TIDMRM2
RNS Number : 1051Q
RM2 International SA
15 June 2015
RM2 International S.A.
Annual Results 2014
15(th) June 2015 - RM2 International S.A. ("RM2" or the
"Company"), the vertically-integrated innovator in pallet
development, manufacture, supply and management, announces its
financial results for the year ended 31 December 2014.
Highlights
-- New production facility in Vaughn, Ontario
fully operational with robust processes in
place to fulfill future contracts and facilitate
manufacturing of pallets in substantial numbers
-- Renewed senior level customer engagement leading
to clear expectations regarding planning of
future deployments
-- Demand for outright purchases more significant
than had been expected
-- Environmental benefits of the pallet proven,
as highlighted in an independent Life Cycle
Analysis report earlier this year
-- Following the previously announced significant
agreement with PPG Industries, an S&P 500/Fortune
200 company, RM2 has now agreed the sale of
a significant number of pallets to another
major industrial customer
-- Outlook strong with the deployment of pallets
expected to expand significantly over the remainder
of 2015 and into 2016
Chairman of RM2, Ian Molson, commented:
"During 2014, as we have previously reported, the Company faced
a number of challenges along the path to mass production and
commercialisation. As well as the relocation to our new production
facility, upgrades were made to personnel and procedures and
operations were further improved. I expect to report significant
progress in the coming months."
Chief Executive Officer, John Walsh, commented:
"We are now producing pallets in increasing numbers which
enables us to engage with leaders of large global businesses about
their deployment and makes the coming months very important for
RM2. Thus far the response of these key individuals has been very
satisfactory and we are confident in the future."
For further information:
+44 (0)20 8820
RM2 International S.A. 1412
John Walsh, Chief Executive Officer
Jean-Francois Blouvac, Chief Financial
Officer
Ruari McGirr, Head of Planning
and Communication
+44 (0)20 7397
RBC Capital Markets 8900
Tristan Lovegrove
Pierre Schreuder
Ema Jakasovic
+44 (0)20 7638
Citigate Dewe Rogerson 9571
Simon Rigby
Shelly Chadda
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 and CEO's Statement
We are pleased to announce RM2's results for the year ended 31
December 2014. Our IPO, raising a net $218 million, completed on 6
January of the year under review.
The funds were used to acquire plant and equipment and move to
our new facility in Vaughn, Ontario, allowing the Company to build
capacity to facilitate the delivery of our revolutionary pallets in
increasingly substantial numbers. An upgraded plant management team
has implemented more robust processes and procedures delivering
clear reporting and forecasting of our increasing production. We
have therefore this year been in a position to reengage with our
client base at senior levels and have strategic discussions
required to drive widespread adoption of such a new and
revolutionary platform in large and complex supply chains.
During the period of lower production where we established our
new manufacturing facility, we focused on smaller users, or local
decision makers, for whom our previous production levels were
adequate. Now we have increasingly clear expectations of which
organisations will pioneer large scale implementation of BLOCKPal
across a number of sectors and where there is generally board level
engagement. Our focus is on deploying, by rental or sale, BLOCKPal
in areas where goods are fast moving or the problems associated
with other pallets are most acute and where pallet retention is
strong, typically internal or inbound movements.
We have taken the opportunity to refine our marketing to focus
even more strongly on the wider attributes of the BLOCKPal which we
are confident will drive penetration as users become familiar with
the pallet and the Company. As well as the overwhelming advantages
of strength, durability and sustainability which as previously
reported were proven in an independent Life Cycle Analysis report,
our discussions indicate that areas including hygiene, health and
safety, and handling will be significant drivers of change.
During the year under review, as previously reported, there was
very limited production due to the factory move and other changes
associated with a transition to a mass production facility and
processes. During this period we have paid for all the plant and
machinery and whilst there is some further capital expenditure
being incurred in 2015, this is largely focused on areas in which
the new production facility management have identified significant
efficiency opportunities. Building a mass production facility with
such production levels also led to very high operating costs
relative to production which are expected to become much lower in
the future with increased production.
Although the Company retains strong cash balances ($82.8 million
at 31 December 2015), as actual production levels build up, capital
requirements increase. As a result, we are reviewing financing
proposals and are confident of putting satisfactory facilities in
place to fund expanded production against contracts.
Outlook
As our production levels increase, the challenge for RM2 is to
build a matching forward order book with an appropriate client base
that gives scale in parts of the supply chain that match our
velocity and retention targets. We believe we are engaged across a
range of sectors with key individuals in leading organisations and
that demand will grow significantly during this year and next.
We have invested in our sales and implementation teams, allowing
us to convert high level engagement into specific deployments with
minimal disruption to our clients' operations.
Following the announcement on 2 March 2015 of a significant
agreement with PPG, we today announce that we have agreed the sale
of a significant number of pallets to a second major industrial
customer. We expect outright purchases to remain a smaller part of
the business than rentals but for these industrial clients, who
have a deep understanding of the strength, durability and other
attributes of composite engineered products, purchase is both an
attractive option and a great endorsement of the product.
We expect to significantly expand deployment with our existing
clients and to start deployment with a number of further global
industry leaders over the balance of this year and next and for
these to form the platform for large scale and profitable
growth.
We would like to take this opportunity to thank our staff and
our shareholders and look forward to reporting further details as
the business develops.
Ian Molson, Chairman and John Walsh, Chief Executive Officer
Posting of Annual Report and Notice of AGM
The Company's Audited Consolidated Accounts for the year ended
31 December 2014 and (in compliance with Luxembourg law) its
Company-only Accounts for the year ended 31 December 2014 have been
posted to the Company's website www.rm2.com.
The Company's Annual General Meeting will be held June 30, 2015
at 9 am at 5, rue de la Chapelle, L-1325 Luxembourg.
Consolidated Statement of Comprehensive Income For the year
ended 31 December 2014
Notes 2014 2013
USD USD
Continuing operations
Revenue 16 2,000,416 104,204
Cost of sales 17 (21,609,717) (47,755)
------------- --------------
Gross profit (19,609,301) 56,449
Administrative expenses
Administrative expenses 18 (18,260,590) (33,529,382)
Cost in association with (4,570,385) -
the IPO
Other operating expenses 19 (656,023) (2,295,949)
Other operating income 19 670,927 1,106,294
------------- --------------
Operating loss (42,425,373) (34,662,588)
Finance costs 19 (5,666,397) (48,600,900)
Finance income 19 776,629 6,063,312
------------- --------------
Loss before tax (47,315,141) (77,200,176)
Income tax 20 97,391 (72,768)
------------- --------------
Loss for the year (47,217,750) (77,272,944)
============= ==============
Other comprehensive income
Other comprehensive income
to be reclassified in
profit or loss in subsequent
periods:
Exchange difference on
translation of foreign
operations 1,370,822 251,078
------------- --------------
Other comprehensive income
for the year, net of tax 1,370,822 251,078
Total comprehensive income
for the year (45,846,928) (77,021,866)
============= ==============
Loss for the year attributable
to:
Equity holders of the
parent (47,217,750) (77,270,973)
Non-controlling interests - (1,971)
------------- --------------
(47,217,750) (77,272,944)
============= ==============
Total comprehensive income
for the year attributable
to:
Equity holders of the
parent (45,846,928) (77,019,895)
Non-controlling interests - (1,971)
------------- --------------
(45,846,928) (77,021,866)
============= ==============
Loss per share 23
Basic loss per share attributable
to ordinary equity holders
of the parent (0.15) (0.62)
Diluted loss per share
attributable to ordinary
equity holders of the
parent (0.15) (0.62)
============= ==============
Consolidated Statement of Financial Position For the year ended
31 December 2014
Notes 2014 2013
USD USD
Assets
Non-current assets
Intangible assets 9 3,606,693 3,751,584
Property, plant & equipment
- Others 6 26,260,546 13,609,658
Property, plant & equipment
- Pallet pool 7 2,754,506 375,836
Investment property 8 1,396,512 1,596,847
34,018,257 19,333,925
Current assets
Inventories 11 7,017,188 1,524,792
Trade and other receivables 12 3,889,105 1,706,754
Other current financial
assets 10 59,548 65,979
Prepayments 2,830,642 452,873
Restricted cash 13 2,149,975 -
Cash and cash equivalents 13 82,882,794 4,215,344
98,829,252 7,965,742
Total assets 132,847,509 27,299,667
Equity and liabilities
Equity 14
Issued capital 3,227,772 1,561,828
Share premium 219,357,851 31,134,458
Retained earnings (117,613,540) (100,836,892)
Share based payment
reserve 16,958,803 15,743,333
Foreign currency translation
reserve 1,398,737 27,915
Equity attributable
to equity holders of
the parent 123,329,623 (52,369,358)
Non-controlling interests - -
Total equity 123,329,623 (52,369,358)
Non-current liabilities
Interest bearing loans
and borrowings 10 2,053,541 2,371,080
Deferred tax liabilities 20.2 403,286 534,523
2,456,827 2,905,603
Current liabilities
Interest bearing loans
and borrowings 10 28,573 31,230,713
Trade and other payables 15 6,160,275 44,587,313
Deferred income 678,397 4,072
Current tax liabilities 193,814 941,324
7,061,059 76,763,422
Total liabilities 9,517,886 79,669,025
Total equity and liabilities 132,847,509 27,299,667
Consolidated statement of changes in equity For the year ended
December 2014
Attributable to equity holders of the parent
Notes Foreign Share
currency based
Share Share Retained translation payment Non-controlling Total
capital premium earnings reserve reserve Total interests equity
USD USD USD USD USD USD USD USD
As at 31
December
2012 55,287,000 693,356 (42,269,357) (223,163) - 13,487,836 70,164 13,558,000
================= ====== ============= ============= ============== ============ =========== ============= ================ =============
Loss for the
year - - (77,270,973) - - (77,270,973) (1,971) (77,272,944)
Other
comprehensive
income - - - 251,078 - 251,078 - 251,078
----------------- ------ ------------- ------------- -------------- ------------ ----------- ------------- ---------------- -------------
Total
comprehensive
income - - (77,270,973) 251,078 - (77,019,895) (1,971) (77,021,866)
Absorption of
losses 14 (4,919,270) - 4,919,270 - - - - -
Decrease in par
value of shares
issued 14 (44,225,217) 44,225,217 - - - - - -
Losses
transferred
to share
premium 14 - (13,784,115) 13,784,115 - - - - -
Acquisition of
non-controlling
interests 5 - - - - - - (68,193) (68,193)
Purchase and
cancellation 14,
of own shares 19 (5,036,773) - - - - (5,036,773) - (5,036,773)
Shares issued in
the period 14 456,088 - - - - 456,088 - 456,088
Share based
payments 22 - - - - 15,743,333 15,743,333 - 15,743,333
Transaction with
owners (53,725,172) 30,441,102 18,703,385 - 15,743,333 11,162,648 (68,193) 11,094,455
Other movements - - 53 - - 53 - 53
As at 31
December
2013 1,561,828 31,134,458 (100,836,892) 27,915 15,743,333 (52,369,358) - (52,369,358)
================= ====== ============= ============= ============== ============ =========== ============= ================ =============
Loss for the
year - - (47,217,750) - - (47,217,750) - (47,217,750)
Other
comprehensive
income - - - 1,370,822 - 1,370,822 - 1,370,822
----------------- ------ ------------- ------------- -------------- ------------ ----------- ------------- ---------------- -------------
Total
comprehensive
income - - (47,217,750) 1,370,822 - (45,846,928) - (45,846,928)
Absorption of
losses 14 - (30,441,102) 30,441,102 - - - - -
Shares issued in
the period 14 1,665,944 223,097,977 - - - 224,763,921 - 224,763,921
Cost of share
issue - (4,433,482) - - - (4,433,482) - (4,433,482)
Share based
payments 22 - - - - 1,215,470 1,215,470 - 1,215,470
-------------
Transaction with
owners 1,665,944 188,223,393 30,441,102 - 1,215,470 221,545,909 221,545,909
-------------
As at 31
December
2014 3,227,772 219,357,851 (117,613,540) 1,398,737 16,958,803 123,329,623 - 123,329,623
================= ====== ============= ============= ============== ============ =========== ============= ================ =============
Consolidated Statement of Cash Flows For the year
ended 31 December 2014
Notes 2014 2013
Cash flows from operating
activities USD USD
Loss before tax (47,315,141) (77,200,176)
Adjustment to reconcile
profit before tax to net
cash flows
Amortisation and depreciation
of non-current assets 6/7/8/9 2,961,340 578,516
Provision for inventory
obsolescence - (1,447,797)
Share based payment charges 1,215,470 15,743,333
Transaction costs on capital
operations, including
IPO 4,570,385 1,701,995
Finance income (332,634) (6,063,312)
Finance expenses 822,896 48,600,900
Unrealised foreign exchange
gains 2,631,708 (277,824)
Net loss/(gain) on disposal
of PPE and intangible
assets 82,775 (737,000)
Variation in working capital
(Increase)/decrease in
inventories (5,492,396) (76,995)
(Increase)/decrease in
trade and other receivables (4,557,881) 560,484
Increase/(decrease) in
trade and other payables 2,247,291 3,593,681
(Increase)/decrease in
restricted cash 13 (2,149,975) -
Income tax paid (809,493) 54,584
Net cash flows from operating
activities (46,125,654) (14,969,611)
Cash flows from investing
activities
Net (purchase of)/proceeds
from intangible assets (1,065,674) -
Purchase of PPE under
construction (5,510,766) -
Net (purchase of)/proceeds
from other PPE (12,266,367) (4,268,631)
Loans granted to third
parties 6,430 5,482,755
Acquisition of a subsidiary,
net of cash acquired 5 - (3,253,708)
Finance income received 332,634 336,958
Dividend received from
investment - 2,302
------------- -------------
Net cash flows from investing
activities (18,503,743) (1,700,324)
Cash flows from financing
activities
Issuance of capital 14 224,763,920 456,088
Transaction costs on capital
operations charged against
share premium account (4,433,482) -
Acquisition of non-controlling
interests - (68,193)
Transaction costs on capital
operations, including
IPO (4,570,385) (1,701,995)
Proceeds from other and
related party borrowings 28,277 24,700,000
Transaction costs on issue
of new borrowings - (500,000)
Interest paid (308,359) (71,154)
Repayment of other and
related party borrowings (360,573) (2,779,302)
Settlement of loans and
costs following IPO
Repayment of other and
related party borrowings (24,700,000) -
DPEI Warrant settlement (40,000,000) -
Interest paid on borrowings (804,712) -
Fees in relation to loans 19.4 (6,175,000) -
------------- -------------
Net cash flows from financing
activities 143,439,686 20,035,444
Net change in cash and
cash equivalents 78,810,289 3,365,509
============= =============
Increase/decrease in cash
and cash equivalents 78,810,289 3,365,509
Cash and cash equivalents
at 1 January 4,193,136 864,209
Exchange adjustment of
cash and cash equivalents (120,631) (36,582)
Cash and cash equivalents
at 31 December 13 82,882,794 4,193,136
============= =============
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, L-1325 Luxembourg. The Company is the
ultimate parent entity of the RM2 Group (the "Group").
The Group is principally engaged in developing and selling
shipping pallets and providing related logistical services.
2 Basis of preparation
The consolidated financial statements comprises the consolidated
financial information of the Group as at 31 December 2014 and are
prepared under the historic cost convention as disclosed in the
accounting policies below.
The accounting policies which follow set out the policies
applied in preparing the consolidated financial statements.
2.1 Statement of compliance
The consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards
("IFRS") and IFRIC interpretations as issued by the International
Accounting Standards Board ("IASB") and IFRS Interpretations
Committee (IFRIC) and as adopted by the European Union ("EU").
2.2 Basis of consolidation
The consolidated financial statements comprise the financial
information of the Group and its subsidiaries. Subsidiaries are
consolidated from the date of acquisition, being the date on which
the Group obtains control, and continue to be consolidated until
the date when such control ceases. The financial information of the
subsidiaries is prepared for the same reporting period as the
parent company, using consistent accounting policies. All
intra-group balances, transactions and dividends are eliminated in
full.
Subsidiaries and business combinations
Subsidiaries are all entities, including structured entities,
over which the group has control. The group controls an entity when
the group is exposed to, or has rights to, variable returns from
its involvement with the entity and has the ability to affect those
returns through its power over the entity. Subsidiaries are fully
consolidated from the date on which control is transferred to the
group. They are deconsolidated from the date that control ceases.
