REG - Ricardo PLC - Interim Results
05/03/2025 07:00
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RNS Number : 3534Z Ricardo PLC 05 March 2025
5 March 2025
Ricardo plc
Interim Report for the six months ended 31 December 2024 (HY 2024/25)
Good strategic progress with market headwinds impacting orders
· Acquisition of E3 Advisory and disposal of Ricardo Defense
demonstrates clear execution against our strategy
· Continuing Group order intake of £221m on the back of multi-year wins
(HY 2023/24: up 11% from £199m on a constant currency basis), with modest
revenue growth of 2% in the face of a challenging macro environment
· Solid improvement in underlying operating profit to £8.3m (HY
2023/24: £1.0m at constant currency), driven by higher margins and ongoing
focus on cost to underpin profitability
· Continuing underlying operating profit margin improved to 4.9% from
0.6% (constant currency)
· Net debt reduced by £41.1m since 30 June 2024, due to the proceeds
on the sale of Ricardo Defense
· Lower than expected underlying cash conversion of 13% in the
continuing operations as a result of delayed receipts and changes to profile
of invoicing milestones; improved performance expected in the second half
· Profit on sale of Ricardo Defense of £36.8m, partly offset by
£14.0m impairment of Emerging A&I due to uncertainty over timing of order
intake
· Resilient solutions in Energy & Environment are key to our
strategy with strong fundamentals providing confidence in mid-term growth
· Continued variability in automotive end markets drives our
diversification into off-highway and industrial applications which supports
expected mid-term growth
· Interim dividend of 1.7p declared
Historical rates Constant currency((6))
HY 2024/25 HY 2023/24 Growth/ (decline)% HY 2023/24 Growth/ (decline)%
Continuing operations
Order intake £m 221.1 200.6 10.2 198.8 11.2
Order book £m 393.0 385.9 1.8 380.0 3.4
Revenue £m 169.1 167.6 0.9 166.0 1.9
Underlying((1))
- Operating profit £m 8.3 1.1 654.5 1.0 730.0
- Operating profit margin % 4.9 0.7 4.2pp 0.6 4.3pp
- Profit/(loss) before tax £m 4.1 (3.0) 236.7 (3.1) 232.3
- Basic earnings/(loss) per share((1&3)) p 4.7 (4.0) 217.5 (4.2) 211.9
Statutory
- Operating loss £m (8.2) (8.8) 6.8 (8.9) 7.9
- Operating loss margin % (4.8) (5.3) 0.5pp (5.4) 0.6pp
- Loss before tax £m (12.5) (12.9) 3.1 (13.0) 3.8
Total
Statutory operating profit £m 33.9 2.0 1,595.0
Underlying((1)) cash conversion((2)) % (5.8) 133.3 (139.1pp)
Cash conversion((2)) % (4.5) 187.2 (191.7pp)
Basic underlying earnings per share((1&3)) p 10.9 9.2 18.5
Basic reported earnings/(loss) per share p 43.9 (5.5)
Closing
Net debt((4)) £m 18.5 63.3 (70.8)
Headcount((5)) no. 2,559 2,978 (14.1)
Dividend proposed per share p 1.7 3.8 (55.3)
Continuing operations exclude the results of Ricardo Defense, which was sold
on 31 December 2024
References are defined in the glossary of terms below.
Commenting on the results, Graham Ritchie, Chief Executive Officer, said:
"With the sale of Ricardo Defense and the acquisition of E3 Advisory, we have
demonstrated clear execution against our strategy, simplifying our business
and accelerating our transition to environmental and energy solutions.
Although we have experienced some market headwinds in the first half, which
impacted the timing of orders, we delivered an improving operating profit
performance year-on-year, owing to actions taken to improve the Group's cost
base, and we will continue to focus on operational efficiency to improve
profitability.
Whilst we have seen volatility owing to elections leading to short term
headwinds, our Energy and Environment business is core to our strategy,
offering long-term resilient solutions that are required for energy transition
and climate adaptation.
Within our Automotive and Industrial engineering business we continue to see
variability in demand from the automotive sectors, but this is becoming a
smaller mix of our revenue as we diversify into Industrial segments, including
marine, aerospace and stationary power, which gives confidence for longer-term
growth.
We remain confident that the actions we are taking to transition our portfolio
of solutions, diversify our sales activity to new markets and our continued
focus on cost control and operational efficiency will deliver mid-term
profitable growth."
About Ricardo plc
Ricardo plc is a global strategic, environmental, and engineering consulting
company, listed on the London Stock Exchange. With over 110 years of
engineering excellence and more than 2,500 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 customers to solve the most complex and dynamic challenges to help achieve
a safe and sustainable world.
Visit www.ricardo.com (http://www.ricardo.com/)
Analyst presentation
There will be a presentation for analysts relating to the Group's interim
results for the six months ended 31 December 2024 at 9:30am on Wednesday 5
March 2025. A recording of the presentation will be available online to all
investors from Wednesday 5 March 2025 at
https://www.ricardo.com/en/investors/results-centre
(https://www.ricardo.com/en/investors/results-centre)
Further enquiries
Ricardo plc
Judith Cottrell Tel +44 (0) 127 345 5611
Natasha Perfect Email investors@ricardo.com (mailto:investors@ricardo.com)
SEC Newgate
Bob Huxford / Ian Silvera Tel +44 (0) 207 680 6882
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 the alternative performance measures,
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 from continuing operations also exclude a tax
credit to statutory earnings of £0.3m (HY 2023/24: £0.9m) for the specific
adjusting items described in Note 10.
(4) Net debt, as set out in Note 14, is defined as current and
non-current borrowings less cash and cash equivalents, including hire purchase
agreements, but excluding any restricted cash and the impact of 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.
(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
Despite continued market uncertainty, owing to global elections in 2024 and
geo-political uncertainty impacting energy transition agendas, Ricardo has
delivered a solid underlying profit performance in the first half and at the
same time, made positive progress in delivering key strategic milestones.
On 31 December 2024 Ricardo successfully completed the sale of the Defense
operating segment for consideration of USD 90.6m (£72.3m). Shortly
afterwards, post-period end on 7 January 2025, Ricardo utilised the funds from
the disposal to acquire 85% of E3 Advisory Pty Ltd (E3A) for a headline
enterprise value of AUD 101.4m (£50.7m), of which AUD 69.0m (£34.5m) was
paid on completion. These transactions serve to simplify Ricardo's portfolio,
focusing on environment and energy solutions and better positioning the Group
for long-term sustainable growth. The acquisition of E3A is immediately margin
accretive in the short term. It also increases Ricardo's international
strategic advisory capability, creating further scale in energy and transport
infrastructure in Australia, which has been a key growth market for the Group
in recent years.
Excluding the results of Defense, Ricardo generated revenue from continuing
operations of £169.1m, 1.9% up on the prior period on a constant currency
basis. This reflects growth in the Established Automotive & Industrial
(A&I), Rail and Performance Products (PP) segments, offset by lower
revenue in Emerging A&I and Energy & Environment (EE). Underlying
operating profit from continuing operations was £8.3m, an increase of £7.3m
on the prior period profit of £1.0m (on a constant current basis), driven by
an improvement in profitability in the Emerging and Established A&I
segments as a result of restructuring actions taken in the prior year and
improved utilisation in a number of areas. This was complemented by a
reduction in Group-wide indirect costs as a result of the centralisation of
enabling functions, also implemented in the prior year. Underlying profit
before tax from continuing operations improved from a loss of £3.1m in the
prior period (on a constant currency basis) to a profit of £4.1m.
These results represent solid underlying operating profit growth within a
challenging macro-economic environment which has caused continued volatility
in order intake. This is most prevalent in our Emerging A&I segment, where
we have seen continued challenge in automotive sectors. Therefore, we are
actively diversifying our sales activity towards off-highway and industrial
applications. Overall, the Group order book is robust at £393m (FY 2023/24:
£356m, HY 2023/24: £380m at constant currency). EE delivered a record order
intake, resulting in its order book growing from £99m at June 2024 to £133m,
which demonstrates strong ongoing demand for our energy transition and
adaptation services and provides confidence for H2.
Reported operating loss from continuing operations, after taking specific
adjusting items into consideration, was £8.2m (HY 2023/24: loss of £8.8m)
and reported loss before tax from continuing operations was £12.5m (HY
2023/24: loss of £12.9m). HY 2023/24 reported operating loss and loss before
tax included a £14.0m non-cash impairment of goodwill in the Emerging A&I
segment, stemming from continuing volatility in order intake and uncertainty
over the pace of energy transition noted above, £1.1m of amortisation of
acquired intangible assets on previous acquisitions, £0.8m of deferred
consideration and retention costs relating to previous acquisitions, and
£0.7m of other transaction related costs. In the prior period, £6.2m of earn
out costs were incurred, together with £0.3m of other M&A-related costs,
£2.5m of amortisation of acquired intangibles, and £0.9m of reorganisation
and other one-time costs.
Ricardo Defense contributed £41.0m of revenue, £5.3m of underlying operating
profit and £5.3m of underlying profit before tax in the current period (HY
2023/24: revenue of £56.6m, £10.9m of underlying operating profit and
£10.9m of underlying profit before tax). FY 2023/24 was a record year for the
Defense segment, which benefitted from high volumes on the ABS/ESC programme,
hence revenue and profit reduced as expected in the first half of FY 2024/25
as a result of reduced ABS/ESC volumes. The reported operating profit and
profit before tax from the discontinued operation in the current period
includes a provisional net gain on disposal, after transaction-related costs,
of £36.8m, subject to any final completion accounts adjustments.
Net debt at 31 December 2024 was £18.5m, a reduction of £41.1m on the 30
June 2024 position of £59.6m. The Group received £64.3m of net proceeds,
after transaction-related costs paid in the period, from the disposal of
Defense. This was partially offset by an increase in Group's underlying net
working capital of £22.6m, of which £13.2m was in the continuing operations
due to a combination of the delay in the HMRC Research and Development
Expenditure Credit receipt (RDEC), reduced levels of payments on account in
A&I and extended invoicing milestones on projects in Asia and the Middle
East. The consideration for E3A was paid following the period end.
Headline trading performance
Underlying((1)) Reported
External revenue Operating profit Profit/(loss) before tax Operating profit/(loss) Profit/(loss) before tax
£m £m £m £m £m
HY 2024/25
Total 210.1 13.6 9.4 33.9 29.6
Less: discontinued operation (41.0) (5.3) (5.3) (42.1) (42.1)
Continuing operations 169.1 8.3 4.1 (8.2) (12.5)
HY 2023/24
Total 224.2 12.0 7.9 2.0 (2.1)
Less: discontinued operation (56.6) (10.9) (10.9) (10.8) (10.8)
Continuing operations 167.6 1.1 (3.0) (8.8) (12.9)
Continuing operations at current year exchange rates 166.0 1.0 (3.1) (8.9) (13.0)
Growth (%) - Total (6) 13 19 1,595 1,510
Growth (%) - Continuing operations 1 655 237 7 3
Constant currency growth((6)) (%) - Continuing operations 2 730 232 8 4
References in superscript are defined in the glossary of terms.
Operating segments summary: Order intake and revenue
HY 2024/25 HY 2023/24 HY 2023/24
Historic rates (restated((a))) Constant currency((6,a))
Order intake Revenue Order intake Revenue Order intake Revenue
£m £m £m £m £m £m
EE((a)) 80.8 50.4 65.5 52.9 65.1 52.5
Rail 57.1 38.1 53.2 38.1 52.0 37.2
Emerging A&I((a)) 21.3 19.1 27.9 27.5 27.8 27.3
Environment & Energy 159.2 107.6 146.6 118.5 144.9 117.0
PP 42.2 40.6 41.9 38.2 41.9 38.2
Established A&I 19.7 20.9 12.1 10.9 12.0 10.8
Established Transport 61.9 61.5 54.0 49.1 53.9 49.0
Total - continuing operations 221.1 169.1 200.6 167.6 198.8 166.0
Discontinued operation 55.1 41.0 113.7 56.6 110.5 54.9
Total 276.2 210.1 314.3 224.2 309.3 220.9
Number references in superscript are defined in the glossary of terms.
