REG - Ricardo PLC - Preliminary Results
11/09/2024 07:00
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RNS Number : 6246D Ricardo PLC 11 September 2024
11 September
2024
This announcement 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.
Ricardo plc
Report for the year ended 30 June 2024 ("FY 2023/24")
Good growth and excellent cash performance
HIGHLIGHTS
· A year of continued good growth and excellent cash performance,
delivering in line with the board's expectations
· Order intake down 5% (3% constant currency) on the back of record
order intake in FY 2022/23
· Continued variability of order timing and order volatility in some
end markets
· Revenue from continuing operations up 7% (9% constant currency) owing
to good sales momentum
· Strong recovery in H2 profit performance, with Automotive and
Industrial returning to profit
· Actions to accelerate the operating model transformation underpinned
H2 profit recovery and delivered improving margins
· Underlying operating profit from continuing operations increased by
£4.8m (£5.6m constant currency)
· On track to double underlying operating profit in the five years to
FY27
· A rigorous focus on working capital management delivered 119%
underlying cash conversion and reduced net debt to £59.6m
· Group leverage on target at 1.25x
· Final dividend of 8.9p proposed giving total dividend for FY 2023/24
of 12.7p (FY 2022/23 11.96p)
· Robust year end order book and good pipeline visibility gives
confidence for FY 2024/25
Growth/ (decline)% Constant Currency
Growth/ (decline)%((6))
2024 2023
Continuing operations
Order intake £m 496.1 521.5 (4.9) (3.0)
Order book £m 396.5 395.3 0.3 0.5
Revenue £m 474.7 445.2 6.6 9.1
Underlying((1))
- Operating profit £m 38.8 34.0 14.1 16.9
- Operating profit margin % 8.2 7.6 0.6pp 0.6pp
- Profit before tax £m 30.5 27.9 9.3 12.5
Statutory
- Operating profit/(loss) £m 12.8 (1.9) 773.7 740.0
- Operating profit/(loss) margin % 2.7 (0.4) 3.1pp 3.2pp
- Profit/(loss) before tax £m 4.3 (8.0) 153.8 153.8
Total
Underlying((1)) cash conversion((2)) % 118.9 66.7 52.2pp
Cash conversion((2)) % 125.4 50.7 74.7pp
Basic underlying earnings per share((3)) p 35.9 33.4 7.5
Basic reported profit/(loss) earnings per share p 1.1 (8.7) 112.6
Closing
Net debt((4)) £m 59.6 62.1 (4.0)
Headcount((5)) no. 2,872 2,919 (1.6)
Dividend per share (paid and proposed) p 12.70 11.96 6.2
Continuing operations exclude the results of Ricardo Software, which was sold
on 1 August 2022.
References are defined in the glossary of terms below.
Commenting on the results, Graham Ritchie, Chief Executive Officer, said:
"This was a year of material change for Ricardo, whilst still delivering
consistent financial performance in line with commitments. This was achieved
with strong momentum in H2.
During the year, we have continued to refine and reposition our portfolio from
services to solutions, which allows us to increase our strategic consulting
expertise while also investing significantly in our digital applications. We
are seeing variability in some end markets but continue to focus on
consistency in organic order growth.
Strong progress has been made with the restructuring programme to deliver One
Ricardo and drive further efficiency across the business. All enabling
functions are now fully centralised and right sized to deliver our future
business, while we have further optimised our flexible resourcing model to
support effective programme delivery and manage order fluctuations in A&I.
At Ricardo, we are more conscious than ever of the importance of the work that
we do, demonstrating the commitment to being purpose-led in the projects that
we work on. Our record order book for the next twelve months provides
confidence in delivering further good growth in the year ahead."
About Ricardo plc
Ricardo plc is a global strategic, environmental, and engineering consulting
company, listed on the London Stock Exchange. With over 100 years of
engineering excellence and circa 3,000 employees in more than 20 countries, we
provide exceptional levels of expertise in delivering innovative cross-sector
sustainable outcomes to support energy transition and environmental services,
together with safe and smart mobility. Our global team of consultants,
environmental specialists, engineers, and scientists support our clients to
solve the most complex and dynamic challenges to help achieve a safe and
sustainable world. Visit www.ricardo.com
Analyst and Retail Investor presentation
There will be a presentation for analysts and investors relating to the
Group's results for the year ended 30 June 2024 at 9:30am on Wednesday 11
September. A recording of the presentation will be available online to all
investors from Thursday 12 September at
https://ricardo.com/investors/financial-reporting/results-presentations
(https://ricardo.com/investors/financial-reporting/results-presentations) .
In addition, a live presentation session hosted by Ricardo's CEO, Graham
Ritchie and CFO, Judith Cottrell, will be held via 'Investor Meet Company' for
existing and potential investors at 16:00 on Tuesday 17 September.
Questions can be submitted pre-event via your Investor Meet Company dashboard
up until Monday 16 September 2024, 09:00, or at any time during the live
presentation.
Investors can sign up to Investor Meet Company and add to meet Ricardo plc
via: https://www.investormeetcompany.com/ricardo-plc/register-investor
Further enquiries
Ricardo plc
Judith Cottrell Tel +44 (0) 12273 455611
Natasha Perfect Email investors@ricardo.com (mailto:investors@ricardo.com)
SEC Newgate
Elisabeth Cowell Tel +44 (0) 207 680 6882
Ian Silvera Email Ricardo@secnewgate.co.uk (mailto:Ricardo@secnewgate.co.uk)
Cautionary Statement
Note: Certain statements in this press release are forward-looking. Although
these forward-looking statements are made in good faith based on the
information available to the Directors at the time of their approval of the
press release, we can give no assurance that these expectations will prove to
have been correct. Because these statements involve risks and uncertainties,
actual results may differ materially from those expressed or implied by these
forward-looking statements. We undertake no obligation to update any
forward-looking statements whether as a result of new information, future
events or otherwise.
Glossary of terms
Cross-referenced to superscript in the financial tables and commentary
(1) Underlying measures exclude the impact on statutory measures of
specific adjusting items as set out in Note 4. Underlying measures are
considered to provide a more useful indication of underlying performance and
trends over time.
(2) Cash conversion is a key measure of the Group's cash generation and
measures the conversion of profit into cash. This is the reported cash
generated from operations (defined as operating cash flow, less movements in
net working capital and defined benefit pension deficit contributions) divided
by earnings before interest, tax, depreciation and amortisation (EBITDA),
expressed as a percentage.
(3) Underlying earnings also exclude a tax credit to statutory earnings
of £4.6m (FY 2022/23: £2.3m) for the specific adjusting items in Note 4.
(4) Net debt, as set out in Note 8, is defined as current and
non-current borrowings less cash and cash equivalents, including hire purchase
agreements, but excluding any impact of IFRS 16 lease liabilities and
restricted cash. Management believes this definition is the most appropriate
for monitoring the indebtedness of the Group and is consistent with the
treatment in the Group's banking agreements.
(5) Headcount is calculated as the number of employees on the payroll at
the reporting date and includes subcontractors on a full-time equivalent
basis.
(6) Constant currency growth/decline is calculated by translating the
result for the prior period using foreign currency exchange rates applicable
to the current period. This provides an indication of the growth/decline of
the business, excluding the impact of foreign exchange.
Trading summary
Overall, Ricardo has performed in line with the board's expectations in FY
2023/24, with a strong improvement in underlying operating profit in the
second half. Revenue was £474.7m, an increase of 7% on the prior period on a
continuing basis, excluding the results of Ricardo Software which was sold in
the prior year (9% on a constant-currency basis). Underlying operating profit
was £38.8m and underlying profit before tax was £30.5m, representing growth
of 14% and 9% on the prior period respectively on a continuing basis (17% and
13% on a constant-currency basis).
FY 2023/24 saw a strong recovery in profit in the second half, with improved
operational efficiencies following the acceleration of our operating model
transformation, which saw us centralise enabling functions and increase our
use of flexible resources. Order intake for the Group was £496.1m, down 5% on
the prior year's record order intake (down 3% on a constant currency basis).
This primarily reflects the new programme wins in the prior year in
Performance Products and the delay of large orders in our Automotive &
Industrial (A&I) businesses.
Reported operating profit from continuing operations, after taking specific
adjusting items into consideration, was £12.8m (FY 2022/23: loss £1.9m) and
reported profit before tax from continuing operations was £4.3m (FY 2022/23:
loss £8.0m). FY 2023/24 reported operating profit included £26.0m of
specific adjusting items (profit before tax: £26.2m) predominately related to
the implementation of our strategic priorities of portfolio transition and
operational efficiency (FY 2022/23: £35.9m). As a result of the Group's
persistent and rigorous focus on working capital management, cash generation
for the full year continues to deliver strong returns, delivering net debt at
30 June 2024 of £59.6m, a reduction of £2.5m on the 30 June 2023 position of
£62.1m. This was after £15.4m of acquisition-related payments, including
earn outs relating to the acquisitions of E3 Modelling SA (E3M) and Aither Pty
(Aither), and £6.4m of restructuring costs, including costs incurred in
accelerating our operating model transformation, partially offset by a £3.2m
cash receipt from the sale and leaseback of a building at the Shoreham
Technical Centre, excluding fees.
Underlying cash conversion improved from 66.7% (restated) in FY 2022/23 to
118.9%. Reported cash conversion was 125.4%, (FY 2022/23: 50.7% (restated))
after taking into account the cash impact of specific adjusting items.
Headline trading performance
Underlying((1)) Reported
External revenue Operating profit Profit before tax Operating profit/(loss) (Loss)/
profit
before tax
£m £m £m £m £m
2024
Continuing operations (a) 474.7 38.8 30.5 12.8 4.3
Less: performance of acquisitions (12.6) (2.7) (2.3) (0.7) (0.3)
Continuing operations - organic (b) 462.1 36.1 28.2 12.1 4.0
2023
Total 446.0 34.5 28.4 6.0 (0.1)
Less: discontinued operation (0.8) (0.5) (0.5) (7.9) (7.9)
Continuing operations (a) 445.2 34.0 27.9 (1.9) (8.0)
Less performance of acquisitions (4.8) (1.1) (1.1) 4.4 4.4
Continuing operations - organic 440.4 32.9 26.8 2.5 (3.6)
Growth (%) - Total 6% 12% 7% 113% 4,400%
Growth (%) - Continuing operations 7% 14% 9% 774% 154%
Growth (%) - Continuing organic 5% 10% 5% 384% 211%
Constant currency growth((6)) (%) - Continuing operations 9% 17% 13% 774% 154%
References in superscript are defined in the glossary of terms.
(a) Growth from continuing operations excludes the results of the Software
operating segment which was sold on 1 August 2022
(b) Organic growth is calculated as the growth in the result for the
current year compared to the prior year, after excluding the impact of
acquisitions or disposals.
FY 2023/24 and FY 2022/23 include the results of E3M and Aither, which were
acquired in January 2023 and March 2023 respectively. In the current year,
these acquisitions contributed £12.6m of revenue and £2.7m of underlying
operating profit. In the prior year, they contributed £4.8m of revenue and
£1.1m of underlying operating profit. In the prior year, Ricardo divested its
Software business unit, Ricardo Software, which contributed £0.8m of revenue
and £0.5m of underlying operating profit in that year.
Operating segments summary: Order intake and revenue
2023 2023
2024 Reported At constant currency((6))
Order intake Revenue Order intake Revenue Order intake Revenue
£m £m £m £m £m £m
EE 116.9 103.3 111.5 88.5 110.1 87.4
Rail 95.1 77.4 89.2 73.5 86.0 70.8
A&I - Emerging 52.4 58.6 84.3 82.3 83.0 80.4
Environmental & Energy Transition 264.4 239.3 285.0 244.3 279.1 238.6
Defense 125.4 123.4 85.0 88.6 81.3 84.8
PP 77.1 83.4 115.3 84.7 115.3 84.7
A&I - Established 29.2 28.6 36.2 27.6 35.6 27.0
Established Mobility 231.7 235.4 236.5 200.9 232.2 196.5
Total - continuing operations 496.1 474.7 521.5 445.2 511.3 435.1
Discontinued operation - - 0.5 0.8 0.5 0.8
Total 496.1 474.7 522.0 446.0 511.8 435.9
References in superscript are defined in the glossary of terms.
