TIDMXSG
RNS Number : 7928C
Xeros Technology Group plc
20 April 2017
20 April 2017
Xeros Technology Group plc
Executing strategy
Xeros Technology Group plc (AIM:XSG, 'the Group', 'Xeros'), the
developer and provider of polymer based technologies with multiple
commercial applications, today publishes its final results for the
17 months ended 31 December 2016.
Group highlights
-- Proven platform technology to be commercialised across three
global scale industries: cleaning, tanning and textiles
-- Meaningful discussions with commercial development partners underway across divisions
-- Strengthened operational structure aligned to commercialising applications
-- Seven new patents filed since the beginning of 2017
-- Group earned income increased to GBP2.5m (year ended 31 July 2015: GBP480,000)
-- Cash resources on 31 March 2017 of GBP23.6m
Cleaning Technologies
-- 140 Commercial Laundry machines commissioned (year ended 31 July 2015: 48)
-- Total machine estate and order backlog totalling 438 at the end of March 2017
-- 'Symphony Project' launched to share Xeros' technology on an
'open source' basis for incorporation within any brand of
commercial laundry machine - see separate release
-- Multiple successful customer trials in high added value performance workwear market
-- Fourth prototype in development which targets simple changes
for the incorporation of Xeros' technology within any domestic
washing machine.
Tanning Technologies
-- Successful completion of multiple scale trials in retanning and dyeing
-- Heads of terms signed with Wollsdorf Leder, a leading European tannery
-- Scale trials planned with four additional European tanneries
Textile Technologies
-- Laboratory scale testing has demonstrated that Xeros
technology can deliver quantum benefits in garment manufacture and
colouration
-- Intellectual property filed and in development to underpin opportunity
Mark Nichols, Chief Executive of Xeros, said:
"Over the past 17 months, we have achieved major milestones in
our technology development and its commercialisation. We now have
strong evidence that we have the capacity to deliver
sustainability, performance and economic benefits across three
world scale industries: cleaning, tanning and textiles.
"Technical validation and increasing market endorsement show
that we possess a platform technology that can transform these
industries.
"The long-term value of our technology in each of the selected
markets is substantial, given their scale, the environmental and
economic pressures on them, and the quantum of the improvements we
deliver in these areas. These benefits are now increasingly being
recognised and we are in active discussions with a number of
partners with the objective of further accelerating our commercial
development.
"Our scope and strategy is now fixed. 2017 will be a year of
execution, in which we significantly progress the commercialisation
of our highly disruptive, innovative technology."
Enquiries:
Xeros Technology Group plc Tel: 0114 321
Mark Nichols, Chief Executive 6328
Officer
Paul Denney, Chief Financial Officer
Jefferies International Limited Tel: 020 7029
(Nominated Adviser and Joint Broker) 8000
Simon Hardy / Harry Nicholas
Berenberg (Joint Broker) Tel: 020 3207
Chris Bowman / Ben Wright / Amritha 7800
Murali
Instinctif Partners (Financial Tel: 020 7457
PR) 2020
Adrian Duffield / Helen Tarbet
/ James Gray
Notes to Editors
Xeros Technology Group plc (LN: XSG) is a platform technology
company that is reinventing water intensive industrial and
commercial processes by reducing water and chemistry usage with its
polymer technologies. Its patented technologies have the capacity
to provide material economic, operational and sustainability
improvements that are unattainable with traditional processes. The
Group is currently exploiting its intellectual property in three
areas: Cleaning Technologies, Tanning Technologies and Textile
Technologies. Xeros has a number of agreements in place with such
international organisations as BASF, Hilton and Wollsdorf
Leder.
For more information, please visit -
http://www.xerostech.com/
Operating Review
Cleaning Technologies
Commercial Laundry
Our objective within the Commercial Laundry market is to
establish and then progressively build a profitable position in the
"On Premise" hotel segment in the US and beyond. Initially, we will
do this with our own brand of washing machines but over time we
seek to supplement these with those of other third party
manufacturers which incorporate our proprietary technology.
Our model is based on Xeros and branded manufacturers supplying
machines directly to approved 'Forward Channel Partners' who have
responsibility for their installation, commissioning and the
delivery of lifetime services and consumables to customers under
our proprietary Sbeadycare(R) programme.
The total number of commissioned machines grew by 140 during the
period commencing 1(st) August 2015 to a total of 212 at the end of
December 2016 and by 195 to 267 at the end of March 2017. In
addition, there were installations awaiting commissioning of 74
machines and letters of agreements for further installations of 97
machines at the end of March 2017. This growth in demand has been
supported by an increasing body of evidence that Xeros' technology
delivers sustainability, performance and economic benefits.
These figures compare to an estimated market size of 10,000
machines installed annually in the hotel "On Premise" Laundry
segment in the US. We therefore see significant opportunity for
growth, given the benefits and competitive differentiation that our
technology delivers.
