Bottom Line: Clean sweep at Pentos

THE new management at Pentos is taking the kitchen-sink approach to accounting. Yesterday it gave due warning that it proposed to make hefty provisions and revise past aggressive accounting techniques.

The provisions - pounds 30m, says NatWest Securities - relate to property, and, more damningly, stock. Outdated stocks of computers will have to be heavily discounted, and most of the other provisions relate to Athena stock.

After the provisions and trading losses, Pentos's net worth will be almost halved and both a chunky rights issue and a dilutive debt-for-equity swap will be looming on the horizon. At this point the new management will have to do a very hard sell on its new strategy. But some of the problems may be beyond it.

Athena in the UK and Ryman Computer Store are high-cost, high-margin businesses operating in marketplaces where this approach is no longer viable.

Demographic and employment trends are against Athena. And Ryman Computer Store has been drastically undercut by the out-of-town superstores. The shares must be a sell.