TIDMXAR
RNS Number : 7089N
Xaar PLC
26 September 2019
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES
OF ARTICLE 7 OF EU REGULATION 596/2014
Xaar plc
2019 INTERIM RESULTS
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
2019.
Summary of results for the six months to 30 June 2019:
Adjusted(1) IFRS
H1 2019 H1 2018 H1 2019 H1 2018
----------- --------- ----------- ----------
Revenue GBP22.5m GBP35.3m GBP22.5m GBP35.3m
----------- --------- ----------- ----------
Gross (loss)/profit (GBP2.6m) GBP19.1m (GBP2.6m) GBP19.1m
----------- --------- ----------- ----------
Gross margin % (12%) 54% (12%) 54%
----------- --------- ----------- ----------
Gross R&D investment2 GBP4.6m GBP8.6m GBP4.6m GBP8.6m
----------- --------- ----------- ----------
Net R&D investment2 GBP4.3m GBP8.5m GBP4.3m GBP8.5m
----------- --------- ----------- ----------
Thin Film Impairment GBP0.0m GBP0.0m (GBP39.0m) GBP0.0m
----------- --------- ----------- ----------
Operating margin
% (67%) 9% (232%) (3%)
----------- --------- ----------- ----------
(Loss)/profit
before tax (GBP15.0m) GBP3.2m (GBP52.3m) (GBP1.1m)
----------- --------- ----------- ----------
Diluted earnings
per share (16.2p) 4.6p (64.6p) (1.2p)
----------- --------- ----------- ----------
Net cash3 at period
end GBP21.6m GBP36.8m GBP21.6m GBP36.8m
----------- --------- ----------- ----------
Dividend per share 0.0p 1.0p 0.0p 1.0p
----------- --------- ----------- ----------
1 - Excluding the impact of share-based payment charges,
exchange differences relating to intra-group transactions, gain on
derivative financial instruments, research and development
expenditure credit, restructuring and investment expenses, and Thin
Film impairment, as reconciled in note 2
2 - Net R&D investment excludes the capitalised costs of the
High Speed Sintering development programme (H1 2019: GBP1.1
million; H1 2018: GBP0.8 million), and includes the amortisation
cost of P4 (Thin Film) technology platform (H1 2019: GBP0.8
million; H1 2018: GBP0.9 million), as required under International
Financial Reporting Standards (IAS 38)
3 - Net cash includes cash, cash equivalents and treasury
deposits
Operational and strategic highlights
-- First half Printhead revenues were stable, up 1% when
compared to the same period last year and after adjusting for the
one-time royalties and the Xaar 1201 revenue reversal.
-- Our Product Print Systems revenues grew by 22% driven by
growth in inkjet and pad printing equipment 26% as well as
consumables 15%.
-- Significant progress in Xaar 3D Printing sees Stratasys
increase its investment from 15% to 45% with an option to acquire
the remaining 55%, subject to Xaar shareholder approval.
-- Our strategic review of the Thin Film business has concluded
with the decision to cease activities. We are announcing today
further restructuring of the Printhead business, subject to
employee consultation, which is expected to deliver GBP8.0 million
of annualised savings.
Financial highlights
-- Revenue in the first half of the year was GBP22.5 million, a
decline of GBP12.8 million compared to the first half of 2018.
However, when adjusted for the Thin Film Xaar 1201 revenue reversal
of GBP4.3 million in 2019 and the one-time royalty payment of
GBP9.7 million from Seiko Instruments Inc. (SII) in 2018, revenue
was up GBP1.3 million or 5%.
-- Gross loss was GBP2.6 million, which represents a decline of
GBP21.7 million when compared to the same period of 2018. This
decline is largely due to the one-time royalty payment received in
the first half of 2018 of GBP9.7 million and GBP7.4 million of Xaar
1201 related items. Reduced factory output and an unfavourable
product mix resulted in a further GBP3.9 million decline.
-- The adjusted operating loss before tax of GBP15.0 million
when adjusted for the GBP7.4 million related to Xaar 1201 items,
results in an underlying loss of GBP7.6 million.
-- Impairment charges of GBP39.0 million have been taken as a
result of our decision to cease all Thin Film activities.
-- Net cash at 30 June 2019 was GBP21.6 million (31 December
2018: GBP27.9 million) impacted by the unwinding of payables and
continued investment associated with the Thin Film programme.
Doug Edwards, CEO, commented:
"The increased investment in Xaar 3D positions it well for
growth and unlocks value for shareholders. Product Print Systems is
showing good growth and a strong sales pipeline. It is with
considerable reluctance that we have taken the decision to cease
all Thin Film activities in the Printhead business, but without a
strategic investment partner it becomes, by ourselves, unaffordable
to continue. This decision and the associated restructuring,
although painful, will result in a substantial improvement in
profitability and operating cashflow for the Company in the coming
year."
Contacts
Xaar plc
Doug Edwards, Chief Executive Today: +44 (0) 20-7353-4200
Officer
Shomit Kenkare, Chief Thereafter: +44 (0) 1223-423663
Financial Officer
www.xaar.com
Tulchan Communications
James Macey White
David Ison
Hollie Ralston +44 (0) 20-7353-4200
CHAIRMAN'S STATEMENT
Xaar has continued to experience trading losses in the first
half of the year, albeit with some stability in the Bulk printhead
business and good progress at EPS and 3D. We are not generating
sufficient cash to fund a development programme of the scale of our
Thin Film activities, which are still not close to commercial
levels of revenue, and I regret to report that the Board has
consequently decided to cease further investment in our Thin Film
programme. The substantial loss we have reported for the half year
under IFRS is dominated by balance sheet write-offs of the
associated capitalised R&D, plant assets and stock. The
underlying trading position is an improvement on this but remains
loss-making, so that we continue to be unable to recommend payment
of a dividend. We retain substantial cash balances in order to have
the flexibility to rebalance the Company's strategic direction and
invest behind our areas of strength.
As we reported in our trading statement on 3 July, the Bulk
printhead business has been more stable than in previous periods
and showed growth in certain segments which demonstrates the
resilience and potential in this product portfolio. We continue to
have some specific advantages in the types of ink we can jet in
Bulk piezo printheads, also in the volume of laydown we can
achieve, so we believe the product range will remain in demand and
justifies further investment to achieve growth.
At EPS, our Product Print business, revenues improved in 2019
and further progress was made across all product categories.
Xaar 3D continues to make progress towards commercial levels of
machine production supported by the partnership with Stratasys. On
12 September, we announced that Stratasys is increasing its
shareholding to 45% in this activity subject to shareholder
approval, with Xaar receiving $15.5 million of gross proceeds from
the proposed transaction, and over the next three years may acquire
the remaining shares. Meanwhile 3D remains an exciting growth area
for Xaar. If Stratasys do exercise their option to acquire the
remaining shares, we will receive a substantial cash sum, which
represents an exceptional return on the investment to date, and a
continuing return in the form of an earn-out on Stratasys sales of
Xaar 3D products to end users. The transaction remains subject to
shareholder approval at a General Meeting of the Company to be
convened following a circular to be sent to shareholders in due
course.
