TIDMXAR
RNS Number : 3603G
Xaar PLC
29 March 2022
This announcement contains inside information for the purposes
of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it
forms part of UK domestic law by virtue of the European Union
(Withdrawal) Act 2018. Upon the publication of this announcement
via the Regulatory Information Service, this inside information is
now considered to be in the public domain.
29 March 2022
Xaar plc
2021 FULL YEAR RESULTS
STRONG FOUNDATIONS IN PLACE AND CLEAR STRATEGY DELIVERING
WELL CAPITALISED TO INVEST IN FUTURE GROWTH
Xaar plc ("Xaar", the "Group" or the "Company"), the leading
inkjet printing technology group, today announces its full year
results for the 12 months ended 31 December 2021.
Financial Summary:
2021 2020 Change
Continuing Operations
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Revenue GBP59.3m GBP48.0m +23%
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Gross profit GBP20.2m GBP13.0m +55%
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Gross margin % 34% 27% +7ppts
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Gross R&D investment GBP5.7m GBP4.5m +26%
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Adjusted EBITDA(1) GBP3.2m GBP0.1m
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Adjusted loss before tax(1) (GBP0.6m) (GBP3.9m)
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Profit/(loss) before tax GBP1.0m (GBP4.3m)
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Profit/(loss) for the year GBP0.7m (GBP4.4m)
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Cash (utilised)/generated (GBP0.6m) GBP8.1m
by operations
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Basic earnings per share 0.9p (5.7p)
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Total Operations
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Profit/(loss) before tax GBP14.5m (GBP14.6m) +200%
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Profit/(loss) for the year GBP14.2m (GBP14.7m) +197%
---------- ----------- -------
Basic earnings per share 20.9p (15.2p) +238%
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Net cash at the year end(2) GBP25.1m GBP18.1m +38%
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1 - Excluding the impact of share-based payment charges,
exchange differences relating to intra-group transactions, gain on
derivative financial instruments, restructuring and transaction
expenses, research and development expenditure credit, other
operating income, fair value gain on financial assets at fair value
through profit and loss, and amortisation of acquired intangible
assets, as reconciled in note 2
2 - Net cash at 31 December includes cash, cash equivalents and
treasury deposits (2020: also excluding Xaar 3D)
Financial Highlights
-- Revenue of GBP59.3 million representing growth of 23%; 12%
growth excluding the acquisition of FFEI
-- Gross margin of 34% (2020: 27%), benefitting from increased
operational leverage in the business
-- R&D spend in continuing operations of GBP5.7 million, up
GBP1.2 million on 2020, with investment focused on the ImagineX
platform and product roadmap
-- Positive EBITDA contributions from all our businesses
-- Adjusted Group profit for second half of the year
-- GBP0.6 million of operating cash utilised excluding Xaar 3D
-- Strong closing balance sheet with net cash of GBP25.1 million
-- On track to return business to profitable growth and to
achieve target of full year profit in 2022
Strategic and Operational Highlights
-- Re-alignment of our go-to-market approach has strengthened customer engagement
-- Strong performance for the Printhead business with consistent
wins of new customers and projects and renewed focus on markets
where products have a competitive advantage
-- Ongoing delivery of product roadmap with two successful
product launches from our ImagineX platform
-- Investment in working capital has allowed Xaar to
successfully mitigate supply chain constraints and secure ability
to deliver on customer demand
-- Further operational progress made in Engineered Printing
Solutions (EPS) delivering strong revenue growth
-- Relocation of Cambridge office during 2021 will result in
GBP0.7 million annualised cost saving
-- Acquisition of Megnajet to provide customers with a more
complete package of integration tools
-- Successful integration of FFEI acquisition expanding business
capability and vertically integrated product offering
-- Completion of divestment of Xaar 3D investment
-- Launch of Sustainability roadmap with clear strategy to reach 'net zero' by 2030
John Mills, Chief Executive Officer, commented:
"We continue to make good progress towards achieving our
strategic goals and we are pleased with our achievements. During
2021 we delivered the first two products on the ImagineX platform
and have a comprehensive roadmap of future product releases for
2022 and beyond, aimed at addressing key customer requirements. We
have strengthened our leadership and functional teams and added
skills and capability with the acquisitions of FFEI and Megnajet.
We are investing in people, processes and our IT infrastructure to
support our growth and we have made significant progress towards
our commitment of 'net zero' by 2030.
"The business was profitable in the second half of 2021, and we
carry positive momentum and a strong order book into 2022. We have
invested in working capital which provides confidence in our
ability to maintain supply to customers throughout the year.
"Market conditions remain uncertain but our progress and strong
performance during the challenging conditions of the past two years
demonstrates our resilience and the continued demand for our
products. We remain on track to return the business to profitable
growth and look forward with confidence."
Contacts:
Xaar plc
Ian Tichias, Chief Financial Officer +44 (0) 1223 423 663
John Mills, Chief Executive Officer
Tulchan Communications +44 (0) 207 353 4200
James Macey White
Giles Kernick
A presentation for analysts and investors will be held via
webcast and conference call at 09:00 today. For further details,
please contact Xaar@tulchangroup.com
Chairman's Introduction
In my first report as Chairman two years ago, I spoke of my
confidence in the new leadership team and in our ability to turn
the business around after the challenges encountered in 2019. At
the end of 2021 and following a period of unprecedented uncertainty
surrounding the COVID-19 pandemic, I am pleased to report good
progress continues to be made.
Our fundamental focus has been on Xaar's core competence in
design and manufacture of world leading printheads, whilst
rebuilding and strengthening all areas of the business to better
serve our customers and deliver consistent and reliable business
performance.
There has been a realignment of our go-to-market approach with a
clear focus on the value chain and our customers, a strengthening
of our senior leadership and functional teams, a revitalisation of
our brand and corporate identity and, importantly, a focus on the
technical and competitive advantages of the Xaar bulk piezo product
range. The introduction of our new ImagineX bulk piezo platform has
created a pipeline of new product developments with the first two
products, Nitrox and Irix launched during 2021.
The Board are pleased with the progress that the management team
has made in re-energising the business and would also like to thank
our teams worldwide for their commitment and adaptability,
particularly across our supply chain, during this period of
uncertainty.
Strategic Progress
We have continued to embed our strategy across the Group and
through our people: a key enabler of the strong performance in
2021. Our focus on customers and a product roadmap that reflects
current and potential customer needs has increased the quality and
responsiveness of the business, and this means that we are well
placed for further performance improvements. We believe a
significant opportunity exists in market sectors and applications
where Xaar technology provides commercial and technical performance
advantages and that is our focus.
During the year, our ability to serve customers was further
advanced through the acquisition of FFEI, adding both capability
and capacity whilst enabling a more vertically integrated approach
to assisting customers with the adoption of digital print
technology. In November 2021 we completed the sale of our stake in
Xaar 3D to our partner Stratasys, further strengthening our balance
sheet whilst retaining a strong commercial partner in the 3D
market.
We recently (March 2022) strengthened the business further with
the acquisition of Megnajet, a leader in design and manufacture of
ink delivery systems. Megnajet adds complementary skills to Xaar's
core competence as we build the capability to provide customers
with a more complete package of integration tools and accelerate
the adoption of Xaar printhead technology. We welcome the Megnajet
team to the Group.
Financial Results
In what has proven to be another challenging year for the global
economy, the Group has delivered sales growth of 23% and moved back
into profit in the second half of the year. Actions have been taken
to build management and organisational strength, while cost control
and careful cash management demonstrate our clear focus on
performance and a return to profit.
The Printhead business has made good progress both commercially
and operationally. Sales volumes have grown and a programme to
improve efficiency and consistency of operational performance is
progressing well. A specific area of focus has been our supply
chain and our response to the challenges caused by the pandemic. An
early recognition of the potential constraints on supply and
logistics enabled us to secure materials to meet expected
production requirements, and to proactively adapt product designs
to accommodate alternative components. These actions have increased
business resilience and will help us maintain uninterrupted supply
to customers during 2022.
After encountering weaker demand and challenges in EPS, during
the first half of the year, the appointment of new leadership and a
realignment of strategy led to a much stronger second half of the
year with sales 25% higher than in the first half. While
performance for the year as a whole was impacted by previously
announced non-cash adjustments relating to slow moving and obsolete
inventory, there is good momentum in the order book and operational
performance is improving in EPS.
We are pleased with the progress made at FFEI. Having only
joined the group in July 2021, integration of the technical teams
is largely complete, and performance is in line with our
expectations.
Good underlying cash flow and receipts from the sale of our
stake in Xaar 3D in November 2021 enabled the Group to close the
year with a robust balance sheet. Net cash of GBP25.1 million
provides a platform for further investment and further
complementary acquisitions.
The Board has not declared a dividend in 2021 as we believe that
prioritising cash for continued investment in the business at this
stage of our rebuilding programme will deliver more compelling
returns for shareholders in the medium term.
Environment
As a Board we consider our responsibility to the environment and
society in general as an integral part of running a successful
business. We are mindful of, and are committed to, the need to be
good custodians of our natural resources for future
generations.
The business has established an ESG Committee with oversight and
input from the Board and has committed to a Sustainability Roadmap
including ways in which we will strive to provide solutions and
products for our customers that are cleaner and healthier. We are
in the process of defining and setting meaningful ESG targets
alongside plans of how we will achieve those targets in a specific
timeframe. Our goal is for the business to be net zero by 2030.
People
For Xaar to be successful we need the energy, commitment and
engagement of all our employees. Periods of 'lockdown', remote
working and constraints on how people interact have all presented
challenges, but I have great admiration for the way in which our
people have overcome these challenges and worked tirelessly
developing a strong 'can-do' culture.
We entered the year with optimism and a renewed sense of purpose
but of course still uncertain as to the wider economic environment
and extent of the challenges that would present. Despite this
backdrop we have pushed on with the necessary changes to the
business and it is to the great credit of the whole team at Xaar,
in all businesses and in the many countries around the world where
colleagues live and work, that they have adapted, committed to and
succeeded in delivering both solid financial results and a platform
for continued growth. On behalf of the Board, I thank them and
congratulate them on the progress made.
Summary
The Board is optimistic following our progress this year and is
confident in the future prospects of the Group.
Andrew Herbert
Chairman
29 March 2022
Strategy Update
Introduction
We are now two years into the turnaround of Xaar and we are
extremely pleased with what we have achieved. We have implemented a
new strategy across the business, with a new commercial model
whilst investing in the business. This has seen significant
progress as old customers have returned and new customers are
continuing to engage with us. The speed with which this has been
achieved is impressive and we have proved our strategy is
working.
