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Interim Results

14 Sep 2018 07:00

RNS Number : 7541A
RM2 International SA
14 September 2018
 

14 September 2018

 

RM2 International S.A.

 

Interim Results

 

RM2 International S.A. ("RM2" or the "Company"), the sustainable smart pallet innovator, today announces its unaudited interim results for the six months to 30 June 2018. The interim results will be made available on the Company's website this morning.

 

Financial summary

 

·

Revenues for H1 2018 of US$2.6 million (H1 2017: US$3.7 million)

·

Loss after tax for the period of US$17.3million (H1 2017: US$19.2 million)

·

Completed simplification of capital structure and received first tranche of US$36 million equity funding and undertook an Open Offer to shareholders, raising, in aggregate, approximately $20 million

·

Well positioned to fulfil funding conditions to drawdown second tranche of equity funding of approximately US$17.8m in H2 2018

 

Operational highlights

 

·

The deployment of RM2 ELIoT smart pallets with Fortune 100 and 500 companies in pilot and Phase 1 agreements is underway

·

Completed a 100-unit trial with one of the world's leaders in the logistics industry, serving both internal and external customer loops

·

Streamlined the Company's operations, significantly reducing the cost-base

·

Announced today the nomination of two high calibre individuals with deep logistics and digital technology experience to the Board of Directors

 

Kevin Mazula, RM2's CEO, commented: "Following the refinancing and simplification of the capital structure in the first half of 2018, the Company is focused on the deployment of RM2 ELIoT Smart pallets. We have delivered against our principal objectives, successfully completing initial trials of RM2 ELIoT pallets with significant industry leaders and entering into a Phase 1 contract with a Fortune 500 customer. We are pleased to see that the robust, eco-friendly RM2 ELIoT pallet, with its proprietary tracking technology, is making inroads with global industry leaders, significantly enhancing the efficiency of their supply chains". 

 

 

 

For further information:

 

RM2 International S.A.

+44 (0)20 7638 9571

Kevin Mazula, Chief Executive Officer

Jean-Francois Blouvac, Chief Financial Officer

 

 

 

Strand Hanson Limited (Nominated & Financial Adviser and Broker)

+44 (0)20 7409 3494

James Spinney / Ritchie Balmer / James Bellman

 

 

Citigate Dewe Rogerson (Financial PR)

+44 (0)20 7638 9571

Ellen Wilton / Elizabeth Kittle

 

 

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014.

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RM2 INTERNATIONAL S.A.

Société Anonyme

 

 

Unaudited Consolidated Interim financial information

 

 

For the six months ended 30 June 2018

 

Chairman's Statement

 

The Company seeks to disrupt the market for ubiquitous wooden pallets by replacing them in select supply chains with its unique track and traceable, ecologically friendly RM2 ELIoT smart pallets. With the secure placement of a chipset using RM2's proprietary tracking technology in each pallet, valuable information is sent to RM2, recording the location, the temperature, and any physical shocks. This information allows customers to improve their supply chains, reduce losses, ensure the safety of their products, all the while reducing the carbon footprint. While the Company initially focused its efforts on the upper end of the supply chain, the ELIoT technology now permits the Company to work up and down the supply chain without risk of asset loss.

 

The Company focused on its principal objectives on the second quarter of 2018, having simplified its capital structure and successfully navigated an extremely stressed cash situation in the first quarter of 2018, culminating with conditionally raising USD 36 million in new equity through the two tranche Placing discussed below. The Company remains debt-free. With the conversion of trials with large customers into long-term contracts taking longer than anticipated, the Company's expectation of turning EBITDA positive in 2019 is challenging.

 

The focus of the Company's activities in the first half of 2018 was the achievement of the principal objectives, being:

 

1)

Focusing sales efforts principally on new deployment opportunities for RM2 ELIoT Smart pallets. The retrofitting of a portion of inventory of non-ELIoT-enabled pallets with smart chipsets in now in progress. While the sales effort is focused on the deployment of smart pallets, consideration is also given to opportunistic deployment of non-ELIoT pallets in inventory where margins and asset-retention justify such deployment.

2)

Successfully complete the initial trials of RM2 ELIoT pallets with Fortune 500 and other significant industry leaders. Subsequent to the reporting period, the Company successfully completed a 100-unit trial and then entered into a pilot agreement for an initial deployment of some 600 RM2 ELIoT pallets with one of the world's leaders in the logistics industry, serving both internal and external loops. Other trials with large multi-national corporations are progressing well. In particular, one large trial with a North American beverage customer has concluded with strong results and discussions on deployment terms are expected to continue over the coming months. The initial deployment of RM2 ELIoT pallets in a Phase 1 contract with a Fortune 500 customer announced on April 13, 2018 was deferred and that deployment is now underway with promising results. Other promising trials are underway with companies in the consumer goods and telecommunications industries.

3)

Complete the transition to a high quality, low-cost outsourced manufacturing model. As the Company has fully transition to outsourced manufacturing, it is now focusing on the production of RM2 ELIoT pallets. The manufacture of ELIoT modules is underway in line with the lead times associated with the procurement of certain electronic components. The completed ELIoT modules are then either retrofitted into existing pallets or installed in newly-produced pallets. As previously announced, due to the significant delays arising under the Chinese agreement, the Company and its partner exchanged communications with respect to the reshaping or termination of the agreement. There has been little progress and the outcome of these discussions is uncertain.

4)

Reduce exposure to previous low-margin non-ELIoT enabled pallet deployment. The wind-down of the Company's principal non-ELIoT lease contract is in its final stages, with new issuances of pallets under the contract having ceased at the end of the second quarter and efforts to recover pallets in the field will continue over the forthcoming months. As these pallets are a bespoke 45" x 45" size, the Company does not currently intend to retrofit them and the sales team is soliciting orders to remove them from inventory.

5)

Unwind operations at the Canadian manufacturing site, streamline operating expenses, eliminate non-value added activities and monetize non-core legacy assets. By and large, management fulfilled this objective during the course of the first semester of 2018. The Company's indirect wholly-owned subsidiary, 7636156 Canada, Inc., which previously ran the Company's manufacturing operations, filed for voluntary liquidation in the Province of Ontario, Canada on May 1, 2018. The Fuller Landau Group Inc. (the "Trustee") was appointed as the Licensed Insolvency Trustee of the estate. The Trustee is proceeding with the orderly wind-up of the entity, including the termination of the lease for the manufacturing facility and the disposition in July 2018 of the entity's physical assets via auction, a significant portion of which was identified as necessary or useful for the Group's operations and was purchased by RM2 (Canada) Leasing, Inc. An initial meeting of creditors was held on May 18, 2018. The Trustee reports that it is reviewing the claims received from creditors, including affiliated RM2 entities, and that it seeks to satisfy the claims of creditors to the extent the estate permits and to finalize the voluntary liquidation process as promptly as possible.

