ELMO Rent AS consolidated annual report for 2023
ELMO Rent AS (hereinafter referred to as "the Company") hereby publishes its consolidated annual report for 2023.
ELMO Rent AS (was founded by the Estonian government in 2013 and has been actively growing under private ownership since 2017. The company specializes in the rental of environmentally friendly vehicles and the development of remote-control technology. In 2023, the Company focused on increasing the profitability of its rental business and expanding its remote-control technology internationally. The Company has taken significant steps to restructure its business lines and ensure sustainability, but also had to apply for court protection for reorganization. The report reflects the financial results and key activities of 2023, with a focus on the development and sale of rental and remote-control technology.
The Company operates in two main business areas:
· Short- and long-term rental: the Company rents electric and hybrid vehicles, offering customers a convenient and environmentally friendly transportation option. Rental cars can be ordered directly to the customer's door, making the service particularly convenient.
· Remote control technology: the Company is one of the first in the world to bring remote control vehicle technology to legal street use. This allows certified remote drivers to navigate cars via a 4G network to the customer’s door, providing a unique and innovative solution in the car-sharing market.
In accordance with the decision of the Supervisory Board in 2022, the Company began separating the rental and remote-control technology business lines into subsidiaries in 2023 to ensure clarity and efficiency. The rental business line is actively seeking a partner or buyer.
The growth of the rental business has been challenging due to difficulties in raising additional financial resources amidst a tough macroeconomic and financial landscape. This has led to increased losses for the Company. The Company has sought a strategic partner or buyer for the rental business line. Until a partner is found, short-term rentals were suspended in the fall to reduce operating costs, focusing on long-term rental clients. Additionally, the vehicle fleet was reduced to cut costs and optimize operations.
The intellectual property and sales of the technology development have been separated into a subsidiary, Elmo Remote OÜ, where investments and sales of the technology continue to be pursued in international markets.
In 2023, the Company conducted two rounds of capital raising to support the growth of the rental business and the development and international expansion of remote-control technology. The first successful round ended in March 2023, raising 2,6 million euros for both business lines. The second round, aimed at raising up to 3 million euros for the technology business line, began in May 2023.
Due to the reorganization of the rental business line and the delay in the second capital raising round, ELMO Rent AS had to file for reorganization proceedings with the Harju County Court on 18.11.2023. The court initiated the reorganization process on 06.12.2023. The aim of the reorganization process is to overcome temporary payment difficulties and ensure the Company’s sustainability. The reorganization plan was approved by creditors on 20.02.2024 and by the court on 18.06.2024.
ELMO Rent AS actively collaborates with various industry companies and authorities, including the Transport Administration, the Ministry of Climate, and the Ministry of Economic Affairs and Communications, to develop legislation for remote control technology and self-driving vehicles. The goal is to establish new requirements and obtain special permits in target countries and cities.
Financial results
The consolidated assets of ELMO Rent AS at the end of 2023 amounted to 3,553,118 euros, a 2% decrease from the previous year (2022: 3,625,569 euros). Current assets accounted for 356,773 euros, a 52,3% decrease compared to 747,216 euros in 2022. Fixed assets amounted to 3,196,345 euros, an 11% increase from 2,878,353 euros the previous year.
Liabilities increased by 42,4% to 4,341,049 euros (2022: 3,047,577 euros). Equity fell significantly to -787,931 euros from a positive 577,992 euros in 2022, reflecting the Company’s financial difficulties and need for additional capital.
Sales revenue decreased by 61,5% to 608,558 euros (2022: 1,580,343 euros). Short-term rental revenue was 509,327 euros, with the remaining 99,231 euros coming from other sales revenues (including technology business sales revenue). The suspension of short-term rental services and focus on long-term rentals led to a significant reduction in short-term rental revenue. Offering long-term rentals allows better management of vehicle usage and operating costs, providing customers with more stable and affordable services. Additionally, sales revenue was greatly impacted by the loss of additional sales income from vehicle resale (since the secondary market for electric cars has significantly declined since the end of 2022).
The total loss for the period was 1,365,923 euros, a 12,3% decrease from the previous year (2022: 1,557,081 euros).
In 2023, the Company took significant steps to optimize labor costs, including a 40% reduction in staff. In the first half of the year, the Company had an average of 35 employees, which decreased to an average of 21 employees in the second half. Despite the reduction in workforce, the Company has maintained the ability to provide quality services and continue developing its technologies.
Further activities
Technology development and sales
The Company plans to continue technology development and licensing internationally through its subsidiary, focusing on car-sharing and other sectors, including road maintenance, construction machinery, and military logistics.
Elmo Remote OÜ, a subsidiary of ELMO Rent AS, focuses on developing and selling vehicle remote control technology. Recent achievements and cooperation with the Canadian company RSG International (more details at https://www.elmoremote.com/revolutionizing-road-safety-elmo-licenses-its-technology-to-global-road-safety-leader-rsg-international/), specializing in road maintenance and safety solutions, have shown great potential. Within the cooperation project, Elmo Remote OÜ is developing remote-controlled crash trucks (TMA) used by RSG International in North American and European road maintenance projects (more details at https://www.elmoremote.com/tele-driving-breakthrough-canadian-tma-truck-makes-global-debut-in-amsterdam/).
Additionally, a significant milestone is the Company’s accumulated experience, technological advancements, and confidence in validating the technology with the Transport Administration, allowing travel at 42 km/h (twice the previous speed limit). Obtaining this permit is an important step in realizing commercial potential. The goal for 2024 is to achieve a permit for remote control without a safety driver.
Restructuring the rental business
Reducing the vehicle fleet and focusing on long-term rentals has helped reduce rental business losses. Currently, ELMO Rent AS is focusing on finding a buyer or partner for the rental business. Negotiations with potential buyers and partners are ongoing, aiming to find a strategic investor who can effectively develop and bring the rental business to market.
Financial forecast
Management believes that fulfilling the reorganization plan and successfully continuing the activities of Elmo Remote OÜ are achievable. The goal for 2024 is to successfully complete the ongoing capital raising round, enabling the company to move forward with its 2024 goals (at least 10 client contracts). Following the capital raise, liabilities will be reduced, including those of ELMO Rent AS, which will subsequently reduce its obligations to creditors post-reorganization. It is expected that the technology company will reach profitability by 2027.
ELMO Rent AS continues to work intensively to achieve its goals and meet the objectives set out in the reorganization plan. Technology development and sales are key to ensuring the Company’s long-term sustainability and satisfying creditor claims.
The consolidated annual report for 2023 of the Company is enclosed and will also be made available on the Company’s website https://www.elmorent.ee/investeeri
Considering that the 2023 consolidated annual report is presented unaudited, a professional accounting service provider was used in its preparation to ensure neutrality and compliance with standards. The company undergoing restructuring has not yet been able to find an auditing firm due to the auditors’ readiness and overload. The company will submit the unaudited report for approval to the General Meeting of Shareholders and then enter it into the Commercial Register, with the final submission pending the completion of the audit.
Enn Laansoo, Jr.
Member of the Management Board
enn@elmorent.ee
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