Fraud uncovered at Greencore

Food group Greencore has been hit by a fraud estimated to involve up to 21m euro.

In a statement this morning it said the matter involved a deliberate concealment of costs at its Scottish mineral water business.

It said that, as a result, it would have to downwardly adjust its operating profits for 2006 by and estimated 4m euro and those of 2007 by an estimated 8m euro.

In addition, the estimated impact in 2008 will be a reduction of operating profit of 9m euro, with a consequent impact on adjusted earnings per share of 4 cent.

The group says it believes the concealment of costs was undertaken by the former financial controller of the mineral water business who left the business prior to the concealment being uncovered. The three managers with direct supervisory responsibility for the former financial controller have left the business.

A new managing director and acting finance director for the mineral water business have been appointed. The group also says it is taking legal advice on what, if any, elements of this financial impact can be recovered.

"While the board believes this to be an isolated issue," the statement says, "it is conducting a thorough review (independently supported by KPMG) of all the group's businesses and of its internal control, financial reporting and external audit processes." The statement adds: "Since this issue was first identified, the priority of the board has been to move quickly to determine the cause, extent and impact of the concealment."

The fraud was first uncovered on June 6 by an internal audit. On June 9 an immediate investigation was instigated by the group's chief financial officer.

This morning's statement says that, apart from adjusting for the impact of this material misstatement, the board remains confident that it will meet consensus market expectations for 2008 EPS performance.