Additional measures taken to increase penetration of the market
included completing the development of our smaller 16kg machine as
a complement to our 25kg washing machine, with the first units
being delivered to customers in the US in late 2016.
We announced two new add-on products: SbeadyCare(R) Xtend and
Assure which are designed to reduce linen replacement and
compliance related costs for hotels by leveraging new polymer
technology and our information technology respectively.
Having market tested our commercial offers against the needs of
different types of customers, we added an operating lease package
called "Excel" to complement our capital leasing ("Complete") and
outright machine purchase ("Perform") propositions. We now believe
we have a suite of offerings that comprehensively addresses the
spectrum of customer requirements both financially and
contractually.
We took a number of actions to increase the capacity of our
supply chain to meet market demand. To serve the western US and
Central America, we opened a regional office in Corona, California
to complement our established sales, warehousing and training
facilities located on the East Coast of the United States. Over
time, this facility will reduce supply chain related expenses and
serve as a hub for sales support and operations activities in the
region.
We integrated all Commercial Laundry engineering in the US into
our new Engineering Centre located in Seekonk, Massachusetts. In
doing so we have accelerated acceptance and life testing of our new
16kg machine. Additionally, we have developed engineering solutions
to advance our strategy of making Xeros' technology increasingly
compatible with a wider range of commercial laundry washing
machines.
Whilst our early market penetration in the US was necessarily
geographically diverse to promote ourselves as a new market
entrant, we have since started to concentrate our efforts towards
defined areas where we can create network density. We continue to
upgrade our Forward Channel Partners in these areas and we now have
five "Platinum" members on the East and West coasts of the United
States who are qualified to sell, commission and service our
installations.
As previously announced, we reduced the installation and
commissioning rates in Q4 2016 in order to work on improving our
commissioning capacity to meet demand. The above improvements have
been instrumental in significantly increasing the rate at which we
can now commission machines; achieving a commissioning rate of 31
machines in March 2017 with high levels of customer satisfaction
being recorded. We intend to broadly maintain these rates during
2017 with a further increase supported by additional fully
certified FCP's later in the year.
Outside of North America, we have continued to expand using
Forward Channel Partners. Post period end, we signed Heads of Terms
with Richard Jay Pty Ltd who will serve three major metropolitan
markets in Australia where drought conditions are experienced on a
regular basis. We also entered the Spanish market with
installations in the Canary Islands where two thirds of the
population of 1.7 million people and 5 million annual tourists rely
on desalinated water.
By the end of April 2017, 16 of our customers in the Americas
will have joined our "Million Gallons Saved Club", providing
further evidence of the benefits our technology delivers to
customers and the environment. Also by the end of April 2017, we
estimate that our technology will have saved approximately 300
million litres of water on a global basis and an equivalent amount
of effluent.
Our enterprise sales team secured Approved Supplier Status with
Hilton Americas Supply Management which represents over 4,300
hotels across Canada, the USA and South America. We are now in
discussions with other hotel chains with a view to achieving a
similar status with them.
Through our Symphony Project, announced on 20 April 2017, we are
making freely available to all machine manufacturers a relatively
simple means of incorporating our technology at the end of their
production lines. In so doing, we are enabling them to sell their
products into the market place and to receive a share of the
long-term savings that Xeros' technology generates. We anticipate
greatly accelerating the adoption rate of our technology. Under
this model, our targeted gross contribution for a 100-month
Sbeadycare(R) contract for a 25kg machine is expected to be
approximately $47,000.
Our total machine installation target remains one per working
hour in 2020. Our ambition is that this demand will be met by
commercial laundry machine manufacturers selling their Xeros
enabled machines to certified Forward Channel Partners who in turn
deliver our differentiated Sbeadycare(R) proposition. This strategy
is expected to enable Xeros to make a financial return on its
intellectual property and know-how with relatively low capital
intensity.
High Performance Workwear
We have trialed our cleaning technology in 12 separate
installations in the High Performance Workwear market, which covers
personal protective clothing including that used by emergency
services and other regulated end markets. Results indicated that we
have the potential to become the de facto standard for cleaning
high-value and often life-protecting workwear.
There is little additional technical development and cost
required for Xeros to enter this market which spans many
sub-segments including petrochemicals and the armed services, all
of which are becoming increasingly aware of the adverse and
potentially dangerous effects of incorrectly or insufficiently
cleaned workwear. Each of the sub-segments can be addressed with
our existing machine technology using bespoke cleaning cycles
developed by our in-house specialists downloaded onto machines from
our databases.
The market size for the cleaning of high performance workwear is
extremely large. In the firefighting segment alone, there are over
one million registered firefighters in the US and over 50,000 fire
houses with increasingly prescriptive maintenance and cleaning
regimes for their gear.
We are currently refining our business model and plans to enter
this market and once our proposition is proven to an appropriate
degree, we will seek to work with partners to generate a return on
our intellectual property and know how.
