4 August 2026

Xaar plc

2026 INTERIM RESULTS

Xaar plc ("Xaar", the "Group" or the "Company"), the inkjet printing technology group, announces its unaudited interim results for the six months ended 30 June 2026.

Highlights:

-     Revenue from continuing operations of £29.7 million (2025 H1: £27.2 million), up 9.2% at constant currency

-     Printhead revenue up 5.5% to £21.0 million (2025 H1: £19.9 million)

-     Adjusted profit before tax from continuing operations of £0.2 million (2025 H1: loss of £0.7 million)

-     Net debt of £0.1 million (2025 H1 net cash of: £5.1 million)

-     R&D investment for Printhead and Megnajet at c.9.5% of revenue, consistent with prior year and supporting long-term application development

-     Flashforge CJ270 launch is expected in the second half with pre-launch manufacturing at Flashforge underway

-     Further progress across key applications has been made, including PCB conformal coating; semiconductor processes replacing spin‑coating; solar panel manufacturing and ceramics glaze

-     Dongguan manufacturing facility is in the final stages of commissioning, enhancing supply chain resilience and enabling customer engagement through the new technology demonstration centre

Commenting on the performance and outlook, John Mills, Chief Executive, said:

Xaar's differentiated technology can deposit precise volumes of high viscosity inks with pin-point accuracy. This capability brings benefits, increasingly in new applications which are driven by global trends towards digital manufacturing and the need to reduce process waste. 

Demand across our core and emerging applications remains encouraging. Strong pre-launch demand for the Flashforge CJ270, evidenced by the receipt of initial printhead orders and the continued build-up of volumes ahead of commercial launch, further validates our strategy to expand into high-value applications.

The Dongguan manufacturing facility is in the final stages of commissioning, enhancing supply chain resilience and enabling deeper engagement with Asian OEMs and integrators through the new technology demonstration centre.

The Board's strategy, to broaden revenue streams and build annuity demand for printhead replacement, is working. The full-year outlook remains unchanged, and the Board looks forward with confidence.

About Xaar plc

Xaar is an inkjet printing technology Group, providing unique printheads and related technologies for customers worldwide. It has over thirty years of operational experience and around 147 patents registered or pending. A key feature of Xaar's technology is its ability to work in both two and three dimensional substrates. Xaar is based in the UK and has operations in the US and China.

Operating Summary

Our priorities for 2026 are to grow printhead revenue; to further develop our differentiated products in new applications; to improve operational efficiencies; and to deliver financial results at or ahead of market expectations.

1 - This excludes the discontinued Life Sciences business of FFEI

2 - Group R&D investment exclusive of R&D tax credit and any capitalised costs as used to determine adjusted profit before tax.

3 - Net (debt)/cash includes cash, cash equivalents and treasury deposits, net of short-term borrowings.

Figures included in this report are subject to rounding adjustments arising from conversion to £millions. Accordingly, figures shown for the same category presented in different tables may vary slightly, and figures shown as totals may not be an arithmetic aggregation of the figures that precede them.  Percentages are calculated based on rounded figures and therefore may differ from percentages calculated on unrounded figures.

Strategy and Purpose

Xaar's strategic objective is the development of differentiated inkjet printing technology businesses for the benefit of all stakeholders. Our unique technology delivers precise deposition of specialist fluids with pin‑point accuracy. Our architecture enables the jetting of higher‑viscosity and higher‑pigment‑loaded fluids than competitors, providing clear advantages in applications where material performance, accuracy and process efficiency are critical.

Our business model is to design and manufacture high‑performance industrial inkjet printheads, ink delivery systems and integrated equipment, offering these - together with the necessary applications expertise - to OEMs and print‑system integrators. The Group is increasingly well positioned to benefit from global trends in digital manufacturing and the need to reduce process waste.

Over more than thirty years, Xaar has built deep technical capability, historically focused on ceramic tiles and coding & marking. These markets remain important but have been challenged in recent years. To improve financial consistency, raise margins and capture the rapid expansion of digital manufacturing, the Group has broadened its application base into several new markets, including: 

• 3D printing - notably Wax and Desktop 3D, where functional fluids enable superior printed components
• Automotive coating - where inkjet provides design flexibility and material savings
• EV battery coating - where inkjet can replace PET wrap
• Packaging & Textiles - where high viscosity and low water content enable higher‑speed printing and lower energy use
• Labelling - where high laydown supports design differentiation such as braille capabilities
• PCB conformal coating - where precise deposition reduces waste and improves reliability
• Semiconductor processes - where inkjet is emerging as a replacement for traditional spin‑coating in selected steps
• Solar panel manufacturing - where controlled deposition supports efficiency improvements
• Ceramics glaze - where digital application reduces waste and enhances design capability

In each case, either high viscosity or higher pigment loading brings demonstrable value to the end customer. Xaar is uniquely able to offer printheads with this capability due to its patent‑protected architecture and technical know‑how.

