TIDMRCDO
RNS Number : 1545G
Ricardo PLC
28 February 2018
28 February 2018
Ricardo plc
Interim results for the six months ended 31 December 2017
Ricardo plc is a global engineering, technical, environmental
and strategic consultancy business, which also manufactures and
assembles niche, high-quality and high-performance products.
HIGHLIGHTS
-- Record order book at GBP302m, up GBP54m on June 2017;
-- Strong order intake at GBP238m, up GBP57m on HY 2016/17;
-- Revenue up 9% to GBP183m and underlying PBT up 8% to GBP16.3m on HY 2016/17;
-- Net debt reduced from GBP38m at June 2017 to GBP32m (after
GBP6m acquisition of Control Point);
-- A good mix of orders in terms of geography, sector and size
with increased orders in hybrid/EV activity at 24% of total Group
order intake, up from 17% in FY 2016/17;
-- Acquisition of Control Point completed in the period and performing well; and
-- Outlook remains positive with a good pipeline.
% Change
HY 2017/18 HY 2016/17 Reported Organic(3)
Order book (GBPm) 302 244 +24 +22
Order intake (GBPm) 238 181 +31 +28
Revenue (GBPm) 182.6 167.0 +9 +7
Underlying(1)
Profit before tax
(GBPm) 16.3 15.1 +8 +6
Basic earnings per
share(2) (p) 23.6 22.3 +6 +3
Statutory
Profit before tax
(GBPm) 12.5 12.1 +3 +1
Basic earnings per
share (p) 16.7 17.7 -6 -9
Dividend per share
(p) 5.75 5.42 +6 n/a
Net debt (31.5) (47.0) +33 n/a
--------------------- ----------- ----------- --------- -----------
(1) Excludes specific adjusting items which have impacted
reported profit before tax, comprised of amortisation of acquired
intangible assets of GBP2.2m (HY 2016/17: GBP1.9m),
acquisition-related expenditure of GBP0.5m (HY 2016/17: GBP1.1m)
and reorganisation costs of GBP1.1m (HY 2016/17: GBPNil).
(2) In the current period, a non-recurring tax charge of GBP1.1m
arising from the reduction in the US federal tax rate was also
classified as a specific adjusting item, which has impacted
reported profit after tax.
(3) Excludes the performance of acquisitions (Control Point
Corporation).
Commenting on the results, Dave Shemmans, Chief Executive
Officer, said:
"Our growth strategy remains focused on the strategic
diversification of our business through organic and acquisitive
actions. We continue to develop the technology and innovative
solutions that will help our clients meet the global challenges of
urbanisation, energy security and efficiency, increasing
environmental and emissions regulations and rising demand for
natural resources.
"We have traded in line with our expectations and I am pleased
to see the strong order intake resulting in an increase of 31%
compared to the first half of the prior year. We have also seen a
good spread of orders across both our Technical Consulting and
Performance Products businesses. This provides a good base as we
head into our traditionally more profitable second half of the
year. I am also particularly pleased with our cash performance in
the period, driven by a strong working capital focus. We look
forward to continued progress in the second half of the year."
Further enquiries:
Ricardo plc
Dave Shemmans, Chief Executive
Officer Tel: 01273 455611
Ian Gibson, Chief Financial Website: www.ricardo.com
Officer
Newgate Communications
LLP Tel: 020 7680 6550
Adam Lloyd / Zoë Sibree E-mail: ricardo@newgatecomms.com
/ Ed Treadwell
MANAGEMENT REVIEW
GROUP RESULTS
The Group has delivered an underlying operating result which is
in line with the Board's expectations for the period. Total Group
revenues increased to GBP182.6m, which was a 9% increase on the
prior period (HY 2016/17: GBP167.0m). Underlying profit before tax,
which excludes specific adjusting items as set out in more detail
in Note 3, increased by 8% to GBP16.3m (HY 2016/17: GBP15.1m), with
the margin reducing slightly to 8.9% from 9.0% in the prior
period.
This growth in underlying profit before tax includes an
additional GBP0.3m from the performance of Control Point
Corporation ('CPC'), an acquisition completed during the period.
Using exchange rates consistent with the prior period, revenue and
underlying profit before tax would have been GBP182.9m and GBP16.6m
respectively, both of which represent growth of 10% on the prior
period.
Revenue PBT
HY 2017/18 GBPm GBPm
----------------------------------- -------- ------
Underlying 182.6 16.3
Less performance of acquisitions:
Control Point Corporation (3.4) (0.3)
Organic 179.2 16.0
----------------------------------- -------- ------
Underlying growth 9% 8%
Organic growth 7% 6%
Organic growth (constant currency
basis) 7% 8%
----------------------------------- -------- ------
Organic growth in revenues and underlying profit before tax was
7% and 6% respectively, which excludes the performance of
acquisitions. Using exchange rates consistent with the prior
period, organic revenue and organic underlying profit before tax
would have been GBP179.5m and GBP16.3m, which represents growth on
the prior period of 7% and 8%, respectively.
The period ended with another record closing order book of
GBP302m, which increased by 24% on the prior period (31 December
2016: GBP244m) and 22% on the year-end (30 June 2017: GBP248m).
Organic growth on the year-end order book was 20%, which excludes
GBP4m of orders secured through the acquisition of CPC. Our order
book comprises the value of all unworked purchase orders
received.
The closing order book comprises a higher proportion of orders
that are for delivery beyond this financial year (31 December 2017:
54%; 31 December 2016: 52%), providing the Group with greater
visibility over the medium-term. This, together with a good
pipeline of further opportunities, continues to represent a
diversified spread of orders across market sectors, customers and
geographies.
Reported profit before tax for the period increased by 3% to
GBP12.5m (HY 2016/17: GBP12.1m). The increase is due to a GBP0.8m
improvement in organic performance, GBP0.3m of profit generated
from acquisitions in the period, a GBP0.6m decrease in
acquisition-related expenditure and a GBP0.1m increase in interest
receivable. This movement is partially offset by a GBP0.3m increase
in the amortisation charge on acquired intangible assets and
reorganisation costs of GBP1.1m.
SEGMENTAL RESULTS
The segmental results for the Group's operating segments are as
follows:
Technical Performance
Consulting Products Total
Revenue GBPm GBPm GBPm
---------------------------------- ------------ ------------ --------
Underlying HY 2017/18 142.0 40.6 182.6
Less performance of acquisitions (3.4) - (3.4)
---------------------------------- ------------ ------------ --------
Organic HY 2017/18 138.6 40.6 179.2
---------------------------------- ------------ ------------ --------
Underlying HY 2016/17 133.6 33.4 167.0
---------------------------------- ------------ ------------ --------
Underlying growth 6% 22% 9%
Organic growth 4% 22% 7%
---------------------------------- ------------ ------------ --------
Technical Performance
Consulting Products Total
Operating profit GBPm GBPm GBPm
---------------------------------- ------------ ------------ --------
Underlying HY 2017/18 13.5 3.9 17.4
Less performance of acquisitions (0.3) - (0.3)
---------------------------------- ------------ ------------ --------
Organic HY 2017/18 13.2 3.9 17.1
---------------------------------- ------------ ------------ --------
Underlying HY 2016/17 12.9 3.4 16.3
---------------------------------- ------------ ------------ --------
Underlying growth 5% 15% 7%
Organic growth 2% 15% 5%
---------------------------------- ------------ ------------ --------
Technical Consulting results
Technical Consulting saw revenues increase by 6% to GBP142.0m
(HY 2016/17: GBP133.6m) and underlying operating profits increase
by 5% to GBP13.5m (HY 2016/17: GBP12.9m). The performance of the
acquired CPC business has been included in the Technical Consulting
segment (see Note 6). Underlying organic revenues and operating
profit, which exclude performance from acquisitions as noted above,
increased to GBP138.6m and GBP13.2m, which represents growth on the
prior period of 4% and 2%, respectively.
