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XEROS TECHNOLOGY
GROUP PLC
ANNUAL REPORT
FOR THE YEAR ENDING
31 DECEMBER 2021
COMPANY NUMBER: 08684474
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021
01
CONTENTS
1
Introduction
2
Reports
06
13
31
35
50
55
63
72
78
85
About Xeros
Our Technologies
Chairman’s Statement
Chief Executive Officer’s Review
Chief Financial Officer’s Review
Strategic Report
Directors’ Report
Directors’ Remuneration Report
Corporate Governance Report
Statement of Directors’ Responsibilities
Auditor’s
3
Report
89
Independent Auditor’s Report to the Members
of Xeros Technology Group plc
4
Financial
Statements
106
Consolidated Statement of Profit or Loss and
Other Comprehensive Income
108
110
112
114
148
150
151
Consolidated Statement of Changes in Equity
Consolidated Statement of Financial Position
Consolidated Statement of Cash Flows
Notes to the Consolidated
Financial Statements
Company Statement of Changes in Equity
Company Statement of Financial Position
Notes to the Company Information
XEROS
TECHNOLOGY
SUBJECT: POLYCOTTON
UNDER MICROSCOPE
OBSERVATION:
MIXED POLYMER FIBRES
MAGNIFICATION:
@15.8MM 400X/300μM
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INTRODUCTION
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SECTION 1
INTRODUCTION
INTRODUCTION
SECTION 1
Xeros
to the power
of change
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07
A collective
of innovators,
delivering
visible solutions
for the invisible
issues facing
our planet.
XEROS
TECHNOLOGY
SUBJECT:
MIXED FIBRES
OBSERVATION:
CLUMP OF NATURAL AND MAN MADE FIBRES
MAGNIFICATION:
@19.1MM 400X/300μM
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INTRODUCTION
INTRODUCTION
SECTION 1
FOR THE PROBLEMS
WE CAN’T SEE,
A DIFFERENCE WE CAN
Microplastics in the sea. Aquifers deplete faster than they recharge.
Sometimes the biggest problems are the ones we can’t see. We shed light
on issues that are affecting our planet, and the big ideas it takes to solve
them.
We are a collective of innovators who believe in a future where limited
resources are no longer limited. So far, our technology has saved millions
of litres of water and could prevent billions of microfibres from ending up
in our oceans.
Launching our textiles technologies is just the beginning of our long-
term mission to reduce waste wherever possible.
XEROS
TECHNOLOGY
SUBJECT:
FILTER MIXED FIBRES
OBSERVATION:
POLYESTER + COTTON FIBRES CAUGHT ON MESH
MAGNIFICATION:
@20.2MM 800X/100μM
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OUR TECHNOLOGIES
Filtration, Care, Finish
Xeros is revolutionising the way we
make and care for our clothes.
Our textile technologies have been
developed as part of our ongoing
mission to innovate new solutions to
reduce waste wherever possible.
We show what’s
possible, and
our partners
make it scalable.
Through our
technologies, we
welcome a world
of profound
possibility.
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Even on an eco-setting, washing our
clothes releases 700,000 microfibres
with every wash. Those tiny fibres can
have a lasting impact. They end up in
our oceans, in our food chain and our
water supply.
Our Filtration technology, XFilter,
can be integrated into a washing
machine for the home, or built at a large
scale for industry. It stops over 90%
of microfibres from ever entering our
oceans.
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INTRODUCTION
INTRODUCTION
SECTION 1
XEROS COMMERCIAL XF2 FILTER
XF1 FILTRATION TECHNOLOGY
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INTRODUCTION
INTRODUCTION
SECTION 1
Xeros Care
What if we told you that you can
do your laundry using less water?
Using only half the energy and half the
chemicals? And that the fabric would
look newer, lasting half its lifetime again
in your wardrobe.
Our Care technology uses XOrbs,
reusable polymer spheres, to wash
and care for clothes. It’s scalable from
domestic washes to heavy industrial
use, and it’s designed to save 10’s of
millions of litres of water every year.
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XEROS
TECHNOLOGY
SUBJECT:
WOOL
OBSERVATION:
KNITWEAR IN XORB WASH
MAGNIFICATION:
GF 120MM ƒ/4.0
1.1
SECTION 1
INTRODUCTION
INTRODUCTION
1.1
SECTION 1
XC1 CARE TECHNOLOGY
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INTRODUCTION
INTRODUCTION
SECTION 1
Xeros Finish
Making one pair of jeans can use
up to 10 years worth of drinking water
for one person. Chemicals used in
the process escape with wastewater
polluting our planet. Today, jeans are
still made using pumice stones, which
constantly need replacing and create
chemically contaminated sludge.
Our XFN technology uses patented
reusable XOrbs to replace pumice, and
reduces water and chemistry use by up
to 50%.
XEROS
TECHNOLOGY
SUBJECT:
XORBS AND DENIM
OBSERVATION:
JEANS IN XORB WASH
MAGNIFICATION:
GF 120MM ƒ/4.0
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SECTION 1
INTRODUCTION
INTRODUCTION
INTRODUCTION
INTRODUCTION
SECTION 1
SECTION 1
XEROS DOMESTIC XF1 FILTER
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025025
XFN1 FINISH TECHNOLOGY
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CARE
FINISH
A Journey To Better
90%
50%
REDUCTION OF MICROFIBERS
WATER SAVING
30%
30%
ENERGY SAVING
DETERGENT SAVING
WE ARE CONSTANTLY DEVELOPING OUR TECHNOLOGY. SO FAR, THESE ARE THE
RESULTS FROM FILTRATION, FINISH AND CARE TECHNOLOGIES.
ALL PERCENTAGES ARE UP TO FIGURES
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REPORTS
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SECTION 2
1.1
REPORTS
PAGE TITLE
REPORTS
SECTION 2
CHAIRMAN'S
STATEMENT
Dear Shareholder,
In Amazon’s 2000 Annual Report, Jeff Bezos mused about the total
disconnect between the progress of Amazon’s business and the trajectory
of its share price. Today I observe the same at Xeros. Amazon’s share price
was down 80% YoY, whereas the business had made very significant
progress on all main metrics. Today, Xeros’ shares are showing a similar
trend, yet the Company has made tremendous progress over the past 12
months. The analogy with Amazon is, however, far from perfect. Amazon
was able to communicate quantifiable financial and commercial metrics,
whereas, in the case of Xeros, most of the progress, although substantial,
is less quantifiable, and we are not in a position to communicate specifics
(yet).
Long term trends do remain very favourable for Xeros. France has
legislated for mandatory in-machine filtration devices from 2025 and in
the UK similar legislation is in preparation. Expectation is that the EU and
the US (led by California) will follow. In parallel, the unsustainable
ecological footprint of the fashion/apparel industry is coming under
increasing public scrutiny. And finally, the shift towards ESG investing will
continue in spite of issues around greenwashing.
The nearer term external environment, however, remains out of our
control, very challenging and unpredictable: Covid continues to disrupt
operations in China, there is a major war going on in Europe, supply chains
remain stretched, and we have rampant inflation. In 2021, Xeros’ partners
in India and China continued to suffer significant delays in their efforts to
commercialise Xeros’ technology, with very little ability for Xeros to
support those partners on the ground. This has negatively impacted our
pathway to profitability.
XEROS
TECHNOLOGY
SUBJECT:
WATER AND DENIM
OBSERVATION:
JEANS IN LOW WATER WASH
MAGNIFICATION:
GF 120MM ƒ/4.0
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For me personally, the main commercial highlights over the past 12
months were:
-------
-------
-------
-------
IFB launching in commercial laundry
Signing of first XFilter licensing deal with Hanning
Continued progress with IFB towards their domestic laundry
launch in 2022, with much better visibility of their timelines
Start of commercial use of Xeros’ denim Finishing
technology by two suppliers in Bangladesh serving two
different global high street brands
I also want to highlight the refresh of Xeros’ purpose, brand and
positioning, which we undertook to strengthen our external presence and
visibility to help widen and accelerate the market adoption of our portfolio
of solutions. This work has also re-energised the entire company internally
following the challenges resulting from Covid.
In addition to ongoing commercial execution, two important areas of
focus for the board in 2022 are funding and company leadership. As is
clear from our announcement on 31 March 2022, the Company will require
further financing before the anticipated breakeven in 2024. The board
decided not to initiate a fundraise immediately following that
announcement, as it wanted to provide more evidence regarding the path
to profitability. As it relates to leadership, in March 2022, our CEO Mark
Nichols announced his desire to transition to a portfolio Career, after six
and a half years at the helm of Xeros. The board is extremely grateful for
Mark’s leadership, under which the company transitioned to a licensing
business model and created the XFilter platform, for his ongoing
commitment to the business and for the amount of notice provided, which
should give ample time to attract a suitable successor to guarantee a
seamless transition.
Finally, a thank you to all our staff, management, Directors,
shareholders and commercial partners for supporting us during two
challenging years dominated by Covid. Your support has been and will
remain critical to bring these important solutions to market at scale.
KLAAS DE BOER, CHAIRMAN ------- 24 JUNE 2022
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CHIEF EXECUTIVE
OFFICER’S REVIEW
2021 was a year of mixed fortunes for Xeros with Covid related
lockdowns delaying the commercial progress of our existing licensees in
contrast with the rapid development of prospective licenses of our
filtration technology. Encouragingly, our South Asian partners are now free
of lockdowns but not so our Chinese partner. Both regions continue to
suffer major supply chain shortages and long lead times. Thus, our
licensing revenues are behind where we planned them to be but
importantly our prospects are unchanged in terms of achieving wide
geographic take-up of all our technologies. Technologies which improve
the cost and environmental sustainability performance of the apparel
industry which is one of the most resource consuming and polluting
industries in the world.
The voices of stakeholders, including consumers, to reduce the
impact of our clothing on our planet have continued to grow louder.
Demands for reduced water usage, lower energy consumption and less
microplastic pollution from the manufacture and cleaning of clothes have
increased to the point that these secular trends are now mainstream with
brands conspicuous if they are not genuinely making improvements.
COP26 gave further impetus to calls to action for every enterprise to
become accountable with hard measures.
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A key theme for Xeros over recent years has been learning how to
navigate and then convert the significant global enterprises that will
ultimately be the drivers of widespread adoption of our technology.
Whether we are addressing the very largest apparel retailers or the very
largest washing machine manufacturers in the world, the challenges of
how our team of 45 people can educate, influence and change the
behaviour of some of the world’s largest companies is one that we have
wrestled with. We have seen very clearly that it takes time, patience and
resilience on our part but ultimately the clear evidence of the benefits of
our technology does win through and we have made strong progress in
the level of engagement with these organisations during the year.
In 2021, Xeros raised £9.0m, before expenses, from strategic and
financial investors with the funds applied to winning and executing license
contracts for our two platform technologies, XTend (the combination of
XOrbs used in an XDrum) and XFilter. During 2021 and the first half of
2022, the business has invested in a new visual identity to boldly reflect
the clear and compelling purpose of the Company and why we do what
we do. This new visual identity is embodied in the new style Annual Report
and allows us to confidently present ourselves to the outside world.
Multiple stakeholders, including apparel brands, washing machine
manufacturers, garment finishing machine manufacturers, environmental
activists, government regulators and, above all, consumers, will be able to
get a clear picture of the solutions brought to the world by Xeros’
technologies and to increasingly demand them.
These solutions are now presented under three product names:
-------
-------
-------
Care (XC): this covers Xeros’ XTend cleaning technologies in
domestic and commercial laundry markets and highlights
the emphasis on garment and fabric life extension brought
by our technology.
Finish (XFN): this covers Xeros’ XTend garment Finishing
technology as currently used in the denim Finishing market.
Filtration (XF): this covers Xeros’ XFilter filtration technology
used to capture over 90% of microfibre pollution from
laundry processes.
replace with TECH IMAGE
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CARE BUSINESS REVIEW
COMMERCIAL LAUNDRY
The Commercial Laundry market has traditionally been the proving ground
of our Care technology platform, and we initially targeted India and China
as the territories for its deployment, given that both countries have a
great need and receptivity for water saving technology. Whilst the
evidence and the environmental, performance and economic benefits
have been verified both by independent testing agencies and by initial
customers, the Covid pandemic had a major impact on the near-term
sales of our licensees in the year.
Xeros addresses the commercial laundry market though two
channels; firstly, through OEM license partners manufacturing and selling
XC machines directly to their customers in nominated territories (i.e. India
and China) and secondly, in other parts of the world, through licensed
distributors who sell XC machines purchased from our OEM license
partners. Xeros sells XOrbs to OEM license partners and licensed
distributors.
As regards our OEM license partners, both Jiangsu SeaLion
Technology Developments Company (“SeaLion”) in China and IFB
Industries Limited (“IFB”) in India have launched two sizes of XC machines
in their markets with plans to add a third to each of their ranges. The
market segments they plan to address include hospitality, which will likely
continue to be impacted by Covid until travel returns to previous levels in
their respective countries. Their response is to address other sectors
offering high growth opportunities including the performance workwear
market, industrial linen launderers and dry cleaners. The current and
additional machine sizes address these opportunities directly.
In February 2022, Georges SAS (“Georges”) in France renewed their
contract with us to purchase commercial laundry machines from IFB and
XOrbs from us. IFB XC machines are now working in a number of their
sites with additional machine orders expected to meet the requirements
of SNCF. Georges services the nationwide fleet of SNCF’s workwear along
with contracts with Air France and other large French workwear garment
users.
During the remainder of 2022, we plan to initiate further licensing
discussions in the commercial laundry market on a selective geographic
basis.
XEROS
TECHNOLOGY
SUBJECT:
XORB
OBSERVATION:
POLYMER TEXTURED SURFACE
MAGNIFICATION:
@59.6MM 30X/4MM
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CARE BUSINESS REVIEW
DOMESTIC LAUNDRY
We address the domestic laundry market using a scaled down version of
the same XC technologies used in the commercial laundry market. Whilst
the 100 million domestic machines sold each year are used far less often
than industrial equivalents, consumers have very high expectations in
terms of their ease of use, performance and increasingly, their
environmental impact. In addition to reducing the water, energy and
detergent used in the washing of clothes, studies have demonstrated that
Xeros’ Care laundry technology also makes them look better and last
longer. This enables consumers to extend the life of their garments,
allowing consumers to choose to reduce the environmental impact of
buying new clothes.
Our first license partner for this application is IFB in India, the
second largest domestic washing machine company in India by sales
volume, with over 500 consumer appliance stores across the country as
well as its own online operation. Prior to Covid, IFB had planned to
commence selling XC front-loading washing machines in 2021. IFB’s plans
are now that this will occur in Q4 of 2022. Prior to this market launch, IFB
will place an order for XOrbs with Xeros to meet their market entry needs
with. BASF will produce these in Germany in Q3.
A successful launch in India of our domestic XC technology will be
a pivotal moment for Xeros, not just in giving a clear line of sight to a
significant future revenue stream but, as importantly, it will be key to
unlocking wider adoption by the industry and we continue our
engagement with other major manufacturers with a view to increasing the
number of licenses for this application in the course of 2023.
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XEROS
TECHNOLOGY
SUBJECT:WATER IN
WASHING MACHINE
OBSERVATION:
CLOSE UP OF WATER
MAGNIFICATION:
GF 120MM ƒ/4.0
FINISHING BUSINESS REVIEW
DENIM FINISHING
The denim market is of global scale with 1.2 billion pairs of jeans
manufactured each year, with many different finishes required to meet
consumer demand. Each pair of jeans exacts a heavy toll in terms of high
levels of water consumption with many still made using pumice stone,
which has a significant environmental impact during the manufacturing
process. Xeros’ solution simplifies the finishing process by completing all
finishing steps within one machine eradicating the use of pumice and
using less chemistry and water with a commensurate reduction in
effluent. Our solution thereby meets the secular trends of this industry to
make the manufacturing process of these garments greener, quicker and
cheaper.
Since our last Annual Report was published, the Xeros team has
been working with our OEM license partner, Ramsons Garment Finishing
Equipments PVT Ltd (“Ramsons”) and Aba Group, a manufacturer of
denim jeans for some of the world’s largest retail brands, based in
Bangladesh. This work, much of it conducted remotely during Covid
lockdowns, has seen the team successfully complete a series of trials of
Xeros’ technology in “real world” production environments.
In early 2022, Xeros and Ramsons extended these trials to a
number of other leading denim manufacturers in Bangladesh, and, to date,
Xeros’ technology has successfully been used in the production of jeans
for two of the world’s largest retail brands, with these jeans deemed to
have been manufactured at sufficiently high quality to be sold to
consumers by the retail brands. These trials not only validated the quality
of denim finishing for retail brands but also validated all our stated
resource and cost reductions. Currently, Xeros is producing denim
samples for a third major global retailer. Whilst not yet significant in terms
of volumes, there are now denim jeans manufactured with Xeros’ Finish
technology being sold to consumers.
Our main focus now is to work with the major brands, across their
production, sustainability and procurement teams, to elicit a positive
brand endorsement of our technology with the end goal of a brand
advocating the use of Xeros Finish technology across their supply chains.
The investment in our brand and messaging is clearly aimed at raising
awareness of our solutions across the apparel industry.
With this market validation of our technology, our intention is to
initiate discussions for additional license contracts during 2022 and
beyond as part of our ambition to eradicate all pumice from denim
manufacturing.
LEATHER TANNING
An additional application of this technology is found in the leather
tanning market. In 2019 Xeros spun off the leather tanning business to the
then management team, operating under the Qualus brand. Since 2019,
the Qualus team have successfully attracted external investment to their
business and are now operating in Mexico, Brazil, India and markets in
Asia with initial revenues flowing. Under the terms of the original sale of
the business in 2019, Xeros will receive royalty income based on Qualus’
revenue from 2022 and, whilst not expected to be material in the short
term, it is encouraging to see this application of our technology making
progress through adoption in a scale industry.
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FILTRATION BUSINESS REVIEW
The world now understands and is reacting to the threat caused by
microfibres entering the world’s rivers and oceans, with its largest source
being the washing of clothes at home. Our proprietary XFilter product
design is over 90% efficient in collecting synthetic and natural fibres from
all sizes of machines with the resultant filtride disposed of easily and
simply into commercial or household solid waste, thereby removing them
from water-borne waste which ultimately ends up in rivers and oceans.
Since January 2021, Xeros has achieved a number of major
milestones towards fulfilling its ambition for XFilter to become the
microfibre Filtration technology of choice for the washing machine
industry. The first milestone was the completion in the middle of the year
of a product design which meets consumer performance requirements in
terms of efficiency, cost and usability. This design has been used to
engage with multiple parties with the result that in July 2021, Xeros signed
a Testing and Trials agreement with one of the world’s largest domestic
washing machine manufacturers headquartered in Asia. The contractual
programme of work with this manufacturer is progressing as planned. As
part of this programme, Hohenstein, a highly respected testing institute
for the textile industry, has accredited Xeros’ Filtration device, XFilter, with
the highest level of performance, capturing over 99% of microplastics
released in a wash cycle.
Also in July 2021, a Co-operation Agreement was signed with
Hanning Elektro-Werke GmbH & Co. KG (“Hanning”) who are a major
supplier of machine parts to the appliance industry. Progress under this
agreement led to the signature of our first Technology Licensing
agreement in June 2022 whereby Hanning will market, produce and sell
XFilter units on a global, non-exclusive basis to washing machine
manufacturers. Hanning will pay Xeros a royalty for each unit sold. Xeros is
also engaged with a number of additional large brands with a view to their
adoption of XFilter within their washing machines.
In June 2021, Xeros signed a license agreement for its commercial
washing machine version of the XFilter technology with Girbau S.A. under
which they will pay a royalty per device for sales on an exclusive basis in
territories including Europe and North America and with non-exclusive
rights for certain other territories. We anticipate their entering the markets
with XFilter products in mid-2023 with products manufactured for them
by a licensed third party.
XEROS
TECHNOLOGY
SUBJECT: SYNTHETIC
MICROFIBRES
OBSERVATION:
CLUMPS OF UNNATURAL FIBRES
MAGNIFICATION:
GF 120MM ƒ/4.0
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In parallel to these activities, our filtration scientists have been working
closely with the UK government advising on microfibres, their filtration in
laundry environments and appropriate standards for their capture from
effluent streams. Legislation is expected to be put in place for the
mandatory fitting of filters within domestic and commercial machines
sold in the UK from the beginning of 2025, the same timescale as French
legislation.
