Predictably, Xeros (XSG) posted losses for the financial year ending July 2014, but that's not how investors should judge this blue-sky company. The maker of environmentally friendly washing machines raised £30m in its March IPO to fund the commercial roll-out of its technology, which uses up to 80 per cent less water, up to 50 per cent less energy and up to 50 per cent less detergent than traditional washing machines.
Xeros' priority market is the US, where the increasing scarcity and cost of water means potential demand is high. The group's core commercial laundry business, which provides full services for a monthly fee of about $1,500 (£934) over five years, now counts hotels representing four of the five largest global hotel brands among its customers in the country. Major US utility companies are also offering big incentives to companies that invest in Xeros machines.
However, it will probably take a while for the company to break even. Sales cycles are long and service levels need to be high. Chief executive Bill Westwater told us it takes 26 months of fees to recoup the money invested in an installed machine. Disappointingly, the company also cut its year-end target for the number of installed machines from 149 at the time of the IPO to 80. As of 31 July, the number was 44.
| XEROS TECHNOLOGY GROUP (XSG) | ||||
|---|---|---|---|---|
| ORD PRICE: | 120p | MARKET VALUE: | £78.2m | |
| TOUCH: | 117-124p | 12-MONTH HIGH: | 130p | LOW: 70p |
| DIVIDEND YIELD: | NA | PE RATIO: | NA | |
| NET ASSET VALUE: | 47p | NET CASH: | £29.5m | |
| Year to 31 July | Turnover (£'000s | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2013* | 65 | -3.4 | -8.0 | nil |
| 2014 | 315 | -6.7 | -12.9 | nil |
| % change | +385 | -95 | -62 | - |
| *Prior to flotation in March 2014Last IC view: None | ||||
