QEX LOGISTICS LIMITED AND ITS SUBSIDIARIES INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2018 QEXCELLENCE

Transcription

1 QEX LOGISTICS LIMITED AND ITS SUBSIDIARIES INTERIM CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2018 QEXCELLENCE

2 Contents CEO s and Chairman s Report Consolidated statement of profit or loss and other comprehensive income Consolidated statement of financial position Consolidated statement of changes in equity Consolidated statement of cash flows Condensed notes to the financial statements NZX Spread wavier Directory

3 INTERIM REPORT

4 02 QEX LOGISTICS Ronnie Xue CEO Conor English CHAIRMAN OF DIRECTORS

5 INTERIM REPORT CEO s and Chairman s Report QEX s growth has seen it ranked at number 4 in this year s Deloitte Fast 50 Master of Growth index We are pleased to present QEX s half year report, for the six months to 30 September It marks another extremely strong period for the company in its first year as a listed entity. Revenue increased 199% to $32.4 million, compared to $10.8 million for the same period in This increase was on the back of new and strengthened commercial relationships, greater customer reach and higher levels of funding enabling the storage of significant amounts of inventory. It reflects QEX s wider strategy of consolidation and expansion in New Zealand and China, which is clearly delivering results. QEX s revenue from Australia was $374,000, after an initial entry into the market. QEX is now focused on its New Zealand and China operations. Australia remains a natural growth market at the right time. The revenue growth for the last six months means the QEX Group has already exceeded the $31.5 million revenue earned in the last full financial year (FY18). It has resulted in a net profit after tax of $1.25 million, a significant improvement on the $345,000 earned in the first six months of FY18. Revenues are expected to be $60 million for the full year, as already indicated to the market. These results are being delivered two months after the company migrated from the NZX s NXT market to the Main Board. During this six months, QEX negotiated an agreement with SF Express, which allows it to export high-value refrigerated products into China such as meat, milk and fruit. It was also invited by the Shanghai Qingpu government to operate a bonded warehouse, which is now operational. A three-year contract has been signed with the warehouse owner. As far as we know, QEX is the only Australasian cross-border logistics company that operates a bonded warehouse in Shanghai, and we are extremely pleased to have this as part of our offering. The bonded warehouse will be used to enhance our existing offerings, and will improve efficiencies and flexibility with inventory storage. We will also be able to use it to offer services to third parties. QEX s agreement to operate its own bonded warehouse comes as China announced it would expand its policies on cross-border ecommerce, which will support our strategy for expansion in that market. We are extremely proud to say QEX s growth has seen it ranked at number 4 in this year s Deloitte Fast 50 Master of Growth index. We are grateful to all our stakeholders and investors for their support as we continue to grow this company across New Zealand, Australia and China. Conor English Chairman Jingjie (Ronnie) Xue CEO

6 04 QEX LOGISTICS Consolidated statement of profit or loss and other comprehensive income For the six months ended 30 September 2018 Notes 30 Sep 2017 Revenue 4 32,382,071 10,836,281 Cost of sales (28,430,950) (9,333,500) Gross profit 3,951,121 1,502,781 Other income Interest received 14,128 19,440 Other income 22,789 Expenses Administrative expenses (1,062,656) (336,386) Employee benefits expenses (922,091) (679,906) Depreciation and amortisation expenses 5.2 (50,629) (42,805) Finance costs 5.1 (141,731) (17,611) Total expenses (2,177,107) (1,076,708) Profit before tax 1,810, ,513 Income tax expense (556,979) (120,639) Profit for the period 1,253, ,874 Other comprehensive income Items that may be classified subsequently to profit or loss Exchange differences on translating foreign operations ,181 Total comprehensive income for the period 1,254, ,055 Attributable to: Owners of the company 1,254, ,055 Earnings per share (from continuous operations) 15 Basic (per share) Diluted (per share) These financial statements have not been audited. The accompanying notes form an integral part of these financial statements and should be read in conjunction with them.

