Ricardo executes strategic transformation for long term value but delays in orders impact in the short term

Accelerating our transformation 
Ricardo recently completed two transactions, both of which support the Group in simplifying and focusing its portfolio on long-term sustainable growth. The acquisition of E3 Advisory (E3A), a leading Australian infrastructure advisory firm, offers Ricardo a compelling strategic opportunity that will add further scope to our energy and environment business and operational scale in Australia. At the same time, the timing of the disposal of Ricardo’s Defense business has optimised cash for the Group, while accelerating its transition in line with its strategic priority of becoming a global leader in environment and energy-transition solutions. 

Ricardo Defense 
Following the disposal of the Defense business noted above, Defense will be reported as discontinued operations. After a peak year in FY23/24, lower volumes of its anti-lock brake system/electronic stability control (ABS/ESC) retrofit kits led to a decline in orders, revenue and operating profit compared to the prior year. Good growth continued in field services support and technical consulting.

Further progress in the first half within Ricardo’s continuing operations 
Order intake for Ricardo’s continuing operations was up by 10% (11% at constant currency) for the six months to 31 December 2024 reflecting good progress in securing multi-year contracts. Order book was up 2% (3% at constant currency) compared to 31 December 2023. Reported year to date revenue increased by 1% (2% at constant currency).

• Energy and Environment (EE) delivered strong order growth driven by multi-year contract wins within air quality and policy, but phasing of orders impacted H1 revenue and profit, due to global elections, the delay in spend ramping for UK water asset management plan (AMP) cycles and global macro uncertainties. We expect good profit growth in the second half, with the impact of delays in orders reducing as we go into the next financial year. 
• Rail saw growth in H1, reflecting strong performance in Asia and the delivery of previously announced contract wins.  However, following the wildfires in California, the California High Speed project has been deferred until further notice impacting H2. 
• Good profit momentum continued in the combined Automotive and Industrial (A&I) businesses driven by actions taken in FY23/24 to create a more flexible resourcing model. From a market perspective, we are seeing prolonged interest in internal combustion solutions across all modes of transport and, by managing the portfolio of solutions as one A&I business, we see growth in the Established portfolio partly offsetting continued fluctuations in demand for the Emerging portfolio. We expect continued profit momentum in H2 compared to H1.  
• Performance Products (PP) delivered good revenue and profit growth, thanks to a one off benefit relating to the  new large framework agreement.  Powertrain volumes remain at consistent levels year on year, with lower volumes in transmissions due to two programmes drawing to a close as previously communicated. 

Net debt
At 31 December 2024, net debt was £18.5m compared to £59.6m at 30 June 2024. This reflects the receipt of £64.3m on the disposal of Defense, net of transaction costs, and is prior to the payment of the consideration for E3 Advisory. While we retain a rigorous focus on working-capital management, our cash conversion has reduced significantly in the six-month period because of delayed R&D tax receipts, increased working capital in Defense and extended invoicing profiles on some large projects, with improvement expected in the second half.

FY 24/25 Outlook 
Due to the delay in orders identified above we will be below consensus expectation for FY 24/25. We still expect to see good Group organic underlying profit growth for the year, in addition to the profit from the Acquisition of E3 Advisory. H2 will show  good profit growth in EE, however due to the order delays described above, will be broadly flat for the full year.  In A&I we will see growth in H2 profit compared to H1 as a result of the variable resourcing model that we established last year, but with lower order mix in emerging solutions we will see a decline in H2 profitability year on year. 

Graham Ritchie, Chief Executive Officer, commented:
“Ricardo has demonstrated clear execution aligned to our strategic ambition. The two transactions support us in simplifying and focusing the Group’s portfolio, while improving our long-term quality of earnings aligned to the environmental megatrends. By accelerating our transformation, we are creating long-term and sustainable value for all our stakeholders. While we are seeing delays in orders resulting from short-term headwinds in some of our end markets we are encouraged by the order intake across many of our businesses. We have recently won several key strategic contracts, particularly in our Energy and Environment business, which gives confidence in our continued growth over the medium term supporting both energy transition and environmental adaptation for climate change.” 

Half-year results
The results for the half year ended 31 December 2024 will be released on 5 March 2025. 

Investor relations contacts
Natasha Perfect 
Ricardo plc 
Tel 01273 455 611 
Natasha.perfect@ricardo.com 

Elisabeth Cowell / Ian Silvera
SECNewgate 
Tel 0203 757 6882 
Ricardo@secnewgate.co.uk