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Xaar plc (LSE:XAR), a leading inkjet printing technology company, has released its unaudited interim results for the six months ended 30 June 2024. While the company continues to face challenges from its legacy ceramics business, it has made significant strides in expanding its presence in new markets. The results reflect Xaar’s efforts to balance market declines with new product launches, showcasing the resilience of its diversified strategy.
Financial Overview
Xaar reported a revenue of £28.6 million for H1 2024, a decline from the £34.5 million recorded in the same period last year. This decrease was largely anticipated, driven by the ongoing decline in the legacy ceramics market, delayed orders, and EPS weakness. However, excluding ceramics, Xaar’s printhead business achieved an impressive 26% revenue growth in new markets, highlighting the success of its diversification efforts.
The Group’s gross margin dropped to 35%, down from 40% in H1 2023. This contraction was attributed to higher energy costs and lower overhead absorption. Xaar posted an adjusted loss before tax of £0.7 million, contrasting with the £1.8 million profit in H1 2023. Despite these financial pressures, the company remains well-capitalized, with a 10% increase in net cash to £6.8 million, reflecting strong cash management.
Strategic and Operational Progress
Xaar’s strategy to diversify away from its legacy markets has yielded positive results. The company successfully commercialized new products across various sectors, including textiles, corrugate, battery coating, and wax markets. Over the past five years, customer product launches have generated annualized revenue exceeding £20 million, delivering a compound annual growth rate (CAGR) of 26%.
The Group continues to focus on operational efficiency, reducing operating expenses by £3.4 million, a 24% reduction, while retaining key capabilities essential to driving future growth. This cost management approach has enabled Xaar to maintain its strategic investments, including £2.4 million in R&D, reflecting its commitment to innovation and product development.
Outlook for H2 2024
Looking ahead, Xaar’s management remains cautiously optimistic about the remainder of the year. Trading conditions are consistent with those reported in the FY results, with ongoing challenges in legacy markets and the global economic environment. Despite these headwinds, Xaar is encouraged by strong customer engagement and anticipates more OEM product launches during the second half of 2024.
The company’s differentiated technology and a growing pipeline of customer projects position it well for future growth, even in a challenging market. Xaar’s expanding presence in new markets like textiles and battery coating offers promising opportunities, with key projects expected to deliver in 2025.
Market Challenges and Full-Year Expectations
While Xaar has made notable progress, market uncertainty remains a concern. Economic conditions, including rising energy costs and supply chain disruptions, continue to pose challenges. Nevertheless, Xaar’s expectations for the full year remain unchanged, as the company believes its diversification strategy and operational efficiencies will help mitigate the impact of market volatility.
