Ricardo plc
Annual Report & Accounts 2002 Ricardo plc Annual Report & Accounts 2002  1
Contents
2 Financial Highlights
3 Corporate Profile
4 Recent Key Projects
14 Board Members
15 Chairman’s Statement
16 Chief Executive’s Review
18 Finance Director’s Review
20 Directors’ Report
24 Remuneration Committee Report
30 Corporate Governance
32 Statement of Directors’ Responsibilities
33 Independent Auditors’ Report
34 Consolidated Profit and Loss Account
35 Consolidated  and Company Balance Sheets
36 Statement of Total Recognised Gains and Losses
36 Reconciliation of Movements in Total
Shareholders’ Funds
37 Consolidated Cash Flow Statement
38 Notes to the Financial Statements
60 Notice of Meeting
64 Secretary and Advisers Financial Highlights
2 Ricardo plc Annual Report & Accounts 2002
Five Year Performance Record
1998* 1999* 2000* 2001 2002
£’000 £’000 £’000 £’000 £’000
Turnover 82,368 95,489 121,107 139,911 143,178
Turnover from continuing operations 78,509 91,003 117,376 138,370 143,178
Profit before taxation 8,012 10,425 12,800 15,107 16,659
Profit for the financial year 5,362 7,219 8,923 10,643 12,061
Total shareholders’ funds 26,807 31,378 37,932 48,131 55,908
Basic earnings per ordinary share 11.8p 15.5p 18.9p 22.2p 24.9p
Dividends per ordinary share 6.6p 7.0p 7.4p 7.8p 8.6p
* The Five Year Performance Record has not been restated for the three years ended 30 June 2000, following the
adoption of FRS19-Deferred tax.
0
20
40
60
80
100
120
140
160
1998 1999 2001
78.5
91.0
138.4
143.2
0
2
4
6
8
10
12
14
16
18
8.0
10.4
12.8
15.1
16.7
24.9
0
5
10
15
20
25
11.8
15.5
18.9
2000
117.4
2002 1998 1999 2001 2000 2002 1998 1999 2001 2000 2002
22.2
T urnover from continuing
operations (£m)
Profit before taxation (£m) Basic earnings per
ordinary share (p)
 Turnover from continuing activities increased to  £143m +3.5%
 Earnings per share advance to  24.9p +12.2%
 Profits before tax up to  £16.7m +10.3%
 Dividends per share  8.6p +10.3%
 Net return on sales  11.6% +7.4% Corporate Profile
Ricardo plc Annual Report & Accounts 2002  3
Ricardo is a leading powertrain and vehicle
engineering technology provider and strategic
consultant to the world automotive industries.
From our advanced technical centres in the UK, North America, Germany and
the Czech Republic, we provide high quality engineering services ranging
from individual component design to complete new engine and vehicle
programmes.
Our greatest asset is our people. We employ over 1400 staff, seventy per cent of
whom are highly qualified graduate engineers and technicians. Together they 
represent one of the most powerful skills and knowledge bases within our industry,
and are able to take on some of the greatest challenges in vehicle, engine,
transmission and driveline engineering.
In order to maintain our technological edge, we commit significant sums to our
own technology research programme. This research is targeted at the future needs
of the automotive industry, for example, in minimising the environmental impact
of new vehicles through increasing fuel efficiency (and hence low CO
2
) and 
minimising exhaust emissions.
The primary customers of Ricardo are the product development and research
organisations of the world’s vehicle manufacturers. Our expertise is embodied in
their latest vehicles produced with the benefit of our support in product design,
electronics and control, computer simulation, analysis, prototype manufacture and
development testing. We also provide licences for our advanced engineering 
software products, enabling these same customers to use Ricardo technology in
their own research and product development activities. Our reputation for 
technology and quality of service is also well known in the arena of motorsport,
where we serve leading teams in all major race formulae.
Positioned at the very heart of the automotive industry, we aim to deliver Ricardo 
expertise in every vehicle and to be the natural first choice partner for customers in
all the world’s major automotive centres. Volvo Car Corporation has an enviable brand reputation for quality, performance, refinement and environmental
protection. While it has long developed its own gasoline engines, the company had for many years purchased its diesel
engine requirements from other leading automotive manufacturers. In 1998 however, recognising that the European
premium diesel market segment was about to take off, Volvo Car Corporation took the bold decision to develop its own
engine from scratch. Named the D5, the engine was to be the world’s first all-aluminium in-line 5 cylinder automotive
diesel, and was to offer extremely high standards of performance, emissions control and refinement. To be worthy of the
Volvo brand, the D5 needed to be a class leading engine and it was needed to fulfil model year requirements in an
extremely tight time scale.
Volvo Car Corporation already had a long-standing relationship with Ricardo for the supply of powertrain engineering
services and technology. However, it also worked with competitors to Ricardo and at the time of embarking upon the D5
programme, the company had projects running with a number of suppliers. Volvo Car Corporation was satisfied that
Ricardo was competent to deliver the whole D5 programme in its own right but due to the work already in progress with
a principal competitor, the company took the highly unusual step of bringing both suppliers into the D5 programme.
Ricardo is highly adept at managing technically demanding and highly complex programmes, but the D5 broke new
ground in the manner in which it was required to work in direct partnership with a principal competitor for the benefit of
its customer. Clear procedures were developed for the allocation of engineering responsibility and a spirit of co-operation
was encouraged within the programme team. As Volvo Car Corporation had previously out-sourced all previous diesel
requirements, it had limited experience of diesel engine development and its primary expertise related to powertrain
installation. Throughout the programme a tapered level of service was therefore provided whereby Ricardo and its
partner suppliers provided almost all the effort for the early stages of the programme, while gradually handing-over
responsibility to Volvo Car Corporation as the programme progressed.
The D5 would have been a demanding programme on any time scale but given the compressed 24 month schedule, the
result is an extremely impressive product. The final power and torque values of 163 horsepower and 340 Newton metres
from just 1750 rev/min speak for themselves: the torque figure is greater than that of the powerful gasoline T5 turbo
powertrain of Volvo’s fastest sports saloons, and more than fulfils the initial brief that driving enjoyment should be “top
of the list of priorities in the development of the D5”. At 67.9 bhp per litre the D5 also has one of the highest specific
power ratings of any diesel on the market, yet its emissions values are also among the best in class. The Volvo D5 thus
demonstrates once again the commitment to quality of service and excellence in powertrain engineering of Ricardo,
together with its flexibility and competence in handling large and highly complex product development programmes.
4 Ricardo plc Annual Report & Accounts 2002
Engineering the Class-Leading Volvo D5 Automotive Diesel Engine  When in 2000 Volkswagen AG decided to produce a sports prototype that would demonstrate the company’s pedigree as
a producer of high performance vehicles – and break a series of world speed and distance records – it turned to Ricardo
to develop and supply a high-performance, reliable transmission system. The car was to use a special 6- litre, 600HP
version of the W12 engine which has since been launched in the new Phaeton luxury saloon. Volkswagen required
assistance both in the development and supply of the transmission system, and with the vehicle installation of the
complete powertrain. Given the highly publicised role that the company has played in developing and supplying the high
performance transmissions used for the Audi R8 car which has won the Le Mans 24 hours classic three years in
succession, Ricardo was the natural first choice as engineering partner for the W12 transmission.
While the record breaking W12 sports car would not operate under race conditions, the engineering challenge was
nonetheless very significant. In order to beat the speed and timed distance records that Volkswagen was aiming for, the
average speed of the W12 car would need to be significantly higher than those typical of a Le Mans winner. At the same
time, the transmission was to be developed according to the norms of road car refinement and durability, for example
including helical gears and multi-cone synchronisers for each gear.
Ricardo became involved in the programme in the middle of 2000 and immediately commenced work with the design of
the advanced 6-speed transmission. The full range of CAE tools were available for use on the programme and the design
was optimised for its intended application – providing sufficient durability for extended high load operation at maximum
speed, coupled with fast accelerations up through the gears following pit stops. Oil circulation was the subject of
particular attention, given the requirement to operate at high temperature and under excessive g-forces, ensuring that
bearings and seals were all properly lubricated and that the location of baffles and oil pickups avoided the risk of oil
starvation. An initial demonstrator unit was prepared for evaluation by Volkswagen which successfully proved the
engineering concept. Ricardo was subsequently asked to prepare further 6-speed transmissions for the record-breaking
attempts.
On 13-14 October 2001 at the high speed circuit at Nardo, southern Italy, the W12 sports prototype successfully set three
world records for the maximum average speed respectively measured over 24 hours, over 5,000 kilometres, and over
5,000 miles. On 23-24 February 2002 Volkswagen returned to Nardo with the W12 for a follow-up speed record attempt.
On this occasion the vehicle with its high performance Ricardo transmission exceeded its previous performance and
now holds a total of six world speed records across all vehicle classes. For maximum average speed over a given time
the records set by the W12 were 325.86km/h over 6 hours, 324.88km/h over 12 hours, and 322.89km/h over 24 hours. For
maximum average speed over a fixed distance the records set by the W12 were 325.86km/h over 1,000 miles, 324.85km/h
over 5,000 km, and 323.03km/h over 5,000 miles. As with the transmissions which have enabled the Audi R8 to dominate
the Le Mans 24 hours and the American Le Mans Series over the past three years, with the W12 Ricardo has
demonstrated once again that it is a leader in the design and production of the highest performance transmission and
driveline products.
6 Ricardo plc Annual Report & Accounts 2002
Development of a High Performance Transmission for the Volkswagen
Nardo W12 Sports Prototype  With the increasing public concern over the impact of global warming, the auto industry world-wide is striving to develop
technologies that can deliver more sustainable modes of transport for the future. The reduction of C0
2
emissions is a
major objective both in its own right and in the ever present consumer demands for increased fuel efficiency. However,
genuine improvements in sustainability need to be deliverable in practical products that consumers will aspire to own
and make use of. Good vehicle performance, high standards of refinement, excellent reliability and practical packaging
are thus aspects of vehicle design that cannot be compromised in developing more sustainable technology.
It was against this back-drop that Ricardo established the i-MoGen (Intelligent Motor Generator) project in partnership
with Valeo of France. The aim was to use a diesel mild hybridisation systems approach to develop a C-segment car
capable of achieving 4.0 litres/100km (70 mpg) over the New European Driving Cycle (NEDC), state of the art low
emissions levels, yet at the same time maintain the driveability characteristics and package of a modern production
donor vehicle, a 2.0 litre diesel Opel Astra.
The powertrain architecture of the i-MoGen vehicle is based on a small, high-output 1.2 litre, 4 cylinder HSDI diesel
engine capable of delivering 74kW (100 PS). This is coupled to a 42V integrated starter-generator which is able to deliver
low speed torque-boost, regenerative braking and a stop-start facility for city operation. An intelligent energy
management system provides supervisory level control of the powertrain enabling operation to be continuously
optimised for performance and fuel economy. The vehicle also incorporates a 42V electrical architecture which
encompasses all major powertrain electrical hardware and ancillaries.
The i-MoGen project has been a highly effective and successful collaboration between Ricardo and Valeo on vehicle
thermal and electrical systems. The i-MoGen demonstrator vehicle achieves its target of providing a full five-seat package
with uncompromised standards of driveability and handling. It gives excellent driving response up to 112 mph (180 km/h)
and accelerates from 0-60mph in 12.6 seconds. At the same time it delivers 4.0 litres/100km NEDC, representing a 28%
fuel economy improvement compared to the donor production vehicle. On exhaust emissions it also has the potential of
achieving tailpipe emissions of half 2005 Euro 4 standards. Significant interest in i-MoGen has already been shown by
vehicle manufacturers in Europe with over 300 demonstrations already carried out. At the time of writing Ricardo is
about to commence demonstration visits to North American and Japanese producers. Given the very positive reaction
already generated, it is likely that many of the technologies demonstrated (several subject to Ricardo patent
applications) will be adopted in new vehicles over the coming years.
8 Ricardo plc Annual Report & Accounts 2002
Development of an Advanced Diesel Mild Hybrid Demonstrator Vehicle  10 Ricardo plc Annual Report & Accounts 2002
The result of a two-year collaboration by a consortium of British-based automotive organisations, the new Bentley State
Limousine was presented as a gift from the British motor industry to the Queen on the occasion of her Golden Jubilee.
Ricardo was a major partner to Bentley on the programme, carrying responsibility for all powertrain integration aspects
of the vehicle. The wide range of Ricardo design technologies available for the programme was clearly an advantage, as
was the company’s appreciation and understanding of the marque value requirements for a vehicle of this stature.
Ricardo has supported Bentley with powertrain and chassis engineering services for many years but was particularly
proud to have been involved in this prestigious programme.
A digital Computer Aided Design buck (model) was created to enable the project team to simulate and develop the
under-bonnet package layout before moving into hardware. Not only did this provide a means of producing a high-quality
engineering solution but it also saved both time and cost. The Ricardo team were also responsible for the thermal
management and refinement aspects of the powertrain installation.
The basic statistics of the Bentley State Limousine give some indication of the engineering challenges it represented. At
6,220mm (249 in) in length and at a height of 1,770mm (70 in), it dwarfs the company’s Arnage, from which the design
is derived. Its wheelbase of 3,844mm (154 in) is around 1,300mm (52 in) longer than that of an average sized family
saloon and it has a kerb weight of 3,390 kg (7,474lb). Despite this the vehicle can accelerate to 60 mph in 8 seconds and
has a top speed of 120mph. The car is powered by a modified version of Bentley’s new 400bhp, twin-turbo 6.75-litre V8
engine. Modifications have been made to the air boxes to allow them to package under the bonnet, while a larger air
conditioning compressor is fitted to cope with the added demands of the heating and ventilation system. The capability
of running on liquid petroleum gas (LPG) will not only extend the range of the car but will also provide reduced
emissions.
Following a ceremonial presentation of the vehicle to the Queen at Windsor Castle on 29 May, the State Limousine
entered royal service as a part of the official Jubilee celebrations on Tuesday 4 June, when the car was used to take the
Queen and the Duke of Edinburgh from the National Service of Thanksgiving at St Paul’s Cathedral. Designed for a
minimum lifespan of 25 years and 125,000 miles, the Bentley State Limousine is expected to be the Queen’s principal
transport at state and ceremonial occasions and will therefore be a familiar sight well beyond the end of the Golden
Jubilee celebrations.
Powertrain Integration for the Bentley State Limousine  12 Ricardo plc Annual Report & Accounts 2002
STM Power, Inc. is a privately held Michigan and Virginia based company that is the world’s leading developer of external
combustion (Stirling cycle) engines for electric power generation in the 2 kW to 500 kW size range. Unlike gasoline or
diesel internal combustion engines that burn their fuel within the cylinder, Stirling cycle engines use an external
combustion source or heat supply to provide energy to the working fluid of the engine. Combustion can thus be a
continual process and may be optimised for a wide range of fuel types. Interest in the use of this form of power unit for
distributed and mobile electrical power applications has grown considerably in recent years due to the potential that it
holds for improved fuel efficiency and reduced operating costs, emissions, and noise.
In May 2001 STM Power announced that it had selected Ricardo as technical partner for the product development
process of the STM 4-120 25 kW Stirling cycle engine, which is to form the basis for STM Power’s products used in a
variety of stationary and mobile power applications. Within this programme, Ricardo led the detailed design and release
of the beta version of the engine and its auxiliary drive systems. Ricardo played a central role, with responsibilities
ranging from the specification of comprehensive durability and reliability targets appropriate to the numerous intended
applications of the engine, through to the development of the detailed design to meet these targets. Starting from what
was essentially a product in concept form, an overall objective for the Ricardo team was to develop the design to meet
the requirements of volume manufacture. In doing so, Ricardo has helped STM Power to move their product from a
research environment to one of structured development and production, conforming to appropriate automotive industry
standards and disciplines. This has included the specification and implementation of rigorous product development, and
design release processes for use by STM Power on all future product engineering programmes.