We have also made great progress updating our infrastructure and
further strengthening the team, our products and the capabilities
to deliver growth in the business. Operationally we have
strengthened the business, improved our efficiency and margins
whilst continuing to build a sustainable solid platform from which
to grow the business further. During the year we successfully
integrated FFEI, which will enhance our commercial offering and
widens our product technology offering.
We have also established an ESG Committee and committed to our
Sustainability Roadmap which will become further embedded in the
business and be visible in everything we do as a business.
Xaar has achieved much in the last two years and this success
will help drive us further in the coming years.
Delivered good results and finished the year well
The results for the year demonstrate significant progress for
the business and we are extremely pleased with the continued strong
performance which, despite challenging market conditions,
demonstrates the positive momentum our strategy is driving
throughout Xaar. Investment in capability and capacity provides us
with further opportunities to accelerate our strategy and future
growth. This leaves the business well placed to capitalise on this
performance and deliver further growth and a return to
profitability. Delivering profit on an adjusted basis over the
second half of 2021 is a key landmark achievement for the Group. It
is a milestone which has been achieved quicker than planned as part
of the turnaround.
Revenue Growth
Revenue for the year was GBP59.3 million, representing an
increase of 23% relative to 2020. Organic growth before the effects
of the acquisition of FFEI was 12%.
In the Printhead business we have a clear customer-focussed
commercial model strategy which is reaping rewards, delivering
revenue growth of 14%. This approach includes removal of
distribution channels, a clear pricing strategy, and a sales
process that is focussed on selling the printhead based on its
technical merits.
The focus has been on markets where our technology has a
competitive advantage and working with the customer, both Original
Equipment Manufacturers (OEMs) and User Developer Integrators
(UDIs), over the entire product lifecycle to reduce their
development times and, therefore, time to market, and to also
provide improved aftersales support. We continue to see increased
customer engagement both from existing as well as new
customers.
The product roadmap delivered two new products during 2021 -
Xaar Nitrox and Xaar Irix - that has broadened the Bulk printhead
product range to offer advantages over the competition in existing
and new markets.
Revenue growth in Asia, especially China, has been significant,
up 33% year-on-year, with ceramics and glass customers particularly
re-engaging, increasing our market share. Revenue growth in this
sector in the year was 38%.
Product Print Systems business ("EPS") delivered improved
performance demonstrating strong revenue growth of 9%. This follows
the effective implementation of operational changes and progress in
developing a modular approach to products. As previously announced
the 2021 results were impacted by non-cash adjustments relating to
slow moving and obsolete inventory following the implementation of
planned process improvement and strategy. This impacted the Gross
Profit negatively by GBP0.7 million of provisions and write
downs.
FFEI delivered revenue of GBP5.3 million in the period from
acquisition on 11 July 2021.
Improved Margins and Returns
This strong revenue growth, coupled with our increased
operational efficiency saw the Gross Margin increasing to 34% in
2021 (2020: 27%). We have invested in our capability and efficiency
most notably in Operations and support functions but have continued
to exercise discipline in our cost management actions.
Accordingly, we can report a much reduced adjusted loss for the
year of GBP0.6 million, compared to GBP3.9 million last year, and
crucially we can report an adjusted profit for the second half of
the year.
Pleasingly we can report positive adjusted EBITDA in each of our
businesses, which is a notable step towards full year profitability
for the Group.
Strong Balance Sheet
The Group retains a strong balance sheet and cash position. Net
cash at 31 December 2021 was GBP25.1million. This represents an
improvement of GBP7.0 million in the year. This has been primarily
driven by the GBP9.3 million initial consideration received for the
Xaar 3D divestment and continued strong cash generation in our
Printhead business. We have taken the opportunity to invest in
inventory of GBP9.1 million in the year to successfully secure
materials to meet expected 2022 production requirements and to
increase our holding of finished goods. This gives us greater
assurance that we can deliver on customer demands throughout 2022.
We have taken further proactive actions to adapt product designs to
accommodate alternative components increasing our resilience to
supply chain constraints.
On track with our journey, plan and strategy and more confidence
in our capability
During the last two years we have successfully re-set the Group
with a new business model and established a robust platform to
deliver profitable growth. The turnaround is now at the end of the
first phase, we have established a clear strategy and we are ready
for the next stage to achieve sustainable profitable growth.
The first phase focussed on stabilising the business and
establishing a clear strategy. Commercially this has seen the
Printhead business reduce complexity in its routes to market by
eliminating third party distributors and selling directly to OEMs
and UDIs. Our principal strategy is to provide an integrated
solution for customers whereby they can access more of the printing
ecosystem, to include supporting elements such as ink supply
systems and the electronics required for printing. We help our
customers take advantage of the Inkjet opportunity and working with
Xaar means a higher chance of success by being faster to market,
making our customers' investment more profitable.
This approach has seen us deliver a more vertically integrated
product offering to a wider group of customers in more market
sectors.
Refreshed customer engagement
Accordingly, we have regained customers, particularly in core
sectors such as Ceramics and Glass, and we now have significant
market opportunities in 3D, Coding and Marking and Direct to Shape.
Our 2021 revenue in the ceramics and glass sector has increased by
over 40% since 2020 and the number of OEM projects commissioning
Xaar products has doubled year on year for each of the last two
years.
Our commercial approach has also been updated with new branding
and a fresh, clear communication plan which has helped to regain
the trust of OEMs, making sure the advantages of Xaar technology
are well understood. The level of engagement from lapsed and
established customers and our desire to listen to their needs and
to work with them to find a solution, through consistent
communication, indicates this has been working and we are regaining
their trust.
Xaar's position in the 3D business is one of technology enabler
and our end goal has been, and remains, to supply printheads for
use in 3D applications and not become an OEM in the sector. That
was the rationale behind our partnership with Stratasys, a
recognised leader in 3D with a proven track record and strong
routes to market. On 1 November 2021 we sold our remaining stake in
Xaar 3D to Stratasys, and we will continue our relationship with
them as a supplier of printheads.
Vertically integrated product offering
The acquisition of print systems and printbar specialist FFEI in
July 2021 further widens our product offering for our OEM and UDI
customers with a broader product range including print engines for
adding effects and embellishments digitally. FFEI has been
successfully integrated and strengthens Xaar's capabilities and
skills. This will accelerate Xaar's existing growth strategy and
widen the product portfolio further engaging UDI customers. We have
a growing pipeline with a significant number of opportunities
thanks to our technology advantages. This will give us further
opportunities for additional vertical integration, and we continue
to strengthen our offering with more products in the pipeline for
2022.
Our product roadmap, built on the ImagineX platform has already
delivered significant enhancements to the current portfolio with
two products, Xaar Irix and Xaar Nitrox, launched on time during
2021.
Our EPS business performed well increasing revenue and margins
on an underlying, ongoing basis. The non-cash adjustments made in
the year were necessary to rebase the business and ensure a strong
financial platform from which to drive further growth. In addition,
we changed the leadership of EPS and embedded the more efficient
modular operational approach which will enable further margin
growth. With increased control, focus and a more precise commercial
approach EPS is well placed to deliver sustainable margin growth in
the coming years.
Operational capability
We have made significant progress in building a world class
leadership team, making some key appointments during the year which
will drive the business in the next phase of our transformation.
This has strengthened our capability and experience across the
business, most notably in our Operations, Finance, Human Resources,
and EH&S Management, as well as re-organising the sales team.
This increase in operational support includes further investment in
infrastructure such as IT, manufacturing and supply chain
management.
During the year we established new corporate headquarters in
Cambridge, UK and focussed our Printhead operations into our main
manufacturing facility in Huntingdon, UK. We also opened a new
customer service centre in Shenzhen, China. These changes give the
benefit of increased efficiency in how our teams work together,
providing us with a better way of working more closely and
collaboratively with our customers across the world and will
deliver GBP0.7 million of annualised cost savings.
We are proud of how our teams have continued to respond to the
difficulties presented by COVID-19. We have proven the business can
operate effectively with greater efficiency whilst building greater
business resilience.
During the year we have worked on embedding new values into our
culture. This is an important step in changing the mindset and
culture of our business and has seen employees show engagement and
empowerment. A cross functional project team developed an easy to
remember logo for our values, launched a new values award, which is
embedded across the Group, and developed a new video which we are
using for employee engagement, recruitment and induction.
Sustainability
We established an ESG Committee during the year, constituted by
a cross functional internal team and supplemented with external
expertise. This group, formed from representatives from across the
business, has developed a co-ordinated Sustainability Roadmap that
will push Xaar towards its goal of 'Net Zero by 2030'. The Roadmap
has four key pillars:
1. Environment,
2. People,
3. Innovation, and
4. Community.
Its purpose is to drive our ESG goals beyond the Energy
Reduction scope to a Group wide activity and provide an essential
backbone for much of Xaar's future investment and activity. It has
the full backing of the Board and is sponsored by Alison Littley,
Senior Independent Director.
Digital inkjet printing is inherently more sustainable compared
to traditional analogue printing with a smaller carbon footprint.
It reduces and prevents excessive waste and uses less energy due to
the ability to print short runs or direct-to-shape. With TF
Technology ink recirculation, Xaar printheads, are capable of
printing very viscous fluids reducing the need for energy intensive
drying processes. We are passionate in continuing further adoption
and understanding of the environmental benefits our products can
bring to customers.
Product development and increased capability
In aggregate the market size across these sectors is huge. We
have a unique roadmap of product development to ensure we offer an
increasing vertically integrated commercial strategy to capitalise
on this market opportunity.
The ImagineX platform will deliver a number of features over the
next few years which will provide significant enhancements to the
current portfolio, these include:
-- substantially improved speed and throughput (frequencies up
to 150kHz, equivalent to a threefold increase in speed compared to
current products),
-- aqueous compatibility,
-- increased throw distance to improve image quality on curved surfaces,
-- increased robustness to improve the life of the printhead and maintain image quality,
-- higher viscosities enabling a broader range of fluids to be printed (above 100cP), and
-- higher resolutions (up to 1440 dpi).
These features will help strengthen our position in markets
where we are already well represented and will drive improved
adoption in several markets where we are currently not, such as
Wide Format Graphics, Labels, Packaging and Textiles. The
performance enhancements in our product roadmap give a clear path
for OEMs to upgrade their products and maintain their product
differentiation.
