REG - Ricardo PLC - Ricardo divests Ricardo Defense
16/12/2024 07:00
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RNS Number : 1972Q Ricardo PLC 16 December 2024
FOR IMMEDIATE RELEASE
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
16 December 2024
Ricardo plc ("Ricardo" or the "Group")
Ricardo divests Ricardo Defense
Further to the previous announcement, dated 21 October 2024, and consistent
with the Group's strategy, Ricardo is pleased to announce the conditional
disposal of the Group's interests in the Ricardo Defense Business to Proteus
Enterprises LLC and Gladstone Investment Corporation, via GPD Acquisition Inc.
(the "Buyer") for US $85 million (£67.5 million*) (the "Disposal"), following
an extensive and thorough process conducted by the Board.
Highlights
· Sale of Ricardo Defense to Proteus and Gladstone, via GPD Acquisition
Inc, for $85 million (£67.5 million) as adjusted post-Closing on a cash-free,
debt-free basis
· 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 Group has separately announced the Acquisition of an 85%
shareholding of E3 Advisory for AUD $101.4 million (£51.0 million^), with the
remaining 15% expected to be acquired after 3 years. Details of the
Acquisition are contained in the Acquisition announcement, which should be
read in conjunction with this announcement.
· Reflecting the current strong financial performance of Ricardo
Defense, the Disposal is expected to be dilutive to the Group's earnings per
share in the near term, partly offset by earnings contribution from E3
Advisory.
Graham Ritchie, Chief Executive Officer of Ricardo, commented:
The Disposal forms part of the Group's stated strategy to optimise our
portfolio, as it repositions itself for long-term and sustainable growth in
environmental and energy transition solutions. Ricardo Defense has an
established and successful history in delivering integrated vehicle
engineering solutions for the US Army, and as a Group, we are privileged to
have played a role in its success. We are confident, that under a different
ownership, this business will continue to grow and prosper.
With the sale of Ricardo Defense and the announcement that we have entered
into an agreement to acquire E3 Advisory, we are now a more focused business,
leveraging our expertise to create further value in the medium to long term
across our chosen markets.
Strategic rationale
Aligned to its strategy, Ricardo continues to position itself as an
environmental, engineering, and strategic consultancy that offers expertise
and solutions that support global sustainability agendas. Ricardo sits at the
intersection of transport, energy, and environmental agendas, which is a key
competitive differentiator in the consulting market. The depth and breadth
of engineering, scientific and economic expertise that the Group holds, from
strategy to implementation, supports the complexity of energy transition.
Ricardo's strategic investments are focused on expanding and strengthening the
'Environmental and Energy Transition' portfolio. This approach allows Ricardo
to strengthen its position for long-term sustainable growth where it can
accelerate its portfolio transition and simplify its brand positioning as a
leader in environmental and energy transition.
The Ricardo Defense Business currently sits within the Group's Established
Mobility portfolio and provides capabilities in engineering and production
services for land vehicles in the defense sector. Its solutions products have
been the principal contributor to its recent strong financial performance, due
to an extension contract award in September 2023.
The Board believes the current timing is optimal to maximise the value of
Ricardo Defense through a sale, considering the successful ramp up of delivery
of the ABS retrofit system, the finite time period for delivery of the ABS
retrofit solution, and the improved visibility in the business of pilot
programmes.
Having conducted an extensive competitive sale process, the Board considers it
has achieved an appropriate valuation for the business and will deploy the
sale proceeds in line with its capital allocation policy, with a focus on
accelerating the portfolio transition of the Group and strengthening its
'Environmental and Energy Transition' portfolio.
Summary transaction details
The aggregate consideration payable by the Buyer in connection with the
Disposal comprises of US $85 million as adjusted for normalised working
capital adjustments, and as reduced by (a) indebtedness, (b) Ricardo's costs
and fees related to the Disposal, and (c) other costs and expenses as
allocated to the Group under the terms of the Ricardo Defense Equity Purchase
Agreement.
The sale of the Ricardo Defense Business is structured as a purchase by the
Buyer of all of the issued and outstanding stock of a wholly owned subsidiary
of the Group, Ricardo US Holdings Inc.
Further details of the principal terms of the Disposal are set out in Appendix
1 to this announcement.
