Xaar (LSE:XAR) — Interim Results

0:00 Good afternoon, and welcome to the XAR PLC Interim Results Presentation. Throughout the quarter presentation, investors will be in listen only mode. Questions are encouraged, and they can be submitted at any time via the Q and A tab situated at the right corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question received in the meeting itself. Have the company come with questions submitted today and publish responses to it as appropriate to do so. Before we begin, I'd like to make the following poll.

0:26 We'll now play a prerecorded presentation and open up for live q and a at the end. Good morning, and welcome to XAR's 2025 interim results presentation. My name is John Mills, and I'm pleased to be joined by our CFO, Paul James. This morning, we will provide an overview of what has been a promising start to the year. Paul will provide details of the financial performance before I present an update of our key market opportunities, namely EV battery coating, automotive coating, and desktop three d printing. I will then provide an outlook for the rest of the current year followed by concluding remarks and an opportunity to ask questions.

1:21 So before handing over to Paul, I am pleased to say that the group continues to make strategic progress with continued recognition of our differentiated technology in our target end markets. And this is perhaps best illustrated by the 96% year on year growth in new print head business revenue. This was generated from the sale of print heads used in OEM products that have launched since 2019. In h one, forty nine percent of our total print head revenue was attributed to this new business. The most substantial progress made during this period was in the jewelry wax market. In the first six months of twenty twenty five, we generated £3,300,000 of revenue, up from just £600,000 of revenue for the first half of twenty twenty four and zero revenue in 2023.

2:17 This clearly illustrates the potential for rapid uptake of our technology once it has been accepted by customers in the end market. In June, we announced the collaboration with XAAR PLC, a long standing partner of the group, for the production of the next generation of battery coating fluids.

2:37 This, alongside our existing partnerships, increases the availability of our unique high viscosity technology in the EV battery coating market. Moving on to automotive coating, where in q two, another important milestone was reached, but as they received their first inbound request to quote from a luxury car manufacturer. This provides concrete evidence of demand for our technology. And within the desktop three d market, we have been encouraged by the demand for a recently launched 2.5 d full color printer, which is being sold at a similar price point to FlashForge's new machine. Sales were a multiple of what was initially expected, which reinforces our belief that the market potential for a well priced, high quality three d full color printer is significant.

3:33 Lastly, while EPS has been a headwind on financial performance in the first half of the year, the new management team has begun to rebuild the order pipeline. So we should see the benefit of this in 2026 and beyond. I will now hand over to Paul, who will take you through the financial performance for the first half of the year. Thank you, John. Overall, we have delivered an encouraging performance. Revenue was £27,200,000, up 7% compared to the first half of twenty twenty four, despite a challenging half for EPS and the increased uncertainty that tariffs brought. Growth was generated by our print head division, which saw revenue up a fifth on last year, This was largely due to our success in the jewelry wax market, as John alluded to, and an easing of the headwinds from our exposure to the predominantly Chinese ceramics market.

4:33 Gross margin was stable, just below 37%, due primarily to proactive supply chain management. In addition, we were able to minimize the impact of inflationary salary increases and higher ancillary costs on the overall operating expense, thanks to stringent cost control. Our adjusted loss before tax for the period was broadly the same at £700,000 largely as anticipated given the 16% decline in EPS revenue and our expectation that revenue will be more heavily second half weighted. The group remains well capitalized with a net cash balance of £5,100,000 Cash utilization was driven by increased investment in capital equipment to boost growth and capitalization of development spend on several exciting projects that will further drive growth over the medium term.

5:28 Our cash position alongside the undrawn revolving credit facility means we retain the ability to deliver on our strategy where additional investment is required. Now, this slide illustrates group revenue performance, with the dashed area showing the performance of the Printhead division, as you can see. We achieved an improvement in sales volumes and overall mix price dynamics across the Printhead portfolio, which was partially offset by the weakness in EPS. When it comes to performance at the level of adjusted profit before tax within Printhead, we made the strategic decision to secure market share in the ceramics segment in anticipation of its recovery through deepening our relationship with a key large customer.

