TIDMRM2
RNS Number : 9016R
RM2 International SA
27 September 2017
27 September 2017
RM2 International S.A.
Interim Results
RM2 International S.A. ("RM2" or the "Company"), the sustainable
pallet innovator, today announces its unaudited interim results for
the six months to 30 June 2017. The interim results have also this
morning been made available on the Company's website:
http://rm2.com/overview/
Financial and operating summary during and post period end
-- Revenues for H1 2017 of US$3.7 million (H1
2016: US$3.7 million)
-- Loss after tax for the period of US$19.2 million
(H1 2016: US$23.8 million)
-- After the reporting period end, completed
issuance of second tranche of US$20 million
Convertible Preference Share placement (as
announced on 30 June 2017)
-- Long-term, scalable manufacturing contracts
with Zhenshi in China and Jabil in Mexico
under discussion, subject to securing additional
funding, which the Company is currently progressing
-- Kevin Mazula, previously COO, appointed as
CEO and to the Board
Shareholders are encouraged to read the Chairman's Statement for
further detail on the Company's current financial position and
strategy going forward.
Kevin Mazula, RM2's CEO, commented: "This has been a period of
significant change at RM2. However, we are making steady progress
at our two manufacturing sites in Mexico and China and the business
is making good strides towards having a low-cost, well-balanced and
flexible manufacturing platform on two continents.
"In addition, the feedback from the market about our track and
trace technology is very encouraging and strengthens our view that
this technology will provide RM2 with a significant competitive
advantage."
The information contained within this announcement is considered
to be inside information prior to its release, as defined in
Article 7 of the Market Abuse Regulation No. 596/2014, and is
disclosed in accordance with the Company's obligations under
Article 17 of those Regulations.
For further information:
+44 (0)20 7638
RM2 International S.A. 9571
Kevin Mazula, Chief Executive
Officer
Jean-Francois Blouvac, Chief
Financial Officer
Strand Hanson Limited (Nominated +44 (0)20 7409
& Financial Adviser) 3494
James Spinney
Ritchie Balmer
James Bellman
+44 (0)20 3829
Zeus 5000
John Goold
+44 (0)20 7638
Citigate Dewe Rogerson 9571
Simon Rigby
Ellen Wilton
Notes to Editors
RM2 International S.A. specialises in pallet development,
manufacture, supply and management to establish a leading presence
in global pallet supply and improve the supply chain of
manufacturing and distribution businesses through the effective and
efficient use and management of composite pallets. It is quoted on
the AIM market of the London Stock Exchange under the symbol RM2.L.
For further information, please visit www.rm2.com
Chairman's Statement
In the six-month period to 30 June 2017 and subsequently, RM2
continued with the large-scale changes necessary to complete the
change from a wholly-owned manufacturing operation to an outsourced
model. Although we have experienced some delays in China, we are
committed, subject to securing the necessary funding, to confirming
a 12-month forecast for Chinese manufacturing by the end of
November 2017. In Mexico, after an initial ramp-up in volumes, we
are now working together with our partner Jabil on a second
production phase focused on efficiency in order to meet a lower
targeted unit production cost. In February 2017, the BlockPalTM
pallet was approved by one of the largest US retailers for use by
its suppliers, effective from 1 February 2017. This encouraging
development represents a significant milestone for the validation
of the BlockPalTM product and significantly enhances its profile
and potential customer base.
ELIoT pallet samples are operating in trials with a number of
current and prospective customers and due to greater demand for
testing, the Company launched another round of production for circa
2,000 new ELIoT- enabled pallets. The current testing results are
highly satisfactory; the Company's systems immediately flags
pallets circulating outside of authorised loops, enabling a
customer to better monitor its supply chain and reduce losses, and
permitting the Company to generate updated balances and accurate
invoices without needing to wait for customer reporting.
In light of the continued positive feedback from customers on
our ELIoT-enabled smart pallets (which are both trackable and
traceable) we are investigating the cost-effectiveness of
retro-fitting the existing inventory of pallets with the smart
technology in order to deliver these smart pallets into the market
quicker.
After the period end, on 3 August 2017, Kevin Mazula - who had
been RM2's Chief Operating Officer since April 2016 - was appointed
Chief Executive Officer. He replaced Jasper Judd who stepped down
as CEO and left the company on that date.
Financial Performance
Revenue generated by the Company including exceptional items in
H1 2017 was USD 3.7m, stable compared to the same period last year.
The Company's rental activity in the period decreased slightly to
USD 2.5m (H1 2016: USD 2.7m). The active pool of rental pallets
amounted to 272k pallets as of June 30, 2017, an increase of 7k
over year-end 2016. The Group's financial result for the period
ended June 30, 2017 is a loss of USD 19.2m, a decrease of USD 4.6m
versus H1 2016, mainly due to the reduction of factory absorption
in the new manufacturing set-up.
A second tranche of convertible preferred shares, totalling
USD20m was subscribed in H1 2017, with USD 14m of the subscription
funds being received in the reporting period and the remaining USD
6m received by end- July 2017.
Non-restricted cash reserves at July 31, 2017 stood at USD 16.6m
following the receipt of the remaining cash from the convertible
subscription (USD 6.0m) announced by the Company on 30 June 2017.
The run-rate cash burn of the Company for the following five months
of the year remains forecasted at USD 1.4m per month (USD 1.0m
excluding Canada, USD 0.4m for Canada). Taking into account the
above and additional payments to be processed in the coming months
relating to manufacturing, the Company has sufficient cash reserves
to operate through the end of February 2018. This estimation
excludes new purchases of pallets which are expected to be covered
by new funding the Company is working on implementing.
Should the Company be successful in monetizing certain
historical assets (including the office building in Switzerland,
pallets in inventory and fiberglass in inventory), such potential
additional cash inflows would provide funds for the operation of
the business potentially through the end of Q3 2018 and/or
participate to the pallet purchases.
Future Funding & Outlook
Following the Board's decision not to pursue an equity offering
in July (as announced on 24 July 2017), the Company has been
actively exploring and making advances on financing alternatives
for pallet production. Management believes that funding will be
available for pallet production upon receipt of purchase orders for
ELIoT-enabled pallets. Nevertheless, the outcome of the Company's
current discussions as well as the amount to be raised are subject
to uncertainties.
The Company confirms that it is in an advanced discussions with
one particular party, which has conducted extensive due diligence
on the Company over the past few weeks, and hopes to be able to
conclude negotiations in the coming weeks. However, the Company
stresses that there is no guarantee any agreement will be reached
with this party or on terms acceptable to the Company. Should the
Company not be able to secure sufficient additional funding, it
will not be able to face liabilities generated by contractual
commitments, including those for manufacturing and operations.
As noted above, significant progress has been made through the
field testing of ELIoT-enabled pallets and management estimates
that, subject to securing the necessary funding, the deployment of
400k ELIoT pallets will allow the Company to generate sufficient
net free cash flow to offset its cost of business.
In conclusion, although this has been a difficult and disruptive
period for RM2, demand for our durable and innovative pallet
remains strong. The Board remains confident that RM2 will obtain
funding to support its future growth ambitions. Further updates
will be made as and when appropriate.