The Ricardo team on the STM 4-120 engine comprised approximately 20 engineers and support staff, including
specialists in the areas of CAE simulation, design, manufacturing and programme management. Working in partnership
with STM Power, the Ricardo team was able to develop the design from concept form to that of a production-ready
product ready for final validation testing. As a result of the support provided by Ricardo, STM Power has been able to
bring their first production Stirling engine concept to market-readiness within a competitive time scale. The company
will also benefit in the longer term as it develops its future products using the product development and design release
processes implemented at STM Power by Ricardo.
Product Development of a Stirling Cycle Engine for STM Power  Sir Noel Davies (Chairman)
Sir Noel Davies, who is 68 years old, was appointed Chairman of the Board on 7 November 1997, having been appointed
non-executive director on 1 March 1997. He was formerly Chairman of Powell Duffryn plc, Chief Executive of VSEL plc
and Deputy Chairman of British Energy plc.
Peter Ward (Non-Executive)
Peter Ward is 56 years old and was appointed a non-executive director on 1 May 1998. He worked in the automotive
industry for over 25 years. His previous positions have included Chairman and CEO Jardine Motors Group plc, executive
director Trafalgar Group plc and Chairman/CEO Cunard Line, Managing Director Operations Vickers P .L.C. and
Chairman/CEO Rolls-Royce Motor Cars. He is currently Chairman of Toad plc and a member of the Harley Davidson Inc.
Advisory Board.
Ian Percy, CBE (Non-Executive)
Ian Percy, who is 60 years old, is Chairman of Kiln plc and a non-executive director of The Weir Group plc together with a
number of other private companies. Former positions include Chairman of the Accounts Commission for Scotland and
President of the Institute of Chartered Accountants of Scotland. He is an Honorary Professor of Accounting at Aberdeen
University.
Rodney Westhead (Chief Executive)
Rodney Westhead, who is 58 years old, was appointed Chief Executive on 13 November 1996. He had previously been
Finance Director having been appointed to that role on joining Ricardo on 2 December 1992. Before joining Ricardo he
was a partner in Grant Thornton for 14 years holding a number of positions including managing partner of their London
Office. He is also a non-executive director of Parkman Group plc.
Andrew Goodburn (Finance Director)
Andrew Goodburn is 55 years old, having qualified as a Chartered Accountant in 1969. He trained with KPMG before
joining the Bowthorpe Group where he spent 11 years in various financial and commercial roles. He then spent 13 years
in management consulting. He joined Ricardo in 1993 initially in the design companies before being appointed Finance
Director of RCE. He was promoted to Group Finance Director on 7 April 1997. 
Christopher Bates (Executive Director)
Christopher Bates, who is 38 years old, joined Ricardo in 1997 as Finance Director of RCE with the additional
responsibility for group IT. He was appointed Managing Director of RCE on 1 January 2001 on which date he was also
appointed to the Board as an executive director. Prior to joining Ricardo he trained at Price Waterhouse and then held
senior positions both in the UK and overseas with divisions of TI Group, Simon plc and Babcock International plc.
Jeremy Holt (Executive Director)
Jeremy Holt joined Ricardo in 1998 as President of Ricardo Inc. having previously held various positions in the 
T&N Group most recently Vice-President product engineering and marketing for the piston products business in the
USA, a position he held for 5 years. He was appointed to the Board as an executive director on 1 January 2001. In
addition he sits on the Ricardo Technical Steering Group which helps determine the future course of research and
development activities. He is 41 years old, resides in, and is a citizen of, the USA.
Stephen Parker (Managing Director, Strategic Development)
Aged 49, Stephen Parker joined Ricardo on 1 August 2002 from A T Kearney, one of the world’s leading management
consulting practices. He was employed as a Vice President of their Global Automotive Practice having responsibility for
the provision of strategy and operational consulting to the executive teams of both automotive manufacturers and tier 1
suppliers. Previous roles include Director of Business Development and General Manager Perkins Technology at Perkins
Engine Group, a position he held for 8 years, as well as 8 years at PSA Peugeot Citroën.
14 Ricardo plc Annual Report & Accounts 2002
Board Members
Sir Noel Davies Peter Ward Ian Percy Rodney Westhead
Andrew Goodburn Christopher Bates Jeremy Holt Stephen Parker Review of the year
During the past year, despite the problems of the world economy and the reaction to and aftermath from 11 September
your Company has continued to develop its position as one of the leading players in the international automotive
industry. Our commitment to the provision of the highest quality consultancy services to this industry has enabled us to
achieve record profits for the fifth consecutive year.
All divisions have contributed to this success. In particular, the transmissions business, Ricardo Driveline and
Transmission Systems (RDTS), had an outstanding year. Despite the fact that a part of this business was transferred to
Ricardo Vehicle Engineering (RVE) when that division was formed in 2001, its response has been to grow its core
transmissions business to more than offset the transfer. RDTS once again supported the Audi team at Le Mans, where
those cars fitted with Ricardo transmissions won first and second place for the third year running. Shortly after the end
of the year we acquired the business and assets of Gemini Transmissions Limited, a specialist transmissions company
located not far from Leamington, which is equipped with many of the machine tools we require for the support of our
consultancy services and development of motor sport interests.
Despite the pressures evident in the market place, RVE made a promising start achieving an encouraging turnover and
profit in its first year of autonomy.
Both Ricardo Consulting Engineers (RCE) at Shoreham and Ricardo North America (Rinc) conducted their businesses in
markets where pressure on margins was significant. This was promptly tackled by reducing costs and continually
improving our own internal efficiencies. We remain confident about the long term opportunities in both these
subsidiaries and in September of 2001 authorised the landlord to build an extension to our facilities in Detroit to more
efficiently respond to those demands in the future.
Annual results and dividend
Profit before tax was £16.7m compared with £15.1m last year. Turnover increased to £143.2m from £139.9m. Earnings per
share increased by 12.2% to 24.9p from 22.2p. Continued application of good cash management practices produced a
net cash inflow of £16.8m, which translates into net cash balances of £19.9m at the end of the year. Your Board is
recommending an increase in total dividend to 8.6p per share, compared with 7.8p last year. This dividend is covered 2.9
times compared to 2.8 times in 2001.
Strategy
Whilst adhering to the strategy of providing engineering consultancy services to the automotive industry, which has
served us well in recent years, we have decided to extend the consultancy service we offer to our clients, to encompass
several of the strategic issues which our customers encounter. We have recruited Stephen Parker, a senior, well
respected individual from the industry, and given him a remit to develop a capacity to provide strategic consulting
alongside the Company’s existing technology based activity. He joined the Board on 1 August 2002.
Alongside our core consultancy business we have continued to benefit from the policy, which I mentioned last year, of
exploiting some of the intellectual property we have developed in recent years.
People
The death of John Needham was a great loss to Ricardo. John spent his entire career with us and made a significant
contribution to our success and he is sadly missed.
Our business is a people business and the Company is fortunate to have such a competent and committed staff. Once
again I thank them all for the contribution they have made.
Prospects
In the current financial year we are making a significant investment in setting up a strategic consulting business and
integrating Gemini. Whilst our cost base is directly impacted by an increased pension charge, our business continues to
grow and we face the future with confidence.
Sir Noel Davies
23 September 2002
Ricardo plc Annual Report & Accounts 2002  15
Chairman’s Statement Ricardo market place
I am pleased to report record results for the fifth consecutive year in an ever tougher market place. Recession in the
United States and Germany, our major markets, led to a very competitive environment with all of our customers striving
to reduce their costs. Despite these pressures we enter the new financial year with a record order book. The overall mix
of our order book continues to change, reflecting a move away from  testing to increasing volumes of engineering
design consultancy.
Our profile and reputation within our industry continue to rise and, whilst this is good news in helping to develop new
business, it does mean that increasingly our customers put our proposals to them under the microscope, especially as
regards cost and performance.
The United States has been a particularly difficult market over the last year with recession following the events of 11
September and continuing problems for some of our major customers. This is our most challenging market place.
However, the satisfactory delivery of a number of major programmes, together with cost containment, resulted in a
profitable year. This has helped to raise the level of our opportunities and proposals presented. In addition, we have
further strengthened our management team.
Business development
The past year was the first year for the newly created RVE business based at our Leamington site. The year started with
one major programme underway and closed with two major programmes in progress and excellent prospects for the
future. The integration of this business unit based on the original parts from Shoreham and Leamington has gone
extremely smoothly. The clear focus that we now have between engine, transmission and vehicle is benefiting our
programme delivery and marketing, and has been achieved at minimal extra cost.
Just after the year end we concluded the acquisition of the assets and staff of Gemini Transmissions Limited, a company
specialising in the development and production of motorsport racing transmissions to further strengthen our growing
presence in motorsport. We are pleased to welcome the Gemini staff to Ricardo and look forward to the integration of
this business into Ricardo and the further development of our motorsport activities. We will increasingly promote and
develop this business stream where our core skills in engine, transmissions and vehicle engineering can be readily
applied. Whereas the popular view is that motorsport leads the automotive industry in technical development, for
Ricardo, the reality is that our technology developments for the mainstream industry can likewise benefit the motorsport
industry.
One of our fastest growing areas of expertise is electronics and controls for engines, vehicle and transmissions. During
the course of the year, we opened an office in Bedfordshire, specifically to attract the high calibre staff that were
becoming available in that locality. Development of this key expertise remains a priority and one in which we will
continue to concentrate our resources.
Our development in Germany, Europe’s major automotive development country has continued. The volume of work
carried out and orders won have grown significantly, aided by our three recently established offices. As well as looking
for growth in Germany we are also looking for accelerated growth in many aspects of automotive electronics but
excluding in-car entertainment. We will also consider other automotive areas where high added value and intellectual
capital can be achieved but not in volume dependent activities.
A significant building programme in Detroit is nearing completion to bring the majority of our US business under one
roof and to provide improved facilities for this business as the US remains at the centre of our strategic development.
In Japan we carry out a steadily increasing level of business and in the year have won our largest orders ever from this
country. Our level of contact continues to grow as our Japanese customers increasingly recognise their need to
outsource and utilise Ricardo’s range of capabilities. We will continue to develop our client base in Japan.
16 Ricardo plc Annual Report & Accounts 2002
Chief Executive’s Review Research and development
Each year Ricardo spends approximately £5 million at prime cost of our own money on research and development and
considerably more on behalf of our customers. Our costs are fully expensed. Many of these research programmes have
historically led to the development of advanced concepts and capabilities which in future years have been part of our
service offering. This year has seen the fruition of a 24 month programme to develop a vehicle demonstrator, embodying
much of our efforts in that time. This vehicle, code-named i-MoGen – Intelligent Motor Generator – is a mild hybrid
vehicle with a 42 volt electronics, regenerative braking, integrated starter motor and generator with a highly complex
electronic control system. The vehicle is powered by a 1.2 litre turbo charged diesel engine, significantly downsized from
the original 2 litre engine in the host vehicle, with a 28% improvement in fuel efficiency. i-Mo-Gen has been driven by
senior executives from all the major European and United States automotive companies to great acclaim and is a superb
showcase for Ricardo skills and expertise. The vehicle will be demonstrated in Japan and Korea in October. A more
detailed account of this vehicle is given on page 8 alongside other client projects where we have client permission to
discuss the work we have carried out. In recent years we have published a series of these project profiles to better
illustrate the breadth of our capability and client base. The whole series is available on our website at www.ricardo.com.
As I reported last year, we are increasingly seeking to exploit our intellectual property and this year our income from this
source has continued to grow.
People
Staff numbers have remained stable in the year but this conceals a constantly changing mix as the business continues
to grow high added-value engineering consultancy and the volume of testing reduced in line with industry demands.
We confirm our continuing support for our final salary and money purchase pension schemes, increasing the
company’s contributions to both of these schemes. Over the last 10 years, the company’s contribution to the final salary
scheme has had to increase from 5% to 26% of payroll for those members of staff in the scheme and for the new
financial year, 2002/03, our pensions charge will increase by approximately £1.4m. However, our staff are our principal
asset and we consider that our pension schemes, incentive plans and base salary levels are a vital part in ensuring that
they are properly rewarded.
I would like to thank everybody for their enormous contribution in the year.
R J Westhead
23 September 2002
Ricardo plc Annual Report & Accounts 2002  17 Profit and loss account
Although turnover for the continuing businesses increased by only 3.5%, the material content reduced significantly due
to the mix of our orders, which resulted in our “added value” turnover increasing by 10% year on year. Whilst the gross
margin was maintained at 31.4%, this lower material content masks an underlying deterioration in our margins due to
the price pressure from certain competitors. However, as we managed to tightly control our overheads, our net margin
improved to 11.6% (2001: 10.8%) and our pre-tax profits increased by 10.3%.
The effective rate of tax reduced to 27.0% (2001: 28.5%) which has helped increase our basic earnings per share by over
12% to 24.9p (2001: 22.2p). At the last budget, the Government announced the introduction of research and development
tax credits which should enable this reduced tax charge to be sustainable for the foreseeable future.
Our dividend policy over the past four years has been to increase our dividend by a little more than inflation but
significantly less than our increase in earnings in order to build our dividend cover. As we enter a period of expected
sustainable cash generation, and our dividend cover is now nearly three times, this year we are increasing our dividend
in line with our increase in profits.
Balance sheet
For the first time for many years our capital expenditure was less than the depreciation charge as we delayed upgrading
certain engine test cells while we wait to see how the present overcapacity in the engine testing market will be resolved.
We also centralised the control of the expensive third party design and analysis software packages we use around the
Group on both sides of the Atlantic to minimise the need for new licenses, which has resulted in a significant saving.
During the last three years our annual capital expenditure has averaged £13.7m which was needed to correct a prior
period of under investment in the UK while large losses in the US were consuming our cash resources. This correction
is now largely complete and going forward we would expect capital expenditure to be similar to the depreciation charge.
The level of working capital has been reduced during the year by negotiating better payment terms from our clients
which has resulted in payments received in advance increasing by nearly £7m. Although some of these payments will
unwind during the new financial year I expect our cash resources to remain around the £20m mark unless we make a
significant acquisition. Given the strength of our balance sheet together with borrowing facilities of nearly £30m we are
in the enviable position of being able to fund a significant acquisition without necessarily having to undertake a fund
raising exercise.
Cash flow
The cash inflow of £16.8m (2001: £5.6m) was due mainly to the lower capital expenditure coupled with the reduced
working capital. However, looking forward, the Group should continue to be significantly more cash generative than it
has been in the past, as the capital expenditure settles down to a lower sustainable level.
Pensions
As shareholders will be aware, significant attention is being given to the funding position of defined benefit pension
schemes under FRS17. During the last twelve months the stock market has plummeted to record lows and bond yields
have also deteriorated. This has resulted in our scheme’s net deficit increasing from £8.8m at 30 June 2001 to £15.8m by
the end of June 2002.
18 Ricardo plc Annual Report & Accounts 2002
Finance Director’s Review However, we are due to complete the triennial valuation of the scheme later this year and initial actuarial valuations
suggest that on an “ongoing” basis, the scheme will be around £9m underfunded. To correct this situation over time we
have increased both the employers’ and employees’ contributions. These actions are expected to return the scheme to a
fully funded position during the average working life of the existing active members.
