Cambridge-based Xaar posted full-year adjusted pre-tax profits of £7.9m, down from £10.5m in 2005. The preliminary results also showed a dip in turnover from £42.8m last year to £42.2m.

The company said that it had recovered strongly in the closing months of the year following a setback in the Chinese market. Trading was affected by an investigation into three of Xaar's customers in China over non-payment of import duties. But Xaar added that the situation had not dented its market share.

Arie Rosenfeld, Xaar chairman said: "The actions we have taken during the past year have created a robust platform for future growth. Sales of established products provide Xaar with a sound and profitable base on which to build incremental sales of platform two and platform three products in the years to come."

The company has now opened its second manufacturing plant in Huntingdon to initially produce its platform three product, Xaar 1001. Rosenfeld added that the plant was completed on schedule and on budget.