Strategic Report
Governance
Financial Statements
Group
Xaar plc
Annual Report and Financial Statements 2023
1
Xaar plc Annual Report and Financial Statements 2023 We are Xaar
Annual Report and
Financial Statements 2023
We are a world leader
in the development of
digital inkjet technology.
We design and manufacture
printheads which we
sell globally to Original
Equipment Manufacturers
(OEMs) and User Developer
Integrators (UDIs).
Our technology drives the conversion of
analogue printing and manufacturing methods
to digital inkjet, which is more efficient, more
economical, more productive and more
sustainable.
In addition to printheads (Xaar), we develop
print systems for product decoration (EPS)
which use our inkjet technology, as well as fluid
management systems (Megnajet) which are
robust, reliable, easy to integrate.
We also produce high performance digital
imaging technology (FFEI) mainly for inkjet
printing applications.
We put innovation and collaboration at the
core of our global partnerships, helping
our customers to unleash the true power
of our technologies and open up a world of
opportunities for their business, today and
into the future.
;
We’ve enhanced our reporting suite for all of our stakeholders
– you can find all of the relevant information on the links below:
Sustainability Report 2023
i Visit our Sustainability Report: www.xaargroup.com
Annual Results 2023
i Visit our website: www.xaargroup.com
Our website
i Visit our website: www.xaargroup.com
Xaar plc
Annual Report and Financial Statements 2023
Strategic Report
Governance
Financial Statements
Our 2023 performance
Revenue – continuing operations
Net cash (outflow)/inflow
£70.6m
2023
2022
£(1.4)m
£70.6m
£72.8m
2023
2022
£(1.4)m
£(16.9)m
Gross margin – continuing operations
Cash & treasury deposits
38%
2023
2022
R&D spend
£5.6m
2023
2022
£7.1m
38%
39%
2023
2022
£7.1m
£8.5m
£5.6m
£6.7m
Our business performance
£70.6m
Printhead
Product Print Systems
Digital Imaging
Ink Supply Systems
53%
31%
12%
4%
Strategic Report
Financial highlights
Business model and strategy
Why invest?
Our strategy
Chairman’s introduction
Strategic update
Business performance
Key Performance Indicators
Risk management
Sustainable and responsible business
Task Force on Climate-related
Financial Disclosures (TCFDs)
Greenhouse Gas Emissions statement
Non-financial information statement
Board approval of the Strategic and
Annual Reports
Governance
Governance at a glance
Chairman's introduction to Governance
Board of Directors
Directors’ report
Section 172 statement
Corporate Governance statement
Audit Committee
Nomination Committee
Directors’ Remuneration report
Directors’ responsibilities statement
Financial Statements
Independent auditor’s report
Consolidated income statement
Consolidated statement of
comprehensive income
Consolidated statement of financial
position
Consolidated statement of
changes in equity
Consolidated cash flow statement
Notes to the consolidated financial
statements
Company balance sheet
Company statement of changes
in equity
Notes to the Company financial
statements
Investor information
Notice of the Annual General Meeting
Company information and advisors
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01
Xaar plc Annual Report and Financial Statements 2023
Business model and strategy
Xaar’s business is focused
on inkjet technology, which
together with our partners
and customers, we have
been transforming for over
31 years.
Xaar plc is structured
into business units: Xaar
Printhead, the largest
BU, focuses on printhead
technology; our other three
business units concentrate
on fluid management
systems, product print
systems and digital imaging.
Our printhead business sells our inkjet
technology in component form (the printhead,
branded Xaar) to OEMs who produce and sell
the complete digital printing solution. We also
work with User Developer Integrators (UDIs)
who are building their own digital system.
Xaar markets
Xaar offers a wide range of industrial
inkjet printheads and print systems which
are designed and produced to meet the
customer-driven requirements for a
range of manufacturing applications.
We work collaboratively with leading fluid
manufacturers to fully optimise the fluids
beyond a lab setting to ensure optimum print
performance in real world applications. We also
sell Xaar branded fluids to UDIs (manufactured
by our ink partners) which helps to build a
long-term relationship with our customers.
In addition, we actively partner with hardware
and software integrators as well as substrate
suppliers to deliver a robust and attractive total
solution to our customers.
Primary markets include:
L 3D Printing
L Advanced Manufacturing
L Ceramic Tile Decoration
L Coding & Marking
L Decorative Laminates
L Direct-to-Shape
L Functional Fluid Deposition
L Glass Printing
L Graphics
L Primary Labels
L Packaging
L Product Printing
L Textiles.
Xaar sells
Xaar’s printhead business sells direct to OEMs
and UDIs around the world through its global
sales team. Xaar’s highly skilled application
engineers offer technical support to assist
OEMs and UDIs in the successful design, build,
commissioning, and ongoing maintenance
of printing systems.
We export over 95% of our printheads to
customers around the world, within the
Europe, Asia and North America regions.
Xaar company EPS sells product printing
equipment, services and consumables.
The majority of sales are to US customers.
FFEI sells via Xaar as a Xaar branded
print engine for our UDI customers.
Megnajet sells its products directly
to customers and via Xaar.
Megnajet is a market leader in the design and
manufacture of industrial fluid management
systems for digital inkjet. The Company
provides robust, reliable, easy to integrate
products which are sold to a range of OEMs in
USA, Europe and Asia.
Our digital imaging company, FFEI Ltd,
manufactures high performance digital imaging
solutions – including digital inkjet label presses
to digital pathology scanners.
Our Business Model
Xaar designs
We have R&D facilities in Cambridge and
Stockholm (printhead business), and Hemel
Hempstead (print systems) and Vermont (EPS).
We invest a substantial proportion of our
product revenue in R&D to remain a world
leader in inkjet technology.
We continually add to our Intellectual Property
(IP) portfolio, and currently, across the Xaar
Group, we have around 290 patents and patent
applications.
Xaar manufactures
Xaar manufactures its printheads in
Huntingdon, UK. Xaar’s manufacturing is
capital intensive.
The Group has invested over £70 million
in assets and production facilities in
Cambridgeshire, UK since the plant opened
in 2007.
EPS, our product printing business, manufactures
customised and bespoke printing solutions in
Vermont, USA.
FFEI, our digital imaging business,
manufactures imaging solutions in
Hertfordshire, UK. Megnajet manufactures
supply systems in Northamptonshire, UK.
02
Xaar plc
Annual Report and Financial Statements 2023
Strategic Report
Governance
Financial Statements
Environment
Digital print methods are inherently more
environmentally friendly than the analogue
techniques we seek to replace. Our research
shows that, compared to analogue alternatives,
digital has a huge impact in reducing energy
consumption but also in reducing pollution and
waste materials.
Xaar is committed to reducing its impact on the
environment wherever possible.
Our actuator technology consumes less energy
than competitor alternatives and our industrial
printheads can remain in use for many years.
In addition, we use a continuous improvement
methodology and we have adopted a
manufacturing ethos of “reduce, reuse and
recycle”. Environmental best practice and our
investment in sustainable manufacturing and
operational efficiencies remain key areas of
business focus.
Our Sustainability Roadmap, launched in our
2021 Annual Report, continues to drive and
shape all business decisions via the ESG
Committee. The Roadmap has four key pillars
– Environmental, People, Innovation
and Community; its purpose is to drive our
ESG goals beyond the energy reduction
scope to a Group-wide activity. We continue
our focus on moving to solar energy. Whilst
we have more work to do, over 99% of
our UK consumption is already green. We
completed the installation of our planned EV
infrastructure. Planning for solar installation
continues for the Huntingdon factory.
We create value for all our
stakeholders
Customers
OEMs, User Developer Integrators and
end users are able to innovate in their
manufacturing methods and their products
as well as benefit from a shorter distribution
chain; they can take products to market more
quickly, implement more precise and efficient
processes, easily produce short batches,
improve productivity, reduce waste and deliver
more creativity.
Shareholders
A key goal at Xaar is to maximise the long-term
growth in value delivered to shareholders via
sustained, consistent growth in earnings per
share. This is delivered through continued
investment in R&D and producing a pipeline
of new products which deliver a sustained
return on capital employed.
Our employees
Our success depends on the skills, capability
and engagement of our people. We want to
create an environment where everyone can
come to work and share our values and passion
for developing and manufacturing world-
leading technology.
We are building a culture where our employees
are passionate about what they do, and where
integrity, innovation, creativity and collaboration
are a way of life. To foster this, we have a cross-
functional project team which is committed to
embedding our values throughout the whole
Group, looking at ways to highlight our EPIICC
values awards and driving the Company-wide
acknowledgement of the nominated employees.
To build up team collaboration and provide an
opportunity for employees to socialise away
from their desks, we regularly provide a coffee
van or lunch. In addition, we have continued with
forums where employees have the opportunity
to meet and chat with all our Non-Executive
Directors along with the Exec Xchange where
our employees get to meet members of the
senior management team in smaller groups
to ask questions and exchange ideas.
We like to build long-term relationships with
all our employees by helping them grow
and develop and by making Xaar businesses
interesting places to work as well as great
companies to be involved with.
03
Xaar plc Annual Report and Financial Statements 2023 Why invest?
1.
Market Opportunity
We focus on markets where we have a
competitive advantage, where we can
offer a number of benefits over incumbent
technologies.
L A unique recirculation technology past the
back of the nozzle as well as inside the
nozzles which offers substantially better
printhead reliability and nozzle open time
L Patented technology which enables
printing fluids which have a high pigment
content and high viscosity. This gives us
a wider window of opportunity because
we can handle a wider range of fluids to
deliver richer, more vibrant colours, or add
functionality like scratch resistant or anti-
slip surfaces, or value add embellishments
and print effects
L An open internal printhead design which
produces industrial levels of printhead
reliability and consequently higher
production uptime.
Sectors where we focus include Ceramics and
Glass, Coding and Marking and Direct-to-Shape,
3D and Advanced Manufacturing, Packaging and
Textiles, as well as Graphics and Labels.
4.
A clear strategic vision
Our customer-centric business model places
the OEM and UDI at the heart of everything
we do. We continue to execute on our plan
to become more vertically integrated to
drive printhead sales. Our ability to supply
electronics, software, fluid management
systems and print engines alongside
application support, combined with a disruptive
technology, sets us apart from our competition.
2.
Proven technology and
product roadmap with a
strong value proposition
We have a product roadmap based on our new
generation ImagineX technology platform that
will develop our range to offer advantages
over the competition and open new markets.
Our unique technologies and products are the
leading enabler for innovation and creativity,
and for driving production efficiencies for
many industries.
3.
Experienced and focused
management team
As the only leading independent printhead
manufacturer we are able to have a flexible,
collaborative approach. Our experienced
management team is committed to remaining
customer-centric with a focus on Xaar’s
profitable growth strategy of offering our
customers a vertically integrated solution.
6.
Healthy balance
sheet position
We have the resources necessary to
implement our strategy. This provides the
platform for security and a great foundation
for future growth.
5.
Roadmap to deliver
the opportunities
Our ImagineX platform (launched September
2020) is driving our progress, enabling the
business to increase its addressable markets
whilst establishing market leading products
across all our sectors. ImagineX has already
delivered significant enhancements to the
current portfolio; these include substantially
improved speed and throughput as well as high
throw distance and viscosities of over 100cP
at jetting temperature. We have now launched
three new printheads on this platform:
(Xaar Aquinox, Xaar Nitrox and Xaar Irix.
Future product launches focus on increased
robustness to improve the life of the printhead
and even higher resolutions.
04
Xaar plc
Annual Report and Financial Statements 2023
Strategic Report
Governance
Financial Statements
Our strategy
Our strategy is to sell more printheads
Our strategy is to sell more. For this to occur we need to extend our range of products to
access all digital print markets, as well as make it easier for customers to use our printheads
by supplying the supporting systems components. To drive this we need to ensure that our
customers understand what Xaar has to offer and why it is the right choice for them.
The business model delivers a clear
value proposition:
Our clear business model:
sell more printheads
To sell more printheads,
we needed to extend
our range of products to
access all digital print
markets
In parallel, we need
to make it easier for
customers to use our
printheads by supplying
the supporting system
components
All underpinned by a very clear value proposition
for each market
05
Xaar plc Annual Report and Financial Statements 2023 Chairman’s introduction
2023 was a challenging year.
Despite a strong start, the
impact of macro-economic
and geo-political factors
slowed the momentum
the business was building,
particularly so in the fourth
quarter. Global inflation
and higher interest rates
have led to lower demand
for capital goods, and this
has had an impact on our
revenues.
Overall financial performance in 2023 was
broadly in line with the Board’s expectations but
trading conditions have been relatively weak,
particularly in China, an important market
for the business. In the latter part of the year,
it also became clear that some customers
were responding to general market conditions
by delaying their new product launch plans,
a consequence of which is less certainty in
the timing of new business for Xaar. Several
customer product launches anticipated to take
place at the end of 2023 and early in 2024 are
now expected in mid to late 2024. This has a
direct impact on Xaar revenues and will hold
back growth in 2024.
Despite these external challenges, good
progress has been made within the business
as our technology and product programme
continue to deliver new capabilities and
enhanced performance. Our High Viscosity
technology is creating significant interest
across a number of markets, and we are
pleased to be developing strong partnerships
with leading suppliers in sectors that represent
new application areas for Xaar.
Within the business the management team
have responded proactively to inflationary cost
pressures, streamlining internal operations,
and lowering total overheads. We remain
focused on our core technology and the
development of strong customer partnerships
as the demand for digital print capability
continues to grow.
Strategic Progress
We believe a significant opportunity exists
in market sectors and applications where
Xaar technology provides commercial and
technical performance advantages. There is
a wide range of interest in digital print across
industrial sectors, in particular those using
higher viscosity fluids, and the economic benefit
of doing so compared to existing analogue
techniques reassures us that prospects for the
business remain significant.
Our technology strategy is focused on
developing product functionality and attributes
which customers tell us they need, and our
operational and commercial strategies are
designed to make doing business with Xaar
straight forward and cost efficient.
Our vertical integration strategy, which
concentrates on developing competence
beyond the printhead itself into electronics,
fluid management and integration skills, is
also helping us gain access to new applications
and is an advantage we can offer our OEM
customers to enable their swift deployment of
the print system element within their products.
As previously announced, we have invested
in our manufacturing facilities to improve
efficiency and lower costs and the first phase
of this programme was completed in early
2023 on time and under budget. This has also
enabled increased capacity and generated
cost savings, especially in reducing our
power usage.
Our financial strategy is aimed at generating
strong returns for stakeholders in the mid-
to longer-term, while maintaining capital
discipline and delivering strong cash generation
to facilitate continued investment in technology,
products and capability.
While there is no doubt that the macro-
economic challenges have slowed our
progress in building revenues, we are pleased
with the progress we have made across several
areas of the business this year and we have a
significant pipeline of opportunity to build upon
in 2024 and beyond.
Financial Results
In a year where inflation and interest rate
increases have dominated the economic
landscape, the Group delivered revenue of £70.6
million and a pre-tax profit adjusted for non-
recurring costs of £2.9 million, slightly ahead
of the prior year. Revenues fell by 3 per cent
(2022: £73 million). The full-year unadjusted
loss was £2.2 million (2022: £0.8 million profit).
Our balance sheet is sound and we remain cash
positive with banking facilities largely undrawn.
The Group has maintained higher levels of
inventory over the past two years as we sought
to mitigate both cost increases and disruption
in the supply chain. We anticipate normalising
inventory and gaining the associated positive
cash benefit during 2024.
The Board has not declared a dividend in 2023
as we continue to believe that prioritising cash
for investment in the business will deliver more
compelling returns for shareholders in the
medium-term.
People and ESG
A highlight of the year was our successful
application for accreditation as a Great Place to
Work. People are at the heart of every business
and in Xaar we prioritise staff safety and well
being alongside performance and delivery.
The Board engages with staff representatives
regularly and we remain encouraged by the
commitment and energy we see in action
every day. On behalf of the Board, I would like
to thank our entire team for their hard work
and diligence. We also seek to have a wider
positive impact on society by understanding
and prioritising stakeholder needs, managing
our business responsibly, and reaching out
to our local communities. Our teams have
continued to support national STEM initiatives,
encouraging young people to develop an
interest in technology and business.
Environmental focus is also important in Xaar
as we make progress towards our goal of net
zero by 2030. Recently we were nominated
as finalists at the Edie awards for Green
Project of the Year in relation to our factory
re-organisation project. In addition to in-house
initiatives, our products are designed to be
cleaner, more efficient and generate less
waste than traditional print techniques. Our
development of printheads capable of reliable
performance using water-based fluids is
a particular area of focus. There is a clear
environmental advantage in using our products
as we can print highly viscous fluids, not just
water-based, which require much less drying
time, thereby reducing significant energy usage
as well as reduced water content.
06
Xaar plc Annual Report and Financial Statements 2023 Board and Governance
During the year Chris Morgan stood down
from the Board and we welcomed two new
non-executive Directors Richard Amos and
Jacqui Sutton.
Richard Amos joined in June 2023 and is the
Chair of Audit Committee. Richard also sits on
the Nomination and Remuneration Committees.
Jacqui Sutton joined the Board in November
2023 and sits on the Audit, Nomination and
Remuneration Committees. Both Richard
and Jacqui bring a wealth of experience and
have relevant knowledge and skills from their
previous executive and non-executive roles.
In February 2024, Stuart Widdowson joined
the Board as a non-executive Director. Stuart
is appointed as a representative of Odyssean
Capital LLP where he is the Managing Partner.
In a further change, Alison Littley has notified
the Board of her intention to step down as a
non-executive Director during 2024. Alison
will stand for re-election this year but will
resign from the Board once her replacement
is recruited. An announcement, including
arrangements for chairing the Remuneration
Committee and the senior independent
director role, will be made in due course. I have
appreciated the support of both Alison and
Chris Morgan over several years and take this
opportunity to express thanks to them both
for their commitment and contribution to the
business.
Looking Ahead
Having put in place strong foundations through
the development of our strategy over the last
three years, the Board is optimistic about the
opportunities that lie ahead for the Group and
for all our stakeholders including employees,
customers, and shareholders.
Xaar remains in a good position with unique
and compelling products and a significant
addressable market. External factors mean
we are cautious about the short-term, but
we believe the business is well positioned
for growth over the medium-and long-term.
We look forward with confidence.
Andrew Herbert
Chairman
25 March 2024
Strategic Report
Governance
Financial Statements
07
Xaar plc Annual Report and Financial Statements 2023
Strategic update
2023 was a year in which
the Group delivered
encouraging progress
in key strategic areas.
Introduction
The Group entered 2023 having invested in
inventory over the previous year to maintain
customer service levels during the period of
exceptional supply chain disruption in 2022, to
mitigate cost inflation and to be well positioned
for several customer product launches.
Due to current geo-political and macro-
economic conditions, OEM machine launches
are taking longer than expected which had
a significant impact in Q4 of 2023. Several
of these launches were delayed, impacting
revenue in the latter stage of the year and the
start of 2024. However, we remain optimistic
about the future, and we are well placed to
benefit as trading conditions improve.
The disappointing end to the year masked some
more encouraging signs. We continue to enjoy
leading positions in attractive structural growth
markets. We deepened our relationships with
key customers helped by our widening product
range, and we have grown our customer base
and maintained our market share.
08
Strategic progress
Xaar delivered a good performance in 2023.
We continue to execute our strategy of
delivering compelling products in each of
our market segments and remain focused
on the significant opportunities that will drive
profitable growth.
Financial Performance
We have delivered performance in 2023 in
line with updated management expectations,
demonstrating operational and strategic
progress across the Group. Revenue for the
period was £70.6 million representing
a decrease of 3% against 2022.
This strategy is now delivering with our
products, especially Aquinox, generating
strong interest from both existing and new
customers underlining our leadership in jetting
highly viscous fluids which, alongside other
advantages, provide significant sustainability
benefits, as well as reducing our customers’
time to market.
We have seen an increase in the number of
customers adopting Xaar technology and we
now have clearer visibility of their product
launches. This is evidenced by the 12 new
customer product launches during 2023.
We expect an increase in customer product
launches that incorporate Xaar’s technology
during 2024, which we anticipate will drive
demand for printheads.
Phase 1 of our factory upgrade has been
successfully completed on time and within
budget, positioning us to deliver increased
efficiency and capacity, whilst realising
significant cost savings. Further phases of
development will see increased modernisation
of our manufacturing facilities leading to
greater efficiencies and scale potential.
These will only be undertaken when business
performance and market conditions improve.
We have seen continued good performance
from EPS, FFEI and Megnajet, with EPS
especially continuing to deliver excellent
revenue and profit growth. As part of our
strategic decision to consider options to
withdraw from the Life Science part of FFEI,
we sold non-core IP assets in the year
delivering a profit of £2.0 million.
The Printhead business has a clear customer-
focused strategy, and we are pleased to
have grown our customer base and at least
maintained our market share in key sectors.
The economic challenges globally, particularly
rising interest rates, have directly impacted
capital equipment purchases by some
customers in the year, particularly so in
Q4 2023.
As a result of these pressures revenue for the
Printhead business was down 5%. The external
pressures not only impacted customers’
new product launches but also existing core
markets for printheads, with the ceramics
sector being particularly affected, linked to the
slowdown in the global construction industry.
Progress has been made in market sectors
beyond Ceramics, especially the key growth
area of 3D printing, and we continue to see
strong customer engagement where we have a
competitive advantage enabling customers’ use
of high viscosity fluids.
Geographically we delivered growth in Asia,
when compared to the COVID-19 impacted
period in 2022. This increase of £4.0 million
(49%) was offset by lower revenue in the US
(down £5.6 million, 15%) and EMEA (down £0.6
million, 2%). While disappointed with revenue
decline in some markets, we are pleased
with the broader spread of business across
geographic regions and market sectors. This
demonstrates the increasing resilience of the
business. We have increased diversification of
customers, applications and geographies as the
customer pipeline continues to grow.
EPS has delivered an excellent performance.
Revenue increased 13%, with growth across
all its product lines, and digital inkjet sales
at the core of the success growing 15%. The
proactive decisions taken in the last two years
to strengthen the management team and
rationalise the product range are delivering
excellent results.
FFEI and Megnajet continue to perform well.
These businesses provide us with an expanded
product range enabling real traction and
opportunity in the printbar and print engine
markets, along with fluid management
systems.
Our plan has been to focus on products that
support our core strategy. As a result, we are
considering options to withdraw from the non-
core Life Sciences part of the FFEI business,
and the sale of IP in this area during the year
is part of this process. We delivered a one-off
profit of £2.0 million through this sale which
helped offset the one-off impact of Phase one
of our factory re-organisation at Huntingdon
completed in Q1.
Xaar plc Annual Report and Financial Statements 2023 Strategic Report
Governance
Financial Statements
Gross margin for the Group was 38% (2022:
39%) despite inflationary cost pressures and
closing the Huntingdon factory for two months
to complete Phase 1 of the operational re-
organisation. We have successfully protected
our gross margins from input cost inflation
which was evident in our supply chain in
2023. Our ability to pass on inflation increases
underlines the strength of our products and our
market position.
Group adjusted profit before tax for 2023 was
£2.9 million, an increase of £0.1 million when
compared to £2.8 million in 2022. The full-year
unadjusted loss was £2.2 million (2022: £0.8
million profit).
Healthy balance sheet and
operational investment
The Group retains a healthy balance sheet and
cash position. Cash at 31 December 2023 was
£7.1 million, reflecting a net outflow of £1.4
million over the year.
During the year we invested £2.1 million in
inventory allowing the Printhead business to
increase its holding of finished goods. This
has been a controlled and systematic approach
over the last 18 months giving confidence in
our ability to deliver on customer orders.
As a consequence of the unexpected reduced
demand in our core markets and particularly a
significant slowdown in the ceramics sector in
Q4 2023, we have a higher than planned finished
goods holding in the Printhead business.
Whilst we have won business through the
advantage of offering shorter lead times than
our competition ensuring we have been able
to capitalise on commercial opportunities, we
continue to monitor the product mix of finished
goods to ensure it is appropriate for customer
demand. Consequently, we expect to reduce
inventory levels during 2024 which will have
a positive impact on cash generation during
the year.
We will maintain our disciplined approach to
balance sheet management, as it remains a key
priority to allow for further investment in the
business focussing on operational capability.
We have been disciplined in our management
of cash expenditure focusing on improving
operational capability and efficiencies, investing
£1.5 million (2022: £2.4 million) in operational
upgrades along with the factory upgrade
completed in March 2023.
R&D investment is critical to the ongoing
success of the business, and we will continue to
invest in our R&D capabilities across the Group
to ensure our technology remains market-
leading. During 2023 we invested £5.6 million
(2022: £6.7 million).
In June 2023 we successfully agreed a
Revolving Credit Facility (RCF) of £5.0 million
with our lead bank, HSBC, which allows for
accelerated investment in the business and
our operational capability.
Operational improvements driving
greater efficiency and capacity
Operational improvements have been made
through investment in our manufacturing
facilities to increase efficiency and lower costs.
The first phase of this programme has now
been completed with the Huntingdon factory
re-organisation completed in early 2023 on time
and under budget.
This will enable us to operate more efficiently,
increase capacity and yields whilst crucially
generating significant cost savings, especially in
reducing our energy consumption. Accordingly,
this investment will deliver a rapid return and
payback in less than a year.
This is the first phase of our efficiency upgrade
programme. The next phase of investment
will result in more modern, efficient, and
environmentally beneficial manufacturing
facilities across the business. This will be
undertaken when business performance
improves, depending on business needs and
volume demand. It is anticipated between £10
million and £15 million will be invested in the
next phase.
We continue to exercise tight control over our
cost base whilst also seeking opportunities to
drive performance. This includes establishing
an internal project, named Hubble, which will
provide focus for our key priorities and goals.
This project is split into 4 key streams:-
L Commercial strategic opportunities
L Operational efficiency
L Organisational effectiveness
L Customer integration.
Each project stream has an appropriate
Executive sponsor and project lead. The project
aims to deliver cost savings on an annual
basis of £2.0 million of which £1.2 million has
already been identified and implemented. The
project will be delivered with no incremental
investment.
Significant market
opportunity remains
We have a strong proposition across our five key
market sectors. Our digital inkjet technologies
provide compelling propositions to transform
print processes across a wide range of
applications, and we can supply our customers
with the products they need to develop their
printers. This means we have significant growth
opportunities, incremental to printhead sales,
where we can shorten our customers’ product
development time to market.
The medium-and long-term opportunity
for the business remains significant. Whilst
we already have good market share in core,
mature markets such as Ceramics and Coding
& Marking, our market leading technologies
provide further growth opportunities in
applications where our capabilities offer
competitive advantage.
During 2023 we have made significant progress
in 3D printing, where our ability to print high
viscosity fluids is transforming the industry. The
3D printing sector is experiencing a greater
level of customer product launches, thereby
providing greater revenue potential opportunity
for our products than previously expected.
Historically Xaar has almost exclusively
operated in the B2B (Business to Business)
area across our product ranges and
applications, however there is an emerging
opportunity for 3D printing in the B2C
(Business to Consumer) sector where
we can facilitate growth.
We are partnering with established system
providers for our Xaar Irix printhead to enable
a new generation of full colour, inkjet-based
desktop 3D printing systems that are higher
resolution and more flexible than the existing
technologies. We anticipate this new generation
of 3D printers to be launched during 2024
and 2025.
Customer engagement has increased as our
printhead product range has expanded. Our
ability to offer a broader solution to customers
with fluid management systems and printbars
has increased the number of customers
developing machines with our products. During
2023 there were 12 customer product launches,
and we anticipate at least a further twelve
launches during 2024.
By providing an integrated solution for
customers whereby they can access more of
the printing ecosystem, we help our customers
take advantage of the inkjet opportunity.
Working with Xaar means a higher chance
of success by being faster to market and
increasing return on investment. Ultimately this
will help us in our overriding strategy to sell
more printheads and enables the business to
manage volatility better, in any given market.
We are further supporting our business model
with three key initiatives.
Firstly, we are diversifying the geographical
spread of our customer base. By targeting
OEMs in Europe and US, we gain greater
regional diversity and reduce our dependence
on any specific region. This has resulted in
growth of new development projects in those
regions and will build further resilience into our
business.
The second initiative is to develop relationships
with our end customers in a way that hasn’t
been previously achieved. By engaging with
end users – in partnership with our OEMs – we
are expanding our market understanding. This
not only strengthens the relationship with end
users and direct customers but presents us
with a clear picture of the decisions that drive
the adoption timing of new systems with Xaar
technology.
09
Xaar plc Annual Report and Financial Statements 2023 Strategic update continued
Significant market opportunity
remains continued
The transition to Xaar technology and
revolutionary high viscosity inks can present
technical challenges when customers integrate
our printheads into a new system. To counter
this we are developing our service offering
to better support them, which is our third
initiative. This involves focusing our resources
to identify issues earlier and provide more
direct support to resolve technical challenges.
Additionally, we are developing a full printer
solution in-house for our key markets so that
we can identify and resolve issues with system
integration before they create problems
in the field.
Product development and capability
We have a unique roadmap of product
development to ensure we offer an increasingly
vertically integrated commercial strategy to
capitalise on this market opportunity.
Our Xaar 2002 printhead has double the
resolution of our competitors giving the ability
for very high-quality print and incorporates
our key technologies which enable printing
of very challenging fluids in harsh production
environments.
The Xaar Irix remains the flagship product in
the Coding and Marking and Direct-to-Shape
sectors. It delivers increased throw distance
whilst maintaining print quality and along
with our Xaar 50X printheads means we are
maintaining our position in Coding and Marking
and have several opportunities in the Direct-to-
Shape market.
The Aquinox printhead is positioned to drive
adoption in Packaging and Textiles markets.
The response to the product has been
extremely positive due to its ability to print
high viscosity water-based inks. This gives
customers the opportunity to use less
energy, with a higher throughput, and more
vibrant colours.
The significant benefits of high viscosity inks
have also recently been independently validated
by the Welsh Centre for Printing at Swansea
University confirming the superiority of our
technology. This was confirmed at a highly
successful R&D open day held in November
2023 which was attended by customers,
commercial partners and potential technology
adopters. They were able to witness and
participate in live demonstration of the
functionality that our products offer. The day
was highly successful, demonstrated by
the level of interest and further enquiries we
have received since.
10
The already successful ImagineX platform
will deliver improved features over the next
few years which will provide significant
enhancements to the current portfolio,
including:
L substantially improved speed and
throughput (frequencies up to 150kHz,
equivalent to a threefold increase in speed
compared to current products),
L increased throw distance to improve image
quality on curved surfaces,
L increased robustness to improve the life of
the printhead and maintain image quality,
L higher viscosities enabling a broader range
of fluids to be printed (above 100cP), and
L higher resolutions (up to 1440 dpi).
These features will help strengthen our
position in markets where we are already well
represented and will drive improved adoption
in several markets where we are currently not
participating.
The enhancements in our product roadmap
support our customers with a clear path to
upgrade their products and maintain their
product differentiation.
Strong commitment to sustainability
We continue to make progress on ESG and the
Group’s Sustainability Roadmap. The Board
remains committed to the business becoming
carbon net zero by 2030.
We are passionate about delivering solutions
and products for our customers that are
cleaner and better for the environment. Our
products are well placed to deliver significant
benefits commercially and environmentally for
our customers through reductions in power
consumption and water usage.
Digital inkjet printing is inherently more
sustainable compared to traditional analogue
printing with a smaller carbon footprint. It
reduces and prevents excessive waste and
uses less energy due to the ability to print
short runs or direct-to-shape. With Ultra High
Viscosity Technology and TF (ThroughFlow)
Technology ink recirculation, Xaar printheads
are capable of printing very viscous fluids
which, in the textiles sector for example, results
in a reduction in energy used in intensive drying
processes. We are passionate about continuing
further adoption and understanding of the
environmental benefits our products can bring
to customers.
During 2023 we gained full accreditation for
the Great Place To Work certification. This was
especially pleasing as it was gained on our first
application and is testament to the hard work
and engagement of colleagues across
the business.
We also seek to have a wider positive impact
on society by understanding and prioritising
employee needs, doing business responsibly,
and reaching out to our local communities.
All our UK sites have now moved to 100%
renewable energy. All printhead product
packaging is fully recyclable. Our Apprentice
Programme is well developed across the
business, and we continue to support activities
promoting STEM (Science, Technology,
Engineering and Maths) subjects amongst
young people as well as several sponsorship
programmes supporting university students
and industry placements.
Outlook
Whilst the end of 2023 was challenging, and the
current external trading environment remains
so, we are focused on the delivery of our
strategy and taking advantage of the significant
opportunities we have that will drive profitable
growth. Our products continue to generate
strong interest from customers, demonstrating
our leadership in printing highly viscous fluids
with all the performance and sustainability
benefits they deliver.
As previously announced in our November 2023
trading update, due to the current geo-political
and macro-economic conditions, bringing some
of our customer’s products to market is taking
longer than expected, meaning we are cautious
on precise timing.
As we reduce our finished goods inventory
during 2024, the lower volumes will impact our
ability to recover production overhead costs.
Together with the effect of increased input
costs, as previously explained, our gross margin
will be impacted this year.
Despite this, we will continue to take decisive
action to manage our costs and maximise cash
generation during this slower trading period
whilst preserving our sources of long-term
competitive advantage.
We are confident that our market position
remains strong and that the Group remains
well positioned to prosper as our key markets
resume a trajectory of healthy long-term
growth. So, despite the short-term challenge
we remain hugely excited for the future of
Xaar and remain confident that the unique
capabilities of our printheads will drive
broad adoption across all markets over the
coming years.
We believe the business is well positioned
for growth through both new applications
and share gains in new and existing markets
and our expectations for the full year remain
unchanged.
John Mills
Chief Executive
Officer
Ian Tichias
Chief Financial
Officer
25 March 2024
25 March 2024
Xaar plc Annual Report and Financial Statements 2023 Strategic Report
Governance
Financial Statements
Revenue from Packaging and Textiles continues
to be modest. Our ability to target this sector
effectively has been somewhat limited by our
product range, although the launch of the
Aquinox printhead has started to address this.
However, advancements in the product portfolio
driven by the ImagineX platform should make
this large sector more accessible in the future.
Full year revenue has remained consistent
year-on-year at £0.5 million.
Revenue from the Product Print Systems
business achieved another year of significant
growth of £2.5 million (13%) in 2023, totalling
£22.1 million (2022: £19.6 million) for the year.
Growth has again been achieved across all
product groups this year, predominantly in
the core area of digital inkjet machine sales,
which have grown by £1.9 million (15%). This is
particularly welcome seeing as this is the core
focus in this segment and will drive increased
profitability.
The anticipated full year increase in Pad
Printing Machine revenue has been achieved.
We see a strengthening demand pipeline due
to the easing of the backlog of customers’
deferred investment in capital equipment and
we are well placed to deliver further growth
in 2024.
The change in commercial strategy, increasing
focus on consumables and accessory sales has
also contributed to the revenue growth seen
in this segment, with increased revenue (60%)
achieved from ink, plates and parts sales.
Revenue generated from customers located in
EMEA regions remained largely stable year-on-
year at £27.8 million (2022: £28.4 million) which
is pleasing and reflects continued customer
engagement across our product offering in
recently entered market sectors.
Whilst COVID-19 restrictions in China have
now been lifted, a trailing impact on demand
is still being suffered by the Group within the
Printhead segment. Suppressed demand has
been exacerbated by the impact of inflationary
cost pressures and interest rate rises on capital
equipment sales globally. These constraints on
demand have translated into a £1.9 million (5%)
year-on-year reduction in Printhead revenue.
Growth has been achieved again this year in
the 3D Printing and Advanced Manufacturing
(AVM) sectors, which is pleasing as this
reflects our overall customer strategy and
enhanced product portfolio. The 3D printing
market remains an exciting opportunity for
us and is a sector we continue to expect to
grow significantly in the future. Revenue from
3D Printing and AVM grew £2.5 million (64%)
year-on-year. Both 3D Printing and AVM are
markets where we are well positioned to take
advantage of growth opportunities and although
OEM machine development cycles can be
long, which means extended time-scales for a
customer to reach full production, the market
opportunity is significant.
As anticipated, revenue in the Ceramics
and Glass market has reduced, due to the
significant slowdown in the sector, with a fall
of 9% in the year.
Coding and Marking (C&M) and Direct-to-Shape
(DTS) revenues declined by £1.4 million (11%)
in the year. Revenue from the Wide Format
Graphics (WFG) and Labels market fell 25%
in the year from £4.8 million to £3.6 million.
Challenges faced with customer deferrals
of orders in the prior year have continued to
postpone revenue recognition for the Group.
Business performance
Revenue
Despite trading conditions becoming more
challenging in the latter part of the year, the
Group achieved revenue of £70.6 million,
representing a marginal £2.2 million (3%)
decline on 2022 revenues of £72.8 million.
Group revenues were £34.5 million in the
first half of the year and £36.1 million in the
second half.
Whilst a lack of growth is disappointing,
underlying market demand remains and we
have retained market share. Therefore, we are
confident in the medium-term of returning to
previous levels of organic growth. The pipeline
of anticipated customer product launches
in the coming 12 to 18 months drives this
confidence.
Revenue generated by the Digital Imaging
operating segment totalled £8.7 million in
the year (2022: £11.6 million), representing a
decline of 25% compared to the prior year. In
accordance with previous statements, as part
of the ongoing integration this year, we have
maintained focus on the core print systems
activities acquired and commenced the
strategic exit from the non-core Life Sciences
activities that also formed part of the acquired
business. This has resulted in an aggregate
reduction in revenue whilst synergies are built
in core activities.
The year ended 31 December 2023 represents
the first full year of trading in the Ink Supply
Systems operating segment following the
Group’s entrance into this market in Q1 2022
via the acquisition of Megnajet Limited.
Whilst the Americas remains the Group’s
primary geographical market representing 43%
of total Group revenue (2022: 50%), revenue
from the Americas experienced a decline of
£5.6 million (15%) year-on-year, due to a £2.8
million reduction in printhead revenue
primarily in the Coding & Marking (C&M)
sector, and a £1.8 million reduction in Digital
Imaging revenue.
These reductions in revenue were partially
offset by increased income generation from
customers in Asia, with revenue increasing by
£4.0 million to total £12.2 million for the year.
This was driven by single-pass machine sales
in Asia by EPS.
Table A – Group revenue by geographic region
£m
FY 2023
FY 2022
Variance
Variance %
PH PPS
DI
ISS* Total
PH PPS
DI
ISS* Total
PH PPS
DI
ISS* Total
PH
PPS
DI
ISS*
Total
Americas
Asia
EMEA
Total
8.0 19.0
3.0
8.4
0.1
20.7
37.1 22.1
3.0
0.1
5.6
8.7
0.6
0.7
1.4
2.7
30.6
12.2
27.8
70.6
10.8
7.5
20.7
19.3
0.2
0.1
4.8
0.1
6.7
39.0
19.6 11.6
1.3
0.4
0.9
2.6
36.2
8.2
28.4
(2.8) (0.3) (1.8) (0.7)
0.3
0.5
–
– (1.1)
0.9
–
2.8
(5.6)
4.0
(0.6)
(26)% (2)% (38)% (54)% (15)%
49%
(2)%
– 75%
– (16)% 56%
12% 1400%
–
72.8
(1.9)
2.5 (2.9)
0.1
(2.2)
(5)% 13% (25)% 4%
(3)%
* Megnajet Limited was acquired on 2 March 2022 – comparative figures in the table above reflect 10 months of post-acquisition revenue.
PH - Print-head
DI - Digital Imaging
ISS - Ink Supply Systems
11
Xaar plc Annual Report and Financial Statements 2023 Business performance continued
Table B – Printhead Revenue by Sector
£m
2023 H1
2023 H2
FY 2023
FY 2022
Var
Var %
Ceramics and Glass
C&M and DTS
WFG and Labels
3D Printing and AVM
Packaging and Textiles
Royalties, Commissions and Fees
8.0
5.1
1.7
2.6
0.2
–
7.5
6.1
1.9
3.8
0.2
–
Total
17.6
19.5
Figures (£m) and percentages (%) are subject to rounding.
Table C – Product Print Systems Revenue by Sector
15.5
11.2
3.6
6.4
0.4
–
37.1
17.0
12.6
4.8
3.9
0.5
0.2
39.0
(1.5)
(1.4)
(1.2)
2.5
(0.1)
(0.2)
(1.9)
9%
(11)%
(25)%
64%
(20)%
(100)%
(5)%
£m
Digital inkjet
Pad printing
Other
Total
2023 H1
2023 H2
FY 2023
FY 2022
Var
Var %
7.3
3.0
0.4
10.7
7.0
4.0
0.4
11.4
14.3
7.0
0.8
22.1
12.4
6.7
0.5
19.6
1.9
0.3
0.3
2.5
15%
4%
60%
13%
Figures (£m) and percentages (%) are subject to rounding.
Total adjusting items affecting the operating
result were £5.3 million (2022: £2.0 million).
Of the total £3.3 million year-on-year increase,
£1.6 million was driven by unfavourable
movements in exchange rates and fair value
measurement. A further £1.0 million of this
increase compared to the prior year was
driven by increased spend on restructuring
and efficiency upgrade programmes. Finally,
a further £0.4 million increase in adjusting
items resulted from the ongoing integration
of previously acquired businesses.
Result for the year
The total reported result for the year consisted
of a loss before tax of £2.4 million (2022: profit
before tax of £0.8 million). All of which resulted
from continuing operations and is attributable
to the owners of the Group. Consequently,
basic (loss)/earnings per share was (2.8)p
(2022: 2.1p).
After factoring in the impact of adjusting items,
the Group achieved an adjusted profit before
tax of £2.9 million (2022: £2.8 million). This
equates to adjusted, basic earnings per share
of 3.6p (2022: 4.8p). This is a pleasing result in
light of the deterioration in the wider macro-
economic environment and trading headwinds
encountered during the year.
Whilst not being measures defined under
IFRS, we believe that the ‘adjusted profit
before tax’ and ‘adjusted earnings per share’
measures presented, provide shareholders
with a consistent presentation of the Group’s
underlying, operational performance. For full
details of the nature and quantum of items
added back as ‘adjusting’ when calculating
these alternative performance measures,
please refer to Note 9 of the consolidated
financial statements.
Cash generation
The Group continued its robust, disciplined
focus on cash, ensuring the maintenance of
sufficient financial resources during the year.
The Group holds a healthy cash balance of £7.1
million as at 31 December 2023 (2022: £8.5
million). This represents a reduction of £1.4
million year-on-year, which has been driven
by planned working capital investment.
Operating cash inflows, before movements in
working capital, generated during the year were
£4.6 million (2022: £6.6 million).
In the context of market headwinds, we
continued a proportionate level of investment
in operational infrastructure and product
development in the year of £1.9 million (2022:
£5.4 million). This included maintenance capital
expenditure and the completion of the first
phase of the efficiency upgrade programme
(namely the Huntingdon factory reorganisation)
in the first half of the year; which was delivered
on time and on budget.
This now enables us to operate more efficiently
by increasing capacity and yields, whilst
crucially generating significant cost savings,
especially in the form of reduced energy
consumption. Accordingly, this investment
is anticipated to deliver a rapid return, with
payback expected in less than a year.
In June 2023, we secured a Revolving Credit
Facility of £5 million with our lead bank, HSBC.
Access to these funds allows for accelerated
investment in the business and in our
operational capability. As at 31 December 2023,
no amounts were drawn under this facility.
Gross profit
The Group maintained a consistent gross profit
margin of 38% (2022: 39%), with gross profit
reducing to £26.9 million (2022: £28.6 million)
in line with the reduction in revenue in the year.
The margin structure across all the Group’s
operating segments has remained stable year-
on-year, cemented by the actions taken in prior
years to deliver efficiency gains and secure raw
material cost-savings to support gross margin.
The impact on profitability resulting from the
temporary suspension of activity at the Group’s
production facility in Huntingdon (the first phase
of the Group’s efficiency upgrade programme)
was largely successfully mitigated by the
improvements in overhead recovery gained
as a consequence of the resultant increased
throughput following the production facility
reorganisation.
Research and
development expenses
The Group maintained its R&D spend to
revenue ratio in the desired region of 8-11%
with gross, pre-tax investment in R&D totalling
£5.6 million for the year (2022: £6.7 million).
This underscores the Group’s continued
commitment to the strategic goal of offering
customers a fully vertically integrated product
offering within all product sectors as set out in
the Group’s product roadmap; with focus in the
year having been on the ImagineX platform.
We will continue to invest in our R&D
capabilities across the Group to ensure our
technology remains market leading.
Operating expenses
There has been a strong focus on the
management of costs across the Group
in response to broader macro-economic
conditions and the headwinds faced in the
trading environment in which the Group is
operating.
Sales and marketing spend for the year of
£5.4 million represents a 19% reduction on
prior years (2022: £6.7 million), demonstrating
the Group’s focused, targeted approach to
managing these costs.
General and administrative expenses of £20.2
million were £5.7 million higher than the prior
year (2022: £14.5 million). Of this increase, £3.1
million arose from adjusting items resulting
from restructuring and integration activities.
The remaining £2.6 million year-on-year
increase in adjusted general and administrative
expenses was broadly offset by the £2.2 million
increase in other operating income. This was
predominantly generated on disposal of the
intangible assets associated with the non-
core Life Sciences activities in the context of
the ongoing integration of the FFEI Limited
business during the year (2023 £2.2 million,
2022: £0.1 million).
12
Xaar plc Annual Report and Financial Statements 2023 Strategic Report
Governance
Financial Statements
Dividend
No dividend has been declared in respect of
the year. The Board regularly reviews its capital
allocation policy and believes that prioritising
investment to enable profitable growth for the
business is currently the most appropriate
use of capital and is expected to achieve
more compelling medium-term returns for
shareholders.
John Mills
Chief Executive
Officer
Ian Tichias
Chief Financial
Officer
25 March 2024
25 March 2024
Healthy balance sheet
The Group has maintained a healthy balance
sheet throughout the year with a consistent net
current assets position of £33.5 million (2022:
£30.0 million).
Non-current assets of £45.5 million decreased
by £6.5 million during the year. In line with the
Group’s cash focus, there was a £1.6 million
reduction in property, plant and equipment as
new purchases were controlled. A £2.8 million
reduction in the non-current element of the
contingent consideration receivable resulted
from the progression of this arrangement
through its ongoing term. The remaining
reduction in the carrying value of non-current
assets being the annual depreciation and
amortisation of assets in line with their useful
economic life for the business.
Current assets increased by £1.3 million from
£50.5 million as at 31 December 2022 to £51.8
million. Working capital balances remained
broadly flat year-on-year, with the £1.9 million
(7%) increase in inventory being offset by
a reduction in cash and cash equivalents.
The increase in current assets year-on-year
predominantly results from the £1.8 million
increase in the contingent consideration
receivable following the re-aging of this balance
based on assessments of the earn-out and
milestone consideration expected to meet the
conditions for payment to the Group during the
year ending 31 December 2024.
Non-current liabilities totalled £7.2 million,
following a £3.0 million reduction year-on-year.
All remaining deferred consideration payable
in respect of business combinations from prior
years falls due for payment during the year
ending 31 December 2024, reducing the non-
current deferred consideration balance by £2.0
million compared to the prior year. The balance
now being £nil as at 31 December 2023. The
remainder of the reduction in non-current
liabilities results from changes in the average
remaining lease term of the Group’s lease
portfolio.
Current liabilities of £18.2 million have reduced
by £2.3 million compared to the prior year
(2022: £20.5 million). This movement is driven
by a £3.6 million reduction in trade and other
payables, which is partially offset by a £1.0
million increase in amounts borrowed under
the Group’s invoice discounting facility.
The business has a clear plan and strategy
which its healthy balance sheet and cash
position will support. There remain external
development opportunities which, if they can
expand our capabilities and expertise, we will
look to potentially add to the Group. At present,
we are focusing investment internally to ensure
we have the operational capacity and efficiency
to meet future demand, alongside investment in
our product roadmap development.
13
Xaar plc Annual Report and Financial Statements 2023 Key Performance Indicators
Measuring our success
We monitor progress
against the delivery of
our strategic goals using
financial key performance
indicators (KPIs).
The Company uses a number of alternative
performance measures (APMs) in addition to
those reported in accordance with IFRS. The
Directors believe that these APMs, shown,
are important when assessing the underlying
financial and operating performance of the
Group and its divisions, providing management
with key insights and metrics in support of
the ongoing management of the Group’s
performance and cash flow. A number of these
align with KPIs and other key metrics used
in the business and therefore are considered
useful to also disclose to the users of the
financial statements.
The following APMs do not have standardised
meaning prescribed by IFRS and therefore
may not be directly comparable with similar
measures presented by other companies.
i See note 9 of the Group’s Consolidated
Financial Statements, for reconciliation
between adjusted and statutory items
2022 figures and 2023 comparative figures
are based on continuing operations (where
relevant), and are subject to rounding.
Revenue
Statutory
Continuing operations
£m
£70.6m
2023
2022
£70.6m
£72.8m
Total revenue for the Group was £70.6 million,
a decrease of £2.2 million year-on-year (2022:
£72.8 million). Revenue decreased 3.0% year-
on-year.
Revenue by sector
Industrial
£m
Graphic Arts
£m
£55.7m
2023
2022
Packaging
£11.1m
2023
2022
£3.8m
£ 55.7m
£54.9m
2023
2022
£m
Royalties
£0m
£3.8m
£4.7m
£m
£11.1m
2023
£0m
£12.9m
2022
£0.3m
Industrial sector revenues have been broadly
maintained with reductions in printhead sales,
particularly in the ceramics market, being offset
by improvements in EPS and Megnajet.
Declines in the packaging sector is due to a
reduction in printhead sales to the coding and
marking market.
Revenue by region
EMEA
£27.8m
£m
Largely stable revenue in EMEA regions,
reflecting continued customer engagement
across our product offering in recently entered
market sectors.
2023
2022
Asia
£12.2m
2023
2022
Americas
£30.6m
2023
2022
£8.2m
£27.8m
£28.4m
£m
£12.2m
£m
£30.6m
£36.2m
£4m revenue growth in Asia predominantly
driven by single-pass machines by EPS to
Japan.
Revenue declines in the Americas due to a
£2.8m reduction in printhead sales to the
coding & market sector and lower Digital
Imaging activity in the region.
