TIDMXSG
RNS Number : 4768X
Xeros Technology Group plc
30 April 2019
30 April 2019
Xeros Technology Group plc
Year end results - good progress towards licensing model
Xeros Technology Group plc (AIM: XSG, 'the Group', 'Xeros'), the
developer and provider of water saving technologies with multiple
commercial applications, today publishes its final results for the
12 months ended 31 December 2018.
Highlights
-- Domestic Laundry
o Exclusive development and licensing agreement signed with the
leading Indian appliance manufacturer
o Development agreement signed with largest Chinese washing machine OEM
-- High Performance Workwear
o Increasing adoption of Xeros technology by US fire departments
to remove harmful contaminants from protective garments
-- Commercial Laundry
o Exclusive licensing agreements signed with largest OEMs in
China and India to manufacture and sell machines incorporating
XDrum technology
o RSA, Dubai, and North America markets now served by channel partners
-- Tanning - 10 year contract signed with tannery to use Xeros' technology
-- Textile - successful tests with major Chinese manufacturers
in texturing and colouration of garments
-- Financial
o Revenue increased by 62% to GBP3.5m (2017: GBP2.2m)
o Adjusted EBITDA(1) loss reduced by 27.3% to GBP20.9m (2017: loss GBP28.7m)
o Administration expenses, after exceptional items and FX, down
9.2% - expected to further reduce in 2019
o Post-tax earnings loss reduced to GBP29.4m (2017: loss GBP30.6m)
o Net cash outflow from operations reduced by 18.4% to GBP22.1m
(2017: GBP27.1m). Cash at 31 March 2019 GBP10.8m
o Rapidly reducing cost base as development phase nears completion
o Expect to raise equity from investors in 2019 to further strengthen balance sheet
Mark Nichols, Chief Executive of Xeros, said:
"Having completed the lion's share of our development our
disruptive water saving technologies are now firmly on a path to
commercialisation under an IP rich and asset light business model
in global scale industries.
"We see the demand for our technology increasing as
environmental and societal pressures continue to put intense strain
on finite water resources - both in terms of pricing and
consumption. Manufacturers, consumers and regulators are
increasingly demanding that supply chains improve their
sustainability credentials with a particular focus on reducing
water usage. Demands that we can help meet.
"We have achieved a number of major inflection points with
others expected to follow in 2019, each of which have the capacity
to generate significant value. As we end the development phase, our
cost base will continue to decline ahead of the implementation of
the contracts we have won which are expected to generate high
margin royalty revenues."
[1] Adjusted EBITDA is defined as loss on ordinary activities
before interest, tax, share-based payment expense, exceptional
costs, depreciation and amortisation
Enquiries:
Xeros Technology Group plc Tel: 0114 321
Mark Nichols, Chief Executive Officer 6328
Paul Denney, Chief Financial Officer
Jefferies International Limited (Nominated Tel: 020 7029
Adviser and Joint Broker) 8000
Simon Hardy / Will Soutar
Berenberg (Joint Broker) Tel: 020 3207
Chris Bowman / Ben Wright / Laure Fine 7800
Instinctif Partners (Financial PR) Tel: 020 7457
Adrian Duffield / Kay Larsen / Chantal Woolcock 2020
Notes to Editors
About Xeros
Xeros Technology Group plc (LN: XSG) is a platform technology
company that is reinventing water intensive industrial and
commercial processes.
Xeros' uses its patented XOrb(TM) technologies to significantly
reduce the amount of water used in a number of major applications
with the remaining water becoming far more efficient in either
affixing or removing molecules from substrates such as fabrics and
garments. The result being significant improvements in economic,
operational and sustainability outcomes.
Xeros has three divisions working in the garment finishing
(Textile Technologies), tanning (Tanning Technologies, branded
Qualus) and cleaning/laundry (Cleaning Technologies) markets. In
cleaning/laundry, the company has three applications covering
domestic laundry, commercial laundry (branded "Hydrofinity") and
the cleaning of high-performance workwear (branded "Marken").
For more information, please visit -
http://www.xerostech.com/
Strategy execution
Xeros' technologies drastically increase the effectiveness of
water in affixing or removing molecules in large scale industrial
and domestic processes. The results are radical improvements in the
sustainability, performance and economics of water intensive
processes, dramatically reducing the consumption of water,
chemistry and energy, so reducing effluent, whilst either meeting
or exceeding the conventional quality standards for the materials
being processed.
Xeros has made significant progress through 2018, meeting a
number of critical milestones, having spent many years developing
our technologies and applications. We are now entering the key
commercialisation phase with our focus on pursuing each technology
application, progressing Xeros' IP rich, asset-light licensing and
royalty business model and accelerating the winning of license
contracts.
There is increasing evidence that accelerating changes in our
climate, global population growth and increasingly affluent, urban
communities are putting finite water resources under extreme
stress. Xeros technology seeks to drive significant reductions in
the volume of water and chemicals used in a number of highly
water-intensive global scale industries.
Results achieved in tests, trials and commercial operations
conducted during 2018 have reaffirmed that Xeros' technologies
reduce water consumption and effluent production by up to 80%,
reduce chemistry used in processes by up to 50% whilst also cutting
energy consumption in cleaning applications by up to 50%.
Xeros is currently commercialising its technologies in three
divisions:
-- Cleaning Technologies with applications in domestic laundry,
commercial laundry (branded "Hydrofinity") and the cleaning and
restoration of high-performance workwear (branded "Marken");
-- Tanning Technologies (branded "Qualus") with applications in leather production;
-- Textile Technologies in the field of garment colouration and
finishing including denim. With the addition of applications of our
technology in the field of garment manufacture, Xeros' technologies
offer the opportunity to improve the sustainability, cost and the
life of garments for manufacturers, brands, retailers and
consumers.
Xeros' strategy remains that of licensing its technologies to
market incumbents and to receive a proportion of the value created
by means of royalties.
Our progress in our Cleaning and Textile Technology applications
has been enabled by the completion of our new XDrum(TM) design
during 2018. The design is an effective solution for applying
Xeros' XOrb(TM) technology in rotating drums.
The new XDrum design allows OEMs to produce hybrid machines, at
a low marginal cost, to dispense and retrieve our patented XOrb
technologies into and from process cycles. The XDrum represents an
important simplification for our application technology,
substantially reducing the cost of incorporating our technology
into existing proprietary machine designs, reducing complexity and
thereby shortening the 'test' to 'production' cycle time.
In order to prove out and de-risk its technology ahead of
licensing to market incumbents, Xeros has historically had to enter
markets in its own right on a selective basis and has had to invest
in operations and working capital to do so. With these ventures now
proving out market acceptance and customer demand, Xeros is now
reducing its physical presence in markets with associated costs
also planned to reduce rapidly. Similarly, technology development
expenditure will continue to reduce having completed the vast
majority of the work needed to license our technologies.
In the future, the majority of Xeros' revenue will be derived
from high margin licensing agreements. During 2018, our revenue was
derived from those businesses where we currently have a physical
operational presence.
Total revenue from these businesses increased 61.8% to GBP3.5m
(2017: GBP2.2m) with our adjusted EBITDA loss reduced by 27.3% to
GBP20.9m (2017: loss GBP28.7m). In a trend which will continue as
the Group migrates to its licensing model, underlying
administrative expenses, after adjusting for exceptional items and
the impact of foreign exchange, reduced during the year by 9.2% to
GBP25.9m (2017: GBP28.5m).
2017 and 2018 represented a period of significant investment in
the development of new applications with expenditure levels now
reducing having materially completed this work.
Following the invention and patenting of our new XDrum design
due to be launched this year to serve our Cleaning and Textile
markets, we wrote down the value of our inventory of earlier design
commercial washing machines and those on operating leases to
customers. This resulted in a non-cash exceptional charge of
GBP7.8m. Net cash outflow from operations reduced by 18.4% to
GBP22.1m (2017: GBP27.1m).
Outlook
In December 2018, Xeros raised GBP15.8m before expenses in order
to continue to execute its licensing strategy and to deliver
further major value inflection points through 2019.
With development completed for the majority of our applications
and the net cost of our business ventures reducing, we anticipate a
continued reduction in our cash burn rate with our current funding
sufficient to deliver these milestones through early 2020. However,
during 2019 we expect to raise further equity to finish the year
with a strong balance sheet as our commercialisation gathers
momentum.
Overall, the Group is trading in line with the Board's
expectations.
Operational Review
Cleaning Technologies
Domestic Laundry
Following the demonstration of our proprietary XDrum domestic
washing machine design at the Consumer Electronics Show in Las
Vegas in January 2018 and the cleaning, fabric care and
sustainability benefits created by our patented XOrb technologies,
Xeros conducted a structured due diligence process with a number of
global appliance brands for them to study the potential adoption
and commercialisation of our technologies in their machines.
In January 2019, Xeros signed a non-exclusive Joint Development
Agreement with Wuxi Little Swan Company Limited, a subsidiary of
Midea Group, the Chinese manufacturer of home appliances. The scope
of the agreement is to develop and design a prototype washing
machine including Xeros' technologies which, if successful, allows
for both parties to enter into commercial discussions under a
separate agreement and timetable. In 2017 Wuxi Little Swan Company
sold 12.4m washing machines in China giving it a 28% share of the
retail market. It also exported 3.9 million washing machines.
In April 2019, the Group signed an exclusive 10-year Licensing,
Development and Commercialisation agreement with IFB Limited, a
major manufacturer, distributor and retailer of washing machines in
India, which included an up-front payment for the use of Xeros'
technology.
Once machine designs are completed and tested, the agreement
provides for fixed royalty percentages on net sales prices, to be
paid to Xeros with agreed minimum unit sales volumes. IFB is the
market leader in front loading washing machine sales in India, a
market currently estimated at 1 million front loading machine sales
per annum and growing at between 15% and 20% per annum.
Assuming product development and testing milestones are
successfully achieved, we expect first royalty revenues from this
application in 2021.
During 2018, Xeros continued the development of its proprietary
XFiltra(TM) filtration device which is designed to prevent
micro-plastics generated by washing cycles from being released into
the aqua-cycle. Plastics released from clothing during washing
cycles is the single largest source of primary micro-plastic
pollution.
XFiltra's unique design is capable of filtering and dewatering
in excess of 99% of micro-particulate matter found in domestic
washing machine effluent. Our design solution to address this
global problem was featured in the BBC series 'Blue Planet UK'
broadcast in March 2019. The proposed business model for the
commercialisation of this technology is licensing with either
domestic washing machine OEMs or the pump manufacturers who supply
them.
High Performance Workwear
Xeros entered the Firefighter PPE segment of this market in July
2017 with the acquisition of Marken Inc, a US market leader in the
cleaning and restoration of firefighter uniforms. The acquisition
has demonstrated that our technologies decontaminate PPE from
substances harmful to health, whilst simultaneously increasing the
life of these expensive garments.
With the objective of creating a broadly accepted platform of
evidence and creating a valuable asset in its own right, Xeros
subsequently purchased the specialist cleaning business of Gloves
Inc in March 2018 with sites in Miami and Atlanta and also
converted a Hydrofinity facility in Corona, South California which
was commissioned in July 2018.
In July and September 2018, we received independent verification
of the cleaning efficacy and garment life extension capabilities of
our technologies from SCS Engineers Inc and Intertek Group plc
respectively. Testing demonstrated the ability of Xeros' technology
to remove heavy metal contamination, remove asbestos contamination
to non-detectable levels and preserve the integrity of high-tech
fabrics used in the manufacture of firefighter turn-out gear -
meaning ensembles last longer.
This evidence has been key to orders received and to build a
strong pipeline of prospective orders for our West Coast and
Atlanta sites. Xeros strategy is to develop its network of sites to
the degree necessary to prove its technology and in locations with
the strongest and best quality demand for Xeros' cleaning
performance.
In the French transportation sector, we increased to eight the
fleet of Xeros machines with a garment fleet provider for the
cleaning the PPE of SNCF and Air France workwear. Our technology
being selected based on its cleaning efficacy and garment life
extension.