Applications development is inherently complex, requiring collaboration between printhead, fluid and machine manufacturers. Multiple layers of customer accreditation are also required before commercial adoption. While this can extend project timelines, it creates long‑term competitive advantage and high barriers to entry. Importantly, printheads require regular replacement, generating annuity revenue streams.

The Group therefore seeks to:

-     Focus on structural growth applications where our technology provides a specific advantage

-     Make product development core to the business

-     Invest in complementary capabilities to offer turnkey solutions

-     Invest in operational efficiency to maintain competitive advantage

The Board aims to meet investment needs from free cash flow and modest borrowing facilities. All investments are assessed against internal demands aligned to strategic and financial priorities. After a period of renewal and revitalisation, the Board believes Xaar is capable of consistent long‑term growth, driven by unique technology and global manufacturing trends.

Performance by business sector

Printhead

Revenue growth of 5.5% to £21.0 million (2025 H1: £19.9 million) was driven by new business with several OEMs adopting Xaar technology for the first time. Core markets were stable with progress in ceramic tile printing benefiting from new ceramics glaze application, offset by lower demand in textiles and lower activities in jewellery wax due to higher global gold prices and Middle East disruption. There have been other increasing contributions from newer applications including Printed Circuit Board (PCB) conformal coating; semiconductor processes replacing spin coating; solar panel manufacturing; and innovative ceramics glazing.

There has been continued progress towards the commercial launch of the Flashforge CJ270, the next-generation desktop 3D printer incorporating Xaar technology. Initial printhead orders have been received from Flashforge, with volumes building in line with expectations ahead of launch. This provides validation of the market opportunity for high-viscosity jetting in desktop 3D applications and demonstrates the technical advantages of Xaar's architecture.

Megnajet

Megnajet specialises in inkjet fluid management, a capability critical to printhead performance. Demand for its high‑precision ink delivery systems comes from applications where consistency, control and reliability are essential.

In 2026 H1, Megnajet saw revenue growth of 27.3% to £1.4 million (2025 H1: £1.1 million), supported by increased uptake of modular platforms that simplify customer integration and enhance the performance of our latest printheads.

Engineered Print Solutions (EPS)

EPS revenue grew 15.9% to £7.3 million in 2026 H1 (2025 H1: £6.3 million). The new management team has strengthened project execution, refined the commercial pipeline and improved overall business discipline.

EPS is now a more streamlined, better‑positioned organisation and is now contributing to Group momentum.

Environmental, Social and Governance (ESG)

Xaar's ESG roadmap has five key pillars - Environment, People, Innovation, Community and Governance.

Xaar's products help customers to adopt digital manufacturing techniques which reduce waste and energy usage. Our research shows that, compared to analogue alternatives, digital manufacturing has a significant impact in reducing energy consumption (by as much as 55%), water consumption (by up to 60%) and CO₂ emissions (by up to 95%).

During the first half of 2026, we continued to embed ESG considerations into day-to-day operations, with further improvements in environmental monitoring, ongoing focus on employee development and wellbeing, and continued reinforcement of governance practices across the Group.

Xaar is committed to reducing its impact on the environment wherever possible and helping customers do the same.

Dividend

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, therefore, no interim dividend has been declared for 2026 H1.

Outlook

Xaar's differentiated technology can deposit precise volumes of high viscosity inks with pin-point accuracy. This capability brings benefits, increasingly in new applications which are driven by global trends towards digital manufacturing and the need to reduce process waste. 

Demand across our core and emerging applications remains encouraging. Strong pre-launch demand for the Flashforge CJ270, evidenced by the receipt of initial printhead orders and the continued build-up of volumes ahead of commercial launch, further validates our strategy to expand into high-value applications.

The Dongguan manufacturing facility is in the final stages of commissioning, enhancing supply chain resilience and enabling deeper engagement with Asian OEMs and integrators through the new technology demonstration centre.