Our global business, operating across the Automotive and
Commercial Vehicles sectors, delivered a record order intake in the
period, securing significant multi-year orders from a number of
clients across Europe, Japan and China. This has extended the
ageing of the order book, which also contains a greater degree of
material content than in the prior period. The improvement in the
flow of orders in the period has enabled a return to more efficient
levels of operation, leading to a more profitable business.
The market in Detroit remains challenging and this is reflected
in the order intake during the period. We are implementing plans to
reposition the business and enhance our electrification and
autonomous vehicle service offering. Although our US Automotive
business ended the period with another loss, the level of losses
incurred have reduced compared to the prior period.
The Rail business saw strong order intake across key geographies
and significant growth in the closing order book, particularly in
Asia. The business continues to perform well.
Order intake for the Energy & Environment business was in
line with the prior period. The closing order book includes a
number of multi-year orders for UK Government programmes and
reflects a broad private sector and international customer
base.
Performance Products results
Performance Products had a strong first half. Revenues increased
on the prior period by 22% to GBP40.6m (HY 2016/17: GBP33.4m) and
underlying operating profits increased on the prior period by 15%
to GBP3.9m (HY 2016/17: GBP3.4m). The current period performance
was principally driven by increased volumes of engines for McLaren,
particularly for the higher value 720S engine, together with
increased volumes of transmissions for both Bugatti and Porsche.
These have been partially offset by a reduction in sales to the
Motorsport and Defence sectors. The software business also
continues to perform well.
MARKET AND STRATEGY UPDATE
We have won good levels of new business across all sectors in
the period. Ricardo's strategic focus on diversification and the
ongoing development of innovative products and technologies,
together with the management of complex, large-scale turnkey
programmes, underpins the growth of our Technical Consulting
business. Our Performance Products business also continues to
perform well.
In addition to the organic growth generated by our existing
activities, the acquired CPC business is now being integrated into
our Ricardo Defense Systems ('RDS') business. This acquisition
expands upon the Group's vehicle engineering capabilities in the
Defence sector and adds expertise in distributed software-based
systems and fleet management technologies.
In this period we have also expanded our Santa Clara Technical
Centre and opened a new electrification and vehicle laboratory to
support innovation in the next generation of clean, electrified and
increasingly autonomous vehicles. In addition, we have extended our
collaboration with Roke to develop robust solutions for autonomous
and connected transport systems against cyber attacks.
Our strategy continues to be underpinned by long-term trends -
population growth, urbanisation, energy security and efficiency,
rising demand for natural resources and increasing environmental
and emission regulations.
These global and strategic changes require new technologies,
strategic oversight, programme management and certification - this
is Ricardo's heritage, and through our future-focused technology
roadmapping, it is our business both today, and tomorrow.
We continue to monitor the risk and potential impact of the
referendum vote for the UK to leave the European Union and the
subsequent triggering of 'Article 50', as disclosed on pages 39 and
40 of the Group's Annual Report & Accounts for the year ended
30 June 2017. These risks are mitigated by the strategy of
broadening the base of the business to reduce exposure to any one
specific customer, territory or market sector, and is shown by the
spread of the Group's order intake across these categories.
Ricardo is well placed to assist major international private and
public sector customers across sectors including Automotive,
Off-Highway & Commercial Vehicles, High-Performance Vehicles
& Motorsport, Rail, Energy & Environment, and Defence, and
we continue to seek opportunities to grow both organically and
through partnerships and acquisitions.
We believe that our overall strategy offers risk mitigation
through the avoidance of cyclicality and the promotion of growth,
supported by investment in excellent people through our
apprenticeship programmes, graduate recruitment, and industry
hires, together with our investment in the right technologies and
the right assets.
TECHNICAL CONSULTING
Ricardo's Technical Consulting businesses provide
innovation-focused services in engineering, technical and strategic
consulting to the Automotive, Rail and Environmental consulting
markets, together with independent safety assurance and
accreditation services to private and public sector customers in
the rail industry.
Our capabilities are based on the application of intellectual
property, know-how and knowledge developed through our investment
in research and development ('R&D') and our participation in
collaborative R&D programmes in several industries and
geographies. These capabilities are complemented by a wide range of
design, test and development tools and equipment.
Our staff includes specialists in: electronics; software and
control strategy; mechanical and electrical design; test and
development; vehicle attribute development; prototype build;
programme management; independent assurance; signalling; critical
system design and development; cost estimation; atmospheric
pollutant modelling; environmental science; and environmental
economics.
We have a global infrastructure that helps us to meet the needs
of our customers. Ricardo has 50 sites in 20 countries, with
technical centres in the US, the UK, Netherlands, Germany, Italy,
Czech Republic and China, supported by offices where a local
presence is needed to service our customers. Engineers from the
technical centres are deployed on projects across the globe using
common engineering processes.
Our Energy & Environment consulting services are delivered
mainly from the UK but the business is making increasing use of
Ricardo's global network in support of its growth objectives.
Ricardo's Rail and Strategic Consulting businesses have global
teams operating from a number of different locations.
Energy & Environment
Ricardo Energy & Environment is underpinned by a variety of
multi-year contracts for clients that include governments, their
agencies, the infrastructure and utilities sector and major
corporate customers. Our value proposition is based on our in-depth
knowledge of legislative challenges and future technology
developments in the energy and environmental consulting
sectors.
The key focus for growth in our environmental consulting
business is in providing additional support and developing common
services for our infrastructure and utility sector clients. Our
international growth is underpinned by our work to support the
international climate change process following the Paris Conference
of the Parties ('COP') at COP 21 in 2015, and we had a significant
presence at COP 23 in Bonn. Our major area of interest at COP this
year has been in climate finance; facilitating private and public
partnerships to provide financial support for climate change
programmes.
Key themes for the business are: air quality and emissions;
climate change and sustainability; energy networks and smart grids;
resource efficiency and waste management; sustainable transport;
water resource management; and chemical risk.
Our energy engineering business retains a focus on the
development of large-scale generator sets, but increasingly we are
seeing collaborations around 'smart grids', energy economics and
technologies as part of the electrification agenda. Across the
renewables business, we continue to pursue a range of opportunities
in offshore wind, community scale solutions and energy storage
applications.
