The UK Serious Fraud Office has launched an investigation into banknote printer De La Rue over “suspected corruption” in South Sudan.
De La Rue, whose customers range from the Bank of England to the Bank of the Bahamas, said on Tuesday that the probe was focused on the company and “its associated persons in relation to suspected corruption in the conduct of business in South Sudan.”
The investigation is the latest blow for a company that faces a fiery shareholder meeting later this week as it grapples with an activist investor, a boardroom exodus and an increasingly difficult outlook for profits.
Shares in De La Rue plunged 16 per cent following the disclosure of the SFO investigation, and are now down more than 50 per cent over the past 12 months.
De La Rue manufactures about a third of the world’s banknotes and employs more than 2,500 people. It secured the mandate to design and print South Sudan’s inaugural banknotes in 2011 when the country was formed. At the time, the deal helped boost revenues in the wake of a failed takeover of the group and a production crisis involving its then-largest client, the Reserve Bank of India.
London-listed De La Rue said in a statement that it intended to co-operate with the SFO, but added that “given the early stage of these matters, it is not possible to predict reliably what effect their outcome may have on De La Rue.”
A De La Rue representative declined to comment further. In a statement, the SFO confirmed it had opened an investigation.
De La Rue has faced increased competition in the banknote market, deepening pressure on a group already dealing with the loss of the contract to print British passports. At its full-year results in May, it unveiled a three-year plan to deliver £20m in annual cost savings as it warned of “significant challenges” ahead. It also said it would take an £18m hit after Venezuela’s central bank failed to pay its bills.
Activist investor Crystal Amber has sharpened pressure on De La Rue’s management, calling for the company’s chairman to be ousted at the AGM on Thursday. De La Rue has criticised Crystal Amber’s move as “precipitous and destabilising”.
Following the disclosure of the SFO investigation, Richard Bernstein, the fund manager behind Crystal Amber, said that executive bonuses should be returned.
“This is a board that blames everyone — including its shareholders — but takes rewards without accepting responsibility,” Mr Bernstein said. Proxy voting for the meeting closed before the announcement of the SFO probe.
De La Rue is already searching for a new chief executive, chairman and senior independent director in what it has described as an “orderly succession plan”, but chairman Philip Rogerson is not due to leave until a new CEO has settled in.
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