7 INTERIM REPORT Consolidated statement of financial position At 30 September 2018 Notes 31 Mar 2018 (audited) Assets Cash 1,396,713 1,751,976 Trade receivables and other current assets 6 11,241,364 6,219,312 Inventories 7 4,725,175 3,781,635 Total current assets 17,363,252 11,752,923 Non-current assets Property, plant and equipment 8 643, ,277 Intangible assets 13,844 5,320 Deferred tax 55,712 69,909 Loan to associate 10,000 Total non-current assets 723, ,506 Total assets 18,086,722 12,270,429 Current liabilities Trade payables and other current liabilities 1,485,789 2,894,339 Borrowings 9 6,214,198 2,319,265 Tax payable 344, ,416 Total current liabilities 8,044,355 6,053,020 Non current liabilities 53,973 Total liabilities 8,098,328 6,053,020 Net assets 9,988,394 6,217,409 Capital Share capital 10 5,075,101 2,575,101 Share based payment reserve 152, ,324 Retained earnings 4,700,034 3,446,082 Foreign currency translation reserve 60,590 59,902 Total equity 9,988,394 6,217,409 These financial statements were approved by the Board on 14 December Signed on behalf of the Board by: Conor English Director Danny Chan Director These financial statements have not been audited. The accompanying notes form an integral part of these financial statements and should be read in conjunction with them.

8 06 QEX LOGISTICS Consolidated statement of changes in equity For the six months ended 30 September 2018 Share capital Share based payments reserve Retained earnings Foreign currency translation reserve Total Balance at 1 April 2017 (audited) 101 2,256,197 2,256,298 Profit for the period 324, ,874 Other comprehensive income Exchange differences on translating foreign operations 20,181 20,181 Total comprehensive income for the period 324,874 20, ,055 Distributions to owner Balance at 30 September ,581,071 20,181 2,601,353 Balance at 1 April 2018 (audited) 2,575, ,324 3,446,082 59,902 6,217,409 Profit for the period 1,253,952 1,253,952 Other comprehensive income Exchange differences on translating foreign operations Total comprehensive income for the period 1,253, ,254,640 Issue of ordinary shares 2,500,000 2,500,000 Recognition of share based payments 16,345 16,345 Distributions to owner Balance at 30 September ,075, ,669 4,700,034 60,590 9,988,394 These financial statements have not been audited. The accompanying notes form an integral part of these financial statements and should be read in conjunction with them.

9 INTERIM REPORT Consolidated statement of cash flows For the six months ended 30 September 2018 Notes 30 Sep 2017 Cash flows from operating activities Receipts from customers 30,122,448 10,745,320 Payments to suppliers and employees (35,503,303) (10,972,768) Cash (used in)/generated from operations (5,380,855) (227,448) Interest received 14, Interest paid (141,731) (17,611) Income taxes (paid) / refunded (1,037,831) 4,470 Net cash (used in)/generated by operating activities 17 (6,546,289) (240,194) Cash flows from investing activities Payments for property, plant and equipment (183,140) (3,681) Payments for intangible assets (10,767) Payment for purchase of subsidiary (720,800) Loan to associate (10,000) Net cash used in investing activities (203,907) (724,481) Cash flows from financing activities Increase in trade finance 3,894, ,123 Proceeds from issue of shares 2,500,000 Proceeds from shareholder loan 1,215,718 Payments to shareholder on loan (2,535) Net cash generated from/(used in) financing activities 6,394,933 1,421,306 Net increase/(decrease) in cash and cash equivalents (355,263) 456,631 Cash and cash equivalents at the beginning of the period 1,751, ,091 Cash and cash equivalents at the end of the period 1,396, ,722 These financial statements have not been audited. The accompanying notes form an integral part of these financial statements and should be read in conjunction with them.

