Xaar half-year results 2026: margins improve but cash conversion needs attention

Xaar's 2026 half-year results show a business making useful operational progress, with revenue growing, margins improving and adjusted profit moving into positive territory.

The less comfortable part is cash conversion. Higher inventories, capital expenditure and exceptional costs contributed to a £3.2 million operating cash outflow, leaving the inkjet technology group with modest net debt.

For investors following Xaar PLC, these results provide evidence that the strategy is gaining traction. However, the group still needs to convert its expanding commercial pipeline into sustainable reported profits and cash flow.

Xaar's half-year results at a glance

Continuing operations	H1 2026	H1 2025	Change
Revenue	£29.7 million	£27.2 million	9.2% at constant currency
Gross margin	38.7%	36.5%	2.2 percentage points
Adjusted EBITDA	£1.7 million	£0.8 million	112.5%
Adjusted profit before tax	£0.2 million	£0.7 million loss	Improved by £0.9 million
Statutory loss before tax	£1.4 million	£2.8 million loss	Loss reduced
Adjusted earnings per share	0.3p	0.7p loss	Returned to profit
Net debt or cash	£0.1 million net debt	£5.1 million net cash	Weakened

The central positive is the move from a £0.7 million adjusted pre-tax loss to a £0.2 million adjusted profit. That remains a thin level of profitability, but it represents a meaningful improvement.

Gross profit increased from £9.9 million to £11.5 million, helped by a more favourable product mix, efficiency improvements and the turnaround at Engineered Print Solutions, or EPS.

Revenue growth was spread across the group

Printhead remains Xaar's largest division. Revenue rose 5.5% to £21.0 million, with new original equipment manufacturer customers adopting its technology for the first time.

The performance within Printhead was mixed:

Printhead market	H1 2026 revenue	Year-on-year change
Ceramics and Glass	£4.0 million	11.1%
Coding and Marking and Direct to Shape	£6.5 million	-8.5%
Wide Format Graphics and Labels	£1.3 million	8.3%
3D Printing and Advanced Manufacturing	£8.6 million	28.4%
Packaging and Textiles	£0.6 million	-53.8%

Growth of 28.4% in 3D Printing and Advanced Manufacturing is particularly important because it supports Xaar's effort to diversify away from its more established markets.

Management highlighted progress in printed circuit board conformal coating, semiconductor manufacturing processes, solar panels and ceramics glaze. These applications use Xaar's ability to deposit precise amounts of high-viscosity fluids, meaning thicker liquids, with considerable accuracy.

There are still weak spots. Packaging and Textiles revenue more than halved, while Coding and Marking and Direct to Shape declined as some customers deferred orders into the second half. Xaar said its full-year expectations for the latter market remain unchanged.

Megnajet and EPS delivered stronger margins

Megnajet, which makes ink delivery systems, grew revenue by 27.3% to £1.4 million. Its gross margin increased from 40.9% to 52.9%, while adjusted operating profit doubled to £0.6 million.

EPS revenue rose 15.9% to £7.3 million. Its gross margin improved from 33.5% to 39.4%, and adjusted operating profit increased from £0.2 million to £0.6 million.

Management credits the EPS improvement to better project execution, cost discipline and a more focused commercial pipeline. This matters because EPS had previously held back group performance. A more dependable contribution should improve Xaar's operating leverage as revenue grows.

Flashforge could be an important commercial test

The planned second-half launch of Flashforge's CJ270 desktop 3D printer is one of the most significant near-term developments.

Flashforge has started pre-launch manufacturing, and Xaar has received initial printhead orders. Volumes are building ahead of the commercial launch, with management describing demand as strong.

The potential attraction is not limited to initial equipment sales. Printheads require replacement, which can create recurring or annuity-style revenue after machines enter active use.

However, the eventual commercial scale of the CJ270 opportunity was not disclosed. Investors will need to watch the launch, customer adoption and subsequent replacement demand rather than relying solely on encouraging pre-launch activity.

Why did cash weaken?

Xaar finished June with £0.1 million of net debt, compared with £5.1 million of net cash a year earlier. Cash and cash equivalents stood at £3.3 million, while borrowings were £3.4 million.

The group reported a £3.2 million net operating cash outflow. Even after excluding exceptional cash outflows, adjusted cash utilised by operations was £1.4 million.

Inventory increased to £29.6 million as Xaar built finished goods ahead of OEM product launches. That may support future revenue, but it also ties up cash and creates execution risk if demand arrives later than expected.

Capital expenditure increased to £2.4 million from £1.3 million, including investment in printhead capability, platform development and technology enhancements. The Dongguan manufacturing facility is also in the final stages of commissioning, with the site intended to strengthen supply chain resilience and deepen relationships with Asian customers.

Xaar expanded its revolving credit facility from £5 million to £10 million, with a further uncommitted £5 million accordion option. It had drawn £2.5 million at the period end. The extra funding provides flexibility, although the move from cash to debt underlines the importance of better cash conversion.

Adjusted profit does not tell the whole story

Although adjusted profit before tax was £0.2 million, continuing operations recorded a statutory pre-tax loss of £1.4 million. Total adjusting items affecting profit before tax were £1.5 million.

These included restructuring and transaction expenses, China expansion start-up costs, share-based payments, a legal settlement and system implementation expenditure. Some items may be non-recurring, but the difference between adjusted and reported performance remains material.

The group also disclosed historic overseas tax liabilities estimated at £1.8 million, expected to be settled over two years. Potential penalties of between £39,000 and £460,000 remain a contingent liability, meaning they have not been recognised as a provision because the final amount is uncertain.

No interim dividend as investment takes priority

Xaar declared no interim dividend. The board believes investment in profitable growth is currently the best use of capital and intends to resume dividends when conditions allow.

Given the operating cash outflow, higher inventory and investment programme, retaining cash appears consistent with the group's priorities. Income-focused investors should note that the timing of any dividend return was not disclosed.

What investors should watch next

Xaar maintained its full-year outlook, although the announcement did not disclose numerical full-year guidance.

The second half now needs to demonstrate that first-half investment can support stronger revenue and cash generation. The main points to monitor are:

• The commercial launch and customer adoption of the Flashforge CJ270.
• Conversion of elevated inventory into sales and cash.
• Continued margin improvement at EPS and Megnajet.
• Progress in newer advanced manufacturing applications.
• The performance of weaker Packaging and Textiles activities.
• The scale of further restructuring or expansion costs.

The results show improving operational momentum, but not yet a fully completed turnaround. Revenue is growing, gross margins are moving in the right direction and adjusted profitability has returned. Against that, statutory losses continue and cash flow remains the clearest area requiring improvement.

Investors can review the figures and full notes in the original company announcement.