Development of our aqueous product remains on track, and we
intend to release more details on this later in the year. The
exciting opportunity this product provides is significant as we
would have an unrivalled portfolio that could satisfy market
demands which we are currently not able to due to our printhead
architecture.
We have made strategic bolt-on acquisitions to the Group that
enable us to strengthen our customer offering and we will continue
to adopt this approach in the future as we look to continue
increasing our capability and become a fully integrated inkjet
product provider.
The actions taken in the last two years leave us with a strong
balance sheet. The strong operational gearing that exists in the
business, which has already delivered good margin growth, has
greater capacity to support further margin improvement in the
medium term. The business is well placed to move into the next
phase of its transformation and to deliver sustainable profitable
growth in the medium term.
Significant opportunity
Xaar's digital inkjet technologies are transforming print
processes in a wide range of markets, and the medium- and long-term
opportunity for the business remains significant. We have already
grown market share in core, mature markets such as Ceramics and
Coding & Marking. There remains further growth opportunity in
these areas as our technology is best in class and we have a clear
competitive advantage over our competitors due to our core
technologies (TF Technology ink recirculation, High Laydown
Technology, Ultra High Viscosity Technology).
Increased market opportunity exists in sectors that are looking
for further digitisation of printing on which we can capitalise. We
see opportunities typically in areas where fluid applications are
challenging, such as Flat Panel Display, Semiconductors, Printed
Electronics and Optics. We are well placed to succeed in these
markets as Xaar technology offers an unrivalled method of
non-contact, fluid deposition with incredible precision, control
and speed.
Other markets that already use digital printing such as
architectural glass printing and 3D printing are tremendously
exciting as our technology has unique benefits that can give our
customers commercial advantage in reducing costs and lead times for
their products.
Outlook
The positive momentum in the business has continued in the first
quarter of 2022 and we remain optimistic about the short-term
outlook for the business. Customer engagement and sales orders have
been maintained in quarter 1 and are in line with our expectations.
We anticipate continued performance improvements during 2022 with
further good organic revenue growth.
Due to the action taken to secure supply by investing in working
capital during 2021 we believe we are well placed to satisfy
customer demand for the year ahead and we have the supply chain
resilience to withstand most disruption. We are continuing to
invest in the business adding skills, capability and capacity.
We expect an improved Gross Margin which will come from the
continued efficiency gains we have in the business. Whilst that
enhancement won't be at the same incremental increase as for 2021,
we are confident of returning to 40% gross margins in the medium
term.
Whilst we are conscious of the continuing risks arising from the
economic consequences of wider global issues, and COVID-19
continues to be a risk to economic disruption, particularly in
Asia, we remain on track to return the business to profitable
growth and look forward to the future with confidence.
We have the right strategy and we remain confident in our
ability to achieve our target of a full year profit this year.
Business Performance
Continuing operations - revenue
Revenue for the Group of GBP59.3 million is an excellent
performance for the year, representing a year-on-year increase of
GBP11.3 million (2020: GBP48.0 million) of which FFEI represents
GBP5.3 million in the period since acquisition.
It is a very pleasing result given the ongoing restrictions
arising from COVID-19, with Printhead revenue increasing 14% and
EPS 9%. Group revenues increased from GBP26.3 million in the first
half of the year to GBP33.0 million in the second half driven
principally by a GBP1.7 million increase in revenue from the EPS
business. This is a strong recovery across the business
demonstrating the positive customer engagement and trust that is
being regained across our customer base and the continued momentum
we have in the business.
GBPM 2021 H1 2021 H2 FY 2021 FY 2020
PH EPS Total PH EPS FFEI Total PH EPS FFEI Total PH EPS Total
----- ---- ------ ----- ---- ----- ------ ----- ----- ----- ------ ----- ----- ------
Americas 3.9 6.1 10.0 3.4 7.8 2.4 13.6 7.3 13.9 2.4 23.6 7.6 12.7 20.3
----- ---- ------ ----- ---- ----- ------ ----- ----- ----- ------ ----- ----- ------
Asia 5.8 - 5.8 6.1 - 0.1 6.2 11.9 - 0.1 12.0 9.6 - 9.6
----- ---- ------ ----- ---- ----- ------ ----- ----- ----- ------ ----- ----- ------
EMEA 10.5 - 10.5 10.4 - 2.8 13.2 20.9 - 2.8 23.7 18.1 - 18.1
----- ---- ------ ----- ---- ----- ------ ----- ----- ----- ------ ----- ----- ------
Total 20.2 6.1 26.3 19.9 7.8 5.3 33.0 40.1 13.9 5.3 59.3 35.3 12.7 48.0
----- ---- ------ ----- ---- ----- ------ ----- ----- ----- ------ ----- ----- ------
Revenue from the Americas grew year-on-year across the Group,
rising GBP3.3 million (2021: GBP23.6 million, 2020: GBP20.3
million), including GBP2.4m from FFEI and despite a small drop in
Printhead revenue of GBP0.3m. The rise, driven by the recovery in
EPS revenue, stems from increases in sales of digital machines and
peripherals demonstrating the new commercial approach is being well
received with customers.
Performance in Asia, and China in particular, has been very
successful in 2021. This has been the key driver for the continued
overall revenue growth in Printhead. Group revenue grew GBP1.3
million in the first half of the year to GBP5.8 million (H1 2020:
GBP4.5 million) and continued to grow in the second half to GBP6.2
million (H2 2020: GBP5.1 million). This growth has largely been
driven by the re-engagement of Chinese Ceramic OEM customers where
our new product range is proving successful. Revenues in Printhead
have increased year-on-year from GBP9.6 million to GBP11.9 million,
a 24% increase.
This is a real proof point for the change in strategy, the
removal of distribution channels, the implementation of a clear
pricing strategy, and more significantly a change in how we
interact and support our customers have all helped with the speed
of adoption of the Xaar 2002 together with Xaar Nitrox and Irix in
China.
Revenue in EMEA has continued to rise year-on-year. Excluding
FFEI, revenue was GBP20.9 million compared to GBP18.1 million, and
we have seen a promising continued upward trend in revenue since H2
2019. Revenue in the first half of the year increased GBP2.1
million compared to H1 2020 of GBP8.4 million and by GBP0.7 million
in the second half compared to GBP9.7 million in H2 2020.
Printhead revenue for the year increased GBP4.8 million to
GBP40.1 million (2020: GBP35.3 million). Growth in the first half
was 20% and in the second half was 8% as we saw continued momentum
in revenue throughout the year.
Printhead revenue growth stems from the continued recovery in
the key sectors of Ceramics & Glass (C&G) with growth of
GBP5.2 million (38%). Increasing market share with our extended
product portfolio and being able to demonstrate our clear
technology advantages has proven successful in the Chinese Ceramics
market, where we have regained trust with our customers. We have
also established a marketing leading position in Glass with the
Xaar 2002 and won several accounts in the Glass sector in 2021,
with revenue in 2021 increasing 38% compared to 2020.
Coding and Marking (C&M) revenue has remained largely flat
year-on-year, Direct to Shape (DTS) revenue has declined with the
majority of the decline taking place in the Americas which we
believe will be a short term flattening of demand.
Whilst still a relatively small part of our business, DTS will
prove to be an increasingly important sector for the business and
an area for potential growth in the long-term and it is encouraging
that we are showing how our unique technology advantages can prove
successful in this area by wining new accounts and commissioning
new machines by switching their production lines over to a digital
solution.
Wide Format Graphics (WFG) and Labels revenue fell slightly in
the year from GBP6.3 million to GBP6.2 million. This is an area
where we have seen some delays in orders, mainly COVID-19 related.
As our customers are more able to access their own customer bases
with a relaxation of travel restrictions, we expect this reduction
to be one of timing only and to recover in 2022.
3D Printing and Advanced Manufacturing (AVM) have stayed
relatively flat year-on-year (2021: GBP2.4 million, 2020: GBP2.5
million) with gains in 3D Printing offset by a reduction in
revenues from AVM. As with the DTS market, the AVM market for
printheads is still relatively small but growing, and we are very
excited about our prospects in this area expecting to see
significant growth in the coming years. Both 3D Printing and AVM
are markets where we are well positioned to take advantage of
growth opportunities, but development cycles can be long,
therefore, it can take several years for a customer to reach full
production and ultimately significant demand for printheads.
Revenues from Packing & Textiles remain modest. Our ability
to target this sector effectively is somewhat limited by our
current product range. However, advancements in the product
portfolio driven by the ImagineX platform should make this large
sector more accessible in the future. Full year revenue of GBP0.8
million was down year-on-year (2020: GBP0.9 million).
Our royalty revenue stream was sold during 2019 and so we have a
declining legacy royalty rate which will continue to decline 2021
and 2022 before ceasing altogether shortly thereafter.
GBPM 2021 2021 FY 2021 FY 2020 Var Var %
H1 H2
Ceramics & Glass 9.5 9.5 19.0 13.8 5.2 +38%
----- ----- -------- -------- ----- ------
C&M & DTS 5.9 5.2 11.1 11.5 -0.4 -3%
----- ----- -------- -------- ----- ------
WFG & Labels 3.4 2.8 6.2 6.3 -0.1 -2%
----- ----- -------- -------- ----- ------
3D Printing & AVM 1.0 1.4 2.4 2.5 -0.1 -4%
----- ----- -------- -------- ----- ------
Packaging & Textile 0.2 0.6 0.8 0.9 -0.1 -11%
----- ----- -------- -------- ----- ------
Royalties, Commissions
& Fees 0.2 0.4 0.6 0.4 0.2 +50%
----- ----- -------- -------- ----- ------
Total 20.2 19.9 40.1 35.3 4.8 14%
----- ----- -------- -------- ----- ------
Revenue from the EPS business increased by GBP1.2 million to
GBP13.9 million (2020: GBP12.7 million) as the new commercial
approach has seen some significant customer order wins.
This has been driven particularly by digital inkjet machines
sales with growth of 11%, which is particularly pleasing as this
will be the core focus for the business in the future. Pad print
machine revenue has also increased (8%) albeit with a decline
year-on-year in the second half. Focus on consumables and accessory
sales have contributed to the growth as a result of the change in
commercial approach, with increased revenue from ink, plates and
parts. We see a strengthening pipeline and order book and we are
well placed to deliver further growth in 2022 as companies start to
invest in capital equipment again and those markets affected by the
pandemic, such as Ad Speciality and Promotional Products, start to
recover.
