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X
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Annual Report and
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Xaar
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Strategic Report
2021
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Our customers seek to work with partners who can help them get their products to market efficiently and effectively and who can support them throughout the product lifetime.
Our strategy is to provide an integrated solution for our customers and to work collaboratively with them so that they get to market more quickly whilst delivering innovative and robust products. This strategy will ultimately ensure we sell more printheads.
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Printheads
Designed,
developed
and
manufactured by Xaar
S
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Systems
Electronics, software, ink system
Ink
Print Bar
Print Engine
OEMs UDIs
I
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solutions
i Read more about our strategy for delivering
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ImagineX
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is already delivering unique product capabilities such as printing at up to 100 metres per minute.
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Operating
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combined
with
drop-
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plug and print capability, for getting up and running at speed in minutes
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Unbeatable uniformity with TF Technology and AcuChp for printing perfectly the first time and every time
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The
widest
application
window
and
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b
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to
handle
broadest
range
of
f
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s
i Read more about the ImagineX platform on page 2
Business
responsibility
Our
three
main
areas
of
focus
during
2021
have
been: sustainability, employee engagement and charity support.
New
opportunities
During the course of 2021 we have seen a broadening of the range of applications using Xaar technology
and
a
number
of
our
OEMs
launched
Sustainability
Our
Sustainability
Roadmap
centres
on four areas, each of which has
a
goal:
L
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People
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Innovation
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Employee
engagement
Our success depends on the capability and engagement of our people, which has included a focus during 2021 on embedding our values deeper into the Xaar culture.
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engagement
on
page 3
C
h
a
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y
support
We continued our support of local charities via a collaboration with Break charity’s Cows About Cambridge Event.
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support
on
page 3
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technology.
OEM products launched included an industrial grade print engine in China and an entry level 3D printer in Europe. We also collaborated with materials science
company,
Meta
Additive,
recently
acquired
by
Desktop
Metal, who have used our technology to push the boundaries of binder jetting technology.
i Read more about our new opportunities on page 3
Strategic Report
Driven
by
our
m
i
s
s
i
o
n
We help companies and industries be more colourful, creative and productive through our world-class technology and printheads.
Overview
We are a world leader in the development
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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,
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a
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methods it replaces.
We also develop print systems for product decoration and 3D printing which use our inkjet technology, and our digital imaging business, FFEI, provides high performance digital
imaging technology for two main applications – inkjet printing and digital pathology.
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.
Our
c
u
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t
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e
We champion a values-led culture so each member
of our team is empowered to do their very best, creating
a
working
environment
that
people
love
to
be
in
and
where
we
can
all
achieve
our
ambitions.
I
W a t c h o u r n e w v i d e o d e m o n s t r a t i n g h o w
these values are part of our day-to-day lives.
S t r a t e g i c Report
2021 at a g l a n c e IFC
Our progress in 2021 02
Chairman's introduction 04
Why invest 0 6
Our business m o d e l 0 8
Marketplace 10
Strategy at a g l a n c e 1 1
Strategy update 1 2
Our business u n i t s 1 6
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Printhead 18
–
Product Print Systems 22
–
Digital Imaging 23
Business performance 2 4
Sustainable and responsible b u s i n e s s 28
Sustainability Roadmap 3 7
Task Force on Climate-related
Financial Disclosures (TCFDs)38
Greenhouse gas emissions s t a t e m e n t 41
Key performance i n d i c a t o r s 4 2
Risk management 4 4
Non-financial information statement 56
Board approval of the S t r a t e g i c
and Annual R e p o r t s 5 7
Governance
G o v e r n a n c e a t a g l a n c e 5 8
Board of Directors 60
Directors’ report 62
S e c t i o n 1 7 2 s t a t e m e n t 6 9
C o r p o r a t e G o v e r n a n c e s t a t e m e n t 7 1
Audit Committee 77
Nomination Committee 81
Directors’ Remuneration report 83
Directors’ responsibilities statement 102
F i n a n c i a l Statements
Independent auditor’s report 103
Consolidated income s t a t e m e n t 115
Consolidated statement o f
comprehensive i n c o m e 115
Consolidated statement
of financial position 116
Consolidated statement o f
changes in e q u i t y 117
Consolidated cash flow s t a t e m e n t 118
Notes to the consolidated financial statements 119
Company balance s h e e t 165
Company statement of c h a n g e s
in equity 166
Notes to the Company f i n a n c i a l
statements 167
F i v e y e a r r e c o r d 172
Notice of the Annual General M e e t i n g 173
Company information and a d v i s o r s 177
Xaar
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Our
progress
in
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We launched two new printheads from this platform during 2021 and have an ongoing roadmap of product
In turn, UDI customers will be able to reduce their
development timescales and shorten their time to market.
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at the heart of our
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.
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our customers are successful that Xaar is
s
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s
f
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d
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a
i
m
is to be the partner of choice, enabling our customers to respond quickly and efficiently to changing market needs with robust and reliable products that are powered by Xaar technology.
Our strategy is to provide integrated solutions, allowing our customers to access not only Xaar’s leading printhead technology but also the
ink supply and electronic control systems required to ensure sustained and reliable performance from a wide range of fluids that deliver market leading print quality every time.
Our ImagineX printhead platform delivers unique capabilities: 720 dpi print resolution, Ultra High Viscosity
and
High
Laydown
Technology
printing at speeds of up to
100
metres
per
m
i
n
u
t
e
.
developments to enable our customers to address a broader range of applications.
The acquisition of print systems and printbar specialist FFEI
in 2021 widens our product range for our OEM and UDI (User Developer Integrators) customers with a broader product range including Xaar Versatex print engines for adding effects and embellishments digitally.
At the heart of our new ink strategy is a close collaboration with leading fluid companies to fully optimise the fluid for the best print performance, not just in the printhead testing lab, but also throughout the machine development programme, through to user integration
and beyond. UDI customers can also buy their fluids direct from Xaar, giving them a single point of contact for both the printhead and the fluids, saving them time and simplifying
the
development
p
r
o
c
e
s
s
.
Our new Ink Supply System roadmap will ensure we can deliver products that help customers evaluate and adopt our technology whilst also reducing their time-to-market. We offer a number of inkjet supply systems under the
Xaar brand, and have further added to our capability with the acquisition of Megnajet in
March
2022.
One
of
the
market
leaders, Megnajet designs
and manufactures industrial ink management and supply systems for digital inkjet.
These easily integrated products are among the most compact ink management and supply systems on the market today, with options of fast and reliable routes to market when developing industrial inkjet printers.
The acquisition of Megnajet is part of Xaar’s growth strategy which focuses on offering our customers, particularly UDIs,
a more integrated inkjet solution, which will attract a broader range of opportunities for us.
This acquisition also enables Megnajet to focus on growth through new developments and shared expertise.
Whilst enabling a broader range of products under the Xaar brand, Megnajet will also continue to offer products to a wide customer base (sectors), under the Megnajet label.
In addition, our datapath
roadmap
has
been
developed
to provide a rich portfolio of
datapath products to enable our customers to build their own systems more easily which take advantage of the full potential of our ImagineX platform.
EPS
progress
In 2021 we achieved +9% growth in sales. In addition, we changed the leadership of EPS and strengthened our teams in
Finance,
Human
Resources,
and
EH&S Management, as well as re-organising the sales team into two distinct groups.
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F
F
E
I
progress
Since acquisition in July, the alignment with Xaar has
progressed well. In addition,
FFEI
has
developed
its
roadmap
of integrated inkjet systems
for Xaar to sell to its UDI customers, with the first product launch in March 2022. On the life sciences side of the business FFEI has continued to develop its product portfolio and now has a pipeline of next generation scanning technologies. Some technologies are very close
to market readiness, others require further development. FFEI is now looking for new partners to reap the rewards of these next generation scanning systems.
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Strategic Report
N
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opportunities
B
u
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s
s
responsibility
D
u
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n
g
t
h
e
c
o
u
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s
e
o
f
2021 we have seen a broadening of the
range of applications
u
s
i
n
g
X
a
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t
e
c
h
n
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y
.
•
Chinese OEM, King Tau, a pioneer in the ceramics and graphics sectors, launched a new industrial-grade print engine, The ‘Magic Cube’,
incorporating
Xaar’s
advanced
printhead technologies.
•
Beijing National Innovation Institute of Lightweight Ltd.
(BNI)
and
Xaar
announced
a
Joint Laboratory to develop new applications in digital inkjet such as printing glass, electronics, 3D and automotive spray painting.
•
The wide operating window and unique technologies within the Xaar 1003
printhead
have
enabled
Meta
Additive to use a variety of fluids that had previously been seen as too difficult
to jet. With Xaar technology, Meta Additive was able to
move
beyond
the
conventional
limits of inkjet printing with its binder jetting innovation.
•
The Xaar 2002 printhead is successfully addressing the current ceramics trend for printing big slab
applications such as dining tables, kitchenware and sanitary ware, where tile viewing distances are much closer. Customers are looking for higher quality tiles with higher resolution and definition, produced by our 720 dpi capability – no other printhead can deliver resolution this high and with this capability we have now set the image quality standard in ceramics.
•
In the 3D printing market, dp polar launched its latest machine, the AMpolar® i1
which jets 3D parts at volume
on a truly industrial scale.
The combination of scalability, productivity and agility of
this new machine achieves an output that traditionally would have required multiple conventional 3D machines, and significantly more capital investment.
•
Xaar continues to see a growing number of new opportunities within the 3D printing markets. Our
technology offers significant advantages and therefore value for managing high viscosity fluids and delivering industrial levels of reliability across a range of additive manufacturing applications and emerging technologies.
EPS ended its year by landing the largest single order in the Company’s history which will be manufactured and delivered during 2022. The Company closed 2021 with a strong order
book for bespoke systems and a plan for continued strong growth for 2022.
Xaar’s recent acquisitions of FFEI and Megnajet enable us to offer our customers, particularly UDIs, a more integrated inkjet solution, which will attract a broader range of opportunities for us from here on in.
i
R e a d m o r e o n p a g e 1 2
We operate as a socially, culturally and environmentally
r
e
s
p
o
n
s
i
b
l
e
b
u
s
i
n
e
s
s
.
Our three main areas of focus during 2021 have
b
e
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n
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and charity support.
Sustainability
During 2021 we set up a Sustainability team with members from across the
Company
to
work
on
a
roadmap
of projects with defined objectives. The Roadmap centres on four areas, each
of
which
has
a
g
o
a
l
:
1.
Environment
Leading the way in environmental sustainability for the industrial inkjet technology sector.
2.
People
To be employer of choice by putting our people, their potential and well-being at the heart of all we do.
3.
Innovation Encouraging more
sustainable
approaches
to
design,
m
a
n
u
f
a
c
t
u
r
e
,
technology and collaboration across the whole product lifecycle.
4.
Community
Actively engaging with our communities to provide practical, lasting support that benefits society.
i
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f
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l
s
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f
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u
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on
pages 29 to 3 7
Employee engagement We hosted a number of COVID-19 safe lunches for our employees to encourage collaboration and team
building, as well as to help new employees meet the wider team. In July we held an employee event to officially open our new Corporate HQ and bespoke
R&D lab at the Cambridge Research Park.
We have also been working on embedding our values more into our culture. A cross functional project team developed an
easy to remember logo for our
values,
launched
a
new
values
award which runs across the whole Group and developed a new video which we are using for employee engagement, recruitment and induction.
I
h t t p s://y o u t u.b e/4 r X m X M l E p g g
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a
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u
e
s
on
page 5
In addition, we have introduced packs for key employee occasions: new starter packs, new baby packs and an anniversary card to mark certain milestones (first year, five, ten, 20, 30 years).
Supporting local charities
Our
employees
nominated
two
charities and each received
a
donation
of
£2,000,
w
i
t
h
the beneficiaries being the Special Care Baby Unit at Hinchingbrooke Hospital in Q1 2021 and Wood Green,
The
Animals
Charity
in
Q4
2
0
2
0
.
Later in the year we fund-raised for Break Charity (www.break- charity.org/charity/). As well as sponsoring their Cows about Cambridge Farewell weekend, Xaar employees hosted a stand at the event and raised £150
by selling for a £1 donation colourful miniature cows that we had 3D printed.
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’s
introduction
Our focus on customers and a product roadmap that reflects current and potential customer needs has increased the quality and responsiveness of the business, and means we are well placed
for further performance improvement.
w
i
t
h
o
u
r
s
t
r
o
n
g
partnerships
During the year, our ability to serve customers was further advanced through
the acquisition of FFEI, adding both capability and capacity whilst enabling a more vertically integrated approach to assisting customers with the adoption of digital print technology. In November 2021 we completed the sale of our stake in Xaar 3D to our partner Stratasys, further strengthening our balance sheet whilst retaining a strong commercial partner in the 3D market.
We recently (March 2022) strengthened the business further with the acquisition of
In
my
first
report
as
Chairman
two years ago, I spoke of
my confidence in the new leadership team and in our ability to turn the business around after the challenges
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.
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of 2021 and following a period of unprecedented uncertainty surrounding the COVID-19 pandemic, I am pleased to
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i
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u
e
s
to be made.
Our fundamental focus has been on Xaar’s core competence in design and manufacture of world leading printheads, whilst rebuilding and strengthening all areas of the business to better serve our customers and deliver
consistent and reliable business performance.
There has been a realignment of our go-to- market approach with a clear focus on the value chain and our customers, a strengthening of our senior leadership and functional teams, a revitalisation of our brand and corporate identity and, importantly, a focus on the technical and competitive advantages of the Xaar bulk piezo product range.
The introduction of our new ImagineX bulk piezo platform has created a pipeline
of new product developments with the first two products, Nitrox and Irix, launched during 2021.
The Board is pleased with the progress that the management team has made in re-energising the business and would also like to thank our teams worldwide for their commitment and adaptability, particularly across our supply chain, during this period of uncertainty.
S
t
r
a
t
e
g
i
c
progress
We have continued to embed our strategy across the Group and through our people: a key enabler of the strong performance in 2021. Our focus on customers and a product roadmap that reflects current and
potential customer needs has increased the quality and responsiveness of the business, and this means that we are well placed
for further performance improvements. We believe a significant opportunity exists in market sectors and applications where
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technical performance advantages and that is our focus.
Megnajet, a leader in design and manufacture of ink delivery systems. Megnajet adds complementary skills to Xaar’s core competence as we build the capability to provide customers with a more complete package of integration tools and accelerate the adoption of Xaar printhead technology.
W
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G
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.
F
i
n
a
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c
i
a
l
results
In what has proven to be another challenging year for the global economy, the Group
has delivered sales growth of 23% and moved back into profit in the second half of the year. Actions have been taken to build management and organisational strength, while cost control and careful cash management demonstrate our clear
focus on performance and a return to profit.
The Printhead business has made good progress both commercially and operationally. Sales volumes have grown and a programme to improve efficiency and consistency of operational performance is progressing well. A specific area of focus has been our supply chain and our response to the challenges caused by the pandemic. An early recognition of the potential constraints on supply and logistics enabled us to secure materials to meet expected production requirements,
and to proactively adapt product designs to accommodate alternative components.
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o
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o
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h t t p s://y o u t u.b e/4 r X m X M l E p g g
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Our
EPIICC
v
a
l
u
e
s
L Re-alignment of our go-to-market approach has strengthened customer engagement
L
S
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p
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f
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m
a
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c
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f
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h
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P
r
i
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t
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a
d
business with consistent wins of new
customers and projects and renewed focus on markets where products have a competitive advantage
L Ongoing delivery of product roadmap with two successful product launches from our
I
m
a
g
i
n
e
X
p
l
a
t
f
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m
L Investment in working capital has allowed
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constraints and secure ability to deliver on customer demand
These
actions
have
increased
business
resilience and will help us maintain uninterrupted supply to customers during 2022.
After encountering weaker demand and challenges in EPS, during the first half of the year, the appointment of new leadership and a realignment of strategy led to a much stronger second half of the year with sales 25% higher than in the first half. While performance for the year as a whole was impacted by previously announced non-cash adjustments relating to slow moving and obsolete inventory, there is good momentum in the order book and operational performance is improving in EPS.
We are pleased with the progress made at FFEI. Having only joined the Group in July 2021, integration of the technical teams is largely complete, and performance is in line with our expectations.
Good underlying cash flow and receipts from the sale of our stake in Xaar 3D in November 2021 enabled the Group to close the year with a robust balance sheet. Net cash of
£25.1 million provides a platform for further investment and further complementary acquisitions.
The Board has not declared a dividend in 2021 as we believe that prioritising cash for continued investment in the business at this stage of our rebuilding programme will deliver more compelling returns for shareholders in the medium term.
Environment
As a Board we consider our responsibility to the environment and society in general as an integral part of running a successful business. We are mindful of, and are committed to, the need to be good custodians of our natural resources for future generations. The business has established an ESG Committee with oversight and input from the Board and
L Further operational progress made in Engineered Printing Solutions (EPS),
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L Relocation of Cambridge office during 2021 will result in £0.7 million annualised cost saving
L
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f
M
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customers with a more complete package
of integration tools
L
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a
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l
y
integrated product offering
L
C
o
m
p
l
e
t
i
o
n
of divestment of Xaar 3D investment
L Launch of Sustainability roadmap with clear strategy to reach ‘net zero’ by 2030.
has committed to a Sustainability Roadmap including ways in which we will strive to provide solutions and products for our customers that are cleaner and healthier. We are in the process of defining and setting meaningful ESG targets alongside plans of
h
o
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e
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t
s
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n
a
s
p
e
c
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f
i
c
time frame. Our goal is for the business to be ‘Net Zero by 2030’.
People
For Xaar to be successful we need the energy, commitment and engagement of all our employees. Periods of ‘lockdown’, remote working and constraints on how people interact have all presented challenges, but I have great admiration for the way in which our people have overcome these challenges and worked tirelessly developing a strong ‘can-do’ culture.
We entered the year with optimism and a renewed sense of purpose but of course still uncertain as to the wider economic environment and extent of the challenges
that would present. Despite this backdrop we have pushed on with the necessary changes to the business and it is to the great credit
of the whole team at Xaar, in all businesses and in the many countries around the world where colleagues live and work, that they have adapted, committed to and succeeded in delivering both solid financial results and a platform for continued growth. On behalf of the Board, I thank them and congratulate them on the progress made.
Summary
The Board is optimistic following our progress this year and is confident in the future prospects of the Group.
A
n
d
r
e
w
Herbert
Chairman
29
March
2
0
2
2
I
I
E
v
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y
t
h
i
n
g
w
i
t
h
P
a
s
s
i
o
n
We care about our technology, our products, our partners and each other.
Innovative
We always look for new, better solutions.
Integrity
We deliver on our promises.
Creative
We push the boundaries of what’s possible.
Collaborative
We work together as a team and with our clients.
O
u
r
v
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s
a
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e
t
h
e
d
r
i
v
i
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g
f
o
r
c
e
of our culture and are at the heart of everything that we do.
We have a cross functional team that has been working on ways to further embed our values throughout the Company, and we have also rolled the values out across all the Group.
The team put together a video which demonstrates the part that our values play in our lives, both at work and in our home lives.
i
Read more about our Company culture on page 9
C
C
E
P
WE ARE
R
E
A
D
Y
F
O
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T
H
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F
U
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Xaar
plc
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Strategic Strategic R R e e p p o o r r t t
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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 growth strategy of offering a more vertically integrated solution.i See Board biographies on pages 60 and 61
6
S
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b
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s
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e
t
position We have the resources necessary to implement our strategy; a strong balance sheet with no debt and net cash of £25.1 million. This provides the platform for security and a great foundation for future growth.
i See the Strategy update on page 12
4
A
c
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v
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o
n
We have a customer-centric business model that places the OEM and UDI at the heart of
everything
we
do.
We
are
executing
on
our
plan
to become more vertically integrated to drive printhead sales. Our ability to supply electronics, software, ink systems and print engines alongside application support, combined with a disruptive technology, sets us apart from our competition.
i See Our business model on page 8
5
R
o
a
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m
a
p
t
o
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l
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r
the opportunities Our ImagineX printhead platform (launched September 2020) is driving our progress,
2
Proven technology and
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v
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o
n
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.i See more on pages 20 and 21
Xaar
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Market opportunity We focus on markets where we have a competitive advantage, where we can offer a number of benefits over incumbent technologies. For example, with Direct-to-Shape printing, Xaar technology offers unique value thanks to the capability of our printheads to print dynamically, in multiple orientations. This is particularly relevant in a number of areas from aerospace
t
o
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f
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.
In addition, Xaar continues to see a growing number of new opportunities within the 3D printing markets. Our technology is unique in its capability for managing high viscosity fluids and at the same time delivering industrial levels of reliability across a range of additive manufacturing applications and emerging technologies.There are significant opportunities in textile printing, particularly in applications using pigmented inks. Xaar’s technology is well suited for the challenges of printing highly pigmented inks, providing several USPs,and when combined with upcoming products from ImagineX, will bring a significant value proposition to that market.
i
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p a g e 1 0
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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 already launched two new printheads on this platform (Xaar Nitrox and Xaar Irix). Future product launches include aqueous compatibility, increased robustness to improve the life of the printhead and even higher resolutions.These features are helping to strengthen our position in markets where we are already well represented and will drive improved adoption in several markets where we are currently not, such as Wide Format Graphics, Labels, Packaging and Textiles.
i See New opportunities on page 3
0
7
5
S
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Our
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and customers, we have been
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Xaar plc is structured into business units: Xaar Printhead, the largest
BU,
focuses
on
printhead
technology; our other two
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on
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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. 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.
Our product printing business, EPS, designs and develops complete industrial printing machines which are sold to
end
users.
Our digital imaging company, FFEI Ltd, manufactures high performance digital imaging solutions – from digital inkjet label presses to digital pathology scanners. Its inkjet products (print engines) use Xaar printheads.
In March 2022 we completed the acquisition of Megnajet, market leader in the design and manufacture of industrial ink management and supply systems for digital inkjet.
We have recently sold our remaining interest in Xaar 3D (which is developing 3D printing machines) to Stratasys.
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Our
business
m
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Xaar
d
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s
We
have
R&D
facilities
in
Cambridge,
Hemel
Hempstead,
Stockholm, and Vermont.We invest a substantial proportion of our revenue in R&D to remain a world leader in inkjet technology (2021: approximately 10%).We continually add to our Intellectual Property (‘IP’) portfolio, and currently we have around 340 patents and patent applications.
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Xaar
m
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s
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 ink management and supply systems in Northamptonshire, UK.
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.Primary markets include:
•
3D
P
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•
Glass
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•
Direct-to-Shape
•
Product
P
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g
.
•
Functional Fluid Deposition
Xaar
s
e
l
l
s
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 Europe, Asia and North America regions.Xaar company EPS also sells product printing equipment, services and consumables. The majority of sales are to US customers.FFEI sells via three routes to market: as a full system to one
O
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,
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as a Xaar branded print engine for our UDI customers.Megnajet sells its products directly to customers and via Xaar.
We
create
value
for
all
our
s
t
a
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e
h
o
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s
Digital printing compared to
a
n
a
l
o
g
u
e
r
e
d
u
c
e
s
c
o
n
s
u
m
p
t
i
o
n
of up to:
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
capability
and engagement of our people. We want bright and driven people who 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.
We like to build long-term relationships with all our employees by helping
them grow and develop – in 2021 we promoted over 70 people – and by making Xaar an interesting place to work as well as a great company to be involved with.
Whilst this year we continued to manage the impact of COVID, we
were
able
to
host
a
number
of
COVID
safe lunches for our employees to encourage collaboration and team building, as well as to help new employees meet the wider team. We
also focused on embedding our values more deeply into our culture which has included launching a new values award across the whole Group.
We have also continued with forums
w
h
e
r
e
e
m
p
l
o
y
e
e
s
h
a
v
e
t
h
e
o
p
p
o
r
t
u
n
i
t
y
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.
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 (by up to 55%), water consumption (by up to 60%) and CO 2 emissions (by up to 95%), 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. Notable outcomes
during
2021
include
a
move
to
100%
certified renewable energy tariffs at three of our UK facilities – a switch
that will make a valuable contribution to our net zero goals. We completed this move for two remaining
facilities in January 2022. One key decarbonisation project that has commenced in 2021 is the installation of EV charging infrastructure. Work on moving to solar energy continues, with other factory level energy efficiency improvements ongoing.
In
the
second
half
of
2021
we
formed
an ESG Committee with governance and accountability to the Board.
Reporting to the ESG Committee, the Sustainability team, formed with representatives from across the
b
u
s
i
n
e
s
s
,
h
a
s
d
e
v
e
l
o
p
e
d
a
c
o
-
o
r
d
i
n
a
t
e
d
Sustainability Roadmap that will push Xaar towards its ‘Net Zero by 2030’ goal. The Roadmap has four key pillars –
E
n
v
i
r
o
n
m
e
n
t
a
l
,
P
e
o
p
l
e
,
I
n
n
o
v
a
t
i
o
n
and Community; its purpose is to drive our ESG goals beyond the Energy Reduction scope to a Group wide activity. Once approved at Board level, the Roadmap will provide an essential backbone for much of Xaar’s future investment and activity.
95%
C
O
2
e
m
i
s
s
i
o
n
s
55%
Energy
consumption
60%
Water
consumption
S
o
u
r
c
e
:
Xaar.
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Marketplace
X
a
a
r
’s
d
i
g
i
t
a
l
i
n
k
j
e
t
t
e
c
h
n
o
l
o
g
i
e
s
a
r
e
t
r
a
n
s
f
o
r
m
i
n
g
p
r
i
n
t
p
r
o
c
e
s
s
e
s
in a wide range of markets.
Industrial
markets
C
e
r
a
m
i
c
T
i
l
e
D
e
c
o
r
a
t
i
o
n
The majority of the tile decoration market uses digital inkjet technology because, compared to traditional analogue techniques, it is superior in terms of image quality and
is lower in cost. In addition, it offers the advantages of flexibility, inventory reduction and larger tile size capability. This is a mature market for Xaar with strong competition.
However, with an average useful life of five to six years, several hundred new ceramics printers are required each year for the foreseeable future. Xaar’s unrivalled 720 dpi print resolution is starting to attract the
attention of tile manufacturers looking to print large slabs for kitchenware (such as table tops).
D
e
c
o
r
a
t
i
v
e
L
a
m
i
n
a
t
e
s
Realistic wood finishes or creative design are the key features which sell the board/ plank/finished item. The digital quality that can be produced with Xaar printheads matches the quality produced by the analogue process, thereby offering the opportunity for more economic short run work to be undertaken whilst reducing inventories and improving time-to-market.
F
u
n
c
t
i
o
n
a
l
F
l
u
i
d
D
e
p
o
s
i
t
i
o
n
Xaar’s focus on functional fluid promotes our inkjet technology, which offers an unrivalled method of non-contact, fluid deposition with incredible precision, control and speed. Typically applications are challenging, pushing our technology to and beyond known limits in markets
such
as
Flat
Panel
Display,
Semiconductors,
Printed Electronics and Optics.
3D
P
r
i
n
t
i
n
g
3D Printing is a manufacturing methodology that encompasses a range of processes
and applications, with a common theme of building parts up, usually layer-upon-layer. This additive approach ultimately enables manufacturers to eliminate the need for tooling. There are significant advantages, including superior geometric freedom, giving designers much more capability, and a substantial reduction in lead time for products. In addition 3D Printing
provides the facility to tailor unique products to consumers, enable de-centralised manufacturing and shrink spare part storage.
Glass
Printing
Architectural glass is increasingly used to complement ceramic tiles in modern commercial design, and is starting to be
used in residential projects also. Functional glass, such as car windscreens or glass tops used in induction hob cookers, is predominantly printed using analogue screen techniques, but is increasingly moving to digital to provide production flexibility and inventory reduction. This is
an emerging sector for digital inkjet and the Xaar 2002 is the leading printhead for this market due to technology advantages.
Packaging
markets
C
o
d
i
n
g
&
M
a
r
k
i
n
g
Coding & Marking is an application which relates to printing product identification
codes
such
as
batch
numbers,
use
by
dates
and barcodes. Xaar’s technology is used
to print barcodes and logos on outer case/ secondary packaging of consumer goods. This is an established and stable business, and competes with alternative technologies including print and apply, and thermal inkjet.
Primary
Labels
Labels are used for many different applications, including product identification, name tags, warning and hazard identification, promotions and as decals for product decoration. There is a large range of substrates and inks in this application which adds complexity to the conversion process. Xaar excels in two areas of label printing: colours (including white) and varnish based finishing effects using Xaar’s High Laydown Technology.
Direct-to-
S
h
a
p
e
Direct-to-Shape is the application where bottles and containers have the image printed directly onto their surface without the need for a label. The solution is aimed at reducing unit costs versus the application of a label. This approach can also be used as part of the identity of a brand, and provides differentiation versus other products that use paper or plastic labels. Xaar printheads are the best at printing in a vertical
mode (a frequent requirement for these applications), thanks to TF Technology.
O
t
h
e
r
m
a
r
k
e
t
s
Product
Printing
Product Printing covers printing onto all kinds of industrial objects, including consumer and promotional items,
packaging, medical, automotive, apparel, appliances, sports equipment and toys. Xaar’s printheads are particularly suitable to these applications because the printhead design enables the use of a wide range
of fluids as well as configurations options. In addition, Xaar company Engineered Printing Solutions (EPS) is a leader in this sector, providing best-fit custom printing solutions for many different applications, including promotional, packaging, medical, automotive, apparel, appliances, sports equipment and toys.
Grand-
and
Wide-Format
G
r
a
p
h
i
c
s
Grand- and Wide-Format Graphics includes both indoor and outdoor signage and advertising, including billboards, posters and point of sale advertising. It is the most mature industrial inkjet market, active for over 15 years. Xaar’s early product range was instrumental in the growth of the digital graphics industry around the world.
New
inkjet
a
p
p
l
i
c
a
t
i
o
n
s
Xaar’s Ultra High Viscosity Technology enables jetting of fluids around 100 centipoises (cP) at jetting temperature, equating to approximately 1000cP at ambient temperature – going well beyond average jetting capabilities of 10-12cP. This opens up inkjet to a wider range of applications including printing adhesives and solder masks.
Strategy
at
a
g
l
a
n
c
e
Printheads
D
e
s
i
g
n
e
d
,
d
e
v
e
l
o
p
e
d
a
n
d
manufactured by Xaar
S
u
b
Systems
Electronics, software, ink system
Ink
Print Bar
Print Engine
OEMs UDIs
S
t
r
a
t
e
g
y
a
t
a
g
l
a
n
c
e
The principal focus of our strategy is selling printheads. We can do this more effectively by providing an integrated service to our UDI and OEM customers. Their success depends in part on a cost effective product development process, getting their products successfully and quickly to market, and maintaining product stability throughout
the product lifetime.
Customers who have less experience of inkjet development projects, such as the
User
Developer
Integrators,
or
OEMs
moving
into a new application area, are looking
for a dedicated, experienced inkjet partner for printheads, sub systems (electronics, software and ink supply systems) and ink, as well as for print engines right up to fully customised solutions.
