TIDMXSG
RNS Number : 7034P
Xeros Technology Group plc
22 June 2022
22 June 2022
Xeros Technology Group plc
('Xeros' or the 'Company' or the 'Group')
2021 Preliminary Results
Xeros Technology Group plc (AIM: XSG), the creator of
technologies that reduce the impact of clothing on the planet,
today publishes its preliminary results for the 12 months ended 31
December 2021.
Highlights
-- First license of XFilter to leading domestic washing machine component supplier.
-- Domestic machine technology planned for launch by leading Indian manufacturer in Q4 2022.
-- Denim Finish technology trialled by multiple major retail brands.
-- New Xeros brand identity and marketing programme launched to drive growth.
-- Cash burn rate remains at planned levels of GBP0.5m per month.
-- XFilter Technology Platform
o Licensing agreement signed in June with Hanning, a leading
component supplier to multiple major domestic washing OEMs.
o Independent test results of XFilter's efficacy by Hohenstein,
a German textile research and testing institute, in June 2022
confirmed an industry leading capture rate of 99%.
o Test and trial agreement signed in July 2021 with a large
Asian domestic washing machine OEM on track and soon to commence
commercial discussions.
-- XOrb/XDrum Technology platform:
o Denim Finishing trials successfully completed with three major
European retail brands fully validating our sustainability and
financial benefits. First denim jeans made with Xeros technology
sold to consumers.
o Following successful machine and cycles design, IFB planning
entry into the Indian domestic laundry market in Q4 2022.
o Sealion and IFB launched their commercial laundry machine
models in China and India respectively. Covid significantly
impacting the level of customer demand.
-- Financial:
o Revenue increased by 23.1% to GBP0.5m (2020: GBP0.4m).
o Adjusted EBITDA(1) loss reduced by 7.1% to GBP6.3m (2020: loss
GBP6.8m).
o Administrative expenses reduced by 4.8% to GBP7.2m (2020:
GBP7.6m).
o Net cash outflow from operations reduced by 8.3% to GBP5.8m
(2020: GBP6.3m). Cash at 31 May 2022 GBP4.3m.
Klaas de Boer, Chairman of Xeros, said:
"This has been a year of significant progress in embedding
Xeros' technologies into product lines of key licensing partners
laying a strong foundation for future growth. The transformation of
the Xeros brand and the supporting marketing programme are key to
accelerating the commercialisation of our transformational
technologies."
1 Adjusted EBITDA is defined as loss on ordinary activities
before interest, tax, share-based payment expense, depreciation and
amortisation
Enquiries :
Xeros Technology Group plc Tel: 0114 321 6328
Klaas de Boer, Chairman
Mark Nichols, Chief Executive Officer
Paul Denney, Chief Financial Officer
finnCap Limited (Nominated Advisor & Broker) Tel: 020 7220 0570
Julian Blunt / Teddy Whiley, Corporate Finance
Andrew Burdis / Sunila de Silva, ECM
Yellow Jersey PR Tel: 020 3004 9512
Sarah Hollins/Lilian Filips/Laurie Gellhorn
Notes to Editors
POWERED BY SCIENCE, XEROS CREATE TECHNOLOGIES ENGINEERED FOR THE
FUTURE
Born out of textile research and advancing new standards of
performance and responsibility, Xeros' technologies revolutionise
the way we make and clean our clothes, conserving water and
preventing waste. Designed to impact industries and people on a
global scale, Xeros transforms the performance, impact and
economics of the fashion and washing machine industry.
Xeros enables the scaling of its innovations and impact by
licencing its intellectual property to partners across the globe.
Their work has, to date, created 38 patent families.
Xeros' technologies are already in use in major global
industries, including commercial and home laundry and garment
manufacture. So far, these technologies have saved millions of
litres of water and could prevent billions of microfibres from
ending in our oceans.
TO THE POWER OF CHANGE
xerostech.com
Chairman's Statement
In Amazon's 2000 Annual Report, Jeff Bezos mused about the total
disconnect between the progress of Amazon's business and the
trajectory of its share price. Today I observe the same at Xeros.
Amazon's share price was down 80% YoY, whereas the business had
made very significant progress on all main metrics. Today, Xeros'
shares are showing a similar trend, yet the Company has made
tremendous progress over the past 12 months. The analogy with
Amazon is, however, far from perfect. Amazon was able to
communicate quantifiable financial and commercial metrics, whereas,
in the case of Xeros, most of the progress, although substantial,
is less quantifiable, and we are not in a position to communicate
specifics (yet).
Long term trends do remain very favourable for Xeros. France has
legislated for mandatory in-machine filtration devices from 2025
and in the UK similar legislation is in preparation. Expectation is
that the EU and the US (led by California) will follow. In
parallel, the unsustainable ecological footprint of the
fashion/apparel industry is coming under increasing public
scrutiny. And finally, the shift towards ESG investing will
continue in spite of issues around greenwashing.
The nearer term external environment, however, remains out of
our control, very challenging and unpredictable: Covid continues to
disrupt operations in China, there is a major war going on in
Europe, supply chains remain stretched, and we have rampant
inflation. In 2021, Xeros' partners in India and China continued to
suffer significant delays in their efforts to commercialise Xeros'
technology, with very little ability for Xeros to support those
partners on the ground. This has negatively impacted our pathway to
profitability.
For me personally, the main commercial highlights over the past
12 months were:
- IFB launching in commercial laundry
- Signing of first XFilter licensing deal with Hanning
- Continued progress with IFB towards their domestic laundry
launch in 2022, with much better visibility of their timelines
- Start of commercial use of Xeros' denim finishing technology
by 2 suppliers in Bangladesh serving 2 different global high street
brands
I also want to highlight the refresh of Xeros' purpose, brand
and positioning, which we undertook to strengthen our external
presence and visibility to help widen and accelerate the market
adoption of our portfolio of solutions. This work has also
re-energised the entire company internally following the challenges
resulting from Covid.
In addition to ongoing commercial execution, two important areas
of focus for the board in 2022 are funding and company leadership.
As is clear from our announcement on 31 March 2022, the Company
will require further financing before the anticipated breakeven in
2024. The Board decided not to initiate a fundraise immediately
following that announcement, as it wanted to provide more evidence
regarding the path to profitability. As it relates to leadership,
in March 2022, our CEO Mark Nichols announced his desire to
transition to a portfolio career, after six and a half years at the
helm of Xeros. The Board is extremely grateful for Mark's
leadership, under which the Company transitioned to a licensing
business model and created the XFilter platform, for his ongoing
commitment to the business and for the amount of notice provided,
which should give ample time to attract a suitable successor to
guarantee a seamless transition.
Finally, a thank you to all our staff, management, Directors,
shareholders and commercial partners for supporting us during two
challenging years dominated by Covid. Your support has been and
will remain critical to bring these important solutions to market
at scale.
Klaas de Boer
Chairman
Chief Executive's Statement
2021 was a year of mixed fortunes for Xeros with Covid related
lockdowns delaying the commercial progress of our existing
licensees in contrast with the rapid development of prospective
licenses of our filtration technology. Encouragingly, our South
Asian partners are now free of lockdowns but not so our Chinese
partner. Both regions continue to suffer major supply chain
shortages and long lead times. Thus, our licensing revenues are
behind where we planned them to be but importantly our prospects
are unchanged in terms of achieving wide geographic take-up of all
our technologies. Technologies which improve the cost and
environmental sustainability performance of the apparel industry
which is one of the most resource consuming and polluting
industries in the world.
The voices of stakeholders, including consumers, to reduce the
impact of our clothing on our planet have continued to grow louder.
Demands for reduced water usage, lower energy consumption and less
microplastic pollution from the manufacture and cleaning of clothes
have increased to the point that these secular trends are now
mainstream with brands conspicuous if they are not genuinely making
improvements. COP26 gave further impetus to calls to action for
every enterprise to become accountable with hard measures.