(a) From 1 July 2024 the management of Ricardo Strategic Advisory (RSA),
historically part of the Emerging A&I segment, was transferred to EE as it
was felt that there was closer strategic alignment between the businesses. The
results of RSA are now reported to the Group's Chief Operating Decision Maker
(the CEO) and the Ricardo plc Board as part of the EE monthly management
results. The segmental analysis reflects this new allocation, with the prior
period restated. HY 2023/24 order intake and revenue for the Emerging A&I
operating segment has decreased by £2.5m and £2.0m respectively (constant
currency: £2.4m and £1.9m) with a corresponding increase in the EE segment.
RSA generated an underlying operating loss of £0.8m (constant currency:
£0.8m) in HY 2023/24. The average headcount for HY 2023/24 in RSA was 56.
Operating segments summary: Underlying operating profit
HY 2024/25 HY 2023/24 HY 2023/24
Historic rates (restated((a))) Constant currency((6,(a)))
Underlying((1)) operating profit Underlying((1)) operating profit Underlying((1)) operating profit Underlying((1)) operating profit Underlying((1)) operating profit Underlying((1)) operating profit
£m margin % £m margin % £m margin %
EE((a)) 6.8 13.5 8.0 15.1 7.9 15.0
Rail 4.6 12.1 4.1 10.8 4.0 10.8
Emerging A&I((a)) 1.5 7.9 (0.7) (2.5) (0.6) (2.2)
Environment & Energy 12.9 12.0 11.4 9.6 11.3 9.7
PP 2.8 6.9 2.0 5.2 2.0 5.2
Established A&I (0.4) (1.9) (3.5) (32.1) (3.5) (32.4)
Established Transport 2.4 3.9 (1.5) (3.1) (1.5) (3.1)
Operating segments - continuing operations 15.3 9.0 9.9 5.9 9.8 5.9
Plc costs (7.0) - (8.8) - (8.8) -
Total - continuing operations 8.3 4.9 1.1 0.7 1.0 0.6
Discontinued operation 5.3 12.9 10.9 19.3 10.6 19.3
Total 13.6 6.5 12.0 5.4 11.6 5.3
Number references in superscript are defined in the glossary of terms. For
letter superscript, please refer to the superscript above this table
Environment and Energy Transition portfolio
Robust performance in Rail, but overall performance impacted by delayed orders
in A&I and EE
Highlights:
· Order intake: £159.2m (HY 2023/24: £146.6m) up 8.6% (constant
currency: £144.9m up 9.9%)
· Revenue: £107.6m (HY 2023/24: £118.5m) down 9.2% (constant
currency: £117.0m down 8.0%)
· Underlying operating profit: £12.9m (HY 2023/24 £11.4m) up 13.2%
(constant currency: £11.3m up 14.2%)
· Underlying operating profit margin: 12.0% (HY 2023/24: 9.6%) up 2.4pp
(constant currency: 9.7% up 2.3pp)
Energy and Environment (EE) delivered record order intake of £80.8m, a
headline increase of 24% compared to the prior period on a constant currency
basis. This included the renewal of the National Atmospheric and Greenhouse
Gas Inventories programme, a ten-year contract awarded by the UK Government
which continues to underpin our global Air Quality services. Normalising for
this win, order intake grew by 10% compared to the prior period. Revenue was
4% down on the prior period on a constant currency basis as global election
cycles, impacting our Policy, Strategy and Economics practice in particular,
combined with continuing challenging market conditions in Water, resulted in
order intake being delayed to the end of the period and into the second half.
This was partially offset by growth in Energy Infrastructure Transition and
Digital Modelling. Underlying operating profit margins reduced to 13.5% (HY
2023/24: 15.0% on a constant currency basis) due to the impact of delayed
orders on utilisation. Whilst we see short-term headwinds as a result of
geopolitical uncertainties, the resilience of our portfolio of solutions,
supported by the strength of the order book, provides confidence in the near
to mid-term.
Rail order intake of £57.1m was a record for a six-month period, with notable
successes in the Asia region. There was more subdued performance in Australia
where we are operating in a more mature market. Revenue increased by 2% on a
constant currency basis, with operational efficiencies increasing underlying
operating profit margin to 12.1% (HY 2023/24: 10.8% on a constant currency
basis). H2 performance will be impacted by our element of the California High
Speed Rail being put on hold but we expect continued good performance in Asia
and Europe.
We continue to see volatility in the Emerging A&I business and increased
demand for internal combustion engines resulting in more activity in
Established A&I. Emerging A&I order intake reduced by £6.5m (23%) on
a constant currency basis compared to the prior period, with revenue reducing
by £8.2m (30%) on a constant currency basis. The short-term volatility has
been influenced by delayed customer investment in emerging solutions,
particularly in Automotive, supporting our continuing diversification away
from the automotive market into off-highway and industrial applications. The
restructuring efforts implemented in the second half of FY 2023/24, focused on
implementing a more flexible resourcing model and reducing indirect costs,
have resulted in an improvement in profitability, with underlying operating
profit increasing by £2.1m compared to the prior period on a constant
currency basis. Underlying operating profit margin improved to 7.9%, compared
to a negative 2.2% in the prior period. Whilst we remain confident over growth
in the mid-term, there is volatility in order intake and uncertainties over
the pace of technology change. Following a re-assessment of the value-in-use
of the segment, goodwill which arose as a result of historic acquisitions was
impaired resulting in a charge of £14.0m. This has been recognised within
specific adjusting items. No other assets were impaired.
Established Transport portfolio
Strong performances from PP and Established A&I
Highlights (continuing basis following the disposal of Defense):
· Order intake: £61.9m (HY 2023/24: £54.0m) up 14.6% (constant
currency: £53.9m, up 14.8%)
· Revenue: £61.5m (HY 2023/24: £49.1m) up 25.3% (constant currency:
£49.0m, up 25.5%)
· Underlying operating profit: £2.4m (HY 2023/24: loss of £1.5m) up
260.0% (constant currency: loss of £1.5m up 260%)
· Underlying operating profit margin: 3.9% (HY 2023/24: (3.1)% reported
and at constant currency, up 7.0pp)
Performance Products (PP) delivered order intake of £42.2m, in line with the
prior period. PP secured a six-year extension to a driveline programme with a
major European OEM in the period. PP delivered growth in revenue (£2.4m or
6%) and underlying operating profit (£0.8m or 40%), driven by the ramp-up of
activities on a significant ten-year driveline and powertrain manufacturing
framework agreement, secured in June 2024.
Established A&I order intake was £19.7m in the period, a 64% increase on
HY 2023/24 on a constant currency basis. HY 2024/25 order intake includes
design and development activities on the ten-year framework agreement
mentioned above. In addition, there has been strong demand in high-efficiency
ICE for the marine industry and large industrial applications, supporting our
continued strategy of transitioning away from traditional automotive markets.
Revenue increased by 94% on a constant currency basis to £20.9m. Established
A&I also benefitted from the structural changes implemented during the
latter half of FY 2023/24. Underlying operating loss reduced from £3.5m in HY
2023/24 to £0.4m in HY 2024/25.
Discontinued operation - disposal of Defense
As anticipated, Defense order intake, revenue and underlying operating profit
all reduced in HY 2024/25 compared to the prior period. Defense received
£32.1m (USD 43.3m) of orders for ABS/ESC kits in the period, compared to
£80.5m (USD 105.4m) in the prior period due to the timing of the release of
funding for the programme. Together with new vehicle kits, Defense delivered
3,430 kits in HY 2024/25 (HY 2023/24: 6,130 kits). There was good growth in
the Technical Solutions consultancy business, including Field Support
Services, being the sustainment of ABS/ESC kits in the field.
Cash performance - inflow from the disposal of Defense
Net debt: £18.5m, a decrease of £41.1m (69.0%) on FY 2023/24.
The Group received £64.3m of net proceeds, after transaction-related costs,
from the disposal of Defense. The Group's underlying net working capital
increased by £22.6m, split between £13.2m from the continuing operations and
£9.4m in Defense. Working Capital for the continuing business has been
adversely impacted by the delay in the HMRC Research and Development
Expenditure Credit receipt (RDEC) of £6.3m together with reduced levels of
payments on account and extended invoicing milestones on projects in Asia and
the Middle East. Overall underlying cash conversion was negative 5.8% and
positive 13.2% for the continuing operations. Reported cash conversion was
negative 4.5%, after taking into account the cash impact of specific adjusting
items. We expect improved performance in FY 2024/25.
The composition of net debt is defined in Note 14.
Specific adjusting items
As set out in more detail in Note 10, the Group's underlying profit before tax
from continuing operations excludes £16.6m of costs incurred during the
period that have been charged to the income statement as specific adjusting
items (HY 2023/24: £9.9m). 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.
HY 2024/25 HY 2023/24 (restated*)
£m £m
Underlying((1)) profit before tax from continuing operations 4.1 (3.0)
Amortisation of acquired intangibles (1.1) (2.5)
Acquisition-related expenditure (1.5) (6.5)
Impairment of goodwill in the Emerging A&I segment (14.0) -
Reorganisation costs - (0.6)
ERP implementation costs - (0.3)
Total specific adjusting items from continuing operations (16.6) (9.9)
Reported loss before tax from continuing operations (12.5) (12.9)
SAI recorded in discontinued operation
Disposal of discontinued operation 36.8 (0.1)
References in superscript are defined in the glossary of terms
*Acquisition-related expenditure of £0.1m in the prior period has been
re-presented as part of the result of the discontinued operation.
Amortisation of acquired intangibles was £1.1m in the period, compared to
£2.5m in HY 2023/24. This has reduced due to the acquired intangibles from
historic acquisition becoming fully amortised.
Impairment of goodwill of £14.0m was recognised in the Emerging A&I
segment. Due to factors previously mentioned, expected cash flows for the
Emerging A&I business have decreased compared to those expected at 30 June
2024, resulting in an impairment of the goodwill in this segment. See Note 9
for further details.
Acquisition-related costs of £1.5m were incurred in the period (HY 2023/24:
£6.5m). These included accruals for:
· deferred consideration and management retention payments in
relation to the acquisition of Aither Pty Ltd (Aither), acquired in March 2022
- £0.6m (HY 2023/24: £4.9m, plus £0.2m of post-deal integration costs);
· deferred consideration in relation to the acquisition of E3
Modelling (E3M), acquired in January 2022 - £0.2m (HY 2023/24: £1.2m plus
£0.1m of post-deal integration costs); and
· incremental M&A costs in relation to the acquisition of E3A,
acquired in January 2025 - £0.7m.
The prior period also included £0.1m in respect of retention payments due to
the former owners of Inside Infrastructure, acquired March 2022.
Restructuring costs of £0.6m were incurred in the prior period in relation to
restructuring of the Established A&I business.
ERP implementation costs of £0.3m were incurred in the prior period for
initial feasibility studies in relation to the proposed implementation of a
new Group-wide ERP system. No costs were incurred in the current period due to
this project being paused.
Disposal of discontinued operation: The Defense business was sold on 31
December 2024 for a total consideration of USD 90.6m (£72.3m), of which
£68.5m was received in cash in the period and £3.8m was received in early
January 2025. The consideration included an initial estimate of closing net
debt and working capital. Transaction-related costs of £7.9m were incurred in
the period. The value of net assets disposed was £27.6m, resulting in a
profit on disposal of £36.8m. A true up of the consideration and gain on
disposal for the final completion net debt and working capital will take place
in the second half of FY 2024/25.
