REG - Xaar PLC - Final Results
26/03/2024 07:15
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20240326:nRSZ2422Ia&default-theme=true
RNS Number : 2422I Xaar PLC 26 March 2024
26 March 2024
Xaar plc
2023 FULL YEAR RESULTS
STRATEGIC PROGRESS AND WELL POSITIONED FOR MEDIUM & LONG-TERM OPPORTUNITY
Xaar plc ("Xaar", the "Group" or the "Company"), the leading inkjet printing
technology group, today announces its full year results for the 12 months
ended 31 December 2023.
Financial Summary:
2023 2022 Change
Revenue £70.6m £72.8m -3%
Gross profit £26.9m £28.6m -6%
Gross margin % 38% 39% -1ppt
R&D spend £5.6m £6.7m -17%
Adjusted EBITDA(1) £6.4m £6.2m 3%
Adjusted profit before tax(2) £2.9m £2.8m +4%
(Loss)/Profit before tax (£2.4m) £0.8m
(Loss)/Profit for the year (£2.2m) £1.8m
Basic (loss)/earnings per share (2.8p) 2.1p
Net cash at the year end(3) £7.1m £8.5m
1 - EBITDA is calculated as statutory operating profit before depreciation
(other than that arising from IFRS 16 lease accounting), amortisation and
impairment of property, plant and equipment, intangible assets and goodwill.
Adjusted EBITDA is calculated as EBITDA excluding Adjusting Items listed in
Note 2 below.
2 - Excluding the impact of share-based payment charges, exchange gains or
losses on intra-group transactions, restructuring and transaction
expenses, research and development expenditure tax credits, fair value
losses on financial assets at fair value through profit and loss, and
amortisation of intangible assets arising on business combinations
3 - Net cash at 31 December includes cash, cash equivalents and treasury
deposits
Financial Highlights
· Revenue of £70.6 million (2022: £72.8 million) with increased
customer adoption of our technology
· Gross margin of 38% benefitting from actions to mitigate input cost
increases and increased operational leverage
· R&D spend of £5.6 million, equating to 8% of Group Revenue,
underscores the continued investment in the product roadmap, with a focus on
the ImagineX platform
· Adjusted Group profit for the year of £2.9 million in line with
Board expectations
· Healthy balance sheet with net cash of £7.1 million
Strategic and Operational Highlights
· Increasing number of customers in development and enhanced
relationships with end customers, giving rise to additional product launches
expected in 2024 and anticipated recovery in key markets
· Further operational progress made in Engineered Printing Solutions
(EPS), delivering strong revenue growth and good performances from FFEI and
Megnajet
· Phase 1 of operational efficiency programme complete with factory
re-organisation delivered on time and under budget delivering cost savings and
increased capacity
· Cost reduction plan in place to navigate current market conditions
· Investment in working capital ensured successful mitigation of
supply chain constraints as well as meeting customer demand
John Mills, Chief Executive Officer, commented:
"Whilst the external trading environment remains challenging, we have a clear
plan in place and remain focused on the delivery of our strategy and taking
advantage of the significant opportunities we have that will drive profitable
growth. Our products continue to generate strong interest from customers,
demonstrating our leadership in printing highly viscous fluids with all the
performance and sustainability benefits they deliver.
Due to the current market conditions, adoption of our customers' products is
taking longer than expected, impacting our revenue, however, we have put in
place a cost action plan to mitigate this. We remain optimistic about the
future, being well placed to benefit as the trading environment improves.
With a substantial market opportunity and the progress made, we remain well
positioned to realise our exciting potential."
Contacts:
Xaar plc
Ian Tichias, Chief Financial Officer +44 (0) 1223 423 663
John Mills, Chief Executive Officer
Teneo +44 (0) 207 353 4200
Giles Kernick
Olivia Lucas
A presentation for analysts and investors will be held via webcast and
conference call at 09:00 today. For further details, please contact
Xaar@teneo.com (mailto:Xaar@teneo.com)
Chairman's Statement
2023 was a challenging year. Despite a strong start, the impact of
macro-economic and geo-political factors slowed the momentum the business was
building, particularly so in the fourth quarter. Global inflation and higher
interest rates have led to lower demand for capital goods, and this has had an
impact on our revenues.
Overall financial performance in 2023 was broadly in line with the Board's
expectations with trading conditions being relatively weak, particularly in
China, which is an important market for the business. In the latter part of
the year, it also became clear that some customers were responding to general
market conditions and geo-political events by delaying their new product
launch plans, resulting in less certainty in the timing of new business for
Xaar. Several customer product launches anticipated to take place at the end
of 2023 and early in 2024 are now expected in mid to late 2024.
Despite these external challenges, good progress has been made within the
business as our technology and product programme continue to deliver new
capabilities and enhanced performance. Our High Viscosity technology is
creating significant interest across a number of markets, and we are pleased
to be developing strong partnerships with leading suppliers in sectors that
represent new application areas for Xaar.
Within the business, the management team have been proactive in taking steps
to manage inflationary cost pressures, streamlining internal operations, and
reducing overheads. We remain focused on our core technology and the
development of strong customer partnerships as the demand for digital print
capability continues to grow.
Strategic Progress
We believe a significant opportunity exists in market sectors and applications
where Xaar technology provides commercial and technical performance
advantages. There is a wide range of interest in digital print across
industrial sectors, in particular those using higher viscosity fluids, and the
economic benefit of doing so compared to existing analogue techniques
reassures us that prospects for the business remain significant.
Our technology strategy is focused on developing product functionality and
places an emphasis on delivering attributes that customers tell us they need,
and our operational and commercial strategies are designed to make doing
business with Xaar straight forward and cost efficient.
Our vertical integration strategy, which concentrates on developing competence
beyond the printhead itself into electronics, fluid management and
integration, is also helping us gain access to new applications and is an
advantage we can offer our OEM customers to enable their swift deployment of
the print system element within their products.
As previously announced, we have invested in our manufacturing facilities to
improve efficiency and lower costs and the first phase of this programme was
completed in early 2023 on time and under budget. This has also enabled
increased capacity and generated cost savings, especially in reducing our
power usage.
Our financial strategy is aimed at generating strong returns, while
maintaining capital discipline and delivering strong cash generation to
facilitate continued investment in technology, products and capability.
While there is no doubt that the macro-economic challenges have slowed growth,
we are pleased with the progress we have made across several areas of the
business this year and we have a significant pipeline of opportunities to
build upon in 2024 and beyond.
Financial Results
In a year where inflation and interest rate increases have dominated the
economic landscape, the Group delivered revenue of £70.6 million (2022:
£72.8 million) and pre-tax profit, adjusted for non-recurring costs, of £2.9
million, slightly ahead of the prior year. The full year unadjusted loss was
£2.2 million (2022: £0.8 million profit).
Our balance sheet is sound, and we remain cash positive with banking
facilities undrawn. The Group has maintained higher levels of inventory over
the past two years to mitigate both cost increases and disruption in the
supply chain. We anticipate normalising inventory and gaining the associated
positive cash benefit during 2024.
The Board has not declared a dividend in 2023 as we continue to believe that
prioritising cash for investment in the business will deliver more compelling
returns for shareholders in the medium term.
