REG - Xeros Tech Grp plc - FULL YEAR RESULTS 2023
28/05/2024 07:00
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RNS Number : 9319P Xeros Technology Group plc 28 May 2024
28 May 2024
Xeros Technology Group plc
('Xeros' or the 'Company' or the 'Group')
FULL YEAR RESULTS 2023
Significant operational and commercial progress
Xeros Technology Group plc (AIM: XSG), the creator of technologies that reduce
the impact of clothing on the planet, today announces its full year results
for the year ended 31 December 2023, which show the Group's licensees moving
closer to commercial launch.
Operational highlights
· Completion of technology transfer process on IFB and Yilmak Makina with these
machines now moving to the manufacture and marketing stage
· Expanded commercial sales team resulting in 10 new opportunities identified
and the Group now in discussion with six of the 10 leading global domestic
washing machine manufacturers
Filtration (estimated addressable market £350m p.a.)
- Two new licensing agreements with major European component manufactures for
XF1 taking the total to three and covering 99% of the 105 million washing
machines produced annually
- In negotiations to manufacture the XF3 under licence - the new external
in-line filter, XF3, was launched successfully at IFA, the world's largest
consumer electronics and home appliances trade show in Berlin
Finish (estimated addressable market £132m p.a.)
- Following the new licensing agreement signed with global garment-finishing
machine specialists, Yilmak Makina, and distributor, KRM, for denim processing
technology, Yilmak's Xeros-enabled denim processing machine was successfully
launched at ITMA in Milan, and will see its full marketing launch at ITM in
June
- Demand side interest progressing with a leading garment brand and a European
retail chain in the process of specifying Xeros' technology in the recipe of
their core denim ranges
- Revenue streams generated from both licensing agreement and ongoing supply of
consumables - XOrb product
Care (estimated addressable market £3bn p.a.)
- IFB Appliances' new domestic 9kg washing machine, featuring Xeros technology
to save water and prolong garment life, moved from R&D to manufacturing
and marketing with a launch in India planned within the calendar year
- Our long-standing partner in France, Georges continues to thrive with plans to
open new sites over the next 12-18 months, in line with their expansion into
the laundering of fire fighter uniforms
- Georges has also received compelling feedback from its key customer base
showing uniform life extension of 20% since using the Xeros CARE technology
Key financials
· Revenue increased 81% to £0.3m (FY22: £0.02m) - as a result of increased
licensing revenue and sales of XOrbs
· The increase in revenue from high margin licensing, has driven an increase in
gross profit in the period to £0.2m (2022: £0.1m), an increase of 81.1%,
resulting in an overall gross margin of 82.5% (2022: 51.2%).
· The Group decreased its adjusted EBITDA loss by 37.9% to £4.6m (2022: loss
£7.4m)
· Administrative expenses decreased by 34.1% to £5.0m (2022: £7.5m), following
a reduction in the Group's headcount and a continued focus on cost across the
business
· Net cash outflow from operations decreased by 33.2% to £4.7m (2022: £7.0m)
as a result of the Group's overall cost reduction
Post Period End and Outlook
· Fundraise in April 2024 and warrant redemptions in January 2024 raised net
£5.6m strengthening the Group's balance sheet to provide working capital to
support our existing partners through to launch
· Cost controls will remain in place and priority will be given to the
commercialisation of existing opportunities.
· A number of our commercial partners close to commercial scale roll-out of
machines containing Xeros' IP
Neil Austin, CEO said:
"Our agreements with licensees moved closer to commercial launch, as we
embarked on the crucial technology transfer process with both IFB and Yilmak
Makina. We completed the technology transfer for IFB domestic machines (Goa)
in December 2023, and Yilmak Makina's commercial denim processing machines
(Turkey) in Q1 of the new financial year. All these machines have now moved to
the manufacture and marketing stage, ahead of scale launch later this year.
"In addition, the work undertaken to increase the Group's commercial focus has
resulted in a stronger than expected pipeline of potential new agreements. We
are now in discussion with 10 major organisations with interest across all the
Group's technologies."
Enquiries
Xeros Technology Group plc Tel: 0114 269 9656
Neil Austin, Chief Executive Officer
Alex Tristram, Director of Finance
Cavendish Capital Markets Limited (Nominated Adviser and Broker) Tel: 020 7220 0570
Julian Blunt/Teddy Whiley, Corporate Finance
Andrew Burdis/Sunila de Silva, ECM
Belvedere Communications xeros@belvederepr.com (mailto:xeros@belvederepr.com)
Cat Valentine Mob: 07715 769 078
Keeley Clarke Mob: 07967 816 525
About Xeros
Xeros Technology plc has developed patented and proven, industry-leading
technologies which reduce the environmental impact of how industries make and
care for clothes.
The traditional wet processing methods used in industrial and domestic laundry
and garment manufacturing consume billions of litres of fresh water and large
amounts of energy and chemicals, as well as damaging and weakening clothing
fibres and creating rising levels of environmental pollution. It is estimated
that washing machines contribute 35% of the 171 trillion microplastic
particles in the ocean.
A range of actors, including consumers, the media NGOs and regulators are
exerting pressure on these industries, with legislative action beginning to be
taken.
Xeros' three main technologies, Filtration, Finish, and Care, facilitate
garment manufacturers, industrial laundries, domestic washing machine
manufacturers and consumers, to reduce their environmental impact, whilst also
significantly improving efficiency in the process.
Xeros' model is to generate revenue from licensing its technologies,
generating royalties and the sale of consumables. Currently there are 8
agreements in place. The addressable markets in Filtration, Finish and Care
are estimated to be valued at £350m p.a., £132m p.a. and £3bn p.a.
respectively.
Chairman's Statement
Given my detailed letter to shareholders in the Circular dated 8 April 2024, I
will keep this year's statement brief, concentrating on what is new, important
and different.
