Powerscreen is back in the black

POWERSCREEN International, the engineering group rocked by an accounting scandal, yesterday took the first step on the road to recovery as it unveiled a return to the black.

The Northern Irish equipment maker - currently under investigation by the Serious Fraud Office over a pounds 65m black hole at one of its subsidiaries - posted a pounds 9.7m interim pre-tax profit after plunging pounds 32.2m into the red in 1997.

The bulk of that loss was due to accounting irregularities discovered two years ago at its tractor unit, Matbro. The affair triggered a collapse in Powerscreen shares and the departure of its chief executive, Shay McKeown, and finance director, Barry Cosgrove, in March.

The chairman, John Craig, said yesterday the company had responded "very positively to its problems of last year".

Finance director John Kennerley said the cost of implementing "rigorous financial controls" throughout the Belfast-based group had wiped around pounds 200,000 from the interim earnings. The company had also spent pounds 1.5m on legal and accountancy fees for the SFO investigation.

Mr Kennerley said the inquiry could go on for up to six months. He added that the new management had still not decided whether to take legal action against some of the people involved in the Matbro debacle.

Analysts noted that the shares, down 4.5p to 121.5p yesterday, had fallen a long way from their 552.5p peak at the start of 1998. One analyst said the stock - on seven times full-year forecast earnings of pounds 20m - looked cheap. He added that the company's core businesses were showing underlying strength, led by its screening division that supplies equipment to the building materials industry. "Their business has quite a lot of potential, especially as they have a good exposure to the booming US." Others warned that the bulk of Powerscreen's earnings still comes from the UK and could be vulnerable to downturn.

Analysts agreed that the company was in much better financial shape after using the pounds 40m from a series of sales, including Matbro, to cut debt. Gearing was now around 35 per cent compared to 210 per cent in March. The fall in debt also helped the company to break free from a punishing agreement with some of its banks and to negotiate a new pounds 30m-plus facility on better terms.