into action

Ambition

Ricardo plc | Annual Report and Accounts 2023/24

What’s in this report

Strategic report

Highlights 1

Our story 2

Chair’s statement 4

Chief Executive’s review 6

At a glance 8

Business model 9

Outlook and opportunities 10

Strategy 11

Case studies 12

Conversation with the CEO and CFO 16

Strategic progress and KPIs 18

Chief Financial Officer’s report 20

Business unit overview 26

Stakeholder engagement 42

Responsible business 44

Risk management and internal control 75

Viability statement 81

Non-financial information and

sustainability statement 83

Section 172 statement 84

Governance report

Board of Directors 86

Corporate governance statement 88

Nomination Committee report 95

Responsible Business Committee report 97

Audit Committee report 99

Directors’ remuneration report 102

Directors’ report 133

Statement of Directors’

responsibilities 136

Financial statements

Independent auditor’s report

to the members of Ricardo plc 138

Group financial statements 147

Company financial statements 215

Additional information

Corporate information 223

Glossary 224

Visit us at: www.ricardo.com

A global consultancy enabling the clean

energy future by delivering strategic,

environmental and engineering solutions

that intersect the global transport, energy

and climate agendas.

We are

Ricardo

We strive to create a safe and sustainable

world by enabling our clients to

solve the most complex and dynamic

challenges.

Our ambition is to become a global

leading strategy and engineering

consultancy in environmental and

energy transition solutions.

While being led by our values:

Create together

Be innovative

Aim high

Be mindful

Highlights

Financial highlights Operational highlights

Order book

(1),(2)

£396.5m

0.3%

Statutory profit

before tax

(2)

£4.3m

153.8%

Dividend

per share

12.7p

6.2%

Revenue

(1),(2)

£474.7m

6.6%

Underlying

(1)

earnings

per share

(2)

35.9p

7.5%

Underlying

(1)

cash

conversion

(2)(3)

118.9%

52.2pp

Underlying

(1)

profit

before tax

(2)

£30.5m

9.3%

2,600+

Active consulting projects

3.81

Employee engagement score

75%

Percentage of revenue that

supports sustainability and safety

1,800+

Students reached through

Ricardo STEM outreach

Statutory earnings

per share

1.1p

112.6%

Statutory

cash conversion

(2)(3)

125.4%

74.7pp

(1) Please see the glossary on page 224 for a definition of the above terms. These alternative performance measures (APMs) are described further, and where appropriate reconciled to GAAP measures, in Note 2

totheGroup financialstatements.

(2) Excluding the results of Ricardo Software which was classified as a discontinued operation at 30 June 2023.

(3) Growth based on prior year restated figure. See Note 37 in the Group Financial Statements.

1Ricardo plc | Annual Report and Accounts 2023/24

Over 100 years ofworld-changing

innovation and ideas

Our story

Ricardo has more than a century of engineering experience in improving transport efficiency and over 60 years of

leadingexpertise in deliveringenvironmental and energy solutions. Today, our consulting services and engineering

solutions are helping overcome some of the world’s most complex strategic and operational challenges.

Founded on principles of sustainability… …that forms the basis for a purpose and

culture that our people believe in…

...and shapes our portfolio

of services and solutions.

In 1915, Harry Ricardo set out on a mission to ‘maximise

efficiency and eliminate waste’. This mindset continues

tomotivate and direct the business of Ricardo today.

Ricardo is powered by c.3,000 highly capable employees, all of

whom are helping to fulfil our vision to create a safer and more

sustainable world.

We are a global team of consultants, environmental specialists,

engineers and scientists delivering innovative and cross-sector

sustainable solutions.

1915

Global

c.3,000

2Ricardo plc | Annual Report and Accounts 2023/24

Our story continued

Enabling a better

energy transition

The shift to clean energy is not only critical to addressing the climate crisis but inevitable. At Ricardo, we’re committed

tohelpingclients in nearly every sector navigate this shift by providing expertise and solutions that create clear paths

to a sustainable future.

We have a clear ambition that is

transforming our business…

…while creating lasting value for

allourstakeholders…

...and working together towards

abetter tomorrow.

We’re taking big leaps to transform Ricardo into a world-leading

strategy and engineering consultancy in environmental and

energy transition solutions.

Through our ambition, we are taking an active role in addressing

climate change and better aligning our business to respond to

megatrends that are shaping the world.

Building on our legacy of world-leading innovation, our teams

are working together to solve complex challenges enabling a

sustainable future.

Leading

Sustainable

Lasting

3Ricardo plc | Annual Report and Accounts 2023/24

Chair’s statement

A year of taking action

to achieve our long-term

ambitions

Dear Shareholders,

I am pleased to present to

you the Ricardo plc Annual

Report and Accounts for the

financial year 2023/24.

Good progress has been made in the year

with the repositioning of our Company to take

advantage of the growth opportunities ahead,

by focusing on clients, our people and the

capabilities necessary for future success. As a

result, we are starting to see real momentum

in a number of areas and, while there is still

work to be done, the board has confidence that

we can deliver against our strategic ambitions.

Group performance

The Group saw underlying operating profit

from continuing operations grow by 14%

from £34.0m to £38.8m, in line with board

expectations and on course to achieve our

objective of doubling underlying operating

profit over the five years to FY 2026/27.

The Group’s reported operating profit from

continuing operations improved from a loss of

£1.9m in FY 2022/23 to a profit of £12.8m in

FY2023/24.

After a challenging first half of the year which

saw Emerging and Established Automotive and

Industrial (A&I) making underlying operating

losses, we were pleased to see a return to

profit for both in the second half, following

the additional restructuring actions taken.

OurDefense business had a particularly strong

year with an underlying operating profit growth

of 82% (constant currency) driven by the ABS/

ESC programme. Our Energy and Environment

and Rail businesses have both shown good

operating profit growth of 11% and 14%

(constant currency), respectively.

Total orders received in the year were down

(5%) against prior year, which was anticipated

after a record order book in FY 2022/23 and

the impact of delayed orders in A&I in FY

2023/24.

Cash performance was particularly strong

with overall net debt falling in the year from

£62.1m to £59.6m, despite having paid out

the maximum earn outs for our E3-Modelling

SA (E3M) and Aither Pty (Aither) acquisitions

based on their strong performance and the

payment of reorganisation costs.

Actioning our ambition

Ricardo has a clear ambition: to become a

leading global strategic and engineering

consultancy in environmental, energy

transition and transport solutions.

It’s an ambition which clearly aligns with

our Company vision to create a safe and

sustainable world. In just over two years since

communicating our strategy, we have taken

actions to make this a reality and are already

seeing good progress. This includes the

acquisitions of E3M and Aither in FY 2022/23

where we have seen strong performance in the

current financial year; a refocusing on our key

client relationships across the Group with much

stronger levels of engagement; streamlining

operations and support functions to optimise

performance and reduce operating costs; and

a stronger focus on the commercial disciplines

required to win key business opportunities.

Mark Clare|Chair

4Ricardo plc | Annual Report and Accounts 2023/24

The board

There have been a number of changes to the

board that we have announced. In May, we

said farewell to Laurie Bowen who served

nine years on the board and, in July, Jack Boyer

stepped down having served nearly six years

with the Company. In addition, Bill Spencer will

be stepping down after the AGM in November

having served over seven years.

We are very grateful to Laurie, Jack and Bill for

their significant contributions to the Company

and we wish them well for the future.

I am delighted to have welcomed Carol Borg

to the board from 1 July and Sian Lloyd Rees

who will join the board from 1 October. Their

significant combined experience and expertise

will be very valuable to the board going

forward.

People and culture

The success of our Company continues to be

in the hands of our c.3,000 colleagues across

the business and significant steps have been

taken to ensure communication throughout the

organisation is as effective as it can be. There

is no doubt that the strength and depth of

talent that exists within Ricardo gives us real

competitive advantage and management’s role

is to harness this for the benefit of our clients

and ultimately our shareholders.

I was delighted to see a number of colleagues

from across the business being recognised

externally for their work during the year.

Inaddition, great progress is being made in

the hydrogen technology area, with Ricardo

being recognised in the IET Excellence and

Innovation Future Mobility awards for our

propulsion inverter technology, and as a top

10 consultancy for green hydrogen by Reuters

Top 100 Innovators in Hydrogen.

Chair’s statement continued

Dividend

Given the financial performance of the

Company, the board is proposing a final

dividend of 8.9p in line with our distribution

policy within the range of 2.5-3.0 times cover.

Following the interim dividend of 3.8p, this will

take the total dividend for the year to 12.7p,

a6.2% increase over the prior year.

Outlook

As I have already said, good progress has

been made in aligning the Company with

its strategic plans to meet its long-term

ambitions. There is still a considerable way to

go and looking ahead the board will continue

to focus on performance optimisation; growing

our longer-term order book; delivering the

benefits of the acquisitions made whilst

critically reviewing further opportunities;

developing our ESG agenda; and delivering

a vision of ‘OneRicardo’ serving all our

stakeholders.

Mark Clare

Chair

10 September 2024

Ricardo plc | Annual Report and Accounts 2023/24

Chief Executive’s review

Building One Ricardo to

create value and deliver

our vision of a safe and

sustainable world

I believe that we are truly

unique in the combination

of services we provide to

support environmental and

energy transition across

the value chain. No other

organisation can deliver

what we can, with the deep

strategic and engineering

expertise across transport,

environmental policy and

energy infrastructure. This

is the capability that binds

us together.

Now more than ever, with the world changing

rapidly and with a heightened level of urgency

towards protecting our planet, Ricardo is

becoming ever-more relevant in the services

itcan deliver to support energy transitions.

As a company, we maintain a strategic focus

on three global megatrends, leveraging

our position to access and drive long-term

sustainable growth in areas encompassing

energy decarbonisation, climate change and

zero emission propulsion.

We are well placed to extract value in

creating solutions for resolving each of these

megatrends in ways that are beneficial for

allof us.

As I travel to meet clients and colleagues across

the world, I am more conscious than ever of the

importance of the work that we do and how we

are purpose-led in the projects that we work

on. Ricardo colleagues, regardless of role or

location, are motivated by the meaningful work

and impact we deliver every day.

Delivering our full-year commitments

Ricardo’s solid performance in FY 2023/24

resulted in the Group trading in line with the

board’s expectations, delivering underlying

operating profit before tax of £30.5m,

aheadofthe prior year (FY 2022/23: £27.9m

on a continuing basis). On a reported basis,

theGroup delivered a profit before tax of

£4.3m (FY 2022/23: loss of £8.0m on a

continuing basis).

As a business, we report our performance in

two portfolios: our Environmental and Energy

Transition portfolio, representing our core

consulting capabilities, in which we deliver

technical engineering and environmental

consulting capabilities that enable the energy

transition; and our Established Mobility

portfolio that focuses on conventional

propulsion engineering design, with niche

manufacturing and production assembly.

Clear highlights for the year in our Environmental

and Energy Transition portfolio included securing

our largest environmentally focused project

to date of close to £12m to support a Middle

East client in establishing its regional air quality

monitoring network.

Additionally, we are delighted to be working

as the independent safety assurance expert

on the California high-speed rail project, which

is a publicly funded 170+ mile high-speed

rail system that is due to open in 2030. Both

projects demonstrate the clear progress we

have made to date in creating operational scale

in our chosen markets.

Within our Established Mobility portfolio,

the United States Army awarded Ricardo’s

Defense business an extension agreement

of USD$385m to continue production and

delivery of the anti-lock braking system/

electronic stability control (ABS/ESC), with

delivery completion in September 2027,

whichcontributed to the Group’s overall

operating profit.

Graham Ritchie |Chief Executive Officer

6Ricardo plc | Annual Report and Accounts 2023/24

Delivering our full-year commitments

continued

Work continues in supporting OEMs with

cleaner transport solutions, and an example of

this is the contract award that we have secured

to design a new large engine concept for an

Asia-based OEM. Through the engine design

performance improvements that we are making,

the client is able to further reduce greenhouse

gas emissions and transition to a greener future.

Realising our long-term ambition

Our strategy is clear: we are on a

transformation journey to become a global,

world-leading strategic and engineering

consultancy in environmental and energy

transitions. And this has been a year of

progress, as we firmly embed our strategy

across Ricardo and focus on execution as we

accelerate our impact in FY 2024/25.

Through our growth priorities, which include

portfolio prioritisation, market expansion and

M&A acceleration, we have ensured a structured

approach to executing the Group’s strategy.

Repositioning our portfolio has been a key

focus for the Group, and we have actively

continued our work to manage our portfolios

through a shift from services to solutions,

allowing us to increase our strategic consulting

expertise while also investing heavily in our

digital transformation. With the launch of

Ricardo’s digital platform, we are now able

to offer scalable and repeatable solutions,

specifically leveraging our market-modelling

tools and converting these all to digital

applications. We have also made great

progress in our digital tools to support our

technical innovation in hydrogen propulsion

advancement and have recently expanded our

hydrogen test facilities, which are already fully

booked for the next 12 months.

Market expansion is crucial to our sales

growth, and we are seeing traction in our key

markets including North America, where we

have established a foothold in rail services

through our partnership with Metrolinx in

Canada and, as I mentioned, the recent win

of the California high-speed railway contract

in the USA. We have successfully grown our

Environmental and Energy Transition team to

support our clients in Europe by establishing

the Madrid hub, and we have also developed

a pathway in Australia and Asia to align our

services and practices through our regional

leadership model.

We take a disciplined approach to M&A to

accelerate growth in our chosen markets. Our

two most recent acquisitions (E3-Modelling

and Aither Pty Ltd) have provided the Group

with good overall performance, achieving

the maximum potential earn out following

successful integrations into the Group.

Building One Ricardo

During the year, we have accelerated the

consolidation of our enabling functions and

right-sized our business operating model to

support us in creating ‘One Ricardo’.

Through the consolidation process of

centralising our functions, we are able to

leverage benefits of scale without duplicating

effort or constraining investment. The

functions have been structured in a way

that supports the business today whilst

enabling us to scale our functions to support

future growth, and also allowing for greater

opportunities for our people to grow and

develop their potential.

The actions that we have taken have delivered

immediate cost benefits within the full year,

but more importantly, are already accelerating

improvements in operational efficiency and

client experience to support our growth ambition.

Acting responsibly

We are committed to making every day in Ricardo

a great day through investing in our incredibly

talented colleagues and creating a culture that is

deeply rooted in being purpose-led.

As we transition the business, it is important

to bring our teams along the journey, so

it was encouraging to see the number of

colleagues who responded to this year’s

engagement survey, which was up by 11

percentage points to 72%. We received more

than 6,900 comments, which is a healthy

measure that our colleagues believe that

their opinion matters. The engagement score

itself was down slightly, reflecting the level of

change delivered through the organisation. In

response to this, we are already beginning to

implement engagement strategies throughout

the organisation to optimise and realise the

benefits of the changes made.

Being responsible and acting ethically are

fundamental to Ricardo. We aim to continue

to accelerate our own ESG performance

through our sustainability commitments,

which include the work that we do in energy

transition and net zero pathways for our

clients, our investment in our people, and our

environmental and governance targets.

The Ricardo mission set out more than

100years ago was to ‘maximise efficiency

and eliminate waste’ and this remains

deeply integrated in our working ethos today

and, more than ever, ignites the passion

that drivesour people and our approach to

responsible business.

Gaining good momentum as

welookahead

Ricardo is gaining good momentum to deliver

its five-year strategic plan communicated in

May 2022. We enter the new fiscal year with

a similar order book level to the record one

we achieved last year, and, through our solid

pipeline visibility, we have good confidence in

performance as we enter FY 2024/25.

With our expertise in environmental and

energy transition, there is a real opportunity for

us to do even more in supporting governments

and the private sector in delivering a net zero

pathway for future generations.

We also know that for us to be a pivotal

part of change, we have to continue to grow

and improve our business. By doing so, we

can extend our reach, supporting even more

clientsand ensuring that our teams across

the world continue to deliver meaningful

work, knowing that the projects are delivering

maximum impact.

The more we can do to accelerate our

transformation, the more value we can create

for all our stakeholders.

Graham Ritchie

Chief Executive Officer

10 September 2024

Chief Executive’s review continued

7Ricardo plc | Annual Report and Accounts 2023/24

Who we are

At a glance

Our

vision

To create a safe

and sustainable world.

Our

purpose

Enable our clients to solve the most complex

anddynamic challenges.

Environmental and

Energy Transition

Revenue

£239.3m

Established

Mobility

Revenue

£235.4m

Trusted the

world over

Countries with Ricardo

operations serving clients

worldwide

2,600+

Active client projects

c.3,000

Colleagues

Markets

we serve

Aerospace

anddefence

Automotive

Industrial and

manufacturing

Energy, utilities

and waste

Financial

services

Government

and public sector

Maritime

Rail and mass transit

Our business portfolio

Our operating segments are grouped into two main portfolios:

Energy and Environment

£103.3m

Rail and Mass Transit

£77.4m

 Emerging Automotive and Industrial

£58.6m

Defense

£123.4m

Performance Products

£83.4m

 Established Automotive and Industrial

£28.6m

52.4%

35.4%

12.2%

43.2%

32.3%

24.5%

Ricardo plc | Annual Report and Accounts 2023/24

Business model

How we create value

We are uniquely positioned to provide differentiated value linking environmental policy, transport and energy transition.

Client demand drivers Our expert capabilities What we deliver Our impact

Engineering services

Our multi-industry knowledge and deep

technical expertise uniquely positions us

to drive innovative engineering solutions

to deliver sustainable outcomes for our

transport clients.

Strategic consulting

and advisory services

Our global advisory and consulting services

range from operational improvement, cost

reduction and new product introduction to

technology strategy and scenario planning.

Environmental

consulting services

Through deep and broad expertise, Ricardo

develops integrated solutions to complex

environmental and sustainability issues.

Strategy

and planning

Implementation

through own

operations

Implementation

through the

supply chain

With our unique

depth and breadth

of engineering,

science and economic

expertise, we support

clients from strategy

to implementation

to monitoring,

to overcome the

complexity of

energy transition

and engineering

challenges.

Electrification and hybrid systems and integration

Sustainable fuels and future internal

combustionengines

Hydrogen fuel cells

Rail systems and operations

Assurance and testing

Niche manufacturing and assembly

Policy, regulation, incentives and funding

optimisation

Economic, environmental, operation feasibility

Optimised economic, risk, safety and

environmental benefits

Optimised procurement for economic and

environmental benefit

Water management

Air quality

Corporate sustainability

Energy and decarbonisation

9Ricardo plc | Annual Report and Accounts 2023/24

Outlook and opportunities

Global megatrends shaping our business

Ricardo’s endurance is, in part, due to our constant monitoring of emerging, long-term

trends, allowing us to ensure we’re preparing the business to enable our clients to solve

their most complex and dynamic challenges.

Global policy and funding

for climate change

While a significant proportion of green transition investment

comes from the private sector, government policy plays a

critical enabling role through instruments such as target

setting, regulation, subsidies, tax credits and R&D investment.

Governments globally are continuing to roll out policies that

advance and enable the financing of green transition.

Beyond green energy and decarbonisation, there is increasing

focus, legislation and investment in the conservation, restoration

and management of natural and modified ecosystems with

initiatives such as the Global Biodiversity Framework and

Taskforceon Nature-related Financial Disclosures.

Energy

decarbonisation

Developing a pathway from fossil-based energy generation

toa low carbon future is a priority issue globally.

In June, the International Energy Agency (IEA) stated that

investment in green energy and infrastructure is set to reach

$2 trillion in 2024, with spending on renewable power, grids

and storage set to greatly exceed spending on oil, gas and

coal. This is partly driven by the falling price of renewable

energy, meaning that investment will continue even with

fluctuating investment rates.

(1)

Zero emission

transport

Globally, there is a growing demand for zero emission vehicles

of all kinds, driven by a mixture of public demand for fossil

fuel-free vehicles and governments driving policy change to

meet Paris Agreement obligations. There are increasingly

stringent targets in major markets for CO

and nitrogen oxides,

and future bans on the sale of passenger vehicles powered

byfossil fuels – such as the EU and UK’s 2035 ban. Maritime

and aviation sectors are also under pressure to achieve net

zero goals.

How we’re responding:

• World-leading modelling tools support governments

worldwide to make energy, environment and

transportation transition decisions for a better world

• Expanding our team of experts on a wide range of

climate, societal and ecological areas

How we’re responding:

• Supporting national-level clean energy and energy

security policy, strategy and implementation plans

• Leading the development of carbon-negative biofuel

technology

• Supporting energy generators and distributors with

development of clean nationally critical infrastructure,

including grid resilience and clean technology integration

• Developing sustainable fuel solutions and technologies

for use in maritime, aviation, rail and ground

transportation

How we’re responding:

• Supporting clients with their electrification journey

from hybrid to fully electrified propulsion

• Leading in the development of commercial

hydrogen technology for more challenging transport

applications, including within the maritime industry

• Supporting the development of renewable aviation fuel

• Partnering with governments around the world

in thedevelopment of rail projects powered by

renewableenergy

(1) Overview and key findings – World Energy Investment 2024 – Analysis – IEA.

10Ricardo plc | Annual Report and Accounts 2023/24

Strategy

Delivering our ambition

Our strategic ambition is to become a global leading strategy and

engineeringconsultancyinenvironmental and energy transition solutions…

….by transforming our business

usingstrategic levers…

…while continuously investing

in our core enablers...

…and delivering on our

own sustainability focus areas.

Portfolio prioritisation

Align our portfolio so it is better able to address global

megatrends, while optimising service andprofitability

Market expansion

Expand and develop our key market positions through

geographic and industry expansion inattractive industries

focused on high growthmarkets

M&A acceleration

Supplement organic growth with rationalised, targeted M&A

that accelerates ambition achievement

Client experience

Deliver the best client experience in each of our projects,

consistently ensuring that our brand is relevant to our entire

client base

Winning teams

Our people plan is developed around trust, accountability,

inclusion, learning and mobility. We aspire to build an

organisation that attracts, retains, develops and inspires the

very best people around the world

Optimised operations

Continuously optimise operations through the improvement of

our processes across the whole value chain to ensure that our

clients’ expectations are consistently met

Our clients

Accelerate clients’ sustainability ambitions

Our environment

Positively impacting our planet

Our people and communities

Nurture an environment for everyone to thrive

Our business

Continuously improve ways of working

FY 2022/23

Our

targets

Portfolio transformation Strong financial framework

• Environmental and Energy Transition portfolio

75% of Group underlying operating profit to deliver a high growth, high margin

and less capital-intensive business

• Established Mobility portfolio

Long-term visibility to support our transformation

• Double underlying operating profit

• Group underlying operating profit

% to mid-teens

• Average cash conversion 90%

• 3-4% capex % of revenue

• Dividend cover 2.5-3.0x

• Leverage <1.25x EBITDA

FY 2026/27

11Ricardo plc | Annual Report and Accounts 2023/24

Turning ambition into action through...

innovation.

Demonstrating the effectiveness of community-scale

carbon capture technology for clean energy and

national energy security.

To accelerate the commercialisation of

low-carbon technologies, systems and

business models in power, buildings

and industry, while reducing the UK’s

contribution to climate change, the UK

government has established a £1bn

Net Zero Innovation Portfolio.

Funded by the Portfolio, Ricardo is

leading a consortium with Bluebox

Energy and Woodtek Engineering that

has designed, installed and is now

operating a combined heat and power

demonstration plant with a carbon

negative footprint that processes

biowaste to produce biochar; generate

heat and power; and capture carbon

dioxide from the exhaust – known

asBIOCCUS.

BIOCCUS combines an innovative

carbon capture system developed

by Ricardo with hot air turbine

technology from Bluebox Energy

andpyrolysis technology from

Woodtek Engineering.

Its innovation lies in the fact that it

can capture 90% of the carbon in the

biowaste – which would otherwise

return to the atmosphere as CO

through combustion or degradation

– while still producing valuable

heat and power outputs. The plant

demonstrates not only highly

innovative technology but also a

realistic carbon negative technology

that can significantly contribute to net

zero targets because of its applicability

to several energy-intensive industry

sectors as an on-site generator of

heatand power.

Processing 2,600 tonnes of waste

wood chip each year, the annual

performance for a commercial,

single-module system based on

8,000hours of operation is:

• 540 tonnes of biochar produced

• 2,300 tonnes of food-grade CO

collected

• 330 MWh of electricity generated

• 1,200 MWh of heat generated

• 4,100 tonnes of CO

e captured

With this project, Ricardo is at the

forefront of removing carbon dioxide

from the atmosphere, providing local

industry/businesses with renewable

heat and electricity, and delivering

national energy security.

Working with

12Ricardo plc | Annual Report and Accounts 2023/24

Turning ambition into action through...

sustainability.

Developing multi-stack hydrogen fuel cell

zero-emission systems for shipping.

Ricardo is working with the

sustainable HYdrogen powered

Shipping consortium (sHYpS) to

design and develop hydrogen fuel

cell propulsion technologies to power

the next generation of zero-emissions

passenger ships, helping to achieve

zero-emissions navigation within

the industry in line with global

regulatorytargets.

At the forefront of innovation, the

project involves 13 partners in

six European countries and will

accelerate the adoption of hydrogen

as a renewable fuel in the maritime

industry. Ricardo’s UK-based work

has been funded by UK Research

and Innovation (UKRI) under the

UKgovernment’s Horizon Europe

funding guarantee.

As experts in hydrogen technology

and integration, Ricardo’s role

includes the specification, design,

build and testing of a ~500 kW gross,

375 kW net power fuel-cell module

(RFC500) and the design of a 40-foot

containerised multi-megawatt power

plant that combines the outputs of

multiple fuel cell modules, intended

to be installed under-deck on

passengerships.

Another key focus has been applying

Ricardo’s expertise in developing the

bespoke, high-power, multi-stack,

optimised fuel cell solution to deliver

significantly enhanced power density

by volume and mass: essential, given

the space constraints of a passenger

ship and the revenues earned from

space on-board.

The project reached a key milestone

in March 2024, when Ricardo

received Approval in Principle (AiP)

from Lloyd’s Register, the leading

provider of classification and

compliance services to the marine

and offshore industries, for the design

of its cutting-edge multi-megawatt

containerised fuel cell power plant

solution. The granting of AiP by

Lloyd’s Register signalled confidence

that this technology has the potential

to satisfy regulatory requirements and

can be used more widely as a solution

to support future decarbonisation

across the maritime industry.

Ricardo is testing the RFC500 module

and now assembling its marine

containerisation system in a new,

purpose-built fuel cell facilities at our

Shoreham Technical Centre.

The sHYpS project is co-funded by the European Union under Horizon

Europe, the European Union’s research and innovation programme

under Grant Agreement Number 101056940. The consortium of

members represents six European countries: Italy, France, Czechia,

Germany, Norway and the UK. UK participants are supported by UK

RI grant numbers 10038162 (Ricardo UK) and 10039049 (Lloyd’s

authors only and do not necessarily reflect those of the European

Union or Innovate UK. Neither the European Union nor Innovate UK

can be held responsible for them.

Working with

Views and opinions expressed are however those of the author(s) only and do not necessarily

reflect those of the European union or European Climate, Infrastructure and Environment

ExecutiveAgency. Neither the European Union nor the granting authority can be held

responsiblefor them,UK participants are supported by UKRI Grants.

13Ricardo plc | Annual Report and Accounts 2023/24

Turning ambition into action through...

digital.

E3-Modelling was acquired by Ricardo in January 2023,

adding world-leading macro energy, economic and

environmental modelling capabilities to Ricardo’s portfolio.

Since becoming part of Ricardo, the

E3-Modelling team has provided

valuable input on important global

projects, which has included

modelling for long-term international

energy decarbonisation planning and

implementation, empowering clients

with essential data, insights and

intelligence. The capabilities continue

to be pivotal for informing policy

development and its performance

assessment, as well as supporting

private sector investment, critical to

the energy transition. The modelling

team has expanded by over 25% to

address the growing needs of our

clients, which include new, long-term

modelling projects, particularly for the

European Commission.

Our reputation for modelling

excellence was further evidenced this

year when one of our models was

recognised as the leading tool for

analysing industrial transformation in

a study published by Renewable and

Sustainable Energy Reviews. Ranking

top out of over 60 models, our

model was recognised for its robust

alignment with key criteria including

industrial/sector representation,

technological change, employment

and environmental impact.

This year we have also invested in the

development of a new software-as-a-

service (SaaS) solution, leveraging our

world-renowned PRIMES-IEM energy

system model.

This innovative subscription-based

model offers comprehensive and

actionable insight into the electricity

market, which can be used to make a

wide range of key decisions to support

the energy transition.

We continue to advance our modelling

capabilities and offerings, ensuring

that we meet the evolving needs of

our clients and contribute meaningfully

to the global energy transition.

Our commitment to excellence and

innovation positions us as a trusted

partner in delivering high-quality

modelling and insights for a

sustainable future.

14Ricardo plc | Annual Report and Accounts 2023/24

Turning ambition into action through...

people.

We recognise that our vision is achieved through ideas,

innovation, expertise and being client-focused, delivered by

our people globally.

In the past year, a number of our

people and initiatives have been

recognised externally for their

excellent work. They include Kynan

Serné and Steve Blevins, who were

both recognised in the prestigious

The Manufacturer Top 100 list

that celebrates the heroes of UK

manufacturing.

Steve Blevins, Head of Engineering,

Performance Products, was named

in both the Inspiring Leader and the

Innovator categories, in recognition for

his outstanding technical contribution

to the world of motorsport and

performance automotive engineering

and his exemplary commitment to

supporting the business at every

level, including beyond his remit of

Head of Engineering.

Meanwhile, manufacturing apprentice

Kynan Serné was named in the Young

Pioneer category, in recognition

of his technical contribution to the

processes on the Performance

Products production line at Ricardo’s

Shoreham Technical Centre. He was

also commended for his dedication

to inspiring the next generation

of engineering and manufacturing

professionals by advocating for

apprenticeships and the impact

thatthey can make to the lives of

young people.

Other colleague accolades from FY

2023/24 include:

• Dr Temoc Rodriguez, Automotive

and Industrial, became a Fellow of

the Institution of Engineering and

Technology (IET)

• Dr David Carslaw, Energy and

Environment, was named in the ENDS

Report Power List 2024

• Honor Puciato, Energy and

Environment, was selected by the UK

government as one of 10 new national

aviation ambassadors

• Ricardo was recognised by Reuters in

its Top 100 Innovators in Hydrogen for

2023 and as a top-10 consultancy for

green hydrogen

• Dr Jessica Bohorquez, Energy and

Environment, was selected as a Junior

Rapporteur at the World Water Week

event in Sweden in August 2023

• Ricardo received the Future Mobility

award at the 2023 IET Excellence and

Innovation Awards, for our propulsion

inverter technology with liquid

hydrogen for long-haul mobility

Ricardo plc | Annual Report and Accounts 2023/24

What has been a key highlight

for you in FY 2023/24?

A key highlight for me is how we are joining

up our proposition and delivering meaningful

project work through our collective consulting

capabilities.

A case in point is the recent work that we

have been doing in positioning Ricardo

to drive the maritime sector towards an

efficient, sustainable and low-carbon future.

Highlights include: our consultancy work to

support the International Marine Organisation

(IMO) in its emissions position, policy work

and future targets; the air quality work in

modelling emissions from shipping that we

have completed for the UK government and

the European Commission, and for ports such

as the Port of London Authority; and the

engineering work we are completing in the

sHYpS consortium in developing hydrogen

fuel cells in marine applications.

Conversation with the CEO and CFO

Graham Ritchie

Group Chief Executive Officer

Judith Cottrell

Chief Financial Officer

In short, our teams are creating solutions

across the entire ecosystem to support

environmental and energy transition

through solutions for policy and strategy,

environmental monitoring, energy

infrastructure, and the green-propulsion

transport solutions that few others can match.

This year, it has been great seeing the impact

that our focus on operational efficiency and

client experience has had across the business.

A great example of this is how our newly

created global sales enablement team is now

delivering consistent bidding processes to

improve client delivery. The team has also

established standard sales performance

reporting, including pipeline management to

provide greater visibility and confidence in our

order book deliveries.

Another example is the introduction of our

flexible resourcing model, which is helping

to drive profitability, principally within A&I.

Finally, we have seen an improvement in cash

collections to drive reductions in working

capital and increase our ability to reinvest for

further growth.

And it has been a real delight to see all the

fantastic work that the teams have produced

this year – particularly in some of our bigger

innovation programmes – in developing new

carbon-negative technology and accelerating

hydrogen development.

We are two years into the

five‑year transformation of

Ricardo. Do you think we are on

target to achieve this strategy?

Unquestionably, yes. We have successfully

delivered our short-term commitments and

this, in turn, has supported us in building

confidence and options for the long term.

FY 2023/24 has been a year of significant

change to how we operate and how we are

structured, but it has also been a year of

great progress across our key priorities that

support us in accelerating our transformation.

Through enhanced digital capabilities, we

have launched our modelling tool for the

electricity market outlook on Ricardo’s own

digital platform, which will support us in

creating repeatable revenue. In terms of

geographic expansion, we have prioritised

and aligned ourselves across key markets

and, as a result, we are gaining scale and

strength in our chosen markets.

16Ricardo plc | Annual Report and Accounts 2023/24

Conversation with the CEO and CFO continued

We are two years into the five‑

year transformation of Ricardo.

Do you think we are on target to

achieve this strategy? continued

With the actions that we have taken in our

A&I businesses, we are seeing a change in

direction, with a return to profitability in H2.

Finally, through the centralisation of our

functions, we are creating efficiencies that

will enable growth.

Having put the key building blocks in place,

we are now well set to accelerate our

execution to enable our successful transition.

Absolutely. We have taken bold actions

to achieve our ambition and these are set

to continue. We are only two years in and

thanks to the changes we have made – such

as flexible resourcing – we are already

delivering improved margins. Expansion

of our operations geographically and

through the breadth of our offering will

also support our ambition. As mentioned by

Graham, the launch of our digital offering

will support improved margins through

repeatable revenue. Importantly, there is real

commitment by the board and the Executive

Committee to deliver our strategic ambition.

And to help ensure this, there will be a

continued focus on operational excellence

and organisational alignment.

M&A is an accelerator to

your organic strategy – what

is important for you when

considering this approach

togrowth?

The Company’s approach to M&A is to

focus investment on highly attractive,

environmentally and technologically led areas

that support the acceleration of our portfolio

capability in attractive growth markets. These

commercial characteristics support strong

financial attributes of a high growth, high

margin and less capital-intensive business.

In addition to the commercial and financial

attributes, we look for companies that share

a culture aligned to Ricardo’s with similar

purpose-led values. The acquisitions that we

have completed in the past 18 months have

supported Ricardo in extending its consulting

solutions and increasing its digital footprint.

In addition, they have enabled further

industry and geographic expansion into key

markets, already delivering strong profitable

growth and potential increased synergies

with our existing solutions.

Key to this success is targeted outreach

and, in particular, partnering in advance of

an acquisition. By developing partnerships,

we can ensure we build a strong pipeline

and trusting relationships in advance of

acquisition, where there is a strong cultural

alignment that is deeply rooted in technical

expertise and being purpose-led.

How important is One Ricardo

to achieving the Company’s

ambition?

We know that our clients choose Ricardo

because of our high integrity and the deep

knowledge we bring to solving their complex

challenges. As mentioned already, we are

unique in our ability to create solutions

across the entire ecosystem that support

the environmental and energy transition.

Bycombining our solutions, we therefore add

more value to our clients and have a bigger

impact in driving environmental and energy

transition.

We also know that this is one of the key

motivators for our teams, applying their

expertise to world-leading innovative projects

that make a difference. This is truly what binds

us all together, regardless of what individuals

may do and in which practice they may work.

By operating as One Ricardo and bringing

these two aspects together, we also create

efficiencies in how we operate.

Coming together as a single company,

rather than acting independently, has had a

significant impact on how we do business and

has allowed us to really focus on operational

excellence to the benefit of our margins.

By introducing a shared operating model

and centralising our enabling functions, we

can leverage the benefits of scale without

duplicating effort, which has afforded us real

improvement.

There are also the cultural benefits of One

Ricardo – allowing us to celebrate as a single

whole rather than as sums of our parts. As

an example, in FY 2023/24 following the

success of Community Week, we launched

our Community Day, which included collecting

over 12,800 pieces of litter in our communities

around the globe. I will be excited to see more

of this in the years ahead.

Anything on the horizon that

youare looking forward to?

I continue to be excited by and look forward

to fully realising the benefits of the changes

we have made so far on our strategic journey.

For FY 2024/25 it is all about accelerating the

benefits of the change we have started. These

include embedding One Ricardo in everything

we do, accelerating our geographic expansion,

realising the efficiencies of our functional

enablers, and continuing to develop strategic

partnerships and acquisitions to accelerate

our growth. None of this is achievable without

the highly talented team we have here in

Ricardo. Through its hard work and expert

delivery, we can all look forward to exciting

times ahead.

While I am looking forward to continuing

to take more big strides towards achieving

our ambition – particularly in how we work

together to achieve our own goals and those

of our clients – I am also excited to see

more of the great projects that our teams

are working on across the business, from

the projects that we deliver to our clients to

internal initiatives that improve processes and

ways of working. There is a real uniqueness to

what we can deliver and achieve at Ricardo,

and I am always impressed at the real-world

impact that these have in creating a safer and

more sustainable world.

17Ricardo plc | Annual Report and Accounts 2023/24

Strategic progress and KPIs

Key performance indicators

Being a trusted partner to our clients

Value added turnover per head

£104k

£103k

£91k

£86k

£104k

2023

2022

2021

2020

2024

FY 2023/24 value added turnover per head has improved marginally

onthe prior year, with a good longer-term improvement from 2020.

Why we measure this

Value added turnover per head is a measure of the revenue we generate from

our own resource divided by the number of heads, including contractors. As

such, it is a useful measure of both profitability and efficiency.

Further details of financial performance are given in the CFO

report on pages 20-25.

per head

49.19

57.34

38.00

2023

2022

2024

We have seen a decrease in CO

emissions in FY 2023/24.

Why we measure this

Based on total Scopes 1, 2 and 3 market-based emissions. This number

helps us to understand the emissions we are producing and drive

strategy to reduce these.

Further details of our approach to Responsible Business are given

on pages 44-74.

Client engagement

88.5%

81%

2023

2024

In May 2024, we completed our second annual client satisfaction survey,

measuring satisfaction, loyalty and brand awareness. We saw a 4.5%

increase in client satisfaction to 88.5% from FY 2022/23 levels. Feedback

will be used to develop our client service excellence and capabilities to

ensure best practice and continuous improvement.

Why we measure this

Provides rich information about engagement with clients, ensuring that

we are providing them with the highest quality service while supporting

their goals.

Further details of how we engage our stakeholders are given on

pages 42-43.

Enabling meaningful and fulfilling work

Voluntary employee turnover

13%

11%

16%

2023

2022

2021

2020

2024

Voluntary attrition has held steady against the prior year, which is down

from our 2022 peak.

Why we measure this

Our people enable us to do the great things we do and we want to make

sure they are doing meaningful work and remaining engaged.

Further details on our people are given on pages 52-56.

Our strategic objectives

havebeen selected to support

execution of our ambition and

ensure we are creating value

for stakeholders.

Enabling meaningful and

fulfilling work

Being a trusted partner to

ourclients

Achieving high growth in

ourchosenmarkets

Delivering operational excellence

and efficiency

Investing for growth

To directly connect our colleagues withthe strategy, we

have aligned team and individual performance objectives

with Ricardo’s own strategicobjectives.

Measuring our performance

Ricardo’s key performance indicators (KPIs)are aligned

with our Company’s strategic objectives, and are based

on financial and non-financial performance.

Ricardo plc | Annual Report and Accounts 2023/24

Strategic progress and KPIs continued

Key performance indicators continued

Delivering operational excellence and efficiency

Underlying operating profit margin

8.2%

7.7%

6.5%

5.7%

7.8%

2023

2022

2021

2020

2024

The Group’s underlying operating profit margin was 8.2% in FY 2023/24.

The increase compared to FY 2022/23 reflects improved margins in our

Defense, Established A&I and Rail operating segments, plus leverage of

our indirect cost base, offset by reduced margins in our Emerging A&I, EE

and PP operating segments.

Why we measure this

Measure of how efficiently the business turns revenue into controllable profit.

Further details are given in the CFO’s report on pages 20-25.

Adjusted leverage

1.25x

1.4x

1.3x

2.3x

0.8x

2023

2022

2021

2020

2024

We saw net debt drop from £62.1m to £59.6m in FY 2023/24, with

adjusted leverage reducing from 1.4x to 1.25x, driven by strong

underlying cash conversion, which more than offset restructuring

andacquisition related cash outflows.

Why we measure this

Represents a more useful measure of how net debt relates

toperformance of the business.

Further details are given in the CFO’s report on pages 20-25.

Achieving high growth in our chosen markets

Order intake

£496.1m

£522.0m

£352.1m

£368.7m

£432.2m

2023

2022

2021

2020

2024

FY 2023/24 order book is in line with the prior year.

Why we measure this

Helps to show us performance over time rather than a point-in-time

position. Order book continues to be monitored as part of the financial

results reported.

Further details of business unit performance are given on

pages26-41.

Investing for growth

Return on capital employed

29%

24%

13%

19%

2023

2022

2021

2020

2024

Return on capital employed has continued to trend upwards over the

five-year period as our product mix moves, towards our less capital

intensive consulting businesses.

Why we measure this

Return on capital employed is a measure of both profitability and capital

efficiency. This ratio helps articulate how well we are generating profits

from our capital as it is put to use.

Further details are given in the CFO’s report on pages 20-25.

19Ricardo plc | Annual Report and Accounts 2023/24

Judith Cottrell|Chief Financial Officer

Chief Financial Officer’s report

A year of positive growth

and excellent cash

performance

Good growth in revenue

and underlying operating

profit. Actions to accelerate

the operating model

transformation delivered

a strong second half profit

performance and improving

margins. A rigorous

focus onworking capital

has driven strong cash

performance, reducing net

debt to £59.6m.

Group results

Overall, Ricardo has performed in line with

the board’s expectations in FY 2023/24, with

a strong improvement in underlying operating

profit in the second half. Revenue was

£474.7m, an increase of 7% on the prior period

on a continuing basis, excluding the results

of Ricardo Software which was sold in the

prior year (9% on a constant currency basis).

Underlying operating profit was £38.8m and

underlying profit before tax was £30.5m,

representing growth of 14% and 9% on the

prior period respectively on a continuing basis

(17% and 13% on a constant currencybasis).

FY 2023/24 saw a strong recovery in profit in

the second half, with improved operational

efficiencies following the acceleration of our

operating model transformation which saw us

centralise enabling functions and increase our

use of flexible resources.

Order intake for the Group was £496.1m, down

5% on the prior year’s record order intake

(down 3% on a constant currency basis). This

primarily reflects the new programme wins in

the prior year in Performance Products and the

delay of large orders in our A&I businesses.

Reported operating profit from continuing

operations, after taking specific adjusting items

into consideration, was £12.8m (FY 2022/23:

loss £1.9m) and reported profit before tax from

continuing operations was £4.3m (FY 2022/23:

loss £8.0m). FY 2023/24 reported operating

profit included £26.0m of specific adjusting

items (profit before tax: £26.2m) predominantly

related to the implementation of our strategic

priorities of portfolio transition and operational

efficiency (FY 2022/23: £35.9m). Further details

can be found below and in Note 6 of the Group

financial statements.

As a result of the Group’s persistent and

rigorous focus on working capital management,

cash generation for the full year continues

to deliver strong returns, delivering net debt

at 30June 2024 of £59.6m, a reduction of

£2.5m on the 30 June 2023 position of £62.1m.

This was after £15.4m of acquisition-related

payments, including earn outs relating to the

acquisitions of E3-Modelling SA (E3M) and

Aither Pty (Aither), and £6.4m of restructuring

costs, including costs incurred in accelerating

our operating model transformation, partially

offset by a £3.2m cash receipt from the sale

and leaseback of a building at the Shoreham

Technical Centre, excluding fees.

Underlying cash conversion improved from

66.7% (restated) in FY 2022/23 to 118.9%.

Reported cash conversion was 125.4%

(FY2022/23: 50.7% (restated)) after taking

into account the cash impact of specific

adjustingitems.

20Ricardo plc | Annual Report and Accounts 2023/24

Chief Financial Officer’s report continued

Headline trading performance

Underlying

(1)

Reported

External revenue

£m

Operating profit

£m

Profit before tax

£m

Operating profit/

(loss)

£m

Profit/(loss)

before tax

£m

2024

Continuing operations

(2)

474.7 38.8 30.5 12.8 4.3

Less: performance of acquisitions (12.6) (2.7) (2.3) (0.7) (0.3)

Continuing operations – organic

(3)

462.1 36.1 28.2 12.1 4.0

2023

Total 446.0 34.5 28.4 6.0 (0.1)

Less: discontinued operation (0.8) (0.5) (0.5) (7.9) (7.9)

Continuing operations

(2)

445.2 34.0 27.9 (1.9) (8.0)

Less: performance of acquisitions (4.8) (1.1) (1.1) 4.4 4.4

Continuing operations – organic

(3)

440.4 32.9 26.8 2.5 (3.6)

Growth (%) – Total 6 12 7 113 4,400

Growth (%) – Continuing operations 7 14 9 774 154

Growth (%) – Continuing organic 5 10 5 384 211

Constant currency

(4)

growth (%) – Continuing operations 9 17 13 774 154

(1) Underlying measures exclude the impact on statutory measures of specific adjusting items as set out in Note 2 and Note 6 to the Group financial statements. Underlying measures are considered to provide a useful

indication of underlying performance and trends over time.

(2) Growth from continuing operations excludes the results of Ricardo Software, which was sold on 1 August 2022.

(3) Organic growth excludes the performance of acquisitions (see Note 13 to the Group financial statements) from the results of 2024 and 2023.

(4) The Group generates revenues and profits in various territories and currencies because of its international footprint. Those results are translated on consolidation at the foreign exchange rates prevailing at the

time. Constant currency growth/decline is calculated by translating the result for the prior year using foreign currency exchange rates applicable to the current year. This provides an indication of the growth/decline

of the business, excluding the impact of foreign exchange (see Note 2 to the Group financial statements).

FY 2023/24 and FY 2022/23 include the results of E3M and Aither, which were acquired in January 2023 and March 2023 respectively. In the current year, these acquisitions contributed £12.6m of revenue

and £2.7m of underlying operating profit. In the prior year, they contributed £4.8m of revenue and £1.1m of underlying operating profit.

In the prior year, Ricardo divested its Software business unit, Ricardo Software, which contributed £0.8m of revenue and £0.5m of underlying operating profit in that year.

Ricardo plc | Annual Report and Accounts 2023/24

Chief Financial Officer’s report continued

Operating segments summary: Order intake and revenue

2024 2023

2023

at constant currency

Order intake

£m

Revenue

£m

Order intake

£m

Revenue

£m

Order intake

£m

Revenue

£m

EE 116.9 103.3 111.5 88.5 110.1 87.4

Rail 95.1 77.4 89.2 73.5 86.0 70.8

A&I – Emerging 52.4 58.6 84.3 82.3 83.0 80.4

Environmental and Energy Transition 264.4 239.3 285.0 244.3 279.1 238.6

Defense 125.4 123.4 85.0 88.6 81.3 84.8

PP 77.1 83.4 115.3 84.7 115.3 84.7

A&I – Established 29.2 28.6 36.2 27.6 35.6 27.0

Established Mobility 231.7 235.4 236.5 200.9 232.2 196.5

Total – continuing operations 496.1 474.7 521.5 445.2 511.3 435.1

Discontinued operation — — 0.5 0.8 0.5 0.8

Total 496.1 474.7 522.0 446.0 511.8 435.9

Operating segments summary: Underlying operating profit

2024 2023

2023

at constant currency

Underlying

operating profit/

(loss)

£m

Underlying

operating profit/

(loss)

margin %

Underlying

operating profit/

(loss)

£m

Underlying

operating profit/

(loss)

margin %

Underlying

operating profit/

(loss)

£m

Underlying

operating profit/

(loss)

margin %

EE 17.6 17.0 16.0 18.1 15.8 18.1

Rail 8.9 11.5 8.0 10.9 7.8 11.0

A&I – Emerging 3.4 5.8 10.6 12.9 10.6 13.2

Environmental and Energy Transition 29.9 12.5 34.6 14.2 34.2 14.3

Defense 23.5 19.0 13.4 15.1 12.9 15.2

PP 6.7 8.0 9.0 10.6 9.0 10.6

A&I – Established (3.3) (11.5) (5.8) (21.0) (5.7) (21.1)

Established Mobility 26.9 11.4 16.6 8.3 16.2 8.2

Operating segments – continuing operations 56.8 12.0 51.2 11.5 50.4 11.6

Plc costs (18.0) (17.2) (17.2)

Total – continuing operations 38.8 8.2 34.0 7.6 33.2 7.6

Discontinued operation — — 0.5 62.5 0.5 62.5

Total 38.8 8.2 34.5 7.7 33.7 7.7

Ricardo plc | Annual Report and Accounts 2023/24

Chief Financial Officer’s report continued

Environmental and Energy

Transitionportfolio

• Order intake: down 7% (constant currency:

down 5%)

• Revenue: down 2% (constant currency: flat)

• Underlying operating profit: down 14%

(constant currency: down 13%)

• Underlying operating profit margin: 12.5%

(FY 2022/23: 14.3% at constant currency)

Energy and Environment (EE) continued to

show good momentum, with overall growth

in order intake, revenue and operating profit,

boosted by the performance of the acquisitions

made in FY 2022/23 and strong demand in

policy, strategy and economics, and air quality

and environment. Performance was tempered

in water advisory services, which was impacted

by project disruptions in end markets.

Rail delivered good growth in orders and

executed consistently against its order book

to deliver strong revenue growth. With

increased revenue from recent contracts wins

in Australia, Asia and North America and

improved operational leverage, underlying

operating profit margins improved from 11.0%

to 11.5% and underlying operating profit grew

by 14% (constant currency).

Order intake, revenue and operating profit

declined year-on-year in Emerging A&I

due to delays and volatility in order intake

as our diversified client base manages the

complexities of energy transition. However,

we saw profit recovery in the second half of

the year, driven by the restructuring initiatives

and cost actions which took place. These were

focused on accelerating the implementation of

its flexible resourcing model, allowing for the

business to be more resilient going forward in

responding to changes within its end markets.

The Emerging A&I order book remains healthy

at £43.3m, albeit lower than in June 2023

(£55.0m). Whilst the business will experience

short-term volatility, we remain confident

about the long-term growth prospects.

Established Mobility portfolio

• Order intake: down 2% (constant currency: flat)

• Revenue: up 17% (constant currency: up 20%)

• Underlying operating profit: up 62%

(constant currency: up 66%)

• Underlying operating profit margin: 11.4%

(FY 2022/23: 8.2% at constant currency)

Defense performed very strongly in the period,

with significant growth in order intake (up 54%

on a constant currency basis), revenue (up

46%) and underlying operating profit (up 82%).

Defense delivered 13,100 Anti-lock braking

system/electronic stability control (ABS/ESC)

kits in FY 2023/24 (FY 2022/23: 8,707 kits). In

addition, there was good growth in the Technical

Solutions consultancy business, including Field

Support Services (the sustainment of ABS/ESC

kits in the field).

Performance Products (PP) benefited from

£40m of multi-year transmission programme

orders in FY 2022/23 and were working

these orders in FY 2023/24. As expected, this

resulted in lower order intake in FY 2023/24.

With lower volumes in powertrain, due to

revised client requirements and reduced

activity in the transmission business, with two

major programmes ramping down and one new

programme in ramp-up phase, revenue was

down by 2% on prior year.

This resulted in lower underlying operating

profit overall, but with a strong profit in the

second half, benefiting from a ramp-up to

complete client transmission projects.

Order intake in Established A&I was down 18%

on prior year on a constant currency basis.

Although there were delays in the timing of

orders, order intake improved in the second

half of the year, which drove overall growth

in revenue in the year of 6% on a constant

currency basis. Actions taken to accelerate the

move to flexible resources and reduce the fixed

cost base resulted in the business returning to

a small profit position in the second half of the

year. The overall underlying operating loss for

the year was £3.3m compared to an underlying

loss of £5.7m in FY 2022/23, on a constant

currency basis.

Cash performance

Net debt decreased £2.5m to £59.6m

(FY2022/23: £62.1m). Underlying cash from

operations was an inflow of £63.4m for the

year. Within this, underlying net working

capital reduced by £8.8m.

In FY 2023/24, the Group paid: £15.4m in

respect of acquisition and strategic project-

related costs, including a total of £13.7m of

acquisition-related and earn out payments to

the former owners of E3M and Aither; £6.4m

of cash costs in relation to restructuring

activities to accelerate our operating model

transformation through centralising enabling

functions and increasing our use of flexible

resources; and £0.5m for external costs incurred

for planning activities to implement a new ERP

system. Partially offsetting these, the Group

received £3.2m for the sale and leaseback of a

property at the Shoreham Technical Centre.

Basis of preparation

These consolidated financial statements of the

Ricardo plc Group (Group) have been prepared

in accordance with UK-adopted international

accounting standards. The Group’s principal

accounting policies are detailed in Note 1 to the

Group financial statements. Those accounting

policies that have been identified as being

particularly sensitive to complex or subjective

judgements or estimates are disclosed in

Note1(d) to the Group financial statements.

Reported results represent the Group’s overall

performance in accordance with IFRS. The

Group also uses a number of alternative

performance measures (APMs) in addition to

those reported under IFRS. Ricardo provides

guidance to the investor community based on

underlying results.

The underlying results and other APMs

may be considered in addition to, but not as

a substitute for or superior to, information

presented in accordance with IFRS.

Explanations of how they are calculated and

how they are reconciled to an IFRS statutory

measure are provided in Note 2 to the financial

statements.

Underlying results include the benefits of the

results of acquisitions and major restructuring

programmes but exclude significant costs (such

as the amortisation of acquired intangibles,

acquisition-related expenditure, reorganisation

costs and other specific adjusting items).

Ricardo believes that the underlying results,

when considered together with the reported

results, provide investors, analysts and other

stakeholders with helpful complementary

information to better understand the financial

performance and position of the Group.

Ricardo plc | Annual Report and Accounts 2023/24

Chief Financial Officer’s report continued

Specific adjusting items

As set out in more detail in Note 6, the Group’s total underlying profit before tax excludes £26.2m

of costs incurred during the period that have been charged to the income statement as specific

adjusting items (FY 2022/23: £35.9m). In line with the Group’s policy, these items have been

recognised as specific adjusting items, due to their nature or significance of their amount, so as

toprovide further clarity over the financial performance.

2024

£m

2023

£m

Underlying profit before tax from continuing operations 30.5 27.9

Amortisation of acquired intangibles (4.8) (4.6)

Acquisition and strategic project-related costs (12.2) (6.2)

Restructuring costs

– A&I: impairment of non-financial assets — (18.7)

– A&I: restructuring costs (3.4) (4.7)

– Rail and EE: restructuring costs (3.3) (1.5)

– Group: restructuring costs (1.7) (0.2)

ERP implementation costs (0.5) —

Sale and leaseback costs (0.3) —

Total specific adjusting items from continuing operations (26.2) (35.9)

Reported (loss)/profit before tax from continuing operations 4.3 (8.0)

Specific adjusting items from discontinued operation

Disposal of discontinued operation — 7.4

Amortisation of acquired intangibles was £4.8m in the current year, compared to

£4.6m in FY 2022/23.

Acquisition and strategic project-related costs of £12.2m were incurred in the year (FY 2022/23:

£6.2m). These included: £5.0m for deferred consideration and £0.5m of integration costs in

relation to the acquisition of Aither, acquired in March 2023 (cash cost: £8.3m); £4.1m for deferred

consideration and £0.2m of integration costs in respect of the acquisition of E3M, acquired in

January 2023 (cash cost: £6.1m, which included £1.3m of payments in relation to items which

were accrued for at completion under the completion adjustment mechanism); £0.1m of deferred

consideration in relation to the acquisition of Inside Infrastructure Pty (Inside Infrastructure),

acquired in March 2022 (cash cost: £0.6m); and £2.3m of external fees in relation to other M&A

andstrategic projects (cash cost: £0.4m).

The prior year included: £3.2m for deferred consideration and £0.4m of external fees and integration

costs for Aither (cash cost: £0.2m); £0.9m for deferred consideration and £0.2m of external fees

and integration costs for E3M (cash cost: £0.1m); £0.4m of deferred consideration and £0.4m of

integration costs for Inside Infrastructure (cash cost: £0.5m); and £0.7m of other M&A and strategic

projects (cash cost: £0.8m).

Restructuring costs

A&I: impairment of non-financial assets: Non-cash goodwill and asset impairment charges of

£18.7m were recognised in the prior year within the Established A&I operating segment. As a result

of the performance of this segment in the year to 30 June 2023, the impact of economic uncertainty

and the continuing technological change in the automotive sector, the future projections and

discounted cash flows for the operating segment were reassessed.

The resulting value-in-use did not support the carrying value of the associated assets, resulting in

an impairment of all of the goodwill associated with the Established A&I segment (£5.2m), together

with £1.8m of intangible assets and £11.7m of property, plant and equipment.

Restructuring costs: As part of the Group’s actions to accelerate its operating model transformation,

£8.4m of restructuring costs were incurred. The total cash cost of restructuring in the year was £6.4m.

These costs have been included within specific adjusting items as they are significant in quantum and

would otherwise distort the underlying trading performance of the Group, and included:

A&I: £3.4m, including £1.8m of redundancy costs, £0.4m of external contractor and legal fees

directly related to the process, and £1.2m of property exit and asset write down costs. The prior

year cost included £2.4m of redundancy costs to right-size the business in response to the impact

of the economic uncertainty above, £1.1m of losses on disposal of non-current assets, £0.2m of

property exit costs and £1.0m of external fees and contractor costs incurred directly in relation to

the transformation activities.

Rail and EE: £3.2m of redundancy costs, plus £0.1m of external legal and other fees incurred

directly as a result of the process. A charge of £1.5m was recognised in Rail and EE in respect of

therestructuring of the senior management structure in the prior year.

Group: £1.0m of redundancy costs, together with £0.7m of external legal and other fees incurred

directly as a result of the process. A charge of £0.2m was recognised in Group in the prior year in

relation to restructuring of the Group functions.

ERP implementation: Costs of £0.5m were incurred in the year in relation to planning activities to

implement a new ERP system. These were classified as a specific adjusting item as they are not

reflective of the underlying performance of the business in the period.

Sale and leaseback costs: External fees of £0.3m were incurred in the year in relation to the sale

and leaseback of part of the Shoreham Technical Centre. These costs were classified as a specific

adjusting item as they are not reflective of the underlying performance of the Group.

Gain on sale of Ricardo Software (recognised within the discontinued operation): In the prior

year, a net gain of £7.4m was recognised in relation to the disposal of Ricardo Software, completed

on 1 August 2022 (the net cash impact was an inflow of £11.9m). Per the terms of the sale, up

to a further £2.4m ($3.0m) was receivable based on Ricardo Software achieving certain revenue

targets in the 12-month period post-sale. These targets were not achieved and no further monies

werepaid.

Ricardo plc | Annual Report and Accounts 2023/24

Chief Financial Officer’s report continued

Research and Development (R&D) and

capital investment

The Group continues to invest in R&D

and spent £11.3m (FY 2022/23: £14.6m)

before government grant income of £1.8m

(FY 2022/23: £6.8m). Development costs

capitalised in the year were £6.3m (FY 2022/23:

£5.4m), reflecting continued investment in

electrification, hydrogen and carbon capture

(BIOCCUS) solutions within the Emerging A&I

segment, together with digital and air quality

models and solutions within EE and R&D

projects within Defense.

Capital expenditure on property, plant and

equipment, excluding right-of-use assets,

was £4.1m (FY 2022/23: £6.2m), reflecting

targeted investment in our business operations,

including hydrogen and electrical capability in

the Emerging A&I segment.

Net finance costs

Finance income was £1.1m (FY 2022/23: £1.0m)

and finance costs were £9.6m (FY 2022/23:

£7.1m) for the year, giving net finance costs

of £8.5m (FY 2022/23: £6.1m). The increase in

costs reflects an increase in the SONIA interest

rate during the current year.

Taxation

The underlying effective tax rate for the year

was 26.6% (FY 2022/23: 26.1%). The reported

effective tax rate was 81.4% (FY 2022/23:

5,100%). This unusually high reported effective

rate in the current and prior year reflected

a number of non-deductible or non-taxable

specific adjusting items, including impairments

and the disposal of the Software business in

FY2022/23.

Earnings per share

Basic earnings per share was 1.1p (FY 2022/23:

loss of 8.7p). The Directors consider that

underlying earnings per share provides a useful

indication of underlying performance and

trends over time. Underlying basic earnings

per share for the year was 35.9p (FY 2022/23:

33.4p). The calculation of basic earnings per

share, with a reconciliation to an underlying

basic earnings per share, which excludes the

impact (net of tax) of specific adjusting items,

is disclosed in Note 7 to the Group financial

statements.

Dividend

As set out in more detail in Note 8 to the

Group financial statements, the board has

declared a final dividend of 8.9p per share

(FY 2022/23: 8.61p). The dividend will be paid

gross on 22November 2024 to holders of

ordinary shares on the Company’s register of

memberson 1 November 2024.

Goodwill

At 30 June 2024, the Group had total

goodwillof £96.0m (FY 2022/23: £96.1m).

Thecarrying value of goodwill is fully

supported by the recoverable amounts of

allcash-generating units.

Net debt and banking facilities

Net debt at 30 June 2024 comprised cash and

cash equivalents, net of any restricted cash, of

£47.3m (FY 2022/23: £49.8m), and borrowing

and overdrafts, including hire purchase

liabilities and net of capitalised debt issuance

costs, of £106.9m (FY 2022/23: £111.9m).

The Group funds its operations via a revolving

credit facility (RCF) of £150m, with a £50m

uncommitted accordion, which provides funding

through to August 2026, alongside the Group’s

uncommitted overdraft facilities of £16.1m.

At 30 June 2024, the amount undrawn on the

RCF was £47.0m. This, together with the net

cash held (net of utilised overdraft) of £43.0m,

and £16.1m of unutilised overdraft facilities,

provided the Group with total cash and liquidity

of £106.1m.

The Group’s adjusted leverage ratio (defined as

net debt over EBITDA for the last 12 months,

excluding the impact of specific adjusting items

and IFRS 16 Leases) was 1.25x as at 30 June

2024. The adjusted leverage covenant is a

maximum of 3.0x.

The interest cover ratio (defined as EBITDA

for the last 12 months, excluding the impact

of specific adjusting items and IFRS 16, over

net finance costs), was 5.86x at 30 June 2024.

Theinterest cover covenant limit is a minimum

of 4.0x.

Further details are provided in Note 23 to the

Group financial statements.

Foreign exchange

On consolidation, revenue and costs are

translated at the average exchange rates for

the year. The Group is exposed to movements

in the Pound Sterling exchange rate, principally

from work carried out with clients that transact

in Euros, US Dollars, Australian Dollars and

Chinese Renminbi.

Had the prior year results been translated at

current year exchange rates, revenue from

continuing operations would have been £10.1m

(2.3%) lower, underlying operating profit would

have been £0.8m (2.3%) lower and underlying

profit before tax would have been £0.8m (2.9%)

lower.

Pensions

The Group’s defined benefit pension scheme

operates within the UK. The fair value of the

scheme’s assets at the end of the year was

£105.4m (FY 2022/23: £104.6m) and the

present value of the scheme’s obligations was

£97.4m (FY 2022/23: £92.0m).

The pre-tax surplus, measured in accordance

with IAS 19, at 30 June 2024 was £8.0m (FY

2022/23: £12.6m). This is predominantly due

to the experience loss from incorporating the

census data from the 5 April 2023 statutory

funding valuation into the IAS 19 liability

calculations compared to the roll forward of

the IAS 19 liabilities from the prior year end,

which were themselves rolled forward from

the 5 April 2020 census data. The discount

rate also reduced during the year, partly due to

the impact of moving to the expanded dataset

version of the Mercer Yield Curve, which

resulted in an increase in the liabilities. Ricardo

paid £0.8m of cash contributions into the

scheme during the year (FY 2022/23: £1.8m),

with the final payment of £0.2m made on

1November 2023.

Judith Cottrell

Chief Financial Officer

10 September 2024

Ricardo plc | Annual Report and Accounts 2023/24

Business unit overview

Providing technical engineering and

environmental consulting services that

enable the energy transition.

Our Environmental and Energy Transition portfolio business

is dedicated to developing innovative solutions that solve our

clients’ challenges, from insights and strategy building, all the

way through to implementation and monitoring. Our teams help

clients overcome complex engineering issues associated with the

integration of renewables, and play a pivotal role in developing

strategies across all modes of transportation to support low

carbon transition. Growth in this portfolio is driven by the global

need to rapidly transition to a low carbon future and minimise

harm to the planet.

 Energy and Environment

 Rail and Mass Transit

 Emerging Automotive and Industrial

(1) At constant currency.

£239.3m

—%

43.2%

32.3%

24.5%

FY 2023/24 portfolio revenue

(1)

Environmental and

Energy Transition

Portfolio

26Ricardo plc | Annual Report and Accounts 2023/24

Business unit overview continued

Environmental and Energy Transition Portfolio

Our operating segments

Governments, public agencies and businesses around the

world trust Ricardo’s expertise in solving the most complex

environmental challenges. Our clients value our deep

understanding of energy and environmental drivers, policy

development and technical insights, and our ability to turn

challenges into business opportunities.

We support our clients in navigating the rail industry’s

developmental, operational, commercial and regulatory

demands. We work with governments, operators,

infrastructure managers and manufacturers to ensure that

railways deliver the highest possible value to their clients

andto the wider community.

Our strategic and technical experts define future technologies

that are innovative and sustainable for all types of emerging

applications, from battery to fuel-cell technologies. We deliver

solutions comprising energy transition propulsion, driveline

and controls design, optimisation and prototype development.

Revenue

£103.3m +18%

Revenue

£77.4m +9%

Revenue

£58.6m (27)%

Energy and

Environment

Rail and

Mass Transit

Emerging

Automotive

and Industrial

27Ricardo plc | Annual Report and Accounts 2023/24

Highlights

Order intake Order book Revenue

£116.9m +6% £99.1m +13% £103.3m +18%

£116.9m

£110.1m

2023

(1)

2024

£99.1m

£87.5m

2023

(1)

2024

£103.3m

£87.4m

2023

(1)

2024

Underlying operating profit

Underlying

operating profit margin Headcount

£17.6m +11% 17.0% (1.1)pp 984 +1%

£17.6m

£15.8m

2023

(1)

2024

17.0%

18.1%

2023

(1)

2024

984

971

2023

2024

(1) At constant currency.

Business unit overview continued

Environmental and Energy Transition Portfolio continued

Energy and Environment (EE) works with

clients across a wide range of sectors and

geographies to deliver robust data-driven

solutions to solve complex energy transition

and environmental challenges. Ricardo’s

depth of environmental and energy expertise

supports our clients across the value chain,

from policy and strategy to implementing

impactful solutions. We have focused our

portfolio on market-facing solutions that

include policy, strategy and economics; air,

land and water management; corporate

sustainability; and energy infrastructure

transition including economic modelling tools.

Competitive strengths

• Expert team of scientists, engineers,

economists and data specialists

• Long-standing heritage on delivering policy,

analysis and technology to clients

• Global leader in air, land and water

qualityanalysis

• Mainstreaming of digital and data-science

capabilities across consultancy projects

• Trusted supplier to governments in tackling

climate change

• Growing international consultancy centres

in the UK, Europe, Australia and the

MiddleEast

Partner of choice for solving complex

environmental challenges through industry-leading

analysis, advice and data.

Energy and

Environment

28Ricardo plc | Annual Report and Accounts 2023/24

Growth drivers

• Increasing focus on sustainability in the

corporate sector driven by the ESG agenda

• Amplified interest in climate and carbon

following COP26

• Innovation in electricity and heat as well as

in key technology areas such as hydrogen

Performance

Overall demand for our solutions resulted in

growth in order intake of 6% from £110.1m in

FY 2022/23 to £116.9m in FY 2023/24,

on a constant currency basis.

Headline EE revenue increased by 18% on

a constant currency basis, from £87.4m to

£103.3m. Excluding Aither and E3M, Ricardo’s

most recent acquisitions, revenue increased by

10% on an organic basis. The growth has been

driven by strong demand across our policy,

strategy and economics (PSE), air quality and

environment (AQE) and our economic and

environmental modelling capabilities.

In PSE we have secured both long-term

renewals and new large-scale policy

contracts with the European Commission and

international governments, delivering advisory

services to support major policy development

to reduce the impacts of climate change.

The AQE practice secured significant long-term

contracts in the Middle East, which included

a new contract that represented EE’s largest

order value to date. In addition to international

growth, the AQE team continues to see strong

performance in its established markets, with

renewals of high-value projects for the UK

government and regional authorities.

Since its acquisition in January 2023, there

has also been strong demand for the energy,

economic and environmental modelling

capabilities of E3M. As with PSE, we have seen

the renewal of important existing contracts

and the winning of new contracts that are

helping to expand our service delivery into

new areas. We have started to realise our

acquisition ambitions, with E3M’s modelling

capabilities being combined with our PSE,

energy decarbonisation and sustainable

transport expertise, providing governments

with enhanced solutions to their complex

environmental challenges. For example, E3M’s

models were combined with our technical

energy consultancy experts to support a

national renewable energy programme.

One of E3M’s macroeconomic models has

recently been named as the leading tool

for analysing industrial transformation in

a new study published in Renewable and

Sustainable Energy Reviews, a peer-reviewed

scientificjournal.

During the year we consolidated our global

water capabilities into a single practice area,

which includes Aither, acquired in March

2023. The new combined water practice

had a positive first half, securing large-scale

orders with new clients in the Middle East and

Asia-Pacific. Performance was tempered in

the second half because of project disruptions

in end markets, specifically the Middle East,

impacting EE’s overall margins.

Headline underlying operating profit increased

from £15.8m in FY 2022/23 to £17.6m, growth

of 11% on a constant currency basis. Organic

underlying operating profit grew by 1%. Aither

and E3M contributed £2.7m of underlying

operating profit in FY 2023/24 (FY 2022/23:

£1.1m). Headline underlying operating profit

margin was 17.0% in FY 2023/24, 1.1pp down

on the prior year on a constant currency basis

due to investment in organic growth and lower

utilisation in the second half in our global

water practice due to the project disruptions.

Outlook

Looking ahead, policy insights, economic

analysis, strategy development and

environmental modelling will continue to

be inhigh demand, which will also lead to

follow-on work in our other environmental

practices. In addition, investment in our

capabilities in energy decarbonisation will

open further opportunities to support new and

existing clients with the critical needs of the

energy infrastructure transition.

Business unit overview continued

Environmental and Energy Transition Portfolio|Energy and Environment

Case study

Multi-disciplinary

expertise to support

decarbonisation of the

aviation industry

Ricardo has been appointed by the

European Union Aviation Safety Agency

(EASA) to support the management of a

new Expert Network focused on assessing

the climate impacts of non-CO

emissions

generated by the aviation sector.

The initiative is funded by the EU’s Horizon

Europe programme and is part of a

package of ‘Climate, Energy and Mobility’

research actions that will collectively

contribute to the EU’s objective to achieve

climate neutrality by 2050.

Ricardo experts will establish a network

of European and international testing

facilities and guide fuel producers in

assessing the environmental impacts

of their products and in meeting strict

eligibility criteria.

29Ricardo plc | Annual Report and Accounts 2023/24

Image TBC

Highlights

Order intake Order book Revenue

£95.1m +11% £115.6m +7% £77.4m +9%

£95.1m

£86.0m

2023

(1)

2024

£115.6m

£107.8m

2023

(1)

2024

£77. 4 m

£70.8m

2023

(1)

2024

Underlying operating profit

Underlying

operating profit margin Headcount

£8.9m +14% 11.5% 0.5pp 544 +6%

£8.9m

£7.8m

2023

(1)

2024

11.5%

11.0%

2023

(1)

2024

544

514

2023

2024

(1) At constant currency.

Business unit overview continued

Environmental and Energy Transition Portfolio

Rail and

Mass Transit

Ricardo’s rail experts provide specialist

engineering and assurance services to help

clients navigate the industry’s complex

operational, commercial and regulatory

demands. Our experts work across a rail

project’s life cycle to provide rail operators,

infrastructure managers and original

equipment manufacturers with the highest

safety, operational and environmental

standards.

Our rail expertise includes railway systems

engineering, which supports our clients in

realising the intended performance of a

complete and integrated system; operations

and maintenance, which support operators

inoptimising day-to-day operations to

deliverlong-term efficiencies; and rail design

and engineering.

Competitive strengths

• Recognised capabilities in systems

engineering and independent assurance

• Renowned expertise in industry standards

and regulations

• Local project teams ensure strong command

of domestic practices and processes

• Diverse service portfolio applicable across

all regional markets

We support our clients in navigating the rail

industry’s developmental, operational, commercial

and regulatory demands.

30Ricardo plc | Annual Report and Accounts 2023/24

Growth drivers

• Greater demand from governments and

industry stakeholders for the rail sector to

exploit cleaner energy sources and adopt

more sustainable practices

• Increasing demand for digital technologies

to maximise capacity and deliver efficiencies

• A complex and evolving regulatory

landscape that underpins increased

quality and safety requirements, where

independent/objective expertise and

assurance is critical

• Whole-system engineering and integration

demands to realise the full system

performance

Performance

FY 2023/24 was a strong year for Rail with

order intake of £95.1m, 11% up on the

previous year on a constant currency basis.

Revenue was £77.4m, a 9% increase on the

prior year on a constant currency basis, and

operating profit was £8.9m, a 14% increase on

a constant currency basis. Revenue increased

across all our major operating regions, except

for the Middle East. The growth during the

year has been driven by successfully securing

significant contracts across our key operating

regions.

In Australia we secured a wide range of

projects, which included a key long-term

high-value contract to provide safety oversight

of the new fleet for Southeast Queensland

as part of the Cross River Rail infrastructure

project, in anticipation of the 2032

OlympicGames.

In Asia, we won large-scale projects with

Colas Rail, an international leader in rail

infrastructure, and Woojin Industrial Systems,

both of which are key projects that are

supporting us in winning new work in new

markets. The positive trajectory in the Asia-

Pacific region reflects positive returns on the

investment in business development capability

made in the previous year.

We saw a decline in the Middle East resulting

from the successful completion of large-scale

projects during the year. This included our

safety assurance support on the Doha Metro,

which came to an end following the completion

of the 2022 FIFA World Cup.

Our North American business has continued

to grow at pace. In Canada, we secured a

combination of high-value project renewals

with key clients, demonstrating the value

being delivered to Ricardo’s clients, as well

as winning projects with new clients. In the

USA we secured our first large-scale project,

providing key expertise to the California High

Speed Rail project, which in turn has opened

additional opportunities in the region.

In the UK and Europe, we successfully grew

our partnership with Irish Rail, and we

continue to work closely with our long-term

national-level rail infrastructure partner, NS,

inthe Netherlands.

Underlying operating profit margin was 11.5%

compared to 11.0% in the prior year on a

constant currency basis, with the improvement

reflecting the combination of good revenue

growth, focus on cost control and operational

efficiency within the business. Improvements

in operational efficiency included actions in

the UK, which delivered increased employee

project utilisation for the second half of the

year, and actions in other territories as part of

the Group’s operating model transformation

programme.