A R Goodburn
23 September 2002
Ricardo plc Annual Report & Accounts 2002  19 20 Ricardo plc Annual Report & Accounts 2002
Directors’ Report
The directors present their report and the financial statements for the year ended 30 June 2002.
Business activity
The principal activities of the Group are the provision of engineering and technological services and strategic consulting
to industry, commerce and other agencies. A review of the Group’s operations and future prospects is covered in the
Chairman’s Statement and the Chief Executive’s Review. A geographical turnover analysis is given in note 2 to the
financial statements.
Dividends
The directors propose a final dividend of 6.0p (2001 – 5.3p) per share, amounting to £2,929,000, payable on 
22 November 2002 to shareholders on the register on 25 October 2002. The final dividend proposed will make a total of
8.6p (2001 – 7.8p) per share for the year.
Donations
During the year, the Group made charitable donations totalling £22,950 (2001 – £6,878). There were no political donations
in either years.
Directors
The directors who served on the Board and on Board Committees during the year were:
*Sir Noel Davies, BSc, FCGI, CEng, FIMechE
*P T Ward
*Professor J P Percy, CBE, LLD, CA
R J Westhead, FCA
A R Goodburn, FCA
J R Needham, CEng, MIMechE (resigned 1 January 2002)
C R Bates, BSc, FCA
J W Holt, BEng, MBA
*non-executive
S Parker, who was appointed as Managing Director, Strategic Development on 1 August 2002, did not serve on the Board
or any Board Committee during the year.
Board committees
Audit: J P Percy (Chairman); Sir Noel Davies; P T Ward
Remuneration: Sir Noel Davies (Chairman); P T Ward; J P Percy
Nomination: Sir Noel Davies (Chairman); P T Ward; J P Percy; R J Westhead
Non-executive directors
Letters of appointment
Each non-executive director is appointed for a period of two years. The Nomination Committee recommends to the
Board whether or not an appointment should be renewed.
Remuneration Committee
The report of the Remuneration Committee appears separately on pages 24 to 29. At the forthcoming Annual General
Meeting, the members will be invited to pass an ordinary resolution approving the report as a whole (Resolution 9).
Sections 80 and 95 authorities
The directors will seek to renew authorities under Sections 80 and 95 of the Companies Act 1985 at the Annual General
Meeting, resolutions 8 and 13, empowering them respectively to allot shares and to allot shares for cash otherwise than
pro-rata to existing shareholdings, in both cases subject to specified limits and periods as stated in the notice. Ricardo plc Annual Report & Accounts 2002  21
The authority to allot shares would be in respect of ordinary shares with a maximum nominal value of £2,687,211, which
represents 21.9% of the issued ordinary share capital at the date hereof. The directors have no present intention to
exercise this authority, but will then have flexibility for any suitable opportunities for expansion as and when they arise. 
The maximum nominal value which may be allotted for cash, otherwise than pro-rata to existing shareholdings, would be
£612,639, equivalent to 5% of the issued ordinary share capital at the date hereof.
No issue will be made which would effectively alter the control of the Company, or the nature of its business, without the
prior approval of the shareholders in a general meeting.
Purchase of own shares
The existing Articles permit the Company to buy back its own shares with authority from its members and resolution 14
to this effect will be proposed at the Annual General Meeting. The directors are seeking to renew the authority to buy
back up to 10% of its issued shares, which they will exercise only if circumstances arise in which they consider such
purchases to be in the interests of the shareholders generally and earnings per share (“eps”) can be improved further.
Performance targets, based on eps, attaching to employee incentive schemes will be adjusted accordingly if the
authority is exercised.
Authority for political donations and expenditure
It is not the policy of the Company or its subsidiaries to make donations to political parties and the directors have no
intention of changing that policy. However, as a result of the wide definitions in the Political Parties, Elections &
Referendums Act 2000 (the “Act”), which provides that donations to EU political organisations or EU political expenditure
by  a company must be authorised in advance by shareholders, normal expenditure (such as expenditure on
organisations concerned with matters of public policy, law reform and representation of the business community) and
business activities (such as communicating with the Government and political parties at local, national and European
level) might be construed as political expenditure or as a donation to a political organisation and fall within the
restrictions of the Act.
Resolutions 10, 11 and 12 do not purport to authorise any particular donation or expenditure but are expressed in
general terms as required by the Act and are intended to authorise normal donations and expenditure. If passed, they
will allow the Company and its subsidiaries, Ricardo Consulting Engineers Limited, Ricardo MTC Ltd. and Ricardo
GmbH., to make donations to EU political organisations and to incur EU political expenditure (as defined in the Act) up
to an aggregate limit of £50,000 each in the period ending at the conclusion of the next Annual General Meeting, whilst
avoiding, because of the uncertainty over the definitions used in the Act, inadvertent infringement of the Act. Any EU
political donation made or EU political expenditure incurred which is in excess of £200 will be disclosed in the
Company‘s Annual Report for next year, as required by the Act. The authority will not be used to make political
donations within the normal meaning of that expression.
Employee involvement
It is the Group’s policy to involve employees in its progress, development and performance. Applications for employment
by disabled persons are fully considered, bearing in mind the respective aptitudes and abilities of the applicants
concerned. The Group is a committed equal opportunities employer and has engaged employees with broad
backgrounds and skills. It is the policy of the Group that the training, career development and promotion of a disabled
person should, as far as possible, be identical to that of a person who is fortunate enough not to suffer from a disability.
In the event of members of staff becoming disabled, every effort is made to ensure that their employment with the Group
continues.
Share option schemes 
Ricardo currently operates a savings related share option scheme and two executive share option schemes:
(i) The Ricardo plc 2000 Savings Related Share Option Scheme, which is approved by the Inland Revenue.
(ii) The 1994 Executive Share Option Scheme, which is approved by the lnland Revenue. (iii) The 1995 Executive Share Option Scheme, which is unapproved by the Inland Revenue. 
The 1995 Executive Share Option Scheme is designed to be operated using market purchased shares held in an
Employee Share Ownership Plan (“ESOP”) trust. It is intended by the directors that it will play an important role in
enabling Ricardo to attract and retain high quality executives who can only participate in the 1994 Executive Share
Option Scheme to a limited extent because of restrictions imposed by statute.
The number of shares which can be held under the ESOP is limited to 5% of the company’s issued share capital. The
trustee is Mourant & Co Trustees Limited, an independent professional trustee. The Ricardo ESOP is being financed by a
non-recourse loan, repayable on demand, of up to £1,000,000 (2001: £750,000) from Ricardo plc to the trustee. At 30 June
2002, £957,056 of this had been loaned, and at that date, the trustee of the Ricardo ESOP held 191,000 ordinary shares of
25p in Ricardo plc with a market value at 30 June 2002 of 365.0p per share. The shares held attract an annual dividend of
0.01p per share. At 30 June 2002, an option over 124,000 of the shares held had been exercised.
Long T erm Incentive Plan (“LTIP”)
The details of the LTIP are dealt with in the Remuneration Committee Report on pages 26 and 27.
Substantial shareholders
The Company is informed that, at 10 September 2002, the following are holders of more than 3% of the Company’s
issued ordinary share capital:
% of issued
share number of
Non-beneficial capital shares
Morley Fund Management Ltd 11.15 5,464,247
Standard Life 6.37 3,121,792
Scottish Widows Investment Partnership Ltd 5.20 2,548,144
Legal and General Investment Management 4.43 2,172,766
M&G Investment Management 4.06 1,989,230
Royal and Sun Alliance 4.02 1,972,213
Schroder Investment Management Limited 3.75 1,840,321
Aegon Asset Management 3.72 1,823,229
Social and environmental issues (“S and E”)
Environmental
All major facilities within the Group have been certified to IS014001, the Environmental Management System standard.
This has been achieved by a commitment from the Board that the environmental impact of the Group’s facilities be kept
to a minimum. The Board is committed to continuous improvement in environmental impacts and makes its policy
widely available via notice boards and its intranet and to the public via the www.ricardo.com website. The drivers for the
policy are both the need to continually improve, be good citizens and responsible members of the local communities in
which we operate as well as many of our clients requiring accreditation to IS014001 for their key suppliers. The
application of the policy is described by appropriate processes and procedures as part of the quality system in each
division. Many of these are closely linked to both quality and health and safety procedures. Best practice is shared
between divisions via meetings between Quality Managers. Verification under ISO 14001 is by 6 monthly surveillance
visits from Lloyds Register Quality Assurance and the internal technical audit team. It is preferred that suppliers have
both IS09001:2000 and IS014001.
Ricardo has three principal areas of environmental impact. The positive impacts are based around the core business of
engineered automotive products for the future where a key business driver is the reductors of emissions, fuel
consumption and noise reduction. Examples of this include Ricardo and client funded projects where we are developing
technology to meet anticipated emissions and fuel economy requirements in the future, as well as engineering products
for current and forthcoming legislation across the world.
Examples include:
l The i-MoGen mild hybrid vehicle from our own research and development
l An EPA contract at Ricardo Inc on advanced hybrid technologies
l A new gasoline engine concept delivering diesel levels of fuel economy
22 Ricardo plc Annual Report & Accounts 2002
Directors’ Report Ricardo plc Annual Report & Accounts 2002  23
l Improved thermodynamic cycles for more efficient commercial power generation
l New software tools to optimise designs for reduced emissions and fuel consumption
As a result of this level of expertise, Ricardo is often asked to provide strategic advice to governmental and commercial
client organisations to support product or regulation strategy development.
To support this positive impact Ricardo also supplies information services to clients covering current and future
emission regulations in an on-line product called EMLEG.
Material selection is the second key impact. Ricardo supports the EC End of Life Directive via close co-operation with its
clients in selecting and testing materials for products it designs and develops. These decisions are normally led from
client corporate standards for materials and manufacturing processes.
The third impact area is the operation of the business. Our testing activities use fuels to support the positive impacts
and meet customer requirements. Research and development on improving test methods leads to lower fuel
requirements, particularly in reducing the amount of vehicle testing in calibration programmes. Other impacts include
the conventional waste streams which are monitored to identify potential improvement opportunities. Higher risk parts
of the facilities such as fuel stores have containment and inspection regimes which meet local requirements. Examples
of improvement projects include removal of halon gas from test cell fire suppression systems and increasing the
number of regenerative dynamometers used in test beds. Good relationships are maintained with national and local
regulatory organisations such as the Environment Agency and Environmental Health Departments in the UK and EPA in
the USA. Staff training in health, safety and environmental matters is a priority and is reviewed annually as part of
normal appraisal processes.
Social
The company has a policy of ensuring that its minimum standards comply with the laws of the countries in which it
operates. Health and safety activities at a minimum comply with the local regulations in the operating countries and are
verified by regular internal audit and inspection and periodic external audit by the British Safety Council in the UK and
OSHA in the USA. In the USA there is a very proactive approach to complying with the Equal Employment Opportunity
Commission (EEOC) requirements and Affirmative Action Plans (AAP) which are focused on equal career enhancement
opportunities for all staff and recruits. Similar policies exist in Europe to comply with European law. Compliance audits
are also undertaken by the technical internal audit team.
There are also policies on helping charities and working with local communities. Examples of charitable donations
include matching the value of an employee collection for the US Red Cross in Ricardo Inc following the terrible events of
11 September 2001 and supporting the equipping of a technology block at a local high school in West Sussex.
The Chief Executive is responsible for S and E issues at Board level and this is delegated to Divisional Managing
Directors at an operational level.
Supplier payment policy and practice
The Group does not operate a standard code in respect of payments to suppliers. The operating companies are
responsible for agreeing with suppliers the terms of payment at the start of business, ensuring that suppliers are aware
of the terms of payment and to make payments in accordance with their contractual and other legal obligations.
The ratio, expressed in days, between the amount invoiced to the Company by its suppliers during the year to 30 June
2002 and the amount owed to its trade creditors at 30 June 2002, was 36.2 days (2001: 37.2 days).
Auditors
The directors propose that PricewaterhouseCoopers be re-appointed as auditors of the Company, and a resolution to that
effect will be proposed at the Annual General Meeting (Resolution 7).
By order of the Board
M Wightman
Secretary
23 September 2002 General policy
The remuneration of the executive directors is set by the Remuneration Committee in accordance with a remuneration
policy determined by the board upon recommendation from the committee. This policy has remained unchanged during
the year ended 30 June 2002.
The Committee, which consists solely of the non-executive directors of the company (whose biographical details are
given on page 14) determines the detailed terms of service of the executive directors, including basic salary, incentives
and benefits and the terms upon which their service may be terminated.
Apart from their letters of appointment with the company (details of which are on page 20 in the Directors’ Report) and
shareholdings in the Company (details of which are given below), the non-executive directors have no personal financial
interest in the Company, no potential conflict of interest arising from cross directorships and no day-to-day involvement
in the running of the Company.
During the year the Committee took advice from independent firms of compensation and benefit consultants in respect
of executive directors’ salaries and long-term incentives.
Ricardo’s remuneration policy for executive directors is designed to attract, retain and motivate executives of the high
calibre required to ensure the Group is managed successfully to the benefit of shareholders. In setting remuneration
levels the Committee takes into consideration the remuneration practices in other UK companies of a similar size.
The fees of the non-executive directors are set at a level which will attract individuals with the necessary experience and
ability to make a significant contribution to the Group’s affairs.
Shareholders will be given the opportunity to approve the remuneration committee report at the forthcoming AGM
(Resolution 9).
Executive directors’ remuneration
Basic salary
This is based on a number of factors including market rates together with the individual director’s experience,
responsibilities and performance. Individual salaries of directors are subject to review annually on 1 July.
Benefits in kind
These comprise principally car benefits, medical and life assurance cover.
Performance related bonus
Payments may be made annually to R.J. Westhead and A.R. Goodburn under arrangements which link remuneration to
the growth in the Group’s basic earnings per share (“eps”). The bonus is calculated by taking the average basic eps
pertaining over the previous three years, applying a growth factor of 7.5% together with the increase in the Retail Price
Index for the current year and comparing that figure (“the target”) with the current basic eps. If those figures equate a
bonus of 30% of basic salary is paid. No bonus is paid if the current eps is 0.4p or more below the target. If the current
eps is 1.2p or more above the target, the maximum bonus of 50% of basic salary is payable. The maximum bonus of 50%
was achieved for the year ended 30 June 2002.
C.R. Bates and J.W. Holt can also earn a maximum bonus of 50% of basic salary based on a combination of the
improvement in profit before tax of both their respective divisions and the Group. If maximum bonuses were to be
earned, the Group element would equate to 25% of basic salary. Local factors are taken into consideration in
determining improvement in profit of their divisions. For the year ended 30 June 2002, C.R. Bates and J.W. Holt achieved
bonuses of 35.4% and 20% of their respective basic salaries.
24 Ricardo plc Annual Report & Accounts 2002
Remuneration Committee Report T otal remuneration
Performance T otal Total
Salary related bonus Benefits 2002 2001
£’000 £’000 £’000 £’000 £’000
R.J. Westhead 269 130 45 444 403
A.R. Goodburn 164 81 12 257 223
J.R. Needham
(a)
75 38 17 130 227
C.R. Bates
(b)
136 46 13 195 98
J.W. Holt
(b)
191 38 5 234
(e)
131
(e)
Sir N. Davies 75 — — 75 70
P .T. Ward 28 — — 28 25
J.P . Percy
(d)
30 — — 30 28
C.W. Foreman
(c)
— — — — 9
968 333 92 1,393 1,214
(a) Resigned 1 January 2002
(b) Appointed 1 January 2001
(c) Resigned 3 November 2000
(d) Appointed 1 July 2000
(e) J.W. Holt was paid in US dollars. For the purposes of this report his emoluments have been translated at US$1.4410/£
(2001: $1.4520/£).