6:16 Now this has negatively affected price variance for this half, but we don't expect this headwind to continue. Despite this, tight cost management drove a 30% increase in adjusted profit before tax within Printhead to £1,900,000 offset by reductions in EPS and MEKNAJET, with central costs being broadly flat. These dynamics led to a first half loss of £700,000 So, looking at the operating results in more detail, starting with the print head division. Following the disposal of our life sciences business within FFEI, we have consolidated the remainder of that business within print head, and for the sake of consistency, historic numbers have been restated.

7:06 Printhead new business revenue has driven growth in the division, with year on year revenue almost doubling to £9,800,000. And as I will touch on in the next slide, the main driver of this growth was the sales of the XAR 2,002 printhead in the jewellery wax market. As revenue from legacy printheads stabilizes, as can be seen from our ceramics and glass segments in the chart, we are pleased to see the underlying growth becoming more apparent at a divisional level. Higher volumes and increasing average selling price, as well as strong cost control, led to 30% growth in adjusted profit before tax to £1,900,000 despite the lower like for like pricing and gross margin mix impact.

7:57 Now, as a reminder, XAR PRLN heads facilitate the use of more viscous, higher quality wax, which enables a higher quality, more accurate product that requires less finishing work and hence lower material loss. The significant benefits of using our technology have meant that from having no revenue just eighteen months ago, we now supply pinheads to four of the five biggest OEMs in the market, and we expect to take a majority share of the market by the end of this year. In addition, OEMs are now developing multiple products using our technology to deepen their share of the market, and most recently, in April 2025, a year after launching the Waxjet five ten, a single printhead machine, FlashForge launched a second machine, the Waxjet five thirty, which utilizes three printheads.

8:57 Demand for this new product has been almost double the level we anticipated.

9:02 This meant that in the first six months of 2025, we generated £3,300,000 of revenue from this market. On top of this, we have started an exciting multi year process to develop a variation of the XAR 2,002 printhead that will significantly expand our addressable market within wax. Now, EPS is our US subsidiary, which sells print systems utilising both XAR and competitor printheads, printing all kinds of industrial and promotional objects such as tools, appliances, sports equipment, medical equipment, golf balls and toys. As highlighted in the 2024 full year results, the start to this year was always going to be challenging for EPS due to historic uncertainty in the market, creating order pipeline weakness.

9:56 As a result of this, coupled with the additional uncertainty caused by US tariffs and the completion of a substantial multi year project in FY24, revenue was 16% lower than the previous year at £6,300,000 While it will remain a drag on group profitability during 2025, the management changes made in 2024 are already starting to deliver positive improvements. The pipeline is in the process of being rebuilt, and despite the fall in revenue, gross margin rose 3.5 percentage points to 34%, and operating expenditure fell 8%, thanks to the efforts to take costs out of the business. Going forward, management is focused on optimizing the supply chain alongside strengthening and widening the customer pipeline to reduce overreliance on a single customer.

10:49 The benefits of these initiatives should be realized in the next financial year. MEGNAjet plays an important role in supporting the sale of print heads through the design and manufacture of industrial fluid management systems for digital inkjet, with the most integrated and compact ink systems in the market today. As a consequence of a process of increased integration, XAR and EPS are two of MegaJet's biggest customers and represent over a third of MegaJet's sales, with a 133% uplift in intragroup transactions year on year. Despite this closer collaboration between the businesses, Magnajet will continue to sell its products externally. On an external basis, revenue in the period was £1,100,000,000 a 19% reduction compared to last year, and this is a reflection of a slowdown in end markets due to growing uncertainty caused by tariffs.

11:46 Overall, we are pleased with MegaJet's performance. It remains an important contributor to the Group's strategy. Now looking at the Group's balance sheet. As I mentioned earlier, we are in a strong position thanks to our healthy cash balance and undrawn revolving credit facility. This ensures we remain well placed to deliver on our strategy, without the need for the utilisation of other sources of cash in the medium term. Over the period, we saw net cash outflow of £3,600,000 primarily due to capital equipment investment and development spend on several exciting projects for future growth. This led to a net cash position as of June 30 of £5,100,000 which will provide sufficient liquidity when required.

12:34 Now, at this point, I will hand back to John. Thanks, Paul. We believe there is significant opportunity for our unique print heads across a wide variety of market sectors. However, we recognize the need to focus our efforts on markets where the high viscosity capability of our technology gives the end user considerable benefits in terms of performance, cost, and quality. We see these key opportunities as being in EV battery coating, automotive coating, and desktop three d printing. It is our view that these markets represent the most significant opportunity for growth and repeat revenue.

