Vmoto Limited Market Update (8154D)

TIDMVMT

RNS Number : 8154D

Vmoto Limited

29 October 2015

VMOTO LIMITED

MARKET UPDATE 3Q15

ANNOUNCEMENT 29 October 2015

Vmoto Limited (ASX/AIM:VMT), the global scooter manufacturing and distribution group specialising in "green" electric powered two-wheel vehicles, is pleased to provide the following update on its activities for the quarter ended 30 September 2015 (3Q15).

3Q15 HIGHLIGHTS

   --   Trading encouraging and in line with management expectations 

-- Over 23,200 units sold in 3Q15, up 15% compared with 3Q14, with the mix of sales continuing to evolve given the growing number of higher margin sales into international markets

-- New international supply agreement signed with North American Telematics high-tech company, Saturna Green Systems, focused on developing state-of-the-art wireless shared transportation and communication systems ("Electric Scooter Sharing Project") for electric two and three-wheel vehicles

   --   Appointed newly exclusive distributor for Israel market 

-- Progress with establishment of internet based retail sales network and system in Australia, expected to be launched in November 2015

-- Progressing significant new market entry, distribution and customer opportunities, including North America, Denmark, Italy, Portugal, Switzerland, United Kingdom, Brazil, Mexico and New Zealand

-- PowerEagle negotiations continuing to extend production agreement and working relationship post 2015

   --   Strategic decision to exit Nanjing Haiyong controller business 
   --   Company on track to meet forecast earnings for 2015 of $4 million - $6 million underlying NPAT 

Managing Director, Charles Chen commented on the Company's activities in 3Q15:

"Historically the September quarter is a very busy period for Vmoto, with orders and sales increasing, and 3Q15 was no exception. Sales of our electric two-wheel vehicle products continued to increase across our various sales channels, in particular to international markets and interest in our electric vehicle products continues to remain high. A number of old and new customers visited the factory during the quarter seeking to enter into new orders or agreements for our electric two-wheel vehicle products.

"We were excited to sign an international supply agreement with Saturna Green Systems and expect significant benefits to flow to Vmoto, including growth initially in the North American and European markets for both, and synergies between the two companies in electric vehicle technology and networks.

"We continued discussions with a significant European supermarket group that has over 300 stores and samples have been delivered to this customer for further evaluation and testing. We have also further progressed the establishment of our internet based retail sales network and system to expand sales and further increase profitability and expect to launch this in Australia in November 2015.

"While we made the difficult decision during the quarter to cease the Nanjing Haiyong business and, post the end of the quarter, to de-list from AIM, we are confident that both of these decisions were the right ones for the Company at its current stage of operations, and will allow management to focus on Vmoto's core business, resulting in better outcomes for shareholders in the longer term.

"We are excited by current growth opportunities, including Saturna Green Systems' Electric Scooter Sharing Project and significant B2B opportunities in Italy and South America, and look forward to capitalising on these and other initiatives over the remainder of FY15 and into FY16."

SALES AND MARKETING

Quarterly Sales Performance

Unit sales for 3Q15 were 23,265 units, up 5.6% from 2Q15, comprising:

 
 OEM                                  13,342 
 Chinese retail stores 
  and distributors                     6,547 
 International                         3,376 
 Total                                23,265 
 

3Q15 was a busy quarter for the Company with production and sales continuing to increase quarter on quarter. This trend is expected to continue over the coming months. Trading was encouraging and in line with management expectations.

The mix of sales continues to evolve with sales into higher margin international markets growing. International unit sales increased by 41% compared with 3Q14, while unit sales to Chinese retail stores and distributors increased by 24% compared with 3Q14. Low margin OEM sales increased slightly by 7% compared with 3Q14 in line with the Company's strategy to focus on higher margin sales to drive profitability.

Internationally the Company continues its strong relationships with its B2B and B2C customers, with many placing orders that will flow through in future quarters.

