TIDMRCDO
RNS Number : 8809J
Ricardo PLC
15 September 2016
15 September 2016
Ricardo plc
Preliminary results for the full year ended 30 June 2016
Ricardo plc is a global engineering and strategic, technical and
environmental consultancy business with a value chain that includes
the niche manufacture and assembly of high-performance products. We
employ over 2,900 professional engineers, consultants, scientists
and support staff to deliver class-leading and innovative products
and services for the benefit of a broad customer base, which
includes the world's major transportation original equipment
manufacturers and operators, supply chain organisations, energy
companies, financial institutions and government agencies.
HIGHLIGHTS
-- Strong year-end order book at GBP231m (2015: GBP140m);
-- Like-for-like order book growth of 18%;
-- Order intake of GBP361m (2015: GBP252m);
-- Revenue up 29% to GBP332.4m (2015: GBP257.5m);
-- Underlying(1) profit before tax up 41% to GBP37.7m (2015: GBP26.8m);
-- Underlying(1) basic earnings per share up 30% to 55.2p (2015: 42.4p);
-- Net debt of GBP34.4m after GBP48.8m of acquisition-related
costs (2015: net funds of GBP14.3m);
-- Full year dividend up 9% to 18.1p per share (2015: 16.6p);
-- Acquisitions of Lloyd's Register Rail ('LR Rail') and Cascade
completed in the financial year; Exnovo completed post year-end;
and
-- Outlook remains positive, good platform for further growth.
(1) Derived from operating profit which includes income of
GBP5.4m under the Research & Development Expenditure Credit
('RDEC') scheme in respect of the current year, but excludes
specific adjusting items, which comprise amortisation of acquired
intangible assets of GBP3.4m (2015: GBP1.3m), acquisition-related
expenditure of GBP2.8m (2015: GBP2.6m) and non-recurring income of
GBP1.5m for claims under RDEC in respect of prior years. Including
specific adjusting items, reported profit before tax was GBP33.0m
(2015: GBP22.9m) and reported basic earnings per share was 48.6p
(2015: 35.6p).
Commenting on the results, Dave Shemmans, Chief Executive
Officer, said:
"Our mission at Ricardo is a simple one: to play a major part in
solving the world's big issues around transportation, pollution,
climate change and the efficient use of scarce resources such as
oil and water.
"This year we have extended our capabilities into rail and water
consulting through the acquisitions of LR Rail and Cascade, and
expanded our capability in the urban mobility market through the
acquisition of the Exnovo business after the year-end. We have
stepped up our investment into facilities and research for the
development of advanced clean automotive products, and we have
supported countries worldwide with their submissions to the global
COP21 congress in Paris. We are also welcoming additional members
to our growing worldwide team of engineers and scientists who are
inspired to make that vital difference. We continue to deliver a
good set of financial results year-on-year, with revenue and profit
growth across a diverse portfolio of clients and projects. Both of
the businesses acquired in the year have performed strongly in
their first year within the Ricardo Group.
"Our strategy to build long-term, multi-year contracts and
relationships has been supported by the further expansion of the
McLaren engine assembly line, by a high-profile transmission supply
contract and through multi-year projects secured within the
Environmental and Technical Consulting parts of the business. Our
year-end order book stands at a record high and, in combination
with our financial position, provides a good platform for the
continued exploitation of the central strategy - to play our part
in solving those big global issues."
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/Madeleine Palmstierna/Steffan E-mail: ricardo@newgatecomms.com
Williams
FINANCIAL REVIEW
Group results
The Group has delivered a strong underlying operating result
with good organic growth for the year ended 30 June 2016. Total
Group revenues increased by 29% to GBP332.4m (2015: GBP257.5m) and
underlying profit before tax, which includes GBP5.4m of income in
the current year in respect of the Research & Development
Expenditure Credit ('RDEC') scheme but excludes specific adjusting
items, increased by 41% to GBP37.7m (2015: GBP26.8m). Underlying
profit before tax excluding the current year RDEC increased by 21%
to GBP32.3m, with the margin reducing slightly from 10.4% in the
prior year to 9.7%. Reported profit before tax for the year
increased by 44% to GBP33.0m (2015: GBP22.9m).
Headline Group performance is as follows:
2016 2015
--------------------- ----------- ----------
Revenue GBP332.4m GBP257.5m
Underlying(1) GBP37.7m GBP26.8m
profit before
tax
Basic underlying(1)
EPS 55.2p 42.4p
Net (debt)/funds GBP(34.4)m GBP14.3m
--------------------- ----------- ----------
(1) excluding specific adjusting items, which comprise
amortisation of acquired intangible assets, acquisition-related
expenditure and non-recurring income for claims under the Research
& Development Expenditure Credit ('RDEC') scheme in respect of
prior years.
The Group results include two acquisitions which completed
during the year. On 1 July 2015, the Group materially completed the
acquisition of the Lloyd's Register Rail ('LR Rail') consultancy
and assurance business from the Lloyd's Register Group, which
subsequently completed in full on 1 March 2016 with the 100% share
purchase of a Chinese joint venture which was partly owned by the
Lloyd's Register Group.
In addition, on the 18 August 2015, the Group also acquired the
entire issued share capital of Cascade Consulting Holdings Limited
and its subsidiary, Cascade Consulting (Environment & Planning)
Limited (together, 'Cascade'), an environmental consultancy
business specialising in the UK water sector.
The LR Rail and Cascade acquisitions have been reported within
the Technical Consulting segment. As set out in the table below,
organic growth in underlying revenues and profit before tax, which
excludes the performance of acquisitions, the associated
incremental borrowing costs and the impact of RDEC, was 7%:
Revenue PBT
FY 2015/16 (GBPm) (GBPm)
----------------------------------- -------- --------
Underlying 332.4 37.7
Less performance of acquisitions:
LR Rail (53.2) (3.9)
Cascade (3.4) (0.6)
Vepro and PPA on a like-for-like
basis with prior year (1.5) (0.1)
Less: RDEC in respect of current
year - (5.4)
Add: Net interest in respect
of acquisitions - 1.0
----------------------------------- -------- --------
Organic 274.3 28.7
----------------------------------- -------- --------
FY 2014/15 257.5 26.8
Organic growth 7% 7%
----------------------------------- -------- --------
The financial year ended with another record closing order book
of GBP231m (2015: GBP140m), of which GBP66m is in respect of the
acquired LR Rail and Cascade businesses. On a like-for-like basis,
the closing order book has increased by 18% on the prior year. The
closing order book, together with a good pipeline of further
opportunities, remains well diversified across market sectors,
customers and geographies. Our order book comprises the value of
all unworked purchase orders received.
