Ricardo launches share sale amid prolonged coronavirus recovery for automotive business

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Engineering firm Ricardo PLC (LON:RCDO) is raising £29.3mln of new equity as the company prepares for a more prolonged recovery back to pre-coronavirus (COVID-19) pandemic levels.

Through a placing, some 7.98mln news shares will be sold at a price of 333p each, meanwhile, a further 801,093 new shares will also be made available on the PrimaryBid platform.

A trading update, also released today, highlighted a stronger volume of orders in the first quarter of Ricardo’s financial year though it also noted the business remains down in the automotive sector, and, the level of orders are ‘lower than required’ in the short term.

It added that the resilient performance in other business areas is not sufficient to offset lower order in its automotive business.

Ricardo noted that the equity raise is intended to reset its capital structure and reduce leverage. It plans to pay-down drawn debt facilities and improve headroom.

The funding can also allow the acceleration of certain contracts that will require capital investment as well as unlocking additional opportunities via upfront investment, Ricardo noted, including positioning the business in new technologies such as hydrogen and electrification.

“The broader outlook for the automotive sector continues to remain uncertain and we are now cautiously planning for a more prolonged recovery to pre-Covid levels in this part of our business,” Ricardo said in a statement.

“Given the reduced level of group profitability over the last nine months, balance sheet leverage remains high and constrains our ability to access the bank facilities in place to grow the business organically.  As opportunities arise in the normal course of business, we will require agility to capitalise on them in a timely fashion.”

The share placing is organised by joint bookrunners and joint brokers Liberum Capital and Investec, whilst Rothschild is acting as financial advisor to the company.

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