What is it?
The company makes digital inkjet printheads and currently holds more than 500 different patents since its founding in 1990.
The applications for its printheads can be found in coding and marking, printing labels, creating unique style patterns in laminate woods, packagings and ceramics, printing out graphic posters and advanced manufacturing.
Management
The company’s independent directors are independent and their profile seems to check out.
Both these men are also experienced in the engineering sector and should be qualified to understand the business.
However, both these non-executives don’t hold any shares in the company, and it seems their paid is fixed, in the £30k region
As for the chairman, he spent 18 years as an HP executive. HP does prints as well. He gets paid £80k and holds 100k of shares in the company.
The company failed my checklist in meetings. They had more renerumation meetings than audit meetings (6 vs. 4), therefore more interested in pay than getting its financial accounts accurate.
Executive managers are rewarding themselves handsomely, being paid in total £4.52m in 2013, compared to £2.27m in 2012, this is more than the growth in revenue.
Looking at the share options, their new long-term incentives tend is based on EPS growth + inflation rate, on a scaling level.
Here is an excrept below:
| Annualised, compounded growth in EPS: % of LTIP awards vesting RPI + 4% pa 35% vests RPI + 10% pa 100% vests |
If EPS grows at RPI (retail price index), plus 4% it means management will only get 35% of the reward each year.
Income Statement
Revenue and profits growth has been impressive in the last five years, with the latter increasing more than 15 times.
The revenue breakdown of Xaar PLC is as follows:
| Applications | 2013 (£m) | 2012 (£m) |
| Industrial | 98.2 | 56 |
| Packaging | 15.7 | 12 |
| Graphic Arts | 13.3 | 13.1 |
These are its impressive financial ratios, including operating margins:
| (%) | 2013 | 2012 | 2011 |
| Operating margins | 29 | 18 | 13.2 |
| ROCE | 36 | 20.8 | 14.5 |
| ROE | 34.6 | 18.6 | 13.3 |
The growth in trade receivables is lower than revenue growth, therefore management is strict with their credit policies, or simply the customers wanted to pay in cash.
The inventory turnover in 2012 is: 3.43 times, and in 2013 is: 4.13 times, representing a faster turnover rate.
Its gross and operating margins are extremely high, at 53% and…