Pensions
Executive directors may join the Group Tier of the Ricardo Group Pension Fund (“RGPF”) at the invitation of the
Company. The plan is established under trust, contracted out of the State Earnings Related Pension Scheme and
approved by the Inland Revenue under the Income and Corporation Taxes Act 1998. All the executive directors, with the
exception of J.W. Holt, who is a member of the Supplemental Executive Retirement plan, which is a defined contribution
plan, are members of the RGPF .
The Group Tier of the RGPF provides directors with a pension of up to two thirds of basic salary (up to the earnings cap)
on retirement at age 62 after 20 or more years service. Members’ contributions are required at the rate of 6% of
pensionable earnings rising to 7% from 1 July 2002 and 8% from 1 July 2003. Performance related bonuses do not form
part of pensionable earnings.
At retirement, members may commute a portion of their pension for a cash sum. Retirement before the pension age is
subject to actuarial reduction except those retiring between the ages of 60 and 62. The right to a pension on early
retirement is only available with the consent of the company and the individual must be over 50 or retiring due to ill
health.
The total pension paid by the fund in excess of the guaranteed minimum pension will increase annually at the rate of 5%
compound or by the rise in the Retail Prices Index if lower. This is subject to an overriding guarantee that pension
increases will not be less than 3% per annum compound increase on the total pension accrued to 30 June 2002.
Pension benefits accrued from 1 July 2002 are not subject to this guaranteed minimum increase.
On death in service, a lump sum of four times annual salary at date of death is payable together with a refund of
members’ contributions paid to the fund, a spouse’s pension of 35% of annual salary and a pension per child of 12
1
/
2
%
of annual salary, subject to a maximum limit of 25%, until the maximum age of 21. On death after retirement, a spouse’s
pension is paid at 50% of the member’s pre commutation pension and if death occurs within five years after retirement
a lump sum equal to the member’s monthly rate of pensionable pay by the fund at the date of death multiplied by the
number of unpaid monthly instalments to the end of that five year period.
Ricardo plc Annual Report & Accounts 2002  25 The company has established a Funded Unapproved Retirement Benefit Schemes (“FURBS”) by which additional
retirement provision is made for R.J. Westhead and A.R. Goodburn whose entitlement under the RGPF is restricted by
the earnings cap. Payments are made to this scheme on the basis of actuarial advice. Under the directors’ service
agreements a review of the funded pension benefits at the date of retirement will need to be carried out and further
amounts may become payable depending on the funding position at that time.
The first table below shows pension amounts for those directors whose pension arrangements were either wholly or
partly of the defined benefit type. The second table shows the amounts paid to the FURBS together with the related tax
on the taxable benefit of the FURBS.
Transfer
values of
Increase the increase
Total accrued in accrued in accrued
pension at pension during pension during
30 June 2002 the year the year
£’000 £’000 £’000
R.J. Westhead 31 4 54
A.R. Goodburn 27 3 45
C.R. Bates 15 3 19
The total accrued pension is the amount that would be paid each year on retirement based on service to the end of the
current year. The increase in the additional pension earned during the year excluding any increase for inflation.
The transfer value has been calculated on the basis of actuarial advice in accordance with Actuarial Guidance Notice
GN11, less directors’ contributions. It does not represent an amount payable to directors and it cannot therefore be
meaningfully added to annual remuneration.
FURBS FURBS 2002 FURBS FURBS 2001
contribution taxation T otal contribution taxation Total
£’000 £’000 £’000 £’000 £’000 £’000
R.J. Westhead 95 63 158 70 47 117
A.R. Goodburn 47 31 78 35 23 58
On appointment as a director, contributions continued in respect of J.W. Holt’s existing US defined contribution
retirement plan. Contributions paid during the year ended 30 June 2002 amounted to £27,000 (2001: £3,000).
LTIP
The LTIP was operated for the sixth time during the year. The aim of the LTIP is to focus the efforts of senior executives on
the long-term performance of the Group in a way, which aligns with the interests of shareholders. The allocation of
shares depends upon seniority and ranges between fifteen and twenty five per cent of salary.
The eventual number of shares which participants may receive, if any, is dependent on the achievement of the
performance conditions of the scheme at the end of the three year cycle of each plan. The principal condition relates to
the Group’s earnings per share performance compared with that of a comparator group comprising companies within the
FTSE 250 excluding financial services companies. Broadly, if the growth in the Group’s basic eps on a cumulative basis
places the Group below the median of the comparator group, no shares are allocated. However if the Group’s basic eps
performance places it between the 50th and 89th percentiles of the comparator group, allocations of shares ranging from
20% to 98% are made. It is only if the Group’s performance places it in the top decile that an award of 100% is made.
26 Ricardo plc Annual Report & Accounts 2002
Remuneration Committee Report For the scheme that matured on 30 June 2001, participants received 98% of the shares provisionally allocated to them.
For the scheme that matured on 30 June 2002, as the Group’s basic eps performance is likely to place it in the 71st
percentile of the comparator group, participants will probably receive 62% of the shares provisionally allocated to them.
The LTIP has been approved by the shareholders.
Details of the provisional number of shares awarded to directors under the LTIP are as follows:
Shares
Shares not At 30
At 1 July provisionally finally June Value
Cycle Award 2001 allocated vesting Shares vested 2002 Vested Vesting
ending date Number Number Number Number Number £’000 date
R.J. Westhead 2001 1.7.98 11,384 – (228) 11,156 – 44 26.09.01
2002 1.7.99 15,041 – – – 15,041 – –
2003 1.7.00 10,653 – – – 10,653 – –
2004 1.7.01 – 15,854 – – 15,854 – –
A.R. Goodburn 2001 1.7.98 6,888 – (138) 6,750 – 27 26.09.01
2002 1.7.99 9,018 – – – 9,018 – –
2003 1.7.00 6,346 – – – 6,346 – –
2004 1.7.01 – 9,817 – – 9,817 – –
C.R. Bates 2001 1.7.98 5,122 – (102) 5,020 – 20 26.09.01
2002 1.7.99 5,418 – – – 5,418 – –
2003 1.7.00 3,808 – – – 3,808 – –
2004 1.7.01 7,927 – – 7,927 – –
J.W. Holt 2001 1.7.98 6,520 – (130) 6,390 – 25 26.09.01
2002 1.7.99 7,228 – – – 7,228 – –
2003 1.7.00 5,704 – – – 5,704 – –
2004 1.7.01 – 11,378 – – 11,378 – –
J.R.Needham 2001 1.7.98 5,434 – (109) 5,325 – 21 26.09.01
2002 1.7.99 9,018 – (9,018) – – – –
2003 1.7.00 6,346 – (6,346) – – – –
2004 1.7.01 – – – – – – –
Total of awards
vested in 2001 34,641 137
The value of the awards vested in 2002 is based on the average market price of Ricardo plc shares on the date of vesting
of £3.98.
Share option schemes
Ricardo currently operates a savings related share option scheme and two executive share option schemes:
(i) The Ricardo plc 2000 Savings Related Share Option Scheme
(ii) The 1994 Executive Share Option Scheme, which is approved by the Inland Revenue
(iii) The 1995 Executive Share Option Scheme, which is unapproved by the Inland Revenue
The company grants options from time to time under either the 1994 or the 1995 Executive Share Option Schemes. The
Ricardo plc 2000 Savings Related Share Option Scheme is an all employee scheme where participants save a fixed
monthly sum for three or five years and may use the sum generated by their savings contract to exercise options which
are granted at a 20% discount to the market price. Depending on the option period chosen, exercise can normally take
place after three, five or seven years.
The above mentioned share option schemes have been approved by the shareholders.
Ricardo plc Annual Report & Accounts 2002  27 Options were granted during the year to C.R. Bates and J.W. Holt, in recognition of their appointment to the main board
of Ricardo plc in January 2001. These options were granted under the 1994 Executive Share Option Scheme and are
subject to the achievement of performance criteria. These criteria require that the Group’s basic eps must increase on
average by at least 7.5% per annum (adjusted for inflation), over the three year period after the grant date, before the
option may be exercised. If the Group’s eps performance fails to meet this target, the period over which performance is
measured is extended to four years and if necessary again to five years, in both cases still requiring the average growth
in eps over the period to exceed 7.5% per annum (adjusted for inflation). If the Group’s performance fails to achieve this
target after five years, the option lapses.
Details of directors’ interests in options over Ricardo plc’s ordinary shares granted under the respective share option
schemes are set out below:
The 1994 Executive Share Option Scheme
Number of Options Exercise Market price
During the year price at date of Date
At At exercise from which Expiry
1.7.01 Granted Exercised 30.6.02 pence pence exercisable Date
R.J. Westhead 70,000 – (70,000) – 138.0 482.5 11.10.97 10.10.04
70,000 – (70,000) – 140.0 482.5 22.03.98 21.03.05
144,000 – – 144,000 114.0 – 15.03.99 14.03.06
A.R. Goodburn 10,000 – – 10,000 114.0 – 15.03.99 14.03.06
C.R. Bates – 50,000 – 50,000 381.0 – 25.09.04 24.09.11
J.W. Holt – 50,000 – 50,000 381.0 – 25.09.04 24.09.11
The 1995 Executive Share Option Scheme
Number of Options Exercise Market price
During the year price at date of Date
At At exercise from which Expiry
1.7.01 Granted Exercised 30.6.02 pence pence exercisable Date
A.R. Goodburn 100,000 – (33,000) 67,000 148.0 469.0 12.12.00 11.12.04
The Ricardo plc 2000 Savings Related Share Option Scheme
Number of Options Exercise Market price
During the year price at date of Date
At At exercise from which Expiry
1.7.01 Granted Exercised 30.6.02 pence pence exercisable Date
R.J. Westhead 9,015 – – 9,015 114.8 – 1.02.03 31.07.03
1,376 – – 1,376 281.6 – 1.12.02 31.05.03
A.R. Goodburn 2,328 – – 2,328 416.0 – 1.02.04 31.07.04
C.R. Bates 2,064 – – 2,064 281.6 – 1.12.02 31.05.03
Gains made by directors on share options
The aggregate of the total theoretical gains on share options exercised by directors during 2002 amounted to £587,000,
comprising £481,000 relating to R.J. Westhead and £106,000 relating to A.R. Goodburn. This compares to a gain on
exercise of options during the year to 30 June 2001 of £34,000, entirely relating to A.R. Goodburn.
The gain made by directors on share options is calculated by reference to the difference between the closing mid market
price on the date of exercise and the exercise price of the options, disregarding whether such shares were sold or
retained on exercise, and is stated before tax. R.J. Westhead retained all of his shares on exercise and A.R. Goodburn
disposed of his shares on exercise during the year.
No directors’ options have lapsed during the year.
28 Ricardo plc Annual Report & Accounts 2002
Remuneration Committee Report Directors’ share interests
Ordinary shares Option over ordinary shares
At 30.6.02 At 1.7.01 At 30.6.02 At 1.7.01
R.J. Westhead 208,198 67,505 154,391 294,391
A.R. Goodburn 42,126 40,076 79,328 112,328
C.R. Bates 6,877 3,865 52,064 2,064
J.W. Holt 23,990 20,000 50,000 –
Sir N. Davies 6,000 6,000 – –
P .T. Ward 10,500 10,500 – –
J.P . Percy – – – –
At 23 September 2002 the respective holdings of the directors had not changed from those at 30 June 2002.
Stephen Parker held no shares at 23 September 2002.
At 30 June 2002, 67,000 ordinary shares in the Company were held in the ESOP trust and each of the executive directors
of the Company, by virtue of being, together with other employees of the Company, a potential beneficiary under that
trust, is taken to be interested in those shares.
The middle market price of the Company’s ordinary shares on 30 June 2002 was 365.0p and the range in the year was
518.5p to 354.5p with an average price of 438.8p.
Non-executive directors
The board determines fees paid to non-executive directors. The non-executive directors do not participate in any of the
company’s share schemes, pension schemes or bonus arrangements nor do they have service agreements.
Executive directors’ service agreements
The board’s policy on setting notice periods for new 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.
R.J. Westhead is employed under a service contract containing a notice period of two years. All of the other directors
have service agreements terminable on one year’s notice.
The Remuneration Committee has given careful consideration to the Combined Code on Corporate Governance, which
suggests that notice periods should not exceed one year, and it takes the view that the current notice period in R.J.
Westhead’s service agreement remains appropriate having regard to all of the circumstances.
External appointments
The board recognises the benefit Ricardo can obtain if executive directors of Ricardo serve as non-executive directors of
other companies. Subject to review in each case, the Remuneration Committee’s general policy is that executive
directors may accept non-executive directorships with other companies from which the director may retain the fees.
On behalf of the board.
Sir Noel Davies
Chairman of the Remuneration Committee
23 September 2002
Ricardo plc Annual Report & Accounts 2002  29 Corporate Governance 
The Board supports the recommendations of “The Combined Code – Principles of Good Governance and Code of Best
Practice” (“The Combined Code”) which has been appended to the UK Listing Rules.
Application and compliance with the Combined Code 
The Company has complied throughout the year with the Combined Code by applying the Principles of Good Governance
as set out in Section 1 of the Combined Code except that as regards Provision B1.7 (Directors’ service contracts) the
service contract of the Chief Executive provides for a notice period by the Company in excess of the one year as
recommended by the Combined Code. There is no plan to reduce this period for the reasons set out in the Remuneration
Committee Report.
The Board of Directors and its committees
The Board meets at least twelve times a year and consists of four executive and three non-executive members at 30 June
2002.
J.P . Percy is Chairman of the Audit Committee, which also has Sir Noel Davies and P .T.Ward as members. All are non-
executive directors. The Audit Committee, which has written terms of reference, meets at least twice a year with the
external auditors in attendance. The executive directors attend as appropriate.
The Remuneration Committee, which is chaired by Sir Noel Davies, also comprises the non-executive directors and
meets at least once a year. The Chief Executive attends when appropriate.
Recommendations of executive and non-executive appointments to the Board are made by the Nomination Committee
which meets as the need arises. The Committee comprises Sir Noel Davies as Chairman, J.P .Percy and P .T.Ward with
R.J.Westhead as an executive member.
The non-executive directors are considered by the Board of Directors to be totally independent of management and are
free to exercise independence of judgement. The non-executive Deputy Chairman, J.P .Percy, has been recognised as
being the senior independent director.
Re-election
Directors are subject to election at the Annual General Meeting following their appointment and are subject to re-
election at least every three years.
Shareholder communications
The directors meet regularly with institutional shareholders to foster a mutual understanding of objectives.
The directors encourage the participation of all shareholders, including private investors, at the Annual General Meeting
and as a matter of policy the level of proxy votes lodged on each resolution is declared at the meeting.
The Annual Report and Accounts is published on our website www.ricardo.com and can be accessed by our
shareholders.
30 Ricardo plc Annual Report & Accounts 2002
Corporate Governance Going Concern
After making enquiries, the directors have confidence that the Company and the Group have adequate resources to
continue in operational existence for the foreseeable future. For this reason they continue to adopt the going concern
basis in preparing the accounts.
