TIDMXAR
RNS Number : 9360Z
Xaar PLC
20 September 2022
XAAR plc
2022 INTERIM RESULTS
CONTINUED IMPROVING PERFORMANCE WITH POSITIVE MOMENTUM - ON
TRACK TO DELIVER FULL YEAR PROFIT
Xaar plc ("Xaar", the "Group" or the "Company"), the leading
inkjet printing technology group, today announces its interim
results for the six months ended 30 June 2022.
Summary of results for the six months ended 30 June 2022:
2022 2021(1) Change
Continuing Operations
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Revenue GBP36.6m GBP26.3m +39%
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Gross profit GBP14.5m GBP8.3m +75%
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Gross margin % 40% 31% +9ppts
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Gross R&D investment GBP3.3m GBP2.6m +27%
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Adjusted EBITDA(2) GBP3.0m GBP0.3m
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Adjusted profit/(loss) GBP1.4m (GBP1.6m)
before tax(2)
---------- ---------- ------
Loss before tax (GBP0.3m) (GBP1.4m)
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Profit/(loss) for the GBP0.7m (GBP1.3m)
period after tax
---------- ---------- ------
Basic earnings per share 0.9p (1.6p)
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Total Operations
---------- ---------- ------
Loss before tax (GBP0.6m) (GBP4.2m) +85%
---------- ---------- ------
Profit/(loss) for the
period after tax GBP0.4m (GBP4.3m) +108%
---------- ---------- ------
Basic earnings per share 0.5p (3.8p) +112%
---------- ---------- ------
Net cash at the period
end(3) GBP12.7m GBP17.1m -26%
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1 - Restated results for June 2021. See note 10
2 - EBITDA is calculated as statutory operating profit before
depreciation, amortisation and impairment of property, plant and
equipment, intangible assets and goodwill. Adjusted EBITDA is
calculated as EBITDA excluding other adjusting items as defined as
follows. Adjusted Measures exclude the impact of share-based
payment charges, exchange differences relating to intra-group
transactions, gain on derivative financial instruments,
restructuring and transaction expenses, research and development
expenditure credit, fair value loss or gains on financial assets at
FVPL, amortisation of acquired intangibles, and discontinued
operations as reconciled in note 2
3 - Net cash at 30 June includes cash, cash equivalents and
treasury deposits, excluding Xaar 3D in 2021
Figures and percentages included in this report are subject to
rounding adjustments arising from conversion to GBPmillions from
actual figures. Accordingly, figures shown for the same category
presented in different tables may vary slightly, and figures shown
as totals in certain tables may not be an arithmetic aggregation of
the figures that precede them.
Improving financial performance
-- Revenue of GBP36.6 million, up 39% on H1 2021 (14% organic
excluding FFEI and Megnajet) and 11% ahead of H2 2021 (9% organic
excluding Megnajet)
-- Gross margin of 40%, up 9ppts on H1 2021 and up 4ppts on H2
2021, as a result of the strong revenue growth and increased
operational efficiencies
-- Adjusted profit before tax of GBP1.4 million compared to an
adjusted loss before tax of GBP1.6 million in H1 2021
-- Positive adjusted EBITDA delivered across each business unit
-- Investment in working capital has strengthened supply chain
resilience and, along with sales price increases, is successfully
mitigating cost inflation
-- Xaar remains well capitalised with a strong balance sheet and
net cash of GBP12.7 million at 30 June 2022
Operational and strategic highlights
-- Printhead business performed well with strong growth in
Europe and the US offsetting a COVID-19 related slowdown in
China
-- On track for the launch in Q4 2022 of our aqueous printhead,
our exciting new superior performing product targeting significant
opportunities in new sectors such as Packaging and Textiles
-- The new print engine product developed by FFEI, the Xaar
Versatex, was successfully launched, whilst the acquisition of
Megnajet further strengthens the Group's vertical integration
offering
-- Product Print Systems business ("EPS") delivered improved
performance with both strong revenue and margin growth
-- Management programme underway to enhance margin and support
Xaar's 'net zero' commitments by driving increased operational
efficiency, reducing costs and energy use
-- Launched Sustainability Roadmap to 2030, a principal driver
for positive change and investment within the business
John Mills, Chief Executive Officer, commented:
"We are really pleased with the excellent progress we have made
in delivering our strategy as evidenced by our strong H1
performance with all of our businesses continuing to perform well.
Our clear customer-focussed strategy is reaping rewards and we
continue to see increased engagement from both existing and new
customers who are recognising our enhanced capability to provide
integrated solutions.
As we move into the next stage of our strategy with the aim of,
achieving sustainable profitable growth, we continue to make
significant progress and remain on track to deliver a full year
profit for 2022 in line with market expectations.
There is positive momentum across the Group and, while remaining
vigilant to macro-economic conditions, principally of cost
inflation and the ongoing impact of COVID-19 related 'lockdowns' in
China, we are confident in and excited by our future and look
forward to the launch of our aqueous printhead later in the
year."
Enquiries:
Xaar plc +44 (0) 1223 423 663
Ian Tichias, Chief Financial Officer
John Mills, Chief Executive Officer
Tulchan Communications +44 (0) 207 353 4200
Giles Kernick
Olivia Lucas
A presentation for analysts and investors will be held via
webcast and conference call at 09:00am today. For further details,
please contact Xaar@tulchangroup.com . The results webcast and
presentation will be made available on the Xaar Group website (
www.xaargroup.com ) at 10:00am (BST).
Strategy Update
Excellent strategic progress
We have made excellent progress in the last two years. The
business is being transformed and re-energised following a
restructuring, rebranding and a new business model which is now
delivering results. We passed a key milestone of delivering an
adjusted profit in H2 2021 which we have followed up with an
increased adjusted profit in H1 2022 and remain ahead of plan to
continue to deliver on commitments. The business is well positioned
to continue this momentum and deliver further improved
performance.
Strong performance in line with expectations
We have delivered a strong performance in H1 2022 in line with
our expectations, further demonstrating that our strategy is
working. Further operational and strategic progress has been
achieved across the Group and we have continued strong trading
momentum. Despite the global macro-economic and political
uncertainties, we are successfully mitigating external challenges,
principally the cost of inflation and the ongoing COVID-19 impact
in China. There has been further investment in capability and
capacity enabling us to take advantage of the opportunities which
we expect to support our future growth ambitions.
Strong revenue growth
Revenue for the period was GBP36.6 million, representing an
increase of 39% compared to H1 2021. Organic growth, before the
effects of the acquisition of FFEI and Megnajet was 14%. It is also
pleasing to report increased revenue compared to H2 2021 with
growth of 11% (9% organic excluding the part year impact of
Megnajet).
The Printhead business has a clear customer-focussed commercial
strategy which is reaping rewards, delivering revenue growth of 2%
compared to H1 2021. This approach includes the removal of
ineffective distribution channels, a clear pricing strategy, and a
sales process that is focussed on selling the printhead products
based on its technical merits.
We continue to focus on markets where our technology has a
competitive advantage. We work in partnership with customers, both
Original Equipment Manufacturers (OEMs) and User Developer
Integrators (UDIs), over the entire product lifecycle to reduce
their development times and, thereby, their time to market. We also
continue to provide improved aftersales support. Customer
engagement is increasing both from existing and new customers.
Revenue growth in Printhead has been strong in the EMEA and
North America regions with growth of 7% and 26% respectively
against H1 2021. This is reward for our strategy of focussing on
key technology areas with particularly notable revenue growth in
Coding & Marking and Additive manufacturing sectors.
Asia, especially China, has been more challenging with revenue
falling 22% year-on-year, a result of the continued COVID-19
'lockdown' related restrictions in China, limiting our customers in
their ability to develop, manufacture and install products
principally in the Ceramics and Glass sectors. Having seen
consistent growth over the last two years we are confident in the
medium and long term opportunity in China and we will continue to
focus efforts on returning to growth in the region. However, whilst
restrictions remain there will continue to be a challenge for our
business.
Product Print Systems business ("EPS") continues to deliver
significantly improved performance demonstrating strong revenue
growth of 51% in H1 2022 against H1 2021. Having made structural,
organisational changes and developed a more commercial modular
approach to products during 2021, we are pleased with the rapid
progress, the strengthening of gross margins and the return to
profitability. We are confident the business is now well placed to
continue to grow profitably.
FFEI delivered revenue of GBP6.1 million in the period, which is
a pleasing performance. We have successfully developed and launched
a new print engine product called the Xaar Versatex. This will
accelerate Xaar's existing growth strategy of widening the product
portfolio thus further engaging UDI customers.
Megnajet was acquired on 2 March 2022 and in the period has
delivered revenue of GBP0.6 million. We are very excited about the
opportunity that Megnajet affords the Group, as it's ink system
product range further strengthens our vertically integrated product
offering. The business is operating well and has been successfully
integrated into the Group.
Improved Margins and Return to Profitability
This strong revenue growth, coupled with operational efficiency
gains saw the Group's overall gross margin increase to 40% in H1
2022 (H1 2021: 31%). We have invested in our capability and
efficiency most notably in Operations and Support functions and
have continued to exercise discipline in our management of
costs.
The increase in Group gross margin is driven by the operational
leverage in the Printhead business where the efforts made to focus
on and reduce its cost base, whilst driving increased volumes have
improved profitability.
EPS has also significantly grown gross margin, rising to 39%
from 19% in H1 2021 (excluding the impact of the non-cash
adjustments the underlying gross margin was 28% in H1 2021). This
is particularly pleasing as it comes directly from the positive
changes we have made to the business and has seen the business
return to profitability.
We continue to actively manage costs and take appropriate action
in response to the significant cost inflation that is prevalent
globally. Our electricity unit costs are fixed into H2 2023 and we
have invested in raw materials to further mitigate against rising
costs. We have also chosen to increase our holding of finished
goods holding to further strengthen our supply chain and ensure we
can meet customer demand. We are confident we have secured all
critical components to enable us to fulfil customer orders for the
remainder of the year and into 2023. Where possible we have passed
cost increases on to our customers through increased sales
prices.
Group adjusted profit before tax for H1 2022 was GBP1.4 million,
compared to an adjusted loss before tax of GBP1.6 million for H1
2021. This is the second successive half year period we have
reported an adjusted profit after reporting a profit of GBP1.0
million in H2 2021. Due to the slowdown in orders from Chinese
customers, the Printhead business unit made an adjusted loss before
tax of GBP0.4 million.
