Interim Results

Xaar PLC 19 July 2000 MEETINGS TODAY Analyst at 9:30am - Press at 11:15am Venue: Buchanan Communications, 107 Cheapside London, EC2V 6DN Please call Lisa Baderoon on 020 7466 5000 if you are able to attend. INTERIM RESULTS FOR THE SIX MONTHS TO 30 JUNE 2000 - RECORD TURNOVER AND A PROFIT Xaar plc ('Xaar'), the ink jet printing technology group headquartered in Cambridge, has announced its unaudited interim results for the six months ended 30 June 2000. Key points : - Record turnover and a profit reflect the excellent progress made during the first half of the year. - Turnover doubled to £10.8m (1999 : £5.4m). - Profit before tax turned round sharply to £0.7m (1999 : loss of £0.4m). - A good balance in revenue profile was achieved between technology income and manufacturing turnover. - As a result of strong operating cashflow, cash balances at the end of the half year increased by £2.9m to £7.1m (£4.2m at 31 December 1999). - Major new licence was signed during the first half with Sharp Corporation of Japan. - Highly successful exhibition at Drupa, the major printing industry show held every four years, with Xaar's digital printing technology incorporated in products on display on the stands of many customers, partners and licensees. - Sales of XaarJet manufactured print heads and inks nearly doubled on a like-for-like basis compared to the first half of last year. - Good progress was made in the development of next-generation wide array printing technology together with partners, Agfa, Kyocera and DuPont. - On outlook, Chairman, Arie Rosenfeld commented : 'We see an enormous range of opportunities for Xaar's technology - and there was solid evidence of this in the number of applications using our technology which were on show at the Drupa printing exhibition in May. We have built on the real momentum created in 1999 and we continue to look to the future with enthusiasm and confidence.' Graham Wylie, Chief Executive or Jonathan Lowe, Finance Director at Xaar on 020-7466-5000 today or 01223-423663 thereafter Lisa Baderoon at Buchanan Communications on 020-7466-5000 CHAIRMAN'S STATEMENT Introduction I am pleased to report that Xaar has made further excellent progress in the first six months of the current year. We achieved record revenues and a profit for the period and concluded a major new licence deal with Sharp Corporation of Japan. Results and Finance Turnover for the period was £10.8m (1999 : £5.4m) which resulted in a profit before tax of £0.7m (1999 : loss before tax £0.4m). The revenue profile showed a good balance between technology revenues (licences and royalties) and trading revenues (printhead and ink sales). Cashflow was strong in the period with operating cash generated of £3.3m; cash balances at 30 June 2000 stood at £7.1m compared with £4.2m at 31 December 1999. Capital expenditure of £0.6m was in line with our plans. Business Review The world's largest printing tradeshow, Drupa 2000, was held in Germany in May and proved a resounding success for Xaar. Many of our customers, partners and licensees exhibited digital printing systems containing Xaar technology covering a wide range of printing applications. The show is held once every four years and it was widely agreed that the 2000 show marked a key milestone in the transition from analogue printing to digital printing. Xaar is recognised as one of the leaders of this movement. Xaar Technology is the division responsible for technology development and licensing. A major licence was signed with Sharp Corporation of Japan who are one of the world's leading consumer electronics and imaging companies. We also saw a number of product launches from licensees in the period. Royalties were modest for the period; however with recent product launches and strong licensing activity over the last twelve months we remain confident that royalties will grow significantly in the future. XaarJet is the printhead and ink business based in Cambridge and Sweden. High performance printheads and inks are sold to a range of OEM customers and end users as the key enabling components of digital printing systems. This business has made excellent progress ever since we acquired the Swedish operation in March 1999. XaarJet sales have nearly doubled on a like-for-like basis since the corresponding period in 1999 and the business was profitable for the first time on a combined basis. Work remains to be done to improve yields in the UK and to strengthen the ink business but we are pleased with the progress made in the last six months. Xaar Digital deals with the technical development and commercial exploitation of our next generation wide-printing technology. We work with our partners Agfa, Kyocera and DuPont on this development which will eventually take digital ink-jet printing into new areas of commercial printing. The technical challenge that is being undertaken is considerable and there have been some technical delays over the past few months. However we remain as firmly committed as ever to developing the next generation of Xaar technology for wide array printing and we are working even more closely and effectively with our partners to ensure that the development programmes will be successful. Intellectual Property We have continued to expand our patent portfolio including a number of important patent applications in the field of wide printing. Our total patent portfolio has increased to over 520 patents and patent applications. Board Changes After many years of continuity on the Board, there have been two recent resignations; Bob Hook, one of our non-executive directors and a previous chairman, has decided to concentrate on his many other business interests. Mark Shepherd has decided to move on to a fresh challenge, having been involved with Xaar since the earliest days. We wish them both well. No immediate replacements are planned. Outlook There are enormous opportunities for Xaar's technology in a wide range of consumer, office, industrial and commercial applications requiring a high speed digital printing solution. This was evidenced by the number of applications utilising the technology at Drupa in May. We will continue to develop and to exploit these opportunities in the way best suited to each market segment; technology licensing for consumer and office products; manufacture and sale of high performance printheads and inks for industrial