Internal controls
The Board is responsible for the Group’s system of internal controls and for reviewing its effectiveness. Such a system is
designed to manage rather than eliminate the risk of failure to achieve business objectives, and can only provide
reasonable and not absolute assurance against material misstatement or loss.
Each part of the Group highlights potential financial and non-financial risks which may impact on the business as part
of the monthly management reporting procedures. The Board receives these monthly management reports and monitors
the position at Board meetings.
As part of the risk management process, directors and senior managers are required to certify on an annual basis that
they have established effective controls to manage risk and to comply with legislation and Group procedures. The
procedures have been put in place to ensure that effective control and risk management is embedded in the Group and
that the Group is in a position to react as appropriate as new risks arise.
The Board confirms that there are ongoing processes for identifying, evaluating and mitigating the significant risks faced
by the Group. The processes have been in place during the year under review and up to the date of approval of the
Annual Report and Accounts, consistent with the guidance for directors on internal control issued by the Turnbull
Committee.
The Group’s internal financial control and monitoring procedures include:
(a) clear responsibility on the part of line and financial management for the maintenance of good financial controls
and the production of accurate and timely financial management information;
(b) the control of key financial risks through clearly laid down authorisation levels and appropriate segregation of
accounting duties;
(c) detailed monthly budgeting and reporting of trading results, balance sheets and cash flows, with regular review by
management of variances from budget;
(d) reporting on compliance with internal financial controls and procedures by Group internal audit.
(e) review of reports issued by the external auditors.
The Audit Committee on behalf of the Board reviews reports from both the internal and external auditors together with
management’s response regarding proposed actions. In this manner they have reviewed the effectiveness of the system
of internal controls for the period covered by the accounts.
Appointment of auditors
The Audit Committee considers the effectiveness of the audit process before recommending to the Board a resolution
for the re-appointment of the auditors for the ensuing year.
Auditor independence
The Audit Committee also reviews the extent of any non-audit service so as to satisfy itself that there is no threat to the
independence of the external auditors. The non-audit services conducted are of an assurance nature.
Ricardo plc Annual Report & Accounts 2002  31 The following statement, which should be read in conjunction with the Independent Auditors’ Report on page 33, is
made with a view to distinguishing for shareholders the respective responsibilities of the directors and of the auditors in
relation to the financial statements.
The directors are required by the Companies Act 1985 to prepare financial statements for each financial year which give
a true and fair view of the state of affairs of the Company and the Group as at the end of the financial year and of the
profit or loss for the financial year.
The directors consider that in preparing the financial statements on pages 34 to 59 and the relevant disclosures in the
Remuneration Committee Report the company has used appropriate accounting policies, consistently applied and
supported by reasonable and prudent judgements and estimates and that all accounting standards which they consider
to be applicable have been followed. The financial statements have been prepared on a going concern basis.
The directors have responsibility for ensuring that the company keeps accounting records which disclose with
reasonable accuracy the financial position of the company and which enable them to ensure that the financial
statements comply with the Companies Act 1985.
The directors have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of
the company and to prevent and detect fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the Annual Report and Accounts on the website in
accordance with United Kingdom legislation governing the preparation and dissemination of financial statements.
Access to the website is available from outside the United Kingdom, where comparable legislation may be different.
32 Ricardo plc Annual Report & Accounts 2002
Statement of Directors’ Responsibilities We have audited the financial statements which comprise the consolidated profit and loss account, consolidated and
company balance sheets, statement of total recognised gains and losses, reconciliation of movements in total
shareholders’ funds, consolidated cash flow statement and the related notes including the disclosures relating to
directors’ remuneration contained in the remuneration committee report.
Respective responsibilities of directors and auditors
The directors’ responsibilities for preparing the annual report and the financial statements in accordance with applicable
United Kingdom law and accounting standards are set out in the statement of directors’ responsibilities.
Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements,
United Kingdom Auditing Standards issued by the Auditing Practices Board and the Listing Rules of the Financial
Services Authority.
We report to you our opinion as to whether the financial statements give a true and fair view and are properly prepared
in accordance with the Companies Act 1985. We also report to you if, in our opinion, the directors’ report is not
consistent with the financial statements, if the Company has not kept proper accounting records, if we have not received
all the information and explanations we require for our audit, or if information specified by law or the Listing Rules
regarding directors’ remuneration and transactions is not disclosed.
We read the other information contained in the annual report and consider the implications for our report if we become
aware of any apparent misstatements or material inconsistencies with the financial statements. The other information
comprises only the chairman’s statement, chief executive’s review, finance director’s review, directors’ report,
remuneration committee report, corporate governance statement, and statement of directors’ responsibilities.
We review whether the corporate governance statement reflects the Company’s compliance with the seven provisions of
the Combined Code specified for our review by the Listing Rules, and we report if it does not. We are not required to
consider whether the board’s statements on internal control cover all risks and controls, or to form an opinion on the
effectiveness of the Company’s or Group’s corporate governance procedures or its risk and control procedures.
Basis of audit opinion
We conducted our audit in accordance with auditing standards issued by the Auditing Practices Board. An audit
includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It
also includes an assessment of the significant estimates and judgements made by the directors in the preparation of the
financial statements, and of whether the accounting policies are appropriate to the Company’s circumstances,
consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we considered
necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are
free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also
evaluated the overall adequacy of the presentation of information in the financial statements.
Opinion
In our opinion the financial statements give a true and fair view of the state of affairs of the Company and the Group at
30 June 2002 and of the profit and cash flows of the Group for the year then ended and have been properly prepared in
accordance with the Companies Act 1985.
PricewaterhouseCoopers
Chartered Accountants and Registered Auditors
Southampton
23 September 2002
Ricardo plc Annual Report & Accounts 2002  33
Independent Auditors’ Report to the Members of Ricardo plc 2002 2001
Notes £’000 £’000
T urnover 2
Continuing operations 143,178 138,370
Discontinued operation – 1,541
143,178 139,911
Operating profit 3
Continuing operations 16,495 15,681
Discontinued operation – 10
16,495 15,691
Profit on disposal of discontinued operation 4 – –
Net interest 5 164 (584)
Profit on ordinary activities before taxation 6 16,659 15,107
Taxation on profit on ordinary activities 8 (4,506) (4,277)
Profit on ordinary activities after taxation 12,153 10,830
Equity minority interest (92) (187)
Profit for the financial year 12,061 10,643
Dividends – including non equity 9 (4,207) (3,755)
Retained profit for the year 22 7,854 6,888
Basic earnings per ordinary share 10 24.9p 22.2p
Diluted earnings per ordinary share 10 24.5p 21.6p
There is no material difference between the profit on ordinary activities before taxation and the retained profit for the
year stated above and their historical cost equivalents.
34 Ricardo plc Annual Report & Accounts 2002
Consolidated Profit and Loss Account for the year ended 30 June 2002 Group Company
2002 2001 2002 2001
Notes £’000 £’000 £’000 £’000
Fixed assets
Intangible assets 11 35 48 – –
Tangible assets 12 45,195 49,445 6,231 5,800
Investment properties 13 – 75 – 75
Investments 14 331 723 16,499 16,889
45,561 50,291 22,730 22,764
Current assets
Stocks 15 1,667 1,487 – –
Debtors 16 46,322 43,010 20,270 19,155
Cash deposit 17 340 340 – –
Cash at bank and in hand 28,090 13,564 24,214 13,532
76,419 58,401 44,484 32,687
Creditors – amounts falling due within
one year 18 (53,166) (45,263) (30,861) (21,428)
Net current assets 23,253 13,138 13,623 11,259
T otal assets less current liabilities 68,814 63,429 36,353 34,023
Creditors – amounts falling due after more
than one year 19 (6,840) (8,641) (5,200) (5,441)
Provisions for liabilities and charges 20 (5,783) (6,302) (125) (278)
Net assets 56,191 48,486 31,028 28,304
Capital and reserves
Called up share capital 21 12,247 12,154 12,247 12,154
Share premium account 22 9,767 8,364 9,767 8,364
Capital redemption reserve 22 40 40 40 40
Merger reserve 22 967 967 – –
Long term incentive plan reserve 22 594 610 594 610
Profit and loss account 22 32,293 25,996 8,380 7,136
T otal shareholders’ funds (including non-equity interests) 55,908 48,131 31,028 28,304
Equity minority interest 283 355 – –
Capital employed 56,191 48,486 31,028 28,304
The financial statements on pages 34 to 59 were approved by the Board of Directors on 23 September 2002 and signed
on its behalf by:
Sir Noel Davies Chairman
Rodney Westhead Chief Executive
Ricardo plc Annual Report & Accounts 2002  35
Consolidated and Company Balance Sheets as at 30 June 2002 2002 2001
Notes £’000 £’000
Profit for the financial year 12,061 10,643
Foreign exchange variances 22 (877) 261
Total recognised gains and losses relating to the year 11,184 10,904
Reconciliation of Movements in Total Shareholders’ Funds 
for the year ended 30 June 2002
2002 2001
£’000 £’000
Profit for the financial year 12,061 10,643
Dividends (4,207) (3,755)
7,854 6,888
Other recognised (losses)/gains (877) 261
Issue of ordinary shares to the trustees of the LTIP 471 468
Proceeds on issue of new shares under an employee share scheme 345 450
Consideration on repayment of preference shares – (72)
Long term incentive plan reserve (16) 143
Goodwill written back to profit and loss account on disposal of 
discontinued operation – 2,061
Addition to total shareholders’ funds 7,777 10,199
Opening total shareholders’ funds 48,131 37,932
Closing total shareholders’ funds 55,908 48,131
36 Ricardo plc Annual Report & Accounts 2002
Statement of Group Total Recognised Gains and Losses for the year ended 30 June 2002 2002 2001
Notes £’000 £’000 £’000 £’000
Net cash inflow from operating activities 23 30,242 23,644
Returns on investments and servicing of finance
Interest received 727 955
Interest paid (541) (1,595)
Interest element of finance lease rental payments – (5)
Dividends paid on non-equity shares – (2)
Dividend paid to minority shareholder (141) (93)
Net cash inflow/(outflow) from returns on investment 
and servicing of finance 45 (740)
T axation (3,204) (4,202)
Capital expenditure and financial investment
Unlisted trade investment – (232)
Purchase of tangible fixed assets (5,967) (13,032)
Sale of tangible fixed assets 332 761
Net cash outflow from capital expenditure and 
financial investment (5,635) (12,503)
Acquisitions and disposals
Sale of subsidiary undertaking – 3,255
Cost of disposal – (260)
Net cash inflow from acquisitions and disposals – 2,995
Equity dividends paid (3,829) (3,587)
Cash flow before use of financing 17,619 5,607
Financing
Issue of ordinary share capital 345 450
Redemption of preference shares – (72)
Amount received in respect of ESOP shares 49 –
Capital elements of finance lease rental payments (1) (52)
Loans repaid (1,209) (306)
Net cash (outflow)/inflow from financing (816) 20
Increase in cash 24 16,803 5,627
Ricardo plc Annual Report & Accounts 2002  37
Consolidated Cash Flow Statement for the year ended 30 June 2002 38 Ricardo plc Annual Report & Accounts 2002
Notes to the Financial Statements
1 Accounting policies
These financial statements are prepared under the historical cost convention, the accounting policies set out below
and in accordance with applicable accounting standards.
(a) Basis of consolidation
The financial statements incorporate the results of all subsidiaries from the date of acquisition or to the date of
disposal.
(b) Goodwill
Goodwill arising on consolidation represents the excess of the fair value of the consideration given over the fair value
of the identifiable net assets acquired. From 1 July 1998 goodwill arising on the acquisition of subsidiaries,
associates and joint ventures is capitalised and amortised as appropriate. Goodwill arising on acquisitions prior to 
1 July 1998 was written off immediately against reserves. This goodwill had been eliminated in line with the
accounting policy in place at the time and will be charged or credited in the profit and loss account on the
subsequent disposal of the business to which it related.
(c) Turnover
Turnover consists of amounts chargeable to customers for products and services provided and is exclusive of value
added tax and other sales taxes.
The Group’s services turnover is derived from work undertaken for customers on substantially long term contracts.
Work is undertaken for customers either on the basis that time and materials are billed as incurred or according to
the terms of fixed price contracts. For time and material contracts, turnover and profit is recognised according to
time worked and materials expended. With respect to fixed price contracts, turnover is recognised according to the
percentage of the estimated total contract value completed or the achievement of contractual milestones; a
proportion of profit is also recognised as the contract progresses. All losses on fixed price contracts are recognised
in the first period they are incurred or foreseen. Revenue and profit is recognised from project variations when it is
expected that it will be recovered from customers.
The corresponding amount for turnover is included within debtors as amounts recoverable on contracts. Advance
payments received from customers are included in creditors as payments received in advance and amounts are set
off against the value of work undertaken as the contracts progress.
The Group’s product turnover is derived from the sale of licenses for its software and related services, which include
maintenance and training services and from the sale of subscriptions for technical support services.
Income from licence arrangements is recognised when a signed contract is obtained and delivery has occurred.
Payments received in advance of revenue recognition are recorded as deferred income. Revenue from training is
recognised when the services are performed. Income from subscriptions is recognised over the life of the
subscription.
(d) Tangible fixed assets
Depreciation is provided to write off the value (being cost less estimated residual value) of long leasehold property
and freehold buildings, and the cost of other tangible fixed assets over their estimated useful lives as follows:
Freehold buildings – Between 25 and 50 years
Long and short leasehold property – Over the term of the lease
Plant and machinery – Between 5 and 10 years
Fixtures, fittings and equipment including computer
aided design equipment – Between 3 and 10 years
Motor vehicles – Between 4 and 5 years
Freehold land is not depreciated. Ricardo plc Annual Report & Accounts 2002  39
1 Accounting policies
(e) Investments
Investments are stated at cost, less any impairment in value.
(f) Stocks and work in progress
Stocks are stated at the lower of cost, including attributable overheads, and net realisable value. Work in progress is
stated at cost, including attributable overheads, less any foreseeable losses and progress payments receivable.
Pre production and development costs relating to specific contracts are included in work in progress to the extent to
which they are recoverable.
(g) Research and development
Expenditure on research and development is written off in the year in which it is incurred.
(h) Foreign exchange
Assets and liabilities denominated in foreign currencies are translated into sterling at the rate of exchange ruling at
the balance sheet date. Transactions in foreign currencies are translated into sterling at the rate of exchange ruling
at the date of the transaction. Exchange gains and losses arising in the normal course of trading are dealt with in the
profit and loss account.
Trading results of overseas subsidiaries are translated into sterling at average rates and the assets and liabilities of
the subsidiaries are translated at the rate of exchange ruling at the balance sheet date. Unrealised exchange gains
and losses arising from the retranslation of equity investments in overseas subsidiaries, and the related foreign
currency borrowings used to finance those investments, are dealt with through reserves.
(i) Deferred tax
Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance
sheet date, with the following exceptions:
– deferred tax assets are only recognised if it is considered more likely than not that there will be suitable profits
from which the future reversal of the underlying timing difference can be reversed;
– provision is made for gains on disposal of fixed assets that have been rolled over into replacement assets only
where, at the balance sheet date, there is a commitment to dispose of those replacement assets; and
– provision is made for the tax that would arise on remittance of the retained earnings of overseas subsidiaries
only to the extent that, at the balance sheet date, dividends have been accrued as receivable.
Deferred tax is measured on a non-discounted basis at the tax rates that are expected to apply in the periods in
which timing differences reverse, based on tax rates and laws enacted or substantively enacted at the balance sheet
date.
