Investment: Much faces a baptism of fire

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The Independent Online
IAN MUCH could hardly have picked a better time to join De La Rue. Barring a catastrophe, yesterday's dire first-half results from the bank-note printing to smart cards group - which showed pre-tax profits plunging pounds 42.3m to pounds 7.8m - should be a low point. The blame for the figures falls squarely on the shoulders of Jeremy Marshall, who stepped down earlier this year. Newly installed as chief executive, Mr Much should now be able to preside over a steady recovery.

Not that the way back will be a doddle. De La Rue's cost base is too high while its management seems more interested in chasing volumes rather than margin. But Mr Much has acted quickly to put this right by reducing bank-note printing capacity by a quarter. The move involves 375 job losses which should add pounds 9m a year to De La Rue's bottom line. Meanwhile, prices are firming, giving a further boost to margins.

Mr Much has also taken personal charge of the cash systems division. Although he insists it is too early to say what his plans are further restructuring looks inevitable, although a fire sale is unlikely. A final decision is scheduled for the first quarter of next year.

Having had their fingers burnt so badly, investors are unlikely to trust De La Rue until Mr Much can show them concrete evidence of his progress. But with the shares - up 1p to 177p yesterday - trading on a multiple of just eight times forecast earnings for the year to March 2000, they are worth tucking away.