In our Thin Film business, since March we have engaged in a
thorough advisor-led process to identify a partner who will provide
the scale and funding that this technology requires, being the
final step in our strategic review of the printhead business.
Despite interest from a number of parties and recognition that the
technology has potential, we have not received a deliverable
proposal that either shares or acquires this activity in a way that
brings the cost of development down to a level which Xaar can
sustain within its cash flows.
In the absence of additional external investment being
available, the Board has reluctantly decided to cease Thin Film
activities and will consult with employees, customers and suppliers
to implement the restructuring and reduce the Xaar headcount
accordingly. At the same time, the headcount in the Bulk business
and general overheads will be reduced to bring the cost base down
to the level appropriate to the sales expected in the short
term.
Meanwhile, further to our announcement on 3 September, we have
written down the balance sheet carrying value of the capitalised
R&D and all other assets involved in Thin Film, by GBP39.0
million, which is the most significant loss contributor to the half
year results.
Xaar's investment in Thin Film printheads has been a lengthy and
costly venture which has brought significantly towards
commercialisation a product with a remarkable position of
technological advantage. The level of investment required for the
next few years, combined with the decline in our revenues
elsewhere, most notably in printheads for the Ceramics industry,
have given us no choice but to cease further investment in this
activity.
We will explore options to derive income from licensing the IP
we have built up. Our planned restructuring however cannot wait any
longer as our priority must be to reduce the cost base to an
appropriate level.
Without our Thin Film activities, Xaar has remaining business
units which are good performers in their sectors with a combination
of strategic and organic growth opportunities available. With a
cost base and balance sheet set at appropriate levels, the Board
looks forward to being able to deliver a more encouraging outlook
for shareholders in 2020.
Board and Governance
There have been no changes to the Board in the period, but today
we announce a succession plan and other Board changes, designed to
provide the Board composition and cost which better reflects the
activities of the Company going forward.
Employees
Our employees have once again had considerable burden placed
upon them and we thank them for their hard work and support as we
implement the restructuring.
Robin Williams
Chairman
26 September 2019
CHIEF EXECUTIVE OFFICER'S STATEMENT
Overview
Our three business unit structure has now been firmly
established as we progress to getting closer to end customers by
becoming an OEM ourselves in two out of three of our business units
and in doing so ultimately improving the sustainability and
predictability of our business. Core to our strategy has also been
to reduce our dependence upon the sale of a single printhead
product into a now largely commoditised ceramics market.
Revenue in the first half of 2019 declined by GBP12.8 million.
Excluding one-time Seiko royalties in H1 2018 and the prior years
Xaar 1201 revenue reversal in H1 2019 revenue grew by 5%.
Underlying trading in the Printhead business stabilised in the
first half (1% revenue growth after adjusting for the one-time
royalties and Xaar 1201 revenue reversal) after the decline of
2018. The Industrial and Packaging segments grew GBP1.0 million
(12%) and GBP0.7 million (8%) respectively whilst Graphics declined
by GBP5.5 million. Graphics revenue and earnings in the first half
being impacted by the revenue reversal and increased inventory
provision on our Xaar 1201 Thin Film product.
From a regional standpoint the Americas grew by GBP2.1 million
(24%) and EMEA by GBP1.2 million (11%). Asia however declined
significantly by GBP16.1 million due to a combination of one-time
royalty income in 2018 and the Xaar 1201 revenue reversal in
2019.
Our Product Print systems business revenue grew by GBP1.2
million (22%) in the first half driven by growth in inkjet and pad
printing equipment as well as consumables.
Xaar 3D Printing is proceeding to plan with strong customer
feedback for our new printer. With the significant progress made
Stratasys expressed an interest to increase its stake in the
business. As announced on 12 September Stratasys, subject to
shareholder approval, will increase its shareholding to 45% with an
incremental investment of $15.5 million, of which $7.3 million is
dedicated for Xaar 3D use. In addition Stratasys will have a call
option to acquire the remaining 55% of Xaar 3D for at least $33
million. We believe this transaction will create good value for
Xaar and Stratasys shareholders and provides the potential for more
significant value in due course.
Our strategic review of the Thin Film business has concluded
with the decision to cease all further activities and as a
consequence we have impaired all associated assets and have
embarked upon further restructuring of the Printhead business unit.
This decision results in annual recurring cost savings of around
GBP8.0 million with one-time restructuring costs expected to be in
the region of GBP2.5 million.
Business Unit Performance
Printheads
Segments
Industrials grew by 12% driven by a combination of growth in
Ceramics (9%), Décor (45%), and Advanced Manufacturing (5%).
Ceramics and Décor growth being driven largely by a 58% growth in
the Xaar 2001 printhead.
Graphics declined by GBP5.5 million largely as a result of the
Xaar 1201 revenue reversal. This relates to inventory being
returned to the business due to credit and sales channel
issues.
Packaging growth of 8% was primarily driven by a 46% growth in
Coding & Marking as volumes of the Xaar 501 new product ramped.
This Coding & Marking growth being offset by a 50% decline in
the Labels market as it transitions away from solvent to water
based inks.
Bulk Piezo
We have seen the Bulk printhead revenue stabilise in the first
half year with modest growth of 1% vs H1 2018.
The growth in the new products of Xaar 2001 (52%) and Xaar 501
(88%) being offset by declines elsewhere mainly in the Xaar 1003
(-15%) and Xaar 128 (-27%) printheads. As we stated at the end of
2018 the replacement ceramics market for which Xaar 1003 was
designed continues to experience significant pricing pressure and
has not proven as robust as we anticipated as new printer installs
have been preferred. This is reflected in the traction we have seen
in the first half for Xaar 2001 designed specifically for new
printer installs. However we do not anticipate further growth in
the second half as OEMs have the inventory they need of Xaar 2001
for their planned new printer installs in the year.
Thin Film
We have two Thin Film product offerings, Xaar 1201 and Xaar
5601, both being intimately linked by way of both utilising the
same wafer fab for the production of actuators, the core component
of the printhead. In fact the anticipated volumes of Xaar 1201
formed an important part of the early purchase commitment necessary
to secure supply of actuators for Xaar 5601.
Over the past six months we have explored a number of structural
options with third parties supported by advisors for our Thin Film
printhead business. This has not produced any viable proposals for
us to recommend to shareholders. We recognise we are some years
away from reaching meaningful scale in Thin Film and that without a
strategic investment partner our own ability to continue to fund
this activity at the required level is challenged. It is therefore
with some reluctance we have concluded our strategic review with
the decision to cease all further activities. We will continue to
seek licensing and technology transfer opportunities to enable a
smooth transition for our customers and to generate some return for
the investments made.
