The inkjet printhead developer's results, which were released this morning, posted a lower than originally anticipated pre-tax profit of £3.8m (2007: £3.1m) but warned of "a lack of visibility and increased uncertainty" in Chinese demand for the company's platform 1 products.

Chief executive Ian Dinwoodie told PrintWeek: "The effects of the Sichuan earthquake and the restrictive measures taken by the Chinese government in the run up to the Olympics, in particular the exclusivity of advertising to Olympic sponsors in the Beijing region, has impacted on demand.

"In addition, we are seeing increased competition from our Chinese platform 1 licensees who have gone to win market share with aggressive pricing."

Despite the increased competition, Dinwoodie said that the strategy of licensing was essential to the growth of the technology but confirmed that there were currently no plans to license the latest technology.

In July, Xaar announced the collapse of talks on a "major commercial agreement", which ended due to adverse economic conditions.

Dinwoodie could not comment any further on the deal, due to non-disclosure agreements signed with the third party, but PrintWeek understands the deal was a potential tie-up with a major press manufacturer to install inkjet technology on to traditional presses.

The company was however, buoyed by a successful Drupa, which saw a record six Xaar-enabled presses on show. Dinwoodie said that the show "reinforced the belief that inkjet is a serious enabling technology for the future of print".

"Many of our rivals were talking about technology coming in 2010 that we were demonstrating as commercially available at the show Key for us now is to convert this technology to recurring revenues going forward," he added.

Xaar's shares fell slightly to 107.5p in early trading, with most of the negative impact of the results already accounted for following the company's July profit warning, after which its shares fell 30%.