MENU

Why RM2 International SA Slumped Today

RM2 International (LSE: RM2), the vertically-integrated pallet development, manufacture, supply and management company, backed by respected fund manger, Neil Woodford is falling today after the company announced its unaudited results for the six months to 30 June 2014.

The company reported a pre-tax loss of $22.1m for the first half of the year, more than double the loss reported for the same period last year. For the first half of 2013 RM2 reported a loss of $8.9m. However, RM2 did generate revenue of $781k during the first half of 2014, compared to nothing last year. Rising administrative expenses were the reason for the company’s rising losses. Expenses rose to $17.7m, from $5.3m as wages and salaries more than doubled, initial public offering costs also added to the company’s costs. 

Still, at the end of June RM2 had a cash balance of $115.5m, giving it plenty of room to manoeuvre and execute its growth strategy. 

Commenting on today’s results, Ian Molson, Chairman of RM2, commented:

“The decisions made in early 2014 have begun to bear fruit as our production builds alongside demand for our products and solutions. We believe we have put in place the foundations for a business that can grow significantly.”

Improving outlook

Today’s results from RM2 may have disappointed the market but investors shouldn’t give up on the company yet. Indeed, today’s set of results only detail activities upto the 30th of June and since then the company has been extremely busy. 

For example, the company moved into its new production facilities in Ontario, Canada on 1st July and production during the first half of the year was seriously impacted by the transfer to the new production facility. Management expects this facility to be running at full capacity by the end of the year, the ramp up appears to be going to plan.

Further, during the period the company signed contracts signed with some of the largest and most recognisable companies in their sectors putting agreements in place for when production is running at full capacity. 

According to management, recurring revenues being generated across a range of key industries and the company has the foundations in place to grow. 

According to John Walsh, chief executive officer of RM2:

“Recent contract wins for RM2 coincide with an increase in production at our new facility. I am confident in the scalability of these contracts and of both further contract wins and increasing customer demand.”

Bolstering the board

Behind every great company, there’s a great management team and RM2’s management team is without a doubt one of the most experienced on Aim. 

CEO John Walsh for example, was once recognized as the third most influential European in US Financial Markets . Sir Stuart Rose, non-executive director has held the position of CEO at many retail companies such as M&S, Booker and Argos. Paul Walsh, former CEO of Diageo also holds a non-executive director position. 

With these management heavyweights on RM2’s board, the company should have no trouble winning contracts. 

 

If you feel that RM2 is too risky and you're looking for a safer bet, analysts here at the Motley Fool have identified a share that they believe has the potential to nearly double profits within the next four years. So, if you're looking for ideas, download this exclusive report entitled "The Motley Fool's Top Growth Stock For 2014".   

The report is completely free, but you've only got a limited time to claim your copy. To claim before it's gone -- click here today -- it's free.  

 

Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.