Engineering consultancy Ricardo (RCDO) hopes to raise around £29.3 million of fresh funding as its struggles to cope with the slump in automotive and industrial sector demand during the Covid pandemic.
The cash call will hand the company greater flexibility to invest in the business in the weeks and months ahead and manage its balance sheet debt.
Struck at 333p per new share, the fundraising implies a rough 10% discount to the 369p share price yesterday, and will expand the shares in issue by 16.5% to about 48 million.
THREAT TO PROFITS?
The discount, while not unreasonable by typical fundraising stands, might explain today’s near-6% slump in the share price to 348p. Yet there was more for investors to chew over, with what many might deem a veiled warning about full year performance.
‘We expect the group’s revenue and trading performance to be materially more weighted towards the second half of the current financial year than in previous years’, the company said, code that many investors will fear raises the threat of missing forecasts.
Historically, Ricardo’s operating profit splits roughly 40%/60% on a first half, second half basis. This year, to 30 June 2021, that skew is anticipated nearer 25%/75%, mainly because of workloads and order flows being hobbled by coronavirus.
RECENT TRADING STRONG ON BIG CONTRACTS
Recent trading has also, arguably, been deceptively tilted to the positive by £20 million worth of long-run contracts won.
Overall orders won in the three months to 30 September 2020 jumped 19% to £105 million year-on year. But strip out the long-run contracts and new business was effectively flat, although it would still be £50 million better than the end June 2020 quarter.
Consensus forecasts call for £27.4 million operating profit on roughly £358 million revenue this year, implying earnings per share of 31.4p for a price to earnings (PE) multiple of 11.1.
BOARD BACKING AND RETAIL OFFER
Chief executive Dave Shemmans and Ian Gibson, the finance chief, both intend to subscribe for new shares, 29,128 between them, or about £97,000’s worth. That will add to the pair’s existing 101,085 and 47,827 stakes respectively.
There will also be a private investor offer conducted via PrimaryBid.com, an inclusive move that we see far too little of from corporate fundraisings in general.
