12th Sep 2007 07:01
Xaar PLC12 September 2007 FOR IMMEDIATE RELEASE 12 September 2007 Xaar plc INTERIM RESULTS FOR THE 6 MONTHS TO 30 JUNE 2007 Xaar plc ("Xaar"), the inkjet printing technology group headquartered inCambridge, has announced its unaudited results for the six months ended 30 June2007. KEY POINTS: • The business has returned to revenue growth after the set-back in H2,2006 with progress in Asia and the Americas and complete recovery in the important Chinese market. • Results for the period reflect the costs of the new Huntingdon production facility which is now fully operational following commencement of production in January 2007. • The financial results were: o Turnover was up 5% to £23.4m (2006: £22.3m); o Gross margins were 53% for the period (2006: 58%), reflecting the dilutive effect of new product manufacturing - and likely to remain broadly at this level for the full year; o Costs associated with Huntingdon were £1.2m in the period (2006: nil); o Profit before tax was £3.1m (2006: £4.8m); o Earnings per share were 3.6p (2006: 5.5p); o Net cash and cash equivalents at 30 June 2007 were £10.0m (31 December 2006 : £16.3m) after making the final stage payments on equipment for the new Huntingdon facility. • Although an interim dividend is not being paid, as last year, a final dividend for the year is expected to be declared, subject to second half performance, (2006: 2.0p). • Strong interest in new products, particularly in the Platform 3 Xaar 1001. • Business development is being focused on sales into the packaging and label markets. On outlook, Chairman, Phil Lawler stated: "Currently less than 10% of commercial printing worldwide is understood to beproduced using inkjet technology, with the bulk of commercial print producedusing traditional printing methods. From my own experience, it is clear inkjetmarkets offer significant long term growth prospects. At Xaar, we have worldleading technology and a growing reputation for performance. Our challenge is tohelp accelerate the development of new printing machines that utilise ourtechnology, and which encompass our highly functional print heads. As inkjettechnologies mature, and gain wider acceptance, we believe Xaar is wellpositioned to capitalise on the opportunities this is now bringing." Contacts Xaar plc: today: 020-7367-8888Ian Dinwoodie, Chief Executive Thereafter: 01223-423663Nigel Berry, Group Finance Director & Deputy www.xaar.comChief Executive Bankside Consultants:Steve Liebmann 020-7367-8883 / 07802-888159 Chairman's statement Introduction In what is my first statement as Chairman of Xaar plc, I am pleased to report onthe continued progress for the group. Sales of established products haverecovered well from the second half of last year and the potential for our newertechnologies is undiminished. Last year we invested significantly in the newproduction facility in Huntingdon; production began as planned in January, andthis facility is now fully operational. The results for the first half reflect the additional costs of this investmentin our future. It is our strong belief that we have developed the right productsto benefit from what will become a rapid escalation in the rate of adoption ofinkjet technology by more traditional areas of the commercial print market,although exact timing remains difficult to predict. Results Group revenues for the six months ending 30 June 2007 were in line with theboard's expectations at £23.4m (2006: £22.3m), an increase of 5% over the sameperiod last year and 18% ahead of the half year to 31 December 2006. Themajority of the revenue was product sales of £22.4m (2006: £21.1m), with royaltyincome of £0.8m (2006: £0.7m) and development fees of £0.2m (2006: £0.5m). Royalty growth continued, albeit at a modest rate, confirming the relevance ofXaar's technology in the market. As expected, development fees more than halvedas Agfa, with which we have a technology agreement, has moved into thecommercialisation stage of its inkjet programme, with a consequent reduction inits ongoing research and associated development payments to Xaar. Profitability was also in line with expectations. The overall group gross marginfor the period was 53%, reflecting the dilutive effects of the early stages ofnew product manufacturing in Sweden and the initiation of production at the newHuntingdon facility. As the production of new products ramps up, gross marginsare expected to remain broadly at this level during the second half year. Overall, operating expenses increased by £0.9m, including increased amortisationof capitalised research