Wednesday 28th October 2020
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QEX Logistics Limited (QEX) advises that an estimated NZ$4 million of inventory has been removed from its secured China Custom’s bonded warehouse without the Company’s authorisation. At this stage the QEX Board has taken the view that the inventory has been stolen from the Company’s Shanghai premises.
The Company is currently engaging with its personnel in Shanghai, its China based auditors, Chinese Customs, the landlord, the local police and diplomatic channels to determine the exact circumstances leading to the removal of these goods from the Company’s Shanghai premises.
The final exact amount of the value of the inventory in question is still being assessed by the Company. The Company will advise the market once it has conclusively determined the exact extent of the loss incurred by the Company.
The Company is actively investigating whether the removed inventory is capable of being recovered, and failing that, whether the Company has any recourse against third parties to mitigate any prospective loss incurred by the Company.
Implications on the Company’s financial performance and financial position
Should the Company be unable to recover the lost inventory, this event will have a material adverse impact on the Company’s financial performance, gross margin, EBITDA, and net profit this year. The extent of the impact on the financial performance and financial position of the Company has yet to be conclusively determined by the Board at this time, and the Executive Leadership Team and Board are continuing to work on assessing the financial impact of this development upon the Company. The Company will make a further release to the market once it has quantified the financial impact of the loss upon the Company.
Implications on Bank Facility Financial Covenants
QEX’s subsidiary, New Y Trading Limited, which owns the inventory that has been misappropriated, and is party to the QEX group of companies principal bank funding facility, will, as a consequence of the misappropriated inventory, not meet three of its financial covenants comprised within the loan facility documentation: total equity to total assets ratio, earnings as a multiple of funding costs and current assets to current liabilities.
The Company is proposing to liaise with its bankers today, with a view to confirming the ongoing support of its bank in respect of the prospective breaches of covenant, and to seek a waiver of those breaches from its bankers.
The Company will provide an update of any material developments in respect of the progress of these discussions with the Company’s bankers.
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