Ricardo reports 189% CAPEX growth in 2020 while 8.4% Revenue decline
10 Sep 2020 • About Ricardo (
$RCDO) • By InTwits
Ricardo reported FY2020 financial results today. Overall the company's long term financial model is characterised by the following facts:
- EBITDA Margin is declining: 8.4% in FY2020 vs. 11.6% in FY2019 vs. 14.7% in FY2016
- Ricardo has low CAPEX intensity: 5 year average CAPEX/Revenue was 2.9%. At the same time it's a lot of higher than industry average of 2.4%.
- CAPEX is quite volatile: £22m in FY2020, £8m in FY2019, £8m in FY2018, £6m in FY2017, £9m in FY2016
- The company has unprofitable business model: ROIC is -0.3%
- It operates with high leverage: Net Debt/EBITDA is 3.5x while industry average is 0.6x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue decreased on 8.4%. Revenue decline was accelerating on average at -7.9 pp per annum in FY2016-FY2020. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased on 2.2 pp from -4.4% to -2.3% in FY2020. EBITDA Margin followed a declining trend at -1.6 pp per annum in FY2016-FY2020.
Gross Margin decreased on 2.4 pp from 35.1% to 32.7% in FY2020. Gross Margin followed a declining trend at -1.5 pp per annum in the last 5 years. SG&A as a % of Revenue increased on 4.7 pp from 25.2% to 29.9% in FY2020.
Net Income margin decreased on 7.0 pp from 5.2% to -1.8% in FY2020. Net Income margin declined at -2.1 pp per annum in the last 5 years.
Investments (CAPEX, working capital and M&A)
Ricardo's CAPEX/Revenue was 6.3% in FY2020. CAPEX/Revenue increased on 4.5 pp from 1.8% in FY2017 to 6.3% in FY2020. It's average level of CAPEX/Revenue for the last three years was 3.4%. Battling declining revenue the company invested a large share of EBITDA (74.8%) to CAPEX but that didn't help at least in this year.
Return on investment
The company operates at negative ROIC (-0.3%) and ROE (-4.1%). ROIC dropped on 11.7 pp from 11.4% to -0.30% in FY2020. ROE dropped on 15.6 pp from 11.6% to -4.1% in FY2020. ROIC declined at -4.7 pp per annum in the last 5 years. ROE followed a declining trend at -5.3 pp per annum in FY2016-FY2020.
Leverage (Debt)
Company's Net Debt / EBITDA is 3.5x and Debt / EBITDA is 5.7x. Net Debt / EBITDA jumped on 2.4x from 1.1x to 3.5x in FY2020. Debt surged on 102% while cash jumped on 82.6%.
Ricardo has no short term refinancing risk: cash is higher than short term debt (383.2%).
Management team
The company's CEO David Shemmans "Dave" has spent 15 years with the company. Ian Gibson is a Ricardo's CFO. Ian Gibson has spent 7 years at the company.
Financial and operational results
FY ended 30 Jun 2020
Ricardo ($RCDO) key annual financial indicators| mln. £ | 2016 | 2017 | 2018 | 2019 | 2020 | 2020/2019 |
|---|
P&L
|
|---|
| Revenue | 332.4 | 352.1 | 378.5 | 384.4 | 352.0 | -8.4% |
| Gross Profit | 129.8 | 132.9 | 142.7 | 134.9 | 115.1 | -14.7% |
| SG&A | 89.5 | 89.6 | 104.7 | 97.0 | 105.3 | 8.6% |
| EBITDA | 48.8 | 51.0 | 45.1 | 44.5 | 29.4 | -33.9% |
| Net Income | 25.6 | 24.8 | 17.6 | 19.8 | -6.5 | -132.8% |
Balance Sheet
|
|---|
| Cash | 23.7 | 27.9 | 33.1 | 36.3 | 66.3 | 82.6% |
| Short Term Debt | 3.4 | 6.0 | 9.4 | 4.0 | 17.3 | 332.5% |
| Long Term Debt | 54.7 | 59.8 | 49.8 | 79.7 | 151.7 | 90.3% |
Cash flow
|
|---|
| Capex | 8.5 | 6.3 | 7.7 | 7.6 | 22.0 | 189.5% |
Ratios
|
|---|
| Revenue growth | 29.1% | 5.9% | 7.5% | 1.6% | -8.4% | |
| EBITDA growth | 42.3% | 4.5% | -11.6% | -1.3% | -33.9% | |
|
|---|
| Gross Margin | 39.0% | 37.7% | 37.7% | 35.1% | 32.7% | -2.4% |