Consumer Cleaning
Similar to high performance workwear, we have established that
we have a highly differentiated technology for cleaning and
extending the life of a number of high value, but hard to clean
garments owned by consumers.
Following extensive market research and process design, we have
evaluated an internet-enabled on-demand outsourcing approach as the
best model to bring our technology to this market. We have designed
and are now ready to test our proposition within a limited number
of zip codes in the US for a single garment type.
Given the nature of this model, we believe that we should
partner from the outset with businesses and investors experienced
in this type of service model and we are currently profiling
suitable partners.
We continue to actively work on bringing Xeros' technology to
the home and we have developed three further domestic washing
machine prototypes. The latest design is planned to be very simple
to manufacture, service and operate. As a result, we believe that
it has the potential to substantially reduce the barriers to
bringing the sustainability and economic benefits of Xeros'
technology to the consumer cleaning market.
Smart Xeros Machines
We have continued to develop the "smart" features in all our
machine designs. In our Commercial Laundry business, we have
continuous data flows which enable remote management and ongoing
performance improvement in each of the constituents in our value
chain. We now have a relatively low financial investment compared
with the value that is being created.
Our "Gateway" communication hubs, which we install in each of
our customers' laundries are now transmitting multiple data points
from each cycle. The data collected resides centrally in our Cloud
storage and is configured into actionable information which is made
available online to customers to improve their operations.
We believe our approach to information technology is unique
within the broader industry and represents another sustainable
competitive advantage for all our cleaning applications.
In overall terms, it has been a period of great progress for
Cleaning Technologies. Commercial Laundry is now becoming
established and we have a business model and routes to market which
we believe will support profitable revenues. We have taken the
first steps towards working with major industry incumbents to
participate in our value chain with the objective of accelerating
growth whilst reducing our capital intensity. Our entry into the
High Performance Workwear market represents another global scale
opportunity where Xeros has the potential to become the de facto
cleaning standard. Finally, we have plans to serve the consumer
market, through an outsourced model in the first instance, and, in
due course, through placing Xeros technology in the home.
Tanning Technologies
In Cleaning Technologies, our polymer technology gently removes
unwanted molecules and contaminants from materials. In contrast,
our tanning technology is highly effective in pushing molecules
into hides during leather processing. As in Cleaning Technologies,
deployment of Xeros' technology and processes substantially reduces
water, chemistry and effluent.
There are significant growth opportunities in the leather
industry. A number of tanneries are becoming output-constrained due
to shortages of water and legal limits on effluent emissions. Xeros
is uniquely positioned to help address these issues and expand
capacity in those tanneries.
Whilst the polymers are different, the process within which they
are used, via deployment in rotating drums, is similar - albeit on
a significantly larger scale. Our Cleaning Technologies currently
use 30kg to 50kg of polymer in a cycle whereas Tanning Technologies
may use as much as five tonnes.
We have chosen to focus initially on the Retanning and Dyeing
stage in the tanning process, which uses large volumes of water to
apply specialty chemicals. In due course, we believe we can also
move upstream to the Tanning stage which typically uses
proportionately more water to apply bulk chemicals.
We conducted six production scale trials in Retanning and Dyeing
during the period, during which over 1,000 hides were processed.
The trials were conducted with our development partner, Wollsdorf
Leder Schmidt & Co. Ges.m.b.h. in Austria. Strong evidence was
produced to show that Xeros' technology is effective in reducing
water, chemistry and effluent in the production process without
impacting the quality of the leather produced.
We have since signed heads of terms with Wollsdorf Leder to
convert their Retanning and Dyeing operations to incorporate Xeros'
technology and are currently determining the final engineering and
commissioning requirements before entering into a binding
contract.
Our business model for this industry is one of sharing gains
with customers under 10 year contracts with the capital required to
add Xeros' technology into the production process, paid for by the
tannery from their share of the savings generated.
The size of the global bovine segment is estimated to be 300
million hides per annum. Our ambition is to achieve a percentage
market share in the high teens by 2022 with typical chemistry
savings of between 10% and 15% per hide for the Retanning and
Dyeing stage.
We have also successfully conducted further first stage trials
in Retanning and Dyeing with four other European tanneries who
address the auto, shoe and garment markets. Each have indicated
that they wish to proceed with scale trials. We plan to complete
these trials by mid-2017 and to establish suitable commercial
arrangements; thereafter, we intend to extend our presence in
Europe and, in due course, the Americas.
The design of the system which delivers this technology is
materially complete and Xeros has engaged with leading equipment
suppliers to the tanning industry to provide key components of a
Polymer Management System to include storage, transportation and
cleaning of the polymers after each cycle.
We have been granted patents for our Tanning and Dyeing process
in Europe and have made similar applications in all territories
with major leather processing industries.
We strengthened our management team in Tanning Technologies
which is exclusively focused on its successful commercialisation.
We will continue to add more resource as we look to scale this
exciting application.
