REG - Vmoto Limited - Operational Review to 30 September 2014 <Origin Href="QuoteRef">VMT.AX</Origin>

VmotoAnnouncement

31/10/2014 08:10

RNS Number : 7657V
Vmoto Limited
31 October 2014
OPERATIONAL REVIEW FOR THE
QUARTER ENDED 30 SEPTEMBER 2014
ANNOUNCEMENT 31 October 2014
Vmoto Limited (ASX/AIM: VMT), the global scooter manufacturing and distribution group specialising in "green" electric powered two wheel vehicles, provides the following update on its activities during the quarter ended 30 September 2014 (3Q14).
HIGHLIGHTS OF SEPTEMBER 2014 QUARTER
 Third consecutive quarter of positive operating cash flow, with $55,244 generated in 3Q14 
 Continued growth in quarterly unaudited normalised net profit after tax, to ~$873,000; compares to a profit of ~$287,000 in 3Q13
 Sold 20,177 units in 3Q14; with approximately 12,500 units sold to OEM customers, over 4,000 sold through Vmoto's retail stores, and the balance sold through international and China distributors and customers
 Acquisition of business assets of Haiyong Electric Technology Co, Ltd, an advanced electric technology company focused on producing controllers, a crucial part in electric vehicle driving systems
 China distribution footprint encompasses 16 company owned retail stores, in addition to relationships with 13 external distributors and dealers across China
 Delivered Vmoto's electric two wheel vehicle products to Vietnamese distributor and received further orders for 500 units
 Delivered five sample scooters to customer in Mexico to target B2B and fast food delivery groups in the Mexican market
 Progressing new market entry opportunities, including Mexico, Nepal and Sri Lanka
THIRD CONSECUTIVE POSITIVE QUARTERLY NET OPERATING CASH FLOW AND HIGHER MARGINS
Vmoto achieved its third consecutive positive operating cash flow result for the September 2014 quarter of $55,244, which represents substantial progress when compared to the negative operating cash outflow of $993,378 in September 2013 quarter. 
Sales during the September 2014 quarter through the Company's retail stores and distributors, to OEM customers and internationally stood at 20,177 units. Whilst total unit sales were slightly down compared to the June 2014 quarter it consolidated the growth of last quarter. In addition, the Company received more orders for higher performance (faster speed and longer range) electric two wheel vehicles, which contributed higher margins as reflected in the Company's increase in net profit as compared to the previous quarter. The shift in demand from lower performance electric two wheel vechicles to higher performance electric two wheel vehicles in China and international markets further highlights Vmoto's competitive advantage as the Company's premium quality unit range is well positioned to meet the growing demand for higher performance electric two wheel vehicles. 
During the quarter, the Company drew down RMB3 million (approximately A$515k) to meet orders and provide working capital for Haiyong. As at 30 September 2014, the total operating facility drawn down was RMB22 million (approximately A$4.1 million) and the total undrawn operating facility was RMB12 million (approximately A$2.2 million). 
As at 30 September 2014, the Company had cash of A$3.5 million (unaudited).
TRADING UPDATE - GROWTH CONTINUES
The Company continues to grow earnings, with normalised net profit after tax generated for the September 2014 quarter of approximately A$872,769 (unaudited) reflecting the higher margins attributable to the units sold. 
The Company's growing profits are a clear demonstration of the increasing traction Vmoto brands are achieving in key markets in China and Asia, as well as the Company's positioning in the premium end of the electric scooter market. 
Quality and pricing of scooters as opposed to quantity has been a key focus over the past quarter, and this is reflected in the increase in gross margins and net profits even though unit sales for the quarter were marginally down on the June 2014 quarter. The Board is pleased that the Company is becoming increasingly recognised for its premium electric scooter products and continues to grow strongly. 
The breakdown of unit sales (unaudited) for the September 2014 quarter is set out below:
Unit sales
June 
2014 
Half Year
September 2014 quarter
Total




OEM
23,096
12,511
35,607
China retail stores
6,680
4,076
10,756
Other Chinese distributors
2,645
1,204
3,849
International and others
4,284
2,386
6,670

