REG - Ricardo PLC - Interim Results
24/02/2022 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20220224:nRSX6264Ca&default-theme=true
RNS Number : 6264C Ricardo PLC 24 February 2022
24 February 2022
This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law
by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is
disclosed in accordance with the Company's obligations under Article 17 of
MAR.
Ricardo plc
Interim Report for the six months ended 31 December 2021 ("HY 2021/22")
Strong order intake up 16% compared to HY 2020/21 and underlying operating
cash conversion of 162%, providing good momentum for the second half
HIGHLIGHTS
· Overall trading in line with the Board's expectations
· Strong order intake of £210.6m, a 16% increase driven by
accelerating environmental trends across all segments
· Revenue up 13% at £185.5m with improved performance in all segments
at constant currency
· Good order intake and revenue growth in A&I signalling inflection
point towards sustainable profitability
· Underlying operating profit up 42% at £10.5m
· Strong underlying operating cash conversion of 162%
· Net debt reduction to £38.5m creating opportunities to invest for
growth
· Interim dividend of 2.91p declared
Reference HY 2021/22 HY 2020/21 Growth/(decline)
Order intake £m 210.6 181.1 16 %
Order book £m 315.5 318.2 (1) %
Revenue £m 185.5 164.7 13 %
Underlying (2)
- Operating profit margin % 5.7 4.5 1.2 pp
- Profit before tax £m 8.7 5.0 74 %
- Basic earnings per share (3) p 10.6 6.8 56 %
Statutory
- Operating profit margin % 3.5 0.2 3.3 pp
- Profit/(loss) before tax £m 4.7 (2.1) 324 %
- Basic earnings/(loss) per share p 5.6 (2.7) 307 %
Underlying cash conversion (2) & (4) % 161.9 100.0 61.9 pp
Cash conversion (4) % 167.6 100.0 67.6 pp
Net debt (5) £m (38.5) (50.4) 24 %
Dividend per share (declared and paid) p 2.91 1.75 66 %
Headcount (6) no. 2,869 2,878 - %
References are defined in the glossary of terms below.
Commenting on the results, Graham Ritchie, Chief Executive Officer, said:
"Our half-year results are in line with our expectations, and I would like to
thank my colleagues for their continued focus during my transition into the
Group. Our strong order intake is particularly encouraging and is driven by
increasing demand for services in respect of energy transition, climate change
and decarbonisation. We have also seen strong cash generation in the first
half that will create opportunity to invest in our key target segments to
deliver sustainable growth.
"The Group enters the second half of the year with a good level of orders and
pipeline of opportunities and solid momentum in all segments. As we enter
our seasonally stronger second half, whilst some economic uncertainty remains,
we are cautiously optimistic to deliver on our full year expectations for
revenue and underlying PBT. Following strong net debt improvement in the first
half we would expect a further small improvement by year-end.
"We look forward to the capital-markets event planned for late spring, where
we will set out our strategic plans for future profitable growth."
About Ricardo plc
Ricardo plc is a world-class environmental, engineering and strategic
consulting company listed on the London Stock Exchange. With over 100 years of
engineering excellence, we provide exceptional levels of expertise in
delivering leading edge and innovative cross sector sustainable products and
solutions, helping our global customers increase efficiencies, achieve growth
and create a cleaner and safer future. Our mission is clear - to create a
world fit for the future.
For more information visit www.ricardo.com.
Analyst and investor presentation
There will be a presentation for analysts relating to the Group's interim
results for the six months ended 31 December 2021 at 9:30am on Thursday 24
February 2022. A recording of the presentation will be available online to all
investors from Thursday 24 February 2022 at
https://ricardo.com/investors/financial-reporting/results-presentations.
Further enquiries:
Ricardo plc
Ian Gibson, Chief Financial Officer Tel: 01273 455611
Natasha Perfect, Group Marketing and Communications Website: www.ricardo.com
SEC Newgate Tel: 020 7680 6882
Elisabeth Cowell / Isabelle Smurfit E-mail: 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) Defense refers to our US-based segment which provides services to
the US defence market.
(2) Underlying measures exclude the impact on statutory measures of
specific adjusting items as set out in Note 8. Underlying measures are
considered to provide a more useful indication of underlying performance and
trends over time.
(3) Underlying earnings also exclude a tax credit to statutory earnings of
£0.9m (HY 2020/21: £1.8m) for the specific adjusting items in Note 8.
(4) 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.
(5) Net debt, as set out in Note 12, 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.
(6) Headcount is calculated as the number of employees on the payroll at
the reporting date and includes subcontractors on a full-time equivalent
basis.
(7) 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. In the prior reporting
period, constant currency results were calculated by translating the result
for the current period using foreign currency exchange rates applicable to the
prior period. Using current period rates to restate prior period results is
considered to provide a more useful comparison, since current period
performance remains stated at actual rates. See also Note 4.
Trading summary
The Group has performed in line with the Board's expectations for the six
months to 31 December 2021 ('HY 2021/22'), delivering revenue of £185.5m, 13%
up on the prior period ('HY 2020/21'). Underlying operating profit was £10.5m
and underlying profit before tax was £8.7m, growth of 42% and 74% on the
prior period, respectively. On a reported basis, operating profit was £6.5m
(HY 2020/21: £0.3m) and profit before tax was £4.7m (HY 2020/21: loss of
£2.1m). The results reflect a continuation of the positive momentum seen in
the second half of the prior year.
Headline trading performance
Underlying((2)) Reported
Revenue Operating profit Profit before tax Operating profit Profit/(loss) before tax
HY 2021/22 (£m) 185.5 10.5 8.7 6.5 4.7
HY 2020/21 (£m) 164.7 7.4 5.0 0.3 (2.1)
Growth (%) 13 42 74 2,067 324
HY 2020/21 (£m) at current period exchange rates 162.2 7.3 4.9 0.4 (2.0)
Constant currency((7)) growth (%) 14 44 78 1,525 335
References in superscript are defined in the glossary of terms.
On a constant currency basis revenue increased by £23.3m (14%) compared to HY
2020/21. Similarly, on a constant currency basis, underlying operating profit
and profit before tax increased by £3.2m (44%) and £3.8m (78%),
respectively.
Energy & Environment ('EE'), Rail, Defense and Performance Products ('PP')
all met or exceeded the Board's expectations in terms of underlying operating
profit. Performance in Automotive & Industrial ('A&I') continues to be
challenging, due to the impact of the slow recovery from COVID-19 and
customers' supply chain issues, although we are seeing improved momentum, with
an increase in order intake and revenue, resulting in a reduced loss compared
to the prior period. The segmental results are discussed in more detail in the
Operating segments review below.
Net debt was £38.5m at 31 December 2021, a reduction of £8.4m on the 30 June
2021 position of £46.9m. This improvement reflects a strong working capital
performance. Working capital reduced by £13.0m in the period and the Group
generated an underlying cash inflow of £15.6m, excluding restructuring costs
and acquisition-related payments.
Order intake up 16% on HY 2020/21 with closing order book of £315.5m
Order intake of £210.6m represents a 16% increase on the prior period. Across
the segments, order intake increased by 37% in EE due to increased demand for
climate and environment related services. Rail order intake was 6% lower than
the prior period due to the timing of large project wins and foreign exchange.
In A&I, order intake increased by 30% compared to the prior period,
reflecting the increasing activity in the sector, with increased order intake
in new mobility solutions. Defense order intake reduced by 27%, reflecting the
timing of Anti-lock braking systems/electronic stability control ('ABS/ESC')
orders and the recognition of the multi-year Infantry Squad Vehicle ('ISV')
programme in the prior period. PP order intake increased by 36%, driven by an
increase in orders on key ongoing client programmes combined with securing a
new multi-year follow on transmission order.
Revenue up 13% on HY 2020/21
Revenue has grown across all the Group's segments, with the exception of Rail,
which saw a small decline compared to the prior period. On a constant currency
basis, revenue grew across all the segments. EE continued its strong growth
trajectory, with revenue increasing by 16%, driven by increased levels of work
supporting international governments with climate commitments and private
sector clients with their decarbonisation strategies. Defense revenue
increased by 55% as it delivered increased volumes of ABS/ESC kits and
engineering services work. Higher engine and transmission volumes, together
with industrial engineering work, increased PP revenue by 17%. A&I revenue
increased by 8% overall, driven by growth in the EMEA and North America
regions. Revenue reduced by 3% in Rail, due to foreign exchange movements (on
a constant currency basis Rail revenue increased by 1%) and lower levels of
work in Australia, partially offset by growth in consulting work in the
Netherlands, the UK and Asia.