We are therefore focused on providing an integrated solution whereby our customers can access more of the printing ecosystem (the supporting elements such as ink supply systems and the electronics required for printing) – as well as the print technology (the printheads). This strategy will ultimately ensure we sell more printheads.
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t
r
a
t
e
g
y
update
E
n
h
a
n
c
i
n
g
o
u
r
integrated
p
r
o
d
u
c
t
o
f
f
e
r
i
n
g
Delivered good results
and
finished
the
year
well
The results for the year demonstrate significant progress for the business and we are extremely pleased with the continued strong performance which, despite challenging market conditions, demonstrates the positive momentum our strategy is driving throughout Xaar. Investment in capability and capacity provides us with further opportunities to accelerate our strategy and future growth. This leaves the business well placed to capitalise on this
Introduction
W
e
a
r
e
n
o
w
t
w
o
y
e
a
r
s
i
n
t
o
t
h
e
t
u
r
n
a
r
o
u
n
d
o
f
X
a
a
r
a
n
d
w
e
a
r
e
extremely pleased with what we have achieved. We have implemented a new strategy across the business, with a
n
e
w
c
o
m
m
e
r
c
i
a
l
m
o
d
e
l
w
h
i
l
s
t
i
n
v
e
s
t
i
n
g
i
n
t
h
e
b
u
s
i
n
e
s
s
.
T
h
i
s
h
a
s
s
e
e
n
s
i
g
n
i
f
i
c
a
n
t
p
r
o
g
r
e
s
s
a
s
o
l
d
c
u
s
t
o
m
e
r
s
h
a
v
e
r
e
t
u
r
n
e
d
a
n
d
n
e
w
c
u
s
t
o
m
e
r
s
a
r
e
c
o
n
t
i
n
u
i
n
g
t
o
engage with us. The speed with which this has been achieved is impressive and we have proved our strategy is working.
We have also made great progress updating our infrastructure and further strengthening the team, our products and the capabilities to deliver growth in the business.
Operationally we have strengthened the business, improved our efficiency and margins whilst continuing to build a sustainable solid platform from which to grow the business further. During the year we successfully integrated FFEI, which will enhance our commercial offering and widens our product technology offering.
We have also established an ESG Committee and committed to our Sustainability Roadmap which will become further embedded in the business and be visible in everything we do as a business.
Xaar has achieved much in the last two years and this success will help drive us further in the coming years.
performance and deliver further growth and a return to profitability. Delivering profit on an
a
d
j
u
s
t
e
d
b
a
s
i
s
o
v
e
r
t
h
e
s
e
c
o
n
d
h
a
l
f
o
f
2
0
2
1
i
s
a
key landmark achievement for the Group. It is a milestone which has been achieved quicker than planned as part of the turnaround.
Revenue
growth
Revenue for the year was £59.3 million, representing an increase of 23% relative to 2020. Organic growth before the effects of the acquisition of FFEI was 12%.
In the Printhead business we have a clear customer-focused commercial model strategy which is reaping rewards, delivering revenue growth of 14%. This approach includes removal of distribution channels,
a clear pricing strategy, and a sales process that is focused on selling the printhead based on its technical merits.
The focus has been on markets where our
technology
has
a
competitive
advantage
and
working with the customer, both Original Equipment Manufacturers (OEMs) and
User Developer Integrators (UDIs), over the entire product lifecycle to reduce their development times and, therefore time
to market, and to also provide improved aftersales support. We continue to see increased customer engagement both from existing as well as new customers.
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The product roadmap delivered two new
products
during
2021
–
Xaar
Nitrox
and
Xaar
Irix – that has broadened the Bulk printhead product range to offer advantages over the competition in existing and new markets.
R
e
v
e
n
u
e
g
r
o
w
t
h
i
n
A
s
i
a
,
e
s
p
e
c
i
a
l
l
y
C
h
i
n
a
,
h
a
s
been significant, up 33% year-on-year, with ceramics and glass customers particularly re-engaging, increasing our market share.
Revenue growth in this sector in the year was 38%.
Product Print Systems business ‘EPS’ delivered improved performance demonstrating strong revenue growth of 9%.
This follows the effective implementation of operational changes and progress in
developing a modular approach to products. As previously announced the 2021 results were impacted by non-cash adjustments relating to slow moving and obsolete inventory following the implementation of planned process improvement and strategy. This impacted the gross profit negatively by
£0.7 million of provisions and write downs.
Digital
Imaging
delivered
revenue
o
f
£5.3 million in the period from acquisition on 11 July 2021.
I
m
p
r
o
v
e
d
m
a
r
g
i
n
s
a
n
d
r
e
t
u
r
n
s
This strong revenue growth, coupled with our increased operational efficiency, saw the gross margin increasing to 34% in
2021
(2020:
27%).
We
have
invested
in
our
capability and efficiency most notably in Operations and support functions but have continued to exercise discipline in our cost management actions.
Accordingly, we can report a much reduced adjusted loss for the year of £0.6 million, compared to £3.9 million last year, and crucially we can report an adjusted profit for the second half of the year.
Pleasingly we can report positive adjusted
EBITDA
in
each
of
our
businesses,
which
is
a notable step towards full year profitability for the Group.
S
t
r
o
n
g
b
a
l
a
n
c
e
s
h
e
e
t
The Group retains a strong balance sheet
and
cash
position.
Net
cash
at
31
December
2021 was £25.1 million. This represents an improvement of £7.0 million in the year.
This has been primarily driven by the £9.3 million initial consideration received for the Xaar 3D divestment and continued strong cash generation in our Printhead business.
We have taken the opportunity to invest in inventory of £9.1 million in the year to successfully secure materials to meet
expected 2022 production requirements and
to increase our holding of finished goods.
This gives us greater assurance that we can deliver on customer demands throughout 2022. We have taken further
proactive actions to adapt product designs to accommodate alternative components, increasing our resilience to supply chain constraints.
On track with our journey,
p
l
a
n
a
n
d
s
t
r
a
t
e
g
y
a
n
d
m
o
r
e
confidence
in
our
c
a
p
a
b
i
l
i
t
y
During the last two years we have successfully re-set the Group with a new business model and established a robust platform to deliver profitable growth. The turnaround is now at the end of the first phase, we have established a clear strategy and we are ready for the next stage to achieve sustainable profitable growth.
The first phase focused on stabilising the business and establishing a clear strategy. Commercially this has seen the
Printhead business reduce complexity in its routes to market by eliminating third party distributors and selling directly to OEMs and UDIs. Our principal strategy is to provide an integrated solution for customers whereby they can access more of the printing ecosystem, to include supporting elements such as ink supply systems and the electronics required for printing. We help our customers take advantage of the Inkjet opportunity and working with Xaar means a higher chance of success by being faster to market, making our customers’ investment more profitable.
This approach has seen us deliver a more vertically integrated product offering to a wider group of customers in more market sectors.
Refreshed customer engagement
Accordingly,
we
have
regained
customers,
particularly in core sectors such as Ceramics and Glass, and we now have
significant market opportunities in 3D, Coding & Marking and Direct-to-Shape. Our 2021 revenue in the ceramics and glass sector has increased by over 40%
since
2020
and
the
number
of
OEM
projects
commissioning Xaar products has doubled year on year for each of the last two years.
Our commercial approach has also been updated with new branding and a fresh, clear communication plan which has helped to regain the trust of OEMs, making sure the advantages of Xaar technology are well understood. The level of engagement from lapsed and established customers and
our desire to listen to their needs and to work with them to find a solution, through consistent communication, indicates this has been working and we are regaining their trust.
£59.3m
Revenue
–
Continuing
o
p
e
r
a
t
i
o
n
s
in line with management expectations (2020: £48.0 million)34%
Gross
margin
–
Continuing
o
p
e
r
a
t
i
o
n
s
increased from 27% in 2020, benefiting from operational leverage in the business£5.7m
G
r
o
s
s
R
&
D
s
p
e
n
d
by continuing operations of £5.7 million, up £1.2 million on 2020 with investment focused on the ImagineX platform and product roadmap(£2.3m)
N
e
t
c
a
s
h
o
u
t
f
l
o
w
Net cash outflow from continuing operations before Xaar 3D disposal
proceeds
(2020:
£7.1
million
i
n
f
l
o
w
)
£9.3m
Cash
inflow
on
Xaar
3D
d
i
s
p
o
s
a
l
Initial cash consideration received, with a further £10.9 million contingent consideration£25.1m
Net cash Strong closing balance sheet with net cash and treasury deposits
(2020:
£18.1
million
excluding
Xaar
3
D
)
F
i
n
a
n
c
i
a
l
highlights
14
Xaar
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S
t
r
a
t
e
g
y
u
p
d
a
t
e
c
o
n
t
i
n
u
e
d
Xaar’s
position
in
the
3D
business
is
o
n
e
of technology enabler and our end goal has been, and remains, to supply printheads for use in 3D applications and not become
an OEM in the sector. That was the rationale behind our partnership with Stratasys,
a recognised leader in 3D with a proven track record and strong routes to market.
On
1
November
2021
we
sold
our
remaining
stake in Xaar 3D to Stratasys, and we will continue our relationship with them as a supplier of printheads.
Vertically integrated product offering The acquisition of print systems and printbar specialist FFEI in July 2021 further widens our product offering for our OEM
and UDI customers with a broader product range including print engines for adding effects and embellishments digitally. FFEI has been successfully integrated and strengthens Xaar’s capabilities and skills. This will accelerate Xaar’s existing growth strategy and widen the product portfolio, further engaging UDI customers. We
have a growing pipeline with a significant number of opportunities thanks to our technology advantages. This will give us further opportunities for additional vertical integration, and we continue to strengthen our offering with more products in the pipeline for 2022.
Our product roadmap, built on the ImagineX platform, has already delivered significant enhancements to the current portfolio with two products, Xaar Irix and Xaar Nitrox, launched on time during 2021.
Our EPS business performed well, increasing revenue and margins on an underlying, ongoing basis. The non-cash adjustments made in the year were necessary to rebase the business and ensure a strong financial platform from which to drive further growth. In addition, we changed the leadership of EPS and embedded the more efficient modular operational approach which will enable further margin growth. With increased control, focus and a more precise commercial approach EPS is well placed to deliver sustainable margin growth
in the coming years.
O
p
e
r
a
t
i
o
n
a
l
capability
During the year we established new corporate headquarters in Cambridge, UK and focused our Printhead operations into our main manufacturing facility in Huntingdon, UK. We also opened a new Customer Service Centre in Shenzhen,
China. These changes give the benefit of increased efficiency in how our teams work together, providing us with a better way of working more closely and collaboratively with our customers across the world and will deliver £0.7 million of annualised
cost
savings.
We are proud of how our teams have continued to respond to the difficulties
p
r
e
s
e
n
t
e
d
b
y
C
O
V
I
D
-
1
9
.
W
e
h
a
v
e
p
r
o
v
e
n
the business can operate effectively with greater efficiency whilst building greater business resilience.
During the year we have worked on embedding new values into our culture. This is an important step in changing the mindset and culture of our business and
has
seen
employees
show
engagement
and
empowerment. A cross functional project team developed an easy to remember
logo for our values, launched a new values award, which is embedded across the Group, and developed a new video which we are using for employee engagement, recruitment and induction.
Sustainability
We established an ESG Committee during the year, constituted by a cross functional internal team and supplemented with external expertise. This group, formed from representatives from across the business, has developed a co-ordinated Sustainability Roadmap that will push Xaar towards its
goal
of
‘Net
Zero
by
2030’.
The
Roadmap
has
four key pillars:
1.
Environment
2.
People
3.
Innovation
4.
Community.
Its
purpose
is
to
drive
our
ESG
goals
beyond
the
Energy
Reduction
scope
to
a
Group
wide
activity and provide an essential backbone for much of Xaar’s future investment and activity. It has the full backing of the Board and is sponsored by Alison Littley, Senior Independent Director.
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
TF
Technology
ink
r
e
c
i
r
c
u
l
a
t
i
o
n
,
Xaar printheads are capable of printing very viscous fluids reducing the need for
e
n
e
r
g
y
i
n
t
e
n
s
i
v
e
d
r
y
i
n
g
p
r
o
c
e
s
s
e
s
.
W
e
a
r
e
passionate in continuing further adoption and understanding of the environmental
benefits our products can bring to customers.
P
r
o
d
u
c
t
d
e
v
e
l
o
p
m
e
n
t
a
n
d
i
n
c
r
e
a
s
e
d
capability
In aggregate the market size across these
sectors
is
huge.
We
have
a
unique
roadmap
of product development to ensure we
offer an increasing vertically integrated commercial strategy to capitalise on this market opportunity. The ImagineX platform will deliver a number of features over the next few years which will provide significant enhancements to the current portfolio; these include:
•
Substantially improved speed and throughput (frequencies up to 150kHz, equivalent to a threefold increase in speed compared to current products)
•
A
q
u
e
o
u
s
compatibility
•
Increased throw distance to improve image quality on curved surfaces
•
Increased
robustness
to
i
m
p
r
o
v
e
the life of the printhead and maintain image quality
•
Higher viscosities enabling a broader
range
of
fluids
to
be
printed
(above
1
0
0
c
P
)
•
Higher
resolutions
(up
to
1440
d
p
i
)
.
We have made significant progress in building a world class leadership team, making some key appointments during the year which will drive the business in the
n
e
x
t
p
h
a
s
e
o
f
o
u
r
t
r
a
n
s
f
o
r
m
a
t
i
o
n
.
T
h
i
s
h
a
s
strengthened our capability and experience
a
c
r
o
s
s
t
h
e
b
u
s
i
n
e
s
s
,
m
o
s
t
n
o
t
a
b
l
y
i
n
o
u
r
Operations, Finance, Human Resources,and EH&S Management, as well as re-organising
t
h
e
s
a
l
e
s
t
e
a
m
.
T
h
i
s
i
n
c
r
e
a
s
e
i
n
o
p
e
r
a
t
i
o
n
a
l
support
includes
further
investment
in
infrastructure
such
as
IT,
manufacturing
and
supply
chain
management.
We have made strategic acquisitions
to the Group that enable us to strengthen our customer offering and we will continue to adopt this approach in the future as we look to continue increasing our capability and become a fully integrated inkjet product provider.
15
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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, such as Wide Format
Graphics,
Labels,
Packaging
and
Textiles.
The performance enhancements in our product roadmap give a clear path for OEMs to upgrade their products and maintain their product differentiation.
Development of our aqueous product remains on track, and we intend to release more details on this later in the year. The exciting opportunity this product provides is significant as we would have an unrivalled portfolio that could satisfy market demands which we are currently not able to due to our printhead architecture.
We have made strategic bolt-on acquisitions to the Group that enable us to strengthen our customer offering and we will continue to adopt this approach in the future as we look to continue increasing our capability and become a fully integrated inkjet
product provider.
The actions taken in the last two years leave us with a strong balance sheet. The strong operational gearing that exists in the business, which has already delivered good margin growth, has greater capacity to support further margin improvement in the medium term. The business is well
We have already grown market share in core, mature markets such as Ceramics & Glass and Coding & Marking. There remains further growth opportunity in these areas as our technology is best in class and we have a clear competitive advantage over our competitors due to
our
core
technologies
(TF
Technology
ink
recirculation, High Laydown Technology, Ultra High Viscosity Technology).
Increased market opportunity exists in sectors that are looking for further
digitisation of printing on which we can capitalise. We see opportunities typically in areas where fluid applications are challenging, such as Flat Panel Display, Semiconductors, Printed Electronics and Optics. We are well placed to succeed in these markets as Xaar technology offers an unrivalled method of non-contact, fluid
deposition with incredible precision, control and speed.
Other markets that already use digital printing such as architectural glass printing and 3D printing are tremendously exciting as our technology has unique benefits
that can give our customers commercial advantage in reducing costs and lead times for their products.
Outlook
The positive momentum in the business has continued in the first quarter of 2022
Due to the action taken to secure supply by investing in working capital during 2021 we believe we are well placed to satisfy customer demand for the year ahead
and we have the supply chain resilience to withstand most disruption. We are
continuing to invest in the business, adding skills, capability and capacity.
We expect an improved gross margin which will come from the continued efficiency gains we have in the business. Whilst
that enhancement won’t be at the same incremental increase as for 2021, we are confident of returning to 40% gross margins in the medium term.
Whilst we are conscious of the continuing risks arising from the economic consequences of wider global issues, and
COVID-19
continues
to
be
a
risk
to
economic
disruption, particularly in Asia, we remain on track to return the business to profitable growth and look forward to the future
with confidence.
We have the right strategy and remain confident in our ability to achieve our target of a full year profit this year.
placed
to
move
into
the
next
phase
of
i
t
s
transformation and to deliver sustainable
profitable
growth
in
the
medium
term.
Significant
opportunity
Xaar’s digital inkjet technologies are transforming print processes in a wide range of markets, and the medium- and long-term opportunity for the business remains significant.
and we remain optimistic about the short- term outlook for the business. Customer engagement and sales orders have been maintained in quarter 1 and are in line with our expectations.We anticipate continued performance improvements during 2022 with further good organic revenue growth.
John Mills
C
h
i
e
f
E
x
e
c
u
t
i
v
e
Officer
29
March
2
0
2
2
Ian Tichias Chief Financial Officer
29
March
2
0
2
2
Our
business
u
n
i
t
s
Xaar
plc
has
a
number
of
business
units
w
i
t
h
i
n
t
h
e
G
r
o
u
p
,
w
i
t
h
t
h
e
p
r
i
n
c
i
p
a
l
f
o
c
u
s
being on inkjet technology.
Xaar
Xaar
plc
plc
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1
6
Printhead Our Printhead business
unit
focuses
on
the
design,
manufacture, marketing
a
n
d
s
a
l
e
s
o
f
p
r
i
n
t
h
e
a
d
s
a
n
d
associated
products
which
are used in a variety of
a
p
p
l
i
c
a
t
i
o
n
s
s
u
c
h
a
s
C
e
r
a
m
i
c
Tile Decoration, Graphics,
D
é
c
o
r
,
L
a
b
e
l
s
a
n
d
P
a
c
k
a
g
i
n
g
as well as 3D Printing and Additive Manufacturing.
Revenue
s
e
g
m
e
n
t
£40.1m
Markets
P
r
o
d
u
c
t
P
r
i
n
t
S
y
s
t
e
m
s
P
r
o
d
u
c
t
P
r
i
n
t
i
n
v
o
l
v
e
s
p
r
i
n
t
i
n
g
all kinds of industrial and promotional objects such as medical equipment, automotive parts, tools, apparel, appliances, sports equipment and toys. Xaar
company
EPS
manufactures
and sells a range of highly
c
u
s
t
o
m
i
s
e
d
p
r
i
n
t
s
y
s
t
e
m
s
f
o
r
t
h
e
s
e
a
p
p
l
i
c
a
t
i
o
n
s
,
i
n
c
l
u
d
i
n
g
some using Xaar’s inkjet printheads.
Revenue
s
e
g
m
e
n
t
£13.9m
Markets
D
i
g
i
t
a
l
Imaging
O
u
r
d
i
g
i
t
a
l
i
m
a
g
i
n
g
c
o
m
p
a
n
y
,
FFEI Ltd, focuses on high performance digital imaging solutions – from digital
inkjet
label
presses
to
digital
pathology scanners.
In
March
2022
we
acquired
Megnajet,
market leader in the design and manufacture of industrial ink management and supply systems for digital inkjet. The acquisition is part of our strategy to offer our customers a more integrated inkjet solution.
Revenue
s
e
g
m
e
n
t
£5.3m
Markets
I
n
d
u
s
t
r
i
a
l
53%
Digital
58%
Inkjet
60%
Packaging
30%
Analogue
39%
Life Sciences
40%
Graphic
Arts
15%
Other
3%
Royalty
2%
3D
Printing
We have recently sold our remaining interest in Xaar 3D to Stratasys (see Financial Statements – note 11, page 137). Xaar 3D is developing, manufacturing and commercialising 3D printing machines with a unique 3D printing technology. The sale to Stratasys will enable Xaar 3D to succeed with their go-to-market plans.
In
addition,
we
have
developed
a
close
relationship
with
Stratasys
for future collaboration and ongoing supply of printheads.
We continue to work on other 3D printing projects which use Xaar printheads to deliver alternative 3D printing technology.
£9.3m
Cash
proceeds
r
e
c
e
i
v
e
d
£10.9m
Fair value of contingent
consideration
on
disposal
£17.9m
Gain
on
sale
of
i
n
v
e
s
t
m
e
n
t
(£246k)
Transaction
costs
on
d
i
s
p
o
s
a
l
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O
u
r
b
u
s
i
n
e
s
s
u
n
i
t
s
c
o
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t
i
n
u
e
d
Printhead
D
E
L
I
V
E
R
I
N
G
ON
O
U
R
S
T
R
A
T
E
G
Y
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summary
Product
launches
The Printhead business continues to perform well with a growing pipeline of new product developments coming from the ImagineX printhead platform.
In April we launched the Xaar Nitrox to deliver greater print speeds (up to 100 metres per minute) and uniformity for unparalleled performance across a wide variety of print applications. By the end of 2021 we already had 23 projects using
the Xaar Nitrox in progress, covering more than seven different application sectors.
We also launched the Xaar Irix in September. This printhead is targeted at our Coding & Marking customers in
particular but also offers a good solution for printing direct to products, printing functional fluids and for 3D printing applications where a highly accurate delivery of ink drops and/or longer throw distances are important. Interest from our Coding & Marking customers has been positive with six customers already evaluating the printhead.
New
opportunities
The number of customers launching new machines has increased year on year, with ten customers launching with Xaar technology during 2021. The sectors into which the machines have been launched are varied and cover labels, ceramics, direct-to-shape, 3D printing and PCB printing. Four other planned launches have been pushed to 2022 due to delays caused by COVID-19.
In June we signed a co-operation agreement to establish a ‘Joint Digital Printing Laboratory’ with the Beijing National Innovation Institute of Lightweight Ltd. (BNI) in China. We are now collaborating on R&D projects built on the innovative technologies from both parties as well as their expertise in inkjet printing. The Joint Laboratory will develop new applications in digital inkjet such
as printing glass, electronics, 3D and automotive spray painting.
O
p
e
r
a
t
i
o
n
a
l
efficiencies
Scalability of the Huntingdon factory has
been
a
focus
in
2021.
We
introduced
some
standard efficiency initiatives within the production area, restructuring the team into smaller work units. This makes it easier to train operators, easier to manage the teams on a day to day basis and easier to react to changing market demands through scaling up production quickly when necessary. In addition, a second initiative, the Xaar Excellence System, is now underway and covers Company-wide standards and processes.
Our IT Transformation Programme to establish a modern, secure and supportable IT infrastructure is also
underway. This will enable us to deliver an optimised and consistent set of
end-to-end operational processes.
The relocation of our corporate HQ from the Cambridge Science Park to the nearby
Cambridge Research Park took place in July and will generate savings of £0.7 million per annum from the start of the second half of 2021. The new global headquarters houses Xaar’s finance, HR, legal and marketing functions, as well as a new purpose-built R&D laboratory. Specifically configured
to enhance the working environment for the team, the new offices embrace
Xaar’s commitment to flexible working for employees. Also, importantly the offices provide a significantly reduced carbon footprint for Xaar.
A
m
o
v
e
t
o
w
a
r
d
s
a
n
i
n
t
e
g
r
a
t
e
d
s
e
r
v
i
c
e
We appointed an Ink Business Director in March 2021 to develop and roll out
a new ink strategy aimed at building collaborative partnerships with leading fluid manufacturers. We are working with these companies to fully optimise the fluid, not just in the printhead in a lab setting, but also throughout the machine development programme, end user integration and beyond. This ensures optimum print performance in the actual application environment, and ultimately delivers a better end result for our customers and their customers, as well as shortening time to market for all parties. For our
UDI customers we are selling fluids, manufactured by our fluid partners under the Xaar brand. This helps to tie us into
a long-term relationship with these customers and will provide an ongoing revenue stream.
We made significant progress this year towards our goal of providing an integrated inkjet solution whereby our customers can access the printing
ecosystem as well as the print technology from Xaar. In July we acquired FFEI, which is enabling us to widen our product offering (of print engines using Xaar technology) to our UDI customers.
The roadmap for our Ink Supply Systems, developed this year, will ensure that we can help customers evaluate and adopt our technology – and ultimately reduce their time-to-market. One focus in 2021
has
been
to
upgrade
the
Hydra
Ink
Supply
System for use with aqueous inks.
In March 2022 we acquired Megnajet, market leader in the design and manufacture of industrial ink management and supply systems for digital inkjet.
The acquisition is part of our strategy to offer our Printhead business unit customers a more integrated inkjet solution.
We have also developed our datapath roadmap, and are now working on delivering a rich portfolio of datapath products to help our customers develop their systems and solutions and also to ensure they can take advantage of the technology advantages available from our ImagineX platform.
Building
stakeholder
engagement
We are now building momentum with our customer-centric business model, re-engaging with past customers and
attracting new ones. Products launched this year are gaining good traction
(23 projects with the Xaar Nitrox and six customers already evaluating the Xaar Irix), and we already have ten new customer launches with Xaar printheads during 2021.
Our 720 dpi print resolution is also attracting interest in our ceramics market. Xaar has the unique ability to print at this high resolution. This capability, which
we showcased at Uniceramics, China, in June, has proven to be of interest to tile manufacturers looking to print exceptionally large tiles which are used for homeware products (for example, table tops).
In August we announced the opening of a new Customer Service Centre to better
support our Chinese customers, delivering technical support and training and providing a fast response to customer needs.
The new marketing platform that we implemented at the end of 2020 is also driving audience engagement. Our campaigns in 2021 generated a unique
r
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video views, over 15,000 meaningful engagements (likes, shares, comments) and gained us over 1,000 new followers on LinkedIn.
B
u
i
l
d
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v
i
a
b
l
e
p
r
i
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e
a
d
b
u
s
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e
s
s
with a stable future
We are making good progress with delivering our product roadmap. The launch of the Xaar Nitrox in April delivered our first high frequency printhead which can reach speeds of 100 metres per minute. We delivered increased throw distance via the Xaar Irix in September, and the aqueous programme is on
track with the printhead now in its beta testing phase. A significant focus for our marketing campaigns in H2 has been
to promote the advantages of our Ultra High Viscosity capability, with the goal of
opening
up
new
applications
which
involve
printing highly viscous fluids to achieve new functionality, such as increased product toughness or material flexibility.
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O
u
r
b
u
s
i
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e
s
s
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Printhead continued
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X
a
a
r
Nitrox
With unparalleled productivity and performance, the Xaar Nitrox lets you create without limits
Exceptional print quality, simple to use, robust, and highly reliable
Xaar
2002
H
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exceptional print quality
Xaar
1003
C
Ultimate
versatility
in
ceramic
tile decoration
Xaar
1003
U
All round reliable high quality
p
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d
industrial reliability
Xaar
502
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Industrial
reliability
and
mineral-oil free inks
Xaar
502
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Wide-Format Graphics
Xaar
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trouble-free integration
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a
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d
s
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s
Fluids
Ink
supply
s
y
s
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m
s
Print engines
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X
a
a
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Irix
2
0
Printhead – technologies
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T
F
Technology
Xaar’s TF Technology is the original and still the best ink recirculation technology available. A printhead’s architecture determines how well ink recirculation is implemented and
therefore influences the degree to which the method delivers benefits across today’s wide range of printing and jetting applications. Xaar’s TF Technology, together with the unique Hybrid Side Shooter printhead architecture, enables ink or other fluids to flow directly past the back of the nozzle during drop ejection at very high flow rates.
This ensures the nozzles are continuously primed, keeping the printhead operational and the nozzles firing and – with the ink in constant motion – prevents sedimentation and nozzle blocking, particularly in heavily pigmented inks. Any air bubbles and unwanted particles in the ink are also carried away, improving reliability, even
in the harshest industrial environment.
This makes jetting significantly more reliable compared to alternative printhead designs where convoluted ink flow paths means that recirculation is close to but not at the back of the nozzle.
The
main
benefits
of
TF
Technology
are unrivalled jetting reliability, outstanding print quality and an increased production uptime.
Ultra High Viscosity technology Xaar’s Ultra High Viscosity technology opens up a wide range of new inkjet capabilities and applications for OEMs
and manufacturers using Xaar technology. Most printheads can only jet materials with viscosities of up to 10-25 centipoise (‘cP’). Thanks to Xaar’s unique TF Technology and innovative High Laydown Technology, fluids with significantly higher viscosities – up to 100 cP – can now be jetted.
High
Laydown
T
e
c
h
n
o
l
o
g
y
Xaar’s High Laydown Technology enables a range of new applications, thanks to its ability to deposit large quantities of fluid in each pass. It makes possible printing very high levels of UV inks or high build varnish in a single pass for tactile embellishments
on labels, packaging and commercial print. Braille and label warning triangles are also possible. High Laydown Technology delivers unprecedented ink discharge rates for gloss and adhesive effects on ceramic tiles, so that effects can be printed at high line speeds.
For additive manufacturing applications,
High
Laydown
Technology
offers
increased
printing productivity which significantly accelerates build rate for parts and the ability to print a broader range of fluids including higher viscosity materials; this ultimately results in tougher 3D printed parts than those printed with standard inkjet technology.
The ability to lay down fluids with higher particle loading and particle sizes offers
advantages
such
as
an
increased
colour
gamut, opacity and special effects.
In addition, jetting higher molecular weight photopolymers for Advanced Manufacturing and 3D printing applications is made possible.
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Ready-to-use development
kits
and
an
extensive
portfolio
of
systems
components
ensures
that OEMs and UDIs can get up and running quickly
Engineers with extensive knowledge of inkjet and its
application
across
many
sectors
as well as considerable field experience. This means they are able to assist our OEMs and UDIs in the successful design, build, commissioning and post- installation support of all Xaar- based inkjet systems
A comprehensive portfolio of
products
to
cover
a
wide
range
of applications
State-of-the-art UK manufacturing facilities and an
enviable R&D department
staffed
by scientists and engineers with a wealth of inkjet industry
knowledge and expertise
W
e
a
r
e
t
h
e
o
n
l
y
t
r
u
l
y
i
n
d
e
p
e
n
d
e
n
t
inkjet technology company with over 30 years of experience. Our independence enables a flexible, collaborative approach to ensure we remain customer-centric and focus on their goals
Where
we
e
x
c
e
l
•
Continuing to deliver on the vertical integration strategy to support our goal of driving printhead sales
•
Launch
Versatex
for
our
UDI
customers
•
Launch of aqueous printhead and the ecosystem to support it (such as the datapath and ink delivery systems)
•
Launch
Sustainability
R
o
a
d
m
a
p
.
Priorities
for
2
0
2
2
2
1
O
u
r
c
o
r
e
s
t
r
e
n
g
t
h
s
a
r
e
d
e
s
i
g
n
i
n
g
,
b
u
i
l
d
i
n
g
a
n
d
i
n
t
e
g
r
a
t
i
n
g
m
a
c
h
i
n
e
s
which allow our customers to product mark their parts in a highly automated manner,
e
n
a
b
l
i
n
g
s
i
g
n
i
f
i
c
a
n
t
c
o
s
t
s
a
v
i
n
g
s
and virtually unlimited print flexibility and personalisation. We offer unparalleled service and support which in turn ensures we build long-term relationships with our customers
Where
we
e
x
c
e
l
In 2022, we will continue our efforts to standardise the base print engine platforms which become part of our customised inkjet solutions. The benefits of more standardisation will be lower costs and improved lead times.At our core, EPS is an innovative group of very talented inkjet and automation experts who utilise their creativity and experience to design, build, and deliver specialised printing systems for our customers.
