We could not find any results for:
Make sure your spelling is correct or try broadening your search.
Register for real-time alerts, custom portfolio, and market movers
| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Xeros Technology Group Plc | LSE:XSG | London | Ordinary Share | GB00BMGYBJ57 | ORD 0.1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 1.40 | 1.30 | 1.50 | 1.40 | 1.40 | 1.40 | 71,684 | 08:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Industrial Patterns | 164k | -6.93M | -0.0459 | -0.31 | 2.11M |
From Apr 2019 to Apr 2024
TIDMXSG
RNS Number : 3906L
Xeros Technology Group plc
19 April 2018
19 April 2018
Xeros Technology Group plc
Commercialisation plans gaining momentum
Xeros Technology Group plc (AIM: XSG, 'the Group', 'Xeros'), the developer and provider of patented polymer based technologies with multiple commercial applications, today publishes its final results for the 12 months ended 31 December 2017.
Group highlights
Hot Features
Premium
-- Significant progress towards commercialising
technology across all targeted applications
under IP-rich, capital-light models
-- Meaningful engagement with major industry
players around the world
-- Group income increased to GBP2.3m (17-month
31 December 2016: GBP2.5m). Adjusted
EBITDA loss GBP28.7m (17-month 31 December
2016: loss GBP20.7)(1)
-- Year end cash GBP25.1m (17-month 31 December
2016: GBP28.9m) following GBP25m capital
raise in December 2017 to accelerate
commercialisation against specific milestones
Cleaning Technologies
-- High Performance Workwear:
Acquired Marken PPE Restoration in July 2017
and Gloves Inc in March 2018; national US
coverage expected in 2019
-- Domestic Laundry:
Structured discussions with number of major
OEMs, after launch of domestic washing machine
incorporating Xeros technologies at the Consumer
Electronics Show in Las Vegas in January 2018
-- Hotel & Lodging:
Ongoing discussions with two major OEMs on
testing and validation after launch of Symphony
Project in April 2017 - enables integration
of Xeros technology in OEM-branded machines
Expansion of Forward Channel Partner network
reducing direct sales and pipeline of opportunities
in high water shortage/price countries and
regions of the US
Total commissioned and revenue generating
estate of 381 machines up 80% in the year
Tanning Technologies
-- Successful scale trials with leading European
tanneries; focus on completing engineering
solutions to facilitate technology incorporation
in existing tannery processes
-- Commercial negotiations on-going with multiple
tanneries
-- Targeting first revenues in 2018
Textile Technologies
-- Successful lab trials in Denim finishing
and Garment dyeing
-- Concurrent IP filing protection now permits
scale trials and development with major
garment manufacturers
Mark Nichols, Chief Executive of Xeros, said:
"Xeros is now providing a unique, proven technological solution in a world increasingly threatened by the environmental challenges of water scarcity and pollution.
"We now have two businesses with turnover, other applications with near term inflection points and are engaged with some of the leading market incumbents in each of our cleaning and tanning applications. We also expect to be in discussion with major garment producers in the near term for our textile applications.
"For the majority of our applications, our plans are to implement IP-rich, capital-light business models with market incumbents.
"With our resources now aligned specifically to business opportunity, we are working our way through major commercialisation milestones.
"We are now at a pivotal point in the commercialisation of our technologies."
(1) Adjusted EBITDA is defined as loss on ordinary activities before interest, tax, share-based payment expense, non-operating exceptional costs, depreciation and amortisation
Enquiries:
Xeros Technology Group plc Tel: 0114 321 Mark Nichols, Chief Executive 6328 Officer Paul Denney, Chief Financial Officer Jefferies International Limited Tel: 020 7029 (Nominated Adviser and Joint Broker) 8000 Simon Hardy / Will Soutar Berenberg (Joint Broker) Tel: 020 3207 Chris Bowman / Ben Wright / Amritha 7800 Murali Instinctif Partners Tel: 020 7457 Adrian Duffield / Helen Tarbet 2020 / James Gray
Notes to Editors
Xeros Technology Group plc (LN: XSG) is a platform technology company that is reinventing water intensive industrial and commercial processes by reducing water and chemistry usage with its polymer technologies. Its patented technologies have the capacity to provide material economic, operational and sustainability improvements that are unattainable with traditional processes. The Group is currently exploiting its intellectual property in three areas: Cleaning Technologies, Tanning Technologies and Textile Technologies. Xeros has a number of agreements in place with such international organisations as BASF, Hilton and Wollsdorf Leder.
For more information, please visit: https://www.xerostech.com/
XEROS TECHNOLOGY GROUP PLC
CHIEF EXECUTIVE OFFICER'S REVIEW
Strategic Overview
Xeros develops polymer based technologies which radically improve the sustainability, performance and economics of water intensive processes, dramatically reducing water, chemistry, energy and effluent whilst either meeting or exceeding the conventional quality standards for the materials being processed.
We have established that our technologies can deliver these benefits in three world-scale industries: cleaning, tanning and textiles. We are now progressively commercialising applications in these sectors to generate profitable returns, leveraging our intellectual property and know-how with low capital requirements.
Given the scale of the markets in which we operate, our strategy is to commercialise our technology with partners who already have strong international market positions and who also demonstrate a strategic intent to deliver increased levels of sustainability. The disruptive nature of our technology enables the creation of new high value-added business models and revenue streams. Where necessary, we enter markets ourselves to prove out our propositions so that our prospective partners benefit from materially lower risk profiles when they join us in the commercialisation process.
In order to accelerate the adoption of our technology, we have increased and aligned our resources to each of the application areas that we are pursuing with the vast majority being applied to those with nearer term profitability. Commercialisation is in progress in our Cleaning Technologies business with Hotel & Lodging and High Performance Workwear business units generating revenue of GBP2.0m and GBP0.2m respectively. We are targeting Tanning Technologies to deliver its first revenues in 2018 with Textile Technologies revenues in 2019, once scale trials have been completed.
Having proven the scale and the quantum of the economic improvements of many of our applications we are now organised to generate revenues where the time horizons for generating significant income from our investments are increasingly in the near term.
In December, we raised GBP25m before fees in an oversubscribed placing to accelerate the commercialistion of our application portfolio and to achieve specific commercial milestones in each of our businesses, thereby giving a clear line of sight to monetisation of our intellectual property portfolio. The Group expects to raise further funds in 2018 for the execution of specific commercialisation strategies.
Operating Review
Cleaning Technologies
High Performance Workwear
Having extensively trialed our technology in the high added value Personal Protective Equipment ("PPE") market during 2017, we entered this market with the acquisition of Marken PPE Restoration's operations in Nevada in July 2017. Turnover for the five months ended December 2017 totaled GBP0.2m. This was an initial step in our aim to create a nation-wide network which will enable us to serve the US firefighter market. We have since acquired our second and third sites in Atlanta and Miami through the acquisition of the trade and assets of Gloves Inc. in March 2018 and are targeting to open two more by the end of the current year. Our target is to have a total of five sites by the end of 2018 with full national coverage of the US achieved by the end of 2019.
The US firefighter PPE market is a specialist market for the cleaning, inspection and repair of uniforms and is valued at approximately $330m p.a. With 1.1m firefighters in the US, there are 350,000 professional firefighters based in approximately 8,000 fire crews. Nearly 40% of these professional firefighters are based within 100 miles of one of the top 10 major US metropolitan areas. Each professional firefighter has, on average, 2 sets of bespoke turnout gear.
Once our network in the US is completed, we believe we will create a valuable proprietary asset which can be leveraged to bring our technology to PPE markets on a global basis.
The PPE market spans many additional sub-segments including petrochemicals, mining, military and transportation, many of which are becoming increasingly aware of the adverse and potentially dangerous effects of incorrectly or insufficiently cleaned workwear. In the transportation sector, we increased the footprint of machines in France cleaning the PPE of SNCF's workers to six by the end of December 2017.
The ability of Xeros' technology to significantly outperform conventional cleaning technologies coupled with major cost savings from extending the life of expensive PPE garments, puts Xeros in a unique position to create high added value for our customers and our shareholders.
Domestic Laundry
During 2017, we developed a new solution called the XDrum(TM) to simply and inexpensively incorporate Xeros' cleaning technology inside a domestic washing machine. Similar to High Performance Workwear, we have demonstrated that Xeros' technology can improve cleaning results whilst simultaneously making garments look better for longer. In so doing, we have the capacity to provide consumers with washing outcomes which are better, cheaper and more environmentally friendly than conventional washing machine technology.
We unveiled the XDrum(TM) technology at the Consumer Electronics Show ("CES") in January 2018, following which we have entered into structured discussions with a number of major OEMs with the objective of licensing our technology.
In response to the increasing amounts of micro-plastic pollution from synthetic fibers in fabrics and garments that are released when they are washed, Xeros also unveiled its proprietary XFiltra(TM) technology at CES. The company expects regulatory authorities across the world to increasingly demand that OEMs place such filters in their washing machines to reduce the micro-plastic pollution.
Xeros' XFiltra(TM) is a novel, simple, low cost solution to meet this need. A licensing process similar to that of XDrum(TM) is being developed as a potential revenue stream.
The estimated global market size for domestic washing machines in 2015 was 119m units including 57m units sold in China.
Hotel & Lodging
We entered the US market in 2013 with our own brand machines and an "all requirements" multi-year contract package, which was sold and delivered by our own staff in combination with "Forward Channel Partners". In 2017, we initiated a plan to transition to a business model whereby major market incumbents incorporate and sell our proprietary technology in exchange for royalties.
To this end we announced Symphony Project in April 2017 and demonstrated a leading conventional branded commercial size washing machine with Xeros' technology inside at the Clean Show in Las Vegas in June. Following this demonstration, we are currently working with two major OEM's on the testing and validation of Xeros technology inside their own branded machines. The objective being to have these companies marketing, selling and servicing machines incorporating Xeros' technology through their own well-established channels.
Simultaneously, we have signed agreements with Forward Channel Partners in Australia, UAE and South Africa, who will market, sell and provide the full set of services for Xeros enabled machines. A number of additional opportunities in high water shortage/price countries are in the pipeline. We have adopted a similar approach in the US with a high focus on metropolitan areas with acute water shortages. This targeted approach to the US market will be with a reduced direct sales and service force and with focused Forward Channel Partners.
Having validated the value and benefits of our technology in the years since our market entry, the new model to which we are migrating will enable broader market penetration of our technology but with lower capital intensity for Xeros, both in operational and financial terms; the savings being redeployed to commercialise our other applications.