People and ESG
A highlight of the year was our successful application for accreditation as a
Great Place to Work. People are at the heart of Xaar and we prioritise staff
safety and well-being alongside business performance and delivery. The Board
engages with staff representatives regularly and we remain encouraged by the
commitment and energy we see in action every day. On behalf of the Board, I
would like to thank our entire team for their hard work and diligence.
We also seek to have a wider positive impact on society by understanding and
prioritising stakeholder needs, managing our business responsibly, and
reaching out to our local communities. Our teams have continued to support
national STEM initiatives, encouraging young people to develop an interest in
technology and business.
A focus on the environment is also important at Xaar as we make progress
towards our goal of net zero by 2030. Recently we were nominated as finalists
at the Edie awards for Green Project of the Year in relation to our factory
re-organisation project. In addition to in-house initiatives, our products are
designed to be cleaner, more efficient and generate less waste than
traditional print techniques. Our development of printheads capable of
reliable performance using water-based fluids is a particular area of focus.
There is a clear environmental advantage in using our products as we can print
highly viscous fluids, not just water based, which require much less drying
time, thereby reducing significant energy usage as well as reduced water
content.
Board and Governance
During the year Chris Morgan stood down from the Board and we welcomed two new
non-executive Directors Richard Amos and Jacqui Sutton.
Richard Amos joined in June 2023 and is the Chair of Audit Committee. Richard
also sits on the Nomination and Remuneration Committees. Jacqui Sutton joined
the Board in November 2023 and sits on the Audit, Nomination and Remuneration
Committees. Both Richard and Jacqui bring a wealth of experience and have
relevant knowledge and skills from their previous executive and non-executive
roles.
In February 2024, Stuart Widdowson joined the Board as a non-executive
Director. Stuart is appointed as a representative of Odyssean Capital LLP
where he is the Managing Partner.
In a further change, Alison Littley has notified the Board of her intention to
step down as a non-executive Director during 2024. Alison will stand for
re-election this year but will resign from the board once her replacement is
recruited. An announcement, including arrangements for chairing the
remuneration committee and the senior independent director role, will be made
in due course. I have appreciated the support of both Alison and Chris
Morgan over the years and would like to take this opportunity to express
thanks to them both for their commitment and contribution to the business.
Looking Ahead
Having put in place strong foundations through the development of our strategy
over the last three years, the Board is optimistic about the opportunities
that lie ahead for the Group and for all our stakeholders including employees,
customers, and shareholders.
Xaar remains in a good position with unique and compelling products and a
significant addressable market. External factors mean we are cautious about
the short term, but we believe the business is well positioned for growth over
the medium and long term.
We look forward with confidence.
Andrew Herbert
Chairman
26 March 2024
Strategy Update
Introduction
2023 was a year in which the Group delivered encouraging progress in key
strategic areas despite unexpected challenges.
The Group entered 2023 having invested in inventory over the previous two
years to maintain customer service levels during the period of exceptional
supply chain disruption in 2022, to mitigate cost inflation and to be well
positioned for several customer product launches.
Due to current geo-political and macro-economic conditions, OEM machine
launches are taking longer than expected which had a significant impact in Q4
of 2023. Several of these launches were delayed, impacting revenue in the
latter stage of the year and the start of 2024. However, we remain optimistic
about the future, and we are well placed to benefit as trading conditions
improve.
The disappointing end to the year masked some more encouraging signs. We
continue to enjoy leading positions in attractive structural growth markets.
We deepened our relationships with key customers helped by our widening
product range, and we have grown our customer base and maintained our market
share.
Strategic progress
Xaar delivered a good performance in 2023. We continue to execute our strategy
of delivering compelling products in each of our market segments and remain
focused on the significant opportunities that will drive profitable growth.
Our products, especially Aquinox, are generating strong interest from both
existing and new customers underlining our leadership in jetting highly
viscous fluids which, alongside other advantages, provide significant
sustainability benefits, as well as reducing our customers' time to market.
We have seen an increase in the number of customers adopting Xaar technology
and we now have clearer visibility of their product launches. This is
evidenced by the twelve new customer product launches during 2023.
We expect an increase in customer product launches that incorporate Xaar's
technology during 2024, which we anticipate will drive demand for printheads.
Phase 1 of our factory upgrade has been successfully completed on time and
within budget, positioning us to deliver increased efficiency and capacity,
whilst realising significant cost savings. Further phases of development will
see increased modernisation of our manufacturing facilities leading to greater
efficiencies and scale potential. These will only be undertaken when business
performance and market conditions improve.
We have seen continued good performance from EPS, FFEI and Megnajet, with EPS
especially continuing to deliver excellent revenue and profit growth. As part
of our strategic decision to consider options to withdraw from the Life
Science part of FFEI, we sold non-core IP assets in the year delivering a
profit of £2.0 million.
Financial performance
We have delivered performance in 2023 in line with updated management
expectations, demonstrating operational and strategic progress across the
Group. Revenue for the period was £70.6 million representing a decrease of 3%
against 2023.
The Printhead business has a clear customer-focussed strategy, and we are
pleased to have grown our customer base and at least maintained our market
share in key sectors. The economic challenges globally, particularly rising
interest rates, have directly impacted capital equipment purchases by some
customers in the year, particularly so in Q4 2023.
As a result of these pressures, revenue for the Printhead business was down
5%. The external pressures not only impacted customers' new product launches
but also existing core markets for printheads, with the ceramics sector being
particularly affected, linked to the slowdown in the global construction
industry.
Progress has been made in market sectors beyond Ceramics, especially the key
growth area of 3D printing, and we continue to see strong customer engagement
where we have a competitive advantage enabling customers' use of high
viscosity fluids.
Geographically we delivered growth in Asia, when compared to the COVID-19
impacted period in 2022. This increase of £4.0 million (49%) was offset by
lower revenue in the US (down £5.6 million, 15%) and EMEA (down £0.6
million, 2%). While disappointed with revenue decline in some markets, we are
pleased with the broader spread of business across geographic regions and
market sectors. This demonstrates the increasing resilience of the business.
We have increased diversification of customers, applications and geographies
as the customer pipeline continues to grow.
EPS has delivered an excellent performance. Revenue increased 13%, with growth
across all its product lines, and digital inkjet sales at the core of the
success growing 15%. The proactive decisions taken in the last two years to
strengthen the management team and rationalise the product range are
delivering excellent results.
FFEI and Megnajet continue to perform well. These businesses provide us with
an expanded product range enabling real traction and opportunity in the
printbar and print engine markets, along with fluid management systems.
Our plan has been to focus on products that support our core strategy. As a
result, we are considering options to withdraw from the non-core Life Sciences
part of the FFEI business, and the sale of IP in this area during the year is
part of this process. We delivered a one-off profit of £2.0 million through
this sale which helped offset the one-off impact of Phase one of our factory
re-organisation at Huntingdon completed in Q1.
Gross margin for the Group was 38% (2022: 39%) despite inflationary cost
pressures and closing the Huntingdon factory for two months to complete Phase
1of the operational re-organisation. We have successfully protected our gross
margins from input cost inflation which was evident in our supply chain in
2023. Our ability to pass on inflation increases underlines the strength of
our products and our market position.
Group adjusted profit before tax for 2023 was £2.9 million, an increase of
£0.1 million when compared to £2.8 million in 2022. The full year unadjusted
loss was £2.2 million (2022: £0.8 million profit).
