TIDMXAR
RNS Number : 1146A
Xaar PLC
22 March 2017
Xaar plc
2016 FULL YEAR RESULTS
Xaar plc ("Xaar", "the Group" or "the Company"), the inkjet
printing technology Group headquartered in Cambridge, UK, today
announces its full year results for the 12 months ended 31 December
2016.
Summary of results for the year to 31 December 2016
Adjusted(1) IFRS
---------------------------- -------------------- --------------------
2016 2015 2016 2015
---------------------------- --------- --------- --------- ---------
Revenue GBP96.2m GBP93.5m GBP96.2m GBP93.5m
---------------------------- --------- --------- --------- ---------
Gross Profit GBP44.7m GBP44.7m GBP44.7m GBP44.7m
---------------------------- --------- --------- --------- ---------
Gross Margin % 46.4% 47.8% 46.4% 47.8%
---------------------------- --------- --------- --------- ---------
Gross R&D investment(2) GBP22.4m GBP19.9m GBP22.4m GBP19.9m
---------------------------- --------- --------- --------- ---------
Net R&D investment(2) GBP12.2m GBP11.5m GBP12.2m GBP11.5m
---------------------------- --------- --------- --------- ---------
Operating Margin % 20% 22% 18% 14%
---------------------------- --------- --------- --------- ---------
Profit before tax GBP19.5m GBP20.8m GBP17.9m GBP13.6m
---------------------------- --------- --------- --------- ---------
Diluted Earnings per share 21.2p 24.5p 18.9p 16.1p
---------------------------- --------- --------- --------- ---------
Net Cash(3) at Period end GBP49.3m GBP69.7m GBP49.3m GBP69.7m
---------------------------- --------- --------- --------- ---------
Dividend per share 10.0p 9.45p 10.0p 9.45p
---------------------------- --------- --------- --------- ---------
(1) Excluding the impact of acquisitions, restructuring costs,
share-based payment charges, exchange differences relating to the
Swedish operations, gains/losses on derivative financial
instruments, and research and development expenditure credits, from
the operating margin, profit before tax and diluted earnings per
share figures. Operating margin % is calculated on operating
profit, which is profit before tax less investment income
(2) Gross R&D investment relates to R&D expenditure
before the capitalisation of development costs. Net R&D
investment relates to R&D expenditure after the capitalisation
of development costs, as recognised in the income statement
(3) Net cash includes cash, cash equivalents and treasury
deposits
Financial highlights
-- Total revenue grew by 3% in 2016 to GBP96.2 million (2015: GBP93.5 million)
-- Disappointing sales into ceramic tile printing were offset by
revenue from the EPS business (acquired 1 July 2016), strong sales
growth in Packaging, and higher license income resulting from
royalty audit settlements
-- Adjusted operating profit margin of 20% achieved for the year (2015: 22%)
-- Gross research and development (R&D) investment (before
capitalisation of development costs relating to the Thin Film
programme) increased to GBP22.4 million in 2016 (2015: GBP19.9
million)
-- Net cash reduced by GBP20.4 million to GBP49.3 million (2015:
GBP69.7 million) through investments in capital expenditure,
working capital and the acquisition of EPS
Strategic and operational highlights
-- Establishment of our vision to grow annual sales to GBP220 million by 2020
-- Two major printhead partnerships have now been announced; Ricoh and Xerox
-- Two Thin Film printheads were launched in 2016
-- Acquisition of EPS completed on 1 July 2016
-- Investment in 3D printing confirmed with resources in Nottingham and Copenhagen
-- Multiple new Bulk piezo products were launched during the year
-- The Sweden facility was closed successfully, as planned
Doug Edwards, Chief Executive Officer, commented:
"I would like to thank all of our staff for their efforts during
2016; an important year in the long term development and
progression of the Company. We remain focused on our long-term
opportunity; the conversion of well-established analogue
manufacturing techniques to digital inkjet solutions. Our vision is
to grow annual revenues to GBP220 million by 2020."
CONTACTS
Xaar plc
Doug Edwards, Chief Executive Today: 020-7353-4200
Officer
Alex Bevis, Chief Financial Officer Thereafter: 01223-423663
www.xaar.com
Tulchan Communications
James Macey White 020-7353-4200
Chairman's Report
I was delighted to be appointed Chairman in October 2016, a year
in which we continued the transformation of Xaar under the
leadership of our Chief Executive Doug Edwards and made good
progress towards our strategic vision.
We took significant steps to deliver our strategy of partnership
and acquisition, with the highlights being the Ricoh partnership,
the Xerox partnership and the acquisition of EPS, a first step for
Xaar outside the area of component manufacture. The partnerships
with Ricoh and Xerox capitalise on each company's considerable
expertise in printhead development. They will deliver substantial
benefits through the expansion of market-leading technology and
enable Xaar to bring to customers a broader range of products. The
acquisition of EPS, a leading provider of product printing
equipment in North America, extends our reach beyond printheads and
provides us with a customer base and footprint in North America, a
region Xaar has been targeting for growth.
