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XAAR – Defying China

XAAR (XAR) specialises in inkjet printing technology and is a world leader in industrial inkjet print heads.

In September 2013 its shares reached an all time high of 1150p and then collapsed to 220p., losing 80% of their value in the 12 months to September 2014. The company took immediate action to overcome the challenges which it faced. The share price began to recover and had nearly doubled by the 26th August 2015 when they touched 450p.

Despite the turbulence which has hit world stock markets since 26th August, especially for companies which had anything to do with China, the shares have continued to rise instead of crashing back with all the others and have steadily risen by 16% over the past week, to 518p . As of yesterday, they were still rising despite the fact that profit before tax for the first half of 2015 fell to 3.7m. compared to 15.3m for the first half of 2014 and 7.8m in the second half. As a sign of confidence in the future Xaar increased its interim dividend to 3.15p

Xaar’s problems were caused by the slowing Chinese property and construction markets –  its print heads are used, amongst other things, for putting patterns on ceramic tiles. In 2014 revenue fell by 19% and profit before tax nearly halved, falling from 41.4m to 24.6m. Xaar responded by making a savage attack on costs. 20% of its global headcount went and new products were announced.. The result is that as per plan, the trading position has now been stabilised and a return to growth is expected in 2016.

The shares are in recovery mode and it will be interesting to see if they can continue to defy the China syndrome.

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