The Group uses the acquisition method of accounting to account for
the acquisition of subsidiaries.
The consideration transferred on acquisition is measured as the
fair value of the assets given, equity instruments issued and
liabilities incurred or assumed at the date of exchange.
Identifiable assets acquired and liabilities and contingent
liabilities assumed in a business combination are measured
initially at their fair values at the acquisition date,
irrespective of the extent of any non-controlling interest. The
excess of the consideration transferred over the fair value of the
Group's share of the identifiable net assets acquired is recorded
as goodwill. If the consideration transferred acquisition is less
than the fair value of the net assets of the subsidiary acquired,
the difference is recognised directly in profit or loss.
Acquisition costs are written off to profit or loss.
Inter-company transactions, balances and unrealised gains on
transactions between group companies are eliminated. Unrealised
losses are also eliminated unless the transaction provides evidence
of an impairment of the asset transferred. Accounting policies of
subsidiaries have been changed where necessary to ensure
consistency with the policies adopted by the Group.
The subsidiaries of the Group are listed in note 24.
3 Summary of significant accounting policies
The principal accounting policies are summarised below:
3.1 Foreign currencies
The Group's consolidated financial statements are presented in
United States Dollars ("USD"), which is also the parent company's
functional currency. For each entity the Group determines the
functional currency and items included in the financial statements
of each entity are measured using that functional currency.
Transactions and balances
Transactions in foreign currencies are initially recorded by the
Group's entities at their respective functional currency spot rates
at the date the transaction first qualifies for recognition.
Monetary assets and liabilities denominated in foreign currencies
are translated at the functional currency spot rates of exchange at
the reporting date.
Differences arising on settlement or translation of monetary
items are recognised in profit or loss.
Non-monetary items that are measured in terms of historical cost
in a foreign currency are translated using the exchange rates at
the dates of the initial transactions. Non-monetary items measured
at fair value in a foreign currency are translated using the
exchange rates at the date when the fair value is determined. The
gain or loss arising on translation of non-monetary items measured
at fair value is treated in line with the recognition of gain or
loss on change in fair value of the item (i.e. translation
differences on items whose fair value gain or loss is recognised in
other comprehensive income or profit or loss are also recognised in
other comprehensive income or profit or loss, respectively).
Group companies
On consolidation, the assets and liabilities of foreign
operations are translated into USD at the rate of exchange
prevailing at the reporting date and their income statements are
translated at average exchange rate prevailing during the financial
year. The exchange differences arising on translation for
consolidation are recognised in other comprehensive income. On
disposal of a foreign operation, the component of other
comprehensive income relating to that particular foreign operation
is recognised in profit or loss.
Any goodwill arising on the acquisition of a foreign operation
and any fair value adjustments to the carrying amounts of assets
and liabilities arising on the acquisition are treated as assets
and liabilities of the foreign operation and translated at the spot
rate of exchange at the reporting date.
3.2 Going concern
The consolidated financial statements have been prepared
assuming the Group will continue as a going concern. Under the
going concern assumption, an entity is ordinarily viewed as
continuing in business for the foreseeable future with neither the
intention nor the necessity of liquidation, ceasing trading or
seeking protection from creditors pursuant to laws or regulations.
In assessing whether the going concern assumption is appropriate,
management has considered the company's existing working capital,
its capacity to raise external financing and management is of the
opinion that the Group has adequate resources to undertake its
planned program of activities for the 12 months from the date of
the closing of the consolidated financial statements.
On 6 January 2014, the parent company of the Group RM2
International SA completed a successful Initial Public Offering
(IPO) on the London Stock Exchange AIM market, raising gross
proceeds of approximately GBP137.2 million (equivalent to
approximately USD 225 million) to expand its production capacity
and to fund the production of pallets for rental and sale.
Following the IPO, the Group terminated the DPEI Warrant Agreement
by paying USD 40,000,000 and repaid all of the bridging loans as
detailed in Note 10.
3.3 Property, plant and equipment
Initial recognition and measurement
Property, plant and equipment ("PPE") are tangible assets used
by the Group for its own production or supply of goods or services,
or for administrative purposes and are expected to be used during
more than one period. PPE is recognised when it is probable that
future economic benefits associated with the asset will flow to the
Group and if the cost can be measured reliably.
PPE is initially recognised at cost. Such cost includes the
purchase price and all cost incurred in bringing the assets to the
location and condition for its operation in the manner intended by
management. The cost of the PPE includes also the borrowing costs
for long-term construction projects if the recognition criteria are
met.
The pallet pool is initially recognised at the standard cost of
production including all expenses directly attributable to the
manufacturing process and portions of related production overheads,
based on normal operating capacity.
When significant parts of property, plant and equipment will be
required to be replaced, the Group will recognise such parts as
individual assets with specific useful lives and depreciate them
accordingly. Likewise, when a major inspection will be performed,
its cost will be recognised in the carrying amount of the plant and
equipment as a replacement if the recognition criteria are
satisfied. All other repair and maintenance costs will be
recognised in profit or loss as incurred.
Finished goods (under inventory) represent pallets produced and
not yet sold or deployed via the pallet pool in property, plant and
equipment.
Subsequent measurement
PPE is subsequently measured at cost less any accumulated
depreciation and any accumulated impairment losses.
Depreciation is calculated on a straight-line basis over the
estimated useful lives of the assets as follows:
Buildings 30 years
Plant and equipment 3 to 20 years
Pallet Pool 5 years
PPE under construction not depreciated
An item of PPE and any significant part initially recognised is
derecognised upon disposal or when no future economic benefits are
expected from its use or disposal. Any gain or loss arising on
de-recognition of the asset (calculated as the difference between
the net disposal proceeds and the carrying amount of the asset) is
included in profit or loss when the asset is derecognised.
The residual values, useful lives and methods of depreciation of
PPE are reviewed at each financial year end and adjusted
prospectively, if appropriate. Further explanation on management
estimates and assumptions is disclosed in note 4.
The Group has not applied revaluation on any of its PPE.
3.4 Leases
The determination of whether an arrangement is, or contains, a
lease is based on the substance of the arrangement at the inception
date. The arrangement is assessed for whether fulfilment of the
arrangement is dependent on the use of a specific asset or assets
or the arrangement conveys a right to use the asset or assets, even
if that right is not explicitly specified in an arrangement.
Group as a lessee
Leases where a significant portion of the risks and rewards of
ownership is retained by the lessor are classified as operating
leases. Payments made under operating leases are charged to profit
or loss on a straight-line basis over the period of the lease.
The aggregate benefit of lease incentives are recognised as a
reduction to the expense recognised over the lease term on a
straight line basis.
Leases of property, plant and equipment where the Group has
substantially all the risks and rewards of ownership are classified
as finance leases. Finance leases are capitalised at the lease's
commencement date at the lower of the fair value of the leased
property or the present value of the minimum lease payments. Each
lease payment is allocated between the liability and finance
charges so as to achieve a constant rate on the finance balance
outstanding. The corresponding rental obligations, net of finance
charges, are included in long-term and short-term borrowings. The
interest element of the finance cost is charged to the profit or
loss over the lease period so as to produce a constant periodic
rate of interest on the remaining balance of the liability for each
period. The property, plant and equipment acquired under finance
leases are depreciated over the shorter of the useful life of the
asset or the lease term.
Group as a lessor
Leases in which the Group does not transfer substantially all
the risks and benefits of ownership of an asset are classified as
operating leases. Initial direct costs incurred in negotiating an
operating lease are added to the carrying amount of the leased
asset and recognized over the lease term on the same basis as
rental income. Contingent rents are recognized as revenue in the
period in which they are earned.
Revenue arising on operating leases for pallets is accounted for
as on a straight line basis or a usage basis in accordance with the
contract.
Rental income arising from operating leases on investment
properties is accounted for on a straight-line basis over the lease
terms and included in other operating income.
3.5 Borrowing costs
Borrowing costs directly attributable to the acquisition,
construction or production of an asset that necessarily takes a
substantial period of time to get ready for its intended use or
sale are capitalised as part of the cost of the asset. All other
borrowing costs are expensed in the period in which they occur.
Borrowing costs consist of interest and other costs that an entity
incurs in connection with the borrowing of funds.
3.6 Investment property
Investment properties are measured initially at cost, including
transaction costs. Subsequent to initial recognition, the Group has
decided to measure investment properties using the cost model.
Investment properties are measured similarly to property, plant and
equipment as described in note 3.3.
The fair value, which reflects market conditions at the
reporting date, is disclosed in the notes to the consolidated
financial statements.
Investment properties are derecognised either when they have
been disposed of or when they are permanently withdrawn from use
and no future economic benefit is expected from their disposal. The
difference between the net disposal proceeds and the carrying
amount of the asset is recognised in the income statement in the
period of de-recognition.
Transfers are made to or from investment property only when
there is a change in use. For a transfer from investment property
to owner-occupied property, the deemed cost for subsequent
accounting is the fair value at the date of change in use. If
owner-occupied property becomes an investment property, the Group
accounts for such property in accordance with the policy stated
under property, plant and equipment up to the date of change in
use.
3.7 Intangible assets
Intangible assets acquired separately are measured on initial
recognition at cost. The cost of intangible assets acquired in a
business combination is its fair value as at the date of
acquisition. Following initial recognition, intangible assets are
carried at cost less any accumulated amortisation and accumulated
impairment losses, if any.
The useful lives of intangible assets are assessed as finite,
except goodwill.
Intangible assets with finite lives are amortised over the
useful economic life and assessed for impairment whenever there is
an indication that the intangible asset may be impaired. The
amortisation period and the amortisation method for an intangible
asset with a finite useful life are reviewed at least at the end of
each reporting period. Changes in the expected useful life or the
expected pattern of consumption of future economic benefits
embodied in the asset is accounted for by changing the amortisation
period or method, as appropriate, and are treated as changes in
accounting estimates. The amortisation expense on intangible assets
with finite lives is recognised in profit or loss in the expense
category consistent with the function of the intangible assets.
Intangible assets with indefinite useful lives (goodwill) are
not amortised, but are tested for impairment annually at the
cash-generating unit level (see note 9 for details and
assumptions). The assessment of indefinite life is reviewed
annually to determine whether the indefinite life continues to be
supportable. If not, the change in useful life from indefinite to
definite is made on a prospective basis.
Gains or losses arising from de-recognition of an intangible
asset are measured as the difference between the net disposal
proceeds and the carrying amount of the asset and are recognised in
profit or loss when the asset is derecognised.
Amortisation is calculated on the straight-line method to write
off the cost of each asset to their residual values, over their
estimated useful life. The annual amortisation periods are as
follows:
Software 3 years
Trade names 5 years
Customer Relationship 5 years
Licences 3 to 5 years
Goodwill Not amortized
3.8 Research and development costs
Research costs are expensed as incurred. Development
expenditures on an individual project are considered as an
intangible asset when the Group can demonstrate:
- The technical feasibility of completing
the intangible asset so that the asset
will be available for use or sale
- Its intention to complete and its ability
to use or sell the asset
- How the asset will generate future economic
benefits
- The availability of resources to complete
the asset
- The ability to measure reliably the expenditure
during development
Following initial recognition of the development expenditure as
an asset, the asset is carried at cost less any accumulated
amortisation and accumulated impairment losses. Amortisation of the
asset begins when development is complete and the asset is
available for use. It is amortised over the period of expected
future benefit. Amortisation is recorded in cost of sales. During
the period of development, the asset is tested for impairment
annually.
To date no amounts have been capitalised in respect of the
development phase of internal projects as management have assessed
that they are unable to demonstrate that they have met all of the
recognition criteria.
3.9 Inventories
Inventories are stated at the lower of cost or net realizable
value. Costs incurred in bringing each product to its present
location and conditions are accounted for as follows:
Raw materials Purchase cost
Finished goods Standard cost of production
and work in progress including all expenses directly
attributable to the manufacturing
process and portions of related
production overheads, based
on normal operating capacity.
Pallets are held as inventory prior to being deployed in the
pallet pool or sold direct to customer.
Net realisable value is the estimated selling price in the
ordinary course of business, less estimated costs of completion and
the estimated costs necessary to make the sale.
When the net realizable value of stock is lower than its cost,
provisions for impairment are created to reduce the value of the
stock to its net realizable value.
The cost of inventories is recognised as an expense in the
period in which the related revenue is recognised.
3.10 Impairment on non-financial assets
Non-financial assets are reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount may
not be recoverable. An impairment loss is recognised for the amount
by which the carrying amount of the asset exceeds its recoverable
amount, which is the higher of an asset's net selling price and
value in use or fair value less cost to sell determined by using
discounted cash flow method. For the purposes of assessing
impairment, assets are grouped at the lowest levels for which there
are separately identifiable cash flows (cash generating units).
The future discounted cash flow method used to determine the
value in use or fair value less cost to sell is usually, but not
always, based on cash flow projections over for the next 3
years.
Impairment losses of continuing operations are recognised in
profit or loss in those expense categories consistent with the
function of the impaired asset.
For assets excluding goodwill, an assessment is made at each
reporting date as to whether there is any indication that
previously recognised impairment losses may no longer exist or may
have decreased. If such indication exists, the Group estimates the
asset's or cash-generating unit's recoverable amount. A previously
recognised impairment loss is reversed only if there has been a
change in the assumptions used to determine the asset's recoverable
amount since the last impairment loss recognised. The reversal is
limited so that the carrying amount of the asset does not exceed
its recoverable amount, nor exceed the carrying amount that would
have been determined, net of depreciation, had no impairment loss
been recognised for the asset in prior years. Such reversal is
recognised in profit or loss unless the asset is carried at a
revalued amount, in which case the reversal is treated as a
revaluation reserve.
For the purpose of impairment testing, goodwill acquired in a
business combination is allocated to each of the Cash Generating
Units (CGUs), or groups of CGUs, that is expected to benefit from
the synergies of the combination. Each unit or group of units to
which the goodwill is allocated represents the lowest level within
the entity at which the goodwill is monitored for internal
management purposes. Goodwill is monitored at the operating segment
level.
Goodwill impairment reviews are undertaken annually or more
frequently if events or changes in circumstances indicate a
potential impairment. The carrying value of the CGU containing the
goodwill is compared to the recoverable amount, which is the higher
of value in use and the fair value less costs of disposal. Any
impairment is recognised immediately as an expense and is not
subsequently reversed.
3.11 Financial instruments
3.11.1 Financial assets
3.11.1.1 Initial recognition and measurement
The Group classifies its financial assets in the following
categories: at fair value through profit and loss, loans and
receivables, held-to-maturity investments and available-for-sale.
The classification depends on the purpose for which the financial
assets were acquired. Management determines the classification of
its financial assets at initial recognition and re-evaluates this
designation at every reporting date.
All financial assets are recognised initially at fair value
plus, in the case of financial assets not at fair value through
profit or loss, directly attributable transaction costs.
The Group's financial assets include cash and short-term
deposits, trade and other receivables, other current and
non-current assets which are classified in the category of loans
and receivables and available-for-sale financial assets. The Group
does not have held-to-maturity investments.
3.11.2 Subsequent measurement
3.11.2.1 Loans and receivables:
Loans and receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active
market. They are included in current assets except for maturities
greater than 12 months after the balance sheet date. These are
classified as non-current assets.
After initial measurement, they are subsequently measured at
amortised cost using the effective interest rate method ("EIR"),
less impairment. Amortised cost is calculated by taking into
account any discount or premium on acquisition and fees or costs
that are an integral part of the EIR. The EIR amortisation is
included in finance income in the statement of comprehensive
income. The losses arising from impairment are recognised in the
finance costs in the statement of comprehensive income.
3.11.3 De-recognition
A financial asset is derecognised when:
The rights to receive cash flows from the asset have
expired;
The Group has transferred its rights to receive cash flows from
the asset or has assumed an obligation to pay the received cash
flows in full without material delay to a third party under a
'pass-through' arrangement; and either (a) the Group has
transferred substantially all the risks and rewards of the asset,
or (b) the Group has neither transferred nor retained substantially
all the risks and rewards of the asset, but has transferred control
of the asset; and
When the Group has transferred its rights to receive cash flows
from an asset or has entered into a 'pass-through' arrangement, and
has neither transferred nor retained substantially all of the risks
and rewards of the asset nor transferred control of the asset, the
asset is recognised to the extent of the Group's continuing
involvement in the asset.
