‘Extraordinary denial of reality’: Ricardo shareholder pens open letter amid vote to oust chair
One of the largest shareholders in transport and energy consultancy Ricardo has blasted the firm’s “blinkered perspective” and “extraordinary denial of reality” ahead of a vote to oust its chair.
Science Group, which controls around a fifth of the share capital of the London-listed business, earlier this month called for a general meeting of shareholders to remove chairman Mark Clare, after a bid to replace Clare and two other directors was rejected in March.
The company has published a 5,000 word “open letter” setting out its reasoning for the vote, in which it lambasted the “misaligned priorities” of Ricardo’s board, adding that it was “oblivious to the destruction in shareholder value for which they are ultimately responsible.”
Ricardo shares have tumbled since the start of the year after the Shoreham-by-Sea-based business warned delays to orders would mean its full year revenues and profit would fall short of market expectations.
The stock made a partial recovery following the Science Group shareholder vote call, and is now down by around a third since the start of the year.
Ricardo’s ‘liberal use’ of adjusting items
Aside from Ricardo’s poor revenue performance, Science Group has also taken issue with what it called the “liberal use” of adjusting items in its financial statements, which it said led to “rose-tinted forecasts and false assurances.”
Science Group cited Ricardo’s use of “restructuring charges” which it has used every year for the past five years, as well as “other strategic projects” with “no explanation” and “IT system planning and implementation costs” which it said “are surely part of the normal operating costs of a business like Ricardo in the 21st Century.”
“The directors, and particularly the chair, of any company are ultimately accountable to a company’s shareholders,” Science Group said.
“The board has failed through a combination of poor operational execution and ineffective governance, resulting in a substantial destruction in shareholder value, a weak balance sheet and a precarious financial position.”
Science Group has also called for for a sale or breakup of Ricardo, adding that it had been contacted by a number of private equity groups over a possible takeover.
Ricardo has refuted the allegations, adding it “does not believe the resolution is in the best interests of Ricardo and its shareholders as a whole and is unanimously recommending shareholders to vote against the resolution.”
The general meeting vote is due on 18 June.