The segments of the PPE market that can be addressed with Xeros'
technologies goes beyond firefighting and transportation and
includes petrochemicals, mining and military markets, many of which
are becoming increasingly aware of the adverse and potentially
dangerous effects of incorrectly or insufficiently cleaned
workwear.
In terms of market opportunity for the US firefighter PPE
market, the cleaning, inspection and repair of uniforms is valued
at approximately $330m p.a. With 1.1m firefighters in the US, there
are 350,000 professional firefighters based in approximately 8,000
fire crews. Nearly 40% of these professional firefighters are based
within 100 miles of one of the top 10 major US metropolitan
areas.
We expect the Marken business to be cash generative by the end
of 2019 and whilst we plan for it to be a valuable asset in its own
right, it will be the learning and evidence base which Xeros will
leverage to create licensing propositions for PPE garment fleet
owners on a global basis.
Commercial Laundry
During 2018, Xeros' Hydrofinity business which addresses the
Commercial Laundry market, made significant progress towards its
objective of becoming a licensor of Xeros' technologies to industry
incumbents.
In July 2018, the business signed an exclusive 10-year licensing
agreement with Jiangsu SeaLion Technology Development Company, a
subsidiary of one of the largest commercial laundry equipment
companies in China, with sales and service offices in each of
China's 30 provinces. The first royalty revenues are expected in
2019.
In April 2019, the division signed a similar agreement with IFB
limited, one of the largest commercial laundry equipment companies
in India with approximately 5,000 machine installations. First
revenues are expected in 2020. These agreements will commercialise
Xeros' technologies using the XDrum design and provide for the
deployment of Xeros' telematics system, XConnect, with all data
being recorded and stored by Xeros.
In aggregate, the Chinese and Indian markets comprise 38% of the
world's population with both countries experiencing increasing
water stress. We continue to develop relationships with OEMs to
license and serve key markets outside of these two countries.
The Hydrofinity business has also taken major steps to reduce
its physical presence in forward channels in countries around the
world. In December 2018, it completed the transfer of all
installation and service to its Channel Partners in the US,
reducing costs whilst simultaneously improving the customer
experience. These partners are also increasingly taking on the
sales role including multi-year subscription packages for the use
of XOrbs.
Sales, installation and servicing agreements were also
established with fanute in South Africa and ElectroRak in Dubai
with commercial machines shipped to these partners in late 2018, a
number of which have now been commissioned. Local water-stress is
one of the key drivers for these partners in selecting Xeros
technology.
In November 2018, our commercial laundry technology was
certified as an "Environmentally Preferred Product" following an
independently conducted Life Cycle Analysis by SCS Global Services.
The certification is the only one yet afforded to this industry and
was based upon 20,000 wash cycles with testing criteria including
water use, energy demand and carbon emissions among other
environmental impacts.
The licensing agreements signed to date, and preparations for
similar arrangements in the Americas and EMEA, have enabled a
significant reduction in the operating costs of the Hydrofinity
business. Once implemented, these license agreements also have the
benefit of significantly reducing Xeros' working capital.
Tanning Technologies
In 2016, our strategic review to determine which applications we
should pursue, identified retanning and dyeing of bovine hides as a
viable opportunity. There being no identifiable, willing licensee
at the time, we took the decision to enter the market directly to
prove out and de-risk the technology. The business, once
sufficiently developed, would present commercial options for Xeros
including the potential for outside investment. This division is
branded Qualus.
Multiple scale trials conducted with tanneries in Europe and
Latin America covering the retanning and dyeing phases of the
tanning process have proven that our technology works for all hide
applications, including auto, fashion and shoe leather, regardless
of the different drum types used in the industry. In addition, we
have established that the water and chemistry savings and the
resultant value created are consistent with our business case for
this market.
Following the development of engineering solutions to introduce
XOrbs into tannery operations, which comprise some 40 separate
operations in a continuous process, Qualus entered into a 10-year
contract in September 2018 with Le Farc SA de CV in Leon, Mexico.
Le Farc will convert its re-tanning operations in order to use
Xeros' technologies. Commissioning of the first drums to process
hides with XOrbs under the agreement is expected around the middle
of 2019 with conversion completed by the end of the year. Le Farc
supplies major footwear and auto brands.
Trials and commercial discussions have also taken place with
multiple large-scale tanners and it is our expectation that
additional contracts will be signed once Xeros' technologies are
demonstrated in the operational environment of Le Farc.
Future developments in this business include applying Xeros'
technologies into the up-stream tanning phases of leather
production which are significant in their consumption of water and
bulk chemicals, including chrome.
We estimate that 300 million bovine hides are tanned globally
per annum and the estimated added value created by Xeros
technologies from water and chemistry savings in the retanning and
dyeing process to be in the range of GBP0.80 per hide.
Xeros continues to consider opportunities to attract third party
finance into the Qualus business with the ultimate objective of
being a licensor of its technology into this industry rather than
being itself a market incumbent.
Textile Technologies
During 2018, we successfully developed XDrum machines to apply
our XOrb technology to wool, cotton and denim garment finishing.
These processes are applied to almost every garment that is made in
order to remove contaminants introduced during manufacture and to
change the texture and colour of raw fabrics to meet the
specifications required by clothing designers, brands, retailers
and consumers.
The Xeros process significantly reduces the amount of water and
chemistry used and effluent produced and, in the case of denim,
also has the capacity to reduce process steps and capital
costs.
Xeros has now successfully completed tests at its technology
centre in Sheffield for three major Chinese garment manufacturers
during which we have successfully matched product outcomes in
multiple garment types using significantly less water and
chemistry. Discussions are ongoing with a number of manufacturers,
with the objective of moving to scale trials later in 2019 ahead of
commercialisation.
Our solutions in these applications offer manufacturers the
resource and pollution reductions that consumers and governments
are demanding. One example being the plan for "Zero Discharge of
Hazardous Chemicals by 2020" which has 23 global clothing brands as
signatories. We have also begun a process of engaging with major
retailers to create demand for Xeros' technologies in the forward
supply chain.
We believe our strategic decision in 2016 to address this market
has now been validated given the benefits that Xeros technology
delivers and the proof points we have now achieved in tests. The
opportunity is very significant, with 22.7 million tonnes of
natural fibres processed annually for the clothing and textiles
industries, a third of those in China.
Intellectual Property
Xeros' IP rich and asset light commercialisation model requires
that we have a strong and defendable patent portfolio which
provides freedom to operate for our businesses and license
partners. Xeros now has in excess of 40 patent families in
application or granted. The Group files its patents in countries
with large potential markets and where it believes it can
successfully defend its Intellectual Property.
Our core patents are filed in countries which represent 90% of
global GDP. In order to have the financial capacity, should it need
to defend its patent portfolio, Xeros has significant levels of
patent defense and litigation insurance. We have not identified any
infringements which have the capacity to materially impair the
validity and enforcement of our patent and trademark portfolio.
During 2018, seven new patent families were filed to protect our
inventions with the majority in the fields of the XDrum and
XFiltra. Xeros does not expect historical levels of new patent
filings to continue as we believe the inventions for our current
portfolio are sufficient for their commercialisation. We will
continue to make filings based upon their ability to secure future
revenues.
Financial review
Group revenue was generated as follows:
Year Year
ended Ended
31 December 31 December
2018 2017
GBP'000 GBP'000
Machine sales 1,058 726
Service revenue 2,474 1,451
Consumables 12 13
___ ___ _______
Total revenue 3,544 2,190
Group revenue was up 61.8% to GBP3.5m in the year ended 31
December 2018 (2017: GBP2.2m). Of this growth, 42.2% represents
organic growth and growth of 19.6% is attributable to the
acquisition by Marken of the specialist firefighter cleaning
business of Gloves Inc in March 2018.
Machine sales revenue represents revenue from the sale of
commercial washing machines by Hydrofinity. Machine sales revenue
grew by 45.7% reflecting both the increase in the number of
machines placed with customers and the full year impact of the
successful conversion of installed machines to fully commissioned
revenue-earning machines during 2017. Machine sales revenue is 30%
of Group revenue (2017: 33%).
As at 31 December 2018 Hydrofinity's total revenue generating
estate of commercial washing machines increased by a net 16
machines to 397 machines. This net figure is the result of a
significant focus on improving the quality of the customer
portfolio as machines have been moved from poor to good credit
quality customers. Whilst such a move does not increase the number
of revenue-earning machines it does result in improved financial
performance from the estate.
Service revenue increased by 70.5% to GBP2.5m. Hydrofinity's
service revenue increased by 34.4% to GBP1.6m from (2017: GBP1.2m).
Marken's revenue jumped by 244% to GBP0.9m (2017: GBP0.2m)
reflecting the combined impact of a full year of the original
Marken business, acquired in July 2017 and the contribution of the
Gloves Inc business acquired in March 2018. Service revenue is 70%
of Group revenue (2017: 66%).
The Group reduced its adjusted EBITDA loss by 27.3% to GBP20.9m
(2017: loss GBP28.7m).
Adjusted gross profit was GBP0.1m (2017: loss GBP0.4m). Adjusted
gross profit comprises a profit of GBP0.2m from Hydrofinity and a
loss of GBP0.1m from Marken. The move to a gross profit for
Hydrofinity reflects the reduced cost of direct sales as
Hydrofinity moves sales and customer servicing activities to third
party channel partners.
Adjusted gross profit/loss and adjusted EBITDA are considered
the key financial performance measures of the Group as they reflect
the true nature of our continuing trading activities. Adjusted
gross profit is defined as gross profit before exceptional cost of
sales items. Adjusted EBITDA is defined as the loss on ordinary
activities before interest, tax, share-based payment expense,
non-operating exceptional costs, depreciation and amortisation.
As reported last year, the Group has now completed all
fundamental applications development which has resulted in core
R&D spending reducing by 5.9% to GBP4.8m including staff and
patent costs (2017: GBP5.1m). This includes direct R&D expense
of GBP1.6m (2017: GBP1.8m), patent and intellectual property
expense of GBP1.3m (2017: GBP1.2m) and GBP1.9m of salary costs
(2017: GBP2.0m).
This R&D spend was all expensed as it represents Group
expenditure on Textiles and Domestic laundry development, none of
which yet meet the full criteria for capitalisation of these costs
in accordance with IAS 38. When these business areas are deemed to
have met the IAS 38 capitalisation criteria ongoing development
costs will be capitalised.
Underlying administrative expenses, which include the R&D
cost, decreased by 9.2% to GBP25.9m (2017: GBP28.5m), after
adjusting for exceptional items and the impact of foreign exchange.
Total administrative expenses reduced by 18.2% to GBP25.3m (2017:
GBP30.9m).
With the announcement that Hydrofinity will be producing the
next generation of machines based on the XDrum technology for sale
in 2020, the existing inventory of machines has been written down
to a minimal net realisable value to reflect the reduced value of
the old technology machines. Therefore a non-cash exceptional
charge of GBP5.4m has been recorded in cost of sales.
Exceptional administrative non-operating, non-cash expenses of
GBP2.2m are included in total administrative expenses (2017:
GBP0.2m). This includes a charge of GBP2.4m reflecting the
impairment of Hydrofinity machines leased to customers. These
machines are held as fixed assets on the Group balance sheet. In
addition there is a charge of GBP0.1m related to the cost of
placing new ordinary shares in 2018 and an exceptional credit of
GBP0.3m from a release of a provision for potential deferred
consideration for the Marken acquisition.
Administrative expenses include a foreign exchange gain of
GBP2.8m resulting from movements in the US dollar rate (2017: loss
GBP2.2m).
Sterling has been marginally stronger against the US dollar
compared to the previous reporting period, which reduces the
reported losses in 2018. However, as we continue to fund the
working capital and operating costs of the US Hydrofinity and
Marken businesses this stronger Sterling benefits the Group.
The Group reported an operating loss of GBP30.5m (2017: loss
GBP31.3m). The loss per share was 28.24p (2017: loss 34.92p).
Xeros expects cash utilisation to reduce as the Group benefits
from the impact of trading at a positive gross margin and from a
reduced direct cost base resulting from the move to a full
licensing business model.
Net cash outflow from operations reduced to GBP22.1m (2017:
GBP27.1m) from a combination of a reduced cash used in operations,
GBP24.5m (2017: GBP27.1m) and the receipt of GBP2.3m R&D tax
credits from HMRC relating to the 2016 and 2017 periods. Cash
utilisation was in line with the Board's expectations.
