Powerscreen still has a lot to do to restore investor confidence and shore up its plummeting share price. The company took the first step yesterday by announcing the resignation of executive director Patrick Dooey - albeit on March 31st next.
However, it is clear investors remain extremely angry and anxious to receive more details about the timing and extent of Powerscreen directors' knowledge of the Matbro debacle. The company has made a £46.7 million write-off in respect of Matbro as a result of which it is projected to make a £10 million sterling pre-tax loss in the year to March next.
Revelations that information was circulating in the industry about Matbro's troubles as early as last November has enraged investors. They believe that if Powerscreen's competitors knew about such problems, the Powerscreen board should also have known.
Last week, when news of the Matbro problems broke, Powerscreen executives said they become aware of them in late January and had acted very quickly, sending in their auditors. Powerscreen chief executive, Mr Shay McKeown met fund managers in Dublin last week. The company's contention is that there were irregularities in Matbro which entailed mispricing of machines, unauthorised discounts to customers and inaccurate and misleading recording and discounting of bills of exchange and warranty costs.
The board's credibility is now clearly damaged. Brokers last night posed the question: how could the board not have known that there were problems in Matbro?
Yesterday, the Irish Association of Investment Managers took the unusual step of publishing a letter which it sent to Powerscreen chairman, Mr John Craig. Its secretary general, Ms Ann Fitzgerald, pointed out that questions had been raised about the appropriateness of KPMG carrying out the current inquiry. As auditors to the company, she said, they may have a conflict of interest.
Powerscreen, in turn, announced that it had appointed an independent firm to review the KPMG findings.
Analysts said that the news of the letter which was circulated by JCB concerning Matbro's difficulties was clearly very damaging to the Powerscreen management's credibility, its management style and management practices.
What makes the JCB letter significant is that a month after it was circulated Powerscreen placed three million shares at 625p (530p sterling) to raise funds to buy SDC Trailers in Northern Ireland.
It is believed that the SDC purchase was funded mainly by Irish institutions. Around 30 per cent of the Powerscreen stock is held by Irish institutions, 30 per cent by British institutions and 40 per cent by US shareholders.