Textile Technologies
In mid-2016, we extensively evaluated major water-intensive
markets and identified garment and fabric manufacturing as market
sectors with significant potential. 22.7 million tonnes of natural
fibres are processed annually for the clothing and textiles
industries which are seeking to improve their environmental
performance without compromising on cost or quality. We see this as
a substantial opportunity, and the research we have conducted so
far supports this view.
Xeros' technology has the capacity to deliver water, chemistry
and energy reductions with commensurate improvements in effluent
whilst improving performance outcomes in a number of textile
applications. In so doing, we believe we have the ability to
support manufacturers, brands and retailers in delivering their
sustainability objectives without compromising cost or quality.
We anticipate significant intellectual property being created in
this area and have filed four patent applications to date with
further filings anticipated.
Polymer Technologies
Our polymer technology is protected by extensive patent
approvals and our R&D team is constantly developing and
evolving our Intellectual Property.
Our Generation One polymers cover the optimal shape, size and
density of the polymers used in each application. During the
period, we supplemented these with Generation Two, which
incorporate performance enhancing additives.
For our cleaning applications, both Generations One and Two were
developed in a partnership with BASF with whom we signed a five
year supply agreement in November 2016.
We are now actively developing Generation Three polymers which
use novel surface effects to deliver further reductions in
chemistry, or performance improvements for the markets we are
addressing. We anticipate these improvements being introduced in a
two to three-year timeframe.
All our novel polymer and engineering developments are
underpinned by Intellectual Property and we have further increased
our coverage and at the end of March 2017 we have a total of 48
patent families "pending" or "granted" to protect our portfolio,
with more anticipated to follow. A number of the patent filings
have the benefit of significantly extending the time horizon of our
protection.
To deliver our development goals, we increased our polymer
science team to eight people by the end of the period. The team is
directly aligned to the three application areas and their
successful commercialisation. As at the end of March 2017, our
development teams possessed a total of 12 PhDs.
Summary and Outlook
Over the past 17 months, we have achieved major milestones in
our technology development and its commercialisation. We now have
strong evidence that we have the capacity to deliver
sustainability, performance and economic benefits across three
world scale industries: cleaning, tanning and textiles.
Technical validation and increasing market endorsement show that
we possess a platform technology that can transform these
industries.
The long-term value of our technology in each of the selected
markets is substantial, given their scale, the environmental and
economic pressures on them, and the quantum of the improvements we
deliver in these areas. These benefits are now increasingly being
recognised and we are in active discussions with a number of
partners with the objective of further accelerating our commercial
development.
Our scope and strategy is now fixed. 2017 will be a year of
execution, in which we significantly progress the commercialisation
of our highly disruptive, innovative technology.
Financial review
Group earned income was generated as follows:
17-month
period ended Year
ended
31 December 31 July
2016 2015
GBP'000 GBP'000
Machine sales 1,540 289
Service income 837 177
Consumables 16 -
Lease interest income 73 14
___ ___ _______
Total earned income 2,466 480
Group earned income increased to GBP2,466,000 in the 17-month
period ended 31 December 2016 when compared to the prior year (year
ended 31 July 2015: GBP480,000).
Notably both machine sales income and service income from the
installed base of Commercial Laundry machines have increased
significantly. Machine sales income has increased to more than five
times the income generated in the year to 31 July 2015 and service
income has increased to more than four times the income generated
in the prior year.
The point at which revenue and costs from machine sales can be
recognised is dependent on the completion of a number of stages.
These include the installation of the machine, commissioning of the
machine, acceptance of the machine by the customer, completion of
utility incentive formalities, where applicable, and then, in the
case of lease sales, finalisation of the lease agreement. The Group
does not recognise revenue and costs from a machine sale until all
of these aspects are complete.
The number of machines installed in the period are as
follows:
17 month Year
period ended ended
31 December 31 July
2016 2015
No. No.
Machines sold - revenue and
costs taken to P&L statement 76 16
Machines commissioned and
generating service revenue,
but machine sale revenues
and costs not yet recognised 64 32
Machines installed but not
yet commissioned 70 34
Machines installed in the
period 210 82
As at 31 December 2016, contracted future revenues amount to
GBP3.8m (31 July 2015: GBP1.6m) and average contract length is 59
months (31 July 2015: 74 months). As the Group's commercial
activities have expanded this average contract period reflects
normal trading terms.
Gross profit was GBP290,000 compared to GBP67,000 in the year
ended 31 July 2015. Adjusted gross margin, defined as gross profit
plus lease interest income, was GBP363,000 (15%) compared to
GBP81,000 (17%) in the year ended 31 July 2015. Adjusted gross
margin and adjusted EBITDA are considered the key financial
performance measures of the Group as they reflect the true nature
our continuing trading activities.