Under the impressive leadership of Neil Austin, the Group has transitioned
from an engineering led organisation to a sales-led organisation. The Group
welcomed five, highly capable employees into new, commercial roles during the
year, generating a pipeline of 10 new opportunities. The Group is now in
direct dialogue with six of the 10 leading global domestic washing machine
manufacturers for its Care and Filtration technologies. While these may not
all come to fruition, the quantum and quality of interest being generated by
our new commercial team is extremely encouraging.
We have completed the technology transfer process with IFB (Care technology)
and Yilmak Makina (Finishing technology). The completion of these processes is
a key milestone with both partners as it now enables the commercial roll-out
of machines equipped with Xeros IP. Further information on the tangible
progress being made on these and our other licensing agreements is given in
the CEO's report.
The team has achieved all of this, while maintaining tight control of costs
and a keen focus on achieving breakeven.
The Group's balance sheet has been significantly strengthened by a post
year-end warrant exercise and fundraise, providing the Group with additional
working capital of £6.3m before fees to support the delivery of our FY24 and
FY25 goals.
The Board underwent significant change in 2022 upon which the Nominations
Committee has reviewed the structure and skill set of the current Board. It
has concluded that, with the appointment of Alex Tristram as Finance Director
in April 2024, it meets the current needs of the Group. The Committee will
continue to monitor the suitability of the Board's composition, as the Company
completes its transition to a full-fledged commercial enterprise.
As always, I want to thank you, shareholders, for your continued support of
the business (through both the warrant exercise and participation in the
recent financing), but also want to express my gratitude to our management
team, all staff, commercial partners and my board colleagues for all your
continued dedication to our cause: the adoption at scale of Xeros' extremely
compelling and necessary technologies.
While we remain dependent on commercial delivery by licensees, the route to
meaningful revenue is becoming clearer. With IFB and Yilmak Makina in final
preparation for commercial scale roll-out later this year, we believe we are
closer than ever to that inflection point.
Klaas de Boer
Chairman
28 May 2024
CEO Statement
I am pleased to report that the Group made significant operational and
commercial progress in the year to 31 December 2023, with further significant
milestones being achieved post year end.
Our agreements with licensees moved closer to commercial launch, as we
embarked on the crucial technology transfer process with both IFB and Yilmak
Makina. We completed the technology transfer for IFB domestic machines (Goa)
in December 2023, and Yilmak Makina's commercial denim processing machines
(Turkey) in Q1 of the new financial year. All these machines have now moved to
the manufacture and marketing stage, ahead of scale launch. This gives the
Board confidence that the Group remains on track to achieve month-on-month
operational breakeven.
In addition, the work undertaken to increase the Group's commercial focus has
resulted in a stronger than expected pipeline of potential new agreements. We
are now in discussion with 10 major organisations with interest across all the
Group's technologies.
This progress, supported by the funds raised post period-end of £6.3m before
fees, puts the Group in a strong position to execute its commercialisation
strategy on existing opportunities, whilst also generating new ones.
The macro environment for our technologies continues to strengthen, in
synchrony with our commercialisation goals. Global businesses are coming under
increasing pressure to improve their environmental practices. Governments are
introducing new regulations and legislation to protect against further
ecological damage and meet their global obligations. Xeros continues to be
called upon to provide expert testimony on microfibre capture to feed into
legislative initiatives in the U.S., European Union and the UK.
Operational review and progress
When I joined Xeros in August 2022, I talked about targeting change, which I
have done in three parts. During my first six months, I reviewed the business
proposition, the pipeline of opportunity for commercialisation, and the
people. That initial period of evaluation told me that, on all three of our
technology platforms, our proposition was incredibly compelling. After some
20 years of commercial experience, I recognised an extremely rare opportunity
to offer both environmental solutions alongside improved efficiency and cost
savings for two huge global industries, apparel manufacture and laundry. These
industries had not innovated in decades and were slow to adopt better
environmental practices, although under significant pressure to do so.
When canvassing the opinion of key industry players on Xeros' Care, Finish and
Filtration technologies, the feedback was unanimous and clear. The combination
of our authentic desire to help the planet and ability to reduce, not
increase, their input costs to achieve a positive outcome is a compelling
proposition.
The second part of the change was to accelerate the commercialisation process.
Before I joined Xeros, the Group had courted some significant players in the
industry but had not managed to achieve any meaningful commercial traction.
Investors often asked me why this was the case. I believe it resulted from a
well-meaning attempt to 'launch' the technology before it was really market
ready, and then, following the strategic change to the current licensing
model, progress was hindered by the turbulent socio-economic issues triggered
by the Pandemic.
Since putting in place a new operational framework and improved processes, our
extremely capable team of engineers and scientists has flourished. A new
contract was signed in April 2023 with Yilmak Makina and, after what has been
a lengthy period of education for our industry licensees, some of the Group's
contracts with IFB are now nearing market launch having completed the
technical transfer process.
People
Perhaps the most important element I have reshaped has been people.
I have mentioned on several occasions that the people in Xeros, our scientists
and engineers, are amongst the brightest, most passionate and intelligent that
I have had the fortune to lead. I am reminded of this on a daily basis. What
the team lacked, however, was commercial acumen, and a 'pace and rhythm' of
activity necessary for commercialisation. Any successful business is
characterised by a high performing, driven sales and marketing effort. I am
delighted that during 2023, we reinforced our team with industry expertise and
a sales programme full of ambition and confidence. We have added five new
roles, incorporating further expertise in category marketing, licensing sales
and applicable business knowledge from the white goods and denim processing
industries. The success of this team is evidenced by the full sales pipeline
described below.
As well as bringing a new operational 'commerciality' led by sales and
marketing, I was keen to surround the business with experience, know-how and
sage advice. This has been achieved through the creation of an Advisory Board,
consisting of high-quality individuals with a lifetime of experience in some
of the world's largest organisations. People who are passionate about Xeros'
technology. Being able to call upon the highest level of engineering, sales,
science, retail, and marketing capability has been a key enabler for the Group
in 2023 and we expect further benefits on future projects.
