Broad-based distributor, Cellnet Group, has announced a 76 per cent drop in net profits to $1.6 million for the year to June 30.
According to its preliminary end of year report to the ASX, annual sales increased by 7 per cent year-on-year to $560 million, up from $524 million. Earnings however, slipped by 62 per cent to $4.6 million, down from $12.1 million the year before.
Managing director, Adam Davenport, attributed the fall to a host of one-off charges relating to the distributor's restructure. Margins had also suffered as a result of major write-downs designed to clear old and slow moving stock.
"I'm pleased with what has been achieved in the past 12 months," he said. "The key issue of restructuring has been completed and we have reduced headcount by 22 per cent to 350."
Most importantly, Davenport said, inventory had been cut back dramatically, falling 62 per cent to $25 million. This had seen its cash flow significantly improve, rising to $33 million compared to a shortfall of $30 million in the previous financial year.
"Stock is moving much faster and we're approaching industry best practices," he said.
The additional working capital would allow Cellnet to pursue a business building and acquisition strategy in the coming year, Davenport said.
Cellnet has three core business units: telecoms, IT and its Mercury Mobile content division. Davenport said the content business had experienced strong year-on-year growth. The company opened a Canadian office and is now looking at branching into the UK.
IT product sales also recorded solid growth, he said. However, its traditional telco business slowed during the past 12 months. Davenport said Telstra's recent decision to source mobile phone products solely from Brightstar had affected overall sales.