Outlook

Strong demand for Ricardo’s core engineering

and safety expertise across the global rail

sector is complemented by increased demand

to support the industry in its adoption of

advanced digital technologies and to continue

the acceleration of rail sector decarbonisation.

The demand for the safe implementation

of digital tooling enables Ricardo to utilise

its advanced digital development capability

and assurance experience to usher in the

implementation of new robust tooling.

As a result of the need for accelerated

decarbonisation, we see growing demand to

support industry and operational management

through our advisory, sustainability, energy,

engineering and modelling expertise to

provide robust strategies.

Business unit overview continued

Environmental and Energy Transition Portfolio|Rail and Mass Transit

Case study

Introduction of new

generation high-speed

rail fleet

Ricardo has been appointed by the Taiwan

High Speed Rail Corporation (THSRC)

to perform independent verification

and validation (IV&V) services for 12

‘New Generation’ trainsets for Taiwan’s

high-speed railway.

Selected for our deep knowledge in rail

and client, Ricardo’s rail engineering

experts are providing oversight

throughout the production of the vehicles,

verifying that overall build quality

complies with the original specifications,

and that the client’s requirements around

safety, functionality, maintainability and

quality – all stipulated in the procurement

process – have either been met or

exceeded. The first vehicles are expected

into passenger operation in 2027.

Once installed, passengers will enjoy a

more efficient rail system and improved

experience.

31Ricardo plc | Annual Report and Accounts 2023/24

Highlights

Order intake Order book Revenue

£52.4m (37)% £43.3m (21)% £58.6m (27)%

£52.4m

£83.0m

2023

(1)

2024

£43.3m

£55.0m

2023

(1)

2024

£58.6m

£80.4m

2023

(1)

2024

Underlying operating profit

Underlying

operating profit margin Headcount

£3.4m (68)% 5.8% (7.4)pp 349 (20)%

£3.4m

£10.6m

2023

(1)

2024

5.8%

13.2%

2023

(1)

2024

349

435

2023

2024

(1) At constant currency.

Business unit overview continued

Environmental and Energy Transition Portfolio

Emerging

Automotive

and Industrial

From strategic planning and policy, concept

to manufacture, Emerging Automotive and

Industrial is a trusted partner for the next

generation of sustainable transport and

infrastructure solutions. Leveraging expertise

in electrification, hybrid technologies and fuel

cells, we deliver clean, efficient and integrated

propulsion and energy solutions to support our

clients in their energy transitions.

Our expertise supports the solution delivery

across the value chain from policy, strategy

and advisory services to design, engineering,

testing and niche production and product

launch. We develop strategies for the

transport sector which address the biggest

challenges of reducing greenhouse gas

emissions and we strive to deliver a better

world through solutions that take a whole life

cycle carbon neutral approach.

Working with clients to develop tomorrow’s clean

and efficient energy and propulsion solutions.

32Ricardo plc | Annual Report and Accounts 2023/24

Competitive strengths

• We leverage our technical expertise to

de-risk electric vehicle (EV) development,

while reducing time, cost and navigating

stringent policies

• Specialists in design and integration of

fuel cell systems to decarbonise transport

sectorapplications

• Renowned for ingenuity in delivering

integrated solutions to accelerate

EVadoption

• Technically agnostic to energy transition

applications allowing us to identify and

implement the right solution to reduce

emissions across a wide range of transport

and stationary power applications

• Experts in complex integration to support

transport decarbonisation

Growth drivers

• A rapid shift to decarbonised, sustainable

transport technology

• Bridge solutions to fill the technology gap

between internal combustion engines and

electric vehicles

• Geopolitical pressures for zero emission

output across the transport sector

• Global acceleration to reduce time and cost

of new product development

• Digital transformation through industry

4.0, connected intelligence and software

development capabilities to unlock new

revenue streams

Performance

Emerging Automotive and Industrial (A&I)

order intake declined by 37% to £52.4m (FY

2022/23: £83m) on a constant currency basis,

and revenue decreased by 27% to

£58.6m (FY 2022/23: £80.4m) reflecting global

market challenges across the transport sector

generally, in respect to timing delays to move

to clean energy solutions that has resulted in

short-term fluctuations.

Although we are expecting continued

market challenges in the near term, we

are increasingly well positioned to support

the green transitions as regulatory and

infrastructure requirements are expedited.

Meanwhile, we are securing contracts from

other transport industries including marine,

aerospace and rail, ensuring confidence in

building a robust sales pipeline, driving further

growth and diversification. Key contracts

awarded in FY 2023/24 include an extension

contract to support continued work with the

sustainable HYdrogen powered Shipping

consortium (sHYpS), to complete the design

of a modular, containerised fuel cell-based

energy conversion system, intended to

accelerate the adoption of hydrogen as a

renewable fuel in the maritime industry.

Additionally, we have secured a significant

contract win, to design an engine variant

running on sustainable fuels for a European

industrial and marine OEM.

Underlying operating profit at £3.4m was

lower than the prior year £10.6m, due to the

delays in orders as reported above. As part

of Ricardo’s operating model transformation

programme, we took proactive actions

throughout the year to restructure A&I in both

its Emerging and Established businesses.

Actions included refocusing the service

portfolio and accelerating our move to increase

our flexible resourcing pool. This has resulted

in ensuring that we better manage future order

fluctuations as well as delivering improved

profitability in the second half of FY 2023/24.

Outlook

Our global focus within Emerging A&I will be

to deliver innovative, sustainable technical

and engineering solutions to clients across the

world and build resilience through continued

expansion across all transport sectors.

Business unit overview continued

Environmental and Energy Transition Portfolio|Emerging Automotive and Industrial

Case study

Driving hydrogen

development

Emerging A&I supported the development

and launch of Toyota’s hydrogen-powered

light commercial vehicle, ensuring the

seamless integration of the hydrogen fuel

cell, fuel storage system and controls,

including design, analysis and validation

across all prototype vehicles. Ricardo was

chosen by Toyota for its proven experience

and capabilities in applying advanced

propulsion technologies and its expertise

in hydrogen fuel cell integration. While

the development of the vehicle is ongoing,

the launch was an important step for the

project, allowing Toyota to undertake

physical test, capability and feasibility

studies.

Since the launch, Ricardo has

concentrated on delivering the test and

analysis stage of the project, including

vehicle performance and fuel economy,

safety, durability, heating, ventilation

and air conditioning; noise, vibration and

harshness, braking and ride handling.

33Ricardo plc | Annual Report and Accounts 2023/24

Business unit overview continued

Established

Mobility Portfolio

Our Established Mobility team’s niche

specialisms in manufacturing and industrial

engineering deliver innovative solutions,

from concept right through to production,

that solve client challenges.

Driven by increasing demands in continuously improving the

performance of traditional transport solutions to reduce the

impacts ofclimate change.

 Defense

Performance Products

 Established Automotive and Industrial

£235.4m

+20%

52.4%

35.4%

12.2%

FY 2023/24 portfolio revenue

(1)

(1) At constant currency.

34Ricardo plc | Annual Report and Accounts 2023/24

Business unit overview continued

Established Mobility Portfolio continued

Our operating segments

A trusted engineering services partner for clean, efficient,

integrated propulsion and energy systems with a deep

legacy in partnering with the US military in the transition

ofinnovative technologies from science to application.

Ricardo specialises in the design, manufacture and

assembly of specialised engine and propulsion systems

delivered at niche volumes to our clients in the motorsport,

high-performance vehicle, defence and aerospace industries.

With over a century of propulsion design and development,

we deliver transportation solutions from strategic planning to

concept. We work across key transportation industries tobring

solutions to market more quickly, enhancing performance.

Revenue

£123.4m +46%

Revenue

£83.4m (2%)

Revenue

£28.6m +6%

Defense Performance

Products

Established

Automotive

and Industrial

35Ricardo plc | Annual Report and Accounts 2023/24

Highlights

Order intake Order book Revenue

£125.4m +54% £37.3m +5% £123.4m 46%

£125.4m

£81.3m

2023

(1)

2024

£37. 3m

£35.4m

2023

(1)

2024

£123.4m

£84.8m

2023

(1)

2024

Underlying operating profit

Underlying

operating profit margin Headcount

£23.5m 82% 19.0% +3.8pp 236 6%

£23.5m

£12.9m

2023

(1)

2024

19.0%

15.2%

2023

(1)

2024

236

223

2023

2024

(1) At constant currency.

Business unit overview continued

Established Mobility Portfolio

Defense

Defense provides solutions to address the

challenges our clients face in the integration

of logistics and field support for complex

and diverse systems. We specialise in

designing vehicle engineering solutions that

improve safety, and we have a deep legacy

in partnering with the US military to take

innovative technologies from science to

application.

We also provide niche product and

assembly services, adapting commercial

industry products to deliver innovative

sector applications that protect people

andinfrastructure.

Competitive strengths

• Leading capability in the design and

management of procurement processes

forUS Department of Defense (DoD)

• Industry expertise across the entire defence

system life cycle support and product

sustainment

• Experts in defence acquisition strategy,

policy and procedure

• A specialist in complex systems, linking all

aspects of a complete system of systems

Trusted experts in delivering wide-ranging

engineering programmes to drive efficiencies while

optimising safety.

36Ricardo plc | Annual Report and Accounts 2023/24

Growth drivers

• Decarbonisation and net zero planning focus

within the US defence sector

• Demand for greater connectivity,

communications and transport within

thefield

• Software-driven solutions to provide

functionality and systems integration

• Continued focus on cybersecurity to protect

against potential and ever-evolving threats

Performance

Defense’s strong growth in orders, revenue

and profit and its margin improvement

underpinned its full-year performance.

Orderintake in FY 2023/24 grew by 54%

to£125.4m (FY 2022/23: £81.3m) on a

constant currency basis.

Revenue significantly increased by 46% to

£123.4m (FY 2022/23: £84.8m) on a constant

currency basis.

Growth was primarily driven by an extension

contract awarded by the US Army, valued

at over $385m, to continue production and

delivery of anti-lock braking system/electronic

stability control (ABS/ESC) retrofit kits, with an

order completion of March 2026 and delivery

completion of September 2027. This contract

extends the previous three-year base contract

by two years and increases the ceiling from

$89m to $474m. Funding is determined with

each delivery order (DO), with the first DO

received in September 2023, under the terms

of the extended contract, for $92m (£73m).

In total, we delivered 13,100 ABS/ESC kits in

FY 2023/24 compared to 8,707 the previous

year. We also received orders for the new

HMMWV production and continue to expand

our ABS/ESC service parts, while recording

several framework purchase agreements with

the US Army to support fleet maintenance of

the ABS/ESC system.

Additionally, Defense has secured several new

and extension projects, including an extension

agreement to continue ongoing efforts to

expand the development of data management

software tools for the US Navy fleet

communications systems. Additional funding

was secured for the testing and evaluation of

wireless communications for the US Army and

a contract award for model-based systems

engineering to support the US Army with

its digital acquisition framework, covering

the entire procurement life cycle for their

vehicle platforms from concept design and

development to production and sustainment

through life support.

Underlying operating profit of

£23.5m represented a considerable increaseof

82% compared to FY 2022/23 of £12.9m,

and contributed to the Group’s overall profit

performance on a constant currency basis.

Outlook

Defense is expected to make further progress

in its digital solutions to enable cross-domain

operations between advanced platforms in

the air, on land and at sea and its predictive

maintenance data management software for

naval fleet management.

We anticipate continued demand for our broad

portfolio of engineering services, products

such as ABS/ESC and field support solutions

to fulfil the needs of future force design and

which spans the entire military vehicle life

cycle. Nevertheless, in FY 2024/25, we expect

revenues for the ABS/ESC programme to

decline as volumes becomes more proportional

for the duration of the contract period.

Business unit overview continued

Established Mobility Portfolio|Defense

Case study

Enabling wireless

communication

Ricardo Defense partnered with the

US Army to enhance operational safety

and efficiency through the Dismounted

Soldier Communication System (DSCS).

This innovative solution allows soldiers

to safely disembark from their vehicles

while maintaining real-time voice

communication with the onboard crew

during critical recovery operations. The

DSCS offers a hands-free, multi-user

communication network, advanced

noise cancellation, and rapid field-level

retrofitting to existing vehicles. Installed

in three brigades of M88 vehicles, the

DSCS is being used to gather data and

soldier feedback, which will be crucial

in evaluating and verifying system

performance and effectiveness from

the soldier’s perspective. The DSCS

solution has proven its effectiveness in

increasing situational awareness and

safety, providing the Army with a scalable

solution adaptable to multiple vehicle

fleets and operational scenarios.

37Ricardo plc | Annual Report and Accounts 2023/24

Highlights

Order intake Order book Revenue

£77.1m (33)% £74.4m (9)% £83.4m (2)%

£77.1m

£115.3m

2023

2024

£74.4m

£81.3m

2023

2024

£83.4m

£84.7m

2023

2024

Underlying operating profit

Underlying

operating profit margin Headcount

£6.7m (26)% 8.0% (2.6)pp 367 +3%

£6.7m

£9.0m

2023

2024

8.0%

10.6%

2023

2024

367

355

2023

2024

Business unit overview continued

Established Mobility Portfolio

Performance

Products

Performance Products (PP) specialises in

the design, low-volume manufacture and

series supply of powertrain and driveline

products for high performance and complex

established and emerging transport

applications. Best known for our world-

class engine and transmission products for

traditional propulsion systems, our capability

has extended to cover the next generation of

decarbonised propulsion systems.

We also provide industrialisation consultancy

services from concept through to series

production. Our clients draw on Ricardo’s

expertise in low-volume production and in

developing low-volume/prototype production

to series production and apply it to their own

facilities and programmes to successfully

introduce new products and improve existing

production processes.

Experts in design, niche-volume manufacture

and industrialisation for high-performance and

specialised powertrain applications.

38Ricardo plc | Annual Report and Accounts 2023/24

Competitive strengths

• Globally recognised for our world-class

capability in driveline and powertrain design

and supply

• Renowned for our expertise in niche-volume

industrial engineering and sustainable

supply chains

• Expanding capability in zero-emissions

propulsion technology

• In-depth knowledge of hybrid and electrified

powertrains/drivetrain developed from

top-flight motorsport

Growth drivers

• Performance road vehicles and motorsport

remain as relevant as ever for manufacturers

and consumers, demonstrating continually

increasing power and efficiency in ICE and

decarbonised powertrains

• Shorter and leaner development

programmes using innovative technologies

are driving demand for proven off-the-

shelf components, and for industrialisation

services

• Transport is decarbonising, but differing

vehicle and marine-vessel types plus

geographic markets are favouring a

multitude of powertrain solutions including

electrification, fuel cells and carbon neutral

combustion

• The defence vehicle sector continues to

grow due to overseas material supply

issues, and increased expenditure on arms

procurement and military R&D

Performance

Order intake in FY 2023/24 was £77.1m,

areduction of 33% on the prior period. TheFY

2023/24 order intake included a multi-year

contract extension from Bugatti as well

as a new multi-year transmission supply

programme to Singer, the California-based

luxury vehicle design specialist.

Performance Products has seen an effective

diversification of its order book during the

year, including several new contracts in new

market sectors and a major key contract win

for a multi-year assembly and production

framework agreement in the marine propulsion

segment, which will commence production in

FY 2027/28. This year saw the commencement

of production of the Singer transmission

programme for the newly launched DLS-T

and CTS platforms and continued deliveries of

powertrains to McLaren and drivetrain product

to Bugatti, Porsche and Aston Martin.

Revenue in FY 2023/24 was £83.4m, which

was 2% lower than the prior year (FY 2022/23:

£84.7m), due largely to two key transmission

programmes ending. Nevertheless, revenue

continues to generate from the programmes

detailed above, ongoing supply agreements

in defence and aerospace and a strong

underlying performance in motorsport,

including a presence in Formula1, World Rally,

Formula E and endurance motorsport.

Underlying profit was £6.7m, a reduction of

26% compared to the prior period, due to the

lower revenue, mix of transmissions sold and

inflationary pressures on input and operating

costs. Underlying operating profit margin was

8.0%, compared to 10.6% in the prior period.

Significant market sector and geographic

expansion has been initiated within FY

2023/24, including the establishment of

a Japanese office and the development of

Ricardo’s Detroit facility to support future

manufacturing programmes.

Outlook

In FY 2024/25, Performance Products

will continue to develop its portfolio of

existing powertrain (engine) and driveline

(transmission) products. Additionally, we are

seeing demand in programmes that support

the transition to net zero propulsion, including

electric drive units, industrial engineering

services focused on niche volume production,

and concept work around fuel cells, battery

systems and electric machines.

Whilst the new opportunities are creating

good growth for the future, we expect a

reduction in revenue in FY 2024/25 as we

conclude several existing programmes and

commence development of production facilities

to allow for the launch of new programmes.

Business unit overview continued

Established Mobility Portfolio|Performance Products

Case study

High-performance

battery

PP, alongside the electrification team in

A&I, launched its flexible battery module,

in collaboration with its battery cell

partners, InoBat, which is tailored for

low-volume performance automotive and

specialised vehicle applications.

The new battery module concept, which

utilises InoBat pouch cells, offers OEMs

in this space a cost-effective, flexible and

efficient solution to the development

of bespoke battery packs for their

high-performance and specialised product

portfolio. The modular design is scalable

and customisable to meet the requirements

of vehicle platforms with complex

performance, efficiency and packaging

requirements, such as supercar, motorsport,

performance motorcycle, marine and other

equally demanding applications.

This product represents Ricardo’s

end-to-end capability in the design,

assembly and industrialisation of battery

technology for niche applications.

39Ricardo plc | Annual Report and Accounts 2023/24

Highlights

Order intake Order book Revenue

£29.2m (18)% £26.8m (3)% £28.6m 6%

£29.2m

£35.6m

2023

(1)

2024

£26.8m

£27.6m

2023

(1)

2024

£28.6m

£27.0m

2023

(1)

2024

Underlying operating profit

Underlying

operating profit margin Headcount

£(3.3)m 42% (11.5)% 9.6pp 321 (5)%

£(3.3)m

£(5.7)m

2023

(1)

2024

(11.5)%

(21.1)%

2023

(1)

2024

321

339

2023

2024

(1) At constant currency.

Business unit overview continued

Established Mobility Portfolio

Established

Automotive

and Industrial

With over a century of propulsion design

and development, we are a trusted global

engineering services partner for clean and

efficient integrated propulsion and energy

systems.

Established Automotive and Industrial is

a trusted partner for original equipment

manufacturers (OEMs) and tier-one suppliers

across the transportation industry, including

land, air and sea. We work across key

transportation industries to bring solutions

to market more quickly, while also enhancing

performance.

Established Automotive and Industrial is

working to decarbonise current technologies

through efficiency improvements, while

helping global clients with bridging

technologies to support the shift to fully

decarbonised transport solutions and the

achievement of a cleaner and greener future.

Trusted global engineering services partner for

clean and efficient integrated propulsion and

energy systems.

40Ricardo plc | Annual Report and Accounts 2023/24

Competitive strengths

• Over a century of transport engineering

experience

• Renowned for our innovative applications

to enable efficient design and validation

ofpropulsion systems

• Industry experts in systems optimisation

and integration from vehicle design through

to production

Growth drivers

• A rapid shift to decarbonised, sustainable

transport technology

• Bridge solutions to fill the technology gap

between internal combustion engines and

battery electric vehicles

• Global acceleration to reduce time and cost

of new product development

Performance

Established Automotive and Industrial order

intake was £29.2m in FY 2023/24, a decrease

of 18% on a constant currency basis, because

of project delays, which created some

variability in the timing of deliveries.

Revenue at £28.6m was up 6% (FY 2022/23:

£27.0m) on a constant currency basis, driven

by increased orders in the second half which

were driven by the increased demand for

the hybridisation of engines and improved

efficiency of current propulsion engines, while

demand for full electrification continues to

evolve and market demand catches up with

development. Recent wins include the design

of a high-efficiency aviation powertrain,

which includes the engine design and

the development and hybridisation of the

powertrain for a world-leading aerospace

manufacturer.

We also secured a contract to complete the

initial phase of a large marine outboard-motor

design and development programme for a

major marine OEM.

Underlying operating loss was £3.3m, an

improvement of 42% compared to FY 2022/23

on a constant currency basis. Despite the

loss for FY 2023/24, we saw good profit

recovery in the second half as a result of

improved revenue and the Group’s accelerated

transformation programme. As part of the

restructuring programme, we have been

constantly vigilant in controlling expenditure,

implementing measures that support improved

working capital and the short to mid-term

business through further optimisation of the

flexible resourcing model.

Through our simplified leadership structure,

our flexible resourcing model and the

execution of further efficiencies to our

operating model, we are able to respond

more rapidly to our clients’ changing

requirements and ensure persistent future

financial performance in line with our strategic

ambition.

Outlook

We are seeing further programmes in key

industries including defence, aerospace and

marine for clean propulsion integrated systems

that will support our clients in their transition

to a cleaner and greener future.

Business unit overview continued

Established Mobility Portfolio|Established Automotive and Industrial

Case study

Developing a next-gen

motorcycle family

The Established A&I team worked closely

with the Italian motorcycle brand, Ducati,

on the design and development of three

new Scrambler motorcycles, Icon, Full

Throttle and Night Shift – all of which

built on Ducati’s legacy and reputation for

performance, quality and aesthetic.

Ricardo supported Ducati proto assembly

and testing, production phase validation

activities, conducted on a test track and

on the road. The project team were able

to deliver the project at pace to very short

timescales and deliver more efficient

product improvement thanks to their

commitment to work closely with the

customer and make product adjustments.

Though the two companies have a long

and established relationship, this project

represented the first time Ricardo has

delivered for Ducati with an on-road

motorcycle.

41Ricardo plc | Annual Report and Accounts 2023/24

Conversations are held with key

stakeholders throughout the year

promoting an open feedback

culture on a variety of themes

across the business. Stakeholder

engagement takes place across

various management levels of

both Group and Business Unit.

The board is regularly informed

of these activities and invited to

attend sessions where deemed

necessary.

Stakeholder engagement

Clients

Link to ESG:

Ricardo is a client-centric organisation that places the needs and

objectives of its client base at the heart of the sustainable solutions

it creates.

What is important to our stakeholders

• Innovative and sustainable solutions to solve problems and

unlockopportunities

• A seamless experience so clients can focus on what they do best

• A reliable partner to build a more sustainable and socially

responsiblefuture

• An unrivalled choice of products and services at the cutting

edgeoftechnology

How we engage

• Our continuous Voice of the Customer (VOC) programme to gather

client feedback including successes and areas of improvement in

ourproject delivery

• Informal feedback is gathered through regular client meetings,

whichtake place both with Group executive team members and

field-based teams

• Annual client survey used to better understand our clients’ needs

inorder to build better experiences and positive business outcomes

How the board engages

• The board ensures that it continuously monitors performance through

regular reviews with the Chief Executive Officer and Managing

Directors of the various Business Units, who present the VOC and

client surveys and the Group-client satisfaction survey, and address

any actionable outcomes

Outcomes of engagement

In June 2024, we completed our second annual client survey. We saw an

8.5% increase in client satisfaction to 88.5% from FY 2022/23, with 93%

saying they would use Ricardo for future projects. We received comments

from 30% of our clients (+11%), which we will use to develop our client

experience and capabilities to ensure best practice and continuous

improvement.

People

Link to ESG:

We provide a safe working environment and regularly engage with

our people and provide opportunities for progression and personal

development.

What is important to our stakeholders

• High-performance, purpose-led culture

• Diversity and inclusion

• Wellbeing and mental health

• Training and career development

• Responsive leadership

• Positive environmental performance

How we engage

• Regular live CEO Townhalls, with Q&A

• Annual global employee engagement survey

• Affinity group meet-ups, providing a space for underrepresented

groups to connect and support each other and share their views with

the business

• Ad hoc emails on organisation updates, and ‘always-on’

communication provided through ‘The Hub’, our Company intranet

How the board engages

• Regular engagement with our people and teams across our sites

through regular ‘Meet the board’ lunches and dinners

• Welcoming a wide range of employees to give presentations at board

meetings

• Malin Persson, board Workforce Engagement Director, maintains

regular engagement with colleagues, including hosting Listening

Sessions when on site to gather first-hand feedback

Outcomes of engagement

Our Group engagement score for 2024 was 3.81 out of 5, a slight

decrease from the previous year’s score. We received a 72% response

rate, an 9% increase year-on-year, and will be using the feedback

from comments and ratings to improve culture, engagement and way

of working across the business. Further feedback is gathered through

our CEO Q&A sessions that take place across our sites annually and

various listening forums – including our Diversity, Equity and Inclusion

(DEI) Council, affinity groups, works councils and union representation –

toallow our people to have a voice and share ideas.

42Ricardo plc | Annual Report and Accounts 2023/24

Stakeholder engagement continued

Communities and environment

Link to ESG:

As a global company with operations in over 23 countries, we play

an active role in helping our local communities thrive by contributing

both socially and economically. We operate in a responsible and

sustainable way by always aligning our decisions and actions

according to our values and our responsible business commitments.

What is important to our stakeholders

• Providing support to our local communities

• Providing opportunities for STEM activities

• Providing educational initiatives to young people

• Limiting environmental impact in operations

How we engage

• Ricardo engages with, a range of community groups in many of, the

communities we operate in

• Community Week 2023 and Community Day 2024 both gave the

opportunity for our people to engage and give back to our communities

How the board engages

• The board is provided with regular updates on initiatives and activities

across countries and sites and their impacts on our wider community

through the Responsible Business Committee

• Considers the Group’s net zero ambitions and its wider responsible

business strategy and how these can be an integral part of the Group’s

long-term sustainable success

Outcomes of engagement

• We have engaged with over 1,800 young people globally regarding

STEM

• We have reduced our Scope 1 and 2 emissions by 42.8% since 2019

Shareholders

Link to ESG:

Engagement with and receiving the support of our shareholders is a

key factor in achieving our ambitions. We seek long-term relationships

based on transparency, honesty and clarity – all of which are critical

for building trust. We are committed to delivering honest value to

our shareholders in a transparent manner. Our shareholders are

concerned with various issues, and need to understand how we are

impacted by such matters but more importantly how we responded.

What is important to our stakeholders

• Conflicts and geopolitical events

• Impact of global economic forces

• Growth within the relevant market sectors

• Sustainable growth and returns

• Understanding the business growth strategy

• Transparency on corporate governance

• ESG

How we engage

• We communicate our financial results through webinars, management

presentations and Annual General Meeting

• Management regularly meet with current and prospective investors,

including hosting at our sites, to communicate key messages and

updates

• Any notable changes to the board or the Company are shared through

RNS and hosted long-term at ricardo.com

• Management regularly attend investor conferences throughout the

year to communicate key messages

How the board engages

• Regular reviews of shareholder interactions, including feedback by the

Chair, Executive Directors and the Group Director of Communications,

and feedback from the Group’s brokers

• The board attends the Annual General Meeting where our shareholders

are invited to submit questions on various governance matters

Outcomes of engagement

• We have participated in several investment conferences to engage

with potential and existing investors both in the UK and the USA

• We have held a live presentation session for private investors with

ourCEO and CFO

• We have held a series of investor meetings covering our major

shareholders

Suppliers and partners

Link to ESG:

Ricardo has a global network of suppliers and partners.

Weactivelyengage with our suppliers to ensure that our supply

chain is competitive and reflects the Group’s values, that supply

chain disruption is minimised or avoided, and that we have trusted

relationships to ensure our operational success.

What is important to our stakeholders

• Ease of doing business

• Positive environmental and social impact, operating to high

ethicalstandards

How we engage

• We complete new supplier questionnaires to assess their risk against

a number of variables, and to ensure that they meet our Sustainable

Procurement Policy, Human Rights Policy and Supplier Code of

Conduct

How the board engages

• Reviews suppliers and supply chain risks and opportunities through

operating segment reviews and strategy day sessions

• Reviews strategic partnership arrangements to ensure that they are

aligned to our overall strategy

• With the Responsible Business Committee, reviewed sustainable

procurement to improve transparency in the supply chain

Outcomes of engagement

• 90% of suppliers were assessed against our supplier questionnaire

• We work with our supply chain partners to ensure that we are creating

innovative approaches that improve on-time delivery and our ESG

credentials in reducing our Scope 3 carbon emissions and waste

43Ricardo plc | Annual Report and Accounts 2023/24

Responsible business

In 1915, Ricardo was set on a mission to

‘maximise efficiency and eliminate waste’.

This mission has remained core to how we operate and, more than ever,

informs the products and services that we provide to clients around the

globe, ignites the passion that drives our people, and our approach to

responsible business.

Focus on

what matters

Clients Environmental People Governance

See page 47.

See pages 48-51.

See pages 52-58.

See pages 59-60.

Ratings

AA – Leader 20.9 medium risk Platinum award

Silver award

C Rating C decile 3 Score 34 Score 3.4

Ricardo plc | Annual Report and Accounts 2023/24

Responsible business continued

Focus on what matters

Our responsible business

framework focuses on

the outcomes we impact,

enable or influence

through our work and

our operations, helping

us to measure and adjust

our behaviour to the

long-term benefits of our

clients, planet, people,

communities and business.

Our responsible business framework covers

a broad range of environmental, social and

governance (ESG) topics as they relate to

Ricardo and to our clients, and links directly to

the United Nations’ Sustainable Development

Goals (SDGs), industry standards, frameworks

and legislation, including Global Reporting

Initiatives, International Sustainability

Standards Board, and CDP.

See page 59 for more on our governance

structure.

ESG

Climate change

Air pollution

Biodiversity

DEI

Labour standards

and modern slavery

Human rights

and value chain

Supplier management

Health and safety

Tax transparency

Anti-corruption

and bribery

Risk management

Leadership and

corporate governance

Business ethics

Water management

Waste management

and reduction

45Ricardo plc | Annual Report and Accounts 2023/24

Our sustainability framework

Responsible business continued

Focus on what matters continued

Commitment Achievement date Progress Target measure

Clients

Working alongside our clients to accelerate the

transition to a sustainablefuture.

Consulting revenue from projects related to climate change,

environmental or safety revenue. Services related to

climate change, environmental and safety

2029

75%

80% of revenue

Delivering 75% underlying operating profit to the business

through theEnvironmental and Energy Transition portfolio

FY 2026/27

53%

75% of underlying

operating Group profit

Environmental

Positively impact the planet by upholding

the ethos ofeliminating waste and driving

efficiency in everythingwe do.

Reduce Scope 1 and 2 emissions. Target aligned to 1.5°C

average global temperature rise – market based

FY 2030/31

42.8%

46.2% reduction from

FY 2019/20 baseline

Maximise procurement of renewable electricity in markets

we operate and manufacture

2030

81%

90% of total electricity

Reduce water intensity (per employee) from 2022 baseline

2030

16%

30% reduction

People

Nurture a workplace where everyone can do

their best, while supporting the communities

where we operate.

Employee engagement score of 4.0

Over 80% response rate to employee survey

2027

3.81

72%

Score of >4.0

80% response rate

Improved gender diversity of new hires

2029

39%

40:60 F/M of new talent

Zero reportable accidents annually

Each year

Employee voluntary turnover below 15%

2027

13%

<15%

Governance

Continuously improving our ways of working;

ensuring the highest ethical standards across

every level of our business and supply chain.

All existing and new suppliers risk assessed against our

Supplier Code of Conduct and due diligence process

2025

90%

100%

61%

Ricardo plc | Annual Report and Accounts 2023/24

Climate change, environmental and safety revenue

Responsible business continued

Clients

We know that the biggest contribution we can

make to the planet is through the work we do

with our clients. We want to be the partner and

champion of our clients and their sustainability

goals, and see their sustainability success as part

of how we achieve our ambition to continue to be

an industry leader of sustainable solutions.

Delivering sustainability-focused work

connects directly to our strategic ambition –

tobe a world-leading strategy and engineering

consultancy in environmental and energy

transition – and our related Environmental

and Energy Transition portfolio transformation

target of delivering 75% operating profit to the

business through the delivery of high growth,

high margin and less capital intensive business

by FY 2026/27. Currently, this part of the

business is providing 53% of operating profit.

Meanwhile in FY 2023/24, Ricardo R&D spend

for climate change and environment was 51%.

To achieve both these ambitions, we constantly

monitor global megatrends to ensure we’re

prepared to support clients with relevant

solutions that accelerate decarbonisation.

We’realso committed to not only advising

clients, but supporting implementation

andmonitoring.

Climate change, environmental

andsafety revenue

Ricardo is in a unique position to provide

a broad range of end-to-end solutions

that support client climate adaption,

environmental improvement and safety

performance. Fromanalysis and advisory,

design, implementation, to ongoing support,

while also being in the position to develop

world-changing engineering solutions that

also address the climate crisis.

We are able to analyse revenue streams

from across our business units to assess

howstrongly they are driven by climate

change, environmental change or issues,

andsafety. In FY 2023/24, such projects

havemade up 75% of revenue. See the graph

on the rightfor more details.

Driven by

environmental

change

Driven by an

environmental

issue

Has environmental

benefits

Relates

to safety

None of

the above

 FY 2020/21 (%)  FY 2021/22 (%)  FY 2022/23 (%)  FY 2023/24 (%)

To help us better understand our business and how it is changing in line with our vision

and ambition, over the past four years we have been analysing revenue streams across our

business units on how they related to climate change, environmental and safety. Looking at this

data side-by-side, we can see trends of increased interest in safety solutions, as the result of

increased demand for our ABS/ESC programme and steady demand for environmental-focused

consulting services and engineering solutions. Whereas remaining revenue, driven by revenue

unrelated to these areas, has been trending downward since FY 2020/21.

47Ricardo plc | Annual Report and Accounts 2023/24

Responsible business continued

Environment

We recognise the importance of minimising the

environmental harm caused by our business. As

part of this, we monitor a range of environmental

metrics including our GHG emissions, energy

and water use, and waste production across all

our sites, so that we can identify improvement

opportunities and ensure legislative compliance.

42.8% 98% 16%

Reduction in GHG

emissions (Scope 1 and

2 location-based)

(1)

Waste diverted from

landfill

Reduction in water

(2)

(1) From 2019 baseline year. (2) Since FY 2021/22.

Carbon reduction

Reducing our emissions is an essential part

of our overarching responsible business

strategy. To support this, Ricardo measures

and discloses elements of its impact on the

environment by GHG emissions inventory

reporting, with a baseline year of FY 2019/20

for Scope 1 and 2, and FY 2021/22 for Scope 3.

As part of our journey to net zero, Ricardo

adopted Science Based Targets initiative (SBTi)

targets in FY 2019/20, committing to:

• Reduce Scope 1 and 2 emissions 46.2%

by FY 2030/31 – aligned to 1.5ºC average

global temperature rise

• Reduce absolute Scope 3 emissions 27.5%

by FY 2030/31 – aligned to well below 2ºC

temperature rise

Since FY 2019/20, we have reduced our Scope

1 and 2 emissions by 42.8% through adoption

of renewable energy and migration to a

digital-first approach.

In FY 2023/24 we saw an 11% year-on-year

reduction in Scope 3 emissions. However,

since we first calculated Scope 3 emissions in

FY 2021/22 there has been vast improvement

in the ability to measure and calculate these

emissions, which, coupled with an increased

volume of products sold by Ricardo, has

resulted in higher Scope 3 emissions since our

baseline year.

During FY 2024/25 we will adjust our baseline

year for all scopes using FY 2024/25 data, and

use this to update our targets and initiatives in

line with the 2025 net zero goal set out in the

UN Paris Agreement.

48Ricardo plc | Annual Report and Accounts 2023/24

Carbon reduction continued

As a result of the improved ability to calculate

emissions, SBTi adjusted their Scope 3

emission grading system, resulting in over

200 companies – including Ricardo – having

their Scope 3 Science Based Targets removed.

Irrespective of this, there is no change in

Ricardo’s resolution to continually reduce our

energy consumption and GHG emissions, and

we intend to re-confirm our SBTi targets once

trends and measurement capabilities at SBTi

have stabilised.

For more information on GHG emissions,

please see page 61.

Reward incentives

As of FY 2023/24, Ricardo senior management

have had a reward incentive on reducing GHG

emissions added to their long-term incentive

scheme (LTIP), helping to integrate responsible

business practices and sustainable thinking

into every part of the business. The structure

of the LTIP, which allocates 10% of the award

on an ESG metric, was approved as part of the

Directors’ Remuneration policy at the AGM in

November 2023. To ensure that this incentive

is both fair and stretching, the Remuneration

Committee will be reviewing the approach to

this measure during the course of FY 2024/25.

More details can be found on page 103.

Site environmental certification

Thirty-nine Ricardo sites, including all

manufacturing sites, and 95% of colleagues

are certified under ISO 14001 – Environmental

management systems. All remaining

colleagues and sites are managed with ISO

14001 processes which call for continuous

improvement of environmental performance.

This helps us to identify and action

environmental initiatives for our specific

sites,while giving clients assurance of their

supply chain.

Air pollution

In 2023, our Energy and Environment business

unit initiated The Air Pollution Footprint

Partnership to help organisations understand

and reduce their air pollution emissions, with

the support of our partners, the Clean Air Fund

and Impact on Urban Health. Through this

initiative, Ricardo has been analysing its own

air pollution metrics using the test air pollution

emission reporting tools to estimate and

report on our air pollutant emissions at our key

UK testing and manufacturing site, parallel to

our GHG emissions.

Through this initiative, we gain transparency to

the type of toxins our operations are producing

and from what activity. The chart to the right

demonstrates what we measure relevant to

our operations, under transport, heat and

power, and non-road transport machinery

by vehicle type, fuel types and consumption

volumes.

The output provides Ricardo with the volume

of NOx (nitrogen oxide), PM

and PM

2.5

(Particulate Matter) toxic pollutants which are

detrimental to good health. Having learned

that our air pollution is localised to our main

manufacturing and testing site, we are now

reviewing the extent of the potential impact

and ways to make improvements.

Responsible business continued

Environment

Non-road mobile machinery

covering engineering, construction and materials handling equipment, including machinery type,

automotive engine test beds; fuel type – diesel, petrol, HVO etc; and fuel consumption (calculated from

fuel use, annual energy use or from machines’ net power rating and load factor)

Heat and power

from boilers, furnaces and related to electricity use, covering fuel group and type – gases (natural gas,

biogas, LPG), liquids (kerosene, petrol, biofuels), solid (coal, coke, biomass), electricity; fuel consumption –

kWh, MJ, tonnes, m

, litres

Transport

covering fuel consumption (litres), distance (km) and transport type, including fleet (own/leased) and

staff vehicles (such as cars, buses, motorcycles) across all fuel types (diesel, petrol, BEV); powertrain

technology, including conventional, HEV, BEV; and travel

emissions (kg) PM

and PM

2.5

emissions (kg)

(1)

562.46

7.48

27.95

11%

4.52

2,065.38

31%

428.66

3,536.21

54%

206.14

84%

(1) Results for PM

and PM

2.5

emissions are identical in this case.

Own/leased vehicles Other business travel Combustion fuels Testing fuels

Next steps

Assessment showed the areas where Ricardo has the highest air pollution, which was focused to

manufacturing and test locations and business travel. Ricardo continues to participate in the pilot, and

as we continue to gather data and information we will begin to take affirmative actions to air pollution

emissions wherever possible.

49Ricardo plc | Annual Report and Accounts 2023/24

Resource efficiency

Water management

We have a limited use of water across Ricardo and seek to reduce its use in our manufacturing processes and test facilities in the UK and US. Overall,

we have achieved a year-on-year reduction in water use since FY 2020/21.

Our testing and manufacturing processes consume water, however many systems run alongside recirculation or filtration systems to prolong and

reduce water consumptions. A centrifuge system has been added to our Stream Finishing process at our Midlands Technical Centre, saving 151,000

litres of waste water annually, eradicating the waste stream in its entirety.

Responsible business continued

Environment continued

Conversations on water

Water is a critical component of life, but

its increasing scarcity means that it is

fast becoming one of the biggest risks to

the global economy. This is where water

policy can come in. Listen to Ricardo

water policy experts Jessica Bohorquez

and Ryan Gormly speak about the vital

importance of robust water policy and

the intricacy behind its development in

Jessica’s podcast: Our Water Connection.

Spotlight

Listen to the Open Water

Connection podcast

Water usage on large sites m

(over 50 people)

FY 2023/24

FY 2022/23

FY 2021/22

FY 2020/21

 Volume  Volume/employee

14.2

12.2

11.9

41,276

39,265

34,167

33,799

Renewable energy use

In FY 2023/24, Ricardo saw a 10% overall decrease in renewable energy use, resulting from higher production levels at sites where we are unable procure

100% renewable energy. This is the case for sites in the US, where the States in which we operate draw their energy from several renewable and non-

renewable sources, and therefore we are unable to claim 100% renewable energy use. Despite this, we have seen annual year-on-year reductions in

electricity use per employee, with a 6% reduction between FY 2022/23 and FY 2023/24.

Renewable electricity

percentage used per

financial year

Non-renewable electricity

percentage used per financial year

Electricity used per employee

for the financial year kWh

2023/24 81% 19% 3,868

2022/23 91% 9% 4,922

2021/22 89% 11% 4,923

2020/21 91% 9% 5,412

50Ricardo plc | Annual Report and Accounts 2023/24

Resource efficiency continued

Waste management

We measure the amount of waste we create so that we can continue to reduce and responsibly dispose of it. We have full

transparency of where waste is disposed with maximum avoidance to landfill. For FY 2023/24, 76% of waste was recycled and

only 2% of waste went direct to landfill.

All hazardous substances are collected from our sites, removed, and correctly controlled and managed by approved specialist

waste companies adhering to environmental legislation. A specialist broker now manages waste from both UK manufacturing

sites – Shoreham Technical Centre and Midland Technical Centre – supporting our overall waste management responsibilities.

This year, we also enhanced our metal recycling capability, with all test product transmissions, engines where possible, plus

machine scrap is 100% recycled.

Waste stream

FY 2023/24 FY 2022/23

Sum of

quantity kg

% of total

waste

kg per

employee

Sum of

quantity kg

% of total

waste

kg per

employee

Electronic waste 4,089 0.6% 1 5,215 0.8% 2

Food waste to recycling (composting

oranaerobic digestion) 4,326 0.7% 2 17,086 2.6% 6

General waste to landfill 13,550 2.1% 5 65,670 9.9% 23

General waste to recycling 310,478 48.0% 109 260,532 39.5% 89

General waste to incineration 139,296 22.0% 49 190,570 28.9% 65

Hazardous waste 170,603 26.6% 60 121,304 18.4% 42

Grand total – Ongoing operations 642,342 226 660,377 227

Waste processing

Amount of waste recycled 485,095 76% 171 390,137 59% 134

Amount of waste converted

toenergy(EfW) 144,992 23% 51 204,570 31% 70

Exceptional item – Demolition waste 612,000

Note:

• Electronic, food and general waste is from our offices and due to the reduction in office sites and occupancy there has been a

decrease, reflected in the reduction in volume to landfill. Our method of estimating office waste has changed from allocated

employee headcount to office occupancy

• Waste to incineration has decreased due to additional waste being put into recycling streams

• Hazardous waste has increased due to manufacturing productivity and disposal of asbestos from the one-off demolition waste.

Thisresulted from the demolition of several end-of-life buildings, some of which contained asbestos, which has cleared an area

forthe construction of a proposed test facility

• Hazardous waste is categorised as oil sludge, batteries, and asbestos

Responsible business continued

Environment continued

Understanding our Scope 3

commuteremissions

To ensure we have a more accurate understanding of our Scope 3

emissions, since FY 2022/23 we have run an employee commuter

survey. Approximately 82% of employees completed the FY2023/24

survey, which asked team members to identify the modes of

transport they use to commute to a Ricardo office, the distance

involved and the frequency, with the data being used to assess

emissions by mode, location, headcount and business unit.

From this year’s results we learned that emissions for commuters

to city centre offices and those with good rail links had much lower

emissions per head. While commuters at some of our largest sites,

with headcounts above 300 – such as Shoreham Technical Centre

and Midland Technical Centre – use higher-emission transport

modes with more frequency, when factoring in headcount, they have

a lower intensity of emissions than some of our sites with smaller

headcounts, as the result of limited public or sustainable transport

options available.

Case study

51Ricardo plc | Annual Report and Accounts 2023/24

People

Responsible business continued

At Ricardo we know that the success of our

business is, quite simply, down to our people.

We are committed to building an inclusive,

engaging workplace that provides colleagues

withmeaningful and fulfilling work and the

opportunity to develop their careers and thrive.

Culture and engagement

We recognise that to achieve our ambition, we

must continue to improve collaboration across

functions and build on our One Ricardo culture.

Throughout FY 2023/24, we have continued to

break down silos and are seeing an increasing

number of projects come to life that are the

result of teamwork across our business units

and functions.

Vision and values

In everything we do, we are led by our vision

to create a safe and sustainable world, and

our values: Create Together, Be Innovative,

Aim High and Be Mindful. It’s not just how we

approach our tasks but also a reflection of how

we behave and what we consider important.

We continue to celebrate how our people put

our values into action through the monthly

CEO Awards, our annual Leading Lights

awards.

Create together

Be innovative

Aim high

Be mindful

Who makes up Ricardo (numbers are reflective of positions held during the year)

Board members

including CEO and CFO

Executive Committee

including CEO and CFO

Male 5 Female 3 Male 6 Female 5

62% 55%

38%

45%

All employees

Percentage of colleagues by gender

Region

Percentage of colleagues by region

Male 71% Female 29%

Americas 12%

Europe 74%

Middle East 1%

APAC 13%

71%

12%

29%

74%

13%

52Ricardo plc | Annual Report and Accounts 2023/24

Responsible business continued

People

Culture and engagement continued

Building One Ricardo culture

Throughout the year, the Group and local sites

have held a number of activities to build a

unified culture at Ricardo:

• Community Day (read more on page 57)

• Global Diversity, Equity and Inclusion (DEI)

celebrations including Pride, International

Woman’s Day and Mental Wellness Day

• Local sport days and seasonal celebrations

• Monthly CEO awards

• Annual Leading Lights awards

In FY 2024/25 we look forward to hosting our

first Ricardo Day, a day of reflection on One

Ricardo and a celebration of the efforts made

by our people.

Communicating to our teams

Ensuring that our people have an appropriate

understanding of business activity and

strategy is important to Ricardo’s success

and employee engagement. We use several

communication streams to keep our people

informed on activity and performance. At a

Group level this includes CEO Townhalls,

weekly newsletters, an active intranet –

known as ‘The Hub’, and emails with the

most important updates. At a team level, we

encourage managers to have regular team and

one-on-one meetings.

Gathering colleague feedback

Our annual employee engagement survey

is a formal feedback mechanism we use to

understand how Ricardo is performing with

regard to culture and engagement, and to

provide our people with the opportunity to

freely express their views freely. Results

and comments from the survey are used by

leadership to make improvements to how we

work with our people.

Overall, we saw a slight decrease in our

engagement score in FY 2023/24 from 4.0 to

3.81 year-on-year, which comes against the

backdrop of many changes occurring across

the business in the previous 12 months. At the

same time, we had our highest response rate

to date at 72%, a 11% increase on FY 2022/23,

and received more than 6,900 comments – a

40% increase from the prior year – which we

see as a reflection of colleagues’ belief that

their opinion matters.

Top three areas where we are performing well:

• I know what is expected of me at work

• My supervisor, or someone at work, seems

to care about me as a person

• At work my opinions count

Following the survey, colleagues were

communicated the results via global

Townhalls, team meetings, email and intranet.

Leadership are using this feedback to develop

engagement action plans for teams, sites

and the wider Company to be implemented

throughout the year.

Outside of the Employee Survey, colleagues

are able to provide informal feedback on an ad

hoc basis via Teams and The Hub.

Bring your daughter to work

Case study

In March, to celebrate International Women’s Day, Ricardo’s Shoreham site hosted a

‘Bringyour daughter to work’ day for young female relatives and friends of employees

acrossthe business.

In total, 20 aspiring female engineers, aged between 7 and 16, took part in a packed day

of activities, which included building a mini race car and marble obstacle course; designing

andbuilding clay model cars to test aerodynamics in a mini wind tunnel – aimed at

encouraging creative problem-solving; a site tour, highlighting many of the different aspects

of engineering; and one-on-one time with their sponsors to get an insight into their specific

job role.

The activities aimed to create an environment where the girls could work together as a team

whilst also have fun and understand the principles of engineering across a variety of areas.

Ricardo plc | Annual Report and Accounts 2023/24

Health, safety and wellbeing

Ricardo places the utmost importance on

the health and safety of our employees,

contractors and visitors. This year, we

continued to strengthen our safety culture

through comprehensive training, rigorous

safety protocols, and proactive risk

management.

Our ISO 45001 certification encompasses

39 sites and covers 95% of our site-based

employees. The remaining employees and

sites are managed through the ISO 45001

process to ensure comprehensive health and

safety management.

Reportable accidents

We achieved a notable 75% decrease in

RIDDOR (Reporting of Injuries, Diseases

and Dangerous Occurrences Regulations)

reportable incidents compared to the previous

year. This improvement reflects our focused

efforts on hazard prevention and heightened

safety awareness.

Reportable

accidents

Number

2023/24 1

2022/23 4

2021/22 1

2020/21 1

2019/20 1

Based on current definitions of the Reporting of

Injuries, Diseases and Dangerous Occurrences

Regulations (RIDDOR).

Following the accident that occurred this

year, an investigation into the cause was

undertaken, allowing us to identify future

mitigation measures to minimise the chances

of this accident reoccurring. This accident did

not result in life-changing injuries or a fatality.

Promoting employee wellbeing

In addition to taking care of our employees’

physical health and safety, across Ricardo

we want to make sure we are providing

opportunities for colleagues to access mental

health services should they experience any

concerns, through our free and anonymous

Employee Assistance Programme, open to

them and their immediate family.

Across the business we encourage

social wellbeing with site-relevant social

engagement teams who organise regular

team activities and seasonal or cultural events

best suited to a country’s or office’s interests.

There are also a number of opportunities

and avenues for colleagues to participate in

community volunteering opportunities (read

more on page 57).

Attraction, capability and reward

People attraction

This year, we have made significant strides

in enhancing our talent attraction initiatives,

ensuring we continue to draw the brightest

minds to our organisation.

Strategic workforce planning: Through our

rigorous annual workforce planning process

we now align our hiring plans with our

business goals, ensuring that all future hiring

requirements are anticipated with proactive

strategies and timelines to meet those needs.

Technology integration: By leveraging

technology partnerships, we have improved

our ability to identify and engage with top

candidates. By using these tools (and their

built-in AI capability) we have been able to

efficiently screen CVs and talent pools to

required skill sets, reducing time-to-hire and

ensuring a better fit.

Early careers partnerships and online

campaigns: Strengthening our relationships

with top universities has allowed us to tap

into a pool of emerging talent. Through our

work placement programmes and campus

recruitment drives, we have successfully

recruited fresh graduates who bring new

perspectives and energy to our team. We

have extended our online presence and range

through our partnerships with organisations

to improve our reach and recruitment of

candidates from various backgrounds,

enhancing diversity and fostering an inclusive

work environment.

Learning and development

To support our clients and engage our

colleagues we understand that continuous

learning is core to our success. We encourage

both on-the-job learning and participation in

internal and external courses and participation

at relevant industry courses. Across the

business, colleagues can commit up to 5% of

their time to learning, helping to expand their

knowledge and keep abreast of changes within

our industry, which can then be applied to

client work.

As part of this learning organisation mindset,

this year we launched LinkedIn Learning to all

our people across the organisation so that they

have sustained access to self-paced learning

across a broad range of topics that interest

them and support their career development.

Since introducing LinkedIn Learning in April,

over 50% of the Ricardo employees have

activated their accounts, engaging in over

1,200 courses; and over 25% have registered

their career goals.

In FY 2024/25, our focus is on the continued

development of our people managers with

the launch of our first global management

development programmes aimed at developing

first-time line managers by providing them with

learning resources and connecting them with

more experienced managers who can provide

guidance and support.

Feedback and objective setting

Managers are expected to give regular

feedback to their team members throughout

the year on their performance, providing the

opportunity to align their activity with business

objectives and personal development.

In FY 2023/24 colleagues across the Company

had their objectives aligned with the strategic

objectives of the business (see KPIs – page 18).

This is intended to align colleague activity and

success more clearly with that of the Company.

Global mobility

Ricardo designed and implemented the Global

Mobility Framework and its associated policies,

which provide an overview on how we manage

and encourage international working within

the Ricardo Group. A robust Global Mobility

Framework, with a strategy closely aligned to

the overall Group strategy, supports talent, the

workforce and our clients.

There are many variables which are taken

into account for each international movement

and the aim is to be consistent, fair and

equitable within the framework of provision,

thus allowing our employees to achieve

their career objectives and goals. The Global

Mobility Framework is designed to be market

competitive and legally compliant. Our overall

reward systems are continually reviewed

for legal compliance and equity, respecting

regional nuances.

Responsible business continued

People continued

54Ricardo plc | Annual Report and Accounts 2023/24

Attraction, capability and reward

continued

Reward and recognition

Ricardo has continued to embed its

international employee recognition awards

including monthly CEO Awards and annual

Leading Lights awards. This year, we launched

an internal tool called Thank You! on the

Ricardo intranet, which allows colleagues to

quickly thank their team members for their

contributions. When a thank you is sent, a

note is also shared with the relevant manager,

so they’re also aware of the recognition their

direct report is receiving.

In January, Ricardo returned to merit-based

salary reviews, completing a consolidated,

centrally led global salary review cycle. Ricardo

continues to monitor its reward systems and

benefits to make sure total reward remains in

line with local markets. Pay principles have also

been reviewed for legal compliance.

Embracing DEI

As an international business working on a

broad range of matters, Ricardo recognises

the need for not only a workforce that reflects

the communities we operate in, but the benefit

that diversity of thought, background and skill

brings to our business; and for creating an

environment that is inclusive and equitable

toall who work here.

DEI is led by General Counsel, Harpreet

Sagoo, who has been leading a number of

discovery sessions across the business to

better understand what diversity, equity and

inclusion (DEI) means across the business and

established an internal benchmark.

Findings from these sessions will help to form

the development of a DEI Action Plan that will

begin its rollout in FY 2024/25, supporting

talent attraction and the development of

Ricardo culture.

Read the interview with DEI Chair, Harpreet

Sagoo, on page 56.

Gender diversity

We are committed to improving gender

diversity at all levels of the organisation, from

graduates to Executive and board level. Across

the Ricardo Group, in the last 12 months 39%

of new joiners at all levels – an increase of

3% – have been female, helping to increase

representation by women in our workforce to

29% female, a slight increase from FY 2022/23.

Gender representation at an executive level

has improved to 45% in FY 2023/24 up from

27% in FY 2021/22, andwe achieved our board

gender diversity goals in July 2024 with the

appointment of Carol Borg.

Reducing our gender pay gap

We have seen positive trends in reducing our

gender pay gap in those parts of the business

we have been reporting on for the last seven

reporting cycles. Our figures have held steady

in FY 2023/24, either sitting beneath or on

par with the UK median of 14.9% in favour

of males, according to the Office for National

Statistics in 2022. However, we recognise that

no amount of gap is appropriate and continue

taking steps to make this a reality.

Responsible business continued

People continued

Global mobility spotlight

Case study

We have a large pool of topic specialists at Ricardo to support our global client base.

Thisprovides the dual benefit of having our clients supported by subject matter experts

andexposing our people to a range of projects around the world at any one time. It also

givesthe opportunity for some of our people to relocate to provide dedicated support.

Daniela Phillips is one such expert who recently relocated to California, USA to lend her

certification experience to the California High Speed Rail project, as part of a larger team

ofRicardo experts who have established in the state.

“It was a big decision to move and be away from family, friends, and cat, but I knew what a

once-in-a-lifetime opportunity it was to work on the first US high speed rail project. My role

on the project is the Systems Certification Manager and on a day-to-day basis I am providing

advice and support to construction packages, the Authority and internal teams and liaising

with the Federal Railroad Administration (FRA). A lot of what I do is about building confidence

in our assurance work and has meant I have had to get to grips with US railway legislation

pretty quickly! It was really key for me to be here in person at the start of our work to meet

thekey people involved and build a relationship with them.”

Ricardo plc | Annual Report and Accounts 2023/24

Responsible business continued

People continued

Why is DEI important

toRicardo?

Ricardo wants everyone it engages

with to feel valued, respected and

a part of the company story. To do

this it is essential to have a safe

environment where individuals are

happy to challenge and provide a

different perspective. This accelerates

our growth culture. The same thought

process, same experience, same ideas

creates a stagnant environment.

That is not Ricardo! Having a clear

commitment to DEI where we can

attract the best and retain the best

is core to our success. DEI is not just

important – it is critical!

What was your impression of

DEI activity across Ricardo?

As part of my interview process,

Iraised DEI and representation as

atopic. I was impressed that our CEO

was open about the fact we needed

to do more. Each business unit was

addressing DEI in silos, but it was

important to elevate this to Group

level. Upon joining, I was impressed

with the different employee-led affinity

groups that were active across the

business. There is a sincere interest

across all levels of the business to

improve DEI and give it the prominence

it needs. This is not a tick box exercise

for Ricardo, or a nice to have, it is an

integral part of our growth journey.

You have been holding a

number of discovery sessions

to understand DEI at Ricardo.

Why did you want to undertake

these sessions and what did

youlearn?

You need to listen, which is difficult

for lawyers! It is important to evaluate

where you are, to map out how you get

to your final destination. I have been

meeting regularly with the affinity

groups, and it has been invaluable for

putting together our DEI Action Plan

and commitment from Ricardo to our

teams. These sessions allowed me to

build relationships and create a safe

environment for feedback. I am very

appreciative for the support I have

received from our CEO and board on

this journey.

What are some clear areas

offocus for you?

Transparency is key. I am focused on

ensuring that DEI has board, Executive

and SLT visibility by elevating the work

undertaken by the affinity groups. We

are currently working on concluding

our Action Plan, with each affinity

group focused on one deliverable to

help us move the dial. In addition,

we are launching a new Code of

Conduct which ties DEI into our values.

There is a lot for us to do, but I feel

empowered, energised and supported

by Ricardo to make a difference. I want

to conclude by saying a massive thank

you to all the DEI Chairs who have

been instrumental to get Ricardo to

this point. Thank you.

Interview with Harpreet Sagoo, General Counsel and DEI Chair on where DEI is heading at Ricardo

Accelerating

ourDEI ambition

56Ricardo plc | Annual Report and Accounts 2023/24

Responsible business continued

People continued

Global Community Day

In May 2024, Ricardo held its first global Community Day to encourage more colleagues to

connect with each other globally across all locations and contribute to their local communities.

As part of the Community Day we encouraged colleagues to step out into their communities

and support the local environment by litter picking, helping to clean up local areas and reduce

waste that could make its way into waterways, and be eaten by pets or wildlife. We also

asked our colleagues to count their steps while collecting litter and encouraged them to say

‘Thank You’ to their team members using the new internal Thank You! channel.

As a thank you to our teams for getting involved, Ricardo also made donations to the local

charities the team chose and contributed too during the day. Overall, we collected over 12,800

pieces of litter, which exceeded our target of 1,000 pieces, walked over 870,000 steps, the

equivalent of 696km, and sent over 175 Thank You messages.

Case study

STEM and the community

12+ £97,000 1,800

Charities supported Donations in FY 2023/24 Young people engaged

As a company of engineers, scientists and

specialist technology experts, Ricardo has

always been a strong supporter of STEM,

engaging with local communities and charity

work. Our commitment was embedded

through a centrally funded social value STEM

programme launched early in 2023 which we

continue with, expanding the work with our

partners into FY 2024/25 and beyond. These

activities support our Social Value team with

their work, demonstrating our commitment to

society often required by our clients.

We actively manage our employee STEM

volunteering programme which provides all

Ricardo employees with the opportunity to

volunteer during the year, which boosts team

engagement, health and wellbeing, while

positively impacting society.

During the last year Ricardo colleagues have

engaged with 1,800 students across the

England, Scotland and the USA to inspire and

demystify careers in STEM. This has taken

place through different STEM initiatives with

our partners, including supporting school

challenges for students to participate in, and

present their final design products to a panel

of judges. We also conduct careers talks

and provide presentations on various topics

such as engineering, air pollution, climate

change, water scarcity and other important

environmental issues.

We have provided week-long work experience

placements and supported many school career

fairs. We support our other STEM partners

with mentoring students through other

activities, which includes post-graduates and

young people venturing into their careers.

The funding donated was for our STEM

partners, and other charities our employees

have supported, which we have fund-matched

against the money they raised.

A key element of our community engagement

is inspiring the future green workforce and

encouraging social transport to overcome

disparity in the STEM sector. We are

setting out to inspire the next generation of

problem-solvers from all backgrounds into

careers in the clean energy, environment

and sustainability sector and support

youngpeople’s knowledge of topical issues

inthe sector.

We partnered with seven STEM charity

organisations in 2023 and have worked with

them during this year. We will be continuing

our work to support STEM charities and

are looking for additional partners in other

locations where we operate, such as the

Netherlands, Middle East and China.

In addition to STEM activities, Ricardo has

donated over £97,000 to STEM, environmental,

health and emergency response charities in

FY2023/24 (FY 2022/23: £16,069).

57Ricardo plc | Annual Report and Accounts 2023/24

Responsible business continued

People continued

Educating on climate change

and its solutions

Over the past year, Ricardo UK teams have been volunteering with

EDT by bringing climate change education and supporting STEM at

schools across the UK. Ricardo team members spoke with around

280 students on the phenomenon of global warming, how our

daily activities impact the world, utilising carbon footprints as an

environmental indicator, and the potential for carbon capture. As part

of the sessions, pupils were then given the chance to plan and create

models for an eco garden, with the aim of reducing their respective

carbon footprints and improving the atmosphere.



Hands-on STEM experience

During the course of many weeks, Ricardo team members Canessa

Hunter and Sarah Keegan volunteered by taking time to teach fourth

graders in Detroit, USA about STEM through the SAE Foundation.

Working with young girls and boys between 9 and 10 years old at

Emerson Elementary School, the pair applied their skills, experience

and education to teach the children about STEM while building a gravity

cruiser as part of SAE’s A World In Motion® (AWIM®) Gravity Cruiser

Challenge. To nurture trust and their passion, the pair committed to

answer all questions asked by the students and made sure they could

attend every session. By the end of eight weeks, the children had

learned more about STEM, as well as the importance of teamwork and

compromise. After weeks of preparation, during their final session the

children had an opportunity to test their gravity cruisers against their

classmates, adjusting their vehicles throughout to improve performance

and to see who could take home the first-place prize.



Encouraging STEM in Australia

Jessica Bohorquez and Jorge Martin Gistau participated in a Superstars

of STEM Career Panel at Brighton Secondary School in Adelaide where

they shared their experiences as STEM professionals, and answered

questions on work environments and necessary educational and

practical advice to pursue their STEM interests in these areas. In addition

to the panel, Jessica collaborated with the School of Architecture and

Civil Engineering at the University of Adelaide, delivering an interactive

workshop to Year 11 and Year 12 students. The ‘Aqualibrium’ activity

was created to enhance students’ understanding of critical issues in

water management and engineering, working with students to design

their own water network, introducing students to design thinking,

iterations, and the importance of infrastructure resilience. Both activities

underscored Ricardo’s essential role in inspiring the next generation of

STEM professionals. By sharing real-world experiences and engaging

students in practical workshops, Jessica and Jorge demonstrated the

exciting possibilities within STEM careers.

Other STEM and charity partners

58Ricardo plc | Annual Report and Accounts 2023/24

Governance

Building the foundations of a strong responsible

business framework with robust governance

structure.

Governance structure

While everyone at Ricardo is responsible for

helping us achieve our sustainability goals, it

is the Responsible Business Committee (RBC)

who steers Ricardo’s effortsin environmental,

social and governance issues. Made up

of the board’s Chair and Non-Executive

Directors, CEO, CFO and the Sustainability

team, decisions made by the RBC are shared

throughout the executive and thebusiness

units for implementation across the business.

Key elements of our responsible business

process include:

• Monthly Executive meetings with our CEO

and senior leadership team

• The ESG transformation workstream, which

meets every two weeks

Part of the RBC’s remit is contributing to the

development and review – annual, or more

frequently if legislation dictates change – of

relevant Company-wide policies.

In the past year, the RBC have contributed to a

new Anti-Bribery, Fraud and Corruption Policy,

and updated the Code of Conduct, Supplier

Code of Conduct, Human Rights Policy, Speak

Up Policy and the DEI Policy Statement.

Leveraging Ricardo’s internal specialist teams,

the RBC makes in-depth analytical reviews

of pending, developing and international

regulations to provide a three to five-year view

on impending changes for risk management,

decision making and reporting. This provides

our stakeholders with increased transparency

regarding our risk decisions through the early

adoption of reporting standards, and the

opportunity to report our involvement publicly.

The RBC reinforces the accountability and

responsibility we all share, to ensure that the

highest standards are adhered to in everything

we do internally and for externally for the

business and our stakeholders.

For more information on the RBC see page 97.

2econd Chance

2econd Chance is a not-for-profit, community interest company that collects and

refurbishes unwanted hardware, and provides opportunity for NEET (not in employment,

education or training) adults and young people aged 16-25 with an EHCP (Education

Health Care Plan). This helps to ‘bridge the digital divide’ by aiding digital inclusion,

helping get people into work. It supports Ricardo to manage its environmental

footprint and minimise its e-waste equipment, giving a second life to machines, and

building further social value. This programme supports our compliance to ISO 27001 –

International Standard for Information Security Management.

“Through our partnership, we have transformed corporate generosity into community

empowerment. This support has enabled us to provide accredited and informal

training for individuals with disabilities and those furthest from the job market,

equipping them with valuable skills. To date, Ricardo has donated over 200 devices,

which has facilitated approximately 260 hours of valuable training, and we have been

able to donate 33 refurbished computers back into the community, providing people

with access to essential technology for online learning and job searching.”

Charlotte Solomon – Director, 2econd Chance

Case study

Responsible business continued

59Ricardo plc | Annual Report and Accounts 2023/24

Our ratings and engagement

withinternational bodies

We proactively engage with investor rating

agencies such as, but not limited to: ISS, CDP,

Sustainalytics, and FTSE Russell. Ecovadis

awarded our Rail business in the Netherlands a

Platinum Award and our A&I UK business Silver

Award status for 2023. We await this year’s

updates.

Ricardo’s ESG framework is set against GRI

(Global Reporting Initiative) and as ISSB

(International Sustainability Standards Board)

evolves further with additional standards, we

will adapt this further as part of the overarching

framework, having already incorporated IFRS S1

and IFRS S2. We remain committed to reporting

annually to CDP (Carbon Disclosure Project),

mandatory reporting to TCFD (Task Force on

Climate-related Financial Disclosures) and GHG

emissions regulations. As a signatory to the

United Nations Global Compact (UNGC), the

world’s largest corporate responsibility initiative,

we remain committed to the 10 Principles.

OurCommunication on Progress (COP) report

issubmitted annually to the UNGC.

Sustainable procurement

Our supplier partnerships are built on business

integrity and transparency, and our suppliers

are equally accountable and responsible

for due diligence of their own value supply

chains, and all activities throughout our

operations. In FY 2023/24, we completed a

due diligence process for 90% of our suppliers,

who were assessed against various risk

categories including country and regions

within, humanrights risk levels, political

or corruptionconcerns, with the support of

Nexisand Dun & Bradstreet.

As a global consultancy, the majority of our

suppliers provide business services rather

than manufacturing, but we expect all our

employees and external stakeholders to

respect individuals with dignity, and to not

breach this per our terms of business, our

Code of Conduct, Supplier Code of Conduct,

Human Rights and Anti-Bribery and Corruption

policies. We have related policies which can

be viewed on www.ricardo.com. These are

linked to our internal policies and processes,

including sustainable procurement processes

and risk assessment supplier evaluation

questionnaires for new and existing suppliers.

We require information and details related

to all core sustainable activities: waste and

pollution, climate risks, carbon reduction

targets, energy saving and renewables,

working conditions, supply chain transparency,

modern slavery due diligence and relevant

accreditation standards.

Modern slavery

We consider the risks of all forms of modern

slavery throughout our global operations.

Modern slavery legislation exists in many

countries including the UK, Australia and the

USA, being three of the large operational

regions for Ricardo Group. Therefore, as part

of our supplier procurement due diligence

process, modern slavery risk assessments are

a mandatory requirement for all suppliers,

even if the threshold of the individual

nationalobligations does not legally impact

asupplier’s business.

Risks are prevalent in all countries, and

wesometimes consider a smaller business

partner more at risk than those who are large

corporate businesses. We identify those who

need support to help assess and mitigate their

own risks. We continue to raise awareness,

educating our teams and suppliers with

this ongoing journey of complex issues and

due diligence. We continue to engage with

organisations such as the UNGC, to share

best practice with other organisations to

keep aware of wider issues that may impact

Ricardo. These matters are fluid and high risk,

therefore consistent monitoring is required

to ensure the highest level of compliance.

Ricardo encourages open, honest, two-way

communication throughout the organisation

to ensure issues of concern are raised, and

addressed.

Whistleblowing

We provide an anonymous ethics hotline,

Navex, hosted outside of the Ricardo internal

network to give confidentiality and protection

to those ‘speaking out’. This service is open to

all employees, clients and suppliers.

Ethics

We consider ethical conduct to be integral

to our business and its success. In the past

year, led by the Responsible Business

Committee, Ricardo has updated its Code of

Conduct, Supplier Code of Conduct, Human

Rights Policy, Speak Up Policy, DEI Policy and

introduced a new Anti-Bribery and Corruption

Policy. We adhere to security standards

to safeguard sensitive information. Our

Information Security Policy is instrumental

in fostering trust with clients, suppliers and

employees.

Data responsibility

Ricardo maintains a robust information security

programme that includes mandatory training

for all employees, upon hire and annually

thereafter, covering essential topics such as

data protection, cybersecurity best practices,

and incident response. Our information

security programme is aligned with industry

best practices and certified to ISO/IEC 27001

and Cyber Essentials standards.

Senior leadership oversees the information

security management system (ISMS) through

annual reviews assessing performance,

risk, operations and incidents. Key

performance indicators are tracked to identify

improvements. Data, information security and

privacy reports are submitted to the Audit

Committee every six months, with findings

presented to the board annually.

Global Slavery Index | Walk Free

Global: Global Slavery Index

2023 finds limited progress

to eradicating modern slavery

& forced labour – Business &

Human Rights Resource Centre

(business-humanrights.org)

2023 Corruption Perceptions

Index: Explore the… –

Transparency.org

Responsible business continued

Governance

60Ricardo plc | Annual Report and Accounts 2023/24

Responsible business continued

Greenhouse gas emissions

The table below and supporting methodology and assumptions summarise the Streamlined Energy and Carbon Reporting (SECR) disclosure in line with the requirements of The Companies

(Directors’Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018. In support of our ambition to achieve our SBTi targets, we are increasing the breadth of KPI

reportingasshownbelow.