The Information Technology solutions required to implement the new commercialisation model met major milestones during the year, with the release of the XConnect(TM) online portal. The portal provides complete operational, financial and sustainability information with which to manage and optimise on-premise laundries.
As part of our strategy to commercialise our technologies in China, the Company joined the UK Department of International Trade's mission to exhibit the country's best advanced manufacturing and innovation companies at the International Industrial Fair in Shanghai in November 2017. Xeros was selected to participate alongside major UK brands and technologies including Jaguar Land Rover, Dyson, McLaren and The Graphene Institute. Xeros is now actively developing opportunities for the licensing of its Cleaning Technologies in China.
In October 2017, we started to implement the relocation of all our US operations (excluding High Performance Workwear) into a new facility in Providence, Rhode Island. It was commissioned in March 2018. The facility, which benefits from favourable tax incentives, will consolidate four office and warehouse locations and result in cost savings.
Additional measures taken to increase penetration of the market included commercialising, at scale, our 16kg commercial washing machine to supplement our 25kg version. The first trial units being delivered to US customers in late 2016, with 88 commissioned by the end of 2017.
Including both our 25kg and 16kg machine options, the total number of machines commissioned and generating revenue grew by 169 during the year commencing 1 January 2017 to a total of 381 at the end of December 2017.
Our plan in this application is for Xeros to make a financial return on its intellectual property and know-how with relatively low capital intensity. Our target is that by the end of 2020, a machine will be commissioned every working hour incorporating Xeros' technology with each providing a royalty to Xeros.
Tanning Technologies
As of the end of March 2018, our tanning team have processed over 2,300 hides in trials in the Retanning and Dyeing phases of the tanning process with multiple tanneries. Production scale trials have proven that our technology works for all hide applications, including auto and shoe leather, and in the different drum types used in their production irrespective of their construction material.
As of the end of March 2018, we have designed the engineering solutions required to introduce our polymers into the tanning process, manage them during the cycle, and then remove them from hides before their re-use. These developments are a significant step forward for transitioning tanneries from trials to contract and implementation. Under proposed contracts, the cost of the equipment that Xeros would supply would be reimbursed, so making the business one of low capital intensity for the Group.
Our business model for this industry is one of sharing gains with customers under long-term contracts. This has been validated by the contract signed with Wollsdorf Leder in July 2017 and in other on-going commercial negotiations. We await a start date for implementing our engineering solutions in Wollsdorf. Following customer acceptance of our engineering solutions, revenue will be generated.
We are currently focused on commercialising our technology in the Retanning and Dyeing stages which use large volumes of water to apply specialty chemicals. In due course, we will also move upstream to the Tanning stages of the process which typically uses proportionately more water to apply bulk chemicals.
We estimate that 300 million bovine hides are tanned per annum and we target to be applying our technology to up to 20 percent of this market by the end of 2022.
Textile Technologies
During 2017, we ratified our mid-2016 decision to include textiles applications within our commercialisation plans due to the scale of the global textiles industry and the very significant water and chemistry usage within the industry. We have now successfully demonstrated that Xeros' technology has the capacity to deliver water, chemistry, energy and effluent reductions which at least match performance outcomes in our other selected applications.
We are achieving these results in Denim Finishing and Garment Dyeing with reductions in chemical and water consumption of up to 70%, initially in lab scale trials but now also increasingly at larger scale. In the case of Denim Finishing, we have also achieved significant reductions in cycle time.
Our scale trials have been conducted in our Technology Centre using adapted commercial size washing machines which are equivalent to the engineered solutions used in the industry.
We have concurrently been working on filing IP on our inventions on these applications with 4 applications made across both areas. With this protection in place, we anticipate moving to scale trials and development agreements with major manufacturers in the near term.
Xeros' solutions in these applications offer manufacturers the resource and pollution reductions that consumers and governments are demanding. One example being the plan for "Zero Discharge of Hazardous Chemicals by 2020" which has 23 global clothing brands as signatories.
This is a sizable opportunity for Xeros, with 22.7 million tonnes of natural fibres processed annually for the clothing and textiles industries, a third of those in China.
Polymer Technologies
During 2017 we completed the polymer developments necessary to begin commercialisation of all our present applications in Cleaning, Tanning and Textiles. In Cleaning Technologies, we use the cleaning properties of nylon polymers which are supplied by our global partner, BASF, under a multi-year agreement through to 2021. Polypropylene, which is broadly available on a global basis, is used for all our Tanning and Textiles applications.
Our polymer science team continues to work on developing "Generation Three" polymers which use novel surface effects with the objective of delivering further major reductions in process inputs or improvements in our Cleaning Technologies. We are currently scaling these developments up at lab scale and in the event they are successful, we anticipate these improvements being introduced within a two year timeframe.
All our novel polymer and engineering developments are underpinned by Intellectual Property and in the 15 months to the end of March 2018 we increased our "pending" or "granted" patent families by seven to a total of 48. A number of these filings have the benefit of significantly extending the time horizon of the protection of our applications.
Outlook
With the development of our Cleaning and Tanning Technologies materially completed during 2017, Xeros is now focused on their commercialisation. The proven sustainability, performance and economic benefits of our technologies have become increasingly understood and accepted by both consumers and those who serve them. They are attracting a number of major industry players to the table. We look forward to reaching formal agreements in the current year.
The results from our Textiles programme have the potential to create significant value. They indicate that we have the capacity to substantially improve the long-term viability of another global industry, which is currently under extreme pressure to reduce its environmental impact. We anticipate demonstrating these technologies at scale with manufacturers in the current year.
All of the commercialisation models for our applications are IP-rich and capital-light with our physical participation in the supply chain only undertaken at an early stage, when there is a need to prove out and de-risk our technologies for current market incumbents.
In December 2017 we raised GBP25m, before fees, from both existing and new investors to fund the business through to the realisation of significant commercial milestones by the end of 2018. In each of our businesses we have a clear strategy to achieve commercial inflection points in 2018 which will allow future monetisation of these businesses. With development work materially completed in 2017 and the foundations for commercialisation put in place, Xeros' costs will remain fixed whilst revenues increase from licensing and other low capital intensity models.
Overall, the Group is trading in line with the Board's expectations.
Mark Nichols
Chief Executive Officer
18 April 2018
XEROS TECHNOLOGY GROUP PLC
CHIEF FINANCIAL OFFICER'S REVIEW
Financial review
Group earned income was generated as follows:
Year 17-month
ended period ended
31 December 31 December
2017 2016
GBP'000 GBP'000
Machine sales 726 1,540
Service income 1,451 837
Consumables 13 16
Lease interest income 80 73
___ ___ _______
Total earned income 2,270 2,466
Group earned income was GBP2,270,000 in the year ended 31 December 2017 (17-month 31 December 2016: GBP2,466,000).
On a normalised basis, average monthly earned income is 30% higher than the previous period (year ended 31 December 2017: GBP189,000 compared to 17-months to 31 December 2016: GBP145,000). Service income includes GBP249,000 from MarKen PPE since its acquisition in July 2017. This income reflects the unit-based pricing model in this business.
In the Hotel & Lodging business, the point at which revenue and costs from machine sales can be recognised is dependent on the completion of a number of stages. These include the installation of the machine, commissioning of the machine, acceptance of the machine by the customer, completion of utility incentive formalities, where applicable, and then, in the case of lease sales, finalisation of the lease agreement. The Group does not recognise revenue and costs from a machine sale until all of these aspects are complete.
The number of machines installed in the period are as follows:
Year 17-month
ended period
ended
31 December 31 December
2017 2016
No. No.
Machines sold - revenue and
costs taken to P&L statement 26 76
Machines commissioned and
generating service revenue,
but machine sale revenues
and costs not yet recognised 143 64
Total revenue generating machines 169 140
Machines installed but not
yet commissioned (104) 70
Machines installed in the
period 65 210
During the period the Group has focused on increasing its commissioning capacity in the Hotel & Lodging business through the use of Forward Channel Partners and this has resulted in an increase of 143 machines commissioned in 2017 (17-month 31 December 2016: 64). At the start of the period the Group had 104
machines installed but not yet commissioned and, due to the focus on increasing commissioning capacity these machines were either commissioned or sold during the year. Therefore the number of machines installed but not yet commissioned at the end of the year was zero and the balance reduced by 104 during the year.
As at 31 December 2017 the total revenue generating estate increased by 169 machines (17-month 31 December: 140) to 381 machines. As there were 212 revenue generating machines at the start of the year this represents growth of 80% during the year.
As at 31 December 2017, contracted future revenues amount to GBP4.2m (31 December 2016: GBP3.8m) and average contract length is 24 months (31 December 2016: 59 months). As the Group's commercial activities have expanded this average contract period reflects normal trading terms.
Gross loss was GBP448,000 (17-month 31 December 2016: gross profit GBP290,000). Adjusted gross loss, defined as gross loss plus lease interest income, was GBP368,000 (17-month 31 December 2016: gross profit of GBP363,000). The gross loss figure includes a loss of GBP74,000 from the MarKen business since its acquisition in July 2017. The move to a gross loss in the period was a result of an increase in consumables costs (principally chemistry and machine spare parts) used to support a larger customer base.
Adjusted gross profit/loss and adjusted EBITDA are considered the key financial performance measures of the Group as they reflect the true nature of our continuing trading activities.
The Group has continued to invest in its R&D programme but, as the Group has now completed all fundamental development, the total R&D spend in the period has fallen in comparison with the prior period. The Group spent GBP5.1m on R&D including staff and patent costs (17-month 31 December 2016: GBP7.6m). This includes direct R&D expense of GBP1.8m (17-month 31 December 2016: GBP3.1m), patent and intellectual property expense of GBP1.2m (17-month 31 December 2016: GBP1.7m) and GBP2.0m of salary costs (17-month 31 December 2016: GBP2.8m). This R&D spend was all expensed during the period as it represents Group expenditure on Textiles, Domestic laundry development and Tanning engineering development, none of which yet meet the full criteria for capitalisation of these costs in accordance with IAS 38. When these business areas are deemed to have met the IAS 38 capitalisation criteria ongoing development costs will be capitalised.
Total administrative expenses (which include the R&D expenses) increased to GBP30.9m (17-month 31 December 2016: GBP22.6m). During the period the Group began the reallocation of expenses away from the US Hotel & Lodging business and towards the new areas of High Performance Workwear and Domestic Laundry. This was achieved through a reduction in direct headcount in the US and an increase in the use of Forward Channel Partners. This reallocation of expenses will continue in 2018.