Priorities
for
2
0
2
2
O
u
r
b
u
s
i
n
e
s
s
u
n
i
t
s
c
o
n
t
i
n
u
e
d
Product Print Systems
Introduction
to
the
Product
P
r
i
n
t
S
y
s
t
e
m
s
b
u
s
i
n
e
s
s
u
n
i
t
E
n
g
i
n
e
e
r
e
d
P
r
i
n
t
i
n
g
S
o
l
u
t
i
o
n
s
(‘E
P
S
’)
i
s
a
r
e
c
o
g
n
i
s
e
d
l
e
a
d
e
r
in the industrial product marking machine industry,
m
a
n
u
f
a
c
t
u
r
i
n
g
h
i
g
h
l
y
a
u
t
o
m
a
t
e
d
machines and accessories. As well as providing an industry-
l
e
a
d
i
n
g
s
e
r
v
i
c
e
a
n
d
s
u
p
p
o
r
t
,
E
P
S
o
c
c
u
p
i
e
s
a
n
i
c
h
e
p
o
s
i
t
i
o
n
a
s
o
n
e
of only a few bespoke product marking machine companies
i
n
N
o
r
t
h
A
m
e
r
i
c
a
.
What
we
achieved
in
2
0
2
1
2021
has
been
a
rebuilding
year
within
E
P
S
.
In April, we changed the leadership of EPS. Additional changes were made in Finance,
Human
Resources,
and
EH&S
Management.
The sales group was re-organised into two distinct groups. One group focuses on
selling pad print equipment and distributed inkjet printers and their related consumable items into the medical, industrial, promotional products, and other markets.
A separate group focuses on selling the bespoke inkjet systems into industrial accounts.
We achieved +9% growth in sales in 2021 and ended the year with a strong order book for bespoke systems as well as a plan for continued strong growth for 2022.
A
t
t
h
e
v
e
r
y
e
n
d
o
f
2
0
2
1
w
e
t
o
o
k
t
h
e
l
a
r
g
e
s
t
s
i
n
g
l
e
o
r
d
e
r
i
n
t
h
e
C
o
m
p
a
n
y
’s
h
i
s
t
o
r
y
(
f
o
r
m
u
l
t
i
p
l
e
u
n
i
t
s
)
w
h
i
c
h
w
i
l
l
b
e
r
e
a
l
i
s
e
d
d
u
r
i
n
g
2
0
2
2
,
a
n
d
t
h
e
f
i
r
s
t
h
a
l
f
o
f
2
0
2
3
.
T
h
e
r
e
w
e
r
e
continued challenges related to COVID-19 including no tradeshow presence and difficulty with travel, as well as regular interruptions of
w
o
r
k
s
c
h
e
d
u
l
e
s
a
n
d
s
u
p
p
l
y
i
s
s
u
e
s
.
We also made many changes in our internal procedures and business systems to allow a more focused approach to the business and better use of our resources to achieve results.
P
r
o
j
e
c
t
focus
In
2021,
EPS
designed,
built,
and
delivered
a
bespoke single pass machine for a leading player in the promotional products industry. Based on the XD-70 platform, this machine featured a six-axis robotic arm controlled
by a vision system to load parts, inline flame pre-treatment, a five-colour, six-head print engine, and servo-controlled offload accumulators for sorting of different SKUs.
Stored recipes enable the robotic arm to locate the part from the load cell, spot check the part for correct orientation and place it on a conveyor for pre-treatment. The part then continues under the printheads for decoration. Following inline UV curing, the part is conveyed to a series of “gates” that open and close according to the recipe. In this manner, parts are sorted automatically. On average, this machine can mark 1,000 parts per hour, including changeovers.
This successful implementation of single pass printing technology to the promotional products industry is an important step forward for EPS. The COVID-19 pandemic affected this market segment greatly, as the cancellation of sporting events, weddings and closure of restaurants negatively impacted sales for promotional products.
As these events start to come back online, EPS is poised to bring this disruptive technology to an established industry that is seeking new efficiencies for their product decoration services.
Xaar
plc
–
Annual
Report
and
Financial
Statements
2
0
2
1
Strategic Report
2
2
Digital
I
m
a
g
i
n
g
Introduction to FFEI
E
s
t
a
b
l
i
s
h
e
d
i
n
1
9
4
7
,
F
F
E
I
h
a
s
an impressive reputation for
d
e
v
e
l
o
p
i
n
g
i
n
n
o
v
a
t
i
v
e
a
n
d
a
w
a
r
d
winning digital inkjet and life
s
c
i
e
n
c
e
s
o
l
u
t
i
o
n
s
–
f
r
o
m
c
o
n
c
e
p
t
to delivery. Most importantly, FFEI works closely with
c
u
s
t
o
m
e
r
s
t
o
e
n
s
u
r
e
t
h
e
i
r
m
a
r
k
e
t
knowledge is transformed into the digital imaging system they need to meet their bespoke requirements. The two core FFEI application areas are digital imaging solutions for label presses and digital pathology scanners.
F
F
E
I
I
n
k
j
e
t
The inkjet side of FFEI focuses on the design and manufacture of inkjet
print engines which it sells to OEMs to incorporate in their own systems and brand as their own.
The FFEI print engine includes an ink system, a control unit to run it and mounted Xaar printheads. The OEM will take these elements and mount them into their own press to add a new print feature.
To
date,
FFEI
has
focused
on
the
labels
and packaging market where the print
engine
provides
an
efficient
way
to
a
d
d
digital embellishments to analogue presses, for example, varnish embellishment, high laydown embellishment, high opacity white, variable data coding/marking (which is
very difficult without digital capability) and spot colours.
FFEI will continue to service its own customers as before but is developing a roadmap of products for Xaar’s UDI customers which is launching in 2022 under the Xaar brand Versatex. This is a stripped back standard print engine which, because of the changes, is more
versatile and open to a range of different applications. It offers a more complete solution for the UDIs who have less inkjet experience and who are looking for a standalone engine, helping them to keep development costs down and get to market more quickly.
F
F
E
I
L
i
f
e
S
c
i
e
n
c
e
s
Digital pathology scanning technology Over ten years ago FFEI applied its digital scanning expertise to the challenge of whole slide imaging (WSI) for pathology. Today
i
t
s
a
w
a
r
d
-
w
i
n
n
i
n
g
t
e
c
h
n
o
l
o
g
y
h
a
s
b
e
e
n
successfully taken to market by a number of blue chip clients. Central to the success
o
f
t
h
e
s
e
s
c
a
n
n
e
r
s
i
s
F
F
E
I
’s
p
a
t
e
n
t
e
d
‘dynamic focus’ technology, which delivers
u
n
p
a
r
a
l
l
e
l
e
d
s
c
a
n
n
i
n
g
s
p
e
e
d
,
z
-
s
t
a
c
k
functionality and high-resolution imaging.
Whether customers are seeking to add imaging capabilities to their existing core competencies, or are planning to extend their existing imaging portfolio, FFEI can help.
Optical imaging and detection technologies developed by FFEI have been successfully applied to a number of different laboratory formats and applications in partnership with a number of blue chip companies.
Product portfolio development is ongoing and there is now a pipeline of next generation scanning technologies; some are very close to market readiness, while others require further development. FFEI is now looking for new partners to reap the rewards of these next generation scanning systems.
S
i
e
r
r
a
s
l
i
d
e
c
o
l
o
u
r
c
a
l
i
b
r
a
t
i
o
n
t
e
c
h
n
o
l
o
g
y
FFEI’s solutions include its patented Sierra slide and the unique capability to integrate with cloud-based ICC colour
management profile generators. The Sierra slide calibration technology universally standardises WSI image quality to the highest ground-truth fidelity across all digital pathology scanning systems. This ensures the true and normalised colour
of stained tissue biopsies are presented to pathologists, researchers and AI alike.
Xaar
plc
–
Annual
Report
and
Financial
Statements
2
0
2
1
Strategic Report
A culture of innovation and a keen focus on customer needs,
underpinned
with
highly
capable
and committed employees
A reputation for developing
sophisticated
solutions
from
concept to delivery
An
extensive
core
technology
patent portfolio
O
v
e
r
6
5
y
e
a
r
s
o
f
k
n
o
w
-
h
o
w
i
n
i
n
d
u
s
t
r
i
a
l
d
i
g
i
t
a
l
i
m
a
g
i
n
g
technology
Where
we
e
x
c
e
l
2
3
24
Xaar
plc
–
Annual
Report
and
Financial
Statements
2
0
2
1
Strategic Report
Business
performance
C
o
n
t
i
n
u
i
n
g
o
p
e
r
a
t
i
o
n
s
–
revenue
Revenue
for
the
Group
o
f
£59.3 million is an excellent performance for the year, representing a year-on-year
increase
of
£11.3
million
(2020:
£48.0 million) of which FFEI
represents
£5.3
million
in
the
period since acquisition.
It is a very pleasing result given the ongoing restrictions arising from COVID-19, with Printhead revenue increasing 14% and EPS 9%. Group revenues increased from £26.3 million in the first half of the year to £33.0 million in the second half driven principally by a £1.7 million increase in revenue from the EPS business. This is a strong recovery across the business demonstrating the positive customer engagement and trust that is being regained across our customer base and the continued momentum we have in the business.
Revenue from the Americas grew year-on- year across the Group, rising £3.3 million (2021: £23.6 million, 2020: £20.3 million), including £2.4 million from FFEI and despite a small drop in Printhead revenue of £0.3 million. The rise, driven by the recovery
in EPS revenue, stems from increases in sales of digital machines and peripherals demonstrating the new commercial approach is being well received with customers.
Performance in Asia, and China in particular, has been very successful in 2021. This has been the key driver for the continued overall revenue growth in
Printhead. Group revenue grew £1.3 million in the first half of the year to £5.8 million H1 2020: £4.5 million) and continued to grow in the second half to £6.2 million
(H2 2020: £5.1 million). This growth has largely been driven by the re-engagement of Chinese Ceramic OEM customers where our new product range is proving successful. Revenues in Printhead have increased year-on-year from £9.6 million to £11.9 million, a 24% increase.
This is a real proof point for the change in strategy; the removal of distribution channels, the implementation of a clear pricing strategy, and more significantly a
change in how we interact and support our customers have all helped with the speed of adoption of the Xaar 2002 together with Xaar Nitrox and Irix in China.
Revenue in EMEA has continued to rise
y
e
a
r
-
o
n
-
y
e
a
r
.
E
x
c
l
u
d
i
n
g
F
F
E
I
,
r
e
v
e
n
u
e
w
a
s
£20.9 million compared to £18.1 million, and we have seen a promising continued upward trend in revenue since H2 2019. Revenue
in the first half of the year increased £2.1 million compared to H1 2020 of £8.4 million and by £0.7 million in the second half compared to £9.7 million in H2 2020.
Printhead
revenue
for
the
year
i
n
c
r
e
a
s
e
d
£4.8 million to £40.1 million (2020: £35.3 million). Growth in the first half was 20% and in the second half was 8% as we saw continued momentum in revenue throughout the year.
Printhead revenue growth stems from the continued recovery in the key sectors of
Ceramics
&
Glass
(C&G)
with
growth
of
£5.2
million (38%). Increasing market share with our extended product portfolio and being able to demonstrate our clear technology advantages has proven successful in the Chinese Ceramics market, where we have regained trust with our customers. We have also established a market leading position
in
Glass
with
the
Xaar
2002
and
won
several
accounts in the Glass sector in 2021, with revenue in 2021 increasing 38% compared
to 2020.
Coding & Marking (C&M) revenue has remained largely flat year-on-year, while
Direct-to
-Shape
(DTS)
revenue
has
declined
with the majority of the decline taking place in the Americas which we believe will be a short-term flattening of demand.
Whilst still a relatively small part of our
b
u
s
i
n
e
s
s
,
D
T
S
w
i
l
l
p
r
o
v
e
t
o
b
e
a
n
i
n
c
r
e
a
s
i
n
g
l
y
important sector for the business and an area for potential growth in the long term and it is encouraging that we are showing how our unique technology advantages can prove successful in this area by winning new accounts and commissioning new machins by switching their production lines over to
a digital solution.
Wide Format Graphics (WFG) and Labels revenue fell slightly in the year from £6.3 million to £6.2 million. This is an area where we have seen some delays in orders, mainly COVID-19 related. As our customers are more able to access their own customer bases with a relaxation of travel restrictions, we expect this reduction to be one of timing only and to recover in 2022.
3D Printing and Advanced Manufacturing
(AVM)
have
stayed
relatively
flat
year-on-year
(2021: £2.4 million, 2020: £2.5 million) with gains in 3D Printing offset by a reduction
in revenues from AVM. As with the DTS market, the AVM market for printheads is still relatively small but growing, and we are very excited about our prospects in this area and expecting to see significant growth in
the
coming
years.
Both
3D
Printing
and
AVM
are markets where we are well positioned to take advantage of growth opportunities, but development cycles can be long, therefore, it can take several years for a customer
to reach full production and ultimately significant demand for printheads.
Revenues from Packing & Textiles remain modest. Our ability to target this sector effectively is somewhat limited by our current product range. However,
advancements in the product portfolio driven by the ImagineX platform should make this large sector more accessible in the future. Full year revenue of £0.8 million was down year-on-year (2020: £0.9 million).
Our royalty revenue stream was sold during 2019 and so we have a declining legacy royalty rate which will continue to decline in 2021 and 2022 before ceasing altogether shortly thereafter.
Revenue
from
the
EPS
business
increased
b
y
£
1
.2
m
i
l
l
i
o
n
t
o
£
1
3
.9
m
i
l
l
i
o
n
(
2
0
2
0
:
£
1
2
.7
million) as the new commercial approach has seen some significant customer order wins.
Table
A
–
Revenue
by
region
–
Continuing
o
p
e
r
a
t
i
o
n
s
£m
2021
H
1
2021
H
2
FY
2021
FY
2020
PH
EPS
Total
PH
EPS
FFEI
Total
PH
EPS
FFEI
Total
PH
EPS
Total
Americas
3.9
6.1
10.0
3.4
7.8
2.4
13.6
7.3
13.9
2.4
23.6
7.6
12.7
20.3
Asia
5.8
–
5.8
6.1
–
0.1
6.2
11.9
–
0.1
12.0
9.6
–
9.6
EMEA*
10.5
–
10.5
10.4
–
2.8
13.2
20.9
–
2.8
23.7
18.1
–
18.1
Total
20.2
6.1
26.3
19.9
7.8
5.3
33.0
40.1
13.9
5.3
59.3
35.3
12.7
48.0
*
Includes
plc
£0.2
million
3D
service
fee
allocated
to
PH
and
EMEA.
Figures
subject
to
r
o
u
n
d
i
n
g
.
25
Xaar
plc
–
Annual
Report
and
Financial
Statements
2
0
2
1
Strategic Report
This has been driven particularly by digital inkjet machine sales with growth of 11%, which is particularly pleasing as this will be the core focus for the business in the future. Pad print machine revenue has also increased (8%) albeit with a decline year-on-year in the second half. The focus on consumables and accessory sales has contributed to the growth as a result of the change in commercial approach, with increased revenue from ink, plates and
parts. We see a strengthening pipeline and order book and we are well placed to deliver further growth in 2022 as companies start to invest in capital equipment again and those markets affected by the pandemic, such as Ad Speciality and Promotional Products, start to recover.
C
o
n
t
i
n
u
i
n
g
o
p
e
r
a
t
i
o
n
s
–
gross profit
Gross profit for the year increased by £7.2 million to £20.2 million (2020: £13.0 million) with an increase in the gross margin to 34% (2020: 27%). This was primarily the result of an improvement in the Printhead business unit’s gross profit which grew from 27%. We increased utilisation of the factory as throughput was increased during
T
a
b
l
e
B
–
p
r
i
n
t
h
e
a
d
r
e
v
e
n
u
e
£m
2021
H
1
2021
H
2
FY
2021
FY
2020
Var
V
a
r
%
Ceramics & Glass
9.5
9.5
19.0
13.8
5.2
+38%
C&M
and
D
T
S
5.9
5.2
11.1
11.5
-
0.4
-
3%
WFG
&
L
a
b
e
l
s
3.4
2.8
6.2
6.3
-
0.1
-
2%
3D Printing & AVM
1.0
1.4
2.4
2.5
-
0.1
-
4%
Packaging & Textiles
0.2
0.6
0.8
0.9
-
0.1
-
1
1
%
Royalties,
Commissions
&
F
e
e
s
1
0.2
0.4
0.6
0.4
0.2
+50%
Total
20.2
19.9
40.1
35.3
4.8
14%
1 Royalties in H2 includes £0.2 million relating to Xaar / Stratasys service fee administered by Group. Figures (£m) and percentages (%) are subject to rounding.
Table
C
–
EPS
r
e
v
e
n
u
e
£m
2021
H
1
2021
H
2
FY
2021
FY
2020
Var
V
a
r
%
Digital inkjet
3.6
4.4
8.0
7.2
0.8
+11%
Pad
printing
2.4
3.1
5.5
5.1
0.4
+8%
Other
0.1
0.3
0.4
0.4
–
–
Total
6.1
7.8
13.9
12.7
1.2
+9%
*
Figures
(£m)
and
percentages
(%)
are
subject
to
r
o
u
n
d
i
n
g
.
the year resulting in better overhead cost recovery, supporting margin gains. We
have
worked
hard
on
cost
saving
initiatives
during the year and as we increase volumes there should be further scope for improved overhead recoveries and accordingly margin gains. During 2021 we proactively worked to secure raw materials which should reduce further supply chain risks.
Issues in supply chains globally are well known and documented, particularly so for semi-conductors and other technology materials, with increasing cost pressures.
Our actions in Q4 should insulate us from further costs and mean we are able to meet customer demand throughout 2022. We have increased our working capital with inventory rising £9.1 million (2020: £4.8 million reduction in inventory), This higher level of both raw materials and finished goods is a deliberate, prudent approach which we believe will see us well placed to both manage customer requirements and further insulate the business from external supply chain risks whilst utilising the high level of operational gearing to deliver further improvements in the gross margin.
Gross
profit
for
the
EPS
business
d
e
c
l
i
n
e
d
£0.2 million in the year to £3.2 million (2020:
£3.4 million) with gross margin down year- on-year (2021: 23%, 2020: 27%). Actions taken to refocus the business on future growth opportunities mean 2021 results have been impacted by non-cash write down adjustments totalling £0.7 million. These are largely related to inventory we now consider to be slow moving or obsolete.
Excluding the non-cash adjustments mainly relating to slow moving and obsolete inventory, the underlying gross margin was 28%, largely due to the resetting of the modular strategy by new management.
Excluding the £0.7 million of adjustments recorded by EPS in 2021, the gross profit
for
the
Group
would
have
improved
to
£20.9
million, with a gross margin of 35%.
C
o
n
t
i
n
u
i
n
g
o
p
e
r
a
t
i
o
n
s
–
R&D
R&D spend of £5.7 million was up £1.2 million on 2020 (2020: £4.5 million). This reflects the investment in the ImagineX platform which will be central to our long- term growth, with the added investment in FFEI of £0.4 million. The total increase is in proportion to our revenue growth
and maintains a spend/revenue ratio of approximately 10%. Sales and marketing
spend
for
the
year
was
£6.3
million
(2020:
£6.0
million).
The
increase
in
spend
of
£0.3
million year-on-year reflects the focus
on sales and business development in the Printhead business unit following the
restructuring of the business in the second half of 2020. Savings were seen in both
the Printhead and EPS businesses due to COVID-19 which limited our ability to visit customers and led to the cancellation of the majority of tradeshows which one, or both, businesses would have attended.
C
o
n
t
i
n
u
i
n
g
o
p
e
r
a
t
i
o
n
s
–
expenses
G
e
n
e
r
a
l
a
n
d
a
d
m
i
n
i
s
t
r
a
t
i
v
e
e
x
p
e
n
s
e
s
i
n
c
r
e
a
s
e
d
£
2
.1
m
i
l
l
i
o
n
f
r
o
m
£
8
.0
m
i
l
l
i
o
n
i
n
2020 to £10.1 million in 2021. This increase largely relates to planned investment in key
areas
of
the
business
and
infrastructure,
including operations, IT and finance, offset
by
£0.3
million
related
to
trading
foreign
e
x
c
h
a
n
g
e
g
a
i
n
s
i
n
2
0
2
1
,
a
s
a
r
e
s
u
l
t
o
f
t
h
e
e
x
c
h
a
n
g
e
r
a
t
e
v
o
l
a
t
i
l
i
t
y
r
e
s
p
o
n
s
e
t
o
C
O
V
I
D
-
1
9
.
Impairment reversals on financial assets were £0.4 million (2020: £0.9 million).
This reversal predominantly relates to a distribution channel used by the Printhead business and the collection of a customer debt previously provided for.
Other operating income in 2020 of £0.8 million related to the PPP loan taken out by the EPS business in the US which met all qualifying criteria to be forgiven.
Restructuring and transaction costs of £1.4 million (2020: £0.8 million) predominantly relate to re-organisation costs, acquisition related professional fees and additional costs relating to the dilapidation and exit of the office on the Cambridge Science Park.
26
Xaar
plc
–
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Report
and
Financial
Statements
2
0
2
1
Strategic Report
B
u
s
i
n
e
s
s
p
e
r
f
o
r
m
a
n
c
e
c
o
n
t
i
n
u
e
d
T
a
b
l
e
D
–
M
o
v
e
m
e
n
t
i
n
n
e
t
c
a
s
h
*
(
i
n
c
l
u
d
i
n
g
3
D
)
*
Net
cash
is
defined
as
cash
and
cash
equivalents,
plus
treasury
d
e
p
o
s
i
t
s
.
Profit
for
the
y
e
a
r
The Group profit for the year was £14.2
million
(2020:
£14.7
million
loss)
of
w
h
i
c
h
£16.2 million is attributable to the owners of the Company (2020: £11.7 million loss), with a £2.0 million loss to non-controlling interests (2020: £3.0 million loss). The total basic earnings per share attributable to shareholders is 20.9p (2020: loss 15.2p).
C
a
s
h
generation
The Group retained a healthy cash balance of £25.1 million at the year end, representing an increase of £4.9 million during the year, comprising a cash outflow from continuing operations of £2.3 million, with discontinued Xaar 3D operations utilising £2.1 million, being offset against cash proceeds received for the sale of Xaar 3D of £9.3 million.
Operating cash inflow for continuing operations before working capital was £2.7 million due to improved aEBITDA of £3.2 million delivered principally in our Printhead division.
As a result of the managed investment in inventory, working capital saw an outflow of £3.4 million, with improvements in
r
e
c
e
i
v
a
b
l
e
s
a
n
d
p
a
y
a
b
l
e
s
h
e
l
p
i
n
g
t
o
o
f
f
s
e
t
C
o
n
t
i
n
u
i
n
g
o
p
e
r
a
t
i
o
n
s
–
profit
The profit before tax from continuing operations under IFRS was £1.0 million in 2021 (2020: £4.3 million loss). Basic earnings per share from continuing operations was 0.9p (2020: loss 5.7p).
The performance of the Printhead business improved £6.5 million from a £4.3 million loss in 2020 to a £2.2 million profit before tax in 2021, driven by increased sales, a much improved gross margin, and a reduction in operating expenditure. The EPS business went from a £0.3 million profit in 2020 to a
£0.9 million loss in 2021 due to the impact arising from the write off and provisioning of legacy inventory. Excluding this one-off
impact, the EPS business made a small loss which given the underlying performance of the business should see turn this into profit during 2022.
FFEI contributed a profit before tax of £0.4 million since acquisition on 11 July 2021.
In calculating the adjusted loss before tax we have adjusted for gains on derivative financial liabilities of £2.9 million (2020:
£0.1 million) and fair value gains on financial
a
s
s
e
t
s
o
f
£
1
.0
m
i
l
l
i
o
n
(
2
0
2
0
:
n
i
l
)
a
l
o
n
g
s
i
d
e
restructuring
costs
of
£1.4
million,
foreign
e
x
c
h
a
n
g
e
l
o
s
s
e
s
o
n
i
n
t
r
a
-
g
r
o
u
p
l
o
a
n
s
o
f
£0.1
million,
and
share-based
payments
o
f
£0.7 million with an R&D expenditure credit of £0.3 million and amortisation of acquired intangible assets of £0.4 million (see
Financial
Statements
–
note 4
on
page
130).
The adjusted loss before tax from continuing operations was £0.6 million, compared to
£3.9 million loss in 2020. This is a significant step forward for the business, emphasised by the delivery of adjusted profit in the second half of 2021. The adjusted EBITDA for continuing operations in the year was
£3.2
million
(2020:
£0.1
m
i
l
l
i
o
n
)
.
Discontinued
operations
Due to the divestment of the remaining investment in Xaar 3D, completed on 1 November 2021, the results are classified as discontinued operation. The business was classified as an asset held for sale as at 31 December 2020.
A £13.5 million profit was recorded in relation to discontinued operations (2020: £10.3 million loss) with cash outflows for the period of £1.9 million (2020: £12.1 million). The
Thin Film business, which was classified as
d
i
s
c
o
n
t
i
n
u
e
d
i
n
2
0
1
9
,
r
e
c
o
r
d
e
d
a
l
o
s
s
o
f
£
0
.2
million (2020: £3.7 million) which related
to inventory commitments and supplier liabilities. All liabilities regarding the Thin
F
i
l
m
b
u
s
i
n
e
s
s
h
a
v
e
n
o
w
b
e
e
n
s
e
t
t
l
e
d
.
T
h
e
3
D
business recorded an operating loss of £4.2 million in 2021 (2020: £6.4 million loss).
T
h
e
G
r
o
u
p
h
a
s
r
e
c
o
g
n
i
s
e
d
a
g
a
i
n
o
n
t
h
e
sale of the investment in subsidiary of
£17.9 million, comprising net cash received of £9.3 million, with contingent consideration at the transaction date of £10.9 million,
l
e
s
s
t
r
a
n
s
a
c
t
i
o
n
c
o
s
t
s
o
f
£
0
.2
m
i
l
l
i
o
n
.
Basic earnings per share from discontinued operations was 20.0p (2020: loss 9.5p).
some of the £9.1 million increase in inventory.
The Group maintains a strong disciplined focus on cash, and this will continue throughout 2022. During 2021, investing activities saw a cash spend of £2.3 million, mainly on infrastructure and IT projects.
The business has a clear plan and strategy which the strong 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. We will also continue to invest internally to ensure we have the operational capacity and efficiency to meet future demand, alongside investment in our product roadmap development.
S
t
r
o
n
g
b
a
l
a
n
c
e
s
h
e
e
t
Non-current assets increased £22.7 million in the year from £24.7 million to £47.4 million. This was driven by the increase
in goodwill following the acquisition of FFEI Limited of £0.7 million, along with an
increase in intangible assets of £3.8 million. The identification of financial assets at fair value arising from the sale of 3D assets was
£10.9 million plus revaluation through profit and loss at year end of £1.0 million (2020:
£nil). Additionally, there were increases in right-of-use assets of £7.3 million, and a
£0.9 million reduction in property, plant and equipment as new purchases were controlled in line with the Group’s cash focus.
£'000
2021
2020
Cash & treasury deposits – Continuing operations
25,051
18,117
Cash & treasury deposits – 3D operations
–
2,120
Cash
&
treasury
deposits
at
the
end
of
the
y
e
a
r
Cash & treasury deposits at the beginning of the year
25,051 20,237
20,237 25,322
T
o
t
a
l
n
e
t
c
a
s
h
i
n
f
l
o
w
/
(
o
u
t
f
l
o
w
)
4,814
(5,085)
Effect of foreign exchange rate changes on cash balances
110
57
Increase/(Decrease)
in
net
cash
for
the
G
r
o
u
p
4,924
(5,028)
Consisting
of:
Total
cash
(outflow)
/
inflow
from
continuing
o
p
e
r
a
t
i
o
n
s
(2,342)
7,073
Cash
outflow
from
Xaar
3D
b
u
s
i
n
e
s
s
(2,109)
(7,018)
Xaar
3D
–
Proceeds
from
share
capital
and
share
s
a
l
e
9,272
–
Net
cash
inflow
(outflow)
from
Thin
Film
o
p
e
r
a
t
i
o
n
103
(5,083)
Increase/(Decrease)
in
net
cash
for
the
G
r
o
u
p
4,924
(5,028)
27
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plc
–
Annual
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Financial
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Strategic Report
Current assets, excluding the disposal group assets held for sale, increased £18.4 million from £38.1 million in 2020 to £56.5 million.
A significant proportion of this increase is attributable to the increase in inventories of £9.1 million to £18.8 million (2020:
£9.7 million), associated with the managed investment in our supply chain capability. Trade and other receivables increased by
£2.5 million to £12.1 million (2020: £9.6 million) and cash and cash equivalents (including treasury deposits) increased by
£7.0 million to £25.1 million (2020: £18.1 million), with current tax assets increasing by £0.1 million to £0.5 million (2020: £0.4 million). Each of these were primarily driven by the consolidation of FFEI.
The
3D
business
was
classified
as
h
e
l
d
for sale with £10.0 million of assets in 2020 and disposed of in 2021.
Current liabilities, excluding liabilities associated with Xaar 3D (held for sale)
in
2020
of
£1.6
million,
increased
by
£8.7
million to £23.0 million (2020: £14.3 million) primarily due to the increase in trade and other payables of £11.6 million to £21.5 million (2020: £9.9 million), as a result of the consolidation of FFEI. A reduction in the provision balance of £0.2 million arose from the utilisation of the £0.3 million restructuring provision in the year, offset
by
an
increase
in
warranty
p
r
o
v
i
s
i
o
n
of £0.1 million. Current lease liabilities increased by £0.1 million to £1.2 million (2020: £1.1 million), with the disposal of Xaar 3D also removing the liability arising from derivative financial instrument, of
£2.9
million.
Non-current liabilities increased by £10.7 million to £12.2 million (2020: £1.5 million), which mainly relate to lease liabilities recorded under IFRS 16 for property, which
i
n
c
r
e
a
s
e
d
b
y
£
7
.0
m
i
l
l
i
o
n
t
o
£
8
.5
m
i
l
l
i
o
n
(
2
0
2
0
:
£1.5 million) in the year, alongside recognising a dilapidation provision on leases of £0.3 million (2020: £nil) and long-term liability
of £3.4 million for the deferred consideration on the acquisition of FFEI Limited.
Dividend
No dividend has been declared for 2021, as the Board believes that prioritising cash for continued investment in the business at this stage of our rebuilding programme will deliver more compelling returns for shareholders in the medium term.
