The Cambridge ink-jet developer had sales of 29.2m for the 12 months to December 31 2003, marginally down from the previous year at 30.9m.

Although pre-tax profits were down 55% at 400,000, the firm recovered from a disastrous first half that saw it post an operating loss of 3.3m.

For the full year Xaar's post-exceptional operating loss was 1.3m, and a foreign exchange gain of 1.8m boosted the bottom line profit figure.

Upbeat chairman Arie Rosenfeld said: We believe we are only at the beginning of the opportunities for digital printing and Xaar intends to remain at the forefront of their profitable development.

The updated MK2 XK500 printhead, released in the first quarter of 2003, has proved its reliability in the marketplace and new printer launches using the technology are expected this year.

The groups manufacturing facility in Sweden has also been reorganised and enhanced, the company said.

The five-year, joint development deal with Agfa will see a new range of printheads, described as a "the most sophisticated products yet developed by Xaar" and providing a step-change in performance, demonstrated at Drupa in May. Xaar will sell the heads under the OmniDot brand.

Rosenfeld said: Changes in the nature of printing requirements, towards shorter run lengths with rapid turnaround and greater personalisation, are now well established in printing markets and are features which lend themselves to a digital solution.

by Tony Brown