Banknote printer De La Rue warned yesterday of a hefty profits blow as it revealed investigations into its recent production crisis found staff had “deliberately falsified” documents.
The group, which prints notes for the Bank of England and 150 other countries, claimed some employees falsified paper specification test certificates for some banknote customers after launching an inquiry into production failures at its UK factory in Overton, Hampshire.
De La Rue has passed its findings on to the Serious Fraud Office and said it was taking disciplinary action against those involved, with a new managing director brought in for the currency division.
The world’s biggest banknote printer cautioned the production woes would cost it at least £35 million in lost profits for the half year to the end of September as sales volumes were also affected.
The firm cautioned it was too early to determine the impact on full-year results and on subsequent years as it holds talks with customers and legal authorities.
Chief executive James Hussey has already resigned over the issue, which forced De La Rue to temporarily halt production at the Overton factory.
The group has maintained that despite the production failures, neither the physical security nor the security features in the paper were compromised.
It stressed production had been brought up to scratch and that the group was now ready to resume supply of fully compliant paper.
Nicholas Brookes, chairman of De La Rue, said: “The behaviour of some of our employees in this matter was totally unacceptable and contravened De La Rue’s rigorous standards.
“We do not tolerate such behaviour and appropriate disciplinary action is being taken.
“The board has put an immediate end to the irregularities that have been identified.”
Shares slumped another four per cent on yesterday’s profits alert.
It is believed De La Rue’s production problems related to its largest contract, to supply watermarked banknote paper to the Reserve Bank of India.
Indian government officials reportedly flew in to the UK late last month to quiz De La Rue over the incident and press for compensation. De La Rue has not given any details over the nature of the blunder, except to say it found some of the many “detailed parameters” for paper specifications had not been met.
It stopped shipment of the affected banknotes as soon as it became aware of the irregularities.
“The company can now report that these matters have already resulted in increased operating costs and lower volumes,” said De La Rue.
As well as the costs associated with its production suspension, it is also facing legal and professional fees, stock write-offs and “some slippage” of currency sales volumes into the second half of its financial year.
The company not only prints banknotes, but also supplies security documents such as passports, authentication labels and fiscal stamps, and provides cash sorting equipment to central banks.
Shares have plunged by more than a quarter since the revelations first emerged, with analysts fearful over the impact on De La Rue’s reputation.
The stock is now trading at lows not seen for more than three years.