Profits soar at deal-hungry Xaar
Article Date: Feb 14 2001Innovative inkjet printing technology group Xaar increased pre-tax profits fivefold last year to more than £2.5 million, but is still waiting to clinch some big deals, writes Ben Cobley.
Pre-tax profits at techMARK-listed Xaar soared from £500,000 to £2.7 million in 2000 and earnings per share leapt tenfold to 4.1p. Turnover was up 50 per cent to £22.7 million. The company says demand for its products continues strong, with orders 'significantly ahead of last year'. However, Xaar is still awaiting the conclusion of partnership agreements with large-scale printer manufacturers, such as Agfa and Kyocera, which would provide a major boost to its commercial printing operations.
Currently Xaar is engaged in low volume manufacture itself. But Agfa and Kyocera are still weighing the commercial merits of taking the big step forward which Xaar is unable to do alone. Also, Xaar has been disappointed by the absence of royalty payments from numerous licensing agreements for its advanced office printing inkjets. These apparently allow colour printing at similar cost and speed to laser printers.
Xaar has been pushing its licensees (who compete against one another) to pool their resources to accelerate progress to profitability. But the first royalty payments are still not expected for another 18 to 24 months.
During the year, Japanese giant Sharp and a (nameless) US industrial printer manufacturer were added to the licensee list. It was license fees which were largely responsible for Xaar's dramatic profits increase.
Xaar's patented PZT inkjet technology uses less power, generates less heat and allows greater flexibility and control in the printing process than thermal inkjets. However, the company is largely reliant on blue chip printer manufacturers to move it forward.
The board says it is confident that the crucial partnerships for large-scale commercial printer manufacture will be concluded within the next six months, but seems to be holding its breath somewhat. Along with the prospect of royalties at last from licensing agreements, the conclusion of such deals would help Xaar's premium stock market rating, even after earlier price falls.
Aim-listed investment vehicle Mountcashel recently sold 750,000 shares in the company, reducing its stake to just under three million - a four per cent interest. This followed a poor year for the shares, the price of which has only recently stabilised after falling from a peak of 531.5p reached in March.
However, at its current share price of 157.5p, Xaar still sits on a p/e of 38, way above the electronics sector average. Investors must be confident therefore, that Xaar can keep on growing as impressively as it has so far.
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