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(Sharecast News) - Science Group announced the formal requisitioning of a general meeting of Ricardo shareholders on Thursday to remove Mark Clare as chair, citing persistent underperformance, failed strategy execution, and governance shortcomings.
The AIM-traded firm's move followed its recent acquisition of a 20.08% stake in Ricardo, making it the company's second-largest shareholder.
It said the requisition, described as a de facto vote of no confidence, proposed a single resolution to remove Clare, who was appointed in November 2022.
Since his appointment, Ricardo's share price had fallen from 430p to 246p, and the company's financial position had materially weakened, with net debt forecast to rise to 84m by June 2026 and limited covenant headroom anticipated by the end of June this year.
Science Group criticised Ricardo's recent business and strategy update as lacking substance and masking a further forecast downgrade, including a projected operating loss for the 2024-2025 financial period.
The group contended that Ricardo had failed to deliver on its 2022 strategic plan, with profitability, cash flow, and returns on capital all reportedly deteriorating despite broadly flat revenue.
Its house broker had also reduced expectations for 2025 since January.
In response to the ongoing decline, Science Group was proposing a turnaround strategy that would restructure Ricardo into three independent operating divisions - energy and environment, rail, and automotive and industrial - to improve efficiency and reduce overhead.
It argued that such a reorganisation, alongside tighter cost control and improved productivity, offered the best path to restoring shareholder value.
While acknowledging growing interest from private equity in Ricardo, Science Group noted that a near-term full sale or break-up of the business would likely fail to deliver sufficient value due to operational challenges, current market conditions, and the need for significant preparatory work.
It warned that the 'break-up model' was particularly high risk given Ricardo's centralised structure and underperformance.
Science Group said it was not a passive investor, and intended to use its industry expertise to support value creation at Ricardo.
While open to strategic alternatives, it said it believed the immediate priority must be addressing leadership and operational performance.
The group said it expected Ricardo to call a general meeting within 21 days of its letter, and for the meeting to be held within 28 days thereafter.
At 1149 BST, shares in Science Group were up 0.91% at 444p.
Reporting by Josh White for Sharecast.com.