(j) Leases
The costs of operating leases are dealt with by way of a charge to the profit and loss account as incurred.
Assets held under finance leases and hire purchase agreements are included as tangible fixed assets at purchase
price and depreciated over their estimated lives. The obligations (net of finance charges) are included, as
appropriate, under creditors, due within or after one year.
(k) Pension costs
The expected cost of pensions in respect of the Group’s main defined benefit pension scheme is charged to the profit
and loss account so as to spread the cost of pensions over the service lives of employees in the scheme.
The pension cost is assessed in accordance with the advice of qualified actuaries. Variations from the regular cost
are spread over the expected remaining service lives of current employees in the scheme. 40 Ricardo plc Annual Report & Accounts 2002
Notes to the Financial Statements
1 Accounting policies
The pension cost for the Group’s defined contribution scheme is charged against profits in the year in which it is
incurred.
(l) Share schemes
The Group’s Employee Share Ownership Plan (ESOP), Qualifying Employee Share Ownership Trust (QUEST) and
Employee Share Ownership Trust (ESOT) are separately administered trusts which are funded by loans (the ESOP)
and gifts, (the QUEST and the ESOT), from the Company, and the assets of which, mainly comprise shares in the
Company. Shares are shown at their estimated recoverable amount being the option price of the shares payable by
employees. The amounts contributed to the QUEST and ESOT, in excess of the option price, are charged against
reserves.
(m) Derivative financial instruments
The Group uses derivative financial instruments to reduce exposure to foreign exchange risk and interest
movements. The Group does not hold or issue derivative financial instruments for speculative purposes.
For a forward foreign exchange contract to be treated as a hedge, the instrument must be related to actual foreign
currency assets or liabilities or to a probable commitment. It must involve the same currency or similar currencies as
the hedged items and must also reduce the risk of foreign exchange currency movements on the Group’s operations.
Gains and losses on these contracts are recognised in the profit and loss account when the hedged transaction is
recognised. The more significant financial instruments of the Group are disclosed in note 31 of the financial
statements.
(n) Changes in accounting policies
In December 2000, the Accounting Standards Board issued FRS19 – Deferred Tax.
The company has adopted FRS19 – Deferred Tax in the accounts. The adoption of this new standard represents a
change in accounting policy.
There has been no material effect on the results of the current year or those reported in the last financial year,
following this change of accounting policy, therefore no prior year adjustment has been made.
2 T urnover by destination
2002 2001
£’000 £’000
Europe 87,699 78,060
North America 46,912 55,255
Pacific Basin 7,046 3,076
Rest of the World 1,521 3,520
143,178 139,911
The directors consider that the Group operates in one business segment, serving the global automotive market. The
United Kingdom is the principal location for operating profits and the net assets of the Group. As a consequence, it is
not meaningful to show separately its turnover, operating results or net assets. 3 Operating profit
2002 2001
£’000 £’000
T urnover
Continuing 143,178 138,370
Discontinued – 1,541
143,178 139,911
Cost of sales
Continuing (98,278) (94,805)
Discontinued – (1,171)
(98,278) (95,976)
Gross profit
Continuing 44,900 43,565
Discontinued – 370
44,900 43,935
Administration expenses
Continuing (28,405) (27,884)
Discontinued – (360)
Operating profit 16,495 15,691
4 Exceptional item – profit on disposal of discontinued operation
2002 2001
£’000 £’000
Disposal of Ricardo Test Automation Limited
Profit on disposal of discontinued operation – 2,061
Goodwill previously written off to reserves
on acquisition – (2,061)
– –
Ricardo plc Annual Report & Accounts 2002  41 5 Net interest
2002 2001
£’000 £’000
Continuing operations:
Interest receivable 729 945
Interest payable on bank loans and overdrafts (565) (1,526)
Interest payable on finance leases – (5)
164 (586)
Discontinued operations:
Interest receivable – 11
Interest payable on bank loans and overdrafts – (9)
164 (584)
6 Profit on ordinary activities before taxation
2002 2001
£’000 £’000
Profit on ordinary activities before taxation is stated after charging/(crediting):
Research and development 4,636 5,273
Operating leases: hire of plant and machinery 424 149
other 2,330 2,575
Amortisation of intangible fixed asset 13 11
Depreciation: own assets 9,117 7,983
assets held under finance leases – 85
Gain on sale of tangible fixed assets and investment properties (14) (108)
Total auditors’ remuneration was as follows:
Audit fees relating to the Group 152 150
Audit fees relating to the Company 51 50
Fees in relation to other services provided by the Group auditors 101 19
7 Employees
2002 2001
£’000 £’000
Staff costs:
Wages and salaries 53,837 51,100
Social security costs 6,165 5,500
Other pension costs (note 29) 1,955 1,694
61,957 58,294
2002 2001
Number Number
Average number of employees (including executive directors) during the year:
Management, administration and sales 197 205
Production and engineering staff 1,241 1,184
1,438 1,389
42 Ricardo plc Annual Report & Accounts 2002
Notes to the Financial Statements Ricardo plc Annual Report & Accounts 2002  43
8 T axation on profit on ordinary activities
2002 2001
£’000 £’000
Analysis of charge in the year
United Kingdom
Corporation tax at 30% (2001: 30%) 5,306 2,879
Adjustments in respect of prior years (945) (1,062)
Double tax relief (446) (232)
3,915 1,585
Foreign tax
Corporation taxes 1,000 840
Adjustments in respect of prior years – (73)
Total current tax 4,915 2,352
Deferred tax
Origination and reversal of timing differences (643) 1,925
Representing:
United Kingdom (643) 2,634
Foreign tax – (709)
Adjustment in respect of prior years 234 –
Total deferred tax (409) 1,925
Tax on profit on ordinary activities 4,506 4,277
The tax for the year is lower (2001: lower) than the standard rate of corporation tax in the UK (30%). The differences
are set out below:
2002 2001
£’000 £’000
Profit on ordinary activities before tax 16,659 15,107
Profit on ordinary activities multiplied by standard rate of corporation tax in the UK of 30% 
(2001: 30%) 4,998 4,532
Effects of:
Expenses not deductible for tax purposes 153 510
QUEST contributions allowable (204) (389)
Timing difference between depreciation charged and capital allowance claims 805 (1,925)
Other short term timing differences (161) –
Adjustments to corporation tax in respect of prior years (945) (1,135)
Irrecoverable overseas tax 57 157
Difference in foreign tax rates 522 452
Utilisation of US tax losses (435) –
Unutilised German tax losses 125 150
4,915 2,352
Factors that may affect future tax charges
Following the introduction of research and development tax credits, the Group anticipates being able to maintain a
lower effective rate of tax on its worldwide profits than the current UK rate of 30%.
Based on current capital investment plans, the Group expects the annual depreciation charge to exceed the claim for
capital allowances but at a lower level than in the current year.
No deferred tax is recognised on the unremitted earnings of overseas subsidiaries, associates and joint ventures. As
the earnings are continually reinvested by the group, no tax is expected to be payable on them in the near future. 44 Ricardo plc Annual Report & Accounts 2002
Notes to the Financial Statements
9 Dividends
2002 2001
£’000 £’000
Non-equity preference dividends:
10% cumulative second preference – 2
– 2
Equity ordinary dividends:
Interim 2.6p per share (2001 – 2.5p) 1,278 1,202
Proposed final of 6.0p per share (2001 – 5.3p) 2,929 2,551
4,207 3,753
10 Earnings per share
Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted
average number of shares in issue during the year, excluding those held in the ESOP (note 14) and those held by the
LTIP which are treated as cancelled.
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. The Group has two classes of dilutive potential ordinary shares: those
options granted to employees where the exercise price is less than the market price of the Company‘s ordinary shares
during the year and the contingently issuable shares under the Group’s LTIP . At 30 June 2002, the performance criteria
for the vesting of awards under the plans maturing on 30 June 2003 and 30 June 2004 had not been met and
consequently the shares in question are excluded from the diluted earnings per share computation.
Reconciliations of the earnings and the weighted average number of shares used in the calculations are set out
below:
2002 2001
Weighted Weighted
average average
number of Per share number of Per share
Earnings Shares amount Earnings shares amount
£’000 ’000 pence £’000 ’000 pence
Profit for the financial year 12,061 10,643
Less: preference dividends – (2)
Basic EPS
Earnings attributable to
ordinary shareholders 12,061 48,352 24.9 10,641 47,844 22.2p
Effect of dilutive securities:
Options – 678 – 807
LTIP – 120 – 571
Diluted EPS
Adjusted earnings 12,061 49,150 24.5 10,641 49,222 21.6p
The weighted average number of shares in issue may be reconciled to the number used in the earnings per share
calculation as follows:
2002 2001
Weighted average number: ’000 ’000
Ordinary shares in issue 48,648 48,135
Shares held by ESOP (189) (224)
Shares held by LTIP (107) (67)
48,352 47,844 11 Intangible fixed assets
Goodwill
T otal
£’000
Group
Cost
At 1 July 2001 59
At 30 June 2002 59
Aggregate amortisation
At 1 July 2001 11
Charge for year 13
At 30 June 2002 24
Net book amount 2002 35
Net book amount 2001 48
The goodwill which arose from a payment to the minority shareholder to establish a 55% controlling interest in
Ricardo Meda Technical Services Inc. is being amortised over five years. This period is the period over which the
directors estimate the value of the underlying business acquired is expected to exceed the value of the underlying
assets.
12 T angible fixed assets
Land and Buildings Fixtures,
Long Short Plant & Fittings &
Freehold Leasehold Leasehold Machinery Equipment T otal
£’000 £’000 £’000 £’000 £’000 £’000
GROUP
Cost:
At 1 July 2001 6,034 383 1,623 67,023 18,848 93,911
Reclassifications 1,026 762 (715) (1,146) 73 –
Additions 61 52 16 2,534 3,233 5,896
Disposals (118) – – (109) (1,504) (1,731)
Foreign exchange adjustment (10) – (58) (1,198) (439) (1,705)
At 30 June 2002 6,993 1,197 866 67,104 20,211 96,371
Depreciation:
At 1 July 2001 982 11 218 29,635 13,620 44,466
Reclassifications (16) 117 (58) (203) 160 –
Depreciation for the year 40 46 76 6,075 2,880 9,117
Disposals – – – (98) (1,404) (1,502)
Foreign exchange adjustment – – (13) (536) (356) (905)
At 30 June 2002 1,006 174 223 34,873 14,900 51,176
Net Book Amount 2002 5,987 1,023 643 32,231 5,311 45,195
Net Book Amount 2001 5,052 372 1,405 37,388 5,228 49,445
Included in the net book value of plant and machinery of £32,231,000 (2001: £37,388,000) are assets under the course
of construction with a net book value of £NIL (2001: £963,000) which have not been depreciated in the year.
Ricardo plc Annual Report & Accounts 2002  45 12 T angible fixed assets
Land and Buildings Fixtures,
Long Short Fittings &
Freehold Leasehold Leasehold Equipment T otal
£’000 £’000 £’000 £’000 £’000
COMPANY
Cost:
At 1 July 2001 5,615 938 236 174 6,963
Reclassifications – 208 (208) – –
Additions – 51 – 459 510
At 30 June 2002 5,615 1,197 28 633 7,473
Depreciation:
At 1 July 2001 919 84 61 99 1,163
Reclassifications (7) 44 (37) – –
Depreciation for the year 12 46 1 20 79
At 30 June 2002 924 174 25 119 1,242
Net Book Amount 2002 4,691 1,023 3 514 6,231
Net Book Amount 2001 4,696 854 175 75 5,800
13 Investment Properties
Group Company
2002 2001 2002 2001
£’000 £’000 £’000 £’000
At 1 July 2001 75 490 75 –
Transferred from subsidiary company – – – 75
Properties sold (75) (415) (75) –
At 30 June 2002 – 75 – 75
14 Investments
Group Company
Group Unlisted Company Company Unlisted
Own Trade Group Shares in Own Trade Company
Shares Investment T otal Subsidiaries Shares Investment T otal
£’000 £’000 £’000 £’000 £’000 £’000 £’000
Cost at 1 July 2001 491 232 723 26,679 491 232 27,402
Disposals (345) – (345) – (345) – (345)
Cost at 30 June 2002 146 232 378 26,679 146 232 27,057
Provisions
Provisions at 1 July 2001 – – – 10,513 – – 10,513
Charged/(released) to profit and loss account 71 – 71 (2) 71 – 69
Disposals (24) – (24) – (24) – (24)
Provisions at 30 June 2002 47 – 47 10,511 47 – 10,558
Net book amount 2002 99 232 331 16,168 99 232 16,499
Net book amount 2001 491 232 723 16,166 491 232 16,889
46 Ricardo plc Annual Report & Accounts 2002
Notes to the Financial Statements 14 Investments
The unlisted trade investment of the Group and the Company represents a 24.19% interest in the ordinary share
capital of SRH Systems Limited (formerly Schenck Ricardo Systems Limited), a company registered in England and
Wales.
For the first trading period ended 31 December 2001 the aggregate amount of share capital and reserves, for SRH
Systems Limited, was £235,000 and a loss for that year of £385,000 was incurred.
The investment in the Company’s own shares, stated at the lower of cost or realisable value, relates to 67,000 (2001:
224,000) ordinary shares of 25p each held by the Group’s Employee Share Ownership Plan Trust. The book value and
market value of the shares at 30 June 2002 were 148.0p and 365.5p respectively. 
15 Stocks
Group
2002 2001
£’000 £’000
Raw materials and consumables 1,180 1,284
Work in progress 487 203
1,667 1,487
16 Debtors
Amounts falling due within one year
Group Company
2002 2001 2002 2001
£’000 £’000 £’000 £’000
Trade debtors 23,696 23,966 8 20
Amounts recoverable on contracts 17,342 15,296 – –
Amounts owed by Group undertakings – – 18,423 18,755
Prepayments 2,655 2,069 918 171
Deferred tax – – 208 –
Overseas taxes 660 80 – –
Other debtors 1,969 1,559 713 209
46,322 43,010 20,270 19,155
17 Cash deposit
This cash is held on deposit at Lloyds TSB Bank Plc and can only be utilised to redeem the loan notes referred to in
note 18. The interest attaching to the deposit is receivable by the Group. The deposit has been excluded from cash in
the cash flow statement.
Ricardo plc Annual Report & Accounts 2002  47 48 Ricardo plc Annual Report & Accounts 2002
Notes to the Financial Statements
18 Creditors – amounts falling due within one year
Group Company
2002 2001 2002 2001
£’000 £’000 £’000 £’000
Loan notes 340 340 – –
Bank loans and overdrafts 1,312 3,634 10,151 2,212
Payments received in advance 22,441 15,610 – –
Trade creditors 4,724 6,073 102 390
Amounts owed to Group undertakings – – 13,156 13,456
Finance lease obligations – 1 – –
Other creditors 2,191 3,273 2,484 2,301
UK corporation tax 3,538 1,354 1,096 17
Overseas taxes 207 99 – –
Other taxes and social security 1,541 1,251 55 60
Dividends 2,929 2,551 2,929 2,551
Accruals 13,943 11,077 888 441
53,166 45,263 30,861 21,428
The interest on the reducing guaranteed floating rate unsecured loan notes 2004 is payable at the rate of 1
1
/8% below
Lloyds TSB Bank Plc base rate. The loan notes are redeemable at the option of the holder. Payment is being
guaranteed by Lloyds TSB Bank Plc. The Group has made an equivalent deposit with the bank (see note 17).