36,705
20,177
56,882
The utilisation level of Vmoto's Nanjing manufacturing facility remains at less than 30% on annualised production rate basis, providing the Company with leverage to grow scale for very little capital expenditure or investment in facilities.
2014 FINANCIAL YEAR GUIDANCE
In line with current orders and customer discussions, and including a contribution from Haiyong, the Company anticipates that it will make a normalised annual profit (excluding one off expenses and impairments) for the financial year ending 31 December 2014 of between A$2.5 million and A$3.0 million.
EXISTING AND NEW CUSTOMERS - KEY LONG TERM GROWTH DRIVERS
PowerEagle: During the September 2014 quarter, Vmoto delivered approximately 12,500 units of electric two wheel vehicles to PowerEagle. As PowerEagle placed more orders for higher performance electric two wheel vehicles during the quarter, which generate higher margins, the Company no longer expects to provide 64,800 units to PowerEagle this year as previously anticipated. However, the Company does not expect any impact to the profits receivable from this area of the business as the lower order numbers are offset by higher margins from units delivered. The Company's relationship with PowerEagle remains strong.
Italy: Vmoto delivered one container of Vmoto's electric two wheel vehicle products to its Italian distributor in August 2014. Vmoto's Italian distributor is currently in discussions with a number of fleet customer groups in Italy for opportunities to supply electric two wheel vehicle products to them.
Denmark: Vmoto received orders and deposits from its Denmark customer for two containers of Vmoto's electric two wheel vehicle products. The products are under preparation with delivery expected in November 2014.
Belgium: Vmoto received sample orders from a new customer in Belgium and have delivered 5 units of electric two wheel vehicle sample to its Belgian customer in the quarter under review. 
Czech Republic: Vmoto's Czech Republic customer recently visited Vmoto's Nanjing manufacturing facilities to discuss future orders. 
Greece: Vmoto's Greek customer exhibited Vmoto's electric two wheel vehicle products in a number of local events in Greece and organised a test ride as part of its evaluation of Vmoto's electric two wheel vehicle products. Feedback from the customers was very positive. 
Croatia: During the quarter, Vmoto received an order and deposit for one container of Vmoto's electric two wheel vehicle products. The products are under preparation with delivery expected in November 2014. 
Vietnam: During the quarter, Vmoto delivered 52 units of its electric two wheel vehicle products to its Vietnamese distributor. Furthermore, Vmoto received orders and deposits for 500 units of Vmoto's electric two wheel vehicle products from its Vietnamese distributor. The products are under preparation with delivery expected in November and December 2014.
Malaysia: Vmoto delivered 72 units of its electric delivery scooters in completely knocked down ("CKD") form to its Malaysian Original Equipment Manufacturer ("OEM") customer during the quarter. A further order for 72 units of the electric delivery scooters is expected in the next few weeks. 
Japan: Vmoto received a deposit from its Japanese distributor for 50 sets of its electric vehicle products in CKD form. The products are under preparation with delivery expected in November 2014. 
Sri Lanka: Vmoto received sample orders from a new customer in Sri Lanka during the quarter and the samples are under preparation with delivery expected in November 2014. 
Mexico: Vmoto delivered 5 units of sample orders to its customer in Mexico during the quarter. The Company is currently in discussion with the Mexican customer for a further order of 50 units of Vmoto's electric two wheel vehicle products and to target the B2B and fast food delivery groups in Mexico. 
Others: The Company's electric two wheel vehicle products were shipped to distributors and customers in Africa, Australia, Chile, Egypt, Japan, South Korea and Spain. 
VMOTO'S RETAIL STORE AND DISTRIBUTION CHANNELS IN CHINA 
In addition to its existing 16 retail stores, Vmoto has relationships with 13 distributors and dealers (up from 10 in the June quarter) who distribute Vmoto's products in China. Combined profits from these two sales channels remains in line with management expectations. 
VMOTO EXPANDS ELECTRIC TECHNOLOGY CAPABILITIES
