Shebang cuts low-margin turnover

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Shebang Distribution is to tear out operational costs from existing business to increase its profit margin by nine per cent in 2010, and to set the ground this year to grow turnover again in 2011.

Daventry-based Shebang has seen turnover double each year for four years, from around £7 million in 2006 to £60 million in 2009. It connected 700,000 prepay handsets in the last quarter of 2009, compared with 40,000 in the same period a year ago.

Managing director Iain Humphrey (pictured) said the business could not go on at such a rate without raising concerns it is over-trading.

He said Shebang will instead consolidate turnover on existing accounts, to improve profit margins, and continue to bring new business in tandem to maintain turnover for the year.

Humphrey explained: We doubled turnover last year yet again, and its great we can do that. But this business is not run off huge loans; we work off a small overdraft only. To continue with that kind of growth would be foolish. Banks and such dont think any better of us for it; they just worry we are over-trading.

We could have taken outside investment in exchange for a sale of shares. Given the balance sheet, that might have been difficult, but based upon our existing base, our earning accrued and our future projections it would have been very easy.

But instead the board of directors decided that were up for the hard work. And in 2010, we wont grow turnover; we will grow the quality of our base to ensure we improve our profit base.

Humphrey said Shebang has already taken steps to improve its revenue base, and is tracking to record a profit margin of 25 per cent in 2010, up from 14 per cent last year.

Id be very surprised if anyone has that kind of margin in either hardware or airtime distribution, he remarked.

Shebang has reduced drastically the volume of SIM-free handsets it is selling. It has also restructured certain arrangements with retail customers so they take their hardware purchases direct with manufacturers, instead of via Shebang itself, thereby wiping huge amounts of low-margin turnover off its balance sheet.

Shebang is however to retain all warehousing, logistics and fulfilment services for client hardware purchase.

Humphrey said it is moving decisively away from box-shifting business to take advantage of the logistics systems it has developed.

Humphrey said the volume of products it will handle at its new Daventry warehouse will in fact increase as existing contracts expand and new fulfilment contracts are signed.

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