INTELLECTUAL PROPERTY
The IP-rich and asset-light commercialisation business model is
founded upon a strong and defendable patent portfolio which provides
freedom to operate and protection for us and for our license partners. Our
technologies are protected by close to 40 patent families which are in
application or have been granted with key patent lives extending through
mid to late 2030s. Our policy is to file patents in countries with large
potential markets and where we believe we can successfully defend our
intellectual property. In overall terms, our core patents are filed in
countries which represent 90% of global GDP. During 2021, the majority of
new patent filing activities were in the area of XFilter, the design of which
has been enhanced significantly to cover methods of integration within
washing machines. We also filed a limited number of patents to protect a
position in areas of future potential interest which are consistent with our
business mission to reduce the impact of clothing on our planet.
In order to have the financial capacity to defend its patent portfolio,
Xeros carries significant levels of patent defence and litigation insurance.
We have
provided
governments
with scientific
advice on
effective
microfibre
filtration.
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OUTLOOK
2021 was a year in which our license and development partners made
continued progress in spite of the ongoing impacts of the Covid pandemic
in their countries. In June 2022 we achieved a notable landmark with our
XFilter technology being licensed for the first time into the domestic
washing machine market. With the evidence from our licensing of both our
Care and Filtration platforms, Xeros plans to increase the number of
license agreements in countries with great need of the benefits that our
intellectual property bestows.
The £9.0m funds raised in an oversubscribed placing and open offer
in March 2021 continue to be applied to winning additional contracts in
each of our application areas with the expectation that a number of new
agreements will be signed in 2022. Our marketing investment will amplify
the reach of our proposition and accelerate new license agreements.
Whilst it is difficult to predict with certainty the timeframe to cash
breakeven due to the nature of our business model whereby our revenue
is effectively entirely in the hands of third parties, we estimate that with
existing and targeted contracts, Xeros will achieve EBITDA profitability
and cash breakeven in 2024. Key to this is the assumption that the impact
of Covid, especially in South Asia, is significantly below that experienced
in 2020 and 2021.
As of 31 May 2022, the Group held cash of £4.3m. In our trading
update published on 31 March 2022 we stated that we expect to require
further investment to fund the business through to cash breakeven and
the board is currently working on plans to achieve this investment.
MARK NICHOLS, CHIEF EXECUTIVE OFFICER ------- 24 JUNE 2022
048
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021
049
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021
049
XEROS
TECHNOLOGY
SUBJECT:
WOOL
OBSERVATION:
KNITWEAR IN XORB WASH
MAGNIFICATION:
GF 120MM ƒ/4.0
SECTION 2
REPORTS
REPORTS
SECTION 2
1.1
CHIEF FINANCIAL
OFFICER’S REVIEW
The financial results in 2021 reflect the first full year of operating as
a pure-play licensing business, having completed the disposal of directly
operated businesses in 2020. Whilst the impact of Covid restrictions in
India and China adversely affected the ability of our license partners to
sell commercial laundry and denim Finishing machines incorporating the
Group’s technology, license partner sales were made in the second half of
the year, driving revenue growth and margin increase.
Future revenue growth is dependent on the pace of commercial
adoption of products incorporating the Group’s technology platforms in
their respective markets. The Group’s licensing business model does not
require administrative expenses to increase in line with revenue growth,
thereby creating future operating leverage to drive the business to
profitability as revenue increases in future years. The Group’s current view
is that licensing partners will generate sufficient revenue to deliver Group
profitability in 2024.
Further information on these financial results is provided below.
Group revenue increased by 23.1% to £0.5m in the year ended 31
December 2021 (2020: £0.4m). With the implementation of the Group’s
licensing model, the revenue mix is changing with revenue now derived
from two principal sources:
1. Licensing revenue: reflecting royalty payments from license partners
and up-front fees for access to group intellectual property.
2. Sale of goods: reflecting sales of XOrbs to license partners and sales of
machines in Europe on behalf of license partners.
050
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021
XEROS TECHNOLOGIES -------- ANNUAL REPORT -------- DEC 2022
051
051
Group revenue
was generated
as follows:
Year ended 31
December 2021
£’000
Year ended 31
December 2020
£’000
Service Revenue
Licensing Revenue
Sale of Goods
Other
Total Revenue
190
124
155
5
474
314
58
8
5
385
The group continues to receive service revenue related to the
retained estate of commercial laundry machines in the UK and Europe. As
the licensing model grows, this service revenue is expected to become a
smaller part of the overall revenue mix.
Licensing revenue in the period was £0.1m (2020: £0.1m), a growth of
113.8%; revenue from sale of goods was £0.2m in the period (2020: £0.0m),
a growth of 1,837.5%. With the change in revenue mix, service revenue in
the period was £0.2m (2020: £0.3m), a reduction of 39.5%.
The change in revenue mix towards licensing drove an increase in
gross profit in the period to £0.3m (2020: £0.0m), resulting in a gross
margin of 59.3% (2020: -12.7%).
The roup reduced its adjusted EBITDA loss by 7.1% to £6.3m (2020:
loss £6.8m).
Gross profit/loss and adjusted EBITDA are considered the key
financial performance measures of the group as they reflect the true
nature of our trading activities. Adjusted EBITDA is defined as the loss on
ordinary activities before interest, tax, share-based payment expense,
depreciation and amortisation.
Administrative expenses, reduced by 4.8% to £7.2m (2020: £7.6m).
This reflects a 16.7% reduction in headcount during the year with the
average number of operational staff in the year to 31 December 2021
falling to 40 (2020: 48).
The Group reported an operating loss of £6.9m (2020: loss £7.6m), a
reduction of 9.1%. The loss per share was 28.11p (2020: loss 44.88p).
Net cash outflow from operations reduced to £5.8m (2020: £6.3m)
from a combination of reduced cash used in operations, £6.3m (2020:
£6.9m) and the receipt of £0.5m R&D tax credits from HMRC relating to
2020. Cash utilisation was in line with the Board’s expectations.
The Group had existing cash resources, including cash on deposit,
as at 31 December 2021 of £7.8m (2020: £5.2m) and remains debt free.
Group cash as at 31 May 2022 was £4.3m. The Going Concern statement
on page 82 draws attention to the Directors’ views on the uncertainty of
future funding and the key assumptions behind the preparation of these
accounts on a going concern basis.
PAUL DENNEY, CHIEF FINANCIAL OFFICER ------- 24 JUNE 2022
052
053
REPORTSSECTION 2REPORTSSECTION 2XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021 SECTION 2
REPORTS
REPORTS
SECTION 2
STRATEGIC REPORT
Principal Activity: Xeros Technology
Group plc (LN: XSG) has developed
textile technologies as part of an
ongoing mission to innovate new
solutions to reduce waste wherever
possible.
Our Care and Finish technologies use patented, reusable XOrbs™ housed
in our engineered XDrum™ for minimum disruption. Together, these
components significantly reduce the amount of water and chemistry used
in the dyeing, finishing or laundering of garments and fabrics. They
increase the efficiency of these processes which require molecules to be
either affixed or removed from substrates. In the case of laundry, they are
proven to significantly increase the life of clothes and fabrics. The results
being major improvements in economic, operational, product and
environmental outcomes.
The Group has signed multiple license agreements for its Care and
Finish technologies with leading OEMs in major commercial and domestic
markets.
XFilter™ is the Company’s proprietary washing machine Filtration
technology which prevents harmful microfibres including microplastics,
generated during washing cycles, from being released into the world’s
rivers and oceans. Microfibres released into the environment from
clothing and fabrics during their laundering, being a major source of
pollution in the environment and contamination in the food chain.
The Company is incorporated and domiciled in the UK.
054
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021
055
SECTION 2
REPORTS
REPORTS
SECTION 2
BUSINESS MODEL
A description of the Group’s activities and how it seeks to create added
value is included in the Chairman’s statement, Chief Executive Officer’s
review and Chief Financial Officer’s review on pages 35-55.
BUSINESS REVIEW AND RESULTS
A review of the Group’s performance and future prospects is included in
the Chairman’s statement, Chief Executive Officer’s review and Chief
Financial Officer’s review on pages 31-55. The loss for the year attributable
to equity holders was £6.4m (2020: £7.0m). The Directors do not
recommend the payment of a dividend (2020: nil).
KEY PERFORMANCE INDICATORS
As the Group is in the process of commercialising its platform
technologies, the Directors consider the key quantitative performance
indicators to be: the level of cash and deposits held in the business of
£7.8m (2020: £5.2m), gross profit/loss and adjusted EBITDA. Adjusted
EBITDA is defined as the loss on ordinary activities before interest, tax,
share-based payment expense, depreciation and amortisation. Adjusted
EBITDA is discussed in more detail in the Chief Financial Officer’s review
on pages 50-55. The board performs regular reviews of actual results
against budget, and monitors cash balances on a regular basis to ensure
that the business has sufficient resources to enact its current strategy.
Certain qualitative measures, such as the performance of commercial
initiatives, are also monitored on a regular basis. The board will continue
to review the KPIs used to assess the business as it grows.
056
XEROS TECHNOLOGY REPORT PLC -------- ANNUAL REPORT -------- DECEMBER 2021
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021
057
XEROS
TECHNOLOGY
SUBJECT:
XORBS
OBSERVATION: SCIENTISTS
WORKING WITH XORBS
MAGNIFICATION:
GF 63MM ƒ/4.0
KEY RISKS
The board Carefully considers the risks facing the Group and endeavours
to minimise the impact of those risks. The key risks are as follows:
INTELLECTUAL PROPERTY
The Group’s success will depend in part on its
ability to maintain adequate protection of its
intellectual property, covering its processes and
applications. The intellectual property on which
the Group’s business is based is a combination
of patent applications and proprietary know-how.
No assurance can be given that any pending
patent applications or any future patent
applications will result in granted patents, that
any patents will be granted on a timely basis, that
the scope of any patent protection will exclude
competitors or provide competitive advantages
to the Group, that any of the Group’s patents will
be held valid if challenged, or that third parties
will not claim rights in, or ownership of, the
patents and other proprietary rights held by the
Group.
There can be no assurance that others
have not developed or will not develop similar
products, duplicate any of the Group’s products
or design around any patent applications held by
the Group. Others may hold or receive patents
which contain claims having a scope that covers
products developed by the Group (whether or not
patents are issued to the Group). In addition, no
assurance can be given that others will not
independently develop or otherwise acquire
substantially equivalent techniques or otherwise
gain access to the Group’s unpatented
proprietary technology or disclose such
technology or that the Group can ultimately
protect meaningful rights to such unpatented
technology.
THIRD PARTY INTELLECTUAL
PROPERTY
Although the board believes that the Group’s
current products, products in development and
processes do not infringe the intellectual
property rights of any third parties, it is
impossible to be aware of all third party
intellectual property. No assurance can be given
that third parties will not in the future claim
rights in or ownership of the patents and other
proprietary rights from time to time held by the
Group. As detailed above, substantial costs (both
financially and in management time) may be
incurred if the Group is required to defend its
intellectual property.
RESEARCH AND DEVELOPMENT RISK
The Group is involved in new product and
applications development. Although the Group
has now developed a number of commercial and
marketable products and applications, some of
the Group’s technology and intellectual property
portfolio is at an early stage of commercial
development and there is no guarantee that the
Group will continue to be successful in
commercialising its products and applications
development. The Group may not be able to
develop and exploit its earlier stage technology
sufficiently to enable it to license its
technologies. Furthermore, the Group may not be
able to develop new applications or identify
additional market needs that can be addressed
by the Group’s technology.
Any claims made against the Group’s
RISK OF COMPETING TECHNOLOGY
intellectual property rights, even without merit,
could be time consuming and expensive to
defend and could have a materially detrimental
effect on the Group’s resources.
There is a risk that technological advances in
competing technology and/or the lower cost of
such technology may impede the commercial
exploitation of the Group’s technology.
ACCEPTANCE OF THE
GROUP’S PRODUCTS
The success of the Group will depend on the
market’s acceptance of, and attribution of value
to, its core technologies and the benefits of
incorporating the same into various applications.
There can be no guarantee that this acceptance
will be forthcoming, that an acceptable value will
be placed upon such technology or that the
Group’s core technology will succeed as an
alternative to other applications.
COMMERCIALISATION RISK
The Group has and will continue to enter into
arrangements with third parties in respect of the
development, production and commercialisation
of products based on its technology. The Group’s
negotiating position in agreeing terms of either
joint development, licensing, service or supply
arrangements may be affected by its size and
limited cash resources relative to potential
development partners with substantial cash
resources and established levels of commercial
success. An inability to enter into or renew such
arrangements on favourable terms, if at all, or
disagreements between the Group and any of its
potential partners could lead to delays in the
Group’s commercialisation strategy.
EARLY STAGE OF OPERATIONS
Whilst the Group has made initial limited
licensing agreements and product sales, it is still
at an early stage of development. There are a
number of operational, strategic and financial
risks associated with such early stage
companies. In particular, the Group’s future
growth and prospects will depend on its ability to
develop and license products and services for
applications which have sufficient commercial
appeal, to manage growth and to continue to
develop operational, financial and quality control
systems on a timely basis, whilst at the same
time maintaining effective cost controls. Any
failure to develop operational, financial and
management information and quality control
systems in line with the Group’s growth could
have a material adverse effect on its business,
financial condition and results of operations.
The Group is currently loss making and there can
be no certainty that the Group will achieve
increased or sustained revenues, profitability or
positive cash flow from its operating activities
within the timeframe expected by the board, or at
all. The development of the Group’s revenues is
difficult to predict and there is no guarantee that
it will generate any material revenues in the
foreseeable future. The successful
commercialisation of the Group’s technology
may rely, in part, on the ability of the Group to
raise further finance. While the Group has been
successful to date in raising funds as required,
there can be no guarantee that a future fundraise
will be successful.
COMPETITION RISK
There is a risk that technological advances in
competing technology and/or the lower cost of
such technology may impede the commercial
exploitation of the Group’s technology. This
would have a significant adverse effect on the
Group’s business.
THIRD PARTY RISK
The majority of products incorporating the
Group’s technology are in the early to mid-stages
of being produced on a fully commercial scale.
As a result, the Group is dependent on its
commercial partners to demonstrate the ability
to scale up such production. Failure to operate
production at an increased capacity may have a
material adverse effect on the growth of the
Group’s business and its financial position.
The Group is dependent on a limited
number of key suppliers in relation to the
production of its polymer based XOrbs. Should
any such key supplier cease to deal with the
Group for any reason and/or materially and
adversely change the terms upon which it deals
with the Group, difficulties may be experienced
by the Group in sourcing alternative suppliers on
acceptable terms. Any such disruption to the
Group’s supply arrangements may have a
material adverse effect on the growth of the
Group’s business and its financial position.
058
059
REPORTSSECTION 2REPORTSSECTION 2XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021 The Group operates, or is seeking to develop its
operations, in several geographic regions and
countries, some of which are categorised as
developing and, as a result, is exposed to a wide
range of political, economic, regulatory, social
and tax environments. These environments are
subject to changes in a manner that may have a
material adverse effect on the Group, including
changes to government policies and regulations
governing import and export controls, tariffs,
subsidies, income and other forms of taxation
(including policies relating to the granting of
advance rulings on taxation matters), repatriation
of income, royalties, the environment, labour and
health and safety. The geopolitical risks
associated with operating in a variety of regions
and countries, if realised, could affect the Group’s
operations and could have a material adverse
effect on the Group’s business, financial
condition or results.
FOREIGN EXCHANGE RISK
Given the international nature of its business, the
Group is exposed to foreign exchange risk arising
from the normal conduct of its activities. The
board regularly reviews this foreign exchange risk
and all forward currency purchases of foreign
currency are reviewed and approved within the
framework of an agreed risk policy.
DEPENDENCE ON KEY EXECUTIVES
AND PERSONNEL AND THE ABILITY TO
ATTRACT AND RETAIN APPROPRIATELY
QUALIFIED PERSONNEL
The Group’s future success is substantially
dependent on the continued services and
performance of its executive Directors and
senior management, and its ability to attract and
retain suitably skilled and experienced personnel.
The Group cannot give assurances that
members of the senior management team and
the executive Directors will continue to remain
within the Group. Finding and hiring any such
replacements could be costly and might require
the Group to grant significant equity awards or
other incentive compensation, which could
adversely impact its financial results.
ECONOMIC CONDITIONS,
CURRENT ECONOMIC WEAKNESS
AND GEOPOLITICAL RISKS
Any economic downturn either globally or locally
in any area in which the Group operates may
have an adverse effect on the demand for the
Group’s products. A more prolonged economic
downturn may lead to an overall decline in the
volume of the Group’s sales, restricting the
Group’s ability to generate a profit.
As a UK domiciled business, the Group is
exposed to the risks associated with the UK’s
decision to leave the EU (“Brexit”). The board
expects future revenues from the
commercialisation of its technology in the EU to
be in the form of royalties on its intellectual
property. The international patent laws that apply
to the protection of intellectual property are not
affected by the status of the UK’s membership of
the EU and, therefore, the board does not view
Brexit as posing a material risk to the Group’s
future revenues.
Travel restrictions and the associated disruption
of Covid have caused a significant level of
economic uncertainty on a global basis. Any
continued disruption may have a negative impact
upon the Group’s ability to work closely with
international license partners.
FUTURE DEVELOPMENTS
Future developments are described in the Chairman’s statement, Chief
Executive Officer’s review and Chief Financial Officer’s review on pages
31-55.
STATEMENT IN RESPECT OF SECTION 172
OF THE COMPANIES ACT 2006
Under section 172 of the Companies Act 2006, the Directors of Xeros
Technology Group plc have a duty to promote the success of the Group
for the benefit of the members as a whole and, in doing so, have regard to:
i. the likely consequences of any decision in the long term;
ii. the interests of the Company’s employees;
iii.
the need to foster the Company’s business relationships with
suppliers, customers and others;
iv. the desirability of the Company maintaining a reputation for high
standards of business conduct; and
v. the need to act fairly between members of the Company.
The Directors of Xeros Technology Group plc consider the following areas
of key importance in fulfilment of this duty:
— Long-term strategic planning and budgeting to allow the Group
to project a path to creating value for shareholders;
— Continued emphasis on health and safety, with regular and
comprehensive dialogue with employees;
— Open and fair dealings with partners, customers, and suppliers,
leading to long-term mutually beneficial relationships;
— A group built on improving sustainability, with innovative
technologies serving a range of industries.; and
— Consideration of the Group’s operations on the community and
the environment.
The strategic report starting on page 55 was approved by the board and is
signed on its behalf.
MARK NICHOLS, CHIEF EXECUTIVE OFFICER ------- 24 JUNE 2022
060
061
REPORTSSECTION 2REPORTSSECTION 2XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021 1.1
DIRECTORS’ REPORT
DIRECTORS’ REPORT
The Directors hereby present their annual report and audited
consolidated and parent company financial statements for the year
ended 31 December 2021.
SHARE CAPITAL AND FUNDING
Full details of the Group and Company’s share capital movements during
the year are given in note 20 of the financial statements.
DIRECTORS AND THEIR INTERESTS
The following Directors held office during the period and up to the date of
signing this report except where noted otherwise:
— Klaas de Boer
— David Armfield
— David Baynes
— Paul Denney
— Mark Nichols
— Rachel Nooney (appointed 20 July 2021)
Directors’ interests in the shares of the Company, including family
interests are included in the Directors’ Remuneration Report on pages
72-75.
DIRECTORS’ INDEMNITY INSURANCE
The Group has maintained insurance throughout the year for its Directors
and officers against the consequences of actions brought against them in
relation to their duties for the Group.
RACHEL NOONEY, NON-EXECUTIVE DIRECTOR
062
062
XEROS TECHNOLOGIES -------- ANNUAL REPORT -------- DEC 2022
063
063
REPORTSSECTION 2REPORTSSECTION 2XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021 SECTION 2
REPORTS
REPORTS
SECTION 2
DIRECTORS
KLAAS DE BOER, Chairman
Klaas joined Xeros as chairman in January 2020. In June 2021
he left Entrepreneurs Fund, where he had served as
managing partner since 2008. Klaas holds numerous board
positions with international companies including SmartKem,
Inc., General Fusion, Inc. and Vasopharm GmbH. Klaas began
his Career with McKinsey & Company before transitioning to
venture capital with Baan Investment more than 20 years ago.
