March 8, 2016/NSE
Following the preliminary review of the Group’s Management Accounts, the Board of Directors of Computer Warehouse Group Plc (CWG) hereby announces that it expects to incur a number of significant one-off charges that will contribute to an overall loss for the financial year ended 31 December 2015:
Foreign exchange losses – principally driven by significant exchange rate volatility. The exchange rate which had been largely stable within a narrow band suddenly plummeted and remained uncertain from the first quarter of 2015, following the significant drop in Oil prices (Nigeria, which is the seventh largest Oil exporter in the world earns about 95% of her foreign exchange from Oil exports).
Inventory write-offs – following technology and business model changes which made some previous investments such as the investments in VSAT and MPLS network obsolete. Recall that CWG was a pioneer an one of the leaders in the provision of VSAT as a service to the banking sector.
Bad debt write-offs – due to a significant amount of income reversal from the previous year as a result of the cancellation of earlier agreed contracts, for which cancellation penalties are yet to be secured.
In addition, the Group expects to report an operational loss stemming from a combination of a reduction in margins in her erstwhile traditional reseller business, and inability to transfer increased cost of doing business to customers due to already existing contracts. This performance occurred on the back of a challenging and uncertain macroeconomic environment including the general elections of 2015 and the subsequent takeover by a new administration which caused significant delays in investments by our traditional customers.
The Board has taken steps to reposition the Group for an improved performance in the New Year, driven by its recent investments in cloud and subscription based business, increased efforts in making its traditional reseller business more efficient and a restructuring of operations for more focus on profitability.