Technical Consulting results
Technical Consulting revenues and underlying operating profits
were GBP267.9m and GBP32.5m, respectively. Underlying organic
revenues and operating profit, which excludes performance from
acquisitions as noted above and GBP4.7m of RDEC income, increased
to GBP209.8m (2015: GBP196.6m) and GBP23.2m (2015: GBP20.0m),
resulting in growth of 7% and 16%, respectively.
Our European Technical Consulting Division was a key driver of
profit generation, with profits growing significantly as a result
of an internal reorganisation undertaken in the prior year to
improve co-ordination and delivery to our clients, as well as to
achieve cost efficiencies.
The Rail business has performed well, and encouragingly, a
number of joint bids between Rail and the core business have been
successful, which neither business could have achieved alone.
The performance of the US business has struggled in challenging
market conditions, but strategic focus is shifting towards our
operations in California in order to support growth from a wider US
customer base.
Our Energy & Environment consulting business has performed
well, and is reducing its reliance on the UK public sector where
ongoing cuts continue to be experienced.
In Asia we continue to grow our activities, establishing a
greater geographical footprint through our acquisition of the Rail
business in China on 1 March 2016, which was partly owned by the
Lloyd's Register Group.
Our Strategic Consulting activities continue to make good
progress.
Performance Products results
Performance Products revenues have increased by 6% on the prior
year to GBP64.5m (2015: GBP60.9m). However, as expected, organic
underlying operating profit, which excludes GBP0.7m of RDEC income,
decreased by GBP1.3m to GBP6.4m (2015: GBP7.7m). The current year
performance was driven principally by lower one-off software
licence sales and an expected reduced level of shipments of
high-performance and monorail transmissions in the year, partially
offset by increased volumes in respect of the new engine supply
contract for McLaren.
Technical Consulting
Performance
Ricardo's Technical Consulting activity accounts for around 80%
of Group revenue and underlying operating profit. We deliver
projects focused on world class innovation in our core service
offerings of engines, transmissions, vehicles, hybrid electric and
autonomous vehicles, environmental, energy and strategic
consulting, independent assurance and the delivery of critical
systems into industries like rail. Our activities range from
detailed collaborations with customers on strategy, policy and
regulatory advice, advanced engineering work, technology
evaluations, independent safety assessments, asset optimisation and
market studies up to large-scale turnkey new product delivery
programmes, encompassing multiple products and international
markets.
Revenue has grown by 36% to GBP267.9m (2015: GBP196.6m). The
growth in revenue can be attributed to the strong opening order
book, our competitive offerings and the impact of the acquisitions
of LR Rail and Cascade made during the year. Underlying operating
profit, excluding GBP4.7m of RDEC income, increased by 39% to
GBP27.8m (2015: GBP20.0m), of which GBP4.6m was contributed by
acquisitions. The underlying operating profit margin has increased
to 10.4%, up from 10.2% in 2015. Order intake in the year stood at
GBP258m (2015: GBP209m). There has been a good balance of Technical
Consulting order intake across the regions and we have continued to
see good levels of diversification across different market
sectors.
The acquisition of LR Rail, and establishment of Ricardo Rail,
has enabled our rail business to expand into new geographic and
product sectors and this business has performed strongly throughout
its integration into Ricardo.
The acquisition of Cascade has enabled our Energy &
Environment business to drive private sector and international
growth into the water sector.
Our Technical Consulting business growth continues to be
underpinned by the following global drivers:
-- Reducing carbon dioxide emissions, underpinned by agreements reached at COP21;
-- Improvements in the efficient use of energy;
-- Eliminating the release of noxious pollutants and particulates;
-- The rise of global connectivity (Internet of Things - 'IoT') and their safety case;
-- Addressing a changing and diverse global energy mix; and
-- Increasing levels of urbanisation and resource scarcity.
The European Technical Consulting ('EUTC') Division, which also
includes India, Japan and South Korea, has secured a range of
large, multi-year programmes in the Automotive, Commercial Vehicles
and Energy sectors, with a particular increase in vehicle
electrification activities in many regions. Activity levels have
been high across all engineering disciplines, with increasing
demand for powertrain application, calibration, electrical and
electronics skills. The EUTC Division continues to be the main
business in terms of profit generation.
In the US, trading continues to be difficult, with reduced
levels of work in Detroit and Chicago partially offset by
increasing work in California. The business is increasingly focused
on achieving growth in the Commercial Vehicles sector, especially
around platooning technologies and the growth of autonomous vehicle
and connected car technologies and their safety cases in both the
traditional automotive and new entrant landscape. We are building a
team in Silicon Valley to service the new automotive clients in
California and to access the relevant talent.
Ricardo Defense Systems was established in the previous
financial year to enable us to deliver classified projects for the
US Defense Administration, and this business has won a number of
new contracts primarily in the land defence space.
China remains a key market and we have secured a number of
large, locally won contracts, some of which are being locally
delivered through our Shanghai- and Beijing-based technical
centres. These contracts have included a mixture of hybrid vehicle,
engine, transmission and rail activities.
In Ricardo Rail, the primary focus has been on growing the
business whilst integrating the former Lloyd's Register Rail
business into Ricardo. We have successfully established a new brand
in the Rail sector and have seen a very positive reaction to the
new products and services that Ricardo Rail can offer. The order
book has remained at consistently high levels as we have seen both
historic and new customer wins throughout the year. In July 2016,
following the award of UKAS accreditation for ISO 17020 and ISO
17065, we established Ricardo Certification. This business will
independently manage and deliver our independent assurance and
accreditation services to the Rail sector.
In Ricardo Motorcycle, the focus has been on the delivery of
existing large, multi-year powertrain and vehicle programmes and
the global roll-out of an expanded product and service offering to
existing and new clients. As a result, we have secured a number of
contracts with new clients in the UK, US and Asia. We are also
developing our urban mobility product offering.
Ricardo Energy & Environment has had a good year and has
seen growth in both international and private-sector clients. The
linkage of our powertrain expertise with our air quality team has
provided our customers with a unique insight into recent urban air
quality issues and how to resolve them. The acquisition of Cascade
has enabled the business to rapidly expand into the fast-growing
water sector.
Our strategic consulting activities continue to operate well
across all geographies and performance has
been good in all operating regions. The combination of
management consulting skills and deep industry insight offers a
unique proposition to our customers. These include companies in the
Automotive, Energy & Environment and Commercial Vehicles
sectors, plus numerous government bodies and private equity
firms.
Market sector highlights
Automotive
The Automotive sector remains the most significant for Ricardo.
Fuel economy and CO(2) reduction remain top global industry
priorities and are being driven strongly by consumers. We have
secured a range of large, multi-year programmes, in vehicle
systems, hybrid and electric systems and the core powertrain areas
of our business, focused on both new and existing product upgrades.
