Final Results

Xaar PLC
13 February 2002


FOR IMMEDIATE RELEASE                                           13 February 2002


                                    Xaar plc

               PRELIMINARY RESULTS FOR YEAR ENDED 31 DECEMBER 2001

Xaar plc ('Xaar'), the ink jet printing technology group headquartered in
Cambridge, has announced its preliminary audited results for the year ended 31
December 2001.

Key points :

-          Turnover was £24.0m (2000 : £22.7m).

-          Profit before tax and exceptional items was £1.6m (2000 : £2.7m).

-          After £1.0m exceptional restructuring charge associated with moving
           UK production to Swedish plant, pretax profit was £0.6m
           (2000 : £2.7m).

-          Despite strong first half performance, second half was held back by
           manufacturing problems in Cambridge and the absence of new technology
           licence revenue.

-          XaarJet printhead manufacturing and ink revenues increased 24% to
           record £19.5m (2000 : £15.7m), royalty income jumped 70% to £1.3m 
           (2000 : £0.8m) but licensing revenue was £2.0m (2000 : £6.0m).

-          Year-end cash balances were £9.8m (2000 : £8.0m), the highest level
           for over three years, after R&D of £4.3m and capital investment (net)
           of £1.2m.

On outlook, Chairman, Arie Rosenfeld stated :

'Despite the unsettled global economic conditions, demand for XaarJet products
was good throughout 2001 and the order book for the beginning of 2002 remains
solid.  The reorganised manufacturing operations are able progressively to
satisfy this demand as both volume and yield improve.  Meanwhile, we continue to
have licence discussions with potential new licensees, although fees from this
business remain unpredictable by their nature, both in terms of timing and
amount.

We approach the current year with a firm belief that the fundamentals of the
business remain strong and provide a secure platform from which to achieve
further progress in establishing Xaar as a mainstream printing technology
provider.'

Jan Fineman, Chief Executive or Gordon MacLeod, Finance Director at  Xaar on:    020-7466-5000 today
                                                                             01223-423663 thereafter

Steve Liebmann or Lisa Baderoon at Buchanan Communications on :                        020-7466-5000



                              CHAIRMAN'S STATEMENT

INTRODUCTION

We were able to report a strong first half with good growth in the sales of
printheads and inks as well as two licence upgrades.  However, as reported on 17
October 2001, progress in the second half was held back by manufacturing
problems in Cambridge which prevented us meeting the demand for the XaarJet 500.
A major group restructuring, with the relocation of UK production to our
subsidiary in Sweden, is improving manufacturing efficiency significantly and
creating the foundation for a faster expansion of manufacturing output during
2002.  No new licence agreements were concluded during the second half,
reflecting in part a hesitancy by potential licensees to make a substantial
strategic and capital commitment in difficult global economic conditions.
Although our results for the year are significantly weaker than we had
originally planned, the year-end cash balances stood at their strongest for over
three years.

RESULTS AND FINANCE

Group turnover for the year to 31 December 2001 grew to £24.0m (2000: £22.7m)
and profit before tax and exceptional items was £1.6m (2000: £2.7m).  The
restructuring of the manufacturing activities has incurred an exceptional charge
of £1.0m.  XaarJet's manufacture and sale of printheads and inks increased by
24% to £19.5m (2000: £15.7m), whilst technology revenues (licence and
development fees and royalties) of £4.5m (2000: £7.0m) were significantly less
than last year due to no new licences being concluded.  This decrease in
licensing revenues to £2.0m (2000: £6.0m) has had a significant impact on
profitability.  Royalty income for the full year was £1.3m (2000: £0.8m), an
increase of 70%.

Group cash has continued to grow, and stands at £9.8m compared with £8.0m at 31
December 2000, after research and development expenditure of £4.3m and capital
expenditure (net) of £1.2m.

BUSINESS REVIEW

We continue to develop our core intellectual property by expanding the patent
portfolio, which now stands at over 650 patents and patent applications - nearly
three times the number than at the time of the flotation in 1997.  This provides
us with the platform from which to exploit commercially the technology in the
office, industrial and commercial printing markets.