Research and Development (R&D) and capital investment
The Group continues to invest in R&D and spent £3.6m (HY 2023/24: £6.9m)
before government grant income of £0.1m (HY 2023/24: £1.2m). Development
costs capitalised in this period were £3.0m (HY 2023/24: £3.1m), reflecting
continued investment in electrification and alternative fuels technology
within the Emerging A&I segment, together with technology, tools and
processes in the EE segment.
Capital expenditure on property, plant and equipment, excluding right-of-use
assets, was £1.9m (HY 2023/24: £1.6m), reflecting targeted investment in our
business operations, including hydrogen and electrical test capability in the
Emerging A&I segment.
Net finance costs
Total finance income was £1.2m (HY 2023/24: £0.7m) and finance costs were
£5.5m (HY 2023/24: £4.8m) for the period, giving net finance costs of £4.3m
(HY 2023/24: £4.1m). The small increase in net costs reflects higher levels
of net debt during the current period, partially offset by a slight reduction
in the SONIA interest rate compared to the prior period.
Taxation
The underlying effective tax rate on continuing operations was 29.3% for the
period (HY 2023/24: tax credit of 20.0%). The reported effective tax rate on
continuing operations was negative 7.2% (HY 2023/24: tax credit of 11.6%). The
reported rate was impacted by the profile and composition of specific
adjusting items and underlying profits which results in a negative effective
tax rate.
For the total Group the underlying effective tax rate was 27.7% for the period
(HY 2023/24: 26.6%). The total reported effective tax rate was 7.8% (HY
2023/24: negative 57.1%).
Earnings per share
Basic loss per share from continuing operations was 21.5p (HY 2023/24: loss of
18.5p). The Directors consider that underlying earnings per share provides a
more useful indication of underlying performance and trends over time.
Underlying basic earnings per share from continuing operations for the period
was 4.7p (HY 2023/24: loss per share 4.0p). The calculation of basic loss per
share, with a reconciliation to underlying basic earnings per share, which
excludes the impact (net of tax) of specific adjusting items, is disclosed in
Note 11.
Dividend
As set out in more detail in Note 12, the Board has declared an interim
dividend of 1.7p per share (HY 2023/24: 3.8p). The dividend will be paid gross
on 11 April 2025 to holders of ordinary shares on the Company's register of
members on 14 March 2025.
Goodwill
At 31 December 2024, the Group had total goodwill of £76.0m (FY 2023/24:
£96.0m), with the reduction in the period reflecting the impairment of the
goodwill in the Emerging A&I segment (£14.0m) and disposal of Defense
(£3.5m) with the remainder reflecting movements in the foreign exchange rate
period on period. The carrying value of goodwill in the remaining operating
segments is fully supported by their recoverable amounts.
Banking facilities
Net debt at 31 December 2024 comprised cash and cash equivalents, excluding
restricted cash, of £111.7m, and borrowing and overdrafts, including hire
purchase liabilities and net of capitalised debt issuance costs, of £130.2m.
The Group funds its operations via a Revolving Credit Facility (RCF) of
£150m, with a £50m accordion, which provides committed funding through to
August 2026, alongside the Group's uncommitted overdraft facilities of
£16.1m. At 31 December 2024, the amount undrawn on the RCF was £38.3m. This,
together with the cash held, net of £12.9m of off-settable overdrafts, of
£98.8m, and £10.5m of unutilised overdraft facilities, provided the Group
with total cash and liquidity of £147.6m. The high cash balance at 31
December 2024 reflects the proceeds received from the Defense sale. A portion
of these proceeds was used to acquire E3A in January 2025, as discussed below.
The Group's Adjusted Leverage ratio (defined as net debt over EBITDA for the
last twelve months, excluding the results of Ricardo Defense and the impact of
specific adjusting items and IFRS 16 Leases) was 0.61x as at 31 December 2024.
The Adjusted Leverage covenant is a maximum of 3.0x.
The Interest Cover ratio was 6.2x at 31 December 2024. The Interest Cover
covenant limit is a minimum of 4.0x. Under the terms of the RCF, interest
cover is defined as EBITDA for the last twelve months, excluding discontinued
operations and the impact of specific adjusting items, divided by net interest
costs for the last twelve months, excluding pension and IFRS 16 interest
costs. An amendment to the covenant definition for the 31 December 2024 and 30
June 2025 covenant test dates was agreed with the lending banks to calculate
interest cover inclusive of the results of Ricardo Defense for the last twelve
months. The covenant will return to its original definition at 31 December
2025. Further details are provided in Note 14.
Foreign exchange
On consolidation, revenue and costs are translated at the average exchange
rates for the period. The Group is exposed to movements in the Pound Sterling
exchange rate, principally from work carried out with customers that transact
in US Dollars, Euros, Australian Dollars and Chinese Renminbi. Compared to the
prior period, the average value of the Pound Sterling weakened by 3% against
the US Dollar, 3% against the Euro, 2% against the Australian Dollar and 2%
the Chinese Renminbi. Had the prior period results been translated at current
period exchange rates, revenue from continuing operations would have been
£1.6m (1%) lower, underlying operating profit would have been £0.1m (9%)
lower and underlying profit before tax would have been £0.1m (3%) 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 period was £100.1m (FY
2023/24: £105.4m) and the present value of the scheme's obligations was
£92.7m (FY 2023/24: £97.5m). The value of the scheme's assets decreased over
the period as a result of stock market performance. However, this was
partially offset by a decrease in the scheme's liabilities, due to an increase
in the discount rate. The pre-tax surplus, measured in accordance with IAS 19,
at 31 December 2024 was £7.4m (FY 2023/24: £7.9m). In line with the last
triennial valuation and agreed funding plan, Ricardo did not pay any cash
contributions into the scheme during the period (HY 2023/24: £0.8m).
Acquisition of E3 Advisory
Following the period end, on 7 January 2025, the Group acquired an 85%
shareholding in E3 Advisory Pty Limited (E3A). E3A is a consulting company,
based in Australia, which advises both governments and private clients through
the infrastructure project lifecycle, with particular expertise in transport,
infrastructure, clean energy, water, and mining and resources. E3A provides
enhanced strategic advisory services to complement Ricardo's existing
technical service capabilities.
The undiscounted value of consideration for the 85% interest is AUD 101.4m
(£50.7m), including payments for an initial estimate of net cash on
completion, of which AUD 69.0m (£34.5m) was paid on completion, with AUD
32.4m (£16.2m) payable in instalments over the next two years.
The holders of the remaining 15% of equity can exercise a put option for
Ricardo to acquire their shares after the third anniversary from completion.
The value of the remaining 15% shareholding is based on the future earnings
before interest, tax and depreciation (EBITDA) performance of the business in
the twelve months to 31 December 2027 at a 9x EBITDA multiple. In the event
that management have not exercised their options on the third anniversary of
completion of the Acquisition, the Option Price will decrease over time.
Ricardo Australia may also elect to mandatorily acquire these shares in
certain other circumstances.
Re-based financial targets
Following the sale of Defense and recent volatility, we are re-basing our
medium-term financial targets. We now expect Group organic revenue growth in
the mid-single digit per annum, with the Group trending towards 10% underlying
operating profit margin.
Outlook for the year ending FY 2024/25
Despite a challenging macro-economic environment, we expect to see double
digit underlying operating profit growth for the continuing Group as a result
of the good order book, the benefits from our proactive cost actions, and the
benefit from E3 Advisory. With a focus on working capital management and
collection of the delayed RDEC receipt we expect an improved cash performance
in H2.
In our EE business we expect improved revenue and profit performance in H2 on
the back of a strong six-month order book and expected wins in the second
half. However, due to the delay in orders in H1, revenue and profit will be
broadly flat for the full year. Within Rail, H2 performance will be impacted
by our element of the California High Speed Rail being put on hold, but with
continued strong performance in Asia and Europe. With continued delays in
orders for emerging technology solutions, we anticipate a lower order mix for
our Emerging A&I business. At the same time, we are winning more contracts
in Established A&I owing to a sustained interest in developing cleaner and
more efficient internal combustion solutions. In terms of our PP business, we
expect operating performance to be broadly stable but with higher capital
expenditure in FY 2025/26 as we invest for growth, ahead of the commencement
of production for our largest ever single framework contract.
The Group has made positive progress in delivering key strategic milestones in
the first half and we remain confident in our mid-term portfolio transition
strategy.
By order of the Board:
Graham Ritchie
Judith Cottrell
Chief Executive Officer Chief
Financial Officer
4 March 2025
Environment and Energy Transition portfolio
ENERGY & ENVIRONMENT (EE)
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 resilience 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 quality, nature and water management; corporate
sustainability; and resilience including energy market modelling tools.
Financial and operational highlights
Historical rates (restated((*))) Constant currency((6))
HY 2024/25 HY 2023/24 Change HY 2023/24 Change
£m £m % £m %
Order intake (£m) 80.8 65.5 23.4 65.1 24.1
Order book (£m) 133.2 99.3 34.1 98.5 35.2
Revenue (£m) 50.4 52.9 (4.7) 52.5 (4.0)
Underlying((1)) operating profit (£m) 6.8 8.0 (15.0) 7.9 (13.9)
Underlying((1)) operating profit margin (%) 13.5 15.1 (1.6pp) 15.0 (1.5pp)
Headcount((5)) (no.) 980 1,017 (3.6) 1,017 (3.6)
References in superscript are defined in the glossary of terms above.
* The results of the RSA business, historically part of the Emerging A&I
segment, was transferred to EE on 1 July 2024. The comparative has been
restated. Please refer to the headline trading section of this Interim Report,
above, for further information.
Performance
In HY 2024/25, the order intake in EE was a record £80.8m, a 24.1% increase
compared to the prior period on a constant currency basis. A significant
component of this order intake was the successful renewal of the National
Atmospheric and Greenhouse Gas Inventories (NAEI) programme, a prestigious
ten-year contract awarded by the UK Government, which continues to be
delivered by our Air Quality team. Underlying growth, after normalising for
this programme, was 10%. There was good growth in order intake in the Energy
Infrastructure Transition practice, driven by contracts from UK, US and Middle
East customers. As reported previously, following the cancellation of a key
Water contract in the Middle East, we have been rebuilding the pipeline in
Water. This has been a little slower than expected in the first quarter, but
we have seen improving orders in Australia and the Middle East, particularly
towards the end of the second quarter, and we are starting to see early
opportunities under the Asset Management Periods (AMP) 8 cycle in the UK.
Order growth in the Policy, Strategy & Economics and Digital Modelling
practices was tempered by global election processes, which have affected both
the timing of government procurement processes and subsequent private-sector
investment decisions. This included elections in Europe in June 2024, the UK
election and subsequent department spending review from July 2024, and the US
elections in November 2024. Performance in Sustainability was also adversely
affected by election processes, in addition to an increasingly competitive
market environment.
The factors above resulted in delays to order intake in the period. However,
following a stronger second quarter, the order book closed on 31 December 2024
at a robust £133.2m, up 35.2% on the prior period on a constant currency
basis and 10% after normalising for NAEI. This provides increasing confidence
as we move into the second half of the year. Encouragingly, the number of new
clients included in HY 2024/25 orders increased by 16% compared to the prior
period.
Revenue in the period was 4% below the prior period on a constant currency
basis. This was mainly driven by the slower ramp up in order intake as set out
above, with a consequent impact on utilisation. Underlying operating profit
reduced by £1.1m (14%) and operating profit margin reduced by 1.5pp to 13.5%.
