Accounting irregularities may force breach in Ashtead banking covenants

Ashtead Group, the plant hire company, last night admitted to an accounting irregularity in the US that may put it in breach of its banking arrangements.

The company said a "senior member" of its finance department at its Sunbelt subsidiary had been suspended and it had brought in external advisers to investigate. The US makes up about half the group's turnover.

"The reason for his suspension is that he has admitted to a failure to reconcile properly certain balance sheet accounts.... The individual concerned who is co-operating with the initial investigation denies any personal gain from the mis-statement and says that no other member of Sunbelt's staff was involved," Ashtead said.

It has emerged that, as a result, costs have been understated in the 2002 financial year and the current year by £5m. For the year to April that company had been expected to report a pre-tax profit of £22.8m. The board is presently reviewing whether there is an impact on its banking arrangements. The board is keeping its bankers appraised of the position," the company said.

The company has long been the subject of criticisms over its accounting policies but two years ago it put in place new systems, which it hoped would answer these concerns.

There has also been anxiety over the integration of the US assets, acquired fours years ago. Ashtead shares have fallen from 54.5p over the past 12 months to close unchanged at 28.5p yesterday ahead of the announcement. The group was rumoured last year to have turned down bid approaches pitched at 60p to 75p a share.

The company also warned about trading conditions in the US yesterday, though it said it was making "good progress" in the UK.