Product Print Systems
Revenues grew by 22% to GBP6.5 million in the first half year
with equipment growing 26% and consumables by 15%. We continue to
see this business as providing a more stable and predictable
revenue stream and aside from its own organic growth offering an
opportunity to serve this substantial market through further
acquisitions.
3D Printing
We announced our partnership agreement with Stratasys in July
2018 to jointly develop and market High Speed Sintering based 3D
printers. Xaar 3D was formed as a result of the initial agreement
in which Stratasys holds a 15% stake. Having made significant
progress over the past year Stratasys expressed an interest to
increase its stake to 45%, with an increased investment of $15.5
million. In addition Xaar will grant Stratasys a call option to
acquire all of the remaining shares of Xaar 3D to be exercised
within the next 3 years. The valuation of Xaar 3D Ltd at the time
this call option is exercised being the greater of $60 million or
two times revenues of Xaar 3D Ltd in the preceding year. We believe
that these terms represent good value for shareholders as they
allow:
-- Xaar 3D to benefit from increased financial resources with
which to accelerate its development;
-- Xaar 3D to benefit to a greater extent from Stratasys'
unrivalled knowledge of the 3D market and go-to-market expertise;
and
-- Xaar to crystallise significant value for its shareholders
while giving continued exposure to an attractive business with the
potential for further value realisation in the future.
Outlook
As outlined in our trading statement on 3 September we expect
sales in the second half of the year to be similar to those in the
first half. Underlying trading in the Printhead business has
stabilised after the declines of 2018. We are seeing good growth in
our Product Print Systems business with a strong sales pipeline. We
believe that the next phase of our partnership with Stratasys
delivers significant value for our shareholders. The decision to
stop all further investment in Thin Film activities results in the
significant impairment of associated assets and a necessary
simplification of the Printhead business unit structure. The
removal of GBP7.4 million of one-time Xaar 1201 related items and
the expected annual cost savings of around GBP8.0 million, will
result in a substantial improvement in profitability for the coming
year. These actions with the additional 3D investment will also
enhance the cash position of the Company.
Doug Edwards
Chief Executive Officer
26 September 2019
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 loss 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 2018 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
Shomit Kenkare
Chief Financial Officer
26 September 2019
CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE SIX MONTHSED 30 JUNE 2019
Six months Six months Twelve months
ended ended ended
30 June 2019 30 June 2018 31 December
2018
(unaudited) (unaudited) (restated -
note 11, audited)
Notes GBP'000 GBP'000 GBP'000
-------------------------------------- ------ ------------- ------------- -------------------
Revenue 3 22,526 35,329 63,534
Cost of sales (25,119) (16,251) (39,085)
-------------------------------------- ------ ------------- ------------- -------------------
Gross (loss)/profit (2,593) 19,078 24,449
Research and development expenses (4,315) (8,454) (14,682)
Research and development expenditure
credit 1,983 649 1,737
Sales and marketing expenses (4,532) (4,324) (9,071)
General and administration
expenses (3,868) (3,693) (7,512)
Impairment (losses)/gains on
financial assets (81) 185 (4,681)
Restructuring and investment
income/(expenses) 2 108 (4,636) (5,804)
Thin Film impairment 9 (39,013) - -
-------------------------------------- ------ ------------- ------------- -------------------
Operating loss (52,311) (1,196) (15,564)
Investment income 58 98 170
Finance costs (46) - -
Loss before tax (52,299) (1,098) (15,394)
Tax 4 2,426 178 2,589
-------------------------------------- ------ ------------- ------------- -------------------
Loss for the period (49,873) (920) (12,805)
-------------------------------------- ------ ------------- ------------- -------------------
Attributable to:
Owners of the Company (49,813) (920) (12,673)
Non-controlling interest (60) - (132)
-------------------------------------- ------ ------------- ------------- -------------------
Loss for the period (49,873) (920) (12,805)
-------------------------------------- ------ ------------- ------------- -------------------
Earnings per share
Basic 5 (64.6p) (1.2p) (16.5p)
Diluted 5 (64.6p) (1.2p) (16.5p)
-------------------------------------- ------ ------------- ------------- -------------------
No dividends were paid in the period. Dividends paid in the six months
to 30 June 2018 amounted to GBP5,238,000 or 6.8p per share 2017 final
dividend (twelve months to 31 December 2018: GBP6,009,000 or 7.8p per
share being 6.8p per share 2017 final dividend and 1.0p per share 2018
interim dividend).
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHSED 30 JUNE 2019
Six months Six months Twelve months
ended ended ended
30 June 2019 30 June 2018 31 December
2018
(unaudited) (unaudited) (restated -
note 11, audited)
GBP'000 GBP'000 GBP'000
----------------------------------------------- ------------- ------------- -------------------
Loss for the period attributable
to shareholders (49,873) (920) (12,805)
----------------------------------------------- ------------- ------------- -------------------
Exchange differences on translation
of net investment (32) 63 202
Tax benefit on share option and restructuring
gains - - (41)
----------------------------------------------- -------------
Other comprehensive (loss)/income
for the period (32) 63 161
----------------------------------------------- ------------- ------------- -------------------
Total comprehensive loss for the
period (49,905) (857) (12,644)
----------------------------------------------- ------------- ------------- -------------------
Total comprehensive loss attributable
to:
Owners of the Company (49,820) (857) (12,510)
Non-controlling interest (85) - (134)
----------------------------------------------- ------------- ------------- -------------------
(49,905) (857) (12,644)
----------------------------------------------- ------------- ------------- -------------------
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2019
As at As at
30 June 2019 31 December
2018
(unaudited) (restated
- note 11,
audited)
Notes GBP'000 GBP'000
------------------------------------ ------- ------------- ------------
Non-current assets
Goodwill 5,538 5,522
Other intangible assets 4,449 32,796
Property, plant and equipment 24,078 28,044
Deferred tax asset 349 -
------- ------------- ------------
34,414 66,362
------------------------------------ ------- ------------- ------------
Current assets
Inventories 22,873 32,142
Trade and other receivables 13,985 21,398
Current tax asset 2,815 5,142
Treasury deposits 3,292 3,277
Cash and cash equivalents 18,288 24,669
------------- ------------
61,253 86,628
------------------------------------ ------- ------------- ------------
Total assets 95,667 152,990
------------------------------------ ------- ------------- ------------
Current liabilities
Trade and other payables (8,505) (18,958)
Lease liabilities 1 (902) -
Other financial liabilities - (33)
Provisions (1,507) (499)
Derivative financial instruments 8 (957) (1,260)
------------------------------------
(11,871) (20,750)
------------------------------------ ------- ------------- ------------
Net current assets 49,382 65,878
------------------------------------ ------- ------------- ------------
Non-current liabilities
Deferred tax liabilities (147) (870)
Lease liabilities 1 (1,909) -
Other financial liabilities - (103)
------------------------------------ ------- ------------- ------------