A key theme for Xeros over recent years has been learning how to
navigate and then convert the significant global enterprises that
will ultimately be the drivers of widespread adoption of our
technology. Whether we are addressing the very largest apparel
retailers or the very largest washing machine manufacturers in the
world, the challenges of how our team of 45 people can educate,
influence and change the behaviour of some of the world's largest
companies is one that we have wrestled with. We have seen very
clearly that it takes time, patience and resilience on our part but
ultimately the clear evidence of the benefits of our technology
does win through and we have made strong progress in the level of
engagement with these organisations during the year.
In 2021, Xeros raised GBP9.0m, before expenses, from strategic
and financial investors with the funds applied to winning and
executing license contracts for our two platform technologies,
XTend (the combination of XOrbs used in an XDrum) and XFilter.
During 2021 and the first half of 2022, the business has invested
in a new visual identity to boldly reflect the clear and compelling
purpose of the Company and why we do what we do. This new visual
identity is embodied in the new style Annual Report and allows us
to confidently present ourselves to the outside world. Multiple
stakeholders, including apparel brands, washing machine
manufacturers, garment finishing machine manufacturers,
environmental activists, government regulators and, above all,
consumers, will be able to get a clear picture of the solutions
brought to the world by Xeros' technologies and to increasingly
demand them.
These solutions are now presented under three product names:
Care (XC): this covers Xeros' XTend cleaning technologies in
domestic and commercial laundry markets and highlights the emphasis
on garment and fabric life extension brought by our technology.
Finish (XFN): this covers Xeros' XTend garment finishing
technology as currently used in the denim finishing market.
Filter (XF): this covers Xeros' XFilter filtration technology
used to capture over 90% of microfibre pollution from laundry
processes.
Business Review - Care
Commercial Laundry
The Commercial Laundry market has traditionally been the proving
ground of our Care technology platform, and we initially targeted
India and China as the territories for its deployment, given that
both countries have a great need and receptivity for water saving
technology. Whilst the evidence and the environmental, performance
and economic benefits have been verified both by independent
testing agencies and by initial customers, the Covid pandemic had a
major impact on the near-term sales of our licensees in the
year.
Xeros addresses the commercial laundry market though two
channels; firstly, through OEM license partners manufacturing and
selling XC machines directly to their customers in nominated
territories (i.e. India and China) and secondly, in other parts of
the world, through licensed distributors who sell XC machines
purchased from our OEM license partners. Xeros sells XOrbs to OEM
license partners and licensed distributors.
As regards our OEM license partners, both Jiangsu SeaLion
Technology Developments Company ("SeaLion") in China and IFB
Industries Limited ("IFB") in India have launched two sizes of XC
machines in their markets with plans to add a third to each of
their ranges. The market segments they plan to address include
hospitality, which will likely continue to be impacted by Covid
until travel returns to previous levels in their respective
countries. Their response is to address other sectors offering high
growth opportunities including the performance workwear market,
industrial linen launderers and dry cleaners. The current and
additional machine sizes address these opportunities directly.
In February 2022, Georges SA ("Georges") in France renewed their
contract with us to purchase commercial laundry machines from IFB
and XOrbs from us. IFB XC machines are now working in a number of
their sites with additional machine orders expected to meet the
requirements of SNCF. Georges services the nationwide fleet of
SNCF's workwear along with contracts with Air France and other
large French workwear garment users.
During the remainder of 2022, we plan to initiate further
licensing discussions in the commercial laundry market on a
selective geographic basis.
Domestic Laundry
We address the domestic laundry market using a scaled down
version of the same XC technologies used in the commercial laundry
market. Whilst the 100 million domestic machines sold each year are
used far less often than industrial equivalents, consumers have
very high expectations in terms of their ease of use, performance
and increasingly, their environmental impact. In addition to
reducing the water, energy and detergent used in the washing of
clothes, studies have demonstrated that Xeros' Care laundry
technology also makes them "look better and last longer". This
enables consumers to extend the life of their garments, allowing
consumers to choose to reduce the environmental impact of buying
new clothes.
Our first license partner for this application is IFB in India,
the second largest domestic washing machine company in India by
sales volume, with over 500 consumer appliance stores across the
country as well as its own online operation. Prior to Covid, IFB
had planned to commence selling XC front-loading washing machines
in 2021. IFB's plans are now that this will occur in Q4 of 2022.
Prior to this market launch, IFB will place an order for XOrbs with
Xeros to meet their market entry needs with. BASF will produce
these in Germany in Q3.
A successful launch in India of our domestic XC technology will
be a pivotal moment for Xeros, not just in giving a clear line of
sight to a significant future revenue stream but, as importantly,
it will be key to unlocking wider adoption by the industry and we
continue our engagement with other major manufacturers with a view
to increasing the number of licenses for this application in the
course of 2023.
Business Review - Finish
Denim Finishing
The denim market is of global scale with 1.2 billion pairs of
jeans manufactured each year, with many different finishes required
to meet consumer demand. Each pair of jeans exacts a heavy toll in
terms of high levels of water consumption with many still made
using pumice stone, which has a significant environmental impact
during the manufacturing process. Xeros' solution simplifies the
finishing process by completing all finishing steps within one
machine eradicating the use of pumice and using less chemistry and
water with a commensurate reduction in effluent. Our solution
thereby meets the secular trends of this industry to make the
manufacturing process of these garments greener, quicker and
cheaper.
Since our last Annual Report was published, the Xeros team has
been working with our OEM license partner, Ramsons Garment
Finishing Equipments PVT Ltd ("Ramsons") and Aba Group, a
manufacturer of denim jeans for some of the world's largest retail
brands, based in Bangladesh. This work, much of it conducted
remotely during Covid lockdowns, has seen the team successfully
complete a series of trials of Xeros' technology in "real world"
production environments.
In early 2022, Xeros and Ramsons extended these trials to a
number of other leading denim manufacturers in Bangladesh, and, to
date, Xeros' technology has successfully been used in the
production of jeans for two of the world's largest retail brands,
with these jeans deemed to have been manufactured at sufficiently
high quality to be sold to consumers by the retail brands. These
trials not only validated the quality of denim finishing for retail
brands but also validated all our stated resource and cost
reductions. Currently, Xeros is producing denim samples for a third
major global retailer. Whilst not yet significant in terms of
volumes, there are now denim jeans manufactured with Xeros' Finish
technology being sold to consumers.
Our main focus now is to work with the major brands, across
their production, sustainability and procurement teams, to elicit a
positive brand endorsement of our technology with the end goal of a
brand advocating the use of Xeros Finish technology across their
supply chains. The investment in our brand and messaging is clearly
aimed at raising awareness of our solutions across the apparel
industry.
With this market validation of our technology, our intention is
to initiate discussions for additional license contracts during
2022 and beyond as part of our ambition to eradicate all pumice
from denim manufacturing.
Leather Tanning
An additional application of this technology is found in the
leather tanning market. In 2019 Xeros spun off the leather tanning
business to the then management team, operating under the Qualus
brand. Since 2019, the Qualus team have successfully attracted
external investment to their business and are now operating in
Mexico, Brazil, India and markets in Asia with initial revenues
flowing. Under the terms of the original sale of the business in
2019, Xeros will receive royalty income based on Qualus' revenue
from 2022 and, whilst not expected to be material in the short
term, it is encouraging to see this application of our technology
making progress through adoption in a scale industry.
Business Review - Filtration
XFilter Technology Platform
The world now understands and is reacting to the threat caused
by microfibres entering the world's rivers and oceans, with its
largest source being the washing of clothes at home. Our
proprietary XFilter product design is over 90% efficient in
collecting synthetic and natural fibres from all sizes of machines
with the resultant filtride disposed of easily and simply into
commercial or household solid waste, thereby removing them from
water-borne waste which ultimately ends up in rivers and
oceans.
