Bottom Line: Simon's pain is far from over

TROUBLES come in threes, except at Simon Engineering, where they come in much larger numbers. Having lost a packet on a project to refurbish a paper mill in Florida, the company cut its dividend in March and last month it announced the death of chairman Roy Roberts.

Sadly, a gloomy assessment of prospects from caretaker boss Sir Philip Foreman at yesterday's annual meeting confirmed that there is more pain to come.

Until recently uncertainty was restricted to the level of the payout. Now it seems there is a serious question mark over the ability of the access equipment to process engineering company to pull through the recession without some sort of refinancing.

Despite selling businesses worth pounds 30m, including the environmental operations once touted as the company's most attractive feature, borrowings are actually higher than in December. Gearing is approaching 100 per cent.

Shareholders were also told to expect an unspecified operating loss at the interim stage. They were warned that the Government's proposed changes to petroleum revenue tax had dealt a deadly blow to the North Sea oil and gas industry, served by one of Simon's important divisions.

Cash is flowing out of the business at an alarming rate. Problem number one is an absence of advanced contract receipts. Those on the books at the year-end have been used up and none has arrived to replace them.

That's a reflection of cash-flow problem number two - poor trading. The process engineering division, especially the paper operations, is yet to get off its knees. And contracting will not recover for a while yet. The resignation of the division's head is an understandable act of blood-letting but his departure will not cure the ills of the industry.

There is also little Simon can do about its final difficulty, collecting money from customers who are paying as late as they can.

Simon's shares have staged a remarkable fall over the past three years. Worth 400p in 1990 they dipped a further 26.5p yesterday to 73.5p, close to their all-time low. They look set to go lower. Sell.