The Group has continued to invest in its R&D programme. The
Group spent GBP7.6m on R&D including staff and patent costs
(year ended 31 July 2015: GBP3.6m) alongside the Commercial Laundry
working capital and start-up costs, in line with the Board's
expectations. Total administrative expenses (which include the
R&D expenses detailed above) increased to GBP22.6m in the
period (year ended 31 July 2015: GBP11.1m). This reflects the
expanded headcount and increased commercial activities of the Group
during the period. The figure of GBP22.6m also includes a foreign
exchange gain of GBP3.8m resulting from movements in the US dollar
rate during the period. This has resulted in an Adjusted EBITDA
loss of GBP20.7m (year ended 31 July 2015: loss GBP9.9m). Adjusted
EBITDA is defined as the loss on ordinary activities before
interest, tax, share-based payment expense, non-operating
exceptional costs, depreciation and amortisation. Non-operating
exceptional costs are the professional advisory costs related to
the November 2015 fundraising.
The recent strength of the US$ means that working capital and
operating costs in the US Commercial Laundry business are
proportionally more expensive when translated into Sterling, the
Group's functional currency. However, a strong US$ will benefit the
Group financial statements as the US business grows to generate
cash and become profitable.
The Group reported an operating loss of GBP22.4m (year ended 31
July 2015: loss GBP10.9m). The loss per share was 25.04p (year
ended 31 July 2015: loss 15.62p).
The Group expects cash utilisation to continue to accelerate
over the coming years, as we continue to fund our R&D
programmes alongside the roll-out in Commercial Laundry. The
increase in net cash outflow from operations to GBP26.4m (year
ended 31 July 2015: GBP11.8m) reflects these activities and was in
line with the Board's expectations.
The Group had existing cash resources as at 31 December 2016 of
GBP28.9 million, comprised of cash and cash equivalents of GBP19.0m
and investments of GBP9.9m (31 July 2015: GBP17.5m, comprised of
cash and cash equivalents of GBP15.9m and investments of GBP1.5m)
and remains debt free.
The Group has tax losses of approximately GBP42.4m to offset
against future taxable profits (31 July 2015: GBP19.8m).
Accounting reference date change
As previously reported in the financial statements for the prior
period, the Group has changed its accounting reference date to 31
December. Consequently, these financial statements have been
prepared for the 17-month period ended 31 December 2016. The
comparative figures are presented for the year ended 31 July
2015.
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE
INCOME
17 months Year
ended ended
31 December 31 July
2016 2015
Notes GBP000 GBP000
----------------------------------- ------ ------------ ---------
Earned income 2,466 480
Less: lease interest income (73) (14)
----------------------------------- ------ ------------ ---------
REVENUE 2,393 466
Cost of sales (2,103) (399)
----------------------------------- ------ ------------ ---------
GROSS PROFIT 290 67
Lease interest income 73 14
Adjusted gross margin* 363 81
----------------------------------- ------ ------------ ---------
Administrative expenses (22,640) (11,102)
Other operating income - 174
Adjusted EBITDA* (20,659) (9,868)
Share based payment expense (1,232) (916)
Non operating exceptional
costs (87) -
Depreciation of tangible
fixed assets (372) (77)
----------------------------------- ------ ------------ ---------
OPERATING LOSS (22,350) (10,861)
Finance income 1,225 192
LOSS BEFORE TAXATION (21,125) (10,669)
Taxation 5 886 464
----------------------------------- ------ ------------ ---------
LOSS AFTER TAX (20,239) (10,205)
----------------------------------- ------ ------------ ---------
OTHER COMPREHENSIVE INCOME:
Items that are or may be
reclassified to profit or
loss:
Foreign currency translation
differences - foreign operations (1,720) 16
----------------------------------- ------ ------------ ---------
TOTAL COMPREHENSIVE EXPENSE
FOR THE PERIOD (21,959) (10,189)
----------------------------------- ------ ------------ ---------
LOSS PER SHARE
Basic and diluted on loss
from continuing operations 6 (25.04)p (15.62)p
----------------------------------- ------ ------------ ---------
* Adjusted gross margin comprises gross profit plus lease
interest income
* Adjusted EBITDA comprises loss on ordinary activities before
interest, tax, share-based payment expense, non-operating
exceptional costs, depreciation and amortisation.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Foreign
currency Retained
Share Share Merger translation earnings
capital premium reserve reserve deficit Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 31 July 2014 98 28,132 15,443 (38) (13,137) 30,498
----------------------- --------- --------- --------- ------------- ---------- ---------
Loss for the
year - - - - (10,205) (10,205)
Other comprehensive
expense - - - 16 - 16
----------------------- --------- --------- --------- ------------- ---------- ---------
Loss and total
comprehensive
expense for the
year - - - 16 (10,205) (10,189)
Transactions
with owners,
recorded directly
in equity:
Issue of shares - 46 - - - 46
Share based payment
expense - - - - 916 916
----------------------- --------- --------- --------- ------------- ---------- ---------
Total contributions