In that case, the Group also recognizes an associated liability.
The transferred asset and the associated liability are measured on
a basis that reflects the rights and obligations that the Group has
retained.
Continuing involvement that takes the form of a guarantee over
the transferred asset is measured at the lower of the original
carrying amount of the asset and the maximum amount of
consideration that the Group could be required to repay.
3.11.4 Impairment of financial assets
The Group assesses at each balance sheet date whether there is
objective evidence that a financial asset is impaired. A financial
asset is deemed to be impaired if, and only if, there is objective
evidence of impairment as a result of one or more events that have
occurred after the initial recognition of the asset and that event
has an impact on the estimated future cash flows of the financial
asset or the group of financial assets that can be reliably
estimated. Evidence of impairment may include, but is not limited
to, indications that the debtors or a group of debtors are
experiencing significant financial difficulty, default or
delinquency in interest or principal payments.
3.11.4.1 Financial assets carried at amortised cost:
For financial assets carried at amortised cost, the Group first
assesses whether objective evidence of impairment exists
individually for financial assets that are individually
significant.
If there is objective evidence that an impairment loss has been
incurred, the amount of the loss is measured as the difference
between the assets carrying amount and the present value of
estimated future cash flows (excluding future expected credit
losses that have not yet been incurred). The present value of the
estimated future cash flows is discounted at the financial assets'
original effective interest rate. If a loan has a variable interest
rate, the discount rate for measuring any impairment loss is the
current effective interest rate.
The carrying amount of the asset is reduced through the use of
an allowance account and the amount of the loss is recognised in
the statement of comprehensive income. Interest income continues to
be accrued on the reduced carrying amount and is accrued using the
interest rate used to discount the future cash flows for the
purpose of measuring the impairment loss. The interest income is
recorded as part of finance income in the statement of
comprehensive income. If, in a subsequent year, the amount of the
estimated impairment loss increases or decreases because of an
event occurring after the impairment was recognised, the previously
recognised impairment loss is increased or reduced by adjusting the
allowance account. If a future write-off is later recovered, the
recovery is credited to finance costs in the statement of
comprehensive income.
3.12 Financial liabilities
3.12.1 Initial recognition and measurement
Financial liabilities are classified as financial liabilities at
fair value through profit or loss or other financial liabilities as
appropriate. The Group determines the classification of its
financial liabilities at initial recognition.
All financial liabilities are recognised initially at fair value
and in the case of loans and borrowings, plus directly attributable
transaction costs.
The Group's other financial liabilities include trade and other
payables, borrowings and long-term payables.
3.12.2 Subsequent measurement
The measurement of financial liabilities depends on their
classification as follows:
3.12.2.1 Other financial liabilities:
After initial recognition, other financial liabilities are
subsequently measured at amortised cost using the effective
interest rate method. Gains and losses are recognised in the
statement of comprehensive income when the liabilities are
derecognised as well as through the effective interest rate method
amortisation process.
Amortised cost is calculated by taking into account any discount
or premium on acquisition and fees or costs that are an integral
part of the EIR. The EIR amortisation is included in finance costs
in the statement of comprehensive income.
Other financial liabilities are classified as current
liabilities unless the Group has an unconditional right to defer
the settlement of the liability for at least 12 months after the
balance sheet date.
3.12.3 De-recognition
A financial liability is derecognised when the obligation under
the liability is discharged or cancelled or expires. When an
existing financial liability is replaced by another from the same
lender on substantially different terms, or the terms of an
existing liability are subsequently modified, such an exchange or
modification is treated as a de-recognition of the original
liability and the recognition of a new liability, and the
difference in the respective carrying amounts is recognised in the
statement of comprehensive income.
3.12.3.1 Offsetting of financial instruments
Financial assets and financial liabilities are offset and the
net amount reported in the consolidated statement of financial
position if, and only if, there is a currently enforceable legal
right to offset the recognised amounts and there is an intention to
settle on a net basis, or to realize the assets and settle the
liabilities simultaneously.
3.13 Cash and cash equivalents
Cash and cash equivalents are carried in the statement of
financial position at fair value. For the purposes of the cash flow
statement, cash and cash equivalents are comprised of cash on hand
and deposits held on call with banks having an original maturity of
3 months of less. In the statement of financial position, bank
overdrafts are included in borrowings under current liabilities net
of any related restricted cash.
3.14 Taxes
Current income tax
Current income tax assets and liabilities for the current period
are measured at the amount expected to be recovered from or paid to
the taxation authorities. A provision is made for corporation tax
for the reporting period using the tax rates that have been
substantially enacted for each company at the reporting date in the
country where each company operates and generates taxable
income.
Current income tax relating to items recognised directly in
equity is recognised in equity and not in the statement of
comprehensive income.
Management periodically evaluates positions taken in the tax
returns with respect to situations in which applicable tax
regulations are subject to interpretations and establishes
provisions where appropriate.
Deferred income tax
Deferred income tax is provided for using the liability method
on all temporary differences arising between the tax bases of
assets and liabilities and the carrying amounts in the financial
statements. The deferred tax is calculated on currently enacted tax
rates that are expected to apply when the temporary differences
reverse. Where an overall deferred taxation asset arises, it is
only recognised in the financial statements where its
recoverability is foreseen with reasonable certainty.
Deferred income tax is provided on temporary differences arising
on investments in subsidiaries except where the timing of the
reversal of the temporary difference is controlled by the Group and
it is probable that the temporary difference will not reverse in
the foreseeable future.
3.15 Pensions and other post-employment benefits
A defined contribution plan is a pension plan under which the
group pays fixed contributions into a separate entity. The group
has no legal or constructive obligations to pay further
contributions if the fund does not hold sufficient assets to pay
all employees the benefits relating to employee service in the
current and prior periods.
The group pays contributions to publicly or privately
administered pension insurance plans on a mandatory, contractual or
voluntary basis. The group has no further payment obligations once
the contributions have been paid. The contributions are recognised
as employee benefit expense when they are due.
The Group does not operate any defined benefit pension plan.
3.16 Provisions, contingent assets and liabilities
Provisions
Provisions are recognised when the Group has a present legal or
constructive obligation as a result of past events, it is probable
that an outflow of resources will be required to settle the
obligation, and a reliable estimate of the amount of the obligation
can be made. Where the Group expects a provision to be reimbursed,
for example under an insurance contract, the reimbursement is
recognised as a separate asset but only when the reimbursement is
virtually certain. The expense relating to any provision is
presented in the statement of comprehensive income net of any
reimbursement. Provisions are not recognised for future operating
losses.
Provisions are measured at the estimated expenditure required to
settle the present obligation, based on the most reliable evidence
available at the reporting date, including the risks and
uncertainties associated with the present obligation. Where there
are a number of similar obligations, the likelihood that an outflow
will be required in settlement is determined by considering the
class of obligations as a whole. Provisions are discounted to their
present values, where the time value of money is material.
Any reimbursement that the Group can be virtually certain to
collect from a third party with respect to the obligation is
recognised as a separate asset. However, this asset may not exceed
the amount of the related provision.
In those cases where the possible outflow of economic resources
as a result of present obligations is considered improbable or
remote, no liability is recognised.
Contingent assets
A contingent asset is a possible asset that arises from past
events and whose existence will be confirmed only by the occurrence
or non-occurrence of one or more uncertain future events not wholly
within the control of the entity.
Contingent assets are not recognised in the consolidated
financial statements. However, when the realisation of income from
the contingent asset is virtually certain, then the related asset
is not a contingent asset and its recognition is appropriate.
Contingent liabilities
Contingent liability is a possible obligation that arises from
past events and whose existence will be confirmed only by the
occurrence or non-occurrence of one or more uncertain future events
not wholly within the control of the entity, or is a present
obligation that arises from past events but is not recognised
because it is not probable that an outflow of resources embodying
economic benefits will be required to settle the obligation or the
amount of the obligation cannot be measured with sufficient
reliability.
Contingent liabilities are not recognised in the consolidation
financial statements.
3.17 Equity, reserves and dividend payments
Issued share capital represents the nominal value of shares that
have been issued. Share premium includes any premiums received on
issue of share capital. Any transaction costs associated with the
issuing of shares are deducted from share premium, net of any
related income tax benefits.
Other components of equity include the following:
- Foreign currency translation reserve -
comprises foreign currency translation
differences arising from the translation
of financial statements of the Group's
foreign entities into US Dollars.
- The share premium account - comprises
any premiums received on issue of share
capital. Any transaction costs associated
with the issuing of shares are deducted
from share premium.
- The share based payment reserve corresponds
to the accumulated amount of instruments
granted to employees regarding share based
payments equity settled (see note 3.19).
- Retained earnings - includes all current
and prior period retained profits and
losses.
All transactions with owners of the parent are recorded
separately within equity.
Dividend distributions payable to equity shareholders are
included in other liabilities when the dividends have been approved
in a general meeting prior to the reporting date.
3.18 Revenue
Revenue is recognised to the extent that it is probable that the
economic benefits will flow to the Group and the revenue can be
reliably measured, regardless of when the payment is being made.
Revenue is measured at the invoiced value for the sale of goods net
of value added tax, rebates and discounts which represents the fair
value of the consideration received or receivable. The Group
assesses its revenue arrangements against specific criteria in
order to determine if it is acting as principal or agent. The Group
has concluded that it is acting as a principal in all of its
revenue arrangements. The following specific recognition criteria
must also be met before revenue is recognised:
Sales of goods
Revenue from the sale of goods is recognised when significant
risks and rewards of ownership of the goods have been transferred
to the buyer and the collectability of the related receivables is
reasonably assured, regardless of when the payment was made.
Rendering of services
Revenue relating to logistical services is recognised as the
services are performed.
Rental income
Pallets
Revenue arising on operating leases for pallets is accounted for
as on a straight line basis or a usage basis in accordance with the
contract.
Property income
Rental income arising from operating leases on investment
properties is accounted for on a straight-line basis over the lease
terms and included in revenue due to its operating nature.
Rental income is recognised within other operating income as it
is not considered as related to the primary activity of the
Group.
Interest income
Interest income is reported on an accruals basis using the
effective interest method.
3.19 Share based payments
The Group operates a number of equity-settled, share-based
compensation plans, under which the entity receives services from
employees as consideration for equity instruments of the Group. The
fair value of the employee services received in exchange for the
grant of the equity instruments is recognised as an expense. The
total amount to be expensed is determined by reference to the fair
value of the instruments granted. At the end of each reporting
period, the group revises its estimates of the number of
instruments that are expected to vest based on the non-market
vesting conditions and service conditions. It recognises the impact
of the revision to original estimates, if any, in the income
statement, with a corresponding adjustment to equity.
3.20 Changes in accounting policies and disclosures
The Group applied, for the first time, certain standards and
amendments for the preparation of these consolidated financial
statements:
Content
IAS 32 Offsetting financial assets
and financial liabilities (amendment)
IAS 27 Separate Financial Statements
IAS 28 Investments in Associates
and Joint Ventures
IFRS 10 Consolidated Financial
Statements
IFRS 11 Joint Arrangements
IFRS 12 Disclosure of Interests
in Other Entities
IFRS 10, IFRS 11 and IFRS 12 Transition
Guidance (amendment)
IAS 39 Novation of Derivatives
and Continuation of Hedge Accounting
(amendment)
IFRS 10, IFRS 12 and IAS 27 Investment
Entities (amendment)
IAS 36 Recoverable Amount Disclosures
for non-Financial Assets (amendment)
The Group has reassessed the control over its investees in the
light of the provisions of IFRS 10 that redefines this notion of
control and concluded that no change was necessary. In addition the
Group has included the disclosures required by IFRS 12.
The other standards and amendments have no significant impact on
these consolidated financial statements.
At the date of approval of these consolidated financial
statements, the following amendments and Interpretations, which
have not been applied in these consolidated financial statements,
were issued but not yet effective. These amendments and
Interpretations are effective for accounting periods beginning on
or after the dates shown below:
IFRS Standards and Interpretations issued by IASB and endorsed
by EU but not yet effective:
Applicable
in EU for
periods
beginning
on
IFRIC 21 Levies 17 June 2014
Annual improvements 2010-2012 and 1 February
2011-2013 2005
IAS 19 Defined Benefit Plans: Employee 1 February
Contributions (amendment) 2015
IFRS Standards and Interpretations issued by IASB but not yet
endorsed by EU:
Applicable
for periods
beginning
on
IAS 1 Disclosures Initiative 1 January
2016
IAS 27 Separate Financial Statements 1 January
(amendments) 2016
Annual improvements 2012-2014 1 January
2016
IFRS 10, IFRS 12 and IAS 28 Investment 1 January
entities (amendments) 2016
IAS 16 and IAS 38 Acceptable methods
of depreciation and amortisation 1 January
(amendments) 2016
IFRS 9 (Phase I, II and III) Financial
Instruments To be determined
IFRS 14 Regulatory Deferral Accounts 1 January
2016
IFRS 15 Revenue from contracts with 1 January
customers 2017
IFRS 10 and IAS 28 Investment entities 1 January
(amendments) 2016
The Group cannot early adopted these new standards and
amendments. The Group is still assessing the impact that the
adoption of these new standards and amendments will have on the
financial statements.
4 Significant accounting judgements, estimates and assumptions
The preparation of financial statements conforming with adopted
IFRS requires management to make judgments, estimates and
assumptions that affect the application of policies and reported
amounts of assets, liabilities, income and expenses. The estimates
and assumptions are based on historical experience and other
factors considered reasonable at the time, but actual results may
differ from those estimates. Revisions to these estimates are
recognised in the period in which they are made.
4.1 Judgments
In the process of applying the Group's accounting policies,
management has made the following judgments, which have the most
significant effect on the amounts recognised in the consolidated
financial information:
Recognition of deferred tax assets
The assessment of the probability of future taxable income
against which deferred tax assets can be utilised is based on the
Group's latest approved forecast, which is adjusted for significant
non-taxable income and expenses and specific limits to the use of
any unused tax loss or credit. The tax rules in the numerous
jurisdictions in which the Group operates are also carefully taken
into consideration. If a positive forecast of taxable income
indicates the probable use of a deferred tax asset in the
foreseeable future, especially when it can be utilised without a
time limit, that deferred tax asset is usually recognised in full.
The recognition of deferred tax assets that are subject to certain
legal or economic limits or uncertainties are assessed individually
by management based on the specific facts and circumstances.
The Group has not recognised any deferred tax assets as there is
no certainty of the timing of recovery. For further detail on
deferred tax, refer to note 20.
Research and development expenditure - comparative
information
Research and development expenditure has been fully written off
to the statement of comprehensive income. Management had taken into
account the inherent risks in all research and development
expenditure and specifically that expenditure being incurred by the
business in the year ended 31 December 2013 and have concluded that
the requirements of IAS 38 to capitalise development expenditure
have not been met. No research and development expenditure was
incurred in 2014.
Receivable from Plastics Research Corporation - comparative
information
The litigation between the Group and Plastics Research
Corporation (ionChe litigation between the Group and Plastics
Research Corporation (etween the parties dated 17 November 2012. As
per the settlement agreement, PRC were required to pay USD
13,500,000 to RM2 as indemnity for the transfer of the equipment
(the "Equipment") to PRC.
The receivable was repayable in several instalments starting 2
years after the settlement agreement date. During this period, PRC
only had to reimburse the interest accrued on the receivable and
this was secured by the Equipment.
Management had estimated that the effective interest rate to
amortise the receivable was 7%.
Due to delay in payment of the interest receivable by PRC,
Management had estimated that there were significant uncertainties
in relation to the future reimbursement of the capital amount.
Therefore, Management had in 2012 decided to record full impairment
of the outstanding nominal amount of the receivable.
The settlement agreement also provided for royalty payments to
be made by PRC to the Group in relation to future sales made by PRC
with the Equipment. The royalty to be paid was computed based on
the quantity of manufactured items sold and the quantity of
composite ground generated and sold by PRC during the 7 years
following the settlement agreement's date, with a cap of USD
11,000,000.
Management also determined that there was very low probability
that PRC will generate sales from the use of the Equipment and
consequently determined that the fair value of the royalty
receivable was nil.
