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Xaar PLC (XAR)

  Print      Mail a friend       Annual reports

Wednesday 19 July, 2000

Xaar PLC

Interim Results

Xaar PLC
19 July 2000


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.


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

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


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

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.


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
19 July 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
                                   =====     =====      =====

                      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
                                    =====    =====     =====



                                 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

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

Arthur Andersen
Chartered Accountants
Betjeman House
104 Hills Road