Xaar Regulatory News (XAR)

15 Mar 2005 07:01

Xaar PLC15 March 2005 FOR IMMEDIATE RELEASE 15 March 2005 Xaar plc PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2004 Xaar plc ("Xaar"), the inkjet printing technology group headquartered inCambridge, has announced its audited results for the year ended 31 December2004. KEY POINTS : • Results reflect a sustained growth in sales and further improvements in profitability. • The financial results for the year were : o Turnover was up 21% to £35.5m (2003: £29.2m); o Profit jumped to £6.1m (2003: loss of £1.4m) giving a 17% return on sales (before foreign exchange on the inter-company loan, tax and dividends); o Earnings per share increased to 7.1p (2003: 1.6p); and o Net cash and short term investments at 31 December 2004 were £15.3m (2003: £8.5m). • Growth in sterling terms was affected adversely by the dollar; had rates remained at 2003 levels, sales would have been £2.4m higher. • Dividend of 1p per share; this is the first dividend proposed by Xaar since its IPO in October 1997. • Phil Eaves appointed as new Director of Sales and Marketing. • Strong pipeline of new products and good progress on development partnerships is expected to boost future growth prospects. On outlook, Chairman, Arie Rosenfeld stated : "I believe the group now has a stable, profitable, platform from which todeliver consistently high growth for the future. This will be achieved throughthe continued development of Xaar's technology, commercialisation of our strongpipeline of new products and their successful deployment into a diverse range ofmarkets". "We continue to see significant new adoption of digital inkjet printing, notonly in the group's core graphics market, but also in new markets where theadvantages of industrial inkjet are equally persuasive. The outlook for 2005remains good." For further information, please contact: Ian Dinwoodie, Chief Executive; or 020-7444-4140 todayNigel Berry, Finance Director at Xaar on: 01223-423663 thereafter www.xaar.co.uk Steve Liebmann at Bankside: 020-7444-4163 / 07802-888159 CHAIRMANS STATEMENT Introduction I am pleased to report an excellent year for Xaar, with record levels ofturnover, profitability, and cash generation. Results and Finance Group revenues increased by 21% in the year to £35.5m (2003: £29.2m), despitecontinued weakness in the group's primary trading currency, the US dollar.Sales of products (printheads, inks and peripherals) were £33.1m (2003: £27.6m),with growth driven by our industry-standard XJ128 which recorded a 47% increasein unit sales. Technology income was £1.1m (2003: £0.5m). This represents royalty receipts fromlicensees, and reflects their increased production and sale of Xaar-basedproducts. Development fees were stable at £1.3m (2003: £1.1m). The group reported an improved profit of £6.1m before tax, foreign exchange losson the inter-company loan and dividends, representing 17% of sales. Foreigncurrency movements on the inter-company loan between Sweden and the UK reducedthis figure to £5.9m (2003: gain of £1.8m). Earnings per share increased to7.1p (2003: 1.6p). Excellent cash generation of £6.8m resulted in a closing cash and short terminvestments balance of £15.3m (2003: £8.5m). The board is confident thatprofitable opportunities will be found to invest these funds in the futuregrowth of the group. Dividend Recognising the sustained improvement in trading and cash generation shown bythe business, the board is recommending payment of a final dividend of 1p forthe year. This will be Xaar's first dividend since becoming a public company in1997. Drupa In May 2004 Xaar exhibited at the Drupa trade show in Dusseldorf. This is theworld's largest imaging and printing show held once every four years. Thisyear's event was very well attended with 2,000 exhibitors from 52 countriesreflecting a more buoyant feeling within the industry; total visitor figures forthe show were almost 400,000. Although the unofficial theme of this year's show was software, most industrycommentators, including myself, labelled this the "Inkjet Drupa". There wererecord numbers of inkjet machines and applications demonstrated at the show,representing a coming-of-age for inkjet as a mainstream printing technology. Ourown stand showcased our new OmniDot product range, as did the Agfa stand,together with customer machines incorporating Xaar's wide range of printheads.Many other stands also featured our technology covering applications such asoffice printers, packaging printers and printed electronics. Business Partnerships Xaar continues to enjoy a long-term relationship with Agfa in the graphic artsmarket. In particular, the OmniDot product has been developed jointly with Agfaand Agfa has contributed substantially to the capital investment required toproduce it. This additional production equipment has been installed andcommissioned in our Swedish plant during 2004. Commercial shipments are due tocommence on schedule during the first half of 2005. During 