Healthy balance sheet and operational investment
The Group retains a healthy balance sheet and cash position. Cash at 31
December 2023 was £7.1 million, reflecting a net outflow of £1.4 million
over the year.
During the year we invested £2.1 million in inventory allowing the Printhead
business to increase its holding of finished goods. This has been a controlled
and systematic approach over the last eighteen months giving confidence in our
ability to deliver on customer orders.
As a consequence of the unexpected reduced demand in our core markets and
particularly a significant slowdown in the ceramics sector in Q4 2023, we have
a higher than planned finished goods holding in the Printhead business.
Whilst we have won business through the advantage of offering shorter lead
times than our competition, ensuring we have been able to capitalise on
commercial opportunities, we continue to monitor the product mix of finished
goods to ensure it is appropriate for customer demand. Consequently, we expect
to reduce inventory levels during 2024 which will have a positive impact on
cash generation during the year.
We will maintain our disciplined approach to balance sheet management, as it
remains a key priority to allow for further investment in the business
focussing on operational capability. We have been disciplined in our
management of cash expenditure focusing on improving operational capability
and efficiencies, investing £1.5 million (2022: £2.4 million) in operational
upgrades along with the factory upgrade completed in March 2023.
R&D investment is critical to the ongoing success of the business, and we
will continue to invest in our R&D capabilities across the Group to ensure
our technology remains market-leading. During 2023 we invested £5.6 million
(2022: £6.7 million).
In June 2023 we successfully agreed a Revolving Credit Facility (RCF) of £5.0
million with our lead bank, HSBC, which allows for accelerated investment in
the business and our operational capability.
Operational improvements driving greater efficiency and capacity
Operational improvements have been made through investment in our
manufacturing facilities to increase efficiency and lower costs. The first
phase of this programme has now been completed with the Huntingdon factory
re-organisation completed in early 2023 on time and under budget.
This will enable us to operate more efficiently, increase capacity and yields
whilst crucially generating significant cost savings, especially in reducing
our energy consumption. Accordingly, this investment will deliver a rapid
return and payback in less than a year.
This is the first phase of our efficiency upgrade programme. The next phase of
investment will result in more modern, efficient, and environmentally
beneficial manufacturing facilities across the business. This will be
undertaken when business performance improves, depending on business needs and
volume demand. It is anticipated between £10 million and £15 million will be
invested in the next phase.
We continue to exercise tight control over our cost base whilst also seeking
opportunities to drive performance. This includes establishing an internal
project, named Hubble, which will provide focus for our key priorities and
goals.
This project is split into 4 key streams:-
· Commercial strategic opportunities
· Operational efficiency
· Organisational effectiveness
· Customer integration
Each project stream has an appropriate Executive sponsor and project lead. The
project aims to deliver cost savings on an annual basis of £2 million of
which £1.2 million has already been identified and implemented. The project
will be delivered with no incremental investment.
Significant market opportunity remains
We have a strong proposition across our five key market sectors. Our digital
inkjet technologies provide compelling propositions to transform print
processes across a wide range of applications, and we can supply our customers
with the products they need to develop their printers. This means we have
significant growth opportunities, incremental to printhead sales, where we can
shorten our customers' product development time to market.
The medium and long-term opportunity for the business remains significant.
Whilst we already have good market share in core, mature markets such as
Ceramics and Coding & Marking, our market leading technologies provide
further growth opportunities in applications where our capabilities offer
competitive advantage.
During 2023 we have made significant progress in 3D printing, where our
ability to print high viscosity fluids is transforming the industry. The 3D
printing sector is experiencing a greater level of customer product launches,
thereby providing greater revenue potential opportunity for our products than
previously expected.
Historically Xaar has almost exclusively operated in the B2B (Business to
Business) area across our product ranges and applications, however there is an
emerging opportunity for 3D printing in the B2C (Business to Consumer) sector
where we can facilitate growth.
We are partnering with established system providers for our Xaar Irix
printhead to enable a new generation of full colour, inkjet-based desktop 3D
printing systems that are higher resolution and more flexible than the
existing technologies. We anticipate this new generation of 3D printers to be
launched during 2024 and 2025.
Customer engagement has increased as our printhead product range has expanded.
Our ability to offer a broader solution to customers with fluid management
systems and printbars has increased the number of customers developing
machines with our products. During 2023 there were twelve customer product
launches, and we anticipate at least a further twelve launches during 2024.
By providing an integrated solution for customers whereby they can access more
of the printing ecosystem, we help our customers take advantage of the inkjet
opportunity. Working with Xaar means a higher chance of success by being
faster to market and increasing return on investment. Ultimately this will
help us in our overriding strategy to sell more printheads and enables the
business to manage volatility better, in any given market.
We are further supporting our business model with three key initiatives.
Firstly, we are diversifying the geographical spread of our customer base. By
targetting OEMs in Europe and US, we gain greater regional diversity and
reduce our dependence on any specific region. This has resulted in growth of
new development projects in those regions and will build further resilience
into our business.
The second initiative is to develop relationships with our end customers in a
way that hasn't been previously achieved. By engaging with end users - in
partnership with our OEMs - we are expanding our market understanding. This
not only strengthens the relationship with end users and direct customers but
presents us with a clear picture of the decisions that drive the adoption
timing of new systems with Xaar technology.
The transition to Xaar technology and revolutionary high viscosity inks can
present technical challenges when customers integrate our printheads into a
new system. To counter this we are developing our service offering to better
support them, which is our third initiative. This involves focussing our
resources to identify issues earlier and provide more direct support to
resolve technical challenges. Additionally, we are developing a full printer
solution in house for our key markets so that we can identify and resolve
issues with system integration before they create problems in the field.
Product development and capability
We have a unique roadmap of product development to ensure we offer an
increasingly vertically integrated commercial strategy to capitalise on this
market opportunity.
Our Xaar 2002 printhead has double the resolution of our competitors giving
the ability for very high-quality print and incorporates our key technologies
which enable printing of very challenging fluids in harsh production
environments.
The Xaar Irix remains the flagship product in the Coding and Marking and
Direct-to-Shape sectors. It delivers increased throw distance whilst
maintaining print quality and along with our Xaar 50X printheads means we are
maintaining our position in Coding and Marking and have several opportunities
in the Direct-to-Shape market.
The Aquinox printhead is positioned to drive adoption in Packaging and
Textiles markets. The response to the product has been extremely positive due
to its ability to print high viscosity water-based inks. This gives customers
the opportunity to use less energy, with a higher throughput, and more vibrant
colours.
The significant benefits of high viscosity inks have also recently been
independently validated by the Welsh Centre for Printing at Swansea University
confirming the superiority of our technology. This was demonstrated at our
first, and well-received, R&D open day held in November 2023 which was
attended by customers, commercial partners and potential technology adopters.
They were able to witness and participate in live demonstration of the
functionality that our products offer. The day was highly successful,
demonstrated by the level of interest and further enquiries we have had since.
The already successful ImagineX platform will deliver improved features over
the next few years which will provide significant enhancements to the current
portfolio, including:
· substantially improved speed and throughput (frequencies up to
150kHz, equivalent to a threefold increase in speed compared to current
products),
· increased throw distance to improve image quality on curved
surfaces,
· increased robustness to improve the life of the printhead and
maintain image quality,
· higher viscosities enabling a broader range of fluids to be printed
(above 100cP), and
· higher resolutions (up to 1440 dpi).
