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Investing.com -- Shares of U.K.-based strategic consultancy firm Ricardo (LON:RCDO) fell by 3.08% on Tuesday after it forecast trading within the range of analyst expectations for fiscal years 2024/25, while also acknowledging increased market uncertainty affecting short-term orders.
Despite this, Ricardo aims to achieve at least an additional £10 million in cost savings by fiscal year 2025/26.
The company highlighted its progress in transforming its portfolio, expressing confidence in its positioning to generate significant value for shareholders. Ricardo’s management is buoyed by a high level of net revenue already secured and in the pipeline across its business units.
However, recent market volatility has led to fluctuations in orders and currency, prompting the company to implement additional cost-saving measures in the second half of the fiscal year to mitigate these effects.
Ricardo anticipates that cash conversion in the latter half of FY24/25 will substantially surpass its medium-term goal, and when considering the two years ending June 30, 2025, the cash conversion for continuing operations is projected to be over 85%.
Furthermore, net debt is expected to align with the lower end of analyst forecasts for FY24/25, prior to accounting for restructuring expenses needed to achieve the planned cost reductions.
The Board remains confident that Ricardo will maintain compliance with its leverage and interest cover covenants. Beyond the current fiscal year, management is targeting an incremental £10 million in cost savings for FY25/26.
RBC analysts provided a positive outlook despite the challenges: "Despite the macro headwinds causing order delays and lower-than-expected revenues so far this year, we are encouraged by RCDO’s strong and growing order book, continued ability to win contracts, and management’s increasing focus on cost management."
"With improved clarity on strategic progress and operational improvements within business segments, we believe RCDO is progressing on the right track," they added.