REG - Xaar PLC - Interim Results
18/09/2024 07:00
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RNS Number : 5976E Xaar PLC 18 September 2024
18 September 2024
Xaar plc
2024 INTERIM RESULTS
RESILIENT PERFORMANCE AGAINST A DIFFICULT MARKET BACKDROP
Xaar plc ("Xaar", the "Group" or the "Company"), the leading inkjet printing
technology group, today announces its unaudited interim results for the six
months ended 30 June 2024.
Financial Summary:
H1 2024 H1 2023 Change
Revenue £28.6m £34.5m (17%)
Gross profit £10.1m £13.8m (27%)
Gross margin % 35% 40% (5%)
Gross R&D investment £2.4m £2.6m (8%)
Adjusted EBITDA(1) £1.0m £3.5m (71%)
Adjusted (loss)/profit before tax (£0.7m) £1.8m (139%)
Loss before tax (£2.8m) (£1.8m) (56%)
Loss for the period after tax (£2.6m) (£1.3m) (100%)
Basic loss per share (3.3p) (1.7p)
Net cash at the period end(2) £6.8m £6.2m 10%
Financial highlights
· Revenue of £28.6 million (H1 2023: £34.5 million) reflects the
expected ongoing decline of the legacy ceramics market, order delays and EPS
weakness
· Excluding ceramics, the printhead business delivered new market
revenue growth of 26%
· Gross margin of 35% (H1 2023: 40%) due to increased energy costs
and reduced overhead absorption
· Adjusted (loss) before tax for the period of (£0.7) million (H1
2023: profit £1.8 million)
· R&D investment of £2.4 million (H1 2023: £2.6 million)
reflecting investment in product development
· Group remains well capitalised, with net cash of £6.8 million,
up 10%, driven by disciplined cash management
Strategic and operational highlights
· Successful commercialisation of new products, with OEM launches
in textiles, corrugate, battery coating and wax markets
· Customer product launches in last five years have created
annualised revenue in excess of £20 million delivering compound annual growth
rate of 26%
· Strong pipeline of opportunities with a number of key projects
expected to deliver in 2025
· Operational efficiency programme continuing, resulting in a £3.4
million (24%) reduction in operating expenses while retaining key capabilities
Outlook
· Trading conditions are consistent with those reported at the FY
results
· We are pleased with customer engagement and expect more OEM
product launches during the second half of the year
· Our differentiated technology and growing pipeline of customer
projects positions us for growth despite challenging end markets
· Market uncertainty persists although expectations for the full
year remain unchanged
John Mills, Chief Executive Officer, commented:
"We remain confident in our strategy which is increasingly demonstrating the
unique capabilities of our printhead technology. Our pipeline of opportunities
has increased in quality in both existing and new application areas and
increasing numbers of OEM's are engaged in, or actively planning, new product
launches incorporating Xaar printheads. Newly developed high viscosity inks
enable us to fully utilise the unique technology of our printheads, and whilst
the legacy ceramics market is challenging, masking our success in new market
sectors, we have enhanced our customer integration capabilities and are
already seeing the benefit in accelerated OEM project launches in other target
markets.
We continue to focus on the elements of the business that are within our
control, enhancing our technology, supporting customer adoption of our
printheads, managing our cost base and strengthening our cash position
demonstrating the benefits that Xaar's unique capabilities can deliver to
customers. We remain convinced of our ability to maximise the substantial
opportunity we have."
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 in person and via
webcast and conference call at 09:15 today. For further details, please
contact Xaar@teneo.com (mailto:Xaar@teneo.com)
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.
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 OEM and
UDI customers worldwide.
By helping customers lay down precise volumes of inks and fluids with absolute
pin-point accuracy, time after time, Xaar's inkjet printheads and technologies
meet the needs of numerous markets. Covering graphics, labelling,
direct-to-shape, packaging, product decoration, ceramic tile and glass
decoration, textiles, 3D, décor, and outer case coding applications - as well
as printing with specialist functional fluids for advanced manufacturing
techniques.
Collaboration is at the very core of its business. Xaar works as a trusted
partner from sites in Europe and China, providing expert insights and
technical support every step of the way.
With over 30 years' experience, around 200 patents registered or pending, and
major ongoing R&D investment, Xaar's digital printhead and precision
jetting technologies create infinite opportunities for today's sustainable
manufacturing innovation.
Group Chief Executive's review
Positioned for growth with market leading technology
We have delivered a solid financial performance in the first half of 2024
against a tough market backdrop. We have successfully progressed our product
development strategy and continue to control what we can control both in
positioning the business for growth in a number of new market areas, and in
demonstrating disciplined cash management. Despite our strategic progress,
results have been impacted by OEM product launch delays, continued weakness in
the ceramics market, and a reduction in major project business in EPS.
Importantly, we remain confident in our strategy and the long-term opportunity
for the Group.
Our business model centres on the sale of highly differentiated printheads,
combined with a vertically integrated commercial offering. Our technology
enables customers to access the benefits of high viscosity inks through
enhanced print functionality and lower financial and environmental cost,
including reduced energy costs and lower water usage. We also provide a wide
range of components such as inks, ink supply systems and print engines, as
well as comprehensive customer support, to better enable the integration of
Xaar technology in OEM products. Over the last five years, we have launched a
wide range of new products with further additions planned in the current year
and beyond.
We have a strong pipeline of OEMs in the process of developing machines that
will incorporate our printheads. We now have 22 customers with
machines/projects in development, including a number of OEMs in new
application areas. Since 2019, new product launches have created annualised
revenue in excess of £20 million and delivered a compound annual growth rate
of 26%. This progress has been masked by a worse than expected cyclical
deterioration in the ceramics market.
Resilient trading in tough market conditions
Group Revenue in the first half reduced by 17% to £28.6 million (H1 2023:
£34.5 million) with weakness in the ceramics market, delays in customer
launches and a lack of major projects in EPS. The gross margin declined to 35%
(H1 2023: 40%) due to decreased overhead absorption rates, significantly
higher energy costs and, within EPS, a one-time design change for a leading
customer, and customer specific cost increases.
R&D investment at £2.4 million (H1 2023: £2.6 million) was 8.4% of H1
revenue (H1 2023: 7.5% of revenue). An increased proportion of this
investment was deployed to support our OEM product launches which will
continue to be a priority.
Operating expenses continue to be proactively managed across all business
units with a £3.4 million (24%) reduction on H1 2023. Adjusted loss before
tax of £(0.7) million was as anticipated and arose from the lower revenue and
its impact on the Group's profitability.
We remain well capitalised and ended the half with net cash of £6.8 million
through disciplined cash management.