by and distributions
to owners - 46 - - 916 962
----------------------- --------- --------- --------- ------------- ---------- ---------
At 31 July 2015 98 28,178 15,443 (22) (22,426) 21,271
----------------------- --------- --------- --------- ------------- ---------- ---------
Loss for the
period - - - - (20,239) (20,239)
Other comprehensive
expense - - - (1,720) - (1,720)
----------------------- --------- --------- --------- ------------- ---------- ---------
Loss and total
comprehensive
expense for the
period - - - (1,720) (20,239) (21,959)
Transactions
with owners,
recorded directly
in equity:
Issue of shares 27 39,973 - - - 40,000
Exercise of share
options 4 281 - - - 285
Costs of share
issues - (2,152) - - - (2,152)
Share based payment
expense - - - - 1,232 1,232
----------------------- --------- --------- --------- ------------- ---------- ---------
Total contributions
by and
distributions
to owners 31 38,102 - - 1,232 39,365
----------------------- --------- --------- --------- ------------- ---------- ---------
At 31 December
2016 129 66,280 15,443 (1,742) (41,433) 38,677
----------------------- --------- --------- --------- ------------- ---------- ---------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At At
31 December 31 July
2016 2015
Notes GBP000 GBP000
---------------------------------- ------ ------------ ---------
ASSETS
Non-current assets
Property, plant and equipment 1,588 577
Trade and other receivables 1,656 363
---------------------------------- ------ ------------ ---------
TOTAL NON-CURRENT ASSETS 3,244 940
---------------------------------- ------ ------------ ---------
Current assets
Inventories 7,005 2,909
Derivative financial instruments 705 -
Trade and other receivables 1,830 578
Current tax asset - 477
Investments - bank deposits 9,959 1,539
Cash and cash equivalents 18,975 15,913
---------------------------------- ------ ------------ ---------
TOTAL CURRENT ASSETS 38,474 21,416
---------------------------------- ------ ------------ ---------
TOTAL ASSETS 41,718 22,356
---------------------------------- ------ ------------ ---------
LIABILITIES
Non-current liabilities
Deferred tax (39) (22)
TOTAL NON-CURRENT LIABILITIES (39) (22)
---------------------------------- ------ ------------ ---------
Current liabilities
Trade and other payables (3,002) (1,063)
TOTAL CURRENT LIABILITIES (3,002) (1,063)
---------------------------------- ------ ------------ ---------
TOTAL LIABILITIES (3,041) (1,085)
---------------------------------- ------ ------------ ---------
NET ASSETS 38,677 21,271
---------------------------------- ------ ------------ ---------
EQUITY
Share capital 7 129 98
Share premium 66,280 28,178
Merger reserve 15,443 15,443
Foreign currency translation
reserve (1,742) (22)
Accumulated losses (41,433) (22,426)
---------------------------------- ------ ------------ ---------
TOTAL EQUITY 38,677 21,271
---------------------------------- ------ ------------ ---------
CONSOLIDATED STATEMENT OF CASH FLOWS 17 months Year
ended ended
31 December 31 July
2016 2015
Notes GBP000 GBP000
---------------------------------------------------------- ------- ------------ ---------
Operating activities
Loss before tax (21,125) (10,669)
Adjustment for non-cash items:
Depreciation of property, plant and equipment 372 77
Share based payment 1,232 916
Increase in inventories (3,957) (2,110)
Increase in trade and other receivables (2,424) (90)
(Decrease)/increase in trade and other payables (663) 288
Finance income (1,225) (192)
Cash used in operations (27,790) (11,780)
Tax receipts/(payments) 1,380 (8)
Net cash outflow from operations (26,410) (11,788)
------------------------------------------------------------------- ------------ ---------
INVESTING ACTIVITIES
Finance income 520 192
Cash placed on deposits with more than 3 months maturity (8,420) (13)
Purchases of property, plant and equipment (811) (532)
------------------------------------------------------------------- ------------ ---------
Net cash outflow from investing activities (8,711) (353)
------------------------------------------------------------------- ------------ ---------
FINANCING ACTIVITIES
Proceeds from issue of share capital, net of costs 38,133 46
Net cash inflow from financing activities 38,133 46
------------------------------------------------------------------- ------------ ---------
Increase/(decrease) in cash and cash equivalents 3,012 (12,095)
Cash and cash equivalents at start of year 15,913 27,999
Effect of exchange rate fluctuations on cash held 50 9
CASH AND CASH EQUIVALENTS AT OF PERIOD/YEAR 18,975 15,913
------------------------------------------------------------------- ------------ ---------
NOTES TO THE FINANCAIL STATEMENTS
1) BASIS OF PREPARATION
This financial information does not constitute the company's
statutory accounts for the period ended 31 December 2016 or the
year ended 31 July 2015 but is derived from those accounts.
Statutory accounts for 2015 have been delivered to the registrar of
companies, and those for the period ended 31 December 2016 will be
delivered in due course. The auditor has reported on those
accounts; their reports were (i) unqualified, (ii) did not include
a reference to any matters to which the auditor drew attention by
way of emphasis without qualifying their report and (iii) did not
contain a statement under section 498 (2) or (3) of the Companies
Act 2006.