GBPM 2021 H1 2021 H2 FY 2021 FY 2020 Var Var %
Digital
Inkjet 3.6 4.4 8.0 7.2 0.8 +11%
-------- -------- -------- -------- ---- ------
Pad Printing 2.4 3.1 5.5 5.1 0.4 +8%
-------- -------- -------- -------- ---- ------
Other 0.1 0.3 0.4 0.4 - -
-------- -------- -------- -------- ---- ------
Total 6.1 7.8 13.9 12.7 1.2 +9%
-------- -------- -------- -------- ---- ------
Continuing operations - gross profit
Gross profit for the year increased by GBP7.2 million to GBP20.2
million (2020: GBP13.0 million) with an increase in the gross
margin to 34% (2020: 27%). This was primarily the result of an
improvement in the Printhead business unit's gross profit which
grew from 27%. We increased utilisation of the factory as
throughput was increased during the year resulting in better
overhead cost recovery, supporting margin gains. We have worked
hard on cost saving initiatives during the year and as we increase
volumes there should be further scope for improved overhead
recoveries and accordingly margin gains. During 2021 we proactively
worked to secure raw materials which should reduce further supply
chain risks. Issues in supply chains globally are well known and
documented, particularly so for semi-conductors and other
technology materials, with increasing cost pressures. Our actions
in Q4 should insulate us from further costs and mean we are able to
meet customer demand throughout 2022. We have increased our working
capital with inventory rising GBP9.1 million (2020: GBP4.8 million
reduction in inventory), This higher level of both raw materials
and finished goods is a deliberate, prudent approach which we
believe will see us well placed to both manage customer
requirements and further insulate the business from external supply
chain risks whilst utilising the high level of operational gearing
to deliver further improvements in the gross margin.
Gross profit for the EPS business declined GBP0.2 million in the
year to GBP3.2 million (2020: GBP3.4 million) with gross margin
down year-on-year (2021: 23%, 2020: 27%). Actions taken to refocus
the business on future growth opportunities mean 2021 results have
been impacted by non-cash write down adjustments totalling GBP0.7
million. These are largely related to inventory we now consider to
be slow moving or obsolete.
Excluding the non-cash adjustments mainly relating to slow
moving and obsolete inventory, the underlying gross margin was 28%,
largely due to the resetting of the modular strategy by new
management. Excluding the GBP0.7 million of adjustments recorded by
EPS in 2021, the gross profit for the Group would have improved to
GBP20.9 million, with a gross margin of 35%.
Continuing operations - R&D
R&D spend of GBP5.7 million was up GBP1.2 million on 2020
(2020: GBP4.5 million). This reflects the investment in the
ImagineX platform which will be central to our long-term growth,
with the added investment in FFEI of GBP0.4 million. The total
increase is in proportion with our revenue growth and maintains a
spend/revenue ratio of approximately 10%. Sales and marketing spend
for the year was GBP6.3 million (2020: GBP6.0 million). The
increase in spend of GBP0.3 million year-on-year reflects the focus
on sales and business development in the Printhead business unit
following the restructuring of the business in the second half of
2020. Savings were seen in both the Printhead and EPS businesses
due to COVID-19 which limited our ability to visit customers and
led to the cancellation of the majority of tradeshows which one, or
both, businesses would have attended.
Continuing operations - expenses
General and administrative expenses increased GBP2.1 million
from GBP8.0 million in 2020 to GBP10.1 million in 2021. The
increase largely relates to planned investment in key areas of the
business and infrastructure, including Operations, IT and Finance,
offset by, GBP0.3 million related to trading foreign exchange gains
in 2021, as a result of the exchange rate volatility response to
COVID-19.
Impairment reversals on financial assets were GBP0.4 million
(2020: GBP0.9 million). This reversal predominantly relates to a
distribution channel used by the Printhead business and the
collection of a customer debt previously provided for.
Other operating income in 2020 of GBP0.8 million related to the
PPP loan taken out by the EPS business in the US which met all
qualifying criteria to be forgiven.
Restructuring and transaction costs of GBP1.4 million (2020:
GBP0.8 million) predominantly relate to re-organisation costs,
acquisition related professional fees and additional costs relating
to the dilapidation and exit of the office on the Cambridge Science
Park.
Continuing operations - profit
The profit before tax from continuing operations under IFRS was
GBP1.0 million in 2021 (2020: GBP4.3 million loss). Basic Earnings
per share from continuing operations was 0.9p (2020: loss
5.7p).
The performance of the Printhead business improved GBP6.5
million from a GBP4.3 million loss in 2020 to a GBP2.2 million
profit in 2021 driven by increased sales, a much improved gross
margin, and a reduction in operating expenditure. The EPS business
went from a GBP0.3 million profit in 2020 to a GBP0.9 million loss
in 2021 due to the impact arising from the write off and
provisioning of legacy inventory. Excluding this one-off impact,
the EPS business made a small loss which given the underlying
performance of the business should see turn into profit during
2022.
FFEI contributed a profit before tax of GBP0.4 million since
acquisition on 11 July 2021.
In calculating the adjusted loss before tax we have adjusted for
gains on derivative financial liabilities of GBP2.9 million (2020:
GBP0.1 million) and fair value gains on financial assets GBP1.0
million (2020: nil) alongside restructuring costs of GBP1.4
million, foreign exchange losses on intra-group loans of GBP0.1
million, and share-based payments of GBP0.7 million with an R&D
expenditure credit of GBP0.3 million and amortisation of acquired
intangible assets of GBP0.4 million.
The adjusted loss before tax from continuing operations was
GBP0.6 million, compared to GBP3.9 million loss in 2020. This is a
significant step forward for the business, emphasised by the
delivery of adjusted profit in the second half of 2021.
The adjusted EBITDA for continuing operations in the year was
GBP3.2 million (2020: GBP0.1 million).
Discontinued operations
Due to the divestment of the remaining investment in Xaar 3D,
completed on 1 November 2021, the results are classified as
discontinued operation. The business was classified as an asset
held for sale as at 31 December 2020.
A GBP13.5 million profit was recorded in relation to
discontinued operations (2020: Loss GBP10.3 million) with net cash
outflows for the period of GBP2.0 million (2020: GBP12.1 million).
The Thin Film business, which was classified as discontinued in
2019, recorded a loss of GBP0.2 million in 2021 (2020: GBP3.7
million) which related to inventory commitments and supplier
liabilities. All liabilities regarding the Thin Film business have
now been settled. The 3D business recorded an operating loss before
tax of GBP4.2 million in 2021 (2020: GBP6.4 million loss).
The Group has recognised a gain on the sale of investment in
subsidiary of GBP17.9 million, comprising net cash received GBP9.3
million, with contingent consideration at the transaction date of
GBP10.9 million, less transaction costs of GBP0.2 million
Basic earnings per share from discontinued operations was 20.0p
(2020: loss 9.5p)
Profit for the year
The Group profit for the year was GBP14.2 million (2020: GBP14.7
million loss) of which GBP16.2 million is attributable to the
owners of the company, (2020: GBP11.7 million loss) with a GBP2.0
million loss to non-controlling interests (2020: GBP3.0 million
loss). The total basic earnings per share attributable to
shareholders is 20.9p (2020: loss 15.2p).
Cash generation
The Group retained a healthy cash balance of GBP25.1 million at
the year end, representing an increase of GBP4.9 million during the
year, comprising a cash outflow from continuing operations of
GBP2.3 million, with discontinued Xaar 3D operations utilising
GBP2.1 million, being offset against cash proceeds received for the
sale of Xaar 3D of GBP9.3 million.
Operating cash inflow from continuing operations before working
capital was GBP2.7 million due to improved aEBITDA of GBP3.2
million delivered principally in our Printhead division.
Movement in net cash* (including 3D) 2021 2020
GBP'000 GBP'000
Cash & Treasury Deposits - Continuing Operations 25,051 18,117
--------- ---------
Cash & Treasury Deposits - 3D operations - 2,120
--------- ---------
Cash & Treasury Deposits at end of year 25,051 20,237
--------- ---------
Cash & Treasury Deposits at the beginning
of the year 20,237 25,322
--------- ---------
Total Net Cash Inflow / (Outflow) 4,814 (5,085)
--------- ---------
Effect of foreign exchange rate changes
on cash balances 110 57
--------- ---------
Increase / (Decrease) in net cash for the
Group 4,924 (5,028)
--------- ---------
Consisting of:
--------- ---------
Total Cash (outflow) / inflow from Continuing
Operations (2,342) 7,073
--------- ---------
Cash outflow from Xaar 3D Business (2,109) (7,018)
--------- ---------
Xaar 3D - Proceeds from share capital and 9,272 -
share sale
--------- ---------
Cash inflow / (outflow) from Thin Film
Operation 103 (5,083)
--------- ---------
Increase / (decrease) in net cash for the
Group 4,924 (5,028)
--------- ---------
*Net cash is defined as cash and cash equivalents, plus treasury
deposits
As a result of the managed investment in inventory, working
capital saw an outflow of GBP3.4 million, with improvements in
receivables and payables helping to offset some of the GBP9.1
million increase in inventory.
The Group maintains a strong disciplined focus on cash, and this
will continue throughout 2022. During 2021 investing activities saw
cash spend of GBP2.3 million, mainly on infrastructure and IT
projects.
The business has a clear plan and strategy which the strong
balance sheet and cash position will support. There remain external
development opportunities which, if they can expand our
capabilities and expertise, we will look to potentially add to the
Group. We will also continue to invest internally to ensure we have
the operational capacity and efficiency to meet future demand,
alongside investment in our product roadmap development.
Cash Inflow from Continuing Operations (excluding 2021 2020
3D) GBP'000 GBP'000
aEBITDA 3,183 62
--------- ---------
Restructuring and transaction expenses (1,404) (754)
--------- ---------
Depreciation of right of use assets 871 1,107
--------- ---------
Government Grant (PPP Loan) - 819
--------- ---------
Other 90 144
--------- ---------
Operating cash flows before movements in working
capital 2,740 1,378
--------- ---------
Movement in working capital (3,383) 6,735
--------- ---------
Cash (utilised) / generated by operations (643) 8,113
--------- ---------
Income taxes received 288 351
--------- ---------
Net cash used in investing & other financing activities (1,987) (1,391)
--------- ---------
Net (decrease) / increase in cash and cash equivalents
from Continuing Operations (2,342) 7,073
--------- ---------
Strong balance sheet
Non-current assets increased GBP22.7 million in the year from
GBP24.7 million to GBP47.4 million. This was driven by the increase
in Goodwill following the acquisition of FFEI Limited of GBP0.7
million, along with an increase in Intangible assets of GBP3.8
million. The identification of financial assets at fair value
arising from the sale of 3D assets was GBP10.9 million plus
revaluation through profit and loss at the year end of GBP1.0
million (2020: GBPnil). Additionally, there were increases in right
of use assets of GBP7.3 million, and a GBP0.9 million reduction in
Property, Plant and Equipment as new purchases were controlled in
with line with the Group's cash focus.
