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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Xaar Plc | LSE:XAR | London | Ordinary Share | GB0001570810 | ORD 10P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| -2.00 | -1.69% | 116.50 | 116.00 | 120.00 | 120.00 | 116.00 | 116.50 | 68,100 | 14:44:53 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Commercial Printing, Nec | 72.78M | 1.63M | 0.0208 | 57.69 | 94.3M |
From Apr 2019 to Apr 2024
TIDMXAR
RNS Number : 0165Q
Xaar PLC
06 September 2017
6 September 2017
AMMENT TO THE 2017 INTERIM RESULTS
The following amendment has been made to the '2017 Interim Results' announcement released on 06/09/2017 at 07:00 under RNS No 9019P.
In the notes to the Condensed Consolidated Financial Information, the corrected text to note 3 is:
Assets in the 'product sales, commissions and fees' segment have increased by GBP13,135,000 over the period and assets in the 'royalties' segment have increased by GBP184,000 over the period;
The original text was:
Assets in the 'product sales, commissions and fees' segment have decreased by GBP13,135,000 over the period and assets in the 'royalties' segment have decreased by GBP184,000 over the period;
All other details remain unchanged.
The full amended text is shown below.
Xaar plc
Interim results in-line with expectations; transforming the business towards 2020 vision
Xaar plc ("Xaar", "the Group" or "the Company"), the inkjet printing technology Group headquartered in Cambridge, UK, today issues its interim report for the six months ended 30 June 2017.
Summary of results for the six months to 30 June 2017
Hot Features
Premium
Adjusted(1) IFRS
--------------------- ------------------------------- -------------------------------
H1 2017 H1 2016 H2 2016 H1 2017 H1 2016 H2 2016
--------------------- --------- --------- --------- --------- --------- ---------
Revenue GBP44.0m GBP44.5m GBP51.7m GBP44.0m GBP44.5m GBP51.7m
--------------------- --------- --------- --------- --------- --------- ---------
Gross profit GBP20.7m GBP19.9m GBP24.8m GBP20.7m GBP19.9m GBP24.8m
--------------------- --------- --------- --------- --------- --------- ---------
Gross margin
% 47% 45% 48% 47% 45% 48%
--------------------- --------- --------- --------- --------- --------- ---------
Gross R&D
investment GBP9.7m GBP11.2m GBP11.2m GBP9.7m GBP11.2m GBP11.2m
--------------------- --------- --------- --------- --------- --------- ---------
Net R&D investment2 GBP5.0m GBP6.3m GBP5.9m GBP5.0m GBP6.3m GBP5.9m
--------------------- --------- --------- --------- --------- --------- ---------
Operating
margin % 18% 19% 20% 13% 17% 19%
--------------------- --------- --------- --------- --------- --------- ---------
Profit before GBP8.8m GBP7.7m
tax GBP7.9m GBP10.7m GBP5.7m GBP10.2m
--------------------- --------- --------- --------- --------- --------- ---------
Diluted earnings
per share 9.1p 10.0p 11.2p 5.9p 8.5p 10.4p
--------------------- --------- --------- --------- --------- --------- ---------
Net cash3 GBP69.0m GBP69.0m
at period
end GBP38.3m GBP49.3m GBP38.3m GBP49.3m
--------------------- --------- --------- --------- --------- --------- ---------
Dividend per
share 3.4p 3.3p 6.7p 3.4p 3.3p 6.7p
--------------------- --------- --------- --------- --------- --------- ---------
(1) Excluding the impact of share-based payment charges, exchange differences relating to intra-group transactions, research and development expenditure credits and restructuring costs
(2) Net R&D investment excludes the capitalised costs of the Thin Film (P4) development programme, as required under International Financial Reporting Standards (IAS 38)
(3) Net cash includes cash, cash equivalents and treasury deposits
Financial highlights
-- Revenue in the first half of the year was in line with the Board's expectations at GBP44.0 million
-- Revenue excluding licensee royalty grew by 5%. Product revenue outside of Ceramics grew by 60%. The revenue from Engineered Printing Solutions (EPS) for the first half of the year was GBP6.5 million
-- Profitability consistent with the first half of 2016; gross margin of 47% (H1 2016: 45%); product gross margin was 43% (H1 2016: 36%); and adjusted operating profit margin of 18% (H1 2016: 19%)
-- Net cash at 30 June 2017 of GBP38.3 million (31 December 2016: GBP49.3 million), after investment in Thin Film Platform and working capital
