Xaar figures confirm ongoing issues

Xaar has released its full year figures for its financial year ending 31 December 2018, which are best avoided by anyone with a heart condition.

Xaar’s 5601 is a thin film silicon MEMs printhead.

That said, the results are broadly in line with the trading update that the company announced at the end of last year, and which I covered here. Thus revenue for the year was £63.5 million, a drop of 37 percent against the previous year’s £100.1 million. Gross profit fell from £47 million to £24.4 million, while the operating margin has gone from 17.8 percent to -18.7 percent. This is largely due to the ongoing decline in the ceramics business. It is true that the ceramic business has gone from a growth to a replacement market but Xaar has simply been out-performed by rivals with cheaper products. Xaar’s also been hit by issues in the Chinese market, which has affected the take up of its 1201 printhead and by delays in introducing the 5601 thin film heads. In addition, Xaar’s licensing revenue has fallen by £5.3 million due to a £20 million deal for Seiko Instruments to buy out its license.

The net cash fell from £44.7 million to £27.9 million, which Xaar attributes to continued investment in the thin film platform and high speed sintering 3D printer technology, hampered by not having the products ready to sell now. Xaar has said that it will take several more years to reach meaningful volumes of the 5601 heads, though the company is probably right that demand for water-based inks will continue to rise, which will drive interest in the 5601 heads. 

In the meantime there are some bright spots as Xaar is attempting to diversify its business more to reduce the exposure to the declining ceramics market. Thus it has grown revenues from the packaging market by 16 percent to £16.6 million, roughly a third of the total revenue. 

The company has actively sought more to partner with other companies to plug some of its gaps, particularly in the thin film printhead business. But, despite investigating several options, it has not come up with any candidates. Nonetheless, the report makes clear that Xaar will continue to look for a partnership to generate the sales volume necessary to justify the huge costs of investing in wafer fab production. This is in addition to the existing partnership with Ricoh, announced in 2016, which gives Xaar both IP coverage and wafer fab volume consolidation.

Doug Edwards, Xaar’s CEO, commented: “We are making progress in transforming Xaar into a more diversified and customer-centric organisation. Challenges clearly remain across our Printhead business. Following the review conducted in 2018, it has become increasingly clear that in order to realise the full potential of our Thin Film portfolio, we require strategic investment partners to help us achieve the necessary scale. The long term opportunities remain for our new Printhead products, particularly Thin Film, and in our new business areas of 3D Printing and Product Print Systems.”

The company has also warned about the effects of Brexit and the effect on its EU workers and customers as well as potential currency fluctuations. 

You can find more about Xaar, including the financial report, at xaar.com.





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