Administrative expenses include a foreign exchange loss of GBP2.2m resulting from movements in the US dollar rate (17-month 31 December 2016: gain of GBP3.8m) and GBP0.4m of administrative expenses from MarKen since its acquisition in July 2017. After adjusting for MarKen and the impact of foreign exchange, underlying administrative expenses increased from GBP26.4m (17 months ending 31 December 2016) to GBP28.3m.
This has resulted in an Adjusted EBITDA loss of GBP28.7m (17-month 31 December 2016: loss GBP20.7m). Adjusted EBITDA is defined as the loss on ordinary activities before interest, tax, share-based payment expense, non-operating exceptional costs, depreciation and amortisation. Non-operating exceptional costs are the professional advisory costs related to the December 2017 fundraising.
Whilst Sterling is still weaker against the US$ compared to the previous reporting period, which increases the reported losses in 2017, it has gradually strengthened against the US$ during 2017. As we continue to fund the working capital and operating costs of the US Hotel & Lodging and MarKen businesses this stronger Sterling benefits the Group.
The Group reported an operating loss of GBP31.3m (17-month 31 December 2016: loss GBP22.4m). The loss per share was 34.92p (17-month 31 December 2016: loss 25.04p).
The Group expects cash utilisation to remain at current levels over the coming years, as we continue to fund the current portfolio of businesses. The increase in net cash outflow from operations to GBP27.1m (17-month period ended 31 December 2016: GBP26.4m) reflects these activities and was in line with the Board's expectations.
The Group had existing cash resources as at 31 December 2017 of GBP25.1m (31 December 2016: GBP28.9m) and remains debt free. The Group expects to raise further funds from investors in 2018.
The Group has tax losses of approximately GBP72.5m to offset against future taxable profits (31 December 2016: GBP42.4m).
Paul Denney
Chief Financial Officer
18 April 2018
XEROS TECHNOLOGY GROUP PLC
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER 2017
Year 17 months
ended ended
31 December 31 December
2017 2016
Notes GBP000 GBP000
--------------------------------------- ------ ------------ ------------
Earned income 2,270 2,466
Less: lease interest income 7 (80) (73)
--------------------------------------- ------ ------------ ------------
REVENUE 3 2,190 2,393
Cost of sales (2,638) (2,103)
--------------------------------------- ------ ------------ ------------
GROSS (LOSS)/PROFIT (448) 290
Lease interest income 7 80 73
Adjusted gross margin* (368) 363
--------------------------------------- ------ ------------ ------------
Administrative expenses 6 (30,894) (22,640)
Adjusted EBITDA* (28,669) (20,659)
Share based payment expense 23 (1,865) (1,232)
Non-operating exceptional
costs 6 (195) (87)
Amortisation of intangible
fixed assets 10 (39) -
Depreciation of tangible
fixed assets 11 (574) (372)
--------------------------------------- ------ ------------ ------------
OPERATING LOSS (31,342) (22,350)
Net finance (expense)/income 7 (574) 1,225
LOSS BEFORE TAXATION (31,916) (21,125)
Taxation 8 1,305 886
--------------------------------------- ------ ------------ ------------
LOSS AFTER TAX (30,611) (20,239)
--------------------------------------- ------ ------------ ------------
OTHER COMPREHENSIVE INCOME/(EXPENSE):
Items that are or may be
reclassified to profit or
loss:
Foreign currency translation
differences - foreign operations 1,727 (1,720)
--------------------------------------- ------ ------------ ------------
TOTAL COMPREHENSIVE EXPENSE
FOR THE PERIOD (28,884) (21,959)
--------------------------------------- ------ ------------ ------------
LOSS PER SHARE
Basic and diluted on loss
from continuing operations 9 (34.92)p (25.04)p
--------------------------------------- ------ ------------ ------------
* Adjusted gross margin comprises gross profit plus lease interest income
* Adjusted EBITDA comprises loss on ordinary activities before interest, tax, share-based payment expense, non-operating exceptional costs, depreciation and amortisation.
XEROS TECHNOLOGY GROUP PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2017
Foreign
currency Retained
Share Share Merger translation earnings
capital premium reserve reserve deficit Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 31 July 2015 98 28,178 15,443 (22) (22,426) 21,271
----------------------- --------- --------- --------- ------------- ---------- ---------
Loss for the
period - - - - (20,239) (20,239)
Other comprehensive
expense - - - (1,720) - (1,720)
----------------------- --------- --------- --------- ------------- ---------- ---------
Loss and total
comprehensive
expense for
the period - - - (1,720) (20,239) (21,959)
Transactions
with owners,
recorded directly
in equity:
Issue of shares 27 39,973 - - - 40,000
Exercise of
share options 4 281 - - - 285
Costs of share
issues - (2,152) - - - (2,152)
Share based
payment
expense - - - - 1,232 1,232
----------------------- --------- --------- --------- ------------- ---------- ---------
Total contributions
by and distributions
to owners 31 38,102 - - 1,232 39,365
----------------------- --------- --------- --------- ------------- ---------- ---------
At 31 December
2016 129 66,280 15,443 (1,742) (41,433) 38,677
----------------------- --------- --------- --------- ------------- ---------- ---------
Loss for the
year - - - - (30,611) (30,611)
Other comprehensive
expense - - - 1,727 - 1,727
----------------------- --------- --------- --------- ------------- ---------- ---------
Loss and total
comprehensive
expense for
the year - - - 1,727 (30,611) (28,884)
Transactions
with owners,
recorded directly
in equity:
Issue of shares
following
placing 17 24,983 - - - 25,000
Exercise of
share options 3 493 - - - 496
Costs of share
issues - (1,374) - - - (1,374)
Share based
payment
expense - - - - 1,865 1,865
----------------------- --------- --------- --------- ------------- ---------- ---------
Total contributions
by and
distributions
to owners 20 24,102 - - 1,865 25,987
----------------------- --------- --------- --------- ------------- ---------- ---------
At 31 December
2017 149 90,382 15,443 (15) (70,179) 35,780
----------------------- --------- --------- --------- ------------- ---------- ---------
XEROS TECHNOLOGY GROUP PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FOR THE YEARED 31 DECEMBER 2017
At At
31 December 31 December
2017 2016
Notes GBP000 GBP000
------------------------------- ------ ------------ ------------
ASSETS
Non-current assets
Intangible assets 10 654 -
Property, plant and equipment 11 3,516 1,588
Trade and other receivables 14 1,104 1,656
------------------------------- ------ ------------ ------------
TOTAL NON-CURRENT ASSETS 5,274 3,244
------------------------------- ------ ------------ ------------
Current assets
Inventories 12 6,392 7,005
Other financial assets 13 - 705
Trade and other receivables 14 2,235 1,830
Current tax asset 8 1,306 -
Investments - bank deposits 15 - 9,959
Cash and cash equivalents 16 25,149 18,975
------------------------------- ------ ------------ ------------
TOTAL CURRENT ASSETS 35,082 38,474
------------------------------- ------ ------------ ------------
TOTAL ASSETS 40,356 41,718
------------------------------- ------ ------------ ------------
LIABILITIES
Non-current liabilities
Deferred consideration 18 (185) -
Deferred tax 19 (38) (39)
TOTAL NON-CURRENT LIABILITIES (223) (39)
------------------------------- ------ ------------ ------------
Current liabilities
Trade and other payables 18 (4,353) (3,002)
TOTAL CURRENT LIABILITIES (4,353) (3,002)
------------------------------- ------ ------------ ------------
TOTAL LIABILITIES (4,576) (3,041)
------------------------------- ------ ------------ ------------
NET ASSETS 35,780 38,677
------------------------------- ------ ------------ ------------
EQUITY
Share capital 20 149 129
Share premium 20 90,382 66,280
Merger reserve 20 15,443 15,443
Foreign currency translation
reserve 21 (15) (1,742)
Accumulated losses 21 (70,179) (41,433)
------------------------------- ------ ------------ ------------
TOTAL EQUITY 35,780 38,677 ------------------------------- ------ ------------ ------------
Approved by the Board of Directors and authorised for issue on 18 April 2018.
John Samuel Paul Denney Chairman Chief Financial Officer
Company number: 08684474
XEROS TECHNOLOGY GROUP PLC
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARED 31 DECEMBER 2017
Year 17 months
ended ended
31 December 31 December
2017 2016
Notes GBP000 GBP000
--------------------------------------------------------------------------- ------ ------------ ------------
Operating activities
Loss before tax (31,916) (21,125)
Adjustment for non-cash items:
Amortisation of intangible assets 10 39 -
Depreciation of property, plant and equipment 574 372
Share based payment 23 1,865 1,232
Increase in inventories (2,218) (3,957)
Increase in trade and other receivables (26) (2,424)
Increase/(decrease) in trade and other payables 3,983 (663)
Finance income (131) (1,225)
Finance expense 705 -
Cash used in operations (27,125) (27,790)
Tax (payments)/receipts (2) 1,380
Net cash outflow from operations (27,127) (26,410)
--------------------------------------------------------------------------- ------ ------------ ------------
INVESTING ACTIVITIES
Finance income 131 520
Acquisition of subsidiary undertaking 25 (577) -
Cash withdrawn from/(placed on) deposits with more than 3 months maturity 9,959 (8,420)
Purchases of property, plant and equipment (271) (811)
--------------------------------------------------------------------------- ------ ------------ ------------
Net cash inflow/(outflow) from investing activities 9,242 (8,711)
--------------------------------------------------------------------------- ------ ------------ ------------
FINANCING ACTIVITIES
Proceeds from issue of share capital, net of costs 20 24,122 38,133
Net cash inflow from financing activities 24,122 38,133
--------------------------------------------------------------------------- ------ ------------ ------------
Increase in cash and cash equivalents 6,237 3,012
Cash and cash equivalents at start of year/period 18,975 15,913
Effect of exchange rate fluctuations on cash held (63) 50
CASH AND CASH EQUIVALENTS AT OF YEAR/PERIOD 16 25,149 18,975
--------------------------------------------------------------------------- ------ ------------ ------------
XEROS TECHNOLOGY GROUP PLC
COMPANY STATEMENT OF FINANCIAL POSITION
FOR THE YEARED 31 DECEMBER 2017
1) BASIS OF PREPARATION
This financial information does not constitute the company's statutory accounts for the year ended 31 December 2017 or the period ended 31 December 2016 but is derived from those accounts. Statutory accounts for 2016 have been delivered to the registrar of companies, and those for the period ended 31 December 2017 will be delivered in due course. The auditor has reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.
