Interim Results
Xaar PLC
18 September 2002
FOR IMMEDIATE RELEASE 18 September 2002
Xaar plc
INTERIM RESULTS FOR THE SIX MONTHS TO 30 JUNE 2002
Xaar plc ('Xaar'), the ink jet printing technology group headquartered in
Cambridge, has announced its unaudited results for the six months ended 30 June
2002.
Key points :
- Turnover increased 14% to £14.0m (2001 : £12.3m).
- XaarJet printhead manufacturing and ink sales business increased turnover
by 44% to £13.0m (2001 : £9.0m).
- Total technology income was £1.0m (2001 : £3.3m) reflecting the absence
of licence sales in the first half of this year.
- Accordingly, profit before tax was £0.4m (2001 : £2.0m).
- Xaar continues to be cash generative with cash and short term investments
standing at £10.9m at 30 June 2002 after providing for capital investment of
£0.5m and R&D expenditure of £1.9m.
- Going forward, business will be focussed on XaarJet manufacturing
activities.
On outlook, Chairman, Arie Rosenfeld stated :
'Xaar has a thriving and profitable high-tech manufacturing business to
concentrate on, and the group as a whole is financially robust and cash
generative. Efforts to sell further technology licences in the future will
continue, but their timing and size will always be unpredictable.'
Jan Fineman, Chief Executive or Nigel Berry, 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
Against a background of continuing expansion in the XaarJet side of our
business, the Board of Xaar has been reviewing the company's positioning within
the digital printing industry. It is the company's intention to focus its
resources in a manner which will build on its strengths, and offer more control
over its future development and growth.
Xaar has some of the very best digital printing technology available, giving
rise to a specialist printhead manufacturing business which goes from strength
to strength. The successful consolidation of these activities at our Swedish
plant during the period will support the future growth of this business. The
global digital printing industry is huge and diverse and offers enormous growth
potential; however, it is clearly not possible for a company of Xaar's size to
address the whole market, and Xaar intends to concentrate its efforts on those
market segments for which its technologies are best suited and where Xaar can be
positioned as a clear market leader. As part of this review, it must also be
acknowledged that technology revenues (principally licences and royalties) have
been disappointing and will remain uncertain as to both quantum and timing;
indeed, no new licence was signed during the first half year.
The differing prospects for the two sides of the business, XaarJet and Xaar
Technology, have led the board to decide the future now lies in developing its
successful XaarJet sales and manufacturing activities. The group's technology
will continue to be driven forward in support of this development, which may
still provide future licensing opportunities. Xaar continues to be technically
and financially strong, providing it with the resources to implement this
strategy.
Results and finance
Group revenues grew by 14% to £14.0 million (2001: £12.3 million). Strong
growth was achieved within the XaarJet manufacturing activities, which increased
turnover by 44% to £13.0 million (2001: £9.0 million). Total technology income
declined to £1.0 million (2001: £3.3 million) with the most important factor
being the absence of licence revenue (2001: £2.0 million). Royalty income fell
to £0.5 million, from £0.8 million in the previous year. Profit before tax was
£0.4 million (2001: £2.0 million), reflecting the absence of licence revenue in
the period. (Loss)/earnings per share were (0.2)p (2001: 2.7p), and reflect a
full tax charge in Sweden, following utilisation last year of all available tax
losses in XaarJet AB.
Xaar generated cash during the half year with cash and short term investments
standing at £10.9 million at 30 June 2002 (31 December 2001: £9.8 million) after
providing for capital investment of £0.5 million and research and development
expenditure of £1.9 million (2001: £2.0 million).
Business review
XaarJet
Demand for XaarJet printheads has continued to outstrip our manufacturing
capacity with a record number of printheads being shipped during the period.
Ink sales also grew strongly. Demand during the first half varied between major
markets; strong demand in Asia and continued growth in Europe were partly offset
by weaker sales in the USA.
During the half year, production of the XJ500 printhead was successfully
transferred to Sweden from Cambridge. As a result, production yields and
margins for this product have improved with further progress expected during the
second half year. Considerable effort is being put into a programme of
continuous development in both product design and manufacturing processes in
order to progressively improve manufacturing profit margins. Capital investment
of some £2 million over the next few months will create additional manufacturing
capacity, allowing a doubling of XJ500 production in 2003, as well as increased
output of the new XJ126 printhead.
