Ricardo (RCDO) turned in full-year figures in line with expectations, with both turnover and adjusted pre-tax profit (of £38.2m) up a single percentage point when the £15.2m currency translation benefit is excluded. The automotive business in Europe had to contend with order deferrals brought about by Brexit uncertainties and the fall-out from the ‘dieselgate’ scandal. However, these were temporary effects on the sequencing rather than the volume of orders. Management noted “a return to more normal order intake patterns” in the fourth quarter, but the disruption still nibbled away at margins.
Nonetheless, the backlog stood at a record £248m at the period-end, buoyed by strengthening demand in the hybrid and electric vehicle sector (17 per cent of order intake). Confidence is also provided by activity levels in the specialist engineer’s rail and environmental consultancies and the performance products business; the latter delivered its 10,000th engine to McLaren, and was selected to design and produce an advanced hypercar transmission for Aston Martin.
The group is well diversified both in terms of its leading-edge technologies and the geographies they serve. Management highlighted tremendous potential in south-east Asia for its rail consultancy and autonomous vehicle technologies, as major conurbations in the region are moving to all but eliminate conventional internal combustion engines from built-up areas. Meanwhile, the group is repositioning its US business to enhance the electrified and autonomous vehicle service offering.
Broker Investec expects adjusted pre-tax profit of £41.5m for the June 2018 year-end, giving EPS of 59.3p (from £38.3m and 55.2p in FY2017).
| RICARDO (RCDO) | ||||
| ORD PRICE: | 760p | MARKET VALUE: | £404m | |
| TOUCH: | 751-760p | 12-MONTH HIGH: | 1,040p | LOW: 691p |
| DIVIDEND YIELD: | 2.5% | PE RATIO: | 16 | |
| NET ASSET VALUE: | 292p* | NET DEBT: | 24% | |
| Year to | Turnover | Pre-tax | Earnings | Dividend |
| 30 Jun | (£m) | profit (£m) | per share (p) | per share (p) |
| 2013 | 230 | 20.7 | 32.5 | 14.0 |
| 2014 | 236 | 23.5 | 36.9 | 15.2 |
| 2015 | 258 | 22.9 | 35.6 | 16.6 |
| 2016 | 332 | 33.0 | 48.6 | 18.1 |
| 2017 | 352 | 32.2 | 46.8 | 19.3 |
| % change | +6 | -2 | -4 | +7 |
| Ex-div: | 26 Oct | |||
| Payment: | 17 Nov | |||
| *Includes intangible assets of £94.4m, or 177p a share | ||||
