1. business and industrial
2. company
3. annual report

RM2 INTERNATIONAL S.A.
Société Anonyme
Consolidated financial statements and
Consolidated management report and
Report of the Réviseur d’Entreprises Agréé
For the period from 1 January to 31 December 2014
Registered Office : 5, rue de la Chapelle
L-1325 LUXEMBOURG
R.C.S. Luxembourg : B 132.740
RM2 INTERNATIONAL S.A.
Table of contents
Page
Company information
Consolidated management report
Corporate governance report
Report of the Réviseur d’Entreprise Agréé
1
2–5
6
7–8
Consolidated statement of comprehensive income
9
Consolidated statement of financial position
10
Consolidated statement of changes in equity
11
Consolidated statement of cash flows
12
Notes to the consolidated financial statements
13 – 54
RM2 International S.A.
Company Information
Directors & Advisers
Directors
Ian Molson
John Walsh
Jean-Francois Blouvac
Jan Dekker
Charles Duro
Lord Rose
Amaury de Seze
Paul Walsh
Chairman
Chief Executive Officer
Chief Financial Officer
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Biographies of the Directors are available on the Company website www.rm2.com
Company Secretary
and Registered Office
Company number
Nominated adviser and
broker
5 rue de la Chapelle
L-1325 Luxembourg
Grand Duchy of Luxembourg
RCS Luxembourg B 132.740
RBC Markets
Riverbank House
London EC4R 3BF
Independent Auditor
Grant Thornton Lux Audit S.A.
89A, Pafebruch
L-8308 Capellen
Luxembourg
Registrar
Computershare Investor Services (Jersey) Limited
Queensway House
Hilgrove Street
Jersey JE1 1ES
1
RM2 INTERNATIONAL S.A.
Consolidated management report
The Directors present their report on the affairs of RM2 International S.A. (the Company) and its
subsidiaries, referred to as the Group, together with the audited Consolidated Financial Statements and
Independent Auditors’ report for the year ended 31 December 2014.
Principal Activities
The main activity of the Group is to manufacture, sell and lease shipping pallets and to provide, where
necessary, related logistical services.
The group operates principally within the upstream logistics market which is focused on the supply of raw
materials and components to manufacturers, and target the sale or rental of its pallets and their utilisation
within closed loop supply chains of its customers.
In addition, the Group’s pallet tracking and management software, the ERICA system provides ‘real time’
equipment balances throughout supply chains.
Business Review and Key Performance Indicators
Following the successful flotation of the group on the London AIM market on 6 January 2014, the group
continued to expand its manufacturing facilities in Canada and to market the group’s products and pallet
pooling capabilities.
The Group started a pallet pool late in 2013, which generated some USD 5,000 of rental income. The
Group has expanded its production and added pallets to its rental pools in North America and Europe in
2014, following successful trials with potential customers.
In 2014 the pool grew to 34,930 generating USD182,388 of rental income.
The Group monitors its cash reserves against projected capital expenditure, overhead, production, sales
and leasing activity.
In 2014, the Group relocated its principal manufacturing facility to a 265,000 square foot site in Ontario,
Canada, in order to concentrate its pultrusion fabrication and assembly activities in a single location.
Going Concern
The Directors have prepared a business plan and cash flow forecast for the three coming years. The
forecast contains certain assumptions about the level of future sales and the level of gross margins
achievable. These assumptions are the Directors’ best estimate of the future development of the business.
The Directors are satisfied that the Group has adequate resources to continue in operational existence for
the foreseeable future and accordingly, continue to adopt the going concern basis in preparing the
consolidated financial statements.
On 6 January 2014 the parent company of the Group RM2 International SA completed a successful Initial
Public Offering (IPO) on the London Stock Exchange AIM market, raising gross proceeds of approximately
£137.2 million (equivalent to approximately USD 225 million) to expand its production capacity and to fund
the production of pallets for rental and sale. The business plan envisions raising further funds in 2015.
Following the IPO, the Group terminated the DPEI Warrant Agreement by paying USD 40,000,000 and
repaid all of the bridging loans as detailed in Note 10, leaving the group debt free, except a loan that is
secured by a mortgage on the building held by the Group in Switzerland.
Dividends
The Directors do not recommend the payment of a dividend (2013: nil).
Capital Structure
Details of the authorised and issued share capital, together with details of the movements in the Company’s
issued share capital during the period are shown in Note 14.
All issued shares are fully paid.
Details of the share option scheme are set out in Note 22.
2
RM2 INTERNATIONAL S.A.
Consolidated management report
Supplier Payment Policy
The Group’s policy is to settle terms of payment with suppliers when agreeing to the terms of each
transaction.
Subsequent Events
Subsequent events are described in note 27 to the Consolidated Financial Statements.
Directors
The Directors who served the Company during the year and up to the date of this report were as follows:
Executive Directors
John Walsh
Jean-Francois Blouvac
Ashavani Mohindra
Appointed 18 September 2014
Resigned 18 September 2014
Non-Executive Directors
Ian Molson
Jan Dekker
Charles Duro
Lord Rose
Amaury de Seze
Paul Walsh
The Director’s emoluments (translated into USD at average rate) were in 2014 and 2013, as follows:
2014
Salary &
Fees
USD
Executive Directors
John Walsh
Jean-Francois Blouvac
Ashavani Mohindra
Non-Executive Directors
Ian Molson
Jan Dekker
Charles Duro
Sir Stuart Rose
Amaury de Seze
Paul Walsh
399,388
236,898
247,158
160,000
81,848
81,848
80,000
80,000
80,000
563,696
1,447,140
2013
Benefits
Total
USD
USD
Salary &
Fees
USD
7,647
9,886
399,388
244,545
257,044
160,000
81,848
81,848
80,000
80,000
80,000
563,696
17,533 1,464,673
Benefits
Total
USD
USD
50,506
1,292
51,798
35,856
17,928
17,928
17,928
10,521
17,928
118,089
168,595
1,292
35,856
17,928
17,928
17,928
10,521
17,928
118,089
169,887
3
RM2 INTERNATIONAL S.A.
Consolidated management report
Directors’ interests
The Directors who held office at 31 December 2014 had the following interests in the ordinary shares of the
Company:
Ian Molson
John Walsh
Jean-Francois Blouvac
Jan Dekker
Charles Duro
Sir Stuart Rose
Amaury de Seze
Paul Walsh
Number of shares
at
31 December 2014
7,500,000
21,052,680
1,000,000
2,400,000
315,000
1,150,000
1,150,000
1,539,091
36,106,771
% held
at
31 December 2014
2.3
6.5
0.3
0.7
0.1
0.4
0.4
0.5
Number of shares
at
30 May 2015
9,400,000
22,252,680
1,000,000
2,500,000
315,000
1,150,000
1,350,000
1,639,091
39,606,771
Of the holdings above 15,625,180 (2013: 12,308,775) consist of restricted shares set out below. A Director
holding Restricted Shares shall not sell, transfer, mortgage, charge, encumber or otherwise dispose of any
of his Restricted Shares as long as certain performance conditions are not fully satisfied (the “Performance
Conditions”). The Performance Conditions are linked to the volume weighted average quoted price of the
Ordinary Shares (the “Average Price”) for a consecutive 30 day period (the “Relevant Period”). If the
Average Price is 50% higher than the Placing Price (0.88 GBP) for the Relevant Period, the Performance
Condition in respect of one third of the Director’s Restricted Shares shall be fulfilled. If the Average Price is
75% higher than the Placing Price for the Relevant Period, the Performance Condition in respect of a
further one third of the Director’s Restricted Shares shall be fulfilled. If the Average Price is 100% higher
than the Placing Price for the Relevant Period, the Performance Condition in respect of the final third of the
Director’s Restricted Shares shall be fulfilled. If any Performance Conditions are not fully satisfied by ten
years after the date of the grant, the Director shall transfer any of his remaining Restricted Shares to the
Company at a purchase price equal to the nominal value of the Restricted Shares, being USD 0.01 per
share.
Ian Molson
John Walsh
Jean-Francois Blouvac
Jan Dekker
Charles Duro
Sir Stuart Rose
Amaury de Seze
Paul Walsh
Total number of
shares at
31 December 2014
7,500,000
21,052,680
1,000,000
2,400,000
315,000
1,150,000
1,150,000
1,539,091
36,106,771
Number of restricted
shares (only) at
31 December 2014
4,600,000
6,552,680
1,000,000
22,500
1,150,000
1,150,000
1,150,000
15,625,180
Number of restricted
shares (only) at
30 May 2015
4,600,000
6,552,680
1,000,000
22,500
1,150,000
1,150,000
1,150,000
15,625,180
Corporate Responsibility
The Board recognises its employment, environmental and health and safety responsibilities. It devotes
appropriate resources towards monitoring and improving compliance with existing standards.
4
RM2 INTERNATIONAL S.A.
Consolidated management report
Employees
The Group is committed to achieving equal opportunities and to complying with relevant anti-discrimination
legislation. It is established Group policy to offer employees and job applicants the opportunity to benefit
from fair employment, without regard to their sex, sexual orientation, marital status, race, religion or belief,
age or disability. Employees are encouraged to train and develop their careers.
The Group has continued its policy of informing all employees of matters of concern to them as employees,
both in their immediate work situation and in the wider context of the Group’s well-being. Communication
with employees is effected through the Board, the Group’s management briefings structure, formal and
informal meetings and through the Group’s information systems.
Directors’ Responsibilities
The Directors are responsible for preparing the Annual Report and the Consolidated Financial Statements
and for being satisfied that the Consolidated Financial Statements give a true and fair view. The Directors
are also responsible for preparing the Consolidated Financial Statements in accordance with International
Financial Reporting Standards (“IFRS”) as adopted by the European Union.
Company law requires the Directors to prepare Consolidated Financial Statements for each financial period
which give a true and fair view of the state of affairs of RM2 International S.A. (the Company) and the Group
and of the profit or loss of the Company and the Group for that period. In preparing those Financial
Statements, the Directors are required to:
·
·
·
·
select suitable accounting policies and then apply them consistently;
make judgements and estimates that are reasonable and prudent;
state whether applicable accounting standards have been followed, subject to any material
departures disclosed and explained in the Financial Statements; and
prepare the Financial Statements on a going concern basis unless it is inappropriate to
presume that the Company and the Group will continue in business.
The Directors confirm that they have complied with the above requirements in preparing the Financial
Statements. The Directors are responsible for keeping adequate accounting records that are sufficient to
show and explain the Company's transactions, and disclose with reasonable accuracy at any time the
financial position of the Company and the Group.
They are also responsible for safeguarding the assets of the Company and hence for taking reasonable
steps for the prevention and detection of fraud and other irregularities.
Statement of disclosure to the Independent Auditor
All of the current Directors have taken all the steps that they ought to have taken to make themselves aware
of any information needed by the Group's Independent Auditor for the purposes of his audit and to establish
that the Independent Auditor is aware of that information. The Directors are not aware of any relevant audit
information of which the Independent Auditor is unaware.
Independent Auditor
The auditor, Grant Thornton Lux Audit S.A., will be proposed for re-appointment at the forthcoming Annual
General Meeting.
5
RM2 INTERNATIONAL S.A.
Corporate governance report
The Board is committed to proper standards of Corporate Governance, managing the Group in an efficient,
effective, entrepreneurial and ethical manner for the benefit of shareholders over the longer term.
In the context of the Group’s strategy for growth, the Board will continue to actively review its Corporate
Governance at regular intervals.
The Board is responsible for the Group’s system of internal control and reviewing its effectiveness. Such a
system is designed to manage rather than eliminate risk of failure to achieve business objectives, and can
only provide reasonable and not absolute insurance against material misstatement or loss. The system of
internal financial control comprises of controls established to provide reasonable assurance of:
·
·
The safeguarding of assets against unauthorised use or disposal and;
The reliability of financial information used within the business and for publication and the
maintenance of proper accounting records.
In addition the key procedures on the internal financial control of the Group are as follows:
·
·
The Board reviews and approves budgets and monitors performance against those budgets
regularly with any variance being fully investigated and;
The Group has clearly defined reporting and authorisation procedures relating to the key
financial areas.
The Annual General Meeting is the principal forum for dialogue with shareholders.
6
To the Shareholders of
RM2 INTERNATIONAL S.A.
5, rue de la Chapelle
L-1325 LUXEMBOURG
Grant Thornton Lux Audit S.A.
89A, Pafebruch
L-8308 CAPELLEN (Luxembourg)
T +352 40 12 99 1
F +352 40 05 98
www.grantthornton.lu
REPORT OF THE REVISEUR D'ENTREPRISES AGREE
Report on the financial statements
Following our appointment by the General Meeting of the Shareholders on 24 June 2014, we
have audited the accompanying consolidated financial statements of RM2 INTERNATIONAL
S.A. and its subsidiaries, which comprise the consolidated statement of financial position as at 31
December 2014, and the consolidated statement of comprehensive income, consolidated
statement of changes in equity and consolidated statement of cash flow for the year then ended,
and a summary of significant accounting policies and other explanatory information.
Board of Directors' responsibility for the financial statements
The Board of Directors is responsible for the preparation and fair presentation of these
consolidated financial statements in accordance with International Financial Reporting Standards
as adopted by the European Union and for such internal control as the Board of Directors
determines is necessary to enable the preparation of consolidated financial statements that are
free from material misstatement, whether due to fraud or error.
Responsibility of the Réviseur d'Entreprises Agréé
Our responsibility is to express an opinion on these consolidated financial statements based on
our audit. We conducted our audit in accordance with International Standards on Auditing as
adopted for Luxembourg by the Commission de Surveillance du Secteur Financier. Those
standards require that we comply with ethical requirements and plan and perform the audit to
obtain reasonable assurance whether the consolidated financial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the consolidated financial statements. The procedures selected depend on the
Réviseur d’Entreprises Agréé’s judgment, including the assessment of the risks of material
misstatement of the consolidated financial statements, whether due to fraud or error. In making
those risks assessments, the Réviseur d’Entreprises Agréé considers internal control relevant to
the entity’s preparation and fair presentation of the consolidated financial statements in order to
design audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the entity’s internal control.
Réviseurs d’Entreprises & Expert-Comptables
Luxembourg member firm of Grant Thornton International Ltd
R.C.S. Luxembourg B 183652
Identifiant TVA: LU 26666925
An audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by the Board of Directors, as well as evaluating the
overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis of our audit opinion.
Opinion
In our opinion, the consolidated financial statements give a true and fair view of the financial
position of RM2 INTERNATIONAL S.A. and its subsidiaries as of 31 December 2014 and of
its financial performance and its cash flows for the year then ended in accordance with the
International Financial Reporting Standards as adopted by the European Union.
Report on other legal and regulatory requirements
The consolidated management report, which is the responsibility of the Board of Directors, is
consistent with the consolidated financial statements.
Luxembourg, 12 June 2015
Réviseurs d’Entreprises & Expert-Comptables
Luxembourg member firm of Grant Thornton International Ltd
R.C.S. Luxembourg B 183652
Identifiant TVA: LU 26666925
RM2 INTERNATIONAL S.A.
