Admission Document

Transcription

Admission Document

RM2 International S.A.
AIM Admission Document
Nominated Adviser & Broker
Cenkos Securities plc
6.7.8 Tokenhouse Yard
London EC2R 7AS
5, rue de la Chapelle
L-1325 Luxembourg
Grand Duchy of Luxembourg
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt about the contents of this document or as to what action you
should take, you are recommended immediately to seek your own financial advice from your stockbroker, bank manager, solicitor, accountant or other independent
adviser who specialises in advising on the acquisition of shares and other securities and is authorised under the Financial Services and Markets Act 2000 (as amended)
(“FSMA”) if you are resident in the UK, or, if you are not resident in the UK, from another authorised independent adviser. The whole of this document should be read.
Your attention is drawn in particular to the section entitled “Risk Factors” in Part III of this document that describes certain risks associated with an investment in the
Company.
The Directors of RM2 International S.A. (the “Company”), whose names, business addresses and functions appear on page 4 of this document, and the Company itself accept
responsibility, individually and collectively, in accordance with the AIM Rules for Companies (“AIM Rules”), for the information contained in this document. To the best of the
knowledge and belief of the Directors and the Company (who have taken all reasonable care to ensure that such is the case), the information contained in this document is
in accordance with the facts and does not omit anything likely to affect the import of such information. To the extent that information has been sourced from a third party,
this information has been accurately reproduced and, as far as the Directors are aware and are able to ascertain from information published by that third party, no facts have
been omitted which may render the reproduced information inaccurate or misleading. In connection with this document, no person is authorised to give any information or
make any representation other than as set out in this document.
This document, which comprises an admission document drawn up in accordance with the AIM Rules, has been issued in connection with the proposed admission of the
issued and to be issued Ordinary Shares to trading on AIM, a market operated by the London Stock Exchange plc (“AIM”). This document does not contain an offer or
constitute any part of an offer to the public within the meaning of sections 85 and 102B of FSMA or otherwise. This document is not an approved prospectus for the purposes
of section 85 of FSMA and a copy of it has not been, and will not be, delivered to the Financial Conduct Authority (the “FCA”) in accordance with the Prospectus Rules or
delivered to or approved by any other authority which could be a competent authority for the purposes of the Prospectus Directive.
A copy of this document will be available, free of charge, during normal business hours on any weekday (except Saturdays, Sundays and public holidays), at the offices of
Dentons UKMEA LLP, One Fleet Place, London EC4M 7WS for a period of one month from the date of Admission. Neither the delivery of this document nor any subscription
made pursuant to this document will, under any circumstances, create any implication that there has been any change in the affairs of the Company since the date of this
document or that the information in this document is correct at any time subsequent to its date. Application will be made to the London Stock Exchange for the issued and
to be issued Ordinary Shares to be admitted to trading on AIM (“Admission”). It is expected that Admission will take place and that dealings in Ordinary Shares will commence
on 6 January 2014.
AIM is a market designed primarily for emerging or smaller companies to which a higher investment risk tends to be attached than to larger or more established
companies. AIM securities are not admitted to the Official List of the United Kingdom Listing Authority (the “Official List”). A prospective investor should be aware of the
risks of investing in such companies and should make the decision to invest only after careful consideration and, if appropriate, consultation with an independent financial
adviser. In particular, it should be remembered that the price of securities and the income (if any) from them can go down as well as up. The AIM Rules are less demanding
than those of the Official List.
All subsequent written and oral forward-looking statements attributable to the Company, its directors or to persons acting on its behalf are expressly qualified in their entirety
by the cautionary statements referred to above and contained elsewhere in this document.
Each AIM company is required pursuant to the AIM Rules to have a nominated adviser. The nominated adviser is required to make a declaration to the London Stock
Exchange on Admission in the form set out in Schedule Two to the AIM Rules for Nominated Advisers. It is emphasised that no application is being made for the Ordinary
Shares to be admitted to the Official List or to any other recognised investment exchange. Further, neither the London Stock Exchange nor the FCA has examined or
approved the contents of this document.
RM2 INTERNATIONAL S.A.
(Incorporated and operating under the laws of Luxembourg with company registration number B 132 740)
PLACING OF 155,903,548 PLACING SHARES
OF US$0.01 EACH AT 88P PER ORDINARY SHARE
ADMISSION TO TRADING ON AIM
NOMINATED ADVISER AND BROKER
Share Capital immediately following the Placing and Admission
Ordinary Shares of US$0.01 each, issued and fully paid
Amount
Number
US$3,162,437.51
316,243,751
The Placing is conditional, inter alia, on Admission taking place on or before 6 January 2014 (or such later date as the Company and Cenkos Securities plc (“Cenkos”) may
agree). The New Ordinary Shares will, on Admission, rank pari passu in all respects with the Existing Ordinary Shares including the right to receive all dividends or other
distributions declared, paid or made after Admission.
Cenkos is authorised and regulated in the United Kingdom by the FCA and is advising the Company and no one else in connection with the Placing and Admission (whether
or not a recipient of this document), and is acting exclusively for the Company as nominated adviser and broker for the purpose of the AIM Rules. Cenkos will not be
responsible to any person other than the Company for providing the protections afforded to its customers, nor for providing advice in relation to the Placing and Admission
or the contents of this document. In particular, the information contained in this document has been prepared solely for the purposes of the Placing and Admission and is
not intended to inform or be relied upon by any subsequent purchasers of Ordinary Shares (whether on or off exchange) and accordingly no duty of care is accepted in relation
to them. Without limiting the statutory rights of any person to whom this document is issued, no representation or warranty, express or implied, is made by Cenkos as to the
contents of this document. No liability whatsoever is accepted by Cenkos for the accuracy of any information or opinions contained in this document, for which the Company
and the Directors are solely responsible, or for the omission of any information from this document.
No legal, business, tax or other advice is provided in this document. Prospective investors should consult their professional advisers as needed on the potential consequences
of subscribing for, purchasing, holding or selling Ordinary Shares under the laws of their country and/or state of citizenship, domicile or residence.
This document does not constitute an offer to sell, or a solicitation of an offer to buy, Placing Shares in any jurisdiction in which such offer or solicitation is unlawful. In
particular, this document is not for distribution in or into the United States, Canada, the Republic of South Africa, the Republic of Ireland or Japan except that the document
may be provided in certain limited circumstances to persons in the United States in connection with a placing of Placing Shares in private placements exempt from the
registration requirements of the US Securities Act of 1933, as amended (“Securities Act”). The Placing Shares have not been and will not be registered under the Securities
Act, any state securities laws in the United States or any securities laws of Canada, the Republic of South Africa, the Republic of Ireland or Japan or in any country , territory
or possession where to offer them without doing so may contravene local securities laws or regulations. Accordingly, the Placing Shares may not, subject to certain limited
exceptions, be offered or sold, directly or indirectly, in the United States, Canada, the Republic of South Africa, the Republic of Ireland or Japan or to, or for the account limited
or benefit of, any person in, or any national, citizen or resident of the United States, Canada, the Republic of South Africa, the Republic of Ireland or Japan. The distribution
of this document outside the United Kingdom may be restricted by law and therefore persons outside the United Kingdom into whose possession this document comes should
inform themselves about and observe any restrictions as to the Placing, the Placing Shares or the distribution of this document.
Notice to prospective investors in the European Economic Area
In the United Kingdom this document is being distributed to, and is directed only at qualified investors (as defined in the Prospectus Directive) who are (i) persons having
professional experience in matters relating to investments who fall within the definition of “investment professionals” in Article 19(5) of the Financial Services and Markets
Act 2000 (Financial Promotion) Order 2005, as amended (the “Order”), or (ii) high net worth bodies corporate, unincorporated associations and partnerships and trustees of
high value trusts as descried in Article 49(2) of the Order and persons within the United Kingdom who receive this document (other than persons falling within (i) and (ii)
above) should not rely on or act upon this document.
In relation to each member state of the European Economic Area which has implemented the Prospectus Directive (each, a “Relevant Member State”), no Ordinary Shares
have been offered or will be offered pursuant to the Placing to the public in that Relevant Member State prior to the publication of a prospectus in relation to the Ordinary
Shares which has been approved by the competent authority in that Relevant Member State, or, where appropriate, approved in another Relevant Member State and notified
to the competent authority in that Relevant Member State, all in accordance with the Prospectus Directive, except that offers of Ordinary Shares to the public may be made
at any time under the following exemptions under the Prospectus Directive, if they are implemented in that Relevant Member State:
(a)
to any legal entity which is a qualified investor as defined in the Prospectus Directive;
(b)
to fewer than 150, or, if the Relevant Member State has not implemented the relevant provision of the Prospectus Directive, 100 natural or legal persons (other
than qualified investors as defined in the Prospectus Directive) in such Relevant Member State; or
(c)
in any other circumstances falling within Article 3(2) of the Prospectus Directive,
provided that no such offer of Ordinary Shares shall result in a requirement for the publication of a prospectus pursuant to Article 3 of the Prospectus Directive or any measure
implementing the Prospectus Directive in a Relevant Member State and each person who initially acquires any Ordinary Shares or to whom any offer is made under the
Placing will be deemed to have represented, acknowledged and agreed that it is a “qualified investor” within the meaning of Article 2(1)(e) of the Prospectus Directive. For
the purposes of this provision, the expression an “offer to the public” in relation to any offer of Ordinary Shares in any Relevant Member State means a communication in
any form and by any means presenting sufficient information on the terms of the offer and any Ordinary Shares to be offered so as to enable an investor to decide to purchase
or subscribe for the Ordinary Shares, as the same may be varied in that Relevant Member State by any measure implementing the Prospectus Directive in that Relevant
Member State and the expression “Prospectus Directive” means Directive 2003/71/EC (as amended), to the extent implemented in the Relevant Member State and includes
any relevant implementing measure in each Relevant Member State.
FORWARD-LOOKING STATEMENTS
This document includes “forward-looking statements” which include all statements other than statements of historical facts, including, without limitation, those regarding
the Company’s financial position, business strategy, plans and objectives of management for future operations, or any statements preceded by, followed by or that include
the words “targets”, “believes”, “expects”, “aims”, “intends”, “will”, “may”, “anticipates”, “would, “could” or similar expressions or negatives thereof. Such forward-looking
statements are subject to, inter alia, the risk factors described in Part III of this document, and involve known and unknown risks, uncertainties and other important factors
beyond RM2’s control that could cause the actual results, performance or achievements of the Company to be materially different from future results, performance or
achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding RM2’s present and
future business strategies and the environment in which the Company will operate in the future. These forward-looking statements speak only as at the date of this document.
The Company expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any
change in the Company’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statements are based unless required to
do so by applicable law or the AIM Rules for Companies.
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CONTENTS
DIRECTORS AND ADVISERS
4
PLACING STATISTICS
5
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
5
PART I
INFORMATION RELATING TO RM2
6
PART II
OVERVIEW OF THE PALLET MARKET
29
PART III
RISK FACTORS
38
PART IV
TAXATION
46
PART V
FINANCIAL INFORMATION ON RM2
49
SECTION A:
ACCOUNTANT’S REPORT ON THE HISTORICAL FINANCIAL INFORMATION ON RM2
49
SECTION B:
HISTORICAL CONSOLIDATED FINANCIAL INFORMATION ON RM2 FOR THE THREE YEARS ENDED 31 DECEMBER 2012
51
SECTION C:
INTERIM REVIEW REPORT ON RM2
95
SECTION D:
UNAUDITED INTERIM INFORMATION ON RM2 FOR THE SIX MONTHS ENDED 30 JUNE 2013
97
PART VI
FINANCIAL INFORMATION ON EQUIPMENT TRACKING
106
SECTION A:
ACCOUNTANT’S REPORT ON THE HISTORICAL FINANCIAL INFORMATION ON EQUIPMENT TRACKING
106
SECTION B:
HISTORICAL CONSOLIDATED FINANCIAL INFORMATION ON EQUIPMENT TRACKING FOR THE
THREE YEARS ENDED 31 DECEMBER 2012
108
SECTION C:
INTERIM REVIEW REPORT ON EQUIPMENT TRACKING
123
UNAUDITED INTERIM INFORMATION ON EQUIPMENT TRACKING FOR THE
31 JULY 2013
125
SECTION D:
NINE MONTHS ENDED
PART VII
ADDITIONAL INFORMATION
133
PART VIII
DEFINITIONS
164
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DIRECTORS AND ADVISERS
DIRECTORS
Ian Molson
John Walsh
Ashavani Mohindra
Jan Dekker
Charles Duro
Sir Stuart Rose
Amaury de Seze
Paul Walsh
Chairman
Chief Executive Officer
Chief Financial Officer
Non-Executive Director
all of:
L-1325 Luxembourg
REGISTERED OFFICE
L-1325 Luxembourg
NOMINATED ADVISER AND BROKER
London EC2R 7AS
SOLICITORS TO THE COMPANY AS TO ENGLISH LAW
Dentons UKMEA LLP
One Fleet Place
London EC4M 7WS
SOLICITORS TO THE COMPANY AS TO LUXEMBOURG LAW
Duro & Goebel
L-1325 Luxembourg
SOLICITORS TO THE NOMINATED ADVISER AND BROKER
CMS Cameron McKenna LLP
Mitre House
160 Aldersgate Street
London EC1A 4DD
REPORTING ACCOUNTANTS AND TAX ADVISERS
Grant Thornton UK LLP
30 Finsbury Square
London EC2P 2YU
REGISTRARS
Computershare Investor Services (Jersey) Limited
Queensway House
Hilgrove Street
Jersey JE1 1ES
DEPOSITARY
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol BS13 8AE
FINANCIAL PR
Citigate Dewe Rogerson
3 London Wall Buildings
London Wall
London EC2M 5SY
COMPANY TELEPHONE NUMBER/FAX NUMBER
+352 27 44 96 53
COMPANY WEBSITE
www.rm2.com
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PLACING STATISTICS
PLACING PRICE
88 pence
NUMBER OF EXISTING ORDINARY SHARES IN ISSUE PRIOR TO THE PLACING
156,182,775
NUMBER OF PLACING SHARES BEING ISSUED PURSUANT TO THE PLACING
155,903,548
NUMBER OF DPE SHARES BEING ISSUED ON ADMISSION
4,157,428
NUMBER OF ORDINARY SHARES ON ADMISSION
316,243,751
PERCENTAGE OF THE ENLARGED ISSUED SHARE CAPITAL BEING PLACED
49.30 per cent.
ESTIMATED GROSS PROCEEDS OF THE PLACING
£137.2 million
ESTIMATED NET PROCEEDS OF THE PLACING RECEIVABLE BY THE COMPANY
£130.8 million
MARKET CAPITALISATION IMMEDIATELY FOLLOWING COMPLETION OF THE PLACING AT THE PLACING PRICE
DPE SHARES
£278.3 million
AND ISSUE OF THE
AIM ‘ TICKER’
RM2.L
SEDOL
BGFB1F1
LU0994178464
ISIN NUMBER
EXPECTED TIMETABLE OF PRINCIPAL EVENTS
PUBLICATION OF ADMISSION DOCUMENT
ADMISSION EFFECTIVE AND DEALINGS IN THE ORDINARY SHARES COMMENCES ON AIM
CREST ACCOUNTS EXPECTED TO BE CREDITED
17 December 2013
8.00 a.m. on 6 January 2014
6 January 2014
References to time are to London time unless otherwise stated. Each of the dates in the above timetable is subject to change without further notice.
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PART I
INFORMATION RELATING TO RM2
1.
INTRODUCTION TO RM2
RM2 specialises in pallet development, manufacture, supply and management and was founded in Luxembourg in 2007
to establish a disruptive 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.
RM2 has designed and manufactured the BLOCKPal, a multi-trip pallet made of a glass fibre and resin composite that is
suitable for use in both automated and manual areas of the supply chain of sectors such as fast moving consumer goods,
food ingredients, pharmaceuticals and packaging.
The composite material and the associated manufacturing process, known as pultrusion, have together been shown to
provide strength, durability and flexibility and the pultrusion manufacturing process is easily scalable with minimal risk.
The BLOCKPal has been independently tested by leading institutions and has been shown to perform well in industry
standard tests. Other benefits of the BLOCKPal are discussed at paragraph 3 below.
RM2 intends to operate principally within the upstream logistics market, which is focused on the supply of raw materials
and components to manufacturers, and to target the rental of its pallets and their utilisation within closed loop supply
chains of its potential customers. RM2 believes that this avoids existing rental competition in the downstream portion of
the logistics market, where customers generally require a higher quality pallet, leaving RM2 to compete with the lower
quality, one-way or limited use pallets in the upstream market. RM2’s products have been developed in consultation with
potential customers and RM2 intends to provide such customers, being typically large manufacturing, distribution and
retail businesses, with an integrated solution to their pallet movement needs whilst interacting with other logistics
partners, as necessary. RM2 is one of the few pallet businesses that provides a holistic solution, combining pallet
manufacturing, standalone pallet management and financial options.
In addition, the Company’s pallet tracking and management software, the TACS (Track Asset, Control Spend) system,
which RM2 previously licenced from Equipment Tracking and acquired on 10 December 2013, offers potential customers
services which can provide ‘real time’ equipment balances throughout their supply chains. These services can replace or
strengthen existing tracking systems and are designed to enable potential customers to improve their pallet pool
management. The TACS system was designed to provide potential 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.
RM2 believes that the velocity of pallet movement, the number of trips a pallet makes in any period, is crucial to value
creation and further that retention, its ability to effectively track and manage pallet movements, is key to preventing value
destruction.
RM2 believes that its competitive advantages, when compared to other pallet manufacturers and pallet rental companies,
include:
‘superior product’
RM2’s ‘next generation’ products are, amongst other things, durable, strong,
customisable, hygienic, non-toxic, fire resistant and consistent.
‘flexible design’
RM2’s manufacturing process allows for considerable flexibility in pallet design and
enables it to meet varied customer requirements with minimal time-consuming and
capital-intensive design and tooling considerations. This facilitates sales opportunities to
the whole marketplace rather than the hitherto mainstream approach, where
competition is at its highest and manufacturing margins at their lowest.
‘stable raw material pricing’
The compound used to produce the BLOCKPal reduces exposure to volatile oil and
natural gas-linked pricing, giving a greater degree of product price certainty than plastic
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alternatives. All raw materials and substances utilised by RM2 in the manufacture of the
BLOCKPal are readily available from leading material providers across the globe.
‘market focus’
Through RM2’s pallet rental model, a product can be offered to potential customers
which can enable savings and revenue opportunities through financial and operational
efficiencies for its target upstream market. This allows RM2 to manage and track its
assets within a closed loop and to initially align in a controlled and effective manner with
fewer, high-quality counterparties who are the receivers of the products before
expanding in a controlled manner.
‘tracking and management’
The TACS system can be customised to track any pool of hired equipment and to support
several providers and allows extensive data capture through interfacing with existing
customer software and systems.
‘expertise’
RM2’s Board draws on the experience of individuals who have, in the recent past, held
senior executive positions within some of the world’s leading organisations, many of
which are the receivers of palletised goods, and a number of its senior executives and
key employees have a demonstrable track record in the key disciplines which are core to
RM2’s business. The Company is staffed by professionals whose core competencies
include materials science, engineering, pallet rental, logistics, sales, commodity trading
and global finance.
RM2 has invested significantly in market research and product R&D to establish a solid foundation for its proposed
strategy. The Company is now ready to enter a phase of significant capital expenditure, asset investment and
commercialisation of the business through which it intends to build a pool of rental pallets which, once deployed in the
pallet pools of its potential rental customers, are expected to generate high quality, long-term, asset backed rental
revenues.
2.
GROUP STRUCTURE AND HISTORY
A.
GROUP STRUCTURE
The Company was incorporated on 23 October 2007 under the laws of Luxembourg having its registered office
at 5, rue de la Chapelle, L-1325 Luxembourg, Grand Duchy of Luxembourg.
The Company is the principal holding company within the Group which currently comprises ten further legal
entities established across eight countries, all of which are Subsidiaries of RM2. The Group is currently
headquartered in Luxembourg with manufacturing and distribution facilities in Ontario, Canada, sales offices in
Switzerland and the USA and an administration office in the UK. Further details of each of these Subsidiaries are
provided in Part VII of this document, together with a Group structure chart.
B.
HISTORY & DEVELOPMENT
The development of RM2 and the BLOCKPal is the result of several years of market research and product R&D
focused on pallet technology, pallet products and market practices. This process has resulted in a deep
understanding of the marketplace and the identification of a scalable business model to address what the
Directors believe to be a substantial market opportunity.
The BLOCKPal product has evolved through multiple manufacturing technologies before the current method of
pultrusion was identified as providing solutions to many of the issues encountered with other techniques and
processes. Pultrusion is a process that produces continuous lengths of composite materials with constant crosssections and is one of the fastest-growing manufacturing processes in the composites industry and is highly
suited to the production of pallets. Pultrusion equipment was installed in the Company’s manufacturing facilities
in 2011 and testing began on various designs of the BLOCKPal. Further information on the pultrusion process is
outlined at paragraph 3.C below.
On 27 September 2013, RM2 signed an agreement to acquire the entire issued share capital of Equipment
Tracking for £2 million. Completion of the acquisition of Equipment Tracking occurred on 10 December 2013.
Equipment Tracking was founded in 1995 (having traded as Adventures in Business Limited until the
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incorporation of Equipment Tracking in 2004) and its pallet tracking and management software, which the
Company previously licensed and (through the acquisition of Equipment Tracking) acquired on 10 December
2013, underpins the TACS system which assists customers to manage complex pallet flows. It has serviced some
of the world’s largest suppliers of consumer goods.
3.
RM2 PRODUCTS AND SERVICES
A.
THE BLOCKPAL
RM2 has designed and manufactured the BLOCKPal, a multi-trip pallet made of a glass fibre and resin composite
that is suitable for use in both automated and manual areas of the supply chain of sectors such as fast moving
consumer goods, food ingredients, pharmaceuticals and packaging.
The BLOCKPal label covers all pallets produced by RM2, regardless of size or dimension.
Figure 1: BLOCKPal
Source: Company
The Company believes that, as a result of the extensive R&D programme, it has achieved the optimum balance
of the five key design parameters – strength, stiffness, durability, functionality and cost – with the maximising of
no single attribute acting to the detriment of the overall effectiveness of the product. Key to this success is the
method of pultrusion manufacturing and the materials utilised in the construction of the BLOCKPal.
The Directors believe, taking into account the preliminary results of simulated pallet use testing currently being
carried out but not yet finalised, that the BLOCKPal can achieve in excess of 70 cycles of use before first failure.
In many cases the BLOCKPal will be capable of repair, further increasing its life cycle and value proposition. In
contrast, a 2010 survey of pallet users estimated that approximately 80 per cent. of pallets were used for ten
cycles or fewer with only 15 per cent. being used for more than 20 cycles.
The combination of the following key attributes ensures the broadest application of roles and usage across
industry sectors and a compelling value proposition to potential customers:
‘durable’
The BLOCKPal has been independently tested to ISO 8611 and ASTM D 1185 standards.
‘specific strength’
The glass fibre utilised in the construction of the BLOCKPal is processed under tension
and the resin employed is specifically selected to provide strength and impact-resistant
qualities. Pultruded glass fibre reinforced plastic has a superior strength-to-weight-ratio
than steel.
‘customisable’
A flexible assembly system allows RM2 to manufacture the BLOCKPal to bespoke
dimensions largely from the same profiles to satisfy a customer’s specific requirements
quickly and with minimal additional capital expenditure.
‘hygienic’
The BLOCKPal is easily cleaned with steam and has a natural resistance to moisture,
bacteria and chemicals, meaning the pallet can be particularly effective in transporting
goods where hygiene or contamination is a primary consideration.
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B.
‘non-toxic’
The materials used in the BLOCKPal are compliant with the ‘Generally Recognised as
Safe’ and/or Food-Additive List Specifications of the US Food and Drug Administration
(“FDA”) for substances and materials.
‘fire resistant’
A BLOCKPal design tested has passed the Underwriters Laboratories 2335 fire test
protocol for storage pallets without the use of expensive and occasionally controversial
fire retardants that tend to affect material properties negatively.
‘consistent’
The pultrusion manufacturing process allows component ‘profiles’ to be produced to
fine tolerances complemented by extensive use of automation in production and
assembly which reduces human involvement and labour costs.
‘high-volume’
The pultrusion manufacturing process is continuous, subject to routine maintenance
and is easily scalable with minimal risk.
‘stable pricing’
The compound used in the BLOCKPal has lower exposure to volatile oil and natural gaslinked pricing than plastic alternatives, giving potential customers a greater degree of
product price certainty.
‘cost-effective’
The light weight of the BLOCKPal, when compared to wooden pallets of the same size,
can lead to significant fuel savings, reducing the effective cost per trip.
‘sustainable’
The combination of the long life cycle, materials used and low weight will assist many of
the potential customers to achieve their sustainability goals.
‘reduced theft risk’
The BLOCKPal can be repaired or, at the end of its useful life, pulverised and the
compound used has little or no secondary value, thereby deterring theft and removal
from the system.
‘RFID enabled’
Potential customers have the option to request installation of RFID tags, which can be
used for tracking, temperature monitoring, global positioning system and/or ownership
and can be located in the legs. The BLOCKPal would have to be broken to remove them.
‘superior handling’
The BLOCKPal is designed to have low profile runners and wide fork openings for easy
handling with materials handling equipment.
STRATEGY & REVENUE MODEL
Since the Group’s establishment, RM2’s vision has been to become a ‘disruptive’ participant in the pallet
manufacture and rental industry and to develop differentiated and value-creating products and services. The
Company’s target market is the upstream logistics operations of large manufacturing, distribution and retail
businesses. RM2’s operations will focus on both rental and sales of the BLOCKPal, as well as the management
and tracking of RM2 and third party products for its potential customers through the TACS system.
It is anticipated that a proactive management of these different opportunities will offer investors an attractive
combination of high-quality, long-term asset backed rental revenues and more short-term, higher-margin
revenue, allowing for significant but prudent growth from a stable platform.
RM2 operates a structured four-stage process for the identification of, and engagement with, potential new
customers as each opportunity moves from trial to full implementation. An often protracted sales cycle within
large companies requires flexibility in RM2’s business model and RM2 intends to adapt to change and to allocate
resources according to customer requirements.
The Company’s objective is to increase Shareholder value through, firstly, establishing itself as a critical service
provider to major companies across a diverse range of industry sectors in the US and Canada before replicating
this strategy in Europe and, thereafter, the rest of the world.
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i.
PALLET RENTAL
RM2’s primary strategy is to utilise its BLOCKPal system to turn a potentially unquantified cost in the
supply chain into a significant, recurring increase in margin using simple, flexible and transparent pricing
structures.
RM2’s market research has indicated that some receivers of palleted goods (the “Receiver”) (typically
large manufacturers and primary and secondary suppliers) regard the cost of “inbound” or “upstream”
palletisation as being difficult to quantify and manage whilst others regard it as a general, embedded
overhead. What is common is that it is often not controlled and, whilst generally recognised as
inefficient by potential customers, the Company is not aware of a complete solution to this issue that is
available in the market.
The RM2 model is designed to reduce direct and indirect costs for both the Receiver and the supplier of
the goods (the “Supplier”) without impacting the apportionment of costs and method of billing
between these parties. In order to tailor its rental offering to its potential customers, RM2 will enter into
discussions to understand each element of that Receiver’s supply chain. That process will allow RM2 to
identify the direct cost of deliveries for that Receiver (such as the cost of the pallets, transport and fuel
costs and labour costs associated with loading and unloading) and estimate ancillary or indirect costs
(such as product damage and returns, inspection, repair and cleaning of pallets, downtime in
automated systems handling inefficiencies and cleaning-up of nails, shards and splinters) as well as the
number of pallets required to adequately populate the pallet pool to allow that aspect of the supply
chain to operate effectively and with maximum efficiency. Consequently, RM2 is then able to identify
potentially significant operational benefits for the Receiver and thereby set an appropriate and
customer-specific cost ‘per trip’ of the pallet based on the anticipated number of trips per annum that
each pallet will make. RM2 will seek to deploy its pallets where pallet velocity, and consequently
recurring revenues, are highest.
In addition to bringing a superior pallet product and mutually agreeable and visible pricing between
Receivers and Suppliers, RM2 also expects to be able to deliver operational efficiencies and direct
and/or indirect cost savings to the Receiver as well as assisting Receivers in achieving sustainability
goals. For example, the BLOCKPal’s material make-up endows a strength-to-weight ratio superior to, and
provides a weight saving when compared to, typical multi-trip wooden pallets. This translates to
reduced fuel usage and associated emissions to transport the same quantity of goods, driving down the
cost per unit. In addition, in most cases the Receiver will receive a participation payment from RM2 per
pallet trip, providing an incentive to optimise the number of pallets within closed loops and encourage
higher pallet velocity.
The following figure illustrates the responses to a 2010 survey appearing in Modern Materials Handling,
which asked respondents to identify the reason which best described their desire to use a pallet
retrieval and recovery system.
Figure 2: Drivers of pallet rental systems
Source: Peerless Media Research Group
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RM2’s strategy aims to identify and address issues experienced by both Receivers and Suppliers:
ii.
‘Receiver issues’
Product damage and pallet debris
‘BLOCKPal solutions’
The BLOCKPal’s superior handling characteristics including impact
resistance and rigidity (i) minimise the occurrence of product
damage and incidence of product contamination; and (ii) avoid
shards of wood, splinters and nails in warehouses and in sensitive
areas of a facility where pallets may be used.
Safety and handling limitations
The BLOCKPal is suited for all mainstream handling equipment and
automated handling systems due to its demonstrable racking
strength, block construction (facilitating 4-way handling), and its
consistent size and shape.
Disposal
Upon a request presented through the TACS system, RM2 will
collect and remove its pallets free of charge by RM2’s local logistics
partner thus avoiding any cost associated with broken limited-use
wooden pallet removal or landfill taxes.
Cost
Any savings or efficiencies accruing from using the RM2 pallet will
create a benefit manifested in lower operational cost for the
parties involved. Where the Receiver collects the goods from the
supplier, further savings can be made in fuel usage and emissions
due to the pallets lighter weight compared to heavy duty
whitewood pallets.
‘Supplier issues’
Capital intensive
‘BLOCKPal solutions’
RM2 will facilitate ‘just-in-time’ delivery of pallets ordered through
the TACS system for which that Supplier has no responsibility or
cost associated with maintaining a pallet stock of sufficient size to
meet peak demand.
Requires storage of pallet stock
RM2’s service offering should free up warehousing space that
might be better utilised by Suppliers.
Damaged stock and stock returns
The BLOCKPal’s superior handling characteristics, rigidity and
impact resistance is designed to reduce the incidence of product
damage and returns which are incurred at the Supplier’s expense.
Retrieval and control of pallets is
a non-core business
RM2 provides a simple and easy to understand pallet ordering and
billing mechanism through the TACS system, allowing the Supplier
to concentrate on its core business.
Cost
In addition to the cost and cash-flow benefits above, including any
applicable fuel cost savings, RM2 can reduce the overheads
typically associated with the required maintenance, refurbishment
or replacement of less durable pallets.
PALLET SALES
Whilst the Company’s primary strategy will require it to direct the majority of BLOCKPal production to
the Company’s pallet rental scheme described in paragraph 3.B.i above, the balance of production will
be targeted at the direct sale of BLOCKPal to potential customers in North America and, in the future,
Europe and the rest of the world.
This will allow RM2’s potential customers to benefit from the flexibility and economy of the Company’s
manufacturing and assembly process which mitigates the financial commitment required to commission
non-standard pallet designs using competing technology.
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The Company will target potential customers likely to procure and populate their supply chains with
RM2’s BLOCKPal and operate these in tightly controlled loops between internal divisions, whereby the
pallets only transport goods from one location to another within a specified network.
Companies that are more likely to purchase bespoke pallets are in sectors that use non-standard pallet
sizes or configurations or who have individual components which are oversized compared to normal
fast-moving consumer goods (and are consequently less suitable for pooling) such as the chemical,
automotive, agricultural, technological, pharmaceutical, packaging and brewing industries. RM2 expects
such products also to be of interest to inter-divisional pools within large organisations.
To assist potential customers analyse the value for money that the BLOCKPal provides against their
existing pallet system, whether purchased or rented, RM2 commissioned additional durability testing at
the Center for Packaging and Unit Load Design at Virginia Polytechnic Institute. This allows a potential
customer to reach a ‘per trip’ cost measurement which can be compared to their current cost of pallet
ownership, repair and disposal and/or the cost of their rental programme(s). The benefits of owning
such an asset are also dependent upon how individual companies perceive their ability to control the
asset and their appetite to hold a long term asset on their balance sheet as against a consumable asset.
Whilst no single dimensional standard governs pallet production, the ISO has sanctioned six pallet
dimensions, detailed in ISO Standard 6780. The most commonly used pallet in North America is the US
Grocery Manufacturers Association (“GMA”) pallet, which is 48 inches by 40 inches under ISO 6780, and
accounted for 26.9 per cent. of all new pallets produced in the US in 2006. However, it was estimated
that almost 50 per cent. of pallets sold in the US in 2006 were of configurations outside the normal
pooling sizes and such pallets are designed to meet the requirements of a specific product, packaging
type or service requirement.
Accordingly, the Company believes that its ability to deliver to its potential customers non-standard,
bespoke pallets represents a significant market opportunity. In addition, the Company believes that a
significant competitive advantage is its ability to do so more quickly and efficiently than can be achieved
by traditional moulding manufacturing processes. The nature of the RM2 manufacturing process means
prices can be quickly and accurately forecast, leading to a more efficient process. Thereafter, RM2’s
manufacturing and assembly processes allow it to re-programme machines to cut existing pultrusion
shapes to the required size, adjust component profile configurations (if required) and plan the build
programme into the factory schedule in a controlled and simple manner. All of this is achieved with
design and tooling considerations that are neither capital-intensive nor time-consuming.
iii.
PALLET TRACKING & MANAGEMENT
Through the TACS system, the integrated equipment management service, RM2 can assist potential
customers with the management of complex pallet flows (including non-RM2 pallets) by providing a
tailored solution that can integrate with, or replace, a customer’s existing tracking infrastructure and
this will allow RM2 to focus on the closed loop operations with the highest velocity.
This analysis of asset movements can identify potential cost reduction exercises through an
understanding of the deployment of assets and associated costs. The software has been integrated with
all relevant third-party systems which have been encountered and is able to track pools down to the
individual asset movement, if required, by barcode or RFID.
The TACS system can provide ‘real time’ equipment balances throughout a customer’s supply chain and
was designed to be the central operations software for equipment suppliers, providing a single
integrated system for tracking, delivering, collecting, and invoicing for an equipment pool. Its inherent
flexibility allows it to support multiple supply scenarios without any modification to the underlying code
and is capable of being used by multiple users and over a network of sites, providing authorised users
with global visibility.
The TACS system can also be optimised for potential customers running hired pools of equipment over
their own network of factories and warehousing sites or logistic operators storing and delivering
equipment for a number of different clients. It also allows potential customers to manage balances,
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declarations of equipment use to suppliers and invoice reconciliation, thereby removing the need to use
a different supplier portal for each pallet type.
The TACS system can reduce administrative time as flexible data entry options give companies the
opportunity to capture the majority of dispatch and receipt data with minimal manual intervention. The
software is able to interface with all relevant production, warehouse management or planning systems
that can produce a flat file and can accept full or partial data, and multiple interface files can each
deliver data that relates to each movement part. It is a dedicated multi user, networked database
system, focused on managing equipment from all current suppliers.
In the year to 22 August 2013, the TACS system, as currently supplied to its customers by Equipment
Tracking, has tracked a total of 200 million individual equipment movements (including 15 million pallet
movements) and the system currently has responsibility for managing 800,000 pallets. No key customer
contracts have been lost by Equipment Tracking in the period covered by the financial information set
out in Part VI, evidencing a high level of customer satisfaction with the system, including asset retention.
C.
PRODUCTION & MATERIALS
Materials
RM2 has developed a composite material for use in the BLOCKPal which consists of approximately 80 per cent.
glass fibre to 20 per cent. liquid resin. The composite has a low-volatility raw material input price when compared
with those made from predominantly hydrocarbon derivative products utilised by some other plastic pallet
manufacturers. All raw materials and substances utilised by RM2 in the manufacture of the BLOCKPal are readily
available from leading international material providers.
Glass fibre provides longitudinal strength and is then ‘wrapped’ in matting which provides strength in the
transverse direction. The reinforcement materials are in continuous form and are saturated within a resin
mixture in a resin bath and pulled through a die. The gelation, or hardening, of the resin is initiated by the heat
in the die and a rigid, cured profile is formed that corresponds to the particular shape of the die.
The resin has been chosen over alternatives primarily to achieve superior product performance and a longer
productive lifecycle. This resin allows higher loadings of glass fibre reinforcement, augmenting its inherent
superior strength (tensile, compressive, shear and bending). Other positive attributes include water resistance,
chemical and acid resistance, impact resistance, abrasion resistance and fire resistance. The resin, together with
the choice of the other materials, mean BLOCKPal is compliant with the GRAS and/or Food-Additive List
Specifications of the FDA for substances and materials.
The typical BLOCKPal consists of up to 58 pieces of pultruded profiles along with fasteners and adhesives and is
produced and assembled in three phases – pultrusion of the composite material, followed by cutting and shaping
and, finally, automated assembly of the pallet.
Pultrusion
Pultrusion is a manufacturing process for producing continuous lengths of composite materials with constant
cross-sections. It is one of the fastest-growing manufacturing processes in the composites industry.
The process is based on fibres that are impregnated with a thermosetting resin and pulled using a continuous
pulling device (rather than pushed, as is the case in extrusion) through a heated die where curing takes place.
Different laminate lay-ups are possible with reinforcements of, for example, fibreglass mats. The finished profiles
are cut to length by a saw at the end of the line and the lengths of the profile can be altered to customer
specifications without the requirement for significant additional capital expenditure.
Pultrusion allows component profiles to be produced to fine tolerances and lends itself to a high degree of
automation with low associated labour costs. The manufacturing process is continuous, subject to routine
maintenance, thereby reducing downtime to a minimum.
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While pultrusion machine design varies, the basic pultrusion process concept is described in the schematic
shown below.
Figure 3: Pultrusion Process
Source: Company
Automated Assembly
The automated assembly system designed for RM2 is configured around a set of assembly fixtures which travel
along parallel hydraulic transfer systems with lateral transfers at each end (see figure 4 below). Locating
mechanisms are positioned at each station to position accurately the assembly fixtures for each function. The
system design specifically allows for the future mechanism of some functions currently carried out manually and
for the introduction of a separate set of assembly fixtures for different sizes of BLOCKPal product.
The fixtures are designed to maintain all of the individual components in an accurate assembly position while
they are being moved from station to station. The fixtures allow the pallet to be clamped for setting the glue and
inverted for screw driving on the bottom surface of the assembly.
The main control houses a human machine interface that allows the operator to start the total system, and also
houses all alarms and operating information. Individual stations have their own control junction boxes and
specific controls as required to allow the station to function as an independent machine.
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Figure 4: Automated Assembly Process
Source: Company
D.
MANUFACTURING FACILITIES
RM2’s manufacturing operation is located in a 15 acre site in Ontario, Canada. The Company leases
approximately 135,000 square feet of manufacturing and warehouse space which has air conditioning and over
8,000 Amps of available power. The existing pultrusion production area is just over 50,000 square feet and
houses all manufacturing, raw material storage and blending areas.
The facility is close to existing rail infrastructure and has eight truck level doors and two drive-in doors for receipt
of materials and equipment and shipment of parts and finished products.
The facility currently has ten pultrusion machines in place, six of which are ‘narrow-bed’ and four of which are
‘wide-bed’ or double capacity, and operational capacity of over 40 million feet of pultruded profiles per annum,
assuming a continuous operation, equivalent to an estimated production capacity of approximately 588,000
pallets per annum. Available space exists for a further ten ‘wide bed’ pultruders giving additional operational
capacity of over 100 million feet of pultruded profiles per annum, again assuming a continuous operation.
The pre-assembly and assembly areas measure approximately 55,000 square feet and are located adjacent to the
pultrusion manufacturing area. The pre-assembly area includes all equipment used to convert the pultruded
profiles to parts of exact dimension and geometric orientations to produce the BLOCKPal, including water jet
cutting and shaping systems, milling machines, and CNC machining centres. The Company currently has one
automated assembly line in operation with an estimated production capacity of approximately 450,000 pallets
per annum, assuming a continuous operation.
It is the Company’s intention to expand the operational capacity of the Ontario facility before opening further
manufacturing and/or assembly facilities (as appropriate) in other locations.
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E.
TESTING & REGULATION
i.
TESTS
The BLOCKPal has been assessed by independent laboratories, including the Center for Packaging and
Unit Load Design at Virginia Polytechnic Institute, the world’s leading authority responsible for various
research activities to develop and progress the design of packaging, pallet and unit load design. It was
assessed according to the following US and international standards:
–
ISO 8611 is an international standard for methods of testing new flat pallets for material
handling; and
–
ASTM D1185 is an alternative standard for methods of testing pallets.
In addition, RM2 has internal testing facilities to assist product development and refinement.
Pallet tests under both regimes are broadly divided into two categories:
‘strength and stiffness’
‘durability and functionality’
Static compression and bending tests provide
Dynamic tests utilise accelerated ‘rough handling’
data that are used to estimate stiffness, strength,
and devices employed in material handling and
and safe working loads for pallets under specified
shipping environments to determine the average
load and support conditions.
life of a pallet.
Typical supports include warehouse floor
stacking, racking across length, racking across
width, and conveyor chain. The load is applied
using a uniform, flexible airbag as a general
purpose load. Specific loads can also be used
during testing.
These tests provide data which are used to
estimate the physical durability and functionality
of a pallet, for example, using an incline impact
tester to impact the end board or stringer/post.
These estimates provide a basis for designing
single or multiple use pallets.
These estimates provide a basis for designing
pallets and comparing the performance between
pallets of different designs and constructions.
Specifically, the following tests have been undertaken and results observed, with the noted safe load
referring to the highest applicable threshold implied by ISO 8611 and ASTM D1185.
‘bending test –
fork time support’
This test replicates the loads and stresses on a pallet using fork tine support
conditions. The top deck of the pallets is loaded across their weakest
orientation for 30 minutes with calculated creep test load. The deflection is
measured at specified locations of the pallet initially and after 30 minutes of
applying the creep load. The creep load is removed after 30 minutes and the
deflection of the pallet is measured after another 30 minutes of relaxation time
to determine permanent deformation. Additionally, the pallets are loaded to
maximum stresses and the failure load and deflection are recorded.
Whilst the safe load for the BLOCKPal was found to be 10,000 lbs., this test also
demonstrated that the BLOCKPal has a maximum load, when tested to failure,
in excess of 20,000 lbs.
‘bending test –
rack support’
This test replicates the loads and stresses on a pallet when it is supported at
either end while the remainder of the pallet is suspended between the end
supports. The top deck of the pallets is loaded across their weakest orientation
for 24 hours with calculated creep test load. The deflection is measured at
specified locations of the pallet initially and after 24 hours of applying the creep
load. The creep load is removed after 24 hours and the deflection of the pallet
is measured after two hours of relaxation time to determine permanent
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deformation. Additionally, the pallets are loaded to maximum stresses and the
failure load and deflection are recorded.
Whilst the safe load for the BLOCKPal was found to be 3,400 lbs. and the
generally accepted industry standard for a pooled general purpose pallet is
2,800 lbs., this test also demonstrated that the BLOCKPal has a maximum load,
when tested to failure, of 7,485 lbs.
‘bending test –
bottom deck’
This test replicates the loads and stresses on a pallet using floor stacking
support conditions where all blocks of the pallet are supported. The bottom
deck of the pallets is loaded across their weakest orientation for 24 hours with
calculated creep test load. The deflection is measured at specified locations of
the pallet initially and after 24 hours of applying the creep load. The creep load
is removed after 24 hours and the deflection of the pallet is measured after two
hours of relaxation time to determine permanent deformation. Additionally,
the pallets are loaded to maximum stresses and the failure load and deflection
are recorded.
demonstrated that the BLOCKPal has an average maximum load, when tested
to failure, of 11,607 lbs.
‘bending test –
top deck’
This test replicates the loads and stresses on a pallet using floor stacking
support conditions where all blocks of the pallet are supported. The top deck of
the pallets is loaded across their weakest orientation for 24 hours with
calculated creep test load. The deflection is measured at specified locations of
the pallet initially and after 24 hours of applying the creep load. The creep load
is removed after 24 hours and the deflection of the pallet is measured after two
hours of relaxation time to determine permanent deformation. Additionally,
the pallets are loaded to maximum stresses and the failure load and deflection
are recorded.
demonstrated that the BLOCKPal has an average maximum load, when tested
to failure, of 22,516 lbs.
