14 February 2001
The Company will hold an Analyst Briefing at Buchanan Communications, 107
Cheapside, London, EC2V 6DN, at 9:30am today.
14 February 2001
RESULTS FOR 2000 : RECORD TURNOVER AND PROFIT
Xaar plc ('Xaar'), the ink jet printing technology group headquartered in
Cambridge, has announced its preliminary audited results for the year ended 31
Key points :
* Record results take Xaar towards its goal of becoming a leading player
in the global digital printing and imaging industry.
* Turnover jumped 50% to £22.7m (1999 : £15.1m).
* Profits before tax rose more than fivefold to a record £2.7m (1999 :
£0.5m) and basic earnings per share increased more than tenfold to 4.1p
(1999 : 0.4p).
* Strong cash flow resulted in an increase in cash to £8.0m (1999 :
£4.2m) after providing for sustained R&D expenditure and capital investment.
* The balance of Xaar's business is changing with ink jet printhead
manufacturing contributing nearly 70% of group turnover. Manufacturing
revenues increased by 50% on a like-for-like basis.
* Major technology licences sold during the year include Sharp
Corporation (Japan) and Xaar's first US licensee.
* Continued progress is being made in the collaborative development of
the next-generation page wide printing arrays.
On outlook, Chairman, Arie Rosenfeld stated :
'We have created a fast-growing, profitable manufacturing business which
complements the activities that exploit our technology through licensing.
Xaar has many of the key ingredients for long term growth and success:
proprietary technology, large addressable markets, a clear business strategy,
high calibre people and world-class business partners.'
Jan Fineman, Chief Executive or Jonathan Lowe, Finance 020-7466-5000 today
Director at Xaar on : 01223-423663 thereafter
Steve Liebmann or Lisa Baderoon at Buchanan Communications on : 020-7466-5000
I am delighted to report on another year of excellent progress for Xaar in
which we have moved a step closer towards our long term goal of becoming a
leading player in the global printing and imaging industry. We have achieved
record revenues and a healthy profit, together with strong cash flow. The
balance of the business is changing; our own printhead manufacturing business
performed very well in 2000 and is contributing an increasing proportion of
revenue. Our intellectual property foundation is now stronger than ever; the
development of our core technology has continued apace and two major new
licences were signed during the year.
Results and finance
Turnover increased by 50% to a record £22.7m (1999: £15.1m), and resulted in a
profit before tax of £2.7m (1999: £0.5m). This was an excellent year for
technology revenues with licence and development fee income of £6.2m; equally
important however was the rapid revenue growth and dramatic margin improvement
in our printhead and ink business, which now accounts for two-thirds of our
turnover, making us progressively less dependent on the inherently
unpredictable nature of licensing revenues.
Cash generation was strong and we closed the year with cash reserves of £8.0m
(1999: £4.2m). Capital expenditure on tangible fixed assets was held at £1.1m
(1999: £1.4m). We remain fully committed to continued investment in research
and development; spending was increased to £3.9m (1999: £3.6m) in the year.
We continue to believe that a great strength of Xaar's platform technology
lies in its inherent capacity to print onto a very wide range of surfaces.
This enables us to target a broad range of applications in office, industrial
and commercial printing markets, collectively one of the world's largest
We continue to exploit these different markets in distinct ways. Firstly we
license our technology and now have eleven licensees including two additions
in 2000: Sharp Corporation and our first US licensee (which we are unable to
name for contractual reasons). Secondly our own XaarJet printhead and ink
business targets customers directly in industrial printing and has had a very
successful year with substantial revenue growth, good profitability and a
strong order book. Thirdly we are developing our next generation technology
for wide array printing in partnership with leading corporations. We have made
sound technical progress overall and are now able to demonstrate good quality
printing within the laboratory. Xaar and its partners collectively drive the
overall timetable for the commercial exploitation of this project. Our
principal partners continue to be fully committed, but the development of
substantial revenues will take longer than previously hoped. Meanwhile,
Xaar's own manufacturing capability means that specialist, low volume
applications for the wide array technology could start to generate revenue
during the course of next year.