Current assets, excluding the disposal group assets held for
sale, increased GBP18.4 million from GBP38.1 million in 2020 to
GBP56.5 million. A significant proportion of this increase is
attributable to the increase in Inventories of GBP9.1 million to
GBP18.8 million (2020: GBP9.7 million), associated to the managed
investment in our supply chain capability. Trade and other
receivables increased by GBP2.5 million to GBP12.1 million (2020:
GBP9.6 million) and Cash & Cash equivalents (including Treasury
Deposits) increased by GBP7.0 million to GBP25.1 million (2020:
GBP18.1 million), with current tax assets increasing by GBP0.1
million to GBP0.5 million (2020: GBP0.4 million). Each of these
were primarily driven by the consolidation of FFEI.
The 3D business was classified as held for sale with GBP10.0
million of assets in 2020 and disposed of in 2021.
Current liabilities, excluding liabilities associated with Xaar
3D (held for sale) in 2020 of GBP1.6 million increased by GBP8.7
million to GBP23.0 million (2020: GBP14.3 million) primarily due to
the. Increase in Trade and other payables of GBP11.6 million to
GBP21.5 million (2020: GBP9.9 million) as a result of the
consolidation of FFEI. A reduction in the provision balance of
GBP0.2 million arose from the utilisation of the GBP0.3 million
restructuring provision in the year, offset against an increase in
warranty provision of GBP0.1 million. Current lease liabilities
increased by GBP0.1 million to GBP1.2 million (2020: GBP1.1
million), with the disposal of Xaar 3D also removing the liability
arising from derivative financial instrument of GBP2.9 million.
Non-current liabilities increased by GBP10.7 million to GBP12.2
million (2020: GBP1.5 million), which mainly relate to lease
liabilities recorded under IFRS 16 for property which increased by
GBP7.0 million to GBP8.5 million (2020: GBP1.5 million) in the
year, alongside recognising a dilapidation provision on leases of
GBP0.3 million (2020: GBPnil) and long-term liability of GBP3.4
million for the deferred consideration on the acquisition of FFEI
Limited.
Dividend
No dividend has been declared for 2021, as the Board believes
that prioritising cash for continued investment in the business at
this stage of our rebuilding programme will deliver more compelling
returns for shareholders in the medium term.
John Mills Ian Tichias
Chief Executive Officer Chief Financial Officer
29 March 2022
CONSOLIDATED INCOME STATEMENT
FOR THE YEARED 31 DECEMBER
2021
2021 2020
Notes GBP'000 GBP'000
-------------------------------------- ------ --------- ---------
Revenue 3 59,254 47,984
Cost of sales (39,064) (34,974)
-------------------------------------- ------ --------- ---------
Gross profit 20,190 13,010
Research and development expenses (5,706) (4,535)
Research and development expenditure
credit 270 142
Sales and Marketing expenses (6,342) (5,970)
General and administrative expenses (10,070) (8,022)
Impairment reversal on financial
assets 388 946
Restructuring and transaction
expenses 2 (1,404) (754)
Other operating income 2 - 819
Fair value gain on financial 987 -
assets at FVPL
Gain on derivative financial
liabilities 2,919 77
Operating profit / (loss) 1,232 (4,287)
Investment income 4 47
Finance costs for leases (242) (82)
-------------------------------------- ------ --------- ---------
Profit / (loss) before tax 994 (4,322)
Income tax expense (299) (52)
-------------------------------------- ------ --------- ---------
Profit / (loss) for the period
from continuing operations 695 (4,374)
Profit / (loss) from discontinued
operations after tax 6 13,533 (10,295)
-------------------------------------- ------ --------- ---------
Profit / (loss) for the year 14,228 (14,669)
-------------------------------------- ------ --------- ---------
Attributable to:
Owners of the Company 16,219 (11,685)
Non-controlling interests (1,991) (2,984)
-------------------------------------- ------ ---------
Profit / (loss) for the year 14,228 (14,669)
-------------------------------------- ------ --------- ---------
Earnings/(loss) per share -
Total
Basic 4 20.9p (15.2p)
Diluted 4 20.6p (15.2p)
-------------------------------------- ------ --------- ---------
Earnings/(loss) per share - Continuing operations
Basic 0.9p (5.7p)
Diluted 4 0.9p (5.7p)
-------------------------------------- ------ --------- ---------
There were no dividends paid during the current and preceding
year.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER
2021
Restated
2021 2020
GBP'000 GBP'000
----------------------------------------- -------- ---------
Profit / (loss) for the year 14,228 (14,669)
------------------------------------------ -------- ---------
Items that may be reclassified subsequently to profit or
loss:
Exchange differences on translation
of net investment 143 262
Tax on items taken directly to
equity - (5)
------------------------------------------ -------- ---------
Other comprehensive income for
the year 143 257
------------------------------------------ -------- ---------
Total comprehensive loss for
the year 14,371 (14,412)
------------------------------------------ -------- ---------
Total comprehensive loss attributable
to:
Owners of the Company 16,366 (11,444)
Non-controlling interests (1,995) (2,968)
------------------------------------------ -------- ---------
14,371 (14,412)
----------------------------------------- -------- ---------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2021
Restated
2021 2020
GBP'000 GBP'000
-------------------------------------- --------- -----------
Non-current assets
Goodwill 5,894 5,152
Other intangible assets 4,043 207
Property, plant and equipment 16,226 17,147
Right of use asset 9,368 2,078
Financial asset at FVPL 11,850 -
Deferred tax asset - 139
--------- -----------
47,381 24,723
-------------------------------------- --------- -----------
Current assets
Inventories 18,839 9,750
Trade and other receivables 12,138 9,640
Current tax asset 531 425
Treasury deposits - 161
Cash and cash equivalents 25,051 17,956
Derivative Financial Instruments - 160
Assets held for sale - 43
--------- -----------
56,559 38,135
Disposal Group Assets held for
sale - 9,968
-------------------------------------- --------- -----------
56,559 48,103
-------------------------------------- --------- -----------
Total assets 103,940 72,826
-------------------------------------- --------- -----------
Current liabilities
Trade and other payables (21,489) (9,940)
Provisions (264) (357)
Derivative financial instruments - (2,919)
Lease liabilities (1,231) (1,064)
-------------------------------------- --------- -----------
(22,984) (14,280)
Liabilities associated with disposal
group - (1,589)
-------------------------------------- --------- -----------
(22,984) (15,869)
-------------------------------------- --------- -----------
Net current assets 33,575 32,234
-------------------------------------- --------- -----------
Non-current liabilities
Deferred tax liabilities (1) -
Lease liabilities (8,499) (1,515)
Provisions (300) -
Other financial liabilities (3,354) -
Total non-current liabilities (12,154) (1,515)
-------------------------------------- --------- -----------
Total liabilities (35,138) (17,384)
-------------------------------------- --------- -----------
Net assets 68,802 55,442
-------------------------------------- --------- -----------
Equity
Share capital 7,844 7,833
Share premium 29,427 29,328
Own shares (1,923) (1,957)
Translation reserves 1,011 864
Other reserves 21,820 21,167
Retained earnings 10,623 (5,564)
--------------------------------------
Equity attributable to owners
of the company 68,802 51,671
-------------------------------------- --------- -----------
Non-controlling interest - 3,771
-------------------------------------- --------- -----------
Total equity 68,802 55,442
-------------------------------------- --------- -----------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31
DECEMBER
2021
Non-controlling
Share Share Own Translation Other Retained Total
capital premium shares reserves reserves earnings Total interest equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------- -------- -------- -------- ------------- ---------- ---------- --------- ---------------- ---------
Balance at 1
January 2020 (as
reported) 7,833 29,328 (2,676) 594 20,921 7,598 63,598 6,739 70,337
Prior year
restatement - - - 24 - (766) (742) - (742)
------------------ -------- -------- -------- ------------- ---------- ---------- --------- ---------------- ---------
Balance at 1
January 2020 (as
restated) 7,833 29,328 (2,676) 618 20,921 6,832 62,856 6,739 69,595
Profit for the
year - - - - - (11,685) (11,685) (2,984) (14,669)
Tax on items
taken directly
to
equity - - - - - (5) (5) - (5)
Exchange
differences on
retranslation
of net
investment - - - 224 - - 224 16 240
Prior year
restatement - - - 22 - 4 26 - 20
------------------ -------- -------- -------- ------------- ---------- ---------- --------- ---------------- ---------
Total
comprehensive
loss for the
period - - - 246 - (11,686) (11,440) (2,968) (14,408)
Own shares sold
in the period - - 719 - - - 719 - 719
Share option
exercises - - - - - (710) (710) - (710)
Credit to equity
for
equity-settled
share-based
payments - - - - 246 - 246 - 246
------------------ -------- -------- -------- ------------- ---------- ---------- --------- ---------------- ---------
Balance at 31
December 2020
(as
restated) 7,833 29,328 (1,957) 864 21,167 (5,564) 51,671 3,771 55,442
------------------ -------- -------- -------- ------------- ---------- ---------- --------- ---------------- ---------
Profit for the
year - - - - - 16,219 16,219 (1,991) 14,228
Tax on items - - - - - - - - -
taken directly
to
equity
Exchange
differences on
retranslation
of net
investment - - - 147 - - 147 (4) 143
------------------ -------- -------- -------- ------------- ---------- ---------- --------- ---------------- ---------
Total
comprehensive
income for
the period - - - 147 - 16,219 16,366 (1,995) 14,371
Own shares sold
in the period 3 - 34 - - 3 34 - 34
Share option
exercises 8 99 - - - (29) 78 - 78
Deferred tax - - - - - - - - -
benefit on share
option gains
Credit to equity
for
equity-settled
share-based
payments - - - - 653 - 653 - 653
De-recognition of
non-controlling
interest - - - - - - - (1,776) (1,776)
Balance at 31
December 2021 7,844 29,427 (1,923) 1,011 21,820 10,623 68,802 - 68,802
------------------ -------- -------- -------- ------------- ---------- ---------- --------- ---------------- ---------
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARED 31 DECEMBER 2021
2021 2020
Notes GBP'000 GBP'000
----------------------------------------------- ------ ----------------- -----------------
Net cash used in operating activities 5 (2,054) (2,807)
----------------------------------------------- ------ ----------------- -----------------
Investing activities
Investment income 13 64
Treasury deposits (deposited)/withdrawn 161 361
Purchase of derivative financial instrument - (130)
Purchases of property, plant and equipment (1,876) (1,098)
Proceeds on disposal of property, plant
and equipment 209 167
Expenditure on software (38) -
Proceeds from disposal of investment in 9,272 -
subsidiary
Cash attributable to subsidiary sold (96) -
----------------------------------------------- ------ ----------------- -----------------
Acquisition of subsidiary, net cash acquired 168 -
----------------------------------------------- ------ ----------------- -----------------
Net cash provided by / (used in) investing
activities 7,813 (636)
----------------------------------------------- ------ ----------------- -----------------
Financing activities
Proceeds from sales of ordinary share capital 150 -
Payment of lease liabilities and related
interest (824) (1,224)
----------------------------------------------- ------ ----------------- -----------------
Net cash used in financing activities (674) (1,224)
----------------------------------------------- ------ ----------------- -----------------
Net increase / (decrease) in cash and cash
equivalents 5,085 (4,667)
Effect of foreign exchange rate changes
on cash balances (110) (57)
Cash and cash equivalents at beginning
of year 20,076 24,800
----------------------------------------------- ------ ----------------- -----------------
Cash and cash equivalents at end of year 25,051 20,076
----------------------------------------------- ------ ----------------- -----------------
Cash and cash equivalents attributable
to subsidiary sold - 2,120
----------------------------------------------- ------ ----------------- -----------------
Cash and cash equivalents 25,051 17,956
----------------------------------------------- ------ ----------------- -----------------
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 2021
1. Basis of preparation and accounting policies
Basis of preparation
The financial information set out above does not constitute the
Group's statutory accounts for the years ended 31 December 2020 and
2021 but is derived from those accounts. Statutory accounts for
2020 have been delivered to the Registrar of Companies and those
for 2021 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 summary
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 2022.
