Ricardo's (RCDO) exposure to a range of long-term structural drivers continues to serve it well. Brexit uncertainty has made UK customers edgy about placing new orders, so it’s just as well that clients in Asia and mainland Europe are spending more than ever on electrification. The upshot was underlying pre-tax profit up by a tenth to £16.6m at constant currencies.
The engineering consultant and manufacturer posted a 31 per cent increase in order intake during the period, driven by rampant demand from numerous industries and countries. Examples include new engine design work from Japan, a European car battery testing program, a large multi-year order for the independent verification and validation of a Taiwanese rail line, air quality work for the UK government and orders for electric vehicle battery systems from China. Visibility is strong, too – 54 per cent of the record £302m orders logged are for delivery beyond this financial year.
Investors will also take encouragement from better cash generation. Management’s efforts to speed up payments, particularly in the Middle East and China, saw working capital improve significantly during the period, leading to free cash flow of £19.5m.
Broker Liberum expects adjusted pre-tax profit of £41m and adjusted EPS of 59.1p for the June 2018 year-end, up from £38.3m and 55.2p in 2017.
| RICARDO (RCDO) | ||||
| ORD PRICE: | 970p | MARKET VALUE: | £518m | |
| TOUCH: | 976-980p | 12-MONTH HIGH: | 1,028p | LOW: 688p |
| DIVIDEND YIELD: | 2.0% | PE RATIO: | 21 | |
| NET ASSET VALUE: | 307p* | NET DEBT: | 19% | |
| Half-year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2016 | 167 | 12.1 | 17.7 | 5.42 |
| 2017 | 183 | 12.5 | 16.7 | 5.75 |
| % change | +9 | +3 | -6 | +6 |
| Ex-div: | 08 Mar | |||
| Payment: | 06 Apr | |||
| *Includes intangible assets of £95.9m, or 180p a share | ||||