Staffing levels are being actively managed to align resources to workable
revenue. We have also realigned business development activities and continue
to invest in digital solutions, principally in our energy market outlook tool,
launched initially in Greece during the period.
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.
Financial and operational highlights
Historical rates Constant currency((6))
HY 2024/25 HY 2023/24 Change HY 2023/24 Change
£m £m % £m %
Order intake (£m) 57.1 53.2 7.3 52.0 9.8
Order book (£m) 122.6 122.2 0.3 117.1 4.7
Revenue (£m) 38.1 38.1 - 37.2 2.4
Underlying((1)) operating profit (£m) 4.6 4.1 12.2 4.0 15.0
Underlying((1)) operating profit margin (%) 12.1 10.8 1.3pp 10.8 1.3pp
Headcount((5)) (no.) 538 539 (0.2) 539 (0.2)
References in superscript are defined in the glossary of terms above.
Performance
The Rail results for the first half of FY 2024/25 reflect a solid performance
having entered the year with a strong orderbook and good pipeline visibility.
Order intake of £57.1m represents a 10% increase on the prior period on a
constant currency basis. As at 31 December 2024, the orderbook was £122.6m,
an increase of 5% on a constant currency basis.
We experienced growth in our key growth geographies of the US and Asia,
highlighting our expanding global footprint in the industry. Notable successes
in the Asia region were achieved through our solid relationships with critical
operators, enabling the local team to effectively support the robust regional
manufacturing base.
In North America, the Assurance business continues to expand, driven by new
railway construction projects in Canada. Our strategic customer relationships
are instrumental in facilitating this growth and the acquisition of new
opportunities. However, H2 performance will be impacted by some delays on
projects.
In the Middle East, the conclusion of key projects has resulted in favourable
returns from our business development efforts, enhancing customer connectivity
and contributing to our recent wins.
In the UK and Europe, we maintained our long-standing partnership with NS, a
national leader in rail infrastructure in the Netherlands. Additionally, we
played a vital role in a significant project in Belfast, culminating in the
successful opening of a new major railway station.
Revenue for the period was £38.1m, a 2% increase on the prior period on a
constant currency basis. This growth is attributable to the strong order book
established at the end of the last financial year with good growth in Asia and
US.
With increased revenue driving operational leverage, underlying operating
profit increased to £4.6m, a 15% increase on a constant currency basis.
Underlying operating profit margin increased by 1.3pp to 12.1%.
EMERGING AUTOMOTIVE AND INDUSTRIAL (EMERGING A&I)
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.
Financial and operational highlights
Historical rates (restated((*))) Constant currency((6))
HY 2024/25 HY 2023/24 Change HY 2023/24 Change
£m £m % £m %
Order intake (£m) 21.3 27.9 (23.7) 27.8 (23.4)
Order book (£m) 35.8 52.8 (32.2) 52.8 (32.2)
Revenue (£m) 19.1 27.5 (30.5) 27.3 (30.0)
Underlying((1)) operating profit (£m) 1.5 (0.7) 314.3 (0.6) 350.0
Underlying((1)) operating profit margin (%) 7.9 (2.5) 10.4pp (2.2) 10.1pp
Headcount((5)) (no.) 382 525 (27.2) 525 (27.2)
References in superscript are defined in the glossary of terms above.
* The results of the RSA business, historically part of the Emerging A&I
segment, was transferred to EE on 1 July 2024. The comparative has been
restated. Please refer to the headline trading section of this Interim Report,
above, for further information.
Performance
In HY 2024/25, Emerging A&I recorded order intake of £21.3m, a 23%
reduction compared to the prior period on a constant currency basis. This
decrease is primarily attributed to the completion and delivery of a
significant marine fuel cell project, as well as volatility and delays in new
customer orders.
During the period, we successfully secured long-term contracts in the
aerospace and heavy-duty industries, reinforcing our commitment to
electrification. Our Emerging A&I business operates across diverse
markets, including marine, aviation, heavy-duty vehicles, industrial
applications, and passenger cars. The business has been facing short-term
fluctuations in order intake, influenced by delayed customer investment in new
emerging solutions. Whilst we remain confident in our long-term growth
potential, particularly in industrial applications, there is volatility in
order intake and uncertainties over the pace of technology change. Following a
re-assessment of the value-in-use of the segment, goodwill which arose as a
result of historic acquisitions was impaired resulting in a charge of £14.0m.
This has been recognised within specific adjusting items. No other assets were
impaired.
Revenue reduced by £8.2m (30%) on a constant currency basis, primarily due to
the lower order intake. However, the decisive restructuring efforts
implemented in the second half of FY 2023/24, targeting both direct and
indirect cost bases, have led to a notable improvement in profitability. In HY
2024/25, underlying operating profit was £1.5m, rebounding from a £0.6m loss
in the prior period (constant currency). Underlying operating profit margin
improved to 7.9%, compared to negative 2.2% in the prior period (constant
currency). This marks the second consecutive six-monthly period in which
Emerging A&I has delivered a profit.
In the face of the ongoing volatility, we continue to focus on core markets to
ensure we are well placed to address the changing market demands in
electrification, fuel cells, sustainable fuels, and hybrid technologies. The
organisational changes implemented in the second quarter of last year help to
underpin profitability into the second half of the year.
Established Transport portfolio
PERFORMANCE PRODUCTS (PP)
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.
Financial and operational highlights
Historical rates Constant currency((6))
HY 2024/25 HY 2023/24 Change HY 2023/24 Change
£m £m % £m %
Order intake (£m) 42.2 41.9 0.7 41.9 0.7
Order book (£m) 75.1 84.3 (10.9) 84.3 (10.9)
Revenue (£m) 40.6 38.2 6.3 38.2 6.3
Underlying((1)) operating profit (£m) 2.8 2.0 40.0 2.0 40.0
Underlying((1)) operating profit margin (%) 6.9 5.2 1.7pp 5.2 1.7pp
Headcount((5)) (no.) 346 347 (0.3) 347 (0.3)
References in superscript are defined in the glossary of terms above.
Performance
In HY 2024/25, PP achieved an order intake of £42.2m, a 1% increase compared
to the prior period. A significant highlight was the six-year extension of a
major driveline contract with a European OEM, secured in November 2024, which
provides a strong baseload for our Driveline business, with purchase orders
being placed on at least annual intervals.
We are focused on developing the Ricardo Detroit Technical Center in the
United States, following the award of a ten-year marine driveline and
powertrain manufacturing framework agreement in June 2024, comparable in scale
to the McLaren programme. This large-scale programme includes significant
design and development work which is being undertaken by the Established
A&I business.
Revenue was £40.6m in HY 2024/25, reflecting a 6% increase on the prior
period. The growth was driven by the ramp-up of development and
industrialisation activities associated with the above contract, as well as an
increase in McLaren engine volumes.
Following the successful completion of development, testing, and validation
for the Singer programme (in our Driveline business), we are ramping up series
production in accordance with our established timelines and this mitigates
some of the downside from two large transmission programmes coming to an end.
Our underlying operating profit for the period was £2.8m, a £0.8m or 40%
increase on the prior period, largely driven by the increase in revenue on the
new marine programme. Underlying operating profit margin improved to 6.9%, up
1.7pp on the prior period, with improvements in operational leverage.
Looking ahead, we remain committed to advancing our portfolio of existing
powertrain (engine) and drivetrain (transmission) products while also
initiating new projects focused on zero-emission propulsion. In particular, we
are enthusiastic about the launch of our "Element" modular epicyclic
transmission system, designed to support both hybrid and electric vehicle
drive concepts, further underscoring our dedication to sustainable
transportation solutions.
ESTABLISHED AUTOMOTIVE AND INDUSTRIAL (ESTABLISHED A&I)
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.
Financial and operational highlights
Historical rates Constant currency((6))
HY 2024/25 HY 2023/24 Change HY 2023/24 Change
£m £m % £m %
Order intake (£m) 19.7 12.1 62.8 12.0 64.2
Order book (£m) 26.3 27.3 (3.7) 27.3 (3.7)
Revenue (£m) 20.9 10.9 91.7 10.8 93.5
Underlying((1)) operating loss (£m) (0.4) (3.5) (88.6) (3.5) (88.6)
Underlying((1)) operating profit margin (%) (1.9) (32.1) 30.2pp (32.4) 30.5pp
Headcount((5)) (no.) 239 242 (1.2) 242 (1.2)
References in superscript are defined in the glossary of terms above.
Performance
Established A&I has experienced significant customer interest in our
internal combustion engine (ICE) and driveline solutions, culminating in an
order intake of £19.7m in the period, a 64% increase on the prior period on a
constant currency basis.
Revenue increased by 94% on a constant currency basis. This growth reflects
the positive trend in order intake, particularly within the high-efficiency
ICE marine industry and large industrial applications. During the period we
ramped up work on the design and development activities on the large-scale
marine programme mentioned within the PP operating segment review.
In addition to revenue growth, the business has benefitted from the structural
changes implemented during the latter half of FY 2023/24. These changes
included the implementation of a streamlined leadership structure and a
flexible resourcing model that allows us to respond promptly to our clients'
evolving needs, thereby ensuring consistent financial performance aligned with
our strategic objectives.
The underlying operating loss for Established A&I has reduced period on
period, from £3.5m in HY 2023/24 to £0.4m in HY 2024/25. The underlying
operating margin has also improved, from negative 32.4% in HY 2023/24 to
negative 1.9% in HY 2024/25, on a constant currency basis.
There continues to be strong demand for Established A&I's services in the
marine, defence, and heavy-duty vehicle sectors globally, particularly for
clean propulsion integrated systems that support our clients in their
transition to a more sustainable future.
Discontinued operation
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.
Financial and operational highlights
Historical rates Constant currency((6))
HY 2024/25 HY 2023/24 Change HY 2023/24 Change
£m £m % £m %
Order intake (£m) 55.1 113.7 (51.5) 110.5 (50.1)
Order book (£m) - 91.3 (100.0) 93.0 (100.0)
Revenue (£m) 41.0 56.6 (27.6) 54.9 (25.3)
Underlying((1)) operating profit (£m) 5.3 10.9 (51.4) 10.6 (50.0)
Underlying((1)) operating profit margin (%) 12.9 19.3 (6.4pp) 19.3 (6.4pp)
Headcount((5)) (no.) - 233 (100.0) 233 (100.0)
References in superscript are defined in the glossary of terms above.
Performance
As expected, HY 2024/25 saw continued demand for Defense's portfolio of
engineering services and there was a decline in revenues from the Anti-lock
Braking System/Electronic Stability Control (ABS/ESC) retrofit kits program,
as volumes started to normalise following the peak delivery year in FY
2023/24.
Defense order intake was £55.1m in HY 2024/25, a reduction of 50% on the
prior period due to the timing and value of ABS/ESC kit orders.
Total Defense revenue decreased by £13.9m (25%), on a constant currency
basis. Defense delivered 3,430 kits ABS/ESC kits in the period, as compared to
6,130 in HY 2023/24. This reduction resulted in a significant revenue decline,
as anticipated. Revenue from engineering services increased in the current
period, driven by strong demand for our field support solutions (the
sustainment of ABS/ESC kits in the field), together with increased revenue
from Technical Services.
Underlying operating profit has decreased to £5.3m, a 50% decline on a
constant currency basis. Underlying operating profit margin reduced by 6.4pp
on a constant currency basis to 12.9% due to the impact of the lower ABS/ESC
volumes.
The Defense business was sold by Ricardo on 31 December 2024 and the HY
2024/25 results are presented as a discontinued operation in the interim
financial statements.