These features will help strengthen our position in markets where we are
already well represented and will drive improved adoption in several markets
where we are currently not participating. The enhancements in our product
roadmap support our customers with a clear path to upgrade their products and
maintain their product differentiation.
Strong commitment to sustainability
We continue to make progress on ESG and the Group's Sustainability Roadmap.
The Board remains committed to the business becoming carbon net zero by 2030.
We are passionate about delivering solutions and products for our customers
that are cleaner and better for the environment. Our products are well placed
to deliver significant benefits commercially and environmentally for our
customers through reductions in power consumption and water usage.
Digital inkjet printing is inherently more sustainable compared to traditional
analogue printing with a smaller carbon footprint. It reduces and prevents
excessive waste and uses less energy due to the ability to print short runs or
direct-to-shape. With Ultra High Viscosity Technology and TF (ThroughFlow)
Technology ink recirculation, Xaar printheads are capable of printing very
viscous fluids which, in the textiles sector for example, results in a
reduction in energy used in intensive drying processes. We are passionate
about continuing further adoption and understanding of the environmental
benefits our products can bring to customers.
During 2023 we gained full accreditation for the Great Place To Work
certification. This was especially pleasing as it was gained on our first
application and is testament to the hard work and engagement of colleagues
across the business.
We also seek to have a wider positive impact on society by understanding and
prioritising employee needs, doing business responsibly, and reaching out to
our local communities. All our UK sites have now moved to 100% renewable
energy. All printhead product packaging is fully recyclable. Our Apprentice
Programme is well developed across the business, and we continue to support
activities promoting STEM (Science, Technology, Engineering and Maths)
subjects amongst young people as well as several sponsorship programmes
supporting university students and industry placements.
Outlook
Whilst the end of 2023 was challenging, and the current external trading
environment remains so, we are focused on the delivery of our strategy and
taking advantage of the significant opportunities we have that will drive
profitable growth. Our products continue to generate strong interest from
customers, demonstrating our leadership in printing highly viscous fluids with
all the performance and sustainability benefits they deliver.
As previously announced in our November 2023 trading update, due to the
current geo-political and macro-economic conditions, bringing some of our
customer's products to market is taking longer than expected, meaning we are
cautious on precise timing.
As we reduce our finished goods inventory during 2024, the lower volumes will
impact our ability to recover production overhead costs. Together with the
effect of increased input costs, as previously explained, our gross margin
will be impacted this year.
Despite this, we will continue to take decisive action to manage our costs and
maximise cash generation during this slower trading period whilst preserving
our sources of long-term competitive advantage.
We are confident that our market position remains strong and that the Group
remains well positioned to prosper as our key markets resume a trajectory of
healthy long-term growth. So, despite the short-term challenge we remain
hugely excited for the future of Xaar and remain confident that the unique
capabilities of our printheads will drive broad adoption across all markets
over the coming years.
We believe the business is well positioned for growth through both new
applications and share gains in new and existing markets and our expectations
for the full year remain unchanged.
Business Performance
Revenue
Despite trading conditions becoming more challenging in the latter part of the
year, the Group achieved revenue of £70.6 million, representing a marginal
£2.2 million (3%) decline on 2022 revenues of £72.8 million. Group revenues
were £34.5 million in the first half of the year and £36.1 million in the
second half.
Whilst a lack of growth is disappointing, underlying market demand remains and
we have retained market share. Therefore, we are confident in the medium term
of returning to previous levels of organic growth. The pipeline of anticipated
customer product launches in the coming twelve to eighteen months drives this
confidence.
Revenue generated by the Digital Imaging operating segment totalled £8.7
million in the year (2022: £11.6 million), representing a decline of 25%
compared to the prior year. In accordance with previous statements, as part of
the ongoing integration this year, we have maintained focus on the core print
systems activities acquired and commenced the strategic exit from the non-core
Life Sciences activities that also formed part of the acquired business. This
has resulted in an aggregate reduction in revenue whilst synergies are built
in core activities.
The year ended 31 December 2023 represents the first full year of trading in
the Ink Supply Systems operating segment following the Group's entrance into
this market in Q1 2022 via the acquisition of Megnajet Limited.
Group revenue by geographic region
£m FY 2023 FY 2022 Variance Variance %
PH PPS DI ISS* Total PH PPS DI ISS* Total PH PPS DI ISS* Total PH PPS DI ISS* Total
Americas 8.0 19.0 3.0 0.6 30.6 10.8 19.3 4.8 1.3 36.2 (2.8) (0.3) (1.8) (0.7) (5.6) (26)% (2)% (38)% (54)% (15)%
Asia 8.4 3.0 0.1 0.7 12.2 7.5 0.2 0.1 0.4 8.2 0.9 2.8 - 0.3 4.0 12% 1400% - 75% 49%
EMEA 20.7 0.1 5.6 1.4 27.8 20.7 0.1 6.7 0.9 28.4 - - (1.1) 0.5 (0.6) - - (16)% 56% (2)%
Total 37.1 22.1 8.7 2.7 70.6 39.0 19.6 11.6 2.6 72.8 (1.9) 2.5 (2.9) 0.1 (2.2) (5)% 13% (25)% 4% (3)%
* Megnajet Limited was acquired on 2 March 2022 - comparative figures in the
table above reflect ten months of post-acquisition revenue.
PH - Print-head DI - Digital Imaging ISS - Ink Supply
Systems
Whilst the Americas remains the Group's primary geographical market
representing 43% of total Group revenue (2022: 50%), revenue from the Americas
experienced a decline of £5.6 million (15%) year-on-year, due to a £2.8
million reduction in printhead revenue primarily in the Coding & Marking
(C&M) sector, and a £1.8 million reduction in Digital Imaging revenue.
These reductions in revenue were partially offset by increased income
generation from customers in Asia, with revenue increasing by £4.0 million to
total £12.2 million for the year. This was driven by single-pass machine
sales in Asia by EPS.
Revenue generated from customers located in EMEA regions remained largely
stable year-on-year at £27.8 million (2022: £28.4 million) which is pleasing
and reflects continued customer engagement across our product offering in
recently entered market sectors.
Printhead revenue by sector (Figures (£m) and percentages (%) are subject to
rounding)
£m 2023 H1 2023 H2 FY 2023 FY 2022 Var Var %
Ceramics and Glass 8.0 7.5 15.5 17.0 (1.5) (9)%
C&M and DTS 5.1 6.1 11.2 12.6 (1.4) (11)%
WFG and Labels 1.7 1.9 3.6 4.8 (1.2) (25)%
3D Printing and AVM 2.6 3.8 6.4 3.9 2.5 64%
Packaging and Textiles 0.2 0.2 0.4 0.5 (0.1) (20)%
Royalties, Commissions and Fees - - - 0.2 (0.2) (100)%
Total 17.6 19.5 37.1 39.0 (1.9) (5)%
Whilst COVID-19 restrictions in China have now been lifted, a trailing impact
on demand is still being suffered by the Group within the Printhead segment.
Suppressed demand has been exacerbated by the impact of inflationary cost
pressures and interest rate rises on capital equipment sales globally. These
constraints on demand have translated into a £1.9 million (5%) year-on-year
reduction in Printhead revenue.