We announced in December an investment in our 3D printing
activity, led by Professor Neil Hopkinson, through the
establishment of staff and facilities in Nottingham, UK and
Copenhagen, Denmark, enabling us to deliver 3D printing services
and equipment to OEMs, material suppliers and end users.
This was also a very active year for product launches and the
commercial development of a new technology platform. We launched
multiple new products during the year to support our partner OEMs
in both existing and new markets for digital printing. The launch
of our first Thin Film piezo printhead, the Xaar 5601, was
particularly satisfying. We have made a significant investment in
this technology and it is an important element of our 2020
vision.
Our financial performance in 2016 was broadly in line with our
expectations set at the start of the year. Revenue increased 3%
compared to 2015, including the sales generated by EPS, which
contributed from the acquisition date of 1 July 2016. In 2016, the
Group achieved an adjusted operating profit margin of 20%. Our cash
balance remains strong, with almost GBP50 million as at 31 December
2016, which puts us in a good position to pursue our strategy of
partnership and acquisition.
I would like to thank our employees for their hard work and
dedication through 2016. Important changes across the business
continue, and the support of staff at all levels getting behind
those changes is much appreciated. As previously announced we
closed our Sweden plant in 2016 following almost 20 years of
service as part of Xaar and I would like to thank our Swedish
colleagues for their dedication and hard work over the entire
period.
There have been a number of changes to the Board since 1 January
2016, and these are set out below. The most notable is the
departure of Phil Lawler, who stepped down as Chairman in 2016
after nine years of service. I thank Phil for his significant
contribution to Xaar and the strong team that he has put together
to take the Company forward.
-- On 4 January 2016, Chris Morgan joined the Board as a Non-Executive Director.
-- Following a review of the Board structure, Jim Brault stepped
down from the Board on 16 March 2016. He continues in his role as
Chief Human Resources Officer.
-- On 1 June 2016, Andrew Herbert joined the Board as a Non-Executive Director.
-- On 30 September 2016, Phil Lawler retired as Chairman. As a
result, Robin Williams was appointed Chairman and Chairman of the
Nomination Committee. Margaret Rice-Jones was appointed Senior
Independent Director and Andrew Herbert was appointed Chairman of
the Audit Committee.
-- On 21 October 2016, the Company announced that Alex Bevis,
Chief Financial Officer and Company Secretary would leave the
Company to pursue other opportunities, effective 29 March 2017.
-- On 24 January 2017, the Company announced the appointment of
Lily Liu as Chief Financial Officer and Company Secretary,
effective 2 May 2017.
The task remains to bring Xaar to a more broadly based position
of leadership in the digital transformation of printing worldwide;
2016 took some important steps in that direction and we aim for the
current year to build on this.
Robin Williams
Chairman
Chief Executive Officer's Report
I am pleased to report on another exciting year of achievement.
In 2016, we made further progress in our transformation to an
externally focussed market led business. We have continued to
improve our understanding of our markets and our customers, we have
developed and successfully launched multiple new products, we have
pursued and signed strategic partnerships and we have secured and
integrated our first acquisition.
In 2015 we performed a thorough review of our strategy. As a
result, we committed to expand our horizons through transformation
from an internally focussed product company to a market and
customer focussed business. We undertook to expand our offering
beyond the printhead in carefully selected applications, and to
access new products and new technology through partnership and
acquisition. We identified packaging as a key market for growth,
and the US as a region with untapped potential. I am pleased with
our progress in 2016 against all of these elements.
In 2016, we established four strategic pillars to support our
2020 vision; Ceramics; Product Printing and Packaging; Thin Film;
Acquisitions and Partnerships. Progress within each of these
pillars is described below.
Ceramics
Ceramics remained our largest application segment in 2016, where
we retain a strong market position. It is a market, which is
maturing in terms of digital conversion, although opportunities to
convert established analogue processes do still remain. As
anticipated, we have seen increased competition from other
printhead suppliers in this application segment. We responded with
two important product launches in 2016. The Xaar 1003, launched in
March 2016, provided an improvement in the all-round performance of
the well-established and market-leading Xaar 1002, and achieved the
longest maintenance-free production runs in the industry. In
September 2016, we launched the Xaar 2001+ family of printheads, a
high performing and extremely versatile product range, which
enables tile manufacturers to easily implement new designs to
respond to changing fashions and tastes, efficiently manage
production changes from one day to the next and benefit from low
maintenance production runs.
Overall, sales performance in ceramics was disappointing in
2016, through a combination of lower overall printer sales in the
market, increased competition and a slower take-up of new products.
Initial demand for the 2001+ printheads was strong following the
launch of those products in September, however, longer than
expected customer printer re-designs and manufacturing ramp up
resulted in lower than expected sales in the second half of 2016.
The products launched in 2016 position the Company well in terms of
maintaining Xaar's market leading position and supporting our OEM
partners in 2017 and beyond.
Product Printing & Packaging
Through our strategic review, we identified the potential to
extend our business model beyond printheads in carefully selected
applications. In 2016, we selected two areas to focus on; product
printing and 3D printing, and we have made good progress on
both.
