Trading Update

RNS Number : 7542J

Xaar PLC

17 June 2014

 



17 June 2014

Xaar plc

Trading Update

Xaar plc ("Xaar", "the Group" or "the Company"), the digital inkjet printing technology Group headquartered in Cambridge, UK, announces an update on trading.

Key points

·     Revenue for the full year 2014 is now projected to be approximately £130 million; 3% lower than the £134.1 million of adjusted revenue achieved in 2013 (2012: £86.3 million)

·     Positive reaction from OEMs and end customers to new product announcements; launches scheduled for late 2014 and early 2015

·     Initial manufacturing capital investment for the Thin Film Piezo (P4) platform is now defined allowing the introduction of a sustainable and progressive dividend policy

Current trading and outlook

Unit sales volumes into ceramic tile decoration, the largest contributor to the Group, have, as expected, stabilised following the exceptional growth in 2013 which saw Group revenue increase by 55% over 2012.  Total sales in 2014 into ceramics are now expected to be lower than 2013, with average sales price being negatively impacted by an increased level of competition, and sales from new products only expected to begin to contribute in the latter part of the year.

In other applications the expected growth in sales has not yet materialised, however, progress in these applications is still expected in the second half of 2014. Pre-production activities within the 'Direct to Shape' application continue under confidentiality agreements, and our expectations for this application for the longer term are strengthening.

The Board expects 2014 Group revenue to be weighted towards the second half of the year through normal seasonality, primarily related to lower sales in the first quarter around Chinese New Year, and anticipated sales growth from both existing products and new products during the second half of 2014.  As previously reported prior period comparisons are difficult, since 2013 was an exceptional year as a rapid acceleration of the adoption of Xaar's technology into Chinese ceramic tile manufacturing distorted the normal seasonal pattern of sales.

Revenue for the full year 2014 is projected to be approximately £130 million, versus the £134.1 million achieved in 2013, reflecting a lower contribution from ceramics and slower than expected progress in other applications. The expected reduction in average sales price into ceramics is forecast to lead to a lower gross profit margin percentage than previously anticipated for 2014.  The combined impact of a lower gross profit margin percentage and an increased level of R&D investment in 2014 compared to 2013 is expected to result in a reduction in adjusted operating profit margin of approximately six percentage points versus the 30% achieved in 2013.  However, this margin reduction is expected to be offset by four to five percentage points from the impact of the capitalisation of Thin Film development costs, in compliance with accounting standards (IAS 38), following the successful completion of the internal technical demonstration in December 2013.  An adjusted operating margin of 28-29% is therefore projected for 2014.

Product development update

In March 2014 the Group was pleased to announce the launch of the Xaar 1002 printhead, building on the success of the world leading Xaar 1001 through improvements in terms of image quality and ease of use.  Production of the Xaar 1001 has now been fully transitioned successfully to the Xaar 1002.

In May 2014 the Company exhibited at the Ceramics China trade show in Guangzhou, showcasing the new Xaar 1002 family of printheads and announcing three new printheads: the Xaar 1002 GS40; the Xaar 1002 SBX; and the Xaar 001, targeting applications beyond the current digital decoration process. Xaar's extended printhead range provides the technology to deliver even bigger advantages by achieving: higher levels of colour intensity; digital secondary glaze and special effects; and, volume digital deposition for base glaze and structure.

Reaction to these announcements by OEMs and end customers has been encouraging, and Xaar is targeting revenues from two of these new printheads to start during the second half of 2014, with the third contributing revenues during H1 2015.

In addition there are two other new products for 2014: the Xaar 501 printhead, targeted at both the graphics and packaging markets, and the Xaar XPM, a gigabit-Ethernet based electronics sub-system.

In total, five new products are expected to commence commercial shipments over the next 12 months.

Thin Film Piezo update and dividend

The Company has now finalised its strategy for the production of the first thin film piezo (P4) products which are expected to commence sales in late 2016. A hybrid manufacturing model combining both outsourced and in house processing has been selected.  The initial capital investment required to support the model will be funded from existing cash resources.

Based on the Group's long term growth potential and the decision reached on the manufacturing plan for the thin film piezo programme, the Board has decided to adopt a sustainable and progressive dividend policy. 

Conference call

A conference call for analysts and investors will take place at 8.00am this morning.  The conference call can be accessed by dialling [phone] and using pin code 72607809#.

Contacts

Xaar plc
Ian Dinwoodie, Chief Executive Officer	01223-423663
Alex Bevis, Finance Director	www.xaar.com
Tulchan Communications
Tom Buchanan	020-7353-4200
Christian Cowley

 

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