Licensing and Technology Revenues
Progress in developing technology revenues has been disappointing reflecting, in
part, a continued reluctance by potential licensees to commit the manufacturing
investment implied by the signing of a full Xaar licence agreement. The level
of royalty income has also not progressed as had been hoped, with licensee sales
and new product launches affected by economic conditions.
New technology and product developments
With the Cambridge facility now focused on research, development and rapid
prototyping, emphasis is being placed on product-related projects which will
generate either cost savings through improvements in design or new sales revenue
within the short to medium term. In this latter context, we are pleased to
report progress on a new advanced design of printhead. The design has full
greyscale capability, a 3 pico-litre drop size and a firing speed and drop
placement accuracy exceeding that of any existing Xaar product. The basic
technical performance of this printhead has now been proven and validated; we
expect to start previewing the product into the graphics, packaging and
industrial markets in 2003.
In April 2002 we announced a new collaboration agreement with Toshiba TEC, part
of Toshiba Corporation. Toshiba TEC will manufacture and supply Xaar branded ink
jet printheads. The first product to be launched under this agreement is
closely targeted at a specific market segment. The 'Leopard' has full greyscale
capability and is designed specifically to deliver the highest quality, 'near
photographic' printing onto plastics such as smart cards, ID cards, CD
decoration and other packaging applications.
Xaar has reviewed its PWA ('page wide array') concept and project. Technical
progress has been satisfactory with the demonstration of working prototypes to
the standards and milestones prescribed by our partners. However, as a result of
changes within the commercial digital printing market and current economic
conditions, we no longer expect significant further progress in this project.
Xaar retains a good working relationship with its partners, which may prove
fruitful in the future. It is Xaar's intention to concentrate its own resources
in the other areas outlined above, and the PWA project in its current form has
now been put on hold, pending further developments in the commercial printing
markets. The PWA project contributed significant new technology to the Xaar
patent portfolio, which will form the basis for future generations of Xaar
products.
Board changes
We were pleased to welcome Nigel Berry to the Board in May as Group Finance
Director. Nigel replaces Gordon MacLeod who has returned to his native New
Zealand with his family. We wish Gordon every success for the future and thank
him for his contribution during his time with us.
Outlook
While the absence of new licensing revenue is clearly disappointing, Xaar has a
thriving and profitable high-tech manufacturing business to concentrate on, and
the group as a whole is financially robust and cash generative. Efforts to sell
further technology licences in the future will continue, but their timing and
size will always be unpredictable.
Arie Rosenfeld 17 September 2002
Chairman
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE SIX MONTHS ENDED 30 JUNE 2002
Notes 6 months to 6 months to 12 months to
30 June 30 June 31 December
2002 2001 2001
(unaudited) (unaudited) (audited, restated)
£'000 £'000 £'000
Turnover 14,041 12,272 23,982
Cost of sales (7,705) (4,992) (11,374)
Gross profit 6,336 7,280 12,608
Other operating expenses (net) (6,011) (5,370) (11,231)
Operating profit 325 1,910 1,377
Costs of fundamental restructuring of
continuing operations - - (1,049)
Profit on ordinary activities
before interest 325 1,910 328
Interest receivable 137 163 315
Interest payable (45) (33) (67)
Profit on ordinary activities
before taxation 417 2,040 576
Tax on profit on ordinary activities (532) (447) (939)
Retained (loss)/profit for the
financial period (115) 1,593 (363)
(Loss)/earnings per share - basic 2 (0.2)p 2.7p (0.6)p
(Loss)/earnings per share - diluted 2 (0.2)p 2.6p (0.6)p
CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES FOR THE SIX MONTHS ENDED 30 JUNE 2002
6 months to 6 months to 12 months to
30 June 30 June 31 December
2002 2001 2001
(unaudited) (unaudited) (audited, restated)
£'000 £'000 £'000
Retained (loss)/profit for the financial period (115) 1,593 (363)
Gain/(loss) on foreign currency translation 715 (528) (489)
Total recognised gains and losses
relating to the period 600 1,065 (852)
Prior year adjustment (see note 1) (332)
Total recognised gains and losses
since last annual report 268
BALANCE SHEET AS AT 30 JUNE 2002
As at As at As at
30 June 30 June 31 December
2002 2001 2001
(unaudited) (unaudited) (audited, restated)