‘incline impact test’
This test utilises an incline table which evaluates the stability of full unit loads
and durability of pallets and packaging designs.
The BLOCKPal did not fail within the range of the testing equipment.
‘coefficient of friction’ This test measures three separate measurements:
Top Deck on Corrugated Board
The top deck of the pallet is placed on top of a corrugated board and a
horizontal force is applied until the pallet moves. The maximum force that
causes this motion is recorded and the coefficient of friction is calculated.
Pallet on Pallet
Two pallets are placed on the floor and another pallet was placed on top of
them. A horizontal force is applied to the top pallet until it moves. The
maximum force that causes this motion is recorded and the coefficient of
friction is calculated.
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Bottom of Top Deck on Fork Tines
The bottom of the top deck is supported by fork tines and a horizontal force is
applied until the pallet moves. The maximum force that causes this motion is
recorded and the Coefficient of Friction is calculated.
The measured coefficient of friction of the BLOCKPal design exceeds the
minimum American National Standards Institute MHI 2005 standard of 0.15.
TESTS
Top deck on corrugated board
Pallet on pallet
Bottom on top deck of fork tines
‘free fall drop test’
RESULT
0.36
0.22
0.24
This test is conducted in two stages:
–
in the first stage, the pallet is dropped on one corner ten times (or until
failure) from a height of 40 inches.
–
in the second stage, the pallet is dropped on one corner a further ten
times from a height of 80 inches.
The BLOCKPal was not damaged after stage one and two-thirds of those tested
were not damaged after completion of stage two, with the remaining third
failing after eight drops in the second stage.
4.
THE COMPETITIVE LANDSCAPE
A.
COMPETING COMPANIES
The pallet production market is highly fragmented with no one manufacturer accounting for more than 3.2 per
cent. of total industry revenues in the US in 2012.
In the pallet rental market, the number of industry participants was estimated to increase at an annualised rate
of 0.6 per cent. in the five years to 2012, to approximately 2,869 establishments. Despite this overall gain, some
consolidation has been occurring and the top four companies account for an estimated 56 per cent. of market
share in the US in 2012. None of these companies’ strategy is specifically aimed at the upstream component of
the supply chain, rather addressing their resources largely to downstream distribution (finished products). This
is due to a number of factors such as the risk of co-mingling between pools, pallets moving downstream with the
flow of goods, generally smaller counterparties and pools and a different approach to losses. Losses are generally
accepted as inevitable in the upstream chain and so the pallets used are often cheap and disposable. RM2’s
product and systems are offering an alternative to this approach.
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Figure 5: US Market Share
Source: “Pallet and Skid rental in the US – 2012” IBISWorld
As outlined in figure 5 above, RM2’s principal competitors in the pallet rental industry are:
‘Brambles’
Brambles Limited (“Brambles”) is a pooling solutions company specialising in the
provision of reusable pallets, crates and containers and associated logistics services.
Headquartered in Sydney, Australia, Brambles operates across multiple industry supply
chains in more than 50 countries.
Brambles operates pooling solutions operations under two core brands:
‘PECO’
–
CHEP is a pooling solutions business specialising in the provision of reusable
pallets, crates, containers and associated logistics services. CHEP owns and
manages approximately 300 million pallets, crates and containers in more than
50 countries; and
–
IFCO operates a pool of more than 150 million reusable plastic crates worldwide
and, in the USA, sorts, repairs and reissues about 200 million pallets a year
through its pallet management network.
PECO Pallet, Inc. (“PECO”) is a private provider of pallet rental services headquartered
in Yonkers, NY. PECO maintains service centres and manufacturing plants throughout
the United States, Canada and Mexico and its redwood block pallets are used by
manufacturers to ship grocery and consumer goods products to retailers throughout
North America.
In March 2011, private investment firm The Pritzker Group acquired PECO.
‘iGPS’
Intelligent Global Pooling Systems Company, LLC (“iGPS”) is a private provider of pallet
rental services founded in 2006 and headquartered in Orlando, Florida and with a
National Sales and Innovation Center in Bentonville, Arkansas.
In June 2013, iGPS filed for bankruptcy and agreed to sell its assets to a newly-formed
joint venture company, iGPS Logistics LLC, a joint venture formed by private equity firms
Balmoral Funds LLC and One Equity Partners, a shareholder of pallet manufacturer
Schoeller Arca Systems, and Jeff and Robert Liebesman.
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The Company believes that the current and future market opportunity is more than sufficient to support RM2’s
forecast growth and, further, that for the reasons set out in paragraph 3.A. above, the RM2 proposition has a
number of significant advantages over those of its competitors.
B.
BARRIERS TO ENTRY
Barriers to entering the industry vary depending on the scale and scope of an aspiring player’s operations.
On one hand, the industry has relatively low barriers to entry if an operator is trying to compete on a local level
or specialise within one product segment. The market is moderately fragmented with little concentration of
ownership, and firms are not required to have any licences or certifications to operate.
On the other hand, firms wishing to compete on a national or international level will have to compete directly
with the industry’s largest players. Although technological change occurs at a medium pace, barriers to entry into
the global market become increasingly difficult as logistics and tracking become increasingly complicated.
Competing effectively in this sector of the market requires a significant capital investment in order to:
–
acquire production and manufacturing equipment;
–
sustain the purchasing power necessary to maintain and operate a pool of pallets;
–
manufacture in sufficient volume to effectively disrupt the market; and
–
fund R&D at the more advanced end of the market.
Recognising the scalability of the marketplace and the opportunity it presented, RM2 has invested significantly
over seven years in developing its products and refining its service offering and now intends to use the net
proceeds of the Placing to move into a phase of significant capital expenditure and asset investment and
commercialisation of the business, thereby establishing itself as a disruptive presence in the upstream logistics
market.
On Admission, the Company believes that there are the following key barriers to entry for the provision of similar
services to those of RM2:
‘resources’
Any new entrant would require the financial resources necessary for a long
development cycle required in order to obtain the relevant equipment and know-how
by which time the Directors believe that RM2 will have achieved such a strong presence
in the market in terms of units deployed and customer relationships that any competitor
will be at a significant disadvantage. Specifically, the Company believes that, once
installed within the supply chain of its customers, the costs and complexity of sorting
pallets from a second source and overlaying a second tracking system are expected to
be a significant disincentive to that customer using other equipment.
The larger pallet pooling and logistics companies have significant capital committed to
their existing business models, both with regard to product type and focus, which are
both different to those of RM2.
‘know-how’
RM2 has developed technical and commercial know-how through its continued R&D
and extensive market research has led to a deep understanding of the marketplace and
the regulatory environment.
In addition, through the acquisition of Equipment Tracking (completion of which
occurred on 10 December 2013), RM2 now owns the logistics and tracking software
which it previously licensed from Equipment Tracking, which will put it ahead of any new
entrants to the market who would require both the technical capability and know-how
to develop and market a commercial and effective product. Utilising Equipment
Tracking’s services will, based on its performance prior to acquisition, ensure a high level
of asset retention.
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Having invested a significant amount of time in understanding the market place, RM2
has a deep understanding of the market’s demands and how these can be met through
a combination of material science, product design and services.
‘customer
relationships’
5.
RM2 has spent considerable time and effort developing senior level relationships with
key players in the relevant industries, giving it the opportunity and credibility to guide
potential customers to make significant and critical decisions and commitments
regarding RM2’s product offering.
REASONS FOR ADMISSION AND USE OF PROCEEDS
The Directors believe that Admission is an important step in RM2’s development and expect that it will provide a platform
for the Company as it moves into a phase of significant capital expenditure and asset investment and commercialisation
of the business. Admission will also provide the Company with a more diversified shareholder base and will help the
Group attract, retain and incentivise Directors and key employees through its equity incentive schemes.
In addition, Admission is also expected to provide the Group with access to further capital in the future, should the
Directors identify appropriate opportunities for acquisitions or seek to accelerate the further development of the
business in response to market demand for its products and services.
The Placing of the Placing Shares will raise up to approximately £130.8 million (equivalent to approximately US$214.5
million) net of expenses, for the Company, which will principally be used to further expand the Company’s pallet
production capacity and fund the production of BLOCKPal for use in both the pallet rental market as well as direct sales.
The Directors believe that RM2’s business model will facilitate successful market penetration as it offers customers the
opportunity to take advantage of the Company’s proposition without having to make significant capital expenditure
decisions or fully understand and take responsibility for the assets and their use.
In order to finance the development of its products and services, RM2 entered into a number of short-term funding
arrangements. Further information on these arrangements is detailed in paragraph 12 of Part VII of this document.
Accordingly, in addition, the Company will use the net proceeds of the Placing to repay these funding arrangements and
to retire the DPE Warrants, leaving the Company debt free (other than in respect of a mortgage granted over the Group’s
property in Switzerland) immediately following Admission and with no options or warrants outstanding other than
options granted to key employees under the 2013 Plan. The Directors intend that the balance of the net proceeds of the
Placing will be used for the Company’s general working capital requirements.
USE
Expand pallet production capacity, production of BLOCKPals and working capital requirement
Repayment of short term loans and retirement of DPE Warrants
Expenses and commissions associated with the Placing
US$ MILLION*
143
71.5
10.5
* Assumes an exchange rate of £1: US$1.64.
6.
DIRECTORS, SENIOR MANAGERS AND EMPLOYEES
A.
THE BOARD
On Admission, the Board of the Company shall comprise two executive Directors and six Non-Executive Directors
whose biographical details are as follows:
R. Ian Molson, aged 58 – Non-Executive Chairman
R. Ian Molson was born and grew up in Montreal, Canada and is currently a director of a number of private
equity, investment and other companies including Alphatec Spine Inc., Cayzer Continuation PCC Ltd, Central
European Petroleum Ltd (Deputy Chairman) and Healthpoint Capital LLC. Mr Molson also serves as Chairman of
The Royal Marsden NHS Foundation Trust and The Royal Marsden Hospital Charity.
From 1999 to 2004, he was deputy chairman of the board and Chairman of the Executive Committee of Molson
Inc, a Canadian public corporation founded in 1786. Between 1977 and 1997, he was employed by Credit Suisse
First Boston, one of the leading investment banking and securities firms in the world. From 1993 to 1997, he
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served as co-Head of their Investment Banking Department in Europe, a position which encompassed all
corporate finance, corporate advisory, mergers and acquisitions businesses in Europe, Russia, Africa and the
Middle East. He graduated from Harvard University (BA Honours) in 1977.
John Walsh, aged 50 – Chief Executive Officer
John Walsh has been Chief Executive Officer since its inception. Mr Walsh has been instrumental in the
development of the Group. Mr Walsh has held leadership positions in the finance industry in New York and
London.
Mr Walsh began his career at Bank of America and then joined Prudential Bache. From 1988 to 2003 Mr Walsh
was at Credit Suisse, where he became a Managing Director. Mr Walsh was Head of Syndication and Head of
Capital Markets in London and spent ten years as Head of Global Capital Markets. Mr Walsh was a member of
the firm’s Fixed Income and Investment Management Committee and the Global Management Committee. In
2004, Mr Walsh joined RBS Greenwich Capital Markets where he was Head of North American Credit Markets.
Immediately prior to leaving the finance industry to focus on RM2, Mr Walsh was recognised as the third most
influential European in US Financial Markets by Financial News (November 2005) and the seventh most
important British Businessman in the US by the Sunday Times (December 2005).
Ashavani Mohindra, aged 54 – Chief Financial Officer
Ashavani Mohindra has been CFO of the Group since its inception. Mr Mohindra has considerable commercial
experience gained at both large and small companies, ranging from ABN Amro, the then financial regulator SFA
(forerunner of the FCA), through to Touche Ross & Co. He has had a number of roles ranging from management
accounts, audits, legal and compliance, computer systems implementation, regulatory and general financial
reporting, and general management through representation at board level as an executive director. Mr Mohindra
graduated in 1980 from Manchester University with a Mathematics degree, and qualified as a chartered
accountant in 1983.
Sir Stuart Rose, aged 64 – Non-Executive Director
Sir Stuart Rose has been the Chief Executive of a number of substantial retail businesses including Burton Group
plc, Argos plc, Booker plc and Arcadia Group plc. He was Chief Executive and also, latterly, Chairman of Marks &
Spencer plc from 2004 to 2010. Sir Stuart is currently a non-executive director of Land Securities Group and
Woolworths Holdings Limited. He is Chairman of Ocado Group plc and Fat Face Group Ltd as well as a number of
other companies.
Paul Walsh, aged 58 – Non-Executive Director
Paul Walsh was Chief Executive of Diageo plc from 2000 to 2013 and is now an adviser to the Chairman and Chief
Executive of Diageo. Mr Walsh joined GrandMet’s brewing division in 1982 and became its Finance Director in
1986. He held financial and commercial positions with Inter-Continental Hotels and in the GrandMet food
business, becoming CEO of The Pillsbury Company in 1992. Mr Walsh was appointed to the GrandMet Board in
October 1995 and to the Diageo Board in December 1997.
Mr Walsh is a non-executive director of FedEx Corporation, Unilever plc, and Avanti Communications plc and was
previously a non-executive director of Centrica plc, stepping down in May 2009. He has also been appointed
Business Ambassador for the food and drink industries by the UK Department for Business, Innovation and Skills
and is a Council Member, and former Chairman, of the Scotch Whisky Association. In June 2013 it was announced
that Mr Walsh will join the board of Compass Group PLC in January 2014 as a non-executive director and will
assume the position of its chairman in February 2014.
Charles Duro, aged 55 – Non-Executive Director
Charles Duro is the founding partner of Duro-Goebel, a Luxembourg law firm started in 1995, after having been
a partner in another law firm in Luxembourg. He practises mainly in company law and has been on the board of
a number of Luxembourg companies active in various sectors. Mr Duro is a former chairman of the tax
commission of the “Association Internationale des Jeunes Avocats”.
Jan Dekker, aged 65 – Non-Executive Director
Jan Dekker worked for Philips Corporation from 1973 to 1981. He then joined KPMG Meijburg & Co where he
became Senior Partner in the International Tax Practice. Mr Dekker is a director of a number of private
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companies and became chairman of RM2 in 2009, moving to a non-executive role shortly before Admission. He
attended the Universities of Leyden, Rotterdam and Tilburg, studying civil and economic and international tax
law, gaining several masters degrees.
Amaury de Seze, aged 67 – Non-Executive Director
Amaury de Seze started his career in 1968 at Bull General Electric. In 1978, he joined Volvo Group, one of the
world’s largest producers of trucks, buses and construction equipment where he successively held positions of
deputy chief executive officer of Volvo France, chairman and chief executive officer of Volvo France, chairman
and chief executive officer of Volvo Europe, member of the group executive committee of AB Volvo and member
of the strategic committee of Renault Volvo. He joined the Paribas group in 1993 as a member of the
management boards of Compagnie Financière de Paribas and Banque Paribas. Mr de Seze is founding partner,
chairman and chief executive officer of the private equity firm PAI Partners. He is currently vice chairman of
Power Financial Corporation of Canada and is a member of the board of directors of Carrefour, Groupe Bruxelles
Lambert, Imerys, Publicis, and Suez Environment.
B.
SENIOR MANAGERS AND OPERATIONAL TEAM
The biographical details of the Senior Managers of RM2 are set out below:
Philip Seligmann – Chairman RM2 North America
Philip Seligmann has been with RM2 since its inception. Mr Seligmann has a wealth of sales experience and has
been instrumental in developing dedicated sales groups to penetrate US markets. Prior to joining the Group,
Mr Seligmann was a Managing Partner of a US based trade and investment banking boutique, prior to which he
was head of Commodity Trade Finance for Merrill Lynch and Company in New York. Mr Seligmann also ran his
family’s metal trading and brokerage business. Mr Seligmann has spent his whole career in sales and marketing.
Mr Seligmann is a graduate of Syracuse University’s Maxwell School of Citizenship and Public Affairs with
advanced degrees in International Relations and Political Economics.
Matthew Gilfillan – Head of North American Sales and Marketing
Matthew Gilfillan has been with RM2 since its inception. Mr Gilfillan has been responsible for developing third
party relationships to execute RM2’s strategy in the US, and has negotiated joint venture agreements with third
party logistics providers and pallet technology providers necessary to achieve RM2’s strategic goals. Prior to
joining RM2 Mr Gilfillan was a senior salesman at ABN Amro, Lehman Brothers and Bear Stearns. Mr Gilfillan
covered some of the largest institutions in the US and served on many committees to devise global sales and
marketing strategies concentrating on the largest US logistics companies. Mr Gilfillan graduated in 1990 from
Bucknell University with a Major in Economics and a Minor in International Politics.
Christopher Gibbs – Head of EMEA Sales and Marketing
Christopher Gibbs has a wealth of experience in the materials handling equipment sector. Prior to joining RM2,
Mr Gibbs worked for Sunrise Global Finance where he was the field based Major Accounts Director in its
Materials Handling Division. Mr Gibbs was responsible for the Materials Handling Division for Asset Finance and
secondary market use for returned assets, via manufacturer partners based in UK, North and South America,
Australia and China. Mr Gibbs developed, in conjunction with selected partner companies, new market
innovative products which can be utilised via asset lease programmes, generating primary and secondary market
streams. Mr Gibbs has also held Senior National Account Managerial Positions with CHEP controlling the Pallet
and Plastic Returnable Packaging Pool for Asda Wal*MART network in the UK.
Ewa Groszek – Managing Director of Equipment Tracking
Ewa Groszek started working with CHEP in 1990 in a wide range of areas including marketing and then account
management. In 1995, Ms Groszek launched a consultancy service and then developed a dedicated network
software system that would provide sophisticated returnable asset tracking data to pool users. Ms Groszek was
the major shareholder in Equipment Tracking. Equipment Tracking, which has been working with RM2 for three
years, was fully acquired by RM2 on 10 December 2013.
Tom Lane – Head of Manufacturing
Tom Lane has been working in product development and manufacturing at RM2 since 2010. Immediately prior
to this he was the Managing Partner and founder of Lane Properties II, before which he held senior, multi office,
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management roles at Wachovia Securities, Prudential, Previsor Corp, Merrill Lynch and ICI. His areas of focus
have included product development, consolidation of operations, and primary responsibility for execution of
strategy. Mr Lane was a member of Prudential Services Executive Council and a director of the National Futures
Association. His five year military service was served in the airborne infantry and as commander of a Special
Forces operational detachment.
Rick Needham – Head of Strategic Manufacturing Development
Rick Needham has a background in engineering and holds a degree in Nuclear Engineering. He started his career
at Bechtel Corporation providing technical administration of the nuclear steam supply system for a commercial
nuclear power plant. More recently, he has held a number of senior management roles including President of
Circle Seal Controls and President CEO of Haskel International and subsequently ProQual Industries. He has been
responsible for contracts, sales and marketing, engineering, operations and acquisitions. His military service
includes serving in the US Navy, achieving Nuclear and Submarine qualification status.
Ruari McGirr – Strategic Development and Investor Relations
Ruari McGirr qualified as a chartered accountant with KPMG and then moved into corporate finance, joining
Dresdner Kleinwort Benson and Daniel Stewart where he focused on advising growth companies before investing
in and becoming Chief Executive of broking firm, St Helens Capital. Mr McGirr joined WH Ireland in 2010 in the
corporate broking group.
Richard San Martin – North America Sales
Richard San Martin began his career at Anheuser Busch where he spent 13 years, primarily in beer packaging and
shipping, rising to Group Manager. He then moved to COTT where he ultimately became Senior Vice President
for Operations and Marketing. Mr San Martin was Senior Vice President for Logistics and Operations at Intelligent
Global Pooling Company LLC until July 2010 and ran his own supply chain and operations consulting and training
business before joining RM2.
Robert Blaikie – EMEA Sales
Robert Blaikie joined the European Sales & Marketing team of RM2 in 2013. Mr Blaikie has extensive experience
in pallets, logistics and industrial sales having been Sales and Marketing Director of Speedy Hire for Core Business
and Industrials, Sales Director of ATS Euromaster Michelin and Sales Director of CHEP UK.
C.
EMPLOYEES
RM2 is headquartered in Luxembourg. It has premises in Luxembourg, Switzerland, Canada, the US and the UK.
As of 31 December 2012, RM2 had 51 employees, the increase in the last 12 months was primarily due to
recruitment of additional employees in Canada. The breakdown of the number of employees and their
respective activities over the previous three financial years (as at 31 December each year) is set out in the table
below:
LOCATION
CANADA
LUXEMBOURG
SWITZERLAND
USA
UK
HOLLAND/FRANCE
TOTAL
2010
–
1
6
1
3
1
2011
–
1
6
3
4
1
2012
33
1
6
4
6
1
12
15
51
In addition, as at 31 December 2012, the Group employed ten additional agency staff at its factory in Canada. As
at 30 June 2013, being the latest date for which full figures are available, the Group employed 77 staff and a
further 17 agency staff. In addition, Equipment Tracking employs 22 staff.
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D.
SHARE OPTIONS AND RESTRICTED SHARES
The Company believes that the success of RM2 will depend to a high degree on the future performance of its
Directors and key employees. The Directors also recognise the importance of ensuring that employees are well
motivated and identify closely with the success of the Group. The Directors regard equity participation to be an
important aspect of the Group’s ability to attract, retain and incentivise its key staff.
Pursuant to the 2013 Plan, the Company has granted options over a total of 1,917,000 Ordinary Shares to certain
of the Group’s key employees. Further details of the grant of options to key employees pursuant to the 2013 Plan
are provided in paragraph 6 of Part VII of this document.
In addition, a total of 12,308,775 Restricted Shares have been granted to certain Directors. Further details of the
Restricted Shares are set out in paragraph 6.2 of Part VII of this document.
7.
THE PLACING AND ADMISSION
Under the Placing, the Company is issuing 155,903,548 Placing Shares representing 49.30 per cent. of the Enlarged Issued
Ordinary Share Capital of the Company following the Placing. At the Placing Price, the Placing of Placing Shares will raise
approximately £130.8 million (net of expenses) for the Company.
Cenkos has agreed, pursuant to the Placing Agreement and conditional inter alia on Admission, to use its reasonable
endeavours to place the Placing Shares with institutional and other investors.
The Placing, which is not being underwritten, is conditional, inter alia, upon:
–
the Placing Agreement becoming unconditional and not having been terminated in accordance with its terms
prior to Admission; and
–
Admission becoming effective not later than 6 January 2014, or such later date as Cenkos and the Company may
agree, being not later than 20 January 2014.
The New Ordinary Shares rank pari passu in all respects with the Existing Ordinary Shares including the right to receive
all dividends and other distributions declared, paid or made after the date of issue.
None of the New Ordinary Shares has been marketed to or will be made available in whole or in part to the public in
conjunction with the application for Admission.
The market capitalisation of the Company immediately following the Placing, at the Placing Price, will be approximately
£278.3 million. Application has been made to the London Stock Exchange for the Ordinary Shares, issued and to be issued,
to be admitted to trading on AIM. Admission is expected to become effective and dealings in the Ordinary Shares are
expected to commence on 6 January 2014.
The existing aggregate shareholdings of the Shareholders prior to the Placing and the issue of the DPE Shares on
Admission will be diluted to 49.39 per cent. of the Enlarged Issued Share Capital and 49.09 per cent. on a fully diluted
basis (assuming that all the 2013 Options have fully vested).
Further details of the Placing Agreement are set out in paragraph 12(i) of Part VII of this document.
8.
LOCK-IN ARRANGEMENTS
The Locked-In Shareholders have agreed with the Company and Cenkos to accept certain restrictions on the disposal of
their interests in Ordinary Shares for a period of at least 12 months from the date of Admission, save in certain limited
circumstances.
Each Locked-In Shareholder has agreed with the Company and Cenkos:
(a)
not to dispose of any of their interests in Ordinary Shares for a period of at least 12 months from the date of
Admission, save in those circumstances expressly permitted by the AIM Rules and the Lock-In Arrangements (as
described in paragraph 12 (l) of Part VII); and
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(b)
not to dispose of any of their interests in Ordinary Shares for a period of 12 months from the first anniversary of
the date of Admission, except with the consent of, and through, Cenkos (or the Company’s broker from time to
time), so as to maintain an orderly market in the Ordinary Shares.
The aggregate interests following Admission which shall be subject to the lock-in and orderly market arrangements as
described above will amount to 53,079,366 Ordinary Shares, which is equivalent to approximately 16.78 per cent. of the
Enlarged Issued Share Capital. Further details of the lock-in and orderly market arrangements described above are set out
in paragraph 12 (l) of Part VII of this document.
9.
CORPORATE GOVERNANCE
The Company intends, following Admission, so far as is practicable and appropriate for a company of its size, stage of
development, resources and nature, to comply with the provisions of the UK Corporate Governance Code, as modified by
the recommendations of the Quoted Companies Alliance in the QCA Code. The Company has appointed six, independent,
Non-Executive Directors (including the Chairman) to bring an independent view to the Board, and to provide a balance to
the executive Directors.
The Board is responsible for formulating, reviewing and approving RM2’s strategy, budgets and corporate actions. The
Directors intend to hold meetings of the Board four times a year following Admission with additional meetings as and
when required. RM2 has also established an Audit Committee and a Remuneration Committee with formally delegated
duties and responsibilities.
A.
AUDIT COMMITTEE
The Audit Committee will have the primary responsibility of monitoring the quality of internal controls and
ensuring that the financial performance of RM2 is properly measured and reported on. It will receive and review
reports from the executive management team (including reports from members of the executive management
team not on the board) and external auditors relating to the interim and annual accounts and the accounting
and internal control systems in use throughout RM2. The Audit Committee will meet not less than twice in each
financial year and will have unrestricted access to RM2’s external auditors.
At Admission, the Audit Committee shall consist of the following persons:
B.
NAME
POSITION
Jan Dekker
Ian Molson
Sir Stuart Rose
Amaury de Seze
Chairman
Member
Member
Member
REMUNERATION COMMITTEE
The Remuneration Committee will review the performance of the executive Directors and make
recommendations to the Board on matters relating to their remuneration and terms of service. The
Remuneration Committee will also make recommendations to the Board on proposals for the granting of share
options and other equity incentives pursuant to any employee equity incentive scheme in operation from time
to time, having due regard to the interests of Shareholders. The Remuneration Committee will meet as and when
necessary and at least once a year. In exercising this role, the Directors shall have regard to the recommendations
put forward in the QCA Code and, where appropriate, the UK Corporate Governance Code.
At Admission, the Remuneration Committee shall consist of the following persons:
NAME
POSITION
Paul Walsh
Ian Molson
Sir Stuart Rose
Amaury de Seze
Chairman
Member
Member
Member
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C.
SHARE DEALING CODE
The Board intends to comply, and to procure compliance, with Rule 21 of the AIM Rules for Companies relating
to dealings in the Company’s securities by the Directors and other applicable employees (as defined in the AIM
Rules for Companies). To this end, the Company has adopted a code for directors’ and other applicable
employees’ dealings appropriate for a company whose shares are admitted to trading on AIM and will take all
reasonable steps to ensure compliance by the Directors and any applicable employees.
D.
NO TAKEOVER PROTECTIONS
The Takeover Code is issued and administered by the Takeover Panel. The Takeover Code applies to takeovers
and merger transactions, however effected, where the offeree company is, inter alia, a company whose
registered office is in the UK, the Channel Islands or the Isle of Man and either (a) such company’s shares are
admitted to trading on a “regulated market” (which term does not include AIM) or a “multilateral trading facility”
(which term does include AIM), in either case in the UK; or (b) in the opinion of the Takeover Panel, such
company’s place of central management and control is in the UK, the Channel Islands or the Isle of Man and only
to private companies in certain prescribed circumstances.
As the Company’s registered office is not in the UK, the Channel Islands or the Isle of Man, the Company does
not fall within the jurisdiction of the Takeover Code and Shareholders are therefore not entitled to the
protections afforded by the Takeover Code. As the Company is not admitted to trading on a “regulated market”,
it is also not subject to any takeover laws in Luxembourg.
E.
THE BRIBERY ACT
The Bribery Act 2010, which inter alia prescribes criminal offences for businesses engaged or allowing others to
engage in bribery or corrupt practices came into force on 1 July 2011. Whilst the Bribery Act 2010 does not apply
to RM2 itself, RM2 has UK subsidiaries and British employees to whom the Bribery Act 2010 does apply. As such
the Directors intend to have regard to the impact of such legislation and, as a result, the Company adopted an
anti-bribery policy on 19 November 2013. The Company intends to train its employees on the impact of the
legislation. The anti-bribery policy contains procedures that allow for reporting and communication by the
employees and to the Board of any matters which may or may not be relevant in ensuring that the daily
operations are maintained in light of such legislation.
10.
DIVIDEND POLICY
The declaration of any payment by the Company of any future dividends in respect of the Ordinary Shares, and the
amount of such dividend, will depend on the results of its operations, financial condition, cash requirements, future
prospects, profits available for distribution and other factors deemed to be relevant at the time. The nature of RM2’s
business and its proposed strategy mean that the Board does not intend to declare a dividend in the short to mediumterm but will reconsider this as and when the growth and profitability of the Company allows.
11.
SETTLEMENT
The Articles permit the Company to issue shares in uncertificated form and contain provisions concerning the transfer of
shares which are consistent with the transfer of shares in uncertificated form under the CREST Regulations. CREST is a
paperless settlement procedure enabling securities to be evidenced otherwise than by a certificate and transferred
otherwise than by written instrument. CREST is unable to take responsibility for the electronic settlement of shares issued
by companies incorporated in certain non-UK jurisdictions, including companies such as the Company, which are
incorporated in Luxembourg. Securities in overseas companies cannot generally be held or settled electronically in the
CREST system.
To enable Shareholders to settle their securities in the Company through the CREST system, the Company has put in place
a Depositary Interests facility operated by the Depositary. The Depositary Interests facility is created pursuant to a deed
poll dated 29 November 2013 (the “Deed Poll”), under which the Depositary (or its nominee) will hold Ordinary Shares
in book-entry form on trust for Shareholders and it will issue uncertificated Depositary Interests (on a one-for-one basis)
representing those underlying Ordinary Shares and provide the necessary custodian services. The relevant Shareholders
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will retain the beneficial interest in the Ordinary Shares held through the Depositary Interests facility and voting rights,
dividends or any other rights relating to those Ordinary Shares will be passed on by the Depositary (or its nominee) in
accordance with the terms of the Deed Poll. The Depositary Interests can then be traded, and settlement can be effected,
within the CREST system in the same way as any other CREST security.
The Company does not issue share certificates. Shareholders wishing to withdraw from the Depositary Interest facility and
hold their Ordinary Shares in book-entry form may do so at any time using standard CREST messages. Transfers of
Depositary Interests are subject to stamp duty reserve tax in the normal way.
Admission is expected to take place and unconditional dealings in the Ordinary Shares is expected to commence on AIM
at 8.00 a.m. on 6 January 2014.
For further information concerning CREST, Shareholders should contact their broker or Euroclear UK & Ireland Limited at
33 Cannon Street, London EC4M 5SB, United Kingdom, or by telephone on +44 (0) 20 7849 0000.
Further details of the settlement arrangements relating to the Placing are set out in Part VII of this document.
12.
TAXATION
Information regarding taxation is set out in Part IV of this document. These details are intended as a general guide only
to the current tax position in Luxembourg and the United Kingdom regarding withholding taxes and are not intended to
constitute personal tax advice for any person. Prospective investors are strongly advised to consult their own independent
professional tax advisers regarding the tax consequences of purchasing and owning Ordinary Shares.
13.
FURTHER INFORMATION
Your attention is drawn to Part III of this document which contains risk factors relating to RM2 and its operations and to
Part VII which contains additional information on RM2.
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PART II
THE PALLET MARKET
1.
OVERVIEW
Pallets are used throughout the world, although their use is most common in the developed economies of North America,
Europe, and the Asia/Pacific region. The Asia/Pacific region represents by far the largest market for pallets, as these
countries have large populations and have also undergone rapid industrialisation in recent decades, manufacturing and
distributing many of North America and Western Europe’s consumer goods.
Global demand for pallets in unit terms was 6.2 billion in 2012. In the US market alone approximately 2.3 billion pallets
are used on an annual basis with demand in 2012 for 1.135 billion new and refurbished pallets.
Figure 6: World Market for Pallets, 2012
Source: “Industry Study #3033: Pallets” Freedonia
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The following figure illustrates the proportion of pallet stock by product in 2012, based on a total stock of 2.3 billion units:
Figure 7: Pallet Stock by Product, 2012
Source: “Industry Study #3033: Pallets” Freedonia
2.
PALLET SALES
Demand for pallets is projected to expand 3.5 per cent. per year in unit terms to 1.3 billion in 2017, driven by the
recovering global economy and exhibiting a reversal of the trend between 2007 and 2012 when the pallet market shrank,
due in large part to the prevailing economic climate.
However, growth in pallet sales is expected to be tempered by the increased use of pallet management service providers
and pallet pools and, in addition, by the higher forecast stock shares of plastic and metal pallets, such as those produced
by RM2. These pallets have longer life spans compared to wood, the dominant material, and thus need to be replaced far
less often, causing overall demand to climb at a less rapid pace that would otherwise be the case.
Specifically, pallet demand in dollar terms is expected to grow at a faster rate than demand in unit terms, stimulated again
by the increasing adoption, and expanding sales, of more expensive pallet products like plastic and metal pallets and the
continued upward pressure on prices due to the recovering global economy. On the other hand, increases in average
pallet life spans attributable, in part, to the preponderance of those durable pallets, will limit replacement product
requirements and will constrain and moderate growth in pallet demand and value.
Plastic pallets are projected to see above average gains in unit and dollar demand over the next few years. Unlike most
other pallet types, plastic pallets did not experience sales declines during the economic downturn (although growth did
decelerate) because the specific advantages – which include durability, temperature tolerance and resistance to biological
contaminants – outweighed the higher initial cost of the product.
3.
PALLET RENTAL
The pallet rental industry in the US alone in 2012 was estimated at US$3.6 billion and this sector is expected to grow at
an average annual rate of 4.6 per cent. between 2012 and 2017 to US$4.5 billion.
Whilst growth in the pallet rental industry also slowed during the economic downturn as downstream demand from the
retail and manufacturing sectors declined, freight volumes and total trade value have since increased, boosting the
demand for pallets used in warehousing and transportation of goods. In addition, the rental industry has benefited from
an increasing number of companies that use pallet rental programmes rather than purchasing pallets.
Reduced profitability during that period, coupled with the attempts of the larger participants to gain market share, has
contributed to some consolidation in the rental sector. However, the industry remains relatively fragmented with the
number of pallet rental companies expected to increase marginally, notwithstanding further, modest consolidation as the
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larger firms acquire smaller, regional operators to extend their geographic reach whilst also continuing to expand into
international markets.
Although it is expected that many pallet users will continue to maintain their own fleet of pallets, more downstream
industries are expected to adopt pallet rental programmes to save time and resources. The renting of pallets can generate
considerable cost savings, given the significant cost of purchasing pallets.
In the US, whilst wooden pallets accounted for an estimated 92.6 per cent. of the pallet rental market in 2012, there has
been a recent shift toward pallets made of other materials, particularly plastic, which accounted for the remaining 7.4 per
cent. of the market during that period. This shift has been relatively slow, given the high cost associated with plastic
pallets. However, this trend is expected to accelerate over the next five years due to the slower increase in the price of
plastic (vs. the price of wood) and an increasing number of retailers who are expected to require suppliers to use pallets
made of impermeable materials, such as metal and plastic, to minimise the risk of contaminating perishable items.
It should be noted that RM2’s strategy is largely focused on the ‘upstream’ area of the supply chain where pooling is
currently not common.
4.
PALLET STRUCTURE & MATERIALS
A.
PALLET STRUCTURE & DIMENSIONS
Pallets are flat structures that support goods in a stable fashion while they are being transported or handled and
which offer the opportunity for the efficient transportation of items on a large scale.
Pallets have upper and lower horizontal surfaces, or decks, upon which goods are placed. These decks have
perpendicular supports underneath them that add stability and strength, enabling them to hold larger loads
without bending or breaking. These supports come either in the form of three long supports (“stringers”) or in
nine cube-shaped supports (“blocks”), with one placed at each corner, in the middle on opposing sides, and one
in the centre.
Pallets have partially hollow interiors that allow forklifts, hand trucks, pallet jacks and other materials handling
equipment to lift loads from one area to another. When stored, they can be stacked supported by racking,
stacked freestanding, or stacked nested within each other.
Although pallets come in all manner of sizes and configurations, all pallets fall into two very broad categories:
Stringer pallets use a frame of three or more
stringers. The top deckboards are then affixed to
the stringers to create the pallet structure. Stringer
pallets can have a notch cut into them allowing
“four-way” entry.
B.
Block pallets are typically stronger than stringer
pallets and utilise both parallel and perpendicular
stringers to better facilitate efficient handling.
A block pallet is also known as a “four-way” pallet,
since a pallet-jack may be used from any side to
move it.
PALLET MATERIALS
Pallets are manufactured from a number of different raw materials: wood, plastic resins, metal, and corrugated
paper. Users select one material over another primarily on the basis of cost, although environmental
considerations, pallet weight, the type of load to be carried, and other factors also influence a purchaser’s
decision.
A 2012 survey conducted for Modern Materials Handling asked respondents to identify the most important
factors in deciding to use a certain type of pallet, and respondents identified reusability, customer requirements,
durability and strength – all attributes of the BLOCKPal – as key features in their selection process with 38 per
cent., 43 per cent., 49 per cent. and 55 per cent. respectively.
i.
WOODEN PALLETS
Wooden pallets dominate the market as the up-front cost is low in comparison to plastic and metal
alternatives. They are highly customisable, primarily in terms of providing a variety of sizes and
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strengths according to user requirements. Wooden pallets can be made from various types of wood
such as hard, soft, kiln-dried, recycled or some combinations thereof. They also benefit from being easy
to make, spawning an industry that is highly fragmented, with localised production, mainly due to cost
of moving the finished pallet. Hygiene concerns have been raised, following wooden pallets testing
positive for e.Coli and Listeria.
The cheapest pallets are made of lumber and are often considered expendable, to be discarded, along
with other wrapping elements, at the end of the trip. These pallets tend to be simple stringer pallets,
where some are only accessible from two opposing sides. In reality, some of these pallets can be
reconditioned and reused and are better described as “limited use” pallets. Limited use lumber pallets
need repair and refurbishment and the average price of such pallets is approximately US$10 (excluding
repair) with an estimated average life of four to six trips.
Slightly more complex block pallets are becoming more popular, as they can be lifted from four sides,
allowing greater handling efficiencies and safety. The higher quality ones, such as those used by the big
pallet rental companies use a higher proportion of hardwood and, although heavier, are much more
robust and therefore suitable for use in storage racking conditions. These typically cost around US$20,
and also require constant inspection, maintenance and cleaning but tend to be part of sophisticated
networks of service centres so that efficiency keeps such costs relatively low compared to the cheaper
pallets.
ii.
PLASTIC PALLETS
Plastic pallets are constructed using a variety of processes, including high pressure injection moulding,
structural foam moulding, thermoforming, compression moulding and rotational moulding. The most
popular resins used are HDPE and polypropylene but other resins can be used or added to give
particular characteristics. Recycled resins are also used but in 2012 it was estimated that the ratio of
virgin resin use to recycled resin use was just over 5-to-1. Comparative to wood, plastic pallets are very
durable, lasting for between ten and 60 trips and costing an average price of US$40.
Plastic pallets are resistant to moisture, rot, mould, chemicals and corrosion, are easy to sanitise and are
exempt from inspection for bio-safety concerns (ISPM-15 regulation) for international shipping. To take
advantage of this, many pallets are made very lightweight and used for export on a ‘send-and-forget’
basis, other light duty pallets are made for downstream distribution purposes and made so that they
nest inside each other to minimise storage space and maximise the amount of pallets that can be
trucked on the return journey. Some heavier duty pallets can become permanently distorted due to
plastic creep if used to store heavy loads for long periods.
Some plastic pallet manufacturers claim that their products are of a higher specific strength (strengthto-weight ratio) than wooden equivalents and certain heavy duty pallets are deemed durable enough
to populate pallet rental pools which have a small but growing share of the overall market. In certain
cases reinforcing bars typically made of steel are added to increase strength though this adds to both
cost and weight.
The large supply chains have increased the use of plastic pallets as organisations seek to maximise
efficiency and reduce costs through waste, transport and health and safety. Plastic pallets with fire
retardant accreditations enable Receivers of pallets to comply with the provisions of NFPA13, the other
alternatives being the installation or upgrading of expensive sprinkler systems. Cheaper fire retardants,
used to mitigate the cost of the pallet, can significantly compromise structural integrity. The use of
DecaBDE as a retardant in the USA has been the subject of great controversy and its further use in new
pallet manufacture has effectively been stopped (albeit this does not impact pallets already in
circulation).
iii.
METAL PALLETS
Metal pallets are strong and are used for heavy loads, high-stacking loads, long term dry storage, and
loads moved by abusive logistic systems. Materials used include carbon steel, stainless steel, and
aluminium. Of these, carbon steel offers excellent durability at the lowest cost; however, it requires
coating to prevent rusting. Stainless steel is preferred for such applications as clean room environments.
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Aluminium offers the durability of steel at a lighter weight. General advantages of metal pallets are high
strength and stiffness, excellent durability, insect free, no splinters, sanitary, fire proof and recyclable.
Disadvantages include a high initial price and susceptibility to rusting (carbon steel) and high weight
(steel). Metal is primarily used in captive or closed loop environments where durability and product
protection are key performance requirements.
iv.
OTHER PALLETS
Paper pallets are often used for light loads, but engineered paper pallets are increasingly used for loads
that compare with wood. Paper pallets are also used where recycling and easy disposal is important.
Paper pallets do not require fumigation or barrier “slip” sheets but do require protection from water
damage.
5.
PALLET INDUSTRY STRUCTURE
The pallet industry is composed of pallet manufacturers, pallet refurbishers and repair specialists, and pallet management
service and pallet pooling firms.
A.
PALLET MANUFACTURERS
There are a significant number of companies involved in the manufacture of pallets and the market is highly
fragmented, albeit these typically fabricate only one product type due to the different manufacturing techniques
and raw materials for production.
B.
PALLET REFURBISHERS
Although wood pallet refurbishing has existed in the US since the 1970s, interest in it increased considerably
through the 1980s and 1990s and, in recent years, users have sought to reduce their environmental impact and
enhance their profitability through the use of pallet refurbishment services. Rather than dispose of pallets, users
send them to pallet refurbishers which repair slightly damaged pallets by replacing broken boards with fresh
panels. More severely distressed pallets are taken apart, and undamaged components are used to repair other
pallets. Rebuilt pallets are either returned to their original owners or sold on the open market. Those parts of
the pallets that are too severely damaged to be refurbished are, depending on what chemical treatment the
pallet may have received, burned for fuel or ground into such products as mulch or animal bedding or,
alternatively, sent to landfill.
C.
PALLET RENTAL & MANAGEMENT SERVICE PROVIDERS
Pallet management service providers and pallet rental pools are important participants in the industry and range
from large firms with national networks of offices, repair sites, and distribution facilities to medium and smaller
pallet pools that typically serve potential customers in one industry that are in close proximity to each other
geographically and often market products at the same retail outlets. This segment of the pallet industry in the
US is somewhat less fragmented than the pallet manufacturing and repair segments.
6.
KEY MARKETS
Pallets find use in a wide variety of applications, not only in durable and non-durable goods manufacturing, but also in
non-manufacturing industries such as retail and transportation and warehousing.
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Figure 8: US Major Market Segmentation, 2012
Source: “Pallet and Skid rental in the US – 2012” IBISWorld
A.
MANUFACTURING
The manufacturing sector is the dominant market for pallet rentals. Regardless of the industry, practically all
manufacturing activities require pallets for the transportation and storage of raw materials, finished goods,
machinery support and warehousing functions.
B.
RETAIL
The retail sector also constitutes a major market for pallet rentals. Most major retail operations receive
shipments of inventory on pallets and move excess inventory within their stock rooms and warehouses.
Accordingly, the choice of pallet type is an important consideration.
For example, major retailers often display retail items on their sales floors on the same pallets that were used to
load and unload shipments on and off the delivery truck. This type of marketing can increase the standards such
retailers require of their pallet supplies. Also, the types of goods destined for retail can have implications for
pallet requirements, such as the regulations some jurisdictions have for using plastic instead of wooden pallets
to stem the possibility of e. coli and other contamination.
C.
