Xeros Technology Group (LSE:XSG) — Half year results

0:01 Good afternoon, ladies and gentlemen, and welcome to the XEROS TECHNOLOGY GROUP PLC interim results investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged. They can be submitted at any time via the q and a tab that's just situated on the right hand corner of your screen. Please just simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company will review all questions submitted today and publish responses where it's appropriate to do so, and these will be available via your investor meet company dashboard.

0:33 Before we begin, I would like to submit the following poll. And I would now like to hand you over to the executive management team from XEROS TECHNOLOGY GROUP PLC. Neil, good afternoon, sir. Afternoon, Jack. Thank you for the introduction. So, yeah, just a brief introduction for myself. So I'm Neil Austin. I'm the chief executive of XEROS TECHNOLOGY. And with me here in our HQ in Botherham is Alex Tristram. Yeah. Alex Trisholm, finance director here at XEROS.

1:02 Just in terms of how we approach today, mindful that there will be new people to the story as well as some, long standing investors. So to to kinda give everybody an opportunity to learn about the story, we will do a brief introduction to XEROS TECHNOLOGY, and then we'll get into some more specifics about, our interim statement, which we issued last, last Wednesday.

1:24 Just before we do that, we're very very glad, very lucky that we've got our chairman, Burr, who's joined us today as well. So, Klasse, if I could hand over to you, perhaps you'd like to introduce yourself and give everybody a little bit perspective of yourself from the chairman's perspective. Yep. We'll do that. Thank you, Neil. Yes. Hello, everyone. For those of you who don't know me, I'm Clance de Boer, chairman of XEROS. I have been in this role since early twenty twenty, but have known the company for much, much longer. The fund I used to run, Entrepreneurs Fund, first invested in, in XEROS back in 2010.

2:03 Through that period, I was never really personally involved. And after the company listed on AIM and my colleague stepped down from the board in in 2015, as an early stage investor, we were actually, seeking to realize our investment at that point in time. But all of that changed in in late two thousand nineteen when Entrepreneurs Fund was the cornerstone investor in rescue financing at that point in time. Important reason for that investment was the recognition of the strategic importance of XEROS of the XEROS technology for the entire Garmin value chain. And the other factor at that point in time, was that under the leadership of Mark Nichols, the company had returned to its roots and its original business model of a capital light pure play licensing business model.

2:54 Shortly after joining the board as chairman, COVID hit, and it hit us hard. We had licensing agreements in place in China and India at that point in time. And with all the travel restrictions imposed on us, our implement the implementation of our technology, in those geographies was, was seriously hampered because we couldn't travel. The other thing, of course, was that one of the important end user markets, the hospitality sector, totally shut down. Coming out of COVID, and I I wanted to give this backdrop, as a bit of context for where we are today. Coming out of COVID, it also became clear that it had not just been, say, the effects of COVID, but also that as a business, we have been too much technology led and not enough market led.

3:45 So I'm still very pleased that we, were able to attract Neil last year to help the company become much more commercial.

3:55 And as you will have, read in our interims and also we'll hear from Neil and Alex today, he has taken significant cost out of the organization and at the same time strengthened the commercial side of the business, and the results of that are starting to show. And with that, a bit of context, I'll hand it back to Neil and Alex. Super. Thank you very much, Klas, for kind words. Without further ado, let let let's take you through the presentation. So, I mean, first thing to really highlight is what what are XEROS? Who are we? What do we do? There's some really key points I want to draw your attention to in the text on the right hand side. So license is the first one as Kass has just, just told us. We are a licensing business. We've made a very conscious decision that we don't want to be in the business of manufacturing.

4:41 We don't want to sell. What we're very good at is creating market leading technology and then finding the right partners to take those to market. So license is the first keyword. Second one is sustainable. We are very firmly in the green tech position. We are clear about what our value is not only to to our shareholders and to business, but also to the planet in a wider sense. Proprietary technology is the other key one. We are not me too solution. We very much strive to have market leading propositions, and pretty much across the board, we've got a third party validation of of that effect. Then to clarify where we play specifically, specifically, we're talking about the laundry and the apparel industries, and we'll go on to subsequent slides and give you a little bit of an indication about how those are actually quite tightly tied together even if it isn't immediately clear.

5:33 And then what solutions do we offer? Very clearly, energy and water usage is extremely high. It's causing issues, both in terms of cost of business and to the planet. We have solutions to improve that and indeed when it comes to pollution. So whether that is chemicals that are used within the processing of of of garments or the cleaning of garments or actually, more personally microplastics as well. Okay. So if we go on to the next slide, this, gives you a little bit of an indication of what we're trying to do. So effectively, this is some of our marketing material. We are in the business of unpolluting, trying to unpollute industries and a number of different players. This schematic gives you a little bit of an indication of the life cycle, if you like, of an article of clothing. So right from the left hand side, where we're talking about the production of the fibers that go into the creation of that article of clothing all the way through to the end, which is the end of life of that garment, which unfortunately more often than not is in the guise of landfill.

6:31 The charts that you will see before you are the, percentage of the c o two e footprint of the lifetime of that garment. Now the two peaks that you will see come at two specific points. One is the textile production and specifically the final stage of that being the bleaching, the dyeing, or the finishing, the final wash, and then the second one being on the use of that garment or more clearly the laundering of that garment as well. We we at XEROS, have very clear mandate, which is we want to be able to add value and to create scenarios whereby players within the industry cannot only improve their green footprint, they can also save money and save water. These two peaks illustrate very clearly why the industry is in distress, and this is why we have very specifically come out with technologies which will help them address some of those issues that they have. The first one being XFN, which is our finished technology for the final stage of textile production, and the second being within the use space where we've got the XC or the care technology and the XF, which is the filtration technology.

