Cellnet On Covid-19 Life Support, 30 Days To Find Equity Partner
Smartphone accessories distributor Cellnet Group has been placed in a trading halt with thee Company desperately looking for an injection of capital after a 60% sales slump.
The Company that was struggling way before COVID-19 currently has a high build-up of old stock and not enough cash to buy new stock ongoing according to insiders.
This has resulted in retailers being left with a lack of stock flow, into stores.
Back in December the Company said that they were punting on 5G and the launch of the new Xbox and PS5 to boost their fortune, now the Company is relying on JobKeeper support and rent relief to prop up the business.
They also claimed that their acquisition of Powerguard would “contribute positively” to the Companies sales in the second half of the year.
In a statement to the ASX today the Company said that COVID-19 epidemic had made a significant impact on the Company.
Revenue in April 2020 was down approximately 60% lower than the expected pre-COVID-19 revenue for the month and in the current economic environment, the Company is not in a position to provide any trading or revenue outlook.
The Company applied for and got a JobKeeper wage subsidy and in New Zealand a COVID-19 Wage Subsidy however they failed to identify the amount of contribution they have received.
ChannelNews understands that the Company got approximately NZ$133,562 from the New Zealand Government to cover off 19 employees.
The Company has also negotiated a 25% reduction in Board and have made a 20% reduction in company-wide employee remuneration.
All employees have moved to a 4-day week while also having to take a 20% salary cut.
While they have frozen all capital expenditure they still appear to be spending on entertainment, marketing and promotions.
They have also approached their landlords for rent relief.
The Company admitted that “A significant reduction in revenue is expected to create a material liquidity shortfall until revenue recovers to more normalised pre-COVID19 levels of approximately 70% of prior year revenue levels”.
The big issue is whether brands such as Huawei, Samsung, Trend Micro and accessory brands such as Tech 21, Griffin Otterbox and mophie will stay with Cellnet.
The Company who is trying to line up a capital injection said that “Working capital requirements to purchase inventory are also expected to increase materially from July 2020. This will be exacerbated by an insurer recently reducing its insurance cover related to Cellnet receivables in the hands of suppliers”.
Recently Westpac extended a $1.5M short term loan that matures in 30 day on May 31, 2020.
This could be a crunch date for the Company who need to find an equity partner to relieve the borrowing or the bank could call in administrators.
The Company said that an extension of this facility is subject to a review of the results of any equity raising and the increased requirement for
invoice finance in FY21; and an increase in the collateral value of the receivables eligible for finance under the existing Invoice Finance facility from 65% to 70%.
The Company also announced today that as part of ongoing conflict management measures, Mr Michael Reddie resigned as a director, “effectively immediately” and has been replaced by the appointment of, the Chief Financial Officer, Mr Chris Barnes, as a director.