We continue to invest in advanced combustion and other key
technologies in areas related to improvements in overall vehicle
efficiency such as lightweighting, intelligent driveline and
electrification.
The future of mobility solutions, including connected and
autonomous vehicle technology in particular, is attracting
significant interest in North America, along with challenges around
the regulatory environment, safety and assurance of autonomous
vehicles. Interest in hybrid and electric vehicle architectures,
battery pack and battery management system design and vehicle
attribute development also feature strongly as OEMs increasingly
look to accelerate the launch of PHEV and BEV vehicles based around
existing vehicle platforms.
Rail
On 1 July 2015, following the completion of the acquisition of
LR Rail, we launched Ricardo Rail. This new business, with its
footprint in the UK, Europe, Asia and the Middle East, is
benefiting from the significant global growth in high-speed and
metro-based railways. The business has the following core product
offerings: Independent Assurance; Rolling Stock; Signalling and
Train Control; Intelligent Rail and Operations. The latter includes
asset management, human factors and Noise, Vibration and Harshness
('NVH') development and optimisation. The business has a large,
long-term order book which provides a strong platform for growth.
The launch of Ricardo Certification enables us to independently
manage and deliver our independent assurance and accreditation
services to the Rail sector.
We continue to look for a range of organic and acquisitive
growth opportunities in the Rail sector.
Energy & Environment
We continue to win new work and retain long-standing contracts
with various government agencies in the UK and the EU. In parallel,
we have seen accelerated growth of private sector and international
clients. Services continue to be delivered in the key practice
areas of climate change and sustainability, air quality, waste and
resources, sustainable transport, chemical risk, energy, and water.
The recent additions through acquisition of PPA Energy (2014) and
Cascade (2015) have provided strong opportunities for growth into
the electricity networks and water sectors respectively and we have
seen strong recent growth in both these businesses. We are also
engaged in supporting many global stakeholders with the
implementation of commitments agreed at COP21 in December 2015.
In power generation, we are engaged in a number of large
projects covering genset development, gas engine conversions, heavy
fuel oil engines and CHP ('Combined Heat and Power') solutions. The
customer base is broad and globally diverse.
Across the renewables sector, we continue to pursue a range of
opportunities in offshore wind, tidal and energy storage
applications.
Motorcycle & Personal Transportation
Growth in this sector is being driven by the need for a
reduction in CO(2) emissions, the increasing focus on urban
mobility solutions and a growing interest in electric bicycles
('e-bikes'), together with the increased demand for high-quality
motorcycles in developing markets. We also recognise the strong
market differences between the value-driven brands of south-east
Asia and the technology-focused luxury marques of Europe, North
America and Japan.
During the year the team remained focused on the development of
long-term multi-product relationships with major customers across
Asia, Europe and North America.
Commercial Vehicles
We have seen growth and secured a number of large engine and
transmission projects across the medium- and heavy-duty sectors. We
continue to see interest across Asia, in particular, for Ricardo's
capabilities in the Commercial Vehicles sector. The order pipeline
is based around a broad mix of largely engine and transmission
opportunities. In the US, greenhouse gas and low NOx standards are
driving interest in powertrain and trailer efficiency, emissions
control and the use of alternative fuels. Commercial vehicle
platooning is also a fast-growing area of opportunity.
Strong engagement in this sector has driven increasing engine
test activity, especially in North America. We have also seen
growing interest in our aftertreatment and fuel cell capabilities
at our technical facility in California.
In addition to our core powertrain offering we have also focused
on developing our product offering in the areas of fuel economy
improvement, system optimisation, platooning and hybridisation: we
see all these as areas of significant future growth.
Defence
In the US we have established Ricardo Defense Systems, which now
enables us to deliver US classified projects and expand the range
of opportunities that we can pursue across the defence sector. The
business has won a number of new contracts, mainly in the land
domain, and is focused on growth into new areas of the US Defense
Administration.
In the UK we have broadened our network within the Ministry of
Defence ('MoD') and have continued to grow key relationships with
defence contractors. In Asia we have secured contracts to deliver
new engine and vehicle designs and we are pursuing other large, new
opportunities.
Off-Highway
Activity in the Off-Highway sector continues to remain at a
relatively low level following the recent implementation of Stage
IV emissions standards in Europe. Our focus in the coming years
will be in assisting clients with EU, US and China legislation for
2020.
The marine industry is driven by increasing demands for
high-speed diesel generator sets and main propulsion systems, and
also 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 activities.
Performance Products
Performance
The Performance Products segment accounts for around 20% of
Group revenue with a large proportion of revenue generated this
year through the supply of products and services to a single
customer.
In the Performance Products segment revenue increased by 6% to
GBP64.5m (2015: GBP60.9m), but underlying operating profit,
excluding GBP0.7m of RDEC income, fell as expected by GBP1.3m to
GBP6.4m (2015: GBP7.7m). Order intake in the year stood at GBP103m
(2015: GBP43m) as we secured a high-profile multi-year transmission
supply contract. Profit performance is lower than the prior year as
increased volumes in respect of the new engine supply contract for
McLaren have been more than offset by lower one-off software
licence sales and an expected reduced level of shipments of
high-performance and monorail transmissions in the year.
The Performance Products business continues to focus on the
development of long-term, strategic relationships, the development
of its people, and using a growing track record of product quality
and on-time delivery to win new, large contracts.
Market sector highlights
High-Performance Vehicles & Motorsport
The expansion of Ricardo's engine build facility is now
complete. This gives us a doubling of capacity and the capability
to deal with increased engine variants. Production of engines for
the McLaren 650S, 675LT and the McLaren P1(TM) supercar continues
in line with expectations, and full production of engines for the
new 570S has been added. We also secured a high-profile multi-year
transmission supply contract.
Ricardo remains a key supplier to the motorsport sector, having
commenced deliveries for BMW and Multimatic (for Ford) GT3
programmes and for the Hyundai R5 Rally programme. Ricardo
continues to manufacture for Formula 1, and supplies products such
as the Ricardo-designed transmissions for the Japanese Super
Formula 14, Indy Lights and the Renault World Series. Production
continues for the Porsche Cup and Bugatti transmissions in line
with the long-term supply agreements.
Defence
As part of a teaming agreement with a leading defence Tier 1,
Ricardo has developed and provided retrofit kits for the Cougar
family of vehicles for the UK MoD.
OTHER FINANCIAL MATTERS
Acquisitions and acquisition-related intangible assets
On 1 July 2015, the Group materially completed the acquisition
of the Rail consultancy and assurance business from the Lloyd's
Register Group and on 1 March 2016, acquired the interests of all
partners of a related joint venture operation in China, for total
consideration of GBP46.3m. In addition, the Group also acquired the
issued share capital of Cascade on 18 August 2015, for
consideration of GBP3.2m.
