Final Results
Ricardo PLC
18 September 2000
18 September 2000
Ricardo plc
Preliminary results for the year to 30 June 2000
HIGHLIGHTS
Ricardo plc is the UK's leading independent automotive consultancy
with technical centres in the UK, USA, Germany and the Czech Republic
employing over 1,300 people. The company's client list includes all the
world's major OEMs. Ricardo is a constituent of the FTSE techMark 100.
- Record profits for the third consecutive year
- Profit before tax up 23% to £12.8m
- Turnover up 27% to £121.1m
- Basic earnings per share up 22% to 18.9p (1999: 15.5p)
- Total dividend of 7.4p per share (1999: 7.0p)
- Order book up 19% at 30 June
- Contract for the new MINI from BMW awarded July 2000
Commenting on the results, Sir Noel Davies, Chairman said:
'We remain optimistic about the future. We believe that Ricardo is well
placed to take advantage of opportunities emerging from the global automotive
industry and expect to maintain profitable growth for the foreseeable future.'
Further enquiries:
Ricardo plc ) (today) 020 7457 2345
Rodney Westhead, Chief Executive ) (thereafter) 01273 455611
Andrew Goodburn, Finance Director )
Gavin Anderson & Company
Marc Popiolek/Laura Hickman/ 020 7457 2345
Charlotte Stone
Website: www.ricardo.com
CHAIRMAN'S STATEMENT
Review of the Year
The year has seen further progress on the initiatives I reported last year.
In the United Kingdom, Ricardo Consulting Engineers has continued to extend
its customer base and develop its resources to better match the forward
workload. Of particular importance was the award of the contract from BMW
for the new MINI project. Ricardo MTC is already fully using the
facilities acquired in 1999. Further investment on that site has been
authorised in the form of test cells and additional office and workshop space
needed to cope with the forecast growth in the business. Ricardo Test
Automation has recovered from a poor start to the year and now has an
improved order book. In the USA, Ricardo Inc. continues to strengthen its
position within the Group. The office in Germany has made a slower start
than we had planned but we remain confident of the prospects for Ricardo
GmbH.
Financial Results and Dividend
Profit before tax was £12.8 million compared with £10.4 million last
year. There have been no exceptional items in any of the last three years.
Turnover increased to £121.1 million from £95.5 million. Earnings per share
increased by 22 per cent. to 18.9p from 15.5p. A small outflow of cash
resulted in our gearing improving to 11.6% from 12.4%.
Your Board is recommending an increase in total dividend to 7.4p per
ordinary share compared with 7.0p last year, which is covered 2.5 times
compared with 2.2 times in 1999.
Strategy
We remain confident that the focus on automotive consulting represents
the optimum strategy for the company. Over recent years we have set a
pattern of investments in people, facilities and research and development
which will be continued on all sites where the investment can be
justified by real opportunities for the international automotive industry.
Simultaneously we are responding to the demands of our global customers,
who are increasingly expecting the supplier to provide high quality, cost
effective, single source consulting services.
People
On behalf of your Board, I would like to thank all our employees for
the contribution they have made to the achievements of the past year. Having
made some adjustments during the year to balance specialist resources with
current demands, the company has continued with its recruitment programme
and the development of a working environment which maximises job
satisfaction and career opportunities.
At the end of the AGM Bill Foreman, who joined us as a non-executive
director in 1992, retires from the Board. Bill has made a valuable
contribution to the affairs of your company, especially as Chairman of the
Audit Committee. We shall miss his wise counsel.
On 1st July 2000 we welcomed Professor Ian Percy. Ian Percy is a
non-executive director of the Weir Group and a number of financial
institutions. He has broad and relevant experience in commerce and
industry and will succeed Bill Foreman as Chairman of the Audit Committee.
Prospects
We remain optimistic about the future. We believe that your company is
well placed to take advantage of opportunities emerging from the global
automotive industry and expect to maintain profitable growth for the
foreseeable future.
