Welcome, everyone to Xaar's 2022 Interim Results. My name is John Mills, the CEO of Xaar, and I'm joined by our CFO, Ian Tichias. Before we go any further, we would like to take a moment to send our deepest condolences to Her Majesty's family and loved ones. Her dedication to the throne and public service will always be fondly remembered. On behalf of Xaar, we thank you. Today, we will update you on the excellent progress made against our strategic plan and why we remain so excited about the future of Xaar. As a reminder, let me start by quickly setting the context. In the last two years, the business has been transformed and re-energized with a restructure and rebrand, and we are now delivering results.
You remember we passed the key milestone of delivering a profit in H2 last year, and we remain ahead of plan and in good shape to take the business forward. Where are we today? To put it simply, the business is now in improved shape and moving towards profitable growth. We have delivered a strong first half despite the economic headwinds, and we are pleased to report a good performance across all four of our business units. We are really proud of the work we have done with the integration of FFEI and Megnajet into the Xaar Group, and it is great to see such a strong turnaround at EPS after the changes we made in the management team last year. We are accelerating our operational efficiency program, which includes a factory upgrade involving a short shutdown, and we will explain more about this later in the presentation.
We are really excited about the launch of Aquinox. All in all, we remain on track with our strategy, and we are very excited about the future of Xaar and what that holds. With that brief summary, let me hand you over to Ian to take you through the financial results in more detail.
Well, as John said, we are really pleased with these results, demonstrating our continuing progress and improving financial performance. This is characterized by several measures. Firstly, we have delivered double-digit growth with revenue up 14% organically and 39% overall. Secondly, our gross margin has grown to 40%. Finally, most importantly of all, we have delivered a group-adjusted profit for the second six-monthly period in a row. As you can imagine, we are really pleased with the further progress made in H1 and the results achieved. With that, let's start by looking at a summary of our financial performance, which has been strong across the group. This slide clearly demonstrates the three key points that I just spoke about. Starting with that strong group revenue growth. This is a 14% increase on a like-for-like basis across all of our business units, excluding FFEI and Megnajet.
Gross margin has seen a 9 percentage point growth. This is due to the high operational leverage and an increase in volumes in Printhead, coupled with a strong recovery in our EPS business in America. Our EBITDA has increased to GBP 3 million over this period. Each of our businesses are delivering a positive contribution, and our adjusted profit before tax is GBP 1.4 million. From a balance sheet perspective, trade working capital has increased, and that's principally due to the proactive investment we have made in our inventory, such as raw materials and holding high stocks of finished goods. We did this to mitigate any further supply chain risks and meet all our customer demands for the year and into next year. Despite macro challenges, we have fulfilled every order and maintained a high level of service to our customers.
This means that we finish the period with a strong cash position of GBP 12.7 million, a strong balance sheet, and we carry no debt. All in all, I'm really pleased with the performance we have delivered and the progress that we have made over this last period. Now let's turn to look at each of these elements in more detail, starting with revenue. As you can see from this slide, group revenue continues to grow. This is a theme that is really coming through as you look across all areas of the business. Starting with Printhead, revenue has grown in H1 despite the difficulties caused by COVID lockdowns in China. Here, we have seen orders delayed by our ceramics customers and expect this will continue through the remainder of this year.
However, we have performed well because of strong growth in EMEA and U.S. regions with customers in a variety of sectors, particularly coding and marking and packaging. The main point is that our hard work is paying off, and we are now seeing great progress against our plan as we continue to build customer relationships and regain market share. The delay in orders from China will continue in the short term, but we are confident in the underlying demand and a return to previous order levels. Additionally, we are well-placed to return to growth in the ceramics and glass sector. We are delighted with the progress in EPS. The strong recovery continues with revenue growth of 51%, driven by digital machine sales, and this is the fourth reporting period in a row in which we see solid growth.
It reflects our strategy of focusing on product modularity and offering complete print solutions. You can see that it is now really delivering a strong performance. Now let's turn to look at each of the business units in more detail, starting with Printhead. Our Printhead business continues to improve, with growth in revenue, margin, and profitability. Revenue is up 2% as customers re-engage, particularly in EMEA and U.S., and we have won more business from new areas outside of our core ceramic sector. There is no doubt that this is being driven by the competitive advantage of our market-leading products. Given the reduction in orders from customers in China, this is a particularly good result. Due to the uplift in volumes that we are putting through our factory, we have delivered an increase in both profit and margin, demonstrating the strong P&L leverage that we have.
