September 12, 2006 -- Increased sales were achieved in each principal territory and in the key graphic arts and packaging industry segments. Sales into the important Chinese market held back by knock-on effect of investigation by Chinese customs authorities into certain Xaar customers over alleged non-payment of import duties. Xaar assisting customers to implement new supply arrangements for PRC shipments. The financial results were: Turnover was up 13% to £22.3m (2005: £19.8m); Profit before tax was £4.8m (2005: £4.9m*); Net margin was 21% (2005: 24%*); Earnings per share were 5.5p (2005: 5.6p*); Net cash and cash equivalents at 30 June 2006 increased to £16.3m (31 December 2005: £14.4m). - stated before non-trading foreign exchange loss on inter-company loan of £1.3m - Although an interim dividend is not being paid, as last year, a final dividend for the year is expected to be declared, subject to second half performance, (2005: 1.5p). - New UK manufacturing facility in Huntingdon on track for initial production in Q1, 2007. On outlook, Chairman, Arie Rosenfeld stated: “The timing of the recovery in China remains uncertain and this will inevitably impact our second half results. We believe that the underlying demand for Xaar-based products in China remains strong and in the medium and longer term we remain positive about the group's prospects in Asian markets and elsewhere. Our medium and longer term growth will be driven by new products and new market applications which are now progressing towards volume production. These new products and markets will bring an increased spread of risk and an improving balance to revenues and profitability.”