10 08 QEX LOGISTICS Condensed notes to the consolidated financial statements For the six months ended 30 September General information These unaudited interim financial statements are for QEX Logistics Limited ( the Company ) and its subsidiaries (together the Group ). The Company and one of its subsidiaries, New Y Trading Limited, are incorporated and domiciled in New Zealand. The Company s other subsidiaries, Shanghai Ditu International Freight Forwarder Co., Limited and New Y Trading (AUS) Pty Limited are registered and domiciled in China and Australia respectively. The address of the Company s registered office and the Group s primary place of business is 70 Richard Pearse Drive, Mangere, Auckland, New Zealand. The Group s ultimate controlling party is Jingjie Xue. The Group operates a public shipping and delivery business that specialises in delivering parcels (including customs clearance) to China for online business sellers in New Zealand and Australia, as well as the sale of milk powder for consumers in China. There have been no significant change in the nature of the Group s business activities during the six months to 30 September Significant accounting policies 2.1 Basis of preparation The Company is an FMC reporting entity under the Financial Markets Conduct Act These financial statements have been prepared in accordance with the requirements of the Financial Markets Conduct Act 2013 and the NZX listing rules. These financial statements for the six months ended 30 September 2018 have been prepared in accordance with NZIAS 34: Interim Financial Reporting and should be read in conjunction with the financial statements published in the Annual Report for the year ended 31 March They also comply with International Reporting Standard 34: Interim Financial Reporting (IAS 34). The financial statements have been presented in New Zealand Dollars. The interim financial statements are unaudited. The comparative information as at 31 March 2018 is audited. 2.2 Changes in accounting polices Apart from the changes noted below, the unaudited interim financial statements have been prepared using the same accounting policies and methods of computation detailed in the last Annual Report. For details of these accounting policies please refer to the 2018 Annual Report. Application of new and revised standards, amendments and interpretations The Group has applied NZ IFRS 15: Revenue from Contracts with Customers and NZ IFRS 9: Financial Instruments, for the first time in the current financial year. Details of the impact of the application of these new NZ IFRSs are described below Application of NZ IFRS 9 Under NZ IFRS 9 it is no longer necessary for an impairment event to have occurred before impairment losses are recognised. Instead, the Group accounts for expected impairment losses and changes in those expected impairment losses. For certain categories of financial assets, such as trade receivables, assets are assessed for impairment on a collective basis even if they were assessed not to be impaired individually. Objective evidence of impairment for a portfolio of receivables could include the Group s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period, as well as observable changes in national or local economic conditions that correlate with default on receivables. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss. The implementation of this NZ IFRS has not had a material impact on the interim financial statements Application of NZ IFRS 15 The application of NZ IFRS 15 has resulted in a change in the revenue classification of certain revenue items. Some milk powder is sold for a one-off combined price that covers the sale of the milk powder, freight charges to China, and Chinese customs duty. Historically the combined revenue from these sales (net of the customs duty) was recognised as revenue from the sale of milk powder. Under NZ IFRS 15 the sale of milk powder and the logistics for delivering the milk powder to the consumer in China are treated as two separate performance obligations. NZ IFRS 15 requires the revenue to be allocated to each separate performance obligation. Note, revenues have historically been, and will continue to be, recognised net of customs duty which is a tax paid by the customer, for which QEX facilities payment to Chinese customs on behalf of the customer. In determining the components of revenue that are allocated against each performance obligation, QEX uses the rates it would charge for performing each separate performance obligation as a standalone service or sale. Refer to note 4.

11 INTERIM REPORT Seasonal business Sales volumes in the second half of the financial year have historically been higher than in the first half, with a greater number of holidays and celebrations (such as 11/11 and Chinese New Year) that generate greater ecommerce trade requiring international logistics and an increase in purchases of milk powder. 4. Revenue 30 Sep 2017 Revenue from customs clearance and logistics 7,956,153 3,038,625 Revenue from sale of goods 24,378,766 7,797,656 Packaging income 47,152 32,382,071 10,836,281 For the six months ended 30 September 2018 New Zealand Australia China Total Revenue from customs clearance and logistics 7,526, ,309 55,079 7,956,153 Revenue from sale of goods 24,378,766 24,378,766 Packaging income 47,152 47,152 31,952, ,309 55,079 32,382,071 For the six months ended 30 September 2017 New Zealand Australia China Total Revenue from customs clearance and logistics 2,883, ,167 3,038,625 Revenue from sale of goods 7,797,656 7,797,656 Packaging income 10,681, ,167 10,836,281 The details above disaggregate the Group s revenue from contracts with customers into primary geographical markets, and major product and service lines. Comparison to segmental reporting disclosures (note 13) Some milk powder is sold for a one-off combined price that covers the sale of the milk powder, freight charges to China, and Chinese customs duty. Historically the combined revenue from these sales (net of the customs duty) was recognised as revenue from the sale of milk powder. In accordance with NZ IFRS 15 the sale of milk powder and the logistics for delivering the milk powder to the consumer in China are treated as two separate performance obligations. NZ IFRS 15 requires the revenue to be allocated to the separate performance obligation. For internal reporting purposes these single price sales are categorised as sales of milk powder. The segmental reporting note (note 13) allocates revenue to segments based upon the information used by the Chief Operating Decision Maker. The difference in treatment of revenue between note 4 and note 13 is shown below. For the six months ended 30 September 2018 Customs clearance and logistics Sale of goods Packaging Total Revenue per segment reporting (note 13) 6,251,119 26,083,800 47,152 32,382,071 Freight component of single price milk powder sales 1,705,034 (1,705,034) Revenue per performance obligation (note 4) 7,956,153 24,378,766 47,152 32,382,071 The freight component of single price milk powder sales shown above is the total impact of applying IFRS 15 for the first time in the current reporting period.

