Shares in banknote maker De La Rue may be off their worst levels (-12.6% vs -19% trough), but remain volatile due to the uncertainty attached to today’s tandem disappointment of the CFO resigning and an unwelcome profits warning (unlikely linked). Whilst the timing is interesting, just week’s ahead of April’s trading update and May’s FY results, even more intriguing is the lack of detail. In fact, had it not been for a key member of the C-Suite resigning, the profits warning – an addendum to the Directorate Change RNS announcement – could almost have been missed.

Full year profits are now expected around “the lower end of the consensus range”, which means the lower boundary could yet be missed. This logically re-sets analyst expectations for this and the following the years and dents valuations. The shares had been weak since 8 Mar, down 8% from their 650p ceiling of the last few months, however, they had also been holding above 590p for the last year. So today’s breakdown to flirt with post-referendum lows understandably has investors wondering what’s up with H2, anything meaningful on contracts/operations surely having to be reported.

H1 results were OK in November (revenues +29%, profits +9.9%; “second half expected broadly in-line with last year, outlook unchanged”) resulting in neither share price strength or weakness. That said almost four months have passed since, and things can and do change. The world of Fiat money may well be going through a period of flux, following years of QE and the rise of alternative currencies, However, it’s unlikely that we lose the notes and coins in our pockets any time soon, even if the former turn from paper to polymer and the powers that be try to reduce the range of the latter.

Mike van Dulken, Head of Research, 20 Mar 2018