20:20 Mobile sees profits dive but sales soar

20:20 Mobile, the Crewe-based mobile phone distributor, continued with its severe restructuring programme in 2009, which wiped out profits, despite a strong underlying performance.

The company, a former subsidiary of The Caudwell Group, was sold to private equity firm to Doughty Hanson in 2006.

It is one of the  the top three mobile handset distributors in the world, and the largest globally largest distributor of mobile phone accessories, according to the company.

Newly filed accounts show that despite a 16% increase in sales to £991.6m for the year to the end of December 2009 (2008: £849.9m), pre-tax profits stood at just £195,000 – a major hit compared to the £219.9m it made a year earlier.

However, operating profit before exceptional items did increase – to £16.6m (2008: £15.5m)

The directors’ report said: “As part of the ongoing restructuring of the business that has followed its separation from Phones 4U in 2006, exceptional costs of £5.3m have been incurred relating to restructuring costs.”

Staff numbers were cut by 176 to 1,271 during the year as part of the continued integration of its old 20:20 Logistics, Dextra Solutions and Caudwell Logistics units.

The move followed its financial restructuring in July 2008, which saw the banking syndicate that put up the debt for Doughty Hanson’s purchase of the business write down net debt to £92m and receive a 45% equity stake.

Doughty Hanson injected £15m capital into 20:20 Mobile as part of the deal, while 20:20 Mobile’s management team also took 10% as part of the restructuring.

20:20 Mobile said its gross margin percentage had reduced in 2009, due to the increased proportion of smartphones in its sales mix, and the competitive market place, but added that this had been fully compensated for by cost reductions.

During 2009, the company expanded its European footprint with operations in Germany, The Netherlands, Belgium, Italy, Portugal and the Czech Republic, to add to existing business in the UK, Ireland, Sweden, Norway, Denmark, Spain, France and the UAE.

The group is actively replacing its senior debt with asset based lending facilities. Net debt fell from £134m in 2008 (including asset based lending of £38.7m) to £125m at Dec 31, 2009 (including asset-based lending of £55.4m).

In their report directors said: “We are very pleased with the group’s results given the challenging economic climate in 2009.

“Our strategy of forging closer relationships with our vendors and customers resulted in growth in sales, operating profit and net cash inflow, and a reduction in net debt.”

They added: “We look forward to the future with confidence, continuing our growth strategy through expanding our European footprint, vendor authorisations and customer base.”