LONDON (ShareCast) - (Sharecast News) - Science Group issued a detailed and strongly-worded update criticising the governance, financial performance and strategic direction of Ricardo, in which it holds a 16.85% stake, on Monday.
The update came amid growing shareholder scrutiny following Ricardo's recent profit warning and a sharp decline in its share price, which Science Group attributed to failings by Ricardo's board.

In its statement, Science Group contrasted its own record operating margins, cash conversion and earnings growth - delivered under similar market conditions - with what it described as Ricardo's weak interim results, poor cash flow and downgraded forecasts.

It reiterated concerns first raised in March over Ricardo's failure to meet profitability targets, citing poor cost control, weak productivity, inadequate financial forecasting, and low cash conversion.

It also took aim at executive remuneration, which it described as excessive relative to Ricardo's current market capitalisation, and highlighted the board's minimal shareholdings as evidence of weak alignment with shareholders.

Science Group argued that Ricardo's underperformance could not be solely attributed to market headwinds, and pointed to its own operational discipline as evidence that stronger governance and management could have mitigated external pressures.

The group said Ricardo's failure to meet its 2022 strategic profit targets, followed by their quiet abandonment, was a serious governance lapse.

It also questioned the timing and rationale of Ricardo's largest-ever acquisition, completed in Australia just weeks before the January profit warning, and said the move demonstrated an "irresponsible failure of governance".

Science Group reiterated its demand that no further acquisitions or disposals be made without shareholder approval and said it would not support further mergers and acquisitions until Ricardo demonstrated consistent operational delivery.

It noted recent analyst speculation about a potential disposal of Ricardo's performance products division, and called on the company to provide full transparency to shareholders on any such process.

The group also criticised Ricardo's response to shareholder concerns, accusing the board of deflection and denial, and described Ricardo's claim that a board nomination by Science Group would result in undue control as "absurd".

It said the real issue was the governance scrutiny Science Group would bring, which it argued would be in the interest of all shareholders.

Science Group acknowledged Ricardo's plan to publish a new business and strategy update in mid-April - its fifth major strategic announcement in five months - but said it was sceptical over the board's credibility, citing past failures to execute.

It said a catalyst for change was needed, and concluded that the position of Ricardo's chair was no longer tenable.

At 1234 BST, shares in Science Group were up 1.4% at 436p.

Reporting by Josh White for Sharecast.com.

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