These investments added goodwill of GBP2.5m to the Ricardo
Energy & Environment cash-generating unit and a new Ricardo
Rail cash-generating unit has been identified, in respect of which
GBP24.2m of goodwill has been allocated (retranslated to GBP26.6m
at year-end). Total goodwill at 30 June 2016 is therefore GBP57.0m
(2015: GBP26.0m). Acquisition-related intangible assets have been
identified as a result of the LR Rail and Cascade acquisitions,
which have net book values at the year-end of GBP14.3m and GBP0.6m,
respectively.
An exercise to assess the fair value of the identifiable net
assets has been completed in respect of the LR Rail businesses
acquired on 1 July 2015 and Cascade. The preliminary assessment of
the provisional fair value of identifiable net assets in respect of
the Chinese joint venture operation acquired from the Lloyd's
Register Group on 1 March 2016 may be adjusted in future in
accordance with the requirements of IFRS 3 'Business
Combinations'.
After the reporting date, on 29 July 2016, the Group also
acquired the entire issued share capital of Motorcycle Engineering
Italia s.r.l., a business that was formed from the trade and assets
of Exnovo s.r.l., for initial consideration of GBP2.1m (EUR2.5m).
Subsequent to a preliminary assessment, the provisional fair value
of identifiable net assets acquired is GBP0.1m, together with
provisional goodwill and other acquisition-related intangible
assets of GBP2.0m.
As a result of the acquisitions completed in the financial year,
amortisation of acquisition-related intangible assets has increased
to GBP3.4m (2015: GBP1.3m). The Group also incurred
acquisition-related expenditure of GBP2.8m (2015: GBP2.6m) during
the year in respect of all completed acquisitions as noted above.
The acquisition-related expenditure and amortisation of
acquisition-related intangible assets have been charged to the
Consolidated Income Statement as specific adjusting items.
Research and Development
The Group continues to invest in Research and Development
('R&D'), and spent GBP9.4m (2015: GBP9.8m) before government
grant income of GBP1.3m (2015: GBP1.1m). This includes costs
capitalised in accordance with IFRS of GBP3.2m (2015: GBP4.2m) in
respect of continued development expenditure on a range of product
developments around the Group and reflects our continued focus on
development activity within Europe and the US.
Net finance costs
Finance income was GBP0.3m (2015: GBP0.2m), which is similar to
the prior year, but finance costs were GBP2.2m (2015: GBP1.1m),
giving net finance costs of GBP1.9m (2015: GBP0.9m). Finance costs
were higher as a result of interest payments on the Group's loan
facilities drawn at the end of the previous financial year,
primarily in order to fund the LR Rail acquisition.
Taxation
The new Research and Development Expenditure Credit ('RDEC')
became mandatory from 1 April 2016 and the Group adopted RDEC from
1 July 2015. Under the new regime, the current year R&D credit
is no longer a tax incentive that benefits the corporation tax line
in the Consolidated Income Statement, but is instead treated as
grant income to offset R&D expenditure within operating profit,
increasing profit before tax, its associated tax charge and the
effective rate of tax.
In addition, applications have been revised during the current
year in respect of accounting years ended 30 June 2014 and 30 June
2015, which were open under the new RDEC regime, generating GBP1.5m
of non-recurring income. These applications have also been treated
as grant income but disclosed as a specific adjusting item as no
associated qualifying R&D expenditure has been incurred in the
current year against which the grant income in respect of prior
years can be offset.
The total current year R&D credit as a result of adopting
RDEC from 1 July 2015 is GBP5.4m which has a corresponding
favourable impact on profit before tax.
The total tax charge for the year was GBP7.4m (2015: GBP4.3m),
but primarily as a result of the Group's adoption of RDEC, the
total effective rate of tax has increased to 22.4% (2015:
18.8%).
The Directors have considered the recoverability of the existing
deferred tax assets of GBP3.6m (2015: GBP3.1m) and GBP4.9m (2015:
GBP4.7m) which exist in Germany and the US, respectively, and
remain satisfied that it is probable that sufficient taxable
profits will be generated in the future, against which the
recognised assets can be utilised. Consistent with the prior year,
a deferred tax asset has not been recognised for the current year
tax losses within the consolidated tax group controlled by Ricardo
GmbH, within which Ricardo Deutschland GmbH is the primary trading
entity.
Earnings per share
Basic earnings per share increased by 37% to 48.6p (2015:
35.6p). The Directors consider that an underlying earnings per
share provides a more useful indication of underlying performance
and trends over time. Underlying basic earnings per share for the
year increased by 30% to 55.2p (2015: 42.4p). On an organic basis,
underlying basic earnings per share increased by 10%.
Dividend
The total (paid and proposed) dividend for the year has
increased by 9% to 18.1p per ordinary share (2015: 16.6p) and
amounts to GBP9.5m (2015: GBP8.7m). The proposed final dividend of
13.03p (2015: 11.95p) will be paid on 11 November 2016 to
shareholders who are on the register of members at the close of
business on 21 October 2016, subject to approval at the Annual
General Meeting on 3 November 2016.
Capital investment
Cash expenditure on property, plant and equipment was GBP8.5m
(2015: GBP10.4m) as we continue to invest in our business
operations. This expenditure included new offices as a result of
the Rail acquisition, together with IT and office equipment to fit
out and refurbish a number of new and existing premises. In
addition, new and upgraded vehicle workshop facilities, test beds
and equipment were purchased for the existing business. The
Centenary Innovation Centre has been constructed at our Shoreham
Technical Centre in the UK, in recognition of our centenary
year.
Net debt
Closing net debt was GBP34.4m (2015: net funds of GBP14.3m). The
Group used net cash of GBP48.7m (2015: generated net cash of
GBP1.7m), after GBP3.4m (2015: GBP3.6m) of acquisition-related
payments and a cash outflow net of cash acquired of GBP45.4m in
respect of the two acquisitions completed in the financial
year.
The Group continues to focus on its management of working
capital, which increased during the year as we invested in revenue
growth in Asia and the Middle East, and as our Energy &
Environment business transitions towards more private sector and
international work. We also invested in our major long-term
assembly programme.
Banking facilities
At the end of the financial year, the Group held total
facilities of GBP90.9m (2015: GBP89.4m), which included committed
facilities of GBP75.0m (2015: 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 GBP15.9m (2015:
GBP14.4m), which mature throughout the next financial year and are
renewable annually.