Summary information on Ricardo Defense
Ricardo Defense provides both product and technical service solutions to
complex integration challenges facing the U.S. Department of Defense and prime
contractors. The business delivers integrated engineering, software and
lifecycle logistics solutions to customer-specific challenges across various
US defense platforms, and it therefore operates as a separate entity within
the Group and functions under a U.S. Government Special Security Agreement.
At present, the Ricardo Defense Business is one of the three business units
within the Group's Established Mobility portfolio, and in FY 23/24 accounted
for 26 per cent of the Group's revenue and 60 per cent of the Group's
operating profit.
Headquartered in Troy, Michigan, USA, Ricardo Defense has circa. 240
colleagues and its business's operations are located mainly across the United
States, with some field-services operating internationally, providing product
and technical services across the various defense platforms.
Process and timetable
Completion of the Disposal is conditional on the terms outlined in Appendix.1
and is expected to take place in December 2024.
UK Listing rules
Due to the Disposal size in relation to Ricardo, it constitutes a Significant
Transaction for the purposes of the UK Listing Rules made by the Financial
Conduct Authority (the "FCA") for the purposes of Part VI of the Financial
Services and Markets Act 2000 (as amended), which came into effect on 29 July
2024 (the "UKLRs") and is therefore notifiable in accordance with UKLR 7.3.1R
and 7.3.2R. In accordance with the UKLRs, the Disposal is not subject to
shareholder approval.
Transaction effects on the Group
In FY 23/24, Ricardo Defense contributed revenue of £123.4 million and an
underlying operating profit of £23.5 million to the Group, reporting an
underlying operating margin of 19%. The gross assets of the Ricardo Defense
Business as at 30 June 2024 were £29.5 million. Appendix 2 includes key
historic financial information on Ricardo Defense.
Following Completion, Ricardo will no longer receive the strong profit
contribution that Ricardo Defense has made to the consolidated profit of the
Group. As a result, the disposal of Ricardo Defense is expected to be dilutive
to the Group's earnings per share in the near term, partly offset by immediate
earnings contribution from the acquisition of E3 Advisory. Future earnings per
share dilution will reduce over time, given lower expected contribution from
the ABS programme and growth in the Group's continuing operations.
Ricardo's continuing operations is focused on growing its core consulting
services in environmental and energy transition, offering higher growth,
higher margin and lower capital intensity in the medium to long term. Within
its outlined five-year strategic ambition, this portfolio will represent over
75% of the Group's operating profit.
Ricardo Defense forms part of the Group's Established mobility portfolio which
is expected to generate lower growth in the medium to long-term when compared
to the Environmental and Energy transition portfolio.
In FY 24/25, the Group will benefit from the receipt of the net cash proceeds,
after payment of the first instalment of consideration for E3 Advisory, and
the reduction in interest costs arising from the reduction in borrowings. The
Group intends to utilise the Net Disposal Proceeds to fund the full
consideration for the purchase of 85% of E3 Advisory, including the deferred
elements due on the initial 85 per cent. of shares acquired.
The sale of Ricardo Defense supports Ricardo's portfolio transition and
improves the Group's long-term quality of earnings.
Group financial targets
Following the disposal of Ricardo Defense and the acquisition of E3 Advisory,
Ricardo remains confident in its objective to deliver higher growth and higher
margin through the portfolio transformation. Ricardo continues to focus on and
remains confident in achieving the financial target set out at the capital
markets day in 2022 of doubling operating profit on an organic basis. With the
disposal of Ricardo Defense, the acquisition of E3 Advisory, and potentially
further portfolio transformation actions, the timing of the delivery of this
target is expected to be later than 2027 and will be influenced by the shape
of the overall Group.
Board's views on the Disposal
Considering all that is outlined above, the Board believes that the disposal
of Ricardo Defense is in the best interests of Ricardo shareholders,
reflecting the intrinsic value of Ricardo Defense and accelerating the Group's
transition to sustainably growing its environmental and energy transition
portfolio.