TRANSPORTATION AND WAREHOUSING
Whilst pallets are integral to the transportation and warehousing sector, such firms generally invest in their own
pallet equipment because of the critical need for it in their businesses. As measured by total trade value, the
transportation and warehousing market is expected to overcome the losses incurred during the economic
downturn, largely on the back of strong demand from emerging markets. Exports in this sector tend to face a
higher degree of regulation, and the US Department of Agriculture’s new fumigation standards for wooden
packaging materials could encourage companies to invest in alternative transportation media.
7.
MARKET DRIVERS
Growth in the key markets for pallets identified in paragraph 6 above is linked to overall economic conditions and,
accordingly, demand for pallets depends on a variety of macro factors, such as population growth, exchange rates and
disposable incomes, as well as industry-specific micro factors, such as product prices, the prices of substitutes and
consumer trends. Demand can also fluctuate in line with changing requirements among downstream industries and any
change in regulations.
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A.
DEMOGRAPHICS
Pallet demand is driven in part by population growth. Many consumer goods – including clothing, food and
beverages, home electronics, pharmaceuticals, and small appliances – are typically shipped on pallets from
manufacturers to distributors and retailers, where consumers then purchase them. Demand for these products
tends to rise as the population grows, which in turn increases demand for the pallets on which these goods are
shipped. In addition, many building and construction materials – such as cement, lumber, paint, shingles, and
siding – are shipped on pallets to contractors, home builders, and remodelers. Population increases often fuel
demand for new housing units and refurbishment of existing housing, which spurs demand for building materials
and thus for pallets.
B.
MANUFACTURING DEMAND
Pallet demand closely follows growth or decline in manufacturers’ shipments. Most manufactured goods are
shipped and stored on pallets, as pallets add load stability during shipment, and allow users to move goods more
compactly and efficiently. Growth in demand from manufacturers will increase the industry’s revenue while a
decline in manufacturing activity will negatively impact industry revenue.
Accordingly, when manufacturing activity contracts, pallet demand tends to fall more rapidly. Pallets make fewer
trips due to reduced shipments and thus last longer, and manufacturers accumulate idle stock, both of which
restrain demand for replacement pallets. Similarly, when manufacturing activity rebounds, pallet demand tends
to rise more slowly because manufacturers utilise idle stock before making new purchases.
One trend that could have a significant impact on the outlook for US manufacturing is insourcing (also called
reshoring or onshoring). A number of factors are making manufacturing in the US more attractive, including
rising labour costs in developing countries, especially China; increasing shipping costs; shorter product
development cycles; supply chain uncertainty; increasing US worker productivity; lower property costs; and
import quality issues. In addition, a rebound in US oil and gas production is improving the feedstock cost position
of downstream material producers. Another major factor in the improving outlook for US manufacturing is the
increasing production of shale oil and gas in the US. Higher production of natural gas and the resultant decrease
in natural gas prices have given the US an advantage over Europe and Asia in a number of manufacturing
industries due to lower energy costs.
C.
RETAIL TRADE LEVELS
Retailers are one of the industry’s largest markets. Pallets are used to transport and store consumer goods in
warehouses to stores and demand from retailers is likely to impact the industry’s revenue. Much like slumping
manufacturing activity during the past five years, retail trade also suffered during the economic downturn.
Durable Goods
Demand for pallets in the US is closely connected to manufacturers’ shipments of durable goods i.e. products
that have an average useful life of at least three years. Many producers use pallets to transport their products
from the factory to the warehouse, as pallets offer the necessary stability and sturdiness to handle most durable
goods, including those most susceptible to damage during transit because of their large size and heavy weight,
or their fragile components. Leading durable goods manufacturing markets for pallets include electronic
equipment, machinery, metal products, and transportation equipment.
In real (inflation-adjusted) terms, shipments of durable goods are projected to increase 2.4 per cent. per year
through to 2017.
Non-durable goods
Pallets are also used to transport non-durable manufactured goods. Many of these items – including chemical
resin pellets, foodstuffs, paper rolls, and textiles – are traditionally packaged in materials that are unwieldy
and/or highly susceptible to damage. Such items can be placed on pallets, which are then wrapped with plastic
film or other protective outer layers to prevent the items from shifting or falling during transit. These loaded
pallets are easier to handle and transport than unpalletised loads, and can be more easily separated at
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warehouses, retail stores, and other end-use facilities. Non-durables frequently shipped on pallets include
beverages, boxed and dried foods, consumer products, and drums of chemical pellets and resins.
In real (inflation-adjusted) terms, shipments of non-durable goods are projected to increase 1.5 per cent. per
annum through to 2017.
D.
WAREHOUSING EXPENDITURES
The warehousing services industry represents a significant market for the US pallet industry. Many warehousing
and storage firms partner with manufacturers to provide for the shipment of palletised products to their
customers and then return the pallets to the manufacturer once they have been emptied. Other warehousing
service providers own large pallet stocks and contract with manufacturers and retailers to palletise and deliver
products to the customer. These companies buy large numbers of pallets each year.
In real (inflation-adjusted) terms, warehousing and storage expenditures are forecast to increase 3.1 per cent.
annually through to 2017, driven in part by further increases in the number of manufacturers and retailers that
prefer to have their shipping and receiving needs handled by third-party providers.
E.
CONSTRUCTION EXPENDITURES
Construction is an important pallet market and many items used in building are shipped on palletised loads.
These include bricks, doors, pipes, shingles, tiles, and wiring, among other items. Increased construction activity
thus results in growth of pallet sales, as more pallets are required to ship construction-related products to
builders, contractors, and retailers.
8.
INDUSTRY STANDARDS
ISO 8611
The ISO is a worldwide network of national standards bodies and the work of preparing international standards is carried
out through ISO technical committees. ISO technical committee TC51 covers pallets exclusively and they work on the
current range of ISO pallet standards started in earnest in 1979.
The test procedures described in ISO 8611-1 are approximate simulations of pallet use. These tests help the pallet
designer to establish an initial acceptable balance between the cost and the performance of a pallet design and are
regarded as the best analytical tools for users or manufacturers to establish exactly how pallets perform under simulated
conditions.
ASTM D1185
ASTM International, formerly known as the American Society for Testing and Materials (“ASTM”), is an international
standards organisation that develops and publishes voluntary consensus technical standards, test methods,
specifications, guides, and practices for a wide range of materials, products, systems, and services.
ASTM D1185 is the Standard Test Methods for Pallets and Related Structures Employed in Materials Handling and
Shipping. These test methods cover the performance of pallets and related structures, functioning as skids, bases,
platforms, and bins in materials handling and shipping.
9.
FIRE REGULATIONS
The National Fire Protection Association (“NFPA”) establishes the standard, NFPA 13, that provides the basis for most
state and local fire prevention laws and regulations governing warehouse construction and management throughout the
United States, although state or local requirements may sometimes be more stringent. The NFPA 13 standard includes
requirements for management of shipping pallets in warehouses, including requirements that mandate stricter
management controls and fire prevention systems for plastic pallets than for wood pallets. For plastic pallets, NFPA 13
provides two options: imposition of more stringent requirements on the warehouse for managing plastic pallets than for
managing wood pallets, or use of plastic pallets that have passed tests demonstrating, “a fire hazard that is equal to or
less than wood pallets and are listed as such.”
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To enable adoption of a rental pool populated with plastic pallets, a pallet supplier would want to be able to provide shippers of
goods with a pallet that has passed testing such as the Factory Mutual (“FM 4996”) or Underwriters Laboratories (“UL 2335”) tests,
or risk rejection of shipments by Receivers who would otherwise then fail to comply with NFPA 13 requirements for plastic pallets.
Phasing out of the use of the popular and widely available DecaBDE fire retardant due to health and environmental fears left
manufacturers of plastic pallets not only facing an array of formulation challenges in balancing the demands of flame retardancy
and other physical attributes for a plastic pallet but also major cost concerns. Cost pressures include both the development
process itself and the ultimate cost of the pallet in the marketplace.
Alternatives create problems as they generally have to be used in larger quantities than DecaBDE, often in excess of 20 per cent.
As a general rule, the cheaper the fire retardant the more is required and this tends to add weight, add cost, reduce material
performance or processing properties (melt-flows) and contain toxins.
A shipping pallet is not a premium-price product – the best pallet capable of manufacture is likely to be far too costly for the massmarket. Accordingly, developers are faced with the technical balancing act of providing the required level of flame retardancy
whilst maximising essential strength, stiffness, durability and functionality.
The compound used by RM2 in the construction of the BlockPal is fire resistant without any fire retardant additives. One design
of the BLOCKPal has been presented for testing, and passed the UL 2335 testing protocol, due to a combination of the pallet
geometry and raw materials utilised.
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PART III
RISK FACTORS
Investing in the Company is speculative and involves a high degree of risk. Before making an investment decision, prospective
investors are advised to consult a professional adviser authorised under FSMA who specialises in investments of the kind described
in this document.
You should carefully consider the entire contents of this document, including, but not limited to, the risk factors described below,
before you decide to invest in the Company. As at the date of this document, the Company considers the following risks to be the
material risks of which they are aware and the most significant risks for shareholders and potential investors. Such risks have not
been set out in any order of priority. In addition, you should note that the risks described below are not the only risks faced by
RM2. In particular, there may be additional risks that the Directors currently consider not to be material or of which they are not
presently aware. The Group’s business, financial condition or results of operations could be materially and adversely affected by
any of the risks described below.
There can be no certainty that the Group will be able to implement successfully the strategy set out in this document. No
representation is or can be made as to the future performance of the Group and there can be no assurance the Group will achieve
its objectives.
1.
GENERAL RISKS
An investment in the Company is only suitable for investors capable of evaluating the risks and merits of such investment
and who have sufficient resources to bear any loss which may result. A prospective investor should consider with care
whether an investment in the Company is suitable for him in the light of his personal circumstances and the financial
resources available to him.
Investment in the Company should not be regarded as short-term in nature. There can be no guarantee that any
appreciation in the value of the Ordinary Shares will occur or that the objectives of the Company will be achieved.
Investors may not get back the full or any amount initially invested.
The prices of shares and the income (if any) derived from them can go down as well as up. Past performance is not
necessarily a guide to the future.
Changes in economic conditions including, for example, exchange rates, interest rates, rates of inflation, industry
conditions, competition, political and diplomatic events and trends, tax laws and other factors can substantially and
adversely affect equity investments and the Company’s prospects.
2.
RISKS RELATING TO RM2 AND ITS BUSINESS
(a)
Early stage of operations
RM2 is at an early stage of development. The commencement of RM2 earning material revenues is difficult to
predict and there is no guarantee that RM2 will generate any material revenues in the near future. RM2 has a
limited operating history upon which its performance and prospects can be evaluated and faces the risks
frequently encountered by developing companies. These risks include the uncertainty as to which areas to target
for growth. There can be no assurance that RM2’s proposed operations will be profitable or produce a
reasonable return, if any, on investment.
(b)
Product development
RM2 intends to continue to develop products which are designed to have a commercial application. There is no
guarantee that any such product will be successful nor that any products will actually result in any commercial
applications.
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The success of RM2 is reliant upon there being a demand for its products. In addition, RM2 relies upon third
parties to incorporate its products into their own processes. A particular third party having access to RM2’s
products may fail to use the products in an effective process or the products or processes may not be or become
commercially viable. There can be no assurance that such products will achieve commercial success or be an
attractive alternative to conventional products or processes.
It is possible that RM2 focuses its activities on a limited number of products and technologies and that after such
further development has taken place, RM2 finds that the resulting product is not successful or has no profitable
commercial application, or that the resulting product has been superseded by other products which have a more
profitable commercial application when compared with those of RM2.
The development and manufacture of products takes some time to complete. Depending on the process, RM2
may not be able to develop its products within the timeframe required by its potential customers and/or that
targeted by its competitors. Further, the success of RM2 may depend on its continued ability to develop new
products and to meet potential customers’ changing requirements.
(c)
Market acceptance
The development of a market for a new product is affected by many factors, most of which are beyond the
control of RM2, including the emergence of newer and more competitive products or processes, the costs of the
products, regulatory requirements, including any future regulatory changes, end-users’ perceptions as to the
safety of any product and the propensity of end-users to try new products or processes.
If a market for any product fails to develop or develops more slowly than anticipated, RM2 may fail to achieve
profitability with respect to the associated products. In addition, RM2 may not continue to develop such
products if market conditions do not support the continuation of those products.
(d)
RM2 may experience accelerated demand for its products and services
RM2 expects to be able to meet its current capital expenditures from internal resources and the net proceeds of
the Placing. In future, it may explore other sources of financing including invoice discounting and other debt
facilities. A need to fulfil large orders rapidly may require RM2 to seek additional capital which could entail the
issuance of new equity, debt financing or some combination thereof. If RM2 is unable to raise the necessary
additional financing for any expanded working capital requirement it could adversely affect its ability to expand
its business.
(e)
RM2 is expected to experience rapid growth. If RM2 is not able to effectively manage its growth, its operations
could be damaged and profitability reduced
RM2’s business and operations are expected to experience rapid growth. This future growth could place
significant demands on RM2’s operational and financial infrastructure and its ability to expand to meet such
growth will be tested. RM2 may need to expand and enhance its infrastructure and technology, and improve its
operational and financial systems and procedures and controls from time to time in order to be able to match
that growth. If RM2 is unable to manage its growth effectively, its operations could be harmed and profitability
reduced. The growth of RM2’s sales and profits in the future will depend, in part, on its ability to expand its
operations through the roll-out of its products and services to new potential customers and into new markets
and geographies. Furthermore, in order to manage its planned expansion, it will need continually to evaluate the
adequacy of its management capability, operational procedures, financial controls and information systems.
Accordingly, there can be no assurance that RM2 will be able to achieve its expansion goals on a timely or
profitable basis.
(f)
RM2 will need to ensure that its financial risk limitation policies, procedures and practices remain suitable as RM2
grows and changes from being a research and development company to an operating manufacturing company
The financial risk limitation policies, procedures and practices RM2 has established to date are suitable for a
company of the size and stage of development of RM2. As RM2 seeks to grow, the design and implementation
of RM2’s policies, procedures and practices used to identify, monitor and control a variety of risks may fail to be
effective. RM2’s financial risk limitation methods rely on a combination of internally developed technical
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controls, industry standard practices, observation of historical market behaviour and human supervision. These
methods may not adequately prevent future losses.
A lack of effective internal controls could have a material adverse effect on RM2’s reputation, business, financial
condition and operating results. Any material weaknesses may materially adversely affect RM2’s ability to report
accurately its financial condition and results of operations in the future in a timely and reliable manner.
(g)
RM2’s expansion may not be successful
RM2’s operations are subject to certain risks including changes in government policies, changes in political and
economic conditions, changes in regulatory environments, exposure to different legal, regulatory or fiscal
standards, difficulties in staffing and managing operations, and potentially adverse tax consequences. There are
no guarantees that RM2 will be able to successfully expand its operations in line with its current expectations.
(h)
RM2 may experience unforeseen delays and cost overruns when rolling out its products and services
Management effort and financial resources are being employed by RM2 in rolling out its products and services
to potential customers. Following Admission, RM2 expects production to increase significantly and its pallet
production capacity is untested on the scale at which it hopes to operate. Although RM2 has budgeted for
expected costings, additional expenses in the event of unforeseen delays, cost overruns, unanticipated expenses,
regulatory changes and increases in the price of materials and other manufacturing equipment utilised in RM2’s
processes may negatively affect RM2’s business, financial condition and results of operations.
(i)
RM2 is dependent on developing relationships with potential customers
The success of RM2’s business is, and is expected to continue to be, dependent on the development of
commercial relationships with its potential customers and suppliers. There is no guarantee that these
relationships will be developed sufficiently to the point of generating revenue for RM2, or that such potential
customers will not seek to use alternative providers of products and services similar to those of RM2.
(j)
RM2 is dependent on continued availability of raw materials and manufacturing equipment
The raw materials and manufacturing equipment utilised by RM2 in the delivery of its products and services are
readily available from a number of suppliers and counterparties. However, any restriction on the availability of
such items may negatively affect RM2’s business, financial condition and results of operations.
(k)
Exchange rate fluctuations
RM2’s principal revenues in the near term are expected to be earned in US$. Currency fluctuations may affect
RM2’s operating cash flow since certain of its costs and revenues are likely to be denominated in a number of
different currencies other than US$ and any potential income may become subject to exchange control or similar
restrictions. Fluctuations in exchange rates between currencies in which RM2 operates may cause fluctuations in
its financial results which are not necessarily related to its underlying operations.
RM2 does not currently have any foreign currency hedges in place. If and when appropriate, the adoption of a
hedging policy will be considered by the Board.
(l)
Terrorism, political and social instability
Terrorist activities or armed conﬂict involving any country in which RM2 operates or to which RM2’s products
and services are provided may adversely affect its business activities and ﬁnancial conditions. If events of this
nature occur or persist, the resulting political and social instability could adversely affect RM2’s revenues.
(m)
Competition
There can be no assurance that potential competitors of RM2, which may have greater financial, R&D, sales and
marketing and personnel resources than RM2, are not currently developing, or will not in the future develop,
products and strategies that are equally or more effective and/or economical as any products or strategies
developed by RM2 or which would otherwise render its products or strategies obsolete.
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RM2 operates within competitive markets and the Directors believe that it has adopted a competitive business
strategy. However, RM2’s business, results, operations and financial condition could be materially adversely
affected by the actions of its competitors (including their marketing and pricing strategies and product and
services development).
RM2 may be forced to change the nature of its business as a result of competitive factors and there is no
assurance that RM2 will be able to compete successfully in the market place in which it seeks to operate.
(n)
Manufacturing technology
Even if new and advanced manufacturing or production equipment becomes available to RM2, it may not have
funds available or be able to obtain necessary financing on acceptable terms to acquire or utilise it. Further, any
investment RM2 may make in a perceived technological advance may not be effective, economically successful
or otherwise accepted in the market.
(o)
RM2’s expenses include fixed costs
A significant proportion of RM2’s costs may be fixed and may not then be easily reduced in the short-term.
Therefore, RM2 may not be able to reduce certain expenses promptly in response to any future reduction in
revenue. Should such a reduction occur and RM2 be unable to reduce its fixed expenses accordingly, its business,
financial condition and results of operations may be materially adversely affected.
(p)
RM2 may acquire other businesses or assets if suitable opportunities become available
Any future acquisition poses integration and other risks which may significantly affect RM2’s results or
operations and any businesses that it may acquire may not turn out to be profitable. In addition, the operation
and management of additional businesses, assets or customers may require additional resources, such as human
or infrastructure resources. There can be no assurance that RM2 will be able to procure the additional resources
to cope with the growth in the number of assets under its management.
(q)
Ability to attract and retain key executives, officers, managers and technical personnel
RM2 is headquartered in Luxembourg. The Chief Executive Officer and the principal sales office are located in
Switzerland and the Company maintains an executive presence in London. RM2’s existing manufacturing facility
is located in Ontario, Canada. Attracting, training, retaining and motivating technical and managerial personnel,
including individuals with significant technical expertise is a critical component of the future success of RM2’s
business. RM2 may encounter difficulties in attracting or retaining qualified personnel. Managing from disparate
locations can pose challenges in communication and decision-making. Continued growth may cause a significant
strain on existing managerial, operational, financial and information systems resources.
The performance of RM2 depends, to a significant extent, upon the abilities and continued efforts of its existing
senior management as well as the recruitment of further senior management in line with the planned growth in
operations. The loss of the services or failure to recruit key management personnel or the failure to retain or
recruit key employees or the inability to effectively communicate across international offices could adversely
affect RM2’s ability to maintain and/or improve its operating and financial performance. In common with many
businesses, the success of RM2 after Admission will, to a significant extent, be dependent on the expertise and
experience of the Directors and key senior management, the loss of one or more of whom could have a material
adverse effect on RM2.
Whilst RM2 has entered into service agreements with the Directors which will become effective on or before
Admission, it does not currently have formal employment contracts in place with all of its senior management
team. The retention of services of the Directors and senior management team cannot be guaranteed.
(r)
RM2’s disaster recovery plans may not be sufficient and if they are not then there could be a material adverse
effect on its financial position
RM2 depends on the performance, reliability and availability of its information technology and communications
systems. Any damage to or failure of its systems could result in disruptions to RM2’s operations and websites,
which could reduce its revenues and profits, and damage its brands.
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RM2’s systems are vulnerable to damage or interruption from power loss, telecommunications failures,
computer viruses, computer denial of service attacks or other attempts to harm its systems, natural disasters,
including floods and fires, volcanic ash and vandalism, terrorist attacks or other acts.
RM2’s disaster recovery plans may not adequately address every potential event and its insurance policies may
not cover any loss in full or in part (including losses resulting from business interruptions) or damage that it
suffers fully or at all.
RM2 relies on third parties, including data centres and bandwidth providers, to host and operate its websites.
Any failure or interruption in the services provided by these third parties could harm its operations and
reputation. In addition, RM2 may have little or no control over these third parties, which increases its
vulnerability to service problems. Any disruptions in the services provided by these parties or any failure of these
providers to handle current or higher visitor traffic or transaction volumes could significantly harm RM2’s
business. RM2 may in the future experience disruptions or delays in these services. If these providers were to
suffer financial or other difficulties, their services could be interrupted or discontinued and replacement
providers may be uneconomical or unavailable. Any of these events could have a material adverse effect on
RM2’s business, operating profit and overall financial condition.
(s)
Levels of insurance carried by RM2
There can be no certainty that RM2’s insurance cover is adequate to protect against every eventuality and the
occurrence of an event for which RM2 did not have adequate insurance cover could have a material adverse
effect on RM2.
(t)
Political, economic, regulatory and legislative considerations
Adverse developments in the political, legal, economic and regulatory environment may materially and adversely
affect the financial position and business prospects of RM2. Political and economic uncertainties include, but are
not limited to, expropriation, nationalisation, changes in interest rates, the retail prices index, changes in taxation
and changes in law. Whilst RM2 strives to continue to take effective measures such as prudent financial
management and efficient operating procedures, there is no assurance that adverse political, economic, legal
and regulatory factors will not materially and adversely affect RM2.
(u)
Development of technology
Continuing research on and development of RM2’s technology may be required and there can be no assurance
that any of its future technology will be successfully developed or exploited. RM2 may encounter delays and
incur additional R&D costs and expenses over and above those anticipated or allowed for by the Directors.
(v)
Unforeseen factors and developments
RM2’s ability to implement its business strategy may be adversely affected by factors that it cannot currently
foresee, such as unanticipated costs and expenses, technological change and severe economic downturn. All of
these factors may necessitate changes to the business strategy described in this document.
(w)
Market acceptance and future funding
Whilst the Directors believe that there are viable markets for RM2’s products and services, there can be no
assurance that these will be generally adopted by RM2’s potential client base.
Whilst the Directors believe that, taking into account the net proceeds of the Placing, RM2 has sufficient working
capital for its present requirements, that is for at least 12 months from the date of Admission, there can be no
assurance that RM2 would have sufficient resources to fund further development beyond that period.
(x)
Regulatory environment
RM2’s operations may be subject to a variety of national, federal, provincial, state, foreign and local laws and
regulations, including environmental, health and safety laws, regulations, treaties and conventions (together,
“Regulations”).
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This includes, inter alia, those controlling the discharge of materials into the environment, requiring removal and
clean-up of environmental contamination, establishing certification, licensing, health and safety, taxes, labour
and training standards, operation of equipment or otherwise relating to the protection of human health and the
environment, and export control regulations. The amendment or modification of existing Regulations or the
adoption of new Regulations curtailing or further regulating RM2’s business could have a material adverse effect
on RM2’s operating results and financial condition.
Whilst RM2 intends to work to comply with all applicable Regulations, it cannot predict the extent to which
future earnings or capital expenditures may be affected by compliance with such new Regulations. In addition,
RM2 may be subject to significant fines, penalties or liability if it does not comply with any such existing or future
Regulations.
There may be a change in the regulatory environment which may materially adversely affect RM2’s ability to
implement successfully the strategy set out in this document.
(y)
Intellectual property and proprietary rights
RM2 relies upon maintaining the confidentiality of the exact nature of the BLOCKPal manufacturing process and
does not for example have any patents. The details of the manufacturing process are the Company’s most
important intellectual property. The Company protects this intellectual property by ensuring that its relevant
employees have confidentiality provisions in their employment contracts preventing them from disclosing the
confidential information of the Group to anyone outside of the Group. RM2 ensures relevant suppliers have
entered into non-disclosure agreements restricting disclosure by such suppliers of the confidential information
of the Group.
However, RM2 cannot be sure that other competitors will not infringe upon, violate, challenge or reverse
engineer its intellectual property in the future. If RM2 is not able to adequately protect or enforce its intellectual
property rights, its business, results of operations and financial condition may be materially adversely affected.
RM2 is also subject to the risk that third parties may allege that RM2’s operations and use of technology infringes
upon their intellectual property rights. RM2 cannot be sure that such litigation will not be brought against RM2
in the future and, if brought, whether RM2 would be successful in defending itself against such claims. Moreover,
defending such claims may result in protracted litigation, which could result in substantial costs and the diversion
of RM2’s resources, as a result of which RM2’s business, results of operations and financial condition may be
adversely affected. Furthermore, RM2 customer contracts may contain indemnities, whereby RM2 may agree to
indemnify its customers for third party intellectual property infringement claims and RM2 cannot be sure that it
would have no liability to its customers in such circumstances.
(z)
Reliance on manufacturing sector for bulk of pallet orders
RM2 is reliant on the manufacturing sector of the economy to produce goods in sufficient volumes to drive
demand for pallets on which to transport those goods. A reduction in manufacturing output may lead to a
reduction in the size of the pallet market and in turn RM2 may find it more difficult to obtain orders to produce
or lease pallets.
(aa)
Increases in input costs
RM2’s operations require raw materials, road transportation and water and electricity supply. Any increase in
these input costs would affect the profitability of RM2 which may find it difficult to pass on such increased costs
to potential customers.
(bb)
Electricity supply
The pultrusion process which forms part of the pallet manufacturing process requires large amounts of
electricity. The amount of electricity required cannot be obtained easily at other premises. Any electricity failure
or outage would affect production of the pallets, risking a failure to meet contractual obligations. Furthermore
if the current factory premises in Ontario, Canada were to become unavailable, the electricity requirement of the
production process would limit the range of sites to which RM2 could switch production.
43
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(cc)
Contamination at the Canadian factory
At the site adjacent to RM2 Canada’s factory, there is contamination in the groundwater (which has migrated
onto RM2 Canada’s premises from a neighbouring site) in the form of dissolved phase petroleum hydrocarbons,
polychlorinated biphenyls and trichloroethylene and its degradation products (including vinyl chloride)) (the
“Contamination”) at concentrations exceeding the applicable Ontario Ministry of the Environment (the “MOE”)
standards. These chemicals can potentially, if present in sufficient concentrations, have an impact on human
health. RM2 Canada’s landlord has engaged the services of an environmental consultant to complete a risk
assessment on the extent of Contamination present at RM2 Canada’s premises. This risk assessment remains
on-going and ultimately is expected to be submitted to the MOE. However, the consultants have advised, as a
preliminary view, that the levels of Contamination found at RM2 Canada’s site do not pose a risk to RM2 Canada’s
workers. In addition, the previous owners of RM2 Canada’s premises carried out activities of plastic films
manufacture and packaging, processes which can sometimes have an environmental impact. The MOE has a
broad discretionary power to make orders under the Canadian Environmental Protection Act against land owners
or occupiers including where contamination was caused by a previous occupier. As such, although RM2 has been
advised that it is not likely, there is a risk that RM2 Canada could be held liable for the Contamination or any
contamination at RM2 Canada’s premises arising from the activities of the former tenant.
3.
RISKS RELATING TO THE COMPANY’S DOMICILE
(a)
Disclosure of interests in shares
Under the Luxembourg Companies Law, shareholders in RM2 are not obliged to disclose their interests in a
company in the same way as shareholders of certain public companies incorporated in the United Kingdom. In
particular, the Disclosure and Transparency Rules do not apply. The Articles have been amended to incorporate
provisions equivalent to those contained in the Disclosure and Transparency Rules, but these may be amended
by a resolution of the Shareholders.
(b)
Takeovers
As RM2 is not admitted to trading on a “regulated market”, it is not subject to any takeover laws in Luxembourg
or elsewhere.
4.
RISKS RELATING TO THE ORDINARY SHARES
(a)
Suitability
Investment in the Ordinary Shares may not be suitable for all readers of this document. Readers are accordingly
advised to consult a person authorised under FSMA who specialises in investments of this nature before making
any investment decisions.
(b)
Investment in AIM-traded securities
Investment in shares traded on AIM involves a higher degree of risk, and such shares may be less liquid, than
shares in companies which are listed on the Official List. The AIM Rules for Companies are less demanding than
those rules that govern companies admitted to the Official List. It is emphasised that no application is being
made for the admission of RM2’s securities to the Official List or to any other investment exchange other than
AIM. An investment in the Ordinary Shares may be difficult to realise. Prospective investors should be aware that
the value of an investment in RM2 may go down as well as up and that the market price of the Ordinary Shares
may not reflect the underlying value of RM2. Investors may therefore realise less than, or lose all of, their
investment.
(c)
Share price volatility and liquidity
The share price of quoted companies can be highly volatile and shareholdings can be illiquid. The price at which
the Ordinary Shares are quoted and the price which investors may realise for their Ordinary Shares will be
influenced by a large number of factors, some specific to RM2 and its operations and others which may affect
quoted companies generally. These factors could include the performance of RM2, large purchases or sales of
the Ordinary Shares, currency fluctuations, legislative changes and general economic, political, regulatory or
social conditions.
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(d)
Access to further capital
RM2 may require additional funds to respond to business challenges, enhancing existing products and services
and further developing its sales and marketing channels and capabilities. Accordingly, RM2 may need to engage
in equity or debt financings to secure additional funds. If RM2 raises additional funds through further issues of
equity or convertible debt securities, existing shareholders could suffer significant dilution, and any new equity
securities or convertible debt securities could have rights, preferences and privileges superior to those of current
shareholders. Any debt financing secured by RM2 in the future could involve restrictive covenants relating to its
capital raising activities and other financial and operational matters, which may make it more difficult for RM2
to obtain additional capital and to pursue business opportunities, including potential acquisitions. In addition,
RM2 may not be able to obtain additional financing on terms favourable to it, if at all. If RM2 is unable to obtain
adequate financing or financing on terms satisfactory to it, when required, its ability to continue to support its
business growth and to respond to business challenges could be significantly limited or could affect its financial
viability.
(e)
Dilution
If available, future financings to provide required capital may dilute shareholders’ proportionate ownership in
RM2. RM2 may raise capital in the future through public or private equity financings or by issuing debt securities
convertible into Ordinary Shares, or rights to acquire these securities (which, in any such case, may not be made
available to existing holders of Ordinary Shares). If RM2 raises significant amounts of capital by these or other
means, that could cause dilution for RM2’s existing shareholders. Moreover, the further issue of Ordinary Shares
could have a negative impact on the trading price and increase the volatility of the market price of the Ordinary
Shares. RM2 may also issue further Ordinary Shares, or create further options over Ordinary Shares, as part of
its employee remuneration policy, which could in aggregate create a substantial dilution in the value of the
Ordinary Shares and the proportion of RM2’s share capital in which investors are interested.
(f)
Future sale of Ordinary Shares
RM2 is unable to predict when and if substantial numbers of Ordinary Shares will be sold in the open market
following Admission. Any such sales, or the perception that such sales might occur, could result in a material
adverse effect on the market price of the Ordinary Shares. RM2 may require additional capital in the future which
may not be available to it.
(g)
No prior trading market for Ordinary Shares
Prior to Admission, there was no public market for the Ordinary Shares. There can be no assurance that an active
market for (and hence liquidity in the trading of) the Ordinary Shares will develop upon Admission, or if
developed, that such market will be sustained.
(h)
Exchange rate risk to investors
RM2’s functional currency is US$. Fluctuations in currency could have an adverse effect on the value of an
investor’s holdings in RM2 where the principal accounting currency of the investor is not US$ or where there are
inverse fluctuations between Sterling, the currency in which the Ordinary Shares are quoted, and US$, the
currency in which the Company’s results are reported.
(i)
Dividends
There can be no assurance as to whether dividends will be paid in future or in what amount. Subject to
compliance with the Luxembourg Companies Law and the Articles, the declaration, payment and amount of any
future dividends are subject to the discretion of the Directors, and will depend on, inter alia, the Company’s
earnings, financial position, cash requirements and availability of profits. A dividend may never be paid and, at
present, there is no intention to pay a dividend in the short to medium term.
The risks noted above do not necessarily comprise all of the risks potentially faced by RM2 and are not intended to be presented
in any assumed order of priority.
Although RM2 will seek to minimise the impact of the Risk Factors, investment in RM2 should only be made by investors able
to sustain a total loss of their investment. Potential investors are strongly recommended to consult an investment adviser
authorised under FSMA, who specialises in investments of this nature before making any decision to invest.
45
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PART IV
TAXATION
The following information is intended only as a general guide to current UK tax legislation, the impact of Luxembourg tax on
Shareholders resident in the UK for tax purposes, and published HM Revenue and Customs practice as it applies to holding or
disposing of Ordinary Shares at the date of this document, all of which are subject to change, possibly with retrospective effect. It
is intended only for Shareholders who are resident in the UK for tax purposes and who hold Ordinary Shares beneficially as
investments. The comments do not address the position of certain classes of shareholder, such as dealers in securities.
This section is not intended, and shall not be construed to be, legal or taxation advice to any particular Shareholder. Any
Shareholder who is in any doubt as to their tax position, or who is subject to tax in a jurisdiction other than the UK, should consult
their professional adviser.
1.
Taxation of dividends
UK
1.1
Individual Shareholders who are resident in the UK for tax purposes should generally be entitled to a tax credit
in respect of any dividend received equal to one ninth of the amount of the dividend paid or ten per cent. of the
combined amount of the tax credit and the dividend. The amount of the dividend received by such an individual
Shareholder and the associated tax credit form part of the individual Shareholder’s income for UK tax purposes.
1.2
The rate of income tax on dividends is ten per cent. for individuals not liable to tax at a rate above the basic rate.
The tax credit therefore discharges the income tax liability of such a Shareholder.
1.3
UK resident individuals who are higher rate taxpayers are liable to tax on dividends at the rate of 32.5 per cent.,
so that, after taking account of the tax credit, such Shareholders will have tax to pay equal to 25 per cent. of the
net dividend received.
1.4
UK resident individuals that are subject to the additional rate of income tax of 45 per cent. are liable to tax on
dividends at the rate of 37.5 per cent. This means that, after taking account of the tax credit, those taxpayers will
have tax to pay on dividends equal to 30.56 per cent. of the net dividend received.
1.5
Special rules apply in respect of dividends received by trustees. Shareholders who hold their Ordinary Shares on
trust should consult their professional adviser.
1.6
Subject to certain exceptions for traders, a UK resident corporate Shareholder will generally be exempt from
corporation tax on any dividend paid by the Company, subject to certain anti-avoidance provisions. If the
Company’s dividends are not exempt, they will be included in the UK resident corporate Shareholders’ profits
chargeable to corporation tax and taxed at the appropriate rate of corporation tax (currently, in the 2013-14
financial year, a maximum of 23 per cent.).
1.7
The Company will not be required to withhold any UK tax on dividend payments in respect of the Ordinary
Shares.
Luxembourg – Taxation of non-resident Shareholders
1.8
Shareholders that are (i) non-residents of Luxembourg and (ii) are either (a) an individual Shareholder or (b) a
corporate Shareholder without any permanent establishment in Luxembourg to which the Ordinary shares are
attributable, are generally not liable to any Luxembourg income tax.
Luxembourg – Withholding tax on dividends and credit in the UK
1.9
Dividends paid by the Company to its shareholders are normally subject to withholding tax in Luxembourg at a
rate of 15 per cent.
46
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2.
3.
1.10
The Company is responsible for withholding such withholding tax.
1.11
If a Shareholder receives a dividend on Ordinary Shares and the dividend is paid subject to Luxembourg
withholding tax, credit for such Luxembourg withholding tax may be available for set-off against a liability to UK
corporation tax or UK income tax on the dividend.
1.12
The amount of such credit will normally be equal to the lesser of the amount withheld and the liability to UK tax
on the dividend. Such credit will not normally be available for set-off against a Shareholder’s liability to UK tax
other than on the dividend and, to the extent that such credit is not set off against UK tax on the dividend, the
credit will be lost. Credit will not be available to the extent that the Luxembourg withholding tax can be
minimised or repaid by taking reasonable steps under a double tax treaty or a provision of Luxembourg law.
1.13
Following Admission, the Company is intending to assess various options to undertake tax planning in
Luxembourg that may potentially minimise the withholding tax on dividends on Ordinary Shares by, for example,
the creation of a reserve from which it may be possible to pay distributions to Shareholders with no withholding
tax. Creation of such a reserve would be subject to the approval of Shareholders in due course and therefore
there is no certainty that it will be created.
Capital gains
2.1
A disposal of Ordinary Shares by a Shareholder who is resident for tax purposes in the UK, may, depending upon
the Shareholder’s circumstances and subject to available exemptions or reliefs, give rise to a chargeable gain or
allowable loss for the purposes of the UK taxation of chargeable gains.
2.2
For UK resident individual Shareholders, any chargeable gain arising after taking account of reliefs and
exemptions will be subject to capital gains tax at the rate of 18 per cent. or, for higher rate taxpayers, 28 per cent.
Personal representatives and trustees will also pay capital gains tax at a flat rate of 28 per cent.
2.3
For UK resident Shareholders within the charge to corporation tax, an indexation allowance may be available to
reduce the amount of the chargeable gain realised on a disposal of the Ordinary Shares. Some corporate
Shareholders may qualify for the substantial shareholding exemption or other reliefs on a disposal of Ordinary
Shares.
Stamp duty and stamp duty reserve tax
The following comments are intended as a guide only to the general UK stamp duty and Stamp Duty Reserve Tax (“SDRT”)
position and do not relate to persons such as market makers, brokers, dealers, intermediaries, persons connected with
depositary arrangements or clearance services or persons who enter into sale and repurchase transactions in respect of
the Ordinary Shares or Depositary Interests, to whom special rules apply.
3.1
No UK stamp duty or SDRT will generally be payable in relation to the issue of Ordinary Shares by the Company.
3.2
UK stamp duty applies to documents executed in the UK or where there is any matter or thing to be done in the
UK. UK SDRT applies, inter alia, to shares and securities transferred electronically through the UK Central
Securities Depository, CREST. Shares and securities are generally excluded from the scope of SDRT if they are in
a company which is not incorporated in the UK, not registered on a UK register and not paired with shares or
securities in a company incorporated in the UK.
3.3
The transfer of Ordinary Shares in a company where the share register is held in the UK will generally give rise to
a liability on the purchaser to stamp duty at the rate of 0.5 per cent. of the consideration (rounded up to the
nearest multiple of £5), or, if an unconditional agreement to transfer such shares is not completed by a duly
stamped transfer, SDRT, generally at the rate of 0.5 per cent. of the consideration. However, stamp duty only
applies where the consideration for the transfer is £1,000 or more.
3.4
UK SDRT will generally be payable on an unconditional agreement to transfer Depositary Interests at a rate of
0.5 per cent. of the consideration paid. This is on the basis that the Ordinary Shares will need to be represented
by Depositary Interests issued by the Depositary in order to be held in CREST and that the conditions for
exemption from charge set out in the SDRT (UK Depositary Interests in Foreign Securities) Regulations 1999 are
not satisfied.
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3.5
On 20 March 2013, it was announced in the Budget 2013 that the UK Government intends, following
consultation, to abolish SDRT on shares quoted on AIM from April 2014. Although specific mention of depositary
interests has not been made in the UK Government’s announcements, it is anticipated that any such abolition of
SDRT would also apply to depositary interests quoted on AIM.
3.6
Shareholders should seek their own professional advice as to any stamp duty, SDRT or other tax consequences
of the conversion of the Ordinary Shares from uncertificated to book-entry form, and vice versa.
3.7
No Luxembourg registration duties or similar taxes should be levied on the transfer of the Ordinary Shares.
48
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PART V
FINANCIAL INFORMATION ON RM2
Section A: Accountant’s report on the historical financial information on RM2
An insnct for growth
The Directors
L‐1325 Luxembourg
Transaction Advisory Services
30 Finsbury Square
London EC2P 2YU
T +44 (0)20 7383 5100
F +44 (0)20 7184 4301
www.grant‐thornton.co.uk
17 December 2013
Dear Sirs,
RM2 International S.A. (the Company) and its subsidiary undertakings (together the Group)
We report on the financial information set out in Part V Section B of the AIM Admission Document dated 17 December 2013 (the
“Admission Document”), for the years ended 31 December 2010, 31 December 2011 and 31 December 2012 (the “Financial
Information”). This Financial Information has been prepared for inclusion in the Admission Document on the basis of the
accounting policies set out in note 2 of the Financial Information.
This report is required by Paragraph (a) of Schedule Two of the AIM Rules for Companies and is given for the purpose of complying
with that paragraph and for no other purpose.
Responsibilities
Save for any responsibility arising under Paragraph (a) of Schedule Two of the AIM Rules for Companies to any person as and to
the extent there provided, to the fullest extent permitted by law we do not assume any responsibility and will not accept any
liability to any other person for any loss suffered by any such other person as a result of, arising out of, or in connection with this
report or our statement, required by and given solely for the purposes of complying Paragraph (a) of Schedule Two of the AIM
Rules for Companies, consenting to its inclusion in the AIM Admission Document.
The Directors of RM2 International S.A. are responsible for preparing the Financial Information in accordance with International
Financial Reporting Standards as adopted by the European Union. It is our responsibility to form an opinion on the Financial
Information and to report our opinion to you.
Basis of opinion
We conducted our work in accordance with the Standards for Investment Reporting issued by the Auditing Practices Board in the
United Kingdom. Our work included an assessment of evidence relevant to the amounts and disclosures in the Financial
Information. It also included an assessment of the significant estimates and judgements made by those responsible for the
Chartered Accountants
Member firm within Grant Thornton International Ltd
Grant Thornton UK LLP is a limited liability partnership registered in England and Wales: No. OC307742.
Registered office: Grant Thornton House, Melton Street, Euston Square, London NW1 2EP
A list of members is available from our registered office.
Grant Thornton UK LLP is authorised and regulated by the Financial Services Authority for investment business.
49
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preparation of the Financial Information and whether the accounting policies are appropriate to the entity’s circumstances,
consistently applied and adequately disclosed.
We planned and performed our work so as to obtain all the information and explanations which we considered necessary in order
to provide us with sufficient evidence to give reasonable assurance that the financial information is free from material
misstatement, whether caused by fraud or other irregularity or error.
Opinion
In our opinion, the Financial Information gives, for the purposes of the Admission Document, a true and fair view of the state of
affairs of the Group as at 31 December 2010, 31 December 2011 and 31 December 2012 and of its losses, cash flows, recognised
gains and losses and changes in equity for the periods then ended in accordance with International Financial Reporting Standards
adopted by the European Union and has been prepared in a form that is consistent with the accounting policies disclosed in the
Financial Information.
Declaration
For the purposes of Paragraph (a) of Schedule Two of the AIM Rules for Companies we are responsible for this report as part of
the Admission Document and declare that we have taken all reasonable care to ensure that the information contained in this
report is, to the best of our knowledge, in accordance with the facts and contains no omission likely to affect its import. This
declaration is included in the Admission Document in compliance with Schedule Two of the AIM Rules for Companies.
Yours faithfully
GRANT THORNTON UK LLP
50
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Section B: Historical consolidated financial information on RM2 for the three years ended 31 December 2012
The financial information set out below of the Company for the three years ended 31 December 2012 has been prepared by the
Directors on the basis set out in note 2.
The accompanying notes represent an integral part of the financial information.
The financial information contained within this section does not constitute statutory financial accounts within the meaning of
section 434 of the Act.