13:22 We remain focused on enabling the accelerated uptake of our technology through supporting the development and scale up of our OEM customers' machines. There is a clear value proposition for using XAR PRANTHeads in each of our target markets. Thanks to our technology providing solutions to the fundamental drawbacks of the incumbent technology. As we discussed in March, there are OEMs with fully functioning machines using our print heads in each of these target markets. And so most of the heavy lifting for these specific applications including r and d investment and CapEx is behind us. As these OEMs continue to launch their products, our focus is on supporting them to accelerate the rates of end user uptake.

14:12 Given the potential significance of each of these market opportunities, I'll now update you on the progress we have made with each of them since the start of the year, as well as reminding you of the value proposition that our technology brings. So starting with the EV battery coating market. There is growing demand for more powerful batteries to increase the range of EV vehicles. 800 volt battery technology enables faster charging times, but has the downside of generating more heat, which can cause safety issues with the current main insulation method. As of today, there are two solutions used to insulate EV batteries. The dominant PET technology, essentially a plastic film that wraps around the battery, has limitations when applied to the new 800 volt technology in relation to yield per unit cost and safety.

15:11 The alternative method is to eliminate the plastic film by spray painting the battery, thus eliminating the issues with the plastic film, but however, this method has significant waste cost and yield issues that have severely restricted its uptake. Our print head technology provides a coating solution that addresses the issue with the plastic film and the yield and waste issues associated with spray painting. As a result of overwhelmingly positive feedback from the EV car manufacturers, our partners have all signaled the intent of the battery industry to adopt inkjet coating as the default solution for EV battery insulation. And as the leading provider of this technology, the market uptake could be substantial.

16:02 There are an estimated 1,300 EV battery production lines in China, which will increase as demand for batteries continues to grow. And with an anticipated replacement cycle of two to three years, we expect to generate healthy repeat revenue once our print heads are installed. Our product offering has been in the market for nine months, and we will generate more than 1,000,000 of revenue this year. Today, the only solution for car graphics is either through expensive hand painting or the use of decals. The decals can quickly appear dirty around the edges and are prone to jet wash damage, historically limiting their appeal.

16:48 XAR's ultra high viscosity technology enables high resolution digital images to be printed on any surface of the vehicle during manufacture. Last year, XAAR PLC and DER announced their partnership to provide a digital paint solution combining XAAR's coating technology with DER's robotics. With a focus on graphic applications, Duh, who supply spray paint systems to 50% of car plants globally, have demonstrated this solution to over 20 car manufacturers in the first half of this year. The response has been extremely positive, and they are now in negotiations for the first installations in 2026. And given the unpredictability of when the car industry adopts any new technology, the exact timing of when this opportunity will start to deliver sizable revenue remains uncertain.

17:45 However, with a revenue generated from a business model of fee per car painted as well as the the rental of the print heads and approximately 90,000,000 passenger vehicles produced annually, a conversion rate of 1% would generate significant revenues at an attractive margin. The current retail cost of a high quality full color enabled three d printer is approximately £50,000, making it inaccessible to the vast majority of potential users. The alternative is a single nozzle monochrome three d printer with a price point of between a few £100 to over £5,000.

18:31 With over 1,000,000 of these comparatively low quality three d printers sold annually, there is an obvious opportunity for a company that can produce an accessible and high quality full color solution. Working in partnership with FlashForge, our high viscosity print head capability has led to the development of the world's first consumer focused full color high resolution desktop three d printer. With a more direct to market strategy than initially envisaged, FlashForge will be selling their desktop three d printers around calendar year end priced for the consumer market. As a positive lead indicator, earlier this year, an OEM launched a 2.5 d full color printer at a similar price point to the FlashForge system.

19:21 The overwhelmingly positive reaction to this launch with sales being a multiple of that initially expected has served to reinforce our belief in the potential demand for XAR's superior technology.

19:38 As I hope we've demonstrated, our technology has the potential to transform each of these markets, and if successful, will generate significant recurring revenue. By focusing on applications across a number of markets where the unique benefits of our technology act as an enabler, we have significantly derisked the business going forward.

