Ricardo Regulatory News (RCDO)

27 July 2021

Ricardo plc

Ricardo plc ("Ricardo") is a world class global engineering, technical, environmental and strategic consultancy business, which also manufactures and assembles niche, high-quality and high-performance products.

Ricardo is today providing a trading update ahead of its full year results in respect of the year ended 30 June 2021. Ricardo plans to announce its full year results in September 2021. The results in this trading update are subject to audit.

Trading update

During the course of the year ended 30 June 2021, Ricardo has continued to recover from the impact of COVID-19. In the first half of the financial year, both revenue and operating profit increased on the prior six-month period and this trend has continued in the second half of the financial year. All divisions saw a higher level of activity and increased their revenues in the second half of the year.

In the year ended 30 June 2021, Order Intake was over £350m, compared to £369m in the prior year. Total Group revenue in the year was c.£350m, at a similar level to the prior year. Underlying profit before tax for the financial year is in line with market consensus[1]. Net debt at 30 June 2021 was £47m compared to £50m at 31 December 2020 and £74m at 30 June 2020.

Trading in our Energy & Environment business has been strong during the year with order intake and revenue increasing by c.14% and c.12% respectively on the prior year. Significant contributions were made by both the Policy segment, due to increased services to the European Commission, and the Water segment, which benefitted from an upsurge in water resource-management services to the UK water sector. Within Sustainability, revenues remained strong for all aspects of Net Zero, from strategy development to establishing targets and producing implementation plans. At the same time, there are growing opportunities to support technology solutions, particularly in connection with electricity network engineering, innovation, and the evolution of 'e-fuels' such as green hydrogen.

Rail has delivered a good performance throughout the year with revenue up c.3% on the prior year together with improving profit margins. Order intake was down on the prior year by c.7%, reflecting the timing of large program wins each year.  Australia continues to be a flourishing market, together with Asia and the Middle East, while the European market remains cautious due to reduced passenger numbers.

Defense saw order intake and revenue increase on the prior year by c.70% and c.14%, respectively. The growth in order intake included the receipt of the first $10m order from the $89m award of the three-year Anti-lock braking system/electronic stability control ('ABS/ESC') retrofit contract to provide critical safety upgrades for the US Army's fleet of High-Mobility Multipurpose Wheeled Vehicles ('HMMWV'). Order intake also included a significant multi-year production contract from General Motors to produce and field the US Army's new Infantry Squad Vehicle ('ISV'). In addition to the increased ABS/ESC volumes the increase in revenue also included further growth in Engineering Services.

Performance Products, including our Software business, saw revenue increase by c.1% during the financial year. Order intake was c.18% lower than the prior year, in line with our expectations, primarily due to the recognition of two large transmission orders in the prior year. Following the shut-down of the McLaren manufacturing plant in the quarter ended 30 June 2020, production re-commenced in July 2020 and, as expected, volumes have increased steadily throughout the financial year to 30 June 2021. Transmission deliveries across all customers during the year have broadly been in line with our expectations.

Automotive & Industrial ('A&I') has seen a reduction in order intake of c.20% compared to the prior year. A&I received a higher level of orders in both the US and China and a lower level in EMEA. Although revenue was c.13% lower than the prior year, this segment returned to profit in the second half of the financial year. During the year, strategic and structural changes have been undertaken within A&I to focus on higher-growth services and markets, and the associated costs will be reported within specific adjusting items. The changes reflect the global shift within the automotive industry which has been heavily impacted by COVID-19, seeing a temporary halt to passenger-car purchases and deliveries across the world, as well as ongoing US-China tensions and border tariffs.

As announced to the market on 25 January 2021, the Board of Ricardo and Dave Shemmans jointly agreed that Dave Shemmans would be leaving his role as Ricardo's Chief Executive Officer. The Board is well advanced in the recruitment of a successor.

Cashflow

The net cash inflow for the year was £26.5m. This includes the net share placing proceeds of £28.2m, acquisition-related cash costs, including earn outs and external fees paid, of £5.7m, exceptional redundancy and restructuring payments of £3.2m and dividend paid of £1.0m. Net Debt at 30 June 2021 was £46.9m compared to £73.4m at 30 June 2020.

The Revolving Credit Facility ('RCF') of £200m continues to provide the Group with committed funding available for the remaining term through to July 2023. At 30 June 2021, the amount undrawn on the RCF was £123m and we held net liquid cash reserves of £30m together with uncommitted overdraft facilities of £15m.

Dave Shemmans, Chief Executive Officer, commented:

We continue to navigate the COVID-19 backdrop and I am pleased to see performance improving again in the second half of the financial year.

Energy & Environment, Rail, Defense and Performance Products performed well and all achieved an increase in Operating Profit compared to the prior year. Within Performance Products, McLaren volumes have increased steadily during the year and in the Defense business the ABS Fleet retrofit programme is underway. A&I continues to face a challenging market and some further restructuring has been necessary, leading to a return to profitability in this segment in the second half of the financial year.

We have established a firm and diversified platform for our business based around the global environmental agenda and looking forward I remain confident of the prospects for the Group.

About Ricardo plc

Ricardo plc is a global engineering, technical, environmental and strategic consultancy business. We also manufacture and assemble low-volume, high-quality and high-performance products and develop advanced virtual engineering tools for conventional and electrified powertrains as well as for complex physical systems.

Our ambition is to be the world's pre-eminent organisation focused on the design, development and application of solutions to meet the challenges within the markets of automotive, rail, environmental & planning, resource management and defence. Our vision is to create a world fit for the future, and we will achieve this through the activities of our portfolio of businesses, each of them underpinned by our talented team of professionals. The Ricardo plc LEI number is 213800ZNYAY35F4XB814.

This announcement is released by Ricardo plc and contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with the Company's obligations under Article 17 of MAR.

For the purposes of MAR and Article 2 of Commission Implementing Regulation (EU) 2016/1055 (as amended by the FCA pursuant to Technical Standards (Market Abuse Regulation) (EU Exit)

Instrument 2019), the person responsible for releasing this announcement is Patricia Ryan, Company Secretary of Ricardo plc.