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2014
Notes
2014
2013
USD
USD
Continuing operations
Revenue
16
2,000,416
104,204
Cost of sales
17
(21,609,717)
(47,755)
(19,609,301)
56,449
(18,260,590)
(33,529,382)
Gross profit
Administrative expenses
Administrative expenses
18
Cost in association with the IPO
Other operating expenses
19
Other operating income
19
Operating loss
(4,570,385)
-
(656,023)
(2,295,949)
670,927
1,106,294
(42,425,373)
(34,662,588)
(48,600,900)
Finance costs
19
(5,666,397)
Finance income
19
776,629
6,063,312
(47,315,141)
(77,200,176)
97,391
(72,768)
(47,217,750)
(77,272,944)
Loss before tax
Income tax
20
Loss for the year
Other comprehensive income
Other comprehensive income to be reclassified in profit or loss
in subsequent periods:
Exchange difference on translation of foreign operations
1,370,822
251,078
Other comprehensive income for the year, net of tax
1,370,822
251,078
(45,846,928)
(77,021,866)
(47,217,750)
(77,270,973)
Total comprehensive income for the year
Loss for the year attributable to:
Equity holders of the parent
Non-controlling interests
-
(1,971)
(47,217,750)
(77,272,944)
(45,846,928)
(77,019,895)
-
(1,971)
(45,846,928)
(77,021,866)
(0.15)
(0.62)
(0.15)
(0.62)
Total comprehensive income for the year attributable to:
Equity holders of the parent
Non-controlling interests
Loss per share
Basic loss per share attributable to ordinary equity holders of
the parent
Diluted loss per share attributable to ordinary equity holders of
the parent
23
The board of directors have authorised for issue these consolidated financial statements on 12
June, 2015.
9
RM2 INTERNATIONAL S.A.
Consolidated Statement of Financial Position
For the year ended 31 December 2014
Notes
2014
2013
USD
USD
Assets
Non-current assets
Intangible assets
9
3,606,693
3,751,584
Property, plant & equipment - Others
6
26,260,546
13,609,658
Property, plant & equipment - Pallet pool
7
2,754,506
375,836
Investment property
8
1,396,512
1,596,847
34,018,257
19,333,925
Current assets
Inventories
11
7,017,188
1,524,792
Trade and other receivables
12
3,889,105
1,706,754
Other current financial assets
10
59,548
65,979
2,830,642
452,873
Prepayments
Restricted cash
13
2,149,975
-
Cash and cash equivalents
13
82,882,794
4,215,344
98,829,252
7,965,742
132,847,509
27,299,667
Total assets
Equity and liabilities
Equity
14
Issued capital
Share premium
Retained earnings
Share based payment reserve
Foreign currency translation reserve
Equity attributable to equity holders of the parent
Non-controlling interests
Total equity
3,227,772
1,561,828
219,357,851
31,134,458
(117,613,540)
(100,836,892)
16,958,803
15,743,333
1,398,737
27,915
123,329,623
(52,369,358)
-
-
123,329,623
(52,369,358)
2,053,541
2,371,080
Non-current liabilities
Interest bearing loans and borrowings
Deferred tax liabilities
10
20.2
403,286
534,523
2,456,827
2,905,603
Current liabilities
Interest bearing loans and borrowings
10
28,573
31,230,713
Trade and other payables
15
6,160,275
678,397
44,587,313
4,072
Deferred income
Current tax liabilities
Total liabilities
193,814
941,324
7,061,059
76,763,422
9,517,886
79,669,025
132,847,509
27,299,667
Total equity and liabilities
The board of directors have authorised for issue these consolidated financial statements on 12 June,
2015.
10
RM2 INTERNATIONAL S.A.
Consolidated Statement of Changes in Equity
For the year ended 31 December 2014
Consolidated statement of changes in equity
Attributable to equity holders of the parent
Notes
As at 31 December 2012
Share capital
Share premium
Retained
earnings
USD
USD
USD
55,287,000
693,356
(42,269,357)
Foreign
currency
translation
reserve
Share based
payment
reserve
Total
Noncontrolling
interests
USD
USD
USD
USD
Total equity
USD
(223,163)
-
13,487,836
70,164
13,558,000
(77,272,944)
Loss for the year
-
-
(77,270,973)
-
-
(77,270,973)
(1,971)
Other comprehensive income
-
-
-
251,078
-
251,078
-
251,078
Total comprehensive income
-
-
(77,270,973)
251,078
-
(77,019,895)
(1,971)
(77,021,866)
Absorption of losses
14
(4,919,270)
-
4,919,270
-
-
-
-
-
Decrease in par value of shares issued
14
(44,225,217)
44,225,217
-
-
-
-
-
-
Losses transferred to share premium
14
-
(13,784,115)
13,784,115
-
-
-
-
-
Acquisition of non-controlling interests
5
-
-
-
-
-
-
(68,193)
(68,193)
(5,036,773)
-
-
-
-
(5,036,773)
-
(5,036,773)
456,088
-
-
-
-
456,088
-
456,088
Purchase and cancellation of own shares
14, 19
Shares issued in the period
14
Share based payments
22
Transaction with owners
Other movements
As at 31 December 2013
-
-
-
-
15,743,333
15,743,333
-
15,743,333
(53,725,172)
30,441,102
18,703,385
-
15,743,333
11,162,648
(68,193)
11,094,455
1,561,828
31,134,458
53
(100,836,892)
27,915
15,743,333
53
(52,369,358)
-
53
(52,369,358)
Loss for the year
-
-
(47,217,750)
-
-
(47,217,750)
-
(47,217,750)
Other comprehensive income
-
-
-
1,370,822
-
1,370,822
-
1,370,822
Total comprehensive income
-
-
(47,217,750)
1,370,822
-
(45,846,928)
-
(45,846,928)
Absorption of losses
14
-
(30,441,102)
30,441,102
-
-
-
-
-
Shares issued in the period
14
1,665,944
223,097,977
-
-
-
224,763,921
-
224,763,921
-
(4,433,482)
-
-
-
(4,433,482)
-
(4,433,482)
22
-
-
-
-
1,215,470
1,215,470
-
Transaction with owners
1,665,944
188,223,393
30,441,102
-
1,215,470
221,545,909
As at 31 December 2014
3,227,772
219,357,851
(117,613,540)
1,398,737
16,958,803
123,329,623
Cost of share issue
Share based payments
The board of directors have authorised for issue these consolidated financial statements on 12 June , 2015.
1,215,470
221,545,909
-
123,329,623
11
RM2 INTERNATIONAL S.A.
Consolidated Statement of Cash Flows
For the year ended 31 December 2014
Notes
Cash flows from operating activities
Loss before tax
2014
2013
USD
USD
(47,315,141)
(77,200,176)
Adjustment to reconcile profit before tax to net cash flows
Amortisation and depreciation of non-current assets
6/7/8/9
2,961,340
578,516
-
(1,447,797)
Share based payment charges
1,215,470
15,743,333
Transaction costs on capital operations, including IPO
4,570,385
1,701,995
Finance income
(332,634)
(6,063,312)
Provision for inventory obsolescence
Finance expenses
822,896
48,600,900
2,631,708
(277,824)
82,775
(737,000)
(Increase)/decrease in inventories
(5,492,396)
(76,995)
(Increase)/decrease in trade and other receivables
(4,557,881)
560,484
2,247,291
3,593,681
Unrealised foreign exchange gains
Net loss/(gain) on disposal of PPE and intangible assets
Variation in working capital
Increase/(decrease) in trade and other payables
(Increase)/decrease in restricted cash
13
(2,149,975)
-
(809,493)
54,584
(46,125,654)
(14,969,611)
Net (purchase of)/proceeds from intangible assets
(1,065,674)
-
Purchase of PPE under construction
(5,510,766)
-
(12,266,367)
(4,268,631)
Income tax paid
Net cash flows from operating activities
Cash flows from investing activities
Net (purchase of)/proceeds from other PPE
Loans granted to third parties
Acquisition of a subsidiary, net of cash acquired
5
Finance income received
Dividend received from investment
Net cash flows from investing activities
6,430
5,482,755
-
(3,253,708)
332,634
336,958
-
2,302
(18,503,743)
(1,700,324)
224,763,920
456,088
Cash flows from financing activities
Issuance of capital
14
Transaction costs on capital operations charged against share
premium account
Acquisition of non-controlling interests
(4,433,482)
-
-
(68,193)
Transaction costs on capital operations, including IPO
(4,570,385)
(1,701,995)
28,277
24,700,000
-
(500,000)
Proceeds from other and related party borrowings
Transaction costs on issue of new borrowings
Interest paid
(308,359)
(71,154)
Repayment of other and related party borrowings
(360,573)
(2,779,302)
Repayment of other and related party borrowings
(24,700,000)
-
DPEI Warrant settlement
(40,000,000)
-
(804,712)
-
(6,175,000)
-
Settlement of loans and costs following IPO
Interest paid on borrowings
Fees in relation to loans
19.4
Net cash flows from financing activities
143,439,686
20,035,444
Net change in cash and cash equivalents
78,810,289
3,365,509
Increase/decrease in cash and cash equivalents
78,810,289
3,365,509
Cash and cash equivalents at 1 January
4,193,136
864,209
Exchange adjustment of cash and cash equivalents
(120,631)
(36,582)
82,882,794
4,193,136
Cash and cash equivalents at 31 December
13
The board of directors have authorised for issue these consolidated financial statements on
12 June , 2015.
12
RM2 INTERNATIONAL S.A.
Notes to the Consolidated Financial Statements
1
Corporate information
RM2 International S.A. (the “Company”) is a limited company (Société Anonyme) incorporated and
domiciled in Luxembourg with the registration number B132.740. The registered office is located at Rue de
la Chapelle 5, L-1325 Luxembourg. The Company is the ultimate parent entity of the RM2 Group (the
“Group”).
The Group is principally engaged in developing and selling shipping pallets and providing related logistical
services.
2
Basis of preparation
The consolidated financial statements comprises the consolidated financial information of the Group as at
31 December 2014 and are prepared under the historic cost convention as disclosed in the accounting
policies below.
The accounting policies which follow set out the policies applied in preparing the consolidated financial
statements.
2.1
Statement of compliance
The consolidated financial statements have been prepared in accordance with International Financial
Reporting Standards ("IFRS") and IFRIC interpretations as issued by the International Accounting
Standards Board (“IASB”) and IFRS Interpretations Committee (IFRIC) and as adopted by the European
Union (“EU”).
2.2
Basis of consolidation
The consolidated financial statements comprise the financial information of the Group and its subsidiaries.
Subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains
control, and continue to be consolidated until the date when such control ceases. The financial information
of the subsidiaries is prepared for the same reporting period as the parent company, using consistent
accounting policies. All intra-group balances, transactions and dividends are eliminated in full.
Subsidiaries and business combinations
Subsidiaries are all entities, including structured entities, over which the group has control. The group
controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with
the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully
consolidated from the date on which control is transferred to the group. They are deconsolidated from the
date that control ceases. The Group uses the acquisition method of accounting to account for the
acquisition of subsidiaries.
The consideration transferred on acquisition is measured as the fair value of the assets given, equity
instruments issued and liabilities incurred or assumed at the date of exchange. Identifiable assets acquired
and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair
values at the acquisition date, irrespective of the extent of any non-controlling interest. The excess of the
consideration transferred over the fair value of the Group’s share of the identifiable net assets acquired is
recorded as goodwill. If the consideration transferred acquisition is less than the fair value of the net assets
of the subsidiary acquired, the difference is recognised directly in profit or loss. Acquisition costs are written
off to profit or loss.
Inter-company transactions, balances and unrealised gains on transactions between group companies are
eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an
impairment of the asset transferred. Accounting policies of subsidiaries have been changed where
necessary to ensure consistency with the policies adopted by the Group.
The subsidiaries of the Group are listed in note 24.
13
RM2 INTERNATIONAL S.A.
Notes to the Consolidated Financial Statements
3
Summary of significant accounting policies
The principal accounting policies are summarised below:
3.1
Foreign currencies
The Group’s consolidated financial statements are presented in United States Dollars (“USD”), which is also
the parent company’s functional currency. For each entity the Group determines the functional currency and
items included in the financial statements of each entity are measured using that functional currency.
Transactions and balances
Transactions in foreign currencies are initially recorded by the Group’s entities at their respective functional
currency spot rates at the date the transaction first qualifies for recognition. Monetary assets and liabilities
denominated in foreign currencies are translated at the functional currency spot rates of exchange at the
reporting date.
Differences arising on settlement or translation of monetary items are recognised in profit or loss.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using
the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a
foreign currency are translated using the exchange rates at the date when the fair value is determined. The
gain or loss arising on translation of non-monetary items measured at fair value is treated in line with the
recognition of gain or loss on change in fair value of the item (i.e. translation differences on items whose fair
value gain or loss is recognised in other comprehensive income or profit or loss are also recognised in other
comprehensive income or profit or loss, respectively).
Group companies
On consolidation, the assets and liabilities of foreign operations are translated into USD at the rate of
exchange prevailing at the reporting date and their income statements are translated at average exchange
rate prevailing during the financial year. The exchange differences arising on translation for consolidation
are recognised in other comprehensive income. On disposal of a foreign operation, the component of other
comprehensive income relating to that particular foreign operation is recognised in profit or loss.
Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying
amounts of assets and liabilities arising on the acquisition are treated as assets and liabilities of the foreign
operation and translated at the spot rate of exchange at the reporting date.
3.2
Going concern
The consolidated financial statements have been prepared assuming the Group will continue as a going
concern. Under the going concern assumption, an entity is ordinarily viewed as continuing in business for
the foreseeable future with neither the intention nor the necessity of liquidation, ceasing trading or seeking
protection from creditors pursuant to laws or regulations. In assessing whether the going concern
assumption is appropriate, management has considered the company’s existing working capital, its capacity
to raise external financing and management is of the opinion that the Group has adequate resources to
undertake its planned program of activities for the 12 months from the date of the closing of the
consolidated financial statements.
On 6 January 2014, the parent company of the Group RM2 International SA completed a successful Initial
Public Offering (IPO) on the London Stock Exchange AIM market, raising gross proceeds of approximately
£137.2 million (equivalent to approximately USD 225 million) to expand its production capacity and to fund
the production of pallets for rental and sale. Following the IPO, the Group terminated the DPEI Warrant
Agreement by paying USD 40,000,000 and repaid all of the bridging loans as detailed in Note 10.
14
RM2 INTERNATIONAL S.A.
Notes to the Consolidated Financial Statements
3.3
Property, plant and equipment
Initial recognition and measurement
Property, plant and equipment (“PPE”) are tangible assets used by the Group for its own production or
supply of goods or services, or for administrative purposes and are expected to be used during more than
one period. PPE is recognised when it is probable that future economic benefits associated with the asset
will flow to the Group and if the cost can be measured reliably.
PPE is initially recognised at cost. Such cost includes the purchase price and all cost incurred in bringing
the assets to the location and condition for its operation in the manner intended by management. The cost
of the PPE includes also the borrowing costs for long-term construction projects if the recognition criteria
are met.
The pallet pool is initially recognised at the standard cost of production including all expenses directly
attributable to the manufacturing process and portions of related production overheads, based on normal
operating capacity.
When significant parts of property, plant and equipment will be required to be replaced, the Group will
recognise such parts as individual assets with specific useful lives and depreciate them accordingly.
Likewise, when a major inspection will be performed, its cost will be recognised in the carrying amount of
the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and
maintenance costs will be recognised in profit or loss as incurred.
Finished goods (under inventory) represent pallets produced and not yet sold or deployed via the pallet pool
in property, plant and equipment.
Subsequent measurement
PPE is subsequently measured at cost less any accumulated depreciation and any accumulated
impairment losses.
Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets as follows:
Buildings
Plant and equipment
Pallet Pool
PPE under construction
30 years
3 to 20 years
5 years
not depreciated
An item of PPE and any significant part initially recognised is derecognised upon disposal or when no future
economic benefits are expected from its use or disposal. Any gain or loss arising on de-recognition of the
asset (calculated as the difference between the net disposal proceeds and the carrying amount of the
asset) is included in profit or loss when the asset is derecognised.
The residual values, useful lives and methods of depreciation of PPE are reviewed at each financial year
end and adjusted prospectively, if appropriate. Further explanation on management estimates and
assumptions is disclosed in note 4.
The Group has not applied revaluation on any of its PPE.
3.4
Leases
The determination of whether an arrangement is, or contains, a lease is based on the substance of the
arrangement at the inception date. The arrangement is assessed for whether fulfilment of the arrangement
is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset or
assets, even if that right is not explicitly specified in an arrangement.