Underlying operating profit up 42% on HY 2020/21, with reported operating
profit of £6.5m (HY 2020/21: £0.3m)
Underlying operating profit, which excludes specific adjusting items,
increased by 42% to £10.5m (HY 2020/21: £7.4m). The Group's underlying
operating profit margin increased to 5.7% from 4.5%. Underlying operating
profit increased by 13% in EE, with an underlying operating profit margin of
13.9% (HY 2020/21: 14.3%), driven by the increased volume of work. Underlying
operating profit in Rail improved from £3.5m in HY 2020/21 to £3.8m in HY
2021/22 due to improved levels of utilisation (margin improved from 9.1% to
10.2%). Defense underlying operating profit increased by 65%, from £1.7m to
£2.8m (margin increased from 12.2% to 13.0%) due to the combination of the
increased ABS/ESC volumes and engineering work. PP underlying operating profit
was stable at £3.9m, with margin reducing from 11.0% to 9.4%, as PP
benefitted from higher engine pricing in the prior period.
Reported operating profit increased from £0.3m to £6.5m. The Group
recognised costs of £4.0m (HY 2020/21: £7.1m) in respect of specific
adjusting items relating to the amortisation of acquired intangible assets,
external project costs and the recognition of costs in relation to the
implementation of a new cloud-based ERP system in PP. Specific adjusting items
in the prior period also included restructuring actions in the A&I
segment. Specific adjusting items are discussed in more detail below.
Underlying profit before tax up 74% on HY 2020/21, with reported profit before
tax of £4.7m (HY 2020/21: loss of £2.1m)
Underlying profit before tax increased by 74% to £8.7m (HY 2020/21: £5.0m),
driven by the improvement in underlying operating profit.
As noted above, HY 2021/22 reported profit before tax includes £4.0m of costs
relating to specific adjusting items (HY 2020/21: £7.1m), discussed in more
detail below.
Net debt down 18% to £38.5m (FY 2020/21: £46.9m)
Closing net debt was £38.5m (FY 2020/21: £46.9m). The Group had a net cash
inflow for the period of £8.4m.
The Group paid acquisition-related earn out and retention costs of £4.9m in
respect of acquisitions made in prior years, external project fees of £0.5m,
and reorganisation costs, in respect of actions provided for at the end of FY
2020/21, of £1.8m. Excluding these specific adjusting items, the Group
generated £15.6m of cash, which was achieved through a continuing strong
focus on working capital, which reduced by £13.0m on an underlying basis. The
composition of net debt is defined in Note 12.
Specific adjusting items
As set out in more detail in Note 8, the Group's underlying profit before tax
excludes £4.0m of costs incurred during the period that have been charged to
the income statement as specific adjusting items (HY 2020/21: £7.1m).
HY 2021/22 HY 2020/21
£m £m £m £m
Underlying((2)) profit before tax 8.7 5.0
Amortisation of acquired intangibles (2.2) (2.8)
Acquisition-related expenditure (1.1) (1.1)
ERP system implementation costs (0.5) -
Reorganisation costs
- A&I US - change in fair value of contingent consideration (0.3) (0.1)
- A&I EMEA - reorganisation costs 0.1 (1.5)
- A&I US - DTC purchase and impairment - (1.5)
Total reorganisation costs (0.2) (3.1)
GMP equalisation - (0.1)
Reported profit/(loss) before tax 4.7 (2.1)
References in superscript are defined in the glossary of terms
Amortisation of acquired intangibles was £2.2m in the period, compared to
£2.8m in HY 2020/21, with the reduction reflecting the end of the
amortisation of intangible assets acquired as part of the purchase of AEA Ltd
in 2012.
Acquisition-related costs of £1.1m were incurred in the period. These
represent external fees in respect of certain strategic projects. Costs in the
prior period reflect earn-out and deferred compensation payments for Transport
Engineering Pty Ltd (renamed Ricardo Rail Australia, or 'RRA') and PLC
Consulting Pty Ltd (renamed Ricardo Energy, Environment and Planning, or
'REEP'), which were acquired in May 2019 and July 2019 respectively.
ERP system implementation costs: Due to the result of guidance being issued
following a recent IFRS Interpretations Committee ('IFRIC') decision, £0.5m
of external costs incurred in FY 2020/21 in relation to the implementation of
a new cloud-based ERP system within the PP operating segment have been
expensed in the period. These costs were previously capitalised in line with
prevailing practice at the time the costs were incurred. They have been
classified as a specific adjusting item as they are not reflective of the
underlying performance of the business in the period.
Reorganisation costs: A charge of £0.3m was recognised in the period in
respect of a reduction in the fair value of contingent consideration arising
on the sale of the US engine test business, located at the Detroit Technology
Campus ('DTC') site (HY 2020/21: charge of £0.1m). The business was sold in
June 2020. The reduction in the fair value reflects lower levels of
traditional engine testing work than originally forecast at the time the
business was sold.
£1.5m of reorganisation costs were incurred in the A&I EMEA business in
the prior period, due to headcount reductions which were made due to the
impact of COVID-19 on the level of short-term workable orders in the business.
Further actions were taken in the second half of FY 2020/21. A credit of
£0.1m has been recognised in the current period, reflecting the difference
between actual costs incurred in HY 2021/22 and the reorganisation provisions
made at 30 June 2021.
A charge of £1.5m was taken in the prior period to reflect a reduction in the
fair value of the South office building of DTC, which was held-for-sale at 31
December 2020. In January 2021, management decided to continue to use the
building as offers received for the property were lower than expected. As a
result, it is not currently classified as held-for-sale.
Guaranteed Minimum Pensions ('GMP') equalisation: in the prior period, a
charge of £0.1m was incurred in order to equalise male and female members'
benefits for the effect of for historical transfers out of the Group's defined
benefit pension scheme.
Research and Development ('R&D') and capital investment
The Group continues to invest in R&D and spent £6.1m (HY 2020/21: £5.0m)
before government grant income of £1.2m (HY 2020/21: £0.4m). Development
costs capitalised in this period were £3.5m (HY 2020/21: £3.5m), reflecting
continued investment in software products in the PP segment, together with
technology, tools and processes in the A&I and EE segments. Developments
in the A&I segment have focused on the electric vehicle and alternative
fuel spaces.
Capital expenditure on property, plant and equipment, excluding right-of-use
assets, was £2.6m (HY 2020/21: £2.2m), reflecting targeted investment in our
business operations, including hydrogen and electrical test capability in our
A&I EMEA business.
Net finance costs
Finance income was £0.2m (HY 2020/21: £0.3m) and finance costs were £2.0m
(HY 2020/21: £2.7m) for the year, giving net finance costs of £1.8m (HY
2020/21: £2.4m). The reduction in costs reflects a reduction in the bank loan
balance, as well as a reduction in the applicable interest rates as a result
of improved leverage.
Taxation
The underlying effective tax rate was 24.4% for the period (HY 2020/21:
23.7%). The reported effective tax rate was 25.9% (HY 2020/2: 27.1%). The
underlying rate is in line with the prior period.
Earnings per share
Basic earnings per share was 5.6p (HY 2020/21: loss per share of 2.7p). 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 for the year was 10.6p (HY 2020/21: 6.8p). The calculation
of basic earnings per share, with a reconciliation to an underlying basic
earnings per share, which excludes the impact (net of tax) of specific
adjusting items, is disclosed in Note 9.
Dividend
As set out in more detail in Note 10, the Board has declared an interim
dividend of 2.91p per share (HY 2020/21: 1.75p), which reflects the Board's
desire to increase the return to shareholders as the Group continues to
recover from the impact of COVID-19. The dividend will be paid gross on 8
April 2022 to holders of ordinary shares on the Company's register of members
on 11 March 2022.
Banking facilities
Net debt at 31 December 2021 comprised cash and cash equivalents of £56.8m,
and borrowing and overdrafts, including hire purchase liabilities and net of
capitalised debt issuance costs, of £95.3m.
The Revolving Credit Facility ('RCF') of £200m continues to provide the Group
with committed funding available for the remaining term through to July 2023,
alongside the Group's uncommitted overdraft facilities of £16m. At 31
December 2021, the amount undrawn on the RCF was £113m and the Group held net
liquid cash reserves of £56.8m. This provides the Group with total cash and
liquidity of £185.5m as at 31 December 2021.