Operating segments summary: Underlaying operating profit
2024 2023 2023 at constant currency((6))
Underlying((1)) operating profit/(loss) Underlying((1)) operating profit/(loss) Underlying((1)) operating profit/(loss) Underlying((1)) operating profit/(loss) Underlying((1)) operating profit/(loss) Underlying((1)) operating profit/(loss)
£m margin % £m margin % £m margin %
EE 17.6 17.0 16.0 18.1 15.8 18.1
Rail 8.9 11.5 8.0 10.9 7.8 11.0
A&I - Emerging 3.4 5.8 10.6 12.9 10.6 13.2
Environmental & Energy Transition 29.9 12.5 34.6 14.2 34.2 14.3
Defense 23.5 19.0 13.4 15.1 12.9 15.2
PP 6.7 8.0 9.0 10.6 9.0 10.6
A&I - Established (3.3) (11.5) (5.8) (21.0) (5.7) (21.1)
Established Mobility 26.9 11.4 16.6 8.3 16.2 8.2
Operating segments - continuing operations 56.8 12.0 51.2 11.5 50.4 11.6
Plc costs (18.0) (17.2) (17.2)
Total - continuing operations 38.8 8.2 34.0 7.6 33.2 7.6
Discontinued operation - - 0.5 62.5 0.5 62.5
Total 38.8 8.2 34.5 7.7 33.7 7.7
References in superscript are defined in the glossary of terms.
Environmental and Energy Transition portfolio
• Order intake: down 7% (constant currency: down 5%)
• Revenue: down 2% (constant currency: flat)
• Underlying operating profit: down 14% (constant currency: down
13%)
• Underlying operating profit margin: 12.5% (FY 2022/23: 14.3%
at constant currency)
Energy and Environment (EE) continued to show good momentum, with overall
growth in order intake, revenue and operating profit, boosted by the
performance of the acquisitions made in FY 2022/23 and strong demand in
policy, strategy and economics and air quality and environment. Performance
was tempered in water advisory services, which was impacted by project
disruptions in end markets.
Rail delivered good growth in orders and executed consistently against its
order book to deliver strong revenue growth. With increased revenue from
recent contracts wins in Australia, Asia and North America and improved
operational leverage, underlying operating profit margins improved from 11.0%
to 11.5% and underlying operating profit grew by 14% (constant currency).
Order intake, revenue and operating profit declined year-on-year in Emerging
A&I due to delays and volatility in order intake as our diversified client
base manages the complexities of energy transition. However, we saw profit
recovery in the second half of the year, driven by the restructuring
initiatives and cost actions which took place. These were focused on
accelerating the implementation of its flexible resourcing model, allowing for
the business to be more resilient going forward in responding to changes
within its end markets. The Emerging A&I order book remains healthy at
£43.3m, albeit lower than in June 2023 (£55.0m). Whilst the business will
experience short-term volatility, we remain confident about the long-term
growth prospects.
Established Mobility portfolio
• Order intake: down 2% (constant currency: flat)
• Revenue: up 17% (constant currency: up 20%)
• Underlying operating profit: up 62% (constant currency: up
66%)
• Underlying operating profit margin: 11.4% (FY 2022/23: 8.2% at
constant currency)
Defense performed very strongly in the period, with significant growth in
order intake (up 54% on a constant currency basis), revenue (up 46%) and
underlying operating profit (up 82%). Defense delivered 13,100 anti-lock
braking systems/electronic stability control (ABS/ESC) kits in FY 2023/24 (FY
2022/23: 8,707 kits). In addition, there was good growth in the Technical
Solutions consultancy business, including Field Support Services (the
sustainment of ABS/ESC kits in the field).
Performance Products (PP) benefited from £40m of multi-year transmission
programme orders in FY 2022/23 and were working these orders in FY 2023/24. As
expected, this resulted in lower order intake in FY 2023/24. With lower
volumes in powertrain, due to revised client requirements and reduced activity
in the transmission business, with two major programmes ramping down and one
new programme in ramp up phase, revenue was down by 2% on prior year. This
resulted in lower underlying operating profit overall, but with a strong
profit in the second half, benefiting from a ramp up to complete client
transmission projects.
Order intake in Established A&I was down 18% on prior year on a constant
currency basis. Although there were delays in the timing of orders, order
intake improved in the second half of the year which drove overall growth in
revenue in the year of 6% on a constant currency basis. Actions taken to
accelerate the move to flexible resources and reduce the fixed cost base
resulted in the business returning to a small profit position in the second
half of the year. The overall underlying operating loss for the year was
£3.3m compared to an underlying loss of £5.7m in FY 2022/23, on a constant
currency basis.
Cash performance
Net debt: decreased £2.5m to £59.6m (FY 2022/23: £62.1m). Underlying cash
from operations was an inflow of £63.4m for the year. Within this, underlying
net working capital reduced by £8.8m. In FY 2023/24, the Group paid £15.4m
in respect of acquisition and strategic project related costs, including a
total of £13.7m of acquisition-related and earn out payments to the former
owners of E3M and Aither; £6.4m of cash costs in relation to restructuring
activities to accelerate our operating model transformation through
centralising enabling functions and increasing our use of flexible resources;
and £0.5m for external costs incurred for planning activities to implement a
new ERP system. Partially offsetting these, the Group received £3.2m for the
sale and leaseback of a property at the Shoreham Technical Centre.
Basis of preparation
These consolidated financial statements of the Ricardo plc Group (Group) have
been prepared in accordance with UK adopted international accounting
standards. The Group's principal accounting policies are detailed in Note 1 to
the Group financial statements. Those accounting policies that have been
identified as being particularly sensitive to complex or subjective judgements
or estimates are disclosed in Note 1(d) to the Group financial statements.
Reported results represent the Group's overall performance in accordance with
IFRS. The Group also uses a number of alternative performance measures (APMs)
in addition to those reported under IFRS. Ricardo provides guidance to the
investor community based on underlying results.
The underlying results and other APMs may be considered in addition to, but
not as a substitute for or superior to, information presented in accordance
with IFRS. Explanations of how they are calculated and how they are reconciled
to an IFRS statutory measure are provided in Note 1. Underlying results
include the benefits of the results of acquisitions and major restructuring
programmes but exclude significant costs (such as the amortisation of acquired
intangibles, acquisition-related expenditure, reorganisation costs and other
specific adjusting items).
Ricardo believes that the underlying results, when considered together with
the reported results, provide investors, analysts and other stakeholders with
helpful complementary information to better understand the financial
performance and position of the Group.
Specific adjusting items
As set out in more detail in Note 4, the Group's total underlying profit
before tax excludes £26.2m of costs incurred during the period that have been
charged to the income statement as specific adjusting items (FY 2022/23:
£35.9m). In line with the Group's policy, these items have been recognised as
specific adjusting items, due to their nature or significance of their amount,
so as to provide further clarity over the financial performance.
2024 2023
£m £m
Underlying((1)) profit before tax from continuing operations 30.5 27.9
Amortisation of acquired intangibles (4.8) (4.6)
Acquisition and strategic project-related costs (12.2) (6.2)
Restructuring costs:
- A&I - impairment of non-financial assets - (18.7)
- A&I - restructuring costs (3.4) (4.7)
- Rail & EE - restructuring costs (3.3) (1.5)
- Group - restructuring costs (1.7) (0.2)
ERP implementation costs (0.5) -
Sale and leaseback costs (0.3) -
Total specific adjusting items from continuing operations (26.2) (35.9)
Reported profit/(loss) before tax from continuing operations 4.3 (8.0)
Specific adjusting items from discontinued operation
Disposal of discontinued operation - 7.4
Amortisation of acquired intangibles was £4.8m in the current year, compared
to £4.6m in FY 2022/23.
Acquisition and strategic project-related costs of £12.2m were incurred in
the year (FY 2022/23: £6.2m). These included: £5.0m for deferred
consideration and £0.5m of integration costs in relation to the acquisition
of Aither, acquired in March 2023 (cash cost: £8.3m); £4.1m for deferred
consideration and £0.2m of integration costs in respect of the acquisition of
E3M, acquired in January 2023 (cash cost: £6.1m, which included £1.3m of
payments in relation to items which were accrued for at completion under the
completion adjustment mechanism); £0.1m of deferred consideration in relation
to the acquisition of Inside Infrastructure Pty (Inside Infrastructure),
acquired March 2022 (cash cost: £0.6m); and £2.3m of external fees in
relation to other M&A and strategic projects (cash cost: £0.4m).
The prior year included: £3.2m for deferred consideration and £0.4m of
external fees and integration costs for Aither (cash cost: £0.2m); £0.9m for
deferred consideration and £0.2m of external fees and integration costs for
E3M (cash cost: £0.1m); £0.4m of deferred consideration and £0.4m of
integration costs for Inside Infrastructure (cash cost: £0.5m); and £0.7m of
other M&A and strategic projects (cash cost: £0.8m).
Restructuring costs:
A&I Impairment of non-financial assets: Non-cash goodwill and asset
impairment charges of £18.7m were recognised in the prior year within the
Established A&I operating segment. As a result of the performance of this
segment in the year to 30 June 2023, the impact of economic uncertainty and
the continuing technological change in the automotive sector, the future
projections and discounted cash flows for the operating segment were
reassessed.
The resulting value-in-use did not support the carrying value of the
associated assets, resulting in an impairment of all of the goodwill
associated with Established A&I segment (£5.2m), together with £1.8m of
intangible assets and £11.7m of property, plant and equipment.
Other restructuring costs: As part of the Group's actions to accelerate its
operating model transformation, £8.4m of restructuring costs were incurred.
The total cash cost of restructuring in the year was £6.4m. These costs have
been included within specific adjusting items as they are significant in
quantum and would otherwise distort the underlying trading performance of the
Group, and included:
· A&I: £3.4m, including £1.8m of redundancy costs, £0.4m of
external contractor and legal fees directly related to the process, and £1.2m
of property exit and asset write down costs. The prior year cost included
£2.4m of redundancy costs to right-size the business in response to the
impact of the economic uncertainty above, £1.1m of losses on disposal of
non-current assets, £0.2m of property exit costs and £1.0m of external fees
and contractor costs incurred directly in relation to the transformation
activities.
· Rail and EE: £3.2m of redundancy costs, plus £0.1m of external
legal and other fees incurred directly as a result of the process. A charge of
£1.5m was recognised in Rail and EE in respect of the restructuring of the
senior management structure in the prior year.
· Group: £1.0m of redundancy costs, together with £0.7m of
external legal and other fees incurred directly as a result of the process. A
charge of £0.2m was recognised in Group in the prior year in relation to
restructuring of the Group functions.
ERP implementation: Costs of £0.5m were incurred in the year in relation to
planning activities to implement a new ERP system. These were classified as a
specific adjusting item as they are not reflective of the underlying
performance of the business in the period.
Sale and leaseback costs: External fees of £0.3m were incurred in the year in
relation to the sale and leaseback of part of the Shoreham Technical Centre.
These costs were classified as a specific adjusting item as they are not
reflective of the underlying performance of the Group.
Gain on sale of Ricardo Software (recognised within the discontinued
operation): In the prior year, net gain of £7.4m was recognised in relation
to the disposal of Ricardo Software, completed on 1 August 2022 (the net cash
impact was an inflow of £11.9m). Per the terms of the sale, up to a further
£2.4m (USD 3.0m) was receivable based on Ricardo Software achieving certain
revenue targets in the 12-month period post-sale. These targets were not
achieved and no further monies were paid.
Research and Development (R&D) and capital investment
The Group continues to invest in R&D and spent £11.3m (FY 2022/23:
£14.6m) before government grant income of £1.8m (FY 2022/23: £6.8m).
Development costs capitalised in this year were £6.3m (FY 2022/23: £5.4m),
reflecting continued investment in electrification, hydrogen and carbon
capture (BIOCCUS) solutions within the Emerging A&I segment, together with
digital and air quality models and solutions within EE and R&D projects
within Defense.
Capital expenditure on property, plant and equipment, excluding right-of-use
assets, was £4.1m (FY 2022/23: £6.2m), reflecting targeted investment in our
business operations, including hydrogen and electrical capability in the
Emerging A&I segment.