Metrics and targets

FY 2023/24 FY 2022/23 FY 2021/22

FY 2019/20

baseline

Emissions – tCO

Scope 1

Gas (methane-based) usage 1,775 1,563 1,599

Diesel usage 574 502 762

Gasoline usage 318 477 495

Other emissions 58 303 966

Total 2,725 2,845 3,822 4,343

Scope 2

Location-based 2,777 2,764 3,292 4,981

Market-based 914 637 618 2,016

Total (Scopes 1 and 2)

Location-based 5,502 5,609 7,114 9,324

Market-based 3,639 3,482 4,440 6,359

Scope 3

Category 1 (including Category 8) – Purchased goods and services 124,699 141,204 85,306 *

Category 2 – Capital goods 649 4,936 4,430 *

Category 3 – Fuel and energy-related activities 195 216 276

Category 4 – Upstream transportation and distribution 340 361 206 *

Category 5 – Waste 36 113 144 *

Category 5 – Waste – exceptional item – demolition at Shoreham Technical Centre 13 * * *

Category 6 – Business travel (all modes) 2,448 3,018 2,462 *

Category 7 – Employee commuting 2,018 1,737 2,902

Category 9 – Downstream transportation and distribution 92 163 89

Category 11 – Use of sold product (weight apportioned basis – GHG Protocol) 4,925 4,894 4,600 *

Category 11 – Use of sold product (whole vehicle weight method – SBTi) 35,172 35,736 32,461

Category 12 – End of life of sold products 517 435 285 *

Category 13 – Downstream leased assets, location-based 61 65 46 *

Scope 3 total – GHG basis 135,994 157,142 100,746 *

Scope 3 total – SBTi basis 166,241 187,984 128,607 *

Total – Location-based (Scopes 1, 2, 3) GHG Protocol basis 141,496 162,751 107,860 13,291

Total – Market-based (Scopes 1, 2, 3) GHG Protocol basis 139,633 160,624 105,186 10,326

• (*) No data

• Scope 1, 2 and Scope 3 categories 1, 2, 3 and 13 have all been verified to ‘Reasonable Assurance’

• Scope 3 – Categories 4, 5, 6, 7, 8, 9, 11 and 12 have been verified to ‘Limited Assurance’

61Ricardo plc | Annual Report and Accounts 2023/24

Responsible business continued

Greenhouse gas emissions continued

Metrics and targets continued

FY 2023/24 FY 2022/23 FY 2021/22

FY 2019/20

baseline

Intensity measures – GHG basis (tCO

e per employee)

Total (Scopes 1 and 2)

Location-based 1.94 2.00 2.57 3.05

Market-based 1.28 1.24 1.61 2.08

Scope 3

GHG Protocol basis 47.91 56.10 36.40 *

Total (Scopes 1, 2, 3)

Location-based 49.85 58.10 38.97 *

Market-based 49.19 57.34 38.00 *

(tCO

e per £m revenue)

Total (Scopes 1 and 2)

Location-based 11.59 12.58 18.37 24.49

Market-based 7.67 7.81 11.46 18.07

Scope 3

GHG Protocol basis 286.48 352.34 260.12 *

Total (Scopes 1, 2, 3)

Location-based 298.07 364.91 278.49 *

Market-based 294.15 360.14 271.59 *

Electricity consumption (MWh)

Electricity consumed (all sources) 10,980 12,021 15,369 17,455

Renewable electricity consumed 8,894 10,901 13,601 12,973

Non-renewable electricity used 2,086 1,120 1,768 4,482

Percentage of renewable electricity used 81% 91% 89% 74%

SECR (UK Streamlined Energy and Carbon Reporting)

UK Scope 1 tCO

e 2,342 2,333 3,430 2,496

UK Scope 2 – Location-based tCO

e 1,931 2,078 2,605 3,065

UK Scope 2 – Market-based tCO

e 138 12 26 166

UK Scope 1 + Scope 2 tCO

e location-based 4,273 4,411 6,035 5,562

UK Scope 1 + Scope 2 tCO

e market-based 2,480 2,344 3,455 2,662

Energy consumption (million kWh) 16 19 26 17

Intensity measures (tCO

e per UK employee)

Scope 1 1.40 1.40 2.07 1.50

Scope 2 Location-based 1.15 1.25 1.57 1.84

Scope 2 Market-based 0.08 0.01 0.02 0.10

Scope 1 + Scope 2 Location-based 2.55 2.64 3.64 3.34

Scope 1 + Scope 2 Market-based 1.48 1.41 2.08 1.60

• (*) No data

• Scope 1, 2 and Scope 3 categories 1, 2, 3 and 13 have all been verified to ‘Reasonable Assurance’

• Scope 3 – Categories 4, 5, 6, 7, 8, 9, 11 and 12 have been verified to ‘Limited Assurance’

62Ricardo plc | Annual Report and Accounts 2023/24

Greenhouse gas emissions continued

Carbon accounting methodology and notes

• The operational control test is applied to determine if an emission is within Scope 1 or Scope 2

• The inventory has been compiled according to the GHG Protocol and internal procedures with

the exception that individual gases are not reported. Our GHG emissions for FY 2023/24 have

been verified by LRQA in accordance with ISO 14064–3:2019, ‘Specification with guidance for

validation and verification of greenhouse-gas assertions’

• The base year is FY 2019/20, as this is the first year where Scope 1 and Scope 2 data was

verified. The Scope 3 base year is FY 2021/22. Some data includes estimates, which may be

updated at a later time when more accurate data are available

• Our enhanced quality assurance processes for data have identified a number of data

improvements which have resulted in updated estimates – the most significant of this was

under-reporting of gas use at our Shoreham Technical Centre caused by a malfunctioning meter

and this has resulted in a 52% increase in Scope 1 emissions, but is less than a 1% increase

in the Group’s total emissions for FY 2023/24 (market-based GHG protocol basis). The related

totals and intensity metrics have been restated for FY 2021/22 and FY 2022/23, but these have

not been verified by LRQA

• Large improvements have been made to our emissions calculation methodology during the FY

2023/24 reporting cycle, including:

• Employee commuting: the return rate increased to 82% from 73% for site-based employees

• Re-evaluation of the vehicle mileage used in the lifetime of the engines we produce. This was

based on a sample of over 2,800 vehicles in the US and UK. As a result, the average mileage

has reduced by 45%. We have restated all previous years based on this, which reduces the

Group’s whole carbon emissions by 2.5% and 13.5% on a market-based GHG protocol basis

and market-based SBTi basis respectively and the same has not been verified by LRQA

• Change to the estimating method for waste in our office-only sites where we moved to

occupancy from capacity, as several buildings are under utilised – this has resulted in a 68%

reduction in ongoing waste emissions from FY 2022/23 to FY 2023/24, and a di minimis

change to Group emissions

• In FY 2023/24 a greater proportion of business travel was calculated on an activity basis

rather than spend basis

• Emission factors used for fuels, transmission and distribution and electricity are based on the

most appropriate open-source data by location. For example, BEIS/Defra conversion factors

are used for the UK, US EPA for the US and the most recent confirmed IEA factors for the

majority of other locations. Electricity emissions factors used for market-based calculations

where renewable electricity is procured are 0kgCO

e/kWh. Location-based factors are

appliedelsewhere

• Scope 3 emissions factors for Categories 1, 2, 4, 5, 8 and 9 are based upon finance data using

Defra for UK and EU-based entities, and Quantis for other entities. Scope 3, Category 7 is based

on an annual employee commuting survey; Defra and US EPA emission factors are used for

this. Category 11 is based on published WLTP emissions for each engine variant, and estimated

vehicle use over 10 years. Category 12 emissions are estimated based on volumes of engines,

transmissions and ABS kits sold. End of life emissions are estimated on material type and

weight using Defra and Ecoinvent emission factors

• Our waste reporting shows an exceptional item in FY 2023/24, where there was significant

demolition of old and unfit buildings at the Shoreham Technical Centre

• Most of the air, rail and hotel emissions are calculated by FCM using bespoke factors that

take airline and aircraft type. This methodology follows those outlined by Thrust Carbon. The

remaining elements of Category 6 are calculated based on cost using the Defra and Quantis

factors as above

• Other Scope 1 emissions include refrigerants used to recharge cooling and air conditioning

plants, fire extinguishants such as FM200 and sulphur hexafluoride (SF

) associated with

switchgear. These vary from year to year depending on the number and type of fire events and

maintenance activities

• SECR: Our UK operations are our biggest consumer of electricity, which is our only UK Scope 2

emission source, where we directly procure electricity from renewable sources for our largest

sites

• We have no Scope 3 emissions in Categories 10 (processing of sold product), 14 (franchises)

or 15 (investments). Category 8 emissions (upstream leased assets) are included within our

Category 1 reporting if applicable

• Our triggers for base year recalculation would be an acquisition or disposal which changed

headcount by +/- 20%; this did not occur in the current or previous year. The combined effect of

the acquisitions was below the threshold

• Revenue-based intensity metrics rely on the financially audited information and the KPMG

auditopinion

Responsible business continued

Greenhouse gas emissions continued

63Ricardo plc | Annual Report and Accounts 2023/24

Responsible business continued

Task Force on Climate-related Financial Disclosures

Background and approach

Ricardo operates a three-year cycle for major TCFD reviews and annual minor updates in the interim. The prior full cycle update was in 2023. The current review and update were used to capture

pertinent changes such as legislation, guidance and the latest climate-related disclosure standards (IFRS S2), in addition to changes to Ricardo’s global footprint, products, supply chain or specific

geopolitical issues that have emerged that would drive sourcing, transportation or manufacturing locations creating the need to take on board major revisions to strategy, risk or production location.

The corporate Group Risk Register was updated and subsequently the Executive Committee validated and signed off on the update.

For the board and the Audit Committee, inputs from our in-house experts and an update to the prior horizon scanning were used. This allowed adjustments and amendments in ratings to be derived.

In addition, our materiality assessment process was updated to quantify the risks and opportunities that climate change presents to Ricardo in terms of financial magnitude and likelihood.

TCFD compliance summary

In accordance with the requirements of LR 9.8.67R and the Companies Act 2006, as amended by the Companies (Strategic Report) (Climate-related Financial Disclosure) Regulation 2022, Ricardo’s

climate-related disclosures are consistent with all the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD).

Topic Disclosure Annual Report reference FY 2023/24 updates Planned updates for FY 2024/25

Governance a) Describe the board’s oversight of climate-related

risks and opportunities

See page 65 and page 59 • Formally held two RBC meetings, with two further planned

after publishing this Annual Report. Both meetings contained

GHG and climate-related topics related to risk, location,

products and setting KPIs for GHG-related incentives for

management

• Hold three RBC meetings, 11 Executive Committee

meetings and >20 ESG/GHG Transformation

Workstream meetings in FY 2024/25

• GHG and climate change to feature as an agenda

item in each ESG Forum and RBC meeting

b) Describe management’s role in assessing and

managing climate-related risks and opportunities

Page 65

Strategy a) Describe the climate-related risks and

opportunities the organisation has identified over

theshort, medium and long term

Pages 66-68 • Reviewed climate-related risks and opportunities and their

relevance to Ricardo in 2024. Integrated and aligned the TCFD

risks and materiality thresholds with the Group Risk Register

and reviewed holistically the climate-related risks with the RBC,

the Audit Committee and the Executive Committee

• Conducted financial quantification of climate-related risks and

opportunities impact on Ricardo’s operating profit

• Conducted formal reviews of the 60 global Ricardo locations,

identifying and prioritising the four properties with the highest risk

of Business Impact Analysis (BIA) due to climate-related disruption

such as floods, wildfire, hurricane, rain or other acute event.

Responses will be included in the FY 2025/26 Business Plan

• Plan FY 2024/25 minor update

b) Describe the impact of climate-related risks and

opportunities on the organisation’s businesses,

strategy and financial planning

Pages 69-72 • Plan FY 2024/25 minor update

c) Describe the resilience of the organisation’s

strategy, taking into consideration different

climate-related scenarios, including a 2°C or

lowerscenario

Page 73 • Formalise BIA assessments and embed the

outcomes into the planning for business continuity

64Ricardo plc | Annual Report and Accounts 2023/24

Responsible business continued

Task Force on Climate-related Financial Disclosures continued

Topic Disclosure Annual Report reference FY 2023/24 updates Planned updates for FY 2024/25

Risk

management

a) Describe the organisation’s processes for

identifying and assessing climate-related risks

Page 74 • Reassessed the materiality of climate-related risks using the

principal risk register thresholds

• Plan FY 2024/25 minor update

b) Describe the organisation’s processes for

managing climate-related risks

Page 74 • Identified additional business resiliency measure to adapt to

theidentified climate-related risks

• Continue to implement mitigation controls

tomanage risks as needed

c) Describe how processes for identifying, assessing

and managing climate-related risks are integrated

into the organisation’s overall risk management

Page 74 • Considered the materiality of climate-related risks within the

context of the principal risk register and the designated risk of

climate change

• Plan FY 2024/25 minor update

Metrics and

targets

a) Disclose the metrics used by the organisation to

assess climate-related risks and opportunities in line

with its strategy and risk management process.

Page 74 • Refined Scope 1 and 2 measurement methodology which

highlighted irregular operating GHG measurement equipment,

allowing opportunity for restatement

• Reviewed Scope 3 measurement approaches highlighting

opportunities for greater accuracy of measurement and a real

reduction of gross CO

emissions

• Restate Scope 3 emissions in light of improved

data. Develop a plan for re-submission of SBTi

2030 short-term targets and for 2050 long-term

targets reflecting the categories measured and the

precision of the measurements (page 49)

b) Disclose Scope 1, Scope 2 and, if appropriate,

Scope 3 emissions, and the related risks.

Page 74

c) Describe the targets used by the organisation to

manage climate-related risks and opportunities and

performance against targets.

Page 74

Governance

Board’s oversight of climate-related risks and opportunities

The Ricardo plc board has ultimate responsibility for risk management including risks and opportunities related to climate change. The board is also responsible for reviewing and directing the strategic

approach on products, capital allocation and decisions related to investment. Support and advice to the board is provided by the ESG Forum, the RBC and the Audit Committee. The ESG Forum is

responsible for ensuring the Company’s approach to climate-related risks and opportunities is appropriate, fit for purpose, and that metrics and targets are in place and reported annually. The ESG Forum

oversees measurement of and progress against these targets via a monthly report to the Executive Committee and twice per year through the RBC. Progress against KPIs for the compensation-linked

GHG reductions are part of the reviews, together with a feed into the Remuneration Committee.

Risk management responsibilities are conducted through the Audit Committee who review the principal risks twice a year formally and on an ongoing basis. All department and business unit risks are

assessed as part of this half-year process (see page 74 for fuller description). The ESG Forum supports the risk management process by reviewing and providing detailed updates of specific aspects of

the risk portfolio. The membership of both the ESG Forum and Audit Committee are Executive Committee and Senior Leadership Team members.

Management’s role in assessing and managing climate-related risks and opportunities

As set out on page 75, each business unit, and each of the enabling functions (HR, finance etc.) maintains its own risk register. The unit/function lead is responsible for ensuring this is done in a timely

and comprehensive manner. Climate-related risks and opportunities are considered, and the Group Risk Register reflects those risks and opportunities most material to Ricardo.

Each business area develops a strategy, and from this strategy the budget is set to run projects to mitigate climate-related risks and grasp opportunities occurring over the short term (up to five years).

These are reviewed and blended with the core enabling functions’ budgets and requirements (Facility Operations, QSHE, HR) and used to prepare a comprehensive five-year plan. Longer-term risks and

opportunities such as shifting weather patterns, and large, structural shifts in the markets in which Ricardo operates – particularly regarding fossil fuel use and the emergence of new technologies – are

considered by the RBC as part of the annual TCFD refresh process. Any substantial changes in these risks and opportunities which might impact the current five-year plan are escalated to the board.

TCFD compliance summary continued

65Ricardo plc | Annual Report and Accounts 2023/24

Strategy

Figure 1 (right) outlines the process undertaken in 2023 and the updates made in FY 2023/24 and

the planned updates for FY 2024/25, when risks and opportunities will be reviewed again as part

of our annual process. Ricardo aims to achieve full compliance with IFRS S2 as part of our major

three-year updates in FY 2025/26

Identification of climate-related risks and opportunities

In 2023, the physical (acute and chronic) and transitional (regulatory, technological, market, legal

and reputational) risks and opportunities attributed to climate change were assessed. Ricardo

identified the six most material risk and opportunity issue groups as detailed in Figure 2 on

page67. Opportunities were assessed relating to Ricardo’s capability to grow environmental

consulting, service ever broader climate needs, maintain integrity of analysis and results, and

develop new tools in a timely fashion.

In 2024, as part of the annual review, the risks and opportunities were reviewed, and it was

concluded that there were no significant changes to the risks and opportunities identified in

2023. We updated our financial materiality assessment, in line with our Group risk management

process, to reassess the individual risks and opportunities. The materiality of the individual risks

and opportunities were assessed based on the magnitude (the financial significance or business

impact level of a particular issue, risk or opportunity on Ricardo) from a scale of very low to very

high and the likelihood of the risk/opportunity occurring from a scale of very unlikely to almost

certain. The materiality assessment was conducted using the five-year timeline in line with the

Group’s strategic view and viability statement. Additionally, as part of this year’s annual update

we conducted financial quantification of the risk and opportunity issue groups and its impact on

Ricardo’s operating profit in the medium term (2030) and long term (2050) using a worst-case

scenario RCP 8.5, as detailed on page 68.

Responsible business continued

Task Force on Climate-related Financial Disclosures continued

2023

Gap analysis

Stakeholder analysis

Risks and opportunity identification

Materiality assessment

Scenario analysis

Review of business impact and resilience measures

Principal Risk Register integration

and ESG strategy integration

2024 & 2025

Annual update: Minor refresh

2026

3-year TCFD update to be IFRS S2 compliant

Figure 1: TCFD review cycle

Annual update cycles

Three-year major review cycle

66Ricardo plc | Annual Report and Accounts 2023/24

Responsible business continued

Task Force on Climate-related Financial Disclosures continued

Assessing the materiality of risks and opportunities

Figure 2: Materiality assessment

Magnitude

Likelihood

Very High Very Low Very High Very Low

Almost Certain Very Unlikely

Portfolio Prioritisation (PP) Human Capital (HC)

Safe and sustainable transport

Clean energy and resources

Environmental services

 Demand, supply, upskilling

andreskilling

Employee retention

Market Expansion (ME) Reputational Pressure (RP)

Geographic expansion

Physical risks altering client needs

Mergers and acquisitions

 Streamlining climate action across

all business units

 Increasing awareness and

expectations of investors,

shareholders and financiers

Physical Risks (PR)

Extreme heat

Chronic/acute flooding

Storm surge (Shoreham)

4a 4b

6b 6c

1a 1b

3a 1c

2a 2b 2c

Digitalisation (D)

Digitalisation

67Ricardo plc | Annual Report and Accounts 2023/24

Responsible business continued

Task Force on Climate-related Financial Disclosures continued

Strategy continued

Identification of climate-related risks and opportunities continued

The definitions of the issue groups, the associated individual risks and opportunities and the potential impact on Ricardo’s operating profit term are detailed below:

Table 1: Climate-related risks and opportunities

Issue groups Definition Risks or opportunities

Climate/risk issue group potential impact on

Ricardo’s operating profit under RCP 8.5 (world

of extreme climate change)

(low: 0-3%, medium: 3-6%, high: >6%)

2030 2050

Physical risks to Ricardo’s operations

and assets

Physical climatic changes reducing function of Ricardo facilities, locations, supply

chain and human capital. Physical risks identified include: flooding (related to

either storm surges or sea level rise), extreme heat and cold, storms, drought.

Ricardo has the ambition to maximise growth in the UK and EU market and to

grow in the Middle East and South Africa. Assessing the physical risks in these

geographies will be key to Ricardo’s success.

Extreme heat (Risk) – Australia, southern

Europe, Middle East.

Low Medium

Chronic/acute flooding (Risk) – Coastal

locations – California, Shanghai, Shoreham,

Prague (river).

Low Low

Storm surge (Risk) – Shoreham, Shanghai. Low Low

Human capital Ricardo’s ability to retain, reskill and recruit the human capital required to meet

opportunity growth targets.

Demand, supply, upskilling and reskilling

(Risk) – Worldwide.

Low Medium

Employee retention (Risk) – USA, Europe,

Middle East.

Low Low

Reputational pressures from stakeholders Increasing pressure to act on climate change, leading to potential reputational

risks.

Streamlining climate action across all

business units (Risk) – Worldwide.

Medium High

Increasing awareness and expectations of

investors, shareholders and financiers (Risk)

– UK dominant but worldwide from fund

managers.

Medium High

Portfolio prioritisation Growth in Ricardo’s and energy transition offering e.g. safe and sustainable

transport, clean energy, environmental services, and clean energy and resources.

Clean energy and resources (Opportunity) –

Europe, UK, USA.

High High

Environmental services offering (Opportunity)

– Middle East, Africa, USA, Europe.

High High

Safe and sustainable transport (Opportunity)

– Developed nations, worldwide.

High High

Market expansion Ricardo’s growth into new geographical and industrial markets, supported by

M&As and partnerships.

Geographic expansion (Opportunity) – USA,

Australia, Middle East.

Medium High

Physical risks altering client needs

(Opportunity) – USA, Australia, Middle East,

Europe.

High High

Mergers and acquisitions (Opportunity) –

USA, Middle East, Australia.

Medium High

Digitalisation Ricardo’s digital solutions can support with the energy and environmental transition. Digitalisation (Opportunity) – Worldwide. Medium High

68Ricardo plc | Annual Report and Accounts 2023/24

Responsible business continued

Task Force on Climate-related Financial Disclosures continued

Strategy continued

Impact of climate-related risks and opportunities on the organisation’s

businesses, strategy and financial planning

Supported by our in-house climate risk expertise in CE&ES, Ricardo undertook a climate scenario

analysis (pages 70-72) to examine business impacts over a range of time horizons to understand

the materiality of the risks and opportunities identified. To allow for an assessment of the impact

of the most material issue groups over a range of potential futures, Ricardo chose a best case (well

below 2ºC) scenario for transition and physical risks and opportunities (IEA Net Zero Emissions by

2050 and IPCC RCP 2.6), and a worst case/business-as-usual scenario (>4ºC and 2.6ºC) for each

respectively (IEA Stated Policies Scenario and IPCC RCP 8.5). These scenarios were also selected

because they are scientifically recognised and robust and are widely used for TCFD reporting

and are regularly updated. The locations in the table 1 on page 68 analysis and the associated

business units were considered during our analysis.

During our analysis Ricardo considered three time frames: 2030, 2050 and out to 2100 as detailed

in the table below. These time frames are linked to Ricardo’s strategic business planning – i.e.

five-years for the short time frame to align with Ricardo’s five-year business cycle.

Table 2: Time frames considered

Time frame Short Medium Long

2024-2030 2030-2050 2050+

Climate change impact on assets and operations

With the extensive global footprint of Ricardo, we need to be aware of the impacts of climate

change, both at a macro level causing shifts in supply chain robustness, employee location of work

and opportunity location, including emerging geographies with market opportunities, and also at

local level for extreme climatic events (flood, hurricane, heatwave, wildfires).

Managing the impacts of climate-related risks to physical assets

To ensure we are a resilient organisation fit for the future, several aspects are considered when

locating or expanding business to manage our climate-related risks and opportunities. As most

leases are of a three-to-ten-year horizon, this span is considered when siting premises or investing

in assets in a location.

Long-term asset investment and resilience planning

For more permanent assets – such as dedicated test facilities or installed machining/assembly

capability – the three-to-ten-year time horizon is supplemented by a review of the extended time

horizon aligned with typical amortisation periods of buildings and test equipment. Thisprocess

guides our assessment of emerging risks and opportunities together with identifying the

appropriate actions to strengthen business resilience.

Transitioning products and services towards zero carbon

Our strategy of fossil-free fuels used for transport at point of use is well established. This has

been reflected in the phase down of facilities related to traditional fossil fuels through age-out,

assigning capital to zero carbon facilities and products. The established sector (fossil fuel) facilities

have a planned age-out and retirement to minimise these risks. Ricardo’s main risks are now

concentrated in managing the expansion and growth, rather than acute and transitional impacts on

the historical business practices and product range. All recent test facility capital investments have

been focused on zero carbon transport – such as the electric drive research facility and hydrogen

test capability for fuel cells and internal combustion engines. The transition that has already

happened is demonstrated in the revenue attributed to climate change, environmental and safety

revenue (page 47). Portfolio prioritisation and physical risks to operations and assets: ICE test-bed

infrastructure at the Shoreham Technical Centre only.

People and market expansion in environmental consulting

With regard to market expansion and human capital growth in environmental consulting,

headcount is planned to continue, reflecting interest and capabilities in these areas. Growth will

be boosted by expanded presence in Australia, the US and Europe for low carbon mass transit.

Continued environmental acquisitions of premium consulting practices. As a consultancy, most

facilities are leased (apart from two sites) and the minimal capital investment needed allows

Ricardo to remain highly responsive in terms of product offerings and locations served.

The table on the following page details the issue groups, the scenario impact rating (high, medium

and low) over the time horizons identified above and the potential risk and opportunity mitigation/

adaption and resiliency measures.

This table on page 70 presents the transition risks and opportunities under two transition

scenarios, ‘Net Zero by 2050 (NZE)’ and ‘Stated Policies (STEPS)’, the potential impact to our

business, and our corresponding current and future business resiliency measures. The business

impact has been scored high, medium, and low for each risk and opportunity (refer to the table

key).

Business Impact Score

Key

-3 -2 -1

N/A

High-moderate potential risk Slight potential risk No potential risk

1 2 3 4 5 6

Slight potential opportunity Moderate potential opportunity High potential opportunity

69Ricardo plc | Annual Report and Accounts 2023/24

Responsible business continued

Task Force on Climate-related Financial Disclosures continued

Strategy continued

Impact of climate-related risks and opportunities on the organisation’s businesses, strategy and financial planning continued

Table 3: Business impact of climate-related risks and opportunities on Ricardo rating

Portfolio prioritisation (Opportunity)

NZE Impact on Ricardo Business resiliency measures

Short Medium Long Short term: Strategy implementation and policy development support for both governments

andprivate sector. Some implementation solutions for easy-to-mitigate sectors.

Medium term: Opportunity ramps up as heavy industries are expected to decarbonise by 2050, and

thedesire for ongoing implementation support is required.

Long term: Opportunities tail off as targets are met. Lighter-touch ongoing strategy support,

butfocus continues with implementation support.

• Refocus EET strategy: Implement and evolve long-term resiliency measures for the next 10-15

years

• Develop skilled workforce: Train employees to innovate and reduce costs in low/zero carbon

technologies

• Engage with industry groups: Actively participate in sustainability standards bodies to stay

competitive

• Track competitors: Monitor competitors and allocate capital strategically to maintain skills and

recruitment

• Plan for post-2050: Explore future offerings based on hydrogen adoption, BEV uptake and

infrastructure development

• Adapt to geopolitical changes: Prepare for challenges in resource access by diversifying supply

chains and technologies

6 6 6

STEPS Short term: Same as current day trends in strategy implementation and policy development

support for both governments and private sector.

Medium term: Increase in opportunities compared to short term but significantly less than

underNZE.

Long term: Opportunities continue to increase due to delayed climate action. This is done under

extreme time pressure and increased costs to industry, increasing financial risks of companies,

particularly SMEs.

Short Medium Long

6 6 6

Market expansion (Opportunity)

NZE Impact on Ricardo Business resiliency measures

Short Medium Long Short term: Significant opportunities for Ricardo to support decarbonisation at a global scale in

multiple emerging sectors. This will first occur in the advanced economies in which Ricardo sits.

Medium term: The size of this opportunity will depend on Ricardo’s service offering of

implementation. There may be an opportunity to also support emerging economies with technology

feasibility studies.

Long term: Post 2050, the size of the opportunity will reduce in scale as climate targets are

met. Opportunities will be around the maintenance and efficiency of systems and technologies

implemented.

• Physical risk responses – majority of growth initiatives can be remote, reducing the vulnerability to

risk. Key is continued investment in digital tool set development

• Hire locally for at-risk countries (physical risk), establish connections, ensure network resiliency to

allow transferability of tasks

• Financial and insurance sector access – recruitment and value propositions

• Ricardo should track market and service growth rates and compare its own figures against this.

Ricardo must actively engage with key industry groups and sustainability standards bodies to

drive legislative standards and promote adoption rates for technologies

• It is too premature to begin assessing in detail what Ricardo’s offering in this area should look like

beyond 2050. This will be very scenario dependent. Ricardo should continue monitoring global

progress against climate targets to understand which direction of travel industry and governments

will take – depending upon fossil versus renewable energy costs and infrastructure development

for zero carbon energy

6 6 6

STEPS Short term: Less opportunities for Ricardo to support decarbonisation at a global scale. Opportunity

will likely sit in portfolio prioritisation.

Medium term: Opportunities for Ricardo to support emerging markets (geographically and industry)

will likely increase as 2050 approaches and delayed climate action kicks in. This will likely be led by

the private sector driven by consumers and investors.

Long term: The opportunity for Ricardo will likely continue increasing after 2050 as decarbonisation is

still occurring, particularly in emerging markets and economies.

Short Medium Long

4 6 6

Ricardo plc | Annual Report and Accounts 2023/24

Responsible business continued

Task Force on Climate-related Financial Disclosures continued

Digitalisation (Opportunity)

NZE Impact on Ricardo Business resiliency measures

Short Medium Long There is little direct evidence within the scenarios selected on the attribution of emission reductions

to digital solutions. However, it could be assumed that global trends and the shifts to automated

services will drive efficiency gains and will continue to contribute towards climate-related solutions.

Ricardo already integrates some digital solutions into its current products and services. This can be

expected to increase in the future to support the Company’s climate-related services and is already

occurring to some extent with digital prototyping in Automotive and Industrial and automation in

Rail.

• Digital knowledge transfer, training and experiential growth for staff. Increased M&A activity with

consideration for how acquisitions will be accretive in the digital sector

• Integrate the IT systems of the Group, meeting security and isolation requirements but building

resiliency and availability

• Ricardo will continue to consider how digitalisation can be integrated into the solutions it provides,

as it is demonstrated in Ricardo’s strategy. Partnerships will support this and fill the gap in the

Company’s current digital capabilities

• Tracking the revenue and efficiencies from digital solutions

• Increased support for digital tools, investment in tools

• Risk around being able to act fast enough – competitor – loss of potential business

6 6 6

STEPS

Short Medium Long

6 6 6

Human capital (Risk)

NZE

Impact on Ricardo Business resiliency measures

Short Medium Long The opportunities for Ricardo under this scenario are high in scale and level of impact. Therefore,

the growth rates and development necessary to take advantage of these are large. Ricardo will be

operating in a competing market and therefore scaling for growth will be difficult.

• Ensure Ricardo’s compensations are competitive with other rivals in the sector

• Continued investment in training, recruitment and providing growth opportunities

• Increase investment in the career development and retention of junior employees. The market

iscurrently under-saturated in the skills and expertise required for the climate transition

• Ensure HR and team leaders are consistently engaging with employees on career and life

satisfaction. Policies such as flexible working, volunteering, personal development and socials all

encourage employee wellbeing

• Better IT infrastructure, resiliency and security-conscious global availability

-3

-2 -1

STEPS Ricardo will still face challenges in scaling for growth, however the scale of the associated

opportunities is lower and therefore this challenge will be less than under the NZE. This will become

a more ‘business as usual’ challenge.

Short Medium Long

-3 -1 -1

Reputational pressure coming from stakeholder (Risk)

NZE

Impact on Ricardo Business resiliency measures

Short Medium Long Political and regulatory pressures will increase in the short to medium term as decarbonisation

progress must be made.

• Competitor awareness – to ensure Ricardo remains appropriately positioned

• Carry out current growth strategy, prioritising the energy and environment transition, implement

corporate strategy with majority of growth and capital allocation in the appropriate segments

• Ricardo should continue impairing elements of declining business units to reduce the risk, and

remain vigilant in the transition to zero carbon fuels

• Ricardo should continue to prioritise the performance of the energy and environment transition, in

both the quality of work delivered to clients also in the quality of reporting and climate action of

Ricardo itself

-3 -2 -2

STEPS Pressures are likely to still increase from current day and so the impact may not be dissimilar to

under the NZE. Over the past few years, Ricardo has made significant progress around prioritising

its portfolio to be focused on the future around the energy and environment transition. This consists

of having targets to increase the proportion of revenue in this area, compared to the established

mobility side of the business which is associated with more reputational risk.

Short Medium Long

-3 -2 -2

Strategy continued

Impact of climate-related risks and opportunities on the organisation’s businesses, strategy and financial planning continued

71Ricardo plc | Annual Report and Accounts 2023/24

Responsible business continued

Task Force on Climate-related Financial Disclosures continued

This table presents the physical risks under two climate scenarios, IPCC SSP1-RCP2.6 and IPCC SSP5-RCP8.5, the potential impact to our business, and our current and future business resiliency

measures. The business impact has been scored high, medium and low for each risk and opportunity (refer to table key) on page 69.

Physical risks (Risk)

RCP 2.6 Impact on Ricardo Business resiliency measures

Short Medium Long Global temperature increases but is limited to below 2°C. Physical impacts of climate change

increase from current day but catastrophic impact is narrowly avoided.

• Becoming a larger and more global player will enable more support for employees with

adaptation (financial strength enabling investment)

• Careful consideration of the location of new technical centres and potential relocation of existing

technical centres. Conscious assessment of climate risk versus capital allocation

• Continuous encouragement of flexible working where possible and exploration of new ways

of working such as work patterns that avoid the hottest period of the year in Ricardo’s most

vulnerable locations

• Investment in building facilities such as efficient air conditioning and flood defence mechanisms

where necessary

• HR policies, business continuity plan, flood analysis at Shoreham to be conducted

• Care when bidding for projects in extreme climate zones (Australia, Africa, Middle East and some

regions of Europe and the USA) – extreme caution and consideration for impacts of heat on human

health of employees

-1 -1 -1

RCP 8.5 Global temperature rises to 5°C, leading to catastrophic impacts at a global scale. Some regions will

become uninhabitable, and others will experience positive impacts e.g. growing season extensions.

The overall impact is very negative, and society falls into a disruptive state.

Short Medium Long

-1 -2

-3

Strategy continued

Impact of climate-related risks and opportunities on the organisation’s businesses, strategy and financial planning continued

72Ricardo plc | Annual Report and Accounts 2023/24

Responsible business continued

Task Force on Climate-related Financial Disclosures continued

Strategy continued

Resilience of the strategy, considering different climate-related scenarios, including a 2°C or lower scenario

We understand the risks, opportunities and appropriate responses. For physical risk, Ricardo demonstrates strong adaptive capabilities with minimal fixed investment, a mobile workforce, and a flexible

global footprint. Business Impact Analysis showed only two sites would be materially impacted by acute weather events, focusing on quantifying probabilities and adapting. The remaining sites use

hybrid/remote work and cloud-based processes to minimise disruption from climate issues.

Climate Transition Plan developments

Our plan to develop a Climate Transition Plan in line with the TPT (Transition Plan Taskforce) as detailed below. Ricardo has operated at the forefront of emissions reduction for 40 years. Thisvantage

point has allowed transition starting close to 20 years ago with investment in zero-carbon skills, products and facilities. As part of the journey, Ricardo acquired a major environmental consultancy,

allowing the growth in policy, strategy, technology, economic analysis and product development to both address climate change and to assist clients in adaption.

Climate Transition Plan

By 2026, Ricardo intends to pull these foundation elements together and publish a Climate Transition Plan in line with the TPT as part of the planned Sustainability Report. By expanding the space and

content outside of the constraints of an annual report, we will demonstrate a robust Climate Transition Plan further integrating environmental sustainability into the core strategy of Ricardo.

Ricardo has several elements for a Climate Transition Plan developed and in place in line with the TPT. These include:

Figure 3: Approach to developing a Climate Transition Plan

Ambition Action Accountability

1. Foundations 2. Implementation strategy 3. Engagement strategy 4. Metrics and targets 5. Governance

Throughout its 100+ year history,

Ricardo has focused on improving

efficiency and minimising waste. The

Company has pioneered technologies

to reduce emissions and achieved

90% adoption of renewable energy

for Scope 2, significantly cutting

emissions from fossil fuel testing for

Scope 1 and 2 to just 3-4% of total

emissions. Ricardo has set GHG

emissions targets through to 2030,

with a 2025 deadline to establish

2050 long-term goals, aligned with

short-term SBTi objectives. As part

of the TCFD update and three-year

review cycle, Ricardo collaborates

with CE&ES for regulatory reviews to

ensure compliance with current and

upcoming regulations.

Capital allocation decisions at

Ricardo are driven in part by their

GHG impact. To support this

priority, Ricardo funds a dedicated

Sustainability enabling function,

covering staffing and operational

costs. Additionally, all business

units and related enabling

functions contribute personnel

to advance our mission of GHG

reduction, efficiency improvement

and waste minimisation. We

have also developed advanced

modelling tools to estimate the

GHG impact of R&D activities and

client programme onboarding,

ensuring that sustainability is a key

consideration in every project we

undertake.

RBC working groups and the SLT/

all-hands meetings are used

to engage and communicate

activities related to GHG and

waste reduction. The Annual

Report details activities together

with sharing data with reporting

frameworks and rating agencies,

clients, prospective employees,

investors and value chain, and

communities.

GHG emissions are accurately

measured and significantly

enhanced since 2019 – our first

year of collecting data. The data set

continues to improve, and we are

adding more Scope 3 categories

to the reasonable assurance

level. These results are included

in the attestation table (pages

61-62) together with risks and

opportunities shown in alignment

with IFRS S2 – climate standard.

Ricardo exhibits good control on

strategy and decision making with

climate impact core to decisions

on product development, capital

allocation and growth initiatives.

Governance structure from Chair

and NEDs through the Executive

Committee and then the SLT and

working groups. Bi-directional

communications are integral to this

process.

73Ricardo plc | Annual Report and Accounts 2023/24

Responsible business continued

Task Force on Climate-related Financial Disclosures continued

Risk management

Identification and assessment of climate-related risks

This year, Ricardo reassessed the materiality of climate-related risks as detailed on page 67.

Weintegrate climate change risks into our Group risk management, annual budgeting and monthly

ESG Forum meetings. In 2023, we conducted a detailed review of climate-related risks, refreshed

in 2024 with insights from our 2023 TCFD assessment. A panel of climate specialists, ESG leaders

and the Executive Committee provided comprehensive input. The summary is detailed on page 77.

In July 2024, we formally re-rated our principal risks, including climate-related risks.

Managing climate-related risks

As part of this year’s annual TCFD update, Ricardo identified additional business resiliency

measures to adapt to the identified climate-related risks. Business units and functions evaluated

the impact of climate issues on their strategy and operations. Mitigating controls will be

implemented as needed. Risks are reviewed continuously, with each climate-related risk having a

designated owner and leadership oversight.

Processes for identifying, assessing and managing climate-related risks are

integrated into the organisation’s overall risk management

The process for managing climate-related risks is integrated into our Group risk management

process. One of the designated principal risks is climate change. This is detailed on page 75 of

this report and is managed by the board, the ESG Forum, business units and enabling functions.

Risk-taking and management occurs through the Audit Committee. Success in achievements is

managed through the ESG Forum and is fed back into the RBC for main board review.

Metrics and targets

Metrics used to assess climate-related risks and opportunities

GHG and ESG metrics reporting

Ricardo records GHG data and other ESG metrics in the FigBytes aggregation system.

Thisincludes fuel consumption for powertrain development, water, waste, utilities and

HVACdischarges. These metrics are summarised on pages 61-62 with absolute and

intensitymeasures for the past three years.

Commitment to emissions reductions

As a values-led organisation, we are committed to reducing emissions under our control

(Scopes 1 and 2) and through our operations (Scope 3).

Linking compensation to GHG emissions

In FY 2022/23, we studied various methodologies linking compensation to GHG emissions, which

were implemented in FY 2023/24. Senior management now has variable compensation based on

GHG reduction as part of a long-term incentive scheme (page 103).

Focus on Scope 3 emissions

Scope 1 and 2 emissions are now less than 2% of our total, and we are focused on reducing Scope

3 emissions.

GHG intensity KPI

Ricardo is committed to and has enacted a KPI related to long term incentives for senior

management. Details are disclosed on page 49.

Scope 1, 2 and, if appropriate, Scope 3 greenhouse gas emissions and

therelated risks

Scope 1, 2 and relevant categories for Scope 3 are disclosed on pages 61-62 along with

restatements and methodology notes. Scope 1, 2 and 3 (category 1, 2, 3 and 13) have been verified

to ‘Reasonable assurance’ and Scope 3 (categories 4, 5, 6, 7, 8, 9, 11 and 12 have been verified

by LRQA to ‘Limited Assurance’. There are risks in the method of data collection and conversion

from cost-based invoices using emissions factors and consideration is being given to changing

methodology to reach true CO

footprint (mass and materials) more accurately for some categories

of S3C1. The FigBytes data aggregation platform has enhanced efficiency of data collection and

allowed all locations to be measured and assessed for anomalous or missing data.

Targets to manage climate-related risks and opportunities

Ricardo has set the following targets:

• Reduce Scope 1 and 2 emissions by 46.2% by FY 2030/31, aligned with a 1.5°C global

temperature rise

• Increase renewable electricity sourcing from 74% in FY 2019/20 to 90% by FY 2025/26

• Reduce absolute Scope 3 emissions by 27.5% by FY 2030/31, aligned with well below a 2°C

temperature rise

Sustainable procurement remains a core focus to ensure compliance with principles, policies

and supply chain legislation. We use the Group Risk Register framework to assess and manage

risks, including climate-related ones, within our risk appetite. Regular reports are provided to

the Responsible Business Committee on ESG ratings, carbon emissions and capital investments.

The board approved an updated risk appetite statement aligned with the new risk management

framework. By FY 2025/26, all non-financial GHG and ESG metrics will be captured in FigBytes.

We use comprehensive reporting dashboards for real-time progress and data tracking.

Ricardo plc | Annual Report and Accounts 2023/24

Governance

Ricardo operates both a bottom-up and top-down approach to the identification, ownership and

management of risks.

Our strategy is designed to optimise our business model and take risk, with the required controls,

on an informed basis. Responsibility for this operates at all levels throughout the Group.

Risk management and internal control

In common with all businesses, the Group faces risks and uncertainties on an ongoing basis. Effective risk

management isrequired to support the achievement of the Group’s strategic and business objectives. Our risk

management framework isaligned to ISO 31000 and includes an ongoing formal process for identifying, assessing

and responding to risk.

Risk management process

The risk management processes updated during 2023 have remained consistent through 2024,

providing dynamic risk assessments to support decision-making for business unit, functional and

executive management. Our risk management processes require identified risks throughout the

Group to be owned by a named individual.

They must review them regularly and consider related emerging risks. Risk identification is

embedded within other processes, including strategy, project management, bid approvals and

other operational activities.

Risks are identified and reviewed at a business unit and functional level on a consistent basis,

before being submitted through the Group’s review process.

Risks are reviewed by all business areas on a quarterly basis and measured against a defined set

of likelihood and impact criteria. The likely time frame within which the impact of these risks might

be felt (risk velocity) is also assessed. These risks are captured and reported consistently, enabling

them to be consolidated and ranked. This prioritisation of risks then feeds into our assessment of

long-term viability.

The resultant Group Risk Register is subject to a detailed review and discussion by the Executive

Committee which includes discussion of risks which may not have been identified through the

normal channels. This is then submitted to the board for review and approval half-yearly. As part

of this bi-annual process, Directors and senior leadership teams are required to confirm that they

maintain effective controls to manage risk and comply with legislation, as well as with the Group’s

policies and procedures.

We also ensure that emergent risks are considered as part of the board’s existing half-yearly

reviews of risk and annual review of strategy. The Board confirms that it has undertaken a robust

assessment of the Group’s emerging and principal risks in FY 2023/24.

The board assesses the outputs from this process and takes comfort from the ‘three lines of

defence’ risk assurance model. The first line represents operational management who own and

manage risk on a day-to-day basis, utilising effective internal controls. Group functions and

business units monitor and oversee these activities, representing governance and compliance

at the second line. The third line is the independent assurance over these activities provided by

internal and external audits. Rigour over the management of these risks is demonstrated through

the updated Group risk assurance matrix which summarises the assurance activities taking place

throughout the Group in relation to the principal risks.

Governance structure

Board

The board takes overall responsibility,

determining the nature and extent of the

principal risks it is willing to take in achieving

our strategic objectives, and overseeing

the Group’s risk governance structure and

internal control framework. Each year, the

board carries out a robust assessment of the

principal risks facing the Group, including

those emerging, that would threaten

its business model, future performance,

solvency or liquidity. Thisreport describes

those risks and how they are beingmanaged

or mitigated.

Executive

The Executive Committee regularly reviews

the Group Risk Register prior to submission

to the board and individual members own

specific risks which are updated at least

quarterly.

Business units

and functions

Business unit and functional leadership are

responsible for the management of risk and

for compiling and maintaining their own risk

registers. These are submitted quarterly and

aggregated to form the basis of the Group

Risk Register.

75Ricardo plc | Annual Report and Accounts 2023/24

Risk management and internal control continued

Internal controls

The system of internal control is designed to manage, but not to eliminate, the risk of failure

to achieve business objectives and to provide reasonable, but not absolute, assurance against

material misstatement or loss.

Ricardo’s internal control and monitoring procedures include:

• Group-level policies, including risk management, approved by the board

• Procedure and process documents setting our controls, approved by Group functions

• Strategic plans, approved by the board and monitored through forecasting and budgeting

processes

• Business unit review processes covering operational and financial performance

• Half-yearly business unit risk and control assessment sign-off confirming compliance with Group

policies and procedures

• Control of key financial risks through clearly set authorisation levels and appropriate segregation

of accounting duties

• Control of key project risks through project delivery and review systems

• Review and implementation of recommendations in reports on internal control by internal and

external auditors

• A Speak Up process to ensure employee concerns are able to be raised

• Reporting on insurance policies as well as any uninsured risks

To ensure our risk process drives continuous improvement across the business, we monitor the

ongoing status and progress of key action plans against each risk on a half-yearly basis. Risk is a

key consideration in all strategic decisions made at board level.

The Group’s internal audit function provides assurances on operating segment systems of internal

control and compliance with applicable legislation and regulations. This is complemented by

audits required as part of maintaining certifications to international standards for management

systems. The effectiveness of these risk management and internal audit processes is reviewed

annually by the Audit Committee and is set out on pages 99-101.

Financial risks faced by the Group comprise capital risk, liquidity risk, credit risk and market risk

(comprising interest rate risk and foreign exchange risk). The Group’s objectives, policies and

strategies in respect of these risks are set out in Note 26 to the Group financial statements.

Principal risks and uncertainties

The following table details the Group’s principal risks, themitigating activities in place to address

them and the riskto the Group.

It is also recognised that the Group is exposed to a number of emergent risks that are currently

deemed to be less material, together with additional risks and uncertainties beyond those listed

below that are at present not known to management and which may also have an adverse effect

on the business.

Key to principal risks

Change in risk

Increase No change Decrease

Risk velocity

High – impact within one

month of risk occurring

Medium – impact within one

year of risk occurring

Low – impact after more than

one year of risk occurring

Strategic priorities

1 2 3

Enabling meaningful

and fulfilling work

Being a trusted partner

to our clients

Achieving high growth in our

chosen markets

4 5

Delivering operational

excellence and efficiency

Optimising cash to invest

for growth

76Ricardo plc | Annual Report and Accounts 2023/24

Risk management and internal control continued

Transformation management

Change:

Velocity:

Link to strategic priorities:

Description

Failure to successfully, and simultaneously, deliver the significant

change programmes currently in process and planned across the Group,

including integration of any future acquisitions.

Impact

Decreased revenue and profit, increased costs, damage to operational

performance and reputation.

Mitigation

• Dedicated project oversight of large capital projects

• Integration management teams for significant acquisitions

• Regular monitoring by the Executive Committee through

operational and project reviews

Market changes

Change: Velocity:

Link to strategic priorities:

Description

The Group operates in diverse markets which are politically and

economically volatile. This exposes the Group to evolving legislative,

geopolitical and macroeconomic pressures, as well as industry

consolidation threats in a dynamic competitive landscape.

Impact

Unpredictability in the timing of the receipt of orders from clients and the

utilisation of our resources to generate revenue and profit may give some

volatility in our ability to forecast future performance.

Mitigation

• Diversification of the Group portfolio, so as to reduce exposure

toany one specific client, territory or segment

• Rigorous performance review process which is led by the

executive to monitor current and forecast performance

• Short-term contingency plans to react to sudden market

downturn or changes in geopolitical risk

Climate change

Change:

Velocity:

Link to strategic priorities:

Description

Climate change is both a series of risks and opportunities to the business,

which we describe on pages 64-74. Failure to adapt to global climate

change or respond to client needs driven by climate change. This includes

both the legal and regulatory transition requirements as well as the acute

and chronic physical impacts.

Impact

If we do not have the right services, capability and products to meet

those client needs, we:

• Will be unable to meet our strategic objectives

• May have assets which are impaired due to the rate of climate change

in certain markets

• May not deliver our net zero objectives

Mitigation

• Climate change in the short term (one to five years) is

addressed by ongoing monitoring of and input towards evolving

environmental legislation, and capital allocation process for

sustainable technologies and solutions

• Long-term site footprint strategy to improve efficiency and take

account of changing weather patterns

• Group-wide business continuity plans and a comprehensive

insurance programme

Strategic risks

Key to principal risks

Change in risk Risk velocity Strategic priorities

Increase High – impact within one month of risk occurring

Enabling meaningful and fulfilling work

Being a trusted partner to our clients

No change Medium – impact within one year of risk occurring

Achieving high growth in our chosen markets

Delivering operational excellence and efficiency

Decrease Low – impact after more than one year of risk occurring

Optimising cash to invest for growth

77Ricardo plc | Annual Report and Accounts 2023/24

Risk management and internal control continued

Client project delivery

Change: Velocity:

Link to strategic priorities:

Description

The Group’s revenue depends on successful delivery of a broad range

of contract types for engineering, technical, environmental and strategic

consultancy services, product supply (niche manufacturing of parts and

components), together with accreditation and independent assurance

services, with an increasingly complex range of projects, technologies,

clients and geographies.

Impact

Failure to perform on contracts within estimated cost and delivery

timescales, and to the required level of quality, could impact profitability.

Mitigation

• Risks are proactively managed by clearly defined lead

qualification, bidding, contracting and project management

processes

• Regular monitoring by the Executive Committee through

operational and project reviews

Supply chain

Change: Velocity:

Link to strategic priorities:

Description

Failure or inability of critical suppliers to supply unique products,

capabilities or services preventing the Group from satisfying clients or

meeting contractual requirements.

Impact

Decreased revenue and profit, damage to operational performance and

reputation.

Mitigation

• Production supplier choices often undertaken with the original

equipment manufacturer client so that risk assessments are

shared

• Supplier quality assurance needs are agreed with clients and

operate within our processes and ISO 9001 certifications

• Production supply chain monitoring and expediting capability and

capacity

• Our sustainable procurement processes increase supply chain

transparency and our Supplier Code of Conduct states our

supplier expectations

Business interruption

Change:

Velocity:

Link to strategic priorities:

Description

A catastrophic event such as natural disasters; civil unrest, military

conflict or terrorist activity; or a pandemic (including further impacts

from COVID-19) could lead to infrastructure disruption and/or property

damage which prevents the Group from fulfilling its contractual

obligations.

Impact

Decreased revenue and profit, damage to operational performance and

reputation.

Mitigation

• Group-wide business continuity and crisis management plans,

subject to regular testing and updated for lessons learned

• Comprehensive insurance programme, renewed annually and

subject to property risk assessment visits

Operational risks

Key to principal risks

Change in risk Risk velocity Strategic priorities

Increase High – impact within one month of risk occurring

Enabling meaningful and fulfilling work

Being a trusted partner to our clients

No change Medium – impact within one year of risk occurring

Achieving high growth in our chosen markets

Delivering operational excellence and efficiency

Decrease Low – impact after more than one year of risk occurring

Optimising cash to invest for growth

78Ricardo plc | Annual Report and Accounts 2023/24

Risk management and internal control continued

People

Change: Velocity:

Link to strategic priorities:

Description

Failure to attract, retain or mobilise people due to factors including

availability of talent, inadequate compensation, workforce demographics,

lack of training and industrial action.

Impact

Decreased revenue and profit, damage to operational performance.

Mitigation

• We aim to ensure that we actively develop and manage staff in

an environment where everybody belongs

• We are sharing best practice in talent acquisition across business

units so we can maximise recruitment and retention efficiency

• Our IT infrastructure enables us to share work and mitigates

transport issues

• Our people as stakeholders are discussed further on pages 42-43

Health, safety & wellbeing

Change: Velocity:

Link to strategic priorities:

Description

Failure to comply with local health and safety requirements impacting the

physical and mental health of our employees, stakeholders or the public.

Impact

Health and safety compliance failures by the Group, or its

representatives, could result in reputational damage, substantial fines

and potential market exclusion.

Mitigation

• The Group has defined health and safety policies and operational

procedures which are supplemented by regular training

• Incident reporting with near miss and lessons learned processes

• Comprehensive insurance programme, renewed annually

• Regular health and safety audits supporting ISO 45001 Health

and Safety Management certification

Information security

Change:

Velocity:

Link to strategic priorities:

Description

A breach of IT security due to increasingly more sophisticated cyber

attacks resulting in proprietary or other sensitive information being

lost, made inaccessible, corrupted or accessed by unauthorised users.

This includes the loss of critical systems due to poorly executed

implementation or change control; poor maintenance, business continuity

or back-up procedures; and the failure of third-party service providers

todeliver to their service level agreements.

Impact

The loss, theft or inability to access information assets could result in

reputational damage, loss of competitive advantage, business disruption

and financial penalties.

Mitigation

• Implemented an Information Security Management System

certified to ISO 27001

• Adoption of a layered defence in-depth approach, with dedicated

information security resources who continuously monitor controls

and adapt them in response to emerging threats

• Penetration tests are conducted regularly by both internal and

external resources to augment our control regime

• Information security risk register maintained and reviewed by

theCIO

• The performance, progress and continued maturing of our

information security controls are monitored bi-annually by

theAudit Committee

Operational risks continued

Key to principal risks

Change in risk Risk velocity Strategic priorities

Increase High – impact within one month of risk occurring

Enabling meaningful and fulfilling work

Being a trusted partner to our clients

No change Medium – impact within one year of risk occurring

Achieving high growth in our chosen markets

Delivering operational excellence and efficiency

Decrease Low – impact after more than one year of risk occurring

Optimising cash to invest for growth

79Ricardo plc | Annual Report and Accounts 2023/24

Risk management and internal control continued

Laws and regulations

Change: Velocity:

Link to strategic priorities:

Description

Failure to comply with laws or regulations leading to reputational

damage, substantial fines and potential market exclusion. The Company

operates in many jurisdictions and as a consequence is subject to complex

and wide-ranging laws and regulations including those concerning export

controls, data privacy, anti-trust, anti-bribery and corruption, and taxation.

Impact

Increased compliance costs, fines, penalties or reputational damage, or

trading restrictions which could have a materially adverse impact on the

business.

Mitigation

• To mitigate these risks, the Group has a number of defined

policies and operating procedures in place and takes professional

advice, where considered necessary, to ensure that the Group

acts upon current and anticipated changes in legislation

• Our Code of Conduct ensures that employees and others act

with the highest ethical standards and within local legal and

regulatory requirements

• The Group’s rolling assurance programme includes the review

of compliance with applicable legislation and regulations and

awareness of key Group policies and procedures

Financing

Change:

Velocity:

Link to strategic priorities:

Description

The Group is in a net debt position, having drawn on available facilities

primarily to fund acquisitions and for general corporate purposes.

Impact

Inability to access financing on normal commercial terms.

Mitigation

• This risk is mitigated by robust cash and working capital

management, regular process improvement initiatives, monitoring

actual cash flows to budgets and forecasts, maintaining good

relationships with the Group’s bankers and ensuring that

sufficient borrowing facilities are in place at all times to support

the Group’s funding requirements to deliver on its growth

strategy, with additional headroom available to meet possible

downside scenarios

• Further details of the Group’s borrowing facilities and other

financial risks can be found in Note 23 and Note 26 to the Group

financial statements, respectively

Corporate risks Financial risks

Investment in technology

Change:

Velocity:

Link to strategic priorities:

Description

Investment in technologies, products or services that prove unsuccessful

or unsuitable for our chosen markets, or failure to invest in areas that are

key for us and our clients.

Impact

Loss of competitive marketplace advantage and reduction in revenue.

If there are disruptions in the implementation of new regulations,

which in turn accelerate or delay client programmes dependent on new

technology, the time taken to deliver returns from our research and

development (R&D) programmes may also increase.

Mitigation

• Our R&D programmes are developed through a mixture of client

consultation, long-range forecasting, thought leadership and

deep technology roadmap development. We are increasingly

leveraging digital and data science technologies as enablers for

our innovations

• Capitalised development costs are subject to regular review to

assess project progress, returns and any risk of impairment

• Capital allocation process to ensure robust executive review of

resource prioritisation

Operational risks continued

Key to principal risks

Change in risk Risk velocity Strategic priorities

Increase High – impact within one month of risk occurring

Enabling meaningful and fulfilling work

Being a trusted partner to our clients

No change Medium – impact within one year of risk occurring

Achieving high growth in our chosen markets

Delivering operational excellence and efficiency

Decrease Low – impact after more than one year of risk occurring

Optimising cash to invest for growth

80Ricardo plc | Annual Report and Accounts 2023/24

The context supporting the

assessment

The Group’s prospects are underpinned by

its business model and strategy, which can

be found on pages 9 and 11. The Group

continues to follow a balanced approach

to its strategy, which is subject to ongoing

monitoring and development as described

herein. In FY 2023/24, the Group delivered

revenue of £474.7m (FY 2022/23: £445.2m on

a continuing basis) and underlying operating

profit of £38.8m (FY 2022/23: £34.0m on a

continuing basis), growth of 7% and 14%

on the prior year, respectively. FY 2023/24

adjusted EBITDA, defined as earnings before

interest, tax, depreciation, impairment and

amortisation, excluding the impact of IFRS 16

leases, adjusted for any one-off, non-recurring,

exceptional costs and acquisitions or disposals,

was £47.5m (FY 2022/23: £44.4m).

The Group enters the new financial year

with an order book of £396.5m (FY 2022/23:

£395.3m), growth of 0.3% on the prior year, of

which c.65% is expected to be workable within

the next 12 months. The year-end order book

comprises the value of all unworked purchase

orders and contracts received from clients.

The Group funds its operations via a

revolving credit facility (RCF) of £150m,

with a £50m uncommitted accordion, which

provides funding through to August 2026,

alongside the Group’s uncommitted overdraft

facilities of £16.1m (FY 2022/23: £16.1m).

Net debt at 30June 2024 was £59.6m

(FY2022/23: £62.1m), comprising cash

and cash equivalents, net of any restricted

cash, of£47.3m (FY 2022/23: £49.8m) and

borrowings, including hire-purchase liabilities,

but excluding IFRS 16 lease liabilities, of

£106.9m (FY 2022/23: £111.9m).

Adjusted leverage, defined as net debt

overadjusted EBITDA, was 1.25x

(FY 2022/23: 1.4x), providing significant

headroom of 1.75x against the covenant

limitof 3.0x. Interest cover, defined as

adjustedEBITDA over net finance costs,

excluding pension and IFRS 16 interest, was

5.86x (FY 2022/23: 8.3x), compared to the

covenant limit of 4.0x. There are no changes

todebt covenants under the new facility.

The strategy of the Group is to deliver

long-term and sustainable growth in

environmental and energy transition services.

The Group’s businesses’ focus is on the

development of longer-term, multi-year

contracts and relationships, underpinned by

global long-term megatrends. The board has

considered the risk appetite and profile of

theGroup in this context and has determined

that this remains appropriate for the Group

asa whole.

Assessing the prospects of the Group

The Group’s prospects are assessed primarily

through its five-year business planning

process, led by the Chief Executive Officer.

The five-year planning process is a forward-

looking process which is undertaken by Group

management and the Group’s constituent

operating segments in the second half of

the financial year. The planning process

includes an assessment of changes in the

market and competitive environment, together

with macroeconomic, political, societal and

technological changes. The detailed operating

segment business plans are consolidated to

form a Group-wide budget and five-year plan.

The Group-wide and individual operating

segment plans are reviewed and approved

by the board. Part of the board’s role is to

review the performance of the Group in the

last financial year and to consider whether

the plan presented is appropriate. The first

year of the business plan forms the Group’s

annual operating budget. This is subject to a

re-forecast on a monthly basis.

Assessment of viability

The five-year business plan reflects the

best estimate of the prospects of the Group.

Thefirst two years of the plan have been

stress-tested, to consider the impact of known

risks, including the pace of technological

change in the automotive sector, driven by

climate change, which continues to shift

rapidly away from the traditional internal

combustion engine towards more renewable

propulsion methods, on the Group’s results,

operations and financial position in a severe

but plausible downside scenario.

Viability statement

The Directors have assessed the prospects of the Group in accordance with

provision 31 of the 2018 UK Corporate Governance Code.

81Ricardo plc | Annual Report and Accounts 2023/24

Assessment of viability continued

The scenario includes:

• Limited revenue growth from Automotive

and Industrial established mobility and

emerging solutions, normalising the revenue

achieved in Q4 FY 2023/24

• Reduced revenue growth rates in Energy

and Environment and Rail

• Decline in key programme volumes in

Performance Products

• Continuation of the ABS retrofit programme

at FY 2023/24 government funding levels

and lower revenue growth in technical

services

• Removal of any assumed working capital

improvement compared with June 2024

• An increase in the SONIA interest rate

compared with external bank forecasts

The scenario incorporates the appropriate

reversal of discretionary bonus payments and

setting suitable levels of dividends based

on the sensitised results of the operating

segments. Under this scenario, the Group’s

adjusted EBITDA is forecast to reduce by

15%in FY 2024/25 and then increase by

8% in FY 2025/26.

The impact of this scenario on the Group’s

business plan has been quantified and

presented to the board as part of the approval

process. The scenario, which is based on

aspects of the Group’s principal and emerging

risks and uncertainties, including clients and

markets, contracts and financing, as set out on

pages 75-80, and takes into consideration the

risks identified as part of our TCFD work, as

set out on pages 64-74, represents severe but

plausible circumstances that the Group could

experience.

The results showed that the Group would be

able to continue operating well within its debt

covenants and liquidity headroom under the

downside scenario. If full bonus costs were

included, headroom under the Group’s banking

covenants and liquidity is reduced, but no

covenants are breached.

The Group also performed reverse stress-

testing on its financial plan using these

scenarios to identify the point at which its

banking covenants would be breached. Based

on this reverse stress testing, a further 26%

reduction in sensitised adjusted EBITDA

compared to the downside scenario would be

required in FY 2024/25 (15% in FY 2025/26)

before the adjusted leverage covenant is

breached. Similarly, a further 19% reduction

in sensitised adjusted EBITDA compared to

the downside scenario would be required in

FY 2024/25 (21% in FY 2025/26) before the

interest cover covenant is breached. In the

event of such scenarios materialising, more

severe cost actions would be taken to ensure

covenant compliance.

The Directors have assessed the prospects

of the Group over the five-year plan period to

30 June 2029, consistent with the five-year

planning process, and confirm that their

assessment of the principal and emerging risks

and uncertainties facing the Group was robust.

Based on their assessment of prospects and

viability, the Directors confirm that they have

a reasonable expectation that the Group will

be able to continue in operation and meet its

liabilities as they fall due over the five-year

period ending 30 June 2029.

Going concern

Given the viability statement provided above,

the Directors consider it appropriate to prepare

the financial statements on a going concern

basis, as explained in Note 1(a) to the Group

financial statements.

Viability statement continued

82Ricardo plc | Annual Report and Accounts 2023/24

This section constitutes the Group’s non-financial information statement (NFIS), produced to comply with Sections 414CA and 414CB of the Companies Act 2006. The information presented below is

incorporated by cross-reference and most of the policies listed can be found on our website: https://www.ricardo.com/en/who-we-are/governance/policies. Our Code of Conduct underpins Ricardo’s

business activities while providing our stakeholders with clear guidance on expected behaviours, actions and compliance requirements covering each of the below areas.

Reporting requirement and policy position Relevant policies and standards Due diligence and further information

Environmental matters Our environmental policies set out our commitment to continuously

improving our environmental performance to ensure sustainable growth

inline with global goals.

Environmental Policy

Carbon Reduction Plan

Sustainable Procurement Policy

• Responsible Business: page 44

• TCFD report: page 64

• Responsible Business Committee report: page 97

• Ricardo.com/en/sustainability

• Ricardo.com/en/who-we-are/governance/policies

People Our people policies support our ambition to create an inclusive and

engaging environment where our employees complete fulfilling work and

thrive.

Human Resource Policy

Health & Safety Policy

Diversity, Equity & Inclusion Policy

Gender Pay Gap Report

• Responsible Business: page 44

• Nomination Committee report: page 95

• Responsible Business Committee report: page 97

• Ricardo.com/en/sustainability

• Ricardo.com/en/who-we-are/governance/policies

Social matters We have strict standards of behaviour that we expect of our employees

and supply chain partners, which are set out in our Code of Conduct

and Supplier Code of Conduct and other related policies. This includes

respecting and safeguarding our people and the wider community.

Code of Conduct

Supplier Code of Conduct

Information Security Policy

Engaging and Supporting Local Communities

Statement

Modern Slavery Policy

• Responsible business – Governance section: page 59

• Governance report: page 85

• Responsible Business Committee report: page 97

• Ricardo.com/en/who-we-are/governance/policies

Human rights We recognise and respect the Universal Declaration of Human Rights,

ensuring that all people have freedom, dignity and equality. We uphold the

highest ethical and legal standards within our business and supply chain.

Human Rights Policy

Modern Slavery Policy

Modern Slavery Statement

• Responsible Business – Governance: page 59

• Ricardo.com/en/who-we-are/governance/policies

Anti-bribery and

corruption

We have zero tolerance on all forms of bribery and corruption and are

committed to conducting our activities in line with UNGC Principle 10.

OurCode of Conduct covers our stance on these matters in detail.

Code of Conduct • Responsible Business – Governance: page 59

• Governance statement: page 88

• Audit Committee report: page 99

• Responsible Business: page 44

• Ricardo.com/en/who-we-are/governance/policies

Business model • Business model: page 9

• Strategy: page 11

Non-financial KPIs • Non-financial KPIs: page 18

Principal risks • How we manage our risks effectively: page 75

• Our principal risks and uncertainties: page 76

Climate-related financial

disclosures

• Disclosure aligned to clauses (a) to (h) of The Companies

(Strategic Report) (Climate-related Financial Disclosure)

Regulations 2022 detailed in the TCFD report: page 64

Non‑financial information and sustainability statement

83Ricardo plc | Annual Report and Accounts 2023/24

Section 172 statement

Stakeholders and the board

The Directors of Ricardo are bound by their duties under the Companies Act 2006 and, in

particular, must act in the way they consider, in good faith, would most likely promote the success

of the Company for the benefit of its members as a whole, taking into account the factors listed in

Section 172(1)(a) to (f) of the Companies Act 2006.

The board recognises the need to build trust with our key stakeholders and executes its

obligations of good faith accordingly to ensure the success of the Company and that of its

shareholders.

In making decisions, we consider the interests of multiple stakeholders across the Company.

Theexecutive team advises the board on levels of engagement and seeks feedback. Board

feedback is carefully considered and the Company adapts its approach where considered

appropriate. Further details on engagement and how our board operates can be found in the

Governance section of this report.

How Section 172 has become part of the way the Company operates can be found

throughout this report, some examples of which are indicated below:

S172 duties and key examples Page

Consequences of decisions in the

long term

Chair’s statement 4 and 88

Chief Executive’s review 6

Our business model 9

Our strategy 11

Principal risks and uncertainties 75

Viability statement 81

Board activity FY 2023/24 91

Interests of the Company’s

employees

Chair’s statement 4 and 88

Chief Executive’s review 6

Our strategy 11

Strategic objectives 18

Stakeholder engagement 42

Sustainability – Social 52

Company’s business relationships

with suppliers, clients and others

Our business model 9

Market overview 8

Our strategy 11

Strategic objectives and KPIs 18

Stakeholder engagement 42

Responsible Business 44

S172 duties and key examples Page

Impact of the Company's operations

on the community and environment

At a glance 8

Chief Executive’s review 6

Our Strategy 11

Responsible Business 44

High standards of business conduct

Responsible Business –

Governance

Responsible Business Committee 97

Shareholders

Chair Statement 4 and 88

Chief Executive’s review 6

Our strategy 11

Strategic objectives and KPIs 18

Corporate governance statement 88

84Ricardo plc | Annual Report and Accounts 2023/24

Governance

report

Board of Directors 86

Corporate governance statement 88

Nomination Committee report 95

Responsible Business Committee report 97

Audit Committee report 99

Directors’ remuneration report 102

Directors’ report 133

Statement of Directors’ responsibilities 136

85Ricardo plc | Annual Report and Accounts 2023/24

Board of Directors

Mark Clare

Chair

Appointed November 2022

Graham Ritchie

Group Chief

Executive Officer

Appointed October 2021

Mark brings to Ricardo substantial plc-level

experience. He is currently Non-Executive

Chair of Grainger plc, a UK-based residential

property business listed on the London FTSE

250 index and is a Senior Independent Director

of Wickes Group plc and a Non-Executive

Director of Premier Marinas Holdings Limited.

Graham started his career with PwC, going on

to hold a number of senior financial positions

at T-Mobile, BT Group plc and Intertek.

Immediately prior to joining Ricardo, Graham

was a member of the Intertek Group plc

Executive Committee responsible for its

operations in Europe, including Russia, and

Central Asia.

Graham has no external appointments.

Our board at a glance

Board and committee attendance

Gender

(1)

Male 5

Female 3

Tenure

(1)

1-3 years 3

4-5 years 2

6+ 3

Independence

(1)

Independent 6

Non-independent 2

Board member Board

Audit

Committee

Responsible

Business

Committee

Nomination

Committee

Remuneration

Committee AGM

Mark Clare

Graham Ritchie

Judith Cottrell

Russell King

Malin Persson

Jack Boyer OBE

Bill Spencer

Laurie Bowen

Ian Gibson

= attended = did not attend = not applicable

(1) Chart includes Laurie Bowen, who resigned 31 May 2024, and excludes Ian Gibson, who resigned from the board in September 2023, and the

General Counsel and Company Secretary.

Ricardo plc | Annual Report and Accounts 2023/24

Board of Directors continued

Jack Boyer OBE

Non-Executive Director

Appointed September 2019

Jack is a Non-Executive Director and Senior

Independent Director of TT Electronics plc

and member of the Audit, Remuneration

and Nomination Committees. Jack is also a

Non-Executive Director of Bela Holdings AG,

and a non-executive board member at the

Department for Education.

Jack resigned from the board in July 2024.

A B N R

Bill Spencer

Non-Executive Director

Appointed April 2017

Bill served as CFO of Intertek Group plc. Since

then he has developed a varied non-executive

career. His former Non-Executive Director

roles, where he also chaired the Audit

Committee, include UK Mail plc, Exova Group

plc and Northgate plc.

A B N R B N R

Harpreet Sagoo

General Counsel and

Company Secretary

Appointed 2023

Harpreet is Group General Counsel and

Company Secretary for Ricardo plc. She began

her career with Marconi Telecommunications,

where she qualified as a lawyer in 2002.

She has held several senior legal positions

internationally, primarily within the technology

sector, from listed companies to the start-ups.

Russell King

Non-Executive Director

Appointed September 2019

Russell served as Chief Strategy Officer

at Anglo American plc where he had

global responsibility for strategy, business

development, government relations, safety

and sustainable development. He was also a

member of its Executive Committee for eight

years. Russell is currently a Non-Executive

Director at J Murphy and Sons Ltd.

A BB N R

Laurie Bowen

Non-Executive Director

Appointed July 2015

Appointed Non-Executive Director in July 2015

and stepped down from the board in May 2024

after nine years.

Key to committee membership

Audit Committee

Nomination Committee

Responsible Business Committee

Remuneration Committee

Executive Committee Chair of the Committee

Read the full

biographies of

our board members

on our website.

www.ricardo.com/en/

who-we-are/our-

leadership

Malin is the nominated Non-Executive

Director for Workforce Engagement and

Responsible Business. She has held a number

of senior executive roles at Volvo Group and

is an elected member of the Royal Swedish

Academy of Engineering Sciences. Malin is

currently a Non-Executive Director of Peab AB,

Getinge AB, Hexpol AB, OX2 AB, and Absolent

Air Care Group.

Malin Persson

Non-Executive Director,

Senior Independent Director

Appointed 2016

N R

Judith Cottrell

Chief Financial Officer

Appointed September 2023

Judith has over 20 years’ experience working in

senior financial and operational roles. She was

previously the Group Finance Director for RPS

and, prior to that, she held various senior roles

within the company, including Chief Executive

of RPS’s UK & Ireland consulting business and

Group Strategy Director.

Judith has no external appointments.

Ricardo plc | Annual Report and Accounts 2023/24

Board overview

As a board, our role is to ensure effective

leadership of the Company and to ensure its

long-term success.

This report sets out our approach to corporate

governance and how the board contributes

to the development and delivery of Ricardo’s

strategy.

The board provides leadership by

approving the strategy of the Company

and by overseeing its implementation by

management. It also monitors the culture

within the Company to ensure that it supports

the agreed purpose and values. The board has

responsibility for managing risk and monitoring

financial and operational performance against

targets set.

Strategy and operations

FY 2023/24 has been a busy year across

the Company as we continue to execute

our strategy and reshape the organisation

to achieve our ambition and optimise

operations. This has not been without its

challenges and in the past 12 months we

have seen the Company make hard choices

as we improve operational performance and

align the businesses to the agreed strategy.

Weare pleased with the performance of the

acquisitions made in FY 2023/24 and continue

to believe that a combination of organic

growth and acquisitions will deliver the

longer-term ambitions of the Group.

Engaging with our stakeholders

With every decision we make as a board,

we consider the impact that this could have

on all our stakeholders and see effective

engagement with these groups as a critical

part of our business success. Our key

stakeholders include our colleagues, clients,

shareholders, suppliers and the communities

inwhich we operate.

Our stakeholder engagement (page 42) and

Section 172 statement (page 84) explain how

the Company and the board have engaged

with these groups throughout the year and

discharged their duties.

Our people and culture

Ensuring a strong and consistent culture is an

important part of achieving our ambition and

making sure that Ricardo is a fulfilling place to

work. The board consistently monitors culture

through our annual colleague survey, ad hoc

engagement with team members, and through

our ‘Meet the board’ sessions. Through my

interactions, I am continually impressed by

the passion and the clear drive of our team

members to see Ricardo succeed. The board is

firm in its belief of the importance of two-way

communication to improve culture and ways

ofworking and it will continue to encourage

open and frank conversations as we transform

the Company.

Responsible business

Thinking and acting sustainably is central to

who we are at Ricardo. This year has seen

progress in our environmental, social and

governance sustainability agendas, driven by

the board’s Responsible Business Committee.

In FY 2024/25 we are expecting to see

further development in this area, led by the

Committee. We have also seen a significant

amount of engagement with community

groups, with a focus on encouraging the

next generation of STEM professionals.

As ascience and engineering-based

business, we understand the importance of

encouraging STEM careers, and hope through

our community actions and DEI strategy to

encourage people from diverse backgrounds

toenter this field.

For more information on our approach towards

responsible business please see page 44.

Mark Clare |Chair

On behalf of the board, I am pleased to present the

Ricardo governance report for the financial year 2023/24

Corporate governance statement

88Ricardo plc | Annual Report and Accounts 2023/24

Board evolution

We’re fortunate to have a board that is

constructed of people with a wide range

of backgrounds and experiences, who are

dedicated to the success of the Company as

well as creating long-lasting impactful change.

This breadth and depth of knowledge and

experience is something that we will continue

to expand upon as the board evolves, ensuring

diversity of thought as well as the right

experiences and values.

In the past year we have said farewell to

Laurie Bowen after nine years of service, and

have announced the departure of Jack Boyer

who has served for five years. Bill Spencer

also announced his retirement in FY 2023/24,

finishing with the board at the FY 2024/25

AGM in November.

To these board members, I would once again

like to give my thanks, for their commitment

and significant contribution over their time

with the Company. I am delighted to have

welcomed Carol Borg to the board from July

2024, and to have announced Sian Lloyd

Rees’s appointment to the board, starting 1

October 2024, and look forward to working

with them and the other board members to

ensure the Company delivers on its strategy.

Looking ahead

The path ahead is an exciting one for Ricardo;

we are transforming the Company in response

to the challenges of our time and bringing

value to all our stakeholders whilst achieving

our vision of creating a safer, more sustainable

world. Into the third year of our strategy,

we will continue to optimise our operations,

increase our services and deliver excellence to

our clients whilst taking the actions necessary

to achieve our ambition for the Company.

To our colleagues

On behalf of myself and the board, I would like

to finish with a sincere note of thanks to our

colleagues at every level of the organisation.

This year has seen many successes and

challenges, and your effort, passion and

resilience has enabled the Company to make

the progress it has.

Mark Clare

Chair

10 September 2024

Corporate governance statement continued

The structure of the board

The board

Responsible for defining the Company’s purpose, setting a strategy to deliver it, and monitoring

values and behaviours that shape how the Company conducts its business and its culture.

The board has several matters reserved for its consideration and delegates other responsibilities

to its board and management committees as appropriate.

Board committees

Audit Committee Nomination Committee

Responsible for overseeing the financial

reporting process, significant accounting

judgements and estimates, the Company’s

ethics and compliance programme,

financial and compliance controls, and risk

management.

Responsible for advising on succession

matters and talent management for the

board, Executive Committee and senior

management.

Remuneration Committee

Responsible Business

Committee

Responsible for recommending the policy

for the remuneration of the Chair, Executive

Directors and the Executive Committee

members, in the context of considering the

pay and conditions of the wider workforce.

Responsible for promoting the long-term

sustainable success of the Company

with regard to environmental, social and

governance matters.

The Disclosure Committee was closed on 31 January 2024. All events requiring disclosure or

possible disclosure were discussed by the board and the General Counsel through emergency

meetings held throughout the year.

Management committee

The board has the following management committee:

Executive Committee

Responsible for the day-to-day management of the Company’s operations.

89Ricardo plc | Annual Report and Accounts 2023/24

Corporate governance statement continued

Corporate Governance Code statement of compliance

As a UK premium listed company, Ricardo plc is expected to comply or explain any non-compliance

with the 2018 UK Corporate Governance Code, published by the FRC and available on its website,

www.frc.org.uk.

The board considers that the Company complied fully with the provisions and principles as set out

in the Code throughout the year ended 30 June 2024.

Reporting in accordance with the 2018 UK Corporate Governance Code

The 2018 UK Corporate Governance Code (the Code) sets out the Company’s approach to

governance. The following table shows where shareholders can evaluate how the Company has

applied the principles of the Code and where key content can be found in this report.

Page Page

Board leadership and company purpose Composition, succession and

evaluation

Chair’s introduction 4-5 and

88-89

Board biographies 86-87

Board leadership 86-87 Board evaluation 92

Purpose, vision, strategy

and values

8, 11 and

Board composition and tenure 93-94

Culture 52-58 Nomination Committee report 95-96

Board engagement with

stakeholders

42-43 Audit, risk and internal control

Section 172 statement 84 Audit Committee report 99-101

Measurement of strategy (KPIs) 18-19 Statement of Directors’

responsibilities

136

Risk assessment and management 75-80 Risk Management 75-80

Viability Statement 81-82 Going concern 82

Rewarding our people 54-55 Viability statement 81-82

Whistleblowing 60 Remuneration

Division of responsibilities Directors’ remuneration report 102-132

Board Leadership and responsibilities 90 Other remuneration disclosures 103-133

Governance Structure 89

Board committees 86-87

Board attendance 86

Board leadership and division of responsibilities

Board and Executive Committee structure

The board and its committees oversee and manage the governance of the Company, and

provideamechanism to approve, review, challenge and monitor the strategies, policies

and codesof conduct and behaviours through which the Company operates. The terms of

referenceofthe committees, and the matters reserved to the board, can all be found at

www.ricardo.com/en/investors/corporate-governance. The structure and responsibilities

oftheboardandits committees are set out below.

