RM2 Faces Cash Crunch, Appoints New CEO

Composite IoT pallet and pooling operator RM2 needs funding to continue its growth

Composite pallet and pooling provider RM2 is facing a challenge to arrange new funding, according to a report in the Sunday Times. The company, which enticed investors with its high tech pallet, enhanced by sensors and IoT technologies, “has burnt through more than £130m since listing on AIM three years ago,” wrote Peter Evans in one of two related reports.

After cash reserves had dwindled to $2.7 million at the end of May, the company looked to existing investors for a $20 million infusion in June. “At its current cash burn rate, it is understood RM2 will be able to keep the lights on for the next nine months, but it does not have the funds to buy new stock. Its existing stockpile is not enough to fulfil the large volumes of orders it hopes to receive,” Evans continued. The company has lost more than 90% of its value since being listed three years ago.

The company continues to make headlines as it positions itself as a leader in the area of bundling IoT capabilities into its pallet offering.

Much has been made of the sterling pedigree of the RM2 board, boasting resumes including top positions at Molson, Marks & Spencer, and Diageo, but reputation wasn’t enough to ensure a positive outlook. Chairman Ian Molson called the decision to manufacture pallets itself in Canada a “terrible mistake” and the  “decision to take the company public had been problematic and premature”. After closing its Canadian production facility, the company began outsourcing production to companies in China and Mexico.

In June, RM2 announced that it “would undertake negotiations to arrange an additional financing, which was expected to amount to at least USD 65.0 million.” On July 24, however, RM2 announced that after sending out feelers to the market, it had decided to not pursue the initiative:

The Company announces today that following market soundings over the last two weeks, the Board has concluded that the best interests of the Company and its shareholders would not be served by completing the current proposed equity offering for an amount up to £60 million at this time. The Board continues to pursue various other financing alternatives, which may include the issuance of equity and/or debt instruments.

In conjunction with the announcement, RM2 also reported the departure of Jasper Judd, the recently hired CEO:

RM2 International S.A., the sustainable composite pallet innovator, announces the appointment – effective immediately – of Kevin Mazula as Chief Executive Officer. He replaces Jasper Judd who has decided to step down as Chief Executive Officer and from the board of directors of the Company (“the Board”). Mr Judd will not be required to continue his employment during his notice period and accordingly will be leaving the Company with immediate effect.  Mr Judd’s resignation follows the Board’s decision not to proceed with a proposed equity offering, as announced on 24 July 2017.

Mazula has been RM2’s Chief Operating Officer since April 2016 and has a lengthy track record of running and growing businesses across a range of industries and countries. Most recently, he was Chief Commercial Officer at PRIMUS Technologies Corp, having previously served as a Senior Vice President of Xerox Corporation, and Vice President of Global Business Units at Jabil Inc, a global manufacturing services company.  Mazula, a Wharton School MBA honors graduate, started his career at General Electric with leadership roles in engineering, operations, and program management.  

Evans concludes with measured optimism:

RM2 is understood to be in talks with several potential multinational customers, though no contracts have been signed. People close to the company are confident it will raise the cash it needs. Time is running out.