The Board's strategy, to broaden revenue streams and build annuity demand for printhead replacement, is working. The full-year outlook remains unchanged, and the Board looks forward with confidence.

John Mills

3^rd August 2026

Financial review

Group revenue for continued operations for the six months ended 30 June 2026 was £29.7 million (2025 H1: £27.2 million). Adjusting for currency and discontinued operations, revenue growth was 9.2%, driven primarily by a 5.5% increase in printhead revenue. Gross margin improved to 38.7% (2025 H1: 36.5%), supported by a more favourable product mix, efficiency improvements and turnaround at the EPS subsidiary.

Gross profit for the period was £11.5 million (2025 H1: £9.9 million), reflecting better operational performance and favourable product mix. These gains supported overall margin expansion and improved operating leverage across the Group.

Adjusted Profit before tax ("aPBT") was £0.2 million (2025 H1: £0.7 million loss). Statutory loss before tax for continued operations was £1.4 million (2025 H1: £2.8 million loss). Basic loss per share was 2.3 pence (2025 H1: 3.9 pence). Adjusted earnings per share from continuing operations was 0.3 pence (2025 H1: (0.7) pence loss).

The period ended with net debt of £0.1 million (2025 H1 net cash of: £5.1 million) primarily due to capital expenditure and working capital. Cash inflows were partially offset by £0.5 million of lease payments (2025 H1: £0.8 million) and capital expenditure of £2.4 million (2025 H1: £1.3 million). Inventories have increased at £29.6 million (2025 H1: £25.9 million) due to increasing finished goods stock in preparation for OEM launches. Trade receivables were £9.7 million (2025 H1: £8.1 million), total assets decreased modestly to £78.1 million (2025 H1: £78.3 million), driven by reduction in cash.

Total adjusted operating expenditure was £11.1 million (2025 H1: £10.5 million). R&D costs were £2.1 million (2025 H1: £2.0 million), sales and marketing costs were £2.9 million (2025 H1: £2.3 million) driven by an increase in workforce. General and administrative (G&A) expenses were £6.1 million (2025 H1: £6.2 million). Total statutory operating expenditure was £12.6 million (2025 H1: £12.5 million) which includes adjusting items of £1.7 million of G&A expenses and £0.2 million of R&D tax credit. See note 3 for further details on adjusting items.

Research & Development

Gross Group R&D investment totalled £2.1 million, representing 7.1% of revenue (2025 H1: £2.0 million; 7.4%). R&D investment for Printhead and Megnajet at c.9.5% of revenue keeping us within our target range of 8-10%. Investment shifted further toward application-led development and OEM integration. Statutory R&D investment was £1.9 million (2025 H1 £1.8 million) with a net of £0.2 million R&R tax credit accrual (2025 H1: £0.2 million).

Financing

The Group entered into an enlarged Revolving Credit Facility with its bankers on the 19 March 2026, increasing the facility from £5 million to £10 million together with an uncommitted £5 million "accordion" facility and an increased Invoice Discounting Facility from £3m to £5m. The enlarged facility strengthens the Group's funding platform and provides additional flexibility to support the execution of its growth strategy and investment opportunities. The amount drawn under the Revolving Credit Facility as of 30 June 2026 was £2,500,000 (2025 H1 : £nil).

Divisional Results

Printhead

Printhead revenue increased to £21.0 million (2025 H1: £19.9 million), with ceramics revenue increasing by £0.2 million, marking an increase in this legacy market, with the new application, ceramics glaze.

Revenue by sector

Ceramics and Glass increased by £0.4 million, with ceramics up £0.2 million and continued growth in automotive glass applications. Coding and Marking (C&M) and Direct to Shape (DTS) declined 8.5% as some customers deferred orders to H2, albeit full year expectations in this sector remain unchanged. 3D Printing & Advanced Manufacturing continues to be a high growth sector delivering 28.4% growth. This growth is driven by the OEMs' ongoing shift toward digital processes replacing analogue methods such as replacing spin coating in semiconductors and screen-printing replacement in PCBs. Wide Format Graphics (WFG) & Labels grew by 8.3%, while Packaging & Textiles fell 53.8%, several key textile projects continue to progress.

Megnajet

Megnajet generated £1.4 million in revenue, up 27.3% year-on-year. This growth reinforces the importance of supporting system reliability, fluid management performance and printhead platform commercialisation to the Group. 

