Cellnet books $836,000 loss, cites Apple and HP contract severances

By Chris Nicholls

SYDNEY: Mobile phone accessory seller Cellnet has announced an $836,000 loss for the half to 31 December 2007, citing the loss of their Apple and HP distribution contracts as a major cause.

The result is 129 per cent down on the previous year’s half, and came after an eight per cent decline in overall sales to $244.3 million.

In its statement to the ASX, Cellnet said the HP and Apple contracts represented 70 per cent of their loss for the half. However, underlying profits for the group came in at $1.8 million dollars, a decrease of only 3.2 per cent, due to the fact both contracts were low margin deals, the company said. As a result, margins rose by forty basis points to 7.7 per cent.

Cellnet said the loss also included a provision for doubtful debts of $3.1 million, a provision that proved necessary, the company said, after an extensive review revealed weaknesses in internal controls and processes over financial reporting in the past. 

In their ASX statement, Cellnet said the six months had been a “tough period”, with “significant effort expended in addressing internal controls and restoring confidence and credibility” to their offerings.

Part of the efforts included bringing back co-founder Stephen Harrison as managing director and other key changes to senior management.

The company will now use a new ‘got to market’ strategy, which revolves around an SMB base in the IT channel. The firm’s retail strategy is also in place with new management.

As a result, Cellnet said it expected a “significant upturn in product placement and market share” in the future.

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