12 10 QEX LOGISTICS Condensed notes to the consolidated financial statements continued For the six months ended 30 September Operating expenses 5.1 Finance costs 30 Sep 2017 Interest expense 141,731 17, ,731 17, Other expenses 30 Sep 2017 Auditor's remuneration for annual audit 45,000 22,500 Capital raising fees 84,740 Depreciation and amortisation expenses 50,629 42,805 Rent 217, , Trade receivables and other current assets 31 Mar 2018 (audited) Trade receivables 6,248,014 4,230,156 Prepayments 4,750,001 1,882,766 Allowance for doubtful debts (15,000) (15,000) Other receivables 258, ,390 11,241,364 6,219, Inventories 31 Mar 2018 (audited) Finished goods 4,622,288 3,719,868 Packaging materials 102,887 61,767 4,725,175 3,781,635

13 INTERIM REPORT Property, plant and equipment Buildings improvements $ Motor vehicles $ Office equipment and furniture $ Plant and equipment $ Motor vehicles - leased $ Total $ Cost or valuation Balance at 1 April , ,264 38, , ,286 Additions 20,860-37,265 49, ,803 Effect of foreign currency movement Disposals (7,665) (5,500) (13,532) - - (26,697) Balance at 31 March , ,764 62, , ,648 Additions 69,902 62,370 3,823 45,330 71, ,425 Effect of foreign currency movement - - (18) - - (18) Disposals - (9,348) (9,348) Balance at 30 September , ,786 66, ,381 71, ,707 Accumulated depreciation Balance at 1 April 2017 (1,580) (87,771) (11,551) (20,387) - (121,289) Depreciation expense (497) (45,165) (10,115) (29,854) - (85,631) Effect of foreign currency movement - - (116) - - (116) Disposals 1,580 4,541 7, ,665 Balance at 31 March 2018 (497) (128,395) (14,238) (50,241) - (193,371) Depreciation expense (3,966) (18,768) (5,488) (15,623) (4,438) (48,283) Effect of foreign currency movement - - (11) - - (11) Disposals - 6, ,872 Balance at 30 September 2018 (4,463) (140,291) (19,737) (65,864) (4,438) (234,793) Carrying Amounts: 31 March 2018 Cost 20, ,764 62, , ,648 Accumulated depreciation (497) (128,395) (14,238) (50,241) - (193,371) Carrying amounts (audited) 20, ,369 48, , , September 2018 Cost 90, ,786 66, ,381 71, ,707 Accumulated depreciation (4,463) (140,291) (19,737) (65,864) (4,438) (234,793) Carrying amounts 86, ,495 47, ,517 66, ,914