~ENDS~
Footnote:
* Rate of exchange USD|GBP 1.26 on the 13 December 2024
^ Rate of exchange AUD|GBP 1.99 on the 13 December 2024
Enquiries
Ricardo plc +44 (0) 1273 455 611
Graham Ritchie, Chief Executive Officer
Judith Cottrell, Chief Financial Officer
Investor and media relations
Natasha Perfect, Ricardo plc investors@ricardo.com (mailto:investors@ricardo.com)
Elisabeth Cowell, SEC Newgate Ricardo@segnewgate.co.uk (mailto:Ricardo@segnewgate.co.uk)
Corporate Brokers
David Flin / Will Brinkley / John Jillings, Investec +44 (0) 20 7597 5970
Nicholas How / Sam Elder, Panmure Liberum +44 (0) 20 3100 2167
About Ricardo plc
Ricardo plc is a global strategic, environmental, and engineering consulting
company, listed on the London Stock Exchange. With over 100 years of
engineering excellence and close to 3,000 employees in more than 20 countries,
we provide exceptional levels of expertise in delivering innovative
cross-sector sustainable outcomes to support energy transition and scarce
resources, environmental services, together with safe and smart transport
solutions. 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.
Appendix 1
PRINCIPAL TERMS OF THE DISPOSAL
Ricardo Defense Equity Purchase Agreement
1. Parties to and structure of the Ricardo Defense Equity Purchase
Agreement
On the 13 December 2024, the Seller and the Buyer, entered into the Ricardo
Defense Equity Purchase Agreement, pursuant to which the Seller agreed to sell
the entire issued share capital of Ricardo US Holdings Inc to the Buyer upon
Completion. The Ricardo Defense Equity Purchase Agreement is governed by the
laws of the state of Delaware, other than the laws of conflict.
2. Consideration
The aggregate consideration payable by the Buyer in connection with the
Disposal comprises US $85 million as adjusted for normalised working capital
adjustments, and as reduced by (a) indebtedness, (b) the Seller's costs and
fees related to the Disposal, and (c) other costs and expenses as allocated to
the Group under the terms of the Ricardo Defense Equity Purchase Agreement.
3. Closing statement
The Buyer will prepare and provide a closing statement in accordance with the
principles set out in the Ricardo Defense Equity Purchase Agreement no later
than 120 business days after Completion. The closing statement (once agreed)
will determine any net debt and working capital adjustments to the
consideration payable by the Buyer.
4. Conditions
Completion is subject to satisfaction (or waiver, where applicable) of certain
conditions prior to the Ricardo Defense Long Stop Date, including:
a. a pre-completion capital restructure of the Group Companies;
b. notification of transaction to US Defense Counter intelligence and
Security Agency;
c. key personnel executing and delivering retention agreements in an agreed
form;
d. there being no breach of the representations and warranties between the
date of signing of the Ricardo Defense Equity Purchase Agreement and
Completion that give rise to a material adverse effect; and
e. certain other conditions precedent which are customary for a transaction
of this nature.
5. Conduct of the Ricardo Defense Business between signing and Completion
During the period from the date of signing of the Ricardo Defense Equity
Purchase Agreement to Completion, the Seller has agreed to customary
obligations relating to the conduct of the Ricardo Defense Business. These
obligations include (i) ensuring the Ricardo Defense Business is carried on in
its ordinary and usual course; (ii) preserving assets; (iii) not making any
warranty inaccurate; and (iv) providing access to the Buyer as required under
the Ricardo Defense Equity Purchase Agreement. Each obligation is subject to
certain customary exceptions.
6. Warranties and indemnities
The Ricardo Defense Equity Purchase Agreement contains representations and
warranties given by the Seller, and the Buyer respectively which are customary
for a transaction of this nature. The Buyer will take out Representations
& Warranty Insurance, the costs of which will be split 50/50 between the
Seller and the Buyer and will be the Buyer's sole recourse for breach of the
representations and warranties under the Equity Purchase Agreement other than
in the case of fraud. The representation and warranties given by the Buyer
relate to amongst other things, title and capacity, authority and insolvency
matters, litigation and funding in place for the Disposal.
7. Termination and liquidated damages
The Ricardo Defense Equity Purchase Agreement may be terminated if any of the
conditions described in paragraph 4 above are not satisfied or (if capable of
waiver) waived on or before the Ricardo Defense Long Stop Date. If the Seller
has satisfied all conditions on or prior to Completion and the Buyer is unable
to comply with its completion obligations to obtain satisfaction of the
conditions, a liquidated damages sum of US $1,700,000 shall be payable to the
Seller.
