REG - Ricardo PLC - Strategy Update

RicardoAnnouncement

28/03/2025 07:15

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RNS Number : 5954C  Ricardo PLC  28 March 2025

FOR IMMEDIATE RELEASE

28 March 2025

 

Ricardo plc ("Ricardo" or the "Company")

Strategy Update

 

Introduction

The Board of Ricardo (the "Board") notes that Science Group plc ("Science
Group") has continued to build its stake in the Company and currently holds
shares representing approximately 16.2% of Ricardo's entire issued share
capital.

Since it became a shareholder, Science Group has levelled a number of
criticisms at the Board and management of the Company and threatened to
requisition a general meeting to make a number of changes to the Board. In
particular, Science Group has demanded the removal of Ricardo's Chairman. It
is the Board's understanding that, if this demand is met, Science Group will
seek to replace him with the Executive Chairman of Science Group. This would
give Science Group effective control of the Board without paying a premium for
that control.

The Board believes Science Group's actions are being taken solely for the
benefit of Science Group and its own shareholders and are contrary to the
interests of Ricardo's other shareholders. Accordingly, the Board has informed
Science Group that, having met to consider its demand that the Chairman be
replaced, the remaining Non-Executive directors of Ricardo have resolved
unanimously to reject it. The Board directors continue to fully support and
have confidence in Mark Clare as Chairman.

Science Group's stake building in Ricardo has come at a time when the Company
has been facing significant market headwinds which have impacted its
short-term financial performance and share price, with delays in government
budgetary allocations as a result of the unprecedented level of election
activity around the world in 2024 and geo-political uncertainty impacting
environmental and energy transition agendas. Indeed, Science Group itself,
while present in different areas of the market, recently reported a (11)%
decrease in its consulting revenues for the year to 31 December 2024.

Against this background, the Board considers it is appropriate to set out some
context as to why it believes that the Company is delivering good progress
against its strategy to transform the portfolio and improve performance in
order to deliver significant value creation for all Ricardo shareholders.

Portfolio transformation

In 2022, Ricardo announced a revised strategy to refocus the Company and
reinforce its competitive differentiation, shifting its portfolio from
mobility services towards environmental and energy transition solutions which
are supported by long term resilient markets.

The Company has made good progress in implementing this strategy and driving
the transformation of Ricardo's portfolio, including:

·     The successful divestment of the Defense operating segment in 2024
after having secured a major $385m US Army contract renewal in 2023, thereby
generating an attractive price for Ricardo shareholders;

·     Redeployment of the Defense sale proceeds into the acquisition of E3
Advisory Pty Ltd ("E3A"), a high growth and high margin business which has
increased the Company's consulting capabilities in energy and infrastructure
markets; and

·      The successful completion and integration of three further
acquisitions within the environmental and energy transition consulting
industry which, together with E3A, have each been completed at attractive
valuation multiples.

The Company's Energy & Environment segment today is well positioned to
drive long-term sustainable growth through its expertise across areas
including energy decarbonisation and climate change. The business has a strong
order book and delivers attractive mid-teens operating margins.

In Rail, the Company has taken actions to enhance its exposure to key growth
geographies in the US and Asia. The business today has a strong orderbook
after record order intake in H1 2024/25 and consistently generates double
digit operating margins.

As a result, on a pro forma basis, Ricardo's Environmental and Energy
Transition portfolio today accounts for approximately 85% of the Company's
operating profits (pre unallocated central costs).

Strategic development of other businesses

The Board also remains focused on enhancing the value of its broader portfolio
and continues to see positive results from its strategic actions. Notable
examples include:

·     In Performance Products, the new multi-year marine framework
programme, the largest single framework agreement in Ricardo's history, will
drive growth and diversify the segment's sector exposure over the medium term.
In addition, the business has secured major programme wins in its
high-performance automotive activities, including a six-year extension of a
driveline contract with a leading European OEM. Together these major
programmes underpin the future performance of the business; and

·     In Automotive & Industrial, restructuring actions have been taken
to return the business to profitability. The business is also successfully
diversifying its exposure to broader industrial end markets such as aerospace
& defence, marine and stationary power.

Actions to improve financial performance

Ricardo has been working to improve its financial performance against the
background of challenging market conditions. Recent highlights include:

·     Delivering strong order intake of £221m in H1 2024/25 on the back
of multi-year wins (up 11% on H1 2023/24). Energy & Environment and Rail
both delivered record order intake in H1 2024/25, with their strong order
books underpinning confidence in their near and medium term performance;

·     Improvement in underlying operating profit in H1 2024/25 to £8.3m
(a very significant increase on H1 2023/24 performance of £1.0m), driven by
higher margins and ongoing focus on costs to underpin profitability; and

·     Progressing the centralisation of enabling functions, which is
driving material efficiencies in indirect costs.

Business and strategy update

The Board believes it is important to ensure that its shareholders have a full
understanding of the actions that are being undertaken to drive performance.
Therefore, Ricardo announces that it plans to provide a further update on its
financial performance and strategic initiatives to the market in mid-April
2025 (the "Business and Strategy Update").

The Business and Strategy Update will focus on the following key areas:

·      YTD 2024/25 trading and outlook;

·    Actions the Company is taking to further reduce costs and improve
cash generation in the near and medium term; and

·      Greater detail on the Company's plans to focus on environmental
and energy transition solutions.

The Company confirms it continues to trade in line with the Board's
expectations.

Mark Clare, Chair of Ricardo, said:

"The Board has confidence in Ricardo's business and strategy and looks forward
to providing an update to our shareholders in mid-April, setting out a clear
path to significant value creation for the benefit of all shareholders."

 

 Investor and media relations
 Ricardo plc  Graham Ritchie    Tel 01273 455 611

              Judith Cottrell   Investors@ricardo.com (mailto:Investors@ricardo.com)

              Natasha Perfect
 SEC Newgate  Bob Huxford       Tel 020 757 6882

              Ian Silvera       Ricardo@secnewgate.co.uk (mailto:Ricardo@secnewgate.co.uk)

This announcement has been issued by, and is the sole responsibility of
Ricardo plc.

The person responsible for arranging the release of this announcement on
behalf of Ricardo is Harpreet Sagoo (Group General Counsel and Company
Secretary).

 

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 (http://www.ricardo.com) .

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