Total non-current liabilities (2,056) (973)
------------------------------------ ------- ------------- ------------
Total liabilities (13,927) (21,723)
------------------------------------ ------- ------------- ------------
Net assets 81,740 131,267
------------------------------------ ------- ------------- ------------
Equity
Share capital 7,833 7,833
Share premium 29,328 29,328
Own shares (2,902) (3,113)
Other reserves 15,693 15,144
Translation reserve 810 817
Retained earnings 29,097 79,278
------------------------------------ ------- ------------- ------------
Equity attributable to owners
of the Company 79,859 129,287
------------------------------------ ------- ------------- ------------
Non-controlling interest 1,881 1,980
------------------------------------ ------- ------------- ------------
Total equity 81,740 131,267
------------------------------------ ------- ------------- ------------
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHSED 30 JUNE 2019
Share Share Own Other Translation Retained Non-controlling Total
capital premium shares reserves reserve earnings Total interest equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------------- -------- -------- -------- --------- ------------ --------- ---------------- ------------------ ---------
Balances at 31 December 2018 as previously
reported 7,833 29,328 (3,113) 15,144 817 79,675 129,684 2,200 131,884
-------------------------------------------- -------- -------- -------- --------- ------------ --------- ---------------- ------------------ ---------
Prior period adjustment (note 11) - - - - - (397) (397) (220) (617)
-------------------------------------------- -------- -------- -------- --------- ------------ --------- ---------------- ------------------ ---------
Balances at 31 December 2018 restated 7,833 29,328 (3,113) 15,144 817 79,278 129,287 1,980 131,267
-------------------------------------------- -------- -------- -------- --------- ------------ --------- ---------------- ------------------ ---------
Effect of initial application of IFRS
16 (note 1) - - - - - (157) (157) (14) (171)
-------------------------------------------- -------- -------- -------- --------- ------------ --------- ---------------- ------------------ ---------
Balances at 1 January 2019 restated
for IFRS 16 7,833 29,328 (3,113) 15,144 817 79,121 129,130 1,966 131,096
-------------------------------------------- -------- -------- -------- --------- ------------ --------- ---------------- ------------------ ---------
Loss for the period - - - - - (49,813) (49,813) (60) (49,873)
Exchange differences on retranslation
of net investment - - - - (7) - (7) (25) (32)
Total comprehensive income for the
period - - - - (7) (49,813) (49,820) (85) (49,905)
-------------------------------------------- -------- -------- -------- --------- ------------ --------- ---------------- ------------------ ---------
Own shares sold in the period - - 211 - - (211) - - -
Credit to equity for equity-settled
share-based payments - - - 549 - - 549 - 549
Balance at 30 June 2019 7,833 29,328 (2,902) 15,693 810 29,097 79,859 1,881 81,740
-------------------------------------------- -------- -------- -------- --------- ------------ --------- ---------------- ------------------ ---------
Balances at 1 January 2018 7,833 29,317 (3,642) 14,638 613 98,425 147,184 - 147,184
-------------------------------------------- -------- -------- -------- --------- ------------ --------- ---------------- ------------------ ---------
Loss for the period - - - - - (920) (920) - (920)
Exchange differences on retranslation
of net investment - - - - 63 - 63 - 63
Total comprehensive income for the
period - - - - 63 (920) (857) - (857)
-------------------------------------------- -------- -------- -------- --------- ------------ --------- ---------------- ------------------ ---------
Issue of share capital - 11 - - - - 11 - 11
Own shares sold in the period - - 344 - - (238) 106 - 106
Dividends (note 6) - - - - - (5,238) (5,238) - (5,238)
Tax on share options - - - - - (13) (13) - (13)
Credit to equity for equity-settled
share-based payments - - - 789 - - 789 - 789
Balance at 30 June 2018 7,833 29,328 (3,298) 15,427 676 92,016 141,982 - 141,982
-------------------------------------------- -------- -------- -------- --------- ------------ --------- ---------------- ------------------ ---------
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
FOR THE SIX MONTHSED 30 JUNE 2019
Six months Six months Twelve months
ended ended ended
30 June 2019 30 June 2018 31 December
2018
(unaudited) (unaudited) (restated -
note 11, audited)
Note GBP'000 GBP'000 GBP'000
------------------------------------------- ----- ------------- ------------- -------------------
Net cash from operating activities 7 (3,886) 167 (9,862)
------------------------------------------- ----- ------------- ------------- -------------------
Investing activities
Investment income 57 100 171
Movement in treasury deposits (15) (4,031) (2,524)
Purchases of property, plant and
equipment (817) (2,340) (2,790)
Proceeds on disposal of property,
plant and equipment - - 584
Expenditure on software (10) (17) (160)
Expenditure on licence - - (177)
Expenditure on capitalised product
development (1,118) (902) (1,915)
------------------------------------------- ----- ------------- ------------- -------------------
Net cash used in investing activities (1,903) (7,190) (6,811)
------------------------------------------- ----- ------------- ------------- -------------------
Financing activities
Dividends paid 6 - (5,238) (6,009)
Repayments of principal under lease (590) - -
liabilities
Proceeds from issue of financial
instrument - - 902
Income from non-controlling interest - - 2,115
Proceeds from the sale of ordinary
share capital - 106 105
Proceeds from issue of ordinary share
capital - 11 11
-------------------
Net cash used in financing activities (590) (5,121) (2,876)
------------------------------------------- ----- ------------- ------------- -------------------
Net decrease in cash and cash equivalents (6,379) (12,144) (19,549)
Effect of foreign exchange rate changes (2) 169 274
Cash and cash equivalents at beginning
of period 24,669 43,944 43,944
------------------------------------------- ----- ------------- ------------- -------------------
Cash and cash equivalents at end
of period 18,288 31,969 24,669
------------------------------------------- ----- ------------- ------------- -------------------
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 2019
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 2018 on pages 91 to 99
(available at www.xaar.com) and were approved by the Board of
Directors on 26 September 2019. The interim financial statements
for the six months ended 30 June 2019 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 2018.
The financial information in these interim financial statements
for the six months ended 30 June 2019, 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 2018 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 Ernst & Young 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 2018, with the
exception of IFRS 16 which was adopted in the 2019 half year
period, with the accounting policy included later in this note.
Risks and uncertainties
An outline of the key risks and uncertainties faced by the Group
is detailed on pages 29 to 33 of the Xaar plc Annual Report and
Financial Statements 2018. Risk is an inherent part of doing
business and the strong cash position of the Group leads the
Directors to believe that the Group is well placed to manage
business risks successfully.
Brexit and other trade barriers
The Group operates globally and may be affected by Brexit
developments, which could provide a number of challenges for Xaar.
The Group is continuously monitoring events and putting mitigating
actions in place. As previously disclosed, one of the greatest
challenges continues to be concerning EU workers and migration.