Over the past year, there have been a number of changes to the Board,
reflecting the maturing of Xaar with its broader business model and marking a
natural transition in the development of the company. In our interim
statement in July 2000, we reported that Bob Hook, a long-standing
non-executive director, had left the Board as had Mark Shepherd, one of the
original founders of the business. In October, Jan Fineman was appointed
Chief Executive in place of Graham Wylie, who had successfully overseen Xaar's
growth since 1991. Jan joined Xaar in April 1999 when Modular Ink Technology
(now called XaarJet AB) was acquired; from August 1999 until his appointment
as Chief Executive, Jan was Operations Director responsible for all
manufacturing and development activities in Cambridge and Sweden.
We are also pleased to announce another internal promotion with Gordon MacLeod
to become Finance Director at the forthcoming AGM on 27 March 2001. Gordon
has been Xaar's Group Financial Controller for three years. Jonathan Lowe,
Finance Director since late 1996, has decided on a new career challenge and is
to join a leading private equity firm. We would like to thank him for the
substantial contribution he has made over the last four years including his
role in Xaar's flotation and in the acquisition of XaarJet AB.
The global printing and imaging industry is currently undergoing a fundamental
transition. Digital printing solutions are now becoming available that only a
few years ago were scarcely imaginable; the world's largest printing tradeshow
in May last year, Drupa 2000, highlighted the inexorable shift from analogue
to digital printing. Xaar is recognised as one of the technology leaders in
this movement. We have created a fast-growing, profitable manufacturing
business which complements the activities that exploit our technology through
licensing. Xaar has many of the key ingredients for long term growth and
success: proprietary technology, large addressable markets, a clear business
strategy, high calibre people and world-class business partners. Many
challenges doubtless remain on our way to creating a substantial global
business but we can certainly look to the future with confidence.
13 February 2001
CHIEF EXECUTIVE'S REVIEW
2000 was a period of rapid growth for Xaar, maintaining the progress achieved
in the previous year. We are developing a momentum which will help us to
benefit from the growing opportunities for the company over the next few
years. This momentum and growth is reflected in our financial performance in
2000 with revenues, profits and cash generation all at record levels.
Since my first involvement with Xaar's core technology in 1997, I have been
excited by its potential as a platform technology across the whole printing
Xaar has a strong and growing patent portfolio that has doubled to more than
500 patents and patent applications over the last three years. Much of this
new intellectual property has been generated by our wide printhead development
Our technology is now licensed to eleven blue-chip multi-national companies.
In addition, Xaar has its own advanced manufacturing facilities and know-how
to address directly those printing markets where licensing is not a viable
We have an experienced and established team of more than 65 R&D engineers
driving the continued development of our technology and keeping Xaar at the
forefront of ink jet printing.
Our vision is for Xaar's technology to become a core printing technology in
the office, industrial and commercial printing markets.
Channels to market
Xaar is approaching each of these markets in a different way:
Office printing includes desktop printers, faxes and copiers. This market is
serviced mainly by major corporations which manufacture and sell products in
high volume. Xaar's route into this market is through its licensing
The desktop part of this market is dominated by Hewlett Packard, Canon and
Epson. At the performance end of the market, where many of Xaar's licensees
operate, monochrome laser printing is currently the established technology.
The benefit that our technology promises is full colour printing at the speed,
cost and quality of an existing monochrome laser printer.
Industrial printing takes place in production environments, often as part of
the production process itself, and includes the printing of cans, plastic
bottles, corrugated board, textiles, ceramics, metal and glass. This market
is addressed directly through the group's XaarJet manufacturing operations.
Our range of XaarJet printheads and inks puts us at the forefront of the
exciting and fast growing market for digital industrial printing.
Commercial printing covers the printing of packaging, labels, magazines, books
and newspapers. Opportunities in this market are being exploited together
with key partners for developing new products or systems such as wide
printhead machines, with Xaar involved in both licensing and manufacturing
Commercial printing work is undertaken using a variety of traditional
technologies such as offset and flexography, the basic principles of which
have not changed for decades. Xaar's wide printheads will enable these
commercial printers to offer short print runs with greater productivity and
variable data processing, enabling the personalisation of each individual
print if required.