Board and committee attendance in FY 2023/24

Board

(scheduled)

Audit

Committee

Nomination

Committee

Remuneration

Committee

Responsible

Business

Committee AGM

Laurie Bowen

(1)

6/7 4/4 2/2 4/4 2/2 Y

Jack Boyer

(2)

6/7 3/4 2/2 2/4 2/2 N

Mark Clare 7/7 4/4 2/2 4/4 2/2 Y

Judith Cottrell 7/7 4/4 2/2 4/4 2/2 Y

Ian Gibson

(3)

2/7 2/4 1/2 2/4 n/a n/a

Russell King 7/7 4/4 2/2 4/4 2/2 Y

Malin Persson 6/7 3/4 1/2 4/4 2/2 Y

Graham Ritchie 7/7 4/4 2/2 4/4 2/2 Y

Bill Spencer 7/7 4/4 2/2 4/4 2/2 Y

(1) Laurie Bowen resigned from the board on 31 May 2024.

(2) Jack Boyer resigned from the board on 31 July 2024.

(3) Ian Gibson departed Ricardo in September 2023.

Directors who are unable to attend meetings continue to receive papers in advance of the

meetingand have the opportunity to discuss them with, and provide comments to, the relevant

Chair or General Counsel and Company Secretary and feedback is provided on any decisions

madeat the meeting.

Ricardo plc | Annual Report and Accounts 2023/24

Board activity

Other key areas of focus for the board and the stakeholders that it considered in its discussions and decisions.

People and culture Stakeholders considered

• Received regular updates on workforce matters including health and wellbeing, recruitment and attrition

rates, gender pay gap, and employee engagement activity. Reviewed the results of the employee engagement

survey

• Succession planning for the board, the Executive Committee and senior management including the approval of

the succession of the Chief People Officer. The board has invested in recruiting new Non-Executive Directors

who are able to bring industry expertise and diversity of thought to its current composition

• Supported management with the further development of a Company-wide diversity, equity and inclusion

programme

Financial performance

Stakeholders considered

• Received regular updates on the Group’s financial performance including its cash management and

conversion, working capital, profits and costs, and the management of clients, suppliers and operations

• Considered and approved the FY 2023/24 and FY 2024/25 budget following review of progress against the

prior year budget

• Approved the Annual Report, interim and full/half-year results presentations

• Considered and approved the Group’s going concern and viability statements

• Considered and approved dividend payments

• Considered and assessed the efficacy of the Group’s capital allocation model

Strategy review

Stakeholders considered

• Received regular updates from the CEO on progress executing the Group’s strategy, to become a leading

environmental and energy transition consultancy, including reviews of the market and updates on investor

relations

• Reviewed progress against the 2022-27 five-year plan. Carried out strategy reviews of the businesses within

the Group

• Oversight of M&A activity: including updates on acquisition and divestiture activities at each scheduled board

meeting

• The board continues to prioritise investment on decarbonisation and the net zero agenda with a focus

on electrification and hydrogen, whilst continuing to support the transition away from fossil fuel-based

internal combustion engines. The board plans to achieve this through a combination of organic growth and a

programme of focused acquisitions

• The board considers that this renewed focus on strategy will positively impact all of our stakeholders and the

long-term health of the business

M&A

Stakeholders considered

• Received updates on the progress made to become a leading environmental and energy transition consultancy

and to prioritise investment on the decarbonisation and net zero agenda and ensured that the Group’s

stakeholders were considered during this process

• Considered and assessed each of the Group’s M&A activities where board approval was required

• Received regular updates on integration progress in respect of previous acquisitions into relevant business

units to drive synergy savings and expertise

Governance and ethics

Stakeholders considered

• Established a clear framework for the RBC ensuring the promotion of long-term environmental, social, health

and safety, and governance matters

• Reviewed and approved the appointment of an external third-party board evaluation to build upon the agreed

deliverables of the 2023 internal board evaluation. The conclusion of the board evaluation is still pending at

the point of publishing

• Reviewed and approved the matters arising to the board

• Received updates on ongoing litigation matters and key legal and regulatory topics

• Received updates on the ethics and compliance programme and reviewed concerns raised through the Group’s

confidential Speak Up helpline

Corporate governance statement continued

Key to board activity

Clients Communities Shareholders Colleagues Suppliers and partners

91Ricardo plc | Annual Report and Accounts 2023/24

Overseeing the Group’s culture

Purpose and culture

The board is committed to maintaining an open and ethical culture at Ricardo and believes this is

of significant importance to the success of the Group. Our Code of Conduct and our values – Create

Together, Be Innovative, Aim High and Be Mindful – provide the framework within which we expect

all of our employees to operate ethically and with integrity and provide solutions for our clients

and other stakeholders.

Our purpose is to enable our clients to solve the most complex and dynamic challenges to help

achieve a safe and sustainable world. Our values focus on the right behaviours to support our

vision and purpose:

Create together

Aim high

Be innovative Be mindful

The board and culture

The board has continued to consider the culture at Ricardo and the activities of the board during

FY 2023/24, which includes:

• Engaging with employees at Meet and Greet board events

• Employee engagement workshops led by Malin Persson, which are discussed and reviewed in

the Responsible Business Committee

• Reviewing the feedback from the annual Group employee engagement survey

• Regular reviews with the Group People Director to understand employee retention and the

reasons why employees join and leave the Company

• Regular reviews of ethics cases reported to the Company’s confidential Speak Up helpline

• Reviews of the Company’s diversity, equity and inclusion programme

• Reviews of feedback from clients and suppliers including through Voice of the Client and

feedback from the annual client engagement survey

Board effectiveness

Informed decision making

The Chair is supported by the General Counsel and Company Secretary in ensuring the

dissemination of accurate, timely and clear information to the board, allowing it to function

effectively and efficiently. The General Counsel and Company Secretary is responsible for

compliance with appropriate laws and regulations and is available to support all of the Directors.

Directors may solicit independent professional advice at the Company’s expense where specific

expertise may be required to effectively discharge their duties. The board has undertaken Directors

training sourced through its legal external advisors to ensure that their skill set remains relevant

for the Group’s activities. The board includes the CEO and the CFO as Executive Directors who are

directly responsible for business operations. The Non-Executive Directors use their independent

and objective judgement in making informed board decisions.

Training and development

The development of Directors is essential to Ricardo, and new Directors receive a formal induction

plan ensuring access to the business leadership team. The General Counsel and Company

Secretary works closely with the Chair to understand any specific training requirements. In FY

2023/24, two formal training sessions were held, focusing on Directors’ roles and responsibilities

and horizon scanning.

Board evaluation

An effective board is critical to the success of Ricardo. To ensure that the board continues to

operate as effectively as possible, this year the board undertook an external evaluation of its

capabilities carried out by Board Alchemy and facilitated by the General Counsel and Company

Secretary. In summary, it was concluded that notwithstanding the extent of change, the board and

its committees operated effectively. The retirements from the board have provided an opportunity

to review and revise board composition to support the strategic growth goals of Ricardo. In

line with the values of Ricardo it was noted that the meetings were chaired in an inclusive way,

enabling open discussions.

The evaluation made several minor suggestions, and some specific recommendations which are

now being taken forward by the board of which the most significant were:

1. To continue providing opportunities for board members to build upon relationships given the

changes in the past 12 months

2. To continue the focus on ethnic diversity for future Non-Executive Director recruitment

3. To ensure board discussions continue to strike the right balance between driving short-term

performance and longer-term strategy

In response, the Nomination Committee will continue to evaluate diversity of skills on an annual

basis and address any gaps through training or recruitment opportunities.

Workforce engagement activity

The Company activity for workforce engagement is part of a programme to establish meaningful

and regular dialogue with the workforce to capture key insights and bring the employee voice

intothe boardroom; the programme supports the requirement of the UK Corporate Governance

Code in this area.

Corporate governance statement continued

92Ricardo plc | Annual Report and Accounts 2023/24

Workforce engagement activity continued

Malin Persson is the board member responsible for workforce engagement and was appointed to this

role in September 2020. The board recognises the importance of having clear lines of communication

with the workforce and is pleased with how the Workforce Engagement Director continues to

strengthen these links and the role that she plays in doing so. Ricardo promotes a transparent

feedback culture which it believes facilitates growth for both employees and the Company.

The workforce engagement activities undertaken in FY 2023/24 were varied and included

thefollowing:

• Members of the board meeting with senior leadership teams of the business units at

boarddinners

• Members of the board presenting at business unit senior leadership team meetings

• Members of the board presenting at the Company’s leadership conference and awards ceremony

• Malin Persson attended the Company’s DEI forums for fireside chats. It is planned that

MarkClare will be invited to similar sessions in FY 2024/25

• Malin Persson conducting on-site workshops with employees at various business locations

• The board being kept updated on feedback received from the Group employee engagement survey

• The board receiving regular feedback from those Directors who had taken part in workforce

engagement activity throughout the year

Board Connections experience

“It was good to know that the higher management wants to understand more about their

business from junior employees who recently joined. We were asked questions on favourite

part of working with Ricardo, what the company can improve on and if we see ourselves

working here in the long run. It was nice to know that our opinions and voices matter too.”

Shaifali Sood, Analyst Consultant

Board composition

As at 30 June 2024, the board had seven Directors – following the departure of Laurie Bowen in

May 2024 – comprised of four Non-Executive Directors, in addition to the Chair and two Executive

Directors. The charts on pages 86-87 and the table to the right provide details of each of the

Directors, as well as some information on gender and nationality split and also on overboarding

scores. There were no related party transactions involving any board member in FY 2023/24.

Board changes

Ian Gibson retired from the board at the end of September 2023, with Judith Cottrell joining

theboard on 1 July 2023 as Chief Financial Officer. Laurie Bowen retired from the board on

31 May 2024. Jack Boyer retired from the board on 31 July 2024. Bill Spencer announced his

retirement from the board and will stand down following the AGM in November 2024.

Ricardo welcomed Carol Borg to the board on 1 July 2024, and looks forward to welcoming

SianLloyd Rees on 1 October 2024.

Directors’ overboarding scores

(1)

Number of

board members

Percentage

of the board

1 mandate 2 25%

2 mandates 1 13%

3 mandates 3 36%

4 mandates — — %

5 mandates 1 13%

6 mandates 1 13%

(1) Based on the 2021 ISS Guidance, which classifies any person with more than five mandates at

a listed company as being overboarded. A Non-Executive Directorship counts as one mandate,

a Non-Executive Chairmanship counts as two mandates and a position as an Executive Director

(orcomparable role) counts as three mandates.

Board representation

(1)

Number

of board

members

Percentage

of the board

Number of

senior positions

on the board

(CEO, CFO,

SID and Chair)

Number

of executive

leaders

Percentage

of executive

leaders

Sex/gender representation

Men 5 75% 2 6 55%

Women 3

(2)

25% 2 5 45%

Not specified/prefer not to say — — — — —

Ethnicity representation

White British or other White

(including minority-white groups) 8 100% 4 10 89%

Mixed/Multiple Ethnic Groups — — — — —

Asian/Asian British — — — 1 11%

Black/African/Caribbean/Black

British — — — — —

Other ethnic group, including Arab — — — — —

Not specified/prefer not to say — — — — —

(1) The gender and ethnicity data for the board and other management groups was captured through a

combined process of self-report where the data is not already captured in our HR systems.

(2) Laurie Bowen resigned 31 May 2024.

Corporate governance statement continued

93Ricardo plc | Annual Report and Accounts 2023/24

Election and re-election of Directors

The Nomination Committee considered a number of factors in considering the election and

re-election of Directors, including:

• The tenure and independence of each of the Directors

• The results of the individual evaluation process

• The skills, capabilities and relevant market experience of the Directors

• The other external appointments held by the Directors

Any potential or actual conflicts of interest were also considered which allowed the board to

assess if any circumstances are likely to, or could, impair a Non-Executive Director’s independence.

Following the Nomination Committee’s recommendation, the board has concluded that all

Non-Executive Directors being recommended for election and re-election are considered to be

independent.

Time commitments and external appointments

On appointment, Directors declare external directorships and any actual or potential conflicts

of interest and these are reviewed annually by the Committee. Any external appointments are

considered and approved by the Chair following careful consideration of the impact on the individual

Director’s ability to meet the necessary time commitments. The Company reviews and records any

conflicts of interest, evidence of any situational or transactional conflicts, and Directors’ shareholdings.

Diversity

The board continues to actively encourage the promotion of diversity in its composition as per the

recommendations issued by the FTSE Women Leaders Review and the Parker Review.

The FTSE Women Leaders Review has set the following targets for FTSE 350 boards and

leadership teams:

• 40% of FTSE 350 board and leadership positions should be held by women by the end of 2025

• FTSE 350 companies should have at least one woman appointed as chair, senior independent

director (SID), CEO or CFO by the end of 2025

Although we did not achieve these targets by 30 June 2024, the board is proud to declare that it

achieved a 50/50 gender spilt, with the appointment of Carol Borg on 1 July 2024.

The board regrettably has not been able to meet the targets set by the Parker Review, for FTSE

250 companies to have at least one member of the board from an ethnic background. This is

a result of limited opportunities to drive personnel change. However, as opportunities arise

the board will seek to address this. The board has been kept up to date on the progress made

holistically across the Company with regard to DEI and is supportive of the action plan.

Corporate governance statement continued

Directors’ tenure

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

July

2024 Appointed Tenure

Mark Clare

November

2022

years

Malin Persson

January

2016

years

Laurie Bowen

resigned May 2024

July

2015

years

Bill Spencer

April

2017

years

Jack Boyer

resigned July 2024

September

2019

years

Russell King

September

2019

years

Graham

Ritchie

October

2021

years

Ian Gibson

resigned September

2023

July

2013

years

Judith Cottrell

July

2023

year

Chair Non-Executive Director Executive Director

94Ricardo plc | Annual Report and Accounts 2023/24

In my position as Chair of the Nomination Committee, I am pleased to be

sharing this year’s Nomination Committee report

Mark Clare|Chair of the Nomination Committee

Introduction

During FY 2023/24 the Nomination Committee

held two meetings and attendance at

those meetings is recorded on page 90.

The Committee’s work has focused on

understanding the executive management

succession plan and filling any gaps identified

in the current board composition with focused

recruitment of new Non-Executive Directors.

The Committee’s terms of reference can be

found at www.ricardo.com.

Composition of the Committee

andattendance

In accordance with the UK Corporate

Governance Code, the Nomination Committee

comprises a majority of independent

Non-Executive Directors.

The Committee members and their biographies

can be found on pages 86-87. The Group

People, Team and Organisation Director

regularly attends meetings of the Committee.

Role of the Committee

The Nomination Committee is responsible

for corporate governance and succession

planning, including leading the process

for board appointments and reviewing the

appropriateness of the size, structure and

composition of the board. The Committee is

also responsible for succession planning for

senior executives of the Company. In fulfilling

its responsibilities, the Committee evaluates

the balance of skills, experience, independence

and knowledge of the members of the board.

The board values diversity in all of its forms

and takes this into account when recruiting

new board members. The gender balance of

the board and those in senior executive roles

can be found on page 93.

The key responsibilities of the Committee are:

• Reviewing the structure, size and

composition of the board

• Undertaking succession planning for

Directors and senior executives

• Evaluating the balance of skills, knowledge

and experience on the board

• Leading the process for board appointments

and nominating for the approval of the board

candidates for appointment as Directors

• Reviewing and refreshing membership of

board committees

• Undertaking the annual review of Directors’

independence

• Assessing whether Directors are able to

commit enough time to discharge their

responsibilities

• Reviewing the induction and training needs

of Directors

The Committee’s performance was assessed

as part of the board’s internal evaluation,

further details of which can be found on

page92. Following the review, the Committee

is considered to be operating effectively.

The Committee’s full terms of reference can be

found at www.ricardo.com.

Diversity

The Company takes diversity and inclusion

seriously and will look at external set targets

as a guideline to ensure it can have the right

representation for its workforce and the wider

community it serves. Details of the targets

achieved are listed on page 94. As a board

it is important to note that although there is

emphasis on the FTSE Women Leaders Review

and the Parker Review, the Company strives to

have diversity of thought and representation

across a wider spectrum to facilitate its

growth. The board is cognisant that the

process of driving change will take time but

will seize the opportunities as they arise.

Nomination Committee report

95Ricardo plc | Annual Report and Accounts 2023/24

Activities of the Committee

During FY 2023/24, the Committee’s key

activities included:

• A detailed review of executive management

and senior leadership team talent and

succession planning

• A review of the learning and development

action plan for key senior individuals across

the organisation

• A review of the operating structure of

business units and enabling functions to a

centralised model

• Considering the independence of each of

the Non-Executive Directors and their time

commitments

• A review of the right mix of skills and

capabilities on the board and the right size

of the board to optimise its effectiveness

• Succession planning for the board

• A detailed review with the Group People,

Team and Organisation Director on the

results from the Group-wide employee

engagement survey

• Board effectiveness

Succession planning

The Committee devoted a considerable period

of time on identifying the opportunities to

enhance the board’s strengths and address

any gaps through the recruitment process

of Non-Executive Directors. The Committee

placed emphasis on diversity but did not

compromise on candidate requirements.

InFY2024/25, the Committee will focus

onfinalising its recruitment process for two

new Non-Executive Directors.

In line with the requirements of the UK

Corporate Governance Code, the Committee

can confirm that Lygon Group was the

external search consultancy engaged for

theappointments referred in the Governance

Statement on page 93 and that there is no

further connection between the consultancy

and the Company or individual Directors.

TheCommittee is clear that any external

search consultancy engaged should ensure

that the selection process used promotes

diversity in all of its forms, together

with personal strengths, merit and other

objectivecriteria.

On joining the board, new Non-Executive

Directors will undertake a tailored induction

process and following the results of the

external board evaluation, the Committee

willlook at any required tailored development

programmes for all Directors.

On becoming the Chair of the Nomination

Committee on 1 July 2023, I have the privilege

of understanding the future requirements of

the Company as part of its growth strategy at

board, Executive and Senior Leadership Team

levels. By building out a robust succession

and retention plan, I believe this will set the

Company up for more success.

Mark Clare

Chair of the Nomination Committee

10 September 2024

Nomination Committee report continued

Introducing

Carol Borg

Ricardo welcomed Carol as a Non-Executive

Director in July 2024

What excites you about

joining the Ricardo board?

As someone who has spent over 25

years in the renewable and natural

energy sectors, I am excited to be

joining the board to share experiences,

insights to like-minded individuals as

Ricardo moves into a new phase of

its strategy, and playing my part in

providing oversight, governance and

delivering on Ricardo’s ambition.

You’re passionate about

sustainability; was this a

factor when considering

Ricardo?

Absolutely; it’s very important to

me that I work with businesses that

are aligned with my values and

somewhere I could utilise my expertise,

so I am excited to be joining Ricardo

and helping them on their sustainable

ambition.

What has your international

experience taught you about

the importance of diversity?

Diverse teams bring about diverse

ways of thinking and allow us to better

represent the communities we serve.

I think by embracing diversity and

inclusion, we can bring difference into

how we think about things and how we

deliver. Diversity can also help bring

understanding and new points of view

so we can get the best results.

What have you noticed since

you began your induction?

What is striking is the talented people

that we have at Ricardo. A significant

percentage of our products and

services are people based, and I have

been really impressed by the calibre

of people I have met in the short time

Ihave been with the board.

96Ricardo plc | Annual Report and Accounts 2023/24

During FY 2023/24 the Responsible Business

Committee (RBC) held two meetings and

attendance at those meetings is recorded

onpage 90.

The core Directors are supported at the

Responsible Business Committee (RBC)

meetings by the CEO, CFO, Director of

Sustainability, Director HSEQ, and Head of ESG

Data. This mix provides the span to ensure

all aspects are covered and reported both

upwards and downwards. Other attendees,

as required, include the Finance Director,

Director of Human Resource, and Director of

Procurement.

The purpose of the RBC is to assist the

boardin promoting the long-term sustainable

success of the Company with regard to

ESGmatters specific to the Company.

All Non-Executive board are members of the

Responsible Business Committee, as is the

CEO and the CFO.

Roles and responsibilities

Developing and overseeing ESG strategy:

The Committee plays a key role in crafting

and overseeing the Company’s ESG strategy,

including setting goals, establishing metrics

and monitoring progress.

Policy and practice integration: ensures ESG

considerations are embedded throughout the

organisation, from employee responsibilities,

supply chain management to human resources

practices.

Stakeholder engagement: facilitates

communication with various stakeholders:

investors, employees and communities on all

ESG initiatives.

Reporting and disclosure: plays a crucial role

in ensuring the Company’s ESG performance is

accurately reported in the AnnualReport.

Board oversight: reviews topics and progress,

providing insights and recommendations to

ensure effective ESGgovernance.

The span of the Responsible Business

Committee’s remit is:

Environmental: The Company’s climate

transition strategy and impact on the

environment including greenhouse gas

emissions, efficient use of resources, use of

renewable energy, land use and biodiversity,

and the environmental impact of the

Company’ssuppliers.

Social: The Company’s responsibilities towards:

• Employees, including workplace policies

concerning safety and wellbeing, engagement,

diversity and inclusion and other standards set

out in the Company’s Code of Conduct

• Engagement with local communities in

which the Company operates

• Clients, suppliers and other stakeholders

and application of human rights to

such stakeholder groups and the

Company’soperations

Governance: The conduct of the Company’s

business including business ethics, product

governance, security, and the Company’s

health and safety programme including its

performance. The RBC also contributes to

external policy disclosures.

Key activities

The priority for the year was to refine the

ESG strategy, broaden the span of coverage

and ensure it covered all aspects related to

governance, environmental sustainability, our

people and the community. It was also to set the

initial targets for management compensation

related to GHG intensity metrics and to

provide experience from the Non-Executive

board into the ESG Forum and through to the

transformation workstream.

Throughout the course of FY 2023/24, the

focus turned to developing milestones for

GHG reduction, improvement in measurement

and monitoring progress along our net zero

roadmap. Strong emphasis was on sustainable

procurement, improving the transparency in

the supply chain due diligence. Also, on filling

any deficiencies in policy disclosure on the

Ricardo website; ensuring there is adequate

governance and reportable metrics inplace.

The Committee has continued to highlight

the importance of ensuring our ESG activities

are understood and that we are able to

demonstrate visible policy compliance and

support for the objectives.

Malin Persson|Responsible Business Committee Chair

I am delighted to present the first report on the Responsible Business

Committee. We established the Committee in 2023, as part of our commitment

to the long-term sustainable success of the Company regardingenvironmental,

socialandgovernance matters

Responsible Business Committee report

97Ricardo plc | Annual Report and Accounts 2023/24

Responsible Business Committee report continued

Key activities continued

Supply chain performance and transparency

was also a focus as Ricardo operates with

smaller and unique suppliers that are in the

early stages of the journey towards carbon

reduction.

There is recognition that we do not have

complete transparency in some aspects of the

supply base as many of Ricardo’s products

are homologated and certified for emissions

or carefully validated for safety-critical

performance.

We engage with our clients, looking for every

opportunity to reduce carbon while preserving

the quality and integrity of our products and

services.

A key highlight of the year was the review

of the STEM charity engagement (see pages

57-58) where we have supported middle/

senior schools, apprenticeships, university and

postgraduate development and early career

focused charities aimed developing interest in

STEM and the transition from education into

workplace readiness.

Another key focus for FY 2023/24 was on our

safety and accident record and understanding

causal factors and changes required to reach

our zero-accident performance target.

We have reviewed the integrated safety and

accident reporting dashboard that covers all

60 sites worldwide and can see a clear picture

of target areas to improve.

Sustainability/

ESG oversight

Strategy,

measurement,

KPIs

Execution, reduction

targets

Targets,

local initiatives

Responsible Business Committee

Board Member –

Malin Persson – Report out

ESG Forum, executive

and business unit heads –

Steering and direction

Transformation workstream

activity – Energy savings/

waste stream/carbon

efficiencyprojects

Committee Scope

Board

Executive

Business units

Sites and

offices

Priorities for FY 2024/25

• SBTi (Science Based Targets initiative)

–achievement against target and planning

forsetting long-term targets with an

improvedbaseline

• Broadening policy coverage and providing

transparency to allow outside assessment

ofour policies and compliance

• Driving GHG reductions from our expanding

offerings and locations with a focus on

intensity reduction

Driving a safety culture to reach

zeroaccidents

Stakeholder communication

The four-layer structure has enabled excellent

communication throughout the Company

and has driven substantial stakeholder

engagement across all functions with an ability

to participate in sustainability, charity, policy

and community-oriented activities. Alignment

up through the Executive Committee to

the RBC and back has enabled excellent

stakeholder communication with ESG-related

topics being a regular feature in the ‘all-hands’

and SLT (Senior Leadership Team) employee

briefings.

Malin Persson

Responsible Business Committee Chair

10 September 2024

Ricardo plc | Annual Report and Accounts 2023/24

As Chair of the Audit Committee, I am pleased to present the

Committee’sreport for the year ended 30 June 2024

Bill Spencer|Chair of the Audit Committee

Composition

I chair the Audit Committee (the Committee). In

line with the requirements of the UK Corporate

Governance Code, during the year the

Committee also comprised the independent

Non-Executive Directors, Laurie Bowen,

Malin Persson, Jack Boyer and Russell King.

There was no change in membership during

the financial year. Following the year end, in

July 2024 Jack Boyer resigned from the Audit

Committee. I thank Jack for his contributions

and insights during his time on the Committee.

Following the year-end, Carol Borg joined the

board as a Non-Executive Director and became

a member of the Audit Committee. I will also

be stepping down as Audit Committee Chair

when I retire from the board at the AGM in

November 2024 and Carol Borg will take over

the Chair role.

As the Committee’s Chair and as is considered

desirable by the Financial Reporting Council’s

Guidance on Audit Committees, I have recent

and relevant financial experience and a

professional accountancy qualification.

As set out on page 92, the performance of

the Audit Committee has been evaluated and

continues to be considered effective.

The Committee convenes four scheduled

meetings each year and other ad hoc meetings,

as required. Details of attendance at meetings

held during the financial year are set out on

page 90. The Chair, Executive Directors, the

Group’s Head of Internal Audit, PwC – the

Group’s internal audit co-source partners –

and the Company’s external auditors all have

standing invitations to attend all Committee

meetings.

Responsibilities and key areas of focus

The Committee is established by, and is

responsible to, the board. As authorised by

the board, the Committee has obtained all

the necessary documentation and information

it required from officers or employees of the

Company, as well as external professional

advice. In order to carry out its responsibilities

during the year, the Committee undertook the

following activities:

Accounting, tax and financial reporting

• Considered separate reports prepared by

the Chief Financial Officer and external

auditors on financial reporting and internal

control matters as part of the interim review

and annual audit processes

• Assessed the results, on behalf of the board,

of the application of agreed assumptions to

re-confirm the continued operational and

financial viability of the Group for a period of

five years from the date of this report

• Reviewed the significant financial reporting

matters, judgements and estimates, and

changes in accounting policies applicable

in the preparation of both the Group’s

interim and year-end consolidated financial

statements, prior to submission to the board

for approval

• Evaluated the content of the Annual Report

and Accounts as a whole and assessed the

processes in place to assure its integrity, to

advise the board on whether the information

presented is considered fair, balanced and

understandable, and whether it contains

the information necessary for shareholders

to assess the Group’s position and

performance, business model and strategy

Risk management

• Monitored the Group’s risk management

processes and internal control systems

as part of its role on behalf of the board

to oversee the Group’s approach to risk

management and with due consideration to

the principal risks and uncertainties facing

the Group

• Assessed the Group’s risk profile, as well

as its appetite for risk on behalf of the

board, and evaluated the effectiveness of

the Group’s risk management and internal

control systems, together with the policies

and procedures in relation to ethics,

speaking up (whistleblowing), fraud and

bribery prevention

• Monitored the key risks to the Group in

respect of data and cyber security and

evaluated the effectiveness of its control

environment

Audit Committee report

99Ricardo plc | Annual Report and Accounts 2023/24

Responsibilities and key areas of focus

continued

Internal controls

• Considered significant matters arising from

internal audits performed during the year,

evaluated the effectiveness of the internal

audit function, and reviewed the scope and

available resource for the internal audit

plan in the following year to ensure that it

isappropriate

External audit

• Reviewed the scope and planning of the

external audit, and evaluated the external

auditors’ remuneration, effectiveness,

independence and objectivity, including

consideration of the provision of non-audit

services

Significant financial reporting matters

The Committee considered the following

significant financial reporting matters,

judgements and estimates in approving the

Group financial statements for the year ended

30 June 2024. Following discussions with

senior management and the external auditors,

the Committee approved the disclosure as

set out in Note 1(d) to the Group financial

statements.

Carrying value of intangible assets

The issue: Intangible assets receive careful

attention from the board and Committee, who

need to be satisfied that their carrying value

isappropriate.

The role of the Committee: The board and

the Committee considered the appropriateness

of the cash generating units (CGUs) for

goodwill testing. In addition, they reviewed

and challenged the assumptions made by

management, at both the half year and the

full year, which underpinned the impairment

review, including the FY 2023/24 forecast, the

FY 2024/25 budget and the five-year plan.

Comments and conclusions: Following the

impairment review at year end, the board and

the Committee concluded that no impairment

charges were necessary.

Revenue recognition on fixed-price

contracts

The issue: The Group recognises a significant

proportion of its consulting revenue from the

supply of services under fixed-price contracts,

which may span a number of reporting periods.

Changes in these estimates, including the

recognition of contingency to guard against

project risk, may impact revenue recognition

and the actual outcome may differ to the

estimate made at the reporting date. The

identification and separate accounting of

distinct performance obligations within the

context of a contract is a critical judgement in

recognising revenue, as set out in more detail

in Note 1(d) to the Group financial statements.

The role of the Committee: A summary

of the judgements and estimates taken by

management, including the assessment of

distinct performance obligations and the

methodology to calculate contingency, to

assess the extent to which these contract

assets are recoverable, was reviewed by the

Committee at the February and September

meetings.

Comments and conclusions: The Committee

is satisfied that the Group’s policies and

procedures have been followed to reflect

management’s best estimate of revenue

recognised at the reporting date and that no

individual judgement or estimate is expected

to have a materially different outcome.

Specific adjusting items

The issue: The Group presents specific

adjusting items in the income statement

which include the amortisation of acquired

intangibles, costs relating to major

restructuring programmes, acquisition-

related expenditure and other items which are

deemed to be significant or non-recurring in

nature. The treatment and disclosure of such

items is critical to allow stakeholders to fully

understand the performance of the Group.

The role of the Committee: The Committee

reviewed the papers presented to the board

detailing the nature and composition of the

specific adjusting items. The Committee

challenged the nature and the amount of the

items and evaluated the disclosures made in

respect of the items.

Comments and conclusions: The Committee

is satisfied that the items have been presented

consistently and are in accordance with the

Group’s policy. The Committee is comfortable

that the enhancements made to the disclosure

of such items presents the Group’s results

in a transparent manner. After reviewing the

Annual Report and Accounts, the Committee

is satisfied that the reported and underlying

results are given equal prominence throughout

the document.

Defined benefit pension obligation

The issue: The Company operates the defined

benefit Ricardo Group Pension Fund (RGPF).

The accounting basis of the RGPF is exposed

to changes in the value of its assets and

liabilities. Economic uncertainty has continued

to drive volatility in markets and the value

of the scheme’s assets and liabilities. The

liabilities of the RGPF are also sensitive to

changes in actuarial assumptions, on which

management takes professional advice.

Further detail is set out in Note 32 to the

Group financial statements.

The role of the Committee: The Committee

reviewed the papers presented to the board

at the February and September meetings

and considered the impact of the changes in

assumptions on the pension obligation.

Comments and conclusions: The Committee is

satisfied that the assumptions were reviewed

by senior management and that the value of

the RGPF’s liabilities reflects the best estimate

at the reporting date.

Financial Reporting Council’s (FRC)

Request for Information

In May 2024, a Request for Information in

respect of the financial statements for the

year ended 30 June 2023 was received from

the FRC. This related to the disclosures made

regarding derivatives and the impairment of

non-financial assets. The observations have

been considered by the Directors, resulting

in the reclassification of a £4.2m non-cash

movement in derivatives from financing

cash flows to operating cash flows in the FY

2022/23 cash flow statement. The Directors

are satisfied that other relevant disclosures are

appropriate in the Annual Report and Accounts

for the year ended 30 June 2023.

Audit Committee report continued

100Ricardo plc | Annual Report and Accounts 2023/24

Audit Committee report continued

Significant financial reporting matters

continued

Financial Reporting Council’s (FRC)

Request for Information continued

The review conducted by the FRC was based

solely on the Company’s Annual Report

and Accounts to 30 June 2023. The FRC’s

review does not provide any assurance that

the Company’s Annual Report and Accounts

to 30June 2023 are correct in all material

respects; the FRC’s role is to consider

compliance with reporting requirements,

not to verify the information provided.

Internal audit

The internal audit function is accountable

to the Committee and is considered to be

an effective function as part of the Group’s

approach to risk management.

During the year, we have continued our co-

source internal audit arrangement with PwC

whilst expanding our in-house capabilities.

Business unit audits are typically performed

by the in-house team, with geographic

support from PwC, where required. PwC

was also engaged to carry out Group-wide

audits of key functional areas. The co-source

arrangement with PwC has given the Group

access to specialist internal audit staff for

deployment on higher risk, more complex

audits and independent subject matter

expertise. Responsibility for the internal audit

process and setting the internal audit plan has

remained with the Group’s Head of Internal

Audit, who has independently reviewed and

scrutinised the work performed by PwC.

The approach ensures independence in the

internal audit process and combines external

experience with the sharing of best practice

around the Group.

All internal audit reports submitted during the

year were reviewed by the Committee, and

the status of each remedial action is tracked to

completion to ensure appropriate resolution.

The Audit Committee meets with the Group’s

Head of Internal Audit without the presence of

management. The Committee also monitored

the effectiveness of the Group’s internal audit

function including the approval of the scope

and resources required to carry out work

to be performed and received an external

perspective on internal audit development

from PwC.

External audit

KPMG LLP were re-appointed for the audit

of the Group’s results to 30 June 2024 at the

Group’s AGM on 16 November 2023.

Non-audit services

The board’s policy is that the provision of

permissible non-audit services may only be

undertaken by KPMG in limited circumstances

and is subject to a cumulative cap (which

prohibits non-audit fees exceeding more

than 70% of the average audit fees for the

preceding three-year period). In order to

remove the possibility of a perceived conflict

of auditor objectivity and independence,

KPMG has agreed with the Committee that

no permissible non-audit services will be

provided to Ricardo other than those closely

related to the audit of the Group, such as the

interim review.

Fees for non-audit services paid to the external

auditors during the year were 6.4% of KPMG’s

audit fee (FY 2022/23: 7.8%). The ratio of audit

and non-audit fees and the nature of non-audit

fees are disclosed in Note 10 to the Group

financial statements.

Given the nature and scale of the services

provided by KPMG, the Committee concluded

that these services did not cause any concerns

regarding KPMG’s objectivity or independence.

There are limited instances where Ricardo

enters into business relationships or

joint arrangements with KPMG to pursue

commercial opportunities, either as a prime

contractor, sub-contractor or as part of a

consortium, with either party or a third party

being the project manager. These business

relationships are considered acceptable to the

extent that they remain immaterial to both

organisations and do not compromise the

auditors’ independence.

Independence and effectiveness

Both the board and KPMG have safeguards

in place to ensure the auditors’ objectivity

and independence cannot be compromised.

The Committee supports KPMG in having

the necessary professional scepticism in its

role. KPMG also provides the Committee with

information about policies and processes for

maintaining its independence.

The Committee confirms that during the year

it has maintained formal and transparent

arrangements for considering corporate

reporting, risk management and internal

control and for maintaining an appropriate

relationship with KPMG.

During the year, the Committee carried out its

annual effectiveness review of the external

auditor, which primarily focused on the 2024

audit. This assessment was completed at

the end of the 2024 audit and was based

upon KPMG’s audit findings and responses to

questions from the Committee, together with

input from senior management and finance

personnel. The Committee also met with the

audit partner without management being

present. There were no significant findings

following the review and it was concluded

that the audit process was effective. The

Committee recommended to the board

that their re-appointment be proposed

toshareholders at the 2024 AGM.

Bill Spencer

Chair of the Audit Committee

10 September 2024

101

Ricardo plc | Annual Report and Accounts 2023/24

I am pleased to present the FY 2023/24 Directors’

remuneration report

Russell King|Chair of the Remuneration Committee

Dear Shareholder,

The Remuneration Committee’s decisions during the year have been taken in the context of

sound performance which was in line with the board’s expectations. Revenue from continuing

operations increased by 7% and underlying profit before tax from continuing operations grew in

line with guidance by 9% to £30.5m. The financial year was marked by a strong recovery in profit

in the second half of the year following the successful and accelerated implementation of the

new operating model. Net debt decreased to £59.6m despite the cash cost of earn out payments

relating to the acquisitions of Aither and E3M which have both been fully integrated into the

Group and have performed well. Our end of year order book is also robust. The board has been

particularly impressed by the management of both working capital and costs to improve cash flow.

Shareholders will be asked to approve a final dividend of 8.9p per share in addition to the interim

dividend paid in April 2024 of 3.8p.

The first year of the new Directors’ Remuneration Policy

At the 2023 AGM, the board sought approval for a new Directors’ Remuneration Policy (the Policy).

The new Policy introduced a one-off ‘Accelerator’ share award for each of the Executive Directors

under the Long Term Incentive Plan (LTIP) equal to 100% of their respective salaries at grant.

Following approval of the Policy, these awards were granted, alongside the usual ‘Core’ awards,

subject to performance targets linked to EPS performance and continued service over a three-year

period. The target range for the ‘Accelerator’ awards aligns with the strategic growth target of

doubling operating profit and awards will vest in full only if we achieve a superior level of EPS

performance or ‘stretch’ which is 12% ahead of this strategic growth target. The share ownership

requirement for the Chief Executive Officer was also increased to 250% of salary.

We embarked on an extensive engagement exercise with our largest investors on the Policy well

before the 2023 Annual General Meeting. We received positive feedback from most respondents

and we modified the final proposals in light of the constructive comments received.

There were, however, differing views and hence 22.9% of votes were cast against the Policy

and 20.2% against the amendments to the LTIP. After the AGM we followed up with the few

investors who chose to vote against the resolutions. The board remains satisfied that the new

Policy supports our growth strategy as well as Ricardo’s style and approach. Further details on

theresults of the AGM are available on page 105.

Pay outcomes during the year

Base salary

The Remuneration Committee increased the base salaries of the Chief Executive Officer and the

Chief Financial Officer by 3% from 1 January 2024. The Chair’s fee was also increased by 3%.

Thesalary increases for employees across the Group averaged 5% for the financial year.

Annual bonus

Three financial measures underpin the annual bonus and they are Group underlying profit

beforetax (with a weighting of 40%); value added turnover (20%); and cash conversion (20%).

The remaining 20% of bonus is assessed on the basis of achievement against specified individual

objectives. The details of the targets and performance against them are shown on page 113.

Performance in respect of underlying profit before tax was between target and maximum; value

added turnover performance was below the threshold level; and adjusted cash conversion

was excellent and well above the maximum. As a consequence, and when combined with the

Remuneration Committee’s assessment of performance against the personal objectives set at

the start of the year, the bonus payments were 58% and 59% as a percentage of maximum

for the Chief Executive Officer and the Chief Financial Officer respectively (or 72% and 59% of

salary respectively). One third of the bonus payments will be deferred into share awards which

will vest after a three-year period. The Committee took the view that these outcomes were in

line with overall underlying Group performance and that no discretion was required to make

anyadjustment.

Directors’ remuneration report

Part 1 – Remuneration Committee Chair’s overview and annual statement

102Ricardo plc | Annual Report and Accounts 2023/24

Directors’ remuneration report continued

Part 1 – Remuneration Committee Chair’s overview and annual statement continued

Pay outcomes during the year continued

FY 2022/23 cash flow restatement

The impact of the reclassification of the non-cash movement in derivatives from financing cash

flows to operating cash flows in FY 2022/23 had no impact on the FY 2022/23 bonus payouts.

The vesting in FY 2023/24 of the 2020 LTIP awards

The LTIP awards that vested in November 2023 were made in 2020 in the midst of the pandemic

and as a result the share price at that time was significantly lower than the share price when the

LTIP awards were made the year before. Neither Graham Ritchie, as Chief Executive Officer, nor

Judith Cottrell, as Chief Financial Officer, received a 2020 LTIP award, having joined in 2021 and

2023 respectively.

The adjusted EPS for the year was 33.0p and the target range for the LTIP awards was 25.4p

to 37.6p. The vesting outcome in respect of the EPS was therefore 68%. Over the three-year

performance period, Ricardo was ranked between the median and the upper quartile of the TSR

comparator group. As a result, 73.9% of the shares linked to Ricardo’s TSR performance over the

period vested. Ricardo’s TSR over the period was 42.1% against a median of 18.8%. The overall

vesting outcome was 70%, taking into account the weighting of the measures. EPS accounts for

two-thirds of the weighting and relative TSR one-third. Following the assessment of performance

conditions, the Committee exercised its discretion, in light of the extent of the fall in the share price

between 2019 and 2020, to reduce the vesting levels of the 2020 LTIP awards by 10 percentage

points – see page 114.

Ricardo’s employees and incentives below the board

Ricardo is fortunate to have 3,000 highly skilled employees who every day do extraordinary work

to support our clients.

The Chief Executive Officer has discretion, within parameters agreed by the Committee, to

nominate annually key colleagues for share awards on a non-hierarchical basis. The number

of participants in the LTIP and Ricardo’s other share-based pay arrangements is constantly

under review but at the moment over 100 employees hold share awards granted to them on a

discretionary basis.

About 100 of Ricardo’s most senior employees below the board were granted awards under the

Ricardo three-year Profit Sharing Scheme which was introduced at the start of the financial year.

Profit-related cash payments will be distributed based on annual performance and subject to

Ricardo exceeding our stretch goals for the year and delivering absolute profit which aligns to our

‘above stretch’ targets. The cash payments are capped as a percentage of salary with the maxima

ranging from 10% to 120% of salary and are determined at the end of the three-year period.

Women currently make up 29% of our UK employees and, although they remainunder-represented

in leadership roles, the Ricardo Group has made significant progress and, at the time of publishing,

there are five women in the executive team of 11 in total. The Ricardo Group continues to strive

towards a more diverse workforce and an even more inclusive culture. The Group is introducing

a new job architecture and reward framework which will not only enhance the management of

internal equity and external competitiveness but also career development and talent attraction

and retention.

The Remuneration Committee members are well informed about and involved in the engagement

of Ricardo’s employees. Malin Persson, who sits on the Remuneration Committee, leads the work

of the board on workforce engagement – see pages 92-93 – and is well placed to answer any

questions about how executive remuneration aligns with wider Company pay policy.

The operation of the Policy in FY 2024/25

The operation of the Policy in FY 2024/25 is set out in detail on page 121. In short, the

LTIPperformance measures will remain the same – EPS, relative TSR and an ESG measure.

TheCommittee is reviewing the approach to the ESG measure and target setting to ensure that

it is fair and also stretching. Details of the ESG measure and targets will be published via RNS

once they have been approved by the Committee and communicated to the LTIP participants.

Thedetails of the EPS target range can be found on page 122. The EPS range fully aligns with our

five-year plan to double operating profit.

Conclusion

I hope you will support the Directors’ remuneration report. If you have any questions or any

comments on the Directors’ remuneration report, please do contact me through Harpreet Sagoo,

Ricardo’s Group Legal Counsel and Company Secretary, at Harpreet.Sagoo@ricardo.com.

Russell King

Chair of the Remuneration Committee

10 September 2024

103

Ricardo plc | Annual Report and Accounts 2023/24

Summary of the key elements of Executive Directors’ pay in FY 2023/24

The following table provides a summary of the key elements of Graham Ritchie’s (CEO), JudithCottrell’s (CFO) and IanGibson’s (former CFO) pay in FY 2023/24.

Base salary • CEO: £498,623 (from 1 January 2024)

• CFO: £375,950 (from 1 January 2024)

• Former CFO: £365,815 (from 1 January 2023)

Other benefits • Company car allowance: £12,000

• Private fuel

• Private medical insurance

• Life assurance

Pension • 7% of salary (over lower earnings limit)

Annual bonus

withdeferral of

one-third of any

bonus earned

• Maximum opportunity of 125% of salary (CEO) and 100% of salary (CFO)

• Based on PBT (40%), value added turnover (20%), adjusted cash conversion (20%), and personal targets (20%)

• One-third of any bonus to be deferred into shares for three years

Long Term Incentive

Plan shares

(1)

• Share awards with a face value of 150% and 130% of base salary were granted to the CEO andCFO, respectively

(2)

• A one-off ‘Accelerator’ LTIP award was also granted in 2023 equal to 100% of salary for both the CEO and CFO, bringing the maximum opportunity up to 250% of

basesalary for the CEO and 230% for the CFO

(3)

Share ownership

and retention policy

• In-post: a minimum of 250% of base salary for the CEO and a minimum of 200% of salary for the CFO

• Post-cessation of employment: a minimum of 250% (CEO)/200% (CFO) of salary (or holding at cessation if lower) for the first 12 months and half of this for the second

12-month period

• Net value of 50% of vested shares under LTIP/DBP to be retained until holding requirement met

• Year-end holding for Graham Ritchie was 70% of base salary

(4)

• Year-end holding for Judith Cottrell was 22% of base salary

(4)

• Shareholding for Ian Gibson was 149% of base salary

(5)

(1) Once vested, the awards granted under the Long Term Incentive Plan will be subject to a holding period of two years and 50% of the vested shares (net of tax) will be retained until the share ownership requirement

has been met.

(2) Face value of the ‘Core’ award of Long Term Incentive Plan shares granted in November 2023 was 150% and 130% of salary for the CEO and CFO respectively. These awards are subject to three-year performance

conditions: 60% underlying EPS growth, 30% TSR vs. FTSE Small Cap Index (excluding financial services companies and investment trusts) and 10% achievement of specific ESG targets.

(3) The face value of the ‘Accelerator’ award of Long Term Incentive Plan shares granted in November 2023 was 100% of salary for both the CEO and CFO. These awards are also subject to a three-year performance

condition based on underlying EPS growth above the EPS maximum target applicable to the ‘Core’ awards.

(4) Calculated by reference to the number of beneficially owned shares, including unvested shares not subject to performance conditions and any vested shares subject to a holding period, both on anet-of-tax basis,

ashare price of 487.0p per share (2023: 572.0p) and salaries as at 30June2024.

(5) Shareholding for Ian Gibson as at 1 April 2024, being the date on which he ceased employment with the Company after stepping down from the board of Directors on 13 September 2023, with percentage

calculated by reference to that shareholding, salary at cessation of employment and a share price of 457.0p, being the closing share price on the dealing day immediately preceding the termination date.

Directors’ remuneration report continued

Part 1 – Remuneration Committee Chair’s overview and annual statement continued

104Ricardo plc | Annual Report and Accounts 2023/24

Directors’ remuneration report continued

Part 2 – Annual report on remuneration

This section of the report explains how Ricardo’s Directors’ Remuneration Policy, which was

approved in November 2023, has been implemented during the financial year ended 30 June 2024.

The paragraphs that have been audited in this annual report on remuneration are indicated.

The Remuneration Committee

During the year under review, the Remuneration Committee (the Committee) was chaired by

Russell King. The Committee also comprised Mark Clare, Laurie Bowen (until she stepped down

from the board on 31May2024), Malin Persson, Bill Spencer andJack Boyer.

The Non-Executive Directors serving on the Committee have no personal financial interest (other

than as shareholders) in matters to be decided, no potential conflicts of interest arising from

cross-directorships and no day-to-day involvement in running the business. Biographical details of

the members of the Committee are shown on pages 86-87; details of attendance at the meetings

of the Committee during the year ended 30June2024 are shown on page 90.

Advisors to the Remuneration Committee

During the year, FIT Remuneration Consultants and Shepherd and Wedderburn (who have been

jointly appointed by the Committee following a competitive tender process) provided independent

advice on matters under consideration by the Committee and updates on legislative requirements

and market practice.

FIT Remuneration Consultants’ fees for this work amounted to £56,084 (calculated based on

a mixture of fixed fees and time spent). Shepherd and Wedderburn’s fees for advising the

Committee amounted to £74,160 (also calculated based on a mixture of fixed fees and time spent).

Shepherd and Wedderburn also advises Ricardo on the design, implementation and operation of

its various share incentive plans. FIT Remuneration Consultants are members of the Remuneration

Consultants Group and their work is governed by its Code of Conduct. Shepherd and Wedderburn

is a law firm and is regulated accordingly. Having carefully considered all relevant factors and

using its judgement, the Committee is satisfied that the advice provided on executive remuneration

is objective and independent and that no conflict of interest arises.

The Committee also seeks internal support from Group Human Resources and the Group

General Counsel and Company Secretary, as appropriate. The Chief Executive Officer attends the

Committee’s meetings by invitation and is consulted in respect of certain proposals. The Chief

Financial Officer may also be invited to attend meetings to address specific matters. Neither the

Chief Executive Officer nor the Chief Financial Officer is consulted or involved in any discussions

inrespect of their own remuneration.

Voting outcome at AGM

The AGM for the financial year ended 30 June 2023 was held on 16 November 2023. The Directors’

Remuneration Policy in operation during the year was approved by shareholders at the 2023 AGM.

The results of the votes on the remuneration report and Remuneration Policy are set out below.

Annual report on remuneration

approved at 2023 AGM

Directors’ Remuneration Policy

approved at 2023 AGM

Votes

(1)

% Number % Number

For, including discretion 97.31 47,457,971

77.12

37,722,908

Against 2.69 1,312,134

22.88

11,191,768

Total votes cast 100.00 48,770,105

100.00

48,914,676

Withheld 149,965 5,394

(1) Excludes withheld votes. A vote withheld is not a vote in law and so is not counted for the purposes

of the calculation of the proportion of votes ‘for’ and ‘against’ a resolution.

The Committee consulted with our largest shareholders as part of the process for developing the

Directors’ Remuneration Policy that was voted on at the 2023 AGM. Once again, we would like to

thank all shareholders who participated for their constructive feedback and guidance. Although

a range of views were received, the responses were generally positive. Following this exercise,

and taking into account the feedback received, a number of changes were made to the original

proposal. While this amended proposal was approved by a significant majority, the Committee

did note the level of votes cast against the resolution to approve the Directors’ Remuneration

Policy. Following the AGM the Committee engaged once more with all the investors who voted

against the resolution to further understand their views. The Committee remains of the view that

the Directors’ Remuneration Policy remains appropriate for Ricardo and is in the best interests of

shareholders. At the same time, the Committee recognises the concerns of some shareholders and

that views on pay vary widely. The Committee appreciates the time that shareholders have given

to Ricardo on executive remuneration matters and will continue to take their views into account

atall times.

105

Ricardo plc | Annual Report and Accounts 2023/24

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Part 2 – Annual report on remuneration continued

Performance at a glance in FY 2023/24 compared with FY 2022/23

Bonus performance outcomes Long-term incentive performance outcomes in respect of awards vesting in FY 2023/24

Underlying PBT (adjusted) Adjusted cash conversion Value added turnover Underlying EPS (adjusted) 3-year TSR growth

£30.5m

(FY 2023/24)

119%

(FY 2023/24)

£304.5m

(FY 2023/24)

33.0p

(1)

for year to 30 June 2023

(between threshold and

max vesting level)

42.1%

(between median and

upper quartile to October 2023)

£26.6m

(FY 2022/23)

70%

(2)

(FY 2022/23)

£291.1m

(FY 2022/23)

31.5p

for year to 30 June 2022

(below threshold vesting level)

(25.8)%

(below median to October 2022)

(1) Adjusted for the disposal of Ricardo Software.

(2) Restated for the impact of the reclassification of a non-cash movement in derivatives. See Note 37 to the Group Financial Statements.

The closing mid-market price of the Company’s shares on 30 June 2024 was 487.0p per share (2023: 572.0p). The highest closing price during the year was 610.0p per share and the lowest closing price

during the year was 404.0p per share.

Pay at a glance in FY 2023/24

Fixed remuneration (salary, benefits and pension) Bonus Face value at grant of vested long-term incentives Share price growth above face value of vested long-term incentives

Former CFO Ian Gibson

(2)

CFO Judith Cottrell

(1)

Single total figure (£’000)

0 100 200 300 400 500

473

454

600 700 800 900 1,000

FY 2023/24

FY 2022/23

FY 2023/24

FY 2022/23

FY 2023/24

FY 2022/23

CEO Graham Ritchie

403 70

102

411

554

563

222

141

360

269

633

695

923

(1) Judith Cottrell was appointed to the board on 1 July 2023.

(2) The long-term incentive awards granted in 2019 to Ian Gibson lapsed in full in FY 2022/23 respectively. As a result, the face value at grant of this award and any share price appreciation has not been shown in the

above table.

106Ricardo plc | Annual Report and Accounts 2023/24

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Part 2 – Annual report on remuneration continued

Single total figure of remuneration table (audited)

The table below sets out the remuneration received by the Executive Directors and Non-Executive Directors during FY 2023/24.

Fixed remuneration Variable remuneration Totals

Financial year

Base salary

and fees

£’000

Benefits

(1)

£’000

Pension

£’000

Bonus

(cash element)

(2)

£’000

Bonus (deferred

element)

£’000

LTIP

(3)

£’000

Total

£’000

Total fixed

£’000

Total variable

£’000

Executive Directors

Graham Ritchie 2023/24 491 38 34 240 120 — 923 563 360

2022/23 477 44 33 94 47 — 695 554 141

Judith Cottrell

(4)

2023/24 370 16 25 148 74 — 633 411 222

2022/23 — — — — — — — — —

Ian Gibson

(5)

2023/24 91 5 6 — — 352 454 102 352

2022/23 360 18 25 47 23 — 473 403 70

Non-Executive Directors

Mark Clare 2023/24 173 2 — — — — 175 175 —

2022/23 113 1 — — — — 114 114 —

Russell King 2023/24 62 1 — — — — 63 63 —

2022/23 60 1 — — — — 61 61 —

Laurie Bowen

(6)

2023/24 49 32 — — — — 81 81 —

2022/23 52 65 — — — — 117 117 —

Malin Persson

(7)

2023/24 71 5 — — — — 76 76 —

2022/23 60 10 — — — — 70 70 —

Bill Spencer 2023/24 62 2 — — — — 64 64 —

2022/23 60 1 — — — — 61 61 —

Jack Boyer 2023/24 53 1 — — — — 54 54 —

2022/23 52 1 — — — — 53 53 —

Total 2023/24 1,422 102 65 388 194 352 2,523 1,589 934

2022/23 1,234 141 58 141 70 — 1,644 1,433 211

(1) Further information on benefits for the Executive Directors can be found on page 111. The benefits include reimbursement of expenses incurred (including any associated personal tax charges) while travelling for

business and committee meetings.

(2) Further details of the annual bonus can be found from page 111.

(3) This column shows the value of shares in respect of the LTIP awards that vested in FY 2023/24. Further details of this, including confirmation of the amount of the vesting value that was attributable to share price

appreciation and a summary of any discretions that were exercised, are provided on page 114.

(4) Judith Cottrell was appointed to the board on 1 July 2023.

(5) Ian Gibson stepped down as an Executive Director on 13 September 2023 and ceased employment with the Company on 1 April 2024. Details of his remuneration for the period following 13 September 2023 are

disclosed on page 121.

(6) Laurie Bowen stepped down as a Director on 31 May 2024. Her benefits to that date consisted of travel and accommodation expenditure.

(7) Malin Persson’s benefits consisted of travel and accommodation expenditure. Malin received additional fees for her roles as Senior Independent Director and Chair of the Responsible Business Committee.

(8) Sir Terry Morgan has been excluded from the table as he was not a Director of the Company during FY 2023/24, therefore the total figure for FY 2022/23 will differ to the figure disclosed in last year’s Directors’ remuneration

report. In FY 2022/23, he received total remuneration of £64,000, split between base salary and fees of £63,000 and benefits of £1,000.

(9) The figures in this table and throughout the report have been rounded so there may appear to be slight inconsistencies between this and some of the other tables in this Annual Report as a result.

107Ricardo plc | Annual Report and Accounts 2023/24

Directors’ remuneration report continued

Part 2 – Annual report on remuneration continued

Single total figure of remuneration table (audited) continued

Following the year end, the Committee considered whether there were any circumstances that

could or should result in the recovery or withholding of any sums pursuant to the Company’s

clawback arrangements. The conclusion reached by the Committee was that it was not aware

ofany such circumstances.

Pay for performance – TSR performance graph and CEO pay history

TSR from the year ended 30 June 2014 to 30 June 2024

Ricardo TSR FTSE Small Cap (ex inv. trusts) TSR FTSE All Share Support Services TSR

Total Shareholder Return (rebased to £100)

At 30 June each year

2014 2015 2016

2017 2024202320222021202020192018

100

150

200

250

300

The chart above shows Ricardo’s TSR performance for the past 10 years against the FTSE Small

Cap index (excluding investment trusts). In the Committee’s opinion, the FTSE Small Cap index

(excluding investment trusts) represents an appropriate index against which the Company should

be compared when considering the Company’s size. The FTSE All Share Support Services index is

also shown for information. The remuneration of the Chief Executive Officer for the same period is

shown in the table to the right.

Financial

year

Group CEO

Single figure

of CEO’s total

remuneration

£’000

Annual variable

element award

rates against

opportunity

Long-term

incentive vesting

rates against

maximum

opportunity

2023/24 Graham Ritchie 923 58 n/a

(1)

2022/23 Graham Ritchie 695 23 n/a

(1)

2021/22 Graham Ritchie 692 52 n/a

(1)

2021/22 Dave Shemmans

(2)

350 18 —

2020/21 Dave Shemmans 813 23 —

2019/20 Dave Shemmans 656 — —

2018/19 Dave Shemmans 998 25 40

2017/18 Dave Shemmans 1,411 43 74

2016/17 Dave Shemmans 1,612 — 100

2015/16 Dave Shemmans 2,291 63 100

2014/15 Dave Shemmans 1,367 59 67

(1) Graham Ritchie commenced employment with the Group on 1 October 2021 and as a result did not

holdany long-term incentive awards that vested during the year.

(2) Dave Shemmans ceased to be a Director on 30 September 2021.

Directors’ remuneration compared to employees

The table on page 109 shows the percentage change in the Directors’ salary/fees, taxable benefits

and annual bonus for each financial year between the year ended 30 June 2019 and the year

ended 30June2024 compared with the percentage change in each of those components of pay

for all employees of the Group on a full-time equivalent basis. Dave Shemmans, former Chief

Executive Officer, Mark Garrett, former Chief Operating Officer, and Sir Terry Morgan, former

board Chair, have been excluded from the table on page 109 as they were not Directors during

FY2023/24. Details of their percentage change in base salary/fees, taxable benefits and annual

bonus are still available in previously published Annual Report and Accounts. For Dave and Sir

Terry, please refer to page 159 of last year’s Annual Report and Accounts. For Mark, please refer

to page 108 of the 2020 Annual Report andAccounts.

108

Ricardo plc | Annual Report and Accounts 2023/24

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Directors’ remuneration compared to employees continued

A = Base salary/fees

B = Taxable benefits

(1)

C = Annual bonus

(1, 2)

Percentage change in FY 2023/24

compared with FY 2022/23 (%)

Percentage change in FY 2022/23

compared with FY 2021/22 (%)

Percentage change in FY 2021/22

compared with FY 2020/21 (%)

Percentage change in FY 2020/21

compared with FY 2019/20

(3)

(%)

Percentage change in FY 2019/20

compared with FY 2018/19 (%)

A B C A B C A B C A B C A B C

All employees 5 — 83 3 — (62) 3 — 556 — — n/a 3 — (100)

Executive Directors

Graham Ritchie

(4)

3 (14) 155 35 301 (54) n/a n/a n/a n/a n/a n/a n/a n/a n/a

Judith Cottrell

(5)

n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a

Ian Gibson

(6, 7)

(75) (72) (100) 3 12 (71) 1 3 403 1 (9) n/a 3 — (100)

Non-Executive Directors

Mark Clare

(8)

53 100 n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a

Russell King

(9)

3 — n/a 2 n/a n/a — — n/a 28 (100) n/a n/a n/a n/a

Laurie Bowen

(10, 11, 12)

(6) (51) n/a 2 75 n/a — n/a n/a 1 (100) n/a 3 (39) n/a

Malin Persson

(13)

9 (50) n/a 2 78 n/a — 232 n/a 7 (57) n/a 14 (52) n/a

Bill Spencer

(9)

3 — n/a 2 n/a n/a — — n/a 1 (100) n/a 3 — n/a

Jack Boyer

(9)

2 — n/a 2 n/a n/a — — n/a 21 (100) n/a n/a n/a n/a

(1) A (100)% change shows the relevant element of remuneration reducing to zero from the previous year.

(2) The Non-Executive Directors are not eligible to participate in the bonus scheme. The large percentage change in annual bonus between FY 2020/21 and FY 2021/22 reflects the business recovering from the

COVID-19 pandemic.

(3) The reduction in taxable benefits for the Non-Executive Directors reflects a lower level of travel and associated costs compared to the prior year. The change in bonus for Ian Gibson between FY 2020/21 and

FY2019/20 cannot be shown as no annual bonus was paid out in respect of FY 2019/20.

(4) Graham Ritchie commenced employment with the Group on 1 October 2021.

(5) Judith Cottrell commenced employment with the Group on 1 July 2023.

(6) Ian Gibson stepped down from the board on 13 September 2023 and ceased employment on 1 April 2024.

(7) The large percentage change in annual bonus for Ian Gibson between FY 2020/21 and FY 2021/22 reflects that a bonus of 13.7% of annual salary was paid in respect of FY 2020/21. While not included in the table

above, as explained on page 112 of the 2022 Annual Report and Accounts, Ian Gibson’s cash in lieu of pension contributions reduced with effect from 1 January 2022 from 20% of salary (above the lower earnings

limit) to 7% of salary (above the lower earnings limit).

(8) Mark Clare was appointed as a Director of the Company on 17 November 2022.

(9) The year-on-year change in taxable benefits for Bill Spencer, Jack Boyer and Russell King between FY 2021/22 and FY 2022/23 cannot be shown as no taxable benefits were received in respect of the 2021/22

financial year.

(10) The increase in taxable benefits for Laurie Bowen between FY 2021/22 and FY 2022/23 largely reflects an increase in travel and associated costs since the prior financial year.

(11) The year-on-year change in Laurie Bowen’s taxable benefits between FY 2020/21 and FY 2021/22 cannot be shown as no taxable benefits were received in respect of the 2020/21 financial year.

(12) Laurie Bowen stepped down from the board on 31 May 2024.

(13) Malin Persson received an additional fee for her role as Chair of the Responsible Business Committee. The increase in taxable benefits for Malin between FY 2020/21 and FY 2021/22 largely reflects an increase in

travel and associated costs since the prior financial year.

109Ricardo plc | Annual Report and Accounts 2023/24

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Pay ratio information in relation to Chief Executive Officer’s remuneration

Year

Method of

calculation

adopted

25th percentile

pay ratio

(CEO : UK

employees)

Median pay ratio

(CEO : UK

employees)

75th percentile

pay ratio

(CEO : UK

employees)

2023/24 Option A 25 : 1 19 : 1 13 : 1

2022/23 Option A 20 : 1 15 : 1 10 : 1

2021/22 Option A 32 : 1 24 : 1 16 : 1

2020/21 Option A 25 : 1 18 : 1 12 : 1

2019/20 Option A 19 : 1 14 : 1 10 : 1

The median, 25th percentile and 75th percentile figures used to determine the above ratios were

calculated by reference to the full-time equivalent annualised remuneration (comprising salary,

benefits, pension, annual bonus and long-term incentives) of all UK-based employees of the Group

as at 30 June 2024 (i.e. ‘Option A’ under the applicable regulations). The Committee selected this

calculation methodology as it was felt to produce the most statistically accurate result available

toit.

The median ratio of the annual total pay of Graham Ritchie, who served as the Chief Executive

Officer throughout year, has increased to 19:1 as a result of the increase in his total realised pay

in line with a higher annual bonus payment for the year-ending 30 June 2024. We expect that the

ratio in future years will be further affected by the levels of pay-outs under the incentive plans

and changes in share price. His first award under the Long-Term Incentive Plan is due to vest

during FY 2024/25. His variable pay (both long-term and short-term) also accounts for a significant

proportion of the Chief Executive Officer’s pay. By contrast, fixed pay accounts for a much higher

proportion of total pay for the majority of Ricardo’s employees.

The ratios shown for all the quartiles have been calculated on the same basis. We take the view

that the median pay ratio which results from Ricardo’s desire to pay for performance, to pay

competitively and to pay fairly is consistent with the pay, reward and progression policies for

the Company’s UK employees taken as a whole. The Committee reviews the pay of all Ricardo’s

employees to ensure the alignment of the Executive Directors’ pay with pay across the Group.

Pay details (on a full-time equivalent annualised basis where appropriate) for the individuals

whose FY 2023/24 remuneration is at the median, 25th percentile and 75th percentile amongst

UK-based employees are as follows:

FY 2023/24 25th percentile Median 75th percentile

Salary £33,125 £40,639 £65,787

Total pay and benefits £36,487 £47,729 £69,945

Relative importance of pay spend

The following table sets out the total amounts spent on remuneration for all employees,

thedividends declared and other significant distributions to shareholders in FY 2022/23 and

FY2023/24.

FY 2023/24 FY 2022/23 % change

Total remuneration spend (£m) 214.8 206.8 4

Key management remuneration as a

percentage of total remuneration spend

(1)

(%) 3.2 3.2 —

R&D expenditure

(2)

(£m) 11.3 14.6 (23)

Distributions to shareholders

(3)

(£m) 7.9 7.4 7

(1) The key management personnel are the board of Directors, together with the Managing Directors who

have the authority and responsibility for planning, directing and controlling the Group’s activities and

resources within the market sectors in which the Group operates. Further details on key management

remuneration can be found in Note 31. This measure was chosen in order to give greater context for

the scale of key management remuneration within Ricardo.

(2) Further details on R&D expenditure can be found on page 25. This measure was chosen because of

the importance to Ricardo’s business of developing its R&D portfolio.

(3) The only distributions made by the Company over these years were in the form of dividends.

(4) The prior year distributions to shareholders has been updated to reflect the true-up of the final

dividend paid.

110Ricardo plc | Annual Report and Accounts 2023/24

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Detailed breakdown of pay in FY 2023/24

Base salary

As described in the policy section on page 126, a number of factors are taken into account when

salaries are reviewed, principally: market levels of total pay for comparable roles in companies

of a similar size, complexity and sector; the individual’s experience, scope of responsibilities and

performance; and the salary increases for colleagues across the Group. The current salary levels

for the Executive Directors, which reflect a 3% increase from the previous year, are set out in the

table below. The salary for Ian Gibson, former CFO, as at 1 January 2023, has also been included

for completeness. The Group-wide average increase approved in FY 2023/24 was 5%.

Executive Director Salary

Graham Ritchie £498,623 (from 1 January 2024)

Judith Cottrell

(1)

£375,950 (from 1 January 2024)

Ian Gibson (former CFO)

(2)

£365,815 (from 1 January 2023)

(1) Judith Cottrell joined the board on 1 July 2023 on a salary of £365,000

(2) Ian Gibson stepped down from the board on 13 September 2023 and ceased employment on

1April2024. Details of the actual amount paid to him during FY 2023/24 up until 13 September

2023 is set out in the single total figure table on page 107 and payments over the remainder of the

financial year are shown on page 121.

Other benefits (audited)

The Company provides other cash benefits and benefits in kind to its Executive Directors. These

include a company car or cash alternative, private fuel, private medical insurance, life assurance

and permanent health or disability insurance. The car allowance levels are set at £12,000 p.a. for

the Executive Directors.

Non-Executive Directors can recover travel and accommodation expenses for carrying out their

duties and do not receive any other benefits. If tax is payable by a Non-Executive Director on

expenses received, these may be paid gross of tax.

Pension (audited)

In accordance with the Directors’ Remuneration Policy, the Company operates a defined

contribution scheme pursuant to which all UK employees are entitled to receive Company pension

contributions. For Executive Directors, the Company’s pension contributions are capped at the

maximum payable to the wider UK workforce population (currently 7% of basic salary). The

following table provides details of payments made in FY 2023/24.

Executive Director

Employer contributions

payable in the year

£’000

Cash in lieu

£’000

Graham Ritchie — 34

Judith Cottrell 10 16

Ian Gibson (former CFO)

(1)

— 6

(1) Ian Gibson stepped down from the board on 13 September 2023 and ceased employment on

1April2024.

Annual performance-related bonus (audited)

Introduction

For the year ended 30 June 2024, the maximum annual performance-related bonus opportunity

was 125% of salary for the Chief Executive Officer and 100% of salary for any other Executive

Director. To determine the amount of bonus payable for the year, the Committee assessed the

level of achievement against the financial measures and targets set in respect of:

• Group underlying profit before tax (40%)

• Value added turnover (20%)

• Adjusted cash conversion (20%)

• The achievement of specified individual objectives (20%)

The choice of these measures, and their respective weightings for each individual, reflected the

Committee’s belief that any incentive compensation should be tied both to the overall performance

of the Group and to those areas of the business that the relevant individual can directly influence.

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Annual performance-related bonus (audited) continued

Details of financial targets

Adjusted cash conversion is defined as underlying cash generated from operations (excluding

defined benefit pension scheme payments and the impact of derivative accounting) divided

by underlying EBITDA. The definition of ‘underlying’ EBITDA excludes specific adjusting items

comprising amortisation of acquired intangible assets, acquisition-related expenditure and

reorganisation costs. On-target performance is set at the budgeted adjusted cash conversion,

i.e.budgeted underlying cash from operations, adjusted for the items above, divided by budgeted

underlying EBITDA. Threshold and maximum adjusted cash conversion targets are calculated

based on performance below and above budget respectively.

Value added turnover is defined as revenue (net of pass-through) less external material costs.

On-target performance is set at budgeted Group value added turnover. Threshold and maximum

value added turnover targets are also calculated based on performance above and below the

budget.

The financial targets for FY 2023/24 (details of which are provided on page 113) were set by the

Committee after taking into account several factors such as the business plan, management’s

expectations and brokers’ forecasts.

A sliding scale of targets for each financial measure of the Group was also set at the start of

FY2023/24:

Performance achieved Element payable

Threshold 20%

On-target 50%

Maximum 100%

Between any two performance levels Sliding scale between the above percentages

Details of personal objectives

The Committee, supported by the Chair of the board in the case of the Chief Executive Officer,

and supported by the Chief Executive Officer in the case of Chief Financial Officer and members

of the leadership team, set the personal objectives at the start of the year. The Committee

usually identifies ‘strategic areas’ which each Executive Director is asked to focus on and seeks

to ensure that all personal objectives are specific, measurable and are indirect drivers of financial

performance and value creation. In the past, it has set five to six objectives and weighted them in

accordance with their relative importance. From FY 2022/23, the Committee determined that only

one of these objectives should be linked to a bonus pay-out for achieving personal objectives. The

remainder continue to be assessed as part of the regular performance review programme run by

the Nomination Committee. At the end of the year, based on a formal and qualitative assessment

of performance against the bonus objective, the Committee decides how well each individual has

performed overall.

The objective set by the Committee for the purposes of the bonus plan for the Executive Directors

was to: continue to transform the Group’s service portfolio in line with the board-approved

strategy, delivering the transition from Established Mobility to Environmental and Energy

Transition; continue to create an efficient operating model that attracts talent and engagement

to deliver growth; and modernise systems and processes laying the foundation of accelerating

margin expansion over the five-year plan.

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Detailed breakdown of pay in FY 2023/24 continued

Annual performance-related bonus (audited) continued

Committee’s assessment of achievement levels and determination of bonuses payable

The following table summarises the bonus outcomes for FY 2023/24. No bonus was paid to the former CFO, Ian Gibson, in respect of FY 2023/24 in light of his cessation of employment on 1 April 2024.

Weighting

(% of maximum

opportunity)

Performance required Actual performance outturn

Pay-out

(as % of maximum opportunity)

Measure Threshold On-target Maximum CEO CFO CEO CFO

Underlying profit before tax 40 £26.9m £29.9m £32.9m £30.5m £30.5m 24 24

Value added turnover 20 £308.7m £324.9m £341.1m £304.5m £304.5m — —

Adjusted cash conversion 20 88% 93% 98% 119% 119% 20 20

Personal objectives 20 0% 75% 100% 69% 75% 14 15

Total pay-out (% of maximum opportunity) = (a) 58 59

Maximum opportunity (% of base salary) = (b) 125 100

Total pay-out (% of base salary) = (a) x (b) 72 59

The performance of the Group over the year included a 9% increase in underlying profit before tax to £30.5m (2023: £27.9m). This was between the on-target and maximum range set and therefore the

resulting bonus outturn was 60% of the maximum payable for this element of bonus or 24% of the overall bonus maximum opportunity.

The Group value added turnover for the year was £304.5m, which was below the threshold set and so no bonus was achieved for this element.

The Group underlying cash conversion for the year was 119% (2023: 67% (restated)). The Group cash from operations was adjusted by £0.8m to remove pension deficit payments and by £(0.9)m to

remove the impact of settlement of derivatives, in line with the Group’s bonus principles, resulting in an adjusted cash conversion of 119%. This was well above the maximum of the target range set

andhence the bonus outturn for Group adjusted cash conversion was achieved in full.

The Committee carried out a detailed and rigorous review of the achievement of personal objectives and determined that these had been achieved at a level of 69% and 75% for Graham Ritchie and

Judith Cottrell respectively.

Examples of performance outcomes against personal objectives are as follows:

Graham Ritchie Significant progress has been made in creating a more flexible resourcing model in A&I with strong profit momentum being created in H2. In addition, the operating model has

been developed to align functional teams across the Group. This creates a more efficient cost base going forward, but more importantly establishes consistent enablers for our

growth for our five-year plan. Good progress has also been made in the cultural transition of the business with improved diversity within the executive team, and greater focus

on leadership talent, and learning and development across the Group.

Judith Cottrell Excellent progress has been made in establishing operational and financial reporting to develop a stronger performance management culture. In addition, the operating model

has been developed to align functional teams across the Group. This creates a more efficient cost base going forward, but more importantly establishes consistent enablers for

our growth for our five-year plan. Cash performance has also been very strong with increased focus on billing and collection across the Group.

One-third (approximately 33%) of the bonus paid to an Executive Director, including former Executive Directors, is deferred into ordinary shares, via the DBP.