The product printing market is served by multiple print
processes today and the fastest growing is inkjet. Here, just as
with other industry sectors, there is great potential to accelerate
the adoption of inkjet. On 1 July 2016, we acquired EPS, a leader
in Product Printing equipment based in the US, to increase our
influence and financial returns from this sector. EPS successfully
established itself through supplying customised and bespoke
printing solutions to a wide variety of market sectors including
promotional, packaging, medical, automotive, apparel, appliances,
sports equipment and toys. One of its achievements has been to
develop flexible and cost effective digital inkjet solutions.
Through the acquisition, Xaar gained a well-established and
successful business, a customer base and a footprint in North
America, a region Xaar has been targeting for growth. I am
delighted with the success of the integration and subsequent
performance of the business since the acquisition.
In December 2016, we announced an investment in 3D printing, led
by Professor Neil Hopkinson, through the establishment of staff and
facilities in Nottingham, UK and Copenhagen, Denmark. We will be
opening a Xaar 3D Centre in Nottingham, UK, to deliver 3D printing
services and equipment to OEMs, material suppliers and end users.
In addition to the investment in Nottingham, Neil's team has
recently been expanded through the acquisition of an experienced
group of talented engineers working in Copenhagen, Denmark. The
Copenhagen team will provide design and process development
expertise to help our partners commercialise equipment, enhancing
Xaar's ability to secure further revenues in this fast growing
sector. Our investments in Nottingham and Copenhagen will
significantly expand our capability in this sector, helping us to
achieve our growth plans.
In the various established and developing packaging applications
outside of product printing, our focus remains our core business of
selling printheads, and I am pleased to report good sales
performance in 2016, with all areas of Packaging (Coding and
Marking, Primary Labels and Direct-to-shape) delivering growth over
2015.
Thin Film
2016 was an exciting year for Thin Film printhead technology,
with two important announcements.
We have made a significant investment in the development of Thin
Film printhead technology, with the objective of producing a
printhead, which unlocks the digital conversion of very large and
established analogue industrial printing markets such as commercial
printing, textiles, brochures, magazines and high-volume packaging.
This development is an important part of our 2020 vision, which
pushes the boundaries of inkjet technology. In May 2016, we were
delighted to announce the launch of the Xaar 5601, our first
product based on this technology platform, which has been
successfully demonstrated to a number of our partners. We had
originally targeted to begin commercial sales of this product in
early 2017; however, our manufacturing partner experienced a
processing issue as they began to increase production levels. The
impact of this issue has limited production output of the Xaar
5601, which has delayed commercial sales volumes. The root cause of
the issue has been identified and resolution is in progress. We are
working closely with our manufacturing partner to minimise the
impact of delays on our customers, and we expect to get back
on-track during the second quarter of 2017 with commercial sales
anticipated from the middle of the year.
The second announcement on Thin Film resulted from a strategic
collaboration with Ricoh, which yielded a new printhead, the Xaar
1201, targeted at the already well-established digital printing
market of outdoor advertising and soft signage in Asia. Initial
demand is high from our partner OEMs. Production output is building
and this printhead is expected to provide a material revenue
contribution from the second half of 2017.
Acquisitions and Partnerships
In 2016, we were delighted to report our first acquisition. EPS,
acquired on 1 July 2016, has been successfully integrated and is
performing well. It has helped extend our business model and
improve our market knowledge. We will continue to explore
acquisition opportunities in the Product Printing space and in
other carefully selected target markets.
We made excellent progress with partnerships in 2016. In May
2016, we announced our Thin Film piezo printhead partnership with
Ricoh, and in January 2017, we announced our Bulk piezo printhead
partnership with Xerox. These partnerships are important for three
reasons; they extend our product range, they produce better
products more efficiently, and they expand our market access.
As noted above, the Ricoh partnership signed last year quickly
yielded a first product, the Xaar 1201, which will contribute in
2017. The first product from the Xerox partnership announced in
January, the Xaar 5501 is already in development and is expected to
be introduced in the middle of this year.
In 2016, we also made progress on our partnership with GIS on
electronics, Megnajet on fluid supply systems, and with a number of
ink companies. Success with printhead adoption is reliant on the
creation of an eco-system of technology, products and partners;
launching a stand-alone printhead without the necessary supporting
elements will not be successful. Our external focus is therefore
very important and we will continue to look for opportunities to
partner.
Product and technology development
2016 was another busy year for our product development and
delivery teams. In addition to the printheads mentioned above, the
Xaar 1003 and Xaar 2001+ for ceramics, and the Xaar 5601 and Xaar
1201 Thin Film products, we achieved a number of other printhead
launches.
In February 2016, we announced the launch of the Xaar 1002 GS40
for UV applications, perfect for a range of high build varnish and
textured effects for labels, packaging, graphics and wood
laminate.
In November 2016, we announced the launch of the Xaar 502
product family of high-performance greyscale piezoelectric
drop-on-demand printheads designed for a wide variety of
applications, including the well established Coding and Marking
application.
We also transferred production of the enduring Xaar 128 from
Sweden to Huntingdon and achieved a successful closure of the
Sweden facility, on plan and on budget.