Since January 2021, Xeros has achieved a number of major
milestones towards fulfilling its ambition for XFilter to become
the microfibre filtration technology of choice for the washing
machine industry. The first milestone was the completion in the
middle of the year of a product design which meets consumer
performance requirements in terms of efficiency, cost and
usability. This design has been used to engage with multiple
parties with the result that in July 2021, Xeros signed a Testing
and Trials agreement with one of the world's largest domestic
washing machine manufacturers headquartered in Asia. The
contractual programme of work with this manufacturer is progressing
as planned. As part of this programme, Hohenstein, a highly
respected testing institute for the textile industry, has
accredited Xeros' filtration device, XFilter, with the highest
level of performance, capturing over 99% of microplastics released
in a wash cycle.
Also in July 2021, a Co-operation Agreement was signed with
Hanning Elektro-Werke GmbH & Co. KG ("Hanning") who are a major
supplier of machine parts to the appliance industry. Progress under
this agreement led to the signature our first Technology Licensing
agreement in June 2022 whereby Hanning will market, produce and
sell XFilter units on a global, non-exclusive basis to washing
machine manufacturers. Hanning will pay Xeros a royalty for each
unit sold. Xeros is also engaged with a number of additional large
brands with a view to their adoption of XFilter within their
washing machines.
In June 2021, Xeros signed a license agreement for its
commercial washing machine version of the XFilter technology with
Girbau S.A. under which they will pay a royalty per device for
sales on an exclusive basis in territories including Europe and
North America and with non-exclusive rights for certain other
territories. We anticipate their entering the markets with XFilter
products in mid-2023 with products manufactured for them by a
licensed third party.
In parallel to these activities, our filtration scientists have
been working closely with the UK government advising on
microfibres, their filtration in laundry environments and
appropriate standards for their capture from effluent streams.
Legislation is expected to be put in place for the mandatory
fitting of filters within domestic and commercial machines sold in
the UK from the beginning of 2025, the same timescale as French
legislation.
Intellectual Property
The IP-rich and asset-light commercialisation business model is
founded upon a strong and defendable patent portfolio which
provides freedom to operate and protection for us and for our
license partners. Our technologies are protected by close to 40
patent families which are in application or have been granted with
key patent lives extending through mid to late 2030s. Our policy is
to file patents in countries with large potential markets and where
we believe we can successfully defend our intellectual property. In
overall terms, our core patents are filed in countries which
represent 90% of global GDP. During 2021, the majority of new
patent filing activities were in the area of XFilter, the design of
which has been enhanced significantly to cover methods of
integration within washing machines. We also filed a limited number
of patents to protect a position in areas of future potential
interest which are consistent with our business mission to reduce
the impact of clothing on our planet.
In order to have the financial capacity to defend its patent
portfolio, Xeros carries significant levels of patent defence and
litigation insurance.
Outlook
2021 was a year in which our license and development partners
made continued progress in spite of the ongoing impacts of the
Covid pandemic in their countries. In June 2022 we achieved a
notable landmark with our XFilter technology being licensed for the
first time into the domestic washing machine market. With the
evidence from our licensing of both our Care and Filtration
platforms, Xeros plans to increase the number of license agreements
in countries with great need of the benefits that our intellectual
property bestows.
The GBP9.0m funds raised in an oversubscribed placing and open
offer in March 2021 continue to be applied to winning additional
contracts in each of our application areas with the expectation
that a number of new agreements will be signed in 2022. Our
marketing investment will amplify the reach of our proposition and
accelerate new license agreements.
Whilst it is difficult to predict with certainty the timeframe
to cash breakeven due to the nature of our business model whereby
our revenue is effectively entirely in the hands of third parties,
we estimate that with existing and targeted contracts, Xeros will
achieve EBITDA profitability and cash breakeven in 2024. Key to
this is the assumption that the impact of Covid, especially in
South Asia, is significantly below that experienced in 2020 and
2021.
As of 31 May 2022, the Group held cash of GBP4.3m. In our
trading update published on 31 March 2022 we stated that we expect
to require further investment to fund the business through to cash
breakeven and the board is currently working on plans to achieve
this investment.
Mark Nichols
Chief Executive Officer
Financial review
Group revenue was generated as follows:
Unaudited Audited year
year ended ended
31 December 31 December
2021 2020
ended
GBP'000 GBP'000
Service revenue 190 314
Licensing revenue 124 58
Sale of goods 155 8
Other 5 5
_______ _______
Total revenue 474 385
The financial results in 2021 reflect the first full year of
operating as a pure-play licensing business, having completed the
disposal of directly operated businesses in 2020. Whilst the impact
of Covid restrictions in India and China adversely affected the
ability of our license partners to sell commercial laundry and
denim finishing machines incorporating the Group's technology,
license partner sales were made in the second half of the year,
driving revenue growth and margin increase.
Future revenue growth is dependent on the pace of commercial
adoption of products incorporating the Group's technology platforms
in their respective markets. The Group's licensing business model
does not require administrative expenses to increase in line with
revenue growth, thereby creating future operating leverage to drive
the business to profitability as revenue increases in future years.
The Group's current view is that licensing partners will generate
sufficient revenue to deliver Group profitability in 2024.
Further information on these financial results is provided
below.
Group revenue increased by 23.1% to GBP0.5m in the year ended 31
December 2021 (2020: GBP0.4m). With the implementation of the
Group's licensing model, the revenue mix is changing with revenue
now derived from two principal sources:
-- Licensing revenue: reflecting royalty payments from license
partners and up-front fees for access to Group intellectual
property.
-- Sale of goods: reflecting sales of XOrbs to license partners
and sales of machines in Europe on behalf of license 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 GBP0.1m (2020: GBP0.1m), a
growth of 113.8%; revenue from sale of goods was GBP0.2m in the
period (2020: GBP0.0m), a growth of 1,837.5%. With the change in
revenue mix, service revenue in the period was GBP0.2m (2020:
GBP0.3m), a reduction of 39.5%.
The change in revenue mix towards licensing drove an increase in
gross profit in the period to GBP0.3m (2020: GBP0.0m), resulting in
a gross margin of 59.3% (2020: -12.7%).
The Group reduced its adjusted EBITDA loss by 7.1% to GBP6.3m
(2020: loss GBP6.8m).
Gross profit/loss and adjusted EBITDA are considered the key
financial performance measures of the Group as they reflect the
true nature of our trading activities. Adjusted EBITDA is defined
as the loss on ordinary activities before interest, tax,
share-based payment expense, depreciation and amortisation.
Administrative expenses, reduced by 4.8% to GBP7.2m (2020:
GBP7.6m). This reflects a 16.7% reduction in headcount during the
year with the average number of operational staff in the year to 31
December 2021 falling to 40 (2020: 48).
The Group reported an operating loss of GBP6.9m (2020: loss
GBP7.6m), a reduction of 9.1%. The loss per share was 28.11p (2020:
loss 44.88p).
Net cash outflow from operations reduced to GBP5.8m (2020:
GBP6.3m) from a combination of reduced cash used in operations,
GBP6.3m (2020: GBP6.9m) and the receipt of GBP0.5m R&D tax
credits from HMRC relating to 2020. Cash utilisation was in line
with the Board's expectations.
The Group had existing cash resources, including cash on
deposit, as at 31 December 2021 of GBP7.8m (2020: GBP5.2m) and
remains debt free. Group cash as at 31 May 2022 was GBP4.3m. The
Going Concern statement below draws attention to the Directors'
views on the uncertainty of future funding and the key assumptions
behind the preparation of these accounts on a going concern
basis.
