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De La Rue Falls After Employees `Deliberately Falsified' Test Certificates
De La Rue Plc dropped to the lowest in almost five years in London trading after the company said a deliberate breach in banknote paper quality will clip first-half pretax profit by at least 35 million pounds ($53.8 million).
De La Rue, the world’s biggest printer of banknotes, fell as much as 9.3 percent to 638 pence, its lowest since October 2005. “Some of the company’s employees have deliberately falsified certain paper specification test certificates for a limited number of customers,” the Basingstoke, U.K.-based company said in a statement today.
The board stopped shipments of affected banknote paper as soon as it was aware of the irregularities, all production is now within specification and it is ready to resume supplying fully compliant paper, the company said.
The Serious Fraud Office said it has been contacted by De La Rue and that the company would be passing along the findings of its internal investigation.
“We were alerted to the situation,” SFO spokesman David Jones said in a telephone interview. “We’ll see in due course whether it prompts us to take it on in any formal way.”
The quality breach will cause “an awful lot of pain and misery” for the company as it tries to re-establish its credibility, Panmure Gordon analyst Paul Jones said.
‘Tarnished’ Reputation
“What this means is that their reputation gets tarnished, at best, and a number of their customers will go through every agreement with a fine tooth comb,” he said in a phone interview. “Even if they manage to keep the business, competitors will have a distinct advantage.”
The Reserve Bank of India said today it has sent a delegation, also including government officials, to De La Rue, according to RBI spokeswoman Alpana Killawala, who didn’t provide any further details. Killawala confirmed RBI is a customer of De La Rue.
An internal investigation led by De La Rue’s board and external legal advisers is continuing, the company said. De La Rue said it has already incurred increased operating expenses and lower volumes.
In response to the discovery, De La Rue appointed Keith Brown as managing director of its currency division, spokesman Richard Mountain said in a telephone interview.
De La Rue was down 36.5 pence, or 5.2 percent, to 667 pence as of 2:12 p.m. in London, giving the company a market value of 660.4 million pounds.
Last month, James Hussey resigned as chief executive officer over paper quality issues following the suspension of operations at one of the company’s factories in July.
To contact the reporter responsible for this story: Chris Spillane at Cspillane3@bloomberg.net
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