Investors chronicle article today ..all on track20 Jul 2020 13:28
Xaar’s recovery on track
Cambridge-based Xaar (XAR:71p), a leader in the development of inkjet technology and maker of piezoelectric drop-on-demand industrial inkjet printheads, has released a solid pre-close trading update ahead of half-year results in September.
The restructuring of the group’s bulk printhead business and the decision to sell directly to original equipment manufacturers (OEMs), so to avoid a previous conflict of interest in aftermarket sales, is paying off. Furthermore, despite product printing systems sales being impacted by Covid-19, Xaar’s first-half revenue of £23.7m was in line with the second half of 2019 and both divisions have improved their cash position. Net cash of £23.9m (30.5p a share) is down only slightly since the start of the year, highlighting success of the new management team in reducing cash burn and turning around the business.
I suggested buying Xaar’s shares, at 36.4p, when my 2020 Bargain Shares Portfolio was published online (magazine price 38.5p) based on the recovery potential. That is clearly now gaining traction, hence the reason why the share price is now 71p. I am also encouraged by comments that product development and testing is progressing well in Xaar’s 3D printing business. Stratasys, a leading 3D printing company, has a call option (expiring in December 2022) to buy out Xaar’s 55 per cent stake in this operation for £26.4m (34p), or three times the carrying value of the investment in its 2019 accounts. I wouldn’t bet against that happening.
https://www.investorschronicle.co.uk/comment/2020/07/20/watchlist-small-caps-on-the-upgrade/