With the sale on March 9, 2018 of the office building in Switzerland for net cash-proceeds of approximately USD 2m and the contract to dispose of excess fiberglass rovings through December 2018, the Company has substantially met the objective of monetizing its remaining non-core legacy assets.

The cost-reduction measures implemented by management are bearing fruit, with the monthly run rate currently reduced to USD0.8m, absent exceptional items. The Company continues to be mindful of opportunities to reduce costs and eliminate non-value added activities and of the necessity to retain a lean operating structure.

6)

Invest in RM2 ELIoT Smart Pallet add-on technologies. The Company continues to develop and enhance RM2 ELIoT's capabilities.

 

 

 

Financial Performance

 

Revenue generated by the Company decreased by USD 1.1m to USD 2.6m for the period ending June 30, 2018 principally due to the wind-down mode of its large 45 x 45 non-ELIoT pallet rental contract in the USA. The sale of pallets and fiberglass rovings from inventory each accounted for USD 0.3m of revenue in the period. The Group's financial result for the period ended June 30, 2018 is a loss of USD 17.3m, an improvement of USD 1.9m versus 1H 2017. Despite a better monitoring of the overall manufacturing costs for USD 0.5m, gross margins decreased by USD 0.5m as revenue decreased by USD 1.1m. The decline in the SGA expenses by USD 0.5m is explained by the removal of 2017 one-time costs (USD 1.8m), the cost saving measures undertaken by management at the end of Q1 2018 (USD 0.4m) and the negative non-cash impact of the share-based payment (USD 1.7m) following the removal of share price performance vesting conditions on restricted shares. Additionally, the sale of the Swiss building impacted positively with USD 1.4m, the remaining positive variance of USD 0.5m comes from lower net finance activities and taxes.

 

The Company traversed a period of extreme financial stress which culminated with the announcement on 29 March 2018 of the Company having simplified its capital structure and conditionally raised USD36 million before fees and expenses by a placing (to be effected in two tranches) of 2,535,211,265 new Ordinary Shares (the "Placing") to existing institutional investors, certain directors and members of senior management at a Placing Price of 1 pence per Placing Share (the "Placing Price"). The net proceeds from the Placing are intended to be used to fund (i) the retrofitting of existing inventory of RM2 BlockPal pallets with RM2 ELIoT chipsets, (ii) the production of new RM2 ELIoT pallets and (iii) SG&A. On 13 April 2018, following shareholder approval at an Extraordinary General Meeting of Shareholders, the Company converted its existing convertible preferred shares to ordinary shares and issued the first tranche of 1,279,049,295 new Ordinary Shares (gross proceeds of USD 18,162,500). The issuance of the second tranche of 1,256,161,970 new Ordinary Shares (gross proceeds of USD 17,837,500 (applying the GBP: USD exchange rate of 1.42 used in the shareholders' circular relating to the Placing)) is to take place ten business days following a drawdown notice issued by the Company. It is subject to the satisfaction of certain key performance indicators, including reducing operating costs of the business to a pre-determined level, launching the next generation IoT Cat-M ELIoT pallets and achieving commercial deployment of RM2 ELIoT pallets, and reviewing the governance of the Company. The Company believes that it has already satisfied or that it is well positioned to satisfy the draw-down conditions, although determination is to be made by the Company's largest shareholder, Woodford Investment Management Limited.

In addition to the funds raised through the Placing, the Company raised gross proceeds of approximately £1.4m pursuant to an Open Offer which was launched on May 21, 2018. The Company issued 142,862,073 new Ordinary Shares of USD0.01 in the Company at the Placing Price of 1 pence per share.

 

Unrestricted cash reserves at 30 June 2018 were USD 12.9m (USD 13.3m including Trustee's activities), as compared to USD 3.9m at 31 December 2017. Cash outflow over the semester consisted of USD 5.5m of manufacturing expenses and USD 7.3m of SG&A, which was offset by the receipt of USD 19.7m from the issuance of equity and USD 2.0m net proceeds from the sale of the office building in Switzerland. Restricted cash in the amount of USD 1.9m remains on the balance sheet of 7636156 Canada, Inc., and its availability is subject to the outcome of the ongoing voluntary liquidation proceedings in Canada. Due to the significant restructuring implemented by management, the monthly cash burn of the Company has been reduced to USD 0.8m on a going-forward basis from July 2018, excluding exceptional items.

 

Future Funding & Outlook

 

The Company believes that it will have satisfied the conditions to drawdown the second tranche of the equity funding of approximately USD 17.8m (before adjusting for any GBP/USD exchange rate impact) in the course of the second semester of 2018. Determination of whether those conditions are met is at the discretion of Woodford Investment Management, the Company's largest shareholder and participant in the equity fundraise.

Having successfully achieved its objectives relating to transitioning to high-quality, outsourced manufacturing, streamlining operating costs, monetizing non-core legacy assets and moving away from non-ELIoT enabled pallet deployments, the Company is focused on activating inventory and deploying RM2 ELIoT Smart pallets in attractive contracts. The execution of the Company's roadmap faces certain challenges with respect to inserting disruptive products and technology in long-standing practices of traditional pallet supply chains, the availability of lower-cost Cat-M chipsets in the face of burgeoning global demand, and the timing of the roll-out of the Cat-M network globally which is in the hands of network operators. With the conversion of trials with large customers into long-term contracts taking longer than anticipated, the Company's expectation of turning EBITDA positive in 2019, as first noted on 9 March 2018, is challenging. The Company will provide further updates on this in due course and in the meantime, continues to implement measures to reduce its cost base.

 

 

Consolidated Statement of Comprehensive Income

 

For the six months ended 30 June 2018

 

 

 

 

 

 

Six months to 30

June 2018 Unaudited

USD

Six months to 30

June 2017 Unaudited

USD

Year to 31

December 2017

Audited

USD

 

Continuing operations

 

 

 

 

Revenue

6

2,645,689

3,715,661

6,557,044

Cost of sales

7

(13,000,813)

(13,560,841)

(34,849,544)

Gross profit

 

(10,355,124)

(9,845,180)

(28,292,500)

 

Administrative expenses

 

8

 

(8,235,129)

 

(8,697,551)

 

(15,001,932)

Other operating expenses

9.1

(12,088)

(16,010)

(81,909)

Other operating income

9.2

1,486,737

199,254

500,934

Operating loss

 

(17,115,604)

(18,359,487)

(42,875,408)

 

Finance costs

 

 

(635,342)

 

(2,484,463)

 

(2,708,809)

Finance income

 

460,754

1,824,454

1,945,887

Loss before tax

 

(17,290,192)

(19,019,496)

(43,638,330)

 

Income tax

 

 

(34,143)

 

(175,369)

 

(218,694)

Loss for the year

 

(17,324,335)

(19,194,865)

(45,857,024)

 

Other comprehensive income

Other comprehensive income to be reclassified in profit or loss in subsequent periods:

 

Exchange difference on translation of foreign operations

(622,369)

