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December 2024 Acquisition of E3 Advisory and the disposal of Ricardo Defense
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2 ACTIONING OUR AMBITION Dec 24 Important information THIS PRESENTATION AND ITS CONTENTS ARE STRICTLY CONFIDENTIAL. This presentation contains confidential information regarding Ricardo plc (the "Company"). This presentation, and any ancillary documents relating to it, any oral presentation and any question or answer session (together, the "Presentation") have been prepared and issued by and are the sole responsibility of the Company. The Presentation is being made available for your information only and are delivered by the Company in connection with the proposed disposal of the Company's interests in Ricardo Defense business (the "Disposal") and the proposed acquisition of E3 Advisory (the "Acquisition", and together with the Disposal, the "Transactions"). The presentation slides are given in conjunction with an oral presentation and should not be taken out of context. The Presentation is confidential and must not be recorded, copied, distributed, reproduced, stored in a retrieval system, transmitted or passed on, directly or indirectly, in whole or in part, or disclosed by any recipient, to any other person (whether within or outside such person's organisation or firm) or published in whole or in part, for any purpose or under any circumstances at any time, without the prior written consent of the Company. [The information contained in the Presentation and any further information made available by, or on behalf of, the Company relating to the Company or any of its subsidiaries or subsidiary undertakings (the "Information") will not form the basis of any contract, does not constitute or form part of, and should not be construed as, an offer, invitation, inducement, solicitation or recommendation for the taking of any action, the acquisition of any asset of, or securities in, the Company or any other entity or the making of any investment, commercial or financial decisions and does not otherwise constitute an agreement to provide investment services. Neither the Presentation nor any part thereof, nor the fact of their distribution, shall form the basis of, or be relied upon in connection with, any contract or commitment by or with the Company, or its affiliates or Representatives (as defined below), for any purpose. Neither receipt of the Presentation by any person, nor any information contained in them, supplied with them or subsequently communicated to any person by, or on behalf of, the Company or any of its affiliates or by any of its directors, officers, employees, members, agents, advisers, representatives or shareholders (collectively, "Representatives"), either constitutes or is to be taken as constituting the giving of investment advice by the Company or any of its affiliates or any of its Representatives to any person. The Presentation is not intended to form (and should not therefore be relied upon as forming) the basis of any investment, financing or other decision. The Presentation does not purport to be comprehensive or to contain all the information that may be relevant to recipients relating to the Company, the Transactions or the other matters described in the Presentation. Each recipient of the Presentation must make its own investigation and assessment of the Company, the Transactions and such other matters described in the Presentation. The information and opinions in the Presentation has not been independently verified and accordingly, no reliance may be placed for any purpose whatsoever on the information or opinions contained or expressed in the Presentation or on the adequacy, accuracy, fairness or completeness of such information and opinions. While the information and opinions has been prepared in good faith, neither the Company, nor any of its affiliates, nor any of its Representatives, gives, has given or has authority to give, any representations or warranties (express or implied) as to, or in relation to, the accuracy, reliability or completeness of the Information or any revision thereof and liability therefor is expressly disclaimed. 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Certain statements contained in the Presentation contain (or may contain) certain forward-looking statements with respect to the Company's current expectations, beliefs, intentions, estimates and projections about future events, strategic initiatives and the Company's future financial condition and performance. These statements sometimes use words such as "aim", "believes", "estimates", "may", "will", "should", "plans", "anticipates", "could", "potential", "expects", "anticipates", "plans", "intends", "projects", "indicates" and words or terms of similar meaning (or the negative thereof). By their nature, forward‐looking statements are inherently predictive, speculative and involve risks, uncertainties and assumptions that could cause actual results, financial condition, performance, developments or achievements to differ materially from those expressed or implied by the forward‐looking statements. Many of these risks, uncertainties and assumptions relate to factors that are beyond the Company's ability to control or estimate precisely. These forward-looking statements speak only as of the date of the relevant statement. Undue reliance should not be placed on these forward-looking statements. In particular, but without prejudice to the generality of the above, no representation or warranty is given, and no responsibility or liability is accepted, either as to the achievement or reasonableness of any future projections, forecasts, estimates or statements as to any prospects or future returns contained or referred to in the Presentation or in relation to the basis or assumptions underlying such projections, forecasts, estimates or statements. Except as required by applicable law or regulation, the Company expressly disclaims any obligation or undertaking to release any updates or revisions to these forward-looking statements whether as a result of new information, future events or otherwise. No statement in the Presentation is or is intended to be a profit forecast or profit estimate or to imply that the earnings of the Company for the current or future financial periods will necessarily match or exceed the historical or published earnings of the Company and/or its subsidiaries. Certain figures contained in the Presentation have been subject to rounding adjustments. Accordingly, the actual arithmetic total of numbers may not conform exactly to the total figures and percentages may not conform exactly to percentages that would be derived if calculations were based on rounded numbers.
