Bottom Line: Bimec overdoes it

AS THE economy emerges from recession and merchant bankers prepare to give the deal roundabout another spin, Bimec Industries stands as a late but terrible warning of the excesses and lax standards of the past. At its height, Bimec had a pounds 100m-a-year business in water and waste treatment, aero-engineering and air-conditioning. Yesterday it unveiled a pounds 27.3m net loss, neatly converting net assets of pounds 12.3m into a deficit of pounds 12.2m. Without a proposed debt write-off and refinancing supported by Lloyds Bank, Bimec is bust.

Nearly pounds 11m of the loss is a correction to the overstated profits of past years. It represents more than three-quarters of the total pre-tax profits of pounds 14.2m that Bimec reported in the previous five years.

Probing further only uncovers additional worries. The pounds 11m correction includes a pounds 2.4m write-down of the value of an old mill building in Burnley, Lancashire. Acquired with a book value of pounds 900,000 in 1990, this property was revalued first to pounds 1.9m and then last year to an incredible pounds 3m.

Another pounds 4.4m relates to an over-optimistic assessment of the value of long- term contracts. Biomechanics Environmental, a much-hyped waste water treatment business, has crashed to a pounds 4.8m loss and has to be severely cut back.

Although the former chairman, Sam Smith, and his boardroom colleagues are principally to blame for this mess, it is hard to see how Grant Thornton, the group's former auditors, can escape criticism.

Roy Barber, the company doctor who is trying to rescue Bimec, is already suing Grant Thornton over a pounds 1.5m stock-take anomaly. He seems to have grounds for a wider action.

Shareholders may have little else to look forward to for quite some while.