Shares in Xaar (XAR) slumped 6 per cent on news that fierce competition has been driving down its prices. The digital inkjet printing group saw its operating margin plunge from 33 to 26 per cent. In addition to pricing pressures, that decline reflected Xaar's return to normal production levels following last year’s rapid expansion, as well as increased capacity at its Huntingdon plant following a £60m investment.
Sales fell 8 per cent at Xaar’s main industrial segment and by nearly a fifth in its graphic arts and packaging units. The pain has continued into the current quarter in the shape of lower forward order volumes and weaker demand from ceramic tile companies, particularly in China, where construction activity has slowed. Management have now lowered their full-year sales guidance to £115-125m, down from £137m last year.
Xaar is betting on new products to revitalise its business. For instance, in May it announced three printheads that digitise aspects of ceramic tile manufacture, such as base glaze and structure. The Xaar 1002 GS40, which is designed to produce intense colours and special effects, launched this month.
Broker N+1 Singer slashed its EPS forecasts for this year and next by 17 and 22 per cent respectively. It now expects full-year pre-tax profits of £29.6m, giving EPS of 32.1p, down from £41.1m and 43.2p last year.
| XAAR (XAR) | ||||
|---|---|---|---|---|
| ORD PRICE: | 435p | MARKET VALUE: | £333m | |
| TOUCH: | 435-436p | 12-MONTH HIGH: | 1,191p | LOW: 387p |
| DIVIDEND YIELD: | 2.0% | PE RATIO: | 13 | |
| NET ASSET VALUE: | 155p* | NET CASH: | £48.1m | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2013 | 70.2 | 23.4 | 25.5 | 2.5 |
| 2014 | 60.4 | 15.3 | 16.7 | 3.0 |
| % change | -14 | -35 | -35 | +20 |
Ex-div: 3 Sep Payment: 3 Oct | ||||
