REG - Xaar PLC - Final Results
25/03/2025 07:15
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RNS Number : 9841B Xaar PLC 25 March 2025
25 March 2025
Xaar plc
2024 FULL YEAR RESULTS
KEY MILESTONES REACHED, STRONG GROWTH EXPECTED IN MEDIUM TERM
Xaar plc ("Xaar", the "Group" or the "Company"), the leading inkjet printing
technology group, today announces its audited full year results for the year
ended 31 December 2024.
Financial Summary:
2024 2023 Change
Revenue £61.4m £70.2m (13%)
Gross margin % 36% 38% (2%)
Gross R&D investment(3) £5.3m £5.6m (5%)
Adjusted EBITDA(1) £3.7m £6.4m (42%)
Adjusted profit before tax £0.3m £2.9m (89%)
Reported loss for the period (£10.7m) (2.4m) 346%
Adjusted earnings per share 0.7p 3.6p (81%)
Basic loss per share (13.5)p (3.0)p 350%
Net cash at the period end(2) £8.7m £7.1m 23%
Financial Highlights:
- Solid 2024 results with new Printhead business revenue up 23% to
£18.9 million (2023:
£15.4 million)
- Ceramics and Glass approaching trough levels, with 2024 revenue of
£7.5 million (2023:
£15.5 million)
- Engineered Print Systems' (EPS) revenue declined 27% to £16.1
million (2023: £22.1 million) amidst tough market conditions and the
completion of a substantial multi-year project
- Proactive cost management with gross margin protected at 36% (2023:
38%) despite increased energy costs and lower sales volumes
- Adjusted operating expenses reduced by 16% to £21.6 million (2023:
£25.7 million)
- R&D investment at c.9% of revenue, consistent with prior year
- Adjusted Group profit before tax of £0.3 million (2023: £2.9
million)
- Net cash position up 23% to £8.7 million due to working capital
improvements
Strategic Highlights:
- Omijia and Shifang both launched Xaar-enabled Electric Vehicle (EV)
battery coating lines
- Exclusive partnership with Axalta and Dürr to provide two-tone and
decal automotive coatings using Xaar Inkjet technology, potentially opening up
a large market opportunity
- Xaar printheads embedded in the first high-resolution colour desktop
3D printer, significantly undercutting the price of comparable technology
- Successful OEM product launches in the Wax and Textiles markets
- New "turnkey" go-to-market initiative introduced, greatly condensing
customer product launch timelines and validating strategy for expanded
offering
John Mills, Chief Executive Officer, commented:
"2024 was a mixed year. While we did not meet our original revenue aims, we
did make strong strategic progress and delivered both a profit and increased
cash over the year. Our key strategic milestones, notably in the areas of EV
battery coating, automotive coating and desktop 3D, are setting the Group up
for sustainable medium-term growth and are all progressing as planned.
Increasing market awareness of our value proposition also means that global
market leaders are now approaching us to learn more about the benefits of high
viscosity fluids.
In addition, the provision of a complete turnkey solution to M&R, a major
player within the textiles market, has proven extremely successful. With a
second project ongoing, we continue to evaluate opportunities to roll out this
go-to-market strategy to additional markets and customers, potentially
transforming our future rate of growth and market capture.
With the ceramics market decline nearing its trough, this headwind should
reduce going forward, allowing new business revenue growth to translate to
profit more readily.
Overall, the visibility and scale of the medium-term opportunities at Xaar
continue to grow. Combined with the cash on our balance sheet, we remain
well-positioned to generate sustainable growth."
Outlook
The Group enters 2025 with renewed optimism as several, potentially
significant, market opportunities start to gain momentum. Over the medium
term, these opportunities should deliver meaningful revenue at attractive
margins, and we see these as major drivers of shareholder value growth over
the medium to long term.
In the short term, in Printhead, early progress in the new business areas is
now more than offsetting the ceramic market's decline. In EPS, the slow-down
in end markets is expected to continue to impact revenue and profit as the
pipeline is rebuilt.
Having proven capability and already secured some key customer orders and
partnerships in Printhead, we are confident that we will continue to make
strategic progress whilst recognising that how this translates to near term
revenue and profitability will be dependent on market dynamics and the timing
of customer decisions to adopt OEM products. Whilst this plays out, we will
continue to manage operating costs and cash tightly and maintain a strong
balance sheet.
Contacts
Xaar plc +44 (0) 1223 423 663
John Mills, Chief Executive Officer
Paul James, Chief Financial Officer
CEN Group - Investor Relations Xaar_IR@cen-grp.com (mailto:Xaar_IR@cen-grp.com)
Stephen Lamacraft
Daniel Verity
1 - EBITDA is calculated as statutory operating profit before depreciation,
amortisation and impairment of property, plant and equipment, intangible
assets, and goodwill. Adjusted EBITDA is calculated as EBITDA excluding other
adjusting items as defined as follows. Adjusted Measures exclude the impact of
share-based payment charges, exchange differences relating to intra-group
transactions, gain on derivative financial instruments, restructuring and
transaction expenses, research and development expenditure credit, fair value
loss or gains on financial assets at FVPL, amortisation of acquired
intangibles, and discontinued operations as reconciled in note 3.
2 - Net cash includes cash, cash equivalents and treasury deposits, net of
invoice discounting facility.
3 - Group R&D investment exclusive of any capitalised costs as used to
determine adjusted profit before tax.
Figures and percentages included in this report are subject to rounding
adjustments arising from conversion to £millions from actual figures.
Accordingly, figures shown for the same category presented in different tables
may vary slightly, and figures shown as totals in certain tables may not be an
arithmetic aggregation of the figures that precede them.
About Xaar plc
Xaar is an inkjet innovator, providing printheads and technologies for
Original Equipment Manufacturer (OEM) and User Development Integrator (UDI)
customers worldwide.
By helping customers lay down precise volumes of high viscosity inks and
fluids with absolute pin- point accuracy, time after time, Xaar's inkjet
printheads and technologies meet the needs of numerous markets. Not only do we
provide solutions for traditional two-dimensional printing, but our technology
also facilitates the laying down of complex fluids onto surfaces in a
three-dimensional environment.
Collaboration is at the very core of our business. Xaar works as a trusted
partner from sites in Europe, North America and China, providing expert
insights and technical support every step of the way. With over thirty years'
experience, around 150 patents registered or pending, and major ongoing
R&D investment, Xaar's digital printhead and precision jetting
technologies create countless opportunities for today's sustainable
manufacturing innovation.
Chairman's Statement
Over the course of 2024, Xaar has continued to make strategic progress,
positioning the Group for sustainable and significant future growth. While
traditional print markets and ceramics remain important, it is in applications
where the jetting of high viscosity and high particle-loaded material is
revolutionising manufacturing processes that the most significant
opportunities exist for Xaar. The recognition of our differentiated technology
is gaining momentum, opening up a wide variety of new markets, each with
substantial revenue potential.
With continued growth in new market revenue, the Group is becoming
increasingly resilient. After completing acquisitions earlier in the decade to
help support the adoption of our printheads, we remain focused on the growth
of our core Printhead business. We disposed of Xaar 3D to Stratasys in
November 2021 and exited the non-core Life Science business, which was part of
FFEI, in June 2023. In addition, we transferred FFEI printbar and print engine
manufacturing to Huntingdon during the first half of 2024, generating cost
savings and enabling greater collaboration between teams. Megnajet and EPS
continue to be managed as separate businesses within the Group.
Substantial market opportunities
As a consequence of our sustained R&D investment, our printhead
development platform "ImagineX" continued to provide enhancements to the
current portfolio, helping to further strengthen our technological leadership.
