TIDMRCDO
RNS Number : 6845M
Ricardo PLC
25 January 2021
25 January 2021
Ricardo plc
Ricardo plc ("Ricardo") is a global engineering, technical,
environmental and strategic consultancy business, which also
manufactures and assembles niche, high-quality and high-performance
products.
Chief Executive Officer to step down after a successor is
recruited, trading in line with the Board's expectations.
Ricardo is today providing a trading update in respect of the
six months ended 31 December 2020 and is also announcing the
details of its management succession plan. Ricardo plans to
announce its half year results on 25 February 2021.
Management succession plan
The Board of Ricardo and Dave Shemmans have jointly agreed that
Dave Shemmans will be leaving his role as Ricardo's Chief Executive
Officer in due course, after more than 15 years in the role. The
board will shortly initiate a process to recruit a successor who
can continue to deliver on the strategy of the company. It is
expected that Dave Shemmans will continue in his current role until
such time as a successor is in place, contributing to a smooth
transition. The board will make further announcements on this
process in due course as appropriate.
Terry Morgan, Chairman, said:
"Dave has had a very successful 15 years as Chief Executive of
Ricardo and on behalf of the Board I would like to thank him for
his substantial contribution. The Company has grown and diversified
significantly under Dave's leadership and he will be leaving the
Company with a strong underlying business and plenty of
opportunities for further profitable growth."
Dave Shemmans, Chief Executive said:
"I have thoroughly enjoyed being part of Ricardo's success story
and am pleased that the Group is well placed to deliver on its
growth strategy. Following my departure, I will be leaving behind a
team of highly able and experienced people leading a high quality
business."
Trading update
In the six months to 31 December 2020, Ricardo has traded in
line with the Board's expectations with the business recovering
from the impact of COVID-19. Whist order intake, revenue and
operating profit are lower than the six months to 31 December 2019
("the prior period"), they have all increased compared to the six
months to 30 June 2020.
In the six months to 31 December 2020, order intake was good at
GBP181m, down 13% on the six months to 31 December 2019 and up 13%
on the six months to 30 June 2020. The order book at 31 December
2020 was in excess of GBP315m, compared to GBP314m at 30 June 2020
and GBP319m at 31 December 2019.
Energy & Environment ('EE') continues to perform well with
GBP28m of orders received, up 15% on the prior period. Strong
growth has continued within the Evidence and Policy Business Unit
where a wide range of policy and strategy related services have
been delivered, particularly in relation to the European Union's
Green Deal. Topic areas have included greenhouse gas reduction
('GHG') targets for the EU; GHG emissions targets for new cars and
vans; policy measures in relation to sustainable renewable aviation
fuels and strengthening legislation on air quality. The water team
have also seen continued growth in orders following the
commencement of the new asset management planning cycle ('AMP7') in
April 2020 and EE is currently working with eleven water companies
within the UK.
In January 2021, EE was pleased to announce our collaboration
with AFC Energy in respect of Innovative hydrogen power
applications. This partnership will accelerate global efforts to
decarbonise transport, energy and nationally critical
infrastructure through the design and delivery of high-quality
hydrogen technologies, supporting carbon neutral measures. The
focus will be on the joint creation of hydrogen fuel cell product
and service offerings, initially on marine, rail and stationary
power generation.
Rail received orders of GBP44m which, although down GBP7m (14%)
on the prior period, is a good level of orders in the current
climate. Order intake continues to be strong in Australia, Asia and
the Middle East, while customers remain cautious in the Netherlands
and the UK. In Europe, this caution has been balanced by a strong
order book for Certification work, notably the significant
appointment of Rail by Siemens Mobility to provide compliance
assessments for 30 new high-speed intercity express trains for
Germany's national operator, Deutsche Bahn.
Defense secured GBP22m of orders, up 60% on the prior period.
Order intake was good in both the Engineering Services part of the
business and the High Mobility Multipurpose Wheeled Vehicles
('HMMWV') anti-lock braking system/electronic stability control
('ABS/ESC') project for the US Army and National Guard. Engineering
Services orders included a significant multi-year production
contract from GM to produce and field the Army's new Infantry Squad
Vehicle ('ISV'), together with increased work on the Navy Systems
Engineering Support contract. ABS/ESC orders in the period exceeded
the prior period due to an increase in orders for kits in respect
of new production vehicles.
In the period, Defense secured an ABS/ESC retrofit contract to
improve the safety of existing HMMWV ambulances. Delivery of these
life-saving ambulance retrofit kits will begin in the second half
of this financial year. In addition, $34.5m first-year funding has
been approved in the US Government's FY21 national defense budget
to procure and install Ricardo's ABS/ESC retrofit kit to vehicles
not addressed during new production. The ABS/ESC fleet retrofit
contract award and first delivery order is anticipated in the
quarter ending 31 March 2021, with follow-on orders anticipated
over three years. Ricardo's kits will be installed at regional
centres throughout the United States by Red River Army Depot in
partnership with Ricardo's field support representatives.
Performance Products, including our Software business, received
orders of GBP28m, down 37% on the prior period. This reduced level
of orders is in line with expectations and primarily reflects fewer
orders from McLaren following the shut-down of its manufacturing
plant in the quarter ended 30 June 2020. Production re-commenced in
July 2020 and has increased month on month with over 800 engines
supplied in the period. Engine and transmission deliveries across
all customers during the period have broadly been in line with the
Board's expectations.
