Demand from the ceramic tile industry for Xaar's (XAR) digital inkjet technology continued to drive earnings growth in the first half of the year. But while this booming market stole the limelight, other areas of the business had a decent showing too, and that's good news for Xaar, as a better balance of revenues is key for future growth, according to chief executive Ian Dinwoodie.
Particularly noteworthy was the 36 per cent rise in sales to £8.3m in the packaging business, driven by the adoption of digital label printing. In this segment, Xaar is developing a new application allowing manufacturers to print labels directly onto bottles, saving them an awful lot of money. This kind of product innovation is reflected in Xaar's research and development spend, which doubled in the period and will reach £15m by the end of the financial year, rising another 15 to 20 per cent in 2014.
Meanwhile, the huge jump in half-year sales meant the manufacturing facility at Huntingdon was running at 130 per cent capacity. As such, Xaar is spending £30m to expand the site, with additional capacity coming on stream in the second half. Strong cash generation means Xaar has more than enough money to fund expansion, too.
Broker N+1 Singer expects pre-tax profit of £41.1m for the full year, giving EPS of 43.1p (from £18.4m and 20.1p in 2012).
| XAAR (XAR) | ||||
|---|---|---|---|---|
| ORD PRICE: | 837p | MARKET VALUE: | £629m | |
| TOUCH: | 835p-838p | 12-MONTH HIGH: | 905p | LOW: 225p |
| DIVIDEND YIELD: | 0.7% | PE RATIO: | 22 | |
| NET ASSET VALUE: | 126p | NET CASH: | £49.4m | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 37.9 | 4.7 | 5.0 | 1.00 |
| 2013 | 70.2 | 23.4 | 25.5 | 2.50 |
| % change | +85 | +398 | +410 | +150 |
Ex-div: 4 Sep Payment: 4 Oct | ||||
