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Cellnet reports $930,000 profit

Cellnet reports $930,000 profit

CEO of the ASX-listed distributor says the decision to exit IT distribution has paid off

ASX-listed distributor, Cellnet (ASX:CLT), has reported a net profit of $930,000 for the six months to December 31, 2009.

The result came off continuing operations revenue of $43.9 million, a drop of 19.5 per cent year-on-year.

In a statement, Cellnet chairman, Alexander Beard, attributed $10.6 million of the revenue decline to its former handset distribution agreement with Telecom New Zealand, which was terminated in June 2008 but still contributed revenue in the six months to December 31, 2008.

Excluding the Telecom NZ arrangement, Cellnet’s year-on-year sales increased by $9m, or 26.2 per cent, he said. The distributor’s gross profit margin percentage also rose from 11.6 per cent to 20.4 per cent, or $8.9m, in the six months to December 31, 2009.

The $930,000 net profit is a significant turnaround on the previous first-half, where Cellnet reported a net loss $4.1m excluding discontinued operations. It is also in line with previous forecasts of up to $1m in net profit for the first-half.

“[This] is a significant achievement in light of generally difficult retail trading conditions over the past six months,” Beard said in a statement. “A clear focus on customer service and a product offering targeting customer requirements and target markets has been instrumental in achieving this result.”

Cellnet CEO, Stuart Smith said its focus on core business lines, along with more a more streamlined operational structure, enabled the distributor to return to profitability. Cellnet relocated its assembly line to China in March 2009, which proved significantly more cost-effective, he said.

“The revenue and sales increase was a significant achievement for us. That, combined with substantial cost reduction and getting a more streamlined supply chain, has contributed to the bottom line,” Stuart said.

Cellnet’s total first-half revenue, including both continuing and discontinuing business, was $45.5m, a fall of 63.5 per cent compared to first-half 2008. The massive revenue drop stemmed from Cellnet’s decision to exit the PC distribution market in December 2008, and the sale of its IBM business to Avnet in June last year.

“Exiting IT [distribution] has enabled us to focus on core business and produced the results we were expecting,” Smith said.

As previously reported in ARN, Cellnet’s January 11 guidance figures indicated net profits for the full-year were expected to reach $1.4m-$1.5m for the first-half. Smith said the distributor was on-track to reach that figure on June 30.


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