Powerscreen's interim results show that it is a far cry from its precarious financial position almost exactly one year ago, when the Dungannon-based group was forced to disclose a £47 million sterling (#67.51 million) black hole in Matbro, one of its subsidiaries. The company has returned to profit, having sold off many of its subsidiaries, tightened its financial procedures, focused on developing closer ties with its contractors and it now seems on course for a £20-£25 million pre-tax profit for a full year (to March 30th next).
Last year's events were a disaster for the company, resulting in two profit warning forecasts, and an annihilation of its share price which fell from 613p sterling to 30p at one stage. A subsequent management reshuffle has seen the company's fortunes reversed and some confidence come back into the share. It is now trading at 120.5p sterling (#134.5), down 5p (6 euro cents) on the day yesterday.
However, the debacle sparked several investigations. The events are currently being investigated by the Serious Fraud Office (SFO), the Department of Trade & Industry (DTI) and the London Stock Exchange. The company also launched its own affair into the debacle. The costs for Powerscreen of its own investigations could eventually amount to £7 million. An audit it commissioned, cost the bulk of £1.5 million.
Powerscreen executives were not very forthcoming about the investigations, saying that the SFO and other authorities "do their own thing" and when they contact the company, "naturally" they get co-operation. Mr Brian Kearney, chief executive, said Powerscreen may not be able to publish the results of its own inquiry, "because there may be legal precedents".
Exactly what happened to turn a projected £10 million profit into a £50 million loss last year, has been a source of considerable puzzlement to analysts and investors. Mr Kearney said investors who had bought into Powerscreen since the turnaround began have done well.
He maintained that some fund managers who exited when the profit warnings were issued and details about irregularities began to emerge, had since reinvested in Powerscreen.
Analysts said yesterday the results were as expected. "Sales should grow modestly, and the recovery looks sustainable," said Mr Rory Gillen, of NCB stockbrokers. "They have delivered what the market was looking for."
Mr Philip Molloy, an analyst with ABN Amro, said Powerscreen appears to be disposing of its lower margin businesses. Profits from these businesses had only contributed about £1 million, on a turnover of £30 million during the period under review. He said the question now was how much they could grow the core businesses.
Others say the company is ripe for a take-over bid, because the share price is very low, capitalising the company at about £111 million sterling. Yesterday, senior Powerscreen executives would only say that if an approach was made, they would look at it, but denied any had taken place so far.