Engineered Printing Solutions (EPS)

EPS revenues were £7.3 million (2025 H1: £6.3 million), increasing 15.9%. EPS focused on strengthening project execution, improving cost discipline and widening the customer pipeline, improving overall business discipline.

Taxation

The Group recognised a total tax credit from continuing operations of £0.1 million (2025 H1: £0.1 million).

As previously disclosed, historic overseas tax liabilities (primarily indirect taxes) estimated at £1.8 million, were identified during a review of local compliance processes which will be settled over the next two years. These non-recurring items are not expected to impact future trading.

Dividend and Reserves

Shareholder equity closed the period at £54.3 million (2025 H1: £58.6 million). Retained earnings were £10.4 million (2025 H1: £14.0 million), and foreign exchange translation reserves totalled £1.3 million (2025 H1: £1.0 million). During the period, the Group purchased £0.6 million of its own shares into the Employee Benefit Trust (2025 H1: £0.3m). No dividend has been declared for 2026 H1.

Capital Expenditure

Capital expenditure for the period totalled £2.4 million (2025 H1: £1.3 million).

£1.7 million was invested in PPE (2025 H1: £0.8 million), primarily in printhead capability and platform development and £0.7 million (2025 H1: £0.5 million) invested in intangibles, mainly capitalised development costs for technology enhancements.

Finance and Treasury Policy

Xaar's treasury activities are managed centrally under Board oversight, with the primary objective of safeguarding liquidity, managing financial risk, and supporting the Group's operational and strategic requirements. The function operates within a clear policy framework designed to limit the Group's exposure to short‑term currency fluctuations.

The Group finances its operations through a combination of share capital, retained earnings and, where appropriate, bank facilities. The Group has adequate committed facilities in place to support trading and investment.

Statement of Directors' Responsibilities

The Directors confirm that these condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting' as adopted by the United Kingdom and that the interim management report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:

·    an indication of important events that have occurred during the first six months 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 financial year; and

·   material related-party transactions in the first six months and any material changes in the related-party transactions described in the last annual report.

The Directors of Xaar plc are listed on the Xaar plc website: www.xaargroup.com.

Paul James

3^rd August 2026

* Comparative balances have been restated to reflect the prior period adjustment recognised in the FY2025 Annual Report (see Note 31). Accordingly, the 30 June 2025 comparative figures differ from those originally reported in the 2025 Interim Results.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 JUNE 2026

1.   Basis of preparation and accounting policies

General information

Xaar Plc ("the Company" and together with its subsidiaries "the Group") is a public limited company whose shares are listed on the London Stock Exchange, is incorporated and domiciled in the United Kingdom and is registered in England under the Companies Act 2006.

Basis of preparation

The interim condensed consolidated financial statements for the six months ended 30 June 2026 have been prepared in accordance with IAS 34 "Interim Financial Reporting" as adopted by the United Kingdom. The interim condensed consolidated 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 consolidated financial statements for the year ended 31 December 2025.

The interim condensed consolidated financial statements are unaudited and 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 2025 are as reported in the Group's consolidated statutory financial statements for that financial year. Those financial statements have been reported on by the Group's Auditor and delivered to the Registrar of Companies. The Independent Auditor's Report for the year ended 31 December 2025 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 Sections 498(2) or 498(3) of the Companies Act 2006.

Going concern

The Group has prepared the interim condensed consolidated financial statements on the basis that it will continue to operate as a going concern. The Directors consider that there are no material uncertainties that may cast significant doubt over this assumption. They have formed a judgement that there is a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future, and not less than 12 months from the end of the reporting period.

Principal accounting policies

The accounting policies adopted in the preparation of these interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual consolidated financial statements for the year ended 31 December 2025.

New accounting standards, interpretations and amendments

Several amendments apply for the first time in the six months ended 30 June 2026. As previously reported in the Group's Annual Report and Financial Statements for the year ended 31 December 2025, these amendments do not have a material financial or disclosure impact on the Group's interim condensed consolidated financial statements for the six months ended 30 June 2026.

Key sources of estimation uncertainty and critical accounting judgements

In preparing these interim condensed consolidated financial statements, the critical accounting judgements and key sources of estimation uncertainty are consistent with those disclosed in the Group's Annual Report and Financial Statements for the year ended 31 December 2025.