14 12 QEX LOGISTICS Condensed notes to the consolidated financial statements continued For the six months ended 30 September Borrowings 31 Mar 2018 (audited) Westpac Trade Finance 6,214,198 2,319,265 6,214,198 2,319,265 The trade finance is obtained from a bank. It is secured over New Y Trading Limited s assets and undertakings. There is an interlocking debt and interest guarantee between New Y Trading Limited, Jingjie Xue (the majority shareholder), his wife Xiaobei Wu and an entity related to them (other than this guarantee there have been no transactions with this related party). Interest rates charged comprise a base rate determined at the date of each drawdown, plus a 3% margin. The minimum term is 15 days to a maximum term of 90 days for each advance. 10. Issued capital Number of shares Share capital Balance at 1 April 2017 (audited) 1,495, Fully paid ordinary shares issued during the period Balance at 30 September ,495, Balance at 1 April 2018 (audited) 50,300,000 2,575,101 Fully paid ordinary shares issued during the period 2,173,913 2,500,000 Balance at 30 September ,473,913 5,075,101 All issued shares are fully paid ordinary shares and carry one vote per share, carry a right to dividends and a pro rata share of net assets on wind up after repayment of the other payables. 11. Subsidiaries Details of the Group s subsidiaries at the end of the reporting period are as follows: Name of subsidiary Principal activity Place of incorporation and operation Balance date Proportion of interest and voting power held by the Group 31 Mar 2018 New Y Trading Limited Shanghai Ditu International Freight Forwarder Co., Limited Logistics, sales of dairy products, export of health and dairy products to China Logistics, Chinese Custom Clearance New Zealand 31 March 100% 100% China 31 December 100% 100% New Y Trading (AUS) Pty Limited Logistics Australia 31 March 100% 100% It is a mandatory requirement in China for foreign owned companies to have a 31 December balance date. The Group will rely upon the Financial Markets Conduct (Overseas Subsidiary Balance Date Alignment) Exemption Notice 2016 in respect of Shanghai Ditu International Freight Forwarder Co., Limited s ongoing non-alignment of balance date with QEX Logistics Limited s balance date. The results of all subsidiaries included in the consolidated financial statements are for the 6 months to 30 September.

15 INTERIM REPORT Associates Details of the Group s associates at the end of the reporting period are as follows: Name of associate Principal activity Place of incorporation and operation Balance date Proportion of interest and voting power held by the Group 31 Mar 2018 ANZ Brand Holdings Limited Sale of infant milk powder & related products New Zealand 31 March 33.3% 33.3% ANZ Brand Holdings Limited s net assets were not material to QEX Logistics Limited s financial position at balance date. 13. Segment reporting The Group specialises in delivering parcels to China for online business sellers in New Zealand, as well as the sale of milk powder that is delivered into China Revenue from major products and services The Group has identified its operating segments based on how the Chief Operating Decision Maker (CODM) reviews internal reports in order to assess the performance of the Group. The CODM of the Group is the Chief Executive Officer. For management purposes the Group reports on revenues for the different product and services. Apart from the cost of milk powder, expenses are not allocated by segment. The unallocated operating expenses include freight costs and overheads. Management does not prepare a calculation of profit by segment. 6 months ended 30 September 2018 Parcel delivery, logistics and customs Sales of milk powder & health supplements Other/ unallocated Total Revenue 6,251,118 26,083,800 47,152 32,382,071 Cost of milk powder (22,758,189) (22,758,189) Freight, clearance and delivery costs* (5,672,761) (5,672,761) Other income 22,790 22,790 Operating expenses (1,984,747) (1,984,747) EBITDA 1,989,163 Depreciation (50,629) Net finance income (costs) (127,603) Profit before income tax 1,810,931 Income tax (556,979) Profit after tax 1,253,952

