Ricardo turns the corner

Automotive consultants Ricardo bounced back with a better-than- expected end to 2004 as its UK operations returned to the black and it made strong progress in Japan.



West Sussex-based Ricardo delivered a £3m pre-tax profit in the six months to December compared to just £200,000 at the same stage in 2003.



The company — which operates a global technology development and consultancy network serving many of the world’s major automotive OEMs — said it was ‘cautiously optimistic’ over its prospects for the full financial year in light of the progress made so far.



Ricardo was forced to make swingeing cost cuts last year in reaction to market conditions which it described as the toughest in its history.



The effect of the £10m savings began to filter through in this week’s interim results, but there were also signs of a broader recovery in Ricardo’s fortunes.



The group’s orders rose by 28 per cent to £58m despite what it admitted were ongoing areas of weakness.



Ricardo’s Controls & Electronics division performed particularly strongly and was operating at ‘full capacity’ by the end of 2004, the company said.



‘As electronics is an increasing part of vehicle development programmes we will continue to grow this activity and seek appropriate acquisitions,’ said Ricardo chief executive Rodney Westhead.



The group’s UK business had returned to overall profitability by the end of last year, with contrasting performances by its engine and transmission operations.



The UK engines business performed strongly thanks to unabated demand for advanced technology to reduce vehicle emissions and cut fuel consumption.



In contrast, demand for transmission technology remained weak, with customers reluctant to commit to full-scale application development, said Westhead. There was brighter news in January, however, when Ricardo received significant manufacturing orders for previously developed high-performance transmissions. ‘This will underpin our transmissions manufacturing activities for the next two years,’ said Westhead.



Outside the UK Ricardo said it continued to make ‘excellent progress’ in Japan, where orders in the six months to December outstripped those for the whole of the previous year and now account for almost 10 per cent of the firm’s total figure.



‘Clearly there is a long way to go given the size and importance of this market, but we now have good contact at all levels with each of the major Japanese car companies,’ said Westhead.



He added that Japanese orders were growing across the whole sweep of Ricardo’s expertise, including engines, transmissions, software and motorsport. Westhead claimed Ricardo’s demonstrator vehicles attracted particularly strong interest ‘as they are well in advance of anything our competitors have produced’.



Ricardo will open a Chinese sales office in Shanghai next month, Westhead announced. ‘We expect our activity in China to grow fairly rapidly, and will invest sensibly to ensure we capitalise on opportunities from this expanding market,’ he said.