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01 02 04 03 Introduction Execution in line with strategic ambition Acquisition High margin, high growth, environmental and energy consulting business Divestment Demonstration of ongoing commitment to shift our portfolio Summary Actioning our ambition AGENDA
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INTRODUCTION
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5 ACTIONING OUR AMBITION Key highlights: Dec 24 ACCELERATING OUR TRANSFORMATION TO BECOME A LEADER IN ENVIRONMENTAL AND ENERGY TRANSITION SOLUTIONS The acquisition and divestment continues to simplify and focus the Group’s portfolio on long-term sustainable growth Acquisition of 85% shareholding of E3 Advisory for AUD $101.4m (£51.0m^) , with remaining 15% expected to be acquired after 3 years The terms of the acquisition offer an attractive valuation for Ricardo at an adjusted c.8.6x EBITDA multiple based on FY 23/24* Acquisition of E3 Advisory increases the Group’s international strategic advisory capability and creates scale in energy and transport infrastructure in Australia Agreed sale of Ricardo Defense for US $85million (£67.5m^^) on a cash free, debt free basis Disposal timing optimises cash for the Group, balancing finite nature of ABS and status of future new programmes Transactions expected to close in the coming weeks Net disposal proceeds fund all the cash consideration for the initial 85% of Turbine *12 months to June 2024 on an IFRS unaudited basis; excludes transaction fees ^ Rate of exchange AUD | GBP 1.99 on 13 December ^^Rate of exchange USD | GBP 1.26 on 13 December Completion of the acquisition is conditional upon the disposal of Ricardo Defense
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6 ACTIONING OUR AMBITION OUR STRATEGIC GROWTH FRAMEWORK Clarity in our growth solutions Capital allocation to support growth Develop digital solutions Develop strategic consulting capability Defined industry targets Strategic key accounts Value proposition by industry Geographic expansion in key markets 1. PORTFOLIO PRIORITISATION 2. MARKET EXPANSION Sales strategy: • Solution selling • Digital tools to upsell • Sales team upskill • Sales team effectiveness Business model: • New commercial models • Digital development • Investment in innovation • Client stickiness through value chain Go to market: • Refine direct/ indirect route • Build regional partner model • Brand build in key territories • Enable ease of doing business ACCELERATE ORGANIC STRATEGY CULTIVATE M&A PIPELINE Portfolio synergies Industry penetration Geographic scale High growth, high margin 3. M&A ACCELERATION Disciplined approach: • Identify capability gaps • Engage with pipeline prospects • Partner on combined opportunities • Acquire to expand Disciplined M&A with strong cultural alignment for accelerated growth and margin Dec 24
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7 ACTIONING OUR AMBITION Dec 24 ORGANIC GROWTH COMPLEMENTED BY DISCIPLINED M&A New strategic direction set out in May 2022 2022 2023 2024 2025 2026 Divestment Ricardo Software August 2022 Acquisition Aither Pty Ltd March 2023 Divestment [Maple] December 2024 Established mobility portfolio To become a world-leading strategic & engineering consultancy in environmental and energy- transition Continue to accelerate the business through disciplined M&A that is focused on highly attractive and technically led areas, allowing us to shift our portfolio to create a high growth, high margin and lower capital intensity business. Acquisition Inside Infrastructure March 2022 Acquisition E3-Modelling January 2023 Environmental and energy transition portfolio Environmental and energy transition portfolio Environmental and energy transition portfolio Established mobility portfolio M&A activities accelerates growth and margin in line with our strategic ambition Acquisition E3 Advisory January 2025 Environmental and energy transition portfolio Divestment Ricardo Defense December 2024 Established mobility portfolio
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ACQUISITION TURBINE