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Long-term incentive awards vesting during the financial year (audited)

Awards granted under the LTIP in November 2020 vested in part in November 2023. The performance conditions applicable to these awards are summarised below:

Relative TSR portion (one-third) Underlying EPS (two-thirds)

Relative TSR performance against the

FTSE Small Cap (excl. financial services

companies and investment trusts) Vesting level (%) Underlying EPS (adjusted)

(1)

Vesting level (%)

Below median — Less than 25.4p —

Median 25 25.4p 15

Upper quartile (or above) 100 Equal to or greater than 37.6p 100

Between median and upper quartile Sliding scale between the above percentages Between 25.4p and 37.6p Sliding scale between the above percentages

(1) The EPS targets were adjusted for the impact of the Software disposal made during FY 2022/23 which resulted in the EPS targets being 3.1p below the original targets set.

Over the three-year performance period, Ricardo was ranked between the median and the upper quartile of the TSR comparator group, giving a vesting level for this portion of 73.9%. Ricardo’s TSR over

the period was 42.1% against a median of 18.8% and an upper quartile of 87%. The adjusted EPS for the year was 33.0p, giving a vesting outcome of 68%.

Following the assessment of performance conditions, the Committee considered whether the relevant participants might unduly benefit from a ‘windfall gain’ on these awards. Taking into account the fall

in share price in 2020 at the time the awards were granted (in comparison to the prior year) and the share price movements in the period since, the Committee determined that the vesting levels should

be reduced by 10 percentage points.

The following table shows, for Ian Gibson (former Chief Financial Officer), details of the LTIP award granted to him on 27 November 2020 that vested during the year. The Chief Executive Officer and

current Chief Financial Officer did not participate in the vestings.

No. of shares originally granted Date of vesting

% of award to vest

as per performance

condition assessment

Adjusted vesting %

to take account

of ‘windfall’ gains No. of shares that vested

(1)

Value of shares vesting

(2)

Amount of vesting

value attributable to

share price appreciation

(3)

126,341 27/11/23 69.97 59.97 75,762 £352,293 £83,473

(1) Following the vesting, the above award became subject to a two-year holding period during which the shares will not be released. The holding period will continue to operate notwithstanding Ian’s cessation of

employment.

(2) The value shown in this column (which is included in the single total figure table) has been calculated by multiplying the number of shares that vested by £4.65, being the closing mid-market price of a share in the

Company on the date such vesting occurred.

(3) The value shown in this column has been calculated by (i) multiplying the grant date face value of the relevant award (as disclosed in previous Directors’ remuneration reports) by the above noted adjusted vesting

%; and (ii) deducting that amount from the ‘value of shares vesting’ figure.

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Long-term incentive awards granted during the financial year (audited)

LTIP awards were granted on 16 November 2023 under the rules of the Ricardo plc 2020 Long Term Incentive Plan to the Executive Directors on the basis set out below. As disclosed in last year’s

Directors’ remuneration report, the Committee approved the grant of ‘Core’ LTIP awards of 150% and 130% of salary respectively for the Chief Executive Officer and the Chief Financial Officer,

andafurther one-off award of 100% of salary to each Executive Director, known as ‘Accelerator’ awards.

‘Core’ awards granted during the financial year

Type of award

Basis of award

(% of salary) Number of shares

Face value of

award (£)

(1)

Threshold level of

vesting (% of maximum) End of performance period

Graham Ritchie

Performance

(2)

150 161,223 £726,148

15 days after

release of preliminary

results announcement

for FY 2025/26 (expected

to be September 2026)

Judith Cottrell 130 105,350 £474,496

(1) The face value of the award is based on the average of the share prices over the five days up to and including 15 November 2023 (450.4p).

(2) As the LTIP awards are granted in the form of performance share awards, no ‘exercise price’ is payable in order to receive any vested shares. This position has not changed since the awards were granted.

The vesting of these ‘Core’ awards will be based on Ricardo’s underlying EPS growth (60%), three-year relative TSR performance (30%) and the achievement of specific ESG targets (10%) summarised

in the table on page 116. The relative TSR measure was chosen by the Committee to link the remuneration of Executive Directors to the performance experienced by shareholders and to further align

their interests. The underlying EPS measure was chosen to reward sustained profit growth and align with one of our key performance indicators. The Committee chose the weighting between TSR and

underlying EPS growth to signal the importance of increasing Ricardo’s profitability as measured by underlying EPS and to give the management team a stronger incentive to drive profitable performance

which should in turn lead to increased shareholder value. The ESG targets relate to the Company’s reduction in carbon emissions (Scopes 1, 2 and 3) intensity and were chosen to enhance the link

between Ricardo’s ESG strategy and remuneration.

In addition, no part of an award will vest unless the Committee is satisfied that the achievement against the TSR, ESG and underlying EPS performance conditions is a genuine reflection of the underlying

performance of the Group over the performance period. The Committee will consider all relevant factors when the awards vest in November 2026 and may reduce vesting levels where appropriate.

These factors will include the overall performance of the Company during the period 2023 – 2026, the experience of shareholders since the date of grant and the board’s expectations in respect of

efficient capital management including, but not limited to, the ratio of debt to EBITDA in light of the Company’s strategy for growth, and any other considerations that the Committee deems relevant.

115

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Long-term incentive awards granted during the financial year (audited) continued

‘Core’ awards granted during the financial year continued

Relative TSR portion Adjusted EPS portion ESG

Relative TSR performance

against the FTSE Small Cap

(1)

Vesting level (%)

Adjusted underlying EPS for

the final year in the performance

period (FY 2025/26) Vesting level (%)

Average reduction in

intensity of carbon emissions

(Scopes 1, 2 and 3)

(2)

Vesting level (%)

Below median — Less than 38.3p — Less than 1 percentage point —

Median 25 38.3p 25 1 percentage point 25

Upper quartile (or above) 100 Equal to or greater than 50.1p 100

Equal to or greater than 2.5

percentage points

100

Between median and

upper quartile

Sliding scale between

the above percentages

Between 38.3p and 50.1p

Sliding scale between

the above percentages

Between 1 percentage point

and 2.5 percentage points

Sliding scale between

the above percentages

(1) Excluding financial services companies and investment trusts.

(2) Average reduction in emissions/number of employees, contractors and production during the performance period.

‘Accelerator’ awards granted during the financial year

Type of award

Basis of award

(% of salary) Number of shares

Face value of

award (£)

(1)

Threshold level

of vesting

(% of maximum) End of performance period

Graham Ritchie

Performance

(2)

100

107,482 484,099

15 days after release

of preliminary results

announcement for

FY 2025/26 (expected

to be September 2026)

Judith Cottrell 81,039 365,000

(1) The face value of the award is based on the average of the share prices over the five days up to and including 15 November 2023 (450.4p).

These awards will vest subject to stretching EPS performance requirement over the three years to 30 June 2026. The targets for these awards are based on delivering an additional 12% above the ‘Core’

award maximum EPS target with vesting for performance above 50.1p (from 0% on a straight-line basis) and 100% vesting where the final year underlying EPS is 56.2p.

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Detailed breakdown of pay in FY 2023/24 continued

Performance target setting and those applying to awards outstanding during FY 2023/24

As shown in previous Directors’ remuneration reports, the Committee has a track record of setting stretching underlying EPS targets which are carefully calibrated in light of Ricardo’s business plan

and market expectations. Full vesting of the shares linked to relative TSR performance only occurs where Ricardo’s performance is in the upper quartile of the FTSE Small Cap index (excluding financial

services companies and investment trusts).

The EPS performance targets applicable to LTIP awards outstanding during the year are as follows:

FY 2020/21

(2)

FY 2021/22 FY 2022/23

Threshold vesting

(1)

25.4p 29.7p 36.8p

Maximum vesting 37.6p 50.2p 51.0p

(1) 15% for FY 2020/21 and FY 2021/22, and 20% for FY 2022/23.

(2) As adjusted in accordance with the principles for the impact of the Software disposal made during FY 2022/23.

The performance condition applicable to the TSR portion of awards has remained constant through this period and is the same as set out on page 114 for awards granted in the year ended 30 June 2024.

The number and value of shares which were awarded to each of the Executive Directors in the year ended 30 June 2024 are set out in the table on pages 115-116.

Directors’ interests in shares provisionally awarded under the LTIP (audited)

The following chart sets out in graphical form how the Company’s LTIP was operated in FY 2023/24.

Targets set for three-year period

and grant of awards.

Performance conditions assessed and

number of shares to vest determined. Shares are released.

Performance period Holding period After tax, 50% of shares continue to be held

pursuant tothe share retention policy until

minimum shareholding isachieved

Year 1 Year 2 Year 3 Year 4 Year 5

For details of the share retention policy, see page 119.

Following holding period

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As at 30 June 2024, the Directors’ interests in shares provisionally awarded under the LTIP were as follows:

Award date

Share price

at award date

in pence

At 1 July

2023 Awarded

(1)

Lapsed Vested

Dividend

(2)

At 30 June

2024

(3)

Vesting date

Holding

period ends

Graham Ritchie (CEO)

Oct 21 420.00 167,857 — — — — 167,857 27/10/2024 27/10/2026

Oct 22 446.80 157,788 — — — — 157,788 06/10/2025 06/10/2027

Nov 23 450.40 — 161,223 — — — 161,223 16/11/2026 16/11/2028

Nov 23 450.40 — 107,482 — — — 107,482 16/11/2026 16/11/2028

Judith Cottrell (CFO)

Nov 23 450.40 — 105,350 — — — 105,350 16/11/2026 16/11/2028

Nov 23 450.40 — 81,039 — — — 81,039 16/11/2026 16/11/2028

Ian Gibson (former CFO)

Nov 20 354.80 — — 50,579 75,762 646 76,408 27/11/2023 27/11/2025

Oct 21

(4)

420.00 106,728 — 20,176 — — 86,552 27/10/2024 27/10/2026

Oct 22

(4)

446.80 103,336 — 51,999 — — 51,337 06/10/2025 06/10/2027

(1) As set out on page 116, in addition to the usual ‘Core’ awards, the Executive Directors were also granted one-off ‘Accelerator’ awards in November 2023. The face value at the date of grant of the awards made in

November 2023 can be found on pages 115-116.

(2) Amounts allocated include shares equivalent to dividends on vested LTIP awards subject to a holding period.

(3) The mid-market closing price of the Company’s shares on 30 June 2024 was 487.0p per share (2023: 572.0p).

(4) The awards granted to Ian Gibson in October 2021 and 2022 were reduced pro-rata following his cessation of employment with the Company. The reduction will be recalculated following the assessment of the

relevant performance conditions.

Directors’ interests in shares provisionally awarded under the DBP (audited)

The following chart sets out in graphical form how the DBP was operated during FY 2023/24.

Bonus targets set for year.

Bonus paid two-thirds in cash and

one-third in deferred shares. Deferred shares released.

Annual bonus performance year Deferred shares held After tax, 50% of shares continue to be held

pursuant tothe share retention policy until

minimum shareholding isachieved

Year 1 Year 1 Year 2 Year 3

For details of the share retention policy, see page 119.

Year 5 and ongoing

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Directors’ interests in shares provisionally awarded under the DBP (audited) continued

As at 30 June 2024, the Directors’ interests in shares provisionally awarded under the DBP were as follows:

Award

date

Deferral/

performance

period

Share price

at award date

in pence

Number of provisional shares

At 1 July 2023 Awarded

(1)

Dividend

(2)

Lapsed Vested

At 30 June

2024

(3)

Graham Ritchie (CEO)

Oct 22 3 years 446.80 23,205 — 617 — — 23,822

Nov 23 3 years 450.40 — 10,452 277 — — 10,729

Ian Gibson (former CFO)

Nov 21 3 years 426.80 3,850 — 102 — — 3,952

Oct 22 3 years 446.80 18,161 — 482 — — 18,643

Nov 23 3 years 450.40 — 5,198 138 — — 5,336

(1) The face value at the date of grant of the awards made in November 2023 was £23,412 for Ian Gibson and £47,076 for Graham Ritchie.

(2) Amounts allocated include shares equivalent to dividends on provisional deferred award shares.

(3) The mid-market closing price of the Company’s shares on 30 June 2024 was 487.0p (2023: 572.0p).

The fees of the Chair of the board and of the Non-Executive Directors

The Chair’s fees as of 1 January 2024 and the Non-Executive Directors’ fees are as follows:

£’000

Chair’s fee 175

Non-Executive Directors’ fees:

Basic fee 54

Additional fee for Audit, Remuneration and Responsible Business Committee Chairs 9

Additional fee for the Senior Independent Director 9

Share retention policy

Current policy

In order to foster greater alignment of interest between our Executive Directors and our shareholders, the board has operated a share retention policy with the objective that the CEO and CFO will own

shares with a value equal to at least 250% and 200%, respectively, of annual base salary with the requirement that 50% of any vested LTIP/DBP shares (net of tax) are held until this is met. In line with

the Investment Association’s Principles of Remuneration, vested shares subject to a holding period (i.e. vested LTIP awards under the 2020 LTIP) and unvested shares that are not subject to performance

conditions (i.e. DBP deferred awards) will count towards this shareholding requirement on a net-of-tax basis.

The retention requirement will continue post-cessation of employment with shares worth 250% or 200% (as the case may be) of annual base salary (or, if lower, the shareholding as at the date

of cessation) to be held for the initial 12-month period, and half of this amount required to be held for the second 12-month period. Executive Directors are required to hold shares covered by the

post-cessation retention requirements in a nominee structure.

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Share retention policy continued

Directors’ shareholdings (audited)

The interests of Directors and their connected persons in ordinary shares as at 30 June 2024 (or date of cessation of employment), including any shares provisionally awarded under the LTIP and DBP,

are presented in the table below.

No. of

shares held

Share awards

not subject to

performance

conditions

(1)

Share awards

subject to a

holding period

Shareholding

for purposes

of share

retention

policy

(2)

Shareholding

(% of base

salary)

(3)

Share awards

subject to

performance

conditions

(4)

Executive Directors

Graham Ritchie 53,263 34,551 — 71,575 70 594,350

Judith Cottrell 16,659

(5)

— — 16,659 22 186,389

Ian Gibson

(6)

64,713 27,696 75,762 119,545 149 137,889

Non-Executive Directors

Mark Clare 20,000 — — — — —

Russell King 5,105 — — — — —

Laurie Bowen

(7)

6,000 — — — — —

Malin Persson 1,500 — — — — —

Bill Spencer 10,402 — — — — —

Jack Boyer — — — — — —

(1) Deferred awards granted pursuant to the rules of the Ricardo plc 2021 Deferred Bonus Plan.

(2) This includes the number of beneficially owned shares, unvested shares not subject to performance conditions and any vested shares subject to a holding period, on a net-of-tax basis (i.e. 53% of the shares shown

in the adjacent ‘share awards not subject to performance conditions’ and ‘share awards subject to a holding period’ columns).

(3) For Executive Directors only (i.e. those who are subject to the share retention policy). Calculated by reference to the number of shares shown in the adjacent ‘shareholding for purposes of share retention policy’

column, a share price of 487.0p per share (2023: 572.0p) and salaries as at 30 June 2024, save for Ian Gibson whose percentage was calculated by reference to his shareholding and salary as at termination of

employment and a share price of 457.0p, being the closing price on the immediately preceding dealing day.

(4) LTIP awards granted pursuant to the rules of the Ricardo plc 2020 Long Term Incentive Plan.

(5) Judith Cottrell participates in the Company’s Share Incentive Plan. 260 of the shares shown in this column were held in the SIP on 30 June 2024.

(6) Shareholding as at 1 April 2024, being the date Ian Gibson ceased to be employed by the Company.

(7) Shareholding as at 31 May 2024, being the date Laurie Bowen stepped down from the board.

At 4 September 2024, the number of shares held by Judith Cottrell had increased to 16,719, meaning that her shareholding for the purposes of the share retention policy was 16,719 and her

shareholding as a percentage of base salary was 23%. The interests in shares of the other Directors who were still in office were unchanged from those at 30 June 2024.

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Dilution limits

The number of shares that may be issued in any 10-year rolling period will be restricted to:

• 10% of the issued ordinary share capital of the Company in respect of all Ricardo share plans

• (included within the above limit) 5% of the issued ordinary share capital of the Company for

Ricardo’s discretionary share plans

At the end of the year under review, the Company’s overall share plan dilution was 3.73%, all

of which related to discretionary share plans. The Company operates an employee benefit trust

which has principally been used to facilitate the operation of the LTIP and DBP arrangements.

Anynew shares issued to the trust are, however, included in the dilution limits noted above.

Executive Directors and their board positions with other companies during

FY2023/24

Executive Directors may, with the prior consent of the board, hold a non-executive directorship

with another company. Neither the Chief Executive Officer, nor the Chief Financial Officer,

held anon-executive directorship with another company during the period from 1 July 2023 to

30June2024 (inclusive).

Payments to past Directors and in respect of loss of office (audited)

As disclosed in the Directors’ remuneration report last year, Ian Gibson ceased to be a Director

of the Company on 13 September 2023 but remained with the Company for a period to allow

fora smooth transition of responsibilities. During the remainder of his notice period, which ended

on 1 April 2024, Ianreceived his salary, pension entitlement and contractual benefits as usual

which totalled £202,343. In line with his contractual arrangements, Ian also received a payment

of £42,913 in respect of accrued but untaken holidays. Ian received a bonus in respect of financial

year ended 30 June 2023 totalling £70,236, a third of which was deferred into shares (further

details can be found on page 119). Ian was treated as a good leaver in respect of the awards

underthe Company’s deferred bonus plan and long-term incentive plans.

As set out on page 114, the November 2020 LTIP awards vested in part following the performance

condition assessment and the exercise of the Committee’s discretion. Details of the vested awards

held by the former CEO and former CFO are as follows:

Former Director

No. of shares

vested

Value of vested

(1)

Dave Shemmans (former CEO) 82,658 £384,360

Ian Gibson (former CFO) 75,762 £352,293

(1) The value shown in this column (which is included in the single total figure table for Ian Gibson) has

been calculated by multiplying the number of shares that vested by 465.0p, being the closing mid-

market price of a share in the Company on the date such vesting occurred.

The vested shares are subject to a two-year holding period and will be released in November 2025.

Implementation of Directors’ Remuneration Policy in FY 2024/25

It is anticipated that the implementation of the 2023 Directors’ Remuneration Policy (the 2023

Policy) in FY 2024/25 will be broadly similar to that of the implementation of the policy in FY

2023/24.

The Committee will:

• Review base salary levels for the Executive Directors with effect from 1 January 2025

• Set and review the performance targets for the FY 2024/25 annual bonus and the LTIP awards

tobe made in 2024 to ensure continued alignment to strategy

• Make awards under the Ricardo plc 2020 Long Term Incentive Plan (the 2020 LTIP)

• Make awards under the Ricardo plc 2021 Deferred Bonus Plan (the 2021 DBP)

To determine the amount of bonus payable for FY 2024/25, the Committee will assess the level

ofachievement against the financial measures and targets set in respect of:

• Group underlying profit before tax (40%)

• Value added turnover (20%)

• Adjusted cash conversion (20%)

• The achievement of specified individual objectives (20%)

Owing to concerns about commercial sensitivity, we do not believe it is in shareholders’ interests

to disclose any further details of these targets on a prospective basis. However, the Company is

committed to adhering to principles of transparency and will, provided disclosure of targets is not

then deemed to be commercially sensitive, make appropriate and relevant levels of disclosure of

bonus targets and performance against these targets for FY 2024/25.

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Implementation of Directors’ Remuneration Policy in FY 2024/25 continued

2024 LTIP awards

Last year the Committee determined that, in addition to the usual ‘Core’ awards, an ‘Accelerator’

award of 100% of salary would also be granted to each of the Executive Directors. As previously

disclosed and as set out in the 2023 Policy, this was a one-off arrangement, meaning that this year

the intention is for the grant of LTIP awards to return to business as usual with only ‘Core’ awards

of 150% and 130% of salary to be granted to the Chief Executive Officer and Chief Financial

Officer, respectively.

In terms of the performance measures, targets and the different weightings ascribed to them,

the Committee believes that TSR, underlying EPS and ESG continue to be appropriate measures

for the Company’s long-term incentive arrangements as they are strongly aligned to shareholder

value creation and the Company’s business strategy.

The peer group applicable to the TSR portion of these awards will be the same as those which

applied to awards granted last year. Threshold performance (i.e. median ranking in the comparator

group, for which 25% of this portion will vest) is generally intended to align with the anticipated

performance of the relevant market and our competitors. If the maximum performance is achieved

(i.e. upper quartile ranking in the comparator group), we would expect to have significantly

outperformed the relevant market and our competitors.

In order to ensure that the target range for the EPS portion of the awards remains challenging

inlight of market expectations of the Company’s underlying EPS performance to the year ending

30 June 2027, the Committee has determined that:

• No part of the underlying EPS portion of these awards will vest if the Company’s underlying EPS

for the final year in the performance period is lower than 41.6p

• 25% of this portion will vest where the final year underlying EPS is 41.6p

• 100% of this portion will vest where the final year underlying EPS is greater than or equal to

54.9p

• Vesting will take place on a straight-line basis between 41.6p and 54.9p

Where the underlying EPS performance period ends before 30 June 2027 (the final year of

the performance period), the Committee retains the discretion to amend these targets and the

corresponding vesting levels accordingly.

The Committee has not yet finalised the decision on the ESG measure and the targets. The details

will be published once they have been approved by the Committee and communicated to the

participants of the LTIP.

It should also be noted that in terms of the 2023 Directors’ Remuneration Policy, the Committee

will have the ability to adjust the formulaic outcomes from performance conditions where

appropriate and the Committee will ensure that outcomes reflect Company and executive

performance as well as the experience of shareholders and other stakeholders. In particular,

before the awards vest at the end of the three-year performance period, the Committee will

apply a supplementary test of the quality of Ricardo’s performance and assess the underlying

performance based on the board’s expectations in respect of, for example, efficient capital

management and the ratio of net debt to EBITDA in light of the Company’s strategy for growth.

Changes to the board of Directors

As announced on 5 March 2024, Carol Borg has been appointed as a Non-Executive Director from

1 July 2024. William Spencer will step down from the board at the AGM in November and Carol

will succeed him as Chair of the Audit Committee. In addition, and as announced on 3 May 2024

and 25 June 2024, Laurie Bowen and Jack Boyer stepped down from the board at the end of May

and July 2024 respectively. Finally, as announced on 28 August 2024, Sian Lloyd Rees has been

appointed as a Non-Executive Director from 1 October 2024. My thanks go to Laurie, Jack and Bill

for their contributions.

The Directors’ remuneration report, comprising the Chair’s overview and annual statement in

Part1, the annual report on remuneration in Part 2 and the Directors’ Remuneration Policy in

Part3, was approved by the board on 4 September 2024 and signed on its behalf by:

Russell King

Chair of the Remuneration Committee

10 September 2024

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Part 3 – Directors’ Remuneration Policy

Introduction

This part of the Directors’ remuneration report provides an overview of the Company’s policy

onDirectors’ pay that is designed to align with and support Ricardo’s strategic plan and will

operate over the three years from the AGM held on 16 November 2023 (the 2023 AGM) until

theAGM to be held in 2026 (the 2023 Policy). The previous policy that was approved by

shareholders at the AGM held on 12 November 2020 (the 2020 Policy) continued to operate until

the 2023 AGM and indeed the 2023 Policy permits the execution of remuneration arrangements

that were agreed when the 2020 Policy was in effect. There have been no changes of substance to

the text of the 2023 Policy that was approved atthe2023AGM. We have, however, updated the

‘remuneration outcomes’ chart on page 130, some of the wording (particularly relating to time) and

page references for ease of use. A copy of the originally approved text is in the Annual Report and

Accounts 2023, which is alsoavailable at www.ricardo.com.

The Remuneration Committee – what we do

The Committee’s primary purpose is to make recommendations to the board on the Group’s

framework or broad policy for executive remuneration. The board has also delegated responsibility

to the Committee for determining the remuneration, benefits and contractual arrangements of the

Chair and the Executive Directors. No individual is involved in deciding their own remuneration.

The Committee has written terms of reference, which are available at www.ricardo.com, and its

responsibilities include:

• Determining and agreeing with the board the policy for executive remuneration and monitoring

and considering the policy for, and structure of, senior management remuneration, taking into

account that the ultimate decision-making responsibility for the remuneration of the senior

management team (other than the Executive Directors) lies with the Chief Executive Officer

• Agreeing the terms and conditions of employment for Executive Directors, including their

individual annual remuneration and pension arrangements, and reviewing such provisions for

senior management

• Agreeing the measures and targets for any performance-related bonus and share plans

• Agreeing the remuneration of the board Chair

• Ensuring that, on termination, contractual terms and payments made are fair, both to the

Company and the individual, so that failure is not rewarded and the duty to mitigate loss is

recognised wherever possible

• Agreeing the terms of reference of any remuneration advisors it appoints

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Taking shareholders’ views into account

When considering Ricardo’s Remuneration Policy and its implementation, the Committee is always

keen to ensure that it takes into account the views and opinions of all the relevant stakeholders in

the business. In particular, when preparing its policy for approval at the 2023 AGM, the Committee

undertook a programme of engagement with the Company’s largest institutional investors and

their representative bodies in order to better understand their perspective on our previous pay

practices and the then proposed policy for 2023-2026.

Through the consultation process, we received valuable feedback and insights from all those

we spoke to which directly influenced the final proposals that were submitted for approval.

For example, as a result of the feedback received, changes were made to the structure of the

performance ranges and enhancements were made to the share ownership guidelines.

In the spirit of continuous improvement and in order to ensure that our Directors’ Remuneration

Policy continues fully to support achievement of business objectives and delivery of value to

shareholders, the Committee will continue to review our policy periodically in the context of the

changing business environment. Any material future changes to the policy will be discussed with

shareholders in advance.

Consideration of employment conditions elsewhere in the Company

Ricardo does not consult directly with employees on the subject of Directors’ remuneration.

Theremuneration packages for each Executive Director and their fixed and variable elements are

reviewed annually. This process (and the setting of the revised Remuneration Policy as a whole)

takes into account a number of factors, including the following:

• Individual and business performance

• Pay arrangements for similar roles in other companies and consultancy organisations of

Ricardo’s size, complexity and international reach

• Risk management

• Pay and employment conditions of employees of the Group

The Committee also looks at the differential between the Chief Executive Officer’s pay and

Ricardoaverage employee earnings over time.

Overview of Ricardo’s Directors’ Remuneration Policy for 2023–2026

The objective of Ricardo’s Directors’ Remuneration Policy is to support the business strategy

and timescales of an international consultancy business by not only rewarding the standard

of performance and the outcomes that our shareholders require, but also encouraging share

ownership and fostering alignment of interest between the Executive Directors and shareholders.

We do this by setting base levels of salaries that are competitive, compared with companies

of similar size and complexity to Ricardo, and providing other remuneration package elements,

namely the short-term annual bonus plan and long-term incentive arrangement, that only pay

forperformance. Taken together, our two variable pay platforms focus on growing the profitability

of the business, its resilience, the achievement of discrete non-financial targets and linking

executive outcomes with the shareholder experience both by delivering rewards in the form of

Ricardo shares and also by using a relative total shareholder return performance measure over

thelonger term.

Changes to the 2020 Directors’ Remuneration Policy

The changes to the 2020 Policy were as follows:

• The maximum opportunity under the long-term incentives was amended to incorporate the

grant, on a one-off basis in FY 2023/24, of an ‘Accelerator’ LTIP award equal to 100% of salary

to each Executive Director

• The share ownership requirement for the Chief Executive Officer was increased to 250% of

salary

• The cash in lieu of pension policy was simplified by the removal of references to legacy pension

arrangements

Overview of the decision-making process that was followed for the

determinationof the new policy

As explained in the Chair’s introduction on page 137 of the Annual Report and Accounts 2023,

the new 2023 Policy, which shareholders approved at the 2023 AGM, was developed by the

Remuneration Committee following a thorough review of the pre-existing executive remuneration

arrangements. This also involved the Committee undertaking a consultation exercise with our

major shareholders and the Chief Executive Officer and Chief Financial Officer.

In its deliberations, the Committee received support and advice from FIT Remuneration

Consultants and Shepherd and Wedderburn, its independent external advisors (see page 105

fordetails).

Although the Executive Directors provided the Committee with a level of input in relation to

theformulation of the new policy, the final decisions around its structure were taken by the

Committee alone in order to avoid any conflicts of interest arising.

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Corporate Governance

When determining the 2023 Policy, the Committee was mindful of its obligations under Provision

40 of the Corporate Governance Code to ensure that the policy and other remuneration practices

were clear, simple, predictable, proportionate, safeguarded the reputation of the Company and

were aligned to Company culture and strategy. Set out below are examples of how the Committee

addressed these factors:

Clarity

• Remuneration Policy and arrangements are clearly disclosed each year in the Annual Report

• The Company invited its principal shareholders and shareholder representative groups to

consult on the 2023 Policy and received good feedback. Changes were made to the proposals

following input from this process

• The Committee is regularly updated on workforce pay and benefits across the Group during the

course of its activity

Simplicity

• Our remuneration structure is comprised of fixed and variable remuneration, with the

performance conditions for variable elements clearly communicated to, and understood by,

participants in order to ensure they are effective

• The 2023 Policy received positive feedback from stakeholders for its simplicity

Risk

• The Committee has the power to modify the outcomes under the incentive plans

• Ricardo’s variable pay is subject to malus and clawback provisions

• When setting the total pay of the Executive Directors the Committee considers pay ratios

withthe wider workforce and shareholder returns

Predictability

• The range of possible rewards for the Executive Directors is considered in the scenario charts

onpage 130

• The Committee has a range of discretions in relation to variable pay awards, new joiners and

leavers, which are identified and explained in the Remuneration Policy section

Proportionality

• As shown in the scenario charts on page 130, variable performance-related elements represent

a significant proportion of the total remuneration opportunity for our Executive Directors

• The Committee considers the appropriate financial and personal performance measures each

year to ensure that there is a clear link to strategy. For example, for FY 2022/23 the value added

turnover measure was introduced under the annual bonus

• Discretions are available to the Committee to reduce awards if necessary to ensure that

outcomes do not reward poor performance

• The potential payments under the 2023 Policy were tested as a proportion of value created for

shareholders and deemed to be good value

Alignment to culture

• The Committee is confident that the incentive schemes, including the one-off changes in

FY2023/24, are aligned with the Company’s purpose, values and strategy

• The use of metrics in both the annual bonus and LTIP measure how we perform against

ourfinancial and non-financial KPIs

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The structure of our Directors’ remuneration package – the 2023 policy table

Pay element and

link to strategy Maximum Operation

Framework for

assessing performance

Base salary

To provide a

core level of

remuneration

to enable the

Company to attract

and retain skilled,

high-calibre

executives to

deliver its strategy.

Base salary increases

will not ordinarily

be more than 10%

p.a. withexceptional

increases over the normal

maximum limit capped

at25% p.a.

However, generally

speaking, increases will

be no higher than salary

increases for employees

across the Group.

Salary levels are normally reviewed annually in January each year.

Pay is set by considering:

• Market levels of total pay for comparable roles in companies of similar size, complexity and

sector

• Each individual Executive Director’s experience, scope of responsibilities and performance

• The salary increases for employees across the Group

Ricardo places a strong emphasis on internal succession planning. This emphasis may mean that

talented individuals are promoted rapidly. In such circumstances, the Committee’s policy is to

set a relatively low base salary initially and then increase this to a market competitive level for

the role over time. This may mean relatively high annual salary increases as the individual gains

experience in the new role. We will notify shareholders where this is the case.

None

Other benefits

To provide market-

competitive

benefits.

The total value of benefits

will not exceed 10% of

base salary p.a., save in

the case ofrelocation.

The Company provides other cash benefits and benefits in kind to Executive Directors in line

with market practice. These include a company car or cash alternative, private fuel, private

medical insurance, life assurance and permanent health and disability insurance. The benefits

arrangements are reviewed on an annual basis.

The Committee reserves the right to provide further benefits where this is appropriate in the

individual’s particular circumstances (for example, costs associated with relocation as a result of

theExecutive Director’s role with the Company).

Certain other employees are eligible for the same or similar benefits described above depending

ontheir role, seniority and geographical location.

None

Pension

To offer market-

competitive

retirement benefits.

Workforce aligned

(currently 7% of salary).

The Company operates a defined contribution scheme (the Pension Scheme). All UK employees

areentitled to receive Company pension contributions.

For Executive Directors, the Company’s pension contributions are at a level that is capped at the

maximum amount payable to the wider UK workforce population (currently 7% of basic salary).

Executive Directors may only choose to opt out of the Pension Scheme where they are close to or

have exceeded the pension lifetime allowance and have applied for fixed protection from HMRC.

Under such circumstances, Executive Directors will receive a cash payment in lieu of pension.

On death in service, all Executive Directors, subject to the medical requirements of the insurance

company, are entitled to a lump sum of four times annual salary at date of death.

Early retirement is available with the consent of the Company and the pension scheme trustees

ifthe individual is over 55 or retiring due to ill health.

None

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Pay element and

link to strategy Maximum Operation

Framework for

assessing performance

Pay for

performance:

Annual bonus

To reward the

annual delivery

of financial and

operational targets.

Maximum opportunity

of 125% of base salary

for the Chief Executive

Officer and 100% of base

salary for other Executive

Directors.

Bonuses are awarded by reference to performance against specific targets

measured over asingle financial year

Two-thirds of any bonus paid to an Executive Director will be paid out in cash shortly after the

assessment of the performance targets has been completed. The remaining one third of the

bonus will be compulsorily deferred into ordinary shares, the vesting of which is normally subject

to continued employment for a three-year period from the award date. The cash element of the

bonus is not payable unless the individual remains in employment at the payment date.

The principal purpose of this bonus deferral mechanism is to:

• Provide for further alignment of executives’ and shareholders’ interests

• Provide an additional retention element

• Encourage Executive Directors to build up a shareholding in accordance with our share

retention policy

Dividends and dividend equivalents for each deferral period may also be paid in respect of shares

under award to the extent that shares have vested in the relevant participants.

Bonus arrangements exist for certain other employees throughout the Group on terms that are

applicable to their role, seniority and geographical location, although typically at lower levels of

maximum opportunity to reflect that a greater proportion of Executive Directors’ remuneration is

performance-based.

Malus and clawback

Annual bonuses (including any element deferred into shares) may be subject to malus and

clawback provisions if certain events occur in the period of three years from the end of the

financial year to which they relate. These events include the Committee becoming aware of:

• A material misstatement of the Company’s financial results

• An error in the calculation of performance conditions

• An act committed by the relevant participant that could have resulted in summary dismissal by

reason of gross misconduct or which has caused significant reputational damage to the Group

The mechanism through which malus and clawback can be implemented enables the Committee

to take various actions including:

• Reducing outstanding incentive awards

• Requiring a cash payment to be made by participants

The measures and targets applicable to the

annual bonus scheme (and the different

weightings ascribed to them) are set annually

by the Committee in order to ensure they

are relevant to participants and take account

of the most up-to-date business plan and

strategy.

A significant majority (at least 50%) of

the bonus opportunity will normally be

determined by reference to performance

against Group KPIs such as:

• Underlying profit before tax

• Adjusted cash conversion

• Value added turnover

Any remaining part of an Executive Director’s

bonus will normally be based on the

achievement of personal objectives which

relate to delivery of the business strategy.

Seepage 112 for examples.

A payment scale for different levels of

achievement against each performance target

is specified by the Committee at the outset of

each year – this ranges from zero for below-

threshold performance up to 100% for full

satisfaction of the relevant target.

Bonus payments will also be subject to

the Committee considering whether the

proposed awards, calculated by reference to

performance against the targets, appropriately

reflect the Company’s overall performance and

shareholders’ experience. If the Committee

does not believe this to be the case, it retains

the discretion to adjust the bonus outturn

accordingly.

The structure of our Directors’ remuneration package – the 2023 policy table continued

127Ricardo plc | Annual Report and Accounts 2023/24

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Pay element and

link to strategy Maximum Operation

Framework for

assessing performance

Pay for

performance:

Long-term

incentives

Performance

shares under

the Long Term

Incentive Plan

(LTIP)

To focus motivation

on the long-term

performance of the

Group and reward

shareholder value

creation.

To encourage share

ownership and

alignment with

shareholders.

Maximum opportunity

of 250% of base salary

for the Chief Executive

Officer and 230% for

other Executive Directors

for awards in FY 2023/24.

Maximum opportunity

drops to 150% of base

salary for the Chief

Executive Officer and

130% for other Executive

Directors for awards in

future years.

LTIP – performance measured over a three-year period

Performance share awards under the LTIP are made on an annual basis to the Executive Directors

and a small group of other senior managers.

Each year, the Company intends to grant ‘Core’ LTIP awards equal to 150% and 130% of base

salary for the Chief Executive Officer and Chief Financial Officer respectively. In addition, a further

one-off ‘Accelerator’ LTIP award equal to 100% of salary was granted in FY 2023/24 to each

Executive Director.

From time to time a number of employees below board level are granted non-performance based

share awards to reflect exceptional performance.

Holding period

Vesting of awards will generally take place on the third anniversary of grant or, if later, the date

on which the performance conditions are assessed by the Committee.

Executive Directors’ awards that vest will normally be subject to a holding period in terms of

which the relevant shares will only be released after a further period of at least two years from

the vesting date has expired.

Dividends and equivalents

Dividends and dividend equivalents for each performance/holding period may also be paid in

respect of shares under award to the extent that shares have vested in the relevant participants.

Malus and clawback

Long-term incentive awards may be subject to malus and/or clawback provisions if certain

events occur after their grant but before the expiry of the period of two years from the end of

therelevant performance period. These events include the Committee becoming aware of:

• A material misstatement of the Company’s financial results

• An error in the calculation of performance conditions

• An act committed by the relevant participant that has (or could have) resulted in summary

dismissal by reason of gross misconduct or which has caused significant reputational damage

to the Group

The mechanism through which malus and clawback can be implemented enables the Committee

to take various actions including:

• Reducing outstanding incentive awards

• Requiring a cash payment to be made by participants

The vesting of long-term incentive awards is

subject to both continued employment and

the extent to which performance conditions

measured over a specified three-year period

are met.

The measures and targets applicable to the

long-term incentive awards will consist of

challenging shareholder return, financial and/

or strategic/ESG measures.

The particular measures and targets to apply

(and the different weightings ascribed to

them) will be set annually prior to each grant

by the Committee in order to ensure they

are relevant to participants, challenging to

achieve and take account of the most up-to-

date business plan and strategy. Our policy

is simply for financial and shareholder return

targets to make up at least 50% of awards.

A maximum of 25% of each element of an

award will vest for achieving the threshold

performance target with 100% of the awards

being earned for maximum performance (with

straight-line vesting between these points).

Further details of the performance conditions

applicable to awards to be made in FY2024/25

are set out on page 122.

Formulaic outcome of all LTIP performance

measures will also be subject to the Committee

considering whether the proposed vesting

levels, calculated by reference to performance

against the targets, appropriately reflect

the Company’s overall performance and

shareholders’ experience. If the Committee does

not believe this to be the case, it retains the

discretion to adjust the LTIP outturn accordingly.

The structure of our Directors’ remuneration package – the 2023 policy table continued

128Ricardo plc | Annual Report and Accounts 2023/24

Directors’ remuneration report continued

Part 3 – Directors’ Remuneration Policy continued

Pay element and

link to strategy Maximum Operation

Framework for

assessing performance

Chair and other

Non-Executive

Directors

Helps recruit and

retain high-quality

experienced

individuals.

Reflects time

commitment and

role.

The aggregate fees

of the Chair and other

Non-Executive Directors

will not exceed the

limit from time to

time prescribed in the

Company’s Articles of

Association.

The fees for the Chair and other Non-Executive Directors are set in line with prevailing market

conditions and at a level that will attract individuals with the necessary experience and ability to

make a significant contribution to the Group’s affairs.

Non-Executive Directors receive an annual basic fee plus an additional fee for acting as the

Chair of the Audit or Remuneration Committee or the Senior Independent Director. The Chair

of the board receives an annual fee payable monthly with no additional fees for chairing board

committees. They also receive reimbursement for travel and incidental costs (including any

associated personal tax charges) incurred in furtherance of Company business.

None

Notes to the 2023 policy table:

(1) Where maximum amounts for elements of remuneration have been set within the 2023 Policy, these

will operate simply as caps and are not indicative of any aspiration.

(2) A description of how the Company intends to implement the 2023 Policy set out in the tables on

pages 126-129 during the financial year to 30 June 2025 is provided on pages 121-122.

(3) A general overview of how each remuneration element applies to other employees of the Group is

included under the relevant section of the policy table.

(4) The Committee reserves the right to make any remuneration payments and payments for loss

of office (including exercising any discretions available to it in connection with such payments)

notwithstanding that they are not in line with the 2023 Policy (as set out on pages 126-131) where

the terms of the payment were agreed

(i) before 29 October 2014 (the date the Company’s first shareholder-approved Directors’

Remuneration Policy came into effect);

(ii) before the 2023 Policy came into effect, provided that the terms of the payment were consistent

with the shareholder-approved Directors’ Remuneration Policy in force at the time they were

agreed; or

(iii) at a time when the relevant individual was not a Director of the Company and, in the opinion of

the Committee, the payment was not in consideration for the individual becoming a Director of

the Company.

For these purposes, payments include the Committee satisfying awards of variable remuneration and,

in relation to an award over shares, the terms of the payment are ‘agreed’ at the time the award is

granted.

(5) The ‘framework for assessing performance’ column of the tables on pages 126-129 provides

information on choosing the particular performance measures and target setting in relation to them.

(6) Ricardo’s variable pay may have any performance conditions applicable to the relevant element

amended or substituted by the Committee if an event occurs which causes the Committee to

determine that an amended or substituted performance condition would be more appropriate and not

materially less difficult to satisfy. The Committee may make adjustments, where these are fair and

reasonable, to measures or targets to take account of, for example, the implications of acquisitions

and disposals.

(7) Long-term incentive awards can be granted in a variety of forms such as performance shares, nil-cost

options or forfeitable shares, and the Committee reserves the right to grant long-term incentive

awards with the same economic effect but in any of these different contractual forms (including in

cash). Long-term incentive awards can also be adjusted in the event of any variation of the Company’s

share capital or any demerger, delisting, special dividend or other event that may affect the

Company’s share price.

(8) Under the terms of long-term incentive award performance conditions, where any company becomes

unsuitable as a member of the comparator group as a result of, for example, a change of control

or delisting, the Committee has the discretion to treat that company in such manner as it deems

appropriate (including replacing it with another organisation).

(9) In the event of a change of control, long-term incentive awards will normally vest at that time, taking

into account, amongst other things, the extent to which any performance criteria have been met (over

the shortened performance periods) and the time elapsed since grant.

All-employee share plans

For its UK employees the Company has historically operated tax-advantaged share plans such as

a Share Incentive Plan (SIP) and a Save As You Earn share option plan. Where operated, these are

intended to encourage share ownership and wider interest in the performance of the Company’s

shares. A SIP, for example, may involve the award of free shares or free matching shares, the

purchase of partnership shares and/or the award of dividend shares. Executive Directors are

eligible to participate in these arrangements when offered up to the applicable statutory limits in

the same way as any UK employee of Ricardo. Equivalent arrangements operate from time to time

for non-UK employees.

The structure of our Directors’ remuneration package – the 2023 policy table continued

129Ricardo plc | Annual Report and Accounts 2023/24

Directors’ remuneration report continued

Part 3 – Directors’ Remuneration Policy continued

Illustrative remuneration outcomes at different performance levels

Ricardo’s pay policy seeks to ensure that the long-term interests of Executive Directors are aligned

with those of shareholders. The remuneration packages for each Executive Director and their fixed

and variable elements are reviewed annually. The scenario chart below presents remuneration

outcomes for the 2023 Policy under minimum, on-target, maximum and maximum with share price

appreciation scenarios.

Total remuneration (£’000)

Chief Executive Officer Chief Financial Officer

Maximum

with share

price

appreciation

MaximumOn-targetMinimumMaximum

with share

price

appreciation

MaximumOn-targetMinimum

1,000

1,500

500

2,000

571

100%

17%

26%

57%

38%

29%

33%

48%

25%

27%

53%100%

29%

18%

29%

32%

39%

48%

27%

25%

1,070

1,942

2,316

418

728

1,283

1,527

2,500

The on-target scenario broadly illustrates the remuneration level when budgeted performance

is achieved. A further column has also been included which illustrates the impact on the figures

contained in the maximum scenario of an assumed share price appreciation for the LTIP award of

50% over the relevant performance period. The disclosures in the chart above are based on the

assumptions set out below.

• Fixed elements comprise current base salary, pension and other benefits. For example, for the

Chief Executive Officer, fixed elements comprise base salary of £498,623, pension (cash in lieu)

of 7% of base salary above the lower earnings limit and benefits equal to those received in

FY2023/24

• Long-term variable element performance includes the maximum policy level of grant for

FY2024/25 (e.g. 150% of annual base salary for the Chief Executive Officer and 130% for the

Chief Financial Officer)

• For minimum performance, Executive Directors receive only the fixed elements of pay

• For on-target performance, an assumption of 50% of bonus pay-out and threshold vesting (25%)

in respect of long-term incentives has been applied

• For maximum performance, an assumption of maximum bonus pay-out and maximum vesting in

respect of long-term incentives has been applied

• Save for the ‘maximum with share price appreciation’ column, no share price increase has been

assumed for the above and this means that the single total figure in any year may be higher

than the maximum shown above

• For maximum with share price growth performance, share price appreciation of 50% over the

relevant performance period has been assumed for the LTIP awards

Fixed elements Short-term variable element Long-term variable element

130Ricardo plc | Annual Report and Accounts 2023/24

Directors’ remuneration report continued

Part 3 – Directors’ Remuneration Policy continued

Recruitment remuneration policy

New Executive Directors will be appointed on remuneration packages with the same structure

and elements as described in the policy table starting on page 126. Annual bonus and long-term

incentive awards will be within the limits described in the policy table for the particular role.

Thelimits for any new Executive Director roles will be set by the Committee taking into account

the particular responsibilities of the role, but will not exceed those that apply to the current

ChiefExecutive Officer. Pension contribution levels will be aligned to those applicable to the

widerworkforce.

For external appointments, although we have no plans to offer additional benefits on recruitment

(and indeed did not do so for our last Executive Director appointment), the Committee reserves the

right to offer such benefits when it considers this to be in the best interests of the Company and

shareholders, and in order to protect a new Director against additional costs. The Committee may

agree that the Company will meet certain relocation expenses as appropriate.

The Company may make an award to compensate a new recruit for the value of any remuneration

relinquished when leaving a former employer. Any such award would reflect the nature, timescales

and performance requirements attaching to that relinquished remuneration. The Listing Rules

exemption 9.4.2 may be used for the purpose of such an award. Shareholders will be informed

ofany such payments as soon as practicable following the appointment.

For an internal appointment, any variable pay element awarded in respect of the prior role

may be allowed to pay out according to its terms, adjusted as relevant to take into account

the appointment. In addition, any other ongoing remuneration obligations existing prior to

appointment may continue and will be disclosed to shareholders at the earliest opportunity.

On the appointment of a new Chair or Non-Executive Director, fees will be set taking into

account the experience and calibre of the individual. Where specific cash or share arrangements

are delivered to Non-Executive Directors, these will not include share options or other

performance-related elements.

The board’s policy on setting notice periods for Directors is that these should not exceed one year.

It recognises, however, that it may be necessary in the case of new executive appointments to offer

an initial longer notice period, which would subsequently reduce to one year after the expiry of

that period. All future appointments to the board will comply with this requirement.

Termination remuneration policy

The contractual termination provision is payment in lieu of notice or, if termination is part way

through the notice period, the amount of base salary relating to any unexpired notice to the date

of termination. There is an obligation on Directors to mitigate any loss which they may suffer if the

Company terminates their service contract. The Committee will take such mitigation obligation into

account when determining the amount and timing of any compensation payable to any departing

Director. No compensation is paid for summary dismissal, save for any statutory entitlements.

The cash element of any bonus is not payable unless the individual remains in employment at the

payment date.

Unvested share-based awards will lapse unless the individual concerned leaves for one of a

number of specified ‘good leaver’ reasons which are: death; injury, illness or disability; redundancy;

or retirement. The Committee retains the discretion to prevent such awards from lapsing

depending on the circumstances of the departure and the best interests of the Company.

Awards which do not lapse on cessation of employment will vest on their originally anticipated

vesting date with any holding period also continuing to apply (although the Committee retains

the discretion to allow vesting and/or release from the holding period at cessation, depending

on the circumstances under the applicable rules). These awards will also usually be subject to a

time pro-rating reduction to reflect the unexpired portion of the performance or deferral period

concerned, although the Committee will retain the discretion to disapply this pro-rating. Awards

that are subject to performance conditions will usually only vest to the extent that these conditions

are satisfied.

Executive Directors will also be entitled to a payment in respect of any accrued but untaken

holiday and statutory entitlements on termination.

In the event that any payment is made in relation to termination for an Executive Director, this

willbe fully disclosed.

131

Ricardo plc | Annual Report and Accounts 2023/24

Directors’ remuneration report continued

Part 3 – Directors’ Remuneration Policy continued

Executive Directors’ service contracts

The service contracts of Executive Directors in post during the financial year contain the key terms

shown in the table below:

Provision Detailed terms

Remuneration • Salary, pension and benefits

• Company car or cash allowance

• Private health insurance for Director and dependants

• Life assurance and death in-service benefits

• Permanent health and disability insurance

• Directors’ liability insurance

• Up to 30 days’ paid annual leave

• Participation in annual bonus plan, subject to plan rules

andatthediscretion of the Committee

• Eligible to participate in share plans, subject to plan rules

andatthediscretion of the Committee

Duration • Indefinite, subject to termination by either party in certain

circumstances including serving notice as set out below

Notice period • 12 months’ notice by the Director and 12 months’ notice by

theCompany

Termination

payment

• See separate general disclosure on page 131

Restrictive

covenants

• During employment and for 12 months after leaving

The Executive Directors’ service contracts are available for inspection, on request, at the

Company’s registered office.

Non-Executive Directors – fees and letters of appointment

The Committee determines the Chair’s fees. The Chair and the Executive Directors determine the

fees payable to other Non-Executive Directors. No Director is present for any discussion or decision

about their own remuneration. The fees are reviewed each January.

The Chair and other Non-Executive Directors do not participate in any of the Company’s employee

share plans, pension schemes or bonus arrangements, nor do they have service agreements.

The Chair and other Non-Executive Directors are appointed for a period of three years by

letter ofappointment and are entitled to one month’s notice of early termination for which no

compensation is payable. The unexpired terms of the Non-Executive Directors’ appointments,

asat30 June 2024, are:

Non-Executive Director

Unexpired terms

of appointment

(months)

Mark Clare 16

Russell King 14

Laurie Bowen

(1)

n/a

Malin Persson 6

Bill Spencer

(2)

Jack Boyer

(3)

n/a

(1) Laurie Bowen stepped down from the board on 31 May 2024.

(2) Bill Spencer will step down from the board at the AGM in November 2024.

(3) Jack Boyer stepped down from the board at the end of July 2024.

132Ricardo plc | Annual Report and Accounts 2023/24

This section sets out the information required to be disclosed by the Company in the Directors’

report in compliance with the Companies Act 2006 (the Act), the Listing Rules of the UK Listing

Authority (Listing Rules) and the Disclosure Guidance and Transparency Rules (DTR).

Overview of information required to be disclosed

Certain matters that would otherwise be disclosed in this Directors’ report have been reported

elsewhere in this Annual Report. This report should therefore be read in conjunction with

the strategic report on pages 1-84 and the Governance section on pages 85-136 which are

incorporated by reference into this Directors’ report. The strategic report and this Directors’ report,

together with other sections of this Annual Report and Accounts including the Governance, are

incorporated by reference, and when taken as a whole, form the management report as required

under Rule 4.1.5R of the DTR.

Disclosure Reported in Page reference

Articles of Association Directors’ report Page 133

Annual General Meeting Directors’ report Page 135

Appointment and removal of Directors Governance Page 94

Auditor’s re-appointment and remuneration Directors’ report Page 135

Authority to allot shares Directors’ report Page 135

Business model Strategic report Page 9

Branches Directors’ report Page 135

Change of control Directors’ report Page 134

Community and charitable giving Strategic report Page 135

Corporate governance Governance Page 85

Directors’ conflicts of interest Directors’ report Page 94

Directors’ details Governance Page 86

Directors’ indemnity Directors’ report Page 134

Directors’ remuneration and interest Directors’ report Page 134

Directors’ responsibility statement Directors’ report Page 136

Disclosure of information to auditor Directors’ report Page 135

Diversity, equity and inclusion Strategic report Pages 55-56

Employee engagement Strategic report Pages 52-56

Employee share plans Directors’ report Page 134

Financial instruments Directors’ report Page 134

Future developments and strategic priorities Chief Executive’s

review

Pages 6-7

Going concern Directors’ report Page 135

Disclosure Reported in Page reference

Internal control and risk management systems Governance Pages 75-80

Non-financial information and sustainability statement Strategic report Page 83

Ongoing Director training and development Governance Page 92

Political donations Directors’ report Page 135

Post balance sheet events Directors’ report Page 133

Powers of Directors Directors’ report Page 134

Purchase of own shares Directors’ report Page 134

Research and development activities Strategic report Page 134

Results and dividends Directors’ report Page 133

Rights and obligations attaching to shares including

restrictions on transfer of shares and voting rights

Directors’ report Page 134

Section 172 statement Strategic report Page 84

Share capital Directors’ report Page 134

Stakeholder engagement Governance Pages 42-44

Streamlined Energy and Carbon disclosures Strategic report Pages 60-63

Substantial share interests Directors’ report Page 135

Treasury shares Directors’ report Page 135

Viability statement Strategic report Page 81

Dividends

On 11 April 2024 an interim dividend of 3.8p (HY 2023/24: 3.35p) was paid to shareholders.

TheDirectors recommend the payment of a final dividend of 8.9p per ordinary share on

22November 2024 to shareholders who are on the register of members at the close of business

on 1 November 2024, which together with the interim dividend makes a total of 12.7p (FY 2023/24:

11.96p) per ordinary share for the year. The payment of the final dividend is subject to the approval

of shareholders at the 2024 AGM. Dividend details are given in Note 8 to the consolidated financial

statements.

Articles of Association

The Company’s Articles of Association are available on the Company’s website

www.ricardo.com/en.

Events after the reporting date

There are no post balance sheet events to report after the reporting date.

Directors’ report

133Ricardo plc | Annual Report and Accounts 2023/24

Research and development

The Group continues to devote effort and resources to the research and development of new

technologies. Costs of £11.3m have been incurred, of which £6.3m has been capitalised and £5.0m

has been charged to the income statement, excluding amortisation of any capitalised costs and net

of £1.8m of government grant income, during the year.

Board of Directors

Details of the Directors who served during the year are set out on pages 86-87.

Directors’ remuneration and interests in shares

Details of Directors’ remuneration and their interest in the Company’s shares are set out on pages

102-132 of the Directors’ remuneration report.

Directors’ indemnities

The Company maintains liability insurance for its Directors and officers. The Company has entered

into deeds of indemnity in favour of each of its Directors, under which the Company agrees to

indemnify each Director against liabilities incurred by that Director in respect of acts or omissions

arising in the course of their office or otherwise by virtue of their office.

At the date of this report, these indemnities are therefore in force for the benefit of all the current

Directors of the Company.

Directors’ powers

The business of the Company is managed by the board, which may exercise all of the powers of

the Company subject to the Company’s Articles of Association and the Act.

Employee share plans

Details of employee share plans are set out in Note 33 to the consolidated financial statements.

Employee information and equal opportunities

The Company provides colleagues with various opportunities to obtain information on matters of

concern to them and to improve awareness of the financial and economic factors that affect the

performance of the Company.

These include bi-annual presentations to all members of staff, department and team briefings and

meetings with employee representatives that take place throughout the year.

All companies within the Group strive to operate fairly at all times and this includes not permitting

discrimination against any employee or applicant for employment on the basis of race, religion

or belief, colour, gender, disability, national origin, age, military service, veteran status, sexual

orientation or marital status. This includes giving full and fair consideration to suitable applications

for employment from disabled persons and making appropriate accommodations so that if existing

team members become disabled they can continue to be employed, wherever practicable, in the

same job or, if this is not practicable, making every effort to find suitable alternative employment

and to provide relevant training.

Change of control provisions

There are a number of agreements that take effect, alter or terminate upon a change of control of

the Company following a takeover bid, such as commercial contracts, bank facility agreements,

property lease arrangements and employees’ share plans. None of these are considered to be

significant in terms of their likely impact on the business of the Group as a whole.

Financial instruments

Details of the Company’s financial risk management in relation to its financial instruments are

given in Note 26 to the consolidated financial statements.

Share capital, shareholders’ rights and obligations, and purchase of own shares

As at 13 August 2024, the Company’s share capital is divided solely into 62,218,280 ordinary

shares of 25p each, all of which are fully paid. The ordinary shares are listed on the London Stock

Exchange. All ordinary shares rank equally for all dividends and distributions that may be declared

on such shares. At General Meetings of the Company, each member who is present (in person,

by proxy or by representative) is entitled to one vote on a show of hands and, on a poll, to one

vote per share. With respect to shares held on behalf of participants in the all-employee Share

Incentive Plan, the trustees are required to vote as the participants direct them to do so in respect

of their plan shares. There are no restrictions on voting rights and no securities carry special voting

rights with regard to the control of the Company.

Awards granted under the Company’s share plans are satisfied either by shares held in the

employee benefit trust or by the issue of new shares when awards vest. The Remuneration

Committee monitors the number of awards made under the various share plans and their potential

impact on the relevant dilution limits recommended by the Investment Association.

Based on the Company’s issued share capital as at 30 June 2024, the overall dilution was 3.73%

(i.e. below the 10% limit for all plans in any rolling 10-year period) and 3.73% for discretionary

employee share plans (i.e. below the 5% limit for discretionary employee share plans in any rolling

10-year period).

Directors’ report continued

134Ricardo plc | Annual Report and Accounts 2023/24

Directors’ report continued

Treasury shares

Shares held by the Company in treasury do not have voting rights and are not eligible to receive

dividends. Currently, the Company does not hold any shares in treasury.

Related party transactions

Details of related party transactions are set out in Note 36 to the consolidated financial statements.

Resolutions at the Annual General Meeting

It is intended that the Company’s AGM will be held on 14 November 2024 at FieldFisher Offices.

The Notice of AGM sets out the resolutions to be considered and approved at the meeting,

together with some explanatory notes. The resolutions cover such routine matters as the renewal

of authority to allot shares, to disapply pre-emption rights and to purchase own shares. The Notice

of AGM accompanies this Annual Report and is available at www.ricardo.com/en

Substantial shareholdings

As at 30 June 2024, the Company has been notified of the following material interests in the voting

rights of the Company under the provisions of the Disclosure and Transparency Rules.

Rank Shareholder Shares % IC

1 Gresham House 11,878,530 19.09

2 Aberforth Partners 5,081,078 8.17

3 Royal London Asset Mgt 3,870,799 6.22

4 abrdn 3,394,748 5.46

5 Invesco 2,773,600 4.46

6 JO Hambro Capital Mgt 2,417,073 3.88

7 Aviva Investors 2,080,070 3.34

8 Schroder Investment Mgt 1,927,931 3.10

9 Montanaro Asset Mgt 1,696,965 2.73

10 Janus Henderson Investors 1,650,520 2.65

Charitable and political donations

During the year the Group made various charitable donations, which are summarised in the

responsible business section on page 57. The Group made no political donations nor incurred

anypolitical expenditure during the year to 30 June 2024.

Auditor’s re-appointment and remuneration

Resolutions for the appointment of KPMG LLP as the Company’s auditor and to authorise

theDirectors, acting through the Audit Committee, to agree the remuneration of the auditor,

aretobe proposed at the 2024 AGM.

Going concern and viability statement

Having reviewed the Company’s plans and available financial facilities, the board has a reasonable

expectation that the Company has adequate resources to continue in operational existence for at

least 12 months following the signing of the accounts. For this reason, it continues to adopt the

going concern basis in preparing the Company’s accounts. The Company’s viability statement can

be found on pages 81-82.

Branches outside the UK

The Company has no overseas branches outside the UK. A number of the Group’s subsidiaries

have overseas branches outside the UK, which are disclosed in their local statutory financial

statements, where required.

Disclosures required under UK Listing Rule 9.8.4

There are no disclosures required to be made under UK Listing Rule 9.8.4 other than in respect of

long-term incentive schemes.

Disclosure of information to auditor

The Directors who held office at the date of approval of the Directors’ report confirm that:

• So far as they are each aware, there is no relevant audit information, which would be needed

by the Company’s auditor in connection with preparing its audit report, of which the Company’s

auditor is unaware

• Each Director has taken all steps that they ought to have taken as a Director in order to make

themselves aware of any relevant audit information and to establish that the Company’s auditor

is aware of that information

Approved by the board and signed on its behalf by:

Harpreet Sagoo

Group General Counsel and Company Secretary

10 September 2024

Registered office

Ricardo plc

Shoreham Technical Centre

Shoreham-by-Sea, West Sussex, BN43 5FG

135

Ricardo plc | Annual Report and Accounts 2023/24

The Directors are responsible for preparing

the Annual Report and the Group and parent

Company financial statements in accordance

with applicable law and regulations.

Company law requires the Directors to

prepare Group and parent Company financial

statements for each financial year. Under

that law they are required to prepare the

Group financial statements in accordance

with UK-adopted international accounting

standards and applicable law and have elected

to prepare the parent Company financial

statements in accordance with UK accounting

standards and applicable law, including FRS

101 Reduced Disclosure Framework. Under

company law the Directors must not approve

the financial statements unless they are

satisfied that they give a true and fair view of

the state of affairs of the Group and parent

Company and of the Group’s profit or loss for

that period. In preparing each of the Group

and parent Company financial statements, the

Directors are required to:

• Select suitable accounting policies and then

apply them consistently

• Make judgements and estimates that are

reasonable, relevant, reliable and prudent

• For the Group financial statements, state

whether they have been prepared in

accordance with UK-adopted international

accounting standards

• For the parent Company financial

statements, state whether applicable UK

accounting standards have been followed,

subject to any material departures disclosed

and explained in the parent Company

financial statements

• Assess the Group and parent Company’s

ability to continue as a going concern,

disclosing, as applicable, matters related to

going concern

• Use the going concern basis of accounting

unless they either intend to liquidate the

Group or the parent Company or to cease

operations, or have no realistic alternative

but to do so

The Directors are responsible for keeping

adequate accounting records that are

sufficient to show and explain the parent

Company’s transactions and disclose with

reasonable accuracy at any time the financial

position of the parent Company and enable

them to ensure that its financial statements

comply with the Companies Act 2006. They

are responsible for such internal control as

they determine is necessary to enable the

preparation of financial statements that are

free from material misstatement, whether

due to fraud or error, and have general

responsibility for taking such steps as are

reasonably open to them to safeguard the

assets of the Group and to prevent and detect

fraud and other irregularities.

Under applicable law and regulations, the

Directors are also responsible for preparing a

strategic report, Directors’ report, Directors’

remuneration report and corporate governance

statement that complies with that law and

those regulations.

The Directors are responsible for the

maintenance and integrity of the corporate

and financial information included on the

Company’s website. Legislation in the UK

governing the preparation and dissemination

of financial statements may differ from

legislation in other jurisdictions.

In accordance with Disclosure Guidance and

Transparency Rule (DTR) 4.1.16R, the financial

statements will form part of the annual

financial report prepared under DTR4.1.17R

and 4.1.18R. The auditor’s report on these

financial statements provides no assurance

over whether the annual financial report

has been prepared in accordance with those

requirements.

Responsibility statement of the

Directors in respect of the annual

financial report

We confirm that to the best of our knowledge:

• The financial statements, prepared in

accordance with the applicable set of

accounting standards, give a true and fair

view of the assets, liabilities, financial

position and profit or loss of the Company

and the undertakings included in the

consolidation taken as a whole

• The strategic report includes a fair review

of the development and performance of

the business and the position of the issuer

and the undertakings included in the

consolidation taken as a whole, together

with a description of the principal risks and

uncertainties that they face

• We consider the Annual Report and

Accounts, taken as a whole, is fair, balanced

and understandable and provides the

information necessary for shareholders

to assess the Group’s position and

performance, business model and strategy

Graham Ritchie

Chief Executive Officer

10 September 2024

Judith Cottrell

Chief Financial Officer

10 September 2024

Statement of Directors’ responsibilities

in respect of the financial statements

136Ricardo plc | Annual Report and Accounts 2023/24

Financial

statements

Independent auditor’s report to the members of Ricardo plc 138

Group financial statements 147

Company financial statements 215

137Ricardo plc | Annual Report and Accounts 2023/24

1. Our opinion is unmodified

We have audited the financial statements of Ricardo plc (“the Company”) for the year ended

30 June 2024 which comprise the consolidated income statement, consolidated statement of

comprehensive income, consolidated statement of financial position, consolidated statement of

changes in equity, consolidated cash flow statement, company statement of financial position,

company statement of changes in equity, and the related notes, including the accounting policies

in Note 1.

In our opinion:

• the financial statements give a true and fair view of the state of the Group’s and of the parent

Company’s affairs as at 30 June 2024 and of the Group’s profit for the year then ended;

• the Group financial statements have been properly prepared in accordance with UK-adopted

international accounting standards;

• the parent Company financial statements have been properly prepared in accordance with UK

accounting standards, including FRS101 Reduced Disclosure Framework and as applied in

accordance with the provisions of the Companies Act 2006; and

• the financial statements have been prepared in accordance with the requirements of the

Companies Act 2006.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs

(UK)”) and applicable law. Our responsibilities are described below. We believe that the audit

evidence we have obtained is a sufficient and appropriate basis for our opinion. Our audit opinionis

consistent with our report to the auditcommittee.

We were first appointed as auditor by the shareholders on 15 November 2018. The period of total

uninterrupted engagement is for the six financial years ended 30 June 2024.

We have fulfilled our ethical responsibilities under, and we remain independent of the Group in

accordance with, UK ethical requirements including the FRC Ethical Standard as applied to listed

public interest entities. No non-audit services prohibited by that standard were provided.

Overview

Materiality: £1.3m (2023: £1.2m)

Group financial statements

as a whole

5.1% (2023: 5.1%) of normalised Group profit before tax

Coverage 62% (2023: 69%) of the total profits and losses that made up

group profit before tax

Key audit matters  vs 2023

Recurring risks Valuation of defined benefit pension obligation <>

Recoverability of Goodwill <>

Revenue recognition of fixed price contracts <>

Independent auditor’s report

to the members of Ricardo plc

138Ricardo plc | Annual Report and Accounts 2023/24

Independent auditor’s report continued

to the members of Ricardo plc

2. Key audit matters: our assessment of risks of material misstatement

Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial statements and include the most significant assessed risks of material

misstatement (whether or not due to fraud) identified by us, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of

the engagement team. We summarise below the key audit matters, in decreasing order of audit significance, in arriving at our audit opinion above, together with our key audit procedures to address those

matters and, as required for public interest entities, our results from those procedures. These matters were addressed, and our results are based on procedures undertaken, in the context of, and solely

for the purpose of, our audit of the financial statements as a whole, and in forming our opinion thereon, and consequently are incidental to that opinion, and we do not provide a separate opinion on these

matters.

The risk

Our response

Group and parent Company:

Valuation of defined benefit pension obligation

(£97.4m; 2023: £92.0m)

Refer to page 99 (Audit Committee report),

page163 (accounting policy) and

pages 204-208 (financial disclosures).

Subjective estimate:

A significant level of estimation is required in order to determine the

valuation of the gross liability of the Defined Benefit Obligation. Small

changes in the key assumptions (in particular, discount rates, inflation &

mortality rates) can have a material impact on the gross liability.

Given the level of judgement involved in the development of assumptions,

the sensitivity of the assumptions and magnitude of the balance at year-

end, we determined that the valuation of the defined benefit obligation has

a high degree of estimation uncertainty, with a potential range of reasonable

outcomes greater than our materiality for the financial statements as a

whole, and possibly many times that amount. The financial statements

(Note 32) disclose the sensitivity estimated by the Group and Parent

Company.

We performed the detailed tests below rather than seeking to rely on any

of the company's controls because the nature of the balance is such that

we would expect to obtain audit evidence primarily through the detailed

procedures described.

Our procedures included:

• Benchmarking assumptions: Challenging key assumptions applied

(discount rate, inflation rate, and mortality rate) with the support of our

own actuarial specialists, including a comparison of key assumptions

against market data;

• Test of detail: Considering whether the data used in the current year

valuation is consistent with that prepared at the triennial valuation as at

5April 2023, with appropriate updates for changes in membership data

inthe intervening period;

• Our actuarial expertise: With the support of our own actuarial

specialists, we performed the following:

• Assess the duration, sensitivities to key assumptions and life

expectancies provided by the Group's actuary for disclosure purposes;

• Evaluate the judgements made and the appropriateness of the

methodologies used by the Group’s experts in determining the key

actuarial assumptions;

• Assessing actuary's credentials: Assessing the competence, capabilities

and objectivity of the Group's actuarial expert;

• Assessing transparency: Considering the adequacy of the Group and

Company’s disclosures in respect of the sensitivity of the obligation to

changes in key assumptions.

Our results

We found the valuation of the defined benefit pension obligation to be

acceptable (2023: acceptable).

139

Ricardo plc | Annual Report and Accounts 2023/24

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to the members of Ricardo plc

2. Key audit matters: our assessment of risks of material misstatement continued

The risk Our response

Recoverability of Goodwill

Goodwill carrying value: £96.0m

(2023: £96.1m), including A&I

Emerging goodwill of £14.0m

(2023: £14.4m)

Refer to page 99 (Audit Committee

report), page 159 (accounting

policy) and pages 181-182

(financial disclosures).

Forecast-based assessment:

The Group holds Goodwill that is allocated to CGUs or groups of CGUs that

align to the Group’s business units as disclosed in Note 14. The carrying value of

goodwill in the Group’s financial statements is significant and could be at risk of

impairment depending on the performance of the respective business units.

During the current year, the CGU which was most sensitive to changes in

performance was the A&I Emerging group of CGUs (2023: Rail division and

A&I Established CGUs). The performance of the A&I Emerging group of CGUs

has been impacted by global market challenges across the transport sector,

including timing delays to move to clean energy solutions due to changing

political environment globally.

The estimated recoverable amount is subjective due to the inherent uncertainty

involved in forecasting risk and discounting future cash flows. The A&I Emerging

business has specific challenges in forecasting due to the relatively limited level

of historical information relating to the division due to the emerging nature of

the industry in which it operates. This uncertainty is further impacted by the

continuing challenging trading environment.

The effect of these matters is that, as part of risk assessment for audit planning

purposes, we determined that the value in use of the A&I Emerging CGU had

a high degree of estimation uncertainty, with a potential range of reasonable

outcomes greater than our materiality for the financial statements as a whole,

and possibly many times that amount. In conducting our final audit work, we

concluded that reasonably possible changes to the value in use of the A&I

Emerging CGU would not be expected to result in an impairment.

The financial statements (Note 14) disclose the key assumptions and sensitivities

for goodwill estimated by the Group.

We performed the detailed tests below rather than seeking to rely on any of the

company's controls because the nature of the balance is such that we would

expect to obtain audit evidence primarily through the detailed procedures

described.

Our procedures included:

• Our sector experience: Challenging cash flow assumptions used, in particular

those relating to forecast revenue growth, by assessing them in the context of

our experience of the sector in which the CGU operates;

• Methodology implementation: Assessing whether the methodology used for

calculation of the recoverable amount has been appropriately implemented;

• Benchmarking assumptions: Comparing the group’s assumptions to externally

derived data in relation to key inputs such as projected economic growth and

discount rates and comparing the forecast revenue growth rate to sector data;

• Historical comparisons: Analysing the reasonableness of operating margin by

comparing to available historical trends;

• Sensitivity analysis: Performing a sensitivity analysis on the assumptions noted

above and considering reasonably possible changes in key inputs that had the

greatest degree of judgment and their impact on the recoverable amount;

• Assessing transparency: Assessing whether the group’s disclosures about the

key assumptions in the impairment assessment reflect the risks inherent in the

recoverable amount of the CGU.

Our results

We found the carrying value of goodwill to be acceptable (2023: acceptable).

140

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to the members of Ricardo plc

The risk Our response

Revenue recognition on fixed

price contracts

(£214.0m; 2023: £216.9m)

Refer to page 133 (Audit

Committee report), pages 157-158

(accounting policy) and page 173

(financial disclosures).

Accounting application:

The group has a large volume of contracts with a fixed price, the revenue from

which is recognised based on the stage of completion calculated utilising the

actual costs incurred for work performed to date, relative to the estimated total

forecast costs of the contract at completion.

The judgments and estimates impacting the recognition of revenue include:

• The identification of distinct performance obligations

• Assessment of stage of completion and costs to complete

A large part of the portfolio comprises contracts that individually have low

estimation uncertainty.

The highest value, highest risk, most technically complex and financially

challenging contracts to deliver are categorised by the Group as ‘Red Category 4’

contracts, which are subject to more frequent and senior levels of management

review.

The financial statements (note 1d) disclose the range of possible financial

outcomes estimated by the Group on ‘Red Category 4’ contracts. Whilst this is

not considered to be an area of significant estimation uncertainty, fixed price

contracts is nonetheless an area that had the greatest effect on our audit due to

the large volume of contracts and size of the related balances.

Our procedures included:

• Control observation: Attending the ‘Red Category 4’ review meetings in

January and July 2024 at which performance of these contracts was discussed

with the Chief Financial Officer, Group Financial Controller, Group Quality & Risk

Director, and divisional Managing and Finance Directors;

• Test of detail: Selecting a sample of contracts over which revenue has been

recognised in the year and costs incurred in the year and agreed to supporting

documentation which included, for example signed contracts, invoices and

timesheets;

• Test of detail: Inspecting a sample of contracts to identify key contract

mechanisms such as, liquidated damages and warranty clauses and assessing

whether these key clauses have been appropriately reflected in the amounts

recognised in the financial statements;

• Test of detail: Inspecting a sample of correspondence with customers and

instances where contractual variations had arisen to inform our assessment of

the revenue and costs recorded up to the balance sheet date. We also agreed

the variations to relevant invoicing schedules and payment plans and the

subsequent cash receipts, where cash has been received;

• Historical comparisons: Assessing the reasonableness of the estimated total

forecasts costs by considering the historical accuracy of previous forecasts;

• Personnel interviews: Obtaining an understanding of the performance and

status of selected contracts through discussions with operational and finance

contract project teams, to consider whether relevant information was included

in cost and revenue forecasts;

• Test of detail: Recalculating the stage of completion based on the actual costs

incurred to date on the contract and the Group’s latest forecast to inform our

assessment of the appropriate amount of revenue and profit to recognise and

comparing this to the amounts recorded by the Group;

• Assessing transparency: Considering the adequacy of the group’s disclosure

about the degree of estimation uncertainty.

Our results

We found revenue recognised on fixed price contracts to be acceptable

(2023:acceptable).

2. Key audit matters: our assessment of risks of material misstatement continued

141Ricardo plc | Annual Report and Accounts 2023/24

Independent auditor’s report continued

to the members of Ricardo plc

3. Our application of materiality and an overview of the scope of our audit

Materiality for the group financial statements as a whole was set at £1.3m (2023: £1.2m),

determined with reference to a benchmark of normalised group profit before tax from continuing

operations, of which it represents 5.1% (2023: 5.1%).

We normalised profit before tax by adding back adjustments that do not represent the normal,

continuing operations of the Group, for both 2024 and 2023. The items we adjusted for were

exceptional acquisition related expenditure, asset purchases and disposals and other reorganisation

costs as disclosed in Note 6.