Licensing and royalties - No further licence fees have been received since we
reported the upgrades with Seiko Instruments Inc. and Toshiba TEC earlier in the
year.  We continue to find that our well protected and growing patent portfolio
generates discussions with potential new licensees.  The concentration of
research and development in Cambridge, resulting from the recent restructuring,
is expected to enable Xaar to further widen the scope of the technology and
thereby our future licensing opportunities.

New product launches and printhead sales to OEMs were both seen during the year
from several licensees.  Growth in royalty income depends on the end sales of
products by licensees; in that context, we were encouraged by the technical and
commercial progress reported at our annual licensee seminar in Japan during
September.

XaarJet  -  Throughout the year demand for all of our printheads remained good -
and for the XJ500, demand has consistently exceeded supply.  To address this
issue, by April 2002 all XJ500 production will take place at our subsidiary in
Sweden which has excellent facilities and spare capacity.  This transfer is
proceeding to plan.

We have increased the ink product portfolio during 2001 by working with partners
to provide inks specifically matched to XaarJet printheads.  The benefits of
this work are beginning to materialise with ink revenues increasing by 50%
during 2001.

Key to XaarJet growth in 2001 was a successful drive into the Asian markets, in
particular China.  The opportunities in the Chinese domestic market for digital
printing of banners, posters and textiles are significant - the development of
printing machines by Chinese manufacturers incorporating our printhead
technology is continuing apace in this region.

Page Wide Array ('PWA') -  The wide printhead development accounted for a third
of R&D effort during 2001 and culminated with the first fully functioning
prototype printhead in December, following a successful colour demonstration in
the first half.  This leading-edge development has generated valuable
intellectual property - the licensee upgrades secured in the first half endorsed
this.

The potential markets for the PWA have evolved.  We believe that digital press
type printing will move more quickly into the general office, replacing some
trade printing.  As a result, Xaar's patents surrounding this area are becoming
key in ongoing licence discussions.  Meanwhile, initial revenues are expected
during 2002 as development partners are secured to commercialise the technology
in other industrial and commercial applications, such as labelling and
packaging.

BOARD CHANGES

We were pleased to welcome Ian Dinwoodie to the Board in November as Group
Operations Director.  His experienced background in hi-tech manufacturing of
leading imaging equipment makes him ideally suited to the role.  We have already
seen significant improvements in production volumes and yields since his joining
the company in September.  Finally, Gordon MacLeod, who was our Group Financial
Controller for three years before being appointed Finance Director in March
2001, has informed the Board that he intends to return to his native New Zealand
with his family.  Gordon has agreed to remain in his role until such time as a
suitable replacement is recruited and a full hand over completed.

OUTLOOK

Despite the unsettled global economic conditions, demand for XaarJet products
was good throughout 2001 and the order book for the beginning of 2002 remains
solid.  The reorganised manufacturing operations are able progressively to
satisfy this demand as both volume and yield improve.  Meanwhile, we continue to
have licence discussions with potential new licensees, although fees from this
business remain unpredictable by their nature, both in terms of timing and
amount.

We approach the current year with a firm belief that the fundamentals of the
business remain strong and provide a secure platform from which to achieve
further progress in establishing Xaar as a mainstream printing technology
provider.


Arie Rosenfeld                                                  12 February 2002
CHAIRMAN



                         CHIEF EXECUTIVE'S REVIEW

After a strong first half year, subsequent production problems at our Cambridge
facility and the absence of a new full licence resulted in only modest revenue
growth and reduced profitability for the full year.  Nevertheless, progress was
made in a number of key areas, with annual XaarJet revenues up significantly,
record XaarJet production in Q4 and cash at its highest level for three years.

DEVELOPMENT ACTIVITY

Xaar is committed to further developing its core technology, thereby broadening
licensing appeal and maintaining our position at the forefront of digital
printing.  A dedicated technology R&D group has been working in Cambridge the
past year to increase the performance of our ink jet technology, to reduce the
cost of exploiting it and to support licensing discussions.  This team includes
a number of the originators of Xaar's technology.

