From Xeros to Hero

From Xeros to hero: Xeros Technology Group has created washing machines that use less water

Investors who were able to buy into Xeros Technology Group at float just over a year ago have done very well as the share price has mapped some significant commercial progress.

Up 63 per cent since float, the valuation of the business, which has developed a polymer bead cleaning system, might give some lay observers cause for concern, particularly as the business is loss-making and cash consuming.

However, there is an opportunity that if tapped into effectively will turn Xeros, capitalised at just north of £130m, into something very much bigger than it is today.

But with every company at this formative stage of commercialisation it is about delivery - though so far, under chief executive Bill Westwater, the execution of the strategy appears to have been hitch free.

To understand the scale of just what all the fuss is about, it is worth taking a little time to get to grips with the technology and more importantly its commercial application.

Xeros, spun out of the University of Leeds, has developed rice sized-polymers that can be used to replace water in aqueous processes.

Laundry is a good example - and in fact it is the first major market Xeros is targeting.

The plastic beads can be used to replace most of the water in the process and they do a number of things.

They increase the mechanical action on the material, while the beads are capable of extracting even the most deep-seated of stains, locking the residue inside the bead.

So there are a number of benefits from using the Xeros polymers.

Washing comes out cleaner, plus there is significant saving in the water and energy consumed.

The electricity bill drops because Xeros machines work at lower temperature than conventional washers.

All of this is great in theory; however, the company has gone a lot further than simply proving the concept.

It has rolled out a 25kg barrel commercial washer in the US that is starting to make a big splash.

Not only is it delivering these big savings to customers such as hoteliers (it is in four of the top five chains Stateside), users are also receiving incentives from the utility companies for being more efficient in their use of water and electricity.

The firm now has a staff of 25 sales, marketing and maintenance personnel in America.

It is gaining significant traction for its machines, which look to the untrained eye like the hard-core equipment you might see in a commercial laundry.

And indeed most of the machine is identical to a conventional washer of this kind.

The company sells the machine, the beads and detergent and signs a minimum five year contract with a client that includes all maintenance.

Customers such as hoteliers like this because it provides a one-stop shop for all their washing needs.

It is ideal for the company because it builds service rather than retail business and means it can grow on the back of recurring rather than one-off revenue streams.

At the moment Xeros is handling the sales in-house as it seeks to manage and perfect the whole after-sales process.

Customer care and maintenance are aided as each piece of equipment is fitted with a remote monitoring system called Xeros Pulse.

The £30mn Westwater and the team raised at float should be enough to see the company through to break-even, analysts said.

For the laundry business this should be 2017 and a year later at group level as Xeros invests heavily in research and development.

Source: This is Money

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