The Financial Statements for the period ended 31 December 2016
included in this announcement were authorised for issue in
accordance with a resolution of the Board of Directors on 19 April
2017. The level of rounding for financial information is the
nearest thousand pounds.
The Company is a limited liability company incorporated and
domiciled in England & Wales and whose shares are quoted on
AIM, a market operated by The London Stock Exchange.
The Company's registered office is Unit 2 Evolution, Advanced
Manufacturing Park, Whittle Way, Catcliffe, Rotherham, S60 5BL.
Going Concern
At this stage in its development the company is reliant on
equity share funding. 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 30 April 2018. These forecasts indicate that
the company is able to settle its liabilities as they fall due in
the forecast period.
Accordingly the directors consider that this should enable the
company to continue in operational existence for the foreseeable
future and the directors believe that it remains appropriate to
prepare the financial statements on a going concern basis.
2) SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements have been prepared under
the historical cost convention in accordance with International
Financial Reporting Standards as adopted by the European Union (EU
IFRS).
3) SEGMENTAL REPORTING
The information that is presented to the Chief Executive
Officer, who is considered to be the Chief Operating Decision Maker
("CODM"), for the purposes of resource allocation and assessment of
performance, is based wholly on the overall activities of the
Group. Due to the current size and activities of the Group, there
is a high degree of centralisation of activities. The Directors
therefore consider that there is one operating, and hence one
reportable segment for the purposes of presenting information under
IFRS8; that of "Development and commercialisation of polymer bead
cleaning technologies". There are no differences between the
segment results and the consolidated statement of comprehensive
income. The assets and liabilities information presented to the
CODM is consistent with the consolidated statement of financial
position.
The single operating segment includes revenue by category as
follows:
17 months Year
ended ended
31 December 31 July
2016 2015
GBP000 GBP000
----------------------- ------------ --------
Sale of goods 1,556 289
Rendering of services 837 177
2,393 466
----------------------- ------------ --------
During the 17-month period ended 31 December 2016 the Group had
two customers who individually generated more than 10 per cent. of
revenue. Those customers accounted for 19% and 13% of revenue
respectively.
During the year ended 31 July 2015 the Group had no customers
who individually generated more than 10 per cent. of total
revenue.
An analysis of revenues by geographic location of customers is
set out below:
17 months Year
ended ended
31 December 31 July
2016 2015
GBP000 GBP000
--------------- ------------ --------
Europe 259 88
North America 2,134 378
2,393 466
--------------- ------------ --------
An analysis of non-current assets by location is set out
below:
17 months Year
ended ended
31 December 31 July
2016 2015
GBP000 GBP000
--------------- ------------ --------
Europe 722 517
North America 2,522 423
3,244 940
--------------- ------------ --------
4) LOSS FROM OPERATIONS
17 months Year
ended ended
31 December 31 July
2016 2015
GBP000 GBP000
------------------------------------------------------------- ------------ --------
Loss from operations is stated
after crediting:
Grant income 410 74
Foreign exchange gains 3,848 174
------------------------------------------------------------- ------------ --------
Loss from operations is stated
after charging to
administrative expenses:
Depreciation of plant and
equipment (see note 11) 372 77
Operating lease rentals -
land and buildings 270 104
Staff costs (excluding share
based payment charge) 10,525 4,334
Research and development 3,067 1,401
------------------------------------------------------------- ------------ --------
Auditors remuneration:
* Audit of these financial statements 12 8
* Audit of financial statements of subsidiaries of the
company 12 12
* all other services 29 6
Total auditor's remuneration 53 26
------------------------------------------------------------- ------------ --------
Other services in the current period related to interim review
work, tax advice and advice in respect of the group's overseas
subsidiary.
5) TAXATION
Tax on loss on ordinary activities
17 months Year
ended ended
31 December 31 July
2016 2015
GBP000 GBP000
---------------------------------------------------------- ------------ --------
Current tax:
UK Tax credits received in respect of prior periods (923) (477)
Foreign taxes paid 20 8
---------------------------------------------------------- ------------ --------
(903) (469)
Deferred tax:
Origination and reversal of temporary timing differences 17 5
---------------------------------------------------------- ------------ --------
Tax credit on loss on ordinary activities (886) (464)
---------------------------------------------------------- ------------ --------
The credit for the period/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 small company rate
of corporation tax as explained below:
17 months Year
ended ended
31 December 31 July
2016 2015
GBP000 GBP000
--------------------------------------------------------------------------------------------- ------------ ---------
The tax assessed for the period varies from the main company rate of corporation tax as
explained
below:
Loss on ordinary activities before tax (21,125) (10,669)
--------------------------------------------------------------------------------------------- ------------ ---------
Tax at the standard rate of corporation tax 20% (2015: 20%) (4,225) (2,134)
Effects of:
Expenses not deductible for tax purposes 291 202
Research and development tax credits receivable (923) (477)
Unutilised tax losses for which no deferred tax asset is
recognised 5,130 1,937
Employee share acquisition adjustment (1,172) -
Foreign taxes paid 20 8
Change in tax rates (7) -
--------------------------------------------------------------------------------------------- ------------ ---------
Tax credit for the period/year (886) (464)
--------------------------------------------------------------------------------------------- ------------ ---------
In the year ended 31 July 2015, the group had an amount of
GBP477,000 receivable from HM Revenue and Customs in respect of
Research and Development tax credits. This was included as a
current tax asset in the Consolidated Statement of Financial
Position on the basis that HMRC had agreed that this amount was
payable and it was received shortly after the period end. The group
accounts for Research and Development tax credits where there is
certainty regarding HMRC approval and, as no claims have yet been
made for the period to 31 December 2016, the group has not
recognised a debtor for any amounts that may be receivable for this
period.
