Last year was a torrid year for ink-jet printhead manufacturer Xaar (XAR). A third-quarter slowdown in crucial Chinese construction and property markets obliterated demand for the group's core ceramic tile-printing products. This resulted in sales to Asia dropping by 29 per cent and revenues sliding by almost a fifth between the first and second halves of the year.
Pricing pressure subsequently ate away at profits, with operating margins tightening by a painful 820 basis points to 20.8 per cent over the period. The situation could have been worse, if not for management's drive to reduce costs - cutting a fifth of the workforce helped lower the annual cost base by about £9m.
There were, however, no plans to cut back gross spend on research and development, which increased by 17 per cent to just over £19m. New chief executive Doug Edwards says fresh products are central to Xaar's long-term strategy to outfox fierce competition. He argues that the introduction of new "market-leading" printhead and technology products are strengthening the company's presence in a market that is already showing signs of stabilising. The group's manufacturing partners are now said to be starting to return to the fold, with new products seen as a key factor.
Broker N+1 Singer expects adjusted pre-tax profit of £15.9m this year, giving adjusted EPS of 17.3p (from 26.4p in 2014).
| XAAR (XAR) | ||||
|---|---|---|---|---|
| ORD PRICE: | 367p | MARKET VALUE: | £281m | |
| TOUCH: | 367-369p | 12-MONTH HIGH: | 942p | LOW:218p |
| DIVIDEND YIELD: | 2.5% | PE RATIO: | 15 | |
| NET ASSET VALUE: | 159p | NET CASH: | £47m* | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2010 | 55 | 5.4 | 6.3 | 2.5 |
| 2011 | 69 | 9.1 | 10.8 | 3.0 |
| 2012 | 86 | 15.7 | 17.5 | 4.0 |
| 2013 | 137 | 40.1 | 43.3 | 8.0 |
| 2014 | 109 | 23.1 | 25.0 | 9.0 |
| % change | -20 | -42 | -42 | +13 |
Ex-div: 21 May Payment: 19 Jun *Includes treasury deposits of £21m | ||||