The Group had existing cash resources as at 31 December 2018 of
GBP16.0m (2017: GBP25.1m) and remains debt free. The Group expects
to raise further equity from investors in 2019.
The Group has tax losses of approximately GBP100.9m to offset
against future taxable profits (2017: GBP72.5m).
Consolidated statement of profit or loss and other comprehensive
income
For the year ended 31 December 2018
Year Year
ended ended
31 December 31 December
2018 2017*
Notes GBP'000 GBP'000
REVENUE 3 3,544 2,190
Cost of sales (3,396) (2,638)
------------------------------------------- ------ ------------ ------------
ADJUSTED GROSS PROFIT/(LOSS)** 148 (448)
Exceptional cost of sales 5 (5,396) -
------------------------------------------- ------ ------------ ------------
GROSS LOSS (5,248) (448)
------------------------------------------- ------ ------------ ------------
Administrative expenses 7 (25,266) (30,894)
Adjusted EBITDA*** (20,850) (28,669)
Exceptional cost of sales 5 (5,396) -
Share based payment expense 22 (1,090) (1,865)
Exceptional administrative expenses 7 (2,186) (195)
Amortisation of intangible fixed
assets 11 (194) (39)
Depreciation of tangible fixed assets 12 (798) (574)
------------------------------------------- ------ ------------ ------------
OPERATING LOSS (30,514) (31,342)
Net finance (expense)/income 8 134 (574)
LOSS BEFORE TAXATION (30,380) (31,916)
Taxation 9 1,012 1,305
------------------------------------------- ------ ------------ ------------
LOSS AFTER TAX (29,368) (30,611)
------------------------------------------- ------ ------------ ------------
OTHER COMPREHENSIVE (EXPENSE)/(INCOME):
Items that are or may be reclassified
to profit or loss:
Foreign currency translation differences
- foreign operations (2,458) 1,727
------------------------------------------- ------ ------------ ------------
TOTAL COMPREHENSIVE EXPENSE FOR THE
PERIOD (31,826) (28,884)
------------------------------------------- ------ ------------ ------------
LOSS PER SHARE
Basic and diluted on loss from continuing
operations 10 (28.24)p (34.92)p
------------------------------------------- ------ ------------ ------------
* The Group has applied IFRS 15 in 2018 using the cumulative
effect method. Under this method, the comparative information is
not restated. See note 4 for further details.
** Adjusted gross profit/loss comprises gross profit/loss before
exceptional cost of sales items
*** Adjusted EBITDA comprises loss on ordinary activities before
interest, tax, share-based payment expense, other exceptional
charges & credits, depreciation and amortisation.
Consolidated statement of changes in equity
For the year ended 31 December 2018
Foreign
currency Retained
Share Share Merger translation earnings
capital premium reserve reserve deficit Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 31 December 2016 129 66,280 15,443 (1,742) (41,433) 38,677
------------------------------ --------- --------- --------- ------------- ---------- ---------
Loss for the year - - - - (30,611) (30,611)
Other comprehensive
expense - - - 1,727 - 1,727
------------------------------ --------- --------- --------- ------------- ---------- ---------
Loss and total comprehensive
expense for the period - - - 1,727 (30,611) (28,884)
Transactions with
owners, recorded
directly in equity:
Issue of shares 17 24,983 - - - 25,000
Exercise of share
options 3 493 - - - 496
Costs of share issues - (1,374) - - - (1,374)
Share based payment
expense - - - - 1,865 1,865
------------------------------ --------- --------- --------- ------------- ---------- ---------
Total contributions
by and distributions
to owners 20 24,102 - - 1,865 25,987
------------------------------ --------- --------- --------- ------------- ---------- ---------
At 31 December 2017 149 90,382 15,443 (15) (70,179) 35,780
Impact of change
in accounting policy* - - - - (111) (111)
Adjusted balance
31 December 2017 149 90,382 15,443 (15) (70,290) 35,669
Loss for the year - - - - (29,368) (29,368)
Other comprehensive
expense - - - (2,458) - (2,458)
------------------------------ --------- --------- --------- ------------- ---------- ---------
Loss and total comprehensive
expense for the
year - - - (2,458) (29,368) (31,826)
Transactions with
owners,
recorded directly
in equity:
Issue of shares following
placing and open
offer 237 15,549 - - - 15,786
Exercise of share
options - 7 - - - 7
Costs of share issues - (754) - - - (754)
Share based payment
expense - - - - 1,090 1,090
------------------------------ --------- --------- --------- ------------- ---------- ---------
Total contributions
by and
distributions to
owners 237 14,802 - - 1,090 16,129
------------------------------ --------- --------- --------- ------------- ---------- ---------
At 31 December 2018 386 105,184 15,443 (2,473) (98,568) 19,972
------------------------------ --------- --------- --------- ------------- ---------- ---------
* The Group has applied IFRS 15 in 2018 using the cumulative
effect method. Under this method, the comparative information is
not restated. See note 4 for further details.
Consolidated statement of financial position
For the year ended 31 December 2018
At At
31 December 31 December
2018 2017
Notes GBP'000 GBP'000
-------------------------------------- ------ ------------ ------------
ASSETS
Non-current assets
Intangible assets 11 1,290 654
Property, plant and equipment 12 1,954 3,516
Trade and other receivables 14 1,292 1,104
-------------------------------------- ------ ------------ ------------
TOTAL NON-CURRENT ASSETS 4,536 5,274
-------------------------------------- ------ ------------ ------------
Current assets
Inventories 13 945 6,392
Trade and other receivables 14 2,402 2,235
Current tax asset 9 - 1,306
Cash and cash equivalents 15 16,001 25,149
-------------------------------------- ------ ------------ ------------
TOTAL CURRENT ASSETS 19,348 35,082
-------------------------------------- ------ ------------ ------------
TOTAL ASSETS 23,884 40,356
-------------------------------------- ------ ------------ ------------
LIABILITIES
Non-current liabilities
Deferred consideration 17 - (185)
Deferred tax 18 (38) (38)
TOTAL NON-CURRENT LIABILITIES (38) (223)
-------------------------------------- ------ ------------ ------------
Current liabilities
Trade and other payables 17 (3,874) (4,353)
TOTAL CURRENT LIABILITIES (3,874) (4,353)
-------------------------------------- ------ ------------ ------------
TOTAL LIABILITIES (3,912) (4,576)
-------------------------------------- ------ ------------ ------------
NET ASSETS 19,972 35,780
-------------------------------------- ------ ------------ ------------
EQUITY
Share capital 19 386 149
Share premium 19 105,184 90,382
Merger reserve 19 15,443 15,443
Foreign currency translation reserve 20 (2,473) (15)
Accumulated losses 20 (98,568) (70,179)
-------------------------------------- ------ ------------ ------------
TOTAL EQUITY 19,972 35,780
-------------------------------------- ------ ------------ ------------
Approved by the Board of Directors and authorised for issue on
29 April 2018.
David Armfield Paul Denney
Chairman Chief Financial Officer
Company number: 0868447
Consolidated statement of cash flows
For the year ended 31 December 2018
Year Year
ended ended
31 December 31 December
2018 2017
Notes GBP'000 GBP'000
--------------------------------------------------------------------------- ------ ------------ ------------
Operating activities
Loss before tax (30,514) (31,916)
Adjustment for non-cash items:
Amortisation of intangible assets 11 194 39
Depreciation of property, plant and equipment 790 574
Share based payment 22 1,090 1,865
Decrease/(increase) in inventories 5,783 (2,218)
Increase in trade and other receivables (3) (26)
(Decrease)/increase in trade and other payables (3,781) 3,983
Release of deferred consideration (398)
Impairment of fixed assets 2,523
Finance income (135) (131)
Finance expense - 705
Cash used in operations (24,451) (27,125)
Tax (payments)/receipts 2,318 (2)
Net cash outflow from operations (22,133) (27,127)
--------------------------------------------------------------------------- ------ ------------ ------------
INVESTING ACTIVITIES
Finance income 134 131
Acquisition of subsidiary undertaking 24 (642) (577)
Cash withdrawn from/(placed on) deposits with more than 3 months maturity - 9,959
Purchases of property, plant and equipment (1,392) (271)
--------------------------------------------------------------------------- ------ ------------ ------------
Net cash inflow/(outflow) from investing activities (1,900) 9,242
--------------------------------------------------------------------------- ------ ------------ ------------
FINANCING ACTIVITIES
Proceeds from issue of share capital, net of costs 19 14,916 24,122
Net cash inflow from financing activities 14,916 24,122
--------------------------------------------------------------------------- ------ ------------ ------------
(Decrease)/increase in cash and cash equivalents (9,117) 6,237
Cash and cash equivalents at start of year/period 25,149 18,975
Effect of exchange rate fluctuations on cash held (31) (63)
CASH AND CASH EQUIVALENTS AT OF YEAR/PERIOD 15 16,001 25,149
--------------------------------------------------------------------------- ------ ------------ ------------
Notes to the consolidated financial statements
For the year ended 31 December 2018
1) BASIS OF PREPARATION
This financial information does not constitute the company's
statutory accounts for the year ended 31 December 2018 or the
period ended 31 December 2017 but is derived from those accounts.
Statutory accounts for 2017 have been delivered to the registrar of
companies, and those for the period ended 31 December 2018 will be
delivered in due course. The auditor has reported on those
accounts; their reports were (i) unqualified, (ii) did not include
a reference to any matters to which the auditor drew attention by
way of emphasis without qualifying their report and (iii) did not
contain a statement under section 498 (2) or (3) of the Companies
Act 2006.
The Financial Statements for the period ended 31 December 2018
from which the information in this announcement is derived were
authorised for issue in accordance with a resolution of the Board
of Directors on 29 April 2019. The level of rounding for financial
information is the nearest thousand pounds.
The Company's registered office is Unit 2, Evolution, Advanced
Manufacturing Park, Whittle Way, Catcliffe, Rotherham, S60 5BL.
The consolidated financial statements have been prepared under
the historical cost convention in accordance with International
Financial Reporting Standards as adopted by the European Union (EU
IFRS).
Business combinations and basis of consolidation
Subsidiaries are 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
At 31 December 2018, the Group had GBP16.0m of cash and cash
equivalents. At this stage in its development the Group is loss
making and incurs operating cash outflows. It is therefore reliant
on equity share funding to continue its development operations and
may require a further capital injection to meet forecast spend
(both discretionary and non discretionary) over the next 12 months
to April 2020. As with all such businesses, the group is reliant on
cyclical equity funding while developing technologies, with a long
term view to commercialising those technologies to enable them to
provide a return to the shareholders. Whilst there is no guarantee
that further equity funding will be made available, the directors
believe that given past history of successful share placings, and
the consistent development progress across the project portfolio,
the required cash can be raised in line with the above.
When making their going concern assessment the directors assess
available and committed funds against all non-discretionary
expenditure, and related cash flows, as forecast for the period
ended 30 April 2020. These forecasts indicate that the Group is
able to settle its liabilities as they fall due in the forecast
period. In these forecasts the directors have considered
appropriate sensitivities such as the level of discretionary
expenditure included and the ability to raise additional funds as
described above. Given the funding status of the Group there is
uncertainty over the long-term financing of the Group but the
Directors do not believe that this uncertainty is material.
Accordingly, the directors consider that this should enable the
Group to continue in operational existence for the foreseeable
future and the Directors believe that it remains appropriate to
prepare the financial statements on a going concern basis.
Note 16 to this financial information includes the Group's
objectives, policies and processes for managing its capital, its
financial risk management objectives, details of its financial
instruments and its exposure to credit, liquidity and market risk.
The Directors have considered their obligation, in relation to the
assessment of the going concern of the Group and each statutory
entity within it and have reviewed the current budget cash
forecasts and assumptions as well as the main risk factors facing
the Group.
2) SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied are set out below.
REVENUE RECOGNITION
The Group has applied IFRS 15 using the cumulative effect method
and therefore the comparative information has not been restated and
continues to be reported under IAS 18. The introduction of IFRS 15
has had no material impact on the reported results of the
Group.