While we still believe there is significant opportunity across a wide breadth
of market sectors, we recognise the importance of focusing on a few key
markets, which we believe will deliver substantial and enduring revenue
streams. Key market opportunities include EV battery coating, automotive
coating and desktop 3D printing markets. Additional exciting opportunities
remain in the longer term, as well as current prospects in the more developed
wax and textile markets.
Enhanced go-to-market approach
Our recent strategy has focussed on developing market-leading technologies
whilst enabling OEMs to efficiently integrate our technology into their
machines. Our technological development has undoubtedly proven successful, but
this did not translate into the anticipated revenue as headwinds, including
technology integration issues, delayed several significant OEM product
launches and the consequent revenue benefit.
It is for this reason that we have developed a complete turnkey solution
approach, designed to allow OEMs to commercialise their Xaar-enabled products
more quickly, mitigating the key integration headwind that we have faced in
recent years. This approach was first utilised in M&R's newly launched
product. M&R are a major player in the textiles sector. Our complete
turnkey solution was integral in enabling the turnaround from concept to first
customer sales in just six months, whereas historically it would have taken
three years on average. Such solutions can then be sold to the wider market,
leveraging the initial investment.
Sustainability
The Board has reviewed and fine-tuned its approach to business sustainability
as we recognise how integral it is to our overall success. We have
re-baselined our ESG goals and created a new Roadmap. Its purpose is to drive
our ESG goals beyond our own operations; Xaar's technology enables our
customers to reduce their emissions as well as reducing Xaar's own. Our
Roadmap provides an essential backbone for much of Xaar's future investment
and activity. Xaar is committed to reducing its impact on the environment
wherever possible and helping customers do the same.
Board Changes
Whilst ensuring the Group is focussed on the right strategy, I have been
working to ensure the Board possesses the blend of skills and experience
necessary to successfully execute our plans.
This was completed during the year as, following Alison Littley stepping down
as a Non-Executive Director, Richard Amos became the Company's Senior
Independent Director and we welcome Dr Inken Braunschmidt as an Independent
Non-Executive Director. Inken is Chair of the Remuneration Committee and is
also a member of the Audit and Nomination Committees. She brings much
experience of innovation in technology businesses and adds a further dimension
to board expertise and senior leadership, completing the non-executive team
with a strong blend of skills and experience to support the Group's
development and future growth.
In November 2024, Ian Tichias resigned as Chief Financial Officer after nearly
four years at Xaar. I would like to thank Ian for his contribution and
commitment to the Group. He played a substantial role in re-invigorating the
strategy and left Xaar with a healthy balance sheet, ensuring that the Group
is well-positioned to capitalise upon the significant market opportunities
that lie ahead.
In January 2025, Paul James was appointed CFO and Executive Director, after
initially joining on an interim basis. Paul brings significant expertise and
experience to the Group, from his time as Group CFO of Biffa from September
2023 until October 2024 and Group CFO of Genuit Group plc from March 2018 to
September 2023. He also previously held senior roles with Dixons Carphone plc,
Inchcape plc, British American Tobacco plc and Ernst and Young.
During 2025, I will reach nine years on the Board and so I will be stepping
down as a Non-Executive Director and Chair once my successor has been
appointed.
Finally, I would like to pay tribute to the whole Xaar team for their tireless
commitment and support, without which, the Group would not be looking forward
to such an array of opportunities after several difficult years facing
challenging end markets. Together we have delivered a material improvement in
the quality and prospects of the Group through diversifying the product
portfolio and expanding the end-markets we have access to. The position that
we now find ourselves in, at the start of an exciting new chapter of
significant growth, is testament to them. As I hand over, it will be exciting
to see the company grow and achieve its market-leading potential.
Chief Executive Officer's Statement
At Xaar, our focus is on the manufacturing and development of reliable and
technically advanced printheads that enable customers, in an increasingly wide
array of end-use markets, to access high quality finish prints. Our precision
inkjet technology facilitates the use of high viscosity inks, which are
thicker and permeate less into surfaces, meaning improved print consistency
and uniformity. These unique characteristics also typically have lower
financial, environmental, water and energy costs, creating less fluid waste
than other fluid application methods.
Looking to our target markets, the sale of printheads has annuity type
characteristics, with demanding applications requiring the replacement of the
printhead typically every two to three years. Furthermore, as all of our
competition focusses on jetting low viscosity inks - with our nearest
competitor capable of only jetting inks with less than a third of the
viscosity our printheads can jet - we are confident that once customers switch
to our printheads, they will not switch back.
With printheads and comprehensive customer support as our main focus, we can
now sell a complete turn-key solution to OEMs including inks, ink supply
systems and print engines. These additional products enable the more rapid
integration of our differentiated technology into OEM products and reduces the
risk of OEMs running into integration difficulties.
Historically, we were heavily reliant on ceramics but we have now successfully
diversified our product portfolio, significantly de-risking Xaar's
over-reliance on a single market in the medium-term and improving the
resilience of the Group to factors outside of our direct control. An
increasingly diverse range of markets also provides a variety of growth
drivers allowing more discretion as to the opportunities we wish to pursue, in
terms of both scale, maturity and returns on capital.
Products launched since 2019 now generate revenue of £18.9 million and have
delivered a compound annual growth rate of 24%. This progress has been masked
by the cyclical deterioration in the ceramics market, which, due to the
accelerated decline seen in 2024, is approaching the anticipated trough level
sooner than previously envisaged. As a consequence, sales into the ceramics
market contributed only 17% of total Printhead revenue in 2024 compared to 32%
in 2023. Following recent developments, it has become clear that the EV
battery coating, automotive coating and desktop 3D printing markets will
likely be the main revenue opportunities for Xaar over the medium term.
Our focus remains on managing what is within our control; prioritising key
revenue drivers, maintaining disciplined cash management and continually
assessing opportunities to further strengthen and utilise the balance sheet.
Our strategy is creating significant long-term opportunities, both within
existing and new markets, especially as end-use customers begin to roll-out
Xaar- enabled machines across their manufacturing lines.
Financial Highlights
During 2024, we delivered a solid financial performance against a tough market
backdrop with revenue declining 13% to £61.4 million (2023: £70.2 million).
Despite clear strategic progress, results remain impacted by OEM product
delays due to technology integration issues, a faster than anticipated
drop-off in ceramics revenue and trading challenges at EPS. New Printhead
business, defined as revenue from products launched since 2019, delivered
year-on-year revenue growth of 23% to £18.9 million (2023: £15.4 million),
underlining the significant progress we continue to make despite global
macroeconomic conditions.
Revenue for EPS in 2024 has returned to a level more comparable with 2021, as
over the prior two years revenue has benefitted from a multi-year, multi-unit
order from a single customer. We were unable to replace this contract with new
business during the year due to market uncertainty delaying the rate of new
customers switching from analogue to digital.
We saw positive performances within FFEI and Megnajet during the year. Within
FFEI, last-time orders for the life-sciences business were stronger than
anticipated, whilst Megnajet revenue increased 7%, mainly due to significant
orders from one customer who went through a period of destocking in 2023.
We continue to make operational efficiency savings, largely minimising the
impact on gross margins caused by lower volumes and reduced fixed cost
recovery as well as rising energy costs.
Finally, the Group continues to retain a strong balance sheet, with a net cash
position at year end of £8.7 million, up 23% from £7.1 million in 2023 due
to improvements in working capital movements as inventory levels were reduced
during the year.
