Brunel Engineering has discovered `significant breaches of policy, practice and procedure’ at its paper subsidiary Dixon-Cameron, based in Taunton, it disclosed last week.
Investigations by internal and external auditors found accounting rules had been improperly applied and there had been a failure in the application or procedures for contract reviews.
The company said this meant that Dixon-Cameron would now generate a `substantial loss’ for the year and push the group into the red.
`The loss before taxation in the second half is forecast to be £5m, bringing the full-year loss to £8.5m – of which £6m are exceptional items,’ the company said.
Brunel also announced the appointment of William Hall, ex-managing director of Aerostructures and one-time manufacturing director of Rolls-Royce Motors, as Dixon-Cameron’s managing director.
He replaces Barrie Barrett who was forced to leave after the problems were discovered.
Brunel said last week it had withdrawn an offer to pay off Barrett in line with his contractual entitlements.
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