The Financial Statements for the period ended 31 December 2017 included in this announcement were authorised for issue in accordance with a resolution of the Board of Directors on 18 April 2018. The level of rounding for financial information is the nearest thousand pounds.
The Company's registered office is Unit 2, Evolution, Advanced Manufacturing Park, Whittle Way, Catcliffe, Rotherham, S60 5BL.
The consolidated financial statements have been prepared under the historical cost convention in accordance with International Financial Reporting Standards as adopted by the European Union (EU IFRS).
Business combinations and basis of consolidation
Subsidiaries are entities controlled by the Company. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable or convertible are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.
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
At 31 December 2017, the Group had GBP25.1m of cash and cash equivalents. At this stage in its development the Group is loss making and incurs operating cash outflows. It is therefore reliant on equity share funding to continue its development operations and will require a further capital injection to meet forecast spend (both discretionary and non discretionary) over the next 12 months to April 2019. As with all such businesses, the group is reliant on cyclical equity funding while developing technologies, with a long term view to commercialising those technologies to enable them to provide a return to the shareholders. Whilst there is no guarantee that further equity funding will be made available, the directors believe that given past history of successful share placings, and the consistent development progress across the project portfolio, the required cash can be raised in line with the above.
When making their going concern assessment the directors assess available and committed funds against all non-discretionary expenditure, and related cash flows, as forecast for the period ended 30 April 2019. These forecasts indicate that the Group is able to settle its liabilities as they fall due in the forecast period. In these forecasts the directors have considered appropriate sensitivities such as the level of discretionary expenditure included and the ability to raise additional funds as described above. Accordingly, the directors consider that this should enable the Group to continue in operational existence for the foreseeable future and the Directors believe that it remains appropriate to prepare the financial statements on a going concern basis.
Note 17 to this financial information includes the Group's objectives, policies and processes for managing its capital, its financial risk management objectives, details of its financial instruments and its exposure to credit, liquidity and market risk. The Directors have considered their obligation, in relation to the assessment of the going concern of the Group and each statutory entity within it and have reviewed the current budget cash forecasts and assumptions as well as the main risk factors facing the Group.
2) SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied are set out below.
REVENUE RECOGNITION
Revenue is recognised at the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of business and is shown net of Value Added Tax. The Group primarily earns revenues from the sale/provision of polymer bead cleaning equipment, consumables and services.
Within the Hotel & Lodging segment, where products are sold outright, product sales revenues are recognised once substantially all the risks and rewards of ownership have been transferred. Where sales are made through the Xeros Sbeadycare(R) service, the contract is separated into the element relating to the initial sale of equipment (where relevant), and the ongoing service element. Consideration is allocated to the different components based on their relative fair values. Service income is recognised pro-rata over the life of the contract. Where equipment is sold under a finance lease agreement revenue is recognised in accordance with the stated lessor accounting policy. Amounts received in respect of operating leases are recognised in the income statement with reference to the period of rental.
Within the High Performance Workwear segment, revenues are recognised once the service contracted with the customer is completed.
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.
GOVERNMENT GRANTS
Government grants are recognised where there is reasonable assurance that the grant will be received and all attached conditions will be complied with. When the grant relates to an expense item, it is recognised as income on a systematic basis over the periods that the costs, which it is intended to compensate, are expensed. Where the grant relates to an asset, it is recognised as income in equal amounts over the expected useful life of the related asset.
Income from grants is allocated to 'cost of sales' and 'administrative expenses' in the Consolidated statement of profit or loss and other comprehensive income to match it against the underlying expenditure incurred.
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 is deemed that the probability of future economic benefit is currently uncertain.
LEASES
As a lessee
At the current time, the Group only partakes of lease arrangements where all of the risks and rewards incidental to ownership are not transferred to the Group (an 'operating lease'), the total rentals payable under the lease are charged to the consolidated statement of profit or loss and other comprehensive income on a straight-line basis over the lease term. The aggregate benefit of lease incentives is recognised as a reduction in the rental expense over the lease term.
As a lessor
As the Group transfers substantially all the risks and benefits of ownership of the asset, the arrangement is classified as a finance lease and 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. Assets held for rentals to customers under operating leases are recorded as fixed assets and are depreciated on a straight-line basis to their estimated residual values over their estimated useful lives. Operating lease income is recognised within revenue on a straight-line basis over the term of the rental period.
INTANGIBLE ASSETS AND GOODWILL
Recognition and measurement
Goodwill - Goodwill arising on the acquisition of subsidiaries is measured at cost less accumulated impairment losses.
Other intangible assets - 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:
5 years
* Customer lists -
5 years
* Brands -
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 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
The gain or loss arising on 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.
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").
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.
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.
Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost less provision for impairment. 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.
Investments - bank deposits
Comprise bank deposits maturing more than three months after the balance sheet date.
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.
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.
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.
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:
Revenue recognition
The Group offers an integrated service and care package, marketed under Xeros Sbeadycare(R) . This package includes the transfer of equipment and an ongoing commitment to service and support. As part of determining the appropriate revenue recognition policy for such packages, the Group is required to determine the relative fair values of the various elements of revenue. The Group is also required to make judgements as to the market rate of interest used in the calculations. Due to the unique nature of the product and the stage of development of the Group, such assessment is based on limited historical information and requires a level of judgement. These judgements may be revised in future years.
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:
IFRS 2 (amended June 2016) Share-based payment 1 January 2018 IFRS 4 (amended September 2016) Insurance Contracts 1 January 2018 IFRS 9 Financial Instruments 1 January 2018 IFRS 15 Revenue from Contracts with Customers 1 January 2018 IFRS 16 Leases 1 January 2019 IFRS 17 Insurance Contracts 1 January 2021 IFRIC 22 Foreign Currency Transactions and Advance Consideration 1 January 2018 IFRIC 23 Uncertainty over Income Tax Treatments 1 January 2019 IAS 28 (amended October 2017) Investment in Associates and Joint Ventures 1 January 2019 IAS 40 (amended December 2016) Investment Property 1 January 2018 IAS 41 (amended June 2014) Agriculture 1 January 2018 Amendments resulting from September 2014 Annual Improvements to IFRSs 1 January 2018 ------------------------------------------------------------------------------------------ ---------------
The Group is implementing IFRS 15 for the period ending 31 December 2018. Transition is ongoing and will be performed under the cumulative effect method as permitted under the standard. Had IFRS 15 been in effect for the period ended 31 December 2017, the Directors do not consider that there would have been a material impact on the results reported.
The Directors are currently evaluating the impact of IFRS 16 on the accounting policies of the Group.
The Directors do not consider that IFRS 9 will have a material impact on the results of the Group. It is not anticipated that any of the other new standards or interpretations will have a material impact.
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 segments are distinct due to the markets they serve. The all other activities segment contains supporting functions and activities in respect of applications that have not yet been fully commercialised.
The way in which the CODM reviews information has changed in the period as the internal reporting structure of the Group has developed and as a result of the acquisition made in the period. The comparative information for the period ended 31 December 2017 is not restated.
For the year ended 31 December 2017:
Hotel & High Performance All Other Total
Lodging Workwear Activities
GBP'000 GBP'000 GBP'000 GBP'000
Revenue 1,941 249 - 2,190
Gross loss (374) (74) - (448)
Adjusted EBITDA (10,854) (453) (17,362) (28,669)
Operating
loss (11,260) (499) (19,583) (31,342)
Net finance
income/(expense) 80 - (654) (574)
Loss before
tax (11,180) (499) (20,237) (31,916)
Segmental
net assets 9,928 87 25,765 (35,780)
Other segmental
information:
Capital expenditure - - 271 271
Depreciation 253 7 314 574
Amortisation - 39 - 39
For the 17-month period ended 31 December 2016:
Single Operating
Segment
GBP'000
Revenue 2,466
Gross profit 290
Adjusted EBITDA (20,659)
Operating loss (22,350)
Net finance income/(expense) 1,225
Loss before tax (21,125)
Segmental net
assets 38,677
Other segmental
information:
Capital expenditure 811
Depreciation 372
Amortisation -
An analysis of revenues by type is set out below:
Year 17 months
ended ended
31 December 31 December
2017 2016
GBP000 GBP000
----------------------- ------------ ------------
Sale of goods 738 1,556
Rendering of services 1,452 837
2,190 2,393
----------------------- ------------ ------------
During the year ended 31 December 2017 the Group had no customers who individually generated more than 10% of revenue.
During the 17-month period ended 31 December 2016 the Group had two customers who individually generated more than 10% of revenue. Those customers accounted for 19% and 13% of revenue respectively.
An analysis of revenues by geographic location of customers is set out below:
Year 17 months
ended ended
31 December 31 December
2017 2016
GBP000 GBP000
--------------- ------------ ------------
Europe 361 259
North America 1,829 2,134
2,190 2,393
--------------- ------------ ------------
An analysis of non-current assets by location is set out below:
31 December 31 December
2017 2016
GBP000 GBP000
--------------- ------------ ------------
Europe 1,529 722
North America 3,745 2,522
5,274 3,244
--------------- ------------ ------------
4) LOSS FROM OPERATIONS
Year 17 months
ended ended
31 December 31 December
2017 2016
GBP000 GBP000
------------------------------------------------------------- ------------ ------------
Loss from operations is stated
after (crediting):
Grant income - (410)
Foreign exchange gains - (3,848)
------------------------------------------------------------- ------------ ------------
Loss from operations is stated
after charging to
administrative expenses:
Foreign exchange losses 2,178 -
Depreciation of plant and
equipment (note 11) 574 372
Amortisation of intangible
assets (note 10) 39 -
Operating lease rentals -
land and buildings 271 270
Staff costs (excluding share-based
payment charge) 11,740 10,525
Research and development 1,859 3,067
------------------------------------------------------------- ------------ ------------
Auditors remuneration:
* Audit of these financial statements 19 12
* Audit of financial statements of subsidiaries of the
company 21 12
* All other services 6 29
Total auditor's remuneration 46 53
------------------------------------------------------------- ------------ ------------
Other services in the current period related to interim review work, tax advice and advice in respect of the Group's overseas subsidiary.