The Group's Adjusted Leverage ratio (defined as net debt over EBITDA for the
last twelve months, excluding the impact of specific adjusting items and IFRS
16 Leases) was 1.0x as at 31 December 2021. The Adjusted Leverage covenant was
3.0x.
The Interest Cover ratio (defined as EBITDA for the last twelve months,
excluding the impact of specific adjusting items and IFRS 16, over net finance
costs), was 11.7x at 31 December 2021. The Interest Cover covenant is 4.0x.
Further details are provided in Note 12.
Foreign exchange
On consolidation, revenue and costs are translated at the average exchange
rates for the year. The Group is exposed to movements in the Pound Sterling
exchange rate, principally from work carried out with customers that transact
in Euros, US Dollars, Australian Dollars and Chinese Renminbi. Compared to the
prior year, the average value of the Pound Sterling strengthened by 6% against
the Euro, 4% against the US Dollar and 3% against the Australian Dollar.
Sterling weakened by 1% against the Chinese Renminbi. On a constant currency
basis revenue increased by £23.3m (14%) compared to HY 2020/21. Similarly, on
a constant currency basis, underlying operating profit and profit before tax
increased by £3.2m (44%) and £3.8m (78%), respectively.
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 £162.8m (FY
2020/21: £156.2m). Due to an increase in scheme assets during the period, the
pre-tax surplus, measured in accordance with IAS 19, increased to £9.6m from
£6.8m at 30 June 2021. Ricardo paid £2.1m of cash contributions into the
scheme during the period (HY 2020/21: £2.3m). From November 2021, following
completion of the 2020 triennial valuation negotiations with the scheme
Trustees, the level of deficit funding contributions reduced from £4.6m per
annum to £1.8m per annum through to November 2023.
Chairman of the Board
Sir Terry Morgan CBE has given notice to Ricardo of his intention to stand
down as Chairman of the Board. The Nomination Committee is commencing the
process to select his successor and Sir Terry, who joined Ricardo in January
2014, has confirmed that he will remain in place for an orderly handover to
the successful candidate. Ricardo will keep investors appraised of progress.
Group Outlook
Our half-year results are in line with our expectations. Our strong order
intake is particularly encouraging and is driven by increasing demand for
services in respect of energy transition, climate change and decarbonisation.
We have also seen strong cash generation in the first half that will create
opportunity to invest in our key target segments to deliver sustainable
growth.
The Group enters the second half of the year with a good level of orders and
pipeline of opportunities and solid momentum in all segments. As we enter our
seasonally stronger second half, whilst some economic uncertainty remains, we
are cautiously optimistic to deliver on our full year expectations for revenue
and underlying PBT. Following strong net debt improvement in the first half we
would expect a further small improvement by year-end.
We look forward to the capital-markets event planned for late spring, where we
will set out our strategic plans for future profitable growth.
By order of the Board:
Graham Ritchie
Ian Gibson
Chief Executive Officer
Chief Financial Officer
23 February 2022
Operating segments review
The Group reports five operating segments, as set out below.
Prior period operational and financial highlights for each segment are shown
both at historical foreign exchange rates (as originally reported) and
restated to the current period exchange rates. This provides an indication of
the performance of each segment, excluding the impact of foreign exchange (see
also note 4).
Plc costs includes the costs of running the public limited company, including
foreign exchange exposure on intercompany loans.
Revenue Underlying((2)) operating profit/(loss) Underlying((2)) operating profit margin
2021 2020 2021 2020 2021 2020
For the six months ended December £m £m £m £m % %
Energy and environment ('EE') 30.9 26.6 4.3 3.8 13.9 14.3
Rail 37.4 38.5 3.8 3.5 10.2 9.1
Automotive & Industrial ('A&I') 54.2 50.1 (1.7) (3.4) (3.1) (6.8)
Defense 21.5 13.9 2.8 1.7 13.0 12.2
Performance Products ('PP') 41.5 35.6 3.9 3.9 9.4 11.0
Operating segments total 185.5 164.7 13.1 9.5 7.1 5.8
Plc costs - - (2.6) (2.1) - -
Total 185.5 164.7 10.5 7.4 5.7 4.5
References in superscript are defined in the glossary of terms above.
ENERGY & ENVIRONMENT ('EE')
Our Energy and Environment ('EE') operating segment works across the value
chain: gathering and evaluating evidence, setting policy measures, and working
with our customers, partners, and stakeholders to support the implementation
of a wide range of solutions. We have more than 40 years of experience in
addressing sustainability issues and customers value our deep understanding of
energy and environmental drivers, policy development, technical excellence,
and the ability to turn challenges into business opportunities.
Operating and financial highlights
Historical rates Constant currency((7))
HY 2021/22 HY 2020/21 Growth/ HY 2020/21 Growth/
(decline) %
(decline) %
Order intake (£m) 38.5 28.2 37 28.2 37
Order book (£m) 56.1 41.5 35 41.5 35
Revenue (£m) 30.9 26.6 16 26.6 16
Underlying((2)) operating profit (£m) 4.3 3.8 13 3.9 10
Underlying((2)) operating profit margin (%) 13.9 14.3 (0.4)pp 14.7 (0.8)pp
Headcount((6)) (no.) 721 625 15 625 15
References in superscript are defined in the glossary of terms above.
EE delivered a strong first half performance. Order intake was £38.5m (HY
2020/21: £28.2m), growth of 37% on the prior period. Revenue and underlying
operating profit increased by 16% and 13%, respectively. Underlying operating
profit margin was 13.9%, broadly in line with the prior period margin of
14.3%.
During a period in which the UK hosted the COP26 Global UN Climate Conference,
our Climate Services business has continued to go from strength to strength,
supporting International Governments with their climate commitments. With the
increasing investor interest in the environmental, social and corporate
governance ('ESG') agenda, there is also increasing demand for private-sector
decarbonisation support, as companies seek to invest in Net Zero strategies,
target-setting, monitoring and reporting. In addition, our Water business has
had a record start to a year, benefitting from strong demand for environmental
and water resource-management support from UK Water companies.
While we continue to service hundreds of global clients from the UK, our
international growth is focussed on three key territories, where we have built
a local presence providing regional advisory and consulting services:
Australia, where performance has been strong, with revenue growth across the
range of environmental advisory and approvals, planning, engineering and
compliance services; the Middle East, which has seen an increasing pipeline of
waste and air-quality advisory work; and Spain, where our team has grown
rapidly over the last year, providing services to the European Commission as
well as Spanish and Latin American markets.
Key contract wins in the period included the UK Government's Climate Services
for a Net Zero Resilient World programme that will help to shape the evidence
base for future UK climate policy, and the renewal of the Automatic Urban and
Rural Air Quality Monitoring Network contract, also for the UK Government.
Internationally, we renewed the contract for "ELTIS", the EU's Urban Mobility
Observatory, and we also won a major air-quality network contract with the
Royal Commission for Riyadh City.
Outlook
The second half outlook remains strong across a wide range of our technical
areas and geographies, all benefitting from increased demand for climate and
environment related services. Climate services support will continue to grow
at the national, regional and city level, as policy makers step up to the
challenges of COP26 and the need for action now.
The insights and track record from our European policy work provide a platform
for activity in other geographies and in the Private sector. We are already
seeing the knock-on effect of governmental led climate strategies, as we
support increasing numbers of private sector clients on their ESG journeys,
and with their decarbonisation plans. Increasingly, we are also assisting with
implementation actions to realise their Net Zero plans, together with
monitoring of progress against targets and external verification.
RAIL
Our Rail operating segment serves the global rail market, delivering technical
and engineering consultancy services. With capabilities in all areas - from
rolling stock, signalling, and telecommunications to energy efficiency, safety
management, and operational planning - we support a client portfolio that
ranges from some of the world's largest rail administrations to niche
component suppliers. Along with our consultancy unit, we also operate a
separate independent entity - Ricardo Certification - which performs
accredited assurance services. Both divisions draw upon an international pool
of rail engineers, technicians, auditors, and support teams.
Operating and financial highlights
Historical rates Constant currency((7))
HY 2021/22 HY 2020/21 (Decline) HY 2020/21 (Decline)
/growth %
/growth %
Order intake (£m) 41.5 44.1 (6) 42.5 (2)
Order book (£m) 99.7 110.5 (10) 107.5 (7)
Revenue (£m) 37.4 38.5 (3) 37.2 1
Underlying((2)) operating profit (£m) 3.8 3.5 9 3.4 12
Underlying((2)) operating profit margin (%) 10.2 9.1 1.1pp 9.1 1.1pp
Headcount((6)) (no.) 569 617 (8) 617 (8)
References in superscript are defined in the glossary of terms above.