2004 we also announced a number of new partnerships aimed at diversifyinginkjet technology into a broader range of markets. We strongly believe theeconomic benefits and flexibility offered by digital inkjet, now clearlydemonstrated in the printing market, are equally applicable to many otherindustries, particularly those where images and patterns are required. Thesepartnerships are described in more detail in the Finance review. Board Changes In January 2005 our Group Sales Director, Hugh Baker-Smith, resigned from thegroup after six years in the post. We thank him for his valuable contributionduring that time and wish him well for the future. I am pleased to welcome Phil Eaves, 51, to the board as Sales and MarketingDirector. Mr Eaves joined us at the beginning of March 2005, and brings with hima wealth of experience in digital printing markets, gained with companies suchas Scitex, Crosfield, Xeikon and, most recently, Dainippon Screen. Mr Michael Geary, non-executive director, has been a member of the board fornine years and, in accordance with corporate governance guidelines on the lengthof tenure of non-executive directors, will be standing down at the next AnnualGeneral Meeting. I would like to thank Michael personally for his input duringhis time on the board which has seen the company progress from a small privatecompany to the publicly listed group that it is today. The search for areplacement non-executive is underway. Outlook We continue to see significant new adoption of digital inkjet printing, not onlyin the group's core graphics market, but also in new markets where theadvantages of industrial inkjet are equally persuasive. I believe the group now has a stable, profitable, platform from which to deliverconsistently high growth for the future. The outlook for 2005 remains good. Arie RosenfeldCHAIRMAN14 March 2005 CHIEF EXECUTIVE'S REVIEW Introduction In last year's annual report I stated our key priority for 2004 would be tomaintain the momentum generated in the second half of 2003. I am pleased toconfirm this has been achieved. In addition to managing a significant increase in printhead production, and infuture production capacity, we have also invested in building the appropriateinfrastructure needed to support future growth in terms of people skills,experience, IT systems and engineering design tools. We remain positioned totake maximum advantage of the opportunities which lie in front of us. Revenue Performance Group revenues increased by 21% over 2003, primarily driven by strong printheadunit growth, and in particular by the XJ128. Overall, product sales accountedfor 93% of revenue, with royalties accounting for 3% and development fees makingup the balance of 4%. The growth in sterling revenues was achieved despite the continued weakness ofthe US dollar. Revenues would have been higher by £2.4m had rates remainedconsistent with 2003. The XJ128 printhead (including the new 'Plus' version) saw volume growth of 47%,and is now clearly the industry-standard digital printhead for large formatexternal advertising. The new OmniDot printhead, co-developed with Agfa andlaunched during the year, will help us address the point-of-sale and indooradvertising market. The XJ500 continues to grow in the secondary case-codingpackaging market, with volumes up by 27%, and volumes of the XJ126 increased by58% during the year. The difference between the growth in unit sales andrevenue reflects the sales mix of printheads and the adverse effect of currencymovements. In total, the company shipped 26 million nozzles during the year (2003: 19million) - nozzles being the individual apertures in the printhead through whichink is ejected. Output measured in this way, as opposed to the number ofprintheads shipped, compensates for the fact that different printheads havedifferent numbers of nozzles. Xaar's direct sales of Leopard printheads (manufactured for us by Toshiba TEC)grew more slowly than we would have liked, but we must recognise that its targetmarket, the high-end UV ink market, is still in its infancy. This is likely tolimit sales in the short-term, although I am pleased to say that the first fullcommercial application for this product, the Impika IPS C9000 machine fordigital ID and security printing, was successfully demonstrated at the Cartes2004 show in France during November 2004. Xaar's ink business is currently in transition and remains an area ofopportunity for the future. As reported previously, for cost and logisticalreasons, high volume Xaar-approved inks are now shipped direct from our inkpartners with Xaar collecting a commission on each shipment. Low volume,specialist inks are shipped direct from Xaar on a purchase and resale basis. During 2004 we saw signs of an industry shift from oil based inks to solventbased inks coupled with aggressive pricing, particularly in the Far East. Thesefactors reduced top line sales by £1.3m over 2003. The volume of ink shippeddirect by Xaar also reduced, and overall the gross