£'000 £'000 £'000
Fixed assets
Intangible assets 1,358 1,523 1,456
Tangible assets 4,310 4,209 4,336
Investments 20 20 20
5,688 5,752 5,812
Current assets
Stocks 1,642 1,461 1,125
Debtors 5,433 5,721 5,517
Short term investments 2,830 4,255 2,875
Cash at bank and in hand 8,039 4,536 6,885
17,944 15,973 16,402
Creditors: amounts falling due within one year (6,292) (4,203) (5,271)
Net current assets 11,652 11,770 11,131
Total assets less current liabilities 17,340 17,522 16,943
Creditors: amounts falling due after
more than one year (446) (222) (470)
Provisions for liabilities and charges (694) - (1,024)
Net assets 16,200 17,300 15,449
Capital and reserves
Called-up share capital 5,965 5,921 5,934
Share premium account 11,129 10,956 11,009
Other reserves 1,095 1,095 1,095
Accumulated deficit (1,989) (672) (2,589)
Shareholders' funds - all equity 16,200 17,300 15,449
CONSOLIDATED CASH FLOW STATEMENT
FOR THE SIX MONTHS ENDED 30 JUNE 2002
6 months to 6 months to 12 months to
30 June 30 June 31 December
2002 2001 2001
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Net cash inflow from operating activities 945 1,160 2,769
Returns on investments and servicing of finance 93 119 248
Capital expenditure and financial investment (539) (603) (1,192)
Cash inflow before management
of liquid resources and financing 499 676 1,825
Management of liquid resources 45 545 1,925
Financing 25 417 238
Increase in cash in the period 569 1,638 3,988
NOTES TO THE INTERIM FINANCIAL INFORMATION
Notes to the interim financial information
1. Prior year adjustment
The Group's policy for accounting for deferred tax has changed to take into
account the new accounting standard FRS19 'Deferred tax'. Previously deferred
tax was only provided to the extent that timing differences were expected to
reverse in the future without being replaced. Deferred tax is now provided in
respect of all timing differences that have originated but not reversed at the
balance sheet date where transactions or events that result in an obligation to
pay more or less tax in the future have occurred at the balance sheet date.
As a result the comparative figure for the tax on profit on ordinary activities
and the deferred tax provision have been restated. The effects of the change in
policy are summarised below:
6 months to 6 months to 12 months to
30 June 30 June 31 December
2002 2001 2001
£'000 £'000 £'000
Profit and loss account
Increase in deferred tax charge 190 - 332
Balance sheet
Increase in deferred tax liability (190) - (332)
2. (Loss)/earnings per ordinary share - basic and diluted
The calculation of (loss)/earnings per share is based upon the (loss)/profit for
the period after taxation and on the weighted average number of ordinary shares
in issue during the period. For basic (loss)/earnings per share, this is
59,498,071 (30 June 2001: 58,556,295, 31 December 2001: 58,890,234) and for
diluted (loss)/earnings per share, this is 59,498,071 (30 June 2001: 62,413,626,
31 December 2001: 58,890,234), the only difference being in relation to
movements in share options.
3. Comparative figures
These interim financial statements do not constitute statutory financial
statements within the meaning of section 240 of the Companies Act 1985. The
results for the year ended 31 December 2001 have been extracted from the
statutory financial statements, which have been filed with the Registrar of
Companies and upon which the auditors reported without qualification. The
accounting policies that have been applied to these interim figures are
consistent with those applied in the preceding annual accounts, taking into
consideration the change as detailed in note 1.
INDEPENDENT REVIEW REPORT TO XAAR PLC
Introduction
We have been instructed by the company to review the financial information for
the six months ended 30 June 2002 which comprises the consolidated profit and
loss account, the consolidated statement of total recognised gains and losses,
the consolidated balance sheet, the consolidated cash flow statement and related
notes 1 to 3. We have read the other information contained in the interim report
and considered whether it contains any apparent misstatements or material
inconsistencies with the financial information.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with the guidance contained in Bulletin
1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A
review consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial data
and, based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with United Kingdom auditing standards and therefore
provides a lower level of assurance than an audit. Accordingly, we do not
express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2002.
Deloitte & Touche
Chartered Accountants
Cambridge
17 September 2002
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