During the quarter, the Company announced the acquisition of the business assets of Haiyong Electric Technology Co, Ltd ("Haiyong"), a technology company focused on the production on controllers, a vital component of electric vehicle driving systems. Post the end of the quarter, on 13 October 2014, the Company announced Haiyong had successfully relocated its manufacturing to Vmoto's Nanjing manufacturing facility.
The strategic acquisition is expected to:
 give Vmoto access to electric vehicle (EV) technologies central to the electric driving system for Vmoto's own electric vehicle products;
 enable Vmoto to market all of its applications to its own customers;
 enable Vmoto to fast-track the development of its electric driving system;
 give Vmoto access to the three-wheel and four-wheel EV markets and further enhance the cooperation with three-wheel and four-wheel manufacturers in both China and overseas;
 materially increase Vmoto's production base, which will deliver improved economies of scale;
 allow Vmoto to access a more diverse base of EV products and markets; 
 further expand and strengthen Vmoto's presence and foothold in the China market; and
 generate additional revenue and profit, with the acquisition expected to be EPS accretive from FY2015.
Vmoto's strategic goal for Vmoto Haiyong is to grow it into a leading global electric driving system manufacturing company.
COLLABORATIONS, TENDERS AND JOINT VENTURE OPPORTUNITIES 
The Company continues to receive significant interest from other electric vehicle distributors and parties for potential collaboration or joint venture opportunities. Discussions with these groups are ongoing and any material developments will be announced as and when they occur.
EXHIBITIONS
During the quarter, Vmoto's Taiwanese distributor exhibited Vmoto's electric two wheel vehicle products at the 4th Tainan International Biotechnology and Green Energy Expo held on 12-15 September 2014 and received positive feedback. The Expo was attended by over 25,000 visitors with more than 450 exhibitors. 
CORPORATE
During the quarter, the Company issued 1 million shares on conversion of unlisted options, exercisable at $0.03 each on or before 28 November 2015. A further 2,700,000 unlisted options, exercisable at $0.25 each, expired unexercised on 1 September 2014. 
OUTLOOK
Key highlights of the September 2014 quarter included the acquisition of Haiyong, achieving the Company's third consecutive positive quarterly operating cash flow and progressing new market entry opportunities in a number of new markets for the Company. 
Utilisation of the Company's manufacturing facility in China (still at less than 30% capacity) is increasing and becoming more efficient. With the strategic acquisition of Haiyong, it will give Vmoto access to electric vehicle (EV) technologies central to the electric driving system for Vmoto's own electric vehicle products and generate additional revenue and profit for the Company. In addition, the Company is seeking other means of increasing its own branded sales in China with discussions with other electric vehicle distributors or parties for potential collaboration or joint venture opportunities. 
Internationally, where higher margins are generated, the Company will continue to focus sales into its existing markets and customers as well as continue discussions with a range of potential new customers across the globe.
For further information, please contact:
Vmoto 

Charles Chen, Managing Director
Olly Cairns, Non-Executive Director
+61 8 9226 3865
+61 8 9226 3865
Investors and media
Market Eye Pty Ltd
Ronn Bechler
+61 400 009 774
ronn.bechler@marketeye.com.au
finnCap Ltd 
Ed Frisby/Christopher Raggett (corporate finance)
Tony Quirke/Mia Gardner (corporate broking)
+44 20 7220 0500
About Vmoto
Vmoto Limited (ASX/AIM: VMT) is a global scooter manufacturing and distribution group. The Company specialises in high quality "green" electric powered two wheel vehicles and manufactures a range of western designed electric scooters from its low cost manufacturing facilities in Nanjing, China. Vmoto combines low cost Chinese manufacturing capabilities with European design. The group operates through two primary brands: Vmoto (aimed at the value market in Asia) and E-Max (targeting the Western markets, with a premium end product). As well as operating under its own brands, the Company also sells to a number of customers on an original equipment manufacturer ("OEM") basis.

This information is provided by RNS
The company news service from the London Stock Exchange
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