-- Interim dividend up 3% to 3.4 pence per share (2016: 3.3 pence per share)
Operational & strategic highlights
-- Announcement of the Joint Development Agreement with Xerox to develop the next generation of Industrial Bulk piezo printheads using the extensive combined resources and IP of both companies. The efficiency gains from this agreement will allow Xaar to redeploy resources to strengthen the go-to-market functions to transform the business to become more customer-centric
-- First printhead arising from Xerox collaboration, the Xaar 5501 printhead, generates its first revenues
-- Good progress achieved in launching the new Thin Film printhead 1201, with a master distribution agreement signed for two years for +90,000 printheads
-- 5601 design frozen, first development kits shipped, capitalisation stopped at the end of July
-- Establishing European distribution channel for EPS digital product portfolio
Doug Edwards, CEO, commented:
"We are making good progress in transforming Xaar to a more diversified and customer-centric company. I am particularly pleased with the new product revenue streams we are delivering in Product Printing & Packaging, Graphic Arts, 3D and Advanced Manufacturing. Product revenue in the first half, outside of Ceramics, has grown by 60%. This transformation is not easy so I would like to thank all of our staff for their continued hard work and dedication as we continue to lay the foundations to deliver our 2020 vision."
Contacts
Xaar plc
Doug Edwards, Chief Today: +44 (0) 20-7353-4200
Executive Officer
Lily Liu, Chief Thereafter: +44 (0) 1223-423663
Financial Officer
www.xaar.com
Tulchan Communications
James Macey White +44 (0) 20-7353-4200
CHAIRMAN'S STATEMENT
Introduction
During the first half of 2017 we continued our transformation to a more customer-focused and market-led business, whilst delivering financial results in line with expectations. We reviewed and confirmed our strategic vision to grow annual sales to GBP220 million by 2020, and announced a partnership with Xerox to jointly develop the next generation Bulk piezo platform.
Dividend
In 2014 we announced a sustainable and progressive dividend policy which takes into account the Group's future prospects, its underlying profitability and the future cash requirements of the business.
The Board has declared a 2017 interim dividend of 3.4 pence, a 3% increase over the 2016 interim dividend, which will be paid on 12 October 2017, with an ex-dividend date of 14 September 2017 to shareholders on the register at close of business on 15 September 2017.
Board
There were two changes to the Board in the first half of the year.
On 2 May 2017 Lily Liu joined the Board as Chief Financial Officer. Lily joined us from the Smiths Group plc, where she held a number of senior financial and management roles. Mostly recently, from 2014 to 2016, Lily was CFO of the Smiths Detection Division.
On 8 August 2017 it was announced that Ted Wiggans, Chief Operations Officer, plans to retire from the Group on 9 August 2018.
Our financial results for the first half of 2017 were in line with expectations and we remain focused on delivering our 2020 vision. I want to thank all our employees for their hard work and commitment.
Robin Williams
Chairman
6 September 2017
CHIEF EXECUTIVE OFFICER'S STATEMENT
Introduction
I am pleased with our progress towards the 2020 vision during the first half of the year. Working together with our manufacturing partner for the Thin Film Xaar 5601, the 5601 design has been frozen, and the first development kits shipped. We launched a new Premier Partnership Programme into the Ceramics market to leverage our advanced High Laydown Technology and diversified product portfolio. We continued with our transformation from an internally-focused organisation to a market and customer-centric business; the savings arising from increased efficiency in operations and R&D will be redeployed into our go-to-market functions.
Results and business commentary
Revenue for the six months ended 30 June 2017 was GBP44.0 million (H1 2016: GBP44.5 million; H2 2016: GBP51.7 million).
Revenue excluding licensee royalties was GBP40.5 million (H1 2016: GBP38.4 million; H2 2016: GBP44.5 million). The revenue contribution from the EPS business was GBP6.5 million for the first half of 2017, consistent with expectations; revenue from the EPS business has been reported within the Packaging and Product Printing market sector.
