2nd Mar 2023 15:37
(Alliance News) - Analysts at Shore Capital maintained their confidence in Ricardo PLC's full-year outturn on Thursday, tipping the environmental and engineering consulting to post top- and bottom-line growth.
Shore forecast earnings before interest, tax, depreciation and amortisation for Ricardo's financial year ending June 30 to be GBP32.9 million, increasing 17% from GBP28.0 million a year earlier.
It predicts revenue will rise 10% to GBP419.0 million.
Shore analyst Jamie Murray said the broker marginally increased its earnings before interest and tax and earnings per shares forecasts by 0.2% and 3.6% respectively. It did, however, shave its cash flow estimate to reflect a guided second half cash outflow in the Automotive & Industrial Established Mobility segment.
Shore also nudged up Ricardo's net debt forecast by 9-10% to around GBP57.7 million.
That said, Shore is "confident" Ricardo will meet its full-year expectations.
"These results provided better granularity on the split between its Automotive & Industrial Energy & Environment [segment] and Automotive & Industrial Established Mobility [segment]. Previously we assumed a 70% weighting towards Automotive & Industrial Energy & Environment but this has now been nudged up to 74%," Shore analyst Murray said.
"This has a knock on impact on revenue and earnings before interest and tax as Automotive & Industrial Energy & Environment is high margin, high growth, whilst Automotive & Industrial Established Mobility is low margin, low growth. In particular, we downgrade our financial 2024 forecast for Automotive & Industrial Established Mobility. Ebit significantly to reflect a weak performance in the first half and a worsening outlook."
Shore also noted the weak performance for Automotive & Industrial Established Mobility meant a GBP18.3 million restructuring charge was incurred.
It also noted it upgraded Ricardo's financial 2023 defence revenue forecast by 12% to reflect "an impressive H1 where revenue increased by 65% year-on-year", largely due to kit orders from the
US Department of Defense.
"We think geopolitical tensions are likely to keep demand for defence products at elevated levels over the medium term," it added.
Shore rates Ricardo at 'buy' rating, with a 630 pence fair value. Shares in Ricardo were up 0.9% to 570.00p each in London on Thursday afternoon.
"Ricardo expects to deliver a full year performance in line with market expectations. Management anticipates a strong second half driven by continued growth in order intake and backlog," said Murray.
"That said, Automotive & Industrial Established Mobility is likely to perform below expectations whilst the group accelerates a restructuring plan."
By Greg Rosenvinge, Alliance News reporter
Comments and questions to [email protected]
Copyright 2023 Alliance News Ltd. All Rights Reserved.
Related Shares:
Ricardo