margin earned on the inkbusiness was down £0.6m. We are addressing this decline by adding to oursources of supply around the world to give end-users a wider choice ofXaar-approved inks, moving away from a product where quality has beenunsatisfactory and which necessitated a change in suppliers and by addressingnew geographical markets such as India and South America. Development ofprinthead sales into new areas of the packaging market, such as cartons andflexible packaging, also introduces the opportunity to supply higher-margin UVinks, use of which has grown strongly in recent years. The applications division of Xaar, Vivid Print Innovations Inc., reported modestrevenues; however we are seeing the operation begin to fulfil its role as atechnical sales tool to open up and support new applications. It is ourintention to add more integration capacity through external partnerships toleverage opportunities in these emerging fields. Geographic Markets Asia continues to be our largest sales area, representing 55% of turnover, withgrowth of 33% in the year albeit from a relatively weak 2003. The Asian marketis dominated by wide format graphics printing for external advertising. Inaddition to large domestic markets, many of our Asian customers are nowsuccessfully exporting to other markets, including Europe, the US, India andSouth America. In November, we opened the first Xaar sales office in India and by the end ofthe year were supplying both ink and printheads to a number of local companies.Europe and the Middle East experienced growth of 7.5% and now represents 34% ofrevenues, covering both graphic arts and packaging customers. US revenues,whilst still modest at 11% of total sales, have shown their first growth forsome time, being up 17% from 2003. During 2004 we started shipping ink direct into South America, where there isalready a large installed base of Xaar-based digital printing machines and wewill be progressing sales to this market in the coming year. End User Markets Sales into the graphics printing market grew 14% in the year and accounted for77% of 2004 product revenues. The most dominant end market is externaladvertising where expenditures are forecast to grow at over 6% in 2005, secondonly to internet advertising. We expect to benefit from this growth,particularly as traditional screen-printing, historically the main printingmedium for this market, converts to inkjet for economic and practical reasons.In addition, we will now be addressing the internal advertising and displaysmarket through introduction of the high resolution OmniDot 760 printhead. The packaging market for Xaar remains dominated by outer-case coding, whererelatively expensive labels for outer cartons are being replaced by the printingof data directly onto the box. This area currently represents 20% of revenueand grew 46% during the year. This was driven by the XJ500, with its attractivemix of high resolution and wide print swathe offering the best combination onthe market. We will further strengthen our position in this market with thelaunch of the XJ500CM product and the OmniDot 380 product in 2005. Industrial markets continue to develop and are covered in more detail in theFinance review. Revenues are still modest in this space, being only 3% ofproduct sales; however this represents a growth of 56% over the previous year.It is clear the opportunities for inkjet as a production tool across numerousapplications has significant potential and we continue to nurture these markets. Licensees Royalty income from licensees increased in the year to £1.1m (2003: £0.5m), as aresult of increased business at a number of our licensees. In my report lastyear, I referred to the Orphis HC5000 office printer being developed by Olympusand manufactured by Riso using a version of the Toshiba TEC printhead. This isthe first major example of Xaar's technology in the 'networked office' marketand initial sales in Japan, the first market in which it was launched, have beenvery successful. The machine was put on global release from the end of 2004. In October, Konica-Minolta announced the establishment of a new subsidiary,Konica-Minolta IJ Technologies Inc., in order to further expand its inkjetbusiness. This new subsidiary encompasses all of Konica-Minolta's inkjet relatedproducts. SII Printek (Seiko), Brother, Sharp, and Toyo Ink also continue to grow theirinkjet activities based on Xaar's technology and we maintain a closerelationship with all of our licensees. Although some estimation is necessary, I am confident that Xaar and itslicensees have shipped over 100 million nozzles during the year, making Xaar'stechnology a leading force in the industrial inkjet market. Research and Development The group spent £5.0m on R&D during the year, representing a sustainable 14% ofturnover. The major programmes of 2004 were; final design sign-off and transferto production of the OmniDot printhead range; continued development of ourGeneration 3 printhead, and finalisation of