5) STAFF NUMBERS AND COSTS
Year 17 months
ended ended
31 December 31 December
2017 2016
Number Number
------------------------------------ ------------ ------------
The average monthly number
of persons (including directors)
employed by the Group during
the year was:
Directors 6 6
Operational staff 140 92
------------------------------------ ------------ ------------
146 98
------------------------------------ ------------ ------------
GBP000 GBP000
------------------------------------ ------------ ------------
The aggregate remuneration,
including directors,
comprised:
Wages and salaries 10,637 9,512
Social security costs 987 992
Pension contributions 116 21
Share based expense (note
23) 1,865 1,232
13,605 11,757
------------------------------------ ------------ ------------
Directors' remuneration comprised:
Emoluments for qualifying
services 743 1,209
------------------------------------ ------------ ------------
Directors' emoluments disclosed above include GBP334,000 paid to the highest paid director (Period ended 31 December 2016: GBP457,000). There are no pension benefits for directors. Please see Directors' Remuneration Report on pages 17 to 19 for further information on directors' emoluments.
6) EXPENSES BY NATURE
The administrative expenses charge by nature is as follows:
Year 17 months
ended ended
31 December 31 December
2017 2016
GBP000 GBP000
------------------------------------------------- ------------ ------------
Staff costs, recruitment and other HR 12,617 11,288
Share-based payment expense 1,865 1,232
Premises and establishment costs 586 504
Research and development costs 1,859 3,067
Patent and IP costs 1,176 1,661
Engineering and operational costs 1,978 1,314
Legal, professional and consultancy fees 2,978 2,720
IT, telecoms and office costs 725 645
Depreciation charge 377 361
Amortisation charge 39 -
Travelling, subsistence and entertaining 2,221 2,102
Advertising, conferences and exhibitions 1,234 1,548
Bad debt expense 412 88
Other expenses 434 237
Foreign exchange losses/(gains) 2,198 (3,848)
Less: grants receivable - (366)
------------------------------------------------- ------------ ------------
Total operating administrative expenses 30,699 22,553
Non-operating administrative exceptional items:
Costs of placing of ordinary shares 195 87
Total administrative expenses 30,894 22,640
------------------------------------------------- ------------ ------------
7) NET FINANCE (EXPENSE)/INCOME
Year 17 months
ended ended
31 December 31 December
2017 2016
GBP000 GBP000
------------------------------------------- ------------ ------------
Bank interest receivable 51 447
(Loss)/gain from forward foreign currency
contracts (705) 705
Finance income from lease receivables 80 73
------------------------------------------- ------------ ------------
Net finance (expense)/income (574) 1,225
------------------------------------------- ------------ ------------
8) TAXATION
Tax on loss on ordinary activities
Year 17 months
ended ended
31 December 31 December
2017 2016
GBP000 GBP000
---------------------------------------------------------- ------------ ------------
Current tax:
UK Tax credits received in respect of prior periods (1,306) (923)
Foreign taxes paid 2 20
---------------------------------------------------------- ------------ ------------
(1,304) (903)
Deferred tax:
Origination and reversal of temporary timing differences (1) 17
---------------------------------------------------------- ------------ ------------
Tax credit on loss on ordinary activities (1,305) (886)
---------------------------------------------------------- ------------ ------------
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:
Year 17 months
ended ended
31 December 31 December
2017 2016
GBP000 GBP000
------------------------------------------------------------------------------------------ ------------ ------------
The tax assessed for the period varies from the main company rate of corporation tax as
explained
below:
Loss on ordinary activities before tax (31,916) (21,125)
------------------------------------------------------------------------------------------ ------------ ------------
Tax at the standard rate of corporation tax 19.25% (2016: 20%) (6,144) (4,225)
Effects of:
Expenses not deductible for tax purposes 418 291
Research and development tax credits receivable (1,306) (923)
Unutilised tax losses for which no deferred tax asset is
recognised 6,649 5,130
Employee share acquisition adjustment (924) (1,172)
Foreign taxes paid 2 20
Change in tax rates - (7)
------------------------------------------------------------------------------------------ ------------ ------------
Tax credit for the year/period (1,305) (886)
------------------------------------------------------------------------------------------ ------------ ------------
The Group accounts for Research and Development tax credits where there is certainty regarding HMRC approval. The Group has recognised a debtor in respect of the claim which has been approved for payment by HMRC and subsequently received by the Group.
9) LOSS PER SHARE (BASIC AND DILUTED)
Basic loss per share is calculated by dividing the loss attributable to equity holders of the parent by the weighted average number of ordinary shares in issue during the year. Diluted loss per share is calculated by adjusting the weighted average number of ordinary shares in issue during the period to assume conversion of all dilutive potential ordinary shares.
Year 17 months
ended ended
31 December 31 December
2017 2016
GBP000 GBP000
--------------------------------------------------------------------- ------------ ------------
Total loss attributable to the equity holders of the parent (30,611) (20,239)
--------------------------------------------------------------------- ------------ ------------
No. No.
Weighted average number of ordinary shares in issue during the year 87,671,769 80,839,504
--------------------------------------------------------------------- ------------ ------------
Loss per share
Basic and diluted on loss for the year (34.92)p (25.04)p
--------------------------------------------------------------------- ------------ ------------
Adjusted earnings per share has been calculated so as to exclude the effect of non-operating exceptional costs including related tax charges and credits. Adjusted earnings used in the calculation of basic and diluted earnings per share reconciles to basic earnings as follows:
Basic earnings (30,611) (20,239) Non-operating exceptional costs 195 87 --------------------------------- --------- --------- Adjusted earnings (30,416) (20,152) --------------------------------- --------- --------- Adjusted loss per share Basic and diluted on loss for the year (34.69)p (24.93)p ---------------------------------------- --------- ---------
The weighted average number of shares in issue throughout the period is as follows:
Year 17 months
ended ended
31 December 31 December
2017 2016
-------------------------------------------------------- ------------ ------------
Issued ordinary shares at 1 January 2017/1 August 2015 86,021,911 65,504,879
Effect of shares issued for cash 1,649,858 15,334,625
Weighted average number of shares at 31 December 87,671,769 80,839,504
-------------------------------------------------------- ------------ ------------
The Company has issued employee options over 7,658,146 (31 December 2016: 6,687,763) 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.
10) INTANGIBLE ASSETS AND GOODWILL
Customer
Goodwill relationships Brand Total
GBP000 GBP000 GBP000 GBP000
------------------------------ --------- -------------- ------- -------
Cost
At 31 July 2015 and 31
December 2016 - - - -
Acquisitions through
business combinations 133 246 326 705
Foreign currency differences (2) (4) (6) (12)
------------------------------ --------- -------------- ------- -------
At 31 December 2017 131 242 320 693
------------------------------ --------- -------------- ------- -------
Accumulated amortisation
and impairment losses
At 31 July 2015 and 31
December 2016 - - - -
Amortisation charge for
the year - 39 - 39
Foreign currency differences - - - -
------------------------------ --------- -------------- ------- -------
At 31 December 2017 - 39 - 39
------------------------------ --------- -------------- ------- -------
Net book value
At 31 December 2017 131 203 320 654
------------------------------ --------- -------------- ------- -------
At 31 December 2016 - - - -
------------------------------ --------- -------------- ------- -------
At 31 July 2015 - - - -
------------------------------ --------- -------------- ------- -------
Amortisation
The amortisation of customer relationships is included within administrative expenses in the consolidated statement of profit or loss and other comprehensive income.
The brand acquired is considered to have a five-year economic life and will be amortised in future periods.
Impairment testing for CGUs containing goodwill
For the purposes of impairment testing, goodwill has been allocated to the Group's CGUs (operating divisions) as follows:
2017 2016
GBP000 GBP000
-------------------------- ------- -------
Commercial Laundry - -
High Performance Workwear 131 -
131 -
-------------------------- ------- -------
High Performance Workwear
The recoverable amount of this CGU is based on fair value less costs of disposal, estimated using discounted cash flows.
The key assumptions used in the estimation of the recoverable amount are set out below. The values assigned to the key assumptions represent management's assessment of future trends in the relevant industry and have been based on historical data from both external and internal sources.
2017 2016
% %
--------------------------- ----- -----
Discount rate 15% -
Terminal value growth
rate 1% -
Budget EBITDA growth rate
(average of next five
years) 5%
All goodwill relates to the purchase of MarKen PPE. Goodwill arising on acquisition represents excess of the fair value of the consideration given over the fair value of the identifiable net assets acquired. The goodwill arising from the acquisition consists largely of the synergies expected from combining the MarKen PPE business with the proprietary Xeros technology and the workforce acquired.
The Group tests annually for impairment, or more frequently if there are indications that goodwill might be impaired.
The forecast used in impairment testing is approved by management and the Board of Directors and is based on a bottom up assessment of costs and uses the known and estimated sales pipeline.
11) PROPERTY, PLANT AND EQUIPMENT
Assets Fixtures
under Leasehold Plant Computer and Motor
construction improvements and equipment equipment fittings vehicles Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------ -------------- -------------- --------------- ----------- ---------- ---------- -------
Cost
At 31
July 2015 360 130 151 85 91 - 817
Additions 116 225 801 186 53 - 1,381
Transfers (476) 476 - - - - -
Foreign
currency
differences - 11 10 6 5 - 32
------------------ -------------- -------------- --------------- ----------- ---------- ---------- -------
At 31
December
2016 - 842 962 277 149 - 2,230
Arising
on acquisitions - - 12 11 11 3 37
Additions - 71 81 69 34 - 255
Transfers
from inventory - - 2,270 - - - 2,270
Foreign
currency
differences - (20) (64) (12) (5) - (101)
------------------ -------------- -------------- --------------- ----------- ---------- ---------- -------
At 31
December
2017 - 893 3,261 345 189 3 4,691
------------------ -------------- -------------- --------------- ----------- ---------- ---------- -------
Depreciation
At 31
July 2015 - 87 65 44 44 - 240
Charge
for the
period - 203 81 61 27 - 372 Foreign currency differences - 16 6 6 2 - 30 ------------------ -------------- -------------- --------------- ----------- ---------- ---------- ------- At 31 December 2016 - 306 152 111 73 - 642 Charge for the year - 206 259 86 23 - 574 Transfers from inventory - - (5) - - - (5) Foreign currency differences - (15) (14) (6) (1) - (36) At 31 December 2017 - 497 392 191 95 - 1,175 ------------------ -------------- -------------- --------------- ----------- ---------- ---------- ------- Net book value At 31 December 2017 - 396 2,869 154 94 3 3,516 ------------------ -------------- -------------- --------------- ----------- ---------- ---------- ------- At 31 December 2016 - 536 810 166 76 - 1,588 ------------------ -------------- -------------- --------------- ----------- ---------- ---------- ------- At 31 July 2015 360 43 86 41 47 - 577 ------------------ -------------- -------------- --------------- ----------- ---------- ---------- -------
Assets under construction comprised leasehold improvements at the Company's Technology Centre at the Advanced Manufacturing Park. These premises were completed in August 2015 and these costs were transferred to leasehold improvements.
