Alfred McAlpine said yesterday that it had suspended two senior managers at its slate division while investigations were carried out into possible fraud in the unit.
The company shocked the City with a statement that it had found accounting errors at its slate business that would reduce profits in 2006 and 2007, wiping nearly a fifth off its market value.
"An internal investigation by Alfred McAlpine's internal audit team has uncovered a systematic misrepresentation of production volumes and sales for a number of years by a number of senior managers at the slate subsidiary," the firm said in a statement to the London Stock Exchange.
"The board believes that the behaviour and collusion of the managers responsible has been deliberate and involves the possibility of fraud."
The company was due to report full-year results for 2006 on March 15 but has delayed the figures while forensic accountants examine the books of the slate business, based in Penryn, Wales.
McAlpine said the accounting errors dating back to 2003 would cut pre-tax profit at its slate business in 2006 by around £13m, prior to any restructuring or impairment charges that might be needed. It also forecast an increased pre-tax loss for the slate business in 2007.
McAlpine said it had uncovered evidence of "systematic misrepresentation" of production volumes and sales for several years by a number of senior managers at the business, which has supplied slate to Buckingham Palace and the British Library in London.
The company added that those involved tried to conceal their actions by pre-selling material at much cheaper prices.
The news sent shares in the company tumbling, closing 137p down at 476.5p - a loss of 22% and valuing the business at about £488m.
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