the ink supply and electronicsperipherals which are now on commercial release. The OmniDot programme completed its final sign-off during the year and kits ofboth the 380 nozzle and 760 nozzle variants have been shipped for beta-sitetesting with selected customers. Initial responses have been very positive andtransfer of the product to production is on schedule. Xaar's third generation programme, codenamed 'Hybrid Side-Shooter' (HSS) hasmade excellent progress during the year. HSS offers a printhead structure withan inherently much higher jetting reliability, coupled with the ability toself-recover from 'temporary jet loss' and the ability to handle a much widerrange of ink formulations, including potentially unstable inks such as metallicinks. The target market for this third generation product is fixed head,high-throughput web or sheet-fed applications. The fundamental performanceenhancements it offers were proved in prototype heads during the year and aspecification for the first printhead (HSS1) has been decided upon. The headwill commence alpha and beta testing during 2005, with commercial productionplanned to commence later in 2006. Manufacturing Continued improvements in our operational performance contributed directly toimproved gross margin during the year. The new management team in Sweden hasinstilled a culture of continuous improvement in the plant and its workforce;improvements in a number of key performance indicators have been significant,including a doubling of productivity compared to 2003. In total, we shipped in excess of 180,000 printheads during the year, or 26million nozzles, making it our best year by a significant margin. Facilitylayout changes were also implemented during the year, which not only allowed theinstallation of the OmniDot production capacity, but also significantly reducedthe footprint required for existing products. Priorities for 2005 Having demonstrated the profitability of the group in 2004, the priority for2005 and beyond is to grow the top line, whilst maintaining profitability. Weexpect to achieve this through a number of developments; Firstly, continued performance enhancement of the existing Generation 1 productrange (XJ64, XJ126, XJ128, XJ500 and Leopard), such as improvements to speed,resolution and their optimisation for a wider range of inks. New printingmachines continue to be introduced based on our Generation 1 technology which,together with the significant global installed base of existing XJ128-basedprinters, offers a strong platform for growth through customer upgradeprogrammes. The XJ128-200 Plus, launched during the year, is a good example ofthis and further such variants will be launched in 2005. Secondly, the commercial launch of the Generation 2 OmniDot range (includingshipments to Agfa) will open up those markets which require higher imagequality, such as interior and point-of-sale advertising, high quality posterwork and other high resolution applications. The fact that the head iscompatible with a very wide range of inks, including, for the first time in aXaar printhead, water based inks, maximises the number of potential endapplications. Finally, we will target sales of inks by offering a wider range of co-brandedinks, both on a local and a global basis and expect this increase in end userchoice to improve our market share. We will continue to develop businessopportunities in new geographical markets such as India and South America. Alongside these activities sits our joint development work with a growing listof partners to explore the longer-term implementation of our technology into newindustrial fields. The alpha testing of the Generation 3, HSS1, printhead,scheduled for mid 2005, will be a key milestone in this process. People In business, good technology is only part of the requirement for success.Equally important are the people and I would like to thank our staff for theirskill and dedication which has facilitated the results achieved in 2004 andwhich is a clear demonstration of the strength of the team at Xaar. Ian DinwoodieCHIEF EXECUTIVE14 March 2005 FINANCE REVIEW Results for 2004 The results for 2004 were particularly pleasing, demonstrating both the inherentprofitability of the group's technology and the increasing adoption of thattechnology by customers and licensees. Sales increased to £35.5m (2003: £29.2m)and gross margin to 58% (2003: 46%), the latter reflecting significantmanufacturing improvements. Other operating expenses were £14.5m, or 41% of sales (2003: £14.8m, 50% ofsales) with profit before tax of £5.9m (2003: £0.4m). Profit before taxincludes a loss on translation of the inter-company loan, between the UK andSweden, of £0.2m (2003: gain £1.8m). Taxation for the year was £1.7m (28%) (2003: credit of £0.5m), resulting inearnings per share for the year of 7.5p, compared to the 2003 loss per share of1.4p (both figures shown before translation differences on the inter-companyloan as set out in note 2). International Financial Reporting