Pleasingly we can report positive adjusted EBITDA in each of our
businesses for H1 2022 (Group adjusted EBITDA of GBP3.0 million, is
made up of Printhead adjusted EBITDA of GBP0.9 million, EPS
adjusted EBITDA of GBP1.3 million, FFEI adjusted EBITDA of GBP0.5
million, and Megnajet adjusted EBITDA of GBP0.3 million), which is
another notable achievement and increases our confidence in
delivering full year profitability for the Group.
Strong balance sheet and operational investment
The Group retains a strong balance sheet and cash position. Net
cash at 30 June 2022 was GBP12.7 million. This represents a net
outflow of GBP12.4 million in the period (net cash outflow from
continuing operations of GBP12.0 million, which excludes the net
cash outflow from discontinued operations of GBP0.4 million as
detailed in note 10 (H1 2021: net cash outflow from continuing
operations of GBP1.0 million, excluding the net cash inflow from
discontinued operations of GBP0.1 million)).
During the period we acquired Megnajet Ltd and Technomation Ltd
(trading as Megnajet) for a combined consideration GBP3.9 million
net of cash acquired. We have made capital investment of GBP1.5
million in upgrading our operational capabilities.
During the period we invested GBP3.2 million in inventory for
the Printhead business to successfully secure materials to meet
expected 2022 production requirements and to increase our holding
of finished goods. This gives us greater assurance that we can
deliver on customer demands throughout 2022 and further into 2023.
We believe we are winning business through a competitive advantage
of offering shorter lead times than our competition. We have taken
further proactive actions to adapt product designs to accommodate
alternative components increasing our resilience to supply chain
constraints.
The continued strong cash generation across the business and
prudent cash management has enabled us to make these investments
and we will maintain our disciplined approach to balance sheet
management.
We are currently finalising our plans to invest further in our
Huntingdon facility. This will be the first stage of a plan that
will involve a significant upgrade and modernising our
manufacturing capabilities. We will gain from much improved
efficiency, yields and reduced product costs in the longer term as
a result of this investment. The investment in working capital we
are currently making will ensure we are able to meet fully all
customer demands whilst this work is being carried out as we close
the factory for 2 months.
Expansion of Vertically integrated product offering
The acquisition of FFEI in July 2021 and Megnajet in March 2022
further widens our product offering for our OEM and UDI customers
with a broader product range including print engines for adding
effects and embellishments digitally. FFEI has been successfully
integrated and strengthens Xaar's capabilities and skills and has
seen the launch of a new print engine product, the Xaar Versatex.
This will accelerate Xaar's existing growth strategy and widen the
product portfolio further engaging UDI customers. We have a growing
pipeline with a significant number of opportunities thanks to our
technology advantages. This platform provides further opportunities
for vertical integration, and we continue to strengthen our
offering with more products in the pipeline for 2022.
Megnajet is a global leader in the manufacture of ink supply
systems. We are delighted with the acquisition of the business
which has been successfully integrated into the Group, and we are
already benefiting from the expansion of our product offering that
the business brings.
We are on schedule to deliver the next product powered by our
ImagineX platform. Our aqueous printhead will be launched in Q4
2022. This is a significant and tremendously exciting product for
the Group and will enable us to compete in new sectors, such as
Packaging and Textiles, with a product that we believe will deliver
superior performance to any currently on the market.
Significantly improved operational capability
We have made further progress in building a world class
leadership team, making key appointments which will drive the
business in the next phase of our transformation. This has
strengthened our capability and experience across the business,
most notably in our Operations, R&D, and Human Resources
functions. This improved operational capability also includes
further and continued investment in infrastructure such as IT,
manufacturing and supply chain management. We now have strong and
experienced leadership throughout the organisation focussed on
delivering a clearly articulated strategy.
During the period we have continued to work on ensuring our
values are embedded into our culture. This continued focus on our
values is important to ensure we have a supportive culture with
employees who are engaged and empowered to succeed.
Continued commitment to sustainability
Xaar has made significant and positive progress to drive forward
its ESG commitments across our operations. We uphold the highest of
standards across our business and comply with all relevant
regulations in the territories in which we operate whilst enhancing
the working environment for our employees and minimising the
environmental impact of our products and operations.
During the reporting period, Xaar has launched its
Sustainability Roadmap to 2030, which is a principal driver for
positive change and investment within the business. Led by our ESG
Committee and a Sustainability Team which is comprised of
colleagues from across our business operations, chaired by the
Group Sustainability Manager; we have been working hard across to
achieve our goals and ambitions across all four of four
sustainability pillars: Environment, People, Innovation and
Community.
Environment
Decarbonisation remains a key objective for us as we move
towards our goal of Net Zero operations by 2030. We are pleased to
report that we have identified and appointed an external partner to
support us with Scope 3 and TCFD Climate Modelling which will
commence in Q3 2022.
This year and in future years Xaar will offset our regulatory
Scope 1 and 2 carbon impact, making the Group a carbon neutral
inkjet manufacturer in 2022. We are committed to continuing this
practise on our journey to achieve complete carbon neutrality in
line with our 2030 goal.
We set a target to source 100% of our power from renewable
sources and excellent progress has been made. Our move to Green
energy is now complete in the UK, and we are pleased to confirm
that EPS is now also supplied with power generated from renewable
sources. We will continue to assess ways to bring our remaining
office locations in line with Green tariff power.
All printhead packaging is now fully recyclable and we are
working towards complete packaging recyclability.
Xaar is committed to supporting decarbonisation of staff and
visitors' vehicles. During the reporting period, we have launched a
salary sacrifice scheme, supported by the UK government, to allow
all UK staff the ability to order electric vehicles (EV) through
the company scheme. In the same period we have completed the
installation of EV charging infrastructure across our sites.
People
Supporting young people and nurturing their skills is key to our
ESG strategy and for this reason we have placed significant
emphasis on our Early Careers programme. As part of this, Xaar's
new Apprenticeship scheme is operational and our first intake is
working within our Logistics team. Further efforts are underway to
connect with local schools and colleges to allow future work
experience programmes to be developed. In the UK, Xaar supported
Learning at Work Week in May, which attracted / engaged 109
attendees across 9 events and resulted in 131 hours of
learning.
A key activity for the second half of 2022 is a Xaar Group
workshop bringing together a cross functional group of people with
the aim of understanding what makes Xaar an 'employer of choice'.
This will help to inform and shape our talent attraction and
retention strategies, and will also feed into our wellbeing
programmes.
Innovation
We are currently researching ways to use biodegradable
structural parts in the manufacture of our products. An area of
focus is to find an alternative, more sustainable material than
Polylactic Acid (PLA) which is a biodegradable plastic used to
print the majority of our jigs and fixtures. Our Operations team
has successfully trailed the use of recycled PLA filaments
generated from returned and waste PLA. These are supplied in 100%
plastic-free sustainable packaging with easy to recycle cardboard
spools.
Significant market opportunity
Xaar's digital inkjet technologies are transforming print
processes in a wide range of markets, and the medium- and long-term
opportunity for the business remains significant. We have already
grown market share in core, mature markets such as Ceramics and
Coding & Marking. There remains further growth opportunity in
these areas as our technology is best in class and we have a clear
competitive advantage over our competitors due to our core
technologies (TF Technology ink recirculation, High Laydown
Technology, Ultra High Viscosity Technology).
Our wider product offering enables us to access an increased
market opportunity through sectors that are looking for further
digitisation of printing on which we can capitalise. We see
opportunities typically in areas where fluid applications are
challenging, such as Flat Panel Display, Semiconductors, Printed
Electronics and Optics. We are well placed to succeed in these
markets as Xaar technology offers an unrivalled method of
non-contact, fluid deposition, particularly viscous fluids, with
incredible precision, control and speed.
Other markets that already use digital printing such as
architectural glass printing and 3D printing are tremendously
exciting as our technology has unique benefits that can give our
customers commercial advantage in reducing costs and lead times for
their products.
Both our current product offering and our product development
programme will help drive our success in meeting customer demand in
these fast growing sectors.
Outlook
The positive momentum in the Group in the last two years has
continued during 2022 and we remain optimistic about the outlook
for the business. Customer engagement remains strong and we have
seen growth in EMEA and the Americas. Our half year results are in
line with our expectations. We anticipate delivering Group revenue
growth and continued performance improvements during the second
half in line with market expectations.
Our investment in working capital during H2 2021 and H1 2022
means we are well placed to satisfy customer demand for the
remainder of the current financial year and we believe we have the
supply chain resilience to withstand most disruption. We are
continuing to invest in the business adding skills, capability and
capacity. We continue to work on delivering efficiency gains aimed
at improving gross margins and business profitability in the medium
term.
We are conscious of the continuing impact arising from the
economic consequences of wider global issues, particularly with
cost inflation, and COVID-19, particularly in China. Whilst we
expect this to continue in the short to medium term, we remain on
track to report adjusted profit for the full year and look forward
to the future with confidence.
Business Performance
Revenue
Revenue for the Group of GBP36.6 million for the first half of
the year, representing a year-on-year increase of GBP10.3 million
(H1 2021: GBP26.3 million) of which FFEI represents GBP6.1 million,
and Megnajet GBP0.6 million in the period since acquisition.
It is a very pleasing result given the ongoing restrictions
arising from COVID-19 in China, with Printhead business unit
revenue increasing 2% and EPS 51%. This is a strong recovery across
the business demonstrating the positive customer engagement and
trust that is being regained across our customer base and the
continued momentum we have in the business.
