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	20211	Change
Continuing Operations
Revenue	£36.6m	£26.3m	+39%
Gross profit	£14.5m	£8.3m	+75%
Gross margin %	40%	31%	+9ppts
Gross R&D investment	£3.3m	£2.6m	+27%
Adjusted EBITDA2	£3.0m	£0.3m
Adjusted profit/(loss) before tax2	£1.4m	(£1.6m)
Loss before tax	(£0.3m)	(£1.4m)
Profit/(loss) for the period after tax	£0.7m	(£1.3m)
Basic earnings per share	0.9p	(1.6p)
Total Operations
Loss before tax	(£0.6m)	(£4.2m)	+85%
Profit/(loss) for the period after tax	£0.4m	(£4.3m)	+108%
Basic earnings per share	0.5p	(3.8p)	+112%
Net cash at the period end3	£12.7m	£17.1m	-26%

 

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 £millions 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 £36.6 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 £1.4 million compared to an adjusted loss before tax of £1.6 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 £12.7 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 £36.6 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 £6.1 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 £0.6 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 £1.4 million, compared to an adjusted loss before tax of £1.6 million for H1 2021. This is the second successive half year period we have reported an adjusted profit after reporting a profit of £1.0 million in H2 2021. Due to the slowdown in orders from Chinese customers, the Printhead business unit made an adjusted loss before tax of £0.4 million.

 

Pleasingly we can report positive adjusted EBITDA in each of our businesses for H1 2022 (Group adjusted EBITDA of £3.0 million, is made up of Printhead adjusted EBITDA of £0.9 million, EPS adjusted EBITDA of £1.3 million, FFEI adjusted EBITDA of £0.5 million, and Megnajet adjusted EBITDA of £0.3 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 £12.7 million. This represents a net outflow of £12.4 million in the period (net cash outflow from continuing operations of £12.0 million, which excludes the net cash outflow from discontinued operations of £0.4 million as detailed in note 10 (H1 2021: net cash outflow from continuing operations of £1.0 million, excluding the net cash inflow from discontinued operations of £0.1 million)).

 

During the period we acquired Megnajet Ltd and Technomation Ltd (trading as Megnajet) for a combined consideration £3.9 million net of cash acquired. We have made capital investment of £1.5 million in upgrading our operational capabilities.

 

During the period we invested £3.2 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 £36.6 million for the first half of the year, representing a year-on-year increase of £10.3 million (H1 2021: £26.3 million) of which FFEI represents £6.1 million, and Megnajet £0.6 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

£m	H1 2022	H1 2021	Var %	H2 2021	Var %
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

£m	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 £17.0 million in the Americas grew £7.0 million year-on-year (H1 2021: £10.0 million, H2 2021: £13.6 million), driven by significant growth in EPS revenue of £3.1 million, £2.4 million from FFEI and excellent growth in Printhead of £1.0 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 £11.2 million compared to £10.5 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 £0.5 million to £20.7 million (H1 2021: £20.2 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

£m	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 £3.1 million to £9.2 million (H1 2021: £6.1 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

£m	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 £6.1 million which compares to £5.3 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 £0.6 million which is ahead of our initial expectations at the time of acquisition.

 

Gross profit

 

Gross profit for the period increased by £6.2 million to £14.5 million (H1 2021: £8.3 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% (£8.5 million from £7.1 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 £5.8 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 £2.4 million in the period to £3.6 million (H1 2021: £1.2 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 £0.6 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 £2.0 million, and for the Megnajet business was £0.3 million.

 

Research & Development

 

Gross R&D spend of £3.3 million was up £0.7 million on H1 2022 (H1 2021: £2.6 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 £0.6 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 £3.7 million (H1 2021: £3.1 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 £6.0 million from £4.5 million in H1 2021. On a like-for-like basis, the organic increase (Group excluding FFEI and Megnajet) was £0.8 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 £1.4 million in 2022 (H1 2021: £1.6 million loss).

 

Total loss for the period before tax was £0.6 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 £0.4 million (H1 2021: loss of £4.3 million), which includes an income tax credit of £0.9 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 £0.4 million from a £0.8 million loss in H1 2021 to a £0.4 million loss in H1 2022 driven by increased sales, and an improved gross margin. The EPS business went from an adjusted £0.8 million loss in 2021 to a £1.1 million profit in H1 2022 due to the increased trading performance. FFEI contributed an adjusted profit before tax of £0.4 million in the period, and Megnajet £0.3 million since acquisition in March 2022.

 

In calculating the adjusted loss before tax fair value losses on financial assets £1.5 million (H1 2021: nil) alongside restructuring costs of £0.2 million, foreign exchange gains on intra-group loans of £0.8 million, research and development expenditure credit of £0.1 million, share-based payments of £0.4m million and amortisation of acquired intangible assets of £0.5 million.

The adjusted profit before tax was £1.4 million, compared to £1.6 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 £3.0 million (2021: £0.3 million), a significant step forward with all elements of the business contributing a positive adjusted EBITDA.

 

The operating loss for the Group was £0.1 million for H1 2022 (H1 2021: £1.3 million), driven by the Printhead business unit which had an operating loss of £1.6 million (H1 2021: £0.5 million). This loss takes account of the H1 2022 fair value loss on financial assets at fair value through profit and loss of £1.5 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 £12.7 million. This represents a decline of £12.4 million in net cash since 31 December 2021 (net cash outflow - continuing operations of £12.0 million, which excludes the net cash outflow from discontinued operations of £0.4 million as detailed in note 10 (H1 2021: net cash outflow from continuing operations of £1.0 million, excluding the net cash inflow from discontinued operations of £0.1 million)), which has been primarily driven by planned capital investment, working capital investment and acquisitions.

Non-current assets increased slightly from £47.4 million at 31 December 2021, to £50.4 million in the first half of the year. Property, plant and equipment increased overall by £1.2 million, driven primarily by the depreciation of assets (£1.3 million), £2.2 million of capital additions and £0.3m of foreign currency exchange movements. Goodwill and intangible assets have increased by £3.4 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 £1.6 million.

Current assets decreased overall by £3.2 million. Overall inventory value has increased by £5.8 million, £3.2 million of which relates to an increase in inventory held by the Printhead business. Trade and other receivables increased by £3.7 million driven by an increase in revenue in the Group and the addition of Megnajet customer balances.

Current liabilities, reduced overall by £1.0 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 £10 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 £4.9 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 Chief Executive Officer	Ian Tichias 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 MONTHS ENDED 30 JUNE 2022
		Six months ended		Six months ended	Twelve months ended
		30 June 2022		30 June 2021	31 December 2021
		(unaudited)		(unaudited, restated)	(audited)
	Notes	£'000		£'000	£'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 MONTHS ENDED 30 JUNE 2022
		Six months ended	Six months ended	Twelve months ended
		30 June 2022	30 June 2021	31 December 2021
		(unaudited)	(unaudited, restated)	(audited)
		£'000	£'000	£'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
		30 June 2022	31 December 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