He holds an MSc in applied physics from Delft University of
Technology and an MBA from INSEAD. Klaas is chair of the
Nominations Committee.
MARK NICHOLS, Chief Executive Officer
Mark joined Xeros as chief executive officer in September
2015. His background is in business development, finance and
operations with global enterprises including Total, Laing
O’Rourke and BOC. Prior to joining Xeros, Mark led a number
of technology start-ups in the clean energy and bio-polymers
sectors.
KLAAS DE BOER, CHAIRMAN
064
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021
065
In March 2022, it was announced that the Group CEO, Mark Nichols, will stand down during 2022.
Mark will remain with the business until 30 September 2022 to oversee the Group’s ongoing
commercialisation process and has committed to a comprehensive and orderly handover to his
successor, for whom a search process is now underway.
REPORTS
SECTION 3
PAUL DENNEY, Chief Financial Officer
and Company Secretary
Paul joined Xeros as chief financial officer in October 2016. He
has a background in international corporate finance working
for companies such as Electronic Data Systems Inc., Experian
plc and Callcredit Information Group. He is a qualified
accountant, holding an MBA from the London Business
School.
DAVID ARMFIELD, Senior Independent Director
David joined Xeros in July 2018. His background is in corporate
finance, having previously worked for Lehman Brothers as its
co-head of European industrial coverage. He has also served
as a partner at PwC, and as the firm’s national head of
industrial products. He is a founding partner of Kinetix
Critchleys Corporate Finance LLP, which provides advisory
services to companies in the Clean Technology and Resource
Efficiency industries. David is chair of the Remuneration
Committee.
066
XEROS TECHNOLOGIES -------- ANNUAL REPORT -------- DEC 2021
067
067
DAVID ARMFIELD, SENIOR INDEPENDENT DIRECTOR
REPORTSSECTION 2REPORTSSECTION 2XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021 DAVID BAYNES, Non-Executive Director
David joined Xeros in February 2019. He was appointed to the
board of IP Group plc in March 2014 following the acquisition
of Fusion IP plc, where he was chief executive officer and one
of the founders. Previously David worked at Celsis
International plc from its incorporation to its flotation on the
full list of the London Stock Exchange in July 1993; Toad plc
(now 21st Century Technology plc), which he also co-founded
where he was responsible for taking the company from start-
up to a full listing on the London Stock Exchange. David was
also chief financial officer of Codemasters Limited, which at
the time was the UK’s largest privately held games company.
David is chair of the Audit Committee.
RACHEL NOONEY, Non-Executive Director
Rachel joined Xeros in July 2021. Her background is in brand
development, strategy, marketing planning, and creative. She
has held senior head of brand and marketing roles at Marks
and Spencer plc and New Look , where she was responsible
for leading brand development, marketing campaigns, digital
and retail marketing, talent, creative and production. Rachel
has worked both client and agency side in marketing, and is
the founder and principal consultant of shoreseven, a brand
and strategic marketing consultancy. Rachel is a member of
CIM and has provided mentorship for marketeers and young
people wanting to develop and break into the creative
industries with both CIM and Creative Mentor Network.
DAVID BAYNES, NON EXECUTIVE DIRECTOR
068
069
REPORTSSECTION 2REPORTSSECTION 2XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021 SUBSTANTIAL
SHAREHOLDERS
As at 31 March 2021, shareholders holding more than 3% of the share
capital of Xeros Technology Group plc were:
Name of shareholder
Number of
shares
% of voting
rights
Entrepreneurs Fund LP
5,767,534
Lombard Odier Investment Managers
3,305,900
IP Group
2,557,629
Canaccord Genuity Wealth Management
2,259,794
Dermot Keane
1,600,000
Richard Griffiths/Ora Ventures
1,449,902
24.3
13.9
10.8
9.5
6.7
6.1
070
EMPLOYMENT POLICIES
The Group supports employment of disabled people where possible
through recruitment, by retention of those who become disabled and
generally through training, Career development and promotion.
The Group is committed to keeping employees as fully informed as
possible with regard to the Group’s performance and prospects and seeks
their views, wherever possible, on matters which affect them as
employees.
DISCLOSURE OF RISKS
The Group’s exposure to price risk, credit risk, liquidity risk and cash flow
risk are discussed in note 17 to the Financial Statements.
RESEARCH AND DEVELOPMENT
The Group is engaged in research and development in respect of current
and future applications of its technologies, improving both existing
processes and developing new ones where appropriate.
KEY DEVELOPMENTS FOLLOWING THE YEAR END
In June 2022, the Group signed its first Domestic XFilter licensing
agreement with Hanning Elektro-Werke Gmbh & Co.KG, a leading
manufacturer of components for the appliance industry.
STATEMENT AS TO DISCLOSURE OF INFORMATION
TO THE AUDITOR
The Directors who were in office on the date of approval of these financial
statements have confirmed that, as far as they are aware, there is no
relevant audit information of which the auditor is unaware. Each of the
Directors have confirmed that they have taken all the steps that they
ought to have taken as Directors in order to make themselves aware of
any relevant audit information and to establish that it has been
communicated to the auditor.
AUDITOR
The board will put Grant Thornton UK LLP forward to be re-appointed as
auditor by the shareholders and a resolution concerning their appointment
will be put to the forthcoming AGM of the Company.
ON BEHALF OF THE BOARD
MARK NICHOLS, CHIEF EXECUTIVE OFFICER –
24 JUNE 2022
UNIT 2, EVOLUTION
ADVANCED MANUFACTURING PARK
WHITTLE WAY, CATCLIFFE
ROTHERHAM, S60 5BL
071
REPORTSSECTION 2REPORTSSECTION 2XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021
DIRECTORS’
REMUNERATION REPORT
TABLE 1 - DIRECTORS’ REMUNERATION
The remuneration of the main board Directors’ of Xeros Technology
Group plc who served from 1 January 2021 (or date of appointment if
later) to 31 December 2021 (or date of resignation if earlier) was:
This remuneration report is not intended to
comply with the quoted company remuneration
reporting requirements in company law and is
provided in order to meet the requirements of
AIM rule 19.
It is the Company’s policy that
executive Directors should have contracts with
an indefinite term providing for a maximum of six
months’ notice. In the event of early termination,
the Directors’ contracts provide for
compensation up to a maximum of basic salary
for the notice period.
Non-executive Directors are employed
on letters of appointment which may be
terminated on not less than one months’ notice.
Companies with securities listed on AIM
do not need to comply with the UKLA Listing
Rules. The Remuneration Committee is, however,
committed to maintaining high standards of
corporate governance and disclosure and has
applied the guidelines, as far as practicable, given
the current size and development of the
Company.
REMUNERATION COMMITTEE
The Remuneration Committee consists of David
Armfield as Chairman, Klaas de Boer and David
Baynes.
The Remuneration Committee will review
and make recommendations in respect of the
Directors’ remuneration and benefits packages,
including share options, and the terms of their
appointment. The remuneration committee will
also make recommendations to the board
concerning the allocation of share options to
employees under the share incentive schemes.
The Remuneration Committee will meet at least
once a year.
The main elements of the remuneration
packages for executive Directors and senior
management are:
BASIC ANNUAL SALARY
(INCLUDING DIRECTORS’ FEES)
The base salary is reviewed annually from the
beginning of each calendar year. The review
process is undertaken by the Remuneration
Committee and takes into account several
factors, including the current position and
development of the Group, individual
contribution and market salaries for comparable
organisations.
Salary
and Fees
£’000
Bonus
Payments
£’000
Benefits
£’000
Total year ended
31 December 2021
£’000
Total year ended
31 December 2020
£’000
Klaas de Boer
(note 1)
Mark Nichols
Paul Denney
David Armfield
David Baynes
(note 2)
Rachel Nooney
(note 3)
70
273
206
35
35
16
–
59
45
–
–
–
–
3
2
–
–
–
5
70
335
253
35
35
16
744
58
364
247
31
30
–
730
DISCRETIONARY ANNUAL BONUS
Total
635
104
All executive Directors and senior managers are
eligible for a discretionary annual bonus which is
paid in accordance with a bonus scheme
developed by the Remuneration Committee. This
takes into account business performance and
commercial progress, along with financial results.
SHARE INCENTIVE SCHEMES
The Group operates share option plans, under
which certain Directors’ and senior management
have been granted options to subscribe for
ordinary shares. All options are equity settled.
The options are subject to service and
performance conditions, have an exercise price
of between 15 pence and 30,500 pence and the
vesting period is generally three years. If the
options remain unexercised after a period of 10
years from the date of grant, the options expire.
The Group has no legal or constructive obligation
to repurchase or settle the options in cash.
REMUNERATION POLICY FOR
NON-EXECUTIVE DIRECTORS
Remuneration for non-executive Directors is set
by the chairman and the executive members of
the board. Non-executives do not participate in
bonus schemes.
Note 1: Klaas de Boer was appointed as a Director on 13 January 2020.
Note 2: Directors fees foar David Baynes are payable to IP Group plc (see note 24 for further details).
Note 3: Rachel Nooney was appointed as a Director on 20 July 2021
TABLE 2 - DIRECTORS’ SHAREHOLDINGS
The interests of the Directors holding office at 31 December 2021 in
the shares of the Company, including family interests were:
Ordinary shares of 15p each
Klaas de Boer
David Armfield
Mark Nichols
Paul Denney
David Baynes
Rachel Nooney
2021
Number
250,000
50,000
87,482
75,000
–
–
2021
%
1.05
0.21
0.37
0.32
–
–
072
073
REPORTSSECTION 2REPORTSSECTION 2XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021
TABLE 3 - DIRECTORS’ INTERESTS IN SHARE OPTIONS
NOTE 1:
Directors’ interests in share options, for Directors who held office at any point during the period,
granted under either the Xeros Technology Group plc Enterprise Management Incentive Share Option
Scheme or the Xeros Technology Group plc Unapproved Share Option Scheme, to acquire ordinary
shares of 15 pence each in the Company at 31 December 2021 were:
At 1
January
2021
Granted
during the
period
Exercised
during the
period
Forfeited/
lapsed
during the
period
At 31
December
2021
Exercise
price
There were employment conditions in relation to
1,000,000 options granted on 12 November 2015
which allowed for vesting in three annual
instalments between 14 September 2016 and 14
September 2018, and a further 250,000 options
granted on 16 December 2015 which allowed for
vesting in three annual instalments between 16
December 2016 and 16 December 2018. As part of
the Group’s share capital reorganisation during
2020, the numbers of options in issue were
reduced by a factor of 100 and the exercise price
increased by a factor of 100, leaving the overall
value of the options unchanged.
NOTE 2:
There were employment conditions in relation to
750,000 options granted on 25 January 2017
which allowed for vesting in three annual
instalments between 25 January 2018 and 25
January 2020. As part of the Group’s share
capital reorganisation during 2020, the numbers
of options in issue were reduced by a factor of
100 and the exercise price increased by a factor
of 100, leaving the overall value of the options
unchanged.
11,401
22,500.0 pence
2,500
21,000.0 pence
5,000
22,500.0 pence
45
15 pence
213,543
70 pence
NOTE 3:
22,000
70 pence
109,703
175 pence
5,000
21,000.0 pence
3,000
22,500.0 pence
150,195
70 pence
81,770
175 pence
There are no performance conditions attached
to 4,504 options grated on 26 January 2018
which vested immediately upon grant. As part of
the Group’s share capital reorganisation during
2020, the numbers of options in issue were
reduced by a factor of 100 and the exercise price
increased by a factor of 100, leaving the overall
value of the options unchanged.
NOTE 4:
There were employment and performance
conditions in relation to the 21,354,350 and
15,019,500 options issued on 14 May 2020 which
allowed for vesting in three equal proportions on
or after the Company’s share price reaching 133
pence per share, 267 pence per share and 400
pence per share. As at 31 December 2021, the
first of these performance conditions had been
met.
As part of the Group’s share capital
reorganisation during 2020, the numbers of
options in issue were reduced by a factor of 100
and the exercise price increased by a factor of
100, leaving the overall value of the options
unchanged. The performance condition targets
were also increased by a factor of 100.
NOTE 5:
There were employment and performance
conditions in relation to the 22,000 options
issued on 1 December 2020 which allowed for
vesting in three equal proportions on or after the
Company’s share price reaching 133 pence per
share, 267 pence per share and 400 pence per
share. As at 31 December 2021, the first of these
performance conditions had been met.
NOTE 6:
There were employment conditions in relation to
800,000 options granted on 18 January 2018
which allowed for vesting in three annual
instalments between 18 January 2019 and 18
January 2021. As part of the Group’s share capital
reorganisation during 2020, the numbers of
options in issue were reduced by a factor of 100
and the exercise price increased by a factor of
100, leaving the overall value of the options
unchanged. The performance condition targets
were also increased by a factor of 100.
NOTE 7:
There were employment conditions in relation to
the 109,703 and 81,770 options issued on 1
January 2021 which allowed for vesting in three
equal proportions on or after the Company’s
share price reaching 275 pence per share, 375
pence per share and 475 pence per share. As at
31 December 2021, none of these performance
targets had been met.
Mark Nichols
(note 1)
Mark Nichols
(note 2)
Mark Nichols
(note 2)
Mark Nichols
(note 3)
Mark Nichols
(note 4)
Mark Nichols
(note 5)
Mark Nichols
(note 7)
Paul Denney
(note 6)
Paul Denney
(note 6)
Paul Denney
(note 4)
Paul Denney
(note 7)
11,401
2,500
5,000
45
213,543
22,000
–
–
–
–
–
–
-
109,703
5,000
3,000
150,195
–
–
–
-
81,770
-
-
-
-
-
-
-
-
-
-
-
–
-
-
–
–
–
-
-
-
-
-
074
075
ON BEHALF OF THE BOARD
DAVID ARMFIELD, CHAIRMAN OF THE REMUNERATION COMMITTEE – 24 JUNE 2022
REPORTSSECTION 2REPORTSSECTION 2XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021 076
077
XEROS
TECHNOLOGY
SUBJECT:
MESH FILTER
OBSERVATION:
FINE LATTICE STRUCTURE
MAGNIFICATION:
@20.7MM 400X/300μM
REPORTSSECTION 2REPORTSSECTION 2XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021 CORPORATE
GOVERNANCE REPORT
In April 2018, the Quoted Companies
Alliance released a new version of its code
for small and mid-sized quoted companies
(the “Code”). The board fully supports the
underlying principles contained within the
Code, has reviewed the Code in detail and
complies with parts of the Code where
it deems it appropriate for the size and
operations of the Group.
The responsibility for ensuring
compliance and accurate reporting of
Corporate Governance resides with the
board. Corporate Governance will be
continually monitored and reviewed by the
board at least annually, as part of the Annual
Report and Accounts process each year.
The board sets out its view on
compliance with the corporate governance
principles as detailed in the following Code:
PRINCIPLE ONE:
ESTABLISH A STRATEGY AND BUSINESS
MODEL WHICH PROMOTE LONG-TERM VALUE
FOR SHAREHOLDERS
The Group’s strategy is to develop into
an IP-rich, capital-light licenser of polymer-based
water saving solutions to multiple scale
industries, all of which deploy the same Xeros
core technologies. Given the scale of the markets
in which the Group operates, the strategy is to
commercialise the Xeros technology with
partners who already have strong international
market positions and who also demonstrate a
strategic intent to deliver increased levels of
sustainability.
PRINCIPLE TWO:
SEEK TO UNDERSTAND AND MEET
SHAREHOLDER NEEDS AND EXPECTATIONS
The Group remains committed to an
ongoing dialogue with shareholders to ensure
that its strategy, direction and performance are
clearly understood. Understanding the opinion of
analysts and investors in the Group, and, as a
result, helping our business be better
understood, is a crucial objective for the Group,
and the Group actively seeks to engage in this
area.
Private shareholders: The AGM is the key
forum for dialogue between retail shareholders
and the board. The Notice of Meeting is sent to
shareholders at least 21 days before the meeting.
The board and the executive Directors routinely
attend the AGM and are available to answer
questions raised by shareholders. For each vote,
the number of proxy votes received for, against
and withheld is announced at the meeting. The
results of the AGM are subsequently published
on the Group’s website.
Institutional shareholders: The Directors
seek to build long-term relationships with
institutional shareholders. These relationships
are primarily managed by the Chief Executive
Officer and the Chief Financial Officer. This
process includes presentations to institutional
shareholders and analysts following the release
of the full-year and interim results, alongside
other meetings as appropriate.
The board as a whole is updated on
these relationships, including any views or
concerns held by shareholders, by the executive
Directors on a regular basis. Analyst reports are
also circulated to the board as and when they are
produced.
PRINCIPLE THREE
TAKE INTO ACCOUNT WIDER STAKEHOLDER
AND SOCIAL RESPONSIBILITIES AND THEIR
IMPLICATIONS FOR LONG-TERM SUCCESS
The board believes that the long-term
success of the Group is reliant on good
relationships with a wide variety of stakeholders,
both internal and external to the Group. The
board is regularly updated on key stakeholder
engagement by the Executive team and through
other members of senior management, who
manage stakeholder relationships where
appropriate.
EMPLOYEES
The Group is committed to employee
engagement, as the knowledge, skill and
application of its employees is the defining factor
in the long-term success of the Group. The
Group takes the employee value proposition
seriously, engaging with employees to establish
what is important to them, through direct
feedback and ongoing dialogue. The annual
performance review cycle is key to the Group,
ensuring that staff are given the necessary
support in their development throughout the
year, as well as allowing the senior management
team to get feedback at a one to one level.
SUPPLIERS
The Group has relationships with key suppliers
which are managed closely by relevant senior
management to ensure ongoing supply of
products or services which are crucial to the
Group. The board is actively updated on supplier
relationships on a regular basis.
CUSTOMERS
As the medium and long-term strategy of the
business evolves into the IP-rich, capital-light
licensor of water saving solutions, relationships
with licensees become longer-term and more
co-operative. These key relationships are
managed by the appropriate members of the
Group’s senior management, with board support
078
079
REPORTSSECTION 2REPORTSSECTION 2XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021 where necessary. The board is updated on key
relationships on a regular basis.
PRINCIPLE FOUR:
EMBED EFFECTIVE RISK MANAGEMENT,
CONSIDERING BOTH OPPORTUNITIES AND
THREATS, THROUGHOUT THE ORGANISATION
The Group has established a framework
of internal controls which the Directors believe to
be appropriate for the size and operations of the
Group. This framework is reviewed by the
Executive team, the Audit Committee and the
board on an ongoing basis.
The board is responsible for reviewing
and approving overall Group strategy, approving
Group budgets and determines the financial
structure of the Group. Monthly results, including
variances and commentary are reported to the
board on a regular basis.
The Audit Committee assists the board
in discharging its duties regarding the financial
statements, accounting policies and the
maintenance of proper internal business, and
operational and financial controls.
The board has ultimate responsibility for
the Group’s system of internal control and the
effectiveness thereof. Any such system can only
mitigate partially against the risk of material
misstatement or loss to the Group. The board
considers that the internal control environment
in place within the Group is appropriate for the
size, complexity and risk profile of the Group. A
formal risk management document is reviewed
by the board on a regular basis, alongside
updates on the functioning of the environment
on an ad hoc basis.
PRINCIPLE FIVE:
MAINTAIN THE BOARD AS A WELL-
FUNCTIONING, BALANCED TEAM LED BY THE
CHAIR
The board comprises the non-executive
chairman, two executive Directors and three
non-executive Directors. The board believes that
the non-executive chairman and the non-
executive Directors are classified as
independent.
The board believes that the make-up of
the Directors provides a balance between
independence and knowledge of the Group
which allows them to discharge their
responsibilities effectively, alongside the relevant
board committees. The board members are
expected to commit time for a minimum of eight
board meetings a year, alongside adequate
preparation time. Other meetings and
commitments may be required as appropriate.
PRINCIPLE SIX:
ENSURE THAT BETWEEN THEM THE
DIRECTORS HAVE THE NECESSARY UP-TO-
DATE EXPERIENCE, SKILLS AND CAPABILITIES
The board believes that the current
make-up of Directors offers a well-balanced mix
of skills in areas relevant to the long-term
strategy of the Group. This belief is gained
through a knowledge and understanding of the
backgrounds of the board members, alongside
the understanding of the needs of the Xeros
Group. Details of the Directors, their backgrounds
and the skills and expertise they bring to Xeros
can be found above in this Annual Report and
Accounts. The board members keep their skills
up to date through regular updates from
professional advisors.
