By Jo Francis, Wednesday 24 August 2016
Xaar is “pleased with progress” at its half-year and has revealed that a major player in textiles is among the first OEM partners for its new 5601 aqueous printhead.
The Cambridge-headquartered inkjet developer officially launched the new thin film printhead at Drupa.
Chief executive Doug Edwards said that following 60 successful demonstrations to potential partners at the show, it was now engaging with the first tranche of OEMs to integrate the head into their products.
“We are working with a major player in textiles that will launch in the middle of next year, and also with a large commercial and office printer manufacturer, and a wide-format graphics company,” Edwards said.
Xaar sales slipped by nearly 7% in the six months to 30 June, falling from £47.8m to £44.5m, but the group said it was pleased with overall progress and highlighted the potential for its pipeline of new products.
Prior year sales had been boosted by “last time buys” for products from its Swedish manufacturing facility, which has now ceased production, explained chief financial officer Alex Bevis. “Compared to the prior period turnover was broadly in line with the total sales level.”
Despite price pressure in Xaar’s key ceramics market, gross margins were maintained on the prior year at 45%.
Adjusted pre-tax profit prior to restructuring and share-based charges was £8.8m (2015: £9.1m). Restructuring costs in the first half were £582,000, with the bulk of the restructuring costs related to the Swedish closure included in last year’s £4.8m charge.
“We are pretty pleased with progress. Our vision [to achieve sales of £220m by 2020] and the new products are going well. We’ll be talking about our plans for 3D printing before the end of the year,” Edwards stated.
He said the acquisition of direct-to-shape specialist EPS, which completed after the period end, was also going well. EPS has secured a large OEM order in the US with a major DIY company, and Edwards said the firm now planned to build a European sales channel for the EPS portfolio.
The group still had a war chest of £69m at the half-year, although this will have been reduced since by the $11m (£8.3m) initial payment for EPS. It will pay up to $18.5m in total for the business.
The first half was a significant period for Xaar in terms of new product launches. As well as the 5601 it also launched the 1003, which effectively replaces the 1002 and provides improved uptime for Xaar’s ceramic customers.
It also launched the 1201 printhead as a result of its joint venture with Ricoh, with China’s Guangzhou Xucheng Electronic Technology becoming the first OEM partner for the head. It demonstrated two new eco-solvent wide-format printers using the head earlier this month.
And at the Tecnargilla ceramics show next month Xaar will launch its another new printhead, the 2001, which will “significantly strengthen” its portfolio in its biggest industrial market. “This is an extremely flexible head, and OEMs can use it in many different ways,” Edwards explained. “You can lay a lot of materials down, or you can run the lines faster, or you can print at a higher resolution of 720dpi. It will be quite difficult for our competition to respond to that.”
The group invested 25% of revenues into R&D and has capitalised £20.6m in development costs for the its thin film printhead programme since 2014. It expects to complete the development of the platform this year.
At the half-year industrial printing applications made up 59% of Xaar’s sales (2015: 70%), packaging and product printing was 19% (2015: 15%), graphic arts slipped from 9% to 8% and licensing revenue was up from 6% to 14% due to a contractual payment from a Japanese customer following a royalty audit.
Outgoing chairman Phil Lawler said that the EU referendum result had provided “a number of challenges and opportunities”.
One in seven of Xaar’s 500 employees have migrated from the EU.
“15% of our workforce comes from the EU and we spend a lot of time recruiting world-class talent, so we want to retain those employees,” said Bevis. “However, the exchange rate certainly makes us more competitive, in particular against the Japanese, so that is a nice competitive benefit for us.
“We are a bit concerned about the uncertainty, although I suspect it will all be fine and we will reach agreements in time,” he added.
Xaar’s share price rose by 4.12%, or 20p, to 505p following the results.