Included within plant and machinery are assets with a net book value of GBP2,582,000 (31 December 2016: GBP506,000) which the Group leases (as lessor) to customers under a number of operating lease agreements.
When an operating lease is agreed with a customer, the assets to which the operating lease relates are, if necessary, transferred from inventory into property, plant and equipment for the duration of the lease. Depreciation is charged on these assets in line with their useful economic lives.
12) INVENTORIES
31 December 31 December
2017 2016
GBP000 GBP000
----------------- ------------ ------------
Finished goods 6,392 7,005
----------------- ------------ ------------
In the year ended 31 December 2017, changes in finished goods recognised as cost of sales amounted to GBP742,000 (period ended 31 December 2016: GBP920,000).
13) OTHER FINANCIAL ASSETS
31 December 31 December
2017 2016
GBP000 GBP000
------------------------------------------------------------------------------------- ------------- ------------
Current
Foreign currency forward contracts designated as fair value through profit and loss - 705
------------------------------------------------------------------------------------- ------------- ------------
14) TRADE AND OTHER RECEIVABLES
31 December 31 December
2017 2016
GBP000 GBP000
-------------------------------- ------------ ------------
Due within 12 months
Trade debtors 345 272
Other receivables 856 1,078
Prepayments and accrued income 1,034 480
2,235 1,830
-------------------------------- ------------ ------------
Due after more than 12 months
Other receivables 1,104 1,656
-------------------------------- ------------ ------------
There is no material difference between the lease receivables amounts included in other receivables noted above, the minimum lease payments or gross investment in the lease as defined by IAS 17.
The minimum lease payment is receivable as follows:
31 December 31 December
2017 2016
GBP000 GBP000
----------------------------------------------- ------------ ------------
Not later than one year 252 284
Later than one year not later than five years 917 1,185
Later than five years 187 471
1,356 1,940
----------------------------------------------- ------------ ------------
Contractual payment terms with the Group's customers are typically 30 to 60 days.
The Directors considered the carrying value of trade receivables at 31 December 2017 and made a provision of GBP270,000 (31 December 2016: GBP77,000) for potential impairment losses arising from balances which were considered to be past due. The Directors believe that the carrying value of trade and other receivables represents their fair value. In determining the recoverability of trade receivables the Directors consider any change in the credit quality of the receivable from the date credit was granted up to the reporting date. For details on credit risk management policies, refer to note 17.
Other receivables of GBP1,104,000 (31 December 2016: GBP1,656,000) due after more than one year comprise the long-term portion of finance leases where the Group acts as lessor.
In July 2017 a small number of lease agreements were sold to Hitachi Capital. The value of the agreements sold is not material to the financial statements.
15) INVESTMENTS - BANK DEPOSITS
31 December 31 December
2017 2016
GBP000 GBP000
------------------------------------------------ ------------- ------------
Bank deposits maturing between 3 and 12 months - 9,959
------------------------------------------------ ------------- ------------
At 31 December 2017, the Group held GBPnil (31 December 2016: GBP9,959,000) in 95-day deposit accounts. This balance was denominated in UK Sterling (GBP). The Directors consider that the carrying value of cash and cash equivalents approximates to their fair value. For details of credit risk management policies, refer to note 17.
16) CASH AND CASH EQUIVALENTS
31 December 31 December
2017 2016
GBP000 GBP000
--------------------------- ------------ ------------
A+ 11 -
A - 5,206
BBB+ 25,138 13,769
Cash and cash equivalents 25,149 18,975
--------------------------- ------------ ------------
The above has been split by the Fitch rating system and gives an analysis of the long-term credit rating of the financial institutions where cash balances are held.
All of the Group's cash and cash equivalents at 31 December 2017 are at floating interest rates. Balances are denominated in UK Sterling (GBP), US Dollars ($) and Euros (EUR) as follows:
31 December 31 December
2017 2016
GBP000 GBP000
------------------------------- ------------ ------------
Denominated in Pound Sterling 24,095 16,999
Denominated in US Dollars 752 1,755
Denominated in Euros 302 221
Cash and cash equivalents 25,149 18,975
------------------------------- ------------ ------------
The Directors consider that the carrying value of cash and cash equivalents approximates to their fair value. For details of credit risk management policies, refer to note 17.
17) FINANCIAL INSTRUMENTS
The Group's principal financial instruments comprise short-term receivables and payables and cash and cash equivalents. The Group does not trade in financial instruments but uses derivative financial instruments in the form of forward foreign currency contracts to help manage its foreign currency exposure and to enable the Group to manage its working capital requirements.
(a) Fair Values of Financial Assets and Financial Liabilities
Derivative Financial Instruments - Fair Value Hierarchy
The following hierarchy classifies each class of financial asset or liability depending on the valuation technique applied in determining its fair value:
Level The fair value is calculated based on
1: quoted prices traded in active markets
for identical assets or liabilities.
Level The fair value is based on inputs other
2: than quoted prices included within Level
1 that are observable for the asset or
liability, either directly or indirectly.
The fair value of a financial instrument
is the price that would be received to
sell an asset or paid to transfer a liability
in an orderly transaction between market
participants at the measurement date.
Level The fair value is based on inputs for
3: the asset or liability that are not based
on observable market data (unobservable
inputs).
In these financial statements, all of the forward foreign exchange contracts are considered to be Level 2 in the fair value hierarchy. There have been no transfers between categories in the current or preceding year. The fair value of financial instruments held at fair value have been determined based on available market information at the balance sheet date.
(b) Credit risk
Financial Risk Management
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations.
The Group is exposed to credit risk in respect of trade and lease receivable balances such that, if one or more customers or a counterparty to a financial instrument encounters financial difficulties, this could materially and adversely affect the Group's financial results. The Group attempts to mitigate credit risk by assessing the credit rating of new customers and financial counterparties prior to entering into contracts and by entering into contracts with customers on agreed credit terms.
The Group is potentially exposed to credit risk in respect of its bank deposits in the event of failure of the respective banks. The Group attempts to mitigate this risk by spreading its cash deposits across different banks and through ongoing monitoring of the credit ratings of those banks. Further details are set out in note 16. At 31 December 2017, the Directors were not aware of any factors affecting the recoverability of the Group's bank balances.
Exposure to Credit Risk
At 31 December 2017, the Group had net trade receivables outstanding of GBP345,000 (2016: GBP272,000). The Directors have considered the recoverability of outstanding balances at 31 December 2017 and have made provisions for bad and doubtful debts amounting to GBP270,000 (2016: GBP77,000). The Group had lease receivable balances outstanding of GBP1,356,000 (2016: GBP1,940,000) after the deduction of provisions amounting to GBP108,000 (2016: GBPnil).
The concentration of credit risk for trade and other receivables and lease receivables at the balance sheet date by geographic region was:
31 December 31 December
2017 2016
GBP000 GBP000
-------------------------- ------------ ------------
United Kingdom 1,029 1,153
United States of America 2,310 2,333
3,339 3,486
-------------------------- ------------ ------------
(c) Liquidity Risk
Financial Risk Management
Liquidity risk arises from the Group's management of working capital. It is the risk that the Group will encounter difficulty in meeting its future obligations as they fall due. The Group's policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due. To achieve this aim, it seeks to maintain cash balances to meet its expected cash requirements.
The following are the contractual maturities of financial liabilities:
Non-derivative financial liabilities 31 December 31 December
2017 2016
GBP000 GBP000
-------------------------------------- ------------ ------------
Due within one year
Trade and other payables 1,661 1,062
-------------------------------------- ------------ ------------
(d) Market Risk
Financial Risk Management
Market risk is the risk that changes in market prices, such as interest rates or foreign exchange rates will affect the Group's income. The objective of market risk management is to manage and control market risk exposures within acceptable parameters. Market interest rate risk arises from the Group's holding of cash and cash equivalent balances and from cash held on term deposit accounts (see notes 15 and 16). The Board make ad hoc decisions at their regular Board meetings, as to whether to hold funds in instant access accounts or longer-term deposits. All accounts are held with reputable banks. These policies are considered to be appropriate to the current stage of development of the Group and will be kept under review in future years.
Foreign Currency Risk
The Group is exposed to currency risk on sales and purchases and cash held in bank accounts that are denominated in a currency other than the respective functional currencies of Group entities, primarily Pound Sterling (GBP), the US Dollars (USD) and the Euro (EUR). The Group's policy is to reduce currency exposure on sales and purchasing through forward foreign currency contracts.
The following are the fair values of assets held in respect of forward foreign currency contracts:
Derivative financial assets 31 December 31 December
2017 2016
GBP000 GBP000
----------------------------------------------------- ------------- ------------
Due within one year
Forward foreign exchange contracts used for hedging - 705
----------------------------------------------------- ------------- ------------
The Group's overall exposure to foreign currency risk is as follows. This is based on the carrying amount for monetary financial instruments.
At 31 December 2017
Sterling US Dollar Euro Total
GBP000 GBP000 GBP000 GBP000
----------------------------- --------- ---------- ------- --------
Cash and cash equivalents 24,095 752 302 25,149
Income tax receivable 1,306 - - 1,306
Trade and other receivables 1,029 2,309 - 3,338
Trade and other payables (774) (873) (14) (1,661)
----------------------------- --------- ---------- ------- --------
Balance sheet exposure 25,656 2,188 288 28,132
----------------------------- --------- ---------- ------- --------
Net exposure - 2,188 288 2,476
-------------- --- ------ ---- ------
At 31 December 2016
Sterling US Dollar Euro Total
GBP000 GBP000 GBP000 GBP000
----------------------------- --------- ---------- ------- --------
Cash and cash equivalents 16,999 1,755 221 18,975
Investments: Cash deposits 9,959 - - 9,959
Trade and other receivables 1,153 2,333 - 3,486
Forward exchange contracts 705 - - 705
Trade and other payables (489) (559) (14) (1,062)
----------------------------- --------- ---------- ------- --------
Balance sheet exposure 28,327 3,529 207 32,063
----------------------------- --------- ---------- ------- --------
Net exposure - 3,529 207 3,736
-------------- --- ------ ---- ------
Sensitivity Analysis
A 10% weakening of the following currencies against the GBP sterling at 31 December 2017 would have increased equity and profit or loss by the amounts shown below. The calculation assumes that the change occurred at the balance sheet date and had been applied to the risk exposure existing at that date.