14
Xaar plc Annual Report and Financial Statements 2023
Strategic Report
Governance
Financial Statements
Alternative Performance Measures (APMs)
Adjusted profit before tax –
Continuing operations £m
£2.9m
2023
2022
£2.9m
£2.8m
Adjusted basic earnings per share –
Continuing operations £p
3.6p
2023
2022
3.6p
4.8p
Adjusted profit before tax from
continuing operations represents
the loss before tax adjusted for
recurring and non-recurring
items. Reconciliation of adjusted
financial measures is provided in
note 9.
Earnings per share adjusted for
the impacts of adjusting items and
share-based payment expense.
This measures the growth
and profitability of the Group
operations.
Alternative Performance Measures (APMs)
R&D investment £m
£5.6m
2023
2022
£5.6m
£6.7m
Group R&D investment exclusive
of any capitalised costs. Reflects
the ongoing focus on the ImagineX
platform and maintains R&D
spend within Xaar’s target of
8-11% ratio to revenue.
Profit
Statutory
Gross margin - Continuing
operations %
38%
2023
2022
38%
39%
(Loss)/profit before tax –
Continuing operations £m
£(2.4)m
2023
£(2.4)m
2022
£0.8m
Basic (loss)/earnings per share
(Total) £p
(2.8)p
2023
(2.8)p
Cash
Statutory
2022
2.1p
Cash & treasury deposits £m
£7.1m
2023
2022
£7.1m
£8.5m
Net (decrease)/increase in cash
and cash equivalents £m
(£1.4)m
2023
2022
(£1.4m)
(£16.5)m
Gross margin well controlled in
the period, despite inflationary
cost pressures, underlining the
strength of the Group’s products
and market position.
Profit before tax represents
operating profit after investment
income and finance costs (2022:
£0.8 million).
The calculation of basic EPS is
based on the weighted average
number of ordinary shares
outstanding during the period
(2022: 2.1p). See Financial
Statements – note 14 for further
information.
Cash and cash equivalents
comprise cash at bank of £7.1
million (2022: £8.5 million).
Cash outflow in the year driven by
ongoing investment in the Group
including £1.9 million operational
infrastructure expense, £1.7m
deferred consideration payments
and £2.1m increase in inventories.
15
Xaar plc Annual Report and Financial Statements 2023 Risk management
Measuring our risks
Key risk areas
The risks around our business are set out in more detail on pages 19 to 25, but the key risk
areas can be identified as being associated with the following:
Market
1. Competition
Risk owner: CEO John Mills
2. Identification of market
3. Commercialising and
4. Merger and acquisition
Monitoring and adjusting
to competitive dynamics
such as pricing/promotion,
innovation, resource
investments and market
share changes.
requirements
Successfully developing
products with the
characteristics that meet
market requirements within
the necessary time-scale.
maintaining products with
cutting edge technology
Creating value by
generating innovative
products that deliver
significant customer
benefit.
opportunities
Seek opportunities to
expand, create synergies
and generate greater
shareholder value.
Operational
5. Climate change
Identifying risks and
scenario planning of
physical and transition
impact upon operations
and developing mitigating
actions.
6. Organisational capability
Having the right people in
the right roles.
IT
11. IT systems and
control environment
Strengthen IT infrastructure
and key IT systems.
Enhance and build
resilience by investing in
and implementing new IT
infrastructure or IT systems.
Risk owner: COO Graham Tweedale
7. Partnerships and alliances
Working with the right
companies, at the right time
on the right terms to deliver
long-term value.
8. Supply chain
10. Laws and regulations
Compliance with key laws
and regulations in all
countries Group operates in.
Optimising sourcing and
supply chain relationships
to drive performance and
minimise operational
issues.
9. War in Ukraine and conflict
in the Middle East
Staying resilient in the face of
a challenging world economy.
Risk owner: CFO Ian Tichias & Group IT Director Graeme Smith
12. Cyber security risk
Loss of systems or
confidential data due to
a malicious cyber-attack,
leading to disruption to
business operations and
loss of data.
Financial
13. Ability to access
sufficient capital
Ability to access sufficient
capital to fund growth
opportunities.
Risk owner: CFO Ian Tichias
14. Customer credit exposure
Offering credit terms
ensuring recoverability is
reasonably assured.
15. Inventory obsolescence
Holding excess inventory
levels when compared
to demand, that leads
to increased risk of
obsolescence and write-off
before consumption.
16. Exchange rates
Monitoring global economic
events and mitigating
any resulting significant
exchange rate impacts.
16
Xaar plc Annual Report and Financial Statements 2023 Strategic Report
Governance
Financial Statements
Effective risk management
is key to our success against
the dynamics of the industry
that we operate in and
the characteristics of our
chosen business model.
Risk management strategy
and framework
To safeguard the assets of the Group and to
ensure the Group’s resources are appropriately
managed, we should have effective processes
to identify key risks and mitigate them. This is
achieved through having appropriate policies
and internal control frameworks.
Cyber security – increased
Cyber risks continue to be a significant area
of focus for the Group following the cyber
security incident in October 2020 (systems were
recovered without disruption to Operations and
Customer Shipments, and costs and damages
were disclosed in the Annual Report in 2021).
There have been no known incidents since
2020.
Risk management responsibilities
Board
Audit
Committee
Reports to
Reports to
Executive Committee
Oversees risk management processes
and procedures and monitors mitigating
actions put in place by the Group. Works
with the Audit Committee to monitor
the effectiveness of internal controls and
the audit process
Top-down review
Risk review (external/internal)
Carried out every half year
Group-wide register
Maintained and reviewed by the Company
Secretary
Bottom-up
review
Group operating companies and
departments
As the rate and impact of cyber attacks
increase across the world, the rating for this
risk has been increased.
Compliance
The Board has applied Principle O of the 2018
UK Corporate Governance Code by establishing
a continuous process for identifying, evaluating,
and managing the significant risks the Group
faces which has operated throughout the year
and up to the date of this report. The internal
control and risk management system is
designed to manage rather than eliminate the
risk of failure to achieve business objectives and
can only provide reasonable and not absolute
assurance with respect to the preparation of
financial information and the safeguarding of
assets against material misstatement or loss.
For all those risks, we were able to identify
identical risks in the principal risks we disclose
in this report.
These also comply with the FRC guidance on
risk management, internal controls and related
risk financial and business reporting.
Emerging Risks
The Board periodically reviews emerging risks,
to consider and evaluate the potential impact of
newly identified risks against current principal
risks.
On review, it was determined that these
emerging risks were appropriately captured
by the Group’s existing principal risks, or risks
or were not significant enough to be deemed
a new principal risk. As part of the annual risk
review, the Board therefore concluded that no
significant emerging risks have been identified
in 2023.
During the year, the structure and the
processes around risk management have
been revised and simplified. The Executive
Committee oversees risk management as part
of its decision-making process. It reviews the
principal risks and key changes in the previous
6 months twice a year. All departmental
risk meetings take place, where all relevant
risks are discussed, ratings re-evaluated,and
current and future mitigating actions are
considered. The risk register is updated after
these meetings and is reviewed and considered
by the Executive Committee as part of their
principal risks’ evaluation.
After all risks and proposals are approved by
Executive Committee, the principal risks are
then presented to the Board and the Audit
Committee for their final review and approval.
Key updates since 2023
Interim Results
Laws and regulations – reduced
Changes have been made to review the process
to ensure that the Group complies with existing
laws and regulations. The level of this risk has
consequently been reduced. However, we must
continually review and update our operations
and procedures, and ensure our colleagues are
fully informed and educated in all applicable
legal requirements.
Breaching any of these laws or regulations
could have serious consequences for the Group.
War in Ukraine and the conflict in the Middle
East – increased and revised
The impact on the world economy and geo-
political environment of the continued war in
Ukraine and the escalation of the conflict in the
Middle East has been assessed. Whilst energy
costs have stabilised in Europe, the fragile
political situation remains concerning. In the
Middle East, further instability has resulted
in some disruptions to shipping and order
uncertainty. Actions have been taken to reduce
energy consumption, diversify markets and
ensure that the shipping of customer products
and raw material supplies continues without
disruption.
Supply Chain –increased
As outlined above, the situation in the Middle
East has resulted in some disruptions to
shipping routes in the Red Sea. Consequently,
this risk has been increased. Mitigating
actions are in place in respect of shipping and
appropriate inventory levels.
17
Xaar plc Annual Report and Financial Statements 2023 Risk management continued
Approach to risks
The first approach to
managing these risks is to
have high quality leaders
and teams within the
business functions that
proactively monitor and
adjust to risks that could
impact effectiveness.
Probability rating
The probability rating is the likelihood of an
event occurring based on previous experiences,
historical information, and professional
judgement with respect to the incident in
the territory or industry. Probability can be
subjective and is not an exact science. The
probability of an incident occurring can be
estimated to give a probability rating. This gives
an overall view of the risk exposure faced by the
business.
Impact rating
The impact of an incident can be measured in
terms of human suffering, damage to assets,
interruption to operations or business, effect
on customers, impact on reputation/brand and
financial loss. The calculation of the impact
rating should be taken as the worst case in
respect of these categories.
The financial element of the impact rating is the
amount of money that is ‘at risk’.
This ‘at risk’ means that it is either revenue
at risk, or the cost of rebuilding a system,
or replacement cost of hardware. This must
be taken in the context that there are limited
recovery capabilities and that revenue at risk is
not a daily amount, but the amount of revenue
that would be lost until the process, system or
business function can be reinstated.
18
Xaar plc Annual Report and Financial Statements 2023 Strategic Report
Governance
Financial Statements
Risk and link
to business unit
Impact
Mitigation
Likelihood
Magnitude Change
Market
1. Competition
Failure to continually improve may
mean that we lose market share or
have to reduce prices. Since there
are fixed factory costs, reductions
in sales volumes may substantially
reduce profit margins.
Competitive pricing policies are employed and
product portfolios and pricing are constantly
monitored. The re-alignment of our go-to-market
capabilities allows us to focus more on our
customers and to deliver requested products into the
OEM marketplace.
Unlikely
Very High – no change
We are the only true independent
printhead Company in the world
and we are competing with
vertically integrated, large scale,
multinational companies.
2. Failure to
identify market
requirements
Products need to meet the
changing demands of the market,
including regulatory changes.
Failure to meet future market
requirements/specifications could
impact on long-term revenue and
profit.
Production efficiency improvement programmes
are established to ensure that cost bases remain
competitive within the marketplace.
Regular communication and sharing of information
with customers and partners to enhance ‘peer-
to- peer’ relationships. Market reports and other
reliable sources are reviewed to improve demand
forecasting.
Continued investment in innovative technical
solutions for development of new applications from
existing technologies and launch new technologies.
Regular, specific and detailed reviews are
held to assess current and anticipated market
requirements, including expected regulatory
changes.
These reviews include regular customer visits
between senior executives, technical experts
and R&D team members to develop a culture of
innovation that focuses on delivering technical
solutions to original equipment manufacturers’
(OEMs) requirements.
Product developments are selected on appropriate
criteria. Product development activity is properly
managed with regular reviews of progress against
project plans, and gated milestone reviews. We
have a rigorous product lifecycle management
process which ensures we deliver against our
customers’ requirements.
Unlikely
Very High – no change
3. Commercialising
new products
Failure to test new products under
all relevant application conditions
could lead to unexpected cost and
loss of reputation due to quality
failures.
New products are thoroughly tested before launch.
Possible
Xaar’s manufacturing facilities are ISO 9001
accredited. We proactively engage with customers
for all new products to ensure all incompatibilities
are reviewed quickly using a consistent and
thorough investigation process.
High – no change
19
Xaar plc Annual Report and Financial Statements 2023 Risk management continued
Risk and link
to business unit
Impact
Market continued
4. Merger and
acquisition
opportunities
Our strategy is predicated
primarily on organic growth.
Failure to realise the expected
benefits of an acquisition or post
acquisition performance of the
acquired business not meeting the
expected financial performance at
the time acquisition terms were
agreed could adversely affect the
strategic development, future
financial results and prospects of
the Group.
Mitigation
Likelihood
Magnitude Change
The Board reviews the Group strategy annually.
Each acquisition is thoroughly reviewed by the
Board at each stage.
Probable
Medium – no change
Whenever a potential for M&A is identified, robust
modelling of the opportunity is undertaken through
involving third-party subject matter experts. The
competence and independence of the third-party
involved gets assessed separately by the Board.
Professional due diligence is a required step in any
acquisition.
Senior management and the Board monitor
customer and supplier activity through regular
meetings and other sources such as industry
gatherings.
Senior management reviews any relevant M&A
activity in the market and decides on specific
actions to defend Xaar's position. The overall
landscape is constantly reviewed with assistance
from external advisors.
20
Xaar plc Annual Report and Financial Statements 2023 Strategic Report
Governance
Financial Statements
Risk and link
to business unit
Impact
Mitigation
Likelihood
Magnitude Change
Operational
5. Climate change
Possible
Medium – no change
Climate change is not only a future
challenge. The IPCC report in
2021 was declared a ‘code red for
humanity’.
The IPCC, IEA & COP26 have
re-enforced the changes that are
required to re-wire the economy to
a low-carbon manufacturing one
– and the climate impacts that are
expected in a range of scenarios.
The impact of Climate change can
be specified as:
a) the physical risks that may
impact the assets of the
business, and cause business
disruption (e.g. flooding), and
extreme weather events that
may negatively impact the
supply chain, to the increases
in temperature that will impact
human activity and the global
supply chain, at an extreme level
this could negatively impact
the global economy and cause
mass emigration from emerging
economies
b) the transition risks in managing
the shift to a low-carbon
economy, and investment
/ expenditure to manage
the transition and remain
viable – the potential for
reputation damage should the
transition be poorly executed
or risk of ‘greenwashing’
if announcements are not
supported by actions that are
measurable.
Investigating and reporting on climate-related risks
and opportunities in adherence to internationally
accepted recommendations, such as those published
by the Financial Stability Board’s Task Force on
Climate-related Financial Disclosures (TCFD).
The assessment of the risks associated with climate
change can also identify opportunities that arise to
help potential customers reduce their emissions
and increase efficiencies by using digital printhead
solutions, as set out in the TCFD disclosure.
Physical risks:
L Major incident plans are in place with specific
provisions for areas most exposed to potential
risks (flood, fires, hurricanes etc.)
L Geographic spread of the business limits the
impact to our customers. Our sourcing strategy
takes into account risks associated with our key
suppliers
L We completed climate scenario planning
across two climate scenarios (e.g. RCP 2.6,
RCP 8.5), using RCP 8.5 to identify risks and
recommendations for key mitigation measures
and resilience consideration
L The review examined ALL Xaar sites globally and
our top 10 critical supplier sites using 12 separate
climate models, in each case the RCP 8.5 model
was used to assess risks at the most extreme
expected temperature rises (4.5°C ).
The report concluded physical risks are low to very low
in almost all cases. The remaining risk is not material,
however the actions are being developed to address
those further.
Transition risks
L Develop Sustainability Roadmap to deliver
‘Net Zero by 2030’
L Outline metrics and targets in support of reducing
greenhouse gas emissions and developing
Science Based Targets to 1.5°C across Scope 1, 2
& 3 emissions. Carbon pricing presents a £1.3m
risk if no actions were taken to reduce the Supplier
Scope 3 impact before 2030 (model suggests it is
around 21,000 tCO2e in 2022)
L Continue reducing carbon use to minimise impact,
and to become a low-carbon manufacturer
L Analyse Supply Chain Infrastructure Risk Exposure
L Identify ‘spend to save’ projects that are cash
generative
L Continue GHG mitigation actions to maintain a
carbon neutral position
L Develop transparency and credibility in
‘net zero’ commitments with verifiable plans
and progress in both near-term and medium-term
action plans.
21
Xaar plc Annual Report and Financial Statements 2023 Risk management continued
Risk and link
to business unit
Impact
Operational continued
Mitigation
Likelihood
Magnitude Change
6. Organisational
capability
Our people remain key to our
business. Ensuring the right people
are in the right roles is critical to our
future success and growth.
Our focus is to minimise the voluntary turnover of
employees, through better hiring for fit, improved
induction procedures and employee engagement
initiatives.
Possible
Medium – no change
Operations in remote locations or
highly competitive markets make
attracting and retaining skilled
employees challenging.
We need to attract and retain the
right talent to enable achievement
of our strategic aims. Failure to do
this risks delivery and growth.
Key management personnel are
critical to success of our business.
Losing them without adequate
succession planning could have a
significant impact on the Group’s
performance.
The Group reviews remuneration to ensure that the
appropriate reward packages accompany a fulfilling
work environment.
Annual performance management reviews for the
majority of employees to identify talent and develop
key employees.
Investment to build a learning organisation with
focus on culture, reward and recognition.
Succession plans are being developed to highlight
key personnel risks with mitigation plans being
developed.
Campaigns to increase performance and
development of communication between
managers and employees to ensure alignment to
Company objectives.
7. Partnerships
and alliances
If key partners we have alliances
with are acquired, this can change
the relationships they have with us.
The IP and Legal team focuses on the extensive
review of legal agreements and in particular IP with
such partners.
Possible
Medium – no change
Partnerships are constantly reviewed both internally
and with those partners at the most senior level
to develop long-term partnerships and supply
agreements to the benefit of both parties.
Where significant investment and research is
undertaken there will be contractual arrangements
to ensure appropriate governance and Board
structure to support the business and product
development.
Focused on monitoring and securing continuity
of supply of components necessary to maintain
production and the supply of printheads for the
following 18 months.
We conduct regular audits of our key suppliers and
in addition keep large amounts of safety inventory of
key components, which we also regularly review.
Dual sourcing for critical components is in place for
some suppliers, and there is ongoing work to extend
this to the full list of critical suppliers.
We will continue to diversify and localise our supply
chains, and investigate developing a circular
manufacturing approach by recovery of materials
from finished goods to be re-utilised in production.
Unlikely
High – increased
8. Supply chain
The Group is dependent on
retaining its key suppliers and
ensuring that deliveries are on
time and the materials supplied
are of appropriate quality.
There has been a shift from a
finished goods risk to a component
materials risk particularly where
components have a single source
of supply.
There are challenges with the
supply of some key components
that are used in production and
global logistics routes have
experienced some disruption.
22
Xaar plc Annual Report and Financial Statements 2023 Strategic Report
Governance
Financial Statements
Risk and link
to business unit
Impact
Operational continued
9. War in Ukraine
and conflict the
Middle East
10. Laws and
regulations
The war in Ukraine continues to
impact the near-term outlook
for the UK and global economies
and increased uncertainty over
the path ahead. Although energy
prices have stabilised in 2023,
they continue to be a concern
for the UK economy which also
result in further upward pressure
on inflation and a potential hit to
GDP growth. The conflict between
Israel and Hamas has further
de-stabilised the Middle East and
disruptions to shipping in the Red
Sea may impact the supply chain.
There is a risk that the Group
may not be compliant with
existing laws and regulations in
the UK and other countries the
Group operates in. This could
be manifested through liabilities
around employee accidents or
consequences of environmental
damage, breaches of export
controls and customs, lack of
awareness of economic sanctions
and product liability claims.
Mitigation
Likelihood
Magnitude Change
We have fixed our unit electricity costs and will
continue to do so in future.
Probable
High – increased & revised
We have been proactive in buying materials and
components to enable continued production.
We have no direct operations in Ukraine, Russia and
the Middle East.
We completed a factory restructuring in 2023, which
will make the production process more efficient,
driving reductions in cost of sales.
We have secured some key long-term contracts
(both sales and procurement) and supply chains
outside of unstable countries and regions.
We have relevant certifications in respect of quality
management and environmental management with
the appropriate bodies including ISO.
Possible
Medium – reduced
The quality of supplies is constantly monitored.
Quality performance is regularly reviewed by senior
management who apply appropriate resources to
systematically address recurrent problems. New
products are thoroughly tested before launch.
All contracts go through legal review before signing.
For all complex transactions relevant third-party
experts are engaged to evaluate all legal risks and
adequately respond to them.
23
Xaar plc Annual Report and Financial Statements 2023 Likelihood
Magnitude Change
Possible
High – no change
Investment has been made to move to a hybrid
cloud model, strengthen the resilience and security
of our IT infrastructure, rationalise and modernise
our business systems, and re-align systems with
improved operational business processes.
Developed the IT Service Delivery maturity and
increased capacity in the Group IT function.
Access to systems and data is only provided on a
‘need-to-know’ and ‘least privilege’ basis consistent
with the user’s role and requires the appropriate
authorisation.
Key business systems are being developed to
strengthen IT system controls and further reduce the
burden from manual controls.
Implemented a Multi-Factor Authentication
solution for VPN. MFA rolled out to protect key
business systems including CRM and HR.
Possible
Medium – increased
Enterprise Backup Solution provides an immutable
copy of all key business systems and data enabling
complete systems and data recovery within an
acceptable timeframe.
Implemented a risk-based security testing
approach across IT infrastructure and systems
to identify ongoing vulnerabilities and prioritise
remediation.
Included a security workstream in the IT
Transformation Programme.
Group IT Director provides an Information Security
update to the Executive on a monthly basis and to
the Board of Directors every six months.
Established Xaar Security Standards (Minimum
and Enhanced Baselines) to measure current
levels of defence and recovery and track progress.
Established a process of undertaking an
independent external audit of Xaar IT Security and
IT Security Technical Controls on an annual basis.
Risk management continued
Risk and link
to business unit
Impact
Mitigation
IT
11. IT systems
and control
environment
12. Cyber
threat and
information
security
IT networks, infrastructure, and
business systems resilience is not
sufficient causing access issues
for end users.
Inability to operate effectively or
loss of operating capability.
Loss of information, incurring
financial or regulatory penalties.
Fraud committed through
manipulation of IT business
systems or data.
Malicious cyber-attack breaches IT
security potentially leading to:
A loss of IT infrastructure, business
systems, or data.
Disruption to business operations,
ranging from inability to operate
effectively to a complete loss of
operating capability.
Unauthorised access to confidential
or personal data and disclosure
externally.
Breach of information security
and data protection regulations
incurring financial penalties from
regulators.
Reputational impact and potential
deterioration in customer and
supplier relationships.
Loss of Intellectual Property or
exposure of commercially sensitive
information.
Extensive resources expended in
responding and recovering.
24
Xaar plc Annual Report and Financial Statements 2023 Strategic Report
Governance
Financial Statements
Risk and link
to business unit
Impact
Mitigation
Likelihood
Magnitude Change
Financial
13. Ability to access
sufficient
capital
Our ability to access sufficient
capital/liquidity may restrict
growth opportunities for our
organisation, as well as the
strategic plan and vision.
Significant investment is required
to bring new products to market
and ramp up to meaningful
volumes.
14. Customer
credit exposure
The Group may offer credit terms
to its customers which at times
could be extended beyond what
are considered normal terms for
products in early stages of their
lifecycle. The Group is at risk to
the extent that a customer may be
unable to pay the debt on time, thus
impacting working capital.
15. Inventory
obsolescence
Holding excess inventory levels
when compared to demand leads to
increased risk of obsolescence and
write-off before consumption, and
working capital restrictions.
The Group has sufficient cash available for execution
and delivery of the strategy within agreed time-
scales.
Unlikely
High – no change
The Group has implemented cost reduction actions
to focus resources on key initiatives.
We work with third parties to realise the full potential
of research and development activities.
We have established partnerships with our banks
who understand our strategic plans. We have a
strong, well capitalised balance sheet.
We returned to profitability which transformed our
ability to raise less expensive financing.
We have secured an invoice facility and a RCF which
helps support short-term cash management.
This risk is mitigated by strong ongoing customer
relationships.
Possible
Low – no change
Where possible, a full credit check of all new
customers is carried out prior to trading.
Payment terms are agreed depending upon credit
assessment and review of credit history. For all
customers with higher risk, payments in advance
are requested.
Overdue receivables are closely monitored and
credit limits are managed rigorously.
Credit insurance is in place to protect against
payment default for most of the customers.
There are appropriate stock holding policies,
ensuring these are reviewed frequently and
change dynamically in line with market/business
conditions.
Probable
High – no change
Obsolete or slow moving stock items are identified
and written-off monthly.
Enforcing lead times for customer orders to ensure
we have the most accurate forecast in place as far
out as possible.
Continually develop forecasting techniques so that
stock requirements can be predicted with great
accuracy.
Ongoing supplier negotiation to reduce minimum
order quantities to prevent obsolescence and
inflated inventory.
16. Exchange rates
Global economic events and
uncertainty may cause currencies
to fluctuate and currency volatility
contributes to variations in our
sales of products and services in
impacted jurisdictions.
There is a partial natural hedge for foreign
currency movements, with sales companies and
manufacturing spread across the globe.
Probable
Medium – no change
Cash flows are constantly reviewed and action is
taken when appropriate. FX exposure is tracked
monthly.
25
Xaar plc Annual Report and Financial Statements 2023 Sustainable and responsible business
The Board believes that the
effective management of
the ESG agenda is integral
to business success. The
Group is not only compliant
with all relevant regulations
and legislation but has
increasingly focused on
enhancing the working
environment for our
employees and minimising
the environmental impact
of our manufacturing
processes.
There is internal reporting of key metrics to
ensure continuous improvement throughout
the business, and each member of staff is
expected to take individual responsibility for
their contribution and to work together to
achieve shared goals. Our digital technologies
are being designed with the environment
in mind – and are to be inherently more
environmentally friendly and less impactful on
the environment and natural resources than the
analogue techniques we seek to replace. Our
research shows that, compared to analogue
alternatives, digital has a significant impact in
reducing energy consumption (by as much as
55%), water consumption (by up to 60%) and
CO2 emissions (by up to 95%), in addition to
reducing pollution and waste materials.
For the first time this year, the Group has
published a full Sustainability Report which is
available on our website. This report contains
full details of our sustainability programme,
including progress against the Company’s
Sustainability Roadmap to 2030 and reports on
the progress against each of our sustainability
pillars. Consequently, the disclosure on
ESG matters in this 2023 annual report has
been reduced and will provide a higher-level
summary of our ESG initiatives, in accordance
with regulatory requirements.
Sustainability Governance Structure
Xaar benefits from a strong ESG governance
structure. Our cross-functional Continuous
Improvement Team has accountability to the
Board. This group brings together a wide range
of skill sets as well as a shared determination
and passion for a more sustainable future.
This team developed our ESG Sustainability
Roadmap to 2030 and continues to take a
leading role in driving internal change and
progress to ensure we meet our ambitions
by the timeline we have set ourselves. The
roadmap is available in the online Sustainability
Report. Our Roadmap has four key pillars
– Environment, People, Innovation and
Community; its purpose is to drive our ESG
goals beyond the energy reduction scope to
a broader Group-wide activity. Our Roadmap
will provides an essential backbone for much
of Xaar’s future investment and activity. Xaar
is committed to reducing its impact on the
environment wherever possible. The Senior
Independent Director, Alison Littley, has specific
Board responsibility for ESG matters. The
Company has established an ESG Committee
which consists of senior management team
representatives from operations, legal, HR,
R&D, Communications and our specialist ESG
advisors. It meets quarterly and makes twice
yearly reports to the Board. The Directors are
given monthly updates by the Chief Operating
Officer on ESG initiatives and compliance.
Environment
The Group fully complies with local and
national regulatory requirements in respect of
the environment relating to the use, storage,
handling and disposal of materials, chemicals,
and waste products. Xaar maintains a Certified
Environmental Management System that meets
the requirements of ISO 14001:2015, helping
us to manage our environmental aspects and
impacts, which complements our commitment
to continual improvement. It is readily available
to view for interested parties. We carry out
environmental management reviews and
audit programmes designed to measure our
progress in relation to our policy statement
and objectives. Our Sustainability Roadmap has
been evaluated against the UN’s Sustainable
Development Goals.
Xaar has identified opportunities and drive
continual improvement in energy efficiencies.
We have seen reductions in non-renewable
energy usage and the related greenhouse
gas emissions of the Company recorded in
Scope 1 and 2 since 2015. The Greenhouse gas
emissions statement is available on page 33.
All Group UK manufacturing locations are now
supplied with certified carbon free electricity
and moved over to a single green power
contract in 2023. EPS, our US manufacturing
site, is supplied with power generated from
renewable sources.
To help mitigate the increase in energy prices
and enhance our business resilience, we have
completed the major reconfiguration of our
PHBU cleanrooms in Huntingdon, UK. This has
reduced electricity usage by 40% at Huntingdon
and produced an overall Group reduction of
around 35%. To further reduce reliance on
the National Grid, we are investigating the
installation of a solar array in Huntington.
In our printhead business, we are a carbon-
neutral inkjet manufacturer, thanks to the offset
of regulatory 2020 Scope 1 & 2 carbon impacts
(1,815 tCO2e). We continue to offset our residual
2022 Scope 1 & 2 carbon emissions (212 tCO2e)
and are committed to offsetting our Scope 1 &
2 emissions for 2023 whilst we investigate the
full extent of our Scope 3 emissions, which may
be added to the offset in the future. As part of
our decarbonisation programme, our UK pool
car is electric and a salary sacrifice scheme is
available for our employees to lease electric
cars. We now have 10 chargers in place at our
printhead sites and two at FFEI.
We have set out to set, measure and disclose
a zero waste to landfill target – with any
waste not recycled being sent to a waste-to-
energy recovery process. Our PHBU and FFEI
operations are certified zero waste to landfill by
our waste treatment partners Veolia/Crawleys,
with any non-recycled waste being sent to
waste to energy recovery. In 2023, 5,184 kg of
waste was diverted and 1,414 kg of waste was
recycled (Printhead and FFEI businesses).
Reducing plastics in our packaging has
been achieved; and all secondary printhead
packaging is now fully recyclable. We removed
plastic adhesive tapes and have removed plastic
bubble wraps, replacing these with recyclable
paper alternatives.
We recognise the relationship between
biodiversity and the wellbeing and health of our
colleagues. We are actively looking to support
supporting and promoting local employee
campaigns, starting with the introduction of
beehives on site in Huntingdon, UK, and the
distribution of wildflower seeds to employees.
We produced our first Xaar branded honey in
summer 2023 which was sold to employees to
raise money for charity. None of our sites are
located in or adjacent to protected areas.
Our operations are considered as low water
usage, and we do not have any operations in any
regions with high water stress. However, within
our Huntingdon factory location we need to be
cognisant of the risk of flooding in the North
of the Cambridgeshire region and the Fens, as
well as the stress on the chalk streams and
water aquifers in the South Cambridgeshire
region. Xaar therefore considers water
management throughout all activities of the
Company and that water should be treated
in a manner that will protect it for future
generations. We regularly monitor and record
water usage and utilise water efficient taps and
cisterns. Xaar has a permit to discharge water
issued by Anglian Water.
26
Xaar plc Annual Report and Financial Statements 2023 The effluent discharge is checked monthly by
external consultants to ensure conformity to
site discharge levels and content and reports
show discharges are below permitted levels.
There are no reported incidents in the last 12
months with regards to emissions to water.
We regularly monitor the air quality,
temperature and relative humidity levels
within the Huntingdon cleanroom facility. All
cleanroom air supplies are fitted with HVAC
filters. Xaar also remains conscious of the
need for good indoor air quality, working
hard to ensure adequate air circulation and
routine maintenance of the systems. There are
smoking areas located away from Huntingdon
building entrances. Xaar has a permit issued
by Huntingdon District Council due to the
business using more than two tonnes of solvent
for surface clean down each year. To comply
with the permit any waste gases must not
exceed total VOCs per room of 75mg/Nm3.
This has been audited and confirmed via an
external UKAS accredited company. There are
no reported incidents in the last 12 months
with regards to emissions to air. There are no
significant air emissions in relation to NOx/SOx.
All substances handled and used by Xaar are
in accordance to the CoSHH regulations and
industry best practice, by risk assessment
and evaluation in their usage, storage and
disposal. Care is taken to look for any less
harmful alternative substances where possible
to minimise any potential impacts in their use
beforehand.
People
The Group respects all human rights and
regards those rights relating to non-
discrimination, fair treatment and respect for
privacy to be the most relevant and to have the
greatest potential impact on its key stakeholder
groups of customers, employees and suppliers.
The Group undertakes extensive monitoring of
the implementation of all of its policies and has
not been made aware of any incident in which
the organisation’s activities have resulted in an
abuse of human rights. Xaar is committed to
only supplying products that contain conflict-
free materials. Suppliers of parts containing tin,
tantalum, tungsten or gold to Xaar are sent and
required to complete an EICC-GeSI declaration
providing evidence that parts supplied do not
contain minerals sourced from areas of conflict
– DRC or adjoining areas.
The Board has overall responsibility for
ensuring that the Group upholds and promotes
respect for human rights. The Group seeks to
anticipate, prevent and mitigate any potential
negative human rights impacts as well as
enhance positive impacts through its policies
and procedures, in particular, through its
policies regarding employment, equality
and diversity, treating customers fairly and
information securely. Group policies seek both
to ensure that employees comply with the
relevant legislation and regulations in place in
the UK and other operating locations and to
promote good practice.
Strategic Report
Governance
Financial Statements
Printhead water usage
Freshwater usage (m3)
Intensity ratio (m3/£m turnover – excl. royalties)
Effluent and waste water (m3)
UK health & safety incidents
RIDDORs*
Accidents
Incidents
Near misses
2023
5,184
73
1,741
2023
0
14
35
10
2022
6,180
158
4,649
2022
0
9
11
5
* Reporting of Injuries, Diseases and Dangerous Occurrences Regulations.
The Group’s policies are formulated and kept
up to date by the relevant business area,
authorised by the Board and communicated to
all employees.
All new employees complete an induction
process that outlines the expectations of
the Company, its employees, customers and
suppliers for the way in which business is
conducted and helps to avoid situations that
might lead to adverse legal issues or damage to
our reputation.
The Group’s most important corporate policies
are incorporated into the Xaar Code of Conduct,
and should be complied with at all times:
L Anti-bribery and Corruption Policy
L Confidential Information Policy
L Corporate Criminal Offence Policy
L Data Protection Policy
L Employee Share Dealing Code
L Email and Internet Policy
L Gifts, Entertainment and Hospitality Policy
L HS&E Policy Statements
L Sanctions Policy
L Whistleblowing Policy.
We have a Whistleblowing Policy that
encourages open and honest communication
where incidents of non-compliance are seen
in our business. Whistleblowing issues are
reported directly to management, and any
significant issues, should they arise, are
reported to the Audit Committee. In each
instance, cases are investigated in detail
and appropriate action taken. There was one
whistleblowing incident reported in the year to
a member of the senior management team.
The report was investigated and reported to the
Audit Committee. Action was taken to resolve
the issue with the agreement of the Directors.
The Group is committed to acting ethically and
with integrity in all our business dealings and
relationships, implementing and enforcing
effective systems and controls to ensure
modern slavery in all its forms (including
human trafficking, forced labour and child
labour) is not taking place anywhere in our
Group businesses or in any of our supply
chains. The Group has published a Group-wide
Modern Slavery Policy and a statement on
the steps taken to prevent slavery, which is
available on the Group’s website.
Xaar has manufacturing sites in Huntingdon,
Hemel Hempstead, Kettering and the USA,
supported by R&D laboratories in Cambridge
and Sweden, alongside head office functions
in Cambridge, plus sales offices worldwide. It
is always Xaar’s intention to conduct business
in a manner that protects the public, the
environment, and employee safety. Xaar’s
Environmental and Health and Safety policies
provide a framework for the setting and
reviewing of Occupational Health, Safety and
Environmental Objectives. This demonstrates
Xaar’s continued commitment to the prevention
of injury and ill health and also the continual
improvement in our Environmental and
Occupational Health and Safety Performance.
Xaar believes that the combination of a safe
place of work and safe working practices,
together with a productive and innovative
environment, are critical to the continued
success of the Company.
The Group undertakes R&D activities and
manufactures products in the UK and the USA.
The Group complies with all local and European
legislation. The Group’s manufacturing facility
in Huntingdon is both ISO 9001:2015 and
ISO 14001:2015 certified and as a minimum
complies to HSG65. It is the Group’s policy
to maintain this level of certification for
its Huntingdon manufacturing facilities
and to comply at all times with all relevant
environmental and other legislation in the
territories in which the Group operates.
27
Xaar plc Annual Report and Financial Statements 2023 Sustainable and responsible business continued
People continued
The Group is compliant with REACH
(‘Registration, Evaluation, Authorisation and
restriction of Chemicals’), WEEE (‘Waste
Electrical and Electronic Equipment’) and RoHS
(‘Restriction of the Use of Certain Hazardous
Substances’) directives, as required under UK
and European legislation. The Group has a
proactive Health and Safety System modelled on
OHSAS 18001/HSG65 in Cambridge, Huntingdon
and Hemel Hempstead.
The Group is committed to providing a working
environment in which employees feel valued
and respected and are able to contribute to
the success of the business. Employees are
expected to co-operate with the Group’s efforts
to ensure that the policy is fully implemented.
The Group’s aim is that its employees should
be able to work in an environment free from
discrimination, harassment and bullying, and
that employees, job applicants, customers,
retailers, business introducers and suppliers
should be treated fairly regardless of:
L race, colour, nationality (including
citizenship), ethnic or national origins;
L gender, gender reassignment, sexual
orientation, marital or civil partnership
status;
L religious or political beliefs or affiliations;
L disability, impairment or age;
L real or suspected infection with HIV/AIDS;
L membership of a trade union;
L pregnancy, maternity and paternity;
and that they should not be disadvantaged by
unjust or unfair conditions or requirements.
The Group aims to ensure that applications for
employment from people with disabilities, and
other under-represented groups, are given full
and fair consideration and that such people are
given the same training, development and job
opportunities as other employees. Every effort is
also made to retrain and support employees who
suffer from disabilities during their employment,
including the provision of flexible working to
assist their re-entry into the workplace.
The Group places considerable value on the
involvement of its employees and has continued
to keep them informed of the various factors
affecting the performance of the Group. This
is achieved through written communications
shared through the Company intranet and
email, and formal and informal meetings. All
employees participate in a bonus scheme based
on both business line individual performance
and Group business targets and, in the UK, all
employee have the opportunity to participate in
an HMRC approved Share Save Scheme.
The CEO pay gap ratio is set out on page 69
of the Director's Remuneration report.
28
Employee Gender Analysis (excluding non-executive directors)
All employees
Executive Directors
Managers
Employees
2023
Male/Female
2022
Male/Female
315/93
2/0
39/16
274/77
346/98
2/0
39/15
305/83
Gender pay reporting is required for companies
with over 250 employees. Xaar is reporting as
Xaar plc, including all UK subsidiaries. The
snapshot date for Xaar’s data is 5 April 2023.
At that point Xaar had 341 relevant employees:
266 male and 75 female. It is fundamentally
important to understand that a gender pay gap
does not necessarily mean men are paid more
money for doing the same job. At Xaar we are
committed to ensuring we pay based on merit
not gender and we regularly monitor our pay
awards to ensure that we pay the same rate for
similar roles.
Xaar’s mean gender pay gap stands at 14.19%
(2022: 13.61%). As with many companies we do
have a gender pay gap, though our results are
consistent with other companies who operate
within the technical, manufacturing
or engineering sector.
There has been a shift across the quartiles with
more movement for female employees from
upper lower middle quartile to higher middle.
This is a reflection of more female employees
being promoted and appointed to senior roles.
Improving our diversity will improve our results,
and we will continue to work on improvements
over the longer-term. A large part of Xaar’s
gender balance gap is due to the challenges of
recruiting women into science and technology
roles. We are continuing to work on increasing
our gender balance in the following ways:
• Xaar operates in a male dominated industry
and we are working to ensure that our hiring
managers are trained to understand and
recognise gender bias. We do, however,
receive significantly fewer applications from
females for technical roles.
• Our Talent Acquisition team assists hiring
managers by giving practical advice, support
and monitoring for gender bias. We seek to
have both female and male candidates as
part of the hiring pool whenever possible
and we constantly review our processes to
ensure we are encouraging more female
applicants.
• Xaar is supporting Cambridgeshire
engineers of the future by sponsoring
local schools’ Imagineering Clubs, which
is designed to introduce children to
engineering and hopes to inspire young
people and especially girls to take up STEM
subjects. A number of our women from
Engineering participate in these endeavours.
• We support all employees to achieve
their potential with a talent management
programme and we offer flexible working
arrangements to support working parents.
The Group Personal Pension scheme is
administered by Scottish Widows. The Company
pension contribution for Directors (or cash
allowance equivalent) does not exceed the
contribution available to the majority of the
workforce, currently 6% of base salary. The
equity assets in the Pension Portfolio Funds
largely track indices, which exclude certain
stocks on environmental, social and governance
(ESG) grounds.
The equity allocation of the Scottish Widows
default pension portfolio is managed in
partnership with State Street Global Advisors
(SSgA) and BlackRock. A proportion of the equity
allocation is currently invested in the climate
transition fund developed with BlackRock and
Scottish Widows has set targets by 2030 to
halve the carbon footprint of their investments
and 2050 to target net zero across all their
investments. All the Equity funds in the pension
portfolio investments are managed by State
Street and BlackRock. The fixed interest fund by
BlackRock and Aberdeen. Property, emerging
market debt and climate transition fund by
BlackRock. Schroders oversee the cash part of
pre-retirement funds. The default investment
has a lifestyling approach to manage risk as
members approach their selected retirement
age and the scheme offers investment flexibility
and choice for employees.
Xaar provides a broad range benefits which
are relevant to each locality, these may include
such items as individual medical cover, income
protection and life assurance, Employee
assistance programmes, wellbeing initiatives,
health shield. Within the UK, there are a
number of salary sacrifice schemes for Xaar
employees including an electric vehicle scheme
for employees to lease a new electric vehicle
and a cycle to work scheme where employees
can obtain finance and discounts on new bikes
including electric options.
Employee health and wellbeing remains a keen
priority for the Group. In line with this approach,
the businesses within the Group have prioritised
different initiatives that best reflect their
workforce, such as volunteering and employee
wellbeing policies, regular wellbeing initiatives
weeks, step challenges, weekly Yoga sessions,
qualified mental health first-aiders and other
activities to encourage and promote a healthier
workforce.
The Group has a training and development
programme which offers a suite of Learning
and Development tools to ensure key skills are
developed and enhanced. An Apprenticeship
Programme is embedded in the Group.
Xaar plc Annual Report and Financial Statements 2023 Strategic Report
Governance
Financial Statements
Taxation
We aim to manage our tax affairs in accordance
with national legislative provisions and within
the guidelines set down by the Organisation
for Economic Cooperation and Development
(OECD). Our objective is to structure our
operations tax efficiently and take advantage of
available incentives and exemptions provided by
governments for eligible capital investments,
R&D and similar expenditure. We do not enter
into any artificial tax arrangements. We have
not received any fines or penalties from any
government tax agencies.
The Group operates an online performance
management and appraisal system providing an
opportunity for individual discussions on training
needs and career planning. This is supported by
a talent management and succession planning
process from which the Executive Management
Team assesses the outcomes, formulates
action plans and reviews progress. The Board
is kept informed of the results. The loss of key
personnel is identified by the Board as a key risk
and is set out in further detail in the principal
risks and uncertainties table on page 22.
Voluntary labour turnover was 12.32% across
the Group in 2023 (2022: 10.4%).
Innovation
Xaar recognises that innovation is key to
achieving many of the sustainability goals
across all four pillars that support our
Sustainability Roadmap. For over 30 years,
we’ve been reinventing inkjet and reimagining
what’s possible for printheads.
Our Product Lifecycle Management process
has been adopted in all parts of the Xaar
Group. It is used to develop new and innovative
print-related products; which includes Design
for Environment as part of the development
considerations. Eco-design is the systematic
application of environmental lifecycle
considerations at the product design stage.
The aim of eco-design is to avoid or minimise
significant environmental impacts at all stages
of the lifecycle of a product, from sourcing of
raw materials and purchased components,
design and manufacture, to distribution, use
and end-of-life disposal. We are researching
ways to use biodegradable structural parts in
the manufacture of our products. An area of
focus is to find an alternative, more sustainable
material than Polylactic Acid (PLA) which is a
biodegradable plastic used to print the majority
of our jigs and fixtures.
The Company supports the precautionary
principle by avoiding materials and production
methods that pose environmental and health
risks when suitable alternatives are available.
Xaar continues to review changes in the
Restriction of Hazardous Substances Directive
(2011/65/EU). We are working hard to eliminate
Substances of Very High Concern (SVHC) from
the manufacturing process.
Our products and processes are designed in
such a way that energy and raw materials are
used efficiently, and waste and residual products
are minimised over the product lifecycles. We
have implemented a successful circular and
resource efficient approach to the recovery of
key electronic and piece parts from printheads
that do not meet our high standards. This
innovative approach, along with considerable
sourcing efforts, has enabled us to continue
production despite global shortages and has
enhanced our business resilience.
The Company routinely audits, follows up and
reports on its environmental performance,
with particular emphasis on evaluating the
potential risks of present and future products
and operations. We issued a number of
Technical Bulletins throughout the course of
2023, advising customers on product updates,
system improvements and product end-of-life
announcements. No product recalls were
initiated in 2023.
Community
Xaar is proud to play an active role in the
communities in which it operates. As part of
our commitment to social value and community
we have an active programme of sponsorship
for projects and initiatives that are aligned to
our business values. Full details of community
initiatives undertaken in 2023 are set in the
2023 Sustainability Report, available on the
Company’s website.
At a strategy and policy level, we published
a Group Charity Policy. It helps us to define
how we select and work with our charity
partners. This is an important part of our ESG/
Sustainability agenda. Xaar contributes annually
to charitable causes through in accordance with
this policy. In total, the Group made charitable
contributions to local and national charities
during the year totalling £24,550 (2022: £2,966).
We have established a three-year partnership
with the East Anglian children’s charity ‘Break’
to help change the lives of vulnerable young
people on the edge of care, in care and leaving
care (www.break-charity.org/charity/). We have
set ourselves a fundraising target of £20,000 –
we aim to reach this figure with the help of our
internal Charity Champions and Break. While
our fundraising activities are clear we hope that
mentoring and employment opportunities may
be offered as a result of this longer-term union.
Our senior leadership team recognises the
benefits to Xaar, our employees and to the
wider community of a framework within which
volunteering can take place. Managed well,
volunteering can raise our profile within the
community and support our social responsibility
plans. Xaar supports employees’ voluntary work
by providing ‘holiday matching’ of up to two
and a half days a year. We believe this will help
them get involved in their community, support
employee mental health and wellbeing through
positive activities and additionally assist them in
developing new skills.
Political donations
The Company has a longstanding global policy
against making contributions to political parties,
political committees or candidates using
Company resources (including monetary and
in-kind services), even where permitted by law.
No political donations were made in the current
or previous year.
29
Xaar plc Annual Report and Financial Statements 2023 Task Force on Climate-related Financial Disclosures (TCFD)
In meeting the requirements of Listing Rule
9.8.6 R, the Board has concluded that:
We comply with the recommended disclosures across each of the
provisions. See below for details.
Disclosures
Recommended disclosures
Response
1. Describe the board’s oversight
of climate-related risks and
opportunities.
The Xaar plc Board reviews key climate-related risks and opportunities and
oversees mitigation strategies as part of the bi-annual review of principal
and emerging risks.
2. Describe management’s role in
assessing and managing climate-
related risks and opportunities.
3. Describe the climate-related risks
and opportunities the organisation
has identified over the short-,
medium-, and long-term.
Alison Littley, Senior Independent Director, has specific responsibility for
ESG matters, including climate change and sustainability.
We have an ESG Committee which is accountable to the Board and reports
twice a year on progress.
The ESG Committee meets on a quarterly basis to assess the opportunities
and proposals developed by the Continuous Improvement/Cost Savings
Initiative team and Energy Steering Group. A key function of this committee
is to review progress against the Roadmap and to identify areas for future
focus and projects.
i See governance structure on page 36 and in our Sustainable and
Responsible Business report on page 26
We completed climate scenario planning out to 2100 across two climate
scenarios (e.g. RCP 2.6, RCP 8.5).
The review examined all Xaar sites globally and our top ten critical supplier
sites using 12 separate climate models, in each case the RCP 8.5 model
was used to assess risks at the most extreme expected temperature rises
(4.5oC).
The report concluded physical risks are low to very low in almost all cases.
There are two Xaar sites at risk of flooding:
L Bayes Street Kettering – surface water high risk
L Fuzhou Avenue, Bao'an District Shenzhen – one metre above sea level.
There are three supplier sites of the 10 analysed with risks:
L Site 1 IPRO PID five metres above sea level near coast.
L Site 4 Fabrinet five metres above sea level protected by Bangkok (7km
inland)
L Site 5 CTS Tianjin China 0 metres above sea level near coast.
Mitigations
China is expected to create one metre coastal defences to protect its major
population centres and both the Xaar and CTS sites are part of major
population centres and should be part of these coastal actions.
IPRO PID at five metres will not be affected for a long time, so there is
plenty of time to monitor actual sea level rise before making any risk
judgement.
Fabrinet at five metres, and 70km inland will not be affected for a long
time, so there is plenty of time to monitor actual sea level rise before
making any risk judgement. We expect coastal defences to be put in place
to protect Bangkok which will also protect Fabrinet.
i See Risk Management on pages 16 to 25
A. Governance
Disclose the
organisation’s
governance around
climate-related risks
and opportunities.
B. Strategy
Disclose the actual
and potential
impacts of climate-
related risks and
opportunities on
the organisation’s
businesses, strategy,
and financial
planning where
such information is
material.
30
Xaar plc Annual Report and Financial Statements 2023
Strategic Report
Governance
Financial Statements
Disclosures
Recommended disclosures
Response
B. Strategy continued
Disclose the actual
and potential
impacts of climate-
related risks and
opportunities on
the organisation’s
businesses, strategy,
and financial
planning where
such information is
material continued.
4. Describe the impact of climate-
related risks and opportunities
on the organisation’s businesses,
strategy, and financial planning.
In managing these financial climate-related risks our business model
would not require material change, except for increasing inventory levels
of components to account for transport delays arising from exceptional
weather events, and to consider mitigation for potential business disruption,
e.g. flood defences.
Opportunities exist in the transition to a low-carbon manufacturer, by
reducing both energy usage and utilising renewable energy sources to
deliver lower costs to the business. Product development will incorporate
sustainability as a central objective, to transition manufacturing from
a linear to a circular process and to being a process to reduce-reuse
and recycle materials, all to be undertaken as part of Xaar’s overall
Sustainability Roadmap.
i See Risk Management on pages 16 to 25
5. Describe the resilience of the
organisation’s strategy, taking into
consideration different climate-
related scenarios, including a 2°C or
lower scenario.