8. Governing Law
The Equity Purchase Agreement is subject to Delaware Law.
9. Transitional Services Agreement
The Seller will provide certain IT services to the Ricardo Defense Business
for a period of up of 12 months from the date of Completion pursuant to a
transitional services agreement with the option of a 3-month extension. The
service charge payable to the Seller in respect of the services is
approximately £112,000.00 per annum (the Service Charge). Each parties'
liability is capped at £500,000 for breach of its obligations under the
Transitional Services Agreement, other than where liability cannot be lawfully
excluded under applicable law, for example in the event of fraud.
Appendix 2
HISTORICAL FINANCIAL INFORMATION RELATING TO RICARDO'S DEFENSE BUSINESS
The following historical financial information relating to Ricardo Defense has
been extracted without material adjustment from the consolidation schedules
and supporting accounting records that underlie the audited consolidated
financial statements of the Group for the years ended 30 June 2023 and 30 June
2024.
KPMG LLP was the auditor of the Group in respect of each of the years ended 30
June 2023 and 30 June 2024. The consolidated statutory accounts for the Group
in respect of each of the years ended 30 June 2023 and 30 June 2024, have been
delivered to the Registrar of Companies. The auditor's reports in respect of
these statutory accounts were unqualified and did not contain statements under
section 498(2) or (3) of the Companies Act.
The following financial information does not constitute statutory accounts
within the meaning of section 434 of the Companies Act. The financial
information in this Section C of Part IV (Unaudited Historical Financial
Information relating to the Ricardo Defense Business) has been prepared using
the IFRS accounting policies used to prepare the consolidated financial
statements of the Group for the years ended 30 June 2023 and 30 June 2024.
Unaudited income statements relating to Year ended 30 June 2023 Year ended 30 June 2024
Ricardo Defense for the years ended 30 June 2023 and 30 June 2024 £ million £ million
Revenue 88.6 123.4
Cost of sales (67.9) (91.3)
Gross profit 20.7 32.1
Administrative expenses (7.4) (8.6)
Operating profit 13.3 23.5
Underlying operating profit 13.4 23.5
Finance income - -
Finance costs (0.1) (0.1)
Net finance costs (0.1) (0.1)
Profit before taxation 13.2 23.4
Income tax expense - -
Profit for the year 13.2 23.4
Profit / (loss) attributable to:
Owners of the parent 13.2 23.4
Non-controlling interests - -
13.2 23.4
Notes:
(1) The income statements presented above are unaudited and have been
extracted without material adjustment from the consolidation schedules and
supporting accounting records that underlie the audited consolidated financial
statements of the Group for the years ended 30 June 2023 and 30 June 2024.
(2) The income statements presented above eliminate the impact of
intercompany transactions between Ricardo Defense and the Group (as
continuing).
(3) The Ricardo Defense Business has been part of the Pre-Completion Group's
US tax group which had available US tax losses and other tax credits and
consequently has not incurred any income tax expense for the periods
presented. The Ricardo Defense Business has since been charged for the use of
the tax losses and credits in the current financial year.
(4) Underlying operating profit is a measure used by the Board to monitor and
measure the trading performance of the Group and its divisions. It excludes
certain items which the Board believes distort the trading performance of the
Group and its divisions. These include the amortisation of acquired intangible
assets, acquisition-related expenditure, costs related to implementation and
configuration of purchased software services, restructuring costs, and other
specific adjusting items.
Unaudited statement of net assets relating to Ricardo Defense as at 30 June As at 30 June 2024
2024
£ million
ASSETS
Non-current assets
Goodwill 3.5
Other intangible assets 2.9
Property, plant and equipment 1.3
Right-of-use assets 1.2
8.9
Current assets
Inventories 9.4
Trade, contract and other receivables 9.4
Cash and cash equivalents 1.8
20.6
Total assets 29.5
LIABILITIES
Current liabilities
Borrowings -
Lease liabilities 0.4
Trade, contract and other payables 8.3
Current tax liabilities 0.3
9.0
Net current assets 11.6
Non-current liabilities
Lease liabilities 0.8
0.8
Total liabilities 9.8
Net assets 19.7
Notes:
(1) The statement of net assets presented above is unaudited and has been
extracted without material adjustment from the consolidation schedules and
supporting accounting records that underlie the audited consolidated financial
statements of the Group for the year ended 30 June 2024.