Materiality for the parent company financial statements as a whole was set at £0.7m (2023:

£0.5m), which is the component materiality for the parent company determined by the group audit

engagement team. This is lower than the materiality we would otherwise have determined with

reference to company total assets, of which it represents 0.2% (2023: 0.2%).

In line with our audit methodology, our procedures on individual account balances and disclosures

were performed to a lower threshold, performance materiality, so as to reduce to an acceptable

level the risk that individually immaterial misstatements in individual account balances add up to a

material amount across the financial statements as a whole.

Performance materiality was set at 65% (2023: 65%) of materiality for the financial statements as

a whole, which equates to £0.85m (2023: £0.8m) for the group and £0.5m (2023: £0.4m) for the

parent company. We applied this percentage in our determination of performance materiality based

on the level of identified misstatements and control deficiencies during the prior period.

We agreed to report to the Audit Committee any corrected or uncorrected identified misstatements

exceeding £0.07m (2023: £0.06m), in addition to other identified misstatements that warranted

reporting on qualitative grounds.

Of the group’s 67 (2023: 67) reporting components, we subjected 7 (2023: 7) to full scope audits for

group purposes.

The components within the scope of our work accounted for the percentages illustrated opposite.

The remaining 28% (2023: 34%) of total group revenue, 29% (2023: 31%) of group’s total profits

and losses that made up group profit before tax and 28% (2023:37%) of total group assets is

represented by 60 (2023: 60) reporting components, none of which individually represented more

than 7.1% (2023: 7.1%) of any of total group revenue, group’s normalised profit before tax or

total group assets. For the residual components, we performed analysis at an aggregated group

level to re-examine our assessment that there were no significant risks of material misstatement

withinthese.

Normalised Group proﬁt

before tax

£25.7m (2023: £23.6m)

Group materiality

£1.3m (2023: £1.2m)

£1.3m

Whole ﬁnancial statements

materiality (2023: £1.2m)

£0.85m

Whole ﬁnancial statements

performance materiality (2023: £0.8m)

£0.8m

Range of materiality at 7 components

(£0.3m-£0.8m) (2023: £0.2m to £0.8m)

£0.07m

Misstatements reported to the

audit committee (2023: £0.06m)

Normalised PBT

Group materiality

Full scope for Group audit purposes 2024

Full scope for Group audit purposes 2023

 Residual components 2024

 Residual components 2023

62%

(2023: 69%)

38%

62%

31%

69%

73%

(2023: 66%)

27%

73%

34%

66%

71%

(2023: 63%)

29%

71%

37%

63%

Total profits and losses that

made up Group profit before tax

Group revenue Group total assets

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to the members of Ricardo plc

We considered whether this risk could plausibly affect the liquidity or covenant compliance in the

going concern period by assessing the Directors’ sensitivities over the level of available financial

resources and covenant thresholds indicated by the Group’s financial forecasts taking account of

severe, but plausible adverse effects that could arise from these risks individually and collectively.

Our procedures also included:

• Critically assessing assumptions in base case and downside scenarios relevant to liquidity and

covenant metrics, and overlaying knowledge of the entity’s plans based on approved budgets

and our knowledge of the entity and the sector in which it operates.

• We also compared past budgets to actual results to assess the directors' track record of

budgeting accurately.

• We inspected the confirmation from the lender of the level of committed financing, and the

associated covenant requirements.

• Our procedures also included an assessment of whether the going concern disclosure in

note 1 to the financial statements gives a complete and accurate description of the Directors’

assessment of going concern.

Our conclusions based on this work:

• We consider that the directors’ use of the going concern basis of accounting in the preparation

ofthe financial statements is appropriate;

• We have not identified, and concur with the directors’ assessment that there is not, a material

uncertainty related to events or conditions that, individually or collectively, may cast significant

doubt on the Group’s or Company's ability to continue as a going concern for the going concern

period;

• We have nothing material to add or draw attention to in relation to the directors’ statement in

Note 1 to the financial statements on the use of the going concern basis of accounting with no

material uncertainties that may cast significant doubt over the Group and Company’s use of that

basis for the going concern period, and we found the going concern disclosure in note 1 to be

acceptable; and

• The related statement under the Listing Rules set out on page 176 is materially consistent with

the financial statements and our audit knowledge.

However, as we cannot predict all future events or conditions and as subsequent events may

result in outcomes that are inconsistent with judgements that were reasonable at the time they

were made, the above conclusions are not a guarantee that the Group or the Company will

continue in operation.

3. Our application of materiality and an overview of the scope of our audit

continued

The Group team instructed component auditors as to the significant areas to be covered, including

the relevant risks detailed above and the information to be reported back. The Group team

approved the component materialities, which ranged from £0.3m to £0.8m (2023: £0.2m to £0.8m),

having regard to the mix of size and risk profile of the Group across the components. The work on

2 of the 7 components (2023: 2 of the 7 components) was performed by component auditors and

the rest, including the audit of the parent company, was performed by the Group team. The Group

team performed procedures on the items excluded from normalised group profit before tax.

The scope of the audit work performed was predominately substantive as we placed limited

reliance upon the Group’s internal control over financial reporting.

During the year, video and telephone conference meetings were held with component auditors

to assess the audit risk and strategy. In the prior year, the Group team visited one component

location. At these meetings, the findings reported to the Group team were discussed in more

detail, and any further work required by the Group team was then performed by the component

auditor, with all other in-scoped components audited by the Group team. Audit work undertaken

by the component auditors were reviewed by the Group team and any further work required by the

Group team was then performed by the component auditor.

4. Going concern

The Directors have prepared the financial statements on the going concern basis as they do

not intend to liquidate the Group or the Company or to cease their operations, and as they have

concluded that the Group’s and the Company’s financial position means that this is realistic. They

have also concluded that there are no material uncertainties that could have cast significant doubt

over their ability to continue as a going concern for at least a year from the date of approval of the

financial statements (“the going concern period”).

We used our knowledge of the Group, its industry, and the general economic environment to

identify the inherent risks to its business model and analysed how those risks might affect the

Group’s and Company’s financial resources or ability to continue operations over the going concern

period. The risk that we considered most likely to adversely affect the Group’s and Company’s

available financial resources and metrics relevant to debt covenants over this period were

challenges impacting the automotive industry with a potential decline in trading results for the A&I

Emerging CGU.

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Identifying and responding to risks of material misstatement due to

non-compliance with laws and regulations

We identified areas of laws and regulations that could reasonably be expected to have a material

effect on the financial statements from our general commercial and sector experience, through

discussion with the directors and other management (as required by auditing standards), and

discussed with the directors and other management the policies and procedures regarding

compliance with laws and regulations. As the Group is regulated, our assessment of risks

involved gaining an understanding of the control environment including the entity’s procedures for

complying with regulatory requirements.

We communicated identified laws and regulations throughout our team and remained alert to any

indications of non-compliance throughout the audit. This included communication from the group

to full scope component audit teams of relevant laws and regulations identified at the Group level,

and a request for full scope component auditors to report to the group team any instances of

non-compliance with laws and regulations that could give rise to a material misstatement at the

Group level.

The potential effect of these laws and regulations on the financial statements varies considerably.

Firstly, the Group is subject to laws and regulations that directly affect the financial statements

including financial reporting legislation (including related companies legislation), distributable

profits legislation, taxation legislation and pensions legislation and we assessed the extent of

compliance with these laws and regulations as part of our procedures on the related financial

statement items.

Secondly, the Group is subject to many other laws and regulations where the consequences of

non-compliance could have a material effect on amounts or disclosures in the financial statements,

for instance through the imposition of fines or litigation. We identified the following areas as those

most likely to have such an effect: health and safety, anti-bribery, employment law, road and

motor vehicle regulations, competition laws, regulatory capital and liquidity and certain aspects of

company legislation recognising the regulated nature of the Group’s activities and its legal form.

Auditing standards limit the required audit procedures to identify non-compliance with these laws

and regulations to enquiry of the directors and other management and inspection of regulatory

and legal correspondence, if any. Therefore if a breach of operational regulations is not disclosed

to us or evident from relevant correspondence, an audit will not detect that breach.

5. Fraud and breaches of laws and regulations – ability to detect

Identifying and responding to risks of material misstatement due to fraud

To identify risks of material misstatement due to fraud (“fraud risks”) we assessed events or

conditions that could indicate an incentive or pressure to commit fraud or provide an opportunity to

commit fraud. Our risk assessment procedures included:

• Enquiring of directors, the audit committee, internal audit and inspection of policy documentation

as to the Group’s high-level policies and procedures to prevent and detect fraud, including the

internal audit function, and the Group’s channel for “whistleblowing”, as well as whether they

have knowledge of any actual, suspected or alleged fraud;

• Considering remuneration incentive schemes and performance targets for management and

Directors including the EPS target for management remuneration;

• Using analytical procedures to identify any unusual or unexpected relationships, and

• Reading Board and Audit Committee minutes.

We communicated identified fraud risks throughout the audit team and remained alert to any

indications of fraud throughout the audit. This included communication from the group to full

scope component audit teams of relevant fraud risks identified at the Group level and request to

full scope component audit teams to report to the Group audit team any instances of fraud that

could give rise to a material misstatement at group.

As required by auditing standards, and taking into account possible pressures to meet profit

targets and our overall knowledge of the control environment, we perform procedures to address

the risk of management override of controls, in particular the risk that Group and component

management may be in a position to make inappropriate accounting entries. On this audit we

do not believe there is a fraud risk related to revenue recognition because of the relatively low

estimation risk across the contract portfolio, the historical accuracy of forecasting and the strength

of the control environment in place. We did not identify any additional fraud risks, other than those

included above.

We performed procedures including:

• Identifying journal entries to test for all full scope components based on risk criteria and

comparing the identified entries to supporting documentation. These included those posted to

cash and revenue where applicable to check for unexpected journal pairings.

• Agreeing of a sample of timesheet entries recorded directly with employees to confirm the

accuracy.

• We considered whether judgements and estimates made by management impact on

remuneration targets and assess whether this results in biased accounting.

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Based on those procedures, we have nothing material to add or draw attention to in relation to:

• The Directors’ confirmation within the viability statement page 81 that they have carried out a

robust assessment of the emerging and principal risks facing the Group, including those that

would threaten its business model, future performance, solvency and liquidity;

• The Principal risks and uncertainties disclosures describing these risks and how emerging risks

are identified, and explaining how they are being managed and mitigated; and

• The Directors’ explanation in the viability statement of how they have assessed the prospects

of the Group, over what period they have done so and why they considered that period to be

appropriate, and their statement as to whether they have a reasonable expectation that the

Group will be able to continue in operation and meet its liabilities as they fall due over the

period of their assessment, including any related disclosures drawing attention to any necessary

qualifications or assumptions.

We are also required to review the viability statement, set out on page 81 under the Listing Rules.

Based on the above procedures, we have concluded that the above disclosures are materially

consistent with the financial statements and our audit knowledge.

Our work is limited to assessing these matters in the context of only the knowledge acquired

during our financial statements audit. As we cannot predict all future events or conditions and

as subsequent events may result in outcomes that are inconsistent with judgements that were

reasonable at the time they were made, the absence of anything to report on these statements is

not a guarantee as to the Group’s and Company’s longer-term viability.

Corporate governance disclosures

We are required to perform procedures to identify whether there is a material inconsistency

between the directors’ corporate governance disclosures and the financial statements and our

audit knowledge.

Based on those procedures, we have concluded that each of the following is materially consistent

with the financial statements and our audit knowledge:

• The Directors’ statement that they consider that the annual report and financial statements

taken as a whole is fair, balanced and understandable, and provides the information necessary

for shareholders to assess the Group’s position and performance, business model and strategy;

• The section of the annual report describing the work of the Audit Committee, including the

significant issues that the audit committee considered in relation to the financial statements, and

how these issues were addressed; and

• The section of the annual report that describes the review of the effectiveness of the Group’s

risk management and internal control systems.

We are required to review the part of the Corporate Governance Statement relating to the Group’s

compliance with the provisions of the UK Corporate Governance Code specified by the Listing

Rules for our review. We have nothing to report in this respect.

5. Fraud and breaches of laws and regulations – ability to detect continued

Context of the ability of the audit to detect fraud or breaches of law or regulation

Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have

detected some material misstatements in the financial statements, even though we have properly

planned and performed our audit in accordance with auditing standards. For example, the further

removed non-compliance with laws and regulations is from the events and transactions reflected

in the financial statements, the less likely the inherently limited procedures required by auditing

standards would identify it.

In addition, as with any audit, there remained a higher risk of non-detection of fraud, as these

may involve collusion, forgery, intentional omissions, misrepresentations, or the override of

internal controls. Our audit procedures are designed to detect material misstatement. We

are not responsible for preventing non-compliance or fraud and cannot be expected to detect

non-compliance with all laws and regulations.

6. We have nothing to report on the other information in the Annual Report

The Directors are responsible for the other information presented in the Annual Report together

with the financial statements. Our opinion on the financial statements does not cover the other

information and, accordingly, we do not express an audit opinion or, except as explicitly stated

below, any form of assurance conclusion thereon.

Our responsibility is to read the other information and, in doing so, consider whether, based on

our financial statements audit work, the information therein is materially misstated or inconsistent

with the financial statements or our audit knowledge. Based solely on that work we have not

identified material misstatements in the other information.

Strategic report and Directors’ report

Based solely on our work on the other information:

• we have not identified material misstatements in the strategic report and the Directors’ report;

• in our opinion the information given in those reports for the financial year is consistent with the

financial statements; and

• in our opinion those reports have been prepared in accordance with the Companies Act 2006.

Directors’ remuneration report

In our opinion the part of the Directors’ remuneration report to be audited has been properly

prepared in accordance with the Companies Act 2006.

Disclosures of emerging and principal risks and longer-term viability

We are required to perform procedures to identify whether there is a material inconsistency

between the directors’ disclosures in respect of emerging and principal risks and the viability

statement, and the financial statements and our audit knowledge.

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Independent auditor’s report continued

to the members of Ricardo plc

9. The purpose of our audit work and to whom we owe our responsibilities

This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of

Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state

to the Company’s members those matters we are required to state to them in an auditor’s report

and for no other purpose. To the fullest extent permitted by law, we do not accept or assume

responsibility to anyone other than the Company and the Company’s members, as a body, for our

audit work, for this report, or for the opinions we have formed.

Jeremy Hall (Senior Statutory Auditor)

for and on behalf of KPMG LLP, Statutory Auditor

Chartered Accountants

15 Canada Square

London

E14 5GL

10 September 2024

7. We have nothing to report on the other matters on which we are required to

report by exception

Under the Companies Act 2006, we are required to report to you if, in our opinion:

• adequate accounting records have not been kept by the parent Company, or returns adequate

for our audit have not been received from branches not visited by us; or

• the parent Company financial statements and the part of the Directors’ Remuneration Report to

be audited are not in agreement with the accounting records and returns; or

• certain disclosures of directors’ remuneration specified by law are not made; or

• we have not received all the information and explanations we require for our audit.

We have nothing to report in these respects.

8. Respective responsibilities

Directors’ responsibilities

As explained more fully in their statement set out on page 136, the Directors are responsible for:

the preparation of the financial statements including being satisfied that they give a true and fair

view; such internal control as they determine is necessary to enable the preparation of financial

statements that are free from material misstatement, whether due to fraud or error; assessing

the Group and parent Company’s ability to continue as a going concern, disclosing, as applicable,

matters related to going concern; and using the going concern basis of accounting unless they

either intend to liquidate the Group or the parent Company or to cease operations, or have no

realistic alternative but to do so.

Auditor’s responsibilities

Our objectives are to obtain reasonable assurance about whether the financial statements as a

whole are free from material misstatement, whether due to fraud or error, and to issue our opinion

in an auditor’s report. Reasonable assurance is a high level of assurance, but does not guarantee

that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement

when it exists. Misstatements can arise from fraud or error and are considered material if,

individually or in aggregate, they could reasonably be expected to influence the economic

decisions of users taken on the basis of the financial statements.

A fuller description of our responsibilities is provided on the FRC’s website at www.frc.org.uk/

auditorsresponsibilities

The Company is required to include these financial statements in an annual financial report

prepared under Disclosure Guidance and Transparency Rule 4.1.17R and 4.1.18R. This auditor’s

report provides no assurance over whether the annual financial report has been prepared in

accordance with those requirements.

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Consolidated income statement

for the year ended 30 June

			2024			2023
			Specific			Specific
			adjusting			adjusting
		Underlying	items	Total	Underlying	items	Total
	Note	£m	£m	£m	£m	£m	£m
Continuing operations
Revenue	5	474.7	—	474.7	445.2	—	445.2
Cost of sales		(340.1)	—	(340.1)	(318.9)	—	(318.9)
Gross profit		134.6	—	134.6	126.3	—	126.3
Administrative expenses		(96.8)	(26.0)	(122.8)	(91.7)	(35.9)	(127.6)
Impairment losses on trade receivables and contract assets	21	(0.2)	—	(0.2)	(1.8)	—	(1.8)
Other income		1.2	—	1.2	1.2	—	1.2
Operating profit	3	38.8	(26.0)	12.8	34.0	(35.9)	(1.9)
Finance income		1.1	—	1.1	1.0	—	1.0
Finance costs		(9.4)	(0.2)	(9.6)	(7.1)	—	(7.1)
Net finance costs	9	(8.3)	(0.2)	(8.5)	(6.1)	—	(6.1)
Profit/(loss) before taxation		30.5	(26.2)	4.3	27.9	(35.9)	(8.0)
Income tax (expense)/credit	11	(8.1)	4.6	(3.5)	(7.3)	3.3	(4.0)
Profit/(loss) from continuing operations		22.4	(21.6)	0.8	20.6	(32.6)	(12.0)
Discontinued operation
Profit from discontinued operation, net of tax		—	—	—	0.4	6.4	6.8
Profit/(loss) for the year		22.4	(21.6)	0.8	21.0	(26.2)	(5.2)
Profit/(loss) attributable to:
Continuing operations
– Owners of the parent		22.3	(21.6)	0.7	20.4	(32.6)	(12.2)
– Non-controlling interests	30	0.1	—	0.1	0.2	—	0.2
		22.4	(21.6)	0.8	20.6	(32.6)	(12.0)
Discontinued operation
– Owners of the parent		—	—	—	0.4	6.4	6.8
Total
– Owners of the parent		22.3	(21.6)	0.7	20.8	(26.2)	(5.4)
– Non-controlling interests	30	0.1	—	0.1	0.2	—	0.2
		22.4	(21.6)	0.8	21.0	(26.2)	(5.2)

(1)

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Consolidated income statement continued

for the year ended 30 June

	2024	2023
Earnings per share – basic and diluted (Note 7)	pence	pence
Basic
Earnings/(loss) per share	1.1	(8.7)
Underlying earnings per share	35.9	33.4
Earnings/(loss) per share from continuing operations	1.1	(19.3)
Earnings per share from discontinued operation	—	10.9
Diluted
Earnings/(loss) per share	1.1	(8.7)
Underlying earnings per share	35.5	33.4
Earnings/(loss) per share from continuing operations	1.1	(19.3)
Earnings per share from discontinued operation	—	10.9

(1) Specific adjusting items are disclosed separately in the financial statements where it is necessary to do so to provide further understanding of the financial performance. See Notes 2 and 6.

The notes on pages 153-214 form an integral part of these consolidated financial statements.

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Consolidated statement of comprehensive income

for the year ended 30 June

		2024	2023
	Note	£m	£m
Profit/(loss) for the year		0.8	(5.2)
Other comprehensive (expense)/income
Items that will not be reclassified to profit or loss:
Remeasurements of the defined benefit pension scheme	32	(6.0)	(5.0)
Deferred tax on remeasurements of the defined benefit pension scheme	19	1.4	1.2
Total items that will not be reclassified to profit or loss		(4.6)	(3.8)
Items that are, or may be, subsequently reclassified to profit or loss:
Currency translation on foreign currency net investments		(0.9)	(6.4)
Reclassification of foreign currency differences on disposal of foreign operation		—	(0.9)
Movement in fair value of cash flow hedge		(0.1)	—
Total items that may be subsequently reclassified to profit or loss		(1.0)	(7.3)
Total other comprehensive expense for the year (net of tax)		(5.6)	(11.1)
Total comprehensive expense for the year		(4.8)	(16.3)
Comprehensive expense attributable to:
– Owners of the parent		(4.9)	(16.5)
– Non-controlling interests	30	0.1	0.2
		(4.8)	(16.3)

The notes on pages 153-214 form an integral part of these consolidated financial statements.

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Consolidated statement of financial position

as at 30 June

		2024	2023
	Note	£m	£m
Assets
Non-current assets
Goodwill	14	96.0	96.1
Other intangible assets	15	33.7	35.4
Property, plant and equipment	16	30.4	35.3
Right-of-use assets	17	19.2	20.7
Retirement benefit surplus	32	8.0	12.6
Other receivables	21	2.5	2.4
Deferred tax assets	19	6.4	8.5
		196.2	211.0
Current assets
Inventories	20	29.4	29.5
Trade, contract and other receivables	21	146.7	153.5
Derivative financial assets	25	0.8	2.3
Current tax assets		7.1	2.7
Cash and cash equivalents	23	48.6	49.8
		232.6	237.8
Total assets		428.8	448.8
Liabilities
Current liabilities
Borrowings	23	4.3	12.7
Lease liabilities	17	6.0	5.7
Trade, contract and other payables	22	107.5	105.0
Current tax liabilities		3.5	2.6
Derivative financial liabilities	25	0.5	1.0
Provisions	18	3.5	2.6
		125.3	129.6
Net current assets		107.3	108.2

		2024	2023
	Note	£m	£m
Non-current liabilities
Borrowings	23	102.6	99.2
Lease liabilities	17	17.8	19.4
Trade, contract and other payables	22	1.2	4.8
Deferred tax liabilities	19	13.0	15.5
Derivative financial liabilities	25	0.1	—
Provisions	18	3.6	3.7
		138.3	142.6
Total liabilities		263.6	272.2
Net assets		165.2	176.6
Equity
Share capital	27	15.6	15.6
Share premium	27	16.8	16.8
Other reserves	28	36.2	37.2
Retained earnings	29	96.1	106.6
Equity attributable to owners of the parent		164.7	176.2
Non-controlling interests	30	0.5	0.4
Total equity		165.2	176.6

The notes on pages 153-214 form an integral part of these consolidated financial statements.

Approved by the board of Ricardo plc (registered number 222915) on 10 September 2024 and

signed on its behalf by:

Graham Ritchie Judith Cottrell

Chief Executive Officer Chief Financial Officer

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Consolidated statement of changes in equity

for the year ended 30 June

			Attributable to owners of the parent
		Share	Share	Other	Retained		Non-controlling
		capital	premium	reserves	earnings	Total	interests	Total equity
	Note	£m	£m	£m	£m	£m	£m	£m
At 1 July 2022		15.6	16.8	44.5	120.5	197.4	0.2	197.6
Loss for the year		—	—	—	(5.4)	(5.4)	0.2	(5.2)
Other comprehensive expense for the year		—	—	(7.3)	(3.8)	(11.1)	—	(11.1)
Total comprehensive (expense)/income for the year		—	—	(7.3)	(9.2)	(16.5)	0.2	(16.3)
Equity-settled transactions	33	—	—	—	1.4	1.4	—	1.4
Purchases of own shares to settle awards		—	—	—	(0.1)	(0.1)	—	(0.1)
Tax relating to share option schemes	19	—	—	—	0.7	0.7	—	0.7
Ordinary share dividends	8	—	—	—	(6.7)	(6.7)	—	(6.7)
At 30 June 2023		15.6	16.8	37.2	106.6	176.2	0.4	176.6
At 1 July 2023		15.6	16.8	37.2	106.6	176.2	0.4	176.6
Profit for the year		—	—	—	0.7	0.7	0.1	0.8
Other comprehensive expense for the year		—	—	(1.0)	(4.6)	(5.6)	—	(5.6)
Total comprehensive (expense)/income for the year		—	—	(1.0)	(3.9)	(4.9)	0.1	(4.8)
Equity-settled transactions	33	—	—	—	2.2	2.2	—	2.2
Purchases of own shares to settle awards		—	—	—	(0.7)	(0.7)	—	(0.7)
Tax relating to share option schemes		—	—	—	(0.4)	(0.4)	—	(0.4)
Ordinary share dividends	8	—	—	—	(7.7)	(7.7)	—	(7.7)
At 30 June 2024		15.6	16.8	36.2	96.1	164.7	0.5	165.2

The notes on pages 153-214 form an integral part of these consolidated financial statements.

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Consolidated cash flow statement

for the year ended 30 June

		2024	2023 (Restated)
	Note	£m	£m
Cash flows from operating activities
Profit/(loss) before taxation		4.3	(0.1)
Adjustments for:
– Share-based payments	33	2.3	1.3
– Unrealised foreign exchange (gains)/losses	25	(1.3)	2.6
– Fair value losses/(gains) on derivatives	25	1.1	(5.6)
– Losses on disposal of property, plant
andequipment	3	—	0.7
– Gains on disposal of discontinued operation	6	—	(7.4)
– Net finance costs	9	8.5	6.1
– Depreciation, amortisation and impairment	3	19.9	37.4
Defined benefit pension scheme payments in excess of past service costs	32	(0.8)	(1.8)
Operating cash flows before movements
inworking capital		34.0	33.2
Changes in:
– Inventories	20	0.1	(9.0)
– Trade, contract and other receivables	21	7.5	(27.9)
– Trade, contract and other payables	22	(1.4)	27.7
– Provisions	18	0.8	(2.0)
Cash generated from operations	2	41.0	22.0
Net interest paid		(8.6)	(7.5)
Income tax paid		(6.5)	(4.6)
Net cash generated from operating activities		25.9	9.9
Cash flows from investing activities
Acquisitions of subsidiaries, net of cash
acquired	13	—	(24.5)
Purchases of property, plant and equipment	16	(4.1)	(4.9)
Proceeds from disposal of property, plantandequipment	16	3.3	—
Proceeds from sale of discontinued operation, net of cash disposed	6	—	13.1
Fees in relation to sale of discontinuedoperation	6	—	(0.8)

		2024	2023 (Restated)
	Note	£m	£m
Purchases of intangible assets and capitaliseddevelopment costs	15	(7.2)	(5.7)
Net cash used in investing activities		(8.0)	(22.8)
Cash flows from financing activities
Purchases of own shares to settle awards		(0.7)	(0.2)
Principal element of lease payments	17	(5.4)	(5.1)
Proceeds from borrowings	23	83.0	128.0
Repayment of borrowings	23	(80.0)	(103.0)
Dividends paid to shareholders	8	(7.7)	(6.7)
Net cash generated (used in)/from financingactivities		(10.8)	13.0
Effect of exchange rate changes on cash
andcash equivalents		—	(2.3)
Net increase/(decrease) in cash and cash
equivalents	23	7.1	(2.2)
Net cash and cash equivalents at 1 July		37.2	39.4
Restricted cash	23	(1.3)	—
Net cash and cash equivalents at 30 June		43.0	37.2
At 1 July
Cash and cash equivalents		49.8	49.4
Cash included in disposal group held-for-sale		—	1.1
Bank overdrafts		(12.6)	(11.1)
Net cash and cash equivalents at 1 July		37.2	39.4
At 30 June
Cash and cash equivalents	23	48.6	49.8
Restricted cash	23	(1.3)	—
Bank overdrafts	23	(4.3)	(12.6)
Net cash and cash equivalents at 30 June		43.0	37.2

The notes on pages 153-214 form an integral part of these consolidated financial statements.

Theprior year cash flow statement has been restated. See Note 37.

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Notes to the consolidated financial statements

Going concern

The board of Ricardo plc has undertaken an assessment of the ability of the Group and Company

to continue in operation and meet their liabilities as they fall due over the period of its assessment.

In doing so, the board considered events throughout the period of their assessment, including the

availability and maturity profile of the Group’s financing facilities and covenant compliance. These

financial statements have been prepared on the going concern basis, which the Directors consider

appropriate for the reasons set out below.

The Group funds its operations through cash generated by the Group and has access to a £150m

revolving credit facility (RCF) with a £50m accordion which is linked to two covenants: adjusted

leverage (defined as net debt divided by underlying EBITDA, adjusted for the impact of acquisitions

and disposals, excluding the impact of IFRS 16, for the last 12 months); and interest cover (defined

as underlying EBITDA, adjusted for the impact of acquisitions and disposals, excluding the impact

of IFRS 16, for the last 12 months divided by net finance costs excluding pension and IFRS 16

interest). Covenant limits are a maximum of 3.0x for adjusted leverage and a minimum of 4.0x for

interest cover. These covenants are tested at 30 June and 31 December each year until the debt

matures in August 2026.

Net debt at 30 June 2024 was £59.6m, comprising cash and cash equivalents, net of any restricted

cash, of £47.3m and borrowings, including hire purchase liabilities, but excluding IFRS 16 lease

liabilities, of £106.9m. Adjusted leverage was 1.25x and interest cover was 5.86x. As at the date

of approval of these financial statements, the amount of RCF undrawn and available to the Group

was £51.0m with total borrowing, including overdrafts, of £114.9m and cash and cash equivalents

of £39.1m.

The Directors have prepared a cash flow forecast which covers a period of at least 12 months from

the date of approval of the financial statements. In this forecast, the Directors have considered the

impact of known risks, including the pace of technological change in the automotive sector, driven

by climate change, which continues to rapidly shift away from the traditional internal combustion

engine towards more renewable propulsion methods, on the Group’s results, operations and

financial position in a severe but plausible downside scenario. The scenario includes:

• Limited revenue growth from Automotive and Industrial established transport and emerging

solutions, normalising the revenue achieved in Q4 FY 2023/24

• Reduced revenue growth rates in Energy and Environment and Rail

• Decline in key programme volumes in Performance Products

• Continuation of the ABS retrofit programme at FY 2023/24 government funding levels and lower

revenue growth in technical services

• Removal of any assumed working capital improvement compared with June 2024

• An increase in the SONIA interest rate compared with external bank forecasts

1. Principal accounting policies

This section describes the critical accounting judgements and estimates that management has

identified as having a potentially material impact on the Group’s consolidated financial statements

and sets out our significant accounting policies. Where an accounting policy is generally applicable

to a specific note to the financial statements, the policy is cross-referenced. We have also detailed

below the new accounting pronouncements that we will adopt in future years and our current view

of the impact they will have on our financial reporting.

Ricardo plc, a public company limited by shares, is listed on the London Stock Exchange and

incorporated and domiciled in the United Kingdom. The address of its registered office is

Shoreham Technical Centre, Shoreham-by-Sea, West Sussex, BN43 5FG, England, United

Kingdom, and its registered number is 222915.

(a) Basis of preparation

These consolidated financial statements of the Ricardo plc Group (the Group) have been prepared

in accordance with UK-adopted international accounting standards. The financial statements have

been prepared on a going concern basis under the historical cost convention, except for certain

financial assets and liabilities measured at fair value. The principal accounting policies applied in

the preparation of these financial statements have been consistently applied to the years ended

30 June 2023 and 30 June 2024.

New or revised standards or interpretations

Some accounting pronouncements which have become effective from 1 January 2023 and have

therefore been adopted do not have a significant impact on the Group's financial results or position

other than the change discussed below.

IAS 12 does not specifically address the tax effects of right-of-use assets and lease liabilities.

However, in May 2021 the IASB made amendments to IAS 12 which narrow the scope of the initial

recognition exemption in paragraphs 15 and 24 of IAS 12 and require entities to recognise deferred

tax on transactions that, on initial recognition, give rise to equal amounts of taxable and deductible

temporary differences.

As a consequence, entities are now required to recognise both a deferred tax asset and a deferred

tax liability on the initial recognition of a lease. While these would typically qualify for offsetting in

the balance sheet, the notes to the financial statements need to disclose the gross amounts.

The amendments apply to annual reporting periods beginning on or after 1 January 2023. The Group

was previously recording deferred tax on right-of-use assets and lease liabilities on a net basis. The

Group has now grossed up deferred tax liabilities of £0.9m (2023: £1.2m) on right-of-use assets and

deferred tax assets of £1.1m (2023: £1.4m) on lease liabilities which are disclosed in Note 19.

Due to the offsetting of these deferred tax assets and liabilities on the basis that they relate to

income taxes levied by the same taxation authority on the same taxable entity, there is no material

impact on the deferred tax position reported on the Consolidated Balance Sheet.

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Notes to the consolidated financial statements continued

Such assets, or disposal groups, are measured at the lower of their carrying amount and fair

value less costs to sell. Any impairment loss on a disposal group is allocated first to goodwill, and

then to the remaining assets and liabilities on a pro rata basis, except that no loss is allocated to

inventories, financial assets, deferred tax assets, employee benefit assets, investment property or

biological assets, which continue to be measured in accordance with the Group’s other accounting

policies. Impairment losses on initial classification as held-for-sale or held-for-distribution and

subsequent gains and losses on remeasurement are recognised in profit or loss.

Once classified as held-for-sale, intangible assets and property, plant and equipment are no

longer amortised or depreciated, and any equity-accounted investee is no longer equity accounted.

A discontinued operation is a component of the Group’s business, the operations and cash flows

of which can be clearly distinguished from the rest of the Group and which:

• Represents a separate major line of business or geographic area of operations

• Is part of a single co-ordinated plan to dispose of a separate major line of business or

geographic area of operations, or

• Is a subsidiary acquired exclusively with a view to resale

Classification as a discontinued operation occurs at the earlier of disposal or when the operation

meets the criteria to be classified as held-for-sale.

When an operation is classified as a discontinued operation, the comparative income statement

or statement of comprehensive income is re-presented as if the operation had been discontinued

from the start of the comparative year.

(d) Management judgements and key accounting estimates

The preparation of financial statements under IFRS requires the Group’s management to make

judgements and estimates that affect the application of accounting policies and the reported

amounts of assets, liabilities, revenues and costs. These judgements and estimates are continually

evaluated and are based on historical experience and other factors, including expectations of

future events that are believed to be reasonable under the circumstances.

Critical judgements in applying the Group’s accounting policies

The following are the critical judgements, apart from those involving estimations (which are dealt

with separately below), that the Directors have made in the process of applying the Group’s

accounting policies and that have the most significant effect on the amounts recognised in the

financial statements:

1. Principal accounting policies continued

(a) Basis of preparation continued

Going concern continued

The scenario incorporates the appropriate reversal of discretionary bonus payments and setting

suitable levels of dividends based on the sensitised results of the operating segments. Under

this scenario, the Group’s adjusted EBITDA is forecast to reduce by 15% in FY 2024/25 and then

increase by 8% in FY 2025/26. The results showed that the Group would be able to continue

operating well within its debt covenants and liquidity headroom under the downside scenario.

Following this assessment, the Directors are confident that the Group and Company will have

sufficient funds to continue to meet their liabilities as they fall due for at least 12 months from the

date of approval of the financial statements and therefore have prepared the financial statements

on a going concern basis. Further information on the going concern of the Group can be found on

pages 81-82 in the viability statement.

(b) Basis of consolidation

The financial statements of the Group consolidate the results of the Company and its subsidiary

entities, and include its share of its joint ventures’ results accounted for under the equity method.

Subsidiaries are all entities (including structured entities) over which the Group has control.

The Group controls an entity when the Group is exposed to, or has rights to, variable returns from

its involvement with the entity and has the ability to affect those returns through its power over

the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the

Group and are deconsolidated from the date that control ceases. Intercompany transactions and

balances are eliminated on consolidation.

The Group applies the acquisition method of accounting for business combinations.

The consideration transferred for an acquisition is the fair value of the assets acquired and the

liabilities assumed. The consideration transferred includes the fair value of any asset or liability

resulting from a contingent consideration arrangement. Changes in fair value of contingent

consideration are included within specific adjusting items. Contingent consideration dependent

upon the employment or retention of specific individuals is expensed over the specified period and

included within specific adjusting items. Identifiable assets acquired, together with liabilities and

contingent liabilities assumed in a business combination, are measured initially at their fair values

at the acquisition date. Acquisition-related expenditure is expensed as incurred and recognised

within specific adjusting items.

Non-current assets, or disposal groups comprising assets and liabilities, are classified as

held-for-sale if it is highly probable that they will be recovered primarily through sale rather than

through continuing use.

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Notes to the consolidated financial statements continued

Key sources of estimation uncertainty

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting

estimates are recognised in the period in which the estimate is revised if the revision affects only

that period, or in the period of the revision and future periods if the revision affects both current

and future periods. The areas involving significant risk of a material adjustment to the carrying

amounts of assets and liabilities within the next financial year are as follows:

Defined benefit obligation – Note 32

The Group operates a defined benefit pension scheme that provides benefits to a number

of current and former employees. This scheme is closed to new entrants and the accrual of

future benefits for active members ceased at the end of February 2010. The value of the deficit

is particularly sensitive to the market value of the discount rates and actuarial assumptions

related to mortality. The sensitivity of the defined benefit obligation to changes in the principal

assumptions is set out in Note 32.

1. Principal accounting policies continued

(d) Management judgements and key accounting estimates continued

Critical judgements in applying the Group’s accounting policies continued

Specific adjusting items: Reorganisation costs – Note 2 and Note 6

Reorganisation costs include expenditure incurred as part of fundamental restructuring activities;

significant impairments of property, plant and equipment and leased assets; significant losses on

disposal of assets; and other items deemed to be one-off in nature. These costs are presented

within specific adjusting items in the income statement. The classification and presentation of

these items require significant judgement to determine the nature and intention of the transaction.

Details of the Group’s alternative performance measures and specific adjusting items are included

in Note 2 and Note 6.

Revenue recognition on fixed price contracts – Note 5

The identification of and separate accounting for distinct performance obligations within the

context of a contract is considered to be a critical judgement. Fixed price contracts often have

multiple performance obligations that are indistinct from one another within the context of the

contract. This is due to a homogeneous pattern of transfer of control to the customer who is

unable to benefit from the performance of less than all of the promises set out in the contract.

This is particularly the case where any intellectual property created is stipulated as not being

owned by the customer until the full transaction price has been paid. These judgements determine

the timing of revenue recognition and recognition of contract assets. If performance obligations

were identified on a different basis, revenue and amounts recoverable on contracts may be

materially reduced or increased.

Goodwill: allocation to CGUs – Note 14

Significant judgement is applied in order to allocate goodwill to cash-generating units (CGUs),

or a group of CGUs, as a change in the allocation of goodwill would impact the result of the

impairment review. As set out in Note 1(l), for the purpose of impairment testing, goodwill

acquired in a business combination is allocated to each of the CGUs, or groups of CGUs, that

is expected to benefit from that business combination, at the lowest level at which goodwill is

monitored for internal management purposes. Goodwill is allocated at the operating segment

level, and if goodwill were allocated at a lower level, the results of impairment testing may be

different. The Rail segment comprises several CGUs which have been grouped for impairment

testing purposes as they are expected to benefit from the synergies of the relevant combinations.

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Notes to the consolidated financial statements continued

As at 30 June 2024, the number of live consulting contracts within the portfolio was in excess

of 2,600 (2023: 2,300), with a total value in excess of £800m (2023: £870m). Of this portfolio of

contracts, seven contracts (2023: eight) were categorised as Red Category 4. At 30 June 2024,

£1.4m (2023: £1.5m) of revenue had been recognised in respect of work performed on these

where outcomes were subject to negotiation with customers. Management has made a specific

judgement over the ability to recover each of the amounts under negotiation and has recognised

provisions of £1.0m (2023: £0.8m) against this revenue, resulting in a net exposure of £0.4m (2023:

£0.7m). The possible financial outcomes from these negotiations range from an upside of £1.0m, if

management recovers the full £1.4m of revenue and potential negotiation upside, to a downside of

£0.4m, if management is unsuccessful in recovering any of the £1.4m.

(e) Research and development expenditure – Note 3

Research and development expenditure is recognised as an administrative expense in the income

statement in the year in which it is incurred. Where the activity is performed for customers the

cost is recognised as a cost of sale. Directly attributable development expenditure that meets

the criteria for recognition as an intangible asset is described in Note 15.

(f) Government grants – Note 3

The Group receives income-related grants from various national and supranational government

agencies, principally for credits in respect of qualifying research and development expenditure,

together with funding of research and development and capital projects. A grant is recognised

in the income statement when there is reasonable assurance that the Group will comply with its

conditions and that the grant will be received. Grants are presented in the income statement as

a deduction from the related expenses.

Grants contributing to the cost of an asset are deducted from the cost of the asset and reflected

in depreciation throughout its useful life.

Grants are not normally received until after qualification conditions have been met and the related

expenditure has been incurred. Where this is not the case, they are recorded within trade, contract

and other payables either as payments received in advance on contracts or as deferred revenue.

1. Principal accounting policies continued

(d) Management judgements and key accounting estimates continued

Other sources of estimation uncertainty

Revenue recognition on fixed price contracts – Note 5

The majority of the Group’s revenue is earned from contracts for the provision of consultancy

services that are typically awarded on a fixed price basis. A small number of similar contracts

are also entered into by Performance Products to design and set up production lines and supply

chains. Services provided under a fixed price contract generally have a single distinct performance

obligation, or a single distinct series of performance obligations, which is satisfied over time.

For each distinct performance obligation recognised over time, revenue is recognised using an

input method, based on total costs incurred to date as a percentage of total estimated costs to

satisfy each performance obligation.

The percentage of completion basis of revenue recognition is determined as actual costs incurred

as a proportion of total forecast contract costs to complete. This method places importance on the

accuracy of uncertain estimates, including total costs to complete, the outcome of contract and

technical risks and agreed variation requests. Changes in these estimates may impact revenue

recognised at the reporting date with the revenue recognition in the reporting period appropriately

adjusted as required.

The actual outcome of wholly or partially unsatisfied performance obligations may differ to the

estimate made at a reporting date and it is reasonably possible that outcomes on these contracts

within the next reporting period could differ, adversely or favourably, in aggregate to those

estimated. It is not possible to fully quantify the expected impact of this, but the estimated costs

to complete reflect management’s best estimate at that point in time and no individual estimate is

expected to have a materially different outcome.

Management does not consider there to be a major source of estimation uncertainty. As set out

further on pages 78 and 99, management undertakes a process to assess the risks on inception of

all fixed price contracts, then monitors and reviews the risks and performance of contracts as they

progress to completion. The highest value, highest risk, most technically complex and financially

challenging contracts to deliver, as measured against a number of quantitative and qualitative

factors, are categorised as ‘Red Category 4’ contracts, which are subject to more frequent and

senior levels of management review.

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Notes to the consolidated financial statements continued

Revenue is recognised as distinct performance obligations are satisfied, and as control of the

goods or services is transferred to the customer. For each distinct performance obligation within

a contract, the Group determines whether they are satisfied over time or at a point in time.

Performance obligations are considered to be satisfied over time if the goods or services provided

have no alternative use to the Group and there is an enforceable right to payment for performance

completed to date, or the customer simultaneously receives and consumes the goods or services

as the Group provides them.

Services provided under fixed price contracts

The majority of the Group’s revenue is earned from contracts for the provision of consultancy

services that are typically awarded on a fixed price basis. A small number of similar contracts

are also awarded to Performance Products to design and set up production lines and supply

chains. Services provided under a fixed price contract generally have a single distinct performance

obligation, or a single distinct series of performance obligations, which is satisfied over time.

For each distinct performance obligation recognised over time, revenue is recognised using an

input method, based on total costs incurred to date as a percentage of total estimated costs to

satisfy each performance obligation.

Revenue and attributable margin are calculated by reference to reliable estimates of transaction

price and total expected costs, after making suitable allowances for technical and other risks.

Revenue and associated margin are therefore recognised progressively as costs are incurred,

and estimated costs to complete are updated regularly as anticipated risks are mitigated or

unanticipated risks materialise. The Group has determined that this method faithfully depicts

the Group’s performance in transferring control of the services to the customer.

The transaction price generally does not include consideration resulting from contract

modifications of distinct performance obligations, such as variation orders, until they have been

approved by the customer. Variable consideration, such as for the achievement of performance

targets or variation requests under negotiation with the customer at the reporting date, can be

included in the transaction price together with the estimated costs to perform the associated

obligations. These estimates of the expected value or most likely amount are recognised to the

extent that it is highly probable that there will not be a significant reversal in the amount of

cumulative revenue recognised in a future reporting period.

Changes in transaction price from contract modifications that do not create separate distinct

performance obligations are added to the transaction price of pre-existing performance obligations

to which the modification relates. Contract modifications for goods or services that do create

separate distinct performance obligations are accounted for separately from pre-existing

performance obligations, together with the expected costs to satisfy those separate distinct

performance obligations.

1. Principal accounting policies continued

(g) Revenue – Note 5

Principle approach

The Group principally earns revenue through the provision of consultancy services and bespoke

products and recognises revenue based on the satisfaction of performance obligations in contracts

with its customers. The core principle is that revenue is recognised in a manner that depicts the

transfer of promised goods and services to customers in an amount that reflects the consideration

to which the Group expects to be entitled in exchange for those goods and services.

A contract with a customer is considered to exist when the Group is in possession of

documentation to provide an agreed scope of goods or services on mutually understood terms

and conditions that are acceptable to the Group which, subject to the successful execution of the

contract, is expected to be invoiced against and paid for by the customer. Each contract with a

customer is assessed to identify the promises to transfer distinct goods or services, or a series of

distinct goods or services, that are substantially the same and have the same pattern of transfer

to the customer. Goods and services are distinct and accounted for as separate performance

obligations if they are separately identifiable in the contract and if the customer can benefit from

them, either on their own or together with other readily available resources.

The total transaction price for a contract is estimated as the amount of consideration to which the

Group expects to be entitled in exchange for transferring the promised goods or services to the

customer, excluding sales taxes. Where multiple distinct performance obligations are identified

within a contract with a customer, the total transaction price is allocated to each of the distinct

performance obligations in proportion to their relative stand-alone selling prices. Given the

bespoke nature of many of the Group’s products and services, which are designed or manufactured

under contract to the customer’s individual scope and specifications, there are typically no

observable stand-alone selling prices. Instead, stand-alone selling prices are typically estimated

based on expected costs plus contract margin.

Costs of fulfilling performance obligations on existing contracts with customers are expensed as

incurred. Costs incurred in advance of obtaining a new contract or an anticipated contract that

directly relate to the fulfilment of specific performance obligations are initially recognised as an

asset and subsequently expensed once the new contract is obtained or obtaining the contract

is no longer anticipated. Incremental costs incurred to obtain new contracts with customers

are recognised as an asset and amortised consistently with the recognition of revenue over the

contract term, providing: the contract term is greater than one year; the costs are only incurred

as a direct result of the new contract being obtained; and the costs do not directly relate to the

fulfilment of specific performance obligations.

Costs incurred to obtain new contracts with customers are expensed when those costs are

incurred irrespective of whether a contract is obtained from a customer.

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Notes to the consolidated financial statements continued

Supply of manufactured or assembled products

The majority of the Group’s revenue in Performance Products and Defense is earned from the

supply of manufactured or assembled high-performance products, some of which are supplied

with assurance-type warranties. Revenue for the supply of these products is measured at the

agreed transaction price per unit that is expected to flow to the Group, and is recognised at the

point in time that the Group has transferred control of the products to the customer, which is

typically on delivery or collection. The point in time at which revenue is recognised can vary based

on the specific intercompany terms present in a contract with a customer.

Revenue recognised from bill-and-hold arrangements occurs when all performance obligations

have been satisfied and there is a substantive reason for the arrangement, which is typically that

the customer has requested the products to be held by the Group until such times as delivery

or collection is required by the customer. Revenue is recognised and billed under usual payment

terms when the customer formally agrees to accept control of the bespoke products which cannot

be sold to another customer and provided that the products have been separately identified and

made available for delivery or collection.

Supply of software products

Revenue from the sale of software products is derived from new and renewed licences, for which

the client has the right to access the product during the licence period, including rolling releases of

the latest functionality. A new or renewed licence is considered to be a single distinct performance

obligation for which revenue is recognised at the agreed transaction price on a straight-line basis

over the licence period.

Perpetual licence sales provide the client with an indefinite right to use the product, excluding

rolling releases of the latest functionality. Rolling releases are provided through the separate

provision of maintenance and support services. The transaction price of these two distinct

performance obligations are separately identifiable within a contract. Revenue is recognised for

perpetual licence sales when the performance obligation is satisfied, being the point of delivery of

the licence key to the customer.

(h) Specific adjusting items – Note 6

Specific adjusting items are disclosed separately in the financial statements where it is

necessary to do so to provide further understanding of the financial performance of the Group.

These items comprise the amortisation of acquired intangible assets, acquisition-related

expenditure, reorganisation costs and other items that are included due to their significance,

non-recurring nature or amount. Acquisition-related expenditure includes the costs of acquisitions,

deferred and contingent consideration fair value adjustments (including the unwinding of discount

factors), transaction-related fees and expenses, and post-deal integration costs. Reorganisation

costs include costs arising from major restructuring activities, profits or losses on the disposal of

businesses, and significant impairments of property, plant and equipment and right-of-use assets.

1. Principal accounting policies continued

(g) Revenue – Note 5 continued

Services provided under fixed price contracts continued

Contract assets arising from the recognition of revenue as and when performance obligations are

satisfied are initially recognised as accrued revenue or amounts recoverable on contracts (AROC)

within trade, contract and other receivables, and transferred to trade receivables when invoiced.

Contract liabilities arising from amounts received from customers for services not yet performed

are initially recognised as deferred revenue or payments received in advance on contracts (POA)

within trade, contract and other payables, and transferred to revenue as and when performance

obligations are satisfied.

A loss on a contract is recognised immediately when it becomes probable that the total estimated

directly attributable costs to satisfy the contract will exceed the consideration receivable. Monthly

reviews of contracts by local management, in conjunction with reviews by senior management of

contracts deemed to be of higher risk, ensure that the Group identifies and immediately recognises

expected losses on fixed price performance obligations within a contract.

Services provided under time and materials contracts

Certain contracts for the provision of consultancy services may be awarded on a time and

materials basis. Services provided under a time and materials basis typically have a single distinct

performance obligation to provide a variable amount of labour to the client at an agreed set of

time-based labour rates, which represents the sales value. Revenue is therefore recognised over

time based upon the agreed sales value of the time worked and costs incurred to date, as the

customer simultaneously receives and consumes these services as the Group provides them.

Services provided under subscription and software support contracts

Other contracts primarily relate to annual subscriptions by customers to emergency response

and support services for chemical incidents and crisis management. Subscription services are

considered to be a single distinct performance obligation for which revenue is recognised at the

agreed transaction price on a straight-line basis over the period of subscription.

Software maintenance and support services revenue is recognised separately from the supply of

software products on a straight-line basis over the period of maintenance and support. Revenue

derived from the supply of ad hoc software-related services, such as training and application

engineering, is recognised at the agreed transaction price on a straight-line basis over a typically

short period during which the obligation is performed.

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Notes to the consolidated financial statements continued

(l) Goodwill – Note 14

Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration

transferred and the fair value of contingent consideration, over the fair value of the identifiable

assets acquired and liabilities assumed. Goodwill arising on acquisitions denominated in foreign

currencies is retranslated using exchange rates prevailing at each reporting date.

Goodwill is recognised as an asset and is carried at cost less accumulated impairment losses.

It is not subject to amortisation, but is reviewed for impairment annually, or more frequently if

events or changes in circumstances indicate a potential impairment. For the purpose of impairment

testing, goodwill acquired in a business combination is allocated to each of the CGUs, or group of

CGUs, that is expected to benefit from that business combination. Each CGU, or group of CGUs, to

which goodwill is allocated represents the lowest level at which goodwill is monitored for internal

management purposes and is not larger than an operating segment before aggregation.

When the Group changes the composition of its CGUs, it reallocates goodwill using a relative

value approach at the date of the reorganisation, unless the entity can demonstrate that some

other method provides a better allocation of goodwill to the reorganised units.

The Group’s impairment review compares the carrying value of the goodwill to the recoverable

amount of the CGU, or group of CGUs, to which the goodwill has been allocated. The recoverable

amount is the higher of the value-in-use or the fair value less costs of disposal. Estimating the

recoverable amount requires the Directors to perform an assessment of the discounted future

cash flows that the CGU, or group of CGUs, is able to generate. See Note 1(d) for discussion of the

critical estimates involved in this assessment.

An impairment is deemed to have occurred where the recoverable amount of a CGU, or group

of CGUs, is less than the carrying value of the allocated goodwill. Any impairment is recognised

immediately in the income statement within specific adjusting items and is not subsequently

reversed. On disposal of an operation, the attributable amount of goodwill is included in the

determination of the gain or loss on disposal.

1. Principal accounting policies continued

(i) Dividends – Note 8

Dividends are recognised as a liability in the year in which they are fully authorised. Interim

dividends are recognised when paid.

(j) Net finance costs – Note 9

Finance income and finance costs are recognised in the income statement in the period in

which they are incurred using the effective interest method.

(k) Income tax expense – Note 11

The tax expense for the year comprises current and deferred tax. Tax is recognised in the income

statement, except to the extent that it relates to items recognised in other comprehensive income

or directly in equity. The current tax charge is the expected tax payable on taxable income for

the year, calculated using the average rate applicable for the year on the basis of the tax laws

enacted or substantively enacted at the reporting date in the countries where the Group operates.

The current tax charge also includes any adjustment to tax payable in respect of previous years.

Management periodically evaluates uncertain positions taken in tax returns with respect to

situations in which applicable tax regulation is subject to interpretation and establishes provisions

where appropriate on the basis of amounts expected to be paid to the relevant tax authorities.

The Group submits annual claims in respect of the UK government’s Research and Development

Expenditure Credit (RDEC) scheme. RDEC is taxable income and is a form of government grant that

effectively gives corporation tax relief on qualifying research and development (R&D) expenditure.

In accordance with IAS 20 Accounting for Government Grants and Disclosure of Government

Assistance, credits receivable under the RDEC scheme are offset against the associated qualifying

R&D expenditure incurred, both of which are included within operating profit.

The Group has provided for uncertain positions taken in the tax returns with respect to situations

in which the applicable tax regulation is subject to interpretation and establishes provisions where

appropriate on the basis of amounts expected to be paid to the relevant tax authorities.

Uncertain tax positions relate primarily to risks around transfer pricing and ongoing tax audits.

The Group’s provision is based on experience of dealing with tax authorities in certain jurisdictions

in which it operates and an estimate of the most likely outcomes in each territory.

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Notes to the consolidated financial statements continued

(n) Property, plant and equipment – see Note 16

Property, plant and equipment is stated at historical cost less depreciation. The gross cost of an

item of property, plant and equipment is the purchase price and any costs directly attributable

to bring the asset to the location and condition necessary for it to be capable of operating in the

manner intended. Grants contributing to the cost of an asset are deducted from the cost of the

asset and reflected in depreciation throughout its useful life.

Depreciation is typically calculated using the straight-line method to allocate the cost of items of

property, plant and equipment less any residual value, over their estimated useful lives, as follows:

• Freehold land Not depreciated

• Freehold buildings including improvements Between 25 and 50 years

• Leasehold property improvements Over the term of the lease

• Plant and machinery Between 4 and 25 years

• Fixtures, fittings and equipment Between 2 and 10 years

The residual values and useful lives of assets are reviewed, and adjusted if appropriate, at the

end of each reporting period. For certain assets classified as plant and machinery in the Group’s

Defense operating segment, depreciation is charged on a units of production basis, as this is

considered to more accurately reflect the expected pattern of consumption of the future economic

benefits embodied in the assets.

Assets under construction are carried at cost less any impairment in value and are included in the

relevant asset category. Depreciation of these assets commences when they are available for their

intended use or sale.

All cash flows relating to the component of a sale-and-leaseback transaction that represents the

fair value of the asset are classified as investing activities.

Government grants

Grants contributing to the cost of an asset are deducted from the cost of the asset and reflected

in its depreciation throughout its useful life.

(o) Impairment of property, plant and equipment and intangible assets

excluding goodwill – Notes 15 and 16

At each reporting date, the Group reviews the carrying amounts of its property, plant and

equipment and intangible assets to determine whether there is any indication that those assets

have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset

is estimated to determine the extent of the impairment loss (if any). Recoverable amount is the

higher of the value-in-use and fair value less costs of disposal. Estimating the recoverable amount

requires the Directors to perform an assessment of the discounted future cash flows that the asset

is able to generate. If the recoverable amount of an asset is estimated to be less than its carrying

amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss

is recognised immediately in the income statement within specific adjusting items.

1. Principal accounting policies continued

(m) Other intangible assets – see Note 15

Acquired intangible assets

Acquired intangible assets that are either separable or arising from contractual rights are

recognised at fair value at the date of acquisition, and subsequently at amortised cost. Such

intangible assets include client contracts and relationships, together with acquired software

and technology. The fair value of acquired intangible assets is determined by use of appropriate

valuation techniques.

Software

Purchased software is capitalised on the basis of the purchase price of the software product

plus any external and internal costs subsequently incurred that are directly attributable to bring

the software product to the condition necessary for it to be capable of operating in the manner

intended.

Development costs

Directly attributable costs which are incurred in the development of certain assets are capitalised

and amortised over their finite useful lives once the Group has determined that it has the intention

and the necessary resources to complete the relevant project, that it is probable the resulting

asset will generate economic benefits for the Group and the attributable expenditure can be

reliably measured.

Amortisation

Amortisation is typically calculated using the straight-line method to allocate the cost of intangible

assets over their estimated useful lives, as follows:

• Acquisition-related intangible assets:

• Customer contracts and relationships Between 2 and 9 years

• Software and technology Between 5 and 10 years

• Software Between 2 and 10 years

• Development costs Between 3 and 5 years

For certain assets classified as development costs in the Group’s Defense operating segment,

amortisation is charged on a units of production basis, as this is considered to more accurately

reflect the expected pattern of consumption of the future economic benefits embodied in the

assets. Assets under construction are carried at cost less any impairment in value, and are

included in the relevant asset category. Amortisation of these assets commences when they

are available for their intended use or sale.

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Notes to the consolidated financial statements continued

Lessor accounting

The Group determines at inception of the lease whether the lease is a finance or an operating

lease. When a lease transfers substantially all the risks and rewards of ownership of the

underlying asset to the lessee then the lease is classified as a finance lease; otherwise, the

lease is classified as an operating lease. Where the Group is an intermediate lessor, the interest

in the head lease and the sub-lease is accounted for separately and the lease classification of

a sub-lease (finance or operating) is determined by reference to the right-of-use asset arising

from the head lease, not with reference to the underlying asset.

Other sub-leased assets are all classified as operating leases, where payments received (net of

any incentives granted by the Group) are recognised in the income statement on a straight-line

basis over the lease term.

(q) Provisions for liabilities and charges – see Note 18

Provisions are required for restructuring costs and employment-related benefits when the Group

has a present legal or constructive obligation at the reporting date as a result of a past event

and it is probable that settlement will be required of an amount that can be reliably estimated.

Provisions for warranty costs are recognised at the date of sale of the relevant products, at the

Directors’ best estimate of the expenditure required to settle the Group’s probable liability.

Other provisions reflect the Directors’ best estimate of future obligations relating to legal claims

and litigation, together with dilapidation costs for the maintenance of leasehold properties arising

from past events such as lease renewals or terminations. These estimates are reviewed at the

reporting date and updated as necessary.

(r) Deferred tax – Note 19

Deferred tax is recognised on temporary differences between the carrying amounts of assets and

liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred

tax liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred tax

is not accounted for if it arises from the initial recognition of an asset or liability in a transaction

other than a business combination that at the time of the transaction affects neither accounting

nor taxable profit and differences relating to investments in subsidiaries to the extent that it is not

probable that they will reverse in the foreseeable future. The amount of deferred tax provided is

based on the expected manner of realisation or settlement of the carrying amount of assets and

liabilities, using tax rates enacted or substantively enacted at the reporting date.

Deferred tax assets are recognised only to the extent that it is probable that taxable profits will

be available in the foreseeable future against which the asset can be utilised. Deferred tax assets

are reduced to the extent that it is no longer probable that the related tax benefit will be realised

within the foreseeable future.

1. Principal accounting policies continued

(p) Leases – see Note 17

The Group’s policy for leases is as follows:

Definition of a lease

Under IFRS 16, a contract is, or contains, a lease if the contract conveys a right to control the use

of an identified asset for a period of time in exchange for consideration.

Lessee accounting

At the lease commencement date, a right-of-use asset is recognised for the leased item with a

corresponding lease liability for any payments due. The right-of-use asset is initially measured at

cost, being the present value of the lease payments paid or payable (net of any incentives received

from the lessor), plus any initial direct costs and/or restoration costs.

Right-of-use assets are depreciated on a straight-line basis from the commencement date of the

lease to the earlier of the end of the asset’s useful life or the end of the lease term. The lease term

is the non-cancellable period of the lease plus any periods for which the Group is ‘reasonably

certain’ to exercise any extension options. If right-of-use assets are considered to be impaired,

the carrying value is reduced accordingly.

For assets where the lessor transfers ownership of the underlying asset to the Group by the end

of the lease term, or where the lease contains a purchase option at a nominal/notional value, then

these assets will be initially classified as property, plant and equipment, and subsequently follow

the depreciation rules set out in Note 1(n).

The lease liability is initially measured at the value of future lease payments, discounted using

the interest rate implicit in the lease. Where this rate is not determinable, the Group’s incremental

borrowing rate is used, which is then adjusted to reflect an estimate of the interest rate the Group

would have to pay to borrow the amount necessary to obtain an asset of similar value, in a similar

economic environment, and with similar terms and conditions.

After initial recognition, the lease liability is recorded at amortised cost using the effective interest

method. It is remeasured when there is a change in future lease payments arising from a change

in an index or rate (e.g. an inflation-related increase) or if the Group’s assessment of the lease

term changes. Any change in the lease liability as a result of these changes also results in a

corresponding change in the recorded right-of-use asset.

Payments in respect of short-term and/or low-value leases are charged to the income statement

on a straight-line basis over the lease term. The Group has classified the principal portion of lease

payments within financing activities and the interest portion within operating activities within the

consolidated cash flow statement.

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Notes to the consolidated financial statements continued

Bank overdrafts are shown within borrowings in current liabilities and bank loans and finance

leases are shown within borrowings in either current liabilities or non-current liabilities depending

on the maturity date. Any cash balances deemed to be restricted in nature are excluded in the

calculation of net debt.

Financial liabilities are classified as either amortised cost or fair value through profit and loss.

Borrowings are recognised initially at fair value net of direct issue costs and subsequently at

amortised cost. Differences between initial value and redemption value are recorded in the income

statement over the period of the loan. The fair value of borrowings due for repayment after more

than one year approximates to the carrying value as they are primarily floating rate loans where

payments are reset to market rates at regular short-term intervals.

(w) Fair value of financial assets and liabilities – Notes 13 & 25

When measuring the fair value of an asset or liability, the Group uses observable market data as

far as possible. Fair values are categorised into different levels in a fair value hierarchy based on

the inputs used in the valuation techniques as follows:

• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities

• Level 2: valuations in which all inputs are observable either directly (i.e. as prices) or indirectly

(i.e. derived from prices)

• Level 3: valuations in which one or more inputs that are significant to the resulting value are not

based on observable market data

The assumptions made in measuring fair values are included in the following notes:

Acquisitions – Note 13

The fair values of identifiable net assets acquired are measured in accordance with IFRS 3

Business Combinations and the sale and purchase agreement.

The fair value of deferred consideration arising on acquisitions of subsidiaries is considered to

be at Level 3 of the fair value hierarchy. The fair value is determined based on financial forecasts

for the acquired entity. Significant observable inputs include order intake, pipeline and historical

performance.

Where deferred consideration is not linked to future performance or the continuing employment

of the vendor, the fair value is assessed at the point of acquisition as part of the business

combination. Any subsequent changes to the fair value, including the unwind of discount factors,

is recognised in the income statement within specific adjusting items.

Where deferred consideration is dependent on the continuing employment of the vendor, it does

not form part of the business combination and is considered to represent post-combination

remuneration which is recognised in the income statement within specific adjusting items.

See Note 13 for further information.

1. Principal accounting policies continued

(s) Inventories – Note 20

Inventories are stated at the lower of cost, including attributable overheads allocated on the basis

of normal operating capacity, and net realisable value. Cost is calculated using the ‘weighted

average’ method across the Group apart from Performance Products and Defense which are

on a ‘first-in, first-out’ method.

(t) Trade, contract and other receivables – Note 21

Trade receivables are stated net of impairment and for the purposes of impairment testing include

non-financial contract assets (amounts recoverable on contracts, AROC) and accrued revenue.

These assets are assessed for impairment using the simplified approach to the expected credit

loss (ECL) model, which applies a 'default rate' at the point of origination that increases as the

unpaid asset ages. The simplified approach of IFRS 9 applies a default rate to trade receivables

and contract assets. Although past experience of significant credit losses on these assets has been

negligible, the impairment assessment considers both past experience and future expectations of

credit losses. As a result of this assessment, the Group considers the risk of expected credit losses

on contract assets to be immaterial.

In order to assess the ECL over the lifetime of the asset, a historical provision matrix is used to

inform a Group-wide ‘default rate’ which is adjusted for current and expected future economic

conditions. To calculate the Group default rates, a weighted average default rate for each business

unit was taken. It is considered appropriate for the Group to use one set of default rates, across

the Group, as the customer base across the Group is sufficiently homogenous. Each business

unit’s customers are primarily comprised of large corporations and historical provision matrices

are sufficiently homogenous.

Trade receivables and contract assets are provided in full and subsequently written off when there

is no reasonable expectation of recovery. Indicators that there may be no reasonable expectation

of recovery could include, amongst others, evidence that the client has entered administration or

liquidation proceedings, or the persistent failure of a client to enter into or adhere to a repayment

plan. The ‘general approach’ is applied to the impairment of other financial assets, the amount

of which is based on whether there has been a significant deterioration in the credit risk of a

financial asset.

(u) Trade, contract and other payables – Note 22

Trade payables are not interest-bearing and are stated at their nominal value.

(v) Net debt and borrowings – Note 23

Cash and cash equivalents in the consolidated cash flow statement comprise cash balances and

bank overdrafts repayable on demand, including cash and cash equivalents included in disposal

groups held for sale.

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Notes to the consolidated financial statements continued

Remeasurements are recognised in other comprehensive income except where they result from

settlements or curtailments, in which case they are reported in the income statement.

Where necessary, past service costs are recognised immediately in the income statement at

the earlier of when the plan amendment or curtailment occurs and when the related restructuring

costs or termination benefit are recognised. The defined benefit obligation recognised represents

the present value of the pension scheme liabilities net of the fair value of scheme assets.

Any asset resulting from the calculation is limited to the future economic benefits available from

either refund or reduction in future contributions to the plan.

The interest cost on the net defined benefit obligation for the year is determined by applying the

discount rate used to measure the defined benefit obligation at the beginning of the year to the

net defined benefit obligation at the end of the year and is included in finance costs.

(y) Share-based payments – Note 33

Equity-settled share-based payments are measured at fair value at the date of grant. The fair

value determined at the grant date is expensed on a straight-line basis over the vesting period.

The amount expensed is adjusted over the vesting period for changes in the estimate of the

number of shares that will eventually vest, save for changes resulting from any market-related

performance conditions.

Cash-settled share-based payments are measured at fair value at the date of grant and expensed

over the vesting period until the vesting date with the recognition of a corresponding liability. The

liability is remeasured to fair value at each reporting date up to and including the settlement date,

with changes in fair value recognised in the income statement for the year. The amount expensed

is adjusted over the vesting period for changes in the estimate of the number of shares that will

eventually vest. Fair value is measured by using the Monte Carlo model. The expected lives used in

the models are adjusted for the effects of exercise restrictions and behavioural considerations.

(z) Foreign currency

Transactions

The functional currency of the Company and the presentation currency of the Group is Pounds

Sterling. The functional currency of each subsidiary is the currency of the primary economic.

environment in which the entity operates. Transactions in currencies other than the functional

currency are recorded at prevailing exchange rates. At each reporting date, monetary assets

and liabilities denominated in foreign currencies are retranslated at the rates prevailing on

the reporting date. Non-monetary assets and liabilities denominated in foreign currencies are

translated at the rates prevailing at the date when the transaction occurred. Gains and losses

arising on retranslation and settlements are included in the income statement for the year.

1. Principal accounting policies continued

(w) Fair value of financial assets and liabilities – Notes 13 & 25 continued

Financial assets and liabilities – Note 25

Derivative financial instruments are initially recognised and measured at fair value on the date a

derivative contract is entered into and subsequently measured at fair value on the reporting date.

Fair value is estimated by discounting expected future contractual cash flows using prevailing

interest rate curves. Amounts denominated in foreign currencies are valued at the exchange

rate prevailing at the reporting date (Level 2 of the fair value hierarchy within IFRS 13 Fair Value

Measurement).

The Group uses the fair value of foreign currency swap, forward and option contracts on

intercompany loans for the purposes of economic hedging and does not apply hedge accounting.

Where intercompany loans denominated in a foreign currency are neither planned nor likely to

be settled in the foreseeable future, they are considered to form part of the net investment in the

borrowing entity, and foreign exchange differences are recognised through other comprehensive

income. We do not apply hedge accounting in this regard.

The fair value of short-term deposits, loans and overdrafts approximates to the carrying amount

because of the short maturity of these instruments.

The fair value of borrowings approximates to the carrying amount as they are primarily floating

rate loans where payments are reset to market rates at regular intervals.

During the year, the Group implemented an interest rate collar to hedge against movements in

the interest rate on a portion of its Revolving Credit Facility (RCF). This has been designated as a

cash flow hedge as the risk being hedged is the exposure to variability in cash flows attributable to

future interest payments on the floating rate debt. Hedge accounting is applied and the difference

between the fair value of expected interest payments outside of and the cap or floor rate is

recognised through other comprehensive income in the cash flow hedge reserve.

(x) Retirement benefits – Note 32

The Group operates one defined benefit and several defined contribution pension schemes, the

assets of which are held in separately administered funds. The defined benefit pension scheme

is closed to new entrants and the accrual of future benefit for active members ceased at the end

of February 2010. Payments to defined contribution pension schemes are charged as an expense

as they fall due. Differences between contributions payable in the year and contributions actually

paid are included in either accruals or prepayments. Payments to state-managed pension schemes

are dealt with as payments to defined contribution pension schemes as the Group’s obligations

under the schemes are similar in nature.

For the defined benefit pension scheme, the cost of providing benefit is determined using the

projected unit credit method, with actuarial valuations being carried out at each reporting date.

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Notes to the consolidated financial statements continued

			Effective date
			(period	Endorsed
			commencing)	by UK
	•	Amendments to IAS 7 Statement of Cash Flows and IFRS 7
		Financial Instruments: Disclosures	1 Jul 2024	Yes
	•	Amendments to IAS 1 Presentation of Financial Statements	1 Jul 2024	Yes
	•	Amendments to IFRS 16 Leases	1 Jul 2024	Yes
other comprehensive income and the translation reserve within equity. On disposal of an operation	•	Amendments to IAS 21 The Effects of Changes in Foreign
		Exchange Rates	1 Jul 2025	Yes

2. Alternative performance measures

Throughout this document the Group presents various alternative performance measures (APMs)

in addition to those reported under IFRS. The measures presented are those adopted by the Chief

Operating Decision Maker (CODM, deemed to be the Chief Executive Officer), together with the

main board, and analysts who follow us in assessing the performance of the business. Ricardo

provides guidance to the investor community based on underlying results. Explanations of how

they are calculated and how they are reconciled to an IFRS statutory measure are set out below.

The underlying results and other APMs may be considered in addition to, but not as a substitute

for or superior to, information presented in accordance with IFRS.

(a) Group profit and earnings measures

Underlying profit before tax (PBT) and underlying operating profit: These measures are used

by the board to monitor and measure the trading performance of the Group. Underlying results

include the benefits of the results of acquisitions and major restructuring programmes but exclude

significant costs (such as the amortisation of acquired intangibles, acquisition-related expenditure,

reorganisation costs and other specific adjusting items). Ricardo believes that the underlying

results, when considered together with the reported results, provide investors, analysts and

other stakeholders with helpful complementary information to better understand the financial

performance and position of the Group.

The Group’s strategy includes geographic and sector diversification, including targeted acquisitions

and disposals. By excluding acquisition-related expenditure from underlying PBT and underlying

operating profit, the board has a clearer view of the performance of the Group and is able to make

better operational decisions to support its strategy.

1. Principal accounting policies continued

(z) Foreign currency continued

Consolidation

On consolidation, the assets and liabilities of foreign operations, including goodwill and fair value

adjustments, are translated into the presentation currency at exchange rates prevailing on the

reporting date. Revenues and costs are translated at the average exchange rates of the year

unless exchange rates fluctuate significantly. All resulting exchange differences are recognised in

the related cumulative translation differences are recognised in the income statement as a

component of the gain or loss arising on disposal.

(aa) Recent accounting developments

Except where disclosed otherwise in this note, the accounting policies adopted in the preparation

of the consolidated financial statements are consistent with those applied when preparing the

consolidated financial statements for the year ended 30 June 2023.

New accounting standards, amendments and interpretations adopted by the Group

The following new standards and amendments to existing standards became effective in January

2023 and have been adopted in the consolidated financial statements for the first time during the

year ended 30 June 2024. These have been assessed as having no financial or disclosure impact

on these consolidated financial statements.

		Effective date
		(period	Endorsed
		commencing)	by UK
•	IFRS 17 Insurance Contracts	1 Jul 2023	Yes
•	Amendments to IFRS 17 Insurance Contracts	1 Jul 2023	Yes
•	Amendments to IAS 1 Presentation of Financial statements	1 Jul 2023	Yes
•	Amendments to IAS 12 Income Taxes	1 Jul 2023	Yes
•	Amendments to IAS 8 Accounting Policies, Changes in
	Accounting Estimates and Errors	1 Jul 2023	Yes

New standards, amendments and interpretations not yet adopted by the Group

The following standards, amendments and interpretations were in issue, but were not yet

effective at the balance sheet date. The below is limited to those standards, amendments and

interpretations that have received endorsement from the UK Endorsement Board as at the date

of this report. These standards have not been applied when preparing the consolidated financial

statements for the year ended 30 June 2024. It is not anticipated that the application of the below

will have a significant financial or disclosure impact in future years.

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2. Alternative performance measures continued

(a) Group profit and earnings measures continued

Acquisition-related expenditure includes the costs of acquisitions, deferred and contingent consideration fair value adjustments (including the unwinding of discount factors), transaction-related fees and

expenses, and post-deal integration costs.

Reorganisation costs arising from major restructuring activities, profits or losses on the disposal of businesses, and significant impairments of property, plant and equipment, are excluded from

underlying PBT and underlying operating profit as they are not reflective of the Group’s trading performance in the year, as are any other specific adjusting items deemed to be one-off in nature.

The related tax effects on the above and other tax items which do not form part of the underlying tax rate are also considered. Items are treated consistently year-on-year, and these adjustments are also

consistent with the way that performance is measured under the Group’s incentive plans and its banking covenants. A reconciliation is shown below. Further details of the nature of the specific adjusting

items are given in Note 6.