Strategic Update
Over the last five years our investment in R&D through our printhead
development platform "ImagineX", has successfully transitioned the Group from
predominantly being a printhead supplier to the ceramics market, to now
providing market-leading technology to OEMs across several markets. This will
grow company revenue beyond historic levels in the medium-term at a far lower
risk level. With a focus on new product launches, we have developed a more
resilient product portfolio with applications and avenues for growth in a
diverse range of end-use markets. This provides a stable foundation going
forward and with the decline in the ceramics market largely behind us, allows
us to concentrate on the accelerated uptake of our technology in markets that
have substantial long term and repeat revenue potential. The portfolio going
forward has much more diversity in end markets and customers than it has ever
had. The unique capability of our technology differentiates us from our
competitors, allowing first-mover advantage in areas such as EV battery
coating, automotive coating and desktop 3D printing.
Printhead
EV Battery Coating opportunity
The problem we solve: With the requirement for ever bigger and more powerful
batteries, there is a corresponding increase in the amount of heat generated
by these batteries. The current dominant technology used to wrap batteries is
based on the use of plastic film which is increasingly no longer fit for
purpose as it is not always able to withstand the higher temperatures, causing
safety concerns. The existing alternative, which mitigates the safety issue,
utilises spray painting. However, this requires a paint recovery system as
some 40% of paint is lost in the process, generating costs that are
unappealing to battery manufacturers.
The Xaar solution: Through the utilisation of Xaar inkjet technology, as
opposed to plastic film, inkjet coated EV batteries can withstand far greater
levels of heat, addressing safety concerns. With 99% yield efficiency, our
technology generates minimal waste, making it significantly more
cost-effective than spray painting.
The maturity of the opportunity: In July 2024, we launched two new printheads,
the Xaar eX and Nitrox eX, specifically designed for coating the new
generation of batteries used in EVs and energy storage systems. Through the eX
printhead, Xaar became the first inkjet company to enter the battery sector
with a printhead specifically for this application, with substantial yield,
cost and environmental benefits. Only our printheads can print a coating
solution that meets the necessary safety tests. We have worked with Shifang, a
leader in EV battery production automation, and Omijia Intelligent
Technology, to develop their own coating lines.
During 2024, these companies became the first to launch inkjet EV battery
coating machines(1) and both have received initial orders so their customers
can test out the capabilities of our technology. These customers have
signalled their intent to order additional machines in the near term, with an
expectation of scaling their orders up markedly as confidence in inkjet
coating technology grows.
The market potential: The market uptake of our technology could be substantial
and we are currently the only provider. To scale the market opportunity, there
are an estimated 1,300 EV battery production lines globally. 100% conversion
of this market could generate £260 million of initial revenue with an
estimate printhead replacement cycle of two years.
Automotive Coating opportunity
The problem we solve: Within the automotive coating market, there are two
distinct problems. Firstly, if manufacturers wish to utilise multiple colours,
such as painting roofs black, after the first colour is applied, the car is
taken off the production line, masked and sprayed in the second colour.
Spraying the car twice is not only inefficient, but with roughly 40% of paint
lost when spray painting, it is costly in terms of both materials and energy.
The result of this is that paint shops are currently the major bottleneck in
car manufacturing plants; end customers and the OEMs, are seeking out a
solution.
Secondly, if the individual customer wishes to customise their cars, adhesive
decals are typically used. Decals applied this way are susceptible to jet wash
damage, which has historically limited their wider appeal. Existing inkjet
solutions for car decoration also face several challenges, including 'sagging'
on sloped or vertical surfaces.
The drawbacks set out above have limited the uptake of incremental coatings to
vehicles.
The Xaar solution: In terms of the two-tone vehicle market, Xaar inkjet
technology is significantly more efficient than spray painting as it
eliminates the need for masking and reduces energy and paint requirements. Our
partner Axalta, a global leader in the sector, recently launched the Axalta
NextJet™. This next generation, sustainable digital painting machine for the
automotive industry, utilises our recirculating TF Technology, keeping the
fluid in constant motion, and by doing so, improving paint shop reliability.
This award-winning digital paint coating technology eliminates masking and
reduces labour, increasing productivity and efficiency rates. Axalta has
already reported that this can contribute to a 30% reduction in CO(2)
emissions and significant cost savings for vehicle OEMs who use two-tone.
Xaar technology also provides a high-quality solution to the drawbacks of
adhesive decals. With the ability to precisely jet lower volumes, our
printheads are leading the way in replacing poorly performing inkjets or
adhesive based decals with no 'sagging' and no risk of damage by jet washing.
The maturity of the opportunity: Axalta has recently agreed a partnership with
Dürr(2), whose machines currently paint 50% of cars globally, to provide a
digital paint solution, combining Axalta's NextJet™ technology with Dürr's
robotics integration. Dürr are currently demonstrating their machines to
potential customers, and we anticipate a select few customers to be chosen as
market partners during 2025.
The market potential: Through our partnership with Axalta, this market
presents a significant opportunity for Xaar, and we anticipate that our
technology will expand demand for customised detailing of vehicles over and
above that from using decals and more traditional two-tone painting.
2.
https://ir.axalta.com/news/press-releases/detail/656/axalta-and-drr-partner-on-automotive-digital-paint-technology
Xaar will receive revenue based on the number of cars painted. Currently c.1% of the 90 million cars produced globally have decals or two-tone paint. As the current sole provider of this technology, we have the potential to take 100% of the market. For every 1% of the global car market, or 900,000 cars annually that are painted using our technology, we would generate significant revenue and profit for Xaar before factoring in any market growth.
Desktop 3D Printing opportunity
The problem we solve: Within the desktop 3D printing market there is currently
an absence of a low- cost, high-quality product. The retail cost of the
nearest competitor machine, of equivalent quality, is roughly £40,000,
meaning usage is restricted to real enthusiasts who are willing to pay for a
premium product. Currently those unwilling to pay so much for a printer resort
to single nozzle, monochrome, 3D printers. The price point of these machines
varies between a few hundred pounds to over £5,000. As a result, large-scale
customer growth in the market is severely limited.
The Xaar solution: Our technology provides the ability to jet high viscosity
fluid at relatively low cost. This has enabled the world's first full colour
high resolution desktop 3D printer aimed at the consumer market. By utilising
Xaar technology, cost as a barrier to high-quality printing, has been
substantially reduced for customers.
The maturity of the opportunity: Flashforge, a major global supplier of
desktop 3D systems, launched their full colour inkjet machines(3) with Xaar
printheads at the Formnext tradeshow in November 2024, priced at c.£2,400. In
the short-term, Flashforge are launching a product promotion campaign
alongside opening the pre-order book and they anticipate sending out the first
orders in the second half the year. We are already engaged in development
projects with other major global suppliers in the 3D wax market and anticipate
further OEM product launches later in 2025.
The market potential: Over one million desktop printers are currently sold
annually. Conversion of just 1% of that market to Xaar technology will
generate multi-million-pound printhead revenue. As the machines have been
designed for printheads to be regularly replaced, we anticipate recurring
future revenue streams from each unit sold.
As the cost of purchasing a high-quality desktop 3D printer falls over the
medium term, we would expect demand to grow, increasing the revenue potential
for Xaar considerably.
Summary of the key future revenue drivers
Overall, these three markets each represent revenue opportunities of a
magnitude greater than the ceramics market, illustrating the process of
de-risking our business model over a relatively short period of time.
Crucially, in all these markets, there are now fully operational machines
using our printheads.
Other Market opportunities
Textiles and Corrugates: Even in established markets like textiles and
corrugates there are significant opportunities for revenue growth. The Aquinox
printhead, and its embedded ink recirculation technology, enables the reliable
use of high-density water-based fluids, allowing for the delivery of very high
volumes of pigment in a single pass, with additional benefits to quality and
consistency. In collaboration with our ink partners, we have developed sector
specific high viscosity aqueous inks for use in conjunction with the Aquinox
printhead, thereby overcoming one of the fundamental barriers to the adoption
and growth of inkjet technology within these sectors.