Consolidated statement of comprehensive income
Continuing operations
Revenue
Cost of sales
NOTES
2010
USD
2011
USD
2012
USD
15
–
–
–
–
–
–
Gross profit
Selling and distribution expenses
Administrative expenses
Other operating expenses
Other operating income
16
16
16
16
–
(519,538)
(4,256,133)
(683,302)
–
–
(871,067)
(4,397,857)
(3,815,808)
92,603
–
(838,331)
(7,772,484)
(2,007,795)
2,326,259
Operating loss
Impairment of financial asset
Finance costs
Finance income
9
16
16
(5,458,973)
–
(1,513,406)
265,604
(8,992,129)
–
(2,605,641)
29,110
(8,292,351)
(13,500,000)
(410,218)
909,013
(6,706,775)
(11,568,660)
(21,293,556)
(1,489)
(11,598)
(16,556)
(6,708,264)
(11,580,258)
(21,310,112)
Loss before tax
Income tax
17
Loss for the year
Other comprehensive income
Exchange difference on translation of foreign operations
528,105
99,090
(188,516)
Other comprehensive income for the year, net of tax
528,105
99,090
(188,516)
Total comprehensive income for the year
(6,180,159)
(11,481,168)
(21,498,628)
Loss for the year attributable to:
Equity holders of the parent
Non‐controlling interests
(6,708,251)
(13)
(11,579,257)
(1,001)
(21,310,522)
410
(6,708,264)
(11,580,258)
(21,310,112)
(6,180,146)
(13)
(11,480,167)
(1,001)
(21,499,038)
410
(6,180,159)
(11,481,168)
(21,498,628)
(60.98)
(100.38)
(0.16)
Total comprehensive income for the year attributable to:
Earnings per share
Basic and diluted earnings per share attributable
to ordinary equity holders of the parent
20
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Consolidated statement of financial position
NOTES
2009
USD
2010
USD
2011
USD
2012
USD
6
7
8
9
4,233,074
–
–
–
15,429,775
1,583,240
21,272
–
21,566,767
1,593,255
33,390
–
9,611,640
1,597,054
39,233
851,587
4,233,074
17,034,287
23,193,412
12,099,514
–
1,422,106
8,708
1,770,523
–
980,251
50,150
3,151,394
–
2,643,964
46,418
15,852,154
–
2,543,640
4,755,051
864,402
3,201,337
4,181,795
18,542,536
8,163,093
7,434,411
21,216,082
41,735,948
20,262,607
100,020
10,388,066
(2,671,327)
(661,842)
110,000
10,860,356
(9,379,578)
(133,737)
122,860
55,857,496
(20,958,835)
(34,647)
55,287,000
693,356
(42,269,357)
(223,163)
Equity attributable to equity holders of
the parent
7,154,917
–
1,457,041
70,755
34,986,874
69,754
13,487,836
70,164
Total equity
7,154,917
1,527,796
35,056,628
13,558,000
–
2,232,736
2,235,017
2,299,304
–
2,232,736
2,235,017
2,299,304
84,819
189,305
5,370
16,171,709
1,281,939
1,902
2,124,152
2,287,363
32,788
2,779,495
1,425,477
200,331
279,494
17,455,550
4,444,303
4,405,303
279,494
19,688,286
6,679,320
6,704,607
7,434,411
21,216,082
41,735,948
20,262,607
Assets
Non-current assets
Property, plant & equipment
Investment property
Intangible assets
Other non‐current financial assets
Current assets
Inventories
Trade and other receivables
Other current financial assets
Cash and cash equivalents
10
11
9
12
Total assets
Equity and liabilities
Equity
Issued capital
Share premium
Retained earnings
Foreign currency translation reserve
Non-current liabilities
Interest bearing loans and borrowings
Current liabilities
Trade and other payables
Current tax liabilities
Total liabilities
Total equity and liabilities
13
9
9
14
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Page
Consolidated statement of changes in equity
ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT
FOREIGN
CURRENCY
NON‐
SHARE
SHARE
RETAINED
TRANSLATION
CONTROLLING
TOTAL
CAPITAL
PREMIUM
EARNINGS
RESERVE
INTERESTS
EQUITY
USD
USD
USD
USD
USD
USD
100,020
–
–
10,388,066
–
–
(2,671,327)
(6,708,251)
–
(661,842)
–
528,105
7,154,917
(6,708,251)
528,105
–
(13)
–
7,154,917
(6,708,264)
528,105
–
9,980
–
–
472,290
–
(6,708,251)
–
–
528,105
–
–
(6,180,146)
482,270
–
(13)
–
70,768
(6,180,159)
482,270
70,768
Transaction with owners
9,980
472,290
As at 31 December 2010
110,000
10,860,356
(9,379,578)
Loss for the year
–
–
–
–
Total comprehensive income
–
NOTES
As at 1 January 2010
Loss for the year
Capital increase
Incorporation of a subsidiary
13
482,270
70,768
553,038
(133,737)
1,457,041
70,755
1,527,796
(11,579,257)
–
–
99,090
(11,579,257)
99,090
(1,001)
–
(11,580,258)
99,090
–
(11,579,257)
99,090
(11,480,167)
(1,001)
(11,481,168)
12,860
44,997,140
–
–
45,010,000
–
45,010,000
12,860
44,997,140
–
–
45,010,000
–
45,010,000
122,860
55,857,496
(20,958,835)
(34,647)
34,986,874
69,754
35,056,628
(Loss)/profit for the year
–
–
–
–
(21,310,522)
–
–
(188,516)
(21,310,522)
(188,516)
410
–
(21,310,112)
(188,516)
–
–
(21,310,522)
(188,516)
(21,499,038)
410
(21,498,628)
Capital increase
Conversion of share premium to
share capital
13
13
–
–
TOTAL
USD
55,164,140
(55,164,140)
–
–
–
–
–
55,164,140
(55,164,140)
–
–
–
–
–
55,287,000
13,487,836
70,164
13,558,000
693,356
(42,269,357)
(223,163)
53
Page
Consolidated statement of cash flows
NOTES
Cash flows from operating activities
Loss before tax
Non-cash adjustment to reconcile profit before
tax to net cash flows
Impairment of non‐current assets
Impairment of financial assets
Amortisation and depreciation of
non‐current assets
Loss on receivables
Provision for inventory obsolescence
Finance income
Finance expenses
Unrealised foreign exchange losses/(gains)
Net gain on disposal of PPE and intangible assets
2010
USD
(6,706,775)
2011
USD
2012
USD
(11,568,660)
(21,293,555)
3,537,463
–
–
13,500,000
58,563
179,500
–
(113)
1,474,216
659,724
–
154,312
–
–
(169)
2,391,169
127,531
–
494,468
–
1,447,797
(265,964)
55,851
(130,625)
(1,991,399)
–
135,134
290,262
–
(1,663,713)
16,320
(1,447,797)
102,433
189,190
(4,965)
(1,292)
(16,187)
Net cash flows from operating activities
(3,914,454)
(7,007,039)
(9,355,788)
Cash flows from investing activities
Net (purchase of)/proceeds from intangible assets
Purchase of PPE under construction
Net (purchase of)/proceeds from other PPE
Purchase of investment property
Purchase of investments
Loans granted to third parties
(24,272)
(8,697,446)
(1,769,935)
(1,583,240)
–
(41,442)
(14,517)
(8,600,873)
(161,606)
(50,868)
–
3,733
(8,243)
(2,885,998)
(1,238,125)
(47,002)
(60,587)
(2,051,929)
6
6/7/8
Variation in working capital
(Increase)/decrease in inventories
(Increase)/decrease in trade and other receivables
Increase/(decrease) in trade and other payables
Income tax paid
Interest received
756
Net cash flows from investing activities
Cash flows from financing activities
Issuance of capital
Capital subscribed by non–controlling interest
Proceeds from bank borrowings
Proceeds from other and related party borrowings
Repayment of other and related party borrowings
–
–
13
Net transaction costs paid
Interest paid
44
14,722
(12,115,579)
(8,824,087)
482,270
70,768
2,232,736
15,228,263
–
45,010,000
–
–
1,161,000
(14,350,000)
–
–
–
655,219
–
(166,526)
(3,079,925)
–
(55,851)
599,368
(599,855)
(4,990)
(6,277,162)
Net cash flows from financing activities
17,409,192
28,574,549
Net change in cash and cash equivalents
1,379,159
12,743,423
(15,033,582)
Increase/decrease in cash and cash equivalents
Cash and cash equivalents at 1 January
Exchange adjustment of cash and cash equivalents
Cash and cash equivalents at 31 December
1,379,159
1,770,523
1,679
3,151,361
12,743,423
3,151,361
(42,700)
15,852,084
(15,033,582)
15,852,084
45,707
864,209
12
54
Page
Notes to the consolidated financial information
1.
Corporate information
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‐1235 Luxembourg. The Company is the
ultimate parent entity of the Group.
The Group is principally engaged in developing and selling shipping pallets and to provide related logistical services.
2.
Basis of preparation
This historical financial information comprises the consolidated financial information of the Group as at 31 December for
each of the three years 2010, 2011 and 2012 and is prepared under the historic cost convention with the exception of
certain items which are measured at fair value as disclosed in the accounting policies below.
The historical financial information has been prepared solely for the purposes of the admission document.
The accounting policies which follow set out the policies applied in preparing the historical financial information.
The historical financial information is presented in USD which is also the functional currency of the Company.
Statement of compliance
The historical financial information has been prepared in accordance with International Financial Reporting Standards
(“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and as adopted by the European Union (“EU”)
and IFRIC interpretations.
Basis of consolidation
The consolidated financial information comprises 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,
unrealised gains and losses resulting from intra‐group transactions and dividends are eliminated in full.
Total comprehensive income within a subsidiary is attributed to the non‐controlling interest even if it results in a deficit
balance.
Subsidiaries and business combinations
Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies generally
accompanying a shareholding of more than one half of the voting rights. Subsidiaries are fully consolidated from the date
on which control is transferred to the Group. They are de‐consolidated from the date that control ceases. The Group uses
the purchase method of accounting to account for the acquisition of subsidiaries.
The cost of an 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 cost of the acquisition over the fair value of the Group’s share of the
identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets
of the subsidiary acquired, the difference is recognised directly in the statement of comprehensive income.
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 23.
55
Page
3.
Summary of significant accounting policies
The principal accounting policies are summarised below:
Foreign currencies
The Group’s consolidated financial information is presented in 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. These are recognised
in other comprehensive income until the net investment is disposed of, at which time, the cumulative amount is
reclassified to profit or loss. Tax charges and credits attributable to exchange differences on those monetary items are
also recorded in other comprehensive income.
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).
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.
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 exchange rates prevailing at the dates of the
transactions. 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.
Going concern
The financial information has 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 and management are of the opinion that the Group has adequate resources to
undertake its planned programme of activities for the 12 months from the date of approval of the consolidated financial
information.
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.
56
Page
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 their operation in the manner intended by management. The cost of the PPE also includes the
borrowing costs for long‐term construction projects if the recognition criteria are met.
The Group has recognised most of the inventory costs within the cost of the property, plant and equipment for which the
inventories have been used in order to produce samples which are considered as part of the cost of the property, plant
and equipment.
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 is satisfied. All other repair and maintenance costs will be recognised in profit or loss as incurred. The
present value of the expected cost for the decommissioning of an asset after its use will be included in the cost of the
respective asset if the recognition criteria for a provision is met.
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
Plant and equipment
30 years
3 to 20 years
PPE under construction is 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 derecognition 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.
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.
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.
The Group does not have any assets under financial lease.
57
Page
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.
The group was in the start up phase during the three years ended 31 December 2012. Cash from borrowings was primarily
used to explore opportunities, pay salaries and other operating expenses. No specific borrowings were made for the
construction or production of an asset. Therefore, the Group did not capitalise any borrowing costs during any period up
to this date.
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.
The fair value, which reflects market conditions at the reporting date, is disclosed in the notes to the consolidated
financial information.
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
derecognition.
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.
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.
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 are not amortised, but are tested for impairment annually, either individually
or at the cash‐generating unit level. 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 derecognition 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.
58
Page
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:
Licences
Other
3 to 5 years
2 to 5 years
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.
Inventories
Inventories are stated at the lower of cost or net realisable value. Costs incurred in bringing each product to its present
location and condition are accounted for as follows:
Raw materials: Purchase cost on a first in, first out basis.
Finished goods and work in progress: Cost of direct materials and labour and a proportion of manufacturing overheads
based on the normal operating capacity, but excluding borrowing costs.
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 realisable value of stock is lower than its cost, provisions for impairment are created to reduce the value
of the stock to its net realisable value.
The cost of inventories is recognised as an expense in the period in which the related revenue is recognised.
Impairment on non-financial assets
Assets that are subject to amortisation and other non‐financial assets, such as inventory, 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 key assumptions used in the computation of the value in use or fair value less cost to sell of an asset are detailed in
the note on intangible assets. 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 for the next 5 years.
59
Page
Impairment losses of continuing operations, including impairment of inventories, 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.
Financial instruments
Financial assets
(i)
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 investments not 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.
(ii)
ii.1.
Financial assets at fair value through profit or loss:
This category has two sub‐categories: “financial assets held for trading”, and those designated at fair
value through profit and loss at inception. A financial asset is classified in this category if acquired
principally for the purpose of selling in the short term or is so designated by management. This category
includes derivative financial instruments entered into by the Group that are not designated as hedging
instruments in hedge relationships as defined by IAS 39. Assets in this category are classified as current
assets if they are either held for trading or are expected to be realised within 12 months of the balance
sheet date.
Financial assets at fair value through profit or loss are carried in the statement of financial position at
fair value with changes in fair value recognised in finance income or finance costs in the statement of
comprehensive income.
The fair values of quoted investments are based on current bid prices. If the market for a financial asset
is not active (and for unlisted securities), the Group establishes fair value by using valuation techniques.
These include the use of recent arm’s length transactions, reference to other instruments that are
substantially the same and discounted cash flow analysis, making maximum use of market inputs and
relying as little as possible on entity‐specific inputs.
The Group has no financial assets designated as held for trading.
ii.2.
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.
60
Page
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.
ii.3.
Available-for-sale financial assets:
Available‐for‐sale financial investments include equity and debt securities. Equity investments classified
as available‐for‐sale are those, which are neither classified as held for trading nor designated at fair
value through profit or loss. Debt securities in this category are those which are intended to be held for
an indefinite period of time and which may be sold in response to needs for liquidity or in response to
changes in the market conditions.
After initial measurement, available‐for‐sale financial investments are subsequently measured at fair
value with unrealised gains or losses recognised as other comprehensive income in the available‐for‐
sale reserve until the investment is derecognised, at which time the cumulative gain or loss is recognised
in other operating income, or determined to be impaired, at which time the cumulative loss is
reclassified to the statement of comprehensive income in finance costs and removed from available‐for‐
sale reserve.
(iii)
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.
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 recognises 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.
(iv)
Impairment of financial assets
The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a
group of financial assets is impaired. A financial asset or a group of financial assets 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.
iv.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, or collectively for
61
Page
financial assets that are not individually significant. If the Group determines that no objective evidence
of impairment exists for an individually assessed financial asset, whether significant or not, it includes
the asset in a group of financial assets with similar credit risk characteristics and collectively assesses
them for impairment. Assets that are individually assessed for impairment and for which an impairment
loss is, or continues to be, recognised are not included in a collective assessment of impairment.
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 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. Loans together with the associated
allowance are written off when there is no realistic prospect of future recovery and all collateral has
been realised or has been transferred to the Group. 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.
iv.2.
Available-for-sale financial investments:
In the case of equity securities classified as available for sale, a significant or prolonged decline in the
fair value of the security below its cost is considered as an indicator that the securities are impaired.
‘Significant’ is evaluated against the original cost of the investment and ‘prolonged’ against the period
in which the fair value has been below its original cost. If any such evidence exists for available‐for‐sale
financial assets, the cumulative loss – measured as the difference between the acquisition cost and the
current fair value, less any impairment loss on that financial asset previously recognised in profit and
loss – is removed from equity and recognised in the statement of comprehensive income. Impairment
losses recognised on equity instruments are not reversed through the statement of comprehensive
income. Increases in their value after impairment are recognised directly in other comprehensive
income.
In the case of debt instruments classified as available‐for‐sale, impairment is assessed based on the
same criteria as financial assets carried at amortised cost. However, the amount recorded for
impairment is the cumulative loss measured as the difference between the amortised cost and the
current fair value, less any impairment loss on that investment previously recognised in the statement
of comprehensive income.
Future interest income continues to be accrued based on the reduced carrying amount of the asset,
using the rate of interest 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 fair value of a debt instrument increases and the
increase can be objectively related to an event occurring after the impairment loss was recognised in
the statement of comprehensive income, the impairment loss is reversed through the statement of
comprehensive income.
62
Page
Financial liabilities
(i)
Financial liabilities are classified as financial liabilities at fair value through profit or loss, loans and borrowings,
or as derivatives designated as hedging instruments in an effective hedge, 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 financial liabilities include trade and other payables, borrowings and long‐term payables.
(ii)
The measurement of financial liabilities depends on their classification as follows:
ii.1.
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and
financial liabilities designated upon initial recognition as at fair value through profit or loss.
Financial liabilities are classified as held for trading if they are acquired for the purpose of selling in the
near term. This category includes derivatives financial instruments entered into by the Group that are
not designated as hedging instruments in hedge relationships as defined by IAS 39. Separated
embedded derivatives are also classified as held for trading unless they are designated as effective
hedging instruments.
Gains or losses on liabilities held for trading are recognised in the statement of comprehensive income.
The Group has not designated any financial liabilities upon initial recognition as at fair value through
profit or loss.
ii.2.
Loans and borrowings
After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised
cost using the effective interest rate method (EIR). 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.
Loans and borrowings 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.
(iii)
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.
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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 realise the assets and settle the liabilities simultaneously.
Fair value of financial instruments
The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not
active (and for unlisted securities), the Group establishes fair value by using valuation techniques. These include
the use of recent arm’s length transactions, reference to other instruments that are substantially the same and
discounted cash flow analysis, making maximum use of market inputs and relying as little as possible on entity‐
specific inputs.
Trade receivables
Trade receivables are carried at original invoice amount less provision made for impairment of these receivables.
A provision for impairment of trade receivables is established when there is objective evidence that the Group
will not be able to collect all the amounts due according to the original terms of receivables. The amount of the
provision is the difference between the carrying amount and the recoverable amount, being the present value
of expected cash flows, discounted at the effective interest rate for similar borrowers. The amount of the
provision is recognised in the statement of comprehensive income.
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 comprise 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.
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 generate 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 from 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 difference 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.
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Pensions and other post-employment benefits
The Group does not operate any defined benefit pension plan nor provide certain additional post employment
healthcare benefits to employees.
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
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 information. 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.
Equity, reserves and dividend payments
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 USD.
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Retained earnings include 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.
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.
The Group has not yet performed sales of goods to a third party as of the date of this consolidated financial
information, except for the sale of samples.
Interest income
For all financial assets at amortised cost and interest bearing financial assets classified as available for sale,
interest income is recorded using the effective interest rate method (EIR), which is the rate that exactly discounts
the estimated future cash payments or receipts through the expected life of the financial asset or shorter period,
where appropriate, to the net carrying amount of the financial asset. Interest income is included in finance
income in the statement of comprehensive income.
Rental 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.
Segment reporting
The Group has only one operating segment: production of pallets for transport and related logistical services.
There was no revenue in the three years ended 31 December 2012.
Geographical information
The parent company is based in Luxembourg. The information for the geographical area of non‐current assets is
presented for the most significant areas where the group has operations, being Luxembourg (country of
domicile), the rest of Europe and North America.
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Page
Luxembourg
Rest of Europe
North America
AS AT
31/12/2010
USD
AS AT
31/12/2011
USD
AS AT
31/12/2012
USD
6,348,819
3,403,333
7,282,135
5,025,942
3,392,396
14,775,074
2,333,842
3,655,153
6,463,932
17,034,287
23,193,412
12,452,927
Changes in accounting policies and disclosures
Standards, amendments and interpretations that are not yet effective
At the date of authorisation of these consolidated financial information, the following Standards and
Interpretations had been issued by the IASB and adopted by the EU but not yet effective:
APPLICABLE FOR
FINANCIAL YEARS
STANDARD/
BEGINNING ON
INTERPRETATION
CONTENT
OR AFTER
IAS 1
IFRS 1
IFRS 7
IFRS 10
IFRS 11
IFRS 12
IFRS 13
IAS 19
IAS 27
IAS 28
IAS 32
Presentation of financial statements (amendment)
Government loans (amendment)
Financial instruments: Disclosures (amendment)
Consolidated financial statements
Joint arrangements
Disclosures of involvement with other entities
Fair value measurement
Employee benefits (revised)
Separate financial statements
Investments in associates and joint ventures
Financial instruments: Presentation (amendment)
1 July 2012
1 January 2013
1 January 2013
1 January 2014
1 January 2014
1 January 2014
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2014
The Directors do not anticipate that the adoption of these standards and interpretations will have a material
impact on the consolidated financial information in the year of initial application. The Directors do not consider
application of any of the amendments made to existing standards as a result of the 2011 annual improvements
project will have a material effect on the consolidated financial information of the Group.
Early adopted standards
The Group did not early adopt any new or amended standards and does not plan to early adopt any of the
standards issued not yet effective.
4.
Significant accounting judgements, estimates and assumptions
The preparation of financial statements in conforming with adopted IFRSs 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 made in the period in which
they are recognised.
Judgements
In the process of applying the Group’s accounting policies, management has made the following judgements, which have
the most significant effect on the amounts recognised in the consolidated financial information:
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Non-current assets held for sale
The Group has not discontinued operations during any period presented in this consolidated financial information. The
Group has decided to dispose several non‐current assets as their carrying value will be principally recovered through sale
transaction rather than continuing use. These assets are machinery in relation with the Persico project and investment in
Mafic.
The Group has determined that none of these assets could be classified as held‐for‐sale at any period ended as the Group
could not determine the sale as highly probable due to the fact that the Group has neither committed to a plan to sell
the asset and not entered into an active programme to locate a buyer, nor is actively marketing the assets for sale at a
reasonable price.
In relation to these assets, the Group has decided to record a value adjustment on the costs of property, plant and
equipment related to the Persico project for USD 3,537,464. The investment in Mafic has been maintained at its cost value
as the Group estimates the realisation value of the investment higher than its acquisition cost.
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 is assessed individually by management based on the specific facts and circumstances.
Research and development expenditure
Research and development expenditure has been fully written off to the statement of comprehensive income.
Management have taken into account the inherent risks in all research and development expenditure and specifically that
expenditure being incurred by the business in the 3 years ended 31 December 2012 and have concluded that the
requirements of IAS 38 to capitalise development expenditure have not been met.
Receivable from PRC
As a result of the resolution of the litigation between the Group and Plastics Research Corporation (“PRC”), the United
States Arbitration Court has established a settlement agreement between both parties on 17 November 2012. As per the
settlement agreement, PRC must pay USD 13,500,000 to RM2 as indemnity for the transfer of the equipment (the
“Equipment”) to PRC.
The receivable is repayable in several instalments starting two years after the settlement agreement date. During this
period, PRC may only reimburse the interest accrued on the receivable.
The management has estimated that the effective interest rate to amortise the receivable was 7 per cent.
Due to delay in payment of the interest receivable by PRC, the management has estimated that there were significant
uncertainties in relation to the future reimbursement of the capital amount. Therefore, management has decided to
record full impairment of the outstanding nominal amount of the receivable.
Also, the settlement agreement includes 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 is computed based on the quantity of manufactured items sold
and the quantity of composite ground generated and sold by PRC during the seven years following the settlement
agreement’s date. The maximum royalty to be paid to the Group amounts to USD 11,000,000.
The management has also considered that there was very low probability that PRC will generate sales from the use of the
machine and in consequence, the management has determined that the fair value of the royalty receivable was nil.
Furthermore, the Group is not able to reliably estimate the amount of sales made or which will be made by PRC with the
Equipment.
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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 was 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.
Apportionment of property, plant and equipment 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 split of cost upon acquisition, the management has made the
assumption that 25 per cent. 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 the straight line method and over a useful life of thirty years.
Due to the inability of the management to determine the residual value at the end of the useful life, the depreciation is
computed on the entire value of the building cost.
Impairment of inventory
During the development of the machine, several samples were produced. Management has 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
should be recorded due to the inability of the Group to sell these samples.
Depreciation
Management review its estimate of useful lives of depreciable assets at each reporting date, based on the expected utility
of the assets.
Fair value of financial instruments
Management apply valuation techniques to determine the fair value of financial instruments where active market quotes
are not available. This requires management to develop estimates and assumptions based on market inputs, using
observable data that market participants would use in pricing the instrument. Where such data is not observable,
management uses its best estimate. Estimating fair values of financial instruments may vary from the actual prices that
would be achieved in an arm’s length transaction at the reporting date.
5.
Business combinations and acquisition of non-controlling interests
During the periods covered by this consolidated financial information, the Group did not acquire any entity. However, the
Group incorporated several entities which are included in this consolidated financial information.
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6.
LAND &
BUILDING
USD
PLANT &
EQUIPMENT
USD
CONSTRUCTION
USD
TOTAL
USD
Cost
Additions
Exchange differences
–
1,659,544
–
116,561
97,828
10,712
4,119,681
9,490,001
–
4,236,242
11,247,373
10,712
Additions
Disposals
1,659,544
143,074
–
1,696
225,101
22,875
(11,186)
129
13,609,682
9,616,415
–
–
15,494,327
9,782,364
(11,186)
1,825
Additions
Disposals
Other/transfers
1,804,314
4,725
–
–
51,382
236,919
358,021
(2,115,000)
8,088,579
6,431
23,226,097
2,515,145
(12,413,815)
(8,088,579)
97,635
25,267,330
2,877,891
(14,528,815)
–
155,448
1,860,421
6,574,950
5,336,483
13,771,854
–
–
–
3,168
55,563
5,821
–
–
–
3,168
55,563
5,821
Depreciation and impairment
Depreciation charge for the year
Impairment charge for the year
Disposals
–
45,443
–
–
(2,621)
IN PROGRESS
64,552
63,116
–
(3,788)
(3,602)
–
–
3,537,463
–
–
64,552
108,559
3,537,463
(3,788)
(6,223)
42,822
46,828
2,389
120,278
404,305
6,129
3,537,463
–
–
3,700,563
451,133
8,518
92,039
530,712
3,537,463
4,160,214
Net book value
1,768,382
6,044,238
1,799,020
9,611,640
1,761,492
116,641
19,688,634
21,566,767
1,659,544
160,549
13,609,682
15,429,775
The Group has no restrictions on the realisability of its property, plant and equipment and no contractual obligations to
either purchase, construct or develop property, plant and equipment or for repairs, maintenance and enhancements.
As at 31 December 2012 the Group had several items of property, plant and equipment which were temporarily idle. The
carrying amount of these items is USD 11,495,457 (2011: 0; 2010: 0). This amount corresponds to the machine for the
production of pallets which have been completed and for which the production has not started. There was no amount as
per prior periods as these machines were still in the construction phase.
There were no borrowing costs capitalised during any period.
Impairment of PPE
The Group has recorded impairment on the construction in progress during the year 2011 in relation to the costs incurred
for the Persico project.
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Page
The Group has decided to abandon the development of the project. As a result, and in the absence of potential market
for the project developed, the Group has determined that the net realisable value of the project was nil.
Therefore, the Group recorded impairment for USD 3,537,463 on the costs capitalised.
Securities on property, plant & equipment for liabilities
The Group has granted a security interest over the assets held in Canada (2012: USD 6,689,980; 2011: USD 4,194,084;
2010: nil) in return for the bridging loan facility (refer to note 26).
The Group has granted a security interest over the property held in Switzerland in return for the CHF 2,100,000 bank loan
(USD 2,704,000).
7.
Investment property
INVESTMENT
PROPERTIES
USD
Cost
Additions
–
1,583,240
Additions
1,583,240
49,250
1,618
1,634,108
47,002
1,681,110
–
–
–
43,353
(2,500)
40,853
40,935
2,268
84,056
Net book value
1,597,054
1,593,255
1,583,240
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.
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Results from investment property
AS AT
31/12/2010
USD
AS AT
31/12/2011
USD
AS AT
31/12/2012
USD
–
92,603
333,088
–
–
–
Rental income from investment property:
direct operating expenses (including repairs and
maintenance) arising from investment property that
generated rental income during the period:
direct operating expenses (including repairs and
maintenance) arising from investment property that
did not generate rental income during the period:
(66,007)
(132,057)
(113,507)
(66,007)
(39,454)
219,581
Fair value of investment property
The investment property is measured at cost. The fair value of the property as at 31 December 2012 has been determined
by Regie Chatel SA on 26 August 2013, an independent external appraiser. This valuation is the only external valuation
made by the Group for the investment property. Regie Chatel SA 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:
2012
Yield (%)
Average price for new construction (m3)
Land price (m2)
Fair value determined for the part classified as investment property
7%
311.9 CHF/m3
250 CHF/m2
2,085,695 USD
(1,904,907 CHF)
This valuation is the first valuation performed on the property and for the purpose of this consolidated financial
information.
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8.
Intangible assets
ACQUIRED LICENCES AND
SIMILAR INTANGIBLE ASSETS
USD
Cost
Additions
–
24,272
Additions
24,272
14,518
Additions
38,790
8,243
47,033
–
3,000
3,000
2,400
5,400
2,400
7,800
Net book value
39,233
33,390
21,272
The Group has no intangible assets pledged as security for liabilities.
The Group has no contractual commitment for the acquisition of intangible assets.
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9.
Financial assets and liabilities
AS AT
31/12/2010
USD
AS AT
31/12/2011
USD
AS AT
31/12/2012
USD
Financial assets
Available for sale investments
Unquoted equity shares
–
–
60,587
Total available for sale investments
–
–
60,587
Total financial assets at fair value
–
–
60,587
837,005
2,635,031
2,320,836
–
–
50,150
–
–
46,418
4,451,000
247,704
56,347
Total current financial assets
Non-current
Other receivables
50,150
3,151,394
3,201,544
46,418
15,852,154
15,898,572
4,755,051
864,402
5,619,453
–
–
791,000
Total loans and receivables
Total financial assets
4,038,549
4,038,549
18,553,603
18,553,603
8,731,289
8,791,876
Total current
Total non-current
4,038,549
–
18,533,603
–
7,940,289
851,587
Financial liabilities at amortised cost
Interest‐bearing loans and borrowings
18,404,445
1,281,939
4,359,169
2,287,363
5,078,799
1,636,477
Total financial liabilities at amortised cost
19,686,384
6,646,532
6,715,276
Total financial liabilities
19,686,384
6,646,532
6,715,276
Total current
Total non-current
17,453,648
2,232,736
4,411,515
2,235,017
4,415,972
2,299,304
Loans and receivables
Loan note to Mafic
PRC accrued interest
Deposits
Available-for-sale investment – unquoted equity shares
The available‐for‐sale financial assets consist of the investments in shares of non‐listed companies, which are valued
based on non‐market observable information.
The Group holds non‐controlling interests (between 3.5 per cent. and 10 per cent.) in entities where it has entered into
business relations for the development of new technology for the creation of pallets. The fair value of the investment has
been the deemed cost paid at acquisition. The management has not been able to determine effective fair value of these
investments, and the management considers that any change in fair value would not be significant for the consolidated
financial information.
Loan notes
The Group has loan note receivables with two entities: PRC and Mafic.
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Loan notes PRC
The Group entered into an agreement with Plastics Research Corporation (“PRC”) for the development and production of
specific shipping pallets. The machine has been developed on land rented by PRC from a third party (the “Redlands
Facility”). The development of the production facility has required the acquisition of equipment which is located at the
Redlands Facility (the “Equipment”). In the course of the development of the Equipment, several disputes arose between
the Group and PRC. The disputes were settled by the United States Arbitration Court on 11 November 2012.
From the settlement of the disputes, a settlement and release agreement has been concluded on 15 November 2012
between both parties. As per the Settlement Agreement, it has been agreed that:
•
PRC has ownership and possession of all Equipment on the Redlands Facility.
•
PRC shall pay to RM2 SA the principal sum of USD 13,500,000 (the “Indebtedness”) as a non‐royalty payment.
•
PRC shall pay to RM2 SA royalties for the sales of pallet and composite compound up to USD 11,000,000 (the
“Royalty payments”).
The outstanding balance of the indebtedness as at 31 December 2012 amounts to USD 13,747,704 and includes interest
of USD 247,704.
The loan bears interest at the effective interest rate of 7% per annum and has a maturity date of 15 November 2019.
Management has 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 has 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 2012, the carrying amount of the PRC loan notes is USD 247,704, which corresponds to the balance
of accrued interests.
As a result of the transfer of the Equipment by the Group to PRC in exchange for the payment of the receivables of USD
13,500,000, the Group has generated a gain on the derecognition of the Equipment of USD 906,399.
Loan notes Mafic
The Group has incurred costs related to the development of new technology for the production of pallets using Basalt
fibre. During the development process, the Group determined that they did not want to use this fibre for the production
of their pallets.
The Group entered into negotiation with Mafic for the sale of the development costs incurred in relation to this project.
An agreement has concluded with Mafic in September 2013.
The Group recognised a loan note receivable with Mafic for USD 4,451,000 as at year end 2012. The receivable has been
fully paid by September 2013.
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Page
Interest-bearing loans and borrowings
EFFECTIVE
MATURITY
INTEREST
DATE
AS AT
31/12/2010
USD
AS AT
31/12/2011
USD
AS AT
31/12/2012
USD
2,232,736
2,235,017
2,299,304
2,232,736
2,235,017
2,299,304
33
963,083
15,208,593
70
2,124,082
–
193
2,779,302
–
Total current interest-bearing loans
and borrowings
16,171,709
2,124,152
2,779,495
Total interest-bearing loans and
borrowings
18,404,445
4,359,169
5,078,799
RATE
Non-current interest-bearing loans
and borrowings
CHF 2,100,000 Bank loan
2.4%
30 November
2015
Total non-current interest-bearing
loans and borrowings
Current interest-bearing loans and
borrowings
Bank overdraft (note 12)
Shareholder current account
DPE Bridge Facility
Variable
0%
18%
On‐demand
On‐demand
June 2011
CHF 2,100,000 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 2,704,000) and by transfer of rental income to the lender.
DPE Bridge Facility
The Group had entered into a bridge facility with DPE 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 loan was secured by property, plant and equipment held by RM2 USA with a carrying value of USD 6,689,980 as at
31 December 2012 (2011: USD 4,194,084; 2010: nil).
The Group also issued the DPE Warrants on the same date to DPE granting to DPE the right to purchase up to 10 per cent.
of the fully diluted share capital of the Company. The right exists as long as the outstanding warrant shares represent
more than 5 per cent. of the share capital of the Company. The fair value of the warrants is immaterial.
The number of Warrant Shares granted to DPE at each year end is as follows:
Number of Warrant Shares
AS AT
31/12/2010
AS AT
31/12/2011
AS AT
31/12/2012
6,109
12,816
12,514,656
The Group maintains sufficient authorised share capital in order to issue the Warrant Shares at any time.
Hedging activities and derivatives
The Group has not entered into any hedging activity during each period covered by the consolidated financial
information.
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.
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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.
As at 31 December 2012, the Group held the following financial instruments carried at fair value in the statement of
financial position:
ASSETS MEASURED AT FAIR VALUE
Available-for-sale financial asset:
Equity shares
AS AT
31/12/2012
USD
LEVEL 1
USD
LEVEL 2
USD
LEVEL 3
USD
60,587
–
–
60,587
The Group had no financial instruments at fair value as at 31 December 2011 and 2010.
Reconciliation of fair value measurements of Level 3 financial instruments
The Group carries unquoted equity shares as available‐for‐sale financial instruments classified as Level 3 within the fair
value hierarchy.
The Group has equity interests in two unlisted entities with which it entered into a research and collaboration agreement.
A reconciliation of the beginning and closing balances including movements is summarised below:
10.
MAFIC S.A.
USD
EQUIPMENT
TRACKING LTD.
USD
TOTAL
USD
1 January 2012
Purchases
–
10,500
–
50,087
–
60,587
31 December 2012
10,500
50,087
60,587
Inventories
The Group produced some sample items. The Group has determined that the recoverable value of those samples which
were not deemed to be part of the cost of property, plant and equipment samples was nil and decided to make full
impairment of the inventory cost. During the year ended 2012, the Group recorded a value adjustment on the inventory
for USD 1,447,797 (2011: nil, 2010: nil).
There was no cost of inventory recognised as an expense during any financial period as the Group has not made any sale
transaction during these periods.
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11.
AS AT
31/12/2010
USD
AS AT
31/12/2011
USD
AS AT
31/12/2012
USD
Income tax receivables
Other tax receivables
Other receivables
8
206,291
630,706
8
920,930
1,714,093
2,118
1,362,630
956,088
Financial assets
837,005
2,635,031
2,320,836
Prepayments
143,246
8,933
222,804
Non-financial assets
143,246
8,933
222,804
Total trade and other receivables
980,251
2,643,964
2,543,640
The Group has no trade receivables as at any period ended due to the fact that the Group has not yet started the trading
of the pallets produced by the machines.
As a result, the Group has no provision for impairment of receivables.
The balance of other receivables includes an advance payment made to STM related to the acquisition of a licence for the
Mafic project (see note 9) for USD 1,000,000 as at 31 December 2012 (2011: USD 1,000,000; 2010: nil) and an advance
payment made to PRC for nil in 2012 (2011: USD 631,788; 2010: USD 631,788).
The other tax receivables primarily relate to Harmonised Sales Tax (VAT) balances due in Canada.
12.
Cash and short-term deposits
AS AT
31/12/2010
USD
AS AT
31/12/2011
USD
AS AT
31/12/2012
USD
Cash at bank and in hand
Short‐term deposits
3,084,448
66,946
15,502,055
350,099
555,580
308,822
Total cash and short-term deposits
3,151,394
15,852,154
864,402
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 each period 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.
The Group has no restricted cash at any period ended.
For the purpose of the statement of cash flows, cash and cash equivalents comprise the following at 31 December:
AS AT
31/12/2010
USD
AS AT
31/12/2011
USD
AS AT
31/12/2012
USD
3,084,448
66,946
15,502,055
350,099
555,580
308,822
Bank overdraft
3,151,394
(33)
15,852,154
(70)
864,402
(193)
Total cash and cash equivalents
3,151,361
15,852,084
864,209
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13.
Share capital and reserves
On 3 August 2011, the Board of Directors of the Company decided to accept the subscription and issuance of 12,860 new
shares equally distributed in each class of shares, with a nominal value of USD 1 per share for an aggregate amount of
USD 12,860 combined with a share premium of USD 3,499 per share. As a result of the resolution of the Board of
Directors, the share capital has increased by USD 12,860 and the share premium by USD 44,997,140. The capital and share
premium increase of USD 45,010,000 has been subscribed in full and paid up in cash on 19 August 2011.
On 20 January 2012, the Extraordinary General Meeting of the Company decided to increase the share capital of the
Company by an amount of USD 55,164,140 through partial incorporation of the share premium into capital so as to raise
its former amount of USD 122,860 to the amount of USD 55,287,000.
The Extraordinary General Meeting also decided to reduce the par value of the shares of the Company from USD 1 per
share to USD 0.45 per share by the issuance of 67,573,000 new shares equivalently distributed in each class of shares.
The Extraordinary General Meeting decided to increase the authorised share capital of the Company by an amount of USD
67,340,143.50 so as to raise its current amount of USD 232,860 to the amount of USD 67,573,003.50 equivalently
distributed in each class of shares with the same rights.
As at 31 December 2012, each ordinary share issued has a nominal value of USD 0.45 and has been fully paid‐up.
Authorised shares
PAR VALUE
SHARES
USD
PER SHARE
At 1 January 2010
200,000
200,000
USD 1
At 31 December 2010
Capital increase dated 3 August 2011
200,000
32,860
200,000
32,860
USD 1
USD 1
At 31 December 2011
Increase of authorised share capital and reduction of
par value per share dated 20 January 2012
232,860
232,860
USD 1
149,929,370
67,340,143.5
At 31 December 2012
150,162,230
67,573,003.5
USD 0.45
The authorised share capital is split equally into 10 classes of shares (from A to J) with the same rights.
Ordinary shares issued and fully paid
PAR VALUE
SHARES
USD
PER SHARE
At 1 January 2010
110,000
110,000
USD 1
At 31 December 2010
110,000
12,860
110,000
12,860
USD 1
USD 1
At 31 December 2011
Conversion of share premium to share capital
dated 20 January 2012
Reduction of par value per share dated 20 January 2012
122,860
122,860
USD 1
55,164,140
67,573,000
55,164,140
–
USD 1
122,860,000
55,287,000
USD 0.45
At 31 December 2012
The share capital issued is split equally into 10 classes of shares (from A to J) with the same rights.
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Page
Share premium
USD
At 1 January 2010
10,860,356
At 31 December 2010
10,860,356
44,997,140
At 31 December 2011
Conversion of share premium to share capital dated 20 January 2012
55,857,496
(55,164,140)
At 31 December 2012
693,356
Warrants
On 30 June 2010, the Group issued warrants to DPE granting to DPE the right to purchase up to ten per cent. of the fully
diluted share capital of the Company (the “Warrant Shares”). The right exists as long as the outstanding warrant shares
represent more than 5 per cent. of the share capital of the Company.
The number of Warrant Shares granted to DPE at each year end is as follows:
Number of Warrant Shares
AS AT 31/12/2010
AS AT 31/12/2011
AS AT 31/12/2012
6,109
12,816
12,514,656
The fair value of the DPE Warrants is immaterial.
The Group maintains sufficient authorised share capital in order to issue the Warrant Shares at any time.
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.
Dividend distribution
As a result of the accumulated losses generated by the Group, no dividend has been declared or paid.
14.
AS AT
31/12/2010
USD
AS AT
31/12/2011
USD
AS AT
31/12/2012
USD
Trade payables
Employee compensation payables
Other tax payables
Other payables
1,025,287
312
147,397
108,943
2,049,121
54
99,067
139,121
991,874
25,084
222,866
185,653
Total trade and other payables
1,281,939
2,287,363
1,425,477
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 of the Group’s liquidity risk management processes, refer to Note 24.
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Page
15.
Revenue
The Group has no revenue for any period presented in the consolidated financial information as the Group has not started
the production and commercialisation of its products.
16.
Other income and expenses
AS AT
31/12/2010
USD
AS AT
31/12/2011
USD
AS AT
31/12/2012
USD
Net gain on disposal of PPE
Rental income
Other
–
–
–
–
92,603
–
1,991,399
333,088
1,772
Total other operating income
–
92,603
2,326,259
The gain on disposal of PPE has been generated from the derecognition of the assets related to the PRC project as a result
of the settlement agreement (USD 906,399) (see note 9), and a gain (USD 1,085,000) in relation to the transfer to Mafic
of development costs on other projects which the Group has considered could not be used for their own purpose.
AS AT
31/12/2010
USD
AS AT
31/12/2011
USD
AS AT
31/12/2012
USD
Direct operating expenses on rental‐earning
investment properties
Impairment on inventory
Impairment on property, plant & equipment
Net wealth tax
Loss on receivables
66,007
488,644
–
–
(50,849)
179,500
132,057
125,627
–
3,537,464
20,660
–
113,508
281,425
1,447,797
–
165,065
–
Total other operating expenses
683,302
3,815,808
2,007,795
The impairment on the inventory was incurred due to the inability of the Company to sell the sample items produced by
the Group. The Group estimated that these items had a nil residual value.
The impairment on the property, plant and equipment was incurred in relation to the decision of the Group to cancel the
development of one production project. Due to the inability of the Group to find an acquirer for the machine, the Group
has decided that impairment for the full amount of the machine was necessary.
The net wealth tax relates primarily to the tax due by each Luxembourgish subsidiary on the net assets of the subsidiary.
Finance income
AS AT
31/12/2010
USD
AS AT
31/12/2011
USD
AS AT
31/12/2012
USD
Interest income on loans and receivables
58
125
240,275
Total interest income
58
125
240,275
Net foreign exchange gain
Other
265,491
55
28,941
44
643,049
25,689
Total finance income
265,604
29,110
909,013
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Finance costs
AS AT
31/12/2010
USD
AS AT
31/12/2011
USD
AS AT
31/12/2012
USD
Interest at amortised costs on loans and borrowings
863,095
2,219,418
55,347
Total interest expenses
863,095
2,219,418
55,347
Net foreign exchange loss
Transaction costs
Other
39,190
599,855
11,266
214,472
166,526
5,225
354,367
–
504
1,513,406
2,605,641
410,218
AS AT
31/12/2010
USD
AS AT
31/12/2011
USD
AS AT
31/12/2012
USD
58,563
154,412
494,468
58,563
154,412
494,468
AS AT
31/12/2010
USD
AS AT
31/12/2011
USD
AS AT
31/12/2012
USD
435,726
56,472
27,340
727,280
100,806
42,981
696,050
101,339
40,942
458,332
39,065
–
659,459
51,486
–
2,134,873
155,647
7,813
1,016,935
1,582,012
3,136,664
11
13
82
AS AT
31/12/2010
USD
AS AT
31/12/2011
USD
AS AT
31/12/2012
USD
488,644
125,627
281,425
Total finance costs
Amortisation and depreciation expenses
Depreciation and amortisation expenses, included in:
Employee benefits expenses
Included in selling and distribution expenses:
Wages and salaries
Social security costs
Pension costs
Included in administrative expenses:
Wages and salaries
Pension costs
Total employee benefits expenses
Average number of full time employees
Included in other operating expenses:
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Page
17.