In addition to existing customers in South America, Europe, United States, South East Asia and the Middle East, Vmoto is also progressing opportunities with potential new customers and distributors from Denmark, Italy, Portugal, Switzerland, United Kingdom, Brazil, Mexico and New Zealand. These potential new customers and opportunities represent significant B2B supply opportunities including a large European supermarket group with over 300 stores, scooter sharing projects, vehicle rental companies, delivery companies and OEM for international brands.

In China, the Company now has a sales network of 45 outlets through a combination of its own retail outlets and third party distributors.

The three-wheel and four-wheel electric vehicle company, in which Vmoto holds a 20% equity interest, relocated its operations to Vmoto's Nanjing manufacturing facility, after initially producing units externally. This company focuses on three-wheel and four-wheel electric vehicles that have applications across a number of industries, including freight and goods delivery, leisure and sightseeing and transportation for the aged and disabled population. Following a thorough assessment and strategic review, the Company has taken the decision to reduce its equity interest in the three-wheel and four-wheel electric vehicle company from 20% to 15% and has entered into an agreement with Mr Cong Cen to sell 5% equity interest in the three-wheel and four-wheel electric vehicle company held by Vmoto at original cost invested by Vmoto.

As previously announced the Company is in the process of establishing an online based retail sales network and system in Australia that will open up a new sales stream for its products and substantially broaden its reach throughout Australia. Work continued on this initiative during 3Q15 and the Company remains confident it will be operational and generating online sales by the end of 2015.

POWEREAGLE

Senior management have had numerous meetings with senior executives of PowerEagle to discuss a new business relationship post 2015 once the current OEM agreement runs out. These negotiations are ongoing and a new arrangement is expected in December.

NEW DISTRIBUTORS

In 2Q15, Vmoto signed an exclusive distribution agreement with a United Kingdom company to distribute, stock and market the Company's Vmoto and E-Max range of electric scooter products for United Kingdom and Ireland markets. During 3Q15, 40 units were ordered and scheduled for delivery by end of October 2015 and more orders are expected in 4Q15.

During 3Q15, the Company also appointed new exclusive distributor in Israel.

FINANCIAL

As at 30 September 2015, the total operating facility drawn down was RMB10 million (approximately A$2.2 million) and the total undrawn operating facility was RMB24 million (approximately A$5.4 million). The Company repaid RMB15 million (approximately A$3.4 million) during the quarter to ease interest payments and making working capital more efficient.

As at 30 September 2015, the Company had cash of A$6.7 million.

In light of the decision to exit the Nanjing Haiyong business, on 23 September 2015, forecast earnings for 2015 were reduced by $1 million (reflecting $650k of earnings assumed in the forecast but not generated by Nanjing Haiyong, a loss by Nanjing Haiyong incurred in September and the raising of provision for doubtful debts) to a range of:

   --      $5 million - $7 million underlying EBITDA 
   --      $4 million - $6 million underlying NPAT. 

EXHIBITION AND EVENT

During 3Q15, Vmoto's United Kingdom distributor participated in three exhibitions and events in United Kingdom.

Vmoto's United Kingdom distributor exhibited Vmoto's electric two wheel vehicle products at the Centre for Engineering Excellence Low Carbon Vehicle (CENEX LCV) held on 9-10 September 2015 and received positive feedback. The 2015 CENEX LCV achieved breaking record with 2,852 total visitors, 211 exhibitors, 103 vehicles and 1,098 organisation represented. Vmoto was the only electric scooter brand exbihited in 2015 CENEX LCV.

Vmoto's United Kingdom distributor also participated in the Zero Emission Network event in 3Q15. The Zero Emissions Network is a London project working across Hackney, Islington and Tower Hamlets aiming to help businesses save money, reduce emissions and improve air quality making London a better place to visit, work and do business. The Vmoto brand received significant press interest and reviews from the event.

Vmoto's United Kingdom distributor also participated in the 2015 Takeaway Innovation Expo held on 29-30 September 2015 and received positive feedback and significant interest from potential customers.

Vmoto's Spanish distributor exhibited Vmoto's electric two wheel vehicle products at the European Mobility Week held on 19-22 September 2015 and received significant interests and positive feedback.

HAIYONG

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October 29, 2015 03:01 ET (07:01 GMT)