Consolidated Statement of Comprehensive Incomes
For the six months ended 30 June 2017
Six months Six months Six months
to 30 to 30 to 30
June 2017 June 2016 June 2017
Unaudited Unaudited Unaudited
USD Restated Restated
USD USD
Continuing operations
Revenue 6 3,715,661 3,707,836 8,882,129
Cost of sales 7 (13,560,841) (18,810,174) (43,118,539)
------------------------- ------------- -------------
Gross profit (9,845,180) (15,102,338) (34,236,410)
Administrative expenses 8 (8,697,551) (8,660,630) (18,005,942)
Other operating expenses 9.1 (16,010) (36,132) (101,960)
Other operating income 9.2 199,254 142,151 286,636
------------------------- ------------- -------------
Operating loss (18,359,487) (23,656,949) (52,057,676)
Finance costs (2,484,463) (2,179,083) (3,063,894)
Finance income 1,824,454 1,936,151 2,234,567
------------------------- ------------- -------------
Loss before tax (19,019,496) (23,899,882) (52,887,003)
Income tax (175,369) 89,907 73,365
------------------------- ------------- -------------
Loss for the year (19,194,865) (23,811,975) (52,813,638)
========================= ============= =============
Other comprehensive
income
Other comprehensive income to be
reclassified in profit or loss in
subsequent periods:
Exchange difference on
translation of foreign
operations 1,052,378 (201,940) 1,182,368
------------------------- ------------- -------------
Other comprehensive income
for the year, net of tax 1,052,378 (204,940) 1,182,368
Total comprehensive
income for the year (18,142,487) (24,013,915) (51,631,270)
========================= ============= =============
Loss for the year
attributable to:
Equity holders of
the parent (19,194,865) (23,811,975) (52,813,638)
========================= ============= =============
Total comprehensive income
for the year attributable
to:
Equity holders of
the parent (18,142,587) (24,013,915) (51,631,270)
========================= ============= =============
Loss per share
Basic loss per share attributable
to ordinary equity holders of the
parent (0.05) (0.06) (0.13)
Diluted loss per share attributable
to ordinary equity holders
of the parent (0.05) (0.06) (0.13)
========================= ============= =============
Consolidated Statement of Financial Position
For the year six months ended 30 June 2017
Notes Six months Six months Year to
to 30 to 30 31 December
June 2017 June 2016 2016
Unaudited Unaudited Audited
USD USD USD
Assets
Non-current assets
Intangible assets 12 1,511,365 2,646,054 1,573,262
Property, plant
& equipment - Other 10 34,272,150 41,803,207 35,789,520
Property, plant
& equipment - Pallet
pool 11 9,165,499 16,997,686 10,700,444
Investment property 1,342,853 1,338,940 1,280,807
46,291,866 62,785,888 49,344,033
Current assets
Inventories 13 17,453,334 21,863,720 16,449,080
Trade and other
receivables 14 4,887,239 5,012,559 5,214,960
Other current financial
assets 24,332 67,624 22,866
Prepayments 503,720 664,068 1,045,572
Restricted Cash 1,954,384 1,951,144 1,884,713
Cash and cash equivalents 13,807,697 4,282,928 9,794,905
-------------- ------------------------------ --------------
38,630,707 33,842,043 34,412,096
Total assets 84,922,573 96,627,931 83,756,129
============== ============================== ==============
Equity and liabilities
Equity 17
Issued capital 4,035,627 3,980,302 4,003,052
Restricted shares 884,999 - 423,280
Share premium 292,947,198 263,317,090 282,893,809
Retained earnings (248,302,641) (200,106,113) (229,107,776)
Share based payment
reserve 20,448,762 19,585,089 20,073,279
Treasury stock (3,423) (3,423) (3,423)
Foreign currency
translation reserve (630,860) (330,207) 1,683,238
Equity attributable
to equity holders of
the parent 69,379,662 86,442,737 76,598,982
Non-current liabilities
Interest bearing
loans and borrowings 16 5,274,498 1,848,920 1,686,007
Deferred tax liabilities 2,550 46,949 (12,425)
5,277,048 1,895,869 1,675,582
Current liabilities
Interest bearing
loans and borrowings 16 59,033 54,034 105,002
Trade and other
payables 9,083,338 7,037,065 4,266,021
Deferred income 625,908 661,673 629,060
Current tax liabilities 497,583 532,554 482,482
10,265,862 8,289,325 5,481,565
Total liabilities 24,058,019 10,185,194 7,157,147
-------------- ------------------------------ --------------
Total equity and
liabilities 84,922,573 96,627,931 83,756,129
============== ============================== ==============
Consolidated Statement of Changes in Equity
For the six months ended 30 June 2017
Attributable to equity holders of the parent
Share capital Share premium Convertible preferred shares Retained earnings Foreign currency translation Treasury Share based payment reserve Total equity
reserve
Stock
USD USD USD USD USD USD USD USD
As at 31
December 2015
(audited) 3,980,302 263,317,090 - (176,294,138) (2,865,606) (3,424) 19,044,095 107,178,319
--------------- ----------------- ---------------------- -------------------------------- ------------------------- ------------------------------- ---------------- ------------------------------- ---------------------
Loss for the
year - - - (23,811,975) - - - (23,811,975)
Other
comprehensive
income - - - - 2,535,399 - - 2,535,399
--------------- ----------------- ---------------------- -------------------------------- ------------------------- ------------------------------- ---------------- ------------------------------- ---------------------
Total
comprehensive
income - - - (23,811,975) 2,535,399 - - (21,276,576)
Shares issued - - - - - - - -
in the period
Cost of share - - - - - - - -
issue
Repurchase of - - - - - - - -
shares into
treasury
Share based
payments - - - - - - 540,994 540,994
Transaction
with owners - - - - - - 540,994 540,994
As at 30 June
2016
(unaudited) 3,980,302 263,317,090 - (200,106,113) (330,207) (3,424) 19,585,089 86,442,737
--------------- ----------------- ---------------------- -------------------------------- ------------------------- ------------------------------- ---------------- ------------------------------- ---------------------
Loss for the
year - - - (29,001,663) - - - (29,001,663)
Other
comprehensive
income - - - - (1,353,031) - - (1,353,031)
--------------- ----------------- ---------------------- -------------------------------- ------------------------- ------------------------------- ---------------- ------------------------------- ---------------------
Total
comprehensive
income - - - (29,001,663) (1,353,031) - - (30,354,694)
Shares issued
in the period 22,750 19,576,719 423,280 - - - - 20,022,749
Cost of share - - - - - - - -
issue
Repurchase of - - - - - - - -
shares into
treasury
Share based
payments - - - - - - 488,190 488,190
---------------------
Transaction
with owners 22,750 19,576,719 423,280 - - - 488,190 20,510,939
As at 31
December 2016
(audited) 4,003,052 282,893,809 423,280 (229,107,776) (1,683,238) (3,424) 20,073,279 76,598,983
--------------- ----------------- ---------------------- -------------------------------- ------------------------- ------------------------------- ---------------- ------------------------------- ---------------------
Loss for the
year - - - (19,194,865) - - - (19,194,865)
Other
comprehensive
income - - - - 1,052,378 - - 1,052,378
--------------- ----------------- ---------------------- -------------------------------- ------------------------- ------------------------------- ---------------- ------------------------------- ---------------------
Total
comprehensive
income - - - (19,194,865) 1,052,378 - - (18,142,487)
Shares issued
in the period 32,575 10,053,389 461,719 - - - - 10,547,683
Cost of share - - - - - - - -
issue
Repurchase of - - - - - - - -
shares into
treasury
Share based
payments - - - - - - 375,483 375,483
---------------------
Transaction
with owners 32,575 10,053,389 461,719 - - - 375,483 10,923,166