Good progress has been made in the development of specific printheads
incorporating our technology.  The new XaarJet XJ126 printhead was shipped to
customers in the fourth quarter of the year and we are now working on a
greyscale version of this product to open up further markets.  This product is
due for launch later this year.

Development of a custom printhead for a specific customer was started in 2000
and has continued on schedule.  Production for this customer is planned to
commence at our Swedish facility in 2003.

PAGE WIDE ARRAY ('PWA')

The PWA has been a major product development project over the last three years
involving nearly a third of our engineering resources during the past year.
Colour printing was successfully demonstrated and the printhead has been
redesigned to enable small-scale manufacture at Xaar from 2002.

The original focus for the PWA printhead was professional 'digital press'
printing, delivering the flexibility of digital ink jet to traditional
commercial printing applications.  More recently it has become evident that this
market has evolved to reveal additional opportunities in office printing.  In
addition, the digital press market has not developed at the speed originally
envisaged by market forecasts.

Xaar remains committed to the PWA development.  Digital press is but a single
application for this revolutionary ink jet product.  We believe that the market
and technology for digital press type printing now suggests a faster move into
general office applications, replacing some trade printing.  The technology
platform developed during the PWA project provides us with licensing
opportunities to address this movement.  Nevertheless, last year we also
repositioned the PWA to address a far wider range of applications, particularly
embracing industrial printing - an area in which XaarJet is already well
established - with customer involvement already under way.  This will generate
the first, albeit modest, revenues from PWA printhead and ink sales over the
coming year.

Finally, it is worth noting that Xaar has been able to develop a completely new
and higher performance printhead architecture through the PWA printhead project;
this will be implemented in future generations of printheads manufactured by
Xaar and its licensees.

The PWA development remains central to Xaar's continuing success.  The colour
printing demonstration given in 2001 represents a unique achievement in ink jet
printing and is a benchmark for our technology.

LICENSING

Both Seiko Instruments and Toshiba TEC upgraded their licence agreements during
2001, giving them access to all Xaar intellectual property including our most
recent innovations.  It is encouraging that existing licensees should wish to
extend their involvement with Xaar technology, illustrating the value of the
continuing development of our core technology platform.

Despite interest from companies in the US and Asia, no new full licence was
concluded during 2001.  While the cost of a licence has not been an issue in any
recent discussions, it is important to recognise that a significant investment
is required to effectively exploit any new technology platform.  In the second
half of the year, we detected a short-term reluctance to undertake such a
commitment attributable, at least in part, to the prevailing global economic
situation.

Xaar remains focused on exploiting licensing opportunities, and we are
dedicating engineering resources to support the ongoing discussions.  As we have
stated previously, however, conclusion of such agreements is very difficult to
predict.

Royalties grew by 70% with new generations of products launched.  However, we
still believe that royalty revenues should play a greater part in Xaar's future
growth, and this belief was supported by the information exchanged at our 2001
Licensee Seminar in Japan.  A number of new product launches by licensees is
expected in 2002.

XAARJET MANUFACTURING

In October 2001, Xaar announced that recent XJ500 printhead production had not
increased at the rate originally planned.  An inability to meet the strong
market demand for this product resulted in the decision to restructure our
manufacturing operations.

We are in the process of transferring XJ500 production to our Swedish facility.
The transfer is being carefully controlled and is on schedule for completion by
the end of April 2002.

In parallel, we have worked hard to address the short-term problems directly
affecting XJ500 output.  Through working closely with key suppliers, and
focussing on manufacturing process improvement, real progress was made during
the final quarter of 2001.  This enabled us to come closer to meeting the
demands from customers during the final months of the year and to achieve record
XaarJet revenues in the fourth quarter.

Production of other XaarJet printheads in Sweden was unaffected by such issues
during 2001.  Record numbers of XJ128 printheads were shipped during the year,
in addition to the first shipments of the new XJ126 product during the final
quarter.

