Xaar plc

good afternoon and welcome to the zaar plc investor presentation throughout this recorded presentation investors will be in this lonely mode questions are encouraged and could be submitted at any time by the q a tab situated on the right hand corner of your screen simply type in your questions and press send the company may not be in a position to answer every question it receives during the meeting itself however the company can review all questions submitted today and publish responses where it's appropriate to do so before we begin i'd like to submit the following poll i'd now like to hand you to john mills ceo good afternoon sir

hey good morning and good afternoon and welcome to everybody out here i'm john mills ceo exam john white paul james who's our cfo today i'd like to take you through the uh 2026 interim results presentation and then give you an overview of where we are and so i think so far this year has been a good year we've seen some disruptions in markets due to the war in iran we have seen that when when there's disruption and uncertainty in the world cash equipment purchases are affected and we sell prepared teams who will be in to build equipment and what happens is that they they sell less machines and we sell less as a result of that there are certain markets where we've actually seen some decline in the markets. However, we're pleased to report that Brent Head Revenue is actually up by 5.5% and the reason for that is actually because there's quite a lot of new business that's come through. So whilst we've seen some headwinds because of the global economic challenges, the growth has been there by these new applications that have come through. and we'll talk more about that later on in the uh the presentation and combined with that mega jet and eps will please overall to report 9.2 so increase uh like like year on year also we've continued to control expenditure and that's a little bit margin improvement of 2.2 cents and one of the things that has been some frustrating and disappointing in the first half is that six months ago when we were doing the full year results we were pretty sure that Flashforge could be launching the desktop 3D within days if not weeks of that time. Since that point they've encountered a few technical issues that have delayed the mulch and we've helped them resolve those technical issues and today we have a team on site with them as they ramp up their pre-manufacturing of mulch. we're fairly confident that they will actually launch in the next couple of months the remaining challenges I think have largely been resolved and we're now supporting them in their production goals so we hopefully will see that launch happening before the end of this year and it's an interesting area because the opportunity with the desktop 3D is significant So, the business themselves are, we are a small company, we compete against very large companies like Epson, Ricoh, Fuji, and these companies have huge geographical reach, they have huge reputations and significant manufacturing capabilities. and so how do we win? well we win as a small company by being able to print with fluids that no one else can print and that as many of you may have already heard themselves that that's about printing materials which have a much higher viscosity or a higher pigment loading so for instance an epsom haze can bring 8cps 1cps is water 20cps would be cream 50cps is olive oil and so the thicker you get the higher the number an epsom pops out around about 8cps and what that means is they're limited to very low viscosity fluids So if you wanted to print out an application where a lot of viscosity fluid is, it's fine, you're absolutely going to choose Epsom. However, for us, what we focus on is the high viscosity applications where if the fluid that you need to deposit is a much higher viscosity, then really you need to be using the Zahaid. and that is the differentiation and that differentiation capability comes from our fundamental architecture which delivers a much broader operating window and that architecture is protected by a significant number of patents 30 years of manufacturing know-how and increasing the application expertise as well for how you actually use the printhead given application and what that means is that for the print heads into the market we can print with much higher pigments and we have a much wider range of fluids that we can print and we can operate at a much higher temperature and what that means is that customers can typically print the fluid that they want to print and ultimately means that they can print with reduced energy, reduced weight and higher precision and the route to market is actually quite complex and it's one of the things that I think if you look at our followers for a number of years you might say well we've been talking about certain applications for many years and that's absolutely true we sell a printhead into an OEM they develop and build the machine they then test it in that application and in many cases the application requires other regulatory approval it might require other investment in processes to adopt in a broader manufacturing sense and all of this means that the time frame to actually get the product into volume manufacturing in the low end application can be very difficult to and actually often sometimes can be many many years the benefit is that once you're in and once you're actually the printhead of choice all of those things have made it difficult to get in and it's very tricky and so it's it's for us we believe that as we enter these markets then we believe that we can sustain the position within that market on this three sources of revenue this protest that we sell to all the ends of the machines that go into the application and then as you build that install base all the time you there will be print head replacement and the replacement cycle depends on the application in in more extreme applications like so we can look so we might see a replacement on an annual cycle in more of the the less demanding areas you might see a replacement every 6-7 years so if the replacement is every 5 years then that means 20% of your installed base is actually effectively a USC revenue going forward so it's key to actually build that installed base and grow that replacement revenue Increasingly we're seeing there's access in the ink revenue and if we've been involved in developing the solution there's often opportunities to share in some ink revenue in the application. So with that I'll hand over to Paul to take you through the financial summary.

