Powerscreen International has said it is at an advanced stage of negotiations for the disposal of four subsidiaries in its materials handling division. It hopes to raise £50 million sterling from the sales to pay down its £65 million debt.
In a long-awaited circular to shareholders, the troubled engineering group outlined its strategy for the future, the findings of a KPMG report into its loss-making Matbro subsidiary and the current state of affairs at the company.
Powerscreen now plans to concentrate on its core crushing and screening businesses although it will retain Dundalk-based forklift manufacturer Moffett Engineering, which it acquired last year.
It also intends to merge the two companies that form its crushing division Brown Lenox and Pesgon into a single entity called BL-Pegson Limited which should enhance the trading position of the group.
"The merged entity will benefit from a wider distribution network, broader range of products and economies of scale in production, all of which should help improve operating margins," the company said.
Powerscreen said current trading remained good, order books were strong in most subsidiaries for the first quarter and management was confident about the prospects for the year ahead.
The company also confirmed it expected to announce a pre-tax loss of £65 million for the year to end-March, but said the audited results would be announced somewhat later than normal because of the investigations into Matbro and a detailed review of the remainder of the group.
It said it had a banking facility of £85 million in place while all its tax matters, barring one small outstanding issue, have been satisfactorily addressed with the Inland Revenue.
Substantial management changes have taken place since the company revealed accounting regularities at its Matbro subsidiary last January.
The three non-executive directors have left the company which is now looking to further strengthen the executive management team through the recruitment of a finance director. In the meantime, Mr Brian Kearney, an independent financial consultant, has assumed the role of acting finance director, while Mr John Craig has taken on the role of executive chairman.
The company also revealed that former sales and marketing director Mr Pat Dooey was paid £50,000 and retained his company car in settlement of his contract but it said it was too early to determine what, if any, compensation payments should be made to former chief executive, Mr Shay McKeown and former finance director Mr Barry Cosgrove.
"In spite of the adversities the group has faced over the past months, the board believes that necessary steps are being taken to stabilise matters and to re-establish and improve the necessary control procedures throughout the group to encourage a rapid recovery," chairman Mr John Craig said.
The share price took heart from the announcement, firming to 100.5p sterling in London from 70.5p at Thursday's close. Analysts said the statement was positive and suggested for the first time that there might be light at the end of the tunnel. The market was also relieved that there was nothing new in terms of further losses in the statement.
"Assuming that all the bad news has now been released and that the disposal programme can succeed in reducing debt levels in the near term, Powerscreen may well be past its nadir," said Mr Philip Molloy, analyst at ABN Amro.
But caution remained the watchword among fund managers who subscribed for an £18 million private placing at a price of 625p last November and are now sitting on heavy losses following the collapse in the share price.
The Irish Association of Investment Managers (IAIM) welcomed publication of the circular. However its secretary general, Ms Ann Fitzgerald said serious questions remained in relation to the circumstances surrounding the placing.