As at 30 June
2017
(unaudited) 4,035,627 292,947,198 884,999 (248,302,641) (630,860) (3,424) 20,448,762 69,379,661
--------------- ----------------- ---------------------- -------------------------------- ------------------------- ------------------------------- ---------------- ------------------------------- ---------------------
Consolidated Statement
of Cash Flows
For the six months ended
30 June 2017
--------------------------
Six months Year
to 30 Six months ended
June 2017 to 30 31 December
Unaudited June 2016 2016
Notes Unaudited Audited
Cash flows from operating USD
activities USD USD
Loss before tax (19,019,496) (23,899,882) (52,887,003)
Adjustment to reconcile
profit before tax to net
cash flows
Amortisation and
depreciation
of non-current assets 4,778,298 4,440,260 8,723,262
Impairment on of current
and non-current assets - - 8,661,080
Provision for bad debts 103,802 44,902 -
Share based payment
charges 375,483 540,994 1,029,185
Finance income (44,730) (68,726) (84,759)
Finance expenses 16,199 60,240 35,096
Unrealised foreign
exchange
gains 377,125 256,062 559,306
Net loss/(gain) on
disposal
of PPE and intangible
assets 11,800 5,797 35,376
Variation in working
capital
(Increase)/decrease in
inventories (1,004,255) (2,017,093) 3,397,547
Decrease/(increase)/in
trade and other
receivables 766,734 4,544,547 3,415,584
Increase/(decrease) in
trade and other payables 4,814,167 (7,398,391) (9,590,080)
Decrease/(increase)/ in
restricted cash (69,671) (135,105) (68,673)
Income tax paid (170,293) (15,336) (101,431)
Net cash flows from
operating
activities (9,064,837) (23,641,731) (36,875,510)
Cash flows from investing
activities
Net purchase of from
intangible
assets (802) (18,066) (25,633)
Purchase of PPE in course
of commissioning (245,208) (1,469,914) (2,557,381)
Net purchase of other
PPE (59,478) (3,474,426) (2,786,014)
Proceeds from the sale
of PPE - - 85,012
(Increase)/decrease in
pallet pool (849,638) (1,668,992) (2,434,564)
Loans granted to third
parties (1,466) (5,552) 39,206
Finance income received 44,730 68,726 84,759
Net cash flows from
investing
activities (1,111,862) (6,568,224) (7,594,615)
Cash flows from financing
activities
Issuance of capital 17 10,547,740 - 20,022,750
Purchase of treasury
shares - - -
Transaction costs on
capital
operations, charged
against
share premium account. - - -
Proceeds from other and
related party borrowings 16 3,482,822 - (34,710)
Repayment of other and
related party borrowings 57,699 (54,361) (35,096)
Finance Costs (16,199) (60,240) (158,635)
Net cash flows from
financing
activities 14,072,062 (114,601) 19,794,309
Net change in cash and
cash equivalents 3,895,363 (30,324,556) (24,675,816)
=========================== ============================ =======================
Increase/decrease in cash
and cash equivalents 3,895,363 (30,324,558) (24,675,816
Cash and cash equivalents
at 1 January 9,794,906 34,515,597 34,515,597
Exchange adjustment of
cash and cash
equivalents 117,428 91,887 (44,875)
--------------------------- ---------------------------- -----------------------
Cash and cash equivalents
at end of period 13,807,697 4,282,928 9'794,906
=========================== ============================ =======================
Notes (unaudited) to the Interim Consolidated Financial
Information
1 Corporate information
RM2 International S.A. (the "Company") is a limited company
(Société Anonyme) incorporated and domiciled in Luxembourg with the
registration number B132.740. The registered office is located at
Rue de la Chapelle 5, L1235 Luxembourg. The Company is the ultimate
parent entity of the RM2 Group (the "Group").
The Group is principally engaged in developing, leasing and
selling shipping pallets and in providing related logistical
services.
This unaudited interim consolidated financial information do not
constitute statutory accounts.
2 Basis of preparation
While being compliant with AIM Rule 18 minimum requirements, the
unaudited interim consolidated financial information does not
include all the information and disclosures required in the annual
financial information, and should be read in conjunction with the
Group's historical financial information for the year ended 31
December 2016.
The accounting policies and basis of preparation adopted are
consistent with those followed in the preparation of the Group's
historical financial information for the year ended 31 December
2016. None of the newly applicable IFRS standards and amendments
had an impact on the Group's interim consolidated financial
information.
2.1 Early adopted standards
The Group did not early adopt any new or amended standards and
does not plan to early adopt any of the standards issued but not
yet effective.
3 Significant accounting judgements, estimates and assumptions
When preparing the unaudited interim consolidated financial
information, Management undertakes a number of judgements,
estimates and assumptions about recognition and measurement of
assets, liabilities, income and expenses. The actual results may
differ from the judgements, estimates and assumptions made by
Management, and will seldom equal the estimated results.
The judgements, estimates and assumptions applied in the interim
consolidated financial information, including the key sources of
estimation uncertainty, were the same as those applied in the
Group's historical financial information for the year ended 31
December 2016.
The Company reclassified logistical expenses, removing them from
Administrative Expenses to record them in Cost of Goods. This
reclassification, which amounts to USD 1.8m for H1 2017 (H1 2016:
USD 2.0m), more accurately reflects the direct and variable costs
required to generate revenue.
3.1 Going Concern
The Group's financial result for the period ended June 30, 2017
is a loss of USD 19.2m, a decrease of USD 4.6m versus H1 2016,
mainly due to the reduction of factory absorption in the new
manufacturing set-up. The factory absorption in Canada dropped by
USD 7.3m, while the Company has agreed to support a manufacturing
non-recurring cost of USD 2.5m, which will be applied through a
temporary price increase per pallet purchased over the first 24
months of production. The Company recorded an impairment charge at
December 31, 2016 with respect to certain equipment, raw material
and pallets. These assets and impairment charges were reviewed as
at June 30, 2017 and the Company has determined it is not necessary
to modify these amounts at the present time. The cash outflow,
before financing activities, for the first semester 2017 was USD
10.2m, which is USD 20.0m lower than the first semester 2016 (cash
outflow of USD 30.2m). This improvement is principally attributable
to: i) the reduction of the cash factory absorption for USD 7.3m,
ii) the reduction of manufacturing capital expenditures compared to
last year and a smaller quantity of pallets purchased at a lower
price versus H1 2016 resulting in a USD 5.4m impact and iii) the
working capital variance for USD 6.8m between the two periods. On
the latter item, it is to be noted that H1 2016 was negatively
impacted by updating payments to suppliers. Net cash outflow in H1
2017 was reduced by the receipt in June 2017 of USD14m of the
USD20m Convertible Preferred Shares subscribed in H1 2017.
The Canadian plant, in dismantling mode during much of 2016,
generated a loss of USD 4.7m for the first semester 2017 which
includes non-cash depreciation of USD 1.8m, one-time costs of USD
1.2m and running cash-costs (mainly building and payroll) of USD
1.7m for 6 months.
Non-restricted Cash reserves at June 30, 2017 stood at USD 13.8m
(excluding the USD 6m issuance proceeds from the convertible
preferred shares received in July 2017).
