UK co in tailspin as RBI axes contract post-fraud

London: The expected loss of a major contract with the Reserve Bank of India has forced the world's largest bank note printer De La Rue to cut jobs, merge divisions and shake up its supply chain in a bid to return to financial health.

Hampshire-based De La Rue, which produces over 150 currencies around the world, faced production difficulties after employees allegedly falsified paper test certificates for the Reserve Bank of India (RBI), which has been its biggest client.

The company has refused to name the client, but said the Serious Fraud Office, which has conducted an investigation, was still "considering the matter".

The company said discussions "remain ongoing with the principal customer" in its currency division, but industry sources believe the contract with the Reserve Bank of India is almost over.

Chief Executive Tim Cobbold told the media: "This was clearly a challenging year for us."

There was "no material announcement" to be made on discussions with the Reserve Bank of India and he would not comment on the likely outcome of the talks.

"There remains uncertainty as to the ultimate outcome of these issues, including their financial impact," he said. The company said its pre-tax profits for the year plunged to 33.3 million pounds from 104.1 million pounds.

Company Chairman Nicholas Brookes said: "The 2010/11 financial year has undoubtedly been a difficult one for De La Rue, our employees, customers and shareholders."

"We have dealt with a number of challenges including paper production issues, lower than expected banknote print volumes, changes in senior management and a takeover approach," he said.

Source: Financial Express