News Column

Xaar Slides After Warning On Margins, Revenue Decline

June 17, 2014

Steve McGrath



LONDON (Alliance News) - Digital inkjet printing technology company Xaar PLC saw its shares slide Tuesday after it warned that revenue will fall slightly in 2014 as it struggles to quickly expand the takeup of its technology outside ceramic tiles markets, and gross margins are expected to decline as it faces increased competition.


The company had a stellar year in 2013 after its technology was taken up by the Chinese ceramic tiles market, and it had warned that growth was set to moderate as that impact wore off. Its rapid growth saw it promoted to the FTSE 250 in June 2013.


However, it warned Tuesday that it now expects revenue in 2014 to be about GBP130 million, down from the GBP134.1 million of revenue it reported in 2013.


"Unit sales volumes into ceramic tile decoration, the largest contributor to the group, have, as expected, stabilised following the exceptional growth in 2013 which saw group revenue increase by 55% over 2012. Total sales in 2014 into ceramics are now expected to be lower than 2013, with average sales price being negatively impacted by an increased level of competition, and sales from new products only expected to begin to contribute in the latter part of the year," it said in a trading update.


It said the expected growth of sales of its technology for other applications has so far failed to materialise, but expects it to do so in the second half of the year.


"Pre-production activities within the 'Direct to Shape' application continue under confidentiality agreements, and our expectations for this application for the longer term are strengthening," the company said.


Lower gross margin will combine with higher investment in research and development to knock about six percentage points off the 30% adjusted operating profit margin it achieved in 2013, it added. However, this will be partly offset by four to five percentage points from the impact of the capitalisation of development costs for its thin film products, in compliance with accounting standards. It is therefore projecting an adjusted operating profit margin of 28% to 29% for 2014.


Xaar shares were down 20.5% at 590 pence early Tuesday, by far the biggest decline on the FTSE 250.







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Source: Alliance News


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