1,052,378

1,675,226

Other comprehensive income for the year, net of tax

(622,369)

1,052,378

1,675,226

Total comprehensive income for the year

(17,946,704)

(18,142,487)

(42,181,798)

 

 

Loss for the year attributable to:

 

 

 

Equity holders of the parent

(17,324,335)

(19,194,865)

(43,857,024)

 

 

Total comprehensive income for the year attributable to:

 

 

 

Equity holders of the parent

(17,946,704)

(18,142,587)

(42,181,798)

 

 

Loss per share

Basic loss per share attributable to ordinary equity holders of the parent

 

 

 

(0.01)

 

 

 

(0.05)

 

 

 

(0.11)

 

Diluted loss per share attributable to ordinary equity holders of the parent

 

(0.01)

 

 

(0.05)

 

 

(0.11)

 

 

 

Consolidated Statement of Financial Position

 

For the six months ended 30 June 2018

 

 

 

 

 

Notes

Six months to 30

June 2018 Unaudited

Six months to 30

June 2017 Unaudited

Year to 31

December 2017

Audited

 

USD

USD

USD

Assets

 

 

 

 

Non-current assets

 

 

 

 

Intangible assets

12

1,148,246

1,511,365

1,276,504

Property, plant & equipment - Other

10

25,816,044

34,272,150

28,717,071

Property, plant & equipment - Pallet pool

11

4,757,709

9,165,499

7,026,363

Investment property

 

-

1,342,853

-

 

 

31,721,999

46,291,866

37,019,938

Current assets

 

 

 

 

Inventories

13

18,125,903

17,453,334

16,614,995

Trade and other receivables

14

2,839,466

4,887,239

3,550,848

Other current financial assets

 

24,752

24,332

10,039

Fixed asset held for sale

 

-

-

2,657,744

Prepayments

 

711,136

503,720

1,024,503

Restricted Cash

 

1,790,961

1,954,384

2,035,642

Cash and cash equivalents

 

13,290,072

13,807,697

3,866,217

 

 

36,782,290

38,630,707

29,759,988

Total assets

 

68,504,289

84,922,573

66,756,129

 

Equity and liabilities

 

 

 

 

Equity

17

 

 

 

Issued capital

 

50,017,820

4,035,627

4,070,627

Restricted shares

 

-

884,999

1,348,157

Share premium

 

276,827,089

292,947,198

301,681,317

Retained earnings

 

(290,170,082)

(248,302,641)

(272,845,748)

Share based payment reserve

 

22,580,014

20,448,762

20,850,588

Treasury stock

 

(29,163)

(3,423)

(29,163)

Foreign currency translation reserve

 

(630,381)

(630,860)

(8,012)

Equity attributable to equity holders of the parent

 

58,595,296

69,379,662

55,067,766

 

 

 

 

 

Non-current liabilities

 

 

 

 

Interest bearing loans and borrowings

16

-

5,274,498

-

Deferred tax liabilities

 

23,161

2,550

43,751

 

 

23,161

5,277,048

43,751

Current liabilities

 

 

 

 

Interest bearing loans and borrowings

16

-

59,033

1,745,527

Trade and other payables

 

9,802,920

9,083,338

9,278,493

Deferred income

 

10,457

625,908

563,474

Current tax liabilities

 

72,456

497,583

80,914

 

 

9,885,832

10,265,862

11,668,409

Total liabilities

 

9,908,993

15,542,911

11,712,160

Total equity and liabilities

 

68,504,289

84,922,573

66,779,926

 

 

Consolidated Statement of Changes in Equity

 

For the six months ended 30 June 2018

 

Attributable to equity holders of the parent

 

Share capital

Share premium

 Convertible preferred shares

Retained earnings

Foreign currency translation reserve

Treasury

Share based payment reserve

Total equity

Stock

 

USD

USD

USD

USD

USD

USD

USD

USD

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

-

-

-

-

-

10,085,964

Convertible preferred shares issued in the year

-

-

461,719

-

-

-

-

461,719.43

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

 

 

 

 

 

 

 

 

 

Loss for the year

-

-

-

(24,662,159)

-

-

-

(24,662,159)

Other comprehensive income

-

-

-

-

622,848

-

-

622,848

Total comprehensive income

-

-

-

(24,662,159)

622,848

-

-

(24,039,311)

 

 

 

 

 

 

 

 

 

Shares issued in the period

35,000

-

-

-

-

-

-

35,000

Convertible preferred shares issued in the year

-

9,021,734

463,158

-

-

-

-

9,484,892

Cost of share issue

-

(287,615)

-

119,052

-

-

-

(168,563)

Repurchase of shares into treasury

-

-

-

-

-

(25,739)

-

(25,739)

Share based payments

-

-

-

-

-

-

401,826

401,826

Transaction with owners

35,000

8,734,119

463,158

119,052

-

(25,739)

401,826

9,727,415

As at 31 December 2017 (audited)

4,070,627

301,681,317

1,348,157

(272,845,748)

(8,012)

29,163

20,850,588

55,067,766

 

 

 

 

 

 

 

 

 

Loss for the year

-

-

-

(17,324,335)

-

-

-

(17,324,335)

Other comprehensive income

-

-

-

-

(622,369)

-

-

(622,369)

Total comprehensive income

-

-

-

(17,324,335)

(622,369)

-

-

(17,946,704)

 

 

 

 

 

 

 

 

 

Shares issued in the period

45,947,193

(24,536,470)

-

-

-

-

-

21,410,723

Convertible preferred shares issued in the year

-

-

(1,348,157)

-

-

-

-

(1,348,157)

Cost of share issue

-

(317,758)

-

-

-

-

-

(317,758)

Share based payments

-

-

-

-

-

-

1,729,426

1,729,426.08

Transaction with owners

45,947,193

(24,854,228)

(1,348,157)

-

-

-

1,729,426.08

21,474,234

As at 30 June 2018 (unaudited)

50,017,820

276,827,089

-

(290,170,083)

(630,381)

(29,163)

22,580,014

58,595,296

 

 

Consolidated Statement of Cash Flows

 

 

 

 

 

Notes

Six months to

30 June

2018Unaudited

Six months to 30 June 2017Unaudited

Year ended 31 December 2017Audited

Cash flows from operating activities

 

USD

USD

USD

Loss before tax

 

(17,290,192)

(19,019,496)

(43,638,330)

Adjustment to reconcile profit before tax to net cash flows

 

 

 

 

Amortization and depreciation of non-current assets

5/6/7/8

4,830,194

4,778,298

9,875,684

Impairment of current and non-current assets

 

995,150

-

2,450,597

Provision for bad debts

 

-

103,802

-

Share based payment charges

 

1,729,426

375,483

777,309

Finance income

 

-

44,730

(27,190)

Finance expenses

 

87,040

16,199

45,865

Unrealized foreign exchange gains

 

(4,511)

377,125

531,860

Net (gain)/ loss on disposal of PPE and intangible assets

 