Our people
I would like to thank all of our staff for their efforts during
2016, an important year in the long-term development and
progression of the Company. We have overcome a number of
challenges, and together we will need to continue to challenge
ourselves, and to change, to achieve our goals. In 2017, we have a
change of CFO, as Alex Bevis departs after six years of service to
join Frontier Developments plc, and Lily Liu joins us from Smiths
Group plc. I'd like to thank Alex for his contribution to Xaar,
particularly the last two years whilst we have been working
together. I look forward to working with Lily to continue Xaar's
transformation.
Summary and outlook
We remain focused on our long-term opportunity, the conversion
of well-established analogue manufacturing techniques to digital
inkjet solutions. Our vision is to grow annual revenues to GBP220
million by 2020.
Looking nearer term, our achievements in 2016 on a number of
fronts position us well for growth. Whilst our strengthened product
portfolio expands our market opportunities, execution risks remain.
The expected growth of new product revenues over the course of 2017
reduces our visibility for the current year, with revenues expected
to be more second half weighted than usual. Our objective is
simple, to take the necessary steps in terms of product
developments, partnerships and financial performance to reach our
2020 target.
Doug Edwards
Chief Executive Officer
Chief Financial Officer's Report
Revenue
The Group achieved total revenue for the year of GBP96.2 million
(2015: GBP93.5 million) which was broadly in line with the Board's
expectations going into 2016. A disappointing performance in
ceramics was offset by strong growth in packaging, the addition of
sales from the acquired EPS business, and higher royalty
income.
The majority of Xaar's revenue is generated by product sales,
commissions and fees (GBP82.9 million or 86% of total sales in
2016, GBP87.3 million or 93% of total sales in 2015), with 14% of
revenue in 2016 (2015: 7%) derived from licensee royalty income.
The significantly higher level of licensee royalty income in 2016
compared to previous years is the result of the resolution of
royalty audits during the year.
Industrial applications (associated with the production of
physical end products) continue to be the largest sector for Xaar's
technology, and represented 55% of Group revenue in 2016 at GBP53.3
million, compared to 66% in 2015 (GBP62.2 million).
The largest revenue contributor in Industrial continues to be
ceramic tile decoration. The development and sale of printing
equipment by our OEM partners continues to drive the conversion
from analogue rotary systems to superior digital inkjet processes,
but this sector is maturing and the replacement cycles for both
printers and printheads are becoming more important.
Revenues from the acquired EPS business have been included in
the Industrial sector and accounted for GBP6.7 million in 2016
(from the acquisition date of 1 July 2016). Total sales into other
Industrial applications such as advanced manufacturing, decorative
laminates (artificial wood), and product printing (industrial
Direct-to-Shape) grew 19%.
Sales into the Packaging market grew 40% in the year, and
accounted for 23% of revenue in 2016 at GBP21.7 million (2015: 17%,
GBP15.5 million). All three of the main sub-sectors; Coding and
Marking, Primary Labels, and Direct-to-shape delivered growth over
2015. Sales into the Coding and Marking application were boosted by
some one-off last-time-buy arrangements for products previously
manufactured In Sweden.
Sales into Graphic Arts, typically the printing of outdoor
advertising and soft signage, accounted for GBP7.9 million for the
year (2015: GBP9.6 million). The Xaar 1201 printhead launched in
2016 will be an important product to enable a return to more
substantial sales in this sector in 2017.
As a supplier of technology to OEM partners, our geographic
sales split reflects where our products are integrated into the
manufacturing equipment, which is not necessarily the end-user
location.
In 2016, Europe, Middle East and Africa (EMEA) remained the
Company's largest sales region at GBP41.7 million (2015: GBP47.1
million), representing 43% of Group sales. The year on year
reduction in revenue is mainly the result of falling European OEM
sales into ceramics. Europe will continue to be a very important
market for us, and so we are keen that efficient trading
arrangements continue with the EU as the UK prepares for
Brexit.
Sales into Asia were also impacted by the lower sale into
ceramics, but benefited from the royalty audit settlements. Overall
sales into Asia reduced to GBP36.4 million (2015: GBP39.9 million)
representing 38% of total revenue.
The Americas remained the lowest region by sales but increased
substantially following the EPS acquisition. Revenue increased to
GBP18.1 million from the GBP6.5 million recorded in 2015,
representing 19% of total revenue.
Profitability
Overall profitability was slightly down year on year, with an
adjusted operating margin in 2016 of 20%, versus the 22% recorded
in 2015. The reduction was mainly due to a lower gross profit
margin, which reduced from 47.8% in 2015 to 46.4% in 2016, despite
the more significant contribution provided by license income
arising from the resolution of two significant royalty audits.
Gross profit margin in 2016 excluding all license related income
was 37.8% compared to 44.1% recorded in 2015. The reduction
reflected lower output from the Sweden manufacturing facility in
the first half of 2016, competition related pricing pressures and
lower than planned production levels in the second half of the year
of new products, including a slower than expected increase in the
Xaar 2001+.
Gross expenditure on R&D (before cost capitalisation)
increased by 13% from GBP19.9 million in 2015 to GBP22.4 million in
2016. Development expenditure on the Thin Film programme of GBP10.2
million was capitalised in 2016 (2015: GBP8.4 million) as required
under International Financial Reporting Standards (specifically IAS
38). We are currently working with our manufacturing partner to
resolve an issue on our first Thin Film product, the Xaar 5601, in
order to increase production volumes and achieve commercial sales.