7:38 Okay. So if we keep going, Alex, how do we do that? So we've got a very clear strategy for our market penetration. So we've mentioned a couple of times that we're a licensing business. The good news is that those partnerships which are important within a licensing business are are are already in place. So across our our three different technologies that I just mentioned, we have licensees already signed up and in place to be able to take our, propositions to market. The second and third piece are probably more recent developments under my watch of the business that we've really focused on. The second being direct engagement. So, yes, it's right and it's appropriate that we focus our energies in terms of finding licensees, but we don't leave it entirely up to them to ensure the success of our technologies. So when we say direct engagement, what we mean is engagement with those decision makers that will decide if our technology gets adopted or not. So whether that be, retail or fashion brands within the finished space or whether that be with the, washing machine manufacturers within the care or the filtration space, We have a very concerted sales and marketing effort, and it is about influencing those decision makers.

8:45 The third piece, is driving influence, is all about the other stakeholders within this space. So as a global leader, which we recognize ourselves and indeed helping recognize externally, particularly within microplastic expertise, we are called upon as a business and indeed we actively drive the agenda when it comes to collaborating with NGOs, collaborating with legislators. This is about creating the environment so that the solutions which XEROS has a has able to provide are fully understand by people that will help to influence how that unfolds.

9:21 Okay. So to talk a little bit more about the technologies, I'll I'll talk us through, firstly, fill, filtration. I'll hand over to Alex to talk us through finish, and then I'll conclude with care. So what do we mean when we talk about finish oh, sorry, filtration? So filtration addresses primarily microplastics. And microplastics is a issue across the globe, which I think most people are fully aware of. What they maybe don't know is the scale of that impact. So here we unveil some of the impacts, firstly, from a human perspective. Some of the numbers that you can see before you is that any single one of us on the planet in an in an average year will either inhale or ingest some in the region of about a 170,000 microplastics. Ultimately, these microplastics are being found in the organs of people, and the truth is nobody really knows the impact that this is gonna have. As layman, I think we can understand that's probably not a good place to be.

10:17 The second from a business impact, we have one example. So not surprisingly, the fisheries impact is one of the first to be impacted, not least because of the amount of microplastics that are flown into the oceans. We have drawn upon studies which highlights the fact that somewhere in the region of 20 up to 26% of the total annual operating costs of municipal fisheries processing has now had to be diverted to dealing with the impact of microplastics. So whether that is in terms of waste management or cleaning the plastic pollution, this is a significant cost which is now being felt by that industry first and clearly will by others in due course. From a planetary impact as well, their numbers are quite concerning. So 2005, we already have a significant number of about 17,000,000,000 microplastics at play within the water water system.

11:12 Unfortunately, that's now got to a 171,000,000,000,000. So a tenfold increase in just eighteen years, and that is not slowing down. So what can we do about it? So this is the first introduction of the XEROS technology, which is what we call X filter. The X filter, as you see, is a mesh filter, which is used in conjunction with a washing machine, can be a commercial or indeed in its first instance can be with a domestic washing machine.

11:41 So as I said, we have three specific propositions when it comes to, XFilter. The the first and most mature is called XF one. XF one is effectively an integrated filtration device which goes inside the washing machine. The second is x f two, which is a proposition for a commercial washing machine environment, and this is effectively a supercharged version of x f one, which, can withstand a greater volume of water and equally is is is built in a more robust fashion so we can withstand the realities of a commercial laundry environment. And x f three is our our latest latest proposition which we unveiled just a few weeks ago at EFA, which is one of the world's largest consumer electronics there. And it's effectively taking all of the great market leading technology that we have on x f one, but it encloses it within an external device.

12:35 So just to give you a little bit more color around this, we have, independently third party verified by the Hohenstein Institute, a very well respected, testing laboratory in Germany, and 99% capture rate. This is market leading, not surprisingly, versus anybody else that's a play within this space. Not only that, but we've conducted lifetime testing on the filter itself as well ourselves. So we know that actually this filter will withstand pretty much the lifetime of a washing machine. So our partners can put this product in conjunction with their machines with absolute confidence that they know they get a good capture rate, and, equally, they know that it will last the longevity of the machine. Just to share some of the numbers which are pretty significant when we talk about this opportunity.

13:25 So x f one and x f three are about trying to take advantage of the quite significant domestic washing machine market. So x f one is about how many washing machines are sold globally every single year, and there's a 100,000,000 machines produced every single year. And you can see that XEROS believes that we can get around about 2.50 per unit, yield of profit on on each of those sales should be should be reached that level of of mass maturity. On XSF three, this gives us an opportunity to be able to, get our proposition ready for an installed base of washing machine. So right for new purchasers of washing machine that they can get the technology. But for the approximately 1,000,000,000 washing machines that are already out there, which are working perfectly well and don't need to be changed, we wanna give those, those users the opportunity to be able to use the XEROS technology. So x f three, as a a retrofit gives them a chance to do that. And as you can see, we we we identify a pretty significant opportunity of approximately a 100,000,000, pounds per annum as well on that. XF two, as I said, is the commercial proposition, much more profitable per unit for XEROS as it's a bigger, more powerful unit and but a slightly more, slightly smaller market size.

14:41 Okay. Something which those familiar with the story will know quite well, but those new to it may not, is that we actually already have a pretty good level of maturity when it comes to our filtration proposition. So we currently have three licensing partnerships in place with what we call component manufacturers. So these are, businesses that operate in the supply of the various, pieces which are required to construct a washing machine. All three based in Europe. And with those three three partnerships in place, we have access through their preexisting commercial relationships from a supply chain perspective effectively into the entirety of the global market. So 99,000,000 washing machine units of a 100 or thereabouts is pretty much the entirety of the global global demand for washing machines, and you can see an example of some of those brands on the right hand side.

15:38 So the opportunity today, we've got those licenses in places like I said, is very much about the third part of our our, strategy, which is how we can drive awareness of that through our partnerships. So the partnerships are very much taken the form of cooperating with really very well respected opinion leaders within the space, but the reality of microplastics, and the potential damage that they can cause to, us as human beings and equally to the to the ecosystem as well. So a number of the the the logos, the brands that you'll see on the left hand side recognize us as a peer. So XEROS is very much respected as the market leader when it comes to washing machine micro microplastics. And as you can see in the right hand side, we've had some pretty good press coverage as well.