Net finance costs
Finance income was £1.1m (FY 2022/23: £1.0m) and finance costs were £9.6m
(FY 2022/23: £7.1m) for the year, giving net finance costs of £8.5m (FY
2022/23: £6.1m). The increase in costs reflects an increase in the SONIA
interest rate during the current year.
Taxation
The underlying effective tax rate for the year was 26.6% for the year (FY
2022/23: 26.1%). The reported effective tax rate was 81.4% (FY 2022/23:
5,100%). This unusually high reported effective rate in the current and prior
year reflected a number of non-deductible or non-taxable specific adjusting
items, including impairments and the disposal of the Software business in FY
2022/23.
Earnings per share
Basic earnings per share was 1.1p (FY 2022/23: loss of 8.7p). The Directors
consider that underlying earnings per share provides a useful indication of
underlying performance and trends over time. Underlying basic earnings per
share for the year was 35.9p (FY 2022/23: 33.4p). The calculation of basic
earnings per share, with a reconciliation to an underlying basic earnings per
share, which excludes the impact (net of tax) of specific adjusting items, is
disclosed in Note 5.
Dividend
As set out in more detail in Note 6, the board has declared a final dividend
of 8.9p per share (FY 2022/23: 8.61p). The dividend will be paid gross on 22
November 2024 to holders of ordinary shares on the Company's register of
members on 1 November 2024.
Goodwill
At 30 June 2024, the Group had total goodwill of £96.0m (FY 2022/23:
£96.1m). The carrying value of goodwill is fully supported by the recoverable
amounts for all cash-generating units.
Net debt and banking facilities
Net debt at 30 June 2024 comprised cash and cash equivalents, net of any
restricted cash, of £47.3m (FY 2022/23: £49.8m), and borrowing and
overdrafts, including hire purchase liabilities and net of capitalised debt
issuance costs, of £106.9m (FY 2022/23: £111.9m).
The Group funds its operations via a Revolving Credit Facility (RCF) of
£150m, with a £50m uncommitted accordion, which provides funding through to
August 2026, alongside the Group's uncommitted overdraft facilities of
£16.1m. At 30 June 2024, the amount undrawn on the RCF was £47.0m. This,
together with the net cash held (net of utilised overdraft) of £43.0m, and
£16.1m of unutilised overdraft facilities, provided the Group with total cash
and liquidity of £106.1m.
The Group's Adjusted Leverage ratio (defined as net debt over EBITDA for the
last 12 months, excluding the impact of specific adjusting items and IFRS 16
Leases) was 1.25 x as at 30 June 2024. The Adjusted Leverage covenant is a
maximum of 3.0x.
The Interest Cover ratio (defined as EBITDA for the last 12 months, excluding
the impact of specific adjusting items and IFRS 16, over net finance costs),
was 5.86x at 30 June 2024. The Interest Cover covenant limit is a minimum of
4.0x. Further details are provided in Note 8.
Foreign exchange
On consolidation, revenue and costs are translated at the average exchange
rates for the year. The Group is exposed to movements in the Pound Sterling
exchange rate, principally from work carried out with clients that transact in
Euros, US Dollars, Australian Dollars and Chinese Renminbi. Had the prior year
results been translated at current year exchange rates, revenue from
continuing operations would have been £10.1m (2.3%) lower, underlying
operating profit would have been £0.8m (2.3%) lower and underlying profit
before tax would have been £0.8m (2.9%) lower.
Pensions
The Group's defined benefit pension scheme operates within the UK. The fair
value of the scheme's assets at the end of the year was £105.4m (FY 2022/23:
£104.6m) and the present value of the scheme's obligations was £97.4m (FY
2022/23: £92.0m). The pre-tax surplus, measured in accordance with IAS 19, at
30 June 2024 was £8.0m (FY 2022/23: £12.6m). This is predominantly due to
the experience loss from incorporating the census data from the 5 April 2023
statutory funding valuation into the IAS19 liability calculations compared to
the roll forward of the IAS19 liabilities from the Prior Year End, which were
themselves rolled forward from the 5 April 2020 census data. The discount rate
also reduced during the year, partly due to the impact of moving to the
expanded dataset version of the Mercer Yield Curve, which resulted in an
increase in the liabilities. Ricardo paid £0.8m of cash contributions into
the scheme during the year (FY 2022/23: £1.8m), with the final payment of
£0.2m made on 1 November 2023.
Looking forward
Ricardo is gaining good momentum to deliver its five-year strategic plan
communicated in May 2022. We enter the new fiscal year with a similar order
book level to the record one we achieved last year, and, through our solid
pipeline visibility, we have good confidence in performance as we enter FY
2024/25.
With our expertise in environmental and energy transition, there is a real
opportunity for us to do even more in supporting governments and the private
sector in delivering a net zero pathway for future generations.
We also know that for us to be a pivotal part of change, we have to continue
to grow and improve our business. By doing so, we can extend our reach,
supporting even more clients and ensuring that our teams across the world
continue to deliver meaningful work, knowing that the projects are delivering
maximum impact.
The more we can do to accelerate our transformation, the more value we can
create for all our stakeholders.
By order of the board:
Graham Ritchie
Judith Cottrell
Chief Executive Officer
Chief
Financial Officer
10 September 2024
Environmental and Energy Transition portfolio
ENERGY AND ENVIRONMENT
Energy and Environment (EE) works with clients across a wide range of sectors
and geographies to deliver robust data-driven solutions to solve complex
energy-transition and environmental challenges. Ricardo's depth of
environmental and energy expertise supports our clients across the value
chain, from policy and strategy to implementing impactful solutions. We have
focused our portfolio on market-facing solutions that include policy, strategy
and economics; air, land and water management; corporate sustainability; and
energy infrastructure transition including economic modelling tools.
Growth drivers
• Increasing focus on sustainability in the corporate sector
driven by the ESG agenda.
• Amplified interest in climate and carbon following COP26.
• Innovation in electricity and heat as well as in key
technology areas such as hydrogen.
Financial and operational highlights
Historical rates Constant currency((6))
2024 2023 Change 2023 Change
£m £m % £m %
Order intake (£m) 116.9 111.5 4.8 110.1 6.2
Order book (£m) 99.1 87.6 13.1 87.5 13.3
Revenue (£m) 103.3 88.5 16.7 87.4 18.2
Underlying((1)) operating profit (£m) 17.6 16.0 10.0 15.8 11.4
Underlying((1)) operating profit margin (%) 17.0 18.1 (1.1pp) 18.1 (1.1pp)
Headcount((5)) (no.) 984 971 1.3 971 1.3
References in superscript are defined in the glossary of terms above.
Performance
Overall demand for our solutions resulted in growth in order intake of 6% from
£110.1m in FY 2022/23 to £116.9m in FY 2023/24, on a constant-currency
basis. Headline EE revenue increased by 18 % on a constant currency basis,
from £87.4m to £103.3m. Excluding Aither and E3M, Ricardo's most recent
acquisitions, revenue increased by 10% on an organic basis. The growth has
been driven by strong demand across our policy, strategy and economics (PSE),
air quality and environment (AQE) and our economic and environmental modelling
capabilities.
In PSE we have secured both long-term renewals and new large-scale policy
contracts with the European Commission and international governments,
delivering advisory services to support major policy development to reduce the
impacts of climate change. The AQE practice secured significant long-term
contracts in the Middle East, which included a new contract that represented
EE's largest order value to date. In addition to international growth, the AQE
team continues to see strong performance in its established markets, with
renewals of high‑value projects for the UK government and regional
authorities.
Since its acquisition in January 2023, there has also been strong demand for
the energy, economic and environmental modelling capabilities of E3M. As with
PSE, we have seen the renewal of important existing contracts and the winning
of new contracts that are helping to expand our service delivery into new
areas. We have started to realise our acquisition ambitions, with E3M's
modelling capabilities being combined with our PSE, energy decarbonisation and
sustainable transport expertise, providing governments with enhanced solutions
to their complex environmental challenges. For example, E3M's models were
combined with our technical energy consultancy experts to support a national
renewable energy programme. One of E3M's macroeconomic models has recently
been named as the leading tool for analysing industrial transformation in a
new study published in Renewable and Sustainable Energy Reviews, a
peer-reviewed scientific journal.
During the year we consolidated our global water capabilities into a single
practice area, which includes Aither, acquired in March 2023. The new combined
water practice had a positive first half, securing large-scale orders with new
clients in the Middle East and Asia-Pacific. Performance was tempered in the
second half because of project disruptions in end-markets, specifically the
Middle East, impacting EE's overall margins.
Headline underlying operating profit increased from £15.8m in FY 2022/23 to
£ 17.6m in FY 2023/24, growth of 11% on a constant currency basis. Organic
underlying operating profit grew by 1%. Aither and E3M contributed £2.7m of
underlying operating profit in FY 2023/24 (FY 2022/23: £1.1m). Headline
underlying operating profit margin was 17.0% in FY 2023/24, 1.1pp down on the
prior year on a constant currency basis due to investment in organic growth
and lower utilisation in the second half in our global water practice due to
the project disruptions.
Outlook
Looking ahead, policy insights, economic analysis, strategy development and
environmental modelling will continue to be in high demand, which will also
lead to follow-on work in our other environmental practices. In addition,
investment in our capabilities in energy decarbonisation will open further
opportunities to support new and existing clients with the critical needs of
the energy infrastructure transition.
RAIL
Ricardo's rail experts provide specialist engineering and assurance services
to help clients navigate the industry's complex operational, commercial and
regulatory demands. Our experts work across a rail project's life cycle to
provide rail operators, infrastructure managers and original equipment
manufacturers with the highest safety, operational and environmental
standards.
Our rail expertise includes railway systems engineering, which supports our
clients in realising the intended performance of a complete and integrated
system; operations and maintenance, which support operators in optimising
day-to-day operations to deliver long-term efficiencies; and rail design and
engineering.
We support our clients in navigating the rail industry's developmental,
operational, commercial and regulatory demands.
Growth drivers
• Greater demand from governments and industry stakeholders for the
rail sector to exploit cleaner energy sources and adopt more sustainable
practices.
• Increasing demand for digital technologies to maximise capacity
and deliver efficiencies.
• A complex and evolving regulatory landscape that underpins increased
quality and safety requirements, where independent/objective expertise and
assurance is critical.
• Whole-system engineering and integration demands to realise the
full system performance.
Financial and operational highlights
Historical rates Constant currency((6))
2024 2023 Change 2023 Change
£m £m % £m %
Order intake (£m) 95.1 89.2 6.6 86.0 10.6
Order book (£m) 115.6 108.7 6.3 107.8 7.2
Revenue (£m) 77.4 73.5 5.3 70.8 9.3
Underlying((1)) operating profit (£m) 8.9 8.0 11.3 7.8 14.1
Underlying((1)) operating profit margin (%) 11.5 10.9 0.6pp 11.0 0.5pp
Headcount((5)) (no.) 544 514 5.8 514 5.8
References in superscript are defined in the glossary of terms above.
Performance
FY 2023/24 was a strong year for Rail with order intake of £95.1m, 11% up on
the previous year on a constant currency basis. Revenue was £77.4m, a 9%
increase on the prior year on a constant currency basis, and operating profit
was £8.9m, a 14% increase on a constant currency basis. Revenue increased
across all our major operating regions, except for the Middle East. The growth
during the year has been driven by successfully securing significant contracts
across our key operating regions. In Australia we secured wide range of
projects, which include a key long-term high-value contract to provide safety
oversight of the new fleet for Southeast Queensland as part of the Cross River
Rail infrastructure project, in anticipation of the 2032 Olympic Games.
In Asia, we won large-scale projects with Colas Rail, an international leader
in rail infrastructure, and Woojin Industrial Systems, both of which are key
projects that are supporting us in winning new work in new markets. The
positive trajectory in the Asia-Pacific region reflects positive returns on
the investment in business development capability made in the previous year.
