Xaar lifts guidance, but Numis keeps at 'hold' on low visibility

A bullish update from industrial inkjet printing group Xaar wasn’t enough to make Numis Securities turn more positive about the stock on Wednesday as the broker kept its ‘hold’ recommendation on the shares.

The shares jumped nearly 14% to 300.71p by 12:40 after Xaar said it sees better-than-expected annual results after a recovery in the Chinese ceramic tile market.

Xaar said it expected 2014 full-year group revenue to be about £108m, near the top of the range announced on 2 October. Profit is forecast to be “higher than current market expectations”.

Numis said that the consensus pre-tax profit forecast of £21m would increase by around 17%. Its own estimate was ahead of consensus at £22.5m so requires only a 9% upgrade to £24.5m.

Looking ahead, however, the broker said that visibility “remains low” and management is not expecting 2015 revenues to surpass £100m.

“Successful cost cutting will help mitigate negative operation gearing but we still expect a large reduction in profits next year," Numis said.

“The longer-term potential remains apparent in our view driven by new product introductions and the potential for other markets to convert to digital printing but near-term limited visibility drives our ‘hold’ rating.”