Group as a lessee
Leases where a significant portion of the risks and rewards of ownership is retained by the lessor are
classified as operating leases. Payments made under operating leases are charged to profit or loss on a
straight-line basis over the period of the lease.
15
RM2 INTERNATIONAL S.A.
Notes to the Consolidated Financial Statements
The aggregate benefit of lease incentives are recognised as a reduction to the expense recognised over the
lease term on a straight line basis.
Leases of property, plant and equipment where the Group has substantially all the risks and rewards of
ownership are classified as finance leases. Finance leases are capitalised at the lease’s commencement
date at the lower of the fair value of the leased property or the present value of the minimum lease
payments. Each lease payment is allocated between the liability and finance charges so as to achieve a
constant rate on the finance balance outstanding. The corresponding rental obligations, net of finance
charges, are included in long-term and short-term borrowings. The interest element of the finance cost is
charged to the profit or loss over the lease period so as to produce a constant periodic rate of interest on
the remaining balance of the liability for each period. The property, plant and equipment acquired under
finance leases are depreciated over the shorter of the useful life of the asset or the lease term.
Group as a lessor
Leases in which the Group does not transfer substantially all the risks and benefits of ownership of an asset
are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to
the carrying amount of the leased asset and recognized over the lease term on the same basis as rental
income. Contingent rents are recognized as revenue in the period in which they are earned.
Revenue arising on operating leases for pallets is accounted for as on a straight line basis or a usage basis
in accordance with the contract.
Rental income arising from operating leases on investment properties is accounted for on a straight-line
basis over the lease terms and included in other operating income.
3.5
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of an asset that
necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part
of the cost of the asset. All other borrowing costs are expensed in the period in which they occur. Borrowing
costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.
3.6
Investment property
Investment properties are measured initially at cost, including transaction costs. Subsequent to initial
recognition, the Group has decided to measure investment properties using the cost model. Investment
properties are measured similarly to property, plant and equipment as described in note 3.3.
The fair value, which reflects market conditions at the reporting date, is disclosed in the notes to the
consolidated financial statements.
Investment properties are derecognised either when they have been disposed of or when they are
permanently withdrawn from use and no future economic benefit is expected from their disposal. The
difference between the net disposal proceeds and the carrying amount of the asset is recognised in the
income statement in the period of de-recognition.
Transfers are made to or from investment property only when there is a change in use. For a transfer from
investment property to owner-occupied property, the deemed cost for subsequent accounting is the fair
value at the date of change in use. If owner-occupied property becomes an investment property, the Group
accounts for such property in accordance with the policy stated under property, plant and equipment up to
the date of change in use.
3.7
Intangible assets
Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible
assets acquired in a business combination is its fair value as at the date of acquisition. Following initial
recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated
impairment losses, if any.
The useful lives of intangible assets are assessed as finite, except goodwill.
Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment
whenever there is an indication that the intangible asset may be impaired. The amortisation period and the
16
RM2 INTERNATIONAL S.A.
Notes to the Consolidated Financial Statements
amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of each
reporting period. Changes in the expected useful life or the expected pattern of consumption of future
economic benefits embodied in the asset is accounted for by changing the amortisation period or method,
as appropriate, and are treated as changes in accounting estimates. The amortisation expense on
intangible assets with finite lives is recognised in profit or loss in the expense category consistent with the
function of the intangible assets.
Intangible assets with indefinite useful lives (goodwill) are not amortised, but are tested for impairment
annually at the cash-generating unit level (see note 9 for details and assumptions). The assessment of
indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If not,
the change in useful life from indefinite to definite is made on a prospective basis.
Gains or losses arising from de-recognition of an intangible asset are measured as the difference between
the net disposal proceeds and the carrying amount of the asset and are recognised in profit or loss when
the asset is derecognised.
Amortisation is calculated on the straight-line method to write off the cost of each asset to their residual
values, over their estimated useful life. The annual amortisation periods are as follows:
Software
Trade names
Customer Relationship
Licences
Goodwill
3.8
3 years
5 years
5 years
3 to 5 years
Not amortized
Research and development costs
Research costs are expensed as incurred. Development expenditures on an individual project are
considered as an intangible asset when the Group can demonstrate:
-
The technical feasibility of completing the intangible asset so that the asset will be available for use
or sale
-
Its intention to complete and its ability to use or sell the asset
-
How the asset will generate future economic benefits
-
The availability of resources to complete the asset
-
The ability to measure reliably the expenditure during development
Following initial recognition of the development expenditure as an asset, the asset is carried at cost less
any accumulated amortisation and accumulated impairment losses. Amortisation of the asset begins when
development is complete and the asset is available for use. It is amortised over the period of expected
future benefit. Amortisation is recorded in cost of sales. During the period of development, the asset is
tested for impairment annually.
To date no amounts have been capitalised in respect of the development phase of internal projects as
management have assessed that they are unable to demonstrate that they have met all of the recognition
criteria.
3.9
Inventories
Inventories are stated at the lower of cost or net realizable value. Costs incurred in bringing each product to
its present location and conditions are accounted for as follows:
Raw materials
Purchase cost
Finished goods and work in progress
Standard cost of production including all expenses directly
attributable to the manufacturing process and portions of related
production overheads, based on normal operating capacity.
Pallets are held as inventory prior to being deployed in the pallet pool or sold direct to customer.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of
completion and the estimated costs necessary to make the sale.
17
RM2 INTERNATIONAL S.A.
Notes to the Consolidated Financial Statements
When the net realizable value of stock is lower than its cost, provisions for impairment are created to reduce
the value of the stock to its net realizable value.
The cost of inventories is recognised as an expense in the period in which the related revenue is
recognised.
3.10 Impairment on non-financial assets
Non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which
the carrying amount of the asset exceeds its recoverable amount, which is the higher of an asset’s net
selling price and value in use or fair value less cost to sell determined by using discounted cash flow
method. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there
are separately identifiable cash flows (cash generating units).
The future discounted cash flow method used to determine the value in use or fair value less cost to sell is
usually, but not always, based on cash flow projections over for the next 3 years.
Impairment losses of continuing operations are recognised in profit or loss in those expense categories
consistent with the function of the impaired asset.
For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any
indication that previously recognised impairment losses may no longer exist or may have decreased. If such
indication exists, the Group estimates the asset’s or cash-generating unit’s recoverable amount. A
previously recognised impairment loss is reversed only if there has been a change in the assumptions used
to determine the asset’s recoverable amount since the last impairment loss recognised. The reversal is
limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the
carrying amount that would have been determined, net of depreciation, had no impairment loss been
recognised for the asset in prior years. Such reversal is recognised in profit or loss unless the asset is
carried at a revalued amount, in which case the reversal is treated as a revaluation reserve.
For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of
the Cash Generating Units (CGUs), or groups of CGUs, that is expected to benefit from the synergies of the
combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within
the entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the
operating segment level.
Goodwill impairment reviews are undertaken annually or more frequently if events or changes in
circumstances indicate a potential impairment. The carrying value of the CGU containing the goodwill is
compared to the recoverable amount, which is the higher of value in use and the fair value less costs of
disposal. Any impairment is recognised immediately as an expense and is not subsequently reversed.
3.11 Financial instruments
3.11.1 Financial assets
3.11.1.1 Initial recognition and measurement
The Group classifies its financial assets in the following categories: at fair value through profit and loss,
loans and receivables, held-to-maturity investments and available-for-sale. The classification depends on
the purpose for which the financial assets were acquired. Management determines the classification of its
financial assets at initial recognition and re-evaluates this designation at every reporting date.
All financial assets are recognised initially at fair value plus, in the case of financial assets not at fair value
through profit or loss, directly attributable transaction costs.
The Group’s financial assets include cash and short-term deposits, trade and other receivables, other
current and non-current assets which are classified in the category of loans and receivables and availablefor-sale financial assets. The Group does not have held-to-maturity investments.
18
RM2 INTERNATIONAL S.A.
Notes to the Consolidated Financial Statements
3.11.2 Subsequent measurement
3.11.2.1 Loans and receivables:
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market. They are included in current assets except for maturities greater than 12
months after the balance sheet date. These are classified as non-current assets.
After initial measurement, they are subsequently measured at amortised cost using the effective interest
rate method (“EIR”), less impairment. Amortised cost is calculated by taking into account any discount or
premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is
included in finance income in the statement of comprehensive income. The losses arising from impairment
are recognised in the finance costs in the statement of comprehensive income.
3.11.3 De-recognition
A financial asset is derecognised when:
The rights to receive cash flows from the asset have expired;
The Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to
pay the received cash flows in full without material delay to a third party under a ‘pass-through’
arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the asset, or
(b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but
has transferred control of the asset; and
When the Group has transferred its rights to receive cash flows from an asset or has entered into a ‘passthrough’ arrangement, and has neither transferred nor retained substantially all of the risks and rewards of
the asset nor transferred control of the asset, the asset is recognised to the extent of the Group’s continuing
involvement in the asset.
In that case, the Group also recognizes an associated liability. The transferred asset and the associated
liability are measured on a basis that reflects the rights and obligations that the Group has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the
lower of the original carrying amount of the asset and the maximum amount of consideration that the Group
could be required to repay.
3.11.4 Impairment of financial assets
The Group assesses at each balance sheet date whether there is objective evidence that a financial asset
is impaired. A financial asset is deemed to be impaired if, and only if, there is objective evidence of
impairment as a result of one or more events that have occurred after the initial recognition of the asset and
that event has an impact on the estimated future cash flows of the financial asset or the group of financial
assets that can be reliably estimated. Evidence of impairment may include, but is not limited to, indications
that the debtors or a group of debtors are experiencing significant financial difficulty, default or delinquency
in interest or principal payments.
3.11.4.1 Financial assets carried at amortised cost:
For financial assets carried at amortised cost, the Group first assesses whether objective evidence of
impairment exists individually for financial assets that are individually significant.
If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured
as the difference between the assets carrying amount and the present value of estimated future cash flows
(excluding future expected credit losses that have not yet been incurred). The present value of the
estimated future cash flows is discounted at the financial assets’ original effective interest rate. If a loan has
a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest
rate.
The carrying amount of the asset is reduced through the use of an allowance account and the amount of
the loss is recognised in the statement of comprehensive income. Interest income continues to be accrued
on the reduced carrying amount and is accrued using the interest rate used to discount the future cash
flows for the purpose of measuring the impairment loss. The interest income is recorded as part of finance
income in the statement of comprehensive income. If, in a subsequent year, the amount of the estimated
impairment loss increases or decreases because of an event occurring after the impairment was
19
RM2 INTERNATIONAL S.A.
Notes to the Consolidated Financial Statements
recognised, the previously recognised impairment loss is increased or reduced by adjusting the allowance
account. If a future write-off is later recovered, the recovery is credited to finance costs in the statement of
comprehensive income.
3.12 Financial liabilities
3.12.1 Initial recognition and measurement
Financial liabilities are classified as financial liabilities at fair value through profit or loss or other financial
liabilities as appropriate. The Group determines the classification of its financial liabilities at initial
recognition.
All financial liabilities are recognised initially at fair value and in the case of loans and borrowings, plus
directly attributable transaction costs.
The Group’s other financial liabilities include trade and other payables, borrowings and long-term payables.
3.12.2 Subsequent measurement
The measurement of financial liabilities depends on their classification as follows:
3.12.2.1 Other financial liabilities:
After initial recognition, other financial liabilities are subsequently measured at amortised cost using the
effective interest rate method. Gains and losses are recognised in the statement of comprehensive income
when the liabilities are derecognised as well as through the effective interest rate method amortisation
process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or
costs that are an integral part of the EIR. The EIR amortisation is included in finance costs in the statement
of comprehensive income.
Other financial liabilities are classified as current liabilities unless the Group has an unconditional right to
defer the settlement of the liability for at least 12 months after the balance sheet date.
3.12.3 De-recognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or
expires. When an existing financial liability is replaced by another from the same lender on substantially
different terms, or the terms of an existing liability are subsequently modified, such an exchange or
modification is treated as a de-recognition of the original liability and the recognition of a new liability, and
the difference in the respective carrying amounts is recognised in the statement of comprehensive income.
3.12.3.1 Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount reported in the consolidated
statement of financial position if, and only if, there is a currently enforceable legal right to offset the
recognised amounts and there is an intention to settle on a net basis, or to realize the assets and settle the
liabilities simultaneously.
3.13 Cash and cash equivalents
Cash and cash equivalents are carried in the statement of financial position at fair value. For the purposes
of the cash flow statement, cash and cash equivalents are comprised of cash on hand and deposits held on
call with banks having an original maturity of 3 months of less. In the statement of financial position, bank
overdrafts are included in borrowings under current liabilities net of any related restricted cash.
3.14 Taxes
Current income tax
Current income tax assets and liabilities for the current period are measured at the amount expected to be
recovered from or paid to the taxation authorities. A provision is made for corporation tax for the reporting
20
RM2 INTERNATIONAL S.A.
Notes to the Consolidated Financial Statements
period using the tax rates that have been substantially enacted for each company at the reporting date in
the country where each company operates and generates taxable income.
Current income tax relating to items recognised directly in equity is recognised in equity and not in the
statement of comprehensive income.
Management periodically evaluates positions taken in the tax returns with respect to situations in which
applicable tax regulations are subject to interpretations and establishes provisions where appropriate.
Deferred income tax
Deferred income tax is provided for using the liability method on all temporary differences arising between
the tax bases of assets and liabilities and the carrying amounts in the financial statements. The deferred tax
is calculated on currently enacted tax rates that are expected to apply when the temporary differences
reverse. Where an overall deferred taxation asset arises, it is only recognised in the financial statements
where its recoverability is foreseen with reasonable certainty.
Deferred income tax is provided on temporary differences arising on investments in subsidiaries except
where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that
the temporary difference will not reverse in the foreseeable future.
3.15 Pensions and other post-employment benefits
A defined contribution plan is a pension plan under which the group pays fixed contributions into a separate
entity. The group has no legal or constructive obligations to pay further contributions if the fund does not
hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior
periods.
The group pays contributions to publicly or privately administered pension insurance plans on a mandatory,
contractual or voluntary basis. The group has no further payment obligations once the contributions have
been paid. The contributions are recognised as employee benefit expense when they are due.
The Group does not operate any defined benefit pension plan.
3.16 Provisions, contingent assets and liabilities
Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past
events, it is probable that an outflow of resources will be required to settle the obligation, and a reliable
estimate of the amount of the obligation can be made. Where the Group expects a provision to be
reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset
but only when the reimbursement is virtually certain. The expense relating to any provision is presented in
the statement of comprehensive income net of any reimbursement. Provisions are not recognised for future
operating losses.
Provisions are measured at the estimated expenditure required to settle the present obligation, based on
the most reliable evidence available at the reporting date, including the risks and uncertainties associated
with the present obligation. Where there are a number of similar obligations, the likelihood that an outflow
will be required in settlement is determined by considering the class of obligations as a whole. Provisions
are discounted to their present values, where the time value of money is material.
Any reimbursement that the Group can be virtually certain to collect from a third party with respect to the
obligation is recognised as a separate asset. However, this asset may not exceed the amount of the related
provision.
In those cases where the possible outflow of economic resources as a result of present obligations is
considered improbable or remote, no liability is recognised.
Contingent assets
A contingent asset is a possible asset that arises from past events and whose existence will be confirmed
only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the
control of the entity.
21
RM2 INTERNATIONAL S.A.
Notes to the Consolidated Financial Statements
Contingent assets are not recognised in the consolidated financial statements. However, when the
realisation of income from the contingent asset is virtually certain, then the related asset is not a contingent
asset and its recognition is appropriate.
Contingent liabilities
Contingent liability is a possible obligation that arises from past events and whose existence will be
confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly
within the control of the entity, or is a present obligation that arises from past events but is not recognised
because it is not probable that an outflow of resources embodying economic benefits will be required to
settle the obligation or the amount of the obligation cannot be measured with sufficient reliability.
