After ten years in development, Xaar has pulled the plug on its thin film printhead development, in order to stem a flow of losses that put the future of the business at risk. The announcement coincides with interim results showing a pretax loss of £52.3 million on sales that are a third lower at £22.5 million (£35.3 million).
At the same time, CEO Doug Edwards announced he will depart, along with finance director Shomit Kenkare, at the end of the year. Edwards will be replaced by John Mills, former CEO of Inca Digital Printers, who will work alongside him for a three-month period until March next year. Edwards joined Xaar in the summer to lead the printhead division.
The decision ends an attempt by the British technology company to take on the Japanese giants in inkjet. When the 5601 thin film printhead was announced at Drupa 2016, it was dubbed the 'Samba killer' owing to its impressive specification. It offered a 1200dpi native resolution capable of firing droplets from 3-21pl through 5,800 nozzles at a print speed equivalent to 120 metre/minute. And the modular design meant a four-colour array could be just 200mm across to give OEMs maximum flexibility.
This was also the first Xaar printhead designed for aqueous inks rather than high viscosity UV inks and so positioned for the industry's transition from offset to high quality inkjet. However, delays and quality control issues at a third-party supplier combined with a lengthy implementation cycle and a slower than predicted take up of inkjet printing has proved too much to bear for a company hoping to compete with the likes of Fujifilm and Epson. The latter has invested $140 million in an additional factory to build its Precisioncore printheads, beyond the scope of the British company.
Instead it has looked to find a partner or purchaser for the technology, having strive a deal with Ricoh for the thin film 1201 head in 2016. The search resulted in deep discussions with 30 parties, but no deal has been forthcoming. Edwards remains hopeful than an eleventh hour deal might be done or else that the design of the thin film print heads can be licensed for a down payment and flow of royalties, but no one is holding their breath.
The development has been a £15 million a year investment for Xaar, he says in discussing the company’s interim results. The cancellation of the thin film development has resulted in an impairment charge of £39 million, pushing a first half loss of £1.1 million in 2018 into a £52.3 million pretax loss. In the same period this year, revenue fell from £35.3 million to £22.5 million. Both revenue and profits in 2018 enjoyed the benefit of a one off royalty payment from Seiko.
Once the extraordinary items are excluded the underlying revenue from printheads was stable. The smaller product print systems division increased sales by 22%, the result of a 26% growth in equipment sales and 15% increase in consumables revenue. Xaar 3D Printing also increased revenue and has seen Stratasys increase its investment in the business to 45% and with the option of buying the remaining 55%. It would value the business at $60 million, a fair return on Xaar’s $7 million investment, says Edwards.
But these are young businesses that have yet to reach their full potential. And while sales of printheads for ceramics, once the mainstay of Xaar's business have risen, revenues are nowhere near their peak. The upheaval will result in around 100 or more job losses, the figure subject to a 45-day consultation period. By the time the round of restructuring is completed, Xaar will be a £50 million business, well short of the £200 million company that Edwards was hoping to lead by 2020.
Nevertheless Xaar remains a leader in inkjet head technology. Its 2001 printhead is a preferred option for UV inks and viscous fluids. At Labelexpo last week for example, Xaar heads were used for printing opaque whites and varnishes on a number of machine, while built in to the Océ LabelStream 4000 and Dantex PicoColour presses.
By Gareth Ward
The Xaar 5601 was intended as the printhead to catapult Xaar to sales of £200 million, but has come closer to crippling the Huntingdon business as it decides to close down the development because of mounting losses.