Situation through December 2017
Non-restricted Cash reserves at July 31, 2017 stood at USD 16.6m
following the receipt of the remaining cash from the convertible
subscription (USD 6.0m). Over the first seven months of 2017, the
cash cost of business is USD 1.0 per month, excluding Canadian
remaining structure (outflow of USD 0.4m per month), two cash
advances to secure the ELIoT technology (outflow of USD 0.5m) and
key people retention (outflow of USD 0.3m) and HST backlog's refund
(inflow of USD 1.0m).
The cash burn of the Company, excluding any one-time cost, for
the following five months of the year remains forecasted at USD
1.4m per month (USD 1.0m excluding Canada, USD 0.4m for Canada).
The cash forecast for the last 5 months of the year includes, on
top of this USD 1.4m of recurring cash burn, potential liabilities
in Canada for a total of USD 1.5m (the exit of the storage
building, the termination of the heath care program, and various
claims issues by local bodies). Regarding the VAT litigation in
Luxembourg, the Company appealed according to its understanding of
the local law. Heretofore no further request from local authorities
is to be reported. The total one-time costs for the fiscal year
2017, which were previously estimated to be USD 5.1m, are now
forecasted to be USD 5.8m, following the decision of the Company to
program a major maintenance reset for the production equipment, of
which USD 2.1m is expected to be paid over H2 2017.
Taking into account the foregoing and the manufacturing
commitments as of the date hereof (pallets purchased from Jabil,
sale of raw material to Jabil, Letter of Credit for China), the
Company has sufficient cash reserves to operate through the end of
February 2018. This estimation excludes new purchases of pallets
which are expected to be covered by new funding the Company is
working on implementing. Should the Company be successful in
monetizing certain historical assets (including the office building
in Switzerland, pallets in inventory and fiberglass in inventory),
such potential additional cash inflows would provide funds for the
operation of the business potentially through the end of Q3 2018
and/or participate to the pallet purchases. The success of
implementing new funding and the Company's ability to monetize
historical assets will impact the cash reserves available to the
Company.
As at June 30, 2017, the Company intended to allocate the
proceeds from the issuance of Convertible Preferred Shares to meet
its current cost of business through the end of December 2017
(without taking into account cost-cutting initiatives to monetize
its balance sheet). Pending the conclusion of new financing, the
Company anticipates employing the proceeds from the issuance of
Convertible Preferred Shares for short term manufacturing
obligations (pallet purchases). Payments to be processed in the
coming months relating to manufacturing are expected to be in the
range of USD 4.0m, including the Letter of Credit expected to be
issued in support of purchase orders for pallets from China.
Manufacturing commitments & funding
The purchase orders sent to China for 30k pallets, which were
initially expected to be delivered through June to August 2017, are
expected to be rescheduled from January through March 2018 in
agreement with Zhenshi and the Company intends to confirm a
12-month production forecast for China by the end of November
2017.
After an initial ramp-up in volumes, the Company and Jabil now
enter a second phase focused on efficiency in order to rapidly meet
the targeted unit production cost. The volume of production at the
Mexican facility will be adjusted to reflect customer demand for
ELIoT-enabled pallets and improved efficiency. Reduction in the
previously-targeted rate of production ramp-up can be expected to
impact the Company's activities, revenue and growth in the short
term.
Given the positive reception by potential customers of
ELIoT-enabled pallets in field tests, Management believes it may be
efficient and cost-effective to capture the existing and growing
demand for smart pallets by retrofitting the existing inventory of
pallets with ELIoT technology as a first step. Following the
Board's decision not to pursue an equity offering in July 2017, the
Company has been actively exploring and making advances on
financing alternatives. Management believes that funding will be
available for pallet production upon receipt of purchase orders for
ELIoT-enabled pallets. Nevertheless, the outcome of the Company's
current discussions as well as the amount to be raised are subject
to uncertainties. Should the Company not be able to secure
sufficient additional funding, it will not be able to face
liabilities generated by its contractual commitments, including
those for manufacturing and operations.
Management estimates the deployment of 400k ELIoT pallets via
leases will allow the Company to generate sufficient net free cash
flow to offset its cost of business. If the Company is not able to
finance and purchase 400k ELIoT-enabled pallets, then it will not
be able to offset its cost of business.
4 Business Review and Key Performance Indicators
The Chairman's statement deals with the review of the business
for the first 6 months of 2017.
The business report considers the key performance indicators to
be the sale or leasing of pallets, the level of production, assets
in inventory and the cash reserves of the business.
Revenue generated by the Company including exceptional items in
the first semester 2017 was USD 3.7m, stable compared to the same
period last year. The Company's rental activity in the period
decreased slightly to USD 2.5m (H1 2016: USD 2.7m). The addition of
new business in the meat processing and global food sector in both
North America and EMEA for USD 0.3m partially offset a decrease in
activity from a large customer in the printing industry (decrease
of USD 0.5m). The active pool of rental pallets amounted to 272k
pallets as of June 30, 2017, an increase of 7k over year-end 2016.
Pallet sales decreased from USD 0.3m (H1 2016) to USD 0.1m for H1
2017. The tracking of third-party assets business unit (Equipment
Tracking), located in Wales, suffered from the loss of a large
customer which occurred in July 2016, with a drop of revenue from
0.6m (H1 2016) to USD 0.3m. An additional USD 0.7m was recognized
in sales revenue in H1 2017 as an exceptional item attributed to
the sale of raw material and WIP to Jabil (H1 2016: nil).
As mentioned in the subsequent events note for 2016 year-end
results, 41k pallets were produced in Mexico during the six-month
period ended June 30, 2017. The Company and its contractor, Jabil,
are now entering a second phase of their collaboration which
focuses on the efficiency of the production process in order to
reach as quickly as possible the targeted production cost per unit.
The targeted production cost per unit is expected to be reached by
year-end, enabling a sustainable increase in volume. The transfer
of production capacities in China will be fully completed after the
final shipment of pultrusion injection boxes and dies from Canada.
The company is in discussions to set-up a Letter of Credit for the
purchase of 30k pallets from China.
The Company reclassified logistical expenses, removing them from
Administrative Expenses to record them in Cost of Goods. This
reclassification, which amounts to USD 1.8m for H1 2017 (H1 2016:
USD 2.0m), more accurately reflects the direct and variable costs
required to generate revenue. After taking into account this
reclassification, Cost of Goods decreased by USD 5.3m to USD 13.6m
for H1 2017 (H1 2016: USD 18.8m). The factory absorption in Canada
decreased by USD 7.3m as pallets were no longer produced in Toronto
in the period. Costs incurred in Canada include lease expenses,
payroll of the transition team and support staff, and one-time
costs arising from the decommissioning of the site. The reduction
in Canada factory absorption is offset by the agreement with Jabil
regarding the ramp up costs supported by the Company. The remaining
decrease (USD 0.5m) is explained by reduced logistical costs (USD
0.2m) and the impact of restructuring measures in Wales following
the loss of a major customer (USD 0.4m). Cost of Goods variance was
negatively impacted by the sale of raw material to Jabil in H1 2017
(USD 0.7m, net of accrual) and positively impacted by the lack of
raw material waste in H1 2016 (USD 1.5m) due to the cessation of
production. The remaining USD 0.2m decrease in Cost of Goods is
explained by lower sales of pallets (RM2 Blockpal and Equipment
Tracking). The Company recorded an impairment charge at December
31, 2016 with respect to certain equipment, raw material and
pallets. These assets and impairment charges were reviewed as at
June 30, 2017 and the Company has determined it is not necessary to
modify these amounts at the present time.