applications; and joint collaborations with leading global corporations for next generation commercial applications. Our technology revenues remain by their nature less predictable than our trading revenues. However our proprietary technology is the firm platform on which all our business opportunities are built and we remain totally committed to the continued development of Xaar's technology to meet the needs of our customers and partners in the years ahead. In the first six months of this year we have built on the real momentum created in 1999 and we continue to look to the future with enthusiasm and confidence. Arie Rosenfeld Chairman 19 July 2000 CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE SIX MONTHS ENDED 30 JUNE 2000 Notes 6 months 6 months 12 months to to to 30 June 30 June 31 2000 1999 December (un- (un- 1999 audited) audited) (audited) £'000 £'000 £'000 Turnover 10,755 5,400 15,064 Cost of sales (5,098) (2,498) (6,957) --------- -------- --------- Gross profit 5,657 2,902 8,107 Other operating expenses (net) 3 (5,041) (3,412) (7,781) --------- -------- --------- Operating profit/(loss) 616 (510) 326 Interest receivable (net) 83 154 216 --------- -------- --------- Profit/(loss) on ordinary activities before taxation 699 (356) 542 Tax on profit/(loss) on ordinary activities (347) (131) (338) --------- -------- --------- Retained profit/(loss) for the financial period 352 (487) 204 ===== ===== ===== Earnings/(loss) per share - basic 1 0.6p (0.9p) 0.4p Earnings/(loss) per share - diluted 0.6p - 0.4p ===== ===== ===== Consolidated statement of total recognised gains and losses 6 months 6 months 12 months to to to 30 June 30 June 31 2000 1999 December (un- (un- 1999 audited) audited) (audited) £'000 £'000 £'000 Retained profit/(loss) for the financial period 352 (487) 204 Gain/(loss) on foreign currency translation 117 (5) (80) --------- -------- --------- Total recognised gains and losses relating to the period 469 (492) 124 ===== ===== ===== CONSOLIDATED BALANCE SHEET AS AT 30 JUNE 2000 As at As at As at 30 June 30 June 31 2000 1999 December (un- (un- 1999 audited) audited) (audited) £'000 £'000 £'000 Fixed assets Goodwill 1,203 1,341 1,272 Tangible assets 4,513 4,875 4,789 Investments 20 20 20 -------- ------- -------- 5,736 6,236 6,081 Current assets Stocks 995 835 842 Debtors 4,315 3,120 5,709 Cash and liquid resources 7,141 5,665 4,217 -------- ------- -------- 12,451 9,620 10,768 Creditors: amounts falling due within one year (4,281) (3,564) (3,682) -------- ------- -------- Net current assets 8,170 6,056 7,086 -------- ------- -------- Total assets less current liabilities 13,906 12,292 13,167 Creditors: amounts falling due after more than one year (232) (351) (415) -------- ------- -------- Net assets 13,674 11,941 12,752 ===== ===== ===== Capital and reserves Called-up share capital 5,697 5,439 5,568 Share premium account 10,408 10,114 10,116 Other reserves 1,042 946 1,010 Accumulated deficit (3,473) (4,558) (3,942) -------- ------- -------- Shareholders' funds - all equity 13,674 11,941 12,752 ===== ===== ===== CONSOLIDATED CASH FLOW STATEMENT FOR THE SIX MONTHS ENDED 30 JUNE 2000 6 months 6 months 12 months to to to 30 June 30 June 31 2000 1999 December (unau- (unau- 1999 dited) dited) (audited) £'000 £'000 £'000 Net cash inflow/(outflow) from operating activities 3,333 (1,050) (2,210) -------- ------- -------- Returns on investments and servicing of finance 76 206 275 Capital expenditure and financial investment (634) (330) (581) Acquisitions (net of cash acquired) - (2,942) (2,942) -------- ------- -------- Cash inflow/(outflow) before management of liquid resources and financing 2,775 (4,116) (5,458) -------- ------- -------- Management of liquid resources (2,040) 4,093 5,728 Financing 80 1,042 960 -------- ------- -------- Increase in cash in the period 815 1,019 1,230 ===== ===== ===== Cash and liquid resources comprise: As at As at As at 30 June 30 June 31 2000 1999 December (unau- (unau- 1999 dited) dited) (audited) £'000 £'000 £'000 Cash at bank and in hand 2,116 1,045 1,232 Treasury deposits 5,025 4,620 2,985 --------- ------- -------- 7,141 5,665 4,217 ===== ===== ===== Notes to the interim financial information 1. Earnings/(loss) per ordinary share - basic and diluted The calculation of earnings/(loss) per share is based on the profit/(loss) for the period after taxation and on the weighted average number of ordinary shares in issue during the period of 56,572,163 (1999: 52,963,518) in respect of basic earnings/(loss) per share, and 60,591,331 in respect of diluted earnings per share (the only difference being in relation to exercises of share options). Due to the loss incurred in 1999 no share options were deemed to be dilutive. 2. Comparative figures The comparative figures for the financial year ended 31 December 1999 do not constitute statutory accounts for that financial year within the meaning of section 240 of the Companies Act 1985. These figures have been extracted from the audited accounts for that year, which have been delivered to the Registrar of Companies. The report of the auditors was unqualified and did not contain a statement under section 237(2) or (3) of the Companies Act 1985. 3. Other operating expenses (net) In June 2000 the pension provider in Sweden confirmed to XaarJet AB that a contribution surplus of some £700,000 would be returned to the company in two portions: £143,000 by way of a cash payment, with the remainder to be offset against future pension contributions. Accordingly, net other operating expenses for the period include a one-off credit of £143,000, with the remaining surplus to be credited as and when future contributions are reduced. Independent Review Report to Xaar plc Introduction We have been instructed by the company to review the financial information and 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 and applicable United Kingdom accounting standards. The Listing Rules 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 guidance contained in Bulletin 1999/4 issued in the United Kingdom by the Auditing Practices Board and with our profession's ethical guidance. 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 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 2000. Arthur Andersen Chartered Accountants Betjeman House 104 Hills Road Cambridge CB2 1LH

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