 

(1,249,206)

 

11,800

 

(30,824)

Variation in working capital

 

 

 

 

(Increase)/decrease in inventories

 

(1,514,261)

(1,004,255)

(165,915)

Decrease/ (increase) in trade and other receivables

 

1,023,646

766,734

1,685,350

Increase/(decrease) in trade and other payables

 

(28,592)

4,814,167

4,946,888

(Increase)/decrease in restricted cash

 

244,681

(69,671)

(150,929)

Income tax paid

 

(91,508)

(170,293)

(596,028)

Net cash flows from operating activities

 

(11,268,133)

(9,064,837)

(24,295,663)

Cash flows from investing activities

 

 

 

 

(Increase)/decrease in intangible assets

 

-

(802)

(802)

(Increase)/decrease PPE in course of commissioning

 

1

(245,208)

(347,767)

Decrease/ (increase) in other PPE

 

(796,475)

(59,478)

(224,760)

Proceeds from the sale of PPE

 

3,949,862

-

70,498

(Increase)/decrease in pallet pool

 

(237,752)

(849,638)

(1,166,989)

Loans granted to third parties

 

(14,713)

(1,466)

12,828

Finance income received

 

-

44,730.00

27,190.00

Net cash flows from investing activities

 

2,900,923

(1,111,862)

(1,629,802)

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

Issuance of capital

13

19,744,808

10,547,740

19,899,011

Purchase of treasury shares

 

-

-

(25,740)

Repayment Proceeds from other and related party borrowings

 

 -

3,482,822

(15,383)

Interest paid

 

(87,040)

57,699

(45,865)

Repayment of other and related party borrowings

 

(1,745,527)

(16,199)

(32,099)

Net cash flows from financing activities

 

17,912,241

14,072,062

19,779,924

 

 

 

 

 

Net change in cash and cash equivalents

 

9,545,030

3,895,363

(6,145,541)

 

 

 

 

 

(Decrease)/increase in cash and cash equivalents

 

9,545,030

3,895,363

(6,145,541)

Cash and cash equivalents at 1 January

 

3,866,217

9,794,906

9,794,906

Exchange adjustment of cash and cash equivalents

 

(121,174)

117,428

216,852

Cash and cash equivalents at end of period

12

13,290,072

13,807,697

3,866,217

 

 

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 does 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 2017.

 

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 2017. 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 judgments, estimates and assumptions

 

When preparing the unaudited interim consolidated financial information, Management undertakes a number of judgments, estimates and assumptions about recognition and measurement of assets, liabilities, income and expenses. The actual results may differ from the judgments, estimates and assumptions made by Management, and will seldom equal the estimated results.

 

The judgments, 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 2017.

 

 

3.1 Going Concern

 

1H 2018 performance

 

The Group's financial result for the period ending 30 June 2018 is a loss of USD 17.3m (June 2017: loss of USD 19.2m), a decrease in the overall loss by USD 1.9m compared to the prior period. Despite a better monitoring of the overall manufacturing costs for USD 0.6m, gross margin decreased by USD 0.5m as revenue decreased by USD 1.1m. The decline in SGA expenses by USD 0.5m is explained by the removal of 2017 one-time costs (USD 1.8m), the cost saving measures undertaken by management at the end of Q1 2018 (USD 0.4m) and the negative non-cash impact of the share-based payment (USD 1.7m) following the removal of share price performance vesting conditions on restricted shares. Additionally, the sale of the Swiss building impacted positively with USD 1.4m, the remaining positive variance of USD 0.5m comes from lower net finance activities and taxes.

 

 

 

 

 

 

 

 

2018 equity funding

 

In 1H2108, in order to fund (i) the retrofitting of existing inventory of RM2 BlockPal pallets with RM2 ELIoT chipsets, (ii) the production of new RM2 ELIoT pallets and (iii) SG&A, the Company conditionally raised USD36 million before fees and expenses by a placing (to be effected in two tranches) of 2,535,211,265 new Ordinary Shares (the "Placing") to existing institutional investors, certain directors and members of senior management at a Placing Price of 1 pence per Placing Share (the "Placing Price"). On 13 April 2018, following shareholder approval at an Extraordinary General Meeting of Shareholders, the Company converted its existing convertible preferred shares to ordinary shares and issued the first tranche of 1,279,049,295 new Ordinary Shares (gross proceeds of USD 18,162,500).

 In addition to the funds raised through the Placing, the Company raised gross proceeds of approximately £1.4m pursuant to an Open Offer which was launched on May 21, 2018. The Company issued 142,862,073 new Ordinary Shares of USD0.01 in the Company at the Placing Price of 1 pence per share.

In accordance with the terms of the Placing, the issuance of the second tranche of 1,256,161,970 new Ordinary Shares (gross proceeds of USD 17,837,500 (applying the GBP: USD exchange rate of 1.42 used in the shareholders' circular relating to the Placing)) is to take place ten business days following a drawdown notice issued by the Company. It is subject to the satisfaction of certain key performance indicators, including reducing operating costs of the business to a pre-determined level, launching the next generation IoT Cat-M ELIoT pallets, achieving commercial deployment of RM2 ELIoT pallets, and reviewing the governance of the Company. The Company believes that it has already satisfied or that it is well positioned to satisfy the draw-down conditions, as described below, although determination is to be made by the Company's largest shareholder, Woodford Investment Management Limited.

 

Management undertook measures to reduce operating costs, including headcount reductions and site closures and relocations. The cost-reduction measures implemented by management are bearing fruit and are satisfy this drawdown condition. The Company continues to be mindful of opportunities to reduce costs and eliminate non-value added activities and of the necessity to retain a lean operating structure.

 

On 31 July 31 2018, AT&T informed the Company that the RM2 ELIoT units with new generation Cat-M chipsets successfully passed their internal certification process, thereby permitting their usage on the AT&T network, subject to PTCBR and FCC certification. The PTCBR and FCC certification is expected to be received before the end of Q3 2018. Cat-1 RM2 ELIoT pallets are in use in Phase 1 and pilot programs with blue-chips customers in North America.

The Company has reviewed governance of the Company and believes that the resulting measures it is in the process of implementing will satisfy the relevant drawdown condition for the second tranche of the Placing.

 

 Conclusion

 

The Directors have analysed the Group's situation and applied their best estimates to assumptions of the future development of the business for the 12-month beginning July 1, 2018. With the conversion of trials with large customers into long-term contracts taking longer than anticipated, the Company's expectation of turning EBITDA positive in 2019, as first noted on 9 March 2018, is challenging.

As described above, the Directors believe that the Company has already satisfied or that it is well positioned to satisfy the draw-down conditions necessary to call the second tranche of the equity funding, although determination is to be made by the Company's largest shareholder, Woodford Investment Management Limited. The issuance of the second tranche of the Placing, combined with existing resources and future revenue and continued attention to cost control, lead the Directors to believe that the Group has adequate resources to justify adopting the going concern basis in preparing its consolidated financial statements.