ELIoT pallet samples are operating in trials with a number of
current and prospective customers and due to greater demand for
testing, the Company launched another round of production for circa
2,000 new ELIoT-enabled pallets. The current testing results are
highly satisfactory; the Company's systems immediately flags
pallets circulating outside of authorized loops, enabling a
customer to better monitor it supply chain and reduce losses, and
permitting the Company to generate updated balances and accurate
invoices without needing to wait for customer reporting.
A second tranche of convertible preferred shares, totalling
USD20m was subscribed in H1 2017, with USD 14m of the subscription
funds being received in the reporting period and the remaining USD
6m received by end-July 2017. The Company announced on July 24,
2017 that following two weeks of market soundings, the Board
determined that the best interests of the Company and its
shareholders would not be served by completing an equity offering
at that time. The Board further announced that it continues to
pursue various other financing alternatives, which may include the
issuance of equity and/or debt instruments.
Unrestricted cash reserves at 30 June 2017 stand at USD 13.8m
(excluding the USD 6m issuance proceeds from the convertible
preferred shares received in July 2017).
Unrestricted cash reserves at 31 December 2016 stood at USD
9.8m.
Cash flow excluding the issuance proceeds from the convertible
preferred shares for H1 2017 was negative by USD 10.2m, of which
USD 3.5m related to one-time costs related to the transfer of
manufacturing to Mexico and China. Cash flow was positively
impacted by working capital variations attributable principally to
the timing of supplier payments.
5 Significant events and transactions
Despite continuing difficult economic circumstances, the Group's
management believes that the Group position remains manageable due
to the following factors:
-- No significant decline in order intake has
been experienced on larger projects. Further,
the Group has several long-term customer
contracts and has highly positive in initial
trial results on its ELIoT-enable pallets,
which it expects to convert to long-term
supply contracts;
-- The Group's major customers have not experienced
financial difficulties. Credit quality of
trade receivables as at 30 June 2017 is
considered to be good; and
-- The group is advancing in discussions with
sources of financing to obtain financing
to produce and deploy a significant number
of pallets.
Overall, the Group is in a manageable position thanks to a high
quality commercial pipeline, which is expected to be profitably
deployed once adequate financing is in place. The Group's
objectives and policies for managing capital, credit risk and
liquidity risk are described in its recent annual financial
statements
6 Revenues and segment reporting
The Group has only one operating segment for the disclosure of
revenue. However the revenue analysis is broken down by revenue
stream as disclosed here below.
Operating segment is reported in a manner consistent with the
internal reporting used by the chief operating decision-maker. The
chief operating decision-maker, who is responsible for allocating
resources and assessing performance of the operating segment, has
been identified as the Board of Directors of the parent company
that makes strategic decisions.
The Group has determined the operating segments based on the
reports reviewed by the Board of Directors, which are used to make
strategic decisions.
The Board of Directors is responsible for the Group's entire
business and considers the business to have a single operating
segment that represent the production, the sale and the rent of
pallets including related logistical services. The asset allocation
decisions are based on a single, integrated investment strategy,
and the Group's performance is evaluated on an overall basis.
The internal reporting provided to the Board of Directors for
the Group's assets, liabilities and performance is prepared on a
consistent basis with the measurement and recognition principles of
IFRS.
There were no changes in the reportable segments during the
year.
The Group has a diversified customer portfolio. During the
period there was one client which represented more than 10% of the
Group's revenues.
Turnover
Six months Six months Year ended
to 30 to 30 31 December
June 2017 June 2016 2016
Unaudited Unaudited Audited
Sold pallets 71,489 288,520 441,537
Leased pallets 2,530,510 2,722,840 5,749,607
Rendering of logistical
services 377,319 696,476 1,195,171
Disposal of raw material
and work in progress 736,344 - 1,495,814
3,715,661 3,707,836 8,882,129
=========== ========================== =============
Geographical information
The breakdown of the revenue allocation by area is as
follows:
Six months Six months Year ended
to 30 to 30 31 December
June 2017 June 2016 2016
Unaudited Unaudited Audited
USA 3,070,426 2,811,930 7,243,677
Europe 645,235 895,906 1,638,452
3,715,661 3,707,836 8,882,129
=========== =========== =============
The parent company is based in Luxembourg. The information for
the geographical area of non-current assets are presented for the
most significant areas where the group has operations, being
Luxembourg (country of domicile), rest of Europe, North America
(including Mexico) and China.
Six months Six months Year ended
to 30 to 30 31 December
June 2017 June 2016 2016
Unaudited Unaudited Audited
Luxembourg 2,164,410 2,280,246 2,221,931
Rest of Europe 5,136,871 6,425,322 5,072,952
North America (including
Mexico) 33,003,868 54,080,320 35,716,850
China 5,986,717 - 6,332,300
----------- ----------- -------------
46,291,866 62,785,888 49,344,033
=========== =========== =============
Non-current assets for this purpose consist of property, plant
and equipment, investment properties and intangible assets.
7 Cost of sales
Six months Six months Year ended
to 30 to 30 31 December
June 2017 June 2016 2016
Unaudited Unaudited Audited
Restated Restated
Cost of pallets sold
- Blockpal 103,440 238,726 125,229
Cost of pallets sold
- raw material/WIP 953,916 - 1,840,302
Cost of pallets sold
- services 62,301 112,162 227,132
Amortization of pallet
pool 2,407,565 2,241,473 4,225,318
Cost of software, licenses
and services 334,427 691,405 1,226,523
Factory absorption Canada 4,691,360 12,042,106 23,389,961
Factory absorption new
set-up 2,500,000 - -
Logistics costs 1,835,980 1,984,845 4,639,428
Impairment and repairs (222,472) (7,831) 6,402,809
Other 894,324 1,527,288 2,267,160
13,560,841 18,810,174 43,118,539
=========== =========== =============
8 Administrative expenses
Six months Six months Year ended
to 30 to 30 31 December
June 2017 June 2016 2016
Unaudited Unaudited Audited
Restated Restated
Payroll costs 3,391,199 3,638,894 7,361,268
Director's expenses 36,041 399,255 121,075
Travel and expenses 433,212 685,120 1,201,689
One Time Costs China
(VAT, import duties,
...) 1,839,590 334,266 509,098
Consultant costs (AIM,
Funding, ...) 674,370 1,011,750 1,828,599
Audit/Tax/Legal costs 389,893 327,969 836,429
Insurance 88,636 92,255 240,210
Eliot 328,432 - 82,666
Other 598,384 670,410 3,334,494
------------------------ ----------------------------- ------------------------
Total cash 7,779,757 7,159,920 15,527,528
Total cash - excluding
One Time Costs 5,940,167 6,852,654 15,018,430
Share based payment
(non-cash item) 375,483 540,994 1,029,185
Depreciation 542,311 959,716 1,449,229
8,697,551 8,660,630 18,005,942
======================== ============================= ========================
9 Other operating income and expenses
9.1 Other operating Six months Six months Year ended
income to 30 to 30 31 December
June 2017 June 2016 2016
Unaudited Unaudited Audited
Net gain on disposal
of PPE - - -
Rental income 199,254 142,151 284,822
Other - - 1,814
----------- ----------- -------------
Total other operating
income 199,254 142,151 286,636
=========== =========== =============
9.2 Other operating Six months Six months Year ended
expenses to 30 to 30 31 December
June 2017 June 2016 2016
Unaudited Unaudited Audited
Direct operating expenses
on rental-earning investment
properties 16,010 36,132 63,210
Net loss on disposal
of PPE - - 35,375
Other - - 3,376
----------- ----------- -------------
Total other operating
expenses 16,010 36,132 101,960
=========== =========== =============
10 Property, plant and equipment- other
Land & Plant Plant Construction Total
Building & Equipment & Equipment in progress
China/Mexico
USD USD USD USD USD
Cost
As at 31
December
2015 (audited) 1,746,227 27,666,398 - 15,087,530 44,500,155