Condensed interim financial statements
Condensed consolidated income statement
for the six months ended 31 December 2024 (unaudited)
2024 2023 (restated*)
Underlying Specific adjusting Total Underlying Specific adjusting Total
items(**)
items(**)
Note £m £m £m £m £m £m
Continuing operations
Revenue 8 169.1 - 169.1 167.6 - 167.6
Cost of sales (118.2) - (118.2) (120.7) - (120.7)
Gross profit 50.9 - 50.9 46.9 - 46.9
Administrative expenses (43.1) (16.5) (59.6) (46.2) (9.9) (56.1)
Other income 0.5 - 0.5 0.4 - 0.4
Operating profit/(loss) 8.3 (16.5) (8.2) 1.1 (9.9) (8.8)
Finance income 1.2 - 1.2 0.7 - 0.7
Finance costs (5.4) (0.1) (5.5) (4.8) - (4.8)
Net finance costs (4.2) (0.1) (4.3) (4.1) - (4.1)
Profit/(loss) before taxation 4.1 (16.6) (12.5) (3.0) (9.9) (12.9)
Income tax (expense)/credit (1.2) 0.3 (0.9) 0.6 0.9 1.5
Profit/(loss) from continuing operations 2.9 (16.3) (13.4) (2.4) (9.0) (11.4)
Discontinued operation
Profit from discontinued operation, net of tax 3.9 36.8 40.7 8.2 (0.1) 8.1
Profit/(loss) for the period 6.8 20.5 27.3 5.8 (9.1) (3.3)
Profit/(loss) attributable to:
Continuing operations
- Owners of the parent 2.9 (16.3) (13.4) (2.5) (9.0) (11.5)
- Non-controlling interests - - - 0.1 - 0.1
2.9 (16.3) (13.4) (2.4) (9.0) (11.4)
Discontinued operation
- Owners of the parent 3.9 36.8 40.7 8.2 (0.1) 8.1
Total
- Owners of the parent 6.8 20.5 27.3 5.7 (9.1) (3.4)
- Non-controlling interests - - - 0.1 - 0.1
6.8 20.5 27.3 5.8 (9.1) (3.3)
Condensed consolidated income statement (continued)
for the six months ended 31 December 2024 (unaudited)
2024 2023
Earnings per share (Note 11) pence pence
Basic
Earnings/(loss) per share 43.9 (5.5)
Underlying earnings per share 10.9 9.2
Underlying earnings/(loss) per share from continuing operations 4.7 (4.0)
Earnings/(loss) per share from continuing operations (21.5) (18.5)
Earnings per share from discontinued operation 65.4 13.0
Diluted
Earnings/(loss) per share 43.3 (5.5)
Underlying earnings per share 10.8 9.2
Underlying earnings/(loss) per share from continuing operations 4.6 (4.0)
Earnings/(loss) per share from continuing operations (21.3) (18.5)
Earnings per share from discontinued operation 64.6 13.0
The accompanying notes are an integral part of these condensed interim
financial statements.
* The prior period has been restated for discontinued operations.
Please refer to Note 6. In addition, to ensure a standardised approach across
the Group, the classification of business development and operational costs
have been aligned across our operating segments, resulting in the
reclassification of £2.2m of salary costs from direct to indirect in the
prior period.
** Specific adjusting items are disclosed separately in the
condensed interim 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 4 and Note 10.
Condensed consolidated statement of comprehensive income
for the six months ended 31 December 2024 (unaudited)
2024 2023
£m £m
Profit/(loss) for the period 27.3 (3.3)
Other comprehensive (expense)/income
Items that will not be reclassified to profit or loss:
Remeasurements of the defined benefit pension scheme (0.7) 1.0
Deferred tax on remeasurements of the defined benefit pension scheme 0.2 (0.2)
Total items that will not be reclassified to profit or loss (0.5) 0.8
Items that are, or may be, subsequently reclassified to profit or loss:
Currency translation on foreign currency net investments (2.5) 0.9
Movement in fair value of cash flow hedge - (0.5)
Total items that may be subsequently reclassified to profit or loss (2.5) 0.4
Total other comprehensive (expense)/income for the period (net of tax) (3.0) 1.2
Total comprehensive income/(expense) for the period 24.3 (2.1)
Comprehensive income/(expense) attributable to:
- Owners of the parent 24.3 (2.2)
- Non-controlling interests - 0.1
24.3 (2.1)
The accompanying notes are an integral part of these condensed interim
financial statements.
Condensed consolidated statement of financial position
As at 31 December 2024 (unaudited)
31 December 2024 30 June 2024
Note £m £m
Assets
Non-current assets
Goodwill 9 76.0 96.0
Other intangible assets 30.4 33.7
Property, plant and equipment 28.6 30.4
Right-of-use assets 19.6 19.2
Retirement benefit surplus 7.4 8.0
Other receivables 2.4 2.5
Deferred tax assets 6.4 6.4
170.8 196.2
Current assets
Inventories 20.7 29.4
Trade, contract and other receivables 143.1 146.7
Derivative financial assets 0.7 0.8
Current tax assets 7.1 7.1
Cash and cash equivalents 14 115.3 48.6
286.9 232.6
Total assets 457.7 428.8
Liabilities
Current liabilities
Borrowings 14 18.5 4.3
Lease liabilities 5.5 6.0
Trade, contract and other payables 91.5 107.5
Current tax liabilities 6.0 3.5
Derivative financial liabilities 1.5 0.5
Provisions 3.5 3.5
126.5 125.3
Net current assets 160.4 107.3
Non-current liabilities
Borrowings 14 111.7 102.6
Lease liabilities 18.3 17.8
Trade, contract and other payables 1.4 1.2
Deferred tax liabilities 12.4 13.0
Derivative financial liabilities - 0.1
Provisions 3.6 3.6
147.4 138.3
Total liabilities 273.9 263.6
Net assets 183.8 165.2
Equity
Share capital 15.6 15.6
Share premium 16.8 16.8
Other reserves 33.7 36.2
Retained earnings 117.2 96.1
Equity attributable to owners of the parent 183.3 164.7
Non-controlling interests 0.5 0.5
Total equity 183.8 165.2
The accompanying notes form an integral part of these condensed consolidated
interim financial statements.
Condensed consolidated statement of changes in equity
for the six months ended 31 December 2024 (unaudited)
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 2023 15.6 16.8 37.2 106.6 176.2 0.4 176.6
Loss for the period - - - (3.4) (3.4) 0.1 (3.3)
Other comprehensive income for the period - - 0.4 0.8 1.2 - 1.2
Total comprehensive income/(expense) for the period - - 0.4 (2.6) (2.2) 0.1 (2.1)
Equity-settled transactions - - - 0.7 0.7 - 0.7
Purchases of own shares to settle awards - - - (0.5) (0.5) - (0.5)
Ordinary share dividends 12 - - - (5.4) (5.4) - (5.4)
At 31 December 2023 15.6 16.8 37.6 98.8 168.8 0.5 169.3
At 1 July 2024 15.6 16.8 36.2 96.1 164.7 0.5 165.2
Profit for the period - - - 27.3 27.3 - 27.3
Other comprehensive expense for the period - - (2.5) (0.5) (3.0) - (3.0)
Total comprehensive (expense)/income for the period - - (2.5) 26.8 24.3 - 24.3
Equity-settled transactions - - - 0.4 0.4 - 0.4
Purchases of own shares to settle awards - - - (0.6) (0.6) - (0.6)
Ordinary share dividends 12 - - - (5.5) (5.5) - (5.5)
At 31 December 2024 15.6 16.8 33.7 117.2 183.3 0.5 183.8
The accompanying notes form an integral part of these condensed interim
financial statements.
Condensed consolidated statement of cash flows
for the six months ended 31 December 2024 (unaudited)
2024 2023 (restated*)
£m £m
Cash flows from operating activities
Profit/(loss) before taxation 29.6 (2.1)
Adjustments for:
- Share-based payments 0.4 0.8
- Unrealised foreign exchange losses 1.1 (0.2)
- Fair value losses on derivatives 0.2 0.7
- Gains on disposal of discontinued operation (36.8) -
- Net finance costs 4.3 4.1
- Depreciation, amortisation and impairment 22.1 9.7
- Defined benefit pension scheme payments in excess of past service costs - (0.7)
Operating cash flows before movements in working capital 20.9 12.3
Changes in:
- Inventories (4.6) (3.5)
- Trade, contract and other receivables (7.1) 14.7
- Trade, contract and other payables (11.9) (1.4)
- Provisions 0.2 (0.2)
Cash (used in)/generated from operations (2.5) 21.9
Interest paid (5.4) (4.0)
Interest received 1.1 0.1
Income tax paid (0.8) (5.4)
Net cash (used in)/generated from operating activities (7.6) 12.6
Cash flows from investing activities
Purchases of property, plant and equipment (1.9) (1.7)
Proceeds from sale of discontinued operation, net of cash disposed 66.1 -
Purchases of intangible assets and capitalised development costs (3.4) (3.6)
Net cash generated from/(used in) investing activities 60.8 (5.3)
Cash flows from financing activities
Purchases of own shares to settle awards (0.5) (0.6)
Principal element of lease payments (3.2) (2.6)
Proceeds from borrowings 15.0 57.0
Repayment of borrowings (6.0) (52.0)
Dividends paid to shareholders (5.5) (5.4)
Net cash used in financing activities (0.2) (3.6)
Effect of exchange rate changes on cash and cash equivalents (0.5) 0.3
Net increase in cash and cash equivalents 52.5 4.0
Net cash and cash equivalents at 1 July 43.0 37.2
Restricted cash movement (2.3) -
Net cash and cash equivalents at 31 December 93.2 41.2
Condensed consolidated statement of cash flows (continued)
for the six months ended 31 December 2024 (unaudited)
2024 2023
£m £m
At 1 July
Cash and cash equivalents 48.6 49.8
Restricted cash (1.3) -
Bank overdrafts (4.3) (12.6)
Net cash and cash equivalents at 1 July 43.0 37.2
At 31 December
Cash and cash equivalents 115.3 46.7
Restricted cash (3.6) -
Bank overdrafts (18.5) (5.5)
Net cash and cash equivalents at 31 December 93.2 41.2
The accompanying notes form an integral part of these condensed interim
financial statements.
* The prior period cash flow statement has been restated. Cash payments to
settle derivatives of £0.7m have been reclassified as a
gain on the fair value of derivatives of £0.9m and an unrealised foreign
exchange loss of £0.2m relating to these derivative foreign
currency swaps.
1. 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 00222915.
The condensed interim financial statements were approved for issue by the
Board of Directors on 4 March 2025. These condensed interim financial
statements have not been audited.
2. Basis of preparation
These condensed interim financial statements of the Company and its
subsidiaries (together, the Group) for the six months ended 31 December 2024
do not comprise statutory accounts within the meaning of Section 434 of the
Companies Act 2006. They have been prepared in accordance with the Disclosure
Guidance and Transparency Rules of the United Kingdom's Financial Conduct
Authority and IAS 34 Interim Financial Reporting, as adopted for use in the
UK.
These condensed interim financial statements should be read in conjunction
with the financial statements for the year ended 30 June 2024 within the
Annual Report & Accounts 2023/24, which were prepared in accordance with
International Financial Reporting Standards (IFRS), IFRS Interpretations
Committee (IFRS IC) interpretations adopted by the UK and the Companies Act
2006 applicable to companies reporting under IFRS. The Annual Report &
Accounts 2023/24, which was approved by the Board of Directors on 10 September
2024 and delivered to the Registrar of Companies. The report of the auditors
on those statutory accounts was unqualified, did not contain an emphasis of
matter paragraph and did not contain any statement under Section 498 of the
Companies Act 2006.
The accounting policies adopted within this Interim Report are consistent with
the Annual Report & Accounts 2023/24 except for the requirements of IAS 34
Interim Financial Reporting in respect of income tax. Taxes on income in the
interim period are accrued using the tax rate that would be applicable to
expected total annual profit or loss.