Trading with our EU customers could be more complex. Any actual or
perceived barriers to free trade are an obvious area of concern for
us. As a result of Brexit, the Group is exposed to potential
currency fluctuations, although not significant. Brexit and trade
barriers continue to be an integral part of the Group's ongoing
risk management and review process, for which solutions to address
the risks identified are explored and implemented. Although there
is still uncertainty surrounding the outcome of Brexit, we do not
expect the direct consequences of Brexit to have a material impact
on the Group.
Going concern
The Group's forecasts and projections, taking account of the
disappointing financial results of the first half of 2019 and
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.
Changes to reportable segments
Following changes to the structure of the Group's internal
organisation and subsequent changes in the way in which financial
and management information is presented to both the Board and the
Executive Team, the composition of the Group's reportable segments
changed in the year ended 31 December 2018.
The changes to the Group's organisational structure has followed
the acquisition of EPS and the investment in 3D printing solutions.
The activities of the Group are managed in three distinct business
units with a more focused approach. As a result of these changes,
activities are now reported under three new operating segments,
'Printhead', 'Product Print Systems' and '3D Printing'.
The changes to reported segments can be summarised as
follows:
The segment disclosure note for the six months ended 30 June
2018 has been amended as follows:
Six months ended
30 June 2018
As reported Adjustment Restated
GBP'000 GBP'000 GBP'000
----------------------- ------------ ----------- ---------
Revenue
Printhead 29,983 (33) 29,950
Product Print Systems 5,346 - 5,346
3D Printing - 33 33
Total revenue 35,329 - 35,329
----------------------- ------------ ----------- ---------
Result
Printhead (541) 17 (524)
Product Print Systems 1 - 1
3D Printing - (17) (17)
Total segment result (540) - (540)
----------------------- ------------ ----------- ---------
Changes in accounting policies - IFRS 16
In the current year, the Group, for the first time, has applied
IFRS 16 Leases. The date of initial application of IFRS 16 for the
Group is 1 January 2019.
IFRS 16 introduces new or amended requirements with respect to
lease accounting. It introduces significant changes to the lessee
accounting by removing the distinction between operating and
finance lease, requiring the recognition of a right-of-use asset
and a lease liability at commencement for all leases, except for
short-term leases and leases of low value assets. In contrast to
lessee accounting, the requirements for lessor accounting have
remained largely unchanged.
The Group is not party to any material leases where it acts as a
lessor, but the Group does have a large number of material property
and equipment leases.
Details of the Group's accounting policies under IFRS 16 are set
out below, followed by a description of the impact of adopting IFRS
16. Significant judgements applied in the adoption of IFRS 16
included determining the lease term for those leases with
termination or extension options and determining an incremental
borrowing rate where the rate implicit in a lease could not be
readily determined.
Accounting policies under IFRS 16 Leases
The Group assesses whether a contract is or contains a lease, at
inception of the contract. The Group recognises a right-of-use
asset and a corresponding lease liability with respect to all lease
arrangements in which it is the lessee, except for short-term
leases (defined as leases with a lease term of 12 months or less)
and leases of low value assets. For these leases, the Group
recognizes the lease payments as an operating expense on a
straight-line basis over the term of the lease unless another
systematic basis is more representative of the time pattern in
which economic benefits from the leased assets are consumed.
The lease liability is initially measured at the present value
of the lease payments that are not paid at the commencement date,
discounted by using the rate implicit in the lease. If this rate
cannot be readily determined, the Group uses its incremental
borrowing rate.
Lease payments included in the measurement of the lease
liability comprise:
-- fixed lease payments (including in substance fixed payments), less any lease incentives;
-- variable lease payments that depend on an index or rate,
initially measured using the index or rate at the commencement
date;
-- the amount expected to be payable by the lessee under residual value guarantees;
-- the exercise price of purchase options, if the lessee is
reasonably certain to exercise the options;
-- payments of penalties for terminating the lease, if the lease
term reflects the exercise of an option to terminate the lease.
The lease liability is presented as a separate line in the
consolidated statement of financial position.
The lease liability is subsequently measured by increasing the
carrying amount to reflect interest on the lease liability (using
the effective interest method) and by reducing the carrying amount
to reflect the lease payments made.
The Group re-measures the lease liability (and makes a
corresponding adjustment to the related right-of-use asset)
whenever:
- the lease term has changed or there is a change in the
assessment of exercise of a purchase option, in which case the
lease liability is re-measured by discounting the revised lease
payments using a revised discount rate;
- the lease payments change due to changes in an index or rate
or a change in expected payment under a guaranteed residual value,
in which cases the lease liability is re-measured by discounting
the revised lease payments using the initial discount rate (unless
the lease payments change is due to a change in a floating interest
rate, in which case a revised discount rate is used);
- a lease contract is modified and the lease modification is not
accounted for as a separate lease, in which case the lease
liability is re-measured by discounting the revised lease payments
using a revised discount rate.
The Group did not make any such adjustments during the periods
presented.
The right-of-use assets comprise the initial measurement of the
corresponding lease liability, lease payments made at or before the
commencement day and any initial direct costs. They are
subsequently measured at cost less accumulated depreciation and
impairment losses.
Whenever the Group incurs an obligation for costs to dismantle
and remove a leased asset, restore the site on which it is located
or restore the underlying asset to the condition required by the
terms and conditions of the lease, a provision is recognised and
measured under IAS 37. The costs are included in the related
right-of-use asset, unless those costs are incurred to produce
inventories.
Right-of-use assets are depreciated over the shorter period of
lease term and useful life of the underlying asset. If a lease
transfers ownership of the underlying asset or the cost of the
right-of-use asset reflects that the Group expects to exercise a
purchase option, the related right-of-use asset is depreciated over
the useful life of the underlying asset. The depreciation starts at
the commencement date of the lease. The Group does not have any
leases that transfer ownership of the underlying asset. The Group
does not have any leases with a purchase option where there is a
reasonable expectation that the option will be exercised.
The right-of-use assets are presented within the same line item
as that within which the corresponding underlying assets would be
presented if they were owned - for the Group this is property,
plant and equipment.
Variable rents that do not depend on an index or rate are not
included in the measurement of the lease liability and the
right-of-use asset. The related payments are recognised as an
expense in the period in which the event or condition that triggers
those payments occurs and are included in the line income
statement.
For short-term leases (lease term of 12 months or less) and
leases of low-value assets (such as personal computers and office
furniture), the Group has opted to recognise a lease expense on a
straight-line basis as permitted by IFRS 16. This expense is
presented within the consolidated income statement.
Approach to transition
The Group has applied IFRS 16 using the modified retrospective
approach, without restatement of the comparative information. In
respect of those leases the Group previously treated as operating
leases, the Group has elected to measure its right of use assets
arising from property leases using the approach set out in IFRS
16.C8(b)(i). Under IFRS 16.C8(b)(i) right of use assets are
calculated as if the Standard applied at lease commencement, but
discounted using the borrowing rate at the date of initial
application.
