Ricardo PLC (LON:RCDO) shares dipped in Tuesday’s deals after a trading update showed the coronavirus (COVID-19) related impacts.
The engineering contractor, in a trading update ahead of full year results, said order intake totalled over £365mln in the twelve months ended June 30 2020, versus £386mln in the prior year. The total for 2020 included some £16mln from businesses acquired in 2019.
Group revenue is said to be over £350mln, versus £384mln in the year before.
Noting the impact of COVID-19, the company said it now expects underlying pre-tax profit will be £15mln to £16mln – which is lower than prior guidance.
Cost-cutting actions are meanwhile expected to see the cost base reduce by more than £10mln per year.
It noted that net debt stood unchanged (from December 31 2019) at £74mln at the end of June, and, the company had a cash neutral position in the second six months of its financial year.
The company said it doesn’t believe it is appropriate to provide guidance for the year ending 30 June 2021, though it added that it expects its profit and cash performance will be weighted to the second half of the new financial year.
“Having navigated the COVID-19 disruption in the second half of our financial year, we emerged with the same net debt as at 31 December 2019, a good order book in excess of £310m, which is at the same level as June 2019, and a strong pipeline of opportunities,” said Dave Shemmans, Ricardo chief executive.
“Given the economic uncertainty, we approach the year ahead with caution, but we enter the year as a more agile group with a reduced cost base and a number of exciting opportunities.”
In London, Ricardo shares were down 10.5p or 3% to change hands at 336p.
Stockbroker Liberum, in a note, described the orders and revenue performance as “resilient in a very difficult environment” though noted that margins have been severely impacted.
“Margin recovery limits future year downgrades to 15-25%. On the positive side, cash generation has been very strong with the group cash neutral in 2H20 despite much weaker earnings due to tight control of working capital,” Liberum analyst Ryan Gregory said in a note.
“As a result, net debt of £74mln is significantly better than our estimate of £87mln.”