Contingent liabilities are not recognised in the consolidation financial statements.
3.17 Equity, reserves and dividend payments
Issued share capital represents the nominal value of shares that have been issued. Share premium
includes any premiums received on issue of share capital. Any transaction costs associated with the issuing
of shares are deducted from share premium, net of any related income tax benefits.
Other components of equity include the following:
-
Foreign currency translation reserve – comprises foreign currency translation differences arising
from the translation of financial statements of the Group’s foreign entities into US Dollars.
-
The share premium account - comprises any premiums received on issue of share capital. Any
transaction costs associated with the issuing of shares are deducted from share premium.
-
The share based payment reserve corresponds to the accumulated amount of instruments granted
to employees regarding share based payments equity settled (see note 3.19).
-
Retained earnings - includes all current and prior period retained profits and losses.
All transactions with owners of the parent are recorded separately within equity.
Dividend distributions payable to equity shareholders are included in other liabilities when the dividends
have been approved in a general meeting prior to the reporting date.
3.18 Revenue
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and
the revenue can be reliably measured, regardless of when the payment is being made. Revenue is
measured at the invoiced value for the sale of goods net of value added tax, rebates and discounts which
represents the fair value of the consideration received or receivable. The Group assesses its revenue
arrangements against specific criteria in order to determine if it is acting as principal or agent. The Group
has concluded that it is acting as a principal in all of its revenue arrangements. The following specific
recognition criteria must also be met before revenue is recognised:
Sales of goods
Revenue from the sale of goods is recognised when significant risks and rewards of ownership of the goods
have been transferred to the buyer and the collectability of the related receivables is reasonably assured,
regardless of when the payment was made.
Rendering of services
Revenue relating to logistical services is recognised as the services are performed.
Rental income
Pallets
Revenue arising on operating leases for pallets is accounted for as on a straight line basis or a usage basis
in accordance with the contract.
22
RM2 INTERNATIONAL S.A.
Notes to the Consolidated Financial Statements
Property income
Rental income arising from operating leases on investment properties is accounted for on a straight-line
basis over the lease terms and included in revenue due to its operating nature.
Rental income is recognised within other operating income as it is not considered as related to the primary
activity of the Group.
Interest income
Interest income is reported on an accruals basis using the effective interest method.
3.19 Share based payments
The Group operates a number of equity-settled, share-based compensation plans, under which the entity
receives services from employees as consideration for equity instruments of the Group. The fair value of the
employee services received in exchange for the grant of the equity instruments is recognised as an
expense. The total amount to be expensed is determined by reference to the fair value of the instruments
granted. At the end of each reporting period, the group revises its estimates of the number of instruments
that are expected to vest based on the non-market vesting conditions and service conditions. It recognises
the impact of the revision to original estimates, if any, in the income statement, with a corresponding
adjustment to equity.
3.20 Changes in accounting policies and disclosures
The Group applied, for the first time, certain standards and amendments for the preparation of these
consolidated financial statements:
Content
IAS 32 Offsetting financial assets and financial liabilities (amendment)
IAS 27 Separate Financial Statements
IAS 28 Investments in Associates and Joint Ventures
IFRS 10 Consolidated Financial Statements
IFRS 11 Joint Arrangements
IFRS 12 Disclosure of Interests in Other Entities
IFRS 10, IFRS 11 and IFRS 12 Transition Guidance (amendment)
IAS 39 Novation of Derivatives and Continuation of Hedge Accounting
(amendment)
IFRS 10, IFRS 12 and IAS 27 Investment Entities (amendment)
IAS 36 Recoverable Amount Disclosures for non-Financial Assets (amendment)
The Group has reassessed the control over its investees in the light of the provisions of IFRS 10 that
redefines this notion of control and concluded that no change was necessary. In addition the Group has
included the disclosures required by IFRS 12.
The other standards and amendments have no significant impact on these consolidated financial
statements.
At the date of approval of these consolidated financial statements, the following amendments and
Interpretations, which have not been applied in these consolidated financial statements, were issued but not
yet effective. These amendments and Interpretations are effective for accounting periods beginning on or
after the dates shown below:
23
RM2 INTERNATIONAL S.A.
Notes to the Consolidated Financial Statements
IFRS Standards and Interpretations issued by IASB and endorsed by EU but not yet effective:
Applicable in EU for
periods beginning on
IFRIC 21 Levies
Annual improvements 2010-2012 and 2011-2013
IAS 19 Defined Benefit Plans: Employee Contributions (amendment)
17 June 2014
1 February 2005
1 February 2015
IFRS Standards and Interpretations issued by IASB but not yet endorsed by EU:
Applicable for periods
beginning on
IAS 1 Disclosures Initiative
IAS 27 Separate Financial Statements (amendments)
Annual improvements 2012-2014
IFRS 10, IFRS 12 and IAS 28 Investment entities (amendments)
IAS 16 and IAS 38 Acceptable methods of depreciation and amortisation (amendments)
IFRS 9 (Phase I, II and III) Financial Instruments
IFRS 14 Regulatory Deferral Accounts
IFRS 15 Revenue from contracts with customers
IFRS 10 and IAS 28 Investment entities (amendments)
1 January 2016
1 January 2016
1 January 2016
1 January 2016
1 January 2016
To be determined
1 January 2016
1 January 2017
1 January 2016
The Group cannot early adopted these new standards and amendments. The Group is still assessing the
impact that the adoption of these new standards and amendments will have on the financial statements.
Significant accounting judgements, estimates and assumptions
4
The preparation of financial statements conforming with adopted IFRS requires management to make
judgments, estimates and assumptions that affect the application of policies and reported amounts of
assets, liabilities, income and expenses. The estimates and assumptions are based on historical experience
and other factors considered reasonable at the time, but actual results may differ from those estimates.
Revisions to these estimates are recognised in the period in which they are made.
4.1
Judgments
In the process of applying the Group’s accounting policies, management has made the following judgments,
which have the most significant effect on the amounts recognised in the consolidated financial information:
Recognition of deferred tax assets
The assessment of the probability of future taxable income against which deferred tax assets can be utilised
is based on the Group's latest approved forecast, which is adjusted for significant non-taxable income and
expenses and specific limits to the use of any unused tax loss or credit. The tax rules in the numerous
jurisdictions in which the Group operates are also carefully taken into consideration. If a positive forecast of
taxable income indicates the probable use of a deferred tax asset in the foreseeable future, especially when
it can be utilised without a time limit, that deferred tax asset is usually recognised in full. The recognition of
deferred tax assets that are subject to certain legal or economic limits or uncertainties are assessed
individually by management based on the specific facts and circumstances.
The Group has not recognised any deferred tax assets as there is no certainty of the timing of recovery. For
further detail on deferred tax, refer to note 20.
24
RM2 INTERNATIONAL S.A.
Notes to the Consolidated Financial Statements
Research and development expenditure – comparative information
Research and development expenditure has been fully written off to the statement of comprehensive
income. Management had taken into account the inherent risks in all research and development
expenditure and specifically that expenditure being incurred by the business in the year ended 31
December 2013 and have concluded that the requirements of IAS 38 to capitalise development expenditure
have not been met. No research and development expenditure was incurred in 2014.
Receivable from Plastics Research Corporation – comparative information
The litigation between the Group and Plastics Research Corporation (“PRC”) was terminated through the
signature of a settlement agreement between the parties dated 17 November 2012. As per the settlement
agreement, PRC were required to pay USD 13,500,000 to RM2 as indemnity for the transfer of the
equipment (the “Equipment”) to PRC.
The receivable was repayable in several instalments starting 2 years after the settlement agreement date.
During this period, PRC only had to reimburse the interest accrued on the receivable and this was secured
by the Equipment.
Management had estimated that the effective interest rate to amortise the receivable was 7%.
Due to delay in payment of the interest receivable by PRC, Management had estimated that there were
significant uncertainties in relation to the future reimbursement of the capital amount. Therefore,
Management had in 2012 decided to record full impairment of the outstanding nominal amount of the
receivable.
The settlement agreement also provided for royalty payments to be made by PRC to the Group in relation
to future sales made by PRC with the Equipment. The royalty to be paid was computed based on the
quantity of manufactured items sold and the quantity of composite ground generated and sold by PRC
during the 7 years following the settlement agreement’s date, with a cap of USD 11,000,000.
Management also determined that there was very low probability that PRC will generate sales from the use
of the Equipment and consequently determined that the fair value of the royalty receivable was nil.
In November 2013, PRC defaulted on the interest payment due and subsequently, in March 2014,
ownership of the Equipment was transferred to the Group, valued at $1, in application of the security
agreement. The Group holds these assets at the year end at the valuation of $1. Full provision has been
made for interest due in respect of the interest receivable and not paid in the year.
Restricted Shares
The Group has issued restricted shares in 2013 and 2014 under the “2013 Share Option Scheme”.
Management has considered that the restricted shares issued to date should be measured similarly to
share options. As per the agreement, the shares granted vest immediately and are accompanied by a
restricted share agreement. Management has considered that the restrictions on shares were
representative of market related vesting conditions, as the holders of the restricted shares can only dispose
of their shares if the quotation price reaches different thresholds, or in certain cases on the third year
anniversary following the date of the grant as long as the holder has a business relationship with the
Company.
Management has considered that achievement of these market conditions would require time
corresponding to the advantage provided to the holders of restricted shares. Management has estimated
that Tranche 1 and 2 would be achieved within 5 years and Tranche 3 within 10 years, therefore,
Management has applied those durations as vesting periods for the instruments. For the restricted shares
that vest on the third anniversary this date has been used as the duration of the vesting period.
For further detail on share-based payments transactions, refer to note 22.
25
RM2 INTERNATIONAL S.A.
Notes to the Consolidated Financial Statements
Accrued liabilities
An amendment to a contract was made in January 2014 which resulted in the payment in respect of past
consultancy services by the Group. In reviewing the contract and the payment the Group has recorded a
liability for the payment in the 2013 consolidated financial statements as all the costs related to past
services rendered.
As part of the bridging facility until the completion of the IPO a premium was payable to cancel outstanding
warrants in the Company. When considering the premium, the period to which it relates and as the IPO was
completed on 6 January 2014, Management considers that the cost of this cancellation had to be
recognised pro rata temporis over the period from issuance date to reimbursement date as a finance charge
in the 2013 consolidated financial statements.
Machinery depreciation 2013 – comparative information
During 2013 the Group had been developing its machinery and products. The Group’s machinery and
products were not in full operation at the end of 2013 and there was no significant income derived from the
machinery. The Group therefore had not depreciated the machinery in the year and will depreciate against
future income when the machinery becomes fully operational in manufacturing finished product for sale or
internal use.
Investment in Mafic S.A. 2013 – comparative information
The investment in Mafic S.A. was disposed of in 2013 by way of a contribution in kind of 842,000 shares of
Mafic S.A. to Basalt Holding S. à r. l.
The Group then cancelled 12,286,000 RM2 International S.A.’s Class J shares and disposed of the entire
share capital of Basalt Holding S. à r. l. to the holders of the Class J shares.
Management considered that the fair value of the disposed investment in Mafic S.A. was represented by the
fair value of the investment held in Basalt Holding S. à r. l. as the disposal was made by an exchange of
financial assets. The final fair value of Mafic S.A. on disposal was determined in consideration of the actual
value transferred to holders of Class J shares, corresponding to the nominal value of the Class J shares.
Management recorded the difference between the carrying value of Mafic S.A., prior to disposal, and the
actual liquidated value of Class J shares as representative of the gain realised on the transaction, the
amount has been recorded within financial income. For further detail, refer to note 19.3.
4.2
Estimates and assumptions
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting
date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year, are described below. The Group based its assumptions and
estimates on parameters available when the consolidated financial information were prepared. Existing
circumstances and assumptions about future developments, however, may change due to market changes
or circumstances arising beyond the control of the Group. Such changes are reflected in the assumptions
when they occur.
The Management has disclosed reasonably possible assumptions and estimates, on the basis of its existing
knowledge at year end. Outcomes within the next financial years that are different from these assumptions
could require a material adjustment to the carrying amount of the asset or liability affected.
Share-based payments
The Group measures the cost of equity-settled transactions by reference to the fair value of the equity
instruments at the date at which they are granted. Estimating fair value for share-based payment
transactions requires determination of the most appropriate valuation model, which is dependent on the
terms and conditions of the grant. This estimate also requires determination of the most appropriate inputs
to the valuation model including the expected life of the share (options), volatility and risk-free interest rate,
dividend yield and making assumptions about them.
During the year, the Company issued restricted shares and options under the 2013 Equity Incentive Plan.
26
RM2 INTERNATIONAL S.A.
Notes to the Consolidated Financial Statements
The assumptions and models used for estimating fair value for share-based payment transactions are
disclosed in note 22.
Employee Stock Option Plan (“ESOP”)
The Group has granted Employee Stock Option Plan to some of its employees and managers. The fair
value of the plan at grant date is based upon actuarial assumptions estimated by the management and
disclosed in note 22.3.
Measurement of property, plant and equipment, pallet pool and investment property
The Group holds a building property which is used for both Group administrative purpose and rental to third
parties. Therefore, the management has determined that the building accounting should be split between
the part used by the Group, classified as property, plant and equipment, and the part rented to third parties,
classified as investment property.
The initial cost of acquisition of the building is for both the building construction and the land. In determining
the part of the acquisition cost related to the land, by default of explicit description in the notarial deed, the
Management has made the assumption that 25% of the initial cost was related to the land.
In determining the measurement of each part of the building (PPE and investment property), the
management has determined the split based on the surface used for each purpose. Management has also
determined that the depreciation should be made using straight line method and over a useful life of 30
years.
Due to the inability of Management to determine the residual value at the end of the useful life, the
Management has made the assumption that the residual value is nil and, therefore, the depreciation is
computed on the entire value of the building cost.
The pallet pool is recognised at an amount based on standard cost of production including all expenses
directly attributable to the manufacturing process and potions of related production overheads, based on
normal operating capacity, and carried at this cost net of impairment and depreciation.
Fair value of financial instruments – comparative information
Prior to completion of the IPO the Group had a significant financial instrument in the form of warrants issued
to DPEI.
As a result of an agreement entered into on 8 November 2013, the warrants were cancelled and the
Company recognised a liability for the termination of the warrants. The liability has been measured in
reference to the amount actually paid by the Company in early January 2014. For further detail on warrants,
refer to note 14.
Finished goods and work in progress
Finished goods and work in progress are recognised at an amount based on standard cost of production
including all expenses directly attributable to the manufacturing process and portions of related production
overheads, based on normal operating capacity.
Management consider that this is a fair reflection of the cost of the pallets.
Pallet Pool
The pallet pool is depreciated over 5 years. Management have assessed the durability of the pallets
supported by external testing and consider that this is a fair reflection of their estimated useful life. The
residual value is estimated to be nil.
Management will review the useful life of the pallets at each reporting date.
27
RM2 INTERNATIONAL S.A.
Notes to the Consolidated Financial Statements
Impairment of Goodwill
In assessing impairment, Management estimates the recoverable amount of cash generating units based
on expected future cash flows and uses an interest rate to discount them. Estimation uncertainty relates to
assumptions about future operating results and the determination of a suitable discount rate (see note 9 for
details and assumptions).
Business combinations comparative for 2013
The directors have identified the separable net assets acquired and have valued those assets using
discounted cash flows for the expected revenue from those assets. The separable assets identified are the
software, client list and brand name.
Management measured assets acquired and liabilities assumed by reference to their fair value at
acquisition date. Management has determined the fair value of separable identified assets using discounted
cash flow (“DCF”) of the entity over the next 6 years. In determining the net present value of each asset, the
Group has applied discount rate of 13%.
For further detail on the Group’s business combination, refer to note 5.
Impairment of inventory comparative for 2013
In 2012, during the development of the production line dedicated to the pallet pool production, several
samples were produced. Management had estimated for those samples which were not deemed to be part
of the cost of property, plant and equipment that full impairment of these inventories was recorded due to
the inability of the Group to sell these samples.
