Bottom Line: Spring Ram closes a door, another opens

MUCH as Spring Ram's new management team may protest that yesterday's rights issue marks a new beginning, it is the end - with luck - of a cleaning- up exercise launched in the wake of the company's dramatic fall from grace.

The pounds 42m cash call launched yesterday is needed specifically to pay off debts taken on by Bill Rooney, the exuberant founder chairman, to fund an ambitious venture into doors.

The outflow of funds at Regency Doors has almost single-handedly turned Spring Ram round from cash balances of pounds 46m two years ago to net debts of pounds 35m now.

The level of gearing is not unduly onerous at 38 per cent. But all the money has been borrowed from one bank, restricting even modest rises in working capital or capital spending to take advantage of a market upturn.

Despite last year's turmoil in the top management ranks, turnover at Spring Ram rose by 24 per cent to pounds 240m, with a 10 per cent advance in underlying organic growth. Eventually the company should be able earn an

operating margin of 10 per cent.

Profits will not be rebuilt immediately even if the promise of a 0.5p dividend this year implies a modest move back into the black.

Spring Ram has always been a company that has made big demands on shareholders' credibility and has let its loyal fans down badly. Even more faith is required to back this rights issue but Roger Regan, the new chairman, has done everything right so far and deserves support. Subscribe.