(2) Intercompany balances between Ricardo Defense and the Group (as
continuing) have been eliminated within the statements of net assets presented
above.
Appendix 3
OTHER INFORMATION
PART A - Risk factors
This Part A (Risk Factors) addresses the risks known to the Group and the
Directors which are material risk factors to the Disposal, will be material
new risk factors to the Continuing Group as a result of the Disposal, or are
existing material risk factors to the Group which will be impacted by the
Disposal. The information given is as of the date of this announcement and,
except as required by any applicable law, rules or regulations, will not be
updated. Shareholders should carefully consider the risks and uncertainties
described below, together with all other information contained in this
announcement. The risks described below are not set out in any order of
priority, assumed or otherwise.
Additional risks and uncertainties currently unknown to the Group and the
Directors, or which the Group and the Directors currently deem immaterial or
deem material to the Group, but which will not result from or be impacted by
the Disposal, may also have an adverse effect on the business, financial
condition, operating results or prospects of the Continuing Group. In such
cases, the market price of the Ordinary Shares may decline, and investors may
lose all or part of their investment.
Risks relating to the proposed Disposal
The proposed Disposal may be delayed or may not proceed to Completion
Completion is subject to, amongst other things, as per Appendix 1 paragraph
(4). Whilst the Seller and the Buyer have obligations in relation to the
satisfaction of these conditions to the Disposal, there can be no assurance
that they will be obtained, nor any guarantee that the Buyer will be able to
pay the cash consideration amount on Completion. The Disposal may, therefore,
be delayed or not complete at all. Completion is also subject to the Seller
and the Buyer having delivered certain deliverables prior to or on the date of
Completion. Any failure on the part of the Seller and/or the Buyer to comply
with any of the aforementioned obligations could result in the Disposal being
delayed or not completing at all.
Having considered a range of options as part of the Company's strategic
review, the Directors believe that the Disposal currently provides the best
opportunity to maximise value for Shareholders and realise an attractive and
certain value for the Ricardo Defense Business. There can be no guarantee of
another transaction involving the Ricardo Defense Business on terms more
favourable than, or equivalent to, the Disposal.
The net proceeds from the Disposal will be used to satisfy all of the
aggregate consideration for the Acquisition (assuming it proceeds). As a
result, completion of the Acquisition is conditional upon the Disposal
Completion. Accordingly, in the event the Disposal does not complete in
accordance with its terms, the Acquisition will not be completed
If the Disposal does not proceed to Completion, the reputation of the Company
and/or the Ricardo Defense Business may be adversely impacted as a result of
media attention in connection with the attempted Disposal. This could, in
turn, have a material adverse effect on the business, financial condition,
operating results or prospects of the Group, as well as the market price of
the Ordinary Shares.
If the Disposal does not complete, the Group would forfeit the benefits of the
sale proceeds, forfeit the benefits of the Acquisition and incur transaction
costs
If the Disposal does not complete, the Group will not receive the cash
proceeds from, nor realise any of the potential benefits of, the Disposal. In
such circumstances, the transaction and other costs incurred by the Group in
connection with the Disposal (including the costs of negotiating the Ricardo
Defense Equity Purchase Agreement as well as the costs associated with the
aborted Acquisition) would not be offset by such cash proceeds. This would
then result in the Group having higher leverage and, therefore, potentially
having less financial headroom in executing its strategy.
Furthermore, the Company's ability to deliver Shareholder value may be
prejudiced such that (i) the Company will not be able to deploy the proceeds
from the Disposal and as a result the Acquisition will not complete and (ii)
it may impact the perceived value of the Ricardo Defense Business to
investors. This could have a material adverse effect on the business,
financial condition, operating results or prospects of the Group, as well as
the market price of the Ordinary Shares.
The Continuing Group may incur liability under the Ricardo Defense Equity
Purchase Agreement
The Ricardo Defense Equity Purchase Agreement contains customary warranties,
indemnities and other contractual protections given by the Seller in favour of
the Buyer, with representations and warranties provided in respect of Ricardo
Defense Business. The Buyer has obtained insurance in respect of the
representations and warranties under the Ricardo Defense Equity Purchase
Agreement, and this is the Buyer's sole recourse for breach of the
representations and warranties under the Equity Purchase Agreement other than
in the case of fraud.