Paul Denney
Chief Financial Officer
Unaudited consolidated statement of profit or loss and other
comprehensive income
For the year ended 31 December 2021
Unaudited Audited
year year
ended ended
31 December 31 December
2021 2020
Notes GBP'000 GBP'000
Continuing operations
REVENUE 3 474 385
Cost of sales (193) (434)
------------------------------------------- ------ ------------ ------------
GROSS PROFIT/(LOSS) 281 (49)
------------------------------------------- ------ ------------ ------------
Administrative expenses 5 (7,225) (7,586)
Adjusted EBITDA* (6,281) (6,761)
Share based payment expense (463) (653)
Depreciation of tangible fixed assets (200) (221)
------------------------------------------- ------ ------------ ------------
OPERATING LOSS (6,944) (7,635)
Net finance income 14 3
LOSS BEFORE TAX (6,930) (7,632)
Taxation 6 492 698
------------------------------------------- ------ ------------ ------------
LOSS AFTER TAX FROM CONTINUING OPERATIONS (6,438) (6,934)
------------------------------------------- ------ ------------ ------------
Loss from discontinued operations - (37)
------------------------------------------- ------ ------------ ------------
LOSS FOR THE PERIOD (6,438) (6,971)
------------------------------------------- ------ ------------ ------------
OTHER COMPREHENSIVE (EXPENSE)/INCOME:
Items that are or may be reclassified
to profit or loss:
Foreign currency translation differences
- foreign operations (1) 44
------------------------------------------- ------ ------------ ------------
TOTAL COMPREHENSIVE EXPENSE FOR
THE PERIOD (6,439) (6,927)
------------------------------------------- ------ ------------ ------------
LOSS PER SHARE
Basic and diluted on loss from continuing
operations 7 (28.11)p (44.88)p
Basic and diluted on total loss
for the period 7 (28.11)p (45.12)p
------------------------------------------- ------ ------------ ------------
Unaudited consolidated statement of changes in equity
For the year ended 31 December 2021
Foreign
currency Retained
Share Share Merger translation earnings
Capital premium reserve reserve deficit Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 31 December
2019
(audited) 1,176 109,226 15,443 (2,246) (118,468) 5,131
------------------------------ --------- --------- --------- ------------- ----------- --------
Loss for the year - - - - (6,971) (6,971)
Other comprehensive
income - - - 41 - 41
------------------------------ --------- --------- --------- ------------- ----------- --------
Loss and total comprehensive
expense for the period - - - 41 (6,971) (6,930)
Transactions with
owners, recorded
directly in equity:
Issue of shares following
placing and open
offer 1,800 4,200 - - - 6,000
Exercise of share
options 21 74 - - - 95
Costs of share issues - (427) - - - (427)
Share based payment
Expense - - - - 653 653
------------------------------ --------- --------- --------- ------------- ----------- --------
Total contributions
by and distributions
to owners 1,821 3,847 - - 653 6,321
------------------------------ --------- --------- --------- ------------- ----------- --------
At 31 December 2020
(audited) 2,997 113,073 15,443 (2,205) (124,786) 4,522
Loss for the year - - - - (6,438) (6,438)
Other comprehensive
expense - - - (1) - (1)
------------------------------ --------- --------- --------- ------------- ----------- --------
Loss and total comprehensive
expense for the
year - - - (1) (6,438) (6,439)
------------------------------ --------- --------- --------- ------------- ----------- --------
Transactions with
owners,
recorded directly
in equity:
Issue of shares following
placing and open
offer 562 8,438 - - - 9,000
Exercise of share
options 9 32 - - - 41
Costs of share issues - (525) - - - (525)
Share based payment
Expense - - - - 463 463
------------------------------ --------- --------- --------- ------------- ----------- --------
Total contributions
by and
distributions to
owners 571 7,945 - - 463 8,979
------------------------------ --------- --------- --------- ------------- ----------- --------
At 31 December 2021
(unaudited) 3,568 121,018 15,443 (2,206) (130,761) 7,062
------------------------------ --------- --------- --------- ------------- ----------- --------
Unaudited consolidated statement of financial position
As at 31 December 2020
Unaudited
at Audited at
31 December 31 December
2021 2020
Notes GBP'000 GBP'000
-------------------------------------- ------ ------------ ------------
ASSETS
Non-current assets
Property, plant and equipment 114 204
Right of use assets 14 68
Trade and other receivables 30 63
-------------------------------------- ------ ------------ ------------
TOTAL NON-CURRENT ASSETS 158 335
-------------------------------------- ------ ------------ ------------
Current assets
Inventories 108 96
Trade and other receivables 346 475
Cash on deposit 5,323 -
Cash and cash equivalents 2,483 5,158
-------------------------------------- ------ ------------ ------------
TOTAL CURRENT ASSETS 8,260 5,729
-------------------------------------- ------ ------------ ------------
TOTAL ASSETS 8,418 6,064
-------------------------------------- ------ ------------ ------------
LIABILITIES
Non-current liabilities
Right of use liabilities - (19)
Deferred tax (38) (38)
TOTAL NON-CURRENT LIABILITIES (38) (57)
-------------------------------------- ------ ------------ ------------
Current liabilities
Trade and other payables (1,318) (1,485)
TOTAL CURRENT LIABILITIES (1,318) (1,485)
-------------------------------------- ------ ------------ ------------
TOTAL LIABILITIES (1,356) (1,542)
-------------------------------------- ------ ------------ ------------
NET ASSETS 7,062 4,522
-------------------------------------- ------ ------------ ------------
EQUITY
Share capital 8 3,568 2,997
Share premium 8 121,018 113,073
Merger reserve 8 15,443 15,443
Foreign currency translation reserve (2,206) (2,205)
Accumulated losses (130,761) (124,786)
-------------------------------------- ------ ------------ ------------
TOTAL EQUITY 7,062 4,522
-------------------------------------- ------ ------------ ------------
Unaudited consolidated statement of cash flows
For the year ended 31 December 2021
Unaudited year Audited year
ended ended
31 December 31 December
2021 2020
Notes GBP'000 GBP'000
----------------------------------------------------- ------ --------------- -------------
Operating activities
Loss before tax (6,930) (7,632)
Adjustment for non-cash items:
Depreciation of property, plant and equipment 200 221
Share based payment 463 653
(Increase)/decrease in inventories (12) 246
Decrease in trade and other receivables 161 3
Decrease in trade and other payables (184) (342)
Finance income (17) (9)
Finance expense 3 6
Cash used in operations (6,316) (6,854)
Tax receipts 6 492 698
Cashflow from discontinued operations - (195)
Net cash outflow from operations (5,824) (6,351)
----------------------------------------------------- ------ --------------- -------------
INVESTING ACTIVITIES
Finance income 17 9
Finance expense (3) (6)
Purchases of property, plant and equipment (56) (13)
Cash placed on deposit (5,323) -
Cashflow from discontinued operations - 193
----------------------------------------------------- ------ --------------- -------------
Net cash inflow/(outflow) from investing activities (5,365) 183
----------------------------------------------------- ------ --------------- -------------
FINANCING ACTIVITIES
Proceeds from issue of share capital, net of costs 8 8,515 5,667
Net cash inflow from financing activities 8,515 5,667
----------------------------------------------------- ------ --------------- -------------
(Decrease) in cash and cash equivalents (2,674) (501)
Cash and cash equivalents at start of year/period 5,158 5,625
Effect of exchange rate fluctuations on cash held (1) 34
CASH AND CASH EQUIVALENTS AT OF YEAR 2,483 5,158
----------------------------------------------------- ------ --------------- -------------
Unaudited notes to the consolidated financial statements
For the year ended 31 December 2021
1) BASIS OF PREPARATION
The financial information set out in this preliminary
announcement of final results has been prepared in accordance with
the recognition and measurement principles of UK-adopted
International Accounting Standards 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 2020 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 contained in this preliminary
announcement does not constitute the Group's statutory accounts for
the year ended 31 December 2021. The statutory accounts for the
year ended 31 December 2021 will be finalised on the basis of the
financial information presented by the Directors in these
preliminary results and will be delivered to the Registrar of
Companies, and made available on the Company's website for the
purposes of the AIM Rules for Companies, following the Annual
General Meeting of Xeros Technology Group plc.
