Spring Ram director faces call to quit

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The Independent Online
STUART Greenwood is coming under intense pressure to resign as finance director of Spring Ram, the one-time City high-flyer which last week warned that profits would be pounds 13m less than anticipated.

Bill Rooney, chairman of the kitchen and bathroom fittings group, faces a grilling tomorrow from disgruntled City analysts and institutions over the shock profits warning.

Mr Rooney's long-term chances of survival are also thought poor in the City, although the partial recovery in Spring Ram's share price since the company revealed its expected profits shortfall suggests a bidder may step in to spare further embarrassment.

Shareholders, who had hoped to see profits of pounds 40m, are focusing on Mr Greenwood's role in permitting inflated profit forecasts and on his track record. He joined Spring Ram two years ago after seven years helping turn Bradford steels group Henry Barrett from a sleepy family company into an aggressively expansionist group.

He quit Barrett in January 1991. The following month, the group warned profits to the end of August that year would fall short of the previous year's pounds 12.5m, a figure that had dashed earlier City hopes of pounds 18m. In fact, the figure slumped to pounds 442,000. Barrett went into receivership last November.

Coincidentally, Barrett's bankers were N M Rothschild's Manchester branch and its brokers were Panmure Gordon, City firms which are also advisers to Spring Ram. Their position also looks uncomfortable since Spring Ram's profit warning, which saw the shares halve to 63 1/2 p, wiping pounds 242m off the company's stock market value.

Four months ago, Spring Ram revealed that false accounting had led to a pounds 5.6m overstatement of profits at its Balterley Bathroom subsidiary in 1991.

In November, Mr Greenwood reassured analysts, and Mr Rooney his institutional shareholders, that the Balterley problem was an aberration. Analysts trimmed their forecasts, but pounds 40m was still expected.

After lengthy talks with auditors Arthur Andersen, Spring Ram last week announced a sudden conversion to 'increasing expectations for accounting rigour and prudence' in a bizarre and confusing circular,

The pounds 13m drop results largely from decisions to stop capitalising start-up costs and charge them against revenues, and to push nearly pounds 6m of profits on forward orders into the 1993 results rather than use them to flatter the 1992 figures. As a result, profits will be about pounds 26.5m.

Shareholders are likely to be shocked again tomorrow as it emerges that profits would barely top pounds 20m without an extra pounds 6m generated by skilful financial engineering. Spring Ram stripped some of its operations from its subsidiaries and sold off what were left as cash shells at a handsome profit.

The buyers were rival building products companies whose higher overseas profits left them with advance corporation tax on dividends that they were unable to offset against mainstream corporation tax. The companies bought Spring Ram's newly-created cash shells, paid themselves a dividend and reclaimed corporation tax from the Inland Revenue.

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