In November 2013, PRC defaulted on the interest payment due and
subsequently, in March 2014, ownership of the Equipment was
transferred to the Group, valued at $1, in application of the
security agreement. The Group holds these assets at the year end at
the valuation of $1. Full provision has been made for interest due
in respect of the interest receivable and not paid in the year.
Restricted Shares
The Group has issued restricted shares in 2013 and 2014 under
the "2013 Share Option Scheme".
Management has considered that the restricted shares issued to
date should be measured similarly to share options. As per the
agreement, the shares granted vest immediately and are accompanied
by a restricted share agreement. Management has considered that the
restrictions on shares were representative of market related
vesting conditions, as the holders of the restricted shares can
only dispose of their shares if the quotation price reaches
different thresholds, or in certain cases on the third year
anniversary following the date of the grant as long as the holder
has a business relationship with the Company.
Management has considered that achievement of these market
conditions would require time corresponding to the advantage
provided to the holders of restricted shares. Management has
estimated that Tranche 1 and 2 would be achieved within 5 years and
Tranche 3 within 10 years, therefore, Management has applied those
durations as vesting periods for the instruments. For the
restricted shares that vest on the third anniversary this date has
been used as the duration of the vesting period.
For further detail on share-based payments transactions, refer
to note 22.
Accrued liabilities
An amendment to a contract was made in January 2014 which
resulted in the payment in respect of past consultancy services by
the Group. In reviewing the contract and the payment the Group has
recorded a liability for the payment in the 2013 consolidated
financial statements as all the costs related to past services
rendered.
As part of the bridging facility until the completion of the IPO
a premium was payable to cancel outstanding warrants in the
Company. When considering the premium, the period to which it
relates and as the IPO was completed on 6 January 2014, Management
considers that the cost of this cancellation had to be recognised
pro rata temporis over the period from issuance date to
reimbursement date as a finance charge in the 2013 consolidated
financial statements.
Machinery depreciation 2013 - comparative information
During 2013 the Group had been developing its machinery and
products. The Group's machinery and products were not in full
operation at the end of 2013 and there was no significant income
derived from the machinery. The Group therefore had not depreciated
the machinery in the year and will depreciate against future income
when the machinery becomes fully operational in manufacturing
finished product for sale or internal use.
Investment in Mafic S.A. 2013 - comparative information
The investment in Mafic S.A. was disposed of in 2013 by way of a
contribution in kind of 842,000 shares of Mafic S.A. to Basalt
Holding S. à r. l.
The Group then cancelled 12,286,000 RM2 International S.A.'s
Class J shares and disposed of the entire share capital of Basalt
Holding S. à r. l. to the holders of the Class J shares.
Management considered that the fair value of the disposed
investment in Mafic S.A. was represented by the fair value of the
investment held in Basalt Holding S. à r. l. as the disposal was
made by an exchange of financial assets. The final fair value of
Mafic S.A. on disposal was determined in consideration of the
actual value transferred to holders of Class J shares,
corresponding to the nominal value of the Class J shares.
Management recorded the difference between the carrying value of
Mafic S.A., prior to disposal, and the actual liquidated value of
Class J shares as representative of the gain realised on the
transaction, the amount has been recorded within financial income.
For further detail, refer to note 19.3.
4.2 Estimates and assumptions
The key assumptions concerning the future and other key sources
of estimation uncertainty at the reporting date, that have a
significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year,
are described below. The Group based its assumptions and estimates
on parameters available when the consolidated financial information
were prepared. Existing circumstances and assumptions about future
developments, however, may change due to market changes or
circumstances arising beyond the control of the Group. Such changes
are reflected in the assumptions when they occur.
The Management has disclosed reasonably possible assumptions and
estimates, on the basis of its existing knowledge at year end.
Outcomes within the next financial years that are different from
these assumptions could require a material adjustment to the
carrying amount of the asset or liability affected.
Share-based payments
The Group measures the cost of equity-settled transactions by
reference to the fair value of the equity instruments at the date
at which they are granted. Estimating fair value for share-based
payment transactions requires determination of the most appropriate
valuation model, which is dependent on the terms and conditions of
the grant. This estimate also requires determination of the most
appropriate inputs to the valuation model including the expected
life of the share (options), volatility and risk-free interest
rate, dividend yield and making assumptions about them.
During the year, the Company issued restricted shares and
options under the 2013 Equity Incentive Plan.
The assumptions and models used for estimating fair value for
share-based payment transactions are disclosed in note 22.
Employee Stock Option Plan ("ESOP")
The Group has granted Employee Stock Option Plan to some of its
employees and managers. The fair value of the plan at grant date is
based upon actuarial assumptions estimated by the management and
disclosed in note 22.3.
Measurement of property, plant and equipment, pallet pool and
investment property
The Group holds a building property which is used for both Group
administrative purpose and rental to third parties. Therefore, the
management has determined that the building accounting should be
split between the part used by the Group, classified as property,
plant and equipment, and the part rented to third parties,
classified as investment property.
The initial cost of acquisition of the building is for both the
building construction and the land. In determining the part of the
acquisition cost related to the land, by default of explicit
description in the notarial deed, the Management has made the
assumption that 25% of the initial cost was related to the
land.
In determining the measurement of each part of the building (PPE
and investment property), the management has determined the split
based on the surface used for each purpose. Management has also
determined that the depreciation should be made using straight line
method and over a useful life of 30 years.
Due to the inability of Management to determine the residual
value at the end of the useful life, the Management has made the
assumption that the residual value is nil and, therefore, the
depreciation is computed on the entire value of the building
cost.
The pallet pool is recognised at an amount based on standard
cost of production including all expenses directly attributable to
the manufacturing process and potions of related production
overheads, based on normal operating capacity, and carried at this
cost net of impairment and depreciation.
Fair value of financial instruments - comparative
information
Prior to completion of the IPO the Group had a significant
financial instrument in the form of warrants issued to DPEI.
As a result of an agreement entered into on 8 November 2013, the
warrants were cancelled and the Company recognised a liability for
the termination of the warrants. The liability has been measured in
reference to the amount actually paid by the Company in early
January 2014. For further detail on warrants, refer to note 14.
Finished goods and work in progress
Finished goods and work in progress are recognised at an amount
based on standard cost of production including all expenses
directly attributable to the manufacturing process and portions of
related production overheads, based on normal operating
capacity.
Management consider that this is a fair reflection of the cost
of the pallets.
Pallet Pool
The pallet pool is depreciated over 5 years. Management have
assessed the durability of the pallets supported by external
testing and consider that this is a fair reflection of their
estimated useful life. The residual value is estimated to be
nil.
Management will review the useful life of the pallets at each
reporting date.
Impairment of Goodwill
In assessing impairment, Management estimates the recoverable
amount of cash generating units based on expected future cash flows
and uses an interest rate to discount them. Estimation uncertainty
relates to assumptions about future operating results and the
determination of a suitable discount rate (see note 9 for details
and assumptions).
Business combinations comparative for 2013
The directors have identified the separable net assets acquired
and have valued those assets using discounted cash flows for the
expected revenue from those assets. The separable assets identified
are the software, client list and brand name.
Management measured assets acquired and liabilities assumed by
reference to their fair value at acquisition date. Management has
determined the fair value of separable identified assets using
discounted cash flow ("DCF") of the entity over the next 6 years.
In determining the net present value of each asset, the Group has
applied discount rate of 13%.
For further detail on the Group's business combination, refer to
note 5.
Impairment of inventory comparative for 2013
In 2012, during the development of the production line dedicated
to the pallet pool production, several samples were produced.
Management had estimated for those samples which were not deemed to
be part of the cost of property, plant and equipment that full
impairment of these inventories was recorded due to the inability
of the Group to sell these samples.
In 2013 the Group reviewed the estimates used in the valuation
of the inventory in 2012 and considered that there is value in the
samples produced in 2012. Therefore, management reversed the
impairment for USD 1,447,797 as at 31 December 2013.
5 Business combinations and acquisition of non-controlling interests
5.1 Acquisitions in 2013
Acquisition of Equipment Tracking Limited
In 2013, the Group acquired the remaining 97% of the voting
shares of Equipment Tracking Limited. The Group had an equity
investment representing 3% of the voting shares of Equipment
Tracking Limited as at 31 December 2012.
On 27 September 2013, RM Total Solutions International BV signed
an agreement to acquire the entire issued share capital of
Equipment Tracking for GBP2 million. Completion of the acquisition
of Equipment Tracking occurred on 10 December 2013. Control of the
business was considered effective at the time of the consideration
was paid.
The assets and liabilities acquired are as follows:
Equipment Tracking
Limited
Value of Fair value Fair value
assets adjustments recognised
in company on acquisition
USD USD USD
Intangible assets
(note 9) - 2,618,912 2,618,912
Plant and equipment
(note 6) 137,007 - 137,007
Trade receivables 168,946 - 168,946
Cash 42,407 - 42,407
Other debtors and
prepayments 5,887 - 5,887
------------ ------------- ----------------
354,247 2,618,912 2,973,159
------------ ------------- ----------------
Loans and borrowings 44,460 - 44,460
Trade payables 75,152 - 75,152
Other creditors and
accruals 33,219 - 33,219
Other taxes payable 83,718 - 83,718
Income tax payable 7,315 - 7,315
Deferred tax liabilities - 523,782 523,782
------------ ------------- ----------------
243,864 523,782 767,646
------------ ------------- ----------------
Total identifiable
net assets at fair
value 2,205,513
Goodwill arising on
acquisition (note
9) 1,150,189
Purchase consideration
transferred 3,355,702
================
Equipment Tracking was founded in 1995 (having traded as
Adventures in Business Limited until the incorporation of Equipment
Tracking in 2004). Its pallet tracking and management software
assists customers in managing complex pallet and equipment flows.
It has serviced some of the world's largest suppliers of consumer
goods.
The ERICA system offers customers services which provide \'real
time' equipment balances throughout their supply chains.
These services can replace or strengthen existing tracking
systems and are designed to enable customers to improve their
pallet pool management. The ERICA system was designed to provide
customers with greater visibility over costs and, where possible,
the ability to reduce the direct and indirect costs associated with
goods movements between customers and suppliers. This offers major
cost savings to the Group and its customers, increasing the Group's
offer and attraction of the pallet pool business. The synergies
arising from the experience and know-how of the team of Equipment
Tracking closely linked to their involvement in the use and
development of ERICA system gives the benefits of a back office
system that can not only track the Group's assets, but also
generate movement statistics, invoicing data and measurement
against performance criteria, which justifies the goodwill in the
acquisition. The fair value of the separable net assets has been
identified and the goodwill in the business has been calculated at
USD 1,150,189 relating to the value attributed to the
organisation.
Included in the results for the 2013 is revenue and loss of USD
98,939 and USD 17,740 respectively representing the results from
the date of acquisition. The results for the full 2013 year, had
Equipment Tracking been owned for the full year, would have shown
revenue and losses of USD 1,079,163 and USD 14,935,
respectively.
No contingent liabilities were considered in determining the
fair value of assets acquired and liabilities assumed.
Acquisition of additional interest in RM2 Europe Sp. Zoo
On 8 October 2013, the Group acquired an additional 20% interest
in the voting shares of RM2 Europe Sp. Zoo increasing its ownership
interest to 100%. The consideration of USD 68,193 was part of the
settlement agreement with STM Technologies, Inc., the
non-controlling shareholders made on 27 September 2013. The
carrying value of the additional interest in RM2 Europe Sp. Zoo was
USD 68,193. Following is a schedule of additional interest acquired
in RM2 Europe Sp. Zoo:
USD
-------
Consideration paid to non-controlling shareholders 68,193
Carrying value of the additional interest
in RM2 Europe Sp. Zoo 68,193
-------
Difference recognised in retained earnings -
within equity
6 Property, plant and equipment - Others
Land Plant Construction Total
& Building & Equipment in progress
Restated*
USD USD USD USD
Cost
As at 1 January
2013 1,860,421 6,574,950 5,336,483 13,771,854
Additions 40,952 5,437,266 - 5,478,218
Disposals - (891,740) - (891,740)
Other/transfers - 1,679,560 (1,679,560) -
Acquired through
business combinations
(note 5) - 233,650 - 233,650
Exchange differences 41,296 (208,970) (119,460) (287,134)
------------ ------------- ------------- ------------
As at 31 December
2013 1,942,669 12,824,716 3,537,463 18,304,848
Additions 110,702 9,688,738 5,510,766 15,310,206
Disposals (121,662) - - (121,662)
Exchange differences (194,542) (900,394) - (1,094,936)
------------ ------------- ------------- ------------
As at 31 December
2014 1,737,167 21,613,060 9,048,229 32,398,456
============ ============= ============= ============
Amortization
and impairment
As at 1 January
2013 92,039 530,712 3,537,463 4,160,214
Amortization
charge for
the year 83,501 375,256 - 458,757
Acquired through
business combinations
(note 5) - 96,643 - 96,643
Exchange differences 2,734 (23,158) - (20,424)
------------ ------------- ------------- ------------
As at 31 December
2013 178,274 979,453 3,537,463 4,695,190
Amortization
charge for
the year 53,926 1,701,292 - 1,755,218
Disposals (38,888) - - (38,888)
Exchange differences (21,865) (251,745) - (273,610)
------------ ------------- ------------- ------------
As at 31 December
2014 171,447 2,429,000 3,537,463 6,137,910
============ ============= ============= ============
Net book value
As at 31 December
2014 1,565,720 19,184,060 5,510,766 26,260,546
============ ============= ============= ============
As at 31 December
2013 1,764,395 11,845,263 - 13,609,658
============ ============= ============= ============
*The Group has decided to disclose the pallet pool as a separate
heading and therefore have disclosed the Pallet Pool separate note
7.
The Group has no liens and encumbrances on its property, plant
and equipment. The Group has capital commitments on the development
and acquisition of property, plant and equipment in Canada for USD
2,249,326 - CAD 2,615,526 (2013: USD 2,386,380 - CAD
2,535,529).
As at 31 December 2013, the Group had several items of property,
plant and equipment which were temporarily idle. The carrying
amount of these items was USD 2,452,532. This amount corresponds to
machines for the production of pallets which have been completed
and for which the production has not started. There was no amount
of depreciation charge as per prior periods as these machines were
still in the construction phase.
As at 31 December 2014, the Group had several items as PPE
corresponding to machines that are not yet completed for the
production of pallets.. These items are presented at construction
in progress and not amortized.
There were no borrowing costs capitalised during any period.
6.1 Security on property, plant & equipment for liabilities
The Group has granted a security interest over the property held
in Switzerland in return for the CHF 2,000,000 bank loan USD
2,021,220 (2013: CHF 2,100,000 - USD 2,361,142).
7 Property, plant and equipment - Pallet pool
*The Group has decided to disclose the pallet pool as a separate
heading and therefore have disclosed the Pallet Pool in a separate
note.
Pallet
Pool
Restated
USD
Cost
As at 1 January 2013 -
Additions 419,153
----------
As at 31 December 2013 419,153
Additions 2,466,928
As at 31 December 2014 2,886,081
==========
Amortization and impairment
As at 1 January 2013 -
Amortization charge for the year 43,317
----------
As at 31 December 2013 43,317
Depreciation charge for the year 88,258
As at 31 December 2014 131,575
==========
Net book value
As at 31 December 2014 2,754,506
==========
As at 31 December 2013 375,836
==========
8 Investment property
Investment
properties
USD
Cost
As at 1 January 2013 1,681,110
Exchange differences 45,213
------------
As at 31 December 2013 1,726,323
Exchange differences (174,642)
------------
As at 31 December 2014 1,551,681
============
Amortization and impairment
As at 1 January 2013 84,056
Amortization charge for the year 41,408
Exchange differences 4,012
------------
As at 31 December 2013 129,476
Amortization charge for the year 41,969
Exchange differences (16,276)
------------
As at 31 December 2014 155,169
============
Net book value
As at 31 December 2014 1,396,512
============
As at 31 December 2013 1,596,847
============
The investment property is a building used by the Group for both
administrative purpose and for rental. The cost of the property
related to the administrative purpose is classified within
property, plant and equipment. The cost for the rental part is
classified as investment property.
8.1 Revenue from investment property
As at 31/12/2014 As at 31/12/2013
USD USD
Rental income from investment
property (*) 329,450 326,125
(*) included within Other operating income (see note 19)
8.2 Fair value of investment property
The investment property is measured at cost. The fair value of
the property as at 31 December 2014 has been determined by Régie
Châtel S.A., an independent external appraiser, on 20 January
2015.. Régie Châtel S.A. is a specialist in valuing such investment
properties. The fair value of the property has been determined
using the rental income and the construction value. The valuation
has been determined with the following primary inputs.
