pounds 46m hole in Powerscreen accounts

Shares in Powerscreen more than halved yesterday, wiping almost pounds 280m off the value of the company, after the Northern Ireland engineering group revealed that accounting irregularities at a subsidiary had blown a pounds 46.7m hole in its accounts and would push the group into the red in the current financial year.

The write-off, which one analyst described as "a shocker", stemmed from Matbro, a business making agricultural and building equipment which Powerscreen has owned since 1991. Facing pressure from continental European competitors as a result of the strong pound, Matbro's management mispriced products and offered refunds to customers to convince them to buy.

"They were gambling that the exchange rate would turn," said Barry Cosgrove, finance director. He said the managers also booked work done under warranty as revenue. All these steps allowed the company to overstate its revenues and profits.

Mr Cosgrove said the managing director of Matbro had left the company last year to join a competitor.

Powerscreen said the pounds 46.7m provision, which covers overvalued stock as well as overstated profits, would pull the company into a pounds 10m loss in the year to March 1998.

Analysts had previously expected the company to report profits of about pounds 48m, including a contribution of about pounds 10m from Matbro.

Mr Cosgrove said the majority of the pounds 46.7m loss had been run up during the current year's trading, though KPMG, the company's auditors, would conduct an in-depth investigation before deciding whether the previous year's accounts had to be restated.

Powerscreen said it was confident that the problems were confined to Matbro. The rest of the group continued to trade "at a level of profitability in line with market expectations".

Matbro was the only Powerscreen subsidiary which had access to the group's overdraft facilities, allowing it to mask the shortfall in its cash flow.

Powerscreen shares, which peaked at 762.5p last year, slumped 298.5p to 254p.