Ricardo warns of coronavirus blow to profit
Shares in engineering consultancy Ricardo fell 12 per cent today after the company warned the coronavirus outbreak will have a “material” hit on its annual profit.
The Covid-19 strain of coronavirus has hurt Ricardo’s presence in China, where it has had to close offices and impose travel restrictions on staff, while clients have faced similar issues.
“The coronavirus outbreak at the start of the second half has already had an operationally disruptive impact on our automotive and rail operations in China and we anticipate continuing disruption to client engagement, project delivery and business development in the coming months in mainland China and surrounding countries,” chief executive Dave Shemmans said.
“Based on the issues highlighted above we are anticipating material impact to our forecast second half profits and thus full year.”
Ricardo, which offers advice on operational challenges for rail and car firms and also builds prototypes, warned China accounted for eight per cent of revenue in the six months to December.
Shemmans added that “challenging macro conditions” have hurt Ricardo’s automotive order intake, particularly in China where car sales fell 91 per cent in February.
Revenue inched up three per cent year on year to £192.9m as Shemmans praised the performance of its energy and environment and defence divisions. Revenue climbed in both sectors by 13 per cent and 100 per cent respectively.
“The performance of E&E and defence has been excellent, underlining the importance of our strategy of diversification,” Shemmans said. “This has helped to offset the continuing challenges in our automotive sector businesses.”
But the acquisitions of a Detroit facility and infrastructure consultancy in Australia caused Ricardo’s net debt to rocket 168 per cent from £27.5m to £73.8m.
Ricardo still hiked its dividend four per cent to 6.24p a share, but earnings per share fell 19 per cent year on year to 11.8p.
“As we start the second half of the year, we have seen increased headwinds in the automotive sector which we anticipate will lead to suppressed order intake in our US, EMEA and China automotive businesses,” Shemmens said.
The coronavirus epidemic has claimed thousands of lives, while the car industry has warned of supply chain disruption due to the outbreak.