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.
17 months Year
ended ended
31 December 31 July
2016 2015
GBP000 GBP000
--------------------------------------------------------------------- ------------ -----------
Total loss attributable to the equity holders of the parent (20,239) (10,205)
--------------------------------------------------------------------- ------------ -----------
No. No.
Weighted average number of ordinary shares in issue during the year 80,839,504 65,336,459
--------------------------------------------------------------------- ------------ -----------
Loss per share
Basic and diluted on loss for the year (25.04)p (15.62)p
--------------------------------------------------------------------- ------------ -----------
Adjusted earnings per share has been calculated so as to exclude
the effect of non-operating exceptional costs including related tax
charges and credits. Adjusted earnings used in the calculation of
basic and diluted earnings per share reconciles to basic earnings
as follows:
Basic earnings (20,239) (10,205)
Non-operating exceptional costs 87 -
--------------------------------- --------- ---------
Adjusted earnings (20,152) (10,205)
--------------------------------- --------- ---------
Adjusted loss per share
Basic and diluted on loss for the year (24.93)p (15.62)p
---------------------------------------- --------- ---------
The weighted average number of shares in issue throughout the
period is as follows:
17 months Year
ended ended
31 December 31 July
2016 2015
--------------------------------------------------- ------------ -----------
Issued ordinary shares at 1 August 65,504,879 65,173,549
Effect of shares issued for cash 15,334,625 162,910
Weighted average number of shares at 31 December/
31 July 80,839,504 65,336,459
--------------------------------------------------- ------------ -----------
The Company has issued employee options over 6,687,763 (31 July
2015: 7,368,901) 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
Share Share Merger
capital premium reserve Total
Number GBP000 GBP000 GBP000 GBP000
--------------------- ----------- --------- --------- --------- --------
Total Ordinary
shares of 0.15p
each as at 31
July 2014 65,173,549 98 28,132 15,443 43,673
--------------------- ----------- --------- --------- --------- --------
Issue of ordinary
shares on exercise
of share options 331,330 - 46 - 46
Total Ordinary
shares of 0.15p
each as at 31
July 2015 65,504,879 98 28,178 15,443 43,719
--------------------- ----------- --------- --------- --------- --------
Issue of ordinary
shares following
placing 17,777,778 27 39,973 - 40,000
Issue of ordinary
shares on exercise
of share options 2,739,254 4 281 - 285
Costs of share
issues - - (2,152) - (2,152)
--------------------- ----------- --------- --------- --------- --------
Total Ordinary
shares of 0.15p
each as at 31
December 2016 86,021,911 129 66,280 15,443 81,852
--------------------- ----------- --------- --------- --------- --------
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
2016:
(a) 666,499 Ordinary Shares were allotted at a price of 10.8
pence per share, for total cash consideration of GBP71,982, upon
the exercise of share options granted in the Company's EMI share
option scheme.
(b) 588,500 Ordinary Shares were allotted at a price of 12.0
pence per share, for total cash consideration of GBP70,620, upon
the exercise of share options granted in the Company's EMI and
Unapproved share option schemes.
(c) 874,499 Ordinary Shares were allotted at a price of 16.2
pence per share, for total cash consideration of GBP141,669, upon
the exercise of share options granted in the Company's EMI share
option scheme.
(d) 609,756 Ordinary Shares were allotted at a price of 0.15
pence per share, for total cash consideration of GBP915, upon the
exercise of share options granted in the Company's Unapproved share
option scheme.
(e) 17,777,778 Ordinary Shares were allotted at a price of 225 pence per share, for total cash consideration of GBP40,000,000 (before costs) following a placing of shares.
At 31 December 2016, the Company had only one class of share,
being Ordinary Shares of 0.15p each.
8) ANNUAL REPORT AND ACCOUNTS
The Group's annual report and accounts for the period ended 31
December 2016 have been published today and will be posted to
shareholders shortly. The annual report and accounts will also be
available in electronic form on www.xerostech.com
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.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR UKOKRBNASAAR
(END) Dow Jones Newswires
April 20, 2017 02:00 ET (06:00 GMT)
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