2014 2013
Yield (%) 7% 7%
Average price for new construction 390 CHF/ 390 CHF/
((m3) ) m3 m3
Land price (m(2)) 250 CHF/m(2) 280 CHF/m(2)
Fair value determined for the USD1,886,895 USD2,092,370
part classified as investment
property
(1,867,085 (1,860,960
CHF) CHF)
9 Intangible assets
Software Trade Customer Acquired Goodwill Total
names relationships licences
and
similar
intangible
assets
USD USD USD USD USD USD
Cost
As at 1 January
2013 - - - 47,033 - 47,033
Additions - - - - - -
Acquired on business
combination (Note
5) 1,964,184 163,682 491,046 - 1,150,189 3,769,101
Exchange differences - - - - (19,317) (19,317)
------------ ---------- --------------- ------------ ------------ ------------
As at 31 December
2013 1,964,184 163,682 491,046 47,033 1,130,872 3,796,817
Additions 815,674 - - 250,000 - 1,065,674
Exchange differences (100,251) (8,354) (25,063) - (57,719) (191,387)
============ ========== =============== ============ ============ ============
As at 31 December
2014 2,679,607 155,328 465,983 297,033 1,073,153 4,671,104
============ ========== =============== ============ ============ ============
Amortization
and impairment
As at 1 January
2013 - - - 7,800 - 7,800
Impairment in
the year - - - 35,033 - 35,033
Amortization
charge for the
year - - - 2,400 - 2,400
------------ ---------- --------------- ------------ ------------ ------------
As at 31 December
2013 - - - 45,233 - 45,233
Amortization
charge for the
year 943,151 32,736 98,209 1,799 - 1,075,895
Exchange differences (50,020) (1,674) (5,023) - - (56,717)
------------ ---------- --------------- ------------ ------------ ------------
As at 31 December
2014 893,131 31,062 93,186 47,032 - 1,064,411
============ ========== =============== ============ ============ ============
Net book value
As at 31 December
2014 1,786,476 124,266 372,797 250,001 1,073,153 3,606,693
============ ========== =============== ============ ============ ============
As at 31 December
2013 1,964,184 163,682 491,046 1,800 1,130,872 3,751,584
============ ========== =============== ============ ============ ============
The Group has no intangible assets pledged as security for
liabilities.
The Group has no contractual commitment for the acquisition of
intangible assets.
In 2013 following the acquisition of Equipment Tracking Limited,
the assets were recognised late in the year therefore, the
software, trade names, customer relationships resulting from the
business combination were not amortized during the year 2013.
The licence acquired in 2014 for USD 250,000 is for the use of
new pallets following development of those pallets. As these are
currently not being used no amortization has been calculated on
this amount.
9.1 Impairment of Goodwill
Management has reviewed the carrying value of goodwill at the
yearend in light of the future three year cash generation of the
entire group as the goodwill underpins the group business. A
pre-tax discount rate of 10% that considers the risk profile of the
Group and growth rates based on the 2015 forecast revenues (being
the base case following the setup of the business) of 104% have
been used in the assessment of any impairment. The growth rate is
based on management's assessment considering the capacity of
production of pallets and the sale and lease capacities. During the
year the group has continued to develop its business, a successful
IPO has been achieved where the group's debt, other than a mortgage
on its Swiss property, has been repaid, the manufacturing
environment has been improved and the pallet pool deployment has
started in the last quarter of 2014. A reasonably possible change
in the discount rate or the growth rate in the revenues forecast
would not cause an impairment on the carrying amount of
goodwill.
Management therefore considered that the prospects of the
business have improved dramatically during the year and therefore
the carrying value of the goodwill has not been impaired as at 31
December 2014 as there is no change in the underlying rational for
the goodwill than as 31 December 2013.
10 Financial assets and liabilities
As at 31/12/2014 As at
31/12/2013
USD USD
Loans and receivables
Trade and other receivables
(Note 12) 3,889,105 1,706,754
Deposits 59,548 65,979
----------------- ------------
Other current financial
assets 59,548 65,979
Restricted Cash, Cash
and cash equivalents 85,032,769 4,215,344
Total current financial
assets 85,092,317 4,281,323
Total loans and receivables 88,981,422 5,988,077
----------------- ------------
Total financial assets 88,981,422 5,988,077
================= ============
Total current 88,981,422 5,988,077
Financial liabilities
Financial liabilities
at amortised cost
Interest-bearing loans
and borrowings 2,082,114 33,601,793
Trade and other payables 5,412,615 45,532,709
Total financial liabilities
at amortised cost 7,494,729 79,134,502
Total financial liabilities 7,494,729 79,134,502
================= ============
Total current 5,441,188 76,763,422
Total non-current 2,053,541 2,371,080
================= ============
10.1 Loan notes
The Group entered into an agreement in 2009 with Plastics
Research Corporation ("PRC") for the development and production of
specific shipping pallets. A machine for the production of pallets
was developed on land rented by PRC from a third party (the
"Redlands Facility"). The development of the production facility
required the acquisition of equipment (the "Equipment") which was
located at the Redlands Facility. In the course of the development
of the Equipment, several disputes arose between the Group and PRC.
The disputes were settled by an agreement of the parties entered
into on 15 November 2012.
As per the Settlement Agreement, it has been agreed that:
- PRC has ownership and possession of
all Equipment in the Redlands Facility;
- PRC shall pay to RM2 S.A. the principal
sum of USD 13,500,000 (the "Indebtedness")
as a non-royalty payment; and
- PRC shall pay to RM2 S.A. royalties
for the sales of pallets and composite
compound up to USD 11,000,000 (the "Royalty
Payments").
The loan bore interest at the effective interest rate of 7% per
annum and had a maturity date as at 15 November 2019.
In November 2013, PRC defaulted on the interest payment due.
At 31 December 2013, Management determined that there was
significant risk on the recoverability of the capital amount of the
Indebtedness for USD 13,500,000 and decided to record a full
impairment on the investment (for further detail, refer to note 4).
The impairment on the loans and receivables was incurred as the
Group estimated that the recoverability of the receivable resulting
from the resolution of the litigation with PRC was uncertain as a
result of the delinquent payment made by PRC.
As at 31 December 2013, the carrying amount of the loan notes
PRC was USD nil, as PRC was in default.
Subsequently in 2014, ownership of the Equipment was transferred
to the Group at a valuation of USD 1, in respect of the
cancellation of the indebtness and accrued interest, pursuant to
the security agreement. The Group will decide whether to dispose of
the Equipment, or redeploy the assets within the Group. The
Equipment is fully impaired in the consolidated financial
statements. Full provision has been made for interest due in
respect of the interest receivable and not paid in the year of USD
236,250 (2013: USD 609,414 also fully provided).
The outstanding balance of the indebtedness as at 31 December
2014 amounts to USD nil (in 2013: USD 14,109,414) and includes
interest of USD nil (in 2013: USD 609,414).
10.2 Interest-bearing loans and borrowings
As at As at
31/12/2014 31/12/2013
Effective Maturity USD USD
interest date
rate
Non-current interest-bearing
loans and borrowings
CHF 2,000,000 Bank 30 November
loan 2.4% 2015 2,021,220 2,361,142
Hire purchase liabilities
in excess of one year 32,321 9,938
Total non-current
interest-bearing loans
and borrowings 2,053,541 2,371,080
============ =============
Current interest-bearing
loans and borrowings
Bank overdraft (note
13) Variable On-demand - 22,208
Shareholder current
account 0% On-demand - 8,550
10% plus
25% on
Shareholder loans repayment - 5,926,532
10% plus
25% on
JKD Capital* repayment - 13,385,105
CVI CVF 11 Lux Securities 10% plus
Trading S. à 25% on
r. l. repayment - 11,853,539
Hire purchase liabilities
within of one year 28,573 34,779
Total current interest-bearing
loans and borrowings 28,573 31,230,713
============ =============
Total interest-bearing
loans and borrowings 2,082,114 33,601,793
============ =============
CHF 2,000,000 bank loan
The loan is secured by a mortgage on the building held by the
Group in Switzerland for a total value of CHF 2,470,000 (USD
2,496,207) and by transfer of rental income to the lender. If the
loan is not terminated by the company at least 3 months before its
maturity, it will be automatically renewed.
10.2.1 Domestic Private Equity Investors LLC ("DPEI") Bridge
Facility
The Group had entered into a bridge facility with DPEI for the
financing of its operations on 30 June 2010. As a result of the
Group restructuring operations in 2011, the bridge facility had
been fully reimbursed during the year 2011.
The Group also issued warrants on the same date to DPEI granting
to DPEI the right to purchase up to 10% of the fully diluted share
capital of the Company. The right existed as long as the
outstanding warrant shares represented more than 5% of the share
capital of the Company. The fair value of the warrants was
immaterial.
On 8 November 2013 the agreement was amended such that the right
to warrants would be terminated following a successful IPO before
31 March 2014 on the condition that the company pay DPEI USD 40m.
This occurred in January 2014 and was considered as a cost of the
facility in the year ended 31 December 2013; as such, it has been
recognised in finance costs during the year 2013 (see note
19.4).
10.3 Hedging activities and derivatives
The Group has not entered into any hedging activity during each
period covered by the consolidated financial statements.
10.4 Fair values
The Group estimates that the fair value of the financial assets
and liabilities approximates their carrying amount as these are
mainly composed of short-term receivables and payables.
10.4.1.1 Fair value hierarchy
The Group uses the following hierarchy for determining and
disclosing the fair value of financial instruments by valuation
technique:
- Level 1: quoted (unadjusted) prices in
active markets for identical assets or
liabilities
- Level 2: other techniques for which all
inputs that have a significant effect
on the recorded fair value are observable,
either directly or indirectly
- Level 3: techniques that use inputs that
have a significant effect on the recorded
fair value that are not based on observable
market data
The Group has no financial instruments carried at fair value as
at 31 December 2014 or 31 December 2013.
11 Inventories
As at As at
31/12/2014 31/12/2013
USD USD
Raw materials 3,157,326 878,357
Work in progress 1,448,420 488,639
Finished goods -pallets 2,411,442 157,796
7,017,188 1,524,792
Finished goods represent pallets produced and not yet sold or
deployed via the pallet pool in property, plant and equipment.
As at 31 December 2013, the Group assessed the carrying value of
the inventory and considered that there were value in the samples
produced in 2012 which had previously been impaired and therefore
reversed the impairment.
The cost of inventory sold and recognised as an expense during
the year was USD 554,962 (2013: USD 47,755).
12 Trade and other receivables
As at As at
31/12/2014 31/12/2013
USD USD
Trade receivables 648,353 190,548
Income tax receivables 2,275 38
Other tax receivables 2,179,364 967,678
Other receivables 1,059,113 548,490
Total trade and other
receivables 3,889,105 1,706,754
============ ============
The ageing of the trade receivables as at 31 December 2014 is
detailed below:
2014 2013
Neither past due nor impaired: 348,185 50,022
Past due but not impaired:
0 to 30 days 216,952 124,682
30 to 60 days 73,968 15,844
60 to 90 days 7,128 -
Over 90 days 2,120 -
-------- --------
648,353 190,548
======== ========
The Group has a provision for impairment of the Canadian HST
receivables for USD 96,465 (2013: USD 143,124).
The other tax receivables primarily relate to Harmonised Sales
Tax (VAT) balances due in Canada and VAT due in Luxembourg.
13 Cash and short-term deposits
As at 31/12/2014 As at 31/12/2013
USD USD
Restricted cash 2,149,975 -
----------------- -----------------
Total restricted
cash 2,149,975 -
================= =================
Cash at bank and
in hand 4,639,083 3,917,084
Short-term deposits 78,243,711 298,260
----------------- -----------------
Total cash and short-term
deposits 82,882,794 4,215,344
================= =================
Cash at banks earns interest at floating rates based on daily
bank deposit rates. Short-term deposits are made for varying
periods of between one day and three months, depending on the
immediate cash requirements of the Group, and earn interest at the
respective short-term deposit rates. At both periods ended, the
Group does not have any undrawn committed borrowing facilities.
The Group has not pledged any part of its short-term deposits to
fulfil collateral requirements other than USD 3,986 in respect of
rental of office space. In connection with the operational lease of
the factory premises located in Canada, a letter of credit
amounting to CAD 2,500,000 (USD 2,149,975) has been issued to the
landlord as a guarantee for lease payments and lease defaults. The
related deposit bank account is shown under Restricted cash.
For the purpose of the statement of cash flows, cash and cash
equivalents comprise the following at 31 December:
As at 31/12/2014 As at 31/12/2013
USD USD
Cash at bank and
in hand 4,639,083 3,917,084
Short-term deposits 78,243,711 298,260
-----------------
82,882,794 4,215,344
Bank overdraft (note
10) - (22,208)
----------------- -----------------
Total cash and cash
equivalents 82,882,794 4,193,136
================= =================
14 Share capital and reserves
2014
On 6 January 2014 the Company completed the IPO issuing,
155,903,548 shares at GBP0.88 on AIM and receiving net proceeds,
after payment of fees of USD 215,760,052. Following repayment of
USD71,679,712 of development loans, fees and interest, the
Company's balance sheet was free of debt (other than the mortgage
on the office building in Switzerland) and retained USD144,080,340
to finance capital expenditure, production of inventory and
overheads. The premium arising on the newly issued IPO shares has
been taken to the Share Premium Account.
On 6 January 2014 the Company issued 4,157,428 Ordinary Shares
at par to a significant shareholder.
On 24 January 2014, 2,316,405 restricted shares were granted to
certain Directors having Performance Conditions (see note 22).
On 3 April 2014, 900,000 restricted shares were granted to a
consultant subject to certain vesting conditions.
On 13 June 2014, 2,317,000 restricted shares were granted to
certain employees, 1,000,000 of which were subject to Performance
Conditions, and 1,317,000 of which were subject to certain vesting
conditions.
On 22 September 2014 1,000,000 restricted shares were granted
subject to certain Performance Conditions.
Following such issuances, the Company had 322,777,156 Ordinary
Shares issued.
2013
On 11 October 2013, the Company's issued share capital was
reorganised. The Company's share capital was decreased by USD
9,956,043 (to reflect absorption of historic losses and
reimbursement in kind to shareholders consisting of all the shares
held by the Company in Basalt Holding S. à r. l.).
Linked to such decrease in issued share capital, the ordinary
shares designated as Class J ordinary shares were cancelled. This
took the Company's total issued share capital to USD 45,330,956,
consisting of 110,574,000 ordinary shares of USD 0.45 each.
Immediately following this, the nominal value of the ordinary
shares was reduced from USD 0.45 to USD 0.01.
Following such reorganisation, the Company's issued share
capital was USD 1,105,740, consisting of 110,574,000 ordinary
shares of USD 0.01 each.
On 6 November 2013, the Company issued an additional 22,275,000
ordinary shares taking the Company's total issued share capital to
132,849,000 ordinary shares of USD 0.01 each.
On 14 November 2013, the Company's shareholders resolved to
reorganise the Company's share capital such that, with effect from
Admission, each of the classes of ordinary share designated as
Class A-I be converted into a single class of ordinary share, being
the Ordinary Shares.
On 26 November 2013, 11,025,000 Ordinary Shares were issued to
certain founders of the Company, taking the Company's total issued
share capital to 143,874,000 Ordinary Shares.
On 3 December 2013, 12,308,775 Restricted Shares were granted to
certain Directors, taking the Company's total issued share capital
to 156,182,775 Ordinary Shares.
The restricted shares are issued with performance criteria. 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-based
payments transactions refer to note 22.