Analysing the geographic split of our revenue based on the location of our customers (and not necessarily end users), Asia has increased to 47% (H1 2016: 42%, H2 2016: 35%), EMEA reduced to 32% (H1 2016: 51%, H2 2016: 36%) and the Americas increased, relative to the same period in 2016, to 21% (H1 2016: 7%, H2 2016: 29%).
Sales into Graphic Arts in the first half of 2017 were 33% higher than the same period for 2016, with first set of revenues from the new Thin Film printhead realised at GBP2m. A master distribution agreement was signed for +90,000 printheads over 2 years.
Revenue from Packaging and Product Printing increased by 54% compared to the first six months of 2016; excluding the contribution from the newly acquired EPS business, the revenue from this market declined by 20%. Sub-segments Direct-to-Shape, and Labels provided growth whilst Packaging, and Coding & Marking declined due to the time for the replacement new products to ramp up.
Revenue from the Industrial sector declined by 14% compared to the same period in 2016 due to the performance of the Ceramics business (a 25% decline), partially offset by strong growth in all other Industrial sub-segments. As previously reported, the Ceramics sub-segment has reached maturity with nearly all production capacity now converted to digital technology. Progress within Ceramics includes gaining traction within the replacement market with the Xaar 1003 and the launch of the Premier Partnership Programme. This provides access to new advanced technology and products for our Premier Partners. We have established a position in the Textiles sub-segment with the sales of 5601 development kits and the introduction of the 5501. The 3D and Advanced Manufacturing sub-segments continue to grow and are up 200% against H1 2016, with growth in Advanced Manufacturing being driven by demand for flat panel displays.
Profitability in the first half of 2017 was consistent with the first six months of 2016; gross margin was 47% (H1 2016: 45%, H2 2016: 48%); product gross margin was 43% (H1 2016: 36%, H2 2016: 40%) due to a favourable product mix effect. Adjusted operating margin was 18% (H1 2016: 19%, H2 2016: 20%).
We continue to invest a substantial amount in research and development to deliver our long term strategy, with expenditure before the capitalisation of development costs at 22% of revenue in H1 2017 (H1 2016: 25%). Gross expenditure (before capitalisation) of R&D was GBP9.7 million in H1 2017 (H1 2016: GBP11.2 million). Development expenditure on the Thin Film programme (also known as P4) of GBP4.7 million was capitalised in H1 2017 (H1 2016: GBP4.9 million), as required under International Financial Reporting Standards (specifically IAS 38). Amortisation of these costs commenced in August following the successful life testing of the printhead and completion of capitalisation at the end of July. Total costs capitalised to June 2017 (from January 2014) were GBP30.6 million.
Adjusted profit before tax for the period was GBP7.9 million (H1 2016: GBP8.8 million). The underlying adjusted profit before tax grew by 90%, adjusting for the effect of foreign exchange movements, the one-off benefit from the licensee royalty payment in H1 2016 and the contribution from the EPS business.
EPS continued to perform as expected, introducing Roto-JET, its new product, in July 2017 with extensive interest received from end user customers.
At 30 June 2017, Xaar's net cash position was GBP38.3 million (31 December 2016: GBP49.3 million), reflecting an employment of working capital to support our new channels and product launches.
Strategic Development
We deepened our partnership with Xerox, and launched the new 5501 printhead. This will initially be targeted at the Textiles market and generated its first revenues in H1. In June we announced a Joint Development Agreement with Xerox to develop the next generation of industrial Bulk piezo printheads using the extensive combined resources and IP of both companies. The efficiency gains from this agreement will allow Xaar to redeploy resources to strengthen the go-to-market functions and transform the business to become more customer-centric.
The partnership with Ricoh continues to be strong, with good steps achieved on the 1201 printhead. We have signed a master distribution agreement for the 1201 worth in excess of 90,000 units over 2 years.
We continue to make good progress in 3D, having officially opened our Nottingham and Copenhagen centres in H1 and we are developing key strategic OEM partnerships.
We are continuing to grow the EPS business and are establishing a European distribution channel for its digital product portfolio.
