In a trading statement ahead of its H1 results to be announcement in September, the industrial inkjet specialist said trading was in line with expectations.
Sales for the six months to 30 June were £27m compared to £35.3m the prior year, which included a £10m one-off royalties payment. However, the 2019 figure was reduced to £23m once the £4m of revenue reversal involving the return of Xaar 1201 printheads from an unnamed Chinese channel customer was taken into account.
Xaar said the inventory had been “returned for rework due to age” and it expected to sell the heads in the second half.
“We have subsequently regained control of this inventory in order to drive payment recovery and explore broader channel options,” the firm stated.
Chief executive Doug Edwards explained that the revenue was expected to be restored in the second half of the year. "It's revenue that was originally booked in 2017. Our printheads are shipped with a transport fluid and if they're not sold through [in a certain period of time] this can block the nozzles.
"We've take them back to flush them out. Accounting practice means that because of that we have to reverse the revenue. We plan to ship these heads out in H2 and then we will reverse the reversal. There's a lot of interest in that printhead in China."
Xaar also said the business had improved its working capital position. Cash at the half-year was £21.6m. “We continue to work diligently at improving our working capital and anticipate further progress through the second half of the year," the firm stated.
It reported that its printhead business had stabilised following last year’s issues, and it was now seeing an uplift in packaging and industrial applications, with new printheads showing “good growth” in the period.
Xaar cited the following growth figures: Xaar 2001 up 43%, Xaar 501 up 88%, “and in particular the Xaar 5601 (490%) which continues to be very positively received by customers as recently witnessed at the ITMA textile printing show in Barcelona.”
The firm said its Product Print Systems had also posted a big jump in sales, while 3D Printing was described as being “on plan with strong customer feedback”.
Progress has been made with the strategic review for more extensive partnering at its Thin Film printhead business and a further update will be made in September alongside the H1 results.
Xaar’s share price has been on a rising trend over the past month and was at 97p at the time of writing (52-week high: 276.5p low: 73.6p.)
Separately, the Cambridge-headquartered firm celebrated 20 years of its Xaar 128 drop-on-demand piezo printhead this month, with the compact and lightweight head described as “the driving force behind the first industrial inkjet revolution in wide-format graphics”.
It is made at Xaar’s Huntingdon factory and more than 1.5m of the heads are in the market today, with the 128 still being used in Advanced Manufacturing and 3D printing.