Ricardo makes a railway engineering acquisition in Australia

/ June 4, 2019/ Australia, M&As (small under $50m in revenues), Ricardo, Train, UK

Ricardo resumed its acquisition after a two-year pause. The company completed the acquisition of a railway engineering firm, Transport Engineering, for AUD 53.6m (~USD 38m) in cash.

Transport Engineering is specialized in the lifecyle of rolling stock, including management and maintenance procurement. The company provides onsite inspections, audits, safety engineering, maintenance engineering, project management, testing, commissioning, and systems integration services.

Transport Engineering had revenues of AUD 21.5m (~USD 15m) in FY18 (ending June 30, 2018) and an adjusted PBT of AUD 4.7m. Its headcount is 100. Folllowing the acquisition, Ricardo renamed Transport Engineering Ricardo Rail Australia.

This is the second acquisition of Ricardo of a rail business, after the 2015 acquisition of Lloyds’ Register Rail for GBP 42.5m. Lloyds Register Raill was significant for Ricardo, with its GBP 48m in revenues and its headcount of 440. Ricardo is chasing after complex rail technology opportunities and expects the Australian market to be high growth.

Ricardo continues to execute on its portfolio and geographical footprint diversification strategy. The company is facing a declining automotive market in the UK, is trying to shift its portfolio towards digital in UK automotive, and is facing delays caused by the never-ending Brexit negotiations.

In its diversification strategy, Ricardo has chosen to be present in multiple geographies and multiple markets, rather than take a focused approach. Does this make sense? This is hard to tell. Ricardo does not provide revenue details on how its diversification outside of automotive is going. Investors seem, however, quite happy with Ricardo and value the firm currently GBP 400m.