Group revenue growth - continuing operations
GBPm Var Var
H1 2022 H1 2021 % H2 2021 %
Printhead 20.7 20.2 2% 19.9 4%
-------- -------- ---- -------- ----
EPS 9.2 6.1 51% 7.8 18%
-------- -------- ---- -------- ----
Organic growth H1 2022
vs H1 2021 29.9 26.3 14% 27.7
-------- -------- ---- -------- ----
FFEI 6.1 - 5.3 15%
-------- -------- ---- -------- ----
Organic growth H1 2022
vs H2 2021 36.0 26.3 33.0 9%
-------- -------- ---- -------- ----
Megnajet 0.6 - -
-------- -------- ---- -------- ----
Total Growth 36.6 26.3 39% 33.0 11%
-------- -------- ---- -------- ----
Group revenue by geographic region - continuing operations
GBPm H1 2022 H2 2021 H1 2021
PH EPS FFEI MJ Total PH EPS FFEI Total PH EPS Total
----- ---- ----- ---- ------ ----- ---- ----- ------ ----- ---- ------
EMEA 11.2 - 3.6 0.2 15.0 10.4 - 2.8 13.2 10.5 - 10.5
----- ---- ----- ---- ------ ----- ---- ----- ------ ----- ---- ------
Americas 4.9 9.2 2.4 0.4 17.0 3.4 7.8 2.4 13.6 3.9 6.1 10.0
----- ---- ----- ---- ------ ----- ---- ----- ------ ----- ---- ------
Asia 4.5 - 0.1 - 4.6 6.1 - 0.1 6.2 5.8 - 5.8
----- ---- ----- ---- ------ ----- ---- ----- ------ ----- ---- ------
Total 20.7 9.2 6.1 0.6 36.6 19.9 7.8 5.3 33.0 20.2 6.1 26.3
----- ---- ----- ---- ------ ----- ---- ----- ------ ----- ---- ------
Revenue of GBP17.0 million in the Americas grew GBP7.0 million
year-on-year (H1 2021: GBP10.0 million, H2 2021: GBP13.6 million),
driven by significant growth in EPS revenue of GBP3.1 million,
GBP2.4 million from FFEI and excellent growth in Printhead of
GBP1.0 million year-on-year (26%). The rise in EPS revenue is
driven by the recovery of the business unit and stems from
increases in sales of digital machines and peripherals
demonstrating the commercial approach established over the last 12
months is being well received by customers.
Revenue in EMEA has continued to rise year-on-year. Printhead
revenue was GBP11.2 million compared to GBP10.5 million, which
maintains the continued upward trend in revenue since H2 2019.
Performance in Asia, and China in particular, has been impacted
by the continued COVID-19 restrictions. We have seen orders from
our customers delayed as they themselves have been impacted by
their own supply chain issues, limiting their ability to fulfil
their own orders. Whilst this is disappointing, and we see it
continuing throughout 2022, the underlying market demand remains
and we are confident in the medium term or returning to the
previous growth levels.
Printhead revenue for the half year increased GBP0.5 million to
GBP20.7 million (H1 2021: GBP20.2 million), despite the
difficulties faced in China. This is also growth of 4% compared to
H2 2021. Whilst the revenue growth has been restricted due to
Chinese customers in the Ceramics sector, the business has seen
growth in other markets such as Coding & Marking (C&M) and
Additive manufacturing and 3D printing which is pleasing as this
reflects our overall customer strategy and enhanced product
portfolio.
Printhead Revenue by Sector
GBPm H1 2022 H1 2021 Var H2 2021 Var %
%
Ceramics & Glass 9.8 9.5 3% 9.5 3%
-------- -------- ----- -------- ------
C&M & DTS 6.8 5.9 15% 5.2 31%
-------- -------- ----- -------- ------
WFG & Labels 1.8 3.4 -47% 2.8 -36%
-------- -------- ----- -------- ------
3D Printing & AVM 1.9 1.0 90% 1.4 36%
-------- -------- ----- -------- ------
Packaging & Textile 0.1 0.2 -50% 0.6 -83%
-------- -------- ----- -------- ------
Royalties, Commissions
& Fees 0.2 0.2 -% 0.4 -50%
-------- -------- ----- -------- ------
Total 20.7 20.2 2% 19.9 4%
-------- -------- ----- -------- ------
Revenue from the EPS business increased by GBP3.1 million to
GBP9.2 million (H1 2021: GBP6.1 million).
This has been driven by digital inkjet machines sales with
growth of 58%, which is particularly pleasing as this is the core
focus for the business and will drive increased profitability. Pad
print machine revenue has also increased 38%. Our focus on
consumables and accessory sales has contributed to the growth with
increased revenue from ink, plates and parts. We see a
strengthening pipeline and order book and we are well placed to
deliver further growth for the full year in 2022.
EPS Revenue by Sector
GBPm H1 2022 H1 2021 Var % H2 2021 Var %
Digital
Inkjet 5.7 3.6 +58% 4.4 +30%
-------- -------- ------ -------- ------
Pad Printing 3.3 2.4 +38% 3.1 +6%
-------- -------- ------ -------- ------
Other 0.2 0.1 +100% 0.3 -33%
-------- -------- ------ -------- ------
Total 9.2 6.1 51% 7.8 +18%
-------- -------- ------ -------- ------
FFEI revenue was GBP6.1 million which compares to GBP5.3 million
in H2 2021, with no comparison to H1 2021. We are pleased with this
performance, achieved through a period of integration, and whilst
establishing a new group wide product offering. Similarly we are
delighted with the addition to the Group of Megnajet which has
delivered revenue of GBP0.6 million which is ahead of our initial
expectations at the time of acquisition.
Gross profit
Gross profit for the period increased by GBP6.2 million to
GBP14.5 million (H1 2021: GBP8.3 million) with an increase in the
gross margin to 40% (H1 2021: 31%), the fourth successive half
yearly increase in gross margin. This was primarily the result of
an improvement in the Printhead business unit's gross profit which
grew to 41% from 35% (GBP8.5 million from GBP7.1 million). We
improved utilisation of the factory as throughput was increased
during the period resulting in better overhead cost recovery,
supporting gross margin gains. We have worked hard on cost saving
initiatives during the period and as we increase volumes there
should be further scope for improved overhead recoveries and
accordingly margin gains. During the latter half of 2021 and into
2022 we proactively worked to secure raw materials which should
reduce further supply chain risks. Issues in supply chains globally
are widely known and well documented, particularly so for
semi-conductors and other technology materials, with increasing
cost pressures.
These actions should insulate us from further costs and mean we
are able to meet customer demand throughout 2022 and into 2023. We
have increased our working capital with inventory rising GBP5.8
million. This higher level of both raw materials and finished goods
is a deliberate, prudent approach which we believe will see us well
placed to both manage customer requirements and further insulate
the business from external supply chain risks whilst utilising the
high level of operational gearing to deliver further improvements
in the gross margin, and potentially providing us with a
competitive advantage.
Gross profit for the EPS business increased GBP2.4 million in
the period to GBP3.6 million (H1 2021: GBP1.2 million) with gross
margin growing year-on-year (H1 2022: 39%, H1 2021: 19%). The
actions taken to refocus the business on future growth
opportunities which resulted in non-cash write down adjustments
totalling GBP0.6 million in 2021 have proven correct, as the
business has benefitted from these actions and profitably
grown.
Gross profit for H1 2022 for the FFEI business was GBP2.0
million, and for the Megnajet business was GBP0.3 million.
Research & Development
Gross R&D spend of GBP3.3 million was up GBP0.7 million on
H1 2022 (H1 2021: GBP2.6 million). This reflects the ongoing
investment in the ImagineX platform which will be central to our
long-term growth, with the added investment in FFEI of GBP0.6
million. The total increase is in proportion with our revenue
growth and maintains a spend/revenue ratio of approximately
10%.
Operating Expenses
Sales and marketing spend for the period was GBP3.7 million (H1
2021: GBP3.1 million). The increase in spend reflects the focus on
sales and business development in the Printhead & EPS business
unit and the ability for increased travel in some areas. Savings
were previously seen in H1 2021 in both the Printhead and EPS
businesses due to COVID-19 which limited our ability to visit
customers and led to the cancellation of the majority of tradeshows
which one, or both, businesses would have attended.
General and administrative expenses increased to GBP6.0 million
from GBP4.5 million in H1 2021. On a like-for-like basis, the
organic increase (Group excluding FFEI and Megnajet) was GBP0.8
million (18%). The increase largely relates to planned investment
in key areas of the business and infrastructure, including
Operations, R&D, HR and Finance.
Profit for the period
The adjusted profit before tax was GBP1.4 million in 2022 (H1
2021: GBP1.6 million loss).
Total loss for the period before tax was GBP0.6 million after
accounting for share-based payment charges, exchange differences on
intra-group transactions, restructuring and transaction expenses,
the R&D expenditure credit, fair value gains on financial
assets, amortisation of acquired intangible assets, and
discontinued operations. Profit after tax and discontinued
operations was GBP0.4 million (H1 2021: loss of GBP4.3 million),
which includes an income tax credit of GBP0.9 million relating to
the recognition of a previously reversed deferred tax asset.
Basic Earnings per share from continuing operations was 0.9p
(2021: loss 1.6p).
The adjusted performance of the Printhead business improved
GBP0.4 million from a GBP0.8 million loss in H1 2021 to a GBP0.4
million loss in H1 2022 driven by increased sales, and an improved
gross margin. The EPS business went from an adjusted GBP0.8 million
loss in 2021 to a GBP1.1 million profit in H1 2022 due to the
increased trading performance. FFEI contributed an adjusted profit
before tax of GBP0.4 million in the period, and Megnajet GBP0.3
million since acquisition in March 2022.
In calculating the adjusted loss before tax fair value losses on
financial assets GBP1.5 million (H1 2021: nil) alongside
restructuring costs of GBP0.2 million, foreign exchange gains on
intra-group loans of GBP0.8 million, research and development
expenditure credit of GBP0.1 million, share-based payments of
GBP0.4m million and amortisation of acquired intangible assets of
GBP0.5 million.
The adjusted profit before tax was GBP1.4 million, compared to
GBP1.6 million loss in H1 2021. This is a significant step forward
for the business, emphasised by the improved delivery of adjusted
profit in the first half of 2022 following the return to profit in
H2 2021.
The adjusted EBITDA for continuing operations in the period was
GBP3.0 million (2021: GBP0.3 million), a significant step forward
with all elements of the business contributing a positive adjusted
EBITDA.
The operating loss for the Group was GBP0.1 million for H1 2022
(H1 2021: GBP1.3 million), driven by the Printhead business unit
which had an operating loss of GBP1.6 million (H1 2021: GBP0.5
million). This loss takes account of the H1 2022 fair value loss on
financial assets at fair value through profit and loss of GBP1.5
million relating to the contingent consideration for the sale of
Xaar 3D Limited.
Balance sheet
The Group retains a strong balance sheet and a net cash position
at 30 June 2022 of GBP12.7 million. This represents a decline of
GBP12.4 million in net cash since 31 December 2021 (net cash
outflow - continuing operations of GBP12.0 million, which excludes
the net cash outflow from discontinued operations of GBP0.4 million
as detailed in note 10 (H1 2021: net cash outflow from continuing
operations of GBP1.0 million, excluding the net cash inflow from
discontinued operations of GBP0.1 million)), which has been
primarily driven by planned capital investment, working capital
investment and acquisitions.
