Listed cleaning technologies business sells its US customer base

Rotherham-based cleaning company Xeros Technology Group has signed two agreements to sell off most of its Hydrofinity US commercial laundry customer portfolio of leased machines.

The sales are being made to Eastern Laundry Systems (‘ELS’) and Wash IQ (‘WIQ’), previously known as Viking Services.

Hydrofinity will receive an up-front payment of $109,000 in cash and ongoing license fees for the provision of Xeros’s patented XOrbs technology to ELS and WIQ. The proceeds from the transaction will fund ongoing Hydrofinity working capital.

In 2018, these lease contracts generated an adjusted gross loss of $376,000. The commercial washing machines and associated lease contracts had no value on the Group’s balance sheet. The value had been written down during 2018, following the invention and patenting of Xeros’ new XDrum design for commercial washing machines.

A total of 164 commercial washing machines installed with Hydrofinity customers and their corresponding lease contracts have been sold to ELS and WIQ. 

As previously announced in November 2018, ELS already held exclusive rights to take over the servicing of Hydrofinity customers in nine states across the east coast of the United States. Since December 2018, WIQ held the same exclusive rights for servicing of Hydrofinity customers in California and Arizona.

This agreement reflects the Hydrofinity strategy to reduce its physical presence in markets and to move to a full licensing model. The Group expects further sales of smaller portfolios to similar regional distributors in the US over the coming months.

Mark Nichols, CEO of Xeros, said: “As part of our strategy to implement a licensing model for all our applications, we completed the transfer of sales and service to our channel partners in the US earlier this year in order to improve customer service and reduce our costs.

“This sale of the majority of our existing Hydrofinity lease agreements in the US to channel partners means we will be paid ongoing fees for the use of XOrbs by customers, providing a high margin return on our technology without any physical involvement in the supply chain.

“The approach is consistent with our license agreements signed with the largest commercial laundry equipment companies in China and India.”