Xaar grows market opportunities while steadying the ship financially
CEO Doug Edwards spelled out that Xaar had re-engineered itself into a very different type of business as he analysed a steady set of interim results for the Cambridge inkjet business and predicted future growth across a significantly broader range of markets.
Revenue for the six months ended June 30 was £44 million (H1 2016: £44.5 million; H2 2016: £51.7m). Revenue excluding licensee royalties was £40.5m (£38.4m; £44.5m). Asia revenues as well as those in The Americas were ahead but they were down in EMEA.
Edwards said: “I am pleased with our progress towards our 2020 vision during the first half of the year. Working together with our manufacturing partner for the Thin Film Xaar 5601, the 5601 design has been frozen, and the first development kits shipped.
“We launched a new premier partnership programme into the ceramics market to leverage our advanced High Laydown Technology and diversified product portfolio.
“We continued with our transformation from an internally-focused organisation to a market and customer-centric business; the savings arising from increased efficiency in operations and R & D will be redeployed into our go-to-market functions.”
Sales into Graphic Arts in the first half of 2017 were 33 per cent higher than the same period for 2016, with first set of revenues from the new Thin Film printhead realised at £2m. A master distribution agreement was signed for +90,000 printheads over two years.
Revenue from Packaging and Product Printing increased by 54 per cent compared to the first six months of 2016.
Profitability in the first half of 2017 was consistent with the first six months of 2016.
Edwards said that Xaar continued to invest a substantial amount in research and development to deliver its long term strategy, with expenditure before the capitalisation of development costs at 22 per cent of revenue in H1.
Adjusted profit before tax for the period was £7.9m (£8.8m).
The underlying adjusted profit before tax grew by 90 per cent, allowing for the effect of foreign exchange movements, the one-off benefit from a licensee royalty payment in H1 2016 and the contribution from the acquired EPS business.
Xaar had net cash of £38.3m at June 30, down from £49.3m in December – reflecting investment of working capital to support new channels and product launches.
Edwards said the company deepened its partnership with Xerox and launched the new 5501 printhead. This will initially be targeted at the textiles market and generated its first revenues in H1.
In June it announced a joint development agreement with Xerox to develop the next generation of industrial Bulk piezo printheads using the extensive combined resources and IP of both companies.
The efficiency gains from this agreement will allow Xaar to redeploy resources to strengthen the go-to-market functions and transform the business to become more customer-centric, Edwards said.
A partnership with Ricoh continues to be strong, with good steps achieved on the 1201 printhead. “We have signed a master distribution agreement for the 1201 worth in excess of 90,000 units over two years,” Edwards revealed.
Looking at the bigger picture, Edwards added: “We have set out our vision to grow annual sales to £220m by 2020 supported under four strategic pillars: Ceramics, Packaging and Product Printing, Thin Film, and Partnerships and Acquisitions.
“In the shorter term, despite challenges and low visibility in the ceramics sector, we are pleased with product revenue growth of 60 per cent outside of ceramics in the first half and anticipate continued new product growth in the second half of the year.”