Science Group Critiques Ricardo's Strategy Amid Strong Q1 Performance

A Storm in a Boardroom: Science Group Flexes Muscles While Taking Swipe at Ricardo

Let’s not mince words: when a company holding a 20.1% stake in another firm starts publicly dissecting its strategy like a frog in a GCSE biology class, things get interesting. Science Group’s latest RNS isn’t just a trading update-it’s a masterclass in shareholder activism with a side of corporate shade. Here’s what you need to know.

Science Group’s Q1: Steady as She Goes

First, the good news. Science Group kicked off 2025 with:

• Revenue and profitability slightly ahead of board expectations
• Robust operating cash flow
• A balance sheet flaunting significant cash reserves
• An entirely undrawn £30m credit facility (with £10m accordion)

In classic British understatement, they call this a “resilient performance”. Given current market volatility, I’d call it a minor triumph of financial discipline.

The Ricardo Roast: A Shareholder’s Frustration Laid Bare

Now, the main event. Science Group’s critique of Ricardo reads like a corporate thriller-complete with missed targets, questionable accounting, and a boardroom seemingly allergic to accountability. Let’s break it down:

1. Profitability? What Profitability?

Ricardo’s 2022 strategic plan promised margin improvements. The reality? Targets “materially missed” and subsequently scrapped. Science Group highlights:

• Underlying Operating Profit (UOP) inflated by excluding shared service costs
• £23.4m in “exceptional” restructuring costs forecast for 2025
• Actual EBIT expected to hit £5.1m loss this year

2. Cash Conversion Charades

Cash is king, but Ricardo’s crown looks decidedly tarnished:

• H1 cash conversion from continuing operations: 13%
• House broker’s FY24/25 cash flow forecast slashed from £7.8m to £1.0m
• Science Group dryly notes this is “the most tangible metric of any business”

3. Governance Grenades

The real fireworks come in the governance critique:

• Board failed to flag performance issues before £46m E3A acquisition
• Executive pay deemed “excessive” for a £150m market cap firm
• Restructuring costs treated as exceptional every year for five years

Science Group’s zinger: “The Ricardo Chairman is accountable for destruction of shareholder value… now is the appropriate time to align the Board.” Translation: Clean house, or we might help you do it.

The Peer Comparison That Stings

An independent analyst report (12 March 2025) comparing 13 consultancies reveals:

• Science Group: #1 in adjusted EBIT margin and ROIC
• Ricardo: Dead last in EBIT margin, second-worst in ROIC

As Science Group notes: “The Ricardo performance is derisory.” When you’re being outclassed by everyone in your peer group during the same market conditions, the problem isn’t the weather-it’s the umbrella.

What’s Next? Boardroom Battles Ahead

Science Group’s endgame is clear: boardroom changes. With Ricardo’s share price at 15-year lows (down ~50% since current chairman’s 2022 appointment), the pressure cooker’s whistling. Key questions for investors:

• Will Ricardo’s Easter epiphany on cost control translate to action?
• Can they break the cycle of “exceptional” restructuring costs?
• Will major shareholders back Science Group’s push for governance changes?

One thing’s certain: in the battle of consultancy heavyweights, Science Group just landed a haymaker. Whether it leads to real change at Ricardo-or simply more boardroom drama-remains to be seen. But for investors? Grab the popcorn. This could get educational.