Going concern
The Group reported a profit after tax for the year ended 31
December 2021 of GBP14.2 million, which includes a profit after tax
of GBP13.5 million related to discontinued operations, being the
costs relating to Thin Film and Xaar 3D (GBP4.4 million loss), as
well as the gain on disposal (GBP17.9 million). The Group's day to
day working capital requirements are expected to be met through the
current cash and cash equivalent resources (including Treasury
deposits) at the balance sheet date of 31 December 2021 of GBP25.1
million. The Group was debt free as at 31 December 2021.
To date the impact of COVID-19 on the Group's trading has been
minimal, however we did experience some COVID-19 related supply
constraints in 2021, for which actions have been taken to mitigate
their impact and therefore the Board continues to be optimistic on
the future trading environment.
The going concern review has been completed by considering the
performance of the different businesses across the Group and each
of their funding requirements before performing a number of stress
tests. The base going concern case is consistent with the current
board approved forecasts and, to reflect judgement over timing of
contingent consideration payments, has been adjusted to exclude
these in the going concern period. A second case which includes the
consideration payable on the acquisition of Megnajet Ltd (as set
out in Note 9), however excludes the revenue compared to forecast
across the entire Group required to prevent the business continuing
as a going concern is more than 30% which is considered remote
given the nature and size of the order book and the trading
experience of the printhead and EPS segments during COVID-19
conditions to date.
Notwithstanding this, the Group has further options to mitigate
a cash shortfall which have not been factored into the above
forecasts, such as staffing reductions, further delaying/stopping
capital and research and development expenditure and aligning
performance related pay to actual results.
The Directors have a reasonable expectation that the Group has
adequate resources to continue in operational existence for the
period to 30 June 2023, taking account of reasonably possible
changes in trading performance. For this reason, we continue to
adopt the going concern basis in preparing the financial
statements.
2. Reconciliation of adjusted financial measures
2021 2020
GBP'000 GBP'000
-------------------------------------------- ---- ----------------------- --------------------
Profit/(loss) before tax from continuing
operations 994 (4,322)
-------------------------------------------------- ----------------------- ----------------------
Share-based payment charges 758 348
Exchange differences on intra-group
transactions 95 347
Gain on derivative financial liabilities (2,919) (77)
Restructuring and transaction expenses 1,404 754
R&D Expenditure credit (270) (142)
Other operating income - (819)
Fair value gain on financial assets (987) -
at FVPL
Amortisation of acquired intangible 354 -
assets
Adjusted loss before tax from continuing
operations (571) (3,911)
Interest income (4) (47)
Finance costs 242 82
Depreciation of property, plant and
equipment 3,318 3,400
Amortisation of intangible assets
(other than acquired intangibles) 121 82
Profit on asset disposal 77 99
Impairment of assets - 391
Other immaterial movements in property,
plant and equipment - (34)
-------------------------------------------------- ----------------------- --------------------
Adjusted EBITDA from continuing operations 3,183 62
-------------------------------------------------- ----------------------- --------------------
EBITDA is calculated as statutory operating profit before
depreciation, amortisation and impairment of property, plant and
equipment, intangible assets and goodwill. Adjusted EBITDA is
calculated as EBITDA excluding other adjusting items as
defined.
Adjusted financial measures are alternative performance
measures, which adjust for recurring and non-recurring items that
management consider to have a distorting effect on the underlying
results of the Group, as they are not reflective of the underlying
performance of the Group. Recurring items are adjusted each year
irrespective of materiality to ensure consistent treatment.
Non-recurring items are identified and adjusted for by virtue of
their size or nature.
Share-based payment charges include the IFRS 2 charge for the
period of GBP653,000 (2020: GBP242,000) and the debit relating to
National Insurance on the outstanding potential share option gains
of GBP105,000 (2020: credit GBP106,000). These costs were included
in the general and administrative expenses in the consolidated
income statement and exclude the Xaar 3D charge of GBP440 (2020:
GBP5,000).
Exchange differences relating to the operations in the United
States, represent exchange gains or losses recorded in the
consolidated income statement as a result of intragroup
transactions in the United States. These costs were included in
general and administrative expenses in the consolidated income
statement.
Gain on derivative financial instruments relates to gains made
on call option contracts. The option was exercised in 2021. These
amounts are included on the consolidated income statement under
Gain on derivative financial liabilities.
Restructuring and transaction expenses of GBP1,404,000 (2020:
GBP754,000) relate to costs incurred and provisions made in
relation to acquisition transaction costs incurred of GBP961,000
and re-organisation costs. In the prior year, it related to
re-organisation costs. The calculated impact of the restructuring
and transaction expenses at the corporation tax rate of 19% would
be GBP52,000 based on the expenses included that would be treated
as deductible (2020: GBP143,000). The cash paid related to
restructuring and investment expenses is GBP992,000 (2020:
GBP518,000).
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. Cash receipts of GBP219,000 was
received during the year were in relation to the FFEI RDEC and
R&D claim which related to their financial year 1 April 2020 to
31 March 2021. The GBP1,460,000 received in 2020 was in relation to
the 2018 and 2019 submitted RDEC claims.
Other operating income of GBPnil (2020: GBP819,000) relates to a
forgivable $1 million loan between Engineered Print Solutions (EPS)
and TD bank and is backed by the US Federal Government (Small
Business Administration); further details are provided under note
7. The loan was taken out as part of the government backed scheme.
The Company met the requirements of the waiver, and therefore the
Loan was waived, and has therefore been treated as a government
grant under IAS 20. A cash receipt of the same amount was
received.
The fair value gain on financial assets at fair value through
profit and loss relates to the sale of Xaar 3D Limited. The net
consideration includes contingent consideration that is valued and
reported at fair value. The fair value movement is recognised in
the income statement as fair value gain on financial assets at fair
value through profit and loss.
The amortisation of acquired intangible assets relates to the
acquisition of FFEI Limited. These include software, patents and
customer relationships and are being amortised over six years.
These costs were included in general and administrative expenses in
the consolidated income statement
2021 2020
Pence per Pence per
Notes share share
Basic earnings per share continuing
operations 4 0.9p (5.7p)
------------------------------------------ ------ ---------- ----------
Share-based payment charges 1.0p 0.5p
Exchange differences on intra-group
transactions 0.1p 0.5p
Gain on derivative financial liabilities (3.8p) (0.1p)
Restructuring and transaction expenses 1.8p 1.0p
Other operating income - (1.1p)
Fair value gain on financial assets (1.3p) -
at FVPL
Amortisation of acquired intangible 0.5p -
assets
Tax effect of adjusting items (0.2p) (0.3p)
Adjusted basic earnings per share (1.0p) (5.2p)
------------------------------------------ ------ ---------- ----------
This reconciliation is provided to align with how the Board
measures and monitors the business at an underlying level, and is a
measure used in establishing remuneration.
3. Business segments
For management reporting purposes, the Group's operations are
analysed according to the three operating segments of 'Printhead',
'Product Print Systems', and 'Digital Imaging'. These three
operating segments are the basis on which the Group reports its
primary segment information and on which decisions are made by the
Group's Chief Executive Officer and Board of Directors, and
resources allocated. Each business unit is run independently of the
others and headed by a general manager. The Group's chief operating
decision maker is the Chief Executive Officer. There is no
aggregation of segments for disclosure purposes.
The Xaar 3D business which was classified as assets held for
sale in the prior year has now divested on 1 November 2021. The
result for the ten-month period is classified as discontinued
operations and is presented separately in note 6.