Standards The 2004 results have been prepared under UK GAAP. For 2005 the group willprepare its consolidated financial statements in accordance with InternationalFinancial Reporting Standards (IFRS) as adopted by the European Commission.Adoption of IFRS will inevitably lead to changes in the way the group reportsits results; these changes will be seen and discussed in the 2005 interimreport. Foreign currency Sales for the year were adversely affected by the continuing weakness of the USdollar, the group's primary trading currency, which accounts for approximately70% of invoiced sales. Compared to 2003, sales were reduced by £2.4m. Profitbefore tax was also adversely affected by £0.3m (2003: £0.6m) due to foreigncurrency movements in the year. Nonetheless, we are operating very successfullyat these less favourable rates. For 2005, invoicing will be moved from our Swedish operation to the UK. Oneeffect of this will be to change the group's primary currency cross rate fromthe dollar/Swedish kronor, as was the case during 2004, to the dollar/sterling.The group will continue its current policy of hedging invoiced dollar revenuesusing the mechanism of a guaranteed floor rate, whilst leaving some upsideavailable should the dollar recover. Cash and capital expenditure Cash and short-term investments at the end of the year were £15.3m (2003: £8.5m)with strong cash collection from Asia at the end of the year. Cash is statedafter capital expenditure of £2.2m (2003: £1.1m) with no lease financing in theyear (2003: £2.5m). The total value of outstanding lease commitments at the endof the year was £1.9m (2003: £2.5m). The board regularly reviews the level of cash held within the group in relationto the investment needs of the business. At this time it considers there arelikely to be attractive opportunities to use the current cash reserves indeveloping the group's core business, particularly through increased productioncapacity as new products come to market and investment in key businesspartnerships for the future. Dividend policy and dividend The group proposes to commence payment of a dividend for the 2004 financialyear. This decision reflects the board's belief that the group's core businesshas achieved a minimum level of profitability which can be maintained into thefuture. In addition, with royalties from licensees increasing, the group has anon-trading source of income from which to fund dividend payments, withoutaffecting its ability to reinvest trading profits back into the growth of itscore business. It is the group's intention to maintain a high level of dividendcover, with cover for the 2004 final payment being 6 times. Subject tocontinuing satisfactory performance, it is expected that a dividend will be paidfor the 2005 financial year. Conditional on the approval of shareholders in Annual General Meeting, thedividend of 1p per share will be paid on 10 June 2005 to shareholders on theregister at the close of business on 13 May 2005. Business development I am pleased to report good progress during the year in the development of newopportunities for the group's technology. We are focussing our resources in the following areas: the traditional printingmarket, the packaging market and new technology markets that can be summarisedunder the headings of printed electronics and biomedical. These markets areeither already multi-billion pound markets or are likely to become such in thenext few years. They are also markets where inkjet can offer specificadvantages in terms of cost reduction, speed of response and processefficiencies. Traditional Printing At Drupa 2004, the printing industry's largest trade show held in May of lastyear, we announced a key strategic partnership with MAN Roland DruckmaschinenAG, the largest traditional offset press manufacturer in the world. We are nowreviewing opportunities to integrate Xaar products, including our second andthird generation technology, into MAN Roland web and sheet-fed presses. The useof inkjet in combination with offset printing will offer customers greaterflexibility for variable data and special coatings. Another traditional market of increasing interest is textile printing. In thisarea we are working under confidentiality agreements on two projects to assessthe potential for inkjet to replace traditional printing processes. Packaging In the area of narrow-web labels we have signed a development agreement whichremains subject to confidentiality terms. The partner in question suppliespost-press converting and finishing equipment for the narrow-web label market,the first application of Xaar's technology will be spot varnishing. I lookforward to reporting on progress in due course. New Technologies Under the overall heading of 'new technologies', we have identified four keysectors on which to focus; the production of PCBs (printed circuit boards), theuse of inkjet in the manufacture of electronic displays covering both LCD(liquid crystal) and OLED (organic light emitting