The board of Ricardo plc has undertaken an assessment of the ability of the
Group and Company to continue in operation and meet their liabilities as they
fall due over the period of its assessment. In doing so, the board considered
events throughout the period of their assessment, including the availability
and maturity profile of the Group's financing facilities and covenant
compliance. These condensed interim financial statements have been prepared on
the going concern basis, which the Directors consider appropriate for the
reasons set out below. The Group funds its operations through cash generated
by the Group and has access to a £150m revolving credit facility (RCF) with a
£50m accordion which is linked to two covenants, which are tested at 30 June
and 31 December each year until the debt matures in August 2026:
• Adjusted Leverage, defined as net debt divided by underlying
EBITDA for the last twelve months, excluding the impact of IFRS 16. Underlying
EBITDA is adjusted to include EBITDA from acquisitions for the last twelve
months and to exclude EBITDA from discontinued operations. The covenant limit
is a maximum of 3.0x.
• Interest cover, defined as underlying EBITDA for the last twelve
months, excluding the impact of IFRS 16, divided by net finance costs
excluding pension and IFRS 16 interest. Underlying EBITDA is adjusted to
include EBITDA from acquisitions from the point of acquisition and to exclude
EBITDA from discontinued operations. The covenant limit is a minimum of 4.0x.
Due to the impact of the disposal of Defense on the Group's EBITDA for the
purposes of calculating the Interest Cover covenant, the definition of
Interest Cover has been amended to include EBITDA from the discontinued
operation for the 31 December 2024 and 30 June 2025 covenant test dates. The
covenant will return to its original definition for 31 December 2025. No
changes were made to the Adjusted Leverage covenant definition.
Net debt at 31 December 2024 was £18.5m, comprising cash and cash
equivalents, net of any restricted cash, and borrowings, including hire
purchase liabilities, but excluding IFRS 16 lease liabilities of £23.8m.
Adjusted leverage was 0.61x and interest cover was 6.2x on an amended basis.
As at the date of approval of these condensed interim financial statements,
the amount of RCF undrawn and available to the Group was £64.0m, with total
borrowing, net of £11.3m of off-settable overdrafts, of £91.0m and cash and
cash equivalents of £27.9m.
The Directors have prepared a cash flow forecast which covers a period of at
least twelve months from the date of approval of these condensed interim
financial statements. In this forecast, the Directors have considered the
impact of the disposal of the Defense operating segment and the acquisition
E3A, together with known risks, including the pace of technological change in
the automotive sector, driven by climate change, which continues to rapidly
shift away from the traditional internal combustion engine towards more
renewable propulsion methods, on the Group's results, operations and financial
position in a severe but plausible downside scenario. The scenario includes
consideration of the level of secured and visible work in the second half of
FY 2024/25 and the impact of potential project disruptions, together with:
• Limited revenue growth from Automotive and Industrial established
transport and emerging solutions in FY 2025/26;
• Reduced revenue growth rates in Energy and Environment, including
E3A, and Rail;
• Decline in key programme volumes in Performance Products;
• Removal of any assumed working capital improvement; and
• An increase in the SONIA interest rate compared with external bank
forecasts
The scenario incorporates the appropriate reversal of discretionary bonus
payments and setting suitable levels of dividends based on the sensitised
results of the operating segments. Under this scenario, the Group's EBITDA is
reduced, relative to the forecast, by 10% in FY 2024/25 and 20% in FY 2025/26.
The Group's organic adjusted EBITDA is forecast to reduce by 6% in FY 2025/26
under this scenario. The results showed that the Group would be able to
continue operating within its debt covenants and has sufficient liquidity
headroom under the downside scenario. Following this assessment, the Directors
are confident that the Group and Company will have sufficient funds to
continue to meet their liabilities as they fall due for at least 12 months
from the date of approval of the condensed interim financial statements and
therefore have prepared the condensed interim financial statements on a going
concern basis.
3. Seasonality
Based upon management's experience, higher levels of revenue and profit are
expected in the second half of each financial year. This is typically due to
lower levels of annual leave and a greater number of chargeable hours, which
equates to higher revenues on a predominantly fixed cost base, and therefore
higher profits.
4. 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 also 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 10.
Reconciliation of underlying profit before tax to reported profit before tax
2024 2023
Underlying Specific adjusting Total Underlying Specific adjusting Total
items
items
£m £m £m £m £m £m
Revenue 169.1 - 169.1 167.6 - 167.6
Cost of sales (118.2) - (118.2) (120.7) - (120.7)
Gross profit 50.9 - 50.9 46.9 - 46.9
Administrative expenses, impairment losses on trade receivables and contract (42.6) - (42.6) (45.8) - (45.8)
assets, and other income
Amortisation of acquired intangibles - (1.1) (1.1) - (2.5) (2.5)
Acquisition-related expenditure - (0.7) (0.7) - (0.3) (0.3)
Earn-out and employee retention costs - (0.7) (0.7) - (6.2) (6.2)
Impairment of goodwill in the Emerging A&I segment - (14.0) (14.0) - - -
Reorganisation costs - - - - (0.6) (0.6)
ERP implementation costs - - - - (0.3) (0.3)
Operating profit/(loss) from continuing operations 8.3 (16.5) (8.2) 1.1 (9.9) (8.8)
Net finance costs (4.2) (0.1) (4.3) (4.1) - (4.1)
Profit/(loss) before taxation from continuing operations 4.1 (16.6) (12.5) (3.0) (9.9) (12.9)
Income tax (expense)/credit (1.2) 0.3 (0.9) 0.6 0.9 1.5
Profit/(loss) for the period from continuing operations 2.9 (16.3) (13.4) (2.4) (9.0) (11.4)
Profit for the year from discontinued operation, net of tax 3.9 36.8 40.7 8.2 (0.1) 8.1
Profit/(loss) for the period 6.8 20.5 27.3 5.8 (9.1) (3.3)
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 11.
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 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.
Headline trading performance
Underlying Statutory
External revenue Operating profit Profit/(loss) before tax Operating profit/(loss) Profit/(loss) before tax
£m £m £m £m £m
HY 2024/25
Total 210.1 13.6 9.4 33.9 29.6
Less: discontinued operation (41.0) (5.3) (5.3) (42.1) (42.1)
Continuing operations 169.1 8.3 4.1 (8.2) (12.5)
HY 2023/24
Total 224.2 12.0 7.9 2.0 (2.1)
Less: discontinued operation (56.6) (10.9) (10.9) (10.8) (10.8)
Continuing operations 167.6 1.1 (3.0) (8.8) (12.9)
Continuing operations at current year exchange rates 166.0 1.0 (3.1) (8.9) (13.0)
Growth (%) - Total (6) 13 19 1,595 1,510
Growth (%) - Continuing operations 1 655 237 7 3
Constant currency growth (%) - Continuing operations 2 730 232 8 4
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
7.
(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 8.3 (16.5) (8.2) 1.1 (9.9) (8.8)
Operating profit from discontinued operation 5.3 36.8 42.1 10.9 (0.1) 10.8
Operating profit 13.6 20.3 33.9 12.0 (10.0) 2.0
Depreciation, amortisation and impairment 7.0 14.0 21.0 7.2 - 7.2
Amortisation of acquired intangibles - 1.1 1.1 - 2.5 2.5
EBITDA 20.6 35.4 56.0 19.2 (7.5) 11.7
Movement in working capital (22.6) (0.8) (23.4) 5.8 3.8 9.6
Pension deficit payments - - - (0.7) - (0.7)
Gain on disposal of discontinued operation - (36.8) (36.8) - - -
Share based payments 0.4 - 0.4 0.8 - 0.8
Unrealised foreign exchange losses 0.7 0.4 1.1 (0.2) - (0.2)
Fair value losses/(gains) on derivatives (0.3) 0.5 0.2 0.7 - 0.7
Cash (used in)/generated from operations (1.2) (1.3) (2.5) 25.6 (3.7) 21.9
Cash conversion (5.8%) (4.5%) 133.3% 187.2%
2024 2023
Underlying Specific adjusting Total Underlying Specific adjusting Total
items
items
£m £m £m £m £m £m
EBITDA
- continuing operations 14.4 (1.4) 13.0 7.3 (7.4) (0.1)
- discontinued operation 6.2 36.8 43.0 11.9 (0.1) 11.8
- Total 20.6 35.4 56.0 19.2 (7.5) 11.7
Cash (used in)/generated from operations
- continuing operations 1.9 (1.3) 0.6 16.4 (3.6) 12.8
- discontinued operation (3.1) - (3.1) 9.2 (0.1) 9.1
- Total (1.2) (1.3) (2.5) 25.6 (3.7) 21.9
Cash conversion
- continuing operations 13.2% 4.6% 224.7% (12800.0%)
- discontinued operation (50.0%) (7.2%) 77.3% 77.1%
- Total (5.8%) (4.5%) 133.3% 187.2%
Net debt: 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. 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 (see Note 14)
(c) Tax measures
Underlying effective tax rate (UETR): 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 period was
£276.2m (HY 2023/24: £314.3m), 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.
5. Critical judgements and key sources of estimation uncertainty
Key sources of estimation uncertainty: Revenue recognition on fixed price
contracts
As set out in Note 1(d) to the Ricardo Plc Annual Report & Accounts
2023/24, management undertakes a process to assess the risks on inception of
all fixed price contracts, then monitors and reviews the risks and performance
of contracts as they progress to completion. The highest value, highest risk,
most technically complex and financially challenging contracts to deliver, as
measured against a number of quantitative and qualitative factors, are
categorised as 'Red Category 4' contracts, which are subject to more frequent
and senior levels of management review.
As at 31 December 2024, five contracts (30 June 2024: seven) were
risk-categorised as Red Category 4. An additional contract was also included
due to risk of recoverability over debt of £1.0m (30 June 2024: £1.1m). At
31 December 2024, £1.3m (30 June 2024: £1.4m) of revenue had been recognised
in respect of work performed on these contracts where outcomes were subject to
negotiation with customers. Management has made a specific judgement over the
ability to recover each of the amounts under negotiation and has recognised
provisions of £1.0m (30 June 2022: £1.1m) against these amounts, resulting
in a net exposure of £0.3m (30 June 2024: £0.4m). The possible financial
outcomes from these negotiations range from an upside of £1.1m, if management
recovers the full £1.0m of revenue and any upside on negotiation, to a
downside of £0.3m, if management is unsuccessful in recovering any of the
£1.3m.
Key sources of estimation uncertainty: Recoverable amount calculation used to
test the carrying value of goodwill
In performing the impairment assessment of the carrying amount of goodwill,
the recoverable amounts of the CGUs, or groups of CGUs, to which goodwill has
been allocated are determined using value-in-use (VIU) and fair value less
cost of disposal (FVLCD) calculations. The recoverable amount of each CGU, or
group of CGUs, is determined by performing discounted future pre-tax cash flow
calculations for a five-year period and projected into perpetuity. Estimates
are used for the operating cash flows, growth rates and pre-tax discount rates
applied in computing the recoverable amounts of different CGUs, or groups of
CGUs. The sensitivity of estimates used to calculate the recoverable value of
each CGU, or group of CGUs, are discussed in Note 9.
6. Discontinued operation
On 31 December 2024, the Group sold Ricardo Defense Systems LLC and its
subsidiaries (together, the Defense operating segment) to a third party.
Management committed to a plan to sell this segment in December 2024. The
disposal is highly complementary to the Group's five-year strategy and
supports the acceleration of Ricardo's portfolio transition to a high growth,
high margin and less capital-intensive business in the medium to long term.