We saw a decline in the Middle East resulting from the successful completion
of largescale projects during the year. This included our safety-assurance
support on the Doha Metro, which came to an end following the completion of
the 2022 FIFA World Cup. Our North American business has continued to grow at
pace. In Canada, we secured a combination of high-value project renewals with
key clients, demonstrating the value being delivered to Ricardo's clients, as
well as winning projects with new clients. In the USA we secured our first
large-scale project, providing key expertise to the California High Speed Rail
project, which in turn has opened additional opportunities in the region. In
the UK and Europe, we successfully grew our partnership with Irish Rail, and
we continue to work closely with our long-term national-level rail
infrastructure partner, NS, in the Netherlands.
Underlying operating profit margin was 11.5% compared to 11.0% in the prior
year on a constant currency basis, with the improvement reflecting the
combination of good revenue growth, focus on cost control and operational
efficiency within the business. Improvements in operational efficiency
included actions in the UK, which delivered increased employee project
utilisation for the second half of the year, and actions in other territories
as part of the Group's operating model transformation programme.
Outlook
Strong demand for Ricardo's core engineering and safety expertise across the
global rail sector is complemented by increased demand to support the industry
in its adoption of advanced digital technologies and to continue the
acceleration of rail sector decarbonisation. The demand for the safe
implementation of digital tooling enables Ricardo to utilise its advanced
digital development capability and assurance experience to usher in the
implementation of new robust tooling. As a result of the need for accelerated
decarbonisation, we see growing demand to support industry and operational
management through our advisory, sustainability, energy, engineering and
modelling expertise to provide robust strategies.
EMERGING AUTOMOTIVE AND INDUSTRIAL
From strategic planning and policy, concept to manufacture, Emerging
Automotive and Industrial is a trusted partner for the next generation of
sustainable transport and infrastructure solutions. Leveraging expertise in
electrification, hybrid technologies and fuel cells, we deliver clean,
efficient, and integrated propulsion and energy solutions to support our
clients in their energy transitions.
Our expertise supports the solution delivery across the value chain from
policy, strategy and advisory services to design, engineering, testing and
niche production and product launch. We develop strategies for the transport
sector which address the biggest challenges of reducing greenhouse gas
emissions and we strive to deliver a better world through solutions that take
a whole life cycle carbon neutral approach.
Growth drivers
• A rapid shift to decarbonised, sustainable transport
technology.
• Bridge solutions to fill the technology gap between internal
combustion engines and electric vehicles.
• Geo-political pressures for zero emission across the transport
sector.
• Global acceleration to reduce time and cost of new product
development.
• Digital transformation through industry 4.0, connected
intelligence and software development capabilities to unlock new
revenue streams.
Financial and operational highlights
Historical rates Constant currency((6))
2024 2023 Change 2023 Change
£m £m % £m %
Order intake (£m) 52.4 84.3 (37.8) 83.0 (36.9)
Order book (£m) 43.3 55.0 (21.3) 55.0 (21.3)
Revenue (£m) 58.6 82.3 (28.8) 80.4 (27.1)
Underlying((1)) operating profit (£m) 3.4 10.6 (67.9) 10.6 (67.9)
Underlying((1)) operating profit margin (%) 5.8 12.9 (7.1pp) 13.2 (7.4pp)
Headcount((5)) (no.) 349 435 (19.8) 435 (19.8)
References in superscript are defined in the glossary of terms above.
Performance
Emerging Automotive and Industrial (A&I) order intake declined by 37% to
£52.4m (FY 2022/23: £83m) on a constant currency basis, and revenue
decreased by 27% to £58.6 m (FY 2022/23 £80.4m) reflecting global market
challenges across the transport sector generally, in respect to timing delays
to move to clean energy solutions that has resulted in short-term
fluctuations.
Although we are expecting continued market challenges in the near term, we are
increasingly well positioned to support the green transitions as regulatory
and infrastructure requirements are expedited. Meanwhile, we are securing
contracts from other transport industries including marine, aerospace and
rail, ensuring confidence in building a robust sales pipeline, driving further
growth and diversification. Key contracts awarded in FY 2023/24 include an
extension contract to support continued work with the sustainable Hydrogen
powered Shipping consortium (sHYpS), to complete the design of a modular,
containerised fuel cell-based energy conversion system, intended to accelerate
the adoption of hydrogen as a renewable fuel in the maritime industry.
Additionally, we have secured a significant contract win, to design an engine
variant running on sustainable fuels for a European industrial and marine OEM.
Underlying operating profit at £3.4m was lower than the prior year £10.6m,
due to the delays in orders as reported above. As part of Ricardo's operating
model transformation programme, we took proactive actions throughout the year
to restructure Automotive and Industrial in both its Emerging and Established
businesses. Actions included refocusing the service portfolio and accelerating
our move to increase our flexible resourcing pool. This has resulted in
ensuring that we better manage future order fluctuations as well as delivering
improved profitability in the second half of FY 2023/24.
Outlook
Our global focus within Emerging A&I will be to deliver innovative,
sustainable technical and engineering solutions to clients across the world
and build resilience through continued expansion across all transport sectors.
Established Mobility portfolio
DEFENSE
Defense provides solutions to address the challenges our clients face in the
integration of logistics and field support for complex and diverse systems. We
specialise in designing vehicle engineering solutions that improve safety, and
we have a deep legacy in partnering with the US military to take innovative
technologies from science to application.
We also provide niche product and assembly services, adapting commercial
industry products to deliver innovative sector applications that protect
people and infrastructure.
Growth drivers
• Decarbonisation and net zero planning focus within the US
defence sector.
• Demand for greater connectivity, communications and mobility
within the field.
• Software-driven solutions to provide functionality and
systems integration.
• Continued focus on cybersecurity to protect against
potential and ever-evolving threats.
Financial and operational highlights
Historical rates Constant currency((6))
2024 2023 Change 2023 Change
£m £m % £m %
Order intake (£m) 125.4 85.0 47.5 81.3 54.2
Order book (£m) 37.3 35.2 6.0 35.4 5.4
Revenue (£m) 123.4 88.6 39.3 84.8 45.5
Underlying((1)) operating profit (£m) 23.5 13.4 75.4 12.9 82.2
Underlying((1)) operating profit margin (%) 19.0 15.1 3.9pp 15.2 3.8pp
Headcount((5)) (no.) 236 223 5.8 223 5.8
References in superscript are defined in the glossary of terms above.
Performance
Defense's strong growth in orders, revenue and profit and its margin
improvement underpinned its full-year performance. Order intake in FY 2023/24
grew by 54% to £125.4m (FY 2022/23: £81.3m). Revenue significantly increased
by 46% to £123.4m (FY 2022/23: £84.8m). Growth was primarily driven by an
extension contract awarded by the United States Army, valued at over $385m, to
continue production and delivery of Anti-lock Braking System/Electronic
Stability Control (ABS/ESC) retrofit kits, with an order completion of March
2026 and delivery completion of September 2027. This contract extends the
previous three-year base contract by two years and increases the ceiling from
$89m to $474m. Funding is determined with each delivery order (DO), with the
first DO received in September 2023, under the terms of the extended contract,
for $92m (£73m).
In total, we delivered 13,100 ABS/ESC kits in FY 2023/24 compared to 8,707 the
previous year. We also received orders for the new HMMWV production and
continue to expand our ABS/ESC service parts, while recording several
framework purchase agreements with the US Army to support fleet maintenance of
the ABS/ESC system. Additionally, Defense has secured several new and
extension projects, including an extension agreement to continue ongoing
efforts to expand the development of data management software tools for the US
Navy fleet communications systems. Additional funding was secured for the
testing and evaluation of wireless communications for the US Army and a
contract award for model-based systems engineering to support the US Army with
its digital acquisition framework, covering the entire procurement life cycle
for their vehicle platforms from concept design and development to production
and sustainment through life support.
Underlying operating profit of £23.5m represented a considerable increase of
82% compared to FY 2022/23 of £12.9m, and contributed to the Group's overall
profit performance.
Outlook
Defense is expected to make further progress in its digital solutions to
enable cross-domain operations between advanced platforms in the air, on land
and at sea and its predictive maintenance data management software for naval
fleet management.
We anticipate continued demand for our broad portfolio of engineering
services, products such as ABS/ESC and field support solutions to fulfil the
needs of future force design and spans the entire military vehicle life cycle.
Nevertheless, in FY 2024/25, we expect revenues for the ABS/ESC programme to
decline as volumes becomes more proportional for the duration of the contract
period.
PERFORMANCE PRODUCTS
Performance Products specialises in the design, low-volume manufacture and
series supply of powertrain and driveline products for high performance and
complex established and emerging transport applications. Best known for our
worldclass engine and transmission products for traditional propulsion
systems, our capability has extended to cover the next generation of
decarbonised propulsion systems.
We also provide industrialisation consultancy services from concept through to
series production. Our customers draw on Ricardo's expertise in low‑volume
production and in developing low volume/prototype production to series
production and apply it to their own facilities and programmes to successfully
introduce new products and improve existing production processes.
Growth drivers
• Performance road vehicles and motorsport remain as relevant as ever
for manufacturers and consumers, demonstrating continually increasing power
and efficiency in ICE and decarbonised powertrains.
• Shorter and leaner development programmes using innovative
technologies are driving demand for proven off-the-shelf components, and for
industrialisation services.
• Transport is decarbonising, but differing vehicle and marine-vessel
types plus geographic markets are favouring a multitude of powertrain
solutions including electrification, fuel cells and carbon neutral combustion.
• The defence vehicle sector continues to grow due to overseas material
supply issues, and increased expenditure on arms procurement and military
R&D.
Financial and operational highlights
Historical rates Constant currency((6))
2024 2023 Change 2023 Change
£m £m % £m %
Order intake (£m) 77.1 115.3 (33.1) 115.3 (33.1)
Order book (£m) 74.4 81.3 (8.5) 81.3 (8.5)
Revenue (£m) 83.4 84.7 (1.5) 84.7 (1.5)
Underlying((1)) operating profit (£m) 6.7 9.0 (25.6) 9.0 (25.6)
Underlying((1)) operating profit margin (%) 8.0 10.6 (2.6pp) 10.6 (2.6pp)
Headcount((5)) (no.) 367 355 3.4 355 3.4
References in superscript are defined in the glossary of terms above.
Performance
Order intake in FY 2023/24 was £77.1m, a reduction of 33% on the prior
period. The FY 2023/24 order intake included a multi-year contract extension
from Bugatti as well as a new multi-year transmission supply programme to
Singer, the California-based luxury vehicle design specialist.
Performance Products has seen an effective diversification of its order book
during the year, including several new contracts in new market sectors and a
major key contract win for multi-year assembly and production framework
agreement in the marine propulsion segment, which will commence production in
FY 2027/28. This year saw the commencement of production of the Singer
transmission programme for the newly launched DLS-T and CTS platforms and
continued deliveries of powertrains to McLaren and drivetrain product to
Bugatti, Porsche and Aston Martin.
Revenue in FY 2023/24 was £83.4m, which was 2% lower than the prior year (FY
2022/23: £84.7m), due largely to two key transmission programmes ending.
Nevertheless, revenue continues to generate from the programmes detailed
above, ongoing supply agreements in defence and aerospace and a strong
underlying performance in motorsport, including a presence in Formula 1, World
Rally, Formula E and endurance motorsport.
Underlying profit was £6.7m, a reduction of 26% compared to the prior period,
due to the lower revenue, mix of transmissions sold and inflationary pressures
on input and operating costs. Underlying operating profit margin was 8.0%,
compared to 10.6% in the prior period. Significant market sector and
geographic expansion has been initiated within FY 2023/24, including the
establishment of a Japanese office and the development of Ricardo's Detroit
facility to support future manufacturing programmes.
Outlook
In FY 2024/25 Performance Products will continue to develop its portfolio of
existing powertrain (engine) and driveline (transmission) products.
Additionally, we are seeing demand in programmes that support the transition
to net-zero propulsion, including electric drive units, industrial engineering
services focussed on niche volume production, and concept work around fuel
cells, battery systems and electric machines. Whilst the new opportunities are
creating good growth for the future, we expect a reduction in revenue in FY
2024/25 as we conclude several existing programmes and commence development to
allow for the launch of new programmes.