Business update
Filtration (XF1 - domestic, XF2 - commercial, XF3 - external)
We have made significant progress in Filtration, adding two licensing
agreements with major European component manufacturers for XF1 in H1 2023. We
now have three agreements in place, which equate to an 'approved supplier'
coverage for 99% of the 105 million washing machines produced annually.
In September 2023 at IFA Berlin, Europe's largest consumer electronics show,
we launched a new external filtration product for the domestic market, the
XF3. This is an 'outside-of-machine' microplastic filtration device, which can
be retrofitted to the existing domestic install base with full flexibility of
placement. The XF3 has all the features of XF1, a market leading microfibre
capture rate of 99% with no requirement for replacement cartridges and is
lifetime of machine tested. Interest at IFA was overwhelming, and we are
currently in negotiations to manufacture and distribute the XF3 under licence.
The aim is for a full market launch later this year.
Finish (XFN1 - Denim and XFN2 - Washing)
Having signed an agreement in April 2023 with Yilmak Makina / KRM, one of the
world's largest and best respected garment finishing manufacturers and
distributors respectively, they previewed their new Xeros-enabled denim
processing machine at ITMA in Milan, the world's most influential textile and
garment technology exhibition. For Yilmak Makina, it was the first
manifestation of the licence, and the feedback was excellent with several soft
orders taken on the stand. Post the year end, in February 2024, Yilmak Makina
concluded the technical transfer of fitting an XDrum and XOrb capability to
their core machine. This important milestone was achieved some three months
ahead of schedule and precedes a full marketing launch of the machine at the
ITM trade show, one of the most important meeting points in the field of
textile machinery in Istanbul in June 2024.
Our existing licensing agreement with Ramsons, a leading full range supplier
of equipment solutions to the apparel industry in South and East Asia, which
was signed in March 2020 for denim finishing in India, continues to make
progress with new installations expected at one of Sri Lanka's largest garment
manufacturers in 2024.
We have also seen some important progression on the 'demand' side of the
industry, with retail brands keen to promote more environmentally
friendly/conscious fashion. As shown by a leading garment brand and a European
retail chain being in the process of specifying Xeros' technology in the
recipe of their core denim ranges.
Care (XC1 - domestic and XC2 - commercial)
As outlined above, an important milestone in the agreement with IFB was
achieved in the Period. IFB and Xeros engineers concluded the technical
transfer process on a mass market 9kg domestic washing machine in December. I
am pleased to report that subsequent field trials have been successful, and
the project has now moved from R&D into manufacturing and marketing. IFB
is targeting a launch later this calendar year.
Our long-standing partner in France, Georges, a leading commercial laundry
business that specialises in the cleaning and maintenance of workwear and PPE,
continues to thrive using Xeros-enabled IFB machines with plans to open new
sites over the next 12-18 months, in line with their expansion into the
laundering of fire fighter uniforms. In addition, Georges has received
compelling feedback from its key customer base, Air France and SNCF, with
statistics showing a uniform life extension of 20% since using the Xeros CARE
technology.
In addition, early in the Period, we appointed Ecoprod as a UK distributor for
Xeros enabled commercial care machines. The UK based company offers water
management solutions to several thousand facilities in five major industries -
healthcare, hotels, the care market, laundry companies and sports clubs.
Sales pipeline
The Company's goal is mass implementation of its three technologies and, to
this aim, I come to my third element of change, which is now well underway.
Fueled by the confidence of our progress with licensees, we led a programme of
outreach to global players with a goal for 2023 to gain interest from a major
European washing machine brand on each of our three technology platforms. As I
write today, we are trending significantly beyond that initial target, and I
am pleased to report that we are now in dialogue with six out of the 10
leading global domestic washing machine manufacturing brands and have 10 new
commercial opportunities including those referenced above:
For Filtration (domestic)
· four global brands
For Finish
· a leading global fashion brand
· a major European retailer
For Care (commercial)
· two global brands
For Care (domestic)
· two European brands
· a North American brand
· an Asian brand
While we would not expect all of these to come to fruition, the response we
have had is extremely encouraging.
Strategy
Our strategy to become an IP-rich, capital-light licensor of proprietary
technology solutions to multiple scale industries, all of which deploy the
same Xeros core technologies remains.
Our technology provides cost-effective solutions for garment manufacture and
clothing care within the $2.5 trillion fashion industry and the $55 billion
domestic washing machine market. Our annual addressable markets in Filtration,
Finish and Care are estimated to be £350 million, £132 million and £3
billion respectively.
To achieve market penetration, we take a three-pronged approach:
· Commercial partnerships - We have commercial partnerships in place with IFB
for domestic and commercial laundry machines, with Ramsons and Yilmak/KRM for
garment finishing equipment, and with three component manufacturers on XF1.
· Direct engagement - We engage and work to influence major fashion and consumer
brands to showcase the benefits of our technology and to build a market for
it. We have significant engagement with leading global OEMs across all our
technology platforms.
· Drive influence - We are a global leader in sustainable textile technologies
and we work with legislators, industry groups and NGOs to show the scale of
the environmental challenges and to demonstrate the effectiveness of our
solutions.
ESG
Xeros' technologies reduce the environmental impact of clothing on the planet.
They save millions of litres of water and have the power to prevent billions
of microfibres ending up in our oceans.
Textiles technologies are just the beginning of our long-term mission to
reduce waste and use resources more responsibly to support a better future for
both people, and the world we call our home.
We are pleased to have been recognised as a B Corp business during the Period.
We are part of a global movement of companies dedicated to using business as a
force for good. We are proud to be included in a network of over 6,000
mission-led businesses, committed to meeting the rising standards for social
and environmental performance.
