Leamington-based automotive consultant Ricardo is seeing increasing demand for its technical services from carmakers facing more stringent CO2 regulations, chief executive Dave Shemmans said yesterday.

He was speaking after the company, which helped Chinese company SAIC to develop a new generation of Rover-based cars, reported a 13 per cent increase in underlying profits for the year to June 30.

Ricardo, which has now sold its share of the joint venture to SAIC, said pre-tax profits for the year rose to £12.2 million on virtually unchanged revenues of £171.5 million.

Tougher rules on vehicle emissions are being "seriously pushed" in developing regions such as China, as well as in the West, Mr Shemmans said.

"Emissions have always been part of the automotive agenda, now they are part of the political agenda.

"The global automotive industry is active with new product offensives driven by stringent emissions legislation, desire to improve fuel economy and the need to reduce CO2 emissions.

"Ricardo is benefiting by having the strategy, technology and presence to exploit these growing demands and global industry drivers."

Strong growth in the group's technical consulting business, particularly in the UK, was offset by a slow start in the US in the first half and reductions in its strategic consulting arm, resulting in flat revenues for the year.

Orders in the the US picked up in the second half, however, and a new management team had refocused the business to be more customer-responsive.

Opportunities were opening up as the major US car-makers resume spending on developing new models, he said.

"The business has changed from cost optimisation to a return to product develop-ment," Mr Shemmans said. "The pipeline is very strong, but we've got to land them."

Asia performed strongly in the year, he said, and the group opened a technical office in China to complement its sales operation in the country.

India is the next territory for the group, with a new office set to open in November.

In Europe, the German operation returned to profit after making a loss in 2006 and the group has also won its first contracts from Russian manufacturers.

Strong demand from German original equipment manufacturers (OEMs) resulted in some work being passed back to the UK for completion, despite the group increasing its engineering capability and recruiting more high quality engineers in the country.

Ricardo's UK business also benefited from increased demand from Asia, particularly in the engines and transmissions businesses.

Ricardo counts the world's leading OEMs among its customers, Mr Shemmans said, and it is helping manufacturers meet the increasing demand for diesel vehicles, particularly in the US, and new hybrid technologies.

"Diesel technology is leading the sector," he said. "Hybrid is also incredibly popular."

Mr Shemmans said that with the group's wide geographical base established, he was on the lookout for bolt-on acquisitions. Likely targets included controls and electronics businesses in Europe and North America.

Future growth was underpinned by the strength of the order book, which was up 28 per cent year-on-year to stand at £92 million at the end of June.

"The delivery of our strategy to increase geographic, customer and sector spread, together with the implementation of a US business improvement plan, gives us confidence for continued progress," he added.