16:23 The opportunity tomorrow is also pretty exciting. So, we are an r and d company at our very heart, and for sure, we don't rest on our laurels. So as well as the application of our technology within the laundry sector, we're also very excited about the potential to be able to move into an industrial manufacturing sector as well. So as Alex talks you through the finish side of the business, you understand that XEROS actually has a very good reputation and already has a very good lead in to the manufacturing sector. And you can see that of those 1,300,000 factories that process textiles or garments around the world, we believe that over half of those are in need of a microplastic solution. And indeed, some of them have proactively, whether from manufacturing or indeed a retail garment brand, have sought out solutions from XEROS directly.

17:15 Just to talk a little bit about the right hand side, which is legislation. So again, those of you that know the story for XEROS very well will understand actually that the legislative environment is very favorable towards microplastics captured within washing machines. So actually, if we go to the next slide, you can see on the left hand side some of those really big markets, Western Europe, North America, and indeed APAC, and an an understanding of the size of the new machine, production every single year and indeed the install base. And on the right hand side, you'll see the reality of how the legislative environment is really starting to take shape. So as you can see at the top of the list, France is the first country to legislate that from 01/01/2025,

17:57 every single washing machine which is sold to a consumer must have a micro microplastics capture capability, associated with it. In addition to that, the European Union, The United Kingdom, and indeed, the California state legislature, which will lead the rest of The United States, are at advanced stages in terms of being able to consider microplastics

18:22 legislation to support it. And indeed, in the same way that France looked to XEROS to be able to support that expert opinion, XEROS has been working closely with the European Union, with The UK private members initiative, and indeed these California state legislature members bill as well. So huge markets and huge opportunity. As I say to everybody when we're having this conversation, it's very clear that this is not a case of if this will happen, small case of when and with within which regions. Okay. If I hand over to Alex to take us a bit through the finished proposition. Yeah. Thanks, Neil. So we showed you that slide earlier on which which which gave details of the the climate impact of a garment's kind of life cycle.

19:08 This just brings that into a bit of a stock relief. So the fashion industry, we believe, is responsible for around 4% of global c o two emissions. XEROS has a proposition which enables those who take it up when they implement a machine fitted with our XEROS technology, which I'll explain in a minute to save 44 tons of CO2 every year, and that's just one machine. And these factories use a lot more than just one. So to give you a kind of a an overview of why why there is a problem here that needs addressing. So the the the garment finishing industry and the fashion industry, the the people who work in that industry are often in in in really poor conditions and and the kind of the processes and the that they undergo and that they they what they do to the garments has has an impact on their health, it's, you know, it's a real problem for them. From a business point of view, this is an enormous industry. There are 75,000,000 people globally who are employed in this. And if we take just jeans, which is the first area that we're targeting with our XEROS technology, there are around 2,000,000,000 pairs of jeans made every year, which is it's just a it's just an enormous market.

20:11 From a plummetry point of view, the fashion industry is is is usually hungry. So it takes 79,000,000,000,000 liters of water. It produces vast amounts of of of solid waste and it and and those 4% of global c o two emissions that I talked about earlier on. So this is a dirty industry that kind of likes to keep that secret. You know, you don't hear a lot about it, but it's you know, we know in the background that they're crying out for solutions in in a way that they can kind of really impact on what they do. So how do we how do we impact the the the garment finishing industry? To kind of take this up to a high level, if you take a pair of jeans, every pair of jeans that gets sold around the world starts off as broad denim, and that's that's stiff purple denim straight off the production line when it's made. And then they that undergoes a number of processes to take it to the finish, the look, the feel that the garment providers want to want to sell to consumers.

21:04 And that's done in a number of ways, but historically, it's been done with with pumice stone. Pumice stone and various chemicals, which which have kind of very harsh on the on the garments. What can XEROS technology do? Well, we can replace that pumice stone, and we can bring down the chemistry involved to a to a much lower level, which means you can run the same cycles, you can run the same same washes, but the water that you need to use, the energy you need to use, and the chemistry you need to use is much reduced, which, you know, saves that's how we save that c o two e that we talked about earlier on, but it also saves time and it saves money for the producers. This is a a visual representation of the little little plastic balls we call XORGs being in introduced into a a denim finishing machine. So they they pop out. They all come out in the right time of the process, and we we harvest them out at the at the appropriate times during that cycle.

21:54 There's a visual representation of something we call the XDrum on the left hand side there. So that's the other key part of our of our process when we talk about our denim finishing. So the XORBs, they're introduced into the wash cycle, and what they allow us to do is to distribute the chemicals and distribute the the kind of the the things which act on the genes inside the wash in a much more efficient manner. But, obviously, the the important thing then is getting them out when they've done their work. And so the XDrum is an addition in the back of the machine and and that works to harvest those XORbs during the right periods of the cycle so that when they they finish the work, open the door, the jeans come out, there aren't any XORbs in there. So to just give you a little stat that we've we we kinda like to quote on the on the right hand side there, you can use ten years of drinking water for one person to make a single pair of jeans. It's an enormously thirsty industry, and it takes a lot of a lot of that water. Now we often get said, you know, people say, well, that not just come out on the other side and go back into the water table?