The auditors' report on the Annual Report and Financial
Statements for the year ended 31 December 2020 was unqualified, did
not draw attention to any matters by way of emphasis, and did not
contain a statement under 498(2) or 498(3) of the Companies Act
2006.
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
2020. 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 2021, the Group had GBP2.5m of cash and
GBP5.3m of cash on deposit. Given the Group's stage of development,
it continues to incur operating cash outflows. The Directors
believe that the current levels of cash held provide the Group with
sufficient cash to meet its obligations as they fall due for at
least twelve months following the date of this report, with some
changes to discretionary expenditure or the proceeds of a potential
fundraise, if necessary. However, given the current commercial
position of the Group the Directors acknowledge that the Group's
current cash position does not provide certainty beyond this point
and may not, with the current rates of cash outflow, provide the
Group with the resources to reach the point at which cash generated
from customer contracts covers the cost base of the Group.
The Directors consider that they have options in place that may
allow them to reach this breakeven point. These include signing
potential commercial agreements and the possibility of raising
further investor funding. Given that these options are not certain
at this stage, the Directors consider the Group's current funding
position indicates a material uncertainty exists that may cast
significant doubt as to the Group's ability to continue as a going
concern. Without some form of action, most likely in the form of a
fundraise, the Group's cash will run out prior to the completion of
commercialisation and, therefore, cash breakeven. The Directors
also believe, however, 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 basis of accounting in preparing this financial
information.
2) SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied are set out below.
REVENUE RECOGNITION
Licence revenue
When the Group receives payments in the form of upfront payments
or technology fees, the Group assesses those payments against the
contacts in accordance with the provisions of IFRS15, and allocates
the revenue against the performance obligations accordingly.
Where licence revenue is based on sales of equipment by the
licensee, the Group recognises revenue at the time of that
sale.
Sale of goods
Where the Group sells either equipment or consumables to a
customer directly, revenue is recognised when the product in
question is delivered to the customer, and, if required, any
installation or setup of the equipment has been performed.
Service contracts
Where the Group has a service contract in place, revenue is
recognised in line with the profile of the delivery of the service
to the customer on an outputs basis.
Linked contracts
When the Group sells equipment, services and consumables in a
package under a single contract, the Group assess the contract
against the five steps of IFRS15. This process includes the
assessment of the performance obligations within the contract and
the allocation of contract revenue across these performance
obligations once identified. Revenue is allocated according to the
value of consideration expected to be received for the transfer of
the relevant goods or services to the customer. This consideration
is calculated on an inputs basis using cost data and an appropriate
margin.
Revenue is shown net of Value Added Tax or Sales Tax as
appropriate.
The difference between the amount of income recognised and the
amount invoiced on a particular contract is included in the
statement of financial position as deferred income. Amounts
included in deferred income due within one year are expected to be
recognised within one year and are included within current
liabilities.
FOREIGN CURRENCIES
The individual financial statements of each group entity are
presented in the currency of the primary economic environment in
which the entity operates (its functional currency). For the
purposes of the consolidated financial statements, the results and
the financial position of each group entity are expressed in pounds
sterling, which is the functional currency of the Company and the
presentational currency for the consolidated financial
statements.
In preparing the financial statements of the individual
entities, transactions in currencies other than the entity's
functional currency (foreign currencies) are recorded at the rates
of exchange prevailing at the dates of the transactions. At each
balance sheet date, monetary items denominated in foreign
currencies are retranslated at the rates prevailing at the balance
sheet date. Non-monetary items carried at fair value that are
denominated in foreign currencies are retranslated at the rates
prevailing at the date when the fair value was determined.
Non-monetary items that are measured in terms of historical cost
in foreign currency are not retranslated.
The assets and liabilities of foreign operations are translated
using exchange rates at the balance sheet date. The components of
shareholders' equity are started at historical value. An average
exchange rate for the period is used to translate the results and
cash flows of foreign operations.
Exchange differences arising on translating the results and net
assets of foreign operations are taken to the translation reserve
in equity until the disposal of the investment. The gain or loss in
the statement of profit or loss and other comprehensive income on
the disposal of foreign operations includes the release of the
translation reserve relating to the operation that is being
sold.
EXCEPTIONAL ITEMS
One-off items with a material effect on results are disclosed
separately on the face of the Consolidated Statement of Profit and
Loss and Other Comprehensive Income. The Directors apply judgement
in assessing the particular items which, by virtue of their scale
and nature, should be classified as exceptional items. The
Directors consider that separate disclosure of these items is
relevant to an understanding of the Group's financial
performance.
RESEARCH AND DEVELOPMENT
Expenditure on research activities is recognised as an expense
in the period in which it is incurred. Development costs are only
capitalised when the related products meet the recognition criteria
of an internally generated intangible asset, the key criteria being
as follows:
-- it is probable that the future economic benefits that are
attributable to the asset will flow to the Group;
-- the project is technically and commercially feasible;
-- the Group intends to and has sufficient resources to complete the project;
-- the Group has the ability to use or sell the asset; and
-- the cost of the asset can be measured reliably.
Such intangible assets are amortised on a straight-line basis
from the point at which the assets are ready for use over the
period of the expected benefit and are reviewed for an indication
of impairment at each reporting date. Other development costs are
charged against profit or loss as incurred since the criteria for
their recognition as an asset are not met.
The costs of an internally generated intangible asset comprise
all directly attributable costs necessary to create, produce and
prepare the asset to be capable of operating in the manner intended
by management. Directly attributable costs include employee costs
incurred on technical development, testing and certification,
materials consumed and any relevant third-party cost. The costs of
internally generated developments are recognised as intangible
assets and are subsequently measured in the same way as externally
acquired intangible assets. However, until completion of the
development project, the assets are subject to impairment testing
only.
No development costs to date have been capitalised as intangible
assets as it was deemed that the probability of future economic
benefit was uncertain at the time the costs were incurred.
LEASES
As a lessee
Where the Group enters a new contract, the Group considers
whether this contract is, or contains, a lease. A lease is defined
as "a contract, or part of a contract, that conveys the right to
use an asset for a period of time in exchange for consideration".
To apply this definition, the Group assesses whether the contract
meets three key evaluations, which are whether:
-- the contract contains an identified asset, which is either
explicitly identified in the contract or implicitly specified by
being identified at the time the asset is made available to the
Group;
-- the Group has the right to obtain substantially all of the
economic benefits from use of the identified asset throughout the
period of use, considering its rights within the defined scope of
the contract; and
-- the Group has the right to direct the use of the identified
asset throughout the period of use.
Measurement and recognition of leases as a lessee
At the lease commencement date, the Group recognises a
right-of-use asset and a lease liability in the statement of
financial position. The right-of-use asset is measured at cost,
which is made up of the initial measurement of the lease liability,
any initial direct costs incurred by the Group, an estimate of any
costs to dismantle and remove the asset at the end of the lease,
and any lease payments made in advance of the lease commencement
date (net of any incentives received).
The Group depreciates the right-of-use assets on a straight-line
basis from the lease commencement date to the earlier of the end of
the useful life of the right-of-use asset or the end of the lease
term. The Group also assesses the right-of-use asset for impairment
when such indicators exist.