20:05 As illustrated by the speed at which we have taken over 50% of the jewelry wax market, we believe that these opportunities will grow rapidly once our technology is embedded in each of our target markets. In the short term, our expectations for 2025 remain unchanged. This is despite the introduction of tariffs announced in April, which we will continue to monitor. As anticipated, revenue will be second half weighted, with order volumes expected to grow steadily throughout the year and into 2026. We expect print head revenue to be strong, although we are hesitant to speculate on the exact timing of orders given the global geopolitical environment.

20:55 EPS will remain a headwind to group growth as the team focuses on rebuilding the order pipeline. Looking further ahead, our focus areas will deliver meaningful revenue at attractive margins. With this, the future is now closer than ever. In summary, I am pleased that we are now progressing as planned. New business revenue growth is significant, and with the ceramics market beginning to stabilize, the positive initiatives underway over the past few years are starting to drive the group's top line forward. We are aware that there is still work to be done to navigate the uncertain economic environment, and we will continue to make the right decisions to ensure we capitalize on the opportunity ahead of us both in the medium and long term.

21:48 There are now fully functional machines using our print heads in our first four target markets, and the overwhelming success of our technology in the jewelry market provides a blueprint which we aim to replicate elsewhere.

22:04 As such, we are confident that our technology will transform our target markets while delivering significant value for our shareholders. The scale of the opportunities at XAR have never been so strong. At this point, I would like to open up to questions.

22:29 That's great. Thank you very much for your presentation. What I'll do is I'll just bring your cameras up now. I know the team want to talk to a few videos, and then we'll move on to the q and a. So do submit your questions now, but I'll now hand over to the team. Yeah. Hi. I first of all, thank you very much for taking the time to come and, look at the XAR story and opportunity. And as we began going around this week talking to, shareholders, we've been we've been sharing a couple of videos,

22:58 which have been generated by our customers, which I think share a bit more, give a bit more flavor as to the to the opportunity. So I thought it'd be useful to share them with you today just on three of the applications that you've heard about in the presentation. So the the first application in wax and just to give you a bit of bit of background. So the way the jewelry is is made is that you produce a a facsimile, a model of the precious metal part in wax by inkjet printing a three d model of that. And then you encase that that wax model in effectively like a plaster of Paris. And then when that's dry, you heat it up, the wax melts, and it drains out to some drainage holes, and that leaves you with a mold. You then pour your precious metal into the the mold, and then you break the mold, and and you have your jewelry part.

23:57 And and so that is a process by which bespoke high quality jewelry is made, and that that market is expanding, to adopt to this, this technology. So a few of you asked about the the the competition and the sustainability of that market. We can print materials that others can't. That's the fundamental proposition of what we do. All of these applications, we've been successful because we can print fluids that others can't. So there isn't really a price pressure because there is no alternative to using from our print heads. And we see the the markets growing rather than diminishing.

24:43 So with that, let me just play you the wax video just so you can see what what that technology is.

24:53 Introducing WaxPrint Neo. The latest breakthrough from Uniway technology, redefining redefining precision precision in in jewelry jewelry wax wax printing. Printing. The Advanced ink recirculation system designed to prevent nozzle clogging for flawless printing.

25:37 Experience mass production like never before. So that that's that's a video from one of the OEMs who make the the machines. They were the second company to to to adopt the technology. The first company was called FlashForge.

26:24 It took us three years working with FlashForge to get them to adopt the print head and actually develop the the machine. When they launched the machine at a trade show in Istanbul in April last year, The competition saw the quality and the improvement that our print heads gave and immediately asked us to work with them to adopt so they could adopt our print heads. And then it took them five months to get their product to market, which just shows that the business model we have is to is to really go after a single company in a market sector, get to market with them. And then as they our technology gives the that market a clear benefit and value proposition, we see their competition coming to us and asking for the for the head price. What that allows us to do is we're we're then selling the print head on a value proposition rather than selling based on price. And what we found is is that for the second, third, fourth OEMs in a given market, we're able to demand a higher price for the for the print heads. So that's the wax market. If we move on to the and that's already generated revenue, 3,300,000 in H1 this year from effectively zero revenue in 2023, and we're very confident that we're over 50% market share in that market and growing. So we're we're very pleased with with that.