| EBITDA Margin | 14.7% | 14.5% | 11.9% | 11.6% | 8.4% | -3.2% |
| SG&A, % of revenue | 26.9% | 25.4% | 27.7% | 25.2% | 29.9% | 4.7% |
| Net Income Margin | 7.7% | 7.0% | 4.6% | 5.2% | -1.8% | -7.0% |
| CAPEX, % of revenue | 2.6% | 1.8% | 2.0% | 2.0% | 6.3% | 4.3% |
|
|---|
| ROIC | 20.4% | 17.2% | 12.9% | 11.4% | -0.3% | -11.7% |
| ROE | 20.0% | 16.8% | 10.8% | 11.6% | -4.1% | -15.6% |
| Net Debt/EBITDA | 0.7x | 0.7x | 0.6x | 1.1x | 3.5x | 2.4x |
Peers in Support Services
Below we provide Ricardo benchmarking against other companies in Support Services industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Mobilityone Ltd ($MBO) | - | 37.9% | 47.4% | 35.0% | - |
| Newmark Security ($NWT) | - | -26.5% | 0.1% | 22.0% | -4.2% |
| Rws Hldgs ($RWS) | 28.1% | 34.5% | 86.6% | 16.2% | - |
| Sthree ($STHR) | 13.1% | 16.1% | 12.9% | 6.9% | - |
| Camco Clean Energy ($CCE) | -2.5% | 9.3% | 97,196.8% | 4.3% | - |
| |
|---|
| Median (8 companies) | 4.3% | 7.0% | 9.2% | 5.6% | -4.2% |
|---|
| Ricardo ($RCDO) | - | 5.9% | 7.5% | 1.6% | -8.4% |
Top companies by Gross margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Rws Hldgs ($RWS) | 42.8% | 43.8% | 38.8% | 40.1% | - |
| Newmark Security ($NWT) | 41.7% | 27.9% | 36.1% | 39.3% | 39.7% |
| Camco Clean Energy ($CCE) | 20.9% | 30.5% | 38.7% | 38.2% | - |
| Sthree ($STHR) | 26.9% | 25.8% | 25.5% | 25.5% | - |
| Driver Group ($DRV) | 20.7% | 24.6% | 26.0% | 23.1% | - |
| |
|---|
| Median (7 companies) | 27.1% | 28.0% | 26.0% | 25.5% | 39.7% |
|---|
| Ricardo ($RCDO) | 39.0% | 37.7% | 37.7% | 35.1% | 32.7% |
Top companies by EBITDA margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Rws Hldgs ($RWS) | 26.4% | 25.5% | 20.8% | 23.4% | - |
| Camco Clean Energy ($CCE) | -51.7% | -65.5% | 15.7% | 18.2% | - |
| Christie Group ($CTG) | 4.8% | 6.5% | 6.7% | 10.5% | - |
| Driver Group ($DRV) | -4.9% | 4.5% | 5.5% | 6.4% | - |
| Croma Security Solutions Group ($CSSG) | 3.1% | 3.6% | 7.1% | 5.4% | - |
| |
|---|
| Median (8 companies) | 5.3% | 5.3% | 6.6% | 5.9% | 7.1% |
|---|
| Ricardo ($RCDO) | 14.7% | 14.5% | 11.9% | 11.6% | 8.4% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Camco Clean Energy ($CCE) | 0.7% | 4.4% | 4.6% | 4.2% | - |
| Rws Hldgs ($RWS) | 0.6% | 0.9% | 0.6% | 1.1% | - |
| Croma Security Solutions Group ($CSSG) | 0.4% | 0.5% | 0.8% | 1.0% | - |
| Newmark Security ($NWT) | 0.9% | 1.3% | 9.8% | 1.0% | 0.8% |
| Christie Group ($CTG) | 1.3% | 0.8% | 0.9% | 0.7% | - |
| |
|---|
| Median (8 companies) | 1.1% | 0.9% | 0.9% | 0.8% | 0.8% |
|---|
| Ricardo ($RCDO) | 2.6% | 1.8% | 2.0% | 2.0% | 6.3% |
Top companies by ROIC, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Christie Group ($CTG) | - | - | 472.3% | 82.9% | - |
| Sthree ($STHR) | 46.2% | 43.4% | 36.3% | 40.2% | - |
| Mobilityone Ltd ($MBO) | 15.0% | -8.6% | -35.1% | 29.9% | - |
| Driver Group ($DRV) | -19.2% | 7.6% | 13.2% | 14.7% | - |
| Rws Hldgs ($RWS) | 23.5% | 20.2% | 12.8% | 12.3% | - |
| |
|---|
| Median (9 companies) | 7.9% | 7.5% | 7.9% | 12.3% | 3.2% |
|---|
| Ricardo ($RCDO) | 20.4% | 17.2% | 12.9% | 11.4% | -0.3% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Camco Clean Energy ($CCE) | - | - | 2.9x | 2.8x | - |
| Mobilityone Ltd ($MBO) | 1.0x | - | - | 1.3x | - |
| Christie Group ($CTG) | 1.3x | 0.5x | 0.4x | 0.6x | - |
| Rws Hldgs ($RWS) | 0.0x | 0.5x | 1.0x | 0.4x | - |
| Newmark Security ($NWT) | -1.8x | - | - | -0.1x | 1.0x |
| |
|---|
| Median (8 companies) | 0.1x | 0.5x | 0.6x | 0.2x | 1.0x |
|---|
| Ricardo ($RCDO) | 0.7x | 0.7x | 0.6x | 1.1x | 3.5x |