M&R, a market leader in textiles, launched its latest product, powered by
Xaar's Aquinox printhead, in September 2024. Our technology enables
consistently clean, high-quality prints while printing on a wide range of
garments. The potential market size for this application is roughly £20
million per annum and we anticipate taking significant market share in the
medium term.
3. https://full-color-solution.flashforge.com/
Wax: In April 2024, Flashforge (also a market leader within the wax printing market) launched their first product using a single Xaar printhead and pre-orders are now being taken for their three-headed wax machine, Waxjet 530. With the wax market being of a similar scale to the textiles market, and the expectation that our technology will ultimately take a majority share, the opportunity is substantial.
Finally, unlike in ceramics where repeat sales take longer to occur, the
printheads in each of our target markets need to be replaced regularly, making
revenue more recurring and highly attractive and earnings of a higher quality.
While adoption of Xaar printheads within the EV battery coating, automotive
coating and desktop 3D markets will be key to the future prospects of the
Group, other markets will continue to generate meaningful revenue. This
includes the ceramics market where we continue to work with market leaders to
develop new products to ensure we are well positioned to generate increasing
revenue when market conditions allow. It is these existing markets which will
benefit from our ability to offer a complete turnkey solution, and we expect
this to further drive demand for our printheads as the barriers to adoption
reduce.
Enhanced go-to-market strategy
The problem: The capability of OEMs to integrate our printheads into their
existing print machines varies materially. The time taken can be considerable
with clients, on occasion, withdrawing from the development process due to the
apparent complexity of the process.
The Xaar solution: We have evolved our strategy to work more closely with
customers to lessen some of the unique challenges posed by working with high
viscosity fluids. Part of this strategy has been to develop, supply and
integrate a complete turnkey solution of ink system, ink, waveform and all the
other parameters associated with a complete product. This solution can then be
provided to other customers within that market, leveraging the initial
investment made.
The critical advantage of the provision of a turnkey solution is a
significantly reduced timeline from point of engagement to a Xaar embedded
solution being fully operational and available for customers to purchase. This
has significant benefits to both revenue and customer relationships.
The maturity of the action: In August 2024, M&R took part in the first
project to build a complete turnkey solution in an effort to reduce the time
to market of a new machine utilising Xaar technology. We provided them with a
functioning system which could easily be attached to their material handling
system, significantly reducing potential integration issues. The product
launched in early September after just six months, whereas previously it would
have typically taken three years.
Since then, we have undertaken a second project in collaboration with another
OEM which, while still ongoing, is delivering promising results. This
approach, along with improving the depth of relationships with OEMs, enables
us to develop market ready solutions that we can sell to the wider market,
leveraging the initial investment.
The market potential: Although the provision of a complete turnkey solution is
not appropriate to all our markets segments, it is relevant in the textiles,
Direct to Shape (DTS) and labels embellishment markets. Although a turnkey
solution does not expand the market itself, it improves our ability to grow
market share and the timeliness of that revenue. Now we have created a
solution for the textiles market, we hope to replicate this approach in other
markets in the future.
The provision of a turnkey solution does have a cost, but we are of the firm
belief that it is an extremely good use of capital, with returns well in
excess of the cost of capital.
Operations
During the year we closed the print systems site in Hemel Hempstead and moved
manufacturing to Huntingdon as part of ongoing efforts to streamline
operations and reduce overheads. All printhead and print system manufacturing
is now undertaken at Huntington, with ink systems produced in Kettering and
the majority of R&D undertaken in Waterbeach.
After a shop floor re-organisation in 2023, the Huntington facility has the
capacity to deliver over twice the current output, providing us with the
ability to ramp-up output without incurring significant capital expenditure.
As volumes increase, so will cost recovery per unit with the resultant benefit
to margins.
At head office entity level we made significant savings, largely due to the
completion of a business restructuring plan at the end of 2023 which reduced
employment costs in 2024.
Disciplined cash management remains a priority, with a focus on improving
product cost and manufacturing process efficiencies on a day-to-day basis
rather than as part of specific large-scale initiatives.
FFEI
During 2024 we completed the disposal of the Life Sciences part of the
business and moved print systems manufacturing from Hemel Hempstead to
Huntingdon. Going forward FFEI products will be sold under the Xaar brand.
FFEI printbars continue to play an important role in our strategy as they
further facilitate the use of our technology into OEM machines. Challenges
when integrating our printheads into third party printbars have historically
caused product delays. By developing printbars and printheads together, we can
provide a solution without such issues arising. This makes it easier for OEMs
to utilise our technology, ultimately allowing us to sell more printheads.
Megnajet
As with FFEI printbars, Megnajet ink systems continue to help facilitate the
integration of Xaar printheads into OEM machines. In 2024 we have increased
our focus on Group projects. Several new product launches, including OmniFlo,
are key to exploiting Xaar's High Viscosity and High Pigment capability and
enhancing offerings into target markets such as textile and advanced/additive
applications.
Engineered Print Systems
EPS remains largely separate to the rest of our business with a distinct
strategy and business model as it utilises both Xaar and competitor
printheads. Amidst a difficult market backdrop, we have taken steps to
strengthen the leadership of this business to focus on a return to growth.
Going forward, while we anticipate volatility in costs and market pricing as
expected tariffs take effect, our focus will be on strengthening the customer
pipeline while optimising the supply chain to reduce the effects of higher
input costs. Because of the terms of the deals we negotiate, upon closure,
revenue is generated over the next twelve to twenty-four months, based on
project percentage of completion. Hence our focus on strengthening the
pipeline and conversion will only provide returns in future periods rather
than 2025.
Sustainability
During the year, we created a new ESG Roadmap to replace our current
Sustainability Roadmap. Developed by a cross-function team of 21 people from
across different departments, the new Roadmap consists of updated milestones,
more realistic targets and a new Governance pillar. Most notably we
re-baselined our emissions targets which previously targeted reaching Net Zero
across scope 1, 2 & 3 by 2030. Now, in line with the UK Government and the
Paris Agreement, we are aiming to reach Scope 1 & 2 Net Zero by 2030, a
45% reduction in Scope 3 by 2040 and Scope 3 Net Zero by 2050.
Our Roadmap has five key pillars - Environment, People, Innovation, Community
and Governance, its purpose is to drive our ESG goals beyond the traditional
focus of Scope 3. We enable our customers to become more sustainable by using
our printheads which need less ink, require less time to dry and use less
energy consumption. Our research shows that, compared to analogue
alternatives, digital has a significant impact in reducing energy consumption
(by as much as 55%), water consumption (by up to 60%) and CO2 emissions (by up
to 95%).
Xaar benefits from a strong ESG governance structure. Our cross-functional ESG
Committee has accountability to the Board. This group brings together a wide
range of skill sets as well as a shared determination and passion for a more
sustainable future. Our CFO Paul James has specific Board responsibility for
ESG matters. We will publish our 2024 ESG report later in the year. This
report will provide furthers detail of our ESG programme, including progress
against each of our pillars.
Outlook
The Group enters 2025 with renewed optimism as several, potentially
significant, market opportunities start to gain momentum. Over the medium
term, these opportunities should deliver meaningful revenue at attractive
margins, and we see these as major drivers of shareholder value growth over
the medium to long term.
In the short term, in Printhead, early progress in the new business areas is
now more than offsetting the ceramics market's decline. In EPS, the slow-down
in end markets is expected to continue to impact revenue and profit as the
pipeline is rebuilt.
Having proven capability and already secured some key customer orders and
partnerships in Printhead, we are confident that we will continue to make
strategic progress whilst recognising that how this translates to near term
revenue and profitability will be dependent on market dynamics and the timing
of customer decisions to adopt OEM products. Whilst this plays out, we will
continue to manage operating costs and cash tightly and maintain a strong
balance sheet.