Brexit
Brexit provides a number of challenges for Xaar. The greatest challenge continues to be the likely prolonged period of uncertainty concerning EU workers and migration; one in seven of our current workforce has migrated from the EU and the continued recruitment of world-class talent is critical to our success in a technical and specialised industry. Another challenge for us continues to be free trade into the EU; around one third of our sales are to customers located in EU countries and so any actual or perceived barriers to free trade are an obvious area of concern for us. Brexit continues to be an integral part of the Company's ongoing risk management and review process.
Outlook
We have set out our vision to grow annual sales to GBP220 million by 2020 supported under four strategic pillars: Ceramics, Packaging and Product Printing, Thin Film, and Partnerships and Acquisitions. In the shorter term, despite challenges and low visibility in the Ceramics sector, we are pleased with product revenue growth of 60% outside of Ceramics in the first half and anticipate continued new product growth in the second half of the year.
Doug Edwards
Chief Executive Officer
6 September 2017
DIRECTORS' RESPONSIBILITIES STATEMENT
We confirm that to the best of our knowledge:
(a) the condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the EU and gives a true and fair view of the assets, liabilities, financial position and profit of the Group.
(b) the interim management report includes a fair review of the information required by DTR 4.2.7R:
(i) an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements, and
(ii) a description of principal risks and uncertainties for the remaining six months of the year.
(c) the interim management report includes a fair review of the information required by DTR 4.2.8R:
(i) related parties transactions that have taken place in the first six months of the current financial year that have materially affected the financial position or performance of the Group in that period, and
(ii) any changes in the related parties transactions described in the Annual Report 2016 that could have a material effect on the financial position or performance of the Group in the current period.
By order of the Board
Doug Edwards
Chief Executive Officer
Lily Liu
Chief Financial Officer and Company Secretary
6 September 2017
CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE SIX MONTHSED 30 JUNE
2017
Six months Six months Twelve months
ended ended ended
30 June 30 June 31 December
2017 2016 2016
(unaudited) (unaudited) (audited)
Notes GBP'000 GBP'000 GBP'000
------------------------------- ------ ------------ ------------ --------------
Revenue 3 43,953 44,516 96,178
Cost of sales (23,252) (24,617) (51,511)
------------------------------- ------ ------------ ------------ --------------
Gross profit 20,701 19,899 44,667
Research and development
expenses (4,986) (6,268) (12,211)
Research and development
expenditure credit 492 326 605
Sales and marketing
expenses (4,022) (3,166) (7,608)
General and administration
expenses (6,063) (2,834) (6,844)
Restructuring costs (588) (582) (1,205)
------------------------------- ------ ------------ ------------ --------------
Operating profit 5,534 7,375 17,404
Investment income 118 281 449
Profit before tax 5,652 7,656 17,853
Tax 4 (1,033) (1,035) (3,052)
------------------------------- ------ ------------ ------------ --------------
Profit for the period
attributable to shareholders 4,619 6,621 14,801
------------------------------- ------ ------------ ------------ --------------
Earnings per share
Basic 5 6.0p 8.7p 19.4p
Diluted 5 5.9p 8.5p 18.9p
------------------------------- ------ ------------ ------------ --------------
Dividends paid in the period amounted to GBP5,132,000
or 6.7 pence per share 2016 final dividend (six months
to 30 June 2016: GBP4,808,000 or 6.3 pence per share
2015 final dividend; twelve months to 31 December 2016:
GBP7,328,000 or 9.6 pence per share being 6.3 pence
per share 2015 final dividend and 3.3 pence per share
2016 interim dividend).
