Member Info for Avalueinvestor

Science Group's corporate activity in relation to Ricardo plc is a rare, intriguing and quite transparent window into the boardrooms of both companies. Science Group has actively engaged with TP Group plc in the past, resulting in a takeover and the way the acquisition played out in the early stages had similarities with Science Group's current engagement (gradual purchase of 20% approx) and public admonishment (by SG) of the destruction of shareholder value by the Ricardo board.

Science Group has sought to requisition a general meeting and has clearly had some engagement with Ricardo's largest shareholders (so few that it would be relatively easy to be in contact with those holding considerably more than a further 50% of the shares not already owned).

Interestingly whilst Science Group is today capitalised at circa £200M, Ricardo is trading at a 15 year low and capitalised circa £168M.

So this engagement is between two companies of an approximately similar size and is not a David & Goliath interaction between one obviously larger and one obviously smaller player.

My sense so far of how the two boards have responded publicly is that Ricardo are a long way behind the curve, poorly led and very likely to have to accept board changes at the least, positively much more engagement than that.

I've been interested in Judges for a long time but have had a planned entry price below £40. I like a great deal about the company - the value investor approach, the commitment to transact once heads of terms agreed, the ability for management to stay on after the purchase, the freedom acquired business have to develop and grow (yet with significant capital allocation decisions retained by HQ). I like a lot... except the Geotek deal, where the sum paid appears to be an anomaly - considerably above the usual 5xEBIT guide.

Any views ?

Https://www.londonstockexchange.com/news-article/RWS/director-pdmr-shareholding/17005172

I also thought a pretty poor RNS. Smaller companies often try to enthuse potential/investors with news that isn't quite there but which they hope will turn into technical milestones or sales orders. Ricardo is (to me) a medium sized company. The RNS today contained a large number of references to things, mainly sales orders, being 'in the pipeline' which is a phrase open to a great deal of interpretation - and one which suggests hope triumphing over certainty.

For a company of this size to release an RNS like this was a disappointment to me. I think there was quite a lot of hot air and that it was light on certainty.

Correct Laura, 43p actually. I only had a small number, my smallest holding, held due to empathy and interest really - I use a JIM x-o share dealing account which I've found inexpensive and straightforward over the past couple of years.

Yep, sold within 5 minutes of the RNS, as 23p

I think 20p this week, or any week is quite unlikely. The business model doesn't work. Regulators have forced a winding down. The CEO / largest shareholder had been ousted. The business is being controlled by advisers (with little to no downward pressure on their costs) who are accountable to regulators. It is not a going concern. Shareholders are last in line to receive any residual value from the orderly wind down.

I'd say the intrinsic value of the shares is nil. But I'm happy for my view to be judged by the price one day before delisting.

No investors will buy this stock at the moment. I agree that speculators might buy it. However there must be alternative speculations with something of a better safety net.

I'm afraid that shareholders are last in line to receive anything in a winding up Laura.

To buy shares now would be speculation - not investing. You could equally go to the bookies and see what horse races are on today.

Work on the basis of £zero Laura. Not a thing.

Similar erosion of value occurred with R & Q Insurance summer 2024. Nothing left for investors after a $333M sale.

Only invest what you can afford to lose happily.

I think it's quite likely that when everyone paid off, including numerous advisers, there is nothing left for shareholders.

Pity, but likely.

I started trying to inform myself about Ricardo as a value opportunity when Science Group RNSs revealed their stake building. I worked with some very impressive Ricardo automotive engineers (my clients) in the 90/00s.

I think I have watched / listened to about 50 trading updates, half yearly and full year results from various AIM and FTSE 350 companies in the last 18 months.

The Ricardo results webinar on 5th March 2025 showed, in my view, the weakest grip by management on their business that I have yet seen or heard as demonstrated during a webinar format. The main takeaway point I was left with was 'we are not very good at invoicing and we are definitely going to try harder to invoice more, earlier and we will even try to write into contracts how much we can invoice and when, which will make a big difference next year'.

Both the CEO (who spoke only extremely briefly over the slide deck) and the CFO appeared wholly reliant on scripts, from which they read rigidly. They hid behind the slide deck (not showing their faces, nor facial expressions, wholly missing the opportunity to engage with the audience) not only throughout the 28 min slide deck presentation but also then a big 'Q & A' slide which shielded them for a further 12 minutes.