Stronger alignment with customers to take greater control of growth
During FY23 we introduced Project Hubble to improve our operations, providing
focus around commercial strategic opportunities, operational efficiency,
organisational effectiveness and customer integration.
We have put three key initiatives in place to ensure we maximise our
commercial strategic opportunities. The first is to diversify our geographic
exposure by targeting OEMs in Europe and USA, which along with our established
strategy of having a compelling product in each target market, will build
further resilience into our business.
The second initiative is to develop relationships with our end customers, in
partnership with our OEMs, allowing us to have a clearer picture of the
decisions that drive the adoption timing of their new systems with Xaar
technology. The feedback from both end customers and OEMs is that they
continue to appreciate this increased involvement.
The final initiative is to ensure a seamless integration of our printheads
into our OEM customers' new systems and to better support them as they
on-board our technology. Although the high viscosity and high pigment loading
capabilities that give Xaar printheads their unique benefits are compelling,
we recognise that the integration into the system can be challenging and that
the capabilities of OEMs vary materially. To mitigate these challenges, we
have developed a complete turnkey solution of ink system, ink, waveform, print
modes and all the other parameters associated with a complete product. This
has helped OEMs manage system integration issues and enabled a better
understanding of the unique characteristics of Xaar printheads.
We have trialled this enhanced approach over the past nine months through
close collaboration with a leading customer throughout their product
development cycle. The result was to significantly reduce integration issues
and accelerate both successful product installation and OEM product launch.
Not only does this approach improve the depth of relationships with OEMs, but
it enables us to develop market ready solutions that we can sell to the wider
market.
One element for future success is the ability to produce full colour print
samples and demonstrate the printheads working in the target application as
part of an integrated system. Demonstrating not only the printheads capability
but also a fully integrated solution will benefit the sales process and also
help closer engagement with OEM's.
Product developments enhancing our market-leading offering
The market opportunity for our highly differentiated printheads remains
significant, but we have recognised the need to offer a complementary broader
range of components such as inks, ink supply systems and print engines.
Enhancing the range of products and support we can offer customers is enabling
us to respond more rapidly to market needs and deliver the full functionality
and performance our OEM partners require.
During the first half, we launched two new printheads, the Xaar eX
(https://www.xaar.com/products/xaar-printheads/xaar-ex/) and Nitrox eX
(https://www.xaar.com/products/xaar-printheads/xaar-nitrox-ex/) , specifically
designed for coating the new generation of batteries used in electric vehicles
(EVs) and energy storage systems. The launch marks Xaar as the first inkjet
company to enter the battery coating sector with a printhead specifically for
this application, setting a new benchmark in this technology.
We have also adapted the Xaar 2002 to create a variant that is capable of
running at a temperature in excess of 100°C. The printhead enables higher
quality wax to be used in specific applications, such as jewellery
manufacturing, which along with the higher resolution and smaller drop size,
gives a significantly higher quality product.
Further enhancing our product range, a full set of ultra-high viscosity and
highly pigmented inks have now been developed by our ink partners for OEMs to
use in conjunction with the Aquinox printhead, ensuring a substantial
competitive advantage in the corrugated and textiles market. Higher pigment
content means more colour per drop, achieving the same colour density with
fewer drops, lowering cost and increasing productivity. Higher viscosity means
less water in the ink which reduces the amount of energy needed to dry the
substrate and allows for an increase in print speed.
These inks are the first in a series of developments to ensure that we have a
qualified high viscosity ink across all of our target markets. The
availability of validated inks will enable our OEMs to make more rapid
progress in their product developments.
Underpinning our existing product range, our printhead development platform
"ImagineX" is continuing to provide enhancements to the current portfolio,
helping to further strengthen our technological leadership and enable adoption
in new market areas markets. Our continued investment in R&D supports our
approach and we will continue to focus on further supporting our customers to
enable successful product launches.
Significant market opportunity
Our technology and strategy have expanded our market opportunity and
positioned us favourably with a compelling product in four of our five target
markets, more than tripling the total addressable market of the Group compared
to 2018, and significantly broadening the breadth of the opportunities in our
pipeline. Completion of new products for the Wide Format Graphics and Labels
markets in due course will enable access to an overall future addressable
market of £1 billion across all our target markets. Key developments include:
· CERAMICS: Global ceramics leader System are on track to launch
their new printer with Xaar 720dpi printheads in the second half of this year,
after successful Beta installation in May. Meanwhile, OEM partner NKT has
increased its market share with the same printhead. Our success in re-engaging
with market leaders in the Ceramics sector means we are well positioned to
gain market share once demand returns to more normal levels.
· CODING & MARKING: A recent product launch from Videojet has
enabled further revenue growth in the US. Public endorsement of Xaar's
printheads from industry leader KBA Kammann, alongside our significant
technical breakthrough in the ultra-high-speed, high-quality printing of 1D
and 2D barcodes, are the main reasons for growing interest in our printheads.
· 3D PRINTING: 3D printing continues to provide opportunities
across several technologies and markets. We expect a major global supplier of
desktop 3D systems to launch their full colour inkjet machines with Xaar
printheads by early 2025 after OEM re-designs have caused earlier delays.
· 3D WAX PRINTING: 3D wax printing, specifically for the jewellery
market, remains an exciting opportunity. Flashforge launched their first
product using Xaar printheads, the Waxjet 510, in Q2 and a higher volume
second product with 3 printheads is being launched in Q4. These developments
have prompted wider market interest for our products in this area. Overall,
despite OEM product delays encountered in 2023, we are confident this market
provides a significant opportunity.
· ADVANCED MANUFACTURING: Advanced Manufacturing remains an
exciting market for Xaar as our technology enables manufacturers to transition
from analogue to digital, with digital inkjet printing replacing other coating
methods including screen printing and spray. Many of these applications are
extremely well suited to Xaar's printhead characteristics and features, namely
its ability to print highly viscous liquids, printing in any orientation
rather than purely vertically, printing on curved surfaces and the Through
Flow architecture minimising ink blockages. Given we are not displacing
incumbent printheads, the size of the opportunity is not bound by the current
scope of existing digital print markets. EV batteries, in particular, offer a
large-scale opportunity. Production of the coating solution, which passed the
required tests in 2023, entered pre-production during the first half. The
first production machine, using Xaar printheads, was installed for one of the
top six global battery manufacturers in May, with a further two machines being
due for installation in the second half.
· PACKING & TEXTILES: Through Xaar Aquinox, we are starting to
grow our market share in the Packaging and Textiles industry, albeit from a
low base. Delays caused by a lack of commercially available aqueous inks have
been remedied with the successful launch of suitable inks for textiles, with
the corrugate aqueous inks launching soon. This opens up a sizeable market,
and we expect our unique capability to deliver high contrast, full colour
print directly, to be an attractive and cost effective solution.