16 14 QEX LOGISTICS Condensed notes to the consolidated financial statements continued For the six months ended 30 September Segment reporting (continued) 6 months ended 30 September 2017 Parcel delivery, logistics and customs Sales of milk powder & health supplements Other/ unallocated Total Revenue 3,038,625 7,797,656 10,836,281 Cost of milk powder (7,180,057) (7,180,057) Freight, clearance and delivery costs* (2,153,443) (2,153,443) Other income Operating expenses (1,016,292) (1,016,292) EBITDA 486,489 Depreciation (42,805) Net finance income (costs) 1,829 Profit before income tax 445,513 Income tax (120,639) Profit after tax 324,874 * The Group does not monitor freight, clearance and delivery costs by segment. Milk powder inventories of $4,622,288 (31 March 2018: $3,719,868) and prepayments of $3,670,740 (31 March 2018: $1,092,128) relate to the purchase and sale of milk powder. Borrowings of $6,214,198 (31 March 2018: $2,319,265) are used to fund the purchase of this milk powder. All other assets and liabilities are not allocated to a particular segment Geographical information During the period the Group provided its services to customers in New Zealand, Australia and China. 6 months ended 30 September 2018 New Zealand Australia China Intra group eliminations Total Revenue from external customers 31,952, ,309 55,079 32,382,071 Intersegment revenues 3,538,734 (3,538,734) Total segment revenue 31,952, ,309 3,593,813 (3,538,734) 32,382,071 Segment profit before income tax 1,709,364 28,121 73,446 1,810,931 Total segment assets 17,407, ,703 1,132,093 (770,907) 18,086,722 Total segment liabilities 7,857,109 95, ,655 (130,714) 8,098,328 6 months ended 30 September 2017 New Zealand Australia China Intra group eliminations Total Revenue from external customers 10,681, ,167 10,836,281 Intersegment revenues 1,100,530 (1,100,530) Total segment revenue 10,681,114 1,255,697 (1,100,530) 10,836,281 Segment profit before income tax 428,028 17, ,513

17 INTERIM REPORT As at 31 March 2018 (audited) New Zealand Australia China Intra group eliminations Total Total segment assets 11,199, ,444 1,137,555 (921,075) 12,270,429 Total segment liabilities 5,254, , ,333 (168,104) 6,053, Information about major customers For the six month period ended 30 September 2018 there were 2 customers who individually accounted for more than 10% of the Group s total sales. The sales to these customers were $3.43 million and $3.38 million respectively. The customers purchased international parcel delivery services and milk powder products. For the six month period ended 30 September 2017 there were 4 customers who individually accounted for more than 10% of the Group s total sales. The sales to these customers were $1.4 million, $1.2 million, $1.1 million and $1.1 million respectively. The customers purchased international parcel delivery services and milk powder products. 14. Related party disclosure Payments to related party for purchase of subsidiary 30 Sep 2017 Payment to director of subsidiary company 720, : $720,800 was paid to Du Yuejuan, the previous owner of Shanghai Ditu Freight Forwarder Co., Limited as settlement for the 31 March 2017 acquisition of that company. Du Yuejuan is the mother in law of the majority shareholder. Since acquisition, Du Yuejuan has remained as a director and legal representative of Shanghai Ditu Freight Forwarder Co., Limited. 15. Earnings per share 30 Sep 2017 Basic earnings per share Diluted earnings per share The earnings per share and diluted earnings per share for the six months to September 2018 are calculated including shares and options issued up to the date of approval of the financial statements. During the year ended 31 March 2018, the company undertook a share split. In accordance with NZ IAS 33 Earnings Per Share, the calculation of the weighted average number of ordinary shares has treated the share split as if it occurred at the start of the reporting period, 1 April The 2017 comparative earnings per share have been restated accordingly Basic earnings per share The earnings and weighted average number of ordinary shares used in the calculation of the basic earnings per share are as follows: 30 Sep 2017 Profit for the period attributable to owners of the parent company ($) 1,254, ,055 Weighted average number of ordinary shares for the purposes of basic earnings per share 51,757,238 40,000,000

18 16 QEX LOGISTICS Condensed notes to the consolidated financial statements continued For the six months ended 30 September Earnings per share (continued) 15.2 Diluted earnings per share The earnings used in the calculation of diluted earnings per share are as follows: 30 Sep 2017 Profit for the period attributable to owners of the parent company ($) 1,254, ,055 Weighted average number of ordinary shares used in the calculation of basic earnings per share 51,757,238 40,000,000 Share options (issued 7 November 2017) 2,600,000 Share options (issued 28 November 2018) 1,000,000 Weighted average number of ordinary shares used in the calculation of diluted earnings per share 55,357,238 40,000, Net tangible assets per share 31 Mar 2018 (audited) Net tangible assets ($) 9,908,838 6,142,180 Issued shares at balance date (31 March 2018: adjusted for subsequent share split) 52,473,913 50,300,000 Net tangible assets per share $0.19 $0.12

