Xaar swings to loss in challenging first half

18th Sep 2024 07:18

(Sharecast News) - Inkjet technology specialist Xaar reported interim revenue of £28.6m on Wednesday, down from £34.5m in the same period last year.

The London-listed firm put the decrease down to the anticipated decline in its legacy ceramics market, order delays, and weaknesses in its EPS segment.

Excluding the ceramics sector, Xaar said its printhead business demonstrated robust growth, with new market revenues increasing by 26% in the six months ended 30 June.

That growth was fuelled by successful commercialisation efforts, including original equipment manufacturer launches in textiles, corrugated packaging, battery coating, and wax applications.

Gross margins dipped to 35%, from 40% in the first half of 2023, impacted by higher energy costs and reduced overhead absorption.

The company posted an adjusted loss before tax of £0.7m, swinging from a profit of £1.8m in the prior year.

Research and development investment remained steady at £2.4m, reflecting ongoing commitment to product innovation.

Despite the revenue decline, Xaar improved its net cash position by 10% to £6.8m, driven by disciplined cash management strategies.

An operational efficiency programme led to a £3.4m, or 24%, reduction in operating expenses without sacrificing key capabilities.

Over the last five years, customer product launches had generated annualised revenues exceeding £20m, delivering a compound annual growth rate of 26%.

The company noted a strong pipeline of opportunities, with several key projects expected to contribute significantly in 2025.

Looking ahead, Xaar said it expected trading conditions to remain consistent with the first half.

Despite the challenging environment, the company's full-year expectations remained unchanged.

"We remain confident in our strategy which is increasingly demonstrating the unique capabilities of our printhead technology," said chief executive officer John Mills.

"Our pipeline of opportunities has increased in quality in both existing and new application areas and increasing numbers of OEM's are engaged in, or actively planning, new product launches incorporating Xaar printheads.

"Newly developed high viscosity inks enable us to fully utilise the unique technology of our printheads, and whilst the legacy ceramics market is challenging, masking our success in new market sectors, we have enhanced our customer integration capabilities and are already seeing the benefit in accelerated OEM project launches in other target markets."

Mills said the company continued to focus on the elements of the business within its control, enhancing its technology, supporting customer adoption of its printheads, managing its cost base and strengthening its cash position, demonstrating the benefits that Xaar's capabilities can deliver to customers.

"We remain convinced of our ability to maximise the substantial opportunity we have."

At 0915 BST, shares in Xaar were down 0.56% at 99.44p.

Reporting by Josh White for Sharecast.com.