Post Period End and Outlook
As detailed in the circular for the fundraise, dated 8 April, the Board
conservatively estimates Xeros' core technologies provide an addressable
global market opportunity of c£40m-£50m pa in revenue in the medium term.
The £6.3m before fees funds raised from the placing and retail offer in April
2024, and the warrant redemptions received in January 2024 will be used to
strengthen the balance sheet and provide working capital to support our
existing partners through to launch (IFB, Yilmak Makina and Ecoprod); the
progression of the significant global opportunities referenced above; provide
contingency against timing of royalty payments, over which we have little
control; and for developing complementary additions to our core propositions
not least on filtration.
Cost controls will remain in place, and priority will be given to the
commercialisation of existing opportunities.
As a technology licensing business, we have the benefits of low overheads, a
high margin business model and an ability to scale up significantly with
minimal cost increase. The other side of the coin however is that we are
unable to directly influence timings and 'Go to Market' decisions.
Nonetheless, the route to nearer-term meaningful revenue is clear, with a
number of our commercial partners, as detailed above, now close to commercial
scale roll-out of machinery containing some element of Xeros' IP.
Neil Austin
Chief Executive Officer
28 May 2024
Financial review
Group revenue was generated as follows:
Year Year
ended ended
31 December 31 December
2023 2022
£'000 £'000
Service revenue 82 82
Licensing revenue 138 64
Sale of goods 77 18
Other - -
_______ _______
Total revenue 297 164
The financial results in 2023 show development of the Group's licencing
strategy alongside management of costs in order the put the Group into a
strong position, and while revenue growth in FY23 was not as strong as
anticipated due to the timing of XOrb orders from partners, it does support
the anticipated revenue growth as contracts enter into their commercial phase.
The Group's future revenue is based upon the anticipated commercial progress
made by its commercial partners as they market and sell products incorporating
Xeros technology into their respective markets. The Group has worked to set a
cost base which can support these contracts as well as win new ones, with the
expectation that costs will not need to rise significantly in future years as
the Group moves into profitability.
Further information on these financial results is provided below.
Group revenue increased by 81.1% to £0.30m in the year ended 31 December 2023
(2022: £0.16m). The Group's revenue is derived from three principal sources:
· Service revenue: reflecting the servicing of existing estate, based
principally in Europe.
· Licensing revenue: reflecting royalty payments from licence partners,
milestone payments during the technology transfer process and advance fees for
access to Group intellectual property.
· Sale of goods: reflecting sales of XOrbs to licence partners and sales of
machines on behalf of licence partners.
The Group continues to receive service revenue related to the retained estate
of commercial laundry machines in the UK and Europe. As the licensing model
grows, this service revenue is expected to become a smaller part of the
overall revenue mix.
Licensing revenue in the period was £0.14m (2022: £0.06m), an increase of
115.6%; revenue from sale of goods was £0.08m in the period (2022: £0.02m),
an increase of 377.8%. Service revenue in the period was flat at £0.08m
(2022: £0.08m).
The increase in revenue and the high margins the Group records on licence
income has driven an increase in gross profit in the period to £0.25m (2022:
£0.08m), an increase of 81.1%, resulting in a gross margin of 82.5% (2022:
51.2%).
The Group decreased its adjusted EBITDA loss by 37.5% to £4.6m (2022: loss
£7.4m).
Gross profit/loss and adjusted EBITDA are considered the key financial
performance measures of the Group as they reflect the trading activities of
the Group. Adjusted EBITDA is defined as the loss on ordinary activities
before interest, tax, share-based payments and warrant expense, depreciation
and amortisation.
Administrative expenses, decreased by 33.7% to £5.0m (2022: £7.5m),
following a reduction in the Group's headcount and a continued focus on cost
across the business. The Group's average headcount fell by 26.8% in the year
to 30 (2022: 41).
The Group reported an operating loss of £4.7m (2022: loss £7.4m), a decrease
of 33.2%. The loss per share was 2.82p (2022: loss 14.29p).
Net cash outflow from operations decreased by 33.2% to £4.7m (2022: £7.0m)
as a result of the Group's overall cost reduction, as shown in a reduction in
cash used in operations to £5.2m (2022: £7.5m), and the receipt of £0.5m
R&D tax credits from HMRC relating to 2022. Cash utilisation was in line
with the Board's expectations. Cash utilisation is not expected to increase
during 2024.
The Group had existing cash resources, including cash on deposit, as at 31
December 2023 of £1.6m (2022: £6.5m) and remains debt free. The Group
received additional funding post period end in the form of warrant exercises
and an equity placing, which between them raised £6.3m before fees. The Going
Concern statement within this announcement draws attention to the Directors'
views on the Group's ongoing prospects and the key assumptions behind the
preparation of the Group's Annual Report for the year ended 31 December 2023
on a going concern basis.
Alex Tristram
Finance Director
28 May 2024
Consolidated statement of profit or loss and other comprehensive income
For the year ended 31 December 2023
Year Year
ended ended
31 December 31 December
2023 2022
Notes £'000 £'000
Continuing operations
REVENUE 297 164
Cost of sales (52) (80)
GROSS PROFIT/(LOSS) 245 84
Administrative expenses (4,982) (7,518)
Adjusted EBITDA* (4,606) (7,368)
Share-based payment credit/(expense) 20 79
Depreciation of tangible fixed assets (151) (145)
OPERATING LOSS (4,737) (7,434)
Net finance (expense)/income (38) (14)
LOSS BEFORE TAX (4,775) (7,448)
Taxation 520 515
LOSS FOR THE PERIOD (4,255) (6,933)
OTHER COMPREHENSIVE (EXPENSE)/INCOME:
Items that are or may be reclassified to profit or loss:
Foreign currency translation differences - foreign operations 2,209 (3)
TOTAL COMPREHENSIVE EXPENSE FOR THE PERIOD (2,046) (6,936)
LOSS PER SHARE
Basic and diluted on loss from continuing operations (2.82)p (14.29)p
Basic and diluted on total loss for the period (2.82)p (14.29)p
* Adjusted EBITDA comprises loss on ordinary activities before interest, tax,
share-based payment expense, warrant expense, depreciation and amortisation.