22:47 Sometimes, yes, but but often no. By the time it's been through this process, it's it's filled with dye, it's covered in chemicals, it's got pumice stone flow, you know, it's not. It it goes in pristine water. It doesn't doesn't come out like that. So what what can we do? We can reduce that water and that chemistry about 50%. It's it's, you know, by introducing XORs into the cycle, we can really bring that down. But this is a big market, so we think there are around eight to 10,000

23:11 machines sold every year that that go into the garment finishing industry, particularly for denim. And so we think there's a there's a significant market for us to go up in in in that in that space. So how do we do that? So we we have two licensed partners that that have licensed our technology. So that's Ramsons, an Indian company, and and really excitingly signed this year, a company called Yilmak based in Turkey. Now Yilmak are,

23:36 you know, they're seen as a market leader in Turkey. They're a really good manufacturing partner for us, and they launched their technology to some acclaim at the launch power technology in their machines, I should say, to some acclaim during during this year, particularly at the at the ITMA show in Milan, which is a huge textile expo that they attended. So it was really positive to see them, you know, putting that front and center of their sun, but really, really positive to see the reception that it got from the from the industry players that we that we saw on that in in that at that show. It was it was really well received, and and we believe that with those two manufacturing partnerships in place, it really gives us a chance to go out of market, which is she's really crying out for solutions. You know, we we we have spent a lot of time on the ground with the denim industry, and there is not a solution like this that can offer the benefits that we can that we can see. They're they're all they're all really really looking for it.

24:24 Alongside the denim piece, a few years ago, we our leather team led us management buyout. So they spun out the the leather team to a separate business, I think, back in 2019 now. So they are live using this technology in in tanneries across the world. And I say that the denim industry is a dirty business if you think that's dirty. The leather industry is at another level another level entirely, but that's that's another revenue stream for us that that that kinda generates generates that every year. It's not hugely significant yet, but but but we just we see it getting slightly slightly more important over the next few years. And as as we said with the filtration, we get some nice press on this because, you know, like we say, it's a really it's a really good story that denim the denim technology that we can bring to the market.

25:06 So what happens from now? So we've got we've got to get into that denim market. We're working with our our licensed partners to to penetrate that market. But beyond that, the garment finishing industry is has has a lot of, you know, a lot of scope for us beyond just that denim. So garment dyeing is another area with a with a significant market that we can address. The garment dyeing machines are made by the same partners that we already have, and they go into the same kinds of factories that we have the relationships with. So we we think that's an area we can we can really sharpen up. And then beyond that, every single garment that gets sold in in in every shop around the world gets a final wash as it comes off the machine. So it

25:43 it collects grease and dirt as it as it as it's sold or or or made across the across the process, and it needs a wash before it goes on to the before it goes on to the onto the shop floor. The the gum that that final wash, we really believe that XEROS technology can make a difference in that. If we can if we can get into that market, it's absolutely vast, and we really think we can make a difference from a from a cost perspective for the for the suppliers, but also from a from an environmental point of view. Let me just as an indication there, we think we can know, if if every pair of jeans is manufactured in our technology, we could save the same amount of water that's used in multiple years, which just a massive step. Okay. So just to talk you through care. So care is as I said, it's kind of the laundry application of XEROS technology. Now the I keep going honest, the observant amongst you will will see similarities in terms of the tech when it comes to care as we've mentioned to to to to finish.

26:37 So effectively, what are we trying to do with care? It's the same idea. So as well as offering energy, water, and the chemistry savings with the implementation of the XORBs, particularly within this space, we're also seeing some really significant benefits when it comes to garment life extension. So when we say garment life extension, we mean literally the clothes that people buy and that they wear will last longer and will look better for a longer period of time. So we click through and give a little bit of a sense. So from a kind of a human impact, fast fashion is unfortunately a very very clear reality of our modern modern society. So 60% more clothes are actually being purchased today than they were fifteen years ago. The rather sad statistic is that the majority of those, some 73%, are ending up in landfill.

27:29 And there's a direct cost associated with that. So if we just look at The UK alone, about a £140,000,000 worth of clothes every single year is is either incinerated or goes to landfill, and that is at a pretty significant cost as well of about £82,000,000 to us as the British taxpayers.

27:48 So what what is XEROS trying to do about that? So as I said before, you'll see effectively it's the same technologies we have on finish. So we're introducing an additional agent, which is the XORB, and the idea being that XORBs actually are better at fulfilling the process of cleaning clothes than water on its own. If you think about it, how we clean clothes really hasn't changed fundamentally in in hundreds of years, and indeed, the modern washing machine as we see it today hasn't really changed from its first evolution back in the fifties and sixties. The only major difference is the fact that it's now got much better consumer electronics within it. What we at XEROS are doing, and I've already started this process, is by starting to revolutionize this industry by introducing, as I said, an an additional element. So XORBs can displace the amount of water, so we're saving that straight away. We displace the amount of water, and immediately we're saving the amount of energy because the heating of that water is the most energy intensive parts of the washing cycle.

28:47 And the other very hugely beneficial piece is that XSG are actually much better at using the detergents that we would add to to a more effective degree, which means that you can use less of them as well. So if we keep going to the next slide, Alex. So to give you a little bit of sense again of of what it is, so here we've got an illustration of a a washing machine drum. So similar as we had with Finish, we introduced the XORPs within that. And as Alex said on Finish, the real magic that we have is how do we introduce them, but we also harvest them so that they do the good, which I've just mentioned, but we also effectively get to a situation which for a consumer using the device, by the end of the cycle, pretty much all of those XEROS have been harvested in in totality. On the right hand side, we've started to see a little bit of what we mean when we talk about the garment life extension.

29:36 So on the left hand side of the split of the picture is something which we'll all be too familiar with. After 10 washes of this, denim denim, chemise, you will effectively start to see patchy dye, you'll see an increased, stress upon the seams, you will see wrinkling, and you'll often see, shrinkage in totality of the product itself. On the right hand side, what we start to see, absolutely, a reduced color fade. The shape is much better, and indeed the solid fabric surface is much better. The whole idea is we're trying to keep the clothes in the same condition as they were for as long as possible when the when the consumer first purchased them. If we can do that, then they will keep them for much longer as well as obviously benefiting from their lower energy and water savings as well.