Business Performance
Revenue
Group revenue growth
£m 2024 2023 Var Var %
Printhead 33.5 37.1 (3.6) -10%
EPS 16.1 22.1 (6.0) -27%
FFEI 9.3 8.7 0.6 7%
Megnajet 2.5 2.3 0.2 7%
Total Revenue 61.4 70.2 (8.8) -13%
The Group achieved revenue of £61.4 million, a year-on-year decline of 13%
(2023: £70.2 million). The largest contributor to this was EPS, which saw
revenue decrease 27% to £16.1 million (2023:
£22.1 million). EPS was unable to replace revenue generated in 2022 and 2023
from a multi-year, multi-unit order from a single customer which was completed
in early 2024. Growth in focus markets within the Printhead operating segment,
including Direct-to-Shape (DTS), Advanced Manufacturing and Textiles, is
masked by a reduction in ceramics revenue. This fell more sharply than
anticipated due to a significant decline in the Chinese construction industry,
which continues to cause weakness in the global ceramics tile market.
Printhead revenue fell 10% to £33.5 million (2023: £37.1 million) as a
result. FFEI grew 7% to £9.3 million (2023: £8.7 million) as a result of
enhanced last-time orders driven by its exit from the Life Sciences segment,
and Megnajet revenue grew 7% to £2.5 million (2023: £2.3 million) due to
significant order growth from one customer who went through a period of
destocking in 2023.
Printhead
Revenue by Sector
£m 2024 2023 Var Var %
Ceramics & Glass 7.5 15.5 (8.0) -52%
C&M & DTS 13.2 11.2 2.0 18%
WFG & Labels 3.5 3.6 (0.1) -3%
3D Printing & AVM 7.3 6.4 0.9 14%
Packaging & Textiles 2.0 0.4 1.6 400%
Total Revenue 33.5 37.1 (3.6) -10%
Xaar offers a wide range of industrial inkjet printheads which are designed
and produced to meet customer-driven requirements in markets including
textiles, graphics, packaging, 3D printing and additive manufacturing.
New business grew 23% to £18.9 million in 2024, up from £15.4 million in
2023. New business revenue is defined as income from OEMs using our
technology, such as the Nitrox, Aquinox or Irix printheads, that has been
launched since 2019. Hence, new business impacts all of our reported end-use
sectors.
Printhead revenue growth excluding Ceramics and Glass increased by 20%, to
£26.0 million for 2024 (2023: £21.6 million). The Coding & Marking
(C&M) and Direct-to-Shape sector revenue grew
£2.0 million to £13.2 million, as we continued to launch new products and
iterations within the existing printhead portfolio. Packaging and Textiles,
which includes our partnership with M&R, saw substantial revenue growth,
up more than 400% to £2.0 million in 2024. However, this progress continues
to be masked by a decline in revenue from Ceramics and Glass from £15.5
million to £7.5 million. While revenue from this sector has fallen faster
than anticipated, we expect the decline in revenue to be bottoming-out,
thereby limiting this as a future expected headwind within Printhead.
Overall, we have retained market share, with new business revenue growing
strongly. This provides confidence that this division will soon be returning
to sustainable growth.
Engineered Print Systems
EPS manufactures a range of highly customised product print systems, printing
all kinds of industrial and promotional objects such as tools, appliances,
sports equipment and toys. The business is split between digital inkjet
machine sales (2024: 54% of revenue), pad printing sales (2024: 35% of
revenue) and servicing (2024: 11% of revenue).
Revenue reduced by 27% year-on-year. This was primarily due to the completion
of a multi-year, multi-unit order from a single customer early in 2024,
distorting comparisons to 2023. The completion of this contract was the main
driver for the decline in both digital inject revenue and pad printing which
fell 39% and 19% respectively. We were unable to replace this contract with
new business during the year as a consequence of market uncertainty causing
new customers to delay switching to digital from analogue. Within EPS, we saw
strong revenue growth in the servicing division where existing customers chose
to increase spending on maintaining existing machines and delay new capital
expenditure.
Yet, EPS will likely remain a drag on Group profitability during 2025 as new
management focus on turning this business around by reducing over reliance on
specific customers by widening the customer pipeline, leading to growth beyond
2026.
FFEI and Megnajet
FFEI develops high performance digital imaging solutions - from digital inkjet
label presses to digital pathology scanners. Its inkjet products - print
engines - use Xaar printheads. Megnajet specialises in the design and
manufacture of industrial fluid management systems for digital inkjet and
these are the most integrated and compact ink systems in the market today.
FFEI revenue was £9.3 million (2023: £8.7 million) with growth primarily
driven by last-time orders from the life-sciences segment of the business
which was disposed during the year. This part of the business was the dominant
driver of revenue for FFEI. As part of efforts to directly deliver a more
complete system, the printbar portfolio has been incorporated into the
Printhead business to then sell to OEMs.
Megnajet delivered £2.5 million of revenue, growth of 7% year-on-year, mainly
due to significant orders from one customer who went through a period of
destocking in 2023. While third party revenue growth is encouraging, our main
focus is on Group projects, with a 44% uplift in sales since last year in
intra-group transactions to Xaar. Xaar and EPS remain two of Megnajet's
biggest customers.
Gross profit
Gross profit decreased by £4.7 million to £22.2 million (2023: £26.9
million) with proactive cost management decisions protecting gross margin at
36% (2023: 38%) despite increased energy costs and reduced sales volumes in
Printhead and EPS and actions to reduce inventory.
Printhead gross margin decreased by 2 percentage points year-on-year. However,
as sales volumes improve and energy costs stabilise, we expect gross margins
to improve in the medium term. Within EPS, gross margin decreased by 10
percentage points as a result of high fixed costs and lower
sales volume. Gross margin for FFEI grew 8 percentage points due to improved
pricing during the completion of the last time buy orders which included extra
requirements beyond those anticipated. Megnajet successfully grew gross margin
by 18 percentage points, to 50% in 2024 (2023: 32%), due to operational
improvements including labour utilisation and improved pricing decisions. We
anticipate gross margin at Megnajet to normalise at c.40% in the medium term.
Research & Development
Gross R&D investment was £5.3 million (2023: £5.6 million), or 8.6% of
revenue, slightly above the prior year (2023: 8.0%). We are continuing to
invest, having reached our target ratio of 8-10% for R&D investment as a
percentage of revenue.
While historical R&D investment has focussed on widening our product
offering, we are currently directing the majority of R&D investment
towards helping OEM companies integrate our technology into their machines.
This includes, but is not limited to, the recent development of a successful
complete turnkey solution which proved successful for M&R in the textiles
market.
Operating Expenses
While we have continued to face inflationary headwinds in areas such as energy
costs, we have been successful in our efforts to manage expenses across the
Group. The sales and marketing expense was £4.6 million (2023: £5.4
million), reflecting the continued focus on cost management. General and
administrative expenses decreased to £11.6 million from £14.6 million in
2023. This reduction reflects the progress made throughout 2023 and as some
efficiency projects were only finished at the end of the year, these savings
were realised in 2024. As previously mentioned, FFEI printbar manufacturing
transitioned to Huntington during the first half of the year and the Hemel
Hempstead site has since been closed.
Profit for the year
Adjusted profit before tax was £0.3 million, a decrease from £2.9 million in
2023. This was principally due to reduced profitability in the Printhead and
EPS businesses, as a consequence of lower sales volumes putting downward
pressure on margin. All businesses continue to generate meaningful profit. We
are making progress managing head office costs (on an adjusted basis) of £5.9
million in 2024 compared to £6.5 million in 2023. These savings have been
achieved because of reductions in employee, travel and insurance costs.