We have undertaken a high-level review of the likely impact of 2°C and
4.5°C global warming scenarios (see section 3 above), and an independent
external climate-related scenario review in 2022 to identify physical
and transition risks and opportunities in delivering carbon neutral
manufacturing leading to ‘Net Zero by 2030’. The review identified very low
to low risks in most cases with five sites identified with slightly higher risk
scenarios.
i See Risk Management on pages 16 to 25
C. Risk management
Disclose how
the organisation
identifies, assesses,
and manages
climate- related
risks.
6. Describe the organisation’s
processes for identifying and
assessing climate- related risks.
The Group has processes in place for identifying, evaluating and managing
the principal risks, which could have an impact upon the Group’s financial
performance. Climate change has been disclosed as an emerging risk in
recent years, and has been escalated to a principal risk category in 2021.
With new inputs from an independent report the Board has considered the
potential impact of climate change that could occur in the short-, medium-
and longer-term.
i See Risk Management on pages 16 to 25
7. Describe the organisation’s
processes for managing climate-
related risks.
See above – A. Governance – Xaar has introduced a new structure to
identify climate-related risks to be reported to the Board bi-annually
including making decisions to mitigate, transfer, accept, or control those
risks.
8. Describe how processes for
identifying, assessing, and
managing climate-related risks are
integrated into the organisation’s
overall risk management.
As part of the Group’s risk management, within the detailed risk register,
climate-related risks are determined alongside other principal risk
areas, e.g. manufacturing facility, inventory and supply chain risks. The
assessment is quantified via a Likelihood/Magnitude matrix to determine
the overall net risk after mitigation.
D. Metrics & Targets
9. Disclose the metrics used by the
organisation to assess climate-
related risks and opportunities
in line with its strategy and risk
management process.
Disclose the metrics
and targets used to
assess and manage
relevant climate-
related risks and
opportunities where
such information is
material.
Metric updates for 2023:
L Continue to comply with ESOS Phase 3. Our Energy Steering Group is
tasked with finding additional energy reduction savings
L Scope 3 travel emissions are to continue to be offset, Scope 1 & 2
emissions are being offset to become ‘carbon neutral’
L Following analysis to identify opportunities to reduce our upstream/
downstream Scope 3 emissions, we are actively working on internal and
external change and engagement to drive achieve our Net Zero aims
L A key focus for 2024 is to achieve our Roadmap target of Zero waste to
landfill across our UK sites
L We continue to investigate the viability of integrating on-site renewables
at our UK operations.
31
Xaar plc Annual Report and Financial Statements 2023 Task Force on Climate-related Financial Disclosures (TCFD) continued
Disclosures
Recommended disclosures
Response
D. Metrics & Targets continued
Disclose the metrics
and targets used to
assess and manage
relevant climate-
related risks and
opportunities where
such information is
material continued.
10. Disclose Scope 1, Scope 2, and, if
appropriate, Scope 3 greenhouse
gas (GHG) emissions, and the related
risks.
GHG emissions are disclosed as per the SECR requirements for Scope 1 and
Scope 2.
An initial assessment has been completed for Printhead business unit Scope
3 emissions, and a boundary developed.
11. Describe the targets used by the
organisation to manage climate-
related risks and opportunities and
performance against targets.
As a global business, we recognise the impact that our employee travel
requirements have on our Scope 3 emissions. To mitigate this, we are
currently offsetting all travel-related activities, using hybrid and/or electric
vehicles for hire cars where possible and working towards a Group travel
policy. We understand that our upstream and downstream Scope 3
emissions are much greater than our Scope 3 employee travel emissions.
A key undertaking in 2024 is to calculate our full Group Scope 3 emissions,
backdated to our 2019 baseline. Moving forward, we aim to capture and
report upstream and downstream Scope 3 data across the Group.
i See GHG/SECR disclosure on page 33
Xaar has committed short-term targets:
L Zero waste to landfill for all UK sites by the end of 2024
L To reduce energy usage across all UK sites by at least 15% against 2022
L Offset of all Scope 3 travel emissions as we continue to drive a reduction
in this
L Committed to doing a detailed materiality assessment in 2024 which will
help steer our ESG decision-making going forward
L Finalise the supplier sustainability policy to green our supply chain.
32
Xaar plc Annual Report and Financial Statements 2023 Greenhouse Gas Emissions statement
Strategic Report
Governance
Financial Statements
Xaar plc has calculated its global greenhouse gas (GHG) emissions statement using an
operational control consolidation approach.
Scope 1 emissions
Scope 1 emissions occur from sources that
are owned or where Xaar plc has operational
control. This includes direct emissions from gas
combustion in our buildings, fuel used in leased
Company vehicles and for the first time we have
chosen to include impacts from refrigerant
leaks.
Actual and estimated gas consumption data
has been collected from each of the leased
properties under the control of the Xaar Group,
from data sources including direct meter
readings, meter readings from suppliers
included on invoices and estimations where
required based on available information from
property management suppliers and other
sources. The Company vehicle fleet is now fully
electric so there is no fuel consumption for that.
Scope 2 emissions
Scope 2 refers to indirect emissions from the
consumption of purchased electricity (also
including any purchased heat, steam, or cooling)
from facilities owned or under the operational
control of Xaar plc. Actual and estimated data has
been collected from each of the leased properties
under the control of the Xaar Group, from data
sources including direct meter readings, meter
readings from suppliers included on invoices
and estimations where required based on
available information from property management
suppliers and other sources.
Scope 3 emissions
Scope 3 emissions are all indirect emissions –
not included in Scope 2 – that occur in the value
chain of the reporting company, including both
upstream and downstream emissions.
Scope 3 CO2 emissions currently represent
calculated and estimated CO2 emissions from
travel and employee commuting.
As the Group’s Sustainability Roadmap
progresses, we aim to collaborate with the
supply chain via a materiality assessment and
supply chain audits to validate our upstream
model data and reduce CO2 emissions. We will
continue to disclose ongoing progress in our
ESG Report.
Activities on downstream Scope 3 have not
yet been initiated, but we aim to understand
and report on these in the future and to
drive reductions across our full Scope 3 CO2
emissions.
i Please refer to pages 26 to 27 for actions
that Xaar is undertaking to offset its carbon
emissions
Assessment parameters
Baseline year
1 January 2013 to 31 December 2013
Consolidated approach
Operational control
Boundary summary
All entities and all facilities under operational control included subject to the materiality threshold applied
Consistency with the
financial statements
The only variation is that leased properties deemed to be under operational control have been included
in Scope 1 and 2 emissions
Materiality threshold
Materiality has been set at Group level at 5%*
Assessment methodology
Greenhouse Gas Protocol and ISO 14064-1 (2018)
Intensity ratio
Emissions per £’000 turnover exc. royalties
* The total of any excluded emission sources is estimated to be less than 5% of Xaar plc’s total reported emissions.
Greenhouse gas emissions
Global energy use
UK
Non-UK
Absolute values
Scope 1
Scope 2
Scope 3
Total
KWh
%
KWh
KWh
tCO2e
tCO2e
tCO2e
tCO2e
– Scope 1 & 2 emissions of which UK tCO2e
Normalised values
Scope 1
Scope 2
Scope 3
Total
tCO2e/£’000
tCO2e/£’000
tCO2e/£’000
tCO2e/£’000
Renewable
8,428,119
97.9%
8,104,416
325,703
Non-
renewable
2023 Total
Renewable
181,006
2.1%
171,456
9,550
8,609,125
8,273,872
335,253
10,525,987
91.1%
10,292,374
233,613
Non-
renewable
1,022,484
8.9%
509,164
513,321
2022 Total
11,548,472
10,801,538
746,934
–
–
–
–
–
–
–
–
–
169
26
166
361
80
239
37
234
510
169
26
166
361
80
239
37
237
510
–
–
–
–
–
–
–
–
–
220
21
479
720
156
302
29
658
989
220
21
479
720
156
302
29
658
989
* UK energy certified by Bryt, by Guarantees of Origin from renewable sources. US energy (Green Mountain) 100% carbon free, 68% renewable (balance being nuclear). Significant
site-based emissions improvements since 2022 including the Cleanroom Efficiency Shutdown project which decreased the Huntingdon site energy use. The Dallas site (carbon
e in 2022) was sold in 2023 contributing to the decrease in non-UK non-renewable energy use. Figures show a reduction in Scope 3 emissions due to our com-
impact of 69 tCO
2
e from refrigerant leaks in Scope 1 across the Group.
e). Our figures include a total of 3.43 tCO
mitment to offsetting all PHBU & MegnaJet travel (485 tCO
2
2
Historic greenhouse gas emissions
Scope 1 – tCO2e
Scope 2 – tCO2e
Total – tCO2e
2021
177
116
293
2020
75.0
1,741.0
2019
108.3
2,622.8
2018
124.8
3,128.1
2017
147.7
4,088.0
2016
167.0
4,432.0
2015
162.2
4,475.2
1,816.0
2,731.1
3,252.9
4,235.7
4,599.0
4,637.4
33
Xaar plc Annual Report and Financial Statements 2023
Non-financial information statement
This Annual Report contains the information required to comply with the Companies, Partnerships and
Groups (and Non-Financial Reporting) Regulations 2016, as contained in sections 414CA and 414CB of
the Companies Act 2006. The table below provides key references to information that, taken together,
comprises the Non-Financial Information Statement for 2023*.
Reporting
requirement
Environmental
matters
Employees
Group policies that guide our approach
L Environmental Policy Statement
L Environmental Sustainability statement
L Health & Safety Policy statement
L Quality Policy statement.
L Absence Policy
L Alcohol & Substance Abuse
Policy
L Annual Leave Policy
L Bullying & Harassment Policy
L Capability Policy
L Code of Conduct
L Disciplinary Policy
L Equal Opportunities Policy
L Family Leave Policy
L Flexible Working Policy
L Gender pay gap report
L Gifts & Entertainment Policy
L Grievance Policy
L Health & Safety Policy
L Performance Planning Policy
L Referral & Reward Policy
L Retirement Policy
L Whistleblowing Policy
L Working time regulations
IT, cyber security
& data protection
Social matters
Respect for
human rights
Anti-corruption
and anti-bribery
matters
L Confidential Information Policy
L Data Protection Policy
L Email and Internet Policy
L Mobile Phone Policy.
L Human Rights Policy
L Charitable Donations Policy
L Employee Volunteering Policy.
L Human Rights Policy
L Sanctions Policy
L Modern Slavery Policy
L Modern Slavery Act Compliance
Statement.
L Anti-Bribery & Corruption Policy
L Anti-money Laundering Policy
L Conflict Materials Policy
L Corporate Criminal Offence
Policy
L Employee Share Dealing code
L Gifts & Entertainment Policy
L Whistleblowing Policy.
Information and risk management,
with page references
i Risk management & principal risks, pages 16 to 25
i Sustainable and responsible business, pages 26 to 33
i Section 172 statement, pages 47 to 48
i Company Purpose, contents page
i Our business model, page 2
i Risk management & principal risks, pages 16 to 25
i Sustainable and Responsible business, pages 26 to
33
i Section 172 statement, pages 47 to 48
i Company Purpose, contents page
i Our business model, page 2
i Risk management & principal risks, pages 16 to 25
i Sustainable and responsible business, pages 26 to 33
i Risk management & principal risks, pages 16 to 25
i Sustainable and responsible business, pages 26 to 33
i Section 172 statement, pages 47 to 48
i Company Purpose, contents page
i Risk management & principal risks, pages 16 to 25
i Sustainable and responsible business, pages 26 to 33
i Our business model, page 2
i Section 172 statement, pages 47 to 48
i Company Purpose, contents page
Description of the business model
i Our business model, page 2
Description of the principal risks in relation to the above matters, including business
relationships, products and services likely to affect those areas of risk, and how the
Company manages the risks
Non-financial key performance indicators
i Risk management & principal risks, pages 16 to 25
i Sustainable and responsible business, pages 26 to 33
i Climate change, page 21
i Sustainable and responsible business, pages 26 to 33
i Greenhouse gas report, page 33
i Key Performance Indicators, pages 14 to 15
* The policies listed above are available to employees via our intranet, alongside corporate policies being available on our website. Compliance with our policies is monitored
through the implementation of annual compliance statements, through our internal audit function, and locally by our General Managers.
34
Xaar plc
Annual Report and Financial Statements 2023
Strategic Report
Governance
Financial Statements
Board approval of the Strategic and Annual Reports
The section 172 statement forms part of this Strategic Report – please see pages 47 to 48.
The Strategic Report, Annual Report and Financial Statements, taken as a whole, are fair,
balanced and understandable and provide the information necessary for shareholders to
assess the Company’s position, performance, business model and strategy.
The Strategic Report was approved by the Board on 25 March 2024 and is signed on its
behalf by:
Andrew Herbert
Chairman
John Mills
Chief Executive Officer
Richard Amos
Non-Executive Director
Alison Littley
Senior Independent Director
Ian Tichias
Chief Financial Officer
Jacqueline Sutton
Non-Executive Director
Stuart Widdowson
Non-Executive Director
35
Xaar plc Annual Report and Financial Statements 2023 Governance at a glance
An experienced leadership team
Board composition
Governance framework
Composition
Board of Directors
The Board’s responsibility for leading the
Group towards achievement of its purpose
is supported by a robust governance
framework.
The Board has established a corporate
governance structure with clearly defined
responsibilities, designed to safeguard and
enhance the long-term sustainable success
of Xaar, creating value and benefit for its
shareholders and other stakeholders.
Biographies
Corporate Governance
i Read more about the Board on page 39
i Read more about Corporate
Governance on pages 49 to 54
The Board delegates certain matters to its Principal Committees
Audit
Committee
The Audit Committee
is responsible for
monitoring and reviewing
the integrity of the
financial reporting
process, including the
appropriateness and
effectiveness of the
Internal Controls and
Risk Management
procedures of the Group.
Nomination
Committee
The Nomination
Committee is responsible
for reviewing the
size, structure and
composition of the Board
and providing advice to
the Board on Board and
senior management
appointments and
succession planning,
monitoring of the
composition of the Board
and its Committees.
Remuneration
Committee
The Remuneration
Committee is responsible
for the development and
implementation of the
Group’s remuneration
framework and policies
for Directors including all
incentives and bonuses.
Richard Amos Chair
Appointed 1 June 2023
Andrew Herbert Chair
Appointed 1 April 2020
Alison Littley Chair
Appointed 1 July 2020
i Read more on page
i Read more on page
i Read more on page
55
59
61
Executive Director 2
Non-Executive Director 4
Chair 1
Diversity
Male 5
Female 2
Tenure
0-3 years 4
3-6 years 2
6-9 years 1
36
Xaar plc Annual Report and Financial Statements 2023
Strategic Report
Governance
Financial Statements
Division of responsibilities
Highlights
Director
Responsibilities
Andrew Herbert
Chairman
John Mills
Chief Executive Officer
Ian Tichias
Chief Financial Officer
Richard Amos,
Jacqueline Sutton,
Stuart Widdowson
Non-Executive Directors
Alison Littley
Senior Independent Director
L Primary responsibility is to lead the Board to ensure
the Board functions properly to meet its obligations
and responsibilities, by facilitating efficient Board
discussion, challenge and debate.
L Chair of the Nomination Committee.
L Leads the Executive Committee responsible for
proposing and implementing Group strategy,
and managing the operational and financial
performance of the Group.
L Engages with various stakeholders of the Group,
providing feedback to the Board.
L Evaluates the financial performance of the business
in line with strategy implementation, operational
objectives, forecasts and budgets.
L Ensures integrity of reported financial information,
and maintaining robust accounting systems and
internal controls.
L As Non-Executive Directors, provides constructive
challenge and strategic guidance to the Board,
monitors achievement of objectives and Executive
Director performance.
L Richard Amos is Chair of the Audit Committee.
L As the Senior Independent Director, acts as
a sounding board for the Chairman and an
intermediary for other Directors, and is available
to discuss any concerns with shareholders that
cannot be resolved through communication with the
Chairman or Executive Directors.
L Chair of the Remuneration Committee.
Key governance activities
During 2023, the Board undertook the following
key governance activities:
L Recruitment of two new non-executive
directors, including the Chairman of the
Audit Committee
L Appointment of a new external auditor
L Ensured compliance with the UK Corporate
Governance Code 2018
L Conducted an internal review of Board and
Committee effectiveness and performance
during the year.
i Read more on pages 49 to 54
Board focus areas
During 2023, the Board focused on the following
key operational and strategic activities:
L Capital and equity strategy
L Undertook a strategy review
L Investment in manufacturing efficiencies at
Huntingdon
L Review of the Group’s ESG activities
L Regular monitoring of cyber security
L Investor and customer engagement
L Cost control measures
L Operational improvements.
Board meeting attendance
The Board held 11 scheduled Board meetings in 2023, with one additional unscheduled meeting held to cover specific items.
Chairman, Non-Executive and Independent Directors
Andrew Herbert – Chairman
Richard Amos – Independent Non-Executive Director (appointed 1 June 2023)
Chris Morgan – Independent Non-Executive Director (resigned 30 November 2023)
Alison Littley – Senior Independent Director & Independent Non-Executive Director
Jacqueline Sutton – Independent Non-Executive Director (appointed 1 November 2023)
Stuart Widdowson – Non-Executive Director (appointed 27 February 2024)
Executive Directors
John Mills – Chief Executive Officer
Ian Tichias – Chief Financial Officer
Scheduled Board
meetings attended
Additional Board
meetings attended
100%
100%
100%
100%
100%
N/A
100%
100%
100%
100%
100%
100%
N/A
N/A
100%
100%
37
Xaar plc Annual Report and Financial Statements 2023 Chairman’s introduction to Governance
Dear Shareholder
I am pleased to introduce this year’s Corporate
Governance report for the financial year ended
31 December 2023.
Board effectiveness review
An internal evaluation of the Board was
undertaken in January 2024. The findings of
the review and our progress against the actions
from 2022 can be found on page 52.
The Board recognises the way that the
Company does business is as important as
what it does. A strong governance framework
with robust supporting processes across Xaar
is a key factor in delivering sustainable
business performance, generating value for
shareholders and contributing to wider society.
A key part of the Board’s role is to provide
entrepreneurial leadership, with appropriate
oversight, challenge and support to the
management team.
Board focus and oversight
Key areas of the Board’s focus during the
year included financial stability, investment
in product development, the upgrade to our
Huntingdon manufacturing site, recruitment of
new Non-Executive Directors, and sustainability
initiatives.
UK Corporate Governance Code 2018
and s.172 reporting
Our report demonstrates the way that we have
applied the principles and complied with the
provisions of the UK Corporate Governance
Code 2018 during the year and our approach to
governance in practice. Our Code compliance
statement can be found on pages 49 to 54.
Further details on the way that our Directors
discharged their duties under s.172 of the
Companies Act are set out on pages 47 to 48.
Board composition
Succession planning is an important part
of our governance processes. Furthermore,
as our strategy evolves, so do the skills and
experience required for the Board to help drive
the execution of Xaar’s strategy. Further details
of the work undertaken by the Nomination
Committee during 2023 on succession planning
are on pages 59 to 60.
Richard Amos joined the Board on 1 June 2023
as a Non-Executive Director to replace Chris
Morgan who stepped down on 30 November
2023 as Chair of the Audit Committee.
Jacqueline Sutton was appointed as a Non-
Executive Director on 1 November 2023. More
information on the search process is set out
in the report of the Nomination Committee on
pages 59 to 60.
Stuart Widdowson was appointed as a
Non-Executive Director on 27 February
2024 representing Odyssean Capital LLP, a
shareholder in the Company. More information
is set out on pages 59 to 60.
Stakeholder engagement and support
building strong working relationships with our
stakeholders is critical to our success and the
development of our strategy and is intrinsic in
our day to day activities. Further details of how
we engage with stakeholders are set out on
page 47 to 48.
Business conduct
Xaar aspires to the highest standards of
conduct. The Code of Conduct is applied
throughout the Company and helps to
ensure that good governance extends beyond
the Boardroom. This Code, which works
alongside our values, relates to the Company’s
policies and procedures, which outline the
responsibilities of our employees and Xaar as
an employer. These policies have been devised
to protect our employees and stakeholders,
as well as the business interests of Xaar,
to ensure that we maintain high standards
both legally and ethically. The Board receives
relevant updates on how the application of the
Group’s culture and values are embedded for
colleagues and the Group’s wider stakeholders.
More details are set on pages 47 to 48.
Engagement with shareholders
We believe that communication with our
shareholders is key. In addition to the
comprehensive programme of investor
relations led by John Mills and Ian Tichias,
I proactively seek periodic engagement with
institutional investors. Both Alison Littley, the
Senior Independent Director, and I are available
to meet with shareholders as appropriate.
Our AGM also provides an important opportunity
to meet with and answer questions from
shareholders.
On behalf of the Board, I would like to thank all
of our shareholders and stakeholders for their
continued support of the Company.
Andrew Herbert
Chairman
25 March 2024
A strong governance
framework with robust
supporting processes
across Xaar is a key
factor in delivering
sustainable business
performance, generating
value for shareholders
and contributing to
wider society.
The changes to the Board
during the year has laid a
strong foundation for the
future.
Andrew Herbert
Chairman
38
Xaar plc
Annual Report and Financial Statements 2023
Board of Directors
Andrew Herbert
Chairman
Appointed to the Board: 2016
Alison Littley
Senior Independent Director
Appointed to the Board: 2020
N
R
A
N
R
Qualifications
L FCMA Chartered Management
Accountant
L BA (Hons) in Business Studies.
Skills and experience
L Extensive experience in the
global digital printing industry
following a 30-year career with
Domino Printing Sciences plc,
working both in the UK and
the US
L Group Finance Director/Chief
Financial Officer of Domino
Printing Sciences plc from
1998 to 2015 during which time
he played an instrumental
role in expanding the business
geographically through
acquisition and creation
of sales channels, and in
broadening the product range
via acquisition of technology
based businesses
L Previously held a number of
line director roles in Finance,
Operations, Planning and
Business Development.
External appointments
L Non-Executive Chairman of
Midwich Group plc.
John Mills
Chief Executive Officer
Appointed to the Board: 2019
Qualifications
L Ph.D Physics.
Skills and experience
L Five years as CEO at Inca
Digital
L Previously CEO at DataLase
and COO at Plastic Logic
L Wealth of experience in inkjet,
having started career at
Domino Printing Sciences as
Development Scientist rising to
Director of Development after
four years in various technical
roles.
External appointments
L None.
Skills and experience
L Over 26 years’ experience
within international blue
chip organisations, including
multinational manufacturing,
supply chain and marketing
services roles
L Strong international leadership
background of building
effective management teams
and third-party relationships
gained through a variety of
senior management positions
in Diageo plc, Mars Inc and an
Agency to HM Treasury, where
she was Chief Executive Officer
L For the past 11 years Alison
has been a Non-Executive
Director (NED) of both
international PLCs and
privately owned businesses.
External appointments
L Non-Executive Director and
the Remuneration Committee
Chair at Norcros plc
L Non-Executive Director and
Employee Engagement and
ESG Committee Chair at
Eurocell plc.
Richard Amos
Non-Executive Director
Appointed to the Board: 2023
A
N
R
Qualifications
L ACA Institute of Chartered
Accountants in England &
Wales
L MA in Engineering.
Skills and experience
L Has over 30 years’ experience,
having started his career at EY
in 1988
L From 2000 to 2020, was an
executive on the boards of
five companies listed on the
London Stock Exchange
L Most recently as Chief
Financial Officer of Wilmington
plc, Chief Financial Officer of
Plant Impact plc and Group
Finance Director of Anite plc.
Strategic Report
Governance
Financial Statements
Committee Key
Chair
Member
External appointments
L Non-Executive Director at
Thruvision Group plc, where
he serves as the Senior
Independent Director, Chair
of the Audit and Nomination
Committees and is a member
of the of the Remuneration
Committee
L the Non-Executive Chairman
of Skillcast Group plc where
he also serves as a member
of the Audit and Remuneration
Committees.
Ian Tichias
Chief Financial Officer
Appointed to the Board: 2020
Qualifications
L ACA Institute of Chartered
Accountants in England &
Wales
L BSc (Hons) Economics &
Maths, University of Leeds.
Skills and experience
L Over 21 years’ experience in
senior financial roles
L Previously, Ibstock plc Group
Finance Director and Deputy
CFO, with direct responsibility
for the Group’s Clay division
business
L Other past roles include Senior
Director, Finance & Global
Pricing Lead – Europe, Africa
and Middle East for Zoetis
and before that, Head of
Finance for Pfizer Diversified
Businesses (PDB) UK
L Proven track record of
delivering business focused
finance operations that drive
efficiency and commercial
performance beyond finance.
External appointments
L None.
Jacqueline Sutton
MBE
Non-Executive Director
Appointed to the Board: 2023
A
N
R
Qualifications
L BA (Hons) Russian and
German
L Postgraduate Diploma in
International Marketing.
A Audit Committee
N Nomination Committee
R Remuneration
Committee
Skills and experience
L From 2008 to 2021, had several
senior leadership roles in
Rolls-Royce plc’s largest
division (Civil Aerospace).
Most recently, Jacqueline was
Chief Customer Officer of Civil
Aerospace, Rolls-Royce Group
L Prior to joining Rolls-Royce,
Jacqueline held senior
management roles with GE
Aviation Systems (formerly
Smiths Aerospace).
External appointments
L Non-executive director of
Farnborough International
and the Women in Aviation
& Aerospace Charter
L Senior Adviser to Newton
Europe
L a Trustee of the Council of
St John’s College, Durham
University.
Stuart Widdowson
Non-Executive Director
Appointed to the Board: 2024
Qualifications
L BA (Hons) Business Economics
L Investment Management
Certificate.
Skills and experience
L Managing Partner of Odyssean
Capital, which he founded in
2017
L Prior to founding Odyssean
he was a Director and fund
manager at GVQ Investment
Management. In 2009, he
became lead fund manager of
Strategic Equity Capital plc
L From 2009 until 2017, Stuart
was the lead fund manager of
Strategic Equity Capital plc
L Stuart began his career
as a strategy consultant
undertaking commercial due
diligence and strategy projects
for private equity and corporate
clients, before working for
HgCapital, a leading private
equity investor.
External appointments
L Managing Partner of Odyssean
Capital LLP.
39
Xaar plc Annual Report and Financial Statements 2023
Directors’ report
Report on the affairs of the Group
The Directors present their Annual Report together with the financial statements for the year
ended 31 December 2023.
The Company has chosen, in accordance with section 414C(11) of the Companies Act 2006, to include matters of strategic importance in the Strategic
Report which otherwise would be required to be disclosed in the Directors’ report. An indication of likely future developments in the business of the
Company and details of research and development activities and important events since the financial year-end are included in the Strategic Report.
The following cross-referenced material is incorporated into this Directors’ report.
Non-financial information statement – Subject Matter
Section/Page
Principal risks and uncertainties
Risk management on pages 16 to 25
Business model
Employee engagement
Strategic Report on pages 2 to 3
Strategic Report on page 3
Stakeholder engagement on pages 47 to 48
Directors’ Remuneration report on pages 61 to 71
Equality, diversity, inclusion and human rights
Sustainable and responsible business on pages 27 to 28
Disabled employees
Supplier engagement
Sustainable and responsible business on page 28
Stakeholder engagement on page 48
Engagement with customers and other business relationships
(including community engagement)
Stakeholder engagement on page 48
Sustainable and responsible business on page 29
Greenhouse gas emissions and environmental policies
Sustainable and responsible business (TCFD) on pages 30 to 32
GHG statement on page 33
Political donations
Sustainable and responsible business on page 29
Ethics and governance, including Code of Conduct,
anti-bribery and corruption policies
Sustainable and responsible business on page 27
Corporate Governance section on pages 49 to 54
Branches
In addition to the subsidiaries disclosed in note C6 of the Company’s separate financial statements on page 124, there is a branch in Stockholm,
Sweden through which research and development activities are conducted.
Dividends
No interim or final dividend was proposed or paid for the year ended 31 December 2023. No interim or final dividends were paid for the year ended 31
December 2022.
i Details on dividends are set out in note 15 on page 98
Capital structure
Details of the issued share capital, together with details of the movements in the Company’s issued share capital during the year, are shown in note 28.
The Company has one class of ordinary shares which carries no right to fixed income. Each share carries the right to one vote at general meetings of
the Company, except for shares held in the Xaar Share Incentive Plan trust and shares held by Xaar Trustee Limited, which hold no voting rights.
There are no specific restrictions on the size of a holding nor on the transfer of shares, which are both governed by the general provisions of the
Articles of Association and prevailing legislation. The Directors are not aware of any agreements between holders of the Company’s shares that may
result in restrictions on the transfer of securities or on voting rights.
There are a number of employee share schemes, namely, Employee Share Option Schemes (ESOP), Long-Term Incentive Plans (LTIPs), Share
Incentive Plans (SIP), and Share Save Schemes (SAYE). There is a Deferred Bonus Plan for the Executive Directors, as introduced in 2020.
L Details of the shareholding held in trust by Xaar Trustee Limited and held by the Xaar plc ESOP trust are provided in note 28. These have voting
rights exercised by the Trustees
L Details of other share-based payment schemes are set out in note 31
L No person has any special rights of control over the Company’s share capital and all issued shares are fully paid.
The business of the Company is managed by the Board, which may exercise all the powers of the Company subject to the Articles and the Companies Act.
i The powers of Directors are described in the Main Board terms of reference, copies of which are available on request, and the Corporate
Governance statement, division of responsibilities on page 37
40
Xaar plc
Annual Report and Financial Statements 2023
Strategic Report
Governance
Financial Statements
Capital allocation policy
The Company is committed to investing in the growth strategy of the business. This investment includes both capital investments within existing
operations as well as pursuing inorganic growth opportunities that align with the Company’s strategy, investing in capability and capacity to accelerate
our strategy and future growth. The Company’s objective is to maximise long-term shareholder returns through a disciplined deployment of capital
and resources, and it has adopted the following capital allocation policy in support of this:
L Organic growth: The Company invests in capital projects and R&D relating to ongoing and new technology development to support demand
in our chosen and target markets and product innovation;
L Inorganic growth: The Company continues to explore complementary inorganic growth and acquisition opportunities consistent with the growth
strategy and supplementary to our existing innovation and product pipeline; and
L Treatment of excess capital and shareholder distributions: The Board keeps under review the Company’s balance sheet and cash position in
line with this policy and medium-term investment requirements. The Company returns excess capital to shareholders if and when the Board
considers it appropriate by means of a dividend or a share repurchase. The Company assesses the underlying profitability and the future cash
requirements of the business at least annually, as well as the distributable reserves available, to determine the appropriateness of paying a
dividend to shareholders, and to review the appropriate policy to adopt.
At this current time, capital resources are focused on and deployed to supporting organic growth and inorganic growth. The Board keeps the
Company’s capital structure under regular review.
Treasury
The Group’s policy enables it to use financial instruments to hedge foreign currency exposures. The main trading currency of the Group is
GBP Sterling. The Group’s use of financial instruments and the related risks are discussed further in notes 22 and 30.
At the 2023 AGM held on 31 May 2023, the Company’s shareholders granted the Company authority to make one or more market purchases
(within the meaning of section 693(4) of the Companies Act 2006) of ordinary shares of 10 pence each in the capital of the Company.
The Company did not purchase any shares for cancellation or to be held as treasury shares in 2023 or 2022.
Directors and their interests
The Directors who served during the year, and subsequent to the year-end, unless otherwise stated, were as follows:
Andrew Herbert
Chairman
John Mills
Chief Executive Officer
Ian Tichias
Chief Financial Officer
Richard Amos
Non-Executive Director (appointed 1 June 2023)
Chris Morgan
Non-Executive Director (resigned 30 November 2023)
Alison Littley
Senior Independent Director
Jacqueline Sutton
Non-Executive Director (appointed 1 November 2023)
Stuart Widdowson
Non-Executive Director (appointed 27 February 2024)
i Brief biographical descriptions of the Directors are set out on page 39
41
Xaar plc Annual Report and Financial Statements 2023 Directors’ report continued
Shareholdings in the Company
The interests of the Directors in the shares of the Company and its subsidiaries (all of which are beneficial) as at 31 December 2023 are as follows:
Andrew Herbert
John Mills
Ian Tichias
Richard Amos
Alison Littley
Jacqueline Sutton
Stuart Widdowson (appointed 27 February 2024)
Number of
ordinary shares
of 10p each
31 December
2023 or date of
appointment
Number of
ordinary shares
of 10p each
31 December
2022
100,000
125,000
50,000
–
–
–
25,000
100,000
125,000
50,000
–
–
–
–
There have been no changes in the Directors’ interests in shares of the Company between 31 December 2023 and 26 March 2024. Directors’ interests
in options in the Company and in deferred bonuses (in shares) are shown in the Directors’ Remuneration report. (The Executive Directors are required
to receive a portion of their bonus in deferred shares. These shares are held in trust until the end of the deferral period.
Directors’ liabilities
Xaar plc, the ultimate Parent Company, and its subsidiaries have granted an indemnity to all of the Directors of Xaar plc and of its subsidiaries against
liability in respect of any potential proceedings that may be brought by third parties, subject to the conditions set out in the Companies Act 2006. Such
qualifying third-party indemnity provision was in place during the year and remains in force as at the date of approving the Directors’ report.
Share capital
As at 31 December 2023 the Company had been notified in accordance with Chapter 5 of the Financial Conduct Authority’s (FCA’s) Disclosure and
Transparency Rules of the following material interests in its share capital:
Top ten shareholders (by holding) – at 31 December 2023
Schroder Investment Mgt
Odyssean Investment Trust
Columbia Threadneedle Investments (London)
Aberforth Partners
Hargreaves Lansdown Asset Mgt
Columbia Threadneedle Investments (ex BMO Global Asset Mgt)
Charles Stanley
Interactive Investor
Cobia Capital Mgt
BlackRock Investment Mgt – Index
Total
Number
of ordinary
shares held
Percentage
of issued
share capital
20,525,938
12,050,000
8,811,839
7,937,509
2,363,108
2,151,589
2,142,275
2,006,487
1,822,573
1,239,406
61,050,724
25.91%
15.21%
11.12%
10.02%
2.98%
2.72%
2.70%
2.53%
2.30%
1.56%
77.06%
During the period 31 December 2023 to 25 March 2024, the Company had been notified in accordance with Chapter 5 of the FCA’s Disclosure and
Transparency Rules of the following material interests in its share capital:
Changes in material shareholdings since 31 December 2023
Odyssean Investment Trust
Schroder Investment Management
Annual General Meeting
i The notice convening the Annual General Meeting is set out on pages 128 to 131
Number of
ordinary shares
held
Percentage of
issued share
capital
13,175,000
17,380,955
16.63%
21.93%
Resolutions 1 to 10 set out in the notice of the meeting deal with the ordinary business to be transacted at the meeting. The special business to be
transacted at the meeting is set out in Resolutions 11 to 14.
Annual Report
Resolution 1
The Board presents its Annual Report and the Financial Statements for the year ended 31 December 2023 to the Meeting.
42
Xaar plc Annual Report and Financial Statements 2023 Strategic Report
Governance
Financial Statements
Auditors
Resolutions 2 and 3
The Board proposes that PKF Littlejohn LLP is appointed as the Auditor of the Company to hold office until the conclusion of the next general meeting
at which accounts are laid before the Company and that the Audit Committee is authorised to agree the remuneration of the Auditor.
Re-election of Directors
Resolutions 4 to 9
The Articles of Association provide that all Directors should be subject to re-election by their shareholders every year. In accordance with this provision
and in keeping with the Board’s aim of following best corporate governance practice, all Directors retire at each Annual General Meeting and offer
themselves for re-election.
Alison Littley has notified the Board of her intention to step down as a Non-Executive Director during 2024. Mrs Littley will stand for re-election at the
forthcoming AGM but will resign from the Board once her replacement is recruited.
Directors’ Remuneration report
Resolution 11
This Resolution seeks shareholder approval for the Directors’ Remuneration report.
i The Directors’ Remuneration report can be found on pages 61 to 71 (inclusive) of the Annual Report and Financial Statements
In accordance with regulations which came into force on 1 October 2013, Resolution 11 offers shareholders an advisory vote on the Directors’
Remuneration report.
Power to issue securities
Resolutions 12 and 13
Under section 551 of the Companies Act 2006 (the ‘Act’), the Directors may only allot shares or grant rights to subscribe for or convert any securities
into shares if authorised by the shareholders to do so.
Resolution 12, which complies with guidance issued by the Investment Association, will, if passed, authorise the Directors to allot ordinary shares
or grant rights to subscribe for or convert any securities into ordinary shares, up to an aggregate nominal value of £2,642,008.50 (corresponding to
approximately one-third of the issued share capital at 25 March 2024) and up to an additional aggregate nominal value of £5,284,017.10 (corresponding
to approximately two-thirds of the issued share capital at 25 March 2024) in the case of allotments only in connection with a fully pre-emptive rights
issue. The Directors may consider using the authority if they believe it would be appropriate in respect of business opportunities that may arise
consistent with the Company’s strategic objectives.
This authority will expire no later than 15 months after the passing of the Resolution. It is the Board’s current intention to seek renewal of such
authority at each future Annual General Meeting of the Company.
Disapplication of pre-emption rights
Resolution 13
Under section 561(1) of the Act, if the Directors wish to allot equity securities (as defined in section 560 of the Act) they must in the first instance offer
them to existing shareholders in proportion to their holdings. In addition, there may be occasions when the Directors will need the flexibility to finance
business opportunities by the issue of shares without a pre-emptive offer to existing shareholders. This cannot be done under the Act unless the
shareholders have first waived their pre-emption rights.
Resolution 13 seek authority from shareholders from within the guidelines set by the Pre-Emption Group.
Under Resolution 13, to be proposed as a Special Resolution, authority is sought to allot shares:
(i) in relation to a pre-emptive rights issue only, up to an aggregate nominal amount of £5,284,017.10 (being the nominal value of approximately
two-thirds of the issued share capital of the Company); and
(ii) in any other case, up to an aggregate nominal amount of £792,602.50 (representing 10% of the issued share capital of the Company).
If Resolution 13 is passed, the authorities will expire at the conclusion of the next Annual General Meeting of the Company, or, if earlier, the date which
is 15 months after the date of passing of the Resolutions. It is the Board’s current intention to seek renewal of such authorities at each future Annual
General Meeting of the Company.
Authority to purchase own shares
Resolution 14
It is proposed by Resolution 14, by Special Resolution, to authorise the Company generally and unconditionally to purchase its own shares at a price
of not less than the par value of the shares and not more than the higher of:
(i) 5% above the average of the middle market quotations of the shares as derived from the London Stock Exchange Daily Official List for the five
dealing days immediately preceding the day on which the purchase is made; and
(ii) the higher of the price of the last independent trade and the highest current independent bid on the trading venue where the purchase is carried
out (in each case exclusive of any expenses payable by the Company).
The authority will be for a maximum of 10% of the Company’s issued share capital and will expire at the earlier of the next Annual General Meeting
of the Company or within 15 months from the date of the passing of this Resolution. The Directors currently have no intention to exercise the authority
and will only purchase shares if it is in the best interests of shareholders as a whole.
43
Xaar plc Annual Report and Financial Statements 2023 Directors’ report continued
Authority to purchase own shares continued
Resolution 14 continued
The total number of ordinary shares under option, which remain unexercised and outstanding as at 25 March 2024 (including options awarded
under LTIP which may be satisfied by subscription for new shares), was 4,859,167. This represents 6.3% of the issued ordinary share capital at
that date.
If the Company was to buy back the maximum number of ordinary shares permitted pursuant to the passing of this Resolution, then the total number
of ordinary shares under option which remain unexercised and outstanding as at 31 December 2023 would represent 7.33% of the reduced issued
ordinary share capital.
Action to be taken
As detailed in the notes to the notice convening the Annual General Meeting, you will not receive a Form of Proxy for the Annual General Meeting
in the post. Instead, you can vote online at www.signalshares.com. To register, you will need your Investor Code, which can be found on your share
certificate; once logged on, click on the ‘Vote Online Now’ button to vote. Proxy votes should be submitted as early as possible and in any event,
no later than 48 hours before the start of the meeting (excluding weekends and public holidays). Shareholders attempting to attend the meeting
will be refused admission.
You may request a hard copy proxy form directly from the registrars, Link Asset Services on 0371 664 0391. (Calls cost 12 pence per minute plus
your phone company’s access charge. If you are outside the United Kingdom, please call +44 371 664 0391. Calls outside the United Kingdom will be
charged at the applicable international rate). Lines are open between 9.00a.m. to 5.30p.m., Monday to Friday, excluding public holidays in England
and Wales.
Additional information for shareholders
The following provides the additional information required for shareholders as a result of the implementation of the Takeovers Directive into UK law.
The structure of the Company’s issued share capital is shown in note 28.
Details of ordinary shares held in trust owned by the Company can be found in note 28.
The total cost of the research and development expenditure is set out on page 12 of the Strategy Report and in note 7.
Employees are provided with regular updates by the senior management team on the Company’s performance and its wider market through online
briefings and meetings with the CEO and CFO. Further details on the Company’s employee benefits are set out on page 28.
The Company is not aware of any agreements between shareholders that may result in restrictions on the transfer of securities and/or voting rights.
The Directors are authorised to issue and allot shares and to undertake purchases of the Company’s shares. Appropriate resolutions to renew these
authorities are proposed to be passed at the Annual General Meeting as detailed above and notice of which is on pages 128 to 129.
i The notice of the Annual General Meeting is on pages 128 to 131
Ordinary shares
On a show of hands at a general meeting of the Company every holder of ordinary shares present in person and entitled to vote shall have one vote for
every ordinary share held and, on a poll, every member present in person or by proxy and entitled to vote shall have one vote for every ordinary share
held. The notice of the Annual General Meeting on pages 128 to 131 specifies deadlines for exercising voting rights either by proxy notice or present in
person or by proxy in relation to resolutions to be passed at the Annual General Meeting.
All proxy votes are counted and the numbers for, against or withheld in relation to each resolution are made available at the Annual General
Meeting and are published on the Company’s website after the meeting. No person holds securities carrying special rights with regard to control
of the Company.
Restrictions
There are no restrictions on the transfer of ordinary shares in the Company other than:
L certain restrictions may from time-to-time be imposed by laws and regulations (for example, insider trading laws and market requirements
relating to close periods); and
L pursuant to the Listing Rules of the FCA whereby all employees of the Company require the approval of the Company to deal in the
Company’s securities.
Articles of Association
The Company’s Articles of Association may only be amended by a Special Resolution at a general meeting of the shareholders. Directors are
reappointed by Ordinary Resolution at a general meeting of the shareholders.
Appointment and replacement of Directors
With regard to the appointment and replacement of Directors, the Company is governed by its Articles of Association, the UK Corporate Governance
Code, the Companies Act and prevailing legislation.
The Board can appoint a Director but anyone so appointed must be elected by an Ordinary Resolution at the next general meeting. All Directors
are required to submit themselves for re-appointment every year at the AGM (see: Re-election of Directors, above) in line with the UK Corporate
Governance Code.
A Director may be removed by the Company in certain circumstances set out in the Articles of Association or by an Ordinary Resolution of the Company.
44
Xaar plc
Annual Report and Financial Statements 2023
Strategic Report
Governance
Financial Statements
Significant interests
i Directors’ interests in the share capital of the Company are shown in the table on page 42
i Major interests (i.e. those greater than 3%) of which the Company has been notified are shown on page 42
Company share schemes
The Xaar plc ESOP Trust holds 0.29% (2022: 0.9%) of the issued share capital of the Company in trust for the benefit of employees of the Group and
their dependants. Xaar Trustee Limited holds 0.03% (2022: 0.03%). The voting rights in relation to these shares are exercised by the Trustees.
Change of control
The Company is not party to any agreements which take effect, alter or terminate upon a change of control of the Company following a takeover bid.
There are no agreements between the Company and its Directors or employees providing for compensation for loss of office or employment (whether
through resignation, purported redundancy or otherwise) that occurs because of a takeover bid. Depending on the achievement of performance
conditions, share-based payment arrangements may vest on change of control but this is subject to the approval and exercise of the discretion of the
Remuneration Committee.
Going concern
The consolidated financial statements are prepared on a going concern basis. Having considered the Group’s forecast financial performance and
cash flows, and after making appropriate enquiries, the Directors have a reasonable expectation that the Group has adequate financial resources
to continue in operational existence for the foreseeable future and for at least one year from the date that these consolidated financial statements
are signed. For these reasons, they continue to adopt the going concern basis in preparing the consolidated financial statements. Accordingly, these
financial statements do not include any adjustments to the carrying amount or classification of assets and liabilities that would result if the Group were
unable to continue as a going concern.
When making their assessment, the Directors have considered the impacts on profitability of margin constraints prompted by inflationary cost
pressures. Furthermore, the impacts on revenue generation and profitability resulting from wider market disruption in certain customer and supplier
markets and jurisdictions have been factored into forecast and sensitivity scenarios.
A reverse stress test has been performed to model the circumstances required to eliminate available liquidity during the going concern period, this
includes reducing revenues. This reverse stress scenario would require a reduction in Printhead segment revenue in excess of 23% in comparison
to the base case, which would be below the actual reported result for the year ended 31 December 2023. The Directors believe the possibility of this
combination of severe downsides arising to be remote given the recurring revenue base and predictability of forecasts and new revenue streams
secured from products launched by OEMs in the second half of 2023 or due to be launched in 2024.
In the unlikely event of such a scenario materialising, the Group has a range of mitigating actions, focused on reducing the Group’s cost base, that
could be taken to avoid a liquidity shortfall. Namely, deferring non-committed capital expenditure, delaying, or suspending research and development
expenditure, reducing performance related pay by aligning payments to actual results and/or ultimately even making headcount reductions. It is worth
noting that such actions would only be required in the event of an extreme downside scenario.
The Group is continuously monitoring and mitigating, where possible, the impacts of such risks. There is a high degree of predictability within the
Group’s short-term cash flows as they reflect existing technologies and products, existing OEM adoption and the committed order pipeline. The level of
sensitivity testing, and reverse stress testing performed is proportionate to this level of predictability.
The Group’s business activities, together with the factors likely to affect its future development, performance and financial position are set out in the
Strategic Report on pages 1 to 35.
The Group continues to have a net current assets position and maintains sufficient financial resources as at 31 December 2023. These consist of cash
and cash equivalents of £7,135,000 as well as £5,000,000 of committed, but undrawn, banking facilities made available under a revolving credit facility
agreement which currently expires in June 2025. The revolving credit facility is subject to leverage, interest cover and capital expenditure threshold
covenants. In addition, to support the Group’s working capital position, alongside the above core banking facilities, the Group also has access to
ancillary funding arrangements in the form of an invoice discounting facility; of which £1,403,000 of the total £3,000,000 committed facility was utilised
as at 31 December 2023.
Details of the Group’s objectives, policies and processes for managing its capital and its exposure to financial risks, including both credit risk and
liquidity risk, are included in Note 30.
Viability Statement
The long-term viability of the Group is assessed by the Directors as part of the risk management process and regular strategic reviews.
The Company has undertaken thorough strategic planning of all four business units which has resulted in a three-year plan which takes into
consideration the principal risks, product portfolios and R&D roadmaps, the market opportunities, our competitive position, core capabilities, and the
cost structure, effectiveness and efficiency of the organisation.
i Details of which are outlined in the strategic review on pages 8 to 10
The plan forms the basis for strategic actions to be taken across the Company and the key objectives for each business. These objectives, and the key
performance metrics associated with these, are regularly reviewed by the Directors.
The Company is aware that it operates in an uncertain environment and faces risks both internally and externally that could potentially impact on the
Company’s ability to achieve its strategy.
i The principal risks and uncertainties faced by the Company are included on pages 19 to 25
45
Xaar plc Annual Report and Financial Statements 2023 Directors’ report continued
Viability Statement continued
As part of the process of reviewing these risks, and other potential risks, the Board assigns responsibility for these to members of the Executive
Committee. It is the responsibility of the Executive Committee members to manage the risk and the mitigating actions. This ensures that the Company
manages the risks it faces appropriately and that these are considered in all financial models.
The Board has assessed the viability of the Group over a three-year timeframe based on the development cycles of our competitors and those of our
customers and the probability this could lead to technological advancements that disrupt the markets that Xaar operates in.
The Board has considered plausible principal risks and the financial impacts that these could have over a three-year period were conservatively
assumed in the Group’s mid-term planning exercise.
Taking account of the Group’s and Company’s current financial position, operating performance, and the principal risks and uncertainties, the
Directors have assessed the prospects of the Company, and confirm that they have a reasonable expectation that the Company will be able to continue
in operation and meet its liabilities as they fall due for the next three years, to December 2026.
Auditor
Ernst & Young LLP resigned as auditor in 2023. The Directors appointed PKF Littlejohn LLP as auditor in 2023 to fill the vacancy, following a tender
process. They have expressed their willingness to continue in office as auditor and a resolution to appoint them will be proposed
at the forthcoming AGM.
Directors’ statement as to disclosure of information to auditor
i The Directors who were members of the Board at the time of approving the Directors’ report are listed on page 39
Having made enquiries of fellow Directors, each of these Directors confirm that:
L To the best of each Director’s knowledge and belief, there is no information relevant to the preparation of their report of which the Group’s auditor
is unaware
L Each Director has taken all the steps a Director might reasonably be expected to have taken to be aware of relevant audit information and to
establish that the Group’s auditor is aware of that information.
This confirmation is given and should be interpreted in accordance with the provisions of section 418 of the Companies Act 2006.
Approval
The Directors’ report was approved by the Board on 25 March 2024 and is signed on its behalf by:
John Mills
Chief Executive Officer
46
Xaar plc Annual Report and Financial Statements 2023 Section 172 statement
Strategic Report
Governance
Financial Statements
The Companies Act 2006 (the ‘Act’), as amended by the Companies (Miscellaneous Reporting)
Regulations 2018, requires companies to include a ‘Section 172(1) Statement’ in the Strategic
Report describing how directors have had regard to the matters set out in Section 172 (1) (a)
to (f) of the Act when performing their duties.
Section 172 of the Act requires directors of a company to act in a way they consider, in good faith, would be likely to promote the success of the
company for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to:
1. Likely consequences of any decision in the long-term,
2. Interests of the company’s employees,
3. Need to foster the company’s business relationships with suppliers, customers and others,
4. Impact of the company’s operations on the community and the environment,
5. Desirability of the company maintaining a reputation for high standards of business conduct, and
6. Need to act fairly as between members of the company.
The Directors’ duties under Section 172 are embedded in all of the decisions that the Board and its Committees make, together with a range of other
factors, including alignment with our strategy and our values. Accordingly, information on how s.172 matters have been considered during the year are
detailed throughout this Annual Report.