 

4. Business Review and Key Performance Indicators

 

The Company defines its key performance indicators to be the business revenues, the level of production and the monitoring of related ramp-up costs, the deployment of RM2 ELIoT pallets and the cash reserves of the business. Having simplified its capital structure and secured equity funding in April 2018, the Company now focuses on the execution of the underlying roadmap.

 

Revenues

 

Revenue generated by the Company in 1H2018 decreased by USD 1.1m compared to the prior period to reach USD 2.6m (1H2017: USD 3.7m). Despite an increase of USD 0.1m in the sale of pallets and a plateauing of the minor third-party asset tracking business located in Wales, the decrease in the revenue is due to the wind-down of the non-ELIoT enabled pallet contract with its largest customer in the United States with an impact to date of

 

USD 0.9m. After an initial sale of raw material for use in pallet production to Jabil last year (USD 0.7m for the first six months of 2017), in the period ending 30 June 2018 the Company sold USD 0.3m of fiberglass and has contracted with third party customers for the sale of a very large portion of its remaining excess inventory over the course of the second semester of 2018. In July and August 2018, a further USD 0.3m was shipped and billed to third parties.

 

 

Production and ramp-up costs

 

As described in the Chairman's statement, gross margins decreased by USD 0.5m as revenue dropped by USD 1.1m. Cost of goods therefore reduced by USD 0.6m. Following the voluntary liquidation of the Canadian manufacturing entity and the implementation of the new pricing mechanism agreed with Jabil, overall manufacturing expenses hitting the Profit and Loss statement in the cost of goods section decreased by USD 1.0m for the first semester, to USD 4.3m. In parallel, the Company commissioned an independent appraisal of the fair market value of idle assets in Canada. This appraisal resulted in a net impairment of USD 0.6m. Other items positively accounted for USD 0.2m.

Cost of goods amounts to USD 13.0m (USD 13.6m for the same period last year) and includes the following non-cash items totaling USD 5.1m: pallet depreciation (USD 2.6m), equipment depreciation (USD 2.2m), equipment impairment following the Canadian appraisal (USD 0.6m), and a positive variance of raw material and pallet impairment (USD 0.3m)

The cash impact of cost of goods sold is USD 7.9m, of which USD 4.0m are manufacturing ramp-up costs and USD 2.0m are logistical costs incurred pursuant to certain per-trip fee pallet contracts.

 

 

RM2 ELIoT deployment

 

On 13 April 2018, the Company announced a Phase 1 contract with a Fortune 500 customer which is expected to involve a significant deployment of RM2 ELIoT pallets. The initial implementation of RM2 ELIoT pallets under that contract was deferred but the deployment is now underway with promising results.

Subsequent to the reporting period, the Company successfully completed a 100-unit trial and then entered into a pilot agreement for an initial deployment of some 600 RM2 ELIoT pallets with one of the world's leaders in the logistics industry, serving both internal and external loops. Other trials with large multi-national corporations are progressing well. In particular, one large trial with a North American beverage customer has concluded with strong results and discussions on deployment terms are expected to continue over the coming months.  Promising trials are also underway with companies in the consumer goods and telecommunications industries.

 

With growing world-wide demand for IoT objects, the Company has noticed a tightening of availability of chipsets. It has issued purchase orders for some 63,000 Cat-1 tested and fully accredited chipsets to satisfy anticipated initial demand and pending final accreditation and availability of lower-cost Cat-M chipsets.

 

 

Cash reserves

 

Unrestricted cash reserves at 30 June 2018 stand at USD 12.9m (USD 13.3m including Trustee's activities), compared to USD 3.9m at 31 December 2017. Restricted cash decreased by USD 0.4m to USD 1.9m due to lease payments made to the landlord of the former manufacturing site in Canada following the voluntary liquidation process. The Company raised an aggregated amount of USD 19.7m of new equity capital between the first tranche of the Placing in April 2018 and the subsequent Open Offer to shareholders. The Company's cash flow, excluding Trustee's activities, is negative by USD 10.7m in the period ending 30 June 2018.

USD 5.5m was paid for the acquisition of pallets, comprised of the agreed pricing mechanism with Jabil (USD 5.0m) and associated one-time maintenance costs (USD 0.5m).

USD 2.0m was received for the sale of the Swiss building, leaving the true cash outflow of the business being USD 7.2m. Canada's contribution was USD 1.3m. The Company also acquired for USD 1.4m (including fees and taxes) from the estate of its Canadian affiliate in voluntary liquidation certain assets identified as necessary or useful for the Group's operations. Excluding Canada and these one-time-costs such as the asset purchase (USD 1.4m), the deposit to transition to a new smaller warehouse in Canada (USD 0.2m), the monthly cash burn of the Company has been reduced to USD 0.8m on a going-forward basis from July 2018, excluding exceptional items.

 

 

 

5. Significant events and transactions

 

Refer to the Chairman's statement and Note 20, Subsequent Events.

 

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 to 30 June 2018Unaudited

Six months to 30 June 2017Unaudited

Year ended 31 December 2017Audited

Sold pallets

 

224,479

71,489

291,752

Leased pallets

 

1,644,569

2,530,510

4,943,673

Rendering of logistical services

 

399,393

377,319

796,858

Disposal of raw material and work in progress

 

377,248

736,344

524,761

Total

 

2,645,689

3,715,661

6,557,044

 

 

 

Geographical information

The breakdown of the revenue allocation by area is as follows:

 

 

 

Six months to 30 June 2018Unaudited

Six months to 30 June 2017Unaudited

Year ended 31 December 2017Audited

 

USA

 

1,392,276

3,070,426

5,170,122

 

Europe

 

1,253,413

645,235

1,386,922

 

Total

 

2,645,689

3,715,661

6,557,044

 

 

 

 

 

 

 

 

 

 

 

 

 

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 to 30 June 2018Unaudited

Six months to 30 June 2018Unaudited

Year ended 31 December 2017Audited

Luxembourg

 

2,048,415

2,164,410

2,105,936

Rest of Europe

 

1,390,517

5,136,871

295,776

North America (including Mexico)

 

13,751,350

33,003,868

29,149,509

China

 

14,531,717

5,986,717

5,468,717

Total

 

31,721,999

46,291,866

37,019,938

 

 

 

Non-current assets for this purpose consist of property, plant and equipment, investment properties and intangible assets.