· WIDE FORMAT GRAPHICS: Wide Format Graphics and Labels is the
largest single industrial print market, and we remain confident that this
market remains open to Xaar although it is not a current area of focus.
Significant environmental benefits of our products
Delivering products which offer significant environmental benefits is a key
element of our product strategy. We are dedicated to helping customers reduce
their power consumption and water. Digital inkjet printing is inherently more
sustainable compared to traditional analogue printing with a smaller carbon
footprint. It uses less energy and prevents excessive waste due to the ability
to print short runs or direct-to-shape.
Compared to analogue alternatives, digital has a huge impact in reducing
energy consumption (by up to 55%), water consumption (by up to 60%) and CO2
emissions (by up to 95%). Furthermore, jetting high viscosity fluids brings
additional sustainability benefits as they are proven to use less water and
less energy than using standard viscosity fluids. The cost savings and
environmental benefits are perhaps best highlighted through our relationship
with Axalta, a leading global coatings company. Axalta are using Xaar
technology in their Nextjet next generation sustainable digital paint product,
which replaces traditional spray painting in the automotive industry. This
allows for precise paint placement eliminates masking and reduces labour,
energy and waste while increasing productivity and efficiency rates.
Xaar's actuator technology consumes less energy than competitor alternatives,
and our industrial printheads are known for their extended lifespan. We use a
continuous improvement methodology, and we have adopted a manufacturing ethos
of 'reduce, reuse and recycle'. Environmental best practice and our investment
in sustainable manufacturing and operational efficiencies remain key areas of
business focus. Publication of our inaugural Sustainability Report highlights
the transformative progress made towards the objectives set out in the
company's Sustainability Roadmap.
We have verified our sustainable impact through the commissioning of an
independent research study led by senior academics at Swansea University. The
researchers examined the end user benefits of using the Xaar Aquinox printhead
and cyan water-based inks from Nazdar and concluded that it enables customers
to halve the ink used, meaning transport costs and process energy costs can
also be reduced.
Outlook
The first half of 2024 has seen trading conditions consistent with those
reported in March, with customers choosing to delay capital expenditure due to
the macroeconomic conditions. Despite the success of our product development
strategy, closer customer engagement and the popularity of the products,
revenue from customers in new sectors has been offset by the significant
decline of our ceramics business, masking the underlying progress that we have
made. Global volume production of ceramic tiles has fallen by over 50% since
peaking in 2020/21, most significantly in China which is by far the largest
producer worldwide. Indications are that these market conditions will remain
for a period before growth is restored in the medium term.
This has made our task of delivering overall revenue growth more difficult as
there is an inevitable time lag between product launches in new sectors and
sales growth as volumes ramp up. The result is slower overall progress in
revenues for Xaar. Despite this, we expect further OEM product launches during
the second half of the year and our high-quality pipeline of opportunities in
new markets and in new applications means we remain optimistic about future
growth prospects for the Group. We believe that in most cases there are strong
economic drivers as to why customers should choose Xaar, and our priority is
to make it as easy as possible for them to make that choice. As sales volumes
improve and energy costs stabilise, we expect gross margins to improve in the
medium term. We remain cautious on providing precise timing given the current
market backdrop and uncertainty caused by economic and geopolitical effects.
Although market uncertainty persists, expectations for the full year remain
unchanged.
Business Performance
Revenue
Group revenue growth
£m H1 2024 H1 2023 Var Var %
Printhead 16.5 17.6 (1.1) -6%
EPS 7.5 10.7 (3.2) -30%
FFEI 3.3 4.8 (1.5) -31%
Megnajet 1.3 1.4 (0.1) -7%
Total Revenue 28.6 34.5 (5.9) -17%
Revenue for the Group was £28.6 million (H1 2023: £34.5 million). for the
first half of the year, representing a year-on-year decline of £5.9 million.
These results have been achieved in a difficult trading environment with
rising costs and elevated interest rates continuing to impact capital
equipment sales globally.
Printhead business unit revenue declined by £1.1 million driven by a £3.4
million reduction in ceramic and glass sales. Other markets within our
Printhead business delivered revenue growth of 26%, a positive dynamic for
when legacy product sales stabilise. EPS revenue fell 30% to £7.5 million
largely due to slowdown in capital equipment purchases. Notably, there was a
delay in shipping two multi-pass machines in June 2024, the issues of which
have since been resolved resulting in the machines shipping in July 2024.
Printhead
Printhead Revenue by Sector
£m H1 2024 H1 2023 Var Var %
Ceramics & glass 4.6 8.0 (3.4) -43%
3D printing & AVM 3.2 2.6 0.6 23%
C&M & DTS 6.0 5.1 0.9 18%
Packaging & textiles 0.4 0.2 0.2 100%
WFG & labels 2.4 1.7 0.7 41%
Total Revenue 16.5 17.6 (1.1) -6%
Xaar offers a wide range of industrial inkjet printheads which are designed
and produced to meet the customer-driven requirements for a range of
manufacturing applications such as ceramic tile decoration, graphics, décor,
labels and packaging as well as 3D printing and additive manufacturing.
Printhead revenue in EMEA was £8.6 million (H1 2023: £11.1 million),
reflecting the decline in ceramics, while revenue in the Americas rose 22% to
£4.7 million on the back of our strategic focus on geographic
diversification. Performance in Asia, and China in particular, has benefitted
from new product launches with revenue increasing 23% year-on-year. 3D
printing and Additive Manufacturing (AVM) continue to grow, reflecting our
overall customer strategy and enhanced product portfolio. Overall, we have
retained market share, and new business wins continue to mitigate declines in
the legacy ceramics business and delays in customer launches utilising the
200X and Aquinox printheads.
EPS
EPS manufactures a range of highly customised product print systems printing
all kinds of industrial and promotional objects such as medical equipment,
automotive parts, tools, apparel, appliances, sports equipment and toys.
Revenue from the EPS business fell by £3.2 million to £7.5 million (H1 2023:
£10.7 million). This has been driven by a decrease in digital inkjet machines
sales of 37% impacted by two multi-pass machines not shipping in June. The pad
printing revenue stream has also fallen, which we expect to recover during H2
2024.
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 are
the most integrated and compact ink systems in the market today.
FFEI revenue was £3.3 million (H1 2023: £4.8 million). The reduction results
from exiting the non-core Life Science business which was considered to be
non-core strategically. Revenue excluding Life Science business grew by 3%,
year-on-year. Megnajet delivered £1.3 million of revenue, in line with the
prior year and overall, we remain pleased with the performance of this
business as we increased the customer base by 15%.