Rail
Our Rail business has continued the strong performance of the
previous year, with a record order intake reported for the opening
months of the current period. Activity in Europe remains buoyant,
with operations in the UK, Netherlands, Spain and Denmark
successfully securing new assignments.
The Asian market is proving particularly strong, with a notable
increase in demand across the region for systems engineering
expertise including 'reliability, availability, maintainability and
safety' ('RAMS') analysis, human factors engineering, and ensuring
electromagnetic compatibility. These are areas in which our
technical consultancy offering has long-established capability.
This is perhaps best illustrated by the new partnerships
recently forged with Asia's major rolling stock OEMs, where
Ricardo's expertise is being used to support the introduction of
their railway vehicles into service in cities such as Chicago,
Boston, Tel Aviv and Melbourne.
Automotive
In the first half of the year we have seen good levels of
activity within Passenger Cars, Motorcycles and High-Performance
Vehicles in China and across Europe, while activity in the US has
been focused on growth in clean energy vehicle activities led by
our technical centre in Silicon Valley.
We have secured a range of programmes in the electrified vehicle
market across both light- and heavy-duty applications and 24% of
the Group's order intake in the period was in connection with
vehicle electrification programmes. This compares to 17% of the
Group's order intake for the year to 30 June 2017. The pipeline
remains strong, especially with the growth of new entrants seeking
Ricardo's engineering expertise.
We continue to invest in advanced combustion and other key
technologies in areas related to improving overall vehicle
efficiency, such as intelligent driveline and electrification. Fuel
economy, electrification and CO(2) reduction remain the top global
industry priorities and the future of mobility solutions -
connected and autonomous vehicle technology, in particular,
continues to attract significant interest across all
geographies.
Off-Highway & Commercial Vehicles
We have seen growth and secured a number of large engine,
transmission and vehicle integration projects for both medium- and
heavy-duty vehicles. We continue to see demand for Ricardo's
capabilities in the Commercial Vehicles sector across Asia, in
particular. The order book and pipeline is based around a broad mix
of opportunities with a growing proportion of electrification and
autonomous vehicle development programmes. In the US, greenhouse
gas and low nitrogen oxide ('NOx') standards are driving interest
in powertrain efficiency as well as the latest requirement for
in-use compliance testing in support of our customers' existing
fleets.
We are seeing market interest in the areas where we have focused
on developing our product offering, such as ultra-low emissions,
fuel economy improvement, system optimisation, platooning and
hybridisation.
In the Off-Highway business, activity remains at a relatively
low level in Europe following the recent implementation of Stage IV
emissions standards, while in Asia the industry is showing renewed
growth, especially in the transmission and driveline areas; here,
Ricardo is securing an increasing number of projects, including
large, multi-year programmes.
We see increasing demand for high-speed diesel generator sets
and main propulsion systems for marine vessels, and for the
conversion of engines for gas or dual fuel operation. The majority
of our activities in this industry have been based around failure
analysis, investigations, specialist design and development.
Defence
Our newly acquired CPC business, now known as Ricardo Control
Point, is performing well. In the UK, we have grown our marine
defence business, both surface, and sub-surface and in Europe and
Asia we have secured contracts to deliver new engine and
transmission designs for land vehicles and we are pursuing other
large opportunities.
PERFORMANCE PRODUCTS
We manufacture and assemble low-volume, high-quality prototypes
and niche volumes of complex engine, transmission and vehicle
products which have either been designed by the Technical
Consulting side of the business, by our motorsport products design
team within Performance Products, or by our clients. To service and
support our customers, we utilise the same global network of
engineering centres as the Technical Consulting business.
The Performance Products business also encompasses the
activities of Ricardo Software, which develops leading-edge
powertrain and vehicle computer-aided engineering ('CAE') software
products licenced to over 2,000 users globally in the automotive,
water and renewable energy industries. Global development teams are
based throughout our network of technical centres and we have a
diverse portfolio of opportunities covering the Automotive,
High-Performance Vehicles & Motorsport and Defence sectors,
together with industrial applications, and as a result, the
Performance Products business is in a good position to deliver
future growth.
High-Performance Vehicles & Motorsport
The production of engines for the McLaren 540C, 570GT, 570S and
720S continued during the period in line with expectations, having
introduced the new engine variant for the class-leading 720S in the
previous financial year. The production of Bugatti transmissions
likewise continues to meet the terms of the supply agreement, while
work is well underway on the transmission for the new Aston Martin
Valkyrie.
Ricardo remains a key supplier to the Motorsport sector,
continuing to manufacture for Formula 1 and the Porsche Cup, whilst
providing design and development services, including manufactured
products to GT3, Le Mans, World Rally Championships, R5 Rally and
specification Formula Series, such as Japanese Super Formula 14,
Indy Lights and the Formula V8 3.5.
Defence
Ricardo continues to supply spare parts to the UK Ministry of
Defence ('MOD') to support the Cougar and Weapons Mount
Installation Kit ('WMIK') vehicle fleets. Ricardo Defense Systems
and Lightweight Innovations For Tomorrow ('LIFT'), a Manufacturing
USA institute, fitted our optimised anti-lock braking system
('ABS') and electronic stability control ('ESC') to 10 Michigan
National Guard vehicles to reduce fatal rollovers in High Mobility
Multipurpose Wheeled Vehicles ('HMMWVs'). The system is now
available for purchase by National Guard units nationwide.
OTHER FINANCIAL MATTERS
Acquisitions and acquisition-related intangible assets
As set out in more detail in Note 6, the Group acquired the
entire issued share capital of Control Point Corporation ('CPC') on
8 September 2017 for initial cash consideration of GBP6.3m ($8.3m)
and contingent cash consideration of GBP1.4m ($1.9m), based upon an
initial probability-weighted assessment of CPC achieving certain
financial performance targets. The maximum cash outflow that could
be required to acquire CPC is GBP8.7m ($11.5m), including payments
for the retention of specific individuals which are not included as
consideration.
This investment added provisional goodwill of GBP1.6m ($2.1m) to
a new Ricardo Defense Systems cash-generating unit. In addition,
acquisition-related intangible assets of GBP2.9m ($3.8m) have been
provisionally identified, which have a net book value at the period
end of GBP2.6m ($3.6m).
A preliminary exercise to assess the fair value of the
identifiable net assets as a result of this acquisition commenced
during the period and will be finalised during the second half of
the financial year. In accordance with IFRS 3 'Business
Combinations', management has one year from the date of acquisition
to finalise this assessment.
As a result of the CPC acquisition completed in the period,
amortisation of acquisition-related intangible assets has increased
to GBP2.2m (HY 2016/17: GBP1.9m). The Group also incurred
acquisition-related expenditure of GBP0.5m (HY 2016/17: GBP1.1m)
during the period, GBP0.3m of which was in respect of the CPC
acquisition. The acquisition-related expenditure and amortisation
of acquisition-related intangible assets have been charged to the
Condensed Consolidated Income Statement as specific adjusting
items. Further detail is disclosed in Note 3.
Also included within specific adjusting items is GBP1.1m of
reorganisation costs (HY 2016/17: GBPNil). These costs have been
incurred as part of the Group's fundamental restructuring of its
Automotive businesses across Europe, China and North America, to
combine their operations into a single, global Automotive business.