The delay of this milestone means that in 2017 we will continue to
capitalise costs associated with the Thin Film platform development
programme. This position will be reviewed in the middle of the
year, at which time we expect to commence commercial sales.
Sales, marketing and general administrative costs increased to
GBP13.4 million (2015: GBP12.7 million) on an adjusted basis,
partly as a result of the acquisition of EPS.
Adjusted profit before tax of GBP19.5 million was recorded for
2016 (2015: GBP20.8 million). Profit before tax as reported under
IFRS was GBP17.9 million (2015: GBP13.6 million).
The tax charge on adjusted profit before tax was GBP2.9 million
(2015: GBP1.8 million), representing an effective tax rate of 15%
(2015: 9%) which compares to the UK corporation tax rate for 2016
of 20%. Xaar benefits from favourable intellectual property and
R&D tax incentive schemes in the UK as a result of our
continued investment in R&D. The effective tax rate for 2015
was particularly low due to prior year adjustments. The tax charge
on IFRS profit before tax was GBP3.1 million (2015: GBP1.0 million)
representing an effective tax rate of 17% (2015: 8%).
Adjusted profit after tax for 2016 was GBP16.6 million (2015:
GBP19.0 million) and adjusted diluted earnings per share was 21.2
pence (2015: 24.5 pence).
Financial position
CONSOLIDATED INCOME STATEMENT
FOR THE YEARED 31 DECEMBER 2016
2016 2015
Notes GBP'000 GBP'000
---------------------------------------- ------ --------- ---------
Revenue 96,178 93,472
Cost of sales (51,511) (48,782)
---------------------------------------- ------ --------- ---------
Gross profit 44,667 44,690
Research and development expenses (12,211) (11,548)
Research and development expenditure
credit 605 818
Sales and marketing expenses (7,608) (5,440)
General and administrative expenses (6,844) (9,254)
Restructuring and acquisition expenses (1,205) (6,120)
---------------------------------------- ------ --------- ---------
Operating profit 17,404 13,146
Investment income 449 426
Profit before tax 17,853 13,572
Tax (3,052) (1,043)
---------------------------------------- ------ --------- ---------
Profit for the year attributable
to shareholders 14,801 12,529
---------------------------------------- ------ --------- ---------
Earnings per share
Basic 3 19.4p 16.6p
Diluted 3 18.9p 16.1p
---------------------------------------- ------ --------- ---------
The Group maintains a strong cash position, with GBP49.3 million
of cash and treasury deposits at 31 December 2016, which is a
decrease of GBP20.4 million compared to balances held at 31
December 2015. Operating cash inflow, being adjusted profit before
tax after adding back depreciation and amortisation, was GBP28.1
million. The change in working capital during the year represented
a net cash outflow of GBP8.5 million. An increase in receivables
was the biggest change in working capital, which resulted from the
phasing of revenue in the year, the establishment of terms with new
customers, last-time-buy credit arrangements for products
previously manufactured in Sweden, and increased receivables from
sales recorded by the acquired EPS business in the latter part of
2016. The acquisition of EPS in July 2016 accounted for an outflow
of GBP8.0 million. Total cash outflow relating to intangible and
tangible assets was GBP21.1 million in the year, including GBP10.2
million of capitalised development expenditure. Dividends accounted
for GBP7.3 million of cash outflow in 2016.
Dividend
As announced in 2014, the Company employs a progressive and
sustainable dividend policy, which takes into account the Group's
future prospects, its underlying profitability and the future cash
requirements of the business. The Board will recommend a final
dividend of 6.7 pence for 2016 (2015: 6.3p) at the forthcoming
Annual General Meeting (AGM), giving a total dividend for the year
of 10.0 pence, a 5.8% increase over 2015 (9.45 pence). An interim
dividend of 3.3 pence was paid during the year (2015: 3.15 pence).
Subject to approval by shareholders at the AGM, the final dividend
will be paid on 26 June 2017, with an ex-dividend date of 25 May
2017, to shareholders on the register at close of business on 26
May 2017.
Alex Bevis
Chief Financial Officer
Dividends paid in the year amounted to GBP7,328,000 (2015:
GBP6,925,000).