T
a
b
l
e
E
–
C
a
s
h
f
l
o
w
t
a
b
l
e
–
C
o
n
t
i
n
u
i
n
g
o
p
e
r
a
t
i
o
n
s
(
e
x
c
l
u
d
i
n
g
3
D
)
2021
2020
aEBITDA
Restructuring and transaction expenses Depreciation of right-of-use assets Government grant (PPP loan)
Other
3,183
(1,404)
871
–
9
0
62
(754)
1,107
819
144
Operating
cash
flows
before
movement
in
working
c
a
p
i
t
a
l
2,740
1,378
Movement
in
working
c
a
p
i
t
a
l
(3,383)
6,735
Cash
(utilised)
/generated
by
o
p
e
r
a
t
i
o
n
s
(643)
8,113
Income
taxes
r
e
c
e
i
v
e
d
Net cash used in investing and other financing activities
288
(1,987)
351
(1,391)
Net
(decrease)
/
increase
in
cash
and
cash
equivalents
from continuing operations
(2,342)
7,073
28
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Financial
Statements
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1
Strategic Report
Sustainable
and
responsible
b
u
s
i
n
e
s
s
Working in responsible ways
A
s
t
r
o
n
g
b
e
l
i
e
f
i
n
r
e
s
p
o
n
s
i
b
i
l
i
t
y
T
h
e
G
r
o
u
p
s
t
r
o
n
g
l
y
b
e
l
i
e
v
e
s
that effective management
o
f
t
h
e
E
S
G
a
g
e
n
d
a
i
s
i
n
t
e
g
r
a
l
t
o
b
u
s
i
n
e
s
s
s
u
c
c
e
s
s
.
T
h
e
G
r
o
u
p
is not only compliant with
all relevant regulation and
l
e
g
i
s
l
a
t
i
o
n
b
u
t
h
a
s
i
n
c
r
e
a
s
i
n
g
l
y
focused on enhancing the working environment for our employees and minimising
the environmental impact of
o
u
r
m
a
n
u
f
a
c
t
u
r
i
n
g
p
r
o
c
e
s
s
e
s
.
There is internal reporting of
k
e
y
m
e
t
r
i
c
s
t
o
e
n
s
u
r
e
c
o
n
t
i
n
u
o
u
s
improvement throughout the business, and each member
of staff is expected to take individual responsibility for their
c
o
n
t
r
i
b
u
t
i
o
n
a
n
d
t
o
w
o
r
k
t
o
g
e
t
h
e
r
to achieve shared goals.
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 significant impact in reducing energy
consumption
(by
as
much
as
55%),
water
consumption (by up to 60%) and CO 2 emissions (by up to 95%), in addition
to reducing pollution and waste materials.
S
u
s
t
a
i
n
a
b
i
l
i
t
y
g
o
v
e
r
n
a
n
c
e
structure
In the second half of 2021 we established a more formal ESG governance structure and formed a Sustainability team with accountability to the Board. The team, formed from representatives across the business, has developed a co-ordinated
ESG
Roadmap
that
will
push
Xaar
towards
its
“Net
Zero
by
2030”
goal.
The
R
o
a
d
m
a
p
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. The Roadmap will provide an essential backbone for much of Xaar’s future investment and activity.
Xaar is committed to reducing its impact on the environment wherever possible, with Senior Independent Director Alison Littley having specific responsibility for ESG matters.
29
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Cross functional team tasked with looking at opportunities and executing these
Selected cross function team, meetings as required to identify, develop and update roadmap, with external support
Sustainability
t
e
a
m
G
l
o
b
a
l
O
p
s
D
i
r
e
c
t
o
r
, G
r
o
u
p
H
R
D
i
r
e
c
t
o
r
, C
o
r
p
o
r
a
t
e
F
i
n
a
n
c
e
D
i
r
e
c
t
o
r
and Company Secretary, Head of Marketing, External Sustainability Comms Advisor
and
Group
Sustainability
L
e
a
d
Review,
assess
and
track,
roadmap
and
established
g
o
a
l
s
ESG
C
o
m
m
i
t
t
e
e
A
l
i
s
o
n
L
i
t
t
l
e
y
,
S
e
n
i
o
r
I
n
d
e
p
e
n
d
e
n
t
D
i
r
e
c
t
o
r
Define corporate strategic vision for ESG and sustainability, approving Group goals
Board
and
Executive
M
a
n
a
g
e
m
e
n
t
Facilities and EHS site team which drives completion of projects
Energy
Efficiency
t
e
a
m
C
a
r
b
o
n
N
e
t
Z
e
r
o
t
e
a
m
Environment
Environmental best practice, our investment in sustainable manufacturing and improving operational efficiencies remain key areas of business focus. The Group fully complies with local and national regulatory requirements in respect of the environment relating to its 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 environment management reviews and audit programmes designed
to measure our progress in relation to our policy statement and objectives.
Climate
change
We
have
escalated
climate
change
from
an emerging risk to a principal risk as part of our risk management process.
i See Risk management on page 44
Our aspiration is to lead our industry in environment and sustainability, in order to minimise the impact we and our products have on the world around us. We have set the aspiration to be ‘Net Zero by 2030’ and to drive sustainable growth and innovation for the zero carbon economy.
i See Innovation on page 34
In 2022, we will assess the risks and opportunities of climate change to deliver activities that improve our resilience by either mitigating or adapting against physical and transitional risks. This will include a commitment to both setting Science Based Targets and evaluating the UN Sustainable Development Goals to determine those of primary importance to the Group.
O
u
r
E
S
G
R
o
a
d
m
a
p
–
f
o
u
n
d
e
d
o
n
f
o
u
r
p
i
l
l
a
r
s
The
ESG
Roadmap
aligns
with
the
Xaar
EPIICC
v
a
l
u
e
s
i Read more about EPIICC on page 32
Environment People
Innovation
Community
Leading
the
way
i
n
A
n
e
m
p
l
o
y
e
r
o
f
c
h
o
i
c
e
b
y
E
n
c
o
u
r
a
g
i
n
g
m
o
r
e
s
u
s
t
a
i
n
a
b
l
e
Actively
engaging
with
o
u
r
environmental sustainability putting our people, their
a
p
p
r
o
a
c
h
e
s
t
o
d
e
s
i
g
n
,
communities to provide
for the industrial inkjet potential and wellbeing at the
m
a
n
u
f
a
c
t
u
r
e
,
t
e
c
h
n
o
l
o
g
y
a
n
d
practical, effective, lasting
technology
sector.heart of all we do.
collaboration across the whole
support that benefits society.
product lifecycle.
i
R
e
a
d
m
o
r
e
o
n
p a g e 2 9
i
R
e
a
d
m
o
r
e
o
n
p a g e 3 1
i
R
e
a
d
m
o
r
e
o
n
p a g e 3 4
i
R
e
a
d
m
o
r
e
o
n
p a g e 3 5
Sustainable
and
responsible
business
c
o
n
t
i
n
u
e
d
30
Xaar
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and
Financial
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2
1
Strategic Report
C
a
r
b
o
n
/
g
r
e
e
n
h
o
u
s
e
g
a
s
e
m
i
s
s
i
o
n
s
A key Group activity at Xaar has been to identify opportunities, and drive continual improvement in energy efficiencies. We have seen reductions in energy usage and
greenhouse
gas
emissions
of
the
Company
recorded in Scope 1 and 2 since 2015.
i See Greenhouse gas emissions
statement
on
page 41
As part of the development to ensure affordable and clean energy, Xaar has entered into a supply contract during 2021 for the supply of green electricity from a renewable source in the UK. The target is to achieve 100% from renewable sources in the UK and to investigate methods to roll this out to other subsidiaries and locations throughout the Group.
All Group UK manufacturing locations are now supplied with certified carbon free electricity. Offices and laboratories will convert where green energy is available in 2022.
Carbon
offset
During 2021, Xaar offset all 2020 Scope 1
and
2
carbon
emissions
(1,815
tCo
2
e)
for
the
Printhead business. We purchased trees
to be planted in the UK, and Amazon tree
p
r
o
t
e
c
t
i
o
n
(
1
,0
0
0
t
r
e
e
s
= 1,0
0
0
t
o
n
n
e
s
C
o
2
e
)
.
In addition we offset 815 tCo 2 e purchasing solar cookers as part of the Heqing Solar Cooker Project for poor rural farmers in remote areas of China to replace coal for cooking and hot water needs.
In 2022 we will continue to offset our residual Scope 1 and Scope 2 carbon emissions, whilst we investigate and identify the full extent of the boundary in relation to our Scope 3 emissions which will be added to the offset in the future.
Waste
Xaar strives to reduce the amount of waste we produce, ensuring that all waste is disposed of ethically and legally through responsible waste handlers.
In
2021,
the
Group
set
a
recycling
target
of
zero waste to landfill, with any waste not recycled being sent to a waste to energy recovery process.
•
Electronic
waste:
The
Group
is
compliant
with WEEE (Waste Electrical and Electronic Equipment) directives as required under UK and EU legislation.
Our waste handler Veolia has provided confirmation that zero waste went to landfill in 2021.
0kg
Landfill
13.48Kkg
W
a
s
t
e
diverted
9,692kg
W
a
s
t
e
recycled
Plastics
and
p
a
c
k
a
g
i
n
g
Xaar initiated a project to remove packaging complexity and improve sustainability, introducing new packaging for its printhead products in 2020. This project to remove plastic as a packaging material has reduced
o
u
r
p
l
a
s
t
i
c
c
o
n
s
u
m
p
t
i
o
n
b
y
1.2
t
o
n
n
e
s
p
e
r
y
e
a
r
.
Significant improvements in the use of fully recyclable and biodegradable cardboard packs during 2021 led to all printheads being shipped in boxes made from a mix of recycled and new material – whereby at least 70% of the printhead box and 85% of the cardboard inserts are from a recycled source.
In 2022 the Xaar Logistics team continues to focus on the remaining peripheral packaging boxes, with aspirations to convert all packing materials to be fully recyclable by mid-2022.
Biodiversity
Biodiversity is the key to healthy ecosystems, to provide us with the soils, nutrients, pollinators (75% of the world’s crops are pollinated by insects), food and water that we need to survive.
As outlined in Carbon offset, to achieve carbon neutrality we are supporting action to protect trees in the Amazon, and have planted 1,000 trees in the UK. In 2022,
we are looking to support and promote local employee campaigns, starting with the introduction of a beehive on site in Huntingdon, UK, and the distribution of wild flower seeds to employees.
In the medium term we will link biodiversity improvements with the employee wellbeing programme in developing outside spaces and garden areas for employees to actively promote physical and mental health.
None of our sites are located in or adjacent to protected areas.
Water
We have determined that 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.
•
Usage: Water usage in Huntingdon operations is limited to domestic use.
We
regularly
monitor
and
record
water
usage, and utilise water efficient taps and
c
i
s
t
e
r
n
s
.
•
Emissions: Xaar has a permit to discharge issued by Anglian Water; 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.
Air
•
Quality: 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.
•
Emissions: Xaar has a permit issued by Huntingdon District Council due to the business using more than 2 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/Nm 3. 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.
Printhead
water
u
s
a
g
e
2021
2020
F
r
e
s
h
w
a
t
e
r
u
s
a
g
e
(
m
3
)
5,000
5,087
Intensity ratio (m 3/£m
t
u
r
n
o
v
e
r
–
e
x
c
l
.
r
o
y
a
l
t
i
e
s
)
127
146
E
f
f
l
u
e
n
t
a
n
d
w
a
s
t
e
w
a
t
e
r
(m 3)
4,542
4,984
31
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Hazardous
materials
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
H
u
m
a
n
rights
The Group respects all human
r
i
g
h
t
s
a
n
d
r
e
g
a
r
d
s
t
h
o
s
e
r
i
g
h
t
s
relating
to
non-discrimination,
fair treatment and respect
for privacy to be the most relevant and to have the greatest potential impact on
i
t
s
k
e
y
s
t
a
k
e
h
o
l
d
e
r
g
r
o
u
p
s
o
f
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 product that contains 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. 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.
C
o
d
e
o
f
C
o
n
d
u
c
t
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:
•
Anti-bribery and Corruption Policy
•
Confidential Information Policy
•
Corporate
Criminal
Offence
P
o
l
i
c
y
•
Data Protection Policy
•
Employee
Share
Dealing
C
o
d
e
•
Email and Internet Policy
•
Gifts, Entertainment and Hospitality Policy
•
HS&E
Policy
S
t
a
t
e
m
e
n
t
s
•
Sanctions
Policy
•
Whistle
blowing
P
o
l
i
c
y
.
Each year the Group requires all employees to read and confirm that they understand and comply with these policies.
i
S
e
e
G
r
o
u
p
p
o
l
i
c
i
e
s
o
u
t
l
i
n
e
d
i
n
t
h
e
N
o
n
-
f
i
n
a
n
c
i
a
l
i
n
f
o
r
m
a
t
i
o
n
s
t
a
t
e
m
e
n
t
o
n
p a g e 5 6
Whistleblowing
W
e
h
a
v
e
a
W
h
i
s
t
l
e
b
l
o
w
i
n
g
P
o
l
i
c
y
t
h
a
t
e
n
c
o
u
r
a
g
e
s
o
p
e
n
a
n
d
h
o
n
e
s
t
c
o
m
m
u
n
i
c
a
t
i
o
n
w
h
e
r
e
i
n
c
i
d
e
n
t
s
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 have been no whistleblowing inciden ts or reports by senior management to the Audit Committee.
Sustainable
and
responsible
business
c
o
n
t
i
n
u
e
d
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M
o
d
e
r
n
slavery
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
G
r
o
u
p
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.
H
e
a
l
t
h
&
s
a
f
e
t
y
a
n
d
e
n
v
i
r
o
n
m
e
n
t
Xaar has manufacturing sites in Huntingdon, Hemel Hempstead, 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.
U
K
H
e
a
l
t
h
&
S
a
f
e
t
y
r
e
p
o
r
t
s
2021
2020
RIDDORs*
0
0
Accidents
9
6
Incidents
11
9
Near misses
5
7
*
Reporting of Injuries, Diseases and Dangerous Occurrences Regulations.
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. 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
S
y
s
t
e
m
m
o
d
e
l
l
e
d
o
n
O
H
S
A
S
1
8
0
0
1
/
H
S
G
6
5
in Cambridge, Huntingdon and Hemel Hempstead.
Equality
and
d
i
v
e
r
s
i
t
y
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 requested 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:
•
race, colour, nationality (including citizenship), ethnic or national origins;
•
gender, gender reassignment, sexual orientation, marital or civil partnership status;
•
religious or political beliefs or affiliations;
•
disability, impairment or age;
•
real or suspected infection with HIV/AIDS;
•
membership of a trade union;
•
pregnancy,
maternity
and
p
a
t
e
r
n
i
t
y
;
and
that
they
should
not
be
disadvantaged
by unjust or unfair conditions or requirements.
I I C
C
E
v
e
r
y
t
h
i
n
g
w
i
t
h
P
a
s
s
i
o
n
We care about our technology, our products, our partners and each other.Innovative We always look for new, better solutions.Integrity
We
deliver
on
our
p
r
o
m
i
s
e
s
.
Creative We push the boundaries of what’s possible.Collaborative We work together as a team and with our clients.
A
value-led
c
u
l
t
u
r
e
E
P
33
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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 individual performance and Group business targets and, in the UK, have the opportunity to participate in an HMRC approved Share Save Scheme and Share Incentive Plan.
B
a
s
e
d
o
n
t
h
e
c
l
o
s
i
n
g
h
e
a
d
c
o
u
n
t
a
t
31 December the split of staff by gender was as follows:
2020
2021
(restated)
M
a
l
e
/
Male/
Female
Female
All employees
350/105
311/77
Directors
4
/
1
4/1
S
e
n
i
o
r
m
a
n
a
g
e
r
s
3
9
/
7
27/5
Employees
307/97
280/71
The split between senior managers and employees (inc. agency staff) has been redefined and 2020 restated.
CEO
pay
gap
r
a
t
i
o
The following table sets out the ratio of the
CEO’s
total
remuneration
in
respect
of
FY21
(taken from the single figure table on page 92) to the 25 th percentile, 50 th percentile
(i.e. the median) and the 75 th percentile full-time equivalent (FTE) of the Group’s UK employees. In line with the applicable regulations, the corresponding ratios for 2020 are also included.
2021
2020
Method
O
p
t
i
o
n
A
O
p
t
i
o
n
A
25 th percentile
16:1
15:1
M
e
d
i
a
n
p
a
y
r
a
t
i
o
11:1
11:1
75 th percentile
7:1
8:1
i Further information is provided in the
R
e
m
u
n
e
r
a
t
i
o
n
C
o
m
m
i
t
t
e
e
r
e
p
o
r
t
on
page 9 8
Gender
pay
g
a
p
Gender pay reporting is required for
c
o
m
p
a
n
i
e
s
w
i
t
h
o
v
e
r
2
5
0
e
m
p
l
o
y
e
e
s
.
X
a
a
r
is reporting as Xaar Plc, including all UK subsidiaries. The snapshot date for Xaar’s
d
a
t
a
i
s
5
A
p
r
i
l
2
0
2
1
.
A
t
t
h
a
t
p
o
i
n
t
X
a
a
r
h
a
d
2
6
5
r
e
l
e
v
a
n
t
e
m
p
l
o
y
e
e
s
:
2
1
3
m
a
l
e
a
n
d
5
2
f
e
m
a
l
e
.
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
nd we regularly monitor our pay awards to ensure
t
h
a
t
w
e
p
a
y
t
h
e
s
a
m
e
r
a
t
e
f
o
r
s
i
m
i
l
a
r
r
o
l
e
s
.
X
a
a
r
’s
m
e
a
n
g
e
n
d
e
r
p
a
y
g
a
p
s
t
a
n
d
s
a
t
1
4
.3
8
%
(2020: 22.96%). 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 lower middle quartile to higher middle. This is a reflection of more female employees being promoted and appointed to senior roles.
We appreciate that improving our diversity will improve our results, and we 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.
Nevertheless 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
a
n
d
r
e
c
o
g
n
i
s
e
g
e
n
d
e
r
b
i
a
s
.
W
e
d
o
,
h
o
w
e
v
e
r
,
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.
Sustainable
and
responsible
business
c
o
n
t
i
n
u
e
d
Strategic Report
•
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.
Pension
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.
All the equity assets in the Pension Portfolio Funds now track indices, which exclude certain stocks on environmental, social and governance (ESG) grounds.
The funds, managed by their strategic
partners
State
Street
Global
Advisors
(SSgA)
and BlackRock, track new benchmarks, which reflect exclusions policies, aligned with Scottish Widows' own policy introduced in 2020. The new benchmarks are amended versions of existing FTSE indices. They incorporate all of the stocks in the original indices, for example the FTSE All-Share, minus the excluded stocks.
Companies excluded from the indices include those that are severely violating international standards in relation to human rights, labour rights, the environment
and corruption, known as the UN Global
Compact
(UNGC),
controversial
weapons
manufacturers and those involved in thermal coal or oil sands.
Flexible
benefits
In addition to the pension contributions, employees are also offered a range of flexible benefits each year, against which they can obtain individual and family cover including income protection and life assurance. Within the UK, there are a number of salary sacrifice schemes for 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.
E
m
p
l
o
y
e
e
h
e
a
l
t
h
a
n
d
wellbeing
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 weeks, step challenges, weekly Yoga sessions, qualified mental health first-aiders and other activities to encourage and promote
a healthier workforce.
As part of the Flexible Benefits programme, employees have access to:
•
Health Shield, a health benefit solution offering access to discounts and re- imbursement of healthcare costs such as dentists, opticians, physiotherapists and health checks.
•
Fitness, employees can pay for gym membership or gain access to gym discounts via a website, that also offers discounts on items such as fitness trackers, experience days and sports clothing.
•
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programme, a positive preventative programme of information, advice and services that can help individuals deal with events in their everyday work and personal life, including bereavement assistance, manager consultation
and coaching, and immediate crisis intervention, through telephone counselling teams 24/7.
Training, development & retention Developing our talent is key to our on- going success, and in 2022 we will recruit a Learning & Development Manager to support the organisational plans and
to identify enablers that can drive the attainment of employees aligned with the business requirements.
•
An updated suite of Learning and
Development
tools
is
being
developed
to ensure key skills are developed and enhanced.
•
Internal courses are developed in conjunction with the Institute of Learning and Management (ILM) to support key manager development.
•
A new graduate and apprenticeship programme was launched in 2021.
The Group operates an online performance management and appraisal system providing opportunity for individual discussions on training needs and career planning. This
is supported by a talent management and succession planning process from which
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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 44. Voluntary labour turnover was 5.5% across the Group in 2021 (2020:
3.6%)
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During the COVID pandemic the safety and wellbeing of our employees has been and continues to be our overriding priority.
Our executive and senior management teams have monitored events closely to ensure that we have been able to react quickly to an ever-changing situation. At the start of the pandemic we enabled working from home at short notice for
those who were able to do so, and in the workplace we took actions to introduce enhanced hygiene and social distancing measures, screens, temperature checks, use of face coverings and more recently workplace lateral flow testing.
The Board recognises the commitment of the Group’s employees demonstrated
through the coronavirus pandemic as they responded with great agility and dedication to the new ways of working required.
Innovation
X
a
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n
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n
is
key
to
achieving
many
of
the
sustainability goals across all four pillars that support our Sustainability Roadmap. For
3
0
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a
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s
,
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inkjet and reimagining what’s possible for printheads.
Sustainable product development Encouraging more sustainable approaches to design, manufacture, technology
and collaboration across the whole
product lifecycle.
In 2021 we relaunched the Product Lifecycle Management process used to develop new and innovative printhead products; this
now 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.
P
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c
a
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principle
The Company supports the precautionary principle by avoiding materials and production methods that pose environmental and health risks when suitable alternatives are available.
34
Xaar
plc
–
Annual
Report
and
Financial
Statements
2
0
2
1
35
Xaar
plc
–
Annual
Report
and
Financial
Statements
2
0
2
1
Strategic Report
Xaar continues to review changes in the Restriction of Hazardous Substances
Directive
(2011/65/EU).
As
a
result
we
are
working hard to eliminate Substances
of
Very
High
Concern
(SVHC)
from
the
manufacturing process.
Resource
e
f
f
i
c
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n
c
y
The Company 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 products lifecycles.
As the COVID impact on the electronics supply chain became clear in 2021, Xaar implemented a 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 allowed us to continue production despite global shortages.
E
n
v
i
r
o
n
m
e
n
t
a
l
performance
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.
Product
q
u
a
l
i
t
y
We issued a number of Technical Bulletins throughout the course of 2021, advising customers on product updates, system improvements and product end of life announcements. No product recall was initiated in 2021, however we did complete a recall initiated in 2020.
18 XPMs were recalled from the field to enable replacement of a defective chip installed in error by a supplier that had the potential to unexpectedly halt the XPM operation. Advanced replacements were made available to all customers affected
to minimise the impact on their production or research.
Community
Xaar is proud to play an active role in the communities in
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community we have an active programme of sponsorship for projects and initiatives that are
aligned
to
our
business
values.
Xaar sponsors an Imagineering Clubs within a local primary schools. Imagineering
Clubs are designed to introduce children to engineering through fun activities.
The sponsorship is part of Xaar’s role in helping to create the ‘engineers of the future’ and drive interest in STEM subjects (‘Science, Technology, Engineering and Mathematics’) amongst school students.
During
2020/21
the
impact
of
COVID
meant
the clubs were held less frequently than previous years. Xaar is delighted that the clubs, and our support have restarted with the onset of the 2021/22 academic year.
For our own employees, the social club, which is aimed at encouraging staff to have fun and get to know each other socially, was paused during 2020 as a consequence of COVID restrictions. Activities have restarted
as
COVID
restrictions
allowed
from
H2
2021.
Volunteering
The Company 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/ activities 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 and hone existing ones.
•
Of the 1,000 trees purchased as part of the carbon offset (see environment section page 30), Xaar employees
volunteered to assist with the planting of 100 trees at two local schools, assisting Year 2 children to plant 90 hedging plants at one of these schools.
•
Xaar has donated and grant matched time off to an employee in 2022 to travel overseas and support construction of a school / facilities building in Africa.
Charities
Xaar contributes annually to charitable causes through three funds:
•
A chosen charities fund: these should be charities that provide benefits locally, or charities with specific connection
to
Xaar
s
t
a
f
f
:
― Xaar employees usually raise money during the year for a number of charities, previously taking part in various activities for Comic Relief on Red Nose Day, coffee mornings for Macmillan Cancer Support and Christmas Jumper Day for Save the Children. Unfortunately due to the coronavirus pandemic in 2021 we were unable to participate in charity fundraisers this year. Charity nominations took place with Hinchingbrooke Special Care Baby Unit receiving a donation
o
f
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•
A Sponsorship fund: for staff and their families engaging in charity events or team activities, Xaar will provide up
to
£100
towards
an
event
(e.g.
charity
golf days, sporting events, donations to community foodbanks) or team
sponsorship.
Wherever
possible
the
Xaar
logo should be incorporated (e.g. in a team sports kit). There is a fixed annual budget to cover all sites.
•
A Central fund: Xaar will donate monies as appropriate to disasters and emergencies or other local causes not covered by the other funds. This will be
at
the
discretion
of
the
Executive
t
e
a
m
.
•
In total, the Group made charitable contributions to local and national charities during the year totalling
£5,060
(2020:
£
3
,1
5
0
)
.
Charitable
sponsorship
•
In 2021, Xaar became an official supporter and sponsor to the ‘Cows about Cambridge’ event (www. c o w s a b o u t c a m b r i d g e.c o.u k),
b
e
c
o
m
i
n
g
a
headline sponsor of the Farewell Weekend (2021: £6,000, 2020: Nil). A team of Xaar employees also volunteered to assist in preparations for and also at the event. The event was organised to raise funds for the East Anglian children’s charity ‘Break’
to help change the lives of vulnerable
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and leaving care (www.break-charity.org/ charity/).
P
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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.
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.
i See Financial Statements – not e 12
on
page 137
Sustainable
and
responsible
business
c
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Strategic Report
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Progress against initial actions in 2021:
Achieved Work ongoing
Initial
action
from
2
0
2
0
Progress
in
2
0
2
1
Offset all of the UK regulatory Scope 1 and 2 carbon impact that we made and reported in 2020.
See: Carbon offset: Based on our carbon footprint reported in 2020 this makes Xaar a carbon neutral inkjet manufacturer. Carbon offset to continue in 2022 with an investigation to identify the inclusion of Scope 3 emissions for future offset.
Identify targets and metrics applicable to Xaar, to measure across the organisation.
Work ongoing – as part of TCFD requirements to identify Science Based Targets.
Preparation and identification of Scope 3 emissions within the supply chain – Identify tier 1 suppliers and their disclosures around climate change and GHG emissions.
Work ongoing – to address with tier 1 suppliers. Initial Scope 3 emissions for travel in 2021 identified for offset in 2022.
Review product return policy, to identify possibilities for improvements in responsible consumption in production and remanufacturing of products, reduction in plastic use, reclaiming raw materials, recovery of any heavy metals, copper, lead etc.
Identified as part of Sustainable Roadmap activities by committee actions to take place as part of sustainable product development and circular economy – actions to be defined.
Set, measure and disclose a zero waste to landfill target, any waste not recycled being sent to a waste to energy recovery process.
See Waste: UK operations certified zero waste to landfill by Veolia, with non-recycled waste being sent to waste to energy recovery.
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Identify actions to remove natural gas as an energy and heat source, or replace with a renewable gas supplier e.g. biogas.
Work ongoing – Limited exposure with gas as a heat source, but working with landlord to identify and replace with electric alternative.
Electric vehicle chargers installation on UK sites and vehicle offer to employees.
Project scope finalised for installation in 2022 at HQ & Huntingdon offices. Electric vehicle options being offered to employees.
LED light installations to further reduce the utilisation of electricity.
Individual projects by location to replace lighting with LED alternatives. New HQ comprises LED lights only.
Investigate solar panel installation at Huntingdon location to generate a proportion of electricity ourselves.
Activities on solar continue with landlord discussion around installation with a contractual supply of energy to Xaar. These discussions are not complete so we do not expect any solar installation in 2022.
The
ongoing
objectives
will
be
incorporated
into
the
ESG
roadmap
for
delivery
in
2
0
2
2
/
2
3
.
36
Xaar
plc
–
Annual
Report
and
Financial
Statements
2
0
2
1
Net zero
Product
Carbon
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n
o
v
e
r
r
a
t
e
v
e
r
s
u
s
s
t
a
n
d
a
r
d
r
a
t
e
s
Ongoing carbon offset to achieve net zero
*
Group
targets
vs
2019
baseline
will
be
confirmed
by
end
of
2
0
2
2
.
2
0
2
0
C
o
n
v
e
r
t
H
u
n
t
i
n
g
d
o
n
p
l
a
n
t
e
l
e
c
t
r
i
c
i
t
y
c
o
n
t
r
a
c
t
s
t
o
g
r
e
e
n
e
n
e
r
g
y
Our
Sustainability
P
i
l
l
a
r
s
Environment
Leading the way in environmental sustainability for the industrial inkjet technology sector.
People
An
employer
of
choice
by
putting
our people, their potential
and wellbeing at the heart of all we do.
Innovation
Encouraging more sustainable approaches to design, manufacture, technology and collaboration across the whole product lifecycle.
Community
Actively engaging with our communities to provide practical, lasting support that benefits society.
Xaar
plc
–
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1
Strategic Report
Carbon
Ethical
Carbon
Waste
H
&
S
Manufacturing
Supply
chain
Transport
HR
Support
Wellbeing
Charity
Carbon
Carbon
100%
Carbon
100%
100%
Carbon
100%
Te am
3
7
38
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1
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T
a
s
k
F
o
r
c
e
o
n
C
l
i
m
a
t
e
-
r
e
l
a
t
e
d
F
i
n
a
n
c
i
a
l
D
i
s
c
l
o
s
u
r
e
s
(
T
C
F
D
)
I
n
m
e
e
t
i
n
g
t
h
e
r
e
q
u
i
r
e
m
e
n
t
s
o
f
L
i
s
t
i
n
g
R
u
l
e
9.8.6
R,
t
h
e
B
o
a
r
d
h
a
s
c
o
n
c
l
u
d
e
d
t
h
a
t
:
•
We
comply
with
recommended
disclosures
–
Governance,
Risk
M
a
n
a
g
e
m
e
n
t
•
W
e
p
a
r
t
i
a
l
l
y
c
o
m
p
l
y
w
i
t
h
r
e
c
o
m
m
e
n
d
e
d
d
i
s
c
l
o
s
u
r
e
s
–
S
t
r
a
t
e
g
y
(
B
5
)
,
M
e
t
r
i
c
s
(
D
1
0
)
•
We
do
not
comply
with
recommended
disclosures
–
n
/
a
Disclosures
Recommended
disclosures
Response
A.
GOVERNANCE
D
i
s
c
l
o
s
e
t
h
e
o
r
g
a
n
i
s
a
t
i
o
n
’s
governance around climate-related risks and opportunities.
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.
Alison Littley, Senior Independent Director, has specific responsibility for ESG matters, including climate change and sustainability.
2. Describe management’s role in assessing and managing climate-
E
x
e
c
u
t
i
v
e
m
a
n
a
g
e
m
e
n
t
r
e
c
e
i
v
e
s
r
e
p
o
r
t
s
f
r
o
m
a
n
E
S
G
C
o
m
m
i
t
t
e
e
whose members consist of senior managers across the Group.
related risks and opportunities.