CHIEF EXECUTIVE'S REVIEW
Our Market Place
Another highly successful year for Ricardo and another year of
extraordinary change in the automotive industry. These changes will
continue to provide opportunities and challenges for Ricardo. Links now
being forged between Western, Japanese and Korean car companies should help
our continuing efforts to gain more business from the Far East. However,
North American and European mergers and the consequent consolidation of
platform and engine families does reduce the overall number of potential
customers. This year has seen major component suppliers seeking Ricardo's
technology, methodologies and systems integration skills as customers in
their own right. This growing demand coupled with the increase of niche
vehicles based on common platforms should further fuel Ricardo's growth
potential. Industry consolidation is creating a need for the new larger
groups to look critically at their often overlapping engine families and to
develop rationalisation plans. These plans are further influenced by the
continuing need for greater fuel efficiency and reduced emissions which can
be achieved only from new engine designs. This is all good news for Ricardo
as we have both the technical skills, project management skills and
staff resources to meet these needs. This should sustain double digit
growth.
During the year, Ricardo Consulting Engineers delivered two important
engine prototype programmes in record time, a significant contribution as
customers strive to take time out of their development programmes. The
ability of Ricardo to shorten time scales thereby reducing customer cost is
an important part of our role in this market place.
The ways in which we carry out our business will change significantly in
the next few years. In addition to the Tier One component suppliers becoming
major customers, our existing customers are likely to change the way they
work with us. We are likely to take on more large-scale projects, with
dedicated project offices adjacent to customers sites involving mixed teams
from Ricardo, the customer and component suppliers. We may also be
involved in running customer facilities where these are of a research or
development nature with financing provided by a third party.
Investments
The investments made in the past year totalling £15 million have been at
a record level, in particular four new test cells in Detroit in support of
a major customer order, a further addition to the Ricardo Consulting
Engineers Design Centre for 100 people, a facility for engine and vehicle
refinement studies, and high precision equipment to support our racing
programmes at our Midlands Technical Centre. We are opening two offices in
Germany to take our skills to the German car manufacturers and opened an
office in Prague to take advantage of high quality lower cost staff
available in the former Eastern Europe.
Brighton Automotive Conference
The UK is recognised as a centre of excellence for automotive engineering,
but has never hosted a conference for the benefit of the professional
engineers.
This year saw the first 'Brighton Automotive Conference' which was
organised and hosted by Ricardo. Following the success of the conference
this is likely to be an annual event. The quality of the speakers, their
papers and the delegates were both excellent and fully representative of
our global industry. The whole event was a tribute to the esteem in which
your company is held by the automotive industry.
BMW MINI Contract
It is very rare that we can write about the work we carry out, at the time
that we win contracts, so it is pleasing that we were able to announce the
award of the BMW MINI contract to Ricardo for the completion of the
powertrain development and installation. This is a major contract, but not
our largest, for a major new model introduction. It has involved the
creation of a new office at our Midlands Technical Centre for over 100
Ricardo Staff, including Ex-Rover Staff and customer staff. The work
covers both engine and transmission development and enabled Ricardo to
recruit over fifty highly experienced engineers from Rover who we are
delighted to welcome to Ricardo.
As a result of the BMW MINI contract we are now able to offer engine
and transmission design and development capability to the Midlands based
Jaguar, Land Rover and Rover business from our Midlands site.
Racing
Of course it is also a great pleasure to be able to report our part in
the remarkable Audi achievement at the Le Mans 24 hours endurance race where
cars equipped with Ricardo designed, developed and manufactured transmissions
came 1st, 2nd and 3rd, only the third time that this feat has been achieved
in the long history of this race. As a result of over twenty two
thousand gear changes per car per race, the transmission is probably the
most stressed part of the car. Its faultless performance was a fitting
tribute to Audi and Ricardo engineers.
Information technology and E-commerce
As a provider of high technology solutions and services to our customers
we regard investment in IT and web enabled technologies as vital to the
future growth of the Group.
During the year we have been active in several fields of
e-commerce. Internally we have developed extensive intranets to manage
and share our specialist knowledge across the Group and to facilitate
for efficient and timely delivery of projects to our clients. Externally,
we have continued to update our website (www.ricardo.com) and have been
heavily involved in establishing with other Automotive partners the new
European Network Exchange which will enable secure transfer of data
throughout the European automotive industry. We also announced earlier in
the year our investment in developing a European auto supplier E-commerce
portal. Ricardo intend to be the engineering information supplier to users who
will consist of the major component suppliers and similar opportunities will
exist outside Europe and with the OEMs. We do consider Ricardo should be
positioned as the leading information supplier to the automotive industry
building on the reputation we have developed over 80 years prior to the
e-commerce arena.