Reconciliation of underlying profit to reported profit/(loss)

		2024			2023
		Specific adjusting			Specific adjusting
	Underlying	items	Total	Underlying	items	Total
	£m	£m	£m	£m	£m	£m
Revenue	474.7	—	474.7	445.2	—	445.2
Cost of sales	(340.1)	—	(340.1)	(318.9)	—	(318.9)
Gross profit	134.6	—	134.6	126.3	—	126.3
Administrative expenses, impairment losses on trade
receivables and contract assets, and other income	(95.8)	—	(95.8)	(92.3)	—	(92.3)
Amortisation of acquired intangibles	—	(4.8)	(4.8)	—	(4.6)	(4.6)
Acquisition-related expenditure	—	(12.0)	(12.0)	—	(6.2)	(6.2)
Impairment of non-financial assets	—	—	—	—	(18.7)	(18.7)
Reorganisation costs	—	(8.4)	(8.4)	—	(6.4)	(6.4)
ERP implementation costs	—	(0.5)	(0.5)	—	—	—
Other	—	(0.3)	(0.3)	—	—	—
Operating profit/(loss) from continuing operations	38.8	(26.0)	12.8	34.0	(35.9)	(1.9)
Net finance costs	(8.3)	(0.2)	(8.5)	(6.1)	—	(6.1)
Profit/(loss) before taxation from continuing operations	30.5	(26.2)	4.3	27.9	(35.9)	(8.0)
Income tax (expense)/credit	(8.1)	4.6	(3.5)	(7.3)	3.3	(4.0)
Profit/(loss) for the year from continuing operations	22.4	(21.6)	0.8	20.6	(32.6)	(12.0)
Profit for the year from discontinued operation, net of tax	—	—	—	0.4	6.4	6.8
Profit/(loss) for the year	22.4	(21.6)	0.8	21.0	(26.2)	(5.2)

Notes to the consolidated financial statements continued

165Ricardo plc | Annual Report and Accounts 2023/24

Notes to the consolidated financial statements continued

2. Alternative performance measures continued

(a) Group profit and earnings measures continued

Underlying earnings attributable to the owners of the parent/earnings per share: The Group uses underlying earnings attributable to the owners of the parent as the input to its adjusted EPS

measure. This profit measure excludes the amortisation of acquired intangibles, acquisition-related expenditure, reorganisation costs and other specific adjusting items, but is an after-tax measure.

The board considers underlying EPS to be more reflective of the Group’s trading performance in the year. A reconciliation between earnings attributable to the owners of the parent and underlying

earnings attributable to the owners of the parent is shown in Note 7.

Organic growth/decline: Organic growth/decline is calculated as the growth/decline in the result for the current year compared to the prior year, after excluding the impact of acquisitions or disposals.

See Note 13 for details of acquisitions during the year.

Constant currency growth/decline: The Group generates revenues and profits in various territories and currencies because of its international footprint. Those results are translated on consolidation at

the foreign exchange rates prevailing at the time. Constant currency growth/decline is calculated by translating the result for the prior year using foreign currency exchange rates applicable to the current

year. This provides an indication of the growth/decline of the business, excluding the impact of foreign exchange.

Headline trading performance

		Underlying		Reported
	External	Operating	Profit	Operating	(Loss)/profit
	revenue	profit	before tax	profit/(loss)	before tax
	£m	£m	£m	£m	£m
2024
Continuing operations	474.7	38.8	30.5	12.8	4.3
Less: performance of acquisitions	(12.6)	(2.7)	(2.3)	(0.7)	(0.3)
Continuing operations – organic	462.1	36.1	28.2	12.1	4.0
2023
Total	446.0	34.5	28.4	6.0	(0.1)
Less: discontinued operation	(0.8)	(0.5)	(0.5)	(7.9)	(7.9)
Continuing operations	445.2	34.0	27.9	(1.9)	(8.0)
Less: performance of acquisitions	(4.8)	(1.1)	(1.1)	4.4	4.4
Continuing operations – organic	440.4	32.9	26.8	2.5	(3.6)
Continuing operations at current year exchange rates	435.1	33.2	27.1	(1.9)	(8.0)
Growth (%) – Total	6%	12%	7%	113%	4,400%
Growth (%) – Continuing operations	7%	14%	9%	774%	154%
Growth (%) – Continuing organic	5%	10%	5%	384%	211%
Constant currency growth (%) – Continuing operations	9%	17%	13%	774%	154%

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Notes to the consolidated financial statements continued

2. Alternative performance measures continued

(a) Group profit and earnings measures continued

Segmental underlying operating profit: This is presented in the Group’s segmental disclosures and reflects the underlying trading of each segment, as assessed by the main board. This excludes

segment-specific amortisation of acquired intangibles, acquisition-related expenditure and other specific adjusting items, such as reorganisation costs. It also excludes unallocated plc costs, which

represent the costs of running the public limited company, and specific adjusting items which are outside of the control of segment management. A reconciliation between segment underlying operating

profit, the Group’s underlying operating profit and operating profit is presented in Note 4.

(b) Cash flow measures

Cash conversion: A key measure of the Group’s cash generation is the conversion of profit into cash. This is the reported cash generated from operations (defined as operating cash flow, less movements

in net working capital and defined benefit pension deficit contributions) divided by earnings before interest, tax, depreciation and amortisation (EBITDA), expressed as a percentage.

Underlying cash conversion: This is underlying cash generated from operations (defined as reported cash generated from operations, adjusted for the cash impact of specific adjusting items) divided by

underlying EBITDA (defined as reported EBITDA, adjusted for the impact of specific adjusting items). A reconciliation between the two is shown below.

Cash conversion

		2024			2023 (restated)
		Specific adjusting			Specific adjusting
	Underlying	items	Total	Underlying	items	Total
	£m	£m	£m	£m	£m	£m
Operating profit/(loss) from continuing operations	38.8	(26.0)	12.8	34.0	(35.9)	(1.9)
Operating profit from discontinued operation	—	—	—	0.5	7.4	7.9
Operating profit	38.8	(26.0)	12.8	34.5	(28.5)	6.0
Depreciation, amortisation and impairment	14.5	0.6	15.1	14.1	18.7	32.8
Amortisation of acquired intangibles	—	4.8	4.8	—	4.6	4.6
EBITDA	53.3	(20.6)	32.7	48.6	(5.2)	43.4
Movement in working capital	8.8	(1.8)	7.0	(12.8)	1.6	(11.2)
Pension deficit payments	(0.8)	—	(0.8)	(1.8)	—	(1.8)
Gain on disposal of discontinued operation	—	—	—	—	(7.4)	(7.4)
Losses on disposal of assets	—	—	—	0.1	0.6	0.7
Share-based payments	2.3	—	2.3	1.3	—	1.3
Fair value losses/(gains) on derivatives	1.1	—	1.1	(5.6)	—	(5.6)
Unrealised exchange losses/(gains)	(1.3)	—	(1.3)	2.6	—	2.6
Cash generated from operations	63.4	(22.4)	41.0	32.4	(10.4)	22.0
Cash conversion	118.9%		125.4%	66.7%		50.7%

The movement in working capital in relation to specific adjusting items for the current year includes trade and other payables of £3.9m and provisions of £1.1m in relation to specific adjusting items

recognised as an expense during the current year which had not been paid at 30 June 2024, compared to £6.8m at the prior year end (which included £1.3m which was accrued under the completion

mechanism in relation to the acquisition of E3M) (see Note 6). The prior year cash flow statement has been restated. See Note 37.

167

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Notes to the consolidated financial statements continued

2. Alternative performance measures continued

(b) Cash flow measures continued

Net debt: Defined as current and non-current borrowings less cash and cash equivalents,

including hire purchase agreements, but excluding any cash deemed to be restricted in nature

and any impact of other IFRS 16 lease liabilities. Management believes this definition is the most

appropriate for monitoring the indebtedness of the Group and is consistent with the treatment in

the Group’s banking agreements. Further details are provided in Note 23.

Underlying effective tax rate (ETR): The Group reports one adjusted tax measure, which is the

tax rate on underlying profit before tax. This is the tax charge applicable to underlying profit

before tax expressed as a percentage of underlying profit before tax.

(d) Other measures

Order book: The value of all unworked purchase orders and contracts received from customers at

the reporting date, providing an indication of revenue that has been secured and will be recognised

in future accounting periods – see Note 21. Management does not consider there to be a closely

equivalent GAAP measure.

Order intake: The value of purchase orders and contracts received from customers during

the period. The order intake for the current year was £496.1m (2023: £522.0m), including results

of the discontinued operation. Management does not consider there to be a closely equivalent

GAAP measure.

Headcount: Headcount is calculated as the number of colleagues on the payroll at the reporting

date and includes subcontractors on a full-time equivalent basis. The number of employees

disclosed in Note 31 is the average for the year.

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Notes to the consolidated financial statements continued

Financial performance

4. Financial performance by segment

The segmental analysis helps explain the business in the way that it is monitored by management.

The Group’s operating segments are being reported based on the financial information provided to

the Chief Operating Decision Maker, who is the Chief Executive Officer. The information reported

includes financial performance but does not include the financial position of assets and liabilities.

The operating segments were identified by evaluating the Group’s products and services,

processes, types of customers and delivery methods.

The following summarises the operations in each of the Group’s reportable segments:

• Energy and Environment (EE) – EE generates revenue from the provision of environmental

consultancy services to customers across the world. Customers include governments, public

agencies and private businesses

• Rail – Rail generates revenue through two separate operations: a consultancy unit that provides

technical advice and engineering services; and a separately operated entity, Ricardo Certification,

that performs accredited assurance services

• Automotive and Industrial – Established – A&I – Established generates revenue through the

provision of engineering, strategic consulting, and design, development and testing services,

focused on the design, building and testing of conventional powertrains. Customers include

businesses in the automotive, aerospace, defence, off-highway and commercial, marine and

rail markets

• Automotive and Industrial – Emerging – A&I – Emerging generates revenue through the provision

of engineering, strategic consulting, and design, development and testing services, focused on

power electronic systems and propulsion systems, software and digital technologies. Customers

include businesses in the automotive, aerospace, defence, energy, off-highway and commercial,

marine, motorcycle and light personal transport, and rail markets

• Defense – Defense provides engineering services, software and products to customers in the US

defence market, aimed at protecting life and improving the operation, maintenance and support

of complex systems

• Performance Products (PP) – PP manufactures, assembles and develops niche, high-quality

components, prototypes and complex products, including engines, transmissions and

other precision and performance critical products. Its customers manufacture low-volume,

high-performance products in markets such as motorsport, automotive, aerospace, defence

and rail

The operations of the Group have been categorised into these segments due to the nature of

their services, market sectors, client bases and distribution channels and operating across markets

requiring adherence to regulatory frameworks that are similar in nature.

The following disclosures provide further information about the drivers of the Group’s financial

performance in the year. This includes analysis of the respective contribution of the Group’s

reportable segments along with information about its operating cost base, net finance costs and

tax. In addition, disclosure on earnings per share and the dividend is provided.

3. Operating profit/(loss)

Research and development expenditure accounting policy – Note 1(e)

Government grants accounting policy – Note 1(f)

Operating profit/(loss), including the result of the discontinued operation, is stated after

charging/(crediting) the following amounts:

		2024	2023
	Note	£m	£m
Depreciation of property, plant and equipment	16	5.3	4.8
Impairment of property, plant and equipment	16	0.2	11.7
Depreciation of right-of-use assets	17	5.0	4.8
Impairment of right-of-use assets	17	0.4	—
Amortisation of other intangible assets	15	9.0	9.1
Impairment of other intangible assets	15	—	1.8
Impairment of goodwill	14	—	5.2
Repairs and maintenance on property, plant and equipment		9.5	8.9
Net impairment expense on trade receivables	21	0.2	1.8
Losses on disposal of property, plant
and equipment		—	0.7
Research and development expenditure		5.0	9.1
Government grant income in respect of research and development expenditure		(1.8)	(6.8)

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Notes to the consolidated financial statements continued

Financial performance continued

4. Financial performance by segment continued

Measurement of performance

Management monitors the financial results of its operating segments separately for the purpose of making decisions about allocating resources and assessing performance. Segmental performance

is measured based on underlying operating profit, as this measure provides management with an overall view of how the different operating segments are managing their total cost base against the

revenue generated from their portfolio of contracts.

There are varying levels of integration between the segments. The segments use EE for their specialist environmental knowledge. The A&I segments and PP have various shared projects. There are also

shared service costs between the segments. Inter-segment transactions are eliminated on consolidation. Inter-segment pricing is determined on an arm’s length basis in a manner similar to transactions

with third parties.

Included within plc costs in the following tables are costs arising from a central Group function, including the costs of running the public limited company, which are not recharged to the other operating

segments. The operating segment section of this Annual Report provides further detail on the segments’ performance (see pages 81-82).

			2024
			Revenue from	Underlying	Specific
	Total segment	Inter-segment	external	operating	adjusting	Operating
	revenue	revenue	customers	profit	items	profit
	£m	£m	£m	£m	£m	£m
Energy and Environment	104.0	(0.7)	103.3	17.6	(10.0)	7.6
Rail	78.0	(0.6)	77.4	8.9	(3.8)	5.1
Automotive and Industrial – Emerging	58.6	—	58.6	3.4	—	3.4
Defense	123.4	—	123.4	23.5	—	23.5
Performance Products	83.5	(0.1)	83.4	6.7	—	6.7
Automotive and Industrial – Established	28.6	—	28.6	(3.3)	(3.4)	(6.7)
Plc	—	—	—	(18.0)	(8.8)	(26.8)
Total	476.1	(1.4)	474.7	38.8	(26.0)	12.8
Net finance costs					(0.2)	(8.5)
Total profit before tax					(26.2)	4.3

(1)

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Notes to the consolidated financial statements continued

Financial performance continued

4. Financial performance by segment continued

Measurement of performance continued

		2024
		Capital expenditure
	Depreciation,	Other	Property,
	amortisation	intangible	plant and	Right-of-use
	and impairment	assets	equipment	assets
	£m	£m	£m	£m
Energy and Environment	6.0	2.8	0.8	1.1
Rail	4.2	0.1	0.2	0.2
Automotive and Industrial – Emerging	5.6	2.1	2.0	0.8
Defense	2.1	1.3	0.8	—
Performance Products	0.8	0.1	0.3	2.0
Plc	1.2	0.8	—	—
Total	19.9	7.2	4.1	4.1

			2023
			Revenue from	Underlying	Specific
	Total segment	Inter-segment	external	operating	adjusting	Operating
	revenue	revenue	customers	profit	items	profit
	£m	£m	£m	£m	£m	£m
Energy and Environment	89.6	(1.1)	88.5	16.0	(2.4)	13.6
Rail	74.1	(0.6)	73.5	8.0	(4.1)	3.9
Automotive and Industrial – Emerging	83.0	(0.7)	82.3	10.6	—	10.6
Defense	88.7	(0.1)	88.6	13.4	(0.1)	13.3
Performance Products	85.2	(0.5)	84.7	9.0	—	9.0
Automotive and Industrial – Established	28.6	(1.0)	27.6	(5.8)	(23.4)	(29.2)
Plc	—	—	—	(17.2)	(5.9)	(23.1)
Total continuing operations	449.2	(4.0)	445.2	34.0	(35.9)	(1.9)
Discontinued operation	0.8	—	0.8	0.5	7.4	7.9
Total	450.0	(4.0)	446.0	34.5	(28.5)	6.0
Net finance costs						(6.1)
Total loss before tax						(0.1)

(1)

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Notes to the consolidated financial statements continued

Financial performance continued

4. Financial performance by segment continued

Measurement of performance continued

		2023
		Capital expenditure
	Depreciation,	Other	Property,
	amortisation	intangible	plant and	Right-of-use
	and impairment	assets	equipment	assets
	£m	£m	£m	£m
Energy and Environment	4.2	0.6	0.6	0.5
Rail	4.5	0.3	0.3	0.7
Automotive and Industrial – Emerging	3.3	2.7	3.1	1.0
Defense	1.8	0.4	0.4	—
Performance Products	0.9	0.6	0.6	—
Automotive and Industrial – Established	21.0	0.7	1.2	1.6
Plc	1.7	—	—	0.1
Total continuing operations	37.4	5.3	6.2	3.9
Discontinued operation	—	0.2	—	—
Total	37.4	5.5	6.2	3.9

172

Ricardo plc | Annual Report and Accounts 2023/24

Notes to the consolidated financial statements continued

Financial performance continued

5. Revenue

Revenue accounting policy – Note 1(g)

Key sources of estimation uncertainty: Revenue on fixed price contracts – Note 1(d)

	Continuing operations		Discontinued operations			Total
	2024	2023	2024	2023	2024	2023
	£m	£m	£m	£m	£m	£m
Revenue stream
Service provided under:
– Fixed price contracts	214.0	216.9	—	—	214.0	216.9
– Time and materials contracts	81.6	81.1	—	—	81.6	81.1
– Subscription and software support contracts	5.8	5.4	—	0.1	5.8	5.5
Goods supplied:
– Manufactured and assembled products	171.6	140.5	—	—	171.6	140.5
– Software products	1.7	1.3	—	0.7	1.7	2.0
Total	474.7	445.2	—	0.8	474.7	446.0
Customer location
United Kingdom	137.3	137.4	—	0.3	137.3	137.7
Europe	83.2	78.5	—	0.1	83.2	78.6
North America	166.2	139.4	—	0.2	166.2	139.6
Rest of Asia	39.7	30.1	—	0.2	39.7	30.3
Australia	22.7	23.4	—	—	22.7	23.4
China	8.3	16.4	—	—	8.3	16.4
Rest of the World	17.3	20.0	—	—	17.3	20.0
Total	474.7	445.2	—	0.8	474.7	446.0
Timing of recognition
Over time	302.8	304.6	—	0.8	302.8	305.4
At a point in time	171.9	140.6	—	—	171.9	140.6
Total	474.7	445.2	—	0.8	474.7	446.0

173

Ricardo plc | Annual Report and Accounts 2023/24

Notes to the consolidated financial statements continued

Financial performance continued

Amortisation of acquired intangible assets

On acquisition of a business, the purchase price is allocated to assets such as customer contracts

and relationships. Amortisation occurs on a straight-line basis over the asset’s useful economic

life, which is between two and nine years.

Acquisition-related expenditure, earn-out and employee retention costs

The current year acquisition-related expenditure comprises:

• £nil (2023: £0.4m) of integration costs and £0.1m (2023: £0.4m) of contingent consideration

following the acquisition of Inside Infrastructure

• £0.2m (2023: £0.2m) of external fees and integration costs and £4.1m (2023: £0.9m) of

contingent consideration following the acquisition of E3M (see Note 13)

• £0.5m (2023: £0.4m) of integration costs and £5.0m (2023: £3.2m) of contingent consideration

following the acquisition of Aither (see Note 13)

• £2.3m (2023: £0.7m) of external fees in respect of other strategic projects

Reorganisation costs

Impairment of non-financial assets

In the prior year, £18.7m of impairment costs were recognised (see Note 14), following a

re-assessment of the future projections and discounted cash flows of the A&I – Established

business as a result of economic uncertainties and the pace of technological change in the sector.

Other reorganisation costs

Reorganisation costs of £8.4m in FY 2023/24 include the following amounts:

• £3.4m in relation to the restructuring and transformation of the A&I businesses, primarily to

transform global operations and enabling functions, including:

• £1.8m of redundancy costs

• £0.4m for external contractors and fees associated with the process

• £1.2m in respect of property exits and asset write-downs, including onerous lease provisions

and impairment unutilised assets. This activity concluded in the current year

• In the prior year, £2.4m of redundancy costs were incurred in order to right-size the business

in response to prevailing the economic challenges discussed above. In addition, £1.1m of

losses on disposal of non-current assets, £0.2m of property exit costs and £1.0m of external

fees and contractor costs were incurred

6. Specific adjusting items

Specific adjusting items accounting policy – Note 1(h)

Critical judgement on specific adjusting items: Reorganisation costs – Note 1(d)

Specific adjusting items are disclosed separately in the financial statements where it is necessary

to do so to provide further understanding of the financial performance of the Group. These

items comprise the amortisation of acquired intangible assets, acquisition-related expenditure,

reorganisation costs and other items that are included due to their significance, non-recurring

nature or amount. Acquisition-related expenditure is incurred by the Group to effect a business

combination, including the costs associated with the integration of acquired businesses.

Reorganisation costs relate to non-recurring expenditure incurred as part of fundamental

restructuring activities, significant impairments of property, plant and equipment, and other items

deemed to be one-off in nature.

	2024	2023
	£m	£m
Continuing operations
Amortisation of acquired intangibles	4.8	4.6
Acquisition-related expenditure	3.0	6.2
Earn-out and employee retention costs	9.2	—
Reorganisation costs
– Impairment of non-financial assets	—	18.7
– Other reorganisation costs	8.4	6.4
ERP implementation costs	0.5	—
Sale and leaseback costs	0.3	—
Total specific adjusting items from continuing operations
before tax	26.2	35.9
Tax credit on specific adjusting items	(4.6)	(3.3)
Total specific adjusting items from continuing operations
after tax	21.6	32.6
Specific adjusting items from discontinued operations
Disposal of discontinued operations	—	(7.4)
Tax on specific adjusting items from discontinued operations	—	1.0
Total specific adjusting items after tax	21.6	26.2

174

Ricardo plc | Annual Report and Accounts 2023/24

Notes to the consolidated financial statements continued

Financial performance continued

6. Specific adjusting items continued

Reorganisation costs continued

Other reorganisation costs continued

• £3.3m in relation to the Rail and EE businesses. The current year cost includes £3.2m of

redundancy costs and £0.1m of external fees arising from the combination of the operational

transformation programme and significant multi-year review to support creating a combined

Clean Energy and Environmental Solutions business focused on key markets across Rail and

EE. Redundancy costs of £1.5m were incurred in the prior year. These activities concluded in the

current year

• £1.7m of central costs including redundancies of £1.0m and the cost of external contractors and

fees of £0.7m in relation to the operational transformation programme. Redundancy costs of

£0.2m were incurred in the prior year. This activity concluded in the current year

These costs have been included within specific adjusting items as they are significant in quantum

and would otherwise distort the underlying trading performance of the Group.

ERP implementation costs

During the year, £0.5m of external costs in relation to the planning activities to implement a new

ERP system were incurred. These have been classified as a specific adjusting item as they are not

reflective of the underlying performance of the business. The ERP system is expected to be utilised

by the Group for at least five years.

Sale and leaseback costs

On 28th June 2024, Ricardo plc sold part of the site at the Shoreham Technical Centre used by

Ricardo PP Ltd, known as Building 2, Building 19 and car parking, to Berwen Ltd for £3.25m, with

no gain or loss on book value. The cost of £0.3m was associated with external fees relating to

the sale. These costs have been recognised as specific adjusting items as they do not reflect the

underlying trading performance of the business. Cash proceeds received for the sale have been

recorded within investing activities in the cash flow statement.

Prior year disposal of discontinued operation

During the prior year, a gain on the disposal of the discontinued Software business of £7.4m was

recognised.

175

Ricardo plc | Annual Report and Accounts 2023/24

Notes to the consolidated financial statements continued

Financial performance continued

	2024	2023
	Number	Number
	of shares	of shares
	millions	millions
Basic weighted average number of shares in issue	62.2	62.2
Effect of dilutive potential shares	0.6	—
Diluted weighted average number of shares in issue	62.8	62.2

	2024	2023
Earnings/(loss) per share	pence	pence
Basic	1.1	(8.7)
Diluted	1.1	(8.7)

	2024	2023
Underlying earnings per share	pence	pence
Basic	35.9	33.4
Diluted	35.5	33.4

	2024	2023
Earnings/(loss) per share from continuing operations	pence	pence
Basic	1.1	(19.3)
Diluted	1.1	(19.3)

	2024	2023
Earnings per share from discontinued operation	pence	pence
Basic	—	10.9
Diluted	—	10.9

7. Earnings per share

Basic earnings per share is calculated by dividing the earnings attributable to ordinary

shareholders by the weighted average number of shares outstanding during the year, excluding

those held by an employee benefit trust for the Long-Term Incentive Plan (LTIP) and by the Share

Incentive Plan (SIP) for the free share scheme, which are treated as cancelled for the purposes of

the calculation.

For diluted earnings per share, the weighted average number of ordinary shares in issue is

adjusted to assume conversion of all dilutive potential ordinary shares. These include potential

awards of LTIP shares and options granted to employees. The assumed proceeds from these are

regarded as having been received at the average market price of ordinary shares during the year.

Reconciliations of the earnings and the weighted average number of shares used in the

calculations are set out below. Underlying earnings per share is also shown because the Directors

consider that this provides a useful indication of underlying performance and trends over time.

	2024	2023
	£m	£m
Earnings/(loss) attributable to owners of the parent	0.7	(5.4)
Add back the net-of-tax impact of:
– Amortisation of acquired intangibles	3.5	3.5
– Acquisition-related expenditure	11.3	6.2
– Other reorganisation costs and impairment	6.1	22.9
– ERP implementation costs	0.4	—
– Sale and leaseback costs	0.3	—
– Discontinued operation	—	(6.4)
Underlying earnings attributable to owners of the parent	22.3	20.8

176

Ricardo plc | Annual Report and Accounts 2023/24

Notes to the consolidated financial statements continued

Financial performance continued

10. Auditor’s remuneration

During the year the Group (including its subsidiaries) obtained the following services from the

Group auditors and its associates:

Fees payable for services provided by the Company’s

auditor and its associates

	2024	2023
	£'000	£'000
Audit fees
Statutory audit of the Company and its consolidated
financial statements	919	899
Statutory audit of the Company’s subsidiaries and their financial statements	886	696
Total audit fees	1,805	1,595
Non-audit fees
Audit-related assurance services provided to the Company	110	106
Audit-related assurance services provided to the Company’s subsidiaries	6	18
Total non-audit fees	116	124
Non-audit fees as a percentage of audit fees	6.4%	7.8%

Fees payable during the year to the Company’s auditor and its associates for audit-related

assurance services related to independent reviews, agreed-upon procedures and other services

closely related to the audit of the Company and its subsidiaries. Total audit fees have increased by

13% in the current year due to additional regulatory audit requirements.

Non-audit services comprised the Group’s interim review and other audit-related assurance

services.

8. Dividends

Dividend accounting policy – Note 1(i)

	2024	2023
	£m	£m
Final dividend for prior period: 8.61p per share (2023: 7.49p per
share)	5.3	4.6
Interim dividend for current period: 3.8p per share (2023: 3.35p
per share)	2.4	2.1
Equity dividends paid	7.7	6.7

On 4 September 2024 the Directors declared a final dividend of 8.9p per share, which will be paid

gross on 22 November 2024 to holders of ordinary shares on the Company’s register of members

on 1 November 2024.

9. Net finance costs

Net finance costs accounting policy – Note 1(j)

	2024	2023
	£m	£m
Finance income
Bank interest receivable	0.3	0.2
Other interest receivable	0.1	0.2
Defined benefit pension financing income	0.7	0.6
Total finance income	1.1	1.0
Finance costs
Bank interest payable on borrowings	(8.3)	(6.1)
Interest expense on lease liabilities	(1.0)	(0.9)
Other interest payable	(0.3)	(0.1)
Total finance costs	(9.6)	(7.1)
Net finance costs	(8.5)	(6.1)

177

Ricardo plc | Annual Report and Accounts 2023/24

Notes to the consolidated financial statements continued

Financial performance continued

The main rate of UK corporation tax for the year ended 30 June 2024 is 25%. The Finance Act

2021, which was substantially enacted on 10 June 2021, announced that the main UK corporation

tax rate would increase to 25% with effect from 1 April 2023. Deferred taxes in the UK have been

measured at the corporation tax rate expected to apply at the time of the reversal of the timing

difference. Overseas deferred taxes at the reporting date have been measured and reflected

in these financial statements by using the enacted rate within each jurisdiction. The tax charge

for the year is higher (2023: higher) than the standard rate of corporation tax in the UK. The

differences are set out below:

	2024	2023
	£m	£m
Profit/(loss) before taxation	4.3	(0.1)
Multiplied by the standard rate of corporation tax in the UK
of 25.0% (2023: 20.5%)	1.1	—
Effects of:
Income not taxable	—	(1.6)
Expenses not deductible for tax purposes	1.7	3.8
Deferred tax recognised in OCI or equity	1.0	1.9
Government tax incentives	(0.5)	(0.2)
Other overseas taxes	1.6	1.2
Adjustment to the IFRIC 23 provision	—	(0.1)
Adjustments in respect of prior years	(2.5)	0.5
Deferred tax not recognised	1.8	(0.7)
Differences in tax rates	(0.7)	0.3
Total taxation	3.5	5.1

(1)

(2)

(1) Primarily relates to R&D tax credits.

(2) Primarily relates to withholding taxes.

11. Tax expense

Tax expense accounting policy – Note 1(k)

	2024	2023
	£m	£m
Current income tax
UK corporation tax	0.7	0.5
Adjustments in respect of prior years	(1.1)	(0.3)
Total UK tax	(0.4)	0.2
Foreign corporation tax	2.3	3.6
Overseas withholding tax suffered	1.2	0.8
Adjustments in respect of prior years	(0.1)	—
Total foreign tax	3.4	4.4
Total current tax	3.0	4.6
Deferred tax
Charge/(credit) for the year	1.8	(0.3)
Adjustments in respect of prior years	(1.3)	0.8
Total deferred tax	0.5	0.5
Total taxation	3.5	5.1
Tax on items recognised in other comprehensive income	(1.4)	(1.2)
Tax on items recognised directly in equity	—	(0.7)

Tax on items recognised in other comprehensive income relates to the tax impact of

remeasurements of the defined benefit pension scheme. Tax on items recognised directly in

equity relates to equity-settled share-based payment transactions.

178

Ricardo plc | Annual Report and Accounts 2023/24

Notes to the consolidated financial statements continued

Financial performance continued/Capital base

12. Non-current assets by geographical location (excluding deferred tax assets

and pension surplus)

		2024	2023
Asset location	Note	£m	£m
United Kingdom		69.3	70.6
Australia		35.2	37.9
Greece		19.0	—
Netherlands		17.8	19.2
North America		16.9	17.8
Rest of the World		23.6	44.4
Total		181.8	189.9
Goodwill	14	96.0	96.1
Other intangible assets	15	33.7	35.4
Property, plant and equipment	16	30.4	35.3
Right-of-use assets	17	19.2	20.7
Other receivables	21	2.5	2.4
Total		181.8	189.9

11. Tax expense continued

The Group operates in a number of countries and is subject to taxation in numerous jurisdictions.

Legislation related to taxation is complex and management is required to make judgements based

on appropriate professional advice, and amounts provided are accrued based on management’s

interpretation of country-specific tax laws. In particular, management applies judgement in respect

of ongoing tax audits around the Group, which can take a significant amount of time to be agreed

with tax authorities. The Group estimates and accrues taxes that will ultimately be payable

when reviews or audits by tax authorities of tax returns are completed. These estimates include

judgements about the position expected to be taken by each tax authority. As at 30 June 2024,

the Group's IFRIC 23 provision for uncertain tax positions was £0.3m (2023: £0.2m). The provision

relates to potential challenges on tax positions in international territories.

Expenses not deductible relates to a variety of types of costs, but largely relates to

acquisition-related expenditure.

Management judgement has also been required to ensure that appropriate transfer pricing is

applied on all intra-group transactions, and in determining the amounts that would be undertaken

on an arm’s length basis. As a result, actual liabilities could differ from the amounts provided,

which could have a consequent impact on the results and net position of the Group.

None of the amounts are individually material and therefore there is not a significant risk of

material differences in future periods.

179

Ricardo plc | Annual Report and Accounts 2023/24

Notes to the consolidated financial statements continued

Capital base continued

(b) Acquisition in the year to 30 June 2023 – E3M

On 24 January 2023, the Group acquired 93% of the issued share capital of E3M, an Energy and

Environment consulting company based in Athens. The commitment to purchase the remaining

amount gives rise to a financial liability; no non-controlling interest is recognised for the remaining

7% shareholding. Total amounts potentially payable in relation to the acquisition include the

following:

• Initial cash consideration of £19.2m (EUR 21.9m), which includes an adjustment for cash and

normalised net working capital of £0.2m (EUR 0.2m), paid in January 2023 and June 2023

respectively

• An earn-out agreement based on the earnings before tax, depreciation and amortisation

(EBITDA) for the 12 months ended 31 December 2023. This amount is considered to represent

post-combination remuneration, in line with IFRS 3. The minimum value of this payment is £nil

and the maximum is £4.7m (EUR 5.4m). E3M achieved EBITDA for the period which resulted in

the maximum earn-out payment of £4.7m (EUR 5.4m), paid in May 2024. An expense of £3.8m

has been recognised in the current year in respect of this post-combination remuneration, being

the movement between the maximum amount paid and the accrual as at 30 June 2023 (£0.9m).

This expense has been recognised in the income statement within specific adjusting items. See

Note 6. In addition, £1.3m (EUR 1.5m) was paid in FY 2023/24 in relation to a deal completion

accounts adjustment to consideration. The payment has been recognised in acquisition-related

payments in the cash flow statement

• The purchase of the remaining 7% of share capital is expected to take place in January 2026

• An amount of £0.9m (EUR 1.0m), with a present value of £0.6m (EUR 0.7m), is not linked to

the continuing employment of the vendors or other performance conditions and has been

treated as deferred consideration. As a result of the unwind in discounting, a charge of £0.1m

(EUR 0.1m) was recognised in the year in the income statement within specific adjusting items

(interest payable)

• A further amount is contingent on the EBITDA for the 12 months ending 31 December 2025.

The minimum undiscounted value of this payment is £0.9m (EUR 1.0m) and the amount is

uncapped. This payment is linked to continuing employment of the vendor, and does not

form part of the business combination and is considered to represent post-combination

remuneration. An expense of £0.2m has been recognised in the current year in respect

of this post-combination remuneration, based on expected EBITDA for the period ending

31 December 2025, and a discount rate of 15.2%. This expense has been recognised in the

income statement within specific adjusting items. See Note 6

13. Acquisitions

(a) Acquisition in the year to 30 June 2023 – Aither

On 10 March 2023, the Group acquired 90% of the issued share capital of Aither, a leading

Australian water and natural resources advisory consultancy. The commitment to purchase the

remaining amount gives rise to a financial liability (see below), therefore no non-controlling

interest is recognised for the remaining 10% shareholding. Total amounts potentially payable in

relation to the acquisition include the following:

• Initial cash consideration of £9.4m (AUD 17.2m), which includes an adjustment for cash and

normalised net working capital of £0.1m (AUD 0.1m), paid in March 2023 and June 2023

respectively

• An earn-out agreement based on the earnings before tax, depreciation and amortisation

(EBITDA) for the 10 months ended 31 December 2023 comprising two elements:

• 90% earn-out payment to the vendors of the business, if they remain employed by the

business at the earn-out date. EBITDA for the period resulted in a maximum earn-out

payment of £6.9m (AUD 13.2m), paid in May 2024

• 10% earn-out bonus to staff employed by the business from completion date and

throughout the earn-out period. An amount of £0.8m (AUS 1.5m) was paid in May 2024

This amount is considered to represent post-combination remuneration, in line with IFRS 3.

An expense of £4.8m has been recognised in the current year in respect of this post-combination

remuneration, being the movement between the final payment (£7.7m) and the accrual made as at

30 June 2023 (£2.9m). This expense has been recognised in the income statement within specific

adjusting items. See Note 6.

• The purchase of the remaining 10% of share capital is expected to take place on the third

anniversary of the acquisition, or the second anniversary by mutual agreement

• An amount of £0.8m (AUD 1.6m), with a present value of £0.7m (AUD 1.3m), is not linked

to the continuing employment of the vendors or other performance conditions and has been

treated as deferred consideration. As a result of the unwind in discounting, a charge of £0.1m

(AUD 0.2m) was recognised in the year in the income statement within specific adjusting items

(interest payable)

• A further amount is based on the EBITDA of the 12 months ending 31 December 2025. The

minimum undiscounted value of this payment is £0.8m (AUD 1.6m) and the maximum is

£4.4m (AUD 8.4m). This payment is linked to continuing employment of the vendor, and does

not form part of the business combination and is considered to represent post-combination

remuneration. An expense of £0.2m has been recognised in the current year in respect of

this post-combination remuneration and a discount rate of 12.8%. This expense has been

recognised in the income statement within specific adjusting items. See Note 6

180

Ricardo plc | Annual Report and Accounts 2023/24

Notes to the consolidated financial statements continued

Capital base continued

14. Goodwill and impairment of non‑financial assets

Goodwill accounting policy – Note 1(l)

Critical judgement on carrying value of goodwill: CGUs – Note 1(d)

Key sources of estimation uncertainty on carrying value of goodwill – Note 1(d)

		2024	2023
Movement in goodwill	Note	£m	£m
At 1 July		96.1	90.6
Acquisition of business	13	—	13.6
Impairment		—	(5.2)
Exchange adjustments		(0.1)	(2.9)
At 30 June		96.0	96.1

(1)

(2)

The carrying value of goodwill and the key assumptions used in determining the recoverable amount of each CGU, or group of CGUs, are as follows:

		Carrying value		Pre-tax discount rate		Long-term growth rate
		2024	2023	2024	2023	2024	2023
	Basis	£m	£m	£m	£m	£m	£m
Rail	VIU	44.6	44.4	14.3%	13.5%	3.6%	2.9%
Automotive and Industrial – Established	VIU	—	—	14.8%	14.9%	(10.0%)	(10.0%)
Automotive and Industrial – Emerging	VIU	14.2	14.4	14.7%	14.9%	3.8%	3.9%
Energy and Environment	VIU	32.6	32.7	16.5%	16.9%	4.7%	4.0%
Defense (3)	VIU	3.5	3.5	16.1%	14.0%	1.7%	3.3%
Performance Products	FVLCD	1.1	1.1	12.4%	15.9%	4.7%	4.4%
At 30 June		96.0	96.1

(2)

(1)

(4)

(1) The Group acquired Aither and E3M during the prior year, adding goodwill of £5.1m and £8.5m respectively to the Energy and Environment CGU.

(2) At 31 December 2022, during the previous financial year, as required by IAS 36, an assessment was carried out to identify whether any indicators existed that the goodwill balances held by the Group may be

impaired. Due to a significantly more challenging performance than expected in the Automotive and Industrial – Established Mobility (A&I – Established) segment, an indicator of impairment was considered to exist

and the recoverable amount of the CGU was estimated. The recoverable amount of the CGU was based on its value-in-use (VIU), determined by discounting the future cash flows expected to be generated from

the continuing use of the CGU. Expected cash flows for the A&I – Established business decreased compared to those expected at 30 June 2022, and the carrying amount of the CGU was therefore determined to be

higher than its recoverable value of £nil. As a result, an impairment charge of £17.7m was recognised during the previous financial year to administrative expenses within specific adjusting items for the

A&I – Established operating segment. This assessment was updated at 30 June 2023 and a further £1.0m of assets were impaired. At 30 June 2024, the recoverable value of A&I – Established remained £nil and

therefore the assets remain fully impaired. No further impairment was added.

(3) The increase in the pre-tax discount rate for this CGU relates to a change in the mix of competitor companies which better reflects the risk profile of the CGU.

(4) In FY 2023/24, the recoverable amount of this CGU was based on fair value less costs of disposal (FVLCD), estimated using discounted cash flows. The fair value measurement was classified as a Level 3 fair value

based on the inputs in the valuation technique used. The key assumptions used are set out in the table. The FY 2023/24 discount rate represents a post tax discount rate.

Movements in the carrying value of goodwill in Rail and A&I – Emerging reflect movements in the foreign exchange rate.

181

Ricardo plc | Annual Report and Accounts 2023/24

Notes to the consolidated financial statements continued

Capital base continued

Due to regulatory and other changes in the market relating to ICE, a long-term decrease of 10%

p.a. has been applied to A&I – Established cash flows.

Cash flows beyond year five are projected into perpetuity using a long-term growth rate, which is

determined as being the lower of the planned compound annual growth rate in each CGU, or group

of CGUs, five-year plan and external third-party forecasts of the prevailing inflation and economic

growth rates for each of the territories in which each CGU, or group of CGUs, primarily operates.

For VIU the cash flows are discounted at a pre-tax discount rate, which is derived from externally

sourced data and reflects the current market assessment of the Group’s time value of money and

risks specific to each CGU. For FVLCD a post-tax discount rate was used.

Research and Development Expenditure Credits (RDEC) cash flows are included in the recoverable

amount calculations for A&I – Established, A&I – Emerging, Performance Products and Energy and

Environment.

Sensitivities

The recoverable amount calculations were assessed for sensitivity to reasonably possible changes

to assumptions. The change in pre-tax discount rate, growth rate, operating profit and working

capital which would cause the unit’s (or group of units’) carrying amount to exceed its recoverable

amount was identified and an assessment made as to whether that change was considered

reasonably possible. In addition, a scenario was modelled for each of a 10% reduction in operating

profit, a 10% increase in working capital movement, a 2% increase in the pre-tax discount rate and

a 2% decrease in the long-term growth rate, and a scenario with each of these changes combined.

None of these scenarios resulted in any CGUs (or group of units) goodwill exceeding its

recoverable amount.

14. Goodwill and impairment of non‑financial assets continued

During the previous financial year, £18.7m of assets were written off including £5.2m of goodwill,

£1.8m of intangible assets (primarily development costs, including calibration tools), and £11.7m

of property, plant and equipment (including £2.8m of buildings and £5.2m of test assets). After

recognising the impairment, the carrying value of non-current assets allocated to this CGU

was £nil.

	£m
Goodwill	5.2
Other intangible assets	1.8
Property, plant and equipment	11.7
Total impairment	18.7

In addition, an estimate of recoverable value for the combined A&I – Established and

A&I – Emerging businesses was calculated in order to assess the carrying value of the assets

shared between these CGUs (see Note 1(d)). The carrying value of the shared assets, and the A&I –

Emerging assets, were supported by this calculation with significant headroom, and no further

impairment was recognised.

Key assumptions

The five-year plan and discounted cash flow calculations thereon are used to calculate

a recoverable amount which is compared to the carrying value of the goodwill and other

non-financial assets allocated to each CGU, or group of CGUs, at 30 June 2024. No impairment

was considered necessary (2023: Impairment was recognised in relation to A&I – Established

(see above)).

The five-year cash flow forecasts are based on the budget for the following year (year one) and

the business plans for years two to five. The five-year plan is prepared by management, and is

reviewed and approved by the board. The five-year plan reflects past experience, management’s

assessment of the current contract portfolio, contract wins, contract retention, price increases,

gross margin, as well as future expected market trends (including the impact of climate change,

where relevant), adjusted to meet the requirements of IAS 36 Impairment of Assets.

The risks associated with climate change which have been incorporated into the five-year planning

process include the known and expected increased regulation in relation the use of the internal

combustion engine (ICE) and the impact that will have on our customers operating in this market.

The five-year planning process takes into account the requirement to adapt our product and

service portfolios in response to megatrends influenced by climate change. Some risks, such as

the risk of sea level rise (see discussion of principal risks on page 77 of the Annual Report), are

expected to arise outside of the timeline of the five-year plan and are not considered sufficiently

quantifiable to include in the longer-term element of the recoverable amount calculation. The

recoverable amounts of the CGUs include consideration of our commitment to carbon reduction

based on the Science Based Targets initiative (SBTi).

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Notes to the consolidated financial statements continued

Capital base continued

15. Other intangible assets

Other intangible assets accounting policy – Note 1(m)

Critical judgement on recoverability of capitalised development costs – Note 1(d)

		Acquired intangible assets
	Customer
	contracts and	Software and		Development
	relationships	technology	Software	costs	Total
	£m	£m	£m	£m	£m
Cost
At 1 July 2022	41.1	2.1	23.3	20.5	87.0
Acquisition of business	5.9	12.5	—	—	18.4
Additions	—	—	0.1	5.4	5.5
Disposals	—	—	(0.8)	(0.1)	(0.9)
Exchange rate adjustments	(1.6)	(0.2)	(0.2)	(0.4)	(2.4)
At 30 June 2023	45.4	14.4	22.4	25.4	107.6
At 1 July 2023	45.4	14.4	22.4	25.4	107.6
Additions	—	—	0.9	6.3	7.2
Disposals	—	—	(3.1)	(3.7)	(6.8)
Exchange rate adjustments	0.1	(0.2)	0.1	—	—
At 30 June 2024	45.5	14.2	20.3	28.0	108.0
Accumulated amortisation
At 1 July 2022	33.1	2.1	20.1	8.6	63.9
Charge for the period	4.0	0.5	1.3	3.3	9.1
Impairment charge	—	—	0.3	1.5	1.8
Disposals	—	—	(0.8)	(0.1)	(0.9)
Reclassifications	—	—	—	(0.3)	(0.3)
Exchange rate adjustments	(1.1)	—	(0.2)	(0.1)	(1.4)
At 30 June 2023	36.0	2.6	20.7	12.9	72.2

(1)

(2)

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Notes to the consolidated financial statements continued

Capital base continued

		Acquired intangible assets
	Customer
	contracts and	Software and		Development
	relationships	technology	Software	costs	Total
	£m	£m	£m	£m	£m
Accumulated amortisation
At 1 July 2023	36.0	2.6	20.7	12.9	72.2
Charge for the period	3.6	1.2	1.0	3.2	9.0
Disposals	—	—	(3.1)	(3.7)	(6.8)
Exchange rate adjustments	—	—	(0.1)	—	(0.1)
At 30 June 2024	39.6	3.8	18.5	12.4	74.3
Net book value
At 1 July 2022	8.0	—	3.2	11.9	23.1
At 30 June 2023	9.4	11.8	1.7	12.5	35.4
At 30 June 2024	5.9	10.4	1.8	15.6	33.7

(1) See Note 13.

(2) See Note 14.

Customer contracts and relationships were primarily identified as part of the prior year acquisition of Aither, Inside Infrastructure and previous acquisitions LR Rail and Transport Engineering. The assets

specific to previous acquisitions have carrying values of £nil (2023: £0.8m) and £nil (2023: £1.7m) and have no remaining amortisation periods (2023: one year). Customer contracts and relationships

identified as part of the acquisition of Inside Infrastructure have a carrying value of £1.2m (2023: £1.5m) and a remaining amortisation period of four years. Customer contracts and relationships identified

as part of the acquisition of Aither in the prior year have a carrying value of £4.7m (2023: £5.4m) (see Note 13).

Software and technology was identified as part of the prior year acquisition of E3M and includes sophisticated energy and economic modelling tools. These have a carrying value of £10.4m (2023: £11.8m)

and a remaining amortisation period of nine years.

Development costs include a patented system that combines anti-lock braking and electronic stability control (ABS brake kits) to mitigate rollover fatalities commonly associated with the High Mobility

Multipurpose Wheeled Vehicle (HMMWV or Humvee). This asset has a carrying value of £1.2m (2023: £1.3m).

In addition, development costs include £7.5m (2023: £6.1m) in respect of assets under construction which are not being amortised until the assets are made available for use. Development costs under

construction include new technology, tools and processes in the emerging A&I and EE segments.

The amortisation charge of £9.0m (2023: £9.1m) is comprised of £3.1m (2023: £3.5m) included within cost of sales and £5.9m (2023: £5.6m) included within administrative expenses in the income

statement, of which £4.8m (2023: £4.6m) relates to acquired intangible assets and is presented within specific adjusting items, as set out in Note 6.

15. Other intangible assets continued

184Ricardo plc | Annual Report and Accounts 2023/24

Notes to the consolidated financial statements continued

Capital base continued

16. Property, plant and equipment

Property, plant and equipment accounting policy – Note 1(n)

	Freehold land	Leasehold	Plant and	Fixtures, fittings
	and buildings	properties	machinery	and equipment	Total
	£m	£m	£m	£m	£m
Cost
At 1 July 2022	33.5	4.4	80.5	21.9	140.3
Acquisition of business	—	—	0.1	—	0.1
Additions	0.2	0.5	3.4	2.1	6.2
Disposals	(0.2)	(0.4)	(3.2)	(1.7)	(5.5)
Reclassifications	0.3	0.1	(0.4)	0.1	0.1
Exchange rate adjustments	(0.5)	0.1	(0.1)	(0.2)	(0.7)
At 30 June 2023	33.3	4.7	80.3	22.2	140.5
At 1 July 2023	33.3	4.7	80.3	22.2	140.5
Additions	0.3	—	2.1	1.7	4.1
Disposals	(3.4)	(0.2)	(21.6)	(2.9)	(28.1)
Reclassifications	—	—	0.1	(0.4)	(0.3)
Exchange rate adjustments	0.1	—	—	(0.1)	—
At 30 June 2024	30.3	4.5	60.9	20.5	116.2
Accumulated depreciation and impairment
At 1 July 2022	15.0	2.3	60.2	15.8	93.3
Charge for the period	0.6	0.5	2.0	1.7	4.8
Impairment	2.8	0.3	7.8	0.8	11.7
Disposals	(0.2)	(0.3)	(2.5)	(1.6)	(4.6)
Reclassifications	—	—	0.3	—	0.3
Exchange rate adjustments	(0.3)	0.2	(0.1)	(0.1)	(0.3)
At 30 June 2023	17.9	3.0	67.7	16.6	105.2

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Notes to the consolidated financial statements continued

Capital base continued

	Freehold land	Leasehold	Plant and	Fixtures, fittings
	and buildings	properties	machinery	and equipment	Total
	£m	£m	£m	£m	£m
Accumulated depreciation and impairment
At 1 July 2023	17.9	3.0	67.7	16.6	105.2
Charge for the period	0.5	0.2	2.7	1.9	5.3
Impairment	—	0.2	—	—	0.2
Disposals	(0.1)	(0.2)	(21.6)	(2.8)	(24.7)
Reclassifications	—	0.1	—	(0.2)	(0.1)
Exchange rate adjustments	—	—	—	(0.1)	(0.1)
At 30 June 2024	18.3	3.3	48.8	15.4	85.8
Net book value
At 1 July 2022	18.5	2.1	20.3	6.1	47.0
At 30 June 2023	15.4	1.7	12.6	5.6	35.3
At 30 June 2024	12.0	1.2	12.1	5.1	30.4

Prior year plant and machinery additions are presented net of a £0.7m (2023: £1.5m) government grant.

The carrying value of assets under construction included in property, plant and equipment amounts to £1.8m (2023: £1.1m) including land and buildings of £0.1m (2023: £nil), leasehold property of

£0.8m (2023: £0.3m), plant and machinery of £0.5m (2023: £0.5m) and fixtures, fittings and equipment of £0.4m (2023: £0.3m).

At 30 June 2024, the Group had plant and machinery financed through a hire-purchase agreement and secured on the asset (see Note 23) with a carrying value of £nil (2023: £0.3m). As disclosed in Note

25, a guarantee was provided to the Ricardo Group Pension Fund (RGPF) of £2.8m in respect of certain contingent liabilities that may arise, which have been secured on freehold land and buildings with

a carrying value of £8.9m (2023: £12.1m).

At 30 June 2024, contracts had been placed for future capital expenditure, which have not been provided for in the financial statements, amounting to £0.2m (2023: £0.6m).

On 28 June 2024, Ricardo plc sold part of the site at the Shoreham Technical Centre used by Ricardo PP Ltd, known as Building 2, Building 19 and car parking, to Berwen Ltd. The sale exchanged and

completed for £3.25m, with no gain or loss on book value. See Note 17 for further details.

16. Other intangible assets continued

16. Property, plant and equipment continued

186Ricardo plc | Annual Report and Accounts 2023/24

Notes to the consolidated financial statements continued

Capital base continued

17. Right-of-use assets, lease liabilities and lease receivables

Leases accounting policy – Note 1(p)

(a) Leasing activities as lessee

The Group leases various office premises and technical centres, vehicles and other equipment.

Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants. Leased assets may not be used as

security for borrowing purposes. Property lease terms range from one to 21 years, with an average of five years, and may have extension or termination options. The impact of exercising these options,

where not currently considered reasonably certain, is quantified below. There are several property subleases within the Group – see Note 17(b) below. Other lease terms range from one to five years,

with an average of three years. Where leases are short term and/or leases of low-value items, the Group has elected not to recognise right-of-use assets and lease liabilities for these leases.

(i) Right-of-use assets

Information about leases for which the Group is a lessee is presented below.

		Plant and	Fixtures, fittings
	Property	machinery	and equipment	Total
	£m	£m	£m	£m
Cost
At 1 July 2022	30.7	0.9	1.0	32.6
Arising on acquisition	0.5	—	—	0.5
Additions	3.5	0.3	0.1	3.9
Disposals	(2.3)	(0.4)	(0.3)	(3.0)
Remeasurements	2.9	0.1	(0.1)	2.9
Exchange rate adjustments	(0.2)	—	—	(0.2)
At 30 June 2023	35.1	0.9	0.7	36.7
At 1 July 2023	35.1	0.9	0.7	36.7
Additions	3.5	0.2	0.4	4.1
Disposals	(1.1)	(0.4)	(0.2)	(1.7)
Remeasurements	0.3	—	(0.2)	0.1
Exchange rate adjustments	(0.4)	—	—	(0.4)
At 30 June 2024	37.4	0.7	0.7	38.8

187

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Notes to the consolidated financial statements continued

Capital base continued

		Plant and	Fixtures, fittings
	Property	machinery	and equipment	Total
	£m	£m	£m	£m
Accumulated depreciation and impairment
At 1 July 2022	13.2	0.7	0.4	14.3
Charge for the period	4.3	0.3	0.2	4.8
Disposals	(2.3)	(0.4)	(0.3)	(3.0)
Exchange rate adjustments	(0.1)	—	—	(0.1)
At 30 June 2023	15.1	0.6	0.3	16.0
At 1 July 2023	15.1	0.6	0.3	16.0
Charge for the period	4.7	0.1	0.2	5.0
Impairment loss	0.4	—	—	0.4
Disposals	(1.1)	(0.3)	(0.2)	(1.6)
Exchange rate adjustments	(0.2)	—	—	(0.2)
At 30 June 2024	18.9	0.4	0.3	19.6
Net book value
At 1 July 2022	17.5	0.2	0.6	18.3
At 30 June 2023	20.0	0.3	0.4	20.7
At 30 June 2024	18.5	0.3	0.4	19.2

In the current period, an impairment charge of £0.4m (2023: £0.6m) was recognised in respect of the decision to vacate the Carlsbad office of £0.3m (2023: £nil) and further reduction of occupancy of the

Prague office of £0.1m (2023: £0.6m). The charge reflects a reduction in the carrying value for part of the site to value-in-use based on expected sublease income, which is expected to be higher than the

fair value less costs of disposal. These costs are recognised within administrative expenses and included in 'Reorganisation costs: Other reorganisation costs' within specific adjusting items (Note 6).

Other reassessments of lease terms resulted in a remeasurement which increased both right-of-use assets and lease liabilities by £0.1m (2023: £2.9m). In the prior year, these reassessments included

a remeasurement related to rent review for Midlands Technical Centre of £1.2m and increase in capacity and extension of lease term for Troy Technical Centre of £1.3m.

The net book value of Property above is shown net of £0.7m (2023: £0.8m) in respect of consideration received as part of a historical sale and leaseback transaction, deemed to be an incentive for

extending the lease term.

The lessee’s incremental borrowing rates applied to lease liabilities recognised in the statement of financial position at the date of initial application vary due to length and geographical location and

are as follows:

• Property – 1.4% to 7.9%

• Plant and machinery – 0.6% to 9.9%

• Fixtures, fittings and equipment – 1.9% to 4.3%

17. Right-of-use assets, lease liabilities and lease receivables continued

(a) Leasing activities as lessee continued

(i) Right-of-use assets continued

188Ricardo plc | Annual Report and Accounts 2023/24

Notes to the consolidated financial statements continued

Capital base continued

17. Right-of-use assets, lease liabilities and lease receivables continued

(a) Leasing activities as lessee continued

(i) Right-of-use assets continued

The following amounts are included in the income statement relating to short-term and

low-value leases:

	2024	2023
	£m	£m
Short-term leases	0.2	0.5

As at 30 June 2024, potential future cash outflows of £4.5m (undiscounted) (2023: £4.4m) have

not been included in the lease liability because it is not reasonably certain that the leases will be

extended, or not terminated.

(ii) Lease liabilities

		2024	2023
Movement in lease liability	Note	£m	£m
At 1 July		25.1	23.3
Arising on acquisition		—	0.5
New leases		4.1	3.8
Interest	9	1.0	0.9
Payments		(6.4)	(6.0)
Remeasurements		0.1	2.9
Exchange rate adjustments		(0.1)	(0.3)
At 30 June		23.8	25.1

	2024	2023
Maturity of lease liability	£m	£m
Current liabilities – maturing within one year	6.0	5.7
Non-current liabilities – maturing after one year	17.8	19.4
At 30 June	23.8	25.1

The maturity analysis of this liability is shown Note 26(c).

(b) Leasing activities as lessor

The Group subleases out several parts of its leased property. All subleases are classified as

operating leases from a lessor perspective with the exception of one sublease, which the Group

has classified as a finance sublease.

For significant subleases, a dilapidations provision is put in place to minimise the risk related

to the value of the residual asset. Information about leases for which the Group is a lessor is

presented below.

(i) Finance lease

During the year, the Group recognised finance income of £nil (2023: £0.1m) relating to its

lease receivable. The following table sets out the movements in the lease receivable balance

during the year.

		2024	2023
Movement in lease receivable	Note	£m	£m
At 1 July		1.9	2.1
Interest	9	—	—
Receipts		(0.2)	(0.2)
Exchange rate adjustments		0.1	—
At 30 June		1.8	1.9

The following table sets out a maturity analysis of lease receivable, showing the undiscounted

lease payments to be received after the reporting date:

	2024	2023
Maturity of lease receivable	£m	£m
Less than one year	0.2	0.2
One to two years	0.2	0.2
Two to three years	0.2	0.2
Three to four years	0.2	0.2
Four to five years	0.2	0.2
More than five years	1.3	1.5
Undiscounted lease receivable	2.3	2.5
Unearned finance income	(0.5)	(0.6)
Net investment in the lease	1.8	1.9

This is a back-to-back lease with a right-of-use asset. As a finance lease this is included in other

receivables. See Note 21.

189

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Notes to the consolidated financial statements continued

Capital base continued

17. Right-of-use assets, lease liabilities and lease receivables continued

(b) Leasing activities as lessor continued

(ii) Operating lease

During the year, the Group recognised rental income of £0.5m (2023: £0.6m) relating to

operating leases.

The following table sets out a maturity analysis of lease payments, showing the undiscounted

lease payments to be received after the reporting date.

	2024	2023
Operating lease income	£m	£m
Less than one year	0.4	0.5
One to two years	0.3	0.4
Two to three years	—	0.3
	0.7	1.2

On 28 June 2024, Ricardo plc sold part of the site at the Shoreham Technical Centre used by

Ricardo PP Ltd, known as Building 2, Building 19 and car parking to Berwen Ltd and entered into

a 12-year lease at £0.2m per annum, with no break clause and options to extend the term by

three years.

The sale price £3.25m with no gain or loss on book value. As there was no gain or loss on disposal,

there is no additional financing component to be considered as part of the sale.

Cash proceeds received for the sale have been recorded within investing activities in the cash flow

statement.

The cost of £0.3m was associated with external fees relating to the sale. This cost was recognised

within the income statement as specific adjusting items as they did not reflect the underlying

performance of the business.

190

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Notes to the consolidated financial statements continued

Capital base continued

18. Provisions for liabilities and charges

Provisions for liabilities and charges accounting policy – Note 1(q)

		Restructuring	Employment-
	Warranty	costs	related benefits	Other	Total
	£m	£m	£m	£m	£m
At 1 July 2022	3.4	2.5	2.0	0.5	8.4
Charged to the income statement	1.6	3.0	0.3	0.1	5.0
Utilised in the period	(0.6)	(4.5)	(0.1)	(0.4)	(5.6)
Released in the period	(1.2)	(0.2)	—	—	(1.4)
Exchange rate adjustments	—	—	(0.1)	—	(0.1)
At 30 June 2023	3.2	0.8	2.1	0.2	6.3
At 1 July 2023	3.2	0.8	2.1	0.2	6.3
Charged to the income statement	2.1	2.3	0.6	0.0	5.0
Utilised in the period	(0.8)	(2.2)	(0.2)	(0.1)	(3.3)
Released in the period	(0.8)	—	—	—	(0.8)
Exchange rate adjustments	—	—	(0.1)	—	(0.1)
At 30 June 2024	3.7	0.9	2.4	0.1	7.1

	2024	2023
	£m	£m
Current	3.5	2.6
Non-current	3.6	3.7
At 30 June	7.1	6.3

The warranty provision reflects the Directors’ best estimate of the cost required to fulfil the Group’s assurance-type warranty obligations within a number of contracts. Subsequent to their initial

recognition, warranty provisions are utilised or released over the periods of the various warranty obligations, which are expected to be less than five years.

The prior provision for restructuring costs included amounts payable to former employees who have been made redundant, primarily as part of the reorganisation of our A&I, EE and Rail segments, as

set out in further detail in Note 6. The element of the provision relating to redundancy costs was partially utilised during the year with the remaining balance expected to be utilised in less than one year.

A provision for additional work to take test assets out of service is also included above.

Employment-related benefits are statutory provisions which include long-service awards and termination indemnity schemes. The timing of the cash outflows is dependent upon the retirement or

attrition of employees, but is predominantly expected to be more than five years.

Other provisions primarily comprise of dilapidation and restoration costs for leasehold property. Dilapidation and restoration costs reflects management’s best estimate of future obligations

relating to the maintenance and restoration of leasehold properties arising from past contractual commitments to new, extended or terminated lease agreements. Restoration costs expected at the

commencement of the lease are included within the right-of-use asset value (see Note 17(a)). The timing of the cash outflows is dependent upon the remaining term of the associated leases and

is subject to negotiation.

191

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Notes to the consolidated financial statements continued

Capital base continued

19. Deferred tax

This note explains how our Group deferred tax charge arises and also provides information on our expected future tax charges and sets out the tax assets held across the Group together with our view

on whether or not we expect to be able to make use of these in the future.

Deferred tax accounting policy – Note 1(r)

	2024	2023
Non-current	£m	£m
Assets	6.4	8.5
Liabilities	(13.0)	(15.5)
At 30 June	(6.6)	(7.0)

	Accelerated	Retirement
	capital	benefit	Tax losses	Unrealised		Right of
	allowances	obligations	and credits	capital gains	Lease liability	use asset	Other	Total
	£m	£m	£m	£m	£m	£m	£m	£m
At 1 July 2022	(6.6)	(3.8)	6.2	(0.7)	1.4	(1.2)	1.0	(3.7)
Arising on acquisition	—	—	—	—	—	—	(4.7)	(4.7)
(Charged)/credited to income statement	(0.1)	(0.6)	(4.2)	—	—	—	4.4	(0.5)
Credited to other comprehensive income	—	1.2	—	—	—	—	—	1.2
Credited directly to equity	—	—	—	—	—	—	0.7	0.7
Foreign exchange movements	0.1	—	0.3	—	—	—	(0.4)	—
At 30 June 2023	(6.6)	(3.2)	2.3	(0.7)	1.4	(1.2)	1.0	(7.0)
At 1 July 2023	(6.6)	(3.2)	2.3	(0.7)	1.4	(1.2)	1.0	(7.0)
(Charged)/credited to income statement	(0.5)	(0.4)	(0.2)	—	(0.3)	0.3	0.6	(0.5)
Credited to other comprehensive income	—	1.4	—	—	—	—	—	1.4
Charged directly to equity	—	—	—	—	—	—	(0.4)	(0.4)
Foreign exchange movements	—	—	—	—	—	—	(0.1)	(0.1)
At 30 June 2024	(7.1)	(2.2)	2.1	(0.7)	1.1	(0.9)	1.1	(6.6)

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Notes to the consolidated financial statements continued

Capital base continued/Working capital

19. Deferred tax continued

On 30 June 2024, a deferred tax liability of £0.3m (2023: 0.3m) is recognised on temporary

differences associated with the undistributed earnings of subsidiaries. The Group controls the

timing of payment of these undistributed earnings and would suffer a withholding tax charge on

these, when remitted to the United Kingdom.

Other deferred tax contains various other short timing differences with material balances in

relation to deferred tax liabilities arising on acquired customer-related intangibles with respect

to Greece and Australia (£3.9m), a deferred tax asset with respect to disallowed interest under

the UK corporate interest restriction rules (£0.9m) and other short-term timing differences largely

in the US and Australia in relation to accrued payable balances resulting in deferred tax asset

(£2.4m).

A deferred tax asset continues to be recognised in the US as at 30 June 2024 in respect of historic

research and development claims (R&D credits) that can be utilised against future taxable profits.

These R&D credits carry a 20-year statute of limitation and must be utilised within that period. The

carrying value of the R&D credits recognised at 30 June 2024 is £0.7m (USD 0.9m) (2023: £1.5m

(USD 1.9m)). The Directors have performed an assessment and consider that it is probable that

future taxable profits will be available in the US against which the carrying value of the recognised

deferred tax asset for the R&D credits can be utilised in the foreseeable future. This assessment

was based on a review of the projected annual profit before tax of the consolidated tax group

in the US, based upon the latest board-approved budgets and business plans for the next three

years, together with long-term growth assumptions based on prevailing inflation and economic

growth rates. Based on the ‘base case’ assumptions, the entire deferred tax asset is forecast to be

fully utilised by no later than 30 June 2026. The assessment was subject to reverse stress testing,

the results of which did not change management’s view of the recoverability of the asset.

A deferred tax asset has been recognised of £1.4m (2023: £nil) in respect of local tax losses

arising in Australia and Japan that can be utilised against future taxable profits. The Directors

have performed an assessment and consider that it is probable that future taxable profits will be

available against which the carrying value of the recognised deferred tax asset on losses can be

utilised.

In the prior year, a deferred tax asset was recognised in China in respect of local tax losses that

can be utilised against future taxable profits. Losses carry a five-year expiry window from the

year subsequent to the year in which the loss was incurred. The carrying value of the tax losses

recognised as at 30 June 2024 is £6.5m (58m CN¥) . The Directors have performed an assessment

and consider that it is probable that no future taxable profits will be available in China against

which the carrying value of the recognised deferred tax asset on losses can be utilised.

With respect to Germany, a deferred tax asset has not been recognised on tax losses totalling

£31m (EUR 36m) as at 30 June 2024 (2023: £31m (EUR 36m)). Due to restructuring and the

reduction in activity in Germany in recent years, the Directors consider it unlikely that sufficient

future taxable income will be generated against which the carrying value of the brought-forward

losses deferred tax asset can be utilised.

With respect to the UK, a deferred tax asset has not been recognised on capital losses of £1.5m

(2023: £0.3m).

20. Inventories

Inventories accounting policy – Note 1(s)

	2024	2023
	£m	£m
Raw materials and consumables	21.4	21.8
Work in progress	7.6	6.2
Finished goods	0.4	1.5
At 30 June	29.4	29.5

Inventories of £110.4m (2023: £90.8m) were recognised as an expense during the year and

included in cost of sales. During the year £0.4m (2023: £1.6m) of inventory was written down and

also included in cost of sales.

193

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Notes to the consolidated financial statements continued

Working capital continued

21. Trade, contract and other receivables

Trade, contract and other receivables mainly consist of amounts owed to us by customers and

amounts that we pay to our suppliers in advance. The note also includes contract assets, which

represent an asset for accrued revenue in respect of goods or services delivered to customers for

which a trade receivable does not yet exist.

Trade, contract and other receivables accounting policy – Note 1(t)

Critical judgements – Impairment of financial assets – Note 1(d)

		2024	2023
	Note	£m	£m
Trade receivables		54.7	74.4
Less: provision for impairment of trade receivables		(2.4)	(2.5)
Trade receivables – net		52.3	71.9
Contract assets:
– Amounts recoverable on contracts (AROC)		65.5	55.3
– Accrued revenue		0.8	1.1
Prepayments		10.8	11.4
Lease receivable	17	1.8	1.9
Other receivables		18.0	14.3
At 30 June		149.2	155.9
Current		146.7	153.5
Non-current		2.5	2.4
At 30 June		149.2	155.9

Contract assets arise from the recognition of revenue as and when performance obligations are

satisfied, initially recognised as accrued revenue or amounts recoverable on contracts (AROC).

The carrying amount of AROC at year end has increased from £55.3m to £65.5m due to a change

in the mix of projects of different sizes and at different stages of completion. AROC is presented

net of a provision for impairment of contract assets of £nil (2023: £0.3m). Amounts are transferred

to trade receivables when the right to consideration becomes unconditional. Typically this is

once specified billing milestones are approved by the customer. Payment terms typically range

from immediate payment to 90 days after the invoice date, and standard payment terms are 30

days after the invoice date. The revenue recognised in the year from wholly or partially satisfied

distinct performance obligations in previous years is £23.0m (2023: £25.9m). This is primarily due

to the impact of variation orders and cancellations for changes in scope and transaction price on

contracts. Information about the Group’s exposure of its trade receivables to credit and market risk

is included in Notes 26(d) and 26(e).

Included within prepayments are £1.0m (2023: £1.2m) of assets recognised from the costs to

obtain or fulfil an expected contract with a customer. No revenue has been recognised on these

costs. An asset has been recognised because the costs directly related to an anticipated contract,

they will be used in satisfying performance obligations in the future and the costs are expected to

be recoverable.

The £2.5m (2023: £2.4m) non-current asset relates to other receivables. £1.6m (2023: £1.7m) of

this relates to the IFRS 16 lease receivable as disclosed in Note 17. £0.9m (2023: £0.7m) relates to

other receivables.

The movement on the provision for impairment of trade receivables is as follows. The impairment

charge is shown net of the release of impairment charge for items subsequently paid.

		2024	2023
Provision for impairment of trade receivables	Note	£m	£m
At 1 July		2.5	3.3
Net impairment to the income statement	3	0.2	1.8
Amounts utilised		(0.3)	(2.5)
Exchange rate adjustments		—	(0.1)
At 30 June		2.4	2.5

194

Ricardo plc | Annual Report and Accounts 2023/24

Notes to the consolidated financial statements continued

Working capital continued

	2024	2023
	£m	£m
Trade payables	25.9	28.1
Accruals	33.3	28.4
Contract liabilities:
– Payments received in advance on contracts (POA)	33.1	34.7
– Deferred revenue	3.8	4.0
Tax and social security payable	8.4	8.8
Other payables	4.2	5.8
At 30 June	108.7	109.8
Current	107.5	105.0
Non-current	1.2	4.8
At 30 June	108.7	109.8

Revenue recognised in the year from contract liabilities at the beginning of the year was £24.8m

(2023: £24.7m). Contract liabilities primarily relate to the Group’s obligation to perform services,

which are paid by customers in advance of those services being provided. Contract liabilities have

increased due to changes in the mix of contracts containing upfront payment terms.

The Group operates a virtual payment solutions agreement. Under the arrangement, the bank

agrees to pay amounts to a participating supplier in respect of invoices owed by the Group and

receives settlement from the Group at a later date. The primary purpose of this arrangement is to

facilitate efficient payment processing.

The Group discloses the liabilities due under this arrangement within trade payables because the

nature and function of the financial liability remain the same as those of other trade payables by

disclosed disaggregated amounts in the notes. All payables under this arrangement are classified

as current at 30 June 2024 and 2023.

The payments to the bank are included with operating cash flows because they continue to be

part of the normal operating cycle of the Group and their principal nature remains operating, being

payments for the purchase of goods and services. At 30 June 2024 the balance on the virtual

payment card was £4.7m.

21. Trade, contract and other receivables continued

Order book

Order book comprises the value of all unworked purchase orders and contracts received from

customers at the reporting date and provides an indication of the amount of revenue that has been

secured and will be recognised in future accounting periods. Order book represents the transaction

price allocated to wholly and partially unsatisfied distinct performance obligations, as defined by

IFRS 15 Revenue from Contracts with Customers. The periods from 30 June in which the distinct

performance obligations are expected to be satisfied, excluding the order book of the discontinued

operation, are as follows:

	2024	2023
	£m	£m
Less than 6 months	168.2	165.5
6 to 12 months	90.6	83.9
Over 12 months	137.7	145.9
At 30 June	396.5	395.3

22. Trade, contract and other payables

Trade, contract and other payables mainly consist of amounts owed to suppliers that have been

invoiced or are accrued and contract liabilities relating to consideration received from customers

in advance. They also include taxes and social security amounts due in relation to the Group’s role

as an employer.

Trade, contract and other payables accounting policy – Note 1(t)

195

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Notes to the consolidated financial statements continued

Net debt and financial risk management

(b) Net debt

	2024	2023
Analysis of net debt	£m	£m
Current assets – cash and cash equivalents
Cash and cash equivalents	48.6	49.8
Restricted cash	(1.3)	—
Net cash and cash equivalents	47.3	49.8
Current liabilities – borrowings
Bank overdrafts repayable on demand	(4.3)	(12.6)
Hire purchase liabilities maturing within one year	—	(0.1)
Total current borrowings	(4.3)	(12.7)
Non-current liabilities – borrowings
Bank loans maturing after one year	(102.6)	(99.2)
Total non-current borrowings	(102.6)	(99.2)
At 30 June	(59.6)	(62.1)
Net cash and cash equivalents at 30 June	47.3	49.8
Total borrowings at 30 June	(106.9)	(111.9)
At 30 June	(59.6)	(62.1)

	2024	2023
Movement in net debt	£m	£m
At 1 July	(62.1)	(35.4)
Net increase/(decrease) in cash and cash equivalents and bank
overdrafts	7.1	(2.2)
Movement in restricted cash	(1.3)	—
Repayments of hire purchase	0.1	0.2
Proceeds from bank loans	(83.0)	(128.0)
Repayments of bank loans	80.0	103.0
Amortisation of bank loan fees	(0.4)	0.3
At 30 June	(59.6)	(62.1)

At the year end, the Group had current hire-purchase liabilities of £nil (2023: £0.1m) and

non-current hire-purchase liabilities of £nil. This hire-purchase agreement had an implicit rate

of interest of 2.4%.

23. Net debt and borrowings

The objectives when managing capital are to safeguard the ability to continue as a going concern

in order to provide returns for shareholders, benefits for other stakeholders and to maintain an

optimal capital structure to reduce the cost of capital. Capital is monitored on the basis of the

gearing ratio, which is calculated as net debt divided by total capital.

The majority of the Group’s cash is held in bank deposits. The Group’s sources of borrowing for

funding and liquidity purposes come from the Group’s £150.0m multi-currency revolving credit

facility and through short-term overdraft facilities.

Accounting policy – Note 1(u)

The disclosures in this note include certain alternative performance measures (APMs). For more

information on the APMs used by the Group, including definitions, please refer to Note 2.

(a) Gearing ratio

	2024	2023
	£m	£m
Net debt	59.6	62.1
Total equity	165.2	176.6
Total capital	224.8	238.7
At 30 June	26.5%	26.0%

196

Ricardo plc | Annual Report and Accounts 2023/24

Notes to the consolidated financial statements continued

Net debt and financial risk management continued

	Borrowings	Lease liabilities
	Note 23	Note 17	Total
	£m	£m	£m
Other changes
Liability related:
– Arising on acquisition	—	0.5	0.5
– New leases	—	3.8	3.8
– Remeasurements	—	2.9	2.9
– Interest expense	6.1	0.9	7.0
– Interest paid	(6.4)	(0.9)	(7.3)
Total other changes	(0.3)	7.2	6.9
At 30 June 2023	111.9	25.1	137.0
At 1 July 2023	111.9	25.1	137.0
Changes from financing cash flows
(see cash flow statement)
– Proceeds from loans and borrowings	83.0	—	83.0
– Repayment of hire purchase liability	(0.1)	—	(0.1)
– Repayment of bank loan	(80.0)	—	(80.0)
– Movement in bank overdraft	(8.3)	—	(8.3)
– Repayment of lease liabilities	—	(5.4)	(5.4)
Total changes from financing cash flows	(5.4)	(5.4)	(10.8)
Effect of changes in foreign exchange rates	—	(0.1)	(0.1)
Other changes
Liability related:
– New leases	—	4.1	4.1
– Remeasurements	—	0.1	0.1
– Interest expense	8.3	1.0	9.3
– Interest paid	(7.9)	(1.0)	(8.9)
Total other changes	0.4	4.2	4.6
At 30 June 2024	106.9	23.8	130.7

23. Net debt and borrowings continued

(b) Net debt continued

At the year end, the Group held total banking facilities of £166.1m (2023: £166.1m), which

included committed facilities of £150.0m (2023: £150.0m). The committed facility consists of a

£150.0m multi-currency revolving credit facility (RCF) which provides the Group with committed

funding through to July 2026. In addition, the Group has uncommitted facilities including

overdrafts of £16.1m (2023: £16.1m), which mature throughout this and the next financial year

and are renewable annually.