Non-current assets increased slightly from GBP47.4 million at 31
December 2021, to GBP50.4 million in the first half of the year.
Property, plant and equipment increased overall by GBP1.2 million,
driven primarily by the depreciation of assets (GBP1.3 million),
GBP2.2 million of capital additions and GBP0.3m of foreign currency
exchange movements. Goodwill and intangible assets have increased
by GBP3.4 million which primarily relates to the acquisition of
Megnajet and Technomation. The fair value of the financial asset at
fair value through profit or loss decreased by GBP1.6 million.
Current assets decreased overall by GBP3.2 million. Overall
inventory value has increased by GBP5.8 million, GBP3.2 million of
which relates to an increase in inventory held by the Printhead
business. Trade and other receivables increased by GBP3.7 million
driven by an increase in revenue in the Group and the addition of
Megnajet customer balances.
Current liabilities, reduced overall by GBP1.0 million due
mainly to the decrease in trade and other payables.
As a result of the managed investment in inventory, working
capital saw an outflow of GBP10 million, because of continuous
operational investment.
The Group maintains a strong disciplined focus on cash, and this
will continue throughout 2022. During H1 2022 investing activities
saw cash spend of GBP4.9 million, primarily driven by the
acquisition of Megnajet.
The business has a clear plan and strategy which the strong
balance sheet and cash position will support. There remain external
development opportunities which, if they expand our capabilities
and expertise, we will look to potentially add to the Group. We
will also continue to invest internally to ensure we have the
operational capacity and efficiency to meet future demand,
alongside investment in our product roadmap development.
Dividend
No interim dividend has been declared for 2022. The Board
regularly reviews capital allocation and believes that prioritising
investment to enable profitable growth for the business is
currently the most appropriate use of capital.
John Mills Ian Tichias
Chief Executive Officer Chief Financial Officer
19 September 2022
Directors' responsibilities statement
We confirm that to the best of our knowledge:
-- the condensed set of financial statements has been prepared
in accordance with International Accounting Standard 34 - Interim
Financial Reporting as adopted by the UK
-- the interim management report includes a fair review of the information required by:
o DTR 4.2.7R of the Disclosure Guidance and Transparency Rules,
being an indication of important events that have occurred during
the first six months of the financial year and their impact on the
condensed set of financial statements; and a description of the
principal risks and uncertainties for the remaining six months of
the year; and
o DTR 4.2.8R of the Disclosure Guidance and Transparency Rules,
being related party transactions that have taken place in the first
six months of the current financial year and that have materially
affected the financial position or performance of the entity during
that period; and any changes in the related party transactions
described in the last annual report that could do so.
By Order of the Board
John Mills
Chief Executive Officer
19 September 2022
CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE SIX MONTHSED 30
JUNE 2022
Six months Six months Twelve months
ended ended ended
30 June 31 December
2022 30 June 2021 2021
(unaudited,
(unaudited) restated) (audited)
Notes GBP'000 GBP'000 GBP'000
--------------------------------------------- ------ ------------ ------------- --------------
Revenue 3 36,608 26,302 59,254
Cost of sales (22,118) (18,027) (39,064)
--------------------------------------------- ------ ------------ ------------- --------------
Gross profit 14,490 8,275 20,190
Research and development expenses (3,319) (2,619) (5,706)
Research and development expenditure
credit 79 200 270
Sales and marketing expenses (3,665) (3,106) (6,342)
General and administrative expenses (5,954) (4,507) (10,070)
Impairment (losses)/reversal
of financial assets (46) 14 388
Restructuring and transaction
expenses 2 (226) (873) (1,404)
Fair value (loss)/gain on financial
assets at FVPL 9 (1,469) - 987
Gain on derivative financial
liabilities - 1,269 2,919
Operating (loss)/profit (110) (1,347) 1,232
Investment income 22 2 4
Finance costs (213) (45) (242)
--------------------------------------------- ------ ------------ ------------- --------------
(Loss)/profit before tax (301) (1,390) 994
Income tax credit/(expense) 4 990 51 (299)
--------------------------------------------- ------ ------------ ------------- --------------
Profit/(loss) for the period
from continuing operations 689 (1,339) 695
(Loss)/profit from discontinued
operations after tax 10 (338) (2,928) 13,533
--------------------------------------------- ------ ------------ ------------- --------------
Profit/(loss) for the period 351 (4,267) 14,228
--------------------------------------------- ------ ------------ ------------- --------------
Attributable to:
Owners of the Company 351 (2,929) 16,219
Non-controlling interest - (1,338) (1,991)
--------------------------------------------- ------ ------------ ------------- --------------
Profit/(loss) for the period 351 (4,267) 14,228
--------------------------------------------- ------ ------------ ------------- --------------
Earnings/(loss) per share -
Total
Basic 5 0.5p (3.8p) 20.9p
Diluted 5 0.4p (3.8p) 20.6p
--------------------------------------------- ------ ------------ ------------- --------------
Earnings/(loss) per share - Continuing operations
Basic 5 0.9p (1.6p) 0.9p
Diluted 5 0.9p (1.6p) 0.9p
--------------------------------------------- ------ ------------ ------------- --------------
No dividends were paid in the current or prior period.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHSED 30 JUNE
2022
Six months Six months Twelve months
ended ended ended
30 June 31 December
2022 30 June 2021 2021
(unaudited,
(unaudited) restated) (audited)
GBP'000 GBP'000 GBP'000
------------------------------------- ------------ ------------- --------------
Profit/(loss) for the period
attributable to shareholders 351 (4,267) 14,228
-------------------------------------- ------------ ------------- --------------
Exchange differences on translation
of net investment 623 (22) 143
Other comprehensive income/(loss)
for the period 623 (22) 143
-------------------------------------- ------------ ------------- --------------
Total comprehensive income/(loss)
for the period 974 (4,289) 14,371
-------------------------------------- ------------ ------------- --------------
Total comprehensive income/(loss)
attributable to:
Owners of the Company 974 (2,947) 16,366
Non-controlling interest - (1,342) (1,995)
-------------------------------------- ------------ ------------- --------------
974 (4,289) 14,371
------------------------------------- ------------ ------------- --------------
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2022
As at As at
31 December
30 June 2022 2021
Notes (unaudited) (audited)
----------------------------------- ------ --------------- -------------
Non-current assets
Goodwill 8 7,139 5,894
Other intangible assets 6,230 4,043
Property, plant and equipment 17,404 16,226
Right of use asset 8,492 9,368
Financial asset at fair value
through profit or loss 10,280 11,850
Deferred tax asset 841 -
------ --------------- -------------
50,386 47,381
----------------------------------- ------ --------------- -------------
Current assets
Inventories 24,637 18,839
Trade and other receivables 15,799 12,138
Current tax asset 235 531
Cash and cash equivalents 12,689 25,051
----------------------------------- ------ --------------- -------------
53,360 56,559
----------------------------------- ------ --------------- -------------
Total assets 103,746 103,940
----------------------------------- ------ --------------- -------------
Current liabilities
Trade and other payables (20,755) (21,489)
Provisions (287) (264)
Lease liabilities (928) (1,231)
(21,970) (22,984)
----------------------------------- ------ --------------- -------------
Net current assets 31,390 33,575
----------------------------------- ------ --------------- -------------
Non-current liabilities
Deferred tax liabilities - (1)
Lease liabilities (8,160) (8,499)
Provisions (300) (300)
Other financial liabilities (3,792) (3,354)
(12,252) (12,154)
----------------------------------- ------ --------------- -------------
Total liabilities (34,222) (35,138)
----------------------------------- ------ --------------- -------------
Net assets 69,524 68,802
----------------------------------- ------ --------------- -------------
Equity
Share capital 7,844 7,844
Share premium 29,427 29,427
Own shares (2,070) (1,923)
Translation reserves 1,634 1,011
Other reserves 22,164 21,820
Retained earnings 10,525 10,623
----------------------------------- ------ --------------- -------------
Total equity 69,524 68,802
----------------------------------- ------ --------------- -------------
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHSED 30 JUNE 2022
Share Share Own Translation Other Retained Non-controlling Total
capital premium shares reserve reserves earnings Total interest equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------- -------- -------- -------- ------------ --------- --------- --------
Balances at 1
January 2022 7,844 29,427 (1,923) 1,011 21,820 10,623 68,802 - 68,802
----------------- -------- -------- -------- ------------ --------- --------- -------- ---------------- --------
Loss for the
period - - - - - 351 351 - 351
Exchange
differences on
retranslation
of net
investment - - - 623 - - 623 - 623
Total
comprehensive
loss
for the period - - - 623 - 351 974 - 974
Own shares sold
in the period - - 353 - - (200) 153 - 153
Own shares
acquired in the
period - - (500) - - - (500) - (500)
Cash settled
share based
payments - - - - - (249) (249) - (249)
Credit to equity
for
equity-settled
share-based
payments - - - - 344 - 344 - 344
----------------- -------- -------- -------- ------------ --------- --------- -------- ---------------- --------
Balance at 30
June 2022 7,844 29,427 (2,070) 1,634 22,164 10,525 69,524 - 69,524
----------------- -------- -------- -------- ------------ --------- --------- -------- ---------------- --------
Share Share Own Translation Other Retained Non-controlling Total
capital premium shares reserve reserves earnings Total interest equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------- -------- -------- -------- ------------ --------- --------- -------- ---------------- --------
Balances at 1
January 2021 7,833 29,328 (1,957) 864 21,167 (5,564) 51,671 3,771 55,442
----------------- -------- -------- -------- ------------ --------- --------- -------- ---------------- --------
Loss for the
period (as
originally
reported) - - - - - (3,699) (3,699) (1,559) (5,258)
Correction of
error (note
11) - - - - - 770 770 221 991
----------------- -------- -------- -------- ------------ --------- --------- -------- ---------------- --------
Loss for the
period (as
restated) - - - - - (2,929) (2,929) (1,338) (4,267)
Exchange
differences on
translation
of net
investment - - - (18) - - (18) (4) (22)
Total
comprehensive
loss
for the period
(restated) - - - (18) - (2,929) (2,947) (1,342) (4,289)
Issue of share
capital 1 - - - - - 1 - 1
Own shares sold
in the period - - 28 - - (26) 2 - 2
Credit to equity
for
equity-settled
share-based
payments - - - - 134 - 134 - 134
----------------- -------- -------- -------- ------------ --------- --------- -------- ---------------- --------
Balance at 30
June 2021
(restated) 7,834 29,328 (1,929) 846 21,301 (8,519) 48,861 2,429 51,290
----------------- -------- -------- -------- ------------ --------- --------- -------- ---------------- --------
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
FOR THE SIX MONTHSED 30 JUNE
2022
Six months Six months Twelve months
ended ended ended
30 June 30 June 31 December
2022 2021 2021
(unaudited) (unaudited) (audited)
Note GBP'000 GBP'000 GBP'000
---------------------------------------- ----- ------------ ------------ --------------
Net cash used in operating activities 7 (6,943) (659) (2,054)
---------------------------------------- ----- ------------ ------------ --------------
Investing activities
Investment income 22 11 13
Movement in treasury deposits - 161 161
Purchases of property, plant
and equipment (1,470) (1,221) (1,876)
Proceeds on disposal of property,
plant and equipment 11 - 209
Acquisition on intangible assets - (10) (38)
Cash earn-out received from financial
asset at FVPL 101 - -
Proceeds from disposal of investment
in subsidiary - - 9,272
Cash attributable to subsidiary
sold - - (96)
Acquisition of subsidiary, net
cash acquired (1,202) - 168
Asset acquisition (Technomation),
net of cash acquired (2,334) - -
---------------------------------------- ----- ------------ ------------ --------------
Net cash used in investing activities (4,872) (1,059) 7,813
---------------------------------------- ----- ------------ ------------ --------------
Financing activities
Proceeds from sale of own shares 181 6 150
Payment of cash settled share-based
payments (249) - -
Payment for own shares acquired (500) - -
Payment of lease interest (138) (52) (165)
Payment of lease liabilities (284) (296) (659)
---------------------------------------- ----- ------------ ------------ --------------
Net cash used in financing activities (990) (342) (674)
---------------------------------------- ----- ------------ ------------ --------------
Net (decrease)/increase in cash
and cash equivalents (12,805) (2,060) 5,085
Effect of foreign exchange rate
changes 443 (155) (110)
Cash and cash equivalents at
beginning of year 25,051 20,076 20,076
---------------------------------------- ----- ------------ ------------ --------------
Cash and cash equivalents at
end of period 12,689 17,861 25,051
---------------------------------------- ----- ------------ ------------ --------------
Cash and cash equivalents attributable
to assets held for sale - 782 -
---------------------------------------- ----- ------------ ------------ --------------
Cash and cash equivalents 12,689 17,079 25,051
---------------------------------------- ----- ------------ ------------ --------------
Cash and cash equivalents (which are presented as a single class
of asset on the face of the condensed consolidated statement of
financial position) comprise cash at bank and other short-term
highly liquid investments with a maturity of three months or less.