Income taxes
Income tax expenses
The major components of income tax expense for each period are:
AS AT
31/12/2010
USD
AS AT
31/12/2011
USD
AS AT
31/12/2012
USD
Current income tax:
Current income tax charge
1,489
11,598
16,556
Total current income tax:
1,489
11,598
16,556
Income tax expenses
1,489
11,598
16,556
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
31/12/2010
USD
Loss before tax
Theoretical income tax charge using applicable
income tax rate
Reconciliation to actual income tax charge
Adjustment in respect of current income tax of previous year
Unrecognised deferred tax assets on losses carried forward
Non‐deductible expenses from:
Other non‐deductible expenses
Non‐taxable income from:
Other non‐taxable income
Income tax expenses
AS AT
31/12/2011
USD
AS AT
31/12/2012
USD
(6,706,775)
(11,568,660)
(18,053,555)
(1,677,596)
(2,855,332)
(4,534,594)
–
2,449,996
(403)
2,983,342
(681)
8,003,846
(770,911)
(130,024)
(3,749,467)
–
(1,489)
14,015
297,452
(11,598)
(16,556)
Deferred taxes
The Group has not recognised deferred tax assets on the tax losses carried forward as the Group has estimated that no
sufficient future benefits would be generated in the near future to cover the losses.
The tax losses for which no deferred tax asset has been recognised amount to USD 29,096,299 as at 31 December 2012
(2011: USD 21,448,604 and 2010: USD 11,826,954). If the Group was able to recognise all unrecognised deferred tax
assets, the loss would decrease by USD 7,120,548 as at 31 December 2012 (2011: USD 5,385,173 and 2010: USD
2,945,057).
18.
Pensions and other post-employment benefit plans
The Group has not entered into any defined contribution plan and defined benefit plan for its employees.
19.
Share based payments
The Group has not entered into any type of share‐based payment plan with any of the Group’s employees.
20.
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.
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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
31/12/2010
USD
Net loss attributable to ordinary equity holders of the
parent for basic and diluted earnings
Weighted average number of ordinary shares for basic
earnings per share
Effect of dilution:
Warrant Shares to DPE
Weighted average number of ordinary shares adjusted
for the effect of dilution
Loss per share (basic and diluted)
(6,708,251)
AS AT
31/12/2011
USD
AS AT
31/12/2012
USD
(11,579,257)
(18,070,522)
110,000
115,358
112,631,905
6,109
12,816
12,514,656
116,109
128,174
125,146,561
(60.98)
(100.38)
(0.16)
The Group issued new Warrant Shares to third party JKD in June 2013 granting 614,300 Warrant Shares each convertible
in 1 share of the Company. Resulting from this transaction, the number of diluted shares has increased by 682,556 shares.
For the years ended 31 December 2010, 2011 and 2012, the additional shares on exercise of outstanding warrants would
decrease the basic loss per share and there is therefore no dilutive effect.
21.
Segment reporting
The Group presents the geographical area of it non–current assets other than financial instruments as follows:
Luxembourg
Rest of Europe
North America
AS AT
31/12/2010
USD
AS AT
31/12/2011
USD
AS AT
31/12/2012
USD
6,348,819
3,403,333
7,282,135
5,025,942
3,392,396
14,775,074
2,333,842
3,655,153
6,463,932
17,034,287
23,193,412
12,452,927
Non‐current assets for this purpose consist of property, plant and equipment, investment properties and intangible
assets.
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22.
Commitments and contingencies
Operating lease commitments – Group as lessor
The Group has entered into a commercial property lease on its investment property, consisting of the Group’s surplus
space in the Switzerland office building. The end of the term of the non‐cancellable lease is 31 December 2021.
Future minimum rentals receivable under non‐cancellable operating leases as at 31 December are as follows:
Within one year
After one year but not more than five years
More than five years
AS AT
31/12/2010
USD
AS AT
31/12/2011
USD
AS AT
31/12/2012
USD
–
–
–
253,241
1,012,964
1,266,204
260,525
1,042,100
1,042,100
–
2,532,409
2,344,725
Operating lease commitments – Group as lessee
The Group has entered into commercial leases for office spaces in London and New Jersey. These leases have an average
life of between 6 months and 3 years with a renewal option included in the contracts. There are no restrictions placed
upon the Group by entering into these leases.
Future minimum rentals payable under non‐cancellable operating leases as at 31 December are as follows:
Within one year
After one year but not more than five years
More than five years
AS AT
31/12/2010
USD
AS AT
31/12/2011
USD
AS AT
31/12/2012
USD
–
–
–
–
–
–
405,476
1,855,903
222,000
–
–
2,483,379
Contingent liabilities
The Group has no contingent liabilities.
DPE Warrants
In relation to the Warrants issued by the Group to DPE, the holder of the warrant has the option to terminate the DPE
Warrants at its discretion. Upon termination of the DPE Warrants, the Group will have to pay the holder an amount equal
to the fair market value of the warrants. The holder may only terminate 25 per cent. of the Warrant Shares and only
during the period from 31 December 2012 until 31 December 2017.
The Group has the possibility, at its discretion, to repurchase the DPE Warrants as follows:
•
50 per cent. of the warrants (first tranche); and
•
25 per cent. additionally (second tranche).
The first tranche of the termination right will terminate on 31 December 2014. The second tranche may only be exercised
upon completion of the first tranche and will also terminate on 31 December 2014.
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Page
Royalties PRC
The Group has the right to royalty receivables from PRC resulting from the sale of pallets manufactured and composite
compound generated by using the equipment transferred to PRC as a result of the litigation between the Group and PRC.
The royalty receivable would be computed as follows and in accordance with the following terms:
•
USD 4 per manufactured pallet sold by PRC (or through assignment given to contractor).
•
USD 0.10 per pound of composite ground generated using the equipment and sold by PRC to third party.
Until the first anniversary date of the Settlement Agreement (15 November 2013), no Royalty Payments shall be due by
PRC to the Group for the sale of pallets or compound composite. The maximum aggregated royalty payments which can
be made by PRC to the Group amounts to USD 11,000,000.
Upon the seventh anniversary date of the Settlement Agreement (15 November 2019), the Group shall not be entitled to
any royalty payments from PRC.
Due to inability of the Group to estimate the future royalty income from the Settlement Agreement, the value of the
instrument in the consolidated financial information is deemed to be nil.
Forward purchase of property, plant and equipment
The Group has commitment in relation to forward purchase for the acquisition of property, plant and equipment, as
follows:
Forward purchase for acquisition of PPE
AS AT
31/12/2010
USD
AS AT
31/12/2011
USD
AS AT
31/12/2012
USD
3,109,152
401,923
–
These amounts correspond to forward purchase for future acquisitions in relation to the PRC project.
23.
Related party disclosures
Group subsidiaries
The consolidated financial information includes the financial statements of the Company and its subsidiaries. The Group
has the following subsidiaries included in this consolidated financial information:
SUBSIDIARY NAME
COUNTRY OF INCORPORATION
2012
% OF EQUITY INTEREST
2011
2010
RM2 S.A., including Swiss branch
RM2 I.P. S.A.
RM2 Holland B.V.
RM2 Total Solutions International B.V.
RM2 Europe Spółka z.o.o.
RM2 USA Inc.
Victoria Rises Ltd.
RM2 Canada Inc.
RM2 France S.à r.l.
Luxembourg
Luxembourg
Netherlands
Netherlands
Poland
United States of America
United Kingdom
Canada
France
100%
100%
100%
100%
80%
100%
100%
100%
100%
100%
100%
100%
100%
80%
100%
100%
100%
–
100%
100%
100%
100%
80%
100%
100%
–
–
All subsidiaries held by the Company are consolidated.
During the year 2010, the Group incorporated the subsidiary RM2 Europe Spółka z.o.o. and acquired 80 per cent. of the
share capital.
During the year 2011, the Group incorporated the subsidiary RM2 Canada Inc.
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During the year 2012, the Group incorporated the subsidiary RM2 France S.à r.l.
Transaction 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 this consolidated financial information.
AMOUNTS
Parent:
AMOUNTS
INCOME WITH
EXPENSES FROM
OWED BY
OWED TO
RELATED PARTIES
RELATED PARTIES
RELATED PARTIES
RELATED PARTIES
YEAR
USD
USD
USD
USD
2012
2011
2010
–
–
–
–
–
–
–
–
–
2,779,302
2,124,083
963,083
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:
Short‐term employee benefits
24.
AS AT
31/12/2010
USD
AS AT
31/12/2011
USD
AS AT
31/12/2012
USD
336,972
428,402
402,447
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 loan and other receivables, trade and other
receivables, and cash and short‐term deposits that arrive directly from its operations. The Group also holds available‐for‐
sale investments.
The Group is exposed to market risk, credit risk and liquidity risk. 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.
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 the interest rate risk as all significant loans
and receivables have been issued with fixed interest rate, to the commodity price risk as the production of pallets does
not require raw material subject to market volatility, and to the equity price risk as the available‐for‐sale investments are
exclusively made in unquoted equity instruments.
The Group only has 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 2012, 2011 and 2010. 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 2012.
87
Page
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.
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.
The Group has no policy to manage its foreign currency risk as the Group’s management estimates the foreign currency
risk as negligible.
The Group has significant operations in the following currencies: United States Dollar (USD), Swiss Franc (CHF) and
Canadian Dollar (CAD). The Group has other operations in the following currencies which are not significant for the
Group: Euro (EUR), Polish Zloty (PLN) and Great British Pound (GBP).
(i)
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 +/– 3 per cent. change of the USD/CHF exchange rate for each period covered
by this consolidated financial information. This percentage has been determined based on the average market
volatility in exchange rates in the previous 24 months.
The variation of the USD/CAD exchange rate of the previous 24 months is less than 1 per cent. and therefore, it
is not considered as a significant risk for the Group. Nevertheless, the Group has decided to present the
sensitivity analysis using a theoretical variation of 3 per cent. in the exchange rate.
EFFECT ON OTHER
CHANGE IN
CHF RATE
YEAR
2012
2011
2010
+3%
–3%
+3%
–3%
+3%
–3%
EFFECT ON PROFIT
COMPREHENSIVE
BEFORE TAX
INCOME
USD
USD
60,640
(64,256)
57,384
(60,806)
62,399
(66,120)
60,640
(64,256)
57,384
(60,806)
62,399
(66,120)
EFFECT ON OTHER
CHANGE IN
CAD RATE
YEAR
2012
2011
2010
+1%
–1%
+1%
–1%
+1%
–1%
EFFECT ON PROFIT
COMPREHENSIVE
BEFORE TAX
INCOME
USD
USD
(6,666)
6,801
(6,270)
6,397
–
–
(6,666)
6,801
(6,270)
6,397
–
–
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Page
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.
The Group is not subject to any credit risk related to trade receivables as the Group has no trade receivables as at each
period ended.
The other receivables are mainly composed of tax receivables owed by the national institutions for which the Group
consider that there is no risk of recoverability.
The Group also have other receivables with Mafic (in 2012 and 2011) and PRC (in 2011 and 2010), net of impairment, for
which they consider that there is no risk of recoverability as all these receivables have been recovered subsequently.
Financial instruments and cash deposits
The Group loans financial instruments are mainly represented by loan receivables owed by PRC and Mafic.
The management has 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 Group does not consider that there is any risk of recoverability on the Mafic receivable as payment was received
subsequent to 31 December 2012.
Credit risk from balances with banks and financial institutions is not considered significant as the Group has made
placements with approved counterparties.
Ageing analysis of receivables
The Group does not have overdue receivables except the interest on the PRC loans which is due as at 31 December 2012
and remains unpaid as at the period end for USD 120,000 (2011: nil; 2010: nil). The interest was subsequently collected.
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.
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.
89
Page
Maturity Profile
The table below summarises the maturity profile of the Group’s financial liabilities based on contractual undiscounted
payments.
DUE ON
Total financial liabilities:
31 December 2011
Interest-bearing loans and
borrowings
Bank borrowings
Current liabilities
borrowings
Bank overdrafts
Loans from other related
parties
Trade payables
Employee compensation
payables
Other tax payables
Other payables
DUE
BETWEEN
DUE
3 AND
1 AND
AFTER
USD
DUE WITHIN
3 MONTHS
USD
12 MONTHS
USD
5 YEARS
USD
5 YEARS
USD
TOTAL
USD
–
–
–
–
–
–
2,299,304
2,299,304
–
–
2,299,304
2,299,304
2,779,495
193
–
–
–
–
–
–
–
–
2,779,495
193
2,779,302
–
–
–
1,636,477
1,202,874
–
–
–
–
–
–
–
–
–
2,779,302
1,636,477
1,202,874
–
–
–
25,084
222,866
185,653
–
–
–
–
–
–
–
–
–
25,084
222,866
185,653
2,779,495
1,636,477
–
2,299,304
–
6,715,276
–
–
–
–
–
–
2,235,017
2,235,017
–
–
2,235,017
2,235,017
2,124,152
70
–
–
–
–
–
–
–
–
2,124,152
70
2,124,082
–
–
–
2,287,363
2,049,121
–
–
–
–
–
–
–
–
–
2,124,082
2,287,363
2,049,121
–
–
–
54
99,067
139,121
–
–
–
–
–
–
–
–
–
54
99,067
139,121
2,124,152
2,287,363
–
2,235,017
–
6,646,532
DEMAND
31 December 2012
borrowings
Bank borrowings
Current liabilities
borrowings
Bank overdrafts
parties
Trade payables
payables
Other tax payables
Other payables
DUE
BETWEEN
90
Page
DUE ON
25.
DUE
BETWEEN
DUE
3 AND
1 AND
AFTER
USD
DUE WITHIN
3 MONTHS
USD
12 MONTHS
USD
5 YEARS
USD
5 YEARS
USD
TOTAL
USD
–
–
–
–
–
–
2,232,736
2,232,736
–
–
2,232,736
2,232,736
963,116
33
–
–
15,208,593
–
–
–
–
–
16,171,709
33
963,083
–
–
–
–
–
1,281,939
1,025,287
–
15,208,593
–
–
–
–
–
–
–
–
–
–
963,083
15,208,593
1,281,939
1,025,287
–
–
–
312
147,397
108,943
–
–
–
–
–
–
–
–
–
312
147,397
108,943
963,116
1,281,939
15,208,593
2,232,736
–
19,686,384
DEMAND
31 December 2010
borrowings
Bank borrowings
Current liabilities
borrowings
Bank overdrafts
parties
Other loans and borrowings
Trade payables
payables
Other tax payables
Other payables
DUE
BETWEEN
Capital management
The Group’s capital management objectives are:
•
to ensure the Group’s ability to continue as a going concern; and
•
to provide sufficient working capital to expand the business and provide adequate returns to shareholders.
The Group monitors capital on the carrying value of its equity, and any share premium plus cash and cash equivalents and
credit facilities as presented on the face of the statements of financial position.
The Group manages the capital structure and makes adjustments to it in the light of changes in economic conditions. In
order to maintain or adjust the capital structure, the Group may issue new shares, or in the future anticipates raising debt
finance as appropriate for working capital.
91
Page
26.
Transition to IFRS
This is the first time that the Group has presented its consolidated financial information under IFRS. The accounting
policies set out above have been applied in preparing the financial information for the years ended 31 December 2010,
31 December 2011 and 31 December 2012 and in the preparation of the opening IFRS statement of financial position at
1 January 2010.
In preparing its opening IFRS statement of financial position, the Group has had to adjust amounts previously reported in
the financial statements prepared in accordance with Luxembourg GAAP. An explanation of how the transition from
Luxembourg GAAP to IFRS has affected the Group’s financial position, financial performance and cash flows at 1 January
2010 and 31 December 2012, being the Group’s most recent annual financial statements prepared in accordance with
Luxembourg GAAP, are set out in the following tables and notes.
Reconciliation of equity at 1 January 2010
Assets
Non-current assets
Intangible assets
LUXEMBOURG
GAAP
USD
ADJUSTMENT1
USD
1,713,456
2,519,618
2,519,618
(2,519,618)
IFRS
USD
4,233,074
–
4,233,074
–
4,233,074
1,422,106
8,708
1,770,523
–
–
–
1,422,106
8,708
1,770,523
3,201,337
–
3,201,337
7,434,411
–
7,434,411
100,020
10,388,066
(2,671,327)
(661,842)
–
–
–
–
100,020
10,388,066
(2,671,327)
(661,842)
7,154,917
–
7,154,917
Current liabilities
84,819
189,305
5,370
–
–
–
84,819
189,305
5,370
Total liabilities
279,494
–
279,494
7,434,411
–
7,434,411
Current assets
Total assets
Equity and liability
Issued capital
Share premium
Retained earnings
Total equity
Total equity
Adjustment:
(1)
Reclassification of costs previously capitalised as Research and Development which do not meet the
capitalisation criteria under IAS 38 and should be included as part of PPE.
The transition to IFRS had no impact on the Group’s financial performance and cash flows at 1 January 2010.
92
Page
Reconciliation of total comprehensive income for the year ended 31 December 2012
LUXEMBOURG
GAAP
USD
ADJUSTMENT1
USD
ADJUSTMENT2
USD
IFRS
USD
Revenue
Cost of sales
–
–
–
–
–
–
–
–
Gross profit
–
–
–
–
(838,331)
(7,515,994)
(2,007,795)
2,326,259
–
(256,490)
–
–
–
–
–
–
(838,331)
(7,772,484)
(2,007,795)
2,326,259
Operating loss
(8,035,861)
(256,490)
–
(8,292,351)
–
127,704
–
(13,500,000)
(410,218)
909,013
127,704
(21,293,556)
–
(16,556)
127,704
(21,310,112)
Impairment of financial asset
Finance costs
Finance income
(13,500,000)
(537,922)
909,013
Loss before tax
(21,164,770)
Income tax
Loss for the year
(16,556)
(21,181,326)
–
–
–
(256,490)
–
(256,490)
Exchange differences on translation
(188,516)
–
–
(188,516)
Other comprehensive income for
the year
(188,516)
–
–
(188,516)
127,704
(21,498,628)
Total comprehensive income for
the year
(21,369,842)
(256,490)
Adjustments:
(1)
Net costs previously capitalised under Luxembourg GAAP which do not meet capitalisation criteria under IFRS.
(2)
Net adjustment in respect of finance cost attributable to the PRC receivable using the effective interest rate
method under IFRS.
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Page
Reconciliation of equity at 31 December 2012
LUXEMBOURG
GAAP
USD
Assets
Non-current assets
Investment property
Intangible assets
Other non‐current financial
assets
8,640,825
–
2,863,592
723,883
12,228,300
Current assets
Total assets
Equity and liability
Issued capital
Share premium
Retained earnings
Foreign currency translation
reserve
ADJUSTMENT1
USD
(256,490)
–
–
–
(256,490)
ADJUSTMENT2
USD
–
–
–
ADJUSTMENT3
USD
ADJUSTMENT4
USD
2,824,359
–
(2,824,359)
(1,597,054)
1,597,054
–
IFRS
USD
9,611,640
1,597,054
39,233
127,704
–
–
851,587
127,704
–
–
12,099,514
2,543,640
4,755,051
864,402
–
–
–
–
–
–
–
–
–
–
–
–
2,543,640
4,755,051
864,402
8,163,093
–
–
–
–
8,163,093
20,262,607
20,391,393
(256,490)
127,704
–
–
55,287,000
693,356
(42,140,571)
–
–
(256,490)
–
–
127,704
–
–
–
– 55,287,000
–
693,356
– (42,269,357)
–
–
–
(223,163)
–
(223,163)
Equity attributable to equity
holders of parent
13,616,622
70,164
(256,490)
–
127,704
–
–
–
–
–
13,487,836
70,164
Total equity
13,686,786
(256,490)
127,704
–
–
13,558,000
Interest bearing loans and
borrowings
2,299,304
–
–
–
–
2,299,304
Current liabilities
Interest bearing loans and
borrowings
2,779,495
1,425,477
200,331
–
–
–
–
–
–
–
–
–
–
–
–
2,779,495
1,425,477
200,331
4,405,303
–
–
–
–
4,405,303
6,704,607
–
–
–
–
6,704,607
127,704
–
–
20,262,607
Total liabilities
Total equity
20,391,393
(256,490)
Adjustments:
(1)
Net costs previously capitalised under Luxembourg GAAP which do not meet capitalisation criteria under IFRS.
(2)
Net adjustment in respect of finance cost attributable to the PRC receivable using the effective interest rate
method under IFRS.
(3)
Reclassification of costs previously capitalised as Research and Development which do not meet the
capitalisation criteria under IAS 38 and have been included as part of PPE under IFRS as these meet the
capitalisation criteria of IAS 16.
(4)
Reclassification of PPE to investment property in accordance with IAS 40.
94
Page
Section C: Interim review report on RM2
The Directors
L‐1325 Luxembourg
30 Finsbury Square
London EC2P 2YU
T +44 (0)20 7383 5100
F +44 (0)20 7184 4301
17 December 2013
Dear Sirs
Independent review report to the members of RM2 International S.A. (the Company) and its subsidiary undertakings (together
the Group)
Introduction
We have reviewed the consolidated interim financial statements of the Company for the six months ended 30 June 2013 which
comprises interim consolidated statement of comprehensive income, interim consolidated statement of financial position, interim
consolidated statement of cash flows and interim consolidated statement of changes in equity. We have read the other
information contained in the interim financial statements, which comprises only the notes related to the interim financial
statements and considered whether this contains any apparent misstatements or material inconsistencies with the information in
the consolidated interim financial statements.
This report is made solely to the Company’s members, as a body, in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, ‘Review of Interim Financial Information performed by the Independent Auditor of the
Entity’. Our review work has been undertaken so that we might state to the Company’s members those matters we are required
to state to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our review work,
for this report, or for the conclusion we have formed.
Directors’ responsibilities
The interim consolidated financial statements are the responsibility of, and has been approved by, the directors. The AIM Rules of
the London Stock Exchange require that the accounting policies and presentation applied to the financial information in the
interim consolidated financial statements are consistent with those which will be adopted in the annual accounts having regard to
the accounting standards applicable for such accounts.
As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with International Financial
Reporting Standards as adopted by the European Union. The financial information in the interim consolidated financial statements
has been prepared in accordance with the basis of preparation in note 2.
Our responsibility
Our responsibility is to express to the Company a conclusion on the financial information in the interim consolidated financial
statement based on our review.
95
Page
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, ‘Review of
Interim Financial Information Performed by the Independent Auditor of the Entity’. A review of interim financial information
consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and
other review procedures. A review is substantially less in scope than an audit conducted in accordance with International
Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the financial information in the interim
consolidated financial statements for the six months ended 30 June 2013 is not prepared, in all material respects, in accordance
with the basis of accounting described in note 2.
Yours faithfully
96
Page
Section D: Unaudited interim information on RM2 for the six months ended 30 June 2013
Interim consolidated statement of comprehensive income for the 6 months ended 30 June 2013
UNAUDITED
6 MONTHS
UNAUDITED
6 MONTHS
ENDED
ENDED
30 JUNE 2012
USD
30 JUNE 2013
USD
Revenue
Cost of sales
–
–
–
–
Gross profit
–
–
NOTES
(411,326)
(3,625,189)
(222,482)
199,549
(410,588)
(5,338,413)
(571,477)
297,279
Operating loss
(4,059,448)
(6,023,199)
Finance costs
Finance income
(2,264,606)
88,863
(3,268,635)
373,147
Loss before tax
(6,235,191)
(8,918,687)
(2,528)
(37,639)
(6,237,719)
(8,956,326)
Income tax
Loss for the period
Exchange difference on translation of foreign operations
(165,062)
368,399
Other comprehensive income for the period, net of tax
(165,062)
368,399
Total comprehensive income for the period
(6,402,781)
(8,587,927)
Loss for the period attributable to:
(6,236,761)
(958)
(8,955,789)
(537)
(6,237,719)
(8,956,326)
(6,401,823)
(958)
(8,587,390)
(537)
(6,402,781)
(8,587,927)
(0.06)
(0.07)
Total comprehensive income for the period attributable to:
Earnings per share
Basic and diluted earnings per share attributable to ordinary
equity holders of the parent
9
97
Page
Interim consolidated statement of financial position as at 30 June 2013
UNAUDITED
30 JUNE 2012
USD
UNAUDITED
30 JUNE 2013
USD
25,352,505
1,547,092
37,003
–
11,437,157
1,524,544
41,572
60,240
26,936,600
13,063,513
–
2,550,435
45,658
7,101,883
–
3,665,672
548,576
3,946,779
9,697,976
8,161,027
Total assets
36,634,576
21,224,540
Equity and liabilities
Equity
Issued capital
Share premium
Retained earnings
Warrant reserve
55,287,000
693,356
(27,195,596)
(199,709)
–
55,287,000
693,356
(51,225,146)
145,236
2,500,000
28,585,051
7,400,446
68,796
69,627
28,653,847
7,470,073
2,198,446
3,746,888
2,198,446
3,746,888
1,828,083
3,823,126
131,074
–
6,224,678
663,914
291,420
2,827,567
5,782,283
10,007,579
7,980,729
13,754,467
36,634,576
21,224,540
NOTES
Assets
Non-current assets
Property, plant & equipment
Investment property
Intangible assets
Other non‐current financial assets
Current assets
Inventories
Equity attributable to equity holders of the parent
Total equity
Current liabilities
Derivative warrant liability
Total liabilities
6
7
8
98
Page
Interim consolidated statement of changes in equity for the 6 months ended 30 June 2013
Attributable to equity holders of the parent
FOREIGN
NON‐
CURRENCY
SHARE
SHARE
RETAINED
TRANSLATION
WARRANT
CAPITAL
PREMIUM
EARNINGS
RESERVE
RESERVE
USD
USD
USD
USD
TOTAL
USD
INTERESTS
USD
USD
TOTAL EQUITY
USD
122,860
55,857,496
(20,958,835)
(34,647)
–
34,986,874
69,754
35,056,628
Loss for the period
–
–
–
–
(6,236,761)
–
–
(165,062)
–
–
(6,236,761)
(165,062)
(958)
–
(6,237,719)
(165,062)
–
–
(6,236,761)
(165,062)
–
(6,401,823)
(958)
(6,402,781)
–
–
–
–
–
–
–
–
–
–
–
–
–
28,585,051
68,796
28,653,847
13,558,000
UNAUDITED
Conversion of share premium to
share capital
55,164,140
55,164,140
As at 30 June 2012
55,287,000
693,356
(27,195,596)
(199,709)
(55,164,140)
(55,164,140)
CONTROLLING
55,287,000
693,356
(42,269,357)
(223,163)
–
13,487,836
70,164
Loss for the period
–
–
–
–
(8,955,789)
–
–
368,399
–
–
(8,955,789)
368,399
(537)
–
(8,956,326)
368,399
–
–
(8,955,789)
368,399
–
(8,587,390)
(537)
(8,587,927)
Issue of warrants
–
–
–
–
2,500,000
2,500,000
–
2,500,000
–
–
–
–
2,500,000
2,500,000
–
2,500,000
55,287,000
693,356
145,236
2,500,000
7,400,446
69,627
7,470,073
As at 30 June 2013
(51,225,146)
99
Page
Interim consolidated statement of cash flows for the 6 months ended 30 June 2013
NOTES
Loss before tax
UNAUDITED
6 MONTHS ENDED
30 JUNE 2012
USD
UNAUDITED
6 MONTHS ENDED
30 JUNE 2013
USD
(6,235,191)
(8,918,687)
185,707
39,855
(52)
27,281
(148,553)
326,311
354,581
(366,107)
2,894,762
357,281
(39,855)
93,529
1,664,201
(354,581)
577,968
(274,495)
(7,916)
(13,988)
Net cash flows from operating activities
(4,420,994)
(5,416,955)
Net purchase of/proceeds from intangible assets
Purchase of PPE under construction
Net purchase of/proceeds from other PPE
Repayment of loan notes
(4,814)
(3,908,254)
(89,166)
760
(3,540)
–
(2,467,480)
4,941,128
Non-cash adjustment to reconcile profit before tax to net cash flows
Amortisation and depreciation
Provision for inventory obsolescence
Finance income
Finance expenses
Unrealised foreign exchange (gains)/losses
Variation in working capital
(Increase)/decrease in inventories
(Increase)/decrease in trade and other receivables
Increase/(decrease) in trade and other payables
Income tax paid
Interest received
52
Net cash flows from investing activities
Proceeds from other and related party borrowings
Net transaction costs paid
Net interest paid
(4,001,422)
2,836,215
(296,000)
6,232,160
–
(27,281)
Net cash flows from financing activities
366,107
(500,000)
(32,705)
(323,281)
5,699,455
Net change in cash and cash equivalents
(8,745,697)
3,118,715
Increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at 1 January
Exchange adjustment of cash and cash equivalents
Cash and cash equivalents at 30 June
(8,745,697)
15,852,084
(4,504)
7,101,883
3,118,715
864,209
(37,582)
3,945,342
8
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Notes to the interim consolidated financial statements for the 6 months ended 30 June 2013
1
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‐1235
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 in providing related logistical services. The
financial statements do not constitute statutory accounts as defined in Section 404 of the Companies Act 2006.
The unaudited interim consolidated financial statements do not constitute statutory accounts as defined in Section 404
of the Companies Act 2006.
2
Basis of preparation and accounting policies
The unaudited interim consolidated financial information for the six months ended 30 June 2013 has been prepared
following the recognition and measurement principles of IFRS as adopted by the European Union. The interim
consolidated financial information does not include all the information and disclosures required in the annual financial
information, and should be read in conjunction with the Group’s historical financial information for the years ended
31 December 2010, 31 December 2011 and 31 December 2012.
The accounting policies and basis of preparation adopted are consistent with those followed in the preparation of the
Group’s historical financial information for the years ended 31 December 2010, 31 December 2011 and 31 December
2012. None of the newly applicable IFRS standards and amendments had an impact on the Group’s interim consolidated
financial statements.
The Group did not early adopt any new or amended standards and does not plan to early adopt any of the standards
issued but not yet effective.
3
Significant accounting judgements, estimates and assumptions
When preparing the interim consolidated financial information, management undertakes a number of judgements,
estimates and assumptions about recognition and measurement of assets, liabilities, income and expenses. The actual
results may differ from the judgements, estimates and assumptions made by management, and will seldom equal the
estimated results.
The judgements, estimates and assumptions applied in the interim consolidated financial information, including the key
sources of estimation uncertainty, were the same as those applied in the Group’s historical financial information for the
years ended 31 December 2010, 31 December 2011 and 31 December 2012.
4
Significant events and transactions of the period
In June 2013, the Group entered into the following agreements with JKD Capital Partners I Ltd, a third party:
•
A loan agreement for a maximum facility of USD 15,000,000 of which USD 5,000,000 was drawn down during the
period. The drawdown amount bears interest at 10 per cent. per annum.
•
A warrant agreement granting JKD the right to purchase 614,300 shares of the Company for a price of USD 0.01
per share. JKD may exercise its right starting at the earlier of (i) one week after the completion of the initial public
offering of shares on the AIM exchange and (ii) 26 May 2014. The exercise of the Warrant Shares expires on
3 June 2014.
The fair value of the warrants at the date of issue was determined to be $2,500,000 and resulted in a warrant reserve at
30 June 2013.
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5
Seasonality of operations
The operations of the Group have not yet started, therefore there is no seasonality in the results presented by the Group.
6
LAND &
BUILDING
USD
PLANT &
EQUIPMENT
USD
CONSTRUCTION
TOTAL
USD
IN PROGRESS
USD
Cost
Additions
Other/transfers
1,804,314
3,528
–
(28,487)
236,919
85,640
11,161,614
(3,730)
23,226,097
3,908,254
(11,161,614)
(21,459)
25,267,330
3,997,422
–
(53,676)
As at 30 June 2012
1,779,355
11,480,443
15,951,278
29,211,076
Additions
Other/transfer
1,860,421
7,607
(62,710)
–
5,336,483
–
(97,182)
(1,701,838)
13,771,854
2,467,480
(373,049)
–
As at 30 June 2013
1,805,318
3,537,463
15,866,285
6,574,950
2,459,873
(213,157)
1,701,838
10,523,504
Depreciation charge for the period
42,822
21,667
(1,307)
120,278
142,170
(4,522)
3,537,463
–
–
3,700,563
163,837
(5,829)
As at 30 June 2012
63,182
257,926
3,537,463
3,858,571
92,039
23,565
(3,338)
530,712
281,043
(32,356)
3,537,463
–
–
4,160,214
304,608
(35,694)
As at 30 June 2013
112,266
779,399
3,537,463
4,429,128
Net book value
As at 30 June 2013
1,693,052
9,744,105
–
11,437,157
1,768,382
6,044,238
1,799,020
9,611,640
As at 30 June 2012
1,716,173
11,222,517
12,413,815
25,352,505
1,761,492
116,641
19,688,634
21,566,767
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7
Investment property
INVESTMENT
PROPERTIES
USD
Cost
1,634,108
(26,739)
As at 30 June 2012
1,607,369
1,681,110
(54,929)
As at 30 June 2013
1,626,181
40,853
20,670
(1,246)
As at 30 June 2012
60,277
84,056
20,503
(2,922)
As at 30 June 2013
101,637
Net book value
As at 30 June 2013
1,524,544
1,597,054
As at 30 June 2012
1,547,092
1,593,255
The investment property is a building used by the Group for both administrative purposes 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
Cash and short-term deposits
For the purpose of the statement of cash flows, cash and cash equivalents comprise the following at 30 June:
9
AS AT
30/06/2012
USD
AS AT
30/06/2013
USD
6,817,404
284,479
3,658,839
287,940
Bank overdraft
7,101,883
–
3,946,779
(1,437)
Total cash and cash equivalents
7,101,883
3,945,342
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.
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Page
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:
UNAUDITED
6 MONTHS ENDED
30 JUNE 2012
USD
Net loss attributable to ordinary equity holders of the parent
for basic and diluted earnings
Weighted average number of ordinary shares for basic
earnings per share
Effect of dilution:
Warrant shares to DPE
Warrant shares to JKD
Weighted average number of ordinary shares adjusted for the
effect of dilution
Loss per share (basic and diluted)
(6,236,761)
UNAUDITED
6 MONTHS ENDED
30 JUNE 2013
USD
(6,128,222)
AS AT
30/06/2012
AS AT
30/06/2013
102,403,810
122,860,000
22,742,751
–
9,900,306
614,300
125,146,561
133,374,606
(0.06)
(0.07)
For the 6 months ended 30 June 2012 and 2013, the additional shares on exercise of outstanding warrants would
decrease the basic loss per share and there is therefore no dilutive effect.
10
Subsequent events
On 14 August 2013 the Company entered into an unsecured loan agreement with Floravell, a company controlled by John
Walsh, which formalises previous loans made to the Company of US$2,778,083. Under this agreement interest of 2 per
cent. per annum is payable by the Company to Floravell on the principal from 1 January 2013. The term of the loan ends
on 31 December 2013.
In September 2013 the Company entered into an interim finance facility totalling $4.7 million with six different unrelated
parties with the principal and any accrued interest being repayable within three days of (i) Admission and (ii)
19 September 2014. The rate of interest on the outstanding principal is 10 per cent. per annum with any amount not paid
on the date it is due accruing default interest at 12 per cent. per annum. In addition, on repayment of the principal, the
Company must either, at its election: (i) issue to the loan note holder ordinary shares of a market equivalent to 25 per
cent. of the initial principal or (ii) pay the loan note holder an amount equal to 25 per cent. of the principal. If the
repayment of the principal occurs on or after 20 June 2014 this additional payment shall be increased to 30 per cent. of
the principal.
On 27 September 2013 the Company entered into an agreement with the shareholders of Equipment Tracking to acquire
the entire issued share capital of Equipment Tracking which the Company did not already hold. Completion of the
acquisition of Equipment Tracking occurred on 10 December 2013. The Company paid £2 million total consideration for
the shares of Equipment Tracking Limited. Of this sum £125,000 had already been paid to the sellers as a non‐refundable
deposit.
On 27 September 2013 the Company reached an agreement with STM Technologies Inc whereby both parties agreed to
terminate a previous commission sales agreement under which the Company had agreed to pay STM a royalty of $4 per
pallet sold or rented to customers introduced to the Company by STM. As consideration for this termination the Company
agreed to pay STM $2 million.
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On 27 September 2013 the Company participated in a contribution in kind of 842,000 shares of MAFIC SA in order to
incorporate and hold 100 per cent. of the issued share capital of Basalt Holding Sarl, a newly incorporated Luxembourg
company.
On 11 October 2013 the Company’s issued share capital was reorganised. The Company’s share capital was decreased by
US$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.a.r.l.). Linked to such decrease in issued share capital, the ordinary shares
designated as J ordinary shares were cancelled. This took the Company’s total issued share capital to US$45,330,956
consisting of 110,574,000 ordinary shares of US$.0.45 each. Immediately following this, the nominal value of the ordinary
shares was reduced from US$0.45 to US$0.01 following such reorganisation, the Company’s issued share capital was
US$1,105,740, consisting of 110,574,000 ordinary shares of US$0.01 each.
On 6 November 2013 the Company issued an additional 22,275,000 Ordinary shares for $0.01 per share for a total
consideration of $222,750 taking the Company's total issued share capital to 132,849,000 Ordinary shares of $0.01 each.
On 7 November 2013 the Company entered into an agreement with CVI CVF II Lux Securities Trading Sarl (“CarVal”)
pursuant to which CarVal agreed to lend the Company $10 million. The Company must repay the full amount of the CarVal
principal on the earlier of: completion of an IPO; or 7 November 2014. In addition, the Company must repay the principal
together with an additional payment equal to 25 per cent. of the issue of the principal or if full repayment of the principal
occurs more than nine months after the date of the agreement an amount equal to 30 per cent. of the principal. Interest
is payable each month on the principal at a rate of 10 per cent. per annum.
On 8 November 2013 an agreement was entered into between the Company and DPE amending the warrant agreement
dated 22 May 2013 in respect of termination of the warrant. As a result, in the event the Company completes an IPO prior
to 31 March 2014, simultaneously on completion of an IPO the rights of DPE to receive warrant shares shall immediately
terminate and be replaced with an obligation by the Company to (i) pay DPE an aggregate amount equal to $40 million
plus the nominal value of the DPE Shares and (ii) upon payment of the nominal value of the DPE Shares by DPE to the
Company, to issue the DPE Shares to DPE.
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Page
PART VI
FINANCIAL INFORMATION ON EQUIPMENT TRACKING
Section A: Accountant’s report on the historical financial information on Equipment Tracking
The Directors
L‐1325 Luxembourg
30 Finsbury Square
London EC2P 2YU
T +44 (0)20 7383 5100
F +44 (0)20 7184 4301
17 December 2013
Dear Sirs,
Equipment Tracking Limited (the Company)
We report on the financial information set out in Part VI Section B of the AIM Admission Document dated 17 December 2013 (the
“Admission Document”), for the years ended 31 October 2010, 31 October 2011 and 31 October 2012 (the “Financial
Information”). This Financial Information has been prepared for inclusion in the Admission Document on the basis of the
accounting policies set out in note 1 of the Financial Information.
This report is required by Paragraph (a) of Schedule Two of the AIM Rules for Companies and is given for the purpose of complying
with that paragraph and for no other purpose.
Responsibilities
Save for any responsibility arising under Paragraph (a) of Schedule Two of the AIM Rules for Companies to any person as and to
the extent there provided, to the fullest extent permitted by law we do not assume any responsibility and will not accept any
liability to any other person for any loss suffered by any such other person as a result of, arising out of, or in connection with this
report or our statement, required by and given solely for the purposes of complying with Paragraph (a) of Schedule Two of the
AIM Rules for Companies, consenting to its inclusion in the AIM Admission Document.
The Directors of RM2 International S.A. are responsible for preparing the Financial Information in accordance with International
Financial Reporting Standards as adopted by the European Union. It is our responsibility to form an opinion on the Financial
Information and to report our opinion to you.
Basis of opinion
We conducted our work in accordance with the Standards for Investment Reporting issued by the Auditing Practices Board in the
United Kingdom. Our work included an assessment of evidence relevant to the amounts and disclosures in the Financial
Information. It also included an assessment of the significant estimates and judgements made by those responsible for the
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Page
preparation of the Financial Information and whether the accounting policies are appropriate to the entity’s circumstances,
consistently applied and adequately disclosed.
We planned and performed our work so as to obtain all the information and explanations which we considered necessary in order
to provide us with sufficient evidence to give reasonable assurance that the financial information is free from material
misstatement, whether caused by fraud or other irregularity or error.
Opinion
In our opinion, the Financial Information gives, for the purposes of the Admission Document, a true and fair view of the state of
affairs of the Company as at 31 October 2010, 31 October 2011 and 31 October 2012 and of its profits, cash flows, recognised
gains and losses and changes in equity for the periods then ended in accordance with International Financial Reporting Standards
adopted by the European Union and has been prepared in a form that is consistent with the accounting policies disclosed in the
Financial Information.
Declaration
For the purposes of Paragraph (a) of Schedule Two of the AIM Rules for Companies we are responsible for this report as part of
the Admission Document and declare that we have taken all reasonable care to ensure that the information contained in this
report is, to the best of our knowledge, in accordance with the facts and contains no omission likely to affect its import. This
declaration is included in the Admission Document in compliance with Schedule Two of the AIM Rules for Companies.
Yours faithfully
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Page
Section B: Historical consolidated financial information on Equipment Tracking for the three years ended 31 October 2012
The financial information of Equipment Tracking set out below for the three years ended 31 October 2012 has been prepared by
the Directors of RM2 International S.A. on the basis set out in note 1.
The accompanying notes represent an integral part of the financial information.
The financial information contained within this section does not constitute statutory financial accounts within the meaning of
section 434 of the Act.
Statement of comprehensive income
NOTES
Revenue
2
2010
USD
2011
USD
2012
USD
922,690
(779,024)
992,033
(881,715)
1,306,534
(1,065,832)
Operating profit
Finance Income
Finance costs
4
5
143,666
35
(1,583)
110,318
21
(3,727)
240,702
20
(3,544)
Profit before income tax
Income tax
6
7
142,118
(27,003)
106,612
(20,171)
237,178
(41,358)
115,115
86,441
195,820
184
175
1,539
115,299
86,616
197,359
Profit for the year
Effect of foreign exchange translation
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Page
Statement of financial position
NOTES
2009
USD
2010
USD
2011
USD
2012
USD
8
75,052
123,307
108,193
107,936
75,052
123,307
108,193
107,936
83,858
12,536
100,758
55,845
111,412
66,969
251,520
61,277
96,394
156,603
178,381
312,797
171,446
279,910
286,574
420,733
165
16,495
3,194
165
41,454
3,377
165
26,117
3,553
165
128,295
5,092
19,854
44,996
29,835
133,552
12
12,226
18,471
18,574
15,516
12
13
8,284
108,902
22,180
58,949
129,666
27,827
40,702
177,196
20,267
34,156
195,471
42,038
139,366
216,442
238,165
271,665
Total liabilities
151,592
234,913
256,739
287,181
171,446
279,910
286,574
420,733
Assets
Non-current assets
Current assets
9
10
Total assets
Equity
Called up share capital
Retained earnings
Other reserves
11
Total equity
Liabilities
Long term borrowings
Current liabilities
Current borrowings
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Page
Statement of changes in equity
1 November 2009
Dividends paid
CALLED UP
RETAINED
OTHER
TOTAL
SHARE CAPITAL
EARNINGS
RESERVES
EQUITY
USD
USD
USD
USD
165
–
16,495
(90,157)
3,194
–
19,854
(90,157)
Transactions with owners
–
(90,157)
–
(90,157)
Profit for the year
*
–
115,115
–
–
184
115,115
184
–
115,115
184
115,299
31 October 2010
Dividends paid
165
–
41,453
(101,777)
3,378
–
44,996
(101,777)
–
(101,777)
–
(101,777)
Profit for the year
–
–
86,441
–
–
175
86,441
175
–
86,441
175
86,616
31 October 2011
Dividends paid
165
–
26,117
(93,642)
3,553
–
–
(93,642)
–
–
Profit for the year
–
–
195,820
–
–
1,539
195,820
1,539
–
195,280
1,539
197,359
165
128,295
5,092
133,552
31 October 2012
29,835
(93,642)
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Page
Statement of cash flows
2010
USD
2011
USD
2012
USD
Profit before tax
Depreciation charges
Loss on disposal of property, plant and equipment
Increase in trade and other receivables
Increase in trade and other payables
Effects of foreign currency
Interest paid
Interest received
142,118
9,226
16,804
(16,900)
20,764
1,917
1,583
(34)
106,612
21,033
2,545
(10,654)
47,530
(433)
3,727
(21)
237,178
23,440
–
(140,108)
18,275
2,440
3,544
(20)
Cash generated from operations
Interest paid
Taxation paid
175,478
(1,583)
(21,355)
170,339
(3,727)
(27,732)
144,749
(3,544)
(19,586)
Net cash inflow from operating activities
152,540
138,880
121,619
Purchase of property, plant and equipment
Proceeds from the disposal of property, plant and equipment
Interest received
(7,185)
17,735
34
(11,118)
3,262
21
(24,085)
–
20
Net cash inflow/(outflow) from investing activities
10,584
(7,835)
(24,065)
Repayments of finance lease arrangements
Dividends paid
(29,658)
(90,157)
(18,144)
(101,777)
(27,067)
(93,642)
Net cash outflow from financing activities
(119,815)
(119,921)
(120,709)
Increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
43,309
12,536
11,124
55,845
(23,155)
66,969
Cash and cash equivalents at end of period
55,845
66,969
43,814
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Page
CORPORATE INFORMATION
Equipment Tracking is a technology company providing software solutions to various industries.