Further restructuring activities are planned in order to complete
the reorganisation of the Group's Automotive businesses.
Research and Development
The Group continues to invest in Research and Development
('R&D'), and spent GBP4.0m (HY 2016/17: GBP4.0m) before
government grant income of GBP0.9m (HY 2016/17: GBP0.9m). This
includes costs capitalised in accordance with IFRS of GBP1.5m (HY
2016/17: GBP1.3m) in respect of ongoing development expenditure on
a range of product developments around the Group and reflects our
sustained focus on development activity within Europe and the
US.
Net finance costs
Finance income was GBP0.2m (HY 2016/17: GBP0.1m) and finance
costs were GBP1.3m (HY 2016/17: GBP1.3m) for the period, giving a
net finance cost of GBP1.1m (HY 2016/17: GBP1.2m). The increase in
finance income was due to higher levels of cash in the Group as a
result of a drive to improve working capital during the period.
Taxation
The total tax charge for the period was GBP3.6m (HY 2016/17:
GBP2.7m) and the total effective rate of tax was 28.8% (HY 2016/17:
22.3%). The increase in the reported rate includes the impact on
existing deferred tax assets in the US arising from the
substantively enacted reduction in the US federal tax rate. This
gave rise to a GBP1.1m reduction in the carrying value of the asset
and has been charged to the Condensed Consolidated Income Statement
as a specific adjusting item, as disclosed in Note 3.
The underlying effective tax rate was 22.7% (HY 2016/17: 21.9%),
which has increased on the prior period due to a change in the mix
of profits across the territories in which the Group operates.
The Group had total deferred tax assets of GBP12.9m (30 June
2017: GBP14.3m), which includes deferred tax assets in Germany of
GBP2.4m (30 June 2017: GBP2.4m) and the US of GBP4.6m (30 June
2017: GBP5.9m) which primarily relate to the availability of
historic losses and R&D tax credits, respectively.
Earnings per share
Basic earnings per share decreased by 6% to 16.7p (HY 2016/17:
17.7p). The Directors consider that an underlying basic earnings
per share provides a more useful indication of underlying
performance and trends over time. Underlying basic earnings per
share for the period increased by 6% to 23.6p (HY 2016/17:
22.3p).
Basic earnings per share, with a reconciliation to an underlying
basic earnings per share, which excludes the net-of-tax impact of
specific adjusting items, is disclosed in Note 4.
Dividend
As set out in more detail in Note 5, the Board has declared a 6%
increase in the interim dividend to 5.75p per share (HY 2016/17:
5.42p), reflecting the Board's confidence in the prospects of the
Group. The dividend will be paid on 6 April 2018 to shareholders on
the register at the close of business on 9 March 2018.
Capital investment
Cash expenditure on property, plant and equipment was GBP3.2m
(HY 2016/17: GBP3.5m) as we continue to invest in our business
operations. This expenditure included new and upgraded test cell
equipment and IT hardware, together with the fit out of new office
locations in the UK.
We continue to review the management and usage of our other test
facilities outside of the UK, in light of changes in the market and
our desire to increase operational effectiveness.
Net debt
Closing net debt was GBP31.5m (30 June 2017: GBP37.9m; 31
December 2016: GBP47.0m). The Group had a reduction in net debt of
GBP6.4m (FY 2016/17: GBP3.5m increase; HY 2016/17: GBP12.6m
increase), after consideration paid in respect of acquisitions, net
of cash acquired, of GBP5.7m (FY 2016/17: GBP1.9m; HY 2016/17:
GBP2.1m) and acquisition and restructuring-related payments of
GBP2.3m (FY 2016/17: GBP4.4m; HY 2016/17: GBP1.6m). The composition
of net debt is defined in Note 8.
The reduction in net debt was due to a renewed focus on the
management of working capital, which significantly improved during
the period despite continued revenue growth. This has been achieved
through targeted programmes across all our major businesses to
enhance working capital processes and commercial terms with
customers, including more frequent invoicing milestones and
increased payments on account.
Going forward, we expect levels of working capital to fluctuate,
driven by both the seasonality of our business and the variation in
agreed commercial terms with an increasingly diverse customer
base.
Banking facilities
At the end of the financial period, the Group held total
facilities of GBP91.1m (30 June 2017: GBP91.1m), which included
committed facilities of GBP75.0m (30 June 2017: GBP75.0m). Of the
committed facilities, a GBP35.0m facility is available until
September 2019 and GBP40.0m is available until April 2020. In
addition, the Group has uncommitted facilities including overdrafts
of GBP16.1m (30 June 2017: GBP16.1m), which mature throughout this
and the next financial year and are renewable annually.
Committed facilities of GBP61.8m (30 June 2017: GBP59.7m), net
of direct issue costs, were drawn primarily to fund previous
acquisitions. These are denominated in Pounds Sterling and have
variable rates of interest dependent upon the leverage of the
Group, which range from 1.6% to 2.6% above LIBOR and are repayable
in the year ending 30 June 2020.
Foreign exchange
On consolidation, income and expense items are translated at the
average exchange rates for the period. The Group is exposed to
movements in the Pound Sterling exchange rate, principally from
work carried out with customers that transact in Euros, US Dollars
and Chinese Renminbi. The average value of Pound Sterling was 3.7%
lower against the Euro, 3.1% higher against the US Dollar and 1.5%
higher against the Chinese Renminbi during the six months ended 31
December 2017 compared to the six months ended 31 December
2016.
Had the results for the six months ended 31 December 2017 been
stated at constant exchange rates, revenue and profit before tax
would have both been GBP0.3m higher than reported. Significant
resulting exposures are managed through foreign currency
contracts.
Pensions
The Group's defined benefit pension scheme operates within the
UK. The accounting deficit measured in accordance with IAS 19
'Employee Benefits' was GBP12.3m before tax (30 June 2017:
GBP22.2m; 31 December 2016: GBP30.1m), or GBP10.2m after tax (30
June 2017: GBP18.1m; 31 December 2016: GBP24.4m).
The GBP9.9m decrease in the pre-tax pension deficit since the
year-end was primarily due to the return on plan assets of GBP6.3m
and the effect of using updated census data of GBP6.7m, together
with GBP2.2m of cash contributions paid to the scheme during the
financial period. These favourable movements are offset by both the
use of an updated set of mortality assumptions and a reduction in
the discount rate assumption to 2.55% (30 June 2017: 2.60%).
Ricardo remains committed to paying GBP4.3m each year until
January 2021 to fund the pension deficit. The next triennial
actuarial valuation, which will assess the level of Ricardo's
future annual contributions, is currently in progress.
OUTLOOK
Our growth strategy remains focused on the strategic
diversification of our business through organic and acquisitive
actions. We continue to develop the technology and innovative
solutions that will help our clients meet the global challenges of
urbanisation, energy security and efficiency, increasing
environmental and emissions regulations and rising demand for
natural resources.