The board considers succession
planning through the work of the nomination
committee, considering the long-term benefits of
an appointee and how their skills fit in to the
existing skills possessed by the board. The
continuous improvement process the board
undergoes ensures that they are aware of the
areas in which they would like to strengthen, and
it is through this lens that Director recruitment is
performed. Executive Director and senior
management succession planning is informed
through the annual review cycle.
PRINCIPLE SEVEN:
EVALUATE BOARD PERFORMANCE BASED ON
CLEAR AND RELEVANT OBJECTIVES, SEEKING
CONTINUOUS IMPROVEMENT
The board, through an internal survey of
board members and led by the chairman and the
senior independent Director, performs an
evaluation procedure at least annually. The
results of this are presented to the board
alongside any actions or recommendations. The
board has and continues to act on the results of
this evaluation where appropriate.
PRINCIPLE EIGHT:
environment of the Group
PROMOTE A CORPORATE CULTURE THAT IS
BASED ON ETHICAL VALUES AND BEHAVIOURS
The Group exists to provide solutions to
global environmental challenges of water
scarcity and pollution. The board believes that
Xeros technology provides genuine solutions to
these challenges and prides itself on the impact
that the Group can make in these critical areas. It
is through this lens that the Group promotes a
corporate culture based on ethical values and
behaviours.
This process is led by the board, through
actions such as committing resources to
projects with an ethical and societally beneficial
purpose and setting a tone at the top which
encourages these within the wider group. The
board receives feedback on the corporate culture
through regular employee surveys and employee
led committees, such as the health and safety
and sustainability committees.
PRINCIPLE NINE:
MAINTAIN GOVERNANCE STRUCTURES AND
PROCESSES THAT ARE FIT FOR PURPOSE AND
SUPPORT GOOD DECISION-MAKING BY THE
BOARD
The board meets at least eight times a
year in accordance with its meeting calendar.
This meeting calendar is established each year to
align with the Group’s financial calendar, ensuring
a spread across the financial year alongside
meetings at key times during the year. This
calendar can also be supplemented with
additional meetings as and when required.
The board and the associated
committees receive appropriate information in a
timely manner prior to each meeting.
Roles of the board, chairman and chief
executive officer
The board is responsible for the long-
term success of the Group. There is a formal
schedule of matters which are reserved for the
board. These matters reserved for the board
include:
— The overall strategy for the Group
— The structure and capital of the Group
— The financial reporting and control
— The Group’s internal control framework
— Major contracts for the Group
— Shareholder communications
— The delegation of authority and other
key Group policies
There is clear distinction between the roles of
the Chairman and the Chief Executive Officer.
The Chairman is responsible for providing
leadership to the board and ensuring that the
long-term strategic focus of the Group is in the
best interest of shareholders. The Chief
Executive Officer is responsible for implementing
the strategy as agreed by the board and
managing the direction of the Group through the
Executive and wider senior management teams.
BOARD COMMITTEES
The board has established three subcommittees
– the Audit, Remuneration and Nomination
committees – which exist to support the board in
its objectives.
The board believes the current
governance structure is appropriate for the
current size and scope of the Group. The board
remains committed to good corporate
governance and will evolve the governance
policies and procedures in place as the nature
and scope of the Group evolves.
PRINCIPLE TEN:
COMMUNICATE HOW THE GROUP IS
GOVERNED AND IS PERFORMING BY
MAINTAINING A DIALOGUE WITH
SHAREHOLDERS AND OTHER RELEVANT
STAKEHOLDERS
The Group communicates with
shareholders through the Annual Report and
Accounts, full-year and half-year
announcements, the AGM, meetings with
institutional shareholders and online shareholder
presentations. More detailed corporate
information, including all announcements and
presentations can be seen on the Xeros website.
The board is provided with updates on these
communications by the executive team and
through the Group’s brokers as appropriate. The
Group maintains an open dialogue with other key
stakeholders, including Group employees.
080
081
REPORTSSECTION 2REPORTSSECTION 2XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021 base of the Group. The Directors also believe,
however, that they have sufficient options in
place in order to allow the Group to continue
trading in the short and medium term. Therefore,
after making enquiries and considering the
uncertainties as described above, the Directors
have a reasonable expectation that the Group
has and will have adequate resources to continue
in operational existence for the foreseeable
future. For these reasons, they continue to adopt
the going basis of accounting in preparing this
financial information.
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.
THE BOARD
Some key features of the internal control system:
The board currently comprises two executive
Directors and four non-executive Directors.
AUDIT COMMITTEE
The Audit Committee consists of David Baynes
as chairman and David Armfield. Klaas de Boer
and the executive Directors attend by invitation.
The Audit Committee will, inter alia, determine
and examine matters relating to the financial
affairs of the Company including the terms of
engagement of the Company’s auditor and, in
consultation with the auditor, the scope of the
audit.
It has in the year received and reviewed reports
from management and the Company’s auditor
relating to the annual accounts and the
accounting and internal control systems in use
throughout the Group. The Audit Committee
meets at least twice a year.
NOMINATIONS COMMITTEE
The Nominations Committee consists of Klaas
de Boer as chairman, David Baynes, David
Armfield and Mark Nichols. The Nominations
Committee monitors the size and composition of
the board and the other board committees, and
is responsible for identifying suitable candidates
for board membership and monitoring the
performance and suitability of the current board
on an ongoing basis. During the year, the
committee considered the composition of the
board and appointed Rachel Nooney as an
additional non-executive Director. The
Nominations Committee meets at least once a
year.
INTERNAL CONTROL
The board is responsible for maintaining a sound
system of internal control. The board’s measures
are designed to manage, not eliminate risk, and
such a system provides reasonable but not
absolute assurance against material
misstatement or loss. As it is AIM listed, the
Company is not required to apply the full
provisions of the UK Corporate Governance
Code. The board has adopted features of the
QCA Corporate Governance Code where it
considers it appropriate for the size and scope of
the business.
I Management accounts information,
budgets, forecasts and business risk
issues are regularly reviewed by the board
which meets at least eight times per year;
II The Company has operational, accounting
and employment policies in place;
III The board actively identifies and evaluates
the risks inherent in the business and
ensures that appropriate controls and
procedures are in place to manage these
risks;
IV There is a clearly defined organisational
structure; and
V There are well-established financial
reporting and control systems.
GOING CONCERN
As at 31 December 2021, the Group had £2.5m of
cash and £5.3m of cash on deposit. Given the
Group’s stage of development, it continues to
incur operating cash outflows. The Directors
believe that the current levels of cash held can
provide the Group with sufficient cash to meet
its obligations as they fall due for at least twelve
months following the date of this report, with
some changes to discretionary expenditure or
the proceeds of a potential fundraise, if
necessary. However, given the current
commercial position of the Group, the Directors
acknowledge that the Group’s current cash
position does not provide certainty beyond this
point and may not, with the current rates of cash
outflow, provide the Group with the resources to
reach the point at which cash generated from
customer contracts covers the cost base of the
Group.
The Directors consider that they have
options in place that may allow them to reach
this breakeven point. These include signing
potential commercial agreements and the
possibility of raising further investor funding.
Given that these options are not certain at this
stage, the Directors consider the Group’s current
funding position constitutes a material
uncertainty as to the going concern status of the
Group, as without some form of action, most
likely in the form of a fundraise, the Group’s cash
will run out prior to the completion of
commercialisation and, therefore, before cash
cash generated from customers covers the cost
082
083
REPORTSSECTION 2REPORTSSECTION 2XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021 STATEMENT OF DIRECTORS’
RESPONSIBILITIES
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
IN RESPECT OF THE ANNUAL REPORT AND THE
FINANCIAL STATEMENTS
The Directors are responsible for
preparing the Strategic Report, the Directors’
Report and the financial statements in
accordance with applicable law and regulations.
Company law requires the Directors to
prepare financial statements for each financial
year. Under that law the Directors have prepared
the consolidated financial statements in
accordance with UK-adopted international
accounting standards and the parent company
financial statements in accordance with United
Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards
and applicable law, including FRS101 ‘Reduced
Disclosure Framework’). Under company law, the
Directors must not approve the financial
statements unless they are satisfied that they
give a true and fair view of the state of affairs
and profit or loss of the Company and the Group
for that period. In preparing these financial
statements, the Directors are required to:
— select suitable accounting policies and
then apply them consistently;
— make judgements and accounting
estimates that are reasonable and
prudent;
— state whether applicable UK-adopted
international accounting standards or
United Kingdom Generally Accepted
Accounting Practice have been followed,
subject to any material departures
disclosed and explained in the financial
statements; and
— prepare the financial statements on
the going concern basis unless it is
inappropriate to presume that the
Company will continue in business.
The Directors are responsible for keeping
adequate accounting records that are sufficient
to show and explain the Company’s transactions
and disclose with reasonable accuracy, at any
time, the financial position of the Company and
enable them to ensure that the financial
statements comply with the Companies Act
2006. The Directors are also responsible for
safeguarding the Company’s assets and hence
for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
The Directors confirm that:
— so far as each Director is aware, there is
no relevant audit information of which
the Company’s auditor is unaware; and
— the Directors have taken all the steps
that they ought to have taken as
Directors in order to make themselves
aware of any relevant audit information
and to establish that the Company’s
auditor is aware of that information.
The Directors are responsible for the
maintenance and integrity of the corporate and
financial information included on the Company’s
website. Legislation in the United Kingdom
governing the preparation and dissemination of
financial statements may differ from legislation
in other jurisdictions.
XEROS
TECHNOLOGY
SUBJECT:
FABRIC CLOSE UP
OBSERVATION: FABRIC
CARED FOR WITH XORBS
MAGNIFICATION:
GF 120MM ƒ/4.0
084
085
REPORTSSECTION 2REPORTSSECTION 2XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021 03
AUDITOR’S REPORT
086
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021
087
SECTION 3
AUDITOR’S REPORT
AUDITOR’S REPORT
SECTION 3
INDEPENDENT
AUDITOR’S REPORT
TO THE MEMBERS OF XEROS TECHNOLOGY GROUP PLC
OPINION - OUR OPINION ON THE FINANCIAL STATEMENTS IS UNMODIFIED
We have audited the financial statements of Xeros Technology Group
plc (the “parent company”) and its subsidiaries (the “Group”) for the year
ended 31 December 2021 which comprise the Consolidated statement of
profit or loss and other comprehensive income, the Consolidated
statement of changes in equity, the Consolidated statement of financial
position, the Consolidated statement of cash flows, the Company
statement of changes in equity, the Company statement of financial
position, and notes to the financial statements, including a summary of
significant accounting policies. The financial reporting framework that has
been applied in the preparation of the group financial statements is
applicable law and UK-adopted international accounting standards. The
financial reporting framework that has been applied in the preparation of
the parent company financial statements is applicable law and United
Kingdom Accounting Standards, including Financial Reporting Standard
101 “Reduced Disclosure Framework” (United Kingdom Generally Accepted
Accounting Practice).
In our opinion:
— the financial statements give a true and fair view of the state of the
Group’s and of the parent company’s affairs as at 31 December 2021
and of the Group’s loss for the year then ended;
— the Group financial statements have been properly prepared in
accordance with UK-adopted international accounting standards;
— the parent company financial statements have been properly
prepared in accordance with United Kingdom Generally Accepted
Accounting Practice; and
— the financial statements have been prepared in accordance with
the requirements of the Companies Act 2006.
XEROS
TECHNOLOGY
SUBJECT:
MESH FILTER
OBSERVATION: FINE
LATTICE STRUCTURE
MAGNIFICATION:
@20.7MM 400X/300µM
088
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021
089
BASIS FOR OPINION
We conducted our audit in accordance with International Standards
on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under
those standards are further described in the ‘Auditor’s responsibilities for
the audit of the financial statements’ section of our report. We are
independent of the group and the parent company in accordance with the
ethical requirements that are relevant to our audit of the financial
statements in the UK, including the FRC’s Ethical Standard as applied to
listed entities, and we have fulfilled our other ethical responsibilities in
accordance with these requirements. We believe that the audit evidence
we have obtained is sufficient and appropriate to provide a basis for our
opinion.
MATERIAL UNCERTAINTY RELATED TO GOING CONCERN
We draw attention to note 1 in the financial statements, which
indicates that the Directors believe that the current levels of cash held
provide the Group with sufficient cash to meet its obligations as they fall
due for at least twelve months following the date of this report, with some
changes to discretionary expenditure, if necessary. However, given the
current position of the Group the Directors acknowledge that the Group’s
current cash position does not provide certainty beyond this point and
may not, with the current rates of cash outflow, provide the Group with
the resources to reach a cash breakeven point. As stated in note 1, these
events or conditions, indicate that a material uncertainty exists that may
cast significant doubt on the company’s ability to continue as a going
concern. Our opinion is not modified in respect of this matter.
In auditing the financial statements, we have concluded that the
director’s use of the going concern basis of accounting in the preparation
of the financial statements is appropriate.
OUR EVALUATION OF MANAGEMENT’S ASSESSMENT OF THE
ENTITY’S ABILITY TO CONTINUE AS A GOING CONCERN
INDEPENDENT
AUDITOR’S REPORT
Our evaluation of the Directors’ assessment of the Group’s and the parent
company’s ability to continue to adopt the going concern basis of
TO THE MEMBERS OF XEROS TECHNOLOGY GROUP PLC
accounting included the following audit procedures:
— Obtained the forecasts and cashflow calculations covering the
period to June 2023. Assessed how these forecasts were compiled
and their appropriateness by applying sensitivities to the underlying
assumptions
— Obtained an understanding of the design and implementation of
controls over management’s going concern assessment;
— Assessed the quality of management’s forecasting by comparing
the reliability of past forecasts to actual results;
— Evaluated the assumptions in the revenue forecasts, particularly in
relation to licensee progress, cost assumptions (including the level
of fixed costs), and mitigations (including cash saving measures or
successful fundraising) are likely to be achievable. Considered
whether the assumptions were consistent with our understanding
of the business derived from other detailed work undertaken;
— Evaluated management’s forecast which demonstrated a
requirement for further funding within the going concern period and
challenged management regarding assumptions made, including
the Group’s plans to generate further cash to fund its operations;
and
— Assessed the adequacy of disclosures within the Annual Report and
Accounts.
In performing our audit procedures, we observed the following:
— In management’s most likely outcome forecast of the period to 30
June 2023, cash balances become negative during Quarter 1 of 2023
and mitigating actions to raise further funds are required; and
— The assumptions made by management in its best-case, worse-
case and most likely outcome assessments did not indicate specific
bias.
090
091
AUDITOR’S REPORTSECTION 3 AUDITOR’S REPORTSECTION 3XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021 OUR RESPONSIBILITIES
We are responsible for concluding on the appropriateness of the
directors’ use of the going concern basis of accounting and, based on the
audit evidence obtained, whether a material uncertainty exists related to
events or conditions that may cast significant doubt on the group’s and
the parent company’s ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are required to draw
attention in our report to the related disclosures in the financial
statements or, if such disclosures are inadequate, to modify the auditor’s
opinion. Our conclusions are based on the audit evidence obtained up to
the date of our report. However, future events or conditions may cause
the group or the parent company to cease to continue as a going concern.
In our evaluation of the directors’ conclusions, we considered the
inherent risks associated with the group’s and the parent company’s
business model including effects arising from macro-economic
uncertainties such as Brexit and Covid-19, we assessed and challenged
the reasonableness of estimates made by the directors and the related
disclosures and analysed how those risks might affect the group’s and the
parent company’s financial resources or ability to continue operations
over the going concern period.
The responsibilities of the directors with respect to going concern are
described in the Responsibilities of the directors for the financial
statements section of this report.
OUR APPROACH TO THE AUDIT
Materiality
Key audit
matters
Scoping
Overview of our audit approach
Overall materiality:
Group: £511,000, which represents
7.2% of the Group’s loss before
taxation.
Parent company: £460,000 which
was based upon 0.9% of total
assets but was capped at 90% of
Group materiality.
In addition to the matter described in the Material Uncertainty Related to
Going Concern section, we have determined the matter(s) described
below to be the key audit matter(s) to be communicated in our report
— Recoverability of the carrying value of investments in, and
intercompany receivables due from, subsidiaries (same as prior
year).
Our auditor’s report for the year ended 31 December 2021 included a key
audit matter that has not been reported as a key audit matters in our
current year’s report. This relates to revenue recognition that has not been
included as recorded revenue is not material and, therefore, has not been
considered a key audit matter.
We have performed the following audit work:
— an audit of the financial statements of the parent company and of
the financial information of one of the components using
component materiality (full scope audit) which represent 98% of the
loss before taxation for the Group; and
— analytical procedures at group level for the remaining component in
the Group during the year.
092
093
AUDITOR’S REPORTSECTION 3 AUDITOR’S REPORTSECTION 3XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021 KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to fraud) that
we identified. These matters included those that had the greatest effect
on: the overall audit strategy; the allocation of resources in the audit; and
directing the efforts of the engagement team. These matters were
addressed in the context of our audit of the financial statements as a
whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters. In addition to the matter described in
the Material Uncertainty Related to Going Concern section, we have
determined the matter described below to be the key audit matter to be
communicated in our report.
Description
Audit response
KAM
Disclosures
Our results
In the graph below, we have presented the key audit matters
and other significant risks relevant to the audit.
Recoverability of the carrying
value of investments in, and
intercompany receivables due
from, subsidiaries
Management
override of
control
Going concern
Improper
revenue
recognition
Key audit matter
Significant risk
Low
Extent of management judgement
High
High
Potential
financial
statement
impact
Low
094
KEY AUDIT MATTER – PARENT COMPANY
RECOVERABILITY OF THE CARRYING VALUE OF
INVESTMENTS IN, AND INTERCOMPANY
RECEIVABLES DUE FROM, SUBSIDIARIES.
We identified recoverability of the carrying value
of investments in subsidiaries and intercompany
receivables as one of the most significant
assessed risks of material misstatement due to
error.
The process for assessing whether an
impairment exists under both International
Accounting Standard (IAS) 36 Impairment of
Assets, when considering the carrying value of
the investment in subsidiary, and International
Financial Reporting Standard (IFRS) 9 Financial
instruments, when considering the recoverability
of the intercompany receivables, is complex.
The group’s subsidiaries are loss making and
have been negatively impacted by delays in the
progression of licencing revenues caused by the
ongoing Covid-19 impact in key markets.
Regarding its operations, management’s
assessment of any potential impairment is
inherently subjective.
The financial statements presented for audit
recorded investment balance in the parent
company of £9.9m and an amount owed by it’s
UK subsidiary of £38.6m, the trading entity for
the group, which has made a loss for the year
ended 31 December 2021. As such there is an
indicator of impairment.
RELEVANT DISCLOSURES IN THE ANNUAL
REPORT AND ACCOUNTS 2020
The company’s accounting policies on the
valuation of investments and the impairment of
financial assets are shown in Note 2, Summary
of Significant Accounting Policies.
HOW OUR SCOPE ADDRESSED THE MATTER –
PARENT COMPANY
In responding to the key audit matter, we
performed the following audit procedures:
Obtained an understanding of the relevant
business processes and controls around the
recoverability of the carrying values and
confirmed that they were implemented through
review of the accounting papers prepared by
management;
Obtained the forecasts that supported
management’s impairment paper and tested
their mathematical accuracy and consistency
with the forecasts provided to support the going
concern assessment and assessed whether they
were reasonable;
Obtained management’s assessment of
the expected credit losses on the intercompany
loan and challenged the probability-weighted
amount so determined by reference to available
evidence including the group’s share price, broker
reports, and management forecasts;
Obtained the forecasts and assessed
management’s revenue assumptions for
progression in licencing revenues and compared
the stated stages achieved so far against our
understanding of the business; and
Assessed the adequacy of the disclosure
included within the financial statements for
compliance with IAS 36 ‘Impairment of assets’
and IFRS 9 ‘Financial Instruments’ as appropriate.
OUR RESULTS
From the work performed we identified that
changes in the group’s strategic plans were not
fully reflected within management’s initial
assessment of impairment.