There is also the potential for other claims to be made against the Seller
under the Ricardo Defense Equity Purchase Agreement, including in respect of a
breach of contract claim or, breach of confidentiality claim or a claim under
the commercial indemnities.
Any liability to make a payment arising from a successful claim by the Buyer
under any of the relevant provisions of the Ricardo Defense Equity Purchase
Agreement would reduce the Net Disposal Proceeds and could have an adverse
effect on the business, financial condition, cash flow or prospects of the
Group.
Material new risks relating to the Continuing Group which result from or are
impacted by the Proposed Disposal
The Disposal involves a material change to the Group's business. The
Continuing Group will be less diversified following completion and its revenue
stream will be reduced, which may be less attractive to investors following
Completion. The Continuing Group will be more susceptible to adverse
developments in the segments where the Group continues to operate, in
particular Environment and Energy Transitions. In addition, the Group will no
longer have the benefit of the revenue stream from the Ricardo Defense
Business, resulting in greater exposure to the cyclical nature of its other
portfolio segments. A material change in the trading, operations or outlook of
the Environment and Energy Transitions portfolio may have an adverse effect on
the business, financial condition, operating results or prospects of the
Continuing Group.
This could have a significant impact on the Company's share price and may mean
that the Company is less attractive to investors. This could also result in
the Company being more vulnerable to a takeover approach, which may have
adverse consequences for Shareholders (whether by reason of resulting share
price fluctuation or a change in ownership of the Company on terms
unfavourable or potentially unfavourable to existing Shareholders).
The Proposed Disposal may have a disruptive effect on the Group
The Disposal has required, and will continue to require, substantial amounts
of time and focus from the management team and employees of the Company and
the central functions of the Group which could otherwise be spent operating
the Group's business in the ordinary course. Key managers and employees may
become distracted by the Disposal and, accordingly, decision-making by the
Company may be delayed, deferred or otherwise impacted. This disruption could
be prolonged if the Disposal does not proceed to Completion. The circumstances
described above may have an adverse effect on the business, financial
condition, operating results or prospects of the Group
Existing material risks to the Group that will be impacted by the Disposal
The Group may not be able to realise its strategy
There is no certainty, and no representation or warranty is given by any
person that the Group will be able to achieve its strategy. The Group's
strategy to transition its portfolio to focus on the Group's core consulting
services is acquisition-led. An inability by the Group to identify suitable
target entities or to execute such transactions would negatively impact this
strategy and may have an adverse effect on the business, financial condition,
operating results or prospects of the Group.
The market price of Ordinary Shares may fluctuate on the basis of market
sentiment surrounding the Disposal
The value of an investment in the Ordinary Shares may go down as well as up
and can be highly volatile. The price at which the Ordinary Shares may be
quoted, the price which investors may realise for their Ordinary Shares and
general liquidity in the market for the Ordinary Shares will be influenced by
a large number of factors, some specific to the Continuing Group and its
operations and some which may affect the industry, markets and segments in
which the Group operates as a whole, other comparable companies or publicly
traded companies as a whole. The sentiment of the stock market (both over the
long and short-term) regarding the Disposal is one such factor which could
lead to the market price of the Ordinary Shares going up or down as well as
impacting liquidity in the Ordinary Shares. The other factors that may affect
the Group's share price include, but are not limited to, (a) actual or
anticipated fluctuations in the financial performance of the Continuing Group
or its competitors, (b) market fluctuations, (c) legislative or regulatory
changes in the markets and segments in which the Continuing Group operates,
and (d) the fluctuation in national and global political, economic and
financial conditions (including the Ukraine-Russia conflict and the Middle
East conflict).
PART B - Material contracts
Continuing Group
The following is a summary of each contract (not being a contract entered into
in the ordinary course of business) to which the Company or any other member
of the Continuing Group is or has been a party: (i) within the two years
immediately preceding the date of this announcement which is, or may be,
material; or (ii) at any time, which contains provisions under which any
member of the Continuing Group has any obligation or entitlement which is
material to the Continuing Group as at the date of this announcement:
1. Ricardo Defense Equity Purchase Agreement
A summary of the principal terms of the Ricardo Defense Equity Purchase
Agreement is set out in Appendix 1 (Principal Terms of the Acquisition) to
this announcement.