 

7. Cost of sales

 

 

 

 

Six months to 30 June 2018Unaudited

Six months to 30 June 2017Unaudited

Year ended 31 December 2017Audited

 

 

 

 

Cost of pallets sold - Blockpal

248,307

103,440

321,731

Cost of pallets sold - raw material / WIP

583,634

953,916

748,198

Cost of pallets sold - services

68,691

62,301

145,605

Amortization of pallet pool

2,558,247

2,407,565

4,752,926

Amortization of production tool

2,172,640

1,930,242

4,364,527

Cost of software, licenses and services

328,283

334,427

695,625

Production tool transfer

617,688

-

-

Factory absorption Canada

524,936

2,761,118

5,657,933

Factory absorption new set-up

3,746,445

2,500,000

12,062,760

Logistic costs

1,985,853

1,835,980

4,041,928

Impairment and repairs

32,005

222,472

1,735,595

Other

134,084

894,324

322,716

Total

13,000,813

13,560,841

34,849,544

 

 

 

 

 

8. Administrative expenses

 

 

 

Six months to 30 June 2018Unaudited

Six months to 30 June 2017Unaudited

Year ended 31 December 2017Audited

 

 

 

 

Payroll costs

3,288,651

3,391,199

6,537,941

Director's expenses (*)

325,000

36,041

122,800

Travel and expenses

275,360

433,212

1,010,469

One Time Costs China (VAT, import duties, …)

21,463

1,839,590

1,865,656

Consultant costs (AIM, Funding, …)

727,276

674,370

1,311,280

Audit/Tax/Legal costs

212,460

389,893

805,780

Insurance

79,119

88,636

172,163

ELIoT

600,456

328,432

1,021,504

Other

725,856

598,384

  733,502

Total cash

6,255,641

7,779,757

  13,581,094

Total cash - excluding One Time Costs

5,909,178

5,940,167

11,715,438

 

 

 

 

Share based payment (non-cash item)

1,729,426

375,483

777,308

Depreciation

250,062

542,311

  643,530

Total

8,235,129

8,697,551

15,001,932

 

(*): Director's expenses are considered as "one-time costs" for the first semester 2018 as per the agreement signed with management during the equity raise. Management is committed to refund the subscription to the Company via a mechanism of salary forbearance over an 18-month-period, which started in April 2018.

 

 

 

 

9. Other operating income and expenses

9.1 Other operating income

Six months to 30 June 2018Unaudited

Six months to 30 June 2017Unaudited

Year ended 31 December 2017Audited

 

 

 

 

Net gain on disposal of PPE

1,443,163

-

30,824

Rental income

34,360

199,254

297,265

Other

9,214

-

172,845

Total other operating income

1,486,737

199,254

500,934

 

 

 

 

 

 

 

 

 

9.2 Other operating expenses

Six months to 30 June 2018Unaudited

Six months to 30 June 2017Unaudited

Year ended 31 December 2017Audited

 

 

 

 

Direct operating expenses on rental-earning investment properties

12,088

16,010

76,673

Net loss on disposal of PPE

-

-

-

Other

-

-

6,236

Total other operating expenses

12,088

16,010

82,909

 

  

 

 

10. Property, plant and equipment- other

 

 

 Land & Building

Plant & EquipmentOthers

Plant & Equipment China/Mexico

Construction

in progress

 Total

 

 

 USD

USD

 USD

USD

 USD

 

Cost

 

 

 

 

 

 

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

Additions

-

122,087

43,191

102,559

267,837

Transfer/reclassification

(1,648,658)

(57,540)

(57,317)

114,857

(1,648,658)

Disposals

(75,954)

-

-

(75,954)

Exchange differences

(79,038)

499,468

57,317

60,406

538,153

As at 31 December 2017 (audited)

123,566

19,373,330

25,395,084

5,701,265

50,593,245

Additions

-

796,475

-

-

796,475

Transfer/reclassification

-

(2,697,325)

2,892,730

(195,405)

-

Disposals

-

(321,225)

-

(6,538)

(327,763)

Exchange differences

-

(704,854)

-

(87,171)

(792,025)

As at 30 June 2018 (unaudited)

123,566

16,446,401

28,287,814

5,412,151

 

50,269,932

 

 

 

 

 

 

Depreciation and impairment

 

 

 

 

 

As at 31 December 2016 (audited)

407,496

7,163,370

3,682,648

3,537,463

14,790,977

Amortization charge for the period

21,009

 

981,455

1,253,966

 

-

 

 2,256,430

Disposal

-

(9,659)

-

-

(9,659)

Exchange differences

15,184.69

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

Amortization charge for the period

20,208

1,294,142

1,245,428

-

2,559,778

Impairment charge for the period

 -

 

(168,763)

 

1,235,341

 

1,220,766

 

2,287,344

Transfer

(288,518)

-

-

-

(288,518)

Disposal

-

(48,081)

-

-

(48,081)

Exchange differences

(51,814)

169,332

8,416

-

125,934

As at 31 December 2017 (audited)

123,566

9,576,996

7,417,383

4,758,229

21,876,174

Amortization charge for the period

 

-

 

1,476,499

 

840,526

 

-

 

2,317,025

Impairment charge for the period

 -

 

774,937

 

105,001

 

-

 

879,938

Disposal

-

(133,806)

-

-

(133,806)

Exchange differences

-

(431,201)

-

(54,243)

(485,444)

 

 

 

 

 

 

As at 30 June 2018 (unaudited)

 123,566

11,263,426

 

8,362,910

 

4,703,986

 

24,453,888

 

 

Net book value

 

 

 

 

 

As at 30 June 2018 (unaudited)

 

-

 

5,182,976

 

19,924,904

 

708,164

 

25,816,044

As at 31 December 2017 (audited)

 

-

 

9,796,334

 

17,977,701

 

943,036

 

28,717,071

As at 30 June 2017 (unaudited)

 

1,407,573

 

10,554,903

 

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

            

 

 

 

11. Property, plant and equipment - Pallet pool

 

 

 

 

 

 

Pallet Pool

 

 

 

USD

Cost

 

 

 

As at 31 December 2016

 

 

23,216,363

Additions

 

 

849,638

As at 30 June 2017

 

 

24,066,001

Additions

 

 

317,351

As at 31 December 2017

 

 

24,383,352

Additions

 

 

237,752

As at 30 June 2018

 

 

24,621,104

 

 

 

 

Amortization and impairment

 

 

 

As at 31 December 2016

 

 

12,515,919

Depreciation charge for the year

 

 

2,384,583

Impairment charge for the year

 

 

-

As at 30 June 2017

 

 

14,900,502

Depreciation charge for the year

 

 

2,399,803

Impairment charge for the year

 

 

56,684

As at 31 December 2017

 

 

17,356,989

Depreciation charge for the year

 

 

2,391,194

Impairment charge for the year

 

 

115,212

As at 30 June 2018

 

 

19,863,395

 

 

 

 

Net book value

 

 

 

As at 30 June 2018

 

 

4,757,709

As at 31 December 2017

 

 

7,026,363

As at 30 June 2017

 

 

9,165,499

 

 

 

 

     

 

 

  

12. Intangible assets

 

 

Software

Trade names

Customer relationships

Acquired licenses and similar intangible assets

Goodwill

Total

 

 

 

 

 

 

 

 

USD

USD

USD

USD

USD

USD

Cost

 

 

 

 

 

 

