27th Apr 2015 13:32
LONDON (Alliance News) - De La Rue PLC Monday said it will take a charge of about GBP13.5 million when it reports its annual results next month, after a major customer invoked performance bonds.
The banknote printer also said it expects to book a GBP9 million gain on the disposal of surplus land at Overton, where it has a banknote paper printing plant, for GBP9.6 million, but expects to account for this item in the current financial year.
Referring to its annual report for 2014, De La Rue said it has had "unresolved issues" with a major customer over bank note paper production contracts since 2010. The company said the customer has invoked performance bonds which have been in place since those contracts were agreed.
According to De La Rue, the performance bonds have a value of about GBP13.5 million.
The company expects its results for the financial year ended March 28 to include a provision for the "exceptional item".
"The board considers this is a material step towards resolution of this issue and discussions continue with this important customer," De La Rue said in a statement.
In its annual report for the year ended March 29, 2014, De La Rue said: "The group provides guarantees and performance bonds which are issued in the ordinary course of business. In the event that a guarantee or bond is called, provision may be required subject to the particular circumstances, including an assessment of its recoverability."
The annual report said that De La Rue asked external lawyers to investigate "issues that had been brought to its attention internally".
The investigation was completed in October 2010 and found "nothing of substance to support the matters raised other than in respect of some paper production issues where it was found that a small number of the many detailed specification parameters of some paper had fallen marginally short of specification".
However, the investigation established that "certain paper specification test certificates had been deliberately falsified".
De La Rue then reported what it had learned from the investigation to authorities. According to the annual report, De La Rue "implemented a number of measures arising from the findings of the investigation".
"Provision has been made in prior years for the costs associated with the paper production issues identified at this stage including the write off of trade receivables and other costs relating to the investigation, production and rectification of these matters," according to the annual report.
"Provision has not been made for the potential cost of resolutions or for potential fines from regulatory authorities. The nature and extent of these resolutions will be the subject of ongoing discussions, the outcome of which cannot be estimated reliably at present. The timing, response and outcome of the consideration by the authorities of the reported findings of the investigation is also uncertain and the financial consequences, if any, cannot be estimated reliably at present," according to the annual report.
De La Rue shares were down 0.7% at 553.00 pence on Monday.
By Samuel Agini; [email protected]; @samuelagini
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