The Group's weighted average incremental borrowing rate applied
to lease liabilities as at 1 January 2019 is 3%.
Practical expedients adopted on transition
The Group has made use of the practical expedient available on
transition to IFRS 16 not to reassess whether a contract is or
contains a lease. Accordingly, the definition of a lease in
accordance with IAS 17 and IFRIC 4 will continue to be applied to
those leases entered into or modified before 1 January 2019.
As part of the Group's adoption of IFRS 16 and application of
the modified retrospective approach to transition, the Group also
elected to use the following practical expedients:
- a single discount rate has been applied to portfolios of
leases with reasonably similar characteristics;
- right-of-use assets have been adjusted by the carrying amount
of onerous lease provisions at 31 December 2018 instead of
performing impairment reviews under IAS 36;
- exclusion of initial direct costs from the measurement of the
right-of-use asset at the date of initial application;
- non-lease components have not been separated from lease
components, and instead both components have been treated as a
single component for the purpose of accounting under IFRS 16;
and
- hindsight has been used in determining the lease term.
Impact on lessee accounting
Former operating leases
IFRS 16 changes how the Group accounts for leases previously
classified as operating leases under IAS 17, which were off-balance
sheet.
Applying IFRS 16, for all leases (except as noted above), the
Group now recognises right-of-use assets and lease liabilities in
the consolidated balance sheet, initially measured at the present
value of the future lease payments as described above.
Lease incentives (e.g. rent free periods) are recognised as part
of the measurement of the right-of-use assets and lease liabilities
whereas under IAS 17 they resulted in the recognition of a lease
incentive liability, amortised as a reduction of rental expenses on
a straight line basis.
Under IFRS 16, right-of-use assets will be tested for impairment
in accordance with IAS 36 Impairment of Assets. This replaces the
previous requirement to recognise a provision for onerous lease
contracts.
Under IFRS 16 the Group recognises depreciation of right-of-use
assets and interest on lease liabilities in the consolidated income
statement, whereas under IAS 17 operating leases previously gave
rise to a straight-line expense in other operating expenses.
Under IFRS 16 the Group separates the total amount of cash paid
for leases that are on balance sheet into a principal portion
(presented within financing activities) and interest (presented
within operating activities) in the consolidated cash flow
statement. Under IAS 17 operating lease payments were presented as
operating cash outflows.
Former finance leases
The main differences between IFRS 16 and IAS 17 with respect to
assets formerly held under a finance lease is the measurement of
the residual value guarantees provided by the lessee to the lessor.
IFRS 16 requires that the Group recognises as part of its lease
liability only the amount expected to be payable under a residual
value guarantee, rather than the maximum amount guaranteed as
required by IAS 17. This change did not have a material effect on
the Group's consolidated financial statements.
Financial impact
The application of IFRS 16 to leases previously classified as
operating leases under IAS 17 resulted in the recognition of
right-of-use assets and lease liabilities. Provisions for onerous
lease contracts have been derecognized and operating lease
incentives previously recognised as liabilities have been
de-recognised and factored into the measurement of the right-to-use
assets and lease liabilities.
The Group has chosen to use the table below to set out the
adjustments recognised at the date of initial application of IFRS
16.
As previously reported
or restated (note As restated
11) as at 31 December Impact of IFRS at 1 January
2018 16 2019
GBP'000 GBP'000 GBP'000
Non-current assets
Property, plant and
equipment 28,044 2,866 30,910
Current assets
Trade and other
assets 21,398 (19) 21,379
---------
Total impact on assets 2,847
=========
Current liabilities
Trade and other payables (18,958) 281 (18,677)
Lease liabilities - (1,000) (1,000)
Non-current liabilities
Lease liabilities - (2,383) (2,383)
Deferred tax
liabilities (870) 85 (785)
---------
Total impact on liabilities (3,017)
=========
Equity
Retained earnings 79,278 (157) 79,121
Non-controlling
interest 1,980 (14) 1,966
---------
(171)
=========
Of the total right-of-use assets of GBP2.87 million recognised
at 1 January 2019, GBP2.77 million related to leases of property
and GBP0.1 million to leases of machinery.
The table below presents a reconciliation from operating lease
commitments disclosed at 31 December 2018 to lease liabilities
recognised at 1 January 2019.
GBP'000
Operating lease commitments disclosed under IAS 17
at 31 December 2018 3,148
Short-term and low value lease commitments straight-line
expensed under IFRS 16 (4)
Effect of discounting (447)
Payments due in periods covered by extension options that
are included in the lease term 599
Other adjustments on transition 87
Lease liabilities recognised at
1 January 2019 3,383
========
In terms of the income statement impact, the application of IFRS
16 resulted in a decrease in other operating expenses and an
increase in depreciation and interest expense compared to IAS 17.
During the six months ended 30 June 2019, in relation to leases
under IFRS 16 the Group recognised the following amounts in the
consolidated income statement:
GBP'000
Depreciation 482
Interest expense 46
Short-term lease
expense 33
2. Reconciliation of adjusted financial measures
Six months Six months Twelve months
ended ended ended
30 June 2019 30 June 2018 31 December
2018
(unaudited) (unaudited) (restated -
note 11, audited)
GBP'000 GBP'000 GBP'000
-------------------------------------- ------------- ------------- -------------------
Loss before tax (52,299) (1,098) (15,394
-------------------------------------- ------------- ------------- -------------------
Share-based payment charges 425 656 235
Exchange differences relating
to intra-group transactions (71) (377) (629)
Gain on derivative financial - (1) -
instruments
Restructuring and investment
(income)/expenses (108) 4,636 5,804
Thin Film impairment 39,013 - -
Research and development expenditure
credit (1,983) (649) (1,737)
Adjusted (loss)/profit before
tax (15,023) 3,167 (11,721)
-------------------------------------- ------------- ------------- -------------------
Share-based payment charges include the IFRS 2 charge for the
period of GBP549,000 (H1 2018: GBP789,000) and the credit relating
to National Insurance on the outstanding potential share option
gains of GBP124,000 (H1 2018: charge of GBP133,000). These costs
were included in the general and administrative expenses in the
Consolidated income statement.
Exchange differences relating to the United States, Danish and
Swedish operations represent exchange gains or losses recorded in
the consolidated income statement as a result of operating in the
United States, Denmark and Sweden. These costs were included in
general and administrative expenses in the Consolidated income
statement.
Gain on derivative financial instruments related to gains and
losses made on forward contracts in 2018. These gains were included
in the general and administrative expenses in the Consolidated
income statement.