2. Transitional Services Agreement
A summary of the principal terms of the Transitional Services Agreement is set
out in Appendix 1 (Principal Terms of the Acquisition) to this announcement.
3. Sale and Purchase Deed for the Aither acquisition
On 10 March 2023, Ricardo plc entered into a share purchase deed with the
Fargher Aither Family Trust and the Olszak Aither Family Trust to purchase 90
per cent. of Aither Pty Ltd.("Aither") a leading Australian consultancy in
water and natural resources (the "Aither SPA") The first tranche of the Aither
acquisition completed on 13 March 2023. Under the Aither SPA, the initial
consideration paid at completion was £9 million, with the total cash
consideration being up to £17 million. Since completion of the Aither
acquisition, 90 per cent. of this additional consideration has been paid with
a further 10 per cent. to follow, (subject to EBITDA performance).
4. Sale and Purchase Agreement for the E3 Modelling acquisition
On 24 January 2023, Ricardo Investments Limited entered into a share purchase
agreement with Mr. Pantelis Capros and Mr. Leonidas Paroussos to purchase a 93
per cent. shareholdings of E3-Modelling S.A. ("E3 Modelling"), a consultancy
specialising in delivering advanced empirical modelling of the
energy-economy-environment nexus (the "E3 Modelling SPA"). The E3 Modelling
acquisition completed on 24 January 2023. Under the E3 Modelling SPA, the
initial consideration paid at completion was £19 million which could increase
by a further £5 million based on the business achieving certain performance
targets for the 12 months ending 31 December 2023 and the retention of key
management. Since completion of the E3 Modelling acquisition, 100 per cent. of
this additional consideration has been paid.
5. Acquisition of E3 Advisory
On the 16 December 2024, Ricardo signed an agreement to acquire 85 percent of
E3 Advisory for an aggregate consideration of approximately AUD $101.4
million. Ricardo expects to purchase the remaining 15% of E3 Advisory by
January 2028. Net disposal proceeds from Ricardo Defense, fund all the cash
consideration for the purchase of the initial 85 per cent holding and other
associated acquisition costs.
Ricardo Defense
No contracts (other than contracts entered into in the ordinary course of
business) have been entered into by the Ricardo Defense Business: (i) within
the period of two years immediately preceding the date of this announcement,
which are or may be material to the Ricardo Defense Business; or (ii) at any
time, which contain any provisions under which the Ricardo Defense Business
has any obligation or entitlement which is, or may be, material to the Ricardo
Defense Business as at the date of this announcement.
PART C - Legal or arbitration proceedings
Continuing Group
There are no governmental, legal or arbitration proceedings (including any
such proceedings which are pending or threatened of which the Group is aware)
during a period covering at least the previous 12 months preceding the date of
this announcement which may have, or have had in the recent past, a
significant effect on the Continuing Group's financial position or
profitability.
Ricardo Defense
There are no governmental, legal or arbitration proceedings (including any
such proceedings which are pending or threatened of which the Company is
aware) during a period covering at least the previous 12 months preceding the
date of this announcement which may have, or have had in the recent past, a
significant effect on the Ricardo Defense Business' financial position or
profitability.
PART D - Significant Change
Group
There has been no significant change in the financial position or financial
performance of the Continuing Group since 30 June 2024, being the end of the
last financial period for which financial information has been published.
Ricardo Defense
There has been no significant change in the financial position or financial
performance of the Ricardo Defense Business since 30 June 2024, being the end
of the last financial period for which the Ricardo Defense Business' financial
information has been published
PART E - Related Party Transactions
Other than those matters disclosed previously in the published Annual Report
and Accounts of Ricardo and/or otherwise disclosed in this announcement
(including its Appendices), there were no related party transactions entered
into by Ricardo during the period since 30 June 2024.
Appendix 4
DEFINITIONS
The following definitions apply in this announcement unless the context
otherwise requires:
"ABS" Antilock Brake System
"Acquisition" the purchase of all of the issued ordinary share capital from the ordinary
shareholders of E3 Advisory by Ricardo Australia announced on 16 December 2024
"Acquisition Announcement" the announcement by the Company of the Acquisition on 16 December 2024
"Board" the board of directors of the Company
"Buyer" GPD Acquisition Inc.
