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Sliding Crystal Amber doubles up on distressed De La Rue

4 December 2019

Activist investor doubles stake in bank note printer as its own shares come under pressure following exit of former backer Neil Woodford.

Activist investor Crystal Amber (CRS) has doubled its stake in De La Rue (DLAR) in the belief new management can turn round the struggling bank note printer.

In a stock exchange filing the AIM-listed investment company confirmed it lifted its position from 7% to over 14% last week after De La Rue swung to a half-year operating loss of £9.2 million, down from a £10.1 million profit a year before.

De La Rue shares plunged to a 19-year low of 134p as it suspended dividends in order to cut its debts and deal with the ‘material uncertainty’ facing the business. The stock has tumbled from a peak of 693p in June 2017.

The company has suffered a string of setbacks in the past two years, including the loss of a contract to print UK passports, and has issued two profit warnings, culminating in the departures of the former chairman Philip Rogerson and chief executive Martin Sutherland.

Crystal Amber fund manager Richard Bernstein emerged with a stake in De La Rue in May and soon after clashed with the company over bonus payments to Sutherland. He is reported to have a higher regard for its new chief executive Clive Vacher, who previously ran Canada-listed electronic chip company Dynex Power.

Vacher told investors last week he would complete a review of the business this month and announce a turnaround plan.

At yesterday’s closing price of 140p, Crystal Amber’s position is worth £20.9 million and accounts for nearly 11% of Crystal Amber’s £192 million portfolio. This should raise it to fourth from sixth place in Crystal Amber’s top investments, behind North Sea oil explorer Hurricane Energy (HUR), payment services provider Equals Group (EQLS) and van hire company Northgate (NTG).

Crystal Amber’s active engagement with companies outside the FTSE 100 has generated underlying growth of 94% for its investors in the past 10 years. It has struggled this year, however, with net asset value (NAV) down nearly 7% in contrast to the 7.5% gain in the FTSE Small Cap index.

Meanwhile the shares have tumbled 24% after Neil Woodford, a long-term backer, was forced to sell his stake after his flagship Woodford Equity Income fund was suspended in a liquidity crunch and is now due to close.

Since the suspension of the Woodford fund, Crystal Amber shares have de-rated and now trade at 25% discount below analysts’ estimate of the NAV, which is formally updated once a month.

Invesco remains its largest shareholder, with a 30% stake according to Refinitiv data, most of it in funds run by Woodford’s successor Mark Barnett.

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