Growth has been achieved again this year in the 3D Printing and Advanced
Manufacturing (AVM) sectors, which is pleasing as this reflects our overall
customer strategy and enhanced product portfolio. The 3D printing market
remains an exciting opportunity for us and is a sector we continue to expect
to grow significantly in the future. Revenue from 3D Printing and AVM grew
£2.5 million (64%) year-on-year. Both 3D Printing and AVM are markets where
we are well positioned to take advantage of growth opportunities and although
OEM machine development cycles can be long, which means extended timescales
for a customer to reach full production, the market opportunity is
significant.
As anticipated, revenue in the Ceramics and Glass market has reduced, due to
the significant slowdown in the sector, with growth of 9% fall in the year.
Coding and Marking (C&M) and Direct-to-Shape (DTS) revenues declined by
£1.4 million (11%) in the year. Revenue from the Wide Format Graphics (WFG)
and Labels market fell 25% in the year from £4.8 million to £3.6 million.
Challenges faced with customer deferrals of orders in the prior year have
continued to postpone revenue recognition for the Group.
Revenue from Packaging and Textiles continues to be modest. Our ability to
target this sector effectively has been somewhat limited by our product range,
although the launch of the Aquinox printhead has started to address this.
However, advancements in the product portfolio driven by the ImagineX platform
should make this large sector more accessible in the future. Full year revenue
has remained consistent year-on-year at £0.5 million.
Product Print Systems revenue by sector
£m 2023 H1 2023 H2 FY 2023 FY 2022 Var Var %
Digital Inkjet 7.3 7.0 14.3 12.4 1.9 15%
6.7 0.3 4%
Pad Printing 3.0 4.0 7.0
Other 0.4 0.4 0.8 0.5 0.3 60%
Total 10.7 11.4 22.1 19.6 2.5 13%
Figures (£m) and percentages (%) are subject to rounding.
Revenue from the Product Print Systems business achieved another year of
significant growth of £2.5 million (13%) in 2023, totaling £22.1 million
(2022: £19.6 million) for the year. Growth has again been achieved across all
product groups this year, predominantly in the core area of digital inkjet
machine sales, which have grown by £1.9 million (15%). This is particularly
welcome seeing as this is the core focus in this segment and will drive
increased profitability.
The anticipated full year increase in Pad Printing Machine revenue has been
achieved. We see a strengthening demand pipeline due to the easing of the
backlog of customers' deferred investment in capital equipment and we are well
placed to deliver further growth in 2024.
The change in commercial strategy, increasing focus on consumables and
accessory sales has also contributed to the revenue growth seen in this
segment, with increased revenue (60%) achieved from ink, plates and parts
sales.
Gross profit
The Group maintained a consistent gross profit margin of 38% (2022: 39%), with
gross profit reducing to £26.9 million (2022: £28.6 million) in line with
the reduction in revenue in the year. The margin structure across all the
Group's operating segments has remained stable year-on-year, cemented by the
actions taken in prior years to deliver efficiency gains and secure raw
material cost-savings to support gross margin.
The impact on profitability resulting from the temporary suspension of
activity at the Group's production facility in Huntingdon (the first phase of
the Group's efficiency upgrade programme) was largely successfully mitigated
by the improvements in overhead recovery gained as a consequence of the
resultant increased throughput following the production facility
reorganisation.
Research and development expenses
The Group maintained its R&D spend to revenue ratio in the desired region
of 8-11% with gross, pre-tax investment in R&D totalling £5.6 million for
the year (2022: £6.7 million). This underscores the Group's continued
commitment to the strategic goal of offering customers a fully vertically
integrated product offering within all product sectors as set out in the
Group's product roadmap; with focus in the year having been on the ImagineX
platform.
We will continue to invest in our R&D capabilities across the Group to
ensure our technology remains market leading.
Operating expenses
There has been a strong focus on the management of costs across the Group in
response to broader macro-economic conditions and the headwinds faced in the
trading environment in which the Group is operating.
Sales and marketing spend for the year of £5.4 million represents a 19%
reduction on prior years (2022: £6.7 million), demonstrating the Group's
focused, targeted approach to managing these costs.
General and administrative expenses of £20.2 million were £5.7 million
higher than the prior year (2022: £14.5 million). Of this increase, £3.1
million arose from adjusting items resulting from restructuring and
integration activities.
The remaining £2.6 million year-on-year increase in adjusted general and
administrative expenses was broadly offset by the £2.2 million increase in
other operating income. This was predominantly generated on disposal of the
intangible assets associated with the non-core Life Sciences activities in the
context of the ongoing integration of the FFEI Limited business during the
year (2023 £2.2 million, 2022: £0.1 million).
Total adjusting items affecting the operating result were £5.3 million (2022:
£2.0 million). Of the total £3.3 million year-on-year increase, £1.6
million was driven by unfavorable movements in exchange rates and fair value
measurement. A further £1.0 million of this increase compared to the prior
year was driven by increased spend on restructuring and efficiency upgrade
programmes. Finally, a further £0.4 million increase in adjusting items
resulted from the ongoing integration of previously acquired businesses.
Result for the year
The total reported result for the year consisted of a loss before tax of £2.4
million (2022: profit before tax of £0.8 million). All of which resulted from
continuing operations and is attributable to the owners of the Group.
Consequently, basic (loss)/earnings per share was (2.8)p (2022: 2.1p).
After factoring in the impact of adjusting items, the Group achieved an
adjusted profit before tax of £2.9 million (2022: £2.8 million). This
equates to adjusted, basic earnings per share of 3.6p (2022: 4.8p). This is a
pleasing result in light of the deterioration in the wider macro-economic
environment and trading headwinds encountered during the year.
Whilst not being measures defined under IFRS, we believe that the 'adjusted
profit before tax' and 'adjusted earnings per share' measures presented,
provide shareholders with a consistent presentation of the Group's underlying,
operational performance. For full details of the nature and quantum of items
added back as 'adjusting' when calculating these alternative performance
measures, please refer to Note 9 of the consolidated financial statements.
Cash generation
The Group continued its robust, disciplined focus on cash, ensuring the
maintenance of sufficient financial resources during the year. The Group holds
a healthy cash balance of £7.1 million as at 31 December 2023 (2022: £8.5
million). This represents a reduction of £1.4 million year-on-year, which has
been driven by planned working capital investment.
Operating cash inflows, before movements in working capital, generated during
the year were £4.6 million (2022: £6.6 million).
In the context of market headwinds, we continued a proportionate level of
investment in operational infrastructure and product development in the year
of £1.9 million (2022: £5.4 million). This included maintenance capital
expenditure and the completion of the first phase of the efficiency upgrade
programme (namely the Huntingdon factory reorganisation) in the first half of
the year; which was delivered on time and on budget.
This now enables us to operate more efficiently by increasing capacity and
yields, whilst crucially generating significant cost savings, especially in
the form of reduced energy consumption. Accordingly, this investment is
anticipated to deliver a rapid return, with payback expected in less than a
year.
In June 2023, we secured a Revolving Credit Facility of £5 million with our
lead bank, HSBC. Access to these funds allows for accelerated investment in
the business and in our operational capability. As at 31 December 2023, no
amounts were drawn under this facility.