"Company" Ricardo plc
"Completion" the completion of the Disposal
"Companies Act" Companies Act 2006, as amended from time to time
"Continuing Group" the Group following Completion
"Directors" the directors of the Company and "Director" means any one of them
"Disposal" the proposed sale of the Ricardo Defense Business to the Buyer on the terms
and subject to the conditions set out in the Ricardo Defense Equity Purchase
Agreement
"FCA" the Financial Conduct Authority
"IFRS" as applicable, either (i) International Financial Reporting Standards as
adopted by the European Union for financial years beginning before 1 January
2021, or (ii) United Kingdom adopted international accounting standards for
financial years beginning on or after 1 January 2021
"Ricardo" or the "Group" the Company and its subsidiary undertakings from time to time
"Seller" Ricardo Investments Limited
"Ricardo Defense Business" Ricardo US Holdings LLC and its subsidiary undertakings
"Ricardo Defense Equity Purchase Agreement" the sale and purchase agreement between the Company and the Buyer as described
in Appendix 1 of this announcement
"UKLR" the UK Listing Rules
"US$" the lawful currency of the United States
Important Notice
This announcement has been issued by, and is the sole responsibility of
Ricardo plc.
This announcement contains inside information as defined under assimilated
Regulation (EU) No. 596/2014 which is part of the laws of the United Kingdom
by virtue of the European Union (Withdrawal) Act 2018 (as amended). The person
responsible for arranging the release of this announcement on behalf of
Ricardo is Harpreet Sagoo (Company Secretary).
No representation or warranty, express or implied, is or will be made by, or
in relation to, and no responsibility or liability is or will be accepted by
any adviser to, the Company or by any of their respective affiliates or agents
as to or in relation to the accuracy or completeness of this announcement or
any other written or oral information made available to or publicly available
to any interested party or its advisers, and any responsibility or liability
therefore is expressly disclaimed.
The contents of this announcement do not constitute or form part of an offer
of or invitation to sell or issue or any solicitation of any offer to purchase
or subscribe for any securities for sale in any jurisdiction nor shall they
(or any part of them) or the fact of their distribution form the basis of, or
be relied upon in connection with, or act as an inducement to enter into, any
contract or commitment to do so.
Neither the content of the Company's website nor any website accessible by
hyperlinks on the Company's website is incorporated in, or forms part of, this
announcement.
This announcement includes statements that are, or may be deemed to be,
forward-looking statements, beliefs or opinions, including statements with
respect to the Company's business, financial condition and results of
operations. These forward-looking statements can be identified by the use of
forward-looking terminology, including the terms "believes", "estimates",
"plans", "anticipates", "targets", "aims", "continues", "expects", "intends",
"hopes", "may", "will", "would", "could" or "should" or, in each case, their
negative or other various or comparable terminology. These statements are
made by the Company's directors in good faith based on the information
available to them at the date of this announcement and reflect the Company's
directors' beliefs and expectations. By their nature these statements
involve risk and uncertainty because they relate to events and depend on
circumstances that may or may not occur in the future. A number of factors
could cause actual results and developments to differ materially from those
expressed or implied by the forward-looking statements. No representation or
warranty is made that any of these statements or forecasts will come to pass
or that any forecast results will be achieved. Forward-looking statements
speak only as at the date of this announcement and the Company and its
advisers expressly disclaim any obligations or undertaking to release any
update of, or revisions to, any forward-looking statements in this
announcement. As a result, you are cautioned not to place any undue reliance
on such forward-looking statements.
No statement in this announcement is intended as a profit forecast or a profit
estimate for any period and no statement in this announcement should be
interpreted to mean that earnings, earnings per share of Ricardo, income or
cash flow for Ricardo, the Continuing Group, or the Ricardo Defense Business
(as appropriate) for the current or future financial years would necessarily
match or exceed the historical published earnings, earnings per share of
Ricardo, income or cash flow for Ricardo, the Continuing Group, or the Ricardo
Defense Business (as appropriate).
Certain figures included in this announcement have been subjected to rounding
adjustments.
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