When a chief executive says he's not happy with his company’s financial performance, it is usually a signal that things are going very poorly. But despite Xaar's (XAR) dramatic swing into a lossmaking position in the first half of 2018, investors' faith in the longer-term growth story has apparently been strengthened. The shares rose as much as 6 per cent after the results announcement.
Xaar’s poor financial performance comes as it tries to navigate the move from its legacy ceramic business – down 69 per cent in the period – towards its three new areas, printheads, 3D printing and product printing. The sharp strategic refocus is risky, especially in light of the speed at which the ceramics division is collapsing. True, products launched in the past two years accounted for 73 per cent of revenues during the period, but this was down from 80 per cent in 2017.
The group also appears to be struggling to get some of its products off the ground. Before the results announcement, management warned that adoption of its 1201 printhead was significantly slower than expected, and so initiated a review of options for increased partnering in the division. But it is reassuring that, alongside these numbers, packaging machinery group Windmöller & Hölscher announced it would begin using Xaar printheads.
Analyst consensus forecasts predict adjusted EPS of 4.7p in 2018 (down from 20.7p in 2017).
| XAAR (XAR) | ||||
| ORD PRICE: | 189p | MARKET VALUE: | £148m | |
| TOUCH: | 188-192p | 12-MONTH HIGH: | 508p | LOW: 161p |
| DIVIDEND YIELD: | 4.1% | PE RATIO: | NA | |
| NET ASSET VALUE: | 182p* | NET CASH: | £36.8m | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2017 | 44.0 | 5.65 | 6.00 | 3.40 |
| 2018 | 35.3 | -1.10 | -1.20 | 1.00 |
| % change | -20 | - | - | -71 |
| Ex-div: | 13 Sep | |||
| Payment: | 12 Oct | |||
| *Includes intangible assets of £37.9m, or 48p a share | ||||