The
ESG
Committee
meets
on
a
quarterly
basis
to
assess
the opportunities and proposals developed by
t
h
e
S
u
s
t
a
i
n
a
b
i
l
i
t
y
W
o
r
k
i
n
g
G
r
o
u
p
.
The Sustainability Working Group meets regularly and is developing a roadmap whilst also receiving information from both the Carbon Net Zero team and Energy Efficiency team.
i See governance structure on page 29
B.
STRATEGY
Disclose the actual and potential impacts of climate-related risks
a
n
d
o
p
p
o
r
t
u
n
i
t
i
e
s
o
n
t
h
e
o
r
g
a
n
i
s
a
t
i
o
n
’s
b
u
s
i
n
e
s
s
e
s
,
strategy, and financial planning where such information is material.
3. Describe the climate-related risks and opportunities the organisation has identified over the short, medium, and long term.
Short term (2021-2025): We do not anticipate any significant physical risk changes over the short term. Implementation of transitionary regulatory controls (e.g. carbon pricing) could potentially commence, and could affect raw material pricing, that would need to be passed onto customers.
Medium term (2025-2035): Mitigating the physical impact of climate change is critical because we depend on raw materials sourced from countries that are particularly vulnerable to rising seas and temperatures from changing weather patterns. We have performed high-level assessments on our business in respect of 2°C and 4°C global warming scenarios which show that without action, both scenarios represent increased financial risks by 2030, with increased risk of property damage and business disruption from e.g. flooding.
Under the 2°C scenario, transition risks and mitigation actions lead to carbon pricing being introduced in
key countries and hence there are increases in both manufacturing costs and the costs of raw materials e.g. plastics and the metals used in products. Change in customer expectations as more companies committed to becoming net zero and set Science Based Targets, assessing the supply chain and Scope 3 emissions.
Longer term (2035-2050): Under the 4°C scenario, there are likely to be significant risks arising from failure to transition, leading to significant increase in physical and adaptation risks. With significantly hotter summers (+4°C to +7.6°C), leading to increased flooding and storm losses and an expectation of significant uninsurable losses affecting financial markets and global economic growth.
3
9
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Disclosures
Recommended
disclosures
Response
B.
STRATEGY
c
o
n
t
i
n
u
e
d
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, re-use and recycle materials all to be undertaken as part of Xaar’s overall Sustainability Roadmap.
i See Risk Management on page 45
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°C global warming scenarios (see above) as outlined by the IPCC report issued in 2021. As part of the sustainability strategy to deliver Science
Based
Targets
to
achieve
1.5°C,
an
independent
external
climate related scenario review will be researched
in 2022 to identify physical and transition risks and opportunities in delivering carbon neutral manufacturing leading to ‘Net Zero by 2030’.
C.
RISK
M
A
N
A
G
E
M
E
N
T
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.
The Board has considered the potential impact of regulatory change that could occur in the short to medium term.
i See Risk Management on pages 45 and 49
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.
Disclose how the
organisation
identifies,
a
s
s
e
s
s
e
s
,
a
n
d
m
a
n
a
g
e
s
climate-related 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.
40
Xaar
plc
–
Annual
Report
and
Financial
Statements
2
0
2
1
Strategic Report
T
a
s
k
F
o
r
c
e
o
n
C
l
i
m
a
t
e
-
r
e
l
a
t
e
d
F
i
n
a
n
c
i
a
l
D
i
s
c
l
o
s
u
r
e
s
(
T
C
F
D
)
c
o
n
t
i
n
u
e
d
Disclosures
Recommended
disclosures
Response
D.
METRICS
&
T
A
R
G
E
T
S
9. Disclose the metrics used by the organisation to assess climate-related risks and opportunities in line with
its strategy and risk management process.
Initial metrics as outlined in 2020:
•
Investigate metrics and targets to be defined as part of Science Based Target initiative
•
Continuing improvement / reduction in Scope 1 & 2 emissions along with intensity measurement
•
Scope
1
&
2
emissions
to
be
offset
to
become
‘carbon neutral’
•
Scope
3
emissions
recognition.
Initial targets as outlined in 2020:
•
Set, measure and disclose a zero waste to landfill target, any waste not recycled being sent to a waste to energy recovery process.
•
Generation
of
a
Sustainability
R
o
a
d
m
a
p
.
i See page 37 for Sustainability Roadmap
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 commenced for Scope 3 emissions, and a boundary developed.
We have recognised Scope 3 emissions arising from employee travel and commuting; the difficulty remains in determining the supply and quality of data via upstream and downstream value chain (ongoing).
i
See GHG/SECR disclosure on page 41
Disclose
the
metrics
and
targets used to assess and manage relevant climate-related risks and
o
p
p
o
r
t
u
n
i
t
i
e
s
w
h
e
r
e
s
u
c
h
information is material.
11. Describe the targets used by the organisation to manage climate- related risks and opportunities and performance against targets.
Xaar has committed short-term targets:
•
To
achieve
a
net
zero
target
by
2
0
3
0
•
100%
renewable
(green)
electricity
at
UK
f
a
c
i
l
i
t
i
e
s
•
Zero
waste
to
l
a
n
d
f
i
l
l
•
Offset of all Scope 1 & 2 Group emissions as we continue to drive reductions in energy use.
i
S
e
e
p a g e 3 6
f
o
r
p
r
o
g
r
e
s
s
s
u
m
m
a
r
y
4
1
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plc
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Greenhouse
gas
emissions
s
t
a
t
e
m
e
n
t
X
a
a
r
p
l
c
h
a
s
c
a
l
c
u
l
a
t
e
d
i
t
s
g
l
o
b
a
l
g
r
e
e
n
h
o
u
s
e
g
a
s
(
G
H
G
)
e
m
i
s
s
i
o
n
s
statement
using
an
operational
control
consolidation
approach.
S
c
o
p
e
1
e
m
i
s
s
i
o
n
s
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 and fuel used in leased Company vehicles.
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. Actual mileage data has been collected from the leased Company vehicle fleet.
S
c
o
p
e
2
e
m
i
s
s
i
o
n
s
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.
S
c
o
p
e
3
e
m
i
s
s
i
o
n
s
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
CO
2
emissions
currently
represent estimated CO 2 emissions from travel and estimates from employee commuting. As the Group’s sustainability programmes develop we will capture
more of our Scope 3 emissions and aim to collaborate with the supply chain to reduce them and will disclose progress in our Annual Report. Please refer to page 30 for actions that Xaar is undertaking to offset its carbon emissions.
Assessment
parameters
B
a
s
e
l
i
n
e
year
1
January
2013
to
31
December
2
0
1
3
Consolidated
approach
Operational
control
Boundary
summary
All entities and all facilities under operational control included subject to the materiality threshold applied
Consistency
with
the
f
i
n
a
n
c
i
a
l
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
G
r
e
e
n
h
o
u
s
e
G
a
s
P
r
o
t
o
c
o
l
a
n
d
I
S
O
1
4
0
6
4
-
1
(
2
0
0
6
)
I
n
t
e
n
s
i
t
y
ratio
Emissions
per
£’000
turnover
exc.
royalties
(2021:
£58.9
m
i
l
l
i
o
n
)
*
The
total
of
any
excluded
emission
sources
is
estimated
to
be
less
than
5%
of
Xaar
plc’s
total
reported
e
m
i
s
s
i
o
n
s
.
Greenhouse
gas
e
m
i
s
s
i
o
n
s
Renewable*
Non-renewable
2021
Total
Renewable
Non-renewable
2020
Total
G
l
o
b
a
l
e
n
e
r
g
y
u
s
e
KWh
10,610,069
752,331
11,362,400
2,351,508
7,764,206
10,115,714
%
93.4%
6.6%
23.2%
76.7%
UK KWh
10,205,766
472,854
10,678,620
2,351,508
7,315,782
9,667,290
Non-UK KWh
404,303
279,477
683,780
–
448,424
448,424
Absolute
values
Scope
1 tCO 2 e
–
98
98
–
75
75
Scope
2 tCO 2 e
–
116
116
–
1,741
1,741
Scope
3 tCO 2 e
–
150
150
–
361
361
Total tCO 2 e
–
364
364
–
2,177
2,177
– Scope 1 & 2 emissions of which UK tCO 2 e
–
198
198
–
1,706
1,706
N
o
r
m
a
l
i
s
e
d
values
Scope
1 tCO 2 e/£’000
–
165
165
–
157
157
Scope
2 tCO 2 e/£’000
–
198
198
–
3,655
3,655
Scope
3 tCO 2 e/£’000
–
254
254
–
618
618
Total tCO 2 e/£’000
–
617
617
–
4,430
4,430
*
UK
energy
certified
by
EON,
in
the
form
of
Guarantees
of
Origin
from
renewable
wind
sources.
US
energy
(Green
Mountain)
100%
carbon
free,
68%
renewable
(balance
being
n
u
c
l
e
a
r
)
.
Historic
greenhouse
gas
e
m
i
s
s
i
o
n
s
2019
2018
2017
2016
2015
2014
Global
energy
use
K
W
h
10,573,689
11,270,047
11,506,598
12,474,406
14,187,311
14,058,636
S
c
o
p
e
1
–
t
C
O
2
e
108.3
124.8
147.7
167.0
162.2
162.0
S
c
o
p
e
2
–
t
C
O
2
e
2,622.8
3,128.1
4,088.0
4,432.0
4,475.2
6,263.0
Total – tCO 2 e
2,731.1
3,252.9
4,235.7
4,599.0
4,637.4
6,425.0
K
e
y
p
e
r
f
o
r
m
a
n
c
e
i
n
d
i
c
a
t
o
r
s
Our progress in numbers
We monitor progress against
t
h
e
d
e
l
i
v
e
r
y
o
f
o
u
r
s
t
r
a
t
e
g
i
c
g
o
a
l
s
u
s
i
n
g
f
i
n
a
n
c
i
a
l
k
e
y
p
e
r
f
o
r
m
a
n
c
e
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
Revenue
S
t
a
t
u
t
o
r
y
£59.3m
Continuing
operations
Total revenue for the Group was £59.3 million, an increase of £11.2 million year-on-year (2020: £48.0 million). Revenue increased 23% year-on-year.
Revenue
by
sector
£
m
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 4 of the Group’s Consolidated
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
, f
o
r
r
e
c
o
n
c
i
l
i
a
t
i
o
n
between adjusted and statutory items
on
page 130
2021 figures and 2020 comparative figures are based on continuing operations (where relevant), and are subject to rounding.
Industrial
2021£40.8m
2020£28.9m
Packaging
2021£11.9m
2020£12.4m
Industrial sector growth incorporates the acquisition of FFEI (£5.3 million), combined with Ceramics and Glass segment increasing throughout the year with full year revenue up 38%.
Revenue
by
region
£
m
EMEA
2021
£23.7m
2020
£18.1m
Asia
2021
£12.0m
2020
£9.6m
Americas
Graphic
Arts
2021£6.2m
2020£6.3m
Royalties
2021£0.4m
2020£0.4m
Royalties from the single remaining licensee declined and will continue to decline in both 2021/22 before ceasing.
Royalties
in
2021
include
a
one
off
service
fee payable by Stratasys.
The increase of revenue in Americas is primarily due to the sales turnaround in the EPS business. Performance in Asia, and China in particular, was successful with growth of £2.6 million in Printheads driven by re-engagement of Chinese Ceramic customers who began to adopt the Xaar 2001 and have now transitioned to the newly launched Xaar 2002 for their new printer builds. EMEA was slightly higher, and we have seen a promising upward trend.
Xaar
plc
–
Annual
Report
and
Financial
Statements
2
0
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1
Strategic Report
2021
£23.6m
£20.3m
2020
4
2
A
l
t
e
r
n
a
t
i
v
e
P
e
r
f
o
r
m
a
n
c
e
M
e
a
s
u
r
e
s
(
A
P
M
s
)
Statutory
Net cash
2021£5.7m
2021£25.1m
2021£3.2m
Profit
Statutory
A
l
t
e
r
n
a
t
i
v
e
P
e
r
f
o
r
m
a
n
c
e
M
e
a
s
u
r
e
s
(
A
P
M
s
)
34%
G
r
o
s
s
m
a
r
g
i
n
–
C
o
n
t
i
n
u
i
n
g
operations
2021
34%
2020
27%
£1.0m
P
r
o
f
i
t
(
L
o
s
s
)
b
e
f
o
r
e
t
a
x
£
m
–
Continuing
o
p
e
r
a
t
i
o
n
s
The increase in the gross profit for the Group can be attributed to the performance of the Printhead business.
This was driven by the operational leverage in the business with increased product throughput absorbing greater costs in 2021
(2020:
27%).
Profit before tax represents operating profit after investment
i
n
c
o
m
e
a
n
d
f
i
n
a
n
c
e
c
o
s
t
s
(
2
0
2
0
:
£4.3 million loss), and before the gain arising on sale of Xaar 3D.
£3.2m
Adjusted
E
B
I
T
D
A
–
Continuing
o
p
e
r
a
t
i
o
n
s
2020£0.1m
(£0.6m)
Adjusted
loss
before
tax
£
m
–
C
o
n
t
i
n
u
i
n
g
o
p
e
r
a
t
i
o
n
s
Adjusted EBITDA is defined as operating profit before separately reported items. It is one of the Group’s KPIs and is used to assess the trading performance of Group businesses. It is also used as one of the targets against which the annual bonuses of certain employees are measured.
Adjusted loss before tax from continuing operations represents the loss before tax adjusted for recurring and non-recurring items. Reconciliation of adjusted
2021
£1.0m
2021(£0.6m)
financial measures is provided
i
n
n o t e 4 (p a g e 1 3 0)
(
2
0
2
0
:
l
o
s
s
2020(£4.3m)
20.9p
B
a
s
i
c
e
a
r
n
i
n
g
s
p
e
r
s
h
a
r
e
(
T
o
t
a
l
)
2021 20.9p
2020 (15.2p)
The calculation of basic EPS is
based
on
the
weighted
average
number of ordinary shares outstanding during the period.
(2020:
15.2p
loss)
see
Financial
Statements - note 14 for further information.
2020(£3.9m)
(1.0p)
Adjusted basic earnings
/
(loss)
p
e
r
s
h
a
r
e
–
C
o
n
t
i
n
u
i
n
g
o
p
e
r
a
t
i
o
n
s
(1.0p)
2020(5.2p)
£3.9
million).
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.
£25.1m
Cash
&
treasury
deposits
£
m
2020£18.1m
£5.2m
N
e
t
i
n
c
r
e
a
s
e
i
n
c
a
s
h
a
n
d
c
a
s
h
equivalents £m
2021£5.2m
2020 (£4.7m)
Cash and cash equivalents
c
o
m
p
r
i
s
e
c
a
s
h
a
t
b
a
n
k
o
f
£
2
5
.1
million (2020: 17.9 million)
and short-term highly liquid investments with an original maturity of three months or less. Net cash incl. treasury deposits of £Nil (2020: £0.2 million).
Net increase in cash and
cash
equivalents
was
£5.2
million following a reduction in cash consumed by operating activities and after adjusting for cash movements in both investing and financing activities during the year (2020: (£4.7) million).
£5.7m
Gross
R&D
investment
£
m
2020£4.5m
(£2.3m)
C
a
s
h
o
u
t
f
l
o
w
f
r
o
m
c
o
n
t
i
n
u
i
n
g
operations £m
2021
(£2.3m)
2020£7.1m
Gross R&D investment (continuing operations) reflects the investment in the ImagineX platform (£5.7 million). 2020 investment
excludes amortisation of Xaar 3D development costs and impairment of Thin Film (2020 restated: £4.5 million).
Net cash outflow (incl. treasury deposits) from continuing operations was £2.3 million
as
a
consequence
of
increases
in working capital and net cash used for investing activities before proceeds from the disposal of Xaar 3D (2020: £7.1 million).
Xaar
plc
–
Annual
Report
and
Financial
Statements
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2
1
Strategic Report
2021
4
3
44
Xaar
plc
–
Annual
Report
and
Financial
Statements
2
0
2
1
Strategic Report
Risk
owner:
CFO
Ian
Tichias
&
Group
IT
Director
Graeme
S
m
i
t
h
IT
Risk
owner:
CFO
Ian
T
i
c
h
i
a
s
F
i
n
a
n
c
i
a
l
Risk
management
Managing
our
r
i
s
k
s
K
e
y
r
i
s
k
a
r
e
a
s
The
risks
around
our
business
are
set
out
in
more
detail
o
n
p a g e s 4 7 t o 5 5,
b
u
t
t
h
e
k
e
y
r
i
s
k
a
r
e
a
s
c
a
n
b
e
i
d
e
n
t
i
f
i
e
d
as being associated with the following:
Market
Risk
owner:
CEO
John
M
i
l
l
s
1. Competition
Monitoring and adjusting to competitive dynamics such as pricing/promotion, innovation, resource investments and market share changes.
2.
Identification of market requirements Successfully developing products with the characteristics that meet
market requirements within the necessary timescale.
3.
Commercialising and maintaining products with cutting edge technology
Creating
value
by
generating
innovative products that deliver significant customer benefit.
4.
M
e
r
g
e
r
a
n
d
a
c
q
u
i
s
i
t
i
o
n
opportunities
Seek opportunities to
expand,
create
synergies
and generate greater shareholder value.
5.
Coronavirus (‘COVID-19’ and variants) – External Tracking and adjusting to the potential global impact and external risks arising from pandemic response and impact on customers / supply chain.
Operational
Risk
owner:
CEO
John
M
i
l
l
s
6.
Climate
change
Identifying risks and scenario planning of physical and transition impact upon operations and developing mitigating actions.
7.
O
r
g
a
n
i
s
a
t
i
o
n
a
l
c
a
p
a
b
i
l
i
t
y
Having the right people in the right roles.
8.
C
o
r
o
n
a
v
i
r
u
s
(‘C
O
V
I
D
-
1
9
’
and variants) –
Internal
/
Company Tracking the potential local impact and response to pandemic and operational internal risks on employees or organisation.
9.
Brexit
Tracking & adjusting to the impact of the Trade & Co-operation agreement between UK & EU.
1
0
.
Manufacturing facility Optimising mix of products, locations and manufacturing partners to drive performance and minimise operational issues.
1
1
.
Partnerships
and
alliances
Working with the right companies, at the right time on the right terms to deliver long-term value.
1
2
.
Supply
chain
Optimising sourcing and supply chain relationships to drive performance and
minimise operational issues.
1
3
.
IT systems and
c
o
n
t
r
o
l
e
n
v
i
r
o
n
m
e
n
t
Strengthen IT infrastructure and key IT systems.
Enhance and build resilience by investing in and implementing new IT infrastructure or IT systems.
1
4
.
IT
transformation
Delays in our IT transformation objectives due to poor prioritisation, ineffective change management and a failure to understand and deliver the IT infrastructure, IT systems, and business process changes required.
1
5
.
Cyber security risk Loss of systems or
confidential
data
due
t
o
a malicious cyber-attack, leading to disruption to business operations and loss of data.
1
6
.
A
b
i
l
i
t
y
t
o
a
c
c
e
s
s
s
u
f
f
i
c
i
e
n
t
c
a
p
i
t
a
l
Ability to access sufficient capital to fund growth opportunities.
1
7
.
C
u
s
t
o
m
e
r
c
r
e
d
i
t
e
x
p
o
s
u
r
e
Offering credit terms ensuring recoverability is reasonably assured.
1
8
.
I
n
v
e
n
t
o
r
y
o
b
s
o
l
e
s
c
e
n
c
e
Holding
excess
inventory
levels when compared to demand, that leads
to increased risk of obsolescence and write-off before consumption.
1
9
.
Exchange
rates
Monitoring global economic events and mitigating any resulting significant exchange rate impacts.
45
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Risk management
E
f
f
e
c
t
i
v
e
r
i
s
k
m
a
n
a
g
e
m
e
n
t
i
s
k
e
y
t
o
o
u
r
s
u
c
c
e
s
s
a
g
a
i
n
s
t
t
h
e
d
y
n
a
m
i
c
s
o
f
t
h
e
i
n
d
u
s
t
r
y
t
h
a
t
w
e
o
p
e
r
a
t
e
i
n
a
n
d
t
h
e
c
h
a
r
a
c
t
e
r
i
s
t
i
c
s
of our chosen business model.
Background
Overall the printing industry is declining in terms of total output, is generally capital intensive, is slow to react to change and is resistant to the adoption of new technology. Analogue printing processes are declining rapidly particularly in areas such as Commercial print (transactional documents and publications) where electronic media and digital printing processes are becoming more widespread. In areas such
as Packaging and Textiles, where analogue processes are still dominant, the conversion to digital opportunity is significant.
The digital printing market in which we operate continues to grow, with the market expected to grow from USD $24.8 billion in
2
0
2
1
t
o
U
S
D
$
3
4
.3
b
i
l
l
i
o
n
i
n
2
0
2
6
,
a
t
a
C
A
G
R
of 6.7%. Growing demand for sustainable printing and developments in packaging and textile industries are key factors driving the growth of the digital printing markets. (Source: www.marketsandmarkets.com)
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
e
f
f
e
c
t
i
v
e
n
e
s
s
.
O
t
h
e
r
e
x
a
m
p
l
e
s
o
f
t
h
e
e
f
f
e
c
t
i
v
e
day-to-day management of these risks include operating multi-functional teams to
share
knowledge
across
the
business,
having
regular stage gates in the management of development programmes, and the regular assessment of manufacturing capacity against future potential needs.
In addition to day-to-day processes the Group’s risk register is formally reviewed at senior management and Board level,
including the assessment of the performance of risk management during the preceding period. The Board will continue to develop the management framework across these specific risks so that it operates effectively alongside the changing organisational structure, and will inform an assessment of the Group’s principal risks throughout 2022.
C
l
i
m
a
t
e
change
During 2021, the senior management and Board re-evaluated the existing principal risks, and approved the escalation of climate change from an emerging to a principal risk. The Board considers that climate change has the potential to affect our business in various ways and while these may not be severe in the short term, we believe climate change-related risks are likely to have a medium and long-term impact on our business.
Notwithstanding the opportunities and threats climate change presents, the Directors have assessed that currently climate risks present no potential material adverse impact to the financial performance or position of the Group.
In 2022, we will conduct a formal assessment of climate-related scenarios to identify risks and opportunities and the potential impact of both physical and transition risks on the Group’s operations, strategy and financial planning.
Supply
chain
In the past year, Xaar has navigated the COVID-related supply chain disruptions fairly well. However, there continue to be significant global supply chain risks that
c
o
u
l
d
w
o
r
s
e
n
d
u
e
t
o
C
O
V
I
D
a
n
d
v
a
r
i
a
n
t
s
,
tight labour markets, key component capacity and potential inflationary dynamics. A new separate principal risk has been identified.
E
m
e
r
g
i
n
g
r
i
s
k
s
The Board periodically reviews emerging risks, to consider and evaluate the potential impact of newly identified risks against current principal risks, and monitor developing issues. A report in Q4 2021 from Gartner highlighted the Top 5 emerging risks, and these were mapped against existing principal risks.
T
h
e
D
i
r
e
c
t
o
r
s
'
v
i
e
w
s
o
n
e
a
c
h
o
f
t
h
e
a
b
o
v
e
a
n
d
on emerging risks in general, were integrated
i
n
t
o
t
h
e
m
a
n
a
g
e
m
e
n
t
d
i
s
c
u
s
s
i
o
n
s
a
n
d
a
c
t
i
o
n
s
being taken on existing principal risks.
Cyber
security
Cyber risks continue to be a significant area of focus for the Group following the cyber security incident in October 2020. During 2021 we conducted further work under the IT transformation program to strengthen our IT security, focused on mitigating risks in operational technology in response to the changing dynamics and external cyber threats of new ransomware models. Work on maintaining and, where appropriate, improving the integrity of our system security remains an area of focus.
Internal controls
In compliance with provision 28 of the 2018
UK
Corporate
Governance
Code,
the
Board
regularly reviews the effectiveness of the Group’s system of internal control.
The Board’s monitoring covers all controls, including financial, operational and compliance controls, risk management systems and internal control systems. It
is based principally on reviewing reports from management to consider whether significant risks are identified, evaluated, managed and controlled and whether any significant weaknesses are promptly remedied and indicate a need for more extensive monitoring.
Following the identification of internal control weakness in EPS during 2020, an action plan was initiated in 2021 to identify and strengthen the internal and management controls. Headcount
restructuring and non-cash adjustments relating to slow moving and obsolete inventory were recognised in 2021. External advisors were engaged to support the newly appointed senior management team of EPS in remediation of the gaps identified and establish a proper control environment. In addition, the external advisors also assisted management in development and execution of audit readiness to support the year end preparation of accurate financial statements and supporting documentation.
The Board has also performed a specific assessment for the purpose of this Annual Report. This assessment considers all significant aspects of internal control arising during the period covered by the report.
The Audit Committee assists the Board in discharging its review responsibilities.
E
m
e
r
g
i
n
g
risks
Principal
risk
r
e
s
p
o
n
s
e
1. New ransomware models
14. IT cyber risks – remote working security risks
2.
Post-pandemic
t
a
l
e
n
t
7.
Organisation
capability
–
retention
&
recruitment
3.
E
n
d
e
m
i
c
C
O
V
I
D
-
1
9
a
n
d
v
a
r
i
a
n
t
s
8.
Internal
COVID-19
risks
&
5.
External
COVID-19 risks – further variants
4.
Supply
chain
d
i
s
r
u
p
t
i
o
n
s
5.
E
x
t
e
r
n
a
l
C
O
V
I
D
-
1
9
r
i
s
k
s
&
1
2
.
S
u
p
p
l
y
c
h
a
i
n
5.
Hybrid
workforce
d
i
s
p
a
r
i
t
i
e
s
7. O
r
g
a
n
i
s
a
t
i
o
n
c
a
p
a
b
i
l
i
t
y
– e
n
g
a
g
e
m
e
n
t
,
development & conduct
R
i
s
k
m
a
n
a
g
e
m
e
n
t
c
o
n
t
i
n
u
e
d
46
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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.
This
also
complies
with
FRC
guidance
on
risk management, internal control and related financial and business reporting (September 2014).
Approach
to
r
i
s
k
s
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.
P
r
o
b
a
b
i
l
i
t
y
r
a
t
i
n
g
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.
I
m
p
a
c
t
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.
Type
of
r
i
s
k
Market
risk
F
i
n
a
n
c
i
a
l
r
i
s
k
Operational
r
i
s
k
IT
r
i
s
k
Increase Decrease
Same New
Certain
8
5
Likely
9 19
7
4 2
18
12
Probable
15
17
11 13
3 16
1 6
Unlikely
14
10
Remote
Very
low
Low
Medium
High
Very
high
Impact
P
r
o
b
a
b
i
l
i
t
y
K
e
y
o
f
c
h
a
n
g
e
Increase No change Decrease NEW
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Risk
and
l
i
n
k
to
business
u
n
i
t
Impact
Mitigation
L
i
k
e
l
i
h
o
o
d
M
a
g
n
i
t
u
d
e
Change
Market
1.
Competition
We compete on the basis of our
t
e
c
h
n
o
l
o
g
y
, i
n
n
o
v
a
t
i
o
n
, p
r
i
c
e
, q
u
a
l
i
t
y
,
reliability, brand, reputation and customer relationships.
Failure to continually improve in these areas may mean that we lose
market share or have to reduce prices. Since there are fixed factory costs, reductions in sales volumes may substantially lower profit margins.
We are the only true independent printhead company in the world and we are competing with vertically integrated large scale multinational companies.
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.
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.
Probable
V
e
r
y
high
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.
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.
Likely
V
e
r
y
h
i
g
h
3.
C
o
m
m
e
r
c
i
a
l
i
s
i
n
g
and maintaining products with cutting edge technology
We aim to produce quality end products. Failure to meet the required quality standards could have an impact on products that have been sold or that are held in inventory.
This
could
lead
t
o
:
•
Unexpected
costs
associated
with
resolving the issues
•
Possible warranty costs, customer compensation or write-down in inventory values
•
Potentially longer-term revenue loss if customers move to competitors and damage
to reputation.
We operate in an increasingly dynamic and changing environment. To counter the risks associated with this and, most importantly, to exploit the opportunities it presents, we must embrace innovation, protect our Intellectual Property and capitalise on technology advancements to ensure we grow our market position.
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.
Xaar’s manufacturing facilities are ISO 9001 accredited. Customer returns are reviewed quickly using a consistent and thorough investigation process.
Warranty costs, RMA and customer return costs are reviewed and compared against forecast to highlight unexpected costs, and identify root cause for corrective
action.
We
will
continue
to
focus
on
product
i
n
n
o
v
a
t
i
o
n
.
This
is
evidenced
by
our
continued
focus
on
R&D
spend
and
the number of new products brought to market.
P
r
o
b
a
b
l
e
High
R
i
s
k
m
a
n
a
g
e
m
e
n
t
c
o
n
t
i
n
u
e
d
48
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Risk
and
l
i
n
k
to
business
u
n
i
t
Impact
Mitigation
L
i
k
e
l
i
h
o
o
d
M
a
g
n
i
t
u
d
e
Change
Market
4. Merger and acquisition
o
p
p
o
r
t
u
n
i
t
i
e
s
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.
Divestments also carry risk. We may sell an asset at the wrong time, or may not realise appropriate value for the asset. Separation may be complex and, if poorly executed, may impact
the wider business.
Full financial and other due diligence is conducted to the extent reasonably achievable in the context
of each opportunity arising from acquisition or divestment.
Integration risk and planning would be reviewed and undertaken as part of every acquisition.
A detailed business case including forecasts is reviewed by the Board for each opportunity for acquisition or divestment.
Use
of
external
a
d
v
i
s
o
r
s
.
Likely
V
e
r
y
h
i
g
h
5.
C
o
r
o
n
a
v
i
r
u
s
(COVID-19) – External
In the uncertain environment of a global pandemic, the impact of COVID-19 can be felt within the entire customer base and supply chain.
W
e
o
p
e
r
a
t
e
i
n
a
g
l
o
b
a
l
e
n
v
i
r
o
n
m
e
n
t
w
i
t
h
Whilst it is difficult for a company individually to mitigate against a global economic slowdown, taking a portfolio approach on risk factors enables Xaar to spread the risk throughout its customer base, rather than previously relying upon distribution as a business model.
C
e
r
t
a
i
n
High
significant exposure as part of the new business model to OEM customers in China, Europe and USA.
We are carefully monitoring our own supply chain and are in regular contact with our suppliers. We hold a sufficient buffer stock of critical components and at present we do
A
n
y
s
l
o
w
d
o
w
n
i
n
t
h
e
g
l
o
b
a
l
e
c
o
n
o
m
y
could lead to delays in capital investment for new equipment that utilises Xaar printheads.
T
e
m
p
o
r
a
r
y
d
i
s
r
u
p
t
i
o
n
t
o
t
h
e
s
u
p
p
l
y
c
h
a
i
n
n
o
t
f
o
r
e
s
e
e
a
n
y
s
u
p
p
l
y
i
s
s
u
e
s
.