This analysis assumes that all other variables, in particular, other exchange rates and interest rates remain constant. The analysis is performed on the same basis for the period ended 31 December 2016.
Equity Profit or Loss
-------------------------- --------------------------
31 December 31 December 31 December 31 December
2017 2016 2017 2016
GBP000 GBP000 GBP000 GBP000
------------ ------------ ------------ ------------ ------------
US Dollars (219) (353) (219) (353)
Euros (29) (21) (29) (21)
A 10% strengthening of the above currencies against the Pound Sterling at 31 December 2017 would have had the equal but opposite effect on the above currencies to the amounts shown above on the basis that all other variables remain constant.
Interest Rate Risk
At the balance sheet date the interest rate profile of the Group's interest-bearing financial instruments was:
31 December 31 December
2017 2016
GBP000 GBP000
--------------------------- ------------ ------------
Fixed rate instruments
Financial assets - 9,959
Financial liabilities - -
--------------------------- ------------ ------------
- 9,959
--------------------------- ------------ ------------
Variable rate instruments
Financial assets 25,149 18,975
Financial liabilities - -
--------------------------- ------------ ------------
25,149 18,975
--------------------------- ------------ ------------
Based on the Group's above balances at 31 December 2017, if interest rates had been 5 per cent higher, then the impact on the results for the year would be a reduction in the loss for the period of approximately GBP831,000 with a corresponding increase in the Group's net assets. If the interest rate had reduced to zero per cent, then the impact on the results for the period would be an increase in the loss for the year of GBP51,000 with a corresponding decrease in the Group's net assets.
(e) Foreign Exchange Forward Contracts
The following table indicates the periods in which the cash flows associated with cash flow hedging instruments are expected to occur:
31 December 31 December
Due within one year 2017 2016
GBP000 GBP000
----------------------------- ------------- ------------
Forward exchange contracts:
Assets - 705
Liabilities - -
----------------------------- ------------- ------------
- 705
------------------------------------------- ------------
(f) Capital Management
The Group's capital is made up of share capital, share premium and retained losses, totalling GBP20,352,000 at 31 December 2017 (31 December 2016: GBP24,976,000).
The Group's objectives when managing capital are:
-- to safeguard the entity's ability to continue as a going concern, so that it can provide returns for shareholders and benefits for other stakeholders; and
-- to provide an adequate return to shareholders by pricing products and services commensurately with the level of risk.
The capital structure of the Group consists of shareholders' equity as set out in the consolidated statement of changes in equity. All working capital requirements are financed from existing cash resources. There are no externally imposed capital requirements. Financing decisions are made by the Board of Directors based on forecasts of the expected timing and level of capital and operating expenditure required to meet the Group's commitments and development plans.
18) TRADE AND OTHER PAYABLES
31 December 31 December
2017 2016
GBP000 GBP000
------------------------------------ ------------ ------------
Trade payables 1,223 696
Taxes and social security 126 116
Other creditors 438 366
Accruals and deferred income 2,566 1,824
Contingent consideration (note 25) 185 -
------------------------------------ ------------ ------------
4,538 3,002
------------------------------------ ------------ ------------
Current 4,353 -
Non-current 185 3,002
------------------------------------ ------------ ------------
4,538 3,002
------------------------------------ ------------ ------------
Trade payables, split by the currency they will be settled are shown below:
31 December 31 December
2017 2016
GBP000 GBP000
---------------- ------------ ------------
Sterling 639 400
US Dollars 570 282
Euros 14 14
Trade payables 1,223 696
---------------- ------------ ------------
Trade and other payables principally comprise amounts outstanding for trade purchases and ongoing costs. They are non-interest bearing and are normally settled on 30 to 45 day terms. The Directors consider that the carrying value of trade and other payables approximate their fair value. The Group has financial risk management policies in place to ensure that all payables are paid within the credit timeframe and no interest has been charged by any suppliers as a result of late payment of invoices during the period.
19) DEFERRED TAX
31 December 31 December
2017 2016
GBP000 GBP000
---------------------------------------------- ------------ ------------
Accelerated depreciation for tax purposes 38 39
Deferred tax credit/(expense) for the period (1) 17
---------------------------------------------- ------------ ------------
Year 17 months
ended ended
31 December 31 December
2017 2016
GBP000 GBP000
---------------------- ------------ ------------
At beginning of year 39 22
Tax expense (1) 17
At end of year 38 39
---------------------- ------------ ------------
As at 31 December 2017, the Group had unrecognised deferred tax assets totalling approximately GBP12,968,000 (31 December 2016: GBP7,208,000), which primarily relate to losses and the IFRS 2 share-based payment charge. The Group has not recognised this as an asset in the Statement of Financial Position due to the uncertainty in the timing of its crystallisation.
20) SHARE CAPITAL
Share Share Merger
capital premium reserve Total
Number GBP000 GBP000 GBP000 GBP000
--------------------- ----------- --------- --------- --------- --------
Total Ordinary
shares of 0.15p
each as at 31
July 2015 65,504,879 98 28,178 15,443 43,719
--------------------- ----------- --------- --------- --------- --------
Issue of ordinary
shares following
placing 17,777,778 27 39,973 - 40,000
Issue of ordinary
shares on exercise
of share options 2,739,254 4 281 - 285
Costs of share
issues - - (2,152) - (2,152)
Total Ordinary
shares of 0.15p
each as at 31
December 2016 86,021,911 129 66,280 15,443 81,852
--------------------- ----------- --------- --------- --------- --------
Issue of ordinary
shares following
placing 11,111,112 17 24,983 - 25,000
Issue of ordinary
shares on exercise
of share options 2,036,933 3 493 - 496
Costs of share
issues - - (1,374) - (1,374)
--------------------- ----------- --------- --------- --------- --------
Total Ordinary
shares of 0.15p
each as at 31
December 2017 99,169,956 149 90,382 15,443 105,974
--------------------- ----------- --------- --------- --------- --------
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 2017:
(a) 421,888 Ordinary Shares were allotted at a price of 0.15 pence per share, for total cash consideration of GBP633, upon the exercise of share options granted in the Company's share option schemes.
(b) 1,351,833 Ordinary Shares were allotted at a price of 12 pence per share, for total cash consideration of GBP162,220, upon the exercise of share options granted in the Company's share option schemes.
(c) 85,333 Ordinary Shares were allotted at a price of 16.2 pence per share, for total cash consideration of GBP13,824, upon the exercise of share options granted in the Company's share option schemes.
(d) 32,800 Ordinary Shares were allotted at a price of 160.5 pence per share, for total cash consideration of GBP52,644, upon the exercise of share options granted in the Company's share option schemes.
(e) 1,215 Ordinary Shares were allotted at a price of 169.5 pence per share, for total cash consideration of GBP2,059, upon the exercise of share options granted in the Company's share option schemes.
(f) 136,250 Ordinary Shares were allotted at a price of 182.5 pence per share, for total cash consideration of GBP248,656, upon the exercise of share options granted in the Company's share option schemes.
(g) 7,614 Ordinary Shares were allotted at a price of 210 pence per share, for total cash consideration of GBP15,989, upon the exercise of share options granted in the Company's share option schemes.
(h) 11,111,112 Ordinary Shares were allotted at a price of 225 pence per share, for total cash consideration of GBP25,000,000 (before costs) following a placing of shares.
At 31 December 2017, the Company had only one class of share, being Ordinary Shares of 0.15p each.
21) MOVEMENT IN ACCUMULATED LOSSES AND FOREIGN CURRENCY TRANSLATION RESERVE
Accumulated losses Foreign currency translation reserve
GBP000 GBP000
------------------------------------------------ ------------------- -------------------------------------
At 31 July 2015 (22,426) (22)
------------------------------------------------ ------------------- -------------------------------------
Loss for the period (20,239) -
Other comprehensive expense - Foreign currency
translation differences - foreign operation - (1,720)
Shared based payment charge 1,232 -
------------------------------------------------ ------------------- -------------------------------------
At 31 December 2016 (41,433) (1,742)
Loss for the year (30,611) -
Other comprehensive income - Foreign currency
translation differences - foreign operation - 1,727
Shared based payment charge 1,865 -
------------------------------------------------ ------------------- -------------------------------------
At 31 December 2017 (70,179) (15)
------------------------------------------------ ------------------- -------------------------------------
22) COMMITMENTS
Operating lease commitments
The Group leases premises under non-cancellable operating lease agreements. The future aggregate minimum lease and service charge payments under non-cancellable operating leases are as follows:
31 December 31 December
2017 2016
GBP000 GBP000
---------------------------------------- ------------ ------------
Land and buildings:
Amounts due within one year 377 179
Amounts due between one and five years 686 97
---------------------------------------- ------------ ------------
1,063 276
---------------------------------------- ------------ ------------
On 19 October 2014, the Group entered into a five-year lease arrangement in respect of a property. The Group has an annual rent commitment of GBP17,185 on this lease. This lease expires on 18 October 2019. On the same date the Group entered into a five-year lease arrangement in respect of another property. The Group has an annual rent commitment of GBP25,487 on this lease. This lease also expires on 18 October 2019.
On 13 February 2015, the Group entered into an arrangement assigning to it a 10-year lease in respect of a property. The lease commenced on 2 April 2012 and expires on 1 April 2022. The Group has an annual rent commitment of GBP75,250 on this lease.
On 30 November 2017, the Group entered into a three-year lease arrangement in respect of a property. The Group has an annual rent commitment of $246,668 on the lease. The lease expires on 31 December 2020. The lease contains an option which allows the Group to extend the lease term by five years.
In addition, the Group has operating lease commitments in respect of its premises in the USA for its subsidiary, Xeros Inc. These are short term rentals with an annual rent charge of approximately GBP150,000.