ESTABLISHED AUTOMOTIVE AND INDUSTRIAL
With over a century of propulsion design and development, we are a trusted
global engineering-services partner for clean and efficient integrated
propulsion and energy systems. Established Automotive and Industrial (A&I)
is a trusted partner for original equipment manufacturers (OEMs) and tier-one
suppliers across the transportation industry, including land, air and sea. We
work across key transportation industries to bring solutions to market more
quickly, while also enhancing performance. Established Automotive and
Industrial is working to decarbonise current technologies through efficiency
improvements, while helping global clients with bridging technologies to
support the shift to fully decarbonised transport solutions and the
achievement of a cleaner and greener future.
Growth drivers
• A rapid shift to decarbonised, sustainable transport technology.
• Bridge solutions to fill the technology gap between internal
combustion engines and battery electric vehicles.
• Global acceleration to reduce time and cost of new product
development.
Financial and operational highlights
Historical rates Constant currency((6))
2024 2023 Change 2023 Change
£m £m % £m %
Order intake (£m) 29.2 36.2 (19.3) 35.6 (18.0)
Order book (£m) 26.8 27.5 (2.5) 27.6 (2.9)
Revenue (£m) 28.6 27.6 3.6 27.0 5.9
Underlying((1)) operating loss (£m) (3.3) (5.8) 43.1 (5.7) 42.1
Underlying((1)) operating profit margin (%) (11.5) (21.0) 9.5pp (21.1) 9.6pp
Headcount((5)) (no.) 321 339 (5.3) 339 (5.3)
References in superscript are defined in the glossary of terms above.
Performance
Established Automotive and Industrial order intake was £29.2m in FY 2023/24,
a decrease of 18% on a constant currency basis,, because of project delays,
which created some variability in the timing of deliveries. Revenue at £28.6m
was up 6% (FY 2022/23: £27m) on a constant currency basis, driven by
increased orders in the second half which were driven by the increased demand
for the hybridisation of engines and improved efficiency of current propulsion
engines, while demand for full electrification continues to evolve and market
demand catches up with development. Recent wins include the design of a
high-efficiency aviation powertrain, which includes the engine design and the
development and hybridisation of the powertrain for a world-leading aerospace
manufacturer. We also secured a contract to complete the initial phase of a
large marine outboard-motor design and development programme for a major
marine OEM.
Underlying operating loss was £3.3m, an improvement of 42% compared to FY
2022/23 on a constant currency basis. Despite the loss for the FY 2023/24, we
saw good profit recovery in the second half as a result of improved revenue
and the Group's accelerated transformation programme. As part of the
restructuring programme, we have been constantly vigilant in controlling
expenditure, implementing measures that support improved working capital and
the short to mid-term business through further optimisation of the flexible
resourcing model.
Through our simplified leadership structure, our flexible resourcing model and
the execution of further efficiencies to our operating model, we are able to
respond more rapidly to our clients' changing requirements and ensure
persistent future financial performance in line with our strategic ambition.
Outlook
We are seeing further programmes in key industries including defence,
aerospace and marine for clean propulsion integrated systems that will support
our clients in their transition to a cleaner and greener future.
Condensed financial statements
Condensed consolidated income statement
for the year ended 30 June
2024 2023
Underlying Specific adjusting Total Underlying Specific adjusting Total
items*
items*
Note £m £m £m £m £m £m
Continuing operations
Revenue 3 474.7 - 474.7 445.2 - 445.2
Cost of sales (340.1) - (340.1) (318.9) - (318.9)
Gross profit 134.6 - 134.6 126.3 - 126.3
Administrative expenses (96.8) (26.0) (122.8) (91.7) (35.9) (127.6)
Impairment losses on trade receivables and contract assets (0.2) - (0.2) (1.8) - (1.8)
Other income 1.2 - 1.2 1.2 - 1.2
Operating profit/(loss) 38.8 (26.0) 12.8 34.0 (35.9) (1.9)
Finance income 1.1 - 1.1 1.0 - 1.0
Finance costs (9.4) (0.2) (9.6) (7.1) - (7.1)
Net finance costs (8.3) (0.2) (8.5) (6.1) - (6.1)
Profit/(loss) before taxation 30.5 (26.2) 4.3 27.9 (35.9) (8.0)
Income tax (expense)/credit (8.1) 4.6 (3.5) (7.3) 3.3 (4.0)
Profit/(loss) from continuing operations 22.4 (21.6) 0.8 20.6 (32.6) (12.0)
Discontinued operation
Profit from discontinued operation, net of tax - - - 0.4 6.4 6.8
Profit/(loss) for the year 22.4 (21.6) 0.8 21.0 (26.2) (5.2)
Profit/(loss) attributable to:
Continuing operations
- Owners of the parent 22.3 (21.6) 0.7 20.4 (32.6) (12.2)
- Non-controlling interests 0.1 - 0.1 0.2 - 0.2
22.4 (21.6) 0.8 20.6 (32.6) (12.0)
Discontinued operation
- Owners of the parent - - - 0.4 6.4 6.8
Total
- Owners of the parent 22.3 (21.6) 0.7 20.8 (26.2) (5.4)
- Non-controlling interests 0.1 - 0.1 0.2 - 0.2
22.4 (21.6) 0.8 21.0 (26.2) (5.2)
2024 2023
Earnings per share - basic and diluted (Note 5) pence pence
Basic
Earnings/(loss) per share 1.1 (8.7)
Underlying earnings per share 35.9 33.4
Earnings/(loss) per share from continuing operations 1.1 (19.3)
Earnings per share from discontinued operation - 10.9
Diluted
Earnings/(loss) per share 1.1 (8.7)
Underlying earnings per share 35.5 33.4
Earnings/(loss) per share from continuing operations 1.1 (19.3)
Earnings per share from discontinued operation - 10.9
The accompanying notes are an integral part of these condensed financial
statements.
* Specific adjusting items are disclosed separately in the condensed
financial statements where it is necessary to do so to provide further
understanding of the financial performance of the Group. Further details are
given in Note 1 and Note 4.
Condensed consolidated statement of comprehensive income
for the year ended 30 June
2024 2023
£m £m
Profit/(loss) for the year 0.8 (5.2)
Other comprehensive (expense)/income
Items that will not be reclassified to profit or loss:
Remeasurements of the defined benefit pension scheme (6.0) (5.0)
Deferred tax on remeasurements of the defined benefit pension scheme 1.4 1.2
Total items that will not be reclassified to profit or loss (4.6) (3.8)
Items that are, or may be, subsequently reclassified to profit or loss:
Currency translation on foreign currency net investments (0.9) (6.4)
Reclassification of foreign currency differences on disposal of foreign - (0.9)
operation
Movement in fair value of cash flow hedge (0.1) -
Total items that may be subsequently reclassified to profit or loss (1.0) (7.3)
Total other comprehensive expense for the year (net of tax) (5.6) (11.1)
Total comprehensive expense for the year (4.8) (16.3)
Comprehensive expense attributable to:
- Owners of the parent (4.9) (16.5)
- Non-controlling interests 0.1 0.2
(4.8) (16.3)
The accompanying notes are an integral part of these condensed financial
statements.
Condensed consolidated statement of financial position
As at 30 June
2024 2023
Note £m £m
Assets
Non-current assets
Goodwill 7 96.0 96.1
Other intangible assets 33.7 35.4
Property, plant and equipment 30.4 35.3
Right-of-use assets 19.2 20.7
Retirement benefit surplus 8.0 12.6
Other receivables 2.5 2.4
Deferred tax assets 6.4 8.5
196.2 211.0
Current assets
Inventories 29.4 29.5
Trade, contract and other receivables 146.7 153.5
Derivative financial assets 0.8 2.3
Current tax assets 7.1 2.7
Cash and cash equivalents 8 48.6 49.8
232.6 237.8
Total assets 428.8 448.8
Liabilities
Current liabilities
Borrowings 8 4.3 12.7
Lease liabilities 6.0 5.7
Trade, contract and other payables 107.5 105.0
Current tax liabilities 3.5 2.6
Derivative financial liabilities 0.5 1.0
Provisions 3.5 2.6
125.3 129.6
Net current assets 107.3 108.2
Non-current liabilities
Borrowings 8 102.6 99.2
Lease liabilities 17.8 19.4
Trade, contract and other payables 1.2 4.8
Deferred tax liabilities 13.0 15.5
Derivative financial liabilities 0.1 -
Provisions 3.6 3.7
138.3 142.6
Total liabilities 263.6 272.2
Net assets 165.2 176.6
Equity
Share capital 15.6 15.6
Share premium 16.8 16.8
Other reserves 36.2 37.2
Retained earnings 96.1 106.6
Equity attributable to owners of the parent 164.7 176.2
Non-controlling interests 0.5 0.4
Total equity 165.2 176.6
The accompanying notes form an integral part of these condensed financial
statements.
Condensed consolidated statement of changes in equity
for the year ended 30 June
Attributable to owners of the parent
Share capital Share premium Other reserves Retained earnings Total Non-controlling interests Total equity
Note £m £m £m £m £m £m £m
At 1 July 2022 15.6 16.8 44.5 120.5 197.4 0.2 197.6
Loss for the year - - - (5.4) (5.4) 0.2 (5.2)
Other comprehensive expense for the year - - (7.3) (3.8) (11.1) - (11.1)
Total comprehensive (expense)/income for the year - - (7.3) (9.2) (16.5) 0.2 (16.3)
Equity-settled transactions - - - 1.4 1.4 - 1.4
Purchases of own shares to settle awards - - - (0.1) (0.1) - (0.1)
Tax relating to share option schemes - - - 0.7 0.7 - 0.7
Ordinary share dividends 6 - - - (6.7) (6.7) - (6.7)
At 30 June 2023 15.6 16.8 37.2 106.6 176.2 0.4 176.6
At 1 July 2023 15.6 16.8 37.2 106.6 176.2 0.4 176.6
Profit for the year - - - 0.7 0.7 0.1 0.8
Other comprehensive expense for the year - - (1.0) (4.6) (5.6) - (5.6)
Total comprehensive (expense)/income for the year - - (1.0) (3.9) (4.9) 0.1 (4.8)
Equity-settled transactions - - - 2.2 2.2 - 2.2
Purchases of own shares to settle awards - - - (0.7) (0.7) - (0.7)
Tax relating to share option schemes - - - (0.4) (0.4) - (0.4)
Ordinary share dividends 6 - - - (7.7) (7.7) - (7.7)
At 30 June 2024 15.6 16.8 36.2 96.1 164.7 0.5 165.2
The accompanying notes form an integral part of these condensed financial
statements.
Condensed consolidated statement of cash flows
for the year ended 30 June
2024 2023
(Restated)(a)
Note £m £m
Cash flows from operating activities
Profit/(loss) before taxation 4.3 (0.1)
Adjustments for:
- Share-based payments 2.3 1.3
- Unrealised foreign exchange (gains)/losses (1.3) 2.6
- Fair value losses/(gains) on derivatives 1.1 (5.6)
- Gains on disposal of discontinued operation - (7.4)
- Losses on disposal of property, plant and equipment - 0.7
- Net finance costs 8.5 6.1
- Depreciation, amortisation and impairment 19.9 37.4
Defined benefit pension scheme payments in excess of past service costs (0.8) (1.8)
Operating cash flows before movements in working capital 34.0 33.2
Changes in:
- Inventories 0.1 (9.0)
- Trade, contract and other receivables 7.5 (27.9)
- Trade, contract and other payables (1.4) 27.7
- Provisions 0.8 (2.0)
Cash generated from operations 41.0 22.0
Net interest paid (8.6) (7.5)
Income tax paid (6.5) (4.6)
Net cash generated from operating activities 25.9 9.9
Cash flows from investing activities
Acquisitions of subsidiaries, net of cash acquired - (24.5)
Purchases of property, plant and equipment (4.1) (4.9)
Proceeds from disposal of property, plant and equipment 3.3 -
Proceeds from sale of discontinued operation, net of cash disposed - 13.1
Fees in relation to sale of discontinued operation - (0.8)
Purchases of intangible assets and capitalised development costs (7.2) (5.7)
Net cash used in investing activities (8.0) (22.8)
Cash flows from financing activities
Purchases of own shares to settle awards (0.7) (0.2)
Principal element of lease payments (5.4) (5.1)
Proceeds from borrowings 8 83.0 128.0
Repayment of borrowings 8 (80.0) (103.0)
Dividends paid to shareholders 6 (7.7) (6.7)
Net cash (used in)/generated from financing activities (10.8) 13.0
Effect of exchange rate changes on cash and cash equivalents - (2.3)
Net increase/(decrease) in cash and cash equivalents 7.1 (2.2)
Net cash and cash equivalents at 1 July 37.2 39.4
Restricted cash (1.3) -
Net cash and cash equivalents at 30 June 43.0 37.2
At 1 July
Cash and cash equivalents 49.8 49.4
Cash included in disposal group held-for-sale - 1.1
Bank overdrafts (12.6) (11.1)
Net cash and cash equivalents at 1 July 37.2 39.4
At 30 June
Cash and cash equivalents 8 48.6 49.8
Restricted cash 8 (1.3) -
Bank overdrafts 8 (4.3) (12.6)
Net cash and cash equivalents at 30 June 43.0 37.2
The accompanying notes form an integral part of these condensed financial
statements.
a) The prior year cash flow statement has been restated. Cash payments to
settle derivatives of £4.2m have been reclassified as a gain on the fair
value of derivatives of £5.6m and an unrealised foreign exchange loss of
£1.4m relating to these derivative foreign currency swaps.