As a result of our challenge management
reperformed their assessment and determined
that the £9.9m investment balance was fully
impaired and that an expected credit loss
provision of £28.7m should be recorded against
the intercompany receivable.
Further, we identified that the intercompany
receivable previously recorded as a current asset
in accordance with its legal form should more
properly be recorded as a non-current asset in
accordance with IAS 1 ‘Presentation of financial
statements’. The statement of financial position
for the year ended 31 December 2020 has been
restated as a result of this as described in note
C8.
095
AUDITOR’S REPORTSECTION 3 AUDITOR’S REPORTSECTION 3XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021 Our application of materiality
We apply the concept of materiality both in planning and performing the audit, and in evaluating the effect
of identified misstatements on the audit and of uncorrected misstatements, if any, on the financial
statements and in forming the opinion in the auditor’s report.
Materiality was determined as follows:
Materiality measure
Group
Parent company
Materiality for financial
statements as a whole
We define materiality as the magnitude of misstatement in the financial statements that,
individually or in the aggregate, could reasonably be expected to influence the economic
decisions of the users of these financial statements. We use materiality in determining the
nature, timing and extent of our audit work.
Materiality threshold
£511,000 which is 7.2% of the Group’s loss
before taxation.
£460,000 which is 0.9% of the parent
company’s total assets but was capped at 90%
of Group materiality.
Significant judgements
made by auditor in
determining the materiality
In determining materiality, we made the
following significant judgements:
In determining materiality, we made the
following significant judgements:
Loss before taxation is considered to be
the most appropriate benchmark for the
Group because it is a key performance
indicator used by the Directors to report
to investors on the financial performance
of the Group.
Materiality for the current year is higher
than the level that we determined for the
year ended 31 December 2020 as we have
used a higher percentage against the
benchmark due to the operations in the
Group being consistent with prior year
and no new significant developments.
Total assets is considered to be the most
appropriate benchmark for the parent company
because the parent company’s principal activity
is that of a holding company.
Materiality for the current year is higher than
the level that we determined for the year ended
31 December 2020 as we have used a higher
percentage against the benchmark due to the
operations in the group being consistent with
prior year and no new significant developments.
Performance materiality
used to drive the extent of
our testing
We set performance materiality at an amount less than materiality for the financial statements
as a whole to reduce to an appropriately low level the probability that the aggregate of
uncorrected and undetected misstatements exceeds materiality for the financial statements
as a whole.
Performance materiality
threshold
£383,000 which is 75% of financial
statement materiality.
£345,000 which is 75% of financial statement
materiality.
Significant judgements
made by auditor in
determining the
performance materiality
Specific materiality
In determining materiality, we made the
following significant judgement:
In determining materiality, we made the
following significant judgement:
Our risk assessment identified a strong
internal control environment and no
significant issues were identified in the
prior year that would have an impact on
the current year audit.
Our risk assessment identified a strong internal
control environment and no significant issues
were identified in the prior year that would have
an impact on the current year audit.
We determine specific materiality for one or more particular classes of transactions, account
balances or disclosures for which misstatements of lesser amounts than materiality for the
financial statements as a whole could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial statements.
Specific materiality
We determined a lower level of specific
materiality for Directors’ remuneration.
We determined a lower level of specific
materiality for Directors’ remuneration.
Communication of
misstatements to the audit
committee
Threshold for
communication
096
We determine a threshold for reporting unadjusted differences to the audit committee.
£26,000 and misstatements below that
threshold that, in our view, warrant
reporting on qualitative grounds.
£23,000 and misstatements below that
threshold that, in our view, warrant reporting on
qualitative grounds.
The graph below illustrates how performance materiality interacts with our overall materiality and the tolerance for potential
uncorrected misstatements.
Overall materiality – Group
Overall materiality – Parent company
Loss before tax £7.1m
Total assets £49m
FSM £511k, 7.2%
PM
£383k, 75%
TFPUM
£128k, 25%
FSM £460k, 0.9%
PM
£345k, 75%
TFPUM
£115k, 25%
FSM: Financial statements materiality, PM: Performance materiality, TFPUM: Tolerance for potential uncorrected
misstatements
AN OVERVIEW OF THE SCOPE OF OUR AUDIT
Our audit approach was a risk-based audit that required an understanding
of the group’s and the parent company’s business and in particular
included:
— The engagement team obtained an understanding of the Group,its
environment and risk profile, including group-wide controls, and
assessed the risks of material misstatement at the group level. We
considered the structure of the Group, its processes and controls
and the industries in which the components operate;
— In order to address the risks identified, the engagement team
performed an evaluation of identified components to assess their
significance and to determine the planned audit response based on
a measure of materiality, calculated by considering the component’s
significance as a percentage of the Group’s total assets, revenue
and loss before taxation.
097
AUDITOR’S REPORTSECTION 3 AUDITOR’S REPORTSECTION 3XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021
— Of the Group’s three components, we identified two which, in our
view, required an audit of their financial information (full scope
audit), either due to their size or their risk characteristics. As a
result of this, we performed an audit of the financial statements of
the parent company and of the financial information of one of the
components using component materiality. We performed analytical
procedures at group level over the remaining component. These
procedures, together with the additional procedures outlined above,
performed at the group level gave us the audit evidence we needed
for our opinion on the Group financial statements as a whole. All
audit work has been undertaken by the Group engagement team;
and
— We identified the recoverability of the carrying value of the parent
company’s investment in, and the intercompany receivables due
from, the subsidiary as a key audit matter and the audit procedures
performed in respect of this has been included in the key audit
matters section of our report.
OTHER INFORMATION
The Directors are responsible for the other information. The other
information comprises the information included in the Annual Report,
other than the financial statements and our auditor’s report thereon. Our
opinion on the financial statements does not cover the other information
and, except to the extent otherwise explicitly stated in our report, we do
not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility
is to read the other information and, in doing so, consider whether the
other information is materially inconsistent with the financial statements
or our knowledge obtained in the audit or otherwise appears to be
materially misstated. If we identify such material inconsistencies or
apparent material misstatements, we are required to determine whether
there is a material misstatement in the financial statements or a material
misstatement of the other information. If, based on the work we have
performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact.
OUR OPINION ON OTHER MATTERS PRESCRIBED BY THE COMPANIES
ACT 2006 IS UNMODIFIED
In our opinion, based on the work undertaken in the course of the audit:
— the information given in the strategic report and the Directors’
report for the financial year for which the financial statements are
prepared is consistent with the financial statements; and
— the strategic report and the Directors’ report have been prepared in
accordance with applicable legal requirements.
MATTER ON WHICH WE ARE REQUIRED TO REPORT UNDER THE
COMPANIES ACT 2006
In the light of the knowledge and understanding of the Group and the
parent company and its environment obtained in the course of the audit,
we have not identified material misstatements in the strategic report or
the Directors’ report.
MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION
We have nothing to report in respect of the following matters in relation
to which the Companies Act 2006 requires us to report to you if, in our
opinion:
— adequate accounting records have not been kept by the parent
company, or returns adequate for our audit have not been received
from branches not visited by us; or
— the parent company financial statements are not in agreement with
the accounting records and returns; or
— certain disclosures of Directors’ remuneration specified by law are
not made; or
— we have not received all the information and explanations we
require for our audit.
098
099
AUDITOR’S REPORTSECTION 3 AUDITOR’S REPORTSECTION 3XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021 RESPONSIBILITIES OF DIRECTORS FOR THE FINANCIAL STATEMENTS
As explained more fully in the Directors’ responsibilities statement, the
Directors are responsible for the preparation of the financial statements
and for being satisfied that they give a true and fair view, and for such
internal control as the Directors determine is necessary to enable
the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for
assessing the Group’s and the parent company’s ability to continue as a
going concern, disclosing, as applicable, matters related to going concern
and using the going concern basis of accounting unless the Directors
either intend to liquidate the Group or the parent company or to cease
operations, or have no realistic alternative but to do so.
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL
STATEMENTS
Our objectives are to obtain reasonable assurance about whether the
financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with
ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of these
financial statements.
A further description of our responsibilities for the audit of the financial
statements is located on the Financial Reporting Council’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our
auditor’s report.
EXPLANATION AS TO WHAT EXTENT THE AUDIT WAS CONSIDERED
CAPABLE OF DETECTING IRREGULARITIES, INCLUDING FRAUD
Irregularities, including fraud, are instances of non-compliance with laws
and regulations. We design procedures in line with our responsibilities,
outlined above, to detect material misstatements in respect of
irregularities, including fraud. Owing to the inherent limitations of an audit,
there is an unavoidable risk that material misstatements in the financial
statements may not be detected, even though the audit is properly
planned and performed in accordance with the ISAs (UK).
The extent to which our procedures are capable of detecting irregularities,
including fraud is detailed below:
— We obtained an understanding of the legal and regulatory
frameworks applicable to the company, and the industry in which
it operates, this was achieved through inquiries with management
and a review of board minutes and papers provided to the Audit
Committee. We determined that the following laws and regulations
were most significant; UK-adopted international accounting
standards, Companies Act 2006 and the Alternative Investment
Market rules. In additional we concluded that there are certain laws
and regulations that may have an effect on the determination of the
amount and disclosures in the financial statements and those laws
and regulations that relate to health and safety.
— We obtained an understanding of how the parent company and the
Group is complying with those legal and regulatory frameworks by
making inquiries of management and those responsible for legal
and compliance procedures. We corroborated our inquiries through
our review of board minutes and papers provided to the Audit
Committee.
— We enquired of management whether there were any instances
of non-compliance with laws and regulations or whether they had
any knowledge of actual, suspected fraud. We corroborated the
results of our enquiries to supporting documentation such as board
minutes reviews and papers provided to the Audit Committee. From
the procedures performed we did not identify any material matters
relating to non-compliance with laws and regulation or matters in
relation to fraud.
0100
0101
AUDITOR’S REPORTSECTION 3 AUDITOR’S REPORTSECTION 3XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021 To assess the potential risks of material misstatement, we obtained an
understanding of:
The Group’s operations, including the nature of its revenue sources,
expected financial statements disclosures and business risks that may
result in a risk of material misstatement; and
The Group’s control environment including the adequacy of
procedures for authorisation of transactions.
— We assessed the susceptibility of the Group’s financial statements
to material misstatement, including how fraud might occur. Audit
procedures performed by the engagement team included:
Evaluating the processes and controls established to address the
risks related to irregularities and fraud;
Testing manual journal entries, in particular journal entries relating
to management estimates and journals entries deemed to relate to
unusual trasnsactions;
Challenging assumptions and judgement made by management in
its significant accounting esitmates; and
Identifying and testing related party transactions.
— These audit procedures were designed to provide reasonable
assurance that the financial statements were free from fraud or
error. The risk of not detecting a material misstatement due to fraud
is higher than the risk of not detecting one resulting from error and
detecting irregularities that result from fraud is inherently more
difficult than detecting those that result from error, as fraud may
involve collusion, deliberate concealment, forgery or intentional
misrepresentations. Also, the further removed non-compliance with
laws and regulations is from events and transactions reflected in the
financial statements, the less likely we would become aware of it.
— Team communications in respect of potentional non-compliance
with laws and regulations and fraud included the potential for fraud
in revenue recognition and appropriate application of the going
concern assumptions.
— The engagement partner has assessed the appropriateness of the
collective competence and capabilities of the engagement team,
including consideration of the engagement team’s knowledge and
understanding of the industry in which the client operates, and its
practical experience through training and participation with audit
engagements of a similar nature. All team members are considered
to have sufficient knowledge and experience of companies of a
similar size and complexity, appropriate to their role within the team.
USE OF OUR REPORT
This report is made solely to the company’s members, as a body, in
accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our
audit work has been undertaken so that we might state to the company’s
members those matters we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent permitted by law, we
do not accept or assume responsibility to anyone other than the company
and the company’s members as a body, for our audit work, for this report,
or for the opinions we have formed.
Mark Overfield, BSc FCA
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Leeds
24 June 2022
0102
0103
AUDITOR’S REPORTSECTION 3 AUDITOR’S REPORTSECTION 3XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021 04
FINANCIAL
STATEMENTS
0104
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021
XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021
0105
CONSOLIDATED STATEMENT
OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2021
NOTES
YEAR ENDED
31 DECEMBER 2021
YEAR ENDED
31 DECEMBER 2020
£’000
£’000
CONTINUING OPERATIONS
REVENUE
Cost of sales
GROSS PROFIT/(LOSS)
Administrative expenses
ADJUSTED EBITDA*
Share based payment expense
Depreciation of tangible fixed assets
OPERATING LOSS
Net finance income
LOSS BEFORE TAX
Taxation
LOSS AFTER TAX FROM CONTINUING OPERATIONS
Loss from discontinued operations
LOSS FOR THE PERIOD
OTHER COMPREHENSIVE (EXPENSE)/INCOME:**
Foreign currency translation differences - foreign operations
TOTAL COMPREHENSIVE EXPENSE FOR THE PERIOD
LOSS PER SHARE
Basic and diluted on loss from continuing operations
Basic and diuted on total loss for the period
3
-
-
6
-
23
12
-
8
-
9
-
7
-
-
10
10
474
(193)
281
(7,225)
(6,281)
(463)
(200)
(6,944)
14
(6,930)
492
(6,438)
-
(6,438)
(1)
(6,439)
(28.11)p
(28.11)p
385
(434)
(49)
(7,586)
(6,761)
(653)
(221)
(7,635)
3
(7,632)
698
(6,934)
(37)
(6,971)
44
(6,927)
(44.88)p
(45.12)p
* Adjusted EBITDA comprises loss on ordinary activities before interest, tax, share-based payment expense,
depreciation and amortisation.
** Items that are or may be reclassified to profit or loss
0106
0107
FINANCIAL STATEMENTSSECTION 4FINANCIAL STATEMENTSSECTION 4XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021 CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2021
SHARE
CAPITAL
SHARE
PREMIUM
£’000
£’000
MERGER
RESERVE
£’000
FOREIGN
CURRENCY
TRANSLATION
RESERVE
£’000
RETAINED
EARNINGS
DEFICIT
TOTAL
£’000
£’000
BALANCE AT 31 DECEMBER 2019
1,176
109,226
15,443
(2,246)
(118,468)
5,131
Loss for the year
Other comprehensive income
Loss and total comprehensive expense for the period
Transactions with owners, recorded directly in equity:
-
-
-
-
-
-
Issue of shares following placing and open offer
1,800
4,200
74
(427)
-
3,847
Excercise of share options
Costs of share issues
Share based payment expense
Total contributions by and distributions to owners
AT 31 DECEMBER 2020
Loss for the year
Other comprehensive expense
loss and total comprehensive expense for the year
Transactions with owners, recorded directly in equity:
Issue of shares following placing and open offer
Exercise of share options
Costs of share issues
Share based payment expense
Total contributions by and distributions to owners
AT 31 DECEMBER 2021
21
-
-
1,821
2,997
-
-
-
562
9
-
-
571
3,568
-
-
-
-
-
-
-
-
-
41
41
-
-
-
-
-
113,073
15,443
(2,205)
(124,786)
-
-
-
8,438
32
(525)
-
7,945
-
-
-
-
-
-
-
-
(1)
(1)
-
-
-
-
-
121,018
15,443
(2,206)
(130,761)
(6,971)
(6,971)
-
41
(6,971)
(6,930)
(6,438)
(6,438)
-
(1)
(6,438)
(6,439)
6,000
95
(427)
653
6,321
4,522
9,000
41
(525)
463
8,979
7,062
-
-
-
653
653
-
-
-
463
463
0108
0109
FINANCIAL STATEMENTSSECTION 4FINANCIAL STATEMENTSSECTION 4XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021 Notes
20
20
20
21
21
At
31 December
2021
At
31 December
2020
£’000
£’000
3,568
2,997
121,018
113,073
15,443
15,443
(2,206)
(2,205)
(130,761)
(124,786)
7,062
4,522
EQUITY
Share capital
Share premium
Merger reserve
Foreign currency translation reserve
Accumulated losses
TOTAL EQUITY
Approved by the board of Directors and authorised for issue on 24 June 2022.
Klaas de Boer
Chairman
Paul Denney
Chief Financial Officer
Company number: 08684474
CONSOLIDATED STATEMENT
OF FINANCIAL POSITION
31 DECEMBER 2021
Notes
At
31 December
2021
At
31 December
2020
£’000
£’000
ASSETS
Non-current assets
Property, plant and equipment
Right of use assets
Trade and other receivables
TOTAL NON-CURRENT ASSETS
Current assets
Inventories
Trade and other receivables
Cash on deposit
Cash and cash equivalents
TOTAL CURRENT ASSETS
TOTAL ASSETS
LIABILITIES
Non-current liabilities
Right of use liabilities
Deferred tax
TOTAL NON-CURRENT LIABILITIES
Current liabilities
12
12
14
13
14
15
16
18
19
114
14
30
158
108
346
5,323
2,483
8,260
8,418
204
68
63
335
96
475
-
5,158
5,729
6,064
-
(38)
(38)
(19)
(38)
(57)
Trade and other payables
18
(1,318)
(1,485)
TOTAL CURRENT LIABILITIES
(1,318)
(1,485)
TOTAL LIABILITIES
NET ASSETS
(1,356)
(1,542)
7,062
4,522
0110
0111
FINANCIAL STATEMENTSSECTION 4FINANCIAL STATEMENTSSECTION 4XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021
CONSOLIDATED STATEMENT
OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER
Notes
Year ended
31 December
2021
Year ended
31 December
2020
£’000
£’000
OPERATING ACTIVITIES
Loss before tax
Adjustment for non-cash items:
Depreciation of property, plant and equipment
Share based payment
(Increase)/decrease in inventories
Decrease in trade and other receivables
Decrease in trade and other payables
Finance income
Finance expense
Cash used in operations
Tax receipts
Cashflow from discontinued operations
12
23
13
14
18
8
8
9
7
(6,930)
(7,632)
200
463
(12)
161
(184)
(17)
3
221
653
246
3
(342)
(9)
6
Notes
8
8
12
7
INVESTING ACTIVITIES
Finance income
Finance expense
Purchases of property, plant and equipment
Cash placed on deposit
Cashflow from discontinued operations
Net cash inflow/(outflow) from investing activities
FINANCING ACTIVITIES
Proceeds from issue of share capital, net of costs
20
Year ended
31 December
2021
Year ended
31 December
2020
£’000
£’000
17
(3)
(56)
(5,323)
-
(5,365)
8,515
8,515
(2,674)
5,158
(1)
2,483
9
(6)
(13)
-
193
183
5,667
5,667
(501)
5,625
34
5,158
(6,316)
(6,854)
Net cash inflow from financing activities
492
-
698
(195)
(Decrease) in cash and cash equivalents
Cash and cash equivalents at start of year/period
Net cash outflow from operations
(5,824)
(6,351)
Effect of exchange rate fluctuations on cash held
CASH AND CASH EQUIVALENTS AT END OF YEAR
16
0112
0113
FINANCIAL STATEMENTSSECTION 4FINANCIAL STATEMENTSSECTION 4XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021 NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
For the year ended 31 December 2021
1) BASIS OF PREPARATION
Xeros Technology Group plc is a public limited
company domiciled in the United Kingdom. The
financial statements of Xeros Technology Group
plc are audited consolidated financial statements
for the year ended 31 December 2021. These
include comparatives for the year ended 31
December 2020. The level of rounding for
financial information is to 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 UK-adopted
international accounting standards.
BUSINESS COMBINATIONS AND BASIS
OF CONSOLIDATION
Subsidiaries are all entities (including structured
entities) over which the Group has control. The
Group controls an entity when the Group is
exposed to, or has rights to, variable returns from
its involvement with the entity and has the ability
to affect those returns through its power over
the entity. Subsidiaries are fully consolidated
from the date on which control is transferred to
the Group and are deconsolidated from the date
control ceases.
Inter-company transactions, balances
and unrealised gains and losses on transactions
between Group companies are eliminated.
Where the acquisition is treated as a
business combination, the purchase method of
accounting is used to account for the acquisition
of subsidiaries by the Group.
The cost of an acquisition is measured
as the fair value of the assets given, equity
instruments issued and liabilities incurred or
assumed at the date of exchange. Acquisition
costs are expensed as incurred. Identifiable
assets acquired and liabilities and contingent
liabilities assumed in a business combination are
measured initially at their fair values at the
acquisition date. The excess of the cost of
acquisition over the fair value of the Group’s
share of the identifiable net assets acquired is
recorded as goodwill. If the cost of the
acquisition is less than the fair value of net
assets of the subsidiary acquired, the difference
is recognised directly in the income statement.
