FULL YEAR RESULTS 2023

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

Neil Austin, Chief Executive Officer

Alex Tristram, Director of Finance

 

Tel: 0114 269 9656

Cavendish Capital Markets Limited (Nominated Adviser and Broker)

Julian Blunt/Teddy Whiley, Corporate Finance

Andrew Burdis/Sunila de Silva, ECM

 

Tel: 020 7220 0570

Belvedere Communications

Cat Valentine

Keeley Clarke

xeros@belvederepr.com

Mob: 07715 769 078

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

ended

Year

 ended


31 December

31 December


2023

2022

 

£'000

£'000

 

 

 

Service revenue

82

82

Licensing revenue

138

64

Sale of goods

Other

77

-

18

-


_______

_______

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

capital

Share premium

Deferred share capital

Warrant reserve

Merger reserve

Foreign currency translation reserve

Accumulated losses

Total


£'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

Expense

-

-

-

-

-

-

(79)

(79)

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 on the closure of overseas subsidiaries

-

-

-

-

-

2,199

(2,199)

-

Loss and total comprehensive

 expense for the year

-

-

-

-

-

2,209

(6,454)

(4,245)

Transactions with owners,

 recorded directly in equity:









Share-based payment

Expense

-

-

-

-

-

-

(20)

(20)

Total contributions by and

 distributions to owners

-

-

-

-

-

 

-

(20)

(20)

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







Property, plant and equipment


129

104

Right of use assets


772

717

Trade and other receivables


-

6

TOTAL NON-CURRENT ASSETS


901

827


 


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


 



 



(727)

(624)


(38)

(38)

TOTAL NON-CURRENT LIABILITIES


(765)

(662)


 


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


 


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. 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 equipment                                                                

151

145

   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

 recognised

911

1,430

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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