Companies: XAR   

Printing technology specialist Xaar is hoping to counteract tough competitive conditions in its main market of China with new tactics and a bulging pipeline for its new technology in the West.

Growth in China’s end markets, where Xaar sells the majority of its older Platform 1 technology, has slowed and been further exacerbated by a licensee acting very ungraciously and aggressively by offering cut-price versions of the technology. Xaar abandoned its licensing strategy some years ago, but this competitor is one of just three remaining licensees.

The increased royalties from this licence aren’t enough of a comfort to chief executive Ian Dinwoodie, who responded by launching new, competitively-priced products in July that might claw back some market share, although at lower margins. Other short-term hiatuses related to the Olympic, including restrictions on the flow of goods, should cease in the current quarter, after which the company will update the market on its potential full year performance.

Away from Asia and Platform 1, things are looking rosier, with newer Platform 2 and 3 technologies attracting a great deal of interest and revenues in Europe up 15% and the Americas 26%. Printer manufacturers have launched 14 new products based on these higher-margin technologies and 60 more make up the pipeline of potential.

So, although turnover slipped a slight 4% to £22.5m in the six months to June, pre-tax profits and earnings rose 23% and 25% to £3.8m and 4.5p respectively. With £2.3m of cash generated, Xaar ended the half with £10.7m of net cash.

Xaar’s shares were backed here in March at 183p and have since fallen from the 220p reached since. They remain a good prospect for the long-term but, while uncertainty clouds issues, might be avoided in the short.

Xaar	LSE	£32.39m	51.50p	-0.50p
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