The carrying amount of these assets is approximately equal to their
fair value.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL INFORMATION
FOR THE SIX MONTHSED 30 JUNE 2022
1. Basis of preparation and accounting policies
Basis of preparation
These interim financial statements have been prepared in
accordance with the accounting policies set out in the Group's
Annual Report and Financial Statements 2021 on pages 120 to 129
(available at www.xaargroup.com) and were approved by the Board of
Directors on 19 September 2022. The interim financial statements
for the six months ended 30 June 2022 have been prepared in
accordance with IAS 34 "Interim Financial Reporting" as adopted by
the United Kingdom. The interim financial statements do not include
all the information and disclosures in the annual financial
statements and should be read in conjunction with the Group's
annual financial statements as at 31 December 2021.
The interim financial statements are unaudited but have been
reviewed by the auditor Ernst & Young LLP. They do not
constitute statutory financial statements as defined in section 434
of the Companies Act 2006. The comparative figures for the
financial year ended 31 December 2021 are derived from the Group's
statutory accounts for that financial year. Those accounts have
been reported on by the Company's auditor and delivered to the
Registrar of Companies. The report of the auditor was (i)
unqualified, (ii) did not include a reference to any matters to
which the auditor drew attention by way of emphasis without
qualifying their report, and (iii) did not contain a statement
under section 498(2) or 498(3) of the Companies Act 2006.
Judgements and estimates
In preparing these interim financial statements, the significant
judgements made by management in applying the Group's accounting
policies and the key sources of estimation uncertainty were the
same as those that applied to the consolidated Financial Statements
for the year ended 31 December 2021.
Significant accounting policies
The accounting policies adopted in the preparation of the
interim condensed consolidated financial statements are consistent
with those followed in the preparation of the Group's annual
financial statements for the year ended 31 December 2021.
Principal risks and uncertainties
The Board has overall responsibility for the establishment and
oversight of the Group's risk management framework. The Board has
an established, structured approach to risk management, which
includes continuously assessing and monitoring the key risks and
uncertainties of the business. An outline of the key risks and
uncertainties faced by the Group is detailed on pages 44 to 55 of
the Xaar plc Annual Report and Financial Statements 2021, which is
available on the Group's website at www.xaargroup.com.
The Board has reviewed these risks as part of half year risk
assessment update including several changes which are reflected in
the Xaar plc Interim Report 2022. The potential impact of these
risks on our strategy and financial performance, together with
details of our specific mitigation actions, are set out in the Xaar
plc Annual Report and Financial Statements 2021, and on pages 8 to
13 of the Xaar plc Interim Report 2022 which includes all the key
changes since the Xaar plc Annual Report and Financial Statements
2021.
Going concern
The Board continuously reviews the performance of the business
and its future prospects, together with other factors likely to
affect its future development, performance and position.
There are continuing risks arising from the economic
consequences of wider global issues, particularly with cost
inflation, and COVID-19 continues to be a risk to economic
disruption, particularly in Asia where we have seen delayed sales
orders from our customers in China due to continued COVID-19
restrictions. Whilst we expect this to continue in the short to
medium term, we remain on track to return the business to
consistent profitable growth and the Board looks forward to the
future with confidence. The Group continues to enjoy a healthy cash
position and is well positioned to cope with the current situation.
The Board remains confident in the long-term future prospects for
the Group and its ability to continue as a going concern for the
foreseeable future.
The Group's day to day working capital requirements are expected
to be met through the current cash and cash equivalents and the
Group was debt free as at 30 June 2022. The Board has a reasonable
expectation that the Group has adequate resources to continue in
operational existence for the period to 31 December 2023, taking
account of reasonably possible changes in trading performance. For
this reason, the Group continues to adopt the going concern basis
in preparing the interim financial statements.
2. Reconciliation of adjusted financial measures
Six months Six months Twelve months
ended ended ended
30 June 30 June 31 December
2022 2021 2021
GBP'000 GBP'000 GBP'000
(unaudited,
(unaudited) restated) (audited)
------------------------------------------ ------------ ------------ --------------
(Loss)/profit before tax from continuing
operations (301) (1,390) 994
------------------------------------------ ------------ ------------ --------------
Share-based payment charges 435 155 758
Exchange differences relating to
intra-group transactions (792) 267 95
Gain on derivative financial liabilities - (1,269) (2,919)
Restructuring and transaction expenses 226 873 1,404
Research and development expenditure
credit (79) (200) (270)
Fair value loss/(gain) on financial
assets at FVPL (note 9) 1,469 - (987)
Amortisation of acquired intangible
assets 486 - 354
------------------------------------------ ------------ ------------ --------------
Adjusted profit/(loss) before tax
from continuing operations 1,444 (1,564) (571)
------------------------------------------ ------------ ------------ --------------
Interest income (22) (2) (4)
Finance costs 213 45 242
Depreciation and impairment of property,
plant and equipment 1,293 1,697 3,318
Amortisation of intangible assets
(other than acquired intangibles) 20 66 121
Loss on asset disposal 85 95 77
------------------------------------------ ------------ ------------ --------------
Adjusted EBITDA from continuing
operations 3,033 337 3,183
------------------------------------------ ------------ ------------ --------------
EBITDA is calculated as statutory operating profit before
depreciation, amortisation and impairment of property, plant and
equipment, intangible assets and goodwill. Adjusted EBITDA is
calculated as EBITDA excluding other adjusting items as
defined.
Adjusted financial measures are alternative performance
measures, which adjust for recurring and non-recurring items that
management consider are not reflective of the underlying
performance of the Group. Recurring items are adjusted each year
irrespective of materiality to ensure consistent treatment.
Non-recurring items are identified and adjusted for by virtue of
their size or nature.
Share-based payment charges include the IFRS 2 charge for the
period of GBP344,000 (H1 2021: GBP134,000) and the expense relating
to National Insurance on the outstanding potential share option
gains of GBP91,000 (H1 2021: GBP21,000). These costs were included
in the general and administrative expenses in the consolidated
income statement.
Exchange differences relating to the operations in the United
States represent exchange gains or losses recorded in the
consolidated income statement as a result of intra-group
transactions in the United States. These costs were included in
general and administrative expenses in the consolidated income
statement.
Gain on derivative financial instruments relates to gains made
on call option contracts. The option was exercised in 2021. These
amounts are included in the consolidated income statement under
Gain on derivative financial liabilities.
Restructuring and investment expenses in the first half of 2022
of GBP226,000 (H1 2021: GBP873,000) mainly relate to costs incurred
and provisions made in relation to acquisition transaction costs of
GBP196,000 and re-organisation costs. Cash expenditure arising from
restructuring costs and transaction expenses in the first half of
2022 was GBP657,000 (H1 2021: GBP396,000).
The research and development expenditure credit relates to the
corporation tax relief receivable relating to qualifying research
and development expenditure. This item is shown on the face of the
consolidated income statement. Cash receipts of GBP199,000 received
during the period were in relation to the XaarJet Limited RDEC
claim which related to the financial year 31 December 2021. There
were no RDEC receipts in 2021.
The fair value loss/(gain) on financial assets at fair value
through profit and loss relates to the sale of Xaar 3D Limited. The
net consideration includes contingent consideration that is valued
and reported at fair value. The fair value movement is recognised
in the income statement as fair value loss/(gain) on financial
assets at fair value through profit and loss.
The amortisation of acquired intangible assets relates to the
acquisition of FFEI Limited in 2021 and the acquisition of Megnajet
Ltd and Technomation Ltd in 2022. These include patents and
customer relationships for FFEI which are being amortised over six
years for FFEI and IP, brand and customer relationships for
Megnajet and Technomation which are being amortised over 8 to 10
years. These costs were included in general and administrative
expenses in the consolidated income statement.