Xaar has improved its customer relationships and remains close to its customers to be able to respond quickly to any slowdown; the opening of the China subsidiary will enable an agile response specifically in this market.
and further workplace restrictions may threaten to slow down production.
Order books and manufacturing processes are closely aligned with goods manufactured to customer order.
Newly
developed
printheads
will
enable
Xaar
to
diversify
into
a
broader
customer
base
and
new
vertical
m
a
r
k
e
t
s
.
Scenario planning alongside stress testing and reverse stress testing to identify and develop alternative solutions, as
g
u
i
d
a
n
c
e
a
n
d
r
e
q
u
i
r
e
m
e
n
t
s
c
h
a
n
g
e
d
u
r
i
n
g
a
n
e
v
o
l
v
i
n
g
e
v
e
n
t
.
K
e
y
o
f
c
h
a
n
g
e
Increase No change Decrease NEW
49
Xaar
plc
–
Annual
Report
and
Financial
Statements
2
0
2
1
Strategic Report
Risk
and
l
i
n
k
t
o
b
u
s
i
n
e
s
s
u
n
i
t
Operational
Impact Mitigation
L
i
k
e
l
i
h
o
o
d
M
a
g
n
i
t
u
d
e
Change
6.
Climate
c
h
a
n
g
e
Climate change is not only a future
challenge.
The
IPCC
report
in
2
0
2
1
was
declared
a
“code
red
for
h
u
m
a
n
i
t
y
”.
T
h
e
I
P
C
C
, I
E
A
& C
O
P
2
6
h
a
v
e
r
e
-
e
n
f
o
r
c
e
d
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.
Physical
r
i
s
k
s
:
•
Major incident plans are in place with specific provisions for areas most exposed to potential risks (flood, fires, hurricanes etc)
•
Geographic spread of the business limits the impact to our customers
•
Our sourcing strategy takes into account risks associated with our key suppliers.
Undertake scenario planning across two climate scenarios (e.g. RCP2.6, RCP 8.5) to identify recommendations for
key mitigation measures and resilience consideration, including:
•
Flood
modelling
•
Full assessment of key climate perils.
T
r
a
n
s
i
t
i
o
n
risks:
•
Develop
Sustainability
Roadmap
to
deliver
‘Net
Zero
by 2030’
•
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
•
Continue reducing carbon use to minimise impact, and to become a low carbon manufacturer
•
Identify “spend to save” projects that are cash generative
•
Continue GHG mitigation actions to maintain a carbon neutral position.
Develop transparency and credibility in ‘net zero’ commitments with verifiable plans and progress in both near-term and medium-term action plans.
Probable
V
e
r
y
High
NEW
R
i
s
k
m
a
n
a
g
e
m
e
n
t
c
o
n
t
i
n
u
e
d
50
Xaar
plc
–
Annual
Report
and
Financial
Statements
2
0
2
1
Strategic Report
Risk
and
l
i
n
k
to
business
u
n
i
t
Impact
Mitigation
L
i
k
e
l
i
h
o
o
d
M
a
g
n
i
t
u
d
e
Change
Operational
7.
O
r
g
a
n
i
s
a
t
i
o
n
a
l
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.
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 as follows:
•
Lack of staff to meet a specific business need or contract requirement
•
Loss of project specialisms
•
Single point of failure
•
Loss
of
key
s
k
i
l
l
s
.
Our focus is to minimise the voluntary turnover of employees, through better hiring for fit, improved induction procedures and employee engagement initiatives.
L
a
u
n
c
h
e
d
i
n
2
0
2
1
,
n
e
w
c
o
r
p
o
r
a
t
e
v
a
l
u
e
s
(
E
P
I
I
C
C
)
:
•
Everything
with
P
a
s
s
i
o
n
•
Innovative
•
Integrity
•
Creative
•
Collaborative
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
e
m
p
l
o
y
e
e
s
.
Investment to build a learning organisation with focus on culture, reward and recognition.
An updated suite of Learning and Development tools is being progressed to ensure key skills are developed and enhanced. Internal courses are developed in conjunction with the Institute of Learning and Management (ILM) to support key manager development.
A new graduate and apprenticeship programme was launched in 2021.
Campaigns to increase performance and development of communication between managers and employees to ensure alignment to Company objectives.
Likely
M
e
d
i
u
m
8.
C
o
r
o
n
a
v
i
r
u
s
(‘COVID-19’)
–
I
n
t
e
r
n
a
l
/
O
p
e
r
a
t
i
o
n
s
Impact across all business operations and locations:
Reduction in staff availability and development of commercial opportunities.
With the continued uncertainty associated with the virus it is too early to assess the impact on the Group’s financial performance.
IT
infrastructure
–
see
13.
IT
s
y
s
t
e
m
s
.
We had stopped all international travel and remote access and business continuity testing has been performed.
As we enter a ‘post-COVID’ world, international travel will be
evaluated
in
conjunction
with
a
risk
assessment
by
l
o
c
a
t
i
o
n
.
Employees where possible are working from home, and we have communicated sick and self-quarantine policies
to all our staff.
Employees who work from home have effective digital collaboration tools to enable continued effective communication with their colleagues, customers and suppliers; we raise employee awareness to cyber security risks and implement additional security measures related to remote working.
There has been minimal impact upon the manufacturing operations in Huntingdon, with work being performed to new shift patterns to reduce the number of staff on site at any one time. COVID secure working practices have been introduced across all sites with handwashing, face coverings and safe working spaces being mandatory
f
o
r
a
l
l
e
m
p
l
o
y
e
e
s
.
The Group is debt free with sufficient cash reserves and liquidity to be able to continue operations “as-is” in the short term. The business has a proven track record for disciplined cost control, which will continue to be vital in the current trading environment.
In 2021 no claims for furlough or job support were requested from the UK Government.
Certain
M
e
d
i
u
m
Risk
and
l
i
n
k
to
business
u
n
i
t
Impact
Mitigation
L
i
k
e
l
i
h
o
o
d
M
a
g
n
i
t
u
d
e
Change
K
e
y
o
f
c
h
a
n
g
e
Increase No change Decrease NEW
51
Xaar
plc
–
Annual
Report
and
Financial
Statements
2
0
2
1
Strategic Report
Operational
9.
B
r
e
x
i
t
The United Kingdom’s decision to leave the European Union presents both risks and opportunities to the Company.
The formal trade negotiations concluded at the end of 2020 and are now governed by the Trade and Co- operation agreement reached between the UK and the European Union.
A challenge continues to be free trade into the EU. Around one third of our revenues are generated from EU countries and so any actual or perceived barriers to free trade are an obvious area of concern.
The
free
movement
of
employees
and
recruitment of potential employees are key focus areas under the new arrangements.
We remain exposed to currency fluctuations that could result from the United Kingdom’s decision to leave the EU.
Key managers across the business are continuously monitoring the latest political developments and putting mitigating actions in place where there may be a potential impact on Xaar or its stakeholders.
A review of import and export tariffs identified minimum effect on the raw materials and finished goods.
Non-tariff barriers (i.e. import/export documents) are being reviewed with our freight forwarders and couriers to ensure pro-active compliance with documentation requirements from 1 January 2022.
Identify
and
support
EU,
EEA
or
Swiss
employees
requiring
advice in completion of application to the EU Settlement Scheme.
Xaar will become a licensed sponsor for recruitment of EU nationals. This does not apply to Irish citizens or those whose eligible status is covered by the EU settlement scheme.
Identify talent that will meet visa requirements under existing Tier 2 conditions and/or minimum threshold criteria for skilled worker general visa.
The Group transacts in four main currencies – Sterling, US Dollars and Euro for sales and purchases, with some additional exposure to purchases in Japanese Yen – and adopts natural hedging where possible to mitigate against exchange rate movements.
The Group has sufficient cash resources to protect against any short-term volatility.
The Board will assess the removal of “Brexit” as a principal risk in 2022, as the transition periods end, and are replaced by normal legislative activities that would be categorised under other principal risks.
L
i
k
e
l
y
Low
10. Loss of
m
a
n
u
f
a
c
t
u
r
i
n
g
facility
We have manufacturing facilities in
the
UK
and
the
US,
and
we
rely
on
our
strategic partners for key products and components.
If our manufacturing sites or our partners’ manufacturing sites were to
experience
an
incident
this
could
have
operational and supply chain issues for the business.
Formal disaster recovery plans are maintained and reviewed. Appropriate precautions are taken in all factories and warehouses to safeguard against theft, fire and flood.
Business continuity plan implemented, site access restricted, security enhanced, daily building and IT checks for security and performance.
Given the specialised nature of the manufacturing equipment and processes there would be short-term disruption.
We are also able to use manufacturing partners to alleviate some operational issues.
2021 update: Reduction versus interim report, as supply chain risk transferred to separate principal risk category.
Unlikely
V
e
r
y
high
1
1
.
P
a
r
t
n
e
r
s
h
i
p
s
and alliances
Companies with whom we have alliances in certain areas (i.e. manufacturing/research) may already be or may become our competitors in other areas. In addition, companies with whom we have partnerships may also acquire or form alliances with our competitors, which could reduce their business with us. If we are unable to effectively manage these complicated relationships with alliance partners, our
business and results of operations could be adversely affected.
The
IP
and
Legal
team
focuses
on
the
extensive
review
of
legal agreements and in particular IP with such partners.
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.
P
r
o
b
a
b
l
e
Medium
R
i
s
k
m
a
n
a
g
e
m
e
n
t
c
o
n
t
i
n
u
e
d
52
Xaar
plc
–
Annual
Report
and
Financial
Statements
2
0
2
1
Strategic Report
Risk
and
l
i
n
k
to
business
u
n
i
t
Impact
Mitigation
L
i
k
e
l
i
h
o
o
d
M
a
g
n
i
t
u
d
e
Change
Operational
12.
Supply
c
h
a
i
n
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.
Focused on monitoring and securing continuity of supply of components necessary to maintain production and the supply of printheads into 2022:
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.
We also dual source our components where possible to minimise dependency on any single supplier.
Working capital investment was undertaken in 2021 to secure the raw component materials required to meet expected 2022 production plans.
We will design new products with multiple sources of components where possible, and identify alternative materials to build resilience into manufacturing.
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.
Likely
V
e
r
y
h
i
g
h
NEW
IT
1
3
.
I
T
s
y
s
t
e
m
s
and control environment
C
O
V
I
D
-
1
9
:
I
T
n
e
t
w
o
r
k
r
e
s
i
l
i
e
n
c
e
a
n
d
access to information via hardware and software capabilities.
Inability to operate effectively or loss of operating capability.
Loss of information, incurring financial or regulatory penalties.
Appropriate testing of the network environment, new software
a
c
c
e
s
s
(
M
S
T
e
a
m
s
)
a
n
d
a
l
l
o
c
a
t
i
o
n
o
f
l
a
p
t
o
p
s
,
m
o
n
i
t
o
r
s
e
t
c
.,
t
o
enable work from home and instant communication.
Developed
and
communicated
a
new
IT
Vision
statement
and IT Strategy which are clearly aligned to our overall business objectives.
Developed a three-year IT Transformation Programme to deliver the necessary enhancements to our IT infrastructure and IT systems. This includes investment in moving
to a hybrid cloud model, strengthening the resilience and security of our IT infrastructure, rationalising and
modernising our business systems, and re-aligning systems with improved operational business processes.
Consolidating more of our critical manufacturing and finance processes into our Epicor ERP system and delivering improved engagement with our existing and potential new customers through our Salesforce based CRM platform.
Placing increased focus on ensuring that continuity plans
f
o
r
c
r
i
t
i
c
a
l
I
T
s
y
s
t
e
m
s
a
r
e
t
e
s
t
e
d
a
n
d
c
u
r
r
e
n
t
a
s
t
h
e
I
T
i
n
f
r
a
s
t
r
u
c
t
u
r
e
a
n
d
s
y
s
t
e
m
s
a
r
e
c
h
a
n
g
e
d
.
Developing
the
IT
Service
Delivery
maturity
and
increasing
capacity in the Group IT function.
P
r
o
b
a
b
l
e
Medium
14. IT
t
r
a
n
s
f
o
r
m
a
t
i
o
n
Delays in transformation project to deliver the key elements of the IT
S
t
r
a
t
e
g
y
a
n
d
a
c
h
i
e
v
e
t
h
e
V
i
s
i
o
n
f
o
r
I
T
.
Inability to progress sufficiently quickly to avoid disproportionate increases
in the operational cost base as the business grows.
Lack of alignment between business processes and IT systems.
Designed the IT Transformation Programme to deliver the three-year plan for IT which has been generated
from
the
IT
Vision
and
Strategy
and
has
been
aligned
with
three-year plans from all the key operational functions within the business.
Established
executive-level
governance
and
oversight
for the IT Transformation activities to ensure that the
programme is adequately resourced, milestones achieved and to approve key rollout decisions.
Undertaking real-time project delivery management and assurance activities throughout the Transformation Programme.
U
n
l
i
k
e
l
y
High
K
e
y
o
f
c
h
a
n
g
e
Increase No change Decrease NEW
53
Xaar
plc
–
Annual
Report
and
Financial
Statements
2
0
2
1
Strategic Report
Risk
and
l
i
n
k
to
business
u
n
i
t
Impact
Mitigation
L
i
k
e
l
i
h
o
o
d
M
a
g
n
i
t
u
d
e
Change
IT
14. IT
t
r
a
n
s
f
o
r
m
a
t
i
o
n
continued
2021 update: Overall risk level reduced as a result of probability being lowered. Good project delivery performance in 2021 with all planned projects in the IT infrastructure
and IT security work streams delivered to plan. Major achievement in the ERP work stream successfully delivered the highest priority project to upgrade Xaar’s ERP system to the latest supported release of the software.
U
n
l
i
k
e
l
y
High
15.
Cyber
threat
a
n
d
i
n
f
o
r
m
a
t
i
o
n
security
Inability to operate effectively or significant loss of operating capability and business disruption.
Unauthorised access to data, breach of information security and data protection regulations incurring financial penalties from regulators.
Reputational impact, business disruption and potential deterioration in customer relationships.
Potential loss of Intellectual Property or exposure of commercially sensitive information.
Extensive resources expended in responding to security incidents and recovering from them. IT security breaches or disruption (loss of network), unauthorised access or mistaken disclosure of information.
Implemented a Multi-Factor Authentication solution for VPN to reduce the likelihood of remote attacks.
MFA rolled out across all key systems in 2021, including CRM and HR systems.
Established incident response and business contingency plans were in place and have been strengthened following the cyber breach in October 2020.
Strengthened our Enterprise Backup Solution by incorporating a third immutable copy of all system data in a secure public cloud environment.
Prioritisation of infrastructure and systems rationalisation to reduce the available attack surface for malicious cyber attackers.
Implemented a risk-based security testing approach across IT infrastructure and systems to identify ongoing vulnerabilities and prioritise remediation.
Inclusion of a security work stream in the IT Transformation Programme, with an in-depth externally conducted IT Security Assessment.
IT Service maturity and increased capacity in the Group IT function will enable us to enhance our security operations capability.
Employees are trained on the risks of phishing and best practices for IT, a new training and education programme for information security will be introduced in 2022.
Access to information is only provided on a “need-to-know” and “least privilege” basis consistent with the user’s role and requires the appropriate authorisation.
2021 update: Overall risk level reduced as a result of probability being lowered.
Whilst the general prevalence of cyber-attacks has increased during the last 12 months, we have made good progress in strengthening Xaar’s IT security and reducing the number of vulnerabilities that malicious attackers could exploit.
External IT security consultants (Claranet) were engaged in 2021 to perform penetration tests to assist in the
identification and resolution of any remaining vulnerabilities in the network.
A
review
will
be
undertaken
in
2022
as
to
the
benefits
of
ISO
27001 certification as part of the IT security stream.
T
h
e
B
o
a
r
d
r
e
c
e
i
v
e
s
r
e
g
u
l
a
r
u
p
d
a
t
e
s
o
n
t
h
e
I
T
T
r
a
n
s
f
o
r
m
a
t
i
o
n
P
r
o
g
r
a
m
m
e
a
n
d
c
y
b
e
r
s
e
c
u
r
i
t
y
r
i
s
k
s
.
T
h
e
B
o
a
r
d
w
i
l
l
c
o
n
t
i
n
u
e
to assess progress in the IT security stream in 2022.
T
h
e
B
o
a
r
d
h
a
s
a
s
s
e
s
s
e
d
t
h
e
I
T
s
e
c
u
r
i
t
y
r
i
s
k
b
a
s
e
d
o
n
the above and deferred introducing specific cyber security
i
n
s
u
r
a
n
c
e
i
n
2
0
2
1
;
t
h
i
s
i
s
s
u
b
j
e
c
t
t
o
a
n
n
u
a
l
r
e
v
i
e
w
b
y
t
h
e
B
o
a
r
d
.
P
r
o
b
a
b
l
e
Medium
R
i
s
k
m
a
n
a
g
e
m
e
n
t
c
o
n
t
i
n
u
e
d
54
Xaar
plc
–
Annual
Report
and
Financial
Statements
2
0
2
1
Strategic Report
Risk
and
l
i
n
k
to
business
u
n
i
t
Impact
Mitigation
L
i
k
e
l
i
h
o
o
d
M
a
g
n
i
t
u
d
e
Change
Financial
16. Ability to
a
c
c
e
s
s
s
u
f
f
i
c
i
e
n
t
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.
The Group has sufficient cash available for execution and delivery of the strategy within agreed timescales.
The Group has implemented cost reduction actions to focus
resources
on
key
initiatives
and
to
achieve
break
even
under
current volume requirements.
In order to continue to fund our research and development activities and to realise the full potential value of our product portfolio we are seeking strategic investment partners.
P
r
o
b
a
b
l
e
High
17. Customer
c
r
e
d
i
t
e
x
p
o
s
u
r
e
The Group may offer credit terms to its customers which at times could be extended beyond what is 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.
This risk is mitigated by strong ongoing customer relationships, close monitoring of product launches by the customer in the marketplace and by credit insurance in certain jurisdictions.
Monitor overdue receivables and manage credit limits
prudently.
Close
management
of
overdue
debtors
and
use
of credit holds to encourage payment.
The business model has moved away from a distribution model, to being a direct supplier to OEM manufacturers, which reduces the future risk being contained in a limited number of large transactions to a wider breadth of supply across a consistent sales order pipeline.
New OEM customers are being onboarded with favourable payment terms depending upon credit assessment and review of credit history. Where there is exposure to Chinese manufacturers payments in advance may be requested.
P
r
o
b
a
b
l
e
Medium
18. Inventory
o
b
s
o
l
e
s
c
e
n
c
e
Holding too much inventory increases the risk of obsolescence, theft
and other costs of holding stock. Furthermore, working capital restrictions created by excess inventories could affect Xaar’s liquidity or prevent investment in new products or identified future acquisitions.
Conversely, too little inventory risks stock outs, missed sales opportunities and ultimately damage to Xaar’s reputation.
Insufficient buffers in raw materials increase Xaar’s exposure to supply chain issues – particularly during times of economic uncertainty (see Brexit) or health emergencies (see COVID).
Put in place appropriate stock holding policies, ensuring these are reviewed frequently and change dynamically in line with market/business conditions.
Identify and write off obsolete or slow moving stock items, review work in progress to determine profitability of contracts and revenue recognition for EPS.
In 2021 a review of inventory recorded in EPS was undertaken as part of the improvements to internal and management controls, leading to the non-cash adjustments for writing off historic inventory values.
Improvements have been made to management controls relating to the costing of projects and physical stock counts.
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.
To minimise the potential impact of supply chain disruption arising from economic uncertainty, inventory levels for components have been increased to provide sufficient availability for production plans in 2022.
Likely
M
e
d
i
u
m
K
e
y
o
f
c
h
a
n
g
e
Increase No change Decrease NEW
55
Xaar
plc
–
Annual
Report
and
Financial
Statements
2
0
2
1
Strategic Report
Risk
and
l
i
n
k
t
o
b
u
s
i
n
e
s
s
u
n
i
t
Financial
Impact Mitigation
L
i
k
e
l
i
h
o
o
d
M
a
g
n
i
t
u
d
e
Change
19. Volatility in
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.
The Group is exposed to currency transactional risk relating to day-to-day sales and purchases across GBP, USD, and EUR.
Reported results of overseas subsidiaries are subject to translational risk which may cause volatility in earnings and the balance sheet.
The risk is that there could be significant adverse movements
in currencies which cause a foreign exchange loss, reducing profit.
We take a balanced view of this risk as the risk arises as a direct result of our global presence, but our
geographic
spread
means
we
are
not
wholly
dependent
on any one currency.
There is a partial natural hedge for foreign currency movements, with sales companies and manufacturing spread across the globe.
Consideration
of
exchange
rate
movements
in
the manufacturing operations.
Cash flows are constantly reviewed and action is taken when appropriate.
We
may
enter
forward
cover
contracts
in
line
w
i
t
h
the Group Treasury Policy on hedging foreign currency exchange movements.
See ‘Brexit’ risk above for further disclosure.
L
i
k
e
l
y
Low
N
o
n
-
f
i
n
a
n
c
i
a
l
i
n
f
o
r
m
a
t
i
o
n
s
t
a
t
e
m
e
n
t
T
h
i
s
A
n
n
u
a
l
R
e
p
o
r
t
c
o
n
t
a
i
n
s
t
h
e
i
n
f
o
r
m
a
t
i
o
n
r
e
q
u
i
r
e
d
t
o
c
o
m
p
l
y
w
i
t
h
t
h
e
C
o
m
p
a
n
i
e
s
,
P
a
r
t
n
e
r
s
h
i
p
s
a
n
d
G
r
o
u
p
s
(
a
n
d
N
o
n
-
F
i
n
a
n
c
i
a
l
R
e
p
o
r
t
i
n
g
)
R
e
g
u
l
a
t
i
o
n
s
2
0
1
6
,
a
s
c
o
n
t
a
i
n
e
d
i
n
s
e
c
t
i
o
n
s
4
1
4
C
A
a
n
d
4
1
4
C
B
o
f
the
Companies
Act
2006.
The
table
below
provides
key
references
to
information
that,
taken
together,
comprises the Non-Financial Information Statement for 2021.*
Reporting
requirement
Group
policies
that
guide
our
a
p
p
r
o
a
c
h
Information
and
risk
management,
with page references
E
n
v
i
r
o
n
m
e
n
t
a
l
• Environmental Policy Statement
m
a
t
t
e
r
s
• Environmental Sustainability statement
•
Health
&
Safety
Policy
s
t
a
t
e
m
e
n
t
•
Quality
Policy
s
t
a
t
e
m
e
n
t
.
i
R
i
s
k
m
a
n
a
g
e
m
e
n
t
&
p
r
i
n
c
i
p
a
l
r
i
s
k
s
,
pages 44 to 55
i Sustainable and responsible business,
pages 28 to 37
i
S
e
c
t
i
o
n
1
7
2
s
t
a
t
e
m
e
n
t
,
p a g e 6 9
i
C
o
m
p
a
n
y
P
u
r
p
o
s
e
,
p a g e 7 1
i Our business model, pages 8 to 9
E
m
p
l
o
y
e
e
s
• Absence Policy• Flexible Working Policy
•
Alcohol & Substance Abuse Policy • Gender pay gap report
•
Annual
Leave
P
o
l
i
c
y
•
G
i
f
t
s
&
E
n
t
e
r
t
a
i
n
m
e
n
t
P
o
l
i
c
y
•
Bullying & Harassment Policy• Grievance Policy
•
Capability
P
o
l
i
c
y
• Health & Safety Policy
•
C
o
d
e
o
f
C
o
n
d
u
c
t
• Performance Planning Policy
•
C
o
v
i
d
-
1
9
P
o
l
i
c
y
s
t
a
t
e
m
e
n
t
• Referral & Reward Policy
•
Disciplinary
P
o
l
i
c
y
•
Retirement
P
o
l
i
c
y
•
Equal
Opportunities
P
o
l
i
c
y
•
W
h
i
s
t
l
e
b
l
o
w
i
n
g
P
o
l
i
c
y
•
F
a
m
i
l
y
L
e
a
v
e
P
o
l
i
c
y
•
W
o
r
k
i
n
g
t
i
m
e
r
e
g
u
l
a
t
i
o
n
s
.
i
R
i
s
k
m
a
n
a
g
e
m
e
n
t
&
p
r
i
n
c
i
p
a
l
r
i
s
k
s
,
pages 44 to 55
i Sustainable and Responsible business,
pages 28 to 37
i
S
e
c
t
i
o
n
1
7
2
s
t
a
t
e
m
e
n
t
,
p a g e 6 9
i
C
o
m
p
a
n
y
P
u
r
p
o
s
e
,
p a g e 7 1
i Our business model, pages 8 to 9
IT,
cyber
• Confidential Information Policy
security
&
data
•
Data Protection Policy
p
r
o
t
e
c
t
i
o
n
•
Email and Internet Policy
•
Mobile
Phone
P
o
l
i
c
y
.
i
R
i
s
k
m
a
n
a
g
e
m
e
n
t
&
p
r
i
n
c
i
p
a
l
r
i
s
k
s
,
pages 44 to 55
S
o
c
i
a
l
m
a
t
t
e
r
s
• Human Rights Policy
•
Charitable
Donations
P
o
l
i
c
y
•
Employee
Volunteering
P
o
l
i
c
y
.
i Sustainable and responsible business,
pages 28 to 37
R
e
s
p
e
c
t
f
o
r
• Human Rights Policy
h
u
m
a
n
r
i
g
h
t
s
•
S
a
n
c
t
i
o
n
s
P
o
l
i
c
y
•
Modern
Slavery
P
o
l
i
c
y
•
Modern
Slavery
Act
Compliance
Statement.
i Risk management & principal risks, pages 44 to 55
i
S
u
s
t
a
i
n
a
b
l
e
a
n
d
r
e
s
p
o
n
s
i
b
l
e
b
u
s
i
n
e
s
s
,
p a g e s 2 8 t o 3 7
i
S
e
c
t
i
o
n
1
7
2
s
t
a
t
e
m
e
n
t
,
p a g e 6 9
i
C
o
m
p
a
n
y
P
u
r
p
o
s
e
,
p a g e 7 1
A
n
t
i
-
c
o
r
r
u
p
t
i
o
n
•
Anti-Bribery
&
Corruption
Policy
• Gifts & Entertainment Policy
and
anti-
•
Anti-money Laundering Policy
•
Whistleblowing
Policy.
bribery
matters
•
Conflict
Materials
Policy
•
Corporate
Criminal
Offence
P
o
l
i
c
y
•
Employee
Share
Dealing
c
o
d
e
i Risk management & principal risks, pages 44 to 55
i
S
u
s
t
a
i
n
a
b
l
e
a
n
d
r
e
s
p
o
n
s
i
b
l
e
b
u
s
i
n
e
s
s
,
p a g e s 2 8 t o 3 7
i
O
u
r
b
u
s
i
n
e
s
s
m
o
d
e
l
,
p a g e s 8 t o 9
i
S
e
c
t
i
o
n
1
7
2
s
t
a
t
e
m
e
n
t
,
p a g e 6 9
i
C
o
m
p
a
n
y
P
u
r
p
o
s
e
,
p a g e 7 1
Description
of
the
business
m
o
d
e
l
i Our business model, pages 8 to 9
D
e
s
c
r
i
p
t
i
o
n
o
f
t
h
e
p
r
i
n
c
i
p
a
l
r
i
s
k
s
i
n
r
e
l
a
t
i
o
n
t
o
t
h
e
a
b
o
v
e
m
a
t
t
e
r
s
,
i
n
c
l
u
d
i
n
g
b
u
s
i
n
e
s
s
r
e
l
a
t
i
o
n
s
h
i
p
s
,
p
r
o
d
u
c
t
s
a
n
d
s
e
r
v
i
c
e
s
l
i
k
e
l
y
t
o
a
f
f
e
c
t
t
h
o
s
e
a
r
e
a
s
o
f
r
i
s
k
,
a
n
d
h
o
w
t
h
e
company manages the risks
i Risk management & principal risks, pages 44 to 55
i
S
u
s
t
a
i
n
a
b
l
e
a
n
d
r
e
s
p
o
n
s
i
b
l
e
b
u
s
i
n
e
s
s
,
p a g e s 2 8 t o 3 7
i
C
l
i
m
a
t
e
c
h
a
n
g
e
,
p a g e s 2 9
N
o
n
-
f
i
n
a
n
c
i
a
l
k
e
y
p
e
r
f
o
r
m
a
n
c
e
i
n
d
i
c
a
t
o
r
s
i Sustainable and responsible business, pages 28 to 37
i
G
r
e
e
n
h
o
u
s
e
g
a
s
r
e
p
o
r
t
,
p a g e 4 1
i Key Performance Indicators, pages 42 to 43
*
The policies listed above are available to employees via our intranet, alongside corporate policies being available on our website (https://www.xaar.com/en/about/corporate-policies/). Compliance with our policies is monitored through the implementation of annual compliance statements, through our internal audit function, and locally by our General Managers.
Xaar
plc
–
Annual
Report
and
Financial
Statements
2
0
2
1
Strategic Report
5
6
B
o
a
r
d
a
p
p
r
o
v
a
l
o
f
t
h
e
S
t
r
a
t
e
g
i
c
a
n
d
A
n
n
u
a
l
R
e
p
o
r
t
s
Board approval
T
h
e
s
e
c
t
i
o
n
1
7
2
s
t
a
t
e
m
e
n
t
f
o
r
m
s
p
a
r
t
o
f
t
h
i
s
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
–
p
l
e
a
s
e
s
e
e
p a g e 6 9.
The
Strategic
Report,
Annual
Report
and
Financial
Statements,
taken
as
a
whole,
are
fair,
balanced
a
n
d
u
n
d
e
r
s
t
a
n
d
a
b
l
e
a
n
d
p
r
o
v
i
d
e
t
h
e
i
n
f
o
r
m
a
t
i
o
n
n
e
c
e
s
s
a
r
y
f
o
r
s
h
a
r
e
h
o
l
d
e
r
s
t
o
a
s
s
e
s
s
t
h
e
C
o
m
p
a
n
y
’s
position, performance, business model and strategy.
T
h
e
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
w
a
s
a
p
p
r
o
v
e
d
b
y
t
h
e
B
o
a
r
d
o
n
2
9
M
a
r
c
h
2
0
2
2
a
n
d
i
s
s
i
g
n
e
d
o
n
i
t
s
b
e
h
a
l
f
b
y
:
A
n
d
r
e
w
Herbert
Chairman
Chris
Morgan
Non-Executive
D
i
r
e
c
t
o
r
Alison
Littley
Senior
Independent
D
i
r
e
c
t
o
r
Ian
Tichias
Chief
Financial
O
f
f
i
c
e
r
John
Mills
C
h
i
e
f
E
x
e
c
u
t
i
v
e
O
f
f
i
c
e
r
Xaar
plc
–
Annual
Report
and
Financial
Statements
2
0
2
1
Strategic Report
5
7
58
Xaar
plc
–
Annual
Report
and
Financial
Statements
2
0
2
1
Governance
Governance
at
a
g
l
a
n
c
e
An
experienced
leadership
t
e
a
m
T
h
e
B
o
a
r
d
’s r
e
s
p
o
n
s
i
b
i
l
i
t
y
f
o
r
l
e
a
d
i
n
g
t
h
e
G
r
o
u
p
t
o
w
a
r
d
s
a
c
h
i
e
v
e
m
e
n
t
o
f
i
t
s
p
u
r
p
o
s
e
i
s
s
u
p
p
o
r
t
e
d
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
i
R
e
a
d
m
o
r
e
a
b
o
u
t
t
h
e
B
o
a
r
d
on
pages 60 and 61
C
o
r
p
o
r
a
t
e
Governance
i
R
e
a
d
m
o
r
e
a
b
o
u
t
C
o
r
p
o
r
a
t
e
G
o
v
e
r
n
a
n
c
e
o
n
p a g e s 7 1 t o 7 6
Audit
C
o
m
m
i
t
t
e
e
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.