In calculating the adjusted profit before tax, the following significant
items, which management consider to be one-off or non-recurring in nature,
have been excluded from the £11.4 million loss before tax (2023: £2.7
million loss); fair value losses on financial assets of £5.6 million (2023:
£0.4 million) arising due to an expected reduction in third-party revenues
underlying the Xaar 3D contingent consideration earn-out; costs relating to
the rationalisation of the Digital Imaging business (£1.2 million, 2023:
£nil); £1.0 million redundancy costs (2023: £0.8 million); share-based
payment charges of £1.1 million (2023: £1.9 million); impairment of contract
assets recognised in prior years not expected to be collected in full (£0.5
million, 2023: £nil); and £2.2 million amortisation of acquisition
intangibles, inclusive of an impairment to Digital Imaging customer
relationships asset (2023: £1.4 million).
Adjusted EBITDA in the period was £3.7 million (2023: £6.4 million).
Cash flow and balance sheet
The Group retains a strong balance sheet, with a net cash position at 31
December 2024 of £8.7 million, representing a net cash inflow of £1.6m
during the period (2023: £7.1 million). This improved cash balance is
reflective of the Group's ongoing focus on careful liquidity management. This
was driven by £6.6 million positive cash flow from operating activities,
offset by deferred consideration payments of £2.1 million (2023: £1.7
million), lease payments of £1.2 million (2023: £1.1 million), capital
expenditure of £0.9 million (2023: £1.5 million) and movements on
receivables finance borrowings resulting in £0.9 million cash outflow (2023:
£0.9 million inflow).
The Group works hard to manage working capital efficiently and it is pleasing
that 2024 saw an overall reduction in trade balances of £3.5 million to
£30.4 million (2023: £33.9 million), which contributed to the cash inflows
from operating activities. Inventory reduced by £3.8 million to £27.2
million (2023: £31.0 million) and trade receivables decreased by £1.3
million to £5.9 million (2023:
£7.2 million), whilst trade creditors reduced by £1.5 million to £2.8
million (2023: £4.3 million).
The Group has a Revolving Credit Facility (RCF) of £5 million in place with
our lead bank, HSBC, to ensure we have adequate resources to invest in the
Group and our operational capability when required. To date, our effective
cash management has meant the facility remains undrawn. During Q1 2025 the
term of the facility was extended by one year, to June 2026.
Non-current assets of £33.4 million decreased by £12.2 million during the
year. As the Group's cash focus continued, there was a £2.0 million reduction
in property, plant and equipment as new purchases were controlled and
prioritised. The consideration receivable balance related to the earn- out
following the divestment of Xaar 3D was revalued to £4.9 million in the year,
with the non-current element of this reducing from £8.3 million to £3.1
million. This revaluation was driven by a downward re-estimate of third-party
revenues underpinning the earn-out. The remaining significant movements in the
carrying value of non-current assets predominantly related to annual
depreciation and amortisation of assets in line with their useful economic
life for the business, as well as a modification and impairment of the FFEI
property lease under IFRS16, resulting in a reduction in the right of use
asset value.
Current assets reduced by £4.5 million from £51.7 million as at 31 December
2023 to £47.2 million. As described above, working capital asset balances
reduced year-on-year, due to proactive management, directly improving cash
flows from operating activities, and contributing to the £1.6m increase in
cash and cash equivalents. The revaluation of contingent consideration assets
resulted in a £0.4 million reduction in the current element to £1.9 million
(2023: £2.3 million), with the next significant milestone payment assumed to
have been delayed by one year but with an expectation of an overall reduction
in short-term royalties receivable. Contract assets reduced by £1.2 million
since 31 December 2023 to £1.0 million (2023: £2.2 million) due to the
discontinuation of the Life Sciences product lines at FFEI and a smaller
project pipeline at EPS.
Non-current liabilities totalled £5.0 million, a year-on-year reduction of
£2.2 million, all relating to lease liabilities payable in more than one
year. The change predominantly reflects the modification of the lease for
FFEI's property in Hemel Hempstead, bring the end date in line with the break
clause when we plan to exit.
Current liabilities of £13.5 million have reduced by £5.1 million compared
to the prior year (2023:
£18.6 million). This majority of this movement is driven by a £0.8 million
reduction trade and other payables, £0.8 million reduction in amounts
borrowed against the Group's receivables financing
facilities, £0.4 million lower provisions balance resulting from increases in
legal provisions offset by utilised restructuring provisions, and £2.1
million of deferred consideration paid in the period.
The business has a clear plan and strategy, which its healthy balance sheet
and cash position will support. 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. We
remain focussed on capitalising on market opportunities, ensuring we are able
to rapidly response to demand requirements. We will continue to review our
approach to inventory levels, with a medium-term aim to reduce it as demand
becomes more stable.
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 Group is currently the most
appropriate use of capital, achieving the best medium-term return for
shareholders.
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2024
Year ended 31 December 2024 Year ended 31 December 2023
(restated)**
Adjusted Adjusting Total Adjusted Adjusting Total
Items* Items*
Notes £'000 £'000 £'000 £'000 £'000 £'000
Revenue 2 61,408 - 61,408 70,241 - 70,241
Cost of sales (39,191) - (39,191) (43,350) - (43,350)
Gross profit 22,217 - 22,217 28,891 - 28,891
Research and development expenses 4 (5,256) 228 (5,028) (5,642) 179 (5,463)
Sales, general and administrative expenses 4 (16,294) (11,959) (28,253) (20,093) (5,780) (25,873)
Other income 5 - - - 2,201 - 2,201
Operating (loss) / profit 667 (11,731) (11,604) 3,357 (5,601) (2,244)
Finance income 134 - 134 89 - 89
Finance costs (495) - (495) (562) - (562)
(Loss) / profit before tax 306 (11,731) (11,425) 2,822 (1,998) (2,717)
Tax 236 497 733 867 100 309
(Loss) / profit for the year 542 (11,234) (10,692) 2,820 (5,228) (2,408)
attributable to the equity shareholder of the parent
(Loss)/earnings per share
Basic 3 0.7p (13.5)p 3.6p (3.0)p
Diluted 3 0.7p (13.5)p 3.5p (3.0)p
* Further information on adjusting items is included in Note 4
** Further information in prior year restatement is included in Note 8
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2024
Year ended 31 December Year ended 31 December (restated)
2024 2023
£'000 £'000
Loss for the year attributable to the equity of the shareholder of the parent (10,692) (2,408)
Items that may be reclassified to the income statement in subsequent years
Exchange gains/(losses) on translation of foreign 122 (308)
operations
Other comprehensive expense for the year (10,570) (2,716)
Total comprehensive expense for the year (10,570) (2,716)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2024
31 December 31 December 31 December
2024 2023 (restated) 2022 (restated)
£'000 £'000 £'000
Non-current assets
Goodwill 6,959 6,873 7,163
Other intangible assets 5,136 7,366 8,681
Property, plant and equipment 12,490 14,529 16,104
Right of use asset 4,734 7,826 8,068
Financial asset at fair value through profit or loss 3,063 8,277 11,089
Deferred tax asset 951 580 753
Non-current financial assets 104 136 136
33,437 45,587 51,994
Current assets
Inventories 27,236 31,035 29,148
Trade and other receivables 8,084 8,802 10,027
Contract assets 1,018 2,156 1,500
Current tax receivable 346 306 735
Financial asset at fair value through profit or loss 1,854 2,322 517
Cash and cash equivalents 8,711 7,135 8,546
47,249 51,756 50,473
Total assets 80,686 97,343 102,467
Current liabilities
Trade and other payables (8,782) (9,568) (13,216)
Deferred consideration - (2,115) (1,646)
Provisions (951) (1,385) (535)
Contract liabilities (1,986) (2,369) (3,799)
Borrowings (557) (1,403) (379)
Lease liabilities (1,218) (1,800) (1,032)
(13,494) (18,640) (20,607)
Net current assets 33,755 33,116 29,866
Non-current liabilities
Lease liabilities (4,710) (6,898) (7,800)