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHSED 30 JUNE 2017
Six months Six months Twelve months
ended ended ended
30 June 30 June 31 December
2017 2016 2016
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
------------------------------------- ------------ ------------ --------------
Profit for the period attributable
to shareholders 4,619 6,621 14,801
------------------------------------- ------------ ------------ --------------
Exchange differences on translation
of net investment (160) 284 708
Tax benefit on share option
and restructuring gains - - 434
------------------------------------- ------------ ------------ --------------
Other comprehensive income
for the period (160) 284 1,142
------------------------------------- ------------ ------------ --------------
Total comprehensive income
for the period 4,459 6,905 15,943
------------------------------------- ------------ ------------ --------------
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2017
As at As at
30 June 31 December
2017 2016
(unaudited) (audited)
GBP'000 GBP'000
------------------------------------- ------------ ------------
Non-current assets
Goodwill 5,776 5,776
Other intangible assets 31,841 27,363
Property, plant and equipment 34,629 36,352
Receivables 1,248 1,516
73,494 71,007
------------------------------------- ------------ ------------
Current assets
Investments - 1,000
Inventories 19,849 13,790
Trade and other receivables 21,797 20,340
Current tax asset 6,345 3,029
Cash and cash equivalents 38,327 49,321
86,318 87,480
------------------------------------- ------------ ------------
Total assets 159,812 158,487
------------------------------------- ------------ ------------
Current liabilities
Trade and other payables (13,605) (14,314)
Other financial liabilities (74) (69)
Provisions (803) (774)
------------------------------------- ------------ ------------
(14,482) (15,157)
------------------------------------- ------------ ------------
Net current assets 71,836 72,323
------------------------------------- ------------ ------------
Non-current liabilities
Deferred tax liabilities (3,574) (2,686)
Other financial liabilities (192) (188)
------------------------------------- ------------ ------------
Total non-current liabilities (3,766) (2,874)
------------------------------------- ------------ ------------
Total liabilities (18,248) (18,031)
------------------------------------- ------------ ------------
Net assets 141,564 140,456
------------------------------------- ------------ ------------
Equity
Share capital 7,792 7,778
Share premium 28,027 27,854
Own shares (3,642) (3,642)
Other reserves 13,516 11,891
Translation reserve 647 807
Retained earnings 95,224 95,768
------------------------------------- ------------ ------------
Equity attributable to shareholders 141,564 140,456
------------------------------------- ------------ ------------
Total equity 141,564 140,456
------------------------------------- ------------ ------------
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHSED 30 JUNE
2017
Share Share Own Other Translation Retained
capital premium shares reserves reserves earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- -------- -------- -------- --------- ------------ --------- --------
Balances at 1 January
2017 7,778 27,854 (3,642) 11,891 807 95,768 140,456
----------------------------- -------- -------- -------- --------- ------------ --------- --------
Profit for the period - - - - - 4,619 4,619
Exchange differences
on retranslation of
net investment - - - - (160) - (160)
Total comprehensive
income for the period - - - - (160) 4,619 4,459
----------------------------- -------- -------- -------- --------- ------------ --------- --------
Issue of share capital 14 173 - - - - 187
Dividends (note 6) - - - - - (5,132) (5,132)
Tax on share options - - - - - (31) (31)
Credit to equity for
equity-settled share-based
payments - - - 1,625 - - 1,625
Balance at 30 June
2017 7,792 28,027 (3,642) 13,516 647 95,224 141,564
----------------------------- -------- -------- -------- --------- ------------ --------- --------
Share Share Own Other Translation Retained
capital premium shares reserves reserves earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- -------- -------- -------- --------- ------------ --------- --------
Balances at 1 January
2016 7,764 27,585 (3,796) 11,006 99 87,880 130,538
----------------------------- -------- -------- -------- --------- ------------ --------- --------
Profit for the period - - - - - 6,621 6,621
Exchange differences
on retranslation of
net investment - - - - 284 - 284
Total comprehensive
income for the period - - - - 284 6,621 6,905
----------------------------- -------- -------- -------- --------- ------------ --------- --------
Issue of share capital 11 207 - - - (2) 216
Own shares sold in
the period - - 154 - - (17) 137
