BM Group dives pounds 120m into red: Chief executive resigns as acquisitions are blamed for engineering company's plight

BM Group, the construction equipment supplier and engineering company built by acquisition in the late 1980s and early 1990s, lost pounds 120m in the year to last June.

The company, once a stock market star, placed blame for the collapse squarely on the acquisitive strategy that fuelled its growth.

BM's chief executive, Howard Sutton, the last remaining board member closely associated with the expansionist regime, resigned yesterday. He will be replaced by Cliff Walker, an internal candidate.

Moger Woolley, the non- executive chairman who replaced BM's charismatic founder, Roger Shute, when problems began to emerge 18 months ago, said the acquisitions had disastrous effects.

Mr Woolley said BM's purchase of the equipment supplier Blackwood Hodge in November 1990 was particularly misguided and directly led to its current problems. The valuation of businesses bought was optimistic and borrowings assumed were high.

Edmond Jackson, a private shareholder, called for an investigation into the role of Kingston Smith, the Birmingham-based accountancy firm that until yesterday was joint auditor to BM. He said: 'It is an issue of accountability. As auditors, Kingston Smith are meant to look after the interests of shareholders and they were there at the time of the troublesome acquisitions.'

Mr Woolley said the company had no plans to take any action against Kingston Smith. However, the firm has been replaced by Price Waterhouse. There are no plans to act against former management.

Mr Jackson has campaigned to make BM tell shareholders more about the company's difficult financial and trading position. He has received letters of support from 170 mostly private shareholders, but Legal & General also replied positively to a circular he sent.

Mr Jackson also criticised BM for planning to hold its annual meeting on the day before Christmas Eve, at its offices in Wiltshire.

As with most of its acquisitions, BM issued shares to fund the moves on Blackwood Hodge and Thomas Robinson, but it also saddled itself with an enormous debt burden. Borrowings at 30 June were pounds 159m - three times the value of shareholders' funds. Asset sales since the year-end have reduced debt to pounds 114m, and the company said an additional pounds 40m of disposals were imminent.

The pounds 120m losses BM reported yesterday were incurred in write-downs of asset values, reorganisation of businesses ready for sale, and losses on disposal of companies.

It made a trading profit of pounds 16.6m but this was all but wiped out by pounds 14m in interest payments.

Sandy Morris, engineering analyst with the stockbroker NatWest Securities, said: 'There is no doubt that these figures are absolutely ghastly.'

However, a survival plan put forward by BM management was credible, he said. He is forecasting profits for the year to next June, after interest charges, of pounds 1.5m. He predicts pounds 5.5m of profits in 1995.

The shares, which traded above 400p in the autumn of 1991, fell 1p to 21p yesterday.