Xaar has reached an agreement to receive an upfront payment instead of future royalties from one of its licensees. Xaar will receive a total payment from Seiko of ¥2.98bn/c.£20m, paid in two tranches. These will both be paid by the end of H1 18, although exact payment dates have yet to be confirmed. We view this upfront payment as a better outcome for Xaar than the royalty stream, which we have always forecast to decline towards zero by the early 2020s (N+1Se £5m in 2018, £4m in 2019). We have not yet amended our forecasts, pending clarity over timing of payments. However clearly we would anticipate an increase in net cash by 2018 and an associated reduction in underlying sales and profits, as the future royalty stream will represent only one remaining licensee (Toshiba TEC).