The Board understands the importance of effectively engaging with the Company’s key stakeholders, in order to better understand their views and
interests, and the potential impact of the Directors’ decisions on them.
The Board is aware that the interests of stakeholders may not always align with each other and that it may not always be possible to provide a positive
outcome for all stakeholders from a given decision.
The Board strives to follow best corporate governance practice and has a governance framework in place that allows it to make reasoned and informed
decisions. Further information on how the Board and its Committees operate can be found in the Corporate Governance statement on pages 49 to 54
of this Annual Report.
The identification and assessment of risk is an integral part of the Board’s decision-making process, particularly when it comes to considering the
longer-term consequences and the sustainability of the Company’s business model and strategy. The Group maintains a risk register, which the senior
leadership team maintain, which is presented to the Board on an annual basis.
i More details of our approach to risk management are set out on pages 16 to 25
Stakeholder engagement
The Directors have ongoing engagement with all of our key stakeholders:
L our Investors
L our People
L our Communities
L our Partners.
The Directors continually review the impact that any decisions will have on these key stakeholders.
The Board regularly reviews the Company’s principal stakeholders, and how it engages with them. This is achieved through information provided by
management and by direct engagement with the stakeholders themselves.
Shareholders
All Board decisions are made to promote the long-term success of the Group for the benefit of our shareholders.
We maintain strong relationships with shareholders, ensuring they understand our strategy, the progress and performance against key milestones and
that we understand how they view our business. We engage with our shareholders through Investor Roadshows and webinar presentations led by the
Chief Executive Officer and Chief Financial Officer, in addition to written communication from and meetings as required with the Chairman, Committee
Chairs and Executive Directors.
The Group’s brokers provide independent feedback to the Board on shareholder opinions and their views on our meetings with investors. Regular
trading updates are provided as well as the Annual Report and Interim Report.
Information provided at analysts’ meetings and financial press releases are made available on the Group’s website. We engage with investors to gain
and maintain support for our strategy, and feedback received has informed the Board’s discussions and decisions on Group strategy.
i More details of our engagement with our shareholders and the results of those engagements are set out in the Corporate Governance
statement on pages 49 to 54 and the Directors’ Remuneration report on page 62
47
Xaar plc Annual Report and Financial Statements 2023
Section 172 statement continued
Employees
Our people are a highly skilled, technical, and valued workforce. They are essential to the Group’s ability to stay ahead in a fast-moving world.
Our people play a crucial role in helping us pursue our strategic goals and are core to the success of the business. We engage and support them
to achieve their full potential. There are regular internal communications from the management team and feedback from employee working and
representative groups, such as the Sustainability team, Exec Exchange and Meet the NEDs. Regular engagement with employees improves open
dialogue channels, collaboration, visibility of achievements and progress across the business, as well as transparency.
i The health and safety of our employees is of the highest importance to us. More details of our engagement with our employees and the
results of those engagements are set out in Sustainability and responsible business on page 27 and the Directors’ Remuneration report on
page 62
Community
As a Group, we have a wide-reaching indirect impact on the communities and environments we interact with and are committed to making sure that
this impact is as positive as possible.
Xaar is a responsible citizen within our communities, offering local recruitment, supporting educational institutions and the local economy. Xaar offers
a range of employment opportunities for apprentices and we work closely with educational establishments. We look to minimise our impact on the
environment. We are investing to reduce greenhouse gas emissions and have transferred electrical supply over to 100% renewable source, invested
in electric vehicle charger and installed LED lighting.
i More details of our engagement with our communities and the results of those engagements are set out in the Sustainability and
Responsible Business Report on page 29
Customers
Our customers depend on us to supply high quality products in a timely manner. We also support them in the development of their next generation
products. They expect us to operate in a responsible manner maintaining the highest standard of business ethics.
The Board is regularly updated on the timeliness and quality of product deliveries to our customers as well as developments with targeted customers,
new customer wins and a sales pipeline, including how the product roadmap aligns. Our sales and engineering teams engage with our customers and
solicit feedback which is used to inform our technology roadmaps.
The key account management structure across the business encourages meaningful, consistent and ongoing engagement with OEM and UDI
customers. There are regular exchanges with our customers on their new programmes especially through engineer-to-engineer interactions so that
we can better understand their emerging needs.
We invested £5.6 million in R&D during 2023, focusing on those areas where we see the opportunity to support our customers’ next generation
product developments.
i More details of our engagement with our customers and the results of those engagements are set out in our Business Model on page 3
Suppliers
Our relationships with our suppliers and partners are integral to the delivery of quality products to our customers and the operational success
of our business.
The supply of goods and services to our operations is critical to our overall success. We regularly review the performance of our suppliers and work
with them to implement improvement programmes.
The Group has established a comprehensive set of policies covering the areas of business ethics. We require our suppliers to operate to the same
high standards and these are set out in our Supplier Code of Conduct which they are required to adhere to. Thus ensuring high standards throughout
our Tier 1 supply chain, by measuring and auditing our key suppliers against specific criteria, including human rights (human trafficking, anti-slavery,
prohibition of child labour) and conflict minerals policies.
48
Xaar plc Annual Report and Financial Statements 2023 Corporate Governance statement
Strategic Report
Governance
Financial Statements
The Board’s primary objective remains ensuring long-term, sustainable growth for the benefit
of the Company’s shareholders and wider stakeholders. This includes an ongoing commitment
to the highest standards of corporate governance as set out in the Financial Reporting Council
(FRC) 2018 UK Corporate Governance Code (‘the Code’).
The 2018 UK Corporate Governance Code is a set of principles and provisions that emphasise
the value of good corporate governance to long-term sustainable success and achievement of
wider objectives. The Code can be found on the FRC’s website at www.frc.org.uk.
Application of the main principles of the Code
The Board has considered and implemented the provisions of the Code effective 1 January 2019.
We are pleased to confirm that throughout the year ended 31 December 2023, the Company has followed the principles and provisions of the UK
Corporate Governance Code 2018, which applies to all companies with a premium listing on the London Stock Exchange, and has either complied with
the provision or explained why the provision has not been followed.
The governance report gives:
L Disclosure of Board discussions and the resulting actions
L A clear and honest view of progress throughout the year
L The outcome of our Board evaluation
L Our approach to ensuring long-term viability of the business
L Our approach to risk and mitigation.
Statement of compliance with the Code
Throughout the year ended 31 December 2023 the Company has followed the provisions set out in the Code and has either complied with the
provisions of the Code or explained why the provision has not been followed, as outlined below. The FRC expects companies to provide a clear and
meaningful explanation for any departures from the Code. This report on the Company’s compliance with and application of the Code has been
approved by the Board and includes this Statement, the Directors’ report on pages 40 to 46, the report of the Audit Committee (see pages 55 to 58),
the Nomination Committee report (see pages 59 to 60) and the Directors’ Remuneration report set out on pages 61 to 71.
A copy of the Code can be found on the FRC website at www.frc.org.uk.
The disclosures in respect of the Takeovers Directive (as implemented in the UK) are included in the Directors’ report and form part of this report.
1. Board Leadership, Culture and Company Purpose
The Board is responsible for leading the Group, focusing primarily upon strategic and policy issues, and is responsible for ensuring the long-term
sustainable success of the Group. It is responsible for effective risk assessment and management. In performance of these duties, the Board has
regard to the interests of the Group’s key stakeholders, generating value for the shareholders and contributing to the benefit of wider society.
In order to achieve this the Board has established a clear vision: ‘A world where you can print anything you can imagine’, with our mission being
“we help companies and industries be more colourful, creative and productive through our world-class technology and printheads”.
The Board has updated the core values which shape our culture and contribute to our success, which are EPIICC:
L We do Everything with Passion
L We are Innovative
L We have Integrity
L We are Creative
L We are Collaborative.
The Board is responsible for establishing, assessing and monitoring the Company’s purpose, values, strategy, and culture. In doing so, the Board
ensures the alignment of the Company’s culture and the transformation programme. The Board receives regular updates on the work being
undertaken by the senior management team to align the operations and policies of the Group with its culture and values. Other than their normal
attendance and participation in discussions at Board meetings, the Executive Directors are responsible for the day-to-day running of the Group and the
implementation of the agreed strategy.
i Refer to pages 7 to 11 for the Strategy review and pages 27 to 28 for Company values and culture
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Xaar plc Annual Report and Financial Statements 2023 Corporate Governance statement continued
1. Board Leadership, Culture and Company Purpose continued
The Group has four main locations. The head office functions, R&D, marketing, human resources, legal and finance are based in Cambridge, UK.
The Group has four manufacturing facilities with offices: one in Huntingdon, UK, one in Hemel Hempstead, UK, one in Kettering, UK and the other
in Vermont, USA. The Group also has representatives in other global locations including Italy, Spain, China, Hong Kong, and Sweden.
i Refer to pages 2 to 3 for the Xaar business model
In accordance with the Directors’ duties in Section 172 of the Companies Act 2006, the Board considers the likely consequences of any decision
in the long-term. The Board incorporates the basis on which the Company generates and preserves value in formation of the strategy and strategic
decision-making.
i Refer to pages 47 to 48 for the s.172 disclosure
The key focus this year has been on managing costs while developing capability and opportunity to deliver future growth. It has been
a priority to maintain the progress made by the business in recent years during a period of macro-economic uncertainty with inflationary pressures
in energy costs and continued challenges in the supply chain. The Board has ensured there is a focus on our core competence of the design and
manufacture of world leading printheads. It has continued to ensure the financial position of the Company is secured whilst also looking forward to the
longer-term strategic options for the Group, including identifying potential further acquisitions that would bring additional value and synergies.
In particular, the main Board decisions during the year were:
L Continuing to invest in R&D and the product roadmap with further product development.
L Held a Strategic Review session over two days with presentations from senior management on key strategy issues for the Group over the next
three years.
L Agreed the disposal of certain IP interests from FFEI.
L Considered the impact of changing revenue expectations for 2024.
Engagement with shareholders
The Board and Directors seek to build on a mutual understanding of objectives between the Group and its institutional shareholders by providing the
opportunity to meet at least twice per year, following interim and annual results, to provide an update on trading and obtain feedback.
i See Shareholder communications as part of the Directors’ Remuneration report on page 62
The Board uses the AGM to communicate with investors and to encourage their participation.
Following a general meeting, voting results are published on the Company’s website. If the votes against a resolution exceeded 20%, an explanation
would also be published on the website. At the most recent AGM in 2023, the majority of resolutions had less than 1% of votes cast against the
Board’s recommendation. The exception being Resolution 5 (re-appointment of Andrew Herbert as a Director) with 13.69% of votes cast against
the Board’s recommendation.
The Company engaged with shareholders both throughout the year and specifically in respect of resolutions where noteworthy votes were against
the Board’s recommendation, in order to better understand shareholders’ thoughts and align resolutions with the members’ views.
Feedback from brokers and financial PR
The Group’s financial public relations advisors and lead brokers give all investors and potential investors who have met with the Group’s investor
relations team the opportunity to provide feedback on the meetings. Additionally, the Chief Executive Officer and the Chief Financial Officer provide
feedback to the Board at the meeting following shareholder meetings to ensure that the Board, and in particular the Non-Executive Directors, possess
an understanding of the views of the Company’s major shareholders. Both the Chairman and the Senior Independent Director are available to meet
with shareholders as required.
Annual Report and Accounts
We review feedback from shareholders and other stakeholders and take this into consideration when drafting our Annual Report and Accounts.
We make our Annual Report and Accounts available on our website as soon as it is practicable following our final earnings release. Shareholders
can access up-to-date Company information, including video presentations, from the Investors section of the Xaar website at www.xaargroup.com.
Workforce engagement
The Board continued to hold employee engagement sessions which are held during the year with the three Non-Executive Directors being responsible
on behalf of the Board for workforce engagement. Topics discussed were wide ranging but focused mainly around the strategy and direction of
the business, acquisitions and divestments, sustainability, executive remuneration and alignment with the wider workforce, employee training,
opportunities for development, and the workings of the Board and governance, i.e. a total of four sessions in total.
Conflict of interest and time commitment
Following the changes made to the Company’s Articles of Association to incorporate the provisions of section 175 of the Companies Act 2006 which
gave boards the statutory power to authorise conflicts of interest, any potential conflict of interest is approved by the Board in advance of any action
or appointment that could result in a conflict of interest arising. Internal controls are in place to ensure that any related party transactions involving
Directors, or their connected parties, are conducted on an arm’s length basis. Each member of the Board is familiar with the procedure to follow in
relation to conflicts of interest and the process is operated efficiently. There were deemed to be no such conflicts of interests in 2023.
The only change to Directors’ outside commitments during 2023 related to the resignation of Alison Littley as a non-executive director of
musicMagpie plc on 31 December 2023
Each Director devoted significant time to their Xaar Board responsibilities during 2023, with all Directors attending all Board meetings (see page 37).
50
Xaar plc Annual Report and Financial Statements 2023 Strategic Report
Governance
Financial Statements
2. Division of Responsibilities
The Board discharges its responsibilities by providing strategic and entrepreneurial leadership of the Company, within a framework of strong
governance, effective controls and a strong culture emphasising openness and transparency, which enables opportunities and risks to be assessed
and managed appropriately. In addition, the Board sets the Company’s strategic direction; ensures that the necessary financial and human resources
are in place for the Company to meet its objectives; and reviews management performance.
The Chairman, Andrew Herbert, was deemed independent on appointment in 2020. There exists a clear division of responsibilities between the Chair
and the Chief Executive Officer, John Mills. The Chair’s primary role includes ensuring the Board functions properly, that it meets its obligations and
responsibilities, and that its organisation and mechanisms are in place and are working effectively.
The responsibilities of the Chair, Chief Executive, Senior Independent Director, Board and Committees are clear, set out in writing, agreed by the Board
and made publicly available, with terms of reference for the Committees available on request.
The Board delegates management of the business to the Executive Committee, comprising Executive Directors and senior operational managers,
headed by the Chief Executive Officer. The Executive Committee meets weekly and is responsible for implementing Group strategy, monitoring
business performance, preparing the operating and capital expenditure budgets for recommendation to the Board, and ensuring efficient management
of the Group.
The Non-Executive Directors attend the Board meetings, and form the Audit, Remuneration and Nomination Committees. They are responsible for
scrutinising the performance of management and determining appropriate levels of remuneration of Executive Directors. They also have a key role in
appointing and, where required, removing Executive Directors.
The Non-Executive Directors are identified on page 39 of the Annual Report with a short biography provided. The Board has determined that each
Non-Executive Director is independent in character and judgement; commits sufficient time and energy to the role; and continues to make a valuable
contribution to the Board and its Committees. The Board keeps under review whether there are relationships or circumstances which are likely to
affect, or could appear to affect, their independence.
The Company Secretary is the secretary to the Board and its Committees. All Directors have access to the services of the Company Secretary and
Directors may take independent legal and other professional advice at the expense of the Company. Julia Crane was appointed as Company Secretary
on 16 January 2023.
3. Composition, Succession and Evaluation
Board composition
The Board of Directors comprises the Chairman, two Executive Directors and four Non-Executive Directors.
The Board considers Alison Littley, Richard Amos, Jacqueline Sutton and Andrew Herbert to be independent within the meaning of the Code. To
be considered independent each Non-Executive Director is sufficiently separate to management and free from any business or other relationships
which could affect their judgement, impartiality or objectivity. Stuart Widdowson joined the Board on 27 February 2024 as a Non-Executive Director
representing a shareholder, Odyssean Capital LLP under the terms of a relationship agreement dated 23 February 2024. He is not considered to be
independent.
All the Non-Executive Directors, other than Stuart Widdowson, are deemed to be independent members of the Board having no financial relationship
or significant links with related parties. All Non-Executive Directors complete a disclosure document prior to appointment and submit an annual
declaration.
Succession
The Nomination Committee is responsible for regularly reviewing the composition of the Board. In recommending appointments to the Board, the
Nomination Committee considers the range of skills, knowledge and experience required, with due regard for the benefits of diversity on the Board,
including gender. When recruiting, search firms are appointed to secure a strong and diverse list of candidates.
The appointment of new Directors is led by the Nomination Committee. Richard Amos joined the Board on 1 June 2023 and Jacqueline Sutton was
appointed as a Director on 1 November 2023. Chris Morgan resigned as Director on 30 November 2023. Stuart Widdowson was appointed as a Non-
Executive Director representing Odyssean Capital LLP on 27 February 2024.
The Committee has considered succession planning and the good progress made on building an executive management team and focusing on senior
management development during the past three years. In making any future appointment the Nomination Committee will consider both diversity and
succession as a matter of course as it seeks to further equip the Board in its role of overseeing future business growth and expansion.
Diversity
The Board continues to consider that diversity quotas at Board level are inappropriate, and is committed to recruiting the best talent available,
assessed against objective criteria of skills, knowledge, independence and experience. All candidates are therefore considered on merit. The Company
does not apply any established measurable objectives in respect of diversity quotas (e.g. age, gender, ethnicity, disability, religion or educational and
professional background) but with reference to the Company’s Diversity Policy. More information on the Group’s gender profile is set out in the report
on Sustainable and Responsible Business Report on page 28.
As the Company grows, the Board will keep under consideration the requirements of the Parker Review (2017) to improve the ethnic and cultural
diversity of UK boards to better reflect their employee base and communities they serve.
A Board Diversity Policy was adopted by the Directors, on the recommendation of the Nomination Committee. A copy of the policy is available on
request.
51
Xaar plc Annual Report and Financial Statements 2023 Corporate Governance statement continued
3. Composition, Succession and Evaluation continued
Board evaluation
The Board conducted an internal review of the effectiveness of itself, with each Non-Executive Director, the Chairman and the Board Committees in
December 2023. A questionnaire was completed by the Directors which looked at all areas of the operation and management of the Board and its
Committees. The Chairman held discussions with each Director on the results of the evaluation. The outcome of the review was discussed by the
Nomination Committee and actions agreed by the Board. From the review and conclusions drawn, areas of improvement were identified as follows:
1. Agreed changes to the oversight of the risk register.
2. To further develop the financial reporting to the Board.
3. Agreed that the majority of scheduled board and committee meetings should be held in person.
4. Review the annual Board and committee work plans to ensure that the key topics are regularly reviewed.
Areas of improvement identified in 2022 were addressed and actions taken and implemented during 2023 as follows:
2022 Recommendations
Action taken in 2023
To review the composition of the Board as part of the succession planning process
specifically taking into account the skills and expertise required as the business grows
while also seeking to enhance the diversity and experience of Board members and ensure
that the Remuneration and Audit Committees are meeting the objectives of the business.
Richard Amos and Jacqueline Sutton were appointed
as Directors during the year.
To consider holding at least one Board meeting each year at a subsidiary location.
This will be actioned once profitability has increased.
To increase the frequency of Board review to quarterly of the identification and
management of risk across the Company.
Changes to the principal risks are submitted to the
Board once a quarter.
To improve the evaluation and consideration of the longer-term implications
of changes to strategy.
A two day strategy session was held in May 2023 and key
strategic milestones were agreed. The Board is updated
each month on progress against these milestones.
i Further details of the activities of the Nomination Committee can be found on pages 59 to 60
As part of the selection process for any potential Directors, any significant external time commitments are considered before an appointment is
agreed. All Directors are required to consult with the Chair of the Board and obtain the approval of the Board before taking on additional appointments.
Executive Directors are not permitted to take on more than one significant appointment as a director of a FTSE 100 company or any other
substantial appointment.
The Board’s policy for individual Director performance review is for a formal and rigorous appraisal process based on performance by the individual
Director against specific targets. Individual Director performance is reviewed at least annually.
L The Senior Independent Director, in consultation with the other Non-Executive Directors and taking into account the views of the other Directors,
appraises the performance of the Chairman.
L The Executive Directors, in consultation with the Chairman, appraise the performance of the Non-Executive Directors.
It is the Board’s intention to review its own performance, and that of its Committees, at least once a year. All Directors were subject to shareholder
re-election at the 2023 AGM.
i The biographies of the Directors, set out on page 39, contain the evaluation of skills and experience beneficial to the Company so that the
Board recommends the re-election or election of each Director
4. Audit and Risk and Internal Controls
i The role and responsibilities of the Audit Committee are set out in the Audit Committee section on pages 55 to 58
L The Audit Committee review of the effectiveness of the external audit is set out on page 58.
L PKF Littlejohn LLP was appointed as auditor in August 2023 following a tender process, and provide no non-audit services; the Audit Committee
assessment of the auditor’s independence is disclosed on page 57.
i The Directors’ assessment of the Group’s internal control environment as required under the UK Corporate Governance Code is set out on
pages 56 to 57 under ‘Internal controls and compliance’
52
Xaar plc Annual Report and Financial Statements 2023 Strategic Report
Governance
Financial Statements
4. Audit and Risk and Internal Controls continued
The Audit Committee, led by Richard Amos, plays a key role in monitoring and evaluating our compliance and risk management processes, providing
independent oversight of our external audit and internal control programmes, accounting policies and business transformation projects, and in
assisting the Board in establishing arrangements to ensure that we are reporting in a fair, balanced and understandable manner to our shareholders.
The Board has satisfied itself that Richard Amos has recent and relevant financial experience and that the Audit Committee as a whole has
competence relevant to the sectors in which the Company operates.
i The significant accounting judgements and estimation uncertainties that the Audit Committee has considered in relation to the financial
statements are set out in the Audit Committee report on pages 55 to 57 and in note 4 to the accounts on pages 90 to 91
All of the Audit Committee members are independent Non-Executive Directors and have financial and/or related business experience due to the senior
positions they hold or have held in other listed or publicly traded companies and/or similar large organisations.
The Board has established arrangements to ensure that reports and other information published by the Group are fair, balanced and understandable.
The Strategic Report, set out on pages 1 to 35, provides information about the performance of the Group, the business model, the Group’s strategy and
the risks and uncertainties relating to the Group’s future prospects.
Principal and emerging risks
As set out on page 17, the Board confirms that it has carried out a robust assessment of the principal and emerging risks facing the Company during
the year, including those that could threaten its values, reputation, business model, future performance, solvency or liquidity.
As a consequence of the risk assessment review:
L Supply Chain – this risk was increased due to shipping delays in the Red Sea.
L War in Ukraine and the conflict in the Middle East – this risk was increased and revised to reflect the impact on the world’s economy.
L Cyber Security – this risk was increased due to the higher incidence of cyber attacks worldwide.
L Law and regulations – this risk has been reduced following a review by the Company Secretary and changes made to the oversight system.
i Descriptions of principal and emerging risks and how they are mitigated and any changes are set out on pages 16 to 25
i The Group’s policies relating to risk management and internal control can be found in the ‘Risk management’ section of the Strategic Report
on pages 16 to 25
The Board explains on pages 45 to 46 of the Directors’ Report how it has assessed the prospects of the Company over the longer-term and why it
considers a three-year period to be appropriate for the purposes of this assessment. The Board confirms that it has a reasonable expectation that the
Company will be able to continue in operation and meet its liabilities as they fall due over this period.
The Committee has formally identified the Chief Executive Officer as responsible for health and safety and the Chief Financial Officer as responsible for
risk assessment.
5. Remuneration
The Remuneration Committee sets levels of remuneration which are designed to promote the long-term success of the Group and structures
remuneration so as to link it to both corporate and individual performance, thereby aligning management’s interests with those of shareholders.
The Remuneration Committee’s primary role is to recommend to the Board the senior management remuneration strategy and framework, giving due
regard to the financial and commercial health of the Company and to ensure the Executive Directors and senior management are fairly rewarded for
their individual contributions to the Company’s overall performance. The remit of the Committee also includes considering the appropriateness of the
senior remuneration framework when reviewed against arrangements throughout the rest of the organisation, determining the terms of employment
and remuneration for Executive Directors and senior managers, including recruitment and termination arrangements, approving the design, targets
and payments for all annual incentive schemes that include Executive Directors and senior managers and agreeing the design, targets and annual
awards made for all share incentive plans requiring shareholder approval. The Remuneration Policy was approved by shareholders at the 2023 AGM.
Further details are set out on page 61 to 71. The Remuneration Committee has exercised its discretion in relation to remuneration outcomes in 2023, in
connection with the outcome of 2023 annual bonus.
i Details of the activities of the Remuneration Committee can be found in the Directors’ Remuneration report on pages 61 to 71
L The alignment of executive remuneration with Company purposes and values is set out on page 61
L The award of long-term incentives and their performance conditions are set out on page 66
L How the Remuneration Committee addresses the principles set out in the UK Corporate Governance Code in respect of the Directors’
Remuneration Policy is set out on page 63
L The discretionary powers of the Remuneration Committee are on page 62
L The alignment of executive pensions with those of the workforce are on page 63
L Recovery and withdrawal provisions (malus/clawback), and the circumstances under which the provisions may apply, are on page 64.
53
Xaar plc Annual Report and Financial Statements 2023 Corporate Governance statement continued
5. Remuneration continued
Summary of Board meeting attendance in 2023
11 Board meetings were held in 2023, with one additional unscheduled meeting for a specific item:
Name
Andrew Herbert
Alison Littley
Chris Morgan (resigned 30 November 2023)
John Mills
Ian Tichias
Richard Amos (appointed 1 June 2023)
Jacqueline Sutton (appointed 1 November 2023)
Board Committees
Summary of Committee membership:
Name
Andrew Herbert
Alison Littley
Richard Amos
Jacqueline Sutton
Stuart Widdowson
John Mills
Ian Tichias
Summary of Committee meeting member attendance in 2023:
Name
Andrew Herbert
Alison Littley
Chris Morgan (resigned 30 November 2023)
Richard Amos (appointed 1 June 2023)
Jacqueline Sutton (appointed 1 November 2023)
Scheduled
Board meetings
Additional
meeting
11 (11)
11 (11)
11 (11)
10 (10)
11 (11)
6 (6)
2 (2)
1 (1)
1 (1)
1 (1)
1 (1)
1 (1)
1 (1)
0 (0)
Audit
Committee
Remuneration
Committee
Nomination
Committee
No
Yes
Chair
Yes
No
No
No
Yes
Chair
Yes
Yes
No
No
No
Chair
Yes
Yes
Yes
No
No
No
Audit
Committee1
Remuneration
Committee1
Nomination
Committee1
n/a
4 (4)
3 (3)
2 (2)
1 (1)
5 (5)
5 (5)
4 (4)
3 (3)
1 (1)
6 (6)
6 (6)
6 (6)
3 (3)
0 (0)
1 The Committees may invite Board Directors who are not Committee members to attend Committee meetings when the subject matter deems their presence appropriate.
2 Richard Amos replaced Chris Morgan as Chair of the Audit Committee on 1 June 2023.
3 Stuart Widdowson was appointed as a Non-Executive Director on 27 February 2024. As he is deemed not be independent, he does not serve on any Committees of the Board.
Figures in brackets denote the maximum number of meetings that could have been attended.
Approval
The Board confirms the 2023 Annual Report and Financial Statements, taken as a whole, is fair, balanced and understandable, and provides the
information necessary for shareholders to assess the position, performance, strategy, and business model of the Company.
The Corporate Governance statement, which incorporates by reference the Directors’ Report, the Audit Committee report, the Nomination Committee
report and the Directors’ Remuneration report, was approved by the Board on 25 March 2024 and is signed on its behalf by:
John Mills
Chief Executive Officer
54
Xaar plc Annual Report and Financial Statements 2023
Audit Committee
Strategic Report
Governance
Financial Statements
The Audit Committee (the ‘Committee’) is appointed by the Board from the Non-Executive
Directors of the Company. The Chair of the Committee is Richard Amos.
Audit Committee composition and meetings
Richard Amos is a Chartered Accountant. His previous roles have given him recent and relevant financial experience working for a number of UK listed
companies. Alison Littley and Jacqueline Sutton, Audit Committee members, also bring a breadth of experience including executive experience in
complex and international business operations. Additional information on the Committee’s skills and experience can be found in the Board biographies
set out on page 39.
The Audit Committee met formally on four occasions during the year. Please see the tables on page 54 for details of the Committee members in the
year and the number of Committee meetings attended. At the Committee’s request, other members of the Board and senior management may be
invited to attend the Audit Committee’s meetings based on the meeting agenda.
Report from the Committee Chairman
I am pleased to present the Audit Committee’s report describing our work during the past year. In addition to its normal work, the main focus of the
Committee was the running of a competitive tender process for the external audit. This resulted in the appointment of PKF Littlejohn LLP (PKF) in
August 2023.
The Audit Committee’s primary responsibilities are the following:
L To approve and monitor key financial and accounting policies and practices
L To monitor the integrity of the financial statements, announcements and review significant financial reporting judgements contained therein
L To keep under review the adequacy and effectiveness of internal controls
L To review procedures, systems and controls for whistleblowing, fraud detection and bribery prevention
L To review, approve and monitor internal audit activities
L To monitor and review the Group’s external auditor’s independence, objectivity and effectiveness
L To monitor and approve any non-audit services provided by the external auditor
L To conduct any tender process and make recommendation to the Board on the appointment, remuneration and terms of engagement of the
external auditor.
The Committee is not responsible for the identification of key risks or the review of the adequacy of arrangements to mitigate those risks, which
remains the responsibility of the Board.
The Committee is required to report its findings to the Board at least annually, identifying any matters on which it considers that action or improvement
is needed, to make recommendations on the steps to be taken, and to ensure that the required actions are implemented.
The Committee shall review its terms of reference annually and may recommend to the Board any amendments. The Committee’s terms of reference
include all matters indicated by Disclosure and Transparency Rule 7.1 and the UK Corporate Governance Code. The terms of reference of the
Committee are available on written request from the Company Secretary.
Significant issues considered by the Committee
The Committee has a work plan that is designed to ensure its responsibilities are fully discharged over the annual reporting cycle. Specific items are
added to the agenda for individual meetings as required. There were a number of significant accounting matters considered during the year including:
L Conducting a competitive tender for the external auditor resulting in the appointment of PKF in August 2023
L Impairment of goodwill, intangible assets and PPE
L Alternative performance measures.
Key areas of management judgement
The Committee has reviewed, discussed with and challenged management in respect of the approaches taken for the following areas of key accounting
judgement and estimation:
Critical accounting judgements
Capitalisation of development costs
The Group capitalises costs for product development projects, where appropriate. At 31 December 2023, the carrying amount of capitalised
development costs was £2,325,000 (2022: £1,879,000). Development costs can be capitalised if and when they relate to a project that is technically
feasible, there is the intention and are adequate resources to be able to complete the project, there are secure future economic benefits that can be
realised in excess of the development costs incurred and all such costs can be reliably measured. This requires management to make judgements as
to whether and when all the criteria for capitalisation are met and when to commence amortising any such assets.
The Audit Committee concurs with the assessment made by management in respect of this matter.
55
Xaar plc Annual Report and Financial Statements 2023 Audit Committee continued
Key areas of management judgement continued
Critical accounting judgements continued
Apportionment of technology based intangible assets
In June 2023 the Group entered into a series of transactions in the context of the integration of the recently acquired FFEI Ltd business. These
consisted of the disposal of the non-core Life Sciences activities and all associated patents, software and technological know-how. On acquisition of
FFEI Ltd in July 2021, the fair value of these patents was not separately identified. Instead, they were grouped with software and technological know-
how and recognised in aggregate as a ‘technology-based intangible asset’. In order to retrospectively estimate the fair value separately attributable to
the patents sold, an apportionment methodology was adopted based on gross margins and estimates of replacement cost.
The Audit Committee concurs with the methodology and the judgements adopted by management in respect of this matter.
Timing of revenue recognition
Under certain contracts entered into by the Product Print Systems and the Digital Imaging segments, revenue has been recognised over time (rather
than at a point in time) following judgements taken as to the existence of alternative uses for the custom-built printing solutions being sold and
assessment as to whether the Group has an enforceable right to payment.
The Audit Committee concurs with the assessments made by management in respect of all applicable, material contracts with customers.
Estimation uncertainty
Fair value measurement of contingent consideration
An element of the consideration receivable under the Group’s divestment of its remaining interest in the share capital of Xaar 3D Limited in 2021
remains contingent on achievement of certain revenue milestones and performance targets. Contingent consideration with an estimated fair value
of £10,863,000 was recognised at the acquisition date and remeasured to £10,599,000 as at the reporting date. Fair value is estimated using a Monte
Carlo simulation. Certain inputs into this statistical model involve estimation; namely, the risk adjusted discount rate and revenue volatility. These
estimates are subject to rapid changes in market conditions that cannot always be fully anticipated.
The Audit Committee concurs with the assessment made by management that the fair value of this asset is appropriately measured and the impact of
the estimation uncertainty is adequately disclosed in the financial statements.
Assessment of the carrying value of goodwill and other intangible assets
The Group reviews goodwill for impairment on at least an annual basis and more frequently where there are indicators of potential impairment. This
review requires the value-in-use of each CGU to be estimated, these calculations are based on a number of assumptions. The assumptions relating to
future cash flows, estimated useful economic lives and discount rates are based on forecasts and are, therefore, inherently judgemental.
The Audit Committee concurs with the assessment made by management that the recoverable values of all CGUs exceed the carrying value of the
underlying assets, therefore, no impairment is required. Furthermore, it is agreed that the disclosures provided in Note 16 are proportionate and
appropriate in light of the levels of headroom available.
Revenue recognition – estimating stage of completion of contracts
Revenue receivable for the manufacture of bespoke machinery and equipment as well as for the provision of research and development consultancy
services is generally required to be recognised over a period of time in line with the stage of completion of each contract with the customer. In order
to estimate the stage of completion of all such contracts, an input methodology (based on total estimated labour hours to deliver the contract) is used.
This estimate is subject to a level of uncertainty as it is not always possible to anticipate the impact of market factors on total project cost.
The Audit Committee concurs with the assessment made by management that the Group’s revenue for those controls, as presented, is materially
accurate.
i Additional disclosure in relation to key sources of estimation uncertainty and critical accounting judgements is provided in the Group financial
statements – note 4 on pages 90 to 91
Key activities
In discharging its responsibilities, the Committee has completed the following activities:
Financial statements and reports
L Reviewed the Annual Report, financial statements and the half-yearly financial results including disclosures made therein, and confirms that
taken as a whole, they are fair, balanced and understandable, and provide the information necessary for shareholders to assess the position,
performance, strategy, and business model of the Company
L Reviewed Going Concern and Viability Statements and supporting assessments
L Reviewed reports from the external auditor on their work and findings
L Reviewed the effectiveness of the Group’s internal control environment.
L Reviewed the accounting treatment of proceeds of the sale of the IP assets.
L Reviewed the accounting papers and reviews prepared as part of the half-yearly and full year results processes.
Internal controls and compliance
To assist the Board with its responsibilities to effectively determine the nature and extent of the Group’s significant risks (as described on pages 16
to 25), the Committee carries out a robust annual assessment of the principal risks and uncertainties facing the Group.
The Board remains ultimately responsible for determining the nature and extent of the effectiveness of the risk management and internal controls
systems which mitigate potential impacts on shareholder investments and the Company’s assets. The Corporate Risk Register is reviewed and
challenged bi-annually by the Audit Committee.
56
Xaar plc Annual Report and Financial Statements 2023 Strategic Report
Governance
Financial Statements
Key activities continued
Internal controls and compliance continued
The Committee having performed the annual review of the Group’s internal control processes considers the systems to be effective and in accordance
with the Guidance on Risk Management, Internal Control and Related Financial and Business Reporting as issued by the FRC. In order to support the
growth of the business and the implementation of Company strategies, the Committee recognises the need to continue to review the adequacy and
effectiveness of our control framework.
The Committee undertakes this evaluation having:
L Reviewed the internal financial controls and risk management systems
L Reviewed fraud detection and the systems and controls for the prevention of bribery including employee confirmation of abiding by the Code of
Conduct, Anti-bribery & Corruption, and Whistleblowing policies
L The Committee considered the revised internal audit plan which was reviewed and amended during the year. A separate risk, control and audit
function has been established headed by the Financial Controls Manager to oversee the planning and implementation of the Group’s internal
audit programme. Measures were put in place to co-source the internal audit function with an external specialist to undertake timely internal
audits for all the controls which had been formalised and implemented.
In line with the provisions of the UK Corporate Governance Code, the Committee monitors and reviews the effectiveness of the Company’s internal
audit function or, where there is not one during a period, considers annually whether there is a need for one. The Committee considered the revised
internal audit plan which was reviewed and amended during the year. Measures were put in place to co-source the internal audit function for 2023 with
an external specialist to undertake timely internal audits for all the controls which have been formalised and implemented.
The Committee remains of the view that the statement made regarding the Company’s viability period continues to be an accurate assessment of the
Company’s viability as at the date of the report. The Viability Statement can be found in full on pages 45 and 46.
External audit
L The Audit Committee provided a forum for reporting and discussion with the Group’s external auditor in respect of the Group’s full-year results.
The Committee had dedicated time for these activities and reviewed the audit work with emphasis on significant risk areas identified and
discussed by the external auditor in their report
L The scope of the audit work to be undertaken by the auditor was reviewed and agreed on 19 December 2023
L The Committee agreed the fees to be paid to the external auditor relating to their services rendered for the annual audit
L The independence and objectivity of the external auditor was assessed by the Committee
L The Chairman of the Audit Committee will be available at the AGM to answer any questions about the work of the Committee.
External auditor
PKF was appointed as the Company’s auditor in August 2023 after a competitive tender. Further details of tender process are set out on page 58
below. Daniel Hutson was appointed as the senior statutory auditor during the year. EY resigned as auditor at the same time. The Committee has met
with the auditor on at least three occasions during the year and it is expected that the Committee will continue to meet with the auditor a minimum
of two times each year. The Chief Executive Officer and Chief Financial Officer, and other relevant managers and Board members, may attend these
sessions by invitation, except for a period of each meeting where the Committee members may meet with the auditor without any member of executive
management present.
The Committee is required to assess the qualifications, expertise, resources, and independence of the external auditor, and the objectivity and
effectiveness of the audit process. The Committee reviews the type of work, effectiveness of, and level of fees charged by the auditor on an annual basis
and recommends to the Board the appointment, re-appointment, term, remuneration, and terms of engagement of the external auditor.
The Committee safeguards auditor objectivity and independence through maintaining a dialogue with the auditor and by monitoring all fees paid. It is
the policy of the Group not to engage the statutory auditor in any non-audit related services. This includes tax services. Specifically, the policy states
that the preparation of tax forms, payroll tax, calculation of indirect tax and the provision of tax advice cannot be provided by the statutory auditor.
Note 7 to the consolidated financial statements includes disclosure of the auditor’s remuneration during the year.
The Committee, taking into consideration relevant UK professional and regulatory requirements, regularly considers the independence and objectivity
of the auditor. The Committee receives an annual statement from the auditor detailing their independence policies and safeguards, and confirming
their independence, taking into account relevant ethical guidance regarding the provision of non-audit services by the external auditor.
The Committee considers the effectiveness of the external audit and the Group’s relationship with the external auditor on an ongoing basis.
In completing the review of the effectiveness of the annual audit in 2023 the Committee was able to conclude the audit undertaken by EY was effective.
This review consisted of considering a number of key points together with the senior financial management of the Group. A similar exercise will be
undertaken following completion of audit procedures on the 2023 results and reported on in next year’s annual report.
57
Xaar plc Annual Report and Financial Statements 2023 Audit Committee continued
External auditor tender
Ernst & Young LLP (EY) was first appointed as the Company’s auditor following a competitive tender process in July 2019. The Committee agreed in
May 2023 that it would initiate a new competitive tender process following a review of the Company’s external auditing requirements. The purpose of
the tender process was to identify an external auditor more suited to the Company’s size and activities and to seek value for money whilst maintaining
the effective audit standards. The Committee appointed a working party consisting of the Chair of the Audit Committee, the CFO and key members
of the senior finance management team to run the tender process. Candidate firms were invited to tender and were sent a detailed information pack
setting out the requirements for the external auditor. Initial meetings were held with the candidate firms by the senior finance management team,
before a short-list was submitted to the Committee for review. Three firms were invited to submit formal tender documents setting out further details
including audit approach, quality, team structure and fee proposal. Each firm on the shortlist gave a presentation to the working party and Committee
members before a recommendation was made to the Board to appoint PKF Littlejohn LLP in August 2023, following EY’s resignation.
Review of the Audit Committee’s effectiveness
The Committee has reviewed and considered the effectiveness of its performance during the year. The review included the views of members of the
Committee and of regular attendees at the various meetings (including the Executive Directors). No significant matters of concern were identified.
I am satisfied that the degree of rigour and challenge applied in performing the Committee’s responsibilities is appropriate and effective.
Richard Amos
Chair of the Audit Committee
25 March 2024
58
Xaar plc Annual Report and Financial Statements 2023 Nomination Committee
Strategic Report
Governance
Financial Statements
The Nomination Committee is appointed by the Board from the Non-Executive Directors
of the Company and the Chief Executive Officer. The Chair of the Committee is Andrew Herbert.
The Committee met six times during 2023. When specific issues or changes need to be addressed, such as the appointment of a new Board member,
the Committee may meet on additional occasions on the request of any member of the Committee. Please see the tables on page 54 for details of the
Committee members in the year and the number of Committee meetings attended.
Responsibilities
The Nomination Committee’s main responsibilities, as outlined in its terms of reference, are:
L Reviewing the size, structure, composition and independence of the Board and its Committees
L Identifying and nominating candidates to fill Board vacancies as the need arises
L Ensuring adequate succession planning is in place for Executive Directors, Non-Executive Directors and members of the senior management team
L Making recommendations to the Board on the appointment of new Executive and Non-Executive Directors and their re-appointment following
retirement by rotation
L Reviewing the results of the annual Board performance evaluation process.
The Committee Chair will not chair the Committee when it deals with the appointment of a successor to that role. The Committee shall review its
terms of reference annually and may recommend to the Board any amendments. The terms of reference of the Committee are available on written
request from the Company Secretary.
The Nomination Committee’s role in the composition, succession and evaluation of the Board is disclosed in the Corporate Governance statement.
Boardroom diversity
The Committee is committed to ensuring that recruitment and promotion of individuals throughout the Group, including those at Board and
senior management level, always consider relevant skills, experience, knowledge and ability without gender or ethnicity bias. Succession planning
is performed and all appointments are made on merit and suitability against objective selection criteria with due consideration of, amongst other
things, the benefits of diversity, including gender and ethnicity. Details of the workforce split by gender are set out on page 28.
The Board approved a Diversity Policy in respect of its membership in February 2023. It is cognisant of the benefits of a rich mix of backgrounds,
experience and skills. The present Board is 29% female versus 71% male (two females and five males). The Board has not set any measurable
objectives in respect of a diversity quota but appointments made to the Board in the past five years have demonstrated our inclusive approach, which
the Nomination Committee expects to maintain for any and all future appointments.
Further disclosure of information in respect of diversity and equal opportunities policies for the Group is in the Sustainable and responsible business
report on pages 27 and 28.
Key issues and activities
In 2021 and further to implementation of a new strategy and the good progress made on building an executive management team, the Nomination
Committee recommended that the Board be strengthened and that the number of independent Non-Executive Directors be increased to four including
the Chair. The recruitment process commenced during 2022 but, in support of other cost actions taken elsewhere in the business, the Committee took
the decision to defer recruitment to the first quarter of 2023. In January 2023 the Committee started the process to recruit a new Chair of the Audit
Committee to replace Chris Morgan who stepped down from the Board on 30 November 2023. The Committee appointed the Independent Search
Partnership to conduct the search for potential candidates. The Committee agreed that candidates with a background in an executive finance role in
listed companies would be suitable for the role. With the assistance of the headhunter, a candidate profile was prepared. A wide range of candidates
were considered and discussed by the Committee. Following the agreement of a shortlist by the Committee, the Chair interviewed the candidates
and considered their skills and attributes against the role profile. Members of the Committee then met with the final shortlisted candidates and a
recommendation was made to the Board. The outcome of the process was the appointment of Richard Amos on 1 June 2023 and his details are shown
on page 39.
In July 2023, the Committee started a process to recruit an additional Non-Executive Director as part of its commitment to build a diverse board.
The role specification was drawn up by the Committee having agreed to search for candidates with recent and relevant operational executive
experience. Initially the role was externally advertised on a reputable web site. The Committee also agreed to appoint Rockwell Search to conduct a
further search for candidates. A wide range of candidates were considered and discussed by the Committee. Following the agreement of a shortlist
by the Committee, the Chair interviewed the candidates and considered their skills and attributes against the role profile. Members of the Committee
then met with the final shortlisted candidates and a recommendation was made to the Board. The outcome of the process was the appointment of
Jacqueline Sutton on 1 November 2023 and her details are shown on page 39.
Other than in respect of recruitment services, Independent Search Partnership and Rockwell Search have no other connection with the Company or
any of its Directors.
In February 2024, the Committee reviewed and considered the terms of the appointment of Stuart Widdowson as an Non-Executive Director
representing Odyssean Capital LLP (Odyssean), a shareholder in the Company. Mr Widdowson was appointed on 27 February 2024 under the terms of
a relationship agreement (Relationship Agreement) between the Company and Odyssean. His details are set out on page 39.
59
Xaar plc Annual Report and Financial Statements 2023 Nomination Committee continued
Key issues and activities continued
A summary of the key terms of the Relationship Agreement is set out below:
L Xaar has granted Odyssean the right to appoint Mr Widdowson to be a Director of the Company for appointment to the Board (the ‘Nominated
Director’) for so long as Odyssean has the right to exercise at least 10% or more of the Company’s ordinary shares or voting rights attaching to the
ordinary shares;
L Odyssean undertakes to, inter alia: (1) conduct all transactions and relationships with any member of Xaar’s Group on an arm’s length basis;
(2) not take any action which would have the effect of preventing Xaar or any member of Xaar’s Group from carrying on business independently
of Odyssean or its associates; (3) not influence the day-to-day running of the Company (save through Mr Widdowson’s role as the Nominated
Director) and (4) not vote to prevent Xaar being managed in accordance with the principles of good governance set out in the UK Corporate
Governance Code; and
L the Relationship Agreement will terminate (1) on the date upon which Odyssean ceases to hold at least 10% of the ordinary shares of the
Company or the voting rights attaching to the ordinary shares of the Company; (2) on six months’ notice written notice by either party at any
time or immediately upon written notice in the event of a material breach of the Relationship Agreement; or (3) in the event that the Company’s
ordinary shares cease to be listed on the Official List or another recognised UK stock exchange.
The Committee has considered organisational development and succession planning, Board diversity, and, in association with the Remuneration
Committee, has worked alongside executive management in reviewing senior management development.
The Committee has facilitated the review of the annual performance evaluations of the Board and its Committees. For further information with regards
to the evaluation, see the Corporate Governance statement. As the Company is not a member of the FTSE 350, it is not required by the UK Corporate
Governance Code to have regular externally facilitated Board evaluations, however the Committee will consider the use of an external evaluator for
future annual performance evaluations.
Induction
On appointment to the Board, the Non-Executive Directors were given a thorough induction on the Group which involves meeting with members
of the senior management team with responsibility for operational and functional areas. Directors visited the Group’s assets and meet with local
management to gain important insights into the business and the strategy. Moreover, Directors are invited to meet with key external advisors to the
Board to gain wider perspectives on Xaar and its sector.
Board appointments
The process adopted by the Committee in respect of any appointment to the Board is, firstly, to identify the specific skills and experience sought and
then, secondly, to conduct a search to determine whether any external individuals known to the Committee or internal candidates would be suitable for
the role. If no compelling candidates can be identified through this process then an external search consultancy is engaged. Even if a suitable internal
candidate exists, an external mapping process may be used.
Members of the Committee and other Executive and Non-Executive Directors interview shortlisted candidates, as the Committee deems appropriate.
Upon identifying a suitable candidate, the Chair of the Nomination Committee will recommend to the Board that the Company makes a formal offer of
employment to the candidate.
As part of the recruitment process the Committee ensures appropriate disclosure of other demands on Directors’ time. The Board of Directors’ profiles
disclose any external appointments, see page 39. No Executive Directors have non-executive roles, or other significant appointment. All Directors are
required to submit themselves for re-appointment every year at the AGM.
Review of the Nomination Committee’s effectiveness
The Committee has reviewed and considered the effectiveness of its performance during the year. The review included the views of members of the
Committee and of regular attendees at the various meetings (including the Executive Directors).
I am satisfied that the degree of rigour and challenge applied in performing the Committee’s responsibilities is appropriate and effective.
Andrew Herbert
Chair of the Nomination Committee
25 March 2024
60
Xaar plc Annual Report and Financial Statements 2023 Strategic Report
Governance
Financial Statements
Directors’ Remuneration report
Statement from the Chair of the Remuneration Committee
Dear Shareholder
On behalf of the Board, I am pleased to present the Directors’ Remuneration report for 2023. Following my statement, the Annual Report on
Remuneration sets out how we implemented the Remuneration Policy in 2023 and how we propose to implement it in 2024. The Annual Report on
Remuneration will be the subject of an advisory shareholder vote at the 2024 AGM.
Remuneration in the context of our business performance and our approach to wider workforce remuneration
As reported elsewhere in the Annual Report, 2023 has been a challenging year for the business as a result of the impact of macro-economic factors.
Despite these external challenges, good progress has been made within the business as our technology and product roadmap continue to deliver
new capabilities and enhanced performance. The management team has responded proactively to inflationary cost pressures, streamlining internal
operations and lowering total overheads. We remain focused on our core technology, and we are pleased with the progress we have made across
several areas of the business. The Board is optimistic about the opportunities that lie ahead.
I have described below, with the detail later in the report, how the performance in the year and across the last three years is reflected in the outturns
for the 2023 annual bonus and 2021 LTIP awards respectively.
Our performance in the year includes the following:
L We continue to execute our strategy of delivering compelling products in each of our market segments, and remaining focused on the significant
opportunities that will drive profitable growth. This strategy is now delivering, with our new products, especially Aquinox, generating strong
interest from both existing and new customers.
L We have seen an increase in the number of customers adopting Xaar technology, evidenced by the 12 new customer product launches during
2023. We expect further customer product launches that incorporate Xaar’s technology during 2024.
L Phase 1 of our factory upgrade has been successfully completed on time and within budget, positioning us to deliver increased efficiency and
capacity, whilst realising significant cost savings.
