Tony,
Similar happened to me around 3 years ago with a couple of guys who worked for me, but it had been going on for a while, I eventually found out when a customer phoned me to say we'd left a bucket in their garden, but they weren't even on our list of customers. They were earning £400+ every week with their bonuses but it obviously still wasn't enough for them.
You've done right, if he has been trading in your van and people think they are dealing with your company, then the money he has made is yours (possibly less his share for doing the work!) Let him come to you for it then tell him you're contacting the police about him defrauding the company.
Things to do to prevent it happening again are:
- Keep the vans at a central workshop every night, don't allow them to take them home
- Move the teams around every month so that they do not have the same rounds every time
- Make sure you balance the sheets with the money at the end of every day
- Encourage people to pay by cheque or on line (take cash out of the equation)
- Send a letter out to all those people saying what has happened (I can send you a copy of the letter we sent out, it implies everything but says nothing libelous)
You've done the right thing, the two guys who worked for us said they were going to set up on their own and "take over all our business". In the end they actually took only about 20 customers, mainly the elderly ones and I know they are making next to nothing.

If you are going down the route of sacking this lad make sure everything for his dismissal is written down, give him the chance to put his side across before you wield the axe. If you decide to give him another chance then make sure measures are put in place to stop it happening again