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9 ACTIONING OUR AMBITION Dec 24 TRANSACTION SUMMARY AND PRINCIPAL TRANSACTION TERMS Complementary advisory and technical services to create long term value for both Ricardo and E3 Advisory * AUD:GBP 1:1.99 ** 12 months to June 2024 on an IFRS unaudited basis; excludes transaction fees. • Agreement to acquire an 85% shareholding of E3 Advisory for AUD $101.4m (£51.0m*) • Attractive valuation for Ricardo at an adjusted c.8.6x EBITDA multiple based on FY 23/24* • Deal structure creates strong benefits for both parties through greater scale in energy and transport infrastructure in Australia, enhanced complementary strategic capability, and offering potential to scale internationally • Phasing for AUD $101.4m (£51.0m*) payment • AUD $69.0m (£34.7m*) in January 2025 • AUD $22.6m (£11.4m*) in January 2026 • AUD $9.8m (£4.9m*) in January 2027 • Put option over the remaining 15% shareholding by January 2028 with phasing of payment over two instalments • Completion expected within the coming weeks
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10 ACTIONING OUR AMBITION Dec 24 E3 ADVISORY OVERVIEW • E3 Advisory is an Australian infrastructure advisory firm founded in 2014 by Peter Byford, Peter Wood and Jason Malouf • Advises government and private clients throughout the infrastructure project lifecycle • Expertise in transport infrastructure, clean energy, water, mining & resources • E3 Advisory is a principal-led advisory firm, headed by Jason Malouf as Board Chair and Sutina Tsang as Managing Principal • Circa. 100 advisory staff, most of whom are located across its four key office locations in Perth, Melbourne, Sydney, and Brisbane • E3 Advisory also services clients outside of Australia, including, New Zealand and Hong Kong Sydney Melbourne Perth Brisbane Key locations Additional presence Hobart (capital of Tasmania) and Auckland, New Zealand Expertise in solving complex problems across the spectrum of infrastructure
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11 ACTIONING OUR AMBITION Dec 24 E3 ADVISORY BUSINESS OVERVIEW Policy and strategy development Business case leadership Programme & project creation Governance and assurance Developing government policy Developing delivery strategies for infrastructure projects Procurement strategy Transaction & commercial management Interactive tendering processes Virtual data room management Time/cost/risk assessment Project and commercial management Time/cost/risk management Commercial and contract Project health checks Post development reviews Expert opinion and advice on contractual disputes, providing advice on cost, time, ‘constructability’ and defects analysis Strategy Transactions Commercial (delivery) Disputes Enhanced strategic advisory portfolio to compliment Ricardo’s technical service capabilities E3 Advisory provides services and engages with its customers throughout the life of an infrastructure project
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12 ACTIONING OUR AMBITION Dec 24 E3 ADVISORY’S COMPLEMENTARY CUSTOMER AND INDUSTRY OVERVIEW Balanced market and industry exposure offering attractive expansion opportunities Largest clients: 1. Major transport infrastructure authority 2. State capital agency 3. Electric utility company 4. State transport agency 5. Desalination company 13% 25% 24% 8% 8% 22% Road Rail Energy Water Technology Other 60% 40% Government Private clients FY24 revenue by sector FY24 revenue by client type
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13 ACTIONING OUR AMBITION Dec 24 E3 ADVISORY FINANCIAL TRACK RECORD E3 Advisory Financials FY22 FY23 FY23 YoY Growth % IAS – GBP (M)* Revenue 19.8 22.3 12.6% Underlying operating profit~ 5.0 5.7 14.0% Underlying operating profit %~ 25.2% 25.4% 0.2 pp Gross assets 9.7 9.0 (7.6)% FY22 FY23 FY24 FY23 YoY Growth % FY24 YoY Growth % AAS - AUD (M)** Revenue 36.4 39.9 46.2 9.6% 15.7% Underlying operating profit~ 9.2 10.1 13.2 9.8% 30.4% Underlying operating profit %~ 25.2% 25.4% 28.5% 0.2 pp 3.1 pp Gross assets 17.2 17.2 20.4 -0.1% 18.5% • Consistently profitable and generating strong operating cashflow • Underlying operating profit adjusts for changes in remuneration of key personnel from dividends to bonus and non-recurring items such as transaction related costs and COVID grant income Accretive high growth, high margin business * Financials based on Ricardo accounting policies under IFRS **Financials based on E3 Advisory accounting policies under AAS ~Management account extraction (unaudited)