27:52 And if we move on to the desktop three three d, this is a a very interesting in market. For those of you who know about desktop three d printers, you probably understand the relevance of this product. But if not, there are 1,600,000 desktop three d printers sold into this commercial into sort of the domestic market every year. And they tend to be monochrome or a couple of colors and relatively low resolution machines. If you want to produce a very high quality, high resolution full color model, then you would need to go and buy a machine for 50 to a 150,000.

28:40 What we're have worked with could be called FlashForge is around developing a desktop three d printer that will sell in the region of 2.5 to 3,000 that can deliver the same performance as the machines at 50,000 pounds in terms of quality and and not far off the the speed. And with the in with with the emergence of AI, you can now take a picture of pretty much anything, and there are I AI programs which will actually take that two d image and convert it into a three d model, and then you can print that model out on your on your home desktop three d printer. So to give you an idea of the the use case, there is a promotional video that they produced. This video has been out now for a few months, and there is a very clear launch program that they're working through to to to the end of the year.

29:36 So if we just play the desktop three d video. So this is a a really exciting

31:26 product. It's just to give you a scale a sense of scale of the opportunity. If if we get 1% of the market, that would translate into 7,500,000 of revenue for for XAR PLC in terms of print head sales. As this is a brand new brand new market, there isn't anything like this out there. It's very difficult to tell exactly the the potential for uptake. FlashForge have indicated to us they believe that it should be in the one to 2% level. We will wait and see. We're expecting the launch at the back end of of this year, and then it's really down to consumer adoption. If you go on to the chat rooms and the and and the promotional stuff that's starting to follow this product, the in the people who are in those chat rooms are very excited about the the product. So look out for this this product. You should see it on the market at the end of end of the year.

32:35 The third opportunity, which we I can talk a little bit more about is around the EV battery. So either there's a few questions that there. So on the EV battery, there is no real other print head. There are there's another print head that's been that is in the market, but the limitation on viscosity that they have really limits the the the throughput and performance of the machine that's based around that head. So the industry has effectively concluded that, our head is the head of choice. In fact, we're in the when the machines are pushing out tenders, they're specifying the XAR head as the head to be used in the in the machines.

33:24 So and and, again, to give you some sort of sense of scale, there are 1,300 machine lines in China. Our revenue is around about a £100,000 per line. So in total, there's a £130,000,000 of revenue potential there. So the questions would be, you know, what how many of those 1,300 lines would trans transition to the new technology and over which period. If we assume 50% of them transition in a over a over a five year period, that's 10 to 15,000,000 per year. And if if they all do all the same period, then it could be 30,000,000 a year. The ongoing revenue would still be there because once the once you have your full installed base, the heads will probably need replacing every two to three years. So there's a continual revenue stream there.

34:15 And the competition, there isn't another print head that can print at the viscosities that are required to print the special coating for for the battery. We have 10 machines now in production. So if you go and buy a BMW, car, then chances are that there will be batteries, in that car that got our coating on there. So there are 10 machines producing batteries in production every day. The two two real big companies in in in in the battery industry, which is BYD and CATL, will take in their first delivery of their first battery machines in the next month or two. And that really is the kind of critical point. If they work there with those companies well, then we we expect and hope to see the industry start to transition in a more standard way.

35:11 Right. So if I just came just to show you the the scale, the the size of the thing the the machines, there's a video showing one of the the battery lines with our print head technology in there. So if you could show the battery, video, please. Yes. Just to answer a question posed by

37:08 Alexandro, which is beyond EV batteries and car painting, what are the most exciting growth opportunities for XAR. I mean, I think that if you look at our revenues from last year for print head sales, was around about $32,000,000 Growth this year has been strong at 20%. So we did 20,000,000 of revenue in h one, and we expect that to continue to to grow. But beyond the four applications that we've we've talked about, there are another 15 that we're actively pursuing, and there are over 50 applications in in total that are at different degrees of maturity. So the strategy that we have is to actually have active projects and products in each of the digital print markets to diversify the risk and give more resilience. XAR's had a history of being very much a one trick pony and and not being able to stay in the market position Rather than being a single product in a single market as XAR has been in the past, we're very much moving to to a model where we now have, you know, forty, fifty different applications, which give us much more resilience and long term stability.