To ensure that performance continues in line with our ambitions, we have chosen to invest in our operational capabilities, our infrastructure, and particularly in IT and other support services. In addition, we will continue to invest in R&D and our ImagineX platform, which will deliver further product developments. Finally, we are very pleased to report strong EBITDA of GBP 0.9 million, which has improved in comparison to last year. A good performance across the business, which enables us to remain on track to deliver in line with our ambitions. Moving on to EPS. We've delivered strong revenue performance with a 51% increase year-on-year. As we saw from the earlier revenue chart, that is reflected in a good recovery in our digital machine sales and positive momentum in our revenue growth.
We have reported a much improved gross margin of 39%, which is driven from the actions that we have taken over the course of the last year. We have made operational and process improvements to ensure that what was an already excellent product now generates the returns that we expect. As you can imagine, it is pleasing to see our strategic actions of aligning EPS to the future of the business are now delivering results. Following the significant one-off write-downs that were reported last year, the results reflect excellent progress. On an underlying gross margin basis, 2021 was 28% in H1 and 29% for the full year. We are delighted to report that we have now grown this to 39%.
As a result of all that work, EPS is a business unit that is stabilized, delivering strong, quality, profitable growth, which we believe is sustainable. Now moving on to our recent acquisitions. As you know, in the last year, we acquired two businesses: FFEI and Megnajet. We are really pleased with the work that has been done to integrate both businesses and how well they support our overall strategy. Instead of just being a printhead supplier, both FFEI and Megnajet help us expand our customer offering to provide vertically integrated print solutions. I'm pleased to report that both businesses are performing well, already delivering accretive profit to the group and driving performance for the future. This is testament to our sound M&A approach, and looking further ahead, operational improvements and wider customer access will mean continued improved profitable performance. Moving on to operating cash flow breakdown.
Firstly, we have delivered positive cash generation in our core business of GBP 2.7 million, driven by the improvements that I've mentioned across the group. We've been strategic in the investment decisions we have made. In H1, we spent GBP 1.5 million on maintenance and asset improvements. We are focused on managing our working capital, where outflows were GBP 9.9 million, to insulate the business from external supply risks. That is broken down to an outflow of GBP 3 million through increases in customer deposits and other non-trade working capital. We have invested nearly GBP 6 million in inventory across the group. That's in raw materials to mitigate any supply chain issues and also involves increasing our stock of finished goods. All of this puts us in a good position to manage our customer demands while mitigating any potential risks.
We are confident this protects our supply chain resilience and enables us to fulfill orders through the remainder of the year and into the next. Due to the factory upgrade in early 2023, there will be a smaller level of investment in inventory during the remainder of 2022, which will unwind during 2023 and 2024. Our maintenance CapEx will remain at a similar level in H2 as it was for H1. Where we will increase investment is in our Huntingdon facility. Here, we look to implement a more efficient factory layout combined with modernized machinery fit for the future. The increased stockholding will enable us to meet customer orders through the first two months of 2023 while this work is carried out. This will be delivered over three phases, with phase one beginning Q1 2023 to the sum of GBP 2-4 million.
The investment will be funded with the continued positive cash generation in the business and diligent cash management. We firmly believe the impact on our manufacturing efficiency, yields, and cost savings will result in a substantial return on this investment. To bring it all together, we have ended the period with a strong cash balance of over GBP 12 million in the bank, having invested in acquisitions and working capital totaling nearly GBP 14 million. We still carry no debt, allowing us for better options to invest within the group, which is what we will continue to do. We have continued to proactively invest in our inventory to the sum of nearly GBP 6 million, insulating us against any future risks within the wider supply chain that many other sectors are facing.
All this leaves us with a healthy balance sheet, puts us in a good position for the future and in line with our strategy. Finally, let me finish with a look at the macroeconomic conditions which we expect to continue for at least the next 12 months and how they are affecting Xaar. Starting with the global supply chain, as mentioned, we have invested in securing our supply chain and increasing our inventory of finished goods to ensure that we minimize the impact of part shortages. To date, this strategy has worked as we have been able to fulfill all customer orders, and we expect this to continue into 2023. However, some of our OEM customers have not been able to make the same investment. This has resulted in increased volatility with delays and cancellations of orders.