General information
Ricardo plc (the 'Company'), a public company limited by shares, is listed on
the London Stock Exchange and incorporated and domiciled in the United
Kingdom. The address of its registered office is Shoreham Technical Centre,
Shoreham-by-Sea, West Sussex, BN43 5FG, England, United Kingdom, and its
registered number is 222915.
This preliminary announcement is based on the audited Annual Report &
Accounts 2024, which was approved for issue on 10 September 2024, and which
has been prepared in accordance with UK-adopted international accounting
standards and applicable law. The financial information herein does not amount
to full statutory accounts within the meaning of Section 434 of the Companies
Act 2006.
1. Alternative performance measures
Throughout this document the Group presents various alternative performance
measures (APMs) in addition to those reported under IFRS. The measures
presented are those adopted by the Chief Operating Decision Maker (CODM,
deemed to be the Chief Executive Officer), together with the main board, and
analysts who follow us in assessing the performance of the business. Ricardo
provides guidance to the investor community based on underlying results.
Explanations of how they are calculated and how they are reconciled to an IFRS
statutory measure are set out below.
The underlying results and other APMs may be considered in addition to, but
not as a substitute for or superior to, information presented in accordance
with IFRS.
a) Group profit and earnings measures
Underlying profit before tax (PBT) and underlying operating profit: These
measures are used by the board to monitor and measure the trading performance
of the Group. Underlying results include the benefits of the results of
acquisitions and major restructuring programmes but exclude significant costs
(such as the amortisation of acquired intangibles, acquisition-related
expenditure, reorganisation costs and other specific adjusting items). Ricardo
believes that the underlying results, when considered together with the
reported results, provide investors, analysts and other stakeholders with
helpful complementary information to better understand the financial
performance and position of the Group.
The Group's strategy includes geographic and sector diversification, including
targeted acquisitions and disposals. By excluding acquisition-related
expenditure from underlying PBT and underlying operating profit, the board has
a clearer view of the performance of the Group and is able to make better
operational decisions to support its strategy.
Acquisition-related expenditure includes the costs of acquisitions, deferred
and contingent consideration fair value adjustments (including the unwinding
of discount factors), transaction-related fees and expenses, and post-deal
integration costs.
Reorganisation costs arising from major restructuring activities, profits or
losses on the disposal of businesses, and significant impairments of property,
plant and equipment, are excluded from underlying PBT and underlying operating
profit as they are not reflective of the Group's trading performance in the
year, as are any other specific adjusting items deemed to be one-off in
nature.
The related tax effects on the above and other tax items which do not form
part of the underlying tax rate are considered. Items are treated consistently
year-on-year, and these adjustments are also consistent with the way that
performance is measured under the Group's incentive plans and its banking
covenants. A reconciliation is shown below. Further details of the nature of
the specific adjusting items are given in Note 4.
Reconciliation of underlying profit to reported profit/(loss)
2024 2023
Underlying Specific adjusting Total Underlying Specific adjusting Total
items
items
£m £m £m £m £m £m
Revenue 474.7 - 474.7 445.2 - 445.2
Cost of sales (340.1) - (340.1) (318.9) - (318.9)
Gross profit 134.6 - 134.6 126.3 - 126.3
Administrative expenses, impairment losses on trade receivables and contract (95.8) - (95.8) (92.3) - (92.3)
assets, and other income
Amortisation of acquired intangibles - (4.8) (4.8) - (4.6) (4.6)
Acquisition-related expenditure - (12.0) (12.0) - (6.2) (6.2)
Impairment of non-financial assets - - - - (18.7) (18.7)
Reorganisation costs - (8.4) (8.4) - (6.4) (6.4)
ERP implementation costs - (0.5) (0.5) - - -
Other - (0.3) (0.3) - - -
Operating profit/(loss) from continuing operations 38.8 (26.0) 12.8 34.0 (35.9) (1.9)
Net finance costs (8.3) (0.2) (8.5) (6.1) - (6.1)
Profit/(loss) before taxation from continuing operations 30.5 (26.2) 4.3 27.9 (35.9) (8.0)
Income tax (expense)/credit (8.1) 4.6 (3.5) (7.3) 3.3 (4.0)
Profit/(loss) for the year from continuing operations 22.4 (21.6) 0.8 20.6 (32.6) (12.0)
Profit for the year from discontinued operation, net of tax - - - 0.4 6.4 6.8
Profit/(loss) for the year 22.4 (21.6) 0.8 21.0 (26.2) (5.2)
Underlying earnings attributable to the owners of the parent/earnings per
share: The Group uses underlying earnings attributable to the owners of the
parent as the input to its adjusted EPS measure. This profit measure excludes
the amortisation of acquired intangibles, acquisition-related expenditure,
reorganisation costs and other specific adjusting items, but is an after-tax
measure. The board considers underlying EPS to be more reflective of the
Group's trading performance in the year. A reconciliation between earnings
attributable to the owners of the parent and underlying earnings attributable
to the owners of the parent is shown in Note 5.
Organic growth/decline: Organic growth/decline is calculated as the
growth/decline in the result for the current year compared to the prior year,
after excluding the impact of acquisitions or disposals.
Constant currency growth/decline: The Group generates revenues and profits in
various territories and currencies because of its international footprint.
Those results are translated on consolidation at the foreign exchange rates
prevailing at the time. Constant currency growth/decline is calculated by
translating the result for the prior year using foreign currency exchange
rates applicable to the current year. This provides an indication of the
growth/decline of the business, excluding the impact of foreign exchange.
Headline trading performance
Underlying Reported
External revenue Operating profit Profit before tax Operating profit/(loss) Profit/(loss) before tax
£m £m £m £m £m
2024
Continuing operations 474.7 38.8 30.5 12.8 4.3
Less: performance of acquisitions (12.6) (2.7) (2.3) (0.7) (0.3)
Continuing operations - organic 462.1 36.1 28.2 12.1 4.0
2023
Total 446.0 34.5 28.4 6.0 (0.1)
Less: discontinued operation (0.8) (0.5) (0.5) (7.9) (7.9)
Continuing operations 445.2 34.0 27.9 (1.9) (8.0)
Less: performance of acquisitions (4.8) (1.1) (1.1) 4.4 4.4
Continuing operations - organic 440.4 32.9 26.8 2.5 (3.6)
Continuing operations at prior year exchange rates 435.1 33.2 27.1 (1.9) (8.0)
Growth (%) - Total 6% 12% 7% 113% 4,400%
Growth (%) - Continuing operations 7% 14% 9% 774% 154%
Growth (%) - Continuing organic 5% 10% 5% 384% 211%
Constant currency growth (%) - Continuing operations 9% 17% 13% 774% 154%
Segmental underlying operating profit: This is presented in the Group's
segmental disclosures and reflects the underlying trading of each segment, as
assessed by the main board. This excludes segment-specific amortisation of
acquired intangibles, acquisition-related expenditure and other specific
adjusting items, such as reorganisation costs. It also excludes unallocated
plc costs, which represent the costs of running the public limited company and
specific adjusting items which are outside of the control of segment
management. A reconciliation between segment underlying operating profit, the
Group's underlying operating profit and operating profit is presented in Note
2.
b) Cash flow measures
Cash conversion: A key measure of the Group's cash generation is the
conversion of profit into cash. This is the reported cash generated from
operations (defined as operating cash flow, less movements in net working
capital and defined benefit pension deficit contributions) divided by earnings
before interest, tax, depreciation and amortisation (EBITDA), expressed as a
percentage.
Underlying cash conversion: This is underlying cash generated from operations
(defined as reported cash generated from operations, adjusted for the cash
impact of specific adjusting items) divided by underlying EBITDA (defined as
reported EBITDA, adjusted for the impact of specific adjusting items). A
reconciliation between the two is shown below.
Cash conversion
2024 2023
Underlying Specific adjusting Total Underlying Specific adjusting Total
items
items
£m £m £m £m £m £m
Operating profit/(loss) from continuing operations 38.8 (26.0) 12.8 34.0 (35.9) (1.9)
Operating profit from discontinued operation - - - 0.5 7.4 7.9
Operating profit 38.8 (26.0) 12.8 34.5 (28.5) 6.0
Depreciation, amortisation and impairment 14.5 0.6 15.1 14.1 18.7 32.8
Amortisation of acquired intangibles - 4.8 4.8 - 4.6 4.6
EBITDA 53.3 (20.6) 32.7 48.6 (5.2) 43.4
Movement in working capital 8.8 (1.8) 7.0 (12.8) 1.6 (11.2)
Pension deficit payments (0.8) - (0.8) (1.8) - (1.8)
Gain on disposal of discontinued operation - - - - (7.4) (7.4)
Losses on disposal of assets - - - 0.1 0.6 0.7
Share based payments 2.3 - 2.3 1.3 - 1.3
Fair value losses/(gains) on derivatives 1.1 - 1.1 (5.6) - (5.6)
Unrealised exchange (gains)/losses (1.3) - (1.3) 2.6 - 2.6
Cash generated from operations 63.4 (22.4) 41.0 32.4 (10.4) 22.0
Cash conversion 118.9% 125.4% 66.7% 50.7%
The movement in working capital in relation to specific adjusting items for
the current year includes trade and other payables of £3.9m and provisions of
£1.1m in relation to specific adjusting items recognised as an expense during
the current year which had not been paid at 30 June 2024, compared to £6.8m
at the prior year end (which included £1.3m which was accrued under the
completion mechanism in relation to the acquisition of E3M). The prior year
cash flow statement has been restated. Cash payments to settle derivatives of
£4.2m have been reclassified as a gain on the fair value of derivatives of
£5.6m and an unrealised foreign exchange loss of £1.4m relating to these
derivative foreign currency swaps.
Net debt: Defined as current and non-current borrowings less cash and cash
equivalents, including hire purchase agreements, but excluding any cash deemed
to be restricted in nature and any impact of other IFRS 16 lease liabilities.
Management believes this definition is the most appropriate for monitoring the
indebtedness of the Group and is consistent with the treatment in the Group's
banking agreements. Further details are provided in Note 8.
c) Tax measures
Underlying effective tax rate (ETR): The Group reports one adjusted tax
measure, which is the tax rate on underlying profit before tax. This is the
tax charge applicable to underlying profit before tax expressed as a
percentage of underlying profit before tax.
d) Other measures
Order book: The value of all unworked purchase orders and contracts received
from customers at the reporting date, providing an indication of revenue that
has been secured and will be recognised in future accounting periods.
Management does not consider there to be a closely equivalent GAAP measure.
Order intake: The value of purchase orders and contracts received from
customers during the period. The order intake for the current year was
£496.1m (2023: £522.0m, including results of the discontinued operation).
Management does not consider there to be a closely equivalent GAAP measure.
Headcount: Headcount is calculated as the number of colleagues on the payroll
at the reporting date and includes subcontractors on a full-time equivalent
basis. The number of employees disclosed in Note 31 to the Group Financial
Statements is the average for the year.
2. Financial performance by segment
The segmental analysis helps explain the business in the way that it is
monitored by management.
