Ricardo Surprises with a 9% Revenue Growth in H1 FY18
Ricardo surprised us by a very solid financial performance in H1 FY18 (ending December 30, 2017). Revenues were up 9.3% to £183m, and up 7% both at CS and CC/CS.
Its Performance Product (small series manufacturing) was up 22% at CS to £41m, thanks to McLaren for the 720S engine, and higher volumes in Bugatti and Porsche transmissions. The large Technical Consulting had a less stellar growth of +4% at CS to £142m. In automotive, Ricardo Technical Consulting’s largest market (£90m in revenues), growth was impacted by challenging market conditions in Detroit. Rail (£30m in revenues) is doing well. Energy & Environment (£20m) was in line with previous growth.
Finally, Ricardo’s EBIT margin was solid at 9.5% in H1 FY18 (down 30 bps).
We had not anticipated such as strong rebound in Ricardo’s H1 FY18 revenues, after a FY17 performance that had been highly profitable (with a 11.6% EBIT margin) but flat (+1% at CC). Oder intake (i.e. bookings) had been disappointing (+1%).
A surprise H1 FY18 performance then, and the future looks promising: order intake was up 32% to £238m. Asia and RoW became the largest geography by bookings of Ricardo to £79m, thanks to a superb 163% growth, and is well ahead of UK and RoE (with bookings of r £65m for each). Automotive bookins were 72% to £98m. Rail order intake was £47m up 57%.
Ricardo continues its transition to hybrid and electric vehicle, (24% of bookings in H1 FY 18 vs. 17% the year before). A priority for the firm is to align its US operations towards those two capabilities, through developing its Santa Clara, CA, office. Outside of the loss-making US, Ricardo is restructuring its activities in Germany. Sign of the times, it is is rethinking its organization and wants to double its nearshore presence in Prague.