L As part of our decision to strategically withdraw from the Life Science part of FFEI, we sold non-core IP assets delivering a profit of £2.0 million.
L We continue to make progress on ESG and the Group’s Sustainability Roadmap. The Board remains committed to the business becoming carbon
net zero by 2030. Our products are well placed to deliver significant benefits both commercially and environmentally for our customers through
reductions in power consumption and water usage.
For 2024 we have again implemented a tiered pay increase, ranging from an 8% base salary increase for our most junior employees and cascading
down to 2.5% for our senior employees, including the Executive Directors. This results in our UK starting base salary for production operatives
continuing to be at a premium to the National Living Wage rate effective from April 2024. Our people are at the heart of our business, and we were
delighted that during 2023 we gained full accreditation for the Great Place To Work certification. This was especially pleasing as it was gained on our
first application and is testament to the hard work and engagement of colleagues across the business .
During the year we welcomed Richard Amos and Jacqueline Sutton to the Board and Remuneration Committee, bringing a wealth of experience to
the business. I will be stepping down as a Non-Executive Director during 2024 meaning that this is my last Directors’ Remuneration Report for Xaar. I
would like to take the opportunity to thank my Committee colleagues, the wider Board and all of my other colleagues at Xaar for their support during
my tenure as Committee Chair.
Annual bonus and LTIP outturns for the year ended 31 December 2023
2023 Annual bonus
For the financial year ended 31 December 2023, the CEO and CFO were eligible for an annual bonus of up to 125% and 100% of base salary
respectively. At the start of the year annual bonus targets were set based on performance measures against adjusted Group profit before tax (70%) and
cash generated from operations (30%).
Full details of the targets and performance achieved can be found on page 70.
Notwithstanding that bonuses would have been earned by reference to the achievements against the targets set, the Committee concluded that, in
light of the overall outturn in the year for our key stakeholders no bonuses should be paid to Executive Directors in respect of 2023.
Long-Term Incentive Plan (LTIP) awards vesting in respect of 2023
John Mills and Ian Tichias were granted LTIP awards over 293,478 and 136,957 shares respectively on 14 October 2021. The awards were based 60%
on Cumulative Adjusted EPS for the three-year period ending 31 December 2023 and 40% on relative TSR performance against the companies in the
FTSE SmallCap Index measured over the same period. The maximum EPS target was exceeded and Xaar’s relative TSR over the performance period
was below the median level and therefore these awards vested at 60% in accordance with the EPS target. In line with the UK Corporate Governance
Code, there is a further two-year holding period following the end of the performance period therefore vested awards cannot be exercised until March
2026. The 2023 LTIP awards were granted at 150% of base salary for the CEO and 100% of salary for the CFO. The awards are based on Cumulative
Adjusted EPS performance (60% of the award) and relative TSR performance against the companies in the FTSE SmallCap Index (40% of the award).
When considering the outturn for the LTIP granted in 2021, the Committee has taken a holistic view, including in relation to the employee and wider
stakeholder experience, in addition to performance relative to the targets and objectives set. The Committee believes that the outcomes are an
appropriate reflection of wider performance and the Committee has not exercised any discretion in relation to remuneration outcomes.
LTIP awards granted in 2023
The 2023 LTIP awards were granted at 150% of base salary for the CEO and 100% of salary for the CFO. The awards are based on Cumulative Adjusted
EPS performance (60% of the award) and relative TSR performance against the companies in the FTSE SmallCap Index (40% of the award). Cumulative
Adjusted EPS and relative TSR performance will be measured over a three-year performance period to 31 December 2025. Each award will be subject
to a further two-year holding period following the end of the performance period.
61
Xaar plc Annual Report and Financial Statements 2023 Directors’ Remuneration report continued
Directors’ Remuneration Policy
The Directors’ Remuneration Policy was approved by shareholders at the AGM held on 31 May in 2023 with over 97% of votes in favour. The Committee
considers that the Policy remains fit for purpose, supports the strategy of the Group and is aligned with stakeholder interests. Therefore, the Policy
approved in 2023 will continue to apply in 2024 and shareholders will not be asked to approve a new Policy at the 2024 AGM. The full Policy is included
in the Directors’ Remuneration report for the year ended 31 December 2022 which is included in the Annual Report and Accounts for that year, which
are available on the Company’s website.
Implementation of the Policy in 2024
A summary of our approach to pay increases for the wider workforce for 2024 is set out above.
As disclosed in last year’s report, our Executive Directors’ salaries were increased by 8% with effect from 1 January 2023. This was the second part of
a phased two-stage approach and recognised our strong performance, future ambitions, and our intention to move our Executive Directors’ salaries on
a phased basis towards the mid-point of the market competitive range. For 2024 our Executive Directors’ salaries have been increased by 2.5% in line
with the lowest rate of increases awarded to the wider workforce.
CEO – John Mills
CFO – Ian Tichias
No other changes are proposed to the Executive Directors’ package for 2023.
L Pension/cash in lieu – in line with wider workforce (currently 6% of salary)
Salary effective from 1 January 2023
Salary effective from 1 January 2024
£390,000
£260,000
£399,750
£266,500
L Maximum annual bonus for 2024 is 125% of salary for the CEO and 100% for the CFO. 30% of any bonus will be deferred in shares and subject to a
two-year deferral period. The balance is delivered in cash. Further information in relation to the performance measures is set out on page 70
L Long-term incentive: maximum 150% of salary for the CEO and 100% of salary for the CFO. LTIP awards vest after three years subject to the
achievement of appropriately stretching performance conditions. A further two-year holding period applies in line with the UK Code. Further
information in relation to the performance measures is set out on page 65
L The Committee retains discretion to override formulaic outcomes if these do not reflect underlying Company performance or other circumstances
as determined by the Committee. As part of this assessment the Committee will take into account progress against Xaar’s Sustainability
Roadmap that will push Xaar towards its Net Zero by 2030 goal and our wider ESG commitments.
Looking ahead – key focus areas for the Committee for 2024
During the course of 2024 we will continue the implementation of the reward policy including suitable bonus targets taking into consideration the wider
workforce.
Board Chair and Non-Executive Directors
Board Chairman
The Committee reviewed the Chairman's fee. It was agreed that the Chairman's fee would increase from £130,000 to £131,223. The Committee
considers that the fee is broadly in line with market practice.
Non-Executive Directors
Under delegated authority from the Board, the Executive Directors and the Chair have reviewed fees for the other Non-Executive Directors. The
outcome was that the base fee of £48,925 for the Non-Executive Directors’ fees is broadly market competitive. The base fee will be increased by 2.5%,
in line with the lowest rate of increase for the wider workforce for 2024 to £50,148. The additional fee in respect of acting as a Committee Chair or
Senior Independent Director will not be increased, remaining at £7,500 and £3,000 respectively.
Employee engagement
As explained in the Annual Report last year, our workforce engagement sessions are held at least three times a year. These include regular business
forums with Non-Executive Directors and senior management update calls to all employees. These have provided an upward channel for views,
comments and debate, as well as an opportunity to provide positive feedback on the Group’s focus on the wellbeing and health and safety of our
employees.
Shareholder engagement
We remain committed to a responsible approach to executive pay, as I trust this Directors’ Remuneration report demonstrates. We believe that the
Policy operated as intended and consider that the remuneration received by the Executive Directors in respect of 2023 was appropriate, taking into
account Group and personal performance and the experience of shareholders and employees. On behalf of the Board, I would like to thank you, our
shareholders, for your engagement, and I hope that we will continue to receive your support at the forthcoming AGM on 29 May 2024.
Alison Littley
Chair of the Remuneration Committee
25 March 2024
62
Xaar plc Annual Report and Financial Statements 2023
Strategic Report
Governance
Financial Statements
Directors’ Remuneration Policy
Introduction
Our Policy was approved by shareholders at the AGM held on 31 May 2023. As noted in the statement from the Committee Chair, the full Policy is
included in the Annual Report for the year ended 31 December 2022, which is available on the Company’s website. We have set out below how the
Remuneration Committee addresses the principles set out in the UK Corporate Governance Code 2018 in respect of the Directors’ Remuneration
Policy.
Annual Report on Remuneration
This part of the report sets out the actual payments made by the Company to its Directors with respect to the year ended 31 December 2023.
The information provided in this part of the Directors’ Remuneration report is subject to audit.
Single figure table
The aggregate remuneration provided to Directors who have served as Directors in the year ended 31 December 2023 is set out below, along with the
aggregate remuneration provided to such Directors for the financial year ended 31 December 2022.
Year ended 31 December 2023
Executive
John Mills
Ian Tichias
Non-Executive
Andrew Herbert (Chairman)
Alison Littley
Chris Morgan1
Richard Amos2
Jacqueline Sutton3
Salary/fees(a)
£'000
Benefits(b)
£’000
Bonus(c)
£’000
Long-term
incentives(d)
£’000
Pension(e)
£’000
Total
remuneration
£’000
Total fixed
remuneration
£’000
Total variable
remuneration
£’000
390
260
130
59
48
33
8
32
25
–
–
–
–
–
–
–
–
–
–
–
–
271
126
–
–
–
–
–
23
16
–
–
–
–
–
716
427
130
59
48
33
8
445
301
130
59
48
33
8
271
126
–
–
–
–
–
1 Chris Morgan stepped down from the Board on 30 November 2023.
2 Richard Amos joined the Board on 1 June 2023.
3 Jacqueline Sutton joined the Board on 1 November 2023.
Year ended 31 December 2022
Executive
John Mills
Ian Tichias
Non-Executive
Andrew Herbert (Chairman)
Alison Littley
Chris Morgan
Salary/fees(a)
£'000
Benefits(b)
£’000
Bonus(c)
£’000
Long-term
incentives(d)
£’000
Pension(e)
£’000
Total
remuneration
£’000
Total fixed
remuneration
£’000
Total variable
remuneration
£’000
360
240
120
58
55
31
24
–
–
–
178
95
–
–
–
1,001
410
–
–
–
22
14
–
–
–
1,592
783
120
58
55
413
278
120
58
55
1,179
505
–
–
–
The figures in the single figure table above are derived from the following:
(a) Salary/fees
The amount of base salary/fees received in the year.
(b) Benefits
(c) Bonus
This is the taxable value of benefits and the flexible benefits allowance received in the year.
The value of the bonus earned in respect of the year, including the amount paid in cash and the amount
deferred into shares.
63
Xaar plc Annual Report and Financial Statements 2023 Directors’ Remuneration report continued
Single figure table continued
Year ended 31 December 2022 continued
(d) Long-term incentives
The value of LTIP awards vesting is in respect of performance periods which ended in the relevant year.
The value of SAYE options granted is based on the fair value of the options/shares at grant.
In the 2022 Directors’ Remuneration Report, the long-term incentives values for the year ended 31 December
2022 were calculated in line with the applicable regulations by reference to the average share price over
October, November and December 2022, being £1.82. In line with the applicable regulations, these have
now been updated to reflect the share price at the date of vesting as follows.
Award
John Mills’ joining award
Ian Tichias’ joining award
John Mills’ 2020 LTIP award
Ian Tichias’ 2020 LTIP award
Number of
vested shares
Share price on
date of vesting
Value of vested
shares
177,623
50,000
365,000
170,000
£1.844
£1.844
£1.844
£1.844
£327,537
£92,200
£687,060
£313,480
(e) Pension
The value of the employer contribution to the defined contribution pension plan in the UK (or the value
of a salary supplement paid in lieu of a contribution to this pension plan).
Individual elements of remuneration
Base salary and fees
The CEO’s salary was increased to £390,000 from 1 January 2023 and the CFO’s salary was increased to £260,000 from 1 January 2023.
Benefits
UK benefits principally comprise a car allowance, private medical insurance and basic levels of other insurances (such as income protection cover).
In addition, UK Executive Directors are provided with an allowance of 5% of base salary which they can apply to a range of benefits such as life
insurance and critical illness insurance.
Pension
The Company operates a self-administered, defined contribution, HMRC approved pension scheme. Executive Directors participate in this scheme.
In appropriate circumstances, Executive Directors may take a salary supplement instead of contributions into a pension plan. This salary supplement
does not form part of salary for the purposes of calculating any other entitlement under the policy. Non-Executive Directors do not receive pension
contributions.
Annual bonus
For the financial year ended 31 December 2023, the CEO and CFO were eligible for a maximum annual bonus of up to 125% of base salary and 100% of
base salary respectively. Annual bonus targets were set based on performance against adjusted Group profit before tax pre bonus (70%) and cash flow
improvement (30%). As set out on page 61, notwithstanding that bonuses would have been earned by reference to the achievements against the target
set, the Committee concluded that, in light of the overall return to key stakeholders, no bonuses should be paid to the Executive Directors in respect of
2023. However, the targets set out below show the performance against them.
Adjusted Group PBT (pre bonus)
Cash flow from operations
Overall outturn
Threshold
(0% of
maximum vests)
Target
(50% of
maximum vests)
Maximum
(100% vesting)
2,863
n/a
6,352
4,000
12,074
7,000
Actual
3,562
(1,047)
Weighting
70%
30%
100%
Long-term incentives vesting in respect of 2023
The 2021 LTIP awards vested by reference to performance over the period ending 31 December 2023. In line with the applicable regulations, the
estimated vesting value of those awards is included in the 2023 single total figure of remuneration. Details of the performance measures, the outturns
against them, and the basis of the calculation of the values included in the single total figure of remuneration are set out below.
When considering the outturns the Committee has taken a holistic view, including in relation to the employee and wider stakeholder experience,
in addition to performance relative to the targets and objectives set. The Committee believes that the outcomes are an appropriate reflection of wider
performance and the Committee has not exercised any discretion in relation to remuneration outcomes.
64
Xaar plc Annual Report and Financial Statements 2023 Strategic Report
Governance
Financial Statements
Individual elements of remuneration continued
Long-term incentives vesting in respect of 2023 continued
Award
Performance condition
2021 LTIP
award
TSR (40%
weighting)1
Threshold
vesting (25%)
Maximum
vesting
Performance
outturn
Vesting
percentage
Shares
under award
Median
Upper quartile Below median
0%
EPS (60%
weighting)
0.5
6.5
8.4
100%
117,391
(John Mills)
54,783
(Ian Tichias)
176,087
(John Mills
82,174
(Ian Tichias)
Vested shares
0
(John Mills)
0
(Ian Tichias)
176,087
(John Mills)
82,174
(Ian Tichias)
1 Total shareholder return relative to the TSR of the companies constituting the FTSE SmallCap Index over the three-year performance period –1 January 2021 to 31 December 2023.
In the 2023 single total figure of remuneration, the value of these awards is calculated as follows:
Award
John Mills’ 2021 LTIP award
Ian Tichias’ 2021 LTIP award
Vested shares
Value of vested shares1
Value of vested shares
attributable to share price
at grant of award2
Value of vested shares
attributable to growth
in shares price3
176,087
82,174
£270,943
£126,440
£283,500
£132,300
£(12,557)
£(5,860)
1 In accordance with the applicable regulations, this is calculated by reference to the average share price over October, November and December 2023 being £1.53869.
2 This is calculated by reference to the share price at the date of grant being £1.61.
3 This is calculated by reference to the difference between the price at the date of grant and the average share price over October, November and December 2023.
Long-term incentives and deferred bonuses awarded during the financial year
The table below outlines awards made under the LTIP and DBP to Executive Directors in 2023:
Award basis
Performance
condition
Number
of shares
Face value
of the award
£’000
Vesting
at threshold
Performance
period
Vesting date
9 May 2023
John Mills
9 May 2023
Ian Tichias
Performance
Share Plan
awards
Deferred
Bonus Plan
Performance
Share Plan
awards
Deferred
Bonus Plan
EPS & TSR
325,180
585
25% of award
–
29,645
53
EPS & TSR
144,524
260
25% of award
–
15,811
28
1 January
2023 to 31
December
2025
March 2026
(2025 Results)
March 2025
(2024 Results)
N/A
1 January
2023 to 31
December
2025
March 2026
(2025 Results)
March 2025
(2024 Results)
N/A
1 The share price used to calculate the face value of the Performance Share Plan award and the Deferred Bonus Plan share award granted on 9 May 2023 was £1.799 being the closing
average share price on the five business date preceding the grant award date. The Deferred Bonus Plan award is a grant calculated as 30% of the 2022 bonus earned.
The 2023 LTIP grants were based on Cumulative Adjusted EPS performance for the three-year performance period commencing with the 2023
financial year (60% of the award) and relative TSR performance against the companies in the FTSE SmallCap Index (40% of the award) measured over
a three-year performance period commencing with the 2023 financial year. In line with the UK Corporate Governance Code, there is a further two-year
holding period following the end of the performance period.
Given the turnaround position of the Company, the Board considers the EPS performance targets for the LTIP awards granted in 2023 to be
commercially sensitive information at this time but, as in past years, will fully disclose the exact measurements retrospectively. The portion of the
awards based on TSR will vest subject to the satisfaction of the following performance conditions:
Company’s TSR performance relative to the comparator group
Portion of the TSR element that vests
Median
25%
Between median and upper quartile
Pro-rata between 25% and 100%
Upper quartile
100%
65
Xaar plc Annual Report and Financial Statements 2023 Directors’ Remuneration report continued
Long-term incentives and deferred bonuses awarded during the financial year continued
Shareholding guidelines and total shareholdings of Directors
Executive Directors are required to retain half of the after tax number of shares they acquire pursuant to the LTIP or deferred bonus until they have
achieved a shareholding with a value of 200% of salary. The extent to which each Executive Director has met the shareholding guideline is shown in the
table below:
Name
Executive Directors
John Mills
Shareholding
guidelines
Current
shareholdings
(% of salary)
Type
Owned
outright
Vested
Subject to
performance
conditions
Not subject to
performance
conditions
Total as at
31 December
2023
Unvested
200% of salary
134%
Shares
125,000
1,564,345
LTIP options
DBP and
SAYE options
177,623
826,590
365,000
28,543
46,883
Ian Tichias
200% of salary
83%
Shares
50,000
686,682
LTIP options
DBP and
SAYE options
50,000
373,895
170,000
10,849
31,938
Non-Executive Directors
Andrew Herbert
Alison Littley
Chris Morgan1
Richard Amos
Jacqueline Sutton
Shares
Shares
Shares
Shares
Shares
100,000
–
–
–
–
100,000
–
–
–
–
1 The number of shares held by Chris Morgan is stated as at 30 November 2023, being the date on which he stepped down as a Non-Executive Director.
Shares that count towards the guideline are those owned outright and the net of tax shares subject to DBP and LTIP awards for which the vesting of
which is not subject to the satisfaction of any further performance condition. The shares are valued at closing price on 31 December 2023 (£1.1650)
with the percentage of salary determined by reference to salaries at 31 December 2023 (CEO £390,000 and CFO £260,000).
There have been no changes in the Directors’ holdings in the share capital of the Company, as set out in the table above, between 31 December 2023
and 26 March 2024. Stuart Widdowson was appointed as Non-Executive Director on 27 February 2024. Mr Widdowson beneficially owns 25,000 shares.
Andrew Herbert holds no options in Xaar plc. Chris Morgan, Alison Littley, Richard Amos and Jacqueline Sutton hold no shares or options in Xaar plc.
Outstanding Directors’ share awards
The awards held by Executive Directors of the Company under the LTIP are shown below:
LTIP
The outstanding awards granted to each Executive Director of the Company under the Xaar plc 2017 LTIP are as follows. All options under the LTIP are
nil-cost options such that no exercise price is payable.
Name
John Mills
Ian Tichias
As at 1
January
2023
Granted
during the
year
Exercised
during the
year
Lapsed
during the
year
As at
31 December
2023
Share price
at date of
grant
Grant date
180,328
365,000
293,478
207,932
–
–
–
–
–
325,180
1,046,738
325,180
50,000
170,000
136,957
92,414
–
–
–
–
–
144,524
449,371
144,524
–
–
–
–
–
–
–
–
–
–
–
–
2,705
–
–
–
–
177,623
365,000
293,478
207,932
325,180
4 October 2019
4 June 2020
14 October 2021
6 April 2022
9 May 2023
2,705
1,369,213
–
–
–
–
–
–
50,000
170,000
136,957
92,414
144,524
593,895
29 April 2020
4 June 2020
14 October 2021
6 April 2022
9 May 2023
£0.452
£0.59
£1.61
£2.70
£1.799
£0.41
£0.59
£1.61
£2.70
£1.799
Earliest date of
exercise
Expiry date
4 October 2029
4 October 2022
4 June 2025
4 June 2030
March 2026* 14 October 2031
6 April 2032
March 2027*
9 May 2033
March 2028*
29 April 2030
29 April 2023
4 June 2025
4 June 2030
March 2026* 14 October 2031
6 April 2032
March 2027*
9 May 2033
March 2028*
* The options vest on the dealing day following the announcement by the Company of its annual results or, if later, the date on which the Remuneration Committee determines whether
the performance condition and any other condition has been satisfied (in whole or in part), and are exercisable two years after this date.
66
Xaar plc Annual Report and Financial Statements 2023 Strategic Report
Governance
Financial Statements
DBP
The outstanding awards granted to each Executive Director of the Company under the Xaar 2020 Deferred Bonus Plan are as follows. All options under
the DBP are nil-cost options such that no exercise price is payable.
Name
John Mills
Ian Tichias
As at
1 January
2023
Granted
during the
year
Exercised
during the
year
Lapsed
during the
year
As at
31 December
2023
23,249
11,944
–
–
–
29,645
35,193
29,645
10,849
6,689
–
–
–
15,811
17,538
15,811
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
23,249
11,944
29,645
64,838
10,849
6,689
15,811
33,349
Grant date
14 October 2021
6 April 2022
9 May 2023
14 October 2021
6 April 2022
9 May 2023
Share price
at date of
grant
£1.61
£2.70
£1.799
£1.61
£2.70
£1.799
Earliest date
of exercise
Expiry date
March 2023* 14 October 2031
6 April 2032
March 2024*
9 May 2033
March 2025*
March 2023* 14 October 2031
6 April 2032
March 2024*
9 May 2033
March 2025*
* The options vest on the dealing day following the announcement by the Company of its annual results.
All employee share plan
The Executive Directors may participate in the Company’s all employee share plan, the Xaar plc SAYE Scheme (SAYE Scheme), on the same basis
as other employees. The SAYE Scheme provides an opportunity to save a set monthly amount (up to £500) over three years towards the exercise of a
discounted share option, which is granted at the start of the three years. Options and awards are not subject to performance conditions.
The outstanding awards granted to each Executive Director under the SAYE Scheme at 31 December 2023 are as follows:
Name
John Mills
Ian Tichias
As at
1 January
2023
Granted
during the
year
Exercised
during the
year
Lapsed
during the
year
As at
31 December
2023
Share price
at date of
grant
Grant date
Earliest date
of exercise
Expiry date
5,294
5,294
5,581
3,857
14,732
–
–
–
–
–
5,294
–
–
5,294–
–
–
–
–
–
5,294
2 November 2020
£1.02 1 December 2023
2 May 2024
0
5,581
2 November 2020
4 November 2021
£1.02 1 December 2023
£1.29 1 December 2024
2 May 2024
4 May 2025
3,857
3 November 2022
£1.40 1 December 2025
3 May 2025
9,438
Payments for loss of office and payments to past Directors made during the year
No payments for loss of office or payments to past Directors were made in 2023.
The information provided in this part of the Directors’ Remuneration report is not subject to audit.
Performance graph and table
The graph on this page shows the Company’s performance measured by total shareholder return (TSR), compared with the performance of the
FTSE TechMARK All Share Index and FTSE SmallCap Index (of which Xaar is now a member), which the Remuneration Committee considers to be
the most appropriate indices for comparison because they illustrate the Company’s TSR performance against a broad equity market index of similar
UK companies.
Total shareholder return
)
£
(
0
0
1
o
t
d
e
s
a
b
e
r
e
u
l
a
V
250.00
200.00
150.00
100.00
50.00
0.00
Dec-12
Dec-13
Dec-14
Dec-15
Dec-16
Dec-17
Dec-18
Dec-19
Dec-20
Dec-21
Dec-22
Dec-23
Source: Datastream (Thomson Reuters).
Xaar
FTSE Small Cap
FTSE TechMARK All Share
67
Xaar plc Annual Report and Financial Statements 2023
Directors’ Remuneration report continued
Payments for loss of office and payments to past Directors made during the year continued
Total shareholder return continued
This graph shows the value, by 31 December 2023, of £100 invested in Xaar on 31 December 2013, compared with the value of £100 invested in the
FTSE TechMARK All Share and FTSE SmallCap Indices on the same date on a yearly basis. The other points plotted are the values at intervening
financial year-ends.
The table below shows details of the total remuneration, annual bonus (as a percentage of maximum opportunity) and LTIP vesting percentage for the
Chief Executive Officer over the last ten financial years.
Year ended 31 December 2023
Year ended 31 December 2022
Year ended 31 December 2021
Year ended 31 December 2020
Year ended 31 December 2019 – John Mills1
Year ended 31 December 2019 – Doug Edwards2
Year ended 31 December 2018
Year ended 31 December 2017
Year ended 31 December 2016
Year ended 31 December 2015
Year ended 31 December 2014
Total
remuneration
Annual bonus
as a %
of maximum
opportunity
LTIP as a %
of maximum
opportunity
716
1,592
454
511
122
357
502
594
429
571
562
0%
39.51%
26.26%
43.27%
0%
0%
12%
0%
12.5%
48%
0%
60%
99.50%
n/a
n/a
0%
0%
0%
50%
0%
0%
100%
1 John Mills did not earn a performance bonus in respect of 2019. He received a buy-out bonus to compensate him for loss of income to join Xaar.
2 Doug Edwards was CEO from 1 January until 10 October 2019, and John Mills was CEO from 11 October to 31 December 2019.
Percentage change in Directors’ remuneration
The table below shows the percentage change in each Director’s salary/fees, benefits and bonus and average remuneration of full-time employees
on a full-time equivalent basis between the year ended 31 December 2022 and the year ended 31 December 2023 (in addition to the changes between
prior years as required by the regulations – notes in relation to the data for prior years are included in prior Directors’ Remuneration Reports), and the
average percentage change in the same remuneration over the same period in respect of the employees of Xaar plc on a full-time equivalent basis. For
the purposes of the table below, and in line with the regulations, the comparator employee group average employee within the UK is the employees
of Xaar plc. This comparator group was chosen because it is the most relevant sub-set of employees and can be used consistently. Richard Amos and
Jacqueline Sutton were appointed to the Board during the year and, accordingly, have been excluded from the table below. Chris Morgan stepped down
from the Board with effect from 30 November 2023; to enable a meaningful comparison, his fees for 2023 have been annualised for the purposes of the
table below. He resigned as Chair of the Audit Committee on 1 June 2023 and his overall fee therefore reduced compared with 2022.
Salary
Benefits
Bonus
Year
2022-
2023 %
Increase
2021-
2022 %
increase
2020-
2021 %
increase
2019-
2020 %
increase
2023
2022-
2023 %
Increase
2021-
2022 %
increase
2020-
2021 %
increase
2019-
2020 %
increase
2023
2022-
2023 %
Increase
2021-
2022 %
increase
2020-
2021 %
increase
2019-
2020 %
increase
2023
John Mills
390,000
8.33%
14%
Ian Tichias
260,000
8.33%
9%
5%
5%
– 32,348
5.54%
9%
4%
– 25,124
4.59%
4% -36%
Andrew
Herbert
130,000
8.33%
30%
15%
70%
Alison Littley
59,425
2.46%
16% 3.9%
–
Chris Morgan
52,334 -4.85%
10% 3.9%
10%
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0 -100%
72% -36% -21%
0 -100%
64% -24%
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Comparator
employee group 91,670
4.70%
46% 11.20% 2.50% 13,492
1.03% 494%
10% 2.5%
0 -100% 149%
5.8%
n/a
1 Average employee – Full-time equivalent median employee of Xaar plc. Benefits calculated as the cost of benefits provided by Xaar to all employees at no cost to each employee (life
cover etc.) plus 5% flexible benefits allowance for Executive Directors, and 3% flexible benefits allowance for comparator employee and any car allowance where applicable.
68
Xaar plc Annual Report and Financial Statements 2023 Strategic Report
Governance
Financial Statements
CEO pay ratio
The following table sets out the ratio of the CEO’s total remuneration in respect of FY23 (taken from the single figure table on page 63, the 25th
percentile, 50th percentile (i.e. the median) and the 75th percentile full-time equivalent (FTE) of the Group’s UK employees. In line with the applicable
regulations, the corresponding ratios for the previous years are also included.
Year
2023
2022
2021
2020
2019
Method
25th percentile Median pay ratio
75th percentile
Option A
Option A
Option A
Option A
Option A
26:1
62:1
16:1
15:1
17:1
20:1
41:1
11:1
11:1
12:1
12:1
29:1
7:1
8:1
8:1
The median and quartile figures have been determined based on Option A as this was stated in government guidance as the most statistically accurate
method. Remuneration for other employees for the purposes of the calculations was as at 31 December in each year.
In line with the applicable regulations, we have set out below for the same employee percentiles (and for the CEO) their total remuneration in respect
of 2021 and 2022 and the salary component of that remuneration.
Year
2023
2022
2021
2020
2019
CEO total
remuneration (salary
component of total
remuneration)
25th percentile
employee (salary
component of total
remuneration)
Median employee
(salary component of
total remuneration)
75th percentile
employee (salary
component of total
remuneration)
£608k
(£390k)
£1,592k
(£360k)
£454k
(£315k)
£511k
(£300k)
£479k
(£338k)
£28k
(£25k)
£26k
(£24k)
£28k
(£24k)
£33k
(£29k)
£28k
(£26k)
£36k
(£33k)
£39k
(£34k)
£43k
(£34k)
£46k
(£34k)
£39k
(£33k)
£59k
(£54k)
£56k
(£51k)
£62k
(£55k)
£64k
(£50k)
£57k
(£52k)
The Committee believes the median pay ratio is consistent with the pay, reward and progression policies for the UK employees taken as a whole.
Spend on pay
The table below sets out the Group’s distributions to shareholders by way of dividends and total Group-wide expenditure on pay for all employees
(including employer social security, pension contributions and share-based payments), as reported in the audited financial statements for the financial
year ended 31 December 2023.
Dividends paid to shareholders
Group-wider expenditure on pay for all employees (note 9)
2023
£’000
–
29,539
2022
£’000
–
28,011
Change %
0%
5.45%
Implementation of Directors’ Remuneration Policy for the financial year commencing 1 January 2024
Information on how the Company intends to implement the Policy for the financial year commencing 1 January 2024 is set out in the statement from
the Chairman of the Remuneration Committee and is summarised below.
Basic salary and fees
Details of the Executive Directors’ salary arrangements and the Chairman and Non-Executive Directors’ fee arrangements for 2024 are set out in the
statement from the Chairman of the Committee.
69
Xaar plc Annual Report and Financial Statements 2023 Directors’ Remuneration report continued
Annual bonus
The maximum opportunity for the CEO and CFO will be unchanged at 125% and 100% of base salary respectively for 2024. The performance metrics
for the bonus for 2024 are adjusted Group profit before tax (70%) and cash generated from operations (30%).
30% of any bonus earned will be deferred in shares and subject to a two-year deferral period. The Committee has discretion to amend formulaic
outputs such that in addition to overall business performance, circumstances that were unexpected or unforeseen (or any other reasons at the
discretion of the Committee) will be considered. As part of this assessment, the Committee will take into account progress against Xaar’s Sustainability
Roadmap that will push Xaar towards its Net Zero by 2030 goal and our wider ESG commitments.
The Board considers the Group profit and cash targets for 2024 to be matters that are commercially sensitive and should therefore remain confidential
to the Company. They provide our competitors with insight into our business plans, expectations and our strategic actions.
However, the Remuneration Committee will disclose on a retrospective basis how the Company’s performance relates to any annual bonus
payments made.
Long-term incentives
The maximum LTIP award in 2024 will be capped at 150% of base salary for the CEO and 100% of salary for the CFO. 2024 LTIP awards will be based on
financial measures appropriate to Xaar.
Cumulative Adjusted EPS and relative TSR performance will be measured over a three-year performance period to 31 December 2026 with a further
two-year holding period following the end of the performance period.
As for 2023, given the turnaround position of the Company, the Board considers the EPS performance targets for the LTIP awards to be granted in 2024
to be commercially sensitive information at this time but, as in past years, will fully disclose the exact measurements retrospectively. We will revert to
publishing any measurement targets in advance as we have done in the past as soon as possible.
The TSR performance condition will be the same as for the awards granted in 2023, as set out above.
Consideration by the Directors of matters relating to Directors’ remuneration
Membership
The Company has established a Remuneration Committee which is constituted in accordance with the recommendations of the UK Corporate
Governance Code. The terms of reference of the Remuneration Committee can be obtained by contacting the Company Secretary. Please see the
tables on page 54 for details of the Committee members in the year and the number of Committee meetings attended.
The Remuneration Committee is currently chaired by Alison Littley. The other members during the year ended 31 December 2023 were Andrew
Herbert, Chris Morgan (until he stepped down from the Board with effect from 30 November 2023), Richard Amos (with effect from 1 June 2023), and
Jacqueline Sutton (with effect from 1 November 2023). All members of the Remuneration Committee are considered independent within the meaning
of the UK Corporate Governance Code 2018.
Role and responsibilities of the Remuneration Committee
The Remuneration Committee’s primary responsibilities are:
L To make recommendations to the Board on the Group’s policy for executive remuneration, and review the ongoing appropriateness and relevance
of the policy taking into account workforce related pay and policies and the alignment of incentives and rewards with culture.
L To determine, on behalf of the Board, the specific remuneration and other benefits of Executive Directors, senior management and the Company
Secretary (including pension contributions, bonus arrangements, long-term incentives and service contracts).
L To review the design of all share incentive plans and oversee any major changes in employee benefit structures.
L To ensure appropriate stakeholder input into the work of the Committee with specific focus on employees through regular employee engagement.
The fees paid to the Non-Executive Directors are determined by the Chief Executive Officer and the Chairman. The fees paid to the Chairman are
determined by the Chief Executive Officer and the Non-Executive Directors.
The members of the Remuneration Committee have no personal financial interest, other than as shareholders, in the matters to be decided, no actual
or potential conflicts of interest arising from other directorships and no day-to-day operational responsibility within the Company. Executive Directors
are not entitled to accept more than one non-executive directorship outside the Group.
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Xaar plc Annual Report and Financial Statements 2023 Strategic Report
Governance
Financial Statements
Consideration by the Directors of matters relating to Directors’ remuneration continued
Key issues and activities
The key activities of the Remuneration Committee during 2023 are shown below:
Remuneration Committee’s key activities in 2023
Executive Directors’ and senior
management remuneration
Assess 2022 bonus and LTIP outturns
Finalise and approve 2023 bonus and LTIP targets
Review update on market practice and corporate governance
Share incentive plans
Governance
Wider workforce
Review eligibility for LTIP awards
Approve grant of LTIP awards
Approve grant of DBP awards
Approve grant of SAYE awards
Consider and approve the Annual Report on Remuneration
Review proposed annual pay increases for the wider workforce. Review proposed bonus payments for the
wider workforce. Agree improved processes for the Remuneration Committee to monitor wider workforce
pay and policies
Advisors to the Remuneration Committee
The Remuneration Committee is assisted in its work by Xaar’s human resources department. The Chief Executive Officer is consulted on the
remuneration of those who report directly to him and also of other senior executives. No Executive Director or employee is present or takes part in
discussions in respect of matters relating directly to their own remuneration.
During the financial year, the Committee received independent advice from Deloitte LLP, which was appointed by the Committee, in relation to the
Committee’s consideration of matters relating to Directors’ remuneration. Deloitte LLP was appointed in 2019 following a formal tender process.
Fees for advice provided to the Remuneration Committee during the year were £17,565. Fees were charged on a time and disbursements basis.
Deloitte LLP is a member of the Remuneration Consultants Group and voluntarily operates under its code of conduct in its dealing with the
Remuneration Committee. The Remuneration Committee continued to review the appointment of Deloitte LLP and is satisfied that all advice received
was objective and independent.
Deloitte also provide advice to the Company on the operation of its employee share plans.
Shareholder voting
The following table sets out actual voting in respect of the resolution to approve the Directors’ Remuneration report for the year ended 31 December
2022 and the Directors’ Remuneration Policy at the 2023 AGM.
Number of votes
Directors’ Remuneration report for the year ended 31 December 2022
Directors’ Remuneration Policy
Approval
This report was approved by the Board on 25 March 2024 and signed on its behalf by:
For (including
discretion)
58,994,131
(97.62%)
58,994,131
(97.6%)
Against
Withheld
1,441,296
(2.38%)
1,441,100
(2.38%)
1
197
Alison Littley
Chair of the Remuneration Committee
71
Xaar plc Annual Report and Financial Statements 2023 Directors’ responsibilities statement
The Directors are responsible for preparing the Annual Report and the Financial Statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors are required to prepare
the Group financial statements in accordance with UK-adopted International Accounting Standards and have also chosen to prepare the Parent
Company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards
and applicable law), including Financial Reporting Standard 101 Reduced Disclosure Framework (‘FRS 101’). Under company law the Directors must
not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company
and of the profit or loss of the Group for that period.
In preparing the Parent Company financial statements, the Directors are required to:
L Select suitable accounting policies and then apply them consistently
L Make judgements and accounting estimates that are reasonable and prudent
L State whether FRS 101 has been followed, subject to any material departures disclosed and explained in the financial statements
L Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.
In preparing the Group financial statements, International Accounting Standard 1 requires that Directors:
L Select and apply accounting policies in accordance with IAS 8
L Present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information
L Provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users to understand the
impact of particular transactions, other events and conditions on the entity’s financial position and financial performance
L Make an assessment of the Group’s ability to continue as a going concern.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s and Company’s transactions
and disclose with reasonable accuracy at any time the financial position of the Group and the Company and enable them to ensure that the financial
statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Group and the Company and hence for
taking reasonable steps for the prevention and detection of fraud and other irregularities.
Under applicable law and regulations the Directors are also responsible for preparing a strategic report, Directors’ report, and Directors’ remuneration
report that comply with that law and those regulations.
Website publication
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website.
Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Responsibility statement
We confirm that to the best of our knowledge:
L The financial statements, prepared in accordance with the relevant financial reporting framework, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole;
L The Strategic Report includes a fair review of the development and performance of the business and the position of the Company and the
undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face;
and
L The Annual Report and Financial Statements, taken as a whole, are fair, balanced and understandable and provide the information necessary
for shareholders to assess the Company’s performance, business model and strategy.
i The Directors of Xaar plc are listed on page 39
This responsibility statement was approved by the Board of Directors and is signed on its behalf by:
John Mills
Chief Executive Officer
25 March 2024
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Xaar plc Annual Report and Financial Statements 2023 Strategic Report
Governance
Financial Statements
Independent auditor’s report
to the members of Xaar plc
Opinion
We have audited the financial statements of Xaar plc (the ‘parent company’) and its subsidiaries (the ‘group’) for the year ended 31 December 2023
which comprise the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the Consolidated and Parent Company
Statements of Financial Position, the Consolidated and Parent Company Statements of Changes in Equity, the Consolidated Statement of Cash
Flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in the
preparation of the group financial statements is applicable law and UK-adopted international accounting standards. The financial reporting framework
that has been applied in the preparation of the parent company financial statements is applicable law and United Kingdom Accounting Standards,
including FRS 101 Reduced Disclosure Framework (United Kingdom Generally Accepted Accounting Practice).
In our opinion:
L the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31 December 2023 and of the
group’s loss for the year then ended;
L the group financial statements have been properly prepared in accordance with UK-adopted international accounting standards;
L the parent company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting
Practices; and
L the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those
standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are independent
of the group and parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK,
including the FRC’s Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance
with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the
financial statements is appropriate. Our evaluation of the directors’ assessment of the group’s and parent company’s ability to continue to adopt the
going concern basis of accounting included the following audit procedures:
L Obtaining and documenting our understanding of the controls in place around the preparation of the going concern forecast and future plans for
the group through discussions with management;
L Obtaining management’s assessment for going concern for the 15-month period to 31 March 2025 and checking the mathematical accuracy of
the cash flow forecasts and budgets prepared;
L Comparing budgeted performance for the year ended 31 December 2023 against actual to assess management’s historical forecasting accuracy;
L Challenging management where appropriate on the reasonableness of key inputs and assumptions underpinning the going concern model. These
challenges included but not limited to:
― Performing sensitivity analysis on key inputs and assumptions to assess the headroom across the going concern period. Key inputs and
assumptions included: (i) sales growth rates, (ii) long-term profitability/margins, (iii) levels of operating and capital expenditure, and (iv) cost-
saving initiatives;
― Assessing management’s reverse stress testing performed and corresponding mitigating actions;
― Assessing management’s assumptions against external factors and market trends for appropriateness;
― Agreeing the opening cash position at 1 January 2024 in the going concern forecast to the audited position as at 31 December 2023; and
― Assessing the prospective accuracy of management’s forecast in 2024 against post year-end bank statements and management accounts;
L Reviewing the terms of debt financing facilities within the group to confirm their availability across the forecast period;
L Assessing the associated covenants and conditions of the Revolving Credit Facility impact on the going concern basis preparation;
L Undertaking a review of subsequent events on matters impacting the going concern assessment; and
L Considering the adequacy of the disclosures and accounting policies in the financial statements.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the group’s or parent company’s ability to continue as a going concern for a period of at least twelve months
from when the financial statements are authorised for issue.
In relation to the entities’ reporting on how they have applied the UK Corporate Governance Code, we have nothing material to add or draw attention
to in relation to the directors’ statement in the financial statements about whether the directors considered it appropriate to adopt the going concern
basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
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Xaar plc Annual Report and Financial Statements 2023 Independent auditor’s report continued
Our application of materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with
qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of audit procedures on the individual
financial statement line items and disclosures in evaluating the effect of misstatements, both individually and in aggregate, on the financial statements
as a whole.
Overall materiality
£350,000
£349,000
Financial statements - group
Financial statements - parent company
Basis for determining overall materiality
0.5% of revenue
Rationale for the benchmark applied
The nature of the business activities and
operations results in the group being revenue-
driven, and revenue is considered to be a core
driver of the overall business. Revenue is a
key performance metric for internal reporting
purposes by group management and is a key
figure within the financial statements for users
of the financial statements, shareholders and
wider stakeholders.
On this basis, revenue was determined to be
an appropriate basis for determining overall
materiality.
1% of gross assets as constrained by the
allocation of overall group materiality
We considered the nature of the parent
company, being a holding company for the
entities within of the group, and determined that
gross assets was an appropriate basis for the
calculation of the overall materiality given the
significant asset base as at 31 December 2023.
Performance materiality
£210,000
£209,000
Basis for determining performance materiality
60% of the group overall materiality
60% of the parent company overall materiality
Rationale for the benchmark applied
In determining the performance materiality, we have considered the following factors:
L The level of significant judgements and estimates;
L The risk assessment and aggregation of risk and the effectiveness of controls;
L The control environment and the group’s financial reporting controls and processes; and
L The stability of key management personnel.
We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected
misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the nature and extent of our testing of account
balances, classes of transactions and disclosures, for example in determining sample sizes.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £17,500 for the audit of the group
and £17,450 for the parent company as well as misstatements below those amounts that, in our view, warranted reporting for qualitative reasons.
For each component in the scope of the group audit, we allocated a materiality that was less than the overall group materiality. The range of materiality
allocated across the components was between £45,000 and £185,000.
Our approach to the audit
In designing our audit approach, we determined materiality and assessed risk of material misstatement in the financial statements. In particular, we
looked at areas involving significant accounting estimates and judgements by the directors, including the recognition of revenue, the impairment of
goodwill and other identifiable intangible assets and the valuation of contingent consideration. Procedures were then performed to address the risk
identified and for the most significant assessed risks of misstatement, the procedures performed are outlined below in the key audit matters section of
this report. We re-assessed the risks throughout the audit process and concluded that the scope remained in line with that determined at the planning
stage of the audit.
An audit was performed on the financial information of the group’s significant operating components which, for the year ended 31 December 2023,
were located in the United Kingdom (UK) and the United States of America (USA). For management reporting purposes, the group is organised into
four reportable business units – Printhead, Product Print Systems, Digital Imaging and Ink Supply Systems.
As a result of our materiality and risk assessments, we determined which components required a full scope audit of their financial information, with
consideration of their significance to the group based on their contribution to overall revenue and their risk characteristics. On this basis, we scoped in
five components requiring a full scope audit of their financial information, of which three were considered to be financially significant components. The
additional two components subject to a full scope audit were selected due to specific risk characteristics and due to the presence of material classes
of transactions and account balances. The remaining eight components, which contributed 0.02% of the group’s total revenue, were subjected to
analytical procedures at the group level.
All components of the group were audited by us in our London, UK office. As group auditor, we performed an on-site visit of the financially significant
component located in Vermont, USA.
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Governance
Financial Statements
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current
period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including those which
had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These
matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
Key Audit
How our scope addressed this matter
Revenue recognition (note 6)
Under ISA (UK) 240, there is a rebuttable presumption that there is
a risk of material misstatement due to fraud in revenue recognition.
Recognition of revenue is a key driver of the presented results of
the group and therefore there is a perceived incentive to manipulate
recognition to meet performance targets.
We consider the risk in relation to the potential manipulation of the
revenue recognised arises from incorrect recognition of revenue
transactions and the posting of inappropriate journal entries via
management override. There is also a significant judgment in relation
to the recognition of revenue at a point in time or over time. Where
revenue is recognised over time (in the Engineered Printing Solutions
component) on the long-term contracts crossing over the year end,
there is significant estimation in determining whether the performance
obligation has been satisfied in the year and how much is recorded as a
contract liability.
A material error in this balance could affect financial statement user’s
decision.
As a result, there is a risk of fraud or error in revenue recognition due
to the potential to inappropriately recognise revenue in the year, and
therefore revenue recognition is a key audit matter.
In addition to the procedures required by ISA (UK) 240, our work on this
key audit matter included:
L Obtaining and documenting an understanding of the internal
control environment in operation and undertaking walk-throughs
to assess whether the key controls within the revenue processes
and systems had been designed and implemented effectively in the
year;
L Reviewing the revenue recognition policy against the requirements
under IFRS 15 Revenue from contracts with customers (IFRS
15) and assessing the adequacy of disclosures made within the
financial statements;
L Performing substantive tests of detail on a sample of revenue
transactions to ensure the occurrence and accuracy of the revenue
through to supporting documents;
L Reviewing the stage of completion and inputs to the supporting
documents and contracts to ensure appropriate recognition of
revenue over time and completeness of the revenue recognised in
the year ended 31 December 2023;
L Analysing the population of all material journals impacting revenue
during the financial period using data analytics. All material journal
entries that fell outside of our expectation were investigated further
by agreeing to underlying supporting documents and through
discussion with management;
L Reviewing contract assets and liabilities balances on a sample
basis, and reviewing the post-year end positions on the samples
selected and agreeing the balances have been appropriately
recognised; and
L Testing the cut-off of the revenue for the year by selecting samples
from pre and post year-end revenue listings to ensure that the
revenue was appropriately recognised in the correct period.
Key observations
Based on the audit procedures performed above, we did not identify any
instance of management override and are satisfied that revenue has
been recognised in accordance with the recognition criteria set out in
IFRS 15.
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Xaar plc Annual Report and Financial Statements 2023 Independent auditor’s report continued
Key Audit
Impairment of goodwill and other intangible assets (notes 16 and 17)
There are material balances of goodwill and other intangible assets on
the Consolidated Statement of Financial Position.
Under IAS 36 Impairment of Assets, goodwill and other intangible
assets with an indefinite useful life must be tested for impairment
annually by comparing its carrying amount with its recoverable amount.
As at 31 December 2023, a goodwill balance of £6.9m is present at the
year-end on the Consolidated Statement of Financial Position. This can
be attributed to the following components within the group:
Cash Generating Unit
Product Print Systems
Digital Imaging
Ink Delivery Systems
£’m
5.5
0.7
0.7
The impairment assessment is performed using value-in-use
calculations, which require the identification of Cash Generating Units
(CGUs), forecasting Cash flows, extrapolated growth rates and an
applicable discount rate. Given the significant amount of management
judgment and estimation involved, goodwill and other intangible assets
was deemed to be significant risk and a key audit matter for the year
ended 31 December 2023.
Valuation of contingent consideration (note 30)
Stratasys Solutions Limited completed the acquisition of the remaining
55% equity stake that Xaar 3D Holdings Limited held in Xaar 3D Limited
on 6 October 2021. The purchase price consideration consisted of £9.3m
paid in cash, an additional potential payment of up to USD21.2m based
on specific milestones, and a 3% earn-out consideration tied to Xaar 3D
Limited’s future revenues.
On the date of the transaction, the group recognised a financial asset
of £10.9m in relation to the contingent consideration., At 31 December
2023, the fair value of the contingent consideration was £10.6m.
Determining the fair value of the contingent consideration is complex
and involves significant judgments and estimates and as such there is a
risk of material misstatement. Given the aforementioned, the Valuation
of contingent consideration is deemed a significant risk and a key audit
matter.
How our scope addressed this matter
Our work on this key audit matter included:
L Obtaining and documenting an understanding of the relevant
controls and procedures in place over the impairment of goodwill
and other intangible assets;
L Reviewing management’s impairment memorandum and models
and challenging management on the key inputs and assumptions
underpinning the assessments;
L Comparing forecasted performance with post year-end actuals in
order to assess management’s forecasting accuracy;
L Reviewing the discounted cash flows for each CGU, performing
downward sensitivity analysis on key inputs and estimates and
assessing the corresponding value-in-use (VIU) against the carrying
value of the corporate assets; and
L Assessing the adequacy of disclosures made in the financial
statements in line with the requirements under UK-adopted
international accounting standards.
Key observations
Based on the audit procedures performed, we are satisfied with
management’s assessment and conclusion that no impairments are
required in respect of goodwill and other intangible assets recognised
within each CGU.
