Business Weekly - Cambridge, UK

Backgrounder
Headquartered in Cambridge with manufacturing plants in Huntingdon and Sweden and sales offices spread across the world’s continents, Xaar plc is a leader in the supply of high-technology inkjet components and the provision of fully integrated systems.

Spun out of Cambridge Consultants, it is an integral part of the world leading Cambridge inkjet cluster and has filed over 700 patents since 1986, commercialisation of which have resulted in the provision of a range of inkjet printheads and inks which benefit from continual development.

Ian Dinwoodie joined Xaar as Group operations director in September 2001 and was appointed chief executive officer in July 2003. With over 20 years experience in hi-tech operations, he has held a variety of roles in engineering, quality assurance and manufacturing within the semiconductor, electronics and electronic imaging industries including director of manufacturing for Fujifilm Electronic Imaging Ltd.

1) What attracted you to Xaar originally and what has kept you there since?
I had spent many years in the semiconductor and electronics industries in my early career, then shifted into print and imaging in the mid 1990s. The opportunity at Xaar appeared to be a unique opening where I could use all of my previous experience to maximum effect.
Additionally after spending many years in large corporations, I was looking for a smaller and much more dynamic environment, where individuals can have a clear impact on the performance of the company. What has kept me here is that we are building a business, and we have a long way to go, every day is different, and we have fun.

2) You’ve been CEO for almost five years, what have been your biggest challenges and accomplishments?
In the early days the challenge was to rapidly change the financial performance of the business. In the first half of 2003, the company was losing significant amounts of money, we took some fairly radical action, and I’m pleased to say that the company returned to profitability in the second half of 2003, and has generated sector leading margins from that point to the present day. Following that turnaround we have build a fairly unique, growing and highly successful business.

3) What would you like to see happen at Xaar over the next five years?
We have made significant investments in new technology and new product developments over the past few years, and I would like to see – and expect to see – the business grow significantly based on the adoptions of this new technology both in our existing markets and our new targeted ones.

4) Xaar rejected an approach from local inkjet cluster hoover, Danaher, because it undervalued the firm; how much pressure is there for Xaar to accept such offers?
As a public company, we must always consider what is best for our shareholders, as well as our employees. Xaar is in an excellent position of having a good cash balance, no debt, great technology, good management, and a good business plan. Hence operationally and financially we are highly self sufficient, and don’t see the need for a parent. However ‘money talks’ and there is no doubt a price at which our shareholders would say ‘thank you very much’.

5) What kind of effect has the American invasion (Linx, Willet, Videojet, Elmjet) of Cambridge inkjet had on the cluster?
For Xaar the only impact so far is that some of our sales have moved from the UK to the US. Industrial inkjet whilst still in it’s infancy is growing and developing rapidly across the world. For a small company we are a very international business with more than 95 per cent of our sales being made outside the UK.

6) As one of the global leaders in the field working from the sector’s foremost cluster, how far in terms of revenues and offering can Xaar go on its own?
As I stated earlier we are financially and operationally independent. We can fund our own growth, and have aggressive plans for the future. As a public company I am not allowed to give forecasts, however I would say that we intend to be significantly larger than we are today, and see our independence as an asset not a constraint.

7) You are involved in a number of collaborations with really exciting cutting edge technologies – printed electronics, fuel cells, medical device skin grafts – how important is this to Xaar and which one of these is closest to producing a market-ready product?
They are interesting opportunities and potential upside for the future; however our core growth plan is based on converting the industrial and commercial world of print across to Xaar technology.

Of the non-print related markets Flat Panel Display manufacturing is the application closest to commercialisation. It is too early to say which will commercially generate the greatest return.

8) Is there some element of risk by becoming involved in so many projects?
Yes, so we have specifically limited the amount of work we do in this space. Our core developments are all based on the requirements of the print market, and if these developments can service alternate applications without distraction then we are happy to service them. We will not start any development without clear financial returns.

9) Manufacturing moved out of Cambridge around nine years ago, but now it’s back (in Huntingdon, £10m, 30 new jobs). What changed and how long can it remain a sustainable practice here?
I joined the company as ops director in 2001, and my first decision was to move manufacturing. At that time our large manufacturing plant in Sweden was under-utilised, and the small UK manufacturing capacity was really still part of R & D in Cambridge. It was an obvious decision to rationalise. The Swedish facility is now approaching full capacity, and we knew that the platform 3 product (XAAR 1001) would be so important to our future that we didn’t want to start in one operation then have to move it later, hence the decision to open a second plant.

The manufacturing process is highly capital intensive, hence the cost of depreciation is dominant, and would be the same anywhere in the world. Also the cost of yield can be significant (if you get it wrong) hence having a brand new technology start close (but not too close) to your R & D centre makes great sense. As we continue to grow we will continuously review our cost base; however I see the Huntingdon facility as being very sustainable over the long term. 

10) You’ve expanded in North and South America; what steps are you taking to penetrate other new markets and how are these going?
Geographically we are strongest in Asia which generates over 50 per cent of our sales. China is our largest market, but India is now also growing fast. Europe generates 30 per cent of our sales, with the Americas topping up the rest.
As I said earlier, we are very international for a small company, and our key drive now is to enter other areas of the print market generating additional growth through diversification of the end applications. These new markets include label print, packaging print, ceramics print, then eventually all areas of commercial print including direct mail, and colour publications.

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