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Ricardo PLC (RCDO)

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Wednesday 11 November, 2020

Ricardo PLC

Trading Update

RNS Number : 9067E
Ricardo PLC
11 November 2020
 

 

 

 

 

11 November 2020

 

Ricardo plc

 

Ricardo plc ("Ricardo") is a 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 following the first quarter's trading to 30 September 2020. Ricardo plans to announce its half year results in February 2021.

 

Trading update

 

In the quarter to 30 September 2020, overall order intake was strong at £105.2m, up 19% on the pre-COVID quarter to 30 September 2019 ("the prior period"). This is also up on the £70m of orders received in the quarter ended 30 June 2020. All segments delivered an increase in order intake compared to the prior period except for Performance Products which, as expected, received fewer orders in respect of McLaren engines.

 

Whilst the level of orders received in the first quarter has been strong, the automotive order intake did include over £20m in respect of two large multi-year programmes which are workable over a longer period. In addition, we continue to experience challenging conditions in Automotive & Industrial (A&I) EMEA and expect the order intake that is workable in the short term to remain at a low level in the remaining months of H1. With this mix of orders received and forecast, we expect the Group's revenue and trading performance to be materially more weighted towards the second half of the current financial year than in previous years. Historically operating profit phasing has typically been 40% H1 and 60% H2 and in FY21, as we emerge from the impact of COVID 19, we expect this to be approximately 25% H1 and 75% H2[1] including a contribution from the expected HMMWV fleet retrofit contract in H2, as referred to below.

 

Energy & Environment continues to perform well and secured £11.7m of orders, up 29% on the prior period. Orders were received in both the UK and internationally and were particularly strong within the Evidence and Policy Business Unit. Here, within the Water Team, we are seeing growth in orders from UK water companies, with our skills in strategic water resource planning in demand at the start of the new Asset Management Planning (AMP) cycle. In the Policy area, the order intake has been driven by additional support for the European Commission with their focus on the European Green Deal and challenging 2030 decarbonisation targets. 

 

Rail received a good level of orders at £26.9m, 40% ahead of the prior period. Within this, order intake was robust in Asia, Australia and the Middle East and included multi-year programmes for Qatar Rail and Sydney Metro. In the Netherlands and the UK, customers remain cautious in the current climate with lower train passenger levels and consulting orders continuing at a low level as a result. Certification orders in these territories remain resilient.

 

Defense secured £14.2m of orders, up 141% on the prior period. Orders were primarily received in the Engineering Services part of the business and included the first three years of the project for the US Army's Infantry Support Vehicle, which we are delivering alongside GM as their strategic partner. With respect to the HMMWV fleet retrofit programme, the approval of the US President's FY21 Defense Budget, which was scheduled for 1 October 2020, has been delayed and is now expected in December 2020.

 

Performance Products, including our Software business, received orders of £13.2m, down 42% on the prior period. The reduced level of orders was in line with our expectations and primarily reflects a lower level of orders from McLaren, which is now steadily increasing production following the shut-down in the quarter ended 30 June 2020.

 

A&I saw a 27% increase in order intake to £39.2m. In China and EMEA, order intake was similar to the prior period, whilst in the US we secured a higher level of orders. However, over £20m of the orders received are in respect of two large multi-year programmes and, excluding these two programmes, the workable amount remains low in A&I EMEA in particular. The EMEA Automotive market continues to be challenging and although there is a solid pipeline, the placing of orders by customers remains slow. As a result, we have implemented additional cost saving actions and have reduced headcount in our A&I EMEA business by a further 120 people in October.

 

Cashflow

 

We continue to maintain a strong focus on cash and in the six months to 31 December 2020 we expect a small net cash outflow in addition to the payment of £5.2m of earnout costs in relation to previous acquisitions and approximately £3m of redundancy costs.

 

 

Dave Shemmans, Chief Executive Officer, commented :

 

I am pleased with the level of orders received in the first quarter, being an increase on the same pre-COVID period last year. However, with the mix of orders received and forecast within A&I, together with the continuing challenging conditions in A&I EMEA, we expect the Group's revenue and trading performance to be materially more weighted towards the second half of the current financial year than in previous years[2].

 

Energy & Environment continues to be our strongest performing business, Performance Products has re-commenced engine assembly for McLaren, and the Rail business has won some excellent long-term projects in Australia and the Middle East. Our Defense team awaits the decision in respect of the US President's FY21 Defense budget, which has been delayed and is now expected in December 2020. A&I EMEA continues to receive a low level of orders that are workable in the short term, so we have taken further action to reduce costs.

 

The economic outlook continues to be uncertain and we approach the year ahead with a degree of caution, with our non-Automotive businesses providing some resilience against continuing challenges in the Automotive segment. Nevertheless, we have established a firm and diversified platform for our business and looking forward I remain confident of the prospects for the Group.

 

 

 

 

 

 

 

 

 

This announcement contains inside information.

 

The Ricardo plc LEI number is 213800ZNYAY35F4XB814

 

Further enquiries: 

 

Ricardo plc

 

 

Dave Shemmans, Chief Executive Officer

Tel:

 01273 455611

Ian Gibson, Chief Financial Officer

 

 

 

 

 

Website: www.ricardo.com

 

 

 

 

 

Newgate Communications

Tel:

 020 7653 9842

Adam Lloyd

 

 

 

 

 

[1] This is an estimate only and not intended to be a forecast of actual results or profits

[2] This is an estimate only and not intended to be a forecast of actual results or profits

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