The Defense segment was not previously classified as held-for-sale or as a
discontinued operation. The results of Defense have now been presented as a
discontinued operation and are, as such, analysed separately from continuing
operations on the face of the condensed consolidated statement of
comprehensive income. When an operation is classified as a discontinued
operation, the comparative condensed consolidated statement of comprehensive
income is re-presented as if the operation had been discontinued from the
start of the comparative period.
Total consideration for the sale was £72.3m (USD 90.6m), inclusive of
adjustments for estimated closing cash and net working capital. £68.5m (USD
85.8m) was satisfied in cash in the period, with £3.8m (USD 4.8m) received in
early January 2025.
The total net assets disposed of were £27.2m, including £2.4m of cash held
in the business. £0.4m of cumulative currency gains were written off to the
condensed consolidated income statement as part of the gains on disposal.
Costs directly attributable to the disposal of £7.9m were incurred in the
period (cash cost in the period: £1.8m).
The disposal is subject to a completion accounts process, due to be completed
during the second half of FY 2024/25, where final adjustments to consideration
in respect of net cash and normal working capital will be agreed. Any changes
to consideration and the gain on disposal will be reflected in the Group's
Annual Report and Accounts for FY 2024/25.
Effect of disposal on the financial position of the Group as at 31 December
2024
£m
Goodwill (3.4)
Other intangible assets (3.4)
Property, plant and equipment (1.4)
Right-of-use assets (1.1)
Deferred tax assets (0.7)
Inventories (13.5)
Trade, other and contract receivables (18.6)
Cash and cash equivalents (2.4)
Trade, other and contract payables 16.2
Obligations under finance & IFRS 16 leases 1.1
Net assets and liabilities (27.2)
Translation reserve (0.4)
Consideration received, satisfied in cash 68.5
Cash and cash equivalents disposed of (2.4)
Proceeds from sale of discontinued operation, net of cash disposed 66.1
Directly attributable fees (1.8)
Net cash proceeds, after transaction-related costs paid in the period 64.3
Result from discontinued operation
2024 2023
£m £m
External revenue 41.0 56.6
External expenses (35.7) (45.7)
Underlying profit from operating activities 5.3 10.9
Income tax on underlying result (1.4) (2.7)
Underlying profit from operating activities, net of tax 3.9 8.2
Specific adjusting items 36.8 (0.1)
Profit from discontinued operation, net of tax 40.7 8.1
Cash flow from (used in) discontinued operation
2024 2023
£m £m
Net cash (used in)/from operating activities (3.1) 9.1
Net cash from investing activities 66.1 -
63.0 9.1
7. Financial performance by segment
The Group's operating segments are being reported based on the financial
information provided to the Chief Operating Decision Maker (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 Group reports the following segments: Energy & Environment (EE); Rail;
Automotive and Industrial Emerging (Emerging A&I); Automotive and
Industrial Established (Established A&I); Performance Products (PP); and
Defense (now discontinued).
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 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.
Revenue
HY 2024/25 HY 2023/24 (restated*)
Total segment revenue Inter-segment revenue Revenue from external customers Total segment revenue Inter-segment revenue Revenue from external customers
£m £m £m £m £m £m
Energy & Environment 50.8 (0.4) 50.4 53.0 (0.1) 52.9
Rail 38.4 (0.3) 38.1 38.3 (0.2) 38.1
Emerging Automotive and Industrial 19.2 (0.1) 19.1 27.5 - 27.5
Performance Products 40.6 - 40.6 38.3 (0.1) 38.2
Established Automotive and Industrial 21.7 (0.8) 20.9 10.9 - 10.9
Total continuing operations 170.7 (1.6) 169.1 168.0 (0.4) 167.6
Discontinued operation 41.0 - 41.0 56.6 - 56.6
Total 211.7 (1.6) 210.1 224.6 (0.4) 224.2
* From 1 July 2024 the management of Ricardo Strategic Advisory (RSA),
historically part of the Emerging A&I segment, was transferred to EE as it
was felt that there was closer strategic alignment. The results of RSA are now
included within the monthly management results of EE to the Group's Chief
Operating Decision Maker (the CEO) and the Ricardo plc Board. The segmental
analysis reflects this new allocation, with the prior period restated. The HY
2023/24 revenue for the Emerging A&I segment has decreased by £2.0m with
a correlating increase recognised to the revenue of the EE segment.
Revenue from one customer represents approximately 15% (HY 2023/24: 14%) of
the Group's continuing external revenue, which is primarily reported in the PP
segment. Over 50% of the Group's revenue from continuing operations was Tier 1
and 2 'Green' per the FTSE Green Revenues Methodology.
Underlying operating profit/(loss)
HY 2024/25 HY 2023/24 *restated
Underlying operating profit/(loss) Specific adjusting items (*) Operating profit/(loss) Underlying operating profit/(loss) Specific adjusting items (*) Operating profit/(loss)
£m £m £m £m £m £m
Energy & Environment 6.8 (1.1) 5.7 8.0 (1.6) 6.4
Rail 4.6 - 4.6 4.1 (1.4) 2.7
Emerging Automotive and Industrial 1.5 (14.0) (12.5) (0.7) (0.4) (1.1)
Performance Products 2.8 - 2.8 2.0 - 2.0
Established Automotive and Industrial (0.4) - (0.4) (3.5) - (3.5)
Plc (7.0) (1.4) (8.4) (8.8) (6.5) (15.3)
Total continuing operations 8.3 (16.5) (8.2) 1.1 (9.9) (8.8)
Discontinued operation 5.3 36.8 42.1 10.9 (0.1) 10.8
Total operating profit/(loss) 13.6 20.3 33.9 12.0 (10.0) 2.0
Net finance costs (4.3) (4.1)
Total profit/(loss) before tax 29.6 (2.1)
* RSA recognised a £0.8m underlying loss in HY 2023/24. Following the
reallocation of RSA from Emerging A&I to EE, as discussed above, the
impact of the restatement is to increase Emerging A&I underlying operating
profit for HY 2023/24 whilst decreasing that of EE.
8. 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 103.5 102.2 1.8 0.7 105.3 102.9
- time and materials contracts 26.0 25.1 19.4 12.7 45.4 37.8
- subscription and software support contracts 2.9 2.9 - - 2.9 2.9
Goods supplied: - -
- manufactured and assembled products 36.5 36.7 19.8 43.2 56.3 79.9
- software products 0.2 0.7 - - 0.2 0.7
Intellectual property - - - - - -
Total 169.1 167.6 41.0 56.6 210.1 224.2
Customer location
United Kingdom 70.8 65.5 - - 70.8 65.5
Europe 36.4 37.3 - - 36.4 37.3
North America 18.6 22.1 41.0 56.6 59.6 78.7
Rest of Asia 20.0 18.0 - - 20.0 18.0
Australia 10.8 10.4 - - 10.8 10.4
China 4.8 4.4 - - 4.8 4.4
Rest of the World 7.7 9.9 - - 7.7 9.9
Total 169.1 167.6 41.0 56.6 210.1 224.2
Timing of recognition
Over time 132.6 130.8 21.2 13.4 153.8 144.2
At a point in time 36.5 36.8 19.8 43.2 56.3 80.0
Total 169.1 167.6 41.0 56.6 210.1 224.2
9. Goodwill and impairment
Movement in goodwill Six months to 31 December 2024 Year to 30 June 2024
Note £m £m
At 1 July 96.0 96.1
Disposal of business((2)) 6 (3.5) -
Impairment((1)) (14.0) -
Exchange adjustments (2.5) (0.1)
At period end 76.0 96.0
At 31 December 2024, as required by IAS 36, an assessment was carried out to
identify whether any indicators existed that the goodwill, finite life
intangibles, and property, plant and equipment balances held by the Group may
be impaired.
There has been a significant reduction in the Group's share price since 31
December 2024. An indicator of impairment is therefore considered to exist,
and the recoverable amount of each cash-generating unit (CGU) was estimated.
Recoverable amount is the higher of the value-in-use (VIU) and fair value less
costs of disposal (FVLCD).
The carrying value of goodwill and the key assumptions used in determining the
recoverable amount of each CGU, or group of CGUs is as follows:
Carrying value Pre-tax discount rate Long-term growth rate
Basis 31 December 2024 30 June 2024 31 December 2024 30 June 2024 31 December 2024 30 June 2024
£m £m £m £m £m £m
Rail((4)) VIU 43.2 44.6 14.1% 14.3% 3.4% 3.6%
Established A&I VIU - - 14.5% 14.8% (10.0%) (10.0%)
Emerging A&I((1)) VIU - 14.2 14.7% 14.7% 3.3% 3.8%
E&E((4)) VIU 31.7 32.6 17.2% 16.5% 5.4% 4.7%
Defense((2)) VIU - 3.5 n/a 16.1% n/a 1.7%
PP((3)) FVLCD 1.1 1.1 12.9% 12.4% 4.2% 4.7%
At period end 76.0 96.0
(1) Emerging A&I: The recoverable amount of this CGU was based on its
value in use, determined by discounting the future cash flows expected to be
generated from the continuing use of the CGU. Due to continuing volatility in
order intake, exacerbated by general uncertainties over the pace of technology
change, expected cash flows for the A&I Emerging business have decreased
materially compared to those expected at 30 June 2024, and the carrying amount
of the CGU was therefore determined to be higher than its recoverable value.
As a result, an impairment charge of £14.0m was recognised in administrative
expenses within specific adjusting items for the Emerging A&I operating
segment (HY 2023/24: £nil). The £14.0m of assets written off all related to
goodwill. After recognising the impairment, the remaining goodwill in this CGU
was £nil. No impairment was required to other assets. The full carrying value
of Emerging A&I's assets, together with the shared assets used by Emerging
A&I along with the Established A&I segment were supported by this
calculation. Following the impairment loss recognised, the recoverable amount
was equal to the carrying value. Therefore, any adverse change in the key
assumptions described below may result in further impairment.
(2) Defense: The Group sold the Defense operating segment to a third party on
31 December 2024, removing £3.5m of goodwill in the process.
(3) Performance Products: The recoverable amount of this CGU was based on
FVLCD, estimated using discounted cash flows. The fair value measurement was
classified as Level 3 fair value based on the inputs and the valuation
technique used. The key assumptions are set out in the table. The discount
rate represents a post-tax discount rate.
(4) Rail, Energy & Environment: The movement in the carrying value
reflects movements in exchange rates.
The carrying values of Rail, Energy & Environment and Performance Products
were all supported by their recoverable amounts.
Key assumptions
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 31 December
2024. These five-year cashflow forecasts are based on the forecast for the
remainder of FY 2024/25 and the business plans for years two to five, adjusted
to take into consideration trading in HY 2024/25, 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. As at 31 December 2024, these factors were re-assessed
and expected cash flows adjusted accordingly. These forecasts were prepared by
management and have been reviewed by the Board.
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 FY 2023/24) 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).
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.
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.
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 VIU 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.
For Rail, EE and PP, under these scenarios, their recoverable amounts exceeded
the carrying value of their goodwill.
10. 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 1.1 2.5
Acquisition-related expenditure 0.7 0.3
Earn-out and employee retention costs 0.8 6.2
Impairment of goodwill in the Emerging A&I segment 14.0 -
Reorganisation costs - 0.6
ERP implementation costs - 0.3
Total specific adjusting items from continuing operations before tax 16.6 9.9
Tax credit on specific adjusting items (0.3) (0.9)
Total specific adjusting items from continuing operations after tax 16.3 9.0
Specific adjusting items from discontinued operations
Disposal of discontinued operation (36.8) 0.1
Total specific adjusting items after tax (20.5) 9.1
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
six to ten years.
Impairment of goodwill
Following a re-assessment of the value-in-use of the Emerging A&I segment,
the goodwill allocated to this cash generating unit was impaired resulting in
a charge of £14.0m. This has been recognised within specific adjusting items
as it material in nature and does not reflect the underlying trading
performance in the period. No other assets were impaired. See Note 9 for
further details.