Consolidated statement of changes in equity
For the year ended 31 December 2023
Share Share premium Deferred share capital Warrant reserve Merger reserve Foreign currency translation reserve Accumulated losses Total
capital
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 31 December 2021 3,568 121,018 - - 15,443 (2,206) (130,761) 7,062
Loss for the year - - - - - - (6,933) (6,933)
Other comprehensive income (3) - (3)
Loss and total comprehensive expense for the period - - - - - (3) (6,933) (6,936)
Transactions with owners, recorded directly in equity:
Change in nominal value of ordinary shares (3,544) - 3,544 - - - - -
Issue of shares following placing and open offer 127 6,234 - - - - - 6,361
Costs of share issues - (539) - - - - - (539)
Warrant expense (restated) - (947) - 947 - - - -
Share-based payment - - - - - - (79) (79)
Expense
Total contributions by and distributions to owners (restated) (3,417) 4,748 3,544 947 - - (79) 5,743
At 31 December 2022 (restated) 151 125,766 3,544 947 15,443 (2,209) (137,773) 5,869
Loss for the year - - - - - - (4,255) (4,255)
Other comprehensive expense - - - - - 10 - 10
Other comprehensive expense: Reclassification of historical foreign exchange - - - - - 2,199 (2,199) -
on the closure of overseas subsidiaries
Loss and total comprehensive - - - - - 2,209 (6,454) (4,245)
expense for the year
Transactions with owners,
recorded directly in equity:
Share-based payment - - - - - - (20) (20)
Expense
Total contributions by and - - - - - (20) (20)
distributions to owners -
At 31 December 2023 151 125,766 3,544 947 15,443 - (144,247) 1,604
Consolidated statement of financial position
As at 31 December 2023
At Restated
At
31 December 31 December
2023 2022
Notes £'000 £'000
ASSETS
Non-current assets
Property, plant and equipment 129 104
Right of use assets 772 717
Trade and other receivables - 6
TOTAL NON-CURRENT ASSETS 901 827
Current assets
Inventories 159 164
Trade and other receivables 352 387
Cash on deposit 4 4
Cash and cash equivalents 1,595 6,465
TOTAL CURRENT ASSETS 2,110 7,020
TOTAL ASSETS 3,011 7,847
LIABILITIES
Non-current liabilities
Right-of-use liabilities (727) (624)
Deferred tax (38) (38)
TOTAL NON-CURRENT LIABILITIES (765) (662)
Current liabilities
Trade and other payables (642) (1,316)
TOTAL CURRENT LIABILITIES (642) (1,316)
TOTAL LIABILITIES (1,407) (1,978)
NET ASSETS 1,604 5,869
EQUITY
Share capital 151 151
Share premium 125,766 125,766
Deferred share capital 3,544 3,544
Warrant reserve 947 947
Merger reserve 15,443 15,443
Foreign currency translation reserve - (2,209)
Accumulated losses (144,247) (137,773)
TOTAL EQUITY 1,604 5,869
Consolidated statement of cash flows
For the year ended 31 December 2023
Year Year
ended ended
31 December 31 December
2023 2022
Notes £'000 £'000
Operating activities
Loss before tax (4,775) (7,448)
Adjustment for non-cash items:
Depreciation of property, plant and equipment 151 145
Share-based payment (20) (79)
(Decrease)/Increase in inventories 5 (56)
(Increase)/decrease in trade and other receivables 40 (15)
Decrease in trade and other payables (615) (46)
Finance income (2) (16)
Finance expense 39 30
Cash used in operations (5,177) (7,485)
Tax receipts 520 515
Net cash outflow from operations (4,657) (6,970)
INVESTING ACTIVITIES
Purchases of property, plant and equipment (79) (63)
Cash removed/(placed on) deposit - 5,319
Net cash inflow/(outflow) from investing activities (79) 5,256
FINANCING ACTIVITIES
Finance income 1 15
Finance expense (39) (30)
Proceeds from issue of share capital, net of costs - 5,821
Payment of lease liabilities (105) (113)
Net cash inflow from financing activities (143) 5,693
Increase/(decrease) in cash and cash equivalents (4,879) 3,979
Cash and cash equivalents at start of year/period 6,469 2,483
Effect of exchange rate fluctuations on cash held 7 3
CASH AND CASH EQUIVALENTS AT END OF YEAR 1,597 6,465
Notes to the consolidated financial statements
For the year ended 31 December 2023
1) BASIS OF PREPARATION
The financial information has been prepared in accordance with the recognition
and measurement principles of International Accounting Standards in conformity
with the requirements of the Companies Act 2006 and in accordance with the AIM
rules. The principal accounting policies of the Group have remained unchanged
from those set out in the Group's 2022 annual report.
The financial information has been prepared under the historical cost
convention and is presented in Sterling, rounded to the nearest thousand.
The financial information set out in this preliminary announcement does not
constitute statutory accounts as defined by section 434 of the Companies Act
2006. The financial information for the period ended 31 December 2023 was
approved by the Board on 24 May 2024 and has been extracted from the Group's
financial statements upon which the auditor's opinion is unmodified and does
not include a statement under section 498(2) or (3) of the Companies Act 2006,
but does include an emphasis of matter regarding the material uncertainty
related to going concern described below.
The statutory accounts for the period ended 31 December 2023 will be posted to
shareholders at least 21 days before the Annual General Meeting and made
available on our website www.xerostech.com (http://www.xerostech.com/) . In
due course, they will be delivered to the Registrar of Companies. The
statutory accounts for the period ended 31 December 2022 have been delivered
to the Registrar of Companies.
