REG - Xeros Tech Grp plc - 2021 Preliminary Results
22/06/2022 07:00
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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 £0.5m 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 £0.5m (2020: £0.4m).
o Adjusted EBITDA(1) loss reduced by 7.1% to £6.3m (2020: loss £6.8m).
o Administrative expenses reduced by 4.8% to £7.2m (2020: £7.6m).
o Net cash outflow from operations reduced by 8.3% to £5.8m (2020: £6.3m).
Cash at 31 May 2022 £4.3m.
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 (http://www.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 £9.0m, 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 £9.0m 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 £4.3m. 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 year ended Audited year ended
31 December 2021 31 December 2020
ended
£'000 £'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 £0.5m in the year ended 31 December 2021
(2020: £0.4m). 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 £0.1m (2020: £0.1m), a growth of 113.8%;
revenue from sale of goods was £0.2m in the period (2020: £0.0m), a growth
of 1,837.5%. With the change in revenue mix, service revenue in the period was
£0.2m (2020: £0.3m), a reduction of 39.5%.
The change in revenue mix towards licensing drove an increase in gross profit
in the period to £0.3m (2020: £0.0m), resulting in a gross margin of 59.3%
(2020: -12.7%).
The Group reduced its adjusted EBITDA loss by 7.1% to £6.3m (2020: loss
£6.8m).
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 £7.2m (2020: £7.6m). 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 £6.9m (2020: loss £7.6m), a
reduction of 9.1%. The loss per share was 28.11p (2020: loss 44.88p).
Net cash outflow from operations reduced to £5.8m (2020: £6.3m) from a
combination of reduced cash used in operations, £6.3m (2020: £6.9m) and the
receipt of £0.5m 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 £7.8m (2020: £5.2m) and remains debt free. Group cash as at
31 May 2022 was £4.3m. 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 £'000 £'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
Share Share premium Merger reserve Foreign currency translation reserve Retained Total
Capital earnings
deficit
£'000 £'000 £'000 £'000 £'000 £'000
Balance at 31 December 2019 1,176 109,226 15,443 (2,246) (118,468) 5,131
(audited)
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 - - - - 653 653
Expense
Total contributions by and distributions to owners 1,821 3,847 - - 653 6,321
At 31 December 2020 2,997 113,073 15,443 (2,205) (124,786) 4,522
(audited)
Loss for the year - - - - (6,438) (6,438)
Other comprehensive expense - - - (1) - (1)
Loss and total comprehensive - - - (1) (6,438) (6,439)
expense for the year
Transactions with owners,
recorded directly in equity:
Issue of shares following 562 8,438 - - 9,000
placing and open offer -
Exercise of share options 9 32 - - - 41
Costs of share issues - (525) - - - (525)
Share based payment - - - 463 463
Expense -
Total contributions by and 571 7,945 - 463 8,979
distributions to owners -
At 31 December 2021 3,568 121,018 15,443 (2,206) (130,761) 7,062
(unaudited)
Unaudited consolidated statement of financial position
As at 31 December 2020
Unaudited at Audited at
31 December 31 December
2021 2020
Notes £'000 £'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 £'000 £'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 END 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 £2.5m of cash and £5.3m 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:
Unaudited year Audited year
ended ended
31 December 31 December
2021 2020
£'000 £'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
£'000 £'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
£'000 £'000
Europe 158 272
North America - -
158 272
4) LOSS FROM OPERATIONS
Unaudited Year Audited Year
ended ended
31 December 31 December
2021 2020
£'000 £'000
Loss from operations is stated after charging to
administrative expenses:
Foreign exchange losses 7 60
Depreciation of plant and equipment (note 200 221
12)
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
£'000 £'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
£'000 £'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
£'000 £'000
The tax assessed for the period varies from the main company rate of
corporation tax as explained below:
Loss on ordinary activities before tax (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 1,229 1,333
recognised
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
£'000 £'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 capital Share premium Merger reserve Total
Number £'000 £'000 £'000 £'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 10,325,966 16 55 - 71
consolidation
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 35,209 5 19 - 24
consolidation
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 £9,000,000 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 purchases from related party Audited amounts owed to related party
Unaudited purchases from related party Unaudited amounts owed to related party
31 December 31 December 31 December 31 December
2021 2021 2020 2020
Related party Relationship £000 £000 £000 £000
IP Group plc Fund manager for certain shareholders (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:
Audited year
Unaudited year
ended ended
31 December 31 December
2021 2020
£000 £000
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 £153,000 has been recognised in the
consolidated statement of profit or loss and other comprehensive income (year
ended 31 December 2020: £155,000).
The highest paid Director in the year received a total remuneration of
£335,000 (year ended 31 December 2020: £364,000). 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.
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