N
o
m
i
n
a
t
i
o
n
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.
R
e
m
u
n
e
r
a
t
i
o
n
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.
Chris
Morgan
C
h
a
i
r
A
p
p
o
i
n
t
e
d
1
A
p
r
i
l
2
0
2
0
i
R
e
a
d
m
o
r
e
o
n
p a g e 6 1
Andrew
Herbert
C
h
a
i
r
A
p
p
o
i
n
t
e
d
1
A
p
r
i
l
2
0
2
0
i
R
e
a
d
m
o
r
e
o
n
p a g e 6 0
A
l
i
s
o
n
L
i
t
t
l
e
y
C
h
a
i
r
Appointed
1
July
2
0
2
0
i
R
e
a
d
m
o
r
e
o
n
p a g e 6 1
T
h
e
B
o
a
r
d
d
e
l
e
g
a
t
e
s
c
e
r
t
a
i
n
m
a
t
t
e
r
s
t
o
i
t
s
P
r
i
n
c
i
p
a
l
C
o
m
m
i
t
t
e
e
s
0-3
years
3
3-6
years
1
6-9
years
1
Male
4
Female
1
E
x
e
c
u
t
i
v
e
D
i
r
e
c
t
o
r
2
Non-Executive
Director
2
Chair
1
Tenure
Diversity
C
o
m
p
o
s
i
t
i
o
n
Board composition in 2021
Board
of
D
i
r
e
c
t
o
r
s
G
o
v
e
r
n
a
n
c
e
framework
59
Xaar
plc
–
Annual
Report
and
Financial
Statements
2
0
2
1
Governance
H
i
g
h
l
i
g
h
t
s
100%100%
100%100%
Andrew
Herbert
–
C
h
a
i
r
m
a
n
C
h
r
i
s
M
o
r
g
a
n
–
N
o
n
-
E
x
e
c
u
t
i
v
e
D
i
r
e
c
t
o
r
A
l
i
s
o
n
L
i
t
t
l
e
y
–
S
e
n
i
o
r
I
n
d
e
p
e
n
d
e
n
t
C
h
a
i
r
m
a
n
,
N
o
n
-
E
x
e
c
u
t
i
v
e
a
n
d
Scheduled
B
o
a
r
d
Additional
Board
I
n
d
e
p
e
n
d
e
n
t
D
i
r
e
c
t
o
r
s
meetings attended meetings attended
The Board held 11 scheduled Board meetings in 2021, with three additional unscheduled meetings held to cover specific items.
Board meeting attendance
Alison Littley Senior Independent Director
•
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
•
Remuneration
Committee
C
h
a
i
r
.
D
i
r
e
c
t
o
r
100%
100%
Executive
Directors
John
Mills
–
Chief
Executive
O
f
f
i
c
e
r
100%
100%
Ian
Tichias
–
Chief
Financial
O
f
f
i
c
e
r
100%
100%
R
e
s
p
o
n
s
i
b
i
l
i
t
i
e
s
Directors
Division
of
r
e
s
p
o
n
s
i
b
i
l
i
t
i
e
s
Andrew
Herbert Chairman
•
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
•
Nomination Committee Chair.
John Mills
Chief
Executive
Officer
•
Leads the Executive Committee responsible for proposing and implementing Group strategy, and managing the operational and financial performance of the Group
•
Engages with various stakeholders of the Group, providing feedback to the Board.
Ian Tichias Chief Financial Officer
•
Evaluates the financial performance of the business in line with strategy implementation, operational objectives, forecasts and budgets
•
Ensures integrity of reported financial information, and maintaining robust accounting systems and internal controls.
C
h
r
i
s
M
o
r
g
a
n
Non-Executive Director
•
As an independent Non-Executive Director, provides constructive challenge and strategic guidance to the Board, monitors achievement of objectives and Executive Director performance
•
Audit Committee Chair.
Key
governance
a
c
t
i
v
i
t
i
e
s
During 2021, the Board undertook the following key governance activities:
L
F
u
r
t
h
e
r
d
e
v
e
l
o
p
e
d
B
o
a
r
d
m
e
e
t
i
n
g
structure,
format,
agenda
and
m
a
t
e
r
i
a
l
L Ensured compliance with the 2018 UK Corporate Governance Code,
agreeing
actions
to
address
any
non-compliance.i Read more on pages 71 t o 76 L Reviewed and updated the Committee Terms of Reference
L
C
o
n
d
u
c
t
e
d
an internal review of Board and Committee effectiveness and performance during the year L Reviewed progress of the action plan addressing the remediation of significant deficiencies in internal control at EPS during the year.
Board
focus
a
r
e
a
s
During
2021,
the
Board
focused
on
the following key operational and strategic activities:
L
Printhead ImagineX product
roadmap progress and customer engagement
L
M
i
t
i
g
a
t
i
o
n
o
f
s
u
p
p
l
y
c
h
a
i
n
c
o
n
s
t
r
a
i
n
t
s
L Strategy progress and operational
i
m
p
r
o
v
e
m
e
n
t
s
a
t
E
P
S
L
I
T
i
n
f
r
a
s
t
r
u
c
t
u
r
e
i
m
p
r
o
v
e
m
e
n
t
s
,
including
the
ERP
upgrade
L
C
a
p
i
t
a
l
a
n
d
e
q
u
i
t
y
s
t
r
a
t
e
g
y
L Development of the Sustainability
R
o
a
d
m
a
p
.
i Read more about the Sustainability
R
o
a
d
m
a
p
o
n
p a g e 3 7
L
F
F
E
I
a
c
q
u
i
s
i
t
i
o
n
a
n
d
i
n
t
e
g
r
a
t
i
o
n
i
m
p
l
e
m
e
n
t
a
t
i
o
n
L
C
o
m
p
l
e
t
i
o
n
of the divestment of the Xaar 3D investment.
Highlights
60
Xaar
plc
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Annual
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1
Governance
N R
N
Board
of
D
i
r
e
c
t
o
r
s
A
n
d
r
e
w
Herbert
Chairman
Appointed
to
the
B
o
a
r
d
2016
Qualifications
•
FCMA Chartered Management Accountant
•
BA
(Hons)
in
Business
S
t
u
d
i
e
s
.
Skills
and
e
x
p
e
r
i
e
n
c
e
•
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
•
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
•
Previously held a number of line director roles in Finance, Operations, Planning and Business Development.
External
a
p
p
o
i
n
t
m
e
n
t
s
•
Non-Executive
Chairman
of Midwich Group plc.
John
Mills
C
h
i
e
f
E
x
e
c
u
t
i
v
e
O
f
f
i
c
e
r
Appointed
to
the
B
o
a
r
d
2019
Qualifications
•
P
h
.D
Physics.
S
k
i
l
l
s
a
n
d
e
x
p
e
r
i
e
n
c
e
•
F
i
v
e
y
e
a
r
s
a
s
C
E
O
a
t
I
n
c
a
D
i
g
i
t
a
l
•
P
r
e
v
i
o
u
s
l
y
C
E
O
a
t
D
a
t
a
L
a
s
e
a
n
d
C
O
O
at Plastic Logic
•
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
a
p
p
o
i
n
t
m
e
n
t
s
•
None.
Ian
T
i
c
h
i
a
s
Chief
Financial
O
f
f
i
c
e
r
Appointed
to
the
B
o
a
r
d
2020
Qualifications
•
ACA Institute of Chartered Accountants in England & Wales
•
BSc
(Hons)
Economics
&
Maths,
University of Leeds.
S
k
i
l
l
s
a
n
d
e
x
p
e
r
i
e
n
c
e
•
Over
15
years’
experience
in
senior
financial roles
•
Previously, Ibstock plc Group Finance Director and Deputy CFO, with direct responsibility for the Group’s Clay division business
•
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
•
Proven track record of delivering business focused finance operations that drive efficiency and commercial performance beyond finance.
External
a
p
p
o
i
n
t
m
e
n
t
s
•
None.
6
1
Xaar
plc
–
Annual
Report
and
Financial
Statements
2
0
2
1
Governance
Chris
Morgan
Non-Executive
D
i
r
e
c
t
o
r
Alison
L
i
t
t
l
e
y
Senior
Independent
D
i
r
e
c
t
o
r
Appointed
to
the
B
o
a
r
d
2016
S
k
i
l
l
s
a
n
d
e
x
p
e
r
i
e
n
c
e
•
Wealth of expertise in managing complex international technology businesses, having spent 25 years at HP Inc.
•
Strong background in global marketing, sales and general management
s
e
n
i
o
r
e
x
e
c
u
t
i
v
e
r
o
l
e
s
i
n
c
l
u
d
i
n
g
g
l
o
b
a
l
accountability for HP’s multibillion dollar
graphics/industrial portfolio of digital
2D
and
3D
printing
businesses
from 2009-2012
•
Extensive
experience
in
Asia
and
Japan
having spent more than a decade in senior APJ leadership roles
•
Led strategic investments in key growth markets and has been involved in a number of mergers and acquisitions at both the strategic and operational levels
•
Chief Marketing Officer for Stratasys in
2014-2015
and
recently
served
as
Senior
Vice President of Americas and Asia for 3D Systems, Inc. until January 2018.
External
a
p
p
o
i
n
t
m
e
n
t
s
•
Non-Executive Director for San Diego
based
additive
manufacturing
company,
Intrepid Automation.
Appointed
to
the
B
o
a
r
d
2020
S
k
i
l
l
s
a
n
d
e
x
p
e
r
i
e
n
c
e
•
Over 25 years’ experience within international blue chip organisations, including multinational manufacturing, supply chain and marketing services roles
•
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
•
For the past ten years Alison has been
a
Non-Executive
Director
(NED)
of
both
international PLCs and privately owned businesses.
External
a
p
p
o
i
n
t
m
e
n
t
s
•
Non-Executive Director and the Remuneration Committee Chair at Norcros plc
•
Senior Independent Director and Remuneration Committee Chair at musicMagpie plc.
Committee key
A
Audit
N
Nomination
R
Remuneration
Chair
Member
A N R
A N R
62
Xaar
plc
–
Annual
Report
and
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2
0
2
1
Governance
D
i
r
e
c
t
o
r
s
’
report
Report on the affairs of the Group
The
Directors
present
their
Annual
Report
together
with
the
financial
statements
and
auditor’s
report
for the year ended 31 December 2021.
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.
N
o
n
-
f
i
n
a
n
c
i
a
l
i
n
f
o
r
m
a
t
i
o
n
s
t
a
t
e
m
e
n
t
–
S
u
b
j
e
c
t
M
a
t
t
e
r
Section/Page
Principal risks and uncertainties
Risk
management
on
pages 44 to 5 5
Business
model
Strategic
Report
on
page 8
E
m
p
l
o
y
e
e
engagement
Strategic
Report
on
page 3
Stakeholder
engagement
on
pages 69 to 70
Directors’ Remuneration report on page 85
Equality,
diversity,
inclusion
and
human
r
i
g
h
t
s
Sustainable
and
responsible
business
on
pages 31 to 3 2
Disabled
employees
Sustainable
and
responsible
business
on
pages 32 to 3 3
Supplier engagement
Stakeholder
engagement
on
page 7 0
Engagement with customers and other business relationships (including community engagement)
Stakeholder
engagement
on
page 7 0
Sustainable
and
responsible
business
on
page 3 5
Greenhouse
gas
emissions
and
environmental
p
o
l
i
c
i
e
s
Sustainable
and
responsible
business
(TCFD)
on
pages 38 to 40
GHG statement on page 41
Political donations
Sustainable
and
responsible
business
on
page 3 5
Ethics
and
governance,
including
Code
of
Conduct,
anti-bribery and corruption policies
Sustainable
and
responsible
business
on
page 31
Corporate Governance section on page 79
Branches
In addition to the subsidiaries disclosed in note 11 of the Company’s separate financial statements on pages 135 to 137, 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
2
0
2
1
.
i Details on dividends are set out in note 13 on page 138
C
a
p
i
t
a
l
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 26. 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,
which
hold
no
voting
r
i
g
h
t
s
.
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.
63
Xaar
plc
–
Annual
Report
and
Financial
Statements
2
0
2
1
Governance
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.
•
Details
of
the
shareholding
held
in
trust
by
Xaar
Trustee
Ltd
and
held
by
the
Xaar
plc
ESOP
trust
are
provided
in
note 28.
These
have
voting
rights exercised by the Trustees
•
Details of other share-based payment schemes are set out in note 32. Shares held in Xaar plc SIP do not hold voting rights. 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 59
C
a
p
i
t
a
l
a
l
l
o
c
a
t
i
o
n
p
o
l
i
c
y
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:
•
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;
•
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
•
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 keep 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 21 and 22.
At the 2021 AGM held on 16 June 2021, 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
2021
or
2
0
2
0
.
D
i
r
e
c
t
o
r
s
a
n
d
t
h
e
i
r
i
n
t
e
r
e
s
t
s
The
Directors
who
served
during
the
year,
and
subsequent
to
the
year-end,
unless
otherwise
stated,
were
as
f
o
l
l
o
w
s
:
A
n
d
r
e
w
H
e
r
b
e
r
t
Chairman
John
M
i
l
l
s
C
h
i
e
f
E
x
e
c
u
t
i
v
e
O
f
f
i
c
e
r
Ian
Tichias
Chief
Financial
O
f
f
i
c
e
r
Chris
Morgan
Non-Executive
D
i
r
e
c
t
o
r
Alison
Littley
Senior
Independent
D
i
r
e
c
t
o
r
i
Brief
biographical
descriptions
of
the
Directors
are
set
out
on
pages 60 and 6 1
Directors’
report
c
o
n
t
i
n
u
e
d
64
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Governance
S
h
a
r
e
h
o
l
d
i
n
g
s
i
n
t
h
e
C
o
m
p
a
n
y
The interests of the Directors in the shares of the Company and its subsidiaries (all of which are beneficial) as at 31 December 2021 are as follows:
Number of
ordinary
shares
o
f
1
0
p
e
a
c
h
31
December
2021
Number of ordinary shares of
10p each
31
December
2020
Andrew
Herbert
100,000
100,000
John
M
i
l
l
s
125,000
125,000
Ian
T
i
c
h
i
a
s
50,000
50,000
Chris Morgan
–
–
Alison
L
i
t
t
l
e
y
–
–
There
have
been
no
changes
in
the
Directors’
interests
in
shares
of
the
Company
between
31
December
2021
and
29
March
2022.
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.
D
i
r
e
c
t
o
r
s
’
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.
S
h
a
r
e
capital
As
at
31
December
2021
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
10
shareholders
(by
holding)
–
at
31
December
2
0
2
1
N
u
m
b
e
r
of ordinary
shares
held
P
e
r
c
e
n
t
a
g
e
of issued share capital
Schroder
Investment
M
g
t
22,791,868
29.05%
Aberforth Partners
7,075,267
9.02%
Odyssean
Capital
6,380,000
8.13%
Columbia
Threadneedle
I
n
v
e
s
t
m
e
n
t
s
4,619,139
5.89%
I
n
v
e
s
c
o
(OppenheimerFunds)
4,068,105
5.19%
Hargreaves
Lansdown
Asset
M
g
t
3,632,282
4.63%
Interactive Investor
3,160,615
4.03%
Chelverton
Asset
M
g
t
2,300,000
2.93%
Barclays
Wealth
1,789,426
2.28%
JO
Hambro
Capital
M
g
t
1,743,309
2.22%
Total
57,560,011
73.38%
During the period 31 December 2021 to 29 March 2022, 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:
Changes in material shareholdings since 31 December 2021
N
u
m
b
e
r
of ordinary
shares
held
P
e
r
c
e
n
t
a
g
e
of issued share capital
Schroder
Investment
M
g
t
22,569,368
28.79%
A
n
n
u
a
l
G
e
n
e
r
a
l
M
e
e
t
i
n
g
i
The
notice
convening
the
Annual
General
Meeting
is
set
out
on
pages 173 to 1 7 6
Resolutions 1 to 9 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 10 to 13.
65
Xaar
plc
–
Annual
Report
and
Financial
Statements
2
0
2
1
Governance
R
e
-
e
l
e
c
t
i
o
n
o
f
D
i
r
e
c
t
o
r
s
Resolutions
4
to
8
The Company’s Articles of Association require the Directors to retire by rotation at least once every three years, with the number to retire by rotation at each Annual General Meeting being the number nearest to but not exceeding one third of the Board. However, the 2018 UK Corporate Governance Code provides that all Directors should be subject to re-election by their shareholders every year. In accordance with this provision of the 2018 UK Corporate Governance Code 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.
D
i
r
e
c
t
o
r
s
’
R
e
m
u
n
e
r
a
t
i
o
n
r
e
p
o
r
t
Resolution
9
This Resolution seeks shareholder approval for the Directors’ Remuneration report.
i
The
Directors’
Remuneration
report
can
be
found
on
pages 83 to 101
(inclusive)
of
the
Annual
Report
and
Financial
S
t
a
t
e
m
e
n
t
s
In accordance with regulations which came into force on 1 October 2013, Resolutio n 9 offers shareholders an advisory vote on the implementation of the Company’s existing Remuneration Policy.
P
o
w
e
r
t
o
i
s
s
u
e
s
e
c
u
r
i
t
i
e
s
Resolutions
10,
11
and
1
2
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 10, 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 £2,614,874 (corresponding to approximately one third of the issued share capital at 29 March 2022) and up to an additional aggregate nominal value of £5,229,749 (corresponding to approximately two thirds of the issued share capital at 29 March 2022) in the case of allotments only
in connection with a fully pre-emptive rights issue. The Directors have no present intention to exercise the authority sought under this Resolution. However, the Directors may consider doing so 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.
D
i
s
a
p
p
l
i
c
a
t
i
o
n
o
f
p
r
e
-
e
m
p
t
i
o
n
r
i
g
h
t
s
R
e
s
o
l
u
t
i
o
n
s
1
1
a
n
d
1
2
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.
In accordance with institutional guidelines, under Resolution 11, 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 £5,229,749 (being the nominal value of approximately two thirds of the issued share capital of the Company); and
(i
i
)
in any other case, up to an aggregate nominal amount of £392,231 (representing 5% of the issued share capital of the Company).
The Directors do not currently have an intention to exercise the authority.
In addition, Resolution 12, which is also to be proposed as a Special Resolution, asks the shareholders to waive their pre-emption rights in relation to the allotment of equity securities or sale of treasury shares up to a further aggregate nominal amount of £392,231 (representing 5% of the issued share capital of the Company), with such authority to be used only for the purpose of financing (or refinancing, if the authority is to be used in the six months after the original transaction) a transaction which the Directors of the Company determine to be an acquisition or other capital investment of a kind contemplated by the Pre-emption Group’s Statement of Principles on Disapplying
Pre-Emption Rights.
The Directors will also have regard to the guidance in the Statement of Principles concerning cumulative usage of authorities within a three-year period. Accordingly, the Board confirms that it does not intend to issue shares for cash representing more than 7.5% of the Company’s issued ordinary share capital in any rolling three-year period other than to existing shareholders, save as permitted in connection with an acquisition or specified capital investment as described above, without prior consultation with shareholders.
If Resolutions 11 and 12 are 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.
Directors’
report
c
o
n
t
i
n
u
e
d
66
Xaar
plc
–
Annual
Report
and
Financial
Statements
2
0
2
1
Governance
Authority
to
purchase
own
s
h
a
r
e
s
Resolution
13
It is proposed by Resolution 13, by Special Resolution, to authorise the Company gene rally 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
(i
i
)
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 14.9% 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.
The total number of ordinary shares under option, which remain unexercised and outstanding as at 29 March 2022 (including options awarded under LTIP which may be satisfied by subscription for new shares) was 4,711,777. This represents 6.0% 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 2021 would represent 7.1% of the reduced issued ordinary share capital.
A
d
d
i
t
i
o
n
a
l
i
n
f
o
r
m
a
t
i
o
n
f
o
r
s
h
a
r
e
h
o
l
d
e
r
s
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 26.
Details
of
ordinary
shares
held
in
trust
owned
by
the
Company
can
be
found
in
note 2 8.
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 173 to 176.
i
The
notice
of
the
Annual
General
Meeting
is
on
pages 173 to 1 7 6
O
r
d
i
n
a
r
y
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 173 to 176 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:
•
certain restrictions may from time to time be imposed by laws and regulations (for example, insider trading laws and market
r
e
q
u
i
r
e
m
e
n
t
s
r
e
l
a
t
i
n
g
t
o
c
l
o
s
e
p
e
r
i
o
d
s
)
;
a
n
d
•
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.
A
r
t
i
c
l
e
s
o
f
A
s
s
o
c
i
a
t
i
o
n
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.
Action
to
be
t
a
k
e
n
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
0871
664
0300.
(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 0300. 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.
67
Xaar
plc
–
Annual
Report
and
Financial
Statements
2
0
2
1
Governance
A
p
p
o
i
n
t
m
e
n
t
a
n
d
r
e
p
l
a
c
e
m
e
n
t
o
f
D
i
r
e
c
t
o
r
s
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 reappointment 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.
Significant
interests
i
Directors’
interests
in
the
share
capital
of
the
Company
are
shown
in
the
table
on
page 9 5
i
Major
interests
(i.e.
those
greater
than
3%)
of
which
the
Company
has
been
notified
are
shown
on
page 6 4
Company
share
s
c
h
e
m
e
s
The
Xaar
plc
ESOP
Trust
holds
0.9%
(2020:
0.9%)
of
the
issued
share
capital
of
the
Company
in
trust
for
the
benefit
of
employees
of
the
Group and their dependants. The voting rights in relation to these shares are exercised by the Trustees.
Change
of
c
o
n
t
r
o
l
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
i
The
Group’s
business
activities,
together
with
the
factors
likely
to
affect
its
future
development,
performance
and
position,
are
set
out
in
the
Strategic
Report
on
pages 12 to 23
and
Business
performance
on
pages 24 to 27
The Group’s business activities, together with the factors likely to affect its future development, performance and position, are set out in the Strategic Report on pages 12 to 23. The Group reported a profit after tax for the year ended 31 December 2021 of £14.2 million, which includes a profit after tax of £13.5 million related to discontinued operations, being the costs relating to Thin Film and Xaar 3D (£4.4 million loss), as well as the gain on disposal (£17.9 million). Notes 21 and 22 include a description of the Group’s objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposure to credit risk and liquidity risk. The Group’s day-to-day working capital requirements are expected to be met through the current
cash and cash equivalent resources (including treasury deposits) at the balance sheet date of 31 December 2021 of £25.1 million. The Group
was debt free as at 31 December 2021.
To date the impact of COVID-19 on the Group’s trading has been minimal, however we did experience some COVID-19 related supply constraints in 2021, for which actions have been taken to mitigate their impact and therefore the Board continues to be optimistic on the future trading environment.
The going concern review has been completed by considering the performance of the different businesses across the Group and each of their funding requirements before performing a number of stress tests. The base going concern case is consistent with the current Board approved forecasts and, to reflect judgement over timing of contingent consideration payments, has been adju sted to exclude these in the going concern period. A second case which includes the consideration payable on the acquisition of Megnajet Ltd (as set out in note 38), however excludes the revenue compared to forecast across the entire Group required to prevent the business continuing as a going concern is more than 30% which is considered remote given the nature and size of the order book and the trading experience of the Printhead and EPS segments during COVID-19 conditions to date.
Notwithstanding this, the Group has further options to mitigate a cash shortfall which have not been factored into the above forecasts, such as staffing reductions, further delaying/stopping capital and research and development expenditure and aligning performance related pay to actual results.
The Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the period to 30 June 2023, taking account of reasonably possible changes in trading performance. For this reason, we continue to adopt the going concern basis in preparing the financial statements.
Directors’
report
c
o
n
t
i
n
u
e
d
68
Xaar
plc
–
Annual
Report
and
Financial
Statements
2
0
2
1
Governance
V
i
a
b
i
l
i
t
y
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 three 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
CEO
report
and
in
the
strategic
review
on
pages 12 to 2 3
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 47 to 5 5
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 of the 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 impact that these could have over a three-year period. The principal risks that were combined and modelled to create a ‘severe but plausible’ scenario are: 2. Identification of market requirements, 4. Merger and acquisition opportunities and 12. Supply chain. The results of this scenario led to an 8% reduction in base case revenue over the three-year period.
Taking account of the 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 wil l be able to continue in operation and meet its liabilities as they fall due for the next three years, to December 2024.
Auditor
Ernst & Young LLP were re-appointed in 2021 and have expressed their willingness to continue in office as auditor and a resolution to reappoint them will be proposed at the forthcoming AGM.
D
i
r
e
c
t
o
r
s
’
s
t
a
t
e
m
e
n
t
a
s
t
o
d
i
s
c
l
o
s
u
r
e
o
f
i
n
f
o
r
m
a
t
i
o
n
t
o
a
u
d
i
t
o
r
i
The
Directors
who
were
members
of
the
Board
at
the
time
of
approving
the
Directors’
report
are
listed
on
pages 60 and 6 1
Having made enquiries of fellow Directors, each of these Directors confirm that:
•
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
•
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
•
If any independent Director does not agree to support this statement this must be disclosed.
This
confirmation
is
given
and
should
be
interpreted
in
accordance
with
the
provisions
of
section
418
of
the
Companies
Act
2
0
0
6
.
Approval
The
Directors’
report
was
approved
by
the
Board
on
29
March
2022
and
is
signed
on
its
behalf
b
y
:
John
Mills
C
h
i
e
f
E
x
e
c
u
t
i
v
e
O
f
f
i
c
e
r
69
Xaar
plc
–
Annual
Report
and
Financial
Statements
2
0
2
1
Governance
Section
172
s
t
a
t
e
m
e
n
t
T
h
e
C
o
m
p
a
n
i
e
s
A
c
t
2
0
0
6
(
t
h
e
‘A
c
t
’),
a
s
a
m
e
n
d
e
d
b
y
t
h
e
C
o
m
p
a
n
i
e
s
(
M
i
s
c
e
l
l
a
n
e
o
u
s
R
e
p
o
r
t
i
n
g
)
R
e
g
u
l
a
t
i
o
n
s
2
0
1
8
,
r
e
q
u
i
r
e
s
c
o
m
p
a
n
i
e
s
t
o
i
n
c
l
u
d
e
a
‘S
e
c
t
i
o
n
1
7
2
(
1
)
S
t
a
t
e
m
e
n
t
’
i
n
t
h
e
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
d
e
s
c
r
i
b
i
n
g
h
o
w
d
i
r
e
c
t
o
r
s
h
a
v
e
h
a
d
r
e
g
a
r
d
t
o
t
h
e
m
a
t
t
e
r
s
s
e
t
o
u
t
i
n
S
e
c
t
i
o
n
1
7
2
(
1
)
(
a
)
t
o
(
f
)
o
f
t
h
e
A
c
t
w
h
e
n
p
e
r
f
o
r
m
i
n
g
t
h
e
i
r
d
u
t
i
e
s
.
Section 172 of the Act requires directors of a company to act in a way they consider, in good faith, would most be most 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
t
e
r
m
,
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 s172 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 Report on pages 73 to 74 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
in
pages 46 to 5 5
S
t
a
k
e
h
o
l
d
e
r
engagement
The
Directors
have
ongoing
engagement
with
all
of
our
key
s
t
a
k
e
h
o
l
d
e
r
s
:
•
our Investors
•
our People
•
our Communities and,
•
our
P
a
r
t
n
e
r
s
.
The
Directors
continually
review
the
impact
that
any
decisions
will
have
on
these
key
s
t
a
k
e
h
o
l
d
e
r
s
.
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
page 72
and
Directors’
Remuneration
Report
on
pages 83 to 102
70
Xaar
plc
–
Annual
Report
and
Financial
Statements
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2
1
Governance
S
e
c
t
i
o
n
1
7
2
s
t
a
t
e
m
e
n
t
c
o
n
t
i
n
u
e
d
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, visib ility 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
a
n
d
t
h
e
r
e
s
u
l
t
s
o
f
t
h
o
s
e
e
n
g
a
g
e
m
e
n
t
s
a
r
e
s
e
t
o
u
t
i
n
S
u
s
t
a
i
n
a
b
i
l
i
t
y
a
n
d
r
e
s
p
o
n
s
i
b
l
e
b
u
s
i
n
e
s
s
o
n
p a g e 3 2
a
n
d
D
i
r
e
c
t
o
r
s
’
R
e
m
u
n
e
r
a
t
i
o
n
r
e
p
o
r
t
on page 85
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 charges and installed LED lighting.
i
More
details
of
our
engagement
with
our
communities
and
the
results
of
those
engagements
are
set
out
in
Sustainability
and
responsible
business
on
page 35
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 worked hard to ensure our factories could continue to operate and supply our customers even at the height of the pandemic.
We invested £5.7 million in R&D during 2021, 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
the
Strategic
Report
on
page 31,
Our
business
model
on
page 9
and
individual
business
unit
updates
on
pages 16 to 23
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.
71
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plc
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Annual
Report
and
Financial
Statements
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0
2
1
Governance
Corporate
Governance
s
t
a
t
e
m
e
n
t
The
Board’s
primary
objective
remains
ensuring
long-term,
sustainable
growth
for
the
benefit
of
the
C
o
m
p
a
n
y
’s s
h
a
r
e
h
o
l
d
e
r
s
a
n
d
w
i
d
e
r
s
t
a
k
e
h
o
l
d
e
r
s
. T
h
i
s
i
n
c
l
u
d
e
s
a
n
o
n
g
o
i
n
g
c
o
m
m
i
t
m
e
n
t
t
o
t
h
e
h
i
g
h
e
s
t
s
t
a
n
d
a
r
d
s
o
f
c
o
r
p
o
r
a
t
e
g
o
v
e
r
n
a
n
c
e
a
s
s
e
t
o
u
t
i
n
t
h
e
F
i
n
a
n
c
i
a
l
R
e
p
o
r
t
i
n
g
C
o
u
n
c
i
l
(‘F
R
C
’)
2
0
1
8
U
K
C
o
r
p
o
r
a
t
e
Governance Code (‘the Code’).