All activities relate to continuing operations.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER 2016
2016 2015
GBP'000 GBP'000
--------------------------------------------------------- -------- --------
Profit for the year attributable to shareholders 14,801 12,529
--------------------------------------------------------- -------- --------
Items that may be reclassified subsequently to profit
and loss:
Exchange differences on retranslation of net investment 708 (27)
Tax benefit on share option 434 -
Other comprehensive income for the year 1,142 (27)
--------------------------------------------------------- -------- --------
Total comprehensive income for the year 15,943 12,502
--------------------------------------------------------- -------- --------
CONSOLIDATED STATEMENT OF FINANCIAL
POSITION
AS AT 31 DECEMBER 2016
2016 2015
GBP'000 GBP'000
------------------------------------- --------- ---------
Non-current assets
Goodwill 5,776 -
Other intangible assets 27,363 17,795
Property, plant and equipment 36,352 31,255
Receivables 1,516 -
71,007 49,050
------------------------------------- --------- ---------
Current assets
Investments 1,000 1,000
Inventories 13,790 13,458
Trade and other receivables 20,340 11,947
Current tax asset 3,029 2,805
Treasury deposits - 27,098
Cash and cash equivalents 49,321 42,649
87,480 98,957
------------------------------------- --------- ---------
Total assets 158,487 148,007
------------------------------------- --------- ---------
Current liabilities
Trade and other payables (14,314) (12,405)
Other financial liabilities (69) (68)
Provisions (774) (3,533)
------------------------------------- --------- ---------
(15,157) (16,006)
------------------------------------- --------- ---------
Net current assets 72,323 82,951
------------------------------------- --------- ---------
Non-current liabilities
Deferred tax liabilities (2,686) (1,222)
Other financial liabilities (188) (241)
------------------------------------- --------- ---------
Total non-current liabilities (2,874) (1,463)
------------------------------------- --------- ---------
Total liabilities (18,031) (17,469)
------------------------------------- --------- ---------
Net assets 140,456 130,538
------------------------------------- --------- ---------
Equity
Share capital 7,778 7,764
Share premium 27,854 27,585
Own shares (3,642) (3,796)
Other reserves 11,891 11,006
Translation reserve 807 99
Retained earnings 95,768 87,880
------------------------------------- --------- ---------
Equity attributable to shareholders 140,456 130,538
------------------------------------- --------- ---------
Total equity 140,456 130,538
------------------------------------- --------- ---------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2016
Share Share Own Other Translation Retained
Capital premium Shares Reserves Reserve Earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- --------- -------- -------- --------- ------------ ---------- --------
Balance at 1
January 2015 7,664 26,345 (3,796) 9,716 126 82,105 122,160
-------------------------- --------- -------- -------- --------- ------------ ---------- --------
Profit for the
year - - - - - 12,529 12,529
Exchange differences
on retranslation
of net investment - - - - (27) - (27)
Total comprehensive
income for the
period - - - - (27) 12,529 12,502
Issue of share
capital 100 1,240 - - - (40) 1,300
Dividends - - - - - (6,925) (6,925)
Tax on share
option gains - - - - - 211 211
Credit to equity
for equity-settled
share-based payments - - - 1,290 - - 1,290
-------------------------- --------- -------- -------- --------- ------------ ---------- --------
Balance at 1
January 2016 7,764 27,585 (3,796) 11,006 99 87,880 130,538
-------------------------- --------- -------- -------- --------- ------------ ---------- --------
Profit for the
year - - - - - 14,801 14,801
Tax on items
taken directly
to equity - - - - - 434 434
Exchange differences
on retranslation
of net investment - - - - 708 - 708
Total comprehensive
income for the
period - - - - 708 15,235 15,943
Issue of share
capital 14 269 - - - (2) 281
Dividends - - - - - (7,328) (7,328)
Credit to equity
for equity-settled
share-based payments - - 154 885 - (17) 1,022
-------------------------- --------- -------- -------- --------- ------------ ---------- --------
Balance at 31
December 2016 7,778 27,854 (3,642) 11,891 807 95,768 140,456
-------------------------- --------- -------- -------- --------- ------------ ---------- --------
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEARED 31 DECEMBER
2016
2016 2015
Notes GBP'000 GBP'000
--------------------------------------- ------ --------- ---------
Net cash from operating activities 4 13,935 40,384
--------------------------------------- ------ --------- ---------
Investing activities
Investment income 471 531
Acquisition of subsidiary, net
of cash acquired 6 (7,556) -
Purchases of property, plant
and equipment (10,831) (3,764)
Proceeds on disposal of property,
plant and equipment 16 46
Expenditure on software (85) (187)
Expenditure on capitalised product
development (10,222) (8,365)
--------------------------------------- ------ --------- ---------
Net cash used in investing activities (28,207) (11,739)
--------------------------------------- ------ --------- ---------
Financing activities
Dividends paid (7,328) (6,925)
Treasury deposits 27,098 (6,098)
Proceeds from the sale of ordinary 137 -
share capital
Proceeds from issue of ordinary
share capital 282 1,300
Net cash from/(used in) financing
activities 20,189 (11,723)
--------------------------------------- ------ --------- ---------
Net increase in cash and cash
equivalents 5,917 16,922
Effect of foreign exchange rate
changes on cash balances 755 (236)
Cash and cash equivalents at
beginning of year 42,649 25,963
--------------------------------------- ------ --------- ---------
Cash and cash equivalents at
end of year 49,321 42,649
--------------------------------------- ------ --------- ---------
Cash and cash equivalents (which are presented as a single class
of asset on the face of the 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 CONSOLIDATED FINANCIAL INFORMATION
FOR THE YEARED 31 DECEMBER 2016
1. Basis of preparation
The financial information set out above does not constitute the
Group's statutory accounts for the years ended 31 December 2015 and
2016, but is derived from those accounts. Statutory accounts for
2015 have been delivered to the Registrar of Companies and those
for 2016 will be delivered following the Company's Annual General
Meeting. The auditor has reported on those accounts; their reports
were unqualified, did not draw attention to any matters by way of
emphasis without qualifying their report and did not contain
statements under s498 (2) or (3) Companies Act 2006.