19 INTERIM REPORT Reconciliation of net operating cash flows to net profit after tax 30 Sep 2017 Profit for the period 1,253, ,874 Adjustments for: Income tax expense recognised in profit or loss 556, ,639 Depreciation and amortisation 50,629 42,805 Share based payments 16,343 (Gain)/loss on disposal of plant & equipment 1,086 Interest income accrued on shareholder loan (19,045) Exchange difference on translation foreign operations ,181 Other non-cash adjustments 2,077 1,879, ,531 Movements in working capital (Increase)/decrease in trade receivables and other current assets (5,022,052) (113,685) Increase/(decrease) in trade payables and other liabilities (1,408,550) (152,967) (Increase)/decrease in inventory (943,540) (1,190,343) Acquisition of property, plant and equipment included in movement in other liabilities (13,993) Acquisition of subsidiary included in movement in other liabilities 720,800 Cash (used in)/generated from operations (5,508,458) (244,664) Income taxes paid (1,037,831) 4,470 Net cash (used in)/generated by operating activities (6,546,289) (240,194) 18. Contingencies At the date the directors approved the consolidated financial statements the directors are not aware of any outstanding litigation or other action against the Group (31 March 2018:nil). 19. Capital commitments The directors are not aware of any unrecognised capital commitments as at balance date (31 March 2018:nil). 20. Events after the reporting period On 28 November 2018 the Company issued 1,000,000 options to subscribe for new shares in the Company. The options were issued to certain employees of the Group. Each option entitles the holder to acquire one ordinary share in the Company at an exercise price of $1.15. The options vest in three tranches over a two year period. All options will have been fully vested following two years of their issue. Any options not exercised within 36 months from the date of their issue shall lapse. On 1 October 2018 the Group entered into a three year lease agreement for a bonded warehouse in Shanghai at an annual rental of $215, Approval of financial statements The financial statements were approved by the directors and authorised for issue on 14 December 2018.

20 18 QEX LOGISTICS NZX Spread waiver Waiver from Main Board Listing Rule Subject to the conditions set out below, NZX Regulations (NZXR) granted QEX a waiver from Rule in respect of its securities for a period of twelve months to allow QEX to have fewer than 25% of its Securities held by at least 500 Members of the Public holding at least a Minimum Holding: The waiver was provided on the following conditions: a. QEX clearly and prominently discloses this waiver, its conditions, and the implications in its half-year and annual reports; b. QEX consistently monitors the total number of Members of the Public holding Securities and the percentage of Securities held by Members of the Public holding at least a Minimum Holding; and c. QEX notifies NZXR as soon as practicable if there is any material reduction to the total number of Members of the Public holding at least a Minimum Holding of Securities, and/or the percentage of Securities held by Members of the Public holding at least a Minimum Holding. The implications of this waiver are that there are initially less shares available to be freely traded than if there had been strict compliance with Rule of the Main Board Listing Rules. This may initially result in less liquidity in the shares of QEX.

21 INTERIM REPORT Notes

22 20 QEX LOGISTICS Notes

23 INTERIM REPORT Directory Issuer details: QEX Logistics Limited 70 Richard Pearse Drive Mangere, Auckland 2022 New Zealand Any queries or complaints about the Shares can be made to Jingjie (Ronnie) Xue, Chief Executive Officer, at this address. Share Registry : Link Market Services Level 11, Deloitte Centre 80 Queen Street Auckland 1010 New Zealand enquiries@linkmarketservices.co.nz NXT Advisor: CM Partners Limited Level 8, AIG Building 41 Shortland Street Auckland 1010 New Zealand tim@cmpartners.co.nz OR sean@cmpartners.co.nz Legal Adviser: Corporate Counsel P4/30 York Street Auckland 1052 New Zealand Auditor: Deloitte Limited Deloitte Centre Levels Queen Street Auckland 1010 New Zealand P.O. Box Auckland 1140 New Zealand

24 70 RICHARD PEARSE DRIVE, MANGERE, AUCKLAND 2022, NEW ZEALAND