Trading Update

Xaar PLC
09 August 2006



FOR IMMEDIATE RELEASE                                           9 August 2006
                                    Xaar plc

                           UPDATE ON TRADING IN CHINA


The company has been informed that certain of its Chinese customers, accounting
for around 15% of Xaar's total revenue, are being investigated by the Chinese
customs authorities over alleged non-payment of import duty. Xaar itself is not
a party to the investigation but is co-operating with customs officials.

Xaar was notified by the authorities of the impending investigation on 19th
July, but at that time did not consider it would have a material effect on
sales. Digital printing is a high profile growth industry in China which has
attracted similar investigations before, with little or no impact on the
company.

It has now become apparent, however, that the current investigation is being
coordinated by central customs authorities, rather than by local officials as
has previously been the case. This is likely to increase the period of the
investigation and its impact on current trading which remains below
expectations.

It is the company's aim that results for the full year should be similar to
those reported for 2005 but, until the current investigation has run its course,
it is not possible to quantify accurately the impact it will have on the timing
of sales over the remainder of the year.

A further update will be issued with the interim results which are scheduled for
release on 13th September.


Contacts

Xaar plc:                                                        01223-423663
Ian Dinwoodie, Chief Executive                                 www.xaar.co.uk
Nigel Berry, Group Finance Director & Deputy
Chief Executive

Bankside Consultants:
Steve Liebmann/Simon Bloomfield                                 020-7367-8888



                      This information is provided by RNS
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