38:21 And just before we go into answer questions, I'll hand over to Paul just to share some comments on the financials. Yeah. Thank you, John. So I've been at XAAR now about six months. It's been a great opportunity to really get to understand the business well and particularly understand the numbers. I think what I'll start with by saying is that the consensus profit number adjusted for tax for this year, I'm comfortable with. I think as we said in the RNS, we're on track to deliver. The results will be H2 weighted, but that just reflects the growth trajectory that we're on. If I perhaps just talk about margin first of all. So we closed our H1 with a gross margin somewhat slightly below 40%.

39:12 And the could have been a bit higher. And the reason why it wasn't is we took the strategic decision to support our biggest customer in the ceramics sector. And that sets us in a very good position for when that sector will start to recover in the coming months and years. But notwithstanding the gross margin percent for XAR in print head, you can well expect to be at least 45% going forward into future years. What is exciting about this business model is that because of this value proposition to do with highly viscous liquids, something others can't compete with or replicate. As we go into these new industrial segments, we should expect to be able to charge premium pricing because of the benefits that we do provide to the customers. That combined with increasing volume should further drive margin performance. So that's quite exciting.

40:14 If I just turn my comments now to cash, we closed the half at $5,100,000 net cash. On top of that, we have an untapped rolling credit facility of 5,000,000 And it was a little bit down compared to where we started the year, but that's for very good reasons. We upped investments in R and D, in development spend, and there are two or three very exciting projects in the offing, which will, when it comes to fruition in the not too distant future, will further boost growth. So I'm very excited about that. So it was good to be able to invest in such things. And we also capital investment. And one area, it's very exciting is that we make something called waveforms for customers. A waveform is basically a precise formula around voltage and current used to produce the perfect drop.

41:10 It's a very much a tailored solution. And that was a bit of a bottleneck with Wave four production. So we've invested in expanding capacity there. And that's a typical example of sort of investment we're making at the moment. So that's good. If I just say a few words about working capital, inventory historically XAR has perhaps been a little bit on the high side. That now is a distinct advantage as we support these launches as they're going to arise. Having said that, I've very clearly stated that I'm a great believer in continuous improvement and we're setting ourselves the goal of improving stock term by at least half or one term a year every year going forward. So the efficiency of our stock holding should improve will improve over that period.

41:58 We also have a tailwind on our debtor portfolio because with the slight change in mix of the customer base, we're moving slightly towards more customers paying in advance. So that's obviously having a beneficial effect on that on our working capital. So yes, XAR is highly cash generative, and we will use that money to invest in further growth. So that's my take on the financials as they currently stand. Perfect. We'll open up for questions then. Starting with freezing to questions. Paul, how are you using AI to maximize efficiency and productivity? Well, AI is sort of invading almost every space in business and in our personal life.

42:43 And then XAR is no different. So I mean, stating the obvious AI increasingly used in the back office for a lot of administrative tasks, know, stuff that used to take a long time, a lot of effort to produce. You know, I was looking at organizational structures and role profiles with the help of AI only last week. So that inevitably will engender some efficiencies going forward in terms of number of people we need to employ to do those things. But in the operations space, AI is also used for diagnostic testing of our equipment, preventative maintenance tasks, that sort of thing. And we're also looking at using AI, that's that waveform investment I talked about. We're looking to see whether we can use AI to more quickly identify the right waveform for a particular print head fluid combination for a customer further easing that particular bottleneck in the sales pipeline.

43:39 So, yeah, AI, we fully expect to utilize to enhance that efficiency in many areas. And and, John, what is the management and board stock management like? How are the board members invested in the company? Yeah. So if I'm myself personally, I bought a 125,000 shares. Have that. That's then, obviously, there's the the the shares, which which is separate to this point. Paul bought shares when he he joined, and I think all as as far as all but one of the board have purchased shares recently. So so I think there is real commitment in with the with the real belief in in the business.

44:29 And and, you know, hopefully, as you follow XAR and see some of these applications coming through, that that will be reflected in the share price and hopefully reward those people who've who've got on board earlier times. Thank you. So the wax jewelry jewelry revenue is growing rapidly. How sustainable is this growth? And when do you expect the adjacent high potential market to start contributing? In so yes. I think it is a stable growth. I think the wax and the jewelry market is a is a growing market, and more of that market will move into into this type of production method.