Revenue on machines sales is recognised once the machine has
been installed at the customer site in line with the contract
agreed. Service revenue is recognised in line with the profile of
the delivery of the service to the customer and consumable revenue
is recognised when the product is delivered to the customer.
When assessing the revenue recognition against IFRS15, 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. This is particularly
relevant where customer contracts are agreed with multiple
elements, such as those sales where a machine is sold in a bundle
with an ongoing service contract, is split according to the amount
of consideration expected to be received for the transfer of the
relevant goods or services to the customer. This consideration is
calculated using cost data and an appropriate margin.
Revenue is shown net of Value Added Tax or Sales Tax as
appropriate.
In comparative periods, revenue is venue is recognised at the
fair value of the consideration received or receivable for the sale
of goods and services in the ordinary course of business and is
shown net of Value Added Tax.
The difference between the amount of income recognised and the
amount invoiced on a particular contract is included in the
statement of financial position as deferred income. Amounts
included in deferred income due within one year are expected to be
recognised within one year and are included within current
liabilities.
FOREIGN CURRENCIES
The individual financial statements of each Group entity are
presented in the currency of the primary economic environment in
which the entity operates (its functional currency). For the
purposes of the consolidated financial statements, the results and
the financial position of each Group entity are expressed in Pounds
Sterling, which is the functional currency of the Company and the
presentational currency for the consolidated financial
statements.
In preparing the financial statements of the individual
entities, transactions in currencies other than the entity's
functional currency (foreign currencies) are recorded at the rates
of exchange prevailing at the dates of the transactions. At each
balance sheet date, monetary items denominated in foreign
currencies are retranslated at the rates prevailing at the balance
sheet date. Non-monetary items carried at fair value that are
denominated in foreign currencies are retranslated at the rates
prevailing at the date when the fair value was determined.
Non-monetary items that are measured in terms of historical cost
in foreign currency are not retranslated.
The assets and liabilities of foreign operations are translated
using exchange rates at the balance sheet date. The components of
shareholders' equity are started at historical value. An average
exchange rate for the period is used to translate the results and
cash flows of foreign operations.
Exchange differences arising on translating the results and net
assets of foreign operations are taken to the translation reserve
in equity until the disposal of the investment. The gain or loss in
the statement of profit or loss and other comprehensive income on
the disposal of foreign operations includes the release of the
translation reserve relating to the operation that is being
sold.
EXCEPTIONAL ITEMS
One off items with a material effect on results are disclosed
separately on the face of the Consolidated Statement of Profit and
Loss and Other Comprehensive Income. The Directors apply judgement
in assessing the particular items which, by virtue of their scale
and nature, should be classified as exceptional items. The
Directors consider that separate disclosure of these items is
relevant to an understanding of the Group's financial
performance.
RESEARCH AND DEVELOPMENT
Expenditure on research activities is recognised as an expense
in the period in which it is incurred. Development costs are only
capitalised when the related products meet the recognition criteria
of an internally generated intangible asset, the key criteria being
as follows:
-- it is probable that the future economic benefits that are
attributable to the asset will flow to the Group;
-- the project is technically and commercially feasible;
-- the Group intends to and has sufficient resources to complete the project;
-- the Group has the ability to use or sell the asset; and
-- the cost of the asset can be measured reliably.
Such intangible assets are amortised on a straight-line basis
from the point at which the assets are ready for use over the
period of the expected benefit and are reviewed for an indication
of impairment at each reporting date. Other development costs are
charged against profit or loss as incurred since the criteria for
their recognition as an asset are not met.
The costs of an internally generated intangible asset comprise
all directly attributable costs necessary to create, produce and
prepare the asset to be capable of operating in the manner intended
by management. Directly attributable costs include employee costs
incurred on technical development, testing and certification,
materials consumed and any relevant third-party cost. The costs of
internally generated developments are recognised as intangible
assets and are subsequently measured in the same way as externally
acquired intangible assets. However, until completion of the
development project, the assets are subject to impairment testing
only.
No development costs to date have been capitalised as intangible
assets as it is deemed that the probability of future economic
benefit is currently uncertain.
LEASES
As a lessee
At the current time, the Group only partakes of lease
arrangements where all of the risks and rewards incidental to
ownership are not transferred to the Group (an 'operating lease'),
the total rentals payable under the lease are charged to the
consolidated statement of profit or loss and other comprehensive
income on a straight-line basis over the lease term. The aggregate
benefit of lease incentives is recognised as a reduction in the
rental expense over the lease term.
As a lessor
As the Group transfers substantially all the risks and benefits
of ownership of the asset, the arrangement is classified as a
finance lease and a receivable is recognised for the initial direct
costs of the lease and the present value of the minimum lease
payments. As payments fall due, finance income is recognised in the
income statement so as to achieve a constant rate of return on the
remaining net investment in the lease. Assets held for rentals to
customers under operating leases are recorded as fixed assets and
are depreciated on a straight-line basis to their estimated
residual values over their estimated useful lives. Operating lease
income is recognised within revenue on a straight-line basis over
the term of the rental period. Depreciation on machines leased to
customers which are held in fixed assets is charged to
administrative expenses as it is not directly related to sales.
The Group has assessed the impact of the introduction of IFRS16
on the Group's financial reporting and does not believe that, had
the new standard been in effect for the year ended 31 December
2018, there would have been a material impact on either the
reported loss for the year or on the Group's net assets as at 31
December 2018.
INTANGIBLE ASSETS AND GOODWILL
Recognition and measurement
Goodwill arising on the acquisition of subsidiaries is measured
at cost less accumulated impairment losses.
Other intangible assets, including customer relationships and
brands, that are acquired by the Group and have finite useful lives
are measured at cost less accumulated amortisation and any
accumulated impairment losses.
Amortisation
Amortisation is calculated to write off the cost of intangible
assets less their estimated residual values using the straight-line
method over their estimated useful lives and is generally
recognised in profit or loss. Goodwill is not amortised. The
estimated useful lives for current and comparative periods are as
follows:
-- Customer lists - 5 years
-- Brands - 5 years
-- Software - 3 years
Amortisation methods, useful lives and residual values are
reviewed at each reporting date and adjusted if appropriate. Assets
considered to have indefinite useful economic lives, such as
goodwill, are tested annually for impairment.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost less accumulated
depreciation and any impairment losses. Cost includes the original
purchase price of the asset and the costs attributable to bringing
the asset to its working condition for its intended use.
Depreciation is charged so as to write off the costs of assets over
their estimated useful lives, on the following basis:
Leasehold improvements - over the term of the lease on a straight-line basis
Plant and machinery - 20% on cost on a straight-line basis
Fixtures and fittings - 20% on cost on a straight-line basis
Computer equipment - 33% on cost on a straight-line basis
Vehicles - 20% on cost on a straight-line basis
The gain or loss arising on the disposal of an asset is
determined as the difference between the sales proceeds and the
carrying amount of the asset and is recognised in the statement of
profit or loss and other comprehensive income.
IMPAIRMENT OF NON-CURRENT ASSETS
For the purposes of assessing impairment, assets are grouped at
the lowest levels for which there are separately identifiable cash
flows (cash-generating units). As a result, some assets are tested
individually for impairment and some are tested at cash-generating
unit level. Goodwill is allocated to those cash-generating units
that are expected to benefit from synergies of the related business
combination and represent the lowest level at which management
monitors goodwill. Cash-generating units to which goodwill has been
allocated are tested for impairment at least annually. All other
individual assets or cash-generating units are tested for
impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. An impairment loss
is recognised for the amount by which the assets or cash-generating
unit's carrying amount exceeds its recoverable amount. The
recoverable amount is the higher of fair value, reflecting market
conditions less costs to sell, and value in use based on an
internal discounted cash flow evaluation.
INVENTORIES
Inventories are valued at the lower of cost and net realisable
value. Cost incurred in bringing each product to its present
location and condition is accounted for as follows:
Raw materials, work in progress and finished goods - Purchase
cost on a first-in, first-out basis.
Net realisable value is the estimated selling price in the
ordinary course of business.
SHARE BASED PAYMENTS
Certain employees and consultants (including Directors and
senior executives) of the Group receive remuneration in the form of
share-based payment transactions, whereby employees render services
as consideration for equity instruments ("equity-settled
transactions"). This policy applies to all schemes, including the
Deferred Annual Bonus scheme open to certain management
personnel.
The cost of equity-settled transactions with employees is
measured by reference to the fair value at the date on which they
are granted. The fair value is determined by using an appropriate
pricing model. The cost of equity-settled transactions is
recognised, together with a corresponding increase in equity, over
the period in which the performance and/or service conditions are
fulfilled, ending on the date on which the relevant employees
become fully entitled to the award ("the vesting date"). The
cumulative expense recognised for equity-settled transactions at
each reporting date until the vesting date reflects the extent to
which the vesting period has expired and the Group's best estimate
of the number of equity instruments that will ultimately vest. The
profit or loss charge or credit for a period represents the
movement in cumulative expense recognised as at the beginning and
end of that period.
No expense is recognised for awards that do not ultimately vest,
except for awards where vesting is conditional upon a market
condition, which are treated as vesting irrespective of whether or
not the market condition is satisfied, provided that all other
performance and/or service conditions are satisfied. Where the
terms of an equity-settled award are modified, the minimum expense
recognised is the expense as if the terms had not been modified. An
additional expense is recognised for any modification, which
increases the total fair value of the share-based payment
arrangement or is otherwise beneficial to the employee as measured
at the date of modification.
Where an equity-settled award is cancelled, it is treated as if
it had vested on the date of cancellation and any expense not yet
recognised for the award is recognised immediately. However, if a
new award is substituted for the cancelled award and designated as
a replacement award on the date that it is granted, the cancelled
and new awards are treated as if they were a modification of the
original award, as described in the previous paragraph. The
dilutive effect of outstanding options is reflected as additional
share dilution in the computation of earnings per share.
FINANCIAL ASSETS AND LIABILITIES
Financial assets and financial liabilities are recognised in the
consolidated statement of financial position when the Group becomes
party to the contractual provisions of the instrument. Financial
assets are de-recognised when the contractual rights to the cash
flows from the financial asset expire or when the contractual
rights to those assets are transferred. Financial liabilities are
de-recognised when the obligation specified in the contract is
discharged, cancelled or expired.
Financial assets, other than those designated and effective as
hedging instruments, are classified into the following
categories:
-- amortised cost
-- fair value through profit or loss (FVTPL)
-- fair value through other comprehensive income (FVOCI)
In the periods presented the Group does not have any financial
assets categorised as FVTPL or FVOCI.
After initial recognition, these are measured at amortised cost
using the effective interest rate method. Discounting is omitted
where the effect is immaterial. All of the Group's financial assets
fall into this category.
Trade receivables
Trade receivables are recognised initially at fair value and
subsequently measured at amortised cost less provision for
impairment. Appropriate provisions for estimated irrecoverable
amounts are recognised in the statement of profit or loss and other
comprehensive income when there is objective evidence that the
assets are impaired.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, demand
deposits, and other short-term highly liquid investments that are
readily convertible to a known amount of cash and are subject to an
insignificant risk of changes in value.
Investments - bank deposits
Comprise bank deposits maturing more than three months after the
balance sheet date.
Equity instruments
An equity instrument is any contract that evidences a residual
interest in the assets of an entity after deducting all of its
liabilities. Equity instruments issued by the Group are recorded at
the proceeds received, net of direct issue costs.
Trade and other payables
Trade payables are initially measured at their fair value and
are subsequently measured at their amortised cost using the
effective interest rate method; this method allocates interest
expense over the relevant period by applying the "effective
interest rate" to the carrying amount of the liability.
Impairment of financial assets
The Group accounts for impairment of financial assets using the
expected credit loss model as required by IFRS 9. The Group
considers a broad range of information when assessing credit risk
and measuring expected credit losses, including past events,
current conditions, reasonable and supportable forecasts that
affect the expected collectability of the future cash flows of the
instrument.
TAXATION
The tax expense/(credit) represents the sum of the tax currently
payable or recoverable and the movement in deferred tax assets and
liabilities.
Current tax is based upon taxable profit/(loss) for the year.