14.1 Authorised shares
Shares USD Par value
per share
At 1 January 2013 150,162,230 67,573,003 USD 0.45
Capital restructuring
of 11 October 2013
* Authorised capital reduction (15,016,223) (6,757,300.4) USD 0.45
- (59,464,243.1) N/A
* Decrease of par value of shares
* Increase of authorised share capital 39,786,093 397,861 USD 0.01
-------------- --------------- -----------
174,932,100 1,749,321 USD 0.01
Decrease of authorised
share capital dated 6
November 2013 (22,275,000) (222,750) USD 0.01
Increase of authorised
share capital dated 14
November 2013 522,274,995 5,222,750 USD 0.01
Increase of authorised
share capital dated 19
November 2013 9,341,361 93,414 USD 0.01
Decrease of authorised
share capital dated 26
November 2013 (11,025,000) (110,250) USD 0.01
Decrease of authorised
share capital dated 26
November 2013 (12,308,775) (123,088) USD 0.01
-------------- --------------- -----------
At 31 December 2013 660,939,681 6,609,397 USD 0.01
-------------- --------------- -----------
IPO placement on 6 January
2014 (155,903,548) (1,559,036) USD 0.01
Subscription for new shares
on 6 January 2014 (4,157,428) (41,574) USD 0.01
Subscription for restricted
shares on 24 January 2014 (2,316,405) (23,164) USD 0.01
Subscription for restricted
shares on 3 April 2014 (900,000) (9,000) USD 0.01
Subscription for restricted
shares on 13 June 2014 (2,317,000) (23,170) USD 0.01
Subscription for restricted
shares on 22 September
2014 (1,000,000) (10,000) USD 0.01
At 31 December 2014 494,345,300 4,943,453 USD 0.01
-------------- --------------- -----------
The above table shows the authorised share capital for available
for issue.
14.2 Ordinary shares issued and fully paid
Shares USD Par value
per share
At 1 January 2013 122,860,000 55,287,000 USD 0.45
Capital restructuring
of 11 October 2013
* Decrease in share capital by absorption of losses - (4,919,270)
* Acquisition and cancellation of own shares (Class J
shares) (note 19.3) (12,286,000) (5,036,773)
* Capital reduction by decrease of par value of shares - (44,225,217)
------------- ------------- -----------
110,574,000 1,105,740 USD 0.01
Subscription for new
shares on 6 November
2013 22,275,000 222,750 USD 0.01
Subscription for new
shares 26 November
2013 11,025,000 110,250 USD 0.01
Subscription for restricted
shares on 3 December
2013 (note 22) 12,308,775 123,088 USD 0.01
------------- ------------- -----------
At 31 December 2013 156,182,775 1,561,828 USD 0.01
IPO placement on 6
January 2014 155,903,548 1,559,036 USD 0.01
Subscription for new
shares on 6 January
2014 4,157,428 41,574 USD 0.01
Subscription for restricted
shares on 24 January
2014 2,316,405 23,164 USD 0.01
Subscription for restricted
shares on 3 April 2014 900,000 9,000 USD 0.01
Subscription for restricted
shares on 13 June 2014 2,317,000 23,170 USD 0.01
Subscription for restricted
shares on 22 September
2014 1,000,000 10,000 USD 0.01
At 31 December 2014 322,777,156 3,227,772 USD 0.01
------------- ------------- -----------
As at 31 December 2014, the issued share capital is composed of
one class of Ordinary Shares (31 December 2013: 9 Classes A to I
having equal rights).
2015
Following 31 December 2014, the Company issued 253,000
restricted shares, refer to note 27 on subsequent events for
further detail.
14.3 Share premium
USD
At 1 January 2013 693,356
Reduction of nominal value per share
11 October 2013 44,225,217
Absorption of the 31 December 2013
loss on 14 November 2013 (13,784,115)
At 31 December 2013 31,134,458
IPO placement 6 January 2014 223,097,977
Transaction costs on issue of shares (4,433,482)
Absorption of the 31 December 2013
loss on 24 June 2014 (30,441,102)
-------------
At 31 December 2014 219,357,851
=============
The share premium account comprises an amount of USD Nil (2013
USD: 30,441,102) corresponding to share premium available to
compensate existing and future losses or to increase the subscribed
share capital. The share premium available for the compensation of
existing and future losses or to increase the subscribed share
capital was USD 44,225,217 and resulted from the reduction of
nominal value of the shares from USD 0.45 to USD 0.01 on October
11, 2013. The USD 44,225,217 was absorbed as to USD 30,441,102
during 2014 and USD 13,784,115 during 2013.
14.4 Warrants
On 30 June 2010, the Group issued warrants to Domestic Private
Equity Investors LLC ("DPEI") granting to DPEI the right to
purchase up to 10% of the fully diluted share capital of the
Company (the "Warrant Shares"). The right existed as long as the
outstanding warrant shares represent more than 5% of the share
capital of the Company.
On 8 November 2013 an agreement was entered into with DPEI to
agree that the right to warrants would be terminated following a
successful IPO before 31 March 2014 on the condition that the
Company pay DPEI USD 40,000,000. Therefore no warrants were
outstanding at 31 December 2014 or 31 December 2013. The Company
made payment of the liability on 7 January 2014. This amount has
been accrued as a finance expense in the year ended 31 December
2013.
The liability for the termination of the warrants amounts to USD
40,000,000 and is recorded within other payables as at year end
2013 and was repaid on 7 January 2014.
14.5 Nature and purpose of reserve
Currency translation reserve:
The currency translation reserve is used to record exchange
differences arising from the translation of the subsidiaries'
financial statements in foreign currencies to the Group reporting
currency.
This reserve cannot be distributed to shareholders.
Share based payment reserve:
The share based payment reserve corresponds to the accumulated
amount of instruments granted to employees regarding share based
payments equity settled.
14.6 Dividend distribution
As a result of the accumulated losses generated by the Group, no
dividend has been declared or paid.
15 Trade and other payables
As at As at
31/12/2014 31/12/2013
USD USD
Trade payables 4,752,320 2,725,769
Employee compensation
payables 258,110 9,046
Other tax payables 747,662 188,582
Other payables 402,183 41,663,916
Total trade
and other payables 6,160,275 44,587,313
============ ============
Other payables includes an amount of USD 120,471 (2013: USD
12,782) due to related parties and in 2014 of nil (2013: USD
40,041,574) due in relation with the cancellation of DPEI warrants
(see notes 10.2.1 and 14.4).
Terms and conditions of the above financial liabilities:
- Trade payables are non-interest bearing
and are normally settled on 30-days terms
- Other payables are non-interest bearing
and have an average term of 30 days terms
- For explanation on the Group's liquidity
risk management processes, refer to Note
25.
16 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. However, during
the year 2014, there were two clients who represent more than 10%
of the Group's revenues totalling 21%.
Turnover
As at 31/12/2014 As at
31/12/2013
USD USD
Sold, leased pallets
and logistical services 444,125 5,265
Rendering of logistical
services 1,556,291 98,939
2,000,416 104,204
----------------- ------------
Geographical information
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 and North
America.
As at 31/12/2014 As at
31/12/2013
USD USD
Luxembourg 3,451,895 2,381,272
Rest of Europe 7,055,336 7,507,598
North America 23,511,029 9,445,055
34,018,260 19,333,925
----------------- ------------
Non-current assets for this purpose consist of property, plant
and equipment, investment properties and intangible assets.
17 Cost of sales
As at 31/12/2014 As at
31/12/2013
USD USD
Cost of pallets sold
- blockpall 271,952 47,755
Cost of pallets sold 283,013 -
- services
Amortization of pallet 88,258 -
pool
Cost of software, licenses 1,393,418 -
and services
Factory absorption 16,767,957 -
Other 2,805,119 -
21,609,717 47,755
======================================== ============
Factory absorption is the variance between actuals costs to
produce pallets and the standard costs used in valuing the pallets
produced in inventory and assets. The total cost of the production
facility for which the total manufacturing capacity is circa 3
million pallets was not fully absorbed by production in the year
and the under absorption is shown as a cost of sales.
18 Administrative expenses
As at 31/12/2014 As at
31/12/2013
USD USD
Administration payroll 4,532,516 5,297,708
Selling and distribution 6,614,849 837,158
Shared based payment 1,215,470 15,743,333
Depreciation 1,362,317 141,924
Other 4,535,440 11,509,259
18,260,591 33,529,382
================= ============
19 Other income and expenses
19.1 Other operating income
As at 31/12/2014 As at
31/12/2013
USD USD
Net (loss)/gain on disposal
of PPE 1 737,000
Rental income 329,450 326,125
Other 341,476 43,169
Total other operating
income 670,927 1,106,294
================= ============
19.2 Other operating expenses
As at As at
31/12/2014 31/12/2013
USD USD
Direct operating
expenses on
rental-earning
investment properties 101,119 124,706
Research and
development
costs - 100,830
Cost of agreement
settlement - 2,000,000
Other 554,904 70,413
Total other
operating expenses 656,023 2,295,949
============ ============
19.3 Finance income
As at As at
31/12/2014 31/12/2013
USD USD
Interest income on loans
and receivables 290,538 936,061
Total interest income 290,538 936,061
Net foreign exchange
gain 443,995 84,536
Dividend income - 2,302
Disposal of investment
in Mafic - 5,036,773
Other 42,096 3,640
Total finance income 776,629 6,063,312
============ ============
On 27 September 2013, the Company participated in a contribution
in kind of 842,000 shares of Mafic S.A. in order to incorporate and
hold 100% of the issued share capital of Basalt Holding S. à r. l.,
a newly incorporated Luxembourg company. This resulted in the
recognition of a financial gain of USD 16,464,380. Subsequently, a
value correction amounting to USD 3,304,857 has been deducted from
the value acquisition of Basalt Holding S. à r. l.
participation.
On 11 October 2013, the Group cancelled 12,286,000 Class J
shares with a nominal value of USD 0.45 each and disposed of the
entire share capital of Basalt Holding S. à r. l. as a payment in
kind to the holders of the Class J shares. The financial loss on
the disposal is USD 8,171,070. The difference between the gain, the
value correction and the loss recognised on this transaction is the
value of the cancellation of the share capital.
19.4 Finance costs
As at As at 31/12/2013
31/12/2014
USD USD
Interest at amortised
costs on loans and borrowings 568,639 7,056,956
Total interest expenses 568,639 7,056,956
Net foreign exchange
loss 4,843,501 891,180
DPEI warrant - 40,000,000
Other 254,257 652,764
Total finance costs 5,666,397 48,600,900
============ =================
On 7 January 2014, the Group paid arrangement fees amounting to
USD 6,175,000, as part of the reimbursement of the development
loans. These arrangement fees were mainly accrued in the fiscal
period 2013 and recorded under Interest at amortised costs on loans
and borrowings.
19.5 Employee benefits expenses
As at 31/12/2014 As at
31/12/2013
USD USD
Included in selling
and distribution expenses:
Wages and salaries 1,317,917 699,284
Social security costs 200,209 101,091
Pension costs 105,527 36,783
Included in administrative
expenses:
Wages and salaries 4,064,343 4,852,273
Social security costs 442,456 290,346
Pension costs 25,715 11,965
Total employee benefits
expenses 6,156,167 5,991,742
================= ============
Average number of full
time employees 274 109
================= ============
19.6 Research and development costs
As at 31/12/2014 As at
31/12/2013
USD USD
Included in other operating
expenses: - 100,830
================= ============
20 Income taxes
20.1 Income tax expenses
The major components of income tax expense for each period
are:
As at As at
31/12/2014 31/12/2013
USD USD
Current income tax:
Current income tax
charge 59,744 62,152
Deferred tax (157,135) 10,616
------------ ------------
Total current income
tax: (97,391) 72,768
Income tax expenses (97,391) 72,768
============ ============
A reconciliation between tax expense and the accounting loss
multiplied by the domestic tax rate of each entity in its
jurisdiction for each period is as follows:
As at As at
31/12/2014 31/12/2013
USD USD
Loss before tax (47,315,141) (77,200,176)
------------- -------------
Theoretical income tax
charge/(income) using applicable
income tax rate (13,148,122) (21,981,699)
Reconciliation to actual
income tax charge
Unrecognised deferred tax
assets on losses carried
forward 14,360,228 21,982,512
Non-deductible expenses
from:
Director's fees, ESOP 494,695 4,828,352
Accelerated capital allowances 299,497 12,011
Other non-deductible expenses (2,150,378) 3,780
Non-taxable income from:
Gain on disposal of mafic - (4,821,943)
Other non-taxable income - -
Minimum income tax charge 52,918 48,881
Other (6,229) 874
Income tax expenses (97,391) 72,768
============= =============
20.2 Deferred taxes
The Group has not recognised any deferred tax assets as there is
no certainty of the timing of recovery. The tax losses for which no
deferred tax asset has been recognised amount to USD 187,484,145 as
at 31 December 2014 (2013: USD 113,788,484). If the Group was able
to recognise all unrecognised deferred tax assets, the loss would
decrease by USD 53,762,795 as at 31 December 2014 (2013: USD
31,474,756).
On the acquisition of Equipment Tracking Limited on 10 December
2013, the valuation of the separable net assets the company created
deferred tax liability of USD 523,782, refer to note 5.
During the year, the Group recognised a deferred tax liability
on the accelerated capital depreciation of some assets held by
Equipment Tracking Limited for USD 157,135 (2013: USD 10,741), the
variation with the amount recognised in profit and loss is due to
currency translation.
As at year end, the Group has recognised deferred tax
liabilities for USD 403,285 (2013: USD 534,523).
21 Pensions and other post-employment benefit plans
RM2 Limited and Equipment Tracking Limited operate defined
contribution pension schemes. The assets of the schemes are held
separately from those of the company in an independently
administered fund. The pension cost charge represents contributions
payable by the company to the fund. The amounts payable were USD
46,863 (2013 USD 34,943)
22 Share-based payments
The Group has a number of share schemes as shown in the table
below.
The Company grants restricted shares, shares grants at par value
and share options at its discretion to employees, officers,
directors, consultants and advisors.
Restricted shares and share options are granted with vesting
periods of between the date of grant and ten years from the
issuance or the date of grant and may carry performance conditions
or time conditions for vesting. Should the restricted shares or
options remain unexercised after a period of ten years from the
date of grant, the options will expire and the restricted shares
will be repurchased from the holder. Options are exercisable at a
price equal to the Company's quoted market price on the date of
grant.
Each programme approved by the Company during the year is
detailed as follows:
22.1 2012 Equity Incentive Plan
The Remuneration Committee approved the issuance of 11,025,000
shares to certain founders of the Group on 16 July 2013. These
shares were immediately issued without any restriction for the
holders.
Management has determined the fair value of this share-based
payment transaction by reference to the placing price of the
shares.
22.2 2013 Equity Incentive Plan
The Remuneration Committee approved the issuance of 12,308,775
shares to certain Directors on 14 November 2013. These shares were
immediately issued and accompanied by a restricted share agreement
for each beneficiary of the awards.
Each restricted share agreement specifies that holders can only
dispose of their shares upon achievement of certain performance
conditions. 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% higher than the Placing Price pf GBP 0.88
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% 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% 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.
Management has considered that, even if shares were immediately
issued to holders and then there was no effective period, the
performance conditions would be similar to vesting conditions. As a
result, Management has determined the duration of tranche 1 and 2
as at 5 years and of tranche 3 as at 10 years from grant date.
In determining the amount of shares that will be exercised
(available for disposal by holders) at 100%, the Management
considers that all beneficiaries would remain in the Group at the
date of the exercise.
22.3 Employee Stock Option Plan ("ESOP")
In 2014, the Remuneration Committee approved the issuance of a
total of 6,533,405 restricted shares and 600,000 options to
Directors, consultants and key employees. Part of these awards
4,316,405 are issued under the same conditions as the restricted
shares described above and part 2,217,000 vest on the third
anniversary of the grant date, assuming the beneficiary continues
to have a business relationship with the Company at such date. In
addition, the Remuneration Committee approved the issuance of
600,000 share options to key employees and management, vesting over
three years in equal tranches on the anniversary of the grant date
and with a strike price equal to fair market value on the date of
grant. The vesting of such options also automatically accelerates
should the volume-weighted average price of the Company's shares
exceed the Placing Price of GBP 0.88 by 100% for a period of 30
consecutive calendar days.
In 2015, the Remuneration Committee approved the issuance of
253,000 restricted shares to key employees. These shares vest on
the third anniversary of the grant date, assuming the beneficiary
continues to have a business relationship with the Company at such
date.
Financial effect of share-based payment transactions:
The expense recognised for employee services received during the
year is shown in the following table:
2014 2013
USD USD
--------- ----------
Expense arising from equity-settled share-based
payment transactions 1,215,470 15,743,333
Total expense arising from share-based payment
transactions 1,215,470 15,743,333
--------- ==========
The Company does not have any liability arising from share-based
payment transactions as at 31 December 2014 (2013 Nil.)
