Xaar revenue falls as it exits Thin Film business

Inkjet printing technology company Xaar reported a £12.8m decline in revenue in the first half on Thursday, to £22.5m.

The London-listed firm said that, when adjusted for the Thin Film Xaar 1201 revenue reversal of £4.3m in 2019 and the one-time royalty payment of £9.7m from Seiko Instruments in 2018, revenue was actually ahead £1.3m for the six months ended 30 June, or 5%.

Its gross loss for the period was £2.6m, which represented a decline of £21.7m when compared to the same period of 2018.

The board said that decline was largely due to the one-time royalty payment received in the first half of 2018 of £9.7m, and £7.4m of Xaar 1201 related items.

Reduced factory output and an “unfavourable” product mix resulted in a further £3.9m decline, it added.

The company’s adjusted operating loss before tax of £15m, when adjusted for the £7.4m related to Xaar 1201 items, resulted in an underlying loss of £7.6m for the period.

Impairment charges of £39m had been taken, as a result of Xaar’s decision to cease all Thin Film activities.

Net cash as at 30 June totalled £21.6m, down from £27.9m at the end of December, which the board said was impacted by the unwinding of payables and continued investment associated with the Thin Film programme.

On the operational front, Xaar said first half printhead revenues were stable, rising 1% when compared to the same period last year and after adjusting for the one-time royalties and the Xaar 1201 revenue reversal.

It said its product print systems revenues grew 22%, which was driven by growth in inkjet and pad printing equipment of 26%, as well as consumables of 15%.

The firm said it saw “significant” progress in Xaar 3D Printing, which saw Stratasys increase its investment from 15% to 45% with an option to acquire the remaining 55%, subject to Xaar shareholder approval.

Its strategic review of the Thin Film business had now concluded, with the decision to cease activities during the period.

The company also announced further restructuring of the printhead business, subject to employee consultation, which was expected to deliver £8m of annualised savings.

“The increased investment in Xaar 3D positions it well for growth and unlocks value for shareholders,” said chief executive officer Doug Edwards.

“Product print systems is showing good growth and a strong sales pipeline.”

Edwards said it was “with considerable reluctance” that the board had taken the decision to cease all Thin Film activities in the printhead business, but without a strategic investment partner it became unaffordable to continue.

“This decision and the associated restructuring, although painful, will result in a substantial improvement in profitability and operating cash flow for the company in the coming year.”