Taxable profit/(loss) differs from net profit/(loss) as reported in
the statement of profit or loss and other comprehensive income
because it excludes items of income or expense that are taxable or
deductible in other years and it further excludes items that are
never taxable or deductible.
The Group's liability for current tax is calculated by using tax
rates that have been enacted or substantively enacted by the
reporting date.
Credit is taken in the accounting period for research and
development tax credits, which have been claimed from HM Revenue
and Customs, in respect of qualifying research and development
costs incurred. Research and development tax credits are recognised
on an accruals basis with reference to the level of certainty
regarding acceptance of the claims by HMRC.
Deferred tax is calculated at the tax rates that are expected to
apply to the period when the asset is realised or the liability is
settled based upon tax rates that have been enacted or
substantively enacted by the reporting date. Deferred tax is
charged or credited in the statement of profit or loss and other
comprehensive income, except when it relates to items credited or
charged directly to equity, in which case the deferred tax is also
dealt with in equity.
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used in
the computation of taxable profit and is accounted for using the
liability method. Deferred tax liabilities are generally recognised
for all taxable temporary differences and deferred tax assets are
recognised to the extent that it is probable that taxable profits
will be available against which deductible temporary differences
can be utilised. Such assets and liabilities are not recognised if
the temporary difference arises from goodwill or from the initial
recognition (other than in a business combination) of other assets
and liabilities in a transaction that affects neither the profit
nor the accounting period.
The carrying amount of deferred tax assets is reviewed at each
reporting date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow
all or part of the asset to be recovered.
CRITICAL ACCOUNTING ESTIMATES AND AREAS OF JUDGEMENT
Estimates and judgements are continually evaluated and are based
on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the
circumstances. Actual results may differ from these estimates. The
estimates and assumptions that have the most significant effects on
the carrying amounts of the assets and liabilities in the financial
information are discussed below:
Revenue recognition
The Group offers an integrated service and care package. This
package includes the transfer of equipment and an ongoing
commitment to service and support. Where appropriate, the Group
accounts for the sales under these packages as finance leases. As
part of determining the appropriate revenue recognition policy for
such packages, the Group is required to allocated the total
contract revenue between the various contract elements in line with
IFRS 15. Due to the unique nature of the product and the stage of
development of the Group, such assessment is based on limited
historical information and requires a level of judgement. These
judgements may be revised in future years.
Research and development costs
Careful judgement by the Directors is applied when deciding
whether the recognition requirements for capitalising development
costs have been met. This is necessary as the economic success of
any product development is uncertain and may be subject to future
technical problems. Judgements are based on the information
available at each reporting date which includes the progress with
testing and certification and progress on, for example,
establishment of commercial arrangements with third parties.
Specifically, the Directors consider production scale evidence of
commercial operation of the Group's technology. In addition, all
internal activities related to research and development of new
products are continuously monitored by the Directors. To date, no
development costs have been capitalised.
ACCOUNTING STANDARDS AND INTERPRETATIONS NOT APPLIED
At the date of authorisation of these financial statements, the
following IFRSs, IASs and Interpretations were in issue but not yet
effective. Their adoption is not expected to have a material effect
on the financial statements unless otherwise indicated:
IFRS 16 Leases 1 January 2019
IFRIC 23 Uncertainty over Income Tax Treatments 1 January 2019
IFRS 9 (amended October 2017) Prepayment Features with Negative Compensation 1 January 2019
------------------------------ ----------------------------------------------- ---------------
The Directors are implementing IFRS16 for the year ended 31
December 2019. Had IFRS16 been in place for the year ended 31
December 2018, the Directors do not consider that there would have
been a material impact on the results reported.
3) SEGMENTAL REPORTING
The financial information by segment detailed below is
frequently reviewed by the Chief Executive Officer, who has been
identified as the Chief Operating Decision Maker ("CODM"). The
segments are distinct due to the markets they serve. The all other
activities segment contains supporting functions and activities in
respect of applications that have not yet been fully
commercialised.
The Hotel & Lodging segment was rebranded as Hydrofinity and
the High Performance Workwear segment was rebranded as Marken
during 2018
For the year ended 31 December 2018:
Hydrofinity Marken All Other Total
Activities
GBP'000 GBP'000 GBP'000 GBP'000
Machine sales 1,058 - - 1,058
Service Income 1,616 858 - 2,474
Consumables 12 - - 12
Total revenue 2,686 858 - 3,544
Adjusted gross
profit/(loss) 181 (33) - 148
Gross loss (5,215) (33) - (5,248)
Adjusted EBITDA (5,027) (1,808) (14,015) (20,850)
Operating loss (12,656) (1,933) (15,925) (30,514)
Net finance income 93 - 41 134
Loss before tax (12,563) (1,933) (15,884) (30,380)
Segmental net
assets 2,324 1,897 15,397 19,618
Other segmental
information:
Capital expenditure - 473 924 1,397
Depreciation 323 85 390 798
Amortisation - 194 - 194
For the year ended 31 December 2017:
Hydrofinity Marken All Other Total
Activities
GBP'000 GBP'000 GBP'000 GBP'000
Revenue 1,941 249 - 2,190
Gross loss (374) (74) - (448)
Adjusted EBITDA (10,854) (453) (17,362) (28,669)
Operating loss (11,260) (499) (19,583) (31,342)
Net finance income/(expense) 80 - (654) (574)
Loss before tax (11,180) (499) (20,237) (31,916)
Segmental net
assets 9,928 87 25,765 35,780
Other segmental
information:
Capital expenditure - - 271 271
Depreciation 253 7 314 574
Amortisation - 39 - 39
An analysis of revenues by type is set out below:
Year Year
ended Ended
31 December 31 December
2018 2017
GBP'000 GBP'000
----------------------- ------------ ------------
Sale of goods 438 738
Rendering of services 3,106 1,452
3,544 2,190
----------------------- ------------ ------------
During the year ended 31 December 2018 the Group had no
customers who individually generated more than 10% of revenue.
During the year ended 31 December 2017 the Group had no
customers who individually generated more than 10% of revenue.
An analysis of revenues by geographic location of customers is
set out below:
Year Year
ended Ended
31 December 31 December
2018 2017
GBP'000 GBP'000
--------------- ------------ ------------
Europe 416 361
North America 3,128 1,829
3,544 2,190
--------------- ------------ ------------
An analysis of non-current assets by location is set out
below:
31 December 31 December
2018 2017
GBP'000 GBP'000
--------------- ------------ ------------
Europe 672 1,529
North America 3,509 3,745
4,181 5,274
--------------- ------------ ------------
4) CHANGES IN ACCOUNTING POLICIES
Except for the changes below, the Group has consistently applied
the accounting policies to all periods presented in these
consolidated financial statements.
The Group has adopted IFRS 15 Revenue from Contracts with
Customers with a date of initial application of 1 January 2018. As
a result, the Group has changed its accounting policy for revenue
recognition as detailed below.
The Group has applied IFRS 15 using the cumulative effect method
- i.e. by recognising the cumulative effect of initially applying
IFRS 15 as an adjustment to the opening balance of equity at 1
January 2018. Therefore, the comparative information has not been
restated and continues to be reported under IAS 18. The details of
significant changes and the quantitative impact of the changes are
set out below.
Sales of machines and service as bundled packages
For bundled packages, where a machine and a service contract a
sold together, the overall contract value was previously split
based on the relative fair values of the elements. Under IFRS 15,
revenue is split based on the amount of consideration expected to
be received for the transfer of the relevant goods or services to
the customer. This consideration is calculated using cost data and
an appropriate margin.
Impacts on financial statements
Had the Group not applied IFRS15 in this financial period, there
would have been no material difference to the reported results.
The Group has also adopted IFRS 9 in these financial statements,
with effect from 1 January 2018. IFRS 9 'Financial Instruments'
replaced IAS 39 'Financial Instruments: Recognition and
Measurement'. It makes major changes to the previous guidance on
the classification and measurement of financial assets and
introduces an 'expected credit loss' model for the impairment of
financial assets. When adopting IFRS 9, the Group has applied
transitional relief and opted not to restate prior periods. No
differences arose on the transition to IFRS 9.
5) LOSS FROM OPERATIONS
Year Year
ended ended
31 December 31 December
2018 2017
GBP'000 GBP'000
------------------------------------------------------------- ------------ ------------
Loss from operations is stated after
charging to cost of sales:
Exceptional write down of inventory 5,396 -
Loss from operations is stated after
(crediting):
Foreign exchange gains (2,786) -
------------------------------------------------------------- ------------ ------------
Loss from operations is stated after
charging to
administrative expenses:
Foreign exchange losses - 2,178
Depreciation of plant and equipment
(note 12) 769 574
Amortisation of intangible assets
(note 11) 194 39
Operating lease rentals - land and
buildings 431 271
Staff costs (excluding share-based
payment charge) 10,658 11,740
Research and development 1,565 1,859
------------------------------------------------------------- ------------ ------------
Auditors remuneration:
* Audit of these financial statements 19 19
* Audit of financial statements of subsidiaries of the
company 25 21
* All other services - 6
Total auditor's remuneration 44 46
------------------------------------------------------------- ------------ ------------
The exceptional write down of inventory relates to provisions
made against the value of inventory held by the Group. The value of
this inventory has fallen as the technology used within the Group's
products and inventory develops. The provision is made in
accordance with IAS2.
Current year audit fees relate to services provided by the
current auditor, Grant Thornton. Prior year audit fees relate to
the previous auditor, KPMG. Other services in the prior period
related to interim review work, tax advice and advice in respect of
the Group's overseas subsidiary.
6) STAFF NUMBERS AND COSTS
Year Year
ended ended
31 December 31 December
2018 2017
Number Number
--------------------------------------- ------------ ------------
The average monthly number of persons
(including directors) employed by
the Group during the year was:
Directors 5 6
Operational staff 149 140
--------------------------------------- ------------ ------------
160 146
--------------------------------------- ------------ ------------
GBP'000 GBP'000
--------------------------------------- ------------ ------------
The aggregate remuneration, including
directors,
comprised:
Wages and salaries 9,709 10,637
Social security costs 775 987
Pension contributions 174 116
Share based expense (note 22) 1,090 1,865
11,748 13,605
--------------------------------------- ------------ ------------
Directors' remuneration comprised:
Emoluments for qualifying services 657 743
--------------------------------------- ------------ ------------
Directors' emoluments disclosed above include GBP300,000 paid to
the highest paid director (Year ended 31 December 2017:
GBP334,000). There are no pension benefits for directors. Please
see Directors' Remuneration Report on pages 15 to 17 for further
information on directors' emoluments.
7) EXPENSES BY NATURE
The administrative expenses charge by nature is as follows:
Year Year
ended ended
31 December 31 December
2018 2017
GBP'000 GBP'000
-------------------------------------------------------- ------------ ------------
Staff costs, recruitment and other HR 11,370 12,617
Share-based payment expense 1,090 1,865
Premises and establishment costs 1,025 586
Research and development costs 1,565 1,859
Patent and IP costs 1,265 1,176
Engineering and operational costs 895 1,978
Legal, professional and consultancy fees 2,749 2,978
IT, telecoms and office costs 1,027 725
Depreciation charge 798 377
Amortisation charge 194 39
Travelling, subsistence and entertaining 1,999 2,221
Advertising, conferences and exhibitions 905 1,234
Bad debt expense 533 412
Other expenses 451 434
Foreign exchange losses/(gains) (2,786) 2,198
Less: grants receivable - -
-------------------------------------------------------- ------------ ------------
Total operating administrative expenses 23,080 30,699
Non-operating administrative exceptional items:
Costs of placing of ordinary shares 114 195
Exceptional impairment of Property Plant & Equipment 2,390 -
Release of deferred consideration (318) -
Total administrative expenses 25,266 30,894
-------------------------------------------------------- ------------ ------------
The exceptional to property plant and equipment relate to the
write off of machines leased to customers across the Group as the
technology used in the Group's products develops. These write offs
are made in accordance with IAS16.
The exceptional release of deferred consideration relates to the
release of deferred consideration on acquisitions which management
no longer believe will become payable.