All intra-group balances and
transactions, including unrealised profits arising
from intra-group transactions, are eliminated
fully on consolidation.
GOING CONCERN
As at 31 December 2021, the Group had £2.5m of
cash and £5.3m of cash on deposit. Given the
Group’s stage of development, it continues to
incur operating cash outflows. The Directors
believe that the current levels of cash held
provide the Group with sufficient cash to meet
its obligations as they fall due for at least twelve
months following the date of this report, with
some changes to discretionary expenditure or
the proceeds of a potential fundraise, if
necessary. However, given the current
commercial position of the Group, the Directors
acknowledge that the Group’s current cash
position does not provide certainty beyond this
point and may not, with the current rates of cash
outflow, provide the Group with the resources to
reach the point at which cash generated from
customer contracts covers the cost base of the
Group.
The Directors consider that they have
options in place that may allow them to reach
this breakeven point. These include signing
2) SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied are set
out below.
REVENUE RECOGNITION
Licence revenue
When the Group receives payments in the form
of upfront payments or technology fees, the
Group assesses those payments against the
contacts in accordance with the provisions of
IFRS15, and allocates the revenue against the
performance obligations accordingly.
Where licence revenue is based on sales of
equipment by the licensee, the Group recognises
revenue at the time of that sale.
Sale of goods
Where the Group sells either equipment or
consumables to a customer directly, revenue is
recognised when the product in question is
delivered to the customer, and, if required, any
installation or setup of the equipment has been
performed.
Service contracts
Where the Group has a service contract in place,
revenue is recognised in line with the profile of
the delivery of the service to the customer on an
outputs basis.
Linked contracts
When the Group sells equipment, services and
consumables in a package under a single
contract, the Group assess the contract against
the five steps of IFRS15. This process includes
the assessment of the performance obligations
within the contract and the allocation of contract
revenue across these performance obligations
once identified. . Revenue is allocated according
to the value of consideration expected to be
received for the transfer of the relevant goods or
services to the customer. This consideration is
calculated on an inputs basis using cost data
and an appropriate margin.
potential commercial agreements and the
possibility of raising further investor funding.
Given that these options are not certain at this
stage, the Directors consider the Group’s current
funding position indicates a material uncertainty
exists that may cast significant doubt as to the
Group’s ability to continue as a going concern.
Without some form of action, most likely in the
form of a fundraise, the Group’s cash will run out
prior to the completion of commercialisation and,
therefore, cash breakeven. The Directors also
believe, however, that they have sufficient
options in place in order to allow the Group to
continue trading in the short and medium term.
Therefore, after making enquiries and
considering the uncertainties as described
above, the Directors have a reasonable
expectation that the Group has and will have
adequate resources to continue in operational
existence for the foreseeable future. For these
reasons, they continue to adopt the going basis
of accounting in preparing this financial
information.
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.
The Company’s business activities,
together with the factors likely to affect its future
development, performance and position are set
out in the Chief Executive Officer’s review on
pages 2 to 5. The financial position of the
Company, its cash flows, and liquidity position
are described in the Chief Financial Officer’s
Review on pages 6 to 7. In addition, notes 2 to 25
to the financial statements include the
Company’s objectives, policies and processes for
managing its capital; its financial risk
management objectives; details of its financial
instruments and hedging activities; and its
exposures to credit risk and liquidity risk.
0114
0115
FINANCIAL STATEMENTSSECTION 4FINANCIAL STATEMENTSSECTION 4XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021 Revenue is shown net of Value Added Tax or
Sales Tax as appropriate.
translation reserve relating to the operation that
is being sold.
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
0116
EXCEPTIONAL ITEMS
One off items with a material effect on results
are disclosed separately on the face of the
Consolidated Statement of Profit and Loss and
Other Comprehensive Income. The Directors
apply judgement in assessing the particular
items which, by virtue of their scale and nature,
should be classified as exceptional items. The
Directors consider that separate disclosure of
these items is relevant to an understanding of
the Group’s financial performance.
RESEARCH AND DEVELOPMENT
Expenditure on research activities is recognised
as an expense in the period in which it is
incurred. Development costs are only capitalised
when the related products meet the recognition
criteria of an internally generated intangible
asset, the key criteria being as follows:
— it is probable that the future economic
benefits that are attributable to the asset
will flow to the Group;
— the project is technically and
commercially feasible;
— the Group intends to and has sufficient
resources to complete the project;
— the Group has the ability to use or sell
the asset; and
— the cost of the asset can be measured
reliably.
Such intangible assets are amortised on a
straight-line basis from the point at which the
assets are ready for use over the period of the
expected benefit and are reviewed for an
indication of impairment at each reporting date.
Other development costs are charged against
profit or loss as incurred since the criteria for
their recognition as an asset are not met.
The costs of an internally generated
intangible asset comprise all directly attributable
costs necessary to create, produce and prepare
the asset to be capable of operating in the
manner intended by management. Directly
attributable costs include employee costs
incurred on technical development, testing and
certification,
materials consumed and any relevant
The Group depreciates the right-of-use
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.
assets on a straight-line basis from the lease
commencement date to the earlier of the end of
the useful life of the right-of-use asset or the end
of the lease term. The Group also assesses the
right-of-use asset for impairment when such
indicators exist.
At the lease commencement date, the
No development costs to date have been
capitalised as intangible assets as it was deemed
that the probability of future economic benefit
was uncertain at the time the costs were
incurred.
Group measures the lease liability at the present
value of the lease payments unpaid at that date,
discounted using the interest rate implicit in the
lease if that rate is readily available of the Group’s
incremental borrowing rate.
LEASES
As a lessee. Where the Group enters a new
contract, the Group considers whether this
contract is, or contains, a lease. A lease is defined
as “a contract, or part of a contract, that conveys
the right to use an asset for a period of time in
exchange for consideration”. To apply this
definition, the Group assesses whether the
contract meets three key evaluations, which are
whether:
— the contract contains an identified asset,
which is either explicitly identified in the
contract or implicitly specified by being
identified at the time the asset is made
available to the Group
— the Group has the right to obtain
substantially all of the economic
benefits from use of the identified
asset throughout the period of use,
considering its rights within the defined
scope of the contract.
— the Group has the right to direct the use
of the identified asset throughout the
period of use.
Measurement and recognition of leases as a
lessee
At the lease commencement date, the
Group recognises a right-of-use asset and a
lease liability in the statement of financial
position. The right-of-use asset is measured at
cost, which is made up of the initial
measurement of the lease liability, any initial
direct costs incurred by the Group, an estimate
of any costs to dismantle and remove the asset
at the end of the lease, and any lease payments
made in advance of the lease commencement
date (net of any incentives received).
Lease payments included in the
measurement of the lease liability are made up
of fixed payments, variable payments based on
an index or rate, amounts expected to be payable
under a residual guarantee and payments arising
from options reasonably certain to be exercised.
Subsequent to initial measurement, the
liability will be reduced for payments made and
increased for interest. It is remeasured to reflect
any reassessment or modification, or if there are
changes in in-substance fixed payments.
When the lease liability is remeasured,
the corresponding adjustment is reflected in the
right-of-use asset, or profit and loss if the
right-of-use asset is already reduced to zero.
The Group has elected to account for
short-term leases and leases of low-value assets
using the practical expedients. Instead of
recognising a right-of-use asset and lease
liability, the payments in relation to these are
recognised as an expense in profit or loss on a
straight-line basis over the lease term.
On the statement of financial position,
right-of-use assets are shown separately and are
included in property, plant and equipment notes
for disclosure purposes. Lease liabilities are
shown separately.
As a lessor. If the Group transfers substantially
all the risks and benefits of ownership of the
asset, a receivable is recognised for the initial
direct costs of the lease and the present value of
the minimum lease payments. As payments fall
due, finance income is recognised in the income
statement so as to achieve a constant rate of
return on the remaining net investment in the
lease.
0117
FINANCIAL STATEMENTSSECTION 4FINANCIAL STATEMENTSSECTION 4XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021 INTANGIBLE ASSETS AND GOODWILL
Recognition and measurement
Goodwill arising on the acquisition of
subsidiaries is measured at cost less
accumulated impairment losses.
Other intangible assets, including customer
relationships and brands, that are acquired by
the Group and have finite useful lives are
measured at cost less accumulated amortisation
and any accumulated impairment losses.
Amortisation
Amortisation is calculated to write off the cost of
intangible assets less their estimated residual
values using the straight-line method over their
estimated useful lives and is generally
recognised in profit or loss. Goodwill is not
amortised. The estimated useful lives for current
and comparative periods are as follows:
— Customer lists – 5 years
— Brands – 5 years
— Software – 3 years
Amortisation methods, useful lives and residual
values are reviewed at each reporting date and
adjusted if appropriate. Assets considered to
have indefinite useful economic lives, such as
goodwill, are tested annually for impairment.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost
less accumulated depreciation and any
impairment losses. Cost includes the original
purchase price of the asset and the costs
attributable to bringing the asset to its working
condition for its intended use. Depreciation is
charged so as to write off the costs of assets
over their estimated useful lives, on the following
basis:
Leasehold improvements – over the term of the
lease on a straight-line basis
Vehicles
cost on a straight-line basis
– 20% on
The gain or loss arising from the disposal of an
asset is determined as the difference between
the sales proceeds and the carrying amount of
the asset, and is recognised in the statement of
profit or loss and other comprehensive income.
IMPAIRMENT OF
NON-CURRENT ASSETS
For the purposes of assessing impairment,
assets are grouped at the lowest levels for which
there are separately identifiable cash flows
(cash-generating units). As a result, some assets
are tested individually for impairment and some
are tested at cash-generating unit level. Goodwill
is allocated to those cash-generating units that
are expected to benefit from synergies of the
related business combination and represent the
lowest level at which management monitors
goodwill. Cash-generating units to which
goodwill has been allocated are tested for
impairment at least annually. All other individual
assets or cash-generating units are tested for
impairment whenever events or changes in
circumstances indicate that the carrying amount
may not be recoverable. An impairment loss is
recognised for the amount by which the assets
or cash-generating unit’s carrying amount
exceeds its recoverable amount. The recoverable
amount is the higher of fair value, reflecting
market conditions less costs to sell, and value in
use based on an internal discounted cash flow
evaluation.
INVENTORIES
Inventories are valued at the lower of cost and
net realisable value. Cost incurred in bringing
each product to its present location and
condition is accounted for as follows:
Raw materials, work in progress and
Finished goods – Purchase cost on a first-in,
first-out basis.
Plant and machinery
cost on a straight-line basis
Fixtures and fittings
cost on a straight-line basis
Computer equipment
cost on a straight-line basis
– 20% on
Net realisable value is the estimated
selling price in the ordinary course of business.
– 20% on
– 33% on
CASH ON DEPOSIT
Bank deposits where maturity is greater than
three months from the date of investment, the
Group cannot access the funds prior to the
Where an equity-settled award is
cancelled, it is treated as if it had vested on the
date of cancellation and any expense not yet
recognised for the award is recognised
immediately. However, if a new award is
substituted for the cancelled award and
designated as a replacement award on the date
that it is granted, the cancelled and new awards
are treated as if they were a modification of the
original award, as described in the previous
paragraph. The dilutive effect of outstanding
options is reflected as additional share dilution in
the computation of earnings per share.
FURLOUGH CREDITS
Where the Group has claimed a credit in respect
of employees furloughed in accordance with the
relevant government support schemes, the
credit is recognised in the statement of profit or
loss and other comprehensive income in the
period to which the credit relates and is netted
off against staff costs.
FINANCIAL ASSETS AND LIABILITIES
Financial assets and financial liabilities are
recognised in the consolidated statement of
financial position when the Group becomes party
to the contractual provisions of the instrument.
Financial assets are de-recognised when the
contractual rights to the cash flows from the
financial asset expire or when the contractual
rights to those assets are transferred.
maturity date and the Group is not relying on the
funds to meet its short term operating
requirements are disclosed as cash on deposit.
SHARE BASED PAYMENTS
Certain employees and consultants (including
Directors and senior executives) of the Group
receive remuneration in the form of share-based
payment transactions, whereby employees
render services as consideration for equity
instruments (“equity-settled transactions”). This
policy applies to all schemes, including the
Deferred Annual Bonus scheme open to certain
management personnel.
The cost of equity-settled transactions
with employees is measured by reference to the
fair value at the date on which they are granted.
The fair value is determined by using an
appropriate pricing model. The cost of equity-
settled transactions is recognised, together with
a corresponding increase in equity, over the
period in which the performance and/or service
conditions are fulfilled, ending on the date on
which the relevant employees become fully
entitled to the award (“the vesting date”). The
cumulative expense recognised for equity-
settled transactions at each reporting date until
the vesting date reflects the extent to which the
vesting period has expired and the Group’s best
estimate of the number of equity instruments
that will ultimately vest. The profit or loss charge
or credit for a period represents the movement in
cumulative expense recognised as at the
beginning and end of that period.
No expense is recognised for awards
that do not ultimately vest, except for awards
where vesting is conditional upon a market
condition, which are treated as vesting
irrespective of whether or not the market
condition is satisfied, provided that all other
performance and/or service conditions are
satisfied. Where the terms of an equity-settled
award are modified, the minimum expense
recognised is the expense as if the terms had not
been modified. An additional expense is
recognised for any modification, which increases
the total fair value of the share-based payment
arrangement or is otherwise beneficial to the
employee as measured at the date of
modification.
0118
0119
FINANCIAL STATEMENTSSECTION 4FINANCIAL STATEMENTSSECTION 4XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021
Financial liabilities are de-recognised
when the obligation specified in the contract is
discharged, cancelled or expired.
Financial assets, other than those
designated and effective as hedging instruments,
are classified into the following categories:
— amortised cost
— fair value through profit or loss (FVTPL)
assets using the expected credit loss model as
required by IFRS 9. The Group considers a broad
range of information when assessing credit risk
and measuring expected credit losses, including
past events, current conditions, reasonable and
supportable forecasts that affect the expected
collectability of the future cash flows of the
instrument.
— fair value through other comprehensive
TAXATION
income (FVOCI)
In the periods presented the Group does not
have any financial assets categorised as FVTPL
or FVOCI.
After initial recognition, these are
measured at amortised cost using the effective
interest rate method. Discounting is omitted
where the effect is immaterial. All of the Group’s
financial assets and financial liabilities fall into
this category.
Trade receivables
Trade receivables are recognised initially at fair
value and subsequently measured at amortised
cost less expected credit losses. Appropriate
provisions for estimated irrecoverable amounts
are recognised in the statement of profit or loss
and other comprehensive income when there is
objective evidence that the assets are impaired.
Cash and cash equivalents
Cash and cash equivalents comprise cash on
hand, demand deposits, and other short-term
highly liquid investments that are readily
convertible to a known amount of cash and are
subject to an insignificant risk of changes in
value.
Equity instruments
An equity instrument is any contract that
evidences a residual interest in the assets of an
entity after deducting all of its liabilities. Equity
instruments issued by the Group are recorded at
the proceeds received, net of direct issue costs.
Trade and other payables
Trade payables are initially measured at their fair
value and are subsequently measured at their
amortised cost using the effective interest rate
method; this method allocates interest expense
over the relevant period by applying the “effective
interest rate” to the carrying amount of the
liability.
Impairment of financial assets
The Group accounts for impairment of financial
The tax expense/(credit) represents the sum of
the tax currently payable or recoverable and the
movement in deferred tax assets and liabilities.
Current tax is based upon taxable profit/
(loss) for the year. Taxable profit/(loss) differs
from net profit/(loss) as reported in the
statement of profit or loss and other
comprehensive income because it excludes
items of income or expense that are taxable or
deductible in other years and it further excludes
items that are never taxable or deductible.
The Group’s liability for current tax is
calculated by using tax rates that have been
enacted or substantively enacted by the
reporting date.
Credit is taken in the accounting period
for research and development tax credits, which
have been claimed from HM Revenue and
Customs, in respect of qualifying research and
development costs incurred. Research and
development tax credits are recognised on an
accruals basis with reference to the level of
certainty regarding acceptance of the claims by
HMRC. The Group accounts for R&D tax credits
as an investment tax credit accounted for on a
flow through basis – R&D tax credits, while
investment tax credits, are not considered to be
substantially different from other tax credits and
they are recognised when the conditions
required to receive the credit are met and they
are claimed on the Group’s tax return.
Deferred tax is calculated at the tax rates
that are expected to apply to the period when the
asset is realised or the liability is settled based
upon tax rates that have been enacted or
substantively enacted by the reporting date.
Deferred tax is charged or credited in the
statement of profit or loss and other
comprehensive income, except when it relates to
items credited or charged directly to equity, in
which case the deferred tax is also dealt with in
equity.
Deferred tax is the tax expected to be
payable or recoverable on differences between
the carrying amounts of assets and liabilities in
the financial statements and the corresponding
tax bases used in the computation of taxable
profit and is accounted for using the liability
method. Deferred tax liabilities are generally
recognised for all taxable temporary differences
and deferred tax assets are recognised to the
extent that it is probable that taxable profits will
be available against which deductible temporary
differences can be utilised. Such assets and
liabilities are not recognised if the temporary
difference arises from goodwill or from the initial
recognition (other than in a business
combination) of other assets and liabilities in a
transaction that affects neither the profit nor the
accounting period.
The carrying amount of deferred tax
assets is reviewed at each reporting date and
reduced to the extent that it is no longer
probable that sufficient taxable profits will be
available to allow all or part of the asset to be
recovered.
DISPOSAL GROUPS AND
DISCONTINUED OPERATIONS
Non-current assets (or disposal groups) are
classified as held for sale if their carrying amount
will be recovered principally through a sale
transaction rather than through continuing use
and a sale is considered highly probable. They
are measured at the lower of their carrying
amount and fair value less costs to sell, except
for assets such as deferred tax assets, assets
arising from employee benefits, financial assets
and investment property that are carried at fair
value and contractual rights under insurance
contracts, which are specifically exempt from
this requirement.
An impairment loss is recognised for any
initial or subsequent write-down of the asset (or
disposal group) to fair value less costs to sell. A
gain is recognised for any subsequent increases
in fair value less costs to sell of an asset (or
disposal group), but not in excess of any
cumulative impairment loss previously
recognised. A gain or loss not previously
recognised by the date of the sale of the
noncurrent asset (or disposal group) is
recognised at the date of derecognition.
Non-current assets (including those that
are part of a disposal group) are not depreciated
or amortised while they are classified as held for
sale. Interest and other expenses attributable to
the liabilities of a disposal group classified as
held for sale continue to be recognised.
Non-current assets classified as held for
sale and the assets of a disposal group classified
as held for sale are presented separately from
the other assets in the balance sheet. The
liabilities of a disposal group classified as held
for sale are presented separately from other
liabilities in the balance sheet.
A discontinued operation is a component
of the entity that has been disposed of or is
classified as held for sale and that represents a
separate major line of business or geographical
area of operations, is part of a single co-
ordinated plan to dispose of such a line of
business or area of operations, or is a subsidiary
acquired exclusively with a view to resale. The
results of discontinued operations are presented
separately in the statement of profit or loss.
CRITICAL ACCOUNTING ESTIMATES
AND AREAS OF JUDGEMENT
Estimates and judgements are continually
evaluated and are based on historical experience
and other factors, including expectations of
future events that are believed to be reasonable
under the circumstances. Actual results may
differ from these estimates. The estimates and
assumptions that have the most significant
effects on the carrying amounts of the assets
and liabilities in the financial information are
discussed below. The point listed below is
considered to be an area of judgement.
Research and development costs
Careful judgement by the Directors is applied
when deciding whether the recognition
requirements for capitalising development costs
have been met.
This is necessary as the economic
success of any product development is uncertain
and may be subject to future technical problems.
Judgements are based on the information
available at each reporting date which includes
the progress with testing and certification and
progress on, for example, establishment of
commercial arrangements with third parties.
0120
0121
FINANCIAL STATEMENTSSECTION 4FINANCIAL STATEMENTSSECTION 4XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021 Specifically, the Directors consider production
scale evidence of commercial operation of the
Group’s technology. In addition, all internal
activities related to research and development of
new products are continuously monitored by the
Directors. To date, no development costs have
been capitalised.
