Trading Update

Xeros Technology Group plc (AIM: XSG), the creator of technologies that reduce the impact of clothing on the planet, announces the following trading update, ahead of its Half Yearly Results, which will be published later this month.

In a circular to shareholders, published on 8 April 2024, the Group reported that its Indian domestic laundry licensee, IFB Industries Limited ("IFB"), was conducting field trials on a 9kg washing machine, ahead of a planned mass market launch in 2024, delivering first royalty revenues to Xeros in FY24. While it is pleasing to note that the trials generated positive consumer feedback, IFB has initiated a further change to the specification of the 9kg machine, in no way related to Xeros technology, with the Board now expecting the mass market launch to take place in 2025. This situation has been compounded by the recent announcement of a change in leadership in the Home Appliances Division of IFB.

In the same circular, mentioned above, we referred to upcoming French legislation for microfibre filtration in washing machines. The environmental impact of microplastics is well established and the need for filtration in both commercial and domestic washing machines continues to be discussed globally. France was expected to lead the way with legislation, effective 1 January 2025, detailing clear standards and efficacies for new filtration technologies and driving early adoption.

Today, while the filtration legislation is in place in France, the standards and efficacies pertaining to it remain unclarified. As a result, this is not expected to drive demand for the Group's XF3 technology in the short term, as the Board anticipated earlier in the year. The Board is, however, confident that the market for microfibre filtration in washing machines remains significant in the medium term and that the licensing agreements it has in place, including the one with Donlim announced separately today, leave the Group well placed to generate significant revenues from this developing market.

Financial outlook

The impact of these delays is to reduce the Group's revenue expectations for FY24 and FY25 to £0.5m and £3.8m respectively, and adjusted EBITDA loss to £4.2m for FY24 and £1.0m for FY25. The Group anticipates cash balances at 31 December 2024 of £2.9m. The Group maintains tight control on costs (SG&A running at 60% of 2022 levels) and expects to reduce selling, general and administrative costs further in 2025.

Cash at 30 August 2024 was £4.0m, which the Board still expects to be sufficient to finance operations through to month on month cashflow break-even, during the latter part of 2025.

Commercial progress

While the Board is disappointed by these delays and their impact on the Group's short term financials, the medium term outlook for the company continues to strengthen.

The management team is progressing a number of new licensing agreements with tier 1 global OEMs, in relation the Group's Care and Filtration technology. These include three global OEMs, which are in active processes with regards to its Domestic Care technology, and one global OEM, with regards to Commercial Care technology. The Board expects to be able to communicate the outcome of these discussions in the coming months.

Furthermore, the Group's newest licensee for its Finish technology, KRM Tekstil/Yilmak Makina ("Yilmak"), launched a Xeros enabled range of denim finishing machines at ITM, a leading garment finishing trade show, in July 2024. Yilmak is working through the initial sales leads, with the expectation of machines being in full production within the current calendar year. The company is a tier 1 OEM within the global garment finishing market and represents a meaningful revenue opportunity for the Group. Revenue generation for Xeros from this licensing agreement remains on track to commence in the current financial year.