Cellnet boss to go shopping

Cellnet boss to go shopping

Having sorted out cash flow and inventory issues in a tough year, Cellnet will use some of its $50 million credit facility to fund a distribution shopping spree.

Managing director, Adam Davenport, said there were plenty of opportunities in the market. If all went to plan, the first buyout could be concluded within weeks.

Potential targets would need to add significant volumes to existing Cellnet vendor contracts, offer complementary brand relationships or improve its geographical presence, Davenport said.

It is likely major software contracts would also be attractive to a business that is heavily weighted towards hardware distribution.

"We have examined the whole distribution landscape in Australia but it's a case of what's available and the price to be paid," Davenport said. "Our model has been successful in Queensland but Australia has lots of regional centres and SMB resellers we want to target.

"Lots of organisations are finding the going pretty tough at the moment and that can lead to them looking for an exit. Merchant bankers have been advising us about potential acquisitions and we have held meetings with interested parties. "Lawyers need to be involved in these things but we want some positive news in the near term."

ASX-listed Cellnet announced its annual results for the year to June 30 last week, with profits falling by 62 per cent to $4.6 million on revenues of $560 million.

On a more positive note, it has reduced inventory by 62 per cent to $25 million and dramatically improved cash flow. It has turned a deficit of $30 million last year into a surplus of $33 million. These were two areas of business Davenport highlighted as most damaging when taking the reins in May last year.

"We now have inventory down to a level we are comfortable with and it is moving through almost twice as fast," he said. "We have improved supply chain management."

More than 100 employees have also been retrenched as part of its restructure. It now has 350 full-time staff. With operational efficiencies improved, Davenport said attentions would turn to delivering significantly improved profits.

"We have done what was needed to put the company in better shape and must now make a return to acceptable profit levels as soon as possible," he said.

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