De La Rue has finally put a figure on the likely payout to the Bank of India as a result of the paper production issues that have now cost the group more than £40m.
The saga dates back to the summer of 2010, when De La Rue admitted to “quality and production irregularities” at its Overton banknote paper mill and launched a major inquiry into what had gone wrong.
The scandal resulted in the departure of then-chief executive James Hussey and involved a huge hit to the security printer’s sales and profits.
Almost five years on, De La Rue has now crystallised the likely payout to the customer affected. The group has never named the client involved, but it is known to be the Bank of India.
In a post-balance sheet statement it has announced that performance bonds with a value of circa £13.5m have been invoked by the customer, and this will result in an exceptional charge of that amount in De La Rue’s financial year just ended on 28 March.
However, the group has still not completely drawn a line under the affair. In a statement it said: “The board considers this is a material step towards resolution of this issue and discussions continue with this important customer.”
De La Rue has stated that it could also be fined by regulatory authorities over the matter.
The £513m-turnover business has already incurred exceptional costs of its own of £29.7m because of the Overton problems. This included legal fees of £3.5m and £19.9m in “production and rectification” costs.
The total cost to the group so far, including the performance bond, has now reached £43.2m.
Separately, De La Rue is reducing overheads at Overton. According to local reports it offered voluntary redundancy deals to around 40 employees at the mill earlier this month. The firm has also sold off surplus land at the Hampshire site for £9.6m, which will result in an exceptional gain of around £9m.
The Andover Advertiser said the moves had sparked fears among some workers that it was “the beginning of the end” for the site.
However, Unite regional and national officer Louisa Bull said the mill, which employs around 500 staff, was reconfiguring its shift patterns and new roles were being created. "Yes, there is a risk of redundancy but hopefully people will take other jobs. We are hoping most people will agree to changed roles."