Healthy balance sheet
The Group has maintained a healthy balance sheet throughout the year with a
consistent net current assets position of £33.5 million (2022: £30.0
million).
Non-current assets of £45.5 million decreased by £6.5 million during the
year. In line with the Group's cash focus, there was a £1.6 million reduction
in property, plant and equipment as new purchases were controlled. A £2.8
million reduction in the non-current element of the contingent consideration
receivable resulted from the progression of this arrangement through its
ongoing term. The remaining reduction in the carrying value of non-current
assets being the annual depreciation and amortisation of assets in line with
their useful economic life for the business.
Current assets increased by £1.3 million from £50.5 million as at 31
December 2022 to £51.8 million. Working capital balances remained broadly
flat year-on-year, with the £1.9 million (7%) increase in inventory being
offset by a reduction in cash and cash equivalents. The increase in current
assets year-on-year predominantly results from the £1.8 million increase in
the contingent consideration receivable following the re-aging of this balance
based on assessments of the earn-out and milestone consideration expected to
meet the conditions for payment to the Group during the year ending 31
December 2024.
Non-current liabilities totalled £7.2 million, following a £3.0 million
reduction year-on-year. All remaining deferred consideration payable in
respect of business combinations from prior years falls due for payment during
the year ending 31 December 2024, reducing the non-current deferred
consideration balance by £2.0 million compared to the prior year. The balance
now being £nil as at 31 December 2023. The remainder of the reduction in
non-current liabilities results from changes in the average remaining lease
term of the Group's lease portfolio.
Current liabilities of £18.2 million have reduced by £2.3 million compared
to the prior year (2022: £20.5 million). This movement is driven by a £3.6
million reduction in trade and other payables, which is partially offset by a
£1.0 million increase in amounts borrowed under the Group's invoice
discounting facility.
The business has a clear plan and strategy which its healthy balance sheet and
cash position will support. There remain external development opportunities
which, if they can expand our capabilities and expertise, we will look to
potentially add to the Group. At present, we are focusing investment
internally to ensure we have the operational capacity and efficiency to meet
future demand, alongside investment in our product roadmap development.
Dividend
No dividend has been declared in respect of the year. The Board regularly
reviews its capital allocation policy and believes that prioritising
investment to enable profitable growth for the business is currently the most
appropriate use of capital and is expected to achieve more compelling
medium-term returns for shareholders.
John Mills Ian Tichias
Chief Executive Officer Chief Financial Officer
26 March 2024 26 March 2024
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2023
Year ended 31 December 2023 Year ended 31 December 2022
Adjusted Adjusting items Total Adjusted Adjusting items Total
Notes £'000 £'000 £'000 £'000 £'000 £'000
Revenue 2 70,614 - 70,614 72,782 - 72,782
Cost of sales (43,723) - (43,723) (44,138) - (44,138)
Gross profit 26,891 - 26,891 28,644 - 28,644
Research and development expenses 4 (5,642) 179 (5,463) (6,718) 379 (6,339)
Sales, general and administrative expenses 4 (20,093) (5,484) (25,577) (18,828) (2,377) (21,205)
Other income 5 2,201 - 2,201 139 - 139
Operating (loss) / profit 3,357 (5,305) (1,948) 3,237 (1,998) 1,239
Finance income 89 - 89 38 - 38
Finance costs (562) - (562) (453) - (453)
(Loss) / profit before tax 2,884 (5,305) (2,421) 2,822 (1,998) 824
Tax (64) 311 247 867 100 967
(Loss) / Profit for the year from continuing operations 2,820 (4,994) (2,174) 3,689 (1,898) 1,791
Loss from discontinued operations after tax - - - (159) - (159)
(Loss) / profit for the year attributable to the equity shareholder of the 2,820 (4,994) (2,174) 3,530 (1,898) 1,632
parent
(Loss)/earnings per share
Basic 3 3.6p (2.8)p 4.8p 2.1p
Diluted 3 3.5p (2.8)p 4.5p 2.0p
* Further information on adjusting items is included in Note 4
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2023
Year ended Year ended
31 December 31 December
2023 2022
£'000 £'000
(Loss) / profit for the year attributable to the equity of the shareholder of (2,174) 1,632
the parent
Items that may be reclassified to the income statement in subsequent years
Exchange (losses)/gains on translation of foreign operations (318) 617
Other comprehensive (expense) / income for the year (2,492) 2,249
Total comprehensive (expense) / income for the year (2,492) 2,249
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2023
31 December 31 December
2023 2022
£'000 £'000
Non-current assets
Goodwill 6,873 7,163
Other intangible assets 7,366 8,681
Property, plant and equipment 14,529 16,104
Right of use asset 7,826 8,068
Financial asset at fair value through profit or loss 8,277 11,089
Deferred tax asset 493 726
Non-current financial assets 136 136
45,500 51,967
Current assets
Inventories 31,035 29,148
Trade and other receivables 8,802 10,027
Contract assets 2,156 1,500
Current tax receivable 306 735
Financial asset at fair value through profit or loss 2,322 517
Cash and cash equivalents 7,135 8,546
51,756 50,473
Total assets 97,256 102,440
Current liabilities
Trade and other payables (9,568) (13,216)
Deferred consideration (2,115) (1,646)
Provisions (972) (405)
Contract liabilities (2,369) (3,799)
Borrowings (1,403) (379)
Lease liabilities (1,800) (1,032)
(18,227) (20,477)
Net current assets 33,529 29,996
Non-current liabilities
Lease liabilities (6,898) (7,800)
Provisions (300) (300)
Deferred consideration - (2,094)
(7,198) (10,194)
Total liabilities (25,425) (30,671)
Net assets 71,831 71,769
Equity
Share capital 7,923 7,844
Share premium 29,950 29,427
Own shares (566) (775)
Translation reserves 1,310 1,628
Other reserves 6,256 6,256
Retained earnings 26,958 27,389
Total equity 71,831 71,769
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023
Share Share Own Translation Other Retained Total
capital premium shares reserve reserves earnings equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 January 2022 7,844 29,427 (1,923) 1,011 6,256 26,187 68,802
Profit for the year - - - - - 1,632 1,632
Other comprehensive income - - - 617 - - 617
Total comprehensive income - - - 617 - 1,632 2,249
Own shares disposed of on exercise of share options - - 2,148 - - - 2,148
Exercise of share options - - - - - (1,989) (1,989)
Purchase of own shares - - (1,000) - - - (1,000)
Share-based payments - - - - - 1,559 1,559
Balance at 31 December 2022 7,844 29,427 (775) 1,628 6,256 27,389 71,769
Loss for the year - - - - - (2,174) (2,174)
Other comprehensive expense - - - (318) - - (318)
Total comprehensive expense - - - (318) - (2,174) (2,492)
Issue of ordinary shares 79 523 - - - - 602
Own shares disposed of on exercise of share options - - 209 - - - 209
Exercise of share options - - - - - (194) (194)
Share-based payments - - - - - 1,937 1,937
Balance at 31 December 2023 7,923 29,950 (566) 1,310 6,256 26,958 71,831
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2023
Year ended Year ended
31 December 31 December
2023 2022
Notes £'000 £'000
Cash utilised by operations 6 (1,537) (5,617)
Net income taxes received 1,088 112
Net cash outflow from operating activities (449) (5,505)
Investing activities
Investment income 89 38
Purchases of property, plant and equipment (1,510) (2,456)
Proceeds from sale of property, plant and equipment 24 17
Purchases of intangible assets (430) (2,933)
Proceeds from sale of intangible assets 1,760 -
Cash earn-out received from financial assets at FVTPL 637 236
Net cash outflow arising from acquisitions - (3,536)
Net cash inflow / (outflow) from investing activities 570 (8,634)
Financing activities
Proceeds from sale of own shares 15 408
Proceeds from issue of shares 602 -
Payment for own shares acquired - (1,000)
Lease payments (1,075) (914)
Interest paid (59) (22)
Utilisation of revolving credit facility 1,700 -
Repayment of revolving credit facility (1,700) -
Net inflows from invoice discounting facility 915 346
Payment of deferred consideration (1,746) (1,733)
Net cash outflow in financing activities (1,348) (2,915)
Net decrease in cash and cash equivalents (1,227) (17,054)
Cash and cash equivalents at beginning of year 8,546 25,051
Effect of foreign exchange rates (184) 549
Cash and cash equivalents at end of year 7,135 8,546
NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2023
1. Presentation of the financial information
a) Basis of preparation
The financial information, which comprises the Consolidated Income Statement,
Consolidated Statement of
Comprehensive Income, Consolidated Statement of Financial Position,
Consolidated Statement of Changes in Equity, Consolidated Cash Flow Statement
and extracts from the notes to the consolidated financial statements for the
year ended 31 December 2023, has been prepared in accordance with UK-adopted
International Accounting Standards and in conformity with the requirements of
the Companies Act 2006.