In 2013 the Group reviewed the estimates used in the valuation of the inventory in 2012 and considered
that there is value in the samples produced in 2012. Therefore, management reversed the impairment for
USD 1,447,797 as at 31 December 2013.
5
Business combinations and acquisition of non-controlling interests
5.1
Acquisitions in 2013
Acquisition of Equipment Tracking Limited
In 2013, the Group acquired the remaining 97% of the voting shares of Equipment Tracking Limited. The
Group had an equity investment representing 3% of the voting shares of Equipment Tracking Limited as at
31 December 2012.
On 27 September 2013, RM Total Solutions International BV signed an agreement to acquire the entire
issued share capital of Equipment Tracking for £2 million. Completion of the acquisition of Equipment
Tracking occurred on 10 December 2013. Control of the business was considered effective at the time of
the consideration was paid.
28
RM2 INTERNATIONAL S.A.
Notes to the Consolidated Financial Statements
The assets and liabilities acquired are as follows:
Equipment Tracking Limited
Value of assets in
company
Fair value
adjustments
USD
USD
Fair value
recognised on
acquisition
USD
Intangible assets (note 9)
Plant and equipment (note 6)
Trade receivables
Cash
Other debtors and prepayments
137,007
168,946
42,407
5,887
354,247
2,618,912
2,618,912
2,618,912
137,007
168,946
42,407
5,887
2,973,159
Loans and borrowings
Trade payables
Other creditors and accruals
Other taxes payable
Income tax payable
Deferred tax liabilities
44,460
75,152
33,219
83,718
7,315
243,864
523,782
523,782
44,460
75,152
33,219
83,718
7,315
523,782
767,646
Total identifiable net assets at fair value
2,205,513
Goodwill arising on acquisition (note 9)
1,150,189
Purchase consideration transferred
3,355,702
Equipment Tracking was founded in 1995 (having traded as Adventures in Business Limited until the
incorporation of Equipment Tracking in 2004). Its pallet tracking and management software assists
customers in managing complex pallet and equipment flows. It has serviced some of the world’s largest
suppliers of consumer goods.
The ERICA system offers customers services which provide ‘real time’ equipment balances throughout their
supply chains.
These services can replace or strengthen existing tracking systems and are designed to enable customers
to improve their pallet pool management. The ERICA system was designed to provide customers with
greater visibility over costs and, where possible, the ability to reduce the direct and indirect costs associated
with goods movements between customers and suppliers. This offers major cost savings to the Group and
its customers, increasing the Group’s offer and attraction of the pallet pool business. The synergies arising
from the experience and know-how of the team of Equipment Tracking closely linked to their involvement in
the use and development of ERICA system gives the benefits of a back office system that can not only track
the Group’s assets, but also generate movement statistics, invoicing data and measurement against
performance criteria, which justifies the goodwill in the acquisition. The fair value of the separable net
assets has been identified and the goodwill in the business has been calculated at USD 1,150,189 relating
to the value attributed to the organisation.
Included in the results for the 2013 is revenue and loss of USD 98,939 and USD 17,740 respectively
representing the results from the date of acquisition. The results for the full 2013 year, had Equipment
Tracking been owned for the full year, would have shown revenue and losses of USD 1,079,163 and USD
14,935, respectively.
No contingent liabilities were considered in determining the fair value of assets acquired and liabilities
assumed.
29
RM2 INTERNATIONAL S.A.
Notes to the Consolidated Financial Statements
Acquisition of additional interest in RM2 Europe Sp. Zoo
On 8 October 2013, the Group acquired an additional 20% interest in the voting shares of RM2 Europe Sp.
Zoo increasing its ownership interest to 100%. The consideration of USD 68,193 was part of the settlement
agreement with STM Technologies, Inc., the non-controlling shareholders made on 27 September 2013.
The carrying value of the additional interest in RM2 Europe Sp. Zoo was USD 68,193. Following is a
schedule of additional interest acquired in RM2 Europe Sp. Zoo:
USD
Consideration paid to non-controlling shareholders
68,193
Carrying value of the additional interest in RM2 Europe Sp. Zoo
68,193
Difference recognised in retained earnings within equity
6
-
Property, plant and equipment - Others
Land &
Building
USD
Cost
As at 1 January 2013
Additions
Disposals
Other/transfers
Acquired through business
combinations (note 5)
Exchange differences
As at 31 December 2013
Additions
Disposals
Exchange differences
As at 31 December 2014
Amortization and impairment
As at 1 January 2013
Amortization charge for the year
Acquired through business
combinations (note 5)
Exchange differences
As at 31 December 2013
Amortization charge for the year
Disposals
Exchange differences
As at 31 December 2014
Net book value
As at 31 December 2014
As at 31 December 2013
Plant &
Equipment
Restated*
USD
Construction
in progress
Total
USD
USD
1,860,421
40,952
-
6,574,950
5,437,266
(891,740)
1,679,560
5,336,483
(1,679,560)
13,771,854
5,478,218
(891,740)
-
41,296
1,942,669
110,702
(121,662)
(194,542)
1,737,167
233,650
(208,970)
12,824,716
9,688,738
(900,394)
21,613,060
(119,460)
3,537,463
5,510,766
9,048,229
233,650
(287,134)
18,304,848
15,310,206
(121,662)
(1,094,936)
32,398,456
92,039
83,501
530,712
375,256
3,537,463
-
4,160,214
458,757
2,734
178,274
53,926
(38,888)
(21,865)
171,447
96,643
(23,158)
979,453
1,701,292
(251,745)
2,429,000
3,537,463
3,537,463
96,643
(20,424)
4,695,190
1,755,218
(38,888)
(273,610)
6,137,910
1,565,720
1,764,395
19,184,060
11,845,263
5,510,766
-
26,260,546
13,609,658
*The Group has decided to disclose the pallet pool as a separate heading and therefore have disclosed the
Pallet Pool separate note 7.
The Group has no liens and encumbrances on its property, plant and equipment. The Group has capital
commitments on the development and acquisition of property, plant and equipment in Canada for USD
2,249,326 - CAD 2,615,526 (2013: USD 2,386,380 - CAD 2,535,529).
As at 31 December 2013, the Group had several items of property, plant and equipment which were
temporarily idle. The carrying amount of these items was USD 2,452,532. This amount corresponds to
machines for the production of pallets which have been completed and for which the production has not
started. There was no amount of depreciation charge as per prior periods as these machines were still in
the construction phase.
30
RM2 INTERNATIONAL S.A.
Notes to the Consolidated Financial Statements
As at 31 December 2014, the Group had several items as PPE corresponding to machines that are not yet
completed for the production of pallets.. These items are presented at construction in progress and not
amortized.
There were no borrowing costs capitalised during any period.
6.1
Security on property, plant & equipment for liabilities
The Group has granted a security interest over the property held in Switzerland in return for the CHF
2,000,000 bank loan USD 2,021,220 (2013: CHF 2,100,000 – USD 2,361,142).
7
Property, plant and equipment - Pallet pool
*The Group has decided to disclose the pallet pool as a separate heading and therefore have disclosed the
Pallet Pool in a separate note.
Pallet Pool
Restated
USD
Cost
As at 1 January 2013
Additions
As at 31 December 2013
Additions
As at 31 December 2014
Amortization and impairment
As at 1 January 2013
Amortization charge for the year
As at 31 December 2013
Depreciation charge for the year
As at 31 December 2014
Net book value
As at 31 December 2014
As at 31 December 2013
8
419,153
419,153
2,466,928
2,886,081
43,317
43,317
88,258
131,575
2,754,506
375,836
Investment property
Investment
properties
USD
Cost
As at 1 January 2013
Exchange differences
As at 31 December 2013
Exchange differences
As at 31 December 2014
Amortization and impairment
As at 1 January 2013
Amortization charge for the year
Exchange differences
As at 31 December 2013
Amortization charge for the year
Exchange differences
As at 31 December 2014
Net book value
As at 31 December 2014
As at 31 December 2013
1,681,110
45,213
1,726,323
(174,642)
1,551,681
84,056
41,408
4,012
129,476
41,969
(16,276)
155,169
1,396,512
1,596,847
31
RM2 INTERNATIONAL S.A.
Notes to the Consolidated Financial Statements
The investment property is a building used by the Group for both administrative purpose and for rental. The
cost of the property related to the administrative purpose is classified within property, plant and equipment.
The cost for the rental part is classified as investment property.
8.1
Revenue from investment property
As at 31/12/2014
As at 31/12/2013
USD
USD
Rental income from investment property (*)
329,450
326,125
(*) included within Other operating income (see note 19)
8.2
Fair value of investment property
The investment property is measured at cost. The fair value of the property as at 31 December 2014 has
been determined by Régie Châtel S.A., an independent external appraiser, on 20 January 2015.. Régie
Châtel S.A. is a specialist in valuing such investment properties. The fair value of the property has been
determined using the rental income and the construction value. The valuation has been determined with the
following primary inputs.
Yield (%)
Average price for new construction (m3)
Land price (m²)
Fair value determined for the part classified as investment property
9
2014
2013
7%
390 CHF/ m3
250 CHF/m²
7%
390 CHF/ m3
280 CHF/m²
USD1,886,895
(1,867,085 CHF)
USD2,092,370
(1,860,960 CHF)
Intangible assets
Cost
As at 1 January 2013
Additions
Acquired on business combination
(Note 5)
Exchange differences
As at 31 December 2013
Additions
Exchange differences
As at 31 December 2014
Amortization and impairment
As at 1 January 2013
Impairment in the year
Amortization charge for the year
As at 31 December 2013
Amortization charge for the year
Exchange differences
As at 31 December 2014
Net book value
As at 31 December 2014
As at 31 December 2013
Software
Trade
names
Customer
relationships
USD
USD
USD
Acquired
licences
and similar
intangible
assets
USD
Goodwill
Total
USD
USD
-
-
-
47,033
-
-
47,033
-
1,964,184
1,964,184
815,674
(100,251)
2,679,607
163,682
163,682
(8,354)
155,328
491,046
491,046
(25,063)
465,983
47,033
250,000
297,033
1,150,189
(19,317)
1,130,872
(57,719)
1,073,153
3,769,101
(19,317)
3,796,817
1,065,674
(191,387)
4,671,104
943,151
(50,020)
893,131
32,736
(1,674)
31,062
98,209
(5,023)
93,186
7,800
35,033
2,400
45,233
1,799
47,032
-
7,800
35,033
2,400
45,233
1,075,895
(56,717)
1,064,411
1,786,476
1,964,184
124,266
163,682
372,797
491,046
250,001
1,800
1,073,153
1,130,872
3,606,693
3,751,584
The Group has no intangible assets pledged as security for liabilities.
The Group has no contractual commitment for the acquisition of intangible assets.
32
RM2 INTERNATIONAL S.A.
Notes to the Consolidated Financial Statements
In 2013 following the acquisition of Equipment Tracking Limited, the assets were recognised late in the year
therefore, the software, trade names, customer relationships resulting from the business combination were
not amortized during the year 2013.
The licence acquired in 2014 for USD 250,000 is for the use of new pallets following development of those
pallets. As these are currently not being used no amortization has been calculated on this amount.
9.1
Impairment of Goodwill
Management has reviewed the carrying value of goodwill at the yearend in light of the future three year
cash generation of the entire group as the goodwill underpins the group business. A pre-tax discount rate of
10% that considers the risk profile of the Group and growth rates based on the 2015 forecast revenues
(being the base case following the setup of the business) of 104% have been used in the assessment of
any impairment. The growth rate is based on management’s assessment considering the capacity of
production of pallets and the sale and lease capacities. During the year the group has continued to develop
its business, a successful IPO has been achieved where the group’s debt, other than a mortgage on its
Swiss property, has been repaid, the manufacturing environment has been improved and the pallet pool
deployment has started in the last quarter of 2014. A reasonably possible change in the discount rate or the
growth rate in the revenues forecast would not cause an impairment on the carrying amount of goodwill.
Management therefore considered that the prospects of the business have improved dramatically during the
year and therefore the carrying value of the goodwill has not been impaired as at 31 December 2014 as
there is no change in the underlying rational for the goodwill than as 31 December 2013.
10 Financial assets and liabilities
Loans and receivables
Trade and other receivables (Note 12)
As at 31/12/2014
As at 31/12/2013
USD
USD
3,889,105
1,706,754
Deposits
Other current financial assets
Restricted Cash, Cash and cash equivalents
Total current financial assets
Total loans and receivables
Total financial assets
59,548
59,548
85,032,769
85,092,317
88,981,422
88,981,422
65,979
65,979
4,215,344
4,281,323
5,988,077
5,988,077
Total current
88,981,422
5,988,077
Financial liabilities at amortised cost
Interest-bearing loans and borrowings
Trade and other payables
Total financial liabilities at amortised cost
Total financial liabilities
2,082,114
5,412,615
7,494,729
7,494,729
33,601,793
45,532,709
79,134,502
79,134,502
Total current
Total non-current
5,441,188
2,053,541
76,763,422
2,371,080
Financial liabilities
10.1 Loan notes
The Group entered into an agreement in 2009 with Plastics Research Corporation (“PRC”) for the
development and production of specific shipping pallets. A machine for the production of pallets was
developed on land rented by PRC from a third party (the “Redlands Facility”). The development of the
production facility required the acquisition of equipment (the “Equipment”) which was located at the
Redlands Facility. In the course of the development of the Equipment, several disputes arose between the
Group and PRC. The disputes were settled by an agreement of the parties entered into on 15 November
2012.
33
RM2 INTERNATIONAL S.A.
Notes to the Consolidated Financial Statements
As per the Settlement Agreement, it has been agreed that:
-
PRC has ownership and possession of all Equipment in the Redlands Facility;
-
PRC shall pay to RM2 S.A. the principal sum of USD 13,500,000 (the “Indebtedness”) as a nonroyalty payment; and
-
PRC shall pay to RM2 S.A. royalties for the sales of pallets and composite compound up to USD
11,000,000 (the “Royalty Payments”).
The loan bore interest at the effective interest rate of 7% per annum and had a maturity date as at 15
November 2019.
In November 2013, PRC defaulted on the interest payment due.
At 31 December 2013, Management determined that there was significant risk on the recoverability of the
capital amount of the Indebtedness for USD 13,500,000 and decided to record a full impairment on the
investment (for further detail, refer to note 4). The impairment on the loans and receivables was incurred as
the Group estimated that the recoverability of the receivable resulting from the resolution of the litigation
with PRC was uncertain as a result of the delinquent payment made by PRC.
As at 31 December 2013, the carrying amount of the loan notes PRC was USD nil, as PRC was in default.
Subsequently in 2014, ownership of the Equipment was transferred to the Group at a valuation of USD 1, in
respect of the cancellation of the indebtness and accrued interest, pursuant to the security agreement. The
Group will decide whether to dispose of the Equipment, or redeploy the assets within the Group. The
Equipment is fully impaired in the consolidated financial statements. Full provision has been made for
interest due in respect of the interest receivable and not paid in the year of USD 236,250 (2013: USD
609,414 also fully provided).
The outstanding balance of the indebtedness as at 31 December 2014 amounts to USD nil (in 2013: USD
14,109,414) and includes interest of USD nil (in 2013: USD 609,414).
10.2 Interest-bearing loans and borrowings
As at 31/12/2014
Effective
interest rate
Non-current interest-bearing loans and
borrowings
CHF 2,000,000 Bank loan
2.4%
Maturity date
30 November
2015
USD
As at
31/12/2013
USD
Hire purchase liabilities in excess of one year
2,021,220
32,321
2,361,142
9,938
Total non-current interest-bearing loans and
borrowings
2,053,541
2,371,080
-
22,208
8,550
-
5,926,532
Current interest-bearing loans and borrowings
Bank overdraft (note 13)
Shareholder current account
Shareholder loans
JKD Capital*
CVI CVF 11 Lux Securities Trading S. à r. l.