It is evident from the growth in XaarJet revenues to £15.7m in 2000 (1999: £
8.5m including XaarJet AB for nine months), that our manufacturing revenue is
becoming increasingly important, contributing nearly 70% of total turnover.
On a like-for-like basis, these revenues increased by 50%.
The significant sales growth occurred across the entire range of XaarJet
products. We believe that this trend will continue as an increasing number of
industrial printing machines are launched onto the market based on our
printheads and inks.
XaarJet has high precision, clean room manufacturing locations in England and
Sweden operating as an integrated, single division. The Cambridge facility is
focussing more on prototype development and low-volume manufacturing while the
much larger Swedish facility is assuming responsibility for higher-volume
During 2000 considerable progress has been made in improving production
processes and yields at both facilities with a consequent lift in operating
margins. This will be an ongoing process which will be accorded a high
priority during 2001 and beyond. We will be investing in further
manufacturing capacity and increased automation during the coming year.
We are addressing an increasingly international customer base and during 2000
Xaar opened a Customer Service and Demonstration Centre in Chicago as a base
for our US sales and support team. Also of note during the year was the level
of interest in XaarJet products in China generated by our agent in Hong Kong.
This region represents a huge opportunity for Xaar and we will be investing
further in local sales and support infrastructure in order to address the
demand from this region.
It is only feasible for a company to license our technology if it has the
available R&D and manufacturing resources to develop and produce ink jet
printheads. In the past this has prevented some companies from working with
us. Our solution is now to offer a Custom Printhead Programme under which
Xaar will design a printhead for a specific customer on a consultancy basis
and then bring it to manufacture either at Xaar or through a third party.
During 2000 Xaar signed its first customer under this programme. The
printhead development is proceeding to schedule.
Ink revenues are important to our continued growth and increased
profitability. We continue to work closely with our ink licensees, Toyo Ink
and Avecia, and in addition, at the end of 2000 Xaar signed an agreement with
Sericol, a division of Burmah Castrol and a leading supplier of industrial
inks. The first new inks resulting from this partnership will be on sale in
2001 and Xaar will also be looking to partner with other leading ink
Wide printhead development
In order to enter the commercial printing market, printing speeds of two pages
per second will be necessary. With ink jet, this can only be achieved by
passing the paper at high speed under a stationary printhead that is as wide
as the paper itself.
The development of a Page Wide Array printhead ('PWA') to meet the necessary
speed, width and quality requirements is a complex challenge. Certain
technical difficulties have caused us to fall behind our original schedule.
However, at the end of 2000 we successfully demonstrated monochrome printing
on a prototype digital press. This provided proof of concept and design of
our prototype PWA printhead. It represents a crucial milestone and it is
right that we acknowledge the contribution of our partners in this
development, particularly Agfa-Gevaert and Kyocera.
Much work remains to be done in order to manufacture the PWA printhead in
volume and to bring it to market in commercial printing machines. We believe
that we will start to generate some initial revenues from printhead sales in
2002, but it will take time for our customers to integrate such an advanced
ink jet printhead into their products.
Licensing and royalties
With the addition of Sharp during 2000, our licensees collectively hold an
estimated 10% share of the office printing market utilising a variety of
printing technologies. In addition to Sharp, our licensees include such
household names as Brother, Konica and Seiko Instruments. Brother, Konica and
Seiko launched new products during 2000; further launches from licensees are
expected over the coming year.
It is clear, however, that royalty streams are currently not developing as we
had hoped. We have concluded that if we work more closely with each licensee,
provide specialised technical support and continue our successful licensee
seminars, our licensees may be able to accelerate the rate at which they
introduce volume products into the marketplace. This work is being
coordinated by our office in Japan, however ultimately the timing of product
launches by licensees remains in their hands.
At the end of 2000 Xaar also signed its first licence in the US. This
licensee is not active in the office market at this time, but operates in
other areas of printing. For confidentiality reasons we are unable to name
Intellectual property rights
Impetus has been maintained in developing Xaar's proprietary technology with
additional new patent filings, many in respect of our PWA development, taking
the total number of patents and patent applications to over 500.
