Xaar plc (LON:XAR), which supplies industrial inkjet printheads, blamed lower margins as it reported a decline in full year profit.
Shares fell 6.52% to 337.0p in morning trading.
Profit before tax, adjusted to exclude the impact of acquisitions, restructuring costs, share-based payment charges, dropped to £19.5mln in the year to 31 December from £20.8m a year earlier.
The company said the dip in overall profits reflected a fall in the gross profit margin to 46.4% from 47.8%, despite a large contribution from licence income after resolving two royalty audits.
Margins were hit by lower output from the Sweden manufacturing facility in the first half of 2016, competitive pricing pressures and worse-than-expected production levels of new products in the second half of the year.
Xaar increased its gross expenditure on research and development to £22.4mln from £19.9mln in 2015, including development costs for its new Thin Film printheads.
The group is trying to resolve a delay on its first Thin Film product, the Xaar 5601, which it said will add to costs in 2017. Xaar expects to start commercial sales by mid-year.
“We are currently working with our manufacturing partner to resolve an issue on our first Thin Film product, the Xaar 5601, in order to increase production volumes and achieve commercial sales,” the company said.
Revenue for the year rose to £96.2mln from £93.5mln, as disappointing sales in the ceramic tile printing division was offset by growth in the engineered printing solutions (EPS) business and in the product printing and packaging arm.
The acquisition of EPS, which provides product printing equipment in North America, in July 2016 marked Xaar’s first step outside of printheads.
During the period, the group also secured partnerships with Xerox for its Bulk piezo printheads and with Ricoh for its Thin Film piezo printheads.
Turning to its outlook for 2017, Xaar said execution risks in expanding its portfolio of products remain.
“The expected growth of new product revenues over the course of 2017 reduces our visibility for the current year, with revenues expected to be more second half weighted than usual,” the firm said.
“Our objective is simple, to take the necessary steps in terms of product developments, partnerships and financial performance to reach our 2020 target.”
Xaar looks to grow annual revenues to £220mln by 2020.