Spring Ram warning shocks City: Start-up costs and problems in bathrooms division blamed for profit fall

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The Independent Online
SPRING RAM, the troubled bathroom and kitchen products group, shocked the City yesterday with its third profit warning in a year.

The warning came just a month after the company's annual meeting and reverses upbeat comments made then by Bill Rooney, chairman.

The company said yesterday that profits in the first half of the year would be substantially lower, despite higher turnover.

It blamed greater-than-expected start-up costs at Regency Doors and Artisan Tile. Regency Doors commissioned the largest door plant in Europe near Barnsley, Yorkshire, in the last quarter of 1992.

It also said that problems had continued at Spring Bathrooms and Balterly Bathrooms.

The company's annual report said that pounds 2m was spent on new production facilities to increase Spring Bathroom's capacity by 50 per cent.

Balterly was the subsidiary at the centre of the group's woes earlier this year, when a pounds 3m provision was made after accounting irregularities were discovered. That announcement led to the resignation of Stuart Greenwood, Spring Ram's finance director, and calls for the resignation of Arthur Andersen, the group's auditors.

The company has still to replace Mr Greenwood, although it said yesterday that the board was actively pursuing the appointment of a new finance director and a second non-executive director.

Yesterday's announcement also said: 'Whilst sales growth in the kitchen division is extremely encouraging, the benefit from the increased turnover is being held back by necessary increases in operating costs designed to protect long-term profitability.'

The spokeswoman was unable to say what these increases were.

But the company said the board believed that prospects for the second half were still good, and expected to benefit from new business in the kitchen division, some recovery in the bathroom market and substantially reduced losses from Regency Doors and Artisan Tile.

At the annual meeting on 22 May, Mr Rooney said: 'The board believes that business prospects for the year as a whole are better than in 1992.

Spring Ram was long a stock market high-flier as it appeared almost impervious to the recession in its markets, but its shares plunged by more than 50 per cent following the Balterly affair and a fall in profits to pounds 26.2m in 1992, against expectations of pounds 39m.

The group made pounds 36.2m in 1991. Yesterday its shares fell 81 2 p to 521 2 p.