Gross profit
Gross profit decreased by £3.7 million to £10.1 million (H1 2023: £13.8
million) with the gross margin at 35% (H1 2023: 40%), driven by reduced sales
volumes, decreased overhead absorption rates and significantly higher energy
costs. As revenues grow and energy costs stabilise, we expect gross margins to
improve in the medium term. Within EPS, a one-time design change for a leading
customer and customer specific cost increases added to the pressure on gross
margin from a fall in volumes. Gross margin for FFEI was flat year-on-year
when accounting for the £2.0 million one off gain from the sale of IP assets
in the first half of 2023 while Megnajet successfully grew its margin 9% due
to improved pricing outcomes and operational efficiency improvements.
Research & Development
Gross R&D was £2.4m in the first half, up 0.9% as a percentage of revenue
compared to the first half of 2023. On an absolute basis the reduction was
£0.2m. We are continuing to invest in the business and have remained within a
ratio of R&D investment/revenue of 8-10%.
Operating Expenses
While we have continued to face inflationary headwinds in areas such as labour
and travel costs, we have been successful in our efforts to manage expenses
across the business. The sales and marketing expense for the period was £2.5
million (H1 2023: £3.2 million) reflecting the continued focus on cost
management. General and administrative expenses decreased to £6.0 million
from £10.3 million in H1 2023. This reduction reflects the difficult decision
taken in 2023 to reduce headcount together with a clear focus on reducing
discretionary spend across the business. FFEI printbar manufacturing
transitioned to Huntington during H1 2024 capturing further cost efficiencies
and synergies.
Profit for the period
Adjusted loss before tax was £(0.7) million. During the comparative period in
2023 Adjusted profit before tax was £1.8 million, aided by a one-off gain
due to the sale of non-core IP assets of £2.0 million.
The loss for H1 2024 was driven by the Printhead business with an Adjusted
loss before tax of £(1.6) million, albeit an improvement on the £(2.2)
million reported in the prior period. This improvement was driven by the
reduction in operating expenditure offsetting the gross margin decrease in the
period.
In calculating the adjusted profit before tax, we have adjusted for fair value
losses on financial assets of £0.2 million (H1 2023: £0.5 million) alongside
restructuring costs of £0.4 million (H1 2023: £1.0 million), foreign
exchange gains on intra-group loans of £43,000 (H1 2023: loss (£0.4)
million), share-based payments of £0.8 million (H1 2023: £1.3 million) and
amortisation of acquired intangible assets of £0.8 million (H1 2023: £0.5
million). After taking these into account, the loss before tax was £(2.8)
million.
The adjusted EBITDA in the period was £1.0 million (H1 2023: £3.5 million).
Balance sheet
The Group retains a strong balance sheet, with a net cash position at 30 June
2024 of £6.8 million.
The Group remains focused on managing working capital efficiently. Inventory
has increased by £0.2 million to £31.3 million whilst trade and other
receivables have decreased by £1.0 million. Following discussion with the
Board, the proactive decision was taken to keep inventory levels broadly flat
at current demand levels to allow us to respond rapidly to future demand
growth. Our medium term aim remains to reduce inventory levels further as
demand becomes more stable.
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
business and our operational capability when required. To date, this has
remained undrawn.
Cash flow
Net cash on hand was £6.8 million was an increase on both H1 2023 and full
year 2023 closing positions (H1 23: £6.2 million, FY 2023: £5.7 million)
reflective of the Group's balance sheet resilience and ongoing focus on
careful liquidity management. Despite challenging trading conditions
resulting in a six-month Group loss before tax of £2.8 million, adjusting for
the impact of non-cash items returns a £0.9m positive operating cashflow
before movements in working capital. The outcome of targeted liquidity
management activities, as we continue to manage KPIs in our direct control, is
an improvement in working capital driving cash inflows of £2.9 million and,
therefore, £3.9 million cash generated from operations in the period.
Other than finance leases, the largest cash outflow outside of operating
activities has been the payment of the Group's deferred consideration
obligations arising from the acquisitions of FFEI and Megnajet, amounting to
£1.4 million in the first half of the year. All acquisition related
liabilities will be settled by the end of the year and without these downwards
pressures we have confidence in delivering further net cash inflows during the
remainder of the year. Borrowings against receivables balances increased
£0.5 million from 31st December 2023 to £1.9 million (2023: £1.4 million),
resulting in net cash inflows of £1.1 million.
Dividend
The Board regularly reviews capital allocation and believes that prioritising
investment to enable profitable growth for the business is currently the most
appropriate use of capital, therefore, no interim dividend has been declared
for H1 2024.
John Mills Ian Tichias
Chief Executive Officer Chief Financial Officer
17 September 2024
Directors' responsibilities statement
We confirm that to the best of our knowledge:
• The condensed set of financial statements has been prepared in
accordance with International Accounting Standard 34 - Interim Financial
Reporting as adopted by the UK
• The interim management report includes a fair review of the information
required by:
• DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an
indication of important events that have occurred during the first six months
of the financial year and their impact on the condensed set of financial
statements; and a description of the principal risks and uncertainties for the
remaining six months of the year; and
• DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being
related party transactions that have taken place in the first six months of
the current financial year and that have materially affected the financial
position or performance of the entity during that period; and any changes in
the related party transactions described in the last Annual Report that could
do so.
By Order of the Board
John Mills
Chief Executive Officer
17 September 2024
INDEPENDENT REVIEW REPORT TO XAAR PLC
Conclusion
We have been engaged by the Group to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30
June 2024 which comprise the Condensed Consolidated Income Statement, the
Condensed Consolidated Statement of Comprehensive Income, the Condensed
Consolidated Statement of Financial Position, the Condensed Consolidated
Statement of Cash Flows, the Condensed Consolidated Statement of Changes in
Equity, and related notes. We have read the other information contained in the
half-yearly financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in the
condensed set of financial statements.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2024 is not prepared, in all
material respects, in accordance with UK adopted International Accounting
Standard 34 and the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410 Review of Interim Financial Information Performed by the
Independent Auditor of the Entity, issued for use in the United Kingdom. A
review of interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting matters, and
applying analytical and other review procedures. A review is substantially
less in scope than an audit conducted in accordance with International
Standards on Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit opinion.
As disclosed in note 1, the annual financial statements of the Group are
prepared in accordance with UK-adopted IASs. The condensed set of financial
statements included in this half-yearly financial report has been prepared in
accordance with IAS 34 Interim Financial Reporting.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the 'Basis for conclusion' section of this report,
nothing has come to our attention to suggest that management have
inappropriately adopted the going concern basis of accounting or that
management have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410, however future events or conditions may cause the Group to
cease to continue as a going concern.