19 Creditors – amounts falling due after more than one year
Group Company
2002 2001 2002 2001
£’000 £’000 £’000 £’000
Bank loans 6,840 8,641 5,200 5,441
Maturity of debt:
Repayable on demand or within one year 1,312 3,635 10,151 –
Between one and two years 1,640 2,844 – –
Between two and five years 5,200 5,797 5,200 5,441
8,152 12,276 15,351 5,441
The interest rates on the outstanding loans, which are denominated in US dollars, vary between 0.85% above UK
bank base rate and 0.85% above LIBOR, as appropriate, and 0.9% above US prime rate or 0.75% above LIBOR, as
appropriate. Ricardo plc Annual Report & Accounts 2002  49
20 Provisions for liabilities and charges
Warranty Onerous Deferred Pension
provision leases Tax costs T otal
£’000 £’000 £’000 £’000 £’000
Group:
At 1 July 2001 7 125 6,067 103 6,302
Utilised in the year – (30) – (103) (133)
Charged/(credited) to profit and loss account (7) 30 (409) – (386)
At 30 June 2002 – 125 5,658 – 5,783
Company:
At 1 July 2001 125 50 103 278
Utilised in the year (30) – (103) (133)
Charged/(credited) to profit and loss account 30 (258) – (228)
Transferred to debtors (see note 16) – 208 – 208
At 30 June 2002 125 – – 125
The onerous leases provision reflects rental shortfall in two surplus properties over the period to March 2006.
2002 2001
Deferred taxation comprises Provided Provided
£’000 £’000
Group:
Capital allowances in excess of depreciation 6,595 5,750
Tax losses carried forward (990) –
Other timing differences 53 317
5,658 6,067
Company:
Depreciation in excess of capital allowances 108 104
Other timing differences (316) (54)
(208) 50
21 Called up share capital
Group and Company
2002 2001
£’000 £’000
Authorised
59,760,000 ordinary shares of 25p each 14,940 14,940
2002 2001
£’000 £’000
Allotted, called up and fully paid
At 1 July 2001 – 48,617,997 shares 12,154 11,989
Allotted under share option schemes – 236,736 shares 59 97
Allotted to LTIP trustee – 133,887 shares 34 68
At 30 June 2002 – 48,988,620 shares* 12,247 12,154
* Included in the total are 29,316 ordinary shares (2001: 161,256) allotted to directors under the Group’s LTIP with a
nominal value of £7,329 (2001: £40,314).
The net consideration received for shares allotted under the share option schemes during the year ended 30 June
2002 was £345,000 (2001: £450,000). 21 Called up share capital
Potential issues of ordinary shares
The Company has two Inland Revenue approved employee share option schemes under which options to subscribe
for ordinary shares may be granted. During the year ended 30 June 2002 options over 100,000 shares were granted
with an exercise price of 381p exercisable until 24 September 2011. Options on 236,736 shares were exercised and
80,952 options lapsed during the year. The number of shares subject to options, the periods in which they were
granted and the periods in which they may be exercised are given below:
Exercise
Year prices Exercise 2002 2001
of grant pence period Numbers Numbers
1994 138.0-140.0 1997-2004 4,000 144,000
1996 114.0 1999-2006 183,000 185,000
1994 122.4 2001-2002 – 56,392
1997 114.8 2002-2004 344,191 379,074
1999 281.6 1999-2002 343,945 387,005
2000 416.0 2003-2007 274,733 316,086
2001 381.0 2004-2011 100,000 –
1,249,869 1,467,557
In addition, at 30 June 2002, the ESOP trustee held 67,000 ordinary shares (2001: 224,000) to satisfy outstanding
options granted under the 1995 Executive Share Option Scheme. The outstanding options are exercisable until 
11 December 2004 at an exercise price of 148.0p.
The Company has taken advantage of the exemptions in UITF abstract 17 (revised 2000) –  Employee Share Schemes
relating to the Savings Related Share Option Scheme.
Under the Group’s LTIP , awards may be made to beneficiaries under the scheme which may result in the issue of up
to 329,131 25p ordinary shares by 30 June 2004.
22 Reserves
Share Capital Profit
premium redemption Merger LTIP and loss
account reserve reserve reserve account
Group £’000 £’000 £’000 £’000 £’000
At 1 July 2001 8,364 40 967 610 25,996
Exchange variances – – – – (877)
Arising on shares issued 1,403 – – – –
Long term incentive plan charge – – – 455 –
LTIP shares issued to trustees – – – (471) –
Quest contributions – – – – (680)
Profit for year – – – – 7,854
At 30 June 2002 9,767 40 967 594 32,293
The cumulative value of goodwill at 30 June 2002 resulting from acquisitions, which has been written off to reserves
is £12,122,000 (2001 – £12,122,000).
50 Ricardo plc Annual Report & Accounts 2002
Notes to the Financial Statements 22 Reserves
Share Capital Profit
premium redemption LTIP and loss
account reserve reserve account
Company £’000 £’000 £’000 £’000
At 1 July 2001 8,364 40 610 7,136
Exchange variances – – – (307)
Arising on shares issued 1,403 – – –
Long term incentive plan charge – – 455 –
LTIP shares issued to trustees – – (471) –
Profit for year – – – 1,551
At 30 June 2002 9,767 40 594 8,380
The holding company profit and loss account has not been presented, as permitted by Section 230 of the Companies
Act 1985. The Company has made a profit for the financial year of £5,758,000 (2001 – £7,057,000).
23 Net cash inflow from operating activities
2002 2001
£’000 £’000
Operating profit 16,495 15,691
Depreciation charges 9,117 8,068
Goodwill amortisation 13 11
Profit on sale of tangible fixed assets and investment properties (14) (108)
Long term incentive plan charge 455 611
(Increase)/decrease in stock (195) 278
Increase in debtors (3,531) (1,116)
Increase/(decrease) in creditors 7,902 (52)
Foreign exchange – 261
Net cash inflow from operating activities 30,242 23,644
24 Reconciliation of net cash flow to movement in net funds
2002 2001
£’000 £’000
Increase in cash 16,803 5,627
Movement in debt and lease financing 1,210 358
Change in net funds from cash flows 18,013 5,985
Translation difference 637 (285)
Movement in net funds in year 18,650 5,700
Net funds/(debt) at 1 July 1,288 (4,412)
Net funds at 30 June 19,938 1,288
Ricardo plc Annual Report & Accounts 2002  51 25 Analysis of net funds
At 1 July Cash Exchange At 30 June
2001 flow movement 2002
£’000 £’000 £’000 £’000
Cash in hand 13,564 14,762 (236) 28,090
Overdrafts (3,634) 2,041 281 (1,312)
Sub total 9,930 16,803 45 26,778
Debt due after one year (8,641) 1,209 592 (6,840)
Finance leases (1) 1 – –
Total 1,288 18,013 637 19,938
26 Changes in finance during the year
Share capital Capital redemption Finance
(including premium) reserve Lease obligations
2002 2001 2002 2001 2002 2001
£’000 £’000 £’000 £’000 £’000 £’000
At 1 July 2001 20,518 18,338 40 – 1 53
Issue of ordinary share capital 1,025 1,752 – – – –
Shares issued with respect to 
LTIP for non cash consideration 471 468 – – – –
Repayment of preference shares – (40) – 40 – –
Capital element of finance lease 
rental payments – – – – (1) (52)
At 30 June 2002 22,014 20,518 40 40 – 1
27 Post Balance Sheet Event
On 9 July 2002 the business and assets of Gemini Transmissions Limited were purchased. The acquisition cost is
estimated at c. £3.4m and the fair value of the assets acquired at c. £1.8m, giving rise to goodwill of c. £1.6m which
will be amortised over its useful economic life.
52 Ricardo plc Annual Report & Accounts 2002
Notes to the Financial Statements Ricardo plc Annual Report & Accounts 2002  53
28 Commitments
(a) Capital commitments
The Group’s commitments for capital expenditure not provided for were as follows:
2002 2001
£’000 £’000
Contracted 448 849
The Company had no capital commitments at 30 June 2002 or 30 June 2001.
(b) Operating leases
The Group’s commitments for operating lease payments due in the next year are as follows:
2002 2001
Land and Land and
buildings Other buildings Other
£’000 £’000 £’000 £’000
In respect of leases expiring:
Within one year 42 178 – 253
Between one and five years 315 365 753 670
After five years 1,383 – 370 –
1,740 543 1,123 923
The Company’s commitments for operating lease payments due in the next year are as follows:
2002 2001
Land and Land and
buildings Other buildings Other
£’000 £’000 £’000 £’000
In respect of leases expiring:
Within one year – – – –
Between one and five years 74 27 74 24
After five years 385 – 370 –
459 27 444 24 29 Pensions
The Group operates pension schemes available to all of its United Kingdom employees, the assets of which are held
in separate trustee administered funds. The largest funds are the Ricardo Group Pension Fund (“RGPF”), a defined
benefit scheme, and Ricardo International Pension Scheme (“RIPS”), a defined contribution scheme. The pension
costs relating to the RGPF are assessed in accordance with the advice of Barnett Waddingham, qualified actuaries,
using the attained age method. The latest actuarial valuation was at 5 April 1999. At that date, the market value of
the assets of the fund amounted to £41.3 million and was sufficient to cover 103% of the benefits that had accrued to
members, after allowing for expected future increases in earnings. On the alternative minimum funding requirement
valuation basis, which was required under the Pensions Act 1995 as part of the triennial valuation of the scheme, the
ratio of assets to liabilities was 96%. The next triennial valuation is scheduled to be carried out as at a date no later
than 5 April 2002.
The principal assumptions made by the actuaries were that investment returns would comprise 5.5% per annum on
gilts, in the long term, and 8.5%, in the long term, on equities, pensionable salaries would rise by 5.5% per annum
and pensions would rise at a minimum of 3% per annum on the whole pension. It is assumed that future price
inflation would rise at a rate of 4% per annum.
The pension charge of £1,955,000 (2001: £1,694,000) comprises £912,000 (2001: £803,000) relating to RGPF , £695,000
(2001: £593,000) relating to RIPS and £348,000 (2001: £298,000) relating to various overseas money purchase plans
and includes a net reduction of £898,000 (2001: £252,000) in respect of the spreading of the surplus in RGPF , using
the mortgage method over 12 years, the average remaining service lives of employees. A prepayment of £795,000
(2001: Provision £103,000) is held within the balance sheet, in accordance with the SSAP24 – Accounting for Pension
Costs, being payments into RGPF in excess of the pension charge.
Additional disclosure required by FRS17 – retirement benefits
A full actuarial valuation was completed as at 5 April 2002 and updated to 30 June 2002 by Barnett Waddingham,
qualified actuaries. Certain 2001 comparatives, below, have been restated to account for an error in the 2001
actuarial calculations. The major assumptions made were:
At 30 June At 30 June
2002 2001
Rate of increase in pensionable salaries 4.30% 4.75%
Rate of increase in pensions in payment 3.00% 3.25%
Discount rate 5.88% 6.12%
Inflation 2.80% 2.75%
The assets of the scheme and the expected rate of return were:
Long term Value at Long term Value at
rate of return 30 June rate of return 30 June
expected at 2002 expected at 2001
30 June 2002 £’000 30 June 2001 £’000
Equities 7.5% 30,213 8.0% 34,303
Bonds 5.0% 5,689 5.0% 6,600
Cash 4.0% 1,954 4.5% 2,774
Other 5.0% 1,675 5.0% 1,669
39,531 45,346
54 Ricardo plc Annual Report & Accounts 2002
Notes to the Financial Statements 29 Pensions
The following amounts at 30 June 2002 and 30 June 2001 were measured in accordance with the requirements of
FRS17:
At 30 June At 30 June
2002 2001
(as restated)
£’000 £’000
Total market value of assets 39,531 45,346
Present value of scheme liabilities (62,102) (57,895)
Deficit in the scheme (22,571) (12,549)
Related deferred tax asset 6,771 3,765
Net pension deficit (15,800) (8,784)
If the above amounts had been recognised in the accounts, the Group’s net assets and profit and loss reserve at 30
June 2002 would be as follows:
At 30 June At 30 June
2002 2001
(as restated)
£’000 £’000
Net assets 56,191 48,486
Pension (prepayment)/provision (795) 103
Net pension deficit (15,800) (8,784)
Net assets including net pension deficit 39,596 39,805
Profit and loss account reserve 32,293 25,996
Pension (prepayment)/provision (795) 103
Net pension deficit (15,800) (8,784)
Profit and loss reserve 15,698 17,315
The following amounts would have been recognised in the performance statements in the year to 30 June 2002
under the requirements of FRS17:
Analysis of amount charged to operating profit £’000
Current service cost (1,164)
Past service cost (76)
(1,240)
Analysis of amount charged to other finance costs
Expected return on pension scheme assets 3,303
Interest on pension scheme liabilities (3,453)
(150)
Statement of total recognised gains and losses (STRGL)
Actual return less expected return on pension scheme assets (9,671)
Experience gains and losses arising on the scheme liabilities (840)
Changes in assumptions underlying the present value of the scheme liabilities 152
Actuarial loss recognised in the STRGL (10,359)
Ricardo plc Annual Report & Accounts 2002  55 56 Ricardo plc Annual Report & Accounts 2002
Notes to the Financial Statements
29 Pensions 
Movement in deficit during the year
£’000
Deficit in the scheme at beginning of year (as restated) (12,549)
Movement in the year:
Current service costs (1,164)
Contributions 1,727
Past service costs (76)
Other finance costs (150)
Actuarial loss (10,359)
Deficit in the scheme at end of the year (22,571)
The actuarial valuation at 30 June 2002 showed an increase in the deficit. To address this, it has been agreed with the
trustees of the RGPF that with effect from 1 July 2002, the employer’s and employees’ contributions increase by 4%
and 1% respectively and that from 1 July 2003, the employees’ contributions increase by a further 1%. Additionally,
the definition of pensionable pay has been amended.
Details of experience gains and losses for the year to 30 June 2002
Difference between the expected and actual return on scheme assets
Amount (£’000) (9,671)
Percentage of scheme assets 25%
Experience gains and losses on scheme liabilities
Amount (£’000) (840)
Percentage of the present value of the scheme liabilities 1%
T otal amount recognised in the statement of total recognised gains and losses
Amount (£’000) (10,359)
Percentage of the present value of the scheme liabilities 17%
30 Contingent liabilities
The Group has been notified of a potential claim relating to work performed for a non-automotive client, which
purports to have suffered losses of approximately £45 million. No proceedings have been commenced. The directors
are of the opinion that the potential claim, if brought, would be successfully defended and accordingly no provision
has been made in respect of this matter.
At 30 June 2002 subsidiaries had entered into guarantees and performance bonds totalling £474,000 
(2001: £474,000). The Company has given a guarantee in respect of certain bank overdrafts of its subsidiaries.
31 Derivatives and other financial instruments
Objectives, policies and strategies
The financial risks faced by the Group comprise interest rate risk, liquidity risk and currency risk. The Board reviews
and agrees policies for managing each of these risks.
As permitted by FRS13, short term debtors and creditors have been excluded from all of the numerical disclosures,
other than the currency risk disclosures.
The Group’s financial instruments comprise floating rate borrowings, the main purpose of which is to raise finance
for the Group’s operations and the use of forward foreign exchange contracts to manage currency risks. 31 Derivatives and other financial instruments
Interest rate risk
The Group does not consider interest rate risk as significant and the current policy is to maintain 100% of its
borrowings at floating rates (2001: 100%). However, this policy is kept under regular review as appropriate by the
Board. At the year end all of the Group’s borrowings were at floating rates.
