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Xaar – H1 results, reception of new products “positive” & “firmly believe in the potential”. Really?

By Steve Moore | Wednesday 5 September 2018

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

Xaar (XAR) has announced results for the first half of 2018, including “the long term opportunity for Xaar remains very significant, but trading continues to be impacted by the aggressive decline in our Ceramics business, and the unpredictability of the adoption of our new products”. Hmmm…

The half-year saw a near 20% decline in revenue compared to the first half of 2017, to £35.3 million, and after particularly £4.6 million of restructuring costs, a swing to a more than £1 million pre-tax loss. Cash reduced to £36.8 million and the dividend per share has been reduced to 1p (£0.8 million) from 3.4p.

Current assets over total liabilities were only £0.3 million lower to £74.6 million. However, this was as “working capital levels were high through a higher inventory position as sales volumes fell below expectation”. Indeed, inventories were £10.9 million higher to £30.1 million. Hmmm!

The statement includes “the reception of new products has been positive” and “we firmly believe in the potential of our Thin Film technology, our 3D Printing business and our Product Print Systems business”, but then also... “adoption of the Xaar 1201 printhead in particular has to date been significantly slower than expected… is reviewing the strategic options for more extensive partnering in the Printhead business”, “the unpredictability of the adoption of our new products” and “as outlined in our trading statement on 30 August, underlying trading since the end of June has been, and is expected to continue to be, below the levels previously anticipated”.

As I concluded then, the scale of deterioration, lack of visibility and continued difficult trading see - despite the shares currently sub 200p – me presently continue to avoid.

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