The financial information incorporates the results of the Company and the
entities under its control (together the 'Group').
The financial information has been presented in Sterling and has been prepared
under the historical cost convention as modified for the revaluation of
certain financial instruments. All values are rounded to the nearest thousand
pounds (£'000) except when otherwise indicated.
The financial information does not constitute statutory financial statements
within the meaning of Sections 434 to 436 of the Companies Act 2006. Statutory
financial statements for the year ended 31 December 2022 have been filed with
the Registrar of Companies and those for the year ended 31 December 2023 were
approved by the Board of Directors on 25 March 2024 and will be delivered in
due course. The Auditor has reported on the financial statements for the year
ended 31 December 2023 and their Report was unqualified and did not contain
statements under Section 498 (2) or (3) of the Companies Act 2006.
b) Alternative performance measures
The alternative performance measures (APMs) used by the Group adjust for both
recurring and non-recurring items that the Directors consider are not
reflective of the underlying performance of the Group. Recurring items are
adjusted each year irrespective of materiality to ensure consistent treatment.
The Directors believe that the 'adjusted profit before tax' and 'adjusted
earnings per share' measures presented provide a consistent presentation of
the Group's underlying operational performance. They also present shareholders
with a clearer insight of performance metrics used by the Chief Operating
Decision Maker and mitigate volatility, for example resulting from exchange
rate fluctuations, resulting from external factors that are not influenced by
the Group.
These measures are not defined under IFRS; therefore, they may not be directly
comparable with the 'adjusted' profit measures of other companies.
Adjusting items are defined as follows:
+ fair value gains or losses on financial assets at FVTPL;
+ restructuring and transaction expenses;
+ amortisation of intangible assets arising on business combinations;
+ foreign exchange gains or losses arising on intra-group transactions;
+ research and development expenditure credits and patent box tax credits;
+ share-based payments charges and employer's tax contributions thereon; and
+ the tax effect of the aforementioned adjusting items.
c) Going Concern
The consolidated financial statements are prepared on a going concern basis.
Having considered the Group's forecast financial performance and cash flows,
and after making appropriate enquiries, the Directors have a reasonable
expectation that the Group has adequate financial resources to continue in
operational existence for the foreseeable future and for at least one year
from the date that these consolidated financial statements are signed. For
these reasons, they continue to adopt the going concern basis in preparing the
consolidated financial statements. Accordingly, these financial statements do
not include any adjustments to the carrying amount or classification of assets
and liabilities that would result if the Group were unable to continue as a
going concern.
When making their assessment, the Directors have considered the impacts on
profitability of margin constraints prompted by inflationary cost pressures.
Furthermore, the impacts on revenue generation and profitability resulting
from wider market disruption in certain customer and supplier markets and
jurisdictions have been factored into forecast and sensitivity scenarios.
A reverse stress test has been performed to model the circumstances required
to eliminate available liquidity during the going concern period, this
includes reducing revenues. This reverse stress scenario would require a
reduction in Printhead segment revenue in excess of 23% in comparison to the
base case, which would be below the actual reported result for the year ended
31 December 2023. The Directors believe the possibility of this combination of
severe downsides arising to be remote given the recurring revenue base,
predictability of forecasts and new revenue streams secured from products
launched by OEMs in the second half of 2023 or due to be launched in 2024.
In the unlikely event of such a scenario materialising, the Group has a range
of mitigating actions, focused on reducing the Group's cost base, that could
be taken to avoid a liquidity shortfall. Namely, deferring non-committed
capital expenditure, delaying, or suspending research and development
expenditure, reducing performance related pay by aligning payments to actual
results and/or ultimately even making headcount reductions. It is worth noting
that such actions would only be required in the event of an extreme downside
scenario.
The Group is continuously monitoring and mitigating, where possible, the
impacts of such risks. There is a high degree of predictability within the
Group's short-term cash flows as they reflect existing technologies and
products, existing OEM adoption and the committed order pipeline. The level of
sensitivity testing, and reverse stress testing performed is proportionate to
this level of predictability.
The Group continues to have a net current assets position and maintained
sufficient financial resources as at 31 December 2023. These consist of cash
and cash equivalents of £7,135,000 as well as £5,000,000 of committed, but
undrawn, banking facilities made available under a revolving credit facility
agreement which currently expires in June 2025. The revolving credit facility
is subject to leverage, interest cover and capital expenditure threshold
covenants. In addition, to support the Group's working capital position,
alongside the above core banking facilities, the Group also has access to
ancillary funding arrangements in the form of an invoice discounting facility;
of which £1,403,000 of the total £3,000,000 committed facility was utilised
as at 31 December 2023.
2. Operating segments
The Group's operating segments are determined based on the internal reporting
to the Chief Operating Decision Maker (CODM). The CODM has been determined to
be the Chief Executive Officer, with support from the other members of the
Board of Directors, being the individual who is primarily responsible for the
allocation of resources to segments and the assessment of performance of the
segments.
The principal activities of the Group are presented in the following segments:
'Printhead', 'Product Print Systems', 'Digital Imaging' and 'Ink Supply
Systems'. This presentation reflects how the Group's operating performance is
reviewed internally by management.
