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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 |
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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