Ricardo gives earnings warning

12th May 2009 16:36

Engine consultant Ricardo said it now believes earnings will be slightly below those of last year as the turbulence caused by the global downturn leads to lower levels of orders and contract delays.Despite the strong underlying market requirements, the January to March period has been very difficult with unusually lower levels of order intake, it said. Order intake for the first four months of the second half has been some 30% below the same period last year. April order intake has recovered to more normal levels."As a result of the above and in particular because there are several major projects in the final stages of negotiation which are the subject of significant delay, it is extremely difficult to assess accurately the prospects for the remainder of the current financial year," said the group."The board has previously expected that some progress on last financial year would be possible, however it now believes that earnings will be slightly below those of the last financial year," it added.The group said this does not take into account the possible risk that GM may file for Chapter 11 in the US and the uncertainty if this will include its subsidiary GM Europe. Although there is no current balance sheet exposure to GM in the USA, Ricardo has £2.6m of current working capital and a £2.9m orderbook with GM Europe. It also has £40k balance sheet exposure to Chrysler.The group added that although the demand for hybrid and electric vehicles is high, orders from these markets cannot fully compensate for the short to medium term delays and reductions in the mainstream automotive business.