Six months Six months Twelve months
ended ended ended
30 June 30 June 31 December
2022 2021 2021
GBP'000 GBP'000 GBP'000
(unaudited,
(unaudited) restated) (audited)
---------------------------------------- ------------ ------------ --------------
Basic earnings/(loss) per share
from continuing operations 0.9p (1.6p) 0.9p
---------------------------------------- ------------ ------------ --------------
Share-based payment charges 0.6p 0.2p 1.0p
Exchange differences relating to
intra-group transactions (1.0p) 0.3p 0.1p
Gain on derivative financial liability - (1.6p) (3.8p)
Restructuring and transaction expenses 0.3p 1.1p 1.8p
Fair value gain on financial assets
at FVPL 1.9p - (1.3p)
Amortisation of acquired intangible
assets 0.6p - 0.5p
Tax effect of adjusting items 0.1p (0.1p) (0.2p)
---------------------------------------- ------------ ------------ --------------
Adjusted basic earnings/(loss) per
share from continuing operations 3.3p (1.7p) (1.0p)
---------------------------------------- ------------ ------------ --------------
The tax credit effect in the adjusted basic earnings per share
reflects the fact that the gain on derivative financial liability
(in prior periods), fair value loss on financial assets at FVPL and
transaction costs were non-deductible. In addition, deferred tax
assets were largely not recognised in respect of Share based
payments.
This reconciliation is provided to align with how the Board
measures and monitors the business at an underlying level, and is a
measure used in establishing remuneration.
3. Business segments
For management reporting purposes, the Group's operations are
analysed according to the four operating segments of 'Printhead',
'Product Print Systems' (EPS), 'Digital Imaging' (FFEI) and 'Ink
Supply Systems' (Megnajet). These four operating segments are the
basis on which the Group reports its primary segment information
and on which decisions are made by the Group's Chief Executive
Officer and Board of Directors, and resources allocated. Each
business unit is run independently of the others and headed by a
general manager. The Group's chief operating decision maker is the
Chief Executive Officer. There is no aggregation of segments for
disclosure purposes.
Digital Imaging was added in the second half of 2021 as a result
of the FFEI acquisition and Ink Supply Systems was added this half
year as a result of the Megnajet acquisition on 2 March 2022.
Segment information for continuing operations is presented
below:
Six months Six months Twelve months
ended ended ended
30 June 30 June 31 December
2022 2021 2021
(unaudited) (unaudited) (audited)
Continuing operations GBP'000 GBP'000 GBP'000
----------------------- ------------ ------------ --------------
Revenue
Printhead 20,658 20,183 40,104
Product Print Systems 9,227 6,119 13,900
Digital imaging 6,108 - 5,250
Ink supply systems 615 - -
Total revenue 36,608 26,302 59,254
----------------------- ------------ ------------ --------------
Six months Six months Twelve months
ended ended ended
30 June 30 June 31 December
2022 2021 2021
(unaudited,
(unaudited) restated) (audited)
Result - Continuing operations GBP'000 GBP'000 GBP'000
------------------------------------ ------------ ------------ --------------
Printhead (1,149) (364) 2,352
Product Print Systems 1,115 (828) (821)
Digital imaging 43 - 459
Ink supply systems 316 - -
------------------------------------ ------------ ------------ --------------
Total segment result 325 (1,192) 1,990
Net unallocated corporate expenses (435) (155) (758)
------------------------------------ ------------ ------------ --------------
Operating (loss)/profit (110) (1,347) 1,232
Investment income 22 2 4
Finance costs (213) (45) (242)
------------------------------------ ------------ ------------ --------------
(Loss)/profit before tax (301) (1,390) 994
Tax 990 51 (299)
------------------------------------ ------------ ------------ --------------
Profit/(loss) for the period 689 (1,339) 695
------------------------------------ ------------ ------------ --------------
Unallocated corporate expense relates to administrative
activities which cannot be directly attributed to any of the
principal product groups, consisting of share-based payment
charges.
4. Income tax
The major components of income tax (credit)/expense in the
income statement are as follows:
Six months Six months Twelve months
ended ended ended
30 June 30 June 31 December
2022 2021 2021
GBP'000 GBP'000 GBP'000
(unaudited,
(unaudited) restated) (audited)
-------------------------------------- ------------ ------------ --------------
Current income tax
Income tax charge 9 139 186
Deferred income tax
Relating to origination and reversal
of temporary differences (999) (101) 83
-------------------------------------- ------------ ------------ --------------
Income tax (credit)/charge (990) 38 269
-------------------------------------- ------------ ------------ --------------
Income tax (credit)/charge reported
in the statement of profit and loss (990) (51) 299
Income tax charge attributable to
discontinued operations - 89 (30)
-------------------------------------- ------------ ------------ --------------
Income tax (credit)/charge (990) 38 269
-------------------------------------- ------------ ------------ --------------
Whilst the Board believes in the long term potential and
profitability of the Printhead business unit, the forecast taxable
losses over the next couple of years mean that the UK tax losses
will not be utilised in the short term. Therefore, no deferred tax
asset has been recognised relating to UK losses for 2022. However,
due to forecasted taxable profits for the EPS business unit, a
deferred tax asset in relation to brought forward US losses has
been fully recognised resulting in a tax credit for the period, and
are expected to be used over 2022, 2023 and 2024.
In the year ending 31 December 2021, the Group claimed R&D
expenditure credit (RDEC), where the R&D credit receivable is
included in operating loss. In the current period, the eligible UK
companies in the Group are claiming R&D tax relief, and RDEC
for paid for development.
5. Earnings per ordinary share - basic and diluted
The calculation of basic and diluted earnings per share is based
upon the following data:
Six months Six months Twelve months
ended ended ended
30 June 30 June 31 December
2022 2021 2021
(unaudited,
(unaudited) restated) (audited)
GBP'000 GBP'000 GBP'000
-------------------------------------------- ------------- ------------ --------------
Earnings
Earnings for the purposes of earnings
per share being net loss attributable
to equity holders of the parent 351 (2,929) 16,219
-------------------------------------------- ------------- ------------ --------------
from continuing operations 689 (1,250) 695
-------------------------------------------- ------------- ------------ --------------
from discontinued operations (338) (1,678) 15,524
-------------------------------------------- ------------- ------------ --------------
Number of shares
Weighted average number of ordinary
shares for the purposes of basic earnings
per share 77,657,189 77,514,560 77,528,064
Effect of dilutive potential ordinary
shares:
Share options 1,481,799 - 1,261,215
-------------------------------------------- ------------- ------------ --------------
Weighted average number of ordinary
shares for the purposes of diluted
earnings per share 79,138,987 77,514,560 78,789,279
-------------------------------------------- ------------- ------------ --------------
Earnings per Earnings per
Earnings per Share Share
Share pence per pence per
pence per share share share
31 December
30 June 2022 30 June 2021 2021
--------------------------- ----------------- ------------- -------------
Earnings/(loss) per share
- Total
Basic 0.5p (3.8p) 20.9p
Diluted 0.4p (3.8p) 20.6p
--------------------------- ----------------- ------------- -------------
Earnings/(loss) per share
- Continuing operations
Basic 0.9p (1.6p) 0.9p
Diluted 0.9p (1.6p) 0.9p
--------------------------- ----------------- ------------- -------------
6. Share capital and own shares
During the six months ended 30 June 2022, there were no new
ordinary shares issued. During the six months ended 30 June 2021, a
total of 9,138 new ordinary shares of 10 pence each were issued to
satisfy exercises under the Company's LTIP schemes with a GBPnil
exercise price.
During the six months ended 30 June 2022, the ESOP purchased
221,751 shares for GBP0.5 million (H1 2021: nil), and 128,533
shares were used by the ESOP to satisfy share award exercises (H1
2021: 10,573 shares).
7. Notes to cash flow statement
Six months Six months Twelve months
ended ended ended
30 June 30 June 31 December
2022 2021 2021
(unaudited,
(unaudited) restated) (audited)
GBP'000 GBP'000 GBP'000
------------------------------------------ ------------ ------------ --------------
(Loss)/profit before tax from Continuing
operations (301) (1,390) 994
Loss before tax from Discontinued
operations (338) (2,839) 13,503
Total loss before tax (639) (4,229) 14,497
Adjustments for:
Share-based payments 344 135 758
Depreciation of property, plant
and equipment 1,293 1,698 3,318
Depreciation of right of use assets 518 361 871
Amortisation of intangible assets 506 67 475
Research and development expenditure
credit (79) (305) (582)
Investment income (22) (2) (4)
Interest expense - finance cost
for leases 212 50 252
Foreign exchange losses/(gains) (837) 289 (23)
Gain on re-measurement of derivative
liability - (1,269) (2,919)
Fair value loss/(gain) on financial
assets at FVPL 1,469 - (987)
Loss on disposal of property, plant
and equipment 85 95 77
Profit on disposal of investment
in subsidiary - - (17,899)
Decrease/(increase) in provisions 20 92 (74)
------------------------------------------ ------------ ------------ --------------
Operating cash flows before movements
in working capital 2,870 (3,018) (2,240)
Increase in inventories (5,047) (3,335) (7,964)
Increase in receivables (3,383) (882) (1,525)
(Decrease)/increase in payables (1,594) 6,741 9,525
------------------------------------------ ------------ ------------ --------------
Cash used in operations (7,154) (494) (2,204)
Income taxes received/(paid) 211 (165) 150
Net cash used in operating activities (6,943) (659) (2,054)
------------------------------------------ ------------ ------------ --------------
8. Goodwill
The carrying amount of goodwill at 30 June 2022 was GBP7,139,000
(31 December 2021: GBP5,894,000).
Goodwill acquired in a business combination is allocated, at
acquisition, to the cash-generating units (CGUs) that are expected
to benefit from that business combination. Goodwill occurred from
the acquisition of Engineered Printing Solutions (EPS) in July
2016, FFEI Limited in July 2021 and Megnajet in March 2022.
30 June 31 Dec
2022 2021
GBP'000 GBP'000
-------------------------------------------- -------------- -----------
Balance at the beginning of the year 5,894 5,152
Addition - acquisition of Megnajet (2021:
FFEI) 661 689
Foreign currency translation 584 53
Balance at the end of the year 7,139 5,894
-------------------------------------------- -------------- -----------
As part of the reportable segments, goodwill amounting to
GBP5,789,000 is attributed to Product Print Systems (a single CGU),
GBP689,000 is attributed to FFEI (a single CGU), and GBP661,000 is
attributed to Megnajet.