Dividends (note 6) - - - - - (4,808) (4,808)
Tax on share options - - - - - 274 274
Credit to equity for
equity-settled share-based
payments - - - 654 - - 654
Balance at 30 June
2016 7,775 27,792 (3,642) 11,660 383 89,948 133,916
----------------------------- -------- -------- -------- --------- ------------ --------- --------
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
FOR THE SIX MONTHSED 30 JUNE 2017
Six months Six months Twelve months
ended ended ended
30 June 30 June 31 December
2017 2016 2016
(unaudited) (unaudited) (audited)
Note GBP'000 GBP'000 GBP'000
------------------------------------ ----- ------------ ------------ --------------
Net cash from operating activities 8 (245) 12,134 13,935
------------------------------------ ----- ------------ ------------ --------------
Investing activities
Investment income 91 270 471
Acquisition of subsidiary,
net of cash acquired - - (7,556)
Purchases of property, plant
and equipment (2,148) (5,065) (10,831)
Proceeds on disposal of property,
plant and equipment - 12 16
Redemption of investment 1,000 - -
Expenditure on software (18) (2) (85)
Expenditure on capitalised
product development (4,655) (4,902) (10,222) ------------------------------------ ----- ------------ ------------ -------------- Net cash used in investing activities (5,730) (9,687) (28,207) ------------------------------------ ----- ------------ ------------ -------------- Financing activities Dividends paid 6 (5,132) (4,808) (7,328) Movement in treasury deposits - 6,948 27,098 Proceeds from the sale of ordinary share capital - 137 137 Proceeds from issue of ordinary share capital 187 216 282 Net cash (used in)/from financing activities (4,945) 2,493 20,189 ------------------------------------ ----- ------------ ------------ -------------- Net (decrease)/increase in cash and cash equivalents (10,920) 4,940 5,917 Effect of foreign exchange rate changes (74) 1,248 755 Cash and cash equivalents at beginning of period 49,321 42,649 42,649 ------------------------------------ ----- ------------ ------------ -------------- Cash and cash equivalents at end of period 38,327 48,837 49,321 ------------------------------------ ----- ------------ ------------ --------------
Cash and cash equivalents (which are presented as a single class of asset on the face of the condensed 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 CONDENSED CONSOLIDATED FINANCIAL INFORMATION
FOR THE SIX MONTHSED 30 JUNE 2017
1. Basis of preparation and accounting policies
Basis of preparation
These interim financial statements have been prepared in accordance with the accounting policies set out in the Group's Annual Report and Financial Statements 2016 on pages 81 to 87 and were approved by the Board of Directors on 6 September 2017. The interim financial statements for the six months ended 30 June 2017 have been prepared in accordance with IAS 34 "Interim Financial Reporting" as adopted by the European Union. The interim financial statements do not include all the information and disclosures in the annual financial statements and should be read in conjunction with the Group's annual financial statements as at 31 December 2016.
The financial information in these interim financial statements for the six months ended 30 June 2017, does not constitute statutory financial statements as defined in section 434 of the Companies Act 2006. The Group's Annual Report for the year ended 31 December 2016 has been delivered to the Registrar of Companies and the auditor's report on those financial statements was not qualified and did not contain statements made under section 498(2) or (3) of the Companies Act 2006.
The interim financial statements are unaudited but have been reviewed by the auditor Deloitte LLP. The report of the auditor to the Group is set out at the end of this announcement.
Significant accounting policies
The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31 December 2016.
Risks and uncertainties
An outline of the key risks and uncertainties faced by the Group is detailed on pages 23 to 25 of the Xaar plc Annual Report and Financial Statements 2016 (available at www.xaar.com). It is anticipated that the risk profile will not significantly change for the remainder of the year. Risk is an inherent part of doing business and the strong cash position of the Group along with the underlying profitability of the core business leads the Directors to believe that the Group is well placed to manage business risks successfully.
Going concern
The Group's forecasts and projections, taking account of reasonably possible changes in trading performance, support the conclusion that there is a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future, a period not less than 12 months from the date of this report. Accordingly, the going concern basis of preparation has been adopted in preparing the interim financial statements.
