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Ricardo PLC (LSE:RCDO) has reported annual results that align broadly with market forecasts, showcasing notable growth in underlying profits. The engineering, environmental, and strategic consultancy firm expressed optimism as it approaches the new financial year.
However, the company's shares experienced a decline on Wednesday, with analysts pointing to a slight dip in order intake as a factor affecting the near-term outlook.
For the year ending 30 June, Ricardo recorded an underlying pre-tax profit of £38.8 million, marking a 14.1% increase from the previous year. This growth was accompanied by an improved operating profit margin of 8.2%, up from 7.6% in the prior year, and a 7% rise in revenues to £474.7 million. The company attributed this positive performance to enhanced operational efficiencies and its ongoing transformation of the operating model, which included centralizing enabling functions and increasing the use of flexible resources.
Despite these gains, order intake declined by 5% to £496.1 million. Ricardo attributed this decrease to challenging comparisons with a record-setting performance from the previous year, along with "continued variability of order timing and order volatility in some end markets."
Shore Capital analyst Jamie Murray highlighted concerns about meeting current revenue forecasts for the upcoming financial year. The order book remained stable, but the reduction in order intake raises concerns. Murray noted that the outlook is somewhat negative due to the drop in order intake and a stable backlog, which could exert downward pressure on forecasts for the financial year 2025.
Additionally, uncertainties in the near term were noted, particularly in the automotive sector—a key market for Ricardo. Major automotive companies, including Volkswagen and Mercedes, have reported declines in volume sales as consumer spending power diminishes.
By 11:54 BST, Ricardo's stock had fallen by 1.5% to 510p. The company’s results reflect solid growth but also underscore challenges related to order intake and market conditions that may influence its performance in the near future.
