Xaar ups inventory and debtor provisions on China delays

Xaar, which supplies industrial inkjet printheads, said on Monday that it was increasing its inventory and debtor provisions by £7m.

"The previously reported delays in ramp of new product volumes in China have resulted in an unfavourable working capital aging profile, and as a result provisions are being taken on the basis of prudency in line with standard accounting practice," the company said.

It added that the integration issues experienced leading to the delays are now behind it and sell-through is expected to increase. It also said that the minimum volume commitments from its supplier have now been met.

Xaar said in the update ahead of its preliminary results that trading results for the year to 31 December 2018 are in line with the expectations announced on 28 December, before the provisions detailed above.

Revenue is expected to be £63.5m and net cash was £27.9m at year end.

Peel Hunt said it had pencilled in revenue of £64m and net cash of £28m.

"We maintain our Hold recommendation and 145p target price, pending an update next week on its review of strategic options for more extensive partnering in the printhead business unit," the broker said.

At 1005 GMT, the shares were down 6% to 126.80p.