Cellnet: Broad-based business key to success

Cellnet: Broad-based business key to success

Cellnet managing director, Stephen Harrison, has promised to continue to expand the broad-based distributor’s product set in the wake of a 40 per cent annual revenue jump.

Figures released by Cellnet show an increase in after-tax profits to $9.1 million in the 2003-2004 financial year, up from $5.2 million. The company reported a rise in total sales from $318.7 million to $447.1 million.

Despite the recent movement of manufacturers towards specialist distributors, Harrison said it was Cellnet’s ongoing policy of diversification which caused the earnings hike.

He said it was this policy which had kept the loss of a $20 million distribution contract with Nokia in January a minimal one.

“I don’t want to put all my eggs in one basket – it’s not good business sense,” he said. “We didn’t retain Nokia because we were becoming a little too broad-based for them, but we don’t want to be reliant on one vendor. They can too easily suddenly turn off the tap.”

Cassa, the specialist IT components distributor purchased by Cellnet in July last year, saw 54 per cent growth and was the company’s strongest performing division.

Harrison attributed the growth to expansion of the business outside its original Queensland operations.

Recently-launched consumer electronics (CE) division, Cellnet Consumer Products, did less well but would take more time to expand, he said.

The division had recently extended an existing deal with Sony Computer Entertainment to take over the distribution arrangements for its audio accessories to many of the vendor’s mass retailers.

“The AV market will be worth $5 billion, there is lots of potential,” Harrison said. “Our springboard in the CE space has been in AV accessories via our Sony contract, but we’re moving slowly into larger equipment.”

Although Hutchison announced its plans to cut ties with Cellnet in June due to a return to direct distribution, Cellnet Group chairman, Darryl McDonough, said he hoped to hold on to the deal for at least another six months.

The loss of the distribution deal would mean a $78 million hit to Cellnet’s revenues.

“When they told us they were going to face the Christmas rush without us, we said to them: ‘Do you really want to do that by yourselves?’” McDonough said. “We have agreed to stay on until January to see them through that period ... Hopefully they might keep us on for longer.”

Cellnet was also continuing to concentrate on growing its NSW and Victoria business, signing up new warehouse contracts in Sydney and Melbourne, Harrison said. It was looking to add 10 specialist resellers in each state.

“We’re trying to service the hell out of what we do,” he said.

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