Rail HY 2021/22 order intake was £41.5m, compared to £44.1m in the prior
period. The reduction was due to the timing of larger project wins and
movements in foreign exchange, with prior period order intake including a
significant multi-year project win in Australia. Revenue was £37.4m, 3% lower
than the prior period (£38.5m). Compared to the prior period, Sterling
strengthened against the Australian Dollar and Euro. As a result, on a
constant currency basis revenue increased by £0.2m. Underlying operating
profit was £3.8m, a 9% increase (HY 2020/21: £3.5m) on the prior period, and
underlying operating profit margin was 10.2%, a 1.1pp improvement. The growth
in profitability was driven by increased utilisation and project margins. On a
constant currency basis, operating profit grew by £0.4m (12%) on the prior
period.
In October 2021, we were appointed by the Taipei City Government to provide
independent verification and validation services for the second phase of a new
metro route for the city. This includes monitoring the route's construction to
ensure that the rolling stock, track infrastructure and other critical
subsystems - such as communications and power supply - meet required quality
and safety standards. When fully operational in 2028, this will be one of the
most advanced driverless systems in the world.
Our teams in Australia and Europe (specifically the Netherlands, Denmark and
the UK) reported encouraging starts to the year, as maintenance schemes and
vehicle-testing programmes recommenced after twelve months of disruption
related to COVID-19.
We also secured a significant contract to provide independent
safety-assessment services to a regional transport operator in Canada,
representing an exciting opportunity to gain a foothold in the wider North
American market.
Outlook
We enter the second half of the year with a good order book and a robust
business pipeline. In growth markets such as Australia and Canada, the
COVID-19 pandemic has not deterred national and regional governments from the
long-term rail infrastructure investments that we are experienced in
supporting. In Australia, Rail is already working on the extension of the
Sydney Metro and the upgrade of train-control technologies on Brisbane's
commuter network.
In Europe, by contrast, there is a greater focus on extending asset value and
a political culture of pushing the industry to reduce its environmental
impact. This has inspired initiatives such as HydroFLEX in the UK - for which
Ricardo provided technical support - which have demonstrated how existing
vehicles could be converted to operate under electric, battery and hydrogen
power. Displayed during COP26 in Glasgow, HydroFLEX reflects a growing
appetite for innovation in decarbonisation, an area rich in potential for the
Ricardo group.
AUTOMOTIVE & INDUSTRIAL ('A&I')
For over 100 years, Ricardo's Automotive and Industrial ('A&I') operating
segment has been using engineering and research-and-development expertise to
help global vehicle manufacturers innovate and improve the efficiency and
performance of their products. With digital engineering, efficiency, and
effectiveness at our core, we are able to solve the most complex mobility
challenges, offering a true end-to-end service to create clean, efficient,
integrated energy and propulsion systems for the future. We are recognised as
a thought leader in clean propulsion, electrification, and renewable fuels and
we apply our experience, processes, and insights to drive innovation - from
the initial concept design right through to product execution.
Operating and financial highlights
Historical rates Constant currency((7))
HY 2021/22 HY 2020/21 Growth/ HY 2020/21 Growth/
(decline) %
(decline) %
Order intake (£m) 76.7 59.0 30 58.4 31
Order book (£m) 88.9 86.1 3 86.8 2
Revenue (£m) 54.2 50.1 8 49.6 9
Underlying((2)) operating loss (£m) (1.7) (3.4) 50 (3.4) 50
Underlying((2)) operating profit margin (%) (3.1) (6.8) 3.7pp (6.9) 3.8pp
Headcount((6)) (no.) 966 1,045 (8) 1,045 (8)
References in superscript are defined in the glossary of terms above.
We entered this financial year having operationally aligned our three
historical regional businesses, in EMEA, North America and Asia, to drive
strategic alignment and increased efficiency. The team is driving a
change-management process, while maintaining a clear focus on delivering into
a market that is still recovering from the impact of the COVID-19 pandemic.
All key metrics have improved on the prior period. Order intake has been
encouraging at £76.7m, a 30% increase on the prior period and an 88% increase
on the second half of FY 2020/21 (£40.8m). Revenue was £54.2m, 8% up on the
prior period, and the underlying operating loss was £1.7m, a 50% reduction on
the prior period loss. The loss reflects the typical seasonality of the
business, with profits historically weighted towards the second half of the
financial year (we made an underlying operating profit of £1.8m in the second
half of FY 2020/21).
In EMEA, order intake and revenue have both improved period on period. These,
together with benefits from a restructuring programme from the previous year,
have improved profitability. In the period we have secured a number of key
contract wins in the electrified vehicle space.
Performance in North America has also improved period on period but remained
subdued in the first quarter. Order intake levels have increased, and we are
seeing positive momentum moving into the second half of the year.
In Asia, new opportunities have emerged in the heavy-duty and light mobility
sectors, specifically in Korea and Japan. China, in contrast, has faced
headwinds, largely resulting from pricing pressure and a highly competitive
labour market.
A competitive recruitment market for highly skilled staff remains our most
pressing challenge across the business. Although the business's global
flexible staffing model has got off to a good start, the costs of
implementation have impacted the overall profitability within this period.
Outlook
We remain cautiously optimistic about the second half of the year, as we
continue to develop our consolidated global operating model. Overall, key
market trends indicate continued demand for our core services, including
internal combustion engine and mild hybrid, together with increasing demand
for services related to emerging technologies, which include electrification
and software. This is bringing opportunities for us to support both "new tech"
and conventional industry players in their developments in electrification.
The pace required for client programme delivery is also increasing
opportunities for us to explore business models that realise value for IP
through focused investment in research and development. Generally, current
challenges as well as future prospects - particularly within sustainable
transportation - bode well for A&I.
DEFENSE
Our Defense operating segment has significant insight into the needs of armed
forces and provides solutions to meet the challenges facing our customers in
the integration of logistics and field support for complex and diverse
systems. Our wide range of engineering and software solutions provides
system-integration engineering for the US Army's ground inventory and we are
the data-replication agent for the US Navy. Ricardo Defense is recognised as a
leader in transitioning commercial and emerging technology research to applied
use by our customer. Defense also specialises in niche manufacturing, adapting
commercial industry products to deliver innovative sector applications that
protect people and infrastructure.
Operating and financial highlights
Historical rates Constant currency((7))
HY 2021/22 HY 2020/21 (Decline) HY 2020/21 (Decline)
/growth %
/growth %
Order intake (£m) 15.9 21.9 (27) 21.0 (24)
Order book (£m) 20.9 21.7 (4) 21.9 (5)
Revenue (£m) 21.5 13.9 55 13.3 62
Underlying((2)) operating profit (£m) 2.8 1.7 65 1.6 75
Underlying((2)) operating profit margin (%) 13.0 12.2 0.8pp 12.0 1.0pp
Headcount((6)) (no.) 184 181 2 181 2
References in superscript are defined in the glossary of terms above.
Defense delivered strong growth period on period. Order intake was £15.9m (HY
2020/21: £21.9m), with the period-on-period movement reflecting the timing of
orders for our anti-lock braking system/electronic stability control
('ABS/ESC') safety systems, together with the recognition of the multi-year GM
Infantry Squad Vehicle ('ISV') order in the prior period. Revenue and
underlying operating profit increased significantly by 55% and 65%,
respectively. Underlying operating profit margin was 13.0%, an improvement of
0.8pp on the prior period. We delivered growth across both of our main
business areas: Solution Products, which includes ABS/ESC, and Technical
Services, which includes software and systems engineering and Field Service
Support (systems installation, training and sustainment of assets in the
field).
Within Solution Products, we delivered 1,786 ABS/ESC units, compared to 581
units in the prior period. Volume growth reflects a combination of increased
volumes for new production vehicles and the program to retrofit the US Army's
in-service fleet of vehicles.
Defense has been successful in supporting the US Army in establishing a new
centralised Army Procurement Office, which focuses on the transition of new
technologies into field applications. This has led to an increase in demand
for our systems engineering and integration expertise as well as Field Service
Support for both ABS/ESC and GM ISV. In addition, the programme to design and
integrate wireless intercom systems for the US Army is ramping up in
preparation of an anticipated application to significantly more vehicle
systems.
Outlook
We see growth potential in Solution Products, in particular sales of ABS/ESC
kits as the retrofit program continues, together with the potential assembly
and supply of wireless intercom kits to multiple vehicle platforms.