Provisions (300) (300) (300)
Deferred consideration - - (2,094)
(5,010) (7,198) (10,194)
Total liabilities (18,504) (25,838) (30,801)
Net assets 62,182 71,505 71,666
Equity
Share capital 7,948 7,923 7,844
Share premium 30,011 29,950 29,427
Own shares (566) (566) (775)
Translation reserves 1,440 1,318 1,626
Other reserves 6,256 6,256 6,256
Retained earnings 17,093 26,624 27,288
Total equity 62,182 71,505 71,666
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2024
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 2023 7,844 29,427 (775) 1,628 6,256 27,389 71,769
Correction of error (net of tax) - - - (2) - (101) (103)
Balance at 1 January 2023 (restated) 7,844 29,427 (775) 1,626 6,256 27,288 71,666
Profit for the year - - - - - (2,408) (2,408)
Other comprehensive income - - - (308) - - (308)
Total comprehensive income - - - (308) - (2,408) (2,716)
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 - - - - - 1,938 1,938
Balance at 31 December 2023 (restated) 7,923 29,950 (566) 1,318 6,256 26,624 71,505
Loss for the year - - - - - (10,692) (10,692)
Other comprehensive income - - - 122 - - 122
Total comprehensive expense - - - 122 - (10,692) (10,570)
Issue of ordinary shares 25 61 - - - - 86
Exercise of share options - - - - - (18) (18)
Share-based payments - - - - - 1,179 1,179
Balance at 31 December 2024 7,948 30,011 (566) 1,440 6,256 17,093 62,182
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2024
Year ended 31 December Year ended 31 December
2024 2023
Notes £'000 £'000
Cash generated/(utilised) by operations 6 5,993 (1,537)
Net income taxes received 605 1,088
Net cash inflow/(outflow) from operating activities 6,598 (449)
Investing activities
Interest income received 134 89
Purchases of property, plant and equipment (936) (1,510)
Proceeds from sale of property, plant and equipment - 24
Purchases of intangible assets (86) (430)
Proceeds from sale of intangible assets - 1,760
Cash earn-out received from financial assets at FVTPL 120 637
Net cash (outflow)/inflow from investing activities (768) 570
Financing activities
Proceeds from sale of own shares - 15
Proceeds from issue of shares 69 602
Lease payments (1,197) (1,075)
Interest paid (87) (59)
Utilisation of revolving credit facility - 1,700
Repayment of revolving credit facility - (1,700)
Net inflows from invoice discounting facility (941) 915
Payment of deferred consideration (2,133) (1,746)
Net cash outflow in financing activities (4,289) (1,348)
Net increase/(decrease) in cash and cash equivalents 1,541 (1,227)
Cash and cash equivalents at beginning of year 7,135 8,546
Effect of foreign exchange rates 35 (184)
Cash and cash equivalents at end of year 8,711 7,135
NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2024
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 2024, 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 2023 have been filed with
the Registrar of Companies and those for the year ended 31 December 2024 were
approved by the Board of Directors on 24 March 2025 and will be delivered in
due course. The Auditor has reported on the financial statements for the year
ended 31 December 2024 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;
+ share-based payments charges and employer's tax contributions thereon;
+ asset impairment outside of the ordinary course of business;
+ legal provisions; 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.
In preparing forecasts Xaar considers all external factors that could impact
on financial performance and makes appropriate allowances for these. The
forecast informing the decision to prepare the consolidated financial
statements on a going concern basis considered, among other things; the
ongoing impact on sales to China due to local economic issues, the likelihood
of inflationary pressures resulting from macro-economic factors, and the wars
in Ukraine & Gaza. Furthermore, forecasts have been subject to
sensitivities to assess the impact on revenue generation, profitability and
liquidity of wider market disruption in certain customer and supplier markets
and uncertainty in timing of revenues expected from significant strategic
opportunities.
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 Group revenue in excess of 22% in comparison to the base case,
before considering any significant mitigating actions, which would be below
the actual reported result for the year ended 31 December 2024 (on a
like-for-like basis). The Directors believe the possibility of this
combination of severe downsides arising to be remote given the recurring
revenue base, visibility of committed orders and expected new revenue streams
secured from products known to be launching by OEMs throughout 2025.
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, 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 maintains
sufficient financial resources as at 31 December 2024. These consist of cash
and cash equivalents of £8,711,000 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 2026. 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 £557,000 of the total £3,000,000 committed facility was utilised as
at 31 December 2024.
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.
By the end of 2024 the Digital Imaging business has been restructured. The
printbar business has been transferred to Printhead and the remainder of the
business has ceased.
Printhead Product Print Digital Ink Supply Head Office Total
Systems Imaging Systems Entities
Year ended 31 December 2024 £'000 £'000 £'000 £'000 £'000 £'000
Revenue - total 34,615 16,807 10,114 3,417 - 64,593
Revenue - intra segment (1,143) (731) (765) (906) - (3,545)
Revenue - external 33,472 16,076 9,349 2,511 - 61,408
Adjusted operating (loss)/profit 2,816 1,211 1,502 1,093 (5,955) 667
Adjusting items (533) (705) (3,720) (363) (6,410) (11,731)
Operating (loss)/profit 2,283 506 (2,218) 730 (12,365) (11,064)
Product Print Digital Imaging Ink Supply Systems Head Office
Printhead Systems Entities Total
Year ended 31 December 2023 £'000 £'000 £'000 £'000 £'000 £'000
Revenue - total 37,857 22,063 8,748 3,140 - 71,808
Revenue - intra segment (restated)* (771) - - (796) - (1,567)
Revenue - external 37,086 22,063 8,748 2,344 - 70,241
Adjusted operating (loss)/profit 3,636 3,195 2,207 822 (6,503) 3,357
Adjusting items (restated)* (1,808) (152) (1,166) (349) (2,126) (5,601)
Operating (loss)/profit 1,828 3,043 1,041 473 (8,629) (2,244)
*Refer note 8 for prior year restatement. Additionally, the share-based
payment charge and management recharges elimination have been allocated and
Head Office separated from Printhead
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 31 December Year ended 31 December
2024 2023
(restated)
£'000 £'000
Earnings
Profit attributable to equity shareholders of the parent - adjusted 542 2,820
Adjusting items (11,234) (5,228)
Loss attributable to equity shareholders of the parent - reported (10,692) (2,408)
Number Number
Number of shares
Weighted average number of ordinary shares in issue 79,377,941 78,584,418
Less: ordinary shares held by Xaar Trustee Limited and the Xaar Plc ESOP Trust (313,201) (335,556)
Weighted average number of ordinary shares for the purposes of basic EPS 79,064,740 78,248,862
Effect of potentially dilutive ordinary shares - share options and awards 2,581,021 2,613,007
Weighted average number of ordinary shares for the purposes of diluted EPS 81,645,761 80,861,869
Pence per Pence per
share share
Basic EPS (13.5)p (3.0)p
Diluted EPS (13.5)p (3.0)p
Adjusted Basic EPS 0.7p 3.6p
Adjusted Diluted EPS 0.7p 3.5p
Year ended 31 December Year ended 31 December
4. Adjusting items 2024 2023
(restated)
£'000 £'000
Share-based payment charges (i) (1,097) (1,882)
Exchange (losses)/gains on intra-group transactions (ii) 110 (364)
Restructuring and transaction expenses (iii) (2,505) (1,501)
Research and development expenditure tax credits (iv) 228 179
Fair value losses on financial assets at FVTPL (v) (5,561) (369)
Amortisation of intangible assets arising on business combinations (vi) (2,201) (1,368)
Impairment of contract assets (vii) (514) -
Legal provision (viii) (191) (296)
Affecting operating profit and profit before tax (11,731) (5,601)
Tax effect of adjusting items 497 373
Total adjusting items after tax (11,234) (5,228)
(i) Comprises share-based payment charges of £1,182,000 (2023: £1,937,000)
partially offset by an accrual release of £85,000 (2023: release of £55,000)
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 USD denominated
intra-group loans between UK and US entities. Such costs are included in
selling, general and administrative expenses.
