Xaar has issued a reassuring H1 trading update. While the previously identified ‘challenging market conditions’ continue, pleasingly trading is in line with expectations. Of the data points: H1 revenue will be slightly down Y/Y to c.£29m, with net cash at £6.8m. With revenue guidance c.£29m, this suggests to us adj. EBITDA c.£1m. Recap that FY23 results were similarly ‘in line’ despite a weak end market where product debuts were delayed. This affected H2 23 and Q1 24 revenue. CEO John Mills concluded that the external trading environment ‘remained challenging’ due to geo-political and macroeconomic headwinds and some customers’ product debuts had slipped into mid- to late 2024, thereby telegraphing that sales phasing would bump revenue into H2. Despite the backdrop, shares have performed well, being +34% YTD. Xaar has rightly gained from the trend whereby quality, and cheap (1.5x EV/Sales), smaller company shares have benefitted from portfolio rotation by the investment community. This ‘large to small’ rotation started only recently but it is a current feature of the UK and US equity markets.