Within Technical Services, we are seeing increased demand for Field Service
Support (as the number of assets in the field increases), and our software and
systems engineering work, including the potential for growth in assisting
customers in improving the management of their mobile fuel delivery systems.
PERFORMANCE PRODUCTS ('PP')
Performance Products ('PP') includes both the PP manufacturing and Software
businesses. PP is responsible for the manufacture and assembly of niche
high-quality components, prototypes, and complex products, including engines,
transmission, and other precision and performance-critical products. Moreover,
PP provides industrial engineering services to enable products to move from
concept to production for customers around the globe. The Software business
delivers advanced virtual-engineering tools and leading-edge simulation
software, and delivers solutions that help our customers reduce costs,
resources, and time to market, while efficiently managing complexity and
safety.
Operating and financial highlights
Historical rates Constant currency((7))
HY 2021/22 HY 2020/21 Growth/ HY 2020/21 Growth/
(decline) %
(decline) %
Order intake (£m) 38.0 27.9 36 27.7 37
Order book (£m) 49.9 58.4 (15) 58.4 (15)
Revenue (£m) 41.5 35.6 17 35.5 17
Underlying((2)) operating profit (£m) 3.9 3.9 - 3.9 -
Underlying((2)) operating profit margin (%) 9.4 11.0 (1.6)pp 11.0 (1.6)pp
Headcount((6)) (no.) 416 399 4 399 4
References in superscript are defined in the glossary of terms above.
PP delivered a resilient performance in the period. Order intake was £38.0m,
an increase of 36% on the prior period, driven by the timing of a large
transmission order and engine orders. Software order intake was at a similar
level to the prior period. Revenue was up by 17% compared to the prior period.
The growth was due to increased engine and transmission volumes. Underlying
operating profit was flat period on period, with margin reducing by 1.6pp, as
PP benefitted from higher engine prices in the prior period.
Transmission deliveries have been broadly in line with expectations. Whilst
total deliveries of engines to McLaren increased compared to the prior period,
volumes have not recovered to levels previously expected, partially due to the
delayed launch of the Artura vehicle platform. The impact of the lower McLaren
engine deliveries has been offset by increased industrial engineering work.
We have continued to develop our product offerings, successfully delivering
hybrid and full electric drivelines for automotive, motorsport and defence
clients. Working in collaboration with the UK Government, PP completed a UK
niche volume battery assembly feasibility study and blueprint, demonstrating
technical readiness for future battery programmes. In the current period, PP
was successful in securing programme continuations for a number of key
clients, including motorsport contracts.
Outlook
The continued disruption to global supply chains affecting our customers and
suppliers presents the greatest risk to the short to medium term performance.
COVID-19, semi-conductor shortages and ongoing Brexit complexities are the key
factors in this challenge over the next six months. These risks have the
potential to impact PP directly, through availability of materials, and
indirectly, through reducing customer demand (caused by their ability to
produce vehicles).
PP's ability to develop niche volume solutions for clients, while maintaining
quality and efficiency usually associated with high volume production, remains
a strong differentiator in the market. Our ability to call upon the in-depth
design capabilities of our engineering consultancy divisions allows us to
provide a comprehensive solution across all our targeted markets. We expect
the demand for industrial engineering and electrification projects to continue
to grow in the second half of the year.
Our Software strategy is focused on building an integrated market-leading
portfolio of products and solutions to provide value to customers as they
navigate the decarbonisation journey. In the current period, we were
successful in winning funded development orders from an EU customer to develop
processes relating to e-fuels. In the second half of the year, we are
concentrating development efforts to improve thermal engine modelling, complex
transmission solutions and tail pipe emissions modelling.
Condensed interim financial statements
Condensed consolidated income statement
for the six months ended 31 December (unaudited)
2021 2020
Underlying Specific adjusting Total Underlying Specific adjusting Total
items(*)
items(*)
Note £m £m £m £m £m £m
Revenue 4 & 7 185.5 - 185.5 164.7 - 164.7
Cost of sales (125.3) - (125.3) (110.2) - (110.2)
Gross profit 60.2 - 60.2 54.5 - 54.5
Administrative expenses (50.0) (4.0) (54.0) (47.7) (7.1) (54.8)
Other income 0.3 - 0.3 0.6 - 0.6
Operating profit/(loss) 10.5 (4.0) 6.5 7.4 (7.1) 0.3
Finance income 0.2 - 0.2 0.3 - 0.3
Finance costs (2.0) - (2.0) (2.7) - (2.7)
Net finance costs (1.8) - (1.8) (2.4) - (2.4)
Profit/(loss) before taxation 8.7 (4.0) 4.7 5.0 (7.1) (2.1)
Income tax (expense)/credit (2.1) 0.9 (1.2) (1.2) 1.8 0.6
Profit/(loss) for the period 6.6 (3.1) 3.5 3.8 (5.3) (1.5)
Profit/(loss) attributable to:
- Owners of the parent 6.6 (3.1) 3.5 3.8 (5.3) (1.5)
- Non-controlling interests - - - - - -
6.6 (3.1) 3.5 3.8 (5.3) (1.5)
Earnings/(loss) per ordinary share attributable to owners of the parent during
the period
Basic and diluted 9 5.6p (2.7)p
(*) 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 8.
Condensed consolidated statement of comprehensive income
for the six months ended 31 December (unaudited)
2021 2020
£m £m
Profit/(loss) for the period 3.5 (1.5)
Other comprehensive income
Items that will not be reclassified to profit or loss:
Remeasurements of the defined benefit pension scheme 0.6 1.9
Deferred tax on remeasurements of the defined benefit pension scheme (0.1) (0.4)
Total items that will not be reclassified to profit or loss 0.5 1.5
Items that may be subsequently reclassified to profit or loss:
Currency translation on foreign currency net investments (0.1) (0.8)
Total items that may be subsequently reclassified to profit or loss (0.1) (0.8)
Total other comprehensive income for the period (net of tax) 0.4 0.7
Total comprehensive income/(expense) for the period 3.9 (0.8)
Income/(expense) attributable to:
- Owners of the parent 3.9 (0.8)
- Non-controlling interests - -
3.9 (0.8)
The accompanying notes are an integral part of these condensed interim
financial statements.
Condensed consolidated statement of financial position
31 December 2021 30 June 2021
Unaudited Audited
Note £m £m
Assets
Non-current assets
Goodwill 84.0 84.7
Other intangible assets 31.2 33.9
Property, plant and equipment 44.9 46.9
Right-of-use assets 16.9 19.5
Retirement benefit surplus 9.6 6.8
Other receivables 2.3 2.3
Deferred tax assets 9.4 8.3
198.3 202.4
Current assets
Inventories 20.1 16.9
Trade, contract and other receivables 120.8 126.9
Derivative financial assets 0.6 0.9
Current tax assets 1.9 1.5
Cash and cash equivalents 12 56.8 42.0
200.2 188.2
Total assets 398.5 390.6
Liabilities
Current liabilities
Borrowings 12 9.0 12.8
Lease liabilities 4.6 5.5
Trade, contract and other payables 79.2 76.6
Current tax liabilities 1.7 1.4
Derivative financial liabilities 2.2 1.0
Provisions 3.9 4.0
100.6 101.3
Net current assets 99.6 86.9
Non-current liabilities
Borrowings 12 86.3 76.1
Lease liabilities 16.3 18.8
Deferred tax liabilities 8.2 8.2
Provisions 2.9 3.4
113.7 106.5
Total liabilities 214.3 207.8
Net assets 184.2 182.8
Equity
Share capital 15.6 15.6
Share premium 16.8 16.8
Other reserves 37.9 38.0
Retained earnings 113.7 112.2
Equity attributable to owners of the parent 184.0 182.6
Non-controlling interests 0.2 0.2
Total equity 184.2 182.8
The accompanying notes form an integral part of these condensed interim
financial statements.