2. Reconciliation of adjusted financial measures
Six months Six months Twelve months
ended ended ended
30 June 30 June 31 December
2017 2016 2016
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
--------------------------- -------------------------- -------------------- --------------------------
Profit before tax 5,652 7,656 17,853
--------------------------- -------------------------- -------------------- --------------------------
Share-based payment
charges 1,801 692 969
Exchange differences
relating to intra-group
transactions 323 199 60
Restructuring costs 588 582 1,205
Research and development
expenditure credit (492) (326) (605)
Adjusted profit before
tax 7,872 8,803 19,482
--------------------------- -------------------------- -------------------- --------------------------
Capitalised research
and development expense (4,697) (4,902) (10,222)
--------------------------- -------------------------- -------------------- --------------------------
Adjusted profit before
tax excluding the impact
of IAS 38 3,175 3,901 9,260
--------------------------- -------------------------- -------------------- --------------------------
Share-based payment charges include the IFRS 2 charge for the period of GBP1,625,000 (H1 2016: GBP654,000) and the charge relating to National Insurance on the outstanding potential share option gains of GBP176,000 (H1 2016: GBP38,000). These costs were included in the general and administrative expenses in the Consolidated income statement.
Exchange differences relating to the United States and Swedish operations represent exchange gains or losses recorded in the consolidated income statement as a result of operating in the United States and Sweden. These costs were included in general and administrative expenses in the Consolidated income statement.
Restructuring costs of GBP588,000 in H1 2017 (H1 2016: GBP582,000) relate to costs incurred and provisions made in relation to a reorganisation and the closure of the manufacturing facility in Sweden in 2016.
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 income statement.
Adjusted profit before tax excluding the impact of IAS 38 (capitalisation of development costs) is the measure that is used internally for setting and comparing achievement of the annual bonus target.
Six months Six months Twelve months
ended ended ended
30 June 2017 30 June 31 December
2016 2016
(unaudited) (unaudited) (audited)
Pence per Pence per Pence per
share share share
------------------------------ ------------- ------------ --------------
Diluted earnings per
share 5.9p 8.5p 18.9p
------------------------------ ------------- ------------ --------------
Share-based payment charges 2.3p 0.9p 1.2p
Exchange differences
relating to the intra-group
transactions 0.4p 0.3p 0.2p
Restructuring costs 0.8p 0.7p 1.5p
Tax effect of adjusting
items (0.3p) (0.4p) (0.6p)
------------------------------ ------------- ------------ --------------
Adjusted diluted earnings
per share 9.1p 10.0p 21.2p
------------------------------ ------------- ------------ --------------
This reconciliation is provided to enable a better understanding of the Group's results.
3. Business segments
For management reporting purposes, the Group's operations are currently analysed according to the two operating segments of 'product sales, commissions and fees' and 'royalties'. These two 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. The Group's chief operating decision maker is the Chief Executive Officer.
Segment information is presented below:
Six months Six months Twelve months
ended ended ended
30 June 30 June 31 December
2017 2016 2016
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
------------------------------- ------------ ------------ --------------
Revenue
Product sales, commissions
and fees 40,461 38,358 82,863
Royalties 3,492 6,158 13,315
------------------------------- ------------ ------------ --------------
Total revenue 43,953 44,516 96,178
------------------------------- ------------ ------------ --------------
Result
Product sales, commissions
and fees 3,843 1,909 5,058
Royalties 3,492 6,158 13,315
------------------------------- ------------ ------------ --------------
Total segment result 7,335 8,067 18,373
Net unallocated corporate
expense (1,801) (692) (969)
------------------------------- ------------ ------------ --------------
Operating profit 5,534 7,375 17,404
Investment income 118 281 449
Profit before tax 5,652 7,656 17,853
Tax (1,033) (1,035) (3,052)
------------------------------- ------------ ------------ --------------
Profit for the period
attributable to shareholders 4,619 6,621 14,801
------------------------------- ------------ ------------ --------------
Unallocated corporate expense relates to administrative activities which cannot be directly attributed to any of the principal product groups, consisting of share-based payment charges.
Assets in the 'product sales, commissions and fees' segment have increased by GBP13,135,000 over the period and assets in the 'royalties' segment have increased by GBP184,000 over the period; there have been no other material movements in segment assets during the period.