23) SHARE BASED PAYMENTS
Share options
The Company has share option plans (The Xeros Technology Group plc Unapproved Share Option Scheme and The Xeros Technology Group plc Enterprise Management Incentive Share Option Scheme) under which it grants options over ordinary shares to certain Directors, employees and consultants of the Group. Options under these plans are exercisable at a range of exercise prices ranging from the nominal value of the Company's shares to the market price of the Company's shares on the date of the grant. The vesting period for shares is usually over a period of three years. The options are settled in equity once exercised. If the options remain unexercised for a period after 10 years from the date of grant, the options expire. Options are forfeited if the employee leaves the Group before the options vest.
The number and weighted average exercise prices of share options are as follows:
Weighted
average
exercise
price
per share
Number of share interests (GBP)
-----------
Deferred
Annual
Unapproved Bonus
EMI options options plan Total
------------ ----------- --------- ------------ -----------
At 31 July
2015 4,115,863 3,191,061 61,977 7,368,901 0.411
Granted in
the period 109,890 2,544,548 115,845 2,770,283 1.924
Exercised
in the year (2,008,165) (609,756) - (2,617,921) (0.101)
Forfeited/lapsed
in the year (131,231) (702,269) - (833,500) (1.434)
At 31 December
2016 2,086,357 4,423,584 177,822 6,687,763 1.032
------------------ ------------ ----------- --------- ------------ -----------
Granted in
the period - 3,167,832 74,907 3,242,739 2.223
Exercised
in the period (1,105,716) (950,139) (15,384) (2,071,239) (0.273)
Forfeited/lapsed
in the period (4,220) (196,897) - (201,117) (1.956)
At 31 December
2017 976,421 6,444,380 237,345 7,658,146 1.719
------------------ ------------ ----------- --------- ------------ -----------
There were 3,677,041 share options outstanding at 31 December 2017 which were eligible to be exercised. The remaining options were not eligible to be exercised as these are subject to employment period and market-based vesting conditions, some of which had not been met at 31 December 2017. Options have a range of exercise prices from 0.15 pence per share to 310.0 pence per share and have a weighted average contractual life of 7.91 years (31 December 2016: 5.00 years).
Options Options Options
granted granted granted
Options granted in in in
in the period January August September
2017 2017 2017
Dividend yield 0% 0% 0%
Expected volatility* 40.00% 40.00% 40.00%
Risk free interest
rate (%) 1.50% 1.50% 1.50%
Expected vesting
life of options
(years) 10 10 10
Weighted average
share price
(pence) 210.0 305.0 305.0
Fair value of
an option (pence
per share) 107.5 156.2 156.2
------------------------ -------- -------- ----------
* Expected volatility is based upon the Company's historical share price.
Any share options which are not exercised within 10 years from the date of grant will expire.
A charge has been recognised in the consolidated statement of profit or loss and other comprehensive income for each period as follows:
31 December 31 December
2017 2016
GBP000 GBP000
--------------- ------------ ------------
Share options 1,865 1,232
---------------- ------------ ------------
24) 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:
Amounts Amounts
Purchases owed to Purchases owed to
from related related from related related
party party party party
31 December 31 December 31 December 31 December
2017 2017 2016 2016
Related party Relationship GBP000 GBP000 GBP000 GBP000
------------------ --------------- --------------- ------------ -------------- ------------
Fund manager
for certain
Enterprise shareholders
Ventures (note
Limited 1) 30 - 28 -
Entrepreneurs' Fund manager
Fund Management for a
LLP shareholder
(note
2) - - 4 -
Corporate
finance
advisor
for certain
Top Technology shareholders
Ventures (note
Limited 3) 260 260 - -
------------------ --------------- --------------- ------------ -------------- ------------
Note 1: Enterprise Ventures Limited provides the services of Julian Viggars as a director for the Company and invoiced the Group for associated director's fees.
Note 2: Entrepreneurs' Fund Management LLP provided the services of Dr Maciek Drozdz, who was a director of the Company until 11 January 2016, and invoiced the Group for associated director's fees.
Note 3: Top Technology Ventures Limited provided corporate finance services on behalf of the IP Group shareholders for the new equity issue in December 2017.
Terms and conditions of transactions with related parties
Purchases between related parties are made on an arm's length basis. Outstanding balances are unsecured, interest free and cash settlement is expected within 60 days of invoice.
Transactions with Key Management Personnel
The Company's key management personnel comprise only the Directors of the Company. During the period, the Company entered into the following transactions in which the Directors had an interest:
Directors' remuneration:
Remuneration received by the Directors from the Company is set out below. Further detail is provided within the Directors' Remuneration Report:
Year 17 months
ended ended
31 December 31 December
2017 2016
GBP000 GBP000
--------------------------------- ------------ ------------
Short-term employment benefits* 743 1,209
--------------------------------- ------------ ------------
*In addition, certain directors hold share options in the Company for which a fair value share based charge of GBP321,639 has been recognised in the consolidated statement of profit or loss and other comprehensive income (31 December 2016: GBP823,466).
During the year ended 31 December 2017, the Company entered into numerous transactions with its subsidiary company which net off on consolidation - these have not been shown above.
25) ACQUISITION OF SUBSIDIARY
During the year, the Group incorporated a new wholly-owned subsidiary in the USA, Xeros High Performance Workwear Inc. On 1 July 2017, Xeros High Performance Workwear Inc. acquired 100% of the trade and net assets of Marken PPE Restoration, a division of Marken Enterprises Inc., a company incorporated in the USA.
For the 6 months ended 31 December 2017, Xeros High Performance Workwear contributed revenue of GBP249,000 and a loss of GBP499,000. If the acquisition had taken place on 1 January 2017, management estimates that consolidated revenue would have been GBP2,455,000 and consolidated loss before taxation would have been GBP(31,944,000). In determining those amounts, management has assumed that the fair value adjustments that arose on the date of acquisition would have been the same as if the acquisition had occurred on 1 January 2017.
Consideration transferred
The following table summarises the acquisition date fair value of each major class of consideration transferred.
GBP000
--------------------------------- -------
Cash 577
Contingent consideration 192
Total consideration transferred 769
---------------------------------- -------
Contingent consideration
The Group has agreed to pay the sellers additional consideration up to a maximum of $250,000 (GBP192,000 at the date of acquisition) over a two-year period following acquisition. This is based on an earn-out calculation which requires the company to achieve sales revenue targets in each of the two years. The Group has included GBP185,000 in creditors at 31 December 2017, being $250,000 translated at the year-end exchange rate.
Acquisition-related costs
The Group incurred acquisition-related costs of GBP44,000 on legal fees and due diligence expenses. These costs have been included in administrative expenses in the consolidated statement of profit and loss and other comprehensive income
Identifiable assets acquired and liabilities assumed
The following table summarises the recognised amounts of assets acquired and liabilities assumed at the date of acquisition.
GBP000
---------------------------------------- -------
Property, plant and equipment 38
Intangible assets 572
Trade and other receivables 26
Trade and other payables -
Total identifiable net assets acquired 636
----------------------------------------- -------
Measurement of fair values
All assets and liabilities acquired are recognised at fair value. For trade and other receivables and trade and other payables, fair value was deemed to be equivalent to book value. Estimates were made in respect of property, plant and equipment and intangible assets based upon managements assessment of the value in use of the assets to the Xeros Group.
The intangible assets acquired with the trade and assets comprise GBP246,000 in relation to non-contractual customer relationships and GBP326,000 in relation to the MarKen PPE brand acquired.
Goodwill
Goodwill arising from the acquisition has been recognised as follows:
GBP000
--------------------------------------- -------
Consideration transferred 769
Fair value of identifiable net assets (636)
Goodwill 133
---------------------------------------- -------
The goodwill arising from the acquisition consists largely of the synergies expected from combining the MarKen PPE business with the proprietary Xeros technology and the workforce acquired.
26) EVENTS AFTER THE REPORTING PERIOD
The Group entered into a key transaction after the reporting date of 31 December 2017.
On 22 March 2018, Xeros Technology Group plc purchased the trade and assets of Gloves Inc., a provider of cleaning, inspection and repair services for firefighter personal protection equipment with facilities in Atlanta and Miami, USA. The maximum total consideration for the Acquisition is $1.1m, comprising an initial cash consideration of $800,000 and a conditional deferred payment of up to $0.3m. The conditional deferred payment is dependent on the future revenue performance of the trade and assets acquired from Gloves, Inc.
For the year ended 31 December 2017, the relevant trade and assets of Gloves Inc generated revenues of $0.99m and EBITDA of $0.36m.
Due to the proximity of the above business combination to the reporting date, the initial accounting for these transactions is still to be completed, and consequently details of the amounts of assets and liabilities acquired and fair value of contingent consideration are not disclosed within these financial statements.
27) ANNUAL REPORT AND ACCOUNTS
The Group's annual report and accounts for the year ended 31 December 2017 have been published today and will be posted to shareholders shortly. The annual report and accounts will also be available from www.xerostech.com
Forward-looking statements
This announcement may include certain forward-looking statements, beliefs or opinions, including statements with respect to Xeros' business, financial condition and results of operations. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "plans", "anticipates", "targets", "aims", "continues", "expects", "intends", "hopes", "may", "will", "would", "could" or "should" or, in each case, their negative or other various or comparable terminology. These statements are made by the Xeros Directors in good faith based on the information available to them at the date of this announcement and reflect the Xeros Directors' beliefs and expectations. By their nature these statements involve risk and uncertainty because they relate to events and depend on circumstances that may or may not occur in the future. A number of factors could cause actual results and developments to differ materially from those expressed or implied by the forward-looking statements, including, without limitation, developments in the global economy, changes in government policies, spending and procurement methodologies, and failure in health, safety or environmental policies.
No representation or warranty is made that any of these statements or forecasts will come to pass or that any forecast results will be achieved. Forward-looking statements speak only as at the date of this announcement and Xeros and its advisers expressly disclaim any obligations or undertaking to release any update of, or revisions to, any forward-looking statements in this announcement. No statement in the announcement is intended to be, or intended to be construed as, a profit forecast or to be interpreted to mean that earnings per Xeros share for the current or future financial years will necessarily match or exceed the historical earnings. As a result, you are cautioned not to place any undue reliance on such forward-looking statements.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR UWRWRWSASAAR
(END) Dow Jones Newswires
April 19, 2018 02:00 ET (06:00 GMT)
1 Year Xeros Technology Chart |
1 Month Xeros Technology Chart |
It looks like you are not logged in. Click the button below to log in and keep track of your recent history.
Support: +44 (0) 203 8794 460 | support@advfn.com
By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions
