The warning came ahead of the extraordinary general meeting today, at which shareholders are expected to grill directors who are seeking approval for a pounds 204.5m rights issue. The cash-raising operation is designed to repair the balance sheet.
Trafalgar is asking shareholders for further cash support after having raised pounds 310m in July 1991 for the acquisition of Davy Corporation. Since then the company's share price and prospects have slumped.
Last October, the Financial Reporting Review Panel, a watchdog body that monitors public company accounts, forced Trafalgar House to produce revised accounts for the year ending 30 September 1992. That resulted in the profits for the previous year being reduced by pounds 122.4m, leaving a pounds 38.3m loss. For the year to September 1992 the group reported a loss of pounds 30.3m.
At the annual general meeting in January this year, Touche Ross came under fire from some small shareholders who were concerned about the accountants' level of competence.
A resolution to reappoint Touche Ross was initially narrowly defeated on a show of hands. A formal vote in a poll of all shareholders secured the firm's reappointment.
Tim Halford, public relations director of Trafalgar House, said yesterday that it was 'pure speculation' that the group intended to drop its merchant banking advisers, Kleinwort Benson, or its securities advisers, UBS Phillips & Drew and Cazenove.
'On the auditing side we will be reviewing Touche Ross's role in the summer,' he said. 'It will be a wider review than usual in view of the comments made by shareholders at the annual general meeting. But Touche will be auditing the accounts for the current financial year. But they may not continue as auditors after that.'
Andrew Colquhoun, secretary and chief executive of the Institute of Chartered Accountants in England and Wales, confirmed that the institute had received the papers from the Financial Reporting Review Panel concerning the role of the auditors in its inquiry.
'As a consequence the institute's investigation appointed a team earlier this month to examine the situation,' Mr Colquhoun said. 'The investigation is still at a very early stage and so there is no basis at the present time that any directors of Trafalgar House who are members of the institute will be reported to the disciplinary committee, always assuming that there is any case to answer.'Reuse content