Movements during the year:
The following table illustrates the number and weighted average
exercise price (WAEP) of, and movements in, share granted and share
options during the year:
Restricted Number
shares of share
issued options
Outstanding at beginning of
year 12,308,775 -
Granted during the year 6,533,405 600,000
Forfeited in the year (9,000)
Exercised during the year - -
------------ ---------
Outstanding at end of the year 18,833,180 600,00
--------------------------------- ------------ ---------
Tradable/Exercisable at end - -
of the year
--------------------------------- ------------ ---------
The weighted average remaining contractual life for the
restricted shares issued outstanding as at 31 December 2014 5.35
years (2013: 6.67 years.)
The weighted average fair value of shares granted during the
year was USD 0.50 (2013: USD 0.67).
Where restricted shares have been issued with performance
conditions, Management considers that range of exercise price will
be from GBP 1.32 to GBP 1.54 for tranche 1, from GBP 1.54 to GBP
1.76 for tranche 2 and from GBP 1.76 for tranche 3.
The weighted average share price at the date of exercise issue
was GBP 0.84.
22.4 Fair value of share based payments transactions
2012 Equity Incentive Plan - Shares issued to founders
The fair value of shares granted was estimated based on the
placing price of shares (GBP 0.88), as at 6 January 2014, as it is
considered to be the most representative value of the shares
granted to founders at the grant date, less the exercise price paid
by the holders of the shares (GBP 0.01).
2013 Equity Incentive Plan - Restricted shares issued
A modified Black-Scholes model has been used to determine the
fair value of the share based payment on the date of grant or
issue. The fair value is expensed to the income statement on a
straight line basis over the vesting period, which is determined
annually. The model assesses a number of factors in calculating the
fair value. These include the market price on the date of grant,
the exercise price of the share options, the expected share price
volatility of the market sector in which the Group operates, the
expected life of the options, the risk free rate of interest and
the expected level of dividends in future periods
The calculation of the fair value of options issued requires the
use of estimates. Expected volatility has been estimated based on
similar sized companies listed on the AIM market of the London
Stock Exchange. It is assumed that all options will be
exercised.
2013
Restricted
Shares
Weighted average exercise price GBP 0.01
Expected volatility 17%
Expected life of restricted shares 5 and
10 years
Risk-free interest rate 1.9%-2.6%
Expected dividend yields Nil
------------------------------------ ------------- ----------- -------------
Model used Black-Scholes
2014 2014 2014
Restricted Restricted Option
Shares Shares Shares
Weighted average GBP 0.01 GBP 0.01 GBP 0.645
exercise price
Expected volatility 17% 17%
Expected life of 5 and 10 3 years 3 years
restricted shares years
Risk-free interest
rate 1.9%-2.6% 1.1% 1.1%
Expected dividend Nil Nil Nil
yields
------------------------------------ ------------- ----------- -------------
Model used Black-Scholes Black-Scholes
In determining the cost to be recognised during the period,
management considered that all shares would be exercised by holders
upon achievement of performance conditions.
23 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:
As at As at
31/12/2014 31/12/2013
USD USD
Net loss attributable
to ordinary equity holders
of the parent for basic
earnings (47,217,750) (77,270,973)
==================== =============
As at As at
31/12/2014 31/12/2013
Weighted average number
of ordinary shares for
basic earnings per share 317,997,300 125,498,680
Weighted average number
of ordinary shares adjusted
for the effect of dilution 317,997,300 125,498,680
==================== =============
Loss per share
Basic (0.15) (0.62)
Diluted (0.15) (0.62)
==================== =============
Management considers that there is no dilutive effect from the
options as they would be negative.
24 Commitments and contingencies
24.1 Operating lease rentals - Group as lessor
Property
The Group has entered into commercial property lease on its
investment property, consisting in the Group's surplus space in the
Swiss office building. The non-cancellable lease has remaining
terms of as at 31 December 2021.
Future minimum rentals receivable under non-cancellable
operating leases as at 31 December are as follows:
As at 31/12/2014 As at 31/12/2013
USD USD
Within one year 329,452 326,125
After one year but not more
than five years 1,317,808 1,304,502
More than five years 658,904 978,375
Pallets
As at 31 December 2014, the Group had contracted 2 customers
having both signed a 3-year-period agreement.
Future minimum rentals receivable under non-cancellable
operating leases as at 31 December are as follows:
As at 31/12/2014 As at
31/12/2013
USD USD
Within one year 64,128 -
After one year but not more 128,256 -
than five years
More than five years - -
192,384 -
================= =====================================================
24.1 Operating lease commitments - Group as lessee
The Group has entered into commercial leases for office spaces
in United Kingdom and New Jersey and for a manufacturing facility
in Canada. These leases have an average life of between 6 months
and 3 years with renewal options included in the contracts. In
connection with the operational lease of the factory premises
located in Canada, a letter of credit amounting to CAD 2,500,000
(USD 2,149,975) has been issued to the landlord as a guarantee for
lease payments and lease defaults.
Future minimum rentals payable under non-cancellable operating
leases as at 31 December are as follows:
As at As at
31/12/2014 31/12/2013
USD USD
Within one year 1,682,661 399,078
After one year but
not more than five
years 5,550,376 256,140
More than five years 5,920,924 -
13,153,961 655,218
============ ============
24.1 Contingent liabilities
At 31 December 2013 the Company had a contingent liability to
pay GBP 363,866 (USD 602,666), on the successful completion of an
IPO. The IPO occurred on 6 January 2014 and the related liabilities
were duly paid.
24.1.1 Warrants DPEI - comparative information
In relation with the Warrants issued by the Group to DPEI, the
holder of the warrant had the option to terminate the Warrants, at
its discretion. Upon termination of the Warrants, the Group would
have to pay the holder an amount equal to the fair market value of
the warrants. The holder may only terminate 25% of the warrant
shares and only during the period from 31 December 2012 until 31
December 2017.
On 8 November 2013 the agreement was amended such that the right
to warrants would be terminated following a successful IPO before
31 March 2014 on the condition that the company pay DPEI USD 40
million. This occurred in January 2014 and has been accrued as a
cost of the facility in the year ended 31 December 2013. The
accrual has been duly paid during the year 2014.
24.2 Forward purchase of property, plant and equipment
The Group has commitment in relation with forward purchase for
the acquisition of property, plant and equipment, as follows:
As at As at
31/12/2014 31/12/2013
USD USD
Forward purchase for
acquisition of PPE 2,249,326 2,386,380
============ ============
24.3 Related party disclosures
24.3.1 Group subsidiaries
The consolidated financial information include the financial
statements of the Company and its subsidiaries. The Group has the
following subsidiaries included in these consolidated financial
information:
% of equity interest
Subsidiary name Country
of incorporation 2014 2013
RM2 S.A., including
Swiss branch Luxembourg 100% 100%
RM2 Leasing S.A. (previously
RM2 IP S.A.) Luxembourg 100% 100%
RM2 Holland B.V. Netherlands 100% 100%
RM2 Europe Spó
ka z.o.o. Poland 100% 100%
United
States
RM2 USA Inc. of America 100% 100%
RM2 Limited (previously United
Victoria Rises Ltd.) Kingdom 100% 100%
RM2 Canada Inc. Canada 100% 100%
RM2 France E.u.r.l.
(previously RM2 France
S.à r.l.) France 100% 100%
Equipment Tracking United
Limited Kingdom 100% 100%
RM2 Holding S.à
r.l. Luxembourg 100% 0%
Total Solutions International
B.V Netherlands 0% 100%
All subsidiaries held by the Company are consolidated, except
for RM2 Total Solutions Inc., United States of America, and RM2
Pallet Investment Limited, Ireland.
On 24 June 2014, the Extraordinary General Meeting of
Shareholders of RM2 International S.A. approved the contribution of
all assets and liabilities of RM2 International S.A. in a newly
incorporated entity in Luxembourg, RM2 Holding S.à r.l., with
accounting and tax effect as at 1 April 2014.
At December 24, 2014 RM2 Total Solutions International B.V.
merged into RM2 Holland B.V and is now a dormant company.
24.3.2 Transactions with related parties
All transactions between the Company and the Group's
subsidiaries, and between Group's subsidiaries, have been
eliminated for the preparation of these consolidated financial
information.
Income Expenses Amounts Amounts Assets
Year with from related owed by owed to acquired
related parties related related from related
parties parties parties parties
USD USD USD USD USD
Parent: Interest
bearing loans 2013 - 1,226,532 - 5,926,532 -
Parent: Interest 2014 - 123,458 - - -
bearing loans
Parent: Non-interest 2013 - - - 8,550 -
bearing loans
Parent: Non-interest 2014 - - - 8,550 -
bearing loans
Key Management personnel: 2013 - 428,402 - - -
Remuneration
Key Management personnel:
Remuneration 2014 - 1,464,673 111,921 - -
Key Management personnel: 2014 - - 107,549 - -
Advances
Key Management personnel: 2013 - 15,743,333 - - -
Share-based payments
Key Management personnel: 2014 - 424,257 - - -
Share-based payments
Other: Advances 2014 - - 31,771,72 10,235 -
Other: Reimbursement
of costs incurred 2014 726,215 - 771,854 - -
Other: Asset acquires 2014 - - - - 250,000
The income from other related parties have been recorded in
Other operating income for USD 339,925 and have been deducted from
Other Administrative expenses for USD 386,291.
In addition, the parent company realized in 2013 a capital
decrease by the distribution in kind of shares in Basalt Holding S.
à r. l. (see note 19.3 for details of the transaction).
Restricted share issues to related parties are disclosed in note
22.
24.3.3 Transactions with key management personnel
There were no specific transactions between the Group and the
key management personnel.
The Group granted compensation to the key management personnel
as follows:
As at As at
31/12/2014 31/12/2013
USD USD
Short-term employee
benefits 1,464,673 428,402
25 Financial risk management objectives and policies
The Group's financial liabilities comprise only loans and
borrowings and trade and other payables. The main purpose of these
financial liabilities is to finance the Group's operations. The
Group has loans and other receivables, trade and other receivables,
and cash and short-term deposits that arrive directly from its
operations.
The Group is exposed to market risk, credit risk and liquidity
risk in relation to the financial instruments held. The Group's
senior management oversees the management of these risks. The Board
of Directors reviews and agrees policies for managing each of these
risks which are summarised below.
25.1 Market risks
Market risk is the risk that the fair value of future cash flows
of a financial instrument will fluctuate because of changes in
market prices. Market prices comprise three types of market risk:
interest rate risk, currency risk and other price risk, such as
commodity price risk or equity price risk. Financial instruments
affected by market risk include loans and borrowings, deposits and
available-for-sale investments.
The Group's management has determined that the Group was not
subject to interest rate risk as all significant loans and
receivables have been issued with fixed interest rate, or to
commodity price risk as the production of pallets does not require
raw material subject to market volatility.
The Group has only exposure to the foreign currency risk as a
result of its operations in various countries and using different
functional currencies.
The sensitivity analyses in the following sections relate to the
position as at 31 December 2014 and 2013. The sensitivity analyses
have been prepared on the basis that the amount of net debt, the
ratio of fixed to floating interest rates of the debt and
derivatives and the proportion of financial instruments in foreign
currencies are all constant and on the basis of the hedge
designations in place (at 31 December 2013: none).
The analyses exclude the impact of movements in market variables
on: the carrying values of pension and other post-retirement
obligations; provisions: and the non-financial assets and
liabilities of foreign operations.
25.1.1 Foreign currency risk
Foreign currency risk is the risk that the fair value or future
cash flows of a financial instrument will fluctuate because of
changes in foreign exchange rates. The Group's exposure to the risk
of changes in foreign exchange rates relates primarily to the
Group's operating activities (when revenue or expense is
denominated in a different currency from the Group's presentation
currency) and the Group's net investments in foreign subsidiaries
(translation risk).
The Group is aware of its non US Dollar exposures but does not
consider a hedging program to be needed currently. Raw materials
and capital expenditure are primarily in US Dollars whilst the
target revenue market is the USA. Any divergence from this would be
considered by management with a view to putting cover in place.
The Group has significant operations in the following
currencies: United States Dollar (USD), Swiss Franc (CHF) and
Canadian Dollar (CAD) and Great British Pound (GBP). The Group has
other operations in the following currencies which are not
significant for the Group: Euro (EUR) and Polish Zloty (PLN).
Sensitivity analysis
All intercompany movements have been excluded from this
sensitivity analysis. The following tables demonstrate the
sensitivity to a reasonably possible change in the CHF and CAD
exchange rates, with all other variables held constant. The impact
on the Group's profit before tax is due to changes in the fair
value of monetary assets and liabilities including non-designated
foreign currency derivatives. The Group's exposure to foreign
currency changes for all other currencies is not material.
The sensitivity analysis assumes a +/- 6% change of the USD/CHF
exchange rate for the year (2013: 3%). This percentage has been
determined based on the average market volatility in exchange rates
in the previous 24 months.
The sensitivity analysis assumes +/- 8% of the USD/CAD exchange
rate of the previous 24 months is (2013: 1%) This percentage has
been determined based on the average market volatility in exchange
rates in the previous 24 months.
Year Change Effect Effect
in CHF on profit on other
rate before comprehensive
tax income
USD USD
2014 +6% (337,512) (337,512)
-6% 308,689 308,689
2013 +3% 16,494 16,494
-3% (16,988) (16,988)
Year Change Effect Effect
in CAD on profit on other
rate before comprehensive
tax income
USD USD
2014 +8% (198,715) (198,715)
-8% 219,422 219,422
2013 +1% (214,057) (214,057)
-1% 217,057 214,507
25.2 Credit risk
Credit risk is the risk that a counterparty will not meet its
obligations under a financial instrument or customer contract,
leading to a financial loss. The Group is exposed to credit risk
from its operating activities and from its financing activities,
including deposits with banks and financial institutions, foreign
exchange transactions and other financial instruments.
Credit risk from balances with banks and financial institutions
is not considered significant as the Group centrally manages the
cash held in Luxembourg and has made placements with lower-risk
counterparties mainly located in an A rating bank. Funding by the
Luxembourg Holding company to the subsidiaries is limited to their
current operational requirements.
Trade and other receivables
The Group is not subject to any credit risk related to trade
receivable as the Group has no material trade receivables as at
each period ended.
25.2.1 Financial instruments and cash deposits
In 2013, the Group loan financial instruments were mainly
represented by loan receivables owed by PRC.
The Management estimated that the recoverability of the PRC
receivable was uncertain (see note 4) and has recorded impairment
on the full nominal amount of the receivables. The loan has been
cancelled in 2014.
Credit risk from balances with banks and financial institutions
is not considered significant as the Group has made placements with
lower-risk counterparties.
25.2.2 Ageing analysis of receivables
The Group receivables ageing list at 31 December 2014 has been
collected during the 1(st) quarter of 2015.The interest on the PRC
loans which are due as at 31 December 2014 and remains unpaid as at
the period end for USD 236,250 (2013: 609,415). The interest has
currently not been collected, as a consequence, it has been fully
impaired.
25.3 Liquidity risk
The Group's objective is to maintain a balance between
continuity of funding and flexibility through the use of raising of
capital via equity issues or bridging facilities. Longer term the
Group will look to finance activities through bank and debt
facilities see Note 3.2.
Maturity Profile
The table below summarises the maturity profile of the Group's
financial liabilities based on contractual undiscounted
payments.