The Group tests goodwill annually for impairment or more
frequently if there are indications that goodwill might be
impaired. No impairment has been identified and therefore no
impairment loss has been recognised during the current or preceding
period. The recoverable amount of the CGU is determined from a
value-in-use calculation. The annual impairment review for Product
Print Systems and Megnajet will continue to be performed on 31
December each year.
FFEI Limited goodwill impairment review
Following the acquisition of FFEI Limited on 11 July 2021, the
Group has performed the annual impairment review for goodwill at
half year, one year post acquisition. A cash flow forecast was
prepared for a period of five years based upon the strategic plan
for the business and a terminal value determined using a 1.01%
growth rate in FFEI Limited, based on OECD growth rates.
To evaluate the risk of impairment, the Group adjusted its cash
flows over the five-year period to reflect constraints on key
assumptions including new product introductions, regional expansion
and growth rates of existing products. These adjusted cash flows
are based on the sensitised forecast as described and bring a
reduction of GBP49.3m to the initial value in use. This adjusted
case is broadly aligned with the cash flows assumed within the
original acquisition accounting, with additional growth arising
from product and market developments in the 12 months since
acquisition. The discount rate applied to the cash flow projections
is 11.35% and reflects external third party advice on the discount
rate associated with FFEI Limited. The discount rate reflects the
risk free rate, equity beta and local market premium as calculated
at 30 June 2022.
The recoverable amount calculated based on the sensitised
forecast set out above exceeds the carrying value of the FFEI
Limited CGU by GBP7.2 million. Further sensitivity analysis has
been completed on each key assumption (Revenue, Gross Margin,
Discount Rate, Long Term Growth Rate and EBITDA) for the FFEI
Limited business. The carrying amount of goodwill would exceed its
recoverable amount, when compared to the adjusted cash flows, if
the following 'reasonably possible changes' were to occur:
-- revenue growth were to decline to 7% across the forecast period;
-- average gross margin on sales were to decline from 31% to 28%
over the five-year period.
9. Derivative financial instruments
Fair value of the Group's financial assets and financial
liabilities that are measured at fair value on a recurring
basis:
Some of the Group's financial assets and financial liabilities
are measured at fair value at the end of each reporting period. The
following table gives information about how the fair value of these
financial assets and financial liabilities are determined (in
particular the valuation technique(s) and inputs used).
Relationship and
sensitivity of
Financial asset/ Valuation technique(s) Significant unobservable unobservable inputs
financial liabilities and key input(s) input(s) to fair value
----------------------- ----------------------------- ------------------------- -----------------------------
Financial asset Monte Carlo Simulation Revenue volatility 10% increase/(decrease)
at fair value model in revenue volatility
through profit would result in
or loss (Level GBP23,000 decrease
3) and GBP11,000 increase
in fair value respectively.
Risk-adjusted discount
rate 2% increase/(decrease)
in discount rate
would result in
GBP50,000 decrease
and GBP53,000 increase
in fair value respectively.
-----------------------------
The following variables
were taken into
consideration:
revenue projections,
management forecast
and discount rate.
The milestone consideration
and 3% earn-out
consideration are
calculated based
on the terms of
the proposed transaction
and by reference
to simulated revenue.
This is then discounted
back to the valuation
date using a discount
rate over a period
commensurate with
the year in which
payments are payable.
-----------------------------
There were no transfers between Level 1 and 2 during the current
or prior year.
Reconciliation of Level 3 fair value measurements of financial
instruments:
On 1 November 2021, the sale of Xaar 3D Limited to Stratasys was
completed and Xaar received net cash of GBP9,272,000 and contingent
considerations of GBP10,863,000. The contingent consideration had a
fair value of GBP11,850,000 as at 31 December 2021. The contingent
consideration is recognised as financial asset at fair value
through profit or loss. During the period, Xaar received an
earn-out income amounting to $128,000 or GBP101,000. The fair value
of the contingent consideration as at 30 June 2022 is GBP10,280,000
with a fair value movement of GBP1,469,000.
Six months ended
30 June 2022
(unaudited)
GBP'000
--------------------------- -----------------
Balance at 1 January 2022 11,850
Earn out received (101)
Fair value loss
on financial assets
at FVPL (1,469)
----------------------------- -----------------
Balance at 30
June 2022 10,280
----------------------------- -----------------
10. Discontinued operations
The Thin Film business which was discontinued in 2019 incurred
costs in 2022 which mainly related to some maintenance costs and a
goodwill repayment to a customer.
As detailed in the 2021 Annual Report, Xaar 3D business
completed its divestment on 1 November 2021. The business unit was
deconsolidated from the Group and there are no transactions
recorded for the period ended 30 June 2022.
The results of Thin Film and 3D related activities for the
period are shown below:
Six months Six months Twelve months
ended ended ended
30 June 30 June 31 December
2022 2021 2021
(unaudited) (unaudited) (audited)
Thin
Film GBP'000 GBP'000 GBP'000
----------------------------------------- ------------ ------------ --------------
Revenue - 334 384
Expenses (338) (485) (623)
----------------------------------------------- ------------ ------------ --------------
Loss before income
tax (338) (151) (239)
Income tax charge - - -
------------------------------------------- ------------ ------------ --------------
Loss after income tax from discontinued
operations (338) (151) (239)
----------------------------------------------- ------------ ------------ --------------
Six months Six months Twelve months
ended ended ended
30 June 30 June 31 December
2022 2021 2021
(unaudited,
(unaudited) restated) (audited)
3D GBP'000 GBP'000 GBP'000
------------------------------ ------------- ------------ --------------
Revenue - 1,472 2,918
Expenses - (4,159) (7,075)
------------------------------------ ------- ------------ --------------
Loss before income
tax - (2,687) (4,157)
Income tax
charge - (89) 30
------------------------------- ------------- ------------ --------------
Net loss before gain on sale - (2,776) (4,127)
Gain on sale of investment
in subsidiary - - 17,899
---------------------------------- ------------- ------------ --------------
Loss after income tax from
discontinued operations - (2,776) 13,772
---------------------------------- ------------- ------------ --------------
Out of the GBP4,357,000 expenses (restated), GBP197,000 relates
to a service charge from the Group undertaking which has to be
eliminated in the Group's consolidated income statement.
The net cash flows incurred by Thin Film and 3D are as
follows:
Six months Six months Twelve months
ended ended ended
30-Jun-2022 30-Jun-2021 31-Dec-2021
(unaudited) (unaudited) (audited)
Thin GBP'000 GBP'000 GBP'000
Film
--------------------------------- ------------ ------------ --------------
Net cash outflow from operating
activities (394) 120 103
-------------------------------------- ------------ ------------ --------------
Net decrease in cash generated
from discontinued operation (394) 120 103
-------------------------------------- ------------ ------------ --------------
Six months Six months Twelve months
ended ended ended
30 June 30 June 31 December
2022 2021 2021
(unaudited) (unaudited) (audited)
3D GBP'000 GBP'000 GBP'000
------------------------------------ ------------- ------------ --------------
Net cash outflow from
operating activities - (1,210) (1,792)
Net cash outflow from
investing activities - (41) (122)
Net cash outflow from financing
activities - (74) (98)
---------------------------------------- ------------- ------------ --------------
Net cash outflow from discontinued
operations - (1,325) (2,012)
----------------------------------------- ------------- ------------ --------------
Six months Six months Twelve months
ended ended ended
30 June 30 June 31 December
2022 2021 2021
(unaudited) (unaudited) (audited)
------------------------------------- ------------ ------------ --------------
Earnings per
share
Basic, loss for the period from
discontinued operations (0.4p) (2.2p) 20.0p
Diluted, loss for the period from
discontinued operations (0.4p) (2.2p) 19.7p
----------------------------------------- ------------ ------------ --------------
Potential ordinary shares are treated as dilutive if their
conversion to ordinary shares would decrease earnings per share or
increase loss per share. Therefore, the diluted earnings per share
is not impacted by the effect of dilutive potential ordinary
shares.
11. Restatement of prior period
The financial statements include a prior period restatement in
relation to non-cash inventory related adjustments identified at
EPS in 2021, that relate prior to 2020. Inventory items with a
total value of $827,000 (GBP589,000) were identified as being held
on the balance sheet that had been previously disposed, scrapped or
consumed prior to 1 January 2020. The errors occurred as a result
of the internal control deficiencies identified in the EPS
subsidiary, in respect of the adequacy of controls over inventory
management, as disclosed in the 2020 Annual Report and Financial
Statements.
Additionally an amount owed to an EPS supplier of $153,000
(GBP109,000) was incorrectly classified as a vendor deposit on the
balance sheet when the payment was made to them in 2020, which
should have been recognised as an expense in 2016. A deferred tax
credit of $274,000 (GBP198,000) was recognised as at 30 June 2021
relating to the loss generated by these adjustments. Within the
2021 interim Financial Statements the inventory and vendor deposit
adjustments were recorded within cost of sales, however following
further investigation (and consistent with the 2021 full year
financial statements) the adjustment has been updated to restate
opening reserves as the issue pre-dates the periods reported in
these financial statements. The increase in the brought forward tax
losses as a result of these adjustments was not recognised as a
deferred tax asset but increased the level of unused tax
losses.
Actions were taken in 2021 to remediate the deficiencies
identified. Process changes have been made to prevent the
reoccurrence of such errors, which has continued during 2022.
Furthermore, there is also a prior period restatement in respect
to depreciation and amortisation of 3D assets held for sale. The
adjustment relates to a reversal of depreciation and amortisation
from the time 3D has been classified as assets held for sale to 30
June 2021. This adjustment is required, because in accordance with
IFRS depreciation and amortisation of non-current assets should
cease from the point the assets are classified as assets held for
sale.