Condensed consolidated statement of changes in equity
for the six months ended 31 December (unaudited)
Attributable to owners of the parent
Share capital Share premium Other reserves Retained earnings Total Non-controlling interests Total equity
£m £m £m £m £m £m £m
At 1 July 2021 15.6 16.8 38.0 112.2 182.6 0.2 182.8
Profit for the period - - - 3.5 3.5 - 3.5
Other comprehensive (expense)/income - - (0.1) 0.5 0.4 - 0.4
Total comprehensive (expense)/income - - (0.1) 4.0 3.9 - 3.9
Equity-settled transactions - - - 0.8 0.8 - 0.8
Purchase of own shares to settle awards - - - (0.1) (0.1) - (0.1)
Ordinary share dividends - - - (3.2) (3.2) - (3.2)
At 31 December 2021 (unaudited) 15.6 16.8 37.9 113.7 184.0 0.2 184.2
At 1 July 2020 13.4 14.3 17.4 103.5 148.6 0.5 149.1
Loss for the period - - - (1.5) (1.5) - (1.5)
Other comprehensive (expense)/income - - (0.8) 1.5 0.7 - 0.7
Total comprehensive expense - - (0.8) - (0.8) - (0.8)
Issue of ordinary share capital 2.2 2.5 23.5 - 28.2 - 28.2
Equity-settled transactions - - - 0.4 0.4 - 0.4
Ordinary share dividends - - - - - (0.4) (0.4)
At 31 December 2020 (unaudited) 15.6 16.8 40.1 103.9 176.4 0.1 176.5
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 (unaudited)
2021 2020
Note £m £m
Cash flows from operating activities
Profit/(loss) before taxation 4.7 (2.1)
Adjustments for:
- Share-based payments 0.7 0.4
- Fair value losses on derivative financial instruments 0.6 0.4
- Profit on disposal of property, plant and equipment - (0.3)
- Net finance costs 1.8 2.4
- Depreciation, amortisation and impairment 11.1 13.8
Operating cash flows before movements in working capital 18.9 14.6
Changes in:
- Inventories (3.2) 0.8
- Trade, contract and other receivables 6.5 1.0
- Trade, contract and other payables 9.8 0.8
- Provisions (0.4) (0.8)
Defined benefit pension scheme payments in excess of past service costs (2.1) (2.3)
Cash generated from operations 29.5 14.1
Net interest paid (1.8) (1.8)
Income tax paid (2.4) (1.5)
Net cash from operating activities 25.3 10.8
Cash flows from investing activities
Acquisitions of subsidiaries, net of cash acquired (4.9) (5.1)
Purchases of property, plant and equipment (2.6) (2.5)
Proceeds from disposal of property, plant and equipment - 0.3
Purchases of intangible assets and capitalised development costs (3.5) (4.2)
Net cash used in investing activities (11.0) (11.5)
Cash flows from financing activities
Proceeds from issuance of ordinary shares - 28.2
Purchases of own shares to settle awards (0.1) -
Principal element of lease payments (2.7) (3.2)
Principal element of lease receivables 0.1 0.1
Proceeds from borrowings 12 10.0 5.0
Repayment of borrowings 12 - (29.1)
Dividends paid to shareholders and return of capital 10 (3.2) (0.4)
Net cash from financing activities 4.1 0.6
Effect of exchange rate changes on cash and cash equivalents 0.2 (1.1)
Net increase/(decrease) in cash and cash equivalents 12 18.6 (1.2)
Net cash and cash equivalents at 1 July 29.3 55.8
Net cash and cash equivalents at 31 December 47.9 54.6
At 1 July
Cash and cash equivalents 12 42.0 66.3
Bank overdrafts 12 (12.7) (10.5)
Net cash and cash equivalents at 1 July 29.3 55.8
At 31 December
Cash and cash equivalents 12 56.8 61.4
Bank overdrafts 12 (8.9) (6.8)
Net cash and cash equivalents at 31 December 47.9 54.6
The accompanying notes form an integral part of these condensed interim
financial statements.
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 222915.
The condensed interim financial statements were approved for issue by the
Board of Directors on 23 February 2022. These condensed interim financial
statements have not been audited, but they have been subject to an independent
review by KPMG LLP ('KPMG'), whose independent review report is included at
the end of this report.
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 2021
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 2021 within the
Annual Report & Accounts 2020/21, 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 2020/21, which was approved by the Board of Directors on 14 September
2021 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 2020/21 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.
In the context of the challenging economic environment in the automotive
sector, exacerbated by the economic uncertainty caused by the ongoing COVID-19
pandemic, the Board of Ricardo plc has undertaken an assessment of the ability
of the Group and Company to continue in operation and meet its 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 £200.0m Revolving Credit Facility
("RCF") which is linked to two covenants. These covenants are tested at 30
June and 31 December each year until the debt matures in July 2023. The
threshold for the Adjusted Leverage (defined as net debt over underlying
EBITDA for the last twelve months, excluding IFRS 16 Leases) is 3.0x for each
test date. The threshold for the Interest Cover (defined as underlying EBITDA
for the last twelve months over net finance costs, excluding IFRS 16 Leases)
is 4.0x for each test date.
At the reporting date, the Group had an adjusted leverage of 1.0x and interest
cover was 11.7x. As at the date of approval of these condensed interim
financial statements, the amount of the RCF undrawn and available to the Group
was £125m, with total borrowing, including overdrafts and hire purchase
liabilities, of £82m and cash and cash equivalents of £43m.
The Directors have prepared a cash flow forecast which covers at least 12
months from the date of approval of these condensed interim financial
statements. In this forecast, the directors have considered the impact of the
ongoing COVID-19 pandemic on trading levels, as well as delays in starting new
projects and converting pipeline opportunities, on the Group's results,
operations and financial position, in a severe but plausible downside
scenario. This scenario models a reduction of 15% in the Group's EBITDA in FY
2021/22 with no growth in FY 2022/23. In addition, the downside scenario
models an increase in net working capital days over the remainder of FY
2021/22 and FY 2022/23.
The modelled downside scenario incorporates some mitigating actions which are
within the control of the Group, such as setting appropriate levels of
dividends, the non-payment of discretionary bonuses and a reduction in
non-essential capital expenditure. Although headroom under the Group's banking
covenants is reduced under this downside scenario, the Group (and Company) is
expected to operate within its committed facilities and covenant requirements
during the forecast period.
Consequently, the directors are confident that the Group and Company will have
sufficient funds to continue to meet its 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.
Explanations of how they are calculated and how they are reconciled to an IFRS
statutory measure are set out below.
(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. They exclude certain items which the Board believes distort the
trading performance of the Group. These include the amortisation of acquired
intangible assets, acquisition-related expenditure, costs related to
implementation and configuration of purchased software services,
reorganisation costs, and other specific adjusting items.
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.
Costs related to implementation and configuration of purchased software
services are excluded from underlying PBT and operating profit as they are not
considered to be reflective of the Group's trading performance in the year.
The costs relate to software which is expected to be utilised over multiple
years.
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 taken into account. 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 8.
Reconciliation of underlying profit before tax to reported profit/(loss)
before tax
2021 2020
Underlying Specific adjusting Total Underlying Specific adjusting Total
items
items
£m £m £m £m £m £m
Revenue 185.5 - 185.5 164.7 - 164.7
Cost of sales (125.3) - (125.3) (110.2) - (110.2)
Gross profit 60.2 - 60.2 54.5 - 54.5
Administrative expenses and other income (49.7) - (49.7) (47.1) - (47.1)
Amortisation of acquired intangibles - (2.2) (2.2) - (2.8) (2.8)
Acquisition-related expenditure - (1.1) (1.1) - (1.1) (1.1)
ERP implementation costs - (0.5) (0.5) - - -
Purchases and disposals - (0.3) (0.3) - (1.6) (1.6)
Other reorganisation costs - 0.1 0.1 - (1.5) (1.5)
GMP equalisation - - - - (0.1) (0.1)
Operating profit/(loss) 10.5 (4.0) 6.5 7.4 (7.1) 0.3
Net finance expense (1.8) - (1.8) (2.4) - (2.4)
Profit/(loss) before taxation 8.7 (4.0) 4.7 5.0 (7.1) (2.1)
Income tax (expense)/credit (2.1) 0.9 (1.2) (1.2) 1.8 0.6
Profit/(loss) for the year 6.6 (3.1) 3.5 3.8 (5.3) (1.5)
Underlying earnings attributable to the owners of the parent: 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 than reported EPS. 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 9.
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. In
the prior reporting period, constant currency results were calculated by
translating the result for the current period using foreign currency exchange
rates applicable to the prior period. Using current period rates to restate
prior period results is considered to provide a more useful comparison, since
current period performance remains stated at actual rates.
Headline trading performance
Underlying Reported
Revenue Operating profit Profit before tax Operating profit Profit/(loss) before tax
HY 2021/22 (£m) 185.5 10.5 8.7 6.5 4.7
HY 2020/21 (£m) 164.7 7.4 5.0 0.3 (2.1)
Growth (%) 13 42 74 2,067 324
HY 2020/21 (£m) at current period exchange rates 162.2 7.3 4.9 0.4 (2.0)
Constant currency growth (%) 14 44 78 1,525 335
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
6.
