Mackie reports £3.7m loss in first six months

Mackie International, the Belfast textile engineering group, whose shares had to be suspended for several months earlier this year, has recorded a loss before exceptional charges and tax of £3.7 million sterling in the six months to June 30th, 1997. This is in line with the £4 million forecast at the time of its rights issue in June. Mackie has also announced the acquisition of Rice & Co, the imminent commissioning of its new foundry, the completion of a management review and a revised organisation. These "enable the board to look forward to a materially improved performance next year", said Mr Sul Sahota, group chief executive. Last April, Mackie shares were suspended after a warning that its 1996 results, which recorded a £440,000 sterling loss, would have to be restated. In June, the results were restated showing a loss of £7.2 million.

The company then held a £5.2 million rights issue, at a fraction of its last traded price, replaced its lawyers, stockbrokers and financial advisers, and announced a massive restructuring of the company through its new chief executive Mr Sahota.

Yesterday, the company said the short and medium-term cost savings initiatives "are progressively beginning to produce benefits". These actions included redundancies, a cut in unnecessary fixed expenditure, elimination of product areas with no clear profit potential and the installation of stringent financial controls.

Mackie has agreed to pay £1.1 million for the fixed assets (not the land and buildings) and net current assets, of Rice which had a book value of £900,000. Rice has recorded a loss before tax of £100,000 on sales of £4.1 million and had net assets of £200,000.

Mackie's interim statement said Rice has a strong record of sales growth but had been unable to expand its town centre foundry to meet rising demand without significant investment to improve efficiency and meet environmental regulations. The acquisition, according to Mackie, will help its own new £14.7 million foundry. This appears to be the main reason for the acquisition. A further development is the integration of three separate companies - Mackie International, Mackie Meshmaster and Spring vale Foundry - to eliminate unnecessary administration. The previous organisation, said Mackie, "was unduly complex and suffered from poor accountability".

The latest results show a rise in sales from £4.1 million to £7.1 million. After an exceptional charge, the net loss amounted to £5.4 million which brought the loss per share up to 44.6p. A note with the accounts says the group entered into a sale and leaseback arrangement with Capital Bank for £2.08 million of foundry equipment. The £7.4 million repayable to Capital Bank is expected to be reduced once the foundry equipment has been "satisfactorily completed and a capital grant of £2.9 million has been approved for payment to Capital Bank by the IDB".

Reviewing the latest results, Mackie said it was adversely affected by the disruption to the Springvale foundry construction programme due to cash constraints and lack of customer confidence. Also Mackie Environ mental, despite a near doubling of sales, was adversely affected by a temporary loss of supplier and customer confidence during the refinancing period.