30:23 Just to give a little bit of sense of the reality of where the business is today. So we have a level of maturity, with our commercial laundry proposition today. And the example that we always like to give is, a an existing laundromat, a commercial scale laundromat in France called Georges. They have some pretty significant contracts with the likes of Air France and SNCF, and they've been using the XEROS technology for a number of years now. Taking the data that they have generated, we now know for a fact that using one, wash washing machine as an example, a 25 kg running on average 14 cycles a day saves Georges £10,000 a year or 2,000,000 liters of water. And when you think about the reality that the on cost for purchasing a XEROS enabled bit of kit is only somewhere in the region of around about 1,500 to £2,000, albeit there are the ongoing costs related to XSORBs, there is significant savings for George across the lifetime of this machine.

31:26 Not only that, but the thing that we talked to before, which is that Garmin Life Extension, is already starting to be seen. So SNCF have already been able to report back that they see a garment life extension for their uniforms fifteen months. So this is significant savings not only to George as a customer of the XEROS technology, but of SNCF as a customer of George as well. So where do we take this technology tomorrow?

31:53 Well, clearly, it's great that we're having some success within the commercial part of the laundry business, and we would like to scale that up. And indeed, there are plans to do that over the next couple of years. But the real piece that we would like to get to, if you move to the next slide, Alex, is to move us into the world of domestic laundry as well. So we have a pretty existing partnership in India with a company called IFB. IFB are the largest manufacturer of washing machines commercial and domestic within the Indian market. And as a brand, they also have a top three position with the Indian consumer as well. IFB are the concluding stages of the development of a domestic platform, a nine k g platform for the for, using the XEROS technology. And indeed, our our technical team were in IFB just a few weeks ago, and they reported back that there are no longer any buyers from a technical perspective in terms of the finalization of this machine.

32:49 So our expectation is that we will be able to launch that, in the foreseeable future, which will, for sure, not only give us the opportunity of revenue generation, but a much long held ambition for the team, which is that it will get into the hands of consumers within their own homes as well. Okay. If we move on, this is an idea this is our attempt to try and give everybody a bit of a sense of what our strategy road map is. So we've talked a little bit about the reality of where the business is today, and you can see in terms of care filtration finish, we have a a very good foundation to be able to to to to leverage from. Distribution in India and China, and they did a very strong case study on commercial laundry, but an imminent launch within the Indian market of a domestic platform. Now where do we

33:39 wanna take this to? My ambition when I came into the business about twelve months ago was absolutely yes to validate and to be able to take the preexisting relationships that we had over the the finish line, but very much to be able to ensure that we had meaningful conversations with the major global brands. I'm very pleased to, report today that of those top 10 global brand families, the the the names of which we will all know at home, we're in meaningful conversations with four of them. We're in conversations, earlier stage conversations with another four. So that's eight of the top 10 are directly engaging with XEROS about its technology. So confident are we at this moment in time? We can say that our ambition is that we will absolutely have a global brand launch of the technology within an eighteen to thirty six month, month window.

34:31 And coming with that, we will have a launch within the European and North American markets, which as we discussed before are fairly significant. Beyond that, our expectations is that beyond that three year window, we will move from one global brand launching up to three. And those three global brands will account for our expectation is about 30% of global share today. So a third of the market in the world, so some three some 30,000,000 washing machines sold every year will have the XEROS technology as part of their proposition. From a filtration perspective, as we said earlier as well, we already have three licensing partnerships in place. We recently launched as well an external proposition, which gives us the opportunity to be able to access that installed base that we talked about before.

35:21 And, again, so confident are we in the current conversations that we're having with major brands that we believe that we will have an x f two. So this is the external device, full scale launch into the European market before that eighteen month window is concluded. That will then move to our expectation is three three global brands prescribing, taking the XEROS technology, and then ultimately, a move into distribution with an APAC in North America. The North American distribution piece has been very much driven by the California legislation. From a development perspective as well, we're also expecting to be able to have a a full scale launch launch of the x f two product before that eighteen month window within, within Europe. And then, ultimately, this r and d, piece of work that we have at the moment will lead to a launch within the garment processing industry as well within a three year window.

36:12 From a finished perspective, we have two licensing agreements in place, as Alex said, with a Turkish and an Indian manufacturer. And our expectation is that particularly with the one of the global leaders being in place that we will eminently be able to announce a partnership effectively with a global apparel brand. So this will be an endorsement of that brand to say that they want their garment manufacturer to use the XEROS technology in the manufacture of a core range. Again, so many for the conversations that we have with those global retail brands, their expectation is that within the eighteen to thirty six, month window that we will move from one to six brand endorsement. And at the same time, we will build our installed base of machines with a move into a licensing partnership to cover The Americas as well.

37:03 And always running parallel, we are an r and d business, so we will continue to evolve and develop and fight in the propositions that we have within our three core spaces and also look for new complementary technologies as well. So Alex can just talk through a little bit in terms of core investment case. Yeah. So we've given you kind of a flavor of the of the investment case, which is to distill it down to a few bits here. So we talk about our proprietary technology. That that's not theoretical technology. We have kind of market based and scientific based evidence for both of those. So if we look at care and and finish, those are in the market today being used commercially and being used commercially successfully. And if we talk about our microplastic solution, we know that that's market leading and and the conversations we have with brands reflect that.

37:51 Underneath that, it's all protected from an IP perspective. We, you know, we we have a we we say this quite frequently, but after headcount, our IP costs are the most significant part of the the group's cost portfolio because we rely on that to be you know, we can't generate license revenue without having a robust IP portfolio underneath that. So this is our technology, and we know that it works. If we talk about the business model more generally so a licensing model means that when these when our partners start generating meaningful revenues, the license revenues for us will will drop through to the bottom line quite quickly. We don't need a big team underneath us to generate our revenues. It's the it's the work that we've already done, and it's it's the work that we're doing to commercialize that technology now that will deliver those margins.

