Xaar warns on H2 sales

By Jo Francis, Monday 20 November 2017

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Shares in Xaar have tanked after the company warned that supply issues have hit anticipated second-half sales of its new 1201 printhead.

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Xaar 1201 printhead: "delayed revenue, not lost revenue"

In a trading statement the manufacturer said that demand for the 1201 was strong, “but due to supply constraints, we have not been able to fulfil all of the demand this year.”

Previously the company had said that it had expected to post higher sales in H2, but has now scaled back those expectations and said sales were likely to be “broadly in line” with the first half of the year, when it had sales of £44m. Full year sales in 2016 were £96.2m.

Xaar shares slumped on the news, falling by 20% to 365p, before recovering slightly to 382.11p at the time of writing.  

Chief executive Doug Edwards told PrintWeek: “The share price has been hammered but hopefully it will come back. This is delayed revenue, not lost revenue.”

He said Thin Film printheads presented “quite a challenge” in terms of manufacturing, but these issues had now been resolved. The 1201 is targeted at applications such as wide-format and textile printers, and Xaar announced a huge order for 90,000 of the printheads in September.

“The problem was we had product in our inventory ready for the Q4 sales ramp but that turned out not to be saleable. The good news is, demand for the 1201 is extremely strong, but this has pushed demand out by six months and it was unfortunately too late in the year to deliver the volumes we had in mind for this year.”

The delay meant planned revenue for the 1201 head was effectively halved. There were also fewer installations of the new 2001 printhead or ceramics applications than anticipated.

Xaar’s strategy is to diversify its offering in order to reduce its reliance on the ultra-competitive ceramics market, where replacement printheads make up around 70% of sales.

“The key thing is, 80% of revenues are now coming from products and businesses that didn’t exist two years ago,” Edwards added. “We are building a new company here.”

The company said that its 2020 vision to grow sales to £220m was “undiminished”.

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