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RM2 Rm2 International S.a.

8.50
0.00 (0.00%)
28 Mar 2024 - Closed
Delayed by 15 minutes
Share Name Share Symbol Market Type Share ISIN Share Description
Rm2 International S.a. LSE:RM2 London Ordinary Share LU1914372336 ORD USD0.01 (DI)
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  0.00 0.00% 8.50 0.00 00:00:00
Industry Sector Turnover Profit EPS - Basic PE Ratio Market Cap
0 0 N/A 0

RM2 International SA Interim Results (9016R)

27/09/2017 7:01am

UK Regulatory


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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

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September 27, 2017 02:01 ET (06:01 GMT)

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