We have traded in line with our expectations and I am pleased to
see the strong order intake resulting in an increase of 31%
compared to the first half of the prior year. We have also seen a
good spread of orders across both our Technical Consulting and
Performance Products businesses. This provides a good base as we
head into our traditionally more profitable second half of the
year. I am also particularly pleased with our cash performance in
the period, driven by a strong working capital focus. We look
forward to continued progress in the second half of the year.
Dave Shemmans
Chief Executive Officer
27 February 2018
Note: Certain statements in this press release are
forward-looking. Although these forward-looking statements are made
in good faith based on the information available to the Directors
at the time of their approval of the report, we can give no
assurance that these expectations will prove to have been correct.
Because these statements involve risks and uncertainties, actual
results may differ materially from those expressed or implied by
these forward-looking statements. We undertake no obligation to
update any forward-looking statements whether as a result of new
information, future events or otherwise.
Condensed consolidated income statement
for the six months ended 31 December 2017
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2017 2016 2017
(Unaudited) (Unaudited) (Audited)
Note GBPm GBPm GBPm
----------------------------- ----- ------------- ------------- ------------
Revenue 2 182.6 167.0 352.1
Cost of sales (115.8) (104.4) (219.2)
----------------------------- ----- ------------- ------------- ------------
Gross profit 66.8 62.6 132.9
Administrative expenses (49.7) (46.6) (92.6)
Other income 0.3 0.3 0.5
----------------------------- ----- ------------- ------------- ------------
Underlying operating
profit 2 17.4 16.3 40.8
Specific adjusting
items(1) 3 (3.8) (3.0) (6.1)
----------------------------- ----- ------------- ------------- ------------
Operating profit 2 13.6 13.3 34.7
Finance income 0.2 0.1 0.2
Finance costs (1.3) (1.3) (2.7)
----------------------------- ----- ------------- ------------- ------------
Net finance costs (1.1) (1.2) (2.5)
----------------------------- ----- ------------- ------------- ------------
Profit before taxation 12.5 12.1 32.2
Comprising:
Underlying profit before
taxation 16.3 15.1 38.3
Specific adjusting
items(1) 3 (3.8) (3.0) (6.1)
----------------------------- ----- ------------- ------------- ------------
Taxation(2) (3.6) (2.7) (7.4)
----------------------------- ----- ------------- ------------- ------------
Profit for the period 8.9 9.4 24.8
----------------------------- ----- ------------- ------------- ------------
Profit attributable
to:
- Owners of the parent 8.9 9.4 24.8
- Non-controlling interests - - -
----------------------------- ----- ------------- ------------- ------------
8.9 9.4 24.8
----------------------------- ----- ------------- ------------- ------------
Earnings per ordinary share attributable to owners
of the parent during the period
--------------------------------------------------------------------------------
Basic 4 16.7p 17.7p 46.8p
Diluted 4 16.6p 17.5p 46.4p
----------------------------- ----- ------------- ------------- ------------
(1) Specific adjusting items comprise amortisation of acquired
intangible assets, acquisition-related expenditure and
reorganisation costs.
(2) In the current period, a non-recurring tax charge arising
from the reduction in the US federal tax rate was also classified
as a specific adjusting item. Further details are given in Note
3.
Condensed consolidated statement of comprehensive income
for the six months ended 31 December 2017
Year
Six months Six months ended
ended ended 30
31 December 31 December June
2017 2016 2017
(Unaudited) (Unaudited) (Audited)
GBPm GBPm GBPm
----------------------------------------- ------------- ------------- ----------
Profit for the period 8.9 9.4 24.8
----------------------------------------- ------------- ------------- ----------
Items that will not be reclassified
to profit or loss:
Remeasurements of the defined
benefit scheme 7.9 (10.5) (4.4)
Deferred tax on remeasurements
of the defined benefit scheme (1.4) 1.8 0.8
----------------------------------------- ------------- ------------- ----------
Total items that will not be
reclassified to profit or loss 6.5 (8.7) (3.6)
----------------------------------------- ------------- ------------- ----------
Items that may be subsequently
reclassified to profit or loss:
Currency translation on foreign
currency net investments (0.5) 3.9 3.0
----------------------------------------- ------------- ------------- ----------
Total items that may be subsequently
reclassified to profit or loss (0.5) 3.9 3.0
----------------------------------------- ------------- ------------- ----------
Total other comprehensive income/(loss)
for the period (net of tax) 6.0 (4.8) (0.6)
----------------------------------------- ------------- ------------- ----------
Total comprehensive income
for the period 14.9 4.6 24.2
----------------------------------------- ------------- ------------- ----------
Attributable to:
- Owners of the parent 14.9 4.6 24.2
- Non-controlling interests - - -
----------------------------------------- ------------- ------------- ----------
14.9 4.6 24.2
----------------------------------------- ------------- ------------- ----------
Condensed consolidated statement of financial position
as at 31 December 2017
31 December 31 December 30 June
2017 2016 2017
(Unaudited) (Unaudited) (Audited)
Note GBPm GBPm GBPm
----------------------------- ----- ------------ ------------ ----------
Assets
Non-current assets
Goodwill 63.7 60.5 62.0
Other intangible assets 32.2 35.4 32.4
Property, plant and
equipment 47.9 54.1 48.0
Deferred tax assets 12.9 13.2 14.3
----------------------------- ----- ------------ ------------ ----------
156.7 163.2 156.7
----------------------------- ----- ------------ ------------ ----------
Current assets
Inventories 13.9 12.6 13.9
Trade and other receivables 141.8 138.6 137.6
Derivative financial
assets 0.6 0.9 0.9
Current tax assets 0.6 0.7 0.6
Cash and cash equivalents 8 34.5 28.2 27.9
----------------------------- ----- ------------ ------------ ----------
191.4 181.0 180.9
Non-current assets
held for sale 2.7 - 2.8
----------------------------- ----- ------------ ------------ ----------
194.1 181.0 183.7
----------------------------- ----- ------------ ------------ ----------
Total assets 350.8 344.2 340.4
----------------------------- ----- ------------ ------------ ----------
Liabilities
Current liabilities
Borrowings 8 (4.2) (5.5) (6.0)
Trade and other payables (94.3) (89.4) (82.1)
Current tax liabilities (5.5) (5.5) (6.3)
Derivative financial
liabilities (0.1) (0.2) (0.7)
Provisions (1.1) (1.2) (1.3)
----------------------------- ----- ------------ ------------ ----------
(105.2) (101.8) (96.4)
----------------------------- ----- ------------ ------------ ----------
Net current assets 88.9 79.2 87.3
----------------------------- ----- ------------ ------------ ----------
Non-current liabilities
Borrowings 8 (61.8) (69.7) (59.8)