The following tables summarise the impact of the prior period
restatement on the financial statements of the Group for the period
ended 30 June 2021:
Six months ended 30 June 2021
---------------------------------------------------------
As reported EPS inventory 3D depreciation Restated
CONSOLIDATED INCOME GBP'000 GBP'000 GBP'000 GBP'000
STATEMENT
-------------------------------------- ------------ -------------- ---------------- ---------
Revenue 26,302 - - 26,302
Cost of sales (18,725) 698 - (18,027)
---------------------------------------- ------------ -------------- ---------------- ---------
Gross profit 7,577 698 - 8,275
Research and development
expenses (2,619) - - (2,619)
Research and development expenditure
credit 200 - - 200
Sales and marketing
expenses (3,106) - - (3,106)
General and administrative
expenses (4,507) - - (4,507)
Impairment gains on financial
assets 14 - - 14
Restructuring and investment
expenses (873) - - (873)
Gain on derivative financial
liabilities 1,269 - - 1,269
---------------------------------------- ------------ -------------- ---------------- ---------
Operating (loss)/profit (2,045) 698 - (1,347)
Investment income 2 - - 2
Finance costs (45) - - (45)
---------------------------------------- ------------ -------------- ---------------- ---------
(Loss)/profit before
tax (2,088) 698 - (1,390)
Income tax credit/(expense) 249 (198) - 51
---------------------------------------- ------------ -------------- ---------------- ---------
(Loss)/profit for the period
from continuing operations (1,839) 500 - (1,339)
(Loss)/profit for the
period from discontinued
operations (3,419) - 491 (2,928)
(Loss)/profit for the
period (5,258) 500 491 (4,267)
---------------------------------------- ------------ -------------- ---------------- ---------
Attributable to:
Owners of the Company (3,699) 500 270 (2,929)
Non-controlling interests (1,559) - 221 (1,338)
(5,258) 500 491 (4,267)
-------------------------------------- ------------ -------------- ---------------- ---------
Earnings/(loss) per
share - Total
Basic (4.8p) 0.65p 0.35p (3.8p)
Diluted (4.8p) 0.65p 0.35p (3.8p)
---------------------------------------- ------------ -------------- ---------------- ---------
Earnings/(loss) per
share - Continuing operations
Basic (2.3p) 0.69p - (1.6p)
Diluted (2.3p) 0.69p - (1.6p)
---------------------------------------- ------------ -------------- ---------------- ---------
Six months ended 30 June 2021
---------------------------------------------------------
As reported EPS inventory 3D depreciation Restated
CONSOLIDATED STATEMENT GBP'000 GBP'000 GBP'000 GBP'000
OF COMPREHENSIVE INCOME
------------ -------------- ---------------- ---------
(Loss)/profit for the
period (5,258) 500 491 (4,267)
----------------------------------------- ------------ -------------- ---------------- ---------
Exchange differences on retranslation
of net investment (22) - - (22)
Other comprehensive loss for
the period (22) - - (22)
----------------------------------------- ------------ -------------- ---------------- ---------
Total comprehensive (loss)/income
for the period (5,280) 500 491 (4,289)
----------------------------------------- ------------ -------------- ---------------- ---------
Attributable to:
Owners of the Company (3,717) 500 270 (2,947)
Non-controlling interests (1,563) - 221 (1,342)
(5,280) 500 491 (4,289)
--------------------------------------- ------------ -------------- ---------------- ---------
Six months ended 30 June 2021
---------------------------------------------------------
As reported EPS inventory 3D depreciation Restated
CONSOLIDATED STATEMENT OF GBP'000 GBP'000 GBP'000 GBP'000
FINANCIAL POSITION
---------------------------------------- ------------ -------------- ---------------- ---------
Current assets
Disposal group assets
held for sale 8,986 - 491 9,477
Equity
Translation reserve 800 46 - 846
Retained earnings (8,527) (262) 270 (8,519)
Non-controlling interests 2,208 - 221 2,429
----------------------------------------- ------------ -------------- ---------------- ---------
Six months ended 30 June 2021
---------------------------------------------------------
As reported EPS inventory 3D depreciation Restated
Consolidated cash flow GBP'000 GBP'000 GBP'000 GBP'000
statement
--------------------------------------- ------------ -------------- ---------------- ---------
Loss before tax from continuing
operations (2,088) 698 - (1,390)
Loss before tax from discontinuing
operations (3,330) - 491 (2,839)
Depreciation of property, plant
and equipment 1,864 - (166) 1,698
Depreciation of right
of use assets 425 - (64) 361
Amortisation of intangible
assets 328 - (261) 67
(Increase)/decrease in
inventories (2,637) (698) - (3,335)
----------------------------------------- ------------ -------------- ---------------- ---------
12. Related party transactions
From 1 November 2021, both product sales between Xaar and
Stratasys and related party transactions associated with the
"go-to-market" functions were no longer classed as related party.
As detailed in the 2021 Annual Report, Xaar 3D business completed
its divestment and deconsolidated from the Group.
There have been no material changes to the related party
arrangements as reported in note 34 to the Annual Report and
Financial Statements for the year ended 31 December 2021.
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not
disclosed in this note.
13. Business combination
On 2 March 2022, Xaar completed the acquisition of 100% of the
share capital of Megnajet Ltd and Technomation Ltd. The companies
trade together under the name of Megnajet, and design and
manufacture industrial ink management and supply systems for
digital inkjet. The acquisitions will accelerate the Company's
growth strategy by creating a more integrated inkjet solution
whereby customers can access more of the printing ecosystem (such
as ink supply systems and the electronics) from Xaar.
Technomation Ltd was acquired for its Intellectual Property and
know-how. The acquisition has been accounted for as an asset
acquisition using the optional concentration test within IFRS 3.
The purchase price of GBP3,038,000, which includes GBP187,000
deferred consideration, was allocated to its Intellectual Property
amounting GBP1,990,000 (being the purchase price net of GBP517,000
cash balance and GBP531,000 balance relating to working capital and
tax). Whilst Megnajet Ltd was accounted for as a business
combination and the details of the net assets acquired, goodwill
and purchase consideration are as follows:
Recognised amounts of identifiable Fair
assets acquired and liabilities value
assumed GBP'000
--------------------------------------- ---------
Cash 1,067
Trade & other
receivables 487
Corporate tax
payable (27)
Inventories 503
Property, plant and equipment 53
Intangible assets 703
Trade & other
payables (821)
Deferred tax liability (170)
------------------------------------- ---------
Total net identifiable
assets 1,795
Goodwill 661
Total consideration 2,456
------------------------------------- ---------
Satisfied by:
Cash 2,269
Deferred consideration 187
Total consideration transferred 2,456
-------------------------------------- ---------
Net cash inflow arising
on acquisition
Cash consideration 2,269
Less: cash and cash equivalents
acquired 1,067
Total net cash outflow arising
on acquisition (1,202)
--------------------------------------- ---------
The fair value of acquired receivables is GBP250,000. The gross
contractual amount for trade receivables due is GBP252,000, with a
loss allowance of GBP2,000 recognised on acquisition. Other
receivables relate to VAT amounting to GBP237,000.
The goodwill of GBP661,000 arising from the acquisition
represents those characteristics and valuable attributes of the
acquired business that cannot be quantified and attributed to
separately identifiable assets in accounting terms. This goodwill
is underpinned by a number of elements the most significant of
which is the well-established, skilled and assembled workforce and
potential future customer relationships and contracts which enable
Megnajet to accelerate the development of Ink Management and Supply
Systems through the shared expertise, technologies, and resources
across the group. None of the goodwill recognised is expected to be
deductible for income tax purposes.
The fair value of the intangible assets attributed to the
acquisition of the business relates to customer relationships
(GBP422,000) and brand (GBP281,000). These have an estimated useful
life of eight and ten years respectively. The amortisation from the
date of acquisition to 30 June 2022 is GBP27,000 which is included
in the income statement under general and administrative
expenses.
In addition to the cash consideration, deferred consideration
shall be paid in the second year anniversary from the date of
acquisition. The undiscounted amount of all future payments that
the Company is required to make under the deferred consideration
arrangement is GBP200,000.
Acquisition related costs which are included in administrative
expenses in the consolidated income statement for the period ended
30 June 2022 amounted to GBP191,000.
The acquired business contributed revenues of GBP615,000 and net
profit of GBP315,000 to the Group for the period from 2 March 2022
to 30 June 2022. If the acquisition had occurred on 1 January 2022,
consolidated pro-forma revenue and profit for the period ended 30
June 2022 would have been GBP1,170,000 and GBP389,000 respectively.
These amounts have been calculated using the subsidiary's results
and adjusting them for differences in the accounting policies
between the group and the subsidiary; and the additional
depreciation and amortisation that would have been charged assuming
the fair value adjustments to property, plant and equipment and
intangible assets had applied from 1 January 2022, together with
the consequential tax effects.
14. Date of approval of interim financial statements
The interim financial statements cover the period 1 January 2022
to 30 June 2022 and were approved by the Board on 19 September
2022.
Further copies of the interim financial statements are available
from the Company's registered office, 3950 Cambridge Research Park,
Waterbeach, CB25 9PE, and can be accessed on the Xaar plc website,
www.xaargroup.com .
Independent review report to Xaar plc
for the six months ended 30 June 2022
Conclusion
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2022 which comprises the condensed
consolidated income statement, condensed consolidated statement of
comprehensive income, condensed consolidated statement of financial
position, condensed consolidated statement of changes in equity,
condensed consolidated cash flow statement and related notes 1 to
14. We have read the other information contained in the half yearly
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2022 is not prepared, in all material respects, in accordance
with UK adopted International Accounting Standard 34 and the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International
Standard on Review Engagements 2410 (UK) "Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity" (ISRE) issued by the Financial Reporting Council. A review
of interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
As disclosed in Note 1, the annual financial statements of the
group are prepared in accordance with UK adopted international
accounting standards. The condensed set of financial statements
included in this half-yearly financial report has been prepared in
accordance with UK adopted International Accounting Standard 34,
"Interim Financial Reporting".
Conclusions Relating to Going Concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis of Conclusion
section of this report, nothing has come to our attention to
suggest that management have inappropriately adopted the going
concern basis of accounting or that management have identified
material uncertainties relating to going concern that are not
appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with this ISRE, however future events or conditions may
cause the entity to cease to continue as a going concern.
Responsibilities of the directors
The directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
In preparing the half-yearly financial report, the directors are
responsible for assessing the company's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the company or to cease
operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the review of the financial
information
In reviewing the half-yearly report, we are responsible for
expressing to the Company a conclusion on the condensed set of
financial statements in the half-yearly financial report. Our
conclusion, including our Conclusions Relating to Going Concern,
are based on procedures that are less extensive than audit
procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
This report is made solely to the company in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK) "Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Financial
Reporting Council. To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone other than the
company, for our work, for this report, or for the conclusions we
have formed.
Ernst & Young LLP
Cambridge, United Kingdom
19 September 2022
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END
IR GPUQUBUPPPGB
(END) Dow Jones Newswires
September 20, 2022 02:00 ET (06:00 GMT)
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