People
Our investment in people has continued with a significant increase in our
level of graduate recruitment, and all staff training to ensure that we
fully understand and exploit the changes taking place in our industry. The
level of change is unprecedented and this can be unsettling for people.
However, the challenge of change is invigorating and provides great
opportunities. Our recruitment of professional engineers from around the
world continues with senior appointments from Germany, the United States,
France, Italy, Japan and the United Kingdom. These indicate both the
international nature of our customers and our determination to make
Ricardo an International Business and not just a business which trades
internationally. This is vital to fulfil our customers' expectations of their
suppliers. Increasing staff mobility is vital as customers demand local
support. Teams of engineers have been seconded to the USA, Germany and
France from the UK and Ricardo Consulting Engineers based staff seconded to
the Ricardo Midlands Technical Centre, all in support of major programmes.
This is in addition to the many individual support assignments that
take place every year. I would like to thank all members of staff for the
efforts, energy and success in the year and the serious sacrifices
that they make to their personal lives in helping Ricardo to succeed.
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the year ended 30 June 2000
Notes 2000 1999
£'000 £'000
Turnover 2 121,107 95,489
--------- ---------
Operating profit 3 13,141 10,882
Net interest (341) (457)
--------- ---------
Profit on ordinary activities before 12,800 10,425
taxation (3,860) (3,206)
Taxation on profit on ordinary activities --------- ---------
Profit on ordinary activities after taxation 8,940 7,219
Equity minority interest (17) -
--------- ---------
Profit for the financial year 8,923 7,219
Non-equity preference dividends (4) (3)
--------- ---------
Profit attributable to ordinary 8,919 7,216
shareholders
Equity ordinary dividends 4 (3,534) (3,261)
--------- ---------
Amount transferred to reserves 5,385 3,955
--------- ---------
Basic earnings per ordinary share 5 18.9p 15.5p
Diluted earnings per ordinary share 5 18.4p 14.9p
All results relate to continuing activities.
There is no material difference between the profit on ordinary activities
before taxation and the profit for the financial year, stated above, and their
historical cost equivalents.
CONSOLIDATED BALANCE SHEET
as at 30 June 2000
2000 1999
£'000 £'000
Fixed assets
Intangible assets 59 -
Tangible assets 44,219 35,198
Investment properties 490 980
Investments 491 493
--------- ---------
45,259 36,671
--------- ----------
Current assets
Stocks 2,397 2,789
Debtors 37,127 31,981
Cash deposit 340 340
Cash at bank and in hand 10,147 5,651
--------- ----------
50,011 40,761
Creditors - amounts falling due within one year (43,610) (39,649)
--------- ---------
Net current assets 6,401 1,112
Total assets less current liabilities 51,660 37,783
Creditors - amounts falling due after more
than one year (8,678) (1,826)
Provisions for liabilities and charges (4,809) (4,579)
--------- ---------
Net assets 38,173 31,378
--------- ----------
Capital and reserves
Called up share capital 12,029 11,831
Share premium account 6,309 4,564
Merger reserve 967 967
Long term incentive plan reserve 467 635
Profit and loss account 18,160 13,381
--------- ---------
Ricardo shareholders' funds (including non-equity 37,932 31,378
interests)
Equity minority interest 241 -
-------- ---------
Total shareholders' funds 38,173 31,378
--------- ----------
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 30 June 2000
2000 1999
Notes £'000 £'000 £'000 £'000
Net cash inflow from
operating activities 6 17,668 18,218
Returns on investments and
servicing of finance
Interest received 379 204
Interest paid (883) (549)
Interest element of finance
lease rental payments (10) (21)
Dividends paid on non-equity
shares (4) (3)
------- --------
Net cash outflow from returns
on investment and servicing
of finance (518) (369)
Taxation (1,460) (1,700)
Capital expenditure and
financial investment
Purchase of tangible and
intangible fixed assets (14,952) (13,279)
Sale of tangible fixed assets 493 178
------- --------
Net cash outflow for capital
expenditure and financial
investment (14,459) (13,101)
Equity dividends paid (3,340) (3,114)
--------- ---------
Net cash outflow before use of
financing (2,109) (66)
Financing
Issue of ordinary share capital 1,315 311
Proceeds from ESOP share options - 127
Purchase of own shares - (328)
Capital elements of finance
lease rental payments (119) (102)
Loans taken out 3,766 -
Loans repaid (2,008) (192)
Issue of shares to minority
shareholder 212 -
------- --------
3,166 (184)
------- --------
Increase/(decrease)
in cash 7 1,057 (250)
------- --------
NOTES
1. Accounting policies
This preliminary announcement has been prepared on the basis of
the accounting policies as set out in the annual financial statements for
the year ended 30 June 2000.