Retirement benefit
obligations (12.3) (30.1) (22.2)
Deferred tax liabilities (5.2) (2.9) (5.0)
Provisions (2.0) (1.6) (1.3)
----------------------------- ----- ------------ ------------ ----------
(81.3) (104.3) (88.3)
----------------------------- ----- ------------ ------------ ----------
Total liabilities (186.5) (206.1) (184.7)
----------------------------- ----- ------------ ------------ ----------
Net assets 164.3 138.1 155.7
----------------------------- ----- ------------ ------------ ----------
Equity
Share capital 13.4 13.3 13.3
Share premium 14.3 14.3 14.3
Other reserves 15.1 16.5 15.6
Retained earnings 121.2 93.7 112.2
----------------------------- ----- ------------ ------------ ----------
Equity attributable
to owners of the parent 164.0 137.8 155.4
Non-controlling interests 0.3 0.3 0.3
----------------------------- ----- ------------ ------------ ----------
Total equity 164.3 138.1 155.7
----------------------------- ----- ------------ ------------ ----------
Condensed consolidated statement of changes in equity
for the six months ended 31 December 2017
Attributable to owners
of the parent
----------------------------------------------------
Share Share Other Retained Non-controlling Total
capital premium reserves earnings Total interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------- --------- --------- ---------- ---------- ------ ---------------- --------
At 1 July 2017 13.3 14.3 15.6 112.2 155.4 0.3 155.7
Profit for the period - - - 8.9 8.9 - 8.9
Other comprehensive
(loss)/income for
the period - - (0.5) 6.5 6.0 - 6.0
----------------------------- --------- --------- ---------- ---------- ------ ---------------- --------
Total comprehensive
(loss)/income for
the period - - (0.5) 15.4 14.9 - 14.9
Equity-settled transactions - - - 1.0 1.0 - 1.0
Proceeds from shares
issued 0.1 - - - 0.1 - 0.1
Ordinary share dividends - - - (7.4) (7.4) - (7.4)
----------------------------- --------- --------- ---------- ---------- ------ ---------------- --------
At 31 December 2017
(unaudited) 13.4 14.3 15.1 121.2 164.0 0.3 164.3
----------------------------- --------- --------- ---------- ---------- ------ ---------------- --------
At 1 July 2016 13.2 14.3 12.6 99.4 139.5 - 139.5
Profit for the period - - - 9.4 9.4 - 9.4
Other comprehensive
income/(loss) for
the period - - 3.9 (8.7) (4.8) - (4.8)
----------------------------- --------- --------- ---------- ---------- ------ ---------------- --------
Total comprehensive
income for the period - - 3.9 0.7 4.6 - 4.6
Reclassification
of non-controlling
interests - - - (0.3) (0.3) 0.3 -
Equity-settled transactions - - - 0.8 0.8 - 0.8
Proceeds from shares
issued 0.1 - - - 0.1 - 0.1
Ordinary share dividends - - - (6.9) (6.9) - (6.9)
----------------------------- --------- --------- ---------- ---------- ------ ---------------- --------
At 31 December 2016
(unaudited) 13.3 14.3 16.5 93.7 137.8 0.3 138.1
----------------------------- --------- --------- ---------- ---------- ------ ---------------- --------
At 1 July 2016 13.2 14.3 12.6 99.4 139.5 - 139.5
Profit for the year - - - 24.8 24.8 - 24.8
Other comprehensive
income/(loss) for
the year - - 3.0 (3.6) (0.6) - (0.6)
Total comprehensive
income for the year - - 3.0 21.2 24.2 - 24.2
Reclassification
of non-controlling
interests - - - (0.3) (0.3) 0.3 -
Equity-settled transactions - - - 1.6 1.6 - 1.6
Tax credit relating
to share option
schemes - - - 0.1 0.1 - 0.1
Proceeds from shares
issued 0.1 - - - 0.1 - 0.1
Ordinary share dividends - - - (9.8) (9.8) - (9.8)
----------------------------- --------- --------- ---------- ---------- ------ ---------------- --------
At 30 June 2017
(audited) 13.3 14.3 15.6 112.2 155.4 0.3 155.7
----------------------------- --------- --------- ---------- ---------- ------ ---------------- --------
Condensed consolidated statement of cash flows
for the six months ended 31 December 2017
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2017 2016 2017
(Unaudited) (Unaudited) (Audited)
Note GBPm GBPm GBPm
--------------------------------- ----- ------------ ------------ ----------
Cash flows from operating
activities
Cash generated from operations 7 30.3 8.8 24.3
Net interest paid (1.3) (0.9) (1.4)
Tax paid (4.7) (4.0) (7.6)
--------------------------------- ----- ------------ ------------ ----------
Net cash generated from
operating activities 24.3 3.9 15.3
--------------------------------- ----- ------------ ------------ ----------
Cash flows from investing
activities
Acquisition of subsidiaries,
net of cash acquired 6 (5.7) (2.1) (1.9)
Purchases of property, plant
and equipment (3.2) (3.5) (6.3)
Proceeds from sale of property,
plant and equipment 0.3 0.1 4.0
Purchases of intangible
assets (1.9) (2.9) (5.6)
--------------------------------- ----- ------------ ------------ ----------
Net cash used in investing
activities (10.5) (8.4) (9.8)
--------------------------------- ----- ------------ ------------ ----------
Cash flows from financing
activities
Proceeds from issuance of
ordinary shares 0.1 0.1 0.1
Net proceeds from borrowings 2.0 15.0 5.1
Dividends paid to shareholders 5 (7.4) (6.9) (9.8)
--------------------------------- ----- ------------ ------------ ----------
Net cash (used in)/generated
from financing activities (5.3) 8.2 (4.6)
--------------------------------- ----- ------------ ------------ ----------
Effect of exchange rate
changes on cash and cash
equivalents (0.1) (1.3) 0.7
--------------------------------- ----- ------------ ------------ ----------
Net increase in cash and
cash equivalents 8 8.4 2.4 1.6
Cash and cash equivalents
at beginning of period 22.0 20.4 20.4
--------------------------------- ----- ------------ ------------ ----------
Net cash and cash equivalents
at end of period 8 30.4 22.8 22.0
--------------------------------- ----- ------------ ------------ ----------
Notes to the condensed interim financial statements
for the six months ended 31 December 2017 (unaudited)
1. General information
Ricardo plc (the 'Company') is a public limited company, which
is listed on the London Stock Exchange and incorporated and
domiciled in the United Kingdom. The address of its registered
office is Shoreham Technical Centre, Shoreham-by-Sea, West Sussex,
BN43 5FG, England, United Kingdom, and its registered number is
222915.
This preliminary announcement is based on the interim report of
Ricardo plc for the six months ended 31 December 2017, which was
approved for issue by the Board of Directors on 27 February 2018.
The interim report has not been audited but it has been subject to
an independent review by PricewaterhouseCoopers LLP.
This preliminary announcement has been prepared in accordance
with the Disclosure and Transparency Rules of the Financial Conduct
Authority and IAS 34 'Interim Financial Reporting', as adopted by
the European Union. The financial information herein does not
comprise statutory accounts within the meaning of Section 434 of
the Companies Act 2006.
The second half of the Group's financial year has historically
seen a higher level of profit as it is normally subject to a
greater number of working days and less annual leave being taken,
both internally and by our customers.