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 and the potential impact of these risks on of the Group's strategy and financial performance, together with details of specific mitigating actions, is detailed on pages 12 to 24 of the Group's Annual Report and Financial Statements for the year ended 31 December 2025, which is available on the Group's website at www.xaargroup.com.

The Board has reviewed these risks as part of the half year risk assessment update resulting in several changes which are reflected in the Group's Interim Report for the six months ended 30 June 2026. Details of all such key changes are included in the risks and uncertainties section of this report.

2. Operating segments

The Group's operating segments are determined based on the internal reporting to the Chief Operating Decision Maker (CODM).  The CODM has been determined to be the Chief Executive Officer, with support from the other members of the Board of Directors, being the individual who is primarily responsible for the allocation of resources to segments and the assessment of performance of the segments.

The principal activities of the Group are presented in the following segments: 'Printhead', 'EPS', 'Megnajet' and the discontinued 'FFEI'. This presentation reflects how the Group's operating performance is reviewed internally by management.

3. Adjusting items

The Directors believe that the 'adjusted profit before tax' and 'adjusted earnings per share' alternative performance measures presented provide a consistent presentation of the Group's underlying operational performance. They also present shareholders with a clearer insight of performance metrics used by the Chief Operating Decision Maker and mitigate volatility, resulting from external factors that are not influenced by the Group.

These items are as defined below and have been presented consistently in both the current and prior year.

i.      Comprises share-based payment charges of £412,000 (2025: £359,000) and the corresponding charge of £102,000 (2025: £nil) for the associated employer's social security contributions and are included in the selling, general and administrative expenses.

ii.     Comprises exchange gains or losses as a result of USD denominated intra-group loans between UK and US entities. Such costs are included in selling, general and administrative expenses.

iii.    Comprises redundancy related costs of £330,000 (2025: £463,000), Group's operational efficiency programs £850,000 (2025: £263,000), start-up costs relating to the Group's China expansion of £425,000 (2025: nil) and £33,000 other consultancy costs (2025: nil). Such costs are included in selling, general and administrative expenses.

iv.    Comprises UK corporation tax relief relating to qualifying research and development expenditure.

v.     Comprises the fair value movement on contingent consideration that arose on the Group's divestment of Xaar 3D Limited.  Such costs are included in selling, general, and administrative expenses.  Refer to Note 6 for further information.

vi.    The intangible assets consist of the customer relationships and brand value recognised on acquisition of Megnajet Limited in 2022. These costs are included in selling, general, and administrative expenses.

vii.   During 2026 a settlement was made to a customer, related to a sale made in prior year on a now discontinued product line.

viii.  During 2025, the Directors identified certain indirect tax liabilities to settle in an overseas jurisdiction. The provision comprised of the tax liability calculated and imputed interest. During 2026 as a result of further work by our consultants and evidence collection, this provision has been reduced by £973,000. Legal and consultants' fees incurred in 2026 are amounts paid to advisors on the matter £266,000 (2025: nil). 

ix.    Comprises the costs incurred for the implementation of a new reporting software application.

4.Taxation

The major components of the tax credit recognised in the Condensed Consolidated Income Statement are as follows.

Deferred tax

Unrecognised deferred tax assets

The Group continues to have significant unrecognised deferred tax assets consistent with the position as at 31 December 2025 (£29,572,000).  Full details of the nature of these balances are disclosed in note 19 of the Group's Annual Report and Financial Statements for the year ended 31 December 2025.

5. Earnings per share

Basic earnings per share and adjusted basic earnings per share are calculated by dividing the earnings attributable to the equity shareholders of the Company by the weighted average number of shares outstanding during the period. Diluted earnings per share and adjusted diluted earnings per share are calculated on the same basis as basic earnings per share but with a further adjustment to the weighted average number of shares outstanding to assume conversion of all potentially dilutive ordinary shares. Such potentially dilutive ordinary shares comprise share options and awards granted to employees where the exercise price is less than the average market price of the Company's ordinary shares during the period and any unvested shares which have met, or are expected to meet, the performance conditions at the end of the vesting period.

6.   Financial instruments

The Group's activities expose it to a variety of financial risks that include currency risk, interest rate risk, credit risk and liquidity risk.

The interim condensed consolidated financial statements do not include all financial risk management information and disclosures required in the annual financial statements: accordingly, the following disclosures should be read in conjunction with the Group's financial statements for the year ended 31 December 2025.

