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Highlights

  • Trading expected within analyst expectations, backed by robust revenue pipeline across all business units.

  • Cash conversion forecast to exceed 85% over the two-year period ending June 2025.

  • At least £10 million in additional cost savings targeted for FY25/26, with further portfolio focus on environmental and energy transition sectors.

Ricardo plc (LSE:RCDO) has issued a strategic and financial update indicating progress on its transformation journey, with expectations of delivering FY24/25 trading in line with market forecasts and a continued focus on operational efficiency and portfolio optimization.

The company announced that it anticipates meeting the range of analyst expectations for FY24/25, bolstered by a high level of secured and pipeline net revenue across all business units. Despite recent market uncertainty that has introduced volatility in orders and currency, Ricardo has taken targeted cost actions in the second half to largely mitigate these short-term impacts.

The company expects cash conversion in the second half of FY24/25 to materially exceed its medium-term target, underscoring a disciplined approach to working capital and financial management. When combining the two fiscal years ending June 30, 2025, cash conversion for continuing operations is projected to surpass 85%.

On the debt front, net debt is forecast to land toward the lower end of analyst guidance, before factoring in restructuring costs necessary to support cost reductions. The Board reaffirmed confidence that the company will remain within its leverage and interest cover covenants, signaling financial stability even amid restructuring efforts.

As part of its ongoing transformation strategy, Ricardo’s management expects to deliver at least £10 million in incremental cost savings in FY25/26, complementing the cost and margin improvements already being realised in FY24/25.

Strategically, the company continues to make headway in reshaping its portfolio to align with environmental and energy transition priorities, aiming for a more focused, simplified, and efficient business model. The company also noted enhanced collaboration between its Automotive & Industrial (A&I) and Performance Products (PP) divisions, unlocking synergies and expanding its presence into broader industrial sectors.