that again here, with the presentation available on our website if you wish to refer back to the detail. In terms of an update for H1, our sales growth has been driven by industry advances in technology and increased complexity of testing. There are a number of well-publicized factors causing disruption in the automotive market. Recent news coverage regarding falling OEM production volumes has a limited impact on our volumes, as we don't sell anything that goes into a production vehicle. We're selling into the R&D teams and the organizations independently conducting testing. The challenge to traditional automotive OEMs posed by the rise of new entrants is resulting in further disruption.
However, not only are we powertrain agnostic, we're also OEM agnostic in the sense that we supply to all major automotive OEMs with 145 different customers, therefore providing protection against the current competitive environment between conventional manufacturers and Chinese EV makers. In addition, the traditional OEMs are responding by innovating and developing faster, more cost-efficient methods of developing new models, giving rise to further opportunities for our simulation capabilities, which enable manufacturers to accelerate the efficiency and speed of development by allowing customers to test in a virtual environment. The traditional OEMs cannot afford to fall behind the new entrants who are continuing to innovate at pace. For example, BYD recently announced it will integrate autonomous driving features from its God's Eye system into nearly all its models at no extra costs. Other OEMs will need to respond to this.
The introduction of tariffs is likely to cause further pressure on OEM R&D budgets in the near term, but we see the most likely impact as being a timing difference while the OEMs take stock. Increases in the complexity of testing, safety regulation, and trends in new mobility, including active safety, autonomy, and connected vehicle technology, are bigger drivers than the number of new models launched to market and provide tailwinds for growth over the long term. In summary, all of these market drivers and our high-quality long-term customer relationships provide resilience against the challenging near-term dynamics in the automotive industry, and long term, are moving in the right direction to support sustainable double-digit revenue growth across our business.
A key part of our medium-term plan is to expand our operating margin, and the improvements we've made in the business in terms of culture and underlying systems and processes mean we have a solid base to build from. To expand margin to above 20%, we are focusing on three areas: delivering operational gearing as we scale the business. The investment we've put in over the last five years means we have the capability and capacity to deliver the next phase of growth without a corresponding step change in overheads. During the first half of the year, the 11% increase in revenue dropped through to a 21% increase in operating profit, demonstrating the impact of the increase in volume.
Simplifying the business, we are focusing on improving our supply chain, rationalizing the number and quality of suppliers to obtain discounts and improve quality and efficiency, as well as rationalizing the number of product variations and combinations in the market. These actions have resulted in improvements in gross margin, up 190 basis points, and improved resilience. Standardizing our processes and procedures in our main manufacturing facility in Bradford- on- Avon, we are already seeing the benefits of continuous improvements to quality control, capacity planning, and improved inventory management with the introduction of barcode scanners. In H1, we've delivered increased production volumes on constant headcount and manufacturing footprint. We've demonstrated a strong track record in delivering and implementing value-enhancing acquisitions. The market is fragmented and consists of a high number of small to medium-sized businesses, which we screen against well-defined strategic and financial criteria.
These are then filtered down into targeted approaches, which are usually off-market opportunities with vendors whom we've built a relationship over a period of time, but are sometimes structured M&A transactions. Our sweet spot is bolt-on acquisitions with high gross margins in areas that we can add to our existing product or service capabilities and that can be sold through our existing international sales channels. We're looking for profitable cash-generative businesses at reasonable multiples, which are EPS accretive, and we typically have several acquisition opportunities in various phases of the transaction process at any one time. During the period, we completed the acquisition of Bolab, which has been integrated into our testing product sector, opening opportunities for Bolab to access new sales channels.
This disciplined approach led to our recent withdrawal from a further transaction over concerns regarding the target earnings forecast arising from some of the findings in due diligence. We have a promising pipeline of opportunities and sufficient resources to take advantage of opportunities that arise, particularly in the event that current market volatility is reflected in target valuations. ABD Solutions was set up as the group's technology accelerator to leverage our core technologies to expand into adjacent markets. We have provided enabling technology into a new mileage accumulation automation solution for a major automotive OEM, with initial revenues delivered during the first half. ABD Solutions technology has opened up a new area of the automotive market that we could not previously access.
The mining pipeline has expanded with the appointment of our new MD for ABD Solutions, who has extensive mining automation experience, and we're gaining more commercial traction in niche applications. As expected, market penetration in this industry is slow, but niche applications are growing for our OEM-agnostic retrofittable solution, and we are focusing initially on entry-level solutions to build confidence with customers, including InView, our retrofittable human form recognition system. As the product development is now largely complete, the future focus is on applications and commercialization. To summarize H1 performance and the outlook for the remainder of the year, we were very pleased with the performance in the first half, having delivered strong strategic, financial, and operational progress, double-digit revenue and profit growth, and operating margin improvement. We increased returns to shareholders and continued our track record of strong cash conversion. Our outlook for the remainder of FY2025 is positive.
While we are cognizant of a number of headwinds, including, of course, the potential impact of tariffs and other inflationary headwinds, such as the U.K. National Insurance increase, FX volatility, and the current disruption to production volumes in the automotive market, we have good visibility into the second half of the year with an order book of GBP 42.1 million, of which GBP 31.4 million is for delivery in H2 FY 2025, giving coverage around 50% of expected revenue for H2. We are assessing the impact of tariffs on both the group and the wider market, and we will keep the situation and our response under review. Direct exposure is likely to be limited, but possible indirect effects, such as inflationary pressures, will be mitigated through price increases.
The group's geographic diversification and critical nature of its market-leading products and services have created a highly resilient platform that is well-positioned to support customers navigating these dynamic market conditions. Whilst being mindful of a potential slowdown in timing of pipeline conversion due to the wider macroeconomic disruption, the board expects to deliver adjusted operating profit for FY 2025 in line with current expectations. Despite potential near-term challenges, OEMs remain committed to R&D and hence continue to need our products and services. Future growth prospects remain supported by long-term structural and regulatory growth drivers in active safety, autonomous systems, and the automation of vehicle applications, underpinning our medium-term financial objectives.
To summarize our growth strategy and value creation plan, our ambition is to double revenue and triple operating profit over the medium term from our FY 2024 baseline through the compounding effect of 10% organic revenue growth, improving margins to 20% and beyond, converting these profits into cash with 100% cash conversion through the cycle, and a self-funded acquisition spend of GBP 30 million to GBP 50 million per year. Despite the current market disruption, the long-term structural and regulatory growth drivers remain supportive of continued growth, underpinning our medium-term growth plan. Our diverse geographic spread of customers provides a portfolio effect, mitigating against regional variations in the near term.
Our operational improvement initiatives support continued future margin expansion, and our robust balance sheet and strong cash generation provide the flexibility to respond to the dynamic economic and geopolitical environment, and our diversified geographic operations give us the ability to flex manufacturing locations as needed. Looking forward, we also currently have a good pipeline of acquisition opportunities, and with GBP 30 million of cash at the period end, we're able to take advantage of any valuation opportunities that arise in the current market environment. All of these factors underpin the medium-term financial objectives for the group. That concludes the presentation. Thank you for joining us.