Xaar confirms stellar '05; sees good medium term growth
Inkjet printing technology group Xaar plc (XAR.L) confirmed its strong performance in 2005 and expressed confidence in medium term growth prospects, when it released its financial results on Tuesday.
It reiterated its brief pre-emptive statement in January that 2005 turnover was up 23% to £42.8m, while pre-tax profit jumped 69% to £11.0m. It detailed a strong product development path.
Chairman Ari Rosenfeld said "Our sales of established products continue to grow and our new products launched in 2006 will add growth in the medium term. For the longer term we have further new products due for commercial launch in 2007, together with an expanding range of applications ready to adopt them."
But perhaps the guidance for the current year was subdued. "The Board looks forward to another year of positive results in 2006," Mr Rosenfeld said. Maybe the stock market was mildly disappointed, with Xaar's share price down 2.5p to 330p by midday. But, in an endorsement of the healthy bigger picture, the share price remains near its highest point, 338p reached recently, since the crazy dotcom days.
The bigger picture is that inkjet continues its penetration of traditional printing markets. Recently, the company pointed out, Agfa reiterated its intention to become a major player in the industrial inkjet market and during 2005 several other large global imaging companies entered the market or significantly expanded their inkjet activities; Hewlett Packard acquired Scitex Vision (a major Xaar customer) and also announced a new strategic partnership with Seiko Instruments (a Xaar licensee); Fuji Photo Film acquired Sericol Inks and Avecia Inks, both Xaar ink partners, and Dainippon Screen purchased Inca Digital Printers in Cambridge.
"The interest shown by such global businesses can only enhance the prospects for inkjet printing and accelerate its acceptance as a primary printing process," Mr Rosenfeld said.
Xaar also sees progress in the development of inkjet as an industrial manufacturing process in non-print related industries such as packaging, electronics, three dimensional modelling and biotechnology. (see recent story)
It now has the products that enable it to address the requirements of these markets and it continues to build strategic partnerships with the main players in these sectors.
The new manufacturing plant it is fitting out in Huntingdon near Cambridge is on schedule to start production by the end of 2006. It will cost £10m and initially create 30 new jobs. It will supplement its factory in Jarfalla, Sweden, which is expected to reach full capacity over the next two years and will be unable to meet future demand alone.
Printheads major source of revenue
Printheads accounted for 85% of total group sales. Asia remains its largest market, representing 59% of turnover with growth of 29% in the year. Most Asian customers produce graphics printing machines and many of them now export a significant proportion of their equipment to the American and European markets.
In terms of end users, the graphic arts market, and particularly the wide and grand format sectors, continues to be the largest single application for Xaar technology. Sales into this market grew 28% in the year and accounted for 77% of total revenues. The growth of digital printing in what was the traditional analogue screen printing market continues apace.
Royalties from licensees, licencing fees and development revenue jumped by 66% to £2.9m as the volume of printheads designed and manufactured by licensees using Xaar patents increased.
Outer-case coding provides the primary demand for Xaar's technology in the packaging market and represents 15% of group sales. The company is talking with five of the world's largest packaging companies about projects involving printing onto products including beverage cans, aerosol cans, paper and other labels, plastic food cartons, supermarket bags and surgical products.
Technological development continues on across its product range, including those that might now be described as in more mature markets. Total R&D spend in 2005 was £5.5m, 13% of revenue.
Chief executive Ian Dinwoodie (pictured) said progress in development of non-print related industrial applications through business development activities remains on track. "Whilst these opportunities are not short term initiatives, the innovation and potential for longer term growth remains attractive," he said.
Sale of Vivid
Since the end of the year, Xaar has sold subsidiary Vivid Print Innovations, after a review that concluded that its increasingly close relationship with other integrators made it unnecessary to continue to own its own integration business.
Integrators play an important role in developing inkjet printing equipment for new markets. Although small, Xaar said these companies are pioneers in their fields and are now beginning to see the benefits of this prime-mover advantage.
As a result it sold Vivid to Xennia Technology Ltd in return for shares in Xennia. Vivid was acquired by Xaar in early 2003 for a nominal sum and at the date of disposal had gross assets of £0.1m. This sale increases Xaar's total holding in Xennia to 12.5%.from 10.0%
14th March 2006
