Cellnet issues ASX profit warning

Cellnet issues ASX profit warning

The Cellnet Group has issued a profit warning to the Australian Stock Exchange for the financial year ended June 30.

The distributor had forecast net profits of between $7.3 million and $7.5 million but has now revised that estimate down to $6.1 million. Its annual results are expected to be announced in the week commencing September 5.

A statement posted on the ASX said the company had continued its trend of strong year-on-year growth but had not converted this growth into profit. It said performance was impacted in the final months of the financial year by lower than expected performance in the market for the company's higher margin products with a decline in average margin.

"We are where we thought we would be in terms of revenues but there has been a mix change," Cellnet managing director, Adam Davenport, said. "The retail market has been bad in the past six months and that is where a lot of our products are sold. We have been selling more low-margin products but were less effective with the higher margin stuff."

Davenport was appointed in June and has spent much of his time since reviewing the group's internal structures and operations. The ASX statement said a comprehensive reorganisation program had been approved by the board and was currently being executed by management.

This includes the appointment of a general manager for its supply chain, who is expected to take up the role shortly.

While further details of the internal restructure will not be provided until its financial results are posted, resellers can expect to see a substantial reduction in both the number of stock items held by Cellnet and its inventory levels. The distributor will now concentrate on stocking products that have high demand and profitability.

"Historically, Cellnet has carried a broad range and held high levels of stock," Davenport said. "But now we want to reduce our inventory while retaining our service levels."

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