Printhead Product Print Systems Digital Imaging Ink Supply Systems Unallocated Total
Year ended 31 December 2023 £'000 £'000 £'000 £'000 £'000 £'000
Revenue - external 37,086 22,063 8,748 2,717 - 70,614
Revenue - intra segment 771 - - 423 (1,194) -
Adjusted operating (loss)/profit (2,867) 3,195 2,207 822 - 3,357
Adjusting items (1,037) (1,251) (922) (213) (1,822) (5,305)
Operating (loss)/profit (3,904) 1,944 1,285 609 (1,882) (1,948)
Printhead Product Print Systems Digital Imaging Ink Supply Systems Unallocated
Total
Year ended 31 December 2022 £'000 £'000 £'000 £'000 £'000 £'000
Revenue - external 39,042 19,624 11,633 2,483 - 72,782
Revenue - intra segment 1,399 - - 538 (1,937) -
Adjusted operating (loss)/profit (626) 2,756 337 770 - 3,237
Adjusting items 457 - (479) (228) (1,748) (1,998)
Operating (loss)/profit (169) 2,756 (142) 542 (1,748) 1,239
3. Earnings per share - basic and diluted
Basic EPS and adjusted basic EPS are calculated by dividing the earnings
attributable to the equity shareholders of the Company by the weighted average
number of shares outstanding during the year. Diluted EPS and adjusted diluted
EPS are calculated on the same basis as basic EPS but with a further
adjustment to the weighted average number of shares outstanding to assume
conversion of all potentially dilutive ordinary shares. Such potentially
dilutive ordinary shares comprise share options and awards granted to
employees where the exercise price is less than the average market price of
the Company's ordinary shares during the year and any unvested shares which
have met, or are expected to meet, the performance conditions at the end of
the year.
The calculation of basic and diluted earnings per share is based on the
following data:
Year ended Year ended
31 December 2023 31 December
2022
£'000 £'000
Earnings
Profit attributable to equity shareholders of the parent - adjusted 2,820 3,530
Adjusting items (4,994) (1,898)
(Loss)/profit attributable to equity shareholders of the parent - reported (2,174) 1,632
Number Number
Number of shares
Weighted average number of ordinary shares in issue 78,584,418 78,446,230
Less: ordinary shares held by Xaar Trustee Limited and the Xaar Plc ESOP Trust (335,556) (896,966)
Weighted average number of ordinary shares for the purposes of basic EPS 78,248,862 77,549,264
Effect of potentially dilutive ordinary shares - share options and awards 2,613,007 4,085,096
Weighted average number of ordinary shares for the purposes of diluted EPS 80,861,869 81,634,360
Pence per share Pence per share
Basic EPS (2.8)p 2.1p
Diluted EPS (2.8)p 2.0p
Adjusted Basic EPS 3.6p 4.8p
Adjusted Diluted EPS 3.5p 4.5p
4. Adjusting items Year ended Year ended
31 December 31 December 2022
2023
£'000 £'000
Share-based payment charges (i) (1,882) (1,748)
Exchange (losses)/gains on intra-group transactions (ii) (364) 811
Restructuring and transaction expenses (iii) (1,501) (450)
Research and development expenditure tax credits (iv) 179 379
Fair value losses on financial assets at FVTPL (v) (369) (8)
Amortisation of intangible assets arising on business combinations (vi) (1,368) (982)
Affecting operating profit and profit before tax (5,305) (1,998)
Tax effect of adjusting items 311 100
Affecting tax 311 100
Total adjusting items after tax (4,994) (1,898)
(i) Comprises share-based payment charges of £1,937,000 (2022: £1,559,000)
partially offset by an accrual release of £55,000 (2022: charge of £189,000)
for the associated employer's social security contributions and are included
in selling, general and administrative expenses.
(ii) Comprises exchange gains or losses as a result of intra-group
transactions in the United States of America. Such costs are included in
selling, general and administrative expenses.
(iii) Comprises restructuring costs of £1,501,000 (2022: £256,000) and
acquisition costs of £nil (2022: £194,000). Restructuring costs include
provision for redundancy costs of £761,000 (2022: £93,000) and £740,000
(2022: £163,000) of costs resulting from the Group's operational efficiency
program. The prior year acquisition costs relate to the acquisition of
Megnajet Limited. Such costs are included in selling, general and
administrative expenses.
(iv) Comprises UK corporation tax relief relating to qualifying research and
development expenditure. During the year, £179,000 was claimed of which
£15,000 related to XaarJet Limited and £164,000 related to FFEI Limited for
the year ended 31 December 2023.
During year ended 31 December 2022, £379,000 was claimed of which
£198,000 related to XaarJet Limited's claim for the year ended 31 December
2020 and £219,000 related to FFEI Limited's claim for the year ended 31 March
2021. These credits are included in research and development expenses.
(v) Comprises the fair value movement on contingent consideration that arose
on the Group's divestment of Xaar 3D Limited. Such amounts are included in
selling, general and administrative expenses. Refer to Note 30 for further
information.
(vi) The intangible assets consist of the software, patents and customer
relationships recognised on acquisition of FFEI Limited in 2021 and the
customer relationships and brand value recognised on acquisition of Megnajet
Limited in 2022. These costs are included in selling, general and
administrative expenses.
5. Other operating income
Year ended 31 December Year ended
2023 31 December 2022
£'000 £'000
Profit on disposal of intangible assets 2,036 -
Settlements received 165 -
Government grants - 139
Total other operating income 2,201 139
In June 2023 the Group entered into a series of transactions in the context of
the integration of the recently acquired FFEI Limited business. These
consisted in part of the disposal of the non-core Life Sciences activities and
all associated patents, software and technological know-how. Consideration for
the sale of these intangible assets totalled £2,312,000, generating a profit
of £2,036,000 after deduction of the asset's carrying value. The
consideration is receivable in instalments with £1,760,000 having been
received as at 31 December 2023. The remaining £552,000 falls due in the year
ending 31 December 2024.
Settlements received constitute compensation under legal claims.
The Group, through the recently acquired FFEI Limited, previously received
grants under the UK Research and Innovation 'Future Leaders Fellowships'
scheme. Grants were issued with the aim of increasing the throughput, quality
and validity of imaging data for biomedical artificial intelligence. No such
grant income has been recognised or received during the year ended 31 December
2023.
6. Note to cash flow statement
31 December 31 December 2022
2023
£'000 £'000
(Loss)/profit before tax from:
Continuing operations (2,421) 824
Discontinued operations - (159)
(Loss)/profit before tax including discontinued operations (2,421) 665
Adjustments for:
Depreciation of property, plant and equipment 2,914 2,654
Depreciation of right-of-use assets 1,084 1,071
Amortisation of intangible assets 1,487 1,067
Impairment of property, plant and equipment - 147
Research and development expenditure credit (179) (379)
Net interest expense 473 415
Unrealised currency translation losses/(gains) 426 (797)
Payment of cash settled share-based payments - (249)
Share-based payment charge 1,882 1,748
Fair value loss on financial assets at FVTPL 369 8
Loss on disposal of property, plant and equipment 24 80
Gain on disposal of intangible assets (2,036) -
Increase in provisions 568 141
Operating cash flows before movements in working capital 4,591 6,571
Increase in inventories (2,057) (9,462)
Decrease/(increase) in receivables 942 (812)
Decrease in payables (5,013) (1,914)
Cash utilised from operations (1,537) (5,617)
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR UVVURSKUOUURRecent news on Xaar
See all newsREG - Xaar PLC - Annual Financial Report
AnnouncementREG - Xaar PLC - Total Voting Rights
AnnouncementREG - Xaar PLC - Final Results
AnnouncementREG - Xaar PLC - Total Voting Rights
AnnouncementREG - Xaar PLC - Holding(s) in Company
Announcement