I’ve recently taken a position in Xeros Technology, which is delivering on its longstanding promise to place environmentally-friendly tech into washing machines.

It has already made substantial progress in it 3 target sectors:

• Filtration – Its filter technology prevents plastic microfibres from clothes being expelled from washing machines goes into waste water. 

• Finish –  XFN is an innovative technology (using its XOrb balls and an XDrum) for wet processing during garment manufacture. It halves the amount of water needed, and removes pumice in denim finishing, and can significantly reduce the chemistry, energy and time needed in the garment finishing stage.

• Care – its XOrb and XDrum tech not only reduces the amount of water and energy used in washing machines but apparently can help extend the life of garments. 

Moreover, it appears set to deliver much more before the end of this calendar year. As Neil Austin, said in the RNS announcing its 2023 full year results on 28 May, 2024:

“Our agreements with licensees moved closer to commercial launch, as we embarked on the crucial technology transfer process with both IFB and Yilmak Makina. We completed the technology transfer for IFB domestic machines (Goa) in December 2023, and Yilmak Makina’s commercial denim processing machines (Turkey) in Q1 of the new financial year. All these machines have now moved to the manufacture and marketing stage, ahead of scale launch later this year.

“In addition, the work undertaken to increase the Group’s commercial focus has resulted in a stronger than expected pipeline of potential new agreements. We are now in discussion with 10 major organisations with interest across all the Group’s technologies.”

I’ve hesitated for a long time before investing, waiting for the fundraise in April that raised £4.7m and brought in Amati and Milton as investors. 

Significant shareholders

Here’s the list of substantial shareholders lifted from its website:

Amati AIM VCT

In its April factsheet for the Amati Aim VCT, co-fund manager David Stevenson explained why he and CEO & Fund Manager Paul Jourdan had taken a new position in this business.

“Xeros is the developer of a patented polymer bead technology, which reduces laundry requirements for water, power and detergent. It also results in less garment damage through time. The company has spent a lot of time and money getting to this point, but now has growth potential from the incorporation of its technology into domestic and commercial washing machines, and the pre-wash treatment of garments by denim manufacturers. Xeros also has a novel filter device for removing micro-plastics from washing machine waste. The long lead time to commercialisation of these technologies has dragged the valuation of the company down to very low levels, making this an attractive entry point for new investors.”

Given it is so tightly held it will only take a little bit of buying from this level to see it rise substantially and I expect news flow over the next few months to deliver that momentum.

I see certain similarities between it and Seeing Machines in terms of its business model of licensing its tech out to major manufacturers, so I’m not surprised to see Lombard Odier holding a chunky 10.8% of its shares.

House broker Cavendish has a price target of 18p on the stock. Xeros is forecast to make an adjusted LBITDA loss for the year ending 31 December 2024 of £2.6m on revenues of £2.7m, before hitting cash flow breakeven next year, with a forecast adjusted EBITDA of £1.3m on revenues of £7.6m for the full year 2025.

In a note published on 28 May 2024, explaining its results for FY 2023, analyst Michael Clifton wrote: “Cash was bolstered post-period end by £1.7m from the exercise of warrants and £4.7m gross from the fundraise in April 2024. Following the fundraise, Xeros now has sufficient liquidity to operate to the end of H2 FY2024E (with some added buffer) by which point we continue to expect the business will have reached adj. EBITDA and cash flow breakeven.

He added: “We reiterate our 18p/share target price which reflects the market-leading quality of Xeros’s solutions; its high gross margins; the underlying environmental, commercial, and legislative drivers; and the size of the addressable markets.”

It’s certainly a high risk stock and ‘not one for widows and orphans’, as the saying goes. However, for those willing to do some research it seems to hold out prospects of near term profitability with a sensible business model. 

The writer holds stock in Xerox Technology and Seeing Machines.