Additions - 3,474,469 - 1,469,914 4,944,383
Disposal - (30,654) - - (30,654)
Other /
transfers - 3,037,026 - (3,037,026) -
Exchange
differences 8,438 1,603,138 - 914,718 2,526,294
As at 30 June
2016
(unaudited) 1,754,665 35,750,377 - 14,435,136 51,940,178
Additions - (688,455) - 1,087,467 399,012
Disposals - (245,825) - - (245,825)
Other /
transfers - (15,294,191) 25,081,276 (9,787,085) -
Exchange
differences (4,634) (1,005,859) - (502,375) (1,512,868)
-------------------- ------------------- ----------------------- ----------------------- ------------
As at 31
December
2016 (audited) 1,750,031 18,516,047 25,081,276 5,233,143 50,580,497
Additions - 59,480 - 245,208 304,688
Disposals - (21,460) - - (21,460)
Other/transfer - (213,077) 327,934 (114,857) -
Exchange
differences 101,231 544,279 (57,317) 59,949 648,142
-------------------- ------------------- ----------------------- ----------------------- ------------
As at 30 June
2017
(unaudited) 1,851,262 18,885,269 25,351,893 5,423,443 51,511,867
Depreciation
and impairment
-------------------- ------------------- ----------------------- ----------------------- ------------
As at 31
December
2015 (audited) 230,019 4,479,722 - 3,537,463 8,247,204
Depreciation
charge for the
period 33,151 1,698,761 - - 1,731,912
Disposal - (24,857) - - (24,857)
Exchange
differences 1,373 181,338 - - 182,711
As at 30 June
2016
(unaudited) 264,543 6,334,964 - 3,537,463 10,136,970
Depreciation
charge for the
period 31,049 1,604,189 - - 1,635,238
Disposals (5,166) (131,235) - - (136,401)
Transfer - (3,682,648) 3,682,648 - -
Impairment
charge
for the year 71,163 3,182,360 - - 3,253,523
Exchange
differences 45,907 (144,260) - - (98,353)
-------------------- ------------------- ----------------------- ----------------------- ------------
As at 31
December
2016 (audited) 407,496 7,163,370 3,682,648 3,537,463 14,790,977
Depreciation
charge for the
period 21,009 981,455 1,253,966 - 2,256,430
Disposal - (9,659) - - (9,659)
Exchange
differences 15,185 195,200 (8,416) - 201,969
-------------------- ------------------- ----------------------- ----------------------- ------------
As at 30 June
2017
(unaudited) 443,690 8,330,366 4,928,198 3,537,463 17,239,716
Net book value
As at 30 June
2017
(unaudited) 1,407,572 10,554,904 20,423,695 1,885,980 34,272,151
==================== =================== ======================= ======================= ============
As at 31
December
2016 (audited) 1,342,535 11,352,677 21,398,628 1,695,680 35,789,520
==================== =================== ======================= ======================= ============
As at 30 June
2016
(unaudited) 1,490,122 29,415,413 - 10,897,673 41,803,208
==================== =================== ======================= ======================= ============
11 Property, plant and equipment - Pallet pool
Pallet
Pool
USD
Cost
-------------
As at 31 December
2015 (audited) 10,781,799
Additions 1,668,994
As at 30 June 2016
(unaudited) 22,450,793
Additions 765,570
As at 31 December
2016 (audited) 23,216,363
Additions 849,638
As at 30 June 2017
(unaudited) 24,066,001
=============
Depreciation and impairment
-------------
As at 31 December
2015 (audited) 3,297,518
Depreciation charge
for the period 2,155,588
As at 30 June 2016
(unaudited) 5,453,106
Depreciation charge
for the period 2,069,730
Impairment 4,993,083
As at 31 December
2016 (audited) 12,515,919
Depreciation charge
for the period 2,384,583
As at 30 June 2017
(unaudited) 14,900,502
=============
Net book value
As at 30 June 2017
(unaudited) 9,165,499
=============
As at 31 December
2016 (audited) 10,700,444
=============
As at 30 June 2016
(unaudited) 16,997,687
=============
12 Intangible assets
Software Trade Customer Acquired Goodwill Total
names relationships licences
and
similar
intangible
assets
USD USD USD USD USD USD
Cost
As at 31
December
2015
(audited) 2,553,487 148,017 444,051 1,197,068 1,022,643 5,365,266
Additions - - - 18,065 - 18,065
Exchange
differences (243,192) (14,097) (42,291) - (97,396) (396,975)
----------------- ----------------- ----------------------- --------------- ----------------- ---------------
As At 30 June
2016
(unaudited) 2,310,295 133,920 401,760 1,215,133 925,247 4,986,356
================= ================= ======================= =============== ================= ===============
Additions - - - 7,568 - 7,568
Exchange
differences (181,311) (10,510) (31,530) - (72,613) (295,964)
----------------- ----------------- ----------------------- --------------- ----------------- ---------------
As at 31
December
2016
(audited) 2,128,984 123,410 370,230 1,222,701 852,634 4,697,959
Additions - - - 802 - 802
Exchange
differences 114,031 6,610 19,830 - 45,668 186,139
----------------- ----------------- ----------------------- --------------- ----------------- ---------------
As At 30 June
2017
(unaudited) 2,243,015 130,020 390,060 1,223,503 898,302 4,884'901
================= ================= ======================= =============== ================= ===============
Depreciation
and
impairment
As at 31
December
2015
(audited) 1,702,319 59,203 177,620 76,764 - 2,015,906
Amortization
charge for
the
period 406,959 14,154 42,462 70,450 - 534,025
Exchange
differences (184,031) (6,397) (19,202) - - (209,630)
----------------- ----------------- ----------------------- --------------- ----------------- ---------------
As at 30 June
2016
(unaudited) 1,925,246 66,960 200,880 147,214 - 2,340,301
================= ================= ======================= =============== ================= ===============
Amortization
charge for
the
period 369,811 12,862 38,586 66,677 - 487,936
Impairment - - - - 485,637 485,637
Exchange
differences (166,073) (5,776) (17,328) - - (201,097)
----------------- ----------------- ----------------------- --------------- ----------------- ---------------
As at 31
December
2016
(audited) 2,128,984 74,046 222,139 213,891 485,637 3,124,698
Amortization
charge for
the
period - 12,577 37,731 66,935 - 117,243
Exchange
differences 114,031 4,391 13,173 - - 131,595
----------------- ----------------- ----------------------- --------------- ----------------- ---------------
As at 30 June
2017
(unaudited) 2,243,015 91,014 273,043 280,826 485,637 3,373,535
================= ================= ======================= =============== ================= ===============
Net book
value
As at 30 June
2017
(unaudited) - 39,006 117,017 942,677 412,665 1,511,366
================= ================= ======================= =============== ================= ===============
As at 31
December
2016
(audited) - 49,364 148,091 1,008,810 366,997 1,573,262
================= ================= ======================= =============== ================= ===============
As at 30 June
2016
(unaudited) 385,049 66,960 200,880 1,067,919 925,247 2,646,054
================= ================= ======================= =============== ================= ===============
13 Inventories
As at As at As at
30 June 30 June 31 December
2017 Unaudited 2016 Unaudited 2016 Audited
USD USD USD
Raw Material 2,167,832 6,908,874 2,383,828
Work in process 933,925 1,874,083 1,593,966
Finished pallets 14,351,577 13,080,763 12,471,286
---------------- ---------------- ----------------
Total inventory 17,453,334 21,863,720 16,449,080
================ ================ ================
14 Trade receivables
As at As at As at
30 June 30 June 31 December
2017 Unaudited 2016 Unaudited 2016 Audited
USD USD USD
Trade receivables 2,660,852 2,134,719 3,116,040
Income tax receivables 5,251 7,317 4,288
Other tax receivables 1,261,090 1,251,627 847,624
Other receivables 960,046 1,618,895 1,247,008
---------------- ---------------- --------------
Total Trade receivables 4,887,239 5,012,559 5,214,960
================ ================ ==============
15 Trade payables
As at As at As at
30 June 30 June 31 December
2017 Unaudited 2016 Unaudited 2016 Audited
USD USD USD
Trade payables 5,067,751 5,034,648 2,741,938
Employee compensation
payables 103,137 67,870 69,171
Other tax liabilities 16,900 243,717 98,942
Other payables 3,895,550 1,690,828 1,355,970
---------------- ---------------- --------------
Total Trade payables 9,083,338 7,037,064 4,266,021
================ ================ ==============
16 Interest-bearing loans and borrowings
Prior to June 30, 2017 the Company received USD14m of the USD20m
subscribed. At 30 June 2017 $10,515,108 of the funds received were
converted to issued convertible preferred shares; the remaining
value of $3,484,892 were posted to shareholder's account pending
the formal issuance of convertible preferred shares on July 2,
2017.
