11th Sep 2014 10:51
LONDON (Alliance News) - Engineering and environmental consultancy Ricardo PLC Thursday reported a higher pretax profit for its last financial year and said it ended the year with a record order book, helped by improved trading in the US and Germany and a recent acquisition.
It added that it was confident in its outlook, partly thanks to the work it does with vehicle makers to help them reduce emissions to meet upcoming reduction legislation, and is also on the lookout for new acquisitions.
The company, which provides technical consulting and performance products to car makers and the wider transport sector, governments, the defence sector and environmental agencies, reported a pretax profit of GBP23.5 million for the 12 months to end-June, up from GBP20.7 million a year earlier, as revenue rose to GBP236.2 million, from GBP229.7 million.
The increase was helped by the full inclusion of the Ricardo-AEA business it acquired in November 2012. Excluding the AEA business for the period between July 1 and November 8, 2013, pretax profit rose 3% to GBP23.3 million, from GBP22.7 million. However, revenue was down 2% due to delays in receiving some orders in its technical consulting business, which then materialised in the final quarter of the year.
Ricardo said its order book at the end of the year stood at GBP142 million, up 17% from GBP121 million a year earlier, as its order intake rose 19% to GBP259 million, from GBP218 million.
"We have ended the year with a strong order intake in the final quarter, leading to a record order book as we enter the new financial year. Market conditions remain positive in the UK and Asia, are improving in the US, and in Germany we enter the new financial year with an order book significantly up on previous years. The strong order book and pipeline across the group, together with the large long-term assembly contracts secured in the year, provide confidence in the further development of the business," Chief Executive Dave Shemmans said in a statement.
Order intake was strongest in the UK and from car and high performance vehicles and motorsport manufacturers, but was broadly diversified across sectors, customers and geographies.
The CEO told Alliance News that the improvement in Germany was being driven by work with BMW on its cars and motorcycles, other motorcycle work, and power generation orders.
The long-term framework assembly deals aren't yet fully included in the company's order book.
The company signed a new multi-year engine supply agreement with McLaren Automotive last December. It expects the deal to earn revenue of about GBP40 million a year from its 2016/17 financial year onwards, or GBP240 million over six years, making it its largest deal ever. It also has another GBP35 million assembly programme not included in the current order book.
The McLaren contract will require capital expenditure of about GBP3.2 million, the CEO said.
Shemmans told Alliance News that the strong order intake had continued into July and August. It had booked orders worth about GBP39 million in the two months, compared to the GBP40 million it booked over the same two months last year.
Chief Financial Officer Ian Gibson said the company is expecting a slight dip in trading in its performance unit in the current financial year, but this will be more than offset by increased technical consulting work.
The company raised its full year dividend to 15.2 pence, from 14.0p a year earlier. It generated net cash of GBP6.5 million in the year, meaning it ended the year with net funds of GBP12.6 million, more than double the GBP6.1 million of a year earlier.
It said that it is actively looking for opportunities to expand and enhance the business. CEO Shemmans said Ricardo was looking at small bolt-on acquisitions that add customers, technology or people to the business, to larger deals that would move the company into new sectors. He said it had looked at a few potential targets during the year, but some weren't for sale while others didn't meet its investment criteria.
Shemmans was confident about the long-term prospects for Ricardo, noting that the major emissions reduction legislation won't come into effect in the EU until 2020 and 2025 in the US.
Ricardo shares were up 4.9% at 646.50 pence Thursday morning
By Steve McGrath; [email protected]; @stevemcgrath1
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