Restructuring and investment income of GBP108,000 in H1 2019
relates to costs incurred and provisions made in relation to a
reorganisation, the closure of the manufacturing facility in Sweden
in 2016, and investment related expenditure. Restructuring and
investment expenses in H1 2018 of GBP4,636,000 related mainly to
the impairment of fixed assets of GBP3,126,000, to write down
assets to their recoverable amount following an impairment review
and testing performed as required by IAS 36. The remainder relates
to costs incurred and provisions made in relation to a
reorganisation, the closure of the manufacturing facility in Sweden
in 2016, and investment related expenditure.
The Thin Film impairment charge of GBP39,013,000 has been
recognised following the conclusion of the strategic review of the
Thin Film business, with GBP28,494,000 relating to the intangible
asset, GBP5,416,000 relating to property, plant and equipment, and
GBP5,103,000 relating to working capital balances.
The research and development expenditure credit relates to the
corporation tax relief receivable relating to qualifying research
and development expenditure that had been recognised in deferred
income relating to Thin Film. This has been released to the income
statement in H1 2019 at the same time that the intangible asset has
been impaired. This item is shown on the face of the Consolidated
income statement.
Six months ended Six months Twelve months
ended ended
30 June 2019 30 June 2018 31 December
2018
(unaudited) (unaudited) (restated -
note 11, audited)
Pence per share Pence per Pence per share
share
---------------------------------- ----------------- ------------- -------------------
Diluted earnings per share (64.6p) (1.2p) (16.5p)
---------------------------------- ----------------- ------------- -------------------
Share-based payment charges 0.5p 0.9p 0.3p
Exchange differences relating
to the intra-group transactions (0.1p) (0.5p) (0.8p)
Gain on derivative financial - - -
instruments
Restructuring and investment
(income)/expenses (0.2p) 5.9p 7.4p
Thin Film impairment 50.6p - -
Tax effect of adjusting items (2.4p) (0.5p) (0.1p)
---------------------------------- ----------------- ------------- -------------------
Adjusted diluted earnings per
share (16.2p) 4.6p (9.7p)
---------------------------------- ----------------- ------------- -------------------
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
analysed according to the three operating segments of 'printheads',
'product print systems' and '3D'. 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.
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 2019 30 June 2018 31 December
2018
(unaudited) (restated (restated -
- note 1, note 11, audited)
unaudited)
GBP'000 GBP'000 GBP'000
------------------------------------ ------------- ------------- -------------------
Revenue
Printhead 15,981 29,950 49,775
Product Print Systems 6,538 5,346 13,658
3D Printing 7 33 101
Total revenue 22,526 35,329 63,534
------------------------------------ ------------- ------------- -------------------
Result
Printhead (51,698) (524) (13,853)
Product Print Systems (69) 1 (576)
3D Printing (119) (17) (900)
Total segment result (51,886) (540) (15,329)
Net unallocated corporate expenses (425) (656) (235)
------------------------------------ ------------- ------------- -------------------
Operating loss (52,311) (1,196) (15,564)
------------------------------------ ------------- ------------- -------------------
Investment income 58 98 170
Finance costs (46) - -
Loss before tax (52,299) (1,098) (15,394)
Tax 2,426 178 2,589
------------------------------------ ------------- ------------- -------------------
Loss for the period (49,873) (920) (12,805)
------------------------------------ ------------- ------------- -------------------
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.
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 2019 30 June 2018 31 December
2018
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
-------------------------------------- ------------- ------------- --------------
Current income tax
Income tax (credit)/charge (1,439) 389 489
Deferred income tax
Relating to origination and reversal
of temporary differences (987) (567) (3,078)
-------------------------------------- ------------- ------------- --------------
Income tax credit (2,426) (178) (2,589)
-------------------------------------- ------------- ------------- --------------
The current income tax credit of GBP1,439,000 for the six months
ended 30 June 2019 includes a surrender of qualifying R&D
losses, as allowable under the HMRC Small or medium-sized
enterprise (SME) R&D tax relief scheme. In 2018, eligible UK
Xaar companies claimed the R&D Expenditure Credit (RDEC), where
the R&D credit receivable is included in operating loss.
The deferred income tax credit of GBP987,000 for the six months
ended 30 June 2019 includes the de-recognition of deferred tax
liabilities relating to the Thin Film impairment and
non-recognition of deferred tax assets relating to tax losses
within the Printhead business unit. Whilst the Board believes in
the long term potential and profitability of the Printhead business
unit, the forecast losses over the next couple of years mean that
the tax losses will not be utilised in the short term. Therefore
the Printhead business unit deferred tax asset brought forward has
been derecognised and no deferred tax asset has been recognised
relating to losses for 2019.
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 2019 30 June 2018 31 December
2018
(unaudited) (unaudited) (restated -
note 11, audited)
GBP'000 GBP'000 GBP'000
------------------------------------- ------------- ------------- -------------------
Earnings
Earnings for the purposes of
earnings per share being net
loss attributable to equity
holders of the parent (49,813) (920) (12,673)
------------------------------------- ------------- ------------- -------------------
Number of shares
Weighted average number of ordinary
shares for the purposes of basic
earnings per share 77,070,748 76,891,906 76,957,142
Effect of dilutive potential
ordinary shares:
Share options - - -
------------------------------------- ------------- ------------- -------------------
Weighted average number of ordinary
shares for the purposes of diluted
earnings per share 77,070,748 76,891,906 76,957,142
------------------------------------- ------------- ------------- -------------------
6. Dividends
Six months Six months Twelve months
ended ended ended
30 June 2019 30 June 2018 31 December
2018
(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 2017 6.8p per share - 5,238 5,238
Interim dividend for the year
ended 31 December 2018 of 1.0p
per share - - 771
------------------------------------- -------------- ------------- --------------
Total distributions to equity
holders in the period - 5,238 6,009
------------------------------------- -------------- ------------- --------------
The Board has not recommended an interim dividend for 2019
(2018: 1.0 pence per share).
7. Notes to the cash flow statement
Six months Six months Twelve months
ended ended ended
30 June 2019 30 June 2018 31 December
2018
(unaudited) (unaudited) (restated -
note 11, audited)
GBP'000 GBP'000 GBP'000
---------------------------------------- ------------- ------------- -------------------
Loss before tax (52,299) (1,098) (15,394)
Adjustments for:
Thin Film impairment 39,013 - -
Share-based payments 425 656 235
Depreciation of property, plant
and equipment 2,487 2,613 4,725
Impairment of fixed assets - 3,126 3,258
Amortisation of intangible assets 887 1,061 2,139
Research and development expenditure
credit (1,983) (649) (1,737)
Investment income (58) (98) (170)
Finance cost 46 - -
Foreign exchange gains (65) (161) (689)
Other (gains)/losses (304) - 357
(Profit)/loss on disposal of property,
plant and equipment (15) 33 (3)
Decrease in provisions (173) (884) (1,383)
---------------------------------------- ------------- ------------- -------------------
Operating cash flows before movements
in working capital (12,039) 4,599 (8,662)
Decrease/(increase) in inventories 6,524 (10,791) (12,817)
Decrease in receivables 6,254 4,138 9,364
(Decrease)/increase in payables (8,307) 2,680 2,724
---------------------------------------- ------------- ------------- -------------------
Cash (used in)/generated by operations (7,568) 626 (9,391)
Income taxes refunded/(paid) 3,728 (459) (471)
Interest paid (46) - -
---------------------------------------- ------------- ------------- -------------------
Net cash from operating activities (3,886) 167 (9,862)
---------------------------------------- ------------- ------------- -------------------
8. Derivative financial instruments
Fair value of the Group's financial assets and financial
liabilities that are measured at fair value on a recurring
basis:
Some of the Group's financial assets and financial liabilities
are measured at fair value at the end of each reporting period. The
following table gives information about how the fair value of these
financial assets and financial liabilities are determined (in
particular, the valuation technique(s) and inputs used).
