It has been 18 months since we last looked at shares in this money printer. Back in September 2012, they cost 1,050p each and looked expensive on over 18 times forecast earnings too punchy for us.
The company was battling against too much capacity in the paper banknote market, which had squeezed its selling prices. Shareholders were to be kept happy with a big cost-cutting plan that was expected to take trading profits from £60m to £100m in just over two years.
A lot has happened since then. The firm will fail to hit its £100m target it will be nearer to £90m instead after issuing two profit warnings.
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
On top of that, the chief executive decided to jump ship. CEOs have developed a canny knack in recent years of getting out when there's nothing more to gain. Investors are right to be cynical. So it's no surprise thatDe La Rue's (LSE: DLAR)shares have fallen back.
However, although times are tough for the company, it is still the world leader in printing bank notes and has good potential for profiting from the introduction of plastic ones. It could also go on to create a decent business with passports, although this is taking some time to develop.
In 2010, French firm OberthurTechnologies failed with a 905p pershare bid for De La Rue. While no-one iscurrently predicting that it'll return soonfor another go, when industries havetoo much capacity one of the ways ofdealing with it is through mergers andcost cutting. This can help prices andprofits for those companies that remain.
Verdict: a speculative buy
-
Reeves warned against property tax shake-up – 3 ways it could backfire on first-time buyersRachel Reeves reportedly has her eye on high-end property taxes in the upcoming Budget, but there are concerns a shake-up could unintentionally hamper those trying to get on the housing ladder
-
Average Brits want to retire five years before they can – who has the widest retirement gap?Brits are expecting to work for longer than ever but there are big disparities in the number of extra working years predicted. A small tweak could help close the gap
