Xaar (LON:XAR) reported full-year results that management described as a year of “growth, investment, and…turnaround” in one part of the group, with revenue rising 12% to £60.1 million and Printhead performance leading the improvement.
Revenue growth led by Printhead, driven by new applications
Chief Executive Officer John Mills said group revenue increased 12%, “largely driven by strong growth within the Printhead group” of 22%. Mills highlighted commercialization and growth in wax printing for jewelry as a key contributor, while emphasizing that the company has continued focusing on margin discipline through stock turns, yield, and other improvements.
Financial performance: profit ahead of consensus, cash down amid investment
Chief Financial Officer Paul James said adjusted profit before tax was £0.8 million, which he said was 8% ahead of consensus estimates. Net cash ended the year at £4.9 million, down year-on-year, though James said it still exceeded consensus by “several hundred thousand pounds.” He attributed the lower net cash to increased investment and a decision to buy shares to help avoid dilution “at their inexpensive versus strategic value.”
James also said Xaar will begin reporting free cash flow as a key alternative performance measure going forward, with the outcome expected to be driven mainly by trading performance, efficiency choices in how the business is supported, and investment for growth.
Division details: Printhead margins improved; EPS down after contract end
James characterized Printhead as the “standout” division for both scale and performance:
- Printhead revenue: up 22% year-on-year, with “pure printhead sales” up 27% and Printbar sales up 31%.
- Printhead gross margin: increased by 300 basis points to 40%.
- Drivers: James said well over half of the Printhead revenue increase came from volume, with the remainder from a mix of pricing and product mix.
He added that after “years of decline,” the ceramics market appears to be stabilizing, which he said could remove a long-running headwind on growth.
Elsewhere, James said Megnajet revenue was slightly up 2% year-on-year and plays an important support role for the group, including sharply higher inter-group sales. EPS revenue declined 10%, which he attributed to the unexpected end of a multi-year contract and the lack of a “credible business pipeline” at the outset of last year. Under new management, EPS has focused on restructuring, improving project execution, strengthening the pipeline, and instilling better business discipline. James said gross margin profitability improved in EPS despite the revenue decline, helped by taking costs out of product.
Strategy and commercialization: building resilience across 21 markets
Mills said Xaar’s strategy is to concentrate on areas where it has “a unique competitive advantage”—printing fluids “no one else can print”—and to apply that advantage across multiple markets. He said the company now has “21 separate markets” with multiple customers in most of them, which he argued improves resilience and reduces reliance on any single segment.
He described a “halo account effect,” where Xaar supports a key customer in a market to reach commercialization and then benefits as competitors of that customer approach Xaar for the same technology. Mills cited jewelry wax printing as an example, saying the company is now seeing major global OEMs engage following the initial commercialization work.
He also described why forecasting remains challenging: Xaar sells components into OEMs and integrators, and customers can require six to 18 months to develop inks and several years to develop and commercialize machines, leading to a one-to-five-year path from initial engagement to meaningful revenue. Mills noted that prior timing estimates for launches have sometimes been wrong, and said the company will avoid giving specific dates for commercial launches.
Mills said key applications include:
- Jewelry wax: commercialized and delivering substantial growth.
- EV battery and automotive coatings: OEMs have launched products, and the business is in a customer accreditation phase.
- Desktop 3D: pre-launch, with expected launch “in the near future,” though timing was not specified.
He also said a priority is shortening customer time-to-market by offering complementary products—electronics, fluids and ink systems, and fully integrated printbars/print engines—rather than leaving customers to develop entire systems alone.
Q&A highlights: ceramics outlook, China hub rationale, and longer-term wax opportunity
On ceramics, Mills said the core tile color printing market has “reached the bottom,” and he does not expect a strong recovery for “another couple of years,” pointing to second-hand equipment supply after many production lines were shut down. He suggested 2027–2028 could be a timeframe when replacement demand may return as used equipment ages. However, he emphasized potential growth in ceramics from new applications such as digital glaze, where Xaar’s high-viscosity and high pigment-loading capability can enable more structural effects on tiles. He said this can be addressed on existing machines by changing printheads (to Aquinox for water-based glazes) and adjusting ink systems.
On desktop 3D, Mills said the customer has built and tested a substantial number of machines and decided to correct issues before launch to ensure a positive customer experience. He said the product has been shown at trade shows, pre-marketing has begun, and interest has been strong.
On regional dynamics, Mills said China is “incredibly strong” and features heavily in the pipeline, noting that even some Western-branded digital printers are developed and manufactured by Chinese companies. He contrasted the U.S. market as showing more appetite for printbars and direct-to-equipment solutions, while describing increased OEM activity in Europe in the past six months as companies look to diversify away from volatile markets.
Mills also addressed the new China facility, saying it was established to manufacture ink delivery systems locally because shipping Megnajet ink systems into China was too expensive for that market. He said ink delivery issues account for the overwhelming majority of project failures, and local production should reduce field issues, provide a secondary revenue stream, and reduce support burden in the region, while keeping core technology in the U.K.
James provided tax-related commentary, noting the company has U.K. tax losses and that U.S. corporate tax applies as normal, with deferred tax assets complicating the calculation. He also discussed legacy indirect tax issues disclosed previously, stating the potential exposure of £3 million to £4 million is now expected to land at the bottom end of that range and will play out over 18 to 24 months.
On inventory and cash generation, James reiterated the focus on improving stock turns rather than targeting an absolute inventory number, calling for at least a half-turn improvement per year. He declined to set a free cash flow target, saying the company will develop its approach to the metric over the coming months and may provide more perspective later in the year.
In response to an online question about capacity, Mills said Xaar has latent capacity dating back to the 2013 ceramics boom, which should allow it to support most expected demand without major investment. If demand were to accelerate beyond expectations, he said it could take around six months to respond.
Finally, on the potential to broaden jewelry wax success into industrial casting, Mills said the current wax is expensive (around £400 per kilogram) and therefore best suited to precious metals. He said a key development project is building a printhead capable of operating at around 125°C to jet lower-cost wax, which could expand the investment casting opportunity by “somewhere between 3x–5x” versus today, if successful.
About Xaar (LON:XAR)
Xaar plc designs, develops, manufactures, markets, and sells printheads and associated products in Europe, the Middle East, Africa, Asia, and the Americas. It operates through four segments: Printhead, Product Print Systems, Digital Imaging, and Ink Supply Systems segments. The company offers print head products; digital imaging solutions, comprising digital inkjet label presses and digital pathology scanners; industrial ink management and supply systems for digital inkjet; electronic products; industrial printing machines; and system components, such as ink system test kit, print manager, hydra ink supply system, midas ink supply system, inkjet development system, head personality card 1000, and 2001+ head personality card.