Our work on this key audit matter included:
L Obtaining and documenting an understanding of the method used
by management’s valuation expert to determine the fair value of the
contingent consideration at the year-end;
L Assessing management expert’s competence, and capability
and objectivity based on knowledge of their qualifications and
professional standards;
L Using our internal valuations team as an audit specialist and
assessing the appropriateness of the key inputs into the Monte
Carlo Simulation model used by management’s expert. This
included a review of the methodology and reasonableness of
assumptions and a determination of a point estimate;
L Challenging management on the appropriateness and consistency
of the forecasted revenue amounts provided by Stratasys Solutions
Limited;
L Recalculating the 3% earn-out consideration based on Xaar 3D
Limited’s reportable revenue within the relevant reporting periods;
L Recalculating the year-end closing fair value movement recorded
in the statement of income and comparing this to management’s
calculation; and
L Ensuring the adequacy and accuracy of the associated disclosures
and that they were in line with the requirements of UK-adopted
international accounting standards.
Key observations
Based on the audit procedures performed above, we are satisfied
that the valuation methodology, and key inputs and assumptions
therein to determine the fair value of the contingent consideration
were reasonable and in line with the requirements of UK-adopted
international accounting standards.
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Financial Statements
Other information
The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon.
The directors are responsible for the other information contained within the annual report. Our opinion on the group and parent company financial
statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of
assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If
we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material
misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of
this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion the part of the directors’ remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
L the information given in the strategic report and the directors’ report for the financial year for which the financial statements are prepared is
consistent with the financial statements; and
L the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we
have not identified material misstatements in the strategic report or the directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
L adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches
not visited by us; or
L the parent company financial statements and the part of the directors’ remuneration report to be audited are not in agreement with the
accounting records and returns; or
L certain disclosures of directors’ remuneration specified by law are not made; or
L we have not received all the information and explanations we require for our audit.
Corporate governance statement
We have reviewed the directors’ statement in relation to going concern, longer-term viability and that part of the Corporate Governance Statement
relating to the group’s and parent company’s compliance with the provisions of the UK Corporate Governance Code specified for our review by the
Listing Rules.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance Statement is
materially consistent with the financial statements or our knowledge obtained during the audit:
L Directors’ statement with regards the appropriateness of adopting the going concern basis of accounting and any material uncertainties identified
set out on pages 45 to 46
L Directors’ explanation as to their assessment of the group’s prospects, the period this assessment covers and why the period is appropriate set
out on page 46;
L Directors’ statement on whether they have a reasonable expectation that the group will be able to continue in operation and meet its liabilities set
out on page 45;
L Directors’ statement that they consider the annual report and the financial statements, taken as a whole, to be fair, balanced and understandable
set out on page 72;
L Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 18;
L The section of the annual report that describes the review of effectiveness of risk management and internal control systems set out on pages 16
to 21; and
L The section describing the work of the audit committee set out on pages 56 to 58.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement, the directors are responsible for the preparation of the group and parent company
financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to
enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the group and parent company financial statements, the directors are responsible for assessing the group’s and the parent company’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting
unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so.
77
Xaar plc Annual Report and Financial Statements 2023 Independent auditor’s report continued
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether
due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a
guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities,
outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of
detecting irregularities, including fraud is detailed below:
L We obtained an understanding of the group and parent company and the sector in which they operate to identify laws and regulations that could
reasonably be expected to have a direct effect on the financial statements. We obtained our understanding in this regard through discussions with
management, industry research experience of the sector.
L We determined the principal laws and regulations relevant to the group and parent company in this regard to be those arising from:
― The Companies Act 2006;
― UK-adopted International Accounting Standards
― United Kingdom General Accepted Accounting Practice
― The UK Corporate Governance Code;
― General Data Protection Regulation;
― Anti-bribery laws;
― Serious Organised Crime and Police Act 2005;
― Proceeds of Crime Act 2002;
― Listing Rules;
― Disclosure Guidance and Transparency Rules;
― UK tax legislation; and
― Tax legislation applicable in other jurisdictions.
L We designed our audit procedures to ensure the audit team considered whether there were any indications of non-compliance by the group and
parent company with those laws and regulations. These procedures included, but were not limited to:
― Making enquiries of management;
― Reviewing Board minutes;
― Reviewing legal expenditure nominal ledger accounts; and
― Reviewing Regulatory News Services announcements.
L We also identified the risks of material misstatement of the financial statements due to fraud. We considered, in addition to the non-rebuttable
presumption of a risk of fraud arising from management override of controls, that the potential for management bias was identified in relation to
revenue recognition, the impairment of goodwill and other intangible assets, and the valuation of the contingent consideration. We addressed this
by challenging the assumptions and judgements made by management when auditing these significant accounting estimates. Please refer to the
Key audit matters section of our report for further information.
L As in all of our audits, we addressed the risk of fraud arising from management override of controls by performing audit procedures which
included, but were not limited to: the testing of journals; reviewing accounting estimates for evidence of bias; and evaluating the business
rationale of any significant transactions that are unusual or outside the normal course of business.
Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material
misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation
is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-
compliance. The risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment,
forgery, collusion, omission or misrepresentation.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: www.frc.
org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Other matters which we are required to address
We were appointed by the Audit Committee on 14 August 2023 to audit the financial statements for the period ending 31 December 2023 and
subsequent financial periods. Our total uninterrupted period of engagement is one year, covering the period ending 31 December 2023.
The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the group or the parent company and we remain independent of
the group and the parent company in conducting our audit.
Our audit opinion is consistent with the additional report to the audit committee.
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Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work
has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and
for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone, other than the company and the
company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Daniel Hutson (Senior Statutory Auditor)
For and on behalf of PKF Littlejohn LLP
Statutory Auditor
25 March 2024
79
Xaar plc Annual Report and Financial Statements 2023 Consolidated income statement
for the year ended 31 December 2023
Revenue
Cost of sales
Gross profit
Research and development expenses
Selling, general and administrative expenses
Other income
Operating (loss) / profit
Finance income
Finance costs
(Loss) / profit before tax
Tax
(Loss) / profit for the year from continuing
operations
Loss from discontinued operations after tax
(Loss) / profit for the year attributable to the
equity shareholder of the parent
(Loss) / earnings per share
Basic (loss) / earnings per share
Diluted (loss) / earnings per share
* Further information on adjusting items is included in Note 9.
Note
6
9
9
8
7
11
11
13
12
14
14
Year ended 31 December 2023
Year ended 31 December 2022
Adjusted
£'000
70,614
(43,723)
26,891
(5,642)
(20,093)
2,201
3,357
89
(562)
2,884
(64)
2,820
Adjusted
items*
£’0000
–
–
–
179
(5,484)
–
(5,305)
–
–
(5,305)
311
(4,994)
Total
£'000
70,614
(43,723)
26,891
(5,463)
(25,577)
2,201
(1,948)
89
(562)
(2,421)
247
(2,174)
–
–
–
Adjusted
£'000
72,782
(44,138)
28,644
(6,718)
(18,828)
139
3,237
38
(453)
2,822
867
3,689
(159)
Adjusted
items*
£’0000
–
–
–
379
(2,377)
–
(1,998)
–
–
(1,998)
100
(1,898)
–
Total
£'000
72,782
(44,138)
28,644
(6,339)
(21,205)
139
1,239
38
(453)
824
967
1,791
(159)
2,820
(4,994)
(2,174)
3,530
(1,898)
1,632
3.6p
3.5p
(2.8)p
(2.8)p
4.8p
4.5p
2.1p
2.0p
Consolidated statement of comprehensive income
for the year ended 31 December 2023
(Loss) / profit for the year attributable to the equity shareholders of the parent
Items that may be reclassified to the income statement in subsequent years
Exchange (losses)/gains on translation of foreign operations
Other comprehensive (expense) / income for the year
Total comprehensive (expense) / income for the year
Year ended
31 December
2023
£'000
Year ended
31 December
2022
£'000
(2,174)
1,632
(318)
(2,492)
(2,492)
617
2,249
2,249
80
Xaar plc Annual Report and Financial Statements 2023
Consolidated statement of financial position
as at 31 December 2023
Strategic Report
Governance
Financial Statements
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Right-of-use assets
Deferred tax assets
Financial asset at fair value through profit or loss
Non-current financial assets
Current assets
Inventories
Trade and other receivables
Contract assets
Current tax receivable
Financial asset at fair value through profit or loss
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Deferred consideration
Provisions
Contract liabilities
Borrowings
Lease liabilities
Net current assets
Non-current liabilities
Lease liabilities
Provisions
Deferred consideration
Total liabilities
Net assets
Equity
Share capital
Share premium
Own shares
Translation reserve
Other reserves
Retained earnings
Total equity attributable to the equity shareholders of the parent
31 December
2023
£'000
31 December
2022
£'000
Notes
16
17
18
19
20
30
19
21
22
23
30
24
25
26
23
27
19
19
26
25
28
28
28
28
28
6,873
7,366
14,529
7,826
493
8,277
136
45,500
31,035
8,802
2,156
306
2,322
7,135
51,756
97,256
(9,568)
(2,115)
(972)
(2,369)
(1,403)
(1,800)
(18,227)
33,529
(6,898)
(300)
–
(7,198)
(25,425)
71,831
7,923
29,950
(566)
1,310
6,256
26,958
71,831
7,163
8,681
16,104
8,068
726
11,089
136
51,967
29,148
10,027
1,500
735
517
8,546
50,473
102,440
(13,216)
(1,646)
(405)
(3,799)
(379)
(1,032)
(20,477)
29,996
(7,800)
(300)
(2,094)
(10,194)
(30,671)
71,769
7,844
29,427
(775)
1,628
6,256
27,389
71,769
The consolidated financial statements on of Xaar Plc, registered number 3320972, were approved and authorised for issue by the Board of Directors
on 25 March 2024 and signed on its behalf by:
John Mills
Chief Executive Officer
Ian Tichias
Chief Financial Officer
81
Xaar plc Annual Report and Financial Statements 2023 Consolidated statement of changes in equity
for the year ended 31 December 2023
Balance as at 1 January 2022
Profit for the year
Other comprehensive income
Total comprehensive income
Own shares disposed of on exercise of share options
Exercise of share options
Purchase of own shares
Share–based payments
Share
capital
£'000
Share
premium
account
£'000
Own
shares
£'000
Translation
reserve
£'000
Other
reserves
£'000
Retained
earnings
£'000
Total
equity
£'000
7,844
29,427
(1,923)
1,011
6,256
26,187
68,802
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,148
–
(1,000)
–
–
617
617
–
–
–
–
–
–
–
–
–
–
–
1,632
–
1,632
–
(1,989)
–
1,559
1,632
617
2,249
2,148
(1,989)
(1,000)
1,559
Balance as at 31 December 2022
7,844
29,427
(775)
1,628
6,256
27,389
71,769
Loss for the year
Other comprehensive expense
Total comprehensive expense
Issue of ordinary shares
Own shares disposed of on exercise of share options
Exercise of share options
Share–based payments
–
–
–
79
–
–
–
–
–
–
523
–
–
–
–
–
–
–
209
–
–
–
(318)
(318)
–
–
–
–
–
–
–
–
–
–
–
(2,174)
–
(2,174)
–
–
(194)
1,937
(2,174)
(318)
(2,492)
602
209
(194)
1,937
Balance as at 31 December 2023
7,923
29,950
(566)
1,310
6,256
26,958
71,831
82
Xaar plc Annual Report and Financial Statements 2023 Consolidated cash flow statement
for the year ended 31 December 2023
Strategic Report
Governance
Financial Statements
Cash utilised from operations
Net income taxes received
Net cash outflow from operating activities
Investing activities
Interest income received
Purchases of property, plant and equipment
Proceeds from sale of property, plant and equipment
Purchases of intangible assets
Proceeds from sale of intangible assets
Cash earn-out received from financial assets at FVTPL
Net cash outflow arising from acquisitions
Net cash inflow / (outflow) from investing activities
Financing activities
Proceeds from sale of own shares
Proceeds from issue of shares
Payment for own shares acquired
Lease payments
Interest paid
Utilisation of revolving credit facility
Repayment of revolving credit facility
Net inflows from invoice discounting facility
Payment of deferred consideration
Net cash outflow from financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Effect of foreign exchange rates
Cash and cash equivalents at end of year
Notes
29
18
18
17
30
33
19
Year ended
31 December
2023
£'000
Year ended
31 December
2022
£'000
(1,537)
1,088
(449)
89
(1,510)
24
(430)
1,760
637
–
570
15
602
–
(1,075)
(59)
1,700
(1,700)
915
(1,746)
(1,348)
(1,227)
8,546
(184)
7,135
(5,617)
112
(5,505)
38
(2,456)
17
(2,933)
–
236
(3,536)
(8,634)
408
–
(1,000)
(914)
(22)
–
–
346
(1,733)
(2,915)
(17,054)
25,051
549
8,546
83
Xaar plc Annual Report and Financial Statements 2023 Notes to the consolidated financial statements
for the year ended 31 December 2023
1. Presentation of the financial statements
a) General information
Xaar plc (the Company, and together with its subsidiaries, the Group) is
a public limited company whose shares are listed on the London Stock
Exchange, is incorporated and domiciled in the UK and is registered in
England under the Companies Act 2006.
b) Basis of preparation
The consolidated financial statements have been prepared in accordance
with UK-adopted International Accounting Standards and with the
requirements of the Companies Act 2006.
The consolidated financial statements include the results of the Company
and its subsidiaries (together 'the Group'). The Group’s directly and
indirectly held subsidiary undertakings are disclosed in note C6 to the
company financial statements.
The consolidated financial statements have been presented in Sterling,
the functional and presentational currency of the Company. Certain of the
Group’s subsidiary entities have functional currencies other than Sterling.
The financial position and performance of all such subsidiary entities is
translated into the presentational currency (Sterling) in accordance with
the foreign currencies accounting policy as detailed in Note 2.
The consolidated financial statements have been prepared under the
historical cost convention as modified for the revaluation of certain
financial instruments. All values are rounded to the nearest thousand
pounds (£’000) except when otherwise indicated.
c) Alternative performance measures
The alternative performance measures (APMs) used by the Group adjust
for both recurring and non-recurring items that the Directors consider
are not reflective of the underlying performance of the Group. Recurring
items are adjusted each year irrespective of materiality to ensure
consistent treatment.
The Directors believe that the ‘adjusted profit before tax’ and ‘adjusted
earnings per share’ measures presented provide a consistent
presentation of the Group’s underlying operational performance. They
also present shareholders with a clearer insight of performance metrics
used by the Chief Operating Decision Maker and mitigate volatility,
for example resulting from exchange rate fluctuations, resulting from
external factors that are not influenced by the Group.
These measures are not defined under IFRS; therefore, they may not
be directly comparable with the ‘adjusted’ profit measures of other
companies.
Adjusting items are defined as follows:
L fair value gains or losses on financial assets at FVTPL;
L restructuring and transaction expenses;
L amortisation of intangible assets arising on business combinations;
L foreign exchange gains or losses arising on intra-group transactions;
L research and development expenditure credits and patent box tax
credits;
L share-based payments charges and employer’s tax contributions
thereon; and
L the tax effect of the aforementioned adjusting items.
d) Going Concern
The consolidated financial statements are prepared on a going concern
basis. Having considered the Group’s forecast financial performance and
cash flows, and after making appropriate enquiries, the Directors have a
reasonable expectation that the Group has adequate financial resources
to continue in operational existence for the foreseeable future and for at
least one year from the date that these consolidated financial statements
are signed. For these reasons, they continue to adopt the going concern
basis in preparing the consolidated financial statements. Accordingly,
these financial statements do not include any adjustments to the carrying
amount or classification of assets and liabilities that would result if the
Group were unable to continue as a going concern.
When making their assessment, the Directors have considered the
impacts on profitability of margin constraints prompted by inflationary
cost pressures. Furthermore, the impacts on revenue generation and
profitability resulting from wider market disruption in certain customer
and supplier markets and jurisdictions have been factored into forecast
and sensitivity scenarios.
A reverse stress test has been performed to model the circumstances
required to eliminate available liquidity during the going concern period,
this includes reducing revenues. This reverse stress scenario would
require a reduction in Printhead segment revenue in excess of 23% in
comparison to the base case, which would be below the actual reported
result for the year ended 31 December 2023. The Directors believe the
possibility of this combination of severe downsides arising to be remote
given the recurring revenue base and predictability of forecasts and new
revenue streams secured from products launched by OEMs in the second
half of 2023 or due to be launched in 2024.
In the unlikely event of such a scenario materialising, the Group has a
range of mitigating actions, focused on reducing the Group’s cost base,
that could be taken to avoid a liquidity shortfall. Namely, deferring non-
committed capital expenditure, delaying, or suspending research and
development expenditure, reducing performance related pay by aligning
payments to actual results and/or ultimately even making headcount
reductions. It is worth noting that such actions would only be required in
the event of an extreme downside scenario.
The Group is continuously monitoring and mitigating, where possible,
the impacts of such risks. There is a high degree of predictability within
the Group’s short-term cash flows as they reflect existing technologies
and products, existing OEM adoption and the committed order pipeline.
The level of sensitivity testing, and reverse stress testing performed is
proportionate to this level of predictability.
The Group’s business activities, together with the factors likely to affect
its future development, performance and financial position are set out in
the Strategic Report on pages 1 to 35.
The Group continues to have a net current assets position and maintains
sufficient financial resources as at 31 December 2023. These consist
of cash and cash equivalents of £7,135,000 as well as £5,000,000 of
committed, but undrawn, banking facilities made available under a
revolving credit facility agreement which currently expires in June
2025. The revolving credit facility is subject to leverage, interest cover
and capital expenditure threshold covenants. In addition, to support
the Group’s working capital position, alongside the above core banking
facilities, the Group also has access to ancillary funding arrangements in
the form of an invoice discounting facility; of which £1,403,000 of the total
£3,000,000 committed facility was utilised as at 31 December 2023.
Details of the Group’s objectives, policies and processes for managing its
capital and its exposure to financial risks, including both credit risk and
liquidity risk, are included in Note 30.
84
Xaar plc Annual Report and Financial Statements 2023 Strategic Report
Governance
Financial Statements
2. Principal accounting policies
Revenue recognition
The Group has the following revenue streams:
1. Product sales;
2. Commissions and services; and
3. Licensee royalties.
Revenue is measured based on the consideration to which the Group
expects to be entitled in a contract with a customer and excludes
amounts collected on behalf of third parties.
Revenue recognition continued
2. Commissions and services
This revenue stream consists of the provision of consulting and research
and development services to customers.
Revenue is recognised over time where the customer simultaneously
receives and consumes the benefits of the Group’s performance
obligations. In order to estimate the stage of completion of the contract
when recognising revenue over a period of time, an input methodology
(based on total estimated labour hours to deliver the contract) is used.
This is considered to best depict the performance conditions.
Revenue is presented after eliminating sales within the Group and is
shown net of discounts, VAT and other sales related taxes.
Where this is not the case, revenue is recognised at a point in time.
Payments for this revenue stream are typically in arrears.
Goods and services deliverable under a contract are identified as
separate performance obligations to the extent that the customer can
independently benefit from each good or service and they are distinct.
Each such product or service provided has a defined transaction price,
being its standalone selling price. Where the criteria to be separately
identifiable as distinct performance obligations are not met, the goods
and services are aggregated until a separate obligation is identified.
Where there are multiple performance obligations, revenue is measured
at the value per the contract of the consideration receivable in exchange
for the products and/or services, allocated by reference to the relative
stand-alone selling prices of each of the performance obligations.
Typically goods and services provided by the Group meet the definition
of separate performance obligations, with the transaction price being
allocated to each such obligation. However, certain contracts in the
Digital Imaging and Product Print Systems segments contain deliverables
that are not distinct, such as where the services provided are essential for
a customer to be able to derive a benefit from the goods purchased.
1. Product sales
This revenue stream consists of:
a. the manufacture and sale of finished goods (printheads);
b. the sale of engineered printing solutions; and
c. the sale of digital imaging devices.
Revenue is recognised when control has been transferred to the
customer. Control is deemed to transfer to the customer at point of
delivery or collection of the products. Revenue is generally recognised at
a point in time (such as on delivery or collection) and is typically invoiced
in arrears.
Certain contractual arrangements in the Product Print Systems and
Digital Imaging segments require revenue to be recognised over a period
of time, such as where the asset produced does not have an alternative
use and the Group has an enforceable right to payment for performance
completed to date. Where this is the case, the performance obligations
are typically not distinct.
In order to estimate the stage of completion of the contract when
recognising revenue over a period of time, an input methodology (based
on total estimated labour hours to deliver the contract) is used. This is
considered to best depict the performance conditions. Payments are
typically invoiced in instalments.
The Group typically provides warranties for general repairs of defects
that existed at the time of sale, as required by law. These assurance-type
warranties are accounted for as warranty provisions. See the ‘Provisions’
accounting policy on page 88 for full details.
3. Licensee royalties
The Group licences intellectual property to third parties. Revenue is
recognised on an accruals basis at a point in time, based on quarterly
statements received from each licensee. The royalties arise from the
licensee’s use of their printheads and the Group’s related intellectual
property installed in equipment developed by original equipment
manufacturers (OEMs).
Leasing
Leased assets are capitalised on inception of the lease as right of-use
assets. A corresponding lease liability, representing the present value
of the lease payments is also recognised and split between current and
non-current liabilities accordingly.
The lease liability includes; fixed payments, variable lease payments
dependent on an index or rate (initially measured using the index or rate
on the lease commencement date) and in substance fixed payments. The
variable aspect of variable payments are recognised when the rate or
index takes effect resulting in an adjustment to the liability and right-of-
use asset.
The discounted lease liability is calculated where possible using the
interest rate implicit in the lease or where this is not attainable the
incremental borrowing rate is utilised. The incremental borrowing rate
is the rate the Group would have to pay to borrow the funds necessary to
obtain a similar asset under similar conditions. The Group calculates the
incremental borrowing rate using risk free rate of the country where the
asset is held, adjusted for length of the lease and a risk premium.
Lease payments are allocated against the principal and finance cost.
Finance costs, representing the unwinding of the discount on the lease
liability are charged to the income statement to produce a constant
periodic rate of interest on the remaining liability. The Group has elected
to not present the capital and interest elements of lease payments
separately within cash flows arising from financing activities. Instead,
these amounts are presented in aggregate as ‘lease payments’ in the
Consolidated Cash Flow Statement.
Right-of-use assets are measured at cost including; the discounted initial
lease liability, lease payments made at or before the commencement
date, any dilapidation provisions and initial direct costs and reduced by
any lease incentives received.
Right-of-use assets are depreciated over the shorter of the non-
cancellable lease period and any extension options that are considered
reasonably certain to be taken or the useful life of the asset. The Group’s
current leases run from 1–20 years.
Modifications to lease agreements result in remeasurement of the lease
liability and right-of-use asset.
Short-term leases, defined as less than one year, and also of low
value, are recognised on a straight-line basis in the Consolidated
Income Statement.
85
Xaar plc Annual Report and Financial Statements 2023 Notes to the consolidated financial statements continued
for the year ended 31 December 2023
2. Principal accounting policies continued
Foreign currencies
Foreign currency transactions are booked at the exchange rate ruling at
the date of the transaction. Monetary assets and liabilities denominated
in foreign currency are retranslated at the rates of exchange ruling at
the balance sheet date. Exchange differences arising on settlement or
retranslation of monetary assets and liabilities are included in the
Consolidated Income Statement.
The results of overseas subsidiaries are translated into Sterling using
the average exchange rates during the year. Assets and liabilities are
translated at the rates ruling at the balance sheet date. Goodwill arising
on the acquisition of a foreign operation is treated as an asset of that
foreign operation and as such is translated at the relevant foreign
exchange rate at the balance sheet date. Exchange differences arising on
this translation are recognised through other comprehensive income in
the translation reserve.
Other exchange differences are recognised in the income statement in
the period in which they arise.
Retirement benefit costs
Payments to defined contribution retirement benefit schemes are
charged as an expense as they fall due. Payments made to state
managed retirement benefit schemes are dealt with as payments to
defined contribution schemes where the Group’s obligations under
the schemes are equivalent to those arising in a defined contribution
retirement benefit scheme.
Taxation
The tax expense represents the sum of tax currently payable and deferred
tax, including UK corporation tax and foreign tax.
The tax currently payable is based on taxable profit for the year. Taxable
profit differs from net profit as reported in the Consolidated Income
Statement because it excludes items of income or expense that are
taxable or deductible in other years and it further excludes items that
are never taxable nor deductible. The Group’s liability for current tax
is calculated using tax rates that have been enacted or substantively
enacted by the reporting date.
Deferred tax is the tax expected to be payable or recoverable on
temporary differences between the carrying amounts of assets and
liabilities in the financial statements and the corresponding tax bases
used in the computation of taxable profit. Deferred tax liabilities are
generally recognised for all taxable temporary differences and deferred
tax assets are recognised to the extent that it is probable that taxable
profits will be available against which deductible temporary differences
can be utilised. Such assets and liabilities are not recognised if the
temporary difference arises from the initial recognition of goodwill
(taxable temporary differences only) or from the initial recognition
(other than in a business combination) of other assets and liabilities in a
transaction that affects neither the tax profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences
arising on investments in subsidiaries, except where the Group is able to
control the reversal of the temporary difference and it is probable that the
temporary difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each reporting
date and risk educed to the extent that is no longer probable that
sufficient taxable profits will be available to allow all or part of the asset
to be recovered.
Deferred tax is charged or credited to the Consolidated Income
Statement, except when it relates to items charged or credited in Other
Comprehensive Income or directly in equity, in which case the deferred
tax is also recognised within either Other Comprehensive Income or
directly in equity respectively.
86
Taxation continued
To the extent that the Group receives a tax deduction relating to share-
based payment transactions, a deferred tax asset is recognised at the
appropriate tax rate on the difference in value between the market price
of the underlying equity as at the date of the financial statements and the
exercise price of the outstanding share options multiplied by the expired
portion of the vesting period. As a result, the deferred tax impact of share
options will not be derived directly from the expense reported in the
consolidated income statement. Where the deductible difference exceeds
the cumulative charge to the consolidated income statement the excess
of the associated tax benefit is recorded directly to equity rather than in
profit or loss.
Deferred tax assets and liabilities are measured on an undiscounted
basis and are offset when there is a legally enforceable right to set off
current tax assets against current tax liabilities and when they relate to
income taxes levied by the same taxation authority and the Group intends
to settle its current tax assets and liabilities on a net basis.
Business combinations
Business combinations are accounted for using the acquisition method.
On the acquisition of a business, fair values are attributed to the
identifiable assets, liabilities and contingent liabilities unless the fair
value cannot be reliably measured in which case the value is subsumed
into goodwill. Where applicable, on a transaction-by-transaction basis
the Group elects to utilise the optional concentration test when assessing
whether a transaction consists of a business combination or instead is
in substance the purchase of a single asset or group of similar assets.
The concentration test is met if substantially all the fair value of the
gross assets acquired is concentrated in a single identifiable asset or
group of similar identifiable assets. Where the concentration test is
met, the transaction is accounted for as an asset acquisition rather than
as a business combination. The fair value of the gross assets acquired
is calculated as the sum of the consideration transferred plus the fair
value of liabilities assumed (other than deferred tax liabilities) less cash
acquired. No goodwill arises on such transactions and acquisition costs
are capitalised.
Where settlement of any part of cash consideration is deferred, the
amounts payable in the future are discounted to their present value as at
the date of exchange. The discount rate used is the entity’s incremental
borrowing rate, being the rate at which a similar borrowing could be
obtained from an independent financier under comparable terms and
conditions.
If the initial accounting for a business combination is incomplete by the
end of the reporting period in which the combination occurs, the Group
reports provisional amounts for the items for which the accounting
is incomplete. Those provisional amounts are adjusted during the
measurement period or additional assets or liabilities are recognized
to reflect new information obtained about facts and circumstances that
existed as at the acquisition date that, if known, would have affected
the amounts recognised as of that date. The measurement period is
the period from the date of acquisition to the date the Group obtains
complete information about facts and circumstances that existed as of
the acquisition date – and is subject to a maximum of one year. Where
measurement period adjustments are identified, comparative prior period
is revised to reflect the change to the acquisition accounting.
Acquisition-related costs are expensed to the Consolidated Income
Statement in the period in which they are incurred.
Goodwill
Goodwill represents the excess of the fair value of the consideration
over the fair value of the net assets acquired. Where the fair value of the
consideration is less than the fair value of the acquired net assets, the
deficit is recognised immediately in the Consolidated Income Statement
as a bargain purchase.
Goodwill is not amortised, but is subject to an impairment review at least
annually and is carried at cost less accumulated impairment losses.
Any impairment is recognised immediately in the income statement and
is not subsequently reversed.
Xaar plc Annual Report and Financial Statements 2023 2. Principal accounting policies continued
Goodwill continued
For the purpose of impairment testing, goodwill is allocated to cash
generating units (CGUs). The CGU to which goodwill has been allocated
is tested for impairment annually, or more frequently when there is an
indication that the carrying value may not be recoverable.
Intangible assets
Acquisition intangibles
Acquisition intangibles comprise of brands, customer relationships,
patents, technology and know-how. These are capitalised at fair value and
are amortised on a straight-line basis over their estimated useful lives.
The principal expected useful lives are as follows:
Brands
Customer relationships
Patents, technology and know-how
10 years
6-8 years
6 years
Other intangible assets
These comprise software, licence fees and expenditure on developed
technology. Costs associated with the development activities are
recognised as an asset if and only if they meet the recognition criteria set
out in IAS 38 ‘Intangible Assets’, namely that:
L the project must be technically feasible;
L there must be the intention to complete the project;
L there must be adequate resources to be able to complete the project;
L the ability to use or sell the asset or product is secure;
L the future economic benefits must exceed the costs; and
L the ability to reliably measure costs.
Where no internally generated intangible assets can be recognised,
development expenditure is recognised as an expense in the period in
which it is incurred. All expenditure on research is expensed in the period
in which it is incurred.
Intangible assets are amortised on a straight-line basis over their
estimated useful lives. Assets under construction are not amortised.
The principal expected useful lives are as follows:
Software
Licence fees
Internally developed technology
3 to 15 years
1 to 20 years
3 to 20 years
Capitalised development costs – patent
Life of patent
Capitalised development costs
Life of project
The gain or loss arising on the disposal or retirement of an asset is
determined as the difference between the sales proceeds and the
carrying amount of the asset and is recognised in the Consolidated
Income Statement.
Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated
depreciation and, where appropriate, provision for impairment in value.
Cost includes the original purchase price of the asset and the costs
attributable to bringing the asset to its working condition for its intended
use. Depreciation is charged so as to write off the cost of assets over their
estimated useful lives, using the straight-line method, as follows:
Leasehold improvements
Plant and machinery
Furniture, fittings and equipment
Buildings
1 to 20 years up to the
maximum of the lease
term
3 to 20 years
3 to 20 years
Up to 40 years
Strategic Report
Governance
Financial Statements
Property, plant and equipment continued
The gain or loss arising on the disposal or retirement of an asset is
determined as the difference between the sales proceeds and the
carrying amount of the asset and is recognised in the income statement.
Assets under the course of construction are not depreciated.
Spare parts are capitalised within property, plant and equipment where
it is expected that future economic benefits will flow to the entity and the
cost can be measured reliably. This typically relates to critical spares,
which must be maintained for business continuity. Depreciation of these
assets commences both when the assets are bought and when they are
put in use. The former has longer useful life of six years to account for
the ‘idle’ time whilst the latter is shorter useful life of three years which
is an approximation for the average useful life of a part in use.
Impairment of property, plant and equipment and intangible assets
excluding goodwill
A review is undertaken upon the occurrence of events or circumstances
which indicate that the carrying amount may not be recoverable. In
addition, any assets not yet available for use are tested for impairment
annually.
The recoverable amount is the higher of fair value less costs to sell and
value in use. In assessing value in use, the estimated future cash flows
are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the
risks specific to the asset for which the estimates of future cash flows
have not been adjusted. If it is not possible to determine the recoverable
amount for an individual asset, the assessment is made for the asset’s
cash-generating unit (CGU).
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost
is calculated using the first in, first out (FIFO) cost formula, by applying
the standard cost methodology, with costs including direct materials,
direct labour costs and an attributable proportion of manufacturing
overheads based on normal levels of activity that have been incurred
in bringing the inventories to their present location and condition. Net
realisable value represents the estimated selling price less all estimated
costs of completion and costs to be incurred in marketing, selling and
distribution. Provision is made for obsolete, slow-moving or defective
items where applicable.
Government and EU grants
Government and EU grants are not recognised until there is reasonable
assurance that the Group will comply with the conditions attached to
them and that the grant will be received. Government and EU grants
relating to research and development are treated as income over the
periods necessary to match them with the related costs.
Other income
Other income comprises government grants, settlements received and
the profits on disposal of patent intangible assets.
Financial instruments
Financial instruments are recognised and classified according to the
substance of the contractual arrangements into which the Group enters.
An equity instrument is any contract that evidences a residual interest
in the assets of the entity after deducting all of its financial liabilities.
Financial assets and financial liabilities are recognised in the Group’s
Statement of Financial Position when the Group becomes a party to the
contractual provisions of the instrument.
87
Xaar plc Annual Report and Financial Statements 2023
Notes to the consolidated financial statements continued
for the year ended 31 December 2023
2. Principal accounting policies continued
Financial assets
Cash and cash equivalents, trade and other receivables (excluding
prepayments and contract assets) and financial assets held at fair value
through profit or loss are categorised as financial assets.
On initial recognition, financial assets are classified as either fair value
through profit or loss, or amortised cost. The classification depends
on the purpose for which the financial assets were acquired and their
contractual cash flows.
Amortised cost assets are non-derivative debt instruments that meet the
following conditions:
L the financial asset is held within a business model whose objective is
to hold financial assets in order to collect contractual cash flows; and
L the contractual terms of the financial asset give rise on specified
dates to cash flows that are solely payments of principal and interest
on the principal amount outstanding.
The amortised cost of a financial asset is the amount at which the
financial asset is measured at initial recognition minus the principal
repayments, plus the cumulative amortisation using the effective interest
method of any difference between that initial amount and the maturity
amount, adjusted for any loss allowance.
The effective interest method is a method of calculating the amortised
cost of a debt instrument and of allocating interest income over the
relevant period. For financial assets other than purchased or originated
credit-impaired financial assets, the effective interest rate is the rate
that exactly discounts estimated future cash receipts excluding expected
credit losses, through the expected life of the debt instrument, or, where
appropriate, a shorter period, to the gross carrying amount of the debt
instrument on initial recognition.
Interest income is recognised in the Consolidated Income Statement and
is included in the 'finance income' line item.
The Group recognises an allowance for expected credit losses (ECLs) for
all debt instruments not held at fair value through profit or loss.
ECLs are based on the difference between the contractual cash flows
due in accordance with the contract and all the cash flows that the Group
expects to receive, discounted at an approximation of the original effective
interest rate. The expected cash flows will include cash flows from the
sale of collateral held or other credit enhancements that are integral
to the contractual terms. ECLs are recognised in two stages. For credit
exposures for which there has not been a significant increase in credit
risk since initial recognition, ECLs are provided for credit losses that
result from default events that are possible within the next 12 months
(a 12-month ECL). For those credit exposures for which there has
been a significant increase in credit risk since initial recognition, a loss
allowance is required for credit losses expected over the remaining life of
the exposure, irrespective of the timing of the default (a lifetime ECL).
The Group always measures the loss allowance for trade receivables at
an amount equal to lifetime ECL. The expected credit losses on trade
receivables are estimated using a provision matrix by reference to past
default experience of the debtor and an analysis of the debtor’s current
financial position, adjusted for factors that are specific to the debtor,
general economic conditions of the industry in which the debtor operates
and an assessment of both the current as well as the forecast direction of
conditions at the reporting date.
For financial assets carried at amortised cost, the amount of the
impairment is the difference between the asset’s carrying amount and
the present value of the estimated future cash flows, discounted at the
financial asset’s original effective interest rate.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits
with an original maturity of three months or less.
88
Trade and other receivables
Trade receivables are recognised at cost less allowances for expected
credit losses. The provision is based on the Group’s expected credit loss,
which is calculated using the simplified approach for trade receivables
based on historical data adjusted for forward looking information.
Financial liabilities
Financial liabilities are those which involve a contractual obligation to
deliver cash to external parties at a future date.
Interest-bearing loans and borrowings
Interest-bearing loans and bank overdrafts are measured initially at fair
value, net of direct issue costs. Interest is subsequently at amortised cost.
Finance charges, including premiums payable on settlement or
redemption and direct issue costs, are accounted for on an accrual basis
in the Consolidated Income Statement using the effective interest rate
method and are added to the carrying amount of the instrument to the
extent that they are not settled in the period in which they arise.
The Group has entered into an invoice discounting arrangement. See
Note 27.
Trade and other payables
Trade payables are non-interest bearing and are stated at amortised
cost which approximates cost here due to the short term nature of the
payables.
Provisions
Provisions are recognised when the Group has a present obligation as
a result of a past event and it is probable that the Group will be required
to settle that obligation. Provisions are measured at the Directors’ best
estimate of the expenditure required to settle the obligation at the date of
the statement of financial position and are discounted where the effect of
the time value of money is material.
Restructuring provisions
A restructuring provision is recognised when the Group has developed
a detailed formal plan for the restructuring and has raised a valid
expectation in those affected that it will carry out the restructuring by
starting to implement the plan or announcing its main features to those
affected by it, and the plan has reached a stage where the decision is
unlikely to be reversed. The measurement of a restructuring provision
includes only the direct expenditures arising from the restructuring,
which are those amounts that are both necessarily entailed by the
restructuring and not associated with the ongoing activities of the entity.
Warranty provisions
Provisions for the expected cost of warranty obligations under contracts
with customers and local sale of goods legislation are recognised in the
month of sale of the relevant products, at the Directors’ best estimate of
the expenditure required to settle the Group’s obligation.
For general warranty provisions, this estimate is based on historical
trends. For specific warranty provisions, this estimate is based on the
known faults in the product sold in the year.
Dilapidation provisions
Provisions for leased property dilapidation are recognised at the
commencement of the lease using the Group’s best estimate to settle the
obligation at the end of the lease term.
Contract assets and contract liabilities
A contract asset is recognised when revenue recognised in respect of
a customer contract exceeds amounts received or receivable from the
customer. This situation arises when the recognition of revenue over time
to date is greater than amounts invoiced to the customer and invoicing is
conditional on further performance. The carrying amount is reduced by
allowances for expected credit losses.
When there is an unconditional entitlement, generally when invoices are
raised, the contract asset values are reclassified to trade receivables.
Xaar plc Annual Report and Financial Statements 2023 2. Principal accounting policies continued
Contract assets and contract liabilities continued
Contract liabilities comprise the Group’s obligation to transfer goods or
services to a customer for which the Group has received payment from
the customer in advance of revenue recognition. This situation arises
when the customer is invoiced in advance and the revenue recognised
over time is lower than the amounts invoiced to the customer.
Discontinued operations
A discontinued operation is a component of the Group that has been
disposed of and that represents a separate major line of business and
is part of a single coordinated plan to dispose of such a line of business.
The results of discontinued operations are presented separately in the
Consolidated Income Statement and are shown net of tax.
The cash flows from the discontinued operations are disclosed in
Note 12.
Share capital
Ordinary shares are classified as equity. Incremental costs directly
attributable to the issue of new shares are shown in share premium as
a deduction from the proceeds.
Own shares
No gain or loss is recognised in the Consolidated Income Statement
on the purchase, sale, issue or cancellation of the Group’s own
shares. Instead, any difference between the carrying amount and the
consideration paid is recognised in equity.
Share-based payments
Equity settled share-based payments are measured at fair value
(excluding the effect of non-market-based vesting conditions) at the
date of grant and is expensed on a straight-line basis over the vesting
period, based on the Group’s estimate of the number of shares that will
eventually vest.
Share-based payments where vesting is by reference to external, market
based performance criteria (such as growth in an external index) are
measured using the Monte Carlo simulation. Those which are subject
only to internal, non-market based performance criteria and/or service
conditions are measured using the Black-Scholes model.
For schemes that have non-market based performance conditions the
number of options expected to vest is recalculated at each reporting
date based on expectations of leavers prior to vesting. The number of
options expected to vest for schemes with internal performance criteria
is also adjusted based on expectations of performance against targets.
No adjustments are made for expected performance against external,
market based targets. Charges recognised in the Consolidated Income
Statement in respect of equity-settled share-based payments are
credited to the share-based payments reserve in equity.
Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the Company and the entities under its control (together
the ‘Group’). Control is achieved when the Company has power to control
the financial and operating policies of an entity either directly or indirectly
and the ability to use that power to affect the returns it receives from its
involvement with the entity.
Consolidation of a subsidiary begins when the Group obtains control over
the subsidiary and ceases when the Group loses control of the subsidiary.
Where necessary, adjustments are made to the financial statements of
subsidiaries to bring the accounting policies in line with those used by
the Group. All intra-group transactions, balances, equity, income and
expenses are eliminated on consolidation.
Strategic Report
Governance
Financial Statements
3. Changes in accounting policies and disclosures
Except where disclosed otherwise in this note, the accounting policies
adopted in the preparation of the consolidated financial statements are
consistent with those applied when preparing the consolidated financial
statements for the year ended 31 December 2022.
New accounting standards, amendments and interpretations adopted
by the Group
The following new standards and amendments to existing standards
became effective in January 2023 and have been adopted in the
consolidated financial statements for the first time during the year ended
31 December 2023.
These have been assessed as having no financial or disclosure impact on
these consolidated financial statements.
Effective for
accounting
periods beginning on
or after
Date issued
May 2017
1 January 2023
June 2020
1 January 2023
February 2021
1 January 2023
February 2021
1 January 2023
May 2021
1 January 2023
IFRS 17 Insurance Contracts
– New standard replacing IFRS
4. Sets out the principles for
the recognition, measurement,
presentation and disclosure of
insurance contracts.
Amendments to IFRS 17
Insurance Contracts
– Narrow scope amendment
to the transition requirements
creating a policy option in
relation to the presentation of
comparative information.
Amendments to IAS 1
Presentation of Financial
Statements
– Changes to the requirements
in respect of the disclosure of
accounting policies.
Amendments to IAS 8
Accounting Policies, Changes
in Accounting Estimates and
Errors
– Clarification of the definition of
an accounting estimate and the
circumstances that constitute a
change in estimate.
Amendments to IAS 12 Income
Taxes
– Clarification of the application
of the initial recognition
exemption to deferred tax assets
and liabilities that arise from a
single transaction.
89
Xaar plc Annual Report and Financial Statements 2023 Notes to the consolidated financial statements continued
for the year ended 31 December 2023
3. Changes in accounting policies and disclosures
continued
New standards, amendments and interpretations not yet adopted by
the Group
The following standards, amendments and interpretations were in issue,
but were not yet effective at the balance sheet date. These have not yet
been endorsed by the UK Endorsement Board. These standards have not
been applied when preparing the consolidated financial statements for
the year ended 31 December 2023.
It is not anticipated that the application of the below will have a significant
financial or disclosure impact in future years.
4. Key sources of estimation uncertainty and critical
accounting judgements
The preparation of financial statements requires management to
make judgements, estimates and assumptions about the application
of its accounting policies which affect the reported amounts of assets,
liabilities, revenue and expenses. Actual amounts and results may differ
from those estimates.
Judgements and estimates are evaluated regularly and are based on
historical experience and other factors, including expectations of future
events that are believed to be reasonable under the circumstances. Any
revisions to accounting estimates are recognised in the period in which
the estimate is revised.
Effective for
accounting
periods beginning on
or after
Date issued
October 2022
1 January 2024
September 2022
1 January 2024
Amendments to IAS 1
Presentation of Financial
Statements
– Clarification of the conditions
required to be met in order to
classify liabilities, notably debt
with covenant, as either current
or non-current.
Amendments to IFRS 16 Leases
– Specifies the requirements
that a seller-lessee uses in
measuring the lease liability
arising in a sale and leaseback
transaction.
a) Critical accounting judgements
The accounting judgements and assumptions (excluding those which
also involve estimates which are covered in the key sources of estimation
uncertainty section below) included in the consolidated financial
statements which have a material impact on amounts reported are as
detailed below.
Apportionment of technology based intangible assets
In June 2023 the Group entered into a series of transactions in the context
of the integration of the recently acquired FFEI Limited business. These
consisted of the disposal of the non-core Life Sciences activities and all
associated patents, software and technological know-how. On acquisition
of FFEI Limited in July 2021, the fair value of these patents was not
separately identified. Instead they were grouped with software and
technological know-how and recognised in aggregate as a ‘technology
based intangible asset’.
In order to retrospectively estimate the fair value separately attributable
to the patents, an apportionment methodology has needed to be adopted
– this is based on gross margins and estimates of replacement cost. This
methodology leverages the approach and data points adopted by external
valuation experts when determining the fair value of the technology based
intangible asset at the original acquisition date.
Capitalisation of development costs
The Group capitalises costs for product development projects. At 31
December 2023, the carrying amount of capitalised development costs
was £2,325,000 (2022: £1,879,000). Development costs can be capitalised
if and when they relate to a project that is technically feasible, there is the
intention and are adequate resources to be able to complete the project,
there are secure future economic benefits that can be realised in excess
of the development costs incurred and all such costs can be reliably
measured.
During a printhead product development programme many sub-systems
are evaluated in parallel and carry their own levels of risk. For most
internal projects, technical feasibility is typically only deemed to have
been achieved at the end of a project; as a result, internal costs of
development activities are typically not capitalised.
90
Xaar plc Annual Report and Financial Statements 2023 Strategic Report
Governance
Financial Statements
b) Key sources of estimation uncertainty continued
Impairment of goodwill and other intangible assets
Goodwill is deemed to have an indefinite useful economic life and is,
therefore, not amortised. As a result, the Group reviews goodwill for
impairment on at least an annual basis and more frequently where there
are indicators of potential impairment. The impairment review requires
the value-in-use of each CGU to be estimated, these calculations are
based on a number of assumptions. Areas of significant judgement
include:
L the estimation of future cash flows;
L the selection of risk and the estimation of risk adjustment factors to
be applied to cash flows;
L the selection of an appropriate discount rate to calculate present
value; and
L the selection of an appropriate terminal growth rate.
The assumptions used in the impairment test are detailed in Note 16. The
assumptions relating to future cash flows, estimated useful economic
lives and discount rates are based on forecasts and are, therefore,
inherently judgemental. Future events could result in the assumptions
used needing to be revised, changing the outcome of the impairment
test and resulting in impairment charges being recognised in the
Consolidated Income Statement.
Revenue recognition – estimating stage of completion of contracts
Revenue receivable under contracts with customers for the manufacture
of bespoke machinery and equipment as well as for the provision of
research and development consultancy services is generally required to
be recognised over a period of time in line with the stage of completion
of each contract with the customer. Such contractual arrangements are
isolated to the Product Print Systems and Digital Imaging segments.
In order to estimate the stage of completion of all such contracts,
an input methodology (based on total estimated labour hours and
total estimated costs to deliver the contract) is used. Each month an
assessment is undertaken on a contract-by-contract basis of work in
progress in respect of both the supply of individual components and
the labour hours allocated to each project. These costs incurred are
assessed against the total estimated costs to complete all contractual,
performance obligations under each contract.
This assessment enables both the stage of completion and profitability
of the contract to be estimated. This estimate is subject to a level of
uncertainty as it is not always possible to anticipate the impact of market
factors on the total project cost.
The aggregate transaction price allocated to partially satisfied and
unsatisfied performance obligations under open contracts with
customers as at the balance sheet date is set out in Note 6.
4. Key sources of estimation uncertainty and critical
accounting judgements continued
a) Critical accounting judgements continued
Timing of revenue recognition
The assessment used by the Group to determine the timing of revenue
recognition could have a significant impact on the amount and timing of
revenue recognised. Under certain contracts entered into by the Product
Print Systems and the Digital Imaging segments, revenue has been
recognised over time (rather than at a point in time) following judgements
taken as to the existence of alternative uses for the custom-built printing
solutions being sold and whether the Group has an enforceable right to
payment.
Firstly, the assessment of which customer projects include significant
customisation (therefore have no alternative use) is based on the extent
to which each machine is made to specific, detailed measurements at
the request of a customer and takes into consideration the commercial
reality underlying each contract. Whilst unlikely in reality, it remains
possible that custom-built machines may have an alternative use and
could potentially be sold to a different customer. Nevertheless, this
remote possibility is not deemed to change the determination of the
timing of revenue recognition because selling to an alternative customer
would necessitate modifications to the printhead/machinery, therefore,
significant additional cost.
Secondly, when determining the timing of revenue recognition an
assessment is made as to whether the contract contains an explicit
enforceable right to payment for performance completed to date, being
recovery of labour hours and other costs incurred in satisfying the
performance obligations plus a reasonable profit margin.
Where these two factors are assessed to be the case, the performance
obligation under the contract is deemed to be satisfied over time.
b) Key sources of estimation uncertainty
The accounting estimates included in the consolidated financial
statements which have a material impact on amounts reported are as
detailed below.
Fair value measurement of contingent consideration
An element of the consideration receivable for the Group’s divestment
in November 2021 of its remaining interest in the share capital of Xaar
3D Limited remains contingent on achievement of certain revenue
milestones and performance targets. Contingent consideration, resulting
from business combinations, is valued at fair value at the acquisition date
as part of the business combination. When the contingent consideration
meets the definition of a financial asset, it is subsequently remeasured
to fair value at each reporting date with any revaluation gains or losses
being recognised in the Consolidated Income Statement.
Fair value is estimated using the Monte Carlo simulation. Certain
inputs into this statistical model involve estimation; namely, the risk
adjusted discount rate and revenue volatility. These estimates are
subject to rapid changes in market conditions that cannot always be fully
anticipated. In light of the materiality of contingent consideration held
in the Consolidated Statement of Financial Position, this uncertainty is
considered to represent a key source of estimation uncertainty.
Contingent consideration with an estimated fair value of £10,863,000 was
recognised at the acquisition date and remeasured to £10,599,000 as at
the reporting date. Future developments may require further revisions
to the estimated fair value. The maximum consideration potentially
receivable at the acquisition date was £16,691,000. Full sensitivity to
changes in these estimates is provided in Note 30.
91
Xaar plc Annual Report and Financial Statements 2023 Notes to the consolidated financial statements continued
for the year ended 31 December 2023
5. Operating segments
The Group’s operating segments are determined based on the internal reporting to the Chief Operating Decision Maker (CODM). The CODM has been
determined to be the Chief Executive Officer, with support from the other members of the Board of Directors, being the individual who is primarily
responsible for the allocation of resources to segments and the assessment of performance of the segments.