When we acquired MIT in Sweden in March 1999, there was a US patent
infringement action against MIT which we believed to be entirely without
merit. However, in order to avoid the enormous time and expense of US patent
litigation which would have been necessary to prove our case, we have taken a
paid-up licence to a limited number of US patents. This has been capitalised
in the year as an intangible asset.
For a high tech company the expertise and know-how of all our people is key to
success and the staff at Xaar have made outstanding efforts in contributing
towards our growth in 2000.
I am confident that we are well positioned in the key printing markets and
have a clear strategy to achieve continued growth in 2001.
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the year ended 31 December 2000
Notes 2000 1999
Turnover 1 22,746 15,064
Cost of sales (9,831) (6,957)
Gross profit 12,915 8,107
Other operating expenses (net) (10,434) (7,781)
Operating profit 2,481 326
Interest receivable 276 272
Interest payable (80) (56)
Profit on ordinary activities 2,677 542
Tax on profit on ordinary (360) (338)
Retained profit for the financial 2,317 204
Earnings per share - basic 2 4.1p 0.4p
Earnings per share - diluted 2 3.8p 0.4p
All activities during the financial year relate to continuing operations.
Consolidated statement of total recognised gains and losses for the year ended
31 December 2000
Retained profit for the financial year 2,317 204
Loss on foreign currency translation (112) (80)
Total recognised gains and losses relating
to the financial year 2,205 124
CONSOLIDATED BALANCE SHEET
as at 31 December 2000
Intangible assets 1,642 1,272
Tangible assets 4,176 4,789
Investments 20 20
Stocks 921 842
Debtors 4,928 5,709
Cash and liquid resources 8,008 4,217
Creditors: amounts falling due within one year (4,025) (3,682)
Net current assets 9,832 7,086
Total assets less current liabilities 15,670 13,167
Creditors: amounts falling due
after more than one year (126) (415)
Net assets 15,544 12,752
Capital and reserves
Called-up share capital 5,742 5,568
Share premium account 10,484 10,116
Other reserves 1,055 1,010
Accumulated deficit (1,737) (3,942)
Shareholders' funds - all equity 15,544 12,752
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 December 2000
Net cash inflow/(outflow)
from operating activities 5,333 (2,210)
Returns on investments and servicing
of finance 193 275
Capital expenditure and financial investment (1,530) (581)
Acquisitions (net of cash acquired) - (2,942)
Cash inflow/(outflow) before management
of liquid resources and financing 3,996 (5,458)
Management of liquid resources (1,815) 5,728
Financing (153) 960
Increase in cash in the year 2,028 1,230
1 Segment information
Turnover by class of business:
Licence and development fees 6,223 5,852
Royalties 769 721
Printheads and related products 15,754 8,491
Turnover by geographical segment (by destination):
Europe 9,076 3,871
Rest of World 13,670 11,193
All turnover in 2000 and 1999 originated from within Europe. No additional
segmental information is provided on the basis that it would be seriously
prejudicial to the interests of the company.
2. Earnings per share - basic and diluted
The calculation of earnings per share is based on the profit for the financial
year after taxation and on the weighted average number of ordinary shares in
issue during the year of 56,912,384 (1999: 54,256,720) in respect of basic
earnings per share, and 61,415,409 in respect of diluted earnings per share
(1999: 57,580,244) (the only difference being in relation to share options).
3. Financial information
The financial information contained in this preliminary announcement of
audited results does not constitute the group's statutory accounts for the
years ended 31 December 2000 or 31 December 1999. The accounts for the year
ended 31 December 1999 have been delivered to the Registrar of Companies.
The statutory accounts for the years ended 31 December 2000 and 1999 have been
reported on by the company's auditors; the reports on these accounts were
unqualified and they did not contain any statement under section 237(2) or (3)
of the Companies Act 1985.
The accounts for the year ended 31 December 2000 are expected to be posted to
shareholders in due course and will be delivered to the Registrar of Companies
after they have been laid before the company in a general meeting on 27 March
Copies will also be available from the registered office of the company,
Science Park, Cambridge, CB4 0XR. The registered number of Xaar plc is