Hire purchase liabilities within of one year
Total current interest-bearing loans and
borrowings
Total interest-bearing loans and borrowings
Variable
0%
10% plus 25%
on repayment
10% plus 25%
on repayment
10% plus 25%
on repayment
On-demand
On-demand
13,385,105
28,573
11,853,539
34,779
28,573
31,230,713
2,082,114
33,601,793
34
RM2 INTERNATIONAL S.A.
Notes to the Consolidated Financial Statements
CHF 2,000,000 bank loan
The loan is secured by a mortgage on the building held by the Group in Switzerland for a total value of CHF
2,470,000 (USD 2,496,207) and by transfer of rental income to the lender. If the loan is not terminated by
the company at least 3 months before its maturity, it will be automatically renewed.
10.2.1 Domestic Private Equity Investors LLC ("DPEI") Bridge Facility
The Group had entered into a bridge facility with DPEI for the financing of its operations on 30 June 2010.
As a result of the Group restructuring operations in 2011, the bridge facility had been fully reimbursed
during the year 2011.
The Group also issued warrants on the same date to DPEI granting to DPEI the right to purchase up to 10%
of the fully diluted share capital of the Company. The right existed as long as the outstanding warrant
shares represented more than 5% of the share capital of the Company. The fair value of the warrants was
immaterial.
On 8 November 2013 the agreement was amended such that the right to warrants would be terminated
following a successful IPO before 31 March 2014 on the condition that the company pay DPEI USD 40m.
This occurred in January 2014 and was considered as a cost of the facility in the year ended 31 December
2013; as such, it has been recognised in finance costs during the year 2013 (see note 19.4).
10.3 Hedging activities and derivatives
The Group has not entered into any hedging activity during each period covered by the consolidated
financial statements.
10.4 Fair values
The Group estimates that the fair value of the financial assets and liabilities approximates their carrying
amount as these are mainly composed of short-term receivables and payables.
10.4.1.1
Fair value hierarchy
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments
by valuation technique:
-
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities
-
Level 2: other techniques for which all inputs that have a significant effect on the recorded fair
value are observable, either directly or indirectly
-
Level 3: techniques that use inputs that have a significant effect on the recorded fair value that are
not based on observable market data
The Group has no financial instruments carried at fair value as at 31 December 2014 or 31 December 2013.
11 Inventories
As at
31/12/2014
USD
Raw materials
Work in progress
Finished goods -pallets
3,157,326
1,448,420
2,411,442
7,017,188
As at
31/12/2013
USD
878,357
488,639
157,796
1,524,792
Finished goods represent pallets produced and not yet sold or deployed via the pallet pool in property, plant
and equipment.
As at 31 December 2013, the Group assessed the carrying value of the inventory and considered that there
were value in the samples produced in 2012 which had previously been impaired and therefore reversed
the impairment.
The cost of inventory sold and recognised as an expense during the year was USD 554,962 (2013: USD
47,755).
35
RM2 INTERNATIONAL S.A.
Notes to the Consolidated Financial Statements
12 Trade and other receivables
As at
31/12/2014
USD
As at
31/12/2013
USD
Trade receivables
Income tax receivables
Other tax receivables
Other receivables
648,353
2,275
2,179,364
1,059,113
190,548
38
967,678
548,490
Total trade and other receivables
3,889,105
1,706,754
The ageing of the trade receivables as at 31 December 2014 is detailed below:
Neither past due nor impaired:
Past due but not impaired:
0 to 30 days
30 to 60 days
60 to 90 days
Over 90 days
2014
2013
348,185
50,022
216,952
73,968
7,128
2,120
648,353
124,682
15,844
190,548
The Group has a provision for impairment of the Canadian HST receivables for USD 96,465 (2013: USD
143,124).
The other tax receivables primarily relate to Harmonised Sales Tax (VAT) balances due in Canada and VAT
due in Luxembourg.
13 Cash and short-term deposits
As at 31/12/2014
As at 31/12/2013
USD
USD
Restricted cash
2,149,975
-
Total restricted cash
2,149,975
-
4,639,083
78,243,711
82,882,794
3,917,084
298,260
4,215,344
Cash at bank and in hand
Short-term deposits
Total cash and short-term deposits
Cash at banks earns interest at floating rates based on daily bank deposit rates. Short-term deposits are
made for varying periods of between one day and three months, depending on the immediate cash
requirements of the Group, and earn interest at the respective short-term deposit rates. At both periods
ended, the Group does not have any undrawn committed borrowing facilities.
The Group has not pledged any part of its short-term deposits to fulfil collateral requirements other than
USD 3,986 in respect of rental of office space. In connection with the operational lease of the factory
premises located in Canada, a letter of credit amounting to CAD 2,500,000 (USD 2,149,975) has been
issued to the landlord as a guarantee for lease payments and lease defaults. The related deposit bank
account is shown under Restricted cash.
For the purpose of the statement of cash flows, cash and cash equivalents comprise the following at 31
December:
Cash at bank and in hand
Short-term deposits
Bank overdraft (note 10)
Total cash and cash equivalents
As at 31/12/2014
As at 31/12/2013
USD
USD
4,639,083
78,243,711
82,882,794
82,882,794
3,917,084
298,260
4,215,344
(22,208)
4,193,136
36
RM2 INTERNATIONAL S.A.
Notes to the Consolidated Financial Statements
14 Share capital and reserves
2014
On 6 January 2014 the Company completed the IPO issuing, 155,903,548 shares at £0.88 on AIM and
receiving net proceeds, after payment of fees of USD 215,760,052. Following repayment of USD71,679,712
of development loans, fees and interest, the Company's balance sheet was free of debt (other than the
mortgage on the office building in Switzerland) and retained USD144,080,340 to finance capital
expenditure, production of inventory and overheads. The premium arising on the newly issued IPO shares
has been taken to the Share Premium Account.
On 6 January 2014 the Company issued 4,157,428 Ordinary Shares at par to a significant shareholder.
On 24 January 2014, 2,316,405 restricted shares were granted to certain Directors having Performance
Conditions (see note 22).
On 3 April 2014, 900,000 restricted shares were granted to a consultant subject to certain vesting
conditions.
On 13 June 2014, 2,317,000 restricted shares were granted to certain employees, 1,000,000 of which were
subject to Performance Conditions, and 1,317,000 of which were subject to certain vesting conditions.
On 22 September 2014 1,000,000 restricted shares were granted subject to certain Performance
Conditions.
Following such issuances, the Company had 322,777,156 Ordinary Shares issued.
2013
On 11 October 2013, the Company’s issued share capital was reorganised. The Company’s share capital
was decreased by USD 9,956,043 (to reflect absorption of historic losses and reimbursement in kind to
shareholders consisting of all the shares held by the Company in Basalt Holding S. à r. l.).
Linked to such decrease in issued share capital, the ordinary shares designated as Class J ordinary shares
were cancelled. This took the Company’s total issued share capital to USD 45,330,956, consisting of
110,574,000 ordinary shares of USD 0.45 each.
Immediately following this, the nominal value of the ordinary shares was reduced from USD 0.45 to USD
0.01.
Following such reorganisation, the Company’s issued share capital was USD 1,105,740, consisting of
110,574,000 ordinary shares of USD 0.01 each.
On 6 November 2013, the Company issued an additional 22,275,000 ordinary shares taking the Company’s
total issued share capital to 132,849,000 ordinary shares of USD 0.01 each.
On 14 November 2013, the Company’s shareholders resolved to reorganise the Company’s share capital
such that, with effect from Admission, each of the classes of ordinary share designated as Class A-I be
converted into a single class of ordinary share, being the Ordinary Shares.
On 26 November 2013, 11,025,000 Ordinary Shares were issued to certain founders of the Company,
taking the Company's total issued share capital to 143,874,000 Ordinary Shares.
On 3 December 2013, 12,308,775 Restricted Shares were granted to certain Directors, taking the
Company’s total issued share capital to 156,182,775 Ordinary Shares.
The restricted shares are issued with performance criteria. The Performance Conditions are linked to the
volume weighted average quoted price of the Ordinary Shares (the “Average Price”) for a consecutive 30
day period (the “Relevant Period”). If the Average Price is 50 per cent higher than the Placing Price for the
Relevant Period, the Performance Condition in respect of one-third of the Restricted Shares shall be
fulfilled. If the Average Price is 75 per cent higher than the Placing Price for the Relevant Period, the
Performance Condition in respect of a further one-third of the Restricted Shares shall be fulfilled. If the
Average Price is 100 per cent higher than the Placing Price for the Relevant Period, the Performance
Condition in respect of the final third of the Restricted Shares shall be fulfilled. If any Performance
Conditions are not fully satisfied by 19 November 2023, the Director shall transfer any of his remaining
Restricted Shares to the Company at a purchase price equal to the nominal value of the Restricted Shares,
being USD 0.01 each.
37
RM2 INTERNATIONAL S.A.
Notes to the Consolidated Financial Statements
The holders of the Restricted Shares cannot sell, transfer, mortgage, charge, encumber or otherwise
dispose of any of the Restricted Shares as long as the performance conditions are not fully satisfied. These
Restricted Shares are considered by Management as share-based payments and performance conditions
as market vesting conditions. For further detail on the share-based payments transactions refer to note 22.
14.1 Authorised shares
Shares
USD
Par value per
share
150,162,230
67,573,003
USD 0.45
Decrease of authorised share capital dated 6 November 2013
Increase of authorised share capital dated 14 November 2013
Increase of authorised share capital dated 19 November 2013
Decrease of authorised share capital dated 26 November 2013
Decrease of authorised share capital dated 26 November 2013
(15,016,223)
39,786,093
174,932,100
(22,275,000)
522,274,995
9,341,361
(11,025,000)
(12,308,775)
(6,757,300.4)
(59,464,243.1)
397,861
1,749,321
(222,750)
5,222,750
93,414
(110,250)
(123,088)
USD 0.45
N/A
USD 0.01
USD 0.01
USD 0.01
USD 0.01
USD 0.01
USD 0.01
USD 0.01
At 31 December 2013
660,939,681
6,609,397
USD 0.01
(155,903,548)
(4,157,428)
(2,316,405)
(900,000)
(2,317,000)
(1,000,000)
(1,559,036)
(41,574)
(23,164)
(9,000)
(23,170)
(10,000)
USD 0.01
USD 0.01
USD 0.01
USD 0.01
USD 0.01
USD 0.01
494,345,300
4,943,453
USD 0.01
At 1 January 2013
Capital restructuring of 11 October 2013
Authorised capital reduction
Decrease of par value of shares
Increase of authorised share capital
IPO placement on 6 January 2014
Subscription for new shares on 6 January 2014
Subscription for restricted shares on 24 January 2014
Subscription for restricted shares on 3 April 2014
Subscription for restricted shares on 13 June 2014
Subscription for restricted shares on 22 September 2014
At 31 December 2014
The above table shows the authorised share capital for available for issue.
14.2 Ordinary shares issued and fully paid
Shares
USD
Par value per
share
122,860,000
55,287,000
USD 0.45
-
(4,919,270)
(12,286,000)
(5,036,773)
110,574,000
22,275,000
11,025,000
(44,225,217)
1,105,740
222,750
110,250
USD 0.01
USD 0.01
USD 0.01
12,308,775
156,182,775
123,088
1,561,828
USD 0.01
USD 0.01
IPO placement on 6 January 2014
Subscription for new shares on 6 January 2014
Subscription for restricted shares on 24 January 2014
Subscription for restricted shares on 3 April 2014
Subscription for restricted shares on 13 June 2014
Subscription for restricted shares on 22 September
2014
155,903,548
4,157,428
2,316,405
900,000
2,317,000
1,559,036
41,574
23,164
9,000
23,170
USD 0.01
USD 0.01
USD 0.01
USD 0.01
USD 0.01
1,000,000
10,000
USD 0.01
At 31 December 2014
322,777,156
3,227,772
USD 0.01
At 1 January 2013
Capital restructuring of 11 October 2013
- Decrease in share capital by absorption of
losses
- Acquisition and cancellation of own shares
(Class J shares) (note 19.3)
- Capital reduction by decrease of par value of
shares
Subscription for new shares on 6 November 2013
Subscription for new shares 26 November 2013
Subscription for restricted shares on 3 December 2013
(note 22)
At 31 December 2013
38
RM2 INTERNATIONAL S.A.
Notes to the Consolidated Financial Statements
As at 31 December 2014, the issued share capital is composed of one class of Ordinary Shares (31
December 2013: 9 Classes A to I having equal rights).
2015
Following 31 December 2014, the Company issued 253,000 restricted shares, refer to note 27 on
subsequent events for further detail.
14.3 Share premium
USD
At 1 January 2013
Reduction of nominal value per share 11 October 2013
693,356
44,225,217
Absorption of the 31 December 2013 loss on 14 November 2013
(13,784,115)
At 31 December 2013
IPO placement 6 January 2014
31,134,458
223,097,977
Transaction costs on issue of shares
(4,433,482)
Absorption of the 31 December 2013 loss on 24 June 2014
(30,441,102)
At 31 December 2014
219,357,851
The share premium account comprises an amount of USD Nil (2013 USD: 30,441,102) corresponding to
share premium available to compensate existing and future losses or to increase the subscribed share
capital. The share premium available for the compensation of existing and future losses or to increase the
subscribed share capital was USD 44,225,217 and resulted from the reduction of nominal value of the
shares from USD 0.45 to USD 0.01 on October 11, 2013. The USD 44,225,217 was absorbed as to USD
30,441,102 during 2014 and USD 13,784,115 during 2013.
14.4 Warrants
On 30 June 2010, the Group issued warrants to Domestic Private Equity Investors LLC (“DPEI”) granting to
DPEI the right to purchase up to 10% of the fully diluted share capital of the Company (the “Warrant
Shares”). The right existed as long as the outstanding warrant shares represent more than 5% of the share
capital of the Company.
On 8 November 2013 an agreement was entered into with DPEI to agree that the right to warrants would be
terminated following a successful IPO before 31 March 2014 on the condition that the Company pay DPEI
USD 40,000,000. Therefore no warrants were outstanding at 31 December 2014 or 31 December 2013.
The Company made payment of the liability on 7 January 2014. This amount has been accrued as a
finance expense in the year ended 31 December 2013.
The liability for the termination of the warrants amounts to USD 40,000,000 and is recorded within other
payables as at year end 2013 and was repaid on 7 January 2014.
14.5 Nature and purpose of reserve
Currency translation reserve:
The currency translation reserve is used to record exchange differences arising from the translation of the
subsidiaries’ financial statements in foreign currencies to the Group reporting currency.
This reserve cannot be distributed to shareholders.
Share based payment reserve:
The share based payment reserve corresponds to the accumulated amount of instruments granted to
employees regarding share based payments equity settled.
14.6 Dividend distribution
As a result of the accumulated losses generated by the Group, no dividend has been declared or paid.
39
RM2 INTERNATIONAL S.A.
Notes to the Consolidated Financial Statements
15 Trade and other payables
As at
31/12/2014
USD
Trade payables
Employee compensation payables
Other tax payables
Other payables
Total trade and other payables
4,752,320
258,110
747,662
402,183
6,160,275
As at
31/12/2013
USD
2,725,769
9,046
188,582
41,663,916
44,587,313
Other payables includes an amount of USD 120,471 (2013: USD 12,782) due to related parties and in 2014
of nil (2013: USD 40,041,574) due in relation with the cancellation of DPEI warrants (see notes 10.2.1 and
14.4).
Terms and conditions of the above financial liabilities:
-
Trade payables are non-interest bearing and are normally settled on 30-days terms
-
Other payables are non-interest bearing and have an average term of 30 days terms
-
For explanation on the Group’s liquidity risk management processes, refer to Note 25.