While the financial information included in this preliminary
announcement has been prepared in accordance with the recognition
and measurement criteria of International Financial Reporting
Standards (IFRSs), this announcement does not itself contain
sufficient information to comply with International Financial
Reporting Standards. The Company expects to publish full financial
statements that comply with IFRSs in April 2017.
2. Reconciliation of adjusted financial measures
2016 2015
GBP'000 GBP'000
-------------------------------------- -------- --------
Profit before tax 17,853 13,572
-------------------------------------- -------- --------
Share-based payment charges 969 1,498
Exchange differences relating
to the Swedish operations 60 447
Restructuring and acquisition
expenses 1,205 6,120
Research and development expenditure
credit (605) (818)
-------------------------------------- -------- --------
Adjusted profit before tax 19,482 20,819
-------------------------------------- -------- --------
Share-based payment charges include the IFRS 2 charge for the
period of GBP887,000 (2015: GBP1,290,000) and the credit relating
to National Insurance on the outstanding potential share option
gains of GBP82,000 (2015: GBP208,000). These costs were included in
the general and administrative expenses in the consolidated income
statement.
Exchange differences relating to the USA and Swedish operations
represent exchange gains or losses recorded in the consolidated
income statement as a result of operating in the USA and Sweden.
These costs were included in the general and administrative
expenses in the consolidated income statement.
Restructuring and acquisition expenses of GBP1,205,000 (2015:
GBP6,120,000) relate to costs incurred and provisions made in
relation to a reorganisation and the planned closure of the
manufacturing facility in Sweden in 2016 and include acquisition
expenses and earn-out provisions for the acquisition of EPS.
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.
2016 2015
Pence per share Pence per
share
------------------------------- ---------------- ----------
Diluted earnings per share 18.9 16.1
------------------------------- ---------------- ----------
Share-based payment charges 1.2 1.9
Exchange differences relating
to the Swedish operations 0.2 0.6
Restructuring and acquisition
expenses 1.5 7.9
Tax effect of adjusting items (0.6) (2.0)
------------------------------- ---------------- ----------
Adjusted diluted earnings per
share 21.2 24.5
------------------------------- ---------------- ----------
This reconciliation is provided to enable a better understanding
of the Group's results.
3. Earnings per ordinary share - basic and diluted
The calculation of basic and diluted earnings per share is based
on the following data:
2016 2015
GBP'000 GBP'000
--------------------------------------- ---------------- ----------------
Earnings
Earnings for the purposes of basic
earnings per share being net profit
attributable to equity holders
of the parent 14,801 12,529
--------------------------------------- ---------------- ----------------
Number of shares
Weighted average number of ordinary
shares for the purposes of basic
earnings per share 76,162,226 75,572,550
Effect of dilutive potential ordinary
shares:
Share options 1,994,875 2,215,736
--------------------------------------- ---------------- ----------------
Weighted average number of ordinary
shares for the purposes of diluted
earnings per share 78,157,101 77,788,286
--------------------------------------- ---------------- ----------------
2016 2015
Pence per share Pence per share
--------------------------------------- ---------------- ----------------
Basic 19.4 16.6
Diluted 18.9 16.1
--------------------------------------- ---------------- ----------------
The weighted average number of ordinary shares for the purposes
of basic earnings per share is calculated after the exclusion of
ordinary shares in Xaar plc held by Xaar Trustee Ltd and the Xaar
plc ESOP trust and the matching shares held in trust for the Share
Incentive Plan.
For 2016, there were share options granted over 22,758 shares
that had not been included in the diluted earnings per share
calculation because they were anti-dilutive at the period end
(2015: 35,678).
The performance conditions for LTIP awards over 1,109,652 shares
(2015: 724,608 shares) have not been met in the current financial
period or are not expected to be met in future financial periods,
and therefore the dilutive effect of those shares have not been
included in the diluted earnings per share calculation.
Adjusted earnings per share
This adjusted earnings per share information is considered to
provide a fairer representation of the Group's trading performance
year on year, as it removes items, which, in the Board's opinion,
do not reflect the underlying performance of the Group.
The calculation of adjusted EPS excluding share-based payment
charges, exchange differences relating to the Swedish operations,
the gain or loss on derivative financial instruments, restructuring
and acquisition expenses, is based on earnings of:
2016 2015
GBP'000 GBP'000
------------------------------------------------------------- -------- --------
Earnings for the purposes of basic earnings per share being
net profit attributable to equity holders of the parent 14,801 12,529
------------------------------------------------------------- -------- --------
Share-based payment charges 969 1,498
Exchange differences relating to the Swedish operations 60 447
Restructuring costs 1,205 6,120
Tax effect of adjusting items (447) (1,570)
------------------------------------------------------------- -------- --------
Adjusted profit after tax 16,588 19,024
------------------------------------------------------------- -------- --------
The denominators used are the same as those detailed above for
both basic and diluted earnings per share.