Responsibilities of directors
The directors are responsible for preparing the half-yearly financial report
in accordance with the Disclosure Guidance and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
In preparing the half-yearly financial report, the directors are responsible
for assessing the Group's ability to continue as a going concern, disclosing,
as applicable, matters related to going concern and using the going concern
basis of accounting unless the directors either intend to liquidate the Group
or to cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the review of financial information
In reviewing the half-year report, we are responsible for expressing to the
Group a conclusion on the condensed set of financial statements in the
half-yearly financial report. Our conclusion, including our conclusions
relating to going concern, are based on procedures that are less extensive
than audit procedures, as described in the Basis for conclusion paragraph of
this report.
Use of our report
This report is made solely to the company's directors, as a body, in
accordance with the terms of our engagement letter dated 16 July 2024. Our
review has been undertaken so that we might state to the company's directors
those matters we have agreed to state to them in a reviewer's report and for
no other purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone, other than the company and the company's
directors as a body, for our work, for this report, or for the conclusions we
have formed.
Daniel Hutson
Statutory Auditor
PKF Littlejohn LLP, 15 Westferry Circus, Canary Wharf, London
17 September 2024
CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE SIX MONTHS ENDED 30 JUNE 2024
Six months ended 30 June 2024 (unaudited) Six months ended 30 June 2023 (unaudited)
Adjusted Adjusting Total Adjusted Adjusting Items* Total
Items*
Notes £'000 £'000 £'000 £'000 £'000 £'000
Revenue 2 28,640 - 28,640 34,515 - 34,515
Cost of sales (18,575) - (18,575) (20,693) - (20,693)
Gross profit 10,065 - 10,065 13,822 - 13,822
Selling, general and administrative (8,192) (2,118) (10,310) (11,376) (3,647) (15,023)
expenses 3
Research and development expenses (2,365) - (2,365) (2,617) - (2,617)
Other income - - - 2,201 - 2,201
Operating (loss)/profit (492) (2,118) (2,610) 2,030 (3,647) (1,617)
Finance income 57 - 57 37 - 37
Finance costs (255) - (255) (235) - (235)
(Loss)/profit before tax (690) (2,118) (2,808) 1,832 (3,647) (1,815)
Tax credit 4 191 - 191 9 458 467
(Loss)/profit for the period (499) (2,118) (2,617) 1,841 (3,189) (1,348)
(Loss)/earnings per share
Basic 5 (0.6) (3.3) 3.1 (1.7)
Diluted 5 (0.6) (3.3) 3.1 (1.7)
* Further information on adjusting items is included in Note 3
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED 30 JUNE 2024
Six months ended 30 June 2024 (unaudited) £'000 Six months ended 30 June 2023 (unaudited)
£'000
Loss for the financial period (2,617) (1,348)
Exchange gains/(losses) on translation of foreign operations 47 (315)
Other comprehensive income/(expense) for the period 47 (315)
Total comprehensive expense for the period (2,570) (1,663)
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2024
As at As at
30 June 2024 31 December 2023
Notes (unaudited) (audited)
Non-current assets
Goodwill 6,910 6,873
Other intangible assets 6,490 7,366
Property, plant and equipment 13,520 14,529
Right-of-use assets 7,275 7,826
Financial asset at fair value through profit or loss 6 9,975 8,277
Deferred tax assets 496 493
Non-current financial assets 104 136
44,770 45,500
Current assets
Inventories 31,265 31,035
Trade and other receivables 7,805 8,802
Contract assets 1,892 2,156
Current tax receivable 633 306
Financial asset at fair value through profit or loss 6 365 2,322
Cash and cash equivalents 8,725 7,135
50,685 51,756
Total assets 95,455 97,256
Current liabilities
Trade and other payables (9,019) (9,568)
Deferred consideration (738) (2,115)
Provisions (460) (972)
Contract liabilities (4,916) (2,369)
Borrowings 7 (1,915) (1,403)
Lease liabilities (1,609) (1,800)
(18,657) (18,227)
Net current assets 32,028 33,529
Non-current liabilities
Lease liabilities (6,417) (6,898)
Provisions (300) (300)
(6,717) (7,198)
Total liabilities (25,374) (25,425)
Net assets 70,081 71,831
Equity
Share capital 8 7,937 7,923
Share premium 30,007 29,950
Own shares (566) (566)
Translation reserve 1,357 1,310
Other reserves 6,256 6,256
Retained earnings 25,090 26,958
Total equity attributable to the equity shareholders of the parent 70,081 71,831
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED 30 JUNE 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
Loss for the period - - - - - (1,348) (1,348)
Other comprehensive expense - - - (315) - - (315)
Total comprehensive expense - - - (315) - (1,348) (1,663)
Issue of ordinary shares 14 16 - - - - 30
Own shares disposed of on exercise of share options - - 209 - - - 209
Exercise of share options - - - - - (186) (186)
Share-based payments - - - - - 1,184 1,184
Balance at 30 June 2023 7,858 29,443 (566) 1,313 6,256 27,039 71,343
Loss for the period - - - - - (826) (826)
Other comprehensive expense - - - (3) - - (3)
Total comprehensive expense - - - (3) - (826) (829)
Issue of ordinary shares 65 507 - - - - 572
Exercise of share options - - - - - (8) (8)
Share-based payments - - - - - 753 753
Balances at 31 December 2023 7,923 29,950 (566) 1,310 6,256 26,958 71,831
Loss for the period - - - - - (2,617) (2,617)
Other comprehensive income - - - 47 - - 47
Total comprehensive income/(expense) - - - 47 - (2,617) (2,570)
Issue of ordinary shares 14 57 - - - - 71
Exercise of share options - - - - - (7) (7)
Share-based payments - - - - - 756 756
Balance at 30 June 2024 7,937 30,007 (566) 1,357 6,256 25,090 70,081
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
FOR THE SIX MONTHS ENDED 30 JUNE 2024
Six months ended Six months ended
30 June 2024 30 June 2023
(unaudited) (unaudited)
Note £'000 £'000
Cash generated/(utilised) from operations 11 3,868 (3,227)
Net income taxes (paid)/received (139) 340
Net cash inflow / (outflow) from operating activities 3,729 (2,887)
Investing activities
Interest income received 57 37
Purchases of property, plant and equipment (373) (942)
Purchases of intangible assets (35) (257)
Proceeds from sale of intangible assets - 2,312
Cash earn-out received from financial asset at FVTPL 73 550
Net cash (outflow) / inflow from investing activities (278) 1,700
Financing activities
Proceeds from sale of own shares - 32
Proceeds from issue of shares 64 30
Lease payments (883) (591)
Interest paid (20) -
Net inflow from invoice discounting facility 473 649
Payment of deferred consideration (1,400) -
Net cash (outflow) / inflow from financing activities (1,766) 120
Net increase / (decrease) in cash and cash equivalents 1,685 (1,067)
Cash and cash equivalents at beginning of period 7,135 8,546
Effect of foreign exchange rate changes on cash balances (95) (176)
Cash and cash equivalents at end of period 8,725 7,303
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2024
1. Basis of preparation and accounting policies
General information
Xaar Plc ("the Company" and together with its subsidiaries "the Group") is a
public limited company whose shares are listed on the London Stock Exchange,
is incorporated and domiciled in the United Kingdom and is registered in
England under the Companies Act 2006.