Equipment Tracking is a limited company domiciled in the United Kingdom and incorporated under registered number 05274087
in England and Wales. Equipment Tracking’s registered office is Ty Matthew House, Llys Edmund Prys, St Asaph, Denbighshire,
LL17 0JA.
1.
ACCOUNTING POLICIES
BASIS OF PREPARATION
This historical financial information comprises the financial statements of Equipment Tracking as at 31 October for each
of the three years 2010, 2011 and 2012 and is prepared under the historic cost convention.
The historical financial information has been prepared for the purposes of the acquisition of Equipment Tracking.
The historical financial information has been prepared in accordance with International Financial Reporting Standards
(“IFRS”) as adopted by the European Union (“EU”), IFRIC interpretations and the Companies Act 2006 applicable to
companies reporting under IFRS. The historical financial information has been prepared under the historical cost
convention.
The accounting policies which follow set out the policies applied in preparing the historical financial information.
The historical financial information is presented in USD the functional currency of the acquiring Group. The company’s
functional currency is Sterling. The information is shown in the functional currency of the acquiring group for better
understanding of the company’s position in the new group.
Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for
services provided in the normal course of business, net of VAT. The company recognises revenue when the amount of
revenue can be reliably measured; when it is probable that future economic benefits will flow to the entity; and when
specific criteria have been met for each of the company’s activities, as described below.
Revenue relating to software development that is contracted on a time and materials basis is recognised as the services
are performed.
Revenue relating to the sale of software licences is recognised over the period to which the license relates.
Revenue from services provided is determined by management’s assessment of the percentage completed of each
contract. Management determine the percentage of completion by considering the work performed to date based upon
internal reports and agreed project milestones.
Revenue in respect of the sales of pallets is recognised at the time that title to the goods passes. Revenue is measured at
the fair value of the consideration received or receivable for the goods in the normal course of business net of VAT.
Depreciation is provided at the following annual rates in order to write off each asset over its estimated useful life.
Fixtures, fittings and equipment
Motor vehicles
– 15% reducing balance
– 25% reducing balance
Property, plant and equipment are stated at cost less accumulated depreciation and any recognised impairment loss.
Taxation
Tax expense represents the sum of the current tax and deferred tax charge for the year.
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Current tax
The current tax payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the
Statement of Comprehensive Income because it excludes items of income or expense that are taxable or deductible in
other periods and it further excludes items that are never taxable or deductible. The Company’s liability for current tax is
calculated using tax rates that have been enacted or substantively enacted by the year end.
Deferred tax
Deferred taxes are provided in full, using the liability method, for all temporary differences arising between the tax bases
of assets and liabilities and their carrying amounts in the Financial Statements. Deferred taxes are determined using tax
rates that have been enacted or substantially enacted and are expected to apply when the related deferred tax asset is
realised or the related deferred tax liability is settled.
The principal temporary differences arise from depreciation or amortisation charged on assets and tax losses carried
forward. Deferred tax assets relating to the carry forward of unused tax losses are recognised to the extent that it is
probable that future taxable profit will be available against which the unused tax losses can be utilised. The carrying
amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is probable that
sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Research and development
Expenditure on research is written off in the year in which it is incurred. Development expenditure is written off in the
same year unless the directors are satisfied as to the technical, commercial and financial viability of individual projects
and the related costs can be measured reliably. In this situation, the expenditure is deferred and amortised within
administration costs over the period from which the company is expected to benefit.
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.
Operating leases
Operating lease payments are recognised as an expense on a straight‐line basis over the lease term, except if another
systematic basis is more representative of the time pattern in which economic benefits will flow to the company.
Contingent rentals arising under operating leases are recognised in the period in which they are incurred.
Lease incentives and similar arrangements of incentives are taken into account when calculating the straight‐lined
expense and spread over the lease term.
Rentals paid under operating leases are charged to the income statement on a straight line basis over the period of the
lease.
Finance leases
Assets held under finance leases are recognised as assets of the company at the fair value at the inception of the lease
or if lower, at the present value of the minimum lease payments. The related liability to the lessor is included in the
statement of financial position as a finance lease obligation.
Lease payments are apportioned between interest expenses and capital redemption of the liability. Interest is recognised
immediately in profit or loss, unless attributable to qualifying assets, in which case they are capitalised to the cost of those
assets.
Contingent rentals are recognised as expenses in the periods in which they are incurred.
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Page
Conversion of foreign currency
Monetary assets and liabilities in sterling are translated into USD at the rate of exchange ruling at the balance sheet date.
Transactions are translated at the average rate for the period. Non‐monetary assets having been translated are carried at
their historical cost. Exchange differences are taken to into other comprehensive income and taken to other reserves.
Critical accounting estimates and judgements
The preparation of the financial statements in conformity with IFRS requires management to make estimates and
assumptions that affect the reported amounts of revenue, expenses, assets and liabilities. The estimates and judgements
are based on historical experience and other factors, including expectations of future events that are believed to be
reasonable and constitute management’s best judgement at the date of the financial statements. In the future, actual
experience could differ from those estimates.
Further details of estimates and assumptions are set out in each of the relevant accounting policies and detailed notes to
the financial statements.
The principal judgements made by management that could have a significant impact upon the company’s financial results
relate to the following:
•
the assertions in the preparation of the financial statements on a going concern basis;
•
the recognition of revenue on longer term contracts;
•
the treatment of product development costs;
•
the assessment and appropriateness of recognition of deferred tax assets;
•
the fair value of the financial instruments: and
•
the assessment of receivables for impairment.
Financial Instruments
Financial instruments are initially recognised at fair value. Fair value is the amount at which such an instrument could be
exchanged in an arm’s‐length transaction between informed and willing parties.
Derecognition of financial assets occurs when the rights to receive cash flows from the investments expire or substantially
all of the risks and rewards of ownership have been transferred. An assessment for impairment is undertaken at least at
each statement of financial position date whether or not there is objective evidence that a financial asset is impaired.
Trade and other receivables are recognised initially at fair value and subsequently at amortised costs under the effective
interest method. If collection is expected in one year or less (or in the normal operating cycle of the business if longer),
they are classified as current assets. If not, they are presented as non‐current assets.
Cash and cash equivalents comprise cash at bank and in hand as well as short term bank deposits.
Financial liabilities are obligations to pay cash or other financial assets and are recognised when the company becomes
party to the contractual provisions of the instrument. All financial liabilities are recorded initially at fair value, net of direct
issue costs and subsequently measured at amortised cost using the effective interest method, less settlement payments.
Interest related charges are recognised as an expense in finance costs in the income statement.
Finance charges, including premiums payable on settlement or redemption and direct issue costs are charged to the
income statement on an accruals basis using the effective interest method. They are added to the carrying amount of the
instrument to the extent that they are not settled in the period in which they arise.
Trade payables are obligations to pay for goods, services and fees that have been either acquired or incurred in the
ordinary course of business. Amounts payable are classified as current liabilities if payment is due within one year or less
(or in the normal operating cycle of the business if longer). If not they are presented as non‐current liabilities.
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A financial liability is derecognised only when the obligation is discharged, cancelled or expires.
Pension costs
Pension contributions to defined contribution schemes are recognised as they fall due.
2.
SEGMENT REPORTING
Operating segments are based on internal reports about components of the company, which are regularly reviewed and
used by the Board of Directors being the Chief Operating Decision Maker (“CODM”) for strategic decision making and
resource allocation, in order to allocate resources to the segment and to assess its performance.
The company’s operations are centred on software services to its customers. The business is structured as a single entity
company and its financial reporting is set to report to the CODM information as a whole. Management therefore
considers there to be only a single reporting segment covering the entire company although revenue analysis is provided
below. Therefore additional analysis of the figures reported in these financial statements is neither appropriate nor
necessary to enable users of the financial statements to evaluate the nature and financial effects of the business
activities.
An analysis of revenue is as follows:
Software services and licences
Pallet sales
AS AT
31/10/10
USD
AS AT
31/10/11
USD
AS AT
31/10/12
USD
882,201
40,489
932,277
59,756
1,206,981
99,553
922,690
922,033
1,036,534
AS AT
31/10/10
USD
AS AT
31/10/11
USD
AS AT
31/10/12
USD
922,690
992,033
1,306,534
AS AT
31/10/10
USD
AS AT
31/10/11
USD
AS AT
31/10/12
USD
506,732
15,204
23,900
558,817
17,023
22,529
642,636
25,940
29,249
545,836
598,369
697,825
AS AT
31/10/10
USD
AS AT
31/10/11
USD
AS AT
31/10/12
USD
2
10
12
2
11
13
4
12
18
87,740
92,194
135,962
7,871
7,992
12,432
The geographical split of revenue is as follows:
Europe
3.
EMPLOYEES AND DIRECTORS
Wages and salaries
Other pension costs
The average monthly number of employees during the periods were as follows:
Directors
Administration and software developers
Directors’ remuneration
Directors’ pension contributions to money purchase schemes
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Page
4.
FINANCE INCOME
AS AT
31/10/10
USD
AS AT
31/10/11
USD
AS AT
31/10/12
USD
35
21
20
AS AT
31/10/10
USD
AS AT
31/10/11
USD
AS AT
31/10/12
USD
1,578
5
3,723
4
3,389
155
1,583
3,727
3,544
AS AT
31/10/10
USD
AS AT
31/10/11
USD
AS AT
31/10/12
USD
16,804
5,616
3,610
9,226
2,545
6,582
14,451
21,033
–
9,508
14,382
23,440
AS AT
31/10/10
USD
AS AT
31/10/11
USD
AS AT
31/10/12
USD
Current tax:
Current tax on profits for the year
27,003
20,171
41,358
Taxation expense
27,003
20,171
41,358
Interest receivable
5.
FINANCE COSTS
Finance costs:
Finance lease interest
Bank interest
6.
PROFIT BEFORE TAX
The profit before tax is stated after charging:
Loss on disposal of property, plant and equipment
Depreciation – owned assets
Depreciation – leased assets
Operating leases
7.
TAXATION
Analysis of the tax charge
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Page
Factors affecting the tax charge
The tax assessed for the year is lower than the standard rate of corporation tax in the UK. The difference is explained
below:
AS AT
AS AT
AS AT
31/10/10
31/10/11
31/10/12
USD
USD
USD
Profit on ordinary activities before tax
8.
142,118
106,612
237,178
Profit on ordinary activities multiplied by the standard
rate of corporation tax in the UK of 21%, 20.4% and
20% respectively
29,845
21,763
47,436
Effects of:
Capital allowances for period in excess of depreciation
Effects of non deductible expenditure
Other differences
(4,566)
3,684
(1,960)
(1,517)
520
(595)
(2,318)
787
(4,547)
Total taxation
27,003
20,171
41,358
FIXTURES AND
MOTOR
VEHICLES
USD
TOTAL
USD
PROPERTY, PLANT AND EQUIPMENT
EQUIPMENT
USD
Cost
At 1 November 2009
Additions
Disposals
At 31 October 2010
Additions
Disposals
At 31 October 2011
Additions
At 31 October 2012
57,459
7,185
–
(1,676)
62,968
11,118
–
349
74,435
24,085
(355)
98,165
71,443
86,568
(58,690)
(2,084)
97,237
–
(10,728)
539
87,048
–
(415)
86,633
128,902
93,753
(58,690)
(3,760)
160,205
11,118
(10,728)
888
161,483
24,085
(770)
184,798
Depreciation
At 1 November 2009
Charge for year
Disposals
At 31 October 2010
Charge for year
Disposals
At 31 October 2011
Charge for year
At 31 October 2012
25,123
5,616
–
(562)
30,177
6,582
–
198
36,957
9,058
(27)
45,988
28,727
3,610
(24,152)
(1,464)
6,721
14,451
(4,922)
83
16,333
14,382
159
30,874
53,850
9,226
(24,152)
(2,026)
36,898
21,033
(4,922)
281
53,290
23,440
132
76,862
Net book value
As at 31 October 2010
32,791
90,516
123,307
37,478
70,715
108,193
52,177
55,759
107,936
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Page
Included within the net book value of USD107,936 is USD55,759 (2011: USD70,715, 2010: USD90,516) relating to assets
held under finance lease agreements. The depreciation charged in the year in respect of such assets amounted to
USD14,383 (2011: USD14,451, 2010: USD3,610).
9.
TRADE AND OTHER RECEIVABLES
Trade receivables
Other debtors and prepayments
Directors current accounts
10.
AS AT
31/10/12
USD
88,437
3,270
9,051
106,695
4,717
–
251,520
–
–
100,758
111,412
251,520
AS AT
31/10/10
USD
AS AT
31/10/11
USD
AS AT
31/10/12
USD
55,845
66,969
61,277
AS AT
31/10/10
USD
AS AT
31/10/11
USD
AS AT
31/10/12
USD
100
100
100
AS AT
31/10/10
USD
AS AT
31/10/11
USD
AS AT
31/10/12
USD
165
165
165
USD
31 OCTOBER
2011
USD
31 OCTOBER
2012
USD
–
58,949
–
40,702
17,462
16,694
58,949
40,702
34,156
18,471
18,574
15,516
CALLED UP SHARE CAPITAL
Number of shares in issue
Ordinary shares of £1 each in issue at beginning
and end of the year
Nominal value of shares in issue
Nominal value of shares in issue at beginning
and end of the year
12.
AS AT
31/10/11
USD
CASH AND CASH EQUIVALENTS
Cash at bank
11.
AS AT
31/10/10
USD
BORROWINGS
Current:
Bank overdrafts
Finance lease agreements
Non Current
Finance lease agreements (repayable between two
and five years)
Interest rates are fixed for the term of the agreements which are payable by equal fixed monthly amounts.
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Page
13.
TRADE AND OTHER PAYABLES
Trade payables
Social security and other taxes
Accruals and deferred income
AS AT
31/10/10
USD
AS AT
31/10/11
USD
AS AT
31/10/12
USD
34
40,661
88,822
149
26,748
57,934
87,842
4,672
18,837
68,883
64,484
43,267
129,666
177,196
195,471
AS AT
31/10/10
USD
AS AT
31/10/11
USD
AS AT
31/10/12
USD
The ageing of the trade payables is detailed below:
0 to 30 days
31 to 60 days
61 to 90 days
Over 90 days
14.
150
–
–
(116)
9,170
17,696
–
(116)
16,987
(10)
79
1,781
34
26,748
18,837
AS AT
31/10/10
USD
AS AT
31/10/11
USD
AS AT
31/10/12
USD
Amounts due from Directors
E Groszek
9,051
–
–
Amounts due from Directors
E Groszek
J Ryan
Y Walsh
P Rowlands
–
149
–
–
3,861
811
–
–
39,776
808
1,875
808
Total
149
4,672
43,267
RELATED PARTY TRANSACTIONS
No interest has been charged or credited to these loan amounts.
15.
RISK MANAGEMENT
General objectives, policies and procedures
The directors have overall responsibility for the determination of the company’s risk management objectives and
operating processes that ensure effective implementation of the policies set out below. Directors receive monthly reports
through which they review the effectiveness of the processes put in place and the appropriateness of the objectives and
policies they set.
The overall objective of the directors is to set policies that seek to reduce risk as far as possible without unduly affecting
the company’s competitiveness and flexibility. Further details of these policies are set out below:
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Page
Credit risk
Credit risk is the risk of financial loss to a company if a customer or counterparty to a financial instrument fails to meet
its contractual obligations. A company is mainly exposed to credit risk from credit sales. It is Equipment Tracking’s policy
to assess the credit risk of new customers before entering contracts. Subject to this assessment, Equipment Tracking’s
standard payment and delivery terms and conditions are offered. Purchase limits are established for each customer.
The directors determine concentrations of credit risk through a monthly review of trade receivables’ ageing analysis.
Customers placed as high risk are placed on a restricted customer list and future sales made on a prepayment basis,
subject to the discretion of the directors and local management.
Currency risks
Equipment Tracking’s operations are located in the United Kingdom. Equipment Tracking’s transactions are primarily
denominated in Sterling with little exposure to foreign currency risks. Due to the limited risks to the Equipment Tracking,
forward exchange contracts are not considered necessary and are not used. The company does not operate foreign
currency bank accounts.
The translation risk on Equipment Tracking’s foreign exchange payables and receivables is considered to be immaterial
due to their short‐term nature.
Liquidity risk
Liquidity risk arises from Equipment Tracking’s management of working capital and the finance charges and principal
repayments on its debt instruments.
Equipment Tracking’s policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they
become due.
The Directors receive rolling 12 month cash flow projections on a monthly basis as well as information regarding cash
investments. At the year end these projections indicated that the company expected to have sufficient liquid resources
to meet its obligations under all reasonably expected circumstances and will not need to secure new facilities with the
bank.
Budgets are set by the directors, enabling Equipment Tracking’s cash requirements to be anticipated and any increase in
facilities requires the approval of the board of directors.
Capital management
Equipment Tracking’s activities are of a type and stage of development where the most suitable capital structure is that
of one almost entirely financed by equities. The directors will reassess the future capital structure when projects under
development are sufficiently advanced. Equipment Tracking considers its capital to consist of share capital only.
Equipment Tracking’s financial strategy is to utilise its resources and current trading revenue streams to further appraise
and test the company’s research and development projects. Equipment Tracking keeps investors informed of its progress
with its projects through regular announcements and raises additional equity finance at appropriate times.
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Page
Categories of financial instruments
Equipment Tracking’s financial assets are classified as loans and receivables, and all of the company’s financial liabilities
are classified as being measured at amortised cost.
Financial assets
Bank balances
Total financial assets
Non financial assets
Total assets per statement of financial position
Current borrowings
Total financial liabilities
Non financial liabilities
Total liabilities per statement of financial position
Current borrowings
2010
USD
2011
USD
2012
USD
97,488
55,845
106,695
66,969
251,520
61,277
153,333
173,664
312,797
3,270
4,717
–
100,758
55,845
111,412
66,969
251,520
61,277
156,603
178,381
312,797
89,005
58,949
18,471
119,262
40,702
18,574
126,588
34,156
15,516
166,425
178,538
176,260
40,661
27,827
57,934
20,267
68,883
42,038
68,488
78,201
110,921
18,471
58,949
129,666
27,827
18,574
40,702
177,196
20,267
15,516
34,156
195,471
42,038
234,913
256,739
287,181
Disclosure of credit risk
The directors consider that the carrying amount of trade and other receivables approximates to their value.
The analysis of unimpaired trade receivables that are past due at the end of the period is detailed below:
0 to 30 days
30 to 60 days
60 to 90 days
Over 90 days
31 OCTOBER
2010
GROSS
USD
31 OCTOBER
2011
GROSS
USD
31 OCTOBER
2012
GROSS
USD
19,846
–
–
79,559
17,951
784
–
142,699
6,278
29,845
–
19,846
98,294
178,822
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Page
16.
FINANCIAL COMMITMENTS
Equipment Tracking leases all of its properties. The terms of property leases vary between properties, although they all
tend to be tenant‐repairing with periodic rent reviews and break clauses.
The total future minimum operating lease payments are due as follows:
Not later than one year
Later than one year and not later than five years
2010
USD
2011
USD
2012
USD
16,485
248,652
26,956
221,696
49,754
171,942
265,137
248,652
221,696
The minimum lease payment recognised as an expense in the year was USD 26,956 (2011: USD 16,485, 2010: USD 2,936).
17.
CONTROLLING INTEREST
E Groszek has ultimate control in Equipment Tracking due to her shareholding.
18.
TRANSITION TO IFRS
Equipment Tracking previously reported under UK GAAP. The transition to IFRS had no impact on the company’s financial
position, financial performance and cash flows at 1 November 2009 and 31 October 2012 as there were no measurement
differences between UK GAAP and IFRS.
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Page
Section C: Interim review report on Equipment Tracking
The Directors
L‐1325 Luxembourg
30 Finsbury Square
London EC2P 2YU
T +44 (0)20 7383 5100
F +44 (0)20 7184 4301
17 December 2013
Dear Sirs
Independent review report on Equipment Tracking Limited (the Company)
Introduction
We have reviewed the interim financial statements of the Company for the nine months ended 31 July 2013 which comprises
statement of comprehensive income, statement of financial position, statement of cash flows and statement of changes in equity.
We have read the other information contained in the interim financial statements, which comprises only the notes related to the
interim financial statements and considered whether this contains any apparent misstatements or material inconsistencies with
the information in the interim financial statements.
This report is made solely to RM2 International S.A.’s members, as a body, in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, ‘Review of Interim Financial Information performed by the Independent Auditor of the Entity’.
Our review work has been undertaken so that we might state to the RM2 International S.A.’s members those matters we are
required to state to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we
do not accept or assume responsibility to anyone other than RM2 International S.A. and RM2 International S.A.’s members as a
body, for our review work, for this report, or for the conclusion we have formed.
Directors’ responsibilities
The interim financial statements are the responsibility of, and has been approved by, the directors of RM2 International S.A. The
AIM Rules of the London Stock Exchange require that the accounting policies and presentation applied to the financial information
in the interim financial statements are consistent with those adopted in the annual accounts having regard to the accounting
standards applicable for such accounts.
As disclosed in note 1, the annual financial statements of the Company are prepared in accordance with International Financial
Reporting Standards as adopted by the European Union. The financial information included in the interim financial statements has
been prepared in accordance with the basis of preparation in note 1.
Our responsibility
Our responsibility is to express to the Company a conclusion on the financial information in the interim financial statements based
on our review.
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Page
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, ‘Review of
Interim Financial Information Performed by the Independent Auditor of the Entity’. A review of interim financial information
consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and
other review procedures. A review is substantially less in scope than an audit conducted in accordance with International
Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the financial information in the interim
financial statements for the nine months ended 31 July 2013 is not prepared, in all material respects, in accordance with the basis
of accounting described in note 1.
Yours faithfully
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Page
SECTION D: Unaudited interim information on Equipment Tracking for the nine months ended 31 July 2013
9 MONTHS
NOTES
Revenue
2
9 MONTHS
ENDED
ENDED
31 JULY 2013
USD
31 JULY 2012
USD
1,096,324
(1,025,460)
973,951
(782,031)
Operating profit
Finance Income
Finance costs
3
4
70,864
–
(2,475)
191,920
29
(2,890)
Profit before income tax
Income tax
5
68,389
(13,271)
189,059
(38,316)
Profit for the period
55,118
150,743
(6,208)
48,910
(3,093)
147,650
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Page
Interim statement of financial position as at 31 July 2013
NOTES
Assets
Non-current assets
Current assets
6
7
Total assets
AS AT
31 JULY 2013
USD
AS AT
31 JULY 2012
USD
148,139
101,479
148,139
101,479
238,834
34,211
291,443
35,591
273,045
327,034
421,184
428,513
Equity
Called up share capital
Retained earnings
Other reserves
165
90,412
(1,116)
165
129,609
460
Total equity
89,461
130,234
8
35,814
–
8
9
33,653
209,460
52,796
56,309
184,785
57,185
295,909
298,279
Total liabilities
331,723
298,279
421,184
428,513
Liabilities
Current liabilities
Current borrowings
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Page
Interim statement of changes in equity for the 9 months ended 31 July 2013
1 November 2011
Dividends paid
CALLED UP
RETAINED
OTHER
TOTAL
SHARE CAPITAL
EARNINGS
RESERVES
EQUITY
USD
USD
USD
USD
165
–
26,117
(47,251)
3,553
–
29,835
(47,251)
–
(47,251)
–
(47,251)
–
–
150,743
–
–
(3,093)
150,743
(3,093)
–
150,743
(3,093)
147,650
31 July 2012
Dividends paid
165
–
129,609
(46,391)
460
–
130,234
(46,391)
–
(46,391)
–
(46,391)
–
–
45,077
–
–
4,632
45,077
4,632
–
45,077
4,632
49,709
165
–
128,295
(93,001)
5,092
–
133,552
(93,001)
–
(93,001)
–
(93,001)
–
–
55,118
–
–
(6,208)
55,118
(6,208)
–
55,118
(6,208)
48,910
165
90,412
(1,116)
89,461
31 October 2012
Dividends paid
31 July 2013
127
Page
Interim statement of cash flows for the nine months ended 31 July 2013
9 MONTHS
Profit before tax
Depreciation charges
Decrease/(increase) in trade and other receivables
Increase in trade and other payables
Effects of foreign currency
Interest paid
Interest received
Cash generated from operations
Interest paid
Taxation paid
9 MONTHS
ENDED
ENDED
31 JULY 2013
USD
31 JULY 2012
USD
68,389
17,701
12,685
13,989
(1,984)
2,475
–
113,255
(2,475)
–
189,059
16,585
(180,031)
7,588
(1,628)
2,890
(29)
34,434
(2,890)
–
Net cash inflow from operating activities
110,780
31,544
Purchase of property, plant and equipment
Interest received
(16,819)
–
(12,734)
29
Net cash outflow from investing activities
(16,819)
(12,705)
Repayments of finance lease arrangements
Dividends paid
(15,054)
(93,001)
(15,068)
(47,251)
Net cash outflow from financing activities
(108,055)
(62,319)
(14,094)
43,814
29,720
(43,480)
66,969
23,489
Decrease in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
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Page
GENERAL INFORMATION
Equipment Tracking is a technology company providing software solutions to various industries.
Equipment Tracking is a limited company domiciled in the United Kingdom and incorporated under registered number 05274087
in England and Wales. Equipment Tracking’s registered office is Ty Matthew House, Llys Edmund Prys, St Asaph, Denbighshire,
LL17 0JA.
The unaudited interim consolidated financial statements do not constitute statutory accounts as defined in Section 404 of the
Companies Act 2006.
1.
BASIS OF PREPARATION AND ACCOUNTING POLICIES
The unaudited interim financial information for the nine months ended 31 July 2013 has been prepared following the
recognition and measurement principles of IFRS as adopted by the European Union. The interim financial information
does not include all the information and disclosures required in the annual financial information, and should be read in
conjunction with Equipment Tracking’s historical financial information for the years ended 31 October 2010, 31 October
2011 and 31 October 2012.
The accounting policies and basis of preparation adopted are consistent with those followed in the preparation of
Equipment Tracking’s historical financial information for the years ended 31 October 2010, 31 October 2011 and
31 October 2012. None of the newly applicable IFRS standards and amendments had an impact on Equipment Tracking’s
interim consolidated financial statements.
Equipment Tracking did not early adopt any new or amended standards and does not plan to early adopt any of the
standards issued but not yet effective.
SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
When preparing the interim financial information, management undertakes a number of judgements, estimates and
assumptions about recognition and measurement of assets, liabilities, income and expenses. The actual results may differ
from the judgements, estimates and assumptions made by management, and will seldom equal the estimated results.
The judgements, estimates and assumptions applied in the interim financial information, including the key sources of
estimation uncertainty, were the same as those applied in Equipment Tracking’s historical financial information for the
years ended 31 October 2010, 31 October 2011 and 31 October 2012.
2.
SEGMENT REPORTING
Operating segments are based on internal reports about components of the company, which are regularly reviewed and
used by the Board of Directors being the Chief Operating Decision Maker (“CODM”) for strategic decision making and
resource allocation, in order to allocate resources to the segment and to assess its performance.
Equipment Tracking’s operations are centred on software services to its customers. The business is structured as a single
entity company and its financial reporting is set to report to the CODM information as a whole. Management therefore
considers there to be only a single reporting segment covering the entire company although revenue analysis is provided
below. Therefore additional analysis of the figures reported in these financial statements is neither appropriate nor
necessary to enable users of the financial statements to evaluate the nature and financial effects of the business
activities.
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Page
An analysis of revenue is as follows:
9 MONTHS TO
31 JULY 2013
USD
9 MONTHS TO
31 JULY 2012
USD
1,084,644
11,680
895,766
78,185
1,096,324
973,951
9 MONTHS TO
31 JULY 2013
USD
9 MONTHS TO
31 JULY 2012
USD
1,096,324
973,951
9 MONTHS TO
31 JULY 2013
USD
9 MONTHS TO
31 JULY 2012
USD
–
29
9 MONTHS TO
31 JULY 2013
USD
9 MONTHS TO
31 JULY 2012
USD
2,303
172
2,890
–
2,475
2,890
9 MONTHS TO
31 JULY 2013
USD
9 MONTHS TO
31 JULY 2012
USD
Current tax:
Current tax on profits for the period
13,271
38,316
Taxation expense
13,271
38,316
Software services and licences
Pallet sales
The geographical split of revenue is as follows:
Europe
3.
FINANCE INCOME
Interest receivable
4.
FINANCE COSTS
Finance costs:
Finance lease interest
Bank interest
5.
TAXATION
Analysis of the tax charge
130
Page
Factors affecting the tax charge
The tax assessed for the year is lower than the standard rate of corporation tax in the UK. The difference is explained
below:
6.
9 MONTHS TO
31 JULY 2013
USD
9 MONTHS TO
31 JULY 2012
USD
Profit on ordinary activities before tax
68,389
189,059
Profit on ordinary activities multiplied by the standard rate
of corporation tax in the UK of 20%
13,678
37,812
Effects of:
Capital allowances for period in excess of depreciation
Effects of non deductible expenditure
Other differences
(1,146)
739
–
Total taxation
13,271
38,316
9 MONTHS TO
31 JULY 2013
USD
9 MONTHS TO
31 JULY 2012
USD
238,834
–
286,852
4,591
238,834
291,443
9 MONTHS TO
31 JULY 2013
USD
9 MONTHS TO
31 JULY 2012
USD
34,211
35,591
9 MONTHS TO
31 JULY 2013
USD
9 MONTHS TO
31 JULY 2012
USD
4,491
29,162
12,102
44,207
33,653
56,309
35,814
–
TRADE AND OTHER RECEIVABLES
Trade receivables
7.
CASH AND CASH EQUIVALENTS
Cash at bank
8.
(258)
762
–
BORROWINGS
Current
Bank overdrafts
Finance lease agreements
Non Current
Finance lease agreements (repayable between two and five years)
Interest rates are fixed for the term of the agreements which are payable by equal fixed monthly amounts.
131
Page
9.
TRADE AND OTHER PAYABLES
Trade payables
Accruals and deferred income
9 MONTHS TO
31 JULY 2013
USD
9 MONTHS TO
31 JULY 2012
USD
46,773
62,913
58,789
40,985
39,573
59,815
78,226
7,170
209,460
184,784
132
Page
PART VII
ADDITIONAL INFORMATION
1.
Responsibility statements
The Directors, whose names and functions are set out on page 4 of this document, and the Company, accept
responsibility, both individually and collectively, for all of the information contained in this document and for the
Company’s compliance with the AIM Rules for Companies. To the best of the knowledge and belief of the Directors and
the Company (who have taken all reasonable care to ensure that such is the case) the information contained in this
document is in accordance with the facts and does not omit anything likely to affect the import of such information. To
the extent that information has been sourced from a third party, this information has been accurately reproduced and,
as far as the Directors are aware and are able to ascertain from information published by that third party, no facts have
been omitted which may render the reproduced information inaccurate or misleading.
2.
Incorporation and registration
2.1
The Company, whose registered office is at, 5, rue de la Chapelle, L‐1325 Luxembourg, Grand Duchy of Luxembourg was
incorporated and registered in Luxembourg under the Luxembourg Companies Law on 23 October 2007 as a société
anonyme with registration number B 132 740.
2.2
The principal headquarters of the Company is 5 rue de la Chapelle, L‐1325 Luxembourg, Grand Duchy of Luxembourg. The
telephone number at this address is + 352 27 44 96 53. The address of the Company’s corporate website on which the
information required by Rule 26 of the AIM Rules for Companies can be found is www.rm2.com.
2.3
The principal activity of the Company is to act as a holding company. There are no exceptional factors which have
influenced the Company’s activities.
2.4
The Company is governed by its Articles and the principal legislation under which the Company operates is the
Luxembourg Companies Law and the regulations made thereunder. The corporate governance regime applicable to the
Company in Luxembourg is the Luxembourg Companies Law and the Company complies with such corporate governance
regime.
2.5
The Company has no commercial name other than its registered name and does not operate under any other name.
2.6
The Company’s auditors are Grant Thornton Lux Audit S.A., which is a member of the Insitut des Réviseurs d’Entreprises.
The address of Grant Thornton Lux Audit S.A. is 89A, Pafebruch, L‐8308 Capellen, Luxembourg.
2.7
The accounting reference date of the Company is 31 December.
2.8
The Company has no administrative, management or supervisory bodies other than the Board, the Audit Committee, and
the Remuneration Committee. In the past, the Company has had a number of other committees including a committee
to administer the 2012 Plan. The functions of these committees are being transferred to the Audit Committee and
Remuneration Committee, as appropriate.
2.9
The liability of the members of the Company is limited to the amount, if any, unpaid on the shares respectively held by
them.
2.10
Save as disclosed in this document, there are no undertakings in which the Company holds a proportion of the capital
that is likely to have a significant effect on the assessment of its own assets and liabilities, financial position or profits.
3.
Group organisation
3.1
A structure chart showing the Group structure is set out below showing each of the Subsidiaries and the percentage of
shares held:
133
Page
Corporate Chart
RM2 Europe Sp. Z.o.o.
Poland
RM2 Total Solutions
International B.V. (f.k.a.
Victoria Rises B.V.)
NL
RM2 Holland B.V.
NL
RM2 S.A.
RM2 Canada, Inc.
(fna 7636156 Canada Inc.)
CAN
Victoria Rises, Ltd.
RM2 France sarl
RM2 Total Solutions, Inc.
DE, USA
FR
RM2 IP S.A.
LUX
UK
LUX
RM2 S.A.
(Swiss Branch)
CH
RM2 USA Inc.
DE, USA
Equipment Tracking Ltd.
UK
3.2
RM2 S.A. was incorporated in Luxembourg on 7 January 2009. RM2 S.A. is 100 per cent. owned by the Company. The focus
of RM2 S.A. is making international sales on behalf of the Group.
3.3
IP Co was incorporated in Luxembourg on 20 September 2011. IP Co is 100 per cent. owned by the Company. IP Co was
established to hold intellectual property; however, the Group’s intellectual property is, in fact, primarily owned by RM2
S.A.. IP Co is a dormant company.
3.4
RM2 Holland was incorporated in the Netherlands on 25 October 2007. RM2 Holland is 100 per cent. owned by the
Company. The primary role of RM2 Holland is to act as an intermediate holding company.
3.5
Total Solutions Netherlands was incorporated in the Netherlands on 25 October 2007. Total Solutions Netherlands is 100
per cent. owned by the Company. The primary role of Total Solutions Netherlands is to act as an intermediate holding
company.
3.6
RM2 Poland was incorporated in Poland on 13 December 2011. RM2 Poland is 100 per cent. owned by the Company. RM2
Poland is a dormant company.
3.7
RM2 Canada was incorporated on 30 August 2010. RM2 Canada is 100 per cent. owned by RM2 Holland. The Group’s
main manufacturing and distribution facility is leased by RM2 Canada from a third party and is located at Mississauga in
Ontario, Canada.
3.8
RM2 France was incorporated in France on 11 May 2011. RM2 France is 100 per cent. owned by RM2 Holland. RM2 France
provides legal support to the rest of the Group.
3.9
VRL was incorporated in the United Kingdom on 5 May 2009. VRL is 100 per cent. owned by Total Solutions Netherlands.
VRL is a satellite service office of the Group.
3.10
Equipment Tracking was incorporated on 29 October 2004. Equipment Tracking is owned by Total Solutions Netherlands.
3.11
Total Solutions Inc was incorporated in Delaware on 30 October 2009. Total Solutions Inc is 100 per cent. owned by Total
Solutions Netherlands. Total Solutions Inc administers the Group’s pooling business.
3.12
RM2 Swiss Branch was registered in Switzerland as a branch of RM2 S.A. on 6 August 2009. RM2 Swiss Branch operates
as a sales unit of the Group and purchases a number of goods for processing in the Group’s manufacturing facilities.
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Page
3.13
RM2 USA was incorporated in Delaware on 25 May 2010. RM2 USA is 100 per cent. owned by RM2 S.A. The focus of RM2
USA is making sales in North America on behalf of the Group.
4.
Share capital
4.1
The issued share capital of the Company at the date of this document and on Admission is/will be:
Existing
At Admission
US$
1,561,827
3,162,437.51
NUMBER OF
ORDINARY SHARES
156,182,775
316,243,751
4.2
The par value of each Ordinary Share is US$0.01. There are currently 156,182,775 Ordinary Shares (including 12,308,775
Restricted Shares) in issue. The Company does not have any issued Ordinary Shares that are not fully paid up.
4.3
The Company’s authorised share capital is currently US$6,842,734.56.
4.4
In the period covered by the financial information set out in Part V of this document, there have been the following
changes to the Company’s issued share capital.
(a)
Before 15 March 2010, the Company’s issued share capital was 100,020 ordinary shares of US$1.00 each, divided
equally into ten classes, each class being designated with an identifying letter in a series from A‐J. On 15 March
2010, the Company issued 9,970 ordinary shares (comprising an issue of 10 ordinary shares of US$1.00 at a price
per ordinary share of US$46,231 and an issue of 9,960 ordinary shares at a price per ordinary share of US$1.00),
taking the Company’s total issued share capital to 109,990 ordinary shares of US$1.00 each.
(b)
On 14 June 2010, the Company issued ten ordinary shares at a price per ordinary share of US$999, taking the
Company’s total issued share capital to 110,000 ordinary shares of US$1.00 each.
(c)
On 19 August 2011, the Company issued 12,860 ordinary shares at a price per ordinary share of US$3,499, taking
the Company’s total issued share capital to 122,860 ordinary shares of US$1.00 each.
(d)
On 10 February 2012, the nominal value of each ordinary share was reduced from US$1.00 to US$0.45. The
ordinary shares were subdivided in a ratio of 1 to 1,000 through the creation of 122,737,140 additional ordinary
shares which were issued to shareholders on a pre‐emptive basis, taking the Company’s total issued share capital
to 122,860,000 ordinary shares of US$0.45 each. The Company’s share premium was then converted, taking the
Company’s total issued share capital to US$55,287,000, consisting of 122,860,000 ordinary shares of US$0.45
each.
(e)
On 11 October 2013, the Company’s issued share capital was reorganised. The Company’s share capital was
decreased by US$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.a.r.l.). Linked to such decrease in issued share
capital, the ordinary shares designated as J ordinary shares were cancelled. This took the Company’s total issued
share capital to US$45,330,956 consisting of 110,574,000 ordinary shares of US$0.45 each. Immediately
following this, the nominal value of the ordinary shares was reduced from US$0.45 to US$0.01. Following such
reorganisation, the Company’s issued share capital was US$1,105,740, consisting of 110,574,000 ordinary shares
of US$0.01 each.
(f)
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 US$0.01 each.
(g)
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 A‐I be converted into a
single class of ordinary share, being the Ordinary Shares.
(h)
On 26 November 2013, 11,025,000 Ordinary Shares were issued to certain officers, Directors and key employees
of the Company, taking the Company's total issued share capital to 143,874,000 Ordinary Shares.
135
Page
(i)
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.
4.5
In addition, the Company has issued options and warrants, details of which are set out in paragraphs 6 and 12 of this Part
VII.
4.6
The Directors may issue Ordinary Shares in the Company, within the limit of the Company’s authorised share capital from
time to time and subject to Shareholders’ rights of pre‐emption under the Luxembourg Companies Law (in the manner
described in more detail described in paragraph 11.3 of this Part VII). The Ordinary Shares are freely transferable.
4.7
The Ordinary Shares all rank pari passu with one another, having an equal right to participate in any dividend, distribution
or return of capital and having equal voting rights.
4.8
On Admission, the Company will issue 155,903,548 Placing Shares pursuant to the Placing.
4.9
The New Ordinary Shares will be issued pursuant to the authorities and powers set out in paragraph 11.3 of Part VII of
this document.
4.10
The New Ordinary Shares will rank pari passu in all respects with the Existing Ordinary Shares, including the right to vote
and to receive dividends and other distributions declared, made or paid after Admission.
4.11
The Directors shall, subject always to the Luxembourg Companies Law and any other applicable laws and regulations and
the facilities and requirements of CREST and the Articles, have the power to implement and/or approve any arrangements
they may, in their absolute discretion, think fit in relation to (without limitation) the evidencing of title to and transfer of
interests in shares in the Company in the form of Depositary Interests or similar interests, instruments or securities, and
to the extent such arrangements are so implemented, no provision of the Articles shall apply or have effect to the extent
that it is in any respect inconsistent with the holding or transfer thereof or the Ordinary Shares represented thereby. The
Directors may from time to time take such actions and do such things as they may, at their absolute discretion, think fit
in relation to the operation of any such arrangements.
4.12
The Ordinary Shares are in registered form and in book‐entry form. Following Admission, Ordinary Shares may be
delivered, held and settled in CREST by means of the creation of Depositary Interests, details of which are set out in
paragraphs 12(m) and 12(o) of this Part VII. A register of Ordinary Shares will be maintained by the Registrar and a register
of Depositary Interests will be maintained by the Depositary.
4.13
Save as disclosed in this document and as at the date of this document:
(a)
no share or loan capital of the Company has been issued or is proposed to be issued;
(b)
there are no outstanding convertible securities, exchangeable securities or securities with warrants issued by the
Company;
(c)
there are no Ordinary Shares in the Company not representing capital;
(d)
there are no Ordinary Shares in the Company held by the Company itself or by its Subsidiaries;
(e)
there are no acquisition rights and/or obligations over authorised but unissued share capital of the Company or
undertakings to increase the share capital of the Company;
(f)
no person has any preferential subscription rights for any share capital of the Company;
(g)
no commissions, discounts, brokerages or other special items have been granted by the Company since its
incorporation in connection with the issue or sale of any Ordinary Shares or loan capital of the Company; and
(h)
no share or loan capital of the Company is under option or agreed conditionally or unconditionally to be put
under option and no commissions, discounts, brokerages or other special terms have been granted by the
Company since its incorporation in connection with the issue or sale of any share or loan capital of the Company.
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Page
4.14
The Ordinary Shares have no redemption or conversion provisions.
4.15
Save as described in this document, the Company has not, nor has any member of the Group, declared any dividends
within the period covered by the historical financial information set out in Part V.
5.
Significant Shareholders
5.1
As at the date of this document, save for the persons set out below, the Directors are not aware of any beneficial holding
of Ordinary Shares representing three per cent. or more of the Company’s issued share capital nor, so far as the Directors
are aware, are there any persons who, directly or indirectly, jointly or severally, exercise control over the Company:
AT THE DATE OF
THIS DOCUMENT
NO OF ORDINARY
SHAREHOLDER
SHARES
Invesco Asset Management
Limited1
44,550,000
John Walsh
20,052,6802
Domestic Private Equity
Investors, LLC
15,809,9783
Matthew Gilfillan
5,094,000
1
2
3
IMMEDIATELY
ADMISSION
PERCENTAGE
SHAREHOLDING
FOLLOWING
PERCENTAGE
SHAREHOLDING
NO OF ORDINARY
SHARES
28.52
12.84
127,088,000
20,052,680²
40.19
6.34
10.12
3.26
11,090,702
5,094,000
3.51
1.61
The shares held by Invesco Asset Management Limited are owned by the following three funds:
1. Invesco Perpetual High Income Fund, a sub fund of the Invesco Perpetual UK Investment Series Investment Company with Variable Capital,
Company Number IC231;
2. Invesco Perpetual Income Fund, a sub fund of the Invesco Perpetual UK 2 Investment Series Investment Company with Variable Capital,
Company Number IC221; and
3. Invesco Perpetual UK Equity Pension Fund, a life fund of Invesco Perpetual Life Limited, Company Number 3507379.
Includes 6,552,680 Restricted Shares
Pursuant to the DPE Warrants described in paragraph 12(b) of Part VII
5.2
The voting rights attaching to the Ordinary Shares are set out in paragraph 11.13 of this Part VII. Significant Shareholders
in the Company do not have different voting rights to other holders of Ordinary Shares.
