Tuesday, 12 June 2012

Cellnet Exit's the Online Category | The Australian

Cellnet (CLT) 25c

June 12 2012 The Australian

THE mobile-phone accessories mob has become the latest to realise that cracking the online market is not just a matter of hiring a spotty-faced web designer to devise a glitzy site -- and will cut its losses and exit the category.

Late on Friday, Cellnet revealed it would post a full-year pre-tax loss of $200,000, solely because of losses from the online venture.

But while the suspiciously timed disclosure attracted the immediate attention of our after-hours surveillance committee, there was also welcome news of a 10c-a-share franked div to disperse the riches from Cellnet's cash-rich balance sheet.

Cellnet, 46 per cent-owned by CVC, owns the Dealfox.com.au bargains site and has a 30 per cent stake in the Off Your Trolley grocery site.

"While fully operational, the necessary scale for profitability has not been achieved, margins have been more aggressive than anticipated and expected repeat customer numbers have not been achieved," management reports.

The planned exit leaves Cellnet with its traditional wholesaling business, which made $1.3m on revenue of $58m for the year.

In contrast, online sales racked only $600,000.

We rate the stock an avoid -- the stock is thinly traded -- although there may be a case for milking the fully franked dividend ahead of June 14 ex date.

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