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14 STRATEGIC RATIONALE Dec 24 ACTIONING OUR AMBITION Strong track record and substantial growth potential aligned to Ricardo’s strategy Market expansion Portfolio prioritisation • Brings complementary advisory and technical solutions in line with the Group’s environmental and energy transition priorities • Increases the Group’s clean energy capabilities • Increases the strategic advisory mix across the Group to underpin high margin growth • Brings the ability to offer an enhanced services portfolio to several common clients • Provides further expansion opportunities in the rail and road sectors in Australia and more widely across the APAC region • Delivers international potential across key growth markets including water, energy and transport infrastructure Growth priorities Growth enablers • Good cultural fit with comparable values and purpose • Retention focus to support the recognition of great talent • Approximately 300 employees across Australia post-acquisition
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DIVESTMENT Ricardo Defense
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16 ACTIONING OUR AMBITION Dec 24 RICARDO DEFENSE DIVESTMENT • The disposal is part of Ricardo’s ongoing priority to focus the Group’s portfolio on its core consulting services in environmental and energy transition, offering higher growth, higher margin and lower capital intensity • Ricardo Defense forms part of the Group’s Established mobility portfolio which is expected to generate lower growth in the medium to long-term when compared to the Environmental and Energy transition portfolio • Ricardo Defense reported total revenues of £123.4m in FY23/24, representing 26% of the Group’s revenue, and 60% of the Group’s operating profit • Growth in Ricardo Defense in FY23/24 was primarily driven by the ABS* extension contract awarded by the US Army for $385m with deliveries expected to run to September 2027 • Timing for Ricardo Defense divestment is optimal as it provides Ricardo with value for the finite ABS contract • The divestment accelerates the Group’s transition in line with its strategic priorities to become a global leader in environmental and energy transition solutions Strategic rationale and key financial terms Key financial terms • The aggregate consideration payable by the Buyers in connection with the Disposal comprises US $85 million (£67.5m*) as adjusted on a cash-free, debt-free basis, normalised working capital adjustments, and expenses, as allocated to the Group under the terms of the Ricardo Defense Equity Purchase Agreement • Completion expected in December 2024 * Rate of exchange USD|GBP 1.26 on 13 December 2024
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17 ACTIONING OUR AMBITION Dec 24 RICARDO DEFENSE DIVESTMENT Short term dilution but repositions group for long term high growth, high margin future Expected to be dilutive to the Group’s EPS in the near term, partly offset by earnings contribution from E3 Advisory EPS dilution to reduce over time, given lower expected contribution from ABS programme and strong growth in the Group’s continuing operations Continuing Group operations positioned for long term growth with over 75% of operating profit from higher margin Environmental and Energy transition portfolio Improves long term quality of earnings aligned to environmental and energy transition mega trends Simplifies brand positioning as a leader in environmental and energy transition
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SUMMARY
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19 PROFORMA FINANCIAL INFORMATION Accelerating our portfolio transformation to become a leader in environmental and energy transition Group today FY24 reported operating profit Proforma 2024 Post-acquisition of E3 Advisory and disposal of Ricardo Defense operating profit Dec 24 ACTIONING OUR AMBITION EE Rail A&I Emr Defense PP, A&I Est EE Rail A&I Emr PP, A&I Est
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20 ACTIONING OUR AMBITION Dec 24 VALUE CREATION IN RE-SHAPING THE RICARDO PORTFOLIO Creating long-term sustainable value for all stakeholders as we continue to deliver our strategic plan 1. 2. Acquiring a highly complementary business Optimal timing to divest Ricardo Defense • Accelerates commercial and operational scale in energy, environmental and transport infrastructure in Australia • High growth, high margin, low capital intensity business • Disposal timing optimises cash for the Group, balancing finite nature of ABS and status of future new programmes • Will improve long term quality of earnings 3. Clear demonstration of strategic execution • Consistent with Group’s stated strategy to reposition from established mobility to environmental and energy transition