The Cambridge-headquartered group has set itself an ambitious growth target of achieving sales of £220m by 2020. In the year to 31 December 2016 the company grew overall sales by 3% to £96.2m.

Although sales in ceramic tile printing, still Xaar’s single biggest market, were described as “disappointing” the firm boosted its sales in packaging by 40%, thanks in part to last year’s acquisition of US direct-to-product firm EPS.

The results were also boosted by circa £7m in royalty adjustments following a royalties audit involving the group’s two legacy licensee agreements.

Gross profit was static at £44.7m, with margins falling from 47.8% to 46.4%. However, excluding licensing income gross margins fell to 37.8% compared with 44.1% the prior year. Profits were impacted by reduced output from its Swedish manufacturing facility prior to its closure last year, pricing pressures from competitors, and delays to new products.

Xaar’s share price fell by 25.5p, or 7%, to 335p on the results.

Chief executive Doug Edwards described it as “an important year” in the firm’s long-term development and ambitions to create a more broadly-based business.

“Some things have gone the way we wanted and some have not. Our challenge is around ceramics and our strategy is to reduce our dependence on that market,” he explained.

Two new product introductions have targeted Xaar’s existing user base as well as OEMs, with the ceramic tile printing becoming increasingly competitive. “We are looking to try and maintain as much market share as we can,” Edwards added.

However, sales of its new 2001+ printhead were lower than expected due to manufacturing ramp up issues and customers taking longer than expected to redesign their printers.

More positively, Edwards said he was particularly pleased at the growth that had been achieved in packaging, with 50% growth in coding and marking, 12% in labels, and 160% in direct-to-shape applications.

“We are expecting EPS to double revenues this year,” he said.

He also anticipated “chunky revenues” for the new 1201 printhead developed with Ricoh, which is targeted at wide-format applications.

“We think that’s really going to re-establish us back in wide-format graphics,” Edwards added.

Xaar also expects the first products using the 5501 scanning printhead as a result of its new partnership with Xerox to be introduced mid-year. Textiles and wide-format are the initial target markets.  

Progress with Xaar’s first Thin Film head, the 5601, which was launched at Drupa and originally slated for commercialisation at the beginning of the year, was held back by manufacturing issues. “When our silicon wafer provider started to scale up the manufacturing process it introduced a few impurity issues, which caused delaminating and impacted the life of the printhead,” Edwards explained.

“The issue is in the process of being resolved now. We’ve got new wafers and we’ve done accelerated ageing tests in the lab. We’re feeling good about it.”

Xaar will bear some extra development costs as a result of the delay. It expects to ship development kits to OEMS in the next few weeks with commercial shipments ramping up from the second half of this year.

“In the longer-term this will be a very significant product for us,” Edwards stated.

Sales to the US market now account for around 20% of sales, with 10% of that coming from the EPS buy and 10% from organic growth.

Xaar still has £49.3m of cash available for further acquisitions, and Edwards said he was targeting the product printing space and looking at targets similar to EPS.

The firm also expects to expand upon its partnerships with Ricoh and Xerox.

Next week Xaar will officially open its new 3D Centre at Nottingham Science Park.

“3D is looking good, we should have a high-speed sintering design ready by the end of the year,” Edwards said.

Xaar also flagged up the possible effects of Brexit, with EMEA (Europe, Middle East and Africa) the group’s single-biggest geographic sales region, accounting for 43% of group sales.

“Europe will continue to be a very important market for us, and so we are keen that efficient trading arrangements continue with the EU as the UK prepares for Brexit,” the firm stated.