Between 16 February and 27 May 2025, UK engineering small cap (and Armchair Trader tip) Science Group LON:SAG has acquired 13,537,623 shares in fellow engineer Ricardo LON:RCDO, equivalent to approximately 21.8% of the voting rights, at an average price of 239 pence per share (including brokerage fees).
Today WSP Group has made an offer for the entire issued and to be issued share capital of Ricardo at a price per share of 430 pence. Science Group has now confirmed that it has entered into a share purchase agreement with WSP to sell 12,443,655 Ricardo shares, equivalent to 19.99% of the issued share capital, at the offer price.
WSP Group is one of the world’s leading professional services firms, with approximately 72,600 professionals in over 50 countries. It said today that the integration of Ricardo into the group will accelerate the implementation of Ricardo’s strategic objectives and provide additional opportunities for cost savings and revenue synergies through increased scale and complementary offerings.
The cash proceeds of the sale, totalling approximately £53.5 million, should be received before the end of June. The Science Group pre-tax net return (after fees and costs) on the Ricardo investment is anticipated to be in the order of 70%.
The investment profit, subject to tax, will be materially accretive for Science Group in the current financial year and the group’s cash position is being further strengthened as a consequence. The Science board says it intends to retain the proceeds for future strategic investments and corporate opportunities.
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Science Group backs offer for Ricardo
Science Group said today that it supports the WSP offer for Ricardo. The offer price is a 102% premium relative to the Ricardo share price of 213 pence shortly before Science Group initiated its share purchases and corporate action. All Ricardo shareholders have benefitted from the Science Group investment, the company said.
The Armchair Trader tipped Science Group on 16 May to our Armchair Trader Plus subscribers. We said at the time that our analytics indicated this is a UK small cap worth paying more attention to at the moment. Management does not seem to be standing still, and some of the work it is already undertaking could see an uptick in revenues in 2025-26.
The Armchair Trader tipped the stock at 451p. At time of writing it is now trading at 515p, a gain of +14% in three weeks.
Science Group looks like an even better investment
Aside from the Ricardo play, which has brought great benefits to Science Group’s bottom line, there are fundamental arguments that still support the firm’s overall investment story.
Science has exposure to the expanding defence sector and is considered a leader in the development of submarine atmosphere management systems. It also works on radio chips and modules for the consumer electronics market.
The group’s fourth quarter 2024 financial performance positions Science in the top 10% of industrials companies listed in the UK, highlighted by its strong performance in Return on Equity Ratio (ROE) and EBITDA, lease adjusted relative to its peers. Strong performance in these two metrics has historically had a positive correlation with industrials stocks outperforming industry competitors.
Science recently reported revenues of £28.5m and net income of just over £3m, reflecting a 0.5% decline in revenue, coupled with a substantial increase of about 4,279% in EPS relative to the corresponding quarter last year.
