Powerscreen's announcement to the Irish and London stock exchanges yesterday was devastating for the company's reputation. The market hates surprises, especially ones on this scale.
Analysts were shocked by the size of the provision Powerscreen is making in this year's accounts and the extent of the losses that will result from the Matbro debacle. Although Powerscreen executives moved quickly into a damage limitation exercise, it could not stem the collapse of the share price.
The executives themselves will be among the losers. The value of the shares held by Powerscreen chief executive, Mr Shay McKeown plummeted from £1.045 million to £482,600. He exercised share options last year, selling 300,000 and keeping a further 100,000 to make £1.9 million. Chairman John Craig saw his shareholding dive from £376,750 to £173,990.
Matbro, which was expected to produce a profit in excess of £10 million will now account for a provision of £46.7 million in the Powerscreen accounts. It is difficult to understand how problems of this scale were racked up.
Powerscreen gave no information yesterday on how this provision figure was reached. The company also failed to give a proper breakdown on how much each factor they cited had contributed to the losses.
The company issued a brief one-page statement to the Dublin and London exchanges. It failed to say how long the practices which contributed to the losses had been going on, whether they had sacked any of their advisors, issued any writs against anyone, or why nothing had been noticed before.
Matbro was considered to be a jewel in the Powerscreen crown.
Powerscreen bought the company in 1991 for £3.3 million and it now has an estimated £7 million turnover.
The news is the first major blow in the company's history, as previously it had recorded uninterrupted growth since its formation in 1986. The market now expects some management changes.
Other events could yet overtake the company. Powerscreen is being tipped as an attractive acquisition target and the share price is expected to remain in the 250p-300p sterling range, until it outlines a credible future strategy.
