Xeros: Interim Results: Progress on all fronts

Highlights

  • Accelerating roll out in Commercial Laundry
  • Group earned income increased to £744,000 in the five months ended 31 December 2015 (prior period 2014: £95,000)
  • Delivering on strategy laid out at fundraising in November 2015
    • 56 commercial washing machine installations for the five months ended 31 December 2015
    • 94 for the seven months ended 29 February 2016
    • Installed fleet totalled 200 at end of February 2016
  •  Developing Leather Processing
    • Full scale leather processing trials continuing in leading European leather tannery, as part of joint development agreement with LANXESS
  • Increasing scope and scale of polymer science platform
    • Detailed studies underway to analyse potential further applications of our polymer science in global industries

 Mark Nichols, Chief Executive of Xeros, said:

“Our business development activities have continued in line with the plans laid out during our £40m fundraising in November last year.

“The roll out of Commercial Laundry continues at a good pace. We are now installing machines at an approximate rate of one per working day and expect this rate to progressively increase.

“In Leather Processing, our full scale trials are on track and are scheduled to be completed around the middle of the year. We anticipate that these trials will show that our polymer beads, which were specifically designed for this application, deliver economic, operational and sustainability improvements.

“Studies to identify new potential applications are also progressing on schedule and are providing further evidence that we possess a platform technology.”

 Notes to Editors

Xeros Technology Group plc (LN: XSG) is a platform technology company that is reinventing water intensive industrial and commercial processes by replacing water with polymer bead technologies. Its patented technologies have the capacity to provide material economic, operational and sustainability improvements that are unachievable with traditional processes. The Group is well established in the commercial laundry market where immediate opportunities exist for substantial growth and is currently in various stages of development to apply its technology across a range of water intensive industrial and commercial markets. The Group joined AIM in 2014 and in November 2015 raised gross proceeds of £40m by way of a placing to accelerate the commercialisation of its innovative technology across global laundry markets and to further develop its patented technology for other identified industrial and domestic processes.

For more information, please visit – http://www.xeroscleaning.com/ 

Operational review: progress and plans

We continue to implement successfully the strategy we set out at the time of our fundraising in November 2015: to build and apply our polymer bead science platform to reduce dramatically the consumption of both water and energy in major global industrial and consumer processes, whilst simultaneously improving the quality and sustainability of their outcomes. In so doing, we seek to derive high quality earnings for the Group based upon the savings and performance improvements delivered.

 The fundraising is enabling us to accelerate the execution of this strategy, in building out our Commercial Laundry business, in driving progress towards commercialisation in the leather processing business and in rapidly progressing the development of additional attractive applications.

 Commercial Laundry

Growth in the machine installation rate continued at a good pace. We are now installing machines at an approximate rate of one per working day, with sales and service margins in line with our expectations. We expect the installation rate to increase progressively. We anticipate broadly equal demand between “Perform” (machine sale) and “Complete” (machine lease) over time, but currently weighted towards “Complete”

We continue to increase the numbers and the accreditation level of our Forward Channel Partners (‘FCPs’) in the US whilst simultaneously increasing customer satisfaction levels, which have consistently exceeded 90% in 2016 to date.  FCPs have also generated 50% of our sales since the beginning of the year.

We are also making progress on the strengthening of our supply chain. Our second source manufacturer for 25kg washing machines is now producing and shipping units. 16kg machines, which allow us to address a larger share of the commercial laundry market as a whole, are now also being produced for field trials as a complement to our 25kg machines.

Our Sbeadycare® integrated customer proposition covering polymer beads, chemistry and service is now being supplemented with our industry changing information technology systems, “Pulse 3.0” and “Connect”. These systems which are now being introduced to all of our customer sites, monitor and help manage machines in customers’ laundries and provide information on cleaning performance, energy/water saving and maintenance requirements. The information received is highly valuable in enhancing laundry operations and their sustainability and also enables us to improve the performance of the entire value chain including our FCPs.

Domestic Laundry

Discussions continue with major machine OEMs, who have shown an encouraging level of interest in working with Xeros.  Alongside such discussions, we are developing a washing machine for the US market with which to conduct consumer field trials in due course.

In addition, we are studying potential models whereby Xeros could share appropriately in the ongoing benefits which would accrue to end consumers from the use of our technology in the form of reduced utilities and detergent.

Leather Processing

Full scale trials as provided for in our Joint Development Agreement with LANXESS, are proceeding within a leading European leather tannery and are scheduled for completion around the middle of the year.

Results so far have been encouraging and we anticipate that these trials will show that our polymer beads, which were specifically designed for this application, deliver economic, operational and sustainability improvements. We are actively working to optimise a number of dependent variables in these trials to produce the best results from both a quality and an economic perspective.

Bead management systems for use within the industry are now being engineered in our Technology Centre in Sheffield with a view to selecting and producing an optimised system toward the end of the year.

Further applications development

Studies to identify future potential applications are now close to completion and we are about to commence detailed reviews of areas which we have identified as being potentially high in opportunity.

Our expectation is that, over the medium term, we will increase our intellectual property estate and ultimately create additional revenue opportunities.

Organisation

We have continued to build capability in our Commercial Laundry organisation to support its future growth. Our Science and Engineering teams have also been increased and are aligned to opportunity areas in multi-disciplinary teams.

We are in the process of integrating all Commercial Laundry engineering in the US into our new Engineering Centre in Seekonk, Massachusetts. This integration will both speed up the development of our washing machine platforms and also create capacity in our Technology Centre in Sheffield to undertake applications engineering in Leather Processing and beyond.

Summary

It has been a busy four months since we raised £40 million to accelerate our strategy, and we are making good progress on all fronts.

Looking ahead: in Commercial Laundry we are on course to grow from our current installation rate of one machine per working day. In Leather Processing, our full scale trials are also progressing on track and are scheduled to be completed around the middle of the year. Studies to identify new potential applications are on schedule and early signs indicate that we possess a platform technology which can be successfully applied to a number of global industries.

We look forward to the future with confidence.