Powerscreen's future in question as losses mount

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The Independent Online
POWERSCREEN International's prospects took a further blow yesterday after it increased an earlier pre-tax loss forecast by a factor of more than six.

The Belfast-based engineering group, already the subject of a Serious Fraud Office inquiry into its Matbro subsidiary after a profit warning in January, said that it would make a loss before tax of pounds 65m in 1997.

"People were expecting another warning but the size of this is surprising - it's a pounds 100m turnaround in a year," Philip Molloy, an equity analyst at ABN Amro in Dublin, said. "Powerscreen's survival in its current state is now in doubt."

In January, the company announced accounting irregularities at its Matbro subsidiary and warned that it expected a pre-tax loss of pounds 10m, compared with a pounds 42.4m profit the previous year.

"It has become apparent that the profitability in aggregate of the other group businesses has fallen short of the management's expectations by approximately pounds 10m," the company said.

Powerscreen said the pounds 65m loss would include pounds 58.6m losses from the Matbro division, including a further pounds 8m trading losses and an estimated pounds 4m in professional fees resulting from the investigation into Matbro.

Earlier this month, Powerscreen said it would continue to co-operate fully with regulators following an announcement that the Serious Fraud Office planned to investigate accounting irregularities at Matbro. The irregularities involved the mispricing of machines, unauthorised discounts offered to customers, and inaccurate and misleading recording and discounting of bills of exchange and warranty costs, the company said.

The pre-tax loss would also include writing off pounds 11.5m of assets, and pounds 14m for changes in accounting policies, it said. Some pounds 20m of the overall loss for the financial year could relate to prior financial years, it added.

"This is the first time they've said this and it's a very worrying development," said Mr Molloy. "Previously, they said the losses were all related to this year."

Other analysts in the Dublin market said a buy-out of Powerscreen looked unlikely.

Analysts estimate Powerscreen's current capitalisation at around pounds 100m.

On Tuesday the stock dived by more than 21 per cent in London after a large parcel of stock was sold at a substantial discount to the prevailing market price. The shares started the year at 608p. Yesterday they closed down 23p at 110.5p.