Why Shares In De La Rue plc Popped

Although we don’t believe in timing the market or panicking over market movements, we do like to keep an eye on big changes — just in case they’re material to our investing thesis.

What: Shares in De La Rue (LSE: DLAR) soared over 10% in early trade this morning, following a very positive interim trading statement.

So what: The producer of security documents (such as passports and driving licences) and over 150 national currencies revealed a whopping 18% lift in operating profit to £39.1m, with earnings per share driven up 24%. Much of the success was accomplished by the company’s Improvement Plan, which began in 2010/11 and realised £10m in the six-month period.

Now what: Before investors rush in on this stock, it’s worth a reminder that the FTSE All-Share has easily beaten De La Rue’s performance this year, with today’s rebound still seeing the share price trading at -10% to where it was a year ago. What’s more, management recognises that there is a “current overcapacity in the banknote paper market”, which has put constraints on the pricing environment. However, for contrarian investors who are backing the Improvement Plan to carry on delivering, De La Rue currently sits on an enticing yield of 5.1%.

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> Sam does not own shares in De La Rue.