A headline drop in order intake for Ricardo (RCDO) belies a solid underlying performance at the half-year mark, with adjusted pre-tax profits up 1 per cent to £15.3m. The automotive engineer signed an extension to its engine deal with supercar manufacturer McLaren, completed against a tough market backdrop, and evidenced by faltering demand in the European, Chinese and US markets, which resulted in the first decline in global car sales since 2009, as per industry analysis from Jato Dynamics.
Though the group ended the period with reduced order intake – down from £238m to £202m – the first half of FY2018 generated an unusual level of long-term deals, according to chief executive Dave Shemmans. Ricardo often receives orders in tranches, but “last year we had a number of clients who gave us five-year orders in one go”.
Then take Ricardo’s updated McLaren engine agreement, which has been extended for the next five to eight years. Ricardo has been asked to raise its engine deliveries from 5,000 to 6,000 a year, but it receives orders on a three-monthly basis from McLaren. The contract is worth a “few hundred million pounds”, Mr Shemmans says, but Ricardo is paid upon the delivery of the engines, so order levels can be deceptive simply due to timing issues.
Broker Liberum forecasts full-year 2019 pre-tax profits and earnings per share of £40.1m and 58.3p respectively, against £39m and 57.3p in the prior year.
| RICARDO (RCDO) | ||||
| ORD PRICE: | 605p | MARKET VALUE: | £ 323m | |
| TOUCH: | 592-605p | 12-MONTH HIGH: | 1,085p | LOW: 572p |
| DIVIDEND YIELD: | 3.4% | PE RATIO: | 17 | |
| NET ASSET VALUE: | 310p* | NET DEBT: | 17% | |
| Half-year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2017** | 181 | 11.3 | 14.8 | 5.75 |
| 2018 | 188 | 10.3 | 14.6 | 6.00 |
| % change | +4 | -9 | -1 | +4 |
| Ex-div: | 14 Mar | |||
| Payment: | 08 Apr | |||
| *Includes intangible assets of £96.8m, or 181p a share **Restated for IFRS 15 accounting standards | ||||