Non-current bank loans comprise committed facilities of £102.6m (2023: £99.2m), net of direct

issue costs, which were drawn primarily to fund acquisitions and general corporate purposes.

These are denominated in Pounds Sterling and have variable rates of interest dependent upon the

Group’s adjusted leverage, which range from 1.65% to 2.45% above SONIA (2023: 1.65% to 2.45%

above SONIA).

Adjusted leverage is defined in the Group’s banking documents as being the ratio of total net

debt to adjusted EBITDA. Adjusted EBITDA is further defined as being earnings before interest,

tax, depreciation, impairment and amortisation, excluding the impact of IFRS 16, adjusted for

any one-off, non-recurring, exceptional costs and acquisitions or disposals during the relevant

period. At the reporting date, the Group has an adjusted leverage of 1.25x, which attracts a rate of

interest of SONIA plus 1.85% (2023: SONIA plus 1.85%). The Group has banking facilities for its

UK companies which together have a net overdraft limit, but the balances are presented on a gross

basis in the financial statements.

24. Reconciliation of movements of liabilities to cash flows arising from

financing activities

	Borrowings	Lease liabilities
	Note 23	Note 17	Total
	£m	£m	£m
At 1 July 2022	85.9	23.3	109.2
Changes from financing cash flows
(see cash flow statement)
– Proceeds from loans and borrowings	128.0	—	128.0
– Repayment of hire purchase liability	(0.2)	—	(0.2)
– Repayment of bank loan	(103.0)	—	(103.0)
– Movement in bank overdraft	1.5	—	1.5
– Repayment of lease liabilities	—	(5.1)	(5.1)
Total changes from financing cash flows	26.3	(5.1)	21.2
Effect of changes in foreign exchange rates	—	(0.3)	(0.3)

197

Ricardo plc | Annual Report and Accounts 2023/24

Notes to the consolidated financial statements continued

Net debt and financial risk management continued

Contingent loan commitments: In the ordinary course of business, the Group has £12.6m (2023:

£13.4m) of possible obligations for bonds and guarantees placed with the Group’s banking and

other financial institutions and primarily relating to performance under contracts with customers.

These contingent loan commitments are accounted for under IFRS9, for which no liability has bee n

recognised as they do not have a material impact on the accounts.

A net derivative financial loss of £1.1m (2023: gain £5.6m) was recognised in the year related to

foreign exchange contracts (see also Note 26(g)):

	2024	2023
	£m	£m
Foreign exchange swap contract assets:
– Fair value losses	(2.4)	(0.7 )
– Fair value gains	1.0	7.1
Foreign exchange swap contract liabilities:
– Fair value losses	(0.4)	(1.0 )
– Fair value gains	0.7	0.2
	(1.1)	5.6

26. Financial risk management

The financial risks faced by the Group comprise capital risk, liquidity risk, credit risk and market

risk (comprising interest rate risk and foreign exchange risk). The board reviews and agrees

policies for managing each of these risks. The Group has no material exposure to commodity

price fluctuations and this situation is not expected to change in the foreseeable future.

The financial instruments of the Group comprise floating rate borrowings, the main purpose

of which is to raise finance for the Group’s operations, and foreign exchange contracts used to

manage currency risks.

(a) Objectives, policies and strategies

The objectives when managing capital are to safeguard the ability to continue as a going concern

in order to provide returns for shareholders, benefits for other stakeholders and to maintain an

optimal capital structure to reduce the cost of capital.

(b) Capital risk

Capital is monitored on the basis of the gearing ratio. This ratio is calculated as net debt divided

by total capital. Net debt is calculated as borrowings less cash and cash equivalents. Total capital

is calculated as equity, plus net debt. Please see Note 23.

25. Fair value of financial assets and liabilities

Fair value of financial assets and liabilities accounting policy – Note 1(w)

There are no differences between the fair value of financial assets and liabilities and their carrying

value. The Group holds the following financial instruments:

		2024	2023
	Note	£m	£m
Financial assets
Amortised cost:
– Trade receivables – net	21	52.3	71.9
– Lease receivable	21	1.8	1.9
– Other receivables	21	18.0	14.3
– Cash and cash equivalents	23	48.6	49.8
Fair value through profit or loss (FVTPL)
– Fair value of derivatives		0.8	2.3
		121.5	140.2
Financial liabilities
Amortised cost:
– Borrowings	23	106.9	111.9
– Lease payables	17	23.8	25.1
– Trade payables	22	25.9	28.1
– Other payables	22	4.2	5.8
Fair value through profit or loss (FVTPL)
– Fair value of derivatives		0.5	1.0
At 30 June		161.3	171.9

Financial guarantee contracts: At 30 June 2024, the Group has the following financial guarantee

contracts in place:

• £6.2m in relation projects in the Middle East (2023: £nil)

• A guarantee provided to the Ricardo Group Pension Fund (RGPF) for an amount that shall not

exceed the employers’ liability were a debt to arise under Section 75 of the Pensions Act 1995.

The guarantee will terminate on 5 April 2026. The outcome of this matter is not expected to give

rise to any material cost to the Group on the basis that the Group continues as a going concern

These financial guarantees are accounted for under IFRS9, for which no liability has been

recognised as they do not have a material impact on the accounts.

198

Ricardo plc | Annual Report and Accounts 2023/24

Notes to the consolidated financial statements continued

Net debt and financial risk management continued

	2024	2023
Maturity of borrowings	£m	£m
Overdrafts repayable on demand	4.3	12.6
Within one year:
– Hire purchase liabilities	—	0.1
Between one and five years:
– Bank loans	120.0	122.3
– Finance portion of liability	(17.4)	(23.1)
At 30 June	106.9	111.9

The borrowings maturing between one and five years relate to the Group's revolving credit

facility (RCF), the balance of which fluctuates as it is used to fund the Group's working capital

requirements. The RCF matures in August 2026.

The finance portion of the liability has been calculated based on the interest rate at the year-end

of SONIA plus 1.85% (2023: SONIA plus 1.85%) and assumes no change in either the interest rate

or the loan balance through to maturity.

	2024	2023
Maturity of undiscounted lease liability	£m	£m
Within one year	6.1	5.8
Between one and five years	14.3	15.3
After five years	7.0	7.4
Finance portion of net liability	(3.6)	(3.4)
At 30 June	23.8	25.1

26. Financial risk management continued

The Group’s policy towards managing its liquidity risks is to maintain a mix of short and

medium-term borrowing facilities. Short-term flexibility is provided by bank overdraft facilities.

In addition, the Group maintains medium-term borrowing facilities in order to provide the

appropriate level of finance to support current and future working capital requirements.

As the cash profile on large contracts can vary significantly, the Group seeks committed

facilities that provide sufficient headroom against forecast requirements to mitigate its exposure.

The tables below analyse the Group’s external non-derivative financial liabilities into relevant

maturity groupings, based on the remaining period at the reporting date to the contractual

maturity date. All amounts disclosed in the tables below are the contractual undiscounted

cash flows.

Not included within the tables below are the following financial liabilities:

• Derivative financial liabilities, as their contractual maturities are not considered to be essential

for an understanding of the timing of the cash flows

• Other payables, as the phasing of these liabilities is not contractually defined

	2024	2023
Maturity of trade payables	£m	£m
Within one month	21.9	25.1
After one month and within three months	4.0	3.0
At 30 June	25.9	28.1

199

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Notes to the consolidated financial statements continued

Net debt and financial risk management continued

The Group’s customers include the world’s major transportation original equipment

manufacturers, tier 1 suppliers, energy companies and government agencies. Revenue by

customer location is disclosed within Note 5 and trade receivables are derived from these

customer groups and locations.

The Group has limited experience of bad debts with any of these customers. Of the total net

trade receivables balance as at 30 June 2024, £34.0m was received in July 2024 (2023: £25.3m).

Trade receivables and contract assets are provided in full when there is no reasonable expectation

of recovery. There were no such balances in the current or prior year.

An analysis of net trade receivables by currency is as follows:

	2024	2023
Analysis of net trade receivables by currency	£m	£m
Pounds Sterling	26.9	33.7
US Dollars	8.2	17.2
Chinese Renminbi	2.1	3.1
Euros	4.7	6.7
Australian Dollars	1.9	1.8
Other currencies	8.5	9.4
At 30 June	52.3	71.9

The Group is exposed to bank credit risk in respect of money held on deposit and certain derivative

transactions entered into with banks. Exposure to this form of risk is mitigated as material

transactions are only undertaken with bank counterparties that have high credit ratings assigned

by international credit-rating agencies. The Group further limits risk in this area by setting

an overall credit limit for all transactions with each bank counterparty in accordance with the

institution’s credit standing.

	2024	2023
Maximum exposure to counterparty risk	£m	£m
Total cash and cash equivalents	48.6	49.8
Derivative financial assets	0.8	2.3
At 30 June	49.4	52.1

26. Financial risk management continued

(d) Credit risk

The Group is exposed to credit risk in respect of its trade receivables, which are stated net of

provision for impairment (see Note 1(t)). Exposure to this risk is mitigated by careful evaluation

of the granting of credit and the use of credit insurance where practicable. Concentrations of

credit risk with respect to trade receivables are limited due to the Group’s customer base being

large and unrelated.

	Weighted –	Gross carrying	Impairment loss
	average loss rate	amount	allowance
Expected credit loss assessment	%	£m	£m
At 30 June 2023
Not overdue not impaired	0.25%	56.7	(0.1)
Overdue but not impaired:
Less than 30 days overdue	2.00%	10.3	(0.2)
31–60 days overdue	5.00%	1.9	(0.1)
61–90 days overdue	10.00%	1.3	(0.1)
91–120 days overdue	20.00%	0.7	(0.1)
121–180 days overdue	25.00%	1.4	(0.6)
181–365 days overdue	50.00%	1.1	(0.5)
Over 365 days overdue	75.00%	1.0	(0.8)
		74.4	(2.5)
At 30 June 2024
Not overdue not impaired	0.25%	45.5	(0.1)
Overdue but not impaired:		—	—
Less than 30 days overdue	2.00%	4.7	(0.2)
31–60 days overdue	5.00%	0.3	—
61–90 days overdue	10.00%	1.1	(0.2)
91–120 days overdue	20.00%	0.7	(0.2)
121–180 days overdue	25.00%	0.3	(0.1)
181–365 days overdue	50.00%	0.3	(0.2)
Over 365 days overdue	75.00%	1.8	(1.4)
		54.7	(2.4)

200

Ricardo plc | Annual Report and Accounts 2023/24

Notes to the consolidated financial statements continued

Net debt and financial risk management continued

Foreign exchange risk

The Group faces currency exposures on trading transactions undertaken by its subsidiaries in

foreign currencies and balances arising therefrom, and on the translation of profits earned in, and

net assets of, overseas subsidiaries primarily in the US, Europe, China and Australia. The carrying

amounts of the Group’s foreign currency denominated monetary assets and liabilities are:

	Assets		Liabilities
Foreign currency denominated	2024	2023	2024	2023
assets and liabilities	£m	£m	£m	£m
US Dollar	15.1	29.9	11.5	13.5
Euro	18.1	16.7	12.8	10.8
Chinese Renminbi	4.7	8.7	1.0	1.3
Australian Dollar	5.6	6.7	2.4	5.5

The following foreign exchange differences were (charged)/credited to the income statement for

the Group:

Foreign exchange gains/(losses) on			2024	2023
financial assets and liabilities		Note	£m	£m
Derivative contracts measured at FVTPL
•	Foreign exchange contract assets	25	(1.4)	6.4
•	Foreign exchange contract liabilities	25	0.3	(0.8)
Other financial assets			1.7	(6.3)
Other financial liabilities			(0.2)	0.8
			0.4	0.1

The Group does not undertake any speculative currency transactions.

The Group use derivative financial instruments primarily to manage currency risk on its US Dollar,

Euro, Chinese Renminbi, Japanese Yen, Hong Kong Dollar, Australian Dollar, Singapore Dollar

and Canadian Dollar denominated receivables from its subsidiaries, in addition to managing

transactional exposures relating to customer contracts denominated in foreign currencies.

26. Financial risk management continued

(d) Credit risk continued

	2024	2023
Analysis of total cash and cash equivalents by geographic location	£m	£m
United Kingdom	18.8	15.2
Asia	10.0	11.4
Europe	7.1	8.3
Australia	3.5	4.4
North America	3.0	3.9
Rest of the World	6.2	6.6
At 30 June	48.6	49.8

(e) Market risk

Interest rate risk

The Group’s borrowings and cash balances held at floating interest rates are exposed to cash

flow interest rate risk. The exposure to interest rate movements is not currently hedged as

the variable rates of interest are largely dependent upon the adjusted leverage of the Group.

The effect of any foreseen changes in the underlying reference interest rate remain unhedged,

although the policy is reviewed on an ongoing basis. The Group’s lease assets and liabilities are

held at fixed interest rates.

	2024	2023
Financial assets and liabilities by interest type	£m	£m
Financial assets
Fixed rate	1.8	1.9
Floating rate	30.0	26.8
Interest-free	89.7	111.5
At 30 June	121.5	140.2
Financial liabilities
Fixed rate	23.8	25.2
Floating rate	107.4	112.5
Interest-free	30.1	34.2
At 30 June	161.3	171.9

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Notes to the consolidated financial statements continued

Net debt and financial risk management continued

(g) Cash flow derivatives

The Group employs derivative financial instruments, including foreign exchange contracts, to

mitigate currency exposures on trading transactions that could affect the income statement.

These are not hedge accounted.

Cash flows expected to occur from derivative financial instruments used by the Group are set

out below.

	2024	2023
Affecting the income statement	£m	£m
Within three months	3.3	22.4
After three months and within twelve months	8.5	12.8
After twelve months	—	16.5
	11.8	51.7

26. Financial risk management continued

(f) Sensitivity analysis of financial instruments to market risk

Exchange rate sensitivity

The Group has financial assets and liabilities denominated in foreign currencies, principally in US

Dollars, Euros, Chinese Renminbi and Australian Dollars, which are not in the functional currency

of the entity that holds them. A 20% change in the value of the US Dollar, Euro, Chinese Renminbi

or Australian Dollar would have an immaterial impact on the value of these financial instruments

at the year end.

Interest rate sensitivity

A reasonably possible change of 2 percentage points in interest rates at the reporting date would

have increased/(decreased) profit or loss by the amounts shown below, based on the value of the

Group’s floating rate financial instruments at the year end. A 2 percentage points sensitivity is

deemed to be appropriate as interest charges on the Group’s loans are based on SONIA, and are

therefore considered reasonably possible to be subjected to fluctuations in interest rates in the

foreseeable future.

	2024	2023
	Decrease	Decrease
	in profit	in profit
	before tax	before tax
Impact of interest rate movements	£m	£m
2pp increase in interest rates	(0.9)	(0.9)

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Notes to the consolidated financial statements continued

Equity

29. Retained earnings

		2024	2023
	Note	£m	£m
At 1 July		106.6	120.5
Profit/(loss) for the period		0.7	(5.4)
Remeasurements of the defined benefit
pension scheme	32	(6.0)	(5.0)
Deferred tax on remeasurements of the defined benefit pension scheme	19	1.4	1.2
Ordinary share dividends	8	(7.7)	(6.7)
Purchases of own shares to settle awards		(0.7)	(0.1)
Tax credit relating to share option schemes		(0.4)	0.7
Equity-settled transactions	33	2.2	1.4
At 30 June		96.1	106.6

30. Non-controlling interests

In the opinion of the Directors, the comprehensive income for the year and equity at the

reporting date which is attributable to non-controlling interests is not considered to be material.

Non-controlling interests are listed in Note 35.

27. Share capital and share premium

Share capital –	2024	2023	2024	2023
ordinary shares of 25p each	Number	Number	£m	£m
Allotted, called up and fully paid
At 1 July	62,218,280	62,218,280	15.6	15.6
At 30 June	62,218,280	62,218,280	15.6	15.6

No dividends were paid for interim and final dividends in respect of shares held by an employee

benefit trust (EBT) in relation to the LTIP. There were 5,300 such shares at 30 June 2024 (2023:

2,816 shares).

	2024	2023
Share premium	£m	£m
At 1 July and 30 June	16.8	16.8

28. Other reserves

The merger reserve represents the amount by which the fair value of the shares issued as

consideration for historic acquisitions exceeded their nominal value, offset by the goodwill on

these acquisitions, and the premium on a placing share issue, net of directly attributable costs.

The translation reserve comprises cumulative foreign exchange differences arising from the

translation of financial statements of foreign operations on consolidation.

	Merger	Translation	Cost of hedging
	reserve	reserve	reserve	Total
	£m	£m	£m	£m
At 1 July 2022	24.5	20.0	—	44.5
Exchange rate adjustments	—	(6.4)	—	(6.4)
Reclassification on disposal of foreign operation	—	(0.9)	—	(0.9)
At 30 June 2023	24.5	12.7	—	37.2
At 1 July 2023	24.5	12.7	—	37.2
Exchange rate adjustments	—	(0.9)	—	(0.9)
Movement in fair value of cash
flow hedge	—	—	(0.1)	(0.1)
At 30 June 2024	24.5	11.8	(0.1)	36.2

The movement in the cost of hedging reserve reflects the change in fair value of the Group’s

interest rate collar. In August 2023, the Group entered into an arrangement to hedge £50m for a

duration of two years by way of a combined Interest Rate Cap of 6.250% and Interest Rate Floor of

4.415%.

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Notes to the consolidated financial statements continued

Employees

32. Retirement benefits

Retirement benefits accounting policy – Note 1(x)

Key sources of estimation uncertainty on defined benefit obligations – Note 1(d)

The Group operates a defined benefit pension scheme, the Ricardo Group Pension Fund (RGPF),

which closed to future accrual on 28 February 2010. Responsibility for the governance of the RGPF

– including investment decisions and contribution schedules – lies with the Board of Trustees,

with the assets held in the fund governed by local regulations and practice in the United Kingdom.

The Board of Trustees must be comprised of representatives of the Group and RGPF participants

in accordance with the RGPF's regulations. The last approved triennial valuation of the RGPF

was completed with an effective date of 5 April 2023 and was finalised on 21 June 2024. At the

effective date, the assets of the RGPF had a market value of £113.5m (2020: £135.8m) and were

sufficient to cover 102% (2020: 84%) of the benefit that had accrued to members when assessed

on the Trustees' prudent funding basis. The actuarial valuation found the fund to be in surplus as

at 5 April 2023, and, as such, the employers shall pay no contributions into the fund. The financial

position of the fund and the level of employer contributions to be paid will be reviewed at the next

actuarial valuation, which is expected to be carried out at 5 April 2026. In the intervening years

the Trustees will obtain annual actuarial reports on the developments affecting the fund’s assets

and technical provisions. The next such report, which will have an effective date of 5 April 2024,

must be completed by 5 April 2025. The IAS 19 Actuarial Valuation Report as at 30 June 2024

was completed on 15 July 2024. The pension costs relating to the RGPF were assessed using the

projected unit credit method, in accordance with the advice of Mercer, qualified actuaries.

From June 2016, the Group and the Trustees decided to introduce a ‘retirement flexibility’ option to

the RGPF, which allows members to transfer out their benefit at retirement. The Group continues

to make no allowance within the defined benefit obligation as at 30 June 2024 for members who

may elect to transfer out their benefits at retirement. This assumption will be reviewed on an

ongoing basis and may change in future as experience emerges as to the level of members who

elect to transfer out their benefits at retirement.

31. Employee numbers and costs

Employee numbers and costs, including the discontinued operation, are as follows:

		2024	2023
Staff costs	Note	£m	£m
Wages and salaries (including redundancy
and termination costs)		182.9	173.4
Social security costs		17.2	19.2
Pensions costs – defined contribution schemes		12.4	12.9
Share-based payments	33	2.3	1.3
Total staff costs		214.8	206.8

Average monthly number of employees (including Executive Directors)	2024	2023
Energy and Environment	1,003	862
Rail	536	531
Automotive and Industrial	743	902
Defense	233	206
Performance Products	356	351
Plc and board	62	59
Total average number of employees	2,933	2,911

	2024	2023
Key management compensation	£m	£m
Short-term employee benefits	5.2	4.6
Share-based payments	1.2	1.0
Post-employment benefits	0.2	0.3
Termination benefits	0.2	0.6
	6.8	6.5
Key management personnel services provided by a separate management entity	—	0.1
Total key management compensation	6.8	6.6

Key management personnel are the board of Directors, together with the Managing Directors who

have the authority and responsibility for planning, directing and controlling the Group’s activities

and resources within the market sectors in which the Group operates. The remuneration received

by all Executive and Non-Executive Directors during the year is disclosed in the single total figure

of remuneration table in the Directors’ remuneration report on page 107.

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Notes to the consolidated financial statements continued

Employees continued

32. Retirement benefits continued

In June 2023, the High Court handed down a decision in the case of Virgin Media Limited v NTL Pension Trustees II Limited and others relating to the validity of certain historical pension changes due to

the lack of actuarial confirmation required by law. In July 2024, the Court of Appeal dismissed the appeal brought by Virgin Media Limited against aspects of the June 2023 decision. This case may have

implications for other UK defined benefit plans. The Company and pension trustees are considering the implications of the case for the RGPF. The defined benefit obligation has been calculated on the

basis of the pension benefits currently being administered, and at this stage we do not consider it necessary to make any adjustments as a result of the Virgin Media case. We will continue to monitor

this position.

The post-retirement mortality assumptions for the current year have been reviewed and use mortality tables known as the SAPS ‘Series 3’ tables (2023: SAPS ‘Series 3’), with an 86% (2023: 85%)

multiplier for males and an 85% (2023: 84%) multiplier for females, both applicable to the ‘standard’ version of the table. The future improvements component has been updated to be in line with the

‘Core’ version of the Continuous Mortality Investigation (CMI) 2023 projection model with an ‘S-kappa’ smoothing parameter of 7, an initial addition to mortality improvements of 0.5%, a 15% weighting

on 2023 and 2022 data and no weighting on 2021 or 2020 data (2023: CMI 2022 with ‘S-kappa’ smoothing parameter of 7, an initial addition to mortality improvements of 0.5%, a 25% weighting on

2022 data and no weighting on 2021 or 2020 data). The Company has elected to refine the approach used to set the discount rate for UK plans under IAS 19 in order to expand the bond dataset used

to make better use of available data and to improve the stability of the discount rate curve over time. The impact of this change is to reduce the discount rate at 30 June 2024 by approximately 0.1% per

annum, resulting in an increase in the defined benefit obligation at 30 June 2024 due to this change of c.£1.1m.

The latest available CMI model will be used at each year end to provide the most accurate representation of the defined benefit obligation. The use of a 1.25% long-term trend is consistent with the prior

year. The ‘Core’ version of the CMI 2023 projection model has been used. Under these principal mortality assumptions, the expected future life expectancy from age 65 is as follows:

	2024		2023
Age	Males	Females	Males	Females
65 now	23.0	25.6	23.1	25.5
65 in 20 years	24.3	26.9	24.3	26.9

	2024	2023
Other principal assumptions	% p.a.	% p.a.
Discount rate	5.15%	5.40%
RPI inflation rate	3.25%	3.30%

205

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Notes to the consolidated financial statements continued

Employees continued

32. Retirement benefits continued

	2024	2023
Other assumptions	%	%
Rate of increase in pensions in payment accrued p.a.
– Pre 1 July 2022 (pensioner/deferred for current year)	3.70%/3.65%	3.75%/3.65%
– Post 1 July 2022 (pensioner/deferred for current year)	3.10%/2.80%	3.10%/2.85%
– Post 88 GMP (pensioner/deferred for current year)	2.20%/2.05%	2.10%/2.05%
Rate of increase in deferred pension revaluation p.a.	2.75%	2.70%
Percentage of pension to be commuted for lump sum at retirement	15.00%	15.00%

		2024			2023
	Quoted	Unquoted	Total	Quoted	Unquoted	Total
Scheme assets	£m	£m	£m	£m	£m	£m
Equities	9.6	—	9.6	14.3	—	14.3
Debt	83.5	—	83.5	73.0	—	73.0
Cash and other	0.5	0.3	0.8	0.9	0.3	1.2
Property fund	5.4	—	5.4	7.8	—	7.8
Investment funds	6.1	—	6.1	8.3	—	8.3
At 30 June	105.1	0.3	105.4	104.3	0.3	104.6

The pension scheme has not invested in any of the Company’s own financial instruments nor in properties or other assets used by the Company. An annuity policy represents the value of an annuity

purchased in the name of the Trustee, which provides the pension benefits for one member. The annuity policy has been valued by a qualified actuary based on the related obligations. The portfolio was

able to maintain the same long-term objective despite the market moves and collateral calls. Strategic positioning was adjusted during the year as a greater strategic allocation to LDI funds was required

to maintain the desired level hedging.

206

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Notes to the consolidated financial statements continued

Employees continued

32. Retirement benefits continued

Movements in the fair value of scheme assets and present value of the defined benefit surplus/(obligation) were as follows:

		2024			2023
	Fair value	Present value		Fair value	Present value
	of plan assets	of obligation	Net total	of plan assets	of obligation	Net total
Scheme movements	£m	£m	£m	£m	£m	£m
At 1 July	104.6	(92.0)	12.6	127.1	(111.9)	15.2
Finance income/(expense)	5.4	(4.8)	0.6	4.8	(4.2)	0.6
Total credit/(charge) to the income statement	5.4	(4.8)	0.6	4.8	(4.2)	0.6
Return on plan assets excluding finance income	0.5	—	0.5	(22.6)	—	(22.6)
Effect of change in demographic assumptions	—	0.6	0.6	—	1.7	1.7
Effect of change in financial assumptions	—	(2.7)	(2.7)	—	18.9	18.9
Effect of experience adjustments	—	(4.4)	(4.4)	—	(3.0)	(3.0)
Total remeasurements in other comprehensive income	0.5	(6.5)	(6.0)	(22.6)	17.6	(5.0)
Contributions from sponsoring companies	0.8	—	0.8	1.8	—	1.8
Benefit payments from plan assets	(5.9)	5.9	—	(6.5)	6.5	—
Total cash flows	(5.1)	5.9	0.8	(4.7)	6.5	1.8
Total movements	0.8	(5.4)	(4.6)	(22.5)	19.9	(2.6)
At 30 June	105.4	(97.4)	8.0	104.6	(92.0)	12.6

There are no restrictions on the realisability of the defined benefit surplus.

		2024
		Impact on	2023
	Change in	present value	Impact on present
The sensitivity of the defined benefit scheme to changes in principal assumptions:	assumption	of obligation	value of obligation ( (1) restated)
Discount rate	-1.00%	Increase by £12.1m	(1) Increase by £11.6m
Inflation rate	+0.25%	Increase by £1.1m	Increase by £1.7m
Post-retirement mortality assumptions	-1 year	Increase by £3.1m	Increase by £2.8m

At 30 June 2024, new census data as at the census date has been incorporated in the actuarial valuation. The impact on the benefit obligation from the change in assumptions and experience over the

year to 30 June 2024 is a £6.6m loss caused by a change in discount rate (£2.7m loss), inflation (£0.1m loss), mortality (£0.6m gain), actual pension increases (£0.3m gain) and impact of new census

data (£4.7m loss). The above sensitivity analysis is based on a change in an assumption while holding all other assumptions constant. In practice this is unlikely to occur and changes in some of the

assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions, the same method has been applied as when calculating the pension

liability recognised within non-current liabilities.

(1)

The methods and types of assumptions used in preparing the sensitivity analysis did not change when compared to the previous year, except for the

change in assumption when measuring the discount rate, which has increased from 0.25% to 1% to reflect changes in market conditions. For the purpose of the post-retirement mortality assumption

sensitivity shown, members are assumed to have future life expectancy as if they are one year younger than their current age. Exposures to significant risks from the RGPF are as follows:

207

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Notes to the consolidated financial statements continued

Employees continued

32. Retirement benefits continued

Risks	Impact
Asset volatility	The RGPF liabilities are calculated using a discount rate set with reference to corporate bond yields. If the RGPF assets underperform this yield, the deficit will
	increase. The RGPF holds a significant proportion of equities and a diversified range of growth funds, which are expected to outperform corporate bonds in the long
	term while providing volatility and risk in the short term. The Directors are of the view that due to the long term nature of the RGPF liabilities and the strength of the
	supporting Group, this is an appropriate strategy to manage the RGPF efficiently.
Corporate bond yields	A decrease in corporate bond yields will increase RGPF liabilities, although this will be partially offset by an increase in the value of the RGPF’s bond holdings.
	The scheme’s assets are predominantly invested in government bonds and corporate bonds in order to reduce the sensitivity of the scheme’s funding level to
	changes in fixed interest yields, resulting in the value of scheme’s assets also reducing significantly due to these increases in bond yields.
Inflation	Although there are some caps in place to protect the RGPF against extreme inflation, increases in the level of inflation will lead to higher liabilities.
Post-retirement	The RGPF provides benefits for the life of the members, therefore improvements in post-retirement mortality assumptions will result in an increase in
mortality assumptions	the RGPF’s liabilities.

The weighted average duration of the defined benefit obligation is 12 (2023: 12) years.

	2024	2023
Expected maturity of undiscounted pension benefits	£m	£m
Less than one year	6.3	5.0
Between one and two years	6.5	5.1
Between two and five years	20.6	16.2
Between five and ten years	38.5	30.3

		2024	2023
Amounts charged to the income statement in respect of the defined benefit obligation	Note	£m	£m
Net financing income	9	(0.7)	(0.6)
Total		(0.7)	(0.6)

208

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Notes to the consolidated financial statements continued

Employees continued

33. Share-based payments

Accounting policy – Note 1(y)

The Group operates the following share-based payment schemes: an equity-settled and a

cash-settled Long-Term Incentive Plan (LTIP); a Deferred Share Bonus Plan (DBP) and an

equity-settled all-employee Share Incentive Plan (SIP). The general terms and conditions,

including vesting requirements and performance conditions for the equity-settled LTIP, the DBP

and the equity-settled SIP, are described in the Directors’ remuneration report. The LTIP, DBP

and SIP require shareholder approval for the issue of shares. There were no awards outstanding

in relation to the SIP at the year end.

30% (2023: one-third) of awards granted under the LTIP and DBP Matching Awards are

dependent on a Total Shareholder Return (TSR) performance condition, 60% (2023: two-thirds)

dependent on earning per share (EPS), and 10% (2023: nil) dependent on an environmental,

social and governance (ESG) measure. As relative TSR is defined as a market condition under

IFRS 2 Share-based Payment, this requires the valuation model used to take into account the

anticipated performance outcome. The TSR element of the charge to the income statement has

been calculated using the Monte Carlo model and EPS elements have been calculated using the

share price at grant date. The following assumptions are used for the plan cycles commencing in

these years:

	2024	2023
Weighted average share price at date of award (pence)	453p	443p
Expected volatility	30.0%	52.0%
Expected life (years)	3	3
Risk-free rate	4.1%	4.3%
Dividend yield	0.0%	0.0%
Possibility of ceasing employment before vesting	13.0%	13.0%
Weighted average fair value per LTIP as a percentage
of a share at date award	77.5%	91.4%

Expected volatility was determined by calculating the historical volatility of the Company’s share

price over the three financial years preceding the date of award. The share-based payments

charge of £2.3m (2023: £1.3m) disclosed in Note 31 was all in respect of equity-settled schemes.

Equity-settled Long-Term Incentive Plan

LTIP awards are forfeited if the employee leaves the Group before the awards vest, unless they are

considered ‘good leavers’.

	2024	2023
	Shares	Shares
Outstanding	allocated	allocated (1)
At 1 July	1,835,827	1,699,535
Awarded	1,380,790	961,963
Lapsed	(405,044)	(802,157)
Vested	(95,504)	(23,514)
At 30 June	2,716,069	1,835,827

(1)

(1) Shares allocated excludes dividend roll-up.

The outstanding LTIP awards had a weighted average contractual life of 1.6 years (2023: 1.6

years). The weighted average exercise price during the current year was 465p (2023: 462p). During

the year, the Group purchased shares in order to settle vested awards. In the prior year, the Group

utilised existing shares held.

Cash-settled Long-Term Incentive Plan

The cash-settled LTIP has the same performance conditions as the equity-settled LTIP but the

award is settled in cash rather than by share issue.

	2024	2023
	Shares	Shares
Outstanding	allocated	allocated (1)
At 1 July	96,266	56,950
Awarded	68,898	44,515
Vested	(6,026)	—
Lapsed	(9,731)	(5,199)
At 30 June	149,407	96,266

(1)

(1) Shares allocated excludes dividend roll-up.

The outstanding LTIP awards had a weighted average contractual life of 1.6 years (2023:

1.8 years). The weighted average exercise price during the current year was 465p (2023: nil).

The total expense recognised in the year was £0.1m and the carrying value of the liability

at 30 June 2024 was £0.3m (2023: £0.2m).

209

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Notes to the consolidated financial statements continued

Employees continued/Other

33. Share-based payments continued

Deferred Share Bonus Plan

The Deferred Share Bonus Plan is described in the Directors’ remuneration report.

	2024	2023
	Shares	Shares
Outstanding	allocated	allocated
At 1 July	107,716	60,413
Awarded	38,064	112,101
Forfeited	(673)	(42,823)
Dividend shares awarded in the year	2,828	2,872
Vested	(38,078)	(24,847)
At 30 June	109,857	107,716

(1)

(1) Shares allocated excludes dividend roll-up.

The outstanding DBP awards had a weighted average contractual life of 1.2 years (2023: 1.4

years). The weighted average exercise price during the current year was 459p (2023: 444p). During

the year, the Group purchased shares in order to settle vested awards. During the prior year, the

Group utilised existing shares held to settle vested awards.

34. Contingent liabilities

In July 2013, a guarantee was provided to the Ricardo Group Pension Fund (RGPF) of £2.8m in

respect of certain contingent liabilities that may arise, which have been secured on specific land

and buildings. The outcome of this matter is not expected to give rise to any material cost to the

Group.

The Group is involved in commercial disputes and litigation with some customers, which is in the

normal course of business. Whilst the result of such disputes cannot be predicted with certainty,

the ultimate resolution of these disputes is not expected to have a material effect on the Group’s

financial position or results.

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Notes to the consolidated financial statements continued

Other continued

35. Related undertakings of the Group

UK subsidiaries

Subsidiary or related undertaking	Registered office	Company Number	Principal activities
Ricardo Investments Limited*	Shoreham Technical Centre, Old Shoreham Road,	02251330	Holding Company and Management Services
	Shoreham-by-Sea, West Sussex, BN43 5FG, United Kingdom†
Ricardo EMEA Limited∞	Shoreham Technical Centre, Old Shoreham Road,	09461485	Holding Company and Management Services
	Shoreham-by-Sea, West Sussex, BN43 5FG, United Kingdom†
Ricardo UK Limited	Shoreham Technical Centre, Old Shoreham Road,	02815682	Automotive & Industrial Consulting, Strategic Consulting,
	Shoreham-by-Sea, West Sussex, BN43 5FG, United Kingdom†		Defence Consulting and Performance Products
Ricardo Asia Limited∞	Shoreham Technical Centre, Old Shoreham Road,	03143661	Automotive & Industrial Consulting,
	Shoreham-by-Sea, West Sussex, BN43 5FG, United Kingdom†		Rail Consulting and Business Development
Power Planning Associates Limited∞	Shoreham Technical Centre, Old Shoreham Road,	03419816	Holding Company
	Shoreham-by-Sea, West Sussex, BN43 5FG, United Kingdom†
Ricardo-AEA Limited	Shoreham Technical Centre, Old Shoreham Road,	08229264	Energy & Environmental Consulting
	Shoreham-by-Sea, West Sussex, BN43 5FG, United Kingdom†
Cascade Consulting	Shoreham Technical Centre, Old Shoreham Road,	04176068	Energy & Environmental Consulting
(Environment & Planning) Limited∞	Shoreham-by-Sea, West Sussex, BN43 5FG, United Kingdom†
Ricardo Innovations Limited∞	Shoreham Technical Centre, Old Shoreham Road,	08977105	Energy & Environmental Consulting
	Shoreham-by-Sea, West Sussex, BN43 5FG, United Kingdom†
Ricardo Rail Limited	Shoreham Technical Centre, Old Shoreham Road,	03226319	Rail Consulting
	Shoreham-by-Sea, West Sussex, BN43 5FG, United Kingdom†
Ricardo Certification Limited∞	Shoreham Technical Centre, Old Shoreham Road,	09481761	Independent Assurance
	Shoreham-by-Sea, West Sussex, BN43 5FG, United Kingdom†
Ricardo Software Limited	Shoreham Technical Centre, Old Shoreham Road,	07527490	Dormant
	Shoreham-by-Sea, West Sussex, BN43 5FG, United Kingdom†
Ricardo Strategic Consulting Limited	Shoreham Technical Centre, Old Shoreham Road,	03696451	Dormant
	Shoreham-by-Sea, West Sussex, BN43 5FG, United Kingdom†
Ricardo Consulting Engineers Limited∞	Shoreham Technical Centre, Old Shoreham Road,	05891521	Automotive & Industrial Consulting
	Shoreham-by-Sea, West Sussex, BN43 5FG, United Kingdom†
Ricardo Technology Limited	Shoreham Technical Centre, Old Shoreham Road,	02924157	Dormant
	Shoreham-by-Sea, West Sussex, BN43 5FG, United Kingdom†
Ricardo Transmissions Limited	Shoreham Technical Centre, Old Shoreham Road,	01498115	Dormant
	Shoreham-by-Sea, West Sussex, BN43 5FG, United Kingdom†
Ricardo Pension Scheme (Trustees) Limited	Shoreham Technical Centre, Old Shoreham Road,	02376569	Dormant
	Shoreham-by-Sea, West Sussex, BN43 5FG, United Kingdom†
Ricardo Performance Products Limited∞	Shoreham Technical Centre, Old Shoreham Road,	15072813	Performance Products
	Shoreham-by-Sea, West Sussex, BN43 5FG, United Kingdom†

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Notes to the consolidated financial statements continued

Other continued

35. Related undertakings of the Group continued

Overseas subsidiaries

Subsidiary or related undertaking	Registered office		Country	Principal activities
Ricardo Energy Environment and Planning Pty Ltd	Grant Thornton Australia Limited, Level 17,		Australia	Energy & Environmental Consulting
	383	Kent Street, Sydney, NSW, 2000, Australia
Ricardo Australia Pty Ltd	Mills Oakley FAO: Thomas Kannan, Level 7,		Australia	Holding Company and Rail Consulting
	151	Clarence Street, Sydney NSW 2000, Australia
Ricardo Rail Australia Pty Ltd	Suite 2.01, Level 2, Tower B, The Zenith, 821 Pacific Highway,		Australia	Rail Consulting
	Chatswood, New South Wales 2067, Australia
Inside Infrastructure Pty Ltd*	Level 1, 101	Flinders Street, Adelaide, SA 5000, Australia	Australia	Energy & Environmental Consulting
Aither Pty Ltd (90%)	O’Connells OBM Pty Ltd, Level 1, 20 Creek Street,		Australia	Energy & Environmental Consulting
	Brisbane QLD 4000
Ricardo Canada, Inc	2600-160 Elgin Street, Ottawa, Ontario, Canada, K0A 1C3		Canada	Business Development
Ricardo Shanghai Company Limited*	Unit DEF, 10F, Building H, No. 2337 Gudai Road,		China	Automotive & Industrial Consulting,
	Minhang District, Shanghai 201100, PR China			Rail Consulting and Business Development
Chongqing Transportation Railway Safety	No. 2 Yangliu Road, Mid Huangshan Street,		China	In Liquidation
Assessment Center Limited (60%)	New North District, Chongqing, 401123, PR China
Ricardo Beijing Company Limited	Room 1215,	11th Floor, No. 63 East 3rd Riding Middle Road,	China	Independent Assurance
	Chaoyang District, Beijing, China
Ricardo Prague s.r.o.	Palác Karlín, Thámova 11-13, 186 00 Praha 8, Czech Republic		Czechia	Automotive & Industrial Consulting
Ricardo Certification Denmark ApS	Høffdingsvej 34, 2500 Valby, Copenhagen, Denmark		Denmark	Independent Assurance
Ricardo GmbH	Güglingstraße 66, 73529, Schwäbisch Gmünd, Germany		Germany	Automotive & Industrial Consulting and
				Business Development
Ricardo Strategic Consulting GmbH	Güglingstraße 66, 73529, Schwäbisch Gmünd, Germany		Germany	Strategic Consulting and Environmental Consulting
E3-Modelling SA (93%)	70-72 Panormou st., Athens 115 23, Greece		Greece	Energy and Environmental Consulting
Ricardo Hong Kong Limited	Room 12101,	12/F, YF, Life Tower, 33 Lockhart Road, Wanchai,	Hong Kong	Rail Consulting
	Hong Kong
Ricardo India Private Limited	306, Corporate One Building, Plot No. 5, Jasola District Centre,		India	Business Development, Strategic Consulting
	New Delhi 110025, India			and Environmental Consulting
Ricardo Italia s.r.l.	Via Giovanni Pascoli 47, 47853, Cerasolo, Coriano, Rimini, Italy		Italy	Automotive & Industrial Consulting
Ricardo Japan K.K.	18th Floor, Shin Yokohama Square Building, 2-3-12 Shin Yokohama,		Japan	Rail Consulting and Business Development
	Kohoku-ku, Yokohama-shi, Kanagawa, 222-0033, Japan
Ricardo Nederland B.V.	Daalsesingel 51A, 3511 SW, Utrecht, The Netherlands		Netherlands	Rail Consulting
Ricardo Certification B.V.	Daalsesingel 51A, 3511 SW, Utrecht, The Netherlands		Netherlands	Independent Assurance
Ricardo Technical Consultancy LLC (49%)	Palm Tower, Block B, 15th Floor, P.O. Box 26600,		Qatar	Independent Assurance
	West Bay, Doha, Qatar
Ricardo Environment Arabia LLC	Bahrain Tower, Building Number 8953, 2393, King Fahd Road,		Saudi Arabia	Dormant
	Olaya, 12214,	Kingdom of Saudi Arabia

(1)

(2)

(3)

(4)

(5)

(6)

212

Ricardo plc | Annual Report and Accounts 2023/24

Notes to the consolidated financial statements continued

Other continued

Subsidiary or related undertaking	Registered office		Country	Principal activities
Ricardo-AEA Limited Saudi Branch	Bahrain Tower, 2nd Floor, King Fahad Road, PO Box 8953,		Saudi Arabia	Dormant
	Riyadh, 12214-2393 Kingdom of Saudi Arabia
Ricardo Singapore Pte Limited	141	Middle Road, 5-6 GSM Building, 188976, Singapore	Singapore	Rail Consulting
Ricardo South Africa (Pty) Ltd (formerly PPA	111	Pretoria Road, Rynfield, Benoni, Johannesburg, 1501,	South Africa	Energy & Environmental Consulting
Energy (Pty) Ltd)	South Africa
Ricardo Consulting SL	Agustín de Foxá 29, 9B, 28036, Madrid, Spain		Spain	Energy & Environmental Consulting and Rail Consulting
Ricardo Certification Iberia SL	Agustín de Foxá 29, 9B, 28036, Madrid, Spain		Spain	Independent Assurance
Ricardo Rail (Taiwan) Ltd	11F-2 (Westside), No.51, Hengyang Rd., Zhongzheng Dist.,		Taiwan	Independent Assurance
	Taipei City 10045, Taiwan (R.O.C.)
Ricardo (Thailand) Ltd (49%)	140/36 ITF Tower 17th Floor, Silom Road, Kwang Surawong,		Thailand	In Liquidation
	Khet bangrak, Bangkok, 10500, Thailand
Ricardo Gulf Technical Consultancy LLC (49%)	Abu Dhabi Island, Corniche Street, G5, Block 17, Floor 11,		UAE	Energy & Environmental Consulting
	Office 1108, Unit Building/Mesmak Real Estate Company,
	United Arab Emirates
Ricardo Defense Systems LLC	35860	Beattie Dr, Sterling heights, Michigan, 48312, United States	USA	Defence Manufacture
Ricardo Defense, Inc.	175	Cremona Drive, Suite 140, Goleta, California, 93117,	USA	Defence Consulting
	United States
C2D Joint Venture (33.3%)	175	Cremona Drive, Suite 140, Goleta, California, 93117,	USA	Defence Consulting
	United States
Ricardo, Inc.	Detroit Technical Campus, 40000 Ricardo Drive,		USA	Automotive & Industrial Consulting,
	Van Buren Township, Detroit, Michigan, 48111-1641, United States			Strategic Consulting and Rail Consulting
Ricardo US Holdings, Inc.	Detroit Technical Campus, 40000 Ricardo Drive,		USA	Holding Company
	Van Buren Township, Detroit, Michigan, 48111-1641, United States
Ricardo Real Estate LLC	Detroit Technical Campus, 40000 Ricardo Drive,		USA	Property Investment Company
	Van Buren Township, Detroit, Michigan, 48111-1641, United States
Ricardo Software, Inc.	Detroit Technical Campus, 40000 Ricardo Drive,		USA	Dormant
	Van Buren Township, Detroit, Michigan, 48111-1641, United States
CDQ Joint Venture (50%)	175	Cremona Drive, Suite 140, Goleta, California, 93117,
	United States

(7)

(8)

(9)

(10)

USA Dormant

35. Related undertakings of the Group continued

Overseas subsidiaries continued

213Ricardo plc | Annual Report and Accounts 2023/24

Notes to the consolidated financial statements continued

Other continued

37. Prior year restatement

The cash flow statement has been restated in the prior year as follows:

	2023	2023	2023
	reported	change	restated
	£m	£m	£m
Unrealised foreign currency exchange losses	1.2	1.4	2.6
Fair value gains on derivatives	—	(5.6)	(5.6)
Operating cash flows before movements in working capital	37.4	(4.2)	33.2
Cash generated from operations	26.2	(4.2)	22.0
Net cash generated from operating activities	14.1	(4.2)	9.9
Payments to settle derivatives	(4.2)	4.2	—
Net cash generated from financing activities	8.8	4.2	13.0

In the prior year, a non-cash movement of £4.2m relating to derivatives was included as a financing

cash outflow. This should have been presented as a reconciling item between profit and operating

cash flows. Comparatives have been restated accordingly. The impact of the adjustment was to

increase net cash flows from financing by £4.2m to £13.0m and decrease net cash flows from

operating activities by £4.2m to £9.9m (by increasing the reconciling item for unrealised exchange

losses by £1.4m to £2.6m and including a reconciling item for a fair value gains on derivatives of

£5.6m).

38. Events after the reporting date

There were no events to report after the reporting date.

35. Related undertakings of the Group continued

Overseas subsidiaries continued

* Wholly owned direct subsidiary of Ricardo plc.

† Registered in England and Wales.

∞ These companies have claimed exemption from audit per s.479A of the Companies Act 2006.

(1) While 93% of the share capital of E3-Modelling SA is owned by Ricardo Investments Limited, the

commitment to purchase the remaining 7% shareholding is considered to give rise to a financial

liability and therefore no non-controlling interest is recognised in respect of this investment – see

Note 13.

(2) 60% owned by Ricardo Beijing Company Limited; 40% owned by Chongqing Science & Technology

Testing Center Limited.

(3) While 90% of the share capital of Aither Pty Ltd is owned by Ricardo Australia Pty Ltd, the

commitment to purchase the remaining 10% shareholding is considered to give rise to a financial

liability and therefore no non-controlling interest is recognised in respect of this investment – see

Note 13.

(4) 99% owned by Ricardo plc; 1% owned by Ricardo UK Limited.

(5) 49% of share capital and 97% of retained earnings owned by Ricardo Rail Limited; 51% of share

capital and 3% of retained earnings owned by Pro-Partnership LLC.

(6) 15% owned by Ricardo plc; 85% owned by Ricardo-AEA Limited.

(7) 49% of share capital and 92.5% of retained earnings owned by Ricardo Hong Kong Limited; 51% of

share capital and 7.5% of retained earning owned by First Asia Industries Limited.

(8) 49% of share capital and 80% of retained earnings owned by Ricardo-AEA Limited; 51% of share

capital and 20% of retained earnings owned by SSD Commercial Investment.

(9) 33.3% owned by Ricardo Defense, Inc.; 33.3% owned by DG Technologies; 33.3% owned by Claxton

Logistics Services LLC.

(10) 50% owned by Ricardo Defense, Inc.; 50% owned by DG Technologies.

In the opinion of the Directors, the comprehensive income for the year and equity at the

reporting date which is attributable to non-controlling interests is not considered to be material.

Non-controlling interests are set out above in footnotes (1) to (10).

36. Related party transactions

Key management personnel are the board of Directors, together with the Managing Directors who

have the authority and responsibility for planning, directing and controlling the Group’s activities

and resources within the market sectors in which the Group operates. This is set out in Note 31.

The remuneration received by all Executive and Non-Executive Directors during the year is

disclosed in the single total figure of remuneration table in the Directors’ remuneration report on

page 107.

The Ricardo Pension Scheme (Trustees) Limited is a related party to the Group. Amounts paid to

the Group’s retirement payments are set out in Note 32.

214

Ricardo plc | Annual Report and Accounts 2023/24

Company statement of financial position of Ricardo plc

as at 30 June

Note

2024

£m

2023

£m

Non-current liabilities

Borrowings 8 50.0 —

Lease liabilities 9 5.4 6.1

Derivative financial liabilities 11f 0.1 —

Deferred tax liabilities 6 2.8 4.1

58.3 10.2

Total liabilities 183.3 130.6

Net assets 125.5 141.8

Equity

Share capital 15.6 15.6

Share premium 16.8 16.8

Other reserves 23.5 23.5

Retained earnings 69.6 85.9

Total equity 125.5 141.8

The Ricardo plc Company statement of financial position has been prepared in accordance with

Financial Reporting Standard 101 Reduced Disclosure Framework (FRS 101). The notes on pages

217-222 form an integral part of these financial statements.

The Company has not presented its own income statement and statement of comprehensive

income as permitted by Section 408 of the Companies Act 2006. The Company’s loss for the year

was £5.2m (2023: profit of £1.9m).

The financial statements of Ricardo plc (registered number 222915) on pages 215-222 were

approved by the board of Directors on 10 September 2024 and signed on itsbehalf by:

Graham Ritchie Judith Cottrell

Chief Executive Officer Chief Financial Officer

Note

2024

£m

2023

£m

Assets

Non-current assets

Intangible assets 2 1.0 0.4

Property, plant and equipment 3 3.6 3.9

Right-of-use assets 4 5.2 5.8

Retirement benefit surplus 11c 8.0 12.6

Investments 5 103.1 103.1

Other receivables 7 115.7 116.4

Deferred tax assets 6 1.7 1.6

238.3 243.8

Current assets

Other receivables 7 60.3 24.1

Derivative financial assets 11f 0.8 2.3

Current tax assets 1.7 0.3

Cash and cash equivalents 7.7 1.9

70.5 28.6

Total assets 308.8 272.4

Liabilities

Current liabilities

Borrowings 8 2.8 4.2

Lease liabilities 9 0.9 0.9

Trade and other payables 10 119.8 114.3

Current tax liabilities 1.0 —

Derivative financial liabilities 11f 0.5 1.0

125.0 120.4

Net current liabilities (54.5) (91.8)

215

Ricardo plc | Annual Report and Accounts 2023/24

Company statement of changes in equity of Ricardo plc

for the year ended 30 June

capital

£m

premium

£m

Other

reserves

£m

Retained

earnings

£m

Total

£m

At 1 July 2022 15.6 16.8 23.5 92.5 148.4

Profit for the year — — — 1.9 1.9

Other comprehensive expense for the year — — — (3.8) (3.8)

Total comprehensive expense for the year — — — (1.9) (1.9)

Equity-settled transactions — — — 1.4 1.4

Purchases of own shares to settle awards — — — (0.1) (0.1)

Tax relating to share option schemes — — — 0.7 0.7

Ordinary share dividends — — — (6.7) (6.7)

At 30 June 2023 15.6 16.8 23.5 85.9 141.8

At 1 July 2023 15.6 16.8 23.5 85.9 141.8

Loss for the year — — — (5.2) (5.2)

Other comprehensive expense for the year — — — (4.5) (4.6)

Total comprehensive expense for the year — — — (9.7) (9.8)

Equity-settled transactions — — — 2.2 2.2

Purchases of own shares to settle awards — — — (0.7) (0.7)

Tax relating to share option schemes — — — (0.4) (0.4)

Ordinary share dividends — — — (7.7) (7.7)

At 30 June 2024 15.6 16.8 23.5 69.6 125.5

The accompanying notes form part of these financial statements.

216

Ricardo plc | Annual Report and Accounts 2023/24

Company notes to the financial statements of Ricardo plc

• Paragraph 17 of IAS 24 Related Party Disclosures (key management compensation) and the

requirements of IAS 24 to disclose related party transactions entered into between two or more

members of the Group, provided that any subsidiary which is party to the transaction is wholly

owned by such a member

Significant accounting policies

The significant accounting policies applied in the preparation of these individual financial

statements are set out below. These policies have been applied consistently to all the years

presented, unless otherwise stated.

Investments

Investments in subsidiaries are stated at cost less any impairment in value. The Company

evaluates the carrying value of investments at the end of each financial year to determine if

there has been an impairment in value, which would result in the inability to recover the carrying

amount. When it is determined that the carrying value exceeds the recoverable amount, the excess

is written off to comprehensive income.

Amounts owed by subsidiary undertakings

The majority of the Company’s financial assets are amounts owed by subsidiary undertakings.

These are measured initially at fair value, and subsequently at amortised cost. The general

approach is applied to the impairment of financial assets, recognising a loss allowance for

expected credit losses (ECL). Where the credit risk has not increased significantly since initial

recognition the loss allowance are measured as 12-month ECL. For balances repayable on

demand, or where the credit risk has increased significantly since initial recognition, a lifetime ECL

is measured. ECLs are a probability-weighted estimate of credit losses. Credit losses are measured

as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the

entity in accordance with the contract and the cash flows that the Company expects to receive,

therefore considering future expectations). ECLs are discounted at the effective interest rate of the

financial asset.

When determining whether the credit risk of a financial asset has increased significantly since

initial recognition and when estimating ECL, the Company considers the available cash and

cashequivalents within the subsidiary, the net current assets of the undertaking and future

cashgeneration.

Assets are provided in full and subsequently written off when there is no reasonable expectation

of recovery. Indicators that there may be no reasonable expectation of recovery could include,

amongst others, evidence that the subsidiary has entered liquidation proceedings, or no

reasonable expectation that sufficient future cash generation to repay the loan will occur in

thesubsidiary undertaking.

1. Principal accounting policies

Basis of preparation

Notwithstanding net current liabilities of £54.5m (2023: liabilities of £91.8m) the financial

statements of Ricardo plc have been prepared on a going concern basis, as discussed in the

viability statement on page 81. These financial statements were prepared in accordance with

Financial Reporting Standard 101 Reduced Disclosure Framework (FRS 101). In preparing

these financial statements, the Company applies the recognition, measurement and disclosure

requirements of UK-adopted international accounting standards, but makes amendments

where necessary in order to comply with the Companies Act 2006 and has set out below where

advantage of the FRS 101 disclosure exemptions has been taken. The accounting policies set out

below have been applied consistently to all years presented in these financial statements. The

following exemptions available under FRS 101 have been applied:

• Paragraphs 45(b) and 46 to 52 of IFRS 2 Share-based Payment (details of the number and

weighted average exercise prices of share options and how the fair value of goods and services

received was determined)

• IFRS 7 Financial Instruments: Disclosures

• Paragraphs 91 to 99 of IFRS 13 Fair Value Measurement (disclosure of valuation techniques

andinputs used for fair value measurement of assets and liabilities)

• Paragraph 38 of IAS 1 Presentation of Financial Statements to present comparative information

in respect of:

• paragraph 73(e) of IAS 16 Property, Plant and Equipment

• paragraph 118(e) of IAS 38 Intangible Assets

• The following paragraphs of IAS 1 Presentation of Financial Statements:

• 10(d) (statement of cash flows)

• 16 (statement of compliance with all IFRS)

• 38(a) (requirement for minimum of two primary statements, including cash flow statements)

• 38(b)-(d) (additional comparative information)

• 111 (cash flow statement information)

• 134–136 (capital management disclosures)

• IAS 7 Statement of Cash Flows (the Company has not published its individual cash flow

statement as its liquidity, solvency and financial adaptability are dependent on the Group rather

than its own cash flows)

• Paragraphs 30 and 31 of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors

(requirement for the disclosure of information when an entity has not applied a new IFRS that

has been issued and is not yet effective)

217

Ricardo plc | Annual Report and Accounts 2023/24

Company notes to the financial statements of Ricardo plc continued

2. Intangible assets

Software

£m

Cost

At 1 July 2022 9.5

Disposals (0.8)

At 30 June 2023 8.7

At 1 July 2023 8.7

Additions 0.8

At 30 June 2024 9.5

Accumulated amortisation

At 1 July 2022 8.8

Charge for the period 0.3

Disposals (0.8)

At 30 June 2023 8.3

At 1 July 2023 8.3

Charge for the period 0.2

At 30 June 2024 8.5

Net book value

At 1 July 2022 0.7

At 30 June 2023 0.4

At 30 June 2024 1.0

1. Principal accounting policies continued

Other significant accounting policies

Other significant accounting policies are consistent with the Group financial statements.

Judgements in applying accounting policies and key sources of

estimationuncertainties

The preparation of financial statements under FRS 101 requires the Company’s management

to make judgements and estimates that affect the application of accounting policies and the

reported amounts of assets, liabilities, revenues and costs. These judgements and estimates

are continually evaluated and are based on historical experience and other factors, including

expectations of future events that are believed to be reasonable under the circumstances. The key

area of judgement that has the most significant effect on the amounts recognised in the financial

statements is the review of financial assets for impairment. Management has applied judgement

towhen determining the credit risk of fellow Group undertakings and their ability to repay loans.

The area involving significant risk of a material adjustment to the carrying amounts of assets and

liabilities due to estimation uncertainty within the next financial year is the Company’s defined

benefit obligation. This risk is the same as that of the Group and is explained in Note 1(d) to the

Group financial statements. Another area of estimation uncertainty is management’s assessment

of the Company’s investments to determine whether an indicator of impairment exists. Where

applicable, management then evaluates the carrying value of investments against their

value-in-use to determine if there has been an impairment in value, which would result in the

inability to recover the carrying amount. The value-in-use is estimated using a discounted cash

flow methodology. A pre-tax discount rate is used to discount the cash flows, which are derived

from externally sourced data reflecting the current market assessment of these investments.

The basis for the projected cash flows is the Group’s five-year plan, which is prepared by

management and reviewed and approved by the board. The plan reflects past experience and

management’s assessment of the current contract portfolio, contract wins, contract retention,

price increases, and gross margin, as well as future expected market trends. Cash flows after

thefive-year plan are projected into perpetuity using a growth rate based on inflation and an

average long-term economic growth rate for the territory.

Changes in accounting policies

Several other standards, interpretations and amendments to existing standards became effective

on 1 July 2021 as detailed in Note 1(aa) to the Group financial statements; none of these had a

material impact on the Company.

218

Ricardo plc | Annual Report and Accounts 2023/24

Company notes to the financial statements of Ricardo plc continued

4. Leases

a) As a lessee

The Company leases one office premises and technical centre, with a remaining lease term of two

years. The lease agreement does not impose any covenants. The leased asset may not be used as

security for borrowing purposes.

Right-of-use assets

Property

£m

Motor

vehicles

£m

Total

£m

Cost

At 1 July 2022 7.6 0.1 7.7

Additions — 0.1 0.1

Remeasurements 1.1 — 1.1

At 30 June 2023 8.7 0.2 8.9

At 1 July 2023 8.7 0.2 8.9

At 30 June 2024 8.7 0.2 8.9

Accumulated depreciation and impairment

At 1 July 2022 2.5 — 2.5

Charge for the period 0.6 — 0.6

At 30 June 2023 3.1 — 3.1

At 1 July 2023 3.1 — 3.1

Charge for the period 0.6 — 0.6

At 30 June 2024 3.7 — 3.7

Net book value

At 1 July 2022 5.1 0.1 5.2

At 30 June 2023 5.6 0.2 5.8

At 30 June 2024 5.0 0.2 5.2

See Note 9 Lease liabilities for details of the associated lease liabilities.

3. Property, plant and equipment

Land and

property

£m

Fixtures, fittings

and equipment

£m

Total

£m

Cost

At 1 July 2022 6.7 1.4 8.1

At 30 June 2023 6.7 1.4 8.1

At 1 July 2023 6.7 1.4 8.1

Additions 3.3 — 3.3

Disposals (3.3) (0.5) (3.8)

At 30 June 2024 6.7 0.9 7.6

Accumulated depreciation and impairment

At 1 July 2022 3.1 0.9 4.0

Charge for the period 0.1 0.1 0.2

At 30 June 2023 3.2 1.0 4.2

At 1 July 2023 3.2 1.0 4.2

Disposals 0.1 0.2 0.3

Charge for the period — (0.5) (0.5)

At 30 June 2024 3.3 0.7 4.0

Net book value

At 1 July 2022 3.6 0.5 4.1

At 30 June 2023 3.5 0.4 3.9

At 30 June 2024 3.4 0.2 3.6

A contingent liability of up to £2.8m which is associated with a guarantee provided to the Ricardo

Group Pension Fund in July 2013 is secured on specific land and buildings. Further detail is given in

Note 25 to the Group financial statements.

Part of the site at the Shoreham Technical Centre used by Ricardo PP Ltd, known as Building 2,

Building 19 and car parking, was transferred to Ricardo plc and sold to Berwen Ltd in the year.

Thesale exchanged and completed on 28 June 2024 for £3.25m, with no gain or loss on book

value. The cost of £0.3m was associated with external fees relating to the sale. Cash proceeds

received for the sale have been recorded within investing activities in the cash flow statement.

219

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Company notes to the financial statements of Ricardo plc continued

6. Deferred tax

Movement in deferred tax balance

2024

£m

2023

£m

At 1 July (2.5) (3.4)

Credited/(charged) to income statement 0.1 (1.0)

Credited to other comprehensive income 1.7 1.2

(Charged)/credited directly to equity (0.4) 0.7

At 30 June (1.1) (2.5)

Balance comprised of:

2024

£m

2023

£m

Accelerated capital allowances (0.2) (0.3)

Defined benefit obligation (2.1) (3.3)

Tax losses and credits — (0.3)

Unrealised capital gains (0.6) (0.6)

Other 1.8 2.0

At 30 June (1.1) (2.5)

Non-current:

2024

£m

2023

£m

Assets 1.7 1.6

Liabilities (2.8) (4.1)

At 30 June (1.1) (2.5)

4. Leases continued

b) As a lessor

The Company subleases part of its right-of-use property with a remaining term of two years.

Thislease is classified as an operating lease.

During the year the Company recognised rental income of £0.5m (2023: £0.4m) on these

subleases.

The following table sets out a maturity analysis of lease payments, showing the undiscounted

lease payments to be received after the reporting date.

Operating lease

2024

£m

2023

£m

Less than one year 0.4 0.4

One to five years 0.3 1.6

Total 0.7 2.0

5. Investments

Shares in

subsidiaries

£m

Cost and net book value

At 1 July 2022 103.1

At 30 June 2023 103.1

At 1 July 2023 103.1

At 30 June 2024 103.1

The Directors consider that the fair value of investments is not less than the carrying value.

Details of the Company’s subsidiaries and related undertakings are shown in Note 35 to the Group

financial statements.

220

Ricardo plc | Annual Report and Accounts 2023/24

Company notes to the financial statements of Ricardo plc continued

7. Other receivables

2024

£m

2023

£m

Amounts owed by subsidiaries 172.8 137.2

Prepayments 1.4 1.8

Other receivables 1.8 1.5

At 30 June 176.0 140.5

Current 60.3 24.1

Non-current 115.7 116.4

At 30 June 176.0 140.5

£57.1m (2023: £17.4m) of the amounts owed by subsidiaries are due for repayment and are

expected to be repaid within the next 12 months and the remaining £115.7m (2023: £119.8m)

have no fixed repayment date.

Non-current trade and other receivables consist of amounts owed by subsidiaries being repayable

on demand, with no fixed repayment date and are not expected to be repaid within the next 12

months. £104.7m (2023: £105.4m) of the amounts owed by subsidiaries carry interest between

6.0% and 8.0% (2023: 2.0% and 5.0%) with the remaining £11.0m (2023: £11.0m) being interest

free. All amounts owed by subsidiaries are unsecured and expected credit losses are considered

tobe material.

8. Borrowings

2024

£m

2023

£m

Current liabilities – borrowings

Bank overdrafts repayable on demand 2.8 4.2

Non-current liabilities – borrowings

Bank loans maturing after one year 50.0 —

At 30 June 52.8 4.2

The Group’s borrowings are split between the Company and another subsidiary entity. The terms

of the borrowings in the Company and the subsidiary are the same. The facilities are denominated

in Pounds Sterling and have variable rates of interest dependent upon the Group’s adjusted

leverage, which range from 1.65% to 2.45% above SONIA (2023: 1.65% to 2.45% above SONIA).

See Note 23 in the Group Financial Statements for further details.

9. Lease liabilities

Movement in lease liability

2024

£m

2023

£m

At 1 July 7.0 6.5

Additions — 0.1

Remeasurement — 1.1

Interest 0.3 0.3

Payments (1.0) (1.0)

At 30 June 6.3 7.0

2024

£m

2023

£m

Current liabilities – maturing within one year 0.9 0.9

Non-current liabilities – maturing after one year 5.4 6.1

At 30 June 6.3 7.0

Maturity of undiscounted lease liability

2024

£m

2023

£m

Within one year 1.0 1.0

Between one and five years 3.8 3.8

After five years 2.7 3.7

Finance portion of net liability (1.2) (1.5)

At 30 June 6.3 7.0

221

Ricardo plc | Annual Report and Accounts 2023/24

Company notes to the financial statements of Ricardo plc continued

10. Trade and other payables

2024

£m

2023

£m

Trade payables 2.2 0.8

Tax and social security payable 1.9 0.9

Amounts owed to subsidiaries 109.7 108.8

Accruals 5.7 3.6

Other payables 0.3 0.2

At 30 June 119.8 114.3

All amounts owed to subsidiaries are unsecured. £105.0m (2023: £104.1m) of the amounts owed

to subsidiaries carry interest at rates between 2.0% and 8% (2023: 2.0% and 5.0%) and have no

fixed repayment date. £4.7m (2023: £4.7m) of the amounts owed to subsidiaries are interest-free

and due for repayment within the next 12 months.

11. Other information

(a) Company audit fee

Fees payable to the Company’s auditor for the audit of the Company’s annual financial statements

totalled £0.9m (2023: £0.9m). Fees payable to KPMG LLP and its associates for non-audit services

to the Company are not required to be disclosed because the Group financial statements disclose

such fees on a consolidated basis (see Note 11 to the Group financial statements).

(b) Directors’ emoluments

The remuneration received by all Executive and Non-Executive Directors during the year is

disclosed in the single total figure of remuneration table in the Directors’ remuneration report on

page 107.

During the year the Company employed an average of 54 (2023: 51) employees.

The Company operates a defined benefit pension scheme, the Ricardo Group Pension Fund (RGPF).

This is disclosed in Note 32 to the Group financial statements together with the accounting policy

and key accounting estimates.

(d) Share capital, share premium and other reserves

See Notes 27 and 28 to the Group financial statements.

(e) Fair value of assets and liabilities

Financial guarantee contracts: At 30 June 2024, the Company has a financial guarantee contract

in the form of a guarantee provided to the Ricardo Group Pension Fund (RGPF) for an amount that

shall not exceed the employers’ liability were a debt to arise under Section 75 of the Pensions Act

1995. The guarantee will terminate on 5 April 2026. The outcome of this matter is not expected

to give rise to any material cost to the Group on the basis that the Group continues as a going

concern.

In addition, the Company provides guarantees in the ordinary course of business to certain

subsidiaries to give assurance of their contractual and financial commitments. None of these

arrangements is expected to give rise to any material cost to the Company.

These financial guarantees are accounted for under IFRS9, for which no liability has been

recognised as they do not have a material impact on the accounts.

(f) Contingent liabilities

In July 2013, a guarantee was provided to the Ricardo Group Pension Fund (RGPF) of £2.8m in

respect of certain contingent liabilities that may arise, which have been secured on specific land

and buildings. The outcome of this matter is not expected to give rise to any material cost to the

Group.

(g) Derivative financial assets and liabilities

The Company has the same derivative financial assets and liabilities as the Group. These are

disclosed in Note 25 to the Group financial statements. These guarantees are considered to be

financial guarantees. The Group has elected to apply IFRS 9 to these financial guarantees.

(h) Related party transactions

The Company has taken the exception under FRS 101 not to disclose related party transactions

entered into between two or more members of the Group, nor to disclose key management

compensation. Directors’ emoluments are referenced in Note 11(b).

222

Ricardo plc | Annual Report and Accounts 2023/24

Group General Counsel and CompanySecretary

Harpreet Sagoo

Registered office

Ricardo plc

Shoreham Technical Centre

Shoreham-by-Sea

West Sussex BN43 5FG

Registered Company number

222915

Registrars

Link Asset Services

The Registry

34 Beckenham Road

Beckenham

Kent BR3 4TU

Independent auditor

KPMG LLP

15 Canada Square

London

E14 5GL

Stockbrokers

Investec Investment Banking

2 Gresham Street

London EC2V 7QP

Tel: 0207 597 5000

Panmure Liberum Limited

Ropemaker Place

25 Ropemaker Street

London EC2Y 9LY

Tel: 0203 100 2000

Website: www.ricardo.com/en

A PDF version of this Annual Report andAccounts can be downloaded from the Investors page

ofour website.

Key dates

Annual General Meeting: 14 November 2024

Shareholder services

Link Asset Services provide a share portal service, which allows shareholders to access a variety

of services online, including: viewing shareholdings; buying and selling shares online; registering

change of address details; and bank mandates to have dividends paid directly into your bank

account. Any shareholder who wishes to register with Link Asset Services to take advantage

ofthis service should visit www.ricardo-shares.com/welcome

Shareholder enquiries

Tel: 0870 162 3131 (from the UK)

Tel: +44 208 639 3131 (from outside the UK)

Principal bankers

Lloyds Bank plc

3rd Floor

10 Gresham Street

London

EC2V 7AE

HSBC Bank plc

First Point Buckingham Gate

London Gatwick Airport

West Sussex

RH16 0NT

Financial advisors

NM Rothschild & Sons

New Court

St Swithin’s Lane

London

EC4P 4DU

Corporate information

223Ricardo plc | Annual Report and Accounts 2023/24

Glossary

Term Definition

Cash conversion Statutory cash conversion is calculated as cash generated from

operations divided by earnings before interest, tax, depreciation and

amortisation (EBITDA).

Constant currency

organic growth/

decline

The Group generates revenues and profits in various territories and

currencies because of its international footprint. Those results are

translated on consolidation at the foreign exchange rates prevailing

at the time. Constant currency organic growth/decline is calculated

by translating the result for the current year using foreign currency

exchange rates applicable to the prior year. This provides an indication

of the growth/decline of the business, excluding the impact of foreign

exchange.

EBITDA Earnings before interest, tax, depreciation, impairment and amortisation

ESG Environmental, social and governance

FY Financial year

GHG Greenhouse gases

Headcount Headcount is calculated as the number of colleagues on the payroll

atthe reporting date and includes subcontractors on a full-time

equivalent basis.

ISO 9001 International standard for Quality Management Systems

ISO 14001 International standard for Environmental Management Systems

ISO 27001 International standard for Information Security Management Systems

ISO 45001 International standard for Occupational Health and Safety

ManagementSystems

Term Definition

Net debt Net debt is defined as current and non-current borrowings less cash

and cash equivalents, excluding any cash deemed to be restricted in

nature, including hire purchase agreements, but excluding IFRS 16 lease

liabilities. Management believes this definition is the most appropriate

for monitoring the indebtedness of the Group and is consistent with the

treatment in the Group’s banking agreements.

Order book The value of all unworked purchase orders and contracts received from

clients at the reporting date, providing an indication of revenue that has

been secured and will be recognised in future accounting periods.

Order intake The value of purchase orders and contracts received from clients during

the period.

Organic growth/

decline

Organic growth/decline is calculated as the growth/decline in the result

for the current year compared to the prior year, after excluding the

performance of acquisitions or disposals in both periods.

SBTi Science Based Targets initiative.

Scope 1 emissions Direct emissions from owned or controlled sources.

Scope 2 emissions Indirect emissions from the generation of purchased energy.

Scope 3 emissions All indirect emissions (not included in Scope 2) that occur in the value

chain, including both upstream and downstream emissions.

TCFD Task Force on Climate-Related Financial Disclosures: An organisation of

31 members aiming to develop guidelines for voluntary climate-centred

financial disclosures across industries.

Underlying Underlying measures exclude the impact on statutory measures

of specific adjusting items. Underlying measures are considered

to providea more useful indication of underlying performance and

trendsover time.

224

Ricardo plc | Annual Report and Accounts 2023/24

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Disclaimer – forward-looking statement

This document does not constitute an offering of securities or otherwise constitute an invitation or

inducement to any person to underwrite, subscribe for or otherwise acquire or dispose of securities

in the Company or any other member of its Group nor should it be construed as legal, tax, financial,

investment or accounting advice. This document contains forward-looking statements which are

subject to known and unknown risks and uncertainties because they relate to future events, many

of which are beyond the Group’s control and accordingly nothing contained herein can be relied

upon as a warranty or representation. The accuracy and completeness of all such statements,

including, without limitation, statements regarding the future financial position, strategy, projected

costs, plans and objectives for the management of future operations of Ricardo plc and its

subsidiaries is not warranted or guaranteed. These statements typically contain words such as

‘intends’, ‘expects’, ‘anticipates’, ‘estimates’ and words of similar import. By their nature, forward-

looking statements involve risk and uncertainty because they relate to events and depend on

circumstances that will occur in the future. Although Ricardo plc believes that the expectations

reflected in such statements are reasonable, no assurance can be given that such expectations

will prove to be correct. There are a number of factors, which may be beyond the control of Ricardo

plc, which could cause actual results and developments to differ materially from those expressed

or implied by such forward-looking statements. Other than as required by applicable law or

the applicable rules of any exchange on which our securities may be listed, Ricardo plc has no

intention or obligation to update forward-looking statements contained herein.

Ricardo plc

Shoreham-by-Sea

West Sussex

BN43 5FG

United Kingdom

Registered company number: 222915