The principal activities of the Group are presented in the following segments: ‘Printhead’, ‘Product Print Systems’, ‘Digital Imaging’ and ‘Ink Supply
Systems’. This presentation reflects how the Group’s operating performance is reviewed internally by management.
Income Statement
Year ended 31 December 2023
Note
Revenue – external
Revenue – intra segment
Adjusted operating (loss)/profit
Adjusting items
9
Operating (loss)/profit
Year ended 31 December 2022
Note
Revenue – external
Revenue – intra segment
Adjusted operating (loss)/profit
Adjusting items
9
Operating profit/(loss)
Printhead
£’000
Product Print
Systems
£’000
37,086
771
(2,867)
(1,037)
(3,904)
Printhead
£’000
39,042
1,399
(626)
457
(169)
22,063
–
3,195
(1,251)
1,944
Product Print
Systems
£’000
19,624
–
2,756
–
2,756
Digital
Imaging
£’000
8,748
–
2,207
(922)
1,285
Digital
Imaging
£’000
11,633
–
337
(479)
(142)
Ink Supply
Systems
£’000
Unallocated
£’000
2,717
423
822
(213)
609
–
(1,194)
–
(1,882)
(1,882)
Ink Supply
Systems
£’000
Unallocated
£’000
2,483
538
770
(228)
542
–
(1,937)
–
(1,748)
(1,748)
Total
£’000
70,614
–
3,357
(5,305)
(1,948)
Total
£’000
72,782
–
3,237
(1,998)
1,239
Statement of Financial Position
Assets are allocated to the segment which has responsibility for their control. No information is provided for segment liabilities as this measure is not
provided to the CODM.
As at 31 December 2023
Non-current assets
Current assets
Total assets
As at 31 December 2022
Non-current assets
Current assets
Total assets
Other segment information
Year ended 31 December 2023
Depreciation and amortisation
Share-based payment charge
Capital expenditure
Year ended 31 December 2022
Depreciation and amortisation
Impairment of property, plant and equipment
Share-based payment charge
Capital expenditure
92
Printhead
£’000
29,854
35,924
65,778
Printhead
£’000
34,925
32,164
67,089
Product
Print Systems
£’000
8,311
7,555
15,866
Digital
Imaging
£’000
5,743
6,069
11,812
Ink Supply
Systems
£’000
1,592
2,208
3,800
Product
Print Systems
£’000
Digital Imaging
£’000
Ink Supply
Systems
£’000
8,436
8,484
16,920
7,726
7,309
15,035
880
2,517
3,397
Printhead
£’000
Product Print
Systems
£’000
Digital
Imaging
£’000
Ink Supply
Systems
£’000
Unallocated
£’000
4,566
–
1,231
276
–
190
599
–
–
47
–
75
–
1,882
–
Printhead
£’000
Product Print
Systems
£’000
Digital
Imaging
£’000
Ink Supply
Systems
£’000
Unallocated
£’000
3,265
147
–
1,639
244
–
–
231
1,260
–
–
673
23
–
–
119
–
–
1,748
–
Total
£’000
45,500
51,756
97,256
Total
£’000
51,967
50,474
102,441
Total
£’000
5,488
1,882
1,496
Total
£’000
4,792
147
1,748
2,662
Xaar plc Annual Report and Financial Statements 2023 Strategic Report
Governance
Financial Statements
6. Revenue
The Group derives its revenue from the provision of goods and services both at a point in time and over time:
Revenue recognised at a point in time
Revenue recognised over time
2023
£’000
57,283
13,331
70,614
2022
£’000
67,318
5,464
72,782
The Group has no individual product or customer which contributes more than 10% of its revenues. Revenues from the top five customers represent
24% of the Group’s total revenues (2022: 29%).
Geographical information
Revenues are attributed to regions based primarily on customers’ location. The Group’s revenue from external customers and information about its
non-current segment assets (excluding deferred tax and financial asset at FVTPL) is set out below:
Revenue
Non-current assets
The Americas
EMEA
China
Rest of Asia Pacific
2023
£’000
30,404
28,035
7,440
4,735
70,614
2022
£’000
36,175
28,418
6,748
1,441
72,782
2023
£’000
7,927
28,504
163
–
36,594
Revenue by operating segment and type
The following table shows the disaggregation of revenue by major product/service lines for continuing operations.
Printhead
Product Print Systems
Digital Imaging
Ink Supply Systems
Product sales
Commissions & services
Licensee royalties
Total
2023
£’000
35,643
21,511
6,094
2,717
65,965
2022
£’000
38,318
19,056
8,809
2,483
68,666
2023
£’000
1,428
552
2,654
–
4,634
2022
£’000
675
568
2,824
–
4,067
2023
£’000
2022
£’000
15
–
–
–
15
49
–
–
–
49
2023
£’000
37,086
22,063
8,748
2,717
70,614
2022
£’000
8,450
31,353
213
–
40,016
2022
£’000
39,042
19,624
11,633
2,483
72,782
Partially completed contracts
The operating segments Product Print Systems and Digital Imaging have contracts with customers where the performance obligations are partially
unsatisfied at 31 December 2023. The transaction price allocated to partially satisfied performance obligations has been recognised in the year while
the transaction price allocated to partially unsatisfied performance obligations has not been recognised and is set out below.
Partially satisfied performance obligations
Partially unsatisfied performance obligations
2023
£’000
13,331
3,500
16,831
2022
£’000
5,464
6,437
11,901
£3,459,000 from partially unsatisfied performance conditions will be recognised during the year ending 31 December 2024 with the remaining £40,000
in future periods (2022: £6,310,000 in 2023, £127,000 in future periods).
93
Xaar plc Annual Report and Financial Statements 2023 Notes to the consolidated financial statements continued
for the year ended 31 December 2023
7. Operating (loss)/profit
Operating (loss)/profit for the year is stated after charging/(crediting):
Research and development expenses
UK R&D tax credits
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Amortisation of other intangible assets
Loss on disposal of property, plant and equipment
Costs of inventories recognised as an expense
Write down of inventories as an expense
Impairment losses on financial assets
Net loss/(gain) on foreign exchange
Auditor’s remuneration comprised the following:
Audit Services – Group and Company audit
Total audit fees
Audit related assurance services
– Interim review
Total assurance-related fees
Total auditor remuneration
Year ended
31 December
2023
£’000
Year ended
31 December
2022
£’000
Notes
9
18
19
17
18
22
5,642
(179)
2,914
1,084
1,487
24
39,692
2,040
99
508
6,718
(379)
2,654
1,071
1,067
80
41,849
335
46
(1,152)
Year ended
31 December
2023
£’000
Year ended
31 December
2022
£’000
547
547
–
–
547
695
695
84
84
779
The Group’s policy on the use of the auditor for non-audit services is set out in the Audit Committee Report on pages 55 to 58.
8. Other operating income
Profit on disposal of intangible assets
Settlements received
Government grants
Total other operating income
Year ended
31 December
2023
£’000
Year ended
31 December
2022
£’000
2,036
165
–
2,201
–
–
139
139
In June 2023 the Group entered into a series of transactions in the context of the integration of the recently acquired FFEI Limited business.
These consisted in part of the disposal of the non-core Life Sciences activities and all associated patents, software and technological know-how.
Consideration for the sale of these intangible assets totalled £2,312,000, generating a profit of £2,036,000 after deduction of the asset’s carrying value.
The consideration is receivable in instalments with £1,760,000 having been received as at 31 December 2023. The remaining £552,000 falls due in the
year ending 31 December 2024.
Settlements received constitute compensation under legal claims.
The Group, through the recently acquired FFEI Limited, previously received grants under the UK Research and Innovation ‘Future Leaders Fellowships’
scheme. Grants were issued with the aim of increasing the throughput, quality and validity of imaging data for biomedical artificial intelligence. No
such grant income has been recognised or received during the year ended 31 December 2023.
94
Xaar plc Annual Report and Financial Statements 2023 Strategic Report
Governance
Financial Statements
9. Adjusting items
The Directors believe that the ‘adjusted profit before tax’ and ‘adjusted earnings per share’ alternative performance measures presented provide a
consistent presentation of the Group’s underlying operational performance. They also present shareholders with a clearer insight of performance
metrics used by the Chief Operating Decision Maker and mitigate volatility, resulting from external factors that are not influenced by the Group.
These items are as defined below and have been presented consistently in both the current and prior year.
Share-based payment charges
Exchange (losses)/gains on intra-group transactions
Restructuring and transaction expenses
Research and development expenditure tax credits
Fair value losses on financial assets at FVTPL
Amortisation of intangible assets arising on business combinations
Affecting operating profit and profit before tax
Tax effect of adjusting items
Affecting tax
Total adjusting items after tax
(i)
(ii)
(iii)
(iv)
(v)
(vi)
Year ended
31 December
2023
£’000
Year ended
31 December
2022
£’000
(1,882)
(364)
(1,501)
179
(369)
(1,368)
(5,305)
311
311
(4,994)
(1,748)
811
(450)
379
(8)
(982)
(1,998)
100
100
(1,898)
(i) Comprises share-based payment charges of £1,937,000 (2022: £1,559,000) partially offset by an accrual release of £55,000 (2022: charge of
£189,000) for the associated employer’s social security contributions and are included in selling, general and administrative expenses.
(ii) Comprises exchange gains or losses as a result of intra-group transactions in the United States of America. Such costs are included in selling,
general and administrative expenses.
(iii) Comprises restructuring costs of £1,501,000 (2022: £256,000) and acquisition costs of £nil (2022: £194,000). Restructuring costs include provision
for redundancy costs of £761,000 (2022: £93,000) and £740,000 (2022: £163,000) of costs resulting from the Group’s operational efficiency program.
The prior year acquisition costs relate to the acquisition of Megnajet Limited – for full details see Note 33. Such costs are included in selling,
general and administrative expenses.
(iv) Comprises UK corporation tax relief relating to qualifying research and development expenditure. During the year, £179,000 was claimed of which
£15,000 related to XaarJet Limited and £164,000 related to FFEI Limited for the year ended 31 December 2023.
During year ended 31 December 2022, £379,000 was claimed of which £198,000 related to XaarJet Limited’s claim for the year ended 31 December
2020 and £219,000 related to FFEI Limited’s claim for the year ended 31 March 2021. These credits are included in research and development
expenses.
(v) Comprises the fair value movement on contingent consideration that arose on the Group’s divestment of Xaar 3D Limited. Such amounts are
included in selling, general and administrative expenses. Refer to Note 30 for further information.
(vi) The intangible assets consist of the software, patents and customer relationships recognised on acquisition of FFEI Limited in 2021 and the
customer relationships and brand value recognised on acquisition of Megnajet Limited in 2022. These costs are included in selling, general and
administrative expenses.
10. Employees and directors
The average monthly number of employees including Executive Directors was:
Research and development
Sales and marketing
Manufacturing and engineering
Administration
Their aggregate remuneration comprised:
Wages and salaries
Social security costs
Post retirement benefits
Share-based payment charges
Total staff costs
Year ended
31 December
2023
Number
Year ended
31 December
2022
Number
82
49
230
65
426
85
49
235
66
435
Year ended
31 December
2023
£’000
Year ended
31 December
2022
£’000
23,656
2,594
1,407
1,882
29,539
22,560
2,400
1,303
1,748
28,011
95
Xaar plc Annual Report and Financial Statements 2023 Notes to the consolidated financial statements continued
for the year ended 31 December 2023
10. Employees and directors continued
Directors’ remuneration
The remuneration of the Directors, including rewards under share schemes and other contractual benefits, is included in the Directors’ Remuneration
Report on pages 61 to 71.
Key management personnel
Key management personnel consist of the Group’s Board of Directors.
11. Finance income and costs
Interest receivable
Finance income
Interest expense on lease liabilities
Interest payable on bank borrowings
Interest expense on invoice securitisation/discounting
Finance costs
12. Discontinued operations
Year ended 31 December 2023
No discontinued operations occurred or were undertaken during the year.
Note
19
Year ended
31 December
2023
£’000
Year ended
31 December
2022
£’000
89
89
(261)
(179)
(122)
(562)
38
38
(242)
(178)
(33)
(453)
Year ended 31 December 2022
The Thin Film business which was discontinued in 2019 continued to incur costs in 2021 and 2022. This trailing activity mainly related to the unwinding
of supplier and customer liabilities and inventory for last time buy sales. All liabilities have now been settled and the Group maintains an amount of
inventory that is fully provided against as these products are not considered likely to be sold.
The results of Thin Film activities were as follows:
Year ended
31 December
2022
£’000
(159)
(159)
Year ended
31 December
2022
£’000
(150)
(150)
Year ended
31 December 2022
Pence per share
(0.2)p
(0.2)p
Operating expenses
Loss after income tax from discontinued operations
The net cash flows incurred by Thin Film were as follows:
Net cash outflow from operating activities
Net cash used from discontinued operations
The losses per share resulting from the Thin Film operations were as follows:
Basic loss per share from discontinued operations
Diluted loss per share from discontinued operations
96
Xaar plc Annual Report and Financial Statements 2023 13. Tax
Tax credit
Current tax
Current income tax credit – UK
Current income tax charge – overseas
Adjustment in respect of prior years
Deferred tax
Origination and reversal of temporary differences
Adjustment in respect of prior years
Total tax credit
Strategic Report
Governance
Financial Statements
Year ended
31 December
2023
£’000
Year ended
31 December
2022
£’000
(304)
291
(467)
(480)
252
(19)
233
(247)
(269)
87
96
(86)
(881)
–
(881)
(967)
The corporation tax credit in both the current and prior years is attributable to profit from continuing operations.
Reconciliation of tax credit
The tax credit for the year differs from the standard rate of corporation tax in the UK of 25% (2022: 19%). The differences are explained below:
(Loss)/profit before tax from continuing operations
Loss before tax from discontinued operations
(Loss)/profit before tax
Notional tax charge at the UK corporation tax rate of 23.5% (2022: 19.0%)
Effects of:
Tax effect of non-deductible expenses*
Tax effect of non-taxable income
Adjustments in respect of overseas tax rates
Utilisation of brought forward losses previously unrecognised
Adjustments in respect of prior years
Losses surrendered for tax credit
Foreign exchange on translation of balances
Total tax credit and effective tax rate
Year ended
31 December
2023
£’000
Year ended
31 December
2023
%
Year ended
31 December
2022
£’000
Year ended
31 December
2022
%
(2,421)
–
(2,421)
(569)
755
3
(22)
302
(486)
(390)
160
(247)
23.5%
(31.1)%
(0.1)%
0.9%
(12.5)%
20.0%
16.1%
(6.6)%
10.2%
824
(159)
665
126
219
2
10
(520)
82
(769)
(117)
(967)
19.0%
32.9%
0.2%
1.4%
(78.2)%
12.3%
(115.6)%
(17.5)%
(145.4)%
* Expenses not deductible for tax purposes predominantly consist of valuation and exchange rate movements on capital items and share-based payments charges.
Effective tax rate
The analysis of the Group’s effective tax rate between adjusted and total reported activities is as follows:
(Loss)/profit before tax
Tax charge/(credit)
Effective tax rate
Year ended 31 December 2023
Year ended 31 December 2022
Adjusted
£’000
Adjusting items
£’000
Total reported
£’000
Adjusted
£’000
Adjusting Iiems
£’000
Total reported
£’000
2,884
64
2.2%
(5,305)
(311)
5.9%
(2,421)
(247)
10.2%
2,663
(867)
(32.6)%
(1,998)
(100)
5.0%
665
(967)
(145.4)%
97
Xaar plc Annual Report and Financial Statements 2023 Notes to the consolidated financial statements continued
for the year ended 31 December 2023
13. Tax continued
Factors affecting the tax charge of future years
Future tax charges, therefore the Group’s effective tax rate, may be affected by factors such as acquisitions, disposals, restructuring and tax
regime reforms.
No planned UK corporation tax rate changes have been announced by the UK Government.
No planned US corporation tax rate changes have been announced by the US Government.
14. Earnings per share
Basic EPS and adjusted basic EPS are calculated by dividing the earnings attributable to the equity shareholders of the Company by the weighted
average number of shares outstanding during the year. Diluted EPS and adjusted diluted EPS are calculated on the same basis as basic EPS but with
a further adjustment to the weighted average number of shares outstanding to assume conversion of all potentially dilutive ordinary shares. Such
potentially dilutive ordinary shares comprise share options and awards granted to employees where the exercise price is less than the average market
price of the Company’s ordinary shares during the year and any unvested shares which have met, or are expected to meet, the performance conditions
at the end of the year.
Earnings
Profit attributable to equity shareholders of the parent – adjusted
Adjusting items
(Loss)/profit attributable to equity shareholders of the parent – reported
Number of shares
Weighted average number of ordinary shares in issue
Less: ordinary shares held by Xaar Trustee Limited and the Xaar Plc ESOP Trust
Weighted average number of ordinary shares for the purposes of basic EPS
Effect of potentially dilutive ordinary shares – share options and awards
Weighted average number of ordinary shares for the purposes of diluted EPS
Basic EPS
Diluted EPS
Adjusted basic EPS
Adjusted diluted EPS
Note
9
Year ended
31 December
2023
£’000
Year ended
31 December
2022
£’000
2,820
(4,994)
(2,174)
3,530
(1,898)
1,632
Number
Number
78,584,418
(335,556)
78,446,230
(896,966)
78,248,862
77,549,264
2,613,007
4,085,096
80,861,869
81,634,360
Pence per share
Pence per share
(2.8)p
(2.8)p
3.6p
3.5p
2.1p
2.0p
4.8p
4.5p
15. Dividends
No interim or final dividend was proposed or paid during either the current or preceding year.
The Board of Directors are mindful of the importance of dividends to its shareholders and intends to resume the payment of dividends as soon as
conditions allow.
98
Xaar plc Annual Report and Financial Statements 2023 16. Goodwill
Cost and carrying amount
Balance at 1 January
Additions*
Exchange differences
Balance at 31 December
Allocated to Product Print Systems CGU
Allocated to Digital Imaging CGU
Allocated to Ink Delivery Systems CGU
Total
Strategic Report
Governance
Financial Statements
31 December
2023
£’000
31 December
2022
£’000
7,163
–
(290)
6,873
5,523
689
661
6,873
5,894
661
608
7,163
5,813
689
661
7,163
* On 2 March 2022 Xaar Plc acquired Megnajet Limited and Technomation Limited. See Note 33 for further details.
The Group tests goodwill annually for impairment or more frequently if there are indications that goodwill might be impaired. Having performed
impairment testing, no impairment has been identified and therefore no impairment loss has been recognised during either the current or
preceding year.
Goodwill balances have been tested for impairment on the following basis:
L The recoverable amount of each CGU has been assessed by reference to its value-in-use, which has been estimated using cash flow forecasts.
The basis of these forecasts is the Board approved budget for the next year and management reviewed three-year plans, which have been
extrapolated to a five-year view for each CGU, taking into consideration any expected inflationary pressures. Margins are broadly consistent
with historic performance and revenues assumed take into account past experience and are reflective of a conservative view of the Group’s
core strategy;
L Discount rates used range between 16.1% and 14.2% (2022: 18.2 % and 14.5%) reflecting specialist, third-party advice. These rates have been
calculated taking into account geographies, size of businesses and industry risk factors;
L Long-term growth rates used are 2.0% (2022: 1.0%) for all UK based CGUs and 2.0% (2022: 1.4%) for those operating in the US (being Product
Print Systems only). These rates are based on OECD growth rates; and
L Before a conclusion on impairment is made, sensitivity analysis is carried out to assess the consequences of any reasonably possible change
to the above inputs.
Product Print Systems impairment review
Using a discount rate of 14.2% (2022: 14.5%) the recoverable amount calculated exceeds the carrying value of the CGU by £12.3 million
(2022: £10.1 million). Therefore, no impairment is required.
No reasonably possible changes to assumptions that could result in an impairment charge have been identified.
Digital Imaging impairment review
Using a discount rate of 15.9% (2022: 18.2%) the recoverable amount calculated exceeds the carrying value of the CGU by £6.9 million
(2022: £5.1 million). Therefore, no impairment is required.
No reasonably possible changes to assumptions that could result in an impairment charge have been identified.
Ink Delivery Systems impairment review
Using a discount rate of 16.1% (2022: 15.6%) the recoverable amount calculated exceeds the carrying value of the CGU by £1.5 million
(2022: £4.1 million). Therefore, no impairment is required.
No reasonably possible changes to assumptions that could result in an impairment charge have been identified.
99
Xaar plc Annual Report and Financial Statements 2023 Notes to the consolidated financial statements continued
for the year ended 31 December 2023
17. Other intangible assets
Cost
At 1 January 2022
Additions
Acquisitions*
Disposals in the year
Transfers
Exchange differences
At 31 December 2022
Additions
Disposals in the year
Transfers
Exchange differences
At 31 December 2023
Accumulated amortisation
At 1 January 2022
Charge in the year
Disposals in the year
Exchange differences
At 31 December 2022
Charge in the year
Disposals in the year
Exchange differences
At 31 December 2023
At 31 December 2022
At 31 December 2023
Acquisition based
Technology
based
£’000
Brands
£’000
Customer
relationships
£’000
Sub-total
£’000
Development
costs
£’000
Licence fees
£’000
Software
£’000
Total
£’000
3,044
–
1,990
–
–
–
5,034
–
(414)
–
–
4,620
254
715
–
–
969
1,087
(138)
–
1,918
4,065
2,702
–
–
281
–
–
–
281
–
–
–
–
281
–
23
–
–
23
28
–
–
51
1,204
–
422
–
–
–
1,626
–
–
–
–
4,248
–
2,693
–
–
–
6,941
–
(414)
–
–
38,687
1,657
–
–
222
–
40,566
446
–
–
–
532
1,100
–
–
–
–
1,632
–
–
–
–
3,483
33
–
(14)
–
12
3,514
6
(7)
4
(9)
46,950
2,790
2,693
(14)
222
12
52,653
452
(421)
4
(9)
1,626
6,527
41,012
1,632
3,508
52,679
100
245
–
–
345
253
–
–
598
354
983
–
–
1,337
1,368
(138)
–
38,687
–
–
–
38,687
–
–
–
2,567
38,687
532
38
–
–
570
77
–
–
647
3,334
46
(14)
12
3,378
42
(7)
(1)
42,907
1,067
(14)
12
43,972
1,487
(145)
(1)
3,412
45,313
258
230
1,281
1,028
5,604
3,960
1,879
2,325
1,062
985
136
96
8,681
7,366
* See Note 33 for details of the intangible assets arising on the acquisition of Megnajet Limited.
Development costs capitalised in the year of £446,000 (2022: £1,657,000) related to externally generated costs for the development of a new generation
printhead platform. These assets were in the course of construction at the reporting date and consequently were not amortised during the year.
Amortisation is recorded in selling, general and administrative expenses. The amortisation periods are in line with the accounting policy in Note 2.
At 31 December 2023 the Group had entered into contractual commitments of £112,000 (2022: £358,000) for the acquisition of intangible assets.
100
Xaar plc Annual Report and Financial Statements 2023 18. Property, plant and equipment
Cost
At 1 January 2022
Additions in the year
Acquisitions
Disposals in the year
Transfers
Exchange differences
At 31 December 2022
Additions in the year
Disposals in the year
Exchange differences
At 31 December 2023
Accumulated depreciation and impairment
At 1 January 2022
Charge in the year
Impairment
Disposals in the year
Exchange differences
At 31 December 2022
Charge in the year
Disposals in the year
Exchange differences
At 31 December 2023
At 31 December 2022
At 31 December 2023
Strategic Report
Governance
Financial Statements
Land &
buildings
£’000
Leasehold
improvements
£’000
Plant and
machinery
£’000
Furniture,
fittings and
equipment
£’000
Total
£’000
88,305
2,662
53
(1,186)
(222)
588
90,200
1,495
(3,063)
(311)
13,680
217
1
–
–
4
13,902
329
(25)
(4)
68,252
1,506
50
(931)
(222)
286
68,941
1,099
(3,033)
(169)
4,447
925
2
(255)
–
73
5,192
67
(5)
(28)
14,202
66,838
5,226
88,321
8,962
586
–
–
1
9,549
672
(25)
(3)
59,085
1,614
147
(833)
201
60,214
1,688
(3,009)
(131)
3,577
393
–
(254)
53
3,769
528
(5)
(16)
72,079
2,654
147
(1,087)
303
74,096
2,914
(3,039)
(179)
10,193
58,762
4,276
73,792
1,926
14
–
–
–
225
2,165
–
–
(110)
2,055
455
61
–
–
48
564
26
–
(29)
561
1,601
1,494
4,353
4,009
8,727
8,076
1,423
950
16,104
14,529
During the year ended 31 December 2022, an impairment charge of £147,000 was recognised in respect of machinery within the Printhead CGU that
had been decommissioned.
Included within Plant and Machinery is £415,000 (2022: £651,000) of assets under construction.
Capital commitments at 31 December 2023 amounted to £14,000 (2022: £923,000).
101
Xaar plc Annual Report and Financial Statements 2023 Notes to the consolidated financial statements continued
for the year ended 31 December 2023
19. Leases
The Group has lease contracts for various items of buildings, equipment and vehicles used in its operations. The Group’s obligations under leases are
secured by the lessor’s title to the leased assets.
Generally, the Group is restricted from assigning and subleasing the leased assets. The Group also has certain leases of machinery with lease terms
of 12 months or less and leases of office equipment with low value. The Group applies the ‘short-term lease’ and ‘lease of low-value assets’
recognition exemptions for these leases.
Right-of-use assets
Cost
At 1 January 2022
Additions
Exchange differences
At 31 December 2022
Additions
Exchange differences
At 31 December 2023
Depreciation
At 1 January 2022
Charge in the year
Disposals in the year
Exchange differences
At 31 December 2022
Charge in the year
Exchange differences
At 31 December 2023
At 31 December 2022
At 31 December 2023
Buildings
£’000
Equipment
£’000
Vehicles
£’000
Total
£’000
12,376
246
17
12,639
852
(21)
13,470
3,590
1,046
(14)
19
4,641
1,057
(11)
5,687
7,998
7,783
97
28
–
125
–
–
125
54
21
–
–
75
19
–
94
50
31
–
24
–
24
–
–
24
–
4
–
–
4
8
–
12
20
12
12,473
298
17
12,788
852
(21)
13,619
3,644
1,071
(14)
19
4,720
1,084
(11)
5,793
8,068
7,826
Lease deposits
A refundable deposit of £136,000 was paid under the lease for office premises in Sweden. This deposit would be due for repayment on expiry of the
lease, currently due to expire in 2026. This receivable is presented within non-current financial assets on the Consolidated Statement of Financial
Position.
Lease liabilities
Lease liabilities are analysed as follows:
Current
Non-current
The movement in lease liabilities is shown below:
At 1 January
Additions
Interest charge
Cash outflows
Exchange differences
At 31 December
102
31 December
2023
£’000
31 December
2022
£’000
1,800
6,898
8,698
1,032
7,800
8,832
31 December
2023
£’000
31 December
2022
£’000
8,832
827
261
(1,188)
(34)
8,698
9,191
323
242
(914)
(10)
8,832
Xaar plc Annual Report and Financial Statements 2023 Strategic Report
Governance
Financial Statements
19. Leases continued
Maturity analysis of lease liabilities:
Amounts falling due within
Less than one year
Between one and five years
Later than five years
Amounts recognised in the Consolidated Income Statement:
Depreciation
Interest charge
Short-term lease expenses
20. Deferred tax assets
At 1 January 2022
(Charge)/credit to income statement
Arising on acquisition
At 31 December 2022
(Charge)/credit to income statement
At 31 December 2023
Accelerated
capital
allowances
£’000
Share-based
payments
£’000
Acquired
intangible
assets
£’000
(171)
(206)
–
(377)
(150)
(527)
1
–
–
1
(1)
–
(925)
142
(170)
(953)
347
(606)
Losses
£’000
1,094
834
–
1,928
(789)
1,139
31 December
2023
£’000
31 December
2022
£’000
1,175
5,498
3,171
9,844
1,163
5,057
3,620
9,840
31 December
2023
£’000
31 December
2022
£’000
1,084
261
24
1,369
Other
temporary
differences
£’000
–
127
–
127
360
487
1,071
242
59
1,372
Total
£’000
(1)
897
(170)
726
(233)
493
Unrecognised deferred tax assets
The Group has unrecognised deferred tax assets totalling £30,236,000 (2022: £30,382,000). These consist of the following.
Trading losses
Deferred tax assets are recognised for tax loss carry forwards to the extent that the realisation of the related tax benefit through future taxable profits
is probable.
As at 31 December 2023, the Group had unused UK trading losses of £112,888,000 (2022: £119,925,000) available to offset against future UK taxable
profits of the same trade. These losses may be carried forward indefinitely.
Whilst the Board believes in the long-term potential and profitability of the Printhead business unit, forecast taxable losses over the immediately
foreseeable period mean that the UK trading losses will not be utilised in the short-term. The impact of climate change has been considered in the
forecast and valuation of future taxable profits and no impacts were noted. Therefore, no deferred tax asset has been recognised in respect of these.
As at 31 December 2023, the Group has an unrecognised deferred tax asset in respect of carried forward UK trading losses of £28,222,000 (2022:
£28,100,000).
Capital losses
As at 31 December 2023, the Group has unused capital losses of £1,131,000 (2022: £1,100,000) available for offset against future chargeable gains. No
deferred tax asset has been recognised in respect of these capital losses as it is not considered probable that there will be future chargeable gains
available. As a result, the Group has an unrecognised deferred tax asset in respect of carried forward UK capital losses of £283,000 (2022: £283,000).
These losses may be carried forward indefinitely.
Other temporary differences
As at 31 December 2023, the Group has £1,631,000 (2022: £1,999,000) of unrecognised deferred tax assets relating to decelerated capital allowances
(£851,000), share options (£660,000) and various, sundry trading items (£120,000). Deferred tax assets arising in these areas have only been recognised
to the extent that they offset deferred tax liabilities held by the Group.
103
Xaar plc Annual Report and Financial Statements 2023 Notes to the consolidated financial statements continued
for the year ended 31 December 2023
21. Inventories
Raw materials
Work in progress
Finished goods
31 December
2023
£’000
31 December
2022
£’000
12,426
4,317
14,292
31,035
11,804
3,516
13,828
29,148
Cost of inventories recognised as an expense and write down of inventories recognised as an expense (and which are included as part of Cost of Sales)
are set out in Note 7.
Gross inventory costs are £35,680,000 (2022: £39,973,000) partially offset by provisions of £4,645,000 (2022: £8,826,000). The provision included £nil
(2022: £6,143,000) in relation to discontinued operations; all inventories formerly used in discontinued operations are fully written down.
There is no specific impact on the valuation of the Group’s inventories arising from climate related matters. Estimates are based upon the most
reliable evidence available at the time the estimates are made.
22. Trade and other receivables
Amounts receivable for the sale of goods and services
Less: provision for expected credit losses
Other receivables
Prepayments
Ageing of trade receivables
Not past due
Past due
0 to 30 days
30 to 60 days
60 to 90 days
More than 90 days
Total receivables
Movement in provision for bad and doubtful debts
Balance at beginning of year
Impairment losses recognised in the income statement
Amounts written off
Exchange differences
31 December 2023
Provision
£’000
–
(7)
–
(1)
(107)
(115)
(115)
Gross
£’000
5,446
1,324
161
175
195
1,855
7,301
Net
£’000
5,446
1,317
161
174
88
1,740
7,186
31 December
2023
£’000
31 December
2022
£’000
7,301
(115)
7,186
367
1,249
8,802
31 December 2022
Provision
£’000
(3)
(1)
–
(8)
(113)
(122)
(125)
Gross
£’000
5,746
831
417
398
54
1,700
7,446
7,446
(125)
7,321
1,291
1,415
10,027
Net
£’000
5,743
830
417
390
(59)
1,578
7,321
31 December
2023
£’000
31 December
2022
£’000
(125)
(99)
108
1
(115)
(144)
(46)
69
(4)
(125)
The average credit period taken on sales of goods is 37 days (2022: 37 days). No interest is charged on the receivables for the period agreed in the
Requirements Contract or, if not specified or applicable, the first 30 days from the date of the invoice. Thereafter, the Group reserves the right to charge
interest at a daily rate from 1.5% to the greater of 4.0% per annum above the base rate of the Bank of England from time-to-time, or the maximum
rate of interest allowable under the Late Payment of Commercial Debts (Interest) Act 1998, on all sums outstanding until payment in full is received.
Trade receivables over 120 days are provided for based on estimated irrecoverable amounts from the sale of goods, determined by reference to past
default experience. The maximum exposure to credit risk is the carrying amount of the financial assets as disclosed in the liquidity section of Note 30.
104
Xaar plc Annual Report and Financial Statements 2023 Strategic Report
Governance
Financial Statements
22. Trade and other receivables continued
Before accepting any new customer, the Group uses an external credit scoring system to assess the potential customer’s credit quality and defines
credit limits by customer. Credit limits are reviewed at least once per year. Of the trade receivables balance at the end of the year, five (2022: seven)
customers each represented greater than 5% (2022: 5%) of the total receivables balance, totalling £3,268,000 (2022: £2,857,000). The total due from
these customers represents 5% (2022: 4%) of the Group’s revenue.
The Group has recognised a loss allowance of 1% for receivables aged 60 days or less, 5% for receivables aged between 61 and 90 days and 15% for 91
and 120 days. A loss allowance of 25% is applied for receivables aged over 120 days. The loss allowance calculation excludes receivables with a specific
provision. Most of the debt over 120 days has been provided in full and relates to a small number of customers where none of the debt is expected to be
recovered through normal trading. A provision is made against trade receivables until such time as the Group believes the amount to be irrecoverable
(such as the bankruptcy of a customer or emerging market risks, which would render the receivable irrecoverable), after which the trade receivable
balance is written off.
The Directors consider that the carrying amount of trade and other receivables approximates their fair value.
23. Contract assets and contract liabilities
Contract assets
Accrued income – general
Accrued income – ink commissions
Accrued income – royalties
Total current contract assets
31 December
2023
£’000
31 December
2022
£’000
2,156
–
–
2,156
1,440
46
14
1,500
Contract assets consist of a small number of contracts relating to the design and production of bespoke machinery or research and development
services. Since there is regular contact with all such customers for project management purposes, with robust milestone payments, there is no
generic risk in relation to the recoverability of contract assets. The only time when an expected credit loss provision would be recognised is where the
Group became aware of a customer being at risk of bankruptcy. The Directors are not aware of any such cases at 31 December 2023 (31 December
2022: none), therefore, no such provision is in place.
Contract liabilities
Deferred income
Customer deposits
Total current contract liabilities
31 December
2023
£’000
31 December
2022
£’000
(350)
(2,019)
(2,369)
(742)
(3,057)
(3,799)
Both deferred income and customer deposits represent consideration received for performance obligations not yet satisfied under contracts to
deliver products or services to customers. All deferred income and customer deposits are anticipated to be recognised in revenue within the next
financial year.
Of the £3,799,000 recognised as contract liabilities as at 31 December 2022, £2,147,000 was recognised in revenue during the year ended 31 December
2023.
24. Trade and other payables
Amounts failing due within one year
Trade payables
Accruals and other payables
31 December
2023
£’000
31 December
2022
£’000
(4,299)
(5,269)
(9,568)
(6,410)
(6,806)
(13,216)
At 31 December 2023, the Group had an average of 31 days of purchases (2022: 36 days) outstanding in trade payables and accruals. The Group has
financial risk management policies in place to ensure that all payables are paid within the credit timetable.
The Directors consider that the carrying amount of trade and other payables approximates to their fair value.
105
Xaar plc Annual Report and Financial Statements 2023 Notes to the consolidated financial statements continued
for the year ended 31 December 2023
25. Deferred consideration
Amounts failing due within one year
Deferred consideration
Amounts failing due after one year
Deferred consideration
31 December
2023
£’000
31 December
2022
£’000
(2,115)
(2,115)
–
–
(1,646)
(1,646)
(2,094)
(2,094)
Deferred consideration relates to the acquisition of FFEI Limited in 2021 and the acquisition of Megnajet Limited and Technomation Limited in 2022.
FFEI Limited
In July 2021, the Group acquired 100% of the issued share capital of FFEI Limited for total consideration of £8,762,000. This comprised of £3,907,000
initial cash consideration as well as deferred consideration measured at £4,855,000 (being the net present value of the total amount payable of
£5,200,000 discounted at 3.49%).
This deferred consideration is payable in equal instalments over the course of three years from the date of acquisition. The second instalment of
£1,733,000 was paid during the year ended 31 December 2023 (2022: £1,733,000). The final instalment of £1,733,000 is payable in 2024.
Megnajet Limited and Technomation Limited
Refer to Note 33 for full details of the transaction giving rise to the deferred consideration. The final instalments of £200,000 each for Megnajet Limited
and Technomation Limited respectively are payable in 2024.
26. Provisions
Current
Warranty provisions
Restructuring provisions
Non-current
Dilapidations
Movement in provisions during the year
At 1 January 2022
Provided for during the year
Provisions utilised
At 31 December 2022
Provided for during the year
Provisions utilised
Provisions released
At 31 December 2023
31 December
2023
£’000
31 December
2022
£’000
(476)
(496)
(972)
(300)
(300)
Warranty
provision
£’000
Restructuring
provision
£’000
Dilapidations
£’000
(253)
(225)
166
(312)
(373)
93
116
(476)
(11)
(93)
11
(93)
(645)
242
–
(496)
(300)
–
–
(300)
–
–
(312)
(93)
(405)
(300)
(300)
Total
£’000
(564)
(318)
177
(705)
(1,018)
335
116
(300)
(1,272)
The warranty and commercial agreements provision represents the Directors’ best estimate of the Group’s potential financial exposure from claims
received under product warranties or commercial sales agreements. The timing of the utilisation of this provision is uncertain.
Restructuring provisions in both the current and prior years consist of redundancy costs arising in the context of the Group’s streamlining of
operations. The provision is expected to be utilised during the year ending 31 December 2024.
The Group operates from a number of leasehold premises under full repairing leases. The dilapidation provision recognised reflects the estimated
costs of repairs that would be required to put these premises back into the state of repair required under these leases.
106
Xaar plc Annual Report and Financial Statements 2023 Strategic Report
Governance
Financial Statements
27. Borrowings
Amounts falling due within one year
Invoice discounting facility
31 December
2023
£’000
31 December
2022
£’000
(1,403)
(379)
Invoice discounting facility
The facility limit is £3 million (2022: £5 million) and operates on a rolling basis from the original inception date of September 2022. The facility can be
cancelled with a three-month notice period. There are no covenants attached to the invoice discounting facility.
Interest on the invoice discounting facility is charged daily when the facility is in an overdrawn position at a rate equivalent to the appropriate base rate
+1.75% pa. There is an annual service fee of £25,000 charged monthly, and there was a one-off arrangement fee to open the facility of £10,000.
No interest is payable on the unutilised element on the facility.
Eligible debts in GBP and USD denominations are legally assigned to the facility provider as, or soon after, they are raised. The facility makes available
90% of the debts to XaarJet Limited, subject to certain monetary funding limits and concentration percentages by customer. XaarJet Limited remain
responsible for collecting the debts as the collection agent for the finance provider and the remittances are made into an account held for the benefit of
the finance provider, the balance of which is held as a liability in XaarJet Limited.
No fair value adjustments are deemed necessary for these amounts; however, the receivables are subject to an allowance for doubtful debt.
The invoice discounting facility is secured with fixed rate charges over purchased debts and a floating charge over the assets of XaarJet Limited.
It remains the Group’s responsibility to appropriately insure, manage and recover the debts assigned under the arrangement, and the transferred
assets are subject to recourse at any time. As a result, the Group retains substantially all the risks/rewards of ownership and control of these assets.
Therefore, the Group continues to recognise the gross debts assigned under the facility as trade receivables.
Committed facilities
On 14 June 2023, Xaar Plc entered into a Revolving Credit Facility (RCF) agreement of £5 million, which matures on 14 June 2025, with an option to
extend for a further year, subject to lender approval. The agreement includes an accordion option of a further £2.5 million which can be requested at
any time during the facility term, subject to lender approval and relevant fees. The facility as at 31 December 2023 remained undrawn.
The facility bears a floating interest rate of the Sterling Overnight Indexed Average (SONIA) rate plus 2.35% margin. A non-utilisation fee of 40% of the
margin is chargeable on undrawn and uncancelled amounts.
The facility is secured by fixed and floating charges over the assets of the Group.
The Group is subject to financial covenants under the facility and has complied with these at all testing points.
107
Xaar plc Annual Report and Financial Statements 2023 Notes to the consolidated financial statements continued
for the year ended 31 December 2023
28. Share capital and reserves
Share capital
Authorised, issued and fully paid:
As at 1 January
Share issued during year (ordinary shares at 10.0p each)
Balance at 31 December
The Company has one class of ordinary shares which carries no right to fixed income.
31 December 2023
31 December 2022
£’000
Number
£’000
Number
7,844
79
7,923
78,446,230
783,775
79,230,005
7,844
–
7,844
78,446,230
–
78,446,230
Retained earnings
Comprises all net gains and losses as well as transactions with owners, such as dividend payments, that are not recognised elsewhere.
The share-based payments reserve, which represents the cumulative charges recognised in relation to equity-settled share option awards, are
presented in retained earnings.
Merger reserve
Comprises the premium on shares issued as consideration for Xaar Technology Limited where conditions for merger relief have been satisfied. These
are presented as part of other reserves in the Consolidated Statement of Changes in Equity.
Non-distributable reserve
Comprises of the dividend received by Xaar Plc from Xaar Digital Limited. These are presented as part of other reserves in the Consolidated Statement
of Changes in Equity.
Own shares reserve
Represents shares in the Company held by Xaar Trustee Limited and Xaar Plc ESOP Trust. These shares are held in order to satisfy options granted
under the Group’s share option schemes.
Own shares
31 December 2023
31 December 2022
Nominal value
£’000
Number
Nominal value
£’000
566
313,201
775
Number
398,660
Of the nominal value £20,000 (2022: £20,000) represents 91,250 ordinary shares held in trust by Xaar Trustee Limited. The remaining value £545,733
(2022: £755,000) represents 221,951 (2022: 307,410) shares in the Company purchased in the market at market value and held by the Xaar Plc ESOP
Trust.
During the year the ESOP Trust sold 85,459 (2022: 860,136) shares to satisfy options exercised and purchased nil (2022: 474,971) shares.
Translation reserve
Represents exchange differences on translation of overseas operations.
108
Xaar plc Annual Report and Financial Statements 2023 Strategic Report
Governance
Financial Statements
29. Notes to the cash flow statement
(Loss)/profit before tax from:
Continuing operations
Discontinued operations
(Loss)/profit before tax including discontinued operations
Adjustments for:
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Amortisation of intangible assets
Impairment of property, plant and equipment
Research and development expenditure credit
Net interest expense
Unrealised currency translation losses/(gains)
Payment of cash settled share-based payments
Share-based payment charge
Fair value loss on financial assets at FVTPL
Loss on disposal of property, plant and equipment
Gain on disposal of intangible assets
Increase in provisions
Operating cash flows before movements in working capital
Increase in inventories
Decrease/(increase) in receivables
Decrease in payables
Cash utilised from operations
Analysis of changes in net debt
Cash and cash
equivalents
£’000
Lease
liabilities*
£’000
Net cash as at 1 January 2022
Additions to leases
Additions to deferred consideration
Cash flow
Foreign exchange and other non-cash movements
Net debt as at 31 December 2022
Additions to leases
Cash flow
Foreign exchange and other non-cash movements
Net debt as at 31 December 2023
25,051
–
–
(17,054)
549
8,546
–
(1,227)
(184)
7,135
(9,191)
(323)
–
914
(232)
(8,832)
(827)
1,075
(114)
31 December
2023
£’000
31 December
2022
£’000
Notes
18
19
17
9
11
31
30
18
8
26
(2,421)
–
(2,421)
2,914
1,084
1,487
-
(179)
473
426
–
1,882
369
24
(2,036)
568
4,591
(2,057)
942
(5,013)
(1,537)
824
(159)
665
2,654
1,071
1,067
147
(379)
415
(797)
(249)
1,748
8
80
–
141
6,571
(9,462)
(812)
(1,914)
(5,617)
Borrowings*
consideration*
Deferred
£’000
–
–
–
(346)
(33)
(379)
–
(915)
(109)
£’000
(4,943)
–
(374)
1,733
(156)
(3,740)
–
1,746
(121)
Net cash/(debt)
£’000
10,917
(323)
(374)
(14,753)
128
(4,405)
(827)
679
(528)
(8,698)
(1,403)
(2,115)
(5,081)
Total financial liabilities included within net debt comprise of those items marked * and amount to £12,216,000 (2022: £12,951,000).
Liabilities arising from financing activities comprise the Group’s RCF, the invoice discounting facility (as set out in Note 27) and lease liabilities
(as set out in Note 19).
109
Xaar plc Annual Report and Financial Statements 2023 Notes to the consolidated financial statements continued
for the year ended 31 December 2023
30. Financial instruments
Financial instruments held at amortised cost
Trade and other receivables
Contract assets
Cash and cash equivalents
Non-current financial assets
Trade and other payables
Borrowings
Lease liabilities
Deferred consideration
Financial instruments held at fair value
Financial asset at FVTPL
Carrying and fair value
31 December
2023
£’000
31 December
2022
£’000
7,553
2,156
7,135
136
(9,568)
(1,403)
(8,698)
(2,115)
8,614
1,500
8,546
136
(13,216)
(379)
(8,832)
(3,740)
10,599
11,606
The Directors consider there to be no material difference between the carrying value and the fair value of the financial instruments classified as held
at amortised cost. For the items classified as held at fair value, the fair value is recognised in the Consolidated Statement of Financial Position as the
carrying amount.
Financial instruments held at fair value
The Group has one financial instrument held at fair value, the contingent consideration that arose on the Group’s divestment of its remaining interest
in Xaar 3D Limited during the year ended 31 December 2021.
In 2021, Xaar 3D Holdings Limited completed the divestment of its remaining interest in the share capital of Xaar 3D Limited. The Group received net
cash consideration of £9,272,000 as well as a potential entitlement to additional cash consideration of up to £10,863,000 calculated on an earn-out
basis at 3% of revenue per annum, with additional amounts becoming receivable on meeting revenue milestones.
Financial instruments that are measured at fair value are classified using a fair value hierarchy that reflects the source of inputs used in deriving the
fair value. The three classification levels are:
L Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
L Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or
indirectly (i.e. derived from prices); and
L Level 3: from valuation techniques that includes inputs for the asset or liability that are not based on observable market data (i.e. unobservable
market inputs).
The financial asset at FVTPL is deemed to be a Level 3 instrument. Fair value is determined using a Monte Carlo Simulation with significant
unobservable inputs being the 20% (2022: 20%) revenue volatility and the 10% (2022: 10%) risk-adjusted discount rate. Fair value movements are
recognised in the Consolidated Income Statement in selling, general and administrative expenses.
Sensitivity observations on these two inputs show that a +/-1,000bps change in revenue volatility would result in £237,000 decrease and £133,000
increase respectively and a +/- 100bps change in discount rate would result in £291,000 decrease and £262,000 increase in fair value respectively.
Movements in the year are as follows:
Balance at 1 January
Earn out received
Milestone consideration received
Fair value loss on financial assets at FVTPL*
Balance at 31 December
* Includes foreign exchange rate movements.
Current
Non-current
Balance at 31 December
110
31 December
2023
£’000
31 December
2022
£’000
11,606
(140)
(497)
(370)
10,599
2,322
8,277
10,599
11,850
(236)
–
(8)
11,606
517
11,089
11,606
Xaar plc Annual Report and Financial Statements 2023 Strategic Report
Governance
Financial Statements
30. Financial instruments continued
Capital risk management
The capital structure of the Group comprises of cash and cash equivalents, an Invoice Discounting Facility of £3 million which operates on a rolling
basis from the original inception date of September 2022, a Revolving Credit Facility of £5 million (with a £2.5 million additional accordion option) that
has a maturity date of June 2025 and equity attributable to the owners of the Company.
The Group maintains a capital structure with the following objectives:
L to protect the ability of the Group to continue as a going concern and maintain sufficient available resources as protection for unforeseen events;
L to provide flexibility of resource for strategic growth and investment where opportunities arise; and
L to provide reasonable returns to shareholders whilst maintaining a limited level of risk.
As part of achieving these objectives the Group identifies the principal financial risk exposures that are created by the Group’s financial instruments
and monitors them on a regular basis. These are considered to be foreign currency risk (a component of market risk), interest rate risk, credit risk and
liquidity risk.
The Group monitors capital using a gearing ratio, which is determined as the proportion of debt to equity. Debt is defined as all long-term and short-
term borrowings except for lease liabilities. Equity includes all capital and reserves of the Group attributable to the equity holders of the parent. The
Group’s policy for its existing business is to use debt where appropriate, whilst maintaining the gearing ratio at a level under 10%. The gearing ratio is
as follows:
Borrowings (excluding lease liabilities)
Equity
Gearing ratio
31 December
2023
£’000
31 December
2022
£’000
1,403
71,831
2%
379
71,769
1%
Foreign currency risk
This is the risk that a change in currency rates causes an adverse impact on the Group’s performance or financial position.
The Group receives approximately 41% of its revenues in US Dollars and 7% of its revenue in Euros, which are partially naturally hedged by supplies in
these currencies; the remainder requires conversion into Sterling in order to fund the remaining costs of the Group’s UK operations. The Group has
R&D operations in Sweden, therefore, also incurs costs and holds cash balances in Swedish Krona.
The Group is mainly exposed to foreign currency risk resulting from transactions in US Dollars, Euros and Swedish Krona. The following table
demonstrates the Group’s sensitivity to a 10% increase and decrease in the Sterling exchange rate against the relevant foreign currencies on the
Group’s profit before tax and equity (due to changes in the fair value of monetary assets and liabilities). 10% represents management’s assessment of
the reasonably possible movement in exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items
and adjusts their translation at the period end for a 10% change in foreign currency rates. The sensitivity analysis includes intercompany balances
within the Group where the denomination of the balance is in a currency other than the functional currency of the debtor or the creditor. A positive
number below indicates an increase in profit or equity
31 December 2023
Equity
31 December 2022
Equity
Euro currency impact
US Dollar currency impact
Swedish Krona currency impact
+10%
£’000
(54)
(63)
–10%
£’000
66
77
+10%
£’000
–10%
£’000
(1,436)
1,756
(1,489)
1,819
+10%
£’000
35
46
–10%
£’000
(43)
(57)
Interest rate risk
The Group’s borrowing facilities, including its invoice discounting facilities, are linked to the Bank of England base rate for GBP values, and the Federal
Bank base rate for USD values. An increase in these benchmarks would impact the Group’s cost of borrowing which, in turn, would affect the Group’s
financial performance. Based on the invoice discounting facility balance at the year end, if interest rates had fluctuated +/- 100bps, and all other
variables were held constant, the Group’s loss for the year ended 31 December 2023 would decrease by £14,000 or increase by £14,000 respectively.
