The bank-note manufacturer, De La Rue (LON:DLAR) will write down at least £35m, after the latest damning update revealed that some of its employee’s deliberately falsified test certificates for banknote paper.
De La Rue warned investors that the problem has already caused an increase in operating costs and lower volumes. Banknote paper specifications contain a large number of detailed parameters, and De La Rue confirmed that in “certain cases” a small number of the parameters fell marginally short of the test specification.
“The company reiterates that it has not found anything to suggest that either the physical security or the security features in the paper have been compromised,” De La Rue chairman Nicholas Brookes commented.
"The behaviour of some of our employees in this matter was totally unacceptable ... We do not tolerate such behaviour and appropriate disciplinary action is being taken.”
Although De La Rue noted a £35m adverse impact on pre-tax profit - including one-off costs such as stock write-offs, professional fees, rectification and production trial costs. The ultimate cost of the problem remains unclear.
“Quantification of the financial impact on the group for the full year and subsequent years is not possible at this stage pending the outcome of discussions with customers and the relevant law enforcement bodies,” the company stated.
The FTSE250 constituent emphasised that production is now within specification, and it is now ready to resume supply of fully compliant paper.
Previously, in August, De La Rue chief executive James Hussey resigned when the ‘serious’ problem initially came to light. However at that time, the difficulties were described as ‘quality and production irregularities’.