6.
Share options and Restricted Shares
6.1
The 2013 Plan
Pursuant to the Company’s current employee share option plan (the “2013 Plan”), the Company has granted options over
1,917,000 Ordinary Shares (“2013 Options”) to 18 of the Group’s key employees (“2013 Optionholders”). One third of
the total number of 2013 Options granted to each 2013 Optionholder vests on each of the first three anniversaries of the
date of Admission, subject to on each such anniversary the 2013 Optionholder being an employee of the Group and not
having given notice to terminate their employment. Once the 2013 Options have vested, the exercise price per 2013
Option is the Placing Price.
6.2
Restricted Shares
Certain Directors have been granted Restricted Shares as set out in paragraph 7.2 of this Part VII. 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 per cent. higher than the Placing Price 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 per cent. 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
per cent. 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 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 US$0.01 each.
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Page
6.3
Authority to grant further options and Restricted Shares
The Directors are authorised to grant further options over Ordinary Shares, and/or Restricted Shares, up to a further
aggregate amount of US$62,053.86 as part of future equity incentive arrangements. However, no such further grants have
been approved or made as at the date of this document.
7.
Directors’ shareholdings and other interests
7.1
The beneficial interests of each of the Directors or any member of their family (as defined in the AIM Rules for Companies)
in the share capital of the Company at the date of this document and immediately following Admission are expected to
be as follows:
AT THE DATE OF
IMMEDIATELY
ADMISSION
THIS DOCUMENT
NAME
Ian Molson
John Walsh
Ashavani Mohindra
Jan Dekker
Charles Duro
Sir Stuart Rose
Amaury de Seze
Paul Walsh
NO. OF ORDINARY
SHARES*
3,951,340
20,052,680
2,034,000
2,124,000
315,000
819,085
819,085
819,085
% SHAREHOLDING
2.53
12.84
1.3
1.36
0.2
0.52
0.52
0.52
FOLLOWING
NO. OF ORDINARY
SHARES*
3,951,340
20,052,680
2,034,000
2,124,000
315,000
819,085
819,085
1,103,176
% SHAREHOLDING
1.25
6.34
0.64
0.67
0.10
0.26
0.26
0.35
* Includes Restricted Shares held by relevant Director as detailed in paragraph 7.2 below.
7.2
On Admission, the Directors and their families (as described in the AIM Rules for Companies) will have the following
Restricted Shares:
NAME
Ian Molson
John Walsh
Ashavani Mohindra
Jan Dekker
Charles Duro
Sir Stuart Rose
Amaury de Seze
Paul Walsh
DATE OF
GRANT
19 November 2013
19 November 2013
–
–
19 November 2013
19 November 2013
19 November 2013
19 November 2013
NUMBER OF
RESTRICTED SHARES
3,276,340
6,552,680
–
–
22,500
819,085
819,085
819,085
7.3
The Directors and applicable employees (as defined in the AIM Rules for Companies) have agreed not to dispose of any
interest in Ordinary Shares for a period of one year from Admission pursuant to the terms of the Lock‐in Arrangements,
details of which are summarised in paragraph 12(l) of this Part VII. Each such Locked‐In Shareholder has agreed, for a
further year, only to dispose of any interest in Ordinary Shares through Cenkos in order to maintain an orderly market for
the Ordinary Shares.
7.4
Save as disclosed in this document, none of the Directors has any interest, whether beneficial or non‐beneficial, in the
issued share capital or loan capital of any member of the Group.
7.5
Save as disclosed in this document there are no outstanding loans granted by any member of the Group to any of the
Directors and there are no guarantees provided or security given by any member of the Group for the benefit of any of
the Directors.
7.6
Save as set out above in this Part VII, no Director nor any member of his family (as defined in the AIM Rules for
Companies) has a related financial product (as defined in the AIM Rules for Companies) referenced to the Ordinary Shares
being admitted.
138
Page
7.7
The date when each Director was appointed to the Board of the Company (notwithstanding that they may have been
directors of other companies in the group before such date) is set out below:
NAME
Ian Molson
John Walsh
Ashavani Mohindra
Jan Dekker
Charles Duro
Sir Stuart Rose
Amaury de Seze
Paul Walsh
8.
DATE OF APPOINTMENT
11 October 2013
5 March 2009
11 October 2013
18 December 2008
23 October 2007
11 October 2013
14 November 2013
11 October 2013
Directors’ service agreements and letters of appointment
Service Agreement of John Walsh
8.1
On 6 November 2013 the Company entered into a service agreement with John Walsh. Mr Walsh is employed to act as
the Chief Executive Officer on a full time basis. Mr Walsh is entitled to a basic salary of £250,000 per annum, which he
may receive for services to any Group Company. In addition, Mr Walsh is entitled to participate in any discretionary bonus
scheme which the Board may determine, in its absolute discretion, from time to time. The Company may deduct any
amounts Mr Walsh owes to the Company from his salary or bonus payments. In addition to the entitlements under his
service agreement, Mr Walsh has been granted Restricted Shares as set out in paragraph 7.2 of this Part VII.
8.2
Either party may terminate Mr Walsh’s employment by giving 12 months’ written notice. The Company may elect to pay
Mr Walsh in lieu of notice. The Company may terminate Mr Walsh’s contract with immediate effect in certain
circumstances, including if Mr Walsh is convicted of a criminal offence, becomes bankrupt, or on grounds of gross
misconduct. Notwithstanding the notice provisions relating to his employment, Mr Walsh may not resign as a director of
the Company (or of any Group Company) without the prior approval of the Board.
8.3
Mr Walsh has also given certain non‐compete and non‐solicitation covenants covering 12 months following termination
of his employment. Mr Walsh has also given certain customary covenants including in respect of confidentiality and
ownership of intellectual property. Mr Walsh’s employment with the Group, under a previous contract, commenced on
26 October 2007.
Service Agreement of Ashavani Mohindra
8.4
On 16 October 2013 VRL entered into a service agreement with Ashavani Mohindra. Mr Mohindra is employed to act as
Chief Financial Officer for the Group on a full time basis. Mr Mohindra has, in addition, been appointed to the Board of
the Company. Mr Mohindra is entitled to a basic salary of £150,000 per annum which he may receive for his services to
any Group Company. In addition, Mr Mohindra is entitled to participate in any discretionary bonus scheme which the
Board may determine, in its absolute discretion, from time to time. The Company may deduct any amounts Mr Mohindra
owes to the Company from his salary or bonus payments.
8.5
Either party may terminate Mr Mohindra’s employment by giving 12 months’ written notice. The Company may elect to
pay Mr Mohindra in lieu of notice. The Company may terminate Mr Mohindra’s contract with immediate effect in certain
circumstances, including if Mr Mohindra is convicted of a criminal offence, becomes bankrupt, or on grounds of gross
misconduct. Notwithstanding the notice provisions relating to his employment, Mr Mohindra may not resign as a director
of the Company (or of any Group Company) without the prior approval of the Board.
8.6
Mr Mohindra has also given certain non‐compete and non‐solicitation covenants covering 12 months following
termination of his employment. Mr Mohindra has also given certain customary covenants including in respect of
confidentiality and ownership of intellectual property. Mr Mohindra’s employment with VRL, under a previous contract
commenced on 5 May 2009.
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Page
Mandate agreements for the appointment of the Non-Executive Directors
8.7
The Company has entered into mandate agreements with each of the Non‐Executive Directors (the “Appointment
Letters”) each of which is, save as set out below, in identical form.
8.8
Pursuant to the Appointment Letters, each Non‐Executive Director other than Ian Molson is entitled to a director’s fee of
US$80,000 per annum, paid quarterly in arrears. Ian Molson is entitled to a director’s fee of US$160,000 per annum, paid
quarterly in arrears. In addition, certain Non‐Executive Directors have been granted Restricted Shares as set out in
paragraph 7.2 of this Part VII.
8.9
Under the terms of the appointment, each Non‐Executive Director is appointed for an initial one year term, ending on the
date of the Company’s annual general meeting to approve the 2013 annual accounts. The appointment may be
terminated earlier by either party giving two months’ written notice. In addition, the Company may terminate the
appointment early in certain customary circumstances including dishonesty, gross misconduct or where the Non‐
Executive Director commits any act which brings the Company into disrepute.
8.10
The Appointment Letter does not specify a minimum time commitment. However, each Non‐Executive Director
confirmed that he was able to allocate sufficient time to meet the expectations generally expected of a Non‐Executive
Director and confirmed that he had notified the Board of other business commitments and had declared any potential
conflicts. The Company may require a Non‐Executive Director to relinquish any external position if the Board believes
such positions compromise his ability to carry out the role. Each Non‐Executive Director has covenanted not, during the
appointment or for one year thereafter, to be employed or engaged by, or acquire a material financial interest in, any
entity which competes with the Group. Each Non‐Executive Director has also given undertakings as to, amongst other
things, confidentiality and ownership of intellectual property.
9.
Additional information on the Board
Save as set out below, none of the Directors is, nor has been within the five years prior to the publication of this
document, a partner in any partnership. Save as set out below, none of the Directors has held directorships of a company,
wheresoever incorporated, within the five years prior to the date of this document. Within the five years prior to the
publication of this document, the Directors hold or have held the following directorships or partnerships:
CURRENT
PAST
NAME
Ian Molson
DIRECTORSHIPS/PARTNERSHIPS
Alphatec Spine Inc.
Cayzer Continuation PCC Ltd
Central European Petroleum Ltd
Healthpoint LLC
The Royal Marsden NHS Foundation
Trust
The Royal Marsden Cancer Charity
Lennox Investment Management LLP
Sapphire Industrials Corp.
Scient’x
World Gold Systems Limited
John Walsh
RM2 Plc
RM Squared Limited
Ashavani Mohindra
Victoria Rises Ltd
RM2 Plc
RM Squared Limited
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CURRENT
PAST
NAME
Sir Stuart Rose
A. Levy & Son Limited
No Exclusions Limited
Wheb LLP
Stylemania Ltd
Dorsub (DPR) Limited (Ireland)
Ocado Group plc
Blue Inc
Dressipi
Fat Face Group Limited
The Oasis Healthcare Group Limited
Soak & Sleep Holdings Limited
Soak & Sleep Limited
Booker plc
Arcadia Group
Marks and Spencer plc
Paul Walsh
Avanti Communications Group Plc
Unilever Plc
FedEx Corporation
United Spirits Limited
Centrica Plc
Diageo Plc
Jan Dekker
Pamoja Business Holding SA
John Taylor Corporate
Therabel Europe Limited
Zap Holding SA
Therabel Pharmaceuticals Limited
Sopal International SA
Therabel Pharma NV
RM2 S.A.
RM2 IP S.A.
RM2 Total Solutions International B.V.
RM2 Holland B.V.
Oxbow Sulphur & Fertiliser S.a.r.l.
Amaury de Seze
Carrefour S.A
BW Group
Erbe S.A.
Groupe Bruxelles Lambert
Imerys
Publicis Group
Suez Environnement Company
PAI Partners S.A.S
Pargesa Holding S.A.
Thales
Industriel Marcel Dassault S.A.S.
Gras Savoye S.C.A
Power Financial Corporation
Charles Duro
3M Management SA
6543 Luxembourg S.A.
Agregat S.A.
Alissia SA
Amanthus SA
Aquarius International SA
Astonia S.A.
ATF Investissements SA
Avaton SARL
B.O.A Participants
Bahnhof Holdings S.A.
Barnley Properties SA
Bemol SA
Arun Immobiliere SA
Ast Investments SA
Beyond SA
Bluedream SA
Brothers Holding SA
Butterfly Participation SA
Caprice SA
Ceigems SA
Cim Global SA
Cygnus SA
Dellen Participation SA
Dreamline Participation SA
Empha SA
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CURRENT
NAME
Charles Duro (Cont.) BHL S.A.
Bluet S.A.
Bolero Investments S.A.
Bouganvillea SA
Caelum SARL
Carthesio Holding SA
Casuarina SA
Ceigems S.A.
Cenoby SA
Chateau Neuf Investment SA
CM Capital Markets SA
Combourg SA
Compagnie Financiere
Francaise S.A.
Compass Rose SA
Gutty S.A.
Dellen Participation SA
Delphin Participation SA
Diamarys SARL
Drei Fluegel SA
Eagle River SA
Ecomulsion Fuel Solutions SA
Ecomulsion Holdings SA
Epazote SA
European Resorts S.A.
Ferlim S.A.
Fie SA
Fin Claude SA
Financiere De Diekirch
Fininvest SARL
Finvela SA
Four J's Development Tools Holding SA
Francois 1ER Investment & Property
GCB Coal Holding SA
Global Offshore S.A.
Greisendall S.A.
Greisendall Holding S.A.
Gresis SA
H.F.I. S.A.
Happyness Holding S.A.
Hoffman & Clark Investments SA
ICEC Holding SARL
ICEC Holding 2 SARL
Ideology S.A.
IFG Continent Holding SA
Inforad Holding SA
Japi SA
J‐Fin SA
J‐Group Invest SA
Joint Bulk Investors S.A.
Kangaroo Invest SA
Koenigsallee LP S.a.r.l
Koenigsallee LP II S.a.r.l
Koenigsallee LP III S.a.r.l
PAST
Enrc Investments Sàrl
E.R.D. Financiere SA
Far Sud SA
Fin Group SA
Gear Investments & Properties SA
Giar SA
Halter SA
Hawthorn Participation SA
Hazon SA
H.L. Heavy Load SA
Immolux Holding SA
Imperial Life Finance Sàrl
Innovision Holding SA
Interimmobiliere SA
International Trade Service SA
Inter Republic SA
Investmarket Holding SA
ISG Immobiliere SA
I.T. Consult SA
J2CG SA
Kairos Estate SA
Koine Hestia SA
(MCV) Koenigsallee Fixtures Sàrl
(MCV) Koenigsallee GP Sàrl
Kyriel SA
Latione SA
Lubaz SA
Lux Board SA
Mafic SA
Marsango Financiere SA
Marine Investments SA
Merc‐Invest SA
Moorsee Investments SA
Neptunia SA
New Land SA
Open Invest SA
Padouhann SA
Palladiana Investment SA
Rafael Productions SARL
Randea SA
Red‐Real Estate Developments SA
Restart SA
RM2 Partners SA
Rm Trading Lux SA
Ruban Bleu Holding SA
Russia Contact Center SA
SIA World SA
SET Management Sàrl
SDI Societe de Developpement
Immobilier SA
Sirej SA
Stargate SA
Steel Lux SA
Tarco Oil International SA
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CURRENT
NAME
Charles Duro (Cont.) Koenigsallee LP IV S.a.r.l
Koenigsallee LP V S.a.r.l
Kroon Shipping International S.A.
La Capite S.A.
Lady Holding S.A.
La Grande Viree SA
Limpiditi SA
LRD SA
Luxbus SA
Luxco 66 sarl
Machiavelli re SA
Manestan S.A.
Martingale SA
Mazel SA
MMB S.A.
Nilimmo SA
Northern Stone S.A.
Novaplot SARL
Nova Spirit Invest SA
NYSA Horizont SA
Oikia Holding SA
Overware S.A.
Oxbow Luxembourg SARL
Oxbow Luxembourg Latinamerica
Holding SARL
Oxbow Suphur & Fertiliser
Palan S.A.
Pamoja Business Holdings SARL
Pamoja Education Holdings SARL
Pamoja Holdings LUX 1 SARL
Placements Financiers et Industriels S.A.
Preinvestment Holding SA
Red Cedar SARL
Rey Project International SA
RM2 SA
RM2 IP SA
Romarine SA
Royal Flush SA
Ruggell SA
Saler S.A.
San Carlos Systems SA
Savannah Investments SA
Savox S.A.
Savox International S.A.
Savox Investments S.A.
SBS (Luxembourg) Holding SARL
SBT Star Bulk & Tankers A.G.
Scolbel Participations SA
Sheik Coast S.A.
Shipping et Industry S.A.
Siriade SA
Sirius Holding SA
Siro SA
So.Co.Mai S.A.
PAST
Thermic Investments SA
Trentelacs SA
Valuable Assets SA
Viking Capital SA
Viking River Cruises SA
Vitale Holding SA
Vittoria Participations SA
Winni SA
World Company SA
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CURRENT
NAME
Charles Duro (Cont.) So.De.Co LUX S.A.
Softpar S.A.
Spirit of Adventure S.A.
Spirit of Discovery SA
Spirit of the Enterprise S.A
Sunray Investment SA
Superplast S.A.
Ta Venture SA
THA SA
Thaleya SA
Thermidor SA
Therabel Sarl
Tradewi SA
Travinter S.A.
Trentelacs S.A.
Two Stars SA
Verbena Investissements SA
Vetrelli S.A.
Viking Croisieres S.A.
Watford S.A.
Webfinance S.A.
Welku S.A.
Zapfi International SA
Zapfi Network International SA
Zapfunding SARL
Zapholding SA
Zunis S.A.
Leman Holding A/S
Leman International System Transport
A/S
Nauta S.A.
Viking Capital S.A.
Viking River Cruises LTD
PAST
The full names of each of the Directors are: John James Walsh, Robert Ian Molson, Paul Steven Walsh, Sir Stuart Alan
Rawson Rose, Jan Arie Dekker, Charles Jean Marie Duro, Ashavani Kumar Mohindra, and Amaury Daniel de Seze.
9.1
Save as disclosed in this document, no Director has:
(a)
any unspent convictions in relation to indictable offences;
(b)
had a bankruptcy order made against him or entered into an individual voluntary arrangement;
(c)
been a director of a company which has been placed in receivership, compulsory liquidation, creditors’ voluntary
liquidation, administration or company voluntary arrangement or which entered into any composition or
arrangement with its creditors generally or any class of its creditors whilst he was a director of that company or
within the 12 months after he ceased to be a director of that company;
(d)
been a partner in any partnership placed into compulsory liquidation, administration or partnership voluntary
arrangement where such Director was a partner at the time of or within the 12 months preceding such event;
(e)
been subject to the receivership of any asset of such Director or of a partnership of which the Director was a
partner at the time of or within 12 months preceding such event; or
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(f)
received public criticisms by statutory or regulatory authorities (including designated professional bodies) and
no Director has been disqualified from acting as a director of a company or from acting in the management or
conduct of the affairs of any company.
9.2
Ian Molson was a non‐executive director of EFDEX, Inc. which was put into insolvent liquidation on 15 September 2000
and wound up on 20 January 2003.
9.3
Save as disclosed in this document, no Director has been interested in any transaction with the Company which was
unusual in its nature or conditions, or significant to the business of the Company during the current financial year which
remains outstanding or unperformed.
10.
Employees
As at 31 December 2012, the Group had 51 employees. As at 30 June 2013, being the latest date for which full figures are
available, the Group employed 77 staff. Equipment Tracking, which became part of the Group following completion of the
agreement described in paragraph 12(h) of Part VII, had 22 employees, as at the latest date for which figures are available.
11.
Articles of Association
The Articles, which were adopted by the Shareholders, conditional on Admission, in their current amended and restated
form pursuant to a resolution passed at an extraordinary general meeting of the Company held on 14 November 2013,
contain provisions which are summarised below in this paragraph 11.
11.1
Duration
The Company is formed for an unlimited duration.
11.2
Authorised share capital
The authorised share capital of the Company is set at US$6,842,734.61. This may be increased from time to time by a
resolution of the Shareholders passed at an extraordinary meeting of Shareholders at which at least one half of the share
capital of the Company is represented (unless at an adjourned meeting) and by a majority of at least two thirds of the
votes cast (a “Special Majority”).
11.3
Alteration of share capital
All Ordinary Shares (which term for the purposes of this paragraph 11 includes any shares of any other class in the share
capital of the Company from time to time) shall be issued by the Company as fully paid‐up and in registered form.
Ordinary Shares may not be converted into bearer shares. No Ordinary Shares may be issued by the Company if such issue
would result in the issued share capital of the Company exceeding the authorised share capital of the Company from time
to time.
Within the limits of the overall authorised capital, the Board is authorised and empowered to issue new Ordinary Shares,
grant options exercisable into Ordinary Shares or rights to subscribe for or convert any instruments into Ordinary Shares,
against payment in cash or in kind, by contribution of claims, by capitalisation of reserves (including in favour of new
Shareholders) or in any other manner determined by the Board.
Under the Luxembourg Companies Law Shareholders are entitled to preferential subscription rights in respect of the
issuance of Ordinary Shares by the Company for cash (i.e. Shareholders hold pre‐emptive rights to subscribe for Ordinary
Shares issued by the Company for cash). The Board is, however, under the Articles authorised to issue such new Ordinary
Shares (or grant options exercisable into Ordinary Shares or rights to subscribe for or convert any instruments into
Ordinary Shares) up to the limit of the authorised share capital by cancelling or limiting the existing Shareholders’
preferential right to subscribe for the new Ordinary Shares (or options exercisable into new Ordinary Shares, or
instruments convertible into new Ordinary Shares) (with the effect that such Ordinary Shares can be issued on a non pre‐
emptive basis):
(a)
in relation to an employee share option scheme up to the amount of US$62,053.86; and
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(b)
in respect of the issue of the New Ordinary Shares in relation to Admission.
The authorisations referred to above will expire on the fifth anniversary of the publication of the Articles in their current
form in the Luxembourg official gazette (Mémorial) and can be renewed in accordance with the applicable legal
provisions.
11.4
Reductions of share capital
The issued share capital and the authorised capital of the Company may be reduced from time to time by a resolution of
the Shareholders passed at an extraordinary meeting by way of a Special Majority.
In the case of a reduction of issued share capital, if the reduction is to be carried out by means of a repayment to
Shareholders, creditors whose claims predate the publication in the Mémorial of the minutes of the Shareholders’
meeting deciding the capital reduction may, within 30 days from such publication, apply for the constitution of security
to the judge presiding at the chamber of the Tribunal d’Arrondissement. The president may only reject such an application
if the creditor already has adequate safeguards or if such security is unnecessary, having regard to the assets of the
Company.
No payment may be made or waiver given to the Shareholders until such time as the creditors have obtained satisfaction
or until the judge presiding at the chamber of the Tribunal d’Arrondissement has ordered that their application should
not be acceded to.
11.5
Variation of rights
The rights attached to Ordinary Shares may be varied with the approval of Shareholders in general meeting by way of
Special Majority (as applied separately to each class of Ordinary Shares in the case of more than one class).
11.6
Ownership of Ordinary Shares
The Company is obliged to maintain a register of Shareholders containing details of each Shareholders’ shareholding.
Ownership of Ordinary Shares shall be established by an entry in the register.
11.7
Indirect holdings of Ordinary Shares
Where Ordinary Shares are recorded in the register of Shareholders on behalf of one or more persons (the “Indirect
Holders”) in the name of a securities settlement system or the operator of such a system or in the name of a professional
depositary of securities or any other depositary (such systems, professionals or other depositaries being referred to
hereinafter, for the purposes of this paragraph, as “Depositaries” and each a “Depositary”) or of a sub‐depositary
designated by one or more Depositaries, the Company, subject to its having received from the Depositary with whom
those Ordinary Shares are kept in account a certificate in proper form, will permit the Indirect Holders to exercise the
rights attaching to those Shares, including admission to and voting at Shareholders’ meetings, and shall consider those
persons to be the Shareholders.
The Company will make payments, by way of dividends or otherwise, in cash, shares or other assets only into the hands
of the Depositary or sub‐depositary recorded in the register of Shareholders of the Company or in accordance with their
instructions, and that payment shall release the Company from any and all obligations for such payment.
11.8
Transfers of Ordinary Shares
The Ordinary Shares of the Company are free from restrictions on transfer subject to the provisions below.
Transfers shall, save in the circumstances set out below in this paragraph 11.8, be carried out by means of a declaration
of transfer entered in the share register of the Company, dated and signed by the transferor and the transferee or by their
duly authorised representatives, and in accordance with the rules on the assignment of claims laid down in article 1690
of the Luxembourg Civil Code. The Company may accept and enter in the register a transfer on the basis of
correspondence or other documents recording the agreement between the transferor and the transferee.
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The Board may, subject to any applicable law, permit Ordinary Shares to be held in uncertificated form and to be
transferred without an instrument of transfer by means of a Depositary (including, without limitation, CREST).
Where Ordinary Shares are permitted to be transferred by means of a Depositary and the Company is entitled under any
applicable law, the Articles or any applicable regulations to sell, transfer, dispose of, forfeit, accept the surrender of or
otherwise enforce a lien over an Ordinary Share held in uncertificated form without an instrument of transfer, the
Company shall be entitled, subject to any applicable law, the Articles, any applicable regulations and the facilities and
requirements of the Depositary:
(a)
to require the holder of that uncertificated Ordinary Share by notice to change that Ordinary Share into
certificated form within the period specified in the notice and to hold that Ordinary Share in certificated form so
long as required by the Company;
(b)
to require the holder of that uncertificated Ordinary Share by notice to give any instructions necessary to transfer
title to that Ordinary Share by means of the Depositary within the period specified in the notice;
(c)
to require the holder of that uncertificated Ordinary Share by notice to appoint any person to take any step,
including, without limitation, the giving of any instructions by means of the Depositary, necessary to transfer that
Ordinary Share within the period specified in the notice; and
(d)
to take any action that the Board considers appropriate to achieve the sale, transfer, disposal of, forfeiture or
surrender of that Ordinary Share or otherwise to enforce a lien in respect of it.
The Directors shall, subject always to any applicable law and the facilities and requirements of any Depositary concerned
and the Articles, have power to implement and/or approve any arrangements they may, in their absolute discretion, think
fit in relation to the evidencing of title to and transfer of interests in Ordinary Shares in the capital of the Company in the
form of depositary interests or similar interests, instruments or securities, and to the extent such arrangements are so
implemented, no provision of the Articles shall apply or have effect to the extent that it is in any respect inconsistent with
the holding or transfer thereof or the Ordinary Shares in the capital of the Company represented thereby. The Directors
may from time to time take such actions and do such things as they may, in their absolute discretion, think fit in relation
to the operation of any such arrangements.
11.9
Takeovers
Compulsory Sale
If a person (the “Offeror”) makes an offer, being an offer on terms which are the same in relation to all the Ordinary
Shares to which the offer relates and, as a result of making that offer, the Offeror has by virtue of acceptances of the offer
acquired or contracted to acquire not less than nine‐tenths in value of the Ordinary Shares to which the offer relates, the
Offeror may by written notice to the Company require the Company as agent for the Offeror to serve notices (each a
“Compulsory Purchase Notice”) on the holders of Ordinary Shares to which the offer relates who have not accepted such
offer (the “Minority Shareholders”) requiring them to sell such Ordinary Shares at the same price per share offered to
any person identified by the Offeror. The Company shall serve the Compulsory Purchase Notices forthwith and for 28 days
from the service of the Compulsory Purchase Notice the Minority Shareholders shall not be entitled to transfer their
Ordinary Shares to anyone except the Offeror (or any other person identified by the Offeror).
The Offeror shall complete the purchase of all Ordinary Shares in respect of which a Compulsory Purchase Notice has
been given at the same time and in any event no later than 21 days from the date of the serving of such Compulsory
Purchase Notice. The consideration shall be payable in cash by cheque in full without any set off. The Directors shall not
register any transfer to the Offeror and the Offeror shall not be entitled to exercise or direct the service of any rights in
respect of any Ordinary Shares to be transferred to the Offeror until in each case the Offeror has fulfilled all his payment
obligations.
If in any case a Minority Shareholder, on the expiration of 28 days from the service of the Compulsory Purchase Notice,
shall not have transferred his Ordinary Shares to the person identified by the Offeror, the Directors may authorise another
person to execute and deliver on his behalf any necessary transfer in favour of the Offeror or the person identified by the
Offeror and provided the Company has received the purchase money in respect of such Ordinary Shares, the Directors
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shall thereupon (subject to the transfer being duly stamped) cause the name of the Offeror (or the person identified by
the Offeror) to be entered into the register of Shareholders as the holder of the relevant Ordinary Shares. The Company
shall hold the purchase money in trust for the Minority Shareholder but shall not be bound to earn or pay interest
thereon. The receipt by the Company of the purchase money shall be a good receipt for the price for the relevant
Ordinary Shares but the Offeror shall not be discharged from procuring that the Company applies the money in payment
to the Minority Shareholder which shall be made against delivery by the Minority Shareholder of the certificate in respect
of the relevant shares or an indemnity in respect of the same. After the name of the Offeror (or the person identified by
the Offeror) has been entered in the register of Shareholders in purported exercise of any aforesaid powers the validity
of the proceedings shall not be questioned by any person.
Compulsory purchase
If an Offeror makes an offer, being an offer on terms which are the same in relation to all the Ordinary Shares to which
the offer relates and, as a result of making that offer, the Offeror has by virtue of acceptances of the offer acquired or
contracted to acquire not less than 90 per cent. in value of all voting Ordinary Shares in the Company and which carry not
less than 90 per cent. of all voting rights in the Company, any Minority Shareholder may by written notice to the Offeror
(“Compulsory Sell-out Notice”) require him to acquire the Ordinary Shares held by such Minority Shareholder at the
same price per Ordinary Share offered to any person identified by the Offeror. A Compulsory Sell‐out Notice may not be
delivered by a Minority Shareholder after the end of the period which is three months from the end of the period within
which the offer can be accepted.
The Offeror shall complete the purchase of all Ordinary Shares in respect of which a Compulsory Sell‐out Notice has been
given at the same time and in any event no later than 21 days from the date of the service of such Compulsory Sell‐out
Notice. The consideration shall be payable in cash or by cheque in full without any set off. The Directors shall not register
any transfer to the Offeror and the Offeror shall not be entitled to exercise or direct the service of any rights in respect of
any Ordinary Shares to be transferred to the Offeror until in each case the Offeror has fulfilled all such payment
obligations. After the name of the Offeror (or the person identified by the Offeror) has been entered in the register of
Shareholders in purported exercise of any aforesaid powers the validity of the proceedings shall not be questioned by any
person.
11.10
Disclosure of voting rights in Ordinary Shares
To enable the Company to comply with its disclosure obligations under Rule 17 of the AIM Rules for Companies, the
provisions of rule 5 of the Disclosure Rules and Transparency Rules (“DTR 5”) relating to the requirement of a company’s
shareholders to disclose their total proportion of voting rights (as defined in DTR 5) are incorporated into the Articles.
Notwithstanding the time limits for disclosure set out in DTR 5, the Company is required by Rule 17 of the AIM Rules to
announce without delay the information contained in any notification made by a person pursuant to the Articles which
reflect rules set out in DTR 5. Under DTR 5 a person must notify a company to which DTR 5 applies of the percentage of
its voting rights he holds as a shareholder or through his direct or indirect holding of certain financial instruments (or a
combination of such holders) if the percentage of those voting rights reaches, exceeds or falls below three per cent. and
each one per cent. thereafter up to 100 per cent. as a result of an acquisition or disposal of shares or such financial
instruments.
The Directors shall keep a register recording the information contemplated above provided by Shareholders (the
“Register of Substantial Interests”) and shall procure that, whenever the Company receives information from a person in
consequence of the fulfilment of a disclosure obligation imposed on him by the Articles, that information is within three
business days thereafter written up in the Register of Substantial Interests against that person’s name, together with the
date of the inscription. The Register of Substantial Interests shall be kept at the registered office of the Company or at any
other place determined by the Directors.
11.11
Directors
The Board must consist of at least three Directors but no more than 11 Directors. Directors need not be Shareholders.
The Directors are appointed for a duration determined by the Shareholders’ meeting which may not exceed three years
and in case no duration is specified by the Shareholders’ meeting the relevant Director(s) shall be deemed appointed for
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one year. Directors may be removed at any time, with or without cause, by a resolution of the Shareholders (and may be
appointed by a resolution of Shareholders).
In the event of a vacancy arising for a member of the Board previously appointed by the Shareholders, because of death,
retirement or otherwise, the remaining Directors may elect, by majority vote, a person who is willing to act as a Director
to fill such vacancy until the next Shareholders’ meeting which will be asked to ratify such election.
Unless otherwise decided by the Shareholders by ordinary resolution, the Company may pay to the Directors for their
services as Directors such amount of aggregate fees as the Board decides. Such fee is distinct from any salary,
remuneration or other amount payable to him pursuant to other provisions of the Articles or of a service agreement in
relation to any of the executive directors or otherwise and accrues from day to day.
A Director is entitled to be reimbursed all reasonable travelling, hotel and other expenses properly incurred by him in the
performance of his duties as Director.
The quorum necessary for deliberating or acting validly is half of the Directors present in person or represented by proxy.
All questions and decisions arising at a meeting of the Board are determined by a majority of votes cast.
The Board shall elect a chairman from among its members from time to time. In case of an equality of votes the chairman
has a second or casting vote.
Any Director having an interest in a transaction submitted for approval to the Board conflicting with that of the Company,
shall advise the Board thereof and cause a record of his statement to be included in the minutes of the meeting. He may
not take part in these deliberations. At the next following Shareholders’ meeting, before any other resolution is put to
vote, a special report shall be made on any transactions in which any of the Directors may have had an interest conflicting
with that of the Company.
The Board may establish various committees which may include non Board members and shall establish all such
committees as may be required by applicable law or the AIM Rules for Companies. The Board may delegate certain of its
powers, authorities and discretions (with power to sub‐delegate) to such committee as it thinks fit.
11.12
Auditors
The Company shall have one or more statutory auditors appointed by vote of the Shareholders’ meeting for a maximum
duration of six years (in case the statutory auditors are elected without mention of the term of their mandate, they are
deemed to be elected for six years from the date of their election) except where Luxembourg law requires that the
Company appoints one or more independent auditors (réviseur(s) d’entreprises agréé(s)). The independent auditor(s)
is/are appointed for a determined period amongst the members of the Institut des Réviseurs d’Entreprises.
11.13
Shareholders and general meetings
The Shareholders shall be liable for the total amount of their Ordinary Shares. Subject to the provisions concerning the
reduction of the subscribed capital, Shareholders may not be released from their obligation to pay‐up their contribution.
Every transferor shall have a right of recourse jointly and severally against his immediate transferees and the subsequent
transferees.
The general meeting of Shareholders shall represent the entire body of Shareholders of the Company. It shall have the
broadest powers to order, carry out or ratify acts relating to the operations of the Company. The Board as well as the
statutory auditors may convene a Shareholders’ meeting. The Board shall be obliged to convene it so that it is held within
a period of one month if Shareholders representing at least ten per cent. of the Company’s share capital require so in
writing with an indication of the agenda.
Convening notices for every Shareholders’ meeting (a “Convening Notice”) shall contain the agenda and shall take the
form of announcements published twice, with a minimum interval of eight days, and eight days before the meeting, in
the Mémorial and in a Luxembourg newspaper. Convening Notices for Shareholders’ meetings will also be published in
accordance with all applicable laws and in particular the on‐going disclosure and stock exchange requirements to which
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the Company is subject (including the AIM Rules for Companies). The Convening Notice will also be sent to each
Shareholder and published on the Company’s website (together with certain other relevant information).
Shareholders representing at least ten per cent. of the Company’s share capital may: (i) request the addition of one or
several items to the agenda of any Shareholders’ meeting; and (ii) table draft resolutions for items included or to be
included on the agenda of a Shareholders’ meeting. Such requests must be received by the Company at least five days
before the date of the relevant Shareholders’ meeting.
Unless otherwise provided for by law, all decisions by the annual or an extraordinary Shareholders’ meeting shall be taken
by simple majority of the votes cast, regardless of the proportion of the capital represented by Shareholders attending
the meeting.
An extraordinary Shareholders’ meeting convened to amend any provisions of the Articles or any other matter expressly
provided for in the Articles, including, without limitation thereto, to alter the share capital of the Company, shall not
validly deliberate unless at least one half of the capital is represented and the agenda indicates the proposed
amendments to the Articles. If the first of these conditions is not satisfied, a second meeting may be convened, in the
manner prescribed by the Articles, by means of notices published twice, at 15 days interval at least and 15 days before
the meeting in the Mémorial and in two Luxembourg newspapers. Such Convening Notice shall reproduce the agenda and
indicate the date and the results of the previous meeting. The second meeting shall validly deliberate regardless of the
proportion of the capital represented. At both meetings, resolutions, in order to be adopted, must be carried by at least
two‐thirds of the votes cast.
Where there is more than one class of Ordinary Shares and the resolution of the Shareholders’ meeting is such as to
change the respective rights thereof, the resolution must, in order to be valid, fulfil the conditions as to attendance and
majority laid down in the Articles with respect to each class.
Each holder of Ordinary Shares shall have one vote in respect of each Ordinary Share held by him.
The right of a Shareholder to participate in a Shareholders’ meeting and exercise voting rights attached to its Ordinary
Shares is determined by reference to the number of Ordinary Shares held by such Shareholder at midnight (00.00) on the
day falling three days before the date of the Shareholders’ meeting (the “Record Date”). Each Shareholder shall, on or
before the Record Date, indicate to the Company its intention to participate at the Shareholders’ meeting.
Each Shareholder may vote through voting forms sent by post (or by facsimile or email or any other form approved by the
Board) to the Company’s registered office or to the address specified in the Convening Notice.
A Shareholder may be represented at any Shareholders’ meeting by proxy (who need not be a Shareholder).
The annual general meeting of Shareholders shall be held in Luxembourg at the registered office of the Company, or at
such other place in Luxembourg as may be specified in the notice of meeting on the last Friday of May at 11.00 a.m. If
such day is a legal holiday in Luxembourg, the annual general meeting shall be held on the next following business day.
The annual general meeting may be held outside Luxembourg if, in the absolute and final judgement of the Board,
exceptional circumstances so require.
11.14
Distributions
Each year at least five per cent. of the net profits must be allocated to the legal reserve account. This allocation is no
longer mandatory if and as long as such legal reserve amounts to at least one tenth of the capital of the Company.
After allocation to the legal reserve, the Shareholders’ meeting determines the appropriation and distribution of the
available distributable funds.
The Board is authorised and may resolve to declare and pay interim dividends in accordance with the following provisions:
(a)
interim accounts shall be drawn‐up showing that the funds available for distribution are sufficient;
(b)
the amount to be distributed may not exceed total profits made since the end of the last financial year for which
the annual accounts have been approved (where applicable), plus any profits carried forward and sums drawn
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from reserves available for this purpose, less losses carried forward and any sums to be placed to reserve
pursuant to the requirements of the law or of the Articles;
(c)
the decision of the Board to distribute an interim dividend may not be taken more than two months after the
date at which the interim accounts referred to under paragraph (a) above have been made up; and
(d)
in their report to the Board, the statutory auditors or the réviseur(s) d’entreprises agréé(s) shall verify whether
the above conditions have been satisfied.
Where the payments on account of interim dividends exceed the amount of the dividend subsequently decided upon by
the Shareholders’ meeting, they shall, to the extent of the overpayment, be deemed to have been paid on account of the
next dividend.
Except for cases of reductions of subscribed capital, no distributions to Shareholders may be made when on the closing
date of the last accounting year the net assets as set out in the annual accounts are, or following such a distribution would
become, lower than the amount of the subscribed capital plus the reserves which may not be distributed under
Luxembourg law or by virtue of the Articles. The amount of a distribution to Shareholders may not exceed the amount of
the profits at the end of the last accounting year plus any profits carried forward and any amounts drawn from reserves
which are available for that purpose, less any losses carried forward and sums to be placed to reserve in accordance with
the law or the Articles. The term “distribution” includes in particular the payment of dividends and of interest relating to
Ordinary Shares. Any distribution made in infringement of this provision must be returned by the Shareholders who have
received it if the Company can prove that the Shareholders knew of the irregularity of the distributions made in their
favour or could not, in the circumstances, have been unaware of it.
11.15
Notice and communications
Any notice, document or information to be sent or supplied by the Company may be sent or supplied in hard copy form,
in writing, by fax, in electronic form or by means of publication on the Company’s website, except where otherwise
provided for or required by the Articles or any other applicable law.
11.16
Dissolution
The Company may be dissolved by a decision of the Shareholders’ meeting voting with the same quorum as for the
amendment of the Articles.
Should the Company be dissolved, the liquidation will be carried out by one or more liquidators appointed by the
Shareholders’ meeting.
On a voluntary winding up of the Company the liquidator may divide among the Shareholders in kind the whole or any
part of the assets of the Company, whether or not the assets consist of property of one kind or of different kinds. For this
purpose the liquidator may set the value he deems fair on a class or classes of property, and may determine on the basis
of that valuation and in accordance with the then existing rights of Shareholders how the division is to be carried out
between Shareholders or classes of Shareholders. The liquidator may not, however, distribute to a Shareholder without
his consent an asset to which there is attached a liability or potential liability for the owner.
Application for dissolution of the Company for just cause may, however, be made to the court. Except in the case of
dissolution by court order, dissolution of the Company may take place only pursuant to a resolution adopted by the
Shareholders’ meeting by Special Majority.
To the fullest extent permitted by law every person who is or was a Director or other officer of the Company (other than
any person (whether or not an officer of the Company) engaged by the Company as auditor) shall be and shall be kept
indemnified out of the assets of the Company against all costs, charges, losses and liabilities incurred by him in relation
to the Company or its affairs provided that such indemnity shall not apply in respect of any liability incurred by him/her:
(a)
to the Company or to any associated company;
(b)
to pay a fine imposed in criminal proceedings;
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(c)
to pay a sum payable to a regulatory authority by way of a penalty in respect of non compliance with any
requirement of a regulatory nature (howsoever arising);
(d)
in defending any criminal proceedings in which he is convicted;
(e)
in case of fraud, gross negligence or wilful misconduct;
(f)
in defending any civil proceedings brought by the Company, or an associated company; or
(g)
refusal by a court to grant him relief.
To the extent permitted by law, the Board may purchase and maintain insurance for the benefit of a person who is or was
a Director or other officer of the Company indemnifying them and keeping them indemnified against liability which may
lawfully be insured against by the Company.
11.17
Summary
The above is a summary of certain provisions of the Articles, the full provisions of which are available on the Company’s
website, www.rm2.com.
12.
Material contracts
The following contracts, not being contracts entered into in the ordinary course of business, have been entered into by
the Group and are, or may be, material:
Financing agreements
(a)
JKD Capital agreements
(i)
Letter agreement regarding a bridge facility
On 4 June 2013, the Company entered into a letter agreement (the “JKD Bridge Facility Letter Agreement”), as
amended on 29 October 2013, regarding a bridge facility in which JKD Capital Partners I Limited (“JKD”) agreed
to provide a committed bridge facility (the “JKD Bridge Facility”) of up to US$10,000,000.
The Company has made two drawdowns under the JKD Bridge Facility. Each drawdown was conditional, amongst
other things, on JKD being provided with certain security (the “Security”), including the Pledge Agreement
described below. Following the amendment of the JKD Bridge Facility Letter Agreement on 29 October 2013, this
Security was released in full.
The obligations on the Company to repay amounts drawn down under the JKD Bridge Facility are set out in the
JKD Promissory Notes (described below). Upon repayment of the JKD Promissory Notes, JKD is entitled to receive
an additional fee of US$2,500,000. As described elsewhere in this document, it is intended that all amounts
owing to JKD will be fully repaid and discharged using the proceeds of Admission.
If the Company does not complete an IPO by 7 January 2014, the Company has agreed to grant a pledge over the
shares in each of its material Subsidiaries and any intercompany debt obligations pari passu in favour of JKD and
the Company’s other lenders.
The Company has given customary warranties in the JKD Bridge Facility Letter Agreement as to power and
capacity, enforceable obligations, non‐breach of any other agreements to which it is bound and that the
obligations it owes to JKD rank pari passu to all other debt obligations of the Company. In addition, the Company
has given a warranty that, at the date the Security was released, no creditors of the Company held security in
respect of the Company and that the Company had outstanding indebtedness for borrowed money of no more
than US$27,500,000. The Company has given an undertaking not to incur any further indebtedness for borrowed
money prior to the repayment of the JKD Promissory Notes.
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Mead Park Advisors LLC received a fee of US$500,000 from the Company upon initial drawdown under the JKD
Bridge Facility.
(ii)
Promissory notes issued to JKD
Pursuant to the JKD Bridge Facility, on 4 June 2013 and 31 July 2013, the Company executed promissory notes of
US$5,000,000 each in favour of JKD (the “JKD Promissory Notes”) representing two draw downs under the JKD
Bridge Facility.
All amounts owing pursuant to the JKD Promissory Notes must be repaid by 3 June 2014 (the “Maturity Date”).
