Fears grow of pounds 10m cost over-run at Spring Ram: Commissioning problems emerge at new door-making factory
Monday 22 March 1993
Initial expected costs of pounds 20m are said to have spiralled to pounds 30m because of serious commissioning problems.
The fears have surfaced as Stuart Greenwood, finance director, faces growing pressure to resign in the wake of last week's profits warning.
The troubled group's relationship with its auditors Arthur Andersen has also come under strain.
Results for 1992 are due today. Last week the shares in the Leeds-based group halved in value after a bleak profits warning. The kitchens part of the business is expected to make pounds 16m, but the bathrooms operation may report losses of pounds 5m.
The 1991 annual report boasted that the new Barnsley plant beside the M1 - being built for Spring Ram's Regency Doors subsidiary - would 'utilise state-of-the-art woodworking machinery, much of it computer controlled'.
With overall profits set to slump from pounds 37m in 1991 to pounds 26m in 1992, close observers are suggesting that the relationship between Spring Ram and Arthur Andersen is becoming increasingly strained. Last-minute changes to accounting policies seem to be responsible for at least part of the profits shock.
Andersen has audited Spring Ram's accounts since it was floated in 1983. Revelations last Thursday come just four months after financial irregularities were discovered at Balterley Bathrooms, another subsidiary of Spring Ram.
Arguments between Spring Ram and Andersen in the wake of the Balterley affair narrowly avoided ending in court action.
Institutional investors want wholesale changes to the board. Stuart Greenwood, finance director, is taking most of the heat. He was formerly with Henry Barrret, a Yorkshire steel stockholding company that expanded quickly in the late 1980s and early 1990s, but went into receivership last November.
As well as seeking a replacement for Mr Greenwood, investors want at least two non-executive directors appointed to the board. They would also like to see Bill Rooney, chairman and chief executive relinquish one of the roles.
Concerns also centre on how Spring Ram has been booking profit on its product. Thursday's statement said: 'Profits amounting to pounds 5.6m will now fall into 1993' - indicating that Spring Ram was taking profit before goods were sold.
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