16 Revenues and segment reporting
The Group has only one operating segment for the disclosure of revenue. However the revenue analysis is
broken down by revenue stream as disclosed here below.
Operating segment is reported in a manner consistent with the internal reporting used by the chief operating
decision-maker. The chief operating decision-maker, who is responsible for allocating resources and
assessing performance of the operating segment, has been identified as the Board of Directors of the
parent company that makes strategic decisions.
The Group has determined the operating segments based on the reports reviewed by the Board of
Directors, which are used to make strategic decisions.
The Board of Directors is responsible for the Group’s entire business and considers the business to have a
single operating segment that represent the production, the sale and the rent of pallets including related
logistical services. The asset allocation decisions are based on a single, integrated investment strategy, and
the Group’s performance is evaluated on an overall basis.
The internal reporting provided to the Board of Directors for the Group’s assets, liabilities and performance
is prepared on a consistent basis with the measurement and recognition principles of IFRS.
There were no changes in the reportable segments during the year.
The Group has a diversified customer portfolio. However, during the year 2014, there were two clients who
represent more than 10% of the Group’s revenues totalling 21%.
Turnover
Sold, leased pallets and logistical services
Rendering of logistical services
As at 31/12/2014
As at 31/12/2013
USD
USD
444,125
1,556,291
2,000,416
5,265
98,939
104,204
40
RM2 INTERNATIONAL S.A.
Notes to the Consolidated Financial Statements
Geographical information
The parent company is based in Luxembourg. The information for the geographical area of non-current
assets are presented for the most significant areas where the group has operations, being Luxembourg
(country of domicile), rest of Europe and North America.
Luxembourg
Rest of Europe
North America
As at 31/12/2014
As at 31/12/2013
USD
USD
3,451,895
7,055,336
23,511,029
2,381,272
7,507,598
9,445,055
34,018,260
19,333,925
Non-current assets for this purpose consist of property, plant and equipment, investment properties and
intangible assets.
17 Cost of sales
As at 31/12/2014
USD
Cost of pallets sold – blockpall
Cost of pallets sold – services
Amortization of pallet pool
Cost of software, licenses and services
Factory absorption
Other
As at
31/12/2013
USD
271,952
283,013
88,258
1,393,418
16,767,957
2,805,119
21,609,717
47,755
47,755
Factory absorption is the variance between actuals costs to produce pallets and the standard costs used in
valuing the pallets produced in inventory and assets. The total cost of the production facility for which the
total manufacturing capacity is circa 3 million pallets was not fully absorbed by production in the year and
the under absorption is shown as a cost of sales.
18 Administrative expenses
Administration payroll
Selling and distribution
Shared based payment
Depreciation
Other
As at 31/12/2014
As at 31/12/2013
USD
USD
4,532,516
6,614,849
1,215,470
1,362,317
4,535,440
18,260,591
5,297,708
837,158
15,743,333
141,924
11,509,259
33,529,382
41
RM2 INTERNATIONAL S.A.
Notes to the Consolidated Financial Statements
19 Other income and expenses
19.1 Other operating income
Net (loss)/gain on disposal of PPE
Rental income
Other
Total other operating income
As at 31/12/2014
As at 31/12/2013
USD
USD
1
329,450
341,476
670,927
737,000
326,125
43,169
1,106,294
19.2 Other operating expenses
Direct operating expenses on
rental-earning investment
properties
Research and development costs
Cost of agreement settlement
Other
Total other operating expenses
As at 31/12/2014
As at 31/12/2013
USD
USD
101,119
554,904
656,023
124,706
100,830
2,000,000
70,413
2,295,949
19.3 Finance income
As at 31/12/2014
USD
As at
31/12/2013
USD
Interest income on loans and receivables
Total interest income
290,538
290,538
936,061
936,061
Net foreign exchange gain
Dividend income
Disposal of investment in Mafic
Other
Total finance income
443,995
42,096
776,629
84,536
2,302
5,036,773
3,640
6,063,312
On 27 September 2013, the Company participated in a contribution in kind of 842,000 shares of Mafic S.A. in
order to incorporate and hold 100% of the issued share capital of Basalt Holding S. à r. l., a newly incorporated
Luxembourg company. This resulted in the recognition of a financial gain of USD 16,464,380. Subsequently, a
value correction amounting to USD 3,304,857 has been deducted from the value acquisition of Basalt Holding S.
à r. l. participation.
On 11 October 2013, the Group cancelled 12,286,000 Class J shares with a nominal value of USD 0.45 each and
disposed of the entire share capital of Basalt Holding S. à r. l. as a payment in kind to the holders of the Class J
shares. The financial loss on the disposal is USD 8,171,070. The difference between the gain, the value
correction and the loss recognised on this transaction is the value of the cancellation of the share capital.
42
RM2 INTERNATIONAL S.A.
Notes to the Consolidated Financial Statements
19.4 Finance costs
Interest at amortised costs on loans and borrowings
Total interest expenses
Net foreign exchange loss
DPEI warrant
Other
Total finance costs
As at 31/12/2014
As at 31/12/2013
USD
USD
568,639
568,639
7,056,956
7,056,956
4,843,501
254,257
5,666,397
891,180
40,000,000
652,764
48,600,900
On 7 January 2014, the Group paid arrangement fees amounting to USD 6,175,000, as part of the reimbursement
of the development loans. These arrangement fees were mainly accrued in the fiscal period 2013 and recorded
under Interest at amortised costs on loans and borrowings.
19.5 Employee benefits expenses
As at 31/12/2014
As at
31/12/2013
USD
USD
Included in selling and distribution expenses:
Wages and salaries
Social security costs
Pension costs
1,317,917
200,209
105,527
699,284
101,091
36,783
Included in administrative expenses:
Wages and salaries
Social security costs
Pension costs
4,064,343
442,456
25,715
4,852,273
290,346
11,965
Total employee benefits expenses
6,156,167
5,991,742
274
109
Average number of full time employees
19.6 Research and development costs
As at 31/12/2014
As at 31/12/2013
USD
USD
Included in other operating expenses:
-
100,830
20 Income taxes
20.1 Income tax expenses
The major components of income tax expense for each period are:
Current income tax:
Current income tax charge
Deferred tax
Total current income tax:
Income tax expenses
As at 31/12/2014
As at 31/12/2013
USD
USD
59,744
(157,135)
(97,391)
(97,391)
62,152
10,616
72,768
72,768
43
RM2 INTERNATIONAL S.A.
Notes to the Consolidated Financial Statements
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 31/12/2014
As at 31/12/2013
USD
USD
Loss before tax
Theoretical income tax charge/(income) using applicable income
tax rate
Reconciliation to actual income tax charge
Unrecognised deferred tax assets on losses carried forward
(47,315,141)
(77,200,176)
(13,148,122)
(21,981,699)
14,360,228
21,982,512
494,695
299,497
(2,150,378)
4,828,352
12,011
3,780
-
(4,821,943)
-
52,918
(6,229)
48,881
874
(97,391)
72,768
Non-deductible expenses from:
Director’s fees, ESOP
Accelerated capital allowances
Other non-deductible expenses
Non-taxable income from:
Gain on disposal of mafic
Other non-taxable income
Minimum income tax charge
Other
Income tax expenses
20.2 Deferred taxes
The Group has not recognised any deferred tax assets as there is no certainty of the timing of recovery.
The tax losses for which no deferred tax asset has been recognised amount to USD 187,484,145 as at 31
December 2014 (2013: USD 113,788,484). If the Group was able to recognise all unrecognised deferred
tax assets, the loss would decrease by USD 53,762,795 as at 31 December 2014 (2013: USD 31,474,756).
On the acquisition of Equipment Tracking Limited on 10 December 2013, the valuation of the separable net
assets the company created deferred tax liability of USD 523,782, refer to note 5.
During the year, the Group recognised a deferred tax liability on the accelerated capital depreciation of
some assets held by Equipment Tracking Limited for USD 157,135 (2013: USD 10,741), the variation with
the amount recognised in profit and loss is due to currency translation.
As at year end, the Group has recognised deferred tax liabilities for USD 403,285 (2013: USD 534,523).
21 Pensions and other post-employment benefit plans
RM2 Limited and Equipment Tracking Limited operate defined contribution pension schemes. The assets of
the schemes are held separately from those of the company in an independently administered fund. The
pension cost charge represents contributions payable by the company to the fund. The amounts payable
were USD 46,863 (2013 USD 34,943)
22 Share-based payments
The Group has a number of share schemes as shown in the table below.
The Company grants restricted shares, shares grants at par value and share options at its discretion to
employees, officers, directors, consultants and advisors.
Restricted shares and share options are granted with vesting periods of between the date of grant and ten
years from the issuance or the date of grant and may carry performance conditions or time conditions for
vesting. Should the restricted shares or options remain unexercised after a period of ten years from the date
of grant, the options will expire and the restricted shares will be repurchased from the holder. Options are
exercisable at a price equal to the Company’s quoted market price on the date of grant.
Each programme approved by the Company during the year is detailed as follows:
44
RM2 INTERNATIONAL S.A.
Notes to the Consolidated Financial Statements
22.1 2012 Equity Incentive Plan
The Remuneration Committee approved the issuance of 11,025,000 shares to certain founders of the
Group on 16 July 2013. These shares were immediately issued without any restriction for the holders.
Management has determined the fair value of this share-based payment transaction by reference to the
placing price of the shares.
22.2 2013 Equity Incentive Plan
The Remuneration Committee approved the issuance of 12,308,775 shares to certain Directors on 14
November 2013. These shares were immediately issued and accompanied by a restricted share agreement
for each beneficiary of the awards.
Each restricted share agreement specifies that holders can only dispose of their shares upon achievement
of certain performance conditions. The performance conditions are linked to the volume weighted average
quoted price of the Ordinary Shares (the “Average Price”) for a consecutive 30 day period (the “Relevant
Period”). If the Average Price is 50% higher than the Placing Price pf GBP 0.88 for the Relevant Period, the
Performance Condition in respect of one-third of the Restricted Shares shall be fulfilled. If the Average Price
is 75% higher than the Placing Price for the Relevant Period, the Performance Condition in respect of a
further one-third of the Restricted Shares shall be fulfilled. If the Average Price is 100% higher than the
Placing Price for the Relevant Period, the Performance Condition in respect of the final third of the
Restricted Shares shall be fulfilled. If any Performance Conditions are not fully satisfied by 19 November
2023, the Director shall transfer any of his remaining Restricted Shares to the Company at a purchase price
equal to the nominal value of the Restricted Shares, being USD 0.01 each.
Management has considered that, even if shares were immediately issued to holders and then there was no
effective period, the performance conditions would be similar to vesting conditions. As a result,
Management has determined the duration of tranche 1 and 2 as at 5 years and of tranche 3 as at 10 years
from grant date.
In determining the amount of shares that will be exercised (available for disposal by holders) at 100%, the
Management considers that all beneficiaries would remain in the Group at the date of the exercise.
22.3 Employee Stock Option Plan (“ESOP”)
In 2014, the Remuneration Committee approved the issuance of a total of 6,533,405 restricted shares and
600,000 options to Directors, consultants and key employees. Part of these awards 4,316,405 are issued
under the same conditions as the restricted shares described above and part 2,217,000 vest on the third
anniversary of the grant date, assuming the beneficiary continues to have a business relationship with the
Company at such date. In addition, the Remuneration Committee approved the issuance of 600,000 share
options to key employees and management, vesting over three years in equal tranches on the anniversary
of the grant date and with a strike price equal to fair market value on the date of grant. The vesting of such
options also automatically accelerates should the volume-weighted average price of the Company’s shares
exceed the Placing Price of GBP 0.88 by 100% for a period of 30 consecutive calendar days.
In 2015, the Remuneration Committee approved the issuance of 253,000 restricted shares to key
employees. These shares vest on the third anniversary of the grant date, assuming the beneficiary
continues to have a business relationship with the Company at such date.
Financial effect of share-based payment transactions:
The expense recognised for employee services received during the year is shown in the following table:
Expense arising from equity-settled share-based payment
transactions
Total expense arising from share-based payment
transactions
2014
USD
2013
USD
1,215,470
15,743,333
1,215,470
15,743,333
The Company does not have any liability arising from share-based payment transactions as at 31
December 2014 (2013 Nil.)
45
RM2 INTERNATIONAL S.A.
Notes to the Consolidated Financial Statements
Movements during the year:
The following table illustrates the number and weighted average exercise price (WAEP) of, and movements
in, share granted and share options during the year:
Outstanding at beginning of year
Restricted Number of
shares issued share options
12,308,775
-
Granted during the year
Forfeited in the year
Exercised during the year
Outstanding at end of the year
Tradable/Exercisable at end of the year
6,533,405
(9,000)
18,833,180
-
600,000
600,00
-
The weighted average remaining contractual life for the restricted shares issued outstanding as at 31
December 2014 5.35 years (2013: 6.67 years.)
The weighted average fair value of shares granted during the year was USD 0.50 (2013: USD 0.67).
Where restricted shares have been issued with performance conditions, Management considers that range
of exercise price will be from GBP 1.32 to GBP 1.54 for tranche 1, from GBP 1.54 to GBP 1.76 for tranche 2
and from GBP 1.76 for tranche 3.
The weighted average share price at the date of exercise issue was GBP 0.84.
22.4
Fair value of share based payments transactions
2012 Equity Incentive Plan – Shares issued to founders
The fair value of shares granted was estimated based on the placing price of shares (GBP 0.88), as at 6
January 2014, as it is considered to be the most representative value of the shares granted to founders at
the grant date, less the exercise price paid by the holders of the shares (GBP 0.01).
2013 Equity Incentive Plan – Restricted shares issued
A modified Black-Scholes model has been used to determine the fair value of the share based payment on
the date of grant or issue. The fair value is expensed to the income statement on a straight line basis over
the vesting period, which is determined annually. The model assesses a number of factors in calculating the
fair value. These include the market price on the date of grant, the exercise price of the share options, the
expected share price volatility of the market sector in which the Group operates, the expected life of the
options, the risk free rate of interest and the expected level of dividends in future periods
46
RM2 INTERNATIONAL S.A.
Notes to the Consolidated Financial Statements
The calculation of the fair value of options issued requires the use of estimates. Expected volatility has been
estimated based on similar sized companies listed on the AIM market of the London Stock Exchange. It is
assumed that all options will be exercised.
2013
Restricted
Shares
Weighted average exercise price
Expected volatility
Expected life of restricted shares
Risk-free interest rate
Expected dividend yields
Model used
GBP 0.01
17%
5 and 10 years
1.9%-2.6%
Nil
Black-Scholes
2014
Restricted
Shares
Weighted average exercise price
Expected volatility
Expected life of restricted shares
Risk-free interest rate
Expected dividend yields
Model used
GBP 0.01
17%
5 and 10 years
1.9%-2.6%
Nil
Black-Scholes
2014
2014
Restricted
Option Shares
Shares
GBP 0.01
3 years
1.1%
Nil
GBP 0.645
17%
3 years
1.1%
Nil
Black-Scholes
In determining the cost to be recognised during the period, management considered that all shares would
be exercised by holders upon achievement of performance conditions.
23 Earnings per share
Basic earnings per share amounts are calculated by dividing the net profit for the year attributable to
ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during
the year.
Diluted earnings per share amounts are calculated by dividing the net profit attributable to ordinary equity
holders of the parent by the weighted average number of ordinary shares outstanding during the year plus
the weighted average number of ordinary shares that would be issued on conversion of all the dilutive
potential ordinary shares into ordinary shares.
The following reflects the income and share data used in the basic and diluted earnings per share
computations:
Net loss attributable to ordinary equity holders of
the parent for basic earnings
As at 31/12/2014
As at 31/12/2013
USD
USD
(47,217,750)
As at 31/12/2014
Weighted average number of ordinary shares for basic
earnings per share
Weighted average number of ordinary shares
adjusted for the effect of dilution
Loss per share
Basic
Diluted
(77,270,973)
As at 31/12/2013
317,997,300
125,498,680
317,997,300
125,498,680
(0.15)
(0.15)
(0.62)
(0.62)
Management considers that there is no dilutive effect from the options as they would be negative.