Basis of preparation
The interim condensed consolidated financial statements for the six months
ended 30 June 2024 have been prepared in accordance with IAS 34 "Interim
Financial Reporting" as adopted by the United Kingdom. The interim condensed
consolidated financial statements do not include all the information and
disclosures in the annual financial statements and should be read in
conjunction with the Group's consolidated financial statements for the year
ended 31 December 2023.
The interim condensed consolidated financial statements are unaudited and do
not constitute statutory financial statements as defined in Section 434 of the
Companies Act 2006.
The comparative figures for the financial year ended 31 December 2023 are as
reported in the Group's consolidated statutory financial statements for that
financial year. Those financial statements have been reported on by the
Group's Auditor and delivered to the Registrar of Companies. The Independent
Auditor's Report for the year ended 31 December 2023 was (i) unqualified, (ii)
did not include a reference to any matters to which the Auditor drew attention
by way of emphasis without qualifying their report, and (iii) did not contain
a statement under Sections 498(2) or 498(3) of the Companies Act 2006.
Going concern
The Group has prepared the interim condensed consolidated financial statements
on the basis that it will continue to operate as a going concern. The
Directors consider that there are no material uncertainties that may cast
significant doubt over this assumption. They have formed a judgement that
there is a reasonable expectation that the Group has adequate resources to
continue in operational existence for the foreseeable future, and not less
than 12 months from the end of the reporting period.
Principal accounting policies
The accounting policies adopted in the preparation of these interim condensed
consolidated financial statements are consistent with those followed in the
preparation of the Group's annual consolidated financial statements for the
year ended 31 December 2023.
New accounting standards, interpretations and amendments
Several amendments apply for the first time in the six months ended 30 June
2024. As previously reported in the Group's Annual Report and Financial
Statements for the year ended 31 December 2023, these amendments do not have a
material financial or disclosure impact on the Group's interim condensed
consolidated financial statements for the six months ended 30 June 2024.
Key sources of estimation uncertainty and critical accounting judgements
In preparing these interim condensed consolidated financial statements, the
critical accounting judgements and key sources of estimation uncertainty are
consistent with those disclosed in the Group's Annual Report and Financial
Statements for the year ended 31 December 2023.
Principal risks and uncertainties
The Board has overall responsibility for the establishment and oversight of
the Group's risk management framework. The Board has an established,
structured approach to risk management, which includes continuously assessing
and monitoring the key risks and uncertainties of the business. An outline of
the key risks and uncertainties faced by the Group and the potential impact of
these risks on of the Group's strategy and financial performance, together
with details of specific mitigating actions, is detailed on pages 16 to 25 of
the Group's Annual Report and Financial Statements for the year ended 31
December 2023, which is available on the Group's website at www.xaargroup.com.
(http://www.xaargroup.com/)
The Board has reviewed these risks as part of the half year risk assessment
update resulting in several changes which are reflected in the Group's Interim
Report for the six months ended 30 June 2024. Details of all such key changes
are included in the risks and uncertainties section of this report.
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.
Six months ended 30 June 2024 Printhead Product print Digital imaging Ink supply systems Unallocated Total
systems
(unaudited) Note £'000 £'000 £'000 £'000 £'000 £'000
Revenue - external 16,524 7,512 3,304 1,300 - 28,640
Revenue - intra segment 501 - 449 280 (1,230) -
Adjusted operating (loss)/profit (1,333) 480 (124) 485 - (492)
Adjusting items 3 (8) (307) (941) (93) (769) (2,118)
Operating (loss)/profit (1,341) 173 (1,065) 392 (769) (2,610)
Six months ended 30 June 2023 Printhead Product print Digital Ink supply Unallocated Total
systems imaging systems
(unaudited) Note £'000 £'000 £'000 £'000 £'000 £'000
Revenue - external 17,618 10,697 4,769 1,431 - 34,515
Revenue - intra segment 358 - - (26) (332) -
Adjusted operating (loss)/profit (2,178) 1,335 2,468 405 - 2,030
Adjusting items 3 (1,167) (585) (512) (109) (1,274) (3,647)
Operating (loss)/profit (3,345) 750 1,956 296 (1,274) (1,617)
3. Adjusting items
The Directors believe that the 'adjusted profit before tax' and 'adjusted
earnings per share' alternative performance 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, resulting
from external factors that are not influenced by the Group.
These items are as defined below and have been presented consistently in both
the current and prior interim periods and remain consistent with the audited
information as disclosed in the Annual Report and Financial Statements for the
year ended 31 December 2023.
Six months ended 30 June 2024 Six months ended 30 June 2023
£'000 £'000
(unaudited) (unaudited)
Share-based payment charges (i) 770 1,274
Exchange (gains)/losses on intra-group transactions (ii) (43) 362
Restructuring and transaction expenses (iii) 356 978
Fair value losses on financial assets at FVTPL (iv) 186 514
Amortisation of intangible assets arising on business combinations (v) 849 519
Affecting operating loss before tax 2,118 3,647
Tax effect of adjusting items - (458)
Total adjusting items after tax 2,118 3,189
(i) Comprises share-based payment charges of £756,000 (2023:
£1,184,000) and the corresponding charge of £14,000 (2023: £90,000) for the
associated employer's social security contributions and are included in the
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) Restructuring costs include provision for redundancy costs of
£343,000 (2023: £252,000) and £13,000 (2023: £723,000) of costs resulting
from the Group's operational efficiency program. Such costs are included in
selling, general, and administrative expenses.
(iv) Comprises the fair value movement on contingent consideration that
arose on the Group's divestment of Xaar 3D Limited. Such costs are included in
selling, general, and administrative expenses. Refer to Note 6 for further
information.
(v) 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.
4. Taxation
The Group calculates the tax credit for the six months ended 30 June 2024 by
applying the expected annual effective tax rate for the year ending 31
December 2024 to the Group's profits chargeable to corporation tax for the
six-month period.
Tax credit
The major components of the tax credit recognised in the Condensed
Consolidated Income Statement are as follows.