As at 1 January 2017

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

186,140

As at 30 June 2017

2,243,015

130,020

390,060

1,223,503

898,302

4,884,901

Additions

-

-

-

-

-

-

Exchange differences

84,532

4,900

14,700

-

33,854

137,985

As at 31 December 2017

2,327,547

134,920

404,760

1,223,503

932,156

5,022,886

Additions

-

-

-

-

-

-

Exchange differences

(49,166)

(2,850)

(8,550)

-

(19,691)

(80,257)

As at 30 June 2018

2,278,381

132,070

396,210

1,223,503

912,465

4,942,629

 

 

 

 

 

 

 

Amortization and impairment

 

 

 

 

 

 

As at 1 January 2017

2,128,984

70,046

222,139

213,891

485,637

3,124,697

Amortization charge for the year

-

12,577

37,731

66,935

-

117,243

Exchange differences

114,031

4,391

13,173

-

-

131,595

As at 30 June 2017

2,243,015

91,014

273,043

280,826

485,637

3,373,535

Amortization charge for the year

-

12,883

38,649

66,965

-

118,496

Impairment

-

-

-

-

106,599

106,599

Exchange differences

84,532

4,039

12,116

-

47,064

147,751

As at 31 December 2017

2,327,547

107,936

323,808

347,791

639,300

3,746,382

Amortization charge for the year

-

13,753

41,259

66,963

 -

121,975

Exchange differences

(49,166)

(2,825)

(8,478)

-

(13,504)

(73,973)

As at 30 June 2018

2,278,381

118,864

356,589

414,754

625,795

3,794,383

 

 

 

 

 

 

 

Net book value

 

 

 

 

 

 

As at 30 June 2018

-

13,206

39,621

808,749

286,670

1,148,246

As at 31 December 2017

-

26,984

80,952

875,712

292,856

1,276,504

As at 30 June 2017

-

39,006

117,017

942,677

412,665

1,511,366

As at 1 January 2017

-

49,364

148,091

1,008,810

366,997

1,573,262

 

 

 

 

 

 

 

 

 

 

 

 

 

13. Inventories

 

As at 30 June 2018Unaudited

As at 30 June 2017Unaudited

As at 31 December 2017

 

USD

USD

USD

 

 

 

 

Raw Material

1,600,710

2,167,831

1,478,998

Work in progress

815,136

933,925

952,969

Finished pallets

15,710,057

14,351,577

14,183,028

Total inventory

18,125,903

17,453,334

16,614,995

 

 

 

 

 

14

. Trade receivables

As at 30 June 2018Unaudited

As at 30 June 2017Unaudited

As at 31 December 2017Audited

 

 

 

Trade receivables

 

932,589

 

2,660,852

 

1,623,565

 

Income tax receivables

181,082

5,251

4,457

 

Other tax receivables

391,701

1,261,090

1,093,409

 

Other receivables

1,334,094

960,046

829,417

 

Total Trade receivables

2,839,466

4,887,239

3,550,848

       

 

 

 

 

 

 

 

15 Trade payables

 

 

 

 

As at 30 June 2018Unaudited

USD

 

As at 30 June 2017Unaudited

USD

As at 31 December 2017Audited

USD

Trade payables

3,665,313

5,067,751

2,907,776

Employee compensation payables

31,620

103,137

21,629

Other tax payables

166,348

16,900

124,826

Other payables

5,939,639

3,895,550

6,224,263

Total trade and other payables

9,802,920

9,083,338

9,278,493

 

     

 

 

 

 

16 Interest-bearing loans and borrowings

 

 

 

 

As at 30 June 2018Unaudited

As at 30 June 2017Unaudited

As at 31 December 2017Audited

 

 

 

 

 

 

 

Effective interest rate

Maturity date

USD

USD

USD

 

 

 

 

 

 

Non-current interest-bearing loans and borrowings

 

 

 

 

 

CHF 1,700,000 Bank loan

1.80%

30 November 2020

-

1,776,979

-

(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

-

Shareholder's current account

 

 

-

3,484,892

-

Total non-current interest-bearing loans and borrowings

 

 

-

5,274,499

-

 

 

 

 

 

 

 

 

 

 

 

 

Current interest-bearing loans and borrowings

 

 

 

 

 

CHF 1,700,000 Bank loan (settled March 2018)

1.80%

30 November 2020

-

-

1,639,580

Short-term part of long-term bank loan

 

 

-

50,000

101,900

Hire purchase liabilities in excess of one year

 

 

-

9,033

  4,047

Total current interest-bearing loans and

 

 

-

59,033

1,745,527

borrowings

 

 

 

 

 

Total interest-bearing loans and borrowings

 

 

-

5,333,532

1,745,527

 

 

 

 

 

17 Share capital and reserves

 

2018

 

On 13 April 2018, the Company issued a total of 4,435,957,235 Ordinary Shares, consisting of 1,279,049,295 Ordinary Shares issued as part of the first tranche of the Placing, raising gross proceeds of USD18,162,500, and of the issuance of 3,156,907,940 new Ordinary Shares upon conversion of the outstanding 134,815,771 Convertible Preferred Shares (as further described in the Chairman's Statement). Following these issuances, no further Convertible Preferred Shares were outstanding and the Company's equity consisted of a single class of Ordinary Shares.

 

On 20 April 2018, a total of 15,900,000 shares were issued to Non-Executive Directors in lieu of cash compensation for the one-year period beginning July 1, 2017. The Remuneration Committee further decided on April 20, 2018 to remove restrictions related to the attainment of share price thresholds previously applied with respect to the free disposition of restricted shares. This removal of restriction applies to 22,157,680 Ordinary Shares.

 

On 15 June 2018, pursuant to an Open Offer to all shareholders, the Company raised gross proceeds of approximately £1.43m and issued 142,862,073 new Ordinary Shares.

 

As of 30 June 2018, the Company's issued share capital is comprised of 5,001,781,964 Ordinary Shares, of which 2,916,334 Ordinary Shares are held by the Company as non-voting treasury stock ("Treasury Shares"). The total number of voting rights in the Company is calculated as the number of outstanding Ordinary Shares, less the Treasury Shares, less the Ordinary Shares not able to be voted on due to restrictions applicable to certain holders as specified in the Company's Articles of Association, which results in a total voting rights figure of 3,434,380,332.

 

 

 

2017

 

On 17 February 2017, 757,500 restricted shares were issued to certain Directors in lieu of cash compensation for the first half of 2017 (and the second half of 2016 with respect to Frédéric de Mevius). 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 20 February 2017, the General Meeting of Shareholders decided the conversion of existing Convertible Preferred Shares into Class A Convertible Preferred Shares; it also decided the creation of a Class B Convertible Preferred Shares.