diode) displays,semi-conductor manufacture and biomedical processes. In these applications inkjet can offer significant advantages over currentproduction techniques, including short-run flexibility, lower investment incapital equipment and highly accurate patterning and deposition for high valuefluids. In addition, many existing production techniques are based aroundsubtractive processes which are environmentally unfriendly and produce highlevels of waste material. Inkjet, as an additive process, deposits materialsonly where required. In PCBs, one of our key relationships is with Rohm and Haas Inc. (NYSE: ROH),with whom we are developing a range of etch and solder masks capable ofdeposition through Xaar printheads. With Xennia Ltd. we are testing conductiveand decorative metallic inks, suitable for a range of applications, and also inthis area is our relationship with Invint Ltd., one of the leaders in applyingnew conductive polymer technology to interconnect applications in fields such asPCBs, RFID tags and smart cards. In the field of semi-conductors we have announced an important relationship withMolecular Imprints Inc. (MII) in Austin, TX, USA who have developed a uniquestep and flash lithography process incorporating Xaar's printheads which ispotentially applicable to a wide range of industries including semi-conductors,photonics, nano fabrication and advanced packaging. For these new applications our recently launched OmniDot printhead, with itsextremely fine drop size down to 3 picolitres (a picolitre being one millionthof one millionth of a litre, which we can deposit accurately to less than fivethousandths of a millimetre), looks set to become a key industry product. Inweb-based applications, such as traditional printing and packaging, we expectour new HSS printhead, incorporating Xaar's unique recirculating ink supply foradded reliability, to be rapidly accepted by the market over the next twelve toeighteen months. Integrator Programme Key to the successful adoption of inkjet by these new markets, which have littleor no experience of using inkjet technology, is the provision of professionalintegration services. Whilst Xaar provides printheads and support products, itdoes not design or supply finished printing equipment incorporating thoseproducts. In the group's core graphic arts market, which has several yearsexperience of using inkjet, individual customers have developed their own designand integration skills. It is important to our success in entering new markets that we provide potentialend-users with access to integration skills, in order to provide turnkeysolutions for the specific needs of each new application. The group addressedthis issue in part through the acquisition of Vivid Print Innovations Inc. in2003, but the range of opportunities now being generated requires a greaterlevel of resource than Vivid alone can provide. To this end, it is Xaar'sintention to establish a small but capable network of integration partners,including Vivid Print, with whom the group will work to provide high qualitysolutions for the new applications generated by Xaar's business developmentteam. Further news on this programme will be announced in due course. Overall, we are positioning ourselves well to diversify the range of marketsinto which we sell our products, and 2005 should see significant progress inthis respect. Nigel BerryFINANCE DIRECTOR AND DEPUTY CHIEF EXECUTIVE14 March 2005 Consolidated profit and loss account for the year ended 31 December 2004 2004 2003 £'000 £'000 Turnover 35,479 29,230 Cost of salesExceptional XJ500 cost - (1,068)Exceptional production cost - (767)Non-exceptional cost of sales (15,078) (13,920) ---------- ---------- Total cost of sales (15,078) (15,755) ---------- ---------- Gross profit 20,401 13,475Other operating expenses (net) (14,462) (14,775) ---------- ---------- Operating profit/(loss) on ordinary activities 5,939 (1,300)Interest receivable and similar incomeForeign exchange gain on inter-company loan - 1,791Interest receivable 306 135 ---------- ---------- Total interest receivable and similar income 306 1,926Interest payable and similar expenditureForeign exchange loss on inter-company loan (231) -Interest payable (100) (180) ---------- ---------- Total interest payable and similar expenditure (331) (180) Profit on ordinary activities before taxation 5,914 446Tax on profit on ordinary activities (1,658) 501 ---------- ---------- Profit on ordinary activities after taxation 4,256 947Dividends paid and proposed (601) - ---------- ---------- Retained profit for the financial year 3,655 947 ========== ========== Earnings/(loss) per share excluding foreignexchange(loss)/gain on inter-company loan - basic 7.5p (1.4)p ----------- ----------- Earnings per share - basic 7.1p 1.6p ----------- ----------- Earnings per share - diluted 6.9p 1.6p ----------- ----------- Consolidated statement of total recognised gains and lossesfor the year ended 31 December 2004 2004 2003 £'000 £'000 Profit on