Six months ended Six months ended
30 June 2024 30 June 2023
(unaudited) (unaudited)
£'000 £'000
Current tax
Current income tax credit - UK Adjustments in respect of prior years (191) (306)
Current income tax charge - overseas - 46
Adjustments in respect of prior years - (501)
(191) (761)
Deferred tax
Origination and reversal of timing differences - 294
- 294
Total tax credit (191) (467)
Unrecognised deferred tax assets
The Group continues to have significant unrecognised deferred tax assets
consist with the position as at 31 December 2023 (£30,236,000). Full
details of the nature of these balances are disclosed in the Group's Annual
Report and Financial Statements for the year ended 31 December 2023.
5. Earnings per share
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 period. 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 period and any unvested shares which
have met, or are expected to meet, the performance conditions at the end of
the period.
Earnings
Six months ended Six months ended
30 June 2024 30 June
2023
(unaudited)
(unaudited)
£'000
£'000
30 June 2024 30 June 2023
(unaudited) (unaudited)
(Loss)/profit attributable to equity shareholders of the parent -
adjusted
(499) 1,841
Adjusting items
(2,118) (3,189)
Loss attributable to equity shareholders of the parent -
reported
(2,617) (1,348)
Number Number
Number of shares
Weighted average number of ordinary shares in issue
78,647,411 78,475,429
Less: ordinary shares held by the Xaar Technology Employee Benefit Trust
and the Xaar Plc ESOP Trust
(335,556)
(358,282)
Weighted average number of ordinary shares for the purposes of basic EPS
78,311,855 78,117,147
Effect of potential dilutive ordinary shares - share options and awards*
― 726,499
Weighted average number of ordinary shares for the purposes of diluted EPS
78,311,855 78,843,646
*Due to the Group recording a loss in the period 923,973 potentially dilutive
shares are not considered within the calculation.
Pence per share Pence per share
Basic
EPS
(3.3) (1.7)
Diluted
EPS
(3.3) (1.7)
Adjusted basic EPS
(0.6) 3.1
Adjusted diluted EPS
(0.6) 3.1
6. Financial instruments
The Group's activities expose it to a variety of financial risks that include
currency risk, interest rate risk, credit risk and liquidity risk.
The interim condensed consolidated financial statements do not include all
financial risk management information and disclosures required in the annual
financial statements: accordingly, the following disclosures should be read in
conjunction with the Group's financial statements for the year ended 31
December 2023.
The Directors consider there to be no material difference between the carrying
value and the fair value of financial instruments classified as held at
amortised cost. For the items classified as held at fair value, the fair value
of such instruments is recognised in the Condensed Consolidated Statement of
Financial Position as the carrying amount.
Financial instruments held at fair value
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. 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.
Financial instruments that are measured at fair value are classified using a
fair value hierarchy that reflects the source of inputs used in deriving the
fair value. The three classification levels are:
+ Level 1: quoted prices (unadjusted) in active markets for identical assets
or liabilities;
+ Level 2: inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (i.e. as prices) or
indirectly (i.e. derived from prices); and
+ Level 3: from valuation techniques that includes inputs for the asset or
liability that are not based on observable market data (i.e. unobservable
market inputs.
The financial asset at FVTPL is deemed to be a Level 3 instrument. As at 30
June 2024, fair value has been estimated by assuming a straight line reduction
in fair value per percentage change in forecast revenue. Fair value
movements are recognised in the Condensed Consolidated Income Statement in
selling, general and administrative expenses.
The movement in the carrying value of the financial asset is as follows:
30 June 2024 31 December 2023
(unaudited) (audited)
£'000 £'000
Balance at beginning of period/year 10,599 11,606
Earn out received (73) (140)
Milestone consideration received - (497)
Fair value loss on financial assets at FVTPL* (186) (370)
Balance at end of period/year 10,340 10,599
* Includes foreign exchange rate movements
7. Borrowings
30 June 2024 31 December 2023
(unaudited) (audited)
£'000 £'000
Amounts falling due within one year
Invoice discounting facility (1,915) (1,403)
(1,915) (1,403)
Invoice discounting facility
The facility limit is £3 million (2023: £3 million) and operates on a
rolling basis from the original inception date of September 2022. The facility
can be cancelled with a three-month notice period. There are no covenants
attached to the invoice discounting facility.
Interest on the invoice discounting facility is charged daily when the
facility is in an overdrawn position at a rate equivalent to the appropriate
base rate +1.75% pa. There is an annual service fee of £25,000 charged
monthly, and there was a one-off arrangement fee to open the facility of
£10,000. No interest is payable on the unutilised element on the facility.
Further details relating to this facility can be found within Note 27 of the
Group's consolidated financial statements for the year ended 31 December 2023.
Committed facilities
In June 2023, the Group entered into a Revolving Credit Facility (RCF)
agreement of £5 million, which matures in June 2025, with an option to extend
for a further year, subject to lender approval. The agreement includes an
accordion option of a further £2.5 million which can be requested at any time
during the facility term, subject to lender approval and relevant fees. The
facility remained undrawn as at 30 June 2024.
The facility bears a floating interest rate of the Sterling Overnight Indexed
Average (SONIA) rate plus 2.35% margin. A non-utilisation fee of 40% of the
margin is chargeable on undrawn and uncancelled amounts.
The facility is secured by fixed and floating charges over the assets of the
Group. The Group is subject to financial covenants under the facility and has
complied with these at all testing points.
8. Share capital
Authorised, issued and fully paid £'000 Number
At 1 January 2023 7,844 78,446,230
Shares issued during the year (ordinary shares at 10.0p each) 79 783,775
At 31 December 2023 7,923 79,230,005
Shares issued during the period (ordinary shares at 10.0p each) 14 139,378
Balance at 30 June 2024 7,937 79,369,383
The Company has one class of ordinary shares which carries no right to fixed
income.
9. Share-based payments
Long-term incentive plans
During the six months ended 30 June 2024, new options over 1,462,281 shares
were granted (2023: 1,160,074) and 71,560 vested options (2023: 178,969) were
exercised.
The weighted average fair value of options granted as at 30 June 2024 was
91.5p (2023: 155.9p).
Fair value of awards with non-market performance conditions (cumulative
adjusted profit before tax and cumulative revenue) are calculated using the
Black Scholes model. Fair values of awards with market-based performance
conditions (total shareholder return) are calculated using the Monte Carlo
model. The inputs into the models for awards granted in the current and prior
periods were as follows:
Six months ended 30 Six months ended 30
June 2024 June 2023
Date of grant 29 April 2024 9 May 2023
Share price at grant 115p 186p
Exercise price nil nil
Expected volatility 51.5% 56.8%
Risk-free rate 4.5% 3.8%
Contractual life 3 years 2.91 years
All LTIP awards are subject to achievement of the performance conditions and
can be exercised up to ten years after the grant date. Save as permitted in
the LTIP rules, awards lapse on an employee leaving the Group.