Thank you John. So I'm actually pleased to present these results for the first half, where we had year-on-year growth in all parts of our business. The group revenues, as John said, up 9.2%. And I'm particularly pleased about the recovery in our US business called EPS under new leadership, which has come with an ever-expanding pipeline. core of our business is printhead and that was up five and a half percent uh and that's prior to the launch of flashforges desktop 3d offering so that is actually in of itself an impressive performance for the first half uh the revenue performance translates to a profitable first half really for the first time in at least three years and we're in line to achieve a consensus on profit The balance sheet is almost net neutral with a net deposition of 0.1 million and an adjusted free cash outflow of 4.3 million. And that was primarily driven by the need to build inventory to support the launch of Flashforge's desktop 3D product. So that's the overall shape of the numbers. Let's have a look now at the divisional performance. So as you can see, I'm pleased with the growth in PrintHead and with the expected launch of FlashForge desktop 3D in the second half. Year-to-year revenue performance for the second half is expected to be much stronger. The growth has been driven by new business, new applications and uses for our unique technology. Within all of this we've seen the legacy ceramics market stabilize after many years decline and that's been helped by the development of new so-called ceramic glaze technology. And as such, this decline that we've experienced for a long time now, many years, no longer represents the headwind for us in our growth going forward. Now, there's a wider important point here. The czar today has broadened its appeal to many different sectors and continues to expand. And as such, there is now a de-risk portfolio effect compared to the czar of old. Operational gearing effects show an enhanced adjusted profit before tax profitability that's improved by some 100 basis points year-on-year and Magnajet gross margin is up 120 basis points built on revenue increase of 27% year-on-year and the Magnajet business underlies the importance of supporting systems or system components for our core offering supporting our customer base The growth comes from new customers as well as increased demand from the existing customer base. And then back to EPS, much hard work has been done to rebuild a durable pipeline, address the cost base, and that's the work that's been ongoing some time now, and solve some long-term intractable problems. So I expect EPS's recovery path to continue into next year. So let's have a look at a bit of detail at the adjusted income statement. So, taking it as a whole, the group grew revenue by 9.2%, a performance that would be the envy of many companies in the current global climate, and growing gross margin performance by 220 basis points. The development of operation expenditure is worthy of mention. Now, it's up just 5.7% year on year, but this increase is driven by building, and some would say rebuilding, capability in the front end, sales and marketing. And the sharp end, which is how I term research and development, and that's to drive growth in the innovation pipeline, which is our lifeblood after all. So general and admin expenses have actually declined by 1.6% note, a contraction in the cost of back office roles. Putting that all together, we now see a business that grew profitability substantially in the first half to achieve an adjusted profit before tax of 0.2 million, compared to the loss of 0.7 million last year and similar losses, I must say, for the first half of the years before that. Then just take a look at cash flow and turning our attention to cash. The group's adjusted free cash flow was an outflow of 4.3 million. This was primarily driven by temporarily building inventory to support the launch of desktop 3D by CashForge. And once this launch has happened, we expect this to sharply reverse. In addition, the group has upped capital expansion in the first half compared to last year, again driven by building out capability to support anticipated higher volume levels in the future, particularly with our new manufacturing facility in Dongguan, China, that is in itself enhancing supply chain resilience. Now, I want to emphasise, and I've done this many times already since I joined Czar, that the days of storing large amounts of cash in what is essentially a current account are over. We have entered into an expanded rolling code facility, increasing it from £5 to £10 million with an EBITDA covenant of three times, whereas previously it was two times. And in addition, we have an uncommitted accordion facility of £5 million and an increased invoice discounting facility of £5 million. So at the moment, our liquidity is substantial. So that's it from me for now. I'll hand back to John.