Committed facilities of GBP54.5m, net of direct issue costs,
were drawn (2015: GBP45.4m) primarily in order to fund the
acquisition of LR Rail on 1 July 2015. These are denominated in
Pounds Sterling and have variable rates of interest dependent upon
the Group's adjusted leverage, which range from 1.6% to 2.35% 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 year. 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 1.9%
higher against the Euro, 5.9% lower against the US Dollar and 1.5%
lower against the Chinese Renminbi during the year compared to the
previous financial year.
Had the current year results been stated at constant exchange
rates, reported revenue and profit before tax would have been
GBP2.6m and GBP0.1m lower, respectively. Significant exposures are
hedged through foreign currency contracts.
The movement in foreign exchange rates and the corresponding
impact on financial performance was more significant as a result of
the UK referendum vote to leave the EU on 23 June 2016, but these
movements only impacted upon the final week of the financial
year.
Pensions
The Group's defined benefit pension scheme operates within the
UK. The accounting deficit measured in accordance with IAS 19
'Employee Benefits' was GBP21.5m before tax, or GBP17.4m after tax
(2015: GBP20.7m and GBP16.6m, respectively).
The GBP0.8m increase in the net pension deficit was primarily
due to a reduction in the discount rate assumption to 2.95% (2015:
3.8%), offset by a reduction in inflation to 2.8% (2015: 3.25%),
the return on plan assets of GBP9.7m, together with GBP4.3m of cash
contributions paid to the scheme during the financial year.
OUTLOOK
Market conditions remain positive, underpinned by the
legislative drivers of our business and clients. We continue to
focus on business as usual following the UK's referendum vote to
leave the EU. We have European mainland operations within the Group
which will continue to support the EU's R&D programmes and
deliver to our European clients close to their operations, as
before. We are a global business, with delivery centres and clients
across the world, and are diversified across many market
sectors.
We enter the new financial year with a record order book and a
good pipeline of opportunities across all sectors: our focus, as
always, remains on converting this pipeline into orders and
delivering to clients efficiently and with quality. Taking these
together with our existing large, long-term assembly contracts, we
continue to have confidence in the further development of the
Group.
Dave Shemmans Ian Gibson
Chief Executive Officer Chief Financial Officer
14 September 2016
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 press release, 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.
Consolidated income statement
for the year ended 30 June 2016
2016 2015
Specific Specific
adjusting adjusting
Underlying items Total Underlying items Total
(1) (1)
Notes GBPm GBPm GBPm GBPm GBPm GBPm
---------------- ------ ------------- ----------- -------- ------------- ----------- --------
Revenue 2 332.4 - 332.4 257.5 - 257.5
Cost of sales (202.6) - (202.6) (155.7) - (155.7)
---------------- ------ ------------- ----------- -------- ------------- ----------- --------
Gross profit 129.8 - 129.8 101.8 - 101.8
Administrative
expenses (90.7) (6.2) (96.9) (74.8) (3.9) (78.7)
Other income 0.5 1.5 2.0 0.7 - 0.7
---------------- ------ ------------- ----------- -------- ------------- ----------- --------
Operating
profit 39.6 (4.7) 34.9 27.7 (3.9) 23.8
Finance income 0.3 - 0.3 0.2 - 0.2
Finance costs (2.2) - (2.2) (1.1) - (1.1)
---------------- ------ ------------- ----------- -------- ------------- ----------- --------
Net finance
costs (1.9) - (1.9) (0.9) - (0.9)
---------------- ------ ------------- ----------- -------- ------------- ----------- --------
Profit before
taxation 37.7 (4.7) 33.0 26.8 (3.9) 22.9
Taxation (8.6) 1.2 (7.4) (4.6) 0.3 (4.3)
---------------- ------ ------------- ----------- -------- ------------- ----------- --------
Profit for
the year 29.1 (3.5) 25.6 22.2 (3.6) 18.6
---------------- ------ ------------- ----------- -------- ------------- ----------- --------
Earnings per ordinary
share
Basic 5 48.6p 35.6p
Diluted 5 48.1p 35.2p
------------------- ---- ------ ------
(1) Specific adjusting items comprise amortisation of acquired
intangible assets and acquisition-related expenditure. In the
current year, non-recurring income for claims under the Research
and Development Expenditure Credit ('RDEC') scheme in respect of
prior years are also included. Further details are given in Note
3.
Consolidated statement of comprehensive income
for the year ended 30 June 2016
2016 2015
GBPm GBPm
--------------------------------------------- ------ ------
Profit for the year 25.6 18.6
--------------------------------------------- ------ ------
Items that will not be reclassified
to profit or loss:
Remeasurements on the defined benefit
scheme (4.4) (4.7)
Deferred tax on items taken directly
to equity 0.9 1.5
--------------------------------------------- ------ ------
Total items that will not be reclassified
to profit or loss (3.5) (3.2)
--------------------------------------------- ------ ------
Items that may be subsequently reclassified
to profit or loss:
Currency translation on foreign currency
net investments 8.7 0.5
Total items that may be subsequently
reclassified to profit or loss 8.7 0.5
--------------------------------------------- ------ ------
Total other comprehensive income/(loss)
for the year (net of tax) 5.2 (2.7)
Total comprehensive income for the
year 30.8 15.9
--------------------------------------------- ------ ------
Consolidated statement of financial position
as at 30 June 2016
2016 2015
GBPm GBPm
---------------------------------- -------- --------
Assets
Non-current assets
Goodwill 57.0 26.0
Other intangible assets 35.3 18.9
Property, plant and equipment 53.6 49.6
Deferred tax assets 13.0 13.7
----------------------------------- -------- --------
158.9 108.2
---------------------------------- -------- --------
Current assets
Inventories 11.0 7.8
Trade and other receivables 108.9 78.6
Derivative financial assets 0.4 0.2
Current tax assets 1.2 2.1
Cash and cash equivalents 23.7 59.7
145.2 148.4
---------------------------------- -------- --------
Total assets 304.1 256.6
----------------------------------- -------- --------
Liabilities
Current liabilities
Borrowings (3.4) -
Trade and other payables (72.5) (63.8)
Current tax liabilities (3.6) (5.8)
Derivative financial liabilities (2.5) (0.1)
Provisions (1.3) (0.4)
(83.3) (70.1)
---------------------------------- -------- --------
Net current assets 61.9 78.3
----------------------------------- -------- --------
Non-current liabilities
Borrowings (54.7) (45.4)
Retirement benefit obligations (21.5) (20.7)
Deferred tax liabilities (3.6) (3.1)
Provisions (1.5) (1.3)
----------------------------------- -------- --------
(81.3) (70.5)
---------------------------------- -------- --------
Total liabilities (164.6) (140.6)
----------------------------------- -------- --------
Net assets 139.5 116.0
----------------------------------- -------- --------
Shareholders' equity
Share capital 13.2 13.1
Share premium 14.3 14.3
Other reserves 12.6 3.9
Retained earnings 99.4 84.7