The Directors consider there to be no material difference between the carrying value and the fair value of financial instruments classified as held at amortised cost. For the items classified as held at fair value, the fair value of such instruments is recognised in the Condensed Consolidated Statement of Financial Position as the carrying amount.

Financial instruments held at fair value

The Group has one financial instrument held at fair value, the contingent consideration that arose on the Group's divestment of its remaining interest in Xaar 3D Limited during the year ended 31 December 2021. The Group received net cash consideration of £9,272,000 as well as a potential entitlement to additional cash consideration of up to £10,863,000 calculated on an earn-out basis at 3% of revenue per annum, with additional amounts becoming receivable on meeting revenue milestones.

Financial instruments that are measured at fair value are classified using a fair value hierarchy that reflects the source of inputs used in deriving the fair value. The three classification levels are:

+ Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;

+ Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

+ Level 3: from valuation techniques that includes inputs for the asset or liability that are not based on observable market data (i.e. unobservable market inputs.

The financial asset at FVTPL is deemed to be a Level 3 instrument. Fair value movements are recognised in the Condensed Consolidated Income Statement in selling, general and administrative expenses.

The movement in the carrying value of the financial asset is as follows:

7.   Borrowings

Invoice discounting facility

On 5 January 2026 the facility limit was increased from £3 million to £5 million. This facility operates on a rolling basis since inception on 22 September 2022 and can be cancelled with a three-month notice period. There are no covenants attached to the invoice discounting facility.

Interest on the invoice discounting facility is charged daily when the facility is in an overdrawn position at a rate equivalent to the appropriate base rate +1.75% pa. There is an annual service fee of £25,000 charged monthly, and there was a one-off arrangement fee to open the facility of £10,000 and a £12,000 fee to increase the facility in 2026. No interest is payable on the unutilised element on the facility.

Further details relating to this facility can be found within Note 25 of the Group's consolidated financial statements for the year ended 31 December 2025.

Committed facilities

On 19 March 2026, Xaar Plc successfully extended a Revolving Credit Facility (RCF) agreement from £5 million to £10 million, maturing in June 2029, having been extended for an additional three years. The agreement includes an accordion option of a further £5 million which can be requested at any time during the facility term, subject to lender approval and relevant fees. The amount drawn under the facility as at 30 June 2026 was £2,500,000 (Dec 2025: £nil).

The facility bears interest at a floating rate of SONIA plus a margin of 2.25-3.00% depending on leverage ratios.  Non-utilisation fee of 40% of the margin is chargeable on undrawn and uncancelled amounts.

The facility is secured by fixed and floating charges over the assets of the Group. The Group is subject to financial covenants under the facility and has complied with these at all testing points.

8.   Share capital

The Company has one class of ordinary shares which carries no right to fixed income.

During the six months ended 30 June 2026, a total of 3,033 (H1 2025: 103,929) new ordinary shares of 10 pence each were issued to satisfy exercises under the Company's LTIP scheme with a £nil exercise price.

During the six months ended 30 June 2026, no shares (H1 2025: 143,127 shares, £341,000) were used by the ESOP to satisfy share award exercises with 494,081 shares purchased by the ESOP for £600,000 (H1 2025: 276,146 shares, £298,000).

9.   Share-based payments

Long-term incentive plans

During the six months ended 30 June 2026, new options over 1,306,155 shares were granted (H1 2025: 1,777,422) and 3,033 vested options (H1 2025: 229,518) were exercised.

Weighted average fair value of options granted as at 30 June 2026 was 112p (H1 2025: 86p).

Fair value of awards with non-market performance conditions (adjusted profit before tax and revenue) are calculated using the Black Scholes model.  Fair values of awards with market-based performance conditions (total shareholder return) are calculated using the Stochastic model.  The inputs into the models fair value granted in the current and prior periods were as follows:

All LTIP awards are subject to achievement of the performance conditions and can be exercised up to ten years after the grant date.  Save as permitted in the LTIP rules, awards lapse on an employee leaving the Group.

Options exercised in the period were satisfied in full by the issue of new shares. In the six months ended 30 June 2025: 103,929 of the options exercised were satisfied using shares held by the Xaar Plc ESOP Trust, with the remaining 125,589 being satisfied by the issue of new shares.