(iii) Comprises restructuring costs of £1,132,000 (2023: £1,501,000),
M&A transaction costs of £182,000 (2023: £nil),
£1,205,000 (2023: £nil) related to the rationalisation of the Digital
Imaging business and subsequent asset review and a
£14,000 credit (2023: £740,000 expense) relating from the Group's
operational efficiency program. Restructuring costs include provision for
redundancy costs £994,000 (2023: £761,000), £121,000 TUPE related bonuses
and £17,000 redundancy related legal fees. Such costs are included in
selling, general and administrative expenses.
(iv) Comprises UK corporation tax relief relating to qualifying research and
development expenditure. £134,000 relates to XaarJet Limited and £81,000
relates to FFEI Limited for the year ended 31 December 2024. £13,000 relates
to Xaar Technology prior year adjustments.
During year ended 31 December 2023, £15,000 related to XaarJet Limited and
£164,000 related to FFEI Limited. 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 7 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.
(vii) During the year it became apparent that we will be unable to collect the
full contract value on a contract which commenced in 2021 in our Product Print
systems business segment. This contract is therefore impaired to the expected
recoverable amount. No profits have been recognised in adjusted profits on
this contract in the current or preceeding year.
(viii) In January 2025, we identified a historical breach of employment law
regulations within one of our operations dating back to 2021. Following a
comprehensive investigation, we have assessed the potential liability
associated with this matter to be approximately £613,000 excluding any legal
fees. £191,000 has been recognised as an expense the current year (£296,000
in 2023). Refer note 8 for the prior period restatement.
5. Other operating income
Year ended 31 December Year ended 31 December
2024 2023
£'000 £'000
Profit on disposal of intangible assets - 2,036
Settlements received - 164
Total other operating income - 2,201
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
received for these intangible assets totalled £2,312,000, generating a profit
of £2,036,000 after deduction of the asset's carrying value. The
consideration was receivable in installments with
£1,760,000 having been received as at 31 December 2023 and £552,000 in the
year ending 31 December 2024. Settlements received constitute compensation
under legal claims.
6. Note to cash flow statement
31 December 31 December
2024 2023
(restated)
£'000 £'000
Loss before taxation (11,425) (2,717)
Adjustments for:
Depreciation of property, plant and equipment 2,863 2,914
Depreciation of right-of-use assets 1,322 1,084
Amortisation of intangible assets 2,321 1,487
Research and development expenditure credit (228) (179)
Net interest expense 361 473
Unrealised currency translation (gains)/losses (130) 426
Share-based payment charge 1,096 1,882
Fair value loss on financial assets at FVTPL 5,561 369
Loss on disposal of property, plant and equipment 126 24
Gain on disposal of intangible assets - (2,036)
(Decrease)/increase in provisions (434) 568
Operating cash flows before movements in working capital 1,433 4,591
Decrease/(increase) in inventories 3,846 (2,057)
Decrease in receivables 1,886 942
Decrease in payables (1,172) (5,013)
Cash generated / (utilised) by operations 5,993 (1,537)
7. Fair value movement on contingent consideration
The Group has one financial instrument held at fair value, the contingent
consideration that arose on the Group's divestment of its remaining interest
in Xaar 3D Limited during the year ended 31 December 2021.
In 2021, Xaar 3D Holdings Limited completed the divestment of its remaining
interest in the share capital of Xaar 3D Limited. The Group received net cash
consideration of £9,272,000 as well as a potential entitlement to additional
cash consideration of up to £10,863,000 calculated on an earn-out basis at 3%
of revenue per annum, with additional amounts becoming receivable on meeting
revenue milestones.
During 2024 the fair value of the contingent consideration has been
considerably reduced to £4,918,000 (2023: £10,599,000). £120,000 was
received during 2024 and a fair value loss of £5,561,000 was booked through
profit and loss. This is due to a reduction in the revenue forecasts for the
disposed business which have resulted in the final revenue milestone
(Milestone 3) no longer being expected to be achieved before the milestone
window closes on 6 Oct 2026. Management view is that Milestone 2 will be
received in late 2025 or early 2026.
8. Restatement of prior period
In January 2025, we identified a historical breach of employment law
regulations within one of our operations dating back to 2021. Following a
comprehensive investigation, we have assessed the potential liability
associated with this matter to be approximately £613,000 excluding any legal
fees. Xaar has established appropriate provisions in our financial statements
to address this obligation.
It was further identified that in preparing the 2023 consolidated financial
statements intercompany revenues were not fully eliminated in the Ink Supply
Systems CGU. This overstated Group revenues and cost of sales by £373,000 but
had no net impact on profits. The error related solely to point in time
revenues.
The errors have been corrected by restating each of the affected financial
statement line items for the prior periods as follows:
Consolidated statement of financial position (extract) 31 December Increase/ decrease 31 December Increase/ decrease
2023 31 December 2022 31 December
2023 2022
(restated) (restated)
£'000 £'000 £'000 £'000 £'000 £'000
Current provisions (972) (413) (1,385) (405) (130) (535)
Deferred tax asset 493 87 580 726 27 753
Translation reserved 1,310 8 1,318 1,628 (2) 1,626
Retained Earnings 26,958 (334) 26,624 27,389 (101) 27,288
Total Equity 71,831 (326) 71,505 71,769 (103) 71,666
Consolidated income statement (extract) 2023 Increase/ 2023 2022 Increase/ 2022
decrease (restated) decrease (restated)
£'000 £'000 £'000 £'000 £'000 £'000
Revenue 70,614 (373) 70,241 72,782 - 72,782
Cost of sales (43,723) 373 (43,350) (44,138) - (44,138)
Selling, general and administrative expenses (25,577) (296) (25,873) (21,205) (106) (21,311)
Operating (loss)/profit (1,948) (296) (2,244) 1,236 (106) 1,122
(Loss)/profit before tax (2,421) (296) (2,717) 824 (106) 718
Tax credit 247 62 309 967 22 989
(Loss)/profit for the year - continuing operations (2,174) (234) (2,408) 1,791 (84) 1,707
(Loss) / profit for the year attributable to the (2,174) (234) (2,408) 1,632 (84) 1,548
equity shareholder of the parent
Basic (loss)/earnings per share (2.8)p (0.2)p (3.0)p 2.1p (0.1)p 2.0p
Diluted (loss)/earnings per share (2.8)p (0.2)p (3.0)p 2.0p (0.1)p 1.9p
Statement of comprehensive income (extract) 2023 Increase/ 2023 2022 Increase/ 2022
decrease (restated) decrease (restated)
£'000 £'000 £'000 £'000 £'000 £'000
(Loss)/profit for the year attributable to the equity shareholder of the (2,174) (234) (2,408) 1,632 (84) 1,548
parent
Exchange (losses)/gains on translation of foreign operations (318) 10 (308) 617 (2) 615
Total Comprehensive (expense)/income for the year (2,492) (224) (2,716) 2,249 (86) 2,163
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