Embattled Queensland-based distributor, Cellnet (ASX:CLT), has reported net losses of $10.2 million for the half-year to December 31.
The result includes a $7.8 million hit resulting from its decision to exit the desktop PC and notebook market in November. This included $1.6 million in restructuring costs and a write-off of $2.3 million in intangible assets. The company also wrote-off $2.4 million in inventory and made provisions of $2.5 million.
Cellnet’s year-on-year combined revenue for the six months to December 31 was also down 48.8 per cent to $125 million. In a statement, the company blamed the drop on the termination of its contract with Telecom New Zealand, worth $65 million. The decision to exit desktop and notebook distribution accounted for a further $30 million in revenue.
According to its financial report, Cellnet’s remaining IT business in servers and printers, contributed $40.1 million during the six-month period, while retail accounted for $54.6 million.
The distributor said it had now repaid all debt and had $10 million cash in-hand.
“The overhead structure of the group has been accordingly reduced to reflect the new slimmer and more focused business model,” Cellnet chairman, Alexander Beard, said in the statement. “While work is continuing on further improvements to the company’s operational efficiencies, given the uncertain economic outlook, no guidance can be given as to second-half earnings.”
For several years, Cellnet has struggled to remain profitable and reported a $4.5 million loss in the full-year to June 30, 2007. In an effort to rein in costs and drive operational efficiencies, the company launched a strategic review of the business and made several rounds of redundancies.
Last month, Cellnet founder and second-time managing director, Stephen Harrison, resigned from the position after 15 months back in the role. He was replaced by CFO, Stuart Smith., who has been with the distributor for 12 months.
Smith ruled out more redundancies across the Cellnet business from the restructure, and said the company hoped to ride out the economic downturn by focusing on core business and leveraging changes already made. But he wouldn’t discount more staff cuts if the market situation deteriorated further.
“As far as the restructuring is concerned, that is reflected in these results,” he said. “As far as the economy goes, you can’t discount any changes, but our restructuring has been implemented.”