- Environmental orders delayed
- California wildfires hit Rail plans
- Worse mix in Auto and Industrial
In an echo of the warning from Renew Holdings (RNWH:AIM) last week (24 January), engineering and infrastructure group Ricardo (RCDO) said it would miss full-year estimates due to events beyond its control including delayed government spending on major projects.
In a further echo, Ricardo shares dropped 74p or 21% to an all-time low of 278p, taking out even their pandemic low, in line with Renew shares which plummeted 22% on the day it warned.
PERFECT STORM
While the group’s Energy and Environment order book for the six months to December rose a healthy 10%, reflecting good progress in securing multi-year contracts particularly in air quality and policy, the phasing of orders meant full-year revenue and earnings would be below target.
Moreover, delayed spending on the latest UK water management plan known as AMP8, which is set to be double that of the previous plan, the timing of global elections and general macro uncertainty have all weighed on the outlook.
In Rail, which saw growth in the first half thanks to previous contract wins, the second half now looks less promising as the California High Speed project has been deferred until further notice due to the wildfires and the need to rebuild a large part of Los Angeles.
The firm still expects to see ‘good organic underlying profit growth’ for the year to June 2025, but profit at the Energy and Environment unit will be no better than flat, earnings in Rail will be down and margins in Automotive and Industrial will be lower due to an unfavourable order mix.
REINVENTING ITSELF
The Shoreham-by-Sea company is in the process of refocusing its portfolio of businesses, having sold its Defence arm and bought E3A, an Australian infrastructure advisory firm to give it further heft in the energy and environmental markets.
Despite the short-term headwinds, ‘Ricardo has demonstrated clear execution aligned to our strategic ambition,’ said chief executive Graham Ritchie.
The sale of the Defence business and the acquisition of E3A ‘support us in simplifying and focusing the group's portfolio, while improving our long-term quality of earnings aligned to the environmental megatrends,’ continued Ritchie.
‘By accelerating our transformation, we are creating long-term and sustainable value for all our stakeholders.’