4. Income tax
The major components of income tax expense in the income statement are as follows:
Six months Six months Twelve months
ended ended ended
30 June 30 June 31 December
2017 2016 2016
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
---------------------------- ------------ ------------ --------------
Current income tax
Income tax charge 205 514 1,730
Deferred income tax
Relating to origination
and reversal of temporary
differences 828 521 1,322
---------------------------- ------------ ------------ --------------
Income tax expense 1,033 1,035 3,052
---------------------------- ------------ ------------ --------------
5. Earnings per ordinary share - basic and diluted
The calculation of basic and diluted earnings per share is based upon the following data:
Six months Six months Twelve months
ended ended ended
30 June 30 June 31 December
2017 2016 2016
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
-------------------------------- ------------ ------------ --------------
Earnings
Earnings for the purposes
of earnings per share
being net profit attributable
to equity holders of
the parent 4,619 6,621 14,801
-------------------------------- ------------ ------------ --------------
Number of shares
Weighted average number
of ordinary shares for
the purposes of basic
earnings per share 76,368,152 76,206,164 76,246,300
Effect of dilutive potential
ordinary shares:
Share options 1,897,619 1,686,525 1,994,875
-------------------------------- ------------ ------------ --------------
Weighted average number
of ordinary shares for
the purposes of diluted
earnings per share 78,265,771 77,892,689 78,241,175
-------------------------------- ------------ ------------ --------------
6. Dividends
Six months Six months Twelve months
ended ended ended
30 June 30 June 31 December
2017 2016 2016
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
---------------------------- ------------ ------------ --------------
Amounts recognised as
distributions to equity
holders in the period:
Final dividend for the
year ended 31 December
2016 of 6.7p (2015: 6.3p)
per share 5,132 4,808 4,808
Interim dividend for the
year ended 31 December
2016 of 3.3p per share - - 2,520
---------------------------- ------------ ------------ --------------
Total distributions to
equity holders in the
period 5,132 4,808 7,328
---------------------------- ------------ ------------ --------------
The interim dividend of 3.4 pence per share has been approved by the Board and will be paid on 12 October 2017 to shareholders on the register at close of business on 15 September 2017. The interim dividend has not been included as a liability at 30 June 2017.
7. Share capital
During the six months ended 30 June 2017 a total of 143,679 new ordinary shares of 10 pence each were issued under the Company's share option schemes for GBP187,000.
8. Notes to the cash flow statement
Six months Six months Twelve months
ended ended ended
30 June 30 June 31 December
2017 2016 2016
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
------------------------------- ------------ ------------ --------------
Profit before tax 5,652 7,656 17,853
Adjustments for:
Share-based payments 1,625 692 969
Depreciation of property,
plant and equipment 3,842 3,789 7,851
Amortisation of intangible
assets 192 395 787
Research and development
expenditure credit (492) (326) (605)
Investment income (112) (281) (449)
Foreign exchange gains (245) (928) (956)
Loss/(profit) on disposal
of property, plant and
equipment 101 1 (3)
Increase/(decrease) in
provisions 29 (1,057) (2,759)
------------------------------- ------------ ------------ --------------
Operating cash flows before
movements in working capital 10,592 9,941 22,688
(Increase)/decrease in
inventories (5,918) 2,000 2,841
Increase in receivables (1,149) (365) (8,910)
Decrease in payables (741) (155) (2,381)
------------------------------- ------------ ------------ --------------
Cash generated by operations 2,784 11,421 14,238
Income taxes (paid)/refunded (3,029) 713 (303)
------------------------------- ------------ ------------ --------------
Net cash from operating
activities (245) 12,134 13,935
------------------------------- ------------ ------------ --------------
9. Date of approval of interim financial statements
The interim financial statements cover the period 1 January 2017 to 30 June 2017 and were approved by the Board on 6 September 2017.
Further copies of the interim financial statements are available from the Company's registered office, 316 Science Park, Cambridge CB4 0XR, and can be accessed on the Xaar plc website, www.xaar.com.
INTERIM REVIEW REPORT TO XAAR PLC
For the six months ended 30 June 2017
We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2017 which comprises the condensed consolidated income statement, condensed consolidated statement of comprehensive income, condensed consolidated statement of financial position, condensed consolidated statement of changes in equity, condensed consolidated cash flow statement and related notes 1 to 9. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the Company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the Company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2017 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.
Deloitte LLP
Statutory Auditor
Cambridge, United Kingdom
6 September 2017
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR UGUQWBUPMGWQ
(END) Dow Jones Newswires
September 06, 2017 09:43 ET (13:43 GMT)
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