Financial asset/ Valuation technique(s) Significant unobservable Relationship and
financial liabilities and key input(s) input(s) sensitivity of
unobservable inputs
to fair value
Derivative financial Black-Scholes model Share price of n/a
instrument (Level The following variables Xaar 3D Ltd - unobservable
3) were taken into as not publicly
consideration: traded shares
current underlying
price of the commodity,
options strike
price, time until
expiration (expressed
as a percent of
a year), implied
volatility of the
commodity and LIBOR.
There were no transfers between Level 1 and 2 during the current
or prior year.
Reconciliation of Level 3 fair value measurements of financial
instruments:
The only financial instrument measured subsequently at fair
value on Level 3 fair value measurement represents a derivative
financial instrument issued to the non-controlling interest
relating to the 3D business.
GBP'000
------------------------------------------------ --------
Balance at 1 January 2019 (restated - note 11) 1,260
Total gains or losses:
- in profit or loss (303)
------------------------------------------------ --------
Balance at 30 June 2019 957
------------------------------------------------ --------
9. Thin Film impairment
Our strategic review of the Thin Film business has concluded
with the decision to cease all further activities, and as a
consequence we have impaired all associated assets to their net
realisable value. An impairment charge of GBP39,013,000 has been
recognised as at 30 June 2019, with GBP28,494,000 relating to the
intangible asset, GBP5,416,000 relating to property, plant and
equipment, and GBP5,103,000 relating to working capital balances,
where the recoverable amounts have been established in accordance
with IAS 36.
10. Events after the balance sheet date
On 12 September 2019, the Group announced a significant
strategic development for Xaar 3D Limited. Xaar has entered into an
agreement, subject to shareholder approval, with Stratasys, Ltd.
(Stratasys), its partner in Xaar 3D, to sell 20% of Xaar's holding
in Xaar 3D to Stratasys for US$10 million and issue Stratasys a
call option to acquire the remaining 55% of Xaar 3D not held by
Stratasys for at least US$33 million, which is exercisable at any
time within three years from closing.
Our strategic review of the Thin Film business has now concluded
with the decision to cease all further activities. As a consequence
we are now embarking upon a restructuring of the Printhead business
unit subject to employee consultation. Restructuring costs are
expected to be in the region of GBP2.5 million.
11. Restatement of prior period
The financial statements include a prior period restatement in
relation to the recognition of the derivative financial instrument
issued to the non-controlling interest relating to the 3D business.
The adjustment relates to a correction to the fair value of the
option granted to the non-controlling interest in Xaar 3D Limited
at both the inception date and prior year end. For full details of
the terms of the option please refer to the 2018 Annual Report and
Accounts.
There is no impact to the six month period ended 30 June 2018.
The following tables summarise the impact of the prior period
restatement on the financial statements of the Group for the twelve
month period ended 31 December 2018:
Twelve months ended
31 December 2018
As reported Adjustment Restated
GBP'000 GBP'000 GBP'000
CONSOLIDATED INCOME STATEMENT
Restructuring and investment expenses (5,337) (467) (5,804)
--------------------------------------------- ------------ ----------- ----------
Operating loss (15,097) (467) (15,564)
--------------------------------------------- ------------ ----------- ----------
Loss before tax (14,927) (467) (15,394)
--------------------------------------------- ------------ ----------- ----------
Loss for the year (12,338) (467) (12,805)
--------------------------------------------- ------------ ----------- ----------
Attributable to:
Owners of the Company (12,276) (397) (12,673)
Non-controlling interests (62) (70) (132)
--------------------------------------------- ------------ ----------- ----------
(12,338) (467) (12,805)
--------------------------------------------- ------------ ----------- ----------
Earnings per share
Basic (16.0p) (0.5p) (16.5p)
Diluted (16.0p) (0.5p) (16.5p)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Loss for the year (12,338) (467) (12,805)
--------------------------------------------- ------------ ----------- ----------
Total comprehensive loss for the year (12,177) (467) (12,644)
--------------------------------------------- ------------ ----------- ----------
Attributable to:
Owners of the Company (12,113) (397) (12,510)
Non-controlling interests (64) (70) (134)
--------------------------------------------- ------------ ----------- ----------
(12,177) (467) (12,644)
--------------------------------------------- ------------ ----------- ----------
As at
31 December 2018
As reported Adjustment Restated
GBP'000 GBP'000 GBP'000
CONSOLIDATED STATEMENT OF FINANCIAL
POSITION
Current liabilities
Derivative financial instruments (643) (617) (1,260)
--------------------------------------------- ------------ ----------- ----------
Equity
Retained earnings 79,675 (397) 79,278
--------------------------------------------- ------------ ----------- ----------
Equity attributable to owners of the
company 129,684 (397) 129,287
--------------------------------------------- ------------ ----------- ----------
Non-controlling interests 2,200 (220) 1,980
--------------------------------------------- ------------ ----------- ----------
Total equity 131,884 (617) 131,267
--------------------------------------------- ------------ ----------- ----------
Twelve months ended
31 December 2018
As reported Adjustment Restated
GBP'000 GBP'000 GBP'000
CONSOLIDATED CASH FLOW STATEMENT
Proceeds from issue of financial instrument 753 149 902
Income from non-controlling interest 2,264 (149) 2,115
--------------------------------------------- ------------ ----------- ----------
12. Date of approval of interim financial statements
The interim financial statements cover the period 1 January 2019
to 30 June 2019 and were approved by the Board on 26 September
2019.
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 2019
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 2019 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
12. 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 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 2019 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.
Ernst & Young LLP
Statutory Auditor
Cambridge, United Kingdom
26 September 2019
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR PGURCBUPBPPA
(END) Dow Jones Newswires
September 26, 2019 02:02 ET (06:02 GMT)
Xaar (LSE:XAR)
Historical Stock Chart
From Sep 2024 to Oct 2024
Xaar (LSE:XAR)
Historical Stock Chart
From Oct 2023 to Oct 2024