Segment information for continuing operations is presented
below:
Product
Print Digital
Printhead Systems Imaging Unallocated Consolidated
Year ended 31 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
December 2021
--------------- ------------------ ------------------ ------------------ ------------------- --------------------
Revenue
Total segment
revenue 40,104 13,900 5,250 - 59,254
--------------- ------------------ ------------------ ------------------ ------------------- --------------------
Result from
continuing
operations
Adjusted
(loss) /
profit before
tax from
continuing
operations (526) (766) 721 - (571)
Share-based
payment
charges - - - (758) (758)
Exchange
differences
on
intra-group
transactions (95) - - - (95)
Restructuring
and
transaction
expenses (1,288) (116) - - (1,404)
Gain on
derivative
financial
liabilities 2,919 - - - 2,919
Research and
development
expenditure
credit 227 - 43 - 270
Fair value
gain on
financial
assets at
FVPL 987 - - - 987
Amortisation
of acquired
intangible
assets - - (354) - (354)
Profit/(loss)
before tax
from
continuing
operations 2,224 (882) 410 (758) 994
--------------- ------------------ ------------------ ------------------ ------------------- --------------------
Product
Print Digital Restated
Printhead Systems Imaging Unallocated Consolidated
Year ended 31 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
December 2020
-------------------- ---------------- ------------------ ------------------ ------------------- -----------------
Revenue
Total segment
revenue 35,283 12,701 - - 47,984
-------------------- ---------------- ------------------ ------------------ ------------------- -----------------
Result from
continuing
operations
Adjusted loss
before tax from
continuing
operations (3,431) (480) - - (3,911)
Share-based payment
charges - - - (348) (348)
Exchange
differences on
intra-group
transactions (347) - - - (347)
Restructuring and
transaction
expenses (754) - - - (754)
Gain on derivative
financial
liabilities 77 - - - 77
Research and
development
expenditure
credit 142 - - - 142
Other operating
income - 819 - - 819
(Loss)/profit
before tax from
continuing
operations (4,313) 339 - (348) (4,322)
-------------------- ---------------- ------------------ ------------------ ------------------- -----------------
Share-based payment charges include the IFRS 2 charge for the
year and the charge relating to National Insurance on the
outstanding potential share options, excluding the charge
attributable to Xaar 3D as discontinued operations GBP440 (2020:
GBP5,000).
4. Earnings per share - basic and diluted
The calculation of basic and diluted earnings per share is based
on the following data:
2021 2020
GBP'000 GBP'000
----------------------------------------------- ----------- -----------
Earnings
Earnings for the purposes of basic earnings
per share being net (loss) attributable
to equity holders of the parent 16,219 (11,685)
----------------------------------------------- ----------- -----------
from continuing operations 695 (4,374)
----------------------------------------------- ----------- -----------
from discontinued operations 15,524 (7,311)
----------------------------------------------- ----------- -----------
Number of shares
Weighted average number of ordinary shares
for the purposes of basic earnings per
share 77,528,064 77,103,593
Effect of dilutive potential ordinary shares:
Share options 1,261,215 -
----------------------------------------------- ----------- -----------
Weighted average number of ordinary shares
for the purposes of diluted earnings per
share 78,789,279 77,103,593
----------------------------------------------- ----------- -----------
2021 2020
Pence per Pence per
share share
----------------------------------------------- ----------- -----------
Basic 20.9p (15.2p)
Diluted 20.6p (15.2p)
----------------------------------------------- ----------- -----------
Continuing operations
Basic 0.9p (5.7p)
Diluted 0.9p (5.7p)
----------------------------------------------- ----------- -----------
Discontinued operations
Basic 20.0p (9.5p)
Diluted 19.7p (9.5p)
----------------------------------------------- ----------- -----------
Potential ordinary shares are treated as dilutive if their
conversion to ordinary shares would decrease earnings per share or
increase loss per share. Therefore in 2020 the diluted earnings per
share is not impacted by the effect of dilutive potential ordinary
shares, given the loss per share.
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, the Xaar plc
ESOP Trust and the matching shares held in trust for the Share
Incentive Plan.
For 2021, there were share options granted over 107,490 shares
that had not been included in the diluted earnings per share
calculation because they were anti-dilutive at the period end
(2020: 310,100 shares that would not have been included).
The performance conditions for LTIP awards over 1,510,685 shares
(2020: 510,482 shares) have not been met in the current financial
period, and therefore the dilutive effect of those shares has not
been included in the diluted earnings per share calculation.
5. Notes to cash flow statement
2021 2020
GBP'000 GBP'000
------------------------------------------------ --------- ---------
Profit / (loss) before tax from continuing
operations 994 (4,322)
Profit / (loss) before tax from discontinued
operations 13,503 (10,105)
Total profit / (loss) before tax 14,497 (14,427)
------------------------------------------------ --------- ---------
Adjustments for:
Share based payments 758 353
Depreciation of property, plant and equipment 3,318 4,223
Depreciation of right of use assets 871 1,236
Amortisation of intangible assets 475 685
Impairment of assets - 391
Research and development expenditure credit (582) (454)
Investment income (4) (72)
Interest expense 252 94
Foreign exchange (loss)/gain (23) 523
Gain on re-measurement of derivative liability (2,919) (77)
Fair value gain on financial assets at (987) -
FVPL
Loss on disposal of property, plant and
equipment 77 99
Profit on disposal of investment in subsidiary (17,899) -
Other gains and losses - 202
Decrease in provisions (74) (2,572)
------------------------------------------------ --------- ---------
Operating cash flows before movements
in working capital (2,240) (9,796)
(Increase) / decrease in inventories (7,964) 4,849
Decrease in receivables (1,525) (1,337)
Increase in payables 9,525 2,011
------------------------------------------------ --------- ---------
Cash used in operations (2,204) (4,273)
Income taxes received 150 1,466
Net cash used in operating activities (2,054) (2,807)
------------------------------------------------ --------- ---------
6. Discontinued operations
The Thin Film business which was discontinued in 2019 incurred
costs in 2020 and 2021 which mainly related to supplier liabilities
and inventory for last time buy sales. All liabilities have now
been settled and we maintain an amount of inventory, that is fully
provided, and not likely to be sold. Of the total Group net assets,
GBPnil (2020: GBP271,000) is related to Thin Film which is not
included in net assets held for sale.
As detailed in the strategic and financial update, the Xaar 3D
business completed its divestment on 1 November 2021. Xaar received
net cash of GBP9,272,000 and as specified in an 'earn out' clause
in the sale agreement, additional cash consideration of up to
$15,456,000 will be receivable. At the time of sale, the fair value
of the consideration was determined to be GBP10,863,000 will be
receivable. It has been recognised as a financial asset at fair
value through profit or loss.
At year end, the fair value was re-estimated to be
GBP11,850,000. The gain of GBP987,000 is presented in the income
statement as fair value gain on financial assets at fair value
through profit or loss. The results of Xaar 3D business for the
period ended 1 November 2021 are included in the discontinued
operations in the income statement.
The results of Thin Film and 3D related activities for the year
are shown below:
Thin Film 3D Total Thin Film 3D Total
2021 2021 2021 2020 2020 2020
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- ---------- -------- -------- ---------- -------- ---------
Revenue 384 2,918 3,302 258 734 992
Expenses (623) (7,075) (7,698) (3,922) (7,175) (11,097)
----------------------------- ---------- -------- -------- ---------- -------- ---------
Loss before income tax (239) (4,157) (4,396) (3,664) (6,441) (10,105)
Income tax (charge)/credit - 30 30 - (190) (190)
----------------------------- ---------- -------- -------- ---------- -------- ---------
Net loss before gain
on sale (239) (4,127) (4,366) (3,664) (6,631) (10,295)
----------------------------- ---------- -------- -------- ---------- -------- ---------
Gain on sale of investment
in subsidiary - 17,899 17,899 - - -
----------------------------- ---------- -------- -------- ---------- -------- ---------
(Loss)/profit after income
tax from discontinued
operations (239) 13,772 13,533 (3,664) (6,631) (10,295)
----------------------------- ---------- -------- -------- ---------- -------- ---------
Attributable to:
Owners of the Company (239) 15,763 15,524 (3,664) (3,647) (7,311)
Non-controlling interest - (1,991) (1,991) - (2,984) (2,984)
-----------------------------
(239) 13,772 13,533 (3,664) (6,631) (10,295)
---------------------------- ---------- -------- -------- ---------- -------- ---------
The gain on sale of investment in subsidiary is not subject to
income tax because it falls under Substantial Shareholding
Exemptions (SSE) Rule.
Included in the GBP7,075,000 expenses in 3D are net of
GBP297,000 relates to a service charge received from the Group
undertaking which has to be eliminated in the Group's consolidated
income statement.
The major classes of assets and liabilities of 3D classified as
held for sale as at 31 December 2020 and its carrying amounts as at
the date of sale (1 November 2021) are as follows:
1 November
2021 2020
GBP'000 GBP'000
------------------------------------------------- ----------- --------
Assets
Property, plant and equipment 1,207 1,041
Intangible assets 4,649 4,649
Deferred Tax Asset 164 68
Right of use asset 592 440
Inventory 870 919
Debtors 2,085 737
Corporate income tax 371 (6)
Cash and cash equivalents 96 2,120
-------------------------------------------------- ----------- --------
Assets held for sale 10,034 9,968
-------------------------------------------------- ----------- --------
Liabilities
Creditors (5,542) (1,115)
Corporate income tax - -
Provisions (Warranty & Restructuring) (31) (11)
IFRS 16 lease liability (525) (463)
Liabilities associated with the assets held for
sale (6,098) (1,589)
---------------------------------------------------- ----------- --------
Net assets associated with disposal group 3,936 8,379
---------------------------------------------------- ----------- --------
The net cash flows incurred by Thin Film and 3D are as
follows.
Thin Thin
Film 3D Total Film 3D Total
2021 2021 2021 2020 2020 2020
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- -------- -------- -------- -------- -------- ---------
Net cash inflow/(outflow)
from operating activities 103 (1,792) (1,689) (5,058) (6,213) (11,271)
Net cash outflow from investing
activities - (122) (122) (25) (645) (670)
Net cash outflow from financing
activities - (98) (98) - (160) (160)
------------------------------------- -------- -------- -------- -------- -------- ---------
Net decrease in cash generated
from discontinued operation 103 (2,012) (1,909) (5,083) (7,018) (12,101)
------------------------------------- -------- -------- -------- -------- -------- ---------
2021 2020
Pence per share Pence per
share
------------------------------------ ---------------- ----------
Earnings / (loss)
per share
Basic, earnings / (loss) for the
year from discontinued operations 20.0p (9.5p)
Diluted, earnings / (loss) for the
year from discontinued operations 19.7p (9.5p)
--------------------------------------- ---------------- ----------
The sale of Xaar 3D business is summarised below. The total
consideration received include the initial cash consideration and
contingent consideration less transaction costs that are directly
attributable to the sale. The carrying amount of the net assets
sold represents 55% of Xaar shareholding to 3D, adjusted by an
intracompany mark-up that relates to inventory.