45:18 Interestingly, the there is opportunities to further extend that market by the ability to print even lower cost and high performing waxes. So if we are able, for instance, to develop a print head that can operate at a much higher temperature, then we can use waxes that are much cheaper. So digital waxes cost £200 a kilogram. If we could use standard regular everyday wax, it's around about a pound per kilogram. So you could imagine that that would open up the technology not just to precious metals, but to other metals for for investment casting. So one of the investments in r and d that Paul referred to was how do we actually get a print head that can operate at much higher temperature that can actually then generate so that we can actually use this, much lower cost fluid to extend the the wax market into other other metals.

46:17 And what is your lead time to fulfill large orders in the electric vehicle and automotive coatings sectors once contract is signed? Yeah. So we we're very confident of being able to deliver in those those markets. We we run on an eight week lead time so customers understand that. With Chinese customers, it's all payment in advance, and we've run on a very strict eight week eight week lead time. So, yes, what the just to follow on that on the desktop three d, that's an area where we are thinking carefully about how we'd respond to very strong market uptake. And as I said, if, you know, 11% of of the that market would be around about a 100,000 print heads, about 7,500,000 of revenue. 2% would be 200,000 print heads, 15,000,000 revenue.

47:14 Today, we have a capacity for that particular product of around about a 100,000 heads per year. And so if that particular product really takes off, then that's where we're gonna need to be able to move quickly to expand capacity. All of the other applications that we have talked about, we're very confident that we can meet the the the demands of the customers in in the eight week lead time that we call. And in that three d printer market, are you involved in machines that can be used in the in manufacturers' r and d departments, or is it purely for retail use? No. Absolutely. I mean, I if we've shown a a video that kind of really focuses on the retail use, but there are medical applications. There are small business applications, educational.

48:05 We we expect to see this in lots of different areas. But, you know, it it's interesting. If you are into things like Warhammers and these kind of model, you know, fantasy model type games, then being able to print out your own figures, You know, if you have a train set and you want a nice new station building, you could just print print one. So I think hobbyists, I think, are potentially really exciting. If you wanna if you remember airfix kits, you wouldn't go out and buy an airfix kit. You would just download airfix pattern and print it out, and then you'd have a pre painted, you know, airfix kit that you could that you could put together. So I think that the hobbyist market is actually really significant and shouldn't be underestimated, but there is also the the nondomestic industrial applications as well. And I I actually sorry. I I actually worked at a business earlier in my career at January, and they would make every use of three d printing for rapid prototyping.

49:10 So they would literally think for an idea, print off something as as a prototype, see if it works and move on. I know they'd be very excited about this development, the higher resolution color. It's they'll be very excited, but I'm sure they'll get one. And in all these opportunities, do you find that OEMs want to try and restrict you to exclusive terms of business with them? Yes. Absolutely. Everybody would like exclusivity. No one can afford it. So we we typically do not accept exclusive deals. The only one that we have is in the automotive declaration, principally because, you know, supply chain people in the supply chain for automotive tend to get squeezed. And we wanted to partner with the fluid company and do a deal because they are they are now talking to over 20 car companies, and we because we couldn't cope with dealing with that number of car companies. So, therefore, we've done a deal with with the market leader in in the ultimate to pay company.

50:20 Outside of that, we don't have any exclusivities, and we'd have no intention of doing so. And you you clearly have that particular products. But given the interaction in China, how confident are you at checking the IP of your products? Yeah. The the IP strategy is really, really key. Even if I gave a copy of the recipe book with instructions and what equipment to buy and access to our best engineers, it would it would take somebody probably three to five years and £3,400,000,000 to kind of get to the point where we are today. And I'm not sure that people would make that investment for, what, you know, 20,000,000 of revenue in in h one. So I I think it's unlikely that someone would do that, and I think it'd be incredibly difficult for them to do it anyway.

51:14 Also, our IP strategy is really to target the end users of the application. So we have strong IP, and we have protection in through Europe and North America, sorry, Japan, where IP is respected. And if if anybody breaks out infringes our IP, even if they manufacture it in an in a region where that doesn't respect IP, If they then try and export a product using our print heads or using IP from our print heads then into a into a a a western company, then we can enforce a cease and desist because it bridges our IP from the point of where it lands. So from that perspective, I think, one, it's very, very difficult to to for people to do that.