RESTRUCTURING

The creation of a world class manufacturing facility in Sweden will enable Xaar
to focus its resources on increasing production capacity and yields.  ISO9001
accreditation for the plant was achieved in 2001 and further investment of
approximately £2.5 million is planned for 2002 in order to upgrade capacity.

The facility on the Science Park in Cambridge is now principally dedicated to R&
D on specific products, as well as on the core technology itself.

As with all restructuring, smooth execution has been critical.  The key
manufacturing processes of the XJ500 have already been established in Sweden.
We plan to cease parallel production in Cambridge by April 2002.

XAARJET SALES

Throughout 2001, we experienced a consistently high level of demand for XaarJet
printheads.  Since the announcement of the interim results, we have won nearly
50 new customers, against a total of 157 active customers during the period.
Over 40 development kits for the new XJ126 printhead have been sold, clearly
illustrating the potential of this new product.

In the short-term, our growth is driven by new printer launches by our
customers, who manufacture printing machines using our printheads.  34 new
printers incorporating XaarJet printheads were launched in the second half of
2001 in Europe, Asia and the US.

China has been a very exciting market for us over the last 12 months.  With the
significant potential for digital printing in this region, we recently expanded
our Hong Kong sales office.  The provision of local sales and technical support
will be fundamental to success in China, where customers are primarily involved
in the printing of banners, barcodes and textiles.

The value of ink sales rose by 50% in 2001.  The first inks from the partnership
with Sericol were launched and we added Sunjet, the ink jet division of the
world's largest ink company, to our list of partners.

PRIORITIES FOR 2002

When completed, we expect that the restructuring of XaarJet's manufacturing
operation will enable us to satisfy the strong demand we are experiencing for
our printheads - the transfer is proceeding to plan.

A key motivation for developing our core technology is to generate further
licence fees and royalties.  Xaar's Technology Development Group is working with
our licensing team to support ongoing discussions with interested parties.

While the main thrust for the PWA printhead technology is the generation of
licensing income, it is also expected to contribute increasingly to
manufacturing and ink revenues.  The first printhead and ink sales will be
generated as we start to work with new partners focussed on a variety of
industrial and commercial printing applications during 2002.

Finally, Xaar is committed to supporting its licensees as they exploit the
technology.

PEOPLE

Xaar's staff have had to address a wide range of challenges during 2001.  I
would like to recognise their outstanding efforts to produce record first half
results, and to successfully implement a major restructuring during a very
challenging second six-month period.

As a company, we retain a strong belief in our technology, its potential and in
our plans to exploit it over the coming years.


Jan Fineman                                                     12 February 2002
CHIEF EXECUTIVE




CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the year ended 31 December 2001


                                                        Notes                             2001            2000
                                                                                         £'000           £'000

Turnover                                                                   1            23,982          22,746

Cost of sales                                                                         (11,374)         (9,831)

Gross profit                                                                            12,608          12,915

Other operating expenses (net)                                                        (11,231)        (10,434)

Operating profit                                                                         1,377           2,481

Exceptional item                                                           2           (1,049)               -

Profit on ordinary activities before interest                                              328           2,481

Interest receivable                                                                        315             276
Interest payable                                                                          (67)            (80)

Profit on ordinary activities before taxation                                              576           2,677

Tax on profit on ordinary activities                                       3             (607)           (360)

Retained (loss)/profit for the financial year                                             (31)           2,317

(Loss) / earnings per share - basic                                        4            (0.1)p            4.1p

(Loss) / earnings per share - diluted                                      4            (0.1)p            3.8p


All activities during the financial year relate to continuing operations.


