Restructure keeps Legend in profit

ASX-listed distributor Legend Corporation has reported $4.6 million in net profit for the full financial year ending 30 June.

Compared to the prior corresponding year, the South Australian distie increased its profit by 14.6 percent from $4.1 million, despite a 13 percent drop in revenues from $103 million in the previous financial year to $90.4 million this year.

The drop in revenue was attributed to a reduction in demand for former core memory business, a fluctuating Australian dollar and tough economic conditions, which forced the distie to restructure in February last year.

It moved to cut back on the international arm of its Technology Business, which distributed memory and related computer components. The restructure involved the closure of operations in Singapore, Hong Kong, Thailand, Taiwan, New Zealand and South Africa.

The technology arm was now a key focus for the Australia business only.

Legend Corporation CEO Bradley Dowe told CRN the results proved the restructure was a success.

"We've delivered growth year on year. It was clearly very dramatic and that's been something that was well demonstrated in the numbers.

"It's been two very tough years as the ICT industry had its own downturn the year before last," said Bradley.

Additional action was taken to counter slipping revenues. Management reduced operating expenses by 10 percent compared to the corresponding period last year.

The distributor also reduced inventory levels by 10 percent, which reduced the demand on capital and led to an operating cash flow for the second half of the financial year January 1 to June 30 to $5.1 million, compared to the first six months of $2.7 million.

"Positive operating cash flows of $7.8 million have enabled us to further strengthen the balance sheet. Restructured bank debt takes advantage of lowered interest rates and the very significant reduction in net debt will position the business well for the coming market recovery," said Bradley.

The company's four divisions, Cabac, Hendon Semiconductors, Legend Performance Technology and Cabac Power, operated profitably with the group gross profit margin increasing to 38.7 percent, up 1.7 per cent on last financial year.

The company's electrical wholesale supplier division (Cabac), performed below expectations further to the slowdown in new house and commercial building starts.

Legend also moved to invest in new products and new markets focusing on product lines including computer room products and accessories, racks and connectivity products which are ‘complimentary to the current environment', said Bradley.