The preparation of financial statements in conformity with UK-adopted
International Accounting Standards requires management to make judgements,
estimates and assumptions that affect the application of policies and reported
amounts of assets and liabilities, income, and expenses. The estimates and
associated assumptions are based on historical experience and various other
factors that are believed to be reasonable under the circumstances, the
results of which form the basis of making the judgements about carrying values
of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period, or in the period
of the revision and future periods if the revision affects both current and
future periods.
In preparing the financial information, management are required to make
accounting assumptions and estimates. The assumptions and estimation methods
are consistent with those applied to the annual report and financial
statements for the year ended 31 December 2022. Additionally, the principal
risks and uncertainties that may have a material impact on activities and
results of the Group remain materially unchanged from those described in that
annual report.
Business combinations and basis of consolidation
Subsidiaries are all entities (including structured entities) over which the
Group has control. The Group controls an entity when the Group is exposed to,
or has rights to, variable returns from its involvement with the entity and
has the ability to affect those returns through its power over the entity.
Subsidiaries are fully consolidated from the date on which control is
transferred to the Group and are deconsolidated from the date control ceases.
Inter-company transactions, balances and unrealised gains and losses on
transactions between Group companies are eliminated.
Where the acquisition is treated as a business combination, the purchase
method of accounting is used to account for the acquisition of subsidiaries by
the Group.
The cost of an acquisition is measured as the fair value of the assets given,
equity instruments issued and liabilities incurred or assumed at the date of
exchange. Acquisition costs are expensed as incurred. Identifiable assets
acquired and liabilities and contingent liabilities assumed in a business
combination are measured initially at their fair values at the acquisition
date. The excess of the cost of acquisition over the fair value of the
Group's share of the identifiable net assets acquired is recorded as
goodwill. If the cost of the acquisition is less than the fair value of net
assets of the subsidiary acquired, the difference is recognised directly in
the income statement.
All intra-group balances and transactions, including unrealised profits
arising from intra-group transactions, are eliminated fully on consolidation.
Going Concern
As at 31 December 2023, the Group had £1.6m of cash and cash equivalents. At
this stage of its development, the Group incurs operating cash outflows and is
reliant on existing cash resources. The Group's received £1.7m of cash in
respect of warrant exercises during January 2024, and during April 2024, the
Group completed an equity placing and retail offer which provided an
additional £4.6m before fees. The Directors consider that, following these,
the Group has sufficient cash to meet its obligations as they fall due for at
least 12 months following the date of this announcement. The Directors also
believe that these financial resources, alongside the Group's existing and
anticipated customer contracts, provide the Group with a platform to reach
cash breakeven.
While the Group actively manages key customer stakeholders where appropriate,
the revenue anticipated to allow the Group to reach cash breakeven anticipated
to be generated by these contracts is reliant on the actions of third parties
and there remains risk that progress is not forthcoming in the timeframes
anticipated by the Directors. Should there be significant delays in the
commencement of the commercialisation of the Group's technology by its licence
partners, the Group's existing cash balance may not be sufficient to support
the Group's expenditure until the point the Group's revenue allows it to reach
cash breakeven.
The Directors consider that they have a number of options in place should
there be delays in commercialisation, including reductions in discretionary
spending, that would allow the existing cash resources to provide a longer
runway. Given the lack of certainty around the timing of the commencement of
significant revenues generated by the Group, the Directors consider that the
Group's current funding position constitutes a material uncertainty that may
cast significant doubt as to the Group's ability to continue as a going
concern; in the absence of significant customer revenue, the Group's cash will
run out. Notwithstanding this uncertainty, the Directors believe that they
have sufficient options in place in order to allow the Group to continue
trading in the short and medium term. Therefore, after making enquiries and
considering the uncertainties as described above, the Directors have a
reasonable expectation that the Group has and will have adequate resources to
continue in operational existence for the foreseeable future. For these
reasons, they continue to adopt the going concern basis of accounting in
preparing this financial information.
The Group is subject to a number of risks, including those as set out in the
strategic report within the Group's Annual Report. These risks include the
global macro-economic conditions, particularly in the global markets in which
the Group and its partners operate. The going concern assessment as carried
out by the Directors has taken the impact of these into account as far as
possible. While this inclusion does not change the assessment of the Directors
in respect of going concern, the Group remains reliant on the progress of
international licence partners in order for it to execute the
commercialisation strategy.
When making their going concern assessment the Directors assess available and
committed funds against all non-discretionary expenditure, and related cash
flows, as forecast for the period ended 31 December 2025. These forecasts
indicate that the Group is able to settle its liabilities as they fall due in
the forecast period. In these forecasts the Directors have considered
appropriate sensitivities, including the progress of the Group's commercial
contracts. Accordingly, the Directors continue to believe that the going
concern assumption is appropriate for the Group and the financial statements
have been prepared on that basis.
2) SEGMENTAL REPORTING
The financial information by segment detailed below is frequently reviewed by
the Chief Executive Officer, who has been identified as the Chief Operating
Decision Maker ("CODM"). The Group's transition to a licensing organisation
has led to a change to how the results of the Group are reviewed internally.
The results are no longer split by segment but are reviewed in terms of the
type of revenue. As such, the analysis below does not split the Group's
results into separate operating segments and instead reports results as one
single segment.
An analysis of revenues by type is set out below:
Year Year
ended ended
31 December 31 December
2023 2022
£'000 £'000
Sale of goods 77 18
Rendering of services 82 82
Licensing revenue 138 64
297 164
The Group's largest customer was responsible for 32% of Group revenue in the
year to 31 December 2023.
During the year ended 31 December 2022 the Group's largest customer was
responsible for 31% of Group revenue.