38:37 The global market solution, we've tried to explain to you over the course of this presentation why the world is is is in need of the of the XEROS solutions that we've got. There is increasing focus across the piece from from microplastics to domestic laundry all the way across to the garment processing industries that they need something which will will will help them reduce their carbon footprint and and reduce the impact they have on the environment. We don't see solutions that can offer the offer the the impacts that we can out in the market. We really don't. From a financial point of view, we we talked about it earlier on, but our operational cash outflow is is down a million pounds the first half of of twenty twenty three against 2022. That's come from some of the operational savings that that Neil put in place when he started.

39:22 That's flowed through to our adjusted EBITDA loss. We spent less than 500,000 a month for the first half of twenty twenty three, and we expect that to be lower for the second half. We we see line of sight to month on month cash flow and EBITDA breakeven in the second half of twenty twenty four with the portfolio of of licensing partners that we have and we expect to have. Okay. So just to talk more specifically about what what what's kind of news. What what are some of the highlights in terms of the last six months? So I I talked before about the importance of licensing agreements to the XEROS proposition. I mean, I'm pleased to say that we've made some really good progress on that. So we had one in place when I joined the business on microplastics filtration, but it was clear that we're gonna need more than one. If any of the major washing machine brands were gonna take us seriously, we needed to be able to offer them more than one choice in terms of manufacturer.

40:18 And indeed, we needed to get greater market access as well. So as I said earlier in the presentation, with the three that we have in hand today, we have got full access to the market from a manufacturing perspective. We've also made some good developments in terms of finish. We we really highlighted the fundamental difference that Yield Mac in particular meant to us as a business. We've had an ongoing very good discussion with fashion brands and and fashion retailers as well. These guys understand what we're trying to do. They're very keen to get their hands on the technology. We needed to have a number of manufacturing partnerships in place so that we could push from a retailer perspective to the current manufacturer, but also push and provide a solution from the machinery manufacturer perspective as well. With Yield Mac in place, we now are very confident that we have closed the loops that we will be able to start to see this technology get into the hands of the, ultimately, of the consumer and indeed of the government manufacturers.

41:17 In terms of the filtration offer specifically, I mean, this is a very topical piece, not least because of France's decision to put a hard stop of 01/01/2025 and watch machines being produced, which don't have this technology. Because we're closer to the to the market, my particular background is actually working within that industry for a number of years, and I've been used and leveraged those contacts. And I've also beefed up our commercial proposition as well in terms of having boots on the ground. We are very close to understanding what people want from a, washing machine brand perspective. It became clear through this year as it unfolded that having an external proposition as well as an internal proposition is gonna be fundamental. We took our time and we made sure that we were gonna have the best that we possibly could. And the great news was that while we launched this in the last few weeks at EFA, Europe's premier consumer electronics fair in in Berlin, the combination that we offered in terms of efficacy, in terms of flexibility of placement of the machine, and in dirt and indeed in terms of price absolutely gave us a very, very strong response from all of the brands that we spoke to.

42:25 We're very confident when it comes to that proposition, and x f three kind of continues to validate that. The third piece is clearly as I joined the business and have got my feet under the table and understood what's good about the business, I've also seen whether there is opportunity for improvement as well. Part of the second strand of our strategy, which we talked about before, which is getting closer to those decision makers, clearly necessitated an ability of the business to be able to be much more commercial at its very core, at its very heart. And I'm pleased to say that we have a very strong commercial team in place, headed up not, most recently by the appointment of a very experienced chief commercial officer who you have been working with the business, in a consultancy basis and has now come on board to to help us hands on.

43:12 And then the final bit, Alex has said, is is cost control. So it's one of the core, beliefs that I have at heart, which is that we need to cut our cloth accordingly. It was important to me that we were able to right size the business. And actually, although we've managed to make some really good progress in the commercial side and we have a stronger team, we also identified opportunity to be able to operate a little bit more prudently and a little bit more efficiently. And as Alex said, that has led to approximately £2,000,000 of annualized cost which we've taken out of the business. Okay. Alex, you wanna take a second? Yeah. So I I mean, we've we've kind of touched on the financial highlights so far in the presentation, but just to to to reiterate cash wise, we we spent from the cash flow for operations down a million pounds against this time last year. Revenue, you know, we we didn't expect this half to be a basic a hugely significant revenue six months for us, but, I mean, we made some progress from last year.

44:06 We expect this year's revenue to be to be back end loaded, and the reason for that is just the timing of the work done by our licensed partners. So we we know the kind of cadence of what of what they that they work to, and we can kind of plan accordingly. So we we expect the second half to be more significant than the first half certainly when it comes to revenue. The the the changes that Neil just talked about in terms of making sure the business is at the right place cost wise has flowed through to our adjusted EBITDA. So that's the kind of key metric for us that kind of takes out some of the variables that that we don't necessarily have control over. So that's that's an area that we've, you know, we've saved some some some significant funds this year. Okay. So just to just to kinda give a little bit of a summary, I mean, those of you close to the story will will kinda notice, but I think it helps sometimes just just just to really drill down to the specifics of of what what we have to offer as a business.

45:01 So, I mean, we genuinely have market leading technology. We believe, I guess, most businesses do when they start off, but I see this still as relatively new to the business. It's validated time and again. So in some cases, quite literally, it's validated by third party testing institutes, but we see it in terms of the engagements we get. So with our potential customers, when we see our potential customers come to market. So the the response that we got hand in hand with Yield Mac on the finished technology was was incredible. The response that we got to AIFA and our consumer electronics firm was really, really strong. We have every confidence in terms of our proposition. In terms of the second piece, we've talked about it before as well. We've absolutely got the right business model in place. Klaus mentioned that before at the very beginning that the a decision was taken to move to a kind of an IP rich asset light model, and it's absolutely the right one. As in when we start to accelerate through into the the the the more global agreements that we have in that we have in in site, the the core running costs of the business will not increase exponentially.