----------------------------------- -------- --------
Total equity 139.5 116.0
----------------------------------- -------- --------
Consolidated statement of changes in equity
for the year ended 30 June 2016
Share Share Other Retained Total
capital premium reserves earnings equity
GBPm GBPm GBPm GBPm GBPm
----------------------------------- --------- --------- ---------- ---------- --------
At 1 July 2015 13.1 14.3 3.9 84.7 116.0
Profit for the year - - - 25.6 25.6
Other comprehensive income/(loss)
for the year - - 8.7 (3.5) 5.2
----------------------------------- --------- --------- ---------- ---------- --------
Total comprehensive income
for the year - - 8.7 22.1 30.8
Equity-settled transactions - - - 1.5 1.5
Proceeds from shares issued 0.1 - - - 0.1
Ordinary share dividends
(Note 4) - - - (8.9) (8.9)
----------------------------------- --------- --------- ---------- ---------- --------
At 30 June 2016 13.2 14.3 12.6 99.4 139.5
----------------------------------- --------- --------- ---------- ---------- --------
At 1 July 2014 13.1 14.2 3.4 76.9 107.6
Profit for the year - - - 18.6 18.6
Other comprehensive income/(loss)
for the year - - 0.5 (3.2) (2.7)
Total comprehensive income
for the year - - 0.5 15.4 15.9
Equity-settled transactions - - - 1.4 1.4
Proceeds from shares issued - 0.1 - - 0.1
Purchases of own shares
to settle awards - - - (0.9) (0.9)
Ordinary share dividends
(Note 4) - - - (8.1) (8.1)
----------------------------------- --------- --------- ---------- ---------- --------
At 30 June 2015 13.1 14.3 3.9 84.7 116.0
----------------------------------- --------- --------- ---------- ---------- --------
Consolidated statement of cash flow
for the year ended 30 June 2016
2016 2015
GBPm GBPm
-------------------------------------------- ------- -------
Cash flows from operating activities
Cash generated from operations (Note
7) 27.5 28.4
Net finance costs (1.1) (0.1)
Tax paid (3.0) (1.3)
-------------------------------------------- ------- -------
Net cash generated from operating
activities 23.4 27.0
-------------------------------------------- ------- -------
Cash flows from investing activities
Acquisitions of subsidiaries, net
of cash acquired (Note 6) (45.4) (2.4)
Purchases of property, plant and equipment (8.5) (10.4)
Government grants received in respect
of property, plant and equipment - 0.1
Proceeds from sale of property, plant
and equipment - 0.1
Purchases of intangible assets (6.2) (5.5)
Net cash used in investing activities (60.1) (18.1)
-------------------------------------------- ------- -------
Cash flows from financing activities
Proceeds from issuance of ordinary
shares 0.1 0.1
Purchases of own shares to settle
awards - (0.9)
Net proceeds from borrowings 9.4 48.4
Repayments of borrowings - (3.0)
Dividends paid to shareholders (Note
4) (8.9) (8.1)
Net cash generated from financing
activities 0.6 36.5
-------------------------------------------- ------- -------
Effect of exchange rate changes on
cash and cash equivalents (3.2) 1.7
-------------------------------------------- ------- -------
Net (decrease)/increase in cash and
cash equivalents (39.3) 47.1
Cash and cash equivalents at 1 July
(Note 8) 59.7 12.6
-------------------------------------------- ------- -------
Net cash and cash equivalents at 30
June (Note 8) 20.4 59.7
-------------------------------------------- ------- -------
Notes to the financial statements
for the year ended 30 June 2016
1. General information
Ricardo plc is a public limited company, incorporated and
domiciled in the United Kingdom and with a premium listing on the
London Stock Exchange. The address of its registered office is
Shoreham Technical Centre, Shoreham-by-Sea, West Sussex, BN43 5FG,
United Kingdom, and its registered number is 222915.
This preliminary announcement is based on the audited Annual
Report and Accounts 2016, which was approved for issue on 14
September 2016, and which has been prepared in accordance with
International Financial Reporting Standards ('IFRS'), IFRS
Interpretations Committee ('IFRS-IC') interpretations adopted by
the European Union ('EU') and those parts of the Companies Act 2006
applicable to companies reporting under IFRS. The financial
information herein does not amount to full statutory accounts
within the meaning of Section 434 of the Companies Act 2006.
2. Operating segments
Technical Performance
2016 Consulting Products Head Office Total
GBPm GBPm GBPm GBPm
---------------------------------- ------------ ------------- ------------- -------
Total segment revenue 269.0 65.1 - 334.1
Inter-segment revenue (1.1) (0.6) - (1.7)
---------------------------------- ------------ ------------- ------------- -------
Revenue from external customers 267.9 64.5 - 332.4
---------------------------------- ------------ ------------- ------------- -------
Underlying operating profit 32.5 7.1 - 39.6
Specific adjusting items (4.4) 0.2 (0.5) (4.7)
Operating profit 28.1 7.3 (0.5) 34.9
Net finance costs - - (1.9) (1.9)
---------------------------------- ------------ ------------- ------------- -------
Profit before taxation 28.1 7.3 (2.4) 33.0
---------------------------------- ------------ ------------- ------------- -------
Underlying operating profit for the year ended 30
June 2016 includes GBP5.4m of income in respect of
RDEC, which has been allocated between Technical Consulting
(GBP4.7m) and Performance Products (GBP0.7m) on a
basis that is consistent with the segment in which
the qualifying expenditure is incurred.
Technical Performance
2015 Consulting Products Head Office Total
GBPm GBPm GBPm GBPm
---------------------------------- ------------ ------------- ------------- -------
Total segment revenue 199.2 62.5 - 261.7
Inter-segment revenue (2.6) (1.6) - (4.2)
---------------------------------- ------------ ------------- ------------- -------
Revenue from external customers 196.6 60.9 - 257.5
---------------------------------- ------------ ------------- ------------- -------
Underlying operating profit 20.0 7.7 - 27.7
Specific adjusting items (1.2) - (2.7) (3.9)
Operating profit 18.8 7.7 (2.7) 23.8
Net finance costs (0.1) - (0.8) (0.9)
---------------------------------- ------------ ------------- ------------- -------
Profit before taxation 18.7 7.7 (3.5) 22.9
---------------------------------- ------------ ------------- ------------- -------
3. Specific adjusting items
2016 2015
GBPm GBPm
-------------------------------------------- ------ -----
Amortisation of acquisition-related
intangible assets 3.4 1.3
Acquisition-related expenditure associated
with LR Rail (Note 6(a)) 1.6 2.1
Other acquisition-related expenditure 1.2 0.5
Non-recurring income for RDEC claims (1.5) -
in respect of prior years
-------------------------------------------- ------ -----
Total 4.7 3.9
-------------------------------------------- ------ -----
The expenditure associated with the Lloyd's Register Rail ('LR
Rail') acquisition comprises expenditure incurred in the years
ended 30 June 2016 and 30 June 2015 for services rendered to, and
consumed by, the Group to effect the LR Rail acquisition (see Note
6(a)), in addition to costs associated with the subsequent
integration of the LR Rail businesses and dual-running costs
incurred during a transitional services period with Lloyd's
Register.