8) NET FINANCE INCOME/(EXPENSE)
Year Year
ended ended
31 December 31 December
2018 2017
GBP'000 GBP'000
------------------------------------------- ------------ ------------
Bank interest receivable 41 51
(Loss)/gain from forward foreign currency
contracts - (705)
Finance income from lease receivables 93 80
------------------------------------------- ------------ ------------
Net finance income/(expense) 134 (574)
------------------------------------------- ------------ ------------
9) TAXATION
Tax on loss on ordinary activities
Year Year
ended ended
31 December 31 December
2018 2017
GBP'000 GBP'000
---------------------------------------------------------- ------------ ------------
Current tax:
UK Tax credits received in respect of prior periods (1,035) (1,306)
Foreign taxes paid 23 2
---------------------------------------------------------- ------------ ------------
(1,012) (1,304)
Deferred tax:
Origination and reversal of temporary timing differences - (1)
---------------------------------------------------------- ------------ ------------
Tax credit on loss on ordinary activities (1,012) (1,305)
---------------------------------------------------------- ------------ ------------
The credit for the year/period can be reconciled to the loss
before tax per the statement of profit or loss and other
comprehensive income as follows:
Factors affecting the current tax charges
The tax assessed for the year varies from the main company rate
of corporation tax as explained below:
Year Year
ended ended
31 December 31 December
2018 2017
GBP'000 GBP'000
------------------------------------------------------------------------------------------ ------------ ------------
The tax assessed for the period varies from the main company rate of corporation tax as
explained
below:
Loss on ordinary activities before tax (30,380) (31,916)
------------------------------------------------------------------------------------------ ------------ ------------
Tax at the standard rate of corporation tax 19% (2017: 19.25%) (5,772) (6,144)
Effects of:
Expenses not deductible for tax purposes 229 418
Research and development tax credits receivable (1,035) (1,306)
Unutilised tax losses for which no deferred tax asset is
recognised 5,544 6,649
Employee share acquisition adjustment (1) (924)
Foreign taxes paid 23 2
Change in tax rates - -
------------------------------------------------------------------------------------------ ------------ ------------
Tax credit for the year/period (1,012) (1,305)
------------------------------------------------------------------------------------------ ------------ ------------
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
2017. There is no certainty regarding the claim for the year ended
31 December 2018 and as such no relevant credit or asset is
recognised.
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 Year
ended ended
31 December 31 December
2018 2017
GBP'000 GBP'000
--------------------------------------------------------------------- ------------ ------------
Total loss attributable to the equity holders of the parent (29,368) (30,611)
--------------------------------------------------------------------- ------------ ------------
No. No.
Weighted average number of ordinary shares in issue during the year 103,990,542 87,671,769
--------------------------------------------------------------------- ------------ ------------
Loss per share
Basic and diluted on loss for the year (28.24)p (34.92)p
--------------------------------------------------------------------- ------------ ------------
Adjusted earnings per share has been calculated so as to exclude
the effect of exceptional costs including related tax charges and
credits. Adjusted earnings used in the calculation of basic and
diluted earnings per share reconciles to basic earnings as
follows:
Basic earnings (29,722) (30,611)
Exceptional costs 7,935 195
------------------- --------- ---------
Adjusted earnings (21,787) (30,416)
------------------- --------- ---------
Adjusted loss per share
Basic and diluted on loss for the year (20.95)p (34.69)p
---------------------------------------- --------- ---------
The weighted average number of shares in issue throughout the
period is as follows:
Year Year
ended ended
31 December 31 December
2018 2017
--------------------------------------------------------- ------------ ------------
Issued ordinary shares at 1 January 2018/1 January 2017 99,169,956 86,021,911
Effect of shares issued for cash 4,820,586 1,649,858
Weighted average number of shares at 31 December 103,990,542 87,671,769
--------------------------------------------------------- ------------ ------------
The Company has issued employee options over 8,120,803 (31
December 2017: 7,658,146) 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
Customer
Goodwill relationships Brand Software Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- --------- -------------- -------- --------- --------
Cost
At 31 December 2016 - - - - -
Acquisitions through business
combinations 133 246 326 - 705
Foreign currency differences (2) (4) (6) - (12)
------------------------------- --------- -------------- -------- --------- --------
As at 31 December 2017 131 242 320 - 693
------------------------------- --------- -------------- -------- --------- --------
Acquisitions through business
combinations 314 404 - 18 736
Foreign currency differences 26 56 19 2 103
------------------------------- --------- -------------- -------- --------- --------
At 31 December 2018 471 702 339 20 1,532
------------------------------- --------- -------------- -------- --------- --------
Accumulated amortisation
and impairment losses
31 December 2016 - - - -
Amortisation charge for
the year - 39 - 39
Foreign currency differences - - - -
------------------------------- --------- -------------- -------- --------- --------
31 December 2017 - 39 - 39
------------------------------- --------- -------------- -------- --------- --------
Amortisation charge for
the year - 97 91 5 194
Foreign currency differences - 6 5 - 11
------------------------------- --------- -------------- -------- --------- --------
At 31 December 2018 - 142 96 5 243
------------------------------- --------- -------------- -------- --------- --------
Net book value
At 31 December 2018 471 561 243 15 1,290
------------------------------- --------- -------------- -------- --------- --------
At 31 December 2017 131 203 321 - 654
------------------------------- --------- -------------- -------- --------- --------
At 31 December 2016 - - - - -
------------------------------- --------- -------------- -------- --------- --------
Amortisation
The amortisation of intangible assets is included within
administrative expenses in the consolidated statement of profit or
loss and other comprehensive income.
Impairment testing for CGUs containing goodwill
For the purposes of impairment testing, goodwill has been
allocated to the Group's CGUs (operating divisions) as follows:
2018 2017
GBP'000 GBP'000
--------------------------- -------- --------
Hydrofinity - -
High Performance Workwear 471 131
471 131
--------------------------- -------- --------
High Performance Workwear
The recoverable amount of this CGU is based on fair value less
costs of disposal, estimated using discounted cash flows.
The key assumptions used in the estimation of the recoverable
amount are set out below. The values assigned to the key
assumptions represent management's assessment of future trends in
the relevant industry and have been based on historical data from
both external and internal sources.
2018 2017
% %
------------------------------------ ----- -----
Discount rate 15% 15%
Terminal value growth rate 1% 1%
Budget EBITDA growth rate (average
of next five years) - 5%
All goodwill relates to the purchase of the trade and assets of
MarKen PPE and of Gloves Inc. Goodwill arising on acquisition
represents excess of the fair value of the consideration given over
the fair value of the identifiable net assets acquired. The
goodwill arising from the acquisition consists largely of the
synergies expected from combining the MarKen PPE and Gloves Inc
businesses with the proprietary Xeros technology and the workforce
acquired.
The Group tests annually for impairment, or more frequently if
there are indications that goodwill might be impaired. This
impairment test compares the net assets of the business against the
future cashflows from the division.
The forecast used in impairment testing is approved by
management and the Board of Directors and is based on a bottom up
assessment of costs and uses the known and estimated sales
pipeline.
12) PROPERTY, PLANT AND EQUIPMENT
Leasehold Plant Computer Fixtures Motor
improvements and equipment equipment and fittings vehicles Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------- -------------- --------------- ----------- -------------- ---------- --------
Cost
At 31 December
2016 842 962 277 149 - 2,230
Arising on
acquisitions - 12 11 11 3 37
Additions 71 81 69 34 - 255
Transfers
from/to inventory - 2,270 - - - 2,270
Foreign currency
differences (20) (64) (12) (5) - (101)
-------------------- -------------- --------------- ----------- -------------- ---------- --------
At 31 December
2017 893 3,261 345 189 3 4,691
Arising on
acquisitions - 16 1 1 11 29
Additions 806 407 142 21 21 1,397
Transfers
from/to inventory - 64 - - - 64
Foreign currency
differences 56 225 16 7 2 306
-------------------- -------------- --------------- ----------- -------------- ---------- --------
At 31 December
2018 1,755 3,973 504 218 37 6,487
-------------------- -------------- --------------- ----------- -------------- ---------- --------
Depreciation
At 31 December
2016 306 152 111 73 - 642
Charge for
the period 206 259 75 23 - 574
Transfers
from/to inventory - (5) - - - (5)
Foreign currency
differences (15) (14) (6) (1) - (36)
-------------------- -------------- --------------- ----------- -------------- ---------- --------
At 31 December
2017 497 392 191 95 - 1,175
Charge for
the year 200 404 123 32 10 769
Impairment
recognised
in the year - 2,390 - - - 2,390
Transfers
from/to inventory - - - - - -
Foreign currency
differences 19 168 10 2 - 199
At 31 December
2018 716 3,354 324 129 10 4,533
-------------------- -------------- --------------- ----------- -------------- ---------- --------
Net book
value
At 31 December
2018 1,039 619 180 89 27 1,954
-------------------- -------------- --------------- ----------- -------------- ---------- --------
At 31 December
2017 396 2,869 154 94 3 3,516
-------------------- -------------- --------------- ----------- -------------- ---------- --------
At 31 December
2016 536 810 166 76 - 1,588
-------------------- -------------- --------------- ----------- -------------- ---------- --------
During the year an impairment has been made in respect of assets
with a prior book value of GBP2,528,000 which were previously
included within plant and equipment which the Group leases (as
lessor) to customers under a number of operating lease agreements.
Following the impairment these assets are now held at nil value. In
the prior year assets leased to customers had a value of
GBP2,582,000 and were reported within plant and equipment.
When an operating lease is agreed with a customer, the assets to
which the operating lease relates are, if necessary, transferred
from inventory into property, plant and equipment for the duration
of the lease. Depreciation is charged on these assets in line with
their useful economic lives.
13) INVENTORIES
31 December 31 December
2018 2017
GBP'000 GBP'000
----------------- ------------ ------------
Finished goods 945 6,392
----------------- ------------ ------------
In the year ended 31 December 2018, changes in finished goods
recognised as cost of sales amounted to GBP1,408,000 (year ended 31
December 2017: GBP742,000).
14) TRADE AND OTHER RECEIVABLES
31 December 31 December
2018 2017
GBP'000 GBP'000
-------------------------------- ------------ ------------
Due within 12 months
Trade debtors 458 345
Other receivables 1,354 856
Prepayments and accrued income 590 1,034
2,402 2,235
-------------------------------- ------------ ------------
Due after more than 12 months
Other receivables 1,292 1,104
-------------------------------- ------------ ------------
There is no material difference between the lease receivables
amounts included in other receivables noted above, the minimum
lease payments or gross investment in the lease as defined by IAS
17.
The minimum lease payment is receivable as follows:
31 December 31 December
2018 2017
GBP'000 GBP'000
----------------------------------------------- ------------ ------------
Not later than one year 317 252
Later than one year not later than five years 1,088 917
Later than five years 234 187
1,639 1,356
----------------------------------------------- ------------ ------------
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 2018 and made a provision
of GBP639,000 (31 December 2017: GBP270,000) 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 16.
Other receivables of GBP1,292,000 (31 December 2017:
GBP1,104,000) due after more than one year comprise the long-term
portion of finance leases where the Group acts as lessor.
15) CASH AND CASH EQUIVALENTS
31 December 31 December
2018 2017
GBP'000 GBP'000
----------------------------------- ------------ ------------
A+ 15,851 11
A 41 -
BBB+ 107 25,138
Held outside banking institutions 2 -
Cash and cash equivalents 16,001 25,149
----------------------------------- ------------ ------------
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 2018
are at floating interest rates. Balances are denominated in UK
Sterling (GBP), US Dollars ($) and Euros (EUR) as follows:
31 December 31 December
2018 2017
GBP'000 GBP'000
------------------------------- ------------ ------------
Denominated in Pound Sterling 15,597 24,095
Denominated in US Dollars 127 752
Denominated in Euros 277 302
Cash and cash equivalents 16,001 25,149
------------------------------- ------------ ------------
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 16.
16) FINANCIAL INSTRUMENTS
The Group's principal financial instruments comprise short-term
receivables and payables and cash and cash equivalents. The Group
does not trade in financial instruments but uses derivative
financial instruments in the form of forward foreign currency
contracts to help manage its foreign currency exposure and to
enable the Group to manage its working capital requirements.