46:07 So the the core costs that we need and we have today will remain the same. So that's a great that's a great return for the investors. In terms of the third piece, this is not a theoretical technology. This is this is a technology which has been seen, which has been tested, and ultimately, some of the leaders within these fields have decided that they want to partner with XEROS. So we have commercial agreements in place, and and the right commercial agreements in place as well, I should add, which will enable us to be able to move this business forward. The fourth piece, Alex mentioned before, is really relevant as well. We are pushing that open door. Whether we talk about microplastics, whether we talk about water scarcity, whether we talk about energy efficiencies, across all of the industries, in particular, in the two that we are targeting, these are these are issues that they want and they're requesting solutions for.

47:00 And then the final piece, which is coverage and protection. So our heart, as I said, we're an r and d business. The way that we protect ourselves is through our IP. We have a very significant level of IP, 38 separate types of families. We don't just cover the, the IP that we have for our technologies. We're aggressive as well. We move out so that we can stop from of our any of any potential competition from getting close to what our proposition is. Quite rightly, we've decided and taken the decision that beyond the running costs of from a staff perspective, IP should be the second largest area that we invest within the business because it gives us our future longevity. K? So, yeah, these are just, slides indicating, you know, bit bit more color around the around the financial statements that we released as part of our interim results. I I don't propose to go through them in any detail. We we've kind of touched on the highlights. So I will, you know, kind of jump across those.

47:54 The one thing to to pull up on here is our is our share register. So we've we have benefited over the years from a supportive investor community and and, you know, those are some of the names that have have have supported us over the years. So I think that was that was it from from a kind of the presentation point of view. So if we could hand back to to to the to Jay. Perfect. Neil, Klas, Alex, thank you very much indeed for your presentation this afternoon. I'll just jump back in there before we move to the questions. And ladies and gentlemen, please do continue to submit your questions just by using the q and a tab that's situated on the top right hand corner of your screen. But just while the team take a few moments to review those questions that were submitted already, I would like to remind you that a recording of this presentation along with a copy of the slides and the published q and a can be accessed via your investor dashboard.

48:43 Class, Neil, Alex, we did receive a number of presubmitted questions ahead of today's event. And as you can see there in the q and a tab, we've also received a number of questions throughout your presentation this afternoon as well. So if I may just hand back to you just to make your way through those questions, and if you could give your responses where it's appropriate to do so, and then I'll pick up from you at the end. Thank you. K. Super. Great. Well, yeah, thank you thank you for your questions, and and do do keep submitting if there's anything that comes to mind. Neil and I will run down them and and and answer answer what we can, if that's okay. Yeah. Okay. So I I think one of the one of the first questions which we actually received earlier today is I mean, it's effectively about, you know, with the commercial agreements that we have in place and obviously the the reality of the the revenue stream that we've had in the first half of the year, you know, I I I guess, ultimately, the question is asking how can we have confidence about the pace moving forward.

49:36 I I think the the key thing to say here is that, you know, we took a very conscious decision, Alex and I, when we effectively assumed responsibility for the business to be able to be responsible and as accurate as we could be with our with our forecast and our predictions. 2023 was always a year for us which was about build. So there as I said at the beginning, we needed to close off a number of the key relationships that we had in place, and we've done that. The 2023 has been about build. So the revenues the revenue which we talked about, the profit which we talked about for 2023, we still believe that what we we can achieve. It was always gonna be very much weighted to the second half of the year, not least because we knew that Yield Mac was gonna be signed, which would give us the opportunity to break through from a finished perspective.

50:29 And, equally, we knew that, some of the developments we put in place, particularly with ISB, both on commercial and indeed on the domestic piece weren't gonna come until the second half of the year. So I think the the key piece is that we feel absolutely confident terms of numbers, and this is why we reiterated the numbers that we've set for 2023, we we see happening. Absolutely. And indeed, the numbers that we've talked about for 2024 as well, we see those those happening. I mean, 2024 will also start to be a little bit more back weighted to the back end. I'm not surprised now a lot of that has to do with the legislative environment, is driving, driving the timing related to some of the actions from the European bodies when it comes to, implementation of filtration pieces. So, yep, that's that's that question.

51:19 There is a question as well specific to IFB and and and the nine k g platform. So what's the feedback that we've had from IFBs? This one's pre submitted. So I think we we touched briefly upon that as well. The technical team were there just a matter of weeks ago, and they have been very hands on this year. Indeed, we had one of our institutional investors with us this morning, and he was surprised to see that we're doing we're we're doing very hands on work with IFB in terms of our testing here within Edge Q and Sheffield as well. So the latest that we hear from IFB is that they are very satisfied with the progress that has been made. They have absolutely a functional, fully operating machine, which is great, bearing in mind that there was decision to to to move to a new platform in the early parts of the year. So, yes, taking the learnings that the team has had for a couple of years in terms of the lead up to this, but actually, there there's been a real fast track implementation onto that new platform. It's it's been some sort of eight months so far, which is which is really good. Our expectations is that launch will be imminent. I don't wanna be specific in terms of that because, obviously, it's not our decision. It's IFB's product. They will launch as and when they see fit.

52:25 But in terms of the confidence that we get from IFB, it's very good and it's very high. So, yeah, we're very pleased with the progress when it comes to that that particular base. I think the another bit that I would mention is that IP is really important, not least because, obviously, it will generate some revenue for the business, but it's also a really important proof of concept. I think I talked a little bit about my real ambition for the business. The thing that brought me here some twelve months ago is that I see that there's a global opportunity with the XEROS propositions, not least on care. And, actually, the really interesting piece is that because we've had such a successful what we call tech transfer process with IFP, which is effectively now concluded, We have made so many learnings from that.

53:10 Some of the big global players, that we're talking to about our care proposition are already at a much more interested level than they otherwise would be because the tech is much more mature and the transfer process is much more, much more effective and efficient now today as well. So I think kind of real related to that one is about the talks with washing machine manufacturers in Europe. I think I kind of addressed that one. So in terms of dependence on adoption of the technology in India, I think, though, it's not dependent, there is absolutely an understanding that the specifics of what drives a decision maker, a consumer within the Indian market can be quite different to to that which drives decision maker within Europe. I I don't think I'm giving too much away when I say that the brands that we talk to are global, so they're thinking about all of the markets, not just Europe, but Europe, North America, and and and indeed APAC.