An analysis of revenues by geographic location of customers is set out below:
Year Year
ended ended
31 December 31 December
2023 2022
£'000 £'000
Europe 161 120
North America 8 31
Rest of the World 128 13
297 164
3) LOSS FROM OPERATIONS
Year Year
ended ended
31 December 31 December
2023 2022
£'000 £'000
Loss from operations is stated after charging to
administrative expenses:
Foreign exchange losses 3 16
Depreciation of plant and 151 145
equipment
Short term and low value rentals 16 42
Staff costs (excluding share-based payment charge) 2,661 4,009
Research and development 222 837
Auditors remuneration:
- Audit of these financial statements 24 38
- Audit of financial statements of subsidiaries of the company 23 30
· - Audit related assurance services 4 5
Total auditor's remuneration 51 73
4) EXPENSES BY NATURE
The administrative expenses charge by nature is as follows:
Year Year
Ended ended
31 December 31 December
2023 2022
£'000 £'000
Staff costs, recruitment and other HR 2,735 4,221
Share-based payment (credit)/expense (20) (79)
Premises and establishment costs 160 157
Research and development costs 84 259
Patent and IP costs 549 687
Legal, professional and consultancy fees 617 1,088
IT, telecoms and office costs 164 265
Depreciation charge 151 145
Travelling, subsistence and entertaining 275 329
Advertising, conferences and exhibitions 256 360
Bad debt expense 10 64
Other expenses (2) 6
Foreign exchange losses/(gains) 3 16
Total administrative expenses 4,982 7,518
5) TAXATION
Tax on loss on ordinary activities
Year Year
ended ended
31 December 31 December
2023 2022
£'000 £'000
Current tax:
UK Tax credits received in respect of prior periods (521) (517)
Foreign taxes paid 1 2
(520) (515)
Deferred tax:
Origination and reversal of temporary timing differences - -
Tax credit on loss on ordinary activities (520) (515)
The credit for the year can be reconciled to the loss before tax per the
statement of profit or loss and other comprehensive income as follows:
Factors affecting the current tax charges
The tax assessed for the year varies from the main company rate of corporation
tax as explained below:
Year Year
ended ended
31 December 31 December
2023 2022
£'000 £'000
The tax assessed for the period varies from the main company rate of
corporation tax as explained below:
Loss on ordinary activities before tax (4,775) (7,448)
Tax at the standard rate of corporation tax 19% (2022: 19%) (907) (1,415)
Effects of:
Expenses not deductible for tax purposes (4) (15)
Research and development tax credits receivable (521) (517)
Unutilised tax losses for which no deferred tax asset is 911 1,430
recognised
Employee share acquisition adjustment - -
Foreign taxes paid 1 2
Tax credit for the year (520) (515)
The Group accounts for Research and Development tax credits where there is
certainty regarding HMRC approval. The Group has received a tax credit in
respect of the year ended 31 December 2022. There is no certainty regarding
the claim for the year ended 31 December 2023 and as such no relevant credit
or asset is recognised.
6) LOSS PER SHARE (BASIC AND DILUTED)
Basic loss per share is calculated by dividing the loss attributable to equity
holders of the parent by the weighted average number of ordinary shares in
issue during the year. Diluted loss per share is calculated by adjusting the
weighted average number of ordinary shares in issue during the period to
assume conversion of all dilutive potential ordinary shares.
Year Year
ended ended
31 December 31 December
2023 2022
£'000 £'000
Total loss from continuing operations (4,255) (6,933)
Total loss attributable to the equity holders of the parent (4,255) (6,933)
No. No.
Weighted average number of ordinary shares in issue during the year 150,982,728 48,526,649
Loss per share
Basic and diluted on loss from continuing operations (2.82)p (14.29)p
Basic and diluted on total loss for the year (2.82)p (14.29)p
The weighted average number of shares in issue throughout the period is as
follows.
Year Year
ended ended
31 December 31 December
2023 2022
Issued ordinary shares at 1 January 2023/1 January 2022 150,980,123 23,784,483
Effect of shares issued for cash 2,605 24,742,166
Weighted average number of shares at 31 December 150,982,728 48,526,649
The Company has issued employee options over 9,557,130 (31 December 2022:
10,852,514) ordinary shares which are potentially dilutive. There is, however,
no dilutive effect of these issued options as there is a loss for each of the
periods concerned.
7) SHARE CAPITAL AND WARRANTS
Share capital Share premium Deferred share capital Merger reserve Total
Number £'000 £'000 £'000 £'000 £'000
Total ordinary shares of 15p each as at 31 December 2021 23,784,483 3,568 121,018 - 15,443 140,029
Change in nominal value of ordinary shares - (3,544) - 3,544 - -
Issue of ordinary shares following placing and open offer 127,195,640 127 6,234 - - 6,361
Costs of share issues - - (539) - (539)
Warrant expense - - (947) (947)
Total ordinary shares of 0.1p each as at 31 December 2022 150,980,123 151 125,766 3,544 15,443 144,904
Issue of ordinary shares as a result of warrants 2,794 - - - - -
Costs of share issues - - - - - -
Total ordinary shares of 0.1p each as at 31 December 2023 150,982,917 151 125,766 3,544 15,443 144,904
The Group undertook a share capital reorganisation exercise during the year
ended 31 December 2022, splitting the ordinary shares with a nominal value of
15p into ordinary shares of 0.1p and deferred shares of 14.9p. The new
deferred shares have no significant rights attached to them and carry no
right to vote or participate in distribution of surplus assets and have not
been admitted to trading on the AIM market of the London Stock Exchange plc,
nor will they in the future. Accordingly, deferred shares are excluded from
the calculation of earnings per share.
Number
Total deferred shares of 14.9p each as at 31 December 2021 -
Issue of deferred shares as part of share capital reorganisation 23,784,483
Total deferred shares of 14.9p each as at 31 December 2022 23,784,483
Total deferred shares of 14.9p each as at 31 December 2023 23,784,483
As permitted by the provisions of the Companies Act 2006, the Company does not
have an upper limit to its authorised share capital.
The following is a summary of the changes in the issued share capital of the
Company during the period ended 31 December 2023:
(a) 2,794 ordinary shares of 0.1p per share were allotted at a price of 5p per
share, for total cash consideration of £137 upon the exercise of warrants.