The Group's operating segments are being reported based on the financial
information provided to the Chief Operating Decision Maker, who is the Chief
Executive Officer. The information reported includes financial performance but
does not include the financial position of assets and liabilities. The
operating segments were identified by evaluating the Group's products and
services, processes, types of customers and delivery methods. The following
summarises the operations in each of the Group's reportable segments:
• Energy and Environment (EE) - EE generates revenue from the provision
of environmental consultancy services to customers across the world. Customers
include governments, public agencies and private businesses;
• Rail - Rail generates revenue from through two separate operations: a
consultancy unit that provides technical advice and engineering services; and
a separately operated entity, Ricardo Certification, that performs accredited
assurance services;
• Automotive and Industrial - Established - A&I Established
generates revenue through the provision of engineering, strategic consulting,
and design, development and testing services, focused on the design, building
and testing of conventional powertrains. Customers include businesses in the
automotive, aerospace, defence, off-highway and commercial, marine and rail
markets;
• Automotive and Industrial - Emerging - A&I Emerging generates
revenue through the provision of engineering, strategic consulting, and
design, development and testing services, focused on power electronic systems
and propulsion systems, software and digital technologies. Customers include
businesses in the automotive, aerospace, defence, energy, off‑highway and
commercial, marine, motorcycle and light personal transport, and rail markets;
• Defense - Defense provides engineering services, software and
products to customers in the US defence market, aimed and protecting life and
improving the operation, maintenance and support of complex systems; and
• Performance Products (PP) - PP manufactures, assembles and develops
niche high-quality components, prototypes and complex products, including
engines, transmissions and other precision and performance critical products.
Its customers manufacture low-volume, high‑performance products in markets
such as motorsport, automotive, aerospace, defence and rail.
The operations of the Group have been categorised into these segments due to
the nature of their services, market sectors, client bases and distribution
channels and operating across markets requiring adherence to regulatory
frameworks that are similar in nature.
Measurement of performance
Management monitors the financial results of its operating segments separately
for the purpose of making decisions about allocating resources and assessing
performance. Segmental performance is measured based on underlying operating
profit, as this measure provides management with an overall view of how the
different operating segments are managing their total cost base against the
revenue generated from their portfolio of contracts.
There are varying levels of integration between the segments. The segments use
EE for their specialist environmental knowledge. The A&I segments and PP
have various shared projects. There are also shared service costs between the
segments. Inter-segment transactions are eliminated on consolidation.
Inter‑segment pricing is determined on an arm's length basis in a manner
similar to transactions with third parties.
Included within plc costs in the following tables are costs arising from a
central Group function, including the costs of running the public limited
company, which are not recharged to the other operating segments. The
operating segment section above provides further detail on the segments'
performance.
2024
Total segment revenue Inter-segment revenue Revenue from external customers Underlying operating profit Specific adjusting items (*) Operating profit
£m £m £m £m £m £m
Energy & Environment 104.0 (0.7) 103.3 17.6 (10.0) 7.6
Rail 78.0 (0.6) 77.4 8.9 (3.8) 5.1
A&I - Emerging 58.6 - 58.6 3.4 - 3.4
Defense 123.4 - 123.4 23.5 - 23.5
Performance Products 83.5 (0.1) 83.4 6.7 - 6.7
A&I - Established 28.6 - 28.6 (3.3) (3.4) (6.7)
Plc - - - (18.0) (8.8) (26.8)
Total 476.1 (1.4) 474.7 38.8 (26.0) 12.8
Net finance costs (0.2) (8.5)
Total profit before tax (26.2) 4.3
2024
Depreciation, amortisation and impairment Capital expenditure
Other intangible assets Property, plant and equipment Right-of-use assets
£m £m £m £m
Energy & Environment 6.0 2.8 0.8 1.1
Rail 4.2 0.1 0.2 0.2
A&I - Emerging 5.6 2.1 2.0 0.8
Defense 2.1 1.3 0.8 -
Performance Products 0.8 0.1 0.3 2.0
Plc 1.2 0.8 - -
Total 19.9 7.2 4.1 4.1
2023
Total segment revenue Inter-segment revenue Revenue from external customers Underlying operating profit Specific adjusting items (*) Operating profit
£m £m £m £m £m £m
Energy & Environment 89.6 (1.1) 88.5 16.0 (2.4) 13.6
Rail 74.1 (0.6) 73.5 8.0 (4.1) 3.9
A&I - Emerging 83.0 (0.7) 82.3 10.6 - 10.6
Defense 88.7 (0.1) 88.6 13.4 (0.1) 13.3
Performance Products 85.2 (0.5) 84.7 9.0 - 9.0
A&I - Established 28.6 (1.0) 27.6 (5.8) (23.4) (29.2)
Plc - - - (17.2) (5.9) (23.1)
Total continuing operations 449.2 (4.0) 445.2 34.0 (35.9) (1.9)
Discontinued operation 0.8 - 0.8 0.5 7.4 7.9
Total 450.0 (4.0) 446.0 34.5 (28.5) 6.0
Net finance costs (6.1)
Total loss before tax (0.1)
2023
Depreciation, amortisation and impairment Capital expenditure
Other intangible assets Property, plant and equipment Right-of-use assets
£m £m £m £m
Energy & Environment 4.2 0.6 0.6 0.5
Rail 4.5 0.3 0.3 0.7
A&I - Emerging 3.3 2.7 3.1 1.0
Defense 1.8 0.4 0.4 -
Performance Products 0.9 0.6 0.6 -
A&I - Established 21.0 0.7 1.2 1.6
Plc 1.7 - - 0.1
Total continuing operations 37.4 5.3 6.2 3.9
Discontinued operation - 0.2 - -
Total 37.4 5.5 6.2 3.9
3. Revenue
Continuing operations Discontinued operations Total
2024 2023 2024 2023 2024 2023
£m £m £m £m £m £m
Revenue stream
Service provided under:
- fixed price contracts 214.0 216.9 - - 214.0 216.9
- time and materials contracts 81.6 81.1 - - 81.6 81.1
- subscription and software support contracts 5.8 5.4 - 0.1 5.8 5.5
Goods supplied:
- manufactured and assembled products 171.6 140.5 - - 171.6 140.5
- software products 1.7 1.3 - 0.7 1.7 2.0
Total 474.7 445.2 - 0.8 474.7 446.0
Customer location
United Kingdom 137.3 137.4 - 0.3 137.3 137.7
Europe 83.2 78.5 - 0.1 83.2 78.6
North America 166.2 139.4 - 0.2 166.2 139.6
Rest of Asia 39.7 30.1 - 0.2 39.7 30.3
Australia 22.7 23.4 - - 22.7 23.4
China 8.3 16.4 - - 8.3 16.4
Rest of the World 17.3 20.0 - - 17.3 20.0
Total 474.7 445.2 - 0.8 474.7 446.0
Timing of recognition
Over time 302.8 304.6 - 0.8 302.8 305.4
At a point in time 171.9 140.6 - - 171.9 140.6
Total 474.7 445.2 - 0.8 474.7 446.0
4. Specific adjusting items
Specific adjusting items are disclosed separately in the financial statements
where it is necessary to do so to provide further understanding of the
financial performance of the Group. These items comprise the amortisation of
acquired intangible assets, acquisition-related expenditure, reorganisation
costs and other items that are included due to their significance,
non-recurring nature or amount. Acquisition-related expenditure is incurred by
the Group to effect a business combination, including the costs associated
with the integration of acquired businesses. Reorganisation costs relate to
non-recurring expenditure incurred as part of fundamental restructuring
activities, significant impairments of property, plant and equipment, and
other items deemed to be one-off in nature.
2024 2023
£m £m
Continuing operations
Amortisation of acquired intangibles 4.8 4.6
Acquisition-related expenditure 3.0 6.2
Earn-out and employee retention costs 9.2 -
Reorganisation costs
- Impairment of non-financial assets 18.7
- Other reorganisation costs 8.4 6.4
ERP implementation costs 0.5 -
Sale and leaseback costs 0.3 -
Total specific adjusting items from continuing operations before tax 26.2 35.9
Tax credit on specific adjusting items (4.6) (3.3)
Total specific adjusting items from continuing operations after tax 21.6 32.6
Specific adjusting items from discontinued operations
Disposal of discontinued operation - (7.4)
Tax on specific adjusting items from discontinued operation - 1.0
Total specific adjusting items after tax 21.6 26.2
Amortisation of acquired intangible assets
On acquisition of a business, the purchase price is allocated to assets such
as customer contracts and relationships. Amortisation occurs on a
straight-line basis over the asset's useful economic life, which is between
two to nine years.
Acquisition-related expenditure, earn-out and employee retention costs
The current year acquisition-related expenditure comprises:
· £nil (2023: £0.4m) of integration costs and £0.1m (2023:
£0.4m) of contingent consideration following the acquisition of Inside
Infrastructure;
· £0.2m (2023: £0.2m) of external fees and integration costs and
£4.1m (2023: £0.9m) of contingent consideration following the acquisition of
E3M;
· £0.5m (2023: £0.4m) of integration costs and £5.0m (2023:
£3.2m) of contingent consideration following the acquisition of Aither; and
· £2.3m (2023: £0.7m) of external fees in respect of other
strategic projects.
Reorganisation costs
Impairment of non-financial assets
In the prior year, £18.7m of impairment costs were recognised, following a
reassessment of the future projections and discounted cash flows of the
A&I Established business as a result of economic uncertainties and the
pace of technological change in the sector.
Other reorganisation costs
Reorganisation costs of £8.4m in FY 2023/24 include the following amounts:
• £3.4m in relation to the restructuring and transformation
of the A&I businesses, primarily to transform global operations and
enabling functions, including:
- £1.8m of redundancy costs;
- £0.4m for external contractors and fees associated with the process; and
- £1.2m of cost in respect of property exits and asset write downs,
including onerous lease provisions and impairment unutilised assets. This
activity concluded in the current year.
- In the prior year, £2.4m of redundancy costs were incurred in order to
right-size the business in response to prevailing the economic challenges
discussed above. In addition, £1.1m of losses on disposal of non-current
assets, £0.2m of property exit costs and £1.0m of external fees and
contractor costs were incurred.
• £3.3m in relation to the Rail and EE businesses. The current
year cost includes £3.2m of redundancy costs and £0.1m of external fees
arising from the combination of the operational transformation program and
significant multi-year review to support creating a combined Clean Energy and
Environmental Solutions business focused on key markets across Rail and EE.
Redundancy costs of £1.5m were incurred in the prior year. These activities
concluded in the current year.
• £1.7m of central costs including redundancies of £1.0m and the
cost of external contractors and fees of £0.7m in relation to the operational
transformation program. Redundancy costs of £0.2m were incurred in the prior
year. This activity concluded in the current year.
These costs have been included within specific adjusting items as they are
significant in quantum and would otherwise distort the underlying trading
performance of the Group.
ERP implementation costs
During the year, £0.5m of external costs in relation to the planning
activities to implement a new ERP system were incurred. These have been
classified as a specific adjusting item as they are not reflective of the
underlying performance of the business. The ERP system is expected to be
utilised by the Group for at least five years.
Sale and leaseback costs
On 28(th) June 2024, Ricardo plc sold part of the site at the Shoreham
Technical Centre used by Ricardo PP Ltd, known as Building 2, Building 19 and
car parking to Berwen Ltd for £3.25m, with no gain or loss on book value. The
cost of £0.3m was associated with external fees relating to the sale. This
cost has been recognised as a specific adjusting item as they do not reflect
the underlying trading of the business. Cash proceeds received for the sale
have been recorded within investing activities in the cash flow statement.
Prior year disposal of discontinued operation
During the prior year, a gain on the disposal of the discontinued Software
business of £7.4m was recognised.
5. Earnings per share
Basic earnings per share is calculated by dividing the earnings attributable
to ordinary shareholders by the weighted average number of shares outstanding
during the year, excluding those held by an employee benefit trust for the
Long-Term Incentive Plan (LTIP) and by the Share Incentive Plan (SIP) for the
free share scheme which are treated as cancelled for the purposes of the
calculation. For diluted earnings per share, the weighted average number of
ordinary shares in issue is adjusted to assume conversion of all dilutive
potential ordinary shares. These include potential awards of LTIP shares and
options granted to employees. The assumed proceeds from these are regarded as
having been received at the average market price of ordinary shares during the
year.