As at As at As at
30 June 30 June 31December
2017 2016 2016
Unaudited Unaudited Audited
Effective Maturity USD USD USD
interest date
rate
Non-current interest-bearing
loans and borrowings
CHF 1,750,000 Bank 1.8 30 November
loan % 2020 1,776,979 1,840,885 1,666,520
(The loan is secured
by a mortgage on
the building held
by the Group in
Switzerland.)
Hire purchase liabilities
in excess of one
year 12,628 8,035 21,487
Shareholder's current 3,484,892 - -
account
Total non-current interest-bearing
loans and borrowings 5,274,499 1,848,920 1,688,007
============ ============ ============
Current interest-bearing
loans and borrowings
Short-term part
of long term bank
loan 50,000 50,000 100,000
Hire purchase liabilities
in excess of one
year 9,033 4,034 5,002
------------
Total current interest-bearing
loans and borrowings 59,033 54,034 105,002
Total interest-bearing
loans and borrowings 5,333,532 1,902,954 1,793,009
============ ============ ============
17 Share capital and reserves
2017
On 17 February 2017, 757,500 ordinary shares with a nominal
value of USD 0.01 per share were issued to non-executive Directors
in lieu of cash compensation with respect to the first semester of
2017.
On 22 June 2017, the Company issued 4,591,743 new Convertible
Preferred shares with a nominal value of USD 0.01 per share in the
capital of the Company.
On 30 June 2017, the Company issued 2,500,000 shares to an
executive director with a nominal value of USD 0.01 per share.
On 30 June 2017, the Company issued 41,580,213 Convertible
Preferred shares with a nominal value of USD 0.01 per share in the
capital of the Company.
2016
On 1 July 2016, the Company issued 2,755,000 options, of which
2,000,000 were issued to an executive director and certain
employees and vest on the third anniversary of the grant, with an
exercise price equal to GBP 0.23 and are not exercisable until the
volume weighted average quoted price of the Ordinary Shares for a
consecutive 30-day period equals or exceeds GBP 1.00.
500,000 were issued to certain employees and vest over three
years in equal tranches on the anniversary of the grant date, with
an exercise price equal to GBP 0.23 and are not exercisable until
the volume weighted average quoted price of the Ordinary Shares for
a consecutive 30-day period equals or exceeds GBP 1.00, and 255,000
options were issued to certain employees and vest over three years
in equal tranches on the anniversary of the grant date and have an
exercise price equal to GBP 0.23.
On 8 July 2016, 1,275,000 restricted shares were issued to
certain Directors in lieu of cash compensation for the year. These
shares are restricted from trading until the volume weighted
average quoted price of the Ordinary Shares for a consecutive
30-day period equals or exceeds GBP 1.00.
On 8 July 2016, 1,000,000 restricted shares were issued (with a
vesting period of one year) to one key employees which are not
exercisable until after three years or when the volume weighted
average quoted price of the Ordinary Shares for a consecutive
30-day period equals or exceeds GBP 1.00.
In each case, employees must retain a business relationship with
the Company on the relevant anniversary date for the options or
restricted shares to vest.
In July 2016, the Company issued 42,328,042 Convertible
Preferred Shares of USD 0.01 in the capital of the Company. See
also Note 13.3.
2015
On 12 March 2015, 253,000 restricted shares were granted to
certain employees. The restricted shares vest three years from the
date of grant if the recipients are still employed by the Group at
such time.
On 17 June 2015, the Company repurchased 333,334 previously
issued restricted shares. These shares are held as non-voting
treasury shares. These shares have been acquired from two former
employees benefiting from the ESOP plan. These shares have been
acquired at nominal value.
On 21 October 2015, the Company issued 75,000,000 ordinary
shares at GBP 0.40 per share.
On 3 November 2015, the Company awarded 5,500,000 options over
its ordinary shares of USD 0.01 each under its 2013 Stock Option
and Incentive Plan to its non-executive directors. The options have
an exercise price of GBP 0.465, being the closing share price on 2
November 2015, and duration of 10 years. The options will vest over
a 3 year period in equal annual instalments but cannot be exercised
until the stock closes above a thirty day average closing price of
GBP 1.00.
On 3 November 2015, the Company awarded 800,000 options over its
ordinary shares of USD 0.01 each under its 2013 Stock Option and
Incentive Plan to some employees. The options have an exercise
price of GBP 0.465, being the closing share price on 2 November
2015, and duration of 10 years. The options will vest over a 3 year
period in equal annual instalments.
As at 31 December 2015, RM2's issued share capital is
398,030,156 Ordinary Shares of USD 0.01 each in the capital of the
Company, of which 342,334 Ordinary Shares are held by the Company
as non-voting treasury stock.
The total number of voting rights in the Company is
397,687,822.
Conditions of certain restricted shares
Conditions of the 14,625,180 restricted shares issued in 2013
and 2014 with performance criteria are as follows:
The Performance Conditions are linked to the volume weighted
average quoted price of the Ordinary Shares (the "Average Price")
for a consecutive 30-day period (the "Relevant Period"). If the
Average Price is 50 per cent higher than the Placing Price for the
Relevant Period, the Performance Condition in respect of one-third
of the Restricted Shares shall be fulfilled. If the Average Price
is 75 per cent higher than the Placing Price for the Relevant
Period, the Performance Condition in respect of a further one-third
of the Restricted Shares shall be fulfilled. If the Average Price
is 100 per cent higher than the Placing Price for the Relevant
Period, the Performance Condition in respect of the final third of
the Restricted Shares shall be fulfilled. If any Performance
Conditions are not fully satisfied by 19 November 2023, the
Director shall transfer any of his remaining Restricted Shares to
the Company at a purchase price equal to the nominal value of the
Restricted Shares, being USD 0.01 each.
