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11 July, 2006 - 10:09 By Staff Reporter

Xaar profit warning hits share price

Shares in Cambridge inkjet printing company Xaar nosedived 44.5p – 17.15 per cent – after a profits warning.

The stock slumped to 215p as Xaar revealed slower than expected sales growth in Asia and said pre-tax profit for the second half would now slip below current year expectations.

A 12 per cent boost in revenues ito £22.2m n the first half to June 30 clearly cut no ice with the market.

Sales to Europe and the US grew in line with expectations but, due to de-stocking by

customers, the growth in sales to Asia in the second quarter was slower than had been expected

and planned for.

Pre tax profit was also down at £4.7m from £4.9m last time, reflecting lower than expected overhead recovery.

A Xaar trading update said: “While growth in profits is expected in the second half of the year, profit before tax for the full year is now likely to be below current year expectations and similar to the level reported in 2005.

“The board remains confident about its prospects for 2007 and a further update will be given at the time of release of the group’s interim results in September.”

Cash generation during the first half was strong with cash at the end of June of approximately

£16.3m (£17.5m). This reflects the resolution of certain customer payment issues referred to at the end of last year, payment of the final dividend for 2005 of £0.9m and capital expenditure on tangible and intangible assets of £4.1m.

The detailed interim results will be announced on September 13.

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