Bottom Line: Starmin must explain

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The Independent Online
STARMIN'S directors have a lot more explaining to do. Shareholders can hardly be satisfied with yesterday's explanation of the accounting changes that have thrown up pounds 3.9m extra losses and a pounds 1.5m hole in net assets.

Shareholders should start by asking for more details of the various sales and purchases that caused the problems. In particular, they should ask why Starmin kept pounds 1.26m of deferred consideration from Chepstow Environmental Services as a debtor on its balance sheet despite the fact that it was not completed.

Starmin's board should also explain why it was so confident in Jeniva, which did the deal in CES's place, that it felt able to take a 35.5 per cent stake in the group - a confidence which, given the losses and deficit on net assets since reported by Jeniva, looks woefully misplaced.

And it must give far more information about Jeniva - including its ownership, history and prospects - which still accounts for more than pounds 400,000 of Starmin's net assets.

Untangling the facts about the acquisition of Tamar and St Mary's is equally difficult. Taking a pounds 1m profit on assets that form part of the payment for an acquisition is hardly an orthodox accounting treatment, albeit now reversed. Nor does the statement make clear exactly who was the proposed purchaser who is now raising queries about the asset's valuations.

But the questions go beyond the detail of individual deals. Shareholders should ask how a company that has raised pounds 29m through rights issues and issued 28.3 million shares for acquisitions could have got itself into this mess.

The company may believe that the resignation of the Abdullah brothers is enough, but shareholders should remember that Owen Rout, acting chief executive, has been chairman since 1990 and Lord Parkinson on the board for 16 months.

The 1.25p rise in the shares to 4.75p yesterday was apparently due to relief that the write-offs were not worse. That is misguided. Until the company gives a better explanation, the shares should be avoided.