Revenues at UK inkjet printhead manufacturer Xaar increased 4% to £100.1 million (£96.2 million), the improvement masking much deeper changes in the company as new businesses introduced in the last couple of years take over where the company’s legacy products are starting to fade.
At one time the company was highly dependent on the ceramics industry, but that has become a replacement market rather than one transitioning from analogue production to digital. “90% of the market is fully digital,” says Xaar CEO Edwards.
It means that the company has to find growth from textiles, graphics, direct to object printing, 3D and newer markets with new printheads and operations. And it is doing so. “Excluding the ceramics business, revenue from products increased 23% in the last year,” says Edwards. “Underlying profit is up 10% and our operating margin is 18%. Eighty percent of product revenues are from products and businesses that we have introduced in the last two years.”
Its pretax profit dipped to £18.1 million (£19.5 million) in the year. Revenue from ceramics dropped from £42.3 million in 2016 to £33.7 million last year, accounting for around a third of revenues.
The substitution of new for old in revenue terms has occurred before the real ramp up begins for a number of the products. While the 1201 printhead is in use in a wide number of products in China, generating orders for 90,000 printheads over two years, and a royalty upgrade and replacement agreement with Seiko Instruments has netted a £10 million contribution for 2017 and a similar amount in Q1 this year, other deals are at the evaluation stage.
The 5601 print head which has wide applications in textiles and commercial print is being shipped to partners for evaluation and testing. Eight have so far received development kits. “They like what they see so far,” he says. “Some of the people looking at the print head are in the folding carton and flexible packaging space.” First implementations should be seen at the next Drupa he says. “We truly believe we have a printhead which will unlock the digital conversion of very large and established analogue industrial printing markets such as textiles, commercial printing and packaging.”
The company is strengthening its Go To Market activities designed to help partners build the electronics and ink supply infrastructure around the printhead and so accelerate the implementation phase of the technology. Currently Xaar has little influence over this and how the printheads will be used in the field. Its responsibilities have ended with supply of the printheads. It now has an applications and integration team as a new layer of technical support to Oem partners.
It is working with Xerox to develop new heavy duty printheads. And while Fujifilm, a competing printhead supplier, is undertaking the acquisition of Xerox, Edwards reckons that this deal is relatively insignificant in what is “a consolidation place in the office print market", so should pass almost unnoticed in the great scheme of things.
Activity in 3D printing, one of two new areas for the business, has resulted in a demonstration of high speed sintering production which will accelerate 3D printing one hundred fold over current technologies and move 3D parts manufacture up a level from creating prototype components. Its printheads are becoming popular in addictive manufacture for their ability to lay down more material than other printheads and so open the way to faster production speeds and to the use of a wider range of materials.
The acquisition of EPS has met expectations and is transitioning towards more digital decoration technology, with the associated higher value. Xaar has a cash pot of £45 million and acquisitions to increase its share of this expanding market are possible, Edwards says.
Products introduced in the last two years are leading the increase in sales at Xaar as the traditional ceramics market continues to decline. The company is putting emphasis into helping partners achieve faster time to market for products using Xaar's printheads.