Acquisition-related expenditure
Acquisition-related expenditure comprises £0.2m (HY 2023/24: nil) of external
fees in relation to the acquisition of E3 Advisory Holdings Pty Ltd (E3A),
acquired in January 2025. In addition, £0.5m has been recognised in the
current period relation to a loss on a foreign exchange contract, taken out to
hedge against adverse foreign exchange movements on the translation of the
deal consideration, denominated in AUD. The cash cost of acquisition-related
expenditure was £0.4m in the period.
The prior period cost of £0.3m related to integration costs resulting from
the acquisitions of E3-Modelling S.A. (acquired in January 2023) and Aither
Pty Limited (acquired in March 2023).
These costs have been included as specific adjusting items, in line with the
Group's policy, as they are incremental and specific to the transactions.
Earn-out and employee retention costs
£0.8m of costs (HY 2023/24: £6.2m) were incurred in HY 2024/25 in relation
to accruals for deferred consideration and management retention payments on
the acquisitions of E3M and Aither. These costs have been included as specific
adjusting items, consistent with prior periods and in line with the Group's
policy.
Restructuring costs
£0.6m were incurred in the prior period in relation to restructuring of the
Established A&I business. No restructuring costs were charged to the
income statement in the current period, but £1.1m of cash cost was incurred
in respect of restructuring activities that were completed and accrued for in
FY 2023/24.
ERP implementation costs
ERP implementation costs of £0.3m were incurred in the prior period for
initial feasibility studies in relation to the proposed implementation of a
new Group-wide ERP system. This project is currently on pause.
Disposal of discontinued operation
The Defense business was sold on 31 December 2024, resulting in a gain on
disposal of £36.8m as set out in Note 6 (cash impact: £64.3m). The gain on
disposal has been recognised within the result from discontinued operations.
11. Earnings per share
2024 2023
£m £m
Earnings/(loss) attributable to owners of the parent 27.3 (3.4)
Add back the net-of-tax impact of:
- Amortisation of acquired intangibles 0.8 1.8
- Acquisition-related expenditure 1.5 6.5
- Impairment of goodwill in the Emerging A&I segment 14.0 -
- Other reorganisation costs and impairment - 0.4
- ERP implementation costs - 0.3
- Discontinued operations (36.8) 0.1
Underlying earnings attributable to owners of the parent 6.8 5.7
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 0.8 -
Diluted weighted average number of shares in issue 63.0 62.2
2024 2023
Earnings/(loss) per share pence pence
Basic 43.9 (5.5)
Diluted 43.3 (5.5)
2024 2023
Underlying earnings per share pence pence
Basic 10.9 9.2
Diluted 10.8 9.2
2024 2023
Underlying Earnings/(loss) per share from continuing operations pence pence
Basic 4.7 (4.0)
Diluted 4.6 (4.0)
2024 2023
Loss per share from continuing operations pence pence
Basic (21.5) (18.5)
Diluted (21.3) (18.5)
2024 2023
Earnings per share from discontinued operation pence pence
Basic 65.4 13.0
Diluted 64.6 13.0
Basic loss per share from continuing operations was 21.5p (HY 2023/24: loss of
18.5p). The Directors consider that underlying earnings per share provides a
more useful indication of underlying performance and trends over time.
Underlying basic earnings per share from continuing operations for the period
was 4.7p (HY 2023/24: loss per share of 4.0p). There are £0.8m potentially
dilutive shares (31 December 2023: nil).
12. Dividends
2024 2023
£m £m
Final dividend for prior period: 8.90p per share (2023: 8.61p) per share 5.5 5.4
On 6 March 2025 the Directors declared an interim dividend of 1.70p per share,
which will be paid gross on 11 April 2025 to holders of ordinary shares on the
Company's register of members on 14 March 2025.
13. Fair value of financial assets and liabilities
There are no differences between the fair value of financial assets and
liabilities included within the following categories in the condensed
consolidated statement of financial position and their carrying value:
• Trade, contract and other receivables;
• Investments;
• Derivative financial assets;
• Cash and cash equivalents;
• Trade, contract and other payables; and
• Derivative financial liabilities.
Derivative financial assets of £0.7m (30 June 2024: £0.8m) and derivative
financial liabilities of £1.5m (30 June 2024: £0.5m) relate to foreign
exchange forward and swap contracts, which are Level 2 of the fair value
hierarchy within IFRS 13 Fair Value Measurement. The Group use derivative
financial instruments primarily to manage currency risk on its US Dollar,
Euro, Chinese Renminbi, Japanese Yen, Hong Kong Dollar and Australian Dollar
denominated receivables and payables from its subsidiaries, in addition to
managing transactional exposures relating to customer contracts denominated in
foreign currencies. It is the Group's policy not to undertake any speculative
currency transactions.
Financial guarantee contracts
As at 31 December 2024, the Group has the following financial guarantee
contracts in place:
· £3.1m in relation to projects in the Middle East (30 June 2024:
£6.2m); and
· A guarantee provided to the Ricardo Group Pension Fund (RGPF) for
an amount that shall not exceed the employers' liability, were a debt to arise
under Section 75 of the Pensions Act 1995. The guarantee will terminate on 5
April 2026. The outcome of this matter is not expected to give rise to any
material cost to the Group on the basis that the Group continues as a going
concern.
These financial guarantees are accounted for under IFRS 9, for which no
liability has been recognised as they do not have a material impact on the
accounts.
Contingent loan commitments
In the ordinary course of business, the Group has £13.3m (30 June 2024:
£12.6m) of possible obligations for bonds and guarantees placed with the
Group's banking and other financial institutions and primarily relating to
performance under contracts with customers.
These contingent loan commitments are accounted for under IFRS 9, for which no
liability has been recognised as they do not have a material impact on the
accounts.
14. Net debt
31 December 2024 30 June 2024 31 December 2023
Analysis of net debt £m £m £m
Current assets - cash and cash equivalents
Total cash and cash equivalents 115.3 48.6 46.7
Restricted cash (3.6) (1.3) -
Net cash and cash equivalents 111.7 47.3 46.7
Current liabilities - borrowings
Bank overdrafts repayable on demand (18.5) (4.3) (5.5)
Hire purchase liabilities maturing within one year - - (0.1)
Total current borrowings (18.5) (4.3) (5.6)
Non-current liabilities - borrowings
Bank loans maturing after one year (111.7) (102.6) (104.4)
Total non-current borrowings (111.7) (102.6) (104.4)
At 31 December (18.5) (59.6) (63.3)
Total cash and cash equivalents at 31 December 111.7 47.3 46.7
Total borrowings at 31 December (130.2) (106.9) (110.0)
At 31 December (18.5) (59.6) (63.3)
31 December 2024 30 June 2024 31 December 2023
Movement in net debt £m £m £m
At 1 July (59.6) (62.1) (62.1)
Net increase in cash and cash equivalents and bank overdrafts 52.5 7.1 4.0
Movement in restricted cash (2.3) (1.3)
Repayments of hire purchase - 0.1 -
Proceeds from bank loans (15.0) (83.0) (57.0)
Repayments of bank loans 6.0 80.0 52.0
Amortisation of bank loan fees (0.1) (0.4) (0.2)
At 31 December (18.5) (59.6) (63.3)
Net debt as at 31 December 2024 was £18.5m (30 June 2024: £59.6m). As
reported to the Board on a monthly basis, there is sufficient headroom in our
banking facilities. At 31 December 2024 the Group held total facilities of
£166.1m (30 June 2024: £166.1m). The committed facility consists of a
£150.0m multi-currency Revolving Credit Facility (RCF) with an additional
uncommitted £50.0m accordion which provides the Group with committed funding
through to August 2026. In addition, the Group has uncommitted facilities
including overdrafts of £16.1m (30 June 2024: £16.1m), which mature
throughout this and the next financial year and are renewable annually.
Non-current bank loans comprise committed facilities of £111.7m (30 June
2024: £102.6m), 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 (30 June 2024:
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 for
the last twelve months, excluding IFRS 16 Leases. Adjusted EBITDA is further
defined as being operating profit before interest, tax, depreciation and
amortisation, adjusted for any one-off, non-recurring, exceptional costs and
acquisitions or disposals during the relevant twelve-month period.
At the reporting date, the Group has an Adjusted Leverage of 0.61x (30 June
2024: 1.25x) which gives rise to an applicable interest rate of SONIA plus
1.65% (30 June 2024: 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 condensed interim financial statements.
15. Contingent liabilities
The Group is also involved in commercial disputes and litigation with some
customers, which is also in the normal course of business. Whilst the result
of such disputes cannot be predicted with certainty, the ultimate resolution
of these disputes is not expected to have a material effect on the Group's
financial position or results.
16. Principal risks and uncertainties
The Board regularly reviews its principal risks and uncertainties. To ensure
our risk process drives continuous improvement across the business, we monitor
the ongoing status and progress of key action plans against each risk on a
half-yearly basis. Risk is a key consideration of the Board in all strategic
decisions. In the most recent risk review cycle, risks were reviewed which
relate to customers and markets; contracts; people; cyber and information
security; technology; compliance with laws and regulations; and financing. The
approach to mitigation of these principal risks is discussed on pages 75 to 80
of the Group's Annual Report & Accounts 2023/24, and the Directors have
concluded that the disclosure remains appropriate. These principal risks and
uncertainties should be read in conjunction with the Trading Summary and
Operating Segments Review for the six months ended 31 December 2024 included
within this Interim Report.
17. Events after the reporting date
On 7 January 2025, the Group acquired 85% of the share capital of E3 Advisory
Holdings Pty Limited (E3A), a company incorporated in Australia. This
acquisition is part of the Group's stated strategy to transform its portfolio
to better position itself as a leader in the energy and environmental sector.
The undiscounted value of consideration for the 85% interest is AUD 101.4m
(£50.7m), including payments for an initial estimate of net cash on
completion. AUD 69.0m (£34.5m) was paid on completion, with AUD 32.4m
(£16.2m) payable in instalments over the next two years.
The holders of the remaining 15% of equity can exercise a put option for
Ricardo to acquire their shares after the third anniversary from completion.
The value of the remaining 15% shareholding is based on the future earnings
before interest, tax and depreciation (EBITDA) performance of the business in
the twelve months to 31 December 2027 at a 9x EBITDA multiple. In the event
that management have not exercised their options on the third anniversary of
completion of the Acquisition, the Option Price will decrease over time.
Ricardo Australia may also elect to mandatorily acquire these shares in
certain other circumstances.
The acquisition is subject to a completion accounts process, due to be
completed during the second half of FY 2024/25, where final adjustments to
consideration in respect of net cash and normal working capital will be
agreed. Acquisition accounting, including an assessment of the value of
goodwill and acquired intangible assets will be completed by 30 June 2025.
Statement of Directors' responsibilities
The Directors confirm that to the best of their knowledge:
· the condensed interim financial statements, which have been prepared
in accordance with International Accounting Standard (IAS) 34 Interim
Financial Reporting as adopted for use in the UK, give a true and fair view of
the assets, liabilities, financial position and profit or loss of the Group.
· the highlights, trading summary and operating segments review within
this Interim Report includes a fair review of the information required by:
(a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an
indication of important events that have occurred during the first six months
of the financial year and their impact on the condensed interim financial
statements; and a description of the principal risks and uncertainties for the
remaining six months of the financial year; and
(b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being
related party transactions that have taken place in the first six months of
the financial year and that have materially affected the financial position or
performance of the Group during that period and any changes in the related
party transactions described in the last annual report that could do so.
By order of the Board:
Graham
Ritchie
Judith
Cottrell
Chief Executive Officer Chief
Financial Officer
4 March 2025
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