2021
GBP'000
--------------------------------------------- --------
Consideration received or receivable:
Net cash received 9,272
Fair value of contingent consideration 10,863
Less: Transaction costs (246)
---------------------------------------------- --------
Total disposal consideration 19,889
Carrying amount of net assets sold (1,990)
----------------------------------------------
Gain on sale of investment in subsidiary 17,899
---------------------------------------------- --------
The carrying amount of net assets sold includes an inventory
mark-up from the Group undertaking amounting to GBP172,000 which
has to be eliminated in the Group consolidated balance sheet.
Following the divestment of 3D, this elimination was reversed and
adjusted to the gain on sale. A recycled foreign exchange
difference of GBP3,000 was also included to the carrying amount as
a result of translation.
7. Business Combination
On 11 July 2021, Xaar acquired 100% of the issued share capital
of FFEI Limited, a leading integrator and manufacturer of
industrial digital inkjet systems and digital life science
technology with many years of experience in managing technical
integration and engineering projects.
Details of the net assets acquired, goodwill and purchase
consideration are as follows:
Recognised amounts of identifiable assets acquired
and liabilities assumed GBP'000
------------------------------------------------------- --------
Cash 4,075
Trade & other
receivables 2,301
Corporate income
tax 291
Inventories 1,169
Property, plant and equipment 91
Right of use assets 3,074
Intangible assets 4,248
Trade & other
payables (4,130)
Lease liabilities (2,996)
Provision (non-current) (50)
----------------------------------------------------- --------
Total net identifiable
assets 8,073
Goodwill 689
Total consideration 8,762
----------------------------------------------------- --------
Satisfied by:
Cash 3,907
Deferred consideration 4,855
Total consideration transferred 8,762
------------------------------------------------------ --------
Net cash inflow arising
on acquisition
Cash consideration 3,907
Less: cash and cash equivalents
acquired 4,075
Total net cash inflow arising on acquisition 168
------------------------------------------------------- --------
The fair value of acquired trade receivables is GBP1,310,000.
The gross contractual amount for trade receivables due is
GBP1,388,000, with a loss allowance of GBP78,000 recognised on
acquisition.
The goodwill of GBP689,000 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 operations
team which will allow Xaar to accelerate the Company's existing
growth strategy and will enable Xaar to capture additional
opportunities in vertically integrated solutions. None of the
goodwill recognised is expected to be deductible for income tax
purposes.
The fair value of the intangible assets attributed to the
acquisition of the business relates to patents and software
(GBP3,044,000) and customer relationships (GBP1,204,000). These
have an estimated useful life of six years. The amortisation from
the date of acquisition to 31 December 2021 is GBP354,000 which is
included in the income statement under general and administrative
expenses.
In addition to the cash consideration, deferred consideration
shall be paid in three annual instalments. The undiscounted amount
of all future payments that the Company is required to make under
the deferred consideration arrangement is GBP5,200,000.
Acquisition related costs which are included in administrative
expenses in the consolidated income statement for the period ended
31 December 2021 amounted to GBP618,000.
The acquired business contributed revenues of GBP5,250,000 and
net profit of GBP410,000 to the Group for the period from 11 July
2021 to 31 December 2021. FFEI Limited had an accounting reference
date of 31 March prior to acquisition, reporting on a 4 week/4
week/5 week basis in their ERP system, which has subsequently been
aligned with the Xaar Group date of 31 December and month end
reporting. FFEI Limited reported under FRS 102 up to 31 March 2021,
transitioning to IFRS and reporting under FRS 101 from 1 April
2021. Due to the difficulties presented in performing an accurate
calculation of the results as if the acquisition had occurred on 1
January, the Board has decided that it is impracticable to present
the pro-forma revenue and profit.
8. Restatement of prior period
The financial statements include a prior period restatement in
relation to non-cash inventory related adjustments identified at
EPS in 2021, that relate prior to 2020. Inventory items with a
total value of $827,000 (GBP627,000) were identified as being held
on the balance sheet that had been previously disposed, scrapped or
consumed prior to 1 January 2020. The errors occurred as a result
of the internal control deficiencies identified in the EPS
subsidiary, in respect of the adequacy of controls over inventory
management, as disclosed in the 2020 Annual Report and Financial
Statements. Additionally an amount owed to an EPS supplier of
$153,000 (GBP116,000) was incorrectly classified as a vendor
deposit on the balance sheet when the payment was made to them in
2020, which should have been recognised as an expense in 2016. The
increase in the brought forward tax losses as a result of these
adjustments has not been recognised as a deferred tax asset but has
increased the level of unused tax losses (as also disclosed in note
23). There was no impact of the restatement on Earnings Per Share.
Actions have been taken in 2021 to remediate the deficiencies
identified. Process changes have been made to prevent the
reoccurrence of such errors.
The following tables summarise the impact of the prior period
restatement on the financial statements of the Group for the
periods ended 1 January and 31 December 2020:
Consolidated statement of
financial position 1 Jan 2020 EPS 1 Jan 2020
as reported adjustment restated
GBP'000 GBP'000 GBP'000
--------------------------- ------------ ----------- -----------
Current assets
Inventories 16,530 (627) 15,903
----------------------------- ------------ ----------- -----------
Total assets 88,224 (627) 87,597
----------------------------- ------------ ----------- -----------
Current liabilities
Trade and other payables (7,973) (116) (8,089)
----------------------------- ------------ ----------- -----------
Total liabilities (17,887) (116) (18,003)
----------------------------- ------------ ----------- -----------
Net assets 70,337 (742) 69,595
----------------------------- ------------ ----------- -----------
Equity
Translation reserve 594 24 618
Retained earnings 7,598 (766) 6,832
Total equity 70,337 (742) 69,595
----------------------------- ------------ ----------- -----------
Consolidated statement of comprehensive 31 Dec
income 2020 EPS 31 Dec 2020
as reported adjustment restated
GBP'000 GBP'000 GBP'000
----------------------------------------- ------------ ----------- ------------
Loss for the year (14,669) - (14,669)
----------------------------------------- ------------ ----------- ------------
Exchange differences on retranslation
of net investment 240 22 262
Tax on items taken directly to equity (5) - (5)
Other comprehensive income for the
year 235 22 257
----------------------------------------- ------------ ----------- ------------
Total comprehensive loss for the year (14,434) 22 (14,412)
----------------------------------------- ------------ ----------- ------------
Attributable to:
Owners of the Company (11,466) 22 (11,444)
Non-controlling interests (2,968) - (2,968)
(14,434) 22 (14,412)
----------------------------------------- ------------ ----------- ------------
Consolidated statement of financial 31 Dec EPS 31 Dec 2020
position 2020
as reported adjustment restated
GBP'000 GBP'000 GBP'000
-------------------------------------- ------------ ----------- ------------
Non-current assets
Goodwill 5,152 - 5,152
Other intangible assets 207 - 207
Property, plant and equipment 17,147 - 17,147
Right of use asset 2,078 - 2,078
Deferred tax asset 139 - 139
24,723 - 24,723
-------------------------------------- ------------ ----------- ------------
Current assets
Inventories 10,355 (605) 9,750
Trade and other receivables 9,751 (111) 9,640
Current tax asset 425 - 425
Treasury deposits 161 - 161
Cash and cash equivalents 17,956 - 17,956
Derivative financial instruments 160 - 160
Assets held for sale 43 - 43
38,851 (716) 38,135
Disposal group assets held for sale 9,968 - 9,968
-------------------------------------- ------------ ----------- ------------
48,819 - 48,103
-------------------------------------- ------------ ----------- ------------
Total assets 73,542 (716) 72,976
-------------------------------------- ------------ ----------- ------------
Current liabilities
Trade and other payables (9,940) - (9,940)
Provisions (357) - (357)
Derivative financial instruments (2,919) - (2,919)
Lease liabilities (1,064) - (1,064)
-------------------------------------- ------------ ----------- ------------
(14,280) - (14,280)
Liabilities associated with disposal
group (1,589) - (1,589)
-------------------------------------- ------------ ----------- ------------
(15,869) - (15,869)
-------------------------------------- ------------ ----------- ------------
Net current assets 32,950 (716) 32,234
-------------------------------------- ------------ ----------- ------------
Non-current liabilities
Lease liabilities (1,515) - (1,515)
Total non-current liabilities (1,515) - (1,515)
-------------------------------------- ------------ ----------- ------------
Total liabilities (17,384) - (17,384)
-------------------------------------- ------------ ----------- ------------
Net assets 56,158 (716) 55,442
-------------------------------------- ------------ ----------- ------------
Equity
Share capital 7,833 - 7,833
Share premium 29,328 - 29,328
Own shares (1,957) - (1,957)
Translation reserve 818 46 864
Other reserves 21,167 - 21,167
Retained earnings (4,802) (762) (5,564)
Equity attributable to owners of the
company 52,387 (716) 51,671
-------------------------------------- ------------ ----------- ------------
Non-controlling interests 3,771 - 3,771
-------------------------------------- ------------ ----------- ------------
Total equity 56,158 (716) 55,442
-------------------------------------- ------------ ----------- ------------
9. Non-Adjusting Post Balance Sheet Event - Megnajet Acquisition
On 2 March 2022, Xaar completed the acquisition of Megnajet Ltd
and Technomation Ltd.
The companies trade together under the name of Megnajet, and
design and manufacture industrial ink management and supply systems
for digital inkjet. The acquisitions will accelerate the Company's
growth strategy by creating a more integrated inkjet solution
whereby customers can access more of the printing ecosystem (such
as ink supply systems and the electronics) from Xaar.
The initial combined cash consideration of GBP3,600,000
(GBP1,800,000 for each Megnajet Ltd and Technomation Ltd) was paid
on completion, with an additional combined GBP400,000 deferred
consideration (GBP200,000 for each Megnajet Ltd and Technomation
Ltd) to be paid out in two years. The Board expects the acquired
expertise and resource will contribute to the long-term profitable
growth in Xaar's core printhead business. The acquisition
accounting is not yet complete due to the timing of the
transaction. Due to the short time since the acquisition of
Megnajet Ltd and Technomation Ltd and date of the financial
statements, and the work yet to be completed with regard to
transitioning the entities to IFRS, this presents difficulties in
performing an accurate calculation of the results as if the
acquisition of Megnajet Ltd and Technomation Ltd had occurred on 1
January 2021. Therefore the Board has decided that it is
impracticable to present the pro-forma revenue and profit.
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END
FR JLMITMTJTMBT
(END) Dow Jones Newswires
March 29, 2022 02:01 ET (06:01 GMT)
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