Ricardo to acquire Lloyd's Register Rail

RNS Number : 5315K

Ricardo PLC

17 April 2015

 



17 April 2015

Ricardo plc

("Ricardo" or the "Group")

RICARDO TO ACQUIRE LLOYD'S REGISTER RAIL

Ricardo plc, a market leading engineering and consulting company, is pleased to announce that it has signed a Share and Asset Purchase Agreement to acquire the business, operating assets and employees engaged in the businesses of Lloyd's Register Rail ("LR Rail"), from Lloyd's Register Group Limited ("LR Group"), for a total cash consideration of £42.5 million  (the "Acquisition").

 

Highlights

 

·      LR Rail is an established international rail consultancy and assurance business with long term blue chip clients.

·      LR Rail will transfer to Ricardo for a total consideration of £42.5m on a cash-free and debt-free basis, payable in cash at completion; transfer is expected to be materially completed on or before 1 July 2015.

·      On completion, Ricardo Rail will be launched to combine LR Rail with Ricardo's existing rail industry expertise.

·      The Acquisition will be immediately enhancing to underlying earnings.

 

Dave Shemmans, Chief Executive Officer of Ricardo plc commented:

"We are delighted to announce today's agreement to acquire Lloyd's Register Rail from Lloyd's Register Group, which on completion will be immediately enhancing to underlying earnings to Ricardo's shareholders.

 

"Lloyd's Register Rail has an impressive market reputation and a very similar culture of quality and excellence in engineering to Ricardo. The combination of their geography, product offering and independent assurance and consultancy expertise complements our own, and will position Ricardo for the growth in this important sector. We believe that increasing global urbanisation will create a growing demand for assurance, consulting and engineering expertise in rail to drive safety, efficiency and sustainability.

 

"With the team from Lloyd's Register Rail, we will be able to provide an expanded range of value-added services to our customers across a significantly enhanced global footprint. It is a well-established business with long term customer relationships and is a complementary fit to Ricardo in terms of culture, geography, product offering and business model. We look forward to welcoming Lloyd's Register Rail employees to the global Ricardo team and are excited about the prospects for the new Ricardo Rail business."

Information on Lloyd's Register Rail and rationale for the transaction

LR Rail is an established rail consultancy and independent assurance business with a wide range of international blue chip clients. In respect of the year ended 30 June 2014, LR Rail recorded on a standalone basis revenue of £48.1 million, standalone EBITDA of £3.7 million^* and gross assets of £19.7 million, excluding cash and intra group balances.  For the year ending 30 June 2015, LR Rail is currently expected to deliver revenue in excess of £50 million and a standalone EBITDA margin of approximately 8 per cent. LR Rail currently has a 12 month order book totalling in excess of £50 million. LR Rail has a total of 440 rail engineers and specialists located at offices across Europe, Asia and the Middle East.

LR Rail uses its understanding of critical and complex technologies and its independent expert advice to provide services ranging from independent assurance services, rolling stock design, signalling and train control, intelligent rail systems, operational efficiency improvement and training. LR Rail's client base consists of international blue chip organisations with which it has long-standing relationships, including Network Rail, Nederlandse Spoorwegen, Hitachi Rail Europe Limited, Cross Rail Limited, MTR and Etihad Rail.

Ricardo's growth strategy is underpinned by global challenges related to urbanisation, resource scarcity, air quality, climate change, energy security, sustainability and waste. This Acquisition is central to the delivery of growth in Transportation and Security, one of the company's three strategic pillars alongside Energy and Scarce Resources and Waste. Rail is a key area for strategic growth for Ricardo and this Acquisition will enable the Group to accelerate activity levels and enhance Ricardo's reputation in the sector.

The Acquisition of LR Rail and the future growth of this business is driven by the increasing global interest in urban and high speed networks and the integration of critical and complex rail technologies as governments respond to accelerating levels of urbanisation. Ricardo sees a strong and increasing demand for technical consulting and assurance services in the rail sector. A combination with LR Rail will bring an extended offering to an enlarged global client base of which there is limited overlap and significant opportunities for joint growth.

Details of the transaction

Ricardo will acquire the whole of the issued share capital of Lloyd's Register Rail Limited and Lloyd's Register Rail Europe B.V. together with various other assets relating to the rail business of Lloyd's Register Group Limited and the group of companies of which it is the ultimate holding company. Total cash consideration for the acquisition will be £42.5 million, on a cash-free and debt-free basis and subject to adjustment to reflect normalised levels of working capital at the date of completion. The consideration will be funded from the Group's enlarged £75 million bank facilities. The Acquisition will be immediately enhancing to underlying earnings.

The transfer of LR Rail to Ricardo is expected to be materially completed on or before 1 July 2015. The business will operate as the core of a new international rail business within Ricardo plc and combined with Ricardo's existing rail industry expertise, to be branded Ricardo Rail. Current LR Rail Managing Director Paul Seller will take on the role of Managing Director of the Ricardo Rail business and will report into the CEO of Ricardo. In parallel with the establishment of the Ricardo Rail business, a standalone assurance management entity, to be known as Ricardo Certification Ltd, will also be established to hold and manage all future accreditations, enabling the complete independence of assurance services. A transitional services agreement will remain in place throughout the transition of LR Rail from LR Group to Ricardo.

Notes:

* For the year ended 30 June 2014, depreciation for LR Rail was £0.2m.

Analyst and investor conference call

Dave Shemmans, CEO and Ian Gibson, CFO will be hosting a conference call for analysts and investors today at 9.30am. The call may be accessed by dialling [phone]. Participants should request to join the Ricardo plc Analyst & Investor Conference call using the password: Ricardo. Participants are recommended to dial in 5 minutes before start time to allow for registration. In case of any questions please contact Newgate Communications on [e-mail] or [phone].

A presentation will be made available on the Investor Relations section of Ricardo's website shortly before the start of the conference call.

Further enquiries:
Ricardo plc	Tel: [phone]
Dave Shemmans, Chief Executive Officer Ian Gibson, Chief Financial Officer Website: www.ricardo.com or http://rail.ricardo.com/
Newgate Communications Fergus Wylie / Madeleine Palmstierna     / Edward Treadwell	Tel: [phone] [e-mail]

Notes:

About Lloyd's Register Rail

Lloyd's Register Rail is a leading international specialist rail consultancy and independent assurance business with a proven track record of providing expert independent assurance and consultancy services to organisations across the industry to help develop, assure and improve the safety, quality and performance of the world's rail systems. Lloyd's Register Rail has an international reach and presence through a network of 17 regional offices across Europe, Asia and the Middle East, with a team of over 440 rail engineers and specialists.

 

END

 

 

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