At the lease commencement date, the Group measures the lease
liability at the present value of the lease payments unpaid at that
date, discounted using the interest rate implicit in the lease if
that rate is readily available, of the Group's incremental
borrowing rate.
Lease payments included in the measurement of the lease
liability are made up of fixed payments, variable payments based on
an index or rate, amounts expected to be payable under a residual
guarantee and payments arising from options reasonably certain to
be exercised.
Subsequent to initial measurement, the liability will be reduced
for payments made and increased for interest. It is remeasured to
reflect any reassessment or modification, or if there are changes
in in-substance fixed payments.
When the lease liability is remeasured, the corresponding
adjustment is reflected in the right-of-use asset, or profit and
loss if the right-of-use asset is already reduced to zero.
The Group has elected to account for short-term leases and
leases of low-value assets using the practical expedients. Instead
of recognising a right-of-use asset and lease liability, the
payments in relation to these are recognised as an expense in
profit or loss on a straight-line basis over the lease term.
On the statement of financial position, right-of-use assets are
shown separately and are included in property, plant and equipment
notes for disclosure purposes. Lease liabilities are shown
separately.
As a lessor
If the Group transfers substantially all the risks and benefits
of ownership of the asset, a receivable is recognised for the
initial direct costs of the lease and the present value of the
minimum lease payments. As payments fall due, finance income is
recognised in the income statement so as to achieve a constant rate
of return on the remaining net investment in the lease.
INTANGIBLE ASSETS AND GOODWILL
Recognition and measurement
Goodwill arising on the acquisition of subsidiaries is measured
at cost less accumulated impairment losses.
Other intangible assets, including customer relationships and
brands, that are acquired by the Group and have finite useful lives
are measured at cost less accumulated amortisation and any
accumulated impairment losses.
Amortisation
Amortisation is calculated to write off the cost of intangible
assets less their estimated residual values using the straight-line
method over their estimated useful lives and is generally
recognised in profit or loss. Goodwill is not amortised. The
estimated useful lives for current and comparative periods are as
follows:
-- Customer lists - 5 years
-- Brands - 5 years
-- Software - 3 years
Amortisation methods, useful lives and residual values are
reviewed at each reporting date and adjusted if appropriate. Assets
considered to have indefinite useful economic lives, such as
goodwill, are tested annually for impairment.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost less accumulated
depreciation and any impairment losses. Cost includes the original
purchase price of the asset and the costs attributable to bringing
the asset to its working condition for its intended use.
Depreciation is charged so as to write off the costs of assets over
their estimated useful lives, on the following basis:
Leasehold improvements - over the term of the lease on a straight-line basis
Plant and machinery - 20% on cost on a straight-line basis
Fixtures and fittings - 20% on cost on a straight-line basis
Computer equipment - 33% on cost on a straight-line basis
Vehicles - 20% on cost on a straight-line basis
The gain or loss arising from the disposal of an asset is
determined as the difference between the sales proceeds and the
carrying amount of the asset, and is recognised in the statement of
profit or loss and other comprehensive income.
IMPAIRMENT OF NON-CURRENT ASSETS
For the purposes of assessing impairment, assets are grouped at
the lowest levels for which there are separately identifiable cash
flows (cash-generating units). As a result, some assets are tested
individually for impairment and some are tested at cash-generating
unit level. Goodwill is allocated to those cash-generating units
that are expected to benefit from synergies of the related business
combination and represent the lowest level at which management
monitors goodwill. Cash-generating units to which goodwill has been
allocated are tested for impairment at least annually. All other
individual assets or cash-generating units are tested for
impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. An impairment loss
is recognised for the amount by which the assets or cash-generating
unit's carrying amount exceeds its recoverable amount. The
recoverable amount is the higher of fair value, reflecting market
conditions less costs to sell, and value in use based on an
internal discounted cash flow evaluation.
INVENTORIES
Inventories are valued at the lower of cost and net realisable
value. Cost incurred in bringing each product to its present
location and condition is accounted for as follows:
Raw materials, work in progress and finished goods - Purchase
cost on a first-in, first-out basis.
Net realisable value is the estimated selling price in the
ordinary course of business.
CASH ON DEPOSIT
Bank deposits where maturity is greater than three months from
the date of investment, the Group cannot access the funds prior to
the maturity date and the Group is not relying on the funds to meet
its short-term operating requirements are disclosed as cash on
deposit.
SHARE BASED PAYMENTS
Certain employees and consultants (including Directors and
senior executives) of the Group receive remuneration in the form of
share-based payment transactions, whereby employees render services
as consideration for equity instruments ("equity-settled
transactions"). This policy applies to all schemes, including the
Deferred Annual Bonus scheme open to certain management
personnel.
The cost of equity-settled transactions with employees is
measured by reference to the fair value at the date on which they
are granted. The fair value is determined by using an appropriate
pricing model. The cost of equity-settled transactions is
recognised, together with a corresponding increase in equity, over
the period in which the performance and/or service conditions are
fulfilled, ending on the date on which the relevant employees
become fully entitled to the award ("the vesting date"). The
cumulative expense recognised for equity-settled transactions at
each reporting date until the vesting date reflects the extent to
which the vesting period has expired and the Group's best estimate
of the number of equity instruments that will ultimately vest. The
profit or loss charge or credit for a period represents the
movement in cumulative expense recognised as at the beginning and
end of that period.
No expense is recognised for awards that do not ultimately vest,
except for awards where vesting is conditional upon a market
condition, which are treated as vesting irrespective of whether or
not the market condition is satisfied, provided that all other
performance and/or service conditions are satisfied. Where the
terms of an equity-settled award are modified, the minimum expense
recognised is the expense as if the terms had not been modified. An
additional expense is recognised for any modification, which
increases the total fair value of the share-based payment
arrangement or is otherwise beneficial to the employee as measured
at the date of modification.
Where an equity-settled award is cancelled, it is treated as if
it had vested on the date of cancellation and any expense not yet
recognised for the award is recognised immediately. However, if a
new award is substituted for the cancelled award and designated as
a replacement award on the date that it is granted, the cancelled
and new awards are treated as if they were a modification of the
original award, as described in the previous paragraph. The
dilutive effect of outstanding options is reflected as additional
share dilution in the computation of earnings per share.
FURLOUGH CREDITS
Where the Group has claimed a credit in respect of employees
furloughed in accordance with the relevant government support
schemes, the credit is recognised in the statement of profit or
loss and other comprehensive income in the period to which the
credit relates and is netted off against staff costs.
FINANCIAL ASSETS AND LIABILITIES
Financial assets and financial liabilities are recognised in the
consolidated statement of financial position when the Group becomes
party to the contractual provisions of the instrument. Financial
assets are de-recognised when the contractual rights to the cash
flows from the financial asset expire or when the contractual
rights to those assets are transferred. Financial liabilities are
de-recognised when the obligation specified in the contract is
discharged, cancelled or expired.
Financial assets, other than those designated and effective as
hedging instruments, are classified into the following
categories:
-- amortised cost
-- fair value through profit or loss (FVTPL)
-- fair value through other comprehensive income (FVOCI)
In the periods presented, the Group does not have any financial
assets categorised as FVTPL or FVOCI.
After initial recognition, these are measured at amortised cost
using the effective interest rate method. Discounting is omitted
where the effect is immaterial. All of the Group's financial assets
and financial liabilities fall into this category.
Trade receivables
Trade receivables are recognised initially at fair value and
subsequently measured at amortised cost less expected credit
losses. Appropriate provisions for estimated irrecoverable amounts
are recognised in the statement of profit or loss and other
comprehensive income when there is objective evidence that the
assets are impaired.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, demand
deposits, and other short-term highly liquid investments that are
readily convertible to a known amount of cash and are subject to an
insignificant risk of changes in value.