ACCOUNTING STANDARDS AND
INTERPRETATIONS NOT APPLIED
At the date of authorisation of these financial
statements, the following IFRSs, IASs and
Interpretations were in issue but not yet
effective. Their adoption is not expected to have
a material effect on the financial statements
unless otherwise indicated:
Amendments to IAS 1, IAS 8 and IAS 21
1 January 2023
Amendments to IFRS 17
1 January 2023
3) SEGMENTAL REPORTING
The financial information by segment detailed
below is frequently reviewed by the Chief
Executive Officer, who has been identified as the
Chief Operating Decision Maker (“CODM”). The
Group’s transition to a licencing organisation has
led to a change to how the results of the Group
are reviewed internally. The results are no longer
split by segment but are reviewed in terms of the
type of revenue. As such the analysis below does
not split the Group’s results into separate
operating segments and instead reports results
as one single segment.
An analysis of revenues by type is set out below:
4) LOSS FROM OPERATIONS
Year ended
31 December
2021
£’000
Year ended
31 December
2020
£’000
Sale of goods
Rendering of services
Licencing revenue
Total
160
190
124
474
13
314
58
385
The Group’s largest customer was responsible
for 19% of Group revenue in the year to 31
December 2021.
During the year ended 31 December 2020 the
Group’s largest customer was responsible for
19% of Group revenue.
An analysis of revenues by geographic location
of customers is set out below:
Year ended
31 December
2021
£’000
Year ended
31 December
2020
£’000
Europe
North America
Rest of the World
Total
271
61
142
474
230
145
10
385
Loss from operations is stated
after charging to administrative
expenses:
Foreign exchange losses
Depreciation of plant and equipment (note 12)
Operating lease rentals – land and buildings
Year ended
31 December
2021
£’000
Year ended
31 December
2020
£’000
7
200
42
60
221
40
Staff costs (excluding share-based payment charge)
3,711
4,010
Research and development
316
144
Auditor’s remuneration
Audit of these financial statements
Audit of financial statements of subsidiaries
All other services
Total auditor’s remuneration
5) STAFF NUMBERS AND COSTS
The average monthly number
of persons (including Directors)
employed by the Group during the
year was:
Directors
Operational staff
Total
The aggregate remuneration, including Directors, comprised:
24
23
4
51
21
20
4
45
Year ended
31 December
2021
£’000
Year ended
31 December
2020
£’000
6
40
46
5
48
53
An analysis of non-current assets by location is
set out below:
Wages and salaries
3,278
3,675
Year ended
31 December
2021
£’000
Year ended
31 December
2020
£’000
Europe
North America
Total
158
-
158
272
-
272
Social security costs
Pension contributions
Share based expense (note 23)
Furlough credit
Total costs
Directors’ remuneration comprised:
Emoluments for qualifying services
335
88
463
367
90
653
(15)
(122)
4,149
4,663
744
730
Directors’ emoluments disclosed above include £335,000 paid to the highest paid Director (Year ended 31 December 2020: £364,000).
There are no pension benefits for Directors. Please see Directors’ Remuneration Report on pages [14 to 16] for further information on
Directors’ emoluments.
0122
0123
FINANCIAL STATEMENTSSECTION 4FINANCIAL STATEMENTSSECTION 4XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021
6) EXPENSES BY NATURE
The administrative expenses charge by nature is as follows:
Year ended 31
December 2021
Year ended
31 December 2020
£’000
£’000
7) DISCONTINUED OPERATIONS
During the year ended 31 December 2020, the Marken sites operated
by the Group were closed and as a result the results for this operating
segment were presented as a discontinued operation in accordance
with IFRS 5. The disposal of the segment was completed in the year
ended 31 December 2020. The loss for the year ended 31 December
2021 related to discontinued operations was £nil (2020: £37,000).
Staff costs, recruitment and other HR
3,908
4,235
Share-based payment expense
Premises and establishment costs
Research and development costs
Patent and IP costs
Engineering and operational costs
Legal, professional and consultancy fees
IT, telecoms and office costs
Depreciation charge
Travelling, subsistence and entertaining
Advertising, conferences and exhibitions
Bad debt expense
Other expenses
Foreign exchange losses/(gains)
Furlough credit
Total administrative expenses
463
150
316
476
-
910
213
200
124
299
161
13
7
(15)
7,225
653
176
144
635
2
895
458
221
130
63
52
(16)
60
(122)
7,586
FINANCIAL PERFORMANCE AND CASH FLOW INFORMATION
The results of the discontinued operations are shown below for the year
ended 31 December 2021 and the year ended 31 December 2020.
Year ended
31 December
2021
£’000
Year ended
31 December
2020
£’000
Revenue
Expenses
Impairment of assets held for sale
Profit on sale of assets
Gain on termination of lease
Loss before and after income tax from discontinued operation
Exchange differences on translation of discontinued operations
Other comprehensive income from discontinued operations
Net cash outflow from operating activities
Net cash inflow/(outflow) from investing activities
Net cash inflow from financing activities
Net decrease in cash generated by the subsidiary
DETAILS OF THE SALE OF THE BUSINESS UNIT
Cash received
Total consideration
Carrying amount of assets sold
Profit on sale
-
-
-
-
-
-
-
-
-
-
-
-
238
(507)
-
116
116
(37)
14
14
195
193
-
(2)
Year ended
31 December
2021
£’000
Year ended
31 December
2020
£’000
-
-
-
-
193
193
(77)
116
0124
0125
FINANCIAL STATEMENTSSECTION 4FINANCIAL STATEMENTSSECTION 4XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021 THE CARRYING AMOUNTS OF ASSETS AND LIABILITIES
AS AT THE DATE OF SALE WERE:
Assets classified as held for sale
Property, plant and equipment
Inventories
Total assets held for sale
Liabilities directly associated with assets classified as held for sale
Right of use lease liabilities
Total liabilities associated with assets held for sale
There were no assets or liabilities classified as held for sale as at 31 December 2021 or 31 December 2020.
30 May
2020
£’000
191
77
268
(191)
(191)
8) NET FINANCE INCOME
Bank interest receivable
Finance expense in relation to right-of-use assets
Finance income from lease receivables
Net finance income
9) TAXATION
Tax on loss on ordinary activities
Current tax:
Year ended
31 December
2021
£’000
Year ended
31 December
2020
£’000
12
(3)
5
14
-
(6)
9
3
Year ended
31 December
2021
£’000
Year ended
31 December
2020
£’000
UK Tax credits received in respect of prior periods
(505)
(698)
Foreign taxes paid
Deferred tax:
13
-
(492)
(698)
Origination and reversal of temporary timing differences
-
-
Tax credit on loss on ordinary activities
(492)
(698)
The credit for the year/period can be reconciled to the loss before
tax per the statement of profit or loss and other comprehensive
income as follows:
Factors affecting the current tax charges
The tax assessed for the year varies from the main company rate
of corporation tax as explained below:
The tax assessed for the period varies from the main
company rate of corporation tax as explained below:
Loss on ordinary activities before tax
Year ended
31 December
2021
£’000
Year ended
31 December
2020
£’000
(6,929)
(7,669)
Tax at the standard rate of corporation tax 19% (2020: 19%)
(1,317)
(1,457)
Effects of:
Expenses not deductible for tax purposes
Research and development tax credits receivable
88
124
(505)
(698)
Unutilised tax losses for which no deferred tax asset is recognised
1,229
1,333
Employee share acquisition adjustment
Foreign taxes paid
Tax credit for the year/period
-
13
-
-
(492)
(698)
The Group accounts for Research and Development tax credits
where there is certainty regarding HMRC approval. The Group has
received a tax credit in respect of the year ended 31 December
2020. There is no certainty regarding the claim for the year ended 31
December 2021 and as such no relevant credit or asset is
recognised.
0126
0127
FINANCIAL STATEMENTSSECTION 4FINANCIAL STATEMENTSSECTION 4XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021 10) 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 ended
31 December 2021
Year ended
31 December 2020
£’000
£’000
Total loss from continuing operations
(6,438)
(6,934)
Total loss from discontinued operations
-
(37)
Total loss attributable to the equity holders of the parent
(6,438)
(6,971)
Weighted average number of
ordinary shares in issue during the year
Loss per share
No.
22,898,879
No.
15,449,084
Basic and diluted on loss from continuing operations
(28.11)p
(44.88)p
Basic and diluted on loss from discontinued operations
-
(0.24)p
Basic and diluted on total loss for the year
(28.11)p
(45.12)p
The weighted average number of shares in issue throughout the
period is as follows.
The 2020 calculation assumes the 100:1 share consolidation
performed in the year ended 31 December 2020 was in place
throughout that year.
Year ended
31 December 2021
Year ended
31 December 2020
£’000
£’000
Issued ordinary shares at 1 January 2021/1 January 2020
19,976,090
7,837,621
Effect of shares issued for cash
2,922,789
7,611,462
Weighted average number of shares at 31 December
22,898,879
15,449,084
The Company has issued employee options over 2,087,895 (31
December 2020: 1,447,324) ordinary shares which are potentially
dilutive. There is however, no dilutive effect of these issued options
as there is a loss for each of the periods concerned.
11) INTANGIBLE ASSETS AND GOODWILL
Goodwill
Customer
Brand
Software
£’000
£’000
£’000
£’000
Cost
As at 31 December 2019
458
Foreign currency differences
(16)
As at 31 December 2020
442
Foreign currency differences
2
As at 31 December 2021
444
Accumulated amortisation and
impairment losses
As at 31 December 2019
458
Foreign currency differences
(16)
As at 31 December 2020
442
Foreign currency differences
2
As at 31 December 2021
444
Net book value
At 31 December 2021
At 31 December 2020
At 31 December 2019
Tax credit for the year/period
-
-
-
-
682
(23)
659
3
662
682
(23)
659
3
662
-
-
-
-
329
(11)
318
2
320
329
(11)
318
2
320
-
-
-
-
19
(1)
18
1
19
19
(1)
18
1
19
-
-
-
-
Total
£’000
1,488
(51)
1,437
8
1,445
1,488
(51)
1,437
8
1,445
-
-
-
-
Amortisation and impairment
No amortisation or impairment have been charged in the year.
Impairment testing for CGUs containing goodwill
Goodwill has previously been allocated to the Group’s High
Performance Workwear operating division. Given the completion of
the disposal of this operating division in the period, there has been
no change in the value of the impairment previously recognised.
0128
0129
FINANCIAL STATEMENTSSECTION 4FINANCIAL STATEMENTSSECTION 4XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021 12) PROPERTY, PLANT AND EQUIPMENT
13) INVENTORIES
31 December 2021
31 December 2020
£’000
£’000
Right-of-
use assets
£’000
Leasehold
improve-
ments
£’000
Plant and
equipment
Computer
equipment
£’000
£’000
Fixtures
and
fittings
£’000
Total
£’000
265
92
48
1,450
177
548
292
134
547
1
-
-
7
-
-
548
273
-
-
19
-
339
100
-
-
139
55
-
-
439
194
87
-
43
-
Cost
As at 31
December 2019
Additions
498
-
Disposals
(328)
Disposals
(164)
7
177
-
-
215
54
4
109
54
-
Foreign currency
differences
As at
31 December 2020
Additions
Disposals
At 31
December 2020
Depreciation
At 31 December
2019
Charge for the
year
Foreign currency
differences
At 31 December
2020
Charge for the
year
Disposals
At 31
December 2021
Net book value
At 31
December 2021
At 31
December 2020
At 31
December 2019
163
526
236
14
68
283
22
109
208
55
79
126
All the right of use assets relate to land and buildings.
5
-
-
97
37
-
71
16
-
-
87
12
-
99
35
10
21
-
-
-
48
-
-
48
46
(4)
-
-
42
4
-
47
2
6
2
13
(328)
7
1,143
56
-
1,199
810
221
(164)
4
871
200
-
1,071
128
272
640
Finished goods
108
96
In the year ended 31 December 2021, changes in Finished goods
recognised as cost of sales amounted to £27,000 (year ended 31
December 2020: £245,000).
14) TRADE AND OTHER RECEIVABLES
31 December 2021
31 December 2020
£’000
£’000
Due within 12 months
Trade debtors
Other receivables
Prepayments and accrued income
Due after more than 12 months
Other receivables
110
63
173
346
116
218
141
475
30
63
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 IFRS 16. The
minimum lease payment is receivable as follows:
Not later than one year
Later than one year not later than five years
Total
35
30
65
90
63
153
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 2020 and made a
provision of £90,000 (31 December 2020:
£247,000) 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 £30,000 (31
December 2020: £63,000) due after more than
one year comprise the long-term portion of
finance leases where the Group acts as lessor.
0130
0131
FINANCIAL STATEMENTSSECTION 4FINANCIAL STATEMENTSSECTION 4XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021
15) CASH ON DEPOSIT
Bank deposits maturing between 3 and 12 months
At 31 December 2021, the Group held £5,323,000 (2020 £nil) in 95
day deposit accounts. This balance is denominated in pound
sterling (£). The Directors consider that the carrying value of cash
and cash equivalents approximates to their fair value. For details of
credit risk management, see note17.
16) CASH AND CASH EQUIVALENTS
A+
A
BBB+
Held outside banking institutions
31 December 2021
31 December 2020
£’000
£’000
5,323
5,323
-
-
31 December 2021
31 December 2020
£’000
£’000
1,427
1,005
49
2
-
5,122
34
1
Cash and cash equivalents
2,483
5,157
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 2020
are at floating interest rates. Balances are denominated in UK
sterling (£), US dollars ($) and euros (€) as follows:
31 December 2021
31 December 2020
£’000
£’000
Denominated in pound sterling
2,323
4,972
Denominated in US dollars
Denominated in euros
Cash and cash equivalents
52
108
36
149
2,483
5,157
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
information at the balance sheet date.
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 1: The fair value is calculated based
on quoted prices traded in active markets for
identical assets or liabilities.
Level 2: The fair value is based on inputs
other 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 3: The fair value is based on inputs
for the asset or liability that are not based on
observable market data (unobservable inputs).
The Group considers any forward foreign
exchange contracts to be Level 2 in the fair
value hierarchy should it enter into any. The
Group has not entered into any such contracts
in either the current or the prior year. 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
(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 cash, both bank
deposits and cash held on deposit, in the event
of failure of the respective banks. The Group
attempts to mitigate this risk through ongoing
monitoring of the credit ratings of those banks.
Further details are set out in note 16. At 31
December 2021, the Directors were not aware of
any factors affecting the recoverability of the
Group’s bank balances.
Exposure to Credit Risk
At 31 December 2021, the Group had gross trade
receivables outstanding of £182,000 (2020:
£363,000). The Directors have considered the
recoverability of outstanding balances at 31
December 2021 and have made provisions for
bad and doubtful debts amounting to £72,000
(2019: £247,000). The Group had gross lease
receivable balances outstanding of £109,000
(2020: £153,000) and provision in place in
respect of these lease receivables of £45,000
(2020: £nil).
0132
0133
FINANCIAL STATEMENTSSECTION 4FINANCIAL STATEMENTSSECTION 4XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021 The concentration of credit risk for trade and other receivables and
lease receivables at the balance sheet date by geographic region
was:
United Kingdom
United States of America
(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.
Non-derivative financial liabilities
Due within one year
Trade and other payables
31 December 2021
31 December 2020
£’000
£’000
372
4
376
217
299
516
31 December
2021
£’000
31 December
2020
£’000
458
539
(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 makes ad hoc decisions at its 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 where appropriate.
The Group had no forward currency contracts in place as at either
31 December 2021 or 31 December 2020.
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 2021
Sterling
US Dollar
Euro
£’000
£’000
£’000
Chinese
Yuan
£’000
Cash and cash equivalents
2,323
Cash on deposit
5,323
Trade and other receivables
323
52
-
10
Trade and other payables
(1,182)
(85)
107
-
44
2
Balance sheet exposure
6,787
(23)
153
-
-
-
(2)
(2)
Total
£’000
2,482
5,323
377
(1,267)
6,915
Net exposure
-
(23)
153
(2)
128
At 31 December 2020
Sterling
£’000
US Dollar
£’000
Euro
£’000
Cash and cash equivalents
4,972
Trade and other receivables
413
Trade and other payables
(1,428)
Balance sheet exposure
3,957
36
125
(71)
90
149
-
(4)
145
Total
£’000
5,157
538
(1,503)
4,192
Net exposure
-
90
145
235
0134
0135
FINANCIAL STATEMENTSSECTION 4FINANCIAL STATEMENTSSECTION 4XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021 Sensitivity Analysis
A 10% weakening of the following currencies against the pound
sterling at 31 December 2021 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 2020.
Equity
Profit or Loss
31 December
2021
£’000
31 December
2020
£’000
31 December
2021
£’000
31 December
2020
£’000
US Dollars
Euros
(2)
(15)
(9)
(15)
(2)
(15)
(9)
(15)
A 10% strengthening of the above currencies against the pound
sterling at 31 December 2021 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:
Based on the Group’s above balances at 31 December 2021, if
interest rates had been 5% higher, then the impact on the results for
the year would be a reduction in the loss for the period of
approximately £124,000 with a corresponding increase in the
Group’s net assets. If the interest rate had reduced to 0%, there
would have been no effect on the reported loss or on the Group’s
net assets.
(e) Capital Management
The Group’s capital is made up of share capital, share premium and
retained losses, totalling £7,062,000 at 31 December 2021 (31
December 2020: £4,522,000).
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
FIXED RATE INSTRUMENTS
Financial assets
Financial liabilities
VARIABLE RATE INSTRUMENTS
Financial assets - cash
Financial liabilities
31 December
2021
£’000
31 December
2020
£’000
5,323
-
-
-
-
-
2,482
5,157
-
-
2,482
5,625
Trade payables
Taxes and social security
Other creditors
Accruals and deferred income
Right of use liabilities
Current
Non-current
31 December
2021
£’000
31 December
2020
£’000
439
110
38
661
19
436
2
67
895
103
1,267
1,503
1,267
1,484
-
19
1,267
1,503
0136
0137
FINANCIAL STATEMENTSSECTION 4FINANCIAL STATEMENTSSECTION 4XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021 Trade payables, split by the currency they will be settled in are
shown below:
31 December
2021
£’000
31 December
2020
£’000
20) SHARE CAPITAL
Sterling
US dollars
Euros
Chinese yuan renminbi
Trade payables
398
41
(2)
2
439
366
66
4
-
436
Total ordinary shares of 0.15p
each as at 31 December 2019
Issue of ordinary shares
following placing and open
offer
Issue of ordinary shares on
exercise of share options prior
to share consolidation
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 relevant 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
Accelerated depreciation for tax purposes
Deferred tax credit/(expense) for the period
At beginning of year
Tax expense
At end of year
As at 31 December 2021, the Group had unrecognised deferred tax
assets totalling approximately £12,664,000 (31 December 2020:
£22,223,000), 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.
31 December
2021
£’000
31 December
2020
£’000
38
-
38
-
Year ended
31 December 2021
Year ended
31 December 2020
£’000
£’000
38
-
38
38
-
38
Number
Share
capital
£’000
Share
Merger
reserve
£’000
Total
£’000
783,762,131
1,176
109,226
15,443
125,845
1,200,000,000
1,800
4,200
10,325,966
16
55
Issue of shares immediately
prior to share consolidation
3
Effect of share consolidation
(1,974,147,219)
Issue of ordinary shares on
exercise of share options after
the share consolidation
35,209
Costs of share issues
-
-
-
5
-
-
-
19
(427)
Total ordinary shares of 15p
each as at 31 December 2020
Issue of ordinary shares
following placing and open
offer
3,749,919
562
8,438
Issue of ordinary shares on
exercise of share options
58,474
Costs of share issues
-
9
-
32
(525)
-
-
-
-
-
-
6,000
71
-
-
24
(427)
-
-
-
9,000
41
(525)
19,976,090
2,997
113,073
15,443
131,513
Total Ordinary shares of 15p
each as at 31 December 2021
23,784,483
3,568
121,018
15,443
140,029
The Group undertook a share capital reorganisation exercise during
the year ended 31 December 2020, reducing the number of shares
in issue by a factor of 100 and increasing the nominal value of the
share by an equivalent factor.
As permitted by the provisions of the Companies Act 2006,
the Company does not have an upper limit to its authorised share
capital.