31 December Due Due Due Due Due Total
2014 on demand within between between after
3 months 3 and 1 and 5 years
12 months 5 years
USD USD USD USD USD USD
Non-current
liabilities
Interest-bearing
loans and
borrowings - - - 2,053,541 - 2,053,541
Bank borrowings - - - 2,053,541 - 2,053,541
Current liabilities - - - -
Interest-bearing
loans and
borrowings - 28,573 - - - 28,573
Bank overdrafts - - - - - -
Other loans
and borrowings - 28,573 - - - 28,573
Loans from - - - - - -
other related
parties
Trade and
other payables - 6,354,090 - - - 6,354,090
Trade payables - 4,752,320 - - - 4,752,320
Payables
to other
related parties - 120,471 - - - 120,471
Employee
compensation
payables - 258,111 - - - 258,111
Other tax
payables - 941,475 - - - 941,475
Other payables - 281,713 - - - 281,713
Total financial
liabilities: - 6,382,663 - 2,053,541 - 8,436,204
============ ============ =========== ========== ========= ============
31 December Due Due Due Due Due Total
2013 on demand within between between after
3 months 3 and 1 and 5 years
12 months 5 years
USD USD USD USD USD USD
Non-current
liabilities
Interest-bearing
loans and
borrowings - - - 2,371,080 - 2,371,080
Bank borrowings - - - 2,371,080 - 2,371,080
Current liabilities
Interest-bearing
loans and
borrowings 22,208 31,208,505 - - - 31,230,713
Bank overdrafts 22,208 - - - - 22,208
Other loans
and borrowings - 25,273,423 - - - 25,273,423
Loans from
other related
parties - 5,935,082 - - - 5,935,082
Trade and
other payables - 45,528,637 - - - 45,528,637
Trade payables - 2,725,769 - - - 2,725,769
Payables
to other
related parties - 12,782 - - - 12,782
Employee
compensation
payables - 9,046 - - - 9,046
Other tax
payables - 1,129,906 - - - 1,129,906
Other payables - 41,651,134 - - - 41,651,134
Total financial
liabilities: 22,208 76,737,142 - 2,371,080 - 79,130,430
=========== ============= =========== ========== ========= =============
25.4 Concentration of risk
Concentrations arise when a number of counterparties are engaged
in similar business activities, or activities in the same
geographical region, or have economic features that would cause
their ability to meet contractual obligations to be similarly
affected by changes in economic, political or other conditions.
Concentrations indicate the relative sensitivity of the Group's
performance to developments affecting a particular industry. The
Group do not consider that others are engaged in similar business
activities, but do monitor the situation.
26 Capital management
The Group's policy is to maintain a strong capital base to
maintain investor, creditor and market confidence and to sustain
the future development of the business. The impact of the level of
capital on shareholders' return is also recognised and the Group
recognises the need to maintain a balance between the higher
returns that might be possible with greater gearing through future
borrowings and the advantage and security afforded by a sound
capital position.
The Group manages the capital structure and makes adjustments to
it in the light of changes in economic conditions and the risk
characteristics of the underlying assets. In order to maintain or
adjust the capital structure, the Group may adjust the amount of
dividends paid to shareholders in the future, return capital to
shareholders, issue new shares, or sell assets to reduce debt.
27 Subsequent events
Operations on capital
Grants of Options and Restricted Shares
Pursuant to the authorisations granted by Extraordinary General
Meetings of Shareholders certain grants of options and Restricted
Shares have been made subsequent to 31 December 2014 as described
below:
The share capital of the Company was increased by an amount of
USD 2,530 on 12 March 2015 raising it from its former amount of USD
3,227,772 to USD 3,230,302, through the issuance of 253,000
Restricted Shares. These Restricted Shares vest on the third
anniversary of the grant date, assuming the beneficiary continues
to have a business relationship with the Company at such date.(see
Note 22). The information necessary to valuate these Share-based
payments is as follows:
2015
Restricted
Shares
Weighted average exercise price GBP 0.01
Expected volatility
Expected life of restricted shares 3 years
Risk-free interest rate 1.35%
Expected dividend yields Nil
------------------------------------- -----------
Directors & Advisers
Directors
Ian Molson Chairman
John Walsh Chief Executive
Officer
Jean-Francois Chief Financial
Blouvac Officer
Jan Dekker Non-Executive
Director
Charles Duro Non-Executive
Director
Lord Rose Non-Executive
Director
Amaury de Seze Non-Executive
Director
Paul Walsh Non-Executive
Director
Biographies of the Directors are available
on the Company website www.rm2.com
Company Secretary
and Registered 5 rue de la Chapelle
Office
L-1325 Luxembourg
Grand Duchy of Luxembourg
Company number RCS Luxembourg B 132.740
Nominated adviser RBC Markets
and broker
Riverbank House
London EC4R 3BF
Independent Auditor Grant Thornton Lux Audit S.A.
89A, Pafebruch
L-8308 Capellen
Luxembourg
Registrar Computershare Investor Services
(Jersey) Limited
Queensway House
Hilgrove Street
Jersey JE1 1ES
Consolidated management report
The Directors present their report on the affairs of RM2
International S.A. (the Company) and its subsidiaries, referred to
as the Group, together with the audited Consolidated Financial
Statements and Independent Auditors' report for the year ended 31
December 2014.
Principal Activities
The main activity of the Group is to manufacture, sell and lease
shipping pallets and to provide, where necessary, related
logistical services.
The group operates principally within the upstream logistics
market which is focused on the supply of raw materials and
components to manufacturers, and target the sale or rental of its
pallets and their utilisation within closed loop supply chains of
its customers.
In addition, the Group's pallet tracking and management
software, the ERICA system provides 'real time' equipment balances
throughout supply chains.
Business Review and Key Performance Indicators
Following the successful flotation of the group on the London
AIM market on 6 January 2014, the group continued to expand its
manufacturing facilities in Canada and to market the group's
products and pallet pooling capabilities.
The Group started a pallet pool late in 2013, which generated
some USD 5,000 of rental income. The Group has expanded its
production and added pallets to its rental pools in North America
and Europe in 2014, following successful trials with potential
customers.
In 2014 the pool grew to 34,930 generating USD182,388 of rental
income.
The Group monitors its cash reserves against projected capital
expenditure, overhead, production, sales and leasing activity.
In 2014, the Group relocated its principal manufacturing
facility to a 265,000 square foot site in Ontario, Canada, in order
to concentrate its pultrusion fabrication and assembly activities
in a single location.
Going Concern
The Directors have prepared a business plan and cash flow
forecast for the three coming years. The forecast contains certain
assumptions about the level of future sales and the level of gross
margins achievable. These assumptions are the Directors' best
estimate of the future development of the business. The Directors
are satisfied that the Group has adequate resources to continue in
operational existence for the foreseeable future and accordingly,
continue to adopt the going concern basis in preparing the
consolidated financial statements.
On 6 January 2014 the parent company of the Group RM2
International SA completed a successful Initial Public Offering
(IPO) on the London Stock Exchange AIM market, raising gross
proceeds of approximately GBP137.2 million (equivalent to
approximately USD 225 million) to expand its production capacity
and to fund the production of pallets for rental and sale. The
business plan envisions raising further funds in 2015.
Following the IPO, the Group terminated the DPEI Warrant
Agreement by paying USD 40,000,000 and repaid all of the bridging
loans as detailed in Note 10, leaving the group debt free, except a
loan that is secured by a mortgage on the building held by the
Group in Switzerland.
Dividends
The Directors do not recommend the payment of a dividend (2013:
nil).
Capital Structure
Details of the authorised and issued share capital, together
with details of the movements in the Company's issued share capital
during the period are shown in Note 14.
All issued shares are fully paid.
Details of the share option scheme are set out in Note 22
Supplier Payment Policy
The Group's policy is to settle terms of payment with suppliers
when agreeing to the terms of each transaction.
Subsequent Events
Subsequent events are described in note 27 to the Consolidated
Financial Statements.
Directors
The Directors who served the Company during the year and up to
the date of this report were as follows:
Executive Directors
John Walsh
Jean-Francois Blouvac Appointed 18 September
2014
Ashavani Mohindra Resigned 18 September
2014
Non-Executive Directors
Ian Molson
Jan Dekker
Charles Duro
Lord Rose
Amaury de Seze
Paul Walsh
The Director's emoluments (translated into USD at average rate)
were in 2014 and 2013, as follows:
2014 2013
Salary Benefits Total Salary Benefits Total
& Fees & Fees
USD USD USD USD USD USD
Executive Directors
John Walsh 399,388 - 399,388 - - -
Jean-Francois
Blouvac 236,898 7,647 244,545 - - -
Ashavani Mohindra 247,158 9,886 257,044 50,506 1,292 51,798
Non-Executive
Directors
Ian Molson 160,000 , 160,000 35,856 - 35,856
Jan Dekker 81,848 - 81,848 17,928 - 17,928
Charles Duro 81,848 - 81,848 17,928 - 17,928
Sir Stuart Rose 80,000 - 80,000 17,928 - 17,928
Amaury de Seze 80,000 - 80,000 10,521 - 10,521
Paul Walsh 80,000 - 80,000 17,928 - 17,928
-------------------- --------- -------- --------- ------- -------- -------
563,696 - 563,696 118,089 - 118,089
-------------------- --------- -------- --------- ------- -------- -------
1,447,140 17,533 1,464,673 168,595 1,292 169,887
-------------------- --------- -------- --------- ------- -------- -------
Directors' interests
The Directors who held office at 31 December 2014 had the
following interests in the ordinary shares of the Company:
Number of % held Number of
shares at at shares
31 December 31 December at
2014 2014 30 May 2015
Ian Molson 7,500,000 2.3 9,400,000
John Walsh 21,052,680 6.5 22,252,680
Jean-Francois
Blouvac 1,000,000 0.3 1,000,000
Jan Dekker 2,400,000 0.7 2,500,000
Charles Duro 315,000 0.1 315,000
Sir Stuart
Rose 1,150,000 0.4 1,150,000
Amaury de
Seze 1,150,000 0.4 1,350,000
Paul Walsh 1,539,091 0.5 1,639,091
36,106,771 39,606,771
--------------- ------------- ------------- -------------
Of the holdings above 15,625,180 (2013: 12,308,775) consist of
restricted shares set out below. A Director holding Restricted
Shares shall not sell, transfer, mortgage, charge, encumber or
otherwise dispose of any of his Restricted Shares as long as
certain performance conditions are not fully satisfied (the
"Performance Conditions"). 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% higher than the
Placing Price (0.88 GBP) for the Relevant Period, the Performance
Condition in respect of one third of the Director's Restricted
Shares shall be fulfilled. If the Average Price is 75% higher than
the Placing Price for the Relevant Period, the Performance
Condition in respect of a further one third of the Director's
Restricted Shares shall be fulfilled. If the Average Price is 100%
higher than the Placing Price for the Relevant Period, the
Performance Condition in respect of the final third of the
Director's Restricted Shares shall be fulfilled. If any Performance
Conditions are not fully satisfied by ten years after the date of
the grant, 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 per
share.
Total number Number of Number of
of shares restricted restricted
at shares (only) shares (only)
31 December at at
2014 31 December 30 May 2015
2014
Ian Molson 7,500,000 4,600,000 4,600,000
John Walsh 21,052,680 6,552,680 6,552,680
Jean-Francois
Blouvac 1,000,000 1,000,000 1,000,000
Jan Dekker 2,400,000 - -
Charles Duro 315,000 22,500 22,500
Sir Stuart
Rose 1,150,000 1,150,000 1,150,000
Amaury de
Seze 1,150,000 1,150,000 1,150,000
Paul Walsh 1,539,091 1,150,000 1,150,000
36,106,771 15,625,180 15,625,180
--------------- ------------- --------------- ---------------
Corporate Responsibility
The Board recognises its employment, environmental and health
and safety responsibilities. It devotes appropriate resources
towards monitoring and improving compliance with existing
standards.
Employees
The Group is committed to achieving equal opportunities and to
complying with relevant anti-discrimination legislation. It is
established Group policy to offer employees and job applicants the
opportunity to benefit from fair employment, without regard to
their sex, sexual orientation, marital status, race, religion or
belief, age or disability. Employees are encouraged to train and
develop their careers.
The Group has continued its policy of informing all employees of
matters of concern to them as employees, both in their immediate
work situation and in the wider context of the Group's well-being.
Communication with employees is effected through the Board, the
Group's management briefings structure, formal and informal
meetings and through the Group's information systems.
Directors' Responsibilities
The Directors are responsible for preparing the Annual Report
and the Consolidated Financial Statements and for being satisfied
that the Consolidated Financial Statements give a true and fair
view. The Directors are also responsible for preparing the
Consolidated Financial Statements in accordance with International
Financial Reporting Standards ("IFRS") as adopted by the European
Union.
Company law requires the Directors to prepare Consolidated
Financial Statements for each financial period which give a true
and fair view of the state of affairs of RM2 International S.A.
(the Company) and the Group and of the profit or loss of the
Company and the Group for that period. In preparing those Financial
Statements, the Directors are required to:
-- select suitable accounting policies and
then apply them consistently;
-- make judgements and estimates that are
reasonable and prudent;
-- state whether applicable accounting standards
have been followed, subject to any material
departures disclosed and explained in
the Financial Statements; and
-- prepare the Financial Statements on a
going concern basis unless it is inappropriate
to presume that the Company and the Group
will continue in business
The Directors confirm that they have complied with the above
requirements in preparing the Financial Statements. The Directors
are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's transactions, and
disclose with reasonable accuracy at any time the financial
position of the Company and the Group.
They are also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
Statement of disclosure to the Independent Auditor
All of the current Directors have taken all the steps that they
ought to have taken to make themselves aware of any information
needed by the Group's Independent Auditor for the purposes of his
audit and to establish that the Independent Auditor is aware of
that information. The Directors are not aware of any relevant audit
information of which the Independent Auditor is unaware.
Independent Auditor
The auditor, Grant Thornton Lux Audit S.A., will be proposed for
re-appointment at the forthcoming Annual General Meeting.
Corporate governance report
The Board is committed to proper standards of Corporate
Governance, managing the Group in an efficient, effective,
entrepreneurial and ethical manner for the benefit of shareholders
over the longer term.
In the context of the Group's strategy for growth, the Board
will continue to actively review its Corporate Governance at
regular intervals.
The Board is responsible for the Group's system of internal
control and reviewing its effectiveness. Such a system is designed
to manage rather than eliminate risk of failure to achieve business
objectives, and can only provide reasonable and not absolute
insurance against material misstatement or loss. The system of
internal financial control comprises of controls established to
provide reasonable assurance of:
-- The safeguarding of assets against unauthorised
use or disposal and;
-- The reliability of financial information
used within the business and for publication
and the maintenance of proper accounting
records
In addition the key procedures on the internal financial control
of the Group are as follows:
-- The Board reviews and approves budgets
and monitors performance against those
budgets regularly with any variance being
fully investigated and;
-- The Group has clearly defined reporting
and authorisation procedures relating
to the key financial areas.
The Annual General Meeting is the principal forum for dialogue
with shareholders.
REPORT OF THE REVISEUR D'ENTREPRISES AGREE
Report on the financial statements
Following our appointment by the General Meeting of the
Shareholders on 24 June 2014, we have audited the accompanying
consolidated financial statements of RM2 INTERNATIONAL S.A. and its
subsidiaries, which comprise the consolidated statement of
financial position as at 31 December 2014, and the consolidated
statement of comprehensive income, consolidated statement of
changes in equity and consolidated statement of cash flow for the
year then ended, and a summary of significant accounting policies
and other explanatory information.
Board of Directors' responsibility for the financial
statements
The Board of Directors is responsible for the preparation and
fair presentation of these consolidated financial statements in
accordance with International Financial Reporting Standards as
adopted by the European Union and for such internal control as the
Board of Directors determines is necessary to enable the
preparation of consolidated financial statements that are free from
material misstatement, whether due to fraud or error.
Responsibility of the Réviseur d'Entreprises Agréé
Our responsibility is to express an opinion on these
consolidated financial statements based on our audit. We conducted
our audit in accordance with International Standards on Auditing as
adopted for Luxembourg by the Commission de Surveillance du Secteur
Financier. Those standards require that we comply with ethical
requirements and plan and perform the audit to obtain reasonable
assurance whether the consolidated financial statements are free
from material misstatement.
An audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the financial statements. The
procedures selected depend on the Réviseur d'Entreprises Agréé's
judgment, including the assessment of the risks of material
misstatement of the consolidated financial statements, whether due
to fraud or error. In making those risks assessments, the Réviseur
d'Entreprises Agréé considers internal control relevant to the
entity's preparation and fair presentation of the consolidated
financial statements in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the entity's internal
control.
An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting
estimates made by the Board of Directors, as well as evaluating the
overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis of our audit
opinion.
Opinion
In our opinion, the consolidated financial statements give a
true and fair view of the financial position of RM2 INTERNATIONAL
S.A. and its subsidiaries as of 31 December 2014 and of its
financial performance and its cash flows for the year then ended in
accordance with the International Financial Reporting Standards as
adopted by the European Union.
Report on other legal and regulatory requirements
The consolidated management report, which is the responsibility
of the Board of Directors, is consistent with the consolidated
financial statements.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR EANKLFLPSEFF
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