and development costs and increased staff incentivepayments. Profit before tax was £3.1m (2006: £4.8m) after providing £0.4m (2006: £0.3m)for share-based payments; earnings per share were 3.6p (2006: 5.5p). Cash at the half year was £10.0m (2006: £16.3m) reflecting the final stagepayments on equipment in the new Huntingdon facility as well as the increasedfinal dividend payment for 2006 of £1.2m. The group's only debt at the half yearwas the outstanding balance on certain equipment leases of £1.4m (2006: £1.0m). Business commentary Shareholders will recall the difficulties in China during the second half oflast year; I am pleased to confirm that sales have more than fully recovered.Revenue growth for Asia overall was 17%, driven by strong growth in both Chinaand India. Sales to the Americas, whilst representing only 11% of the total group sales,grew by 45% in the period amid encouraging signs from our South American salesoperation. The pleasing growth shown in Asia and the Americas was not matched in Europe,which showed a 20% decline over the period although revenues were up 4% comparedto the second half of last year. We do not believe the first half shortfallreflects any fundamental trend, but is rather due to the individual performancesof certain customers in the period. Shareholders will be aware that our geographical split reflects the location ofthe printing machine manufacturer, and not the end users of those machines;consequently fluctuations in sales to particular territories do not alwaysrelate directly to the end user market in those areas. Markets and technology Inkjet is firmly established as the 'technology of choice' for the large andgrand-format commercial print sector. This provides a solid market for ourPlatform 1 products, which continue to grow even though our best-selling XJ128printhead was first introduced in its original form over ten years ago. Xaar'snewer Platform 2 and Platform 3 products represent incremental markets. Thereare an increasing number of these products under test with global printingequipment manufacturers and ink companies, and we expect some of thesedevelopments to move to commercial production later this year, with othersmaking that transition in 2008. As we have previously highlighted, the timing ofsuch printing machinery product launches is not in the company's control andtherefore is difficult to predict. However, once the newer products are inproduction we can look forward to sustained long-term revenue from them, as withour earlier Platform 1 products. In June 2007, during the international FESPA exhibition in Berlin, we gave thefirst public demonstration of four colour, single pass, continuous web-basedprinting using our latest Xaar 1001 product. This demonstration created asignificant amount of positive interest and, together with a number of othersales and marketing initiatives, is creating a healthy spread of evaluation kitsinstalled across commercial printing markets. This adds further to the pipelineof potential future sales. The markets for non-print related uses of inkjet continue to look positive inthe longer term, but more immediate opportunities for our technology, and theXaar 1001 product in particular, exist in packaging markets. Accordingly, weintend now to focus much of our business development activities on the packagingand label markets. Board changes Steve Temple, 60, one of the founders of Xaar and mainstay for innovation andpatent registrations for so many years, has decided to step down from the boardand from his role as Technical Director. We thank Steve for his immensecontribution to Xaar, and to the establishment of the very successful Cambridge'inkjet cluster'. Following a handover period, Steve will remain a consultant tothe company. We are pleased to have appointed Ramon Borrell as Research and DevelopmentDirector with effect from September of this year. Over the last 13 years, Ramonhas held various senior positions within the research and development team atHewlett-Packard's large format printing division, based in Spain, and as aresult joins us with a good understanding of inkjet and its markets. Dividend In line with recent years, it is not our intention to pay an interim dividendbut, subject to second half performance, it is our intention to pay a dividendfor the full year. Outlook Currently less than 10% of commercial printing worldwide is understood to beproduced using inkjet technology, with the bulk of commercial print producedusing traditional printing methods. From my own experience, it is clear inkjetmarkets offer significant long