Voluntary prepayments may be made at any time. The entire amount outstanding under the JKD Promissory
Notes must be repaid within three business days of Admission.
Interest on all unpaid principal under the JKD Promissory Notes is payable at a rate of ten per cent. per annum
(or at a 12 per cent. per annum rate if the Company is in default of its payment obligations). Interest may (other
than when due at the Maturity Date or pursuant to an acceleration), at the Company’s election, be added to the
principal amount due.
The Company has, in the JKD Promissory Notes, given customary warranties as to, among other things, corporate
standing, power and capacity, enforceable obligations and non‐breach of any other agreements to which it is
bound. The Company has also given covenants including to preserve and maintain its legal existence (and that of
its subsidiaries) and all of its material rights, privileges, licences and franchises.
A breach of warranty or covenant, or a failure to pay any principal sum outstanding which is not paid within three
business days of the due date, constitute an event of default (an “Event of Default”), triggering an immediate
right for JKD to accelerate all sums due under the JKD Promissory Note.
As described elsewhere in this document, it is intended that the JKD Promissory Notes be fully repaid and
discharged using the proceeds of Admission.
(iii)
Pledge Agreement
On 4 June 2013, John Walsh and the Company executed a pledge agreement (the “Pledge Agreement”) in favour
of JKD in respect of all John Walsh’s beneficially owned shares in the Company (the “JW Shares”) and all John
Walsh’s rights and claims towards the Company (including dividends and any other benefits deriving from John
Walsh’s ownership of the JW Shares). The Pledge Agreement was terminated and released by virtue of the
amendment to the JKD Bridge Facility Letter Agreement on 29 October 2013. This is a related party agreement
for the purposes of the AIM Rules for Companies.
(b)
Domestic Private Equity Investors, LLC (“DPE”) agreements
(i)
DPE Warrant Agreement
On 30 June 2010, the Company entered into an agreement (the “DPE Warrant Agreement”) with DPE by which
the Company granted warrants to DPE (the “DPE Warrants”) equivalent to ten per cent. of the Company’s fully
diluted share capital on a post exercise basis.
The DPE Warrant Agreement was amended on 19 August 2011, on 22 May 2013 and on 8 November 2013. The
description below refers to the DPE Warrant Agreement as it is amended.
The DPE Warrants are exercisable after 31 March 2014, subject to certain customary acceleration rights, for
example on a material disposal or a merger by the Company, and early termination provisions where either the
Company or DPE can, in certain circumstances, require part of the DPE Warrants to be bought out.
However, the Company does not intend to exercise its early termination rights as, in the event the Company
completes an IPO prior to 31 March 2014, simultaneously on completion of such IPO the rights of DPE to receive
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shares in respect of the DPE Warrants shall immediately terminate and be replaced with an obligation by the
Company: (i) to pay DPE an aggregate amount equal to US$40,000,000 plus the nominal value of the DPE Shares;
and (ii) upon payment of the nominal value of the DPE Shares by DPE to the Company, to issue the DPE Shares
to DPE. Upon such payment and issuance, the DPE Warrant Agreement shall be terminated in its entirety. The
DPE Letter Agreement (described below) which contains certain restrictions on the Company in favour of DPE,
shall be terminated upon Admission.
(ii)
Letter agreement dated 17 June 2010
The Company, John Walsh and Jane Walsh entered into a letter agreement (the “DPE Letter Agreement”) with
DPE on 17 June 2010. The DPE Letter Agreement provides that for so long as DPE and its affiliates hold 5 per cent.
of the ‘equity interests’ of the Company, (it being expressly stated that ‘equity interests’ includes the holding of
warrants), the Company will not take (and John Walsh and Jane Walsh shall procure that the Company does not
take) decisions in respect of certain prescribed matters without DPE’s prior written consent. The list of prescribed
matters (each a “Prescribed Matter”) includes:
(aa)
a merger or consolidation of the Company; the sale, transfer or leasing of any of the Group’s material
assets; or the dissolution or liquidation of any material company in the Group (except that any merger
or sale, transfer or lease of assets within the Group shall not constitute a Prescribed Matter);
(bb)
an acquisition by the Company or any member of the Group that owns assets of a book value of
US$500,000 or more (a “Material Subsidiary”), of any business or property or capital stock of a value of
more than US$25,000,000;
(cc)
causing any share split or share divide of the Ordinary Shares;
(dd)
issuing new shares of the Company except to employees or management pursuant to stock option
plans; and
(ee)
amending the Articles in such a way as the changes are adverse to DPE.
The Company, John Walsh and Jane Walsh have given other customary representations and warranties in the DPE
Letter Agreement including as to power and capacity, due execution and non‐breach of any other agreement to
which John Walsh, Jane Walsh and the Company is party. Neither the Company, John Walsh nor Jane Walsh may
assign their rights under the DPE Letter Agreement. DPE may assign its rights with the prior written consent of
the Company (not to be unreasonably withheld).
Where DPE’s prior written consent is required to permit Admission, such consent has been provided by DPE in
the amendment to the DPE Warrant Agreement dated 8 November 2013. The DPE Letter Agreement is being
terminated with effect from Admission.
(c)
CarVal interim financing arrangements
On 7 November 2013, the Company entered into a letter agreement (the “CarVal Letter Agreement”) with CVI
CVF II Lux Securities Trading S.a.r.l. (“CarVal”), pursuant to which CarVal agreed to lend the Company
US$10,000,000 (the “CarVal Loan”). On 8 November 2013, CarVal advanced the CarVal Loan to the Company.
The Company gave certain customary representations and warranties including as to power and capacity,
enforceable obligations, and non‐breach of any other agreements to which it is bound. The representations and
warranties are given at the time of initial draw down and on each date when interest is due under the CarVal
Loan (as described in the CarVal Promissory Note below).
On 7 November 2013, the Company issued a promissory note (the “CarVal Promissory Note”) to CarVal in
respect of the full amount of the CarVal Loan (the “CarVal Principal”). The Company must repay the full amount
of the CarVal Principal on the earlier of: completion of an IPO (which includes Admission); or 7 November 2014
(the “CarVal Maturity Date”). On the CarVal Maturity Date, the Company must repay the Carval Principal
together with an additional payment (the “CarVal Additional Payment”) equal to 25 per cent. of the issue of the
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CarVal Principal (or, if full repayment of the CarVal Principal occurs more than nine months after the date of the
CarVal Promissory Note an amount equal to 30 per cent. of the CarVal Principal). Interest is also payable each
month on the CarVal Principal at a rate of ten per cent. per annum (or a higher default rate of interest if the
Company is in default under the CarVal Promissory Note).
If the Company repays part of any other non‐ordinary course indebtedness (subject to certain exceptions) owed
to other lenders and entered into before the CarVal Promissory Note (“Interim Debt”), the Company is obliged
to repay CarVal an equivalent proportion of the CarVal Principal at the same time.
The Company gave certain undertakings to CarVal for the duration of the CarVal Promissory Note including (each
subject to specified exceptions) that it will not enter into any merger, acquisition, sale or establish any joint
venture, that no Group Company shall grant any security over its assets, that no Group Company shall incur non‐
ordinary course indebtedness, that no Group Company shall issue any shares (other than pursuant to Admission)
and that no Group Company shall pay a dividend.
The CarVal Promissory Note provides that if Admission does not occur by 7 January 2014, the Company shall
execute security over the shares in each of the Subsidiaries, over all of the Group’s material assets and properties
and an assignment of receivables, claims and any intra group debt in favour of both CarVal and the providers of
the Interim Debt.
The CarVal Promissory Note stipulates certain events of default (each a “CarVal Default”) including non‐payment
of the CarVal Principal, or cross default under any non‐ordinary course indebtedness and a reduction in the
percentage of shares or ownership the Company directly or indirectly holds in RM2 Canada, Equipment Tracking
and RM2 Swiss Branch. Upon the occurrence of a CarVal Default (which is not remedied within a specified grace
period), CarVal may demand immediate repayment of the CarVal Principal (together with interest) and the CarVal
Additional Payment.
(d)
Subscription Agreement by Invesco (“Invesco Subscription Agreement”)
On 22 October 2013, Invesco Asset Management Limited (“IAML”) (acting as agent for and on behalf of certain
of its funds) agreed to subscribe for an additional 22,275,000 Ordinary Shares (the “New Invesco Shares”). IAML
paid a subscription price of US$222,750 in consideration for issue of the New Invesco Shares.
Pursuant to the Invesco Subscription Agreement, the Company gave a number of customary representations and
warranties including, amongst others, in respect of the Company’s power and capacity, its issued and authorised
share capital, outstanding options and warrants and its outstanding debt obligations. In addition, the Company
warranted that it was not in breach of any of the material contracts to which the Company had been a party in
the two years prior to the Invesco Subscription Agreement.
(e)
Interim financing agreements (together, the “Interim Finance Agreements”)
(i)
Floravell Loan
On 14 August 2013 the Company entered into an unsecured loan agreement with Floravell (the “Floravell Loan”).
The Floravell Loan was repaid in its entirety on 26 September 2013.
Floravell is an entity controlled by the family of John Walsh. The Floravell Loan formalised loans made to the
Company with a value of US$2,778,082.52 (the “Floravell Principal”). Under the terms of the Floravell Loan
interest of two per cent. per annum was payable by the Company on the Floravell Principal from 1 January 2013
(with interest and the Florvell Principal to be repaid by 31 January 2014). This is a related party agreement for
the purposes of the AIM Rules for Companies.
(ii)
Christopher Carter Interim Facility and promissory note
On 18 September 2013, the Company entered into an interim facility letter with Christopher Carter (“CC”) under
the terms of which CC agreed to loan to the Company the sum of US$1,000,000 (the “CC Principal”), with such
loan being evidenced by a promissory note (the “CC Note”).
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The CC Note states that the CC Principal and any accrued interest is repayable within three business days of the
earlier of (i) Admission and (ii) 19 September 2014. In addition, on repayment of the CC Principal, the Company
must either, at its election: (i) issue to CC Ordinary Shares of a market value equivalent to 25 per cent. of the
initial CC Principal or (ii) pay to CC an amount equal to 25 per cent. of the CC Principal. If the repayment of the
CC Principal occurs on or after 20 June 2014 this additional payment shall be increased to 30 per cent. of the CC
Principal.
The rate of interest on all outstanding CC Principal is ten per cent. per annum with any amount not paid on the
date it is due accruing default interest at 12 per cent. per annum. The Company may discharge its obligation to
pay interest by adding such sums to the outstanding CC Principal.
(iii)
Robert Fahrbach Jr. Interim Facility and promissory note
On 18 September 2013, the Company entered into an interim facility letter with Robert Fahrbach Jr. (“RF”) under
the terms of which RF agreed to lend the Company the sum of US$1,000,000 (the “RF Principal”), with such loan
being evidenced by a promissory note (the “RF Note”).
The RF Note states that the RF Principal and any accrued interest is repayable within three business days of the
earlier of (i) Admission and (ii) 19 September 2014. In addition, on repayment of the RF Principal, the Company
must either, at its election: (i) issue to RF Ordinary Shares of a value equivalent to 25 per cent. of the initial RF
Principal or (ii) pay an amount equal to 25 per cent. of the initial RF Principal. If the repayment of the RF Principal
occurs on or after 20 June 2014 this additional payment shall be increased by five per cent.
The rate of interest on all outstanding RF Principal is ten per cent. per annum with any amount not paid on the
pay interest by adding such sums to the outstanding RF Principal.
(iv)
Simon Meadows Interim Facility and promissory note
On 13 September 2013, the Company entered into an interim facility letter with Simon Meadows (“SM”) under
the terms of which SM agreed to lend the Company US$1,000,000 (the “SM Principal”), with such loan being
evidenced by a promissory note (the “SM Note”).
The SM Note states that the SM Principal and any accrued interest is repayable within three business days of the
earlier of (i) Admission and (ii) 17 September 2014. In addition, on repayment of the SM Principal, RM2 must
either, at its election: (i) issue to SM Ordinary Shares of a value equivalent to 25 per cent. of the initial SM
Principal or (ii) pay an amount equivalent to 25 per cent. of the initial SM Principal. If the repayment of the SM
Principal occurs on or after 18 June 2014 this additional payment shall be increased by five per cent.
The rate of interest on all outstanding SM Principal is ten per cent. per annum with any amount not paid on the
pay interest by adding such sums to the outstanding SM Principal.
(v)
Jennifer Powers Interim Facility and promissory note
On 18 September 2013, the Company entered into an interim facility letter with Jennifer Powers (“JP”) under the
terms of which JP agreed to lend the Company the sum of US$400,000 (the “JP Principal”), with such loan being
evidenced by a promissory note (the “JP Note”).
The JP Note states that the JP Principal and any accrued interest is repayable within three business days of the
earlier of (i) Admission and (ii) 19 September 2014. In addition, on repayment of the JP Principal, RM2 must
either, at its election: (i) issue to JP Ordinary Shares of a value equivalent to 25 per cent. of the initial JP Principal
or (ii) pay an amount equal to 25 per cent. of the initial JP Principal. If the repayment of the JP Principal occurs
on or after 20 June 2014 this additional payment shall be increased by five per cent.
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The rate of interest on all outstanding JP Principal is ten per cent. per annum with any amount not paid on the
pay interest by adding such sums to the outstanding JP Principal.
(vi)
Moshe Tomkiewicz Interim Facility and promissory note
On 18 September 2013, the Company entered into an interim facility letter with Moshe Tomkiewicz (“MT”) under
the terms of which MT agreed to lend the Company the sum of US$300,000 (the “MT Principal”), with such loan
being evidenced by a promissory note (the “MT Note”).
The MT Note states that the MT Principal and any accrued interest is repayable within three business days of the
earlier of (i) Admission and (ii) 19 September 2014. In addition, on repayment of the MT Principal, RM2 must
either, at its election: (i) issue to MT the Ordinary Shares of a value equivalent to 25 per cent. of the initial MT
Principal or (ii) pay an amount equal to 25 per cent. of the initial MT Principal. If the repayment of the MT
The rate of interest on all outstanding MT Principal is ten per cent. per annum with any amount not paid on the
pay interest by adding such sums to the outstanding MT Principal.
(vii)
Donald Devine Interim Facility and promissory note
On 18 September 2013, the Company entered into an interim facility letter with Donald Devine (“DD”) under the
terms of which DD agreed to lend the Company the sum of US$1,000,000 (the “DD Principal”), with such loan
being evidenced by a promissory note (the “DD Note”).
The DD Note states that the DD Principal and any accrued interest is repayable within three business days of the
earlier of (i) Admission and (ii) 19 September 2014. In addition, on repayment of the DD Principal, RM2 must
either, at its election: (i) issue to DD Ordinary Shares of a value equivalent to 25 per cent. of the initial DD
Principal or (ii) pay to DD an amount equal to 25 per cent. of the initial DD Principal. If the repayment of the DD
The rate of interest on all outstanding DD Principal is ten per cent. per annum with any amount not paid on the
pay interest by adding such sums to the outstanding DD Principal.
Commercial/Group organisation agreements
(f)
Settlement agreement with STM Technologies, Inc.
On 27 September 2013 the Company and various Group companies (as detailed below) entered into a settlement
agreement with STM Technologies, Inc., STM Pallet Company Inc., Inline Fiberglass Ltd and Stanley Rokicki (the
“STM Settlement”) which provides for:
(i)
the termination of a contract between STM Pallet Company, Inc. and RM2 S.A. under which STM Pallet
Company, Inc. agreed to manufacture and sell pallets to RM2 S.A.;
(ii)
the amendment of an intellectual property transfer agreement between STM Pallet Company, Inc. and
RM2 S.A., namely the deletion of a provision under which RM2 S.A. was obliged to pay STM Pallet
Company, Inc. royalties in relation to pultruded fabricated pallets produced and technology included in
pultruded fabricated pallets;
(iii)
an agreement that the Company acquire the shares of RM2 Poland owned by Bazalt Kleszczow Ltd
(“BKL”), a company controlled by Stanley Rokciki before 30 September 2013. The Company had loaned
BKL the initial subscription fee for the shares in RM2 Poland when BKL originally subscribed for such
shares. The consideration for the acquisition will be the cancellation of this loaned amount. This
acquisition has now been completed;
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(iv)
the parties to enter into a commission sales agreement under which the Company agrees to pay STM
Technologies, Inc. or Stanley Rokicki royalties on all pallets sold or rented by RM2 S.A. to customers
introduced to RM2 S.A. by STM Technologies, Inc. or Stanley Rokicki; and
(v)
the parties to release one another from all known and unknown claims under all historic contracts or
agreements between them.
As consideration for the provisions detailed at (i) to (v) above RM2 S.A. agreed to pay US$2,000,000 to STM
Technologies, Inc. The STM Settlement also references the terms of further ordinary course commercial
undertakings agreed between the parties on or around the date of the STM Settlement.
(g)
Settlement agreement with Plastic Resources Corporation
RM2 S.A. and RM2 USA entered into a Settlement and Release Agreement (the “PRC Settlement”) dated
15 November 2012 with Plastics Research Corporation (“PRC”), Gene Gregory, Michael Maedel, (together with
PRC, the “PRC Parties”) John Walsh, Jane Walsh, Rick Needham and DBA Needham Consulting (together with
RM2 S.A. and RM2 USA the “RM2 Parties”). Under the terms of the PRC Settlement, the PRC Parties and RM2
Parties release each other from all claims, known and unknown, which relate to an Exclusive Manufacturing and
Supply Agreement entered into between RM2 S.A. and PRC (the “EMSA”), a non‐disclosure agreement between
the parties and various related claims and arbitrations.
Furthermore PRC agreed to pay RM2 S.A. a total of US$13,500,000 (the “PRC Settlement Amount”) plus interest
in instalments over a seven year period as settlement of claims brought under the EMSA. The outstanding
amount of this payment is subject to interest payable at a rate of seven per cent. per annum. This payment
obligation is secured by a first priority lien in favour of RM2 S.A. on all pallet‐making machinery and equipment
owned by PRC and an obligation on PRC to assign the lease of a facility in Redlands, California (the “Redlands
Facility”) to RM2 S.A. (the “PRC Security”). RM2 S.A. and PRC entered into a promissory note restating these
payment provisions, and a security agreement under which PRC grants the PRC Security to RM2 S.A.
Should PRC begin commercial production of pallets using the design in production at the Redlands Facility at the
date of the PRC Settlement, PRC would be obliged to pay royalties to RM2 S.A. Such royalties are payable on sales
of such pallets made between 15 November 2013 and 14 November 2019, up to a maximum aggregate of royalty
payments of US$11,000,000.
The RM2 Parties all agree that for a period of two years from the date of this agreement none of them shall
develop, manufacture or sell pallets incorporating ‘Low Pressure Molding Compound’ or ‘thermoset Sheet
Molding Compound’ technology.
On 13 December 2013, the Company received a letter from PRC stating that PRC would be defaulting on its
payment obligations in respect of the PRC Settlement Amount. RM2 had previously considered that there were
significant uncertainties in relation to the payment of the PRC Settlement Amount and had therefore decided to
record full impairment of the PRC Settlement Amount as detailed in notes 4 and 9 of the historical consolidated
financial information set out in Section B of Part V. RM2 will now take steps to enforce the PRC Security.
(h)
Sale and Purchase Agreement relating to Equipment Tracking
On 27 September 2013, the Company entered into an agreement (“ET SPA”) with Ewa Groszek, Yvette Walsh,
James Ryan, and Philip Rowland (“Sellers”) to acquire from the Sellers the entire issued share capital of
Equipment Tracking which the Company did not already hold (“Sale Shares”).
Completion of the ET SPA (“ET SPA Completion”) occurred on 10 December 2013. The Company paid £2,000,000
total consideration for the Sale Shares, paid to each of the Sellers pro rata to their ownership. Of this sum,
£125,000 had already been paid to the Sellers as a non‐refundable deposit.
The Sellers provide customary representations and warranties on, amongst other things, the organisation and
standing of Equipment Tracking, and title to shares. In addition, the representations and warranties provide
detail on the nature, scope, ownership and validity of the intellectual property and software owned by
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Equipment Tracking. The Sellers have also entered into non‐compete covenants and non‐solicitation covenants
for a two year period following ET SPA Completion.
Agreements relating to the Admission
(i)
Placing Agreement
The Company, the Directors and Cenkos entered into the Placing Agreement on 17 December 2013. Pursuant to
the Placing Agreement, the Company appointed Cenkos as its agent for the purpose of carrying out the Placing
and Cenkos agreed to use its reasonable endeavours to procure subscribers for the Placing Shares at the Placing
Price.
The obligations of Cenkos and completion of the Placing are subject to the Placing Agreement becoming
unconditional and not being terminated in accordance with its terms. Such conditions include, inter alia,
Admission occurring by not later than 8.00 a.m. on 6 January 2014 or such later date as Cenkos may agree with
the Company (being not later than 3.00 p.m. on 20 January 2014).
The fees payable to Cenkos for acting as broker and nominated adviser are provided for in the Nomad
Engagement Letter and IPO Engagement Letter (each of which are described below). In addition to the fees and
commissions referred to above, the Company has agreed to pay or bear all costs, charges and expenses properly
and reasonably incurred and arising out of, or incidental to, the Placing, Admission and the arrangements
referred to or contemplated in the Placing Agreement, including the costs and expenses of the Registrar.
The Placing Agreement contains (1) certain customary warranties and undertakings given by the Company and
the Directors to Cenkos as to the accuracy of the information contained in this document and other matters
relating to the Group and its business; (2) certain customary indemnities from the Company in favour of Cenkos;
and (3) certain undertakings from the Company to, inter-alia, consult with, or obtain the consent of, Cenkos.
Cenkos may terminate the Placing Agreement in certain circumstances prior to Admission. These include, inter
alia, if any statement contained in this document was untrue, incorrect or misleading in any material respect or
if any of the warranties given in the Placing Agreement was not true and accurate, or if there is a material adverse
change in the condition of the Group as a whole or a material adverse change in the financial markets.
(j)
Nominated Adviser engagement letter (“Nomad Engagement Letter”)
The Company and Cenkos entered into an agreement on 11 November 2013 whereby, conditional on Admission,
the Company appointed Cenkos to act as its nominated adviser and broker following Admission for an annual
retainer fee of £75,000 per annum plus VAT. The appointment may be terminated by either party on at least
three months’ written notice after the first anniversary of the Nomad Engagement Letter. Either party may
terminate the Nomad Engagement Letter forthwith in the event of a material breach by the other party or the
other party suffering an insolvency event. Cenkos may also terminate the Nomad Engagement Letter forthwith
at any time in certain circumstances including where Cenkos would suffer reputational damage or default of
regulatory obligations by continuing to act or where the Company fails to accept Cenkos’ advice on a material
matter during the appointment. The Nomad Engagement Letter contains certain customary indemnities from the
Company. In addition, the Company has granted Cenkos a right of first refusal to act as the Company’s adviser
on certain other equity transactions within the first 12 months of the appointment.
(k)
IPO engagement letter (“IPO Engagement Letter”)
The Company and Cenkos entered into an agreement on 11 November 2013 whereby the Company appointed
Cenkos to act as its broker and financial adviser in relation to the Admission and the Placing. Cenkos is entitled
to a success fee comprising 3.5 per cent. of all gross monies raised on Admission. The IPO Engagement Letter
terminates automatically upon Admission. Either party may terminate the IPO Engagement Letter on one
month’s written notice or forthwith if one party commits a material breach of its obligations. Cenkos may
terminate the IPO Engagement Letter forthwith in certain circumstances including if the Company commits a
material breach of the AIM Rules or if Cenkos would suffer reputational damage or default of regulatory
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obligations by continuing to act. The IPO Engagement Letter contains certain customary indemnities from the
Company.
(l)
Lock‐In Arrangements
The Company, Cenkos and the Locked In Shareholders entered into the Lock‐In Arrangements on 17 December
2013 whereby the latter have agreed not to dispose of any part of their interests in Ordinary Shares held by them
or their associates at Admission for a period of 12 months from Admission (the “Restricted Period”). The Locked‐
In Shareholders have further agreed they will, during the period of 12 months from the expiry of the Restricted
Period, only dispose of any part of their interests in Ordinary Shares held by them or their associates at
Admission through Cenkos (or through a replacement broker for the time being of the Company) in such manner
so as to ensure an orderly market in the Ordinary Shares. The restrictions in the Lock‐In Arrangements are subject
to certain customary limited exceptions.
(m)
Registrar’s Agreement
A registrar’s agreement dated 26 November 2013 (the “Registrar’s Agreement”) was entered into between the
Company and the Registrar, pursuant to which the Company appointed the Registrar to act as its registrar and
provide the services set out in the Registrar’s Agreement.
In consideration of the services to be provided, the Company has agreed to pay the Registrar a set up fee of
£1,500 and a minimum annual fee of £5,500. Any additional services that the Company may require during the
Registrar’s engagement are set out in the schedule of fees to the Registrar’s Agreement. Certain additional
services are included in the minimum annual fee.
Subject to earlier termination, the Registrar’s Agreement is for a fixed term of one year and thereafter until
terminated by either party on not less than three months’ notice. Either party may terminate the Registrar’s
Agreement at any time in certain other circumstances, such as one party being in persistent material breach of
its obligations under the Registrar’s Agreement.
The Registrar’s maximum liability under the Registrar’s Agreement in respect of any 12 month period is capped
at an amount equal to two times the fees payable by the Company to the Registrar in that 12 month period. The
parties are required under the Registrar’s Agreement to indemnify each other in certain circumstances.
(n)
Deed poll creating depositary arrangements
To enable Shareholders to settle their securities in the Company through the CREST system, the Company has
put in place a Depositary Interests facility operated by the Depositary. The Depositary Interests facility is created
pursuant to a deed poll dated 29 November 2013 (the “Deed Poll”), under which the Depositary (or its nominee)
will hold Ordinary Shares in book‐entry form on trust for Shareholders and it will issue uncertificated Depositary
Interests (on a one‐for one basis) representing those underlying Ordinary Shares and provide the necessary
custodian services. The relevant Shareholders will retain the beneficial interest in the Ordinary Shares held
through the Depositary Interests facility and voting rights, dividends or any other rights relating to those
Ordinary Shares will be passed on by the Depositary (or its nominee) in accordance with the terms of the Deed
Poll. The Depositary Interests can then be traded, and settlement can be effected, within the CREST system in
the same way as any other CREST security.
Shareholders wishing to withdraw from the Depositary Interests facility and hold their Ordinary Shares in book‐
entry form may do so at any time using standard CREST messages. Transfers of Depositary Interests are subject
to stamp duty or stamp duty reserve tax, as appropriate, in the normal way.
The Deed Poll is in a standard form approved by Euroclear. There is no separate fee payable to the Depositary
under the Deed Poll; however, the Company shall pay the Depositary the fees specified in the Depositary
Agreement (as defined and summarised in paragraph (o) below). The Depositary is also entitled to charge the
holders of Depositary Interests its reasonable and properly incurred fees and expenses as notified to them from
time to time.
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The Depositary may resign as depositary by giving not less than 90 days’ prior written notice to the holders but
this may not take effect until the appointment of a successor Depositary takes effect. The Deed Poll may be
terminated by the Depositary giving 30 days’ prior written notice. Each holder of Depositary Interests is required
to indemnify the Depositary in certain circumstances (excluding default, fraud and negligence on the part of the
Depositary). In order to discharge any liability of the holders of Depositary Interests to the Depositary arising
under such indemnity, the Depositary may sell the Ordinary Shares it holds on trust for such holder or make
deductions from any income or capital arising from such Ordinary Shares.
The Depositary’s maximum liability under the Deed Poll is the value of the Ordinary Shares to which such liability
relates or, if less, £5,000,000.
(o)
Depositary Agreement
An agreement for the provision of depositary and custody services dated 29 November 2013 (the “Depositary
Agreement”), was entered into between the Company and the Depositary, pursuant to which the Company
appointed the Depositary to act as depositary and custodian in respect of the Depositary Interests and to provide
the services set out in the Depositary Agreement.
In consideration of the services to be provided, the Company has agreed to pay the Depositary an annual fee of
£10,000. The Company has also agreed to pay the Depositary £9,000 in respect of the compilation of the initial
Depositary Interests register and the provision of the draft documentation in respect of the Deed Poll and the
Depositary Agreement. There is a fee schedule in the Depositary Agreement which stipulates the costs of any
additional services that the Company may require during the Depositary’s engagement including £3.50 per
deposit or cancellation, and £0.60 per transfer, of any Depositary Interests.
Subject to earlier termination, the appointment of the Depositary is for a fixed term of one year and thereafter
until terminated by either party giving to the other not less than three months’ notice. Either party may also
terminate the Depositary Agreement at any time in certain other circumstances.
The Depositary’s maximum liability under the Depositary Agreement in respect of any 12 month period is capped
at an amount equal to two times the fees payable by the Company to the Depositary in that 12 month period.
The parties are required under the Depositary Agreement to indemnify each other in certain circumstances.
13.
Working capital
The Directors are of the opinion that, having made due and careful enquiry, the working capital available to the Company
and the Group, taking into account the net proceeds of the Placing, will be sufficient for its present requirements, that is
for the period of at least 12 months from Admission.
14.
Litigation
Save as disclosed in this document, the Group is not involved nor has it been involved in any governmental, legal or
arbitration proceedings in the previous 12 months which have, or may have had in the recent past, a significant effect on
the Group’s financial position or profitability nor, so far as the Directors are aware, are any such proceedings pending or
threatened against the Company or any member of the Group.
15.
Principal investments
The Company does not intend to make any investments and no further investments are planned for the foreseeable
future other than in accordance with the Company’s strategy as set out in Part I of this document.
16.
Disclosure and Transparency Rules
To enable the Company to comply with its disclosure obligations under Rule 17 of the AIM Rules for Companies, a
requirement for Shareholders to disclose their total proportion of voting rights (as defined in DTR5) are incorporated into
the Articles. The Company is required by Rule 17 of the AIM Rules to announce without delay the information contained
in any such notification received from its Shareholders notwithstanding any statutory requirements of disclosure. A
summary of the provisions contained in the Articles is set out in paragraph 11 of this Part VII.
161
Page
17.
Third party information
Where information has been sourced from a third party, the information has been accurately reproduced and, as far as
the Company and the Directors are aware and are able to ascertain from information published by that third party, no
facts have been omitted which would render the reproduced information inaccurate or misleading.
18.
Other Information
18.1
The fees and expenses of, and incidental to, Admission are estimated at £6.4 million inclusive of VAT. These include (but
are not limited to) accountancy fees, solicitors’ fees and the fees of the Company’s nominated adviser and broker.
18.2
Except for the material contracts referred to in paragraph 12 of this Part VII, there are no contracts or agreements which
are of fundamental importance to the Company’s business.
18.3
Save as disclosed in this document and as set out below, the Group is not dependent on any patents, licences, industrial
or commercial or financial contracts or manufacturing processes which have a material effect on the Group’s business or
profitability. The Group is, to an extent, dependent on the pultrusion process. Equipment Tracking derives a significant
proportion of its income from licencing its software to third parties.
18.4
Except as stated in this document, none of the Directors performs any principal activities outside the Company that are
significant with respect to the Company.
18.5
Except as stated in this document, there have been no principal investments made by the Company during the last three
financial years and there are no principal future investments on which firm commitments have been made.
18.6
Except as otherwise stated in this document, no person has received, directly or indirectly, from the Company within the
12 months preceding the Company’s application to AIM, or has entered into any contractual arrangements with the
Company to receive, directly or indirectly, from the Company on or after Admission fees totalling £10,000 or more,
securities which have a value of £10,000 or more or any other benefit with a value of £10,000 or more at the date of
Admission.
18.7
Grant Thornton, as Reporting Accountants, have given and not withdrawn their written consent to the issue of this
document with the inclusion in it of their report at Parts V & VI and references to their name in the form and context in
which they respectively appear.
18.8
Grant Thornton is registered with the Institute of Chartered Accountants in England and Wales to carry out audit work.
18.9
Cenkos, as Nominated Adviser and Broker, has given and not withdrawn its written consent to the issue of this document
with the inclusion in it of references to its name in the form and context in which it appears.
18.10
Cenkos is regulated by the FCA.
18.11
Except as disclosed in this document, there has been no significant change in the financial or trading position of the Group
since the period ending 31 December 2012, the date to when the financial information in Part V has been drawn up.
18.12
Save as disclosed in this document, the Company has not entered into any related party transactions.
18.13
Save as disclosed in this document, there are no environmental issues that the Directors have determined may affect the
Company’s utilisation of tangible fixed assets and the Directors have not identified any events which have occurred since
the end of the last financial year and which are considered to be likely to have a material effect on the Company’s
prospects for the current financial year.
18.14
The financial information relating to the Company contained in this document does not comprise statutory accounts
within the meaning of section 434 of the Act.
18.15
It is expected that CREST accounts will be credited in respect of entitlements to Depositary Interests representing
beneficial interests in Ordinary Shares on Admission.
162
Page
18.16
The Ordinary Shares have been allocated the ISIN Number of LU0994178464 and the SEDOL number of BGFB1F1, each of
which will be enabled on Admission.
18.17
Save as disclosed in this document, there are no arrangements of which the Company is aware which may result in a
change of control of the Company.
18.18
There have been no takeover bids by third parties in respect of the Ordinary Shares received by the Company in the last
financial year.
19.
Copies of this document
Copies of this document and the Articles are available to the public, free of charge, at the offices of Dentons UKMEA LLP,
One Fleet Place, London EC4M 7WS, United Kingdom during normal business hours on any weekday (other than
Saturdays, Sundays and public holidays), for a period of at least one month from the date of Admission. This document
will also be available for download from the Company’s website at www.rm2.com.
17 December 2013
163
Page
PART VIII
DEFINITIONS
“2013 OPTIONS”
has the meaning given in paragraph 6 of Part VII
“2013 OPTIONHOLDERS”
“2013 PLAN”
“ACT”
the UK Companies Act 2006
“ADMISSION”
admission of the entire issued and to be issued share capital of the Company to trading on
AIM and such admission becoming effective in accordance with the AIM Rules for Companies
“AIM”
AIM, a market operated by the London Stock Exchange
“AIM ADMISSION DOCUMENT”
this document dated 17 December 2013
“AIM RULES”
the AIM Rules for Companies and the AIM Rules for Nomads
“AIM RULES FOR COMPANIES”
the rules for AIM companies, as issued by the London Stock Exchange, as amended from time
to time
“AIM RULES FOR NOMADS”
the rules for nominated advisers to AIM companies, as issued by the London Stock Exchange,
as amended from time to time
“ARTICLES”
the Company’s articles of association
“ASTM”
ASTM International, formerly known as the American Society for Testing and Materials
“ASTM D1185”
has the meaning given in paragraph 8 of Part II
“AUDIT COMMITTEE”
the audit committee of the Board
“BOARD” OR “DIRECTORS”
the directors of the Company, or a duly authorised committee thereof, whose names are set
out on page 4 of this document
“CENKOS”
Cenkos Securities PLC, a company registered in England and Wales with registered number
5210733
“CHEP”
a pooling solutions business owned by Brambles Limited
“CREST”
the computerised settlement system (as defined in the CREST Regulations) operated by
Euroclear
“CREST REGULATIONS”
the Uncertificated Securities Regulations 2001 (SI 2001/3755) as amended
“DECABDE”
decabromodiphenyl ether
“DEPOSITARY”
Computershare Investor Services plc with company number 3498808 and registered office at
The Pavilions, Bridgwater Road, Bristol BS13 8AE
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Page
“DEPOSITARY INTERESTS”
the uncertificated depositary interests issued by the Registrar and representing Ordinary
Shares in the Company pursuant to a deed poll described in paragraph 12(n) of Part VII of this
document
“DISCLOSURE AND
TRANSPARENCY RULES”
the disclosure and transparency rules issued by the FCA acting in its capacity as the
competent authority for the purposes of Part V of FSMA
“DPE”
has the meaning given in paragraph 12(b) of Part VII
“DPE SHARES”
the 4,157,428 new Ordinary Shares to be issued by the Company to DPE on Admission as part
consideration for retiring the DPE Warrants
“DPE WARRANTS”
has the meaning given in paragraph 12(b) of Part VII
“DTR5”
has the meaning given in paragraph 11.10 of Part VII
“EEA”
the European Economic Area
“ENLARGED ISSUED SHARE CAPITAL”
the entire issued ordinary share capital of the Company immediately following Admission,
comprising the Existing Ordinary Shares and the New Ordinary Shares
“EQUIPMENT TRACKING”
Equipment Tracking Limited, a company incorporated in England and Wales with registered
number 05274087
“EUROCLEAR”
Euroclear UK & Ireland Limited, a company incorporated in England with registered number
2878738, being the operator (as defined in the CREST Regulations) of the system known as
CREST
“EXISTING ORDINARY SHARES”
the 156,182,775 Ordinary Shares (including 12,308,775 Restricted Shares) in issue
immediately prior to the Placing and Admission
“FCA”
the UK Financial Conduct Authority
“FDA”
the US Food and Drug Administration
“FSMA”
the Financial Services and Markets Act 2000, as amended
“GMA”
the US Grocery Manufacturers Association
“GRANT THORNTON”
Grant Thornton UK LLP, Reporting Accountants and tax advisers to the Company
“GRAS”
generally recognised as safe by FDA
“GROUP”
the Company and the Subsidiaries
“GROUP COMPANY”
any member of the Group
“HDPE”
high‐density polyethylene
“IFRS”
International Financial Reporting Standards, as adopted for use in the European Union
“IGPS”
has the meaning given to it in paragraph 4.A. of Part I of this document
“IP CO”
RM2 IP S.A., a company registered in Luxembourg with registered number B 163 514
“ISIN”
the International Securities Identification Number
“ISO”
the International Organisation for Standardisation
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Page
“ISO 8611”
has the meaning given in paragraph 8 of Part II
“JKD”
has the meaning given in paragraph 12(a) of Part VII
“LOCK‐IN ARRANGEMENTS”
the agreement by which the Locked‐In Shareholders have agreed, with Cenkos and the
Company, certain undertakings with respect to their holdings of Ordinary Shares following
Admission, as more particularly described in paragraph 12(l) of Part VII of this document
“LoCKED‐IN SHAREHOLDERS”
each Director, Elizabeth Pauchet, Brian Dougan, Andrew Dowse, Christopher Gibbs, Matthew
Gilfillan, Michael Greenspan, Tom Lane, Ruari McGirr, Rick Needham, Anthony Parry, Philip
Seligmann, Peter Andrianopoulos and Jeffrey Thompson
“LONDON STOCK EXCHANGE”
London Stock Exchange plc
“LUXEMBOURG COMPANIES LAW”
Loi du 10 août 1915 concernant les sociétés commerciales (telle que modifiée) – Law dated
August 10, 1915 concerning commercial companies (as amended)
“NEW ORDINARY SHARES”
the Placing Shares and the DPE Shares
“NFPA13”
National Fire Protection Association Standard for the installation of sprinkler systems
“NOMAD”
the Nominated Adviser to the Company, as defined in the AIM Rules
“NON‐EXECUTIVE DIRECTOR”
a non‐executive director of the Company
“OFFICIAL LIST”
the Official List of the UKLA
“ORDINARY SHARES”
Ordinary Shares of US$0.01 each in the capital of the Company
“PLACEES”
subscribers for the Placing Shares, as procured by Cenkos on behalf of the Company pursuant
to the Placing Agreement
“PLACING”
the conditional placing by Cenkos of the Placing Shares on behalf of the Company at the
Placing Price pursuant to and on the terms of the Placing Agreement
“PLACING AGREEMENT”
the conditional agreement dated 17 December 2013 between (i) Cenkos; (ii) the Company;
and (iii) the Directors relating to the Placing and Admission, further details of which are set
out in paragraph 12(i) of Part VII of this document
“PLACING PRICE”
88 pence per Placing Share
“PLACING SHARES”
the 155,903,548 new Ordinary Shares to be issued by the Company and placed with Placees
pursuant to the Placing
“PRC”
has the meaning given in paragraph 12(g) of Part VII
“PROSPECTIVE DIRECTIVE”
the Prospectus Directive (2003/71/EC)
“PROSPECTUS RULES”
the prospectus rules of the UK Listing Authority made in accordance with Section 73A of
FSMA as amended from time to time brought into effect on 1 July 2005 pursuant to
Commission Regulation (EC) No. 809/2004 and the Prospectus Regulations 2005 (SI
2005/1433)
“QCA CODE”
the Corporate Governance Code for small and mid‐sized quoted companies 2013 published
by the Quoted Companies Alliance (as amended from time to time)
“R&D”
research and development
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“RECEIVER”
has the meaning given to it in paragraph 3.B.i. of Part I of this document
“REGISTRAR”
Computershare Investor Services (Jersey) Limited of Queensway House, Hilgrove Street,
Jersey JE1 1ES
“REGULATION S”
Regulation S promulgated under the Securities Act
“REMUNERATION COMMITTEE”
the remuneration committee of the Board
“RESTRICTED SHARES”
12,308,775 restricted Ordinary Shares granted to certain Directors as set out in paragraph 7.2
of Part VII of this document and having the performance conditions and restrictions as set
out in paragraph 6.2 of Part VII of this document
“RESTRICTED TERRITORIES”
the United States of America, Australia, Canada, Japan, the Republic of Ireland and the
Republic of South Africa
“RFID”
radio‐frequency identification
“RM2” OR THE “COMPANY”
RM2 International S.A., a company incorporated in Luxembourg with registered number
B 132 740, and “RM2” shall be deemed to include such of the Subsidiaries as the context may
require
“RM2 CANADA”
RM2 Canada Inc, a company incorporated in Canada with registered number 7636156
“RM2 FRANCE”
RM2 France sarl, a company incorporated in France with registered number 751 487 067
“RM2 HOLLAND”
RM2 Holland B.V., a company incorporated in the Netherlands with registered number
24423716
“RM2 POLAND”
RM2 Europe Sp. Z.o.o., a company incorporated in Poland with registered number
KRS0000404937
“RM2 S.A.”
RM2 S.A., a company incorporated in Luxembourg with registered number B143964
“RM2 SWISS BRANCH”
RM2 S.A., (Swiss Branch), a branch of RM2 S.A., registered in Switzerland with registered
number CH‐217.3.542.870‐6
“RM2 USA”
RM2 USA Inc, a company registered in Delaware with registered number 4828283
“SECURITIES ACT”
the US Securities Act of 1933, as amended
“SEDOL”
the Stock Exchange Daily Official List Identification Number
“SENIOR MANAGERS”
the senior managers of the Group whose names are listed in paragraph 6.B. of Part I of this
document
“SHAREHOLDER”
a holder of Ordinary Shares
“SPECIAL MAJORITY”
a Shareholders’ resolution required to be passed by at least two thirds of the votes cast
“STERLING” OR “£”
Pound sterling, the lawful currency of the United Kingdom
“SUBSIDIARIES”
any subsidiary or subsidiary undertaking of the Company, as defined in the Act
“SUPPLIER”
has the meaning given to it in paragraph 3.B.i. of Part I of this document
“TACS”
Track Asset, Control Spend, the pallet tracking and management software previously licensed
by RM2 from Equipment Tracking, which was acquired by RM2 on 10 December 2013
167
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“TAKEOVER CODE”
the City Code on Takeovers and Mergers
“TAKEOVER PANEL”
the Panel on Takeovers and Mergers
“TOTAL SOLUTIONS INC ”
RM2 Total Solutions Inc, a company incorporated in Delaware with registered number
4747908
“TOTAL SOLUTIONS NETHERLANDS”
RM2 Total Solutions International B.V., a company incorporated in the Netherlands with
registered number 24423714
“UK” OR “UNITED KINGDOM”
the United Kingdom of Great Britain and Northern Ireland
“UK CORPORATE GOVERNANCE CODE”
the UK Corporate Governance Code published by the Financial Reporting Council
“UK LISTING AUTHORITY” OR “UKLA”
the FCA acting in its capacity as the competent authority for the purposes of Part VI of FSMA
“USA” OR “US” OR “UNITED STATES”
United States of America, each state thereof (including the District of Columbia), its
territories, possessions and all areas subject to its jurisdiction
“US$” OR “USD”
the United States dollar
“UNCERTIFICATED” OR “IN UNCERTIFICATED securities recorded on a register of securities maintained by Euroclear in accordance with the
FORM”
CREST Regulations as being in uncertificated form in CREST and title to which, by virtue of the
CREST Regulations, may be transferred by means of CREST
“VRL”
Victoria Rises Limited, a company incorporated in England and Wales with registered number
06894905
168
sterling 162549
Page
AIM Admission Document
Nominated Adviser & Broker
London EC2R 7AS
L-1325 Luxembourg

Admission Document

Transcription

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