(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
2021 2020
Underlying Specific adjusting Total Underlying Specific adjusting Total
items
items
£m £m £m £m £m £m
Operating profit/(loss) 10.5 (4.0) 6.5 7.4 (7.1) 0.3
Depreciation, amortisation and impairment 9.2 (0.3) 8.9 9.5 1.5 11.0
Amortisation of acquired intangibles - 2.2 2.2 - 2.8 2.8
EBITDA 19.7 (2.1) 17.6 16.9 (2.8) 14.1
Movement in working capital 13.0 (0.3) 12.7 1.8 - 1.8
Pension deficit payments (2.1) - (2.1) (2.3) - (2.3)
Profit on disposal of assets - - - (0.3) - (0.3)
Share based payments 0.7 - 0.7 0.4 - 0.4
Fair value losses on derivative financial instruments 0.6 - 0.6 0.4 - 0.4
Cash generated from/(used in) operations 31.9 (2.4) 29.5 16.9 (2.8) 14.1
Cash conversion 161.9% 167.6% 100.0% 100.0%
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.
(c) Tax measures
Underlying effective tax rate ('ETR'): We report 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.
5. Critical judgements and key sources of estimation uncertainty
As set out in Note 1c to the Group annual financial statements 2020/21,
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 2021, 12 contracts (30 June 2021: 9) were categorised as Red
Category 4. At 31 December 2021, £4.7m (30 June 2021: £3.6m) of revenue had
been recognised in respect of work performed on these plus one other contract
where outcomes were subject to negotiation with customers. This amount
includes a change in scope which was deemed to be a contract modification as
it had been agreed with the customer and was awaiting formal signature at 31
December 2021. If this change had not been accounted for as a contract
modification, reported revenue would have been up to £0.4m lower. Management
has made a specific judgement over the ability to recover each of the amounts
under negotiation and has recognised provisions of £2.0m (30 June 2021:
£1.7m) against this revenue, resulting in a net exposure of £2.7m (30 June
2021: £1.9m). The possible financial outcomes from these negotiations range
from an upside of £2.5m, if management recovers the full £4.7m of revenue
and potential negotiation upside, to a downside of £2.7m, if management is
unsuccessful in recovering any of the £4.7m.
6. 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 five segments: Energy & Environment
('EE'); Rail; Automotive & Industrial ('A&I'); Defense; and
Performance Products ('PP').
The Software business is aggregated into the Performance Products operating
segment for reporting purposes. Whilst the Software business continues to be
run as a separate business with its own leadership team, it has a number of
similar characteristics to the Performance Products manufacturing business, in
that it is involved in the development and sale of niche products, requiring a
high level of capital/development spend, primarily selling to automotive
manufacturers.
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. A&I 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.
EE Rail A&I Defense PP Plc Total
£m £m £m £m £m £m £m
For the six months ended 31 December 2021
Total segment revenue 31.4 37.4 56.1 21.5 43.0 - 189.4
Inter-segment revenue (0.5) - (1.9) - (1.5) - (3.9)
Revenue from external customers 30.9 37.4 54.2 21.5 41.5 - 185.5
Segment underlying operating profit/(loss) 4.3 3.8 (1.7) 2.8 3.9 - 13.1
Plc costs - - - - - (2.6) (2.6)
Underlying operating profit/(loss) 4.3 3.8 (1.7) 2.8 3.9 (2.6) 10.5
Specific adjusting items(*) (0.2) (1.8) (0.2) (0.2) (0.5) (1.1) (4.0)
Operating profit/(loss) 4.1 2.0 (1.9) 2.6 3.4 (3.7) 6.5
Net finance costs (1.8)
Profit before taxation 4.7
For the six months ended 31 December 2020
Total segment revenue 27.0 38.6 51.5 13.9 37.0 - 168.0
Inter-segment revenue (0.4) (0.1) (1.4) - (1.4) - (3.3)
Revenue from external customers 26.6 38.5 50.1 13.9 35.6 - 164.7
Segment underlying operating profit/(loss) 3.8 3.5 (3.4) 1.7 3.9 - 9.5
Plc costs - - - - - (2.1) (2.1)
Underlying operating profit/(loss) 3.8 3.5 (3.4) 1.7 3.9 (2.1) 7.4
Specific adjusting items(*) (0.7) (1.8) (3.1) (0.2) - (1.3) (7.1)
Operating profit/(loss) 3.1 1.7 (6.5) 1.5 3.9 (3.4) 0.3
Net finance costs (2.4)
Loss before taxation (2.1)
(*) See Note 8
7. Revenue
2021 2020
Disaggregation of revenue for the six months ended 31 December: £m £m
a) Revenue stream
Service provided under:
- fixed price contracts 98.9 85.3
- time and materials contracts 42.8 42.2
- subscription and software support contracts 3.7 3.4
Goods supplied:
- manufactured and assembled products 36.5 30.9
- software products 2.9 2.9
Intellectual property 0.7 -
Total 185.5 164.7
b) Customer location
United Kingdom 66.6 53.4
Europe 41.1 38.3
North America 39.3 28.1
Rest of Asia 11.8 14.8
Australia 11.8 13.3
China 10.3 12.0
Rest of the World 4.6 4.8
Total 185.5 164.7
c) Timing of recognition
Over time 148.9 132.8
At a point in time 36.6 31.9
Total 185.5 164.7
8. Specific adjusting items
Specific adjusting items are disclosed separately in the financial statements
where it is necessary to do so in order to provide further understanding of
the financial performance of the Group. These items comprise the amortisation
of acquired intangible assets, acquisition-related expenditure, costs related
to implementation and configuration of purchased software services,
reorganisation costs and other non-recurring items that are included due to
the significance of their 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. Costs related to
implementation and configuration of purchased software services are excluded
as they relate to software which is expected to be utilised over multiple
years. 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.
2021 2020
For the six months ended 31 December £m £m
Amortisation of acquired intangibles 2.2 2.8
Acquisition-related expenditure 1.1 1.1
ERP implementation costs 0.5 -
Reorganisation costs
- Purchases and disposals 0.3 1.6
- Other reorganisation costs (0.1) 1.5
Guaranteed Minimum Pensions ('GMP') equalisation - 0.1
Total before tax 4.0 7.1
Tax charge on specific adjusting items (0.9) (1.8)
Total after tax 3.1 5.3
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 3
to 9 years. During the period, certain "customer contracts and relationships"
intangible assets reached the end of their economic life, resulting in a
decrease in amortisation charges compared to the prior period.
Acquisition-related expenditure
The current period acquisition-related expenditure comprises £1.1m of
external fees in respect of strategic projects. The comparative period
included £1.1m of earn-out and employee retention costs, in relation to
Transport Engineering Pty Ltd (now Ricardo Rail Australia - 'RRA'), and PLC
Consulting Pty Ltd (now Ricardo Energy Environment and Planning - 'REEP'),
acquired in May 2019 and July 2019 respectively.
ERP implementation costs
As a result of an IFRS Interpretations Committee ('IFRIC') decision in March
2021, £0.5m of external costs incurred in FY 2020/21 in relation to the
implementation of a new cloud-based ERP system within the PP segment have been
expensed in the current period. These costs were previously capitalised in
line with prevailing practice at the time the costs were incurred. They have
been classified as a specific adjusting item as they are not reflective of the
underlying performance of the business in the period. The ERP system is
expected to be utilised by the Group for at least five years.
Reorganisation costs
Purchases and disposals
The current period charge of £0.3m (HY 2020/21: £0.1m) relates to a
reduction in the fair value of deferred consideration in respect of the sale
of Ricardo's Detroit engine test business on 3 June 2020, in accordance with
the treatment of the original proceeds in FY 2019/20. The reduction in the
fair value reflects lower levels of traditional engine testing work than
originally forecast at the time the business was sold. The comparative period
charge includes a £1.5m impairment charge as a result of a decrease in the
fair value of the Detroit Technology Campus ('DTC') South building, reflecting
its market value at the balance sheet date. These costs were classified as
specific adjusting items as they are significant in value and would distort
the underlying trading performance of the Group if included.
Other reorganisation costs
A credit of £0.1m has been recognised in the current period reflecting the
difference between actual costs in incurred in HY 2021/22 and provisions made
at 30 June 2021. The comparative period charge reflects £1.5m of redundancy
costs from headcount reductions in the Group's A&I business in Europe.