(a) Fair Values of Financial Assets and Financial
Liabilities
Derivative Financial Instruments - Fair Value Hierarchy
The following hierarchy classifies each class of financial asset
or liability depending on the valuation technique applied in
determining its fair value:
Level 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).
In these financial statements, all of the forward foreign
exchange contracts are considered to be Level 2 in the fair value
hierarchy. There have been no transfers between categories in the
current or preceding year. The fair value of financial instruments
held at fair value have been determined based on available market
information at the balance sheet date.
(b) Credit risk
Financial Risk Management
Credit risk is the risk of financial loss to the Group if a
customer or counterparty to a financial instrument fails to meet
its contractual obligations.
The Group is exposed to credit risk in respect of trade and
lease receivable balances such that, if one or more customers or a
counterparty to a financial instrument encounters financial
difficulties, this could materially and adversely affect the
Group's financial results. The Group attempts to mitigate credit
risk by assessing the credit rating of new customers and financial
counterparties prior to entering into contracts and by entering
into contracts with customers on agreed credit terms.
The Group is potentially exposed to credit risk in respect of
its bank deposits in the event of failure of the respective banks.
The Group attempts to mitigate this risk by spreading its cash
deposits across different banks and through ongoing monitoring of
the credit ratings of those banks. Further details are set out in
note 15. At 31 December 2018, the Directors were not aware of any
factors affecting the recoverability of the Group's bank
balances.
Exposure to Credit Risk
At 31 December 2018, the Group had net trade receivables
outstanding of GBP458,000 (2017: GBP345,000). The Directors have
considered the recoverability of outstanding balances at 31
December 2018 and have made provisions for bad and doubtful debts
amounting to GBP639,000 (2017: GBP270,000). The Group had lease
receivable balances outstanding of GBP1,639,000 (2017:
GBP1,356,000) after the deduction of provisions amounting to
GBP145,000 (2017: GBP108,000).
The concentration of credit risk for trade and other receivables
and lease receivables at the balance sheet date by geographic
region was:
31 December 31 December
2018 2017
GBP'000 GBP'000
-------------------------- ------------ ------------
United Kingdom 1,527 1,029
United States of America 2,167 2,310
3,694 3,339
-------------------------- ------------ ------------
(c) Liquidity Risk
Financial Risk Management
Liquidity risk arises from the Group's management of working
capital. It is the risk that the Group will encounter difficulty in
meeting its future obligations as they fall due. The Group's policy
is to ensure that it will always have sufficient cash to allow it
to meet its liabilities when they become due. To achieve this aim,
it seeks to maintain cash balances to meet its expected cash
requirements.
The following are the contractual maturities of financial
liabilities:
Non-derivative financial liabilities 31 December 31 December
2018 2017
GBP'000 GBP'000
-------------------------------------- ------------ ------------
Due within one year
Trade and other payables 1,812 1,661
-------------------------------------- ------------ ------------
(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 note 15). The Board make ad hoc decisions at their regular
Board meetings, as to whether to hold funds in instant access
accounts or longer-term deposits. All accounts are held with
reputable banks. These policies are considered to be appropriate to
the current stage of development of the Group and will be kept
under review in future years.
Foreign Currency Risk
The Group is exposed to currency risk on sales and purchases and
cash held in bank accounts that are denominated in a currency other
than the respective functional currencies of Group entities,
primarily Pound Sterling (GBP), the US Dollars (USD) and the Euro
(EUR). The Group's policy is to reduce currency exposure on sales
and purchasing through forward foreign currency contracts where
appropriate.
The Group had no forward currency contracts in place as at
either 31 December 2018 or 31 December 2017.
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 2018
Sterling US Dollar Euro Total
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- --------- ---------- -------- --------
Cash and cash equivalents 15,596 128 277 16,001
Trade and other receivables 1,527 2,167 - 3,694
Trade and other payables (1,013) (244) - (1,257)
----------------------------- --------- ---------- -------- --------
Balance sheet exposure 16,110 2,051 277 18,438
----------------------------- --------- ---------- -------- --------
Net exposure - 2,051 277 2,437
-------------- --- ------ ---- ------
At 31 December 2017
Sterling US Dollar Euro Total
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- --------- ---------- -------- --------
Cash and cash equivalents 24,095 752 302 25,149
Income tax receivable 1,306 - - 1,306
Trade and other receivables 1,029 2,309 - 3,338
Trade and other payables (774) (873) (14) (1,661)
Balance sheet exposure 25,656 2,188 288 28,132
----------------------------- --------- ---------- -------- --------
Net exposure - 2,188 288 28,132
-------------- -------- ------ ---- -------
Sensitivity Analysis
A 10% weakening of the following currencies against the GBP
sterling at 31 December 2018 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 2017.
Equity Profit or Loss
-------------------------- --------------------------
31 December 31 December 31 December 31 December
2018 2017 2018 2017
GBP'000 GBP'000 GBP'000 GBP'000
------------ ------------ ------------ ------------ ------------
US Dollars (205) (219) (205) (219)
Euros (28) (29) (28) (29)
A 10% strengthening of the above currencies against the Pound
Sterling at 31 December 2018 would have had the equal but opposite
effect on the above currencies to the amounts shown above on the
basis that all other variables remain constant.
Interest Rate Risk
At the balance sheet date the interest rate profile of the
Group's interest-bearing financial instruments was:
31 December 31 December
2018 2017
GBP'000 GBP'000
--------------------------- ------------ ------------
Fixed rate instruments
Financial assets - -
Financial liabilities - -
--------------------------- ------------ ------------
- -
--------------------------- ------------ ------------
Variable rate instruments
Financial assets 16,001 25,149
Financial liabilities - -
--------------------------- ------------ ------------
16,001 25,149
--------------------------- ------------ ------------
Based on the Group's above balances at 31 December 2018, if
interest rates had been 5 per cent higher, then the impact on the
results for the year would be a reduction in the loss for the
period of approximately GBP800,000 with a corresponding increase in
the Group's net assets. If the interest rate had reduced to zero
per cent, then the impact on the results for the period would be an
increase in the loss for the year of GBP41,000 with a corresponding
decrease in the Group's net assets.
(e) Capital Management
The Group's capital is made up of share capital, share premium
and retained losses, totalling GBP6,648,000 at 31 December 2018 (31
December 2017: GBP20,352,000).
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.
17) TRADE AND OTHER PAYABLES
31 December 31 December
2018 2017
GBP'000 GBP'000
------------------------------ ------------ ------------
Trade payables 1,257 1,223
Taxes and social security 164 126
Other creditors 555 438
Accruals and deferred income 1,897 2,566
Contingent consideration - 185
------------------------------ ------------ ------------
3,874 4,538
------------------------------ ------------ ------------
Current 3,874 4,353
Non-current - 185
------------------------------ ------------ ------------
3,874 4,538
------------------------------ ------------ ------------
Trade payables, split by the currency they will be settled are
shown below:
31 December 31 December
2018 2017
GBP'000 GBP'000
---------------- ------------ ------------
Sterling 1,013 639
US Dollars 244 570
Euros - 14
Trade payables 1,257 1,223
---------------- ------------ ------------
Trade and other payables principally comprise amounts
outstanding for trade purchases and ongoing costs. They are
non-interest bearing and are normally settled on 30 to 45 day
terms. The Directors consider that the carrying value of trade and
other payables approximate their fair value. The Group has
financial risk management policies in place to ensure that all
payables are paid within the credit timeframe and no interest has
been charged by any suppliers as a result of late payment of
invoices during the period.
18) DEFERRED TAX
31 December 31 December
2018 2017
GBP'000 GBP'000
---------------------------------------------- ------------ ------------
Accelerated depreciation for tax purposes 38 38
Deferred tax credit/(expense) for the period - (1)
---------------------------------------------- ------------ ------------
Year Year
ended ended
31 December 31 December
2018 2017
GBP'000 GBP'000
---------------------- ------------ ------------
At beginning of year 38 39
Tax expense - (1)
At end of year 38 38
---------------------- ------------ ------------
As at 31 December 2018, the Group had unrecognised deferred tax
assets totalling approximately GBP17,981,000 (31 December 2017:
GBP12,968,000), 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.
19) SHARE CAPITAL
Share Share Merger
capital premium reserve Total
Number GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- ------------ --------- --------- --------- --------
Total Ordinary shares
of 0.15p each as at
31 December 2016 86,021,911 129 66,280 15,443 81,852
--------------------------- ------------ --------- --------- --------- --------
Issue of ordinary
shares following placing 11,111,112 17 24,983 - 25,000
Issue of ordinary
shares on exercise
of share options 2,036,933 3 493 - 496
Costs of share issues - - (1,374) - (1,374)
Total Ordinary shares
of 0.15p each as at
31 December 2017 99,169,956 149 90,382 15,443 105,974
--------------------------- ------------ --------- --------- --------- --------
Issue of ordinary
shares following placing
and open offer 157,861,209 237 15,549 - 15,786
Issue of ordinary
shares on exercise
of share options 4,554 - 7 - 7
Costs of share issues - - (754) - (754)
--------------------------- ------------ --------- --------- --------- --------
Total Ordinary shares
of 0.15p each as at
31 December 2018 257,035,719 386 105,184 15,443 121,013
--------------------------- ------------ --------- --------- --------- --------
As permitted by the provisions of the Companies Act 2006, the
Company does not have an upper limit to its authorised share
capital.
The following is a summary of the changes in the issued share
capital of the Company during the period ended 31 December
2018:
(a) 451 Ordinary Shares were allotted at a price of 160.05 pence
per share, for total cash consideration of GBP724, upon the
exercise of share options granted in the Company's share option
schemes.
(b) 434 Ordinary Shares were allotted at a price of 182.5 pence
per share, for total cash consideration of GBP792, upon the
exercise of share options granted in the Company's share option
schemes.
(c) 795 Ordinary Shares were allotted at a price of 210 pence
per share, for total cash consideration of GBP1,670, upon the
exercise of share options granted in the Company's share option
schemes.
(d) 4,103 Ordinary Shares were allotted at a price of 160.5
pence per share, for total cash consideration of GBP6,585, upon the
exercise of share options granted in the Company's share option
schemes.
(e) 448 Ordinary Shares were allotted at a price of 182.5 pence
per share, for total cash consideration of GBP818, upon the
exercise of share options granted in the Company's share option
schemes.
(f) 1,755 Ordinary Shares were allotted at a price of 210 pence
per share, for total cash consideration of GBP3,686, upon the
exercise of share options granted in the Company's share option
schemes.
(g) 157,861,209 Ordinary Shares were allotted at a price of 10
pence per share, for total cash consideration of GBP15,786,121,
upon the placing and open offer of the Company's shares in December
2018.
At 31 December 2018, the Company had only one class of share,
being Ordinary Shares of 0.15p 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.
20) MOVEMENT IN ACCUMULATED LOSSES AND FOREIGN CURRENCY
TRANSLATION RESERVE
Accumulated losses Foreign currency translation reserve
GBP'000 GBP'000
------------------------------------------------ ------------------- -------------------------------------
At 31 December 2016 (41,433) (1,742)
------------------------------------------------ ------------------- -------------------------------------
Loss for the period (30,611) -
Other comprehensive expense - Foreign currency
translation differences - foreign operation - 1,727
Shared based payment charge 1,865 -
------------------------------------------------ ------------------- -------------------------------------
At 31 December 2017 (70,179) (15)
Impact of change in accounting policies (111) -
Adjusted balance 31 December 2018 (70,290) (15)
Loss for the year (26,979) -
Other comprehensive income - Foreign currency
translation differences - foreign operation - (2,319)
Shared based payment charge 1,090 -
------------------------------------------------ ------------------- -------------------------------------
At 31 December 2018 (96,179) (2,334)
------------------------------------------------ ------------------- -------------------------------------
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
overseas subsidiaries.