Consolidated statement of total recognised gains and losses for the year ended
31 December 2001


                                                                                            2001            2000
                                                                                           £'000           £'000

Retained (loss)/profit for the financial year                                               (31)           2,317

Loss on foreign currency translation                                                       (489)           (112)

Total recognised gains and losses relating
to the financial year                                                                      (520)           2,205


CONSOLIDATED BALANCE SHEET
as at 31 December 2001


                                                                                            2001            2000
                                                                                           £'000           £'000
Fixed assets
Intangible assets                                                                          1,456           1,642
Tangible assets                                                                            4,336           4,176
Investments                                                                                   20              20

                                                                                           5,812           5,838

Current assets
Stocks                                                                                     1,125             921
Debtors                                                                                    5,517           4,928
Cash and liquid resources                                                                  9,760           8,008

                                                                                          16,402          13,857
Creditors: amounts falling due within one year                                           (5,271)         (4,025)


Net current assets                                                                        11,131           9,832


Total assets less current liabilities                                                     16,943          15,670

Creditors: amounts falling due after more than one year                                    (470)           (126)
Provisions for liabilities and charges                                                     (692)               -

Net assets                                                                                15,781          15,544

Capital and reserves

Called-up share capital                                                                    5,934           5,742
Share premium account                                                                     11,009          10,484
Other reserves                                                                             1,095           1,055
Accumulated deficit                                                                      (2,257)         (1,737)

Shareholders' funds - all equity                                                          15,781          15,544



CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 December 2001


                                                                                            2001            2000
                                                                                           £'000           £'000

Net cash inflow from operating activities                                                  2,769           5,333

Returns on investments and servicing of finance                                              248             193

Capital expenditure and financial investment                                             (1,192)         (1,530)

Cash inflow before management
of liquid resources and financing                                                          1,825           3,996

Management of liquid resources                                                             1,925         (1,815)

Financing                                                                                    238           (153)

Increase in cash in the year                                                               3,988           2,028




NOTES

1.                    Segmental information

Turnover by class of business:
                                                                                            2001            2000
                                                                                           £'000           £'000

Licence and development fees                                                               3,188           6,223
Royalties                                                                                  1,306             769
Printheads and related products                                                           19,488          15,754

                                                                                          23,982          22,746

Turnover by geographical segment:
                                                                                            2001            2000
                                                                                           £'000           £'000

Europe                                                                                     6,652           9,076
Rest of World                                                                             17,330          13,670

                                                                                          23,982          22,746

All turnover in 2001 and 2000 originated from within Europe. No additional
segmental information is provided on the basis that it would be seriously
prejudicial to the interests of the group.

2.                  Exceptional item reported after operating profit

The costs of a fundamental restructuring of continuing operations arose in
respect of the transfer of all volume production to the XaarJet AB facility,
which has had a material effect on the nature and focus of the group's
operations.

3.                  Taxation

The effective tax rate in the year has changed significantly due to XaarJet AB
having fully utilized brought forward tax losses during the year.

4.                  (Loss)/earnings per share - basic and diluted

The calculation of earnings per share is based on the (loss)/profit for the
financial year after taxation and on the weighted average number of ordinary
shares in issue during the year of 58,890,234 (2000: 56,912,384) in respect of
basic earnings per share, and 58,890,234 in respect of diluted earnings per
share (2000: 61,415,409) (the only difference being in relation to share
options).  Due to the group having a retained loss for the year outstanding
share options are anti-dilutive thus the diluted loss per share equals the basic
loss per share.

5.         Financial information

The financial information contained in this preliminary announcement of audited
results does not constitute the group's statutory accounts for the years ended
31 December 2001 or 31 December 2000.  The financial information has been
prepared using consistent accounting policies.  The accounts for the year ended
31 December 2000 have been delivered to the Registrar of Companies.

The statutory accounts for the years ended 31 December 2001 and 2000 have been
reported on by the company's auditors; the reports on these accounts were
unqualified and they did not contain any statement under section 237(2) or (3)
of the Companies Act 1985.

The accounts for the year ended 31 December 2001 are expected to be posted to
shareholders in due course and will be delivered to the Registrar of Companies
after they have been laid before the company in a general meeting on 26 March
2002.

Copies will also be available from the registered office of the company, Science
Park, Cambridge, CB4 0XR.  The registered number of Xaar plc is 3320972.



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