The solution to a shortage of parts often requires a redesign and the use of alternate solutions, which leads to additional R&D time and a delay in the development of new printers. China and their zero COVID-19 policy is also proving a challenge. We have seen significant reduction in business from our Chinese OEMs and those who supply printers into China. As we are all aware, we are seeing increasing pressure on prices which, without mitigation, would impact on our margins. How has it impacted Xaar, and what are we doing about it? We have still been able to grow revenue and margins and deliver a profit in H1 in line with expectations. We are bringing forward our operational efficiency program to help mitigate cost inflation while also increasing our focus on markets outside of China.
We will continue to develop our new product range on time and on budget, and work hard to mitigate the impact of factors outside our control. To summarize, we are really pleased with the work that we have done in H1. We have delivered a profit for the second six-monthly period, driven by strong revenue and margin growth with underlying strong cash generation. By investing in inventory, we have mitigated future supply chain issues, and we have a well-invested business and balance sheet. All this provides us with a stable platform for our strategy to drive our future growth ambitions. That brings us on nicely to the outlook for the remainder of the year. We anticipate further good organic revenue growth coupled with strong gross margin growth, albeit not at the same rate as in H1.
Of course, COVID-19 continues to be a risk to economic disruption, particularly in Asia. However, we have demonstrated resilient growth in the face of this disruption and remain on track to deliver a full year profit in line with expectations. Finally, we have the right strategy, and we remain confident in our ability to achieve our target of a full year profit this year. Thank you. Now let me hand back to John, who will expand on our ambitions.
Thank you, Ian. Let's turn back to our strategy and an update on the strong progress we are making against the plan. As we've described before, the primary goal for Xaar is clear. Sell more print heads. To do this, we need to do two things. Extend our product range so that we can compete in all market sectors, and supply our customers with the other critical components required to develop a digital printer. Supporting all of this, we need to ensure that our customers understand what Xaar has to offer and why it is the right choice for them. We have made good steps in extending our product range and reestablishing Xaar's brand credibility, but we also need to ensure that we have the right product for each market we are targeting. What have we done to address that?
Well, the first step was ImagineX, which we successfully launched in 2019. This is a portfolio of IP from three different sources. It has given us the capability to produce print heads with increased speed, increased resolution, and a wider range of ink types. It's the foundation of our product roadmap, giving us confidence that we will deliver our new range of products. Since then, we have successfully rolled out three new products, giving us an edge in some exciting markets. The first is our 2002 in the ceramics and glass market. This product has been fundamental in winning back customers, and I'm delighted that three of the top five global ceramics OEMs are now in development with new products using Xaar heads. This is an exciting and important step in regaining market share. Next is our Irix.
The increased throw distance has enabled us to retain and grow our position in the secondary packaging market. Alongside the Nitrox, we are also seeing strong interest for the Irix in smaller 3D print systems. Finally, Nitrox. This product's increased speed, along with ability to print a wide range of fluid types, has driven significant adoption in 3D and advanced manufacturing. These three products were delivered on time, on budget, and have made a significant positive impact on customer adoption. In the packaging and textiles market, I'm delighted to tell you that we will deliver our new aqueous product on time and on budget in mid-November this year. This will be the first water-based version of Xaar's bulk printhead technology and will be a transformational product. Our beta customers are now testing the printhead, and to date, the feedback has been very positive.
Look out for the aqueous launch. It will be an exciting time and a significant step in our journey. Finally, the biggest single industrial print market is wide-format graphics. To be clear, this is any large graphic that you may find in a supermarket or retail store. It is a truly global opportunity. In H1 2024, we will be delivering a product with higher resolution, higher speed, and a more robust nozzle plate. Due to our market-leading through flow and high viscosity capabilities, we will have a very competitive product in this space. I can now report that we have now produced our first 1200 DPI print samples, proving the core technology, and I will keep you updated on our progress. An exciting array of new products to address large market opportunities.
Now, going back to our business model as a reminder, we want to sell more printheads. As you can see, we have made great progress in delivering the right product for each market. In parallel, we have been working to develop the supporting system components. While we can celebrate gaining a new customer as it gets designed into a new product, it could be several years before we see any revenue from that customer until they launch their printer and start to sell in volume. We want to get to market more quickly by helping them reduce their development time and simplify the mechanical integration of their printheads. Let me update you on our progress. All digital printers, regardless of application, require the same component parts as seen here.
