Ricardo PLC (LSE:RCDO) intends to sell its defence business under a five-year strategy to become a "strategic and engineering consultancy in environmental and energy transition".
The London-listed engineering consultancy firm’s defence segment provides technical consulting and operating advice to global clients including the US Army.
Despite enjoying a strong financial performance, Ricardo said the shift towards the environmental consulting market would accelerating its "transition to a high-growth, high-margin, lower-capital intensive business".
Chief executive Graham Ritchie said: "The proposed sale of the group's defense business will enhance Ricardo's focus on growing as a leader in environmental and energy transition markets, whilst allowing for Defense to realise its full potential through new programme development, following the successful award of the ABS programme."
A $385 million ABS (Antilock Brake System) contract extension was won in September 2023.
The divestment is expected to be earnings-dilutive in the near term, but Ricardo suggests that the proceeds could be used for new earnings-accretive acquisition opportunities.