Guaranteed Minimum Pensions ('GMP') equalisation
In the prior period, a charge of £0.1m was incurred in order to equalise male
and female members' benefits for the effect of for historical transfers out of
the Group's defined benefit pension scheme.
9. Earnings per share
2021 2020
For the six months ended 30 December £m £m
Earnings/(loss) attributable to owners of the parent 3.5 (1.5)
Add back the net-of-tax impact of:
- Amortisation of acquired intangibles 1.7 2.1
- Acquisition-related expenditure 0.9 0.8
- ERP implementation costs 0.4 -
- Asset purchases and disposals 0.2 1.2
- Other reorganisation costs (0.1) 1.1
- Guaranteed Minimum Pensions ('GMP') equalisation - 0.1
Underlying earnings attributable to owners of the parent 6.6 3.8
2021 2020
Number of shares millions Number of shares millions
Weighted average number of shares in issue 62.2 55.7
2021 2020
pence pence
Earnings/(loss) per share 5.6 (2.7)
Underlying earnings per share 10.6 6.8
Underlying earnings per share is also shown because the Directors consider
that this provides a more useful indication of underlying performance and
trends over time than reported earnings per share.
There are no potentially dilutive shares (HY 2020/21: Nil).
10. Dividends
2021 2020
For the six months ended 31 December: £m £m
Final dividend for prior period: 5.11p per share (HY 2020/21: 0.00p) per share 3.2 -
On 23 February 2022 the Directors declared an interim dividend of 2.91p per
share, which will be paid gross on 8 April 2022 to holders of ordinary shares
on the Company's register of members on 11 March 2022.
In HY 2020/21 a dividend of £0.4m was issued during the period to a
non-controlling interest. No such dividend was issued in the current period.
11. 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;
• Derivative financial assets;
• Cash and cash equivalents;
• Trade, contract and other payables; and
• Derivative financial liabilities
Derivative financial assets of £0.6m (30 June 2021: £0.9m) and derivative
financial liabilities of £2.2m (30 June 2021: £1.0m) 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.
12. Net debt
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 believe 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.
31 December 30 June
2021
2021
Analysis of net debt £m £m
Current assets - cash and cash equivalents
- Cash and cash equivalents 56.8 42.0
Total cash and cash equivalents 56.8 42.0
Current liabilities - borrowings
- Bank overdrafts repayable on demand (8.9) (12.7)
- Hire purchase liabilities maturing within one year (0.1) (0.1)
Total current borrowings (9.0) (12.8)
Non-current liabilities - borrowings
- Hire purchase liabilities maturing after one year (0.2) (0.3)
- Bank loans maturing after one year (86.1) (75.8)
Total non-current borrowings (86.3) (76.1)
(38.5) (46.9)
Total cash and cash equivalents 56.8 42.0
Total borrowings (95.3) (88.9)
(38.5) (46.9)
31 December 30 June
2021
2021
Movement in net debt £m £m
At the beginning of the period (46.9) (73.4)
Net increase/(decrease) in cash and cash equivalents and bank overdrafts 18.6 (26.5)
Repayments of hire purchase 0.1 0.1
Amortisation of loan fees (0.3) -
Proceeds from bank loans (10.0) (5.0)
Repayments of bank loans - 57.9
At the end of the period (38.5) (46.9)
Net debt at 31 December 2021 was £38.5m (FY 2020/21: £46.9m). As reported to
the Board on a monthly basis, there is sufficient headroom in our banking
facilities. At 31 December 2021 the Group held total facilities of £215.7m
(FY 2020/21: £215.5m), which included committed facilities of £200.0m (FY
2020/21: £200.0m). The committed facility consists of a £200.0m
multi-currency Revolving Credit Facility ('RCF') which provides the Group with
committed funding through to July 2023. In addition, the Group has uncommitted
facilities including overdrafts of £15.7m (FY 2020/21: £15.5m), which mature
throughout this and the next financial year, and are renewable annually.
Non-current bank loans comprise committed facilities of £86.1m (FY 2020/21:
£75.8m), 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 1.4% to 2.2% above SONIA (FY 2020/21: 1.4%
to 2.2% above LIBOR). 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 period. At the reporting date, the Group has an
adjusted leverage of 1.0x (FY 2020/21: 1.3x) which gives rise to an applicable
interest rate of SONIA plus 1.4% (FY 2020/21: LIBOR plus 1.8%). 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.
The Adjusted Leverage (covenant is 3.0x for each test date. The only other
financial covenant is Interest Cover (defined as underlying EBITDA net finance
costs for the last twelve months over, excluding IFRS 16 Leases), which is set
at 4.0x for each test date.
13. Contingent liabilities
In the ordinary course of business, the Group has £11.8m (30 June 2021:
£13.0m) of possible obligations for bonds, guarantees and counter-indemnities
placed with our banking and other financial institutions, primarily relating
to performance under contracts with customers. These possible obligations are
contingent on the outcome of uncertain future events which are considered
unlikely to occur. 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.
In July 2013, a guarantee was provided to the Ricardo Group Pension Fund
('RGPF') of £2.8m in respect of certain contingent liabilities that may
arise, which have been secured on specific land and buildings. The outcome of
this matter is not expected to give rise to any material cost to the Group. In
October 2018, a further guarantee was provided to the RGPF for an amount that
shall not exceed the employer's liability were a debt to arise under Section
75 of the Pensions Act 1995. The guarantee will terminate on 5 April 2023. 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.
14. Principal risks and uncertainties
The Board regularly reviews its principal risks and uncertainties, including
those relating to COVID-19. 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; the defined benefit pension scheme; financing; and these
included the continued consideration of the potential impact of COVID-19. The
approach to mitigation of these principal risks is discussed on pages 35 to 37
of the Group's Annual Report & Accounts 2020/21, 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 2021 included
within this Interim Report.
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
Ian
Gibson
Chief Executive Officer Chief
Financial Officer
23 February 2022
Independent review report to Ricardo plc
Conclusion
We have been engaged by Ricardo plc (the 'Company') to review the condensed
interim financial statements for the six months ended 31 December 2021, which
comprise the condensed consolidated income statement, the condensed
consolidated statement of comprehensive income, the condensed consolidated
statement of financial position, the condensed consolidated statement of
changes in equity, the condensed consolidated statement of cash flows and the
related explanatory notes.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed interim financial statements for the six months
ended 31 December 2021 are not prepared, in all material respects, in
accordance with International Accounting Standard ('IAS') 34 Interim Financial
Reporting as adopted for use in the UK and the Disclosure Guidance and
Transparency Rules (the 'DTR') of the United Kingdom's Financial Conduct
Authority (the 'UK FCA').
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410 'Review of Interim Financial Information
Performed by the Independent Auditor of the Entity' issued by the Auditing
Practices Board for use in the UK. A review of interim financial information
consists of making enquiries, primarily of persons responsible for financial
and accounting matters, and applying analytical and other review procedures.
We read the other information contained in the Interim Report and consider
whether it contains any apparent misstatements or material inconsistencies
with the information in the condensed interim financial statements.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and consequently does not enable
us to obtain assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not express an audit
opinion.
Directors' responsibilities
The Interim Report is the responsibility of, and has been approved by, the
Directors. The Directors are responsible for preparing the Interim Report in
accordance with the DTR of the UK FCA.
As disclosed in Note 2, the annual financial statements of the Group are
prepared in accordance with International Financial Reporting Standards as
adopted by the UK. The Directors are responsible for preparing the condensed
interim financial statements in accordance with IAS 34 as adopted by the UK.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed
interim financial statements based on our review.
The purpose of our review work and to whom we owe our responsibilities
This report is made solely to the Company in accordance with the terms of our
engagement to assist the Company in meeting the requirements of the DTR of the
UK FCA. Our review has been undertaken so that we might state to the Company
those matters we are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company for our review work, for this
report, or for the conclusions we have reached.
Jeremy Hall
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
London
E14 5GL
23 February 2022
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END IR BRGDDRSDDGDXRecent news on Ricardo
See all newsREG - Miria Asset Mgmt. Ricardo PLC - Form 8.3 - Ricardo PLC
AnnouncementREG - L&G – Asset Ricardo PLC - Form 8.3 - Ricardo plc
AnnouncementREG - Jefferies Intl Ltd Ricardo PLC - Form 8.3 - Ricardo Plc
AnnouncementREG - Panmure Liberum Ltd. Ricardo PLC - Form 8.5 (EPT/RI)
AnnouncementREG - BlackRock Group Ricardo PLC - Form 8.3 - Ricardo plc
Announcement