Automotive & Industrial ('A&I') received orders of
GBP59m, a reduction of 21% on the prior period. Across the Group,
A&I received a higher level of orders in the US, a similar
level in China and a lower level in EMEA. The automotive market
overall is still challenging as customers continue to place orders
at a slow pace. However, the pipeline remains good and A&I has
focused on its 'digital first' agenda to drive faster
time-to-market, more agile project management, virtual working and
product development. In addition, the A&I EMEA has largely
completed its significant investment in a hybrid powertrain
development facility in the UK, which will be available to clients
in the second half of this financial year.
Cashflow
The operating business generated positive net cash inflow of
approximately GBP3 million in the period and for the whole of the
COVID-19 impacted 2020 calendar year. At 31 December 2020, net debt
was GBP50m compared to GBP73m at 30 June 2020 and GBP74m at 31
December 2019. During the period we completed a share placing which
raised GBP28m, net of fees, to reset the capital structure of the
Group, reducing leverage and repaying borrowings to achieve an
appropriate level of balance sheet efficiency and resilience. In
the period, we paid acquisition related costs of GBP5m and
exceptional redundancy costs of GBP3m. This has been achieved by
our continuing strong focus on cost control and efficient working
capital management.
The Revolving Credit Facility ('RCF') of GBP200m continues to
provide the Group with committed funding available for the
remaining term through to July 2023. At 31 December 2020, the
amount undrawn on the RCF was GBP94m and we held net liquid cash
reserves of GBP54m together with uncommitted overdraft facilities
of GBP15m.
COVID-19
Across the Ricardo Group, we have continued to work hard to
minimise the disruption caused by COVID-19, while at the same time
acting responsibly to do what we can to prevent the further spread
of the virus. Our digital-first strategy has provided us with the
flexibility to work remotely and has enabled us to deliver
innovations such as virtual certification, remote audits and
inspections. Together with the use of virtual conferencing tools,
we have been able to use this approach to continue our business
processes largely unimpeded. The most recent lockdowns around
Europe have made little difference in our ability to operate and we
have built on the experience of the original lockdowns in the
Spring of 2020.
As we enter 2021 with more stringent restrictions placed on many
cities, regions and countries around the world, our focus on the
safety of our employees remains as important as ever. The guiding
perspective of 'Healthy People, Healthy Business' remains the
business as usual focus for Ricardo, and we currently have no
voluntary closures of any of our international network of offices
and technical centres.
Brexit
We have been preparing for Brexit for some time and have robust
plans in place to ensure that we can both contract and operate
without customer risk. Our technical and commercial bases in many
cities within the European Union give us the necessary trading
flexibility, and we are already contracting from these locations
for engineering, consulting and certification projects.
The key division impacted at this time is Performance Products
and I am pleased to say that we have been exporting and importing
goods since 1 January 2021 without major disruption. The experience
to date has been a significant increase in paperwork and increased
vigilance at borders, resulting in some delays but goods continue
to flow. Our preparation included an increase in stock to cater for
such delays and training staff in new customs procedures.
Dave Shemmans, Chief Executive Officer, commented :
We have traded in line with the Board's expectations and
continue to navigate the COVID-19 backdrop with all key financial
metrics improving well on the preceding six-month period. Order
intake has been good and this has resulted in a healthy order book
at the end of December 2020, providing confidence for further
improvement moving forward.
EE, Rail and Defense continue perform well with strong demand.
We welcomed the signing of the US Defense budget and look forward
to the completion of procurement negotiations with the US Army in
the coming weeks with regards to the ABS Fleet retrofit programme.
Performance Products volumes are ramping back up. A&I has
recovered to pre COVID-19 normality in China, the US business has
improved its run-rate performance and we are seeing improved orders
in EMEA, albeit still at a lower level than the six months to 30
June 2020.
The economic outlook continues to be uncertain and we continue
with cautious optimism based on our order book and pipeline. We
have established a firm and diversified platform for our business
based around the global environmental agenda and looking forward I
remain confident of the prospects for the group.
About Ricardo plc
Ricardo plc is a global engineering, technical, environmental
and strategic consultancy business. We also manufacture and
assemble low-volume, high-quality and high-performance products and
develop advanced virtual engineering tools for conventional and
electrified powertrains as well as for complex physical
systems.
Our ambition is to be the world's pre-eminent organisation
focused on the design, development and application of solutions to
meet the challenges within the markets of automotive, rail,
environmental & planning, resource management and defence. Our
vision is to create a world fit for the future, and we will achieve
this through the activities of our portfolio of businesses, each of
them underpinned by our talented team of professionals. The Ricardo
plc LEI number is 213800ZNYAY35F4XB814.
This announcement is released by Ricardo plc and 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.
For the purposes of MAR and Article 2 of Commission Implementing
Regulation (EU) 2016/1055 (as amended by the FCA pursuant to
Technical Standards (Market Abuse Regulation) (EU Exit)
Instrument 2019), the person responsible for releasing this
announcement is Patricia Ryan, Company Secretary of Ricardo
plc.
Notes for Editors
Mr Shemmans' full departure terms will be confirmed closer to
his final date of service and these terms will be consistent with
Ricardo's approved Directors Remuneration Policy. It is expected
that Mr. Shemmans will be treated as a good leaver for these
purposes. Mr Shemmans will continue to receive his normal
remuneration whilst he remains an employee of Ricardo.
Further enquiries:
Ricardo plc Tel: 01273 4556611
Dave Shemmans, Chief Executive Officer
Ian Gibson, Chief Financial Officer
Investec Tel: 020 7597 5970
David Flin
Liberum Tel: 020 3100 2000
Richard Crawley
Newgate Communications Tel: 020 7653 9842
Adam Lloyd
Website: www.ricardo.com
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END
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