ordinary activities after taxation for 4,256 947the financial yearGain/(loss) on foreign currency translation 171 (1,290) ----------- ----------- Total recognised gains and losses relatingto the financial year 4,427 (343) =========== =========== Consolidated balance sheet as at 31 December 2004 2004 2003 £'000 £'000 Fixed assetsIntangible assets 1,222 1,576Tangible assets 5,880 6,090 ---------- ---------- 7,102 7,666 ========== ========== Current assetsStocks 2,485 2,592Debtors 5,741 6,424Short term investments 900 2,325Cash at bank and in hand 14,416 6,133 ----------- ----------- 23,542 17,474Creditors: amounts falling duewithin one year (8,233) (5,968) ----------- ----------- Net current assets 15,309 11,506 ----------- ----------- Total assets less current liabilities 22,411 19,172Creditors: amounts falling dueafter more than one year (1,278) (1,833)Provisions for liabilities and charges (134) (345) ----------- ----------- Net assets 20,999 16,994 =========== =========== Capital and reservesCalled-up share capital 6,013 5,983Share premium account 8,713 11,129Own shares (20) (20)Merger reserve 1,105 1,105Other reserves 485 -Accumulated income/(deficit) 4,703 (1,203) ------------ ------------ Shareholders' funds - all equity 20,999 16,994 ============ ============ Consolidated cash flow statement for the year ended 31 December 2004 2004 2003 £'000 £'000 Net cash inflow from operating activities 10,093 182 ---------- ---------- Returns on investments and servicing of finance 208 (49)Taxation (892) (564)Acquisitions and disposals - (5)Capital expenditure and financial investment (2,199) (1,083) ---------- ---------- Cash inflow/(outflow) before managementof liquid resources and financing 7,210 (1,519) ---------- ---------- Management of liquid resources 1,425 (2,325)Financing (444) (587) ---------- ---------- Increase/(decrease) in cash in the year 8,191 (4,431) ========== ========== NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. Segmental information 2004 2003 £'000 £'000Turnover by class of business: Printheads and related products 33,064 27,570Development fees 1,279 1,107Licence fees and royalties 1,136 553 ---------- ---------- 35,479 29,230 ---------- ---------- Turnover by geographical segment: Europe & Middle East 11,975 11,148Asia 19,748 14,875Americas 3,756 3,207 ---------- ---------- 35,479 29,230 ---------- ---------- Turnover by industry segment: Graphic arts 25,593 22,497Packaging printing 6,566 4,494Industrial printing 905 579Development fees 1,279 1,107Licence fees and royalties 1,136 553 ---------- ---------- 35,479 29,230 ---------- ---------- Gross profit by class of business: Printheads and related products 18,296 11,976Development fees 1,173 1,087Licence fees and royalties 932 412 ---------- ---------- 20,401 13,475 ---------- ---------- 2. Earnings/(loss) per ordinary share - basic and diluted The calculation of earnings per share is based upon the profit for the yearafter taxation and on the weighted average number of ordinary shares in issueduring the year. For basic earnings per share, this is 60,043,056 (2003:59,783,345) and for diluted earnings per share, this is 61,746,960 (2003:60,027,840), the only difference being in relation to movements in shareoptions. Basic earnings/(loss) per share excluding foreign exchange loss/(gain) on theinter-company loan is based on earnings of: 2004 2003 £'000 £'000 Profit on ordinary activities after tax 4,256 947 ---------- ----------Foreign exchange loss/(gain) on theinter-company loan 231 (1,791) ---------- ----------Profit on ordinary activities after tax excludingforeign exchange loss/(gain) on the inter-companyloan 4,487 (844) ---------- ----------- The additional earnings per share information is considered to provide a fairerrepresentation of the company's trading performance year on year. 3. Financial information The financial information contained in this preliminary announcement of auditedresults does not constitute the group's statutory accounts for the years ended31 December 2004 or 31 December 2003. The accounting policies that have beenapplied are consistent with those applied in the preceding annual accounts. Theaccounts for the year ended 31 December 2003 have been delivered to theRegistrar of Companies. The statutory accounts for the years ended 31 December 2004 and 2003 have beenreported on by the company's auditors; the reports on these accounts wereunqualified and they did not contain any statement under section 237(2) or (3)of the Companies Act 1985. The accounts for the year ended 31 December 2004 are expected to be posted toshareholders in due course and will be delivered to the Registrar of Companiesafter they have been laid before the company at the annual general meeting on 28April 2005. Copies will also be available from the registered office of the company, SciencePark, Cambridge, CB4 0XR. The registered number of Xaar plc is 3320972. This information is provided by RNS The company news service from the London Stock Exchange