T
h
e
2
0
1
8
U
K
C
o
r
p
o
r
a
t
e
G
o
v
e
r
n
a
n
c
e
C
o
d
e
i
s
a
s
e
t
o
f
p
r
i
n
c
i
p
l
e
s
a
n
d
p
r
o
v
i
s
i
o
n
s
t
h
a
t
e
m
p
h
a
s
i
s
e
t
h
e
v
a
l
u
e
o
f
g
o
o
d
c
o
r
p
o
r
a
t
e
g
o
v
e
r
n
a
n
c
e
t
o
l
o
n
g
-
t
e
r
m
s
u
s
t
a
i
n
a
b
l
e
s
u
c
c
e
s
s
a
n
d
a
c
h
i
e
v
e
m
e
n
t
o
f
w
i
d
e
r
o
b
j
e
c
t
i
v
e
s
.
The
Code
can
be
found
on
the
FRC’s
website
at
www.frc.org.uk.
A
p
p
l
i
c
a
t
i
o
n
o
f
t
h
e
m
a
i
n
p
r
i
n
c
i
p
l
e
s
o
f
t
h
e
C
o
d
e
The
Board
has
considered
and
implemented
the
provisions
of
the
Code
effective
1
January
2
0
1
9
.
We are pleased to confirm that throughout the year ended 31 December 2021, the Company has followed the principles and provisions of the 2018 UK Corporate Governance Code, 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 terms of reference for the Audit, Nomination and Remuneration Committees were reviewed during 2021 to address the requirements of the Code, and updated as of 1 January 2022.
The
governance
report
g
i
v
e
s
:
•
Disclosure of Board discussions and the resulting actions
•
A clear and honest view of progress throughout the year
•
The
outcome
of
our
Board
e
v
a
l
u
a
t
i
o
n
•
Our approach to ensuring long-term viability of the business
•
Our
approach
to
risk
and
m
i
t
i
g
a
t
i
o
n
.
S
t
a
t
e
m
e
n
t
o
f
c
o
m
p
l
i
a
n
c
e
w
i
t
h
t
h
e
C
o
d
e
Throughout the year ended 31 December 2021 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.
A
copy
of
the
Code
can
be
found
on
the
FRC
website
at
w w w.f r c.o r g.u k.
Provision 36: The current policy on post-employment shareholdings do not comply fully with the Code, as it doesn’t include a minimum two-year post-employment holding. This is partially mitigated through applying the leaver provisions under the Company’s share plans. We intend to introduce a post-employment shareholding for future LTIP grants from 2023 onwards and will update the guideline when a new remuneration policy is introduced.
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
and
Company
P
u
r
p
o
s
e
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
E
P
I
I
C
C
:
•
We
do
Everything
with
P
a
s
s
i
o
n
•
W
e
a
r
e
I
n
n
o
v
a
t
i
v
e
•
We
have
I
n
t
e
g
r
i
t
y
•
W
e
a
r
e
C
r
e
a
t
i
v
e
•
W
e
a
r
e
C
o
l
l
a
b
o
r
a
t
i
v
e
.
C
o
r
p
o
r
a
t
e
G
o
v
e
r
n
a
n
c
e
s
t
a
t
e
m
e
n
t
c
o
n
t
i
n
u
e
d
72
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1
Governance
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. 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 page 5 for the Strategy review and page 32 for Company values
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 three manufacturing facilities with offices: one in Huntingdon, UK, one in Hemel Hempstead, 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 page 8 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
R
e
f
e
r
t
o
p a g e 6 9
f
o
r
t
h
e
s.1
7
2
d
i
s
c
l
o
s
u
r
e
The key focus this year was to maintain the progress made by the business in recent years while navigating the unpredictable impacts of a global pandemic. The Board has focused on ensuring 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. In particular, the main Board decisions during the year were:
•
Continuing to invest in R&D and the product roadmap, leading to two further product launches from the ImagineX platform:
–
April 2021 – launch of the Xaar Nitrox printhead attracting new customers and increased opportunities.
–
September 2021 – launch of the Xaar Irix printhead, strengthening our product offering in the Coding & Marking sector.
•
Concluded the divestment of the remaining shareholding of Xaar 3D to Stratasys generating a positive cash inflow of £9.3 million (before transaction costs of £0.3 million) to enable Xaar to focus on its core business.
•
Completed the acquisition of FFEI, a leading integrator and manufacturer of industrial digital inkjet systems and digital life science technology, as part of the vertical integration strategy to grow Xaar’s capability and help accelerate customer adoption of our printhead technology.
•
Initiated operational changes within the EPS business unit to strengthen management and internal controls, to take advantage of the compelling growth opportunity in the market.
•
Relocated
the
corporate
headquarters
in
Cambridge,
UK
which
is
expected
to
deliver
£0.7
million
of
annual
cost
s
a
v
i
n
g
s
.
•
Opened
a
new
Customer
Service
Centre
in
Shenzhen,
C
h
i
n
a
.
•
Established
an
ESG
Committee
to
develop
a
Sustainability
Roadmap
to
2
0
3
0
.
•
Presented a pandemic response during 2021 to ensure the safety and wellbeing of our people, security of supply chain and provision of finished goods to our customers.
The Board worked closely with executive management to redefine the Group’s mission, vision and values which will underpin the Group’s evolving culture under the executive leadership team. Further information is in the Directors’ Remuneration report on page 83 and Sustainable and responsible business on page 32.
E
n
g
a
g
e
m
e
n
t
w
i
t
h
s
h
a
r
e
h
o
l
d
e
r
s
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 8 5
The
Board
uses
the
AGM
to
communicate
with
investors
and
to
encourage
their
p
a
r
t
i
c
i
p
a
t
i
o
n
.
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 2021, the majority of resolutions had less than 1% of votes cast against the Board’s recommendation. The exceptions being resolutions 4, 5 & 10 with c. 8% 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.
73
Xaar
plc
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Annual
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Statements
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1
Governance
F
e
e
d
b
a
c
k
f
r
o
m
b
r
o
k
e
r
s
a
n
d
f
i
n
a
n
c
i
a
l
P
R
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
A
c
c
o
u
n
t
s
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.xaar.com.
W
o
r
k
f
o
r
c
e
engagement
Workforce engagement has been increasingly important during 2021 due to the second year of the COVID-19 pandemic and changes to working patterns. Despite the restrictions on international travel, we have endeavoured to stay close to our employees and support them during this difficult time. We have ensured that our managers have taken additional time to check on the wellbeing of their teams, for those individuals working on site and those who are working from home.
The Board continued to hold employee engagement sessions which are hel d recurrently throughout the year. With the impact of COVID-19, the three Non-Executive Directors hosted two sessions each during 2021, which were held either virtually via video call or in person,
i.e. a total of six sessions in total. 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.
C
o
n
f
l
i
c
t
o
f
i
n
t
e
r
e
s
t
a
n
d
t
i
m
e
c
o
m
m
i
t
m
e
n
t
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 2021.
The only change to Directors’ outside commitments during 2021 related to Senior Independent Director Alison Littley, who resigned as a Non-Executive Director from Headlam plc, Osborne Group Holdings Ltd and Rosewood Holdings Ltd, and was appointed as Senior
Independent Director and Chair of the Remuneration Committee of musicMagpie plc in April 2021. Each Director devoted significant time to their Xaar Board responsibilities during 2021, with all Directors attending all Board meetings (see page 76).
2.
Division
of
R
e
s
p
o
n
s
i
b
i
l
i
t
i
e
s
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 enab les 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 pages 60 and 61 of the Annual Report and 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. Camila Cottage was
re-appointed as Company Secretary on 1 February 2021.
C
o
r
p
o
r
a
t
e
G
o
v
e
r
n
a
n
c
e
s
t
a
t
e
m
e
n
t
c
o
n
t
i
n
u
e
d
74
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Governance
3.
C
o
m
p
o
s
i
t
i
o
n
,
S
u
c
c
e
s
s
i
o
n
a
n
d
E
v
a
l
u
a
t
i
o
n
Board
c
o
m
p
o
s
i
t
i
o
n
The
Board
of
Directors
comprises
the
Chairman,
two
Executive
Directors
and
two
Non-Executive
D
i
r
e
c
t
o
r
s
.
The Board considers Alison Littley, Chris Morgan 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.
All the Non-Executive Directors are deemed to be independent members of the Board having no financial relationship or significant links with related parties. Chris Morgan maintained his independence, having departed Stratasys in 2015. 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. The year was a less active one for the Nomination Committee, with no Board appointments, resignations or changes during 2021 for Executive and Non-Executive Directors.
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 two years. The Nomination Committee has recommended that during 2022 the Board be broadened and that the number of independent Non-Executive Directors be increased to four including the Chair. 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 but without reference to a specific diversity policy and without any established measurable objectives in respect of diversity quotas (e.g. age, gender, ethnicity, disability, religion or educational and professional background). More information on the Group’s gender profile is reported in Sustainable and responsible business on page 33.
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 the UK boards to better reflect their employee base and communities they serve.
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 2021. From the review and conclusions drawn, areas of improvement were identified as follows:
1.
Board
membership
diversity,
skills
and
experience
to
be
reviewed
and
an
additional
NED
appointment
to
be
c
o
n
s
i
d
e
r
e
d
2.
Improve the balance of time spent in Board meetings considering strategic as compared to operational issues, allowing sufficient time for in depth discussion, debate and challenge
3.
Further develop the approach to succession planning and talent management in the business to create greater opportunity for progression and increased diversity among senior management and the Board
Areas
of
improvement
identified
in
2020
were
addressed
and
actions
taken
and
implemented
during
2
0
2
1
.
i
Further
details
of
the
activities
of
the
Nomination
Committee
can
be
found
on
pages 81 and 8 2
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.
•
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.
•
The
Executive
Directors,
in
consultation
with
the
Chairman,
appraise
the
performance
of
the
Non-Executive
D
i
r
e
c
t
o
r
s
.
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 2021 AGM.
i
The
biographies
of
the
Directors,
set
out
on
pages 60 to 61,
contain
the
evaluation
of
skills
and
experience
beneficial
to
the
Company
so that the Board recommends the re-election or election of each Director
75
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and
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0
2
1
Governance
4.
A
u
d
i
t
a
n
d
R
i
s
k
a
n
d
I
n
t
e
r
n
a
l
C
o
n
t
r
o
l
s
i
The
role
and
responsibilities
of
the
Audit
Committee
are
set
out
in
the
Audit
Committee
section
on
pages 77 to 8 0
•
The
Audit
Committee
review
of
the
effectiveness
of
the
external
audit
is
set
out
on
page 8 0
•
The auditors Ernst and Young LLP were appointed follo wing a tender process in July 2019, and provide no non-audit services; the Audit Committee assessment of the auditor’s independence is disclosed on page 80.
i
The
Directors’
assessment
of
the
Group’s
internal
control
environment
as
required
under
the
UK
Corporate
Governance
Code
is
set
out
on
page 79 under ‘Internal controls and compliance’
The Audit Committee, led by Chris Morgan, 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 Chris Morgan 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
section
on
page 78
and
in
note 2
to
the
accounts
on
pages 119 and 120
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 2 to 57, 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.
P
r
i
n
c
i
p
a
l
a
n
d
e
m
e
r
g
i
n
g
r
i
s
k
s
The Board has confirmed on page 44 of the Annual Report 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
r
e
v
i
e
w
:
•
Climate change, was escalated from an emerging to a principal risk.
•
IT and Cyber risks, following the progress of the transformation programme has seen the risk probability reduced.
i
Descriptions
of
principal
and
emerging
risks
and
how
they
are
mitigated
and
any
changes
are
set
out
on
pages 44 to 5 5
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 44 to 46
The Board explains on
pages 67 and 68
of the Annual 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 tho se of shareholders.
The Remuneration Committee’s primary role is to recommend to the Board the senior 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. During 2022 the Remuneration Policy will be reviewed ahead of being put to a shareholder vote in 2023, and as part of this review we will consider how our ESG priorities should be reflected in the reward framework. The Remuneration Committee has not exercised any discretion in relation to remuneration outcomes in 2021.
i
Details
of
the
activities
of
the
Remuneration
Committee
can
be
found
in
the
Remuneration
Committee
section
on
page 83
and
in
the
Directors’ Remuneration report on pages 86 to 101
C
o
r
p
o
r
a
t
e
G
o
v
e
r
n
a
n
c
e
s
t
a
t
e
m
e
n
t
c
o
n
t
i
n
u
e
d
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Governance
•
The
alignment
of
executive
remuneration
with
Company
purposes
and
values
is
set
out
on
page 8 6
•
The award of long-term incentives and their performance conditions are set out on page 88
•
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 91
•
The
discretionary
powers
of
the
Remuneration
Committee
are
on
page 8 8
•
The
alignment
of
executive
pensions
with
those
of
the
workforce
are
on
page 8 7
•
Recovery
and
withdrawal
provisions
(malus/clawback),
and
the
circumstances
under
which
the
provisions
may
apply,
are
on
page 8 9.
S
u
m
m
a
r
y
o
f
B
o
a
r
d
m
e
e
t
i
n
g
a
t
t
e
n
d
a
n
c
e
i
n
2
0
2
1
Eleven
Board
meetings
were
held
in
2021,
with
three
additional
unscheduled
meetings
for
specific
i
t
e
m
s
:
Scheduled
Additional
Name
B
o
a
r
d
meetings
meetings
Andrew
Herbert
11
(11)
3
(3)
Alison
L
i
t
t
l
e
y
11
(11)
3
(3)
Chris Morgan
11
(11)
3
(3)
John
M
i
l
l
s
11
(11)
3
(3)
Ian
T
i
c
h
i
a
s
11
(11)
3
(3)
Board
Committees
Summary of Committee membership:
Remuneration
Nomination
Name
Audit
Committee
Committee
Committee
Andrew
Herbert
No
Yes
Chair
Alison
L
i
t
t
l
e
y
Yes
Chair
Yes
Chris Morgan
Chair
Yes
Yes
John
M
i
l
l
s
No
No
Yes
Ian
T
i
c
h
i
a
s
No
No
No
Summary of Committee meeting member attendance in 2021:
Name
Audit
Committee 1
Remuneration
C
o
m
m
i
t
t
e
e
1
Nomination
C
o
m
m
i
t
t
e
e
1
Andrew
Herbert
n/a
5
(5)
1
(1)
Alison
L
i
t
t
l
e
y
7
(7)
5
(5)
1
(1)
Chris Morgan
7
(7)
5
(5)
1
(1)
John
M
i
l
l
s
n/a
n/a
1
(1)
1 The Committees may invite Board Directors who are not Committee members to attend Committee meetings when the subject matter deems their presence appropriate.
Figures in brackets denote the maximum number of meetings that could have been attended.
Approval
The Board confirms the 2021 Annual Report and Financial Statements, taken as a who le, 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
was
approved
by
the
Board
on
29
March
2022
and
is
signed
on
its
behalf
b
y
:
John
Mills
C
h
i
e
f
E
x
e
c
u
t
i
v
e
O
f
f
i
c
e
r
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Governance
Audit
Committee
T
h
e
A
u
d
i
t
C
o
m
m
i
t
t
e
e
(
t
h
e
‘C
o
m
m
i
t
t
e
e
’)
i
s
a
p
p
o
i
n
t
e
d
b
y
t
h
e
B
o
a
r
d
f
r
o
m
t
h
e
N
o
n
-
E
x
e
c
u
t
i
v
e
D
i
r
e
c
t
o
r
s
of
the
Company.
The
Chair
of
the
Committee
is
Chris
Morgan.
Audit
Committee
composition
and
m
e
e
t
i
n
g
s
Chris Morgan’s previous roles have given him senior executive and financial experience working across a number of technology and digital printing sectors and across a number of jurisdictions. Alison Littley, Audit Committee member, also brings a breadth of experience including executive experience in complex, international business operatio ns. Additional information on our skills and experience can be found in the Board biographies set out on pages 60 and 61.
The Audit Committee met formally on seven occasions during the year and details of the attendance at meetings by members of the Audit Committee are set out on page 76. Please see the tables on page 76 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.
R
e
p
o
r
t
f
r
o
m
t
h
e
C
o
m
m
i
t
t
e
e
C
h
a
i
r
m
a
n
I am pleased to present the Audit Committee’s report describing our work during the past year. Ernst & Young LLP (EY) was reappointed as the Group external auditor at the Annual General Meeting and Adrian Bennett is the engagement partner.
The Audit Committee’s primary responsibilities are the following:
•
To
approve
and
monitor
key
financial
and
accounting
policies
and
p
r
a
c
t
i
c
e
s
•
To monitor the integrity of the financial statements, announcements and review significant financial reporting judgements contained therein
•
To
keep
under
review
the
adequacy
and
effectiveness
of
internal
c
o
n
t
r
o
l
s
•
To review procedures, systems and controls for whistleblowing, fraud detection and bribery prevention
•
To
review,
approve
and
monitor
internal
audit
a
c
t
i
v
i
t
i
e
s
•
To
monitor
and
review
the
Group’s
external
auditor’s
independence,
objectivity
and
e
f
f
e
c
t
i
v
e
n
e
s
s
•
To
monitor
and
approve
any
non-audit
services
provided
by
the
external
a
u
d
i
t
o
r
•
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 2018 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
C
o
m
m
i
t
t
e
e
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:
•
Revenue
recognition
•
Valuation
of
Xaar
3D
disposal
contingent
c
o
n
s
i
d
e
r
a
t
i
o
n
•
FFEI
acquisition
•
Impairment of goodwill, intangible assets and PPE
•
Inventory
valuation
and
obsolescence,
including
EPS’
H1
2021
non-cash
adjustments
relating
to
slow
moving
and
obsolete
i
n
v
e
n
t
o
r
y
•
Consideration and treatment as a prior year adjustment of the remediation of the significant deficiencies in internal control identified within EPS as part of the 2020 year end audit process, as described on page 79.
A
u
d
i
t
C
o
m
m
i
t
t
e
e
c
o
n
t
i
n
u
e
d
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Governance
K
e
y
a
r
e
a
s
o
f
m
a
n
a
g
e
m
e
n
t
j
u
d
g
e
m
e
n
t
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:
A
c
c
o
u
n
t
i
n
g
j
u
d
g
e
m
e
n
t
s
Capitalisation of development costs – note 16
The Audit Committee considers management’s assessments when the criteria for capitalisation are met. The development of the High Speed Sintering in 3D was completed in December 2020, the cost and accumulated depreciation was reclassified as part of an asset group held for sale as at 31 December 2020, and subsequently disposed of in 2021.
Discontinued operations – note 11
The 3D business met the criteria of a discontinued operation in December 2020 and the disposal was formally completed on 1 November 2021. The accounting treatment of the disposal of the Xaar 3D business reclassified as discontinued operations has been presented to, considered and agreed by the Audit Committee and the external auditors.
E
s
t
i
m
a
t
i
o
n
uncertainty
Climate-related risks – Risk management
Climate change is a global challenge and an emerging risk to businesses, people and the environment across the world. In management’s view and the Audit Committee’s review, climate change does not currently create any further key sources of estimation uncertainty for the Group.
Contingent consideration – note 22
The contingent consideration is a financial asset measured at fair value, which is calculated using the Monte Carlo Simulation model,
the model uses a number of inputs that require estimation: forecast revenues, time until expiration, expected volatility and discount rates. Third party experts are used to provide these inputs, but the estimates remain uncertain. The valuations are considered by the Audit Committee on review of the accounting treatment of the disposal of the Xaar 3D business.
Inventory provision – note 20
A policy is used by management to calculate the inventory provisions based upon use and ageing of inventory; a significant proportion of the inventory provision relates to discontinued operations.
Credit provision for the allowance of doubtful debts – note 21
A review has been undertaken to consider the requirements of IFRS 9 and the expected credit loss provision requirements based on historical default and loss experience by management.
Impairment of capitalised development costs – note 16
The Group determines whether capitalised development costs, and all other non-current assets, are impaired at least on an annual basis. The carrying amount of capitalised development costs at 31 December 2021 was £nil.
Impairment of goodwill in relation to EPS – note 15
The Group tests goodwill annually for impairment. A budget has been prepared for EPS and a cash flow forecast derived to determine
a
value
in
use
calculation.
The
recoverable
amount
is
estimated
and
discounted
with
regards
to
a
discount
rate
applicable
to
EPS,
t
h
i
s
reflects external third party advice and input estimates of the risk free rate, equity beta and market premium calculated at the year end. Sensitivity analysis is undertaken, but the estimates remain uncertain and rely upon forward guidance. Management’s assessment has been reviewed by the Audit Committee, which is satisfied that there is no impairment identified.
Revenue recognition – note 5
The Audit Committee reviews the assessment of the application of IFRS 15, as presented to it, with regards to the stage of completion for relevant customer contracts.
i
Additional
disclosure
in
relation
to
key
sources
of
estimation
uncertainty
and
critical
accounting
judgements
is
provided
in
the
Group
financial statements – note 2 on pages 119 and 120
Key
activities
In discharging its responsibilities, the Committee has completed the following activities:
F
i
n
a
n
c
i
a
l
s
t
a
t
e
m
e
n
t
s
a
n
d
r
e
p
o
r
t
s
•
Reviewed the Annual Report, financial statements and the half-yearly financial report 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
•
Reviewed
Going
Concern
and
Viability
Statements
and
supporting
a
s
s
e
s
s
m
e
n
t
s
•
Reviewed reports from the external auditor on their work and findings
•
Reviewed
the
effectiveness
of
the
Group’s
internal
control
e
n
v
i
r
o
n
m
e
n
t
.
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Governance
I
n
t
e
r
n
a
l
c
o
n
t
r
o
l
s
a
n
d
c
o
m
p
l
i
a
n
c
e
To assist the Board with its responsibilities to effectively determine the nature and extent of the Group’s significant risks (as described on pages 44 and 45), 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.
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
h
a
v
i
n
g
:
•
Reviewed the internal financial controls and risk management systems
•
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
•
Reviewed
and
approved
actions
for
improvements
to
Treasury
m
a
n
a
g
e
m
e
n
t
•
The Committee considered and reviewed the internal audit plan that in 2020 was unable to progress as planned due to the impact of COVID-19 restricting the ability to travel to overseas sites alongside requirements to work from home, which continued to disrupt plans in 2021. A review was undertaken for the approach of internal audit, internal resource was recruited (joined in January 2022) and an external provider was engaged to commence internal audit activities in 2022. In addition, an audit readiness engagement was performed at EPS in the place of an internal audit in 2021 (see more detail below).
In line with the provisions of the UK Corporate Governance Code 2018, 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 recognises the challenges faced over the last two years, and has ensured steps have been taken to commence internal audits of financial processes and controls in 2022 across the Group. The Committee sanctioned an approach for greater emphasis to be placed on the methodology and effectiveness of management controls. This was implemented during 2021 with the objective to identify effective and ineffective processes and controls, and will drive increased engagement with internal audit in the future through the design and implementation of new internal systems to ensure a robust and effective solution.
As disclosed in the Xaar plc Annual Report and Financial Statements 2020, significant deficiencies in internal control were identified in the EPS subsidiary during the external audit process for the year ended 31 December 2020, in respect to the financial statement close process and management controls. An action plan was established, presented to the Board and Audit Committee, and implemented in
2021, covering the actions required to remediate the internal management and reporting controls and remediate the identified deficiencies. The significant deficiencies in internal control identified in the EPS subsidiary were in respect of the adequacy of controls in the financial reporting close process, controls over revenue recognition, and controls over inventory management and valua tion.
The action plan was substantially underway by the end of 2021, enab ling the delivery of improved operational processes across the business and addressing the concerns raised during the external audit of the 2020 financial year. The Board and the Audit Committee are kept up to date with the progress made against the action plan. A third party, RSM LLP US (RSM), were engaged to support the audit readiness of EPS ahead of the 2021 year end audit. In addition to reviewing actions taken during 2021, RSM helped to identify and implement further actions as required to enable a successful year-end external audit. This engagement was undertaken ahead of traditional internal audit activities
in order to provide assurance that appropriate processes have been performed resulting in accurate accounting, free from significant deficiencies in internal controls.
Further to this, RSM will work with EPS in relation to risk and controls to ensure we have clear integrated controls and reporting across the EPS business. This work will be enhanced further by internal audi t procedures to follow later in 2022 once clear processes and controls have
been
established
at
EPS.
Work
continues
across
the
business
to
enable
delivery
of
improved
operational
processes,
however
the
actions
taken
to date have resulted in significant progress being made, with clear and demonstrable improvement in operations, process and culture.
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 page 68.
FRC’s
Corporate
Reporting
R
e
v
i
e
w
Xaar plc’s Annual Report and Accounts to 31 December 2020 was selected as part of the FRC thematic review of companies’ disclosure of alternative performance measures (APMs); as such, only the disclosures in relation to APMs were reviewed. Xaa r’s disclosure relating to the cash flow impact and tax effect of restructuring costs was highlighted as an example of better practice in the FRC Thematic Review:
Alternative Performance Measures (APMs), published in October 2021. A request for information was also made; Xaar provided a response
covering the specific questions raised and on 10 November the FRC confirmed that the matter was brought to a satisfactory conclusion.
The FRC asked Xaar to explain the difference between the amount of depreciation of property, plant and equipment disclosed within the reconciliation of adjusted EBITDA, and the depreciation charge discl osed elsewhere in the notes to the accounts. We provided a satisfactory analysis and clarified that the main difference related to an impairment charge. We also stated that the depreciation of right-of-use assets was not added back when arriving at the adjusted EBITDA. We confirmed that the nature of the reconciling items, and the reasons for their selection, would be clarified in the next Annual Report and Financial Statements.
A
u
d
i
t
C
o
m
m
i
t
t
e
e
c
o
n
t
i
n
u
e
d
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Governance
Note that there are inherent limitations in the FRC’s review as the FRC provides no assurance that Xaar’s 2020 Annual Report and Financial Statements are correct in all material aspects; their role is not to verify the information provided but to consider compliance with reporting requirements. The FRC accepts no liability for reliance on them by Xaar or any third party, including but not limited to investors and shareholders.
External
audit
•
Following the conclusion and sharing of the 2020 audit results, there was an extensive collaborative effort by the Xaar and the EY teams to review the process in detail, and identify and implement improvements for future audit efforts including improved planning and timing of audit procedures, as well as working team adjustments to better handle engagement given the d ynamic COVID-19 situation. This process work and the related recommendations were reviewed by the Audit Committee and were instrumental in aiding the planning
of
the
2021
a
u
d
i
t
•
The Audit Committee provided a forum for reporting and discussion with the Group’s external auditors 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
•
The
scope
of
the
audit
work
to
be
undertaken
by
the
auditor
was
reviewed
and
agreed
o
n
•
The Committee agreed the fees to be paid to the external auditor relating to their services rendered for the annual audit
•
The
independence
and
objectivity
of
the
external
auditor
was
assessed
by
the
C
o
m
m
i
t
t
e
e
.
The
Chairman
of
the
Audit
Committee
will
be
available
at
the
AGM
to
answer
any
questions
about
the
work
of
the
C
o
m
m
i
t
t
e
e
.
External
auditor
This was the third year for Ernst & Young LLP (EY) as the Company’s auditor having first been appointed in July 2019 after a competitive tender. For the second year the senior statutory auditor is Adrian Bennett. 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, reappointment, term, remuneration, and terms of engagement of the external auditor.
The Committee safeguards auditor objectivity and independence through maintain ing 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. EY were engaged to provide tax services for FFEI for their year ending 31 March 2021, however on the completion
of Xaar’s acquisition of FFEI, there was no open work and EY discontinued their engagement as tax advisor. Note 8 to the consolidated financial statements includes disclosure of the auditor’s remuneration for 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 2021, the Committee was able to conclude the audit undertaken by Ernst & Young LLP 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 2021 results and reported on in next year’s Annual Report.
R
e
v
i
e
w
o
f
t
h
e
A
u
d
i
t
C
o
m
m
i
t
t
e
e
’s
e
f
f
e
c
t
i
v
e
n
e
s
s
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.
Chris
Morgan
Chair of the Audit Committee
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Governance
Nomination
C
o
m
m
i
t
t
e
e
T
h
e
N
o
m
i
n
a
t
i
o
n
C
o
m
m
i
t
t
e
e
i
s
a
p
p
o
i
n
t
e
d
b
y
t
h
e
B
o
a
r
d
f
r
o
m
t
h
e
N
o
n
-
E
x
e
c
u
t
i
v
e
D
i
r
e
c
t
o
r
s
o
f
t
h
e
C
o
m
p
a
n
y
and
the
Chief
Executive
Officer.
The
Chair
of
the
Committee
is
Andrew
Herbert.
The terms of reference of the Committee state that it shall meet typically twice per year. 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 76 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:
•
Reviewing
the
size,
structure,
composition
and
independence
of
the
Board
and
its
C
o
m
m
i
t
t
e
e
s
•
Identifying
and
nominating
candidates
to
fill
Board
vacancies
as
the
need
a
r
i
s
e
s
•
Ensuring adequate succession planning is in place for Executive Directors, Non-Executive Directors and members of the senior management team
•
Making recommendations to the Board on the appointment of new Executive and Non-Executive Directors and their reappointment following retirement by rotation
•
Reviewing
the
results
of
the
annual
Board
performance
evaluation
p
r
o
c
e
s
s
.
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.
T
h
e
N
o
m
i
n
a
t
i
o
n
C
o
m
m
i
t
t
e
e
’s
r
o
l
e
i
n
t
h
e
c
o
m
p
o
s
i
t
i
o
n
,
s
u
c
c
e
s
s
i
o
n
a
n
d
e
v
a
l
u
a
t
i
o
n
o
f
t
h
e
B
o
a
r
d
i
s
d
i
s
c
l
o
s
e
d
i
n
t
h
e
C
o
r
p
o
r
a
t
e
G
o
v
e
r
n
a
n
c
e
s
t
a
t
e
m
e
n
t
.
B
o
a
r
d
r
o
o
m
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, know ledge 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.
The Board has not established a specific diversity policy in respect of its membership but is cognisant of the benefits of a rich mix of backgrounds, experience and skills. The present Board is 20% female versus 80% male (one female and four males). The Board has not set any measurable objectives in respect of a diversity quota but appointments made to the Board in the past four 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 32 and 33.
Key
issues
and
a
c
t
i
v
i
t
i
e
s
In 2020 and following significant losses in the business and as part of a move to control costs, a decision was made to reduce the Board size to five comprising three independent Non-Executive Directors and two Executive Directors. This position was retained in 2021 during which there were no changes to the Board. The matter has, however, been kept under constant review.
Following implementation of a new strategy and the good progress made on building an executive management team during the past
two years, the Nomination Committee has recommended that during 2022 the Board be strengthened and that the number of independent Non-Executive Directors be increased to four including the Chair. This move will allow the balance of skills of Board members to be enhanced, will facilitate some reassignment of responsibilities among the Non-Executive team and will ensure continuation of strong governance. In making any future appointment the Nomination Committee will consider both diversity and succession as a matter
of course as we seek to further equip the Board in its role of overseeing future business growth and expansion.
The Committee has considered organisational development and succession planning, an induction programme for Non-Executive Directors, and, in association with the Remuneration Committee, has worked alo ngside executive management in reviewing senior management development. A number of senior appointments have been made during 2021 to strengthen the executive team across the business units as the Company rebuilds competencies appropriate to its strategy and structure following the acquisition of FFEI Limited and divestment of the 3D business in the year.
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 FTSE 350 company, it is not required by the 2018 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.
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Xaar
plc