Equity instruments
An equity instrument is any contract that evidences a residual
interest in the assets of an entity after deducting all of its
liabilities. Equity instruments issued by the Group are recorded at
the proceeds received, net of direct issue costs.
Trade and other payables
Trade payables are initially measured at their fair value and
are subsequently measured at their amortised cost using the
effective interest rate method; this method allocates interest
expense over the relevant period by applying the "effective
interest rate" to the carrying amount of the liability.
Impairment of financial assets
The Group accounts for impairment of financial assets using the
expected credit loss model as required by IFRS 9. The Group
considers a broad range of information when assessing credit risk
and measuring expected credit losses, including past events,
current conditions, reasonable and supportable forecasts that
affect the expected collectability of the future cash flows of the
instrument.
TAXATION
The tax expense/(credit) represents the sum of the tax currently
payable or recoverable and the movement in deferred tax assets and
liabilities.
Current tax is based upon taxable profit/(loss) for the year.
Taxable profit/(loss) differs from net profit/(loss) as reported in
the statement of profit or loss and other comprehensive income
because it excludes items of income or expense that are taxable or
deductible in other years and it further excludes items that are
never taxable or deductible.
The Group's liability for current tax is calculated by using tax
rates that have been enacted or substantively enacted by the
reporting date.
Credit is taken in the accounting period for research and
development tax credits, which have been claimed from HM Revenue
and Customs, in respect of qualifying research and development
costs incurred. Research and development tax credits are recognised
on an accruals basis with reference to the level of certainty
regarding acceptance of the claims by HMRC. The Group accounts for
R&D tax credits as an investment tax credit accounted for on a
flow through basis - R&D tax credits, while investment tax
credits, are not considered to be substantially different from
other tax credits and they are recognised when the conditions
required to receive the credit are met and they are claimed on the
Group's tax return.
Deferred tax is calculated at the tax rates that are expected to
apply to the period when the asset is realised or the liability is
settled based upon tax rates that have been enacted or
substantively enacted by the reporting date. Deferred tax is
charged or credited in the statement of profit or loss and other
comprehensive income, except when it relates to items credited or
charged directly to equity, in which case the deferred tax is also
dealt with in equity.
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used in
the computation of taxable profit and is accounted for using the
liability method. Deferred tax liabilities are generally recognised
for all taxable temporary differences and deferred tax assets are
recognised to the extent that it is probable that taxable profits
will be available, against which deductible temporary differences
can be utilised. Such assets and liabilities are not recognised if
the temporary difference arises from goodwill or from the initial
recognition (other than in a business combination) of other assets
and liabilities in a transaction that affects neither the profit
nor the accounting period.
The carrying amount of deferred tax assets is reviewed at each
reporting date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow
all or part of the asset to be recovered.
DISPOSAL GROUPS AND DISCONTINUED OPERATIONS
Non-current assets (or disposal groups) are classified as held
for sale if their carrying amount will be recovered principally
through a sale transaction rather than through continuing use and a
sale is considered highly probable. They are measured at the lower
of their carrying amount and fair value less costs to sell, except
for assets such as deferred tax assets, assets arising from
employee benefits, financial assets and investment property that
are carried at fair value and contractual rights under insurance
contracts, which are specifically exempt from this requirement.
An impairment loss is recognised for any initial or subsequent
write-down of the asset (or disposal group) to fair value less
costs to sell. A gain is recognised for any subsequent increases in
fair value less costs to sell of an asset (or disposal group), but
not in excess of any cumulative impairment loss previously
recognised. A gain or loss not previously recognised by the date of
the sale of the noncurrent asset (or disposal group) is recognised
at the date of derecognition.
Non-current assets (including those that are part of a disposal
group) are not depreciated or amortised while they are classified
as held for sale. Interest and other expenses attributable to the
liabilities of a disposal group classified as held for sale
continue to be recognised.
Non-current assets classified as held for sale and the assets of
a disposal group classified as held for sale are presented
separately from the other assets in the balance sheet. The
liabilities of a disposal group classified as held for sale are
presented separately from other liabilities in the balance
sheet.
A discontinued operation is a component of the entity that has
been disposed of or is classified as held for sale and that
represents a separate major line of business or geographical area
of operations, is part of a single co-ordinated plan to dispose of
such a line of business or area of operations, or is a subsidiary
acquired exclusively with a view to resale. The results of
discontinued operations are presented separately in the statement
of profit or loss.
CRITICAL ACCOUNTING ESTIMATES AND AREAS OF JUDGEMENT
Estimates and judgements are continually evaluated and are based
on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the
circumstances. Actual results may differ from these estimates. The
estimates and assumptions that have the most significant effects on
the carrying amounts of the assets and liabilities in the financial
information are discussed below. The point listed below is
considered to be an area of judgement.
Research and development costs
Careful judgement by the Directors is applied when deciding
whether the recognition requirements for capitalising development
costs have been met. This is necessary as the economic success of
any product development is uncertain and may be subject to future
technical problems. Judgements are based on the information
available at each reporting date which includes the progress with
testing and certification and progress on, for example,
establishment of commercial arrangements with third parties.
Specifically, the Directors consider production scale evidence of
commercial operation of the Group's technology. In addition, all
internal activities related to research and development of new
products are continuously monitored by the Directors. To date, no
development costs have been capitalised.
ACCOUNTING STANDARDS AND INTERPRETATIONS NOT APPLIED
At the date of authorisation of these financial statements, the
following IFRSs, IASs and Interpretations were in issue but not yet
effective. Their adoption is not expected to have a material effect
on the financial statements unless otherwise indicated:
Amendments to IAS 1, IAS 8 and IAS 21 1 January 2023
Amendments to IFRS 17 1 January 2023
3) 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 licencing 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:
U naudited year A udited year
ended ended
31 December 31 December
2021 2020
GBP'000 GBP'000
----------------------- ---------------- --------------
Sale of goods 160 13
Rendering of services 190 314
Licencing revenue 124 58
474 385
----------------------- ---------------- --------------
The Group's largest customer was responsible for 19% of Group
revenue in the year to 31 December 2021.
During the year ended 31 December 2020 the Group's largest
customer was responsible for 19% of Group revenue.