At 31 December 2023, the Company had two classes of share, being ordinary
shares of 0.1p each and deferred shares of 14.9p each.
The Group's Share Capital reserve represents the nominal value of the ordinary
shares in issue. The Group's Share Premium Reserve represents the premium the
Group received on issue if its shares. The Group's Deferred Share Capital
reserve represents the nominal value of the deferred shares in issue. The
Merger Reserve arose on the combination of companies within the Group prior to
the flotation on AIM.
As part of the placing completed in October 2022 the Group issued warrants to
purchase ordinary shares of 0.1p for a fixed fee of 5p per share. Following
consultation with warrant holders, the outstanding warrants were repriced to
2.85p per share in December 2023. In addition, the warrant exercise lapse date
was amended to 31 January 2024. The warrant charge as calculated based on this
reprice was lower than the initial warrant charge recognised on issue and
hence no adjustment to the warrant charge has been recognised in these
financial statements.
Number of warrants Weighted average exercise price (p) Weighted average contractual life (years)
At 31 December 2021 - - -
Issued in the period 127,195,640 5 1.5
At 31 December 2022 127,195,640 5 1.5
Exercised in the period (2,794) 5 1.5
Effect of warrant reprice - (2.15) (1.4)
At 31 December 2023 127,192,666 2.85 0.1
8) RELATED PARTY TRANSACTIONS
During the year, the Group entered into transactions, in the ordinary course
of business, with other related parties. Those transactions with directors are
disclosed below. Transactions entered into, along with trading balances
outstanding at each period end with other related parties, are as follows:
Purchases from related party Amounts owed to related party
Purchases from related party Amounts owed to related party
31 December 31 December 31 December 31 December
2023 2023 2022 2022
Related party Relationship £000 £000 £000 £000
IP Group plc Fund manager for certain shareholders (note) (4) - 35 4
Cofra London Limited Shareholder (note2) 15 15 - -
Note: IP Group plc provide the services of David Baynes, who was a director of
the Company until 31 December 2022, and invoice the Group for related fees.
David Baynes was a Director of both the Company and of IP Group plc.
Note2: Cofra London Limited provide the services of Donald Brenninkmeijer as a
strategic advisor to the Board, and invoice the Group for related fees.
Terms and conditions of transactions with related parties
Purchases between related parties are made on an arm's length basis.
Outstanding balances are unsecured, interest free and cash settlement is
expected within 60 days of invoice.
Transactions with Key Management Personnel
The Company's key management personnel comprise only the Directors of the
Company. During the period, the Company entered into the following
transactions in which the Directors had an interest:
Directors' remuneration:
Remuneration received by the Directors from the Company is set out below.
Further detail is provided within the Directors' remuneration report:
Year Year
ended Ended
31 December 31 December
2023 2022
£000 £000
Short-term employment benefits* 493 968
*In addition, certain Directors hold share options in the Company for which a
fair value share based charge of £93,000 has been recognised in the
consolidated statement of profit or loss and other comprehensive income (year
ended 31 December 2022: £93,000).
The highest-paid Director in the year received a total remuneration of
£262,000 (year ended 31 December 2022: £405,000). During the year ended 31
December 2023, the Company entered into numerous transactions with its
subsidiary companies which net off on consolidation - these have not been
shown above.
9) EVENTS AFTER THE REPORTING PERIOD
Exercise of warrants
Following the repricing of the Group's warrants as approved by warrant holders
on 21 December 2023, during the revised warrant exercise period the Group
received valid warrant exercise notices for 58,913,935 warrants during January
2024. The exercise of these warrants provided the Group with £1,679,000.
Board appointment
On 11 March 2024, the Group announced that Alex Tristram, the Group's Finance
Director, would join the Board.
Placing and Retail Offer
On 4 April 2024, the Group announced a placing and retail offer to issue
310,789,561 new shares at 1.5p each. The placing raised £4,662,000 for the
Group, before fees.
10) PRIOR YEAR RESTATEMENT
In the current year it was noted that, the warrant reserve of £947,000 as
created in 2023 was posted as a debit balance within equity rather than as a
credit balance in error. As a result, and due to the material nature of the
balance, the prior year has been restated in these financial statements. Given
the nature of this restatement, there is no impact in either net assets as
at 31 December 2022 or on the reported loss for the year ended 31 December
2022.
Forward-looking statements
This announcement may include certain forward-looking statements, beliefs or
opinions, including statements with respect to Xeros' business, financial
condition and results of operations. These forward-looking statements can be
identified by the use of forward-looking terminology, including the terms
"believes", "estimates", "plans", "anticipates", "targets", "aims",
"continues", "expects", "intends", "hopes", "may", "will", "would", "could" or
"should" or, in each case, their negative or other various or comparable
terminology. These statements are made by the Xeros Directors in good faith
based on the information available to them at the date of this announcement
and reflect the Xeros Directors' beliefs and expectations. By their nature
these statements involve risk and uncertainty because they relate to events
and depend on circumstances that may or may not occur in the future. A number
of factors could cause actual results and developments to differ materially
from those expressed or implied by the forward-looking statements, including,
without limitation, developments in the global economy, changes in government
policies, spending and procurement methodologies, and failure in health,
safety or environmental policies.
No representation or warranty is made that any of these statements or
forecasts will come to pass or that any forecast results will be achieved.
Forward-looking statements speak only as at the date of this announcement and
Xeros and its advisers expressly disclaim any obligations or undertaking to
release any update of, or revisions to, any forward-looking statements in this
announcement. No statement in the announcement is intended to be, or intended
to be construed as, a profit forecast or to be interpreted to mean that
earnings per Xeros share for the current or future financial years will
necessarily match or exceed the historical earnings. As a result, you are
cautioned not to place any undue reliance on such forward-looking statements.
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