Cellnet profits down by $3 million

Cellnet profits down by $3 million

Tough market conditions and a significant write off of obsolete stock were cited as major factors why the after-tax profits of mobile, accessory and IT distributor, Cellnet, fell by $3 million.

The group announced an after-tax profit of $5.2 million on revenue of $318.7 million for the 2003 financial year. The second half of the financial year, which ended on June 30, saw substantial improvement as Cellnet Group recorded an after-tax profit of $3 million, an increase of 36 per cent on the first six months.

“We are very pleased with the result given the current environment and, if you take out the $2.2 million obsolescence write off out of the equation, we were not too far off the previous year,” managing director, Stephen Harrison, said.

As previously reported in ARN, mobile giant Nokia announced it would end a nine-year accessories distribution deal with Cellnet in August. This was worth $20 million a year. Cellnet has since negotiated a January 31 finish to that contract, which had originally been scheduled to wind-up at the end of September.

It is also still in talks with Nokia about retaining a two-year Telstra contract for a mixture of Cellnet and Nokia accessories, which is also worth about $20 million and has about 18 months left to run.

“Nokia has shaken us a little bit but we are currently looking at lots of avenues to make up for that loss,” said Harrison. “The full impact of Nokia won’t be felt until next year, which gives us plenty of time to put on another range of products.”

In the current financial year, Harrison said the distribution of Hutchison 3G handsets would provide a boost.

“We are purchasing handsets from NEC and Motorola but it is no secret that Europe is getting the majority of stock at the moment,” he said. “Moving forward towards Christmas will be a huge few months and it will be even better next year when handset supply gets better.” Cellnet would also look to grow its newly acquired components distributor, Cassa, by 20 per cent, according to Harrison. Having focused mostly on Queensland before the takeover, Cassa now has a presence in Sydney, Melbourne and Perth. Further offices in Adelaide and New Zealand are planned.

“We are cross-training the IT Wholesale and Cassa guys because there is more synergy between the two businesses than we thought,” Harrison said. “It’s a perfect marriage and has opened the door to both sides of the databases.”

He also said further acquisitions were a possibility as the group continued to position itself between the converging telecommunications and IT sectors.

“We will continue to pursue the dual strategies of growing the existing business and expanding into new areas,” he said. "We are always open-minded about acquisitions and, as a lot of companies like HP are consolidating distributors, there will be some ripe pickings.”

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