0138
0139
FINANCIAL STATEMENTSSECTION 4FINANCIAL STATEMENTSSECTION 4XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021 The following is a summary of the changes in the issued share
capital of the Company during the period ended 31 December 2021:
I
3,749,919 ordinary shares of 15p per share were allotted
at a price of 240p per share, for total cash consideration
of £9,000,000 upon the placing and open offer of the
Company’s shares in March 2021.
II 58,474 ordinary shares of 15p per share were allotted at a
price of 70p per share, upon the exercise of share options
granted in the Company’s share option schemes.
At 31 December 2021, the Company had only one class of share,
being ordinary shares of 15p each.
The Group’s Share Capital reserve represents the nominal
value of the shares in issue. The Group’s Share Premium Reserve
represents the premium the Group received on issue if its shares.
The Merger Reserve arose on the combination of companies within
the Group prior to the flotation on AIM.
21) MOVEMENT IN ACCUMULATED LOSSES AND FOREIGN
CURRENCY TRANSLATION RESERVE
22) LEASES
The Group has leases for office buildings and
associated warehousing and operational space.
With the exception of short-term leases and
leases of low-value underlying assets, each lease
is reflected on the balance sheet as a right-of-
use asset and a lease liability. The Group
classifies its right-of-use assets in a consistent
manner to its property, plant and equipment (see
note 12).
Leases of buildings end within one year.
Lease payments are generally fixed.
Each lease generally imposes a
restriction that, unless there is a contractual right
for the Group to sublet the asset to another
party, the right-of-use asset can only be used by
the Group. Leases are either non-cancellable or
may only be cancelled by incurring a substantive
termination fee. Some leases contain an option
to extend the lease for a further term. The Group
is prohibited from selling or pledging the
underlying leased assets as security. For leases
over office buildings and factory premises the
Group must keep those properties in a good
state of repair and return the properties in their
original condition at the end of the lease. Further,
the Group must insure items of property, plant
and equipment and incur maintenance fees on
such items in accordance with the lease
contracts.
The table below describes the nature of
the Group’s leasing activities by type of right-of-
use asset recognised on the balance sheet:
Accumulated
losses
£’000
Foreign currency
translation reserve
£’000
Right-of-use asset
No. of right-
of-use assets
leased
Remaining
range of term
Average
remaining
lease term
No. of leases
with extension
options
AT 31 DECEMBER 2019
(118,468)
(2,246)
Land and buildings
1
3 months
3 months
-
Loss for the period
Other comprehensive expense – Foreign currency
translation differences – foreign operation
Shared based payment charge
(6,971)
-
653
-
41
-
AT 31 DECEMBER 2020
(124,786)
(2,205)
Loss for the period
Other comprehensive expense – Foreign currency
translation differences – foreign operation
Shared based payment charge
(6,438)
-
463
-
(1)
-
AT 31 DECEMBER 2021
(130,761)
(2,206)
The Group’s accumulated losses reserve represents the
accumulation of losses of the Group since inception. The foreign
currency translation reserve represents the cumulative differences
recognised on the translation of the net assets of the Group’s
Right-of-use assets
Additional information on the right-of-use assets by class is as
follows:
Balances as at 31 December 2019
Depreciation charged in the year
Disposals in the year
Foreign exchange differences
Balance as at 31 December 2020
Depreciation charged in the year
Balance as at 31 December 2021
Land and buildings
£’000
283
(54)
(164)
3
68
(54)
14
0140
0141
FINANCIAL STATEMENTSSECTION 4FINANCIAL STATEMENTSSECTION 4XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021 Lease liabilities
Lease liabilities are presented in the statement of financial
position as follows:
Current
Non-current
31/12/21
£’000
31/12/20
£’000
19
-
19
84
19
103
There are no leases with termination options and no leases with
extension options. Following the year end, the Group has signed a
new lease on its current premises for a five-year term commencing
in April 2022, with an annual commitment of £92,000.
The lease liabilities are secured by the related underlying assets.
The undiscounted maturity analysis of the lease liabilities at 31
December 2021 is as follows:
Within
1 year
1-2 years
2-3 years
3-4 years
5+ years
Total
Lease payments
(20)
Finance charges
1
Net present value
19
-
-
-
-
-
-
-
-
-
-
-
-
Lease payments not recognised as a liability
The Group has elected not to recognise a liability for short term
leases (12 months or less) or for leases of low value assets.
Payments made under such leases are expensed on a straight-line
basis.
The expense relating to payments not included in the measurement
of the lease liability is as follows:
Short term leases
At 31 December 2021 the Group was committed to short term
leases and the total commitment at that date was £21,000 (2020:
£19,000).
(20)
1
(19)
£’000
42
42
0142
0143
FINANCIAL STATEMENTSSECTION 4FINANCIAL STATEMENTSSECTION 4XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021 EMI
options
Unapproved options
Deferred Annual Bonus plan
Total
Weighted average exercise
price per share (£)
AT 31 DECEMBER 2019
5,572,626
5,237,360
Granted in the period
132,163,079
14,406,101
Exercised in the year
(10,056,721)
Forfeited/lapsed in the year
(713,757)
(278,696)
(370,399)
Effect of share consolidation
(125,708,204)
(18,804,019)
AT 31 DECEMBER 2020
1,257,013
Granted in the period
Exercised in the period
593,450
(52,664)
Forfeited/lapsed in the period
(42,017)
AT 31 DECEMBER 2021
1,755,792
190,256
149,007
(5,810)
(1,395)
332,058
78,251
-
(25,758)
-
(52,448)
45
-
-
-
45
10,888,237
146,569,089
(10,361,175)
(1,084,156)
(144,564,671)
1,447,324
742,457
(58,474)
(43,412)
2,087,895
0.957
0.007
(0.010)
(0.402)
6.949
7.501
1.75
(0.70)
(8.49)
5.62
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. Options issued in 2019 and later have
vesting conditions based upon the share price
meeting certain targets.
The number and weighted average
exercise prices of share options are in the table
above. There were 214,921 share options
outstanding at 31 December 2021 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 2021. Options have a range
of exercise prices from 15 pence per share to
30,500 pence per share and have a weighted
average contractual life of 8.48 years (31
December 2020: 5.56 years).
0144
0145
FINANCIAL STATEMENTSSECTION 4FINANCIAL STATEMENTSSECTION 4XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021 Options granted in the period
Dividend yield
Expected volatility*
Unapproved
options
granted in
January
2021
EMI options
granted in
January
2021
EMI
Options
granted in
June
2021
0%
0%
0%
41.00%
41.00%
41.00%
Risk free interest rate (%)
0.26%
0.26%
0.26%
Expected vesting life of options (years)
Weighted average share price (pence)
Fair value of an option (pence per share)**
3
175.0
86.0
3
175.0
86.0
3
231.5
130.0
* Expected volatility is based upon the Company’s historical share
price.
**Those options issued prior to the share consolidation have been
updated to reflect their post-consolidation value.
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
2021
£’000
31 December
2020
£’000
Share options
463
653
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:
Related party
Relationship
Purchases
from related
party
31/12/21
£000
Amounts owed
to related party
31/12/21
£000
Purchases
from related
party
31/12/20
£000
Amounts owed
to related party
31/12/20
£000
IP Group plc
Fund
manager
30
13
30
48
Note: IP Group plc provide the services of David Baynes, who is a Director of the
Company, and invoice the Group for related fees. David Baynes is a Director of both
the Company and of IP Group plc.
Terms and conditions of transactions with related parties
Purchases between related parties are made on an arm’s-length
basis. Outstanding balances are unsecured, interest free and cash
settlement is expected within 60 days of invoice.
Transactions with Key Management Personnel
The Company’s key management personnel comprise only the
Directors of the Company. During the period, the Company entered
into the following transactions in which the Directors had an
interest:
Directors’ remuneration:
Remuneration received by the Directors from the Company is set
out below. Further detail is provided within the Directors’
Remuneration Report:
Short-term employment benefits*
744
730
Year ended
31/12/21
£’000
Year ended
31/12/20
£’000
*In addition, certain Directors hold share options in the Company for which a fair
value share based charge of £153,000 has been recognised in the consolidated
statement of profit or loss and other comprehensive income (year ended 31
December 2020: £155,000).
The highest paid Director in the year received a total remuneration
of £335,000 (year ended 31 December 2020: £364,000). During the
year ended 31 December 2021, the Company entered into numerous
transactions with its subsidiary companies which net off on
consolidation – these have not been shown above.
25) EVENTS OCCURING AFTER THE REPORTING PERIOD
Board changes
In March 2022, it was announced that the Group CEO, Mark Nichols,
will stand down during 2022. Mark will remain with the business
until 30 September 2022 to oversee the Group’s ongoing
commercialisation process and has committed to a comprehensive
and orderly handover to his successor, for whom a search process
is underway.
0146
0147
FINANCIAL STATEMENTSSECTION 4FINANCIAL STATEMENTSSECTION 4XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021
Share capital
Share premium
Merger reserve
Retained earnings reserve
Total
Attributable to the equity holders of the Company
COMPANY STATEMENT OF
CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER
£000
£000
AT 31 DECEMBER 2019
1,176
109,226
Total expense and other comprehensive loss for the period
-
-
Transactions with owners, recorded directly in equity:
Issue of placing shares
1,800
Exercise of share options
Costs of share issues
Share based payment expense
Share based payment expense in respect of services
provided to subsidiary undertaking
Total contributions by and distributions to owners
AT 31 DECEMBER 2020
21
-
-
-
1,821
2,997
4,200
74
(427)
-
-
3,847
113,073
Total expense and other comprehensive loss for the period
-
-
Transactions with owners, recorded directly in equity:
Issue of placing shares
Exercise of share options
Costs of share issues
Share based payment expense
Share based payment expense in respect of services
provided to subsidiary undertaking
Total contributions by and distributions to owners
AT 31 DECEMBER 2021
562
9
-
-
-
571
3,568
8,438
32
(525)
-
-
7,945
121,018
£000
6,625
-
-
-
-
-
-
-
6,625
-
-
-
-
-
-
-
£000
(81,945)
(828)
-
-
-
155
498
653
(82,120)
(39,759)
-
-
-
123
340
(613)
6,625
(121,416)
£000
35,082
(828)
6,000
95
(427)
155
498
6,321
40,575
(39,759)
9,000
41
(525)
123
340
8,979
9,795
0148
0149
FINANCIAL STATEMENTSSECTION 4FINANCIAL STATEMENTSSECTION 4XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021
COMPANY STATEMENT OF
FINANCIAL POSITION
FOR THE YEAR ENDED 31 DECEMBER
Notes
At
31 December
2021
Restated At
31 December
2020
£’000
£’000
9,853
9,853
32
279
311
9,513
26,738
9,513
7
4,587
4,594
10,164
40,845
(369)
(369)
9,795
(270)
(270)
40,575
C4
C5
C6
ASSETS
Non-current assets
Investments
Intercompany loan balance
Total non-current assets
Current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
TOTAL ASSETS
LIABILITIES
Current liabilities
Trade and other payables
C7
TOTAL LIABILITIES
NET ASSETS
EQUITY
Share capital
Share premium
Merger reserve
Retained earnings
TOTAL EQUITY
20
20
3,568
2,997
121,018
113,073
6,625
6,625
(112,416)
(82,120)
9,795
40,575
The Company reported a loss for the year ended 31 December 2020 of £39,759,000 (2020: £828,000). The accounting policies and
notes on pages 67 to 69 form part of these Financial Statements.
Approved by the Board of Directors and authorised for issue on 21 June 2022.
Klaas de Boer
Chairman
Paul Denney
Chief Financial Officer
Company number: 08684474
C1. BASIS OF PREPARATION AND ACCOUNTING
POLICIES
Xeros Technology Group plc is registered in
England and Wales as a public limited company.
The address of its registered office is Unit 2,
Evolution, Advanced Manufacturing Park, Whittle
Way, Catcliffe, Rotherham, South Yorkshire, S60
5BL.
The principal activity of Xeros
Technology Group plc (together the “Group”) is
that of a platform technology company that is
transforming water intensive industrial and
commercial processes. The principal activity of
the Company is that of a holding company.
The separate financial statements of the
Company have been prepared in accordance
with the Financial Reporting Standard 101
“Reduced Disclosure Framework” (FRS 101), on
the going concern basis under the historical cost
convention, and in accordance with the
Companies Act 2006 and applicable Accounting
Standards in the UK. The principal accounting
policies are consistent with those set out in the
financial statements of the Group.
The following exemptions from the
requirements in IFRS have been applied in the
preparation of these financial statements, in
accordance with FRS 101:
— The following paragraphs of IAS 1
“Presentation of Financial Statements”
— 10f Requirement to present a statement
of financial position as at the beginning
of the preceding period in the event of a
retrospective restatement;
— 16 (statement of compliance with all
IFRS); and
— 134-136 (capital management
disclosures)
— IFRS 9 “Financial Instruments:
Disclosures”;
— IAS 24 (paragraphs 17 and 18a) “Related
Party Disclosures” (key management
compensation); and
— IAS 24 “Related Party Disclosures” – the
requirement to disclosure related party
transactions between two or more
members of a group.
As the Group financial statements include the
equivalent disclosures, the Company has taken
the exemptions available under FRS 101 in
respect of the following disclosures:
— A cashflow statement and related notes
— IFRS 2 “Share-Based Payments” in
respect of Group settled equity share-
based payments; and
— Certain disclosures required by IFRS
13 “Fair Value Measurement” and
disclosures required by IFRS 7 “Financial
Instruments: Disclosures”
CRITICAL ACCOUNTING ESTIMATES AND
AREAS OF JUDGEMENT
Estimates and judgements are
continually evaluated and are based on historical
experiences 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:
CARRYING VALUE OF INVESTMENTS AND
INTERCOMPANY LOAN BALANCES
Xeros Technology Group has significant
balances held as investments in subsidiaries and
intercompany loan balances. The Directors
consider the valuation and recoverability of these
balances based on the potential future cashflows
from utilisation of the Xeros technology. The
Directors consider all available evidence in
making their judgements on the recoverability of
these balances, including both internal and
external valuations of the Group, the likelihood
and extent of any Group funding requirements
and the anticipated timescale to recovery of the
balances. During the year, a provision of
£38,683,000 was made against both the
investment in Xeros Ltd and the outstanding
intercompany loans from Xeros Ltd, reducing the
carrying value of the investment in Xeros Ltd to
nil and the carrying value of the intercompany
loans receivable from Xeros Ltd to £9,853,000.
The Group does not in any case expect the
intercompany loans to be repaid within the next
twelve months.
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FINANCIAL STATEMENTSSECTION 4FINANCIAL STATEMENTSSECTION 4XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021
C2. COMPANY RESULTS
The Company has elected to take the exemption under section 408
of the Companies Act 2006 not to present the parent company’s
statement of profit or loss and other comprehensive income. The
parent company’s result for the year ended 31 December 2021 was a
loss of £39,759,000 (year ended 31 December 2020: loss of
£828,000).
The audit fee for the company is set out in note 5 of the Group’s
financial statements.
C3. STAFF NUMBERS AND COSTS
The average monthly number of persons (including Directors)
employed by the Group during the year was:
The aggregate remuneration,
including Directors, comprised:
Wages and salaries
Social security costs
Share based expense (note 22)
Directors’ remuneration comprised:
Emoluments for qualifying services
Directors’ emoluments disclosed above include £335,000 paid to the highest paid
Director (Year ended 31 December 2020: £364,000). There are no pension benefits
for Directors. Please see Directors’ Remuneration Report on page 72 for further
information on Directors’ emoluments.
Year ended
31 December 2021
Year ended
31 December 2020
Number
Number
6
6
5
5
£’000
£’000
685
92
123
900
744
679
99
154
932
730
C4. INVESTMENT IN SUBSIDIARY COMPANIES
At 31 December 2021, the Company held the following investments in subsidiaries;
Undertaking
Sector
Xeros Limited
Xeros Inc*
Research, development and commercialisation of polymer
technology alternatives to traditional aqueous based
technologies
Commercialisation of polymer technology alternatives to
traditional aqueous based technologies
Xeros Environmental
Protection Technology
(Shanghai) Co. Ltd*
* Held through Xeros Limited
Commercialisation of polymer technology alternatives to
traditional aqueous based technologies
Share of issued
capital and voting
rights 2021
100%
100%
100%
Xeros Limited, is incorporated in England and Wales as a private limited company under registered
number 05933013. Its registered office is Unit 2, Evolution, Advanced Manufacturing Park, Whittle
Way, Catcliffe, Rotherham, S60 5BL.
Xeros Inc. is incorporated in Delaware, USA. Its registered office is 195 Dupont Drive, Providence,
Rhode Island, 02907, USA.
Xeros Environmental Protection Technology (Shanghai) Co. Ltd.’s registered office is 15F, HSBC
Building, Pudong, Shanghai, 200120, China.
Cost and net book value
At 31 December 2019
Additions
At 31 December 2020
Additions
Impairment
At 31 December 2021
£000
9,014
499
9,513
340
(9,853)
-
Additions comprise amounts in respect of the IFRS 2 share-based payment contribution relating to
options granted to employees of the Company’s subsidiaries. Impairment relates to provisions
against the investment in Xeros Ltd as the Directors believe that this amount may not be recoverable.
0152
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FINANCIAL STATEMENTSSECTION 4FINANCIAL STATEMENTSSECTION 4XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021 C5. INTERCOMPANY LOANS
31 December
2021
£000
31 December
2020
£000
Intercompany loan
9,853
26,738
Loans comprise a loan of £9,853,000 (31 December 2020:
£26,738,000) to Xeros Limited. No interest was payable on this
loan. All intercompany loans are repayable on demand.
C6. TRADE AND OTHER RECEIVABLES
Prepayments
Other debtors
C7. TRADE AND OTHER PAYABLES
Trade payables
Social security and other taxes
Accruals
31 December
2021
£000
31 December
2020
£000
33
(1)
32
1
6
7
31 December
2021
£000
31 December
2020
£000
166
28
175
369
26
26
218
270
C8. PRIOR YEAR RESTATEMENT
In the current year the decision has been taken to classify intercompany loan balances as non-current
assets due to the anticipated timing of their repayment. As a result of the material nature of these
balances, the prior year balance sheet has been restated in order to also classify the balances as at 31
December 2020 as non-current assets. This results in an intercompany loan balance of £26,738,000
which was reported within current assets in the financial statements for the year ended 31 December
2020 reclassified as non-current assets within the comparative figures in these financial statements.
Given the nature of this restatement, there is no impact on either net assets as at 31 December 2020
or on the reported loss for the year ended 31 December 2020.
0154
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FINANCIAL STATEMENTSSECTION 4FINANCIAL STATEMENTSSECTION 4XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021 DIRECTORS AND OFFICERS
DIRECTORS
COMPANY SECRETARY
Klaas de Boer (Chairman)
Paul Denney
Mark Nichols (Chief Executive Officer)
Paul Denney (Chief Financial Officer)
COMPANY WEBSITE
David Armfield (Non-Executive Director)
http://www.xerostech.com
David Baynes (Non-Executive Director)
Rachel Nooney (Non-Executive Director)
COMPANY NUMBER
REGISTERED OFFICE
Unit 2 Evolution
08684474 (England and Wales)
REGISTRAR
Advanced Manufacturing Park
Neville Registrars Limited
Neville House
Steelpark Road
Halesowen
B62 8HD
LEGAL ADVISER
Squire Patton Boggs (UK) LLP
Premier Place
2 & A Half Devonshire Square
London
EC2M 4UJ
Whittle Way
Catcliffe
Rotherham
S60 5BL
AUDITOR
Grant Thornton UK LLP
No 1 Whitehall Riverside
Leeds
LS1 4BN
NOMINATED ADVISER
AND BROKER
finnCap Ltd
1 Bartholomew Close
London
EC1A 7BL
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XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021
0157
XEROS TECHNOLOGIES -------- ANNUAL REPORT -------- MAY 2022XEROS TECHNOLOGIES -------- ANNUAL REPORT -------- MAY 2022
XEROS
TECHNOLOGY
SUBJECT:
POLYCOTTON
OBSERVATION:
MIXED POLYMER FIBRES
MAGNIFICATION:
@15.8MM 400X/300μM
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XEROS TECHNOLOGY GROUP PLC -------- ANNUAL REPORT -------- DECEMBER 2021