21) COMMITMENTS
Operating lease commitments
The Group leases premises under non-cancellable operating lease
agreements. The future aggregate minimum lease and service charge
payments under non-cancellable operating leases are as follows:
31 December 31 December
2018 2017
GBP000 GBP000
---------------------------------------- ------------ ------------
Land and buildings:
Amounts due within one year 471 377
Amounts due between one and five years 562 686
---------------------------------------- ------------ ------------
1,033 1,063
---------------------------------------- ------------ ------------
On 19 October 2014, the Group entered into a five-year lease
arrangement in respect of a property. The Group has an annual rent
commitment of GBP17,185 on this lease. This lease expires on 18
October 2019. On the same date the Group entered into a five-year
lease arrangement in respect of another property. The Group has an
annual rent commitment of GBP25,487 on this lease. This lease also
expires on 18 October 2019.
On 13 February 2015, the Group entered into an arrangement
assigning to it a 10-year lease in respect of a property. The lease
commenced on 2 April 2012 and expires on 1 April 2022. The Group
has an annual rent commitment of GBP75,250 on this lease.
On 30 November 2017, the Group entered into a three-year lease
arrangement in respect of a property. The Group has an annual rent
commitment of $246,668 on the lease. The lease expires on 31
December 2020. The lease contains an option which allows the Group
to extend the lease term by five years.
In addition, the Group has operating lease commitments in
respect of its premises in the USA for its subsidiary, Xeros High
Performance Workwear Inc. These are short term rentals with an
annual rent charge of approximately GBP170,000.
The new accounting standard IFRS 16 'Leases', is effective for
years commencing on or after 1 January 2019. A disclosure of the
potential impact of IFRS 16 is shown below. The actual figures will
be impacted by the discount rates used, as well as decisions on the
use of expedients and exemptions, along with any additional lease
information that comes to light in the year. A notional discount
rates of 5% has been used to show the users of the financial
statements the potential impact of IFRS 16. The actual rates used
may differ. The modified retrospective approach has been used and
the right of use asset has been valued retrospectively using the
assumed transition discount rates.
Operating leases that were active at 1 January 2019 have been
incorporated into the potential impact analysis below. Changes that
occur in the year will impact the actual figures that will appear
in the 2019 accounts following transition to IFRS 16.
Additionally, the assumption has been made that, wherever
possible, the low value item exemption for leases assets with a
value of less that GBP4,000 and the short remaining term expedient
for those with less that 12 months left will be utilised.
The potential impact of the transition to IFRS 16 is:
-- At 1 January 2019: Assets of GBP1,587,000, Liabilities of
GBP1,702,000 and estimated impact on reserves of GBP115,000
-- At 31 December 2019: Assets of GBP1,296,000, Liabilities of
GBP1,443,000 and estimated impact on EBITDA of GBP414,000
22) SHARE BASED PAYMENTS
Share options
The Company has share option plans (The Xeros Technology Group
plc Unapproved Share Option Scheme and The Xeros Technology Group
plc Enterprise Management Incentive Share Option Scheme) under
which it grants options over ordinary shares to certain Directors,
employees and consultants of the Group. Options under these plans
are exercisable at a range of exercise prices ranging from the
nominal value of the Company's shares to the market price of the
Company's shares on the date of the grant. The vesting period for
shares is usually over a period of three years. The options are
settled in equity once exercised. If the options remain unexercised
for a period after 10 years from the date of grant, the options
expire. Options are forfeited if the employee leaves the Group
before the options vest.
The number and weighted average exercise prices of share options
are as follows:
Weighted
average exercise
price per
Number of share interests share (GBP)
------------------
Deferred
Unapproved Annual Bonus
EMI options options plan Total
-------------- ------------ -------------- ------------ ------------------
At 31 December
2016 2,086,357 4,423,584 177,822 6,687,763 1.032
Granted in the
period - 3,167,832 74,907 3,242,739 2.223
Exercised in
the year (1,105,716) (950,139) (15,384) (2,071,239) (0.273)
Forfeited/lapsed
in the year (4,220) (1,96,897) - (201,117) (1.956)
At 31 December
2017 976,421 6,444,380 237,345 7,658,146 1.719
------------------ -------------- ------------ -------------- ------------ ------------------
Granted in the
period - 2,436,832 25,900 2,462,732 2.166
Exercised in
the period (451) (7,535) - (7,986) (1.787)
Forfeited/lapsed
in the period (17,518) (1,868,320) (106,971) (1,992,809) (1.752)
At 31 December
2018 958,452 7,005,357 156,274 8,120,083 1.839
------------------ -------------- ------------ -------------- ------------ ------------------
There were 5,339,849 share options outstanding at 31 December
2018 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 2018. Options have a range of
exercise prices from 0.15 pence per share to 310.0 pence per share
and have a weighted average contractual life of 8.07 years (31
December 2017: 7.91 years).
Unapproved
options DAB options Options
granted granted granted
Options granted in in in
in the period January January September
2018 2018 2018
Dividend yield 0% 0% 0%
Expected volatility* 40.00% 40.00% 40.00%
Risk free interest
rate (%) 1.50% 1.50% 1.50%
Expected vesting
life of options
(years) 10 10 10
Weighted average
share price (pence) 225.0 222.0 76.5
Fair value of an
option (pence per
share) 115.2 221.9 39.2
------------------------ ----------- ------------ ----------
* Expected volatility is based upon the Company's historical
share price.
Any share options which are not exercised within 10 years from
the date of grant will expire.
A charge has been recognised in the consolidated statement of
profit or loss and other comprehensive income for each period as
follows:
31 December 31 December
2018 2017
GBP000 GBP000
--------------- ------------ ------------
Share options 1,090 1,865
---------------- ------------ ------------
23) 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:
Purchases Amounts owed Amounts
from related to related Purchases owed to
party party from related related
party party
31 December 31 December 31 December 31 December
2018 2018 2017 2017
Related party Relationship GBP000 GBP000 GBP000 GBP000
--------------------- --------------- -------------- ------------- -------------- ------------
Fund manager
for certain
Enterprise Ventures shareholders
Limited (note 1) 12 - 30 -
Corporate
finance
advisor
for certain
Top Technology shareholders
Ventures Limited (note 2) - - 260 260
--------------------- --------------- -------------- ------------- -------------- ------------
Note 1: Enterprise Ventures Limited provided the services of
Julian Viggars, who was a director of the Company until 23 May 2018
and invoiced the Group for associated director's fees.
Note 2: Top Technology Ventures Limited provided corporate
finance services on behalf of the IP Group shareholders for the new
equity issue in December 2017.
Terms and conditions of transactions with related parties
Purchases between related parties are made on an arm's length
basis. Outstanding balances are unsecured, interest free and cash
settlement is expected within 60 days of invoice.
Transactions with Key Management Personnel
The Company's key management personnel comprise only the
Directors of the Company. During the period, the Company entered
into the following transactions in which the Directors had an
interest:
Directors' remuneration:
Remuneration received by the Directors from the Company is set
out below. Further detail is provided within the Directors'
Remuneration Report:
Year Year
ended Ended
31 December 31 December
2018 2017
GBP000 GBP000
--------------------------------- ------------ ------------
Short-term employment benefits* 657 743
--------------------------------- ------------ ------------
*In addition, certain directors hold share options in the
Company for which a fair value share based charge of GBP658,601 has
been recognised in the consolidated statement of profit or loss and
other comprehensive income (Year ended 31 December 2017:
GBP321,639).
The highest paid Director in the year received total
remuneration of GBP300,000 (Year ended 31 December 2017:
GBP334,000). During the year ended 31 December 2018, the Company
entered into numerous transactions with its subsidiary companies
which net off on consolidation - these have not been shown
above.
24) ACQUISITION OF SUBSIDIARY
On 22 March 2018, Xeros High Performance Workwear Inc., a
subsidiary of the Group, acquired 100% of the trade and net assets
of the High Performance Workwear division of Gloves Inc., a company
incorporated in the USA. The trade and assets acquired are those of
a provider of cleaning, inspection and repair services for
firefighter personal protective equipment with facilities in
Atlanta and Miami, USA.
During the year ended 31 December 2018, the trade and assets
purchased from Gloves Inc. contributed revenue of GBP430,000 and a
loss of GBP87,000 to the consolidated results of the Group. If the
acquisition had taken place on 1 January 2017, management estimates
that consolidated revenue would have been GBP4,117,000 and
consolidated loss before taxation would have been GBP(30,850,000).
In determining those amounts, management has assumed that the fair
value adjustments that arose on the date of acquisition would have
been the same as if the acquisition had occurred on 1 January
2018.
Consideration transferred
The following table summarises the acquisition date fair value
of each major class of consideration transferred.
GBP000
--------------------------------- -------
Cash 569
Deferred consideration 73
Contingent consideration 213
Total consideration transferred 855
---------------------------------- -------
Deferred consideration
The Group agreed to pay the sellers and additional GBP73,000
based on an adjustment to the purchase price as a result of working
capital targets defined in the acquisition agreement.
Contingent consideration
The Group has agreed to pay the sellers additional consideration
up to a maximum of $300,000 (GBP213,000 at the date of acquisition)
during a one-year period following acquisition. This is based on an
earn-out calculation which requires the company to achieve sales
revenue targets in the twelve months following acquisition. The
Group has released this creditor at year end as management no
longer believe that the revenue targets will be met.
Acquisition-related costs
The Group incurred acquisition-related costs of GBP80,000 on
legal fees and due diligence expenses. These costs have been
included in administrative expenses in the consolidated statement
of profit and loss and other comprehensive income
Identifiable assets acquired and liabilities assumed
The following table summarises the recognised amounts of assets
acquired and liabilities assumed at the date of acquisition.
GBP000
---------------------------------------- -------
Property, plant and equipment 28
Intangible assets 422
Trade and other receivables 93
Trade and other payables (2)
Total identifiable net assets acquired 541
----------------------------------------- -------
Measurement of fair values
All assets and liabilities acquired are recognised at fair
value. For trade and other receivables and trade and other
payables, fair value was deemed to be equivalent to book value.
Estimates were made in respect of property, plant and equipment and
intangible assets based upon management's assessment of the value
in use of the assets to the Xeros Group.
The intangible assets acquired with the trade and assets
comprise GBP404,000 in relation to non-contractual customer
relationships and GBP18,000 in relation to bespoke computer
software acquired.
Goodwill
Goodwill arising from the acquisition has been recognised as
follows:
GBP000
--------------------------------------- -------
Consideration transferred 855
Fair value of identifiable net assets (541)
Goodwill 314
---------------------------------------- -------
The goodwill arising from the acquisition consists largely of
the synergies expected from combining the Gloves Inc. business with
the proprietary Xeros technology and the workforce acquired.
25) ANNUAL REPORT AND ACCOUNTS
The Group's annual report and accounts for the period ended 31
December 2018 have been published today and will be posted to
shareholders shortly. The annual report and accounts will also be
available in electronic form on www.xerostech.com
Forward-looking statements
This announcement may include certain forward-looking
statements, beliefs or opinions, including statements with respect
to Xeros' business, financial condition and results of operations.
These forward-looking statements can be identified by the use of
forward-looking terminology, including the terms "believes",
"estimates", "plans", "anticipates", "targets", "aims",
"continues", "expects", "intends", "hopes", "may", "will", "would",
"could" or "should" or, in each case, their negative or other
various or comparable terminology. These statements are made by the
Xeros Directors in good faith based on the information available to
them at the date of this announcement and reflect the Xeros
Directors' beliefs and expectations. By their nature these
statements involve risk and uncertainty because they relate to
events and depend on circumstances that may or may not occur in the
future. A number of factors could cause actual results and
developments to differ materially from those expressed or implied
by the forward-looking statements, including, without limitation,
developments in the global economy, changes in government policies,
spending and procurement methodologies, and failure in health,
safety or environmental policies.
No representation or warranty is made that any of these
statements or forecasts will come to pass or that any forecast
results will be achieved. Forward-looking statements speak only as
at the date of this announcement and Xeros and its advisers
expressly disclaim any obligations or undertaking to release any
update of, or revisions to, any forward-looking statements in this
announcement. No statement in the announcement is intended to be,
or intended to be construed as, a profit forecast or to be
interpreted to mean that earnings per Xeros share for the current
or future financial years will necessarily match or exceed the
historical earnings. As a result, you are cautioned not to place
any undue reliance on such forward-looking statements.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR BKLLLKZFZBBV
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