Tuesday, September 3, 2019

News: Xeros outlines future as pure-play licensing business


The board of Rotherham-based Xeros Technology Group plc has set out what it sees the company looking like as it moves to a full licensing business model.

Based on the Advanced Manufacturing Park (AMP), Xeros is a Leeds University spin-out that has developed a patented system using a unique method of special polymer beads rather than the usual large amounts of fresh water to clean clothes.

Xeros is moving to a IP rich and asset light business model with the majority of revenue derived from high margin licensing agreements. The strategy sees the licensing of technologies to market incumbents and receiving a proportion of the value created by means of royalties.

In a update to the stock exchange, Xeros said that it plans to have fully completed its migration to a license model by the end of the year and to cease any involvement in direct sales and physical supply chains. This will result in licensees paying Xeros royalties for the use of its extensive intellectual property portfolio.

Exiting from all direct sales business by the end of 2019 will mean that it will have less than 60 staff in early 2020, down from 160 in September 2018. A unit used by Xeros on the AMP is already being advertised to let.

The comapny, which has appointed new financial advisors, added that it believes that £10m of additional funding is required before licence royalties creative sufficient revenues.


Last month, Xeros signed two agreements to sell the majority of its US commercial laundry customer portfolio of leased machines and equivalent arrangements are in development for European customers.

The Xeros tech can also save water in the tanning industry and, having entered the market itself, Xeros signed a deal which will see a Mexican producer convert its re-tanning operations in order to use Xeros' technologies. The board has now approved, subject to contract, the spin-out of its tanning business (under the Qualus brand) to its management in exchange for future royalty payments.

Mark Nichols, chief executive of Xeros, said: "The business case for our technologies continues to increase as the scarcity and pricing of water rises with consumption progressively outstripping availability in many parts of the world.

"With our technologies now proven and much simplified, following the introduction of the XDrum, global scale OEMs are now licensing or testing our products with a view to long term licensing.

"It has been a challenging journey to this point, given the maturity and size of the industry players we have to convince to adopt our technology. However, we have now reached an inflection point in the implementation of our strategy to become an asset light IP rich licensing business.

"Our focus for the rest of the year is to complete our exit from all direct sales businesses, win further licensing contracts and implement those already awarded. Our cost base has and will continue to move down to that required for a successful high margin licensing business.

"Switching to high margin licensing turnover over the next two years against a backdrop of a low-cost licensing organisation provides us with a line of sight to cash breakeven."

Xeros website

Images: Xeros


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