Reconciliations of the earnings and the weighted average number of shares used
in the calculations are set out below. Underlying earnings per share is also
shown because the Directors consider that this provides a useful indication of
underlying performance and trends over time.
2024 2023
£m £m
Earnings/(loss) attributable to owners of the parent 0.7 (5.4)
Add back the net-of-tax impact of:
- Amortisation of acquired intangibles 3.5 3.5
- Acquisition-related expenditure 11.3 6.2
- Other reorganisation costs and impairment 6.1 22.9
- ERP implementation costs 0.4 -
- Sale and leaseback costs 0.3 -
- Discontinued operations - (6.4)
Underlying earnings attributable to owners of the parent 22.3 20.8
2024 2023
Number Number
of shares
of shares
millions
millions
Basic weighted average number of shares in issue 62.2 62.2
Effect of dilutive potential shares 0.6 -
Diluted weighted average number of shares in issue 62.8 62.2
2024 2023
Earnings/(loss) per share pence pence
Basic 1.1 (8.7)
Diluted 1.1 (8.7)
2024 2023
Underlying earnings per share pence pence
Basic 35.9 33.4
Diluted 35.5 33.4
2024 2023
Earnings/(loss) per share from continuing operations pence pence
Basic 1.1 (19.3)
Diluted 1.1 (19.3)
2024 2023
Earnings per share from discontinued operation pence pence
Basic - 10.9
Diluted - 10.9
6. Dividends
2024 2023
£m £m
Final dividend for prior period: 8.61p per share (2023: 7.49p) per share 5.3 4.6
Interim dividend for current period: 3.80p per share (2023: 3.35p) per share 2.4 2.1
Equity dividends paid 7.7 6.7
On 4 September 2024 the Directors declared a final dividend of 8.9p per share,
which will be paid gross on 22 November 2024 to holders of ordinary shares on
the Company's register of members on 1 November 2024.
7. Goodwill and impairment of non-financial assets
Movement in goodwill 2024 2023
£m £m
At 1 July 96.1 90.6
Acquisition of business((1)) - 13.6
Impairment((2)) - (5.2)
Exchange adjustments (0.1) (2.9)
At 30 June 96.0 96.1
The carrying value of goodwill and the key assumptions used in determining the
recoverable amount of each CGU, or group of CGUs, are as follows:
Carrying value Pre-tax discount rate Long-term growth rate
2024 2023 2024 2023 2024 2023
Basis £m £m £m £m £m £m
Rail VIU 44.6 44.4 14.3% 13.5% 3.6% 2.9%
Automotive and Industrial - Established((2)) VIU - - 14.8% 14.9% (10.0%) (10.0%)
Automotive and Industrial - Emerging VIU 14.2 14.4 14.7% 14.9% 3.8% 3.9%
Energy and Environment((1)) VIU 32.6 32.7 16.5% 16.9% 4.7% 4.0%
Defense((3)) VIU 3.5 3.5 16.1% 14.0% 1.7% 3.3%
Performance Products((4)) FVLCD 1.1 1.1 12.4% 15.9% 4.7% 4.4%
At 30 June 96.0 96.1
(1) The Group acquired Aither and E3M during the prior year, adding
goodwill of £5.1m and £8.5m respectively to the Energy and Environment CGU.
(2) At 31 December 2022, during the previous financial year, as required
by IAS 36, an assessment was carried out to identify whether any indicators
existed that the Goodwill balance es held by the Group may be impaired. Due to
a significantly more challenging performance than expected in the Automotive
and Industrial - Established Mobility (A&I Established) segment, an
indicator of impairment was considered to exist, and the recoverable amount of
the CGU was estimated. The recoverable amount of the CGU was based on its
value in use (VIU), determined by discounting the future cash flows expected
to be generated from the continuing use of the CGU. Expected cash flows for
the A&I Established business decreased compared to those expected at 30
June 2022, and the carrying amount of the CGU was therefore determined to be
higher than its recoverable value of nil. As a result, an impairment charge of
£17.7m was recognised during the previous financial year to administrative
expenses within specific adjusting items for the A&I Established operating
segment. This assessment was updated at 30 June 2023 and a further £1.0m of
assets were impaired. At 30 June 2024 the recoverable value of A&I
Established remained nil and therefore the assets remain fully impaired. No
further impairment was added.
(3) The increase in the pre-tax discount rate for this CGU relates to a
change in the mix of competitor companies which better reflects the risk
profile of this CGU.
(4) The recoverable amount of this CGU was based on fair value less costs
of disposal (FVLCD), estimated using discounted cash flows. The fair value
measurement was classified as a Level 3 fair value based on the inputs in the
valuation technique used. The key assumptions used are set out in the table.
The FY 2023/24 discount rate reflects a post-tax discount rate.
Movements in the carrying value of goodwill in Rail and A&I - Emerging
reflect movements in foreign exchange rates.
During the previous financial year, £18.7m of assets were written off include
£5.2m of goodwill, £1.8m of intangible assets (primarily development costs,
including calibration tools), and £11.7m of property, plant and equipment
(including £2.8m of buildings and £5.2m of test assets). After recognising
the impairment, the carrying value of non-current assets allocated to this CGU
was £nil.
£m
Goodwill 5.2
Other intangible assets 1.8
Property, plant and equipment 11.7
Total impairment 18.7
In addition, an estimate of recoverable value for the combined A&I
Established and A&I Emerging businesses was calculated in order to assess
the carrying value of the assets shared between these CGUs. The carrying value
of the shared assets, and the A&I Emerging assets were supported by this
calculation with significant headroom, and no further impairment was
recognised.
Key assumptions
The five-year plan and discounted cash flow calculations thereon are used to
calculate a recoverable amount which is compared to the carrying value of the
goodwill and other non-financial assets allocated to each CGU, or group of
CGUs at 30 June 2024. No impairment was considered necessary (2023: Impairment
was recognised in relation to A&I Established (see above).
The five-year cashflow forecasts are based on the budget for the following
year (year one) and the business plans for years two to five. The five-year
plan is prepared by management and is reviewed and approved by the board. The
five-year plan reflects past experience, management's assessment of the
current contract portfolio, contract wins, contract retention, price
increases, gross margin, as well as future expected market trends (including
the impact of climate change, where relevant), adjusted to meet the
requirements of IAS 36 Impairment of Assets.
The risks associated with climate change which have been incorporated into the
five-year planning process include the known and expected increased regulation
in relation the use of the internal combustion engine (ICE) and the impact
that will have on our customers operating in this market. The five-year
planning process takes into account the requirement to adapt our product and
service portfolios in response to megatrends influenced by climate change.
Some risks, such as the risk of sea level rise (see discussion of Principal
Risks in the Annual Report) are expected to arise outside of the timeline of
the five-year plan and are not considered sufficiently quantifiable to include
in the longer-term element of the recoverable amount calculation. The
recoverable amounts of the CGUs include consideration of our commitment to
carbon reduction based on the Science Based Targets initiative (SBTi).
Due to regulatory and other changes in the market relating to ICE, a long-term
decrease of 10% p.a. has been applied to A&I - Established cashflows.
Cash flows beyond year five are projected into perpetuity using a long-term
growth rate, which is determined as being the lower of the planned compound
annual growth rate in each CGUs, or group of CGUs, five-year plan and external
third party forecasts of the prevailing inflation and economic growth rates
for each of the territories in which each CGU, or group of CGUs, primarily
operates.
For VIU, the cash flows are discounted at a pre-tax discount rate, which is
derived from externally sourced data and reflects the current market
assessment of the Group's time value of money and risks specific to each CGU.
For FVLCD, a post-tax discount rate was used.
Research and Development Expenditure Credits (RDEC) cash flows are included in
the value‑in‑use calculations for A&I - Established, A&I -
Emerging, Performance Products and Energy and Environment.
Sensitivities
The recoverable amount calculations were assessed for sensitivity to
reasonably possible changes to assumptions. The change in pre-tax discount
rate, growth rate, operating profit and working capital which would cause the
unit's (or group of units') carrying amount to exceed its recoverable amount
was identified and an assessment made as to whether that change was considered
reasonably possible. In addition, a scenario was modelled for each of a 10%
reduction in operating profit, a 10% increase in working capital movement, a
2% increase in the pre-tax discount rate and a 2% decrease in the long-term
growth rate, and a scenario with each of these changes combined.
None of these scenarios resulted in any CGU's (or group of units') goodwill
exceeding its recoverable amount.
8. Net debt and borrowings
The objectives when managing capital are to safeguard the ability to continue
as a going concern in order to provide returns for shareholders, benefits for
other stakeholders and to maintain an optimal capital structure to reduce the
cost of capital. Capital is monitored on the basis of the gearing ratio, which
is calculated as net debt divided by total capital.
The majority of the Group's cash is held in bank deposits. The Group's sources
of borrowing for funding and liquidity purposes come from the Group's £150.0m
multi-currency revolving credit facility and through short-term overdraft
facilities.
The disclosures in this Note include certain Alternative Performance Measures
(APMs). For more information on the APMs used by the Group, including
definitions, please refer to Note 1.
a) Gearing ratio
2024 2023
£m £m
Net debt 59.6 62.1
Total equity 165.2 176.6
Total capital 224.8 238.7
At 30 June 26.5% 26.0%
b) Net debt
2024 2023
Analysis of net debt £m £m
Current assets - cash and cash equivalents
Cash and cash equivalents 48.6 49.8
Restricted cash (1.3) -
Net cash and cash equivalents 47.3 49.8
Current liabilities - borrowings
Bank overdrafts repayable on demand (4.3) (12.6)
Hire purchase liabilities maturing within one year - (0.1)
Total current borrowings (4.3) (12.7)
Non-current liabilities - borrowings
Hire purchase liabilities maturing after one year - -
Bank loans maturing after one year (102.6) (99.2)
Total non-current borrowings (102.6) (99.2)
At 30 June (59.6) (62.1)
Net cash and cash equivalents at 30 June 47.3 49.8
Total borrowings at 30 June (106.9) (111.9)
At 30 June (59.6) (62.1)
2024 2023
Movement in net debt £m £m
At 1 July (62.1) (35.4)
Net increase/(decrease) in cash and cash equivalents and bank overdrafts 7.1 (2.2)
Movement in restricted cash (1.3) -
Repayments of hire purchase 0.1 0.2
Proceeds from bank loans (83.0) (128.0)
Repayments of bank loans 80.0 103.0
Amortisation of bank loan fees (0.4) 0.3
At 30 June (59.6) (62.1)
At the year-end, the Group had current hire purchase liabilities of nil (2023:
£0.1m) and non-current hire‑purchase liabilities of £nil. This
hire-purchase agreement had an implicit rate of interest of 2.4%.
At the year-end, the Group held total banking facilities of £166.1m (2023:
£166.1m), which included committed facilities of £150.0m (2023: £150.0m).
The committed facility consists of a £150.0m multi‑currency Revolving
Credit Facility (RCF) which provides the Group with committed funding through
to July 2026. In addition, the Group has uncommitted facilities including
overdrafts of £16.1m (2023: £16.1m), which mature throughout this and the
next financial year and are renewable annually.
Non-current bank loans comprise committed facilities of £102.6m (2023:
£99.2m), net of direct issue costs, which were drawn primarily to fund
acquisitions and general corporate purposes. These are denominated in Pounds
Sterling and have variable rates of interest dependent upon the Group's
adjusted leverage, which range from 1.65% to 2.45% above SONIA (2023: 1.65% to
2.45% above SONIA).
Adjusted leverage is defined in the Group's banking documents as being the
ratio of total net debt to adjusted EBITDA. Adjusted EBITDA is further defined
as being earnings before interest, tax, depreciation, impairment and
amortisation, excluding the impact of IFRS 16, adjusted for any one‑off,
non-recurring, exceptional costs and acquisitions or disposals during the
relevant period. At the reporting date, the Group has an adjusted leverage of
1.25x, which attracts a rate of interest of SONIA plus 1.85% (2023: SONIA plus
1.85%). The Group has banking facilities for its UK companies which together
have a net overdraft limit, but the balances are presented on a gross basis in
the financial statements.
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