2. Turnover
2000 1999
£'000 £'000
Geographical
Analysis
Europe 75,032 69,459
North America 40,167 19,294
Pacific Basin 4,557 3,806
Rest of World 1,351 2,930
--------- --------
121,107 95,489
--------- --------
The directors consider that the Group operates in one business segment,
serving the global automotive market. The United Kingdom is the principal
location for operating profits and the net assets of the Group. The only
significant overseas operation is in the USA, which is an integral part of the
UK operation. As a consequence, it is not meaningful to show its turnover,
operating results or net assets separately.
3. Profit on ordinary activities before taxation
Profit on ordinary activities before taxation is after charging for research
and development of £5.2 million (1999: £4.7 million) and depreciation of £6.4
million (1999: £5.0 million).
4. Dividends
The final dividend is 5.0p (1999: 4.7p). This is payable on 24 November 2000
to ordinary shareholders on the register on 27 October 2000.
5. Earnings per share
The calculation of basic earnings per ordinary share and diluted earnings per
ordinary share have been calculated in accordance with FRS14 and is based on
the weighted average number of shares.
Weighted average number of shares
2000 1999
'000 '000
Basic eps 47,105 46,442
Diluted eps 48,567 48,329
6. Net cash inflow from operating activities
2000 1999
£'000 £'000
Operating profit 13,141 10,882
Depreciation charges 6,432 5,047
(Profit)/loss on sale of tangible
fixed assets and investment (23) 2
properties
Long term incentive plan charge 460 623
Quest contributions - written off (870) -
to reserves
Provision for diminution in value
of investment properties 200 235
Decrease/(increase) in stocks 395 (81)
Increase in debtors (4,219) (712)
Increase in creditors 2,152 2,222
-------- --------
17,668 18,218
-------- --------
7. Reconciliation of net cash flow to movement in net debt
2000 1999
£'000 £'000
Increase/(decrease) in cash 1057 (250)
Decrease in debt and lease (1,639) (55)
financing -------- --------
Change in net debt from cash (582) (305)
flows - (18)
New finance leases 69 295
Exchange movement ------- ---------
Movement in net debt in year (513) (28)
------- ---------
-
Net debt at 1 July (3,899) (3,871)
Net debt at 30 June (4,412) (3,899)
-------- ---------
-
8. Analysis of net debt
Non
At 1 July Cash Cashflow Exchange At 30 June
1999 flow Movements Movement 2000
£'000 £'000 £'000 £'000 £'000
Cash in hand 5,651 4,339 - 157 10,147
Overdrafts (2,656) (3,282) - 109 (5,829)
-------- -------- --------- --------- ------
2,995 1,057 - 266 4,318
Debt due after 1 year (1,775) (3,766) 2,939 (197) (8,677)
Debt due within 1 year (4,947) 2,008 (2,939) - -
Finance leases (172) 119 - - (53)
------- ------ ------- ------ --------
Total (3,899) (582) - 69 (4,412)
--------- ------- ------- ------ ---------
9. The figures for the year ended 30 June 2000 are an extract from the
Group's statutory accounts, which will be delivered to the Registrar of
Companies following the Annual General Meeting. The auditors' report on these
accounts was unqualified and does not contain any statement under section 237
of the Companies Act 1985.
Tuesday, 14th May 2024
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