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Xaar shares plummet amid trading warning

Inkjet printhead manufacturer Xaar has issued a trading update to warn of “weaker” sales than expected for the remainder of 2019.

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Xaar issues trading update

The firm, headquartered in Cambridge, has been affected by lower sales volumes of some printheads, namely the Xaar 1201 and Xaar 2001, as a result of “slower than expected” new printer installs by original equipment manufacturers (OEMs) and credit and sales channel issues on the Xaar 1201 printhead.

Shares crashed by 26% in early trading on September 3rd following the announcement.

In a statement, Xaar says: “Management continues to focus on its strategic negotiations and expects that some additional time could enable the board to provide a more meaningful update on progress, including any effect this may have on our interim results statement.

“Hence we are deferring the announcement of our interim results to September 26th from the previously announced date of September 10th.”

In its 2018 Full Year report published in March 2019, the firm admitted the year had been a “difficult” one, and a “challenging” year for the printhead business.

Xaar said it had experienced a significant decline in its legacy ceramics business, and the “slower than anticipated” ramp of the Xaar 1201 Thin Film printhead which the company had hoped would re-establish its position in the wide-format graphics market in China.

Due to the difficulties, Xaar has reported a £4.3m “revenue reversal” on the Xaar 1201 printhead inventory

At the time, Doug Edwards, chief executive officer, said in his report: “Xaar is now nine years into its Thin Film investment. We have explored a variety of partnership options starting with the one we announced in 2016 with Ricoh.

"This partnership, providing valuable IP coverage and wafer fab volume consolidation, has been a core component of our strategy.

“It is this type of partnership, in conjunction with the large number of OEMs working with our 5601 for integration into their next generation machines across a wide range of applications, that provides strong evidence of the potential for Xaar's Thin Film product and technology.

Sales declined by 65%, or £8.3m, due to the printer integration issues the firm experienced with Xaar 1201 printhead in China.

Due to the difficulties, Xaar has reported a £4.3m “revenue reversal” on the Xaar 1201 printhead inventory.

The firm has made a £5.7m provision for the review of the Xaar 1201 inventory which it says will be reflected in its first half results.

The firm expects the second half to be similar to the first half of £22.5m.

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