2. Operating segments
Six months ended 31 December 2017
Technical Performance Products Head
Consulting Office Total
GBPm GBPm GBPm GBPm
Total segment revenue 142.0 42.4 - 184.4
Inter-segment revenue - (1.8) - (1.8)
---------------------------------- ----------- -------------------- ------- -------
Revenue from external customers 142.0 40.6 - 182.6
---------------------------------- ----------- -------------------- ------- -------
Underlying operating profit 13.5 3.9 - 17.4
Specific adjusting items (3.3) - (0.5) (3.8)
Operating profit/(loss) 10.2 3.9 (0.5) 13.6
Net finance costs - - (1.1) (1.1)
---------------------------------- ----------- -------------------- ------- -------
Profit/(loss) before taxation 10.2 3.9 (1.6) 12.5
---------------------------------- ----------- -------------------- ------- -------
Total assets 293.3 39.9 17.6 350.8
---------------------------------- ----------- -------------------- ------- -------
Six months ended 31 December 2016
Technical Performance Products Head
Consulting Office Total
GBPm GBPm GBPm GBPm
Total segment revenue 133.7 34.1 - 167.8
Inter-segment revenue (0.1) (0.7) - (0.8)
---------------------------------- ----------- -------------------- ------- -------
Revenue from external customers 133.6 33.4 - 167.0
---------------------------------- ----------- -------------------- ------- -------
Underlying operating profit 12.9 3.4 - 16.3
Specific adjusting items (3.0) - - (3.0)
Operating profit 9.9 3.4 - 13.3
Net finance costs - - (1.2) (1.2)
---------------------------------- ----------- -------------------- ------- -------
Profit/(loss) before taxation 9.9 3.4 (1.2) 12.1
---------------------------------- ----------- -------------------- ------- -------
Total assets 280.1 43.3 20.8 344.2
---------------------------------- ----------- -------------------- ------- -------
Year ended 30 June 2017
Technical Performance Products Head
Consulting Office Total
GBPm GBPm GBPm GBPm
Total segment revenue 280.6 73.3 - 353.9
Inter-segment revenue (0.1) (1.7) - (1.8)
---------------------------------- ----------- -------------------- ------- -------
Revenue from external customers 280.5 71.6 - 352.1
---------------------------------- ----------- -------------------- ------- -------
Underlying operating profit 32.8 8.0 - 40.8
Specific adjusting items (5.0) - (1.1) (6.1)
Operating profit/(loss) 27.8 8.0 (1.1) 34.7
Net finance costs - - (2.5) (2.5)
---------------------------------- ----------- -------------------- ------- -------
Profit/(loss) before taxation 27.8 8.0 (3.6) 32.2
---------------------------------- ----------- -------------------- ------- -------
Total assets 280.6 42.7 17.1 340.4
---------------------------------- ----------- -------------------- ------- -------
3. Specific adjusting items
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2017 2016 2017
GBPm GBPm GBPm
------------------------------------- ------------ ------------ --------
Amortisation of acquisition-related
intangible assets 2.2 1.9 4.0
Acquisition-related expenditure(1) 0.5 1.1 1.7
Reorganisation costs(2) 1.1 - 0.4
------------------------------------- ------------ ------------ --------
Total included in profit
before tax 3.8 3.0 6.1
------------------------------------- ------------ ------------ --------
Non-recurring impact of
change in US federal tax
rate(3) 1.1 - -
------------------------------------- ------------ ------------ --------
Total included in profit
after tax 4.9 3.0 6.1
------------------------------------- ------------ ------------ --------
(1) Acquisition-related expenditure comprised costs incurred in
the current period and prior year for services rendered to, and
consumed by, the Group to effect the Control Point Corporation
acquisition (see Note 6), together with a proportion of the cost
incurred in the current period to retain specific individuals.
Costs were also incurred throughout the prior year for services
rendered to, and consumed by, the Group to effect the Motorcycle
Engineering Italia (Exnovo) acquisition, together with the costs of
the subsequent integration and associated earn-out arrangements of
this business, as well as those of the Cascade acquisition
completed previously. In addition, costs were incurred in the prior
period associated with the completion of the integration of the LR
Rail business subsequent to its acquisition, together with
dual-running costs incurred during a transitional services period
with Lloyd's Register. These costs were partially offset by the
release in the prior year of previously recognised fair value
provisions on acquisition as those risks had not crystallised
during the integration of the business as originally
anticipated.
(2) Reorganisation costs relate to non-recurring expenditure
incurred as part of a fundamental restructuring of the Group's
Automotive businesses across Europe, China and North America, to
combine their operations into a single, global Automotive business.
The incremental costs incurred in the period comprised
restructuring activities carried out by either contractors or
full-time employees who have had their roles back-filled by
contractors, together with redundancy costs. In addition, further
activities were also undertaken to prepare the test cell facilities
and related equipment at the Group's technical centre in Chicago
for disposal. Further restructuring activities are planned in order
to complete the reorganisation of the Group's Automotive
businesses.
(3) Tax reform legislation in the US was enacted on 22 December
2017, which became effective from 1 January 2018 and reduced the
federal taxation rate to 21%. These changes are substantively
enacted for accounting purposes at the reporting date and resulted
in a GBP1.1m ($1.5m) non-recurring deferred tax charge which
reduced the carrying value of net deferred tax assets held in the
US. This non-recurring deferred tax charge is included within the
taxation line of the Condensed Consolidated Income Statement.
4. Earnings per share
Six months Six months Year
ended ended ended
31 December 31 December 30 June
2017 2016 2017
GBPm GBPm GBPm
---------------------------------- ------------ ------------ -----------
Earnings attributable to
owners of the parent 8.9 9.4 24.8
---------------------------------- ------------ ------------ -----------
Add back amortisation of
acquisition-related intangible
assets (net of tax) 1.6 1.5 3.1
Add back acquisition-related
expenditure (net of tax) 0.7 0.9 1.3
Add back reorganisation costs
(net of tax) 0.3 - 0.3
Add back non-recurring impact
of change in US federal tax
rate 1.1 - -
---------------------------------- ------------ ------------ -----------
Underlying earnings attributable
to owners of the parent 12.6 11.8 29.5
---------------------------------- ------------ ------------ -----------
Number Number Number
of shares of shares of shares
millions millions millions
---------------------------------- ------------ ------------ -----------
Basic weighted average number
of shares in issue 53.4 52.9 53.0
---------------------------------- ------------ ------------ -----------
Effect of dilutive potential
shares 0.2 0.5 0.4
---------------------------------- ------------ ------------ -----------
Diluted weighted average
number of shares in issue 53.6 53.4 53.4
---------------------------------- ------------ ------------ -----------
Earnings per share pence pence pence
---------------------------------- ------------ ------------ -----------
Basic 16.7 17.7 46.8
Diluted 16.6 17.5 46.4
---------------------------------- ------------ ------------ -----------
Underlying earnings per share pence pence pence
---------------------------------- ------------ ------------ -----------
Basic 23.6 22.3 55.7
Diluted 23.5 22.1 55.2
---------------------------------- ------------ ------------ -----------
Underlying earnings per share is shown because the Directors
consider that this provides a more useful indication of underlying
performance and trends over time.