term growth prospects. At Xaar, we have worldleading technology and a growing reputation for performance. Our challenge is tohelp accelerate the development of new printing machines that utilise ourtechnology, and which encompass our highly functional print heads. As inkjettechnologies mature, and gain wider acceptance, we believe Xaar is wellpositioned to capitalise on the opportunities this is now bringing. Phil LawlerChairman11 September 2007 Consolidated income statementfor the six months ended 30 June 2007 Six months Six months Twelve months ended ended ended 30 June 30 June 31 December 2007 2006 2006 (unaudited) (unaudited) (audited) Notes £'000 £'000 £'000Revenue 1 23,441 22,296 42,207Cost of sales (11,092) (9,274) (18,096)Gross profit 12,349 13,022 24,111Distribution costs (1,962) (2,032) (4,108)Administrative expenses (7,396) (6,410) (13,426)Operating profit 2,991 4,580 6,577Investment income 193 233 451Finance costs (62) (39) (116)Profit before tax beforeabortive deal costs andshare-based payments 3,553 5,082 7,921Abortive deal costs - - (298)Share-based payments (431) (308) (711)Profit before tax 3,122 4,774 6,912Tax (874) (1,432) (2,068)Profit for the periodattributable toshareholders 2,248 3,342 4,844Earnings per shareBasic 2 3.6p 5.5p 7.9pDiluted 2 3.5p 5.2p 7.6p Dividends paid in the period amounted to £1,218,000 (six months to 30 June 2006:£921,000; twelve months to 31 December 2006: £903,000). Consolidated statement of recognised income and expensefor the six months ended 30 June 2007 Six months Six months Twelve months ended ended ended 30 June 30 June 31 December 2007 2006 2006 (unaudited) (unaudited) (audited) £'000 £'000 £'000Exchange differences on translation 55 (37) (113)of foreign operations(Losses)/gains on cash flow hedges (18) 1,487 1,197taken in equityTax on items taken directly to equity 222 (1,198) (415)Net income recognised directly in 259 252 669equityProfit for the period 2,248 3,342 4,844Total recognised income and expense 2,507 3,594 5,513for the period Consolidated balance sheetas at 30 June 2007 As at As at As at 30 June 30 June 31 December 2007 2006 2006 (unaudited) (unaudited) (audited) £'000 £'000 £'000Non-current assetsProperty, plant and equipment 11,886 8,633 11,990Goodwill 720 720 720Other intangible assets 7,097 4,770 7,030Investments 2,020 1,768 1,931Deferred tax asset 916 607 1,383 22,639 16,498 23,054Current assetsInventories 4,098 3,358 3,690Trade and other receivables 7,041 7,444 6,135Current tax assets 834 188 757Cash and cash equivalents 10,033 16,264 12,438Derivative financial instruments 36 290 - 22,042 27,544 23,020Total assets 44,681 44,042 46,074Current liabilitiesTrade and other payables (7,181) (8,986) (7,928)Other financial liabilities (191) - (185)Current tax liabilities (308) (3,163) (1,264)Obligations under finance leases (453) (490) (468)Provisions (164) (188) (209)Derivative financial instruments (18) - - (8,315) (12,827) (10,054)Net current assets 13,727 14,717 12,966Non-current liabilitiesDeferred tax liabilities (1,635) - (1,635)Other financial liabilities (752) - (865)Obligations under finance leases (42) (512) (267) (2,429) (512) (2,767)Total liabilities (10,744) (13,339) (12,821)Net assets 33,937 30,703 33,253EquityShare capital 6,275 6,147 6,201Share premium 10,048 9,512 9,669Own shares (4,465) (3,420) (3,420)Other reserves 3,528 2,695 3,097Hedging and translation reserves 635 872 593Retained earnings 17,916 14,897 17,113Equity attributable to shareholders 33,937 30,703 33,253Total equity 33,937 30,703 33,253 Consolidated cash flow statementfor the six months ended 30 June 2007 Six months Six months Twelve months ended ended ended 30 June 30 June 31 December 2007 2006 2006 (unaudited) (unaudited) (audited) £'000 £'000 £'000Net cash from operating activities 2,905 6,791 8,692Investing activitiesInterest received 193 233 450Purchases of property, plant and (2,177) (2,626) (7,274)equipmentProceeds on disposal of property,plant and equipment - 5 5Purchases of trading investments (89) (141) (427)Payments to acquire intangible assets (1,084) (1,412) (3,420)Net cash used in investing activities (3,157) (3,941) (10,666)Financing activitiesDividends paid (1,218) (921) (903)Proceeds from issue of ordinary share 449 162 384capitalNew borrowings - - 1,050Repayments of borrowings (107) - -Repayments of obligations under (224) (261) (520)finance leasesPurchase of own shares (1,045) - -Net cash (outflow)/inflow from (2,145) (1,020) 11financing activitiesNet (decrease)/increase in cash andcash equivalents (2,397) 1,830 (1,963)Effect of foreign exchange rate (8) 39 6changesCash and cash equivalents at 12,438 14,395 14,395beginning of periodCash and cash equivalents at end of 10,033 16,264 12,438period Notes to the interim financial informationfor the six months ended 30 June 2007 1. Business and geographical segments Business segments For management reporting purposes, the group's operations are currently analysedaccording to product type. These product groups are the basis on which the groupreports its primary segment information. Segment information about these product types is presented below: Six months Six months Twelve months ended ended ended 30 June 30 June 31 December 2007 2006 2006 (unaudited) (unaudited) (audited) £'000 £'000 £'000RevenuePrintheads and related products 22,353 21,112 39,918Development fees 244 497 748Licence fees and royalties 844 687 1,541Total revenue 23,441 22,296 42,207 Geographical segments The group's operations are located in Europe, Asia and North and South America.The following table provides an analysis of the group's revenue by geographicalmarket, which is considered to be the group's secondary segment: Six months Six months Twelve months ended ended ended 30 June 30 June 31 December 2007 2006 2006 (unaudited) (unaudited) (audited) £'000 £'000 £'000Asia 13,940 11,955 23,937Europe and Middle East 6,800 8,479 14,997Americas 2,701 1,862 3,273Total revenue 23,441 22,296 42,207 2. Earnings per ordinary share - basic and diluted The calculation of basic and diluted earnings per share is based upon thefollowing data: Six months Six months Twelve months ended ended ended 30 June 30 June 31 December 2007 2006 2006 (unaudited) (unaudited) (audited) £'000 £'000 £'000EarningsEarnings for the purposes of basic earningsper share being net profit attributable toequity holders of the parent 2,248 3,342 4,844Number of sharesWeighted average number of ordinary shares forthe purposes of basic earnings per share 62,246,666 61,323,233 61,447,492Effect of dilutive potential ordinary shares:Share options 1,729,183 2,405,029 2,221,595Weighted average number of ordinary sharesfor the purposes of diluted earningsper share 63,975,849 63,728,262 63,669,087 2. Earnings per ordinary share - basic and diluted continued Adjusted earnings per share The calculation of earnings per share excluding abortive deal costs andshare-based payments is based on earnings of: Six months Six months Twelve months ended ended ended 30 June 30 June 31 December 2007 2006 2006 (unaudited) (unaudited) (audited) £'000 £'000 £'000Earnings for the purposes of basicearnings per share being net profitattributable to equity holders of theparent 2,248 3,342 4,844Abortive deal costs - - 298Share-based payments 431 308 711Tax effect of adjusting items (129) (92) (303)Profit after tax excluding abortivedeal costs and share-based payments 2,550 3,558 5,550 The denominators used are the same as those detailed above for both basic anddiluted earnings per share. Earnings per share excluding abortive deal costs and share-based payments: Six months Six months Twelve months ended ended ended 30 June 30 June 31 December 2007 2006 2006 (unaudited) (unaudited) (audited) £'000 £'000 £'000Basic 4.1p 5.8p 9.0pDiluted 4.0p 5.6p 8.7p This adjusted earnings per share information is considered to provide a fairerrepresentation of the group's trading performance year on year. 3. Financial information These interim financial statements do not constitute statutory financialstatements within the meaning of section 240 of the Companies Act 1985. Theresults for the year ended 31 December 2006 have been extracted from thestatutory financial statements, which have been filed with the Registrar ofCompanies. The auditor's report on those accounts was unqualified and did notcontain a statement made under section 237 (2) or section 237 (3) of theCompanies Act 1985. The unaudited interim financial statements for the six months ended 30 June 2007have been prepared on the basis of the accounting policies set out in the mostrecently published financial statements of the group for the year ended 31December 2006. 4. Date of approval of interim financial statements The interim financial statements cover the period 1 January 2007 to 30 June 2007and were approved by the board on 11 September 2007. The interim financial statements will be sent to shareholders in due course.Further copies will be available from the company's registered office, SciencePark, Cambridge CB4 0XR and can be accessed on the Xaar plc website,www.xaar.com. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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