Long-term incentive plans (Cash settled)

During the six months ended 30 June 2026, new options over 92,437 shares were granted (2025 H1: 70,000). These LTIP awards mirror the criteria of our equity settled LTIPS but are specifically to be settled in cash on vesting date.

Deferred bonus plans

86,444 options were granted in the period (2025 H1: none) and no vested options were exercised (2025 H1: 17,538). Weighted average fair value of options granted in the period was 8p. All of the options exercised in 2025 were satisfied using shares held by the Xaar Plc ESOP Trust.

The fair value of awards are calculated using the Finnerty model.  The inputs into the model for grants in the current and prior periods were as follows:

Save as you earn schemes

No new options were granted in the period (2025 H1: none). No vested options were exercised during the period (2025 H1: none).

10.  Dividends

No interim dividend was proposed or paid during either the current or preceding period. The Board of Directors are mindful of the importance of dividends to its shareholders and intends to resume the payment of dividends as soon as conditions allow.

11.  Note to cash flow statement

12.  Discontinued operations

In 2024 the FFEI business unit was reorganised into two separate major lines of business, Life Sciences and Printbar. The Printbar part of the business was gradually migrated to Xaar Jet Limited for efficiency reasons and the Life Sciences part of the business was gradually reduced until finally being abandoned in Q1 2025.

The net cashflows of the FFEI business unit is set out below:

Included within adjusting items is £250,000 relating to a provision for lease termination settlement (2025: £nil) and £4,000 credit relating to share-based payment charges (2025: £3,000 credit). 2025 exceptionals also include redundancy and restructuring costs of £303,000.

13.  Contingent Asset

During 2025, the Engineering Print Solutions (EPS) business incurred additional US import tariffs under executive orders issued pursuant to the International Emergency Economic Powers Act (IEEPA). Following a ruling by the United States Supreme Court in February 2026 that IEEPA did not provide legal authority for the imposition of those tariffs, amounts previously paid became potentially recoverable.

As at 30 June 2026, the Group had received approximately £8,000 in cash refunds and expected a further approximately £227,000 may be refundable. As at the reporting date uncertainty remained regarding the timing, quantum and ultimate receipt of amounts claimed. Refund claims are being processed through freight agents without contractual obligation to pass the refunds back to EPS. Consequently, the Group did not have sufficient evidence that recovery of the outstanding amounts was virtually certain.

In accordance with IAS 37, no asset has been recognised in respect of the outstanding refund claims at 30 June 2026. The potential recovery is therefore disclosed as a contingent asset.

14.  Contingent liability

During 2025, the Directors identified certain indirect tax liabilities to settle in an overseas jurisdiction. Potential penalties in respect of this matter do not meet the criteria of a provision under IAS 37 due to the uncertainty around the amount and as such are not reflected in the provision. The estimated penalties are expected to be between £39,000 - £460,000 and settled over the next three years. The outcome of penalties is contingent on the acceptance of voluntary disclosures and subsequent waivers of penalties.

15. Date of approval of interim financial statements

The interim financial statements cover the period 1 January 2026 to 30 June 2026 and were approved by the Board on 3^rd August 2026.

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.

Risks and uncertainties

The Board considers that the nature of the principal risks and uncertainties which may have a material effect on the Group's performance in the second half of the financial year is unchanged from those set out in Xaar's Annual Report and Financial Statements 2025. That risk assessment was reviewed and updated by the Board on 18 March 2026 and remains, in the Directors' view, a current and complete description of the Group's principal risks and uncertainties for the remaining six months of the financial year. The Board notes that the overall profile is broadly stable - with the risk associated with war and conflict slightly increased, reflecting the continued impact of the conflict in the Middle East on production and assembly capacity, energy costs and the wider operating environment; the assessed level of risk reducing as it relates to customer credit exposure and inventory obsolescence, reflecting strong ongoing customer relationships and continued improvements in inventory management; and the risk relating to the supply chain and laws/regulations remaining elevated, driven in particular by ongoing uncertainty in US markets and expansion of our Asian operations.

The Board continues to monitor these risks, and the mitigating actions and controls in place to manage them. 

The full list of principal risks identified at the year-end and a description of how they relate to the Group's strategy and the approach to managing them are set out on pages 11 to 24 of the Xaar plc Annual Report and Financial Statements 2025, which is available on the Group's website at www.xaargroup.com. Management and the Board have reviewed these risks and concluded they will continue to remain relevant for the second half of the financial year.