52:03 And I think that and we do have very strong IP protection anyway. Now looking at one of the markets outside of the four that you focused on, do have any update on progress on the packaging markets? Yeah. Yeah. So so as you said, there are there are, you know today, there are over 50 customers that are developing product using XAR PLC in variety of different different markets. One of them is in is in packaging, particularly in packaging for for corrugated packaging. So here, the value proposition is is really interesting because if you print with a pigmented ink today, a low viscosity pigment is ink. It's it's mostly water because it needs to be low viscosity. It needs to print in the current print heads.

52:55 And what happens is when you print the ink onto the corrugated, the ink soaks into the cardboard, and it takes the pigment with it. So most of the pigment that you put down ends up inside the cardboard, and you can't see it. And the net result of that is that you end up with a very poor color saturation so that the color looks really washed out. And to get stronger color, you have to put more and more ink down onto the, to the substrate. What we've done is we've generated developed high viscosity inks, and those high viscosity inks, first of all, they have a lot less water in there, so and then much thicker. So when you print it onto the corrugated ink, it doesn't soak into the corrugated board. So the pigment that you put into the ink stays on the surface of the board where you can see it. And the net result of that is that you can achieve the same color saturation with one quarter of the ink. So potentially giving you a 50 to 75% saving on on cost with substantially less water, and less water means less drying, less energy consumption.

54:06 So we believe that that is a value proposition is going to be very strong inside the corrugated packaging market. Then there are other packaging projects which I could talk about. But as I said, there are 15 significant projects of that small of them, and there's up to 50 of all the things that are in the pipeline. Thank you. And our final question for now. EPS, you're sort of separate part of the business. How dependent is that on The UK markets? And is there any alternative geographies where you could move sort of tariff to reduce tariff risk? I mean, the The US is the EPS is is absolutely a US market company. The the the the challenge with the EPS has been, to a certain extent, tariffs, but there was a very significant contracts that we had with the golf ball manufacturers. I mean, golf balls from company called Tailor Made. So if there's any golfers in the in online, if you look at the tailor made balls with the kind of the the the yellow stripe around the middle, they were all printed on machines made by EPS.

55:16 Tailor made ordered quite a significant number over a couple of years, then they reached saturation. And that sort of that that contract went away. Unfortunately, during that time, the team really didn't focus on diversification. So when that project finished, it left the sort of a weak pipeline, and that's really affected the first half of this year. We've changed management about nine months ago, and the new team is really focused on rebuilding that pipeline. So we should start to see recovery in H2 in EPS and into next year. Tariffs have had an impact on the business.

56:02 It's never really a market share because everyone's in the same boat and costs have gone up pretty much equally for everybody. So we haven't seen a market share. It's more a question of uncertainty that's led people to delay decisions in buying capital equipment. So I think as the tariff situation hopefully stabilizes and people understand what the final position is going to be, then hopefully that stability will enable companies to start reinvesting in capital equipment and that will help EPS. Thank you. And that's all the questions we've received. So I'll now hand back to John for some closing remarks. Thank you. Well, first of all, again, thank you very much for taking the time to come and listen to XAR PLC.

56:52 We're hugely excited about the the opportunity within the business. The the the the capability that we have to print fluids that no one else can really is a game changer in the industry, and the time taken to to to to get people to switch heads is is significant. It has taken several years. We're now starting to see the fruits of that labor coming through, and we're hoping that as we move into 2026, as wax has really matured now into a into a good revenue stream, we should see these other opportunities also start delivering revenue. And that top line growth should then start feeding through into into margin and and profit growth. So, hopefully, that's giving you a good overview of the opportunity.

57:43 If there's any more questions that you have, please please let us know, and we'll do our best to to answer them. Once again, thank you very much, and have a good rest of your day. Thank you. That's great. Well, thank you for updating investors today. Can I please ask investors not to close this session as you know, we automatically redirected to provide your feedback in order that the management team can better understand your views and expectations on behalf of the management team of XAR PLC? We'd like to thank you for attending today's presentation, and good afternoon to you all.