Xaar plans 'substantial' investment in P3 capacity following strong first half

Simon Nias, printweek.com, 18 August 2010

Inkjet printhead manufacturer Xaar has taken a bullish view of future growth, reversing the planned closure of its Swedish facility and investing in new manufacturing capacity in Huntingdon, Cambridgeshire, following a strong first-half performance.

In its interim results, published today (18 August), the Cambridge-based business recorded a pre-tax profit of £1.8m, improving on an £800,000 loss last year, following a "substantial increase in demand" for its Platform 3 (P3) products.

Xaar also revealed a 14% annual rise in revenues to £23.9m (H1 2009: £20.9m)  for the six months to 30 June 2010, backed by healthy royalty growth and a 131% increase in P3 sales to the industrial inkjet sector.

Gross margin declined slightly to 39% (H1 2009: 42%) due to "excessive costs of manufacturing, warranty and customer support" related primarily to new products, although Xaar said this was the financial result of problems that had arisen in 2009 and were now "under control and continuing to reduce".

Following the growth in demand for its P3 products, the firm has reversed the previously announced closure of its Swedish facility and announced an investment in additional capacity at its Huntingdon site, due to come on stream in 2011.

Operations that have already been transferred from Sweden to Huntingdon will remain in the UK, however, the manufacture of some finished goods and sub assemblies will now remain at the firm's Jarfällä facility.

"This allows us to maximise P3 production, the benefits of which will significantly outweigh the benefits of the previously planned plant consolidation," said Xaar chairman Phil Lawler.

Commenting on the firm's outlook, Lawler added that, while the global economy remained uncertain, the combination of better visibility in certain markets and rising P3 product demand had persuaded the board that "further and substantial investment in capacity and capability will be necessary to capitalise on the potential".

"We are increasingly confident about the market potential for P3," said Lawler. "While the past two years have been testing for the management team, we are excited about the opportunities that have emerged and are committed to pursuing them."

The company has announced an unchanged interim dividend of 1p per share to be paid on 24 September.

Xaar shares were up more than 15% on the LSE to 147p.