Ricardo’s (RCDO) plight in the face of weak automotive markets has continued for some time now, and played a part in the contraction of its half-year profits. The engineering consultancy’s largest division, which is devoted to automotive and industrial work, experienced a 12 per cent revenue fall, while the performance products arm, which manufactures engine and transmission products, declined by 6 per cent over the period.
But Ricardo’s problems will now be compounded by the onset of the coronavirus. The company warned that the outbreak has already disrupted its automotive and rail businesses in China. “We anticipate continuing disruption to client engagement, project delivery and business development in the coming months in mainland China and surrounding countries,” chief executive Dave Shemmans said.
The impact on rail is all the more galling given the division’s progress, having secured 35 per cent growth in its first-half organic order intake. Ricardo has also already witnessed reduced order intake for its US, China and EMEA (Europe, the Middle East and Africa) automotive businesses in its second half.
Liberum forecasts adjusted pre-tax profits and EPS of £30.7m and 44.9p, respectively, for the June 2020 year-end, rising to £35.2m and 51.9p in FY2021.
| RICARDO (RCDO) | ||||
| ORD PRICE: | 640p | MARKET VALUE: | £342m | |
| TOUCH: | 634-656p | 12-MONTH HIGH: | 846p | LOW: 586p |
| DIVIDEND YIELD: | 3.4% | PE RATIO: | 19 | |
| NET ASSET VALUE: | 304p* | NET DEBT: | 64%** | |
| Half-year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2018 | 188 | 10.3 | 14.6 | 6.00 |
| 2019 | 193 | 8.3 | 11.8 | 6.24 |
| % change | +3 | -19 | -19 | +4 |
| Ex-div: | 12 Mar | |||
| Payment: | 06 Apr | |||
| *Includes intangible assets of £124.2m, or 232p a share **Includes IFRS 16 lease liabilities of £29.8m | ||||