On 6 July 2017, 6,000,000 restricted shares were issued to key employees which are not exercisable until after three years and when the volume weighted average quoted price of the Ordinary Shares for a consecutive 30-day period equals or exceeds the lower of GBP 50p or 2.5 times the offering price of the first ordinary share placement following the issuance date of the restricted shares. Following the resignation of the recipient of 2,500,000 restricted shares, these shares were forfeited and transferred to the Company to be held as non-voting treasury stock.

In June and July 2017, the Company issued a total of 92,487,729 Class B Convertible Preferred Shares of USD 0.01 in the capital of the Company. See also Note 14.3.

As at 31 December 2017, RM2's issued share capital is 407,062,656 Ordinary Shares of USD 0.01 each and an aggregate of respectively 42,328,042 and 92,487,729 Class A and B 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 as at 31 December 2017 was 538,962,093.

 

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 14.3.

As at 31 December 2016, RM2's issued share capital is 400,305,156 Ordinary Shares of USD 0.01 each and 42,328,042 Convertible Preferred Shares of USD 0.01 in the capital of the Company, of which 397,334 Ordinary Shares are held by the Company as non-voting treasury stock.

The total number of voting rights in the Company as at 31 December 2016 was 442,235,864.

 

 

 

Ordinary shares issued and fully paid

 

Shares

 

USD

 

Par value per

share

At 30 June 2017 (unaudited)

403,562,656

4,0356,267

USD 0.01

Issue of ordinary shares on 6 July 2017

1,500,000

15,000

USD 0.01

Issue of ordinary shares on 6 July 2017

2,000,000

20,000

USD 0.01

At 31 December 2017 (audited)

407,062,656

4,070,627

USD 0.01

Issue of ordinary shares on 13 April 2018

1,279,049,295

12,790,493

USD 0.01

Issue of ordinary shares from

convertible pref. shares on 13 April 2018

3,156,907,940

 

31,569,079

 

USD 0.01

Issue of ordinary shares on 20 April 2018

15,900,000

159,000

USD 0.01

Issue of ordinary shares on 15 June 2018

142,862,073

1,428,621

USD 0.01

At 30 June 2018 (unaudited)

5,001,781,964

50,017,820

USD 0.01

     

 

 

Convertible Preferred Shares issued and fully paid

 

 

 

 

 

 

Shares

USD

Par value per share

 

 

 

 

 

At 30 June 2017 (unaudited)

 

88,499,998

885,000

USD 0.01

Issue of Convertible Preferred Shares on 17 July 2017

 

17,017,110

170,171

USD 0.01

Issue of Convertible Preferred Shares on 31 July 2017

 

29,298,663

292,987

USD 0.01

At 31 December 2017 (audited)

 

134,815,771

1,348,158

USD 0.01

Issue of ordinary shares as a result of conversion of convertible pref. shares on 13 April 2018

 

(134,815,771)

(1,348,158)

USD 0.01

At 30 June 2018 (unaudited)

 

-

-

-

         

 

 

Share premium

 

 

USD

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

Issue of Convertible Preferred Shares on 17 July 2017

3,314,720

Issue of Convertible Preferred Shares on 31 July 2017

5,707,013

Cost of shares issued

(287,615)

At 31 December 2017 (audited)

301,681,317

Issue of ordinary shares on 13 April 2018

5,372,007

Issue of ordinary shares as a result of conversion of convertible pref. shares on 13 April 2018

 (27,132,132)

Issue of ordinary shares on 13 April 2018

(3,088,790)

Issue of ordinary shares on 20 April 2018

(159,000)

Issue of ordinary shares on 15 June 2018

471,445

Cost of shares issued

(317,758)

At 30 June 2018 (unaudited)

 276,827,089

 

 

 

 

 

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 to 30 June 2018Unaudited

Six months to 30 June 2017Unaudited

Year ended 31 December 2017Audited

 

USD

USD

USD

Net loss attributable to ordinary equity holders of the parent for basic earnings

 

(17,324,335)

 

(19,194,865)

 

(43,857,023)

 

 

 

 

 

 

 

 

 

As at 30 June 2018

As at 30 June 2017

As at 31 December 2017

 

 

 

 

Weighted average number of ordinary shares for basic earnings per share

 

2,375,275,308

 

400,903,623

 

403,848,177

 

 

 

 

Weighted average number of ordinary shares adjusted for the effect of dilution

 

2,375,275,308

 

400,903,623

 

403,848,177

 

 

Loss per share

 

 

 

Basic

(0.01)

(0.05)

(0.11)

Diluted

(0.01)

(0.05)

(0.11)

 

 

 

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

 

Subsequent to the reporting period, the Company successfully completed a 100-unit trial and then entered into a pilot agreement for an initial deployment of some 600 RM2 ELIoT pallets with one of the world's leaders in the logistics industry, serving both internal and external loops. Other trials with large multi-national corporations are progressing well. In particular, one large trial with a North American beverage customer has concluded with strong results and discussions on deployment terms are expected to continue over the coming months. An ELIoT-enabled pallet is fitted with RM2 proprietary tracking technology which communicates its precise location, allowing misdirected or mishandled goods to be identified immediately, enabling customers to reduce loss, mishandling, spoilage and theft, thereby creating significant cost savings and supply chain efficiencies.

 

On 13 April 2018, the Company announced a Phase 1 contract with a Fortune 500 customer which is expected to involve a significant deployment of RM2 ELIoT pallets. The initial implementation of RM2 ELIoT pallets under that contract was deferred but the deployment is now underway with promising results.

 

Current deployment of RM2 ELIoT pallets utilizes Cat-1 technology. However, RM2 sees significant benefit in the transition to Cat-M technology as it comes on-stream due to its lower demand on battery resources and significantly lower-priced components. Global demand for Cat-M components is increasing rapidly and the ability of suppliers to meet all orders may be stretched. RM2 expects to transition to Cat-M as chipsets become available.

With the conversion of trials with large customers into long-term contracts taking longer than anticipated, the Company's expectation of turning EBITDA positive in 2019, as first noted on 9 March 2018, is challenging. The Company will provide further updates on this in due course and in the meantime, continues to implement measures to reduce its cost base.

 

New Board Appointments

 

The Company announced today the nomination of David Binks and Andrew Geisse to join the board of directors of the Company. Their appointment is being submitted to shareholders for confirmation at an EGM to be held on October 3, 2018.

 

 

Funding Update

 

The Company believes that it has already satisfied or that it is well positioned to satisfy the drawdown conditions under the Placing by the end of the year, although determination is to be made by the Company's largest shareholder, Woodford Investment Management Limited.

 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
 
END
 
 
IR DGGDCBUBBGIX
Date   Source Headline
17th Jan 202011:04 amRNSHolding(s) in Company
16th Jan 20205:30 pmRNSRM2 International
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3rd Oct 20182:35 pmRNSResult of EGM
18th Sep 20187:00 amRNSSignificant Contract
14th Sep 20187:00 amRNSBoard Appointments
14th Sep 20187:00 amRNSInterim Results
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5th Jun 20184:07 pmRNSUpdate on Open Offer

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