LONDON (ShareCast) - (Sharecast News) - Ricardo shares tanked on Thursday as it said full-year results will be below consensus expectations due to order delays in several end markets.
In an update ahead of half-year results in March, the strategic, environmental, and engineering consulting company said its Energy and Environment (EE) segment delivered strong order growth, driven by multi-year contract wins within air quality and policy.

However, phasing of orders impacted first-half revenue and profit, due to global elections, the delay in spend ramping for UK water asset management plan (AMP) cycles and global macro uncertainties. Ricardo said it expects good profit growth in the second half, with the impact of delays in orders reducing into the next financial year.

In Rail, Ricardo said there was growth in the first half, reflecting a strong performance in Asia and the delivery of previously-announced contract wins. However, the second half will take a hit as the California High Speed project has been deferred until further notice due to the wildfires.

As a result of these order delays, Ricard said it will be below consensus expectations for FY 24/25.

It still expects to see good group organic underlying profit growth for the year, in addition to the profit from the acquisition of E3 Advisory.

"H2 will show good profit growth in EE, however due to the order delays described above, will be broadly flat for the full year," it said.

"In Automotive & Industrial we will see growth in H2 profit compared to H1 as a result of the variable resourcing model that we established last year, but with lower order mix in emerging solutions we will see a decline in H2 profitability year-on-year."

Chief executive Graham Ritchie said: "While we are seeing delays in orders resulting from short-term headwinds in some of our end markets, we are encouraged by the order intake across many of our businesses.

"We have recently won several key strategic contracts, particularly in our Energy and Environment business, which gives confidence in our continued growth over the medium term supporting both energy transition and environmental adaptation for climate change."

At 1020 GMT, Ricardo shares were down 22% at 273p.

Berenberg, which rates the stock at 'buy', slashed its price target to 440p from 730p as it downgraded earnings estimates after the update.

The bank cut its FY25 EBIT forecast by around 23%, with a circa 32% EBIT impact to FY26 and FY27.

"While disappointing, we think the medium-term investment thesis for Ricardo remains comfortable on balance (noting a c8x FY26 EV/EBITDA on our new forecasts before any share price movement today), with the group remaining well positioned to benefit from long-term structural tailwinds once markets normalise," it said.

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