There would be no effect on equity reserves.
2023
2022
Fixed rate
financial
liabilities
£’000
Floating rate
financial
liabilities
£’000
Interest free
financial
liabilities
£’000
(8,698)
–
–
–
–
(1,403)
–
–
–
–
(9,568)
(2,115)
Total
£’000
(8,698)
(1,403)
(9,568)
(2,115)
Fixed rate
financial
liabilities
£’000
Floating rate
financial
liabilities
£’000
Interest free
financial
liabilities
£’000
(8,832)
–
–
(379)
–
–
–
–
(13,216)
(3,740)
Lease liabilities
Invoice discounting facility
Trade and other payables
Deferred consideration
Total
£’000
(8,832)
(379)
(13,216)
(3,740)
111
Xaar plc Annual Report and Financial Statements 2023 Notes to the consolidated financial statements continued
for the year ended 31 December 2023
30. Financial instruments continued
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group has
adopted a policy of only dealing with creditworthy counterparties and carrying out supplier due diligence as a means of mitigating the risk of financial
loss from defaults.
Trade receivables consist of a large number of customers, spread across different industries and geographical areas. Ongoing credit evaluation is
performed on the financial condition of accounts receivable.
The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by international credit rating agencies.
Additional credit insurance coverage is maintained where appropriate against agreed credit terms with customers.
Further information on the Group’s trade receivable ageing and impairment can be found in Note 22.
Liquidity risk
This is the risk that the Group will have insufficient funds available in the right currency to settle its obligations as they fall due.
The Group aims to mitigate liquidity risk by managing cash generation by its operations and applying cash collection targets throughout the Group.
Investment is carefully controlled, with authorisation limits operating up to Group Board level and cash payback periods applied as part of the
investment appraisal process. In this way the Group aims to maintain a good credit rating to facilitate fund raising.
In order to mitigate the Group’s liquidity risks, the Group can choose to fund significant fixed asset purchases by finance leases repayable over a period
of three to five years dependent on the individual asset being financed and interest-bearing loans.
In its funding strategy, the Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of overdrafts, bank
loans, finance leases and hire purchase contracts. The Group manages liquidity risk by maintaining adequate reserves and banking facilities by
continuously monitoring cash flows and matching the maturity profiles of financial assets and liabilities.
On 14 June 2023, Xaar PLC entered into a Revolving Credit Facility (RCF) agreement of £5 million, which matures on 14 June 2025, with an option to
extend for a further year, subject to lender approval. The agreement includes an accordion option of a further £2.5 million which can be requested at
any time during the facility period, subject to lender approval and relevant fees.
The Group’s policy is to invest any excess cash used in managing liquidity in financial instruments exposed to insignificant risk of changes in market
value, being placed on interest-bearing deposit with maturities no more than 12 months.
The maturity profile of financial liabilities shown below represents the Group’s gross expected contractual cash flows.
Less than
one year
£’000
Between one
and five years
£’000
Over
five years
£’000
9,568
1,403
1,175
2,115
–
–
5,498
–
–
–
3,171
–
Less than
one year
£’000
Between one
and five years
£’000
Over
five years
£’000
13,216
379
1,163
1,733
–
–
5,057
2,133
–
–
3,620
–
Total
£’000
9,568
1,403
9,844
2,115
Total
£’000
13,216
379
9,840
3,866
31 December 2023
Trade and other payables
Invoice discounting facility
Lease liabilities
Deferred consideration
31 December 2022
Trade and other payables
Invoice discounting facility
Lease liabilities
Deferred consideration
112
Xaar plc Annual Report and Financial Statements 2023 Strategic Report
Governance
Financial Statements
31. Share-based payments
Equity-settled share-based payments expense
Cash-settled share-based payments expense
Year ended
31 December
2023
£’000
Year ended
31 December
2022
£’000
1,882
–
1,882
1,748
249
1,997
The Group operates a number of share schemes for certain employees of the Group as follows:
L 2017 Share save scheme (SAYE);
L 2007 Long term incentive plan (LTIP);
L 2017 Long term incentive plan (LTIP); and
L 2020 Deferred bonus plan (DBP).
Options or conditional share grants under each scheme have been aggregated.
Vesting periods range from one to four years. Where options remain unexercised after a period of ten years from the date of grant, or forty-two months
in the case of the share save scheme, they expire and are no longer exercisable. Options are forfeited if the employee leaves the Group before they vest,
save where the employee is deemed to be a ‘good leaver’, in which case options awarded are pro-rated to the leaving date.
Save as You Earn Scheme
Year ended 31 December 2023
Year ended 31 December 2022
Outstanding at beginning of year
Granted
Forfeited
Exercised
Outstanding at end of year
Number of options exercisable at end of year
Weighted average fair value of options granted
Weighted average share price at date of exercise
Weighted average remaining contractual life
The inputs into the Black-Scholes model are as follows:
Date of grant
Share price at grant
Exercise price
Expected volatility
Risk-free rate
Contractual life
Weighted
average
exercise price
Pence
116
140
127
121
134
95
Number
1,905,927
494,309
(173,039)
(679,695)
1,547,502
84,948
Weighted
average
exercise price
Pence
88
140
149
49
116
34
Number
2,351,911
508,529
(105,267)
(849,246)
1,905,927
145,893
Year ended
31 December
2023
Year ended
31 December
2022
81.1p
91.1p
2 years
109.8p
205.0p
2 years
Year ended
31 December
2023
Year ended
31 December
2022
9 November 2023
170p
140p
52.8%
4.3%
3.31 years
3 November 2022
181p
140p
78.0%
3.1%
3.25 years
Expected volatility was determined by calculating the historical volatility of the Group’s share price over periods ranging from the previous one to three
years. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise
restrictions and behavioural considerations.
113
Xaar plc Annual Report and Financial Statements 2023 Notes to the consolidated financial statements continued
for the year ended 31 December 2023
31. Share-based payments continued
Long-Term Incentive Plans
Outstanding at beginning of year
Granted
Forfeited
Modification to cash-settled*
Exercised
Outstanding at end of year
Number of options exercisable at end of year
Year ended
31 December
2023
Number
Year ended
31 December
2022
Number
3,009,441
1,160,074
(408,271)
–
(178,969)
2,379,665
941,240
(190,043)
(84,700)
(36,721)
3,582,275
3,009,441
283,849
60,929
* During the year ended 31 December 2022, the Remuneration Committee used its discretion to settle 84,700 awards that vested in the year in cash at their market value as at 31 March
2022 of £249,000.
Weighted average fair value of options granted
Weighted average share price at date of exercise
Weighted average remaining contractual life
Year ended
31 December
2023
Year ended
31 December
2022
162.2p
172.6p
7 years
234.4p
203.0p
8 years
Fair values of awards with non-market performance conditions (earnings per share) are calculated using the Black-Scholes model. Fair values of
awards with market-based performance conditions (total shareholder return) are calculated using the Monte Carlo model. The inputs into the models
for awards granted in the current and prior years were as follows:
Date of grant
Share price at grant
Exercise price
Expected volatility
Risk-free rate
Contractual life
Year ended 31 December 2023
Year ended 31 December 2022
1 November 2023
168p
nil
n/a
n/a
1.17 years
9 May 2023
186p
nil
56.8%
3.8%
2.91 years
6 April 2022 14 December 2022
185p
nil
53.2%
3.4%
2.31 years
270p
nil
83.1%
1.5%
2.98 years
All LTIP awards are subject to achievement of the performance conditions and can be exercised up to ten years after the grant date. Save as permitted
in the LTIP rules, awards lapse on an employee leaving the Group.
Deferred bonus plan
Under the Group’s deferred bonus plan, the Executive Directors are awarded an annual bonus, 70% is achieved in cash and 30% is awarded in the form
of share options for which there is a compulsory holding period of two years and a requirement for continued employment before these fully vest to the
employees (deferred shares).
Year ended
31 December
2023
Number
Year ended
31 December
2022
Number
52,731
45,456
–
–
98,187
–
34,098
18,633
–
–
52,731
–
Outstanding at beginning of year
Granted
Forfeited
Exercised
Outstanding at end of year
Number of options exercisable at end of year
114
Xaar plc Annual Report and Financial Statements 2023 Strategic Report
Governance
Financial Statements
31. Share-based payments continued
Deferred bonus plan continued
Weighted average fair value of options granted
Weighted average remaining contractual life
Year ended
31 December
2023
186.0p
9 years
Year ended
31 December
2022
270.0p
9 years
Fair values of the awards with non-market performance conditions (earnings per share) are calculated using the Black-Scholes model. The inputs into
the models for awards granted in the current and prior years were as follows:
Date of grant
Share price at grant
Exercise price
Expected volatility
Risk-free rate
Contractual life
Year ended
31 December
2023
9 May 2023
186p
nil
n/a
n/a
1.91 years
Year ended
31 December
2022
6 April 2022
270p
nil
n/a
n/a
1.25 years
32. Retirement benefit schemes
The UK based employees of the Group’s UK companies have the option to be members of a defined contribution pension scheme managed by a
third-party pension provider. For each employee who is a member of the scheme, the Group contributes a fixed percentage of each employee’s
salary to the scheme. The only obligation of the Group with respect to this scheme is to make the specified contributions.
In addition to the above, the Group complies with all retirement benefit scheme requirements in all other jurisdictions in which it has employees.
The total cost charged to the Consolidated Income Statement in respect of all of the Group’s retirement benefit schemes during the year was
£1,407,000 (2022: £1,303,000). As at 31 December 2023 contributions of £129,000 (2022: £165,000) due in respect of the current reporting period had
not been paid over to the schemes.
33. Business combinations
Year ended 31 December 2023
No business combinations were undertaken during the year.
Year ended 31 December 2022
Megnajet Limited and Technomation Limited
On 2 March 2022, the Group completed the acquisition of 100% of the share capital of both Megnajet Limited and Technomation Limited. The
companies trade together under the name of Megnajet and design and manufacture industrial ink management and supply systems for digital inkjet.
The acquisitions contributed to the Group’s growth strategy by creating a more integrated inkjet solution whereby customers can access more of the
printing ecosystem (such as ink supply systems and the electronics) from the Group.
Technomation Limited was acquired for its intellectual property and know-how. The acquisition was accounted for as an asset acquisition using the
optional concentration test within IFRS 3. The purchase price of £3,038,000, which included £187,000 of deferred consideration, was allocated to its
intellectual property amounting £1,990,000 (being the purchase price net of a £517,000 cash balance and a £531,000 balance relating to working capital
consisting of £816,000 receivables, £130,000 corporation tax creditor and £155,000 VAT creditor).
115
Xaar plc Annual Report and Financial Statements 2023 Notes to the consolidated financial statements continued
for the year ended 31 December 2023
33. Business combinations continued
Year ended 31 December 2022 continued
Megnajet Limited and Technomation Limited continued
Megnajet Limited was accounted for as a business combination. The details of the net assets acquired, goodwill and purchase consideration were
as follows:
Intangible assets
Property, plant and equipment
Inventory
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Corporate tax payable
Deferred tax liabilities
Total identifiable net assets acquired
Goodwill
Total consideration
Satisfied by:
Cash
Deferred consideration
Total consideration
Net cash outflow on acquisition
Cash consideration
Less: cash and cash equivalents acquired
Total consideration transferred
Final fair value
£’000
703
53
503
487
1,067
(821)
(27)
(170)
1,795
661
2,456
£’000
2,269
187
2,456
£’000
(2,269)
1,067
(1,202)
The fair value of acquired trade receivables was £250,000, being the gross contractual amount of trade receivables due of £252,000, less a loss
allowance of £2,000 recognised on acquisition. Other receivables consisted of VAT amounting to £237,000.
The goodwill of £661,000 arising from the acquisition represents those characteristics and valuable attributes of the acquired business that cannot
be quantified and attributed to separately identifiable assets in accounting terms. This goodwill is underpinned by a number of elements, the most
significant of which is the well established, skilled and assembled workforce and potential new customer relationships and contracts which enable
the acquired business to accelerate the development of ink management and supply systems through the shared expertise, technologies and
resources across the Group. None of the goodwill recognised is expected to be deductible for corporation tax purposes.
The fair value of the intangible assets attributed to the acquisition of the business consisted of customer relationships £422,000 and brand £281,000.
These have an estimated useful life of eight and ten years respectively.
In addition to the cash consideration, deferred consideration shall be paid in the second anniversary from the date of acquisition. The undiscounted
amount of all future payments that the Group is required to make under the deferred consideration arrangement is £200,000.
Acquisition related costs are included in selling, general and administrative expenses in the Consolidated Income Statement for the year ended
31 December 2022 and amounted to £193,000.
The acquired business contributed revenues of £2,483,000 and net profit of £758,000 to the Group for the period from 2 March 2022 to 31 December
2022. If the acquisition had occurred on 1 January 2022, consolidated pro -forma revenue and profit for the year ended 31 December 2022 would
have been £3,038,000 and £832,000 respectively. These amounts have been calculated using the acquired subsidiary’s results and adjusting them for
differences in the accounting policies between the Group and the acquired subsidiary. They also include the additional depreciation and amortisation
that would have been charged assuming the fair value adjustments to property, plant and equipment and intangible assets, together with the
consequential tax effects, had been applied from 1 January 2022.
116
Xaar plc Annual Report and Financial Statements 2023 Strategic Report
Governance
Financial Statements
34. Related party transactions
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed
in this note.
With the exception of transactions with Directors, there were no other transactions during either the current or preceding year with related parties who
are not members of the Group.
Details of the remuneration of the Directors is set out in the Directors’ Remuneration Report on pages 61 to 71.
35. Subsidiary undertakings exempt from audit
The following subsidiaries, which are incorporated in England and Wales, are exempt from the requirements relating to the audit of individual financial
statements for the year ended 31 December 2023 by virtue of Section 479A of the Companies Act 2006.
Company name
XaarJet Limited
XaarJet (Overseas) Limited
Xaar Technology Limited
Xaar Digital Limited
Xaar Trustee Limited
Xaar 3D Holdings Limited
FFEI Limited
Megnajet Limited
Technomation Limited
36. Subsequent events
The Directors believe that there are no such events to report.
37. Ultimate controlling party
The Directors believe that there is no ultimate controlling party of the Group.
Company
registration
number
03375961
04312431
02469592
03588121
03025096
11425540
03244452
07160441
05262517
117
Xaar plc Annual Report and Financial Statements 2023 Company balance sheet
as at 31 December 2023
31 December
2023
£’000
31 December
2022
£’000
Notes
Non-current assets
Right-of-use asset
Investments in subsidiaries
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Deferred consideration
Provisions
Lease liabilities
Net current liabilities
Non-current liabilities
Lease liabilities
Provisions
Deferred consideration
Total liabilities
Net assets
Equity
Share capital
Share premium
Own shares
Other reserves
Retained earnings
C5
C6
C7
C8
C9
C10
C5
C5
C10
C9
C12
Total equity attributable to the equity shareholders of the parent
Xaar Plc reported a profit for the financial year ended 31 December 2023 of £1,534,000 (2022: loss of £3,588,000).
826
99,909
942
99,282
100,735
100,224
4,909
791
5,700
1,619
517
2,136
106,435
102,360
(17,867)
(2,115)
(4)
(89)
(20,075)
(14,375)
(600)
(250)
–
(850)
(20,925)
85,510
7,923
29,950
(546)
38,630
9,553
85,510
(16,147)
(1,646)
–
(113)
(17,906)
(15,770)
(689)
(250)
(2,094)
(3,033)
(20,939)
81,421
7,844
29,427
(755)
38,003
6,902
81,421
The financial statements of Xaar Plc, registered number 3320972, were approved and authorised for issue by the Board of Directors on 25 March 2024.
They were signed on its behalf by:
John Mills
Chief Executive Officer
Ian Tichias
Chief Financial Officer
118
Xaar plc Annual Report and Financial Statements 2023 Strategic Report
Governance
Financial Statements
Company statement of changes in equity
for the year ended 31 December 2023
Balance as at 1 January 2022
Loss for the year
Total comprehensive expense
Own shares disposed of on exercise of share options
Purchase of own shares
Capital contributions for share-based payments
Share-based payments
Share
capital
£’000
7,844
–
–
–
–
–
–
Share
premium
account
£’000
29,427
–
–
–
–
–
–
Own
shares
reserve
£’000
(1,903)
–
–
2,148
(1,000)
–
–
Other
reserves
£’000
37,108
–
–
–
–
895
–
Balance as at 31 December 2022
7,844
29,427
(755)
38,003
Profit for the year
Total comprehensive income
Issue of ordinary shares
Own shares disposed of on exercise of share options
Capital contributions for share-based payments
Share-based payments
–
–
79
–
–
–
–
–
523
–
–
–
–
–
–
209
–
–
–
–
–
–
627
–
Balance as at 31 December 2023
7,923
29,950
(546)
38,630
Retained
earnings
£’000
11,816
(3,588)
(3,588)
(1,989)
–
–
663
6,902
1,534
1,534
–
(194)
–
1,311
9,553
Total
equity
£’000
84,292
(3,588)
(3,588)
159
(1,000)
895
663
81,421
1,534
1,534
602
15
627
1,311
85,510
119
Xaar plc Annual Report and Financial Statements 2023 Notes to the Company financial statements
for the year ended 31 December 2023
C1. Presentation of the financial statements
Basis of preparation
The Company meets the definition of a qualifying entity under FRS 100 (Financial Reporting Standard 100) issued by the Financial Reporting Council.
Accordingly, the financial statements have been prepared in accordance with FRS 101 ‘Reduced Disclosure Framework’ and in accordance with the
Companies Act 2006 as applicable to companies using FRS 101.
The financial statements have been prepared under the historical cost convention and on the going concern basis.
The financial statements are prepared in Sterling which is both the functional and presentational currency of the Company. All values are rounded
to the nearest thousand pounds (£’000) except where otherwise indicated.
Disclosure exemptions adopted
As permitted by FRS 101, the Company has taken advantage of the disclosure exemptions available under that standard in relation to:
L Business combinations;
L Share-based payments;
L Financial instruments;
L Fair value measurement;
L Presentation of a Statement of Cash Flows;
L Key management and related party transactions, including those with subsidiaries;
L impairment testing related disclosures; and
L The effects of newly issued but not yet effective IFRSs.
The basis for the above exemptions is that equivalent disclosures are included in the consolidated financial statements which incorporate the financial
position and performance of the Company.
C2. Principal accounting policies
The adopted principal accounting policies, which have been applied consistently with the year ended 31 December 2022, are the same as those set out
in Note 2 to the consolidated financial statements. Those noted below are in addition to those disclosed in the consolidated financial statements and
are company specific.
Investments in subsidiaries
Investments in subsidiaries are stated at cost plus capital contributions arising from intercompany share-based payments arrangements and after
provision for impairment, where required.
Where consideration for an investment in a subsidiary consists of the issue of shares qualifying for merger relief, the cost of investment is measured
by reference to the nominal value of the shares issued, excluding any premium. The transactions subject to merger relief arose before the adoption of
FRS 101. Grandfathering relief has been used, therefore, these legacy amounts were not modified on adoption of FRS 101.
Share-based payments
The share-based payments reserve represents the cumulative charge recognised in relation to share option awards granted. Only the portion of the
charge that relates to awards granted to employees of the Company is recognised in the Income Statement. The remainder of the costs (i.e. those
related to employees of other entities in the Group) are recorded as an increase to the cost of investments in subsidiaries and are presented as a
capital contribution.
Dividend income
Income is recognised when the Company’s irrevocable right to receive the payment is established, it is probable that the economic benefits will flow
to the Company and the amount can be measured reliably. This is generally when shareholders approve the dividend.
C3. Income statement
In accordance with the exemption permitted by Section 408 of the Companies Act 2006, the Company has elected to present neither a Company Income
Statement nor a Company Statement of Comprehensive Income.
The Auditor’s fee for the audit of the Company’s financial statements was £39,000 (2022: £20,000).
120
Xaar plc Annual Report and Financial Statements 2023 Strategic Report
Governance
Financial Statements
C4. Employees and directors
The average monthly number of employees (including Executive Directors) was:
Research and development
Sales and marketing
Manufacturing and engineering
Administration
Their aggregate remuneration comprised:
Wages and salaries
Social security costs
Post retirement benefits
Share-based payments charge
Total staff costs
Year ended
31 December
2023
Number
Year ended
31 December
2022
Number
1
3
3
21
28
1
3
5
19
27
Year ended
31 December
2023
£’000
Year ended
31 December
2022
£’000
3,629
441
143
1,257
5,470
3,277
421
138
852
4,688
Directors’ remuneration
The remuneration of the Directors, including rewards under share schemes and other contractual benefits, is included in the Directors’ Remuneration
Report on pages 61 to 71.
Share-based payments
The Company operates various share-based payments schemes; having adopted the disclosure exemptions available, full details of these schemes
are included in Note 31 to the consolidated financial statements and are not duplicated here.
The share-based payments expense recognised by the Company is calculated by reference to the number of options awarded to the employees
of the Company, not those of the entire Group.
Post retirement benefits
The UK based employees of the Company’s UK companies have the option to be members of a defined contribution pension scheme managed
by a third-party pension provider. For each employee who is a member of the scheme, the Company contributes a fixed percentage of each
employee’s salary to the scheme. The only obligation of the Company with respect to this scheme is to make the specified contributions.
The total cost charged to the Income Statement in respect of all of the Company’s retirement benefit schemes during the year was £143,000 (2022:
£138,000).
As at 31 December 2023 contributions of £24,000 (2022: £22,000) due in respect of the current reporting period had not been paid over to the scheme.
121
Xaar plc Annual Report and Financial Statements 2023
Notes to the Company financial statements continued
for the year ended 31 December 2023
C5. Leases
Right-of-use assets
Cost
At 1 January 2022, 31 December 2022 and 31 December 2023
Depreciation
At 1 January 2022
Charge in the year
At 31 December 2022
Charge in the year
At 31 December 2023
At 31 December 2022
At 31 December 2023
Lease liabilities
Lease liabilities are analysed as follows:
Current
Non-current
The movement in lease liabilities is shown below:
At 1 January
Interest charge
Cash outflows
At 31 December
Maturity analysis of lease liabilities:
Amounts falling due within
Less than one year
Between one and five years
Later than five years
122
Buildings
£’000
1,166
107
117
224
116
340
942
826
31 December
2023
£’000
31 December
2022
£’000
89
600
689
113
689
802
31 December
2023
£’000
31 December
2022
£’000
802
15
(128)
689
862
17
(77)
802
31 December
2023
£’000
31 December
2022
£’000
102
532
108
742
103
400
342
845
Xaar plc Annual Report and Financial Statements 2023 C5. Leases continued
Lease liabilities continued
Amounts recognised in the Income Statement:
Depreciation
Interest charges
C6. Investments in subsidiaries
At 1 January
Additions
Capital contributions arising from share-based payments
At 31 December
Strategic Report
Governance
Financial Statements
31 December
2023
£’000
31 December
2022
£’000
116
15
131
117
17
134
31 December
2023
£’000
31 December
2022
£’000
99,282
–
627
99,909
92,893
5,494
895
99,282
Additions
Comprise of the acquisitions of 100% of the issued share capital of Megnajet Limited for total consideration of £2,456,000 and Technomation Limited
for consideration of £3,038,000.
For further details of these transactions and the subsidiaries acquired, refer to Note 33 to the consolidated financial statements.
Impairment
Impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate that the carrying value may not be
recoverable and a potential impairment may be required. Impairment reviews have been performed for all investments in subsidiaries as at
31 December 2023 and 2022.
The Directors believe that the carrying values of investments in subsidiaries are at least equal to their recoverable amounts. Therefore, no
impairments have been recognised in either the current or previous years.
Capital contributions arising from share-based payments
These amounts represent the fair value of equity-settled share options awarded to employees of subsidiary undertakings.
123
Xaar plc Annual Report and Financial Statements 2023 Notes to the Company financial statements continued
for the year ended 31 December 2023
C6. Investments in subsidiaries continued
Subsidiaries
The subsidiary undertakings of the Company are listed below. All subsidiaries are directly owned by the Company except where indicated otherwise.
Name
Xaar Technology
Limited
Country of
incorporation
England & Wales
XaarJet Limited
England & Wales
Address of registered office
Principal activity
Cambridge Research Park,
Waterbeach, Cambridge, CB25 9PE
Research and development
Issued and fully paid up
share capital
4,445,322 ordinary
£1 shares
Proportion
of ordinary
share capital
held by the
Company
100%
Cambridge Research Park,
Waterbeach, Cambridge, CB25 9PE
Manufacturing, research
and development and sales
and marketing
2 ordinary £1 shares
100%
XaarJet (Overseas)
Limited
England & Wales
Cambridge Research Park,
Waterbeach, Cambridge, CB25 9PE
Sales and marketing
1 ordinary £1 share
100%
Xaar Trustee Limited1 England & Wales
Cambridge Research Park,
Waterbeach, Cambridge, CB25 9PE
Trustee
2 ordinary £1 shares
100%
Xaar Digital Limited
England & Wales
Cambridge Research Park,
Waterbeach, Cambridge, CB25 9PE
Treasury
100 ordinary £1 share
100%
Xaar 3D Holdings
Limited
England & Wales
Cambridge Research Park,
Waterbeach, Cambridge, CB25 9PE
Holding company
1,100 ordinary shares
of £0.01 each
Xaar US Holdings Inc. USA
1000 Post and Paddock, Suite 405,
Grand Prairie, Texas 75050, USA
Holding company
10,000 shares of
common stock
US$1 each
Pad Print Machinery
of Vermont Inc.2
USA
201 Tennis Way, East Dorset, VT
05253, USA
Manufacturing, sales
and marketing
200 shares of common
stock US$1 each
Xaar Americas Inc.2
USA
1000 Post and Paddock
Suite 405, Grand Prairie, Texas
75050, USA
Sales and marketing
Xaar Inkjet Technology
(Shenzhen) Company
Limited
China
Room 409, Floor 4, Building 13,
Fuhai Industrial Zone,
Fuzhou Avenue, Shenzhen, China
Sales and marketing
10,000 shares of
common stock
US$1 each
30 ordinary shares
of £10,000 each
FFEI Limited
England & Wales
Cambridge Research Park,
Waterbeach, Cambridge, CB25 9PE
Manufacturing, sales
and marketing
100,000 ordinary
£1 shares
100%
100%
100%
100%
100%
100%
Megnajet Limited
England & Wales
Cambridge Research Park,
Waterbeach, Cambridge, CB25 9PE
Manufacturing, sales
and marketing
1 ordinary £1 share
100%
Technomation
Limited
England & Wales
Cambridge Research Park,
Waterbeach, Cambridge, CB25 9PE
Research and development
100 ordinary £1 shares
100%
1. Xaar Trustee Limited shares are held by Xaar Technology Limited.
2. Xaar Americas Inc and Pad Print Machinery of Vermont Inc. shares are held by Xaar US Holdings Inc.
124
Xaar plc Annual Report and Financial Statements 2023 Strategic Report
Governance
Financial Statements
C7. Trade and other receivables
Amounts owed by subsidiary undertakings
Other receivables
Prepayments
31 December
2023
£’000
31 December
2022
£’000
4,728
–
181
4,909
1,384
27
208
1,619
Amounts owed by subsidiary undertakings are unsecured, interest free and repayable on demand.
During the year ended 31 December 2023 the Company made no provision for doubtful debts relating to amounts owed by subsidiary undertakings
(2022: £nil).
C8. Trade and other payables
Amounts falling due within one year
Amounts owed to subsidiary undertakings
Other payables and accruals
Amounts owed to subsidiary undertakings are unsecured, interest free and payable on demand.
C9. Deferred consideration
Amounts falling due within one year
Deferred consideration
Amounts falling due after one year
Deferred consideration
31 December
2023
£’000
31 December
2022
£’000
(16,456)
(1,411)
(17,867)
(13,869)
(2,278)
(16,147)
31 December
2023
£’000
31 December
2022
£’000
(2,115)
(2,115)
(1,646)
(1,646)
–
(2,094)
For full details of the deferred consideration balances and the transactions that gave rise to them, refer to Note 25 to the consolidated financial
statements.
C10. Provisions
Current
Restructuring
Non-current
Dilapidations
31 December
2023
£’000
31 December
2022
£’000
(4)
(4)
–
–
31 December
2023
£’000
31 December
2022
£’000
(250)
(250)
(250)
(250)
The restructuring provision recognised in the year consists of redundancy costs. The provision is expected to be utilised during the year ending 31
December 2024.
The Company operates from leasehold premises under a full repairing lease. The dilapidation provision recognised reflects the estimated costs of
repairs that would be required to put these premises back into the state of repair required under the lease.
125
Xaar plc Annual Report and Financial Statements 2023 Notes to the Company financial statements continued
for the year ended 31 December 2023
C11. Deferred tax
Unrecognised deferred tax assets
The Company has unrecognised deferred tax assets totalling £1,308,000 (2022: £1,879,000). These consist of the following.
Trading losses
Deferred tax assets are recognised for tax loss carry forwards to the extent that the realisation of the related tax benefit through future taxable profits
is probable.
As at 31 December 2023, the Company had unused UK trading losses of £2,002,000 (2022: £5,119,000) available to offset against future UK taxable
profits of the same trade. These losses may be carried forward indefinitely. A deferred tax asset in respect of these losses is only recognised to the
extent that there are offsetting deferred tax liabilities. Therefore, no deferred tax asset has been recognised (2022: £nil).
As at 31 December 2023, the Company has an unrecognised deferred tax asset in respect of carried forward UK trading losses of £501,000 (2022:
£1,280,000).
Capital losses
As at 31 December 2023, the Company has unused capital losses of £1,131,000 (2022: £1,100,000) available for offset against future chargeable gains.
No deferred tax asset has been recognised in respect of these capital losses as it is not considered probable that there will be future chargeable
gains available. As a result, the Company has an unrecognised deferred tax asset in respect of carried forward UK capital losses of £283,000 (2022:
£283,000).
These losses may be carried forward indefinitely.
Other temporary differences
As at 31 December 2023, the Company has £524,000 (2022: £316,000) of unrecognised deferred tax assets relating to timing differences in respect of
the recognition of the cost of share options granted and the future tax relief available on the exercise of these options.
C12. Share capital and reserves
Details of the Company’s share capital, share premium and own shares reserves are included in Note 28 to the consolidated financial statements.
Other reserves
Comprises the non-distributable portion of the dividend received by Xaar Plc from Xaar Digital Limited, the profit from the sale of a subsidiary and
the capital contribution relating to share options granted to employees of subsidiaries.
C13. Dividends
No interim or final dividend was proposed or paid during either the current or preceding year. The Board of Directors are mindful of the importance of
dividends to its shareholders and intends to resume the payment of dividends as soon as conditions allow.
C14. Related party transactions
Transactions with subsidiaries
The Company has taken advantage of the available exemption from disclosing related party transactions with other entities within the Group.
Transactions with Directors
Details of the remuneration of the Directors is set out in the Directors’ Remuneration Report on pages 61 to 71.
126
Xaar plc Annual Report and Financial Statements 2023
Investor information
Five year record
Summarised consolidated results
Results
Revenue
Gross profit
Adjusted profit/(loss) before tax
Adjusted profit/(loss) after tax
Adjusted diluted earnings per share
Total reported (loss)/profit before tax
Basic (loss)/earnings per share
Diluted (loss)/earnings per share
Assets employed
Cash and cash equivalents2
Strategic Report
Governance
Financial Statements
2023
Continuing
operations
£’000
2022
Continuing
operations
£’000
2021
Continuing
operations
£’000
2020
Continuing
operations
£’000
2019
Continuing
operations 1
£’000
70,614
26,891
2,871
2,807
3.5p
(2,187)
(2.8)p
(2.8)p
72,782
28,644
2,822
3,689
4.5p
824
2.3p
2.2p
59,254
20,190
(571)
(779)
(1.0)p
994
0.9p
0.9p
47,984
13,010
(3,911)
(4,038)
(5.2p)
(4,322)
(5.7)p
(5.7)p
49,379
12,290
(7,952)
(11,632)
(15.1)p
(10,937)
(19.4)p
(19.4)p
7,135
8,546
25,051
18,117
25,322
1 On adoption of IFRS 15 & 16, the Group used the modified approach, therefore, the impact on prior years was adjusted through retained earnings and comparatives were not restated.
2 Cash and cash equivalents consist of cash at bank and in hand as well as treasury deposits.
127
Xaar plc Annual Report and Financial Statements 2023 Notice of the Annual General Meeting
Notice is hereby given that the twenty-seventh Annual General Meeting (AGM) of Xaar plc (the
‘Company’) will be held at Xaar plc, 1 Hurricane Close, Ermine Business Park, Huntingdon,
Cambridgeshire, PE29 6XX on Wednesday 29 May 2024 at 9:30am for the following purposes:
Ordinary business
To consider and, if thought fit, pass the following Resolutions which will be proposed as Ordinary Resolutions:
1. THAT the Company’s annual financial statements for the financial year ended 31 December 2023, together with the Directors’ report and auditor’s
report on those financial statements, be received and adopted.
2. THAT PKF Littlejohn LLP be appointed as the Company’s auditors to hold office from the conclusion of this meeting until the conclusion of the next
general meeting of the Company at which financial statements are laid.
3. THAT the Directors be authorised to determine the remuneration of the auditors.
4. THAT Richard Amos be re-elected as Director of the Company.
5. THAT John Mills be re-elected as a Director of the Company.
6. THAT Andrew Herbert be re-elected as a Director of the Company.
7. THAT Alison Littley be re-elected as a Director of the Company.
8. THAT Ian Tichias be re-elected as a Director of the Company.
9. THAT Jacqueline Sutton be re-elected as a Director of the Company.
10. THAT Stuart Widdowson be re-elected as a Director of the Company.
Special business
To consider and, if thought fit, pass the following Resolutions which will be proposed in the case of Resolutions 11 and 12 as Ordinary Resolutions and
in the case of Resolutions 13 to 14 as Special Resolutions:
11. THAT the Directors’ Remuneration report for the year ended 31 December 2023 be approved.
12. THAT, in substitution for all existing authorities, pursuant to and in accordance with section 551 of the Companies Act 2006 (‘Act’) the Directors of
the Company be hereby generally and unconditionally authorised to exercise all powers of the Company to allot shares in the Company, or grant
rights to subscribe for, or convert any security into, shares in the Company (‘Rights’):
(i) up to an aggregate nominal value of £2,642,008.50 (being the nominal value of approximately one-third of the issued share capital of the
Company); and
(ii) up to an aggregate nominal value of £5,284,017.10 (being the nominal value of approximately two-thirds of the issued share capital of the
Company) (such amount to be reduced by the nominal amount of any shares allotted or Rights granted under paragraph (i)) in connection with
an offer by way of a rights issue (as defined in the Listing Rules issued by the Financial Conduct Authority pursuant to Part VI of the Financial
Services and Markets Act 2000) or other pre-emptive offer to:
(a) the holders of ordinary shares of 10 pence each in the capital of the Company (‘ordinary shares’) in proportion (as nearly as may be
practicable) to the respective numbers of ordinary shares held by them; and
(b) holders of other equity securities, as required by the rights of those securities or, subject to such rights, as the Directors otherwise
consider necessary,
and so that, in each case, the Directors of the Company may impose any limits or restrictions and make any arrangements which they consider
necessary or appropriate to deal with treasury shares, fractional entitlements, record dates, legal, regulatory or practical problems in, or under the
laws of, any territory or the requirements of any regulatory body or stock exchange or any other matter.
The authority granted by this Resolution will expire at the conclusion of the Company’s next Annual General Meeting after the passing of this
Resolution or, if earlier, at the close of business on the date 15 months after the passing of this Resolution, save that the Company may at any time
before such expiry make any offer(s) or enter into any agreement(s) which would or might require shares to be allotted or Rights to be granted after
such expiry and the Directors may allot shares or grant Rights in pursuance of any such offer(s) or agreement(s) as if the authority conferred hereby
had not expired. This Resolution revokes and replaces all unexercised authorities previously granted to the Directors to allot shares or grant Rights but
without prejudice to any allotment of shares or grant of Rights already made, offered or agreed to be made pursuant to such authorities.
128
Xaar plc Annual Report and Financial Statements 2023 Strategic Report
Governance
Financial Statements
Special business continued
13. THAT, subject to the passing of Resolution 12, the Directors of the Company be authorised to allot equity securities (as defined in section 560 of the
Act) for cash under the authority conferred by that Resolution and/or to sell ordinary shares held by the Company as treasury shares as if section
561 of the Act did not apply to any such allotment or sale, provided that such authority shall be limited to:
(a) the allotment of equity securities in connection with an offer of equity securities (but, in the case of the authority granted under paragraph (ii)
of Resolution 12, by way of a rights issue only):
(I) to the holders of ordinary shares in proportion (as nearly as may be practicable) to their respective holdings; and
(II) to holders of other equity securities as required by the Rights of those securities or as the Directors otherwise consider necessary,
but subject to such exclusions or other arrangements as the Directors of the Company may deem necessary or expedient in relation to treasury
shares, fractional entitlements, record dates, legal or practical problems in or under the laws of any territory or the requirements of any regulatory
body or stock exchange; and
(b) the allotment of equity securities or sale of treasury shares (otherwise than pursuant to paragraph (a) of this Resolution) to any person
up to an aggregate nominal amount of £792,602.50.
The authority granted by this Resolution will expire at the conclusion of the Company’s next Annual General Meeting after the passing of this
Resolution or, if earlier, at the close of business on the date 15 months after the passing of this Resolution, save that the Company may, before
such expiry make offers or agreements which would or might require equity securities to be allotted (or treasury shares to be sold) after the
authority expires and the Directors of the Company may allot equity securities (or sell treasury shares) in pursuance of any such offer or agreement
as if the authority had not expired.
14. THAT the Company be generally and unconditionally authorised for the purposes of section 701 of the Act to make one or more market purchases
(within the meaning of section 693(4) of the Act) of ordinary shares provided that:
(a) the maximum aggregate number of ordinary shares authorised to be purchased is 7,926,025 (representing 10% of the issued ordinary share
capital);
(b) the minimum price (excluding expenses) which may be paid for an ordinary share is the par value of the shares;
(c) the maximum price (excluding expenses) which may be paid for an ordinary share is an amount equal to the higher of (i) 105% of the average
of the middle market quotations for an ordinary share as derived from the London Stock Exchange Daily Official List for the five business days
immediately preceding the day on which that ordinary share is purchased, and (ii) the higher of the price of the last independent trade and the
highest current independent bid on the trading venue where the purchase is carried out;
(d) this authority shall expire at the conclusion of the next Annual General Meeting of the Company, or, if earlier, at the close of business on the
date which is 15 months after the passing of this Resolution unless renewed, revoked or varied before that time; and
(e) the Company may make a contract to purchase ordinary shares under this authority before the expiry of the authority which will or may be
executed wholly or partly after the expiry of the authority, and may make a purchase of ordinary shares in pursuance of any such contract.
By order of the Board
Julia Crane
Company Secretary
25 March 2024
129
Xaar plc Annual Report and Financial Statements 2023 Notice of the Annual General Meeting continued
Notes
1. A member entitled to attend the meeting may appoint one or more proxies to exercise all or any of the member’s rights, to speak at the
meeting. A proxy need not be a member of the Company. If a member appoints more than one proxy, each proxy must be appointed to exercise
the rights attached to a different share or shares held by the member. If a member wishes to appoint one or more proxies they may do so at
www.signalshares.com. If not already registered you will need your Investor Code to do so, this can be found on your share certificate. If you need
help with voting online, or require a paper proxy form, please contact our registrar, Link Group by email at shareholderenquiries@linkgroup.
co.uk, or you may call Link on 0371 664 0391. Calls are charged at the standard geographic rate and will vary by provider. Calls outside the United
Kingdom will be charged at the applicable international rate. Link Group are open between 09:00 – 17:30, Monday to Friday excluding public
holidays in England and Wales.
2. To be effective, the proxy vote must be submitted at www.signalshares.com so as to have been received by the Company’s registrars not less than
48 hours (excluding weekends and public holidays) before the time appointed for the meeting or any adjournment of it. Any power of attorney or
other authority under which the proxy is submitted must be returned to the Company’s registrars, Link Group, PXS 1, Central Square, 29 Wellington
Street, Leeds LS1 4DL. If a paper form of proxy is requested from the registrar, it should be completed and returned to Link Group, PXS 1, Central
Square, 29 Wellington Street, Leeds LS1 4DL to be received not less than 48 hours before the time of the meeting (excluding weekends and public
holidays).
3. Any person to whom this notice is sent who is a person nominated under section 146 of the Companies Act 2006 to enjoy information rights
(a ‘Nominated Person’) may, under an agreement between him/her and the shareholder by whom he/she was nominated, have a right to be
appointed (or to have someone else appointed) as a proxy for the Annual General Meeting. If a Nominated Person has no such proxy appointment
right or does not wish to exercise it, he/she may, under any such agreement, have a right to give instructions to the shareholder as to the exercise
of voting rights. The statement of the rights of shareholders in relation to the appointment of proxies in paragraphs 1 and 2 above does not apply to
Nominated Persons. The rights described in these paragraphs can only be exercised by shareholders of the Company.
4.
In accordance with Regulation 41 of the Uncertified Securities Regulations 2001, the Company specifies that only those members entered on the
register of members of the Company as at close of business on 24 May 2024 (or in the event the meeting is adjourned, on the register of members
48 hours before the time of any adjourned meeting) shall be entitled to vote at the meeting in respect of the number of shares registered in their
name at that time. Changes to entries on the register of members after close of business on 24 May 2024 (or in the event the meeting is adjourned,
on the register of members less than 48 hours before the time of any adjourned meeting) shall be disregarded in determining the rights of any
person to vote at the meeting.
5. Copies of Directors’ service agreements, the terms of appointment of Non-Executive Directors, and the register of Directors’ interests kept by the
Company under section 808 of the Companies Act 2006 will be available 15 minutes prior to the commencement of the meeting and will remain
open and accessible during the continuance of the meeting to any person attending the meeting.
6. Biographical details of all Directors offering themselves for re-appointment are set out on page 39 of the Annual Report and Accounts.
7. Shareholders should note that it is possible that, pursuant to requests made by shareholders of the Company under section 527 of the Companies
Act 2006, the Company may be required to publish on a website a statement setting out any matter relating to: (i) the audit of the Company’s
accounts (including the auditor’s report and the conduct of the audit) that are to be laid before the Annual General Meeting; or (ii) any circumstance
connected with an auditor of the Company ceasing to hold office since the previous meeting at which annual accounts and reports were laid in
accordance with section 437 of the Companies Act 2006. The Company may not require the shareholders requesting any such website publication
to pay its expenses in complying with sections 527 or 528 of the Companies Act 2006. Where the Company is required to place a statement on a
website under section 527 of the Companies Act 2006, it must forward the statement to the Company’s auditor not later than the time when it
makes the statement available on the website. The business which may be dealt with at the Annual General Meeting includes any statement that
the Company has been required under section 527 of the Companies Act 2006 to publish on a website.
8. A corporation that is a shareholder can appoint one or more corporate representatives who may exercise, on its behalf, all its powers as a
shareholder provided that they do not do so in relation to the same shares.
9. CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so by using the
procedures described in the CREST Manual. CREST Personal Members or other CREST sponsored members, and those CREST members who
have appointed a service provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate
action on their behalf.
10. In order for a proxy appointment or instruction made using the CREST service to be valid, the appropriate CREST message (a ‘CREST Proxy
Instruction’) must be properly authenticated in accordance with Euroclear UK & International Ltd’s (‘Euroclear’) specifications, and must
contain the information required for such instruction, as described in the CREST Manual. The message, regardless of whether it constitutes
the appointment of a proxy or is an amendment to the instruction given to a previously appointed proxy must, in order to be valid, be transmitted
so as to be received by the issuer’s agent (ID RA10) by 9:30am on 24 May 2024. For this purpose, the time of receipt will be taken to be the time
(as determined by the timestamp applied to the message by the CREST Application Host) from which the issuer’s agent is able to retrieve the
message by enquiry to CREST in the manner prescribed by CREST. After this time any change of instructions to proxies appointed through CREST
should be communicated to the appointee through other means.
11. CREST members and, where applicable, their CREST sponsors, or voting service providers should note that Euroclear does not make available
special procedures in CREST for any particular message. Normal system timings and limitations will, therefore, apply in relation to the input of
CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal member,
or sponsored member, or has appointed a voting service provider, to procure that his CREST sponsor or voting service provider(s) take(s)) such
action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time. In this connection,
CREST members and, where applicable, their CREST sponsors or voting system providers are referred, in particular, to those sections of the
CREST Manual concerning practical limitations of the CREST system and timings.
12. The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities
Regulations 2001 (as amended).
13. As at 7am on 25 March 2024, the Company’s issued share capital comprised 79,260,257 ordinary shares of 10 pence each. Each ordinary share
carries the right to one vote at a general meeting of the Company, and, therefore, the total number of voting rights in the Company as at 7am on 25
March 2024 is 79,260,257.
130
Xaar plc Annual Report and Financial Statements 2023 Strategic Report
Governance
Financial Statements
Notes continued
14. Any member has the right to ask questions. The Company must answer any such question relating to the business being dealt with at the meeting
but no such answer need be given if: (a) to do so would interfere unduly with the preparation for the meeting or involve the disclosure of confidential
information; (b) the answer has already been given on a website in the form of an answer to a question; or (c) it is undesirable in the interests of the
Company or the good order of the meeting that the question be answered.
15. You may vote your shares electronically at www.signalshares.com. On the home page, search ‘Xaar plc’ and then log in or register, using your
Investor Code. To vote, click on the ‘Vote Online Now’ button.
16. A copy of this Notice, and other information required by section 311A of the Companies Act 2006, can be found at www.xaar.com.
17. Under section 338 of the Companies Act 2006, shareholders meeting the threshold requirements set out in that section, may, subject to conditions,
require the Company to give to shareholders notice of a resolution which may properly be moved and is intended to be moved at that meeting.
18. Under section 338A of the Companies Act 2006, shareholders meeting the threshold requirements set out in that section may, subject to
conditions, require the Company to include in the business to be dealt with at the meeting a matter (other than a proposed resolution) which may
properly be included in the business.
19. Unless otherwise indicated on the Form of Proxy, CREST or any other electronic voting instruction, the proxy will vote as they think fit or, at their
discretion, withhold from voting.
20. LinkVote+ is a free app for smartphone and tablet provided by Link Group (the Company’s registrar). It offers shareholders the option to submit a
proxy appointment quickly and easily online, as well as real-time access to their shareholding records. The app is available to download on both the
Apple App Store and Google Play.
131
Xaar plc Annual Report and Financial Statements 2023 Company information and advisors
Registered office
3950 Cambridge Research Park
Waterbeach
Cambridge CB25 9PE
Registered number
3320972
Company Secretary
Julia Crane
Brokers
Investec
30 Gresham Street
London, EC2V 7QP
Registered Auditor
PKF Littlejohn LLP
15 Westferry Circus
London E14 4HD
Solicitors
Mills & Reeve LLP
Botanic House 100 Hills Road
Cambridge CB2 1PH
Principal Bankers
HSBC Bank plc
63-64 St Andrews Street
Cambridge CB2 3BZ
Registrars
Link Group
Central Square
29 Wellington Street
Leeds LS1 4DL
Unsolicited mail:
The Company is obliged by
law to make its share register
publicly available should a
request be received. As a
consequence, shareholders may
receive unsolicited mail from
organisations that use it as a
mailing list. Shareholders wishing
to limit the amount of such mail
should either write to Mailing
Preference Service, DMA House,
70 Margaret Street, London W1W
8SS, register online at www.
mpsonline.org.uk or call the
Mailing Preference Service (MPS)
on +44 (0)845 703 4599. MPS is an
independent organisation which
offers a free service to the public.
Warning to shareholders –
boiler room scams:
Each year in the UK, £1.2 billion
is lost to investment fraud, with
the average victim losing around
£20,000. What is more, it is
estimated that only 10% of the
people that become victims of
investment fraud actually report it.
Investment scams are becoming
ever more sophisticated –
designed to look like genuine
investments, they are increasingly
difficult to spot. They are targeted
at those most at risk, typically
people in retirement who are
actively seeking an investment
opportunity.
Protect yourself:
1. Reject cold calls
If you have been cold called
with an offer to buy or sell
shares, it is likely to be a
high-risk investment or scam.
You should treat the call with
extreme caution. The safest
thing to do is hang up. If
you are offered unsolicited
investment advice, discounted
shares, a premium price
for shares you own, or free
company or research reports,
you should get the name of
the person and organisation
contacting you and take these
steps before handing over any
money.
2. Check the firm on the
Financial Services Register
at www.fca.org.uk/register
The Financial Services
Register s a public record of all
the firms and individuals in the
financial services industry that
are regulated by the FCA. Use
the details on the Financial
Services Register to contact
the firm.
3. Get impartial advice
Think about getting impartial
financial advice before
you hand over any money.
Seek advice from someone
unconnected to the firm that
has approached you.
REMEMBER, if it sounds too
good to be true, it probably is!
If you use an unauthorised
firm to buy or sell shares
or other investments, you
will not have access to the
Financial Ombudsman
Service or Financial Services
Compensation Scheme if
things go wrong.
Report a scam
If you suspect you have been
approached by fraudsters
please tell the FCA using the
share fraud reporting form at
www.fca.org.uk/scams, where
you can find out more about
investment scams. You can
also call the FCA Consumer
Helpline on
+44 (0)800 111 6768.
If you have lost money to
investment fraud, you should
report it to Action Fraud on
+44 (0)300 123 2040 or online
at www.actionfraud.police.uk.
i Find out more at
www.fca.org.uk/scamsmart
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Xaar plc Annual Report and Financial Statements 2023
Design and Production
www.carrkamasa.co.uk
Xaar plc
3950 Cambridge Research Park
Waterbeach
Cambridge
CB25 9PE
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Xaar plc Annual Report and Financial Statements 2023