Over the last two years, we have, through a combination of acquisition and organic growth, established the capability to offer all of these components to our customers. We are really pleased to have acquired Megnajet, who are one of the leading providers of inkjet delivery systems. The integration has gone extremely well, and we are already seeing the benefits of being able to offer a full range of ink systems to our customers. We expect Megnajet to make a positive contribution to revenue and profit for the full year. This one-stop-shop approach has proven to be very attractive, with many customers choosing to adopt Xaar system components, which not only shortens their time to market, but also delivers complementary revenue streams for us. We expect the proportion of Xaar Group revenue coming from system components and ink to grow.
We are delivering the right products for our target markets, and we are supporting our customers with system components. All of this is underpinned by a very clear value proposition, which will be further enhanced with the launch of our aqueous product. Of course, none of this will be possible without a focus on operational improvements. We have a three-year plan to increase capacity, improve yields, reduce overhead costs, and improve product margins. To achieve this plan, we will need to upgrade and improve some of our process equipment and change parts of the product design. We expect to invest in the region of GBP 10 million over this period, but we are confident that the improvements in efficiency and margins will justify this investment. The first phase of this project is the re-layout of the factory.
Currently at Xaar, our Printhead manufacturing operates in four clean rooms. Our plan is to reduce to two. This restructure will give significant savings in energy and operational efficiency. To enable this, on the first of January 2023, the factory will be closed for up to two months. To ensure that we maintain continuity of supply for our customers, we will build a buffer stock of products and inventory levels through H2 before unwinding as we go through 2023 and 2024. The improved efficiency and reduced energy consumption are all part of our journey towards a more sustainable future, which neatly brings us to our ESG roadmap. Xaar has made a significant and positive progress to drive forward its ESG commitments across all operations. During the reporting year, we launched our sustainability roadmap to 2030.
Led by our ESG committee and sustainability team, we have been working hard to achieve our goals and ambitions across all four of our sustainability pillars, environment, people, innovation, and community. We are fully committed to this initiative. This is a principal driver for positive change and investment within the business, and I would encourage you to visit our website or annual report for more information. Now, I want to share a bit more with you about what's driving our confidence for the future of Xaar and the significant market opportunity for printheads. To put it in context, we need to briefly rewind in time. In 2013, Xaar had 100% market share of the ceramics business globally. By 2018, it had lost all that market share due to a range of factors which we have now addressed.
As I speak to you today, we have regained over 10% of that market share and have three of the top five ceramic OEMs developing machines using our printheads. This gives us increased confidence of gaining further market share over the coming years. We are seeing growing interest in the 3D printing space as our printheads are capable of printing more functional fluids which yield better 3D printed parts. We expect 3D printing to be a significant growth area. With the launch of our Aquinox product, we will see OEMs in textiles and packaging adopting our technology through 2023. Our new business model, product roadmap, and value proposition have all had a very positive impact on customer engagement. As I've highlighted before with this pipeline of opportunities, it can take several years from adoption of Xaar technology before seeing significant revenues.
For example, in 2019, there were only two new products launched using Xaar printheads and only three customers who were actively developing a product with us. That pipeline has now grown significantly. In 2021, there were 12 new product launches, which in turn will drive increased volume in 2022. The growth we see in the pipeline is based on us having the right products in three of the major markets. As we launch Aquinox and reenter the wide-format graphics market, we should see an acceleration in the pipeline, with revenue growth following one to three years behind. A very exciting pipeline giving us visibility for the future. In summary, a strong performance in H1 with revenues up 14% on the same period last year and delivering an adjusted profit of GBP 1.4 million.
Our business model is working and we are on track. We are executing our plan with the integration of FFEI and Megnajet well on the way and the turnaround of EPS complete. As a team, we will remain flexible to mitigate the effects of the global economic challenges, delivering on our operational efficiency program and building out our pipeline of opportunities that our products provide. Also, we look forward to the imminent launch of Aquinox in November.
In spite of the global economic challenges and the impacts of continued COVID restrictions in China, we remain excited about the medium to long-term future, and we expect to deliver a full-year profit for 2022 in line with expectations. Which is why I make the statement, we have great technology, great people, a large market opportunity, and we will be successful. Thank you very much, and we're very happy now to take questions.