Liquidity risk
As regards liquidity, the Group’s policy has throughout the year been to maintain a mix of short and medium term
borrowings with their bankers. Short term flexibility is provided by overdraft facilities. Details of the year-end position,
which is in accordance with this policy and consistent with prior years, are given in notes 18 and 19 to the financial
statements. It is, in addition, the Group’s policy to maintain undrawn committed borrowing facilities in order to
provide flexibility in the management of the Group’s liquidity. At the year end, the Group had committed facilities of
£29.8m (2001: £32.6m) with their banks, 27.4% (2001: 37.7%) of which was drawn down. These facilities are subject to
periodic review.
Currency management
The Group faces currency exposures on the translation of profits earned in overseas subsidiaries, primarily in the
USA, and on trading transactions undertaken by its subsidiaries in foreign currencies.
The Group is also subject to currency exposures on the translation of the net assets of its overseas subsidiaries,
primarily in the USA.
The Group hedges its profit translation exposures by taking out forward exchange contracts of up to eighteen months
forward against the USA subsidiary’s budgeted profits. This policy which was implemented in January 2001 has been
applied consistently throughout the year. The actual movement in the exchange rate has resulted in a charge against
profit of £132,000 (2001: £75,000). At the year end those forward exchange contracts had been settled leaving $Nil
outstanding (2001 $6,000,000 – £4,132,000) and all exchange gains or losses realised (2001 – unrealised loss of
£229,000).
The Group does hedge a proportion of its transactional exposures by taking out forward foreign exchange contracts
against its anticipated and known sales and purchases. The decision to hedge is influenced by the size of exposure,
the certainty of it arising, the trading and market position of the respective company in which the exposure arises
and the current exchange rate. At the year end there were two (2001 – Nil) forward exchange contracts outstanding
in respect of transactional exposures, Euro 2,500,000 and Euro 5,000,000 were sold forward for settlement in
December 2002 and June 2003 at  Euro/Sterling rates of 1.6042 and 1.5975 respectively.
The Group seeks to minimise the currency risk arising from translation of the net assets of its overseas subsidiaries
in the United States, by taking out borrowings in US dollars. The Group’s policy is to operate with 50% to 100% (2001
– 50% to 100%) of the net assets to be covered by these foreign currency borrowings. At the year end 100% (2001 –
95%) of the total currency exposure was covered by currency borrowings.
Numerical disclosures of interest rates and currency profile of financial assets and liabilities:
2002
Floating rate No interest Floating rate
financial financial financial
Total liabilities liabilities assets
£’000 £’000 £’000 £’000
Currency
Sterling 22,217 (340) (125) 22,682
US dollars (4,854) (8,152) – 3,298
Euro 2,450 – – 2,450
19,813 (8,492) (125) 28,430
Ricardo plc Annual Report & Accounts 2002  57 31 Derivatives and other financial instruments
2001
Floating rate No interest Floating rate
financial financial financial
Total liabilities liabilities assets
£’000 £’000 £’000 £’000
Currency
Sterling 9,805 (340) (125) 10,270
US dollars (9,155) (12,276) – 3,121
Deutsche mark 178 – – 178
Euro 335 – – 335
1,163 (12,616) (125) 13,904
Further details on the interest profile of the floating liabilities can be found in notes 18 and 19.
Fair value of financial assets and liabilities
The following are the book values of the Group‘s financial assets and liabilities at 30 June 2002. The fair values
closely approximate to book values.
2002 2001
£’000 £’000
Cash at bank and in hand 28,090 13,564
Bank overdrafts (1,312) (3,634)
Loans repayable after more than one year (6,840) (8,641)
Cash deposit 340 340
Loan notes (340) (340)
Finance lease obligations – (1)
Onerous leases (125) (125)
19,813 1,163
Summary of methods and assumptions
Short term borrowing and deposits – The fair value of short-term deposits, loans and overdrafts
approximates to the carrying amount because of the short
maturity of these instruments.
Long term borrowings – The fair value of bank loans approximates to the carrying
value in the balance sheet as they are all floating rate loans
where payments are reset to market rates at regular
intervals.
58 Ricardo plc Annual Report & Accounts 2002
Notes to the Financial Statements 31 Derivatives and other financial instruments
Numerical disclosures relating to currency exposures
The table below shows the extent to which group companies have monetary assets and liabilities in currencies other
than their local currency. Foreign exchange differences arising on the retranslation of the assets and liabilities are
taken to the profit and loss account of the group companies and the group.
2002
Net foreign currency monetary assets/(liabilities)
Sterling US Dollar Euro
£’000 £’000 £’000
Functional currency of group operation
Sterling – (1,802) 4,247
US Dollar 36 – –
36 (1,802) 4,247
2001
Net foreign currency monetary assets/(liabilities)
Deutsche 
Sterling US Dollar Euro Mark
£’000 £’000 £’000 £’000
Functional currency of group operation
Sterling – 2,682 4,027 (49)
US Dollar (324) – – –
(324) 2,682 4,027 (49)
32 Related parties
P .T. Ward is a non-executive director of Ricardo plc and a member of the Harley Davidson Inc. European Advisory
Board. The Group has traded with Harley Davidson Inc. during the year on normal commercial terms of trade.
33 Principal operating subsidiaries
Each subsidiary company operates principally in the country in which it is incorporated.
The Company owns directly, or indirectly, 100% of the issued share capital of the following principal operating
subsidiaries which are included in the consolidated accounts:
Incorporated in Great Britain
(and registered in England and Wales)
Ricardo Consulting Engineers Ltd. (“RCE”)
Ricardo MTC Ltd. (“MTC”)
Incorporated in Germany
Ricardo GmbH. (“GmbH”)
Incorporated in the USA
Ricardo Inc. (“Rinc.”)
The subsidiaries owned directly by the Company are included in investments (note 14).
Ricardo plc Annual Report & Accounts 2002  59 NOTICE IS HEREBY GIVEN THAT THE ANNUAL GENERAL MEETING OF RICARDO plc WILL BE HELD AT THE
BROOKLANDS MUSEUM, BROOKLANDS ROAD, WEYBRIDGE, SURREY KT13 0QN ON 8 NOVEMBER 2002 AT 11.00 am
FOR THE FOLLOWING PURPOSES:
ORDINARY BUSINESS
1. To receive and adopt the report of the directors, the financial statements and the independent auditors’ report
thereon for the year ended 30 June 2002.
2. To declare a dividend as recommended by the Board.
3. To re-elect Peter Ward, who retires by rotation, as a director of the Company on the recommendation of the Board.
4 . To re-elect Ian Percy, who retires by rotation, as a director of the Company on the recommendation of the Board.
5. To re-elect Rodney Westhead, who retires by rotation, as a director of the Company on the recommendation of the
Board.
6. To elect Stephen Parker as a director of the Company on the recommendation of the Board.
7. To re-appoint PricewaterhouseCoopers as auditors of the Company to hold office until the conclusion of the next
general meeting at which accounts are laid before the Company and to authorise the directors to fix their
remuneration.
SPECIAL BUSINESS
Ordinary Resolutions
To consider and, if thought fit, pass the following resolutions which will be proposed as ordinary resolutions:
8. That the authority conferred on the directors by Article 4(B) of the Company’s Articles of Association be renewed
for the period expiring 15 months after the date of the passing of this resolution and for that period the “section 80
amount” is £2,687,211.
9. That the contents of the Remuneration Committee Report be approved.
10. To authorise the Company and its subsidiary, Ricardo Consulting Engineers Limited, for the purposes of Part XA of
the Companies Act 1985 to make donations to EU political organisations and/or to incur EU political expenditure
(as such terms are defined in section 347A of the Companies Act 1985) provided that:
(a) the maximum amount which may be donated to EU political organisations and/or incurred in respect of EU
political expenditure shall not in aggregate exceed £50,000 (or its equivalent in any other currency) in the
period ending at the conclusion of the next Annual General Meeting;
(b) this authority expires twelve months after the date of the passing of this resolution unless previously renewed,
varied or revoked by the Company in general meeting; and
(c) the Company and its subsidiary, Ricardo Consulting Engineers Limited, may before such expiry enter into a
contract or undertaking which would or might require donations to be made to EU political organisations
and/or EU political expenditure to be incurred wholly or partly after the expiry of this authority, and the
Company and its subsidiary, Ricardo Consulting Engineers Limited, may make donations to EU political
organisations and/or incur EU political expenditure in pursuance of any such contract or undertaking (subject
always to the maximum amount in sub-paragraph (a) above not thereby being exceeded) as if the authority
conferred by this resolution had not expired.
60 Ricardo plc Annual Report & Accounts 2002
Notice of Meeting 11. To authorise Ricardo MTC Ltd. for the purposes of Part XA of the Companies Act 1985 to make donations to EU
political organisations and/or to incur EU political expenditure (as such terms are defined in section 347A of the
Companies Act 1985) provided that:
(a) the maximum amount which may be donated to EU political organisations and/or incurred in respect of EU
political expenditure shall not in aggregate exceed £50,000 (or its equivalent in any other currency) in the
period ending at the conclusion of the next Annual General Meeting;
(b) this authority expires twelve months after the date of the passing of this resolution unless previously renewed,
varied or revoked by Ricardo MTC Ltd. in general meeting; and
(c) Ricardo MTC Ltd. may before such expiry enter into a contract or undertaking which would or might require
donations to be made to EU political organisations and/or EU political expenditure to be incurred wholly or
partly after the expiry of this authority, and Ricardo MTC Ltd, may make donations to EU political
organisations and/or incur EU political expenditure in pursuance of any such contract or undertaking (subject
always to the maximum amount in sub-paragraph (a) above not thereby being exceeded) as if the authority
conferred by this resolution had not expired.
12. To authorise Ricardo GmbH., for the purposes of Part XA of the Companies Act 1985 to make donations to EU
political organisations and/or to incur EU political expenditure (as such terms are defined in section 347A of the
Companies Act 1985) provided that:
(a) the maximum amount which may be donated to EU political organisations and/or incurred in respect of EU
political expenditure shall not in aggregate exceed £50,000 (or its equivalent in any other currency) in the
period ending at the conclusion of the next Annual General Meeting;
(b) this authority expires twelve months after the date of the passing of this resolution unless previously renewed,
varied or revoked by Ricardo GmbH. in general meeting; and
(c) Ricardo GmbH., may before such expiry enter into a contract or undertaking which would or might require
donations to be made to EU political organisations and/or EU political expenditure to be incurred wholly or
partly after the expiry of this authority, and Ricardo GmbH., may make donations to EU political organisations
and/or incur EU political expenditure in pursuance of any such contract or undertaking (subject always to the
maximum amount in sub-paragraph (a) above not thereby being exceeded) as if the authority conferred by
this resolution had not expired.
Special Resolutions
To consider and, if thought fit, pass the following resolutions which will be proposed as special resolutions:
13. That, subject to the passing of resolution 8, the power conferred on the directors by Article 4(C) of the Company’s
Articles of Association be renewed for the period expiring 15 months after the date of the passing of this resolution
and for that period the “section 89 amount” is £612,639.
14. That the directors be and are hereby generally and unconditionally authorised pursuant to section 166 of the
Companies Act 1985 to make on behalf of the Company market purchases (as defined in section 163 of the said
Act) of ordinary shares of 25p in the capital of the Company provided that;
(i) the maximum number of ordinary shares authorised to be acquired shall be 4,901,116, being 10% of the
issued ordinary share capital;
(ii) the maximum price which may be paid for the ordinary shares shall be, in respect of a share contracted to be
purchased on any day an amount equal to 105% of the average of the middle market quotations (as derived
from the London Stock Exchange Daily Official List) for the ordinary shares of the Company on the 5 business
Ricardo plc Annual Report & Accounts 2002  61 62 Ricardo plc Annual Report & Accounts 2002
Notice of Meeting
days immediately preceding the day on which the share is to be purchased, which amount shall be exclusive
of expenses;
(iii) the minimum price which may be paid for the ordinary shares shall be in respect of a share contracted to be
purchased on any day, an amount equal to 75% of the average of the middle market quotations (as derived
from the London Stock Exchange Daily Official List) for the ordinary shares of the Company on the 5 business
days immediately preceding the day on which that share is to be purchased, which amount shall be exclusive
of expenses but shall not, in any event be less than the par value of that share; and
(iv) this authority shall expire at the conclusion of the next Annual General Meeting except in relation to any
purchase of shares the contract for which was concluded before the expiry of such authority and which might
be executed wholly or partly after such expiration.
Notes:
1. A member entitled to attend and vote at the meeting is also entitled to appoint one or more proxies to attend and,
on a poll, vote instead of him. The proxy need not be a member of the Company.
2. In accordance with Regulation 41 of the Uncertificated Securities Regulations 2001, only those members entered
on the register of members of the Company as at 11.00 am on 6 November 2002 shall be entitled to attend or vote
at the meeting in respect of the number of shares registered in their name at that time. Changes to entries on the
register of members after 11.00 am on 6 November 2002 shall be disregarded in determining the rights of any
person to attend or vote at the meeting.
3. A form of proxy is enclosed. To be effective, it must be delivered at the offices of the Registrar of the Company by
not later than 11.00 a.m. on 6 November 2002. Completion of the form of proxy does not preclude members from
subsequently attending and voting at the meeting in person if they should so wish.
4. The Register of Directors’ Interests in shares of the Company, copies of contracts of service and letters of
appointment (unless expiring or determinable by the Company within 1 year without payment of compensation) of
the directors of the Company will be available for inspection at the registered office of the Company during
business hours on any weekday (excluding Saturday) from the date of this notice until the date of the Annual
General Meeting and at The Brooklands Museum, Brooklands Road, Weybridge, Surrey KT13 0QN on 8 November
2002 from 10.45 am until the conclusion of the meeting.
By order of the Board Dated 23 September 2002
M Wightman Registered Office:
Secretary Bridge Works, Shoreham-by-Sea,
West Sussex BN43 5FG Ricardo plc Annual Report & Accounts 2002  63
Annual General Meeting Location Map
M25
11
M3
and Heathrow
Staines
Weybridge
Station
To London Waterloo
A3 London
M25
Reigate
and Gatwick
A3
Guildford
To Portsmouth
S’hampton, Salisbury
& Woking
10
BYFLEET RD
PARVIS RD
A245
BROOKLANDS RD
B374
Brooklands Museum
Shareholders attending the Annual General Meeting are invited to view the exhibition on display at the museum at no charge. 64 Ricardo plc Annual Report & Accounts 2002
Secretary and Advisers
Secretary and Registered Office
M. Wightman CA
Ricardo plc
Bridge Works
Shoreham-by-Sea
West Sussex
BN43 5FG
Auditors
PricewaterhouseCoopers
The Quay
30 Channel Way
Ocean Village
Southampton
SO14 3QG
Stockbrokers
Hoare Govett Ltd.
250 Bishopsgate
London
EC2M 4AA
Principal Bankers
Lloyds TSB Bank Plc
55 Corn Street
Bristol
BS99 7LE
Bank One, NA, London Branch
1 Triton Square
London
NW1 3FN
Solicitors to the Company
Clifford Chance Limited Liability Partnership
200 Aldersgate Street
London
EC1A 4JJ
Financial Advisers
N M Rothschild & Sons Ltd.
New Court
St Swithin’s Lane
London
EC4P 4DU
Registrars and Transfer Office
Capita IRG Plc
Bourne House
34 Beckenham Road
Beckenham
Kent
BR3 4TU