For Xaar (XAR), 2015 was never going to be smooth sailing after the Chinese property market slowdown knocked demand for the group's core ceramic tile printheads. Since then the focus has been on stabilising the business, a difficult task that's been placed in the hands of a new management team.
Chief executive Doug Edwards' opening words warned that slowing growth in China would likely result in flat revenue for 2016. Given that sales tumbled 14 per cent in the reported period, investors - probably still jittery about the October 2014 profit warning - started the day by sending the ink-jet printhead manufacturer's shares down 6 per cent.
A closer read suggests these results weren't so bad. Sales growth of 16 per cent in its smaller packaging division, coupled with signs that demand for ceramic tiles is stabilising, offer hope that the tide is turning. Maintaining the adjusted operating margin at 22 per cent demonstrated that management's cost-cutting and efficiency drive had the desired effect of offsetting a weak top-line performance.
Although mindful of China, Mr Edward reckons Xaar can achieve revenue of £220m by 2020. The plan is to invest in manufacturing and unleash new products, only this time with a closer focus on customer requirements. In response, broker N+1 Singer increased its adjusted pre-tax profit and EPS forecasts by 6 per cent to £18.5m and 20.4p (from £20.8m and 24.5p in FY2015).
| XAAR (XAR) | ||||
|---|---|---|---|---|
| ORD PRICE: | 442p | MARKET VALUE: | £343m | |
| TOUCH: | 440-445p | 12-MONTH HIGH: | 567p | LOW: 352p |
| DIVIDEND YIELD: | 2.1% | PE RATIO: | 27 | |
| NET ASSET VALUE: | 168p | NET CASH: | £69.7m* | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 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 |
| 2015 | 93 | 13.6 | 16.6 | 9.45 |
| % change | -14 | -41 | -34 | +5 |
Ex-div: 26 May Payment: 24 Jun *Includes treasury deposits of £27.1m | ||||