Adjusted earnings per share is earnings per share excluding the
items adjusted for as detailed above:
2016 2015
Pence per Share Pence Per
Share
------------------ ---------------- ----------
Adjusted basic 21.8 25.2
Adjusted diluted 21.2 24.5
------------------ ---------------- ----------
Adjusted EPS is considered to provide a fairer representation of
the Group's trading performance year on year.
4. Notes to the cash flow statement
2016 2015
GBP'000 GBP'000
-------------------------------------- -------- --------
Profit before tax 17,853 13,572
Adjustments for:
Share-based payments 969 1,498
Depreciation of property, plant
and equipment 7,851 10,147
Amortisation of intangible assets 787 834
Impairment of goodwill - 720
Research and development expenditure
credit (605) (818)
Investment income (449) (426)
Foreign exchange (gains)/losses (956) 149
(Profit)/loss on disposal of
property, plant and equipment (3) 75
(Decrease)/increase in provisions (2,759) 3,108
-------------------------------------- -------- --------
Operating cash flows before
movements in working capital 22,688 28,859
Decrease in inventories 2,841 6,274
(Increase)/decrease in receivables (8,910) 1,469
(Decrease)/increase in payables (2,381) 2,405
-------------------------------------- -------- --------
Cash generated by operations 14,238 39,007
Income taxes (paid)/received (303) 1,377
-------------------------------------- -------- --------
Net cash from operating activities 13,935 40,384
-------------------------------------- -------- --------
5. Going concern
The Group has considerable financial resources and through a
diverse base is exposed not only to the Western economies but also
China, India and Latin America. As a consequence, the Directors
believe that the Group is well placed to manage its business risks
successfully.
After making enquiries, the Directors have a reasonable
expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future, based on the
Group's forecasts and projections for the next four years, taking
account of reasonably possible changes in trading performance. For
this reason, they continue to adopt the going concern basis in
preparing the financial information.
6. Acquisition of subsidiary
On 1 July 2016, the Group obtained control of Engineered
Printing Solutions ("EPS") by acquiring 100 per cent of its issued
share capital. EPS, founded in 1985 as Pad Print Machinery of
Vermont Inc., is a leading provider of product printing equipment
in North America. EPS was acquired as part of the Company's
strategic vision to achieve GBP220m of annual sales by 2020.
Recognised amounts of identifiable assets GBP'000
acquired and liabilities assumed
----------------------------------------------- --------
Other intangible assets 84
Property, plant and equipment 1,240
Inventories 2,876
Trade and other receivables 939
Cash and cash equivalents 207
Trade and other payables (2,335)
Current tax asset 36
Current tax liability (236)
Current financial liabilities (501)
Deferred tax liability (81)
Non-current financial liabilities (242)
Total identifiable assets 1,987
Goodwill 5,776
----------------------------------------------- --------
Total consideration 7,763
----------------------------------------------- --------
Satisfied by:
----------------------------------------------- --------
Cash 7,763
----------------------------------------------- --------
Total consideration transferred 7,763
----------------------------------------------- --------
Net cash outflow arising on acquisition
----------------------------------------------- --------
Cash consideration 7,763
Less: cash and cash equivalents acquired (207)
----------------------------------------------- --------
Total net cash outflow arising on acquisition 7,556
----------------------------------------------- --------
The fair value of the trade and other receivables includes trade
receivables with a fair value of GBP674,000 and a gross contractual
value of GBP712,000. The best estimate at acquisition date of the
contractual cash flows not to be collected was GBP38,000.
The goodwill of GBP5,776,000 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 experienced management
team, including the founder Julian Joffe, which will allow Xaar to
accelerate the adoption of inkjet in the product printing market
and provide a strategic platform for expanding Xaar's footprint in
North America. None of the goodwill recognised is expected to be
deductible for income tax purposes.
In addition to the total consideration, deferred consideration
is due during the following 3-year period based on revenue and
profit performance over that time. The potential undiscounted
amount of all future payments that the Company could be required to
make under the deferred consideration arrangement is between $nil
and $7.5m.
Acquisition related costs (included in administrative expenses
in the consolidated income statement for the period ended 31
December 2016) amounted to GBP399,000.
Separate to the Share Capital transaction set out in the table
above, Xaar US Holdings Inc. injected equity, in the form of cash,
into EPS. Part of this cash injection was then used by EPS to
acquire the freehold land and buildings previously leased from
Julian Joffe at the market value of GBP1,152,000.
EPS contributed GBP6,692,000 revenue and GBP292,000 to the
Group's profit for the period 1 July 2016 to 31 December 2016. If
the acquisition of EPS had been completed on the first day of the
financial year, Group revenues for the 6-month period would have
been GBP49,387,000 and the Group's profit before tax would have
been GBP7,697,000. If the acquisition had taken place at the
beginning of the reporting period, the Group Revenue would have
been GBP101,049,000 and the Group profit before tax would have been
GBP17,896,000.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR UAUNRBRAOUAR
(END) Dow Jones Newswires
March 22, 2017 03:00 ET (07:00 GMT)
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