54:09 And the core fundamentals of what we offer which is water and energy savings, those are valid requirements for consumers within all of those regions. So we absolutely feel this is not just a regional play. Interesting question. So can XEROS be a viable business without future regulatory changes? I think that's a really interesting one that we we we probably forget to mention. So, you know, as part of our due diligence when it's come to the specifics of what's a proposition on on particularly filtration, we did quite extensive consumer research. So we took about 3,000 individuals across The UK, France, and Germany. We asked them a series of questions and some really illuminating statistics and responses come out to that. So regardless of regulations, it was absolutely clear to us that at a specific price point and £70 or €70 is that that key price point, four out of 10 of the people, candidates would buy the XEROS proposition when it came to microplastics.

55:17 So that's a very clear signal to us and obviously we use that conversation when we talk to the washing machine brands That whilst regulation is driving the timing relating to this, this is absolutely something that's gonna happen. Consumers want it. And I think as soon as the manufacturers are in a position particularly to help us get the XEROS technology into the hands of the consumers, there's clearly gonna be a quite significant market for it as well. Okay. A little bit about so Ransom. So how many machines are the Ransom's factory using that can be replaced by XEROS products? Are they planning to buy more from XEROS? So I think if we make that a broader kind of answer, so it's maybe not just specifically Ransom's, but we talk about Ransom's and Yealmak as well. So I think we've kinda seeded the market quite well in the last couple of years, and we've demonstrated that the product can work within a manufacturing setting as well.

56:18 What what we maybe haven't had is a piecing together of the various jig jigsaw pieces within the garment manufacturing industry. It's it's quite fragmented and it it's quite complicated. With the work that we've been doing in terms of that stakeholder management, in particular on a on a comms piece as well, we've had some really good engagement, whether that's been the British Fashion Council on on one hand raising awareness of the XEROS technology, which has led to that cavalcade of of brands that have come and visited us and seen the XEROS technology in the last twelve months. And indeed, that key piece, which is Yealmak being, you know, I don't wanna use the word Rolls Royce, but if you work within the industry, they're a very, very well respected brand. The fact that they have decided to go with the XEROS technology is a huge validation and you'll might have access to pretty much all of the manufacturing facilities that we want to, particularly in the core hubs in Bangladesh, Pakistan, and in Sri Lanka.

57:17 So so actually, those got those combinations plus, of course, Ransom supporting the piece as well, absolutely gives us an opportunity to be able to to to get more. And in terms of what our our numbers are for 2024, yeah, absolutely. We've got an expectation that we will sell more machines. Say more more importantly, Ramsons and Yealmak will sell more machines, which would generate revenue streams from a royalty perspective and also in terms of an ongoing demand and need for XORBs as well. Yeah. Do you understand? Well, we may we may need to wrap it up next. I think we've got a Okay. Good stuff. We've got a we yeah, I think I think there's a there's a few more questions, but we will if we don't have time to get to them now, I suspect we will kind of answer them answer them kind of textually and and and that'll get sent around. Is that that correct?

58:09 Yep. I I know. Just to say, yeah, absolutely. We will be able to give you back all of the questions immediately after the presentation's ended just for you to review to then add any additional responses, of course, where it's appropriate to do so. So yeah. Super. Yeah. Super. Okay. Tass, if you any last words from you? Yeah. I I I want to pick up on a few things you said, Neil, if I may. And and one of those things, just to bring them out, is if you compare how we conducted a tech transfer with Ramsons a few years ago, and if you compare that to to how we have been able to implement our technology together with Yulnik on their machines, it's night and day. So the learnings from working with Ramsons pay off in future agreements on the denim finishing side. Similarly, the work that we've done on domestic with IFB gone through the cycle of implementing our technology in their environment will help us do the tech transfer with future licensees on domestic a lot quicker. And I you you referred to it a few times, but I think it's important for people to understand that the the the speed of adoption historically is not what we anticipate the speed of adoption Yeah. To be going forward.

59:34 And and I think that is also, Neil, why you're confident in in sort of our Yes. Our future. So I wanted to bring that out for people because that that in particular was not not addressed specifically. I think the momentum that that that we see in the business at this point in time is real, and and that's why we have confidence in in second half of this year and next year across all areas of the business. Thank you. Nicely put, Klas. Okay. I think that's everything from us, Jake. Perfect, Neil. And thank you very much, Alex and for addressing those questions that came in. Of course, as we just did discuss, we'll give you back all of the questions immediately after the presentation has ended, and we'll publish all those all those responses on the platform, and we'll notify all the investors when they're ready for their review.

1:00:25 But, Neil, if I may, just before redirecting investors to provide you their feedback, which I know is particularly important to the company, if I could please just ask you for a few closing comments just to wrap up with that, I think, class may have just well delivered those. But perhaps there's anything further to add, that would be great. And then as I said, I'll redirect those on the call for their feedback. Yeah. Thank you. I I I mean, I I probably would I just doubled down on what Class said. I think I still consider myself quite new to the business and to the story. I guess if it gives confidence to to the investors, what I can say is that the reasons why I chose to join the business, which are the absolute preeminence of the technology and some really very good minds here within the business and not least the market readiness, believe those now tenfold. So I have, if anything, more confidence now than I did join the business after one month under my belt. So, hopefully, that that equally gives the investors confidence too.

1:01:19 Neil, that's great. And thank you once again for updating investors this afternoon. Could I please ask investors not to close this session as you'll now be automatically redirected for the opportunity to provide your feedback in order that the management team can better understand your views and expectations? This may take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of XEROS TECHNOLOGY GROUP PLC, we would like to thank you for attending today's presentation. That now concludes today's session. So good afternoon to you all. Thank you. Thank you, everyone. Thank you.