5. Dividends
Six months Six months Six months Six months
ended ended ended ended
31 December 31 December 31 December 31 December
2017 2016 2017 2016
pence/share pence/share GBPm GBPm
--------------------- ------------ ------------ ------------ ------------
Amounts distributed
in the period 13.88 13.03 7.4 6.9
Interim dividend 5.75 5.42 3.1 2.9
--------------------- ------------ ------------ ------------ ------------
The Directors have declared an interim dividend of 5.75p per
share, which will be paid on 6 April 2018 to shareholders who are
on the register of members at the close of business on 9 March
2018.
6. Acquisitions
Control Point Corporation acquisition
The Group acquired the entire issued share capital of Control
Point Corporation ('CPC') on 8 September 2017 for initial cash
consideration of GBP6.3m ($8.3m) and contingent cash consideration
of GBP1.4m ($1.9m), based upon an initial probability-weighted
assessment of CPC achieving certain financial performance targets.
The acquisition of CPC expands upon the Group's vehicle engineering
capabilities in the Defence sector and adds expertise in
distributed software-based systems and fleet management
technologies.
The following table sets out the cash consideration payable to
acquire CPC, together with the provisional assessment of the net
assets acquired:
GBPm
---------------------------------------------- ------
Initial cash consideration 6.3
Contingent cash consideration 1.4
---------------------------------------------- ------
Total cash consideration 7.7
---------------------------------------------- ------
Provisional fair value of identifiable
assets acquired and liabilities assumed
Customer contracts and relationships 2.2
Developed software 0.7
Property, plant and equipment 0.1
Trade and other receivables 3.1
Cash and cash equivalents 0.6
Trade and other payables (0.6)
Total provisional fair value of identifiable
net assets 6.1
Goodwill 1.6
---------------------------------------------- ------
Total 7.7
---------------------------------------------- ------
All of the initial cash consideration of GBP6.3m ($8.3m) was
paid in September 2017, net of cash acquired of GBP0.6m
($0.8m).
Adjustments have been made to identifiable assets and
liabilities on acquisition to reflect their fair value. These
include the recognition of customer-related intangible assets
amounting to GBP2.2m ($2.9m) and developed software assets of
GBP0.7m ($0.9m). The fair values of net assets acquired are
provisional and represent estimates following a preliminary
valuation exercise which will be finalised during the second half
of the financial year. These estimates of fair value may be
adjusted in future in accordance with the requirements of IFRS 3
'Business Combinations'.
The goodwill arising on acquisition can be ascribed to the
existence of a skilled, active workforce, developed expertise and
processes and the opportunities to obtain new contracts and develop
the business. None of these meet the criteria for recognition as
intangible assets separable from goodwill. The goodwill recognised
is expected to be deductible for tax purposes.
The provisional fair value of trade and other receivables of
GBP3.1m ($4.1m) includes net trade receivables of GBP3.0m ($4.0m)
and amounts recoverable on contracts of GBP0.1m ($0.1m), all of
which is expected to be collectible.
Acquisition-related expenditure of GBP0.3m has been charged to
the Condensed Consolidated Income Statement for the six months
ended 31 December 2017 and is included as a specific adjusting item
in Note 3.
The revenue included in the Condensed Consolidated Income
Statement in relation to the acquired business was GBP3.4m. The
underlying operating profit over the same period was GBP0.3m. This
is reported in the Technical Consulting segment in Note 2.
Had CPC been acquired and consolidated from 1 July 2017, revenue
and underlying operating profit in the Condensed Consolidated
Income Statement would be GBP2.2m and GBP0.2m higher respectively,
based on available information for the period from 1 July 2017 to
the acquisition date.
7. Cash generated from operations
Six months Six months Year
ended ended ended
30
31 December 31 December June
2017 2016 2017
GBPm GBPm GBPm
---------------------------------------- ------------ ------------ -------
Profit before tax 12.5 12.1 32.2
Adjustments for:
Share-based payments 1.0 0.8 1.6
Fair value gains/(losses)
on derivative financial instruments 0.4 (2.8) (3.2)
Profit on disposal of property,
plant and equipment (0.1) - (0.7)
Net finance costs 1.1 1.2 2.5
Depreciation and amortisation 8.2 7.8 16.3
---------------------------------------- ------------ ------------ -------
Operating cash flows before
movements in working capital 23.1 19.1 48.7
Increase in inventories - (1.6) (2.9)
Increase in trade and other
receivables (3.4) (20.6) (15.5)
Increase/(decrease) in payables 12.3 14.2 (1.1)
Increase/(decrease) in provisions 0.5 (0.1) (0.5)
Defined benefit payments (2.2) (2.2) (4.4)
---------------------------------------- ------------ ------------ -------
Cash generated from operations 30.3 8.8 24.3
---------------------------------------- ------------ ------------ -------
8. Net debt
Net debt is defined by the Group as net cash and cash
equivalents less borrowings.
30
31 December 31 December June
2017 2016 2017
Analysis of net debt GBPm GBPm GBPm
--------------------------------- ------------ ------------ -------
Cash and cash equivalents
(current assets) 34.5 28.2 27.9
Bank overdrafts (current
liabilities) (4.1) (5.4) (5.9)
--------------------------------- ------------ ------------ -------
Net cash and cash equivalents 30.4 22.8 22.0
Loans maturing within one
year (current liabilities) (0.1) (0.1) (0.1)
Loans maturing after one
year (non-current liabilities) (61.8) (69.7) (59.8)
--------------------------------- ------------ ------------ -------
At period end (31.5) (47.0) (37.9)
--------------------------------- ------------ ------------ -------
30
31 December 31 December June
2017 2016 2017
Movement in net debt GBPm GBPm GBPm
--------------------------------- ------------ ------------ -------
At beginning of period (37.9) (34.4) (34.4)
Net increase in cash and
cash equivalents 8.4 2.4 1.6
Net proceeds from borrowings (2.0) (15.0) (5.1)
At period end (31.5) (47.0) (37.9)
--------------------------------- ------------ ------------ -------
The non-current bank loans are repayable in the year ending 30
June 2020 and are denominated in Pounds Sterling. The non-current
bank loans have variable rates of interest which are dependent upon
the leverage of the Group and range from 1.6% to 2.6% above LIBOR.
Leverage is defined as being net debt as a proportion of EBITDA.
EBITDA is defined as being operating profit before interest, tax,
depreciation and amortisation. At the reporting date, the Group has
a leverage which attracts the lowest rate of interest, being LIBOR
+ 1.6%.
At the period end, the Group held total facilities of GBP91.1m
(30 June 2017: GBP91.1m; 31 December 2016: GBP91.6m). This included
committed facilities of GBP75.0m (30 June 2017 and 31 December
2016: GBP75.0m). Committed facilities of GBP61.8m were drawn at 31
December 2017 (30 June 2017: GBP59.7m; 31 December 2016: GBP69.6m),
net of direct issue costs. Committed facilities were primarily
drawn to fund previous acquisitions. Of the committed facilities, a
GBP35.0m facility is available for the period to September 2019 and
a GBP40.0m facility is available until April 2020. In addition, the
Group has uncommitted facilities including overdrafts of GBP16.1m
at 31 December 2017 (30 June 2017: GBP16.1m; 31 December 2016:
GBP16.6m), which mature throughout this and the next financial year
and are renewable annually.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR BCGDDRBDBGIR
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