47
RM2 INTERNATIONAL S.A.
Notes to the Consolidated Financial Statements
24 Commitments and contingencies
24.1 Operating lease rentals – Group as lessor
Property
The Group has entered into commercial property lease on its investment property, consisting in the Group’s
surplus space in the Swiss office building. The non-cancellable lease has remaining terms of as at 31
December 2021.
Future minimum rentals receivable under non-cancellable operating leases as at 31 December are as
follows:
As at 31/12/2014
USD
As at 31/12/2013
USD
329,452
1,317,808
658,904
2,306,164
326,125
1,304,502
978,375
2,609,002
Within one year
After one year but not more than five years
More than five years
Pallets
As at 31 December 2014, the Group had contracted 2 customers having both signed a 3-year-period agreement.
Future minimum rentals receivable under non-cancellable operating leases as at 31 December are as follows:
As at 31/12/2014
As at
31/12/2013
USD
USD
Within one year
After one year but not more than five years
More than five years
64,128
128,256
192,384
-
24.2 Operating lease commitments – Group as lessee
The Group has entered into commercial leases for office spaces in United Kingdom and New Jersey and for
a manufacturing facility in Canada. These leases have an average life of between 6 months and 3 years
with renewal options included in the contracts. In connection with the operational lease of the factory
premises located in Canada, a letter of credit amounting to CAD 2,500,000 (USD 2,149,975) has been
issued to the landlord as a guarantee for lease payments and lease defaults.
Future minimum rentals payable under non-cancellable operating leases as at 31 December are as follows:
Within one year
After one year but not more than five years
More than five years
As at 31/12/2014
As at 31/12/2013
USD
USD
1,682,661
5,550,376
5,920,924
13,153,961
399,078
256,140
655,218
24.3 Contingent liabilities
At 31 December 2013 the Company had a contingent liability to pay GBP 363,866 (USD 602,666), on the
successful completion of an IPO. The IPO occurred on 6 January 2014 and the related liabilities were duly
paid.
48
RM2 INTERNATIONAL S.A.
Notes to the Consolidated Financial Statements
24.3.1 Warrants DPEI – comparative information
In relation with the Warrants issued by the Group to DPEI, the holder of the warrant had the option to
terminate the Warrants, at its discretion. Upon termination of the Warrants, the Group would have to pay the
holder an amount equal to the fair market value of the warrants. The holder may only terminate 25% of the
warrant shares and only during the period from 31 December 2012 until 31 December 2017.
On 8 November 2013 the agreement was amended such that the right to warrants would be terminated
following a successful IPO before 31 March 2014 on the condition that the company pay DPEI USD 40
million. This occurred in January 2014 and has been accrued as a cost of the facility in the year ended 31
December 2013. The accrual has been duly paid during the year 2014.
24.4 Forward purchase of property, plant and equipment
The Group has commitment in relation with forward purchase for the acquisition of property, plant and
equipment, as follows:
As at
31/12/2014
USD
Forward purchase for acquisition of PPE
2,249,326
As at
31/12/2013
USD
2,386,380
24.5 Related party disclosures
24.5.1 Group subsidiaries
The consolidated financial information include the financial statements of the Company and its subsidiaries.
The Group has the following subsidiaries included in these consolidated financial information:
% of equity interest
Subsidiary name
RM2 S.A., including Swiss branch
RM2 Leasing S.A. (previously RM2 IP S.A.)
RM2 Holland B.V.
RM2 Europe Spółka z.o.o.
RM2 USA Inc.
RM2 Limited (previously Victoria Rises Ltd.)
RM2 Canada Inc.
RM2 France E.u.r.l. (previously RM2 France S.à r.l.)
Equipment Tracking Limited
RM2 Holding S.à r.l.
Total Solutions International B.V
Country of
incorporation
Luxembourg
Luxembourg
Netherlands
Poland
United States of
America
United Kingdom
Canada
France
United Kingdom
Luxembourg
Netherlands
2014
2013
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
0%
100%
100%
100%
100%
0%
100%
All subsidiaries held by the Company are consolidated, except for RM2 Total Solutions Inc., United States
of America, and RM2 Pallet Investment Limited, Ireland.
On 24 June 2014, the Extraordinary General Meeting of Shareholders of RM2 International S.A. approved the
contribution of all assets and liabilities of RM2 International S.A. in a newly incorporated entity in Luxembourg,
RM2 Holding S.à r.l., with accounting and tax effect as at 1 April 2014.
At December 24, 2014 RM2 Total Solutions International B.V. merged into RM2 Holland B.V and is now a
dormant company.
49
RM2 INTERNATIONAL S.A.
Notes to the Consolidated Financial Statements
24.5.2 Transactions with related parties
All transactions between the Company and the Group’s subsidiaries, and between Group’s subsidiaries,
have been eliminated for the preparation of these consolidated financial information.
Year
Parent: Interest bearing loans
Parent: Interest bearing loans
Parent: Non-interest bearing loans
Parent: Non-interest bearing loans
Key Management personnel: Remuneration
Key Management personnel: Remuneration
Key Management personnel: Advances
Key Management personnel: Share-based
payments
Key Management personnel: Share-based
payments
Other: Advances
Other: Reimbursement of costs incurred
Other: Asset acquires
Income
with
related
parties
USD
Expenses from
related parties
Amounts owed
by related
parties
Amounts owed
to related
parties
Assets
acquired from
related parties
USD
USD
USD
USD
2013
2014
2013
2014
2013
2014
2014
2013
-
1,226,532
123,458
428,402
1,464,673
15,743,333
111,921
107,549
-
5,926,532
8,550
8,550
-
-
2014
-
424,257
-
-
-
2014
2014
2014
726,215
-
-
31,771,72
771,854
-
10,235
-
250,000
The income from other related parties have been recorded in Other operating income for USD 339,925 and
have been deducted from Other Administrative expenses for USD 386,291.
In addition, the parent company realized in 2013 a capital decrease by the distribution in kind of shares in
Basalt Holding S. à r. l. (see note 19.3 for details of the transaction).
Restricted share issues to related parties are disclosed in note 22.
24.5.3 Transactions with key management personnel
There were no specific transactions between the Group and the key management personnel.
The Group granted compensation to the key management personnel as follows:
As at 31/12/2014
As at 31/12/2013
USD
USD
Short-term employee benefits
1,464,673
428,402
25 Financial risk management objectives and policies
The Group’s financial liabilities comprise only loans and borrowings and trade and other payables. The
main purpose of these financial liabilities is to finance the Group’s operations. The Group has loans and
other receivables, trade and other receivables, and cash and short-term deposits that arrive directly from its
operations.
The Group is exposed to market risk, credit risk and liquidity risk in relation to the financial instruments held.
The Group’s senior management oversees the management of these risks. The Board of Directors reviews
and agrees policies for managing each of these risks which are summarised below.
25.1 Market risks
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because
of changes in market prices. Market prices comprise three types of market risk: interest rate risk, currency
risk and other price risk, such as commodity price risk or equity price risk. Financial instruments affected by
market risk include loans and borrowings, deposits and available-for-sale investments.
50
RM2 INTERNATIONAL S.A.
Notes to the Consolidated Financial Statements
The Group’s management has determined that the Group was not subject to interest rate risk as all
significant loans and receivables have been issued with fixed interest rate, or to commodity price risk as the
production of pallets does not require raw material subject to market volatility.
The Group has only exposure to the foreign currency risk as a result of its operations in various countries
and using different functional currencies.
The sensitivity analyses in the following sections relate to the position as at 31 December 2014 and 2013.
The sensitivity analyses have been prepared on the basis that the amount of net debt, the ratio of fixed to
floating interest rates of the debt and derivatives and the proportion of financial instruments in foreign
currencies are all constant and on the basis of the hedge designations in place (at 31 December 2013:
none).
The analyses exclude the impact of movements in market variables on: the carrying values of pension and
other post-retirement obligations; provisions: and the non-financial assets and liabilities of foreign
operations.
25.1.1 Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate
because of changes in foreign exchange rates. The Group’s exposure to the risk of changes in foreign
exchange rates relates primarily to the Group’s operating activities (when revenue or expense is
denominated in a different currency from the Group’s presentation currency) and the Group’s net
investments in foreign subsidiaries (translation risk).
The Group is aware of its non US Dollar exposures but does not consider a hedging program to be needed
currently. Raw materials and capital expenditure are primarily in US Dollars whilst the target revenue
market is the USA. Any divergence from this would be considered by management with a view to putting
cover in place.
The Group has significant operations in the following currencies: United States Dollar (USD), Swiss Franc
(CHF) and Canadian Dollar (CAD) and Great British Pound (GBP). The Group has other operations in the
following currencies which are not significant for the Group: Euro (EUR) and Polish Zloty (PLN).
Sensitivity analysis
All intercompany movements have been excluded from this sensitivity analysis. The following tables
demonstrate the sensitivity to a reasonably possible change in the CHF and CAD exchange rates, with all
other variables held constant. The impact on the Group’s profit before tax is due to changes in the fair value
of monetary assets and liabilities including non-designated foreign currency derivatives. The Group’s
exposure to foreign currency changes for all other currencies is not material.
The sensitivity analysis assumes a +/- 6% change of the USD/CHF exchange rate for the year (2013: 3%).
This percentage has been determined based on the average market volatility in exchange rates in the
previous 24 months.
The sensitivity analysis assumes +/- 8% of the USD/CAD exchange rate of the previous 24 months is
(2013: 1%) This percentage has been determined based on the average market volatility in exchange rates
in the previous 24 months.
Year
Change in
CHF rate
Effect on profit
before tax
USD
Effect on other
comprehensive
income
USD
2014
+6%
-6%
(337,512)
308,689
(337,512)
308,689
2013
+3%
-3%
16,494
(16,988)
16,494
(16,988)
Year
Change in
CAD rate
Effect on profit
before tax
USD
Effect on other
comprehensive
income
USD
51
RM2 INTERNATIONAL S.A.
Notes to the Consolidated Financial Statements
2014
+8%
-8%
(198,715)
219,422
(198,715)
219,422
2013
+1%
-1%
(214,057)
217,057
(214,057)
214,507
25.2 Credit risk
Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or
customer contract, leading to a financial loss. The Group is exposed to credit risk from its operating
activities and from its financing activities, including deposits with banks and financial institutions, foreign
exchange transactions and other financial instruments.
Credit risk from balances with banks and financial institutions is not considered significant as the Group
centrally manages the cash held in Luxembourg and has made placements with lower-risk counterparties
mainly located in an A rating bank. Funding by the Luxembourg Holding company to the subsidiaries is
limited to their current operational requirements.
Trade and other receivables
The Group is not subject to any credit risk related to trade receivable as the Group has no material trade
receivables as at each period ended.
25.2.1 Financial instruments and cash deposits
In 2013, the Group loan financial instruments were mainly represented by loan receivables owed by PRC.
The Management estimated that the recoverability of the PRC receivable was uncertain (see note 4) and
has recorded impairment on the full nominal amount of the receivables. The loan has been cancelled in
2014.
Credit risk from balances with banks and financial institutions is not considered significant as the Group has
made placements with lower-risk counterparties.
25.2.2 Ageing analysis of receivables
The Group receivables ageing list at 31 December 2014 has been collected during the 1 st quarter of
2015.The interest on the PRC loans which are due as at 31 December 2014 and remains unpaid as at the
period end for USD 236,250 (2013: 609,415). The interest has currently not been collected, as a
consequence, it has been fully impaired.
52
RM2 INTERNATIONAL S.A.
Notes to the Consolidated Financial Statements
25.3 Liquidity risk
The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use
of raising of capital via equity issues or bridging facilities. Longer term the Group will look to finance
activities through bank and debt facilities see Note 3.2.
Maturity Profile
The table below summarises the maturity profile of the Group’s financial liabilities based on contractual
undiscounted payments.
31 December 2014
Due on
demand
Due within
3 months
USD
USD
Non-current liabilities
Interest-bearing loans
and borrowings
Bank borrowings
Current liabilities
Interest-bearing loans
and borrowings
Bank overdrafts
Other loans and
borrowings
Loans from other related
parties
Trade and other
payables
Trade payables
Payables to other
related parties
Employee compensation
payables
Other tax payables
Other payables
Non-current liabilities
Interest-bearing loans
and borrowings
Bank borrowings
Current liabilities
Interest-bearing loans
and borrowings
Bank overdrafts
Other loans and
borrowings
Loans from other related
parties
Trade and other
payables
Trade payables
Payables to other
related parties
Employee compensation
payables
Other tax payables
Other payables
Total financial liabilities:
Due
between 1
and 5
years
USD
Due after 5
years
Total
USD
USD
-
-
-
2,053,541
-
2,053,541
-
28,573
-
2,053,541
2,053,541
-
-
-
28,573
-
-
-
28,573
-
-
-
-
-
-
-
6,354,090
4,752,320
-
-
-
6,354,090
4,752,320
-
120,471
-
-
-
120,471
-
258,111
941,475
281,713
-
-
-
258,111
941,475
281,713
-
6,382,663
-
2,053,541
-
8,436,204
Due on
demand
Due within
3 months
Total
USD
Due
between 1
and 5
years
USD
Due after 5
years
USD
Due
between 3
and 12
months
USD
USD
USD
Total financial liabilities:
31 December 2013
Due
between 3
and 12
months
USD
28,573
-
-
-
2,371,080
-
2,371,080
-
-
-
2,371,080
-
2,371,080
22,208
22,208
31,208,505
-
-
-
-
31,230,713
22,208
-
25,273,423
-
-
-
25,273,423
-
5,935,082
-
-
-
5,935,082
-
45,528,637
2,725,769
-
-
-
45,528,637
2,725,769
-
12,782
-
-
-
12,782
-
9,046
1,129,906
41,651,134
-
-
-
9,046
1,129,906
41,651,134
22,208
76,737,142
-
2,371,080
-
79,130,430
53
RM2 INTERNATIONAL S.A.
Notes to the Consolidated Financial Statements
25.4 Concentration of risk
Concentrations arise when a number of counterparties are engaged in similar business activities, or
activities in the same geographical region, or have economic features that would cause their ability to meet
contractual obligations to be similarly affected by changes in economic, political or other conditions.
Concentrations indicate the relative sensitivity of the Group’s performance to developments affecting a
particular industry. The Group do not consider that others are engaged in similar business activities, but do
monitor the situation.
26 Capital management
The Group’s policy is to maintain a strong capital base to maintain investor, creditor and market confidence
and to sustain the future development of the business. The impact of the level of capital on shareholders’
return is also recognised and the Group recognises the need to maintain a balance between the higher
returns that might be possible with greater gearing through future borrowings and the advantage and
security afforded by a sound capital position.
The Group manages the capital structure and makes adjustments to it in the light of changes in economic
conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital
structure, the Group may adjust the amount of dividends paid to shareholders in the future, return capital to
shareholders, issue new shares, or sell assets to reduce debt.
27 Subsequent events
Operations on capital
Grants of Options and Restricted Shares
Pursuant to the authorisations granted by Extraordinary General Meetings of Shareholders certain grants of
options and Restricted Shares have been made subsequent to 31 December 2014 as described below:
The share capital of the Company was increased by an amount of USD 2,530 on 12 March 2015 raising it
from its former amount of USD 3,227,772 to USD 3,230,302, through the issuance of 253,000 Restricted
Shares. These Restricted Shares vest on the third anniversary of the grant date, assuming the beneficiary
continues to have a business relationship with the Company at such date. (see Note 22). The information
necessary to valuate these Share-based payments is as follows:
2015
Restricted
Shares
Weighted average exercise price
Expected volatility
Expected life of restricted shares
Risk-free interest rate
Expected dividend yields
GBP 0.01
3 years
1.35%
Nil
54