Renaissance flags another tough year

Renaissance flags another tough year

Renaissance has told an annual meeting its first half year result for 2009 could be down as much as 80 percent on the same period last year, amid a “difficult transition”. However, it still expects a full year profit in line with what it reported in 2008. Updating the distributor’s trading performance against forecasts up to April this year, managing director Paul Johnston said sales in its distribution business, including Apple, were down about 23 percent to $36 million. This was mostly due to direct buying of Apple products by the channel. Renaissance says in 2008, two large retailers moved to buying directly from Apple, which impacted its trading last year and would also impact its 2009 first half result. The distributor has previously stated the contribution from the Apple division will be down about $1.5 million in 2009 because of the reduced margins. Renaissance’s education sales, in particular hardware, are down from $23 million to about $21 million against forecasts to April, with flat retail sales experienced by its retail chain Magnum Mac. Retail sales were particularly hard hit last year, and Johnston says this year, and possibly the next, will see difficult conditions as well. Fourth quarter sales, particularly in hardware, had fallen substantially. “The scale of the drop was greater than anything we have experienced, certainly in the last 15 years,” Johnston says. Renaissance says it will continue to invest in Magnum Mac as a long-term strategy. It is set to open a new store and head office in Christchurch in July, and opened a new Natcoll campus in Wellington recently. It is also now the exclusive local distributor for online learning business Learning Seat, based in Australia. Chairman Colin Giffney says Renaissance began to consciously redesign its business three years ago, and by the end of 2009, distribution will account for only about 35 percent of EBITDA. In 2008, the company’s EBITDA in the education segment grew 28 percent, and this would account for 35 percent by the end of this year. Giffney says Natcoll is performing well this year. “The recession is inevitably having an impact on us,” says Giffney. “2009 will reflect our ability to get MagnumMac performing as it should. It will reflect our ability to ‘right size’ the business and respond to the environment. It will reflect our ability to optimise a significantly changed but still loved and important Apple distributorship. “We are going through a difficult transition - but it is a transition. By 2010 we should be back to increasing profits off a broader base.”

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