Options exercised in the period were satisfied in full by the issue of new
shares. In the prior period, 85,469 of the options exercised were satisfied
using shares held by the Xaar Plc ESOP Trust, with the remaining 93,500 being
satisfied by the issue of new shares.
Deferred bonus plans
No new options were granted in the period (2023: 45,456) and no vested options
were exercised (2023: none).
Save as you earn schemes
No new options were granted in the period (2023: 494,309). A total of 62,524
vested options were exercised (2023: 679,695).
10. Dividends
No interim dividend was proposed or paid during either the current or
preceding period. The Board of Directors are mindful of the importance of
dividends to its shareholders and intends to resume the payment of dividends
as soon as conditions allow.
11. Notes to the cash flow statement
Six months ended Six months ended
30 June 2024 30 June 2023
(unaudited) (unaudited)
£'000 £'000
Loss before tax (2,808) (1,815)
Adjustments for:
Depreciation of property, plant and equipment 1,404 1,438
Depreciation of right-of-use assets 550 542
Amortisation of intangible assets 911 581
Net interest expense 197 198
Unrealised currency translation losses 46 280
Share-based payments charge 770 1,274
Fair value losses on financial assets at FVTPL 186 514
Gain on disposal of property, plant and equipment - (11)
Gain on disposal of intangible assets - (2,036)
Net gain on disposal of leases (5) -
(Decrease)/increase in provisions (315) 25
Operating cash flows before movements in working capital 936 990
Increase in inventories (207) (3,167)
Decrease/(increase) in receivables 1,316 (6)
Increase/(decrease) in payables 1,823 (1,044)
Cash generated/(utilised) from operations 3,868 (3,227)
Analysis of changes in net debt
Cash and Lease liabilities Deferred consideration
cash Borrowings Net debt
equivalents
£'000 £'000 £'000 £'000 £'000
Net debt as at 1 January 2023 8,546 (8,832) (379) (3,740) (4,405)
Additions to leases - (827) - - (827)
Cash flows (1,067) 591 (649) - (1,125)
Foreign exchange and other non-cash movements (176) (70) (32) (66) (344)
Net debt as at 30 June 2023 7,303 (9,138) (1,060) (3,806) (6,701)
Cash flows (160) 593 (266) 1,746 1,913
Foreign exchange and other non-cash movements (8) (153) (77) (55) (293)
Net debt as at 31 December 2023 7,135 (8,698) (1,403) (2,115) (5,081)
Additions to leases - (75) - - (75)
Cash flows 1,685 883 (473) 1,400 3,495
Foreign exchange and other non-cash movements (95) (136) (39) (23) (293)
Net debt as at 30 June 2024 8,725 (8,026) (1,915) (738) (1,954)
12. Date of approval of interim financial statements
The interim financial statements cover the period 1 January 2024 to 30 June
2024 and were approved by the Board on 17 September 2024.
Further copies of the interim financial statements are available from the
Company's registered office, 3950 Cambridge Research Park, Waterbeach, CB25
9PE, and can be accessed on the Xaar plc website, www.xaargroup.com
(http://www.xaargroup.com) .
Risks and uncertainties
Several potential risks and uncertainties exist which could have a material
impact on the Group's performance over the second half of the financial year
and could cause actual results to differ materially from expected and
historical results.
The Group has continued identifying, evaluating, and managing the key risks
which could impact the Group's performance over the six months to 30 June
2024.
The full list of principal risks identified at the year-end and a description
of how they relate to the Group's strategy and the approach to managing them
are set out on pages 19 to 25 of the Xaar plc Annual Report and Financial
Statements 2023, which is available on the Group's website at www.xaar.com.
(http://www.xaar.com.) Management and the Board have reviewed these risks and
concluded they will continue to remain relevant for the second half of the
financial year. The principal risks as at 30 June 2024, showing any changes
from the 2023 year-end disclosure, are summarised in the table below:
Risk Area: Market
Description Likelihood/Magnitude Changes since 31 December 2023
1. Competition Unlikely/Very High No change.
Monitoring and adjusting
to competitive dynamics
such as pricing/promotion,
innovation, resource
investments and market
share changes
2. Failure to identify market requirements Possible/Very high Increased.
Successfully developing
products with the More work required than anticipated to help customers integrate new products.
characteristics that meet
market requirements within the necessary timescale.
3. Commercialising and Probable/Very High Increased.
maintaining products with
cutting edge technology Project to help customers with sourcing high viscosity inks.
Creating value by generating
innovative products that
deliver significant customer
benefit.
4. Merger and acquisition opportunities Probable/Medium No change.
Our strategy is predicated primarily on organic growth. Seek opportunities to
expand, create synergies
and generate greater
shareholder value.
Risk Area: Operational
5. Climate change Possible/Medium No change
Identifying risks and
scenario planning of physical
and transition impact upon
operations and developing
mitigating actions.
6. Organisational capability Possible/High Increased.
Having the right people in
the right roles. Increased challenges in recruiting and retaining key workforce skills.
7. Partnerships and alliances Possible/Medium No change.
Working with the right
companies, at the right time on the right terms to deliver long-term value.
8. Supply chain Unlikely/Medium Reduced.
Optimising sourcing and
supply chain relationships Impact of shipping disruptions in the Red Sea reduced.
to drive performance and
minimise operational issues.
9. War in Ukraine and the Probable/Medium Reduced.
Middle East
The war in Ukraine continues to impact the near-term outlook for Energy prices have further stabilised and further work on energy cost control
undertaken. Have built new customer relationships to diversify the customer
the UK and global economies and increased uncertainty over the path base for key sectors and regions.
ahead. Although energy prices have stabilised, they continue to be a concern
for the UK economy which also result in further upward pressure on inflation
and a potential hit to GDP growth. The conflict
between Israel and Hamas has further destabilised the Middle East.
10. Laws and regulations Compliance with key laws and regulations in all Possible/Medium No change.
countries Group operates in.
Risk Area: IT
11. IT systems and Possible/High No change.
control environment
Strengthen IT infrastructure
and key IT systems. Enhance and build
resilience by investing in
and implementing new IT
infrastructure or IT systems.
12. Cyber security risk Possible/Medium No change.
Loss of systems or
confidential data due to
a malicious cyber-attack,
leading to disruption to
business operations and
loss of data.
Risk Area: Financial
13.Ability to access Unlikely/High No change.
sufficient capital
Ability to access sufficient
capital to fund growth opportunities.
14. Customer credit exposure Possible/Low No change.
Offering credit terms
ensuring recoverability is
reasonably assured.
15. Inventory obsolescence Probable/High No change.
Holding excess inventory
levels when compared
to demand, that leads
to increased risk of
obsolescence and write-off before consumption.
16. Exchange rates Probable/Medium No change
Monitoring global economic
events and mitigating any
resulting significant exchange
rate impacts
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