I wondered of the CEO and CFO if either knew what the right questions were and concluded that neither had the answers. That's very critical I know - but this was a good company a time ago and the owners deserve better management.

All this left me with several thoughts:

- my small purchase at £2.50 may have been too high a price, lacking the safety margin I like to buy with

- if the CEO and CFO have stacked the company with people in their own image, there may be a huge cultural dead weight within the company, holding it back

- if other investors have done similar research to me, there will likely be a large number of willing sellers should an offer with some sort of premium by Science Group ever be put to shareholders

- the rhetoric of Science Group RNSs about Ricardo performance and a poorly performing board and particularly the chair seem absolutely to be a fair challenge.

I'm a holder and have been following the company for about 4 years.

I like this company because I think I have invested with a margin of safety - ie the price I paid is less than the real value.

I particularly like the simple technology, backed up by many patents and method statements.

I also like the large, unserved market in which to take market share.

The US model (licensing to Parker Labs) offers the chance of steady growth whilst risking little capital.

I like the approx £11M in the bank and no bank debt.

I like the multiple (approx 13) subsidiaries around the world in more developed markets.

I like that the dividend is noticeable and growing (as opposed to being negligible).

I'm not sure Mr Market always prices the shares at the right value though.

So I've concluded that owning TSTL shares is for me (and should remain for me) something like owning a home. You buy it and aim to keep it for the foreseeable future. You don't examine it every day but enjoy owning it. And in all probability, if you continue to own it for quite a few years it is extremely likely to appreciate in value.

Listening to the webinar today, I'm left with two over-residing takeaways.

There slide deck is full of crisp bar charts and pie charts showing growth trends. The language too is very positive. However, earnings per share reported are almost reduced by 50%. I don't think the different messages were reconciled as transparently as I would like.

Secondly, when asked by an analyst about the market reaction today (share initially down more than 16% or 20p), the CEO declined to comment on the share price / market reaction. That's not a good look as far as I am concerned - it shows a dismissive attitude to those shareholders who are rewarded by share price performance and a lack of alignment by those who are rewarded by salary.

I was left disappointed.

I picked out these notes from the prelims today which provide comfort that the Board still sees growing momentum:

Quote from the third paragraph titled 'The opportunity in the US futures market...."

As of 31 December 2024, the futures business held approximately $350m of customer segregated funds which represents growth of approximately 20% versus 31 December 2023. The growth in customer segregated funds has been significant over the last three years at approximately 600%, illustrating the strategic position the business has attained. Further growth in these funds was delivered after the period end, and as of today they continued to grow by more than 50% compared to 31 December 2024, reflecting both the onboarding of new customers and increased trading activity from existing customers.

Feb 2023 dividend $0.32 announced

Feb 2024 dividend $0.94 announced

Feb 2025 dividend $1.22 announced - shows good growth.

EPS for full year 2024 $3.47 versus $3.17 which is 13% ahead of 2023.

Margins maintained at a very healthy level (45% against 47%).

New $110M share buy back announced. This is the second $110M buy back announced in a row (prior was Aug 2024 when the share price was circa £25). This new buy back suggests that the Board still believes that the shares are undervalued at around £28.50.

Agreed - my buy today also shown as a sell at £3.68.

Seatank, a very interesting insight and link. Could you extract a couple of numbers from amongst the huge amount of data on that link to illuminate your point about customer segregated funds pls ? Always interested to understand more. Thanks

poppy****. hope you are banned soon.

An interesting point to make here (and surprisingly few people are aware of this):

Labour votes in 2019 under Jeremy Corbyn ...................10.2M

(source: https://www.bbc.co.uk/news/election-2019-50779901 )

Labour votes under Keir Starmer in 2024..........half a million fewer......9.7M

(source: https://researchbriefings.files.parliament.uk/documents/CBP-10009/CBP-10009.pdf )

Conservative votes in 2019 under Boris Johnson: 13.9M

(see above same source)

Conservative votes in 2024 under Rishi Sunak......7 million fewer at 6.8M

So, I agree.....just because Labour have a very large majority in the current parliament, and even ignoring the absolute horlicks of a first few months they have made for themselves (and us), that 200 seat majority could evaporate very quickly indeed. I don't have a clear idea what the result will be - but I would think another Labour majority is not very likely.

Still some of watching. One of my 7 holdings.

The long term visibility of earnings and room for dividend growth as well as capital appreciation make this one of favourite value shares at the moment. The company doesn't make too many announcements, but they have all been good in the last 2 years in my view.