An analysis of revenues by geographic location of customers is
set out below:
Unaudited year Audited year
ended ended
31 December 31 December
2021 2020
GBP'000 GBP'000
------------------- --------------- -------------
Europe 271 230
North America 61 145
Rest of the World 142 10
474 385
------------------- --------------- -------------
An analysis of non-current assets by location is set out
below:
Unaudited 31 December Audited 31 December
2021 2020
GBP'000 GBP'000
--------------- ---------------------- --------------------
Europe 158 272
North America - -
158 272
--------------- ---------------------- --------------------
4) LOSS FROM OPERATIONS
Unaudited
Year Audited Year
ended ended
31 December 31 December
2021 2020
GBP'000 GBP'000
------------------------------------------------------------- ------------ -------------
Loss from operations is stated after
charging to
administrative expenses:
Foreign exchange losses 7 60
Depreciation of plant and equipment
(note 12) 200 221
Operating lease rentals - land and
buildings 42 40
Staff costs (excluding share-based
payment charge) 3,711 4,010
Research and development 316 144
------------------------------------------------------------- ------------ -------------
Auditors remuneration:
* Audit of these financial statements 24 21
* Audit of financial statements of subsidiaries of the
company 23 20
* All other services 4 4
Total auditor's remuneration 51 45
------------------------------------------------------------- ------------ -------------
5) EXPENSES BY NATURE
The administrative expenses charge by nature is as follows:
Unaudited year Audited year
ended ended
31 December 31 December
2021 2020
GBP'000 GBP'000
------------------------------------------ --------------- -------------
Staff costs, recruitment and other HR 3,908 4,235
Share-based payment expense 463 653
Premises and establishment costs 150 176
Research and development costs 316 144
Patent and IP costs 476 635
Engineering and operational costs - 2
Legal, professional and consultancy fees 910 895
IT, telecoms and office costs 213 458
Depreciation charge 200 221
Travelling, subsistence and entertaining 124 130
Advertising, conferences and exhibitions 299 63
Bad debt expense 161 52
Other expenses 13 (16)
Foreign exchange losses/(gains) 7 60
Furlough credit (15) (122)
------------------------------------------ --------------- -------------
Total administrative expenses 7,225 7,586
------------------------------------------ --------------- -------------
6) TAXATION
Tax on loss on ordinary activities
Unaudited year Audited year
ended ended
31 December 31 December
2021 2020
GBP'000 GBP'000
---------------------------------------------------------- --------------- -------------
Current tax:
UK Tax credits received in respect of prior periods (505) (698)
Foreign taxes paid 13 -
---------------------------------------------------------- --------------- -------------
(492) (698)
Deferred tax:
Origination and reversal of temporary timing differences - -
---------------------------------------------------------- --------------- -------------
Tax credit on loss on ordinary activities (492) (698)
---------------------------------------------------------- --------------- -------------
The credit for the year/period 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:
Unaudited year Audited year
ended ended
31 December 31 December
2021 2020
GBP'000 GBP'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 (6,929) (7,669)
-------------------------------------------------------------------------------------- --------------- -------------
Tax at the standard rate of corporation tax 19% (2020: 19%) (1,317) (1,457)
Effects of:
Expenses not deductible for tax purposes 88 124
Research and development tax credits receivable (505) (698)
Unutilised tax losses for which no deferred tax asset is
recognised 1,229 1,333
Employee share acquisition adjustment - -
Foreign taxes paid 13 -
Tax credit for the year/period (492) (698)
-------------------------------------------------------------------------------------- --------------- -------------
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
2020. There is no certainty regarding the claim for the year ended
31 December 2021 and as such no relevant credit or asset is
recognised.
7) 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.
Unaudited year Audited year
ended ended
31 December 31 December
2021 2020
GBP'000 GBP'000
--------------------------------------------------------------------- --------------- -------------
Total loss from continuing operations (6,438) (6,934)
--------------------------------------------------------------------- --------------- -------------
Total loss from discontinued operations - (37)
--------------------------------------------------------------------- --------------- -------------
Total loss attributable to the equity holders of the parent (6,438) (6,971)
--------------------------------------------------------------------- --------------- -------------
No. No.
Weighted average number of ordinary shares in issue during the year 22,898,879 15,449,084
--------------------------------------------------------------------- --------------- -------------
Loss per share
Basic and diluted on loss from continuing operations (28.11)p (44.88)p
--------------------------------------------------------------------- --------------- -------------
Basic and diluted on loss from discontinued operations - (0.24)p
--------------------------------------------------------------------- --------------- -------------
Basic and diluted on total loss for the year (28.11)p (45.12)p
--------------------------------------------------------------------- --------------- -------------
The weighted average number of shares in issue throughout the
period is as follows. The 2020 calculation assumes the 100:1 share
consolidation performed in the year ended 31 December 2020 was in
place throughout that year.
Unaudited year Audited year
ended ended
31 December 31 December
2021 2020
--------------------------------------------------------- --------------- -------------
Issued ordinary shares at 1 January 2021/1 January 2020 19,976,090 7,837,621
Effect of shares issued for cash 2,922,789 7,611,462
Weighted average number of shares at 31 December 22,898,879 15,449,084
--------------------------------------------------------- --------------- -------------
The Company has issued employee options over 2,087,895 (31
December 2020: 1,447,324) 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.
8) SHARE CAPITAL
Share Share Merger
capital premium reserve Total
Number GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- ---------------- --------- --------- --------- --------
Total ordinary shares
of 0.15p each as at
31 December 2019 (audited) 783,762,131 1,176 109,226 15,443 125,845
------------------------------- ---------------- --------- --------- --------- --------
Issue of ordinary shares
following placing and
open offer 1,200,000,000 1,800 4,200 - 6,000
Issue of ordinary shares
on exercise of share
options prior to share
consolidation 10,325,966 16 55 - 71
Issue of shares immediately
prior to share consolidation 3 - - - -
Effect of share consolidation (1,974,147,219) - - - -
Issue of ordinary shares
on exercise of share
options after the share
consolidation 35,209 5 19 - 24
Costs of share issues - - (427) - (427)
Total ordinary shares
of 15p each as at 31
December 2020 (audited) 19,976,090 2,997 113,073 15,443 131,513
------------------------------- ---------------- --------- --------- --------- --------
Issue of ordinary shares
following placing and
open offer 3,749,919 562 8,438 - 9,000
Issue of ordinary shares
on exercise of share
options 58,474 9 32 - 41
Costs of share issues - - (525) - (525)
------------------------------- ---------------- --------- --------- --------- --------
Total ordinary shares
of 15p each as at 31
December 2021 (unaudited) 23,784,483 3,568 121,018 15,443 140,029
------------------------------- ---------------- --------- --------- --------- --------
The Group undertook a share capital reorganisation exercise
during the year ended 31 December 2020, reducing the number of
shares in issue by a factor of 100 and increasing the nominal value
of the share by an equivalent factor.
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
2021:
(a) 3,749,919 ordinary shares of 15p per share were allotted at
a price of 240p per share, for total cash consideration of
GBP9,000,000 upon the placing and open offer of the Company's
shares in March 2021.
(b) 58,474 ordinary shares of 15p per share were allotted at a
price of 70p per share, upon the exercise of share options granted
in the Company's share option schemes.
At 31 December 2021, the Company had only one class of share,
being ordinary shares of 15p each.
The Group's Share Capital reserve represents the nominal value
of the shares in issue. The Group's Share Premium Reserve
represents the premium the Group received on issue if its shares.
The Merger Reserve arose on the combination of companies within the
Group prior to the flotation on AIM.
9) 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:
Audited
Unaudited Unaudited Audited amounts
purchases amounts owed purchases owed to
from related to related from related related
party party party party
31 December 31 December 31 December 31 December
2021 2021 2020 2020
Related party Relationship GBP000 GBP000 GBP000 GBP000
--------------- --------------- --------------- --------------- -------------- ------------
Fund manager
for certain
shareholders
IP Group plc (note) 30 13 30 48
--------------- --------------- --------------- --------------- -------------- ------------
Note: IP Group plc provide the services of David Baynes, who is
a director of the Company, and invoice the Group for related fees.
David Baynes is a Director of both the Company and of IP Group
plc.
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:
Unaudited
year Audited year
ended ended
31 December 31 December
2021 2020
GBP000 GBP000
--------------------------------- ------------ -------------
Short-term employment benefits* 744 730
--------------------------------- ------------ -------------
*In addition, certain directors hold share options in the
Company for which a fair value share based charge of GBP153,000 has
been recognised in the consolidated statement of profit or loss and
other comprehensive income (year ended 31 December 2020:
GBP155,000).
The highest paid Director in the year received a total
remuneration of GBP335,000 (year ended 31 December 2020:
GBP364,000). During the year ended 31 December 2021, the Company
entered into numerous transactions with its subsidiary companies
which net off on consolidation - these have not been shown
above.
10) EVENTS OCCURING AFTER THE REPORTING PERIOD
Board changes
In March 2022, it was announced that the Group CEO, Mark
Nichols, will stand down during 2022. Mark will remain with the
business until 30 September 2022 to oversee the Group's ongoing
commercialisation process and has committed to a comprehensive and
orderly handover to his successor, for whom a search process is
underway.
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 news service of the
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END
FR BKDBPABKDQAB
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June 22, 2022 02:00 ET (06:00 GMT)
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