Other acquisition-related expenditure primarily comprises costs
incurred in the years ended 30 June 2016 and 30 June 2015 for
services rendered to, and consumed by, the Group to effect the
Cascade and Motorcycle Engineering Italia s.r.l. acquisitions (see
Notes 6(b) and 9, respectively), in addition to the costs of the
associated earn-out arrangements of the Cascade acquisition,
together with the Vepro and Power Planning Associates acquisitions
completed in the prior year.
On 2 July 2013, legislation was enacted to allow UK companies to
elect for the Research and Development Expenditure Credit ('RDEC')
on qualifying expenditure incurred since 1 April 2013, instead of
the 'super-deduction' rules, which were abolished from 1 April
2016. Management elected to adopt the RDEC regime as of 1 July
2015, which also permitted claims to be made on qualifying
expenditure under RDEC in excess of the tax relief received under
the legacy scheme since 1 July 2013. The credit relating to claims
made for the excess in RDEC over the tax relief received under the
legacy scheme in prior years is recorded as other income and
classified as a specific adjusting item on the basis that it is
non-recurring and there is no corresponding expenditure against
which these credits can be offset. In previous years the tax relief
received under the legacy scheme was recorded as a reduction in the
income tax expense.
4. Dividends
2016 2015
GBPm GBPm
---------------------------------------- ----- -----
Final dividend for the year ended 30
June 2015 of 11.95p (2014: 10.9p) per
share 6.3 5.7
Interim dividend for the year ended
30 June 2016 of 5.07p (2015: 4.65p)
per share 2.6 2.4
Equity dividends paid 8.9 8.1
---------------------------------------- ----- -----
The Directors are proposing a final dividend in respect of the
financial year ended 30 June 2016 of 13.03p per share which will
utilise GBP6.9m of retained earnings. It will be paid on 11
November 2016 to shareholders who are on the register of members at
the close of business on 21 October 2016, subject to approval at
the Annual General Meeting on 3 November 2016.
5. Earnings per share
Basic earnings per share is calculated by dividing the earnings
attributable to ordinary shareholders by the weighted average
number of shares outstanding during the year, excluding those held
by an employee benefit trust for the Long-Term Incentive Plan
('LTIP') and by the Share Incentive Plan ('SIP') for the free share
scheme which are treated as cancelled for the purposes of the
calculation.
For diluted earnings per share, the weighted average number of
ordinary shares in issue is adjusted to assume conversion of all
dilutive potential ordinary shares. These include potential awards
of LTIP shares and options granted to employees where the exercise
price is less than the market price of the Company's ordinary
shares at year-end.
Reconciliations of the earnings and the weighted average number
of shares used in the calculations are set out below. Underlying
earnings per share is also shown because the Directors consider
that this provides a more useful indication of underlying
performance and trends over time.
2016 2015
GBPm GBPm
---------------------------------------------- ------------ ------------
Earnings 25.6 18.6
Add back amortisation of acquisition-related
intangible assets (net of tax) 2.7 1.1
Add back acquisition-related expenditure
associated with LR Rail (net of tax) 1.3 2.1
Add back other acquisition-related
expenditure (net of tax) 1.0 0.4
Less non-recurring income for RDEC (1.5) -
claims in respect of prior years
---------------------------------------------- ------------ ------------
Underlying earnings 29.1 22.2
---------------------------------------------- ------------ ------------
Number Number
of shares of shares
millions millions
---------------------------------------------- ------------ ------------
Basic weighted average number of shares
in issue 52.7 52.3
Effect of dilutive potential shares 0.5 0.6
---------------------------------------------- ------------ ------------
Diluted weighted average number of
shares in issue 53.2 52.9
---------------------------------------------- ------------ ------------
Earnings per share pence pence
---------------------------------------------- ------------ ------------
Basic 48.6 35.6
Diluted 48.1 35.2
---------------------------------------------- ------------ ------------
Underlying earnings per share pence pence
---------------------------------------------- ------------ ------------
Basic 55.2 42.4
Diluted 54.7 42.0
---------------------------------------------- ------------ ------------
6. Acquisitions
(a) Lloyd's Register Rail acquisition
On 1 July 2015 the Group materially completed the acquisition of
the Lloyd's Register Rail ('LR Rail') business, operating assets
and employees of Lloyd's Register Rail Limited and Lloyd's Register
Rail Europe B.V., together with various other assets relating to
the rail business of Lloyd's Register Group Limited and the group
of companies of which it is the ultimate holding company. On 1
March 2016, the Group also acquired the interests of all partners
of a related joint venture operation in China. LR Rail is a rail
consultancy and assurance business and is a trusted partner to a
wide range of international clients. LR Rail uses its understanding
of critical and complex technologies and its independent expert
advice to provide services ranging from rolling stock design,
signalling and train control, intelligent rail systems, operational
efficiency improvement, training and independent assurance
services.
The following table sets out the consideration paid for LR Rail,
together with the fair value of assets acquired and liabilities
assumed:
GBPm
------------------------------------------------ -------
Cash consideration 46.3
------------------------------------------------ -------
Fair value of identifiable assets acquired
and liabilities assumed
Customer contracts and relationships 13.1
Technology assets 1.3
Property, plant and equipment 0.1
Trade and other receivables 15.6
Cash 3.8
Trade and other payables and provisions (11.8)
Total fair value of identifiable net assets(1) 22.1
------------------------------------------------ -------
Goodwill 24.2
Total 46.3
------------------------------------------------ -------
(1) The total fair value of identifiable net assets acquired
includes GBP1.3m in respect of the Chinese joint venture acquired
on 1 March 2016, which is provisional and represents an estimate
following a preliminary valuation exercise. This estimate of fair
value may be adjusted in future in accordance with the requirements
of IFRS 3 'Business Combinations'.
All of the cash consideration of GBP46.3m was paid in the
year.
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 GBP13.1m and technology assets of GBP1.3m. The fair
values of net assets acquired were identified following a valuation
exercise 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. An element of the
goodwill recognised is deductible for tax purposes in certain
jurisdictions.
