Greencore hit by €21m fraud at Scottish mineral water unit

The Irish food group Greencore has sacked three senior managers after uncovering what it believes is a €21m (£17m) fraud at its Scottish mineral water business, Campsie Spring.

Greencore said its investigations were ongoing, but it warned that the "deliberate concealment of costs at its mineral water business" could slash its operating profit for the current year by €9m. It estimates that the investigation could lead to a restatement of its group operating profit by €4m in 2006 and €8m in 2007.

Following the revelation, Greencore's shares plummeted by more than 15 per cent to €2.09.

Greencore said it was first alerted to the problem on 6 June and its investigation found that 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.

Greencore said a new managing director and acting finance director for the mineral water business have been appointed.

Greencore is the UK's biggest bottler of mineral water in terms of supplier customers, such as Waitrose, Sainsbury's and Asda, with their own branded water. It bottles about 200 million units of mineral water each year.

An Investec analyst, Nicola Mallard, said the water business generates about €40m of revenue a year and has historically had higher-than-average margin operation in line with other water businesses. But she said its underlying profitability must have been suffering as it has expanded and its customer profile has changed. "Through the concealment of costs, this has been hidden from management's attention, so after adjusting for these costs, the water business is now operating at close to break-even," she said.

Greencore said it believed the fraud was an isolated issue and that it is conducting an independent review of all its businesses, as well as its internal control, financial reporting and external audit processes. Greencore declined to offer an executive for an interview.