The holders of the Restricted Shares cannot sell, transfer,
mortgage, charge, encumber or otherwise dispose of any of the
Restricted Shares as long as the performance conditions are not
fully satisfied. These Restricted Shares are considered by
Management as share-based payments and performance conditions as
market vesting conditions. For further detail on the share-base
Ordinary shares issued and fully paid
Shares USD Par value
per share
At 30 June 2016 (unaudited) 398,030,156 3,980,302 USD 0.01
Issue of restricted
shares on 8 July 2016 2,275,000 22,750 USD 0.01
At 31 December 2016
(audited) 400,305,156 4,003,052 USD 0.01
Issue of ordinary shares
on 17 February 2017 757,500 7,575 USD 0.01
Issue of ordinary shares
on 29 June 2017 2,500,000 25,000 USD 0.01
At 30 June 2017 (unaudited) 403,562,656 4,0356,267 USD 0.01
========================= =========== ===========
Convertible Preferred Shares issued and fully paid
Shares USD Par value
per share
At 31 December 2015 (audited) - - -
--------------- --------------------- -------------------------
Issue of Convertible Preferred
Shares on 27 July 2016 42,328,042 423,280 USD 0.01
At 31 December 2016 (audited) 42,328,042 423,280 USD 0.01
Issue of Convertible Preferred
Shares on 22 June 2017 4,591,743 45,917 USD 0.01
Issue of Convertible Preferred
Shares on 30 June 2017 41,580,213 415,802 USD 0.01
At 30 June 2017 (unaudited) 88,499,998 884,999 USD 0.01
=============== ===================== =========================
Share premium
USD
At 31 December 2015 (audited) 263,317,090
At 30 June 2016 (unaudited) 263,317,090
Issue of restricted shares on 8 July 2016 -
Issue of Convertible Preferred Shares
on 27 July 2016 19,576,719
------------
At 31 December 2016 (audited) 282,893,809
Issue of Convertible Preferred Shares
on 22 June 2017 1,954,083
Issue of Convertible Preferred Shares
on 30 June 2017 8,099,306
At 30 June 2017 (unaudited) 292,947,198
18 Earnings per share
Basic earnings per share amounts are calculated by dividing the
net profit for the year attributable to ordinary equity holders of
the parent by the weighted average number of ordinary shares
outstanding during the year.
Diluted earnings per share amounts are calculated by dividing
the net profit attributable to ordinary equity holders of the
parent by the weighted average number of ordinary shares
outstanding during the year plus the weighted average number of
ordinary shares that would be issued on conversion of all the
dilutive potential ordinary shares into ordinary shares.
The following reflects the income and share data used in the
basic and diluted earnings per share computations:
Six months Six months Year ended
to 30 to 30 31 December
June 2017 June 2016 2016
Unaudited Unaudited Audited
USD USD USD
Net loss attributable
to ordinary equity holders
of the parent for basic
earnings (19,194,865) (23,811,975) (52,813,638)
============= ============= =============
As at As at As at
30 June 30 June 31 December
2017 2016 2016
Weighted average number
of ordinary shares for
basic earnings per share 400,903,623 398,030,156 399,124,145
Weighted average number
of ordinary shares adjusted
for the effect of dilution 400,903,623 398,030,156 399,124,145
============= ============= =============
Loss per share
Basic (0.05) (0.06) (0.13)
Diluted (0.05) (0.06) (0.13)
============= ============= =============
Management considers that there is no dilutive effect from the
options as they would be negative.
19 Publication of announcement and the Interim Results
A copy of this announcement will be available at the Company's
registered office 14 days from the date of this announcement and on
its website.
This announcement is not being mailed to shareholders. The
Interim Results will be posted to shareholders shortly and will be
made available on the Company's website.
20 Subsequent events
Production in Mexico
The Company and its manufacturer in Mexico, Jabil, are now
entering a new phase of their collaboration. After a first semester
of production of circa 40k pallets, the focus is now on refining
unit production costs. Thanks to RM2's previous experience in
Canada and Jabil's engineering expertise, the two companies are
reshaping the production plan for the coming six to twelve months
following the introduction of the ELIoT technology in the
manufacturing process.
Production in China
Purchase orders with initial delivery dates for June, July and
August, 2017 are expected to be rescheduled for Q1 2018 in common
agreement between the Company and its contract manufacturer,
Zhenshi. This rescheduling is the result of the introduction of the
ELIoT technology in the production process and the expected demand
for ELIoT-enabled pallets in light of the successful initial
customer trials. The Company has agreed to audit the costs
associated with this delay of the production start date with a view
to making a financial contribution towards such costs in China. The
Company intends to confirm a 12-month production forecast by the
end of November 2017.
Exit of Canada
Early August 2017, the Company signed an early termination
agreement with respect to the lease of the warehouse in Canada. The
Company negotiated a termination fee of USD 320k in exchange for a
full discharged of the obligations under the lease agreement, which
otherwise would have run through July 1, 2020. The reduction of
monthly rental costs is USD 55k.
The Company continues to seek to reduce or eliminate the
obligations arising from its rental agreement for its former
production facility in Canada. The Company currently uses this
facility for its own storage needs as some manufacturing assets,
inventory and raw materials remain in Canada.
Sales and ELIoT
The Company is managing the transition to its proprietary
technology-based pallet solution that is leading to significant
customer interest and opening previously un-addressable markets to
RM2.
The Company is in deep discussions with those customers which
have had the opportunity to initially trial the first wave of
ELIoT-enabled pallets samples beginning in Q2 2017. These North
American customers are in industries which require robust pallets
due to heavy loads, hygienic pallets due to contact with food,
and/or heightened visibility of the location of pallets due to
recurrent losses.
The initial phase of internal development of the IT portal to
capture the ELIoT data is now complete and the phase of
user-acceptance testing has begun. The user-testing protocol is
designed to identify potential issues before the solution is more
broadly rolled-out to customers.
Funding
The Company announced on July 24, 2017 that following two weeks
of market soundings, the Board determined that the best interests
of the Company and its shareholders would not be served by
completing an equity offering at that time. The Board further
announced that it continues to pursue various other financing
alternatives, which may include the issuance of equity and/or debt
instruments.
Share issuances, Treasury shares
On July 6, 2017, the Company issued a total of 6,000,000
restricted shares to executive directors and key employees.
Following the resignation of Jasper Judd as Chief Executive
Officer and as a member of the Board of Directors in August 2017,
2,500,000 restricted shares were forfeited and are now held as
treasury shares.
On 28 July, 2017, the final USD 6m tranche of the issuance of
USD 20m of Convertible Preferred Shares was completed, with the
Company issuing 46,315,773 Convertible Preferred shares with a
nominal value of USD 0.01 per share in the capital of the
Company.
As at 27 September 2017, RM2's issued share capital is
407,062,656 Ordinary Shares of USD 0.01 each and 134,815,771
Convertible Preferred Shares of USD 0.01 in the capital of the
Company, of which 2,916,334 Ordinary Shares are held by the Company
as non-voting treasury stock.
The total number of voting rights in the Company is
538,962,093.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR BQLLLDKFEBBK
(END) Dow Jones Newswires
September 27, 2017 02:01 ET (06:01 GMT)
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