The provisional fair value of trade and other receivables of
GBP15.6m includes net trade receivables of GBP10.1m and amounts
recoverable on contracts of GBP3.4m, all of which is expected to be
collectible. In the ordinary course of business, LR Rail also has
GBP3.4m of guarantees and counter-indemnities in respect of bonds
relating to performance under contracts. These are not recognised
in the provisional assessment of net assets acquired.
Acquisition-related expenditure of GBP1.6m (2015: GBP2.1m) has
been charged to the Consolidated Income Statement for the year
ended 30 June 2016 and is disclosed as a specific adjusting item in
Note 3. Acquisition-related expenditure comprise costs incurred for
services rendered to, and consumed by, the Group to effect the LR
Rail acquisition, in addition to costs associated with the
subsequent integration of the LR Rail businesses and dual-running
costs incurred during a transitional services period with Lloyd's
Register.
The revenue included in the Consolidated Income Statement in
relation to the acquired businesses was GBP53.2m. The underlying
operating profit over the same period was GBP3.9m. This is reported
in the Technical Consulting segment.
Had the Chinese joint venture acquired on 1 March 2016 been
acquired and consolidated from 1 July 2015, the Consolidated Income
Statement would show revenue of GBP334.4m and underlying operating
profit of GBP39.5m based on the management accounts plus the
reported results for the post-acquisition period.
6. Acquisitions
(b) Cascade acquisition
On 18 August 2015 the Group acquired the entire issued share
capital of Cascade Consulting Holdings Limited and its subsidiary,
Cascade Consulting (Environment & Planning) Limited (together,
'Cascade') for total consideration of GBP3.2m. Cascade is an
environmental consultancy business specialising in the UK water
sector, which provides additional capability and reach in water
resource management, ecosystem services and environmental impact
assessment.
The following table sets out the consideration paid for Cascade,
together with the fair value of assets acquired and liabilities
assumed:
GBPm
------------------------------------------------ ------
Cash consideration 3.2
------------------------------------------------ ------
Fair value of identifiable assets acquired
and liabilities assumed
Customer contracts and relationships (included
within intangible assets) 0.9
Trade and other receivables 1.0
Cash 0.3
Trade and other payables and provisions (1.5)
Total fair value of identifiable net assets 0.7
------------------------------------------------ ------
Goodwill 2.5
Total 3.2
------------------------------------------------ ------
All of the cash consideration of GBP3.2m was paid in the
year.
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 GBP0.9m. The fair values of net assets acquired were
identified following a valuation exercise 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. None of the goodwill
recognised is expected to be deductible for tax purposes.
The fair value of trade and other receivables of GBP1.0m
includes net trade receivables of GBP0.8m and amounts recoverable
on contracts of GBP0.1m, all of which is expected to be
collectible.
Acquisition-related expenditure of GBP0.7m has been charged to
the Consolidated Income Statement for the year ended 30 June 2016
and is disclosed as a specific adjusting item in Note 3.
The revenue included in the Consolidated Income Statement in
relation to the acquired business was GBP3.4m. The underlying
operating profit over the same period was GBP0.6m. This is reported
in the Technical Consulting segment.
Had Cascade been acquired and consolidated from 1 July 2015, the
Consolidated Income Statement would show revenue of GBP332.9m and
underlying operating profit of GBP39.7m based on the management
accounts plus the reported results for the post-acquisition
period.
7. Cash generated from operations
2016 2015
GBPm GBPm
----------------------------------------- ------ -------
Profit before tax 33.0 22.9
Adjustments for:
RDEC income (6.9) -
Share-based payments 1.5 1.4
Cash flow hedges 2.3 (0.1)
Net finance costs 1.9 0.9
Depreciation and amortisation 13.9 10.5
----------------------------------------- ------ -------
Operating cash flows before movements
in working capital 45.7 35.6
(Increase)/decrease in inventories (3.2) 0.2
Increase in trade and other receivables (7.7) (10.6)
(Decrease)/increase in payables (4.0) 8.0
Increase/(decrease) in provisions 1.1 (0.4)
Defined benefit payments (4.4) (4.4)
----------------------------------------- ------ -------
Cash generated from operations 27.5 28.4
----------------------------------------- ------ -------
8. Net (debt)/funds
Net (debt)/funds is defined by the Group as net cash and cash
equivalents less borrowings.
2016 2015
Analysis of net (debt)/funds GBPm GBPm
--------------------------------------- ------- -------
Cash and cash equivalents (current
assets) 23.7 59.7
Bank overdrafts (current liabilities) (3.3) -
--------------------------------------- ------- -------
Net cash and cash equivalents 20.4 59.7
Borrowings maturing within one year (0.1) -
Borrowings maturing after one year (54.7) (45.4)
At 30 June (34.4) 14.3
--------------------------------------- ------- -------
9. Events after the reporting date
Motorcycle Engineering Italia s.r.l. acquisition
On 29 July 2016 the Group acquired the entire issued share
capital of Motorcycle Engineering Italia s.r.l. for initial cash
consideration of GBP2.1m (EUR2.5m). This business was formed from
the operating assets and employees of Exnovo s.r.l., a leading
vehicle design house, which creates class-leading aesthetics for
global motorcycle and scooter brands.
The following table sets out the consideration paid for
Motorcycle Engineering Italia s.r.l., together with the provisional
assessment of the net assets acquired:
GBPm
---------------------------------------------------- -----
Initial cash consideration 2.1
---------------------------------------------------- -----
Provisional assessment of identifiable net
assets acquired 0.1
Provisional goodwill and other acquisition-related
intangible assets 2.0
---------------------------------------------------- -----
Total 2.1
---------------------------------------------------- -----
All of the initial cash consideration of GBP2.1m (EUR2.5m) was
paid after the year-end in July 2016. The acquisition was completed
on a cash-free and debt-free basis, subject to normal levels of
working capital.
Adjustments have not yet been made to identifiable net assets on
acquisition to reflect their fair value, including the recognition
of customer-related intangible assets separable from the goodwill
arising on acquisition. It is expected that the remaining value of
goodwill will 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 the
goodwill recognised is expected to be deductible for tax
purposes.
Given the proximity of the completed acquisition of Motorcycle
Engineering Italia s.r.l. to the date of approval of these
financial statements, the provisional assessment of net assets
acquired is based upon available financial information.
The provisional value for initial consideration and provisional
assessment of net assets acquired may be adjusted in future in
accordance with the requirements of IFRS 3 'Business Combinations'
and the sale and purchase agreement.
The provisional assessment of net assets of GBP0.1m includes net
trade receivables of GBP0.1m, all of which is expected to be
collectible.
Acquisition-related expenditure of GBP0.1m has been charged to
the Consolidated Income Statement for the year ended 30 June 2016
and is disclosed as a specific adjusting item in Note 3.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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September 15, 2016 02:00 ET (06:00 GMT)